Sig Plc · LSE:SHI
Sig — FY2021 Earnings Presentation
42 slides from Sig's earnings presentation, Mar 11, 2022
Slide 1: A pivotal year: accelerating to the next level
A pivotal year: accelerating to the next level Full year 2021 results 11th March 2022
Slide 2: Today's presenters
Today’s presenters Steve Francis Ian Ashton Phil Johns Chief Executive Officer Chief Financial Officer Managing Director, UK 2
Slide 3: 2021 Results – Agenda
2021 Results – Agenda 2021 Results Strategic Progress UK Progress & Outlook Driving Sustainable Growth Summary 3
Slide 4: Earlier, stronger profit delivery underpins confidence in future
Earlier, stronger profit delivery underpins confidence in future Returning to winning ways • Strategy delivering ahead of expectations – proof of demand and SIG’s core model • Rapid return to underlying £41m profit through market share gain and margin discipline in turbulent markets • Strong franchi
Slide 5: 2021 Results
2021 Results 2021 Results Key financials Capital allocation priorities Strategic Progress and medium term goals Outlook and technical guidance UK Progress & Outlook Driving Sustainable Growth Summary 5
Slide 6: Key financials – return to profitability
Key financials – return to profitability 2021 Results 6 Note: Data presented on a post IFRS 16 basis unless stated otherwise
Slide 7: Group revenues – back to growth
Group revenues – back to growth 2021 Results Sales per working day growth Variance (7)% 8% 9% 22% 8% to 2019 61% Variance 24% to 2020 17% 17% 10% Q1 21 Q2 21 Q3 21 Q4 21 FY 21 • LFL revenue growth of 24% vs. 2020, and 8% vs. non Covid-affected 2019, driven by strong trading in UK, France and Poland
Slide 8: Revenue bridge by business unit
Revenue bridge by business unit 2021 Results £4m £11m £48m £50m £36m £109m £112m £150m Variance to 2019* £2,291m (19)% 7% 21% 17% 4% (8)% (5)% 29% £1,873m H2: £29m H1: £76m £96m £26m £7m £4m £42m £56m 2020 UK UK France Germany Benelux Ireland Poland FX 2021 underlying Interiors Exteriors underlying
Slide 9: Improving Gross Margin and Opex as % of sales
Improving Gross Margin and Opex as % of sales 2021 Results Gross margin • Full year gross margin of 26.3%, 120bps higher than 2020 • Trading volumes driving higher rebates in key OpCos • H2 margin represents 70bps improvement on H1; increased 25.9% 25.1% 26.3% volumes and favourable change in produc
Slide 10: Operating Profit margin – consistent upward momentum
Operating Profit margin – consistent upward momentum 2021 Results Group Operating Margin (LTM rolling) 4% • Notable improvement in operating 3% margin since implementation of new 2% strategy: 2.2% uptick to date, excluding estimated Covid impact in 2020 (>4% 1% on unadjusted basis) - • Expect to con
Slide 11: Cash flow
Cash flow 2021 Results Restated £'m FY 2021 FY 2020 Underlying operating profit/(loss) 41 (53) • Exceptional items detailed further in “other items” in Appendix Add back: Depreciation 68 68 Add back: Amortisation 3 5 • Working capital: Underlying EBITDA 113 20 • 2021 reflects year on year volume gro
Slide 12: Free Cash Flow reflects atypical inventory backdrop
Free Cash Flow reflects atypical inventory backdrop 2021 Results £(9)m Working cap ex. inventory (growth) £(22)m Inventory volume (growth) 1 £(29)m Inventory inflation £23m £(25)m Inventory tactical buying £10m 1 £113m £(85)m Working capital outflow £57m £19m £31m £3m £(38)m £8m £54m £(124)m £17m £8
Slide 13: Capital allocation priorities
Capital allocation priorities 2021 Results • Inventory in supply challenged segments Organic • Investment in new branches to drive growth growth • Investment in existing branch network and fleet to optimise efficiencies and growth Criteria for acquisitions: • OpCo readiness Focused M&A • Strategic f
Slide 14: Medium-term financial goals
Medium-term financial goals 2021 Results • Confidence in achieving 3% for FY2023 Margin • 5% Group operating margin in the medium term • Cash neutral in 2022 Cash • Meaningfully cash generative by 2023 Leverage • Headline Financial Leverage of <2.5x (post IFRS 16 basis); equivalent to c1.5x pre IFRS
Slide 15: Outlook and technical guidance
Outlook and technical guidance 2021 Results • Revenue in H1 2022 will reflect annualisation of input inflation, following increases in H2 2021 • Good start to 2022 • Similar demand and inflationary conditions continuing into 2022 • Q1 ahead of plan to date • Expect to be cash neutral in FY 2022; unw
Slide 16: Strategic Progress
Strategic Progress 2021 Results Strategic Progress UK Progress & Outlook Driving Sustainable Growth Summary 16
Slide 17: Strategic progress drove profit and strengthened foundations
Strategic progress drove profit and strengthened foundations Strategic Progress Investing in • We invested in stock availability, more expertise and people in the field, better training and incentives, modernising our strategy and decarbonising our fleet, digitalising processes across our supply cha
Slide 18: UK Progress & Outlook
UK Progress & Outlook 2021 Results Strategic Progress UK Progress & Outlook Driving Sustainable Growth Summary 18
Slide 19: UK Progress & Outlook – Phil Johns
UK Progress & Outlook • SIG 1987 to 2015 • From independent company to plc, rapid growth periods, 2008/09 recession and recovery • MD UK Exteriors, other OpCo Board positions, M&A • MKM Building Supplies CEO – largest and fastest growing independent merchant in the UK Phil Johns • Returned to SIG Ap
Slide 20: Turnaround started with market focus, people and culture
Turnaround started with market focus, people and culture UK Progress & Outlook UK had lost focus Rebuilt UK organisation Executed Return to Growth on its core model in first 6 months strategy at pace • Disconnected from customers, • Hand-picked UK Board: 5 of 7 market • Shift from centralised genera
Slide 21: The 7 pillars: SIG's playbook
The 7 pillars: SIG’s playbook UK Progress & Outlook 1. Responsible 2. Winning 3. Superior 4. Specialist 5. Valuable 6. Highest 7. Focused actions branches service expertise partnerships productivity growth • Early H&S focus • Reinstated branch • Commitment to stock • More specialists in • Reconnecte
Slide 22: UK Interiors – now in continuous improvement mode
UK Interiors – now in continuous improvement mode UK Progress & Outlook • Recent sales hires hit the ground running • Improved supplier relationships – rebates, terms, stock • Regaining lost customers / lost share of wallet • Improved pricing discipline and inflation management • H2 growth despite s
Slide 23: UK Interiors profitable again; UK Exteriors now >5% margin
UK Interiors profitable again; UK Exteriors now >5% margin UK Progress & Outlook Operating Profit Margin 10% UK Interiors UK Interiors 5% • 7% LFL growth vs. H2 2019 - • 38% LFL growth vs. 2020 and 2.6ppt Gross Margin uplift drove (5)% 9.5ppt improvement in Opex ratio (leverage on fixed cost base) (
Slide 24: UK Interiors – clear roadmap for further margin uplift
UK Interiors – clear roadmap for further margin uplift UK Progress & Outlook Levers Actions Underway Deploying branch-specific roadmaps with guidance on customer/category mix • Enter / grow higher margin categories Boost Strengthening expertise in priority specialisms growth with • Fix low margin ca
Slide 25: Driving Sustainable Growth
Driving Sustainable Growth 2021 Results Strategic Progress UK Progress & Outlook Driving Sustainable Growth Path to 5% Leadership in sustainable Summary construction Focused M&A 25
Slide 26: 2021 momentum underpins confidence to accelerate
2021 momentum underpins confidence to accelerate Driving Sustainable Growth 2020 – 21: Delivering Turnaround 2022 onward: Driving Sustainable Growth Cash 3% Operating Profit margin by 2023 Path to 5% margin Return to YOY growth Return to profit conservation Return to cash generation Outpacing constr
Slide 27: Portfolio: different stages on the path, common recipe
Portfolio: different stages on the path, common recipe Driving Sustainable Growth • Experienced and committed leadership High performing OpCo operating businesses • Back to basics margin (2021) – Reconnect – business to customers, leaders to people, senior management to suppliers – Decentralise, emp
Slide 28: Path to 5% tailored to OpCo situation
Path to 5% tailored to OpCo situation Driving Sustainable Growth 3 portfolio priorities… …with similar £ Operating Profit Uplift 2021 Margin Target1 Group OP (£) Continue market 1. High performers: outperformance, drive process >6% on • UK Exteriors & Other 3-6% automation, restart network average •
Slide 29: Focused M&A will accelerate execution of our strategy
Focused M&A will accelerate execution of our strategy Driving Sustainable Growth Recent • UK acquisitions of SM Roofing, F30 (Construction Accessories) and Penlaw (Insulation) are acquisitions on performing well, beating 2021 profit expectations track • M&A execution and integration capability stren
Slide 30: Sustainability – structural market growth drivers
Sustainability – structural market growth drivers Driving Sustainable Growth • Energy prices and climate awareness raising • Built environment is c40% of emissions; the importance of energy efficiency c30% of construction materials wasted Energy • EU commission proposed mandatory energy Sustainable
Slide 31: SIG well positioned to lead industry shift to sustainability
SIG well positioned to lead industry shift to sustainability Driving Sustainable Growth • Since 1957: a leading role in helping to make the built environment sustainable – deep expertise and commitment “Born green” • In each energy conservation era: partnered with suppliers & governments to promote
Slide 32: Summary
Summary 2021 Results Strategic Progress UK Progress & Outlook Driving Sustainable Growth Summary 32
Slide 33: Summary: entering a new era for SIG
Summary: entering a new era for SIG Summary 1 Supportive structural market growth drivers: energy efficiency categories likely to outpace construction 2 Resilient, diversified and high potential franchise in sustainable construction 3 Proven business model, tried and tested in SIG’s core categories
Slide 34: Appendix
Appendix 34
Slide 35: Operational Excellence through our 7 pillars
Operational Excellence through our 7 pillars Appendix Sustainable Construction Enable modern, sustainable and safe living and working environments in the communities in which we operate 1. Responsible 2. Winning 3. Superior 4. Specialist 5. Valuable 6. Highest 7. Focused actions branches service exp
Slide 36: SIG "born green" – 7 decades of environmental leadership
SIG “born green” – 7 decades of environmental leadership Appendix SIG began measuring its carbon footprint in 2007 Detailed environmental 2020s Chairman Sir Norman objectives published Adsetts awarded OBE for services to energy 2010s SIG led the industry’s conservation SIG awarded green response to
Slide 37: Underlying financials by segment
Underlying financials by segment Appendix LFL LFL Operating Change vs Operating Change vs Revenue vs 2020 vs 2019 (loss)/profit PY margin PY UK Interiors £507m 38.0% (7.7)% £(2.5)m £42.9m (0.5)% 12.2% UK Exteriors £422m 35.5% 21.0% £25.0m £32.4m 5.9% 8.3% Total UK £930m 36.9% 3.6% £22.5m £75.3m 2.4%
Slide 38: Other items
Other items Appendix PBT Cash Impact Impact H1 H2 FY FY £'m 2021 2021 2021 2021 Amortisation of acquired intangibles (2.3) (2.4) (4.7) - Impairment charges - (10.2) (10.2) - £9.9m impairment of Benelux goodwill Net restructuring costs (2.2) (1.5) (3.7) (2.4) Restructuring in different OpCos, notably
Slide 39: Net debt bridge
Net debt bridge Appendix £19m £57m £33m £19m £85m £113m £365m £11m £17m £238m Opening Underlying Cash Working Working Capital Interest Lease additions/ Acquisitions Closing net debt EBITDA exceptionals Capital Capital Expenditure and renewals net debt (post IFRS 16) Tax (post IFRS 16) • Net debt inc
Slide 40: Revised debt structure
Revised debt structure Appendix Structure Draw down Date of 31 Dec 31 Dec 31 Dec 31 Dec £'m expiry Denomination 2020 2021 2020 2021 Private placement notes* 2023 - 2026 EUR/USD 136 - 136 - Term loan May 2023 GBP 70 - 70 - Old RCF May 2023 GBP 25 - - - Senior Secured Notes** Nov 2026 EUR - 252 - 252
Slide 41: Number of trading sites in 2021
Number of trading sites in 2021 Appendix 31 Dec 31 Dec Opened Acquired Merged Closed 2020 2021 UK Interiors 43 4 7 - (1) 53 UK Exteriors 116 - - (1) - 115 Total UK 159 4 7 (1) (1) 168 France Interiors 38 - - - - 38 France Exteriors 106 - - - - 106 Total France 144 - - - - 144 Germany 51 - - - - 51 B
Slide 42: Disclaimer
Disclaimer This presentation may include certain forward-looking statements, beliefs or opinions, including statements with respect to SIG plc’s business, financial condition and results of operations. These forward-looking statements can be identified by the use of forward-looking terminology, incl