Interim Results

SIG PLC 08 September 2004 P R E S S R E L E A S E 8 September 2004 INTERIM RESULTS FOR SIX MONTHS TO 30 JUNE 2004 SIG plc is the market leading specialist distributor of insulation, commercial interiors and roofing products in Europe. • Excellent first half performance with record sales, profits and earnings. Improvements in all key product and geographic areas were boosted by strong like for like results and generally helpful pricing conditions • Sales increased by 6.2% to £649m (2003 : £612m). Excluding the impact of foreign exchange, sales growth was up 7.9% - UK and Republic of Ireland (c. 65% of Group sales) sales increased 6.5% to £423m (2003 : £397m), driven primarily by continued robust demand in housing and non-residential construction and improving market conditions in Commercial Interiors - Mainland Europe (c. 30% of Group sales) sales increased 11% in local currencies and 8% in Sterling to £197m (2003 : £183m), with sales up in all countries - In the USA sales were up 5% in local currency • Operating profit before amortisation of goodwill increased 21.3% to £33.9m - UK and Republic of Ireland up 13.7% to £28.9m - Mainland Europe up 84% to £6.2m, led by a strong performance in France and Germany and a profits turnaround in Poland - USA increased to £0.7m (2003 : £0.5m) • Profit before tax was up 30% to £28.3m (2003 : £21.8m) and earnings per share increased by 29% to 15.6p (2003 : 12.1p) • Dividend per share up 12.2% to 4.6p (2003 : 4.1p) • Sharp acceleration in acquisition programme with 9 deals completed to date for c. £37m, spread right across SIG's business activities. Annualised sales from these acquisitions exceeds £60m. These additional branches bring SIG's total network to 403 branches Les Tench, Chairman, commented: 'As previously indicated, the exceptional rate of improvement in profits in the first half is not expected to be replicated in the second half. However, market demand and pricing have remained firm since the end of June and in the light of continued strong trading, the Group is confident that further progress will be made. On a longer term basis, the Group believes that it is well positioned to benefit from increased demand for energy efficiency products and services, expected to arise from rising energy costs and further regulation.' Enquiries: David Williams, Chief Executive SIG plc today 020 7251 3801 Gareth Davies, Finance Director thereafter 0114 285 6300 Faeth Birch / Gordon Simpson Finsbury 020 7251 3801 Full Interim Results information is available on www.sigplc.co.uk/results. An interview with David Williams, Group Chief Executive in video/audio and text is now available on http://www.sigplc.co.uk and http://www.cantos.com. Introduction The Group has made excellent progress in the first half of 2004, having achieved significant growth in sales and profits compared with the corresponding period in 2003. As indicated in the Trading Statement which was published on 7 July 2004, price inflation combined with increased sales volume created a number of opportunities to improve the margin during the first half of 2004. The Group has been very successful in ensuring the benefits of these particularly favourable conditions were maximised during the period. Acquisitions completed in 2003 and in the first half of 2004 made a positive contribution during the period. The number of trading sites continues to grow and a number of 'brownfield' branches have been opened since the start of the year, in addition to those which have been acquired. Currency movement had a small adverse effect on the results in the first half. Cash flow has been good and the balance sheet further strengthened. Results For the 6 months to 30 June 2004 compared with the corresponding period in 2003: Sales • Sales were £649m, an increase of £37m, up 6.2% on prior year (2003 : £612m). • Like for like sales growth (i.e. excluding the impact of acquisitions completed after 1 January 2003) was 5.4%. • The exchange rates of Sterling against the Euro and the US Dollar were less favourable in the first half of 2004 than in the corresponding period in 2003. Sales in local currency grew by 7.9% in total and 7.1% on a like for like basis. • Sales were increased in all three geographic reporting regions, on a like for like constant currency basis. Sales increased in Sterling in both the UK and Republic of Ireland and Mainland Europe, but declined in the USA due to adverse currency exchange movement. Profits • Operating profit before amortisation of goodwill increased by 21.3% to £33.9m (2003 : £28.0m - restated for FRS17). • Operating profits improved in all three geographic reporting regions, both in local currency and in Sterling. • Amortisation of goodwill increased slightly to £2.5m (2003 : £2.4m). Total interest and other finance charges reduced by £0.7m to £3.1m (2003 : £3.8m - restated for FRS17), reflecting the reduced level of borrowings. • Profit before tax increased by 30% to £28.3m (2003 : £21.8m). • Basic earnings per share, after amortisation of goodwill were 29% higher at 15.6p (2003 : 12.1p). Fully diluted earnings per share, after amortisation of goodwill, were 15.4p, up 28% (2003 : 12.0p). Financial • Balance sheet gearing was 36% at 30 June 2004. This compares with 50% at 30 June 2003 and 38% at 31 December 2003. • Interest cover was further improved to 10.2 times (2003 : 6.8 times). The 2004 and 2003 figures shown above are after adjusting for FRS17 (see below). Pensions The Group adopted the accounting policy FRS17 Retirement benefits in its accounts for the year ended 31 December 2003, but had not done so in its interim report for the six months ended 30 June 2003. As set out more fully in note 7, the comparative results for the six months ended 30 June 2003 have been restated to comply with FRS17. IFRS The requirement to adopt International Financial Reporting Standards ('IFRS'), with effect from 1 January 2005, is a major change process, for which SIG has established a dedicated team working in conjunction with their external auditors and other technical advisors. To date, the project has identified the main differences between IFRS and current UK GAAP impacting the Group. The Group is committed to ensuring it complies fully with all material aspects of IFRS. Good progress is being made in establishing the accounting policies, systems and reporting changes that will be required to be implemented. Dividend An interim dividend of 4.6p per share has been declared, an increase of 12.2% (2003 interim dividend 4.1p), with dividend cover at 3.4 times. This increase is consistent with the Group policy of progressive increases, whilst maintaining prudent cover. The dividend is payable on 26 November 2004 to shareholders on the register at 29 October 2004. Trading Review UK and Republic of Ireland (65% of Group Sales) Total sales in the UK and Republic of Ireland increased by 6.5% to £423m in the first 6 months of 2004 (2003 : £397m). The like for like sales growth was 5.9%. Operating profits (pre amortisation of goodwill) were up 13.7%. This reflects the benefit of increased sales volume, stronger prices, continued tight control of costs and an improvement in the operating profit margin to 6.8% (2003 : 6.4% - restated for FRS17). Sales and operating profits increased in all business streams on a like for like basis. Sales of insulation and related products grew by 8% almost entirely like for like. Market demand was strong in the key building and construction related sectors, partly due to the continued positive impact of the revised Building Regulations, which require all new buildings to meet higher standards of energy efficiency through improved insulation standards. Demand declined in the smaller market for specialist insulation used within industrial applications, which includes power, petrochemical and process industries. Sales to these industries were down against prior year. Roofing product sales increased by 6% including a modest contribution from recent acquisitions. Whilst market demand is believed to have been broadly flat, pricing was slightly stronger overall. Five new trading locations were added during the period. In contrast with the decline in 2002 and 2003, sales of commercial interiors products increased by 4% entirely like for like. Sales were up in both the premium office sector and in the larger, more broadly based market for ceilings, partitions and related products in all types of non-residential buildings. Again pricing was generally more helpful in this sector. The development businesses, Safety Products and Construction Accessories, achieved increased sales of 5.5% and operating profits increased substantially. Mainland Europe (30% of Group Sales) Sales in the first 6 months of 2004 increased by 11% in local currencies and by 8% in Sterling to £197m (2003 : £183m). Like for like sales growth was 10% in local currencies and 6% in Sterling. Operating profits increased by 84% overall in Mainland Europe to £6.2m (2003 : £3.4m). In Germany profits improved sharply due to increased sales (up 5% in Euros), reduced costs and an outstanding improvement in pricing control by the local management, achieved against the background of stable market conditions and increased product pricing. In France, in local currency like for like sales grew by 18%, reflecting increased sales penetration through the existing business in stable market conditions. Total sales increased by 24%, assisted by an acquisition in the commercial interiors sector and slightly stronger pricing. Operating profits were increased. In The Netherlands, against the background of depressed markets, sales increased by 7% in Euros. Increased costs and a reduction in the margin due to adverse sales mix produced a small reduction in operating profit in the period compared with prior year. The strong recovery in market demand in Poland continued and sales were up 66% in local currency on a like for like basis. This includes the impact of a new branch opened in the period. This excellent performance resulted in a small operating profit being achieved by the Polish business for the first time in any reporting period. USA (5% of Group Sales) Against the background of a slight improvement in both market demand and pricing, sales increased by 5% in local currency. The weakness of the Dollar to Sterling resulted in a 7% decline in sales in Sterling. Tight management of costs and pricing produced a much improved operating profit. Acquisitions In the July trading statement SIG announced that six bolt-on acquisitions had been completed in the first 6 months, with annualised sales of c. £22m. Of these six acquisitions, five were in the U.K. (one in insulation, one in construction accessories and three in roofing) and one was in the commercial interiors sector in France. The strategy of supplementing organic growth with targeted acquisitions within the range of their existing markets and with emphasis on specialist construction related products continues to create opportunities. During the last few days SIG has completed three further acquisitions, one in Germany and two rather larger acquisitions in the UK which together add 22 additional trading sites, 7 in insulation, 14 in roofing and 1 in commercial interiors with annualised sales of approximately £40m. The total consideration for the 9 acquisitions completed to date in 2004 is approximately £37m. Corporate Governance As part of the Board's ongoing commitment to maintaining the highest standards of Corporate Governance, Peter Blackburn CBE, who has been on the Board as a Non-Executive Director since July 2001, has been appointed Senior Independent Director with effect from 1 June 2004. Prospects As previously indicated, the exceptional rate of improvement in profits in the first half is not expected to be replicated in the second half. However, market demand and pricing have remained firm since the end of June and in the light of continued strong trading, the Group is confident that further progress will be made. On a longer term basis, the Group believes that it is well positioned to benefit from increased demand for energy efficiency products and services, expected to arise from rising energy costs and further regulation. Financial Statements Summary Consolidated Profit and Loss Account for the six months ended 30 June 2004 Unaudited Unaudited Audited Six Six Year months ended months ended ended 30 June 30 June 31 December 2004 2004 2003 2003 2003 2003 Restated Restated ----------------------------------------------------------------------------------------------- Note £000's £000's £000's £000's £000's £000's ----------------------------------------------------------------------------------------------- Turnover 3 649,494 611,738 1,268,525 ----------------------------------------------------------------------------------------------- |Operating profit before | |amortisation of goodwill 33,917 27,966 63,438 | |Amortisation of goodwill 2,475 2,398 4,796 | ----------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------- Operating profit 3 31,442 25,568 58,642 Net interest payable 2,882 3,426 6,466 Other finance charges 213 343 685 ----------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------- Profit on ordinary activities before taxation 28,347 21,799 51,491 Tax on profit on ordinary activities 9,241 7,106 16,786 ----------------------------------------------------------------------------------------------- Profit on ordinary activities after taxation 19,106 14,693 34,705 Minority interest (all equity) 279 213 447 Equity dividends 5,568 4,932 14,920 ----------------------------------------------------------------------------------------------- Retained profit for the period 13,259 9,548 19,338 ----------------------------------------------------------------------------------------------- Earnings per share Basic earnings per share 4 15.6p 12.1p 28.6p Diluted earnings per share 4 15.4p 12.0p 28.2p ----------------------------------------------------------------------------------------------- Earnings per share before amortisation of goodwill Basic earnings per share 4 17.7p 14.1p 32.5p Diluted earnings per share 4 17.4p 14.0p 32.2p ----------------------------------------------------------------------------------------------- Consolidated Statement of Total Recognised Gains and Losses for the six months ended 30 June 2004 Unaudited Unaudited Audited Six Six Year months ended months ended ended 30 June 30 Jun 31 December 2004 2003 2003 Restated -------------------------------------------------------------------------------- £000's £000's £000's -------------------------------------------------------------------------------- Profit on ordinary activities after taxation and minority interests 18,827 14,480 34,258 Tax credit on exchange difference arising on foreign currency borrowings - 1,315 1,570 Exchange difference on retranslation of overseas net investments (5,159) 5,192 5,202 Exchange difference on foreign currency borrowings 3,999 (4,383) (5,235) Actuarial gain relating to the pension schemes - 168 335 Deferred tax movement associated with actuarial gain - (50) (101) -------------------------------------------------------------------------------- Total recognised gains and losses for the period 17,667 16,722 36,029 Prior year adjustment (FRS 17) - (16,884) (16,884) -------------------------------------------------------------------------------- Total recognised gains and losses since last annual report 17,667 (162) 19,145 -------------------------------------------------------------------------------- Reconciliation of Movement in Consolidated Shareholders' Funds for the six months ended 30 June 2004 Unaudited Unaudited Audited Six Six Year months ended months ended ended 30 June 30 June 31 December 2004 2003 2003 Restated -------------------------------------------------------------------------------- £000's £000's £000's -------------------------------------------------------------------------------- Profit on ordinary activities after taxation and minority interests 18,827 14,480 34,258 Dividends (5,568) (4,932) (14,920) -------------------------------------------------------------------------------- 13,259 9,548 19,338 New share capital issued 740 83 895 Tax credit on exchange difference arising on foreign currency borrowings - 1,315 1,570 Exchange difference on retranslation of overseas net investments (5,159) 5,192 5,202 Exchange difference on foreign currency borrowings 3,999 (4,383) (5,235) Credit to L-TIP reserve 94 94 137 Actuarial gain relating to the pension schemes - 168 335 Deferred tax movement associated with actuarial gain - (50) (101) -------------------------------------------------------------------------------- Net addition to shareholders'funds 12,933 11,967 22,141 Opening shareholders' funds as previously reported 199,313 194,056 194,056 Prior year adjustment - (16,884) (16,884) -------------------------------------------------------------------------------- Opening shareholders' funds as restated 199,313 177,172 177,172 -------------------------------------------------------------------------------- Closing shareholders' funds 212,246 189,139 199,313 -------------------------------------------------------------------------------- Summary Consolidated Balance Sheet as at 30 June 2004 Unaudited Unaudited Audited 30 June 30 June 31 December 2004 2003 2003 Restated -------------------------------------------------------------------------------- £000's £000's £000's -------------------------------------------------------------------------------- Fixed Assets Intangible assets 85,090 79,103 78,696 Tangible assets 68,820 71,288 69,194 -------------------------------------------------------------------------------- 153,910 150,391 147,890 -------------------------------------------------------------------------------- Current assets Stocks 109,990 94,289 93,035 Debtors 264,046 251,466 223,483 Cash at bank and in hand 30,877 22,567 55,417 -------------------------------------------------------------------------------- 404,913 368,322 371,935 Creditors: Amounts falling due within one year (227,646) (202,929) (198,618) -------------------------------------------------------------------------------- Net current assets 177,267 165,393 173,317 -------------------------------------------------------------------------------- Total assets less current liabilities 331,177 315,784 321,207 Creditors: Amounts falling due after more than one year (94,539) (109,565) (98,419) Provision for liabilities and charges (10,625) (2,940) (9,327) -------------------------------------------------------------------------------- Net assets excluding pension liability 226,013 203,279 213,461 Pension liability (13,488) (13,927) (13,701) -------------------------------------------------------------------------------- Net assets including pension liability 212,525 189,352 199,760 -------------------------------------------------------------------------------- Shareholders' funds (all equity) 212,246 189,139 199,313 Minority interest 279 213 447 -------------------------------------------------------------------------------- Total capital employed 212,525 189,352 199,760 -------------------------------------------------------------------------------- Summary Consolidated Cash Flow Statement for the six months ended 30 June 2004 Unaudited Unaudited Audited 30 June 30 June 31 December 2004 2003 2003 Restated -------------------------------------------------------------------------------- Note £000's £000's £000's -------------------------------------------------------------------------------- Net cash inflow from operating activities 5 31,551 56,333 97,942 -------------------------------------------------------------------------------- Returns on investments and servicing of finance (3,538) (4,106) (7,432) -------------------------------------------------------------------------------- Tax paid (6,025) (3,487) (10,809) -------------------------------------------------------------------------------- Capital expenditure (8,454) (6,114) (11,962) -------------------------------------------------------------------------------- Acquisitions (8,659) (552) (2,683) -------------------------------------------------------------------------------- Equity dividends paid (10,005) (9,283) (14,153) -------------------------------------------------------------------------------- Financing (19,594) (10,118) 5,399 -------------------------------------------------------------------------------- (Decrease)/increase in cash in the period 6 (24,724) 22,673 56,302 -------------------------------------------------------------------------------- Notes to the Unaudited Interim Results 1. Basis of preparation of interim financial information The interim financial information has been prepared in accordance with the accounting policies included in the Annual Report for the year ended 31 December 2003, which have been applied consistently throughout the current and preceding periods. The interim financial information was approved by the Board of Directors on 8 September 2004. 2. Publication of non statutory accounts The financial information included in this statement does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The interim results to 30 June 2004 and 2003 are neither audited nor reviewed. The financial information for the full preceding year is based on the statutory accounts for the financial year ended 31 December 2003. Those accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies. The auditors' report contained no statement under Section 237(2) or 237(3) of the Companies Act 1985. 3. Segmental information Unaudited Unaudited Audited Six Six Year months ended months ended ended 30 June 30 June 31 December Geographical analysis 2004 2003 2003 Restated -------------------------------------------------------------------------------- £000's £000's £000's -------------------------------------------------------------------------------- Turnover - UK & Republic of Ireland 422,558 396,869 810,704 - Mainland Europe 197,304 183,107 394,153 - USA 29,632 31,762 63,668 -------------------------------------------------------------------------------- Total operations 649,494 611,738 1,268,525 -------------------------------------------------------------------------------- Operating Profit - UK & Republic of Ireland 28,889 25,410 54,235 - Mainland Europe 6,230 3,384 11,038 - USA 726 528 906 - Parent company (1,928) (1,356) (2,741) - Amortisation of goodwill (2,475) (2,398) (4,796) -------------------------------------------------------------------------------- Total operations 31,442 25,568 58,642 -------------------------------------------------------------------------------- Turnover and operating profit by destination is not materially different from these amounts. Turnover and operating profit from acquisitions during the periods have not been reported separately due to their immateriality to the Group results. 4. Earnings per share The calculations of earnings per share are based on the following profits and numbers of shares: Basic and diluted Basic and diluted before amortisation of goodwill Unaudited Unaudited Audited Unaudited Unaudited Audited Six months Six months Year Six months Six months Year ended ended ended ended ended ended 30 June 30 June 31 December 30 June 30 June 31 December 2004 2003 2003 2004 2003 2003 £000's £000's £000's £000's £000's £000's --------------------------------------------------------------------------------------------------- Profit on ordinary activities after taxation 19,106 14,693 34,705 19,106 14,693 34,705 Minority interests (279) (213) (447) (279) (213) (447) Amortisation of goodwill - - - 2,475 2,398 4,796 --------------------------------------------------------------------------------------------------- 18,827 14,480 34,258 21,302 16,878 39,054 --------------------------------------------------------------------------------------------------- Weighted average number of shares Unaudited Unaudited Audited Six Six Year months ended months ended ended 30 June 30 June 31 December 2004 2003 2003 Number Number Number --------------------------------------------------------------------------------------------------- For basic earnings per share 120,444,412 119,743,323 119,981,696 Exercise of share options 2,126,258 1,006,237 1,313,821 --------------------------------------------------------------------------------------------------- For diluted earnings per share 122,570,67 120,749,560 121,295,517 --------------------------------------------------------------------------------------------------- Earnings per share before amortisation of goodwill is presented in order to give an indication of the underlying performance of the Group. 5. Reconciliation of operating profit to net cash inflow from operating activities Unaudited Unaudited Audited Six Six Year months ended months ended ended 30 June 30 June 31 December 2004 2003 2003 Restated -------------------------------------------------------------------------------- £000's £000's £000's -------------------------------------------------------------------------------- Operating profit 31,442 25,568 58,642 Depreciation and amortisation 10,750 10,828 21,627 Profit on sale of tangible fixed assets (208) (193) (335) Changes in working capital (10,433) 20,130 18,008 -------------------------------------------------------------------------------- Net cash inflow from operating activities 31,551 56,333 97,942 -------------------------------------------------------------------------------- 6. Reconciliation of net cash flow to movement in net debt Unaudited Unaudited Audited Six Six Year months ended months ended ended 30 June 30 June 31 December 2004 2003 2003 Restated -------------------------------------------------------------------------------- £000's £000's £000's -------------------------------------------------------------------------------- (Decrease)/increase in cash in the period (24,724) 22,673 56,302 Cash outflow/(inflow) from movement in debt 20,335 10,201 (4,504) -------------------------------------------------------------------------------- Changes in net debt resulting from cash flows (4,389) 32,874 51,798 Acquisitions (93) (21) (20) Exchange differences 4,045 (4,345) (4,713) -------------------------------------------------------------------------------- Movement in net debt in the period (437) 28,508 47,065 Net debt at beginning of period (76,315) (123,380) (123,380) -------------------------------------------------------------------------------- Net debt at end of period (76,752) (94,872) (76,315) -------------------------------------------------------------------------------- 7. Prior year adjustment The Group adopted FRS 17 Retirement benefits in its accounts for the year ended 31 December 2003, but did not do so in its interim report for the six months ended 30 June 2003. In this document the comparative results for the six months ended 30 June 2003 have been restated to comply with FRS 17. The following reconciliation provides an explanation of the effect of this change in accounting policy on the six months ended 30 June 2003. Opening shareholders' funds for 2003 have been restated as follows: Group Balance Sheet Prepayments Pension Deferred Equity liability taxation shareholders funds £000's £000's £000's £000's -------------------------------------------------------------------------------- 31 December 2002 as previously reported 10,541 - (1,609) 194,056 Reversal of SSAP 24 (3,900) - 1,170 (2,730) Adoption of FRS 17 - (14,154) - (14,154) -------------------------------------------------------------------------------- 1 January 2003 restated 6,641 (14,154) (439) 177,172 -------------------------------------------------------------------------------- There was no material impact on reported profit as a result of adopting FRS 17 in the six months ended 30 June 2003. As a result, the only adjustment to the Consolidated Profit and Loss Account for the six months ended 30 June 2003 has been to include 'Other finance charges' of £343,000 and to increase 'Operating profit' by the same amount. The actuarial gains relating to the pension schemes of £118,000 (net of deferred tax charge of £50,000) which arose in the six months ended 30 June 2003 has been included in the Consolidated Statement of Total Recognised Gains and Losses. In total, the impact on the 30 June 2003 Consolidated Balance Sheet of adopting FRS 17 was to reduce net assets by £16,766,000. This information is provided by RNS The company news service from the London Stock Exchange

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