Trading Update for the year ended 31 December 2011
SIG plc ("SIG") is a leading distributor of specialist building products in Europe, with strong positions in its core markets of insulation & energy management, interior fit out and roofing.
Group sales from continuing operations for 2011 were approximately £2,740m, an increase of nearly 8% (c.7% on a constant currency basis) compared with 2010. Based on this performance the Board is confident that underlying* profit before tax will be marginally above the upper end of the range of analyst expectations for 2011 (Bloomberg upper end of range: £80.4m**).
Trading towards the end of the year benefited from the relatively mild weather, particularly in comparison to the exceptionally severe conditions in December 2010. The Group expects gross margin for 2011 to be maintained at a similar level to 2010.
In Mainland Europe (2011: c.56% of Group sales) revenues were up by c.11% and by c.10% on a constant currency basis, with France demonstrating the strongest progress of the countries in which SIG operates, where revenues increased by c.14%. The strong performance in Mainland Europe is in part attributable to the Group's investment in new branches in recent years, which contribute additional sales and profit as they mature.
In the UK & Ireland (2011: c.44% of Group sales) revenues from continuing operations were up by c.3.5%, with sales in the UK up by c.4% and down by c.1% in Ireland on a constant currency basis.
The Group expects net debt to have reduced from £163m at 30 June 2011 to c.£120m at 31 December 2011, reflecting the Group's continued tight management of working capital.
Organisation and Structure
Following the disposals of its Interiors Manufacturing, Scaffolding and Safety & Workwear businesses in 2011, the Group is now strategically focused on its three core markets of insulation & energy management, interior fit out and roofing, which will strengthen its competitive advantage going forward. Accordingly, future growth initiatives will be based on carefully selected investments in new trading sites concentrated in these areas.
Following John Chivers' retirement from the Group, SIG has streamlined its management structure and appointed Robert Barclay, previously Managing Director of SIG Distribution, to the new post of Managing Director UK & Ireland. This new structure will enable SIG to increase opportunities for revenue growth through cross-selling in the region and drive further operational efficiencies.
In this regard the Group has identified approximately £5m of further annual cost savings principally related to the rationalisation of its branch network. The Group intends to implement these initiatives during 2012 and will gain the full benefit of the savings in 2013. Exceptional costs of c.£12m relating to this rationalisation and previous branch closures will be charged to the 2011 accounts. Going forward SIG will continue to assess market conditions and adjust its cost base appropriately.
Whilst trading in the last quarter of 2011 remained resilient, the recent weakening in the macroeconomic outlook for both the UK and Mainland Europe leads the Group to expect that market volumes will be slightly down overall in 2012. Nonetheless, management anticipates that SIG will continue to gain market share, not least from the maturing of branches opened in recent years, but also from other growth initiatives.
SIG will announce its Preliminary results for the year ended 31 December 2011 on 14 March 2012.
There will be a conference call with management at 8.00am to discuss this statement. The dial in number is +44 (0)20 3140 0668; Participant Pin: 614367#.
Chris Davies, Chief Executive
Doug Robertson, Finance Director
Simon Bielecki, Head of Investor Relations
0114 285 6300
07515 794 359
Richard Mountain / Nick Hasell
020 7269 7291
* Underlying is before the amortisation of acquired intangibles, impairment charges, restructuring costs, profit and loss arising on sale of businesses, trading profits and losses associated with disposed businesses and gains and losses on derivative financial instruments.
** Source: Bloomberg as at 11 January 2012
This Trading Update is prepared for and addressed only to the Company's shareholders as a whole and to no other person. The Company, its directors, employees, agents or advisors do not accept or assume responsibility to any other person to whom this Trading Update is shown or into whose hands it may come and any such responsibility or liability is expressly disclaimed.
Certain information included in this Trading Update is forward looking and involves risks and uncertainties that could cause the actual results to differ materially from those expressed or implied by forward looking statements. 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 future outcomes to differ from those foreseen in forward looking statements, including but not limited to, changes in risks associated with the level of market demand, product availability and pricing, competitor risk, credit risk, credit insurance, restructuring of SIG and exchange rates. More information about the risks and uncertainties that may affect the Group's performance is contained in the Annual Report to Shareholders for the year ended 31 December 2010. All statements in this release are based upon information known to the Company at the date of this Trading Update. The Company undertakes no obligation to publicly update or revise any forward looking statement, whether as a result of new information, future events or otherwise.