SIG Regulatory News (SHI)

5 March 2024

SIG plc

Full year results for the year ended 31 December 2023

Resilient performance in challenging markets

SIG plc ("SIG", "the Group" or "the Company") today announces its results for the full year ended 31 December 2023 ("FY23" or "the year").

Financial highlights

· FY23 results reflect continued strong execution, against a challenging market backdrop

· Full year Group like-for-like2 ("LFL") sales down 2%, with revenues of £2.76bn (2022: £2.74bn)

· Underlying1 operating profit of £53.1m, down from £80.2m in 2022, with effective cost actions mitigating in part the impact of operating cost inflation and subdued market demand

· Underlying1 profit before tax of £17.4m. Statutory loss before tax of £(31.9)m, reflecting £49.3m of Other items, including £33.8m non-cash impairment of UK Interiors business

· Operating cash flow3 of £53m, representing a 100% conversion of underlying operating profit to operating cash; positive free cash flow3 of £4m

· Year end net debt of £458m post-IFRS 16 (2022: £444m) and £154m pre-IFRS 16 (2022: £160m)

Operational and strategic highlights

· Benefits of a diversified pan-European portfolio helped in managing through challenging market conditions:

o  UK Exteriors delivered positive LFL sales growth, with good market momentum following ongoing programme of revitalising branches, sales team skills, and training

o  Both French businesses executing well in a tough market

o  Germany benefiting from strengthening execution to maintain operating margin gains of recent years, despite weaker volumes and difficult local market conditions

o  Poland achieved 5% growth in H2 with local market conditions stabilising

· Restructuring executed during H2 2023 will deliver approximately £10m of annualised cost savings, the majority of which will benefit FY24

· Increased strategic focus on specialist businesses and operational execution across the Group

· Management structures in corporate centre and the UK business simplified to provide greater focus and efficiency

· Strategic actions and priorities set out at Capital Markets Event in November 2023

Commenting, Gavin Slark, Chief Executive Officer, said:

"The Group delivered robust results in 2023, despite ongoing market weakness, demonstrating the benefits and resilience of our diversified geographic and end-market profile. Alongside this, the Group has also been effective in executing restructuring and productivity initiatives across the business. These are a key element of our strategic plan to drive operating margin growth over the medium-term to our target of 5%.

By increasing focus on driving operational efficiencies, stronger commercial execution and employee engagement, the Board is confident that the Group's leading market positions will continue to strengthen further when conditions improve across our markets. We remain financially and commercially well placed and are taking proactive steps to drive meaningful shareholder value in the medium and long-term."

Notes

1. Underlying represents the results before Other items. Other items have been disclosed separately in order to give an indication of the underlying earnings of the Group. Underlying profit includes a £3.7m profit in H2 2023 on the sale of the old French Exteriors head office building, as previously guided.

2. Like-for-like ("LFL") is defined as the growth/(decline) in sales per working day in constant currency excluding any current and prior year acquisitions and disposals. Sales are not adjusted for branch openings or closures.

3. Free cash flow is defined as all cash flows excluding M&A transactions, dividend payments, and financing transactions. Operating cash flow represents free cash flow before interest and financing, costs of refinancing and tax.

An Investor and Analyst presentation will be available on www.sigplc.com from 7:15am on Tuesday 5 March 2024.

A live presentation of the results followed by Q&A, hosted by Gavin Slark, CEO, and Ian Ashton, CFO, will take place at 10:15am UK time on the date above.

Please click the link below to join the webinar:

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Webinar ID: 857 8775 6657

Or One tap mobile:

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Or join by phone:

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International numbers available: https://storm-virtual-uk.zoom.us/u/kb6OTlSB3N

Enquiries

LEI: 213800VDC1BKJEZ8PV53

About

SIG plc is a leading pan-European supplier of specialist building products to trade customers across the UK, France, Germany, Ireland, Benelux and Poland. With leading market positions in specialist insulation, interiors and exteriors products, as well as a growing position in construction accessories, SIG facilitates one-stop access to an extensive product range, provides expert technical advice and coordinates often complex delivery requirements. For suppliers, SIG offers a channel through which products can be brought to a highly fragmented market of smaller customers and sites that are of insufficient scale to supply direct. SIG employs more than 7,000 employees across Europe and is listed on the London Stock Exchange (SHI). For more information, please visit the Company's website, www.sigplc.com.

Trading overview

Reported Group revenues were 1% higher in the year, including a c1% contribution from acquisitions and a c1% positive impact from exchange rates. LFL revenues declined 2% compared to prior year, reflecting the subdued demand conditions in many of the Group's key markets. Pass through of input cost inflation added an estimated 5% to revenues for the year as a whole, being 9% in H1 and flat in H2.

2023 LFL growth rates across most geographies reduced in H2, compared to H1, due to the declining impact of input cost inflation noted above. As expected, year-over-year volume declines moderated in H2, reflecting weaker comparators in H2 2022. Absolute volumes softened through the year due to continued weakening in market demand, reflecting conditions across the European building and construction sector.

Table note: 1.UK numbers reflect new reporting structure including restatement of H1.

In the UK Interiors business, the strategic and operational changes made since mid-2020 continue to enable the business to return towards its previous market position, reflected in a robust performance against the market in FY23. In UK Exteriors, the performance was also strong relative to the market, driven by renewed commercial focus and execution under the new structure.

As announced at our Capital Markets Event on 23 November 2023, we are now reporting the UK Specialist Markets business as a separate reporting unit, in line with the new management structure in place. The UK Specialist Markets business experienced continuing good demand for its high specification and innovative building solutions, but revenue was affected by weaker demand in the agricultural and commercial warehousing and residential new build segments, and by lower year-over-year input pricing on steel.

In France, market conditions affected demand in our specialist roofing Exteriors business (Larivière) in H2 in particular, but both businesses continued to execute very effectively on their strategic plans. Larivière, has successfully expanded product categories in the year including private label slate, its Irondel range and its solar product offering. In LiTT, our Interiors business, we have strengthened our market position in insulation and focused on driving up sales and performance at new and refreshed branch locations. The German business continued its robust recovery of the last two years, performing well in what was a very challenging market. During 2023 we have expanded our product mix in specialist flooring and technical insulation with a continued focus on branch performance and operational productivity overall, boosted by modernisation initiatives. Poland's growth rebounded in the second half, with increased volumes as well as the impact of some softer H2 comparators. Benelux has had new management in place since October 2023 to address and improve performance. Ireland's results reflect a tough market environment in 2023 in the sectors in which we operate.

Strategic progress

In November 2023 the Group presented an update on the Group's vision, long-term priorities and strategic growth opportunities at a Capital Markets Event in London.

Our vision is to be the best provider of specialist construction and insulation products in Europe. Being a "partner of choice" to our customers remains one of our three long-term objectives, and to achieve this we need to provide great service, the right products, and excellent logistics.

Our second long-term objective is to improve our operating performance. We have outlined four key pillars, which are set out further below, to drive our operating performance over the medium-term to reach our target 5% operating profit margin. Within this we have set medium-term target operating margins for each of our operating companies. These targets are a key threshold for unlocking meaningful value creation for shareholders, specifically through higher cash generation.

Our third long-term commitment is to grow sustainably, as we work towards five long-term sustainability commitments including reaching net zero carbon by 2035.

During 2023 we made good progress in improving the underlying quality and effectiveness of our operations through our four key pillars, summarised below:

Grow

We are focused on delivering above-market growth in all of our businesses.

Despite the market contraction and lower volumes seen in 2023, we kept our focus on readying our business for the medium-term sales growth opportunities ahead of us, and to gain business with our customers by winning on service.

By way of illustration, the UK Exteriors business delivered strong sales growth in 2023 relative to the market conditions. The business has invested consistently across the last 18 months in reinvigorating its branches, in in-store merchandising and in structured programmes to boost the sales and customer service skills of our teams. This is yielding good results, and there are similar initiatives being executed across the Group, tailored to reflect local market dynamics.

Execute

We are focused on strengthening our operational execution and margin across our geographies.

During the latter part of 2023 we executed a number of restructuring and productivity initiatives that will benefit the business in 2024 and beyond. These include a streamlining of central costs, and a review of operating company cost structures, most notably in the UK, Germany and Ireland. As well as generating permanent cost reductions of around £10m on an annualised basis, these initiatives will facilitate improved operational agility and execution.

Modernise

We are pursuing actions to modernise our operations to increase efficiency and productivity.

The Group made further progress on modernisation of our operations in 2023. We are expanding our customer-facing e-commerce platforms, with development work in Germany and France, where we are leveraging our successful e-commerce experience in Poland. In Germany we launched a new fast-collection service utilising technology which allows quicker collections for customers at greater efficiency for us, and 90% of branch customer collections are now signed for digitally. In addition we delivered continued technology enabled delivery improvements in France and Ireland during the year.

Specialise

We will accelerate growth in our more specialist and higher return businesses within our portfolio.

As outlined above, the creation of UK Specialist Markets as a standalone reporting unit in the UK will allow us to better focus on and accelerate the growth and higher margin opportunities that exist in these specialist businesses that have previously been less of a focus in the Group's strategy.

The UK Specialist Markets team had a successful year in growing our relationships with, and sales to, some of the UK's largest infrastructure investment projects, such as the HS2 rail line (stage 1) and the Hinkley Point development. In addition, the business has seen resilient demand for our innovative steel structure offerings in solar canopies and bespoke, high performance insulation fabrication services.

In France Exteriors, 2023 was a year of good progress in expanding our solar product offering, in particular in introducing new highly innovative lightweight solar panels into our product range.

Balance Sheet

The Group maintained a robust balance sheet during 2023. The Group has reported a free cash inflow of £4.2m, helped by solid working capital management, with year end gross cash balances of £132.2m (2022: £130.1m). The movement in cash balances in the year reflects the free cash flow, partially offset by small currency movements and deferred acquisition costs. The Group's revolving credit facility ("RCF") of £90m remained undrawn as at 31 December 2023, providing a significant liquidity reserve.

Year end net debt (post-IFRS 16) was £458.0m (2022: £444.0m). Year end net debt on a pre-IFRS 16 basis was £154.0m (2022: £160.3m). Year end net debt represented leverage of 3.5x and 2.8x on post and pre-IFRS 16 bases respectively. An increase in net lease liabilities of £20.1m due to lease renewals and extensions, mainly in the UK and Germany, was partially offset by a favourable currency movement of £5.8m on bond debt.

Dividend

No dividend will be paid for 2023. The Board reiterates its commitment to return to paying a dividend, appropriately covered by underlying earnings, when it is prudent to do so. Continued successful strategic execution, including sensible investment where appropriate, will deliver sustainable, profitable growth and cash generation, especially as markets recover, allowing the Board to consider a range of capital allocation options.

Sustainability

SIG is committed to growing sustainably and we have five long-term commitments to guide us in this journey.

In 2023, we achieved a further 3% reduction in carbon emissions, through ongoing progress on fleet transition and energy mix and with lower year-on-year volumes. We also completed our first Scope 3 emissions impact assessment.

Reducing our waste and diverting it from landfill is also a key focus area, and waste diverted from landfill in 2023 improved to 94% (2022: 92%), with our total waste volume 16% lower.

Our safety performance has improved in 2023, with a good reduction in our Lost Time Injury Frequency Rate ("LTIFR") to 8.4 from 11.1 in 2022, with solid improvements in France and the UK in particular. We have achieved an encouraging increase in "near miss" hazard reporting (66%) in 2023, demonstrating a more open reporting culture and better opportunity to prevent hazards from becoming incidents. This has been supported by a new "Everyone Safe, Every Day" safety strategy across the Group, along with aligned safety objectives and KPIs.

People

The Board would like to thank all employees of the Group for their continued commitment and hard work throughout the year. During the year, employee engagement was stable at +14, which the Board regards as a positive result given the context of the challenging market conditions and restructuring initiatives in some areas of the business during the year.

Having an engaged and high performing workforce remains a priority within the Group's ongoing development. We are committed to our ambition of being an employer of choice in the building materials sector.

Outlook

Looking ahead, the Group expects continued softness in market conditions in 2024.

However, during this period of market weakness we will continue to strengthen our execution and organisation such that we deliver higher margin growth and performance for the medium-term. We remain confident in our ability to manage through this current phase of the cycle and to ensure that we are more than ready to take advantage of the significant long-term opportunities for the Group as markets recover.

FINANCIAL REVIEW

The Group managed effectively the impact of increasingly challenging market conditions during 2023. We maintained robust liquidity, and executed productivity and restructuring initiatives that will reduce costs and improve operational agility.

Revenue

Group revenue of £2,761.2m (2022: £2,744.5m) was 1% higher on a reported basis, including 1% from acquisitions, 1% from movements on exchange rates and a marginal impact from differences in the number of working days. LFL revenue was down 2% year-on-year. Within this figure, volumes declined in the majority of our markets. We estimate the positive impact of the pass through of input cost inflation on revenue growth for the year was approximately 5%, with this impact reducing significantly over the course of the year as prior year increases annualised.

Operating costs and profit

Gross profit decreased 1.6% to £699.6m (2022: £711.0m) with a gross profit margin of 25.3% (2022: 25.9%). The reduction in gross margin was due partly to strong comparatives, especially in our UK Exteriors business, and also greater than normal pricing pressure, reflective of the challenging demand environment. The businesses continue to manage these dynamics effectively.

The Group's underlying operating costs increased by 2.5% to £646.5m (2022: £630.8m). The increase was primarily due to inflation, with the biggest impact being on wages and salaries, followed by property and energy costs. These headwinds were partially offset by ongoing productivity initiatives and the initial impact of restructuring actions taken in the second half. Year-over-year operating costs were also affected by a lower charge for bad debts as a result of one unusually high charge incurred during 2022 of £5m, as reported at the time, and a £3.7m profit in 2023 from the sale of the French Exteriors head office building in Angers.

As a result, the Group's underlying operating profit decreased to £53.1m (2022: £80.2m), at an operating margin of 1.9% (2022: 2.9%). Reported operating profit was £4.0m (2022: £56.2m) after Other items of £49.1m (2022: £24.0m). Other items includes a £33.8m impairment in the UK Interiors business and restructuring costs of £8.0m, with a further breakdown of Other items set out later in this report.

Segmental analysis

UK

1. The 2022 segmental information has been restated in order to present on a consistent basis with the current year, see Note 1 for further details.

Following a change in the UK management structure announced in November 2023, we now report three segments in the UK, with the Specialist Markets businesses separated out from the Interiors and Exteriors businesses under which they were reported previously.

Reported revenue in UK Interiors, a specialist insulation and interiors distribution business, decreased slightly to £556.5m (2022: £561.5m). LFL revenue was down 1% year-on-year with the impact of a declining market being offset by a further strengthening in market position and the pass through of some continued year-over-year input price inflation. The flat revenue, together with operating cost inflation, resulted in an operating loss of £1.6m (2022: £7.9m profit).

Reported revenue in UK Exteriors, a specialist roofing merchant, increased by 2% to £369.4m (2022: £363.1m), with LFL revenue up 1%. This was due to benefits from purchase price inflation partially offsetting reduced demand, notably in the new build market. A reduction in gross margin, partly due to high prior year comparators, combined with operating cost inflation, resulted in operating profit of £10.6m (2022: £9.9m). The year-on-year improvement was partly due to the impact in 2022 of the administration of a large customer, Avonside, as reported last year.

Reported revenue in our UK Specialist Markets increased by 11% to £247.6m (2022: £223.2m). This included a 16% impact from the acquisition of Miers Construction Products Limited in July 2022. LFL revenue declined 6%, driven by a softer market, and by input price deflation in steel, which are a bigger element of these businesses than elsewhere in the Group. These factors, coupled with operating cost inflation, resulted in a reduction in operating profit to £10.3m (2022: £14.9m).

France

France Interiors, our structural insulation and interiors business trading as LiTT, saw reported revenue remain in line with the prior year at £218.9m (2022: £218.4m), and 1% down on a LFL basis. This was driven by lower demand and volumes, offset by continued input price inflation pass through. Flat revenue and operating cost inflation resulted in a £1.8m decrease in operating profit to £10.4m (2022: £12.2m).

Reported revenue in France Exteriors, our specialist roofing business trading as Larivière, decreased 2% to £458.0m (2022: £465.6m), and by 3% on a LFL basis. Demand and volumes were lower due to a reduction in consumer spending following interest rate increases, as well as softening of the new build market and a reduction in the benefit from pass through of input price inflation. The decrease in revenue together with increased operating costs due to inflation, resulting in an operating profit decrease to £19.3m (2022: £23.6m). During the year, the Larivière business moved into a new leased headquarters in Angers to better support the needs of the business going forward. We had owned the previous office building in Angers for many years, and the sale of it resulted in a profit on disposal in H2 of £3.7m.

Germany

Reported revenue in WeGo/Vti, our specialist insulation and interiors distribution business in Germany, increased by 1% to £462.1m (2022: £457.8m). This included a 1% year-over-year impact from the acquisition of Thermodämm in 2022. LFL revenue decreased by 1%, with pass through of input price inflation offset by a decline in volumes, reflecting weaker market conditions, particularly in new build. Good gross margin management was offset by operating cost inflation, resulting in reduced operating profit of £15.6m (2022: £16.8m).

Poland

In our Polish business, a market-leading distributor of insulation and interiors, revenue increased to £237.9m (2022: £230.7m), although LFL sales decreased by 2%. Weaker demand in the market was partially offset by further improvements made in our market position. Together with operating cost inflation, this resulted in a reduction in operating profit to £7.1m (2022: £10.6m).

Benelux

Reported revenue from the Group's business in Benelux increased by 1% to £116.9m (2022: £115.9m) with LFL revenue flat year-on-year. Revenue benefited from the business recovering some market share after prior years' losses. The turnaround of the business continues with ongoing progress in tackling operational issues, and a new Managing Director joined the business in Q4 to carry this forward. Despite the initial recovery referenced above, the business continues to trade with lower market share than it had historically. Margin pressure and operating cost inflation offset the improved trading and turnaround actions, resulting in an operating loss of £3.0m (2022: £3.0m loss).

Ireland

Our business in Ireland is a specialist distributor of interiors and exteriors, and also includes specialist contracting businesses for office furnishing, industrial coatings and kitchen/bathroom fit out. Its reported revenue decreased by 13% to £93.9m (2022: £108.3m), and by 15% on a LFL basis. This was a result of softening demand in our segments of the Irish market, along with some strong prior year comparatives, notably in H1. Operating profit reduced as a result by £4.6m to £1.4m (2022: £6.0m), reflecting the lower revenue as well as operating cost inflation.

Reconciliation of underlying to statutory result

Other items, being items excluded from underlying results, amounted to £49.3m for the year (2022: £24.1m) on a pre-tax basis and are summarised in the table below:

Other items are disclosed separately in order to provide a better indication of the underlying earnings of the Group. Further details of other items are as follows:

· Impairment charge of £33.8m relates to the impairment of goodwill and other non-current assets in UK Interiors. This non-cash charge is related to the splitting out of the more profitable UK Specialist Markets businesses from UK Interiors and Exteriors, which has reduced the reported margin of the latter two and notably Interiors. It also reflects the weaker markets at present and hence a delay in the anticipated improvements in profitability in the UK Interiors business.

· Cloud based ERP implementation costs relate to project configuration and customisation costs associated with strategic cloud computing arrangements, which are expensed, rather than being capitalised as intangible assets.

· Costs associated with acquisitions relate principally to the acquisition of Miers Construction Products Limited in the UK in 2022, including earnout consideration being accrued over the performance period.

· Net restructuring costs in the year comprise £6.7m redundancy costs and £2.4m branch closure costs, including £1.6m impairment of right-of-use assets, tangible fixed assets and software, offset by £1.1m gain on the sublease and termination of property leases previously impaired, all related to restructuring across the Group.

· "Other specific items" - a credit of £1.1m in aggregate - include reversal of provision for lease receivables, the reversal of an onerous lease provision and an impairment of right-of-use asset in relation to a branch which has been reopened, offset by additional impairment of an investment property which is no longer in use by the Group.

Taxation

The effective tax rate for the Group on the total loss before tax of £31.9m (2022: profit £27.5m) is negative 36.1% (2022: 43.6%). The effective tax rate on underlying profit before tax, excluding the impact of Other items, is 74.7% (2022: 27.9%).

Tax losses cannot be surrendered or utilised cross border, and the Group is therefore subject to tax in some countries and not in others. Tax losses in the UK and Benelux businesses are not currently recognised as deferred tax assets, which impacts the overall and underlying effective tax rate. The relative proportions of these losses compared to the total Group underlying profit before tax are also higher for the year to 31 December 2023 compared to the previous year, and the combination of these factors has led to the increase in the underlying effective tax rate in the current year.

In accordance with UK legislation, the Group publishes an annual tax strategy, which is available on our website (www.sigplc.com).

Pensions

The Group operates a number of pension schemes, four of which provide defined benefits based upon pensionable salary. One of these schemes, in the UK, has assets held in a separate trustee administered fund, and three are overseas book reserve schemes. The largest defined benefit pension scheme is the UK scheme, which was closed to further accrual in 2016.

The Group's total pension charge for the year, including amounts charged to interest after Other items, was £8.9m (2022: £7.4m), of which a charge of £1.4m (2022: £0.2m) related to defined benefit pension schemes and £7.5m (2022: £7.2m) related to defined contribution schemes.

The total net liability in relation to defined benefit pension schemes at 31 December 2023 was £20.3m (2022: £23.0m). The current triennial actuarial valuation of the UK scheme as at 31 December 2022 is in progress and will conclude during March 2024. The scheme remains well funded.

Financial position

Overall, the net assets of the Group decreased by £39.3m to £228.5m (2022: £267.8m), with a gross cash position at year end of £132.2m (2022: £130.1m) and net debt (post-IFRS 16) of £458.0m (2022: £444.0m). Net debt on a pre-IFRS 16 basis was £154.0m (2022: £160.3m)

The movement in post?IFRS 16 net debt includes the movement in cash noted below. An increase in net lease liabilities of £20.1m due to lease renewals and extensions, mainly in the UK and Germany, was partially offset by a favourable currency movement of £5.8m on bond debt. The movement in pre-IFRS 16 net debt is not affected by the movement on leases.

Cash flow

1. Free cash flow is defined as all cash flows excluding M&A transactions, dividend payments, and financing transactions. Operating cash flow represents free cash flow before interest and financing, costs of refinancing and tax.

2. Cash and cash equivalents at 31 December 2023 comprise cash at bank and on hand of £132.2m (2022: £130.1m) less bank overdrafts of £nil (2022: £nil).

During the period, the Group delivered £52.9m of operating cash flow, which represents a 100% conversion of the underlying operating profit to operating cash. Despite the lower profit in the year this operating cash flow was very similar to the 2022 number, helped by a positive movement on working capital. The key factor driving the working capital in the period was the lower levels of trading year-on-year, allied by strong management of the key working capital drivers. The Group reported a free cash inflow of £4.2m (2022: £10.6m inflow). This slight decline versus the prior year was driven by the higher interest charge, driven by the increase in lease liabilities noted above along with higher interest rates embedded in renewed leases.

Capex during the period was £15.8m (2022: £14.5m). Cash exceptional items are those that are related to "Other items" in the Consolidated income statement, and include restructuring costs and Benelux ERP implementation. "Other" in the cash flow includes payments to the Employee Benefit Trust to fund share plans of £1.7m (2022: £4.0m), add back of non-cash P&L items and provision movements, and proceeds on sale of property, plant and equipment.

Financing and funding

The Group's debt funding comprises ?300m of 5.25% fixed rate secured notes and an RCF of £90m. These mature and expire in November 2026 and May 2026 respectively. The secured notes are subject to incurrence-based covenants only, and the RCF has a leverage maintenance covenant set at 4.75x which only applies if the facility is over 40% drawn at a quarter end reporting date. The RCF was undrawn at 31 December 2023.

The Group's liquidity position remained robust throughout 2023, and at the end of the period stood at £222m, consisting of cash of £132m and the £90m undrawn RCF noted above. On the basis of current forecasts, the Group is expected to remain in compliance with all banking covenants throughout the forecast period to 31 March 2025.

Directors' responsibility statement on the Annual Report

The responsibility statement below has been prepared in connection with the Company's full Annual Report for the year ended 31 December 2023. Certain parts solely thereof are not included within this announcement.

We confirm that to the best of our knowledge:

(a) the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;

(b) the Strategic report includes a fair review of the development and performance of the business and the position of the Company, and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

(c) the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

This responsibility statement was approved by the Board of Directors on 4 March 2024 and signed on its behalf by:

Cautionary statement

The securities of the Group have not been and will not be registered under the US Securities Act of 1933, as amended (the "Securities Act"), or under the securities laws of any state or other jurisdiction of the United States, and may not be offered, sold, pledged or transferred, directly or indirectly, in, into or within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any relevant state or other jurisdiction of the United States. There has been and will be no public offering of the securities of the Group in the United States.

This announcement has been prepared to provide the Company's shareholders with a fair review of the business of the Group and a description of the principal risks and uncertainties facing it. It may not be relied upon by anyone, including the Company's shareholders, for any other purpose.

This announcement contains forward-looking statements that are subject to risk factors including the economic and business circumstances occurring from time to time in countries and markets in which the Group operates and risk factors associated with the building and construction sectors. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions because they relate to events and/or depend on circumstances that may or may not occur in the future and could cause actual results and outcomes to differ materially from those expressed in or implied by the forward-looking statements. No assurance can be given that the forward-looking statements in this announcement will be realised. Statements about the Directors' expectations, beliefs, hopes, plans, intentions and strategies are inherently subject to change and they are based on expectations and assumptions as to future events, circumstances and other factors which are in some cases outside the Group's control. Actual results could differ materially from the Group's current expectations.

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 actual results or trends to differ materially, including but not limited to, changes in risks associated with the level of market demand, fluctuations in product pricing and changes in foreign exchange and interest rates.

The Company's shareholders are cautioned not to place undue reliance on the forward-looking statements. This announcement has not been audited or otherwise independently verified. The information contained in this announcement has been prepared on the basis of the knowledge and information available to Directors at the date of its preparation and the Company does not undertake any obligation to update or revise this announcement during the financial year ahead.

Consolidated income statement

For the year ended 31 December 2023

1 Underlying represents the results before Other items. Other items have been disclosed separately in order to give an indication of the underlying earnings of the Group. Further details are disclosed in Note 3.

Consolidated statement of comprehensive income

For the year ended 31 December 2023

Consolidated balance sheet

As at 31 December 2023

1 The 2022 Consolidated balance sheet has been restated as a result of the finalisation of the acquisition fair values, as explained in Note 1

Consolidated statement of changes in equity

For the year ended 31 December 2023

The share option reserve represents the cumulative equity-settled share option charge under IFRS 2 "Share-based payment" less the value of any share options that have been exercised.

The hedging and translation reserves represent movements in the Consolidated balance sheet as a result of movements in exchange rates and movements in the fair value of cash flow hedges which are reflected in equity through Other comprehensive income.

Treasury shares relate to shares purchased by the SIG Employee Share Trust to satisfy awards made under the Group's share plans which are not vested and beneficially owned by employees.

The merger reserve represents the premium on ordinary shares issued in a previous year through the use of a cash box structure.

Consolidated cash flow statement

For the year ended 31 December 2023

1 Cash and cash equivalents comprise cash at bank and on hand of £132.2m (2022: £130.1m) less bank overdrafts of £nil (2022: £nil).

1. Basis of preparation

The Group's financial information has been prepared in accordance with the recognition and measurement requirements of UK adopted international accounting standards. It has been prepared on a basis consistent with that adopted in the previous year. The Financial statements have been prepared under the historical cost convention except for derivative financial instruments and unquoted investments which are stated at their fair value.

Whilst the financial information included in this Preliminary Results Announcement has been prepared in accordance with the recognition and measurement criteria of IFRS, this announcement does not itself contain sufficient information to comply with IFRS. The Preliminary Results Announcement does not constitute the Company's statutory accounts for the years ended 31 December 2023 and 31 December 2022 within the meaning of Section 435 of the Companies Act 2006 but is derived from those statutory accounts.

The Group's statutory accounts for the year ended 31 December 2022 have been filed with the Registrar of Companies, and those for 2023 will be delivered following the Company's Annual General Meeting. The Auditor has reported on the statutory accounts for 2023 and 2022. Their report for 2023 and 2022 was (i) unqualified, (ii) included no matters to which the auditor drew attention by way of emphasis and (iii) did not contain statements under Sections 498 (2) or 498 (3) of the Companies Act 2006 in relation to the financial statements.

Restatement of 2022 Consolidated balance sheet

The fair values of the identifiable assets and liabilities acquired in relation to the acquisition of Miers Construction Products Limited in 2022 have been finalised during the year. This resulted in a decrease in the current tax asset of £0.3m, an increase in the current tax liability of £0.3m and a corresponding increase in the goodwill recognised of £0.6m (see Note 7). This has been accounted for retrospectively and the Consolidated balance sheet at 31 December 2022 has been restated to reflect this, resulting in a decrease in the current tax asset of £0.6m and an increase in goodwill at the year end date. This had no impact on profit or loss, cash flows or net assets for the year ended or as at 31 December 2022. 

Disclosure restatement

Reported operating segments for the UK have been changed during the year to align with changes in the UK leadership structure. There are now considered to be three operating segments in the UK, being UK Interiors, UK Exteriors and UK Specialist Markets, and the segmental reporting disclosure has been updated to reflect the way in which information is reported to the Chief Operating Decision Maker ("CODM"). The prior year comparatives have been restated to be consistent with the current year presentation.

During the preparation of the 2023 Annual report and accounts an error was identified in the comparative disclosure in relation to the classification of operating expenses in Note 3. The prior year comparatives have been restated to correct the error and update the classification of certain costs, increasing Management, administrative and central costs in 2022 by £16.5m (14.1%) and decreasing Distribution costs and Selling and marketing costs by £11.8m (3.7%) and £4.7m (2.6%) respectively. There is no effect on total net operating expenses and the restatement does not impact any of the primary statements or other notes to the Consolidated financial statements.

Going concern

The Group closely monitors its funding position throughout the year, including monitoring compliance with covenants and available facilities to ensure it has sufficient headroom to fund operations.

The Group's financing facilities comprise a ?300m fixed rate bond (secured notes), due November 2026, and £90m Revolving Credit Facility ("RCF") which expires in May 2026. One of the trading businesses also has a £2.1m bank loan repayable over the period to June 2026. The only financial covenant within these facilities is a leverage maintenance covenant within the RCF, which is only effective if the facility is over 40% drawn (i.e. £36m) at a quarter end reporting date. The RCF was undrawn at 31 December 2023 and has remained undrawn subsequent to the year end.

The Group has significant available liquidity and on the basis of current forecasts is expected to remain in compliance with all banking covenants throughout the forecast period to 31 March 2025 ("the going concern period").

The Directors have considered the Group's forecasts which support the view that the Group will be able to continue to operate within its banking facilities and comply with its banking covenants. The Directors have considered the following principal risks and uncertainties that could potentially impact the Group's ability to fund its future activities and adhere to its banking covenants, including:

· worsening market conditions and further reductions in demand;

· high levels of product inflation, and current economic and political uncertainties, potentially impacting market demand; and

· potentially recessionary conditions in the coming year.

The forecasts on which the going concern assessment is based have been subject to sensitivity analysis and stress testing to assess the impact of the above risks and the Directors have also reviewed mitigating actions that could be taken. Under a severe but plausible downside scenario, factoring in a 6% reduction in volume, a reduction in gross margin and a resulting 55% reduction in underlying operating profit from the base forecast for the 12 months to 31 March 2025, the analysis shows that sufficient cash would be available without triggering a covenant breach, as the RCF is not expected to be drawn at a relevant quarter end. Reverse stress testing has also been performed, which shows that the Group could withstand up to a 22% reduction in revenue for the 12 months to 31 March 2025, or up to 15% for the nine months to the forecast liquidity low point of 30 September 2024, before triggering a covenant breach if the RCF was 40% drawn at a relevant quarter end. Further cash phasing mitigations would also be available to avoid this situation.

The Directors have considered the impact of climate-related matters and this is not expected to have a significant impact on the Group's going concern assessment to 31 March 2025.

On consideration of the above, the Directors believe that the Group has adequate resources to continue in operational existence for the forecast period to 31 March 2025 and the Directors therefore consider it appropriate to adopt the going concern basis in preparing the 2023 Consolidated financial statements.

New standards, interpretations and amendments adopted

The Group has adopted the amendments to IAS 12 Income taxes - International tax reform: Pillar Two model rules and has applied the temporary mandatory exception from recognising and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes.

The following new standards, amendments and interpretations apply for the first time in 2023, but have not had a material impact on the Financial statements of the Group:

· IFRS 17 "Insurance contracts"

· Amendments to IAS 1 "Presentation of financial statements", IFRS Practice statement 2 "Making materiality judgements" and IAS 8 "Accounting policies, changes in accounting estimates and errors"

· Amendment to IAS 12 "Income taxes" - deferred tax related to assets and liabilities arising from a single transaction

2. Revenue and segmental information

In accordance with IFRS 8 "Operating Segments", the Group identifies its reportable operating segments based on the way in which financial information is reviewed and business performance is assessed by the CODM. Reportable operating segments are grouped on a geographical basis.

1 The 2022 segmental information has been restated in order to present on a consistent basis with the current year, as explained in Note 1.

Other segment information