Historical overstatement of profit
1 February 2018
SIG plc
("SIG" or "the Group")
Historical overstatement of profit
SIG plc ("SIG" or "the Group"), a leading European supplier of specialist building products with strong positions in its core markets of Insulation & Interiors, Roofing & Exteriors, and Air Handling, today issues the following statement.
Summary
The Group has identified a historical overstatement of profit relating to the year ended 31 December 2016 and prior years and relating to the half year ended 30 June 2017. The expectations for underlying profitability for the year ended 31 December 2017 remain unchanged.
Background
Following a whistleblowing allegation of potential accounting irregularity at SIG Distribution, the core insulation and interiors business in the UK, the Group, with support from its external auditors Deloitte and from KPMG, has conducted a forensic review of the recoverability of a number of balances recognised at 31 December 2016 in relation to rebates and other potential recoveries from suppliers. Findings from this ongoing review were presented to the Audit Committee of the Board on 31 January 2018 and confirm that a number of these balances were overstated at 31 December 2016, in some cases intentionally. This resulted in an overstatement of profit for the year ended 31 December 2016 of up to c.£3.7m, with up to a further c.£0.4m overstatement of profit relating to years before 2016.
The review has also identified an overstatement of balances at 30 June 2017 relating to recoverable balances brought forward from 2016 and some additional receivables accrued in the first half of 2017. This resulted in up to a further c.£2.5m overstatement of profit for the half year ended 30 June 2017.
The Group intends to restate previous financial statements for these overstatements, which remain subject to audit, and is currently working with Deloitte to ensure the correct accounting treatment. A further update will be provided at the time of the Group's full year results.
In the meantime, the Group is suspending from employment a number of individuals who are being placed under disciplinary investigation into the circumstances surrounding the accounting for these balances and the cash overstatement disclosed in the trading update issued by the Group on 9 January 2018. The Remuneration Committee of the Board is reviewing maIus and clawback provisions in relation to incentive payments made to certain individuals in relation to prior years.
In addition, the Group has identified a number of actions to remediate the control environment in SIGD, including some specific additional controls around rebates and other supplier recoverables, which are being implemented with immediate effect. The Group has also engaged KPMG to conduct a detailed review of financial reporting controls at SIGD to confirm the accounting treatment of other material items at 31 December 2017, prior to finalising the year end results.
Outlook
As the overstatements relate to 2016 and prior years, and to an overstatement in the first half of 2017 which has been reversed in the second half, expectations for underlying profitability for the year ended 31 December 2017 remain unchanged.
Management continues to focus on the execution of key strategic levers to deliver a step change in the operational and financial performance of the Group, as announced at the Group's Strategy Day in November 2017.
The Group will announce its full year results on Friday 9 March 2018.
This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014.
- Ends -
Enquiries
SIG plc
Meinie Oldersma, Chief Executive Officer +44 (0) 114 285 6300
Nick Maddock, Chief Financial Officer +44 (0) 114 285 6300
Hilary Kendrick, Group Communications Director +44 (0) 114 285 6300
FTI Consulting
Richard Mountain / Frances Bussey +44 (0) 20 3727 1340
Jefferies Hoare Govett
Chris Dickinson / Paul Nicholls +44 (0) 20 7029 8000
Peel Hunt LLP
Justin Jones / Charles Batten +44 (0) 20 7418 8900
Cautionary Statement
This Trading Statement 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 Statement is shown or into whose hands it may come and any such responsibility or liability is expressly disclaimed.
Certain information included in this Trading Statement 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 2016. All statements in this release are based upon information known to the Company at the date of this Trading Statement. 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.
This information is provided by RNS
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