Sig Plc · LSE:SHI
Sig — Sheffield Insulations Group — Q2 2023 Earnings Presentation
39 slides from Sig's earnings presentation, Sep 20, 2023
Slide 1: SIG Plc H1 2023 Results
SIG Plc H1 2023 Results 8 August 2023
Slide 2: H1 2023 Results Agenda
H1 2023 Results Agenda 1 2 3 Overview Financial Results Business Review Gavin Slark Ian Ashton Gavin Slark CEO CFO CEO 2
Slide 3: Overview
Overview Gavin Slark, CEO
Slide 4: Observations after six months
Observations after six months 1 A good business platform for long term growth • Travelled extensively around countries, visiting branches, our people and our stakeholders; Impressed with quality of business and people • Managing for growth through the economic cycle; Growing sustainably 2 Conviction
Slide 5: H1 2023 Results Overview
H1 2023 Results Overview • Resilient LFL revenue in our largest businesses Resilient operating • Reported Group revenue growth of 5% including performance acquisitions • Managing near-term margin pressure • Declining market demand across all geographies Market conditions • Inflation tailwinds modera
Slide 6: Pan-European presence
Pan-European presence Geographically diversified EU 58% of Revenue UK 42% of Revenue EU 71% of Profit1 UK 29% of Profit1 Ireland Ireland Benelux 3% 1% 4% Poland Poland 6% 8% UK Germany 29% Germany 22% 17% UK 1 Revenue 42% Operating Profit by region by region H1 23 H1 23 France 26% France 42% Note: 1
Slide 7: Financial Results
Financial Results Ian Ashton, CFO
Slide 8: Key Financials
Key Financials H1 H1 £'m 2023 2022 Revenue 1,423 1,359 LFL sales growth 0% 21% • Challenging market conditions resulting in volume decline, offset by inflation Gross profit 365 356 Gross margin 25.6% 26.2% • Resilient gross margin; slight reduction Underlying operating profit 33 43 due partly to str
Slide 9: Revenue bridge
Revenue bridge £32m 1 Jan to H1 £37m 30 June LFL UK Interiors 4% £121m £118m UK Exteriors (2)% UK 1% £1,423m France Interiors 1% £1,359m France Exteriors 2% Germany 0% Poland (9)% Benelux 7% Ireland (18)% EU (1)% H1 LFL - LFL - M&A Working Days/ H1 Group 0% 2022 Volume Inflation FX 2023 • Market dem
Slide 10: Operating profit bridge
Operating profit bridge £7m £1m £2m £13m £32m £31m £8m £43m £33m H1 GP: Sales GP: Sales Gross margin % Operating cost Net operating Acquisitions FX/Other H1 2022 volume inflation inflation cost saving 2023 • Inflationary tailwinds offset by volume decline • Slight reduction in GM% due partially to s
Slide 11: Free cash flow
Free cash flow Normal seasonality in working capital • Increase in interest reflecting higher levels of lease liability and increases in lease discount rates, up from £14m • Working capital seasonality expected to reverse in H2 £9m £17m Inflation: £(11)m £72m Volume: £7m £32m Seasonality: £(24)m £6m
Slide 12: Balance sheet
Balance sheet £280m Strong liquidity Leverage1 Secure long term debt profile 3.3x £230m 2.8x Core Group debt facilities with maturity in 2026 : £196m 2.3x £180m £163m 3.2x • Debt refinanced in November 2021 3.0x £90m 1.8x 0 £130m £50m 2.8x • €300m Senior Secured Notes: 1.3x • 5.25% fixed rate £80m H
Slide 13: Technical guidance FY23
Technical guidance FY23 • Inflation: • Minimal levels of new inflation expected in H2 • Positive but moderating year on year impact expected in H2 due to H1 23 increases and some remaining annualisation of prior year. Mid single digit % in aggregate for FY • Capex now expected to be £14-17m (previou
Slide 14: Business Review
Business Review Gavin Slark, CEO
Slide 15: Our operations
Our operations Pan-European presence c440 branches supporting local markets across six geographies Ireland 1% Poland 6% UK Germany 29% 22% Operating Profit1 by region H1 23 France 42% Note: 1) Underlying operating profit adjusted to exclude Group overhead and Benelux loss 15
Slide 16: Strategic priorities
Strategic priorities Path to 5% operating margin underpinned by consistent execution 1 Drive LFL sales by winning locally • Empowered branches focused on sales and service excellence • Smart pricing and promotions to respond to local market conditions 2 Improve mix and margin • Growth in high margin
Slide 17: Margin: Product mix
Margin: Product mix Supporting the path to 5% margin Increase higher margin Growing private Enhancing categories label processes • Supporting higher margin branch sales • Stocking and selling more higher margin • Shop-in-shop items and merchandising product categories • Pricing tools and analytics •
Slide 18: Regulatory themes across Europe supporting long term demand
Regulatory themes across Europe supporting long term demand for our products and markets Regulatory themes across our European markets relevant to SIG Tailwind to SIG’s core markets and business Examples 1 Demand for commercial building retrofit from France: RE 2020 EPC changes and carbon reduction
Slide 19: Resilient LFL Revenue performance in our largest OpCos
Resilient LFL Revenue performance in our largest OpCos in a challenging market LFL growth1 H1 23 Revenue per OpCo (£m) 4% 2% 0% (2)% 1% (9)% 7% (18)% Note: 1) LFL revenue growth vs H1 22. 19
Slide 20: OpCo Margins temporarily impacted by challenging market
OpCo Margins temporarily impacted by challenging market Resilience in France at c5% with Germany and UK Interiors improving yoy H1 23 Operating margin1 H1 23 Operating profit1 (£m) 5.5% 4.8% 4.1% 2.7% 2.5% 1.7% 1.1% (2.6)% Note: 1) Underlying operating profit 20
Slide 21: Improving our operating platform for long term growth
Improving our operating platform for long term growth Motivated people, winning branches and efficient operations are key to performance In H1 we have retained our focus on: People Branches Productivity 21
Slide 22: France Exteriors
France Exteriors H1 23 H1 22 Change1 H1 Trading • Residential new-build market demand slowed in Q2 Revenue (£'m) 249.7 239.8 1.6% • RMI (larger projects) also impacted Operating profit (£'m) 12.1 15.3 (3.2) • Strong growth in small but expanding solar category Operating margin (%) 4.8% 6.4% (1.6)% S
Slide 23: France Interiors
France Interiors H1 Trading H1 23 H1 22 Change1 • Volume decline greater in Q2 with new-build market weakest Revenue (£'m) 116.4 111.2 1.3% • Volume growth from newer branches Operating profit (£'m) 6.4 7.4 (1.0) • Robust margin despite market weakness Operating margin (%) 5.5% 6.7% (1.2)% Two year
Slide 24: UK Interiors
UK Interiors H1 Trading H1 23 H1 22 Change1 • Total revenue up 15%, including 10% from Miers acquisition Revenue (£'m) 381.6 331.9 3.9% • Strengthened market position Operating profit (£'m) 6.6 3.8 2.8 • Residential end-market demand weakest Operating margin (%) 1.7% 1.1% 0.6% • Continued year over
Slide 25: UK Exteriors
UK Exteriors H1 23 H1 22 Change1 H1 Trading • Reduction in new-build and public-sector RMI activity Revenue (£'m) 221.1 224.0 (2.1)% • Market decline in Building Solutions (metal building envelope) Operating profit (£'m) 6.0 11.1 (5.1) in agriculture and warehousing in Q2, driving margin decline Ope
Slide 26: Germany
Germany H1 Trading H1 23 H1 22 Change1 • Continued momentum under new management since late 2021 Revenue (£'m) 234.8 224.5 (0.1)% • Residential end-market conditions weakened significantly; Operating profit (£'m) 9.6 8.3 1.3 commercial weaker but less severe Operating margin (%) 4.1% 3.7% 0.4% • Fur
Slide 27: Summary & Outlook
Summary & Outlook H1 2023 Results FY 2023 Outlook Longer term • Volumes and input inflation • Full year revenue: • Medium and long term growth offsetting to result in flat LFL • Weak demand conditions to aided by sustainable construction sales continue tailwinds • Inflation benefit moderating vs PY,
Slide 28: Appendix
Appendix SIG Plc H1 2023 Results
Slide 29: Capital allocation and value creation
Capital allocation and value creation • Investment in new branches and new capabilities, focused on high margin categories Organic growth • Investment in existing network and fleet to optimise efficiency, growth and sustainability • Inventory to drive new product focus areas Criteria for acquisition
Slide 30: Underlying financials by segment
Underlying financials by segment LFL Operating Change vs Operating Change vs Revenue vs 2022 profit/(loss) PY margin PY UK Interiors £382m 3.9% £6.6m £2.8m 1.7% 0.6% UK Exteriors £221m (2.1)% £6.0m £(5.1)m 2.7% (2.2)% Total UK £603m 1.5% £12.6m £(2.3)m 2.1% (0.6)% France Interiors £116m 1.3% £6.4m £
Slide 31: Operating profit bridge by Operating Company
Operating profit bridge by Operating Company £2.8m £5.1m £1.0m £3.2m £1.3m £3.2m £0.1m £2.5m £1.0m £42.5m £32.7m H1 UK UK France France Germany Poland Benelux Ireland Head Office H1 2022 Interiors Exteriors Interiors Exteriors 2023 31
Slide 32: Other items
Other items PBT Cash Impact Impact H1 H1 H1 £'m 2023 2022 2023 Amortisation of acquired intangibles (1.6) (2.4) - Costs related to acquisitions (1.4) (0.2) - Legal and professional fees for acquisitions and related earn out recognition Cloud computing costs (1.3) (0.8) (1.4) Changed accounting regar
Slide 33: Cash flow and net debt
Cash flow and net debt H1 H2 H1 £'m 2023 2022 2022 Underlying operating profit 33 38 42 Add back: Depreciation & amortisation 39 39 38 Underlying EBITDA 72 76 80 • Working capital reflecting normal H1 seasonality Working capital movements (28) 28 (42) Repayment of lease liabilities (32) (29) (31) •
Slide 34: Net debt bridge
Net debt bridge £12m £47m £3m £6m £26m £72m £28m £469m £444m FY 2022 Underlying Working Cash Capital Interest Lease additions/ Provisions/ H1 2023 net debt EBITDA capital exceptionals expenditure and renewals FX/Other net debt (post-IFRS 16) tax (post-IFRS 16) • Net debt benefits from £72m EBITDA, p
Slide 35: Poland
Poland H1 Trading H1 23 H1 22 Change1 • Revenue decline reflects very strong comparator and decline in residential and commercial market since H1 2022 Revenue (£'m) 110.2 115.1 (8.8)% • Maintaining good market position against wider market Operating profit (£'m) 2.7 5.9 (3.2) • Actively managing pri
Slide 36: Ireland
Ireland H1 Trading H1 23 H1 22 Change1 • Lower volumes driven by decline in construction market activity Revenue (£'m) 47.5 55.9 (18.5)% • Strong H1 2022 comparator ahead of price inflation spike Operating profit (£'m) 0.5 3.0 (2.5) • Operating margin impact from lower volumes Operating margin (%) 1
Slide 37: Benelux
Benelux H1 Trading H1 23 H1 22 Change1 • Improved year over year revenue benefitting from inflation and Revenue (£'m) 62.1 56.1 7.0% refocussed commercial operations Operating profit (£'m) (1.6) (1.7) 0.1 • Weak market conditions overall, with continuing competitive pressure Operating margin (%) (2.
Slide 38: Number of trading sites
Number of trading sites 31 Dec 30 Jun Opened Merged Closed 2022 2023 1 UK Interiors 61 - - - 61 1 UK Exteriors 113 1 - - 114 Total UK 174 1 - - 175 France Interiors 38 1 - - 39 1 France Exteriors 103 - (1) - 102 Total France 141 1 (1) - 141 Germany 52 - - - 52 Benelux 17 - - (1) 16 Ireland 11 - - -
Slide 39: SIG Plc H1 2023 Results
SIG Plc H1 2023 Results 8 August 2023
Sheffield Insulations Group — Q2 2023 Earnings Presentation on 6ix