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

- Link: https://www.directorstalkinterviews.com/sig-plc-significant-operational-and-financial-progress-as-the-transformation-starts-to-deliver/412768933
- Published: 2019-03-08T07:27:44+00:00
- Author: Charlotte Edwards

**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 operations^(1)

  |

2018

  |

2017

Restated

  |

Change

  |  
 |

Revenue

  |

£2,683.2m

  |

£2,716.4m

  |

(1.2)%

  |  
 |

LFL^(2) sales

  |

(2.1)%

  |

+3.5%

  |

n/a

  |  
 |

Gross margin

  |

26.7%

  |

26.2%

  |

+50bps

  |  
 |

Underlying^(3) operating profit

  |

£90.6m

  |

£85.6m

  |

+5.8%

  |  
 |

Underlying^(3) profit before tax (PBT)

  |

£75.3m

  |

£69.4m

  |

+8.5%

  |  
 |

Underlying^(3) profit before tax excl. property profits

  |

£72.7m

  |

£58.1m

  |

+25.1%

  |  
 |

Underlying^(3) 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.”

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