SIG Regulatory News (SHI)

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF REGULATION 2014/596/EU WHICH IS PART OF DOMESTIC UK LAW PURSUANT TO THE MARKET ABUSE (AMENDMENT) (EU EXIT) REGULATIONS (SI 2019/310) ("UK MAR"). UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION (AS DEFINED IN UK MAR) IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

SIG plc

(the "Company" or "SIG")

Acquisition of Miers Construction Products Limited

SIG, a leading supplier of specialist insulation and sustainable building products to customers across Europe, announces that, on 22 July 2022, it acquired the entire issued share capital of Miers Construction Products Limited ("MCP") for an initial cash consideration of £28m on a debt-free and cash-free basis (the "Acquisition"). A further contingent cash payment of up to £6.7m will be payable, subject to the performance of the business during the period ending on 31 December 2023, together with a deferred cash payment of £1.8m, payable in 24 months. The consideration will be funded from the Company's existing facilities.

Transaction Highlights

· Acquisition of one of the UK's leading suppliers of specialist construction materials, broadening SIG's UK offering in high-performance construction accessories and fixings

· Strong strategic fit with SIG's proven business model of entrepreneurial teams, delivering superior service through deep supplier partnerships and specialist expertise

· Strengthens existing relationships with key end-users, serving complementary customer and supplier groups across a number of key sectors including Infrastructure and Private New Residential

· Significant growth opportunities across the combined business, driven by SIG's national supply network and extensive product range together with MCP's strong global supply chain and supplier agreements

· MCP was acquired by the Company from two founding shareholders and four members of MCP's management team. The existing management team, which has delivered MCP's strong sales growth of c.20% CAGR in recent years, are remaining with the business. MCP will continue to trade under its existing brand

Financial Highlights

· Total potential consideration of £36.5 million1 on a cash-free and debt-free basis represents a multiple equivalent to 7.1x MCP's LTM Adjusted EBITDA2. Fixed consideration of £29.8m represents a multiple equivalent to 5.8x MCP's LTM Adjusted EBITDA2

· The Acquisition is expected to be immediately accretive to SIG's underlying earnings per share as well as to the Company's operating margins. MCP generates c.9%3 operating margin

· ROIC is expected to exceed SIG's WACC in the first full year of ownership 

Commenting on the Acquisition, Steve Francis, Chief Executive Officer of SIG, said:

"We are delighted to announce the acquisition of MCP, which demonstrates delivery of SIG's Group strategy to grow both organically and through carefully targeted value-enhancing acquisitions. MCP is a highly attractive specialist business with a strong brand, a great reputation for quality service, and technical sector specialism and expertise. These key elements have created a business that has the ability to grow sustainably ahead of the market. MCP illustrates the opportunities to accelerate through acquisition our path to 5% margins in the medium term. We welcome MCP's knowledgeable and committed management team and employees to SIG and look forward to working with them."

MCP Overview

Established in 2010, MCP is a leading provider of specialist construction products to specialist sub-contractors, builders and main contractors. MCP has a proven track record of delivering growth ahead of the underlying UK construction market. Despite the disruption caused to both operations and the market by Covid-19, MCP delivered revenue CAGR of c.20% from 2019 to 2021 (£32.3m in 2019 to £46.7m in 2021).4

For the year ended 30 September 2021, MCP reported revenue of £46.7m and operating profit of £4.4m. As at 30 September 2021, MCP had gross assets of £23.5m4. The business has continued to perform strongly in the current year, with (unaudited) revenue of £55.5 million and adjusted EBITDA2 of £5.1m for the 12 month period to 31 May 2022.

Notes:

1. To be adjusted via customary closing mechanism in due course.

2. Based on unaudited Management Accounts for the year to 31 May 2022. Adjusted EBITDA is operating profit after adjusting items and amortisation/depreciation and excludes the impact of any synergies.

3. Operating profit margin per audited statutory accounts to 30 September 2021.

4. Audited statutory accounts to 30 September.

The person responsible for arranging the release of this announcement on behalf of the Company is Andrew Watkins, Group General Counsel & Company Secretary.