SIG plc Interim Results 2004 Delivering the goods to construction and industry 8 September 2004

SIG plcInterim Results

2004Delivering the goods

to construction and industry8 September 2004

Introduction

Les TenchChairman

Delivering the goods to construction and industry

3

SIG: Strength and Growth

Excellent underlying sales & profit growth

Strong market position further enhanced

Acquisition opportunities being realised

Sound financial position to support future growth

Financial Review

Gareth DaviesFinance Director


5

Key Financial Points

Solid like for like sales increase

Improvement in operating margin

Ongoing working capital management


6

Summary Profit and Loss

£m

H12004

H12003 Change

Turnover 649.5 611.7 +6.2%Operating profit before goodwill

33.9 * 28.0 +21.3%

Goodwill amortisation (2.5) (2.4)Operating Profit 31.4 * 25.6 +23.0%Interest (2.9) (3.5)Other Finance Charges (0.2) * (0.3)Profit before tax 28.3 21.8 +30.0%

Interest cover 10.2x * 6.8x

* Restated for FRS 17


7

Tax, Earnings and Dividends

Tax rate at 32.6% (2003 : 32.6%)

EPS up 29% to 15.6p (2003 : 12.1p)

DPS up 12.2% to 4.6p (2003 : 4.1p)

Dividend cover 3.4x (2003 : 2.9x)


8

Balance Sheet

£m

June 2004

June 2003

Dec. 2003

Capex / Depreciation 102% 73% 71%

Capital employed 212.5 * 189.4 199.8

Net debt 76.8 94.9 76.3

Gearing 36% * 50% 38%

R.O.C.E. 15.3% * 13.0% 14.9%



9

Working Capital to Sales

June 2004

June 2003

Dec. 2003

Working Capital/Sales* 13.4% 13.3% 13.2%

Increased sales volume£10.1

m

Real working capital increase

£2.4m

Increase in working capital from June 2003 to June 2004

£12.5m

* Working Capital to Sales is calculated using annualised sales and the period end working capital position


10

Working Capital

June2004

June2003

Stock days 41 37

Debtor days 58 60

Bad & doubtful debtas a % of sales

0.7% 0.7%

Creditor days 47 46Working Capital is calculated to

eliminate the effect of acquisitions


11

Average Working Capital

12.0%

12.5%

13.0%

13.5%

14.0%

14.5%

15.0%

Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04

Wo

rkin

g C

apit

al t

o S

ales

Rat

io

* Average working capital is calculated using the average working capital balances for the preceding 12 months

Continued improvement in

average working capital to sales ratio

H1 ‘03 H2 ‘03 H1 ‘04


12

Cash flow

£mJune 2004

June 2003

Cash inflow from trading 42.0 * 36.2Change in working capital (10.4) 20.1

Cash inflow from operations

31.6 * 56.3

Interest and tax (9.6) * (7.6)22.0 48.7

Capex and dividends (18.5) (15.4)Operating cash inflow 3.5 33.3

Acquisitions, exchange & shares (3.9) (4.8)Net (increase) / decrease in borrowings

(0.4) 28.5



13

Pensions update

Restatement of 30 June 2003 comparatives Balance sheet includes pension liability Reclassification of pension costs

Valuation of main scheme completed Triennial valuation as at 1 January 2004 Additional contribution


14

IAS project

Initial impact assessment complete

Actions in progress Development of policies Calculation of opening balance sheet Collection of data from subsidiaries

Next steps Further guidance and application notes to be

issued by IFRIC We will continue to watch developments


15

Financial Summary

Record first half sales and profits

30% PBT improvement

Working capital management

Group in good shape

Trading Review

David WilliamsChief Executive


17

Presentation Content

Trading Highlights

Performance Analysis

Strategy and Outlook

Questions and Answers


18

Trading Highlights

Sales & Profits up in all three geographic regions

Sales & Profits up in all business streams

Excellent growth in sales & profits, through: Stronger market demand Firmer pricing Increased volumes Tight cost controls Improved margins


19

Salesby region

UK & ROI65.1%

Europe30.4%

USA4.5%

%03 FY

04 H1 Δ

UK & ROI 63.9

65.1

+1.2

Europe 31.1

30.4

-0.7

USA 5.0 4.5 -0.5

£649m

Sales up on a like for like basis in all geographic regions


20

Sales Growthby region, in constant currency

5.4% Total

6.7% Total

7.1%

5.4%

9.8%

6.0%

11.0% Total

7.9% Total

0% 2% 4% 6% 8% 10% 12%

Group

USA

EUR

UK & ROI

Acquired Like for Like


21

Sales by sector

Roofing20.1%

Others5.7%

Insulation49.1%

Commercial Interiors25.1%

%03FY

04 H1 Δ

Ins. 50.5 49.1

-1.4

Roofing 20.7 20.1

-0.6

Comm. Int. 23.6 25.1

+1.5

Others 5.2 5.7 +0.5Premiu

m Office Interiors

5.7%

Industrial Insulation15.5%

Sales up in all sectors other than UK Industrial

Trading Review

Performance Analysis


23

USAResults - Sales

$54.0m

£31.8m £29.6m

$51.3m

H1 '03 H1 '04

GrowthLocal currency Total +5.4% LFL +5.4%Sterling

Total -6.7% LFL -6.7%


24

USAResults – Operating Profit

£0.53m£0.73m

$1.32m

$0.85m

H1 '03 H1 '04

GrowthLocal currency

Total+55.2

%

LFL+55.2

%Sterling

Total+37.5

%

LFL+37.5

%


25

USASummary

Market Indicators

Demand Pricing Market Outlook SIG Results

Sales Costs % to sales Op. Margin Op. Profit

Sales and Profits up in improved market conditions

Margin increased


26

Mainland EuropeResults - Sales

€295.0m

£183.1m £197.3m

€265.7m

H1 '03 H1 '04

GrowthConstant currency

Total+11.0

% LFL +9.8%Sterling Total +7.8% LFL +6.5%


27

Mainland EuropeResults – Operating Profit

€9.29m

£3.38m

£6.23m

€4.91m

H1 '03 H1 '04

GrowthConstant currency

Total+89.1

%

LFL+91.3

%Sterling

Total+84.1

%

LFL+86.3

%


28

Mainland EuropeSummary

Market Indicators



Sales up in each country Profits strongly ahead Margin increased Increased market

coverage – 2 additional locations (after integration)


29

Germany

Market Indicators

Demand Pricing

Much improved performance due to internal efficiencies and margin gains

Outlook: Market demand stable and pricing firm

SIG Results £ €

Sales Op. Profit Op. Margin Market share


30

France

Market Indicators

Demand Pricing

Strong sales growth and profits up Sales up 24% in Euros

Acquisition adding to market penetration Outlook: Market demand stable and pricing

firm

SIG Results £ €



31

Netherlands

Market Indicators

Demand Pricing

Sales up 7% in Euros despite depressed market

Outlook: Market conditions expected to improve

SIG Results £ €



32

Poland

Market Indicators

Demand Pricing

Sales up 66%, prices increased Traded profitably in period, against losses in

prior years New branch added Outlook: Continued market growth

SIG Results £ PLN



33

UK & ROI Results - Sales

£396.9m £422.6m

H1 '03 H1 '04

GrowthSterling Total +6.5% LFL +5.9%Growth slightly higher at constant currency


34

UK & ROI Results – Operating Profit

£25.41m£28.89m

H1 '03 H1 '04

GrowthSterling

Total+13.7

%

LFL+12.1

%Growth slightly higher at constant currency


35

UK & ROISummary

Market Indicators



Sales and Profits up in all business streams

Margin increased Residential and non-

residential building activity strong

Increased market coverage – 4 additional locations (after integration)


36

UK & ROIInsulation

Market Indicators

Demand Pricing

Further positive impact from building regulation changes industrial demand down

Prices up, remaining firm Outlook:

Short term volume growth rate likely to moderate Next regulatory boost in 2006 Longer term - rising energy costs expected to increase

demand

SIG Results £



37

UK & ROIRoofing

Market Indicators

Demand Pricing

Further expansion with 5 additional trading sites (after integration)

Upgrading of existing branches underway Local authority housing renovation programmes strong Outlook: Market stable, further expansion planned

SIG Results £



38

UK & ROICommercial Interiors

Market Indicators

Demand Pricing

New build and refurb. strong in both Education and Health sectors

Premium office improved sales and profits up, costs down

Outlook: Market demand improving

SIG Results £



39

Operating Margins

2.5%

6.8%

4.6%

1.7%

1.8%

6.4%

3.2%

5.2%

0% 2% 4% 6% 8%

Group *

USA

EUR

UK & ROI

H1 '04 H1 '03

* Including group costs, pre-goodwill

Trading Review

Strategy & Outlook


41

Acquisitions strategy

Acquisitions will be chiefly:

Focusing on The specialist construction products sector

Our existing geographic markets

Aligned with meeting core objectives of Strengthening the Group

Enhancing shareholder value


42

Acquisitions

Six acquisitions made during H1 2004

Sector Acquired

Strategy

UK: Insulation 1 bolt-on Geographic in-fill

UK: Roofing 3 bolt-on Geographic in-fill

UK: Const. Acc. 1 bolt-on Range extension

France: Comm. Int. 1 bolt-on Geographic in-fill £12m total consideration (including £2m deferred)

Annualised sales of £22m Integrating well


43

Acquisitions since 1 July 2004

UK insulation specialist distributor 7 branches High quality bolt-on with further scope for growth

UK roofline specialist distributor 14 branches Geographic in-fill

German commercial interiors specialist distributor 1 branch Range extension

Year to date (8 Sept ’04) c.£37m consideration (including £3m contingent) Annualised sales of c.£62m


44

Strategic Objectives

Increased share in several main markets

Overseas profits and margins increased

Costs down as percentage of sales

Gearing reduced in first half

EPS up 29%

Develop Market Share in all core operations

Enhance Quality of earnings from overseas businesses

Maintain tight cost control

Strengthen Balance Sheet and reduce Gearing

Improve Earnings Per Share

2004 Progress Report


45

Outlook

UK and ROI Construction activity remaining firm in both

housing and non-residential

Overseas Markets stable and steadily improving

Pricing remaining firm overall Acquisition activity stepped up significantly

Pipeline increasing


46

Long term Outlook

Increases in energy costs expected to reinforce the drive for energy efficiency

SIG is ideally placed to benefit from this changing environment - Insulation offers a proven, low-cost, measure

Further Building Regulation changes due in ‘06

Product pricing - expected upward trend due to manufacturers’ input cost pressures

Branch network expansion targets raised


47

Summary

Market demand and pricing have remained firm since 30 June

Trading strong

Further progress expected

Strongly positioned for future growth

Questions and Answers

Appendix


50

Market volume & price indicatorsUK & Republic of Ireland Volum

ePrice

Insulation Roofing Commercial Interiors Others

Mainland Europe

Germany France Netherlands Poland

USA


51

Trading Site changes

Dec.

2003

Net organic

Net acquired

June2004

To 8 Sept *

UK & ROI

225 -2 6 229 +22

Europe 123 1 1 125 +5

USA 22 0 0 22

Total branches

370 -1 7 376403

(+27)

* Including organic and acquired


52

Market positionSpecialist Distribution

UK & ROI GER FRA NETH POL USA

Insulation 1 1 1 a 2 1 1 a,b

Comm. Int. 1 3 2 1 3 c -

Roofing 1 - - - - -

a Industrial Insulationb Regionallyc Insufficient data


53

Market sectors

Indicative breakdown of SIG main business sectors, based on company estimates.

% of Group Total

New Build% of

Subgroup

RMI % of

Subgroup

Housing 28% 42% 58%

Non-housing Building &

Construction56% 56% 44%

Industry (non-construction) 16% 39% 61%

Note: It is not possible to sharply define sales into the respective sectors, as many products are used for all types of work, in all types of construction


54

EBITDA Growth

0

10

20

30

40

50

60

70

80

90

'99 '00 '01 '02 '03 '04

EBIT

DA

/ £

m

CAGR over 5 years: 10.6%

H1 04 Growth: 15.9%

Documents

SIG plc Interim Results 2004 Delivering the goods to construction and industry 8 September 2004