TIDMSHI
RNS Number : 9420Z
SIG PLC
24 September 2020
24 September 2020
SIG plc
Results for the six months ended 30 June 2020
Successful recapitalisation provides foundation for new growth
strategy
SIG plc ("SIG", "the Group" or "the Company") is a leading
supplier of specialist building solutions to trade customers across
Europe, with strong positions in its core markets as a market
leading supplier of insulation and interiors solutions to the
construction industry, and a specialist merchant of roofing
materials for small to medium sized construction businesses. The
Group today announces its half year results for the six months
ended 30 June 2020 ("H1 2020" or "the period").
Strategic and operational highlights
-- New leadership team appointed
-- Successful restructuring of the Group's financing facilities
and capital raise of GBP165m, concluded in July, including GBP83m
equity investment by Clayton, Dubilier & Rice LLC
-- Post capital raise, substantial liquidity headroom provides
security against ongoing market uncertainty and confidence to
invest in new growth strategy, with a net cash position at 31
August of GBP29m, pre IFRS 16
-- Branch and customer-centric restructuring in the UK
progressing to plan; Germany and Benelux also refocusing under new
combined team
-- The Group has been able to trade safely, working closely and
flexibly with our employees, customers and suppliers to adapt to
new Covid-19 norms
Financial results
-- Like-for-like H1 sales down 23.9% on prior year, impacted by Covid -19
-- Gross margin down 50bps due to lower volumes. Group
underlying operating loss of GBP43.2m (H1 2019: GBP29.1m
profit)
-- Underlying LBT of GBP53.7m (H1 2019: GBP17.4m profit) and
underlying loss per share of 9.1p (H1 2019: 2.1p earning per
share)
-- Statutory loss before tax from continuing operations of
GBP125.4m (H1 2019: profit before tax of GBP2.2m) reflecting
GBP71.7m of Other items, including GBP42.8m of impairment of
goodwill in the UK businesses, mainly reflecting the impact of
Covid-19
-- Net debt, pre IFRS 16, down to GBP90.0m (H1 2019: GBP158.2m),
helped by sale of Air Handling division in January
Current trading and outlook
-- Market fundamentals remain sound and near-term order books
give an element of encouragement, but there remains significant
economic uncertainty
-- Trading following initial estimates of immediate H1 Covid-19
impact was better than anticipated, and the Board now expects full
year sales to be moderately higher than guided in May
-- H2 expected to remain loss-making, but at a lower rate than H1
-- Net cash outflow expected in H2 due to unwind of tax
deferrals (government supported Covid-19 schemes) and cessation of
some historical year-end and half-year working capital
practices
Underlying operations(1) H1 2020 H1 2019 Change
------------ ------------ -----------
Revenue GBP817.7m GBP1,071.5m (23.7)%
LFL (2) sales (23.9)% (3.8)% n/a
Gross margin 24.8% 25.3% (50)bps
Underlying(3) operating
(loss)/profit (GBP43.2m) GBP29.1m (GBP72.3m)
Underlying(3) (loss)/profit
before tax (GBP53.7m) GBP17.4m (GBP71.1m)
Underlying(3) (loss)/earnings
per share (9.1p) 2.1p (11.2p)
Operating margin (5.3)% 2.7% (800)bps
Net debt GBP341.8m GBP449.0m 23.9%
Net debt (pre IFRS 16) GBP90.0m GBP158.2m 43.1%
------------ -----------
Statutory results H1 2020 H1 2019
------------------------------- ------------ ------------
Revenue(4) GBP840.1m GBP1,113.3m
Operating (loss)/profit(4) (GBP102.9m) GBP14.2m
(Loss)/profit before tax(4) (GBP125.4m) GBP2.2m
Basic (loss)/earnings
per share(4) (9.1p) 0.2p
Total (loss)/profit after
tax (5) (GBP53.8m) GBP1.3m
Dividend per share - 1.25p
------------------------------- ------------ ------------
1. Underlying operations excludes businesses divested or closed,
or which the Board has resolved to divest or close by 23 September
2020.
2. Like-for-like (LFL) is defined as sales per working day in
constant currency excluding acquisitions and disposals completed or
agreed in the prior year, or before announcement of the Group's
results for the relevant period. Sales are not adjusted for branch
openings or closures. LFL sales differ from the previous trading
statement primarily as a result of the reclassification of non-core
businesses.
3. Underlying represents the results before Other items. Other
items relate to the amortisation of acquired intangibles,
impairment charges, profits and losses on agreed sale or closure of
non-core businesses and associated impairment charges, net
operating profits and losses attributable to businesses identified
as non-core, net restructuring costs, investment in omnichannel
retailing, other specific items, fair value gains and losses on
derivative financial instruments, the taxation effect of Other
items and the effect of changes in taxation rates. Other items have
been disclosed separately in order to give an indication of the
underlying earnings of the Group.
4. Statutory results of Continuing operations only.
5. Statutory results including both Continuing and Discontinued
operations.
Commenting, Steve Francis, Chief Executive Officer, said:
"I would like to thank all our people for their resilience and
commitment in the face of the very challenging circumstances of
recent months, the effects of which clearly impacted our first half
results. Providing a safe environment and instilling an even
greater focus on good health and safety behaviours have been a
major focus of the new management team.
"In mid-summer, we concluded the successful restructure of our
financing facilities and a GBP165m capital raise. These, along with
our careful management of working capital and cash in recent
months, have created a sound financial base on which we can rebuild
the business.
"The new management team has started to execute its strategy and
implement its organisational model, which focuses on our local
branch teams, enabling growth and returning to active industry
leadership. As previously stated, the essence of our new strategy
is re-connection with our people - employees, customers, suppliers
and the communities in which we do business. We are a local, sales
and service-driven business. We firmly believe that our new
strategy for growth will provide the basis, not only for the
restoration of profit and strong cash conversion, but also serve as
a foundation to play a leading role in our industry in the years to
come.
"Long term fundamentals remain sound in the Group's markets
across Europe. In the short term, significant economic uncertainty
remains in all of our markets, although government stimulus for the
construction sector, notably in the UK, is welcome.
"Trading was better than anticipated during the peak lockdown
months of March to May, compared to our initial estimates of the
possible Covid-19 impact, and the Board now expects full year sales
to be moderately higher than guided in May. Group sales in July and
August were encouraging although down year on year, and market
share losses during 2019, particularly in the UK distribution
business, will take time to recover. The second half of 2020 is
expected to remain loss making, but at a lower rate than the first
despite some increased pressure on gross margin in the UK.
"I am extremely encouraged by the energy and excitement with
which our people have embraced the new strategy and by the initial
progress made in a short space of time.
"The Group demonstrated agility and resilience in the first half
of the year, dealing with an unprecedented external challenge, and
significant internal change and activity. Coupled with a
strengthened balance sheet, the foundations are now in place for
the business to grow."
Investor and Analyst presentation (9am today)
A webcast of the Group's briefing for analysts and investors
will take place today at 9am, a recording of which will also be
available later in the day on the investor page of the company's
website, www.sigplc.com .
Please click this URL to join.
https://storm-virtual-uk.zoom.us/j/81232011672
Or join by phone:
United Kingdom: +44 203 481 5240 / +44 203 901 7895 / +44 131
460 1196 / +44 203 051 2874 / +44 203 481 5237
Webinar ID: 812 3201 1672
International numbers available:
https://storm-virtual-uk.zoom.us/u/kbsO8Tkr7C
LEI: 213800VDC1BKJEZ8PV53
Enquiries
SIG plc
Steve Francis, Chief Executive Officer +44 (0) 114 285 6300
Ian Ashton, Chief Financial Officer +44 (0) 114 285 6300
Jefferies International Limited -
Joint Broker
Ed Matthews / Will Soutar +44 (0) 20 7029 8000
Peel Hunt LLP - Joint Broker
Charles Batten / Nicholas How +44 (0) 20 7418 8900
FTI Consulting
Richard Mountain / Susanne Yule +44 ( 0) 20 3727 1340
OPERATIONAL REVIEW
The first half has been a transformational period for the Group.
In order to return to profitable growth and win back market share,
a new management team has been appointed to develop a new,
customer-centric strategy that reprioritises sales and
re-establishes SIG's traditional strengths of being an experienced,
technically strong and service-focused local sales business. In
July, the Group concluded the successful renegotiation of its debt
arrangements and capital raise. These actions, along with careful
management of working capital and cash in recent months, have
created a sound financial base on which to rebuild the
business.
Covid-19
We acted quickly to develop a coordinated and decisive response
to Covid-19 to support our operating companies , to ensure the
health and safety of our people, customers, suppliers and local
communities within which we operate and to minimise the adverse
impacts on our businesses. Collective actions across all central
support and operations functions at branch, regional and Group
management levels were implemented, under demanding circumstances,
in accordance with local government guidelines.
In response to the challenges posed by the pandemic, we acted
swiftly to reduce costs, optimise cash flow, protect the Group's
liquidity and, where necessary, change our ways of operation and
how we interacted with both suppliers and customers.
The furloughing of employees for a limited period, combined with
other wage saving initiatives and, where available, accessing
various government support schemes in all of its countries of
operation, enabled the Group to support its cash position in the
period. From 1 April to 30 June 2020, the Board of Directors and
the Group Executive Leadership Team took pay reductions.
Additionally, the majority of the UK and Ireland employees took
lower pay during April, the period when those businesses were,
effectively, closed.
The Board also took the decision not to declare a full year 2019
dividend.
The ability of the Group to respond effectively to the Covid-19
pandemic and to maintain its liquidity position during this
unprecedented period of extreme uncertainty reflects the
effectiveness of the mitigating actions initiated by the Board, and
the agility and resilience of the organisation, and points towards
the successful adoption of the new strategy as the Group emerges
from this period of business disruption.
H1 Trading
Overall, the Group performed better than initial internal
estimates made at the beginning of the pandemic. Nevertheless,
trading in the first half was significantly impacted by Covid-19,
particularly in March and April during the most severe lockdown
period in the majority of markets. With the easing of lockdown
restrictions in May and June, the Group saw a gradual improvement
in trading performance, accompanied by a corresponding improvement
in profitability.
January to February
The Group's underlying revenue for the two months ended 29
February 2020 was GBP296.0m, down by GBP36.9m from the prior year
(two months ended 28 February 2019: GBP332.9m), a like-for-like
decline of 11.1%. Trading in the UK and Germany saw a continuation
of the challenging trends seen in the last quarter of 2019, whilst
trading activity in the rest of Europe was relatively stable.
Due to reduced sales volumes in key markets, the gross profit
margin fell compared to the prior year period (two months ended 28
February 2019).
March to April
As announced on 29 May 2020, the Group's underlying revenue for
the two months ended 30 April 2020 was GBP235.0m, down by GBP138.8m
from the prior year (two months ended 30 April 2019: GBP373.8m).
Revenues in the period were significantly impacted by the Covid-19
outbreak, particularly in the UK, Ireland and France, with the
Group's underlying like-for-like revenues down 37.7% over the two
months.
On 30 March 2020, the Group announced that large parts of its UK
market had seen sales fall away rapidly, in common with the broader
construction industry. It was concluded that it was necessary and
appropriate to temporarily close UK operations. Trading sites in
Ireland were also temporarily closed due to restrictions
implemented by the Irish Government. The UK and Ireland businesses
remained open to service critical and emergency projects only, such
as for the NHS, energy and food sectors.
Trading activity in France was affected by the short-term
closure of all branches for three days in mid-March, which was
followed by a staged reopening throughout April. Like-for-like
revenues in France during this two-month period were down
39.0%.
The Group's operating companies in Germany, Poland and Benelux
were also impacted by government measures, albeit to a lesser
extent.
Similar to the first two months, the Group's gross profit margin
in March and April was negatively impacted by the decline in
overall sales, combined with a shift in mix away from the more
profitable roofing merchanting businesses in the UK and France.
During this period, the Group took a number of decisive cost
saving actions and also accessed government-supported job retention
schemes, resulting in a reduction in its operating costs year on
year.
May to June
The Group witnessed a gradual improvement in trading performance
throughout May and June 2020, particularly in the UK and Ireland
where branches continued to reopen during May as lockdown
restrictions were eased. The Group's underlying like-for-like sales
over May and June were down 21.7%, with May 35.7% down and June
improving to just 8.0% down on 2019.
In the UK and Ireland, average daily sales began to recover in
May, at which point all but two of the UK and Ireland sites had
reopened. This positive revenue trend continued throughout June
with combined like-for-like revenues in May and June down
40.9%.
France also demonstrated a strong recovery during May, despite
the fact that parts of the French construction market were not
fully open, reflecting the release of pent-up demand during the
lockdown period, and signalling optimism for the early summer
trading period when sales are seasonally strongest. Average daily
sales continued to improve in June.
Sales in Germany, Poland and Benelux remained stable during May,
with further improvement during June. On a combined basis,
like-for-like sales were 10.0% behind prior year over the two-month
period.
Profitability across the Group also improved materially during
May and June, albeit the Group was still loss making overall. The
improvements were driven by a combination of the improved trading
performance, particularly in the UK and Ireland, the decisive cost
actions by management, and continued governmental support.
Liquidity and balance sheet strengthening
The successful renegotiation of the Group's debt facilities in
the summer resulted in a resetting of its covenant requirements,
with consolidated net debt and liquidity covenants to be tested
monthly through to February 2022. From March 2022, covenants over
the Group's liquidity, leverage and interest cover will be tested
on a quarterly basis. Consolidated net worth will also be tested,
throughout the above periods.
The significant loss of revenues in 2020 impacted profitability,
cash generation and therefore debt levels, though the immediate and
comprehensive set of actions enacted across the business around
cash conservation, coupled with the receipt of the sale proceeds of
the Air Handling division, meant that the Group was able to
preserve its liquidity throughout the period.
In the announcement of its full year 2019 results on 29 May
2020, the Group reported that it had cash resources of GBP155.3m as
at 30 April, with a net debt position, pre IFRS 16, of GBP114.1m.
As at 30 June, the cash position had improved to GBP197.3m with net
debt, pre IFRS 16, of GBP90.0m. This improvement reflects improved
levels of profitability, a continuation of cost control actions and
utilisation of government support schemes, as well as an ongoing
rigorous, though careful, management of working capital.
In mid-July, the Group completed a successful capital raise, as
previously announced, raising gross proceeds of GBP165m (GBP153m
net of related costs). In addition, approximately GBP13m costs were
paid in relation to the debt refinancing.
As at 31 August, the Group had cash resources of GBP267.5m, with
a net cash position, pre IFRS 16, of GBP29.2m. Approximately GBP13m
of deferred payments relating to government support schemes will
unwind over the coming months, the majority doing so in H2 2020.
The settlement of these deferrals, the cessation of some historical
year-end working capital practices, as well as a carefully managed
increase in stock levels in parts of the business to improve the
service to customers and to support the Group's sales growth, will
result in working capital levels increasing over H2 . This increase
in working capital will be funded from the Group's available
resources.
Strategy update: re-connect, re-energise and re-set
On 29 May, the Group launched its new strategy for growth. The
restructuring of its debt facilities and the successful capital
raise provide firm and stable foundations for this strategy to be
delivered. Fundamental to the new strategy is the recognition that
SIG is a sales-led organisation, where the ability to grow its
customer base through the provision of high levels of customer
service and disciplined pricing are critical. The establishment of
strong customer relationships, by empowering and energising key
account and branch teams, and promoting an entrepreneurial spirit
throughout the company's extensive branch network, is key to this
objective.
With a strong executive team in position, and the strengthening
of the senior management teams across a number of areas of the
business over the past few months, particularly in the UK and
Germany, the Board is confident that the Group will deliver a
significant improvement in its operational and financial
performance over the medium term and achieve its vision of being
the leading B2B distributor of specialist construction products in
the markets in which it operates.
The implementation of the strategy is now underway. In the UK
and Germany, where the Group's operational and financial
performance has seen greater deterioration, the new strategy is
initially focusing on repairing the operational foundations of
these businesses so as to provide the appropriate platform from
which market share can be recaptured and profitable growth
restored. In France, Benelux, Poland and Ireland, where the Group's
operational and financial performance has been more stable, the new
strategy is empowering the Group's operating companies to move onto
a growth footing.
The Group's new strategy for growth is shaped around seven key
pillars which have been developed over the past few months and can
be summarised as follows:
o Sustainable behaviours: establishing a sustainable and wholly
recognisable set of behaviours across the Group's workforce so that
our people feel safe, valued and proud to be SIG employees
o Branch focus: developing our branch-based employees to create
an entrepreneurial and well-trained workforce
o Sales and customer focus: driving a sales-led culture by
strengthening sales capacity and productivity, with the key focus
being one of customer service
o Superior expertise: re-establishing specialist focus and
expertise across all customer-facing functions of the
organisation
o Closer to suppliers and markets: gaining market share through
enhanced customer proximity and service, and re-partnering with
suppliers
o High productivity: investing in consistent and highly
productive support functions, with a strong governance framework
and robust financial disciplines
o Expansive vision: recognising and building on the company's
core strengths as a platform for acquisitive growth
Through the implementation of these strategic pillars, supported
by the strengthened balance sheet and strong leadership teams
across the organisation, the Board is confident that SIG will
return to sustainable and long term profitable growth, recognising
that the primary short term focus for the Group is to recapture the
market share that it has lost over recent years.
Market share recapture plan
The Group's market share recapture plan, particularly for SIG's
UK businesses, Distribution and Exteriors, as well as for its
Germany and Benelux businesses, is built upon five key
enablers.
Merger of leadership of UK Distribution and Exteriors
The UK's Distribution and Exteriors businesses have now been
merged to create a single UK division, with a combined leadership
team replicating the model already deployed in SIG France, which
will leverage potential synergies in support functions whilst
maintaining separate commercial organisations and footprints
(primarily branches). The new regional structure of the combined
business will focus on promoting local entrepreneurship,
accountability and P&L account responsibility.
Combined Germany and Benelux businesses
A similar combined management approach to that now deployed in
the UK and France is close to finalisation across the German and
Benelux businesses. Due to their geographic positions, the cost
synergies are expected to be less than those in the UK.
A clearer understanding of "core" business
In light of the new strategy for growth, the Group has now
commenced a review to refine the definitions of its marketplace and
thereby revise and expand the definition of "core" business. This
is designed to facilitate the development of a more expansive
growth strategy in each of the Group's countries of operation. The
Company expects this review to highlight opportunities, consistent
with the Group's USPs (Expertise, Proximity, Service), to widen its
product offering and expand its geographic coverage.
Energise sales and market share recovery and growth efforts
The Group plans to improve proximity to its customers by
identifying and filling gaps in its geographical coverage. Sales
forces are being expanded and up-skilled by restoring their
historic industry-leading, bench-strength of specialist local
expertise in areas such as fire protection, energy efficiency and
sustainable materials. Salesforce productivity will also be
increased through enhanced sales management and training, supported
by salesforce management tools, disciplines and aligned incentives,
with customer reconnection a top priority.
Facilitate growth through better operations
A number of actions are underway in the Group's operations to
increase efficiency and service levels to boost the sales effort,
including:
o pricing tools and training for key account and branch
managers, providing enhanced visibility and autonomy to set pricing
quickly and competitively;
o improved product availability through the use of enhanced
systems and more accurate operational key performance indicators,
such as stock availability;
o enhanced on time and in full delivery; and
o additional training, which is being provided to the Group's
workforce in order to promote operational excellence and customer
service.
Portfolio management
As announced on 3 February 2020, the Company completed the sale
of its Air Handling division to France Air Management SA for an
enterprise value of EUR222.7m (c.GBP187.0m) on a cash free, debt
free basis on 31 January 2020. The net proceeds received by SIG
were EUR180.9m (c.GBP151.9m), exclusive of the repayment of debt
owed to SIG by the Air Handling division of EUR40.9m (c.GBP34.3m).
The results from this business have been excluded from the reported
underlying results and are shown as a discontinued operation in
order to provide a better understanding of the Group's underlying
performance in the continuing businesses.
The Building Solutions business was classified as held for sale
at 31 December 2019, as a sale to Kingspan had been agreed and was
due to complete in first half of 2020 subject to approval from the
UK Competition & Markets Authority (CMA). On 21 May 2020, the
Group announced that the parties had agreed to terminate the sales
agreement as terms could not be agreed for the extension of the
agreement to enable the completion of the CMA phase 2
investigation. The business continues to be classified as non-core
but does not meet the criteria to be presented as held for sale at
30 June 2020.
Dividend
The Board took the decision not to declare and pay a final
dividend for the 2019 financial year, in the interest of preserving
the Group's liquidity position. No interim dividend for the current
year will be paid (2019: 1.25p) under the terms of the Group's
amended debt arrangements and nor will a final dividend be
declared.
People
The Board would like to thank all employees of SIG for their
continued commitment and resilience in what has been a challenging
six months, particularly in relation to the ongoing Covid-19
pandemic. The key priority for the Group continues to be ensuring
that all necessary measures are taken in line with government
safety guidelines to protect the health and safety of employees,
suppliers, customers and other partners. The Board is pleased to
report that of the c.2,000 Group employees who were put on furlough
(principally in the UK, Ireland and France), the vast majority are
now back at work.
Current trading and outlook
Long term fundamentals remain sound in the Group's markets
across Europe. In the short term, significant economic uncertainty
remains in all of our markets, although government stimulus for the
construction sector, notably in the UK, is welcome.
Trading was better than anticipated during the peak lockdown
months of March to May, compared to our initial estimates of the
possible Covid-19 impact, and the Board now expects full year sales
to be moderately higher than guided in May. Group sales in July and
August were encouraging although down year on year, and market
share losses during 2019, particularly in the UK distribution
business, will take time to recover.
The second half of 2020 is expected to remain loss making, but
at a lower rate than the first despite some increased pressure on
gross margin in the UK.
As at 31 August, the Group had cash resources of GBP267.5m, with
a net cash position, pre IFRS 16, of GBP29.2m. Approximately GBP13m
of deferred payments relating to government support schemes will
unwind over the coming months, the majority doing so in H2 2020,
and in aggregate H2 is expected to generate a cash outflow, as
previously outlined above.
The Group demonstrated agility and resilience in the first half
of the year, dealing with an unprecedented external challenge, and
significant internal change and activity. Coupled with a
strengthened balance sheet, the foundations are now in place for
the business to grow.
FINANCIAL REVIEW
Revenue and gross margin
The Group saw a 23.9% decline in its like-for-like (LFL) revenue
over the period, including a favourable 0.1% currency movement and
an adverse 0.3% impact from fewer working days . Group underlying
revenue was down 23.7% to GBP817.7m (H1 2019: GBP1,071.5m),
impacted by Covid-19.
Underlying results exclude the results from the businesses that
are classified as non-core in order to provide a better
understanding of the underlying performance of the Group. These
businesses reported sales of GBP22.4m (H1 2019: GBP41.8m). On a
statutory basis, Group revenue was GBP840.1m (H1 2019:
GBP1,113.3m).
The Group's underlying gross margin decreased by 50bps to 24.8%
(H1 2019: 25.3%) and underlying gross profit reduced by GBP68.2m to
GBP203.0m (H1 2019: GBP271.2m), reflecting lower rebate receipts
due to decreased revenue volumes. On a statutory basis, the Group's
gross margin decreased by 40bps to 24.9% (H1 2019: 25.3%) and
statutory gross profit fell from GBP282.1m to GBP209.5m.
Operating costs and profit
The Group's underlying operating costs were GBP246.2m (H1 2019:
GBP242.1m). The increase is primarily due to the release of a
number of one-off accruals and provisions in H1 2019, which reduced
the comparator, some temporary costs related to the UK and broader
Group reorganisations, additions to bad debt reserves in response
to Covid-19 uncertainty, and cost inflation. These increases were
partially offset by c.GBP10m benefit from furlough schemes and wage
saving initiatives. The Group's underlying operating loss was
GBP43.2m (H1 2019: GBP29.1m profit) and at a statutory level the
Group's operating loss was GBP102.9m (H1 2019: GBP14.2m profit)
after non-underlying items of GBP59.7m (H1 2019: GBP14.9m),
including GBP42.8m impairment charges relating to impairment of
goodwill in the UK businesses following the reassessment of trading
expectations to reflect the impact of Covid-19, GBP6.9m costs
associated with refinancing, and GBP4.1m costs relating to
investment in omnichannel retailing.
The Group's underlying net finance costs decreased to GBP10.5m
(H1 2019: GBP11.7m), resulting in underlying loss before tax of
GBP53.7m (H1 2019: GBP17.4m profit). On a statutory basis, the
Group saw a loss before tax of GBP125.4m (H1 2019: GBP2.2m profit)
after non-underlying items of GBP71.7m (H1 2019: GBP15.2m),
including a GBP11.3m loss on modification recognised in relation to
the private placement notes.
The Group's underlying tax credit for the period was GBP0.1m (H1
2019: GBP4.7m charge), representing an underlying effective tax
rate credit of 0.2% (H1 2019: 26.7%). After Other items, the total
tax credit was GBP0.8m (H1 2019: GBP1.5m charge).
Segmental analysis
As a result of recent organisational changes, we have reassessed
our operating segments to ensure they are appropriate. In 2019, the
reportable operating segments were grouped on a line of business
basis with subtotals for Specialist Distribution and Roofing
Merchanting. There is no change to the reported operating segments
from those reported in the 2019 Annual Report and Accounts, but the
segments are now grouped on a geographical basis instead of on a
line of business basis. This reflects the way in which information
is reported and reviewed by the Chief Operating Decision Maker
(CODM) following the change in management and strategy during
2020.
Underlying Underlying
Underlying Underlying
operating operating
revenue revenue (loss)/profit profit
H1 2020 H1 2019 H1 2020 H1 2019
(GBPm) (GBPm) LFL sales (GBPm) (GBPm)
----------- ----------- ---------- --------------- -----------
UK Distribution 154.9 295.2 (47.5)% (27.4) 6.8
UK Exteriors 104.1 143.5 (27.5)% (8.9) 5.1
UK before
non-core 259.0 438.7 (41.0)% (36.3) 11.9
----------- ----------- ---------- --------------- -----------
Non-core businesses 21.2 29.6 - 0.3 1.1
--------------------- ----------- ----------- ---------- --------------- -----------
UK 280.2 468.3 (41.0)% (36.0) 13.0
--------------------- ----------- ----------- ---------- --------------- -----------
UK
Underlying revenue in UK Distribution, a market leading
specialist insulation and interiors distribution business, was down
47.5% to GBP154.9m (H1 2019: GBP295.2m). Underlying gross margin
dropped to 22.9% (H1 2019: 24.9%). The lockdown during March and
April severely impacted UK trading and as a result, combined with
some continued underlying weakness in performance, underlying
operating loss for the half year was GBP27.4m (H1 2019: GBP6.8m
profit). On a statutory basis, after taking into account Other
items, notably an impairment charge of GBP31.0m due primarily to
the Covid-19 impact, UK Distribution reported an operating loss of
GBP61.0m (H1 2019: GBP2.6m profit).
UK Exteriors, a market leading and national specialist roofing
merchant, saw underlying revenue fall by 27.6% to GBP104.1m (H1
2019: GBP143.5m). Gross margin decreased 170bps to 27.2% (H1 2019:
28.9%). As a result of the trading impact of Covid-19, the business
saw an underlying operating loss of GBP8.9m (H1 2019: GBP5.1m
profit). On a statutory basis, after taking into account Other
items, notably an impairment charge of GBP11.8m due primarily to
the Covid-19 impact, UK Exteriors reported an operating loss of
GBP23.4m (H1 2019: GBP2.0m profit).
France
Underlying Underlying
Underlying Underlying
operating Operating
revenue revenue profit/(loss) Profit/(Loss)
H1 2020 H1 2019 H1 2020 H1 2019
(GBPm) (GBPm) LFL sales (GBPm) (GBPm)
----------- ----------- ---------- --------------- ---------------
France Distribution 73.8 93.0 (20.2)% 1.3 6.6
France Exteriors 154.4 172.4 (11.4)% 1.6 4.2
France before
non-core 228.2 265.4 (14.5)% 2.9 10.8
----------- ----------- ---------- --------------- ---------------
Non-core businesses 1.2 0.9 - (0.2) (0.3)
--------------------- ----------- ----------- ---------- --------------- ---------------
France 229.4 266.3 (14.5)% 2.7 10.5
--------------------- ----------- ----------- ---------- --------------- ---------------
Trading activity suffered a temporary setback in France
following the short term closure of all branches for three days in
mid-March. The businesses then commenced a staged reopening through
into May.
In France Distribution, trading as LiTT, a leading structural
insulation and interior business, underlying revenue decreased by
20.6% to GBP73.8m (H1 2019: GBP93.0m), impacted by the
aforementioned temporary lockdown. However, underlying gross margin
increased 280bps to 26.4% (H1 2019: 23.6%), largely enabled by the
introduction of a new pricing framework during the latter stages of
2019. The reduction in revenue, offset by improved margin, resulted
in a GBP5.3m decrease in underlying operating profit to GBP1.3m (H1
2019: GBP6.6m). On a statutory basis, after taking into account
Other items, France Distribution reported an operating profit of
GBP1.3m (H1 2019: GBP6.6m).
Underlying revenue in France Exteriors, trading as Larivière, a
market leading specialist roofing business, decreased by 10.4% to
GBP154.4m (H1 2019: GBP172.4m), also impacted by the lockdown.
Underlying gross margin remained relatively stable at 23.6% (H1
2019: 23.3%). This resulted in a GBP2.6m decrease in underlying
operating profit to GBP1.6m (H1 2019: GBP4.2m). On a statutory
basis, after taking into account Other items, France Exteriors
reported an operating profit of GBP1.1m (H1 2019: GBP2.8m).
Germany and Benelux
Underlying Underlying
Underlying Underlying
operating operating
revenue revenue (loss)/profit profit
H1 2020 H1 2019 H1 2020 H1 2019
(GBPm) (GBPm) LFL sales (GBPm) (GBPm)
----------- ----------- ---------- --------------- -----------
Germany 177.1 191.5 (7.8)% (1.3) 3.3
Benelux 47.7 53.7 (10.7)% 1.8 2.9
Germany and
Benelux before
non-core 224.8 245.2 (8.5)% 0.5 6.2
----------- ----------- ---------- --------------- -----------
Non-core businesses - 11.3 - - 0.6
--------------------- ----------- ----------- ---------- --------------- -----------
Germany and
Benelux 224.8 256.5 (8.5)% 0.5 6.8
--------------------- ----------- ----------- ---------- --------------- -----------
The Group's operating companies in Germany and Benelux were
impacted by government measures due to Covid-19 but to a lesser
extent than in the UK, Ireland and France, and trading continued
from all sites throughout the period.
Underlying revenue in a specialist insulation and interiors
distribution business in Germany, trading as WeGo/VTi, fell by 7.5%
to GBP177.1m (H1 2019: GBP191.5m). In addition to Covid-19, trading
in Germany saw a continuation of the challenging trends seen in the
last quarter of 2019. However, underlying gross margin increased
60bps to 28.2% (H1 2019: 27.6%) assisted by further enhancements
around pricing controls. As a result, underlying operating loss for
the period was GBP1.3m (H1 2019: GBP3.3m profit). On a statutory
basis, after taking into account Other items, Germany reported a
loss of GBP1.1m (H1 2019: GBP1.9m loss).
Underlying revenue from the Group's distributor of insulation
and interiors in the Benelux region fell by 11.3% to GBP47.7m (H1
2019: GBP53.7m). Underlying gross margin decreased slightly to
24.5% (H1 2019: 24.8%). As a result, operating profit decreased to
GBP1.8m (H1 2019: GBP2.9m). On a statutory basis, after taking into
account Other items, Benelux reported an operating profit of
GBP1.4m (H1 2019: GBP2.7m).
Ireland
Underlying Underlying
Underlying Underlying
operating operating
revenue revenue (loss)/profit profit
H1 2020 H1 2019 H1 2020 H1 2019
(GBPm) (GBPm) LFL sales (GBPm) (GBPm)
----------- ----------- ---------- --------------- -----------
Ireland 33.4 47.5 (29.4)% (1.4) 2.9
--------- ----------- ----------- ---------- --------------- -----------
In Ireland, a specialist distributor of interiors, insulation
and construction accessories, revenues in March to April were
significantly impacted by the Covid-19 pandemic, with a gradual
improvement in performance in May to June as branches began to
reopen. Underlying revenue declined by 29.7% to GBP33.4m (H1 2019:
GBP47.5m). Underlying gross margin dropped to 21.9% (H1 2019:
24.9%). Underlying operating loss was GBP1.4m (H1 2019: GBP2.9m
profit) and on a statutory basis, after taking into account Other
items, Ireland reported an operating loss of GBP1.4m (H1 2019:
GBP2.1m profit).
Poland
Underlying Underlying
Underlying Underlying
operating operating
revenue revenue profit profit
H1 2020 H1 2019 H1 2020 H1 2019
(GBPm) (GBPm) LFL sales (GBPm) (GBPm)
----------- ----------- ---------- ----------- -----------
Poland 72.3 74.7 (6.0)% 0.6 1.3
-------- ----------- ----------- ---------- ----------- -----------
In Poland, a market leading distributor of insulation and
interiors, underlying revenue fell to GBP72.3m (H1 2019: GBP74.7m).
Whilst also impacted by government measures, trading continued from
all sites throughout the period. However, underlying gross margin
increased slightly to 20.6% (H1 2019: 20.3%), reflecting a change
in customer sales mix during the period, with greater volumes
coming from its sole trader and small company customer base, where
margins are usually higher. The business delivered an underlying
and statutory operating profit of GBP0.6m (H1 2019: GBP1.3m).
Air Handling disposal complete
The Group completed the sale of its Air Handling division on 31
January 2020. The Air Handling division delivered revenue for the
period of GBP25.4m (H1 2019: GBP159.3m) and underlying operating
profit of GBP1.1m (H1 2019: GBP9.2m). The results from this
business are shown as a discontinued operation.
Other items
Other items, being items excluded from underlying results,
during the period amounted to GBP71.7m (H1 2019: GBP15.2m) on a
pre-tax basis, and comprised:
-- Amortisation of acquired intangibles of GBP2.8m (H1 2019: GBP3.1m);
-- Impairment charges of GBP42.8m (H1 2019: GBPnil), relating to
impairment of goodwill in the UK businesses following the
reassessment of trading expectations to reflect the impact of
Covid-19;
-- Profits and losses on the sale or closure of non-core
businesses and associated impairment charges of GBP1.4m profit (H1
2019: GBP0.9m loss), together with net operating profit from those
businesses of GBP0.1m (H1 2010: GBP1.4m);
-- Net restructuring costs of GBP3.5m comprising property
closure costs of GBP0.7m (H1 2019: GBP0.5m), redundancy and staff
related costs of GBP0.8m (H1 2019: GBP6.1m), impairment of
non-current and current assets due to restructuring of GBP0.1m (H1
2019: GBP0.5m), restructuring consultancy costs of GBP1.7m (H1
2019: GBP5.1m) and GBP0.2m other (H1 2019: GBPnil), primarily
incurred in connection with the fundamental restructuring of the
target operating model of the major operating companies in the UK,
Germany and France;
-- Costs relating to investment in omnichannel retailing of GBP4.1m (H1 2019: GBPnil);
-- Costs associated with refinancing GBP6.9m (H1 2019: GBPnil);
-- Other specific items of GBP1.1m (H1 2019: GBP0.1m), including
GBP1.7m of fees in relation to a PwC independent review offset by
GBP0.6m gain in forward currency options;
-- Non underlying finance costs GBP12.0m (H1 2019: GBP0.3m),
including GBP11.3m loss on modification recognised in relation to
the private placement notes.
Impact of non-core businesses
H1 2019 has been restated to reflect the business divestments
classified as non-underlying subsequent to the 2019 interim
announcement (Building Solutions and Maury) and the presentation of
the Air Handling division as discontinued. Please refer to the
table below.
Underlying Underlying
revenue PBT
(GBPm) (GBPm)
----------- -----------
As reported at H1 2019 results 1,260.1 27.3
-------------------------------- ----------- -----------
Air Handling (159.3) (8.6)
Building Solutions (National)
Ltd (28.4) (1.6)
Maury (0.9) 0.3
-------------------------------- ----------- -----------
Restated at H1 2020 results 1,071.5 17.4
-------------------------------- ----------- -----------
Responsibility Statement
We confirm to the best of our knowledge that:
(a) the condensed interim set of financial statements has been
prepared in accordance with IAS 34 "Interim Financial Reporting" as
adopted by the European Union;
(b) the Interim Report includes a fair review of the information
required by DTR 4.2.7R (indication of important events during the
first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
(c) the Interim Report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related parties' transactions
and changes therein).
By order of the Board
Steve Francis Ian Ashton
Director Director
24 September 2020 24 September 2020
Cautionary Statement
This Interim Report is prepared for and addressed only to the
Company's Shareholders as a whole and to no other person. The
Company, its Directors, employees, agents or advisors do not accept
or assume responsibility to any other person to whom this Interim
Report is shown or into whose hands it may come and such
responsibility or liability is expressly disclaimed.
This Interim Report contains forward-looking statements that are
subject to risk factors including the economic and business
circumstances occurring from time to time in countries and markets
in which the Group operates and risk factors associated with the
building and construction sectors. By their nature, forward-looking
statements involve a number of risks, uncertainties and assumptions
because they relate to events and/or depend on circumstances that
may or may not occur in the future and could cause actual results
and outcomes to differ materially from those expressed in or
implied by the forward-looking statements. No assurance can be
given that the forward-looking statements in this Interim Report
will be realised. Statements about the Directors' expectations,
beliefs, hopes, plans, intentions and strategies are inherently
subject to change and they are based on expectations and
assumptions as to future events, circumstances and other factors
which are in some cases outside the Group's control. Actual results
could differ materially from the Group's current expectations.
It is believed that the expectations set out in these
forward-looking statements are reasonable but they may be affected
by a wide range of variables which could cause actual results or
trends to differ materially, including but not limited to, market
conditions, competitors and margin management, commercial
relationships, fluctuations in product pricing, changes in foreign
exchange and interest rates, government legislation, availability
of funding, working capital and cash management, IT infrastructure
and cyber security and availability and quality of key
resources.
The Company's Shareholders are cautioned not to place undue
reliance on the forward-looking statements. This Interim Report has
not been audited or otherwise independently verified. The
information contained in this Interim Report has been prepared on
the basis of the knowledge and information available to Directors
at the date of its preparation and the Company does not undertake
any obligation to update or revise this Interim Report during the
financial year ahead.
Condensed Consolidated Income Statement
for the six months ended 30 June 2020 (unaudited)
Six months ended 30 June Six months ended 30 June Year ended 31 December
2020 2019 2019
Other
Other Underlying* items** Total Other
Underlying* items** Total Restated^ Restated^ Restated^ Underlying* items** Total
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 2 817.7 22.4 840.1 1,071.5 41.8 1,113.3 2,084.7 75.9 2,160.6
Cost of sales (614.7) (15.9) (630.6) (800.3) (30.9) (831.2) (1,545.5) (56.0) (1,601.5)
------------------ ----- ------------ -------- -------- ------------ ---------- ---------- ------------ -------- ----------
Gross profit 203.0 6.5 209.5 271.2 10.9 282.1 539.2 19.9 559.1
Other operating
expenses (246.2) (66.2) (312.4) (242.1) (25.8) (267.9) (499.6) (147.4) (647.0)
------------------ ----- ------------ -------- -------- ------------ ---------- ---------- ------------ -------- ----------
Operating
profit/(loss) 3 (43.2) (59.7) (102.9) 29.1 (14.9) 14.2 39.6 (127.5) (87.9)
Finance income 0.3 - 0.3 0.2 - 0.2 0.5 - 0.5
Finance costs (10.8) (12.0) (22.8) (11.9) (0.3) (12.2) (24.5) (0.8) (25.3)
------------------ ----- ------------ -------- -------- ------------ ---------- ---------- ------------ -------- ----------
Profit/(loss)
before tax (53.7) (71.7) (125.4) 17.4 (15.2) 2.2 15.6 (128.3) (112.7)
Income tax
(expense)/credit 5 0.1 0.7 0.8 (4.7) 3.2 (1.5) (15.9) 4.5 (11.4)
------------------ ----- ------------ -------- -------- ------------ ---------- ---------- ------------ -------- ----------
Profit/(loss)
after tax
from continuing
operations (53.6) (71.0) (124.6) 12.7 (12.0) 0.7 (0.3) (123.8) (124.1)
------------------ ----- ------------ -------- -------- ------------ ---------- ---------- ------------ -------- ----------
Discontinued
operations
Profit/(loss)
after tax
from
discontinued
operations 8 - 70.8 70.8 - 0.6 0.6 - (0.4) (0.4)
------------------ ----- ------------ -------- -------- ------------ ---------- ---------- ------------ -------- ----------
Profit/(loss)
after tax
for the period (53.6) (0.2) (53.8) 12.7 (11.4) 1.3 (0.3) (124.2) (124.5)
------------------ ----- ------------ -------- -------- ------------ ---------- ---------- ------------ -------- ----------
Attributable to:
Equity holders of
the Company (53.6) (0.2) (53.8) 12.7 (11.4) 1.3 (0.3) (124.2) (124.5)
Earnings per
share
Basic and diluted
earnings/(loss)
per share 6 (9.1)p 0.2p (21.0)p
Basic and diluted
earnings/(loss)
per share from
continuing
operations 6 (21.1)p 0.1p (21.0)p
------------------ ----- ------------ -------- -------- ------------ ---------- ---------- ------------ -------- ----------
* Underlying represents the results before Other items.
** Other items relate to the amortisation of acquired
intangibles, impairment charges, profits and losses on agreed sale
or closure of non-core businesses and associated impairment
charges, net operating profit/(losses) attributable to businesses
identified as non-core, net restructuring costs, investment in
omnichannel retailing, other specific items, fair value gains and
losses on derivative financial instruments, non-underlying finance
costs, the taxation effect of Other items and the effect of changes
in taxation rates. Other items have been disclosed separately in
order to give an indication of the underlying earnings of the
Group. Further details can be found in Note 4.
^ The results for the period to 30 June 2019 have been restated
to present Air Handling as a discontinued operation. See Note 1 and
Note 8 for further details.
Condensed Consolidated Statement of Comprehensive Income
for the six months ended 30 June 2020 (unaudited)
Six months Six months Year ended
ended ended 31 December
30 June 2020 30 June 2019 2019
GBPm GBPm GBPm
Profit/(loss) after tax (53.8) 1.3 (124.5)
Items that will not subsequently
be reclassified to the Consolidated
Income Statement:
Remeasurement of defined benefit
pension liability (Note 13) (9.8) (3.8) (1.8)
Current tax movement associated
with remeasurement of defined
benefit pension liability - - 0.4
Deferred tax movement associated
with remeasurement of defined
benefit pension liability - 0.8 (6.6)
(9.8) (3.0) (8.0)
Items that may subsequently
be reclassified to the Consolidated
Income Statement:
Exchange difference on retranslation
of foreign currency goodwill
and intangibles 4.4 (0.4) (7.4)
Exchange difference on retranslation
of foreign currency net investments
(excluding goodwill and intangibles) 18.0 (0.9) (16.1)
Exchange and fair value movements
associated with borrowings and
derivative financial instruments (12.5) - 10.9
Tax credit on exchange and fair
value movements arising on borrowings
and derivative financial instruments 2.4 - (2.1)
Exchange differences reclassified
to the Consolidated Income Statement
in respect of the disposal of
foreign operations (5.9) - (0.1)
Gains and losses on cash flow
hedges 2.0 0.8 0.4
Transfer to profit and loss
on cash flow hedges (1.6) (0.1) 0.9
---------------------------------------- -------------- -------------- -------------
6.8 (0.6) (13.5)
---------------------------------------- -------------- -------------- -------------
Other comprehensive (expense)/income (3.0) (3.6) (21.5)
---------------------------------------- -------------- -------------- -------------
Total comprehensive (expense)/income (56.8) (2.3) (146.0)
---------------------------------------- -------------- -------------- -------------
Attributable to:
Equity holders of the Company (56.8) (2.3) (146.0)
(56.8) (2.3) (146.0)
---------------------------------------- -------------- -------------- -------------
Condensed Consolidated Balance Sheet
as at 30 June 2020 (unaudited)
30 June 31 December
30 June 2020 2019 2019
Note GBPm GBPm GBPm
Non-current assets
Property, plant and equipment 67.1 81.1 58.6
Right-of-use assets 257.6 304.4 255.2
Goodwill 131.3 293.5 159.0
Intangible assets 43.1 46.7 42.3
Lease receivables 4.0 4.8 4.4
Deferred tax assets 6.9 15.5 4.4
Derivative financial instruments 11 4.5 2.6 1.7
Deferred consideration 11 - 0.3 -
---------------------------------- ----- --------------- --------- -------------
514.5 748.9 525.6
---------------------------------- ----- --------------- --------- -------------
Current assets
Inventories 185.3 219.7 156.5
Lease receivables 0.8 0.8 0.8
Trade and other receivables 293.6 464.8 294.7
Contract assets - 3.1 -
Current tax assets - 5.3 0.9
Derivative financial instruments 11 0.7 - 0.9
Deferred consideration 11 - 0.6 -
Cash at bank and on hand 197.3 153.1 110.0
Assets classified as held
for sale 7 - 9.3 258.4
---------------------------------- ----- --------------- --------- -------------
677.7 856.7 822.2
---------------------------------- ----- --------------- --------- -------------
Total assets 1,192.2 1,605.6 1,347.8
---------------------------------- ----- --------------- --------- -------------
Current liabilities
Trade and other payables 341.8 480.8 327.4
Contract liabilities - 2.3 -
Lease liabilities 54.6 61.2 51.5
Bank overdrafts - 5.6 -
Bank loans - 94.7 99.6
Private placement notes 48.3 - 175.5
Other financial liabilities 0.5 1.2 1.5
Derivative financial instruments 11 0.1 0.1 0.2
Current tax liabilities 3.2 2.7 3.7
Provisions 8.1 7.0 6.7
Liabilities directly associated
with assets classified as
held for sale - 2.2 115.7
---------------------------------- ----- --------------- --------- -------------
456.6 657.8 781.8
---------------------------------- ----- --------------- --------- -------------
Non-current liabilities
Lease liabilities 224.5 258.2 224.1
Bank loans 67.2 - -
Private placement notes 149.4 185.0 -
Derivative financial instruments 11 3.2 4.2 1.9
Other financial liabilities 1.3 - 1.4
Deferred tax liabilities - 1.4 -
Other payables 3.1 3.5 1.0
Retirement benefit obligations 13 33.0 30.7 24.8
Provisions 16.5 19.0 18.6
---------------------------------- ----- --------------- --------- -------------
498.2 502.0 271.8
---------------------------------- ----- --------------- --------- -------------
Total liabilities 954.8 1,159.8 1,053.6
---------------------------------- ----- --------------- --------- -------------
Net assets 237.4 445.8 294.2
---------------------------------- ----- --------------- --------- -------------
Capital and reserves
Called up share capital 12 59.2 59.2 59.2
Share premium account 447.3 447.3 447.3
Capital redemption reserve 0.3 0.3 0.3
Share option reserve 1.8 2.3 1.8
Hedging and translation
reserve 16.8 20.4 10.2
Cost of hedging reserve 0.5 0.4 0.3
Retained losses (288.5) (84.1) (224.9)
---------------------------------- ----- --------------- --------- -------------
Attributable to equity holders
of the Company 237.4 445.8 294.2
---------------------------------- ----- --------------- --------- -------------
Total equity 237.4 445.8 294.2
---------------------------------- ----- --------------- --------- -------------
Condensed Consolidated Cash Flow Statement
for the six months ended 30 June 2020 (unaudited)
Six months Six months Year ended
ended 30 June ended 30 31 December
2020 June 2019 2019
Note GBPm GBPm GBPm
Net cash flow from operating
activities
Cash generated from operating
activities 9 (28.5) 86.4 166.0
Income tax paid (3.5) (5.9) (10.8)
--------------------------------- ----- ---------------- ----------- -------------
Net cash generated from
operating activities (32.0) 80.5 155.2
--------------------------------- ----- ---------------- ----------- -------------
Cash flows from investing
activities
Finance income received 0.3 0.3 0.6
Purchase of property, plant
and equipment and computer
software (13.4) (13.1) (34.5)
Proceeds from sale of property,
plant and equipment 4.6 3.9 7.6
Net cash flow arising on
the sale of businesses 7 149.5 0.6 8.4
Net cash (used in)/generated
from investing activities 141.0 (8.3) (17.9)
--------------------------------- ----- ---------------- ----------- -------------
Cash flows from financing
activities
Finance costs paid (10.8) (5.8) (25.1)
Repayment of lease liabilities (27.2) (34.8) (59.9)
Acquisition of non-controlling
interests - (0.9) (0.9)
Repayment of loans/settlement
of derivative financial
instruments 1.0 (3.7) -
Additional drawdown/(repayment)
of revolving credit facility* (30.0) 41.0 42.4
Costs paid in relation to
equity raise 20 (1.3) - -
Dividends paid to equity
holders of the Company 14 - - (22.2)
Net cash used in financing
activities (68.3) (4.2) (65.7)
--------------------------------- ----- ---------------- ----------- -------------
Increase in cash and cash
equivalents in the period 10 40.7 68.0 71.6
--------------------------------- ----- ---------------- ----------- -------------
Cash and cash equivalents
at beginning of the period 145.1 78.8 78.8
Effect of foreign exchange
rate changes 11.5 0.7 (5.3)
--------------------------------- ----- ---------------- ----------- -------------
Cash and cash equivalents
at end of the period** 197.3 147.5 145.1
--------------------------------- ----- ---------------- ----------- -------------
* As part of the changes to the debt facility agreements on 18
June 2020 (see Note 1), GBP70.0m drawn under the existing revolving
credit facility was converted into a GBP70.0m term facility, with
no additional repayment or drawdown made.
** Cash and cash equivalents comprise cash at bank and on hand
of GBP197.3m (30 June 2019: GBP153.1m; 31 December 2019: GBP145.1m)
less bank overdrafts of GBPnil (30 June 2019: GBP5.6m; 31 December
2019: GBPnil)
Condensed
Consolidated
Statement
of Changes in
Equity
for the six
months ended 30
June
2020 (unaudited)
Called Hedging Retained
up Share Capital Share and Cost of (losses)
share premium redemption option translation hedging / Non-controlling Total
capital account reserve reserve reserves reserve profits Total interests equity
For the six
months ended 30
June
2020 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ -------- -------- ----------- -------- ------------ -------- --------- ------- ---------------- -------
At 1 January 2020 59.2 447.3 0.3 1.8 10.2 0.3 (224.9) 294.2 - 294.2
Profit/(loss)
after tax - - - - - - (53.8) (53.8) - (53.8)
Other
comprehensive
income/(expense) - - - - 6.6 0.2 (9.8) (3.0) - (3.0)
------------------ -------- -------- ----------- -------- ------------ -------- --------- ------- ---------------- -------
Total
comprehensive
income/(expense) - - - - 6.6 0.2 (63.6) (56.8) - (56.8)
------------------ -------- -------- ----------- -------- ------------ -------- --------- ------- ---------------- -------
At 30 June 2020 59.2 447.3 0.3 1.8 16.8 0.5 (288.5) 237.4 - 237.4
------------------ -------- -------- ----------- -------- ------------ -------- --------- ------- ---------------- -------
Called Hedging Retained
up Share Capital Share and Cost of (losses)
share premium redemption option translation hedging / Non-controlling Total
capital account reserve reserve reserves reserve profits Total interests equity
------------------
For the six
months ended 30
June
2019 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ -------- -------- ----------- -------- ------------ -------- --------- ------- ---------------- -------
At 1 January 2019 59.2 447.3 0.3 1.7 21.7 1.0 (68.3) 462.9 - 462.9
Impact of
adoption of IFRS
16 - - - - - - (0.6) (0.6) - (0.6)
Adjusted balance
at 1 January
2019 59.2 447.3 0.3 1.7 21.7 1.0 (68.9) 462.3 - 462.3
Profit after tax - - - - - - 1.3 1.3 - 1.3
Other
comprehensive
income/(expense) - - - - (1.3) (0.6) (1.7) (3.6) - (3.6)
Total
comprehensive
income/(expense) - - - - (1.3) (0.6) (0.4) (2.3) - (2.3)
Credit to share
option reserve - - - 0.6 - - - 0.6 - 0.6
Dividends paid to
equity holders
of the Company - - - - - - (14.8) (14.8) - (14.8)
------------------ -------- -------- ----------- -------- ------------ -------- --------- ------- ---------------- -------
At 30 June 2019 59.2 447.3 0.3 2.3 20.4 0.4 (84.1) 445.8 - 445.8
------------------ -------- -------- ----------- -------- ------------ -------- --------- ------- ---------------- -------
Called Hedging Retained
up Share Capital Share and Cost of (losses)
share premium redemption option translation hedging / Non-controlling Total
capital account reserve reserve reserves reserve profits Total interests equity
------------------
For the year
ended 31 December
2019 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ -------- -------- ----------- -------- ------------ -------- --------- -------- ---------------- --------
At 1 January 2019 59.2 447.3 0.3 1.7 21.7 1.0 (68.3) 462.9 - 462.9
Impact of
adoption of IFRS
16 - - - - - - (0.6) (0.6) - (0.6)
Adjusted balance
at 1 January
2019 59.2 447.3 0.3 1.7 21.7 1.0 (68.9) 462.3 - 462.3
Profit/(loss)
after tax - - - - - - (124.5) (124.5) - (124.5)
Other
comprehensive
income/(expense) - - - - (12.8) (0.7) (8.0) (21.5) - (21.5)
------------------ -------- -------- ----------- -------- ------------ -------- --------- -------- ---------------- --------
Total
comprehensive
income/(expense) - - - - (12.8) (0.7) (132.5) (146.0) - (146.0)
Transfer of
reserves - - - - 1.3 - (1.3) - -
Credit to share
option reserve - - - 0.1 - - - 0.1 - 0.1
Dividends paid to
equity holders
of the Company - - - - - - (22.2) (22.2) - (22.2)
------------------ -------- -------- ----------- -------- ------------ -------- --------- -------- ---------------- --------
At 31 December
2019 59.2 447.3 0.3 1.8 10.2 0.3 (224.9) 294.2 - 294.2
------------------ -------- -------- ----------- -------- ------------ -------- --------- -------- ---------------- --------
The share option reserve represents the cumulative
equity-settled share option charge under IFRS 2 "Share-based
payment" less the value of any share options that have been
exercised.
The hedging and translation reserve represent movements in the
Condensed Consolidated Balance Sheet as a result of movements in
exchange rates and movements in the fair value of cash flow hedges
which are taken directly to reserves.
Notes to the Condensed Interim Financial Statements
1. Basis of preparation of Condensed Interim Financial Statements
The Condensed Interim Financial Statements were approved by the
Board of Directors on 24 September 2020.
The Condensed Interim Financial Statements do not constitute
statutory accounts as defined in Section 434 of the Companies Act
2006. The interim results to 30 June 2020 and 30 June 2019 have
been subject to an Interim Review in accordance with ISRE 2410 by
the Company's Auditor. The financial information for the full
preceding year is based on the audited statutory accounts for the
financial year ended 31 December 2019 prepared in accordance with
IFRS as adopted by the European Union. Those accounts have been
delivered to the Registrar of Companies. The Auditor's Report was
(i) unqualified, (ii) contained a number of material uncertainties
in respect of going concern to which the auditor drew attention by
way of emphasis without modifying their report and (iii) did not
contain statements under Section 498(2) or Section 498(3) of the
Companies Act 2006 in relation to the financial statements.
The Group's Condensed Interim Financial Statements have been
prepared in accordance with IAS 34 "Interim Financial Reporting" as
adopted by the European Union and the accounting policies included
in the Annual Report and Accounts for the year ended 31 December
2019, which have been applied consistently throughout the current
and preceding periods. In 2019 the reportable operating segments
were grouped on a line of business basis with subtotals for
Specialist Distribution and Roofing Merchanting. There is no change
to the reportable operating segments from those reported in the
2019 Annual Report and Accounts, but the segments are now grouped
on a geographical basis instead of a line of business basis. This
reflects the way in which information is reported and reviewed by
the Chief Operating Decision Maker (CODM) following the change in
management and strategy during 2020.
The areas of critical accounting judgements and key sources of
estimation uncertainty set out on pages 154 to 155 of the 2019
Annual Report and Accounts are considered to continue and be
consistently applied. The impact of Covid-19 on the key sources of
estimation has been considered. The carrying value of non-current
assets has been reviewed, which has resulted in an impairment of
GBP42.8m being recognised at 30 June 2020 in relation to the UK
Distribution and UK Exteriors CGUs. Provisions for expected credit
losses in relation to trade receivables have been considered, but
this has not resulted in any significant increase in the level of
provision required.
The Air Handling business, which has been sold during the
period, was classified as a discontinued operation in the 2019
Annual Report and Accounts and the results for the period to the
date of disposal continue to be classified as discontinued in these
interim financial statements, together with the gain on sale. The
comparatives for the period to 30 June 2019 have been restated to
present the results for Air Handling on a consistent basis. Other
businesses identified as non-core in 2019 did not meet the
disclosure criteria of being discontinued operations as they did
not individually or in aggregate represent a separate major line of
business or geographical area of operation. In order to give an
indication of the underlying earnings of the Group, the results of
these businesses have been included within Other items in the
Condensed Consolidated Income Statement. The comparatives for the
period ending 30 June 2019 have been re-analysed to present net
operating profits of GBP1.6m attributable to businesses identified
as non-core in the second half of 2019 within Other items.
Significant changes in the current reporting period
The Covid-19 pandemic has had a significant impact on the global
and UK economies and on the Group's results for the period ended 30
June 2020, as explained in more detail below and in the operational
and financial review. The Group has completed the sale of the Air
Handling business during the period, with further details of the
impact on the results for the period included in Note 8 to these
interim financial statements. The Group has also amended the terms
of its financing arrangements, as explained below and in Note
4.
As disclosed in the 2019 Annual Report and Accounts, the project
to implement SAP 1Hana in Germany and France has been paused during
the period in light of the Covid-19 situation and to allow new
senior management to fully assess the overall IT strategy. A
decision will be made over the coming months to determine the
future direction and feasibility of the project. Costs of GBP13.6m
are included in intangible assets at 30 June 2020.
Going Concern
The Group closely monitors its funding position throughout the
year, including monitoring compliance with covenants and available
facilities to ensure it has sufficient headroom to fund
operations.
Following a challenging trading period in 2019 and a change in
its Executive Directors in February 2020, the Group undertook an
extensive review of its business and operating strategy together
with potential growth opportunities. During these reviews, it
became clear that revised lower forecasts for future earnings for
2020 to 2022 were likely to leave the Group with higher than
anticipated leverage levels during this period. In turn, these
highlighted that the Group's capital structure needed to be
addressed and, as a result, the Group sought to raise new equity in
order to support its ability to successfully deliver the Group's
new strategy while at the same time managing liquidity.
In July 2020 the Group successfully raised GBP165m of equity
through a firm placing and placing and open offer in order to
reduce net debt and strengthen the Group's balance sheet. Alongside
this, as announced on 19 June 2020, the Group also agreed amended
debt facility agreements in respect of its Revolving Credit
Facility (RCF) and private placement debt.
Following the conclusion of the refinancing in June, the Group
is, or will be, now subject to covenant testing as follows:
-- Leverage (net debt/EBITDA) and interest cover
(EBITA/interest) will not be tested until March 2022, from which
point they will be tested every quarter, the tests being applied to
the prior 12 months.
-- From 31 July 2020 until 28 February 2022 the Group must
ensure that Consolidated Net Debt (CND) does not exceed GBP125m for
each test date in 2020 and GBP225m for each test date thereafter.
As at 30 June 2020, the CND was GBP82.2m. However, following
completion of the equity raise, the Group is currently in a net
cash position.
-- Consolidated Net Worth (CNW) must at all times not be less
than GBP250m. At 30 June 2020 the CNW, under frozen GAAP, as
reported herein, was GBP257.2m. After the equity raise, completed
on 10 July 2020 this rose by approximately GBP152m.
-- The Company must ensure that Liquidity of the Group is not
less than GBP40m from the date of signing the amendments (18 June
2020).
The forecasts which underpin our going concern assessment, and
specifically our ability to meet the CND, CNW and liquidity tests
above, look out to 30 September 2021. These forecasts reflect the
more normal trading levels seen since the worst of the Covid-19
impact, as well as the expected positive impact of the strategic
actions being undertaken to improve future performance, notably in
the UK. Management have continued to manage liquidity, such that
cashflow performance is better than initial expectations for the
current period and continue to monitor the Group's forecast
liquidity position to ensure it does not fall below minimum
required levels. The forecasts indicate that the Group will be able
to operate within the covenants for at least 12 months from the
date of approval of this half-year report. This is also the case
under a plausible downside scenario, which was prepared for the
equity raise and assumed a decline in sales volumes across most of
the Group's end use markets, and specifically assumed an impact
from further potential Covid-19 related restrictions. It also
assumed a slower turnaround in our UK business.
After careful consideration, the Directors therefore believe
that it is appropriate to prepare the financial statements on a
going concern basis.
New standards, interpretations and amendments adopted by the
Group
A number of amended standards became applicable for the current
reporting period. These standards did not have any impact on the
Group's accounting policies and did not require retrospective
adjustments.
2. Revenue from contracts with customers
Set out below is the disaggregation of the Group's revenue from
contracts with customers:
Total
Germany
UK UK Total France France Total and Total
Distribution Exteriors UK Distribution Exteriors France Germany Benelux Benelux Ireland Poland Eliminations Group
Six months
ended 30 June
2020 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- ------
Type of
product
Interiors 154.9 - 154.9 73.8 - 73.8 177.1 47.7 224.8 19.8 69.2 - 542.5
Exteriors - 104.1 104.1 - 154.4 154.4 - - - 13.6 - - 272.1
Heating,
ventilation
and air
conditioning - - - - - - - - - - 3.1 - 3.1
Inter-segment
revenue^ 1.0 1.0 2.0 0.7 3.1 3.8 - - - - - (5.8) -
---------------
Total
underlying
revenue 155.9 105.1 261.0 74.5 157.5 232.0 177.1 47.7 224.8 33.4 72.3 (5.8) 817.7
--------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- ------
Revenue
attributable
to businesses
identified
as non-core - 21.2 21.2 - 1.2 1.2 - - - - - - 22.4
--------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- ------
Total 155.9 126.3 282.2 74.5 158.7 233.2 177.1 47.7 224.8 33.4 72.3 (5.8) 840.1
--------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- ------
Nature of
revenue
Goods for
resale 155.9 126.3 282.2 74.5 158.7 233.2 177.1 47.7 224.8 31.6 72.3 (5.8) 838.3
Construction
contracts - - - - - - - - - 1.8 - - 1.8
--------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- ------
Total 155.9 126.3 282.2 74.5 158.7 233.2 177.1 47.7 224.8 33.4 72.3 (5.8) 840.1
--------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- ------
Timing of
revenue
recognition
Goods
transferred
at
a point in
time 155.9 126.3 282.2 74.5 158.7 233.2 177.1 47.7 224.8 31.6 72.3 (5.8) 838.3
Goods and
services
transferred
over time - - - - - - - - - 1.8 - - (1.8)
--------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- ------
Total 155.9 126.3 282.2 74.5 158.7 233.2 177.1 47.7 224.8 33.4 72.3 (5.8) 840.1
--------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- ------
^ Inter-segment revenue is charged at the prevailing market
rates.
Set out below is the disaggregation of the Group's revenue from
contracts with customers:
Total
Germany
UK UK Total France France Total and Group
Distribution Exteriors UK Distribution Exteriors France Germany Benelux Benelux Ireland Poland Eliminations Total
Six months
ended 30 June
2019 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Type of
product
Interiors 295.2 - 295.2 93.0 - 93.0 191.5 53.7 245.2 28.5 71.7 - 733.6
Exteriors - 143.5 143.5 - 172.4 172.4 - - - 19.0 - - 334.9
Heating,
ventilation
and air
conditioning - - - - - - - - - - 3.0 - 3.0
Inter-segment
revenue^ 1.8 1.8 3.6 0.3 3.7 4.0 - 0.1 0.1 - - (7.7) -
---------------
Total
underlying
revenue 297.0 145.3 442.3 93.3 176.1 269.4 191.5 53.8 245.3 47.5 74.7 (7.7) 1,071.5
--------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Revenue
attributable
to businesses
identified
as non-core 1.2 28.4 29.6 - 0.9 0.9 11.3 - 11.3 - - - 41.8
--------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Total 298.2 173.7 471.9 - 177.0 270.3 202.8 53.8 256.6 47.5 74.7 (7.7) 1,113.3
--------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Nature of
revenue
Goods for
resale 298.2 173.7 471.9 93.3 177.0 270.3 202.8 53.8 256.6 44.2 74.7 (7.7) 1,110.0
Construction
contracts - - - - - - - - - 3.3 - - 3.3
--------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Total 298.2 173.7 471.9 124.3 177.0 270.3 202.8 53.8 256.6 47.5 74.7 (7.7) 1,113.3
--------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Timing of
revenue
recognition
Goods
transferred
at
a point in
time 298.2 173.7 471.9 93.3 177.0 270.3 202.8 53.8 256.6 44.2 74.7 (7.7) 1,110.0
Goods and
services
transferred
over time - - - - - - - - - 3.3 - - 3.3
--------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Total 298.2 173.7 471.9 93.3 177.0 270.3 202.8 53.8 256.6 47.5 74.7 (7.7) 1,113.3
--------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
^ Inter-segment revenue is charged at the prevailing market
rates.
Set out below is the disaggregation of the Group's revenue from
contracts with customers:
Total
Germany
UK UK Total France France Total and Group
Distribution Exteriors UK Distribution Exteriors France Germany Benelux Benelux Ireland Poland Eliminations Total
Year ended 31
December
2019 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Type of
product
Interiors 515.4 - 515.4 184.5 - 184.5 381.5 103.0 484.5 56.4 149.6 - 1,390.4
Exteriors - 288.2 288.2 - 342.2 342.2 - - - 38.5 - - 668.9
Heating,
ventilation
and air
conditioning 18.9 - 18.9 - - - - - - - 6.5 - 25.4
Inter-segment
revenue^ 11.9 9.1 21.0 0.1 0.2 0.3 1.0 0.1 1.1 - - (22.4) -
---------------
Total
underlying
revenue 546.2 297.3 843.5 184.6 342.4 527.0 382.5 103.1 485.6 94.9 156.1 (22.4) 2,084.7
--------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Revenue
attributable
to businesses
identified
as non-core 1.2 58.3 59.5 - 1.9 1.9 14.5 - 14.5 - - - 75.9
--------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Total 547.4 355.6 903.0 184.6 344.3 528.9 397.0 103.1 500.1 94.9 156.1 (22.4) 2,160.6
--------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Nature of
revenue
Goods for
resale 547.4 355.6 903.0 184.6 344.3 528.9 397.0 103.1 500.1 88.7 156.1 (22.4) 2,154.4
Construction
contracts - - - - - - - - - 6.2 - - 6.2
--------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Total 547.4 355.6 903.0 184.6 344.3 528.9 397.0 103.1 500.1 94.9 156.1 (22.4) 2,160.6
--------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Timing of
revenue
recognition
Goods
transferred
at
a point in
time 547.4 355.6 903.0 184.6 344.3 528.9 397.0 103.1 500.1 88.7 156.1 (22.4) 2,154.4
Goods and
services
transferred
over time - - - - - - - - - 6.2 - - 6.2
--------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Total 547.4 355.6 903.0 184.6 344.3 528.9 397.0 103.1 500.1 94.9 156.1 (22.4) 2,160.6
--------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
^ Inter-segment revenue is charged at the prevailing market
rates.
3. Segmental information
In accordance with IFRS 8 "Operating Segments", the Group
identifies its reportable operating segments based on the way in
which financial information is reviewed and business performance is
assessed by the CODM. Reportable operating segments are grouped on
a geographical basis as explained in Note 1.
Total
Germany
UK UK Total France France Total and Total
Distribution Exteriors UK Distribution Exteriors France Germany Benelux Benelux Ireland Poland Eliminations Group
Six months
ended 30 June
2020 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ------------- ---------- ------- ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Revenue
Underlying
revenue 154.9 104.1 259.0 73.8 154.4 228.2 177.1 47.7 224.8 33.4 72.3 - 817.7
Revenue
attributable
to businesses
identified
as non-core - 21.2 21.2 - 1.2 1.2 - - - - - - 22.4
Inter-segment
revenue^ 1.0 1.0 2.0 0.7 3.1 3.8 - - - - - (5.8) -
Total revenue 155.9 126.3 282.2 74.5 158.7 233.2 177.1 47.7 224.8 33.4 72.3 (5.8) 840.1
---------------- ------------- ---------- ------- ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Result
Segment result
before
Other items (27.4) (8.9) (36.3) 1.3 1.6 2.9 (1.3) 1.8 0.5 (1.4) 0.6 - (33.7)
Amortisation of
acquired
intangibles (0.4) (2.2) (2.6) - (0.2) (0.2) - - - - - - (2.8)
Impairment
charges (31.0) (11.8) (42.8) - - - - - - - - - (42.8)
Profits and
losses on
agreed sale or
closure
of non-core
businesses
and associated
impairment
charges (Note
7) - - - - - - - - - - - - -
Net operating
losses
attributable
to businesses
identified as
non-core
(Note 7) - 0.3 0.3 - (0.2) (0.2) - - - - - - 0.1
Net
restructuring
costs (2.2) (0.8) (3.0) - (0.1) (0.1) - (0.4) (0.4) - - - (3.5)
Other specific
items - - - - - - 0.2 - 0.2 - - - 0.2
---------------- ------------- ---------- ------- ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Segment
operating
profit/(loss) (61.0) (23.4) (84.4) 1.3 1.1 2.4 (1.1) 1.4 0.3 (1.4) 0.6 - (82.5)
---------------- ------------- ---------- ------- ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Parent Company
costs (9.5)
Parent Company
other
items (6.8)
Investment in
omnichannel
retailing (4.1)
---------------- ------------- ---------- ------- ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Operating loss (102.9)
---------------- ------------- ---------- ------- ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Net finance
costs before
Other items (10.5)
Non-underlying
finance
costs (12.0)
---------------- ------------- ---------- ------- ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Profit before
tax (125.4)
---------------- ------------- ---------- ------- ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Income tax
credit 0.8
Profit after
tax from
discontinued
operations 70.8
---------------- ------------- ---------- ------- ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Loss for the
year (53.8)
---------------- ------------- ---------- ------- ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
^ Inter-segment revenue is charged at the prevailing market
rates.
In accordance with IFRS 8 "Operating Segments", the Group
identifies its reportable segments as those upon which the Group
Board regularly bases its opinion and assesses performance. The
Group has deemed it appropriate to aggregate its operating segments
into geographical groupings as explained in Note 1.
Total
Germany
UK UK Total France France Total and Total
Distribution Exteriors UK Distribution Exteriors France Germany Benelux Benelux Ireland Poland Eliminations Group
Six months
ended 30 June
2019 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Revenue
Underlying
revenue 295.2 143.5 438.7 93.0 172.4 265.4 191.5 53.7 245.2 47.5 74.7 - 1,071.5
Revenue
attributable
to businesses
identified
as non-core 1.2 28.4 29.6 - 0.9 0.9 11.3 - 11.3 - - - 41.8
Inter-segment
revenue^ 1.8 1.8 3.6 0.3 3.7 4.0 - 0.1 0.1 - - (7.7) -
Total revenue 298.2 173.7 471.9 93.3 177.0 270.3 202.8 53.8 256.6 47.5 74.7 (7.7) 1,113.3
---------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Result
Segment result
before
Other items 6.8 5.1 11.9 6.6 4.2 10.8 3.3 2.9 6.2 2.9 1.3 - 33.1
Amortisation of
acquired
intangibles (0.4) (2.2) (2.6) - (0.4) (0.4) - (0.1) (0.1) - - - (3.1)
Impairment
charges - - - - - - - - - - - - -
Profits and
losses on
agreed sale or
closure
of non-core
businesses
and associated
impairment
charges (Note
7) (0.6) 1.0 0.4 - - - (0.8) - (0.8) (0.5) - - (0.9)
Net operating
losses
attributable
to businesses
identified as
non-core
(Note 7) (0.8) 1.9 1.1 - (0.3) (0.3) 0.6 - 0.6 - - - 1.4
Net
restructuring
costs (2.7) (3.8) (6.5) - (0.6) (0.6) (5.0) (0.1) (5.1) - - - (12.2)
Other specific
items 0.3 - 0.3 - (0.1) (0.1) - - - (0.3) - - (0.1)
---------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Segment
operating
profit/(loss) 2.6 2.0 4.6 6.6 2.8 9.4 (1.9) 2.7 0.8 2.1 1.3 - 18.2
---------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Parent Company
costs (4.0)
Operating
profit 14.2
---------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Net finance
costs before
Other items (11.7)
Non-underlying
finance
costs (0.3)
Profit before
tax 2.2
---------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Income tax
expense (1.5)
Profit after
tax from
discontinued
operations 0.6
---------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Profit for the
year 1.3
---------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
^ Inter-segment revenue is charged at the prevailing market
rates.
In accordance with IFRS 8 "Operating Segments", the Group
identifies its reportable segments as those upon which the Group
Board regularly bases its opinion and assesses performance. The
Group has deemed it appropriate to aggregate its operating segments
into geographical groupings as explained in Note 1.
Total
Germany
UK UK Total France France Total and Total
Distribution Exteriors UK Distribution Exteriors France Germany Benelux Benelux Ireland Poland Eliminations Group
Year ended 31
December
2019 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ------------- ---------- ------- ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Revenue
Underlying
revenue 534.3 288.2 822.5 184.5 342.2 526.7 381.5 103.0 484.5 94.9 156.1 - 2,084.7
Revenue
attributable
to businesses
identified
as non-core 1.2 58.3 59.5 - 1.9 1.9 14.5 - 14.5 - - - 75.9
Inter-segment
revenue^ 11.9 9.1 21.0 0.1 0.2 0.3 1.0 0.1 1.1 - - (22.4) -
Total revenue 547.4 355.6 903.0 184.6 344.3 528.9 397.0 103.1 500.1 94.9 156.1 (22.4) 2,160.6
---------------- ------------- ---------- ------- ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Result
Segment result
before
Other items 7.9 8.9 16.8 11.2 8.6 19.8 4.4 5.2 9.6 6.8 4.3 - 57.3
Amortisation of
acquired
intangibles (0.9) (4.4) (5.3) - (0.7) (0.7) - (0.2) (0.2) - - - (6.2)
Impairment
charges (58.2) (0.5) (58.7) - (32.2) (32.2) - - - - - - (90.9)
Profits and
losses on
agreed sale or
closure
of non-core
businesses
and associated
impairment
charges (Note
7) (0.9) (1.6) (2.5) - (1.6) (1.6) 6.0 - 6.0 (1.8) - - 0.1
Net operating
losses
attributable
to businesses
identified as
non-core
(Note 7) (0.8) 2.9 2.1 - (0.9) (0.9) 0.8 - 0.8 - - - 2.0
Net
restructuring
costs (10.2) (8.0) (18.2) - (2.1) (2.1) (6.6) (0.2) (6.8) - - - (27.1)
Other specific
items 0.2 - 0.2 - (0.2) (0.2) (0.1) - (0.1) (0.3) - - (0.4)
---------------- ------------- ---------- ------- ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Segment
operating
profit/(loss) (62.9) (2.7) (65.6) 11.2 (29.1) (17.9) 4.5 4.8 9.3 4.7 4.3 - (65.2)
---------------- ------------- ---------- ------- ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Parent Company
costs (17.7)
Investment in
omnichannel
retailing (5.7)
Gain in fair
value of
forward
currency
option 0.7
---------------- ------------- ---------- ------- ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Operating loss (87.9)
---------------- ------------- ---------- ------- ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Net finance
costs before
Other items (24.0)
Non-underlying
finance
costs (0.8)
Loss before tax (112.7)
---------------- ------------- ---------- ------- ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Income tax
expense (11.4)
Loss from
discontinued
operations (0.4)
---------------- ------------- ---------- ------- ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
Loss for the
year (124.5)
---------------- ------------- ---------- ------- ------------- ---------- ------- -------- -------- -------- -------- ------- ------------- --------
^ Inter-segment revenue is charged at the prevailing market
rates.
In accordance with IFRS 8 "Operating Segments", the Group
identifies its reportable segments as those upon which the Group
Board regularly bases its opinion and assesses performance. The
Group has deemed it appropriate to aggregate its operating segments
into geographical groupings as explained in Note 1.
Total
Germany
UK UK Total France France Total and
Distribution Exteriors UK Distribution Exteriors France Germany Benelux Benelux Ireland Poland Total
Six months
ended 30 June
2020 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- --------
Balance sheet
Assets
Segment
assets 159.0 218.2 377.2 60.5 203.1 263.6 162.2 59.6 221.8 46.7 63.1 972.4
Unallocated
assets:
Right-of-use
assets 2.7
Property,
plant and
equipment 0.4
Derivative
financial
instruments 5.2
Cash and cash
equivalents 158.2
Deferred tax
assets 6.9
Other assets 46.4
-------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- --------
Consolidated
total assets 1,192.2
-------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- --------
Liabilities
Segment
liabilities 190.3 100.6 290.9 51.0 114.8 165.8 101.9 19.4 121.3 26.7 31.5 636.2
Unallocated
liabilities:
Bank loans 67.2
Private
placement
notes 197.7
Derivative
financial
instruments 3.3
Other
liabilities 50.4
-------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- --------
Consolidated
total
liabilities 954.8
-------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- --------
Other segment
information
Capital
expenditure
on:
Property,
plant and
equipment 1.4 2.4 3.8 0.1 1.1 1.2 0.5 0.2 0.7 0.3 0.2 6.2
Computer
software 1.4 0.9 2.3 - - - - - - - - 2.3
Non-cash
expenditure:
Depreciation 10.1 5.7 15.8 6.3 1.6 7.9 7.2 1.1 8.3 1.1 1.8 34.9
Amortisation
of acquired
intangibles
and computer
software 2.0 2.4 4.4 - 0.2 0.2 - - - 0.1 - 4.7
Impairment of
goodwill
and
intangibles
(excluding
computer
software) 31.0 11.8 42.8 - - - - - - - - 42.8
-------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- --------
^ Inter-segment revenue is charged at the prevailing market
rates.
In accordance with IFRS 8 "Operating Segments", the Group
identifies its reportable segments as those upon which the Group
Board regularly bases its opinion and assesses performance. The
Group has deemed it appropriate to aggregate its operating segments
into geographical groupings as explained in Note 1.
Total
Germany
UK UK Total France France Total and
Distribution Exteriors UK Distribution Exteriors France Germany Benelux Benelux Ireland Poland Total
Six months
ended 30 June
2019 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- --------
Balance sheet
Assets
Segment
assets 373.6 249.6 623.2 47.8 294.4 342.2 175.8 65.3 241.1 58.2 70.8 1,335.5
Unallocated
assets:
Air Handling
assets 215.2
Property,
plant and
equipment 8.2
Derivative
financial
instruments 2.6
Cash and cash
equivalents 12.9
Deferred tax
assets 15.5
Other assets 15.7
-------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- --------
Consolidated
total assets 1,605.6
-------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- --------
Liabilities
Segment
liabilities 216.0 120.1 336.1 53.1 126.7 179.8 105.5 21.4 126.9 39.5 41.2 723.5
Unallocated
liabilities:
Air Handling
liabilities 101.8
Private
placement
notes 185.0
Bank loans 94.7
Derivative
financial
instruments 4.3
Other
liabilities 50.5
-------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- --------
Consolidated
total
liabilities 1,159.8
-------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- --------
Other segment
information
Capital
expenditure
on:
Property,
plant and
equipment 1.8 1.2 3.0 0.5 1.5 2.0 0.5 0.3 0.8 0.8 1.7 8.3
Computer
software 0.7 - 0.7 0.1 0.1 0.2 - - - 5.6 - 6.5
Non-cash
expenditure:
Depreciation 11.3 3.7 15.0 2.5 5.0 7.5 7.1 1.3 8.4 1.1 1.6 33.6
Amortisation
of acquired
intangibles
and computer
software 2.0 2.2 4.2 - 0.8 0.8 0.1 0.1 0.2 0.3 - 5.5
Impairment of
goodwill
and
intangibles
(excluding
computer
software) - - - - - - - - - - - -
-------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- --------
^ Inter-segment revenue is charged at the prevailing market
rates.
In accordance with IFRS 8 "Operating Segments", the Group
identifies its reportable segments as those upon which the Group
Board regularly bases its opinion and assesses performance. The
Group has deemed it appropriate to aggregate its operating segments
into geographical groupings as explained in Note 1.
Total
Germany
UK UK Total France France Total and
Distribution Exteriors UK Distribution Exteriors France Germany Benelux Benelux Ireland Poland Total
Year ended 31
December
2019 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- --------
Balance sheet
Assets
Segment
assets 268.3 204.1 472.4 57.5 211.1 268.6 154.0 51.6 205.6 56.0 66.5 1,069.1
Unallocated
assets:
Right-of-use
assets 2.9
Property,
plant and
equipment 0.4
Derivative
financial
instruments 2.6
Cash and cash
equivalents (3.6)
Deferred tax
assets 4.4
Assets held
for sale
(Note 7) 258.4
Other assets 13.6
-------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- --------
Consolidated
total assets 1,347.8
-------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- --------
Liabilities
Segment
liabilities 196.9 83.5 280.4 54.8 97.4 152.2 96.4 16.4 112.8 36.1 35.7 617.2
Unallocated
liabilities:
Private
placement
notes 175.5
Bank loans 99.6
Derivative
financial
instruments 2.1
Liabilities
held for
sale (Note
7) 115.7
Other
liabilities 43.5
-------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- --------
Consolidated
total
liabilities 1,053.6
-------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- --------
Other segment
information
Capital
expenditure
on:
Property,
plant and
equipment 2.4 6.5 8.9 0.8 0.9 1.7 1.3 0.3 1.6 0.7 2.2 15.1
Computer
software 5.1 1.2 6.3 - - - 0.1 - 0.1 0.4 - 6.8
Non-cash
expenditure:
Depreciation 19.1 10.6 29.7 5.2 10.0 15.2 13.8 2.4 16.2 2.8 3.5 67.4
Impairment of
right-of-use
assets 0.5 0.5 1.0 - 0.5 0.5 - - - - - 1.5
Impairment of
property,
plant and
equipment
and
computer
software 0.9 - 0.9 - - - - - - - - 0.9
Amortisation
of acquired
intangibles
and computer
software 3.5 4.5 8.0 - 0.7 0.7 0.1 0.2 0.3 - 0.1 9.1
Impairment of
goodwill
and
intangibles
(excluding
computer
software) 57.4 - 57.4 - 33.3 33.3 - - - - - 90.7
-------------- ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- -------- ------- --------
^ Inter-segment revenue is charged at the prevailing market
rates.
4. Other items
Profit after tax includes the following Other items which have
been disclosed in a separate column within the Condensed
Consolidated Income Statement in order to provide a better
indication of the underlying earnings of the Group:
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
------------------------------------------------ ----------- ----------- -------------
Amortisation of acquired intangibles (2.8) (3.1) (6.2)
Impairment charges (42.8) - (90.9)
Profits and losses on agreed sale or
closure of non-core businesses and associated
impairment charges (Note 7) 1.4 (0.9) 0.1
Net operating profit/(losses) attributable
to businesses identified as non-core(1)
(Note 7) 0.1 1.4 2.0
Net restructuring costs(2) (3.5) (12.2) (27.1)
Investment in omnichannel retailing (4.1) - (5.7)
Costs associated with refinancing(3) (6.9) - -
Other specific items(4) (1.1) (0.1) 0.3
------------------------------------------------ -----------
Impact on operating profit/(loss) (59.7) (14.9) (127.5)
Non-underlying finance costs(5) (12.0) (0.3) (0.8)
------------------------------------------------ -----------
Impact on profit/(loss) before tax (71.7) (15.2) (128.3)
Income tax credit on Other items 0.7 3.2 4.9
Other tax adjustments in respect of
previous years - - (0.4)
Impact on profit/(loss) after tax (71.0) (12.0) (123.8)
------------------------------------------------ ----------- ----------- -------------
(1) The comparatives for 30 June 2019 for net operating
profit/(losses) attributable to businesses identified as non-core
are updated to include any additional business classified as
non-core in the second half of 2019.
(2) Net restructuring costs include property closure costs of
GBP0.7m (30 June 2019: GBP0.5m; 31 December 2019: GBP6.0m),
redundancy and related staff costs of GBP0.8m (30 June 2019:
GBP6.1m; 31 December 2019: 9.5m), impairment of non-current and
current assets due to restructuring of GBP0.1m (30 June 2019:
GBP0.5m; 31 December 2019: GBPnil) and GBP1.7m (30 June 2019:
GBP5.1m; 31 December 2019: GBP9.6m) in relation to restructuring
consultancy costs, and other costs of GBP0.2m (30 June 2019:
GBPnil; 31 December 2019: GBP2.0m) mainly incurred in connection
with the fundamental restructuring of the target operating model of
the major operating companies in the UK, Germany and France.
(3) Costs associated with refinancing includes legal and
professional fees of GBP8.1m offset by GBP1.2m gain in relation to
the partial derecognition of a cash flow hedging arrangement as a
result of the change in debt facility agreements.
(4) Other specific items comprise the following:
Six months Six months Year ended
ended 30 ended 30 31 December
June 2020 June 2019 2019
GBPm GBPm GBPm
---------------------------------------- ----------- ----------- -------------
PwC investigation costs (see Note 18) (1.7) - -
Gain in fair value of forward currency
option not hedged 0.6 - 0.7
Costs in relation to the cyberattack
in France - (0.2) (0.6)
Other specific items - 0.1 0.2
---------------------------------------- ----------- ----------- -------------
Total other specific items (1.1) (0.1) 0.3
---------------------------------------- ----------- ----------- -------------
(5) Non-underlying finance costs comprise GBP11.3m loss on
modification recognised in relation to the private placement notes,
GBP0.3m write-off of arrangement fees in relation to the previous
RCF which has been extinguished and refinanced and GBP0.4m in
relation to non-core businesses.
5. Income tax
The income tax expense comprises:
Six months Six months Year ended
ended 30 ended 31 December
June 2020 30 June 2019 2019
GBPm GBPm GBPm
---------------------------------- ----------- -------------- -------------
Total income tax expense for the
period 0.8 (1.5) (11.4)
---------------------------------- ----------- -------------- -------------
Tax for the six month period ended 30 June 2020 on underlying
profits (before Other items) is credited at 0.2% (30 June 2019:
26.7%; 31 December 2019: 101.9%), representing the best estimate of
the average annual effective tax rate expected for the full year
being applied to the underlying pre-tax income of the six month
period to 30 June 2020.
The effective tax rate at 31 December 2019 reflected deductible
temporary differences that were not recognised for deferred tax
purposes, principally in the UK. Consistent with 31 December 2019,
the taxable losses generated by the UK business have not been
recognised but the taxable profits from the European business
operations, mainly in France and Germany, have been taxed at the
statutory rate. It is not anticipated that the derecognised UK
losses, nor losses generated in the current trading period, will be
utilised in the foreseeable future.
On 25 April 2019, the European Commission (EC) concluded its
investigation into the UK's controlled foreign company (CFC) tax
rules. The EC concluded that the UK's CFC rules, which provide an
exemption for 75% of the CFC charge where the CFC is carrying out
financing activities, were in breach of EU State Aid. The UK
Government disagrees with this conclusion and has applied to have
this judgement annulled. In the meantime, the Group is continuing
to review the specific facts and circumstances of its position in
conjunction with professional advisors (having claimed the
exemption in historic periods). Based on the initial assessment
undertaken to date, a provision is not deemed to be required.
However, should the UK Government be unsuccessful in appeal and all
CFC profits deemed taxable in the UK, this would give rise to
additional UK tax payable of up to a maximum of GBP5 million
(before interest and penalties).
6. Earnings per share
The calculations of earnings per share are based on the
following profits and numbers of shares:
Basic and diluted
---------------------------------------
Six months Six months Year ended
ended 30 ended 30 31 December
June 2020 June 2019 2019
GBPm GBPm GBPm
------------------------------------------------- ----------- ----------- -------------
Profit/(loss) after tax attributable
to ordinary equity holders of the parent
for basic and diluted earnings per share
from continuing operations (124.6) 0.7 (124.1)
------------------------------------------------- ----------- ----------- -------------
Profit/(loss) attributable to ordinary
equity holders of the parent from discontinued
operations 70.8 0.6 (0.4)
------------------------------------------------- ----------- ----------- -------------
Profit/(loss) attributable to ordinary
equity holders of the parent for basic
and diluted earnings per share (53.8) 1.3 (124.5)
Basic and diluted before Other
items
---------------------------------------
Six months Six months Year ended
ended 30 ended 30 31 December
June 2020 June 2019 2019
GBPm GBPm GBPm
------------------------------------------- ----------- ----------- -------------
Profit/(loss) after tax from continuing
operations (124.6) 0.7 (124.1)
Add back:
Other items (see Note 4) 71.0 12.0 123.8
------------------------------------------- ----------- ----------- -------------
Profit/(loss) attributable to ordinary
equity holders of the parent for basic
and diluted earnings per share from
continuing operations before other items (53.6) 12.7 (0.3)
------------------------------------------- ----------- ----------- -------------
Weighted average number of
shares
-----------------------------------------
Unaudited Year ended
Six months six months 31 December
ended 30 ended 30 2019
June 2020 June 2019
Number Number Number
------------------------------------------ ------------ ------------ -------------
For basic and diluted earnings per share 591,556,982 591,556,982 591,556,982
------------------------------------------ ------------ ------------ -------------
Earnings/(loss) per share
---------------------------------------
Six months Six months Year ended
ended 30 ended 30 31 December
June 2020 June 2019 2019
--------------------------------------- ----------- ----------- -------------
Basic and diluted earnings/(loss) per
share (9.1)p 0.2p (21.0)p
Basic and diluted earnings/(loss) per
share from continuing operations (21.1)p 0.1p (21.0)p
--------------------------------------- ----------- ----------- -------------
Earnings per share before
Other items^
------------------------------------------ ---------------------------------------
Six months Six months Year ended
ended 30 ended 30 31 December
June 2020 June 2019 2019
------------------------------------------ ----------- ----------- -------------
Basic and diluted earnings/(loss) per
share from continuing operations before
other items (9.1)p 2.1p (0.1)p
------------------------------------------ ----------- ----------- -------------
^ Earnings per share before Other items (also referred to as
underlying earnings per share) has been disclosed in order to
present the underlying performance of the Group.
Earnings per share from discontinued operations is included in
Note 8.
7. Divestments and exit of non-core businesses
The Group has recognised a net gain of GBP1.4m (30 June 2019:
charge of GBP0.9m, 31 December 2019: gain of GBP0.1m) in respect of
profits and losses on agreed sale or closure of non-core businesses
and associated impairment charges within Other items of the
Consolidated Income Statement. This consists of GBP2.0m gain in
relation to the disposal of the Middle East entity in the current
year, offset by costs of GBP0.6m in relation to the disposal of
Building Solutions which was due to complete in the first half of
2020 but was terminated in May 2020. These are explained further
below.
The sale of the Air Handling business also completed in the
period and the gain on sale is included with the results from
discontinued operations (see Note 8).
Divested businesses
As disclosed in the 2019 Annual Report and Accounts, the Middle
East business, which was in the process of being closed, was sold
on 22 January 2020 for AED1. A gain on sale of GBP2.0m has been
recognised, in relation to the reclassification to the Consolidated
Income Statement of the cumulative exchange differences on the
retranslation of the net assets of the business previously
recognised in other comprehensive income in accordance with IAS 21
"The effects of foreign exchange rates".
Costs of GBP0.6m have also been recognised during the period in
relation to the disposal of the Building Solutions business, which
was classified as held for sale at 31 December 2019 as a sale had
been agreed and was due to complete in first half of 2020 subject
to approval from the UK Competition and Markets Authority (CMA). As
disclosed in the 2019 Annual Report and Accounts, on 21 May 2020 it
was announced that the parties had agreed to terminate the sales
agreement as terms could not be agreed for an extension to enable
completion of the CMA investigation and the disposal is no longer
proceeding. The business continues to be classified as non-core but
does not meet the criteria to be presented as held for sale at 30
June 2020.
Disposal groups held for sale
At 31 December 2019 the Air Handling and Building Solutions
businesses were presented as held for sale, with assets and
liabilities comprising the following:
Building
Air Handling Solutions Other Total
GBPm GBPm GBPm GBPm
--------------------------------- ------------- ----------- ------ --------
Goodwill and intangible assets 33.2 12.5 - 45.7
Property, plant and equipment 15.1 6.2 1.9 23.2
Right-of-use assets 31.5 12.5 - 44.0
Inventories 33.9 3.8 - 37.7
Trade and other receivables 58.9 8.5 - 67.4
Contract assets 1.5 - - 1.5
Deferred tax asset 1.3 1.7 - 3.0
Deferred consideration 0.8 - - 0.8
Cash at bank and on hand 28.8 6.3 - 35.1
--------------------------------- ------------- ----------- ------ --------
Assets held for sale 205.0 51.5 1.9 258.4
Trade and other payables (46.0) (15.3) - (61.3)
Contract liabilities (1.5) - - (1.5)
Lease liabilities (31.9) (13.4) - (45.3)
Deferred tax liability (1.0) - - (1.0)
Corporation tax liability (1.2) - - (1.2)
Retirement benefit obligations (3.4) - - (3.4)
Provisions (1.5) (0.5) - (2.0)
--------------------------------- ------------- ----------- ------ --------
Liabilities directly associated
with assets held for sale (86.5) (29.2) - (115.7)
--------------------------------- ------------- ----------- ------ --------
Net assets directly associated
with disposal groups 118.5 22.3 1.9 142.7
--------------------------------- ------------- ----------- ------ --------
The sale of the Air Handling business completed on 31 January
2020. See Note 8 for further details. The Building Solutions
business is no longer classified as held for sale. The other amount
related to land in Germany, which was sold in April 2020.
There are no assets or disposal groups classified as held for
sale at 30 June 2020. At 30 June 2019 WeGo Floortec GmbH was
classified as held for sale with assets of 39.3m and liabilities of
GBP2.2m.
Prior year divestments
On 13 August 2019 the Group completed the sale of WeGo Floortec
GmbH, the German raised access flooring division, for proceeds of
EUR13.5m plus settlement of intercompany balances. An overall gain
on sale of GBP6.0m has been recognised within Other items,
including the reclassification of the cumulative exchange
differences on the retranslation of the net assets from equity to
the consolidated income statement, in accordance with IAS 21 "The
effects of changes in foreign exchange rates".
The Commercial Drainage business, part of the SIG Distribution
segment, was also closed, which led to redundancy costs of GBP0.2m
being included within Other items in the Consolidated Income
Statement at 30 June 2019.
Contribution to revenue and operating loss
The results of the above businesses for the current and prior
periods have been disclosed within Other items in the Consolidated
Income Statement in order to provide an indication of the
underlying earnings of the Group. The revenue and net operating
profit/(loss) of the non-core businesses for the periods ended 30
June 2020, 31 December 2019 and 30 June 2019 are as follows:
Year ended
Six months ended Six months ended 31 December
30 June 2020 30 June 2019 2019
Net operating Net operating Net operating
Revenue profit/(loss) Revenue profit/(loss) Revenue profit/(loss)
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- -------- --------------- -------- --------------- -------- ---------------
Building Solutions 21.2 0.3 28.4 1.9 58.3 2.9
Maury 1.2 (0.2) 0.9 (0.3) 1.9 (0.9)
Commercial Drainage - - 1.2 (0.8) 1.2 (0.8)
WeGo Floortec - - 11.3 0.6 14.5 0.8
----------------------- -------- --------------- -------- --------------- -------- ---------------
Total attributable to
non-core businesses 22.4 0.1 41.8 1.4 75.9 2.0
----------------------- -------- --------------- -------- --------------- -------- ---------------
Cash flows associated with divestments and exit of non-core
businesses
The net cash inflow in the six-month period ended 30 June 2020
in respect of divestments and the exit of non-core businesses
(including Air Handling) is as follows:
Six months Six months Year ended
ended 30 ended 30 31 December
June 2020 June 2019 2019
GBPm GBPm GBPm
--------------------------------------------- ----------- ----------- -------------
Cash consideration received for divestments 191.9 0.6 12.6
Cash at date of disposal (29.3) - (0.5)
Disposal costs paid (13.1) - (3.7)
--------------------------------------------- ----------- ----------- -------------
Net cash inflow 149.5 0.6 8.4
--------------------------------------------- ----------- ----------- -------------
The profits and losses arising on the agreed sale or closure of
non-core businesses and associated impairment charges, along with
their results for the current and prior periods have been disclosed
within Other items in the Condensed Consolidated Income Statement
in order to present the underlying earnings of the Group.
8. Discontinued operations
(a) Description
On 7 October 2019, the Group announced that it had agreed a sale
of the Air Handling business for consideration of EUR222.7m. The
sale was approved by shareholders at a general meeting on 23
December 2019 and completed on 31 January 2020. At 31 December
2019, Air Handling was classified as a disposal group held for sale
and as a discontinued operation as it represented a major line of
business of the Group. With Air Handling being classified as a
discontinued operation, the Air Handling segment is no longer
presented in the segment note.
(b) Financial performance and cash flow information
Financial information relating to the discontinued operation for
the period to the date of disposal is set out below:
Six months
Six months ended 30 Year ended
ended 30 June 2019 31 December
June 2020 Restated 2019
GBPm GBPm GBPm
------------------------------------------------ ----------- ----------- -------------
Revenue 25.4 159.3 323.1
Cost of sales (15.0) (97.5) (202.0)
------------------------------------------------ ----------- ----------- -------------
Gross profit 10.4 61.8 121.1
Other operating expenses (9.3) (52.6) (101.3)
------------------------------------------------ ----------- ----------- -------------
Underlying operating profit 1.1 9.2 19.8
Other items - (0.1) (0.7)
------------------------------------------------ ----------- ----------- -------------
Operating profit 1.1 9.1 19.1
Finance income - 0.1 0.1
Finance costs (0.1) (0.7) (1.3)
------------------------------------------------ ----------- ----------- -------------
Profit before tax from discontinued operations
before group other items 1.0 8.5 17.9
Gain on sale of subsidiary after income
tax (see below) 74.8 - -
Costs incurred in connection with the
agreed disposal of the Air Handling business (4.5) (4.5) (12.2)
Amortisation of acquired intangibles - (1.0) (1.9)
------------------------------------------------ ----------- ----------- -------------
Profit before tax from discontinued operations 71.3 3.0 3.8
Income tax (expense)/credit (0.5) (2.4) (4.2)
------------------------------------------------ ----------- ----------- -------------
Profit after tax from discontinued operations 70.8 0.6 (0.4)
------------------------------------------------ ----------- ----------- -------------
Amounts included in accumulated OCI are as follows:
Six months Six months Year ended
ended 30 ended 30 31 December
June 2020 June 2019 2019
GBPm GBPm GBPm
----------------------------------------------------- ----------- ----------- -------------
Remeasurement of defined benefit
pension liability - (0.5) (0.5)
Deferred tax movement associated
with remeasurement of defined benefit
pension liability - 0.1 0.1
----------------------------------------------------- ----------- ----------- -------------
Total - (0.4) (0.4)
----------------------------------------------------- ----------- ----------- -------------
The net cash flows incurred by
Air Handling are as follows:
Six months Six months Year ended
ended 30 ended 30 31 December
June 2020 June 2019 2019
GBPm GBPm GBPm
----------------------------------------------------- ----------- ----------- -------------
Operating 1.1 7.7 26.5
Investing 150.3 (1.4) (5.1)
Financing (0.1) (4.9) (9.4)
----------------------------------------------------- ----------- ----------- -------------
Net cash (outflow)/inflow 151.3 1.4 12.0
----------------------------------------------------- ----------- ----------- -------------
Earnings per share:
Six months Six months Year ended
ended 30 ended 30 31 December
June 2020 June 2019 2019
GBPm GBPm GBPm
----------------------------------------------------- ----------- ----------- -------------
Basic and diluted (loss)/earnings
per share from discontinued operations 0.12p 0.00p 0.00p
----------------------------------------------------- ----------- ----------- -------------
(c) Gain on sale
Six months ended 30 June 2020
GBPm
----------------------------------------------------- ---------------------------------------
Consideration received:
Cash 191.9
Carrying amount of net assets sold (120.3)
----------------------------------------------------- ---------------------------------------
Gain on sale before income tax and reclassification
of foreign currency translation reserve 71.6
Reclassification of foreign currency
translation reserve 3.7
Income tax expense on gain (0.5)
----------------------------------------------------- ---------------------------------------
Gain on sale after income tax 74.8
----------------------------------------------------- ---------------------------------------
9. Reconciliation of operating profit to cash generated from
operating activities
Six months Six months Year ended
ended 30 ended 30 31 December
June 2020 June 2019 2019
GBPm GBPm GBPm
-------------------------------------------- --- ----------- ----------- -------------
Profit before tax from continuing
operations (125.4) 2.2 (112.7)
Profit before tax from discontinued
operations 71.8 3.0 3.8
-------------------------------------------- --- ----------- ----------- -------------
Profit before tax (53.6) 5.2 (108.9)
Depreciation 36.1 37.8 76.2
Net finance costs 22.5 12.6 26.3
Amortisation of computer software 2.4 2.1 4.5
Amortisation of acquired intangibles 2.8 4.1 8.1
Impairment of computer software - - 0.3
Impairment of property, plant and
equipment - - 0.6
Impairment of goodwill 42.8 - 89.6
Impairment of right-of-use
asset - - 1.0
Profits and losses on agreed sale or
closure of non-core businesses and
associated impairment charges (72.2) 1.0 (0.1)
Profit on sale of property, plant and
equipment (0.5) (0.8) (1.4)
Gain on termination of lease (0.3) - -
Share-based payments - 0.6 0.1
Gains on derivative financial instruments (1.8) - -
Net foreign exchange differences (0.2) - (1.3)
Decrease in provisions (1.1) (5.8) (2.9)
Working capital
movements (5.4) 29.6 73.9
------------------------------------------------- ----------- ----------- -------------
Cash generated from
operating activities (28.5) 86.4 166.0
------------------------------------------------- ----------- ----------- -------------
10. Reconciliation of net cash flow to movements in net debt
Six months Six months Year ended
ended 30 ended 30 31 December
June 2020 June 2019 2019
GBPm GBPm GBPm
--------------------------------------- ----------- ----------- -------------
Increase/(decrease) in cash and cash
equivalents in the period 40.7 68.0 71.6
Cash flow from (increase)/decrease
in debt 62.6 (2.2) (37.6)
---------------------------------------- ----------- ----------- -------------
Decrease in net debt resulting from
cash flows 103.3 65.8 34.0
Debt relating to divested businesses 30.4 - -
Non-cash items* (18.6) (25.9) (6.4)
Exchange differences (1.5) 0.9 6.8
--------------------------------------- ----------- ----------- -------------
Decrease in net debt in the period 113.6 40.8 34.4
Net debt at beginning of the period (455.4) (189.4) (189.4)
--------------------------------------- ----------- ----------- -------------
Impact of adoption of IFRS 16 - (300.4) (300.4)
--------------------------------------- ----------- ----------- -------------
Net debt at end of the period (341.8) (449.0) (455.4)
--------------------------------------- ----------- ----------- -------------
* Non-cash items include the fair value movement of debt
recognised in the period which does not give rise to a cash inflow
or outflow.
Net debt is defined as follows:
Six months Six months Year ended
ended 30 ended 30 31 December
June 2020 June 2019 2019
GBPm GBPm GBPm
---------------------------------------- ----------- ----------- -------------
Non-current assets:
Derivative financial instruments 4.5 2.6 1.7
Deferred consideration - 0.3 -
Lease receivables 4.0 4.8 4.4
Current assets:
Derivative financial instruments 0.7 - 0.9
Deferred consideration - 0.6 -
Lease receivables 0.8 0.8 0.8
Other financial assets - - -
Cash at bank and on hand 197.3 153.1 110.0
Less restricted cash in relation
to asset backed funding arrangement - - (8.1)
Financial assets held for sale - - 35.9
Current liabilities:
Lease liabilities (54.6) (61.2) (51.5)
Bank overdrafts - (5.6) -
Bank loans - (94.7) (99.6)
Private placement notes (48.3) - (175.5)
Loan notes and deferred consideration - - -
Other financial liabilities (0.5) (1.2) (1.5)
Derivative financial instruments (0.1) (0.1) (0.2)
Lease liabilities directly associated
with liabilities classified as held
for sale - (1.0) (45.3)
Non-current liabilities:
Lease liabilities (224.5) (258.2) (224.1)
Bank loans (67.2) - -
Private placement notes (149.4) (185.0) -
Derivative financial instruments (3.2) (4.2) (1.9)
Other financial liabilities (1.3) - (1.4)
---------------------------------------- ----------- ----------- -------------
Net debt (341.8) (449.0) (455.4)
---------------------------------------- ----------- ----------- -------------
11. Financial instruments fair value disclosures
At the balance sheet date, the Group held the following
financial instruments at fair value:
31 December
30 June 2020 30 June 2019 2019
GBPm GBPm GBPm
----------------------------------- ------------- ------------- ------------
Financial assets
Deferred consideration - 0.9 -
Derivative financial instruments 5.2 2.6 2.6
----------------------------------- ------------- ------------- ------------
5.2 3.5 2.6
----------------------------------- ------------- ------------- ------------
Financial liabilities
Derivative financial instruments 3.3 4.3 2.1
----------------------------------- ------------- ------------- ------------
5.1 5.5 5.0
----------------------------------- ------------- ------------- ------------
The derivative financial instruments above all have fair values
which are calculated by reference to observable inputs (i.e.
classified as level 2 in the fair value hierarchy). The fair values
of these derivative financial instruments, adjusted for credit
risk, are calculated by discounting the associated future cash
flows to net present values using appropriate market rates
prevailing at the balance sheet date.
The carrying value of financial assets and liabilities that are
recorded at amortised cost in the accounts is approximately equal
to their fair value.
12. Called up share capital
31 December
30 June 2019 30 June 2019 2019
GBPm GBPm GBPm
--------------------------------------- ------------- ------------- ------------
Authorised:
800,000,000 ordinary shares of
10p each (30 June 2019: 800,000,000;
31 December 2019: 800,000,000) 80.0 80.0 80.0
--------------------------------------- ------------- ------------- ------------
Allotted, called up and fully
paid:
591,556,982 ordinary shares of
10p each (30 June 2019: 591,556,982
; 31 December 2019: 591,556,982) 59.2 59.2 59.2
--------------------------------------- ------------- ------------- ------------
The Company has not allotted any shares during the period (30
June 2019: nil; 31 December 2019: nil).
13. Retirement benefit schemes
Defined benefit schemes
The Group operates a number of pension schemes, four of which
provide defined benefits based upon pensionable salary. One of
these schemes has assets held in a separate trustee administered
fund, and three are overseas book reserve schemes. The UK defined
benefit pension scheme obligation is calculated on a year to date
basis, using the latest triennial valuation as at 31 December
2016.
The IAS 19 valuation conducted as at 31 December 2019 has been
updated to reflect current market conditions, and as a result an
actuarial loss of GBP9.8m has been recognised within the Condensed
Consolidated Statement of Comprehensive Income. The total net
pension liability in relation to defined benefit schemes at 30 June
2020 is GBP33.0m (30June 2019: GBP30.7m; 31 December 2019:
GBP24.8m).
14. Interim dividend
No interim dividend is declared for the period (30 June 2019:
1.25p per ordinary share). In accordance with IAS 10 "Events After
the Balance Sheet Date", dividends declared after the balance sheet
date are not recognised as a liability in the Financial
Statements.
There was no final dividend for the year ended 31 December
2019.
15. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and have
therefore
not been disclosed.
In the period to 30 June 2020, SIG incurred expenses of GBP0.4m
(30 June 2019: GBP0.2m; 31 December 2019: GBP0.4m) on behalf of the
SIG plc Retirement Benefits Plan, the UK defined benefit pension
scheme.
The Group has not identified any other material related party
transactions in the six-month period to 30 June 2020.
16. Risks and uncertainties
The Directors consider that the principal risks and
uncertainties which could have a material impact upon the Group's
performance over the remaining six months of the 2020 financial
year remain consistent with those set out in the Strategic Report
on pages 47 to 49 of the Group's 2019 Annual Report and Accounts.
These risks and uncertainties include, but are not limited to:
(1) access to finance and liquidity;
(2) retention of talent;
(3) cyber security;
(4) delivering the customer experience;
(5) business growth;
(6) market downturn;
(7) system failure;
(8) supplier rebates;
(9) health and safety; and
(10) delivering business change.
The primary risk affecting the Group for the remaining six
months of the year continues to be the level of market demand in
the markets in which SIG operates and the continued impact of
Covid-19. SIG's diverse market sectors are affected by
macroeconomic factors which limit visibility and therefore render
the short to medium-term outlook difficult to predict. As SIG
continues with its strategic change programme there is an increase
in focus on the risk of the availability and quality of key
resources (personnel). SIG continues to ensure that the strategic
and budget review process identifies and manages all key resource
requirements, whilst senior management succession planning
mitigates the risk of knowledge loss associated with
restructuring.
The "Group outlook" section of the Trading Review details the
current assessment of the markets in which the Group operates.
17. Seasonality
The Group's operations are not normally affected by significant
seasonal variations between the first and second halves of the
calendar year. In 2019, the period to 30 June accounted for 51% of
the Group's underlying annual revenue (2018: 50%). In 2020 the
first half performance was impacted by the Covid-19 pandemic and in
particular the temporary closure of operations in the UK and
Ireland. The business therefore expects a stronger second half
trading performance, subject to the risk of a second wave of
Covid-19, as detailed in the "Group outlook" section of the Trading
Review.
18. Contingent liabilities
As at the balance sheet date, the Group had outstanding
obligations under customer guarantees, claims, standby letters of
credit and discounted bills of up to GBP13.4m (20 June 2019;
GBP14.2m; 31 December 2019: GBP13.4m). Of this amount, GBP8.0m (30
June and 31 December 2019: GBP8.0m) relates to a standby letter of
credit issued by HSBC Bank plc in respect of the Group's insurance
arrangements.
As disclosed in the 2019 Annual Report and Accounts, Metechno
Limited and SIG Building Systems Limited have taken advantage of
the exemption available under Section 479A of the Companies Act
2006 in respect of the requirement for audit. As a condition of the
exemption, the Company has guaranteed the year end liabilities of
the relevant subsidiaries until they are settled in full.
As part of the disposal of Building Plastics in 2017 a guarantee
was provided to the landlord of the leasehold properties
transferred with the business covering rentals over the remaining
term of the leases in the event that the acquiring company enters
into administration before the end of the lease term. The maximum
liability that could arise from this would be approximately
GBP2.1m. No provision has been made in these financial statements
as it is not considered likely that any loss will be incurred in
connection with this.
As disclosed in the 2019 Annual Report and Accounts, the Company
referred itself to the FCA regarding the circumstances leading to
the trading update issued on 9 January 2020. Since such
self-referral the Company has provided to the FCA a copy of the
report prepared by PricewaterhouseCoopers LLP. The FCA has
wide-ranging powers to investigate potential breaches of market
rules and regulations, including the power to require disclosure of
documents and to compel witnesses to be interviewed. The FCA also
has wide-ranging powers to impose sanctions in the event it finds
an issuer has breached market rules or regulations, including
censuring issuers and imposing financial sanctions. There is no
certainty whether the FCA will open an investigation into the
Company; how long any such investigation would take to conclude;
the findings of the FCA and any remedy imposed by the FCA. At this
point, the Company considers this to be a possible obligation whose
existence will be confirmed only by the occurrence or
non-occurrence of one or more uncertain future events not wholly
within the control of the Company and, accordingly, no provision
has been recognised. The Company does not believe it is possible to
make a reliable estimate of the potential financial effect in the
event that the Company was determined to have any liability that
may arise from this matter.
19. Non-statutory information
The Group uses a variety of alternative performance measures,
which are non-IFRS, to assess the performance of its
operations.
The Group considers these performance measures to provide useful
historical financial information to help investors evaluate the
underlying performance of the business.
These measures, as shown below, are used to improve the
comparability of information between reporting periods and
geographical units, to adjust for Other items or to adjust for
businesses identified as non-core to provide information on the
ongoing activities of the Group. This also reflects how the
business is managed and measured on a day-to-day basis. Non-core
businesses are those businesses that have been closed or disposed
of or where the Board has resolved to close or dispose of the
businesses by 30 June 2020.
These measures are used by management for performance analysis,
planning, reporting and incentive setting purposes and remain
consistent
year-on-year.
Information regarding covenant calculations (Notes 19a and 19b)
is provided to show the financial measures used to calculate
financial covenants as defined by the banking agreements.
A number of these measures reconcile the reported numbers to
what would have been reported prior to the adoption of IFRS 16, in
order to
allow comparison between periods and as covenant calculations
are prepared on a frozen GAAP basis.
a) Covenant net debt
Maximum net debt is one of the primary covenants applicable to
the Group's debt facilities. The monitoring of this covenant is
therefore an important element of treasury risk management for the
Group. For the purpose of covenant calculations, net debt is stated
before the impact of IFRS 16.
31 December
30 June 2020 30 June 2019 2019
Note GBPm GBPm GBPm
--------------------------------------- ----- ------------- ------------- ------------
Reported net debt 10 341.8 449.0 455.4
Lease liabilities recognised
in accordance with IFRS 16 (254.9) (296.4) (296.0)
Lease receivables recognised
in accordance with IFRS 16 4.8 5.6 5.2
Other financial liabilities
recognised in accordance with
IFRS 16 (1.7) - (1.8)
---------------------------------------- ----- ------------- ------------- ------------
Net debt excluding impact
of IFRS 16 90.0 158.2 162.8
Loss on debt modification
recognised in accordance with
IFRS 9 (11.3) - -
--------------------------------------- ----- ------------- ------------- ------------
Net debt on frozen GAAP basis 78.7 158.2 162.8
---------------------------------------- ----- ------------- ------------- ------------
Other covenant financial indebtedness 5.4 11.6 5.4
Foreign exchange adjustment* (1.9) (0.9) 0.3
---------------------------------------- ----- ------------- ------------- ------------
Covenant net debt 82.2 168.9 168.5
---------------------------------------- ----- ------------- ------------- ------------
b) Consolidated net worth
Consolidated net worth is one of the primary covenants
applicable to the Group's debt facilities. The monitoring of this
covenant is therefore an important element of treasury risk
management for the Group.
31 December
30 June 2020 30 June 2019 2019
GBPm GBPm GBPm
-------------------------------------- ------------- ------------- ------------
Net assets 237.4 445.8 294.2
Lease liabilities recognised
in accordance with IFRS 16 254.9 296.4 296.0
Right-of-use assets recognised
in accordance with IFRS 16 (236.7) (283.3) (279.8)
Lease receivables recognised
in accordance with IFRS 16 (5.1) (5.6) (5.2)
Other financial liabilities
recognised in accordance with
IFRS 16 1.7 - 1.8
Other net asset adjustments
recognised in accordance with
IFRS 16 (6.3) (4.8) (6.7)
Loss on debt modification recognised
in accordance with IFRS 9 11.3 - -
-------------------------------------- ------------- ------------- ------------
Covenant consolidated net worth 257.2 448.5 300.3
--------------------------------------- ------------- ------------- ------------
c) Effective tax rates
The effective tax rate is a ratio of income tax expense to
profit/(loss) before tax and is used to assess SIG's contribution
to corporate taxation across the tax jurisdictions in which the
Group operates.
Six months Six months Year ended
ended 30 June ended 30 31 December
2020 June 2019 2019
Note GBPm GBPm GBPm
------------------------------------ ----- --------------- ----------- -------------
Profit/(loss) before tax (125.4) 2.2 (112.7)
Other items 4 71.7 15.2 128.3
------------------------------------- ----- --------------- ----------- -------------
Underlying profit/(loss) before
tax (53.7) 17.4 15.6
------------------------------------- ----- --------------- ----------- -------------
Income tax credit/(expense) 0.8 (1.5) (11.4)
Income tax (credit)/expense
associated with Other items (0.7) (3.2) (4.5)
------------------------------------- ----- --------------- ----------- -------------
Underlying tax credit/(charge) 0.1 (4.7) (15.9)
------------------------------------- ----- --------------- ----------- -------------
Effective tax rate (income
tax credit/expense to profit/loss
before tax) 0.6% 65.9% 10.1%
------------------------------------- ----- --------------- ----------- -------------
Underlying effective tax rate
(underlying tax credit/charge
to underlying profit/loss before
tax) 0.2% 26.7% 101.9%
------------------------------------- ----- --------------- ----------- -------------
d) Like-for-like sales
Like-for-like sales is calculated on a constant currency basis
and represents the growth in the Group's sales per day excluding
any acquisitions or disposals completed or agreed in the current
and prior year. Revenue is not adjusted for branch openings and
closures. This measure shows how the Group has developed its
revenue for comparable business relative to the prior period. As
such it is a key measure of the growth of the Group during the
year.
Total
Germany
UK UK Total France France Total and Total
Distribution Exteriors UK Distribution Exteriors France Germany Benelux Benelux Ireland Poland Group
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ------------- ---------- -------- ------------- ---------- -------- -------- -------- -------- --------- ------- --------
Statutory
revenue for
the
period to 30
June 2020 154.9 125.3 280.2 73.8 155.6 229.4 177.1 47.7 224.8 33.4 72.3 840.1
Revenue
attributable
to non-core
businesses - (21.2) (21.2) - (1.2) (1.2) - - - - - (22.4)
Underlying
revenue for
the
period to 30
June 2020 154.9 104.1 259.0 73.8 154.4 228.2 177.1 47.7 224.8 33.4 72.3 817.7
--------------- ------------- ---------- -------- ------------- ---------- -------- -------- -------- -------- --------- ------- --------
Statutory
revenue for
the
period to 30
June 2019 296.4 171.9 468.3 93.0 173.3 266.3 202.8 53.7 256.5 47.5 74.7 1,113.3
Revenue
attributable
to non-core
businesses (1.2) (28.4) (29.6) - (0.9) (0.9) (11.3) - (11.3) - - (41.8)
Underlying
revenue for
the
period to 30
June 2019 295.2 143.5 438.7 93.0 172.4 265.4 191.5 53.7 245.2 47.5 74.7 1,071.5
--------------- ------------- ---------- -------- ------------- ---------- -------- -------- -------- -------- --------- ------- --------
% change year
on year:
Underlying
revenue (47.5)% (27.5)% (41.0)% (20.6)% (10.4)% (14.0)% (7.5)% (11.2)% (8.3)% (29.7)% (3.2)% (23.7)%
Impact of
currency - - - 0.4% 0.4% 0.4% 0.5% 0.5% 0.4% 0.3% (2.8)% 0.1%
Impact of
working days - - - - (1.4)% (0.9)% (0.8)% - (0.6)% - - (0.3)%
--------------- ------------- ---------- -------- ------------- ---------- -------- -------- -------- -------- --------- ------- --------
Like-for-like
sales (47.5)% (27.5)% (41.0)% (20.2)% (11.4)% (14.5)% (7.8)% (10.7)% (8.5)% (29.4)% (6.0)% (23.9)%
--------------- ------------- ---------- -------- ------------- ---------- -------- -------- -------- -------- --------- ------- --------
e) Gross margin
Gross margin is the ratio of gross profit to revenue and is used
to understand the value the Group creates from its trading
activities.
Total
Germany
UK UK Total France France Total and Total
Distribution Exteriors UK Distribution Exteriors France Germany Benelux Benelux Ireland Poland Group
% % % % % % % % % % % %
------------ ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- --------- -------- ------
Statutory
gross
margin for
the period
ended 30
June
2020 22.9% 26.9% 24.5% 26.4% 23.5% 24.5% 28.2% 24.5% 27.4% 21.9% 20.6% 24.9%
Impact of
non-core
businesses - 28.9% 28.9% - 33.3% 33.3% - - - - - 29.0%
------------ ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- --------- -------- ------
Underlying
gross
margin for
the period
ended 30
June
2020 22.9% 27.2% 24.8% 26.4% 23.6% 24.5% 28.2% 24.5% 27.4% 21.9% 20.6% 24.8%
------------ ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- --------- -------- ------
Statutory
gross
margin for
the period
ended 30
June
2019 25.1% 29.0% 26.3% 23.6% 23.3% 23.4% 27.7% 24.8% 27.1% 24.9% 20.3% 25.3%
Impact of
non-core
businesses (16.7)% 28.5% 26.7% - 22.5% 22.5% 24.8% - 24.8% - - 26.1%
------------ ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- --------- -------- ------
Underlying
gross
margin for
the period
ended 30
June
2019 24.9% 28.9% 26.4% 23.6% 23.3% 23.4% 27.6% 24.8% 27.0% 24.9% 20.3% 25.3%
------------ ------------- ---------- ------ ------------- ---------- ------- -------- -------- -------- --------- -------- ------
f) Operating margin
Operating margin is the ratio of underlying operating profit to
underlying revenue and is used to enhance understanding and
comparability of the underlying financial performance of the Group
by period and segment.
Total
Germany Parent
UK UK Total France France Total and Company Total
Distribution Exteriors UK Distribution Exteriors France Germany Benelux Benelux Ireland Poland costs Group
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ ------------- ---------- -------- ------------- ---------- ------- -------- -------- -------- --------- ------- --------- --------
Unaudited
six months
ended
30 June
2020
Underlying
revenue
(Note
3) 154.9 104.1 259.0 73.8 154.4 228.2 177.1 47.7 224.8 33.4 72.3 - 817.7
Underlying
operating
profit
(Note 3) (27.4) (8.9) (36.3) 1.3 1.6 2.9 (1.3) 1.8 0.5 (1.4) 0.6 (9.5) (43.2)
Operating
margin (17.7)% (8.5)% (14.0)% 1.8% 1.0% 1.3% (0.7)% 3.8% 0.2% (4.2)% 0.8% n/a (5.3)%
------------ ------------- ---------- -------- ------------- ---------- ------- -------- -------- -------- --------- ------- --------- --------
Unaudited
six months
ended
30 June
2019
Underlying
revenue
(Note
3) 295.2 143.5 438.7 93.0 172.4 265.4 191.5 53.7 245.2 47.5 74.7 - 1,071.5
Underlying
operating
profit
(Note 3) 6.8 5.1 11.9 6.6 4.2 10.8 3.3 2.9 6.2 2.9 1.3 (4.0) 29.1
Operating
margin 2.3% 3.6% 2.7% 7.1% 2.4% 4.1% 1.7% 5.4% 2.5% 6.1% 1.7% n/a 2.7%
------------ ------------- ---------- -------- ------------- ---------- ------- -------- -------- -------- --------- ------- --------- --------
g) Other non-statutory measures
In addition to the alternative performance measures noted above,
the Group also uses underlying EPS (as set out in Note 6) and
underlying net finance costs (as set out on the Condensed
Consolidated Income Statement).
20. Post balance sheet events
Equity raise
On 10 July 2020 the Group completed the equity raise announced
on 19 June 2020 with 589,999,995 new ordinary shares issued for
proceeds, before costs, of GBP165m. GBP48m of the proceeds has been
used to repay private placement debt in line with the terms of the
revised debt facilities signed on 18 June 2020.
INDEPENDENT REVIEW REPORT TO SIG PLC
Introduction
We have been engaged by the Company to review the condensed set
of financial statements of SIG plc in the half-yearly financial
report for the six months ended 30 June 2020 which comprises the
Condensed Consolidated Income Statement, the Condensed Consolidated
Statement of Comprehensive Income, the Condensed Consolidated
Balance Sheet, the Condensed Consolidated Cash Flow Statement, the
Condensed Consolidated Statement of Changes in Equity and the
related explanatory notes 1 to 20. We have read the other
information contained in the half yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2020 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
24 September 2020
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