Final Results
SIG PLC
09 March 2006
9 March 2006
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005
SIG plc is the market leading specialist supplier of insulation, roofing and
commercial interiors products in Europe.
• SIG reports record sales and profits across all regions, with
significant growth over 2004.
• Sales increased by 17.2% to £1,639m (2004: £1,398m). Like for like sales
growth (i.e. excluding the impact of acquisitions made in 2004 and 2005) was
9.3% in Sterling.
o UK and Ireland sales increased 21.1% to £1,098m (2004: £907m).
o Mainland Europe sales increased 9.2% to £473m (2004: £434m).
o USA sales increased 17.9% to £67.9m (2004: £57.6m).
• Underlying* operating profit increased 32.6% to £102.1m (2004: £77.0m).
o UK and Ireland underlying operating profit increased 32.2% to
£84.4m (2004: £63.8m).
o Mainland Europe underlying operating profit increased 26.9% to
£19.6m (2004: £15.5m).
o USA underlying operating profit increased by 78.9% to £3.0m
(2004: £1.7m).
• Underlying profit before tax was up 33.0% to £94.3m (2004: £70.9m) and
underlying basic earnings per share increased by 30.8% to 52.7p (2004:
40.3p).
• Profit before tax was up 23.6% to £86.8m (2004: £70.2m) and basic
earnings per share increased by 17.8% to 47.0p (2004: 39.9p).
• Dividend per share up 20% to 16.8p (2004: 14.0p).
• 21 acquisitions were completed during the year, for a total
consideration of £110m. Each of these acquisitions is complementary to our
existing trading activities and are within our existing geographic regions.
* - Underlying - means excluding the effect of amortisation of acquired
intangibles, impairment of goodwill and hedge ineffectiveness.
Les Tench, Chairman, commented:
'In 2005, SIG continued its policy of investing in growth and development both
organically and through acquisition. This programme of targeted investment, and
the strong entrepreneurial spirit of the management and staff throughout the
Group produced outstanding levels of growth over prior year.
Whilst market demand in most of the key areas in which the Group is located was
good, we believe that SIG again outperformed the overall market.
The Group enters 2006 with confidence that further progress will be made.'
Enquiries:
David Williams, Chief Executive SIG plc today 020 7251 3801
Gareth Davies, Finance Director thereafter 0114 285 6300
Faeth Birch / Gordon Simpson Finsbury 020 7251 3801
Full Preliminary Results information is available on www.sigplc.co.uk. An
interview with David Williams, Chief Executive is now available on SIG's website
and www.cantos.com
Chairman's Statement
In 2005, SIG continued its policy of investing in growth and development both
organically and through acquisition. This programme of targeted investment, and
the strong entrepreneurial spirit of the management and staff throughout the
Group produced outstanding levels of growth over prior year.
Whilst market demand in most of the key areas in which the Group is located was
good, we believe that SIG again outperformed the overall market.
Results
The results have been prepared in accordance with International Financial
Reporting Standards (IFRS), which are fully effective at 31 December 2005. The
comparative information for the year ended 31 December 2004 has been restated on
an IFRS basis.
Where reference is made to 'underlying', this should be taken as before the
amortisation of acquired intangibles, the impairment of goodwill and hedge
ineffectiveness.
For the year ended 31 December 2005, compared with the corresponding period in
2004:
Sales
• Total sales in Sterling increased by £241.1m (17.2%) to £1,639.3m (2004:
£1,398.2m).
• Sales growth, excluding the marginally positive impact of foreign
exchange movement, was 16.7%.
• Like for like sales growth (i.e. excluding the impact of acquisitions
made in 2004 and 2005) was 9.3% in Sterling and 8.8% on a constant currency
basis.
Profits
• Underlying operating profit increased by £25.1m (32.6%) to £102.1m
(2004: £77.0m).
• Amortisation of acquired intangibles increased by £3.1m to £3.7m (2004:
£0.6m).
• As notified in our Trading Statement in January 2006, an exceptional
goodwill impairment charge of £5.7m was made in the year, relating to the
write off of the remaining goodwill of the Screenbase business (which was
acquired in 2000).
• Underlying net finance costs increased by £1.7m to £7.8m (2004: £6.1m),
before a credit of £1.9m to finance income relating to hedge
ineffectiveness, arising from the new accounting requirements of IAS39.
• Underlying profit before tax increased by £23.4m (33.0%) to £94.3m
(2004: £70.9m).
• Profit before tax increased by £16.6m (23.6%) to £86.8m (2004: £70.2m).
Margins
• The gross margin increased to 27.0% (2004: 25.8%).
• The net underlying operating profit margin increased to 6.2% (2004:
5.5%).
Earnings and Dividends
• Underlying basic earnings per share increased by 12.4p to 52.7p (2004:
40.3p), an increase of 30.8%.
• Basic earnings per share increased by 7.1p to 47.0p (2004: 39.9p), an
increase of 17.8%.
• A final dividend of 11.5p is proposed, subject to shareholder approval.
This would make a total dividend for the year of 16.8p, an increase of 2.8p
(20%) on the 2004 full year dividend of 14.0p per share. If approved, this
will be payable on 22 May 2006 to shareholders on the register at 21 April
2006.
Finances
SIG has benefited from another good year of generating cash to help support its
investment in organic and acquired growth, with 97% of profit attributable to
equity holders being converted into free cashflow. After acquisition spend,
gearing increased to 60% (2004: 39%). Interest cover improved to 13.1 times
(2004: 12.5 times).
Acquisitions
2005 was the most successful year yet in respect of the Group's acquisition
programme, with 21 acquisitions completed during the year, for a total
consideration of £110m including assumed debt.
Each of these acquisitions is complementary to our existing trading activities,
and is within our existing geographic trading regions.
Employees
Personal commitment and the personal will to excel lies at the heart of the
culture of the Group and I would like to thank all employees for their hard work
and valuable efforts during the year.
Prospects
The Group has benefited from increased demand and a positive pricing environment
in most of the main areas in which it operates during both 2004 and 2005.
Coming into 2006, it is expected that demand will continue to improve modestly,
but that the impact of pricing, and in particular that of price inflation, will
be less helpful than has been the case for the last 2 years.
Looking at the three geographic regions in which we have trading operations,
beginning with the UK and Ireland, we expect demand from both residential and
non-residential new build to continue to be positive, and anticipate some
continued weakness in the residential repairs and maintenance sectors.
In Mainland Europe, positive conditions are expected in France, Benelux and
Poland. In Germany, whilst market conditions are expected to continue to be
difficult, we do not expect to see the same degree of decline in general
construction activity which occurred in 2005.
In the USA, the specific industries which we serve are expected to continue the
programme of investment and rebuilding that began in 2005.
Looking at the prospects of SIG on a longer term basis, we plan to continue the
focused and measured expansion of the Group's activities, by adding additional
trading sites, and by widening the range of specialist products that the Group
sells. The strength of the Group's finances will enable the Company to take
advantage of opportunities that may arise.
Increasing global energy prices and concern about the harmful impact of energy
consumption on the environment are expected to influence demand for insulation.
Insulation materials offer a proven solution in the quest to reduce energy
consumption in buildings and in industry. Over time, the Group believes that
governments, businesses and the public will increasingly focus on reducing
energy consumption more vigorously than in the past, and that as a result
insulation demand will rise in the years ahead.
The Group enters 2006 with confidence that further progress will be made.
Chief Executive's Review of Operations
It is pleasing to report that 2005 was a year in which the Group achieved
unprecedented levels of growth and expansion.
In markets where we have market leadership, this was reinforced and in areas
where we are still developing our position, considerable progress has been made.
Whilst the acquisition programme achieved the largest number of transactions in
any year, it is particularly encouraging to see the continued progress and
growth achieved on a like for like basis.
This demonstrates the Group's policy of driving for organic growth, and
supplementing this with targeted acquisitions.
Two points stand out as key features of the 2005 results; the underlying like
for like growth in sales, and the improvement in the net operating profit
margin. The improvement in these two key performance measures are a result of
SIG's core principles of Focus, Specialisation and Service.
Trading Highlights
Where reference is made to underlying operating profit and net underlying
operating profit margin this should be taken as being before the amortisation of
acquired intangibles and impairment of goodwill.
UK & Ireland (67% of total sales)
• Total sales increased by £191.0m (21.1%) to £1,098.1m (2004: £907.1m).
• Like for like sales increased by £86.6m (9.8%).
• Underlying operating profit increased by £20.6m (32.2%) to £84.4m (2004:
£63.8m).
• Like for like underlying operating profit increased by £9.4m (15.2%) to
£71.3m (2004: £61.9m).
• The net underlying operating profit margin was increased to 7.7% (2004:
7.1%)
• 80 trading sites were added in the year, taking the total at 31 December
2005 to 337 (31 December 2004: 257).
Still the largest single part of the Group, the Insulation operations in the UK
and Ireland had an excellent year.
Total sales increased by 17.3%, and 9.9% on a like for like basis. The net
underlying operating profit margin increased and underlying operating profits
were substantially ahead of prior year.
In line with expectations, the increased demand for thermal insulation products
for use in new buildings, arising from the increased mandatory standards which
were introduced by a change in the UK Building Regulations in April 2002, had
levelled off by mid year 2005. This is reflected in a reduced rate of growth in
like for like sales in the second half year.
After periods of product shortages in 2003 and 2004, additional manufacturing
capacity began to come on stream throughout 2005, partly to meet demand but also
in anticipation of future increases in demand, as the Building Regulations
introduce higher minimum standards of thermal performance in new buildings again
in April 2006. This change in the supply / demand balance put pressure on
pricing in 2005, and some product prices fell during the year.
Demand for insulation for upgrading standards in existing residential properties
increased during the year, and the Group's leading position with a number of
energy producers and grant schemes enabled it to benefit from these positive
conditions.
In summary, our insulation business in the UK and Ireland had an excellent
performance in market conditions which became more challenging as the year
progressed.
Against the background of reduced market demand, the Roofing division increased
sales by 15.7% in total, and 5.7% on a like for like basis.
The net underlying operating profit margin was slightly reduced, due to cost
increases associated with expansion and the dilutive impact of acquisitions made
during the year. Underlying operating profits were increased significantly over
prior year.
A significant proportion of sales in this division are materials for the repair
and renovation of the roof areas of existing domestic properties. Some of this
work is driven by discretionary consumer spending - for example the practice of
replacing wood boarding around the perimeter of house roofs with long lasting,
low maintenance, PVC materials. Reduced consumer spending in 2005 has had some
impact on some parts of the roofing industry, and this, together with a
reduction in housing transactions meant that overall market demand was reduced
in the UK. However, in some areas of the country, urban renewal schemes such as
the Decent Homes programme created demand for complete roof renewals in older
residential properties.
In addition, the continued strength of construction in Ireland augured well for
our roofing products, and our roofing sales grew substantially on a like for
like basis through our trading sites in this region.
Market coverage was improved significantly during the course of the year, and we
increased the number of dedicated roofing product trading sites by 64 to 193 at
31 December 2005. The new trading sites were a mixture of brownfield openings
and acquisitions.
The Commercial Interiors operations in the UK and Ireland, benefited from
government expenditure on the renovation and replacement of schools, hospitals
and other public buildings. In addition, other areas of non-residential
construction were quite strong, including hotels, retail developments, leisure
complexes and offices. As the leading supplier of internal fit-out products to
the non-residential building industry, the Group made substantial progress in
2005. Total sales in the sector were up 25.9%, and 15.0% on a like for like
basis.
The net underlying operating profit margin was increased, due to positive
changes in the mix of sales, together with the positive impact of the higher
margin in the business acquired during the year.
The operating profit was substantially increased, both before and after the
£5.7m goodwill write-off relating to Screenbase, a business which was acquired
in 2000 and which forms a small part of our UK Commercial Interiors operations.
In June 2005 we acquired the UK's premier supplier of high performance interior
door sets, with a proven track record in the design and supply of quality
products to all types of non-residential buildings. This substantially increases
our existing doors business, and is part of the programme of offering a wider
range of products to customers.
The 2004 revision of the UK Building Regulations concerning the acoustic
performance of buildings had an impact on parts of the Commercial Interiors
business (in addition to the UK Insulation business itself), and resulted in
increased sales of certain products to meet the new standards.
Within Safety and Specialist Construction Products, excellent progress was made
with sales up 57.6% in total, and 9.2% on a like for like basis.
The net underlying operating margin increased, and underlying operating profits
were substantially ahead of prior year.
Within Safety products, sales via the company internet trading site increased
significantly.
During 2005 the Specialist Construction Products division was created and given
increased focus and identity. A new senior management team was appointed with
dedicated responsibility for this emerging division.
Operating in a focused but fragmented industry, the business supplies essential
specialist materials and products to tradesmen and construction companies
working on both housing and non-residential building projects. Specific products
include specialist mechanical fixings and fastenings, chemicals and metal
reinforcing products used in concrete structures and other civil engineering
applications. There are related uses for certain types of insulation materials,
which provides a natural synergy with other parts of SIG.
Mainland Europe (29% of total sales)
• Total sales in Mainland Europe increased by £39.8m (9.2%) to £473.4m
(2004: £433.6m).
• Like for like sales, on a constant currency basis, increased by 5.8%
over 2004.
• Total underlying operating profit increased by £4.2m (26.9%) to £19.6m
(2004: £15.5m).
• Underlying operating profit, on a constant currency basis increased by
25.6%.
• 6 trading sites were added during the year, taking the total in Mainland
Europe to 139 at 31 December 2005 (133 at 31 December 2004).
• All countries in which SIG has trading activities increased both sales
and operating profit on a like for like basis, over 2004.
• The net underlying operating profit margin was increased to 4.1% (2004:
3.6%).
In Germany, (60% of total sales in Mainland Europe), the construction and
building industry experienced lower levels of activity across both residential
and non-residential sectors, which caused a reduction in market demand for our
products, principally insulation and commercial interiors materials. Market
prices weakened, and the combination of these factors made trading conditions
very challenging.
Demand for more specialist insulation materials for a range of process and
industrial applications held up rather better. In addition, we had the benefit
in 2005 of a full year's contribution from the new trading sites which began
trading towards the latter part of 2004 including three brownfield trading sites
in Austria. Overall, sales increased by 4.2% in Euros, 4.8% in Sterling, a good
performance in a difficult market.
Continued close management attention to pricing controls and cost efficiencies
enabled the net operating margin to be improved, and the operating profit was
substantially increased.
During the course of 2005, we added 1 further trading site, taking the total in
Germany and Austria combined to 65.
In France, (25% of total sales in Mainland Europe), overall market conditions
were favourable, with good levels of demand for both insulation and commercial
interiors products, and pricing levels firm.
In addition, we continued to expand our sales of air handling products, which
are used primarily in larger, non-residential buildings.
The two roofing trading sites which were opened in 2003 on a trial basis had not
met our expectations, and they were sold in November 2005.
Total sales in France increased by 13.6% in Euros, 14.3% in Sterling. The like
for like sales growth on a constant currency basis was 8.2%.
Again, local management were successful in achieving an increase in the net
operating profit margin, and operating profits were increased significantly.
We added 3 new trading sites during 2005, taking our network to a total of 45 at
the year end.
In Benelux, (7.5% of total sales in Mainland Europe), market conditions
contrasted from weak in the Netherlands, to strong in Belgium. Our activities
are biased towards the Netherlands, and we acquired a further trading site in
Belgium towards the year end to improve our market penetration.
The changes made in 2004 to the branch structure and to the local management
team had a very positive impact on our performance in 2005. Total sales
increased by 9.2% in Euros, 9.9% in Sterling. Like for like sales growth was
6.7% on a constant currency basis, an excellent achievement in difficult
markets.
The net operating margin was increased and operating profits rose substantially.
We added 3 trading sites in the year, taking our total at the year end to 10.
In Poland, (7.5% of total sales in Mainland Europe), we had our most successful
year. Market conditions were actually less favourable than had been expected,
and whilst non-residential construction was a little stronger than in the
previous year, housebuilding, which is very fragmented in Poland, was reported
to have declined.
We continued to invest in our operations to improve customer-facing services,
and believe we have made good progress despite the rather hesitant recovery in
the building sector.
Total sales, entirely like for like, were up by 23.2% in local currency, 38.9%
in Sterling. In line with the pattern across SIG's operations in Europe, both
the net operating margin and operating profits were substantially ahead of prior
year.
USA (4% of total sales)
• Total sales increased by £10.3m (17.9%) to £67.9m (2004: £57.6m).
• Like for like sales in local currency increased by 16.4%.
• Total operating profit increased by £1.3m (78.9%) to £3.0m (2004:
£1.7m), entirely on a like for like basis.
• The net operating profit margin increased to 4.4% (2004: 2.9%).
Specialist technical insulation materials, used in a wide range of industrial,
process and air-handling applications, form the core of the Group's sales in the
USA, and demand increased throughout the year.
This momentum was accelerated by the after effects of the catastrophic hurricane
damage which occurred in the Southern US States in September 2005.
The Group has its larger trading operations in the area affected by the
hurricanes and after a period of major disruption throughout the region,
customers involved in oil, gas and petrochemical industries began to rebuild,
repair and replace process plants. This work requires technical high temperature
insulation as a core material, and the Group's operations were able to quickly
respond to the increased demand.
It should be recognised that many of our staff experienced enormous personal
difficulties and loss due to the storm damage, including in some cases the
complete destruction of their homes. The speed with which employees responded to
both the personal and business challenges was very impressive.
Acquisitions
A total of 21 acquisitions were completed in the year, all of which complement
existing businesses within SIG, and are within countries in which we already
have a trading presence.
The total spend on these acquisitions was £110m (including assumed debt and
contingent consideration) bringing £145m of annualised sales to the Group.
17 of the acquisitions were made in the UK, comprising 2 in insulation, 9 in
roofing, 1 in commercial interiors and 5 in specialist construction products.
The remaining 4 businesses acquired are in Mainland Europe, comprising an
insulation business in France, an insulation and a commercial interiors business
in Benelux, and a commercial interiors business in Germany.
All of the acquisitions meet the strategic requirement of being suppliers of
specialist products, chiefly to the building and construction industry and the
integration process is progressing well.
The 68 additional sites added through the acquisition programme have enabled SIG
to reach new customers, extend our product offering to existing and new
customers, and to further improve our standards of service to all customers
thereby continuing the process of strengthening the Company going forward.
Summary of Trading Performance
The combination of strong growth from the core operations of SIG, and the high
level of acquisition activity during the year, produced excellent overall
results in 2005. This performance also demonstrates the success of another
combination; that of clear, focused strategies combined with the drive, energy
and enthusiasm of all our employees.
Consolidated Income Statement
for the year ended 31 December 2005
Before Amortisation of Total Before Amortisation of Total
amortisation of acquired amortisation of acquired
acquired intangibles, acquired intangibles,
intangibles, goodwill intangibles, goodwill
goodwill impairment and goodwill impairment and
impairment and hedge impairment and hedge
hedge ineffectiveness* hedge ineffectiveness*
ineffectiveness* ineffectiveness*
2005 2005 2005 2004 2004 2004
Continuing Note £000's £000's £000's £000's £000's £000's
Operations
Revenue
Existing 1,581,142 - 1,581,142 1,369,093 - 1,369,093
operations
Acquisitions 58,190 - 58,190 29,144 - 29,144
Continuing 2 1,639,332 - 1,639,332 1,398,237 - 1,398,237
operations
Cost of sales 1,196,328 - 1,196,328 1,037,052 - 1,037,052
Gross profit 443,004 - 443,004 361,185 - 361,185
Other 340,901 9,342 350,243 284,165 634 284,799
operating
expenses
Operating
profit
Existing 96,356 (9,342) 87,014 75,139 (634) 74,505
operations
Acquisitions 5,747 - 5,747 1,881 - 1,881
Continuing 2 102,103 (9,342) 92,761 77,020 (634) 76,386
operations
Finance income (6,691) (1,880) (8,571) (5,045) - (5,045)
Finance costs 14,521 - 14,521 11,202 - 11,202
Profit before tax 94,273 (7,462) 86,811 70,863 (634) 70,229
Income tax expense 29,211 (542) 28,669 21,615 (190) 21,425
Profit after tax 65,062 (6,920) 58,142 49,248 (444) 48,804
Attributable to:
Equity holders of the 64,106 (6,920) 57,186 48,676 (444) 48,232
Company
Minority 956 - 956 572 - 572
interests
Earnings per
share
Basic earnings 3 52.7p (5.7p) 47.0p 40.3p (0.4p) 39.9p
per share
Diluted 3 51.9p (5.6p) 46.3p 39.7p (0.4p) 39.3p
earnings per
share
* Amortisation of acquired intangibles, goodwill impairment and hedge ineffectiveness have been
disclosed separately in order to give an indication of the underlying earnings of the Group.
Consolidated Statement of Recognised Income and Expense
for the year ended 31 December 2005
2005 2004
Note £000's £000's
Profit after tax 58,142 48,804
Exchange difference on retranslation of foreign (725) 149
currency goodwill and intangibles
Exchange difference on retranslation of foreign (1,669) (619)
currency net investments (excluding goodwill and
intangibles)
Exchange difference on foreign currency 1,111 (1,676)
borrowings
Tax (charge)/credit on exchange difference (639) 1,786
arising on foreign currency borrowings
Deferred tax on share options 596 1,824
Actuarial loss relating to the pension schemes (1,885) (8,741)
Deferred tax movement associated with actuarial 563 2,537
loss
Transitional adjustment to adopt IAS 32 and IAS 7 (6,625) -
39 at 1 January 2005
Recognition of deferred tax assets on certain 7 3,869 -
transitional adjustments at 1 January 2005
Total recognised income and expense for the year 52,738 44,064
Attributable to:
Equity holders of the Company 51,782 43,492
Minority interests 956 572
52,738 44,064
Consolidated Balance Sheet 2005 2004
as at 31 December 2005 Note £000's £000's
Non-current assets
Property, plant and equipment 102,093 74,481
Goodwill 164,675 113,467
Intangible assets 49,252 14,714
Deferred tax assets 21,085 21,455
337,105 224,117
Current assets
Inventories 128,101 113,636
Trade receivables 281,053 243,766
Other receivables 21,745 19,996
Cash and cash equivalents 32,120 19,467
463,019 396,865
Total assets 800,124 620,982
Current liabilities
Trade and other payables 224,859 189,233
Obligations under finance leases and hire 756 1,391
purchase agreements
Bank overdrafts 3,211 2,966
Bank loans 95,148 10,245
Loan notes 2,253 -
Current tax liabilities 25,483 13,995
Provisions 2,252 1,735
353,962 219,565
Non-current liabilities
Obligations under finance leases and hire 838 564
purchase agreements
Bank loans 521 1,345
Derivative financial instruments 28,376 -
Loan notes 75,740 101,274
Deferred tax liabilities 7,507 6,615
Other payables 2,159 3,955
Retirement benefit obligations 26,987 25,035
Provisions 13,695 8,714
155,823 147,502
Total liabilities 509,785 367,067
Net assets 290,339 253,915
Capital and reserves
Called up share capital 4 12,189 12,139
Share premium account 4 17,883 16,793
Capital redemption reserve 4 347 347
Special reserve 4 22,113 22,113
Share option reserve 4 1,375 639
Hedging and translation reserve 4 (2,282) (360)
Retained profits 4 237,515 201,672
Attributable to equity holders of the Company 289,140 253,343
Minority interests 4 1,199 572
Total equity 4 290,339 253,915
Consolidated Cash Flow Statement
for the year ended 31 December 2005
2005 2004
Note £000's £000's
Net cash flow from operating activities
Cash inflow from operating activities 5 113,581 77,422
Borrowing costs paid (11,511) (8,472)
Interest received 3,518 2,319
Income tax paid (21,850) (15,049)
Net cash inflow from operating 83,738 56,220
activities
Cash flows from investing activities
Purchase of property, plant and (34,547) (22,627)
equipment
Proceeds from sale of property, plant 2,098 1,549
and equipment
Purchase of businesses (83,482) (35,740)
Net cash used in investing activities (115,931) (56,818)
Cash flows from financing activities
Proceeds from issue of ordinary share 1,140 1,938
capital
Capital element of finance lease rental (335) (3,317)
payments
Repayment of loans (22,020) (17,172)
New loans 84,511 -
Dividends paid to equity holders of the (17,861) (15,587)
Company
Payments to minority shareholder (572) (447)
Net cash generated/(used) in financing 44,863 (34,585)
activities
Increase/(decrease) in cash and cash 6 12,670 (35,183)
equivalents in the year
Cash and cash equivalents at beginning 16,501 51,356
of year
Effect of foreign exchange rate changes (262) 328
Cash and cash equivalents at end of year 28,909 16,501
Notes
1. Basis of preparation
The Group's financial information has been prepared in accordance with
International Financial Reporting Standards ('IFRS') issued for use in the
European Union and are effective or available for adoption at the Group's first
IFRS annual reporting date, 31 December 2005. Comparative information for the
year ended 31 December 2004 has been restated under IFRS from the UK Financial
Reporting Standard ('UK GAAP') values originally reported by the Group.
While the financial information included in this preliminary announcement has
been computed in accordance with IFRS, this announcement does not itself contain
sufficient information to comply with IFRS. The Company will publish full IFRS
compliant accounts towards the end of March 2006.
The preliminary announcement does not constitute the Company's statutory
accounts for the year ended 31 December 2005 or 31 December 2004 within the
meaning of Section 240 of the Companies Act 1985 but is derived from those
statutory accounts.
The Group's statutory accounts for the year ended 31 December 2004 have been
filed with the Registrar of Companies, and those for 2005 will be delivered
following the Company's Annual General Meeting. The auditors have reported on
the statutory accounts for 2005 and 2004, and their reports were unqualified and
did not contain statements under section 237 (2) or 237 (3) of the Companies Act
1985.
The financial information has been prepared under the historical cost convention
except for derivative financial instruments that are stated at their fair value.
IFRS 1 permits those companies adopting IFRS for the first time to take certain
exemptions from the full requirements of IFRS in the transition period. The
Group has taken advantage of the following exemptions:
a) IFRS 3 'Business combinations' - the Group has elected not to appl IFRS 3
retrospectively to acquisitions that took place before 1 January 2004.
b) IFRS 2 'Share based payments' - the Group has elected to apply IFRS 2 only
to those share based payment options that were granted after 7 November 2002
and remained unvested at 1 January 2005.
c) IAS 21 'The effects of changes in foreign exchange rates' - the Group has
elected to reset the hedging and translation reserve to zero at 1 January
2004.
d) IAS 32 'Financial Instruments: Disclosure and Presentation' and IAS 39
'Financial Instruments: Recognition and Measurement'- the Group has elected
to apply UK GAAP to its comparative accounts (i.e. 1 January 2004 to 31
December 2004) and implement IAS 32 and IAS 39 at 1 January 2005. On 1
January 2005, in accordance with IAS 32 and IAS 39, all derivative financial
instruments are recorded at their fair value. The difference between the
fair value and book value of all derivative financial instruments at 1
January 2005 has been recorded in 2005 through the Consolidated Statement of
Recognised Income and Expense.
The Group has today released a 'Final Restatement of 2004 Financial Information'
document that contains the following:
• the restatement of 2004 comparative financial information from UK GAAP
to IFRS, including a reconciliation of equity from UK GAAP to IFRS at the
date of transition and 31 December 2004;
• a summary of significant accounting policies; and
• an unqualified independent auditors' report on the document
This document can be found on the Company's website, www.sigplc.co.uk and is
also available in hard copy from the Company Secretary of SIG plc at the
registered office (tel. 0114 2856300).
2. Segmental information
The Group is managed and organised in three geographies: UK & Ireland, Mainland
Europe and the USA. These geographies are the basis on which the Group reports
its primary segment information. Segment information about these geographies is
presented below:
2005 2005 2005 2005 2005 2004 2004 2004 2004 2004
UK & Mainland USA Eliminations Total UK & Mainland USA Elimina- Total
Ireland Europe Ireland Europe tions
REVENUE £000's £000's £000's £000's £000's £000's £000's £000's £000's £000's
External sales 1,098,055 473,393 67,884 - 1,639,332 907,054 433,595 57,588 - 1,398,237
Intersegment sales* - 2 50 (52) - 3 48 57 (108) -
Total Revenue 1,098,055 473,395 67,934 (52) 1,639,332 907,057 433,643 57,645 (108) 1,398,237
Segment result before 84,359 19,612 3,008 - 106,979 63,823 15,456 1,681 - 80,960
amortisation of acquired
intangibles and goodwill
impairment loss
Amortisation of acquired (3,630) (58) - - (3,688) (619) (15) - - (634)
intangibles
Goodwill impairment loss (5,654) - - - (5,654) - - - - -
Segment result 75,075 19,554 3,008 - 97,637 63,204 15,441 1,681 - 80,326
Parent Company costs (4,876) (3,940)
Operating profit 92,761 76,386
Net finance costs (5,950) (6,157)
Profit before tax 86,811 70,229
Income tax expense (28,669) (21,425)
Minority interests (956) (572)
Retained profit 57,186 48,232
BALANCE SHEET
Assets
Segment assets 587,710 179,100 31,535 798,345 422,705 168,095 24,826 615,626
Unallocated assets ,779 5,356
Consolidated total assets 800,124 620,982
Liabilities
Segment liabilities 238,255 54,200 6,327 298,782 190,587 57,332 4,350 252,269
Unallocated liabilities 211,003 114,798
Consolidated total 509,785 367,067
liabilities
* Intersegment sales are charged at the prevailing market rates.
2. Segmental information (continued)
2005 2005 2005 2005 2004 2004 2004 2004
UK & Mainland USA Total UK & Mainland USA Total
Ireland Europe Ireland Europe
£000's £000's £000's £000's £000's £000's £000's £000's
OTHER SEGMENT INFORMATION
Capital expenditure on:
Property, plant and 25,773 8,448 326 34,547 16,526 5,672 429 22,627
equipment
Intangible assets 37,543 689 - 38,232 15,138 210 - 15,348
Goodwill 56,107 1,474 - 57,581 29,543 801 - 30,344
Non cash expenditure:
Depreciation 16,537 4,781 501 21,819 12,295 4,899 626 17,820
Amortisation of acquired 3,630 58 - 3,688 619 15 - 634
intangibles
Goodwill impairment loss 5,654 - - 5,654 - - - -
3. Earnings per share
The calculations of earnings per share are based on the following
profits and numbers of shares:
Basic and diluted Basic and diluted before
amortisation of acquired
intangibles, goodwill
impairment and hedge
ineffectiveness
2005 2004 2005 2004
£000's £000's £000's £000's
Profit after tax 58,142 48,804 58,142 48,804
Minority interests (956) (572) (956) (572)
Amortisation of intangibles - - 3,688 634
Goodwill impairment loss - - 5,654 -
Hedge ineffectiveness - - (1,880) -
Tax effect of amortisation - - (542) (190)
of acquired intangibles and
hedge ineffectiveness
57,186 48,232 64,106 48,676
2005 2004
Weighted average number of Number Number
shares
For basic earnings per 121,625,474 120,863,011
share
Exercise of share options 1,970,146 1,747,068
For diluted earnings per 123,595,620 122,610,079
share
Earnings per share before amortisation of acquired intangibles, goodwill impairment
and hedge ineffectiveness is presented in order to give an indication of the
underlying performance of the Group.
4. Consolidated Statement of Changes in Equity
Called Share Capital Special Share Hedging and Retained Total Minority Total
up premium redemption reserve option translation profits interests equity
share account reserve reserve reserve
capital
£'000's £'000's £'000's £'000's £'000's £'000's £'000's £'000's £'000's £'000's
At 1 January 12,027 14,967 347 22,113 237 66 149,556 199,313 447 199,760
2004 -
UK GAAP
IFRS
adjustments:
Reverse - - - - - - 9,983 9,983 - 9,983
proposed
dividend
Stock - - - - - - (2,800) (2,800) - (2,800)
valuation
adjustment
Deferred tax - - - - - - 12,845 12,845 - 12,845
Lease - - - - - - (510) (510) - (510)
incentives
Retranslation - - - - - 4,278 - 4,278 - 4,278
of goodwill
Exchange - - - - - (4,344) 4,344 - - -
reserve reset
Adjustment to - - - - - - (57) (57) - (57)
pension asset
valuation
Adjustment - - - - (46) - 46 - - -
for IFRS 2
Share based
payments
At 1 January 12,027 14,967 347 22,113 191 - 173,407 223,052 447 223,499
2004 - IFRS
Profit for - - - - - - 48,232 48,232 572 48,804
the period
Dividends - - - - - - (15,587) (15,587) - (15,587)
New share 112 1,826 - - - - - 1,938 - 1,938
capital
issued
Exchange - - - - - 149 - 149 - 149
difference on
retranslation
of foreign
currency
goodwill and
intangibles
Exchange - - - - - (619) - (619) - (619)
difference on
retranslation
of overseas
net
investments
(excluding
goodwill and
intangibles)
Exchange - - - - - (1,676) - (1,676) - (1,676)
difference on
foreign
currency
borrowings
Tax credit on - - - - - 1,786 - 1,786 - 1,786
exchange
difference
arising on
foreign
currency
borrowings
Deferred tax - - - - - - 1,824 1,824 - 1,824
on share
options
Credit to - - - - 448 - - 448 - 448
share option
reserve
Actuarial - - - - - - (8,741) (8,741) - (8,741)
loss on
defined
benefit
pension
schemes
Deferred tax - - - - - - 2,537 2,537 - 2,537
movement
associated
with
actuarial
loss
Payment to - - - - - - - - (447) (447)
minority
interest
shareholder
At 31 12,139 16,793 347 22,113 639 (360) 201,672 253,343 572 253,915
December 2004
- IFRS
4 .Consolidated Statement of Changes in Equity (continued)
Hedging
Capital and
Called up Share redemp Share trans
share premium -tion Special option -lation Retained Minority Total
capital account reserve reserve reserve reserve profits Total interests equity
£'000's £'000's £'000's £'000's £'000's £'000's £'000's £'000's £'000's £'000's
At 31 December 2004
- IFRS 12,139 16,793 347 22,113 639 (360) 201,672 253,343 572 253,915
Profit for the period - - - - - - 57,186 57,186 956 58,142
Dividend - - - - - - (17,861) (17,861) - (17,861)
New share capital issued 50 1,090 - - - - - 1,140 - 1,140
Exchange difference on - - - - - (725) - (725) - (725)
retranslation of foreign
currency goodwill
and intangibles
Exchange difference on - - - - - (1,669) - (1,669) - (1,669)
retranslation of overseas
net investments (excluding
goodwill and intangibles)
Exchange difference on
foreign - - - - - 1,111 - 1,111 - 1,111
currency borrowings
Tax debit on exchange
difference - - - - - (639) - (639) - (639)
arising on foreign currency
borrowings
Deferred tax on share
options - - - - - - 596 596 - 596
Credit to share option
reserve - - - - 736 - - 736 - 736
Actuarial loss on defined
benefit - - - - - - (1,885) (1,885) - (1,885)
pension schemes
Deferred tax movement
associated - - - - - - 563 563 - 563
with actuarial loss
Payment to minority
interest - - - - - - - - (572) (572)
shareholder
Recognition of minority
interest - - - - - - - - 243 243
on acquisition
Transitional adjustment
to adopt - - - - - - (6,625) (6,625) - (6,625)
IAS 32 and IAS 39 at 1
January 2005 (note 7)
Recognition of deferred
tax assets - - - - - - 3,869 3,869 - 3,869
on certain transitional
adjustments at 1
January 2005 (note 7)
At 31 December 2005 -
IFRS 12,189 17,883 347 22,113 1,375 (2,282) 237,515 289,140 1,199 290,339
5. Reconciliation of operating profit to cash inflow from operating
activities
2005 2004
£000's £000's
Operating profit 92,761 76,386
Depreciation charge 21,819 17,820
Amortisation of intangibles 3,688 634
Goodwill impairment loss 5,654 -
Profit on sale of property, plant and (572) (279)
equipment
Share based payments 736 448
Increase in inventories (5,066) (19,037)
Increase in receivables (10,043) (21,573)
Increase in payables 4,604 23,023
Cash inflow from operating activities 113,581 77,422
Acquisitions made in the year had the following impact on the Group's cashflows
in 2005: cash inflow from operating activities £5.795m (2004 : £1.125m),
borrowing costs paid £1.389m (2004: £0.049m), purchase of property, plant and
equipment £1.018m (2004: £0.114m), repayment of loans £3.247m (2004 : £nil) and
income tax paid £1.034m (2004: £0.624m).
Included within the increase in payables is a cash outflow relating to defined
benefit pension contributions being £0.863m (2004 : £5.048m) greater than the
amount charged to operating profit.
6. Reconciliation of net cash flow to movements in net 2005 2004
debt
£000's £000's
Increase / (decrease) in cash and cash equivalents 12,670 (35,183)
in the year
Cash (outflow) / inflow from movement in debt (62,156) 20,255
Increase in net debt resulting from cash flows (49,486) (14,928)
Debt acquired with acquisitions (21,270) (7,488)
Non-cash items (271) -
IFRS transitional adjustment (note 7) (6,625) -
Exchange differences 1,247 413
Increase in net debt in the year (76,405) (22,003)
Net debt at beginning of year (98,318) (76,315)
Net debt at end of year (174,723) (98,318)
7. Transitional adjustment to adopt IAS 32 and IAS 39 at 1 January
2005
The Group has derivative financial instruments associated with its US Senior loan
notes, being interest and foreign currency contracts. These convert the Group's
interest and loan principal payments under the US Senior loan notes into Sterling
and Euro currencies in order to fund the Group's UK and European operations.
Previously under UK GAAP, the Group recognised the book value of its derivative
financial instruments in the carrying value of its US Senior loan note debt.
The Group has elected to apply UK GAAP to its comparative accounts (i.e. 1 January
2004 to 31 December 2004) and implement IAS 32 and IAS 39 at 1 January 2005. On 1
January 2005, in accordance with IAS 32 and IAS 39, all derivative financial
instruments are recorded at their fair value. The difference between the fair value
and book value of all derivative financial instruments at 1 January 2005 was
£6.625m, being an additional liability for the Group. In addition, as a result of
further guidance issued by the UK tax authorities regarding the tax treatment of
transitional adjustments relating to derivative financial instruments and foreign
currency exchange differences, the Group has recognised a deferred tax asset of
£3.869m at 1 January 2005. Both of these transitional adjustments have been
recorded in 2005 through the Consolidated Statement of Recognised Income and
Expense. The table below shows the effect of including the fair value of these
derivative financial instruments on the Consolidated Balance Sheet and the
associated deferred tax assets at 1 January 2005:
At 1 January 2005 UK GAAP IFRS
£000's £000's
US Senior loan note debt 94,268 63,854
US Senior loan note derivative - 37,039
financial instruments
Total 94,268 100,893
Additional liability under IFRS 6,625
Deferred tax assets (3,869)
Reduction in net assets at 1 January 2,756
2005 as a result of adopting IAS 32 and
IAS 39
Under UK GAAP, the debt is valued as a composite liability by converting the
Sterling and Euro principal values featuring in the loan note derivative financial
instruments at the closing rates of exchange at the balance sheet date. The
Sterling value of this debt therefore moves with the Sterling:Euro exchange rate.
Under IFRS, the US Senior loan notes are valued at the closing US dollar:Sterling
exchange rate. The derivative financial instruments are valued at their fair market
value at the balance sheet date.
It must be noted that the recognition of this additional £6.625m liability as a
result of adopting IFRS will not impact the cashflows of the Group. Upon expiry of
these derivatives in 2008 and 2011, the value of the loan notes and the associated
derivatives under IFRS will equal the equivalent UK GAAP book value of the
composite debt at that time.
This information is provided by RNS
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