SIG: 'Return To Growth' Strategy Gathers Momentum

SIG plc today announces its half year results for the six months ended 30 June 2021.

Highlights

• Return to Growth strategy gathers momentum: UK profitable, and France and Poland delivering record first halves
• Group like-for-like H1 sales up 33% on prior year, and 1% up on 2019. Group sales excluding the UK Distribution business up 8% on 2019, with UK Distribution itself now back on track
• Strong gross margin management: H1 gross margin of 25.9%, 100bps higher than H1 2020
• Impact of material shortages and cost price inflation successfully managed to date, with minimal impact in H1
• £13.6m underlying operating profit in H1 (H1 2020: £42.9m loss). Underlying profit before tax (“PBT”) of £3.0m (H1 2020: £53.8m loss)
• Continued balance sheet strength provides confidence to invest in growth strategy and to manage near term supply challenges. Net debt in line with expectations after H1 seasonal working capital increase, at £289.4m post IFRS 16 (H1 2020: £341.8m; FY2020: £238.2m) and £57.5m pre IFRS16 (H1 2020: £90.0m; FY2020: £4.1m)
• Trading in July/August remained solid, strengthening the Board’s confidence in full year outlook despite caution over ongoing impact of material shortages and cost price inflation
• Continued profit improvement expected in H2 2021 and full year underlying operating profit anticipated to be ahead of prior expectations

Trading Overview

Like-for-like sales growth by market is summarised as follows:

 
As noted in the trading update on 14 July 2021, revenues in H1 were strong with a return to profitability faster and more significant than previously expected, with like-for-like ("LFL") growth of 33% compared to the Covid-affected prior year and up 1% against 2019.

This reflects the ongoing positive impact of the Group's Return to Growth strategy, which is delivering improved organic sales performance, and has been supported by continuing robust demand in the repair, maintenance and improvement ("RMI") segments in the majority of markets. Profitability improved throughout the period, a result of the normal seasonality in the business and the improving trading across the Group.

The UK Distribution turnaround, focused on delivering distinctive expertise and superior local service, is ahead of plan and shows continued momentum. We remain very encouraged by the enthusiasm and energy with which our teams have embraced and driven the new strategy. The business’s sales were on a declining trend throughout 2019 and most of 2020, and hence the 19% drop versus 2019 shown above. The monthly growth figures vs 2019 have turned positive in early H2, in line with previous guidance. The UK Exteriors business is trading very strongly, benefitting from the strong demand environment, growing 14% over 2019.

The French businesses are continuing to perform strongly, benefitting in particular from strong RMI demand in Exteriors, as well as the strong foundations built in the business in recent years. Germany’s performance is improving, with good growth throughout the half. We remain confident the Benelux performance will pick up over coming months following the recent changes made in its commercial leadership.

Ireland was affected by the significant Government restrictions imposed on construction from January to May this year, and we have seen a return to LFL sales growth over the summer. 

Poland has achieved record levels of revenue in Q2 2021, and this has continued into Q3, with increasing customer numbers and strong product mix.

Outlook

We are anticipating a continued impact from material shortages, which could be more significant than in H1, and which could persist for an extended period. Driver shortages have also affected the supply chain in recent weeks, notably in the UK.

Given these prevailing macro-economic uncertainties, we retain a cautious view on market conditions for the remainder of the second half at this stage. However, the strong results in H1, the solid trading seen in July/August and continuing robust demand, together with the effectiveness of our supply chain management and commercial agility, gives the Board confidence for the full year performance.

Providing the disruption from material shortages and haulage constraints does not worsen in coming months, full year underlying operating profit is now anticipated to be ahead of prior expectations.

Commenting, Steve Francis, Chief Executive Officer, said: “I’m delighted with the progress of our Return to Growth strategy: our customers, supplier partners and colleagues continue to affirm that our focus on empowered and entrepreneurial local teams, delivering exceptional service and expertise to our customers, is a successful approach for building back our market share and profitability.

“The strong revenue growth across our broad product offering, together with disciplined margin management, has been key to delivering an earlier and stronger profit than previously anticipated.

“The achievements to date have only been possible because of our teams’ energy, resilience and commitment in the face of the continually challenging circumstances, both with the effects of Covid-19 and the more recent industry-wide supply challenges.

“Trading in July and August has continued to be solid and we expect continued profit improvement through H2 2021, despite the ongoing impact of material shortages and cost price inflation. As a result, providing the disruption from these headwinds does not worsen, we now anticipate full year underlying operating profit will be ahead of our prior expectations.

“The momentum behind our Return to Growth strategy is positioning the Group well, and we have growing confidence in our ability to take advantage of both strong near‐term demand and healthy long‐term fundamentals, including market tailwinds from sustainability initiatives. The continued strength of our balance sheet, along with the positive trading momentum, provides a strong platform for sustainable, profitable growth and cash generation.”

Source : SIG

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