SIG Ups Guidance After Strong Start To 2022

SIG plc today issues a trading update for 1 January 2022 to date, in advance of its Annual General Meeting, which is being held on 12 May 2022. 

Key Points

• Group expected to deliver full year performance significantly ahead of previous expectations
• Underlying operating margin for 2022 now anticipated to reach 3%
• Positive free cash flow now forecast in 2022

Trading Summary

The Group has made a strong start to the year, with the Return to Growth strategy continuing to deliver excellent progress across the business. In addition to robust demand, we have seen further impetus to sales and profit as a result of continuing input cost inflation. 

Group sales were 25% up on 2021 for the quarter to 31 March on a like for like ("LFL") ¹ basis. This represented a performance well ahead of previous expectations, with this momentum continuing into the month of April to date. 

Reported Group sales were 27% up on 2021 for the quarter, with acquisitions adding 4% to the LFL result referenced above, offset partially by movements on working days and exchange rates.  Including the acquisitions, the reported UK Interiors growth rate was 45%. 

The overall impact of inflation is estimated to have added c19% to Group growth over the period, albeit the levels have varied across the different operating companies. This reflects the annualisation of input cost inflation experienced in the second half of 2021, as well as further increases in early 2022 as our suppliers have passed on steeply increasing energy costs in manufacturing. There remain some constraints in supply across the business, but these are continuing to abate, as previously reported.

Outlook

Given the strong momentum seen through the early part of 2022, together with increasing visibility on the near-term trading outlook, the Board now expects the Group to deliver a full year performance significantly ahead of previous expectations. 

Input cost inflation is currently higher than previously anticipated, as noted above, and expected to remain elevated in the near term. We expect that the resulting increase in revenue will more than offset any localised market softening. 

In addition, we are confident that we will be able to maintain and build on the strong margin discipline that has been an important part of the recent progress made by the Group, with underlying operating margin for 2022 now expected to reach 3%.  Furthermore, we now expect the Group to be cash generative in 2022. 

Steve Francis, Chief Executive, said:

"The first four months have seen markedly stronger growth than anticipated, driving positive margin momentum across all our countries of operation. Our decentralised model, with 433 branches in seven countries providing strong local specialist expertise and superior stock availability, continues to gain ground and to show resilience in market conditions that remain challenging. Demand for our sustainable construction offerings remain strong. The three acquisitions made during the last 18 months are performing well and this is an area of increasing strategic focus for us.

"Although it is relatively early in the year, and notwithstanding the current macro-economic and geo-political environment, the strength of our recent trading gives us the confidence that we will now reach our initial margin target of 3% and return to cash generation this year, ahead of schedule." 

(1) Like-for-like ("LFL") is defined as sales per working day in constant currency, excluding completed acquisitions and disposals.

Source : SIG PLC

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