14th Mar 2007 07:03
SIG PLC14 March 2007 14 March 2007 PRELIMINARY RESULTS FOR YEAR ENDED 31 DECEMBER 2006 SIG plc is the leading specialist supplier of insulation, roofing and commercialinteriors products in Europe. • SIG reports record sales and profit in 2006. • Each country in which the Group operates achieved sales and underlying* operating profit growth on a like for like basis (i.e. excluding the impact of acquisitions made in 2005 and 2006). • Total ** sales increased by 17.4% to £1,925m (2005: £1,639m). • Continuing (i.e. excluding the USA) sales increased by 18.4% to £1,860m (2005: £1,571m). Like for like sales growth was 7.1%. o UK and Ireland sales increased by 14.2% to £1,254.4m (2005: £1,098.1m). o Mainland Europe sales increased by 27.9% to £605.5m (2005: £473.4m). • Underlying operating profit from continuing operations increased by 22.5% to £121.4m (2005: £99.1m). o UK and Ireland underlying operating profit increased by 18.4% to £99.9m (2005: £84.4m). o Mainland Europe underlying operating profit increased by 40.6% to £27.6m (2005: £19.6m). • Total underlying profit before tax increased by 18.8% to £112.0m (2005: £94.3m), slightly above analyst consensus figures. • Profit before tax from continuing operations increased by 22.6% to £102.7m (2005: £83.8m). • Total underlying basic earnings per share increased by 20.3% to 63.4p (2005: 52.7p). Continuing basic earnings per share increased by 28.5% to 58.1p (2005: 45.2p). • Dividend per share for the year increased 22% to 20.5p. • The Group made 23 acquisitions during 2006. Annualised sales (on a historic basis) for these acquisitions was £240m. Total consideration, including assumed debt, was £109m. * - Underlying - means excluding the effect of amortisation of acquiredintangibles, impairment of goodwill, profit on sale of USA business and hedgeineffectiveness. ** - Total - means including the USA business. The Group sold its USA businesson 20 November 2006 for cash proceeds of £27m. Sales in the USA accounted for 3%of the Group's sales up to the time of its disposal. Les Tench, Chairman, commented: "The Group has made excellent progress during 2006; the strategic disposal ofthe USA combined with the continued expansion and diversity of the tradingactivities in the two core regions of UK and Ireland and Mainland Europe lay thefoundations for the future growth and development of SIG. In terms of growth opportunities, we enter 2007 with a healthy pipeline ofopportunities, both organic and through acquisition. Trading since the start of2007 has been good, and the Group is confident that further progress will bemade." Enquiries: David Williams, Chief Executive SIG plc today 020 7251 3801Gareth Davies, Finance Director thereafter 0114 285 6300Faeth Birch / Gordon Simpson Finsbury 020 7251 3801 Full Preliminary Results information is available on www.sigplc.co.uk. Aninterview with David Williams, Chief Executive is now available on SIG's websiteand www.cantos.com Chairman's Statement The Group has made excellent progress during 2006; the strategic disposal of theUSA combined with the continued expansion and diversity of the tradingactivities in the two core regions of UK and Ireland and Mainland Europe lay thefoundations for the future growth and development of SIG. Highlights of the year are: • Record sales growth • Increased margins • Record number of acquisitions • Record increase in the number of additional trading sites • Sale of the Group's operations in the USA in November 2006 • Significant growth in Mainland Europe • Significant increase in the full year dividend, reflecting the Board's confidence in the Group's outlook. Results Where reference is made to "Total" this refers to the results of both continuingand the discontinued USA operations. Where reference is made to "Underlying",this should be taken as before the amortisation of acquired intangibles, theimpairment of goodwill, the profit on sale of the USA business and hedgeineffectiveness. For the year ended 31 December 2006, compared with the corresponding period in2005: Sales • Total sales increased by £285.7m (17.4%) to £1,925.0m (2005: £1,639.3m). • Continuing sales increased by £288.4m (18.4%) to £1,859.8m (2005: £1,571.4m). • Like for like sales growth (i.e. excluding the impact of acquisitions made in 2005 and 2006) on a continuing basis, was 7.1% in Sterling. • Foreign exchange rate movements on a year on year basis were negligible, and have no significant impact on the growth figures as stated in Sterling for the Group as a whole. Profits • Total underlying operating profit increased by £23.1m (22.6%) to £125.2m (2005: £102.1m). • On a continuing basis, underlying operating profit increased by £22.3m (22.5%)to £121.4m (2005: £99.1m). • Underlying net finance costs increased by £5.3m to £13.1m (2005: £7.8m). • Total underlying profit before tax increased by £17.7m (18.8%) to £112.0m (2005: £94.3m). Underlying profit before tax from continuing operations increased by £17.0m (18.6%) to £108.3m (2005: £91.3m). • Amortisation of acquired intangibles increased by £3.2m to £6.9m (2005: £3.7m). There was no charge made in the year for goodwill impairment (2005: £5.7m). A credit of £1.4m has arisen in relation to hedge ineffectiveness (2005: £1.9m). • A one off profit of £1.9m arose from the disposal of the USA business. • Total profit before tax increased by £21.6m (24.9%) to £108.4m (2005: £86.8m). Profit before tax from continuing operations increased by £18.9m (22.6%) to £102.7m (2005: £83.8m). Margins • The total gross margin increased to 27.2% (2005: 27.0%). • On a continuing basis, the gross margin increased to 27.3% (2005: 27.1%). • The continuing underlying operating profit margin increased to 6.5% (2005: 6.3%). Earnings and Dividends • Total underlying basic earnings per share increased by 10.7p to 63.4p (2005: 52.7p), an increase of 20.3%. • Total basic earnings per share increased by 14.9p to 61.9p (2005: 47.0p), an increase of 31.7%. • On a continuing basis, basic earnings per share increased by 12.9p to 58.1p (2005: 45.2p), an increase of 28.5%. A final dividend of 14.3p is proposed, subject to shareholder approval. Thiswould make a total dividend for the full year of 20.5p, an increase of 3.7p(22%) on the 2005 full year dividend of 16.8p and would be covered 2.8 times. Ifapproved, this will be payable on 29 May 2007 to Shareholders on the register at27 April 2007. Finances Underlying cash flow (i.e. operating cash flow before working capital movements)strengthened further throughout 2006 compared with prior year. An increase instock levels (partly due to new trading sites and also to support increasedcommercial activities), together with further investment in customer service andthe acquisition programme resulted in increased borrowings at the year end.Gearing rose to 65% as at 31 December 2006 (2005: 60%). During the year the Company raised £151m and €100m with a maturity of 7,10 and12 years via its second successful Private Placement transaction. This was usedto repay existing facilities with its UK relationship banks. The Group has a sound financial position with prudent continuing interest cover(9.2x). Acquisitions The ongoing programme of the acquisition of businesses in market sectors andgeographic regions related to those in which SIG operates, continued with 23acquisitions completed during 2006. Annualised sales (on a historic basis) for these acquisitions is a total of£240m. Total consideration, including assumed debt, was £109m. Board Appointment We recently announced the appointment of Chris Davies as Executive Director tothe Board. Chris joined SIG in 1994, and has responsibility as Managing DirectorEurope for the Group's operations in that area. Chris has extensive practicalexperience of both operational management and M&A activity. Employees Our people lie at the heart of our success; the personal efforts of eachemployee, and their dedication to customer service and the will to succeedpersonally in their own particular job is fundamental to SIG, and I would liketo thank all employees throughout the Group for their hard work and efforts. Prospects In the UK and Ireland, overall construction activity is expected to growmodestly in 2007 over 2006, providing positive conditions for all of the Group'sactivities in this region. Non residential new build construction is the mostimportant single part of the overall market for SIG, and the ongoing recovery incommercial building together with the continuing public expenditure on schoolsand hospitals is expected to be helpful. Later in the year, the initial impact of the most recent (April 2006) change inthe regulations concerning the minimum standards of thermal efficiency of allnew buildings is expected to begin to increase market demand for insulationmaterials. As explained in our Interim Announcement in September 2006 the volume of workwhich is anticipated to be available in 2007 from the EEC2 (Energy EfficiencyCommitment) scheme concerning the upgrading of insulation in existingresidential properties will be reduced in 2007 over previous years. The newscheme, EEC3, begins in April 2008, and this is expected to increase demandsignificantly once it begins. Following an exceptionally strong second half in 2006 in Mainland Europe,conditions in all those countries in which we operate are expected to remainpositive, with modest growth in overall construction activity anticipated. In terms of growth opportunities, we enter 2007 with a healthy pipeline ofopportunities, both organic and through acquisition. Trading since the start of 2007 has been good, and the Group is confident thatfurther progress will be made. Trading Performance 2006 was another year of strong growth, expansion and solid financialperformance for the Group. Our strategy of investing in the core operations to drive growth and in theacquisition of complimentary businesses, continued at a strong pace. During the course of the year we expanded the range of specialist products whichare offered to customers across all of our operations; improved the service anddelivery facilities to ensure that we strengthen further our ability to providecustomers with first class service; increased the number and quality of ourcustomer-facing staff; and significantly increased the number of trading sitesto facilitate improved service to existing customers and the securing of newcustomers. This continued investment in customer-related services provides the platform forcontinued future growth. Trading Highlights Where reference is made to "total" sales, this refers to the results of bothcontinuing and the discontinued USA operations. Where reference is made tounderlying operating profit and underlying operating profit margin, this isdefined as being before the amortisation of acquired intangibles, the impairmentof goodwill and the profit on sale of the USA business. UK and Ireland (65% of total sales) • Sales increased by £156.3m (14.2%) to £1,254.4m (2005: £1,098.1m). • Like for like sales increased by £45.6m (4.4%). • Underlying operating profit increased by £15.5m (18.4%) to £99.9m (2005: £84.4m). • Like for like underlying operating profit increased by £6.8m (8.7%) to £85.4m (2005: £78.6m). • The underlying operating profit margin was increased to 8.0% (2005: 7.7%). • 85 trading sites were added in the year, taking the total at 31 December 2006 to 422 (31 December 2005: 337). Within the Insulation market in the UK and Ireland, whilst the volume of demandgrew, prices were on average lower than prior year due to the over-supplyarising from additional capacity coming on stream late 2005 and during 2006.This additional capacity is in anticipation of higher market demand inforthcoming years, partly driven by Regulations. The UK Government introduced new (Part L) Building Regulations in April 2006,requiring all types of buildings which commenced new construction after thatdate to meet new higher standards of thermal efficiency. In practice, thischange means that more insulation will be built-in to new buildings goingforward. As we indicated in September 2006 at the time of our 2006 InterimResults Announcement, problems within the Local Government planning authorities,where the implementation of new Building Regulations effectively begins throughthe planning consent process, meant that the practical application of the higherstandards of insulation in new construction was delayed. The April 2006 new(Part L) Building Regulations had no impact on the market in 2006, and are nowexpected to begin to influence demand in the second half of 2007. We also indicated in September 2006 that the amount of work relating to theupgrading of roofing and wall insulation in existing homes was set to declineduring the latter part of 2006, and throughout 2007, due to timing and fundingissues under the government-backed EEC2 (Energy Efficiency Commitment phase 2).This programme has been very successful, and has generated increased volumes ofdemand for insulation over the last four years. The targeted amount of workrequired to be conducted under EEC2 has been substantially met, and thereforethe amount of insulation upgrading under this scheme will be very limited untilthe next phase of targets and funding commences in 2008, under EEC3. Against the background of these mixed conditions in 2006, the Insulationoperations in the UK and Ireland increased sales by 6% and underlying operatingprofits by a similar amount. We added four trading sites during the year and relocated five branches intonew, larger premises to cater for increased stockholding and future growth. In the insulation market, SIG has a number of facilities which convert basicinsulation materials into more specialist products, to meet specific customerrequirements. These activities were expanded, with two additional facilitiesacquired during the year. In the Roofing division, the subdued market conditions which existed in 2005continued throughout 2006. Repairs and maintenance of existing buildings, especially residential buildings,is a significant driver of market demand. Some of this roofing work is of anessential nature and, as such, carries on regardless of economic conditions.Other work is less essential, and its timing is more discretionary, dependingupon a range of factors relating to household expenditure. This discretionaryelement of the market has been slower than in previous years, reducing overallmarket demand for roofing materials. It is believed that these are timingfactors and that the longer term outlook for this market is positive. Within the residential new-build market, the proportion of dwellings built asapartments rather than using more traditional designs increased, which has theeffect of reducing the area of roof constructed on a "per dwelling" basis, thusreducing demand for roofing materials in the new build sector. In a market in which the supply chain is still very fragmented, we continued toexpand the number of trading sites both through acquisition and by openingbrownfield trading sites. 63 trading sites were added during the year, includinga number which specialise in new ranges of building maintenance products. InIreland, a new central stocking facility was opened, enabling imported roofingproducts to be more efficiently distributed throughout the trading site networkand to customers. The combination of acquisitions and product range expansion enabled the divisionto increase sales by 19% and significantly increase underlying operating profitscompared with prior year. The Commercial Interiors division experienced generally improved demand, andwhilst the volume of new public expenditure related work was slower in beingreleased than had been expected, private sector developments such as commercial,retail, sports and leisure were more buoyant. Several new products were launched during the year, including new securitydoorsets, a system of wall panel products for use specifically in hospitals andother health facilities, and access panels for services in commercial and publicbuildings. The division was the focus of significant investment during the year, includingseveral relocations to larger premises, additional sales staff, and upgradingand renewal of processing machinery to improve productivity and product rangediversity. A new facility was opened to improve the range and quality ofmanufactured metal clad wall systems, which are essential to certain marketsectors. Two trading sites were added during the year. The division increased sales by 15% and grew the underlying operating profitssubstantially. The Specialist Construction and Safety Products division continued to expand anddevelop its activities significantly. Supplying an increasing range of specialist products to construction andindustry, the main end markets are new-build non-residential and secondlyresidential construction. 16 trading sites were added in the year, including 3 in Ireland, which are ourfirst stand-alone Specialist Construction Products (SCP) trading sites outsidethe UK. This takes the total number of trading sites in this division to 43.This compares with just 17 at the end of 2003. This continued expansion of the customer base, trading sites and product rangediversity resulted in sales increasing by 40% and underlying profits increasedsubstantially. Mainland Europe (32% of total sales) • Sales in Mainland Europe increased by £132.1m (27.9%) to £605.5m (2005: £473.4m). • Like for like sales on a constant currency basis increased by 13.2%. • Underlying operating profits increased by £8.0m (40.6%) to £27.6m (2005: £19.6m). • Like for like underlying operating profit, on a constant currency basis, increased by £4.5m (22.9%) to £24.1m (2005: £19.6m). • The underlying operating profit margin increased to 4.6% (2005: 4.1%). • All countries in which SIG has trading activities in Mainland Europe increased both sales and underlying operating profit on a like for like basis in 2006 compared with prior year. • 57 trading sites were added to the Group in Mainland Europe during the year, taking the total to 196 at 31 December 2006. In Germany and Austria (63% of sales in Mainland Europe), market conditions inthe first four months of the year were very disappointing. Weather conditionswere much more adverse than normal, and the construction industry struggled toget sites moving until the spring. This low level of activity reduced demand formaterials, and had a knock-on effect of effectively eliminating price increasesthat had been intended to take effect in January and February. From May onwards, activity levels began to rise progressively, and demandstrengthened right through into the final quarter of the year, at which time afurther boost to orders was created by some pull-forward to beat the increasedrate of VAT on building materials which came into effect on 1 January 2007 inGermany. Outside the construction sector, demand for more specialist insulation forindustrial applications was good. Overall results in Germany were further boosted by the acquisition in July of aregional roofing materials distributor, our first move into this fragmented,specialist market. The roofing supplies industry in Germany is inherentlysharply seasonal, with a very high proportion of profits being achieved in thesecond half year. The timing of this acquisition meant that it had adisproportionately positive effect on H2 underlying operating profit margins. In total 11 trading sites were added in the year, taking the total to 76 at 31December 2006. Sales increased by 31.2% in Euros, 30.9% in Sterling. Like for like sales growthwas 13.9% in Euros, an excellent performance. The underlying operating profit margin increased and underlying operatingprofits were increased substantially. In France (22% of sales in Mainland Europe), construction activity and overalldemand was good throughout the year. We continued to expand our product range and geographic coverage, and added 6new trading sites during the year, 2 of which were acquired. We now have a totalof 51 trading sites in France. Sales increased by 11.0% in Euros, 10.7% in Sterling. Like for like sales grewby 9.1% in Euros. Again, the underlying operating profit margin was increased,and the underlying operating profit was increased substantially. In Poland (9% of sales in Mainland Europe), overall construction activitycontinued to grow, with non-residential construction doing rather better thanresidential, which is a more favourable mix in terms of the SIG product range. 2006 was a transforming year for SIG in Poland due to a significant increase inthe number of trading sites, chiefly arising from two acquisitions during thesecond half year, and a substantial expansion of the range of specialistproducts offered to customers including roofing materials and a range ofbuilding chemicals and other products which are sold in the UK within theSpecialist Construction Products (SCP) division. In total, 40 trading sites were added in the year, taking the total to 59 at 31December 2006. Sales in Poland increased by 70.0% in local currency, 75.1% in Sterling. Likefor like sales increased by 23.1% in local currency and the underlying operatingprofits were substantially increased. Market conditions improved in Benelux (6% of sales in Mainland Europe), withsome modest growth in overall construction activity. Whilst the number of trading sites was unchanged at 10, various investments weremade to the facilities including improvements to the fabrication and processingfacilities for industrial insulation materials. Sales increased by 20.8% in Euros, 20.5% in Sterling. Like for like sales growthwas 11.9% in Euros. The underlying operating profit margin was increased and underlying operatingprofits grew substantially. USA (3% of total Group sales) The Group sold its business in the USA in November 2006 for a total of $51m(£27m) in cash. The decision to divest the USA operations was taken following astrategic review of all the Group's activities, and of the opportunity forfuture growth within each trading region. Up to the time of its disposal, sales in the USA were £65.2m, slightly less thanthe full year 2005 figure of £67.9m. Good cost control and gross marginimprovement enabled the underlying operating profit to increase by £0.8m to£3.8m (2005: £3.0m). Acquisitions 2006 was a year of record acquisition activity, with 23 transactions completedin the year, for a total consideration of £109m, including assumed debt. Salesof these acquired businesses was £240m on a historic annualised basis, and theircombined impact on 2006 was sales of £93m. The acquisitions added 133 trading sites to the Group, and substantially widenedthe product range on a regional basis. Of the 23 acquisitions, 19 were in the UK and Ireland, and 4 in Mainland Europe.The £240m historic sales breaks down £132m Mainland Europe and £108m UK andIreland. Each of the acquired businesses fits into the Group's strategy of strengtheningand developing our position as a leading European supplier of specialistproducts for the building, construction and related industries, with emphasis onprofessional trades rather than consumer-led markets. The acquisitions are being successfully absorbed into the Group, and progressingwell with their respective individual improvement plans. Summary of Trading Performance 2006 has been a year of high performance and strong growth, with each region andeach business stream showing expansion and development; the dynamic nature ofSIG is clearly reflected in the excellent results. Consolidated Income Statementfor the year ended 31 December 2006 Before Other Total Before Other Total other items* other items* items* items* 2006 2006 2006 2005 2005 2005 Note £000's £000's £000's £000's £000's £000's------------------------------------------------------------------------------------------RevenueExisting operations 1,766,682 - 1,766,682 1,513,258 - 1,513,258Acquisitions 93,150 - 93,150 58,190 - 58,190------------------------------------------------------------------------------------------Continuing operations 2 1,859,832 - 1,859,832 1,571,448 - 1,571,448Cost of sales 1,352,483 - 1,352,483 1,145,337 - 1,145,337------------------------------------------------------------------------------------------Gross profit 507,349 - 507,349 426,111 - 426,111Other operating expenses 385,948 6,942 392,890 327,016 9,342 336,358------------------------------------------------------------------------------------------ Operating profitExisting operations 116,696 (6,942) 109,754 93,348 (9,342) 84,006Acquisitions 4,705 - 4,705 5,747 - 5,747------------------------------------------------------------------------------------------Continuing operations 2 121,401 (6,942) 114,459 99,095 (9,342) 89,753Finance income (6,056) (1,357) (7,413) (6,691) (1,880) (8,571)Finance costs 19,200 - 19,200 14,509 - 14,509------------------------------------------------------------------------------------------Profit before tax 108,257 (5,585) 102,672 91,277 (7,462) 83,815Income tax expense 32,515 (1,676) 30,839 28,377 (542) 27,835------------------------------------------------------------------------------------------Profit after tax from 75,742 (3,909) 71,833 62,900 (6,920) 55,980continuing operations------------------------------------------------------------------------------------------ Discontinued operation:Profit on disposal of discontinued operation 7 - 1,947 1,947 - - -Profit before tax from discontinued operation 7 3,774 - 3,774 2,996 - 2,996Income tax expense on discontinued operation 7 1,124 (92) 1,032 834 - 834------------------------------------------------------------------------------------------ 2,650 2,039 4,689 2,162 - 2,162------------------------------------------------------------------------------------------ Profit after tax 78,392 (1,870) 76,522 65,062 (6,920) 58,142------------------------------------------------------------------------------------------Attributable to:Equity holders of the 77,719 (1,870) 75,849 64,106 (6,920) 57,186CompanyMinority interests 673 - 673 956 - 956------------------------------------------------------------------------------------------Earnings per shareFrom continuing operations:Basic earnings per share 3 61.3p (3.2p) 58.1p 50.9p (5.7p) 45.2pDiluted earnings per share 3 60.6p (3.1p) 57.5p 50.1p (5.6p) 44.5p------------------------------------------------------------------------------------------From continuing and discontinuedoperations:Basic earnings per share 3 63.4p (1.5p) 61.9p 52.7p (5.7p) 47.0pDiluted earnings per share 3 62.8p (1.6p) 61.2p 51.9p (5.6p) 46.3p------------------------------------------------------------------------------------------ * Other items relate to the amortisation of acquired intangibles, goodwill impairment,hedge ineffectiveness and the profit on disposal of discontinued operation. Other itemshave been disclosed separately in order to give an indication of the underlying earningsof the Group. Consolidated Statement of Recognised Income and Expensefor the year ended 31 December 2006 2006 2005 £000's £000's---------------------------------------------------------------------------- Profit after tax 76,522 58,142Exchange difference on retranslation of (918) (725)foreign currency goodwill and intangiblesExchange difference on retranslation of (3,980) (1,669)foreign currency net investments (excludinggoodwill and intangibles)Exchange and fair value movements associated 6,712 1,111with borrowings and derivative financialinstrumentsTax charge on exchange difference arising on (1,078) (639)borrowings and derivative financialinstrumentsCurrent and deferred tax on share options 2,214 596Actuarial gain/(loss) on defined benefit 3,292 (1,885)pension schemesDeferred tax movement associated with (966) 563actuarial gain/(loss)Transitional adjustment to adopt IAS 32 and IAS 39 - (6,625)at 1 January 2005Recognition of deferred tax assets on - 3,869certain transitional adjustments at 1 January 2005----------------------------------------------------------------------------Total recognised income and expense for the 81,798 52,738year----------------------------------------------------------------------------Attributable to:Equity holders of the Company 81,125 51,782Minority interests 673 956 81,798 52,738---------------------------------------------------------------------------- Consolidated Balance Sheetas at 31 December 2006 2006 2005 Note £000's £000's--------------------------------------------------------------------------------Non-current assetsProperty, plant and equipment 134,943 102,093Goodwill 216,257 164,675Intangible assets 81,925 49,252Deferred tax assets 16,435 21,085-------------------------------------------------------------------------------- 449,560 337,105--------------------------------------------------------------------------------Current assetsInventories 151,791 128,101Trade receivables 310,418 281,053Other receivables 20,527 21,745Derivative financial instruments 1,668 -Cash and cash equivalents 62,447 32,120-------------------------------------------------------------------------------- 546,851 463,019--------------------------------------------------------------------------------Total assets 996,411 800,124--------------------------------------------------------------------------------Current liabilitiesTrade and other payables 260,601 224,859Obligations under finance leases and hire purchase 1,391 756agreementsBank overdrafts 3,302 3,211Bank loans 50,845 95,148Loan notes 483 2,253Derivative financial instruments 61 -Current tax liabilities 21,366 25,483Provisions 12,019 2,252-------------------------------------------------------------------------------- 350,068 353,962--------------------------------------------------------------------------------Non-current liabilitiesObligations under finance leases and hire purchase 1,448 838agreementsBank loans 4,703 521Loan notes - 5,081Private placement notes 193,043 70,659Derivative financial instruments 37,659 28,376Deferred tax liabilities 17,764 7,507Other payables 1,267 2,159Retirement benefit obligations 23,633 26,987Provisions 14,164 13,695-------------------------------------------------------------------------------- 293,681 155,823--------------------------------------------------------------------------------Total liabilities 643,749 509,785--------------------------------------------------------------------------------Net assets 352,662 290,339--------------------------------------------------------------------------------Capital and reservesCalled up share capital 4 12,310 12,189Share premium account 4 19,636 17,883Capital redemption reserve 4 347 347Special reserve 4 22,113 22,113Share option reserve 4 1,786 1,375Hedging and translation reserve 4 (4,570) (2,282)Retained profits 4 299,887 237,515--------------------------------------------------------------------------------Attributable to equity holders of the Company 351,509 289,140--------------------------------------------------------------------------------Minority interests 4 1,153 1,199--------------------------------------------------------------------------------Total equity 4 352,662 290,339-------------------------------------------------------------------------------- Consolidated Cash Flow Statementfor the year ended 31 December 2006 2006 2005 Note £000's £000's-------------------------------------------------------------------------Net cash flow from operating activitiesCash inflow from operating activities 5 132,355 113,581 Borrowing costs paid (14,206) (11,511)Interest received 2,433 3,518Income tax paid (36,615) (21,850)-------------------------------------------------------------------------Net cash inflow from operating 83,967 83,738activities-------------------------------------------------------------------------Cash flows from investing activitiesPurchase of property, plant and (44,682) (33,576)equipmentProceeds from sale of property, plant 2,009 2,098and equipmentPurchase of businesses (90,061) (83,482)Net proceeds from sale of discontinued 25,327 -operation-------------------------------------------------------------------------Net cash used in investing activities (107,407) (114,960)-------------------------------------------------------------------------Cash flows from financing activitiesProceeds from issue of ordinary share 1,874 1,140capitalCapital element of finance lease rental (1,723) (1,306)paymentsRepayment of loans (135,112) (22,020)New loans 211,562 84,511Dividends paid to equity holders of the (21,719) (17,861)CompanyPayments to minority shareholder (719) (572)-------------------------------------------------------------------------Net cash generated in financing 54,163 43,892activities-------------------------------------------------------------------------Increase in cash and cash equivalents in 6 30,723 12,670the year-------------------------------------------------------------------------Cash and cash equivalents at beginning 28,909 16,501of yearEffect of foreign exchange rate changes (487) (262)-------------------------------------------------------------------------Cash and cash equivalents at end of year 59,145 28,909------------------------------------------------------------------------- 1. Basis of preparation The Group's financial information has been prepared in accordance withInternational Financial Reporting Standards ("IFRS") issued for use in theEuropean Union and on a basis consistent with that adopted in the previous year. The financial information has been prepared under the historical cost conventionexcept for derivative financial instruments that are stated at their fair value. While the financial information included in this preliminary announcement hasbeen computed in accordance with IFRS, this announcement does not itself containsufficient information to comply with IFRS. The Company will publish full IFRScompliant accounts in April 2007. The preliminary announcement does not constitute the Company's statutoryaccounts for the year ended 31 December 2006 or 31 December 2005 within themeaning of Section 240 of the Companies Act 1985 but is derived from thosestatutory accounts. The Group's statutory accounts for the year ended 31 December 2005 have beenfiled with the Registrar of Companies, and those for 2006 will be deliveredfollowing the Company's Annual General Meeting. The auditors have reported onthe statutory accounts for 2006 and 2005, and their reports were unqualified anddid not contain statements under section 237 (2) or 237 (3) of the Companies Act1985. 2. Revenue and segmental information RevenueAn analysis of the Group's revenue is as follows: 2006 2005 £000's £000's----------------------------------------------------------Continuing operations - 1,859,832 1,571,448sale of goodsDiscontinued operation - 65,228 67,884sale of goods----------------------------------------------------------Total revenue 1,925,060 1,639,332---------------------------------------------------------- Segmental information As at 31 December 2006, the Group is managed and organised in two geographies: UK and Ireland and Mainland Europe. On 20 November 2006, the Group disposed of its operations in the USA. These geographies are the basis on which the Group reports its primary segment information. Segment information about these geographies is presented below: 2006 2006 2006 2006 2006 2005 2005 2005 2005 2005 UK & Main Discont'd Elimin Total UK & Main Discont'd Elimin Total Ireland -land operation -ations Ireland -land operation -ations Europe (USA) Europe (USA) £000's £000's £000's £000's £000's £000's £000's £000's £000's £000's-----------------------------------------------------------------------------------------------------------------------RevenueExternal sales 1,254,376 605,456 65,228 - 1,925,060 1,098,055 473,393 67,884 - 1,639,332Inter-segment sales* 34 - 17 (51) - - 2 50 (52) ------------------------------------------------------------------------------------------------------------------------Total revenue 1,254,410 605,456 65,245 (51) 1,925,060 1,098,055 473,395 67,934 (52) 1,639,332-----------------------------------------------------------------------------------------------------------------------ResultSegment result before amortisationof acquired intangiblesand goodwill 99,919 27,577 3,758 - 131,254 84,359 19,612 3,008 - 106,979impairment lossAmortisation of acquired intangibles (6,470) (472) - - (6,942) (3,630) (58) - - (3,688)Goodwill impairment loss - - - - - (5,654) - - - (5,654)------------------------------------------------------------------------------------------------------------------------Segment result 93,449 27,105 3,758 - 124,312 75,075 19,554 3,008 - 97,637 Parent Company costs (6,095) (4,876)------------------------------------------------------------------------------------------------------------------------Operating profit 118,217 92,761 Net finance costs -continuing operations (11,787) (5,938)Net finance income/(costs) - discontinued operation 16 (12)------------------------------------------------------------------------------------------------------------------------Profit before tax 106,446 86,811 Profit on disposal of discontinued operation 1,947 -Income tax credit - on profit on disposal of discontinued operation 92 -Income tax expense -continuing operations (30,839) (27,835)Income tax expense - discontinued operation (1,124) (834)Minority interests (673) (956)------------------------------------------------------------------------------------------------------------------------Retained profit 75,849 57,186------------------------------------------------------------------------------------------------------------------------Attributable to:Continuing operations 71,160 55,024Discontinued operation 4,689 2,162------------------------------------------------------------------------------------------------------------------------ 75,849 57,186------------------------------------------------------------------------------------------------------------------------ * Inter-segment sales are charged at the prevailing market rates. 2006 2006 2006 2006 2006 2005 2005 2005 2005 2005 UK & Main Discont'd Elimin Total UK & Main Discont'd Elimin Total Ireland -land operation -ations Ireland -land operation -ations Europe (USA) Europe (USA) £000's £000's £000's £000's £000's £000's £000's £000's £000's £000's-----------------------------------------------------------------------------------------------------------------------Balance sheetAssetsSegment assets 718,293 266,490 - - 984,783 587,710 179,100 31,535 - 798,345Unallocated assets 11,628 1,779-----------------------------------------------------------------------------------------------------------------------Consolidated total assets 996,411 800,124----------------------------------------------------------------------------------------------------------------------- LiabilitiesSegment liabilities 264,338 91,886 - - 356,224 238,255 54,200 6,327 - 298,782Unallocated liabilities 287,525 211,003-----------------------------------------------------------------------------------------------------------------------Consolidated total 643,749 509,785liabilities----------------------------------------------------------------------------------------------------------------------- Other segment informationCapital expenditure on:Property, plant and equipment 37,289 8,121 391 45,801 25,773 8,448 326 34,547Intangible assets 28,835 10,793 - 39,628 37,543 689 - 38,232Goodwill 36,470 18,891 - 55,361 56,107 1,474 - 57,581 Non-cash expenditure:Depreciation 18,217 5,540 346 24,103 16,537 4,781 501 21,819Amortisation of acquired intangibles 6,470 472 - 6,942 3,630 58 - 3,688Goodwill impairment loss - - - - 5,654 - - 5,654----------------------------------------------------------------------------------------------------------------------- 3. Earnings per share The calculations of earnings per share are based on the following profits and numbers of shares: Basic and diluted-------------------------------------------------------------------------------------------- 2006 2006 2006 2005 2005 2005 Continuing Discontinued Total Continuing Discontinued Total operations operation operations operation £000's £000's £000's £000's £000's £000's--------------------------------------------------------------------------------------------Profit after tax 71,833 4,689 76,522 55,980 2,162 58,142Minority interests (673) - (673) (956) - (956)-------------------------------------------------------------------------------------------- 71,160 4,689 75,849 55,024 2,162 57,186-------------------------------------------------------------------------------------------- Basic and diluted before amortisation of acquired intangibles, goodwill impairment, hedge ineffectiveness and profit on disposal of discontinued operation-------------------------------------------------------------------------------------------- 2006 2006 2006 2005 2005 2005 Continuing Discontinued Total Continuing Discontinued Total operations operation operations operation £000's £000's £000's £000's £000's £000's--------------------------------------------------------------------------------------------Profit after tax 71,833 4,689 76,522 55,980 2,162 58,142Minority interests (673) - (673) (956) - (956)Amortisation of 6,942 - 6,942 3,688 - 3,688acquired intangiblesGoodwill impairment - - - 5,654 - 5,654lossHedge ineffectiveness (1,357) - (1,357) (1,880) - (1,880)Tax relating to the (1,676) - (1,676) (542) - (542)amortisation ofacquired intangiblesand hedgeineffectivenessProfit after tax on - (2,039) (2,039) - - -disposal ofdiscontinued operation-------------------------------------------------------------------------------------------- 75,069 2,650 77,719 61,944 2,162 64,106-------------------------------------------------------------------------------------------- Weighted average number of shares: 2006 2005 Number Number---------------------------------------------------------------------------------------------For basic earnings per share 122,560,171 121,625,474Exercise of share options 1,287,923 1,970,146---------------------------------------------------------------------------------------------For diluted earnings per share 123,848,094 123,595,620--------------------------------------------------------------------------------------------- 2006 2005---------------------------------------------------------------------------------------------Earnings per shareBasic earnings per share - 58.1p 45.2pcontinuing operationsBasic earnings per share - 3.8p 1.8pdiscontinued operationTotal basic earnings 61.9p 47.0pper share Diluted earnings per share - 57.5p 44.5pcontinuing operationsDiluted earnings per share - 3.8p 1.7pdiscontinued operationTotal diluted earnings 61.2p 46.3pper share---------------------------------------------------------------------------------------------Earnings per share before amortisation of acquired intangibles, goodwill impairment, hedgeineffectiveness and profit on disposal of discontinued operation Basic earnings per share - 61.3p 50.9pcontinuing operationsBasic earnings per share - 2.2p 1.8pdiscontinued operationTotal basic earnings 63.4p 52.7pper share Diluted earnings per share - 60.6p 50.1pcontinuing operationsDiluted earnings per share - 2.1p 1.7pdiscontinued operationTotal diluted earnings 62.8p 51.9pper share--------------------------------------------------------------------------------------------- Earnings per share before amortisation of acquired intangibles, goodwill impairment, hedgeineffectiveness and profit on disposal of discontinued operation is disclosed in order topresent the underlying performance of the Group. 4. Consolidated statement of changes in equity Called Share Capital Share Hedging and up share premium redemption Special option translation Retained Minority Total capital account reserve reserve reserve reserve profits Total interests equity £000's £000's £000's £000's £000's £000's £000's £000's £000's £000's-----------------------------------------------------------------------------------------------------------------------At 31 December 2004 12,139 16,793 347 22,113 639 (360) 201,672 253,343 572 253,915Profit after tax - - - - - - 57,186 57,186 956 58,142Dividends - - - - - - (17,861) (17,861) - (17,861)New share capital issued 50 1,090 - - - - - 1,140 - 1,140Exchange difference on retranslation of foreign currency goodwill and intangibles - - - - - (725) - (725) - (725)Exchange difference on retranslation of foreign currency net investments(excluding goodwilland intangibles) - - - - - (1,669) - (1,669) - (1,669)Exchange and fair value movements associated with borrowings and derivative financialinstruments - - - - - 1,111 - 1,111 - 1,111Tax charge on exchange difference arising on borrowings and derivative financial instruments - - - - - (639) - (639) - (639)Current and deferredtax on share options - - - - - - 596 596 - 596Credit to share option reserve - - - - 736 - - 736 - 736Actuarial loss on defined benefit pension schemes - - - - - - (1,885) (1,885) - (1,885)Deferred tax movement associated with actuarial loss - - - - - - 563 563 - 563Payment to minority interest shareholder - - - - - - - - (572) (572)Recognition of minority interest on acquisition - - - - - - - - 243 243Transitional adjustment to adopt IAS 32 and IAS 39 at 1 January 2005 - - - - - - (6,625) (6,625) - (6,625)Recognition of deferredtax assets on certain transitional adjustmentsat 1 January 2005 - - - - - - 3,869 3,869 - 3,869-----------------------------------------------------------------------------------------------------------------------At 31 December 2005 12,189 17,883 347 22,113 1,375 (2,282) 237,515 289,140 1,199 290,339----------------------------------------------------------------------------------------------------------------------- Profit after tax - - - - - - 75,849 75,849 673 76,522Dividends - - - - - - (21,719) (21,719) - (21,719)New share capital issued 121 1,753 - - - - - 1,874 - 1,874Exchange difference on retranslation of foreign currency goodwill and intangibles - - - - - (918) - (918) - (918)Exchange difference on retranslation of foreign currency net investments(excluding goodwilland intangibles) - - - - - (3,980) - (3,980) - (3,980)Exchange and fair valuemovements associated with borrowings andderivative financial instruments - - - - - 3,688 3,024 6,712 - 6,712Tax charge on exchange difference arising onborrowings and derivativefinancial instruments - - - - - (1,078) - (1,078) - (1,078)Current and deferred tax on share options - - - - - - 2,214 2,214 - 2,214Actuarial gain on definedbenefit pension schemes - - - - - - 3,292 3,292 - 3,292Deferred tax movement associated with actuarial gain - - - - - - (966) (966) - (966)Credit to share option reserve - - - - 1,089 - - 1,089 - 1,089Exercise of share options - - - - (678) 678 - - -Payment to minority interest shareholder - - - - - - - (719) (719)-----------------------------------------------------------------------------------------------------------------------At 31 December 2006 12,310 19,636 347 22,113 1,786 (4,570) 299,887 351,509 1,153 352,662----------------------------------------------------------------------------------------------------------------------- 5. Reconciliation of operating profit to cash inflow from operating activities 2006 2005 £000's £000's----------------------------------------------------------------------------Operating profit from continuing operations 114,459 89,753Operating profit from discontinued operation 3,758 3,008----------------------------------------------------------------------------Operating profit 118,217 92,761---------------------------------------------------------------------------- Depreciation charge 24,103 21,819Amortisation of acquired intangibles 6,942 3,688Goodwill impairment loss - 5,654Profit on sale of property, plant and equipment (630) (572)Share-based payments 1,089 736Increase in inventories (14,896) (5,066)Increase in receivables (4,320) (10,043)Increase in payables 1,850 4,604----------------------------------------------------------------------------Cash inflow from operating activities 132,355 113,581---------------------------------------------------------------------------- 6. Reconciliation of net cash flow to movements in net debt 2006 2005 £000's £000's-----------------------------------------------------------------------------Increase in cash and cash equivalents in the year 30,723 12,670Cash flow from increase in debt (75,846) (62,156)-----------------------------------------------------------------------------Increase in net debt resulting from cash flows (45,123) (49,486)Debt acquired with acquisitions* (15,920) (21,270)Non-cash items+ 5,911 (271)IFRS transitional adjustment - (6,625)Exchange differences 1,035 1,247----------------------------------------------------------------------------- Increase in net debt in the year (54,097) (76,405)Net debt at beginning of year (174,723) (98,318)-----------------------------------------------------------------------------Net debt at end of year (228,820) (174,723)----------------------------------------------------------------------------- * including loan notes issued.+ Non-cash items relate to the fair value movement of debt recognised in the year which does not give rise to a cash inflow or outflow. 7. Disposal of discontinued operation a) Profit on disposal of discontinued operation On 20 November 2006, the Group disposed of its USA business to Grey MountainPartners for a total consideration of $51m (£26.999m equivalent) in cash. Thisgenerated a Group profit on disposal after tax of £2.039m. This is calculated asfollows: £000's---------------------------------------------------------------------------------Consideration 26,999Disposal expenses incurred (1,672)---------------------------------------------------------------------------------Net proceeds from sale 25,327--------------------------------------------------------------------------------- Net assets disposed of (22,918)Recycling of hedging and translation reserve movements from 1 January (462)2004 to date of disposal---------------------------------------------------------------------------------Profit on disposal of USA business before tax 1,947--------------------------------------------------------------------------------- Tax credit on profit on disposal 92---------------------------------------------------------------------------------Profit after tax on disposal of USA business 2,039--------------------------------------------------------------------------------- b) Profits generated by the discontinued operation up to the date of disposal The following revenue and profit numbers have been included in the ConsolidatedIncome Statement which represent the contribution of the USA business up to thedate of disposal: 2006 2005 £000's £000's---------------------------------------------------------------------------------Revenue 65,228 67,884Cost of sales 48,480 50,991---------------------------------------------------------------------------------Gross profit 16,748 16,893--------------------------------------------------------------------------------- Operating expenses 12,990 13,885---------------------------------------------------------------------------------Operating profit 3,758 3,008--------------------------------------------------------------------------------- Net finance (income)/costs (16) 12---------------------------------------------------------------------------------Profit before tax 3,774 2,996--------------------------------------------------------------------------------- Income tax expense 1,124 834---------------------------------------------------------------------------------Profit after tax 2,650 2,162--------------------------------------------------------------------------------- c) Cash flows from discontinued operation 2006 2005 £000's £000's---------------------------------------------------------------------------------Net cash flows from operating activities 3,535 (128)Net cash flows from investing activities (360) (287)Net cash flows from financing activities (1,802) (1)-------------------------------------------------------------------------------- 1,373 (416)-------------------------------------------------------------------------------- 8. Final dividend A final dividend of 14.3p per share (2005: 11.5p) has been proposed, taking thefull year dividend to 20.5p (2005: 16.8p). In accordance with IAS 10 "Events after the balance sheet date", dividendsdeclared after the balance sheet date are not recognised as a liability in theAccounts. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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