SIG PLC HAS REPORTED sales growth of 17%, achieving revenues of £2.74bn across its European operations, with operating profit expected to be at c£80m, up from £41m in 2021.
In its trading update for the year ended 31 December 2022, the suppliers of specialist insulation and building products attributed its increased turnover and profit to its continuing ‘Return to Growth’ strategy and the resilience of the Group’s diversified business.
Despite softening market demand in H2, SIG continued to benefit from this commercial strategy. Input price inflation eased in H2, as expected, but remained a strong tailwind to year-on-year revenue growth.
As a result, and subject to audit, the Board expects to report FY22 revenues of c£2,743m. This performance was achieved despite a one-off loss of c£5m in H2 resulting from the administration of major UK roofing contractor Avonside, one of the Group’s largest customers. Whilst disappointing, the Group says it believes that this situation arose from company‐specific factors. Customer bad debt metrics more broadly remain in line with management’s expectations.
The Group expects to report positive free cash flow for the year of c£12m, and year‐end gross cash balances of £131m (2021: £145m). The movement in cash balances in the year reflects previously reported cash outflows on M&A, as well as the positive free cash flow. The Group’s revolving credit facility (RCF) was increased in November 2022 from £50m to £90m and remained undrawn as at 31 December 2022.
Additionally, the Group expects to report net debt as at 31 December 2022 of c£440m on a post IFRS 16 basis (2021: £365m), and c£159m on a pre IFRS 16 basis (2021: £129m). The movement in post IFRS 16 net debt is due mainly to increase in lease liabilities of c£45m, driven by timing of lease renewals and investments in new branches, and a currency movement of c£17m on bond debt, says the Group. Leverage continued to come down towards the Group’s medium‐term targets, and finished the year at 2.8x and 1.8x on post and pre IFRS 16 bases respectively. The Group’s pre IFRS 16 debt consists almost wholly of a €300m bond at a fixed rate of 5.25%. The bond, and the currently undrawn RCF, both mature in 2026.
UK and EU Performance
The Group continues to benefit from a balanced geographic spread of country revenues, with 58% of revenues derived from the EU in FY22, and 42% from the UK.
FY22 LFL revenues grew 17% compared to prior year. Reported Group revenues were 20% higher in the year, including c4% from acquisitions, slightly offset by c1% adverse currency movements.
Group revenue growth rates across most geographies moderated in H2 compared to H1 primarily due to the impact of lower rates of input cost inflation, following the annualisation of significant rises in H2 21, and some broadly based softening in market demand.
Pass through of input cost inflation added to the top line in all geographies. The Group estimates the impact on revenue for the full year to be around 17‐18%.
In the UK Interiors business, the strategic and operational changes made since mid‐2020 continue to drive the business’s return towards its previous market position and performance.
In UK Exteriors, volumes were down, more notably in H2. This was in line with weaker market conditions and against particularly strong 2021 comparators.
Recent UK acquisitions, including Miers Construction Products acquired in July 2022, are reported to be performing well.
In the EU, FY growth of 18% reflected solid trading across all SIG businesses, including some incremental market share gains, and H2 growth remained robust at 14%.
The Group also says performance remains strong in its French businesses, and reports its German business is benefiting from the new, experienced leadership put in place in the second half of 2021.
Benelux’s performance is improving, and Poland’s growth normalised in H2 after the exceptional growth seen in H1, and sales in Ireland reflected some weaker market conditions in H2.
As of 1 February 2023, Gavin Slark will join SIG as Group CEO. Gavin joins SIG with a long track record of success in the pan‐European construction distribution industry, including most recently as CEO of Grafton Group plc for 11 years. Steve Francis steps down as CEO.
Steve Francis, SIG plc CEO
Steve Francis, SIG plc CEO, commented: “SIG’s performance in 2022 demonstrated the resilience, flexibility and diversity of its pan‐European business. Thanks to strong employee and customer engagement, the Group has continued to drive strong profit growth, even as market conditions became increasingly challenging as the year progressed. SIG now has strong foundations for the future, and the Group remains well positioned to benefit from the need for governments and end‐customers to increase the sustainability and energy efficiency of buildings over time.
“Gavin and I are now completing a very smooth leadership handover, and I am confident that Gavin and the team will build on the progress made in the last three years.”
The full FY22 results will be published on 8 March 2023.
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