SIG Half Year Results Reports Rises in Revenue, Margin & Profit

IN ITS GROUP financial results to 30 June 2022 SIG plc reports rises in revenue, margin and profit for the six months, described as “a strong half year demonstrating continued progress”. 

The company says its successes stem from a strong commercial performance, together with price increases, delivering Group like-for-like (LFL) sales growth of 21% on 2021 despite some variability in demand. It has maintained consistent margin ‘progression’ with a gross margin of 26.2%, 30bps higher than H1 2021 as trading volumes drove higher rebates, coupled with front-end margin improvement in UK, France and Poland.

Likewise, the underlying operating profit margin of 3.1%, was up 180bps on H1 2021, reflecting price and volume growth in sales which more than offset inflation in salaries, energy and fuel costs.

The Half Year report highlights SIG’s two-year strategy of investing for growth which has driven structural improvements across the businesses and, along with pricing tailwinds, has increased underlying operating margin ahead of plan, the company says.

UK Performance

In the UK, underlying revenue in UK Interiors, a specialist insulation and interiors distribution business, was up 39% to £331.9m (H1 2021: £239.3m). This included a 17% impact from acquisitions in 2021. LFL growth was 24% reflecting the success of the Return to Growth strategy as well as benefitting from input price inflation, the company says. The improved revenue drove an underlying operating profit of £3.8m for the half year, compared to a restated underlying operating loss of £5.0m in H1 2021, with the business pushing the additional volumes through the existing capacity in the network.

SIG says the turnaround of UK Interiors is complete, and the business is now in continuous improvement mode, recovering share and demonstrating robust volume growth. Sales per working day have risen consistently and are now above 2019 levels as the company recaptures share from specialist contractors. SIG says that gross margins rose through pricing discipline, better rebates and terms, and improving product mix, and have driven the business to operating profitability.

UK Exteriors, the specialist SIG Roofing merchant, which also includes SIG’s Building Solutions business, continued to trade well despite some initial signs of softening in the RMI market, benefitting from both the strong demand environment, strategic stock management and purchase price inflation with underlying revenue of £224.0m (H1 2021: £199.2m), a LFL increase of 13%. The increase in revenue, further benefit from an increased margin due to rebates, and favourable product mix resulted in an underlying operating profit of £11.1m (H1 2021 restated: £8.1m).

The company says the strength of UK Exteriors reflects the benefits of its deep supplier partnerships. It also attributes its success to investments in sales capacity, branch manager talent and training, and the modernisation of warehouse and transport management systems.  The acquisition of the three businesses over the last 18 months: Penlaw, F30, and Miers, brings over £120m of revenue at an average operating margin of 7%, as well as leadership and specialist expertise, notably in construction accessories.

Outlook

SIG says market conditions, demand and inflation have been variable across the Group’s geographic end markets through the second quarter, and it expects this to persist in the second half of the year.

Steve Francis, SIG plc CEO

Steve Francis, Chief Executive Officer, said: “SIG is a structurally different business to two years ago – more specialist, more local, more productive, more flexible. Over this time, we have delivered above market performance and enabled a rapid return to robust profitability, along with a rhythm of steady progress. The first half of 2022 in particular saw significantly stronger growth than originally planned, which resulted in margin improvement across our operations.

“SIG today is resilient, flexible and sustainable: 80% of our products serve the insulation and building energy efficiency markets. We are by far the largest independent supplier in Europe of these products, which are needed now more than ever.

“Our strong market position, growth strategy and decentralised model will continue to enable us to navigate the pricing environment well and drive market share gains.

“In addition, our scale, diversification and resilience in uncertain markets mean that we are confident both in delivering the Board’s expectations for the year and in our growth path to 5% operating margin in the medium term.”

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