Sig Plc · LSE:SHI

Sig — H1 2013 Earnings Presentation

32 slides from Sig's earnings presentation, Aug 15, 2013

  1. Slide 1: SIG plc Half Year results for the six months ended 30 June 2013

    SIG plc | Half Year results for the six months ended 30 June 2013 15 August 2013

  2. Slide 2: Highlights

    Highlights H1 affected by extended winter and weak market conditions Prompt action to reduce costs - further efficiency savings of £3.9m Improving May & June sales trend continued into July Continued market outperformance of 2.8% Key strategic initiatives progressing well Interim dividend increased

  3. Slide 3: Financial Review

    Financial Review Doug Robertson | Group Finance Director

  4. Slide 4: Challenging H1

    Challenging H1 H1 2013 H1 2012 Change Revenue £1,277.4m £1,280.6m -0.2% Gross margin 26.2% 26.0% +20bps Operating profit £36.2m £41.7m -13.2% Operating margin 2.8% 3.3% -50bps Profit before tax £30.2m £35.5m -14.9% Basic EPS 3.5p 4.2p -16.7% Interim dividend per share 1.15p 1.0p +15.0% Net debt £141

  5. Slide 5: Trading results

    Trading results Change on H1 2012 H1 2013 Reported LFL** Revenue Mainland Europe £692.2m -0.7% -4.5% UK & Ireland £585.2m 0.3% -2.2% Group £1,277.4m -0.2% -3.5% Operating profit Mainland Europe £20.7m -8.8% Operating margin 3.0% UK & Ireland £18.6m -18.1% Operating margin 3.2% Group* £36.2m -13.2% A

  6. Slide 6: Continued tight cost control

    Continued tight cost control 4.8 (2.9) 298.0 6.5 (4.0) 4.9 (2.4) 0.0 291.1 (11.8) £0.8m increase in core operating costs £m H1 2012 Currency Cost Inflation Bad debt Volume Investment H1 2013 Operating impact savings and in growth Operating costs depreciation inc. costs acquisitions NB: Underlying op

  7. Slide 7: Further efficiency savings

    Further efficiency savings Exceptional Annualised Incremental H1 2013 H2 2013 charge savings 2014 Previously £16.6m £10.0m £3.5m £3.5m - announced (2012) (£3m in 2012) New H1 2013 £5.6m £3.9m £0.5m £1.6m £1.8m measures Additional measures anticipated in H2 2013 7

  8. Slide 8: Working capital and cash conversion

    Working capital and cash conversion H1 2013 H1 2012 Stock days 47 46 Debtor days 50 49 Creditor days 48 46 Working capital / sales 10.0% 9.5% Cash conversion* (LTM) 113.1% 115.5% Medium term cash conversion* (last 3 years) 116.1% 136.5% * Excludes cash costs on restructuring and one-off pension paym

  9. Slide 9: Higher net debt due to acquisitions and FX

    Higher net debt due to acquisitions and FX £m H1 2013 H1 2012 Cash inflow from trading 41.8 54.9 Increase in working capital (23.6) (25.5) Cash inflow from operations 18.2 29.4 Interest and tax (11.6) (16.0) Net capex (12.9) (12.2) Free cash flow (6.3) 1.2 Dividends (12.0) (9.1) Net payment for purc

  10. Slide 10: 2013 financial objectives

    2013 financial objectives  Increase return on capital employed  Gross margin enhancement  Contain growth in fixed costs  Improve operating margin  Closing working capital 8-9% of sales  Closing net debt £105-115m excluding H2 acquisitions and FX 10

  11. Slide 11: Business Review & Outlook

    Business Review & Outlook Stuart Mitchell | Chief Executive

  12. Slide 12: Continued market outperformance of 2.8%

    Continued market outperformance of 2.8% Market SIG -0.4% -0.4% -2.3% -2.3% -0.4% -0.4% -3.5% -4.5% -4.4% -4.9% -5.4% -5.6% -6.2% -6.3% -8.1% -9.4% UK Ireland Germany & France Benelux* Poland GROUP Austria * Includes ATC Source: Company estimates 12

  13. Slide 13: Good performance relative to weak French market

    Good performance relative to weak French market France  Sales +0.6% to £302.2m (-4.5% LFL)  Gross margin +40bps  Market down 8%, with residential and non- residential sectors both declining  H1 performance also impacted by poor weather  Position as a specialist an advantage  SIG continuing to

  14. Slide 14: Trading in Germany affected by poor weather

    Trading in Germany affected by poor weather Germany & Austria  Sales -2.8% to £258.4m (-4.9% LFL)  Gross margin +100bps  Underlying H1 market conditions slightly weaker than anticipated  Poor weather until mid-April significantly affected trading, particularly in roofing  Residential sector con

  15. Slide 15: Improved gross margin in the Benelux

    Improved gross margin in the Benelux Benelux*  Sales +0.7% to £76.8m (-4.4% LFL)  Gross margin +80bps  Market conditions remain difficult  Bounce back in gross margin as product mix reverted to a more normal blend Poland  Sales +0.7% to £54.8m (-2.3% LFL)  Gross margin -20bps  Market currentl

  16. Slide 16: LFL sales in UK distribution business up 1%

    LFL sales in UK distribution business up 1% United Kingdom & Ireland  UK sales +0.2% to £554.2m (-2.3% LFL) & gross margin -40bps  H1 performance impacted by significant decline in SIG Energy Management  Signs that UK market conditions are starting to improve, driven by residential sector  UK Go

  17. Slide 17: Recent trading & outlook

    Recent trading & outlook  Trading improved in May and June as the weather reverted to seasonal norms  July was consistent with this trend  Market outlook for 2013 remains unchanged from our trading update  Signs that conditions are starting to improve in the UK  Mainland Europe remains weak  C

  18. Slide 18: Strategic Initiatives

    Strategic Initiatives Stuart Mitchell | Chief Executive

  19. Slide 19: Strategic review progressing well

    Strategic review progressing well  Confirming early impressions of SIG  Potential to improve performance by working together more as a Group  Started workstreams on key business initiatives - currently quantifying costs/benefits  Requires significant culture change in SIG and execution is key 

  20. Slide 20: Initiatives to improve business performance

    Initiatives to improve business performance  Improve co-ordination across the Group Procurement  Work more closely with key suppliers  Further optimise current network Branch network  Consider more structural change Commercial  Improve fleet utilisation vehicles  Secure pan-European Group purc

  21. Slide 21: Procurement

    Procurement Historically procurement in SIG has been decentralised UK GERMANY FRANCE POL BNX £0.8bn £0.4bn £0.1 £0.1 £0.4bn bn bn Now moving to six international product categories Structural Technical Air Roofing Insulation Drywall Ceilings Insulation Handling Which will further enable SIG to… Work

  22. Slide 22: Branch network & commercial vehicles

    Branch network & commercial vehicles Branch network  Phase I: Further optimise current branch network – ‘good housekeeping’  Phase II: Consider more structural change – supersite prototype Commercial vehicles  Significant opportunities for better fleet utilisation (c.1,900 vehicles)  Remove inac

  23. Slide 23: eCommerce

    eCommerce  Over time more of our customers will want to buy online  Need to be ready and able to transact across multiple channels  No consistent approach to eCommerce in SIG  Opportunity to develop common platforms and apply best practice  Modest investment required 23

  24. Slide 24: Focused on achieving ROCE target

    Focused on achieving ROCE target  Significant opportunity to improve the Group’s performance and position business for longer term growth  Key theme is working together and making the whole greater than the sum of the parts  Requires some investment and culture change within the Group, and execut

  25. Slide 25: Highlights

    Highlights H1 affected by extended winter and weak market conditions Prompt action to reduce costs - further efficiency savings of £3.9m Improving May & June sales trend continued into July Continued market outperformance of 2.8% Key strategic initiatives progressing well Interim dividend increased

  26. Slide 26: Appendix

    Appendix

  27. Slide 27: Sales analysis

    Sales analysis Mainland % change on H1 2012 UK & Ireland Group Europe Price 0.4% -1.2% -0.3% Volume -4.9% -1.0% -3.2% LFL -4.5% -2.2% -3.5% 27

  28. Slide 28: Balance sheet

    Balance sheet £m H1 2013 H1 2012 Net Capex 12.9 12.2 Depreciation 11.8 12.0 Capex / Depreciation 1.09x 1.02x Net working capital 255.9 237.5 Net debt 141.7 129.9 Net debt / EBITDA ratio* 1.2x 1.1x Interest cover* 8.2x 8.2x * Based on covenant calculation. 28

  29. Slide 29: Underlying profit before tax

    Underlying profit before tax 2.1 (10.9) 2.9 35.5 0.0 (1.5) 0.2 1.2 0.7 30.2 0.0 29.5 £m 0.0 0.2 0.0 0.0 H1 2012 PBT Improvement Operating Reduction in Incremental Loss on Acquisitions H1 2013 PBT Foreign H1 2013 PBT in gross costs sales new branch associate and (constant exchange margin losses inter

  30. Slide 30: Other items

    Other items £m H1 2013 H1 2012 Amortisation of acquired intangibles 10.2 10.9 Defined benefit pension scheme curtailment gain - (4.4) Operating loss attributed to Central Europe - 0.8 Restructuring costs and other one off items 5.8 2.1 Net fair value losses on derivative financial instruments 1.1 0.

  31. Slide 31: Markets supplied by SIG and sector sales split

    Markets supplied by SIG and sector sales split New Build RMI* Industry (non- 10% 40% 60% construction) Interiors Insulation and Energy Management Residential 44% 23% 43% 57% 46% 31% 46% Non-residential 58% 42% Exteriors H1 2013 * RMI: Repairs, Maintenance and Improvement 31

  32. Slide 32: Trading sites movement

    Trading sites movement 31 Dec Closed/ 30 June Opened Acquired 2012 merged 2013 UK 304 (2) - 18 320 Ireland 12 - - - 12 UK & Ireland 316 (2) - 18 332 France 199 (1) 3 - 201 Germany & Austria 85 - - - 85 Benelux* 28 (1) 1 - 28 Poland 53 - 1 - 54 Mainland Europe 365 (2) 5 - 368 Group Total 681 (4) 5 18

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