TIDMSHI
RNS Number : 4278E
SIG PLC
11 March 2022
11 March 2022
SIG plc
Full year results for the year ended 31 December 2021
A pivotal year: growing momentum
SIG plc ("SIG", "the Group" or "the Company") today announces
its results for the full year ended 31 December 2021 ("FY 2021" or
"the year").
Strategic highlights
-- Group back to underlying profit, driven by market share gains
and margin discipline in challenging supply markets
-- Strategy delivering ahead of expectations, reinforcing the value of SIG's core model
-- Leadership further strengthened; platform for growth
established; industry reputation regained and acknowledged
-- Accelerating revenue growth throughout 2021 against pre Covid-19 2019 comparators
-- EUR300m (GBP253m) bond issue in November 2021 further
increases financial stability and longer-term flexibility
Financial highlights
-- Group like-for-like ("LFL") sales up 24% on prior year, and
8% up on non Covid-19 affected 2019; H2 growth of 15% vs 2019
-- Strong margin progression: H2 2021 gross margin of 26.6%,
70bps higher than H1 2021 and 120bps higher than H2 2020;
underlying operating profit margin improved consistently throughout
2021
-- GBP41.4m underlying operating profit (2020 restated : GBP53.1m loss)
-- Statutory loss before tax for the year of GBP15.9m (2020
restated: GBP194.6m loss) after reflecting other items of GBP35.2m
(2020 restated : GBP118.5m)
-- Net debt of GBP365.0m post IFRS 16 (2020: GBP238.2m) and
GBP128.6m pre-IFRS 16 (2020: GBP4.1m), reflecting investment in
inventory to optimise customer service at a time of supply
shortages, as previously guided, as well as one-off costs related
to refinancing and M&A investment
-- Gross cash of GBP145m; new and increased revolving credit
facility ("RCF") of GBP50m remains undrawn
Current trading and outlook
-- Trading well in 2022 to date, and ahead of plan
-- Supply challenges being managed
-- Confidence in 3% Group operating profit margin for FY23, and
in the Group's medium-term path towards 5%
-- Cash generation expected in H2; full year cash neutral
Restated
(5)
Change
vs
2021 2020 2020
------------ ------------ -------
Underlying(1) revenue GBP2,291.4m GBP1,872.7m 22.4%
LFL(2) sales growth 24.3% (13.3%)
Gross margin 26.3% 25.1% 120bps
Underlying(1) operating
profit/(loss) GBP41.4m (GBP53.1m)
Underlying(1) profit/(loss)
before tax GBP19.3m (GBP76.1m)
Underlying(1) earnings/(loss)
per share 0.3p (10.0p) 10.3p
Underlying
operating
margin 1.8% (2.8%) 460bps
Net
debt GBP365.0m GBP238.2m
Net
debt
(pre-IFRS
16) GBP128.6m GBP4.1m
------------------------------- ------------ ------------ -------
Restated(5)
Statutory results 2021 2020
------------------------------- ------------ ------------
Revenue(3) GBP2,291.4m GBP1,874.5m
Operating profit/(loss)(3) GBP14.0m (GBP160.0m)
Loss before tax(3) (GBP15.9m) (GBP194.6m)
Basic loss per share(3) (2.4p) (23.1p)
Total loss after tax
(4) (GBP28.3m) (GBP131.5m)
Dividend per share n/d n/d
------------------------------- ------------ ------------
1.Underlying represents the results before Other items. Other
items have been disclosed separately in order to give an indication
of the underlying earnings of the Group.
2. Like-for-like ("LFL") is defined as the growth/(decline) in
sales per working day in constant currency excluding any current
and prior year acquisitions and disposals. Sales are not adjusted
for branch openings or closures.
3. Statutory results of continuing operations only in 2020.
4. Statutory results including both continuing and discontinued
operations in 2020.
5. 2020 restatement is due to the change in accounting policy
regarding configuration and customisation costs incurred in
implementing cloud computing arrangements following the IFRS
Interpretations Committee (IFRIC) Agenda Decision published in
April 2021.
Commenting, Steve Francis, Chief Executive Officer, said:
" 2021 was a pivotal year - accelerating progress on our
strategy has returned the Group to profitability ahead of
expectations, delivering above market growth rates and consistent
margin improvement, the result of record performance in France and
Poland, and strong turnaround in the UK."
"In uncertain times, SIG demonstrated in 2021, as it has in
previous decades, its ability to manage successfully through
inflationary and volatile market conditions, thanks to our strong
relationships with suppliers and customers, and the quality of our
people."
"Growth momentum, resilience of our businesses, and experienced
leadership all underpin our confidence in the organic growth path
towards 5% underlying operating margin in the medium term."
"I'm proud that SIG has a long-established focus on energy
efficient solutions, and we will play a leadership role in the
shift to sustainable construction."
"SIG is back to winning ways, and we look forward to 2022 and
beyond with confidence."
Investor and Analyst presentation will be available on
www.sigplc.com from 7:15am on Friday 11 March. A live Q&A
session, hosted by Steve Francis, CEO, Ian Ashton, CFO, and Phil
Johns, Managing Director of SIG UK, will take place at 10:00am.
Join from a PC, Mac, iPad, iPhone or Android device:
Please click this URL to join.
https://storm-virtual-uk.zoom.us/j/88998333444
Or One tap mobile:
+13017158592,,88998333444# US (Washington DC)
+13126266799,,88998333444# US (Chicago)
Or join by phone:
Dial(for higher quality, dial a number based on your current
location):
US: +1 301 715 8592 or +1 312 626 6799 or +1 346 248 7799 or +1
408 638 0968 or +1 646 876 9923 or +1 669 900 6833 or +1 253 215
8782
United Kingdom: +44 203 481 5237 or +44 203 481 5240 or +44 203
901 7895 or +44 208 080 6591 or +44 208 080 6592 or +44 330 088
5830 or +44 131 460 1196
Webinar ID: 889 9833 3444
International numbers available:
https://storm-virtual-uk.zoom.us/u/kehtaYf7fs
Enquiries
SIG plc +44 (0) 114 285 6300
Steve Francis Chief Executive Officer
Ian Ashton Chief Financial Officer
FTI Consulting +44 (0) 20 3727 1340
Richard Mountain
Peel Hunt LLP - Joint broker to SIG +44 (0) 20 7418 8900
Mike Bell / Charles Batten
Jefferies International Limited - Joint
broker to SIG +44 (0) 20 7029 8000
Ed Matthews / Will Soutar
About
SIG plc is a leading European supplier of specialist building
solutions to trade customers across the UK, France, Germany,
Ireland, Benelux and Poland. As a distributor of insulation and
interiors products and merchant of roofing and exteriors products,
SIG facilitates one-stop access to an extensive product range,
provides expert technical advice and coordinates often complex
delivery requirements. For suppliers, SIG offers a channel through
which products can be brought to a highly fragmented market of
smaller customers and sites that are of insufficient scale to
supply direct. SIG employs approximately 6,800 employees across
Europe and is listed on the London Stock Exchange (SHI). For more
information, please visit the Company's website, www.sigplc.com
.
Trading overview
FY21 LFL revenues grew 24% vs prior year, which was distorted by
Covid-19, notably in H1, and 8% vs 2019. Reported Group revenues
from underlying operations were 22% higher in the year vs 2020,
including an adverse 3% currency movement.
LFL sales growth
2021 vs 2019 H1 Q3 Q4 H2 FY
UK Interiors (19)% 0% 15% 7% (8)%
UK Exteriors 14% 26% 29% 28% 21%
UK (7)% 10% 22% 15% 4%
------------------ ------ ------ ----- ----- -----
France Interiors 8% 1% 13% 7% 7%
France Exteriors 19% 11% 40% 25% 22%
Germany 1% 3% 12% 7% 4%
Benelux (10)% (12)% (1)% (6)% (8)%
Poland 20% 33% 41% 36% 29%
Ireland (21)% 6% 14% 10% (5)%
------------------ ------ ------ ----- ----- -----
EU 7% 8% 22% 15% 11%
------------------ ------ ------ ----- ----- -----
Group 1% 9% 22% 15% 8%
------------------ ------ ------ ----- ----- -----
LFL sales growth FY 2021
2021 vs 2020 H1 Q3 Q4 H2 FY sales
GBPm
UK Interiors 54% 30% 21% 26% 38% 508
UK Exteriors 58% 24% 17% 20% 36% 422
UK 56% 27% 19% 23% 37% 930
------------------ ---- ---- ---- ---- ---- --------
France Interiors 38% 2% 10% 6% 20% 195
France Exteriors 34% 6% 17% 12% 22% 406
Germany 11% 7% 9% 8% 10% 393
Benelux 2% 0% 17% 9% 5% 92
Poland 22% 44% 46% 45% 33% 187
Ireland 14% 18% 9% 13% 14% 88
------------------ ---- ---- ---- ---- ---- --------
EU 22% 11% 16% 14% 17% 1,361
------------------ ---- ---- ---- ---- ---- --------
Group 33% 17% 17% 17% 24% 2,291
------------------ ---- ---- ---- ---- ---- --------
Strategic progress
2021 saw a step change in the Group's performance, driven by the
major strategic initiatives initiated at the outset of the Return
to Growth strategy in the summer of 2020.
Reinforcing our decentralised business model, with a focus on
driving operational performance at branch level, has driven record
performance in France and Poland and strong growth in the UK , as a
result of:
-- Empowered local teams - investing in their sites, giving them
the tools to operate, simplifying targets, and upgrading incentives
has generated huge energy and increased employee engagement
-- Disciplined margin management in inflationary conditions
-- Superior product range and availability, leveraging our
supplier partnerships to secure scarce products, and supporting
customers in a very challenging supply year
The UK organisation has been rebuilt and is back in profit:
-- Decentralised operating model re-established, slimmed down
national and central structures and strengthened regional and
branch structures, underpinned by branch P&L accountability
-- Recovery of market share lost since 2018 well under way
-- Gross margins back to target levels
-- Improved supplier relationships - rebates, terms, stock allocation
-- Improved pricing disciplines and focus on enhancing mix of higher margin products
-- The UK business overall returned to underlying profitability
for the year, with Interiors returning to profit in H2
Group wide, investment in our strategy is paying off and laying
the foundations for sustainable growth:
-- We invested in stock availability, more expertise, more
people in the field, better training and incentives, modernising
and decarbonising the fleet, and improving our branches
-- We opened branches in most countries, with a multi-year
programme of branch openings now underway to in-fill geographic
gaps or upgrade our presence in major urban markets
-- Our Germany and Benelux businesses both have new, experienced
leadership in place, and we are confident that they will continue
to build on the early signs of improvement already seen in the
later months of the year
-- We strengthened our leadership bench whilst streamlining and
upskilling the corporate centre, moving the corporate office from
central London to our new depot at Heathrow airport
-- Recent acquisitions - SM Roofing, F30 (construction
accessories) and Penlaw (insulation), all in the UK - are
performing well, beating 2021 profit expectations, and fit our
specialist model
-- We see a clear opportunity to accelerate delivery against the
strategic plan through targeted investment in extending our product
range, specialist solutions and footprint
As a result, SIG's reputation and influence has been
regained:
-- Larivi è re (France Exteriors) awarded "2021 Best Specialist
Distributor" (Geste D'Or 2021) and UK Interiors awarded
"Distributor of the Year" in the supply category (BMJ awards)
-- SIG appointments to high profile leadership roles in key industry associations
-- Increasingly viewed as an attractive and trusted home by
prospective industry recruits and M&A targets
Strong Balance Sheet
The Group's liquidity position remained strong throughout 2021,
and on 18 November 2021 the Group completed the restructuring of
its debt arrangements, comprising the issue of EUR300m 5.25% fixed
rate senior secured notes and the establishment of a new RCF of
GBP50m. The senior secured notes are subject to incurrence-based
covenants, and the RCF has a leverage maintenance covenant which
only applies if the facility is over 40% drawn at a quarter end
reporting date. The RCF was undrawn at 31 December 2021.
Where possible and appropriate we have built up increases in our
inventory holding levels, in light of the supply challenges
experienced by the industry in recent months. O ur strong balance
sheet can accommodate this short-term investment in inventory, and
our strong liquidity position continues to provide an appropriate
buffer given the prevailing macro-economic uncertainties. Inflation
was a headwind in working capital and cash flow during the year,
and the cash outflow was also affected by acquisitions and
one-offs, including those related to the refinancing.
Dividend
No dividend will be paid for 2021. However, continued successful
execution of the Return to Growth strategy, including sensible
investment where appropriate, will return the Group to sustainable,
profitable growth and cash generation, supporting a range of
capital allocation priorities. The Board reiterates its medium-term
commitment to return to a progressive dividend policy,
appropriately covered by underlying earnings.
The Group completed a share capital reduction in June by
cancelling its share premium account. This has created
distributable reserves to provide flexibility for dividend payments
in future.
People
The Board would like to thank all employees of SIG for their
continued commitment and resilience. Their efforts over the last
two years were the key to the excellent results in 2021, and will
remain the key for the next phase of the Group's evolution, as we
focus on building a stronger business with a high performing
workforce that is rewarded for making a positive difference. We are
committed to building a great business that can play a key role in
the construction supply chains across Europe for many years to
come.
Covid-19
The safety of our people, customers and suppliers continues to
be our primary concern. Safety protocols developed during the
pandemic continue to be adhered to across the Group, in line with
the government guidance across all jurisdictions in which it
operates.
Despite various lockdowns and restrictions throughout the year,
the business was able to trade broadly as normal, albeit within the
new operating norms and protocols. The Irish market was, uniquely
in the Group, impacted by further government restrictions on
construction from January until May 2021.
Outlook
The Group has strong positions in its core markets, and the
fundamentals of those markets remain attractive. The Board believes
that we have the right strategy and foundations in place to deliver
long term, sustainable, profitable growth and to build a strong and
growing Group for the future.
With no direct exposure to Russia or Ukraine, we are currently
not seeing any significant impact on our business arising from the
current conflict, but we will continue to monitor the situation
closely. The conflict, and the response to it, could affect,
amongst other things, energy prices, commodity supply, and exchange
rates. This is alongside the existing global backdrop of
inflationary pressures.
In the near-term we are anticipating some remaining impact from
material shortages, but these are gradually abating. We have
started the year well, and ahead of plan, helped by a continuation
of the robust demand seen in late 2021. This, together with the
effectiveness of our supply chain management and commercial
agility, gives the Board increasing confidence over the full year
performance. We expect to be free cash flow neutral for the year,
before returning to sustainable free cash generation thereafter,
enabling us to continue to invest in and drive our strategic
goals.
FINANCIAL REVIEW
Revenue and gross margin
The Group saw a 24.3% increase in its LFL revenue over the year,
with Group underlying revenue up to GBP2,291.4m (2020:
GBP1,872.7m), reflecting a strong recovery from the Covid-19 impact
in 2020, driven by the effective implementation of the Return to
Growth strategy as well as the inflationary tailwind. Underlying
results exclude businesses that are classified as non-core, and
Other items, in order to provide a better understanding of the
performance of the Group. On a statutory basis, Group revenue was
GBP2,291.4m (2020: GBP1,874.5m), with no sales from non-core
businesses (2020: GBP1.8m).
Pass through of product price inflation added to the top line in
all geographies, to an increasing degree in H2. We estimate the
impact on revenue for the full year to be approximately 8%.
Underlying gross profit increased 28% to GBP602.1m (2020:
GBP470.0m) with a gross profit margin of 26.3% (2020: 25.1%). This
primarily reflects increased rebate receipts due to increased
sales. On a statutory basis, gross profit increased from GBP470.5m
to GBP602.1m with gross margin increasing by 120bps to 26.3% (2020:
25.1%).
Operating costs and profit
The Group's underlying operating costs were GBP560.7m (2020
restated: GBP523.1m). The increase was primarily due to the
increased trading volumes, inflation, increased variable
compensation, and the non-recurring government support schemes in
the prior year, such as furlough and other wage initiatives. The
Group's underlying operating profit was GBP41.4m (2020 restated:
GBP53.1m loss), and at a statutory level the Group's operating
profit was GBP14.0m (2020 restated: GBP160.0m loss) after Other
items of GBP27.4m (2020 restated: GBP107.4m). The latter included
GBP9.9m impairment of goodwill, GBP4.7m amortisation of
intangibles, GBP2.0m of onerous contract costs, GBP2.4m costs
associated with refinancing, GBP3.7m costs relating to
restructuring activities, and GBP3.3m related to cloud computing
costs following IFRS Interpretation Committee guidance on this
topic issued during the year. Prior year operating profit has also
been restated as a result of the cloud computing guidance
issued.
Profitability continued to improve in H2 compared to the first
half, with underlying operating profit approximately doubling in H2
vs H1.
Segmental analysis
UK
LFL sales
-------------
Underlying
Underlying operating
Underlying Underlying operating loss
revenue revenue (loss)/profit restated
2021 2020 2021 2020
GBPm GBPm v2020 v 2019 GBPm GBPm
------------- ---------- ---------- ----- ------ -------------- ----------
UK Interiors 507.4 357.4 38% (8)% (2.5) (45.3)
UK Exteriors 422.2 310.1 36% 21% 25.0 (7.3)
------------- ---------- ---------- ----- ------ -------------- ----------
UK 929.6 667.5 37% 4% 22.5 (52.6)
------------- ---------- ---------- ----- ------ -------------- ----------
Underlying revenue in UK Interiors, a specialist insulation and
interiors distribution business, was up 42% to GBP507.4m (2020:
GBP357.4m). This included a 5% impact from acquisitions in the
year. LFL growth was 38%. The LFL decline against 2019 (pre
Covid-19) included a decline in H1 and then good growth in H2,
reflecting the strong progress being made. Despite supply chain
shortages and consequent adoption of "allocations" by suppliers,
especially around dry lining, daily sales showed strong growth
throughout the year. The improved trading volume drove a
substantially lower loss, with the business driving the additional
volumes through the existing capacity in the network. This resulted
in an underlying operating loss of GBP2.5m (2020 restated: GBP45.3m
loss).
UK Exteriors, a specialist roofing merchant, which also includes
our Building Solutions business, traded extremely well, benefitting
from both the strong demand environment and strategic stock
management, with underlying revenues of GBP422.2m (2020:
GBP310.1m), a LFL increase of 36%. The increase in revenue, further
benefit from an increased margin due to rebates, and favourable
product mix resulted in an underlying operating profit of GBP25.0m
(2020 restated: GBP7.3m loss).
France
LFL sales
---------------
Underlying
Underlying Underlying operating
Underlying
operating
revenue revenue profit profit/(loss)
2021 2020 2021 2020
GBPm GBPm v 2020 v 2019 GBPm GBPm
-------------------- ---------- ---------- ------- ------ ---------- --------------
France Interiors 195.3 168.1 20% 7% 11.2 7.1
France Exteriors 406.0 344.8 22% 22% 17.4 8.3
-------------------- ---------- ---------- ------- ------ ---------- --------------
France before
non-core 601.3 512.9 21% 17% 28.6 15.4
-------------------- ---------- ---------- ------- ------ ---------- --------------
Non-core businesses - 1.8 - - - (0.3)
-------------------- ---------- ---------- ------- ------ ---------- --------------
France 601.3 514.7 21% 17% 28.6 15.1
-------------------- ---------- ---------- ------- ------ ---------- --------------
France Interiors, trading as LiTT, a structural insulation and
interiors business, saw underlying revenue increase by 16% to
GBP195.3m (2020: GBP168.1m), and by 20% on a LFL basis. 2021
continued the revenue growth experienced in the second half of
2020. The increases in revenue, coupled with an improved margin as
a result of increased supplier rebates, partially offset by higher
operating costs due to trading levels and inflation, resulted in a
GBP4.1m increase in underlying operating profit to GBP11.2m (2020:
GBP7.1m).
Underlying revenue in France Exteriors, trading as Larivière, a
specialist roofing business, increased by 18% to GBP406.0m (2020:
GBP344.8m), and by 22% on a LFL basis. The strong demand in the RMI
market witnessed in late 2020 continued throughout 2021. The
increase in revenue together with increased supplier rebates and
strict pricing discipline, partially offset by increased costs to
fulfil higher trading volumes, resulted in an underlying operating
profit increase of GBP9.1m to GBP17.4m (2020: GBP8.3m).
LFL sales
--------------
Underlying Underlying
Underlying Underlying operating operating
revenue revenue profit profit
2021 2020 2021 2020
GBPm GBPm v 2020 v 2019 GBPm GBPm
-------- ---------- ---------- ------ ------ ---------- ----------
Germany 393.2 370.7 10% 4% 3.6 0.4
-------- ---------- ---------- ------ ------ ---------- ----------
Germany
Underlying revenue in WeGo/VTi, our specialist insulation and
interiors distribution business in Germany, increased by 6% to
GBP393.2m (2020: GBP370.7m) and by 10% on a LFL basis. The
improvement in Germany was aided by proactive stock management,
allowing the business to meet customer demand despite supply
shortages, and input price inflation that was largely passed on to
customers. The increased trading levels resulted in an underlying
operating profit of GBP3.6m (2020: GBP0.4m). We have new management
in place in our German business and are encouraged by early
progress.
LFL sales
--------------
Underlying Underlying
Underlying Underlying operating operating
revenue revenue loss profit
2021 2020 2021 2020
GBPm GBPm v 2020 v 2019 GBPm GBPm
-------- ---------- ---------- ------ ------ ---------- ----------
Benelux 92.4 91.6 5% (8)% (4.9) 2.5
-------- ---------- ---------- ------ ------ ---------- ----------
Benelux
Underlying revenue from the Group's business in Benelux
increased slightly by GBP0.8m to GBP92.4m (2020: GBP91.6m), with
increased volumes following recovery from Covid-19 in the prior
year largely offset by the impact of strong competitive pressure in
the Netherlands, combined with certain regulatory changes. This,
along with a temporary increase in the cost base necessary to
improve operational effectiveness has resulted in an operating loss
of GBP4.9m compared to an operating profit of GBP2.5m in 2020. The
new management appointed in mid-2021 have made good initial
progress in addressing both the operational issues and the cost
base.
Ireland
LFL sales
--------------
Underlying Underlying
Underlying Underlying operating operating
revenue revenue profit profit
2021 2020 2021 2020
GBPm GBPm v 2020 v 2019 GBPm GBPm
-------- ---------- ---------- ------ ------ ---------- ----------
Ireland 88.2 80.5 14% (5)% 2.8 0.8
-------- ---------- ---------- ------ ------ ---------- ----------
Our business in Ireland is a specialist distributor of interiors
and exteriors, as well as a specialist contractor for office
furnishing, industrial coatings and kitchen/bathroom fit out. The
business was affected by further Covid-19 related Government
restrictions in the Republic of Ireland from January until early
May 2021, but saw a strong rebound in the second half, with
underlying revenue increasing by 10% to GBP88.2m (2020: GBP80.5m),
and by 14% on a LFL basis. Underlying operating profit improved by
GBP2.0m, finishing at GBP2.8m (2020: GBP0.8m) as the business saw a
shift in sales mix towards its higher margin offerings.
Poland
LFL sales
--------------
Underlying Underlying
Underlying Underlying operating operating
revenue revenue profit profit
2021 2020 2021 2020
GBPm GBPm v 2020 v 2019 GBPm GBPm
------- ---------- ---------- ------ ------ ---------- ----------
Poland 186.7 149.5 33% 29% 6.3 2.0
------- ---------- ---------- ------ ------ ---------- ----------
In our Polish business, a market leading distributor of
insulation and interiors, underlying revenue increased to GBP186.7m
(2020: GBP149.5m), with LFL sales up 33% due to an increase in
customer numbers, branch openings and significant price inflation.
The business had a record year with underlying profit of GBP6.3m
(2020: GBP2.0m), driven by the sales growth and partially offset by
volume-related increases in operating costs.
Reconciliation of underlying to statutory result
Other items, being items excluded from underlying results,
during the period amounted to GBP35.2m (2020 restated: GBP118.5m)
on a pre-tax basis and are summarised in the table below:
Restated
2021 2020
GBPm GBPm
--------------------------------------------------- ------ --------
Underlying profit/(loss) before tax 19.3 (76.1)
Other items - impacting profit/(loss) before
tax:
Amortisation of acquired intangibles (4.7) (5.6)
Impairment charges (10.2) (61.5)
Net restructuring costs (3.7) (6.7)
Onerous contract costs (2.0) (13.2)
Cloud computing configuration and customisation
costs (3.3) (7.1)
Costs associated with acquisitions (1.5) (0.2)
Costs associated with refinancing (2.4) (7.4)
Non-underlying finance costs (7.8) (11.6)
Profit on agreed sale or closure of non-core
businesses and associated impairment charges - 0.6
Net operating losses attributable to businesses
identified as non-core - (0.3)
Investment in omnichannel retailing - (4.2)
Other specific items 0.4 (1.3)
--------------------------------------------------- ------ --------
Total Other items (35.2) (118.5)
--------------------------------------------------- ------ --------
Statutory loss before tax (15.9) (194.6)
--------------------------------------------------- ------ --------
Further details on Other items are as follows:
-- Impairment charges of GBP10.2m (2020: GBP61.5m) includes
GBP9.9m relating to the impairment of goodwill in Benelux
-- Net restructuring costs of GBP3.7m (2020: GBP6.7m) were
incurred principally in connection with the restructuring of
corporate functions as part of the implementation of the Return to
Growth strategy, and restructuring in Germany and Benelux
-- Onerous contract costs of GBP2.0m (2020: GBP13.2m) related to
provisions recognised for licence fee commitments where no future
economic benefit is expected, principally in relation to the SAP
1HANA implementation
-- Cloud computing costs relate to project configuration and
customisation costs associated with cloud computing arrangements,
which are expensed rather than being capitalised as intangible
assets following IFRS Interpretation Committee guidance on this
topic issued during the year
-- Costs associated with refinancing of GBP2.4m (2020: GBP7.4m)
includes adviser, legal and other professional fees of GBP4.9m
offset by a GBP2.5m gain in relation to the recycling of the cash
flow hedging reserve following the termination of hedging
arrangements in connection with the refinancing
-- Non-underlying finance costs of GBP7.8m (2020: GBP11.6m)
comprise GBP12.9m make whole payment on settlement of the previous
private placement notes, GBP2.8m write-off of arrangement fees in
relation to the previous debt arrangements, offset by GBP8.0m
release of the loss on modification previously recognised in
relation to the amendment of the private placement notes in 2020,
together with GBP0.1m unwinding of the discount on the onerous
contract provision
Taxation
The effective tax rate for the Group on the total loss before
tax of GBP15.9m (2020 restated: GBP122.6m) is negative 78.0% (2020
restated: negative 7.3%). As the Group operates in several
different countries, tax losses cannot be surrendered or utilised
cross border. Tax losses are not currently recognised in respect of
the UK business, which also impacts the overall effective tax rate.
The combination of these factors means that the effective tax rate
is less meaningful as an indicator or comparator for the Group.
In accordance with UK legislation, the Group publishes an annual
tax strategy, which is available on our website ( www.sigplc.com
).
Pensions
The Group operates four (2020: four) defined benefit pension
schemes and a number of defined contribution pension schemes. The
largest defined benefit scheme is a UK scheme, which was closed to
further accrual in 2016.
The Group's total pension charge for the year, including amounts
charged to interest, was GBP6.9m (2020: GBP6.9m), of which a charge
of GBP0.6m (2020: GBP0.7m) related to defined benefit pension
schemes and GBP6.3m (2020: GBP6.2m) related to defined contribution
schemes.
The total net liability in relation to defined benefit pension
schemes at 31 December 2021 was GBP10.7m (2020: GBP25.1m). The last
triennial actuarial valuation of the UK scheme as at 31 December
2019 was concluded at the end of March 2021. This showed that the
market value of the scheme's assets had increased by 20% to GBP196m
and that their actuarial value covered 102% of the benefits accrued
to members after allowing for expected future increases in
pensionable salaries. As part of the funding discussions the
Company paid an additional one-off contribution of GBP2.5m into the
Plan in July 2021 to accelerate plans to achieve a secondary
funding target.
Financial position
Overall, the net assets of the Group have decreased by GBP37.2m
to GBP264.7m (2020 restated: GBP301.9m), with a cash position at
year-end of GBP145.1m (2020: GBP235.3m) and net debt of GBP365.0m
(2020: GBP238.2m).
Cash flow
Restated
2021 2020
GBPm GBPm
---------------------------------------------- ------- --------
Underlying operating profit/(loss) 41.4 (53.1)
Add back: Depreciation 68.3 68.4
Add back: Amortisation 3.4 4.8
---------------------------------------------- ------- --------
Underlying EBITDA 113.1 20.1
---------------------------------------------- ------- --------
Cash exceptionals (10.9) (19.7)
Increase in working capital (85.4) (42.1)
Repayment of lease liabilities (57.3) (54.8)
Capital expenditure (18.6) (13.3)
Other (15.0) 5.1
---------------------------------------------- ------- --------
Operating cash flow (74.1) (104.7)
---------------------------------------------- ------- --------
Interest and financing (22.7) (22.6)
Refinancing cash costs (16.9) (8.3)
Tax (10.4) (9.7)
---------------------------------------------- ------- --------
Free cash flow (124.1) (145.3)
---------------------------------------------- ------- --------
(Acquisitions)/disposals (10.6) 147.0
Drawdown/(repayment) of debt 52.0 (85.2)
Net proceeds from equity raise - 151.9
Total cash flow (82.7) 68.4
---------------------------------------------- ------- --------
Cash and cash equivalents at beginning of the
year(1) 235.3 145.1
Effect of foreign exchange rate changes (7.5) 21.8
---------------------------------------------- ------- --------
Cash and cash equivalents at end of the year 145.1 235.3
---------------------------------------------- ------- --------
1. Cash and cash equivalents comprise cash at bank and on hand
of GBP145.1m (2020: GBP235.3m) less bank overdrafts of GBPnil
(2020: GBPnil). Cash and cash equivalents at 1 January 2020 include
GBP110.0m from continuing operations and GBP35.1m from businesses
held for sale.
Free cash flow represents the cash available after supporting
operations, including capex and the repayment of lease liabilities,
and before acquisitions and any movements in funding.
During the year, the Group reported a free cash outflow of
GBP124.1m (2020 restated: GBP145.3m outflow) as a result of the
increased underlying operating profit in the year being offset by
an increase in working capital, together with payments in relation
to interest, tax and capital expenditure, and exceptional and other
cash flows. The costs associated with the refinancing exercise
totalled GBP16.9m. "Other" includes payments to the Employee
Benefit Trust to fund share plans, and payments of GBP5m to the UK
pension scheme, including the additional GBP2.5m referenced
above.
The increase in working capital was GBP85m of which GBP76m
related to inventory movements. There were three key factors
driving the increase being sales volume growth, year-over-year
inflation, and the increases in holding levels referenced
above.
Other movements in cash below free cash flow include GBP10.6m
cash outflow in relation to the purchase of businesses (2020:
GBP147.0m inflow from the sale of businesses) and GBP52.0m net cash
inflow from the restructuring of the debt facilities, consisting of
GBP200.3m repayments of previous facilities offset by GBP251.5m net
proceeds from the new senior secured notes and GBP0.8m receipt on
settlement of derivatives (2020: GBP85.2m repayments).
Financing and funding
On 18 November 2021 the Group completed a restructuring of its
debt arrangements, comprising the issue of EUR300m 5.25% fixed rate
senior secured notes and the establishment of a new RCF of GBP50m.
The existing private placement notes of GBP129.8m and GBP70m term
loan were repaid, together with a GBP12.9m make-whole payment on
early settlement of the private placement notes. The Group now has
committed facilities in place to November 2026 (senior secured
notes) and May 2026 for the RCF. The senior secured notes are
subject to incurrence based covenants, and the RCF has a leverage
maintenance covenant set at 4.75x which only applies if the
facility is over 40% drawn at a quarter end reporting date. The RCF
was undrawn at 31 December 2021.
The Group has significant available liquidity, and on the basis
of current forecasts is expected to remain in compliance with all
banking covenants throughout the forecast period to 31 March
2023.
Directors' responsibility statement on the Annual Report
The responsibility statement below has been prepared in
connection with the Company's full Annual Report for the year ended
31 December 2021. Certain parts solely thereof are not included
within this announcement.
We confirm that to the best of our knowledge:
(a) the financial statements, prepared in accordance with the
relevant applicable set of accounting standards, give a true and
fair view of the assets, liabilities, financial position and profit
or loss of the Company and the undertakings included in the
consolidation taken as a whole;
(b) the Strategic report includes a fair review of the
development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face; and
(c) the Annual Report and financial statements, taken as a
whole, are fair, balanced and understandable and provide the
information necessary for shareholders to assess the Company's
position and performance, business model and strategy.
This responsibility statement was approved by the Board of
Directors on 10 March 2022 and signed on its behalf by:
By order of the Board
Steve Francis Ian Ashton
Director Director
10 March 2022 10 March 2022
Cautionary statement
The securities of the Group have not been and will not be
registered under the US Securities Act of 1933, as amended (the
"Securities Act"), or under the securities laws of any state or
other jurisdiction of the United States, and may not be offered,
sold, pledged or transferred , directly or indirectly, in, into or
within the United States except pursuant to an exemption from, or
in a transaction not subject to, the registration requirements of
the Securities Act and in compliance with any applicable securities
laws of any relevant state or other jurisdiction of the United
States. There has been and will be no public offering of the
securities of the Group in the United States.
This announcement has been prepared to provide the Company's
shareholders with a fair review of the business of the Group and a
description of the principal risks and uncertainties facing it. It
may not be relied upon by anyone, including the Company's
shareholders, for any other purpose.
This announcement 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. Forward-looking
statements in this Announcement include, but are not limited to,
statements about the Group's future financial and operational
performance, the management's ability to successfully execute the
strategy, and the ability of the Group and the construction
industry generally to respond to the effects and aftermath of the
Covid-19 pandemic. No assurance can be given that the
forward-looking statements in this announcement 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, changes
in risks associated with the level of market demand, fluctuations
in product pricing and changes in foreign exchange and interest
rates.
The Company's shareholders are cautioned not to place undue
reliance on the forward-looking statements. This announcement has
not been audited or otherwise independently verified. The
information contained in this announcement 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 announcement during the
financial year ahead.
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
Consolidated income
statement
for the year ended
31 December 2021
----------------------------- ----- ------------ --------- ---------- ------------ --------- ----------
Other Other
Underlying* items** Total Underlying* items** Total
Restated Restated Restated
2021 2021 2021 2020 2020 2020
Note GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ----- ------------ --------- ---------- ------------ --------- ----------
Continuing operations
Revenue 2 2,291.4 - 2,291.4 1,872.7 1.8 1,874.5
Cost of sales (1,689.3) - (1,689.3) (1,402.7) (1.3) (1,404.0)
----------------------------- ----- ------------ --------- ---------- ------------ --------- ----------
Gross profit 602.1 - 602.1 470.0 0.5 470.5
Other operating expenses 3 (560.7) (27.4) (588.1) (523.1) (107.4) (630.5)
----------------------------- ----- ------------ --------- ---------- ------------ --------- ----------
Operating profit/(loss) 41.4 (27.4) 14.0 (53.1) (106.9) (160.0)
Finance income 0.7 - 0.7 0.7 - 0.7
Finance costs (22.8) (7.8) (30.6) (23.7) (11.6) (35.3)
----------------------------- ----- ------------ --------- ---------- ------------ --------- ----------
Profit/(loss) before
tax from continuing
operations 19.3 (35.2) (15.9) (76.1) (118.5) (194.6)
Income tax (expense)/credit 4 (15.6) 3.2 (12.4) (10.7) 4.1 (6.6)
Profit/(loss) after
tax from continuing
operations 3.7 (32.0) (28.3) (86.8) (114.4) (201.2)
----------------------------- ----- ------------ --------- ---------- ------------ --------- ----------
Discontinued operations
Profit after tax
from discontinued
operations 11 - - - - 69.7 69.7
Profit/(loss) after
tax for the year 3.7 (32.0) (28.3) (86.8) (44.7) (131.5)
----------------------------- ----- ------------ --------- ---------- ------------ --------- ----------
Attributable to:
Equity holders of
the Company 3.7 (32.0) (28.3) (86.8) (44.7) (131.5)
----------------------------- ----- ------------ --------- ---------- ------------ --------- ----------
Loss per share
From continuing operations:
Basic 5 (2.4)p (23.1)p
Diluted 5 (2.4)p (23.1)p
Total:
Basic 5 (2.4)p (15.1)p
Diluted 5 (2.4)p (15.1)p
----------------------------- ----- ------------ --------- ---------- ------------ --------- ----------
* Underlying represents the results before Other items.
** Other items have been disclosed separately in order to give
an indication of the underlying earnings of the Group. Further
details are disclosed in Note 3.
The 2020 results have been restated as disclosed in Note 1.
Consolidated statement of comprehensive
income
for the year ended 31 December 2021
----------------------------------------------------- ------- ---------
Restated
2021 2020
GBPm GBPm
----------------------------------------------------- ------- ---------
Loss after tax for the year (28.3) (131.5)
Items that will not subsequently be reclassified
to the Consolidated Income Statement:
Remeasurement of defined benefit pension
liability 9.1 (1.7)
Deferred tax movement associated with remeasurement
of defined benefit pension liability 0.1 0.3
Current tax movement associated with remeasurement
of defined benefit pension liability - 0.4
9.2 (1.0)
Items that may subsequently be reclassified
to the Consolidated income statement:
Exchange difference on retranslation of
foreign currency goodwill and intangibles (3.7) 5.1
Exchange difference on retranslation of
foreign currency net investments (excluding
goodwill and intangibles) (10.7) 13.2
Exchange and fair value movements associated
with borrowings and derivative financial
instruments 8.6 (11.0)
Tax credit on fair value movements arising
on borrowings and derivative financial
instruments - -
Exchange differences reclassified to the
Consolidated income statement in respect
of the disposal of foreign operations - (5.9)
Gains and losses on cash flow hedges 0.7 (0.5)
Transfer to profit and loss on cash flow
hedges (3.1) (0.7)
------------------------------------------------------ ------- ---------
(8.2) 0.2
----------------------------------------------------- ------- ---------
Other comprehensive income/(expense) 1.0 (0.8)
------------------------------------------------------ ------- ---------
Total comprehensive expense (27.3) (132.3)
------------------------------------------------------ ------- ---------
Attributable to:
Equity holders of the Company (27.3) (132.3)
(27.3) (132.3)
----------------------------------------------------- ------- ---------
The 2020 results have been restated as disclosed in Note 1.
Consolidated balance sheet
as at 31 December 2021
--------------------------------------- -------- --------- -----------
Restated
Restated 1 January
2021 2020 2020
GBPm GBPm GBPm
--------------------------------------- -------- --------- -----------
Non-current assets
Property, plant and equipment 66.9 63.2 58.6
Right-of-use assets 230.9 229.6 255.2
Goodwill 120.1 128.8 159.0
Intangible assets 16.7 18.5 30.2
Lease receivables 2.9 3.6 4.4
Deferred tax assets 4.8 5.7 4.4
Derivative financial instruments - 0.1 1.7
442.3 449.5 513.5
--------------------------------------- -------- --------- -----------
Current assets
Inventories 242.0 170.3 156.5
Lease receivables 0.8 0.7 0.8
Trade and other receivables 371.3 294.4 294.7
Current tax assets - - 0.9
Derivative financial instruments 0.2 - 0.9
Cash at bank and on hand 145.1 235.3 110.0
Assets classified as held for
sale - - 258.4
759.4 700.7 822.2
--------------------------------------- -------- --------- -----------
Total assets 1,201.7 1,150.2 1,335.7
--------------------------------------- -------- --------- -----------
Current liabilities
Trade and other payables 369.7 301.4 327.4
Lease liabilities 50.7 50.6 51.5
Interest-bearing loans and borrowings - - 275.1
Deferred consideration 1.1 0.5 -
Other financial liabilities 0.4 0.5 1.5
Derivative financial instruments 0.5 0.5 0.2
Current tax liabilities 4.6 4.2 3.7
Provisions 12.9 10.5 6.7
Liabilities directly associated
with assets classified as held
for sale - - 115.7
439.9 368.2 781.8
--------------------------------------- -------- --------- -----------
Non-current liabilities
Lease liabilities 210.4 211.6 224.1
Interest-bearing loans and borrowings 249.6 212.2 -
Deferred consideration 0.7 0.4 -
Derivative financial instruments - 0.4 1.9
Other financial liabilities 0.6 1.2 1.4
Other payables 3.8 3.5 1.0
Retirement benefit obligations 10.7 25.1 24.8
Provisions 21.3 25.7 18.6
497.1 480.1 271.8
--------------------------------------- -------- --------- -----------
Total liabilities 937.0 848.3 1,053.6
--------------------------------------- -------- --------- -----------
Net assets 264.7 301.9 282.1
--------------------------------------- -------- --------- -----------
Capital and reserves
Called up share capital 118.2 118.2 59.2
Share premium account - 447.7 447.3
Treasury shares (12.5) (0.2) -
Capital redemption reserve 0.3 0.3 0.3
Share option reserve 4.4 2.0 1.8
Hedging and translation reserves 2.4 10.5 10.2
Cost of hedging reserve 0.1 0.2 0.3
Merger reserve 92.5 92.5 -
Retained profits/(losses) 59.3 (369.3) (237.0)
Attributable to equity holders
of the Company 264.7 301.9 282.1
--------------------------------------- -------- --------- -----------
Total equity 264.7 301.9 282.1
--------------------------------------- -------- --------- -----------
The 2020 and 2019 Consolidated balance sheets have been restated
as disclosed in Note 1.
Consolidated
statement
of changes in
equity
for the year
ended 31
December 2021
------------------ -------- -------- ---------- ----------- -------- ------------ -------- --------- --------- --------
Called Hedging Cost
up Share Treasury Capital Share and of Retained
share premium shares redemption option translation hedging Merger profits/
capital account reserve reserve reserve reserves reserve reserve (losses) Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ -------- -------- ---------- ----------- -------- ------------ -------- --------- --------- --------
At 1 January 2020
(restated) 59.2 447.3 - 0.3 1.8 10.2 0.3 - (237.0) 282.1
------------------ -------- -------- ---------- ----------- -------- ------------ -------- --------- --------- --------
Loss after tax
(restated) - - - - - - - - (131.5) (131.5)
Other
comprehensive
income/(expense) - - - - - 0.3 (0.1) - (1.0) (0.8)
------------------ -------- -------- ---------- ----------- -------- ------------ -------- --------- --------- --------
Total
comprehensive
income/(expense) - - - - - 0.3 (0.1) - (132.5) (132.3)
Issue of share
capital 59.0 0.4 - - - - - 92.5 - 151.9
Transfer of
unallocated
treasury shares - - (0.2) - - - - - 0.2 -
Credit to share
option
reserve - - - - 0.2 - - - - 0.2
At 31 December
2020 (restated) 118.2 447.7 (0.2) 0.3 2.0 10.5 0.2 92.5 (369.3) 301.9
------------------ -------- -------- ---------- ----------- -------- ------------ -------- --------- --------- --------
Loss after tax - - - - - - - - (28.3) (28.3)
Other
comprehensive
(expense)/income - - - - - (8.1) (0.1) - 9.2 1.0
------------------ -------- -------- ---------- ----------- -------- ------------ -------- --------- ---------
Total
comprehensive
(expense)/income - - - - - (8.1) (0.1) - (19.1) (27.3)
Purchase of
treasury shares - - (12.3) - - - - - - (12.3)
Credit to share
option
reserve - - - - 2.6 - - - - 2.6
Settlement of
share options - - - - (0.2) - - - - (0.2)
Capital reduction - (447.7) - - - - - - 447.7 -
At 31 December
2021 118.2 - (12.5) 0.3 4.4 2.4 0.1 92.5 59.3 264.7
------------------ -------- -------- ---------- ----------- -------- ------------ -------- --------- --------- --------
Total equity at 1 January 2020 and 31 December 2021 has been
restated as disclosed in Note 1.
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 reserves represents movements in the
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.
Treasury shares reserve relate to shares purchased by the SIG
Employee Benefit Trust to satisfy awards made under the Group's
share plans which are not vested and beneficially owned by
employees. Shares became unallocated during the prior year and were
transferred to the treasury share reserve.
The share premium account was cancelled during the year through
a capital reduction.
The merger reserve represents the premium on ordinary shares
issued during the prior year through the use of a cash box
structure.
Consolidated cash flow statement
for the year ended 31 December
2021
Restated
2021 2020
Note GBPm GBPm
------------------------------------------------- ------ -------- -----------
Net cash flow from operating
activities
Cash generated from/(used in)
operating activities 6 7.4 (50.5)
Income tax paid (10.4) (9.7)
Net cash used in operating activities (3.0) (60.2)
-------------------------------------------------- ------ -------- -----------
Cash flows from investing activities
Finance income received 0.7 0.7
Purchase of property, plant and
equipment and computer software (18.6) (13.3)
Proceeds from sale of property,
plant and equipment 2.7 5.6
Net cash flow on the purchase
of businesses (10.1) (0.8)
Settlement of amounts payable
for previous purchases of businesses (0.5) -
Net cash flow arising on the
sale of businesses 10 - 147.8
Net cash flow from investing
activities (25.8) 140.0
-------------------------------------------------- ------ -------- -----------
Cash flows from financing activities
Finance costs paid(1) (36.3) (23.3)
Repayment of lease liabilities (57.3) (54.8)
Repayment of borrowings (200.3) (55.1)
Proceeds from borrowings 251.5 -
Repayment of revolving credit
facility(2) - (30.0)
Settlement of derivative financial
instruments 0.8 (0.1)
Acquisition of treasury shares (12.3) -
Net proceeds from equity raise - 151.9
Net cash flow from financing
activities (53.9) (11.4)
-------------------------------------------------- ------ -------- -----------
(Decrease)/increase in cash and
cash equivalents in the year (82.7) 68.4
-------------------------------------------------- ------ -------- -----------
Cash and cash equivalents at
beginning of the year 235.3 145.1
Effect of foreign exchange rate
changes (7.5) 21.8
Cash and cash equivalents at
end of the year(3) 145.1 235.3
-------------------------------------------------- ------ -------- -----------
(1) Finance costs paid in the current year includes GBP12.9m
make-whole payment in connection with the refinancing during
the year.
(2) As part of the changes to the debt facility agreements
on 18 June 2020, GBP70.0m drawn under the existing revolving
credit facility was converted into a GBP70.0m term facility,
with no additional repayment or drawdown made.
(3) Cash and cash equivalents comprise cash at bank and on
hand of GBP145.1m (2020: GBP235.3m) less bank overdrafts of
GBPnil (2020: GBPnil). Cash and cash equivalents at 1 January
2020 include GBP110.0m from continuing operations and GBP35.1m
from businesses held for sale.
The 2020 cash flow statement has been restated as disclosed
in Note 1.
1. Basis of preparation
The Group's financial information has been prepared in
accordance with the recognition and measurement requirements of UK
adopted international accounting standards. It has been prepared on
a basis consistent with that adopted in the previous year, except
for the change in accounting policy noted below.
The Financial statements have been prepared under the historical
cost convention except for derivative financial instruments which
are stated at their fair value.
Whilst the financial information included in this Preliminary
Results Announcement has been prepared in accordance with the
recognition and measurement criteria of IFRS, this announcement
does not itself contain sufficient information to comply with
IFRS.
The Preliminary Results Announcement does not constitute the
Company's statutory accounts for the years ended 31 December 2021
and 31 December 2020 within the meaning of Section 435 of the
Companies Act 2006 but is derived from those statutory
accounts.
The Group's statutory accounts for the year ended 31 December
2020 have been filed with the Registrar of Companies, and those for
2021 will be delivered following the Company's Annual General
Meeting. The Auditor has reported on the statutory accounts for
2021 and 2020. Their report for 2021 and 2020 was (i) unqualified,
(ii) included no matters to which the auditor drew attention by way
of emphasis and (iii) did not contain statements under Sections 498
(2) or 498 (3) of the Companies Act 2006 in relation to the
financial statements.
In preparing the Consolidated Financial Statements management
has considered the impact of climate change, particularly in the
context of the financial statements as a whole, in addition to
disclosures included in the Strategic Report this year. This
included an assessment of the impact on the carrying value of
non-current assets and the impact on forecasts used in the
impairment review and the assessments of going concern and
longer-term viability. These considerations did not have a material
impact on the financial reporting judgements and estimates,
consistent with the assessment that climate change is not expected
to have a significant impact on the Group's going concern
assessment to 31 March 2023 nor the viability of the Group over the
next three years.
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.
On 18 November 2021 the Group completed the restructuring of its
debt arrangements, comprising the issue of EUR300m senior secured
notes and a new RCF of GBP50m. The existing private placement notes
of GBP129.8m and GBP70m term loan were repaid, together with a
GBP12.9m make-whole payment on early settlement of the private
placement notes. The Group now has committed facilities in place to
November 2026 (senior secured notes) and May 2026 for the RCF. The
senior secured notes are subject to incurrence based covenants
only, and the RCF has a leverage maintenance covenant which is only
effective if the facility is over 40% drawn at a quarter end
reporting date. The RCF was undrawn at 31 December 2021.
The Group has significant available liquidity and on the basis
of current forecasts is expected to remain in compliance with all
banking covenants throughout the forecast period to 31 March
2023.
The Directors have considered the Group's forecasts which
support the view that the Group will be able to continue to operate
within its banking facilities and comply with its banking
covenants. The Directors have considered the following principal
risks and uncertainties that could potentially impact the Group's
ability to fund its future activities and adhere to its banking
covenants, including:
-- a decline in market conditions resulting in lower than forecast sales;
-- continued implementation of the Return to Growth strategy
taking longer than anticipated to deliver forecast increases in
revenue and profit;
-- potential impact of material shortages on forecast sales; and
-- further waves of the Covid-19 pandemic having an impact on trading.
The forecasts on which the going concern assessment is based
have been subject to sensitivity analysis and stress testing to
assess the impact of the above risks and the Directors have also
reviewed mitigating actions that could be taken.
The Directors have considered the impact of climate-related
matters on the going concern assessment and is not expected to have
a significant impact on the Group's going concern.
On consideration of the above, the Directors believe that the
Group has adequate resources to continue in operational existence
for the forecast period to 31 March 2023 and the Directors
therefore consider it appropriate to adopt the going concern basis
in preparing the 2021 financial statements.
New standards, interpretations and amendments
The following amendments and interpretations apply for the first
time in 2021, but have not had a material impact on the Financial
Statements of the Group:
-- Amendments to IFRS 4, IFRS 7, IFRS 9, IFRS 16 and IAS 39
Interest Rate Benchmark Reform - Phase 2
-- Amendments to IFRS 16 Covid-19 Related Rent Concessions beyond 30 June 2021
Certain new accounting standards and interpretations have been
published that are not mandatory for 31 December 2021 reporting
periods and have not been early adopted by the Group. None of these
are expected to have a material impact on the Group in the current
or future reporting periods or on foreseeable future
transactions.
Change in accounting policy - Software as a Service ("SaaS")
arrangements
Following the IFRS Interpretations Committee ("IFRIC") agenda
decision published in April 2021, the Group has reviewed its
accounting policy regarding the configuration and customisation
costs incurred in implementing SaaS arrangements.
SaaS arrangements are arrangements in which the Group does not
currently control the underlying software used in the
arrangement.
The Group's revised policy is as follows:
-- Where costs incurred to configure or customise SaaS
arrangements result in the creation of a resource which is
identifiable, and where the Group has the power to obtain the
future economic benefit flowing from the underlying resource and to
restrict the access of others to those benefits, such costs are
capitalised as separate software intangible assets and amortised
over the useful life of the software on a straight-line basis.
-- Where costs incurred to configure or customise do not result
in the recognition of an intangible software asset then those costs
that provide the Group with a distinct service (in addition to the
SaaS access) are recognised as expenses when the supplier provides
the services. When such costs incurred do not provide a distinct
service, the costs are expensed as incurred. Costs are included
within Other items in the consolidated income statement if they
relate to significant strategic projects and are considered to meet
the Group's definition of Other items.
Previously some configuration and customisation costs relating
to SaaS arrangements which did not result in a separately
identifiable software intangible assets had been capitalised.
The change in accounting policy has been retrospectively
applied, resulting in a restatement to previously reported numbers.
The impact on the Consolidated balance sheet and equity is a
reduction in intangible assets and retained profits/(losses) of
GBP12.1m at 1 January 2020 and GBP4.4m at 31 December 2020. The
impact on the Consolidated income statement is as follows:
31 December
2020
Increase/(decrease) in profit/(loss) GBPm
------------------------------------------------------- ------------
Other underlying operating expenses (0.4)
Amortisation of computer software 0.6
------------------------------------------------------- ------------
Underlying operating profit 0.2
Impairment charges 14.6
Cloud computing configuration and customisation costs (7.1)
------------------------------------------------------- ------------
Other items 7.5
------------------------------------------------------- ------------
Operating loss 7.7
------------------------------------------------------- ------------
Loss before and after tax from continuing operations 7.7
------------------------------------------------------- ------------
GBP14.6m impairment was previously recognised in 2020 and
included within Other items in relation the SAP 1HANA and related
project implementation costs. The impact of the restatement is that
GBP9.7m of this is now included in costs expensed in the previous
year (so is reflected within the GBP12.1m reduction in intangibles
at 1 January 2020) and GBP4.9m is included within cloud computing
configuration and customisation costs within Other items in 2020. A
further GBP2.2m other costs relating to significant strategic
projects are also now included within Other items in 2020,
amounting to the total GBP7.1m shown above.
The impact on basic and diluted loss per share is an increase in
basic and diluted loss per share from continuing operations of 0.9p
per share and an increase in basic and diluted total loss per share
of 0.9p per share.
The impact on the Consolidated cash flow statement is an
increase in the net cash inflow from investing activities of
GBP7.5m (due to a reduction in the purchase of property, plant and
equipment and computer software) and a decrease in the net cash
used in operating activities of GBP7.5m, with no change in the
overall increase in cash and cash equivalents in the year.
Disclosure restatement
Disaggregation of revenue:
Heating, ventilation and air conditioning is no longer
considered to be a distinct product type requiring separate
disclosure in Note 2. The prior year comparatives have been
restated to present revenue by product type on a consistent basis
with the current year, with GBP6.9m of revenue previously shown as
heating, ventilation and air conditioning combined within the
Interiors product type. This does not impact any of the primary
statements or other notes to the financial statements.
2. Revenue and segmental information
Revenue
UK UK Total France France Total Total
Interiors Exteriors UK Interiors Exteriors France Germany Benelux Ireland Poland Eliminations Group
2021 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- ------------- --------
Type of product
Interiors 507.4 - 507.4 195.3 - 195.3 393.2 92.4 51.1 186.7 - 1,426.1
Exteriors - 422.2 422.2 - 406.0 406.0 - - 37.1 - - 865.3
Inter-segment
revenue^ 3.4 0.6 4.0 0.1 11.6 11.7 - - 0.1 - (15.8) -
Total underlying
revenue 510.8 422.8 933.6 195.4 417.6 613.0 393.2 92.4 88.3 186.7 (15.8) 2,291.4
------------------ ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- ------------- --------
Revenue
attributable
to businesses
identified
as non-core - - - - - - - - - - - -
Total 510.8 422.8 933.6 195.4 417.6 613.0 393.2 92.4 88.3 186.7 (15.8) 2,291.4
------------------ ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- ------------- --------
Nature of revenue
Goods for resale
(recognised
at point in
time) 510.8 422.8 933.6 195.4 417.6 613.0 393.2 92.4 83.7 186.7 (15.8) 2,286.8
Construction
contracts
(recognised over
time) - - - - - - - - 4.6 - - 4.6
Total 510.8 422.8 933.6 195.4 417.6 613.0 393.2 92.4 88.3 186.7 (15.8) 2,291.4
------------------ ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- ------------- --------
^ Inter-segment revenue is charged at the prevailing market
rates.
Revenue
UK UK Total France France Total Total
Interiors Exteriors UK Interiors Exteriors France Germany Benelux Ireland Poland Eliminations Group
2020 (Restated) GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- ------------- --------
Type of product
Interiors 357.4 - 357.4 168.1 - 168.1 370.7 91.6 46.3 149.5 - 1,183.6
Exteriors - 310.1 310.1 - 344.8 344.8 - - 34.2 - - 689.1
Inter-segment
revenue^ 1.5 0.5 2.0 0.9 7.6 8.5 0.1 0.1 0.1 - (10.8) -
Total underlying
revenue 358.9 310.6 669.5 169.0 352.4 521.4 370.8 91.7 80.6 149.5 (10.8) 1,872.7
------------------ ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- ------------- --------
Revenue
attributable
to businesses
identified
as non-core - - - - 1.8 1.8 - - - - - 1.8
Total 358.9 310.6 669.5 169.0 354.2 523.2 370.8 91.7 80.6 149.5 (10.8) 1,874.5
------------------ ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- ------------- --------
Nature and timing
of
revenue
Goods for resale
(recognised
at point in
time) 358.9 310.6 669.5 169.0 354.2 523.2 370.8 91.7 75.2 149.5 (10.8) 1,869.1
Construction
contracts
(recognised over
time) - - - - - - - - 5.4 - - 5.4
Total 358.9 310.6 669.5 169.0 354.2 523.2 370.8 91.7 80.6 149.5 (10.8) 1,874.5
------------------ ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- ------------- --------
^ Inter-segment revenue is charged at the prevailing market
rates.
The 2020 revenue disclosure has been restated as disclosed in
Note 1.
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 Chief Operating Decision Maker "CODM.
a) Segmental
analysis
UK UK Total France France Total Total
Interiors Exteriors UK Interiors Exteriors France Germany Benelux Ireland Poland Eliminations Group
2021 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- ------------- --------
Revenue
Underlying
revenue 507.4 422.2 929.6 195.3 406.0 601.3 393.2 92.4 88.2 186.7 - 2,291.4
Revenue
attributable
to businesses
identified
as non-core - - - - - - - - - - - -
Inter-segment
revenue^ 3.4 0.6 4.0 0.1 11.6 11.7 - - 0.1 - (15.8) -
Total revenue 510.8 422.8 933.6 195.4 417.6 613.0 393.2 92.4 88.3 186.7 (15.8) 2,291.4
---------------- ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- ------------- --------
Segment result
before
Other items (2.5) 25.0 22.5 11.2 17.4 28.6 3.6 (4.9) 2.8 6.3 - 58.9
Amortisation of
acquired
intangibles (0.3) (4.0) (4.3) - (0.4) (0.4) - - - - - (4.7)
Impairment
charges (0.3) - (0.3) - - - - (9.9) - - - (10.2)
Acquisition
costs (1.5) - (1.5) - - - - - - - - (1.5)
Cloud computing
customisation
and
configuration
costs (0.6) (0.5) (1.1) - (0.8) (0.8) (0.8) (0.6) - - - (3.3)
Net
restructuring
costs 0.1 (0.6) (0.5) - - - (1.4) (0.4) - - - (2.3)
Segment
operating
(loss)/profit (5.1) 19.9 14.8 11.2 16.2 27.4 1.4 (15.8) 2.8 6.3 - 36.9
---------------- ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- ------------- --------
Parent Company
costs (17.5)
Parent Company
Other
items* (5.4)
Operating
profit 14.0
---------------- ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- ------------- --------
Net finance
costs before
Other items (22.1)
Non-underlying
finance
costs (7.8)
---------------- ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- ------------- --------
Loss before tax (15.9)
Income tax
expense (12.4)
---------------- ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- ------------- --------
Loss for the
year (28.3)
---------------- ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- ------------- --------
^ Inter-segment revenue is charged at the prevailing market
rates.
* Parent company Other items include costs associated with
refinancing GBP2.4m, onerous contract costs GBP2.0m, restructuring
costs GBP1.4m offset by other specific items GBP0.4m credit. See
Note 3 for further details.
a) Segmental
analysis
UK UK Total France France Total Total
Interiors Exteriors UK Interiors Exteriors France Germany Benelux Ireland Poland Eliminations Group
2020 (Restated) GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ---------- ---------- -------- ---------- ---------- ------- -------- -------- -------- ------- ------------- --------
Revenue
Underlying
revenue 357.4 310.1 667.5 168.1 344.8 512.9 370.7 91.6 80.5 149.5 - 1,872.7
Revenue
attributable
to businesses
identified
as non-core - - - - 1.8 1.8 - - - - - 1.8
Inter-segment
revenue^ 1.5 0.5 2.0 0.9 7.6 8.5 0.1 0.1 0.1 - (10.8) -
Total revenue 358.9 310.6 669.5 169.0 354.2 523.2 370.8 91.7 80.6 149.5 (10.8) 1,874.5
---------------- ---------- ---------- -------- ---------- ---------- ------- -------- -------- -------- ------- ------------- --------
Segment result
before
Other items (45.3) (7.3) (52.6) 7.1 8.3 15.4 0.4 2.5 0.8 2.0 - (31.5)
Amortisation of
acquired
intangibles (0.9) (4.3) (5.2) - (0.4) (0.4) - - - - - (5.6)
Impairment
charges (49.7) (11.8) (61.5) - - - - - - - - (61.5)
Acquisition
costs - (0.2) (0.2) - - - - - - - - (0.2)
Profits and
losses on
agreed sale or
closure
of non-core
businesses (0.3) - (0.3) - (0.9) (0.9) - - - - - (1.2)
Net operating
losses
attributable
to businesses
identified as
non-core - - - - (0.3) (0.3) - - - - - (0.3)
Onerous
contract costs (1.0) - (1.0) - - - - - - - - (1.0)
Net
restructuring
costs (4.0) (1.7) (5.7) - (0.1) (0.1) (0.5) (0.4) - - - (6.7)
Cloud computing
customisation
and
configuration
costs (1.5) (0.9) (2.4) - - - - - - - - (2.4)
Other specific
items (0.1) - (0.1) - 0.1 0.1 0.2 - - - - 0.2
Segment
operating
(loss)/profit (102.8) (26.2) (129.0) 7.1 6.7 13.8 0.1 2.1 0.8 2.0 - (110.2)
---------------- ---------- ---------- -------- ---------- ---------- ------- -------- -------- -------- ------- ------------- --------
Parent Company
costs (21.6)
Parent Company
Other
items* (28.2)
Operating loss (160.0)
---------------- ---------- ---------- -------- ---------- ---------- ------- -------- -------- -------- ------- ------------- --------
Net finance
costs before
Other items (23.0)
Non-underlying
finance
costs (11.6)
Loss before tax
and
discontinued
operations (194.6)
---------------- ---------- ---------- -------- ---------- ---------- ------- -------- -------- -------- ------- ------------- --------
Income tax
expense (6.6)
Profit from
discontinued
operations 69.7
Loss for the
year (131.5)
---------------- ---------- ---------- -------- ---------- ---------- ------- -------- -------- -------- ------- ------------- --------
^ Inter-segment revenue is charged at the prevailing market
rates.
* Parent company Other items include investment in omnichannel
retailing GBP4.2m, costs associated with refinancing GBP7.4m,
onerous contract costs GBP12.2m, cloud computing customisation and
configuration costs
GBP4.7m and other specific items GBP1.6m, offset by profit on
agreed sale or closure of non-core businesses of GBP1.9m.
The 2020 results have been restated as a result of the change in
accounting policy relating to configuration and customisation costs
in cloud computing arrangements. See note 1 for further
details.
Balance Sheet
UK UK Total France France Total
Interiors Exteriors UK Interiors Exteriors France Germany Benelux Ireland Poland Total
2021 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- --------
Balance sheet
Assets
Segment assets 222.3 262.6 484.9 69.5 208.0 277.5 136.1 53.9 54.2 66.2 1,072.8
Unallocated
assets:
Property, plant
and equipment 0.3
Derivative
financial
instruments 0.2
Cash and cash
equivalents 126.9
Other assets 1.5
------------------ ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- --------
Consolidated
total assets 1,201.7
------------------ ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- --------
Liabilities
Segment
liabilities 204.6 124.1 328.7 54.6 117.8 172.4 74.7 21.7 30.9 33.5 661.9
Unallocated
liabilities:
Interest-bearing
loans
and borrowings 249.6
Derivative
financial
instruments 0.5
Other liabilities 25.0
------------------ ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- --------
Consolidated
total
liabilities 937.0
------------------ ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- --------
UK UK Total France France Total
Interiors Exteriors UK Interiors Exteriors France Germany Benelux Ireland Poland Total
2020 (Restated) GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- --------
Balance sheet
Assets
Segment assets 150.6 241.0 391.6 67.6 210.6 278.2 138.1 48.7 52.6 59.5 968.7
Unallocated
assets:
Right-of-use
assets 1.4
Property, plant
and equipment 0.3
Derivative
financial
instruments 0.1
Cash and cash
equivalents 174.9
Other assets 4.8
------------------ ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- --------
Consolidated
total assets 1,150.2
------------------ ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- --------
Liabilities
Segment
liabilities 188.3 112.1 300.4 48.8 104.9 153.7 79.5 9.6 31.9 28.3 603.4
Unallocated
liabilities:
Interest-bearing
loans
and borrowings 212.2
Derivative
financial
instruments 0.9
Other liabilities 31.8
------------------ ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- --------
Consolidated
total
liabilities 848.3
------------------ ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- --------
The 2020 balance sheet has been restated as disclosed in Note
1.
UK UK Total France France Total Parent Total
Interiors Exteriors UK Interiors Exteriors France Germany Benelux Ireland Poland company Group
2021 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- --------- ------
Other segment
information
Capital
expenditure
on:
Property,
plant and
equipment 5.3 3.1 8.4 1.4 2.6 4.0 0.7 2.9 0.9 0.2 0.1 17.2
Computer
software - 0.4 0.4 0.1 0.5 0.6 0.1 - 0.2 0.1 - 1.4
Goodwill and
intangible
assets
acquired 9.8 - 9.8 - - - - - - - - 9.8
Non-cash
expenditure:
Depreciation
of fixed
assets 3.1 3.3 6.4 0.6 1.6 2.2 1.1 0.7 0.6 0.3 0.1 11.4
Depreciation
of
right-of-use
assets 13.5 8.6 22.1 5.9 9.1 15.0 12.8 2.1 1.6 3.2 0.1 56.9
Impairment of
property,
plant and
equipment
and
computer
software 0.3 - 0.3 - - - - - - - - 0.3
Impairment of
right-of-use
assets - - - - - - - 0.1 - - 0.4 0.5
Amortisation
of acquired
intangibles
and computer
software 2.5 4.5 7.0 - 0.4 0.4 0.1 - 0.2 0.1 0.3 8.1
Impairment of
goodwill
and
intangibles
(excluding
computer
software) - - - - - - - 9.9 - - - 9.9
-------------- ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- --------- ------
UK UK Total France France Total Parent Total
Interiors Exteriors UK Interiors Exteriors France Germany Benelux Ireland Poland company Group
2020
(Restated) GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- --------- ------
Other segment
information
Capital
expenditure
on:
Property,
plant and
equipment 4.4 3.9 8.3 0.3 2.4 2.7 0.9 0.7 0.4 0.2 0.1 13.3
Computer
software^ 0.2 0.1 0.3 - - - 0.2 - 0.3 - 0.4 1.2
Goodwill and
intangible
assets
acquired - 1.8 1.8 - - - - - - - - 1.8
Non-cash
expenditure:
Depreciation
of fixed
assets 3.3 2.5 5.8 0.6 1.5 2.1 1.7 0.6 0.5 0.4 0.1 11.2
Depreciation
of
right-of-use
assets 15.2 8.0 23.2 5.1 8.6 13.7 12.9 1.6 1.7 3.2 0.3 56.6
Impairment of
right-of-use
assets 10.2 - 10.2 - - - - - - - - 10.2
Impairment of
property,
plant and
equipment
and
computer
software^ 4.0 - 4.0 - - - - - - - - 4.0
Amortisation
of acquired
intangibles
and computer
software 4.1 4.7 8.8 - 0.4 0.4 - - 0.2 0.1 0.9 10.4
Impairment of
goodwill
and
intangibles^
(excluding
computer
software) 35.5 11.8 47.3 - - - - - - - - 47.3
-------------- ---------- ---------- ------ ---------- ---------- ------- -------- -------- -------- ------- --------- ------
^ Restated due to the change in accounting policy in relation to
customisation and configuration costs in cloud computing
arrangements. See Note 1 for further details.
b) Geographic information
The Group's non-current operating assets (including property, plant and equipment, right-of-use
assets, goodwill and intangible assets but excluding lease receivables, deferred tax and derivative
financial instruments) by geographical location are as follows:
-----------------------------------------------------------------------------------------------------------
Restated
2021 2020
Country GBPm GBPm
------------------------------------------------------------------ --------------- ----------------------
United Kingdom 228.7 217.6
Ireland 13.1 14.6
France 108.3 113.4
Germany 49.8 59.5
Poland 12.0 13.4
Benelux 22.7 21.6
Total 434.6 440.1
------------------------------------------------------------------ --------------- ----------------------
3. Other operating expenses
3a. Analysis of other operating expenses
------------- ------------ ------ ------------- ------------ ------
2021 2020 (restated)
----------------------------------- -----------------------------------
Before Other Before Other
items Other items Total items Other items Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------ ------------- ------------ ------ ------------- ------------ ------
Other operating expenses:
Distribution costs 282.2 3.7 285.9 261.2 8.0 269.2
Selling and marketing costs 158.0 1.0 159.0 138.8 1.4 140.2
Management, administrative and central
costs 120.5 22.7 143.2 123.3 98.2 221.5
Property profits - - - (0.2) (0.2) (0.4)
Total 560.7 27.4 588.1 523.1 107.4 630.5
------------------------------------------ ------------- ------------ ------ ------------- ------------ ------
3b. Other items
Profit/(loss) after tax includes the following Other items which have been disclosed in a separate
column within the Consolidated Income Statement in order to provide a better indication of the
underlying earnings of the Group:
--------------------------------------------------------------------------------------------------------------------
2021 2020 (restated)
-------------------------------------- --------------------------------------
Other items Tax impact Tax impact Other items Tax impact Tax impact
GBPm GBPm % GBPm GBPm %
------------------------------------ ------------ ----------- ----------- ------------ ----------- -----------
Amortisation of acquired
intangibles (4.7) 0.2 4.3% (5.6) 1.1 19.6%
Impairment charges(1) (10.2) - - (61.5) - -
Net restructuring costs(2) (3.7) 0.5 13.5% (6.7) 1.0 14.9%
Onerous contract costs(3) (2.0) - - (13.2) 0.3 2.3%
Cloud computing configuration and
customisation
costs(4) (3.3) 0.5 15.2% (7.1) - -
Costs related to acquisitions (1.5) - - (0.2)
Costs associated with
refinancing(5) (2.4) 0.5 20.8% (7.4) 1.4 18.9%
Profits and losses on agreed sale
or
closure of non-core businesses - - - 0.6 - -
Net operating losses attributable
to
businesses identified as non-core - - - (0.3) - -
Investment in omnichannel retailing - - - (4.2) - -
Other specific items(6) 0.4 - - (1.3) 0.2 15.4%
------------------------------------ ------------ ----------- ----------- ------------ ----------- -----------
Impact on operating profit/(loss) (27.4) 1.7 6.2% (106.9) 4.0 3.7%
Non-underlying finance costs(7) (7.8) 1.5 19.2% (11.6) 0.1 0.9%
------------------------------------ ------------ ----------- ----------- ------------ ----------- -----------
Impact on profit/(loss) before tax (35.2) 3.2 9.1% (118.5) 4.1 3.5%
------------------------------------ ------------ ----------- ----------- ------------ ----------- -----------
(1) Impairment charges comprises GBP9.9m relating to goodwill and GBP0.3m relating to additional
impairment of an investment property. Impairment charges in the prior year comprised GBP45.4m
related to goodwill, GBP1.9m customer relationships in intangibles, GBP0.5m other software costs,
GBP3.5m tangible fixed assets and GBP10.2m right-of-use assets. The prior year numbers have
been restated to remove GBP14.6m impairment of software due to the change in accounting policy
relating to configuration and customisation costs in cloud computing arrangements. See Note
1 for further details.
(2) Net restructuring costs include property closure costs of GBP1.2m (2020: GBP0.8m), redundancy
and related staff costs of GBP2.4m (2020: GBP2.8m), restructuring consultancy costs of GBP0.1m
(2020: GBP2.9m) and other costs of GBPnil (2020: GBP0.2m). These costs have been incurred principally
in connection with the restructuring of corporate functions as part of the implementation of
the Return to Growth strategy, and restructuring in Germany and Benelux.
(3) Onerous contract costs includes GBP2.0m (2020: GBP11.4m) relating to provisions recognised
for licence fee commitments where no future economic benefit is expected to be obtained, principally
in relation to the SAP 1HANA implementation together with GBPnil (2020: GBP1.8m) licence fees
recognised in the Consolidated income statement during the year whilst the project was on hold.
(4) Cloud computing configuration and customisation costs relate to costs incurred on strategic
projects involving software as a service arrangements which are expensed as incurred rather
than being capitalised as intangible assets. Prior year amounts have been restated to include
these costs as a result of the change in accounting policy during the year. See Note 1 for further
details.
(5) Costs associated with refinancing includes legal and professional fees of GBP4.9m (2020:
GBP8.3m) offset by a GBP2.5m (2020: GBP0.9m) gain in relation to the termination of the cash
flow hedging arrangements as a result of the refinancing.
(6) Other specific items of GBP0.4m credit in 2021 relates principally to the transfer from
cash flow hedging reserve to profit and loss in relation to the cash flow hedging arrangements
on the private placement notes following partial repayment in 2020. The prior year amount included
PwC investigation costs GBP1.8m and GMP equalisation costs GBP0.4m, offset by GBP0.6m gain on
fair value of a forward currency option not hedged, GBP0.1m costs in relation to the cyber attack
in France and GBP0.2m other specific items.
(7) Non-underlying finance costs comprise a GBP12.9m make-whole payment on settlement of the
private placement notes, GBP2.8m write-off of arrangement fees in relation to the previous debt
arrangements, offset by GBP8.0m release of the loss on modification recognised on amendment
of the private placement notes in 2020, together with GBP0.1m unwinding of the discount on the
onerous contract provision. Costs in 2020 comprised GBP11.3m loss on modification recognised
in relation to the private placement notes and GBP0.3m write-off of arrangement fees in relation
to the previous RCF which was extinguished during 2020.
4. Income tax
The income tax expense
comprises:
----------------------------- -------------------------- ------ ------
2021 2020
GBPm GBPm
----------------------------- -------------------------- ------ ------
Current tax
UK & Ireland corporation
tax: - charge for the year 0.3 0.5
- adjustments in respect
of previous years - -
----------------------------- -------------------------- ------ ------
0.3 0.5
Mainland Europe corporation
tax - charge for the year 10.6 5.6
- adjustments in respect
of previous years 2.0 (0.1)
-------------------------------------------------------- ------ ------
12.6 5.5
Total current tax 12.9 6.0
--------------------------------------------------------- ------ ------
Deferred tax
Current year credit (1.1) (2.2)
Adjustments in respect
of previous years 0.6 2.6
Deferred tax charge in
respect of pension schemes (0.1) -
Effect of change in rate 0.1 0.2
Total deferred tax (0.5) 0.6
--------------------------------------------------------- ------ ------
Total income tax expense 12.4 6.6
--------------------------------------------------------- ------ ------
As the Group's profits and losses are earned across a number
of tax jurisdictions an aggregated income tax reconciliation
is disclosed, reflecting the applicable rates for the countries
in which the Group operates.
The total tax charge for the year differs from the expected
tax using a weighted average tax rate which reflects the applicable
statutory corporate tax rates on the accounting profits/losses
in the countries in which the Group operates. The differences
are explained in the following aggregated reconciliation of
the income tax expense:
----------------------------------------------------------------------------------------------------
2021 Restated 2020
GBPm % GBPm %
----------------------------------------------------------- --------- -------- -------- --------
Loss before tax from continuing
operations (15.9) (194.6)
Profit before tax from discontinued
operations - 72.0
----------------------------------------------------------- --------- -------- -------- --------
Loss before tax (15.9) (122.6)
----------------------------------------------------------- --------- -------- -------- --------
Expected tax credit (1.5) 9.4% (13.4) 10.9%
Factors affecting the income tax
expense for the year:
Expenses not deductible for tax
purposes^ 4.5 (25.8)% 19.6 (16.0)%
Non-taxable income* (0.1) 0.6% (33.2) 27.1%
Impairment and disposal charges
not deductible for tax purposes** 1.4 (8.8)% 15.1 (12.3)%
Deductible temporary differences
not recognised for deferred tax
purposes 5.4 (34.0)% 18.1 (14.8)%
Losses utilised not previously
recognised for deferred tax purposes -
Other adjustments in respect of
previous years 2.6 (16.4)% 2.5 (2.0)%
Effect of change in rate on deferred
tax 0.1 (0.6)% 0.2 (0.2)%
Total income tax expense 12.4 (78.0)% 8.9 (7.3)%
----------------------------------------------------------- --------- -------- -------- --------
Income tax expense reported in
the consolidated income statement 12.4 6.6
Income tax attributable to a discontinued
operation - 2.3
12.4 8.9
--------- --------
^ The majority of the Group's expenses that are not deductible
for tax purposes are in relation to internal restructuring and
impairments of property in 2021 and 2020, and the divestments
of businesses in 2020.
* The majority of the Group's non-taxable income in 2020 relates
to the divestments of businesses.
** During the year the Group incurred impairment charges of
GBP9.9m (2020: GBP45.4m) in relation to goodwill which are not
deductible for tax purposes.
The effective tax rate for the Group on the total loss before
tax of GBP15.9m (2020 restated: GBP122.6m) is negative 78.0%
(2020 restated: negative 7.3%). As the Group operates in several
different countries tax losses cannot be surrendered or utilised
cross border. Tax losses are not currently recognised in respect
of the UK business, which has the effect of reducing the overall
effective tax rate.
Factors that will affect the Group's future total tax charge
as a percentage of underlying profits are:
- the mix of profits and losses between the tax jurisdictions
in which the Group operates;
- the impact of non-deductible expenditure and non-taxable
income;
- agreement of open tax computations with the respective tax
authorities; and
- the recognition or utilisation (with corresponding reduction
in cash tax payments) of unrecognised deferred tax assets.
The Group has previously disclosed the EU's investigation into
the UK controlled foreign company (CFC) rules which gave rise
to potential additional tax payable of up to GBP5m (before interest
and penalties), which was not provided for. HMRC has now completed
its review of the Group's tax arrangements for the periods in
question and confirmed that they complied with the requirements
of the UK CFC legislation and that it considers that the Group's
arrangements did not result in unlawful State Aid. Accordingly,
HMRC has accepted the Group's tax returns as submitted and there
is no longer a potential exposure or payment to be made.
In addition to the amounts charged to the Consolidated income
statement, the following amounts in relation to taxes have been
recognised in the Consolidated statement of comprehensive income,
with the exception of deferred tax on share options which has
been recognised in the Consolidated statement of changes in
equity:
----------------------------------------------------------------------------------------------------
2021 2020
GBPm GBPm
----------------------------------------------------------- --------- -------- -------- --------
Deferred tax movement associated with re-measurement
of defined benefit pension liabilities* (0.1) 0.3
Tax credit associated with re-measurement of
defined benefit pension liabilities* - 0.4
Total (0.1) 0.7
----------------------------------------------------------- --------- -------- -------- --------
* These items will not subsequently be reclassified to the Consolidated
income statement.
5. (Loss)/earnings per share
The calculations of (loss)/earnings per share are based on the
following (losses)/profits and numbers of shares:
Basic and diluted
----------------------------
Restated
2021 2020
GBPm GBPm
-------------------------------------------------- -------------- ------------
Loss attributable to ordinary equity holders
of the parent for basic and diluted earnings
per share from continuing operations (28.3) (201.2)
Profit attributable to ordinary equity
holders of the parent from discontinued
operations - 69.7
-------------------------------------------------- -------------- ------------
Loss attributable to ordinary equity holders
of the parent for basic and diluted earnings
per share (28.3) (131.5)
-------------------------------------------------- -------------- ------------
Basic and diluted before
Other items
----------------------------
Restated
2021 2020
GBPm GBPm
-------------------------------------------------- -------------- ------------
Loss attributable to ordinary equity holders
of the parent for basic and diluted earnings
per share from continuing operations (28.3) (201.2)
Add back:
Other items 32.0 114.4
Profit/(loss) attributable to ordinary
equity holders of the parent for basic
and diluted earnings per share from continuing
operations before other items 3.7 (86.8)
-------------------------------------------------- -------------- ------------
Restated
2021 2020
Weighted average number of shares Number Number
-------------------------------------------------- -------------- ------------
For basic and diluted (loss)/earnings per
share 1,177,972,694 871,941,603
Effect of dilution from share options - -
-------------------------------------------------- -------------- ------------
Adjusted for the effect of dilution 1,177,972,694 871,941,603
2021 2020
-------------------------------------------------- -------------- ------------
Loss per share
From continuing operations:
Basic loss per share (2.4)p (23.1)p
Diluted loss per share (2.4)p (23.1)p
Total:
Basic loss per share (2.4)p (15.1)p
Diluted loss per share (2.4)p (15.1)p
Earnings/(loss) per share before Other
items^
Basic earnings/(loss) per share from continuing
operations before Other items 0.3p (10.0)p
-------------------------------------------------- -------------- ------------
^ Earnings/(loss) per share before Other items (also referred to
as underlying earnings/(loss) per share) has been disclosed in
order to present the underlying performance of the Group.
Loss per share for the year ended 31 December 2020 has been
restated to reflect the restatement of the 2020 results as
explained in Note 1. The diluted loss per share for the year ended
31 December 2020 has also been restated to reflect the antidilutive
nature of the share options.
6. Reconciliation of loss before tax to cash generated from operating activities
2021 2020
GBPm GBPm
-------------------------------------------------------- --------- ---------
Loss before tax from continuing operations (15.9) (194.6)
Profit before tax from discontinued
operations - 72.0
-------------------------------------------------------- --------- ---------
Loss before tax (15.9) (122.6)
Net finance costs 29.9 34.6
Depreciation of property, plant and
equipment 11.4 11.2
Depreciation of right-of-use assets 56.9 57.2
Amortisation of computer software 3.4 4.8
Amortisation of acquired intangibles 4.7 5.6
Impairment of computer software - 0.5
Impairment of property, plant and equipment 0.3 3.5
Impairment of goodwill 9.9 45.4
Impairment of acquired intangibles - 1.9
Impairment of right-of-use assets 0.5 10.2
Profit on agreed sale or closure of
non-core businesses - (71.6)
(Profit)/loss on sale of property, plant
and equipment (0.9) 0.7
Share-based payments 2.4 0.2
Gains on derivative financial instruments (2.8) (1.5)
Net foreign exchange differences 0.3 0.2
(Decrease)/increase in provisions (7.3) 11.3
Working capital movements:
- Increase in inventories (75.7) (5.4)
- (Increase)/decrease in receivables (68.1) 19.7
- Decrease/(increase) in payables 58.4 (56.4)
Cash generated from/(used in) operating
activities 7.4 (50.5)
-------------------------------------------------------- --------- ---------
Included within the cash generated from/(used in) operating
activities is a defined benefit pension scheme employer's contribution
of GBP5.0m (2020: GBP2.5m).
Of the total loss on sale of property, plant and equipment,
GBPnil profit (2020: GBP0.2m) has been included within Other
items of the Consolidated income statement.
7. Reconciliation of net cash flow to movements in net debt
2021 2020
GBPm GBPm
----------------------------------------------------- -------- --------
(Decrease)/increase in cash and cash equivalents
in the year (82.7) 68.4
Cash flow from decrease in debt 15.8 183.0
----------------------------------------------------- -------- --------
(Increase)/decrease in net debt resulting
from cash flows (66.9) 251.4
Movement in deferred consideration (0.9) (0.9)
Debt added on acquisitions (7.5) -
Non-cash items^ (60.0) (39.3)
Exchange differences 8.5 6.0
----------------------------------------------------- -------- --------
(Increase)/decrease in net debt in the
year (126.8) 217.2
----------------------------------------------------- -------- --------
Net debt at 1 January (238.2) (455.4)
----------------------------------------------------- -------- --------
Net debt at 31 December (365.0) (238.2)
^ Non-cash items include the fair value movement of debt recognised
in the year which does not give rise to a cash inflow or outflow,
the movement in cash restricted for use in relation to the asset
backed funding arrangement implemented in relation to the UK
defined benefit pension plan and non-cash movements in relation
to lease liabilities.
8. Dividends
No interim dividend was paid for the year ended 31 December 2021
and no final dividend is proposed. No interim or final dividend was
proposed or paid for the year ended 31 December 2020. No dividends
have been paid between 31 December 2020 and the date of signing the
Financial Statements.
At 31 December 2021 the Company has distributable reserves of
GBP190.2m (2020: negative GBP217.1m). On 24 June 2021 the Group
completed the cancellation of its share premium account, resulting
in the transfer of GBP447.7m from share premium to retained
profits/(losses) and the creation of distributable reserves.
9. Acquisitions
The Group acquired the following businesses during the year:
% ordinary Acquisition Country Principal Activity
share date of incorporation
capital
acquired
------------------- ----------- ------------ ------------------ ----------------------------
F30 Building 100% 10 March United Distributor of construction
Products Limited 2021 Kingdom accessories
Penlaw and Company 100% 26 October United Distributor of interiors
Limited 2021 Kingdom and insulation products
Penlaw Northwest 100% 26 October United Distributor of interiors
Limited 2021 Kingdom and insulation products
Penlaw Norfolk 100% 26 October United Distributor of interiors
Limited 2021 Kingdom and insulation products
Penlaw Fixings 100% 26 October United Distributor of interiors
Limited 2021 Kingdom and insulation products
The Group acquired the above businesses to enlarge the UK
Interiors business in terms of product range and geographic
location, and the acquisitions are allocated to the UK Interiors
segment. The four Penlaw companies were acquired as one transaction
and are therefore considered as one business combination below and
referred to as the Penlaw Group.
The provisional fair values of the identifiable assets and
liabilities of the Penlaw acquisition and the final fair values of
the F30 acquisition at the date of acquisition are as follows:
F30 Building 2021 2020
Penlaw Group Products Total Total
GBPm GBPm GBPm GBPm
------------------------------------ --------------- ------------- ------- -------
Assets
Intangible assets (customer
relationships) 3.2 1.8 5.0 0.8
Property, plant and equipment 1.4 0.1 1.5 0.1
Right-of-use assets 7.2 0.3 7.5 0.2
Cash and cash equivalents 2.0 0.2 2.2 3.2
Trade and other receivables 20.6 1.1 21.7 0.7
Inventories 3.1 0.2 3.3 0.4
------------------------------------ --------------- ------------- ------- -------
37.5 3.7 41.2 5.4
Liabilities
Trade and other payables (20.8) (1.3) (22.1) (0.8)
Provisions (0.6) (0.1) (0.7) (0.2)
Current tax liability (0.1) (0.1) (0.2) (0.2)
Deferred tax liability (0.9) (0.4) (1.3) (0.1)
Lease liabilities (7.2) (0.3) (7.5) (0.2)
------------------------------------ --------------- ------------- ------- -------
(29.6) (2.2) (31.8) (1.5)
Total identifiable net assets
at fair value 7.9 1.5 9.4 3.9
Goodwill arising on acquisition 2.7 2.1 4.8 1.0
------------------------------------ --------------- ------------- ------- -------
Purchase consideration transferred 10.6 3.6 14.2 4.9
------------------------------------ --------------- ------------- ------- -------
The fair value of trade receivables amounts to GBP13.8m for the
Penlaw Group and GBP1.2m for F30 Building Products. The gross
amount of trade receivables is GBP15.1m for the Penlaw Group and
GBP1.2m for F30 Building Products.
The Group measures the acquired lease liabilities using the
present value of the remaining lease payments at the date of
acquisition. The right-of-use asset was measured at an amount equal
to the lease liability.
The goodwill of GBP2.1m relating to F30 Building Products
comprises the value of expected synergies arising from the
acquisition, strategic fit with the UK Interiors business and
geographic location, in particular the developing sales in the
construction accessories sector.
The goodwill of GBP2.7m relating to the Penlaw Group comprises
the value of expected synergies arising from the acquisition and
the strategic fit with the UK Interiors business.
From the date of acquisition, the Penlaw Group contributed
GBP9.9m of revenue and GBP0.4m loss to underlying profit before tax
of the Group, and F30 Building Products contributed GBP6.5m of
revenue and GBP0.8m to underlying profit before tax. If the
acquisitions had taken place at the beginning of the year, revenue
for the Group would have been GBP2,349.6m and loss before tax for
the Group would have been GBP13.9m.
Purchase Consideration
F30 Building 2021 2020
Penlaw Group Products Total Total
GBPm GBPm GBPm GBPm
------------------------------ --------------- ------------- ------- -------
Cash paid on completion 9.8 2.5 12.3 4.0
Deferred consideration due
within one year 0.2 0.5 0.7 0.5
Deferred consideration due
after more than one year 0.1 0.6 0.7 0.4
Contingent consideration due
within one year 0.1 - 0.1 -
Contingent consideration due
after more than one year 0.4 - 0.4 -
------------------------------ --------------- ------------- ------- -------
Total consideration 10.6 3.6 14.2 4.9
------------------------------ --------------- ------------- ------- -------
The contingent consideration in relation to the Penlaw Group is
payable dependent on future performance of the business based on
adjusted EBITDA exceeding an EBITDA threshold, as defined in the
sale and purchase agreement, with up to a maximum of GBP0.6m
payable for the first twelve months from completion and up to a
maximum of GBP1.2m for the second twelve months from completion,
subject to a maximum of GBP1.2m in total. The range of contingent
consideration payable is therefore GBPnil to GBP1.2m. GBP0.5m has
been recognised at the date of acquisition on the basis of current
forecasts. This is included within other payables on the
Consolidated balance sheet. The provision is remeasured to fair
value at subsequent reporting dates with changes in fair value
recognised in profit or loss. The fair value is measured using
level 3 inputs and is sensitive to changes in one or more
observable inputs.
In relation to F30 Building Products, a further amount of up to
GBP0.8m is also payable over the twelve months from completion
dependant on the future performance of the business and dependent
on the vendor remaining within the business. This is therefore
treated as remuneration and is being charged to the Consolidated
income statement as earned. GBP0.6m has been recognised and
included within accruals in relation to this at 31 December
2021.
Analysis of cash flows on acquisition
Penlaw F30 Building 2021 2020
Group Products Total Total
GBPm GBPm GBPm GBPm
---------------------------------------- ------- ------------- ------- -------
Consideration paid (included
in cash flows from investing
activities) (9.8) (2.5) (12.3) (4.0)
Net cash acquired with the subsidiary
(included in cash flows from
investing activities) 2.0 0.2 2.2 3.2
---------------------------------------- ------- ------------- ------- -------
Total net cash flow included
in cash flows from investing
activities (7.8) (2.3) (10.1) (0.8)
Transaction costs (included in
cash flows from operating activities) (0.3) (0.1) (0.4) (0.2)
---------------------------------------- ------- ------------- ------- -------
Net cash flow on acquisition (8.1) (2.4) (10.5) (1.0)
---------------------------------------- ------- ------------- ------- -------
2020
The 2020 amounts above relate to the acquisition of S M Roofing
Supplies Limited. On 17 October 2020 the Group acquired 100% of the
share capital of S M Roofing Supplies Limited, a non-listed company
based in the UK, for an enterprise value of GBP1.9m on a debt free
cash free basis. Total consideration was GBP4.9m, including GBP3.2m
for cash within the business on completion. GBP4.0m was paid in
cash on completion and two further amounts totalling GBP0.9m are
payable in one and two years' time (not subject to performance
criteria and not conditional upon vendors remaining within the
business).
The goodwill of GBP1.0m comprises the value of expected
synergies arising from the acquisition (e.g. overhead costs in
relation to finance, administration and management), strategic fit
with the UK Exteriors business and geographic location. The 2020
provisional fair values of the identifiable assets and liabilities
have been finalised during the current year with no further
adjustments recognised.
From the date of acquisition, S M Roofing Supplies Limited
contributed GBP1.0m of revenue and GBPnil to underlying profit
before tax from continuing operations of the Group for the year
ended 31 December 2020. If the combination had taken place at the
beginning of the year, revenue from continuing operations for the
Group would have been GBP1,877.8m and loss before tax from
continuing operations for the Group would have been GBP70.1m
(restated).
10. Divestments
There have been no business divestments or closures during the
current year and no amounts recognised in respect of profits and
losses on agreed sale or closure of non-core businesses (2020: net
gain of GBP0.6m). The prior year gain consisted of GBP2.0m gain in
relation to the disposal of the Middle East business, offset by
costs of GBP0.2m in relation to the proposed disposal of Building
Solutions which was due to complete in the first half of 2020 but
was terminated in May 2020, a loss on the sale of the Maury
business of GBP0.9m and other costs in relation to previous
disposals of GBP0.3m. These are explained further below.
The sale of the Air Handling business also completed in the
prior year and the gain on sale was included with the results from
discontinued operations.
Prior year divestments
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 was recognised in 2020, 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".
On 10 September 2020 the Group completed the sale of Maury NZ
SAS ("Maury"), the Group's high-end fabrication business in France
and part of the France Exteriors (Larivière) segment, for proceeds
of EUR25,000. An overall loss on sale of GBP0.9m was 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". Net assets at the date of disposal were GBP0.9m and costs
of less than GBP0.1m were incurred, resulting in the overall loss
on sale of GBP0.9m.
Costs of GBP0.2m were recognised during 2020 in relation to the
proposed disposal of the Building Solutions business, which was
previously classified as held for sale at 31 December 2019 as a
sale had been agreed and was due to complete in the first half of
2020, which was subsequently terminated in May 2020 (and the
business is now included within underlying operations). GBP0.3m
costs were also incurred and recognised within Other items in
relation to the Commercial Drainage business which was closed in
2019.
Contribution to revenue and operating loss
The only business classified as non-core in the prior year was
Maury, which contributed GBP1.8m to revenue for the year ended 31
December 2020 and GBP0.3m operating loss for the year.
Cash flows associated with divestments and exit of non-core
businesses
There is no net cash inflow in the year ended 31 December 2021
in respect of divestments and the exit of non-core businesses.
Amounts for the prior year were as follows:
2020
Other non-core
Air Handling businesses Total
GBPm GBPm GBPm
----------------------------- ------------- --------------- -------
Cash consideration received
for divestments 189.7 0.7 190.4
Cash at date of disposal (29.2) (0.2) (29.4)
Disposal costs paid (12.9) (0.3) (13.2)
Net cash inflow 147.6 0.2 147.8
------------------------------- ------------- --------------- -------
Included within 'Other non-core businesses' is GBP0.7m received
during the year in relation to contingent consideration on the sale
of the Building Plastics division in 2017.
The 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 were disclosed within
Other items in the Consolidated income statement in order to
present the underlying earnings of the Group.
11. Discontinued operations
On 7 October 2019, the Group announced that it had agreed a sale
of the Air Handling business for consideration of EUR222.7m on a
cash free, debt free basis. 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. The results of
the Air Handling business for the prior year are presented below.
There are no amounts relating to discontinued operations in the
current year.
2020
GBPm
------------------------------------------------- -------
Revenue 25.4
Cost of sales (15.0)
-------------------------------------------------- -------
Gross profit 10.4
Other operating expenses (9.3)
-------------------------------------------------- -------
Operating profit 1.1
Finance costs (0.1)
-------------------------------------------------- -------
Profit before tax from discontinuing operations 1.0
Income tax expense (0.3)
Profit after tax from discontinued operations 0.7
-------------------------------------------------- -------
Gain on sale of subsidiary after income tax
(see below) 69.0
-------------------------------------------------- -------
Profit from discontinued operation 69.7
-------------------------------------------------- -------
There were no amounts included in OCI.
The net cash flows incurred by Air Handling were as follows:
2020
GBPm
---------------------------------------------- ------
Operating 1.1
Investing 147.6
Financing -
Net cash inflow 148.7
----------------------------------------------- ------
Earnings per share:
-------------------------------------------------------
2020
---------------------------------------------- ------
Basic earnings per share from discontinued
operations 8.0p
Diluted earnings per share from discontinued
operations 8.0p
----------------------------------------------- ------
Gain on sale
2020
GBPm
------------------------------------------------------------ --------
Consideration received(1) :
Cash 191.9
Adjustment to consideration (2.2)
Final consideration 189.7
Carrying amount of net assets sold(2) (118.1)
------------------------------------------------------------- --------
Gain on sale before costs, income tax and reclassification
of foreign currency translation reserve 71.6
Costs incurred in connection with the agreed
disposal of the Air Handling business(3) (4.3)
Reclassification of foreign currency translation
reserve 3.7
Income tax expense on gain (2.0)
------------------------------------------------------------- --------
Gain on sale after income tax 69.0
(1) Consideration received was based on an enterprise value of
EUR222.7m on a cash free, debt free basis, adjusted for actual
levels of cash, debt and working capital in the Air Handling
division at completion to give proceeds received of EUR228.6m
(GBP191.9m). Net proceeds received exclusive of amounts repaid in
relation to debt owed to the Group by the Air Handling division was
EUR187.4m (GBP157.3m). As part of the completion process, further
adjustments to the consideration were agreed and repaid by the
Group, together with settlement of tax payments, reducing total
consideration by GBP2.2m.
(2) The carrying amount of net assets sold was the net assets
held for sale at 31 December 2019 plus GBP0.4m relating to the net
profit for the month of January 2020 less tax payments and working
capital movements.
(3) GBP12.2m of costs were incurred and recognised in 2019 in
connection with the sale. Including these in the overall
calculation of the gain on sale above would give a gain on sale
after income tax of GBP57.0m.
12. 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 2021, SIG incurred expenses of GBP0.6m (2020: GBP0.5m) on
behalf of the SIG plc Retirement Benefits Plan, the UK defined
benefit pension scheme.
Remuneration of key management personnel
The total remuneration of key management personnel of the Group,
being the Executive Leadership Team members and the Non-Executive
Directors is set out below in aggregate for each of the categories
specified in IAS 24 "Related Party Disclosures".
--------------------------------------------------------------------------
2021 2020
GBPm GBPm
--------------------------------------------------------- ------- ------
Short term employee benefits 6.7 5.8
Termination and post-employment benefits - 0.1
IFRS 2 share option charge 1.5 -
8.2 5.9
--------------------------------------------------------- ------- ------
13. Non-statutory information
The Group uses a number of alternative performance measures,
which are non-IFRS, to describe the Group's performance. The Group
considers these performance measures to provide useful historical
financial information to help investors evaluate the underlying
performance of the business. Alternative performance measures are
not a substitute for or superior to statutory IFRS measures.
These measures, as shown below, are used to improve the
comparability of information between reporting periods and
geographical units, to adjust for Other items (as explained in
further detail within the Statement of significant accounting
policies) 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 31 December 2021. Measures
presented are aligned with the key performance measures used in the
business and as included in this report. Operating costs as a
percentage of sales is not included as a KPI in the current year
and is therefore not presented below, and gross margin by segment
are no longer presented, whilst free cash flow is included for the
first time in the current year.
a) Net debt
Net debt is a key metric for the Group, and monitoring it is an
important element of treasury risk management for the Group. Net
debt excluding the impact of IFRS16 is no longer relevant for
financial covenant purposes but is still monitored for comparative
purposes. Net debt on frozen GAAP basis and covenant net debt which
were presented last year are no longer relevant following the
change in debt arrangements during the year and are therefore no
longer presented.
2021 2020
GBPm GBPm
-------------------------------------------- -------- --------
Reported net debt 365.0 238.2
Lease liabilities recognised in accordance
with IFRS 16 (239.1) (237.0)
Lease receivables recognised in accordance
with IFRS 16 3.7 4.3
Other financial liabilities recognised
in accordance with IFRS 16 (1.0) (1.4)
Net debt excluding the impact of IFRS 16 128.6 4.1
--------------------------------------------- --------
b) 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. Underlying revenue is revenue from continuing operations
excluding non-core businesses.
France France
UK UK Total Interiors Exteriors Total Total
Interiors Exteriors UK (LiTT) (Larivière) France Germany Benelux Ireland Poland Group
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------- ---------- ------- ----------------- -------- -------- -------- -------
Statutory
revenue
2021 507.4 422.2 929.6 195.3 406.0 601.3 393.2 92.4 88.2 186.7 2,291.4
Non-core
businesses - - - - - - - - - - -
Underlying
revenue
2021 507.4 422.2 929.6 195.3 406.0 601.3 393.2 92.4 88.2 186.7 2,291.4
---------- ---------- ------- ----------------- -------- -------- -------- -------
Statutory
revenue
2020 357.4 310.1 667.5 168.1 346.6 514.7 370.7 91.6 80.5 149.5 1,874.5
Non-core
businesses - - - - (1.8) (1.8) - - - - (1.8)
Underlying
revenue
2020 357.4 310.1 667.5 168.1 344.8 512.9 370.7 91.6 80.5 149.5 1,872.7
---------- ---------- ------- ----------------- -------- -------- -------- -------
% change year
on
year:
Underlying
revenue 42.0% 36.1% 39.3% 16.2% 17.7% 17.2% 6.1% 0.9% 9.6% 24.9% 22.4%
Impact of
currency - - - 3.9% 4.0% 4.0% 3.5% 3.4% 3.6% 7.0% 2.6%
Impact of
acquisitions (4.6)% (1.2)% (3.0)% - - - - - - - (0.3)%
Impact of
working
days 0.6% 0.6% 0.6% - - - - 0.8% 0.5% 1.6% (0.4)%
Like-for-like
sales 38.0% 35.5% 36.9% 20.1% 21.7% 21.2% 9.6% 5.1% 13.7% 33.5% 24.3%
---------- ---------- ------- ----------------- -------- -------- -------- -------
c) Operating margin
This is used to enhance understanding and comparability of the
underlying financial performance of the Group and is calculated as
underlying operating profit/(loss) as a percentage of underlying
revenue.
Restated
2021 2020
GBPm GBPm
------------------------------------
Underlying revenue 2,291.4 1,872.7
Underlying operating profit/(loss) 41.4 (53.1)
Operating margin 1.8% (2.8)%
---------
d) Free cash flow
Free cash flow represents the cash available after supporting
operations, including the repayment of lease liabilities, and
capital expenditure, including the maintenance of capital assets,
and before investing activities.
2021 2020
GBPm GBPm
--------------------------------------------------
(Decrease)/increase in cash and cash equivalents
in the year (82.7) 68.4
Add back:
Net cash flow on the purchase of businesses 10.1 0.8
Settlement of amounts payable for previous
purchases of businesses 0.5 -
Net cash flow arising on the sale of businesses - (147.8)
Repayment of borrowings 200.3 55.1
Proceeds from borrowings (251.5) -
Repayment of revolving credit facility - 30.0
Settlement of derivative financial instruments (0.8) 0.1
Net proceeds from equity raise - (151.9)
Free cash flow (124.1) (145.3)
--------
e) Other non-statutory measures
In addition to the alternative performance measures noted above,
the Group also uses underlying EPS (as set out in Note 5),
underlying net finance costs and average trade working capital to
sales ratio. Average trade working capital to sales ratio is
calculated as the average trade working capital each month end (net
inventory, gross trade creditors, net trade receivables and
supplier rebates receivable) divided by underlying revenue.
14. Principal risks and uncertainties
The Board, supported by the Audit Committee, sets the strategy
for the Group and ensures the associated risks are effectively
identified and managed through the implementation of the risk
management and control frameworks.
The Group employs a three lines model to provide a simple and
effective way to enhance the risk and control management process
and ensure roles and responsibilities are clear. The Board
maintains oversight to ensure risk management and control
activities carried out by the three lines are proportionate to the
perceived degree of risk and its own risk appetite across the
Group.
To identify our risks, we focus on our strategic objectives and
consider what might stop us achieving our plan within our strategic
planning period. The approach combines a top-down strategic
Group-level view and a bottom-up operational view of the risks at
operating company level. Meetings are held with our operating
company leadership teams to identify the risks within their
operations. These are consolidated and, in conjunction with a
series of discussions held with Executive Leadership Team and
Non-Executive Directors, provide the inputs to identify and
validate our principal risks.
Risk Mitigations
Cyber security: Internal or external cyber-attacks could Cyber security continues to receive Board and Executive
result in system disruption or sensitive Leadership Team focus with an emphasis
date being compromised on ensuring that appropriate technologies are deployed
across IT infrastructure to manage
There is a risk that we lack the capabilities to cyber threats.
effectively prevent, monitor, respond or
recover from suspected cyber-attacks on our IT Regular and independent reviews are performed to assess
infrastructure. Such attacks may result in the nature of our cyber threats, security
a loss of data or disruption to IT services which may have processes and initiatives. They also ensure that we
a significant impacts on our ability implement appropriate tools and processes
to operate and comply with data protection and privacy to better identify and remediate new and emerging cyber
laws (e.g. GDPR) and may have a detrimental risks and vulnerabilities.
effect on our reputation.
Cyber-incident response protocols are also in place to
support our ability to effectively
respond and recover from a cyber threat or incident and
ongoing cyber training campaigns and
initiatives ensure employees are alert to the nature and
consequences of cyber-attacks.
Health & Safety: Danger of incident or accident, resulting The Group Director of Health & Safety is a member of the
in injury or loss of life to employees, Executive Leadership Team and provides
customers, or the general public strategic leadership for all matters relating to health,
safety and environmental performance,
There is a risk that poor organisational arrangements or oversight and strategy. He is supported by local Health &
behavioural culture with regards Safety managers, embedded in each
to Health & Safety causes harm to individuals and as a of our businesses, who provide local leadership and
result may result in enforcement action, support, and provide regular monitoring
penalties, reputational damage, or adverse press coverage. and reporting of key performance metrics and the status of
local actions and initiatives implemented.
A compliance standards framework is in place to ensure the
adequacy of local Health & Safety
standards and arrangements with assurance provided through
a programme of compliance audits
performed by suitably trained and experienced Health &
Safety professionals.
Macro-economic uncertainty: Macro-economic volatility We continue to assess inflationary and other supply chain
impacts the Group's ability to accurately pressures and impacts on product
forecast and to meet internal and external expectations pricing and will continue to work with our suppliers to
identify opportunities to improve
Supply and demand distortions (such as goods and materials supply chain resilience and to selectively pre-purchase
shortages throughout the global products in order to ensure continuity
supply chains and increased inflationary pressures) and of supply.
the re-imposition of public health
restrictions in response to future waves and variants of The Group's geographical diversity across Europe reduces
Covid-19 may continue to impact European the impact of changes in market conditions
economies throughout 2022. This volatility has the in any one country while industry based KPIs, monitored
potential to impact customer demand, along monthly at a Group and operating company
with presenting significant challenges to our financial, level, help to ensure that warnings and indicators of risk
operational and commercial resilience, are identified early, and appropriate
whilst adding costs to our operations and making planning mitigation strategies implemented.
and forecasting more difficult.
Very recently the conflict in Ukraine has contributed to
heightened uncertainty. Changes in
macro-economic conditions may adversely affect the Group's
people, business, results of operations,
financial condition or prospects.
Attract, recruit and retain our people: Failure to attract We continue to invest in learning and development
and retain people with the right programmes to ensure both vocational and
skills, drive and capability to reshape and grow the technical training needs are met whilst retaining an agile
business workforce.
A combination of structural labour and vocational skills We ensure accountabilities, responsibilities, and
shortages in the construction sector, organisational structures are regularly
exacerbated by reduced short term intra-EU and UK-EU reviewed and where necessary restructured to optimise
mobility resulting from both Covid-19 employee motivation and engagement.
restrictions and Brexit, has the potential to negatively
impact SIG's ability to attract, Ongoing enhancements to pay and conditions, including
recruit and retain staff across the full spectrum of benchmarking remuneration packages to
disciplines. ensure market competitiveness, broadening the scope of
variable elements of remuneration and
the development of retention and succession plans for
critical roles helps to mitigate this
risk.
Data quality and governance: Poor data quality negatively Product and customer data quality remains a focus area for
impacts our financial management, our operating companies, who continue
fact-based decision making, business efficiency, and to monitor, assess, and upgrade their product data
credibility with customers requirements, capabilities, and governance
considering ongoing changes in business needs and
There is a risk that we lack the necessary quality of regulation.
systems and processes to ensure sufficient
granularity, completeness, and accuracy of vendor,
product, and pricing master data. This
has the potential to impact our ability to deliver a
digital customer experience, provide
enhanced product and customer analytics or insight and
comply with both existing and new regulatory
requirements.
Environmental, social and governance (ESG): SIG suffers We have set ambitious ESG commitments and will focus on
reputational impacts due to poor environmental, demonstrating leadership in building
social and governance arrangements and performance materials distribution, Health & Safety, committing to a
net zero carbon target by 2035 at
Public and commercial consciousness has been growing on a the latest, sending zero SIG waste to landfill by 2025,
wide range of environmental, social partnering with manufacturers and
and governance issues, including climate change, employee customers to reduce carbon and waste across the supply
wellbeing and how an organisation chain and to being recognised as the
contributes to society. Organisations should not only employer of choice in building materials distribution.
minimise their negative impacts, but
to also contribute positively to both society and the These commitments will be supported by verifiable and
environment. evidenced based data to ensure that
progress in achieving these aims and ambitions is
While SIG has a long and rich heritage in helping the monitored and subject to appropriate rigour.
construction industry deliver energy
efficient solutions and products, risks remain in terms of
how we deliver our ESG agenda.
This is particularly the case in how we ensure we achieve
our stated aims with regards to
climate change. These risks include the cost and
complexity of compliance, the challenges
presented by the decarbonisation of our vehicle fleet and
estate and how we engage with the
wider industry to reduce product and supply chain carbon
impacts.
Mergers and acquisitions: We lack the capabilities to We have dedicated M&A Group resource supported by
identify, acquire and integrate significant appropriately skilled in-house expertise
mergers and acquisition opportunities and ensure deals and the use of approved external advisors.
deliver desired scalability and value
creation Clear accountability and authority limits for the
initiation and approval of M&A activity
As part of our growth strategy, we may from time to time is clearly defined in the Group Delegation of Authority.
acquire new businesses. Such decisions Resource is also available in the organisation to ensure
are based on detailed plans that assess the value creation that transactions are subject to
opportunity for the Group. By their post-integration and lessons learnt exercises.
nature, there is an inherent risk that we fail to manage
the execution and integration risks
which may result in delays or additional costs and impact
the future value and future revenues
generated.
Legal or regulatory compliance: We fail to comply with or Our Group General Counsel is a member of the Executive
are found to be in breach of legal Leadership Team and is supported by
or regulatory requirements appropriately skilled in-house legal and
company-secretarial resource at Group and operating
The Group's operations are subject to an increasing and company level with further support provided by an approved
evolving range of regulatory and other panel of external lawyers and advisors.
requirements in the markets in which it operates. A major
corporate failure resulting from Policies and procedures are in place to ensure compliance
a non-compliance with legislative, regulatory or other with legal and regulatory frameworks,
requirements would impact our brand including Health & Safety, environmental, ethical, fraud,
and reputation, could expose us to significant operational data protection and product safety.
disruption or result in enforcement
action or penalties. The Group has a dedicated internal controls function to
ensure that appropriate controls are
in place and are operating effectively to mitigate against
material financial misstatement,
errors, omissions or fraud.
Our Code of Conduct is available on our website and forms
part of our employee's induction
programme. E-learning tools are also deployed across the
organisation to ensure employees
are aware of, and understand their, obligations.
A whistleblowing hotline, managed and facilitated by an
independent third party, is in place
throughout the Group. All calls are followed up and
investigated fully with all findings reported
to the Board.
Digitalisation: SIG fails to maintain or offer the digital We continue to evaluate new technologies and make
capabilities necessary to maintain investments in the digital workplace to
market competitiveness ensure that we maintain a competitive digital proposition.
Increased technological innovation and change, some of Across our markets each operating company is responsible
which has been driven by the societal for ensuring that it implements the
and working environment challenges presented by the necessary technologies and ways of working to ensure that
Covid-19 pandemic, has accelerated the it can maximise digital opportunities
increasing role digitalisation will have in the in terms of enhancing the customer experience and
construction materials supply chain. Both optimising transactional, fulfilment or
suppliers and customers are increasingly seeking digital process efficiencies.
solutions to enable a more integrated
and frictionless experience. During 2021, we benchmarked our digital capabilities
across the Group and have identified
This risk may be exacerbated by legacy systems and opportunities for further growth in digital, particularly
technologies which are heavily customised, with regards to how we can increase
require significant system maintenance to prevent outages our own internal efficiencies and enhance the customer
and lack the functionality to allow experience. This will form the basis
their integration into a more modern digital of the focus on developing our digital capabilities
infrastructure. throughout 2022.
Change management: Failure to deliver the change and Operating companies continue to manage change portfolios
growth agenda in an effective and efficient through programme management governance
manner, resulting in management stretch, compromised committees. Increased monitoring has been implemented,
quality, and inability to meet growth particularly regarding progress against
targets growth initiatives, in line with our strategy.
As part of the "Return to Growth" strategy we have made Monitoring of business growth metrics and early warning
significant changes to our operating indicators or trends, continues as
model, infrastructure, and leadership. As we enter the part of business reviews at both the management and Board
next phase of executing our strategy, level.
allied to ongoing economic and pandemic-driven shifts in
everything from demand patterns, Our ongoing staff engagement surveys continue to
delivery models and working arrangements, there is a risk facilitate the early identification of change
that the business is challenged impacts in terms of our employees and action plans are
by "change fatigue" and future changes either are not implemented and monitored accordingly.
implemented as planned or benefits realised.
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