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SIG PLCPreliminary Resultsfor the year ended 31st December 2004
8th March 2005
IntroductionLes Tench - Chairman
Copyright SIG plc 2005 3
2004 : Growth and Progress
Excellent year, growth in all sectors
Strong like for like sales & profit growth
Acquisition & investment activity
increased, reinforcing market leadership
Dividend increased by 12.9%
Financial ReviewGareth Davies – Finance Director
Copyright SIG plc 2005 5
Key Financial Points
Solid sales growth
Margins increased
Positive impact from product price inflation
Excellent performance across all regions
Significant investment for the future
Copyright SIG plc 2005 6
Summary Profit and Loss
£m 2004 2003 ChangeTurnover 1,398.2 1,268.5 +10.2%Operating profit before goodwill 77.3 63.4 +21.9%
Goodwill amortisation (5.6) (4.8)
Operating Profit 71.7 58.6 +22.2%Interest (5.7) (6.4)
Other Finance Charges (0.5) (0.7)
Profit before tax 65.5 51.5 +27.2%
Interest cover 11.6x 8.2x
Copyright SIG plc 2005 7
Tax, Earnings and Dividends
Tax rate at 32.6% (2003 : 32.6%)
EPS up 26.2% to 36.1p (2003 : 28.6p)
DPS up 12.9% to 14.0p (2003 : 12.4p)
Dividend cover 2.6x (2003 : 2.3x)
Copyright SIG plc 2005 8
Balance Sheet
£m 2004 2003
Capex / Depreciation 121% 71%
Capital employed 222.1 199.8
R.O.C.E. 15.7% 15.2%
Net debt 98.3 76.3
Average Net Debt 83.8 98.2
Gearing 44% 38%
Copyright SIG plc 2005 9
Working Capital to Sales
2004 2003
Working Capital/Sales* 12.2% 13.2%
Like for like sales increase (£97.2m)
£11.9m
Real working capital increase £5.6m
Increase in working capital from1 January to 31 December 2004
£17.5m
* Working Capital to Sales is calculated using annualised sales and the period end working capital position
Copyright SIG plc 2005 10
Working Capital
2004 2003Stock days 40 36
Debtor days 52 52
Bad & doubtful debtas a % of sales
0.8% 0.8%
Creditor days 39 33Working Capital is calculated to eliminate the effect of acquisitions
Copyright SIG plc 2005 11
Stock Movement
£m
Book value at start of year 93.0
Increased value of stock (c. 3%) 2.8
Effect of new branches – Acquisitions 6.8
Effect of new branches – Brownfield 1.6
Further investment – Average £32K per Site 12.2
Book value 31 December 2004 116.4
Total Increase 23.4m(25%
)
Copyright SIG plc 2005 12
Average Working Capital
12.0%
12.5%
13.0%
13.5%
14.0%
14.5%
15.0%
Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04
Wo
rkin
g C
ap
ital
to S
ale
s R
ati
o
Average working capital is calculated using the average working capital balances for the preceding 12 months
Continued improvement in average working capital to
sales ratio
H1 ‘03 H2 ‘03
H1 ‘04 H2 ‘04
Dec-04
Copyright SIG plc 2005 13
Cash flow
£m 2004 2003Cash inflow from trading 94.9 79.9
Change in working capital (17.5) 18.0Cash inflow from operations 77.4 97.9
Interest and tax (21.6) (18.2)55.8 79.7
Capex and dividends (36.7) (26.1)Operating cash inflow 19.1 53.6
AcquisitionsExchange & shares
(42.7)1.6
(2.7)(3.8)
Net (increase) / decrease in borrowings
(22.0) 47.1
* Restated for FRS 17
Copyright SIG plc 2005 14
Pensions Update
Triennial Valuations of UK schemes completed
– Triennial valuation as at 1 January 2004– Special additional cash contributions - £4.1m
FRS17 was fully adopted in 2003.
FRS17 pension liability increased by £2.1m to £17.0m
Copyright SIG plc 2005 15
IFRS
Well advanced in the implementation process.
Actions in progress– Development of policies.– Calculation of opening balance sheet.
Key items to affect earnings– Apportionment of the fair value of options.– Any hedge ineffectiveness contained within our
US $ loan note currency derivatives.– Intangible amortisation v goodwill amortisation.
Copyright SIG plc 2005 16
Financial Summary
Record sales and profits.
Pretax profits up by more than 27%.
Continued focus on working capital management.
Group in good shape for future growth.
Trading ReviewDavid Williams – Chief Executive
Copyright SIG plc 2005 18
Presentation Content
Trading performance.
Strategy, acquisitions and outlook.
Questions and answers.
Copyright SIG plc 2005 19
Trading Highlights
Sales and profits up in all 3 geographic regions – total and like for like.
Operating margin up.
Benefit of price inflation maximised.
Strong underlying performance.
Copyright SIG plc 2005 20
Sales by Sector
Roofing 20.4%(03 - 20.7%)
Insulation 49.7%(03 - 50.5%)
Others 5.2%(03 - 5.2%)
Commercial Interiors24.7% (03 - 23.6%)
Copyright SIG plc 2005 21
Sales by Region
USA 4.1%(03 - 5.0%)
Europe 31.0%(03 - 31.1%)
UK & ROI 64.9%(03 - 63.9%)
Copyright SIG plc 2005 22
Sales Growth – SIG Total
Constant Currency
Like for Like£ Like for LikeConstant
Currency Total£ Total
10.2%
2004 over 200311.6%
7.7%9.0%
% Growth
(Actual Growth £129.7m)
Copyright SIG plc 2005 23
Sales Growth by Region
USAMainland EuropeUK & ROI
Acquired
Like for Like
Total 11.9%% Growth – Constant Currency
2004 over 2003
9.0%
Total 12.4%
10.5%
Total 1.0%
(Actual Growth £129.7m)
Copyright SIG plc 2005 24
Operating Profits – 2004 Results
£3.0m# Exceptional Stock Gains
Source of Growth 2004 / 2003
£2.6m Acquisitions (2003 and 2004)
£8.3m# ‘Normalised’ like for like
# - SIG Estimate
Total*
£13.9m
* - Operating profit growth, excluding goodwill
Copyright SIG plc 2005 25
Operating Margins
2.9%
7.1%
5.0%
1.4%
2.8%
5.5%
3.6%
6.7%
0% 2% 4% 6% 8%
Group *
USA
EUR
UK & ROI
2004 2003
* Including group costs, pre-goodwill
Copyright SIG plc 2005 26
Key Operating Ratios
2004 / 2003
Sales per Employee
Op. Profit per Employee
Op. Costs as % to Sales
Gross Margin % to Sales
Copyright SIG plc 2005 27
2004 ResultsRegional Performance
Copyright SIG plc 2005 28
USA 2004 Results - Sales
20042003
$105.7m
£57.6m
$104.7m
£63.7m
Growth (All Like for Like)
Local Currency + 1.0%
Sterling – 9.6%
Copyright SIG plc 2005 29
USA 2004 Results – Operating Profit
20042003
$3.1m
£1.7m
$1.5m
£0.9m Local Currency + 107.1%
Sterling + 85.5%
Copyright SIG plc 2005 30
USA – 2004 Results
Market Indicators
Demand Pricing
Petrochem market difficult. Commercial market stronger. Sales and operating profits increased. Operating margin doubled.
SIG Results £ $Sales Op. Profit Op. Margin Market share
Copyright SIG plc 2005 31
Mainland Europe 2004 Results - Sales
20042003
£394.2m
Growth
Constant Currency
Total +12.4%LFL +10.5%
Sterling
Total +10.0%LFL +8.2%
£433.6m
€568.8m
€638.7m
Copyright SIG plc 2005 32
Mainland Europe 2004 Results – Operating Profit
20042003
£11.0m
Growth
Constant Currency
Total +43%LFL +43%
Sterling
Total +40%LFL +40%
£15.5m
€15.9m
€22.8m
Copyright SIG plc 2005 33
Germany – 2004 Results
Market Indicators
Demand Pricing
5 new trading sites added Like for like sales increase of 6.1% Much improved performance due to internal efficiencies
and margin gains
SIG Results £ €Sales +6.4%
Op. Profit Op. Margin Market share
Copyright SIG plc 2005 34
France – 2004 Results
Market Indicators
Demand Pricing
Sales ahead in all product groups 4 additional trading sites Like for like sales up 18.4% Strong like for like sales and profit growth
SIG Results £ €
Sales +25.9%
Op. Profit Op. Margin Market share
Copyright SIG plc 2005 35
Benelux – 2004 Results
Market Indicators
Demand Pricing
Market conditions weak; sales strengthened into H2 Business restructuring during the year New commercial interiors branch opened in Belgium
SIG Results £ €
Sales +11.0%
Op. Profit Op. Margin Market share
Copyright SIG plc 2005 36
Poland – 2004 Results
Market Indicators
Demand Pricing
Achieved first full year of profitable trading Construction activity increased Four new branches added
SIG Results £ PLN
Sales +42.5%
Op. Profit Op. Margin Market share
Copyright SIG plc 2005 37
UK & ROI 2004 Results - Sales
20042003
£810.7m
Growth
Total +11.9%
LFL +8.8%
£907.1m
Copyright SIG plc 2005 38
UK & ROI 2004 Results – Operating Profit
20042003
£54.2mGrowth
Total +18.2%
LFL +14.1%
£64.1m
Copyright SIG plc 2005 39
UK & ROI Insulation – 2004 Results
Market Indicators
Demand Pricing
Demand increase greater than expected Increased use of thermal and acoustic insulation in residential
and non-residential buildings Increased upgrading of insulation in existing homes assisted by
grants and energy efficiency schemes
SIG Results
Total Sales LFL Sales Op. Profit Op. Margin Trading Sites +8
Copyright SIG plc 2005 40
UK & ROI Roofing – 2004 Results
Market Indicators
Demand Pricing
Market penetration increased through adding new sites Product range expanded Programme of branch upgrading underway
SIG Results
Total Sales LFL Sales Op. Profit Op. Margin Trading Sites +17
Copyright SIG plc 2005 41
UK & ROI Commercial Interiors – 2004 Results
Market Indicators
Demand Pricing
Non residential building market strong Some recovery in demand from premium office sector Strong internal performance – all key ratios improved
SIG Results
Total Sales LFL Sales Op. Profit Op. Margin Trading Sites +1
Copyright SIG plc 2005 42
UK Safety & Construction Products – 2004 Results
Market Indicators
Demand Pricing
Product range expanding. Increased emphasis on civil engineering and
major projects.
SIG Results
Total Sales LFL Sales Op. Profit Op. Margin Trading Sites +3
Copyright SIG plc 2005 43
Strategy & Outlook
Copyright SIG plc 2005 44
Strategy
“To develop and grow the Group as a
leading supplier of specialist
products to the construction and
related markets, in order to achieve
sustainable long term growth in
shareholder value”
Copyright SIG plc 2005 45
Growth Drivers
Organic expansion within existing geographic regions
Wider product range
Market demand growth e.g. Regulation, environmental issues
Acquisition pipeline
Copyright SIG plc 2005 46
Acquisitions – Part of Growth Strategy
Aimed at meeting core objectives of:
– Strengthening the Group
– Enhancing shareholder value
Will be focused on:
– Specialist products mainly in construction
industry
– Within our existing geographic regions
Copyright SIG plc 2005 47
Acquisitions in 2004
13 completed in the year
4 Mainland Europe: 1Germany, 3 France (2 Com Ints, 1
Insulation)
9 UK: 2 Insulation, 4 Roofing, 3 Construction Products
33 additional trading sites retained (2 closed in France)
Total Consideration £45.1m (including £2.3m
contingent)
Annualised sales c. £80m
Integrating well
Copyright SIG plc 2005 48
Outlook - Markets
UK & Republic of Ireland– demand in construction activity remaining
strong
Overseas– generally stable demand. USA improving,
Germany – market remaining tough
Price Inflation– some anticipated price inflation although
less than in 2004
Copyright SIG plc 2005 49
Summary
Good start to 2005.
Acquisition opportunities and organic development plans in progress.
Confident of further growth.
Copyright SIG plc 2005 50
Appendix
Copyright SIG plc 2005 51
Market Volume & Price IndicatorsUK & Republic of Ireland Deman
dPrice
Insulation
Roofing
Commercial Interiors
Safety & Construction Products
Mainland Europe
Germany
France
Netherlands
Poland
United States America
Copyright SIG plc 2005 52
Trading Site Changes
June
2004
Net Organic
Net Acquired
Dec 2004
To 8 March
UK & ROI 229 6 26 259 +7
Europe 125 3 7 133 0
USA 22 0 0 22 0
Total branches
376 9 33 412 419
Copyright SIG plc 2005 53
Market Position
UK & ROI GER FRA NETH POL USA
Insulation 1 1 1 a 2 1 1 a,b
Comm. Int.
1 3 2 1 3 c -
Roofing 1 - - - - -
a Industrial Insulation b Regionally c Insufficient data
Copyright SIG plc 2005 54
Market Sectors – Indicative Breakdown
% of Group Total
New Build% of
Subgroup
RMI % of
Subgroup
Housing 28% 42% 58%
Non-Housing, Building &
Construction56% 56% 44%
Industry(Non-Construction)
16% 39% 61%
Note: It is not possible to sharply define sales into the respective sectors, as many products are used for all types of work, in all types of construction
Copyright SIG plc 2005 55
EBITDA Growth
0
10
20
30
40
50
60
70
80
90
100
'99 '00 '01 '02 '03 '04
EBIT
DA
/ £
m 56.4
64.4
73.4 73.980.3
95.1
5 Year Compound Annual Growth Rate of 11%