Sig Plc · LSE:SHI
Sig — Sheffield Insulations Group — FY 2023 Earnings Presentation
41 slides from Sig's earnings presentation, Mar 6, 2024
Slide 1: SIG plc FY 2023 Results
To update image SIG plc FY 2023 Results 5 March 2024
Slide 2: FY 2023 Results Agenda
FY 2023 Results Agenda 1 2 3 Overview Financial Results Business Review Gavin Slark Ian Ashton Gavin Slark CEO CFO CEO 2
Slide 3: Overview
To update image Overview Image WIP Gavin Slark, CEO
Slide 4: FY 2023 Results Overview
FY 2023 Results Overview Robust performance Strategic actions to Financial in challenging improve underlying discipline markets operations • Group reported revenue up • Restructuring to deliver £10m • Operating cost discipline 1% at £2.76bn, down 2% LFL annualised savings • Effective cash management
Slide 5: Pan-European presence
Pan-European presence Geographically diversified EU 58% of Revenue UK 42% of Revenue EU 74% of Profit1 UK 26% of Profit1 Ireland Ireland Benelux 3% 2% 4% Poland Poland 10% 9% UK 26% UK 1 Revenue 42% Germany Operating Profit Germany 21% 17% by region by region FY 2023 FY 2023 France France 25% 41% No
Slide 6: Financial Results
Financial Results Ian Ashton, CFO
Slide 7: Key Financials
Key Financials FY FY £'m 2023 2022 • Challenging market conditions: Revenue 2,761 2,744 LFL sales growth (2)% 17 % o Demand and volume declines Gross profit 700 711 o Y-o-y input inflation impact flattening off in H2 Gross margin 25.3% 25.9% • Gross margin reflects strong comparator and pricing Unde
Slide 8: Revenue bridge
Revenue bridge 1 Jan to FY £34m 31 December LFL £39m 1 UK Interiors (1)% £181m 1 UK Exteriors 1% £125m 1 UK Specialist Markets (6)% UK (1)% £2,744m £2,761m France Interiors (1)% France Exteriors (3)% Germany (1)% Poland (2)% Benelux 0% Ireland (15)% FY LFL - LFL - M&A Working Days/ FY 2022 Volume In
Slide 9: Operating profit bridge
Operating profit bridge £46m £19m £2m £32m £4m £9m £80m £27m £18m £53m FY GP: Sales GP: Sales Gross margin Operating cost Net operating Property sale Acquisitions FX/Other FY 2022 volume inflation % inflation cost saving and PY bad 2023 debt • Market volume declines partially offset by inflationary
Slide 10: Free cash flow
Free cash flow Working capital % of sales: FY 2021: 10.6% FY 2022: 10.1% Dep’n & FY 2023: 9.5% Amort’n: £79m vs. £14m outflow Operating in FY 2022 Profit: £53m • Second consecutive year of positive free cash generation • Strong working capital management to offset lower trading volumes, resulting in
Slide 11: Balance sheet
Balance sheet Liquidity Leverage1 Secure long-term debt profile Core Group debt facilities with maturity in 2026: £220m £222m • Debt refinanced in November 2021 3.5x £90m £90m 3.2x • €300m Senior Secured Notes 2.8x (mature Nov 2026): o 5.25% fixed rate FY 2021 FY 2022 FY 2023 • £90m RCF (expires May
Slide 12: Ongoing approach to capital allocation
Ongoing approach to capital allocation • Investment in new branches and capabilities, focused on high margin categories • Investment in existing network and fleet to optimise efficiency, growth and Organic growth sustainability • Inventory to drive new product focus areas Criteria for acquisitions:
Slide 13: France
France Exteriors Interiors • 2023 LFL Revenue down 3% (H1 +2%; H2 -8%) • 2023 LFL Revenue down 1% (H1 +1%; H2 -3%) • Notable market weakening in H2 • New branch sales growth and expansion in technical insulation offsetting market volume decline • Solar panel growth supporting sales • Mix and pricing
Slide 14: UK Restructuring to support performance
UK Restructuring to support performance Historic reporting New segmental reporting Management actions & rationale INTERIORS INTERIORS • Clearer management £731m £557m structure and FY 2023 REVENUE FY 2023 REVENUE accountability - three MDs now report to Group CEO 0.8% (0.3)% OPERATING MARGIN OPERATI
Slide 15: UK: Interiors, Exteriors, Specialist Markets
UK Interiors Exteriors Specialist Markets • 2023 LFL Revenue down 1% (H1 +5%; H2 • 2023 LFL Revenue up 1% (H1: +1%; H2 • 2023 LFL Revenue down 6% (H1: -7%; -7%) +2%) H2: -5%) • Strong sales versus market • Solid momentum; sales growth through • Reported revenue increases due to 2022 • Gross margin p
Slide 16: Germany and Poland
Germany and Poland Germany Poland • 2023 LFL Revenue down 1% (H1: 0%; H2: -2%); • 2023 LFL Revenue down (2)% (H1: -9%; H2: +5%) reported increases due to 2022 acquisition • Strong recovery in sales volume in H2 • Strong sales result in a challenging German market • Margin impact from market price pr
Slide 17: Productivity and efficiency
Productivity and efficiency Restructuring: • Commenced in H2 2023 o Delivering annualised operating profit benefit of c£10m, the majority benefiting 2024 o Reduction of c150 positions across Group, UK, Germany and Ireland o Closure of non-strategic branches in UK (x2 in Q4 2023) and Germany (x2 in Q
Slide 18: Technical guidance – FY 2024 expectations
Technical guidance – FY 2024 expectations • Inflation: o Minimal input cost inflation seen in H2 2023 o Flat to slightly negative y-o-y input cost inflation for FY 2024 in aggregate • Capex of £20-25m • Net interest charge of c£40m, reflecting the higher interest rates embedded within lease renewals
Slide 19: Business Review
Business Review Gavin Slark, CEO
Slide 20: SIG Overview: Our Pan-European operations
SIG Overview Our Pan-European operations Ireland 2% Poland 10% Operating Germany 1 21% Profit France 41% by region FY 2023 UK 26% c440 7,000+ 1,200 BRANCHES COLLEAGUES DELIVERY ACROSS SIX FLEET GEOGRAPHIES Note: 1) Underlying operating profit adjusted to exclude Group overhead and Benelux loss. 20
Slide 21: 2023 Market conditions
2023 Market conditions Trends across our end-markets Exceptions • High interest rate and inflation • Poland: Market better than average Demand supressing building and construction with an improvement in market activity conditions in H2 driven by non- (volumes) residential • Residential new build mos
Slide 22: LFL Revenue performance
LFL Revenue performance LFL growth1 FY 2023 Revenue (£m) UK Interiors (1)% Germany (1)% France Exteriors (3)% UK Exteriors 1% UK Specialist (6)% 248 Poland (2)% France Interiors (1)% Benelux 0% Ireland (15)% Note: 1) LFL revenue growth vs FY 2022. 22
Slide 23: Operating margins
Operating margins FY 2023 Operating Target margin1 margin1 FY 2023 Operating profit1 (£m) France Interiors 4.8% 7% 10.4 France Exteriors 4.2% 7% 19.3 UK Specialist 4.2% 7% 10.3 Germany 3.4% 6% 15.6 Poland 3.0% 5% 7.1 UK Exteriors 2.9% 7% 10.6 Ireland 1.5% 6% 1.4 UK Interiors (0.3)% 3% (1.6) Benelux
Slide 24: Our Vision and Strategic framework
Our Vision and Strategic framework OUR VISION To be the best provider of specialist construction and insulation products in Europe OUR LONG-TERM Partner of choice Growing sustainably Improving OBJECTIVES for specialist as a responsible our operating contractors business performance OUR MEDIUM-TERM S
Slide 25: Grow: UK Exteriors
Grow UK Exteriors Strong FY 2023 growth relative to market Energised branches and people driving results • Strong momentum in a subdued market • 2023 investment in customer service, branches and people • Successful recovery of market share over last 3 years • 4 branch openings and relocations; 55 br
Slide 26: Execute: France
Execute France Commercial discipline and initiatives offsetting Strong focus on operational excellence market pressure • Branch performance, productivity and • LiTT: Strong key account focus, category management product mix and pricing discipline in challenging market • Further expansion in private
Slide 27: Execute: UK Interiors
Execute UK Interiors • Restructuring actions taken in H2 2023 to improve cost base and realign operations Realigning o c80 headcount reduction operations o 2 strategic branch closures and actions in FY 2023 to • New branch pricing model and software rolled out drive • Rebranding and relaunch of high
Slide 28: Modernise: Germany
Modernise Germany Technology driving efficiency in sales processes Omnichannel sales development in FY 2023 • New digital fast ‘Xpress Pick-Up’ service via phone and • New e-commerce site launching in 2024 tablet • Integrated omnichannel offering • 90% of branch customer collections now signed for d
Slide 29: Specialise: UK Specialist Markets
Specialise UK Specialist Markets Portfolio of Construction accessories higher margin • Range of specialist technical products for early stages of construction businesses • Diverse infrastructure projects • Includes: Miers acquisition (£63m revenue 2023) FY 2023 Revenue: £248m Building structures FY
Slide 30: ESG: 2023 progress towards sustainability commitments
ESG 2023 progress towards our long-term sustainability commitments Five key commitments Measure Change FY 2023 FY 2022 Net Zero Carbon by • Net zero carbon emissions 1 Improved 42,015 43,328 2035 Zero SIG waste to landfill by 2025 • % total waste diverted from landfill Improved 94% 92% Health & Safe
Slide 31: People
People External validation of our commitment to our people in 2023 Germany Poland France Top Company 2023 Great Place to Work Top Employer Award - Kununu Certification Certification 31
Slide 32: 2023 Strategic progress – summary
2023 Strategic progress – summary • Operating in cyclical markets – managing market conditions effectively • Taking action to strengthen operations – ready for when markets turn o Better organisational structure and overhead cost alignment o Ongoing action in UK Interiors and Benelux o UK Exteriors,
Slide 33: FY 2023 Results Summary & Outlook
FY 2023 Results Summary & Outlook FY 2023 Results FY 2024 Outlook Longer term • Robust sales result despite • Full year revenue: • Medium and long-term growth market volume declines and aided by sustainable moderating impact of input cost o Weak demand conditions to construction tailwinds inflation
Slide 34: Appendix
Appendix SIG Plc FY 2023 Results
Slide 35: Underlying financials by segment
Underlying financials by segment LFL Operating Change vs Operating Change vs Revenue vs 2022 profit/(loss) PY margin PY 1 UK Interiors £557m (1.3)% £(2)m £(9)m (0.3)% (1.7)% 1 UK Exteriors £369m 1.3% £11m £1m 2.9% 0.1% 1 UK Specialist Markets £248m (5.9)% £10m £(5)m 4.2% (2.4)% Total UK £1,174m (1.2
Slide 36: Benelux and Ireland
Benelux and Ireland Benelux Ireland • 2023 LFL Revenue flat: (H1: +7%; H2: -8%) • 2023 LFL Revenue down 15% (H1: -18%; H2: -10%) • Progress on market share recovery • Weak market demand in our segments, with a strong H1 2022 comparable • New MD in October 2023 • Margin impact from weaker trading 36
Slide 37: Other items
Other items PBT Cash Impact Impact FY FY FY £'m 2023 2022 2023 Historic acquisitions fully amortised, remaining amortisation relates to Amortisation of acquired intangibles (2.8) (4.7) - acquisitions from 2021 onwards Impairment of UK Interiors CGU of £33.8m (2022 impairment of Benelux CGU Impairmen
Slide 38: Cash flow and net debt
Cash flow and net debt FY FY £'m 2023 2022 Underlying operating profit 53 80 Add back: Depreciation & amortisation 79 76 Underlying EBITDA 132 157 • Second consecutive year of positive free cash flow Working capital movements 3 (14) generation Repayment of lease liabilities (64) (60) Capital expendi
Slide 39: Net debt bridge
Net debt bridge £11m £89m £132m £49m £16m £444m £3m £6m £458m FY 2022 Underlying Working Cash Capital Interest Lease additions/ Provisions/ FY 2023 net debt EBITDA capital exceptionals expenditure and renewals FX/Other net debt (post-IFRS 16) tax (post-IFRS 16) • Modest increase in net debt due to E
Slide 40: Number of trading sites
Number of trading sites 31 Dec 31 Dec Opened Merged Closed 2022 2023 1 UK Interiors 36 - - (2) 34 1 UK Exteriors 108 2 - - 110 UK Specialist Markets 30 - - - 30 Total UK 174 2 - (2) 174 France Interiors 38 1 - - 39 1 France Exteriors 103 - (1) - 102 Total France 141 1 (1) - 141 Germany 52 1 - - 53 1
Slide 41: SIG plc FY 2023 Results
To update image SIG plc FY 2023 Results 5 March 2024
Sheffield Insulations Group — FY 2023 Earnings Presentation on 6ix