13th Jan 2005 07:00
SIG PLC13 January 2005 13 January 2005 TRADING STATEMENT SIG plc, the leading supplier of insulation, roofing and commercial interiorsproducts, issues the following trading update in advance of the preliminaryresults for the year ended 31 December 2004 which will be announced on 8 March2005. The previously reported very strong performance in the first six months of 2004continued throughout the second half of the year, with continued growth in likefor like sales compared with the corresponding period in 2003. The Group expects to report full year pre-tax profits ahead of consensus and atthe top end of market expectations. Whilst the gross margin gains made as aresult of the price increases were, as anticipated, less significant in thesecond half year than in the first half, performance in the second half wasboosted by higher than expected sales volume in some areas, and the positiveimpact of recent acquisitions. Total sales for the year exceeded £1,395m, an increase of approximately £126m(10%) over 2003. Adverse currency movement compared with prior year reducedsales by £17m, and the sales growth on a constant currency basis was over 11%. During the year, the Group increased the number of trading locations by 42, to atotal of 412 at the year end. Like for like sales growth was over 7% in Sterling, and approximately 9% atconstant currency. UK and Republic of Ireland (c. 65% of Group sales) Total sales in our largest geographic region increased by approximately 11% over2003. The like for like sales growth was in excess of 8%. Operating profits increased strongly, due to the operational gearing effect ofthe additional sales revenue and the margin improvements which were in part theresult of careful management of stocks in a period of significant product priceinflation. Sales and operating profits were increased in all businesses on a like for likebasis, against the background of generally good demand in all construction andbuilding related markets. Of the three larger business streams, like for like sales growth in roofing,which is more biased towards housing repairs and maintenance, was less than thatachieved in both insulation and commercial interiors. Non-residential buildingactivity, partly influenced by increased Government investment in health andeducation sectors was robust throughout the year. Demand for insulation in newbuildings continued to rise, albeit at a slower rate than in the previous year.This trend is in line with the expected pattern of demand following phase one ofthe tightening of the thermal performance requirements in the UK BuildingRegulations (April 2002). Mainland Europe (c. 30% of Group sales) Sales in Mainland Europe were up 12% in local currencies and 10% in Sterling. Like for like sales growth was achieved in all countries in which we operate,Germany, France, The Netherlands and Poland. Operating profits rose substantially compared with prior year in both localcurrency and in Sterling. Compared with a relatively strong performance in thesecond half of 2003, further growth was achieved in the second half of 2004,though not at the exceptional rate reported for the first half. Again, themargin benefits which chiefly occurred in the first half year in the MainlandEuropean businesses were a factor. Market conditions in Germany and France were stable, depressed in TheNetherlands and buoyant in Poland. USA (c. 5% of Group sales) Sales and operating profits increased in local currency. On conversion toSterling, the weakness of the Dollar resulted in a reduction in sales, thoughthe operating profit shows a significant improvement over prior year. Market conditions were a little stronger than the prior year, and whilst therewas a sharp upturn in the level of enquiries and quotations for project work inthe key Petrochemical and Energy related markets, few of these programmesactually began work in 2004. Acquisitions A total of 13 acquisitions were completed during the year, all of whichcomplement existing businesses and are within our existing geographic reach.Total spend on acquisitions was circa £47m (including assumed debt and deferredconsideration). With the exception of the French commercial interiors businessacquired in May which was loss making at the time of acquisition, all acquiredtrading locations have been retained, and all the businesses are performing inline with our expectations. In total, acquisitions added 31 additional trading sites by the end of 2004. Outlook The strong performance in 2004 has been achieved against the background ofmarket conditions which have been generally more favourable compared with prioryear, in most of the main markets in which the Group operates. The beneficialimpact of significant price inflation and stock holding gains has been marked,particularly in the first half of the year. Looking into 2005, market conditions are expected to remain broadly similar inMainland Europe, Ireland and the USA. In the UK, whilst the Group would clearly not be immune from any weakness in theRM&I housing market, activity levels in new construction, both residential andnon-residential are expected to remain solid. Government expenditure on socialhousing and related upgrading programmes and in the health and educationbuilding sectors is expected to continue in 2005. Price inflation in 2004 was driven by rising manufacturers' input costs formaterials and energy. A number of these influences are still in place, and somefurther price inflation can be anticipated during 2005, though it is notexpected to have as significant an impact as in 2004. Acquisitions made in 2004 are performing well, and are on course to make ameaningful contribution on a full-year basis in 2005. The Group continues toseek growth opportunities and expects to increase further the number of tradingsites during the year. Further investments are being made to increase productstorage and handling facilities, and to enhance customer service. Theseinvestments include several UK operations moving to larger sites, and thecontinued programme of upgrading existing premises. The Board is confident that further progress will be made in 2005. Enquiries: David Williams, Chief ExecutiveGareth Davies, Finance Director SIG plc 0114 285 6300 Gordon Simpson / Kirsty Flockhart Finsbury 020 7251 3801 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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