Interim Results

SIG PLC 6 September 1999 INTERIM RESULTS FOR THE HALF YEAR ENDED 30 JUNE 1999 SIG plc ('SIG'), Europe's largest specialist distributor of insulation and related products, has achieved good organic growth, increased its sales and operating profits and improved its market share. * turnover increased 6% to £399m (1998: £375m) * operating profit increased 15% to £19.7m (1998: £17.1m) * profit before tax up 16% to £18.7m (1998: £16.1m) * 88% improvement in German operating profits * earnings per share of 10.7p (1998: 9.1p), a 17.6% rise * interim dividend of 3.1p (1998: 2.8p), a 10.7% increase Barrie Cottingham, Chairman of SIG, commenting on the results, said: 'We have made substantial progress in the first half of 1999 and I am pleased to report a significant increase in profits. Good results in the UK and France have been complemented by a substantially improved performance in Germany. Once again, we have demonstrated the strength and resilience of our business spread and our capacity to perform well in subdued markets.' 'The trading performance in July and August has been encouraging throughout all our principal operations. We are confident that we will continue to make further progress in the second-half of 1999 and beyond.' Enquiries: Bill Forrester, Chief Executive SIG plc today 0171 251 3801 Frank Prust, Finance Director SIG plc thereafter 0114 285 6300 Rupert Younger/ Faeth Finnemore Finsbury 0171 251 3801 CHAIRMAN'S STATEMENT As indicated in our trading up-date on 12 July, the Group made substantial progress in the first half of 1999 and I am pleased to report a significant increase in profits. Good results from our operations in the UK and France have been complemented by a substantially improved performance in Germany. These results demonstrate the strength and resilience of our business spread and our capacity to perform well in subdued markets. Results and Dividends * Sales in the first half have increased by 6% to £399m (1998: £375m); Operating profits for the period are 15% higher at £19.7m (1998: £17.1m); * Earnings per share for the half year are 18% higher at 10.7p compared with 9.1p in 1998; * The balance sheet has strengthened with gearing at 35% compared to 49% at December 1998 and interest cover at 30 June 1999 was over 20 times. An interim dividend of 3.1p (1998: 2.8p) has been declared, an increase of 10.7%, reflecting the Group's strong performance and the Board's confidence in the future. The dividend is payable on 17 November 1999 to shareholders on the register at 17 September 1999. Insulation and Related Products UK In a market where modest growth in the construction sector was balanced by a further decline in the industrial sector, our UK insulation and related products distribution businesses performed well. Good organic growth was achieved in sales and operating profits, and margins were improved at both gross and operating levels. We believe that we gained share in key product sectors and further strengthened our position in the UK market. Sheffield Insulations and Warren Insulation traded strongly, benefiting from increased investment in sales and marketing resources and development of specialist products and applications. Selling prices remained under pressure during the period; however, effective management of pricing and sales growth in higher margin products ensured an overall increase in gross margins. The rationalisation programme at Kitsons Insulation Products, acquired in mid 1998, has involved branch closures and, as a result, operating losses have been reduced significantly. We expect this business to make a small contribution to the Group's profits in the second half of the year. Further progress has been made in roofing product distribution with a strong performance from Asphaltic Roofing Supplies, where good sales growth has contributed to substantially improved operating profits. Benefit has clearly been derived from the major investment in selling resources made in 1998 and the continued development of the branch network. Germany We believe that volume demand in the construction sector stabilised in the period. However, competitive pressures in the first half of the year continued to force prices down and input and selling prices in key products decreased, contributing to an overall market decline of approximately 4% by value. In these conditions, our businesses have produced an excellent performance, increasing operating profits significantly, albeit from a depressed level. In a difficult market, sales revenue has increased by 2.5% on a like for like basis and gross margins have been held at prior year levels. We have completed the branch closure and rationalisation programme, improved efficiencies and reduced operating costs. The development of the specialist industrial and dry wall divisions has continued and we believe market share has been gained in these important sectors. Our expansion programme continued in Poland with the opening of three new branches. The branch network now numbers ten, including Canon Artis, acquired in July 1999. France Demand in our core industrial sector has been weak in the first half and we estimate that the market declined by over 6%. However, Ouest Isol, our market leading distributor, has traded well. Growth in sales of specialist insulation and fixing products, together with the development of the distribution of suspended ceiling and partitioning products, has led to further improvement in operating profits. We also expanded our geographical coverage through the opening of two new branches. USA Our core petro-chemical and oil related markets have experienced extremely difficult conditions. This has led to lower sales and operating profits in our US industrial insulation distribution businesses, Distribution International and Branton Industries. Action has been taken to reduce costs, broaden the product range and develop sales in complementary markets. Ceilings and Partitioning In subdued market conditions where both volume and selling prices were under pressure in the period, all our ceiling and partitioning businesses performed well. Good sales growth and improved gross margins resulted in a significant increase in operating profits. Management concentration on best practice, together with further investment in sales and marketing, has resulted in Ceilings Distribution and CP Supplies out-performing the market, improving share and strengthening their position. The specialist partitioning business, Komfort Systems, has had another excellent trading period. The investment made in late 1998 and early 1999 in enhanced production facilities and concentration on higher specification products has contributed to growth in both sales and operating profits. Three new strategically placed showrooms have been established to complement the improved and enlarged selling resource. Acquisitions Two small acquisitions were made during the first half of the year. In January we acquired CLIPS, a small ceilings and partitioning distribution business based in eastern France, and in May we added BWI, a specialist insulation distributor based on the east coast of the USA. Both acquisitions strengthen our existing activities in their respective markets. In July we acquired a further two small specialist distributors: Canon Artis in Poland and Roofing Centre Group in south east England. Prospects Market conditions are not expected to change significantly in our main markets in the second half of the year. In the UK there are signs that prices are stabilising in some of our key products against a background of slow improvement in volume demand. There are some more optimistic signals from the German economy and, in the construction and industrial sectors we serve, some slight improvement in demand and a more stable pricing environment is expected. As a result of the actions taken last year, our German operations are well placed to benefit from any improvement in our markets. The Group has performed well in the first half of the year and we have continued to improve, strengthen and invest in our businesses. The trading performance in July and August has been encouraging and we are confident that we will continue to make further progress in the second half of 1999 and beyond. Summary Consolidated Profit and Loss Account for the six months ended 30 June 1999 Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 30 June 31 Dec 1999 1998 1998 Note £'000 £'000 £'000 Turnover 3 399,352 375,429 795,780 ============ ========== ======== Operating Profit 3 19,647 17,091 37,530 ------------ ---------- -------- Net interest payable 956 1,008 2,184 ------------ ---------- -------- Profit before taxation 18,691 16,083 35,346 Tax on profit on ordinary 5,940 5,320 11,303 activities ------------ ---------- -------- Profit on ordinary 12,751 10,763 24,043 activities after tax Minority interests (all 62 42 297 equity) Equity dividends 3,689 3,308 9,931 ------------ ---------- -------- Retained profit for the 9,000 7,413 13,815 period ============ ========== ======== Basic earnings per share 4 10.7p 9.1p 20.1p ============ ========== ======== Fully diluted earnings per 4 10.7p 9.0p 20.0p share ============ ========== ======== Consolidated Statement of Total Recognised Gains and Losses for the six months ended 30 June 1999 Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 30 June 31 Dec 1999 1998 1998 £'000 £'000 £'000 Profit on ordinary activities after taxation and minority interests 12,689 10,721 23,746 Currency translation differences on foreign currency net investments (1,432) (403) 1,965 ------------ ---------- -------- Total recognised gains and losses for the period 11,257 10,318 25,711 ========== ======== Prior year adjustment (Note 1) (2,818) ------------ Total recognised gains and losses since last annual report 8,439 ========== Summary Consolidated Balance Sheet as at 30 June 1999 Unaudited Audited Unaudited As adjusted As adjusted 30 June 30 June 31 Dec 1999 1998 1998 £'000 £'000 £'000 Fixed Assets Intangible assets 7,343 628 5,351 Tangible assets 49,685 46,121 49,231 ------------ ---------- -------- 57,028 46,749 54,582 Current Assets Stocks 63,925 61,619 60,468 Debtors 170,999 159,854 154,121 Cash at bank 3,816 2,922 4,960 ------------ ---------- -------- 238,740 224,395 219,549 ------------ ---------- -------- Creditors due within one year (167,529) (153,780) (151,361) ------------ ---------- -------- Net Current Assets 71,211 70,615 68,188 ------------ ---------- -------- Total assets less current 128,239 117,364 122,770 liabilities Creditors due after one year (9,337) (12,301) (11,017) Provision for liabilities (4,153) (5,446) (4,639) and charges ------------ ---------- -------- Net Assets 114,749 99,617 107,114 ============ ========== ======== Capital and reserves (all 114,749 99,617 107,114 equity) ============ ========== ======== Summary Consolidated Cash Flow Statement for the six months ended 30 June 1999 Unaudited Unaudited Audited 30 June 30 June 31 Dec 1999 1998 1998 Note £'000 £'000 £'000 Net cash inflow from operating activities 5 33,190 28,937 41,558 ------------ ---------- -------- Returns on investments and servicing of finance (956) (1,008) (2,184) ------------ ---------- -------- Taxation (2,469) (3,527) (13,742) ------------ ---------- -------- Capital expenditure and financial investment (6,700) (5,876) (9,948) ------------ ---------- -------- Acquisitions and disposals (5,932) 711 (9,060) ------------ ---------- -------- Equity dividends paid (6,641) (6,343) (9,650) ------------ ---------- -------- Cash inflow/(outflow) before 10,492 12,894 (3,026) financing ------------ ---------- -------- Financing - Issue of shares 50 - 3 - Decrease in debt (1,197) (2,569) (4,980) ------------ ---------- -------- Increase/(decrease) in cash in the period 6 9,345 10,325 (8,003) ============ ========== ======== Notes to the Unaudited Interim Results 1. Basis of Preparation of Interim Financial Information The accounts have been prepared in accordance with the accounting policies included in the Annual Report for the year ended 31 December 1998, which have been applied consistently throughout the current and preceding periods; except for the requirement under FRS 12 'Provisions, contingent liabilities and contingent assets' to provide for onerous leasehold property contracts. The effect of this change in accounting policy on the consolidated balance sheet at both 30 June and 31 December 1998 is to reduce net assets by £2.818m compared to those previously reported. The provision at 30 June 1999 amounted to £2.407m, net of tax. Prior period results have not been restated as the directors consider the effect of the change in policy on those results to be immaterial. 2. Publication of Non Statutory Accounts The financial information included in this interim statement does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The interim results to 30 June 1999 and 1998 are unaudited. The financial information for the full preceding year is based on the statutory accounts for the financial year ended 31 December 1998. Those accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies. 3. Segmental Information Class of business Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 30 June 31 Dec 1999 1998 1998 £'000 £'000 £'000 Turnover - Insulation 326,500 301,107 647,036 - Ceilings and partitions 72,852 74,322 148,744 ------------ ---------- -------- Total operations 399,352 375,429 795,780 ============ ========== ======== Operating profit - Insulation 14,306 12,257 26,955 - Ceilings and partitions 6,790 5,900 12,596 - Parent company (1,449) (1,066) (2,021) ------------ ---------- -------- Total operations 19,647 17,091 37,530 ============ ========== ======== Of the above total, £238.6m (1998: £220.1m) of turnover and £15.2m (1998: £13.5m) of operating profit arose in the United Kingdom; £138.5m (1998: £131.8m) of turnover and £3.6m (1998: £2.5m) of operating profit arose in the Rest of Europe; the remainder arose in the Rest of the World. Turnover and operating profit by destination is not materially different from these amounts. 4. Earnings Per Share Basic earnings per share are based on Group profit after taxation and minority interests of £12,689,000 (1998: £10,721,000) and on 118,162,078 shares (1998: 118,136,614), being the weighted average number of ordinary shares in issue during the period. Fully diluted earnings per share are calculated on diluted Group profit after taxation and minority interests of £12,689,000 (1998: £10,721,000) and on 118,878,141 ordinary shares (1998: 118,708,260). 5. Reconciliation of Operating Profit to Net Cash Flow from Operating Activities Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 30 June 31 Dec 1999 1998 1998 £'000 £'000 £'000 Operating profit 19,647 17,091 37,530 Depreciation and amortisation 5,585 5,068 10,873 Profit on sale of tangible (207) (187) (490) fixed assets Changes in working capital 8,165 6,965 (6,355) ------------ ---------- -------- Net cash flow from operating 33,190 28,937 41,558 activities ============ ========== ======== 6. Reconciliation of Net Cash Flow to Movement in Net Debt Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 30 June 31 Dec 1999 1998 1998 £'000 £'000 £'000 Increase(Decrease) in cash 9,345 10,325 (8,003) in the period Repayment of debt 1,197 2,569 4,980 ------------ ---------- -------- Changes in net debt 10,542 12,894 (3,023) resulting from cash flows Acquisitions - - 26 Translation differences 2,675 996 (2,532) ------------ ---------- -------- Movement in net debt in the 13,217 13,890 (5,529) period Net debt at start of period (53,576) (48,047) (48,047) ------------ ---------- -------- Net debt at end of period (40,359) (34,157) (53,576) ============ ========== ========

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