Final Results - Year Ended 31 December 1999
SIG PLC
8 March 2000
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 1999
SIG plc, Europe's largest specialist distributor of insulation and related
products, has had an excellent year, once again demonstrating its capacity to
grow in moderate trading conditions and to continue to outperform its markets.
Organic growth in operating profits is well ahead of last year and market
share has been increased in all SIG's main markets. Particularly good results
from the UK operations have been supported by a significant recovery in the
German businesses.
- sales increased 6% to £841m (1998 £796m)
- operating margin on sales was 5.3% compared with 4.7% last year, giving
operating profit up 18% to £44.2m
- strong organic growth in operating profits of 14%
- profit before tax rose 20% to £42.3m (1998 £35.3m)
- earnings per share were 24.4p, an increase of 21%
- proposed final dividend of 6.2p per share giving a total dividend for the
year up 10.7% at 9.3p per share
- e-commerce strategy well advanced
Barrie Cottingham, Chairman of SIG, commenting on the results, said:
'Trading in the first two months of the year has been encouraging, and this,
combined with the strengths of our businesses and our proven ability to
produce organic growth, leads the Board to view the current year with
confidence.'
Enquiries:
Bill Forrester, Chief Executive SIG plc today 0171 251 3801
Frank Prust, Finance Director SIG plc thereafter 0114 285 6300
Rupert Younger/ Faeth Finnemore Finsbury 0171 251 3801
Introduction
The Group has produced excellent results for the year and good progress has
been made in SIG's principal areas of activity. Organic growth in operating
profits is well ahead of last year and SIG has increased market share in all
its main markets. Particularly good results from the UK operations have been
supported by a significant recovery in the German businesses.
Since the recession of 1990/91, turnover and profits have grown every year and
earnings per share have increased more than six times. In this period, the
Group has expanded its activities both in scope and internationally. SIG has
a major presence in Germany and France and has established a position in the
USA. From the broader base now created, SIG will continue its proven strategy
of developing its specialist distribution activities by acquisition and
organic growth.
Results
Sales for the year were £841m (1998 £796m) and Group profit before taxation
was £42.3m (1998 £35.3m). Earnings per share were 24.4p against 20.1p in the
previous year, an increase of 21%. Operating profits have increased in the UK
from £31.2m to £36.2m and in mainland Europe from £6.4m to £10.4m, and include
acquisitions during the year which have contributed sales of £29m and
operating profits of £1.3m.
The Group operating profit margin on sales was 5.3% compared with 4.7%
last year.
The Group generated £56m from trading operations during the year. After
payments in respect of interest £1.9m, taxation £15.8m, dividends £10.3m and
capital expenditure of £13.1m, there was a cash inflow of £14.9m. A further
£17.1m was expended on acquisitions, inclusive of borrowings acquired, leaving
total borrowings at the year end of £51.3m and capital gearing of 42%,
compared with 50% last year.
Dividend
The Board is proposing a final dividend of 6.2 pence per share which, subject
to shareholders' approval, will make a total dividend for the year of 9.3
pence per share, covered 2.6 times, an increase of 10.7%. If approved, the
final dividend will be payable on 16th May 2000 to shareholders on the
register at 14th April 2000.
UK
Much of the improvement in the overall performance has come from the UK
businesses where good growth in profits across all activities has been
achieved. SIG's UK markets have been sluggish with modest volume growth in
construction being tempered by a continued decline in industrial and petro-
chemical related demand. Competitive pressures have led to further price
deterioration in some products and, once again, SIG has operated in a
deflationary environment. Despite these market conditions the Group has
increased sales, achieved operating margins of 7.3% compared with 6.7% in 1998
and produced a significant improvement in UK earnings.
SIG's insulation and related products businesses improved substantially, with
operating profits up 10% on a sales increase of 4%, and improvements in both
gross and operating margins. Organic growth was also strong, with sales and
profits ahead of last year.
The ceilings and partitioning division has had another excellent year and,
despite significant price erosion in suspended ceiling products, operating
profits grew by 13%, reflecting SIG's very strong position in this market.
In its second full year as part of SIG, the roofing division produced another
year of growth in sales and operating profits. Sales advanced by 19% and
operating profits by 35%.
EUROPE
Germany
In Germany, where market conditions in the construction sector have remained
difficult, the Group has traded well and produced an excellent recovery.
Operating from 10 fewer branches, sales have been maintained at prior year
levels and operating margins have improved from 1.3% to 2.6%. The results
reflect the actions taken in 1998 to rationalise the branch network, reduce
costs and improve efficiencies. Whilst profits have not yet returned to 1997
levels, the Group has created a sound platform for further progress.
Poland
In a growing construction sector, the fledgling business in Poland continues
to develop and sales have doubled in the year. The acquisition of Canon Artis
in mid year added two well established branches in the Warsaw area and the
branch network has increased to twelve.
France
Profits have increased in France where growth in ceilings and partitioning
complemented another sound performance from SIG's industrial insulation
distribution business.
REST OF WORLD
USA
In a severely depressed oil related market, the small USA based industrial
insulation distributor has experienced a reduction in operating profits.
Actions have been taken to reduce costs and develop sales of complementary
products.
Acquisitions
The Group has continued its strategy of expansion by making a number of small
but important acquisitions.
In the UK, two roofing distributors and a personal protective equipment
distributor were purchased and are being integrated into the existing network.
In Europe, two acquisitions have been made, expanding the distribution of
ceiling products in France and the insulation distribution operations in
Poland.
In the USA, a distributor of commercial and industrial insulation has been
added to SIG's US activities.
These additions to the Group's core activities will consolidate and strengthen
SIG's trading position and contribute to future growth.
E-Commerce
SIG is well advanced with its E-commerce strategy. A dedicated team is
working to establish and maintain active internet sites for the UK businesses
and subsequently for SIG's overseas operations. The first site, Protec-
direct.co.uk is fully operational and trading in personal protective
equipment. SIG is also developing a portal site which will enable entry to
its trading sites and offers a potential link with other complementary
materials providers outside the Group. SIG believes that its UK and European
branch network and logistics support puts it in a very strong position to
benefit from E-commerce development in SIG's sectors.
Directors
In July 2000 Bill Forrester, Chief Executive, reaches the Group's normal
retirement age of 60 for executives. The Board is delighted to report that
he has accepted the Board's invitation to continue in his present role until
31st December 2001.
Prospects
In its main markets in the UK and mainland Europe, SIG expects volume demand
to be positive and, whilst conditions will remain competitive, the Board
believes that selling prices will stabilise and rise as the year progresses
In recent years, the UK businesses have achieved growth in excess of the
market and SIG expects this to continue. The increase in sales achieved in
the past year indicates that SIG has gained market share in its main UK
insulation, ceilings & partitioning and roofing distribution activities. The
small bolt-on acquisitions made in 1999 will further consolidate and
strengthen SIG's leadership position.
In slowly improving markets in Germany, SIG expects to build on the recovery
made in 1999.
In France, SIG believes that its ceilings and partitioning business will
benefit from growth in commercial construction activity, and further progress
is expected from the industrial insulation distribution operations.
The US industrial insulation business will benefit from a modestly improving
oil-related market.
Trading in the first two months of the year has been encouraging, and this,
combined with the strengths of the Group's businesses and its proven ability
to produce organic growth, leads the Board to view the current year with
confidence.
Consolidated Profit and Loss Account
for the year ended 31 December 1999
1999 1999 1998 1998
£000's £000's £000's £000's
Turnover
Continuing operations 811,845 795,780
Acquisitions 29,459 -
_______ _______
841,304 795,780
Cost of sales 632,054 606,438
_______ _______
Gross Profit 209,250 189,342
Other operating expenses 165,043 151,812
_______ _______
Operating Profit
Continuing operations 42,918 37,530
Acquisitions 1,289 -
______ ______
44,207 37,530
Net Interest payable 1,902 2,184
_______ _______
Profit before taxation and
amortisation of goodwill 42,854 35,506
Amortisation of goodwill 549 160
______ ______
Profit on ordinary activities
before taxation 42,305 35,346
Tax on profit on ordinary activities 13,233 11,303
_______ _______
Profit on ordinary
activities after tax 29,072 24,043
Minority interests (all equity) 185 297
Equity dividends paid and proposed 11,020 9,931
_______ _______
Retained profit for the year 17,867 13,815
_______ _______
Earnings per share
Basic earnings per share 24.4p 20.1p
Fully diluted earnings per share 24.2p 20.0p
======= =======
Earnings per share before
goodwill amortisation
Basic earnings per share 24.9p 20.2p
Fully diluted earnings per share 24.7p 20.2p
======= =======
Consolidated Statement of Total Recognised Gains and Losses
For the year ended 31 December 1999
1999 1998
£000's £000's
Profit on ordinary activities after taxation
and minority interests 28,887 23,746
Currency translation differences on
foreign currency net investments (2,840) 1,965
_______ ______
Total recognised gains and losses for the year 26,047 25,711
Prior year adjustment (2,716) -
_______ ______
Total gains and losses recognised since last
annual report. 23,331 25,711
_______ ______
There is no difference between the results presented above and the results on
an unmodified historical cost basis. Therefore, a note of historical cost
profits is not required.
Reconciliation of Movement in Consolidated Shareholders' Funds
1999 1998
£000's £000's
Profit after taxation and minority interests 28,887 23,746
Dividends (11,020) (9,931)
_______ ______
17,867 13,815
New share capital issued 77 3
Goodwill written back (off) during the year 139 (780)
Gain/(Loss) on foreign currency translation (2,840) 1,965
_______ ______
Net addition to shareholders' funds 15,243 15,003
Opening shareholders' funds as previously stated 109,932 94,929
Prior year adjustment (2,716) (2,716)
_______ ______
Closing shareholders' funds 122,459 107,216
_______ _______
Consolidated Balance Sheet
As at 31 December 1999
1999 1998
As
adjusted
£000's £000's
Fixed assets
Intangible assets 16,035 5,351
Tangible assets 49,946 49,231
______ ______
65,981 54,582
______ ______
Current assets
Stocks 61,663 60,468
Debtors 155,015 154,121
Cash at bank and in hand 4,538 4,960
______ ______
221,216 219,549
Creditors:
Amounts falling due within one year (138,448) (151,361)
______ ______
Net current assets 82,768 68,188
______ ______
Total assets less current liabilities 148,749 122,770
Creditors:
Amounts falling due after more than one year (22,688) (11,017)
Provision for liabilities and charges (3,602) (4,537)
______ ______
Net assets 122,459 107,216
______ ______
Capital and reserves
Called up share capital 11,820 11,814
Share premium account 12,100 12,029
Capital redemption reserve 347 347
Special reserve 17,278 17,139
Profit and loss account 86,526 68,659
Exchange reserve (5,612) (2,772)
______ ______
Shareholders' funds (all equity) 122,459 107,216
______ ______
Consolidated Cash Flow Statement
For the year ended 31 December 1999
1999 1999 1998 1998
£000's £000's £000's £000's
Net cash inflow from operating activities 55,944 41,558
______ ______
Returns on investment and
servicing of finance
Interest received 1,162 1,263
Interest paid (1,808) (2,204)
Interest element of finance lease rentals (1,256) (1,243)
______ ______
Net cash outflow from returns on
investments and servicing of finance (1,902) (2,184)
Tax Paid (15,801) (13,742)
Capital expenditure
Purchase of tangible fixed assets (14,601) (12,423)
Sale of tangible fixed assets 1,520 2,475
______ ______
(13,081) (9,948)
Acquisitions and disposals
Purchase of subsidiary undertakings (14,452) (10,460)
Net overdrafts acquired with subsidiary
undertakings (2,675) -
Sale of business - 1,400
______ ______
Net cash outflow from acquisitions
and disposals (17,127) (9,060)
Equity dividends paid (10,306) (9,650)
Financing
Issue of ordinary share capital 77 3
Inception of finance lease agreements 4,788 3,147
Capital element of finance lease
rental payments (5,367) (4,341)
Repayment of loans (2,293) (3,786)
Reclassification of loan 14,673 -
______ ______
Net cash inflow/(outflow)
from financing 11,878 (4,977)
______ ______
Increase/(Decrease) in cash 9,605 (8,003)
______ ______
Notes
1. Segmental information
Geographical analysis and
class of business 1999 1998
Operating Net Operating Net
Turnover Profit Assets Turnover Profit Assets
£000's £000's £000's £000's £000's £000's
Continuing
activities
- UK 488,047 35,773 93,396 464,502 31,248 69,413
- Europe 281,057 9,689 47,254 283,725 6,424 48,550
- Rest of world 42,741 606 7,581 47,553 1,879 6,364
- Parent Company - (2,601) (29,873) - (1,861)(17,111)
- Amortisation of - (549) - - (160) -
goodwill
_______ ______ _______ _______ ______ _______
811,845 42,918 118,358 795,780 37,530 107,216
Acquisitions
- UK 7,802 395 1,945 - - -
- Europe 13,551 699 1,735
- Rest of world 8,106 195 421 - - -
_______ ______ _______ _______ ______ _______
29,459 1,289 4,101 - - -
_______ ______ _______ _______ ______ _______
Total Operations 841,304 44,207 122,459 795,780 37,530 107,216
======= ====== ======= ======= ====== =======
Turnover and operating profit by destination is not materially different from
these amounts. The reporting of the activities of the Group was restructured
during the year with results being reported on a geographic basis. Prior
year segment information has therefore been restated in this format.
2. Earnings per share
Basic earnings per share are calculated on Group profit after taxation and
minority interests of £28,887,000 (1998 - £23,746,000) and on 118,178,515
(1998 - 118,137,405) ordinary shares, being the weighted average number of
ordinary shares in issue and ranking for dividend during the year.
Fully diluted earnings per share are calculated on Group profit after taxation
and minority interests of £28,887,000 (1998 - £23,746,000) and on 119,171,384
ordinary shares (1998 - 118,507,548).
3. Abridged accounts
The 1999 financial information is an abridged version of the Group's financial
statements which have not yet been filed with the Registrar of Companies but
upon which the auditors have given an unqualified report. The 1998 figures
are an extract from the Group's statutory accounts for the year ended 31
December 1998 as adjusted for a provision in respect of onerous leasehold
property contracts as required by FRS 12, which have been filed with the
Registrar of Companies. The auditors' report thereon was unqualified and did
not contain a statement under section 237 (2) or (3) of the Companies Act
1985.
4. Proposed dividend
The proposed final dividend of 6.2p per ordinary share, if approved, will be
payable on 16 May 2000 to shareholders on the register on 14 April 2000.
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