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SIG PLC

SIG plc Significant operational and financial progress as the transformation starts to deliver

SIG plc (LON:SHI) is a leading supplier of specialist building materials to trade customers across Europe, with strong positions in its core markets as a specialist distributor of insulation and interiors products, a merchant of roofing and exteriors products, and a provider of air handling solutions. The Group today issued its results for the year ended 31 December 2018 (“FY 2018”).

Highlights

· Significant operational and financial progress in the second half of the year as the transformation starts to deliver

· Underlying revenue down 1.2% due to challenging market conditions and focus on profitability over volume

· Underlying gross margin up 50bps and operating costs down

· Underlying PBT (excl. property profits) up 25% to £72.7m (2017: £58.1m) in line with expectations

· SIG Distribution turnaround well underway, with underlying operating profit up to £20.9m (2017: £3.5m)

· Net debt sharply lower at £189.4m (2017: £258.7m) and headline financial leverage down to 1.7x (2017: 2.3x)

· Final dividend of 2.5p per share, bringing total for the year to 3.75p (2017: 3.75p)

· Group return on sales (excl. property profits) up to 4.0% in the second half, providing good visibility of further significant progress in 2019, despite macro uncertainties

· Board reviewing strategic options for Air Handling

Underlying operations1

2018

2017

Restated

Change

Revenue

£2,683.2m

£2,716.4m

(1.2)%

LFL2 sales

(2.1)%

+3.5%

n/a

Gross margin

26.7%

26.2%

+50bps

Underlying3 operating profit

£90.6m

£85.6m

+5.8%

Underlying3 profit before tax (PBT)

£75.3m

£69.4m

+8.5%

Underlying3 profit before tax excl. property profits

£72.7m

£58.1m

+25.1%

Underlying3 basic earnings per share

9.3p

8.6p

+8.1%

Return on sales (excl. property profits)

3.3%

2.7%

+60bps

Return on capital employed (post-tax)

10.3%

9.3%

+100bps

Net debt

£189.4m

£258.7m

26.8%

Headline financial leverage (net debt/EBITDA)

1.7x

2.3x

0.6x

 

Statutory results

2018

2017

Restated

Revenue

£2,741.9m

£2,878.4m

Operating profit/(loss)

£44.3m

£(36.3)m

Profit/(loss) before tax

£28.5m

£(54.7)m

Basic earnings/(loss) per share

3.0p

(10.2)p

Dividend per share

3.75p

3.75p

 

Commenting, Meinie Oldersma, SIG Chief Executive Officer, said:

“As expected, our transformation strategy began to deliver during the year and we saw significant operational and financial progress in the second half. Despite challenging market conditions and lower revenue in our largest markets, our focus on pricing and profitability over volume, coupled with tighter control over operating costs, has enabled us to grow our gross margins and profit.

We have continued to strengthen our balance sheet during the year, enhanced by the disposal of peripheral businesses and structural reductions in levels of working capital, particularly stock. We have now reduced debt by over a third since the start of 2017. Leverage reduction remains a key priority for the Group and we expect further significant progress during 2019 towards our medium term target of headline financial leverage below 1.0x.

The Group brings considerable financial benefits into 2019 and the delivery of a step change in performance in SIG Distribution has given us confidence to accelerate the pace of transformation in other major Group businesses. Trading conditions remain challenging, with the outlook in many of our end markets uncertain, and the Group expects continuing like-for-like sales declines in the first part of the year. Notwithstanding these headwinds, the margin and cost actions taken in 2018 give us good visibility of further significant progress in the current year.

While much work remains to be done, our delivery in 2018 and the momentum brought into 2019 confirm that our transformation of SIG is on track.”