Sig Plc · LSE:SHI
Sig — Sheffield Insulations Group — H1 2022 Earnings Presentation
41 slides from Sig's earnings presentation, Aug 9, 2022
Slide 1: A strong half, continued progress
AAstrong stronghalf, half, continued continued progress progress Halfyear Half year2022 2022results results 99 August2022 ththAugust 2022
Slide 2: H1 22 Results – Agenda
H1 22 Results – Agenda Introduction 3-4 Steve Francis H1 2022 Results and Outlook 5 - 14 Ian Ashton Strategic Progress 15 - 28 Steve Francis Summary 29 – 30 Steve Francis 2
Slide 3: Strong half reinforces confidence in future
Strong half reinforces confidence in future Strong H1 performance • Back to 3% Group operating margin delivered ahead of expectations, 21% LfL revenue growth; successful management of price / volume pressures • Momentum across operating companies: growth in all Op Cos; continued strength in Poland a
Slide 4: H1 2022 Results and Outlook
H1 2022 Results and Outlook Introduction Steve Francis H1 2022 Results and Outlook Key H1 financials Ian Ashton Medium term goals Strategic Progress and capital allocation Steve Francis Technical Guidance Summary Steve Francis 5
Slide 5: Key financials
Key financials H1 2022 Results H1 H1 £'m 2022 2021 Revenue 1,359 1,108 LFL sales 21.2% 33.0% • Strong first half Gross profit 356 287 • Gross margin robust Gross margin 26.2% 25.9% Underlying operating profit 42 14 • Operating margin at 3.1%, ahead of Operating margin 3.1% 1.2% plan Finance costs (1
Slide 6: Revenue bridge by Op Co – growth across the portfolio
Revenue bridge by Op Co – growth across the portfolio H1 2022 Results £39m Acquisitions £13m £10m £23m £54m LFL growth £20m £25m £36m £37m £40m £93m £1,359m LFL vs H1 2021 £1,108m LFL: 24% 18% 44% 17% 13% 55% 13% 20% 21% H1 2021 UK France Poland Germany UK Ireland France Benelux FX H1 2022 Interiors
Slide 7: Improving Gross Margin and Operational Leverage
Improving Gross Margin and Operational Leverage H1 2022 Results Gross margin • H1 2022 gross margin of 26.2%, 30bps higher than 2021 • Trading volumes and strong supplier relationships driving 25.9% 26.2% higher rebates as a % of sales, coupled with front-end margin improvement in UK, France and Pol
Slide 8: Operating Profit Margin – consistent upward momentum
Operating Profit Margin – consistent upward momentum H1 2022 Results Group Operating Margin (LTM rolling) 4% • Consistent strategy execution has driven 3% a swing of 4% in LTM operating margin 2% (after adjusting for Covid in 2020) 1% • LTM now at 2.8% • H1 2022 at 3.1% - • Confidence remains in ach
Slide 9: Cash flow and net debt
Cash flow and net debt H1 2022 Results H1 H1 £'m 2022 2021 Underlying operating profit 42 14 • Working capital outflow reflects normal H1 seasonality, in-year Add back: Depreciation 36 33 inflation, and year on year volume growth Add back: Amortisation 2 2 Underlying EBITDA 80 49 • H1 capital expend
Slide 10: Free Cash Flow reflects seasonality and further inflation
Free Cash Flow reflects seasonality and further inflation H1 2022 Results Confidence in strong H2 positive free cash flow with seasonal and tactical buying unwinds £(25)m Inflation impact £14m £6m Underlying working capital improvement £9m Seasonality, partially offset by £(23)m inventory tactical b
Slide 11: Medium-term financial goals
Medium-term financial goals H1 2022 Results • Confidence in maintaining 3% for FY2022, as highlighted in April trading statement Margin • 5% Group operating margin in the medium term • Expect to be cash positive in FY 2022, as highlighted in April statement Cash • Meaningfully cash generative by 202
Slide 12: Capital allocation and value creation
Capital allocation and value creation H1 2022 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: Positive • OpCo readiness FCF t
Slide 13: Technical guidance
Technical guidance H1 2022 Results • Some further input cost inflation expected in H2 22 • H2 year on year inflation impact expected to be lower than high teens impact seen in H1, following annualisation of significant rises in H2 21 • Expect to be strongly cash generative in H2, and positive for FY
Slide 14: Strategic Progress
Strategic Progress Introduction Steve Francis H1 2022 Results and Outlook Ian Ashton Strategic Progress A structurally different business Steve Francis Summary Resilient and flexible Steve Francis Confidence in path to 5% OP 15
Slide 15: Consistent execution of our Return to Growth strategy
Consistent execution of our Return to Growth strategy Strategic Progress • Response to a long period of share loss and decline (pre-Covid) Return to Growth • New management, Board and investors launched • 2 years ago we said: Revenue growth to return SIG to 3% Group operating margin, with potential
Slide 16: SIG is structurally different to 2 years ago, resulting in a step-change in performance
SIG is structurally different to 2 years ago, Strategic Progress resulting in a step-change in performance • 3% Group operating margin achieved ahead of expectations • >50% of revenue generated from OpCos above 5% operating margin in H1 2022 - More specialist - More local • Sales per working day up
Slide 17: Actions taken drove significant shift in competitive position
Actions taken drove significant shift in competitive position Strategic Progress An underperforming Back to winning portfolio 2 yrs ago ways by 2022 • Most businesses losing share and/or <3% OP margin • Margin & market share gain across the portfolio… • UK significantly unprofitable • …in markets wi
Slide 18: Three distinct groups within our portfolio
Three distinct groups within our portfolio - different starting points Strategic Progress and strategic focus; equally important to Group 5% goal Operating Margin Strategic Med-Term 2020 H2 2021 H1 2022 H1 Focus Target1 1. High performers: (55% rev) • More than half the portfolio (by • UK Exteriors
Slide 19: High performers: long upward trend in LiTT; acceleration in Lariviere
High performers: long upward trend in LiTT; acceleration in Strategic Progress Lariviere France Interiors Revenue Operating margin France Interiors: 6.3 % 6.7 % 7.0 % £120m 6.1 % • Steady long-term profitability progression £111m 6.0 % £101m • Already >5% prior to recent inflation £100m £88m £93m £8
Slide 20: High performers: execution and innovation in Poland
High performers: execution and innovation in Poland Strategic Progress Poland • Experienced team liberated by Return to Growth Revenue Operating margin £140m 5.1 % – Longest serving MD (SIG since 1999) 5.0 % £120m £115m – Growth acceleration: 15% CAGR since 2019, 4.0 % £100m £83m 39% up YoY £75m 3.0
Slide 21: UK Interiors: out of turnaround mode, more to come
UK Interiors: out of turnaround mode, more to come Strategic Progress Recapturing share • Regaining lost customers and share of wallet with specialist contractors Sales per • 240 specialist Sales & Operational hires hit the ground Working Day £2.6m running (6 month £2.2m £2.0m average) £1.8m £1.5m £
Slide 22: Germany: similar playbook to UK turnaround
Germany: similar playbook to UK turnaround Strategic Progress Sales per • Return of Alfons Horn in Q3 2021 (previously MD in Working Day €2.1m SIG Germany’s most successful period) (6 month average) €1.7m €1.7m €1.8m • Sales force re-energised, reputation restored, €1.6m €1.6m €1.6m rebuilding Techn
Slide 23: We continue to invest to grow our network, sales capacity and productivity
We continue to invest to grow our network, Strategic Progress sales capacity and productivity Reversed footprint decline # Trading Sites • 11 new branches since H1 20* (5 UK, 3 Poland, 3 Benelux), 8 now already profitable • 16 branches acquired (incl. July 2022) • First new branch in Ireland (Limeri
Slide 24: Five margin accretive acquisitions added £140m revenue
Five margin accretive acquisitions added £140m revenue Strategic Progress • Acquisition of Miers Construction Products c£140m revenue from 5 acquisitions since Q4 Limited (“MCP”) in July 2022 2020* • Run rate at time of deal • One of the UK's leading suppliers of specialist construction materials, b
Slide 25: Strategic Progress – Resilient & Flexible
Strategic Progress – Resilient & Flexible Introduction Steve Francis H1 2022 Results and Outlook Ian Ashton Strategic Progress A structurally different business Steve Francis Summary Resilient and flexible Steve Francis Confidence in path to 5% OP 26
Slide 26: Pan-European scale, resilience and operational flexibility
Pan-European scale, resilience and operational flexibility Strategic Progress 2x nearest Interiors player, 3x nearest Exteriors Differentiated ability to manage varied market conditions Diversification by geography, end-market, customer, supplier • 60% EU; <15% of revenues in UK residential RMI Comp
Slide 27: Well positioned for sustainability tailwinds
Well positioned for sustainability tailwinds Strategic Progress c80% of SIG sales in insulation and building energy solutions – likely to outpace construction sector • Investing to meet shifts in customer expectations: product sustainability expertise, regulatory compliance • Bringing new low carbon
Slide 28: Strategic Progress – Confidence in Path to 5% Margins
Strategic Progress – Confidence in Path to 5% Margins Introduction Steve Francis H1 2022 Results and Outlook Ian Ashton Strategic Progress A structurally different business Steve Francis Summary Resilient and flexible Steve Francis Confidence in path to 5% OP 29
Slide 29: Path to 5% driven by capital-light growth and productivity
Path to 5% driven by capital-light growth and productivity Strategic Progress Growth Mix / Productivity Value Add Branch • 35-40 branch openings openings • Geographic in-fill plus focus on key specialisms Own label / • Currently underpenetrated in France Interiors and Germany merchandising Product •
Slide 30: Summary
Summary Introduction Steve Francis H1 2022 Results and Outlook Ian Ashton Strategic Progress Steve Francis Summary Steve Francis 31
Slide 31: 3% achieved ahead of plan, resilient and flexible model, confidence in growth path to 5%
3% achieved ahead of plan, resilient and flexible model, Summary confidence in growth path to 5% 1 UK turnaround complete, Germany progressing well, >50% of sales from OpCos at 5%+ OP margin (pre HO costs) 2 Structurally different to 2 years ago - more specialist, more local, more service-driven, mo
Slide 32: A strong half, continued progress – Q&A
A strong half, continued Q&A progress Half year 2022 results 9th August 2022
Slide 33: Appendix
Appendix 34
Slide 34: 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 35: High performers: UK Exteriors, continued progression
High performers: UK Exteriors, continued progression Appendix UK Exteriors Revenue Operating margin 5.0 % • Embraced 7 pillar model resulting in steady 4.1 % 4.1 % 5.0 % progression in revenue and operating margin £250m £224m 4.0 % 3.4 % £199m • Strengthens position as #1 in the UK market £200m £185
Slide 36: Underlying financials by segment
Underlying financials by segment Appendix LFL Operating Change vs Operating Change vs Revenue vs 2021 profit/(loss) PY margin PY UK Interiors £332m 23.7% £3.8m £8.8m 1.2% 3.2% UK Exteriors £224m 13.4% £11.1m £3.0m 5.0% 0.9% Total UK £556m 19.0% £14.9m £11.8m 2.7% 2.0% France Interiors £111m 12.7% £7
Slide 37: Other items
Other items Appendix PBT Cash Impact Impact H1 H1 H1 £'m 2022 2021 2022 Amortisation of acquired intangibles (2.4) (2.3) - Net restructuring costs - (2.2) - Costs related to acquisitions (0.2) (0.3) (0.8) Legal and professional fees for acquisitions and related earn out recognition Cloud computing c
Slide 38: Net debt bridge
Net debt bridge Appendix £4m £63m £7m £7m £23m £2m £80m £42m £432m £365m Opening Underlying Working Provisions Cash Capital Interest Lease additions/ EBT purchase/ Closing net debt EBITDA Capital exceptionals Expenditure and renewals FX/Other net debt (post IFRS 16) Tax (post IFRS 16) • Net debt ben
Slide 39: Debt structure
Debt structure Appendix 30 June 2022 Date of £'m expiry Denomination Structure Draw down Senior Secured Notes* Nov 2026 EUR 258 258 New RCF May 2026 GBP 50 - Total 308 258 • The Group refinanced its debt structure in November 2021 through raising €300m of 5.25% fixed rate senior secured notes, and r
Slide 40: Number of trading sites in 2022
Number of trading sites in 2022 Appendix 31 Dec 30 Jun Opened Acquired Merged Closed 2021 2022 UK Interiors* 53 - - - - 53 UK Exteriors 115 1 - - - 116 Total UK 168 1 - - - 169 France Interiors 38 - - - - 38 France Exteriors 106 - - - - 106 Total France 144 - - - - 144 Germany** 51 - - - - 51 Benelu
Slide 41: 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
Sheffield Insulations Group — H1 2022 Earnings Presentation on 6ix