SIG Annual Report 2013 | Quarterlytics

FY2013 Annual Report · SIG

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ANNUAL REPORT AND ACCOUNTS 2013

STRONGER TOGETHER

ABOUT US

SIG IS A LEADING DISTRIBUTOR OF SPECIALIST BUILDING
PRODUCTS IN EUROPE WITH STRONG POSITIONS IN ITS CORE
MARKETS OF INSULATION AND ENERGY MANAGEMENT,
EXTERIORS AND INTERIORS.

Our mission is to give our customers the edge through value, reliability
and specialist knowledge.

SIG’S STRATEGIC INITIATIVES TO IMPROVE BUSINESS PERFORMANCE

SIG is targeting a net annual benefit of c.£30m by 2016 from the following four strategic initiatives to improve business performance,
with a key theme of working more closely together as a group.

PROCUREMENT

COMMERCIAL
VEHICLES

BR ANCH
NETWORK

eCOMMERCE

WORKING CLOSELY
WITH KEY SUPPLIERS

IMPROVING FLEET
UTILISATION

FURTHER OPTIMISING
OUR NETWORK

PROVIDING CUSTOMERS
WITH MORE CHOICE

Our strategy
p.14

KEY PERFORMANCE
INDICATORS

CONTENTS

LIKE FOR LIKE* SALES PERFORMANCE %

(0.4)%

(0.4)

3
1
0
2

2
1
0
2

UNDERLYING^ GROSS MARGIN %

26.4%

3
1
0
2

2
1
0
2

UNDERLYING^ OPERATING MARGIN %

3.9%

3
1
0
2

2
1
0
2

0.3

26.4

3.9

LIKE FOR LIKE* WORKING CAPITAL TO SALES %

8.8%

3
1
0
2

2
1
0
2

8.8

8.4

Read more about us
online at www.sigplc.com

Q&A with the Chief Executive
p.9

02 Working together

04 How we operate

06 Chairman’s statement

08 Chief Executive’s statement

10 Our markets

12 Our business model

14 Our strategy

16 Key performance indicators

Principal risks and uncertainties

22 Operational review

Financial review

38 Corporate responsibility report

50 Chairman’s introduction to governance

Board of Directors

52 Corporate governance

60 Report of the Audit Committee

63 Directors’ remuneration report

80 Nominations Committee

81 Directors’ responsibility statement

RETURN ON CAPITAL EMPLOYED (POST-TAX)# %

8.8%

3
1
0
2

2
1
0
2

Board of Directors
p.51

8.8

8.6

Like for like excludes the impact of acquisitions and disposals
completed or agreed in the current or prior year.

^ Underlying is before the amortisation of acquired intangibles, net

restructuring costs, other one-off items, loss arising on the sale
or agreed sale of businesses and associated impairment charges,
trading profits and losses associated with disposed businesses, other
impairment charges, fair value gains and losses on derivative financial
instruments, the defined benefit pension scheme curtailment gain, the
taxation effect of these items and the effect of changes in taxation.

# Return on Capital Employed (“ROCE”) is defined as underlying
operating profit less taxation divided by average net assets plus
average net debt. Net assets at 31 December 2013 are stated
before the £42.8m impairment charge attributable to the agreed
sale of German Roofing.

Group accounts

Company accounts

83 Consolidated income statement

128 Company balance sheet

Consolidated statement of
comprehensive income

85 Consolidated balance sheet

129 Statement of significant accounting policies

130 Notes to the Company accounts

86 Consolidated cash flow statement

Principal trading information

Consolidated statement
of changes in equity

134 Principal addresses

Statement of significant accounting policies

135 Principal trading subsidiaries

Critical accounting judgments and key
sources of estimation uncertainty

136 Company information

94 Notes to the accounts

123

Independent Auditor’s report

126 Five year summary

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewWORKING TOGETHER

SIG IS CHANGING. FROM BEING A LOOSE FEDERATION OF INDIVIDUAL
BUSINESSES, IT IS NOW WORKING TOGETHER MORE AS A GROUP.
WE’RE STRONGER TOGETHER.

OUR PEOPLE

HIGH QUALITY, MOTIVATED EMPLOYEES

The Group has excellent, high quality, motivated
employees who care passionately about the business.

In the past, SIG has acted more like a loose federation of individual businesses rather than a
group; however, this is changing. Our vision is to be stronger together. The Group is working
together more to improve performance by making its whole greater than the sum of the
parts. This will enable SIG to fully leverage its scale and presence in the marketplace. This
applies to the way we work with our customers, our suppliers and each other.

Adapting to this new way of working will require significant culture change. Although it will
take time, progress is already being made. In early 2014, SIG is conducting an employee
satisfaction survey to help maximise motivation and retention of our employees.

Our business model
p.12

SIG plc Annual Report and Accounts 2013OUR PEOPLE

OUR BRAND

OUR SERVICE

HIGH QUALITY, MOTIVATED EMPLOYEES

STRENGTHENING
OUR BRAND

GREAT RELATIONSHIPS
WITH OUR CUSTOMERS

During 2013 SIG streamlined its UK
insulations and interiors branding.

Fifteen legacy insulation and interiors brands were
consolidated into the five clear brands of SIG Insulation, SIG
Technical Insulation, SIG Interiors, SIG Construction
Accessories and SIG Fixings. This has made it much easier
for customers to identify the Group’s branches and product
offerings, as well as providing SIG with back‑office synergies.

Following this successful exercise, SIG will be rebranding
its UK roofing business during 2014, where it currently
trades under 40 different brands.

SIG’s strong customer focus and local
relationships are crucial to its long-term
success. The Group has a market-leading
position in terms of its service levels,
product knowledge and technical expertise.

Customers place a high value on the Group’s specialist
proposition. SIG is focused on retaining this competitive
advantage as it goes through a period of change and will
balance local requirements with the need to work more
holistically as a Group.

Q&A with the Chief Executive
p.9

How we operate
p.4

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewHOW WE OPERATE

SIG’S PRODUCT AND SERVICE OFFERING IS OF SIGNIFICANT SCALE
WITH LEADING POSITIONS IN EACH OF ITS CORE MARKETS.

OUR PRODUCTS

INSULATION AND
ENERGY MANAGEMENT

EXTERIORS

INTERIORS

SIG is the largest supplier of insulation
and related products in Europe. The
Group is the market leader in the UK,
Ireland, Germany and Poland and
is the leader in industrial insulation
in France.

SIG is the largest specialist supplier
of exterior roofing products in the
UK and Ireland and the leading
independent supplier in France. It is
also a key regional supplier in Poland.

SIG is a leading supplier of all products
required for the interior fit out of
non-residential buildings in Europe.

£1,223.8m

% OF CONTINUING
GROUP REVENUE

47.4%

£754.9m

% OF CONTINUING
GROUP REVENUE

29.2%

£603.7m

% OF CONTINUING
GROUP REVENUE

23.4%

NUMBER OF TRADING SITES

275

(108 of which also supply
interior fit out products)

317

184

(108 of which also supply
insulation products)

SIG plc Annual Report and Accounts 2013
OUR PRODUCTS

OUR STRATEGY

WHERE WE OPERATE

Find out more online at
www.sigplc.com

The Group has a clear strategy based on
its specialism, high customer service levels
and scale, giving SIG a clear competitive
advantage in the marketplace.

Our strategy
p.14

MAINLAND EUROPE

FRANCE

NUMBER OF BRANCHES

SALES

204

£622.4m

GERMANY AND AUSTRIA

NUMBER OF BRANCHES

SALES

BENELUX*

£437.5m

NUMBER OF BRANCHES

SALES

POLAND

£154.8m

NUMBER OF BRANCHES

SALES

£124.7m

Includes international air handling business (headquartered in The Netherlands).

UK AND IRELAND

UNITED KINGDOM

DEMAND DRIVERS

NUMBER OF BRANCHES

SALES

Construction activity is the main driver
of demand for SIG’s products. In addition,
increasingly stringent regulations benefit
specialist suppliers like SIG who can
provide the necessary expertise when
interpreting these changes.

311

IRELAND

£1,177.5m

NUMBER OF BRANCHES

SALES

£65.5m

Our markets
p.10

Operational review
p.22

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewCHAIRMAN’S STATEMENT

LESLIE VAN DE WALLE
CHAIRMAN

A YEAR OF DISTINCT HALVES

HIGHLIGHTS

INTRODUCTION

e Post-tax ROCE up 20bps to 8.8%

e Underlying PBT up 5.3% to £88.1m

e Dividend increased by 18.3%

e Moving into the next stage of

SIG’s development

e Working more closely together as a group

e New Group HR Director appointed

The first half of 2013 was affected by the extended winter weather across
Europe, which exacerbated already weak market conditions, resulting
in a like for like sales decline of 3.1% for the Group. However, trading
improved significantly as the year progressed and SIG delivered a strong
performance in H2 with like for like sales up by 2.2%.

For the year as a whole like for like sales decreased marginally, by 0.4%,
but revenues in Sterling were up by 4.4% having benefited from favourable
exchange rates and acquisitions. Having continued to tightly control our
underlying cost base, underlying profit before tax at £88.1m increased by
5.3% compared to prior year (£83.7m).

With non-underlying charges before tax totalling £86.0m (2012: £40.0m), the
Group recorded a total profit before tax of £2.1m (2012: £43.7m). Statutory
loss after tax was £14.3m (2012: profit of £26.6m). At £121.2m, following
£16.4m of acquisition expenditure, SIG continued to keep net debt well
within its target range for leverage (net debt/underlying EBITDA), of 1.0x–1.5x.

The Group continued to increase its post-tax Return on Capital Employed
(“ROCE”), its key financial metric, by 20bps to 8.8%, and remains focused
on its medium-term target of achieving ROCE 300bps greater than its
weighted average cost of capital by 2015.

STRATEGY

Following his appointment as Chief Executive, Stuart Mitchell conducted a review
of the Group’s strategy, concluding that, although there are some areas for
improvement, the Group is generally heading in the right direction and is in
the right products and markets. One area that does require attention, however,
is the way in which SIG works, as historically its businesses have tended to
operate independently of each other. This has meant we have not been fully
leveraging the Group’s significant scale or presence in the marketplace.

We now need to move onto the next stage of our development and take a more
holistic view of the Group. We recognise that this will require significant cultural
change and will take time. To help make this happen the Group has appointed
a new HR Director, Linda Kennedy, who is an expert in change and talent
management. Of course there is a balance to be had, so as well as maximising
Group synergies we also need to retain our strong customer focus and local
relationships, ensuring that managers retain full accountability of their branches.

Stuart has outlined four strategic initiatives to improve business performance
from which SIG is targeting a net annual benefit of c.£30m by 2016. These
are all based around the common theme of working together more closely
as a group in the areas of procurement, commercial vehicles, branch network
and eCommerce.

SIG plc Annual Report and Accounts 2013A YEAR OF DISTINCT HALVES

Corporate governance
p.50

Board of Directors
p.51

BOARD

OUTLOOK

Stuart Mitchell was appointed as Chief Executive with effect from 1 March 2013
(Stuart joined SIG on 1 December 2012 as Chief Executive Designate).

Further information on the Board of Directors can be found on page 51.

I wish to take the opportunity to pass on my thanks to colleagues on the Board
who have again made invaluable contributions during the year under review.

During 2014 we expect construction activity in the UK residential market to
remain buoyant, with the non-residential sector continuing to be subdued.
In Mainland Europe construction markets are anticipated to remain variable.
The trading outlook, operational efficiency savings and an expected modest
net benefit from its strategic initiatives give the Group confidence in
achieving good progress this year.

CORPORATE GOVERNANCE

The Board provides strong leadership to the Company and engages well
with both management and stakeholders. SIG is committed to business
integrity, high ethical values and professionalism in all of its activities. At SIG,
we believe that good governance comes from an effective Board and the
Board supports the highest standards in corporate governance. The Board
has in place a diversity policy and has set out its aim of achieving at least
25% female representation among the Board’s membership by 2015.

The Board considers that throughout the year under review the Company
has complied with the governance rules and best practice provisions applying
to UK listed companies. Shareholders will also note that the Directors’
Remuneration Report on pages 63 to 79 complies with the new
Department for Business, Innovation and Skills regulations.

As Chairman, I take responsibility for ensuring that good corporate
governance is operated at SIG in order that we can maintain the highest
standards to which we continually aspire. Details of this and how corporate
governance is operating in SIG can be found in the Corporate Governance
Report on pages 50 to 59.

EMPLOYEES

On behalf of the Board and Shareholders I would like to thank our
employees for their continued commitment and hard work during the year.

DIVIDENDS

The Board has proposed a final dividend of 2.4p per ordinary share. Taken
together with the interim dividend of 1.15p per ordinary share, this provides
a total dividend of 3.55p per ordinary share for the year. The final dividend
is expected to be paid on 30 May 2014 to Shareholders on the register at
close of business on 2 May 2014. The ex-dividend date is 30 April 2014.

Going forward the Board is committed to a progressive dividend policy
while maintaining a dividend cover of 2x–3x on an underlying basis over
the medium-term.

LESLIE VAN DE WALLE
Chairman
12 March 2014

BOARD GOVERNANCE STRUCTURE

CHAIRMAN

Key objectives: the leadership, operation and governance of the Board,
ensuring effectiveness, and setting the agenda for the Board.

THE BOARD

Key objectives: the overall conduct of the Group’s business
and setting the Group’s strategy.

AUDIT
COMMITTEE

Key objectives:
to ensure high
standards of
corporate and
regulatory reporting
controls, risk
management and
compliance.

REMUNERATION
COMMITTEE

Key objectives:
to determine the
remuneration policy
for the Executive
Directors and other
Senior Management,
renew remuneration
packages, Executive
Directors’ service
contracts and review
remuneration trends
across the Group.

NOMINATIONS
COMMITTEE

Key objectives:
the nomination of
suitable candidates
to fill Executive and
Non-Executive
vacancies on
the Board.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewCHIEF EXECUTIVE’S STATEMENT

STUART MITCHELL
CHIEF EXECUTIVE

LEADING POSITIONS IN CORE MARKETS

HIGHLIGHTS

INTRODUCTION

e Clear strategy based on specialist model

and product offering

e Strong customer focus and ownership at

local level

e Provision of technical expertise and

delivery capability

STRATEGIC REPORT CONTENTS

Q&A with the Chief Executive

10 Our markets

12 Our business model

14 Our strategy

Key performance indicators

SIG is a leading distributor of specialist building products in Europe and has a clear
strategy. The Group has a product and service offering of significant scale
with strong positions in its three core product areas of Insulation and
Energy Management, Exteriors and Interiors.

The Group plays a crucial role in the supply chain in both the new construction
market and Repairs, Maintenance and Improvement (“RMI”) market. Each
of these account for around half of SIG’s revenues.

SIG operates from trading sites across the UK and Ireland and Mainland Europe
and employed 9,283 people as at 31 December 2013 (excluding German
roofing employees). The Group’s main countries of operation are the UK,
France and Germany, which together account for 87% of its continuing revenues.
The Group operates under a variety of trading names which are widely
recognised throughout their respective market sectors and countries.

While SIG is seeking to work more closely together to exploit Group
synergies, its operations are managed on a country-by-country basis.
Within each country there is dedicated divisional management focusing on
each market sector. This is critical to the success of the business, ensuring
that close attention is given to the specific requirements of the customer.

While the vast majority of the products SIG distributes have been manufactured
by other companies, SIG fabricates certain bespoke products. This involves
adding value by cutting, reshaping or attaching two or more of its core products
together. The largest fabrication activities are the cutting and shaping of insulation,
for example, Insulshell and Insulslab, and the assembly of roofing panels.

STUART MITCHELL
Chief Executive
12 March 2014

Principal risks and uncertainties

22 Operational review

Financial review

Treasury risk management

Corporate responsibility report

SIG plc Annual Report and Accounts 2013
Q&A

Stuart Mitchell has worked with SIG for over a year and here
talks about the performance of the Company and the Group’s
strategic direction.

WORKING ON A SUCCESSFUL STRATEGY FOR SIG

Q: WHAT IS YOUR BACKGROUND?
My background has been in retail operations. I learned my trade at
Sainsbury’s during a 22 year career, starting as a Graduate Trainee on
the shop floor and culminating as Managing Director. I then moved to the
multinational Hutchison Whampoa, again in retail, based in Hong Kong
and covering the rapidly expanding Asian market.

Before joining SIG, I was Chief Executive of Wilkinson, where I grew the
store network by 50%, introduced an eCommerce business, rationalised
the supply base and established an overseas sourcing business in Hong Kong.

Q: WHY DID YOU JOIN SIG?
For me, SIG represents an opportunity to apply the operational skills
I’ve gained throughout my career. There are lots of fundamental
similarities between the businesses I’ve worked for and SIG.

Meeting the needs of customers is key, whether they be trade or retail.
All customers want the same thing – quality, reliability and high service
levels at the right price.

Equally important is supply chain management and procurement –
which are particularly crucial when you’re selling high volumes of
relatively low-margin products.

Q: WHAT WERE YOUR FIRST IMPRESSIONS OF THE GROUP?
My early impressions of SIG were that it was in good shape but with areas
for improvement. The Group has a clear strategy that is taking it in the right
direction – and, through the five pillars of profit recovery, has already
identified many of the steps needed to make progress.

The Group has excellent, high quality, motivated employees, who care
passionately about the business, and it has sound financials, with a strong
balance sheet and tight cost control.

Furthermore, based on its specialism, size and customer proposition,
SIG has a clear competitive advantage in the marketplace.

However, there are some areas that need addressing in order for us to
deliver higher shareholder returns. We don’t do enough together. We act
more like a loose federation of individual businesses than a group.

Finally, we need to reinvest in the business following a period of reduced capital
investment, and our branding has been confusing, particularly in the UK.

Q: WHAT ARE YOU DOING TO IMPROVE THE BUSINESS?
We believe that all of these areas can be effectively addressed and we’re
already making good progress in doing so.

We outlined our strategy to the investment community at our Capital
Markets Day in November and, as you will see from the front cover of this
report, we’re encapsulating this strategy as SIG being “stronger together”.

As well as changing the way we work, we need to invest more in our asset
base and people. During the downturn the focus, quite rightly, was to take
cost out of the business. This has left us with some legacy issues. We now
need to improve our fleet, branches and IT infrastructure. This includes
a new UK ERP system, which we are in the process of implementing.
In terms of people we are bringing in additional expertise in some areas,
such as procurement and IT.

On branding we have already streamlined our UK insulations and interiors
brands so they are much simpler for our customers.

Q: CAN YOU TELL US MORE ABOUT YOUR STRATEGIC INITIATIVES?
We’ve identified four key areas to improve business performance that are all
based around a common theme of working together more closely. They are:

e procurement, which we believe has the most significant potential to

improve our returns;

e commercial vehicles, where we can do more to improve utilisation and

the way we procure and manage our fleet;

e branch network, where we’re adopting a two-phase approach, with

benefits in the short-term and long-term; and

e eCommerce, where we need to provide our customers with more

choice and develop common platforms within the Group.

Each of these initiatives is being led by a senior operational expert and includes
representatives from across our businesses. Each workstream also has a sponsor
at our Group Executive Committee, to monitor progress and to ensure delivery.

The last year has been spent putting a clear and deliverable plan into place
and we are now in the implementation phase. We’re targeting to deliver
a net annual benefit of c.£30m from this programme by 2016.

Q: WHAT ARE YOUR PLANS FOR GROWTH?
Our strategic initiatives are very much focused on improving efficiency.
This is right for the stage the business is at. The first step needs to be about
optimising the existing business model.

That’s not to say we are ignoring growth. I believe that a number of our
existing businesses have significant untapped potential which can be leveraged
to much greater effect. There are opportunities available to expand our
network, for example in Southern France.

We’re thinking about how we grow the business in the longer-term, above
and beyond any benefit from market recovery, so it’s firmly on the agenda.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewOUR MARKETS

SIG HAS A BALANCED MARKET EXPOSURE BETWEEN
THE RESIDENTIAL AND NON-RESIDENTIAL SECTORS, GIVING
THE GROUP A MORE EVEN SPREAD THROUGH THE CYCLE.

MARKETS OF OPERATION

RESIDENTIAL

SIG is more weighted to the essential Repairs,
Maintenance and Improvement (“RMI”) market
which is less sensitive to the economic fluctuations
that can impact the new build sector and
provides an underlying market in periods
of economic downturn.

PERCENTAGE OF CONTINUING REVENUE BY MARKET

Residential

Non-residential

Industry

M I

53%

I
L

56%

NON-RESIDENTIAL

SIG’s largest market includes both private
and public expenditure on schools, hospitals,
prisons, warehouses, leisure complexes,
retail developments, sports stadia,
airports and offices.

43%

47%

10%

44%

R
MI

61% 39%

RMI NEW B U I L D

INDUSTRY (NON-CONSTRUCTION)

SIG predominantly supplies industrial
(technical) insulation to this market which
includes, for example, power stations and
process industries where heat is an important
part of the production process.

Our strategy
p.14

SIG plc Annual Report and Accounts 2013

Operational review
p.22

PRODUCT DEMAND DRIVERS

OUR MARKET POSITION

INSULATION AND ENERGY
MANAGEMENT
e Reducing energy consumption and related
costs, particularly given recent higher
energy prices.

e Increasingly stringent Government

regulation across Europe aimed at lowering
energy usage and reducing Greenhouse
Gas Emissions.

EXTERIORS
e The replacement of old/damaged roofs

gives rise to an ongoing RMI requirement,
providing a core product demand.

e Demand for new products to reduce
building exterior maintenance costs.

e Growth of specialist distribution as
the main supply route in the market.

The Group has a clear competitive advantage in the
market based on its specialism, size and customer
proposition. SIG is able to combine customer
relationships at a local level with its national brands,
together with the scale efficiencies that are derived
from being part of a multinational group.

2013

2012

Number of branches

311

303

204

200

UNITED
KINGDOM

IRELAND

GERMANY*
AND AUSTRIA

FRANCE

POLAND

BENELUX^

TOTAL

y
g
r
e
n
E
d
n
a
n
o

i
t
a
u
s
n

t
n
e
m
e
g
a
n
a
M



668

681

s
r
o
i
r
e
t
x
E



s
r
o
i
r
e
t
n



INTERIORS
e Increasingly stringent fire and acoustic
regulations, which as well as driving
demand, also benefit the larger specialist
suppliers that can provide the necessary
technical expertise.

e Increased demand for integrated solutions.

e Demand for higher standards of internal

fit outs.

On 28 February 2014 the Group completed the sale of its German Roofing business.
The number of branches at 31 December 2013 has been reduced to reflect the 24 branches
associated with this business unit.

^ Includes international air handling business (headquartered in The Netherlands).

SIG HAS CONSISTENTLY OUTPERFORMED
ITS MARKETS BY 2–3%, DEMONSTRATING THE VALUE
OF BEING A SPECIALIST DISTRIBUTOR.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewStrategic reportOverview

OUR BUSINESS MODEL

SIG PLAYS A CRUCIAL ROLE IN THE SUPPLY CHAIN, WORKING
CLOSELY WITH SUPPLIERS AND CUSTOMERS TO ENSURE THE RIGHT
PRODUCT IS DELIVERED TO THE RIGHT SITE AT THE RIGHT TIME.

OUR BUSINESS MODEL

ADDING SHAREHOLDER VALUE

The Group continues to
endeavour to create shareholder
value through its business model,
which is based on:

e Customer relationships
e Credit provision
e Innovation in the supply chain
e Delivery capability
e Customer service and

technical advice

e Product knowledge and depth
e Market-leading positions
e Group synergies and
cross-fertilisation

ENERGY EFFICIENCY

With around 40% of global energy
consumption relating to buildings,
better insulation offers the highest
potential for carbon dioxide savings
in Europe.

BREAK BULK

Taking bulk delivery
from the manufacturers,
storing product safely
and securely, and
breaking it into specific
job quantities that are
manageable for specialist
contractors.

BUILDING REGULATIONS

As Governments across Europe
seek to reduce energy usage and
Greenhouse Gases, building regulations
are becoming increasingly stringent
and more complex.

SIG plc Annual Report and Accounts 2013OUR BUSINESS MODEL

MANUFACTURERS/SUPPLIERS

INSULATION
AND ENERGY
MANAGEMENT

EXTERIORS

INTERIORS

DELIVERY
CAPABILITY

AVAILABILITY
OF STOCK

TECHNICAL
ADVICE

CREDIT

Using its extensive
delivery fleet and
geographical coverage
to provide immediate
availability of product on
site and at short notice,
enabling contractors to
maximise labour
efficiency.

Providing an efficient
sales channel through
which manufacturers
can access thousands
of specialist contractors.

Providing customers with
technical advice and
product expertise in order
to comply with increasingly
complex building
regulations and help to
minimise their costs.

Providing credit to
customers based on
established and rigorous
control procedures,
ensuring continuity
of the supply chain.

EXPERTISE OF OUR PEOPLE

SIG can provide the necessary technical expertise to help
its customers understand the latest changes to building regulations.

OUR CUSTOMERS

MAINLY SPECIALIST CONTRACTORS/SUBCONTRACTORS WORKING
ON LARGER PROJECTS.

ADD VALUE
THROUGH
FABRICATION

SIG adds value by
cutting, reshaping or attaching
certain products to create
bespoke solutions for the
construction industry.

MARKET DEMAND
DRIVERS

NEW BUILD

REPAIRS,
MAINTENANCE
AND IMPROVEMENT

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewOUR STRATEGY

SIG HAS A CLEAR STRATEGY TO GROW IN ITS THREE CORE
MARKETS OF INSULATION AND ENERGY MANAGEMENT, EXTERIORS
AND INTERIORS BY COMBINING THE REPUTATIONAL STRENGTHS OF
ITS LOCAL BRANDS WITH THE SCALE EFFICIENCIES AND KNOW-HOW
OF A MULTINATIONAL GROUP.

SIG’s strategy is underpinned by the following five pillars of profit recoverability:
e Outstanding customer service;
e Sales outperformance;

e Gross margin enhancement;
e Operational efficiency; and

e Focus on financial returns.

The Group has outlined four strategic initiatives to improve business performance and support the delivery of our strategy.

STRATEGIC
INITIATIVE

CURRENT
POSITION

PROCUREMENT

COMMERCIAL VEHICLES

BRANCH NETWORK

eCOMMERCE

WORKING CLOSELY WITH A
RANGE OF KEY SUPPLIERS

IMPROVING FLEET UTILISATION

FURTHER OPTIMISING OUR

PROVIDING CUSTOMERS

CURRENT NETWORK

WITH MORE CHOICE

e Uncoordinated purchasing conducted at multiple levels

e Uncoordinated purchasing of fork lift trucks (“FLT”)

e Sub-optimal network structure in UK and Germany

e Ad hoc development of eCommerce websites

within the Group

and lorries

e Long tail of suppliers with duplication of products

e Under-utilised fleet

e Inefficient scheduling

e Too many branches in some areas and too

few elsewhere

within SIG

e Relatively small and not integrated across the Group

ACTIONS

e Professionalise function and invest in new resources

e Telematics implementation

e Further branch rationalisation (UK)

e Develop scalable model on one platform

e Consolidate volumes and leverage size

e Group-wide buying agreements

e Scope ideal network for UK and Germany

e Support multiple devices

e Work more closely with selected suppliers

e Grow own label and new products

e Review North East supersite

e Integrate with new UK ERP system

e Fulfilment through branch network

CHALLENGES

e New way of working for the Group

e Closure costs for existing sites

e Lack of expertise within the Group

e Coordinate buying across businesses and countries

e Standardise lorries/FLT

e Availability of suitable new branch locations

e Different ERP systems across SIG

KEY TARGETS

e Fully recruited team – H1 2014

e Implement telematics (Mainland Europe) – H1 2014

e UK branch rationalisation – H1 2014

e Design UK platform – H1 2014

e Reduce suppliers by one third – 2015

e Fleet purchasing agreement – H1 2014

e North East supersite appraisal – H2 2014

e Launch UK platform – Q1 2015

e Grow own label by 50% – 2016

e Implement telematics (UK) – H2 2013 completed

e Scope UK ideal network – H1 2014

e Mainland Europe strategy – 2015

e FLT purchasing agreement – H2 2013 completed

e Scope Germany ideal network – H2 2014

LINK TO
STRATEGIC
PILLARS

e Gross margin enhancement

e Operational efficiency

e Focus on financial returns

e Outstanding customer service

e Operational efficiency

e Focus on financial returns

e Outstanding customer service

e Sales outperformance

e Operational efficiency

e Focus on financial returns

e Sales outperformance

e Operational efficiency

e Focus on financial returns

SIG plc Annual Report and Accounts 2013WE ARE TARGETING A NET
ANNUAL BENEFIT OF C.£30M
BY 2016 FROM OUR STRATEGIC
INITIATIVES

TARGET NET ANNUAL BENEFIT BY 2016

c.£30m

BENEFITS
2014: INVESTMENT AND CHANGE
Gross benefit: £8m–£12m
Net benefit: £1m–£5m

2015: MEANINGFUL PAYBACK
Gross benefit: £25m–£30m
Net benefit: £15m–£20m

2016: SIGNIFICANT SAVINGS
Gross benefit: c.£42m
Net benefit: c.£30m

within the Group

and lorries

e Long tail of suppliers with duplication of products

e Under-utilised fleet

e Inefficient scheduling

e Professionalise function and invest in new resources

e Telematics implementation

e Consolidate volumes and leverage size

e Group-wide buying agreements

e Work more closely with selected suppliers

e Grow own label and new products

PROCUREMENT

COMMERCIAL VEHICLES

BRANCH NETWORK

eCOMMERCE

WORKING CLOSELY WITH A

IMPROVING FLEET UTILISATION

RANGE OF KEY SUPPLIERS

FURTHER OPTIMISING OUR
CURRENT NETWORK

PROVIDING CUSTOMERS
WITH MORE CHOICE

e Uncoordinated purchasing conducted at multiple levels

e Uncoordinated purchasing of fork lift trucks (“FLT”)

e Sub-optimal network structure in UK and Germany

e Ad hoc development of eCommerce websites

e Too many branches in some areas and too

few elsewhere

within SIG

e Relatively small and not integrated across the Group

e Further branch rationalisation (UK)

e Develop scalable model on one platform

e Scope ideal network for UK and Germany

e Support multiple devices

e Review North East supersite

e Integrate with new UK ERP system

e Fulfilment through branch network

e New way of working for the Group

e Closure costs for existing sites

e Lack of expertise within the Group

e Coordinate buying across businesses and countries

e Standardise lorries/FLT

e Availability of suitable new branch locations

e Different ERP systems across SIG

e Fully recruited team – H1 2014

e Implement telematics (Mainland Europe) – H1 2014

e UK branch rationalisation – H1 2014

e Design UK platform – H1 2014

e Reduce suppliers by one third – 2015

e Fleet purchasing agreement – H1 2014

e North East supersite appraisal – H2 2014

e Launch UK platform – Q1 2015

e Grow own label by 50% – 2016

e Implement telematics (UK) – H2 2013 completed

e Scope UK ideal network – H1 2014

e Mainland Europe strategy – 2015

e FLT purchasing agreement – H2 2013 completed

e Scope Germany ideal network – H2 2014

e Gross margin enhancement

e Operational efficiency

e Focus on financial returns

e Outstanding customer service

e Operational efficiency

e Focus on financial returns

e Outstanding customer service

e Sales outperformance

e Operational efficiency

e Focus on financial returns

e Sales outperformance

e Operational efficiency

e Focus on financial returns

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewStrategic reportOverviewKEY PERFORMANCE INDICATORS

IN ORDER TO EVALUATE SUCCESS AGAINST THE GROUP’S FINANCIAL
AND STRATEGIC OBJECTIVES, THE BOARD HAS IDENTIFIED FIVE
KEY PERFORMANCE INDICATORS ON WHICH IT MONITORS AND
ASSESSES THE GROUP’S PERFORMANCE.

LIKE FOR LIKE SALES
PERFORMANCE %

(0.4)%

UNDERLYING GROSS MARGIN %

26.4%

(0.4) 2

3
1
0

0.3

2
1
0
2

1
1
0
2

3
1
0
2

2
1
0
2

1
1
0
2

7.7

26.4

26.0

Like for like sales performance is defined as the
percentage growth/(decline) in the Group’s sales
per day on a constant currency basis, excluding
acquisitions and disposals completed or agreed in
the current or prior year. Sales are not adjusted
for branch openings and closures.

SIG expected the markets in which it operates to decline in
2013 by similar levels to that experienced in 2012 (c.2.4%).
Although the Group’s sales performance is largely dictated by
market volumes, the Group continually aims to outperform
the market and take market share. Over recent years, the
Group has outperformed the market between 2% and 3%,
and in 2013 the Group was once again targeting to
outperform its markets by a similar level, whilst taking
an appropriate balance between sales growth and gross
margin enhancement.

In 2013 the Group recorded an underlying sales growth
in constant currency of 1.9% including the impact of 2013
and 2012 acquisitions (not adjusted for working days).
Excluding these acquisitions, the Group’s sales on a
constant currency basis were flat year on year.

On a like for like constant currency basis (i.e. adjusted for
working days), Group sales for the full year fell by 0.4%
as the strong performance in the second half (+2.2%) was
outweighed by the difficult, weather-affected start to the
year (first half down 3.1%).

SIG estimates that overall its market declined by c.3.2%
in 2013. Given that the Group reported a like for like
constant currency sales decline of 0.4%, this equates
to a market outperformance of c.2.8%, which is in line
with the Group’s average over recent years.

SIG is targeting a level of market outperformance similar
to that recorded in 2013 (i.e. 2%–3%) but will continue
to seek an appropriate balance between sales growth and
gross margin enhancement.

Underlying gross margin is the ratio of
underlying gross profit to underlying sales
(excluding businesses sold or agreed to
be sold in 2013 and 2012).

The Group’s objective for 2013 was to record
a further improvement in its gross margin.

In the context of declining markets, heightened competition
and significant sales market outperformance (2.8%),
the Group overall delivered a gross margin consistent
with the level experienced in 2012 at 26.4%.

The Group is targeting further improvement in gross
margin in 2014 and is seeking to continue to work
closely with a range of key suppliers in order to drive
enhanced returns. A number of actions have been
identified as part of the Group’s key strategic priorities
on pages 14 and 15.

DEFINITION

2013 OBJECTIVE

2013 PERFORMANCE

2014 OBJECTIVE

SIG plc Annual Report and Accounts 2013Our strategy
p.14

Financial review
p.28

UNDERLYING OPERATING
MARGIN %

LIKE FOR LIKE WORKING CAPITAL
TO SALES %

RETURN ON CAPITAL EMPLOYED
(POST-TAX) %

3.9%

8.8%

3
1
0
2

2
1
0
2

1
1
0
2

3.9

3.7

3
1
0
2

2
1
0
2

1
1
0
2

8.8

8.4

8.0

3
1
0
2

2
1
0
2

1
1
0
2

8.8^

8.6

7.9

^ Excluding the capital employed impact arising from the
impairment of German Roofing at 31 December 2013.

Underlying operating margin is the ratio of
underlying operating profit to underlying sales
(excluding businesses sold or agreed to be sold
in 2013 and 2012).

Working capital to sales is defined as the ratio of
working capital (including provisions but excluding
pension scheme obligations) to annualised sales
(after adjusting for any acquisitions and disposals
completed or agreed in the current and prior year)
on a constant currency basis.

Return on Capital Employed (“ROCE”) is
defined as underlying operating profit less
taxation divided by average net assets plus
average net debt. ROCE is then compared
to the Weighted Average Cost of Capital
(“WACC”).

The Group’s objective for 2013 was to continue the
incremental improvements noted over recent years and
deliver an underlying operating margin in excess of that
achieved in 2012.

As a consequence of a 1.9% increase in continuing
constant currency sales, flat gross margin, limiting
operating cost inflation to 1.7%, together with efficiency
savings arising from 2013 and 2012 restructuring actions,
the Group achieved an operating margin consistent with
the prior year at 3.9%.

In order to support the organic growth of the business,
the Group has continued to invest in a number of
initiatives and new branches, which increased the Group’s
operating costs by £4.7m year on year.

In 2012 the Group reported a working capital to sales
ratio of 8.4%. Management acknowledged that as the
Group’s restructuring provisions reduce over time
(i.e. rent payments on onerous properties) there would
be upward pressure on the Group’s working capital
to sales ratio. The Group therefore anticipated a slight
increase in the working capital to sales ratio in 2013 but
anticipated the working capital to sales ratio would not
exceed 9%.

The Group recorded a working capital to sales ratio of
8.8% in 2013, in line with the Group’s stated objective.
The increase of 40bps over the prior year arises from
stronger year on year sales activities in the last quarter
of the year and also includes the anticipated increase
from regulatory changes in some of the Group’s
countries of operation.

The difference between ROCE and WACC determines
whether the Company is creating an economic profit for
its shareholders. If ROCE equals WACC then profit is
just compensating investors for the risk they bear in
holding the Company’s equity or debt. The Group’s
objective for 2013 was to achieve a further incremental
ROCE improvement over that noted in 2012.

Through a combination of increased operating profit
(in constant currency terms) and strong balance sheet
management, the Group recorded a ROCE of 8.8%
in 2013, 20bps above prior year and 50bps above
WACC (8.3%).

The Group is targeting incremental improvements in
operating margins through gross margin improvements,
continued control of operating costs and incremental
profit enhancement of between £1m and £5m from
its strategic initiatives in 2014.

Given that the majority of SIG’s operating costs are
relatively fixed, the Group derives a significant benefit
from operational gearing as sales increase. Over the
medium-term, the Group aims to achieve an operating
margin in line with that achieved historically (c.6%).

The management of working capital is important given
its impact on the Group’s overall net debt position and
ROCE, but needs to be controlled appropriately to
facilitate growth. The Group is anticipating a further slight
increase in its working capital to sales ratio in 2014,
to c.9%, reflecting the continued investment in growth
initiatives (such as new branches) and the reduction
of restructuring provisions over time.

In order to increase the value added to Shareholders,
the Group is targeting a further improvement in ROCE
in 2014, consistent with its previously stated objective
of achieving a ROCE which is equivalent to WACC
+300bps by 2015.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewPRINCIPAL RISKS AND UNCERTAINTIES

THE GROUP HAS A SERIES OF REVIEW PROCESSES IN PLACE
(INCLUDING PERIODIC STRATEGIC REVIEWS, BUDGET REVIEWS
AND ROLLING FORECAST REVIEWS) WHICH ENSURE THAT ALL KEY
RESOURCE REQUIREMENTS ARE IDENTIFIED AND MANAGED.

PRINCIPAL RISKS AND UNCERTAINTIES

RISK IDENTIFICATION, MONITORING
AND REPORTING FRAMEWORK

Risk management involves the identification and evaluation
of risks and is the responsibility of the Group Board. The field
of risk management is constantly evolving within SIG and
the process was reviewed again during 2013 to ensure that
it remained robust and that emerging risks are identified,
assessed and managed effectively. The review process
involved the consideration of the objectives and targets
of the Group’s strategic business plan, the ongoing
development of a risk universe and the identification of
key strategic risks. Risks are continually evaluated using
consistent measurement criteria. Mitigating controls are
identified and opportunities for the enhancement of
the Group’s control environment are implemented.

Further information on our risk management procedures is included
in the Corporate Governance section on pages 55 and 56.

There are a number of potential risks and uncertainties that could have
a material impact on SIG’s long-term performance. The risk identification,
monitoring and reporting framework, together with the key risks and
uncertainties identified as part of the Group’s risk management process,
are as follows:

BOARD

e Sets strategic objectives

e Approves risk governance structure and agrees risk appetite

e Sets delegation of authority

e Receives and reviews Group Risk Register

e Receives and reviews Audit Committee reports on risk governance

and internal controls

AUDIT COMMITTEE

e Considers adequacy of risk management and internal

control framework

e Receives and reviews reports from the Risk Working Group

e Receives and reviews reports from independent assurance providers

M I T

DIT C O

U
A

K
I

INDEPE

BOARD OF
DIRECTORS

NIT

U SI N ESS U

G G
R

OUP

Our strategy
p.14

Report of the
Audit Committee
p.60

RISK WORKING GROUP

INDEPENDENT ASSURANCE

e Conducts continual review
of risks and risk controls

e Concludes on treatment

of risks

e Reviews and reports on

risk to the Audit Committee
and Board

e Internal audit

e External audit

e Quality standards audit

e Insurer and property

risk surveyors

BUSINESS UNIT

e Management and employees are responsible for the identification,

management and reporting of local risks

e Maintenance of local risk registers

e Implementation of risk mitigation plans

SIG plc Annual Report and Accounts 2013

Understanding movements in business risk:

Increase

Moderate increase

No change

Moderate decrease

Decrease

PRINCIPAL RISKS

RISK

NATURE OF RISK

CHANGE

MITIGATION

Market conditions

Competitors and
margin management

The Group operates in a number
of countries across Europe with
the vast majority of the Group’s
sales being made to the building,
construction and civil engineering
industries. These industries are
driven by both private and
Government expenditure.

The Group is exposed to changes
in the level of activity and therefore
demand from these industries.
Government policy and expenditure
plans (for example, Green Deal and
Energy Company Obligation (“ECO”)),
private investor decisions, the
general economic climate and both
business and (to a lesser extent)
consumer confidence are all factors
that can influence the level of building
activity and therefore the demand for
many of the Group’s products.

The Group has a mix of both direct
specialist competition and some
overlap with more general suppliers
(such as general builders’ merchants)
in all of its markets and countries
of operation.

Challenging market trading conditions
mean that competition pressures
remain high which in turn results
in continued margin pressures being
faced by the Group.

e The Group continually reviews all available indicators
of market activity including market data, economic
forecasts and surveys and also has regular communication
with key suppliers and customers to ensure that any
change in market demand is anticipated as early as
possible. Early identification of reducing market demand
ensures that the Group is able to act swiftly to changing
market conditions.

e The Group operates in a number of different countries
and market sectors. This diversification provides an
element of protection against reduced market activity
in any individual country or sector. The Group Board’s
portfolio review ensures that the Group’s capital is
appropriately allocated to the geographies and markets
which remain core to the Group and which have strong
long-term growth prospects.

e The majority of products that are sold by the Group
are relatively bulky and inexpensive in relation to their
mass and the cost of transport. This means that the
risk faced by the Group of price disruption and possible
cross-border or international trading having a detrimental
impact on prices in any particular country is relatively low.

e Similarly, the risk posed by internet-based trading

dependent upon parcel carrier service is mitigated by
the bulky nature of most of the products sold by the
Group and the fact that specialist handling and delivery
services are an important feature of the service
provided by the Group to many customers.

e The Group operates in a number of different countries
and market sectors and has a strong trading presence
in the majority of these markets. This strong market
position and balanced portfolio provides an element of
protection against increased competition in any individual
country or sector.

e Notwithstanding the above, the Group continues to

implement initiatives designed to improve the Group’s
core competencies surrounding customer service,
including enhanced sales support and training.

e Operating margin is considered to be a Key Performance
Indicator by the Group (see page 16 and 17). In order to
improve operating margin, the Group must reduce its
operating costs as a percentage of sales and/or improve
gross margins. The Group has a number of ongoing
pricing and purchasing initiatives designed to improve
gross margin. Tight control of operating costs is a
permanent feature of management practice.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewStrategic reportOverviewPRINCIPAL RISKS AND UNCERTAINTIES CONTINUED

Understanding movements in business risk:

Increase

Moderate increase

No change

Moderate decrease

Decrease

RISK

NATURE OF RISK

CHANGE

MITIGATION

Commercial relationships

Failure to negotiate competitive
terms of business with our suppliers
or failure to satisfy the needs of
our customers could harm the
Group’s business.

Customer or supplier consolidation
and/or manufacturers dealing directly
with customers.

SIG operates in a number of
countries across Europe, each
with its own laws and regulations,
encompassing environmental, legal,
health and safety, employment and
tax matters. Changes in these laws
and regulations could impact on
SIG’s ability to conduct its business,
or make such conduct of business
more costly.

As well as the inherent cost of
compliance, there is also the
reputational and financial cost of being
penalised for non-compliance with
legislation such as the Anti-Competition
& Anti-Bribery laws.

Group net debt at 31 December 2013
amounted to £121.2m. The Group
has to manage the following risks
relating to its net debt:

(1) future availability of funding;

(2) interest rate risk;

(3) foreign currency risk;

(4) compliance with debt

covenants; and

(5) counterparty credit risk.

Government legislation

Debt

e Gross margin improvement is a Key Performance

Indicator of the Group (see page 16). The Group has
an ongoing pricing and purchasing initiative designed
to improve gross margin.

e Operational management in each country and business
unit is tasked on an ongoing basis to maintain and
develop its relationships with customers and suppliers.
In particular, the following key tasks are undertaken:

Suppliers:
e Long-term key supplier harmonisation and national account
strategy planning. The Group purchases its products from
a number of suppliers, thereby ensuring it is not overly
reliant upon any one supplier. In addition, each business
performs alternative key supplier scenario-planning should
product not be available from any one individual supplier.

e Strategically important suppliers are reviewed globally to
assess their financial health to ensure that any disruption
to product supply is minimised.

Customers:
e Long-term key customer harmonisation and national
account strategy planning. Customer behaviour and
performance is continually monitored and analysed.

e The Group continues to add to its resources dedicated
to legal and regulatory compliance in order to further
enhance its capability to identify and manage the risk
of compliance failure. The Group actively monitors
relevant laws and regulations across its markets to ensure
that the effect of any changes to the legal framework
are minimised. During the course of 2013 the Group
undertook a comprehensive review of its Anti-Bribery
& Anti-Fraud practices. Improvements have been made
to existing risk frameworks and procedures.

e Policies, procedures and associated training schemes are
in place, which are frequently reviewed with reference
to changing legislative requirements.

e The Group has a number of affiliations with regulatory

bodies and trade associations.

e The Group has a comprehensive Treasury Policy that covers
the Group’s management of treasury risk. Further details of the
Group’s policies and mitigation of treasury risk can be found in
the Treasury Risk Management section on pages 35 to 37.

e During the year the Group successfully refinanced €100m

of maturing private placement debt with a further €100m of
private placement debt (seven, eight and ten year maturities)
on a bilateral basis with two institutional investors, providing
further longevity to the Group’s debt profile.

e The Group also has in place a £250m committed revolving

credit facility (“RCF”) provided by its four key relationship banks.
At 31 December 2013 this facility was undrawn and therefore
represents the committed funding headroom for the Group.
The RCF matures in March 2015 and therefore it is envisaged
that SIG will undertake a refinancing exercise during 2014 in
order to ensure that sufficient funding headroom and liquidity is
available to support the Group’s medium-term strategic plans.

SIG plc Annual Report and Accounts 2013Understanding movements in business risk:

Increase

Moderate increase

No change

Moderate decrease

Decrease

RISK

NATURE OF RISK

CHANGE

MITIGATION

Working capital/credit
management

Failure to manage working capital
effectively may lead to a significant
increase in the Group’s net debt,
thereby reducing the Group’s
funding headroom and liquidity.

IT infrastructure
and resilience

Availability of key resources

SIG uses a range of computer
systems to provide order processing,
inventory control and financial
management within each country.
Outages and interruptions could
affect SIG’s ability to conduct
day-to-day operations. Any lengthy
failure or disruption to the IT system
in any business unit or country
would result in loss of sales and
delays to cash flow.

A new ERP system is currently
being implemented in the UK
distribution businesses.

Unavailability of key resources
(e.g. assets such as property, stock
and personnel) will impact on the
ability of SIG to operate effectively
and efficiently.

Failure to retain key individuals,
or the failure to attract and retain
strong management and technical
staff in the future, could have
an adverse effect upon the
Group’s business.

e Post-tax Return on Capital Employed (“ROCE”) is a

Key Performance Indicator of the Group (see page 17) and
therefore working capital management remains a key priority.

e Cash flow targets are agreed with each business unit
as part of the annual budget process. All targets are
reviewed on a monthly basis.

e The Group has well established and stringent authorisation
procedures and debt collection cycles which control all
capital expenditure and working capital requirements.

e The Group operates a centrally led and proactive credit
management system with bespoke customer monitoring
solutions, internal risk categorisations that drive credit
policy (perpetually reviewed) and excellent major
customer relationships.

e The IT strategies in place across the Group continue to
be reviewed and developed to ensure that they remain
appropriate and that the business continuity frameworks
are robust and effective.

e The Group employs dedicated internal IT support

teams, together with external support service providers
to monitor the IT systems.

e Technology, infrastructure, communications and

application systems are regularly updated. The Group
has advanced hardware and software security in place
to ensure protection of commercial and sensitive data.

e For new IT projects, external consultants are utilised in
conjunction with internal project management teams.

e The new ERP system for the UK distribution businesses
has been successfully rolled out to selective branches
during the course of 2013 and this will continue during
2014 and 2015.

e The Group has a series of review processes in place
(including periodic strategic reviews, budget reviews
and rolling forecast reviews) which ensure that all
key resource requirements are identified and
managed accordingly.

e In respect of key personnel, senior management
succession planning is performed with an annual
review of current and future management
requirements. The Group also performs regional
talent management programmes and management
development initiatives which are reviewed regularly
by the Group Board.

e During 2014 we will be conducting an Employee
Engagement survey across the entire SIG Group.
The Board is fully committed to the survey and its
outcomes and will support action plans which positively
impact on our performance, people, customer service
and financial results and those which make SIG an
employer of choice.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewStrategic reportOverviewOPERATIONAL REVIEW

THE GROUP PRINCIPALLY OPERATES IN NINE COUNTRIES IN EUROPE
AND HAS TRADING OPERATIONS IN A FURTHER SIX, SERVING A WIDE
RANGE OF TRADES IN THE BUILDING AND CONSTRUCTION MARKETS.

OUR YEAR AT A GLANCE – CONTINUING OPERATIONS

CONSOLIDATED

£2,582.4m SALES

(2012: £2,473.9m)

8.8% ROCE

(2012: 8.6%)

2.8%

NET DEBT AT 31 DECEMBER
(2012: £105.3m)

£121.2m

LIKE FOR LIKE MARKET
OUTPERFORMANCE
(2012: 2.7%)

GROSS MARGIN
(2012: 26.4%)

26.4%

NUMBER OF BRANCHES
(2012: 681)

NET OPERATING COST DEFLATION
(2012: inflation 0.2%)

(0.1)%

AVERAGE NUMBER OF EMPLOYEES
(2012: 9,555)

UNDERLYING PROFIT BEFORE TAX
(2012: £83.7m)

£88.1m

NUMBER OF ACQUISITIONS
COMPLETED
(2012: 5)

Financial review
p.28

Segmental information
p.94

668

9,335

SIG plc Annual Report and Accounts 2013OUR YEAR AT A GLANCE – CONTINUING OPERATIONS

GLOSSARY OF TERMS

UNDERLYING
is before the amortisation of acquired intangibles,
net restructuring costs, other one-off items, loss
arising on the sale or agreed sale of businesses
and associated impairment charges, trading profits
and losses associated with disposed businesses,
other impairment charges, fair value gains and
losses on derivative financial instruments, the
defined benefit pension scheme curtailment gain,
the taxation effect of “Other items” and the effect
of changes in taxation.

LIKE FOR LIKE
excludes the impact of acquisitions and disposals
completed or agreed in the current or prior year.

CONTINUING
is excluding the impact of any disposals made or
agreed in the current and prior year.

RETURN ON CAPITAL EMPLOYED (“ROCE”)
is defined as underlying operating profit less
taxation divided by average net assets plus average
net debt. Net assets at 31 December 2013 are
stated before the £42.8m impairment charge
attributable to the agreed sale of
German Roofing.

Key Performance Indicators
p.16

Acquisition note
p.106

Divestment note
p.103

MAINLAND EUROPE

UK AND IRELAND

BENELUX*
£154.8m

POLAND
£124.7m

IRELAND
£65.5m

GERMANY
AND AUSTRIA
£437.5m

FRANCE
£622.4m

* Includes international air handling business

(headquartered in The Netherlands).

UNITED
KINGDOM
£1,177.5m

PERCENTAGE OF GROUP SALES
(2012: 52%)

52%

PERCENTAGE OF GROUP SALES
(2012: 48%)

48%

SALES
(2012: £1,289.8m)

GROSS MARGIN
(2012: 26.3%)

£1,339.4m

SALES
(2012: £1,184.1m)

£1,243.0m

26.6%

GROSS MARGIN
(2012: 26.6%)

UNDERLYING OPERATING PROFIT
(2012: £56.5m)

£59.0m

UNDERLYING OPERATING PROFIT
(2012: £47.7m)

AVERAGE NUMBER OF EMPLOYEES
(2012: 4,294)

4,265

AVERAGE NUMBER OF EMPLOYEES
(2012: 5,261)

26.2%

£48.5m

5,070

BRANCH MOVEMENTS IN MAINLAND EUROPE

BRANCH MOVEMENTS IN UK AND IRELAND

366

(5)

(24)

323

315

(15)

345

31 DECEMBER
2012

CLOSED/
MERGED

OPENED

ACQUIRED

DISPOSED

31 DECEMBER
2013

31 DECEMBER
2012

CLOSED/
MERGED

OPENED

ACQUIRED

31 DECEMBER
2013

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewStrategic reportOverviewOPERATIONAL REVIEW CONTINUED

STUART MITCHELL
CHIEF EXECUTIVE

STRATEGIC INITIATIVES PROGRESSING WELL

SUMMARY

2013 was a year of contrasting halves. Having been affected by the
extended winter weather across Europe, which exacerbated the already
weak market conditions, like for like (“LFL”) sales in H1 decreased by 3.1%.
However, in H2 SIG benefited from generally good weather and improved
trading conditions, particularly in the UK residential market, resulting in a
2.2% increase in LFL sales.

For the year as a whole, sales from continuing operations were up 4.4% to
£2,582.4m (2012: £2,473.9m), having benefited from favourable exchange
rates and acquisitions, but fell 0.4% on a LFL basis, with the Group experiencing
slight product price deflation of 0.5% and a marginal volume increase of
0.1%. Given that SIG estimates that the overall market, weighted according
to the sectors in which it operates, declined by 3.2% in 2013, this equates
to an outperformance of 2.8%.

Revenues in Mainland Europe benefited from the stronger Euro, increasing
by 3.8% to £1,339.4m, but were down by 1.5% on a LFL basis. France
continued to perform well relative to a weak market with sales up by 5.4%,
though LFLs were slightly down, by 1.1%. Continuing revenues in Germany
and Austria were up by 0.8% in Sterling but down 3.4% on a LFL basis,
having been affected by weak demand for industrial insulation from power
stations and the petrochemical sector.

Sales in the UK and Ireland increased by 5.0%, and were up 0.8% on a LFL
basis despite a 60% reduction in sales for SIG Energy Management due to
the ending of CERT and slow start-up of Green Deal and ECO.

The Group’s underlying gross margin remained steady at 26.4% compared
to prior year, with a 30bps increase in gross margin in Mainland Europe
being offset by a 40bps reduction in the UK and Ireland.

SIG has continued to keep tight control of its overheads, with core
operating costs declining marginally in 2013. Underlying operating profit
from continuing operations increased by 3.5% to £99.5m (2012: £96.1m)
and the Group’s underlying operating margin remained at 3.9%
(2012: 3.9%), increasing by 30bps in H2 2013 to 4.5% (H2 2012: 4.2%).

Underlying net finance costs fell to £11.3m (2012: £12.1m), which after
the £0.1m share of loss of associate (2012: £0.3m) resulted in underlying
profit before tax from continuing operations increasing by 5.3% to £88.1m
(2012: £83.7m). Underlying basic earnings per share were up by 7.2%
to 10.4p (2012: 9.7p).

Non-underlying net charges before taxation during the period totalled
£86.0m (2012: £40.0m) and included amortisation of acquired intangibles
of £20.6m (2012: £22.0m), net restructuring costs of £18.0m (2012: £16.6m),
net fair value losses on derivative financial instruments of £1.9m (2012: £1.8m),
other one-off items which gave rise to a charge of £0.7m (2012: credit of £1.4m),
net losses on the sale or agreed sale of businesses and associated

LIKE FOR LIKE MARKET OUTPERFORMANCE OF 2.8% IN 2013

0.9%

(1.2%)

(3.0%)

(1.4%)

2.8%
OUTPERFORMANCE

2.7%
OUTPERFORMANCE

2.9%
OUTPERFORMANCE

7.7%

4.8%

2.9%

0.3%

(3.4%)

(4.6%)

(5.3%)

(1.1%)

(0.2%)

(0.4%)

(4.3%)

(3.2%)

(2.4%)

(8.5%)

IRELAND

GERMANY
AND AUSTRIA

FRANCE

BENELUX

POLAND

GROUP 2013

GROUP 2012

GROUP 2011

MARKET GROWTH

SIG GROWTH

SIG plc Annual Report and Accounts 2013STRATEGIC INITIATIVES PROGRESSING WELL

impairment charges of £42.8m (2012: £4.6m) and other goodwill
impairment charge of £2.0m (2012: £nil).

NEW SUPERSITE IN NEWCASTLE

Including these charges, profit before tax was £2.1m compared to £43.7m
in 2012. Basic loss per share was 2.5p (2012: earnings per share of 4.5p).

Net debt at 31 December 2013 increased by £15.9m to £121.2m compared
with 31 December 2012 (£105.3m), due to an increase in net capital expenditure
to £38.1m (2012: £28.2m) and £16.4m expenditure on nine infill acquisitions.
The Group aims to increase expenditure on infill acquisitions to £30m–£50m
in 2014 and capital expenditure to be c.150% of depreciation.

Having consistently underperformed against the Group’s Weighted Average Cost
of Capital (“WACC”), SIG divested its German roofing business to The Gores
Group, a US private equity firm, for an enterprise value of c.£9m. The business
lacked scale in a market dominated by co-operatives and in 2013 was break-even
(2012: profit of £0.4m) on sales of £137.4m (2012: £134.7m). All necessary
regulatory approvals have been received and the transaction completed in
February 2014.

As detailed in its January 2014 trading statement, SIG identified £8.9m of
additional efficiency savings from its branch network. Excluding the divested
German roofing business this now equates to an annualised benefit of £7.9m,
with £5.1m of this to come in 2014.

STRATEGIC INITIATIVES

As outlined at its Capital Markets Day in November 2013, the Group is
targeting a net annual benefit of c.£30m by 2016 from its four key strategic
initiatives to improve business performance, covering procurement,
commercial vehicles, branch network and eCommerce.

SIG believes procurement has the most potential for savings and is targeting
a 1.5% reduction in purchasing costs by 2016. The Group has moved from
a decentralised structure to six international product categories covering
roofing, structural insulation, drywall, ceilings, technical insulation and air
handling and is professionalising its procurement function. SIG is on track
to reach its first milestone, which is to have fully recruited its procurement
team by H1 2014.

In terms of branch network SIG has adopted a two-phase approach.
Phase one, which relates to the further optimisation of its existing UK
network, is currently underway and due to conclude in H1 2014.
Phase two, which involves scoping more fundamental network change,
is continuing and will be informed by the performance of the Group’s
new supersite in the North East of England. This opened on schedule
in December 2013 and combined four SIG branches into one.

As part of the Group’s strategic initiatives, SIG has
opened a new supersite in Newcastle, combining
four branches into one, significantly lowering the cost
of servicing customers.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewOPERATIONAL REVIEW CONTINUED

BREMAT MIXING TRUCK

STRATEGIC INITIATIVES CONTINUED

Regarding commercial vehicles SIG has met its first two milestones of signing
a Group-wide purchasing agreement for fork lift trucks and rolling out
telematics across its UK fleet. The next steps are to replicate these actions in
Mainland Europe and negotiate a Group-wide fleet purchasing agreement.

With regard to eCommerce the Group is currently in the design phase for its
UK platform and will shortly start on its construction. The Group is targeting
to launch the site in 2015 and has recently appointed a new eCommerce
Director to lead the programme.

As there is a significant step-up in activity and investment this year, SIG is
targeting a small net benefit of between £1m–5m from its strategic initiatives
in 2014 (c.75% from procurement and c.25% from supply chain). The Group
is on track to achieve this target, providing SIG with a strong base for
delivering the rest of the programme.

RETURN ON CAPITAL EMPLOYED

Wego Austria has developed a new service offering for
its customers in the region.

The Group is now able to deliver premixed to-order
lightweight floor screeds up to six stories high in
Austria. This significantly differentiates our service
offering from the competition, reduces construction
build time and is more efficient than traditional methods.

Post-tax Return on Capital Employed (“ROCE”) is a key metric for the Group
and is calculated as underlying operating profit less tax, divided by average net
assets plus average net debt. Net assets as at 31 December 2013 have not
been adjusted for the £42.8m impairment charge attributable to the agreed
sale of German Roofing.

In 2013 SIG’s ROCE increased by 20bps to 8.8% (2012: 8.6%), compared
to a WACC of 8.3%. The Group’s medium-term target is for ROCE to
exceed its WACC by 300bps by 2015 assuming flat markets. SIG’s
longer-term aspiration is to achieve a ROCE beyond this target.

DIVIDEND

The Board has proposed a final dividend of 2.4p per ordinary share, an increase
of 20% on prior year. Taken together with the interim dividend of 1.15p per
ordinary share, this provides a total dividend of 3.55p per ordinary share for
the year (2012: 3.0p), an increase of 18.3% on prior year. The final dividend
is expected to be paid on 30 May 2014 to shareholders on the register at close
of business on 2 May 2014. The ex-dividend date is 30 April 2014.

Going forward the Board is committed to a progressive dividend policy
while maintaining a dividend cover of 2x–3x on an underlying basis over
the medium-term.

TRADING REVIEW

MAINLAND EUROPE (52% OF CONTINUING GROUP SALES)

Sales from continuing operations up 3.8% to £1,339.4m

(2012: £1,289.8m)

Gross margin from continuing operations improved by 30bps to 26.6%

(2012: 26.3%)

Underlying operating profit up 4.4% to £59.0m (2012: £56.5m)

Total operating loss of £0.7m (2012: profit of £34.1m)

STREAMLINED BRANDING/
STRONGER TOGETHER

The Group has streamlined and strengthened its
branding in the UK, providing clarity for customers
and the Group’s employees.

SIG plc Annual Report and Accounts 2013
2013
Continuing
sales

£622.4m
£437.5m
£154.8m
£124.7m

Change

5.4%
0.8%
4.5%
6.4%

Like for like
change

Change in
gross margin

(1.1)%
(3.4)%
(1.5)%
2.9%

+30bps
+30bps
+80bps
+30bps

France
Germany and Austria
Benelux*
Poland

* Includes international air handling business (headquartered in The Netherlands).

During 2013, in Mainland Europe SIG opened six new branches
and acquired two sites, closed or merged five branches and divested
24 branches. As a result the total number of trading sites in Mainland
Europe fell to 345 as at 31 December 2013.

Revenues in Mainland Europe benefited from the stronger Euro, increasing
by 3.8% to £1,339.4m, but were down by 1.5% on a LFL basis.

In France although LFL sales declined slightly, by 1.1%, SIG again performed
strongly compared to the market, which the Group estimates fell by 5.3%.
Following a 4.6% decline in H1 LFL sales, and having been affected by the
adverse weather and weak trading conditions, SIG performed well in H2,
increasing LFL sales by 2.5%. In November SIG also acquired two branches
from Wolseley, in Rouen and Amiens, with a combined annual turnover
of c.€12m.

Although the Group remains cautious on the outlook for the French
construction market in 2014, SIG believes that it can continue to
outperform the market based on its specialist expertise, the strength of
its local management team and growth from new and acquired branches.

In Germany and Austria LFL sales declined by 3.4%, having been adversely
affected by the weather in H1 and weak demand throughout the period
for industrial insulation, which accounts for nearly 20% of SIG’s sales in
the region. This was due to the uncertainties in the German power station
and petrochemical industry. Despite this uncertainty, the outlook for
the German market in 2014 is generally positive, driven by activity
in the German new build residential market.

While trading conditions remained very challenging in Benelux in 2013,
SIG’s LFL sales declined slightly, by 1.5%, and the Group significantly
outperformed the market. Gross margin also increased by 80bps due to
SIG’s product mix reverting to a more normal blend compared to 2012,
and a strong performance in its pan-European air handling business.
While the market in The Netherlands is expected to remain weak this
year, the Group is anticipating better prospects for Belgium.

Following a poor H1 in Poland, which was in part due to severe weather,
sales accelerated sharply in H2 and were up by c.7% on a LFL basis.
In contrast to Western European economies, where structural insulation
and residential products performed best, in Poland the strongest demand
was for ceilings and technical insulation. This positive momentum is
expected to continue into 2014.

UK & IRELAND (48% OF CONTINUING GROUP SALES)

Sales up 5.0% to £1,243.0m (2012: £1,184.1m)

Gross margin down by 40bps to 26.2% (2012: 26.6%)

2013
Continuing
sales

£1,177.5m
£65.5m

Change

5.1%
3.1%

Like for like
change

Change in
gross margin

0.9%
(1.4)%

-40bps
-10bps

UK
Ireland

During the year the Group opened two new trading sites in the UK,
acquired 21 sites and closed or merged 15 branches. As a result the total
number of trading sites in the UK and Ireland increased by eight to 323
as at 31 December 2013.

Revenues in the UK and Ireland increased by 5.0%, and were up 0.8%
on a LFL basis despite sales in SIG Energy Management declining by c.60%
due to the ending of CERT and slow start-up of Green Deal and ECO.
Excluding SIG Energy Management, LFL sales in the Group’s UK distribution
business increased by 4.5%. Gross margin in the UK declined by 40bps
mainly due to volume and pricing pressures affecting the Group’s
roofing business.

While the UK construction market as a whole declined during H1 due to
the weather and a weak market, trading conditions improved significantly in
H2 driven by increased activity in the residential sector. The non-residential
sector, however, remained subdued due to a lack of demand in both the
public and commercial sectors. SIG expects these market trends to
continue into 2014.

The implementation of Kerridge K8, SIG’s new ERP system in the UK,
is progressing well and has recently completed a major milestone, having
been successfully rolled out in the back office of SIG Distribution. This
project is expected to take around two years to complete and is integral
to the delivery of the Group’s strategic initiatives.

Following the successful rebranding of the Group’s UK insulation and
interiors business, during 2014 SIG will begin to streamline and rebrand
its market-leading roofing business, which currently trades under
40 different brands across the UK.

There are early signs of an improvement in market conditions in Ireland,
with the rate of decline in the Group’s LFL sales slowing significantly in 2013
to 1.4%, compared to a double-digit sales decline in 2012.

OUTLOOK

As expected the Group has had a good start to the year, helped by the
mild weather and weak comparatives, and its outlook for 2014 remains
unchanged from its January trading statement. SIG expects construction
activity in the UK residential market to remain buoyant, with the
non-residential sector continuing to be broadly flat. In Mainland Europe
construction markets are anticipated to be variable.

The trading outlook, operational efficiency savings and a modest net benefit
from its strategic initiatives give the Group confidence in achieving good
progress in 2014.

Underlying operating profit up by 1.7% to £48.5m (2012: £47.7m)

Total operating profit of £24.1m (2012: £31.9m)

STUART MITCHELL
Chief Executive
12 March 2014

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverview
FINANCIAL REVIEW

DOUG ROBERTSON
FINANCE DIRECTOR

TRADING IMPROVED SIGNIFICANTLY AS 2013 PROGRESSED

HIGHLIGHTS

GROUP PERFORMANCE

e ROCE increased by 20bps to 8.8% compared

to a WACC of 8.3%

e H2 LFL sales up 2.2% compared to prior year

e H2 operating margin up 30bps to 4.5%

Underlying*

Sales
Gross margin
Operating profit
Profit before tax
Basic EPS (pence)
ROCE

2013
£m

2,582.4
26.4%
99.5
88.1
10.4p
8.8%

2012
£m

2,473.9
26.4%
96.1
83.7
9.7p
8.6%

Change

+4.4%
–
+3.5%
+5.3%
+0.7p
+20bps

e ¤100m of private placement successfully refinanced

e Leverage maintained at c.1.0x

e Underlying EPS grew 7.2% to 10.4p

Glossary of terms
p.23

Report of the Audit Committee
p.60

Group accounts
p.83

* Underlying is before the amortisation of acquired intangibles, net restructuring costs, other one-off

items, loss arising on the sale or agreed sale of businesses and associated impairment charges,
trading profits and losses associated with disposed businesses, other impairment charges, fair value
gains and losses on derivative financial instruments, the defined benefit pension scheme curtailment
gain, the taxation effect of these items and the effect of changes in taxation rates.

Statutory

Total sales
Gross margin
Operating profit
Profit before tax
Basic (loss)/earnings per share (pence)
Total dividend per share (pence)

REVENUE

2013
£m

2,719.8
26.1%
15.4
2.1
(2.5p)
3.55p

2012
£m

2,635.5
26.0%
57.9
43.7
4.5p
3.0p

Change

+3.2%
+10bps
(73.4)%
(95.2)%
(7.0p)
+0.55p

Sales on a statutory basis increased by £84.3m, or 3.2%, to £2,719.8m.
On 1 February 2014, an agreement was reached on the sale of the Group’s
German Roofing business, which completed on 28 February 2014. Sales of
£137.4m arose in 2013 (2012: £134.7m) from this operating business and at
31 December 2013 the associated assets and liabilities were held for sale
on the Consolidated Balance Sheet. In addition, the Group’s 2012 statutory
result included sales of £26.9m relating to the Central European operations
divested in December 2012.

Continuing sales* (£m)

2013

2012

2,582.4

2,473.9

Change

+4.4%

* Continuing sales in 2013 and 2012 represents total sales less sales attributable to businesses sold or

agreed to be sold in both 2013 and 2012.

Group sales from continuing operations (i.e. excluding businesses sold or agreed
to be sold) in Sterling grew by 4.4% to £2,582.4m (2012: £2,473.9m). Eliminating
the impact of foreign exchange rate movements, total continuing sales grew by
1.9% in constant currency. The incremental impact of acquisitions made in the
current and prior year added c.1.9% to this sales growth, and therefore, excluding

SIG plc Annual Report and Accounts 2013TRADING IMPROVED SIGNIFICANTLY AS 2013 PROGRESSED

LIKE FOR LIKE SALES PER WORKING DAY VS. PRIOR YEAR

4.0%

3.0%

2.0%

1.0%

0.0%

(1.0)%

(2.0)%

(3.0)%

(4.0)%

(5.0)%

Quarter

YTD

2013 and 2012 acquisitions, the Group’s sales on a constant currency basis were
flat year on year.

OPERATING COSTS AND MARGIN

Like for like constant currency
sales performance^

Group

UK and
Ireland

Mainland
Europe

(0.4)%

0.8%

(1.5)%

^ Like for like constant currency sales performance represents the growth/(decline) in the Group’s

sales per day excluding acquisitions and disposals completed or agreed in the current or prior year.
Sales are not adjusted for branch openings and closures.

On a like for like constant currency basis (i.e. adjusted for working days),
Group sales for the full year fell by 0.4% as the strong performance in the
second half (+2.2%) was outweighed by the difficult, weather-affected start
to the year (first half down 3.1%).

SIG estimates that overall its market declined by c.3.2% in 2013. Given the
Group reported a like for like constant currency sales decline of 0.4%, this
equates to a market outperformance of c.2.8%. A key element of delivering
this sales outperformance has been the continued expansion of the Group’s
branch network. A further eight branches have been opened in the year
(2012: 21 openings).

GROSS MARGIN

Underlying operating costs in Sterling increased by £24.4m (4.4%) in 2013.
On a constant currency basis, underlying operating costs increased by £10.4m
(1.9%). As a percentage of sales, underlying operating costs remained relatively
flat when compared to the prior year at 22.5% (2012: 22.6%).

The Group has continued to review its operating cost base in 2013 and
has identified further annualised cost savings of c.£7.9m with associated
restructuring costs recognised in 2013 of £15.1m (excluding the actions taken
by the German Roofing operation before the business was agreed to be
sold). Approximately £5.1m of these savings are expected to be realised in
2014. Including the actions taken in German Roofing before the agreed sale,
annualised savings of £8.9m were identified with associated costs of £18.0m.

In line with one of the Group’s strategic objectives (see Key Performance
Indicators on page 17), operating cost inflation in the year was limited
to c.1.7%. Net of cost savings from 2013 and 2012 actions, the Group
experienced operating cost deflation of 0.1% in 2013 (2012: inflation of 0.2%).
In order to support the organic growth of the business, the Group has
continued to invest in a number of initiatives and new branches (£4.7m),
and acquisitions (£9.0m) which increased the Group’s operating costs
by a total of £13.7m year on year.

2013

2012

2011

2013 VS 2012 OPERATING COST BRIDGE

Gross margin movements
over prior year

+0bps

+40bps

+20bps

The Group’s underlying gross profit margin remained flat at 26.4% when
compared to the prior year, despite tough competition throughout the
markets in which the Group operates. This performance follows a 40bps
improvement in gross margin in 2012 and a 20bps improvement in 2011.

557.9

14.0

(9.9)

9.4

(2.3)

(0.5)

13.7

582.3

Improvement of gross margin remains of great importance to the Group.
Gross margin pressures are expected to remain in the short-term to
medium-term; however, as the Group’s markets stabilise and ultimately
recover, the Group’s aim is to continue to improve gross margins. Driving
the best possible returns from the Group’s assets is a fundamental part of
SIG’s strategy and therefore, as detailed on page 14, SIG intends to realise
gross margin improvement through its procurement initiatives and by
working closely with a range of key suppliers.

2012
OPERATING
COSTS

CURRENCY
MOVEMENT

COST
SAVINGS

INFLATION

BAD DEBT
MOVEMENT

DEPRECIATION
AND OTHER

INVESTMENT
IN GROWTH*

2013
OPERATING
COSTS

* Including acquisitions.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewFINANCIAL REVIEW CONTINUED

S.K. SALES

SIG’s largest acquisition in 2013 was S.K. Sales,
a specialist Heating, Ventilation and Air Conditioning
(“HVAC”) distribution business that trades from
16 locations across the UK and complements the
Group’s existing strong presence in the European
HVAC market through its Air Trade Centre business.

OPERATING COSTS AND MARGIN CONTINUED

The Group’s bad debt charge on an underlying basis (being both bad debts
written off and the movement in the allowance for bad and doubtful debts)
decreased by 10bps to 0.5% of sales (2012: 0.6% of sales). Reducing the Group’s
bad debt charge as a percentage of sales in difficult trading conditions is testament
to the Group’s strong credit control procedures. Despite this encouraging
performance, the Group is very mindful of the risk of bad debts increasing as the
economies in which it operates remain weak, construction activity is subdued,
and the Group’s customer base remains at risk of having credit withdrawn by its
banks. The Group’s credit control policies and procedures are regularly reviewed
and a number of the Group’s businesses have credit insurance to protect them
from bad debts rising above prescribed aggregate loss levels.

As detailed in the Key Performance Indicators section, while the Group’s
underlying operating profit margin at 3.9% remains consistent with that
achieved in 2012, it remains well below that historically achieved. Given the
operational gearing impact of the business where the majority of operating
costs are fixed, it is envisaged that the Group’s operating margins will
continue to improve when the Group experiences sustained sales growth.

OTHER ITEMS

Amounts included in the “Other items” column of the Consolidated Income
Statement, which in total amounted to a loss before tax of £86.0m
(2012: £40.0m), are as follows:

amortisation of acquired intangibles – £20.6m (2012: £22.0m). The

Accounting Policies section on page 89 and Note 14 to the Accounts on
page 105 provide details of what is included within intangible assets and
over what periods the assets are amortised. In response to the economic
downturn, SIG halted its acquisition activities between 2008 and 2012.
Intangible amortisation is therefore expected to fall in future years as the
intangible assets realised through the acquisitions in 2008 and prior
become fully amortised;

loss arising on the sale or agreed sale of businesses and associated
impairment charges – £42.8m (2012: £4.6m). On 1 February 2014 the
Group agreed to sell its German Roofing operation for a net consideration
of £7.2m. As a consequence the assets and liabilities associated with this
operation have been written down to the recoverable amount through
the recognition of a one-off charge of £21.3m. In addition, a goodwill and
intangible assets impairment charge of £21.5m associated with the write
down of the German Roofing Cash Generating Unit was recognised.
Further details can be found in Note 12 to the Accounts on page 103;

net operating loss attributable to businesses sold or agreed to be

sold in 2013 and 2012 – £nil (2012: £0.8m). The 2013 result represents
the break-even operating contribution reported by the German Roofing
business. The 2012 net operating loss represents the performance of
German Roofing (operating profit £0.4m) and Central Europe (operating
loss £1.2m);

other goodwill impairment charge – £2.0m (2012: £nil). An impairment
of £2.0m relating to the SIG Energy Management Cash Generating Unit was
recognised in the year. Further details are included in Note 13 to the Accounts;

net restructuring costs – £18.0m (2012: £16.6m). The Group has taken
a number of actions to reduce operating costs in the year. These one-off
actions have resulted in redundancy costs of £7.6m (2012: £8.0m),
property closure costs of £5.8m (2012: £4.3m), asset write down costs
of £0.2m (2012: £1.0m), rebranding of £3.7m (2012: £nil) and other
restructuring costs of £0.7m (2012: £3.3m);

defined benefit pension scheme curtailment gain – £nil (2012: £4.4m).

Further details can be found in Note 30c to the Accounts;

SIG plc Annual Report and Accounts 2013
Taxation note
p.98

other one-off items – a charge of £0.7m (2012: credit of £1.4m).

PROFIT BEFORE TAX

Included within other one-off items are acquisition expenses (which will vary
depending on the number of acquisitions per year and their nature) and other
one-off costs, partially offset by the reversal of certain onerous lease property
provisions previously provided for through other one-off items whereby the
Group has negotiated the surrender of the lease in 2013; and

net fair value losses on derivative financial instruments – £1.9m

(2012: £1.8m). The finance costs section below explains these items.

OPERATING PROFIT AND OPERATING MARGIN

UNDERLYING OPERATING MARGIN %

3
1
0
2

2
1
0
2

1
1
0
2

3.9

3.7

Underlying operating profit

UK and Ireland
Mainland Europe
Head office costs

Group

2013
£m

48.5
59.0
(8.0)

99.5

2012
£m

47.7
56.5
(8.1)

96.1

Change

+1.7%
+4.4%
(1.2)%

+3.5%

On an underlying basis, operating profit increased by £3.4m (3.5%) to
£99.5m (2012: £96.1m). Foreign exchange rate movements increased the
Group’s operating profit by £2.7m year on year. Therefore on a constant
currency basis underlying operating profit increased by £0.7m.

Acquisitions completed during 2013 and 2012 made a contribution of
c.£3.9m to operating profit in the year (2012: £0.3m).

The Group recorded a statutory operating profit of £15.4m (2012: £57.9m)
after recognising a number of “Other items” that are described opposite.

FINANCE COSTS

Net finance costs before gains and losses on derivative financial instruments and
financing items relating to defined benefit pension schemes (i.e. net borrowing
costs) reduced by £0.8m to £11.3m in 2013.

Finance costs included in the “Other items” column of the Consolidated Income
Statement amounted to £1.9m (2012: £1.8m). Following the Group’s equity
issuance in H1 2009 and the subsequent reduction in the Group’s level of net
debt, SIG cancelled certain interest rate derivative contracts at a cash cost of
£32.2m. This termination payment did not increase the Group’s overall level
of debt as this payment cancelled the mark-to-market liability already included
in the Group’s Consolidated Balance Sheet. The amounts previously recorded
in reserves are being amortised through the Consolidated Income Statement
over the life of the associated debt to 2018 in line with the relevant accounting
standards. The amortisation included within the “Other items” column
amounted to £2.1m (2012: £2.2m). The remaining balance recorded in
reserves in relation to the settlement of interest rate derivative contracts,
which is to be amortised in the Consolidated Income Statement over a period
of four years, is £7.5m (2012: £9.6m). Also included within finance costs is a credit
of £0.2m (2012: £0.4m) relating to hedge ineffectiveness incurred on the
Group’s financial instruments.

Net finance costs after other items reduced by £0.7m to £13.2m in 2013.

Further details of SIG’s interest rate policies are provided in the Interest
Rate Risk section on pages 35 and 36.

Underlying PBT
Other items:
Amortisation of acquired intangibles
Goodwill impairment charge
Loss arising on the sale or agreed sale of
businesses and associated impairment charges
Net operating losses attributable to businesses
sold or agreed to be sold in 2013 and 2012
Net restructuring costs
Other one-off items
Defined benefit pension scheme curtailment gain
Net fair value losses on derivative financial instruments

Total other items

Statutory PBT

2013
£m

88.1

(20.6)
(2.0)

(42.8)

–
(18.0)
(0.7)
–
(1.9)

(86.0)

2.1

2012
£m

83.7

(22.0)
–

(4.6)

(0.8)
(16.6)
1.4
4.4
(1.8)

(40.0)

43.7

Underlying profit before tax (excluding businesses divested or agreed to be
divested in both 2013 and 2012) increased by £4.4m to £88.1m (2012: £83.7m).
On a constant currency basis underlying profit before tax increased by £1.8m.
Underlying profit before tax (including businesses divested or agreed to be
divested in both 2013 and 2012) increased by 6.3% to £88.1m (2012: £82.9m).

Statutory profit before tax decreased by £41.6m to £2.1m (2012: £43.7m).

TAXATION

The Group’s approach to tax matters is to comply with all relevant tax laws
and regulations, wherever it operates, whilst managing its overall tax burden.
The Group looks to pay the right and fair amount of taxes in accordance with
the laws of the countries in which it operates.

The Group recorded an income tax charge on underlying profits from
continuing operations amounting to £26.1m (2012: £26.1m) which represents
an underlying effective rate of 29.6% (2012: 31.2%). On the statutory profit
before tax of £2.1m (2012: £43.7m), the effective income tax charge of £16.4m
represents an effective rate of 781.0% (2012: 39.1%). These movements are
a result of amounts included as “Other items” in the year.

Cash tax payments amounted to £15.7m, £10.4m below the £26.1m income
tax charge on underlying profits primarily as a result of the restructuring costs
incurred in the year included within “Other items” and also the utilisation
of the Group’s brought forward tax losses recorded within “Other items”,
which reduced UK taxable profits.

In 2014, the Group’s underlying effective tax rate will continue to depend on
the mix of Group profits from different jurisdictions, although it is anticipated
that the Group’s underlying effective tax rate in 2014 will decrease slightly to
c.29.0%, reflecting the known reduction in the UK domestic corporation tax
headline rate. The Group will continue to seek to utilise brought forward tax
losses arising principally from 2008 foreign exchange rate losses in order to
reduce UK taxable profits in 2014 and beyond.

EARNINGS PER SHARE (“EPS”)

Underlying basic EPS
Statutory basic (loss)/earnings per share

2013

10.4p
(2.5p)

2012

9.7p
4.5p

Change

+0.7p
(7.0p)

Underlying basic EPS from continuing operations amounted to 10.4p (2012: 9.7p),
which represents an increase of 0.7p. Total basic loss per share amounted to
2.5p (2012: earnings per share of 4.5p), which takes into account a number
of “Other items” as described on the previous page. The weighted average
number of shares in issue in the period was 591.0m (2012: 590.8m).

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverview
FINANCIAL REVIEW CONTINUED

INSULSHELL

DIVIDENDS

The Board is committed to a progressive dividend policy while maintaining
a dividend cover of 2x–3x (on an underlying basis) over the medium-term.

Based upon improved underlying business performance and financial stability,
SIG continued to increase its dividend payments in 2013 with an interim
dividend of 1.15p per share (2012: 1.0p). Following this interim dividend, SIG
has proposed a final dividend of 2.4p per share (2012: 2.0p), taking the 2013
full year dividend to 3.55p per share (2012: 3.0p), representing an 18.3%
increase in total dividend year on year. A total dividend of 3.55p represents
a dividend cover of 2.9x in 2013 on an underlying basis.

SHAREHOLDERS’ FUNDS

Shareholders’ funds decreased by £15.3m to £692.5m (2012: £707.8m).
The decrease comprised the following elements:

Loss after tax attributable to equity holders of the Company
Share capital issued in the year
Exchange differences on assets and liabilities after tax
Gains and losses on cash flow hedges
Movements attributable to share options
Actuarial gain on pension schemes (net of deferred tax)
Effect of change in tax rates on deferred tax
Adjustment arising from changes in non-controlling interest
Dividends paid to equity holders of the Company

Decrease in Shareholders’ funds

CASH FLOW AND FINANCIAL POSITION

£m

(15.0)
0.2
9.8
1.7
0.4
6.3
(0.9)
0.8
(18.6)

(15.3)

In 2013, the Group generated £86.2m of cash flow from operating activities
to help support its strategy of investment in both organic and acquisition-based
growth, and progressive dividend policy. The following table explains the
movement in SIG’s net debt:

Cash generated from operating activities
Interest and tax
Maintenance capital expenditure*

Free cash flow available for investment
Investment capital expenditure*
Acquisition investment
Proceeds from sale of businesses
Dividends paid to non-controlling interests
Foreign exchange (losses)/gains
Issue of shares
Dividends paid to equity holders of the Company
Other items (including fair value movements)

Movement in net debt
Opening net debt

Closing net debt

2013
£m

86.2
(26.3)
(23.7)

36.2
(14.4)
(16.4)
(0.1)
(0.3)
(1.0)
0.2
(18.6)
(1.5)

2012
£m

88.7
(31.2)
(23.6)

33.9
(4.6)
(7.3)
1.2
(0.3)
3.2
–
(14.8)
(0.7)

(15.9)
(105.3)

(121.2)

10.6
(115.9)

(105.3)

* Where net capital expenditure is equal to or less than depreciation and computer software

amortisation, all such net capital expenditure is assumed to be maintenance capital expenditure.
To the extent that net capital expenditure exceeds depreciation and computer software, the balance
is considered to be investment capital expenditure.

Insulshell is a super-insulated interlocking panel
system developed by SIG. It is manufactured off site
and is designed to shorten build time, reduce waste
and optimise the energy efficiency and air tightness
of a building.

SIG plc Annual Report and Accounts 2013
WORKING CAPITAL

WORKING CAPITAL TO SALES %

3
1
0
2

2
1
0
2

1
1
0
2

8.8

8.4

8.0

Included within “Cash generated from operating activities” is an increase
in working capital of £17.7m (2012: £19.1m). Included within this working
capital increase, however, is a £3.0m (2012: £7.0m) special pension
contribution and also a cash outflow of £13.3m (2012: £12.7m) representing
the cash costs associated with the Group’s cost saving and restructuring
programme. Excluding these payments, working capital increased in 2013
by £1.4m (2012: decrease of £0.6m).

The key working capital measures are set out below on a constant currency
basis (continuing operations):

Inventory days
Trade receivable days
Trade payable days

2013

42
43
37

2012

43
42
36

As can be seen above, the continued focus on working capital management
in 2013 resulted in only a small increase in the overall level of working capital
in the Group, despite stronger sales in the final months of the year compared
to the prior year. As a result, the Group’s working capital to sales ratio
(on a constant currency basis for continuing operations) at 31 December 2013
was 8.8% (2012: 8.4%), in line with the Group’s objective of no more
than 9.0%.

FIXED ASSETS

Net capital expenditure (including computer software) increased in the year by
£9.9m to £38.1m (2012: £28.2m), representing a capex to depreciation ratio of
1.61x (2012: 1.19x). Capital expenditure includes new vehicles, new brownfield
sites, a number of relocations to larger trading sites and the initial investment in
a new UK IT platform. It is anticipated that the level of capital expenditure will
remain above the level of depreciation in 2014 reflecting the Group’s continuing
investment in the business.

FOREIGN CURRENCY TRANSLATION

Overseas earnings streams are translated at the average rate of exchange
for the year while balance sheets are translated using closing rates. The
table below sets out the principal exchange rates used:

Average rate

Movement

Closing rate

Movement

2013

1.18
4.96

2012

1.23
5.15

(4.1)
(3.7)

2013

1.20
5.00

2012

1.23
5.03

(2.4)
(0.6)

Euro
Polish Zloty

The movement in exchange rates compared to 2012 had a beneficial effect on
the translation of total overseas earnings streams and assets, but a detrimental
impact on translation of the Group’s Euro denominated debt. The impact of
exchange rate movements on the translation of the Group’s overseas earning
streams, net assets and net debt can be summarised as follows:

Impact of currency movements in 2013

Continuing sales
Underlying operating profit
Underlying PBT
Consolidated net assets
Net debt

£m

+62.8
+2.7
+2.6
+9.8
+1.0

+2.5
+2.8
+3.1
+1.4
+0.9

As can be seen above, fluctuations in exchange rates give rise to translation
differences on overseas earnings streams when translated into Sterling.
Further details of SIG’s foreign exchange policies are detailed in the
Foreign Currency Risk section on page 36.

PENSION SCHEMES

In total, the Group operates five (2012: five) defined benefit pension
schemes, the largest is a funded scheme held in the UK. The remaining four
defined benefit pension schemes are unfunded book reserve schemes held
in the Group’s Mainland European businesses. Together the UK defined
benefit scheme and the four book reserve schemes are referred to as
“defined benefit pension schemes”.

In addition to the defined benefit pension schemes, the Group also
operates a number of defined contribution pension schemes.

The IAS 19 actuarial valuation at 31 December 2013 resulted in the gross
pension deficit of the main UK defined benefit scheme decreasing from
£26.3m at 31 December 2012 to £16.6m at 31 December 2013. As can be
seen below, the decrease arose primarily from the actual return on assets
being £9.0m above the expected return.

Following the finalisation of the triennial valuation as at 31 December 2010,
a schedule of special contributions was agreed. As part of this agreement,
the Group paid £3.0m in 2013 to the UK defined benefit pension scheme
(2012: £7.0m) and a further £2.5m special contribution was made in
January 2014.

SIG contributed £4.0m (2012: £8.5m) into its five defined benefit pension
schemes during the year (including the £3.0m special contribution noted
above). The total charge in respect of defined benefit pension schemes to
the Consolidated Income Statement was £3.4m (2012: credit of £1.8m); of
this total £2.3m was charged to operating expenses (2012: credit of £2.3m)
and £1.1m was charged to net finance costs (2012: £0.5m). Included in the
2012 credit to operating expenses of £2.3m was a £4.4m curtailment gain.

The overall gross defined benefit pension schemes’ liability decreased
during the year by £8.9m to £25.5m. This can be broken down as follows:

(Decrease)/increase in pension scheme liability

Actual return above expected return on assets
Change in financial and demographic assumptions in all schemes
Profit and loss charge below cash contributions to the schemes

Decrease in pension scheme liability

£m

(9.0)
0.7
(0.6)

(8.9)

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverview
FINANCIAL REVIEW CONTINUED

PENSION SCHEMES CONTINUED

The Group continues to monitor the life expectancy assumptions used
to value its pension scheme liabilities. For the UK defined benefit pension
scheme, the life expectancy for a male employee beyond the normal
retirement age of 60 is 28.1 years (2012: 28.7 years), which is considered
appropriate for a scheme of this nature.

The cost of the Group’s defined contribution pension schemes increased
by 13.0% (£0.6m) to £5.2m, partly as a consequence of the introduction
of auto-enrolment in the UK. Details of the pension schemes operated
by SIG are set out in Note 30c to the Accounts on pages 119 to 122.

the Parent Company, comprising issued capital, reserves and retained earnings
as detailed in the Consolidated Statement of Changes in Equity on page 87.

The main measure used to assess the appropriateness of the Group’s capital
structure is its net debt to EBITDA ratio (i.e. leverage), thus ensuring that
the Group’s capital structure is aligned to the Group’s debt covenants.
The Group’s long-term target is to manage its leverage ratio within the range
of 1.0x–1.5x. The Group’s leverage position at 31 December 2013 was 1.0x
(31 December 2012: 0.9x).

SHAREHOLDER RETURN

ACQUISITIONS

Acquisitions are a key component of SIG’s growth strategy, supplementing
organic growth. A total of nine acquisitions were completed in the year for
a total net consideration of £16.4m.

Contingent consideration not specific to employment criteria of £0.6m
has been calculated as part of goodwill. Contingent consideration of
£2.8m, which is in part conditional on the continued employment of specific
individuals, has not been recognised as an investment cost but instead will
be accounted for as an employment cost in the Consolidated Income
Statement as earned. Including total contingent consideration, the total spend
on 2013 acquisitions would increase from £16.4m up to £19.8m.

Acquisitions remain subject to strict financial return criterion, with all acquisitions
required to achieve a ROCE in excess of the Group’s Weighted Average Cost
of Capital (“WACC”) in the first full year of ownership. Further details of the
Group’s acquisitions can be found in Note 15 on pages 106 and 107.

Included within working capital movements in the year is £0.4m in relation
to contingent consideration settled during the year in respect of the acquisition
of Monteis Materiaux in 2012.

DIVESTMENTS

On 1 February 2014 the Group agreed to the sale of its German Roofing
business to The Gores Group, a US private equity firm, for a net consideration
of £7.2m. Following a strategic review, and having consistently underperformed
the Group’s WACC, SIG concluded that the business was unlikely to achieve
its medium-term return on capital employed targets. The sale completed on
28 February 2014.

Included in “Other items” is a one-off charge of £42.8m relating to the post
year end divestment of the German Roofing operation, being a £21.5m
goodwill and intangible assets impairment charge and £21.3m relating to
the write down of assets and liabilities at the balance sheet date to their
recoverable amount.

German Roofing reported sales of £137.4m in 2013 (2012: £134.7m) and
a break-even operating result (2012: profit of £0.4m). The results of the
German Roofing operation have been included within “Other items” in
order to provide an indication of the continuing earnings of the Group.

CAPITAL STRUCTURE

The Group manages its capital structure to ensure that entities in the Group
will be able to continue as going concerns, while maximising the return to
stakeholders through the optimisation of the debt and equity balance. The capital
structure of the Group consists of debt, which includes the borrowings disclosed
in Note 20, cash and cash equivalents and equity attributable to equity holders of

DELIVERING AN IMPROVEMENT IN SHAREHOLDER RETURNS

8.6%

8.8%

8.2%

8.3%

8.2%

7.9%

8.6%

5.6%

2010

2011

2012

2013

ROCE*

WACC

* post-tax

In line with the Group’s stated objective for 2013, SIG has delivered a 20bps
improvement in underlying post-tax ROCE to 8.8% for 2013 (2012: 8.6%).
After taking into account the £42.8m reduction in capital employed at
31 December 2013 relating to the agreed divestment of the German Roofing
operations and restating the prior year comparative capital employed, the
Group ROCE increased to c.9.3% (2012: 9.0%). Further improvement in
the Group’s post-tax ROCE remains the prime management focus, with the
Group’s medium-term target to deliver a post-tax ROCE which is 300bps
above the Group’s WACC. Further information on the Group’s KPIs is included
on pages 16 and 17.

Gearing, being net debt divided by net assets, increased during the year from
14.9% to 17.5%.

As at 12 March 2014, SIG’s share price closed at £2.016 per share, representing
a market capitalisation of £1,191.7m at that date. SIG monitors relative Total
Shareholder Return (“TSR”) for assessing relative financial performance.
The Group’s TSR performance has been detailed in the Directors’
Remuneration Report on page 77.

OUTLOOK

The Directors’ view of the outlook and prospects for the Group is set out
in the Chairman’s Statement on pages 6 and 7.

DOUG ROBERTSON
Finance Director
12 March 2014

SIG plc Annual Report and Accounts 2013
TREASURY RISK MANAGEMENT

TREASURY RISK – INTRODUCTION

SIG enters into derivative financial instruments (principally currency and
interest rate swaps) to hedge certain currency risks arising from SIG’s
operations and to hedge interest expenses arising from SIG’s sources
of finance. SIG’s financial instruments, other than derivatives, comprise
borrowings, cash and liquid resources and various items such as trade
receivables and trade payables that arise directly from its operations.

SIG’s Finance and Treasury Policies set out the Group’s approach to
managing treasury risk. These policies are approved by the Group Board
on a regular basis. It is Group policy that no trading in financial instruments
or speculative transactions be undertaken.

SIG finances its operations through a mixture of retained profits, Shareholders’
equity, bank funding, private placement and other borrowings. SIG uses
derivative financial instruments in order to manage its exposure to
exchange rate and interest rate fluctuations. A small proportion of SIG’s
assets are funded using fixed rate finance lease contracts.

The Group’s financial liabilities (including derivative financial assets but excluding
trade receivables and payables) at 31 December 2013 amounted to £239.9m
(2012: £236.1m). After taking into account positive cash held on deposit of
£118.7m (2012: £128.1m, and an associate loan and deferred consideration
of £2.7m), the Group’s net debt amounted to £121.2m (2012: £105.3m).
The Group’s net debt is made up of the following categories:

Treasury risk management incorporates liquidity risk, interest rate risk,
foreign currency risk, counterparty credit risk and debt covenants. These
specific risks, and the Group’s management of them, are detailed below.

LIQUIDITY RISK AND DEBT FACILITIES

Liquidity risk is the risk that SIG is unable to meet its financial obligations as they
fall due. In the longer-term, a substantial reduction in operating performance
and cash generation may result in the Group being unable to service its debt,
which would have a material adverse effect on the Group’s business.

In order to mitigate the risk of not being able to meet its financial obligations,
SIG seeks a balance between certainty of funding and a flexible, cost-effective
borrowing structure, using a mixture of sources of funding in order to reduce
the risk of being over reliant upon any one provider. The key sources of finance
are private placement note investors, being mainly US-based pension funds,
and principal bank debt.

During the year €100m of private placement debt matured and was repaid.
In order to maintain the Group’s level of liquidity, this debt was successfully
refinanced during the year with a further €100m of private placement debt
being raised from two bilateral investors at attractive rates of interest. This
increased the certainty of the Group’s debt funding by providing committed
seven, eight and ten year facilities. The maturity of the Group’s debt facilities
at 31 December 2013 are as follows:

Finance lease contracts
Bank overdrafts
Bank loans
Private placement notes
Derivative financial instruments

Total
Derivative financial instruments (assets)

Net total
Cash on deposit
Associate loan and deferred consideration

Net debt

2013
£m

9.8
4.9
0.3
252.5
2.1

269.6
(29.7)

239.9
(118.7)
–

121.2

2012
£m

7.6
4.1
1.4
256.0
10.6

279.7
(43.6)

236.1
(128.1)
(2.7)

105.3

The Group’s gross financial liabilities can be further analysed as follows:

2013
£m

2013
%

2012
£m

2012
%

Gross financial liabilities with a maturity
profile of greater than five years
Gross financial liabilities held on an
unsecured basis

84.3

25.5

229.4

226.4

Details of derivative financial instruments are shown in Note 20 to the
Accounts on pages 110 to 112.

Facility
amount
£m

250.0

Amount
drawn
£m

Amount
undrawn
£m

Date of expiry

–

250.0

March 2015

130.6

– November 2016

20.0

25.0

16.7

41.6

20.0

25.0

16.7

41.6

– November 2018

–

October 2020

October 2021

October 2023

Bank debt
Private placement
loan notes
Private placement
loan notes
Private placement
loan notes
Private placement
loan notes
Private placement
loan notes

Total

483.9

233.9

250.0

The Group also has in place a £250m committed Revolving Credit Facility
(“RCF”) provided by its four key relationship banks. At 31 December 2013
this facility was undrawn and therefore represents the committed funding
headroom for the Group. The RCF matures in March 2015, and therefore,
it is envisaged that SIG will undertake a refinancing exercise during 2014
in order to ensure that sufficient funding headroom and liquidity is available
to support the Group’s medium-term strategic plans.

INTEREST RATE RISK

The Group’s interest costs in respect of its borrowings will increase in the
event of rising interest rates. To reduce this risk the Group monitors its mix
of fixed and floating rate debt and enters into derivative financial instruments
to manage this mix where appropriate and has a policy of aiming to fix
between 60% and 85% of its average net debt over the medium-term.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverview
TREASURY RISK MANAGEMENT CONTINUED

INTEREST RATE RISK CONTINUED

The Group monitors its percentage of fixed rate debt on a monthly average
balance basis, after adjusting for non-interest bearing assets and liabilities
(primarily being the mark-to-market value of derivative instruments).
The percentage of net debt at fixed rates of interest at 31 December 2013
is 98% (2012: 79%) and on a gross debt basis is 82% (2012: 62%).
The percentage of fixed rate debt has increased in the year as a result
of maturing floating rate private placement debt being replaced with
an equivalent principal amount of fixed rate private placement debt.
At 31 December 2013, the level of fixed rate debt was above the upper
end of the Group’s targeted medium-term range.

In February 2014 the Group cancelled two interest rate derivative contracts
that swapped floating rate debt into fixed rate debt at a cash cost of c.£2.0m.
The termination payment will not increase the Group’s level of net debt as
this payment cancelled the mark-to-market liability already included in the
Group’s Consolidated Balance Sheet. The amounts previously recorded in
reserves will be amortised through the Consolidated Income Statement over
the life of the associated debt to 2018 in line with the relevant accounting
standards. As a consequence of cancelling the swaps, the percentage of the
Group’s debt that is fixed returned to being within the Group’s targeted
medium-term range.

FOREIGN CURRENCY RISK

INCOME STATEMENT

SIG has a number of overseas businesses whose revenues and costs are
denominated in the currencies of the countries in which the operations are
located. 55% of SIG’s 2013 continuing revenues (2012: 55%) were in foreign
currencies, being primarily Euros and Polish Zloty. The vast majority of SIG’s sales
and purchases are not cross-border. When cross-border transactions occur, it is
SIG’s policy to eliminate currency exposure at that time through forward currency
contracts, if the exposure is considered to be material.

SIG faces a translation risk in respect of the local currencies of its primary
foreign operations, principally being Euro and Polish Zloty sales and profits.
SIG does not hedge the income statement translational risk arising from
these income streams.

SIG also faces a translation risk from the US Dollar in respect of its private
placement borrowings. This risk has been eliminated through the use of
cross-currency swaps, which swap the US Dollar private placement debt
into Sterling.

BALANCE SHEET

The Consolidated Balance Sheet of the Group is inherently at risk from
movements in the Sterling value of its net investments in foreign businesses
and the Sterling value of its foreign currency net debt.

For currencies where the Group has significant balance sheet translational
risk, SIG seeks to mitigate this risk by combining financial liabilities and
derivatives in currencies that partially hedge the net investment values.
The Group’s policy is that for currencies where a material balance sheet
translational exposure exists, the Group will hold financial liabilities in that
particular currency in proportion to the overall ratio of net debt to
capital employed.

Net debt denominated in foreign currencies, held
partially to hedge the assets of our overseas businesses
% of net debt

£67.3m
56%

£53.5m
51%

2013

2012

At 31 December 2013, SIG had the following net foreign currency
borrowings (including cash and cash equivalents):

Euro
Polish Zloty
Other currencies

Total

Local
currency net
borrowings/
(cash)
LC’m

Sterling
equivalent
borrowings/
(cash)
£m

94.1
(47.1)
Various

78.4
(9.4)
(1.7)

67.3

As noted above, net Euro borrowings at 31 December 2013 amounted
to €94.1m, or £78.4m, and therefore represented 65% of Group net debt
(2012: 62%).

IMPACT OF FOREIGN CURRENCY MOVEMENTS IN 2013

The overall impact of foreign exchange rate movements on the Group’s
Consolidated Income Statement and Consolidated Balance Sheet is
disclosed on page 33 of this Strategic Report.

COUNTERPARTY CREDIT RISK

SIG holds significant investment assets, being principally cash deposits
and derivative assets. Strict policies are in place in order to minimise
counterparty credit risk associated with these assets.

A list of approved deposit counterparties is maintained. Counterparty credit
limits, based on published credit ratings and CDS spreads, are set. These
limits, and the position against these limits, are reviewed and reported on
a monthly basis.

Sovereign credit ratings are also monitored, and country limits for investment
assets are in place. If necessary, funds are repatriated to the UK.

DEBT COVENANTS AT 31 DECEMBER 2013

The Company’s debt facilities in place at 31 December 2013 contained
a number of covenants to which the Group must adhere. The Group’s
debt covenants are tested at 30 June and 31 December each year, with
the key financial covenants being leverage, interest cover and Fixed Charge
Cover (“FCC”).

However, the FCC covenant only applies should certain trigger points be
met (i.e. leverage exceeds 2.25x or annual operating lease rentals exceed
£90m). While the trigger points for the FCC covenant have not been met in
2013 and therefore the covenant does not apply at this stage, the Group
manages its financial position as if the covenant were in place at all times.

SIG plc Annual Report and Accounts 2013
The actual ratio for each of the debt covenants is set out below:

Interest cover ratio*
Leverage ratio^
FCC ratio#

Year
ended 31
December
2013

9.8x
1.0x
2.4x

Year
ended 31
December
2012

8.2x
0.9x
2.4x

Requirement

>3.0x
<3.0x
>1.75x

* Covenant interest cover is the ratio of the previous twelve months’ underlying operating profit
(including the trading losses and profits associated with divested businesses) over net financing
costs (excluding pension scheme finance income and costs).

^ Covenant leverage is the ratio of closing net debt (at average rates) over the underlying operating
profit before depreciation, adjusted if applicable for the impact of acquisitions and disposals during
the previous twelve months (“EBITDA”).

# Covenant FCC is the ratio of EBITDA plus gross operating lease rentals over operating lease

rentals plus underlying net finance costs.

As can be seen in the table above, the Company is in compliance with
its financial covenants in all respects and anticipates maintaining a healthy
headroom on covenants.

GOING CONCERN BASIS

In determining whether the Group’s Annual Report and Accounts can be
prepared on a going concern basis, the Directors considered all factors likely
to affect its future development, performance and its financial position,
including cash flows, liquidity position and borrowing facilities and the
risks and uncertainties relating to its business activities. These are set
out in the Chairman’s Statement and Strategic Report on pages 6 to 37
and in the Notes to the Group Accounts.

The key factors considered by the Directors were as follows:

the implications of the challenging economic environment and

the continuing weak levels of market demand in the building and
construction markets on the Group’s revenues and profits. The Group
prepares forecasts and projections of revenues, profits and cash flows
on a regular basis. While this is essential for targeting performance
and identifying areas of focus for management to improve performance
and mitigate the possible adverse impact of a deteriorating economic
outlook, these also provide projections of working capital requirements;

the impact of the competitive environment within which the Group’s

businesses operate;

the availability and market prices of the goods that the Group sells;

The Directors have a reasonable expectation that the Company and the
Group have adequate resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the going concern
basis in preparing the Group’s 2013 Annual Report and Accounts.

CAUTIONARY STATEMENT

This Strategic Report has been prepared to provide the Company’s
Shareholders with a fair review of the business of the Group and a description
of the principal risks and uncertainties facing it. It may not be relied upon by
anyone, including the Company’s Shareholders, for any other purpose.

This Strategic Report and other sections of this report contain
forward-looking statements that are subject to risk factors including
the economic and business circumstances occurring from time to time
in countries and markets in which the Group operates and risk factors
associated with the building and construction sectors. By their nature,
forward-looking statements involve a number of risks, uncertainties and
assumptions because they relate to events and/or depend on circumstances
that may or may not occur in the future and could cause actual results
and outcomes to differ materially from those expressed in or implied
by the forward-looking statements. No assurance can be given that
the forward-looking statements in this Strategic Report will be realised.
Statements about the Directors’ expectations, beliefs, hopes, plans,
intentions and strategies are inherently subject to change and they are
based on expectations and assumptions as to future events, circumstances
and other factors which are in some cases outside the Group’s control.
Actual results could differ materially from the Group’s current expectations.

It is believed that the expectations set out in these forward-looking
statements are reasonable but they may be affected by a wide range of
variables which could cause actual results or trends to differ materially,
including but not limited to, changes in risks associated with the level of
market demand, fluctuations in product pricing and changes in foreign
exchange and interest rates.

The forward-looking statements should be read in particular in the context
of the specific risk factors for the Group identified on pages 18 to 21 of this
Strategic Report. The Company’s Shareholders are cautioned not to place
undue reliance on the forward-looking statements. This Strategic Report
has not been audited or otherwise independently verified. The information
contained in this Strategic Report has been prepared on the basis of the
knowledge and information available to Directors at the date of its
preparation and the Company does not undertake any obligation
to update or revise this Strategic Report during the financial year ahead.

the credit risk associated with the Group’s trade receivable balances;

APPROVAL OF THE STRATEGIC REPORT

the potential actions that could be taken in the event that revenues are

worse than expected, to ensure that operating profit and cash flows are
protected; and

the committed and renewed finance facilities available to the Group or

the reasonable expectation of the renewal of facilities.

Having considered all the factors above impacting the Group’s businesses,
including downside sensitivities, the Directors are satisfied that the Group
will be able to operate within the terms and conditions of the Group’s
financing facilities for the foreseeable future.

The Strategic Report (including the Chairman’s Statement) on pages 6 to 49
was approved by a duly authorised Committee of the Board of Directors
on 12 March 2014 and signed on the Board’s behalf by Stuart Mitchell and
Doug Robertson.

STUART MITCHELL
Chief Executive
12 March 2014

DOUG ROBERTSON
Finance Director
12 March 2014

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverview

CORPORATE RESPONSIBILITY REPORT

SIG HAS A CLEAR APPROACH TO BUSINESS INTEGRITY AND ETHICS
WHICH UNDERLINES THE GROUP’S CORE VALUES OF OPENNESS,
COLLABORATION, MUTUAL DEPENDENCY, SUSTAINABILITY,
PROFITABLE GROWTH AND INNOVATION.

CORPORATE RESPONSIBILITY AWARDS

OUR PEOPLE

FTSE Group confirms that SIG plc has been independently assessed
according to the FTSE4Good criteria and has satisfied the requirements
to become a constituent of the FTSE4Good Index Series. Created by
the global index company FTSE Group, FTSE4Good is an equity index
series that is designed to facilitate investment in companies that meet
globally recognised corporate responsibility standards. Companies in the
FTSE4Good Index Series have met stringent social and environmental
criteria and are positioned to capitalise on the benefits of responsible
business practice.

SIG is a member of Business in the Community in the UK and has
worked with that organisation to develop its approach and practices.

SIG continues to recognise the strength of the
individuals who work within the Group and we believe
that our people are the best in their particular field.
SIG believes that the continued support we provide
to our people is invaluable to our success.

In 2013 the Group acknowledged the contribution our employees
make to SIG and continued to support our people in a variety of ways.
This included continuing to run the Executive Development Programme,
holding the SIG Driver of the Year competition for the third consecutive
year and recognising the contribution of our outstanding employees at
the annual Senior Management Conference.

SIG considers the safety of its employees of paramount importance.
The Group continues to maintain an integrated Health, Safety and
Environmental (“HS&E”) management system.

The completion of the initial stages of a Group-wide health and safety
programme, which saw the successful introduction of several health and
safety measures across the Group, has provided the foundation for the
next step in the programme. It is SIG’s philosophy that all accidents are
avoidable, and therefore the aspiration for the Group is for “Zero Harm”
every day.

SIG plc
Annual Report and Accounts 2013

SUPPORTING THE COMMUNITY

ENVIRONMENT

The Group endeavours to contribute to the
communities in which it operates, particularly those
neighbouring its sites.

SIG acknowledges its responsibility to the
environment as a leading distributor of building
products in Europe.

The Group Human Resources Director has responsibility for community
issues within the Group and reports to the Chief Executive, who
is responsible for community issues at Board level. SIG’s employees
continue to take part in a range of activities which support our work
in the community. This includes, but is not limited to, participation
in the Sheffield Half Marathon, fundraising in branches and by our
graduates, and making donations through a payroll giving scheme.

To help support the Group’s contribution to the communities it
operates in across the UK, SIG is a member of Business in the
Community. SIG continues to work with this organisation to help
develop its approach and practices. This is mainly achieved through
charitable donations and other initiatives that help the community.

During 2013 SIG has also raised funds and made donations for local
charities and organisations throughout Mainland Europe. A prime
example of this is the sponsorship provided by WeGo Systembaustoffe
GmbH to the seventh Hanau Soapbox Derby – a local initiative that
promotes community involvement, team working, creativity and
inter-generational involvement. The proceeds from the derby will be
used to build a child-friendly outdoor play area at a local after-school
care centre.

SIG’s UK operations continue to maintain accreditation to the
international environmental standard ISO 14001, with a roll-out plan in
place for new businesses acquired in 2013 to gain certification in 2014.
The principles of this management system standard form the basis of
the approach to environmental matters across the Group.

The main focus of the Group’s environmental objectives and targets for
2014 relate to the aims of SIG’s Low Carbon Business Policy to reduce
fuel, energy and water consumption and to reduce waste.

The Group’s partnership with the Carbon Trust to carry out
energy audits and develop an Internal Audit programme, along with
an employee awareness programme and “Switch Off” campaign,
have enabled the business to achieve an overall reduction of 4.8%
in its carbon emissions in 2013 compared to 2012.

In 2013 SIG has ensured its commitment to reducing its environmental
impact has been upheld by also re-launching the Group’s “Switch Off”
campaign, commencing installation of Solar PV at its branches in the UK,
continuing to recycle water for commercial processes in Southport (UK)
and Alizay (France), introducing paperless delivery processes and
providing online activity reports, among other activities.

SIG Insulations was the main sponsor for the Sheffield Half Marathon for the sixth
consecutive year, which raised £105,000 for good causes in 2013.

To help maintain the momentum in reducing waste and operating costs, the
“Switch Off” campaign, which was originally launched in 2010, was re-launched
in 2013. The campaign encourages employees to turn off lights and other electrical
appliances when not in use.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewCORPORATE RESPONSIBILITY REPORT CONTINUED

In 2013 SIG continued its drive to integrate Corporate
Responsibility (“CR”) across the Group, with focus on
taking forward the key aspects of the CR plan. SIG believes
that the inclusion of broader social and environmental
issues into its decision-making process will support the
Group in achieving our business goals as well as helping us
grow Shareholder value.

SIG continues to be a constituent of the FTSE4Good Index of socially responsible
companies and the Group recognises its corporate responsibilities toward its
Shareholders, employees, customers and suppliers and is committed to good
practice in all its activities. SIG seeks to continually develop its approach to CR
and is pleased to be able to inform its stakeholders of the measures which
it is taking to monitor and improve its CR performance reporting.

e as a matter of policy, we do not make political donations;

e no bribes will be given or received;

e conflicts of interest must be avoided and in all cases must be reported; and

e employees are encouraged to report any suspected wrongdoings.

A confidential and independent hotline service is available to all employees so that
they can raise any concerns that they have about how we conduct our business.
We believe this is an important resource which supports a culture of openness
throughout the Group. The service is provided by an independent third party
with a full investigation being carried out on all matters raised and a report
prepared for feedback to the complainant.

HUMAN RIGHTS

CR COMMITTEE

The CR Committee was established in 2009 and provides the SIG Board with a
regular account of the significance of social, environmental and ethical matters to
the business. It has put in place a comprehensive risk management and internal
control process which identifies and assesses the significant risks to the Group’s
short-term and long-term value arising from such matters. The Board receives a
report on CR issues at each of its Board meetings and reviews CR strategy. CR
issues also form part of the overall internal control process and are covered in the
training of the Directors.

The Committee has a rolling three year plan which informs the CR objectives
and target actions of the Group and drives continual improvement of its CR
performance. The objectives allow the Group to focus its CR efforts and work
to continually improve the Group’s index ratings.

The Group’s CR credentials are central to its commercial aspirations. Throughout
2013 the Group continued to provide access to tender lists for major contractors
through formal assessment and pre-qualification questionnaires.

BUSINESS PRINCIPLES AND CODE OF ETHICS

SIG has a clear and unequivocal approach to business integrity and ethics which
underlies the Group’s core values of openness, collaboration, mutual dependency,
sustainability, profitable growth, professional delivery and innovation. The Group
has in place Group-wide Ethics, Anti-Bribery & Corruption and Ethical Trading &
Human Rights policies. These policies, which are regularly reviewed, underpin
our CR programme and support our business integrity.

ETHICS POLICY

SIG has in place a Group-wide Ethics Policy, which has been issued to all
employees. The policy sets out the standards and behaviours that all SIG
employees are expected to meet throughout the Group’s operations, and is
designed to ensure that the business conforms to the highest ethical standards.
The policy can be viewed on the Company’s website at www.sigplc.com.

The key business principles contained in the Ethics Policy are set out below:

e SIG’s policy is to operate within applicable laws;

e discrimination or harassment of any kind will not be tolerated;

e SIG aims to be a responsible partner within its local communities;

e the legal and moral rights of others will be taken into account in all of

SIG’s business transactions;

e we will maintain a safe and healthy environment for people to work in;

e we will be proactive in managing our responsibilities to the environment;

e we will not knowingly make misrepresentations;

SIG does not currently have in place a policy that deals specifically with human
rights. SIG will give careful consideration to whether a specific Human Rights
policy is required in future over and above existing policies.

ANTI-BRIBERY & CORRUPTION POLICY

SIG plc has a number of fundamental principles and values that it believes are the
foundation of sound and fair business practice and as such are important to uphold.
One such principle is a zero tolerance position in relation to bribery and corruption,
wherever and in whatever form that it may be encountered. The Group’s
Anti-Bribery & Corruption Policy supports our Ethics Policy and clearly states the
standards and principles required to ensure conformance to legal requirements
within the countries in which SIG and its subsidiary companies operate.

We have continued to roll out our Anti-Bribery & Corruption Policy training
(which since 2012 has included competition law training) via the comprehensive
online training resource to all Senior Management through to branch managers
and external salespeople across the Group.

The Company values its reputation for ethical behaviour, financial probity and
reliability. It recognises that over and above the commission of any crime, any
involvement in bribery will also reflect adversely on its image and reputation.
Its aim therefore is to limit its exposure to bribery and corruption by:

e setting out a clear Anti-Bribery & Corruption Policy;

e training all employees so that they can recognise and avoid the use of

bribery by themselves and others;

e encouraging its employees to be vigilant and to report any suspicion of
bribery, providing them with suitable channels of communication and
ensuring sensitive information is treated appropriately;

e rigorously investigating instances of alleged bribery and assisting the

police and other appropriate authorities in any resultant prosecution; and

e taking firm action against any individual(s) involved in bribery or corruption.

A copy of the Group’s Anti-Bribery & Corruption Policy can be viewed on the
Company’s website www.sigplc.com.

ENVIRONMENT

ENVIRONMENTAL MANAGEMENT

SIG continues to operate an integrated Health, Safety and Environmental (“HS&E”)
management system. The Group Chief Executive is the Board Director
responsible for the implementation of the management system. A copy of the
Group’s HS&E Policy signed by the Chief Executive is displayed at each location
in the local language.

SIG plc
Annual Report and Accounts 2013

SIG INTERIORS PARTNERS WITH
ARMSTRONG WORLD INDUSTRIES
TO DRIVE RECYCLING INITIATIVES

The initiatives enable new build ceiling contractors
and refurbishment teams to recycle suspended ceiling
products and “off-cuts”. SIG Interiors handles the
collection and recycling, driving significant cost and time
savings for new customers while supporting sustainable
building practices.

SIG’s UK operations continue to maintain accreditation to the international
environmental standard ISO 14001, with a roll-out plan in place for new
businesses acquired in 2013 to gain certification in 2014. The principles of this
management system standard form the basis of the approach to environmental
matters across the Group.

The Group’s policy for continuous improvement is supported through the
maintenance of its Environmental Aspects and Impacts Register and Corporate
Environmental Risk Assessment. These documents record and assess the
principal environmental hazards within the Group and were reviewed in 2013
through each business’ Management Review process.

The Group has maintained its excellent record of legal compliance and
environmentally sound operations throughout 2013 and can continue to report
that there have been no prosecutions, no actions from the authorities and
no incidents reported through internal processes.

The main focus of the Group’s environmental objectives for 2014 relate to
the aims of the business’ Low Carbon Policy to reduce fuel, energy and water
consumption and to reduce waste. The progress that the business has made
in this area in 2013 is covered in this report.

CARBON MANAGEMENT

SIG plc’s Low Carbon Policy was first published in 2010. The policy was
reviewed in 2013 and signed by the Group’s Chief Executive who retains
responsibility for environmental performance.

In addition to this annual CR Report, SIG continues to report its Carbon Footprint
performance through the Carbon Disclosure Project, CRC Energy Efficiency
Scheme (“CRC”) and the Carbon Trust Standard.

The CRC scheme is the UK Government’s mandatory carbon reporting process,
designed to encourage higher consuming businesses to take action to reduce their
emissions. The first phase of this programme comes to an end in 2014 and SIG
has notified the Environment Agency that, following the sale of the manufacturing
business in 2011, the Group now falls outside of the scope of the scheme.

In 2013 SIG’s UK and Ireland businesses re-launched their ”Switch Off” campaign.
Originally launched in 2010, the campaign encourages employees to turn off
lights and other electrical appliances when not in use. Also, as a founder member
of the Association for the Conservation of Energy, SIG is active in promoting and
encouraging the raising of mandatory standards for thermal insulation.

Carbon emissions
p.43

ROAD RISK POLICY

SIG recognises that driving is among the most hazardous tasks performed by
its employees across the Group and that its vehicles and drivers represent the
Company while they are on the road. It also recognises the potential impact
that driving and vehicle use has on the local and global environment.

The UK business, in partnership with its insurers and brokers, operates a
UK Occupational Road Risk Accident Review Panel. The Panel meets monthly
and reviews all serious accidents and incidents. The aims of the panel are
to improve the speed of reporting, the quality of investigation, identify
the causes of accidents and take action to reduce the risk of reoccurrence
including recommending further training where appropriate.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverview
CORPORATE RESPONSIBILITY REPORT CONTINUED

EKO PROJECT IN POLAND

ENVIRONMENT CONTINUED

ROAD RISK POLICY CONTINUED

In 2013 the panel focused on reducing the number of vehicle accidents
across the Group through the ”New Focus on Accidents” campaign. There has
been on average a 7% reduction in accident numbers over a five year period,
with an average annual reduction in cost of £300,000 for the last four years.

The Occupational Road Risk Policy which has been developed within the UK
was communicated across the Group as best practice. This will pave the way
for the introduction of the policy across the Group.

The aims of the policy are:

e to take the risks associated with the use of vehicles into account during

management decision-making processes;

e to reduce the frequency and severity of accidents that occur during

driving activities;

e to reduce the adverse impact that driving and vehicles have on the local

and global environment; and

e for SIG drivers to be acknowledged by customers, employees and the public
as being socially and environmentally responsible in their approach to driving.

This will be achieved by improving the knowledge, developing the attitude and
influencing the driving behaviour of employees.

In addition a Group-wide Commercial Vehicle Audit was commissioned and
commenced in 2013.

Health and safety
p.44

TRANSPORT

Emissions from road vehicle fuel consumption form the majority of the Group’s
carbon footprint. SIG has targeted an absolute reduction in this Scope 1 category
and has achieved significant reductions in each of the last three years, with an
overall reduction of 8.9% in 2013 compared to the base year of 2010. This has
largely been achieved through the replacement of older commercial vehicles with
new and low emission vehicles, and more efficient journey planning.

The Group’s plans for growth and increased business will have a significant
impact on the absolute consumption of vehicle fuel and the key thrust of the
programme in 2014 will be the improved efficiency of road vehicles and
better driving behaviours.

The Group maintains its policy to purchase commercial vehicles to the latest
European standard and low emissions vehicles to facilitate deliveries into “Low
Emission” zones across Europe. These vehicles are less fuel efficient, but are
designed to reduce harmful emissions from exhaust fumes to minimise the
effect on the local environment.

The roll-out of the in-vehicle Telematics system in the UK to c.1,000 commercial
vehicles, along with a training programme for branch and transport managers,
was a significant achievement in 2013. This has enabled managers and drivers to
assess opportunities for more efficient driving by reducing heavy braking and
acceleration, speeding and engine idling. SIG is also in the advanced planning stage
for the roll-out of Telematics to Poland and France.

The “EKO Driving” and “Eco Driving” driver training programmes in SIG Poland
and the UK and Ireland respectively continue to provide information and
instruction to drivers over and above the training provided at induction.

For the third year running, SIG held its Driver of the Year competition at MIRA in the
UK, recognising the best drivers from the UK branches. The one-day competition

In Poland, SIG has developed an EKO project where
every employee who receives a company car also
receives a tree to plant. A tree is also planted when
new livery is purchased.

The project raises environmental awareness in its staff
and encourages its employees’ families to become
involved. All trees that are given to staff to plant come
with the slogan “We plant trees which absorb the CO2
that our vehicles produce.”

SIG plc
Annual Report and Accounts 2013

set driving tasks that allowed the competitors to prove their skills, including wet
handling, wet braking, fuel efficiency and vehicle defect checks. Qualification to enter
the final was based on a year’s worth of safe and efficient driving practice supported
by training. Jed Hazelden of SIG Roofing in Huddersfield was the winner for 2013.

ENERGY

Emissions from electricity consumption equate to 14.4% of the Group’s Scope
1 and 2 emissions.

Programmes including a partnership with the Carbon Trust to carry out
Energy Audits and develop an Internal Audit programme, along with an
employee awareness programme and the “Switch Off” campaign, have
enabled the business to achieve an absolute reduction of 8.4% in 2013.

The programme for capital projects, which commenced in 2012, has continued
with a capital investment of almost £600,000 providing annual savings of more
than one million kWh of electricity, 650 tonnes of CO2 emissions and a payback
period of less than four years.

The principal savings have been achieved through the replacement of inefficient
lighting with low energy systems fitted with both daylight and movement sensors.

The Group’s first Solar PV installation was completed in 2013 by SIG Energy
Management at an SIG Fixings branch in the West Midlands. The system will
provide the site with almost all of its electricity, saving 500 tonnes of CO2 over
its 20 year lifetime.

Running alongside the capital projects programme is the continuing business
need for employees to use electrical equipment more efficiently and the
“Switch Off” campaign saw the provision of sticky labels and notices in corporate
colours with energy saving advice.

GREENHOUSE GAS (“GHG”) EMISSIONS

Providing quality and verifiable data is key to SIG’s carbon footprint reporting
programme. We have reported on all of the emission sources required under
the Large and Medium-Sized Companies and Groups (Accounts and Reports)
Regulations 2008 as amended in August 2013. We have used the GHG
Protocol Corporate Accounting and Reporting Standard (revised edition), data
gathered to fulfil our requirements under the CRC Energy Efficiency scheme,
and emission factors from the UK Government’s GHG Conversion Factors for
Company Reporting 2014 to calculate our GHG disclosures. These include
Scope 1 CO2 emissions, for which businesses are directly responsible, and
Scope 2 CO2 emissions, which are indirect emissions from the generation
of electricity. We have also disclosed Scope 3 CO2 emissions over which the
business has limited control, being third-party air and rail transportation, which
fall outside of the scope of the GHG Protocol.

In collecting this data, SIG has used a period non-coterminous with the Group’s
financial year, with current year data reflecting the year to 30 September 2013.
This is because much of the data is captured via utilities bills, which tend to be
quarterly. A September period end for carbon reporting therefore allows for
actual data to be used as opposed to estimates (in 2013, 93.5% of emissions are
based on actual data). Estimates are prepared on the basis of applying equivalent
emission rates to the remainder of the Group’s footprint.

The comparatives are also twelve month periods, but are based on calendar
years. However the method of collecting data on CO2 emissions has not
changed year on year; therefore the prior year numbers have been included
within this report as the Group feels that they provide meaningful comparison.
The method of collection for each component of CO2 emissions has been
disclosed in the footnotes to each table.

The processes and procedures used have been audited and assessed by the
Carbon Trust Standard and the UK Environment Agency for the CRC Energy
Efficiency scheme.

In accordance with the Group’s policy of continuous improvement a full Internal
Audit of the processes will be completed in the first quarter of 2014 to identify
further opportunities for improvement in the quality of recorded data.

The Group achieved an absolute reduction of 4.8% in Scope 1 and 2 emissions
combined year on year, with an overall reduction of 9.7% compared to the base
year of 2010.

The overall footprint of the business for Scope 1, 2 and 3 improved with a
reduction of 4.8% year on year. The figures represent an overall reduction of
8.7% in emissions per £m of revenue in 2013 compared to 2012 as a result of
the measures taken to reduce road vehicle fuel and energy consumption.

CO2 EMISSIONS – SCOPE 1 – DIRECT

Road vehicle fuel emissions1
Plant vehicle fuel emissions2
Natural gas3
Coal/coke for heating4
Heating fuels (kerosene and LPG)5

Total

Metric
tonnes
2013

68,560
4,934
3,372
52
1,313

78,231

Metric
tonnes
2012

72,223
5,369
2,999
70
943

81,604

Metric
tonnes
2011

73,252
5,204
3,136
79
410

82,081

Data source and collection methods:
1. Fuel cards and direct purchase records in litres converted according to Defra guidelines.
2. Direct purchase records in litres converted according to Defra guidelines.
3. Consumption in kWh converted according to Defra guidelines.
4. Purchases in tonnes converted according to Defra guidelines.
5. Purchases in litres converted according to Defra guidelines.

CO2 EMISSIONS – SCOPE 2 – INDIRECT

Metric
tonnes
2013

Metric
tonnes
2012

Metric
tonnes
2011

Electricity1

13,142

14,346

14,855

Data source and collection methods:
1. Consumption in kWh converted according to Defra guidelines.

CO2 EMISSIONS – SCOPE 3 – OTHER INDIRECT

Metric
tonnes
2013

Metric
tonnes
2012

Metric
tonnes
2011

Third-party provided transport
(air and rail)1

308

349

449

Data source and collection methods:
1. Distance travelled converted according to Defra guidelines.

EMISSION PER £M OF REVENUE

Scope 1
Scope 2

Scopes 1 and 2
Scope 3

Scopes 1, 2 and 3

Metric
tonnes
2013

28.8
4.8

33.6
0.1

33.7

Metric
tonnes
2012

31.2
5.5

36.7
0.2

36.9

Metric
tonnes
2011

30.2
5.5

35.7
0.2

35.9

The data relating to CO2 emissions has been collected from all of the
Group’s material operations and is based on a combination of actual and
estimated results where actual data is not available. Discontinued operations
as at the balance sheet date are not included in the data above.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverview
CORPORATE RESPONSIBILITY REPORT CONTINUED

ENVIRONMENT CONTINUED

NON-HAZARDOUS WASTE

WATER CONSUMPTION

The Group uses very little water for commercial processes and its use is almost
completely for welfare purposes at an estimated 99% of the total consumption.
However SIG recognises that potable water is a precious resource and continues
to maintain water recycling and reuse for the processes in Southport (UK)
and Alizay (France).

In partnership with Waterscan in the UK, SIG has identified significant
opportunities for water consumption efficiencies including: improved automatic
cistern controls, identification and repair of leaks and improved billing processes.

The number of Group companies reporting their water consumption continues
to improve with only Germany and Austria not submitting data in 2013.

Litres ’000

2013

2012

Third-party provided water supply from national
network for processes and welfare

107,604

108,201

The above data is based on a combination of actual and estimated data.

WASTE MANAGEMENT

SIG’s key objective remains maximising the percentage of waste diverted from
landfill. The Group is continuing its programme to reduce the amount of waste
generated, for instance by introducing paperless delivery processes and providing
online activity reports.

Waste management is included in the branch HS&E inspection and Internal Audit
process. Branches provide dedicated waste bins for materials segregation and
waste balers where appropriate.

SIG continues to work in partnership with suppliers and manufacturers to
facilitate compliance with their Producer Responsibility Obligations under waste
management legislation. As part of this, branches provide dedicated waste facilities
for plasterboard and plaster products, uPVC windows, fibre ceiling tiles and vinyl
floor covering material.

As a break bulk supplier of products, packaging has the greatest potential
for waste production. SIG continues to comply with its obligations under
the Producer Responsibility Obligations (Packaging Waste) Regulations and
is a member of the Valpak compliance scheme.

Branches actively minimise waste though the use of second-hand packaging, the
reuse of opened packaging and operating return schemes for pallets and bearers.

As the measurement of waste generated is notoriously difficult, in order to ensure
that the data is as accurate as possible SIG works with waste management
recycling companies to provide our best estimate. The figures for 2013 indicate
an increase in waste diverted from landfill from 62% in 2012 to 79% in 2013.

HAZARDOUS WASTE

Landfill
Recycled (diverted from landfill)
Incinerated

Total

Hazardous waste per £m of revenue

* Volume per annum converted to tonnes.

Absolute tonnes*

2012

21
279
72

372

Absolute tonnes*

2012

0.14

2013

13
139
65

217

2013

0.08

2011

28
339
11

378

2011

0.14

SIG plc
Annual Report and Accounts 2013

Landfill
Incinerated

Total

Absolute tonnes*

2013

4,283
12

4,295

2012

8,743
–

8,743

2011

9,231
31

9,262

* Volume per annum converted to tonnes.

OTHER WASTE DIVERTED FROM LANDFILL

WEEE (Waste, Electrical and
Electronic Equipment)
Glass
Wood
Metal
Plasterboard
Paper/cardboard
Plastic
Other

Total

* Volume per annum converted to tonnes.

Non-hazardous and other waste per
£m of revenue

* Volume per annum converted to tonnes.

Absolute tonnes*

2013

2012

2011

5
3
1,324
977
1,258
1,024
440
10,860

15,891

3
3
2,058
1,234
390
1,165
762
8,250

5
38
1,372
1,158
480
932
914
7,306

13,865

12,205

Absolute tonnes*

2013

2012

2011

7.4

8.7

7.9

The above data is based on a combination of actual and estimated data.

HEALTH AND SAFETY

SIG continues to maintain an integrated HS&E management system with
SIG UK’s operation accredited to the BS-OHSAS 18001:2007 (Health
and Safety) standard for its operations. The principles of the standard form the
basis of the Group’s approach to health and safety matters across the Group.
A roll-out programme has commenced to bring new businesses acquired
in 2013 on to the certification in 2014.

A copy of the Group’s HS&E Policy, signed by the Chief Executive who is
the Board member responsible for health and safety, is displayed at each
location in the local language.

The Group’s strategy for managing health and safety is founded on the key
principles of competent assistance, common written procedures within each
business, risk assessment for hazardous activities and an HS&E inspection process
across all locations with written reports detailing any issues and target actions.

The Group HS&E Manager is a dedicated resource employed to communicate
and support the implementation of HS&E principles across the Group.

With the exception of Benelux, where external advisors are employed
when necessary, all other Group businesses have dedicated, qualified HS&E
personnel directly employed to provide advice and support to the business and
the Group HS&E manager. This lack of reliance on consultants has improved the
internal communication of HS&E incidents and best practice and the facilitated
introduction of local campaigns.

SIG operates a robust Risk Assessment and Management Review
process through which the key health and safety risks have been identified.

The greatest hazards within the business, in terms of the potential for
severity, come from Occupational Road Risk Traffic Management and
Machining Processes. With the exception of road risk, manual handling and
slips, trips and falls remain the largest cause of accidents in the Group.

In 2013, Traffic Management was a key focus for health and safety audits
across the Group, and in France a programme to refresh traffic plans at each
branch was implemented, including relining pedestrian and loading zones and
providing informative signage and speed limitations. This initiative continues to
reinforce the safety of employees and customers alike.

SIG UK received its third consecutive Silver RoSPA Occupational Health and
Safety award in May 2013. This award recognises our ongoing commitment to
raising the standards of Health and Safety Management across the Group.

Statement from Stuart Mitchell, Group Chief Executive
(issued following the Group Senior Management Conference in February 2014):

The “New Focus on Accidents” campaign has been a significant step forward
in the Group HS&E programme, with the introduction of:

“ The health, safety and wellbeing of our workforce and others we come
into contact with are vital to the way SIG operates.

e a Group-wide web-based instantaneous accident reporting database and
communication process. This has improved communication of accident
information and improved the ability of the business to investigate them
fully and in a timely manner;

e a Group-wide Hazard Alert process for serious accidents, designed to

share information about the occurrence, causes and preventative action
associated with accidents;

e Accident Review Panels, which meet regularly in each business. Chaired by
the operating company’s Managing Director, the panels review accidents
that have occurred in the business to ensure that they have been
investigated and recorded properly, fully and in a timely manner and that
actions have been identified and taken to reduce the likelihood of the
accident recurring; and

e a formal routine branch inspection process carried out by branch

management, line management and Senior Management specifically
targeting housekeeping, manual handling and traffic management.

Health and safety is high on the agenda for all of the Group’s businesses.
A dashboard for accident statistics, along with supporting information about
serious accidents and incidents, is included in the monthly Board report which
is reviewed and discussed by the Board at its meetings.

The successful implementation of the above elements across the Group has
provided the foundation for the next step in the programme. It is SIG’s philosophy
that all accidents are avoidable and the aspirational target for the business is for
“Zero Harm” every day.

This will be achieved through the continuation of the SIG Certificate in HS&E
Management training programme, designed to ensure that managers know and
understand their legal, financial and moral responsibilities for health and safety.
This includes a programme of support through the HS&E competent assistance
and the measurement of KPIs with accountability for those in control.

The accident statistics indicate that there has been an increase in the rate of
major injuries as defined in RIDDOR. The increase is largely due to injuries
sustained from slips, trips and falls in the severe weather in the early months of
2013 in the UK. Whilst remaining static in the UK and Ireland, the Group’s
“over three day” accident rate has reduced. Some caution is advised when
comparing RIDDOR rates as the data for 2011 and 2012 has not been
adjusted for the revised “over seven day incapacity” definition.

My vision is to provide a safe, healthy and efficient working
environment that supports the long-term growth of the business and
puts our staff’s welfare first.

I believe that this can be achieved through a knowledgeable, committed
and competent management and support structure that makes health
and safety the primary consideration in the development, growth and
day-to-day operation of SIG’s business.

Line managers at all levels are crucial to this vision. They need to engage
with all staff on health and safety matters and to challenge any unsafe
practice. Nobody should just ‘walk by’.

I expect all management to deliver the safety message to target
Zero Harm every day and to work hard so we can make SIG a safe
place that we can all be proud of.”

ACCIDENTS AND INCIDENTS

UK & IRELAND

Major injury
Injury resulting in over three
absence days from work
All RIDDORs
Average UK and Ireland headcount
Lost work day rate – number of
work days per 100 employees

GROUP

Major injury
Injury resulting in over three
absence days from work
All RIDDORs (equivalent)*
Average Group headcount

Rate per 1,000 employees

2013

3.6

11.2
13.4
5,070

2012

2.7

11.2
14.1
5,261

2011

2.5

12.8
15.4
6,111

23.3

29.6

34.0

Rate per 1,000 employees

2013

2.8

16.7
16.5
9,806

2012

2.2

17.1
17.9
10,228

2011

2.1

16.1
18.3
11,105

* This includes accidents in non-UK businesses that would meet the criteria for reporting

in the UK under RIDDOR.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverview
CORPORATE RESPONSIBILITY REPORT CONTINUED

EMPLOYEES AT SIG INSULATION
LEEDS RAISED A GRAND TOTAL
OF £10,000 IN 2013

Over the course of the year employees took part in a
range of events and activities including sponsorship of head
shaving, beard growing, runs and walks. Funds have been
donated to a variety of charities including Leeds Children’s
Hospital, Cancer Research UK, Dementia and British
Heart Foundation.

QUALITY ASSURANCE

The Group’s management systems are maintained to a high standard through
management review and internal auditing. A supplier audit programme is in
place to identify opportunities for continuous improvement. The programme
is conducted by way of questionnaire and includes questions regarding the
health, safety and environmental credentials of the supplier. Where it is
commercially advantageous the quality managements systems are externally
certificated to ISO9001:2008 with Sitaco Poland and certificated branches in
the UK achieving re-certification in 2013.

COMMUNITY

SIG recognises the ethical obligation it holds to the communities in which
it operates, both as a local employer and as a FTSE 250 company.

To help support the Group’s contribution to the UK communities in which
it operates, SIG is a member of Business in the Community. The Group
has worked with Business in the Community for a number of years to help
develop its approach and practices. This is mainly achieved through
charitable donations and other initiatives that help the community.

As part of its work with this organisation, SIG has signed up to Business
in the Community’s Business Class Programme to partner with a local UK
School for a period of three years. Commencing in 2014, the headteacher
of the local school will drive the agenda with SIG working closely with the
school across several key areas: leadership and governance, enterprise
and employability, the curriculum and wider issues. The Business Class
Programme targets secondary schools facing challenging circumstances,
prioritising engagement in the most deprived communities in the UK, and
will be a long-term approach to ensure that the lives of young people are
transformed through their education.

In 2013, SIG Energy Management helped an inner city primary school
by recycling materials from an ECO project. SIG Energy Management
in Leeds diverted excess pebbledash from landfill and instead used the
leftover materials to help transform the school grounds. The pebbledash
has been used to landscape the outdoor areas and brighten up communal
areas in the school which would otherwise have been left as scrubland.
The landscaping means the learning environment is cleaner and requires
less maintenance.

SIG Insulations was the main sponsor for the Sheffield Half Marathon
event for the sixth year. In 2013 the Half Marathon raised £105,000
for good causes.

The Group Human Resources Director has responsibility for community
issues within the Group and reports to the Chief Executive who is
responsible for community issues at Board level.

CHARITABLE DONATIONS

During the year the Group made donations of £109,000 (2012: £124,000).
It is the Group’s policy not to make political donations and no political
donations were made in the year (2012: £nil).

The Group supports charities and community projects that enhance SIG’s
engagement in the communities in which it operates, assist in managing the
sustainability of the local environment and help to educate young people
and assist disadvantaged groups. In addition, the Group’s policy encompasses
other charities which its employees particularly wish to support.

SIG plc
Annual Report and Accounts 2013

SIG GRADUATES RAISE OVER
£5,000 FOR CHARITY

The UK Graduates worked together on a number of
projects to raise money for The Children’s Hospital Charity,
including a sponsored hike, a raffle and bake sales. Over
£5,000 was raised for the Charity and it allows SIG to
sponsor an Ante Room at the hospital.

The International Graduates also raised over £1,000.
The funds were split between the Ronald McDonald charity
in France and the Aktion Deutschland Hilft in Germany.

SIG employees have been involved in a wide range of activities and events
to raise funds for the charities of their choice in 2013. These included
trekking up Killimanjaro, 24 hour football matches and walking the
Kennedy March in The Netherlands, as well as sponsored cycle rides,
bake sales, summer fêtes and quizzes.

A clear example of SIG’s employees’ commitment to helping charities, local
or otherwise, is the £10,000 raised by employees at SIG Insulation Leeds.
Over the course of the year employees took part in an array of events and
activities to raise funds which have been donated to a variety of charities
including Leeds Children’s Hospital, Cancer Research UK, Dementia UK
and the British Heart Foundation.

The Group actively encourages its UK employees to help charities through
a dedicated intranet forum for employees to highlight their fundraising efforts
and receive support from their colleagues as well as the Group’s matched
funding initiative.

The matched funding initiative, whereby employees are able to apply for a
donation matching the money raised by them up to £500 (or equivalent),
raised £34,000 in 2013. A Charities Committee approves applications and
ensures that they are in line with SIG’s Charitable Donations Policy. SIG
matched donations from employee applications, to a variety of charities and
good causes in 2013, including Leeds Children’s Hospital, Motor Neurone
Disease Association, Roparun Foundation Netherlands, Comic Relief, Cancer
Research UK, Mama Cash Netherlands and African Child Foundation Kenya,
among many others.

The Group also has in place a Payroll Giving Scheme, which is available to
all UK employees. Employees are free to choose any charity of their choice.
Donations of £20,000 were made through the scheme in 2013. As a result
of this, SIG has been awarded a Payroll Giving Quality Mark Silver Award in
the UK for commitment to good causes and the local community.

During 2013, SIG’s Graduates took part in a CR challenge to raise money for
Sheffield Children’s Hospital by completing the three dams challenge, holding
donut sales and organising a raffle. They were successful in raising £5,000
which will be used towards creating an Ante Room at the hospital.

SIG also continued support of the Sheffield Children’s Hospital through
replacing Christmas cards with an additional donation to the hospital.

OUR PEOPLE

Throughout SIG, regardless of geography, business or function, we believe that we
have exceptional people. This is demonstrated by the levels of experience SIG has
throughout the organisation, and in particular through the specialist and technical
knowledge of our employees, which we believe gives real differentiation in the
market for SIG. The commitment and professionalism of our people and the
dedication of our employees in consistently meeting and exceeding customer
demands is key to the success of our business.

SIG has recently launched the new Group Vision, Mission and Values. Our aim
is to be stronger together. This applies to the customers we serve, in terms
of working closely with them to develop complete solutions to their problems.
It applies to our suppliers, partnering more closely with them to better deliver
on time and in full. “Stronger together” applies to our employees, as we can share
best practice and knowledge and better utilise the skills and capabilities across the
whole of our business by working more closely together. It also applies to our
shareholders, as by leveraging the strength of the SIG Group and working together
as a team, we will be well placed to ultimately deliver better returns.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverview
CORPORATE RESPONSIBILITY REPORT CONTINUED

OUR PEOPLE CONTINUED

Our new Group Values have been developed through working with our
employees and asking for their views, to ensure that the values reflect the voice
of our people and that they are lived within the organisation. Trust and respect are
very important to us and came through as being the values which employees felt
most strongly represented SIG. However, teamwork and commitment were also
identified as key and integrity was seen as critical – this aligns with our customer
ethos of always delivering on our promises. Finally, it was felt having fun at work
was important and we see this reflected in our SIG spirit and the work that SIG
undertakes for charity and in the community.

SIG is committed to ensuring that all managers and employees know what is
expected of them in their roles and that performance is measured and managed
throughout the business. Our Performance Development Review (“PDR”) process
continues to help us in this regard, with improved standardisation in 2013 which
enables clearer identification of Group-wide training and development priorities.

DEVELOPING OUR PEOPLE

This review process assists in not only identifying high performance but also high
potential employees, allowing us to provide specific fast track development options
and project work for this population. We will continue to refine and further
automate this process in 2014.

SIG relies on the expertise and knowledge of its employees whose specialist skills
and experience differentiate it in the marketplace. Competency based training
plans continue to form the basis of structured development in our business and
are now rolled out across the UK, with plans to implement in our European
businesses in 2014. This competency framework has allowed us to improve the
training that we offer to employees and ensure that it is up to date and relevant
to their roles. We are developing our eLearning proposition to allow us to roll
this out more widely and cost effectively in 2014. The Group’s Coaching
and Mentoring Programme, which was established in 2011, continues to develop
and will form a key part of our Talent and Development Strategy going forward
in 2014. An integrated approach to the identification of training needs and the
development of talent is core to our People Development Strategy.

Our Executive Development Programme with Sheffield Hallam University has
been further developed in 2013. This programme has six levels, ranging from
our three day entry level Management Development Programme (“MDP1”)
up to our MDP VI, which leads to a BA Honours Degree in Professional
Business Practice. All the programmes cover business planning and strategy
and leadership, and combine theoretical concepts and practical exercises.
This programme has led to good interaction and cross-fertilisation of ideas
across all geographies and parts of our business, and is attended by a variety
of nationalities who benefit from exposure to their fellow team members.
In support of “Stronger together”, this programme helps connect people
and leads to a joined up approach to problem solving and innovation.

Much of our development activity is organised locally on a business or country
basis, depending on local priorities and needs. In our UK business, SIG Distribution
has taken a very customer focused approach by carrying out a customer survey in
2013 where customer service was a key issue. Much of the sales training was then
focused around this. In 2013, the SIG Roofing and Roofline business further
developed its “Expert Workforce” philosophy and focused on further developing its
“Strong Team Ethos”. The measurement of an “Expert Workforce” is determined
by having 90% skills achievement, less than 10% poor performers, 20% able to
progress to the next level and less than 10% staff turnover. “Strong Team Ethos”

means all branches will operate collaboratively across local geographies and this
will be promoted by the organisational structure and management style. The SIG
Distribution re-organisation at the beginning of 2014 supports this vision and
further embraces the matrix management concept. The implementation of our
new ERP system in 2014 in the UK business has also led to quite extensive training
across the business in the new ways of working.

In Europe during 2013, we continued to further develop our HR support to the
business. In Germany, we continue to permanently hire trainees upon successful
completion of apprenticeship and demonstration of excellence in both theory and
practice, which has proved to be a very successful strategy for us. In Europe generally
we are focused on the concept of professional career development and on
improving our capability to train and develop in a more consistent and aligned way.

The Group has continued with English language training to help support
Group-wide working and proactively develop employees wishing to enhance their
language capabilities. This training takes place in the Group’s Sheffield Corporate
Office and attendees from all parts of the Group have the opportunity to meet
colleagues in the UK business. Going forward, we are exploring the option of an
eLearning solution for English which is currently being tested with our European
employees and is planned for roll-out in 2014.

The Group has a strong track record of recruiting and investing in graduate talent
to help meet our future management requirements. Our graduates have a mix
of backgrounds and experience which is relevant to our customer base. As well
as being recruited for specific functions, SIG also runs country and international
programmes which give graduates exposure across our European businesses and
allows us to develop cross cultural working and understanding. During the two year
programme, graduates attend six development events. The programme develops
self-awareness, commercial acumen and personal impact in order to help the
graduates significantly increase their effectiveness and value to the business.
The graduates also complete a business challenge and take part in a CR project,
where they give something back to the community.

Our Apprenticeship Programme, which was launched in September 2012,
continues to help us attract talented individuals to the organisation, as well
as supporting people looking to gain qualifications and work experience.
2013 saw the launch of our Apprenticeship Development Programme,
bringing our apprentices together and building on key skills to support their
career development. The programme runs in our UK business and has been
very well received with 16 apprentices now employed in various roles across
our Head Office and branches. We are looking to recruit upwards of five
additional positions in the course of 2014. Along with our Graduate and
Placement Programme, the Apprenticeship Programme will help us to
develop a strong pipeline of future talent and is a key element of our Talent
Strategy for 2014.

SIG are now Gold Sponsors of Enactus, which is a community of student,
academic and business leaders developing outreach projects to improve
quality of life and standard of living of people across the globe. In 2013, SIG
was involved in the judging process for the Enactus national competition,
as well as attending a couple of training events for the Enactus students
and taking part in careers fairs. This year we will continue to build on this
relationship and plan to link some business advisors with local universities
to support their project development.

SIG plc
Annual Report and Accounts 2013

voting and questions from the audience, which proved to be a great success.
Chief Executive led roadshows are held following the Senior Management
Conference, to ensure that the message is disseminated throughout the
business and use of videos and supporting material means that this
communication is clear and consistent.

In addition to the Senior Management Conference, each business within SIG
holds its own conference annually, to set priorities for the year ahead and
communicate key imperatives.

RECOGNISING OUTSTANDING PERFORMANCE

We believe that recognition of success and excellent performance is key
and continue to recognise this through our New Manager of the Year Award and
our Emerging Manager of the Year Award programmes which are run biennially,
with the next awards being in 2014. On an annual basis, we run awards for the
Business of the Year, Branch of the Year and Manager of the Year, with challenging
criteria around both business and personal performance. In addition, there is the
Chief Executive’s Award for Excellence to recognise one individual who embodies
the SIG values, has shown consistently excellent personal performance and had a
transformational effect on their business or function. The winners of these awards
are announced at the Senior Management Conference and give us a unique
opportunity to recognise the great efforts of our people.

GENDER DIVERSITY

At 31 December 2013, across the total workforce, 1,959 (21%) of all employees
are female. One Board member (14%) and ten senior managers (11%) are
female. We continue to work towards improving our workforce diversity.

EMPLOYEE BENEFITS

SIG’s policy with respect to salaries is to adopt a consistent approach, whilst
at the same time taking into account local practices and benchmarking data.
In respect of bonuses, schemes have been designed to reward exceptional
performance. Senior leaders within the business are party to a bonus scheme,
as are leaders within the local operating business across the Group. In all
cases the underlying feature for an award is the level of improvement and
achievement attained.

Employees are encouraged to become shareholders in the Company.
The Share Incentive Plan (“SIP”) was introduced in 2005 and gives one
matching share for each share purchased by the employee up to a maximum
of four matching shares per month. As at 31 December 2013, there were
957 employees participating in the SIP.

The Group operates a number of employee pension schemes across its
businesses. In the UK, SIG operates a Group personal pension scheme which
is open to all employees. In line with UK pension auto-enrolment, SIG started
a scheme with People’s Pensions, B&CE on 1 June 2013. The scheme
currently has 2,695 members.

EQUAL OPPORTUNITIES

SIG’s policy is to provide equal opportunities to all existing and prospective
employees. The Group recognises that its reputation is dependent upon fair and
equitable treatment of all its employees and specifically to prohibit discrimination
on the grounds of race, religion, gender, disability, sexual orientation, age,
nationality or ethnic origin. Employment opportunities are equally available to all.
The Group values diversity of thinking and sees this as critical going forward
in generating new ideas and innovative solutions for our customers.

Employment opportunities are available to disabled persons in accordance
with their abilities and aptitudes on equal terms with other employees. If an
employee becomes disabled during employment, the Group makes every effort
to enable them to continue in employment by making reasonable adjustments
in the workplace and with retraining for alternative work where necessary.

EMPLOYEE ENGAGEMENT

The HR Director has responsibility for the Group’s People and HR Strategy,
which is designed to support the business strategy. The HR Director reports
directly to the Chief Executive, who is responsible for HR issues at Board level.

SIG is launching its first Group-wide Employee Engagement survey
in March 2014. Through the survey, we are hoping to drive employee
engagement, with a focus on excellence in customer service and business
delivery, to provide a clear link between customer and employer brand
values and behaviours.

The survey will give us a mechanism for employees to provide feedback
anonymously and confidentially. Most importantly, it will provide base line
measures and benchmarks with respect to employee engagement and the
employee journey across the SIG Group internationally.

As a result of the survey, we will determine targeted actions and priorities
focused on improving the work environment, employee engagement and
thereby our customer service over time. The survey will also be helpful in
identifying leadership and management development requirements specifically
relating to mindset and behavioural development to drive an engaged workforce.

We are committed to running a regular survey cycle/process driving up
participation and our Employee Engagement Index in 2014 and beyond.

SIG sees two-way communication with employees as paramount and is
continually looking to improve in this regard. The organisation, keeps employees
informed through our Group-wide newsletter, Communiqué, as well as
business specific publications and newsletters to keep employees up to date.

In many of the countries in which we operate, we utilise the SIG intranet to
communicate, which we have recently spent time improving and refreshing.
This is an ongoing process, with the aim of having global and local content
on all our intranet sites and ultimately providing an interactive forum for our
employees. Both the intranet and newsletters will help to communicate
operational changes, share knowledge and best practice, update on business
performance and highlight success stories throughout the Group.

SIG holds an annual Senior Management Conference every February, to
review the previous year and communicate the Group’s aspirations and
goals, both long-term and short-term. This conference provides the forum
to update our leaders on our progress against key strategic initiatives and
financial objectives, and discuss how we can better collaborate and work
together. This year, we saw increased use of technology in real time key pad

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverview
INTRODUCTION TO GOVERNANCE

WE BELIEVE THAT GOOD GOVERNANCE COMES FROM
AN EFFECTIVE BOARD WHICH PROVIDES STRONG
LEADERSHIP TO THE COMPANY AND ENGAGES WELL
WITH BOTH MANAGEMENT AND STAKEHOLDERS.

DEAR SHAREHOLDER,

SIG is committed to business integrity, high ethical values and
professionalism in all of its activities. At SIG, we believe that good
governance comes from an effective Board which provides strong
leadership to the Company and engages well with both management and
stakeholders. As an essential part of this commitment, the Group supports
the highest standards in corporate governance.

COMPLIANCE WITH THE UK CORPORATE
GOVERNANCE CODE

GOVERNANCE WITHIN SIG

As Chairman, I take responsibility for ensuring that good governance is
operated at SIG in order that we can maintain the highest standards of
corporate governance to which we continually aspire. The Board is
accountable to the Company’s Shareholders for good governance and this
Report, the Directors’ Remuneration Report on pages 63 to 79 and the
Report of the Audit Committee on pages 60 to 62 describe how the
principles of good governance set out in the Code are applied within SIG.

The Board considers that throughout the year under review the Company
has complied with the governance rules and best practice provisions applying
to UK listed companies, as contained in the UK Corporate Governance
Code (“the Code”) of September 2012 as issued by the Financial Reporting
Council (“FRC”).

The Company’s Auditor, Deloitte LLP, is required to review whether
the above statement reflects the Company’s compliance with the nine
provisions of the Code specified for their review by the Listing Rules
of the UK Listing Authority and to report if it does not reflect such
compliance. No such report has been made.

The Code can be accessed at:
www.frc.org.uk/corporate/ukcgcode.cfm.

BOARD EVALUATION

Under the Code, the Board is required to undertake a formal and rigorous
annual evaluation of its own performance and that of its Committees and
individual Directors. In December 2013 the Board conducted such an
evaluation. Details of the process concerning this evaluation are covered
on page 55 of this Corporate Governance Report.

BOARD DIVERSITY

The Board of SIG acknowledges the importance of diversity in its broadest
sense in the Boardroom as a driver of Board effectiveness. Diversity
encompasses diversity of perspective, experience, background, psychological
type and personal attributes. The Board recognises that gender diversity
is a significant aspect of diversity and acknowledges the role that women
with the right skills and experience can play in contributing to diversity
of perspective in the Boardroom. The Board Diversity Policy is published
on the Company’s website at www.sigplc.com.

All appointments to the Board will continue to be made on merit; however,
differences in background, skills, experience and other qualities as well
as gender will be considered in determining the optimum composition
of the Board and the aim will be to balance them appropriately.

I can confirm that in December 2013 the SIG Board discussed the matter of
women on Boards and set out the aim of achieving at least 25% female
representation among the Board’s membership by 2015. As at 31
December 2013, this percentage is 14%. In reviewing Board composition
and in agreeing criteria for new Director appointments, the Nominations
Committee is committed to seeking Directors with the right skillset and gender
balance in line with the 25% aspiration.

LESLIE VAN DE WALLE
Chairman
12 March 2014

AS 31 DECEMBER 2013

BOARD DIVERSITY

MEN

WOMEN

BOARD EXPERIENCE

BUSINESS
MANAGEMENT

FINANCE

ENGINEERING

LENGTH OF TENURE

4 YEARS +

3 YEARS +

2 YEARS +

1 YEAR +

SIG plc Annual Report and Accounts 2013BOARD OF DIRECTORS

LESLIE VAN DE WALLE HEC

STUART MITCHELL BSC (HONS)

DOUG ROBERTSON BA, FCA

NON-EXECUTIVE CHAIRMAN

CHIEF EXECUTIVE

FINANCE DIRECTOR

Leslie Van de Walle (age 57) became a Non-Executive
Director in October 2010 and became Non-Executive
Chairman on 1 February 2011. He is also Chairman of the
Nominations Committee. He is Non-Executive Chairman of
Robert Walters plc and a Non-Executive Director of Cape plc
and DCC plc. Formerly Chief Executive Officer of Rexam plc,
Executive Vice President of Global Retail, a division of
Royal Dutch Shell plc and a Non-Executive Director of
Aegis Group plc and Aviva plc. He formerly held a number of
senior management positions with Cadbury Schweppes plc
and United Biscuits Limited.

Stuart Mitchell (age 53) joined SIG on 1 December 2012
as Chief Executive Designate, was appointed a Director
of the Company on 10 December 2012 and became
Chief Executive on 1 March 2013. Most recently he
was Chief Executive of Wilkinsons Hardware Stores from
2006 to 2012. He was previously Managing Director of
the Taiwan arm of the Asian retail giant AS Watson. He
joined Sainsbury plc as a graduate trainee in 1984 rising
up the ranks to become Managing Director of Sainsbury’s
Supermarkets in 2003. He is a Non-Executive Director of
Enactus UK (formerly SIFE – Students in Free Enterprise UK).

Doug Robertson (age 60) joined the Group in
November 2011 and was appointed Finance Director
on 1 December 2011. He was previously Finance Director
of Umeco plc from 2007 until 2011 and Finance Director
of Seton House Group Limited from 2002 until 2007.
From 1994 to 2000 he held a variety of Divisional
Finance Director roles within Williams plc and, in 2000,
became Managing Director of Tesa Group, Chubb’s
hotel security division.

CHRIS GEOGHEGAN BA (HONS), FRAES

JANET ASHDOWN BSC (HONS)

MEL EWELL BSC (HONS)

NON-EXECUTIVE DIRECTOR

Chris Geoghegan (age 59) became a Non-Executive
Director in July 2009. He is the Senior Independent
Director and Chairman of the Remuneration Committee.
Prior to his retirement he was Chief Operating Officer of
BAE Systems plc with responsibility for all European joint
ventures and UK defence electronics assets. He is a
Fellow of the Royal Aeronautical Society and a past
President of the Society of British Aerospace companies.

Janet Ashdown (age 54) became a Non-Executive Director
in July 2011. She is a Non-Executive Director of Coventry
Building Society and Essar Oil (UK) Limited and Chair of the
charity Hope in Tottenham. She was until the end of 2012
Chief Executive Officer of Harvest Energy Limited and
Blue Ocean Oil Trading Limited, the UK’s largest independent
road fuels marketing and import business. Janet previously
worked for BP p.l.c. for 29 years from 1980 to 2009,
serving in a variety of posts in the UK, continental Europe
and the US ranging from manufacturing, to supply and
trading, to retail marketing. Her last role in BP was as Head
of BP’s Fuels Marketing and Distribution business in the UK.
Janet holds a degree in Energy Management.

Mel Ewell (age 55) became a Non-Executive Director
on 1 August 2011. He is currently Chief Executive and
an Executive Director of Amey Plc, one of the UK’s
leading infrastructure services providers. He previously
held a number of senior management positions for
TNT International, Xerox and ADI Group.

JONATHAN NICHOLLS BA, ACA, FCT

BOARD COMMITTEES

NON-EXECUTIVE DIRECTOR

Jonathan Nicholls (age 56) became a Non-Executive Director
in November 2009 and is Chairman of the Audit Committee.
He is a Non-Executive Director of DS Smith Plc and Great
Portland Estates plc. Most recently he was Group
Financial Director of Old Mutual plc and prior to
that he was Group Finance Director of Hanson plc.

AUDIT COMMITTEE

REMUNERATION
COMMITTEE

NOMINATIONS
COMMITTEE

Mr. J. C. Nicholls – Chairman
Ms. J. E. Ashdown
Mr. M. Ewell
Mr. C. V. Geoghegan

Mr. C. V. Geoghegan – Chairman
Ms. J. E. Ashdown
Mr. M. Ewell
Mr. J. C. Nicholls

Mr. L. Van de Walle – Chairman
Ms. J. E. Ashdown
Mr. M. Ewell
Mr. C. V. Geoghegan
Mr. S. R. Mitchell
Mr. J. C. Nicholls

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewCORPORATE GOVERNANCE

LEADERSHIP

THE BOARD

At 31 December 2013, the Board was made up of seven members,
comprising the Chairman, two Executive Directors and four Non-Executive
Directors. The Directors who held office during the year were:

Mr. L. Van de Walle

Non-Executive Chairman

Mr. C. J. Davies

Chief Executive (resigned 28 February 2013)

Mr. S. R. Mitchell

Chief Executive (appointed 1 March 2013)
(previously Chief Executive Designate,
appointed 10 December 2012)

Mr. D. G. Robertson

Group Finance Director

Ms. J. E. Ashdown

Independent Non-Executive Director

Mr. M. Ewell

Independent Non-Executive Director

Mr. C. V. Geoghegan

Senior Independent Non-Executive Director

Mr. J. C. Nicholls

Independent Non-Executive Director

Biographical details of the Directors holding office at the date of this
report appear on page 51. Details of Committee memberships are set out
on page 54.

Mr. S. R. Mitchell joined SIG on 1 December 2012 as Chief Executive Designate
and was appointed a Director on 10 December 2012. Mr. C. J. Davies stepped
down as Chief Executive and as a Director of the Company on 28 February 2013.
Mr. Mitchell became Chief Executive on 1 March 2013.

At 31 December 2013, SIG had one female Board member, equating to
14% female representation of its Directors.

The Non-Executive Directors are considered by the Board to be
independent of management and free of any relationship which could
materially interfere with the exercise of their independent judgment. The
Board has satisfied itself that there is no compromise to the independence of
those Directors who have other appointments in outside entities. The Board
considers that each of the Non-Executive Directors brings their own senior
level of experience and expertise and that the balance between Non-Executive
and Executive representation encourages healthy independent challenge to
the Executive Directors and Senior Management.

The Non-Executive Directors have been appointed for their specific areas of
expertise and knowledge. Their wide-ranging experience and backgrounds
ensure that they can debate matters constructively in relation to both the
development of strategy and performance against objectives set out by the
Board. Biographical details of each of the Directors, which illustrate their
range of experience, are set out on page 51.

The Company’s policy relating to the terms of appointment and remuneration
of both the Executive and Non-Executive Directors is detailed in the Directors’
Remuneration Report on pages 63 to 79.

The roles of the Chairman and Chief Executive are separate and clearly
defined with the division of responsibilities set out in writing which are agreed
by the Board and reviewed by the Company Secretary on a regular basis.
The Board approves any necessary changes to reflect changes in legislation,
policy and practices. The Chairman leads the Board and sets its agenda,
ensuring that all Directors, particularly the Non-Executive Directors, are able
to make an effective contribution. He also ensures that there is a constructive
relationship between the Executive and Non-Executive Directors. The Chief
Executive has responsibility for all operational matters which include the
implementation of the Group strategy and policies approved by the Board.

The Chairman at the time of his appointment met and continues to meet
the independence criteria set out in the Code.

The Senior Independent Director is Mr. C. V. Geoghegan.

There is no maximum number of Directors but there shall at no time be
less than two. Directors may be appointed by the Company by ordinary
resolution or by the Board. A Director appointed by the Board shall hold
office only until the next Annual General Meeting (“AGM”) and shall then be
eligible for re-appointment by the Shareholders. The Board may from time
to time appoint one or more Directors as Managing Director or to fulfil any
other Executive function within the Company for such term, remuneration
and other conditions of appointment as they may determine and may revoke
such appointment (subject to the provisions of the Companies Acts).

ELECTION AND RE-ELECTION OF DIRECTORS

Under the Articles of Association all Directors are subject to election at the
AGM immediately following their appointment and to re-election every three
years. However, in accordance with the Code, all Directors will seek election
or re-election at the Company’s AGM each year. To enable Shareholders to
make an informed decision, the 2014 Notice of AGM includes biographical
details and a statement as to why the Company believes that Directors
should be re-elected.

It is the view of the Board that each of the Non-Executive Directors standing
for re-election brings considerable management experience and an independent
perspective to the Board’s discussions and are considered to be independent
of management and free from any relationship or circumstance that could
affect, or appear to affect, the exercise of their independent judgment.

The Chairman intends to confirm at the AGM that the performance of each
individual continues to be effective and demonstrates commitment to the role.

The terms of the Directors’ service contracts are disclosed in the Directors’
Remuneration Report commencing on page 63. Full details of Directors’
remuneration, of their interests in the share capital of the Company and
of their share options are set out on pages 72 to 79 in the Directors’
Remuneration Report.

Directors’ service contracts and the letters of appointment of the Non-Executive
Directors are available for inspection at the Company’s registered office and will
be available at the AGM which is scheduled to take place on 16 May 2014.

BOARD PROCEDURES AND RESPONSIBILITIES

The Board meets regularly during the year, as well as on an ad hoc basis
as required by time-critical business needs. The Board met formally on nine
occasions during the year and individual attendance at those and the Board
Committee meetings is set out in the table on the opposite page. All Board
members are supplied with information in a form and of a quality appropriate
to enable them to discharge their duties. Board and Committee papers are
sent out seven days before meetings take place.

The Directors are provided with opportunities for training to ensure that they
are kept up-to-date on relevant new legislation and regulation changes,
corporate governance developments and changing commercial risks. There
is an agreed schedule of matters reserved to the Board for collective decision
(which can be viewed on the Company’s website at www.sigplc.com).
These matters include:

e determining the strategy and control of the Group;

e amendments to the structure and capital of the Company and Group;

e approval of financial reporting;

e oversight of the Group’s internal controls;

e approval of capital and revenue expenditure of a significant size;

e Board membership and appointments;

SIG plc Annual Report and Accounts 2013 e acquisitions and disposals above a prescribed limit;

e corporate governance matters; and

e approval of Group policies and risk management strategies.

The Board has formally delegated specific responsibilities to Board Committees,
including the Nominations, Audit and Remuneration Committees. The Board
will also appoint Committees to approve specific processes as deemed necessary.
For example, during the year, Board Committees were established to approve
bank documentation and the preliminary and interim results announcements.

The Terms of Reference for each of the Board Committees are available on
request from the Company Secretary or on the SIG website (www.sigplc.com).

To enable the Board to perform its duties effectively all Directors have
full access to all relevant information and to the services of the Company
Secretary whose responsibility it is for ensuring that Board procedures are
followed. The appointment and removal of the Company Secretary is a
matter reserved for the Board. There is an agreed procedure whereby
Directors wishing to take independent legal advice in the furtherance of
their duties may do so at the Company’s expense.

The Company Secretary is responsible for ensuring that Board procedures
are followed including the formal minuting of any unresolved concerns that
any Director may have in connection with the operation of the Company.
During the year there were no such unresolved issues. Further, on resignation,
if a Non-Executive Director had any such concerns, the Chairman would
invite him/her to provide a written statement for circulation to the Board.

All Board Committees are provided with sufficient resources to undertake
their duties. Appropriate training is available to all Directors on appointment
and on an ongoing basis as required.

Following the implementation of a secure iPad paperless meeting system in
2012, its successful roll-out has progressively resulted in the replacement of
hard copy packs with electronic versions. Paperless meetings are now the
norm, not only for the SIG plc Board but also its Committees and the Group
Executive Committee. This supports our online drive across the Group and is
consistent with reducing the impact of our operations on the environment.

DIRECTORS’ CONFLICTS OF INTERESTS

Each Director has a duty under the Companies Act 2006 (“CA 2006”) to
avoid a situation where they have, or can have, a direct or indirect interest that
conflicts, or possibly may conflict, with the Company’s interests. This duty is
in addition to the obligation that they owe to the Company to disclose to the
Board any transaction or arrangement under consideration by the Company.
Directors of public companies may authorise conflicts and potential conflicts,
where appropriate, if a company’s Articles of Association permit and
Shareholders have approved appropriate amendments.

Procedures have been put in place for the disclosure by Directors of any such
conflicts and also for the consideration and authorisation of any conflicts by the
Board. These procedures allow for the imposition of limits or conditions by
the Board when authorising any conflict, if they think this is appropriate. These
procedures have been applied during the year and are now included as a regular
item for consideration by the Board at its meetings. The Board believes that the
procedures established to deal with conflicts of interest are operating effectively.

The Board is aware of the other commitments of its Directors and is satisfied
that these do not conflict with their duties as Directors of the Company.

ATTENDANCE AT BOARD AND COMMITTEE MEETINGS

The following table shows the attendance of Directors at meetings of the Board, Audit, Remuneration and Nominations Committees during the year
ended 31 December 2013:

Board
Meetings eligible to attend

Audit Committee
Meetings eligible to attend

Remuneration Committee
Meetings eligible to attend

Nominations Committee
Meetings eligible to attend

J. E. Ashdown

C. J. Davies

M. Ewell

C. V. Geoghegan

S. R. Mitchell

J. C. Nicholls

D. G. Robertson

L. Van de Walle

n/a

Meeting attended

Absent

Chairman

This table only shows those meetings which each Director attended as a member rather than as an invitee. Where “n/a” appears in the table the Director
listed is not a member of the Committee. Due to illness the Chairman was unable to attend the AGM on 23 May 2013. All of the other Directors in office
at the date of the AGM were in attendance at that meeting. Directors do not participate in meetings when matters relating to them are discussed.

The Chairman also holds meetings with the Non-Executive Directors without the Executive Directors present. The Senior Independent Director also meets
with the other Independent Non-Executive Directors without the Chairman present.

The Board arranges to hold at least two Board meetings each year at Group business locations both in the UK and Ireland, and Mainland Europe to help all Board
members gain a deeper understanding of the business. This also provides senior managers from across the Group the opportunity to present to the Board
as well as to meet the Directors on more informal occasions. Board members also attend divisional and Group management conferences whenever possible.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverview

CORPORATE GOVERNANCE CONTINUED

LEADERSHIP CONTINUED

GOVERNANCE STRUCTURE

GROUP BOARD

AUDIT COMMITTEE

The Audit Committee operates
under written Terms of Reference,
which are consistent with current
best practice. The Committee
comprises only independent
Non-Executive Directors. The
Chairman of the Committee
attends the AGM to respond
to any Shareholder questions
that might be raised on the
Committee’s activities. The
Committee’s report is set out
on pages 60 to 62.

The Group operates an
outsourced Internal Audit function
(the Group does not have a
dedicated Internal Audit function).
KPMG LLP were appointed
on 1 January 2014 in place of
EY LLP. The Board annually
reviews the need for such a
function and the effectiveness
of the Internal Audit function.

Delegated authorities:

Monitors the integrity of financial
reporting, the performance of the
external auditor and reviews the
effectiveness of the Group’s
systems of internal control and
related compliance activities.

Members:

Mr. J. C. Nicholls – Chairman

Ms. J. E. Ashdown

Mr. M. Ewell

Mr. C. V. Geoghegan

GROUP EXECUTIVE
COMMITTEE

REMUNERATION
COMMITTEE

NOMINATIONS
COMMITTEE

The Remuneration Committee
operates under written Terms of
Reference, which are consistent
with current best practice. The
Committee comprises only
independent Non-Executive
Directors. The Chairman of the
Committee attends the AGM
to respond to any Shareholder
questions that might be raised
on the Committee’s activities.
The Committee’s report is set
out on pages 63 to 79.

Delegated authorities:

Sets remuneration and
incentives for the Executive
Directors; approves and
monitors remuneration and
incentive plans for the Group;
and assesses and makes
recommendations to the Board
on the policy on Executive
remuneration.

Members:

Mr. C. V. Geoghegan – Chairman

Ms. J. E. Ashdown

Mr. M. Ewell

Mr. J. C. Nicholls

The Executive Committee
operates under written Terms
of Reference. The Committee
addresses operational issues and
is responsible for implementing
Group strategy and policies,
day-to-day management and
monitoring performance. The
Committee met eleven times
during the year.

Members:

Mr. S. R. Mitchell
Group Chief Executive
(from 1 March 2013)

Mr. R. T. Barclay
Managing Director, UK
and Republic of Ireland

Mr. A. P. Greenaway
Corporate Development Director

Miss. L. H. Kennedy
Group Human Resources
Director (from 7 October 2013)

Mr. D. Kilby
Managing Director,
Mainland Europe

Mr. D. G. Robertson
Group Finance Director

Mr. C. J. Davies
Group Chief Executive
(until 28 February 2013)

Mr. A. Mander
Group Human Resources Director
(until 30 September 2013)

The Nominations Committee
operates under written Terms
of Reference, which are consistent
with current best practice.
The Nominations Committee
comprises the Chairman, Chief
Executive and the Independent
Non-Executive Directors. The
meetings of the Committee are
chaired by the Non-Executive
Chairman. The Chairman of the
Committee attends the AGM
to respond to any Shareholder
questions that might be raised
on the Committee’s activities.
The Committee’s report is set
out on page 80.

Delegated authorities:

Ensures that the Board and its
Committees have the optimum
balance of skills, knowledge and
experience by nominating
suitable candidates for approval
by the Board to fill Executive
and Non-Executive vacancies

Members:

Mr. L. Van de Walle – Chairman

Ms. J. E. Ashdown

Mr. M. Ewell

Mr. C. V. Geoghegan

Mr. S. R. Mitchell

Mr. J. C. Nicholls

UK AND IRELAND EXECUTIVE COMMITTEE

MAINLAND EUROPE EXECUTIVE COMMITTEE

COUNTRY/OPERATING COMPANY
MANAGEMENT BOARDS

Report of the Audit Committee
p.60

Directors’ remuneration report
p.63

Nominations Committee
p.80

SIG plc Annual Report and Accounts 2013BOARD EFFECTIVENESS AND PERFORMANCE EVALUATION

The key elements of the existing systems of internal control, which accord
with the revised Turnbull Guidance (2005), are as follows:

The effectiveness of the Board and its Committees is vital to the success of
the Company, and during the year the Board continued its ongoing evaluation
process to assess its performance and that of its three principal Committees.

In December 2011, as part of this programme, the Board commissioned
Equity Communications Limited, an independent third party, to prepare a
tailored Board evaluation process. This was facilitated by way of questionnaire
process with the emphasis, in addition to the evaluation of the performance
of the Board and its Committees, being targeted at identifying the future
needs of the Board, including Board structure, succession planning, induction
programmes and the Board’s approach to risk and strategy. Each Director
completed their questionnaire and these were then evaluated by the
independent facilitator who then prepared a report for the Chairman.

The Chairman and the facilitator presented the results of the evaluation to the
Board, which discussed the results of the evaluation in detail at its March 2012
meeting. The discussions then focused on how the actions and improvements
identified through the process should be implemented. The Board was satisfied
that the evaluation of its performance was a worthwhile exercise and that the
Directors had participated on an open and frank basis.

In December 2012 and 2013 by way of follow up to the evaluation process
completed in March 2012 an effectiveness survey of the Board and its
Committees (Audit, Remuneration and Nominations) was undertaken.
The surveys were internally facilitated and carried out by questionnaire. Each
Director (including the Chairman) was asked to place a score against a variety
of questions and to make additional comments where appropriate. The surveys
also sought to identify the extent to which the issues raised in the previous
evaluation process had been addressed. The summary report and response
analysis for the December 2012 survey were presented to the Board in March
2013, with suggested improvement actions.

The 2013 summary report was presented to the Board in December 2013.
In January 2014, the progress on agreed actions was reviewed and debated.

The Board notes that the Code requires FTSE 350 companies to carry out
an externally facilitated Board evaluation at least every three years. Having last
conducted such an evaluation in December 2011, the Board intends to conduct
a formal externally facilitated effectiveness and evaluation process in 2014.

The Chairman regularly reviews and agrees with each Director their training and
development needs. During the year a number of the Directors attended training
courses and seminars on subjects and topics including those that the Chairman
had identified as being areas where training would increase the knowledge
and effectiveness of the Director. The Board as a whole received training
on corporate governance developments in relation to the UK Stewardship
Code, the revisions to the UK Corporate Governance Code and the new
annual report reporting requirements. Further training is programmed for 2014.

The Non-Executive Directors, chaired by the Senior Independent Director,
meet once a year without the Chairman present to assess his performance,
taking into account the views of the Executive Directors.

RISK MANAGEMENT AND INTERNAL CONTROL

The Board has ultimate responsibility for the Group’s system of internal
control and for reviewing its effectiveness. It is the role of management to
implement the Board’s policies on risk and control through the design and
operation of appropriate internal control systems. Such systems are designed
to manage, rather than eliminate, the risk of failure to achieve the business
objectives and can therefore only provide reasonable and not absolute
assurance against material misstatement or loss.

The Audit Committee monitors and reviews the effectiveness of the Group’s
internal control systems, accounting policies and practices, standards of risk
management and risk management procedures and compliance controls.

OPEN CULTURE

The Board considers that the Group operates a risk-aware culture with
an open style of communication. This facilitates the early identification of
problems and issues, so that appropriate action is taken quickly to minimise
any impact on the business.

ONGOING PROCESS FOR RISK IDENTIFICATION,
EVALUATION AND MANAGEMENT

During 2013 the Board conducted a review of the effectiveness of the Group’s
system of internal control. This review covered all controls including operational,
compliance and risk management procedures, as well as financial controls. The
review is undertaken on a six monthly basis. This process includes the following:

e the Group Board maintains an overall corporate risk register, the

content of which is determined by regular discussions between Senior
Management, the Group Board and the Audit Committee. This is also
formally reviewed twice yearly by the Audit Committee and discussed
with the Board. The risk register contains the significant risks faced by the
Group and identifies the potential impact and likelihood at both a gross
level (before consideration of mitigating controls) and net level (after
consideration of mitigating controls). This provides the Board with the
opportunity to review the level of risk that the business is prepared to
accept. The register also contains the assurance provided over current
key mitigating controls. Where further actions have been identified to
mitigate risks to a level deemed acceptable, these are agreed with specific
timelines for delivery and are monitored closely until fully implemented.
This is summarised in the Strategic Report on pages 6 to 49;

e the risk management process is cascaded throughout the Group, with
operating subsidiary Boards responsible for maintaining their own risk
registers and assessing their control systems;

e a defined organisation structure with appropriate delegation of authority;

e formal authorisation procedures for all investments with clear guidelines

on appraisal techniques and success criteria;

e clear responsibilities on the part of financial management for the

maintenance of good financial controls and the production and review
of detailed, accurate and timely financial management information;

e a comprehensive system of financial reporting. An annual budget for

each operating company is prepared in detail and approved by the Chief
Executive. The Board approves the overall Group’s budget and plans.
Monthly actual results are reported against budget and prior year and the
forecast for the year is revised where necessary. Any significant changes
and adverse variances are questioned by the Board and remedial action
is taken where appropriate. There is also weekly cash and treasury
reporting to the Group Finance Director and periodic reporting to the
Board on the Group’s tax and treasury position;

e provision to management and the Board of relevant, accurate and timely
information including relevant Key Performance Indicators, based on
reliable management information systems which are continually being
improved and updated;

e monthly reports to the Board from the Chief Executive and Group

Finance Director;

e regular business unit management Board meetings (periodically attended
by the Chief Executive or Group Finance Director), Executive Board
meetings and the Company Board meetings at which existing, new
and evolving operational, financial and other risks are discussed, and
appropriate actions to manage these risks are agreed and followed up;

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewCORPORATE GOVERNANCE CONTINUED

RISK MANAGEMENT AND INTERNAL CONTROL CONTINUED

ONGOING PROCESS FOR RISK IDENTIFICATION,
EVALUATION AND MANAGEMENT CONTINUED

e discussion of any significant issues or control weaknesses identified and,
if considered necessary, their inclusion in reports to the Executive Board
and the Company Board;

e operating units, both trading sites and central functions, complete

comprehensive Control Self Assessment (“CSA”) questionnaires every
six months. These questionnaires require managers to respond to
questions about procedures and controls in the unit for which they have
responsibility. These are analysed by local and Group Management and
all potential risks or control failure issues which are raised by the CSA
process are classed in terms of escalation levels with any significant
Group level issues being reported to the Audit Committee; and

e a structured and approved programme of Internal Audit visits with the
implementation of recommendations made being monitored as part
of a continuous programme of improvement.

ANNUAL ASSESSMENT OF THE EFFECTIVENESS OF
SYSTEMS OF INTERNAL CONTROL

The Board and Audit Committee requested, received and reviewed reports
from Senior Management, its advisors, the outsourced Internal Audit function
and our external auditor in order to assist the Board with their annual
assessment of the effectiveness of the Group’s systems of internal controls.
Through the ongoing processes outlined above, areas for improvement in
internal controls are continuously identified and action plans are devised.
Progress towards completion of actions is regularly monitored by management
and the Board. The Board considers that none of the areas of improvement
identified constitute a significant failing or weakness. The Board considers
that the information that it receives is sufficient to enable it to review the
effectiveness of the Group’s internal controls in accordance with the internal
control guidance for Directors on the Code issued by the Turnbull
Review Group.

FINANCIAL REPORTING

In addition to the general internal controls and risk management processes
described above, the Group also has specific internal controls and risk
management systems to govern the financial reporting process and
preparation of the annual financial statements. These systems include clear
policies and the procedures for ensuring that the Group’s financial reporting
processes and the preparation of its Consolidated Accounts comply with all
relevant regulatory reporting requirements. These are comprehensively
detailed in the Group Finance Manual, which is used by the businesses in the
preparation of their results. Financial control requirements are also set out in
the Group Finance Manual.

WHISTLEBLOWING

The Group has in place a Whistleblowing Policy under which employees
may, in confidence, raise concerns about possible wrongdoing in financial
reporting or other matters. A copy of this policy is available on the Company’s
website. The Company also has in place a confidential hotline which is
available to all of the Group’s employees and provides a facility for them to
bring matters to management’s attention on a confidential basis. The hotline
is provided by an independent third party. During 2013 these systems were
operational throughout the Group. A full investigation is carried out on all
matters raised and a report is prepared for feedback to the complainant.

The Company Secretary is required to report to the Audit Committee
biannually on the integrity of these procedures, the state of ongoing
investigations and conclusions reached. During 2013 Group employees
used this system to raise concerns about a number of separate issues,
all of which were appropriately responded to.

The risk framework, as outlined above, gives reasonable assurance that the
structure of controls in operation is appropriate to the Group’s situation and
that there is an acceptable level of risk throughout the business.

The Board confirms that there is an ongoing process for identifying, evaluating
and managing the significant risks faced by the Group that this has been in place
for the year under review and up to the date of approval of the Annual Report
and Accounts.

RELATIONS WITH SHAREHOLDERS

The Company recognises the importance of communicating with its
Shareholders, including its employee Shareholders, to ensure that its strategy
and performance is understood. This is achieved principally through the
Annual Report and the AGM. The Group’s annual and interim results, as well
as all announcements issued to the London Stock Exchange, are published on
the Company’s website. The Company issues regular trading updates to the
market and these, together with copies of the presentations made to analysts,
can also be found on the Company’s website. In addition, a range of other
corporate information is available to investors on the Company’s website.

The Chief Executive, Group Finance Director and Head of Investor Relations
are primarily responsible for direct investor relations. The Board is kept
informed of investors’ views through distribution and regular discussion of
analysts’ and brokers’ briefings and a summary of investor opinion feedback.
In addition feedback from major Shareholders is reported to the Board by the
Chairman and the Finance Director and discussed at its meetings. Formal
presentations are made to institutional Shareholders following the
announcement of the Company’s annual and interim results.

Contact is also maintained, where appropriate, with Shareholders to discuss
overall remuneration plans and policies. The Chairman and the Senior
Independent Director are available to discuss governance and strategy with
major Shareholders if requested and both are prepared to contact individual
Shareholders should any specific areas of concern or enquiry be raised.

Throughout the year, we respond to correspondence received from
Shareholders on a wide range of issues and also participate in a number
of surveys and questionnaires submitted by a variety of investor research
bodies. Although the other Non-Executive Directors are not at present asked
to meet the Company’s Shareholders, they regularly attend presentations of
the annual and interim results.

The Board recognises that the AGM is the principal forum for dialogue with
private Shareholders and all Shareholders are invited to attend. All Directors
attend the AGM and are available to answer any questions that Shareholders
may wish to raise. The Notice of Meeting is sent to Shareholders at least
20 working days before the meeting. The Company provides a facility
for Shareholders to vote electronically and the Form of Proxy provides
Shareholders with the option of withholding their vote on a resolution if they
so wish. Shareholders vote on a show of hands, unless a poll is validly called
and after each such vote the number of proxy votes received for or against
the resolution together with the number of absolutions is announced. The
Company Secretary ensures that votes are properly received and recorded.
Details of the Proxies lodged on all resolutions are published on the Company’s
website immediately after the AGM.

Find out more online at
www.sigplc.com

SIG plc Annual Report and Accounts 2013SUBSTANTIAL SHAREHOLDINGS

OTHER STATUTORY DISCLOSURES

At the date of approval of the Annual Report and Accounts 2013, the
Company had received notification of the following shareholdings in excess
of 3% of its unused share capital pursuant to the Disclosure and Transparency
Rules of the Financial Services Authority (these notifications were the same
at 31 December 2013):

Shareholder

Blackrock Inc.
Aviva plc
IKO Enterprises Limited
Schroders plc
Investec Asset Management
Norges Bank

Number of
ordinary shares
of 10p each

65,075,088
43,150,450
34,384,891
29,961,817
29,728,826
17,762,016

% of
issued voting
share capital

11.01
7.30
5.82
5.07
5.03
3.01

STATEMENT OF THE DIRECTORS ON THE DISCLOSURE
OF INFORMATION TO THE AUDITOR

The Directors who held office at the date of approval of this Statutory
Information confirm that:

e so far as they are each aware, there is no relevant audit information

of which the Company’s Auditor is unaware; and

e each Director has taken all steps that he/she ought to have taken as a

Director to make himself/herself aware of any relevant audit information
and to establish that the Company’s Auditor is aware of that information.

This confirmation is given and should be interpreted in accordance with the
provisions of Section 418 of the Companies Act 2006.

GOING CONCERN

After making enquiries the Directors have formed a judgment, at the time
of approving the Accounts, that there is a reasonable expectation that the
Group has adequate resources to continue in operational existence for
the foreseeable future. For this reason the Directors continue to adopt the
going concern basis in preparing the financial statements. The key factors
considered by the Directors in making this statement are set out on page 37
of the Strategic Report.

INDEPENDENT AUDITOR

On the recommendation of the Audit Committee in accordance with Section 489
of the Companies Act 2006, resolutions are to be proposed at the AGM for the
re-appointment of Deloitte LLP as Auditor of the Company and to authorise the
Board to fix its remuneration. The remuneration of the Auditor for the year ended
31 December 2013 is fully disclosed in Note 4 to the Consolidated Financial
Statements on page 97.

ANNUAL GENERAL MEETING

The Notice convening the AGM, which is to be held at the Aston Hotel,
Britannia Way, Catcliffe, Sheffield S60 5BD at 12 noon on Friday 16 May 2014,
together with explanatory notes on the resolutions to be proposed and full
details of the deadlines for exercising voting rights, is contained in a circular
which will be circulated to all Shareholders at least 20 working days before
such meeting along with this report. This document will also be available on
the SIG plc website. All Shareholders are invited to the Company’s AGM,
at which they will have the opportunity to put questions to the Board.

PRINCIPAL ACTIVITY AND BUSINESS REVIEW

The principal activity of the Group is the supply of specialist products to
construction and related markets in the UK, Ireland and Mainland Europe.
The main product sectors supplied are Insulation and Energy Management,
Exteriors and Interiors.

The Chairman’s Statement and Strategic Report on pages 6 to 49 contain a
review of these activities and comment on the future outlook. The financial
risk management objectives, policies and Key Performance Indicators of the
Group are set out in the Strategic Report on pages 6 to 49.

As at the date of this report, other than the sale of the German Roofing
business detailed in Note 12 to the Accounts, there have been no important
events affecting the business of the Company, or any of its subsidiaries, that
have occurred since the end of the financial year.

Details of the Group’s policies in relation to employees (including disabled
employees) and information on charitable and political donations are
disclosed in the Corporate Responsibility Report on pages 46 to 49.
It is the Group’s policy not to make political donations and no political
donations were made during the year (2012: £nil).

Details of the Group’s policies in relation to Corporate Governance are
disclosed on pages 50 to 59.

GROUP RESULTS AND DIVIDENDS

The Consolidated Income Statement for the year ended 31 December 2013
is shown on page 83. The movement in Group reserves during the year is
shown on page 87 in the Consolidated Statement of Changes in Equity.
Segmental information is set out in Note 1 on pages 94 and 95.

The Board is recommending a final dividend of 2.4p per share (2012: 2.0p)
which, together with the interim dividend of 1.15p per share (2012: 1.0p),
makes a total for the year ended 31 December 2013 of 3.55p (2012: 3.0p).
Payment of the final dividend, if approved at the AGM, will be made
on 30 May 2014 to Shareholders registered at the close of business
on 2 May 2014.

GREENHOUSE GASES

Details of the Group’s Greenhouse gas emissions are detailed on page 43
of the Corporate Responsibility Report.

POST BALANCE SHEET EVENTS

Details of post balance sheet events are included in Notes 12 and 15 of the
Consolidated Financial Statements.

RELATED PARTY TRANSACTIONS

Save as disclosed in Note 31 to the Accounts on page 122 and except for
Directors’ service contracts, the Company did not have any material transactions
or transactions of an unusual nature with, and did not make loans to, related
parties in the periods in which any Director is or was materially interested.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewCORPORATE GOVERNANCE CONTINUED

OTHER STATUTORY DISCLOSURES CONTINUED

DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE
AND INDEMNITIES

The Company purchases liability insurance cover for Directors and Officers
of the Company and its subsidiaries which gives appropriate cover for any
legal action brought against them. The Company has also provided an
indemnity which was in force during the financial year for its Directors to the
extent permitted by the law in respect of liabilities incurred as a result of their
office. The indemnity would not provide any coverage to the extent that a
Director is proved to have acted fraudulently or dishonestly.

No claims or qualifying indemnity provisions and no qualifying pension
scheme indemnity provisions have been made either during the year
or by the time of approval of this Directors’ Report.

FINANCIAL INSTRUMENTS

Information on the Group’s financial risk management objectives and policies
and on the exposure of the Group to relevant risks of financial instruments
is set out on pages 35 to 37 and in Note 20 to the Consolidated Financial
Statements on pages 110 to 112.

ACQUISITIONS AND DISPOSALS

Details of acquisitions during the year and subsequently are covered in
Note 15 of the Consolidated Financial Statements on pages 106 and 107.
Details of businesses sold or agreed to be sold at the balance sheet date are
covered in Note 12 of the Consolidated Financial Statements on page 103.

SHARE CAPITAL

The Company has a single class of share capital which is divided into ordinary
shares of 10p each. At 31 December 2013, the Company had a called up
share capital of 591,100,447 shares of 10p each (2012: 590,837,435).

During the year ended 31 December 2013, options were exercised pursuant
to the Company’s share option schemes, resulting in the allotment of
263,012 new ordinary shares. No new ordinary shares have been allotted
under these schemes since the end of the financial year to the date of this
Report. Details of outstanding options under the Group’s Employee and
Executive Schemes are set out in Note 9 on pages 100 to 102 which also
contains details of options granted over unissued share capital.

Shareholders can declare final dividends by passing an ordinary resolution
but the amount of the dividends cannot exceed the amount recommended
by the Board. The Board can pay interim dividends on any class of shares of
the amounts and on the dates and for the periods they decide provided the
distributable profits of the Company justify such payment. The Board may,
if authorised by an ordinary resolution of the Shareholders, offer any
Shareholder the right to elect to receive new ordinary shares, which
will be credited as fully paid, instead of their cash dividend.

Any dividend which has not been claimed for twelve years after it became
due for payment will be forfeited and will then belong to the Company,
unless the Directors decide otherwise.

If the Company is wound up, the liquidator can, with the sanction of an
extraordinary resolution passed by the Shareholders, divide among the
Shareholders all or any part of the assets of the Company and he/she can
value any assets and determine how the division shall be carried out as
between the members or different classes of members. The liquidator can
also transfer the whole or any part of the assets to trustees upon any trusts
for the benefit of the members. No Shareholders can be compelled to
accept any asset that would give them a liability.

VOTING AT GENERAL MEETINGS

Any Form of Proxy sent by the Company to Shareholders in relation to any
general meeting must be delivered to the Company, whether in written form
or in electronic form, not less than 48 hours before the time appointed for
holding the meeting or adjourned meeting at which the person named in
the appointment proposes to vote.

No Shareholder is, unless the Board decides otherwise, entitled to attend
or vote either personally or by proxy at a general meeting or to exercise
any other right conferred by being a Shareholder if he/she or any person
with an interest in shares has been sent a notice under Section 793 of the
Companies Act 2006 (which confers upon public companies the power
to require information with respect to interests in their voting shares) and
he/she or any interested person failed to supply the Company with the
information requested within 14 days after delivery of that notice. The Board
may also decide that no dividend is payable in respect of those default shares
and that no transfer of any default shares shall be registered.

These restrictions end seven days after receipt by the Company of a notice
of an approved transfer of the shares or all the information required by the
relevant Section 793 Notice, whichever is the earlier.

RIGHTS ATTACHING TO SHARES

TRANSFER OF SHARES

The rights attaching to the ordinary shares are defined in the Company’s
Articles of Association. The Articles of Association may be changed with the
agreement of Shareholders. A Shareholder whose name appears on the
Company’s Register of Members can choose whether his shares are evidenced
by share certificates (i.e. in certificated form) or held in electronic (i.e.
uncertificated) form in CREST (the electronic settlement system in the UK).

Subject to any restrictions below, Shareholders may attend any general meeting
of the Company and, on a show of hands, every Shareholder (or his or her
representative) who is present at a general meeting has one vote on each
resolution and, on a poll, every Shareholder (or his or her representative)
who is present has one vote on each resolution for every ordinary share of
which they are the registered Shareholder.

A resolution put to the vote of a general meeting is decided on a show
of hands unless before or on the declaration of the result of a vote on a show
of hands, a poll is demanded by the Chairman of the meeting, or by at least
five Shareholders (or their representatives) present in person and having
the right to vote, or by any Shareholders (or their representatives) present
in person having at least 10% of the total voting rights of all Shareholders,
or by any Shareholders (or their representatives) present in person holding
ordinary shares in which an aggregate sum has been paid up of at least
one-tenth of the total sum paid up on all ordinary shares.

The Board may refuse to register a transfer of a certificated share which is
not fully paid, provided that the refusal does not prevent dealings in shares
in the Company from taking place on an open and proper basis. The Board
may also refuse to register a transfer of a certificated share unless: the
instrument of transfer: (i) is lodged, duly stamped (if stampable), at the
registered office of the Company or any other place decided by the Board
accompanied by a certificate for the share which it relates and such other
evidence as the Board may reasonably require to show the right of the
transferor to make the transfer; (ii) is in respect of only one class of shares;
and (iii) is in favour of not more than four transferees.

Transfer of uncertificated shares must be carried out using CREST and the
Board can refuse to register a transfer of an uncertificated share in accordance
with the regulations governing the operation of CREST.

The Board may decide to suspend the registration of transfers, for up to
30 days a year, by closing the register of Shareholders. The Board cannot
suspend the registration of transfers of any uncertificated shares without
gaining consent from CREST. There are no other limitations on the holding
of ordinary shares in the Company.

SIG plc Annual Report and Accounts 2013VARIATION OF RIGHTS

ACQUISITION BY THE COMPANY OF ITS OWN SHARES

If at any time the capital of the Company is divided into different classes of
shares, the special rights attaching to any class may be varied or revoked either:

(i) with the written consent of the holders of at least 75% in nominal value

of the issued shares of the class; or

Shareholders’ authority for the purchase by the Company of 59,085,970
of its own shares existed at the end of the year. The Company has made
no purchases of its own shares pursuant to this authority. The Company
will seek to renew this authority at the 2014 AGM.

(ii) with the sanction of an extraordinary resolution passed at a separate

general meeting of the holders of the shares of the class.

The Company can issue new shares and attach any rights to them. If there
is no restriction by special rights attaching to existing shares, rights attaching
to new shares can take priority over the rights of existing shares, or the new
shares and the existing shares are deemed to be varied (unless the rights
expressly allow it) by a reduction of paid up capital or if another share of that
same class is issued and ranks in priority for payment of dividend or in respect
of capital or more favourable voting rights.

FAIR, BALANCED AND UNDERSTANDABLE

The Board has reviewed the contents of this year’s Annual Report and
Accounts and in its view, the report is fair, balanced and understandable and
provides the necessary information to enable Shareholders to assess the
Group’s performance and strategy.

CAUTIONARY STATEMENT

The cautionary statement can be found on page 37 of the Strategic Report.

ELECTION AND RE-ELECTION OF DIRECTORS

APPROVAL OF DIRECTORS’ REPORT

The Directors’ Report (comprising pages 50 to 81) was approved by a duly
authorised Committee of the Board of Directors on 12 March 2014 and
signed on its behalf by Richard Monro, the Company Secretary.

RICHARD MONRO
Company Secretary
12 March 2014

The Company may, by ordinary resolution, of which special notice has been
given in accordance with the Companies Act, remove any Director before the
expiration of his/her period of office. The office of a Director shall be vacated if:
(i) he/she ceases to be a Director by virtue of any provision of law or is removed
pursuant to the Company’s Articles of Association or he/she becomes prohibited
by law from being a Director; (ii) he/she becomes bankrupt or compounds with
his/her creditors generally; (iii) he/she becomes of unsound mind or a patient
for any purpose of any statute relating to mental health and the Board resolves
that his/her office is vacated; (iv) he/she resigns; (v) he/she fails to attend Board
meetings for six consecutive months without leave of absence from the Board
and the Board resolves that his/her office is vacated; (vi) his/her appointment
terminates in accordance with the provisions of the Company’s Articles;
(vii) he/she is dismissed from Executive office; (viii) he/she is convicted of an
indictable offence and the Directors resolve that it is undesirable in the interests
of the Company that he/she remains a Director; or (ix) the conduct of the
Director is the subject of an investigation and the Directors resolve that it is
undesirable in the interests of the Company that he/she remains a Director.

AGREEMENTS WITH EMPLOYEES AND
SIGNIFICANT AGREEMENTS

There are no agreements between the Company and its Directors or
employees providing for compensation for loss of office or employment
(whether through resignation, purported redundancy or otherwise) that
occurs because of a takeover bid.

The Company’s banking arrangements are terminable upon a change of
control of the Company. Certain other indebtedness becomes repayable if a
change of control leads to a downgrade in the credit rating of the Company.

FIXED ASSETS

In the opinion of the Directors, there is no material difference between the
book value and the current open market value of the Group’s interests in
land and buildings.

CREST

The Company’s ordinary shares are in CREST, the settlement system for
stocks and shares.

2014 INTERIM REPORT

Current regulations permit the Company not to send hard copies of its
Interim Reports to Shareholders and therefore the Company intends to
publish its Interim Report only on its website at www.sigplc.com.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewREPORT OF THE AUDIT COMMITTEE

MEMBERSHIP

Throughout 2013, the Committee comprised the four independent
Non-Executive Directors of the Company. The Board considers that each
member of the Committee is independent within the definition set out in the
Code. The Chairman of the Committee is Mr. J. C. Nicholls. He is a Chartered
Accountant and was most recently Group Finance Director of Old Mutual plc
and, prior to that, Group Finance Director of Hanson plc. He is Audit
Committee Chairman for Great Portland Estates plc and the Senior
Independent Director and Audit Committee Chairman of DS Smith plc.
The other members of the Committee, Ms. J. E. Ashdown, Mr. M. Ewell and
Mr. C. V. Geoghegan, all have a wide range of business experience, which
is evidenced by their biographical summaries on page 51.

The combined relevant commercial and financial knowledge and experience
of the Committee members satisfies compliance with the Code provision C3.1.
Attendance of members at Committee meetings is displayed on page 53. The
Board makes appointments to the Committee. The Company Secretary acts as
Secretary to the Committee.

Members of the Committee undertake ongoing training as required.

RESPONSIBILITIES

The Committee operates under Terms of Reference which can be found
on the Company’s website. They are reviewed annually by the Committee,
including comparison against the Code, and changes are recommended to
the Board for approval.

The responsibilities of the Committee set out in its Terms of Reference are:

e monitoring the integrity of the Company’s Accounts including its
Annual Report and Accounts and Interim Report and reviewing
significant financial reporting judgments contained therein;

e reviewing the consistency of accounting policies, including any changes;

e reviewing the effectiveness of the Company’s internal financial controls
and the Company’s internal control and risk management systems;

e reviewing the Company’s arrangements for its employees to raise

concerns, in confidence, about possible wrongdoing in financial reporting
or other matters;

e monitoring and reviewing the effectiveness of the Company’s outsourced

Internal Audit function;

e reviewing the annual audit plan and receiving the Auditor’s reports and

the Company’s response;

e reviewing the effectiveness of the Company’s external Auditor;

e considering and making recommendations to the Board in relation

to the appointment, re-appointment and removal of the Company’s
external Auditor;

e reviewing the Annual Report and Accounts and giving consideration
as to whether it presents a fair, balanced and understandable picture
of the Group’s activities in the year;

e overseeing the relationship with the external Auditor, including

(but not limited to) approving its remuneration, assessing annually its
independence and objectivity, taking into account relevant professional and
regulatory requirements and the relationship with the Auditor as a whole,
including the policy on the provision of any non-audit services; and

e reporting to the Board and identifying any matters on which the

Committee considers that action or improvement is needed and making
recommendations as to the steps to be taken.

The Chairman of the Committee attends the Annual General Meeting to
respond to any Shareholder questions that might be raised on the
Committee’s activities.

J. C. NICHOLLS
AUDIT COMMITTEE CHAIRMAN

PURPOSE AND AIM

The purpose of the Audit Committee (“the Committee”) is to
make recommendations on the reporting, controls, risk
management and compliance aspects of the Directors’ and the
Group’s responsibilities, providing independent monitoring,
guidance and challenge to Executive Management in these areas.

Through this process its aim is to ensure high standards of corporate
and regulatory reporting, controls, risk management and compliance.
The Committee believes that excellence in these areas enhances
the effectiveness and reduces the risks of the business.

During the year, we have continued to focus on improving the quality
of financial reporting and the control environment, and it is pleasing to
note another year of good progress in the achievement of fulfilling our
responsibilities in this respect. We are conscious that there remains
room for the implementation of improvements and therefore is a
key focus for the Committee.

The Committee is supportive of the latest UK Corporate Governance
Code recommendations and aspires to achieve the aims of the best
practice recommendations.

SIG plc Annual Report and Accounts 2013The Committee has in its Terms of Reference the power to engage external
advisors and to obtain its own independent external advice at the Company’s
expense, should it deem it necessary. During 2013 no member of the Committee
nor the Committee collectively, found it necessary to obtain such separate
advice beyond the advice that is directly provided to the Committee by the
external Auditor, Deloitte LLP, or from EY LLP who operate the Group’s
outsourced Internal Audit function.

As part of corporate governance, the Committee reviews its own performance
annually and considers where improvements can be made. The Committee
reviewed its own performance in December 2013 and the results of this
review were reported to the Board.

MEETINGS

The Committee meets regularly throughout the year with four planned
meetings, and its agenda is linked to events in the Company’s financial calendar.
The agenda is mostly cyclical although each member of the Committee may
request reports on matters of interest in addition to the regular items. The
agenda is designed to ensure that all significant areas of risk are considered
during the course of the year. The Committee met four times during the
financial year.

The Committee is presented with papers of good quality and in a timely
manner to allow due consideration of the subjects under review. Furthermore,
Committee meetings are scheduled to allow sufficient time for a full and
informed debate of the matter.

Attendance by individual members of the Committee is disclosed in the table
on page 53. The Group Finance Director, Mr. D. G. Robertson, attended all
four of the meetings by invitation of the Committee Chairman. The external
Auditor attended meetings of the Committee on three occasions. The external
Auditor has direct access to the Committee Chairman and meets routinely with
the Committee Chairman outside of the formal meetings. The Chairman of the
Board and the other Executive Directors attend certain meetings of the
Committee at the invitation of the Committee Chairman.

The external Auditor had confidential discussions with members of the
Committee without the Chairman of the Board and the Executive Directors
being present on three occasions in 2013 and in March 2014 before the
approval of the 2013 Annual Report and Accounts.

EY LLP, who provided an outsourced Internal Audit function for the Group
in 2013, were invited to meetings to present its reports and attended on one
occasion in 2013 and at the January 2014 meeting as they had not attended
the December 2013 meeting. The Committee also meets EY LLP without the
Executive Directors present and did so on one occasion in 2013 and in
January 2014. In addition, the Committee Chairman met routinely with
EY LLP outside of the formal meetings.

REPORT ON THE COMMITTEE’S ACTIVITIES DURING
THE YEAR

During 2013, the Committee has ensured that its understanding of the risks
and challenges faced by the business has remained informed and relevant.
No major matters were raised in the annual evaluation of the
Committee’s performance.

The main activities of the Committee in 2013 included the following:

e with the assistance of reports received from management and the

external Auditor, the critical review of the significant financial reporting
issues in connection with the preparation of the Company’s half year
and full year financial statements. These included: non-underlying costs;
impairment of non-current assets; post-employment benefits; taxation;
provisions; and rebates payable and receivable;

e assessing the scope and effectiveness of the systems established to identify,
assess, manage and monitor financial and non-financial risks. The Group’s
risk identification and management process is fully set out on pages 18 to 21
and pages 55 and 56;

e reviewing whether the going concern basis continued to be appropriate

in the context of the Group’s funding and liquidity position;

e monitoring the integrity of the Company’s internal financial controls;

e reviewing the Group’s Whistleblowing Policy;

e monitoring and reviewing the plans, work and effectiveness of the
Internal Audit function, including any actions taken following any
significant failures in internal controls;

e reviewing, with the external Auditor, its terms of engagement, its audit
plans, the findings of its work, and at the end of the audit process
reviewing its effectiveness;

e reviewing the independence and objectivity of the external Auditor;

e reviewing and making a recommendation concerning the re-appointment
of the external Auditor and considering future audit tender requirements;

e reviewing and making a recommendation concerning the appointment
of KPMG LLP with effect from 1 January 2014 to provide the externally
outsourced Internal Audit function; and

e carrying out an annual performance evaluation exercise and noting

the satisfactory operation of the Committee.

The Chairman of the Committee reports to the subsequent meeting of the
Board on the key issues covered by the Committee, identifying any matters
on which it considers that action or improvement is needed, and makes
recommendations on the steps to be taken. In addition, the Board receives
copies of the minutes of each meeting.

FINANCIAL REPORTING AND SIGNIFICANT
ACCOUNTING MATTERS

The Committee considered the following significant issues in relation to the
key accounting issues with regard to the financial statements:

e the carrying value of goodwill is systematically reviewed at each half year
and year end. A consistent methodology is applied to the individual cash
generating units, taking account of market outlook, risk-adjusted discounted
future cash flows, sensitivities and other factors which may have a bearing
on impairment considerations;

e the Committee examined the procedures and controls in place to ensure
that the reporting, reviewing and accounting for supplier rebate income
is properly managed and recognised appropriately in the Group Accounts;

e the Committee gave careful consideration to the judgments made
in the separate disclosure of non-underlying items. In particular, the
Committee sought to ensure that the treatment followed consistent
principles and that reporting is suitably clear; and

e methodologies and judgments applied in establishing provisions for trade
receivables, stock, onerous leases and dilapidations, were examined to
ensure consistent application and appropriateness to the trading position
of the Group.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewREPORT OF THE AUDIT COMMITTEE CONTINUED

OVERSIGHT OF INTERNAL AUDIT

The Internal Audit function provides independent assurance to senior management
and the Board on the adequacy and effectiveness of SIG’s risk management
framework. Internal Audit forms an independent and objective assessment as to
whether risks have been adequately identified; adequate internal controls are in
place to manage those risks; and those controls are working effectively. The results
of all assignments have been reported to the Audit Committee during the year.
Areas of weakness that were identified during the year prompted a detailed
action plan and a follow up audit check to establish that actions had been
completed. No failings or weaknesses were identified during the year which
had a material effect on the Group’s performance.

The Audit Committee notes that the Group operates a Control Self
Assessment (“CSA”) internal control process to support the Internal Audit
process. This process is summarised in the Corporate Governance Report
on page 56.

KPMG LLP were appointed on 1 January 2014 in place of EY LLP to provide
the outsourced Internal Audit function. KPMG LLP were appointed following
a full review process which involved tenders being made by five accounting
firms, leading to a short list of three firms, from which a candidate was
recommended. The process was carried out by the Finance Director and
the Chairman of the Audit Committee, who then recommended KPMG LLP
as the selected Internal Audit provider to the Audit Committee. Their
appointment was then recommended by the Audit Committee to the Board.

OVERSIGHT OF EXTERNAL AUDITOR

The Board is aware of the need to maintain an appropriate degree of
independence and objectivity on the part of the Group’s external Auditor.
The external Auditor reports to the Committee on the actions taken to
comply with both professional and regulatory requirements and with best
practice designed to ensure its independence.

The Group has an agreed policy with regard to the provision of audit and
non-audit services by the external Auditor, which was operated during 2013.
The policy is based on the principles that they should undertake non-audit
services only where they are the most appropriate and cost-effective
provider of the service, and where the provision of non-audit services does
not impair, or is not perceived to impair, the external Auditor’s independence
and objectivity. It categorises such services between Auditor-permitted
services, Auditor-excluded services and Auditor-authorised services. The
policy, which can be viewed on the Company’s website (www.sigplc.com),
defines the types of services falling under each category and sets out the
criteria to be met and the internal approvals required prior to the
commencement of any Auditor-authorised services.

The external Auditor cannot be engaged to perform any assignment where
the output is then subject to their review as external Auditor. The Committee
regularly reviews an analysis of all services provided by the external Auditor.
The policy is reviewed annually by the Committee and is approved by the Board.

The total sum invoiced to the Group by its external Auditor for non-audit
services provided in 2013 was £0.1m, representing the Interim Review
and other audit-related assurance services (2012: £0.1m). The total sum
invoiced by the Auditor for audit services in respect of the same period was
£1.4m (2012: £1.3m).

The external Auditor reports to the Committee each year on the actions
taken to comply with professional and regulatory requirements and best
practice designed to ensure its independence, including the rotation of key
members of the external audit team. Deloitte LLP has formally confirmed its
independence to the Board in respect of the period covered by these
financial statements. Deloitte LLP was invited to propose for the global audit

of SIG plc in 2005 and was appointed, having previously been the Auditor
of certain of the Group’s operations from 2002, succeeding Arthur Andersen.

In March 2013, the Committee undertook its annual review of the
effectiveness of the external Auditor and considered the re-appointment
of Deloitte LLP. A questionnaire was sent to the Finance Directors of each
of the Group’s operating companies, which provided the Committee with
an overall view across the Group. The questionnaire sought to establish
the quality of the performance across a number of areas in relation to
their performance of the 2012 audit with individual scores allocated to
each area. From this questionnaire and further discussions in the meeting,
the Committee is satisfied that Deloitte LLP continues to provide an
effective audit service.

Having reviewed and expressed satisfaction with the level of fees,
independence, objectivity, expertise, resources and general effectiveness
of Deloitte LLP, the Committee did not consider it necessary to conduct
a tender process for the appointment of the Group’s Auditor at this time,
although the Committee will continue to keep this under review. The
Committee recommends (and the Board agrees) that a resolution for the
re-appointment of Deloitte LLP as Auditor of the Group for a further year
will be proposed at the forthcoming Annual General Meeting.

AUDIT TENDER

The UK Corporate Governance Code has introduced a new recommendation
that external audits should be put out for tender every ten years. The
Committee has noted the changes to the Code, and the recent findings
of the Competition Commission and the Guidance for Audit Committees
issued by the Financial Reporting Council.

Having previously acted as Auditor to parts of the Group since 2002
Deloitte LLP was invited to tender for the whole Group audit in 2005
and this resulted in Deloitte LLP being appointed as the external Auditor.

As noted previously, the Committee continues to review the performance
of the external Auditor and has been satisfied with the independent and
rigorous audit process. The current lead audit partner took over the audit
for the year ended 31 December 2013. Having conducted a tender exercise
previously and having considered re-tendering in later years, the Committee
is to give consideration to the timing of the next formal tender with regard
to the regulatory requirements. The Committee is currently of the view
that it is potentially more effective to align the tender of the external Auditor
with the rotation of the current lead audit partner, which is due in 2018.
The Committee will continue to keep this under review with a particular
regard to regulatory developments.

FAIR, BALANCED AND UNDERSTANDABLE

The Committee has reviewed the contents of this year’s Annual Report and
Accounts and advised the Board that, in its view, the report is fair, balanced
and understandable and provides the necessary information to enable
Shareholders to assess the Group’s performance and strategy.

As a result of its work during the year, the Audit Committee has concluded
that it has acted in accordance with its Terms of Reference and has ensured
the independence and objectivity of the external Auditor.

On behalf of the Board

JONATHAN NICHOLLS
Chairman, Audit Committee
12 March 2014

SIG plc Annual Report and Accounts 2013DIRECTORS’ REMUNERATION REPORT
ANNUAL STATEMENT BY THE REMUNERATION COMMITTEE CHAIRMAN

In August 2013, the UK Government Department for Business, Innovation
and Skills (“BIS”) published regulations setting out what companies must
disclose in the Directors’ Remuneration Report with the aim of improving
transparency and promoting best practice. This report is therefore divided
into three sections:

e the Annual Statement by the Remuneration Committee Chairman;

e the Directors’ Remuneration Policy, which details SIG’s remuneration
policies and their link to Group strategy, as well as projected pay
outcomes under various performance scenarios; and

e the Annual Report on Remuneration, which focuses on the

remuneration arrangements and outcomes for the year under review
and how the Committee intends to implement the remuneration
policy in 2014.

The Directors’ Remuneration Policy (set out on pages 64 to 70) will be put to
Shareholders for approval in a binding vote at the AGM and every three years
thereafter. The Annual Report on Remuneration will be subject to an advisory
vote at the forthcoming AGM.

CHRIS GEOGHEGAN
Chairman, Remuneration Committee
12 March 2014

C. V. GEOGHEGAN
REMUNERATION COMMITTEE CHAIRMAN

DEAR SHAREHOLDER,

On behalf of the Board I am pleased to present the Remuneration
Committee’s (“the Committee”) Directors’ Remuneration Report for
2013 for which we will be seeking Shareholder approval at the Annual
General Meeting (“AGM”) on 16 May 2014.

SIG’s strategy is to focus on seeking to grow our three core markets of
Insulation and Energy Management, Exteriors and Interiors by combining
the reputational strengths of our local brands with the scale efficiencies and
know-how of a multi-national group. Moreover, with its focus on specialist
expertise and high customer service levels, SIG aims to continue to outperform
its markets and thereby generate sustainable long-term growth in
shareholder value.

KEY ACTIVITIES

The activities of the Committee and key decisions in 2013 are set out on
page 71. In summary, for the year ended 31 December 2013 underlying
profit before tax increased by 5.3%, Return on Capital Employed (“ROCE”)
by 20bps and underlying EPS by 7.2%. In light of this performance, the
annual bonus outcome was 60.5% and 59.5% of salary for the Chief
Executive and Finance Director respectively. Awards granted in 2011 under
the existing Long Term Incentive Plan (“LTIP”) vest based on an underlying EPS
performance condition; the performance condition was not met during the
year and, as a result, these awards will lapse in April 2014.

REMUNERATION POLICY

The Committee also reviewed the existing LTIP during the year (which expires
in April 2014), and has proposed a number of revisions which will be incorporated
in the new LTIP (for which Shareholder approval is being sought at the 2014
AGM). For awards to be made in 2014 and subsequent years, the opportunity
will be increased from 100% to 150% of salary (200% under exceptional
circumstances). Awards will continue to vest based on EPS and ROCE
performance conditions, and the EPS performance range will be strengthened
to take into account the Company’s long-term strategy and the current
economic environment. We have also introduced clawback provisions for
unvested shares, and a two-year post-vesting holding period to further
improve Shareholder alignment.

In addition, the shareholding guideline will be increased from 100% to 200%
of salary. The Committee consulted the Company’s major Shareholders prior
to making these revisions, and received support for the proposed changes.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewDIRECTORS’ REMUNERATION REPORT CONTINUED
DIRECTORS’ REMUNERATION POLICY

This section of the report sets out the policy for Executive Directors in accordance with Section 439A of the Companies Act 2006 (“the Act”), which Shareholders
are asked to approve at the 2014 Annual General Meeting (“AGM”). The Committee intends that this policy will formally come into effect from the date of the
2014 AGM.

COMPLIANCE STATEMENT

This report, prepared by the Remuneration Committee (“the Committee”) on behalf of the Board, takes full account of the UK Corporate Governance Code
(“the Code”) and the latest ABI/NAPF guidelines and has been prepared in accordance with the provisions of the Act, the Listing Rules of the Financial Conduct
Authority and the Large and Medium-Sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013. The Act requires the Auditor
to report to the Company’s Shareholders on the audited information within this report and to state whether in their opinion those parts of the report have
been prepared in accordance with the Act. The Auditor’s opinion is set out on pages 123 to 125 and those aspects of the report that have been subject to
audit are clearly marked.

It is considered that throughout the year under review the Company has complied with the governance rules and best practice provisions applying
to UK listed companies, and Shareholders will note that the Directors’ Remuneration Policy supports compliance with the new BIS regulations.

REMUNERATION POLICY

The Company’s policy is to provide remuneration packages that fairly reward the Executive Directors for the contribution they make to the business and that
are appropriately competitive to attract, retain and motivate Executive Directors and Senior Managers of the right calibre. The policy is designed to align the
Executive Directors’ interests with those of Shareholders, and to incentivise the Executive Directors to meet the Company’s financial and strategic objectives
such that a significant proportion of remuneration is performance related. The Group’s financial and strategic objectives are set out in the Strategic Report on
pages 6 to 49.

The Remuneration Policy for Executive Directors is summarised in the table below:

Fixed remuneration

Element

Base salary

Purpose and link
to strategy

To attract and retain talent in
the labour market in which
the Executive Director is
employed.

Operation and process

Opportunity

Performance metrics

Not applicable

Reviewed on an annual basis (with
effect from January) or following a
significant change in responsibilities,
taking into account the individual’s
performance and experience, with
reference to published remuneration
information from similar sized
companies (excluding financial
services) and companies operating
in a similar sector. The Committee
also takes account of the annual
salary review for the rest of the Group.

Base salary increases will
be applied in line with the
outcome of the review.

In respect of existing Executive
Directors, it is anticipated that
salary increases will be within
the range of increases for the
general employee population
over the term of this policy.
In exceptional circumstances
(including, but not limited to,
a significant increase in role size
or complexity) the Committee
has discretion to make
appropriate adjustments to
salary levels to ensure they
remain market competitive.

Benefits

To provide benefits that are
appropriately competitive within
the relevant labour market.

Benefits include (but are
not necessarily limited to)
a company car, medical and
permanent health insurance.
Benefits are reviewed annually
and their value is not pensionable.

Benefits may vary by role.

Not applicable

It is not anticipated that the cost
of benefits will exceed £35,000
per annum per Executive Director
over the term of this policy.

The Committee retains
the discretion to approve
a higher cost in exceptional
circumstances (e.g. relocation)
or in circumstances driven by
factors outside the Company’s
control (e.g. material increases
in insurance premiums).

SIG plc Annual Report and Accounts 2013Fixed remuneration continued

Element

Pension

Purpose and link
to strategy

To provide retirement
benefits that are appropriately
competitive within the
relevant labour market.

Share Incentive
Plan (“SIP”)

To encourage share
ownership across all
UK-based employees using
HMRC-approved schemes.

Variable remuneration

Annual
performance
bonus (“annual
bonus”)

To provide an incentive to
achieve annual performance
targets, which are set at the
beginning of the financial
year in line with the
Company’s strategy.

Operation and process

Opportunity

Performance metrics

New joiners will participate in the
Company’s defined contribution
pension scheme (open to all
UK-based employees of the Group)
or receive a cash equivalent.

The two current Executive
Directors participate in the defined
contribution pension scheme.

The SIP is an HMRC-approved
arrangement which entitles all
UK-based employees to purchase
shares and receive matching shares
in a potentially tax-advantageous
manner. The Company gives one
matching share for each share
purchased by the employee up to
a maximum of four matching shares
per month.

The annual bonus is reviewed
annually prior to the start of each
financial year to ensure bonus
opportunity, performance
measures, targets and weightings
are appropriate and continue to
support the strategy.

Executive Directors are required
to defer one-third of their bonus
into an award over SIG shares
for a period of three years under
the Deferred Share Bonus Plan
(“DSBP”), subject to clawback,
i.e. forfeiture or reduction in
exceptional circumstances.
Such circumstances may include
(but are not limited to) material
misstatement of the Company’s
financial results or gross misconduct.
The awards are granted under the
Company’s deferred annual bonus
plan, the SIG plc 2011 DSBP.

Dividend equivalents are payable
over the vesting period in respect
of the awards which vest.

Defined contribution: SIG
contributes 15% of base salary.

Not applicable

Maximum opportunity is in line
with HMRC limits.

Maximum annual opportunity
of up to 100% of salary.

For entry level and target
performance, the bonus earned
is up to 30% and up to 65%
of maximum respectively.

The SIP is an all-employee
scheme and Executive
Directors participate on
the same terms as other
employees. The acquisition
of shares is therefore not
subject to the satisfaction
of a performance target.

Performance is determined by
the Committee on an annual basis
by reference to Group financial
measures, as well as the
achievement of personal and/or
strategic objectives.

The personal/strategic element
will not be weighted more than
30% of the total in any year.

When assessing financial
performance, the Committee
typically considers underlying
profit before tax and Group
working capital, as well as other
indicators of performance
defined at the start of the year.
Performance targets are
generally calibrated with
reference to the Group’s
budget for the year.

Details of the measures and
weightings applicable for the
financial year under review are
provided in the Annual Report
on Remuneration.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewDIRECTORS’ REMUNERATION REPORT CONTINUED
DIRECTORS’ REMUNERATION POLICY CONTINUED

REMUNERATION POLICY CONTINUED

Variable remuneration continued

Element

Purpose and link
to strategy

Operation and process

Opportunity

Performance metrics

Long-Term
Incentive Plan
(“LTIP”)

To reward and retain
Executive Directors to
deliver the Group’s long-term
strategy whilst providing
strong alignment with
Shareholders.

Executive Directors are granted
annual awards of nil-cost options or
contingent rights to acquire shares
for no cost as determined by the
Committee, which vest based on
performance over three years.

The Company will be seeking
Shareholder approval for the new LTIP
at the 2014 AGM to replace the existing
LTIP which expires in April 2014.

To encourage long-term
decision-making and further improve
Shareholder alignment, the Committee
will introduce a two year holding period
on vested LTIP awards for awards
made in 2014 and subsequent
years. Performance will continue
to be measured over three years.

Unvested awards are subject to
clawback, i.e. forfeiture or reduction in
exceptional circumstances (e.g. material
misstatement or gross misconduct) .

Dividend equivalents are payable over
the five-year vesting and holding period
in respect of the awards which vest.

Maximum annual award of up
to 150% of salary.

In exceptional circumstances,
such as to facilitate the
recruitment of an external hire,
the Committee may, in its
absolute discretion, exceed this
maximum annual opportunity,
up to 200% of salary.

Threshold performance
will result in no more than
25% vesting.

Vesting of LTIP awards is
subject to the Group’s
performance over a three year
performance period. If no
entitlement is earned at the
end of the performance period,
awards will lapse.

The performance measures
and respective weightings may
vary year on year to reflect
strategic priorities, subject
to retaining an element on
underlying earnings per share
(“EPS”) growth and Return on
Capital Employed (“ROCE”).

Details of the measures,
weightings and performance
targets used for specific LTIP
grants are included in the
Annual Report on Remuneration.

The Committee is satisfied that the above Remuneration Policy is in the best interests of Shareholders and does not promote excessive risk-taking. The Committee
will consider the Company’s performance on environmental, social and governance issues when determining the overall reward for the Executive Directors, and has
discretion to make adjustments as appropriate. The Committee also retains discretion to make non-significant changes to the policy without reverting to Shareholders.

NOTES TO THE REMUNERATION POLICY TABLE

PAYMENTS FROM EXISTING AWARDS

Executive Directors are eligible to receive payment under any award made prior to the approval and implementation of the Remuneration Policy including under the existing LTIP.

LTIP AWARDS

Awards under the new LTIP may be structured in a manner which delivers tax advantages to the Executive Directors but the value delivered will be no greater
than as set out in the table above.

SELECTION OF PERFORMANCE MEASURES

The performance measures used under the annual performance bonus are selected annually to reflect the Group’s main strategic objectives for the year and
reflect both financial and non-financial priorities.

The Committee continues to believe that ROCE reinforces the focus on capital efficiency and delivery of strong returns for our Shareholders, thereby further strengthening the
alignment of management’s incentives with SIG’s strategy. The Committee also continues to believe that underlying EPS is a key driver of long-term Shareholder value for SIG.

Performance targets are set to be stretching and achievable, taking into account the Group’s strategic priorities and the economic environment in which
the Company operates. Targets are set taking into account a range of reference points including the Group’s strategic plan and broker forecasts for both SIG and its
peers. The Committee believes that the performance targets set are very challenging and that the maximum outcomes are only available for truly outstanding performance.

REMUNERATION POLICY FOR OTHER EMPLOYEES

Our approach to salary reviews is consistent across the Group, with consideration given to the level of responsibility, experience, individual performance,
salary levels in comparable companies and the Company’s ability to pay. Remuneration surveys are referenced, where appropriate, to establish market rates.

Senior Managers participate in an annual bonus plan which has similar performance targets to those of the Executive Directors. A limited number of
Senior Managers also receive LTIP awards. Performance conditions are consistent for all participants, while award sizes vary by organisational level. All UK
employees are eligible to participate in the SIP on the same terms.

Pension and benefits arrangements are tailored to local market conditions, and so various arrangements are in place for different populations in SIG. Executive
Directors participate in the same pension scheme as other Senior Managers.

SIG plc Annual Report and Accounts 2013APPROACH TO RECRUITMENT REMUNERATION

The Committee’s policy is to set pay for new Executive Directors within the existing Remuneration Policy in order to provide internal consistency.
The Committee aims to ensure that the Company pays no more than is necessary to appoint individuals of an appropriate calibre.

EXTERNAL APPOINTMENTS

In the case of appointing a new Executive Director, the Committee may make use of any of the existing components of remuneration, as follows:

Component

Approach

Maximum annual
grant value

Base salary

Benefits

Pension

The base salary will be determined by reference to the scope and responsibility of the position as well as
internal relativities and their current remuneration. Where a new appointee has an initial base salary set below
market, any shortfall may be managed with phased increases over a period of years, subject to the Executive
Director’s development in the role, which may result in above-average salary increases during this period

n/a

New appointees will be eligible to receive benefits which may include (but are not limited to) a company car,
medical and permanent health insurance

New appointees will be eligible to participate in the Company’s defined contribution pension scheme or receive
a cash equivalent payment

SIP

New appointees will be eligible to participate in the SIP

Annual
performance
bonus

LTIP

The plan as described in the policy table will apply to new appointees with the relevant maximum being pro-rated to
reflect the proportion of the year employed. Targets for the personal element will be tailored to the role of the appointee

100% of salary

New appointees will be granted awards under the LTIP on the same terms as other Executives, as described in
the policy table

200% of salary

The Committee may also make an award in respect of a new appointment to “buy out” incentive arrangements forfeited on leaving a previous employer and may exercise
the discretion available under the relevant Listing Rule to facilitate this, i.e. in the event that a different structure would be required. In doing so, the Committee will ensure
that “buyout awards” would have a fair value no higher than that of the awards forfeited and would consider relevant factors including any performance conditions attached
to these awards, the likelihood of those conditions being met, and the remaining vesting period of these awards. Where, in the Committee’s opinion, awards forfeited are
still subject (at date of appointment) to substantive performance conditions, any awards made in compensation will have SIG-specific performance conditions attached.

INTERNAL APPOINTMENTS

Remuneration for new Executive Directors appointed by way of internal promotion will similarly be determined in line with the policy for external appointees, as detailed
above. Where an individual has contractual commitments made prior to their promotion to the Board, the Company will continue to honour these arrangements.
Incentive opportunities for below Board employees are typically no higher than for Executive Directors, but incentive measures may vary to provide better line of sight.

SHARE OWNERSHIP GUIDELINES

To ensure alignment between Executive Director interests and those of Shareholders, the Company has established the principle of requiring Executive
Directors to build up and maintain a beneficial holding of shares in the Company equivalent to a minimum of 200% of base salary. Under normal
circumstances it is expected that this should be achieved within five years of appointment. It is anticipated that the satisfaction of this target will be mainly
achieved by the vesting of shares through the Company’s share plans.

EXECUTIVE DIRECTOR SERVICE CONTRACTS AND LEAVER/CHANGE OF CONTROL PROVISIONS AND POLICY FOR
LOSS OF OFFICE

The Committee sets notice periods for the Executive Directors (including future Executive Directors) at twelve months.

Subject to the considerations set out overleaf, the Company’s policy is to limit termination payments to pre-established contractual arrangements. In the event
that the employment of an Executive Director is terminated, any compensation payable will be determined in accordance with the terms of the service contract
between the Company and the employee, as well as the rules of any incentive plans.

If employment is terminated by the Company, the departing Executive Director may have a legal entitlement (under statute or otherwise) to additional
amounts, which would need to be met. In addition, the Committee retains discretion to settle any claims by or on behalf of the Executive Director in return
for making an appropriate payment and contributing to the legal fees incurred by the Executive Director in connection with the termination of employment,
where the Company wishes to enter into a settlement agreement (as provided for overleaf) and the individual must seek independent legal advice.

There is no provision in the Executive Directors’ contracts for compensation to be payable on termination of their contract over and above sums due in
respect of notice and accrued but untaken holiday, and as outlined overleaf regarding bonus and LTIP. Executive Director service contracts are available to view
at the Company’s registered office.

In certain circumstances, the Committee may approve new contractual arrangements with departing Executive Directors including (but not limited to)
settlement, confidentiality, outplacement services, restrictive covenants and/or consultancy arrangements. These will be used sparingly and only entered into
where the Committee believes that it is in the best interests of the Company and its Shareholders to do so.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewDIRECTORS’ REMUNERATION REPORT CONTINUED
DIRECTORS’ REMUNERATION POLICY CONTINUED

EXECUTIVE DIRECTOR SERVICE CONTRACTS AND LEAVER/CHANGE OF CONTROL PROVISIONS AND POLICY
FOR LOSS OF OFFICE CONTINUED

The table below provides details of the main terms of Executive Director service contracts and termination payments not otherwise set out in this report.

Provision

Duration

Holiday

Notice period

Exit payments

Policy

Continuous term subject to notice or reaching retirement age

30 working days’ holiday plus public holidays per holiday year

Twelve months’ notice period in writing by either party, save in circumstances justifying summary termination

The Executive Directors will be paid a sum equal to base salary and the value of contractual benefits (or receive the
benefits themselves) which will not include bonus. The Company may pay as a lump sum or in instalments and may
require the Executive Director to mitigate his loss by seeking alternative employment. Where phasing payments any
income received from a third party shall be deducted from sums due to the Company

The Company will take account of all the circumstances on a case-by-case basis when determining whether to
exercise its discretion, including the need for an orderly handover and the contribution of the Executive Director to
the success of the Company during his tenure

Restrictive covenants

Apply during the contract and for up to a period of twelve months after leaving, subject to any period served by way
of gardening leave

Executive Director

Date of service contract

S. R. Mitchell

D. G. Robertson

10 December 2012

10 October 2011

When considering termination payments under incentive plans, the Committee reviews all potential incentive outcomes to ensure they are fair to both
Shareholders and participants. The table below summarises how the awards under the annual bonus, the Deferred Share Bonus Plan, the existing 2004 LTIP
and the proposed 2014 LTIP are typically treated in specific circumstances, with the final treatment remaining subject to the Committee’s discretion.

Plan

Scenario

Timing of vesting

Calculation of vesting/payment

Annual bonus

Death, injury, ill-health or disability, retirement,
or any other reason the Committee may determine.

Normal payment date, although the
Committee has discretion to accelerate.

Change of control.

Immediately.

The Committee will determine the
bonus outcome based on circumstances
and the date of leaving. Performance
against targets is typically assessed at
the end of the year in the normal way
and any resulting bonus will be pro-rated
for time served during the year.

Performance against targets will be
assessed at the point of change of
control and any resulting bonus will
be pro-rated for time served up to
the point of change of control.

All other reasons.

No bonus is paid.

Deferred Share
Bonus Plan

Death, injury, ill-health or disability, retirement, or
any other reason the Committee may determine.

Normal vesting date, although the
Committee has discretion to accelerate.

Change of control.

All other reasons.

Immediately.

Awards lapse.

n/a

2004 LTIP

Injury, ill-health or disability, redundancy,
retirement, the sale of the employing company or
business out of the Group or any other reason as
the Committee may determine.

Normal vesting date, although the
Committee has discretion to accelerate.

Any outstanding awards will normally
be pro-rated for time and performance
conditions will be measured.

Death.

Change of control.

Immediately.

n/a

Any outstanding awards will normally
be pro-rated for time and performance
conditions will be measured up to the
point of the change of control.

All other reasons.

Awards lapse.

n/a

SIG plc Annual Report and Accounts 2013Plan

2014 LTIP

Scenario

Timing of vesting

Calculation of vesting/payment

Death, injury or disability, redundancy, the sale of
the employing company or business out of the
Group or any other reason as the Committee
may determine.

Normal vesting date, although the
Committee has discretion to accelerate.

Change of control.

Immediately.

Any outstanding awards will normally
be pro-rated for time and performance
conditions will be measured. The
Committee retains discretion to
dis-apply performance conditions in
exceptional circumstances.

Any outstanding awards will be
pro-rated for time and performance
up to the point of the change of
control. The Committee retains
discretion to dis-apply performance
conditions in exceptional circumstances.

All other reasons.

Awards lapse.

n/a

PAY-FOR-PERFORMANCE: SCENARIO ANALYSIS

The following charts provide an estimate of the potential future reward opportunities for the Executive Directors, and the potential split between the different
elements of pay under three different performance scenarios: “Minimum”, “On-target” and “Maximum”. Potential reward opportunities are based on SIG’s
current Remuneration Policy, applied to salaries as at 31 December 2013. Note that the projected values exclude the impact of any share price movements.

CHIEF EXECUTIVE

FINANCE DIRECTOR

Maximum

33%

27%

40%

£2,029k

Maximum

33%

27%

40%

£1,228k

On-target

66%

27%

Minimum

100%

£997k

£654k

On-target

66%

27%

Minimum

100%

£608k

£401k

(£000)

500

1,000

1,500

2,000

(£000)

500

1,000

1,500

Salary, pension and benefits

Annual bonus

Long-term incentives

The “Minimum” scenario shows base salary, pension and benefits only. These are the only elements of the Executive Directors’ remuneration packages which are
not at risk.

The “On-target” scenario shows fixed remuneration as above, plus a target payout of 50% of the annual bonus and threshold performance vesting for long-term incentives.

The “Maximum” scenario reflects fixed remuneration, plus full payout of all incentives.

NON-EXECUTIVE DIRECTORS

The Non-Executive Directors (“NEDs”), including the Chairman, do not have service contracts. The Company’s policy is that NEDs are appointed for specific
terms of three years unless otherwise terminated earlier in accordance with the Articles of Association or by and at the discretion of either party upon three
months’ written notice. NEDs’ appointments are reviewed at the end of each three-year term. NEDs will normally be expected to serve two three-year
terms, although the Board may invite them to serve for an additional period.

Summary details of terms and notice periods for NEDs are included below:

NED

L. Van de Walle

J. E. Ashdown

M. Ewell

C. V. Geoghegan

J. C. Nicholls

Original date of appointment

Date of letter of engagement

Unexpired term

1 October 2010

11 July 2011

1 August 2011

1 July 2009

6 November 2009

16 September 2013

30 September 2016

7 July 2011

18 May 2012

10 July 2014

31 July 2014

30 June 2015

5 November 2015

NEDs do not receive benefits from the Company and they are not eligible to join the Company’s pension scheme or participate in any bonus or incentive plan.
Any reasonable expenses that they incur in the furtherance of their duties are reimbursed by the Company.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewDIRECTORS’ REMUNERATION REPORT CONTINUED
DIRECTORS’ REMUNERATION POLICY CONTINUED

NON-EXECUTIVE DIRECTORS CONTINUED

Details of the policy on NED fees are set out in the table below:

Purpose and link to strategy

Operation and process

Opportunity

To attract and retain NEDs of the highest calibre
with experience relevant to the Company.

Fees are reviewed annually in May with any
increase effective from 1 June.

Any fee increases are applied in line with the
outcome of the review.

The fee paid to the Chairman is determined by
the Committee, and fees to NEDs are determined
by the Board. The fees are calculated by
reference to current market levels and take
account of the time commitment and the
responsibilities of the NEDs.

Additional fees are payable for acting as Senior
Independent Director or as Chairman of a
Board Committee as appropriate

It is anticipated that increases to Chairman and
NED fee levels will typically be in line with market
levels of fee inflation. In exceptional circumstances
(including, but not limited to, material misalignment
with the market or a change in the complexity,
responsibility or time commitment required to
fulfil an NED role) the Board has discretion to
make appropriate adjustments to fee levels to
ensure they remain market competitive and fair
to the Director.

The maximum aggregate fees, per annum, for
all NEDs allowed by the Company’s Articles of
Association is £500,000.

NED RECRUITMENT

In recruiting a new Chairman or NED, the Committee will use the policy as set out in the table above. A base fee would be payable for Board membership,
with additional fees payable for acting as Senior Independent Director or as Chairman of a Board Committee as appropriate.

CONSIDERATIONS OF CONDITIONS ELSEWHERE IN THE GROUP

The Committee considers the pay and employment conditions elsewhere in the Group when determining remuneration for Executive Directors, and the
Company seeks to promote good relationships with employee representative bodies as part of its employee engagement strategy. However, the Committee
does not currently consult specifically with employees on the Executive Remuneration Policy.

CONSIDERATIONS OF SHAREHOLDER VIEWS

When determining remuneration, the Committee takes into account the guidelines of investor bodies and Shareholder views. The Committee is always open
to feedback from Shareholders on the Remuneration Policy and arrangements, and commits to undergoing Shareholder consultation in advance of any
significant changes to the Remuneration Policy. Further detail on the votes received on the 2012 Directors’ Remuneration Report and the Committee’s
response are provided in the Annual Report on Remuneration.

EXTERNAL DIRECTORSHIPS

The Committee acknowledges that Executive Directors may be invited to become independent Non-Executive Directors of other quoted companies which
have no business relationship with the Company and that these duties can broaden their experience and knowledge to the benefit of the Company.

Executive Directors are permitted to accept such appointments with the prior approval of the Chairman. Approval will only be given where the appointment
does not present a conflict of interest with the Group’s activities and the wider exposure gained will be beneficial to the development of the individual. Where
fees are payable in respect of such appointments, these would be retained by the Executive Director.

SIG plc Annual Report and Accounts 2013ANNUAL REPORT ON REMUNERATION

The following section provides details of how SIG’s Remuneration Policy was implemented during the financial year ended 31 December 2013 and how it will
be implemented in 2014.

THE REMUNERATION COMMITTEE

The key responsibilities of the Remuneration Committee are to:

e determine the remuneration policy for Executive Directors and such other members of the Executive Management as it is designated to consider;

e design specific remuneration packages which include salaries, bonuses, equity incentives, pension rights and benefits;

e review the Executive Directors’ service contracts;

e ensure that failure is not rewarded and that steps are always taken to mitigate loss on termination, within contractual obligations;

e review remuneration trends across the Group; and

e approve the terms of and recommend grants under the Group’s incentive plans.

The Committee’s Terms of Reference, which are reviewed regularly, are set out on the Company’s website, www.sigplc.com.

As of 31 December 2013, the Committee comprised the following Non-Executive Directors: Mr. C. V. Geoghegan (who chairs the Committee); Ms. J. E. Ashdown;
Mr. M. Ewell; and Mr. J. C. Nicholls, all of whom are considered independent within the definition set out in the Code. During the year the Committee met
five times. Attendance by individual members of the Committee is disclosed in the Corporate Governance section of the Directors’ Report on page 53.

Only members of the Committee have the right to attend Committee meetings. The Chairman of the Board, Chief Executive, HR Director and
Company Secretary attend the Committee’s meetings by invitation, but are not present when their own remuneration is discussed. The Committee
also takes independent professional advice, on an ad hoc basis, as required. See below for more details.

The Committee reviews its own performance annually and considers where improvements can be made as appropriate.

KEY ACTIVITIES OF THE COMMITTEE IN 2013

The Committee met five times in 2013, twice in February and in May, November and December. Its key activities included:

e annual review of Executive Director salaries;

e assessment and approval of performance outcomes for the annual bonus and long-term incentives in respect of performance to 31 December 2013;

e calibration of award levels and targets for the 2013 LTIP awards for the Executive Directors;

e review of the Non-Executive Chairman’s fees;

e preparation of the 2012 and 2013 Directors’ Remuneration Reports;

e review of changes required for the 2013 Directors’ Remuneration Report in order to comply with the BIS regulations;

e development of Senior Executive Remuneration Policy for 2014;

e review of the LTIP, consideration of potential revisions and related Shareholder consultation; and

e preparation for the 2013 AGM.

EXTERNAL ADVISORS

Kepler Associates (“Kepler”), an independent firm of remuneration consultants appointed by the Committee after consultation with the Board, continued to act as the
remuneration advisor to the Committee during the year. Kepler attends Committee meetings and provides advice on remuneration for executives, analysis on all elements
of the remuneration policy and regular market and best practice updates. Kepler reports directly to the Committee Chairman and is a signatory to the Code of Conduct for
Remuneration Consultants of UK-listed companies (which can be found at www.remunerationconsultantsgroup.com). Kepler provides no other services to the Company
and is therefore considered independent. Kepler’s fees for the year were charged on a time and materials basis and totalled £61,270.

Deloitte LLP, Auditor to the Group, has when requested, performed specific testing on the LTIP calculations at the end of the respective performance periods.
Deloitte LLP was not asked to perform this service in 2013 and therefore did not receive any fees for this service in 2013.

SHAREHOLDER VOTE AT 2013 AGM

The following table shows the results of the advisory vote on the 2013 Directors’ Remuneration Report at the 23 May 2013 AGM:

Total number of votes

% of votes cast

For

482,949,242

98.8%

Against

5,703,476

1.2%

Total votes cast

Abstentions

488,652,718

100%

9,380

<0.1%

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewDIRECTORS’ REMUNERATION REPORT CONTINUED
ANNUAL REPORT ON REMUNERATION CONTINUED

DIRECTORS’ REMUNERATION AS A SINGLE FIGURE (AUDITED)

We have set out the amounts earned by the Directors in the table below:

YEAR TO 31 DECEMBER 2013

Executive

S. R. Mitchell

D. G. Robertson

C. J. Davies+

Non-Executive

L. Van de Walle
(Chairman)

J. E. Ashdown

M. Ewell

C. V. Geoghegan

J. C. Nicholls

Total

1. Base
salary/fee
£000

2. Benefits
£000

3. Pension
£000

4. Annual
bonus
£000

5. LTIP
£000

6. Other
£000

Total
remuneration
£000

550

324

162

–

400

–

333

193

–

1,312

532

594

–

467

–

10*

487

987

586

1,031

162

2,970

YEAR TO 31 DECEMBER 2012

Executive

S. R. Mitchell

D. G. Robertson

C. J. Davies

Non-Executive

L. Van de Walle
(Chairman)

J. E. Ashdown

M. Ewell

C. V. Geoghegan

J. C. Nicholls

Total

1. Base
salary/fee
£000

2. Benefits
£000

3. Pension
£000

4. Annual
bonus
£000

5. LTIP
£000

6. Other
£000

Total
remuneration
£000

315

549

155

–

160

–

164

296

–

1,245

214

460

–

545

1,024

155

1,974

* Relates to additional fees for Senior Independent Non-Executive Directors and Chairmanship of the Audit and Remuneration Committees.

+ Includes remuneration in lieu of salary, pension and other benefits after 1 April 2013.

TOTAL SINGLE FIGURE OF REMUNERATION FOR EXECUTIVE DIRECTORS

The table below sets out the total single figure remuneration received by each Executive Director for the year to 31 December 2013 and the prior year:

1. Base salary
£000

2. Benefits
£000

3. Pension
£000

4. Annual
bonus
£000

5. LTIP
£000

6. Other
£000

Total
remuneration
£000

550

324

315

549

400

160

333

–

193

164

296

–

467

–

987

586

545

1,031

1,024

Executive Director

S. R. Mitchell7

2013

2012

D. G. Robertson

2013

C. J. Davies8

2012

2013

2012

SIG plc Annual Report and Accounts 2013The figures in the table opposite have been calculated as follows:

1. Base salary/ fee: amount earned for the year.

2. Benefits: comprised company car, medical and permanent health insurance.

3. Pension: value based on increase in accrued pensions (net of inflation) multiplied by a factor of 20, or the Company’s pension contribution during the year of 15% of salary.

4. Annual bonus: payment for performance during the year (including deferred portion).

5. LTIP: the value at vesting of awards vesting on performance over the three-year periods ended 31 December 2013 and 31 December 2012. For the 2011 award the

performance criteria was not achieved, therefore the award will lapse.

6. Other: includes SIP, valued based on the face value of matching shares at grant. For C. J. Davies, includes remuneration in lieu of salary, pension and other

benefits after 1 April 2013 and fees paid for Non-Executive search services.

7. Appointed to the Board on 10 December 2012 and became Chief Executive on 1 March 2013.

8. See retirement arrangements in the section below.

RETIREMENT ARRANGEMENTS OF MR. C. J. DAVIES

Mr. C. J. Davies retired from the Board on 28 February 2013 and remained employed with no obligation to perform his Executive duties from 1 April 2013.
His leaving arrangements are in line with those set out in his contract, i.e. a twelve month notice period with effect from 1 March 2013 providing salary,
pension and other benefits until the termination date. His outstanding incentive awards will be adjusted in line with best practice for a good leaver, i.e. pro-rated
to his termination date and vesting at the end of the normal vesting period, subject to measurement of the performance conditions. For 2013, he was entitled to
an annual bonus, pro-rated for time worked before ceasing to perform his executive duties and as determined by the Committee. In addition the Company has
offered to provide limited support from a Non-Executive search agency.

Further details on incentive outcomes for Mr. C. J. Davies are provided in the sections below.

INCENTIVE OUTCOMES FOR 2013

ANNUAL BONUS IN RESPECT OF 2013

In 2013, the maximum bonus opportunity for Executive Directors was 100% of salary. 80% of salary was based on financial performance and 20% on the
achievement of personal or strategic objectives. For the financial performance element, 65% of salary was linked to underlying profit before tax and the
remaining 15% of salary to working capital improvement, as measured through cash generation.

Further details of the bonuses paid, including Group and individual targets set and performance against each of the metrics, are provided in the tables below:

FINANCIAL ELEMENT OUTCOMES

Measure

Underlying profit before tax

Working capital
improvement/cash
generation

Year to 30 Jun 13

Year to 31 Dec 13

Total

PERSONAL ELEMENT OUTCOMES

Weighting
(% of salary)

65%

10%

80%

Performance targets

Threshold

£84.0m

£90.0m

Target

£89.0m

£94.0m

Stretch

£94.0m

£100.0m

Actual
performance

Payout
(% of salary)

£88.1m

£102.9m

£115.0m

£120.0m

£130.0m

£102.5m

38.5%

5.0%

–

43.5%

Executive Director

Personal objectives for the year

Payout (% of salary)

S. R. Mitchell

D. G. Robertson

Included Group ROCE; successful transition to the Chief Executive role;
development and communication of strategy; and delivery of key projects.

Included Group ROCE; operating and financial management; refinancing
project delivery; recruitment; succession planning; and delivery of key projects.

17%

16%

OVERALL BONUS OUTCOMES

Executive Director

S. R. Mitchell

D. G. Robertson

Financial element bonus outcome
(% of salary)

Personal element bonus
outcome (% of salary)

Overall bonus outcome
(% of salary)

43.5%

17%

16%

60.5%

59.5%

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewDIRECTORS’ REMUNERATION REPORT CONTINUED
ANNUAL REPORT ON REMUNERATION CONTINUED

INCENTIVE OUTCOMES FOR 2013 CONTINUED

OVERALL BONUS OUTCOMES CONTINUED

Mr. C. J. Davies’ annual bonus was pro-rated for time worked before going on garden leave. Based on the Group’s financial performance and
Mr. C. J. Davies’ personal contributions to the Company during the year, his bonus was calculated to be £67,876, equivalent to 50% of his pro-rated salary
to 31 March 2013.

As stated in the Policy table, for all current Executive Directors one-third of the total annual bonus outcome for 2013 is deferred into SIG shares for three
years, subject to clawback. Bonus deferral did not apply to Mr. C. J. Davies in 2013 on account of his retirement. No discretion was applied by the Committee
to the annual bonus outcome calculation. In the Committee’s view, the level of bonus paid to Executive Directors appropriately reflects the individuals’ and
Group’s performance in an exceptionally difficult environment.

LONG-TERM INCENTIVE PLAN: 2011 AWARDS

On 27 April 2011, Mr. C. J. Davies received an award of 379,000 nil-cost options under the LTIP. Vesting of the award was dependent on three year
cumulative underlying EPS performance. There was no re-testing of performance. The performance targets are illustrated below:

EPS performance

100%

g
n
i
t
s
e
v

Cumulative underlying EPS 2011–2013

30p

40p

Performance measure

Actual performance

Vesting outcome (% of maximum)

Three year cumulative underlying EPS

30.0p

The three year period over which performance was measured ended on 31 December 2013. Actual cumulative underlying EPS was 30.0p, which resulted
in nil vesting. The award will therefore lapse on 27 April 2014.

No awards are due to vest for the incumbent Executive Directors based on performance to 31 December 2013.

LONG-TERM INCENTIVE PLAN: 2013 AWARDS

On 18 April 2013, Mr. S. R. Mitchell and Mr. D. G. Robertson were granted awards under the LTIP of 363,036 and 214,191 shares respectively; details are
provided in the table below. The three year period over which performance will be measured will be 1 January 2013 to 31 December 2015. The award is
eligible to vest in its entirety on the third anniversary of the date of grant (i.e. 17 April 2016), subject to ROCE and EPS performance.

Executive Director

Date of grant

Awards made
during the year

Market price at
date of award

Face value at date
of award

Face value at date
of award
(% of salary)

S. R. Mitchell

D. G. Robertson

18 April 2013

363,036

214,191

151.5p

£550,000

£324,500

100%

These awards will vest based on three-year average ROCE, defined as underlying operating profit after tax divided by average net assets plus average net debt
(representing two-thirds of the award) and three-year cumulative underlying EPS one-third. The performance targets are illustrated below:

ROCE element of the award (two-thirds)

EPS element of the award (one-third)

100%

g
n
i
t
s
e
v

100%

g
n
i
t
s
e
v

Average ROCE 2013–2015

Cumulative underlying EPS 2013–2015

13%

30p

40p

SIG plc Annual Report and Accounts 2013

For the ROCE element, if three year average ROCE over the three financial years ending 31 December 2015 is less than or equal to 9%, no shares will vest.
Awards vest in full for ROCE of 13% or higher and vesting is on a straight line basis between these two points.

For the EPS element, if cumulative underlying EPS over the three financial years ending 31 December 2015 is less than or equal to 30p, no shares will vest.
Awards vest in full for cumulative EPS of 40p or higher and vesting is on a straight line basis between these two points.

As in previous years, the ROCE and EPS targets have been calibrated with reference to analysis based on internal and external data and the Committee’s view
of what it believes will provide an appropriate level of stretch.

In order to ensure targets remain commensurately stretching with what was intended at the outset, and also to ensure a fair outcome for both participants
and Shareholders, the Committee has discretion to adjust the targets as appropriate, e.g. to reflect changes in capital, M&A activity, and any other reason
the Committee determines in its absolute discretion. Further, if such discretion is exercised, the Committee undertakes to disclose the rationale for its
decision in the Annual Report on Directors’ Remuneration the following year.

TOTAL SINGLE FIGURE OF REMUNERATION FOR NON-EXECUTIVE DIRECTORS

The table below sets out the total single figure remuneration received by each NED for the year to 31 December 2013 and the prior year:

NED

L. Van de Walle (Chairman)

J. E. Ashdown

M. Ewell

C. V. Geoghegan

J. C. Nicholls

EXIT PAYMENTS

Base fee £000

Additional fees £000

Total fees £000

2013

162

2012

155

2013

2012

–

2013

162

2012

155

In line with his contractual entitlements, Mr. C. J. Davies received termination payments equal to salary, pension and benefits from 1 March 2013. In addition
the Company has offered to provide limited support from a Non-Executive search agency, up to a total amount of £10,000. Such payments are included
in Mr. C. J. Davies’ single figure of remuneration, as detailed in the table on page 72.

IMPLEMENTATION OF REMUNERATION POLICY FOR 2014

BASE SALARY

The Committee approved the following salary increases from 1 January 2014. The average salary increase across each territory/business for 2014 is between 1.5% and 2.0%.

Executive Director

S. R. Mitchell

D. G. Robertson

PENSION AND BENEFITS

2014 salary
£

550,000

330,990

2013 salary
£

550,000

324,450

% change

nil

2.0

The Executive Directors will continue to receive pension contributions of 15% of salary and receive benefits in line with the policy.

ANNUAL BONUS

The maximum annual bonus opportunity for Executive Directors in 2014 will remain unchanged from the opportunity in 2013 and will be 100% of salary.

As in 2013, 2014 bonuses will be based 80% on underlying profit before tax and working capital improvement and 20% against personal and key operating
objectives. The Committee has determined that performance targets will not be disclosed on a prospective basis for reasons of commercial sensitivity, but will
be disclosed on a retrospective basis in due course when they are no longer considered commercially sensitive.

LTIP

In advance of each LTIP cycle, the Committee reviews the appropriateness of the performance measures and corresponding targets. Following a review of
performance measures and the calibration of targets, the Committee strengthened the EPS targets for 2014 awards and determined that 25% of the element
should vest for threshold EPS performance. No changes are proposed to the way that ROCE is measured.

Subject to Shareholder approval, a number of other changes will be introduced for LTIP awards from 2014. To encourage long-term decision-making and
further improve Shareholder alignment, the Committee will introduce a two year post-vesting holding period on vested LTIP awards for awards made in 2014
and in subsequent years. Unvested awards will be subject to clawback, i.e. forfeiture or reduction in exceptional circumstances (e.g. material misstatement or
gross misconduct). Dividend equivalents will be payable over the five year vesting and holding period in respect of the awards which vest.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverview

DIRECTORS’ REMUNERATION REPORT CONTINUED
ANNUAL REPORT ON REMUNERATION CONTINUED

IMPLEMENTATION OF REMUNERATION POLICY FOR 2014 CONTINUED

LTIP CONTINUED

When the Committee initially consulted with Shareholders on these changes, it advised that the performance range would be 9.0% to 13.0% for ROCE and
the cumulative equivalent of 8% to 22% p.a. growth for underlying EPS. In February 2014, the Group completed the sale of its German Roofing Business.
To ensure no reduction in the toughness of the ROCE performance targets under the 2014 LTIP as a result of this sale, the Committee has determined that
the threshold for ROCE should be increased from 9.0% to 9.2%, with the maximum ROCE unchanged at 13.0%. The 2014–2016 cumulative underlying
EPS performance targets will remain unchanged in relation to the sale.

Performance targets for awards to be made in 2014 are illustrated below:

ROCE element of the award (two-thirds)

EPS element of the award (one-third)

100%

g
n
i
t
s
e
v

100%

25%

g
n
i
t
s
e
v

Average ROCE 2014–2016

Cumulative underlying EPS 2014–2016

9.2%

13%

35p

45p

CHAIRMAN AND NON-EXECUTIVE DIRECTOR FEES

With effect from 1 May 2013, the fee payable to the Chairman of the Board is £162,500 p.a. and the basic fee payable to each Non-Executive Director
is £46,550 p.a. The fees payable for chairing the Audit and Remuneration Committees are £10,000 and £8,000 p.a. respectively. The additional fee paid
for being Senior Independent Director is £2,000 p.a. Non-Executive Director fees are reviewed in May each year.

PERCENTAGE CHANGE IN CHIEF EXECUTIVE REMUNERATION

The table below shows the percentage change in the Chief Executive’s remuneration from the prior year compared to the average percentage change in
remuneration for all other employees being the Senior Leadership team. To provide a meaningful comparison, the analysis includes only salaried employees
and is based on a consistent set of employees, i.e. the same individuals appear in the 2013 and 2012 populations.

Salary

Taxable benefits

Annual performance bonus (including deferred element)

Total

Chief Executive £000

20131

2012

% change

Other
employees
% change

550

333

904

549

296

864

0.2

10.5

12.5

4.6

4.0

4.3

11.4

5.6

1. Based on the sum of remuneration paid to Mr. C. J. Davies up to and including 28 February 2013 and to Mr. S. R. Mitchell from 1 March 2013.

RELATIVE IMPORTANCE OF SPEND ON PAY

The table below shows the percentage change in total employee pay expenditure and Shareholder distributions (i.e. dividends and share buybacks) from the
financial year ended 31 December 2012 to the financial year ended 31 December 2013.

Distribution to Shareholders

Employee remuneration

2013
£m

20.4

337.5

2012
£m

17.7

327.7

% change

15.3

3.0

The Directors are proposing a final dividend for the year ended 31 December 2013 of 2.4p per share (2012: 2.0p).

SIG plc Annual Report and Accounts 2013

PAY FOR PERFORMANCE

The graph below shows the Company’s Total Shareholder Return (“TSR”) performance (share price plus dividends paid) compared with the performance of the FTSE
All Share Support Services Index over the five year period to 31 December 2013. This index has been selected because the Company believes that the constituent
companies comprising the FTSE All Share Support Services Index are the most appropriate for this comparison as they are affected by similar commercial and
economic factors to SIG. The table below details the Chief Executive’s single figure of remuneration and actual variable pay outcomes over the same period.

HISTORICAL TSR PERFORMANCE

Growth in value of a hypothetical £100 holding over the five years to 31 December 2013.

SIG plc
FTSE All Share Support Services Index

8
0
0
2
r
e
b
m
e
c
e
D
1
3
t
a

d
e
t
s
e
v
n

0
0
1
£

o
e
u
a
V

300

250

200

150

100

31 Dec 08

31 Dec 09

31 Dec 10

31 Dec 11

31 Dec 12

31 Dec 13

S. R. Mitchell

Chief Executive single figure of remuneration (£000)

Annual bonus outcome (% of maximum)

LTIP vesting outcome (% of maximum)

C. J. Davies

Chief Executive single figure of remuneration (£000)

Annual bonus outcome (% of maximum)

LTIP vesting outcome (% of maximum)

2012

n/a

2012

1,024

54%

20131

987

60.5%

n/a

20132

1,031

50%

2009

1,354

45%

2010

1,087

59%

2011

1,065

96%

1. Mr. S. R. Mitchell was appointed to the Board on 10 December 2012 and became the Chief Executive on 1 March 2013. The figures shown in this table are taken from the

Total Single Figure of Remuneration table displayed earlier in the report and the 2013 figure pertains to the period 1 January 2013 to 31 December 2013.

2. The figures shown (as set out in the Total Single Figure of Remuneration table shown earlier in the report) pertains to the period 1 January 2013 to 31 December 2013

(includes remuneration in lieu of salary, pension and other benefits after 1 March 2013).

DIRECTORS’ INTERESTS IN SIG SHARES (AUDITED)

The interests of the Directors in office at 31 December 2013 and their families in the ordinary shares of the Company at the dates below were as follows:

31 December 2013

1 January 2013

J. E. Ashdown

M. Ewell

C. J. Davies (resigned 28 February 2013)

C. V. Geoghegan

J. C. Nicholls

S. R. Mitchell

D. G. Robertson

L. Van de Walle

21,700

8,600

n/a

40,000

14,220

164,545*

60,566*

30,000*

21,700

8,600

162,597

40,000

14,220

–

60,000

30,000

* Includes shares purchased under the SIG plc SIP.

There have been no changes to shareholdings between 1 January 2014 and 12 March 2014 save that on 15 January 2014 when Mr. S. R. Mitchell and Mr. D. G. Robertson
acquired a further 59 shares each under the SIG plc SIP, and on 15 February 2014 Mr. S. R. Mitchell acquired a further 60 shares and Mr. D. G. Robertson acquired a
further 61 shares under the SIG plc SIP.

None of the Directors had an interest in the shares of any subsidiary undertaking of the Company or in any significant contracts of the Group. Details
of Directors’ interests in shares and options under SIG long-term incentives are set out on page 78.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverview

DIRECTORS’ REMUNERATION REPORT CONTINUED
ANNUAL REPORT ON REMUNERATION CONTINUED

DIRECTORS’ SHAREHOLDING (AUDITED)

The table below shows the shareholding of each Director against their respective shareholding requirement as at 31 December 2013:

Shares held

Nil-cost options held

Owned
outright or
vested

164,545

60,566

21,700

8,600

40,000

14,220

30,000

S. R. Mitchell

D. G. Robertson

J. E. Ashdown

M. Ewell

C. V. Geoghegan

J. C. Nicholls

L. Van de Walle

Vested but
subject to
holding
period

Vested
but not
exercised

Unvested
and
subject to
performance
conditions

Unvested
and subject
to deferral

Shareholding
required (%
basic salary)

–

363,036

513,336

–

45,082

200

Requirement*
met

Current
shareholding/
potential
(% of basic
salary/basic
fee)

100

185

* Based on SIG share price of 211.6p as at 31 December 2013.

DIRECTORS’ INTERESTS IN SIG SHARE AND OPTION PLANS (AUDITED)

Date of grant

Share price

Number of
nil-cost
options
awarded

Face value
at grant
£

Performance period

Exercise period

LTIP

S. R. Mitchell

D. G. Robertson

C. J. Davies

Deferred Bonus Plan

S. R. Mitchell

D. G. Robertson

C. J. Davies

18/04/2013

26/04/2012

18/04/2013

26/04/2012

27/04/2011

07/06/2010*

18/04/2013

30/03/2012

18/04/2013

30/03/2012

18/04/2013

30/03/2012

151.5p

105.3p

151.5p

105.3p

140.6p

110.0p

n/a

149.95p

117.95p

149.95p

117.95p

363,036

299,145

214,191

521,235

379,000

463,772

–

36,409

8,673

65,880

–

54,594

10,230

98,785

144,425

170,350

550,000

18/04/2013 – 17/04/2016

18/04/2016 – 17/04/2023

315,000

26/04/2012 – 25/04/2015

26/04/2015 – 25/04/2022

324,500

18/04/2013 – 17/04/2016

18/04/2016 – 17/04/2023

548,860

26/04/2012 – 25/04/2015

26/04/2015 – 25/04/2022

532,874

27/04/2011 – 26/04/2014

27/04/2014 – 26/04/2021

510,149

07/06/2010 – 06/06/2013

07/06/2013 – 06/06/2020

n/a

18/04/2016 – 17/04/2023

30/03/2015 – 29/03/2022

18/04/2016 – 17/04/2023

30/03/2015 – 29/03/2022

18/04/2016 – 17/04/2023

30/03/2015 – 29/03/2022

* The LTIP awarded to Mr C. J. Davies on 7 June 2010 lapsed during the year based on performance to 31 December 2012.

Under the SIG Share Incentive Plan (“SIP”), the Company provides one matching share for each share purchased by the employee, up to a maximum
of four matching shares per month. Mr. S. R. Mitchell, Mr. D. G. Robertson and Mr. C. J. Davies all participated in the SIP in 2013.

The market price of the shares at 31 December 2013 was 211.6p and the range during 2013 was 122.4p to 216.3p.

There were no options exercised by the Directors in 2013 (2012: nil) and the aggregate of the total theoretical gains on options exercised by the Directors during
2013 amounted to £nil (2012: £nil). This is calculated by reference to the difference between the closing mid-market price of the shares on the date of exercise
and the exercise price of the options, disregarding whether such shares were sold or retained on exercise, and is stated before tax.

SIG plc Annual Report and Accounts 2013DIRECTORS’ PENSIONS (AUDITED)

Mr C. J. Davies was a member of the Company’s registered defined benefit scheme.

Mr C. J. Davies retired from the registered defined benefit scheme on 8 December 2010. At that date, Mr C. J. Davies took a pension of £67,500 per annum
and a cash sum of £450,000. Mr C. J. Davies took the option of an increased initial pension in exchange for lower pension increases.

Mr C. J. Davies stopped accruing pension in the registered defined benefit scheme from 1 January 2009 and began accruing benefits in the defined benefit
unfunded EFRBS (unregistered). Under the defined benefit unfunded EFRBS (unregistered), as at 28 February 2014, Mr C. J. Davies took a pension
of £91,011 per annum, converted to a net cash amount of £1,068,890.

APPROVAL OF THE DIRECTORS’ REMUNERATION REPORT

The Directors’ Remuneration Report (comprising pages 63 to 79) was approved by a duly authorised Committee of the Board of Directors on
12 March 2014 and signed on its behalf by Chris Geoghegan, the Chairman of the Remuneration Committee.

CHRIS GEOGHEGAN
Chairman, Remuneration Committee
12 March 2014

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewNOMINATIONS COMMITTEE

L. VAN DE WALLE
NOMINATIONS COMMITTEE CHAIRMAN

PURPOSE AND AIM

The Nominations Committee’s (“the Committee”) principal duty is the
nomination of suitable candidates for the approval of the Board to fill
Executive and Non-Executive vacancies on the Board. Members of
the Committee are not involved in matters affecting their own positions.

MEETINGS AND MEMBERSHIP

The Committee meets as appropriate but at least once a year.
During the year the Committee met on two occasions. A quorum
is four members, at least two of whom shall be independent
Non-Executive Directors. The Committee operates under written
Terms of Reference, which are consistent with current best practice
and are available on the Company’s website at www.sigplc.com.

As at 31 December 2013, the Committee comprised the Chairman,
Chief Executive and the Independent Non-Executive Directors.
The Chairman is Mr. L. Van de Walle and the other members
are Mr. C. V. Geoghegan, Ms. J. E. Ashdown, Mr. M. Ewell,
Mr. J. C. Nicholls and Mr. S. R. Mitchell. Mr. S. R. Mitchell was
appointed a member of the Committee on his appointment as
Chief Executive on 1 March 2013 succeeding Mr. C. J. Davies who
ceased to be a member of the Committee on 28 February 2013.

RESPONSIBILITIES AND ACTIVITIES DURING
THE YEAR

The Committee reviews the structure, size, diversity and
composition of the Board and makes recommendations
concerning the re-appointment of any Non-Executive Director
at the conclusion of their specified term of office and in the
identification and nomination of new Directors. During the year,
the Committee (in recognising the impact of the Davies Report)
ensured that skills, experience, potential and overall balance of the
Board, as well as diversity including gender, were fully considered
in relation to the Board appointments made during the year. The
Committee retains external search and selection consultants as
appropriate. The Committee also advises the Board on succession
planning for Executive Board appointments although the Board itself
is responsible for succession generally. All appointments to the Board
will continue to be made on merit, however, differences in background,
skills, experience and other qualities as well as gender will be
considered in determining the optimum composition of the Board,
with the aim to balance them appropriately.

In general terms, when considering candidates for appointment as Directors
of the Company, the Committee, in conjunction with the Board, drafts a
detailed job specification and candidate profile. In drafting this, consideration
would be given to the existing experience, knowledge and background of
Board members as well as the strategic and business objectives of the Group.
Once a detailed specification has been agreed with the Board, the Committee
would then work with an appropriate external search and selection agency
to identify candidates of the appropriate calibre and with whom an initial
candidate short list could be agreed. The agency is required to present for
consideration by the Committee a long list of potential candidates considered
to meet the essential criteria for the role which fully reflects the benefits of
diversity. The policy on Board diversity is available on the Company’s website
at www.sigplc.com. The drawing up of this list is entirely consistent
between external and internal candidates. Shortlisted candidates would
then be invited to interview with members of the Committee and, if
recommended by the Committee, would be invited to meet the entire
Board before any decision is taken relating to the appointment. This process
was followed in respect of the appointment of Mr. S. R. Mitchell as Group
Chief Executive.

Following the appointment of a new Director, the Chairman, in conjunction
with the Company Secretary, is responsible for ensuring that a full, formal and
tailored induction to the Company is given. Such an induction programme
was operated for Mr. S. R. Mitchell.

The Board utilises executive search consultants in the selection process for
Non-Executive Directors in reviewing candidates with a variety of backgrounds
and perspectives. The consultants are required to work to a specification that
includes the strong desirability of producing a full list of candidates who meet
the essential criteria, whilst reflecting the benefits of diversity. The Board will
only engage such consultants who are signed up to the voluntary code of
conduct on gender diversity on corporate boards.

As has been reported in the Corporate Governance Report on page 50,
the SIG Board discussed in December the matter of women on Boards and
set out the aim of achieving at least 25% female representation among the
Board’s membership by 2015. As at 31 December 2013, this percentage
is 14%. In reviewing Board composition and in agreeing criteria for new
Director appointments, the Committee is committed to seeking Directors
with the right skillset and gender balance in line with the 25% aspiration.

As part of corporate governance the Committee reviews its own
performance annually and considers where improvements can be made.
The Committee reviewed its own performance in December 2013 and
the results of this review were reported to the Board.

The proposed activities for the Committee in 2014 will be to continue
to monitor and assess the Board’s composition and diversity,
longer-term succession planning and potential further recruitment
of Non-Executive Directors.

LESLIE VAN DE WALLE
Chairman, Nominations Committee
12 March 2014

SIG plc Annual Report and Accounts 2013DIRECTORS’ RESPONSIBILITY STATEMENT

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the Group
financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union and Article 4 of the IAS
Regulation and have elected to prepare the Parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the Accounts unless they are satisfied that
they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing the Parent Company financial statements, the Directors are required to:

e select suitable accounting policies and then apply them consistently;

e make judgments and accounting estimates that are reasonable and prudent;

e state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial

statements; and

e prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

In preparing the Group financial statements, International Accounting Standard 1 requires that Directors:

e properly select and apply accounting policies;

e present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

e provide additional disclosures when compliance with the specific requirements in IFRS are insufficient to enable users to understand the impact

of particular transactions, other events and conditions on the entity’s financial position and financial performance; and

e make an assessment of the Company’s ability to continue as a going concern.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose
with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the
Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation
in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

DIRECTORS’ RESPONSIBILITY STATEMENT

We confirm that to the best of our knowledge:

e the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities,

financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;

e the Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings

included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

e the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for

Shareholders to assess the Company’s performance, business model and strategy.

STUART MITCHELL
Director
12 March 2014

DOUG ROBERTSON
Director
12 March 2014

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewGROUP ACCOUNTS
PREPARED IN ACCORDANCE WITH IFRS

SIG plc Annual Report and Accounts 2013CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2013

Revenue
Cost of sales

Gross profit
Other operating expenses

Operating profit
Finance income
Finance costs

Profit before tax and share of loss of associate
Share of loss of associate

Profit before tax
Income tax expense

(Loss)/profit after tax

Attributable to:
Equity holders of the Company
Non-controlling interest

Earnings per share
Basic (loss)/earnings per share
Diluted (loss)/earnings per share

Note

1
2

4
3
3

Before
other
items*
2013
£m

2,582.4
(1,900.6)

681.8
(582.3)

99.5
1.4
(12.7)

88.2
(0.1)

88.1
(26.1)

62.0

61.3
0.7

Other
items*
2013
£m

137.4
(110.0)

27.4
(111.5)

(84.1)
0.2
(2.1)

(86.0)
–

(86.0)
9.7

(76.3)

(76.3)
–

Before
other
items*
2012
£m

Total
2013
£m

Other
items*
2012
£m

Total
2012
£m

2,719.8
(2,010.6)

2,473.9
(1,819.9)

161.6
(129.3)

2,635.5
(1,949.2)

709.2
(693.8)

654.0
(557.9)

15.4
1.6
(14.8)

2.2
(0.1)

2.1
(16.4)

(14.3)

(15.0)
0.7

96.1
1.5
(13.6)

84.0
(0.3)

83.7
(26.1)

57.6

57.3
0.3

9.7p
9.7p

32.3
(70.5)

(38.2)
0.4
(2.2)

(40.0)
–

(40.0)
9.0

(31.0)

(31.0)
–

(5.2p)
(5.2p)

686.3
(628.4)

57.9
1.9
(15.8)

44.0
(0.3)

43.7
(17.1)

26.6

26.3
0.3

4.5p
4.5p

8
8

10.4p
10.4p

(12.9p)
(12.9p)

(2.5p)
(2.5p)

* “ Other items” relate to the amortisation of acquired intangibles, net restructuring costs, other one-off items, loss arising on the sale or agreed sale of businesses and associated
impairment charges, trading profits and losses associated with disposed businesses, other impairment charges, fair value gains and losses on derivative financial instruments, the
defined benefit pension scheme curtailment gain, the taxation effect of “Other items” and the effect of changes in taxation rates. “Other items” have been disclosed separately in
order to give an indication of the underlying earnings of the Group. Further details can be found in Note 2 and within the Statement of Significant Accounting Policies on page 89.

The accompanying Statement of Significant Accounting Policies and Notes to the Accounts are an integral part of this Consolidated Income Statement.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverview

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2013

(Loss)/profit after tax

Items that will not subsequently be reclassified to the Consolidated Income Statement:
Remeasurement of defined benefit pension liability
Deferred tax movement associated with remeasurement of defined benefit pension liability
Effect of change in rate on deferred tax

Items that may subsequently be reclassified to the Consolidated Income Statement:
Exchange difference on retranslation of foreign currency goodwill and intangibles
Exchange difference on retranslation of foreign currency net investments (excluding goodwill and intangibles)
Exchange and fair value movements associated with borrowings and derivative financial instruments
Tax credit/(charge) on exchange and fair value movements arising on borrowings and derivative financial instruments
Gains and losses on cash flow hedges
Transfer to profit and loss on cash flow hedges

Other comprehensive income/(expense)

Total comprehensive income

Attributable to:
Equity holders of the Company
Non-controlling interests

Note

30c
24
24

2013
£m

(14.3)

8.3
(2.0)
(0.9)

5.4

6.6
4.7
(1.9)
0.4
(0.4)
2.1

11.5

16.9

2.6

1.9
0.7

2.6

2012
£m

26.6

(0.2)
0.2
(0.8)

(0.8)

(6.2)
(5.2)
4.0
(1.0)
(2.7)
2.2

(8.9)

(9.7)

16.9

16.6
0.3

16.9

The accompanying Statement of Significant Accounting Policies and Notes to the Accounts are an integral part of this Consolidated Statement
of Comprehensive Income.

SIG plc Annual Report and Accounts 2013CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2013

Non-current assets
Property, plant and equipment
Interest in associate
Goodwill
Intangible assets
Deferred tax assets
Derivative financial instruments

Current assets
Inventories
Trade and other receivables
Assets held for sale
Derivative financial instruments
Associate loan and deferred consideration
Cash and cash equivalents

Total assets

Current liabilities
Trade and other payables
Liabilities held for sale
Obligations under finance lease contracts
Bank overdrafts
Bank loans
Private placement notes
Derivative financial instruments
Current tax liabilities
Provisions

Non-current liabilities
Obligations under finance lease contracts
Bank loans
Private placement notes
Derivative financial instruments
Deferred tax liabilities
Other payables
Retirement benefit obligations
Provisions

Total liabilities

Net assets

Capital and reserves
Called up share capital
Share premium account
Capital redemption reserve
Share option reserve
Hedging and translation reserve
Retained profits

Attributable to equity holders of the Company

Non-controlling interests

Total equity

Note

2013
£m

2012
£m

10
11
13
14
24
20

16
17
17
17
17

18
18
18
18
18
18
18
18
18

19
19
19
19
19
19
19
19

135.6
–
417.6
49.3
22.2
29.7

654.4

220.4
391.9
9.1
–
–
118.7

740.1

134.2
0.8
428.7
54.4
29.0
37.4

684.5

224.0
373.3
–
6.2
2.7
128.1

734.3

1,394.5

1,418.8

346.3
1.9
2.7
4.9
0.3
–
0.1
5.3
9.5

371.0

7.1
–
252.5
2.0
14.7
4.3
25.5
24.3

330.4

701.4

693.1

59.1
447.2
0.3
1.1
12.6
172.2

692.5

0.6

693.1

333.0
–
2.2
4.1
1.3
81.8
5.8
4.4
9.3

441.9

5.4
0.1
174.2
4.8
17.3
3.0
34.4
28.9

268.1

710.0

708.8

59.1
447.0
0.3
0.9
2.8
197.7

707.8

1.0

708.8

The accompanying Statement of Significant Accounting Policies and Notes to the Accounts are an integral part of this Consolidated Balance Sheet.

The Accounts were approved by the Board of Directors on 12 March 2014 and signed on its behalf by:

STUART MITCHELL
Director

DOUG ROBERTSON
Director

Registered in England: 998314

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewCONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2013

Net cash flow from operating activities
Net cash generated from operating activities
Finance costs paid
Finance income received
Income tax paid

Net cash generated from operating activities

Cash flows from investing activities
Purchase of property, plant and equipment and computer software
Proceeds from sale of property, plant and equipment
Net proceeds from sale of businesses
Settlement of amounts payable for purchase of businesses

Net cash used in investing activities

Cash flows from financing activities
Capital element of finance lease rental payments
Issue of share capital
Repayment of loans/settlement of derivative financial instruments
New loans
Dividends paid to equity holders of the Company
Dividends paid to non-controlling interest

Net cash used in financing activities

(Decrease)/increase in cash and cash equivalents in the year

Cash and cash equivalents at beginning of the year
Effect of foreign exchange rate changes

Cash and cash equivalents at end of the year

Note

12
15

29
29

2013
£m

86.2
(12.0)
1.4
(15.7)

59.9

(37.9)
4.8
(0.1)
(14.9)

(48.1)

(3.3)
0.2
(87.3)
85.6
(18.6)
(0.3)

(23.7)

(11.9)

124.0
1.7

113.8

2012
£m

88.7
(13.3)
1.5
(19.4)

57.5

(29.7)
4.1
1.2
(12.7)

(37.1)

(2.1)
–
(1.2)
–
(14.8)
(0.3)

(18.4)

2.0

122.9
(0.9)

124.0

The accompanying Statement of Significant Accounting Policies and Notes to the Accounts are an integral part of this Consolidated Cash Flow Statement.

SIG plc Annual Report and Accounts 2013CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2013

Called up
share
capital
£m

Share
premium
account
£m

Capital
redemption
reserve
£m

Share
option
reserve
£m

Hedging and
translation
reserve
£m

At 31 December 2011
Profit after tax
Other comprehensive income/(expense)

Total comprehensive income/(expense)
Debit to share option reserve
Current and deferred tax on share options
Dividends paid to non-controlling interests
Dividends paid to equity holders of the Company

59.1
–
–

447.0
–
–

–
–
–
–
–

0.3
–
–

–
–
–
–
–

At 31 December 2012

59.1

447.0

0.3

Loss after tax
Other comprehensive income/(expense)

Total comprehensive income/(expense)
Share capital issued in the year
Credit to share option reserve
Exercise of share options
Current and deferred tax on share options
Adjustments arising from changes in
non-controlling interests
Dividend paid to non-controlling interest
Dividends paid to equity holders of the Company

–
–

–
–
–
–
–

–
–
–

–
–

–
0.2
–
–
–

–
–
–

–
–

–
–
–
–
–

–
–
–

1.2
–
–

–
(0.3)
–
–
–

0.9

–
–

–
–
0.3
(0.1)
–

–
–
–

11.2
–
(8.4)

(8.4)
–
–
–
–

2.8

–
9.8

9.8
–
–
–
–

–
–
–

Retained
profits
£m

187.7
26.3
(1.3)

25.0
–
(0.2)
–
(14.8)

Total
£m

706.5
26.3
(9.7)

16.6
(0.3)
(0.2)
–
(14.8)

197.7

707.8

(15.0)
7.1

(15.0)
16.9

(7.9)
–
–
0.1
0.1

0.8
–
(18.6)

1.9
0.2
0.3
–
0.1

0.8
–
(18.6)

At 31 December 2013

59.1

447.2

0.3

1.1

12.6

172.2

692.5

Non-
controlling
interests
£m

Total equity
£m

1.0
0.3
–

0.3
–
–
(0.3)
–

1.0

0.7
–

0.7
–
–
–
–

(0.8)
(0.3)
–

0.6

707.5
26.6
(9.7)

16.9
(0.3)
(0.2)
(0.3)
(14.8)

708.8

(14.3)
16.9

2.6
0.2
0.3
–
0.1

–
(0.3)
(18.6)

693.1

The share option reserve represents the cumulative share option charge under IFRS 2 less the value of any share options that have been exercised.

The hedging and translation reserve represents movements in the Consolidated Balance Sheet as a result of movements in exchange rates which are taken directly
to reserves as detailed in the Statement of Significant Accounting Policies on page 91.

The accompanying Statement of Significant Accounting Policies and Notes to the Accounts are an integral part of this Consolidated Statement of Changes in Equity.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewSTATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies adopted in this Annual Report and Accounts for the year ended 31 December 2013 are set out below.

BASIS OF PREPARATION
The Accounts have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”),
and therefore the Group Accounts comply with Article 4 of the EU IAS Regulation.

The Accounts have been prepared under the historical cost convention except for derivative financial instruments which are stated at their fair value.

The Accounts have been prepared on a going concern basis as set out on page 37.

The following standards became effective or were amended in the current period:

X IAS 1 (amended) “Presentation of Financial Statements”;

X IAS 19 (revised) “Employee Benefits”;

X IAS 27 (revised) “Separate Financial Statements”;

X IAS 28 (revised) “Investments in Associates and Joint Ventures”;

X IFRS 10 “Consolidated Financial Statements”;

X IFRS 11 “Joint Arrangements”;

X IFRS 12 “Disclosure of Interests in Other Entities”; and

X IFRS 13 “Fair Value Measurement”.

The disclosures as a result of the changes arising from the above standards are not considered to be material by the Directors except as follows:

X IAS 19 (revised) – calculating and treating interest costs on the defined benefit pension scheme on a net basis. This has caused both finance income and

finance costs to be reduced by £5.3m in the year ended 31 December 2013;

X IFRS 13 – additional disclosure of fair values of financial instruments; and

X IAS 1 (amended) – revised presentation of the Consolidated Statement of Comprehensive Income.

At the date of authorisation of these Accounts, the following significant standards and interpretations, which have not been applied in these Accounts, were
in issue but not yet effective (and in some cases have not yet been adopted by the EU):

X IFRS 9 “Financial Instruments” – effective for accounting periods beginning on or after 1 January 2015;

X IAS 27 (amended) “Separate Financial Statements”;

X IAS 36 (amended) “Impairment of Assets” – effective for accounting periods beginning on or after 1 January 2014;

X IAS 39 (amended) “Financial Instruments: Recognition and Measurement” – effective for accounting periods beginning on or after 1 January 2014; and

X IFRIC Interpretation 21 – effective for accounting periods beginning on or after 1 January 2014.

The Directors do not expect that the adoption of the standards and interpretations listed above will have a material impact on the financial statements of the
Group in future periods, except that IFRS 9 will impact upon both the measurement and disclosures of financial instruments.

Beyond the information above, it is not practicable to provide a reasonable estimate of the effect of these standards until a detailed review has been completed.

BASIS OF CONSOLIDATION
The Consolidated Accounts incorporate the Accounts of the Company and each of its subsidiary undertakings after eliminating all significant inter-company
transactions and balances. The results of subsidiary undertakings acquired or sold are consolidated for the periods from or to the date on which control passed.

Non-controlling interests in the net assets of consolidated subsidiaries are identified separately therein. Non-controlling interests consist of the amount of those
interests at the date of the original business combination and the non-controlling interest’s share of changes in equity since the date of the combination. Losses
attributable to the non-controlling interest in excess of their interest in the subsidiary’s equity are allocated against the interest of SIG except to the extent that
the non-controlling interest has a binding obligation and is able to make an additional investment to cover the losses.

Changes in the Group’s interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amount of the Group’s interests
and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the
non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the Company.

Profit and loss on disposal is calculated as the difference between the aggregate of the fair value of the consideration received and the previous carrying
amount of the net assets (including goodwill and intangible assets) of the businesses.

All results are from continuing operations under IFRS as the businesses disposed of in 2013 and 2012 did not meet the disclosure criteria of IFRS 5
“Non-Current Assets Held for Sale and Discontinued Operations” as they did not represent a separate major line of business or geographical area
of operation. In order to give an indication of the underlying earnings of the Group the results of these businesses have been included in the column
of the Consolidated Income Statement entitled “Other items”.

SIG plc Annual Report and Accounts 2013CONSOLIDATED INCOME STATEMENT DISCLOSURE
In order to give an indication of the underlying earnings of the Group, certain items are presented in the column of the Consolidated Income Statement
entitled “Other items”. These include:

X amortisation of acquired intangibles;

X net restructuring costs;

X other one-off items;

X loss arising on the sale or agreed sale of businesses and associated impairment charges;

X trading profits and losses associated with disposed businesses;

X other impairment charges;

X fair value gains and losses on derivative financial instruments;

X the defined benefit pension scheme curtailment gain;

X the taxation effect of “Other items”; and

X the effect of the change in taxation rates.

The prior year comparatives have been re-analysed to present the results of the businesses divested in 2013 within “Other items”.

GOODWILL AND BUSINESS COMBINATIONS
All business combinations are accounted for by applying the purchase method.

Goodwill arising on consolidation represents the excess of the cost of the acquisition over the Group’s interest in the fair value of identifiable assets (including
intangible assets) and liabilities of the business acquired.

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is not amortised but is tested annually for impairment, or more frequently when
there is an indication that goodwill may be impaired. For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units
(“CGUs”) expected to benefit from the synergies of the combination. If the recoverable amount of the CGU is less than the carrying amount of the unit, the
impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the
basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

On disposal of a subsidiary, the attributable amount of remaining goodwill relating to the entity disposed of is included in the determination of any profit or loss on disposal.

Goodwill recorded in foreign currencies is retranslated at each period end. Any movements in the carrying value of goodwill as a result of foreign exchange
rate movements are recognised in the Consolidated Statement of Comprehensive Income.

Any excess of the fair value of net assets over consideration arising on an acquisition is recognised immediately in the Consolidated Income Statement.

INTANGIBLE ASSETS
The Group recognises intangible assets at cost less accumulated amortisation and impairment losses. The Group recognises two types of intangible asset:
acquired and purchased. Acquired intangible assets arise as a result of applying IFRS 3 which requires the separate recognition of intangible assets from
goodwill on all business combinations. Purchased intangible assets relate primarily to software that is separable from any associated hardware.

Intangible assets are amortised on a straight line basis over their useful economic lives as follows:

Asset

Customer relationships
Non-compete contracts
Computer software

Amortisation period

Life of the relationship
Life of the contract
Useful life of the software

Customer relationship assets and non-compete contracts have an average useful economic life of 7.4 years and 3.0 years respectively.

At 31 December 2012 the Group transferred amounts relating to computer software out of property, plant and equipment and into intangible assets.

Assets in the course of construction are carried at cost, with amortisation commencing once the assets are ready for their intended use.

INTEREST IN ASSOCIATE
An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence
is the power to participate in the financial and operating policy decisions of the investee but does not have control or joint control over those policies.

Investments in associate businesses are recognised initially at cost, less impairment charges. The Group then applies the equity method to investments in
associates, whereby the interest is carried in the Consolidated Balance Sheet at cost as adjusted for post-acquisition changes in the Group’s share of the net
assets of the associate, less any impairment in the value of individual investments. Losses in excess of the Group’s interest in the associate are recognised only
to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

REVENUE RECOGNITION
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the
normal course of business, net of discounts and other allowances, VAT and other sales-related taxes. Revenue from the sale of goods is recognised when the
goods have been received by the customer.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewSTATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED

BORROWING COSTS
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period
of time to get ready for their intended use or sale, are added to the cost of those assets, until such a time as the assets are substantially ready for their intended
use or sale. All other borrowing costs are recognised in the Consolidated Income Statement in the period in which they are incurred.

PENSION COSTS
SIG operates five defined benefit pension schemes. The Group’s net obligation in respect of these defined benefit pension schemes is calculated separately
for each plan by estimating the amount of future benefit that employees have earned in return for their service in both current and prior periods. That benefit
is discounted using an appropriate discount rate to determine its present value and the fair value of any plan assets is deducted.

Where the benefits of the plan are improved, the portion of the increased benefit relating to past service by employees is recognised as an expense in the
Consolidated Income Statement, on a straight line basis, over the average period until the benefits become vested. To the extent that the benefits vest immediately,
the expense is recognised immediately.

The full service cost of the pension schemes is charged to operating profit. Net finance costs on defined benefit pension schemes are recognised in the
Consolidated Income Statement.

Any actuarial gain or loss arising is charged through the Consolidated Statement of Comprehensive Income and is made up of changes in the expected return
on assets and those actually achieved, the difference between the actuarial assumptions for demographics and any changes in the financial assumptions used
in the valuations.

The pension scheme deficit is recognised in full and presented on the face of the Consolidated Balance Sheet. The associated deferred tax asset is recognised
within non-current assets in the Consolidated Balance Sheet.

For defined contribution schemes the amount charged to the Consolidated Income Statement in respect of pension costs and other post-retirement benefits
is the contributions payable in the year. Differences between contributions payable in the year and contributions actually paid are included within either
accruals or prepayments in the Consolidated Balance Sheet.

SHARE-BASED PAYMENT TRANSACTIONS
The Group issues both equity-settled and cash-settled share-based payments (“share options”). Share options are measured at fair value at the date of grant
based on the Group’s estimate of the number of shares that will eventually vest. The fair value determined is then expensed in the Consolidated Income
Statement on a straight line basis over the vesting period, with a corresponding increase in equity (equity-settled share options) or in liabilities (cash-settled
share options). The fair value of the options is measured using the Black-Scholes option pricing model.

The amount recognised as an expense is adjusted to reflect the actual number of share options that vest except where forfeiture is only due to share prices
not achieving the threshold for vesting.

At each balance sheet date the Group revises its estimate of the number of share options expected to vest as a result of the effect of non market-based vesting
conditions. The impact of the revision of the original estimates, if any, is recognised in the Consolidated Income Statement such that the cumulative expense
reflects the revised estimate, with a corresponding adjustment to equity reserves.

Save As You Earn share options granted to employees are treated as cancelled when employees cease to contribute to the scheme. This results in accelerated
recognition of the expense that would have arisen over the remainder of the original vesting period.

For cash-settled share-based payments, a liability is recognised for the goods or services acquired, measured initially at the fair value of the liability. At each
balance sheet date until the liability is settled, and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair value recognised
in the Consolidated Income Statement.

CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less.

Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash
equivalents for the purposes of the Consolidated Cash Flow Statement.

FINANCIAL ASSETS
Financial assets are measured initially at fair value and then subsequently at amortised cost using the effective interest rate method.

Financial assets (including trade receivables) are assessed for indicators of impairment on an ongoing basis. Financial assets are impaired where there is
objective evidence that as a result of one or more events that occurred after the initial recognition of the financial asset the estimated future cash flows have
been negatively impacted. When there is objective evidence of impairment, appropriate allowances are made for estimated irrecoverable amounts based
upon expected future cash flows discounted by an appropriate interest rate where applicable. The carrying amount of the financial asset is reduced by the
impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance
account. When a trade receivable is uncollectible it is written off against the allowance account. Subsequent recoveries of amounts previously written off are
credited to the Consolidated Income Statement.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment
was recognised, the previously recognised impairment loss is reversed through the Consolidated Income Statement to the extent that the carrying amount of
the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Other financial assets are classified as either financial assets at fair value through profit or loss or loans and receivables. The classification depends on the nature
and purpose of the financial asset and is determined at the time of initial recognition.

When determining the fair value of financial assets, the expected future cash flows are discounted using an appropriate interest rate.

SIG plc Annual Report and Accounts 2013FINANCIAL LIABILITIES
Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities.

Financial liabilities at fair value through profit or loss are initially measured and subsequently stated at fair value, with any resultant gain or loss recognised in the
Consolidated Income Statement. The net gain or loss recognised in the Consolidated Income Statement incorporates any interest paid on the financial liability.

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

Other financial liabilities (including trade and other payables) are initially measured at fair value, net of transaction costs, and are subsequently measured at
amortised cost using the effective interest rate method.

When determining the fair value of financial liabilities, the expected future cash flows are discounted using an appropriate interest rate.

FOREIGN CURRENCY
Transactions denominated in foreign currencies are recorded in the local currency and converted at actual exchange rates at the date of the transaction.

Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss in the Consolidated
Income Statement.

At each balance sheet date, monetary assets and liabilities denominated in foreign currencies are reported at the rates of exchange prevailing at that date.

For the purpose of consolidation, income statements of overseas subsidiary undertakings are translated at the average rate for the year and their balance
sheets at the rates ruling at the balance sheet date.

Exchange differences arising on translation of the opening net assets and results of overseas operations and on foreign currency borrowings, to the extent that
they hedge the Group’s investment in such operations, are reported in the Consolidated Statement of Comprehensive Income.

DERIVATIVE FINANCIAL INSTRUMENTS
The Group uses derivative financial instruments including interest rate swaps, forward foreign exchange contracts and cross-currency swaps to hedge its exposure to
foreign currency exchange and interest rate risks arising from operational and financial activities. In accordance with its Treasury Policy, the Group does not hold or issue
derivative financial instruments for trading purposes. However, derivative financial instruments, or any parts thereof, that do not qualify for hedge accounting are accounted
for as trading instruments. The fair values of derivatives are classified as a non-current asset or a non-current liability if the remaining maturity of the derivatives is more
than twelve months and they are not expected to be realised or settled within twelve months. Other derivatives are presented as current assets or current liabilities.

Derivative financial instruments are recognised immediately at cost. Subsequent to their initial recognition, derivative financial instruments are then stated
at their fair value. The fair value of derivative financial instruments is derived from “mark-to-market” valuations obtained from the Group’s relationship banks
and adjusted for credit risk.

Unless hedge accounting is achieved, the gain or loss on remeasurement to fair value is recognised immediately and is included as part of finance income or finance
costs together with other fair value gains and losses on derivative financial instruments within the column of the Consolidated Income Statement entitled “Other items”.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, exercised, no longer qualifies for hedge accounting, or when
the Group revokes the hedging relationship. At that time, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until
the forecast transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to the
Consolidated Income Statement in the period.

At the inception of the hedge relationship the Group documents the relationship between the hedging instrument and the hedged item, along with its risk management
objectives and its strategy for undertaking various hedging transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents
whether the hedging instruments that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of the hedged items.

CASH FLOW HEDGES
When a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable forecast
transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in the Consolidated Statement of Comprehensive
Income (i.e. equity). When the forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability, the associated
cumulative gain or loss is removed from equity and included in the initial cost or other carrying amount of the non-financial asset or liability. If a hedge of a
forecast transaction subsequently results in the recognition of a financial asset or financial liability, the associated gains or losses that were previously recognised
in the Consolidated Statement of Comprehensive Income are reclassified into the Consolidated Income Statement in the same period or periods during
which the asset acquired or liability assumed affects the Consolidated Income Statement.

For cash flow hedges, the ineffective portion of any gain or loss is recognised immediately as fair value gains or losses on derivative financial instruments and
is included as part of finance income or finance costs within the column of the Consolidated Income Statement entitled “Other items”.

HEDGE OF NET INVESTMENT IN FOREIGN OPERATIONS
The portion of any gain or loss on an instrument used to hedge a net investment in a foreign operation that is determined to be an effective hedge is recognised in the
Consolidated Statement of Comprehensive Income. The ineffective portion of any gain or loss is recognised immediately as fair value gains or losses on derivative financial
instruments and is included as part of finance income or finance costs within the column of the Consolidated Income Statement entitled “Other items”. Gains and losses
deferred in the hedging and translation reserve are recognised immediately in the Consolidated Income Statement when the foreign operation is disposed of.

FAIR VALUE HEDGES
For an effective hedge of an exposure to changes in fair value, the hedged item is adjusted for changes in fair value attributable to the risk being hedged with
the corresponding entry in the Consolidated Income Statement within “Other items”. Fair value gains or losses from remeasuring the derivative financial
instruments are recognised immediately in the Consolidated Income Statement within “Other items”.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewSTATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED

TAXATION
Income tax on the profit or loss for the periods presented comprises both current and deferred tax. Income tax is recognised in the Consolidated
Income Statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in the Consolidated Statement
of Comprehensive Income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates that have been enacted by the balance sheet date, and any
adjustment to tax payable in respect of previous years.

Deferred tax is provided using the balance sheet liability method, providing for all temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation purposes.

In accordance with IAS 12, the following temporary differences are not provided for:

X goodwill not deductible for taxation purposes;

X the initial recognition of assets or liabilities that affect neither accounting nor taxable profit; and

X differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax
rates enacted or substantively enacted by the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.
Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is shown at original cost to the Group less accumulated depreciation and any provision for impairment.

Depreciation is provided at rates calculated to write off the cost less the estimated residual value of property, plant and equipment on a straight line basis over
their estimated useful lives as follows:

Freehold buildings

Leasehold buildings

– 50 years

– period of lease

Plant and machinery (including motor vehicles) – 3 to 8 years

Freehold land is not depreciated.

Residual values, which are based on market rates, are reassessed annually.

Assets in the course of construction are carried at cost, with depreciation charged on the same basis as all other assets once those assets are ready for their
intended use.

INVENTORIES
Inventories are stated at the lower of cost (including an appropriate proportion of attributable overheads, supplier rebates and discounts) and net realisable
value. The cost formula used in measuring inventories is either a weighted average cost, or a First In First Out basis, depending on the most appropriate
method for each particular business.

Net realisable value is based on estimated normal selling price, less further costs expected to be incurred up to completion and disposal. Provision is made
for obsolete, slow moving or defective items where appropriate.

LEASES AND HIRE PURCHASE AGREEMENTS
The cost of assets held under finance leases and hire purchase agreements is capitalised with an equivalent liability categorised as appropriate under current
liabilities or non-current liabilities. The asset is depreciated over the shorter of the lease term or its useful life.

Rentals under finance leases and hire purchase agreements are apportioned between finance costs and reduction of the lease obligation so as to achieve
a constant rate of interest on the remaining balance of the liability. The finance costs are charged in arriving at profit before tax.

Rentals under operating leases are charged to the Consolidated Income Statement on a straight line basis over the lease term.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives
is recognised as a reduction of rental expense on a straight line basis over the lease term.

PROPERTY PROVISIONS
The Group makes provisions in respect of onerous leasehold property contracts and leasehold dilapidation commitments where it is probable that a transfer
of economic benefit will be required to settle a present obligation. The amount recognised as a provision is the best estimate of the consideration required
to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation.

DIVIDENDS
Dividends proposed by the Board of Directors that have not been paid by the end of the year are not recognised in the Accounts until they have been
approved by the Shareholders at the Annual General Meeting.

SIG plc Annual Report and Accounts 2013CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES
OF ESTIMATION UNCERTAINTY

The following are the critical judgments that the Directors have made in the process of applying the Group’s accounting policies and that have the most
significant effect on the amounts recognised in the Accounts.

IMPAIRMENT OF NON-CURRENT ASSETS
The Group tests goodwill, intangible assets and property, plant and equipment annually for impairment, or more frequently if there are indications that
an impairment may exist.

The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for these value in use calculations are those
regarding discount rates, sales growth rates and expected changes to selling prices and direct costs to reflect the operational gearing of the business. The
Directors estimate discount rates using pre-tax rates that reflect current market assessments of the time value of money for the Group. For those businesses
not based in the UK or Western Europe, the cash flows are further risk adjusted to reflect the risks specific to the individual CGU.

For the majority of CGUs, the Group performs goodwill impairment reviews by forecasting cash flows based upon the following year’s budget and a
projection of cash flows based upon industry growth expectations (0%–3%) over a further period of four years. Where detailed five year forecasts for a CGU
have been prepared and approved by the Board, which can include higher growth rates or varied results reflecting specific economic factors, these are used
in preparing cash flow forecasts for impairment review purposes. After this period, the sales growth rates applied to the cash flow forecasts are no more
than 1% and operating profit growth no more than 3%, which do not exceed the long-term average growth rate for the industry or economy.
The discount rates applied to all impairment reviews represent pre-tax rates and range between 10% and 13%.

Assumptions regarding sales and operating profit growth are considered to be the key area of judgment in the impairment review process, and appropriate
sensitivities have been performed and disclosed in Note 13.

Impairments are allocated initially against the value of any goodwill and intangible assets held within a CGU, with any remaining impairment applied
to property, plant and equipment on a pro-rata basis.

The carrying amount of relevant non-current assets at 31 December 2013 is £602.5m (2012: £618.1m). The impairment reviews performed during
the year indicated impairment in two of the Group’s CGUs, German Roofing and SIG Energy Management (see Note 13 for details). The carrying
value of all of the remaining CGUs of the Group were considered supportable.

POST-EMPLOYMENT BENEFITS
The Group operates five defined benefit pension schemes. All post-employment benefits associated with these schemes have been accounted for in
accordance with IAS 19 (revised) “Employee Benefits”. As detailed within the Statement of Significant Accounting Polices on page 90, in accordance with IAS
19, all actuarial gains and losses have been recognised immediately through the Consolidated Statement of Comprehensive Income.

For all defined benefit pension schemes, pension valuations have been performed using specialist advice obtained from independent qualified actuaries.
In performing these valuations, judgments, assumptions and estimates have been made. These assumptions have been disclosed within Note 30c on
pages 119 to 122.

TAXATION
Accruals for corporation tax contingencies require the Directors to make judgments and estimates as to the level of corporation tax that will be payable
based upon the interpretation of applicable tax legislation on a country-by-country basis and an assessment of the likely outcome of any open tax
computations. All such accruals are included within current liabilities.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.
Therefore, judgments are required to establish whether deferred tax balances should be recognised, in particular in respect of non-trading losses.

PROVISIONS
Using information available at the balance sheet date including third-party advice when available, the Directors make judgments based on experience regarding
the level of provision required to satisfy all onerous lease and dilapidation commitments and to account for potentially uncollectible receivables and unsaleable
inventory.

REBATES PAYABLE AND RECEIVABLE
The Group has a number of customer and supplier rebate agreements, with the amounts payable and receivable often being subject to negotiation after
the balance sheet date. At the balance sheet date, the Directors make judgments on the amount of rebate that will become both payable and due to the
Group under these agreements based upon prices, volumes and product mix.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewNOTES TO THE ACCOUNTS

1. REVENUE AND SEGMENTAL INFORMATION
REVENUE
An analysis of the Group’s revenue is as follows:

Sale of goods

Total revenue

Finance income

Total income

2013
£m

2012
£m

2,719.8

2,635.5

2,719.8

2,635.5

1.6

1.9

2,721.4

2,637.4

SEGMENTAL INFORMATION
(A) SEGMENTAL RESULTS
Following the adoption of IFRS 8 “Operating Segments”, the Group identifies its reportable segments as those upon which the Group Board regularly bases
its opinion and assesses performance. The Group has deemed it appropriate to aggregate its operating segments into two reported segments: UK and Ireland,
and Mainland Europe. The constituent operating segments have been aggregated as they have similar products and services; production processes; types of
customer; methods of distribution; regulatory environments; and economic characteristics.

2013

2012

UK and
Ireland
£m

Mainland
Europe
£m

Eliminations
£m

Total
£m

UK and
Ireland
£m

Mainland
Europe
£m

Eliminations
£m

Total
£m

Revenue
Continuing sales
Sales attributable to business divested in 2012
Sales attributable to business held for sale at
31 December 2013
Inter-segment sales*

1,243.0
–

1,339.4
–

–
–

2,582.4
–

1,184.1
–

1,289.8
26.9

–
1.6

137.4
9.6

–
(11.2)

137.4
–

–
0.8

134.7
8.2

Total revenue

1,244.6

1,486.4

(11.2)

2,719.8

1,184.9

1,459.6

48.5
(9.9)
(12.0)
(0.5)

–

–
(2.0)
–

59.0
(10.7)
(6.0)
(0.2)

(42.8)

–

–
–
–

24.1

(0.7)

–
–
–
–

–

–
–
–

–

47.7
(12.3)
(8.6)
0.7

–

–
–
4.4

56.5
(9.7)
(8.0)
0.7

(4.6)

(1.2)

0.4
–
–

31.9

34.1

107.5
(20.6)
(18.0)
(0.7)

(42.8)

–

–
(2.0)
–

23.4
(8.0)

15.4
(11.3)
(1.9)
(0.1)

2.1
(16.4)
(0.7)

(15.0)

–
–

–
(9.0)

(9.0)

–
–
–
–

–

–
–
–

–

2,473.9
26.9

134.7
–

2,635.5

104.2
(22.0)
(16.6)
1.4

(4.6)

(1.2)

0.4
–
4.4

66.0
(8.1)

57.9
(12.1)
(1.8)
(0.3)

43.7
(17.1)
(0.3)

26.3

639.6

691.0

–

1,330.6

612.1

711.9

–

1,324.0

29.7
33.3
–
0.9

1,394.5

43.6
46.1
2.4
2.7

1,418.8

Result
Segment result before Other items
Amortisation of acquired intangibles
Net restructuring costs
Other one-off items
Loss on sale or agreed sale of businesses and
associated impairment charges
Operating loss attributable to business
divested in 2012
Operating profit attributable to business
held for sale at 31 December 2013
Goodwill impairment charge
Defined benefit pension scheme curtailment gain

Segment operating profit/(loss)
Parent Company costs

Operating profit
Net finance costs
Net fair value losses on derivative financial instruments
Share of loss of associate

Profit before tax
Income tax expense
Non-controlling interests

(Loss)/profit for the period

Balance sheet
Assets
Segment assets
Unallocated assets:
Derivative financial instruments
Cash and cash equivalents
Associate loan
Other assets

Consolidated total assets

* Inter-segment sales are charged at the prevailing market rates.

SIG plc Annual Report and Accounts 20131. REVENUE AND SEGMENTAL INFORMATION CONTINUED
SEGMENTAL INFORMATION CONTINUED
(A) SEGMENTAL RESULTS CONTINUED

Liabilities
Segment liabilities
Unallocated liabilities:
Private placement notes
Derivative financial instruments
Other liabilities

Consolidated total liabilities

Other segment information
Capital expenditure on:
Property, plant and equipment
Computer software
Goodwill and intangible assets (excluding
computer software)
Non-cash expenditure:
Depreciation
Impairment of property, plant and equipment
and computer software
Amortisation of acquired intangibles
and computer software
Impairment of goodwill and intangibles
(excluding computer software)

2013

2012

UK and
Ireland
£m

Mainland
Europe
£m

Eliminations
£m

Total
£m

UK and
Ireland
£m

Mainland
Europe
£m

Eliminations
£m

Total
£m

262.8

174.7

–

437.5

264.0

167.4

–

431.4

252.5
2.1
9.3

701.4

32.9
10.0

14.5

21.8

11.7

11.0
7.3

0.2

11.2

1.0

22.5

12.3

23.5

–

256.0
10.6
12.0

710.0

24.2
8.1

6.4

23.6

1.0

22.0

–

13.2
0.8

6.2

12.4

–

9.7

–

–
–

–

19.5
9.6

14.5

8.5

0.2

10.2

2.0

13.4
0.4

–

13.3

11.5

12.3

21.5

–
–

–

(B) REVENUE BY PRODUCT GROUP
The Group focuses its activities into three product sectors: Insulation and Energy Management; Exteriors; and Interiors, as set out on page 9.

The following table provides an analysis of Group sales by type of product:

Insulation and Energy Management
Exteriors
Interiors

Total continuing

Sales attributable to business divested in 2012
Sales attributable to business held for sale at 31 December 2013

Total

2013
£m

2012
£m

1,223.8
754.9
603.7

1,181.1
705.5
587.3

2,582.4

2,473.9

–
137.4

26.9
134.7

2,719.8

2,635.5

(C) GEOGRAPHIC INFORMATION
The Group’s revenue from external customers and its non-current assets (including property, plant and equipment, interest in associate, goodwill and intangible
assets but excluding deferred tax and derivative financial instruments) by geographical location are as follows:

Country

United Kingdom
Ireland
France
Germany and Austria
Poland
Benelux*

Total continuing

Attributable to business held for sale at 31 December 2013

Attributable to business divested in 2012

Total

* Includes international air handling business (headquartered in The Netherlands).
^Excluding deferred tax assets and derivative financial instruments.

2012

Revenue
£m

2012
Non-current

assets^
£m

2013

2013
Non-current

Revenue
£m

1,177.5
65.5
622.4
437.5
124.7
154.8

assets^
£m

312.3
0.9
223.9
16.5
18.4
30.5

1,120.6
63.5
590.6
433.9
117.2
148.1

2,582.4

602.5

2,473.9

137.4

–

134.7

2,719.8

602.5

2,608.6

618.1

–

26.9

–

2,719.8

602.5

2,635.5

618.1

276.3
0.9
228.3
20.5
16.1
42.1

584.2

33.9

There is no material difference between the basis of preparation of the information reported above and the accounting policies adopted by the Group.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewNOTES TO THE ACCOUNTS CONTINUED

2. COST OF SALES AND OTHER OPERATING EXPENSES

Cost of sales
Other operating expenses:
– distribution costs
– selling and marketing costs
– administrative expenses

Before
Other items
£m

2013

Other
items
£m

Total
£m

Before
Other items
£m

2012

Other
items
£m

Total
£m

1,900.6

110.0

2,010.6

1,819.9

129.3

1,949.2

210.9
224.8
146.6

582.3

9.7
8.8
93.0

111.5

220.6
233.6
239.6

693.8

204.0
215.5
138.4

557.9

11.2
11.0
48.3

70.5

215.2
226.5
186.7

628.4

Operating profit includes the following “Other items” which have been disclosed in a separate column within the Consolidated Income Statement in order to
provide a better indication of the underlying earnings of the Group. Other operating expenses and net finance costs included within “Other items” are as follows:

Amortisation of acquired intangibles (Note 14)
Loss arising on the sale or agreed sale of businesses and associated impairment charges (Note 12)
Operating loss attributable to business divested in 2012
Operating profit attributable to business held for sale at 31 December 2013
Net restructuring costs^
Other one-off items*
Goodwill impairment charge (Note 13)
Defined benefit pension scheme curtailment gain

Impact on operating profit
Net fair value losses on derivative financial instruments

Impact on profit before tax
Income tax credit

Impact on profit after tax

2013
£m

(20.6)
(42.8)
–
–
(18.0)
(0.7)
(2.0)
–

(84.1)
(1.9)

(86.0)
9.7

(76.3)

2012
£m

(22.0)
(4.6)
(1.2)
0.4
(16.6)
1.4
–
4.4

(38.2)
(1.8)

(40.0)
9.0

(31.0)

^ Included within net restructuring costs are redundancy costs of £7.6m (2012: £8.0m), property closure costs of £5.8m (2012: £4.3m), rebranding costs of £3.7m (2012: £nil),

asset write down costs of £0.2m (2012: £1.0m) and other restructuring costs of £0.7m (2012: £3.3m).

* Other one-off items include acquisition expenses (see Note 15).

3. FINANCE INCOME AND FINANCE COSTS

Finance income
Interest on bank deposits

Finance income before fair value gains on derivative financial instruments
Fair value gains on derivative financial instruments

Total finance income

Finance costs
On bank loans, overdrafts and other items*
On private placement notes
Interest on obligations under finance lease contracts
Net finance charge on defined benefit pension schemes

Finance costs before fair value losses on derivative financial instruments
Fair value losses on derivative financial instruments

Total finance costs

Net finance costs

* Other items include amortisation of arrangement fees of £0.7m (2012: £0.8m).

2013
£m

1.4

1.4
0.2

1.6

3.0
8.0
0.6
1.1

12.7
2.1

14.8

13.2

2012
£m

1.5

1.5
0.4

1.9

3.8
8.5
0.8
0.5

13.6
2.2

15.8

13.9

SIG plc Annual Report and Accounts 2013

4. PROFIT BEFORE TAX

Profit before tax is stated after crediting:
Foreign exchange rate gains*
Fair value gains on derivative financial instruments
Net decrease in provision for inventories
Defined benefit pension scheme curtailment gain
Other one-off items (Note 2)
Gains on disposal of property, plant and equipment

And after charging:
Cost of inventories recognised as an expense
Depreciation of property, plant and equipment:
– owned
– held under finance leases and hire purchase agreements
Amortisation of acquired intangibles
Amortisation of computer software
Operating lease rentals:
– land and buildings
– plant and machinery
Auditor remuneration for audit services
Non-audit fees
Net increase in provision for receivables
Foreign exchange rate losses*
Fair value losses on derivative financial instruments
Goodwill impairment charge (Note 13)
Loss arising on the sale or agreed sale of businesses and associated impairment charges (Note 12)
Net restructuring costs (Note 2)
Other one-off items (Note 2)
Staff costs (Note 5)

* Excludes gains and losses incurred as a result of applying IAS 39 “Financial Instruments: Recognition and Measurement”.

A more detailed analysis of Auditor remuneration is provided below:

Audit services
Fees payable to the Company’s Auditor for the audit of the Company’s Consolidated Accounts
Fees payable to the Company’s Auditor and its associates for other services to the Group:
– for the audit of the Company’s subsidiaries

Total audit fees

Audit-related assurance services (including Interim Review)

Total non-audit fees

Total fees

2013
£m

0.1
0.2
1.2
–
–
1.2

2012
£m

0.6
0.4
1.3
4.4
1.4
1.1

2,005.7

1,922.0

19.2
2.6
20.6
1.9

49.1
16.5
1.3
0.1
9.1
0.1
2.1
2.0
42.8
18.0
0.7
337.5

21.3
2.3
22.0
–

46.9
16.0
1.3
0.1
8.7
0.2
2.2
–
4.6
16.6
–
327.7

2013
Deloitte LLP
£m

2012
Deloitte LLP
£m

0.1

1.2

1.3

0.1

1.4

0.1

1.2

1.3

0.1

1.4

In 2012, audit fees of £10,000 were payable to the Company’s Auditor in respect of associated pension schemes. In 2013, this work was performed by a party
other than the Company’s Auditor.

The Report of the Audit Committee on pages 60 to 62 provides an explanation of how auditor objectivity and independence is safeguarded when non-audit
services are provided by the Auditor.

5. STAFF COSTS
Particulars of employees (including Directors) are shown below:

Employee costs during the year amounted to:
Wages and salaries
Social security costs
IFRS 2 share option charge/(credit)
Pension costs (Note 30c)

Total

2013
£m

2012
£m

279.2
50.4
0.4
7.5

337.5

275.4
50.3
(0.3)
2.3

327.7

Of the pension costs noted above, a charge of £2.3m (2012: credit of £2.3m) relates to defined benefit schemes and a charge of £5.2m (2012: £4.6m)
relates to defined contribution schemes. The £2.3m credit in 2012 relating to defined benefit pension schemes includes a £4.4m curtailment gain.
See Note 30c for more details.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewNOTES TO THE ACCOUNTS CONTINUED

5. STAFF COSTS CONTINUED
The average monthly number of persons employed by the Group during the year was as follows:

Production
Distribution
Sales
Administration

Total

2013
Number

833
3,530
3,987
1,456

2012
Number

1,014
3,719
4,026
1,469

9,806

10,228

Included within the numbers above for 2013 and 2012 are staff employed by businesses divested or agreed to be sold. In 2013 this included 471 (2012: 501)
employees of the Group’s German Roofing business and nil (2012:172) employees of the Group’s Central European operations.

DIRECTORS’ EMOLUMENTS
Details of the individual Directors’ emoluments are given in the Directors’ Remuneration Report on page 72.

The employee costs shown on the previous page include the following emoluments in respect of Directors of the Company:

Directors’ remuneration (excluding IFRS 2 share option charge/(credit))

6. INCOME TAX
The income tax expense comprises:

Current tax
UK corporation tax:
– on profits/(losses) for the year
– adjustments in respect of previous years

Overseas tax:
– on profits/(losses) for the year
– adjustments in respect of previous years

Total current tax

Deferred tax
Current year
Adjustments in respect of previous years
Deferred tax charge in respect of pension schemes
Effect of change in rate

Total deferred tax

Total income tax expense

The total tax charge for the year differs from that resulting from applying the standard rate of corporate tax in the UK at 31 December 2013 of 23.0%
(31 December 2012: 24.0%). The differences are explained in the following reconciliation:

Profit on ordinary activities before tax

Tax at 23% (2012: 24%) thereon
Factors affecting the income tax expense for the year:
– non-deductible and non-taxable items
– impairment charges not deductible for tax
– losses not recognised
– losses utilised not previously recognised
– other adjustments in respect of previous years
– effect of overseas tax rates
– effect of change in rate on deferred tax

Total income tax expense

The effective tax rate for the Group on the total profit before tax of £2.1m is 781.0% (2012: 39.1%).

2013

2012

£m

2.1

0.5

1.6
9.5
0.1
(1.7)
0.7
5.0
0.7

16.4

23.0

76.2
452.4
4.8
(81.0)
33.3
239.0
33.3

781.0

£m

43.7

10.5

3.6
–
0.6
(5.0)
1.6
5.2
0.6

17.1

2013
£m

3.0

2012
£m

2.0

2013
£m

2012
£m

–
0.3

0.3

15.7
0.2

16.2

(0.9)
0.2
0.2
0.7

0.2

16.4

(0.2)
0.1

(0.1)

14.8
0.8

15.5

(2.2)
0.7
2.5
0.6

1.6

17.1

24.0

8.1
–
1.4
(11.4)
3.7
11.9
1.4

39.1

SIG plc Annual Report and Accounts 20136. INCOME TAX CONTINUED
The effective tax charge for the Group on profit before tax before other items of £88.1m is 29.6% (2012: 31.2%), which comprises a charge of 29.1%
(2012: 31.3%) in respect of current year profits and a tax charge of 0.5% (2012: credit 0.1%) in respect of prior years.

The following factors that will affect the Group’s future total tax charge as a percentage of underlying profits are:

X the mix of profits between the UK and overseas; in particular, France/Germany/Belgium/The Netherlands (corporate tax rates greater than that of the UK) and Ireland/
Poland (corporate tax rates less than that of the UK). If the proportion of profits from these jurisdictions changes this could result in a higher or lower Group tax charge;

X the impact of non-deductible expenditure and non-taxable income;

X the agreement of open tax computations with the respective tax authorities; and

X the recognition or utilisation (with a corresponding reduction in cash tax payments) of unrecognised deferred tax assets (see Note 24).

In addition to the amounts charged to the Consolidated Income Statement, the following amounts in relation to taxes have been recognised in the
Consolidated Statement of Comprehensive Income with the exception of deferred tax on share options which has been recognised in the Consolidated
Statement of Changes in Equity.

Deferred tax movement associated with remeasurement of defined benefit liabilities*
Deferred tax on share options
Tax credit/(charge) on exchange and fair value movements arising on borrowings and derivative financial instruments
Effect of change in rate on deferred tax*

Total

* These items will not subsequently be reclassified to the Consolidated Income Statement.

2013
£m

(2.0)
0.1
0.4
(0.9)

(2.4)

2012
£m

0.2
(0.2)
(1.0)
(0.8)

(1.8)

7. DIVIDENDS
An interim dividend of 1.15p per ordinary share was paid on 7 November 2013 (2012: 1.0p). The Directors have proposed a final dividend for the year ended
31 December 2013 of 2.4p per ordinary share (2012: 2.0p). The proposed final dividend is subject to approval by Shareholders at the Annual General Meeting and
has not been included as a liability in these financial statements. No dividends have been paid between 31 December 2013 and the date of signing the Accounts.

8. EARNINGS PER SHARE
The calculations of earnings per share are based on the following (losses)/profits and numbers of shares:

(Loss)/profit after tax
Non-controlling interests

(Loss)/profit after tax
Non-controlling interests
Other items:
Amortisation of acquired intangibles
Loss arising on the sale or agreed sale of businesses and associated impairment charges (Note 12)
Operating loss attributable to business divested in 2012
Operating profit attributable to business held for sale at 31 December 2013
Net restructuring costs
Other one-off items
Goodwill impairment charge (Note 13)
Defined benefit pension scheme curtailment gain
Net fair value losses on derivative financial instruments
Tax credit relating to “Other items” (see page 100)

Basic and diluted

2013
£m

(14.3)
(0.7)

(15.0)

2012
£m

26.6
(0.3)

26.3

Basic and diluted
before Other items

2013
£m

(14.3)
(0.7)

20.6
42.8
–
–
18.0
0.7
2.0
–
1.9
(9.7)

61.3

2012
£m

26.6
(0.3)

22.0
4.6
1.2
(0.4)
16.6
(1.4)
–
(4.4)
1.8
(9.0)

57.3

Weighted average number of shares:

For basic earnings per share
Exercise of share options*

For diluted earnings per share

2013
Number

590,881,190
154,065

591,035,255

2012
Number

590,835,039
–

590,835,039

* For earnings per share after Other items, due to the fact that the Group has recorded a loss after tax any share options would be anti-dilutive. Therefore the impact of the exercise

of share options has been removed from the weighted average number of shares when calculating earnings per share after Other items.

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewNOTES TO THE ACCOUNTS CONTINUED

8. EARNINGS PER SHARE CONTINUED

Earnings per share
Basic (loss)/earnings per share
Diluted (loss)/earnings per share

Earnings per share before Other items^
Basic earnings per share
Diluted earnings per share

2013

2012

(2.5p)
(2.5p)

10.4p
10.4p

4.5p
4.5p

9.7p
9.7p

^ Earnings per share before Other items has been disclosed in order to present the underlying performance of the Group.

The following disclosures reconcile these adjustments to the disclosures made on the face of the Consolidated Income Statement:

a) amortisation of acquired intangibles of £20.6m (2012: £22.0m) is included as part of operating expenses within the column of the Consolidated Income

Statement entitled “Other items”;

b) loss arising on the sale or agreed sale of businesses and associated impairment charges of £42.8m (2012: £4.6m) is included as part of operating expenses

within the column of the Consolidated Income Statement entitled “Other items”;

c) operating loss attributable to business divested in 2012 of £1.2m is included within the column of the Consolidated Income Statement entitled “Other items”;

d) operating profit attributable to business held for sale at 31 December 2013 of £nil (2012: £0.4m) is included within the column of the Consolidated Income

Statement entitled “Other items”;

e) net restructuring costs of £18.0m (2012: £16.6m) are included as part of operating expenses within the column of the Consolidated Income Statement

entitled “Other items”;

f) other one-off items amounting to a charge of £0.7m (2012: credit of £1.4m) are included as part of operating expenses within the column of the

Consolidated Income Statement entitled “Other items”;

g) goodwill impairment charge of £2.0m (2012: £nil) is included as part of operating expenses within the column of the Consolidated Income Statement

entitled “Other items”;

h) the prior year defined benefit pension scheme curtailment gain of £4.4m is included as part of operating expenses within the column of the Consolidated

Income Statement entitled “Other items”;

i) net fair value losses on derivative financial instruments of £1.9m (2012: £1.8m) are included as finance income and finance costs within the column of the

Consolidated Income Statement entitled “Other items”; and

j) the “Other items” give rise to tax as disclosed in the table below:

Amortisation of acquired intangibles
Loss arising on the sale or agreed sale of businesses and associated
impairment charges
Operating loss attributable to business divested in 2012
Operating profit attributable to business held for sale at 31 December 2013
Net restructuring costs
Other one-off items
Goodwill impairment charge
Defined benefit pension scheme curtailment gain
Net fair value losses on derivative financial instruments
Utilisation of losses not previously recognised
Effect of change in rate on deferred tax

2013

Other items
£m

Tax impact
£m

Other items
£m

20.6

3.3

16.0

22.0

42.8
–
–
18.0
0.7
2.0
–
1.9
–
–

86.0

1.3
–
–
4.0
–
–
–
0.4
1.4
(0.7)

9.7

3.0
–
–
22.2
–
–
–
21.1
–
–

11.3

4.6
1.2
(0.4)
16.6
(1.4)
–
(4.4)
1.8
–
–

40.0

2012

Tax impact
£m

4.9

–
–
(0.1)
1.2
(0.3)
–
(1.1)
0.4
4.6
(0.6)

9.0

22.0

–
–
30.0
7.2
21.0
–
24.5
24.5
–
–

22.5

9. SHARE-BASED PAYMENTS
The Group had four share-based payment schemes in existence during the year ended 31 December 2013 (2012: five). The Group recognised a total charge
of £0.4m (2012: credit of £0.3m) in the year relating to share-based payment transactions issued after 7 November 2002 with a corresponding entry to the share
option reserve. The weighted average fair value of each option granted in the year was 137p (2012: 105p). Details of each of the schemes are provided below.

(A) SAVE AS YOU EARN (“SAYE”) SCHEME
The Company operates a SAYE scheme within the Republic of Ireland which is open to all employees and is linked to a monthly savings contract over three
and five year periods. Options have been granted to scheme participants at a percentage of the prevailing market price. The market price is taken approximately
one month prior to the official grant date. There are no performance conditions attached to the exercise of these options.

100

SIG plc Annual Report and Accounts 20139. SHARE-BASED PAYMENTS CONTINUED
(A) SAVE AS YOU EARN (“SAYE”) SCHEME CONTINUED
No SAYE options have been granted in the UK since 2005. Instead, the Company has operated a Share Incentive Plan (“SIP”) since 2005 as approved at the
2004 Annual General Meeting (see page 102).

SAYE options (issued after 7 November 2002)

At 1 January
Lapsed during the year
Exercised during the year

At 31 December

2013

2012

Weighted
average
exercise
price (p)

95.0
95.0
95.0

Options

514,273
(39,036)
–

Options

475,237
(58,160)
(263,012)

154,065

95.0

475,237

Weighted
average
exercise
price (p)

95.0
95.0
–

95.0

Of the above share options outstanding at the end of the year, none are exercisable at 31 December 2013. The options are expected to vest within the
next two years.

(B) EXECUTIVE SHARE OPTION SCHEMES (“ESOS”)
Under the ESOS (now closed), Directors and Senior Management were awarded an annual grant of share options at market price, provided that the total
amount payable by the individual to exercise options under the ESOS or any other share option scheme of the Group (excluding savings related schemes)
granted during the immediately preceding ten years did not exceed four times base salary, bonus and benefits.

ESOS (issued after 7 November 2002)

At 1 January
Lapsed during the year

At 31 December

2013

2012

Weighted
average
exercise
price (p)

Options

169.7*
169.7*

41,159
(26,289)

Options

14,870
(14,870)

–

14,870

Weighted
average
exercise
price (p)

169.7*
169.7*

169.7*

* Adjusted to reflect the impact of the placing and open offer and firm placing in 2009.

(C) LONG-TERM INCENTIVE PLAN (“LTIP”)
Under the existing LTIP policy, Executive Directors can be awarded an annual grant of nil paid share options up to a maximum value of 100% of base salary.

The criteria and vesting conditions of the LTIP options are as follows:

Weighting of criteria
Vesting conditions:
– does not vest
– vests proportionately
– vests in full
– exercise period

2013 and 2012 awards

2011 award

EPS

67%

ROCE

33%

EPS

100%

< 30p
30p > < 40p
40p >

< 9.0%
9.0% > < 13.0%
13.0% >

< 30p
30p > < 40p
> 40p

3–10 years

3–4 years

ROCE

n/a
n/a
n/a

The right to exercise options terminates upon the employee ceasing to hold office with the Group, subject to certain exceptions and the discretion of the Board.

Awards have also been made annually since 2011 through a shadow Cash LTIP scheme that requires the Group to pay the intrinsic value of the share
appreciation rights to the employee at the date of exercise. This scheme has exactly the same conditions and vesting criteria as the LTIP, the difference being
that the award is settled in the cash value of the equity in the event of the options being exercised, rather than through the issue of shares. This scheme has
been accounted for in the same way as the equity-settled scheme, with the exception that the liability is recognised within accruals as opposed to equity.

LTIP options (issued after 7 November 2002)

At 1 January
Granted during the year
Exercised during the year
Lapsed during the year

At 31 December

2013

2012

Weighted
average
exercise
price (p)

0.0
0.0
0.0
0.0

0.0

Options

3,149,341
1,689,804
(5,707)
(577,862)

4,255,576

Weighted
average
exercise
price (p)

0.0
0.0
0.0
0.0

0.0

Options

4,255,576
1,232,817
–
(1,459,751)

4,028,642

Of the above share options outstanding at the end of the year, none (2012: none) are exercisable at 31 December 2013.

The options outstanding at 31 December 2013 had a weighted average exercise price of nil p (2012: nil p) and a weighted average remaining contractual life
of 2.0 years (2012: 1.4 years). No options were exercised in the year.

101

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewNOTES TO THE ACCOUNTS CONTINUED

9. SHARE-BASED PAYMENTS CONTINUED
(C) LONG-TERM INCENTIVE PLAN (“LTIP”) CONTINUED
The assumptions used in the Black-Scholes model in relation to the LTIP options are as follows:

Share price (on date of official grant)
Exercise price
Expected volatility
Actual life
Risk free rate
Dividend
Expected percentage options exercised versus
granted at date of grant
Revised expectation of percentage of options to
be exercised as at 31 December 2013

2013

Shares granted in

2012

2011

152p (18 April 2013)
0.0p
185.7%
3 years
4.5%
3.15p

100p (3 October 2012)
0.0p
189.1%
3 years
4.5%
2.25p

105p (26 April 2012)
0.0p
189.1%
3 years
4.5%
2.25p

139p (27 April 2011)
0.0p
147.0%
3 years
4.5%
0.0p

35%

25%

15%

25%

15%

60%

The weighted average fair value of LTIP options granted during the year was 137p.

The expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous three years. The expected percentage
of total options exercised is based on the Directors’ best estimate for the effects of behavioural considerations.

(D) SHARE INCENTIVE PLAN (“SIP”)
The SIP is offered to UK employees. The SIP is an HM Revenue and Customs approved scheme and operates by inviting participants, including Executive Directors,
to purchase shares in the Company in a tax efficient manner on a monthly basis. For each share purchased by the employee, the Company will match one free
share up to a maximum of four free shares per month. No performance criteria are attached to these matching shares, other than to avoid forfeiture the participants
must remain within the plan for a minimum of two years. In 2013, 37,650 (2012: 41,179) matching shares were granted during the year. Given the nature of
the scheme, the fair value of the matching shares equates to the cost of the Company acquiring these shares.

10. PROPERTY, PLANT AND EQUIPMENT
The movements in the year and the preceding year were as follows:

Cost
At 1 January 2012
Exchange differences
Additions
Added on acquisition
Transferred to intangible assets (Note 14)
Disposals

At 31 December 2012

Exchange differences
Additions
Added on acquisition
Disposals

At 31 December 2013

Accumulated depreciation and impairment
At 1 January 2012
Charge for the year
Impairment charges
Exchange differences
Added on acquisition
Transferred to intangible assets (Note 14)
Disposals

At 31 December 2012

Charge for the year
Impairment charges
Exchange differences
Added on acquisition
Disposals

At 31 December 2013

Net book value

At 31 December 2013

At 31 December 2012

102

Land and buildings

Freehold
£m

Short
leasehold
£m

Plant and
machinery
£m

85.7
(1.4)
1.2
0.1
–
(2.8)

82.8

1.3
5.5
1.6
(2.9)

37.5
(0.4)
2.8
–
–
(1.3)

38.6

0.4
3.3
0.3
(1.7)

211.2
(2.1)
28.3
1.2
(18.5)
(21.3)

198.8

2.6
24.1
2.7
(23.8)

Total
£m

334.4
(3.9)
32.3
1.3
(18.5)
(25.4)

320.2

4.3
32.9
4.6
(28.4)

88.3

40.9

204.4

333.6

19.6
0.8
0.7
(0.5)
0.1
–
(1.0)

19.7

1.9
6.7
0.4
0.2
(1.2)

19.0
3.0
0.2
(0.3)
–
–
(0.9)

21.0

2.7
0.6
0.3
0.1
(1.6)

153.1
19.8
0.1
(1.5)
0.8
(7.7)
(19.3)

145.3

17.2
3.1
1.9
1.7
(22.0)

191.7
23.6
1.0
(2.3)
0.9
(7.7)
(21.2)

186.0

21.8
10.4
2.6
2.0
(24.8)

27.7

23.1

147.2

198.0

60.6

63.1

17.8

17.6

57.2

53.5

135.6

134.2

SIG plc Annual Report and Accounts 201310. PROPERTY, PLANT AND EQUIPMENT CONTINUED
The net book value of plant and machinery at 31 December 2013 includes an amount of £9.0m (2012: £6.3m) in respect of assets held under finance lease contracts.

Included within plant and machinery additions in 2012 were assets in the course of construction of £1.5m.

Of the £10.4m impairment charges, £10.2m relates to the post balance sheet divestment of the Group’s German Roofing business (see Note 12), and £0.2m
relates to other fixed asset impairments.

11. INTEREST IN ASSOCIATE
On 5 March 2013 the Group purchased an additional 26% shareholding in its associate, Ice Energy Technologies Limited (“Ice”), for a consideration of £1.5m
(debt for equity exchange), taking its total shareholding to 51%. Following this transaction Ice became a subsidiary of the Group. The Group has a call option
to purchase the remaining 49% shareholding of Ice in 2015.

The Group’s share of loss after tax arising from its interest in Ice for the period ending 5 March 2013 was £0.1m (2012: £0.7m, of which £0.4m was included
within “Other items”), which has been recognised on the face of the Consolidated Income Statement. In accordance with IFRS 3, the 25% holding in Ice is
deemed to have been disposed of and reacquired on the same day, and as a result a profit on disposal of £0.2m has been recognised within “Other items”
in the Consolidated Income Statement.

The current accounting period for Ice ends on 31 March 2014. Ice does not have the same accounting reference date as SIG plc for commercial reasons.

In the period to 5 March 2013 there were no material transactions between Ice and SIG companies.

12. DIVESTMENTS
DIVESTMENT OF GERMAN ROOFING
As at 31 December 2013 the Group Board had resolved to dispose of the Group’s German Roofing operations. The disposal was completed on
28 February 2014. The assets and liabilities sold were as follows:

Goodwill and intangible assets
Property, plant and equipment
Computer software
Cash (less debt)
Inventories
Trade and other receivables
Trade and other payables

Net assets

Impairment of goodwill and intangible assets (Note 13)
Impairment of assets

Loss on disposal and associated impairment charges

Sale proceeds less costs to sell

2012
£m

22.0
9.9
2.0
0.4
10.3
8.3
(2.1)

50.8

2013
£m

21.5
10.2
1.3
–
10.5
8.4
(1.9)

50.0

(21.5)
(21.3)

(42.8)

7.2

The various assets of the business have been impaired to reflect the recoverable amount indicated by the consideration received in respect of the sale, and
assets and liabilities presented as held for sale within the Consolidated Balance Sheet. The loss arising on the agreed sale of German Roofing of £42.8m and
the results for the current and prior year have been disclosed within “Other items” in the Consolidated Income Statement.

DIVESTMENT OF ATC SPAIN
On 5 April 2013 the Group sold its 85% shareholding in Air Trade Centre Spain S.L. for a consideration of €1. SIG’s share of net liabilities at the date of disposal amounted
to £0.1m, and the resulting profit on disposal of £0.1m is included within other one-off items in the Consolidated Income Statement.

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13. GOODWILL

Cost
At 1 January 2012
Exchange differences
Acquisitions
Disposals

At 31 December 2012

Exchange differences
Acquisitions

At 31 December 2013

Accumulated impairment losses
At 1 January 2012
Disposals
Exchange differences

At 31 December 2012

Impairment charges
Exchange differences

At 31 December 2013

Net book value
At 31 December 2013

At 31 December 2012

£m

519.6
(6.2)
2.9
(19.0)

497.3

5.3
5.4

508.0

88.2
(19.0)
(0.6)

68.6

21.6
0.2

90.4

417.6

428.7

Goodwill acquired in a business combination is allocated at the date of acquisition to the Cash Generating Units (“CGUs”) that are expected to benefit from that
business combination.

IMPAIRMENT REVIEW PROCESS
The Group tests goodwill and the associated intangible assets and property, plant and equipment of CGUs annually for impairment, or more frequently if there are
indications that an impairment may exist.

The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for these value in use calculations are those regarding discount
rates, sales and operating profit growth rates and expected changes to selling prices and direct costs to reflect the operational gearing of the Group. These assumptions
have been revised in the year in light of the current economic environment. The Directors estimate discount rates using pre-tax rates that reflect current market
assessments of the time value of money for the Group. In respect of the other assumptions, external data and management’s best estimates are applied.

For the majority of CGUs, the Group performs goodwill impairment reviews by forecasting cash flows based upon the following year’s budget and a projection of sales and
cash flows based upon industry growth expectations (0%–3%) over a further period of four years. Where detailed five year forecasts for a CGU have been prepared and
approved by the Board, which can include higher growth rates or varied results reflecting specific economic factors, these are used in preparing cash flow forecasts for
impairment review purposes. After this period, the sales growth rates applied to the cash flow forecasts are no more than 1% and operating profit growth no more than
3%, which do not exceed the long-term average growth rate for the industry or economy. The discount rates applied to all impairment reviews represent pre-tax rates
and range between 10% and 13%.

2013 IMPAIRMENT REVIEW RESULTS
The most recent results of the impairment review process indicated that the carrying value of goodwill associated with the Group’s Energy Management and
German Roofing CGUs were no longer supportable.

The SIG Energy Management business has undergone significant structural change in recent years, and consequently now operates in different markets to those in which it
had made historical acquisitions. The goodwill recognised in respect of these acquisitions is therefore no longer generating economic benefit, and as a result an impairment
charge of £2.0m has been made to reduce the carrying value of goodwill in respect of this CGU to £nil. There are no intangible assets in respect of this CGU.

On 28 February 2014 the Group sold its German Roofing business. The consideration received did not support the carrying value of the goodwill and intangible
assets of the CGU, and therefore an impairment charge of £21.5m (of which £19.6m relates to goodwill) has been recorded as at 31 December 2013.

The carrying value of the Group’s other CGUs remain supportable.

SENSITIVITY ANALYSIS
The Group currently has twelve CGUs. The forecasts used in the annual impairment reviews have been prepared taking into account current economic conditions.
Revenue is the key assumption in the forecasts used in the goodwill impairment reviews, and therefore a 5% reduction in turnover has been determined as a
reasonably possible change for the purposes of the disclosure requirements of IAS 36 “Impairment of Assets”.

If a 5% reduction in revenue were to arise from that forecast in the goodwill impairment reviews, an impairment of £43m would arise in one CGU, Larivière.
The Board has actively reviewed the forecast associated with Larivière, noting the conservative assumptions used, its continued pattern of strong results in a
challenging economic environment and its outperformance of the markets in which it operates, and is satisfied that no impairment is necessary. If revenues fell
by 2% then the recoverable amount of the CGU would equal its carrying value. The current forecasts provide headroom of £22m.

104

SIG plc Annual Report and Accounts 201313. GOODWILL CONTINUED
SUMMARY ANALYSIS CONTINUED
The recoverable amounts of goodwill in respect of all CGUs are fully supported by the value in use calculations in the year and are as follows:

UK Distribution
UK Exteriors
Larivière
German Roofing
Other CGUs

Total

2013
£m

107.8
98.0
162.5
–
49.3

417.6

2012
£m

107.7
96.0
159.1
19.3
46.6

428.7

The 2012 numbers were incorrectly analysed in the prior year accounts and have been corrected above. There is no change to the total prior year goodwill number.

14. INTANGIBLE ASSETS
The intangible assets presented below relate to acquired intangibles that arise as a result of applying IFRS 3, which requires the separate recognition of
acquired intangibles from goodwill and computer software (separable from any associated hardware).

Cost
At 1 January 2012
Acquisitions
Disposals
Transferred in from property, plant and equipment (Note 10)
Exchange differences

At 31 December 2012

Acquisitions
Additions
Exchange differences

At 31 December 2013

Amortisation
At 1 January 2012
Charge for the year
Disposals
Transferred in from property, plant and equipment (Note 10)
Exchange differences

At 31 December 2012

Charge for the year
Impairment charges
Exchange differences

At 31 December 2013

Net book value

At 31 December 2013

At 31 December 2012

Customer
relationships
£m

Non-compete
clauses
£m

Computer
software
£m

182.2
3.1
(9.4)
–
(1.2)

174.7

8.0
–
3.0

10.9
0.4
(0.8)
–
–

10.5

1.1
–
–

185.7

11.6

119.5
22.0
(9.4)
–
(0.6)

131.5

20.3
1.9
1.5

10.9
–
(0.8)
–
–

10.1

0.3
–
–

–
–
–
18.5
–

18.5

–
10.0
–

28.5

–
–
–
7.7
–

7.7

1.9
1.3
–

Total
£m

193.1
3.5
(10.2)
18.5
(1.2)

203.7

9.1
10.0
3.0

225.8

130.4
22.0
(10.2)
7.7
(0.6)

149.3

22.5
3.2
1.5

155.2

10.4

10.9

176.5

30.5

43.2

1.2

0.4

17.6

10.8

49.3

54.4

Amortisation of acquired intangibles is included in the Consolidated Income Statement as part of operating expenses and is classified within “Other items”.

The weighted average amortisation period for each category of intangible asset is disclosed in the Statement of Significant Accounting Policies on page 89.

Computer software includes £15.0m (2012: £5.0m) of assets in the course of construction relating to the UK ERP system. Included within additions in the
year is £0.4m (2012: £nil) of borrowing costs which have been capitalised in accordance with IAS 23 “Borrowing Costs”.

The impairment charges relate to the post balance sheet divestment of the Group’s German Roofing business (Note 12).

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15. ACQUISITIONS
During the period SIG acquired the following:

Acquisition name

% of share
capital acquired Acquisition date

Country of incorporation

Principal activity

United Roofing Products Limited

100%

28 February 2013

United Kingdom

51%
Ice Energy Technologies Limited*
100%
S.K. (Sales) Limited
Roof Care (Northern) Limited
100%
United Trading Company (UK) Limited 100%

United Kingdom
5 March 2013
United Kingdom
30 April 2013
22 July 2013
United Kingdom
29 November 2013 United Kingdom

Manufacture and distribution of roofing materials and
associated products
Design and distribution of renewable energy systems
Distribution of air handling products
Distribution of roofing materials and associated products
Distribution of roofing materials and associated products

* The Group increased its shareholding in Ice Energy Technologies Limited (“Ice”) from 25% to 51% on 5 March 2013 via a debt for equity exchange, at which point the company

became a subsidiary undertaking of the Group (see Note 11).

The Group also acquired the trade and certain assets and liabilities of the following businesses:

Acquisition name

Acquisition date

Country of operation

Principal activity

30 April 2013
KC Roofing Supplies
30 April 2013
Harris Slate and Stone (UK) Limited
Roof Warehouse Limited
31 October 2013
Coverpro Rouen and Coverpro Amiens 1 December 2013

United Kingdom
United Kingdom
United Kingdom
France

Distribution of roofing materials and associated products
Distribution of roofing materials and associated products
Distribution of roofing materials and associated products
Distribution of roofing materials and interiors products

The net assets of these businesses at acquisition (in aggregation) were as follows:

Property, plant and equipment
Inventories
Trade and other receivables
Net cash acquired
Trade and other payables
Net corporation tax and deferred tax asset
Finance leases

Net assets acquired

Intangible assets – customer relationships
Intangible assets – non-compete clauses
Deferred tax liability on acquired intangible assets
Goodwill
Debt for equity exchange in respect of Ice

Total consideration

Consideration is represented by:
Cash
Contingent consideration

Total consideration

Total consideration including assumed cash:
Cash (per above)
Net cash acquired

Settlement of amounts payable for purchase of businesses

At date
of acquisition
£m

Fair value
adjustments
£m

2.7
4.9
10.6
3.4
(12.6)
0.3
(0.3)

9.0

(0.1)
(0.4)
(0.4)
–
(0.4)
–
–

(1.3)

Total
£m

2.6
4.5
10.2
3.4
(13.0)
0.3
(0.3)

7.7

8.0
1.1
(1.8)
5.4
(1.5)

18.9

18.3
0.6

18.9

18.3
(3.4)

14.9

Included within working capital movements in the year (Note 27) is £0.4m in relation to contingent consideration settled during the year in respect
of the acquisition of Monteis Materiaux in 2012.

In accordance with IFRS 3 (2008), acquisition expenses of £0.8m in relation to the above acquisitions have been recognised within “Other items” in the
Consolidated Income Statement.

106

SIG plc Annual Report and Accounts 201315. ACQUISITIONS CONTINUED
In addition, it is currently expected that, dependent upon future profits, a further £2.8m will be paid to the vendors of recent acquisitions who are employed
by the Group. These payments are contingent upon the vendors remaining within the business and, as required by IFRS 3 (2008), this will be treated
as remuneration and will be charged to the income statement as earned. The related accrual of potential consideration in the period to 31 December 2013
is £0.6m (31 December 2012: £0.1m). Added to the £0.8m acquisition expenses this has led to a charge within “Other items” in the Consolidated Income
Statement of £1.4m in respect of acquisitions (see Note 2).

Further to this, £0.6m of contingent consideration (not subject to the vendors remaining within the business) has been recognised within goodwill and
intangible assets in the year in relation to the acquisition of United Trading Company (UK) Limited.

The Directors have made a provisional assessment of the fair value of the net assets acquired. Any further adjustments arising will be accounted for in 2014.
These fair value adjustments may relate primarily to:

a) the review of the carrying value of all non-current assets to ensure that they accurately reflect their fair value;

b) the alignment of valuation and provisioning methodologies to those adopted by the Group; and

c) an assessment of all provisions and payables to ensure they are accurately reflected in accordance with the Group’s policies.

Included within goodwill is the benefit of staff acquired as part of the business and strategic acquisition synergies which are specifically excluded in the
identification of intangible assets on acquisition in accordance with the relevant accounting standards. Goodwill arising is not deductible for tax purposes.

Post-acquisition revenue and operating profit for the year ended 31 December 2013 for all 2013 acquisitions amounted to £39.0m and £3.0m respectively.

The Directors estimate that the combined pre-acquisition revenue and operating profit of the 2013 acquisitions for the period from 1 January 2013 to the
acquisition dates was £32.7m and £1.1m respectively.

POST BALANCE SHEET EVENTS
On 20 January 2014, the Group acquired 100% of the issued share capital of Trimform Products Limited, a manufacturer and distributor of roofing materials
and associated products in the United Kingdom for an initial consideration of £3.6m with net assets acquired of £0.9m.

Due to the proximity to the period end, further financial information has not been provided. This will be included in the Group’s interim financial statements
for the period ending 30 June 2014.

16. INVENTORIES

Raw materials and consumables
Work in progress
Finished goods and goods for resale

Total inventories

The estimated replacement cost of inventories is not materially different from the balance sheet value stated above.

17. TRADE AND OTHER RECEIVABLES

Trade receivables
VAT
Other receivables
Prepayments and accrued income

Trade and other receivables
Assets held for sale
Derivative financial instruments
Associate loan and deferred consideration

Total receivables

2013
£m

3.7
0.3
216.4

2012
£m

3.3
0.3
220.4

220.4

224.0

2013
£m

369.0
0.7
3.9
18.3

391.9
9.1
–
–

401.0

2012
£m

352.9
0.8
4.4
15.2

373.3
–
6.2
2.7

382.2

The average credit period on sale of goods and services for continuing operations on a constant currency basis is 43 days (2012: 42 days). No interest
is charged on receivables. An allowance has been made for estimated irrecoverable amounts from the sale of goods of £27.7m at 31 December 2013
(2012: £29.3m). This allowance has been determined by reference to past default experience.

Included within the Group’s trade receivable balance are debtors with a carrying amount of £125.0m (2012: £127.1m) which are past due at the reporting
date for which the Group has not provided, as there has not been a significant change in credit quality and the Group considers that the amounts are still
recoverable. The Group does not hold any collateral over these balances. The average age of these receivables is 33 days overdue (2012: 29 days).

107

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewNOTES TO THE ACCOUNTS CONTINUED

17. TRADE AND OTHER RECEIVABLES CONTINUED
AGEING ANALYSIS OF TRADE RECEIVABLES FOR WHICH NO PROVISION FOR IMPAIRMENT HAS BEEN MADE

Neither past due nor renegotiated
Renegotiated
Balances overdue which have no provision for impairment:
1–30 days
31–60 days
61–90 days
91–120 days
121–180 days
180+ days

Total trade receivables for which no provision for impairment has been made

MOVEMENT IN THE ALLOWANCE FOR DOUBTFUL DEBTS

At 1 January
Utilised
Disposals
Reclassified as held for sale
Added on acquisition
Charged to the Consolidated Income Statement
Exchange differences

At 31 December

2013
£m

231.2
0.2

79.8
28.8
10.0
2.9
1.8
1.7

125.0

356.4

2013
£m

(29.3)
10.1
–
1.3
–
(9.1)
(0.7)

(27.7)

2012
£m

211.1
0.4

89.1
26.3
7.2
1.8
1.3
1.4

127.1

338.6

2012
£m

(31.1)
9.1
1.8
–
(0.8)
(8.7)
0.4

(29.3)

In determining the recoverability of trade receivables, the Group considers any change in the credit quality of the trade receivable from the date credit was
initially granted up to the reporting date and makes a provision for impairment accordingly. The concentration of credit risk is limited due to the customer
base being large and unrelated. The Directors therefore believe that no further credit provision is required in excess of the allowance for doubtful debts.

Included in the allowance for doubtful debts are trade receivables with a gross balance of £40.3m (2012: £43.6m) and a provision for impairment of £27.7m
(2012: £29.3m). The provision for impairment represents the difference between the carrying amount of the specific trade receivable and the present value
of the expected recoverable amount.

The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.

CREDIT RISK MANAGEMENT
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. Trade receivable credit
exposure is controlled by counterparty limits that are set, reviewed and approved by operational management on a regular basis.

Trade receivables consist of a large number of typically small to medium sized customers, spread across a number of different market sectors and geographical areas.
Ongoing credit evaluation is performed on the financial condition of accounts receivable and, where appropriate, credit guarantee insurance cover is purchased.

The Group does not have any significant credit risk exposure to any single customer.

18. CURRENT LIABILITIES

Trade payables
Bills of exchange payable
VAT
Social security and payroll taxes
Accruals and deferred income

Trade and other payables

Current liabilities held for sale
Obligations under finance lease contracts (Note 25)
Bank overdrafts
Bank loans
Private placement notes
Derivative financial instruments
Current tax liabilities
Provisions (Note 23)

Current liabilities

108

2013
£m

212.6
15.4
18.6
13.5
86.2

346.3

1.9
2.7
4.9
0.3
–
0.1
5.3
9.5

2012
£m

204.7
13.6
14.6
14.4
85.7

333.0

–
2.2
4.1
1.3
81.8
5.8
4.4
9.3

371.0

441.9

SIG plc Annual Report and Accounts 201318. CURRENT LIABILITIES CONTINUED
£0.7m (2012: £2.0m) of the Group bank loans and overdrafts disclosed on the opposite page are secured on the assets of subsidiary undertakings. All of the
private placement notes and derivative financial instruments are guaranteed by certain companies of the Group. With the exception of finance leases, the
remaining balances are unsecured.

The bank overdrafts are repayable on demand and attract floating rates of interest, which at 31 December 2013 ranged from 0.5% to 4.0% (2012: 0.4% to 5.6%).

Included within overdrafts are prepaid arrangement fees of £1.0m (2012: £1.4m).

£0.2m (2012: £1.1m) of the bank loans due within one year are at variable rates of interest. £0.1m (2012: £0.2m) of the bank loans due within one year attract
an average fixed interest rate of 5.2% (2012: 4.3%).

There are no private placement notes due within one year. In 2012, £51.1m of the private placement notes due within one year were at variable rates of interest,
and £30.7m of the private placement notes due within one year attracted a fixed interest rate of 4.7%.

Trade payables, accruals and deferred income principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period
taken for trade purchases for continuing operations on a constant currency basis is 37 days (2012: 36 days).

The Group has financial risk management policies in place to ensure that all payments are paid within the pre-agreed credit terms.

The Directors consider that the carrying amount of current liabilities approximates to their fair value.

19. NON-CURRENT LIABILITIES

Obligations under finance lease contracts (Note 25):
– due after one and within two years
– due after two and within five years
– due after five years
Bank loans
Private placement notes
Derivative financial instruments
Deferred tax liabilities (Note 24)
Other payables
Retirement benefit obligations (Note 30c)
Provisions (Note 23)

Non-current liabilities

The bank loans included above are repayable as follows:
– due after one and within two years

Total

2013
£m

2012
£m

1.9
4.3
0.9
–
252.5
2.0
14.7
4.3
25.5
24.3

330.4

2013
£m

–

2.7
2.1
0.6
0.1
174.2
4.8
17.3
3.0
34.4
28.9

268.1

2012
£m

0.1

Of the debt noted above due after one year, which includes bank loans, private placement notes and derivative financial instruments, £254.5m (2012: £179.0m)
is guaranteed by certain companies of the Group.

There are no bank loans due after more than one year in 2013. In 2012, £0.1m of the bank loans due after one year attracted an average fixed rate of interest
of 6.6%, were secured on certain of the assets of subsidiary undertakings and were repayable by instalments.

Details of the private placement notes (before applying associated derivative financial instruments) are as follows:

Repaid in 2013
Repayable in 2016
Repayable in 2018
Repayable in 2020
Repayable in 2021
Repayable in 2023

Total

The Directors consider that the carrying amount of non-current liabilities approximates to their fair value.

2013

2012

Fixed
interest
rate
%

n/a
5.9%
5.1%
3.7%
3.9%
4.2%

5.2%

£m

–
146.2
23.0
25.0
16.7
41.6

252.5

£m

81.8
149.5
24.7
–
–
–

256.0

Fixed
interest
rate
%

5.0%
5.8%
4.7%
n/a
n/a
n/a

5.5%

109

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewNOTES TO THE ACCOUNTS CONTINUED

20. FINANCIAL INSTRUMENTS
The “Treasury Risk Management” section of the Strategic Report on pages 35 to 37 includes a review of all treasury, liquidity, interest rate and foreign currency
risks, and provides an explanation of the role that derivative financial instruments have had during the year in changing the risks the Group faces in its activities.
The capital structure of the Group is outlined in the Strategic Report on page 34.

The Group’s financial assets consist of trade and other receivables, assets held for sale, associate loan and deferred consideration, cash and cash equivalents,
and derivative financial instruments. The following financial assets form part of the net debt of the Group:

Cash and cash equivalents (including cash deposits repayable on demand)
Associate loan and deferred consideration
Derivative financial instruments

Total

2013
£m

118.7
–
29.7

148.4

2012
£m

128.1
2.7
43.6

174.4

The Directors consider the fair value of financial assets to approximate to their book value. The interest received on cash deposits is at variable rates
of up to 4% (2012: 4%).

The Group’s credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit ratings assigned
by international credit rating agencies.

Of the above cash and cash equivalents, £36.2m is denominated in Sterling, £69.3m in Euros, £11.5m in Polish Zloty and £1.7m in other currencies.

2013 INTEREST RATE AND CURRENCY PROFILE
The interest rate and currency profile of the Group’s financial liabilities at 31 December 2013, after taking account of interest rate and currency derivative
financial instruments (including derivative assets of £29.7m as noted above), was as follows:

Private placement notes
Other borrowings
Finance lease contracts
Private placement notes
Other borrowings
Finance lease contracts
Other borrowings
Finance lease contracts

Total

Currency

Sterling
Sterling
Sterling
Euro
Euro
Euro
Polish Zloty
Polish Zloty

Total
£m

141.5
0.1
0.2
83.3
5.0
7.7
0.2
1.9

239.9

Floating
rate
£m

37.8
–
–
–
5.0
–
0.2
–

43.0

Effective
fixed interest
rate
%

Fixed
rate
£m

Weighted
average
time for which
rate is fixed
Years

103.7
0.1
0.2
83.3
–
7.7
–
1.9

196.9

4.2%
n/a
7.0%
4.0%
5.0%
7.4%
n/a
7.4%

3.7
0.2
2.2
8.5
1.0
4.1
n/a
3.9

Amount
secured
£m

Amount
unsecured
£m

–
–
0.2
–
0.5
7.7
0.2
1.9

10.5

141.5
0.1
–
83.3
4.5
–
–
–

229.4

In addition to the currency exposures above, the Group has entered into a short-term currency derivative financial instrument which alters the currency profile of
the Group’s financial liabilities. A net investment hedge amounting to an asset of £51.7m and a liability of €62.0m was entered into on 31 December 2013 at
market rates and therefore the fair value is deemed to equate to its book value of £nil. The Group’s net debt at 31 December 2013 was £121.2m, of which
£78.4m is denominated in Euros.

All of the above finance lease contracts, totalling £9.8m, are secured on the underlying assets.

The Directors consider the fair value of the Group’s floating rate financial liabilities to materially approximate to the book values shown in the table above.
The fair value of the Group’s private placement notes approximates to the amount in the value of the financial liabilities above. The remaining fixed rate debt
amounts to £9.9m and relates to finance lease contracts and fixed rate loans. The Directors consider the fair value of these remaining fixed rate debts to
materially approximate to the book values shown above.

2012 INTEREST RATE AND CURRENCY PROFILE
The interest rate and currency profile of the Group’s financial liabilities at 31 December 2012, after taking account of interest rate and currency derivative
financial instruments (including derivative assets of £43.6m as noted above), were as follows:

Currency

Sterling
Euro
Euro
Euro
Polish Zloty
Polish Zloty

Total
£m

143.7
79.3
5.4
6.8
0.1
0.8

236.1

Floating
rate
£m

37.1
46.9
5.1
–
0.1
–

89.2

Fixed
rate
£m

106.6
32.4
0.3
6.8
–
0.8

146.9

Effective
fixed interest
rate
%

Weighted
average
time for which
rate is fixed
Years

4.1%
4.7%
4.6%
5.8%
n/a
7.3%

4.8
0.8
1.4
4.2
n/a
3.9

Amount
secured
£m

Amount
unsecured
£m

–
–
2.0
6.8
0.1
0.8

9.7

143.7
79.3
3.4
–
–
–

226.4

Private placement notes
Private placement notes
Other borrowings
Finance lease contracts
Other borrowings
Finance lease contracts

Total

110

SIG plc Annual Report and Accounts 201320. FINANCIAL INSTRUMENTS CONTINUED
2012 INTEREST RATE AND CURRENCY PROFILE CONTINUED
In addition to the currency exposures noted opposite, the Group entered into a short-term currency derivative financial instrument which altered the currency
profile of the Group’s financial liabilities. A net investment hedge amounting to an asset of £42.4m and a liability of €52.0m was entered into on 31 December
2012 at market rates and therefore the fair value was deemed to equate to its book value of £nil. The Group’s net debt at 31 December 2012 was £105.3m, of
which £65.8m was denominated in Euros.

All of the above finance lease contracts, totalling £7.6m, were secured on the underlying assets.

The Directors considered the fair value of the Group’s floating rate financial liabilities to materially approximate to the book values shown in the table above.
The fair value of the Group’s private placement notes approximated to the amount in the value of the financial liabilities above. The remaining fixed rate debt
amounted to £7.9m and related to finance lease contracts and fixed rate loans. The Directors considered the fair value of these remaining fixed rate debts to
materially approximate to the book values shown above.

In both 2013 and 2012, the interest rate on floating rate financial liabilities is based upon appropriate local market rates.

HEDGING RELATIONSHIPS
Included within financial assets are derivative financial instruments in designated hedge accounting relationships amounting to £29.7m (2012: £43.6m) and
loans and receivables (including cash and cash equivalents and associate loan and deferred consideration) of £496.8m (2012: £483.7m).

Included within financial liabilities are derivative financial instruments in designated hedge accounting relationships amounting to £2.1m (2012: £10.6m) and
liabilities (including trade payables) at amortised cost of £482.0m (2012: £473.8m).

The Group does not trade in derivative financial instruments for speculative purposes. Where the Group can demonstrate a hedge relationship under the
rules of IAS 32 and IAS 39, movements in the fair values of these derivative financial instruments (for cash flow and net investment hedges) will be recognised
in the Consolidated Statement of Comprehensive Income. Where the Group does not meet these rules, movements in the fair value will be recognised as
gains and losses on derivative financial instruments in the Consolidated Income Statement in the column entitled “Other items”.

The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. In order to manage the Group’s
exposure to interest rate and exchange rate changes, the Group utilises both currency and interest rate derivative financial instruments. The fair values of these
derivative financial instruments, adjusted for credit risk, are calculated by discounting the associated future cash flows to net present values using appropriate
market rates prevailing at the balance sheet date.

The Group is required to analyse financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based
on the degree to which the fair value is observable:

– Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

– Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability,

either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

– Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable

market data (unobservable inputs).

All of the financial instruments below are categorised as Level 2.

(A) NET INVESTMENT HEDGES
As at 31 December 2013, the Group had no (31 December 2012: one) cross-currency interest rate derivative financial instruments which swap fixed Sterling
denominated debt into fixed Euro denominated debt. In addition, as at 31 December 2013, the Group had entered into one (31 December 2012: one)
cross-currency forward contract which swaps Sterling denominated debt into Euro denominated debt. This derivative financial instrument forms a net investment
hedge of the Group’s Euro denominated assets and is effective as a net investment hedge, and the fair value movement has therefore been recognised in the
Consolidated Statement of Comprehensive Income.

Hedge of the Group’s Euro denominated assets

Liability at 1 January
Fair value (losses)/gains recognised in equity
Maturity of net investment hedges

Liability at 31 December

2013
£m

(5.8)
(1.4)
7.2

–

2012
£m

(6.8)
1.0
–

(5.8)

(B) CASH FLOW HEDGES
With regard to cash flow hedges, the effective portion of the gain or loss on the hedging instrument is recognised in equity and is subsequently removed
and included in the Consolidated Income Statement within “Finance costs” in the same period the hedged item affects the Consolidated Income Statement.
The cash flow hedges described below are expected to impact upon both profit and loss and cash flow annually over the life of the hedging instrument and
the related debt as interest falls due and upon maturity of the debt and related hedging instrument.

As at 31 December 2013, the Group had entered into two (31 December 2012: three) cross-currency interest rate derivative financial instruments which
swap fixed US Dollar denominated debt held in the UK into fixed Sterling denominated debt. In addition, as at 31 December 2013, the Group had entered
into one (31 December 2012: one) cross-currency interest rate derivative financial instrument which swaps fixed rate US Dollar denominated debt into
variable rate Sterling denominated debt. These derivative financial instruments form a cash flow hedge as they fix the functional currency cash flows of the
Group. All of these derivative financial instruments are designated and effective as cash flow hedges and the fair value movement has therefore been deferred
in equity via the Consolidated Statement of Comprehensive Income. At 31 December 2013, the weighted average maturity date of these swaps is 2.8 years
(31 December 2012: 3.2 years).

111

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewNOTES TO THE ACCOUNTS CONTINUED

20. FINANCIAL INSTRUMENTS CONTINUED
HEDGING RELATIONSHIPS CONTINUED
(B) CASH FLOW HEDGES CONTINUED

Hedge of the Group’s functional currency cash flows

Asset at 1 January
Fair value losses recognised in equity
Maturity of cash flow hedges

Asset at 31 December

2013
£m

33.6
(5.0)
(4.2)

24.4

2012
£m

42.4
(8.8)
–

33.6

As at 31 December 2013, the Group had entered into three (31 December 2012: three) interest rate derivative financial instruments which swap variable
rate debt into fixed rate debt thereby fixing the interest cash flows of the Group. All of these interest rate derivative financial instruments are designated and
effective as cash flow hedges and the fair value movement has therefore been deferred in equity via the Consolidated Statement of Comprehensive Income.
At 31 December 2013, the weighted average maturity date of these swaps is 4.6 years (31 December 2012: 5.6 years).

Hedge of the Group’s interest cash flows

Liability at 1 January
Fair value gains/(losses) recognised in equity

Liability at 31 December

2013
£m

(4.8)
2.8

(2.0)

2012
£m

(3.6)
(1.2)

(4.8)

The following table reconciles the net fair value loss recognised in equity on cash flow hedges as noted above of £2.2m (2012: £10.0m) to the gain on cash
flow hedges recorded in the Consolidated Statement of Comprehensive Income of £1.7m (2012: loss of £0.5m).

Movement in cash flow hedges recognised in equity
Movement in the hedged item
Spreading charge associated with the cancellation of cash flow hedges

Total movement relating to cash flow hedges included in the Consolidated Statement of Comprehensive Income

2013
£m

(2.2)
1.8
2.1

1.7

2012
£m

(10.0)
7.3
2.2

(0.5)

(C) FAIR VALUE HEDGES
As at 31 December 2013, the Group had entered into two (31 December 2012: three) derivative financial instruments which hedge the fair value of the fixed
interest private placement notes drawn down on 1 February 2007. All of these interest rate derivative financial instruments are designated and effective as fair value
hedges and the fair value movement has therefore been recognised immediately in the Consolidated Income Statement.

Hedge of the fair value of fixed interest borrowings

Asset at 1 January
Net fair value losses recognised in the Consolidated Income Statement

Asset at 31 December

2013
£m

10.0
(4.7)

5.3

2012
£m

10.2
(0.2)

10.0

The following table reconciles the losses on derivative financial instruments recognised directly in the Consolidated Income Statement to the movements
in derivative financial instruments.

Fair value losses on derivative financial instruments recognised in the Consolidated Income Statement
Fair value gains attributable to the hedged item recognised in the Consolidated Income Statement
Hedge ineffectiveness recognised in the Consolidated Income Statement
Spreading charge associated with cancellation of cash flow hedges

Total losses on derivative financial instruments included in the Consolidated Income Statement

2013
£m

4.9
(4.9)
(0.2)
2.1

1.9

2012
£m

0.6
(0.6)
(0.4)
2.2

1.8

112

SIG plc Annual Report and Accounts 201321. MATURITY OF FINANCIAL ASSETS AND LIABILITIES
MATURITY OF FINANCIAL LIABILITIES
The maturity profile of the Group’s financial liabilities (inclusive of derivative financial assets) at 31 December 2013 was as follows:

In one year or less
In more than one year but not more than two years
In more than two years but not more than five years
In more than five years

Total

The table above excludes trade payables of £212.6m (2012: £204.7m).

BORROWING FACILITIES
The Group had undrawn committed borrowing facilities at 31 December 2013 as follows:

Expiring in more than one year but not more than two years
Expiring in more than two years but not more than five years

Total

2013
£m

7.8
2.0
145.8
84.3

239.9

2012
£m

89.0
2.8
118.8
25.5

236.1

2013
£m

250.0
–

250.0

2012
£m

–
250.0

250.0

As at 31 December 2013, the Group had £484m of UK committed facilities, of which £250m were undrawn as disclosed above. Since 31 December 2013,
a maximum of £30m has been drawn down against these facilities.

CONTRACTUAL MATURITY ANALYSIS OF THE GROUP’S FINANCIAL LIABILITIES, DERIVATIVE FINANCIAL INSTRUMENTS,
ASSOCIATE LOAN AND DEFERRED CONSIDERATION AND CASH AND CASH EQUIVALENTS
IFRS 7 requires disclosure of the maturity of the Group’s remaining contractual financial liabilities. The tables below have been drawn up based on the undiscounted
contractual maturities of the Group’s financial assets and liabilities including interest that will accrue to those assets and liabilities except where the Group is
entitled and intends to repay the liability before its maturity. Both the inclusion of future interest and the values disclosed being undiscounted results in the total
position being different to that included in the Consolidated Balance Sheet. Given that this is a maturity analysis all trade payables (including amongst other
items payroll and sales tax accruals which are not classified as financial instruments) have been included.

2013 ANALYSIS

Current liabilities
Trade and other payables
Obligations under finance lease contracts
Bank overdrafts
Bank loans
Derivative financial instruments

Total

Non-current liabilities
Obligations under finance lease contracts
Private placement notes
Derivative financial instruments

Total

Total liabilities

Other
Derivative financial instrument assets
Cash and cash equivalents

Total

Grand total

Maturity analysis

< 1 year
£m

1–2 years
£m

2–5 years
£m

> 5 years
£m

Total
£m

Balance
sheet value
£m

346.3
2.7
4.9
0.3
0.1

346.3
2.9
4.9
0.3
0.1

354.3

354.5

7.1
252.5
2.0

261.6

0.3
13.1
1.1

14.5

615.9

369.0

(29.7)
(118.7)

(5.3)
(118.7)

(148.4)

(124.0)

–
–
–
–
–

–

2.4
13.1
1.1

16.6

(5.3)
–

(5.3)

–
–
–
–
–

–

–
–
–
–
–

–

4.3
164.3
2.9

1.0
115.4
–

346.3
2.9
4.9
0.3
0.1

354.5

8.0
305.9
5.1

171.5

116.4

319.0

171.5

116.4

673.5

(19.4)
–

(19.4)

–
–

–

(30.0)
(118.7)

(148.7)

467.5

245.0

11.3

152.1

116.4

524.8

113

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewNOTES TO THE ACCOUNTS CONTINUED

21. MATURITY OF FINANCIAL ASSETS AND LIABILITIES CONTINUED
CONTRACTUAL MATURITY ANALYSIS OF THE GROUP’S FINANCIAL LIABILITIES, DERIVATIVE FINANCIAL INSTRUMENTS,
ASSOCIATE LOAN AND DEFERRED CONSIDERATION AND CASH AND CASH EQUIVALENTS CONTINUED
2012 ANALYSIS

Current liabilities
Trade and other payables
Obligations under finance lease contracts
Bank overdrafts
Bank loans
Private placement notes
Derivative financial instruments^

Total

Non-current liabilities
Obligations under finance lease contracts
Bank loans
Private placement notes
Derivative financial instruments

Total

Total liabilities

Other
Derivative financial instrument assets
Associate loan and deferred consideration
Cash and cash equivalents
Derivative financial instruments^

Total

Grand total

Maturity analysis

< 1 year
£m

1–2 years
£m

2–5 years
£m

> 5 years
£m

Total
£m

Balance
sheet value
£m

333.0
2.2
4.1
1.3
81.8
5.8

333.0
2.4
4.1
1.3
85.3
39.9

428.2

466.0

5.4
0.1
174.2
4.8

0.5
–
9.9
1.2

184.5

11.6

612.7

477.6

(43.6)
(2.7)
(128.1)
–

(11.2)
(2.7)
(128.1)
(28.3)

(174.4)

(170.3)

438.3

307.3

–
–
–
–
–
–

–

2.9
0.1
9.9
1.1

14.0

(6.9)
–
–
–

(6.9)

7.1

–
–
–
–
–
–

–

2.1
0.1
165.6
3.4

171.2

(26.4)
–
–
–

(26.4)

144.8

–
–
–
–
–
–

–

0.7
–
21.1
0.7

22.5

(0.7)
–
–
–

333.0
2.4
4.1
1.3
85.3
39.9

466.0

6.2
0.2
206.5
6.4

219.3

685.3

(45.2)
(2.7)
(128.1)
(28.3)

(0.7)

(204.3)

21.8

481.0

^ In accordance with IFRS 7, for all gross settled derivative financial instruments (i.e. £/€ net investment hedges), the pay leg has been disclosed within liabilities and the receive leg

has been included within other.

22. SENSITIVITY ANALYSIS
IFRS 7 requires the disclosure of a sensitivity analysis that details the effects on the Group’s profit or loss and other equity of reasonably possible fluctuations
in market rates.

This sensitivity analysis has been prepared to illustrate the effect of the following hypothetical variations in market rates on the fair value of the Group’s financial
assets and liabilities:

i) a 1% (100 basis points) increase or decrease in market interest rates; and

ii) a 10% strengthening or weakening of Sterling against all other currencies to which the Group is exposed.

(A) INTEREST RATE SENSITIVITY
The Group is currently exposed to Sterling, Euro and US Dollar interest rates. To a lesser extent the Group is also exposed to Polish Zloty interest rates.

In order to illustrate the Group’s sensitivity to interest rate fluctuations, the following table details the Group’s sensitivity to a 100 basis point change in each
respective interest rate. The sensitivity analysis of the Group’s exposure to interest rate risk at the reporting date has been determined based on the change
taking place at the beginning of the financial year and held constant throughout the reporting period. A positive number indicates an increase in profit or loss
and other equity.

2013 ANALYSIS

GBP

EUR

USD

PLN

Total

+100bp
£m

-100bp
£m

+100bp
£m

-100bp
£m

+100bp
£m

-100bp
£m

+100bp
£m

-100bp
£m

+100bp
£m

-100bp
£m

Profit or loss
Other equity

Total Shareholders’ equity

(0.2)
3.8

0.2(i)
(4.0)(ii)

3.6

(3.8)

(0.1)
–

(0.1)

0.1(iii)
–(iv)

0.1(iv)

–
(3.8)

(3.8)

–(ii)
3.9(ii)

3.9(ii)

–
–

–

–(v)
–(v)

–(v)

(0.3)
–

(0.3)

0.3
(0.1)

0.2

114

SIG plc Annual Report and Accounts 201322. SENSITIVITY ANALYSIS CONTINUED
(A) INTEREST RATE SENSITIVITY CONTINUED
2012 ANALYSIS

GBP

EUR

USD

PLN

Total

+100bp
£m

-100bp
£m

+100bp
£m

-100bp
£m

+100bp
£m

-100bp
£m

+100bp
£m

-100bp
£m

+100bp
£m

-100bp
£m

Profit or loss
Other equity

Total Shareholders’ equity

(0.1)
5.1

5.0

0.1(i)
(5.3)(ii)

(5.2)

(0.1)
0.3

0.2

0.1(iii)
(0.3)(iv)

(0.2)

–
(5.6)

(5.6)

–
5.8(ii)

5.8

0.1
–

0.1

(0.1)(v)
–

(0.1)

(0.1)
(0.2)

(0.3)

0.1
0.2

0.3

The movements noted above are mainly attributable to:

(i) floating rate Sterling debt and cash deposits;

(ii) mark-to-market valuation changes in the fair value of effective cash flow hedges;

(iii) floating rate Euro debt and Euro cash deposits;

(iv) changes in the value of the Group’s Euro denominated assets and liabilities; and

(v) floating rate Polish Zloty debt and cash deposits.

(B) FOREIGN CURRENCY SENSITIVITY
The Group is exposed to currency rate changes between Sterling and Euros, US Dollars and Polish Zloty.

The following table details the Group’s sensitivity to a 10% change in Sterling against each respective foreign currency to which the Group is exposed, indicating
the likely impact of changes in foreign exchange rates on the Group’s financial position. The sensitivity analysis of the Group’s exposure to foreign currency risk at
the reporting date has been determined based on the change taking place at the beginning of the financial year and held constant throughout the reporting period.
A positive number indicates an increase in profit or loss and other equity.

2013 ANALYSIS

Assets and liabilities under the scope of IFRS 7
Profit or loss
Other equity

Total Shareholders’ equity

Total assets and liabilities*
Profit or loss
Other equity

Total Shareholders’ equity

2012 ANALYSIS

Assets and liabilities under the scope of IFRS 7
Profit or loss
Other equity

Total Shareholders’ equity

Total assets and liabilities*
Profit or loss
Other equity

Total Shareholders’ equity

EUR

USD

PLN

Total

+10%
£m

-10%
£m

+10%
£m

-10%
£m

+10%
£m

-10%
£m

+10%
£m

-10%
£m

0.3
(0.8)

(0.5)

(3.5)
(25.1)

(28.6)

(i)

(0.4)a
1.0(ii)

0.6

2.6(iii)
32.4(iv)

35.0

–
(1.7)

(1.7)

–
(1.7)

(1.7)

–
2.0(ii)

2.0

–
2.1(ii)

2.1

–
(1.4)

(1.4)

(0.1)
(3.6)

(3.7)

–(v)
1.7(ii)

1.7

0.1(vi)
4.3(iv)

4.4

0.3
(3.9)

(3.6)

(3.6)
(30.4)

(34.0)

(0.4)
4.7

4.3

2.7
38.8

41.5

EUR

USD

PLN

Total

+10%
£m

-10%
£m

+10%
£m

-10%
£m

+10%
£m

-10%
£m

+10%
£m

-10%
£m

0.4
1.4

1.8

(0.5)(i)
(0.9)(ii)

(1.4)

(3.5)
(29.7)

2.4(iii)
39.0(iv)

(33.2)

41.4

–
(2.6)

(2.6)

–
(2.6)

(2.6)

–
3.1(ii)

3.1

–
2.5(ii)

2.5

–
(1.4)

(1.4)

–
(3.6)

(3.6)

–(v)
1.7(ii)

1.7

–(vi)
4.4(iv)

4.4

0.4
(2.6)

(2.2)

(3.5)
(35.9)

(39.4)

(0.5)
3.9

3.4

2.4
45.9

48.3

* Certain assets and liabilities such as inventories, non-current assets and provisions do not come under the scope of IFRS 7. Therefore, in order to present a complete analysis

of the Group’s exposure to movements in foreign currency exchange rates, the exposure on the Group’s total assets and liabilities has been disclosed.

The movements noted above are mainly attributable to:

(i) gains and losses on derivative financial instruments on the Group’s £/€ net investment hedges and retranslation of Euro interest flows;

(ii) mark-to-market valuation changes in the fair value of effective cash flow and net investment hedges and retranslation of assets and liabilities under the scope of IFRS 7;

(iii) retranslation of Euro profit streams and gains and losses on derivative financial instruments on the Group’s £/€ net investment hedges;

(iv) retranslation of foreign currency denominated assets and liabilities outside the scope of IFRS 7 and mark-to-market valuation changes in the fair value

of fully effective cash flow and net investment hedges;

(v) retranslation of Polish Zloty interest flows; and

(vi) retranslation of Polish Zloty profit streams.

115

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewNOTES TO THE ACCOUNTS CONTINUED

23. PROVISIONS FOR LIABILITIES AND CHARGES

At 1 January 2013
Unused amounts reversed in the period
Utilised
New provisions
Transferred in from accruals
Reclassified as held for sale
Exchange differences

At 31 December 2013

Included in current liabilities
Included in non-current liabilities

Total

Onerous
leases
£m

Leasehold
dilapidations
£m

Contingent
consideration
£m

Other
amounts
£m

18.4
(0.1)
(7.8)
3.9
0.1
(0.3)
0.2

14.4
(0.1)
(1.0)
1.6
0.1
(0.1)
–

14.4

14.9

0.3
(0.3)
–
0.6
–
–
–

0.6

5.1
(1.6)
(2.2)
2.4
0.2
–
–

3.9

2013
£m

9.5
24.3

33.8

Total
£m

38.2
(2.1)
(11.0)
8.5
0.4
(0.4)
0.2

33.8

2012
£m

9.3
28.9

38.2

ONEROUS LEASES
The Group has provided for the rental payments due over the remaining term of existing operating lease contracts where a period of vacancy is ongoing.
The provision has been calculated after taking into account both the periods over which the properties are likely to remain vacant and the likely income from
existing and future sub-lease agreements on a contract-by-contract basis. The provision covers potential transfer of economic benefit over the full range of
current lease commitments disclosed in Note 30.

LEASEHOLD DILAPIDATIONS
This provision relates to contractual obligations to reinstate leasehold properties to their original state of repair. The provision is calculated with reference
to the expired portion of individual lease agreements where such a clause exists in the lease contract. The transfer of economic benefit will be made at
the end of the leases as set out in Note 30.

CONTINGENT CONSIDERATION
Contingent consideration relates to the amounts due to vendors of prior year acquisitions providing certain future profit targets are met. The transfer
of economic benefit is expected to be made within three years.

OTHER AMOUNTS
Other amounts relate principally to claims and warranty provisions. The transfer of economic benefit is expected to be made between one and three years’ time.

24. DEFERRED TAX
The net deferred tax asset at the end of the year is analysed as follows:

Deferred tax assets
Deferred tax liabilities

Net deferred tax asset

2013
£m

22.2
(14.7)

7.5

2012
£m

29.0
(17.3)

11.7

116

SIG plc Annual Report and Accounts 201324. DEFERRED TAX CONTINUED
SUMMARY OF DEFERRED TAX
The different components of deferred tax assets and liabilities recognised by the Group and movements thereon during the current and prior years are
analysed below:

At 31 December 2011
Credit/(charge) to income
Credit/(charge) to equity
Added on acquisition
Exchange differences
Transfer between categories
Change of rate charged to equity

At 31 December 2012

Credit/(charge) to income
Credit/(charge) to equity
Added on acquisition
Exchange differences
Change of rate charged to equity

At 31 December 2013

Goodwill
and
intangibles
£m

Property,
plant and
equipment
£m

(14.0)
5.1
–
(1.0)
–
–
–

(9.9)

3.8
–
(1.8)
–
–

(7.9)

7.5
(3.2)
–
–
0.1
–
–

4.4

(3.1)
–
–
(0.1)
–

1.2

Tax
assets
£m

12.2
(0.4)
–
–
–
(1.1)
–

10.7

(2.2)
–
–
–
–

8.5

Retirement
benefit
obligations
£m

Losses
£m

Other
£m

9.7
(2.3)
0.2
–
–
1.5
(0.8)

8.3

0.2
(2.0)
–
–
(0.9)

5.6

0.5
0.3
–
–
–
–
–

0.8

(0.6)
–
0.8
–
–

1.0

(1.0)
(1.1)
(0.2)
–
0.1
(0.4)
–

(2.6)

1.7
0.1
–
(0.1)
–

(0.9)

Total
£m

14.9
(1.6)
–
(1.0)
0.2
–
(0.8)

11.7

(0.2)
(1.9)
(1.0)
(0.2)
(0.9)

7.5

The deferred tax charge for 2013 includes a charge of £0.7m arising from the change in domestic tax rates in the countries in which the Group operates
and is net of a charge of £2.0m relating to retirement benefit obligations and a credit of £1.3m (£0.5m goodwill and intangibles and £0.8m other) in relation
to the reversal of the deferred tax in respect of the German Roofing business divested in 2014.

Given current and forecast trading the Directors consider that recognition of the deferred tax assets above is appropriate.

The Group has not taken account of excess non-trading losses associated with financial instruments in determining the above deferred tax asset at 31 December 2013
on the grounds of uncertainty. During the year, the Group has utilised c.£6m (gross) of previously unrecognised deferred tax on non-trading losses. In this respect, any
future utilisation of the unrecognised deferred tax asset associated with the gross non-trading losses of £69m (2012: £75m) will result in a reduction of cash payments
of tax and will also result in a profit and loss benefit in the year of utilisation.

There are other potential deferred tax assets in relation to tax losses totalling £8m (2012: £8m) that have not been recognised on the basis that the realisation
of their future economic benefit is uncertain. The tax losses in Poland of £1m expire after five years and the tax losses in The Netherlands of £3m expire after
nine years. The remaining tax losses may be carried forward indefinitely.

The total gross value of unrecognised tax losses at 31 December 2013 therefore amounted to £77m (2012: £83m).

At the balance sheet date, the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries with a lower rate of corporation
tax than that suffered in the UK, for which no deferred tax liabilities have been recognised, was £17m (2012: £15m). No liability has been recognised in respect
of these differences as the Group is in a position to control the timing of the reversal of the temporary differences and it is probable that such differences will not
reverse in the foreseeable future.

25. OBLIGATIONS UNDER FINANCE LEASE CONTRACTS

Amounts payable under finance lease contracts:
– within one year
– after one year and within five years
– after five years

Less: future finance charges

Present value of lease obligations

Minimum lease payments

Present value of minimum
lease payments

2013
£m

2.9
7.0
1.0

10.9

(1.1)

9.8

2012
£m

2.4
5.5
0.7

8.6

(1.0)

7.6

2013
£m

2.7
6.2
0.9

9.8

2012
£m

2.2
4.8
0.6

7.6

The Group leases certain of its motor vehicles, fixtures and equipment under finance lease contracts.

The average remaining lease term is 4.1 years (2012: 4.2 years). For the year ended 31 December 2013, the average effective borrowing rate was 7.4%
(2012: 6.0%). Interest rates are fixed at the contract date.

The carrying amount of the Group’s lease obligations approximates to their fair value.

117

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewNOTES TO THE ACCOUNTS CONTINUED

26. CALLED UP SHARE CAPITAL

Authorised:
800,000,000 ordinary shares of 10p each (2012: 800,000,000)

Allotted, called up and fully paid:
591,100,447 ordinary shares of 10p each (2012: 590,837,435)

2013
£m

2012
£m

80.0

59.1

There were 263,012 shares allotted during 2013 (2012: 8,096). The Company has one class of ordinary share which carries no right to fixed income.

At 31 December 2013 the following share options were outstanding:

Scheme and date of grant

Long-term Incentive Plan
07/06/2010
27/04/2011
26/04/2012
03/10/2012
18/04/2013
Executive Share Option Scheme
11/04/2003
Savings Related Schemes
20/10/2010

Number of shares

Exercise dates

At
31 December
2012

Granted

Exercised

Lapsed

At
31 December
2013

Original
option
price per
10p share

Adjusted
option
price per
10p share*

Date from
which option
may be
exercised

Date on
which option
expires

1,459,751
1,106,021
1,504,136
185,668

–
–
–
–
– 1,232,817

– (1,459,751)
–
–
–
–

–
– 1,106,021
– 1,504,136
–
185,668
– 1,232,817

0.0p
0.0p
0.0p
0.0p
0.0p

0.0p 07/06/2013 06/06/2020
0.0p 27/04/2014 26/04/2021
0.0p 26/04/2015 25/04/2022
0.0p 03/10/2015 02/10/2022
0.0p 18/04/2016 17/04/2023

14,870

–

(14,870)

–

205.5p

169.7p 11/04/2006 10/04/2013

475,237

– (263,012)

(58,160)

154,065

95.0p

95.0p 01/12/2013 30/06/2015

Total

4,745,683 1,232,817 (263,012) (1,532,781) 4,182,707

* Adjusted to reflect the impact of the placing and open offer and firm placing in 2009.

27. RECONCILIATION OF OPERATING PROFIT TO CASH GENERATED FROM OPERATING ACTIVITIES

Operating profit

Depreciation (Note 10)
Amortisation of computer software (Note 14)
Impairment of property, plant and equipment (Note 10)
Loss arising on the sale or agreed sale of businesses and associated impairment charges (Note 12)
Amortisation of acquired intangibles (Note 14)
Goodwill impairment charge (Note 13)
Profit on sale of property, plant and equipment
Share-based payments
Working capital movements:
– increase in inventories
– (increase)/decrease in receivables
– decrease in payables

Cash generated from operating activities

2013
£m

15.4

21.8
1.9
0.2
42.8
20.6
2.0
(1.2)
0.4

–
(12.0)
(5.7)

86.2

2012
£m

57.9

23.6
–
1.0
4.6
22.0
–
(1.1)
(0.2)

(4.0)
4.0
(19.1)

88.7

Included within the cash generated from operating activities is cash paid in respect of current year and prior year restructuring costs of £13.3m (2012: £12.7m).
Also included within the cash generated from operating activities is a defined benefit pension scheme employer’s special contribution of £3.0m (2012: £7.0m).
The decrease in payables of £5.7m includes the payment of £0.4m contingent consideration in respect of the 2012 acquisition of Monteis Materiaux.

28. RECONCILIATION OF NET CASH FLOW TO MOVEMENTS IN NET DEBT

(Decrease)/increase in cash and cash equivalents in the year
Cash flow from decrease in debt

(Increase)/decrease in net debt resulting from cash flows
Debt added on acquisition
Non-cash items^
Exchange differences

(Increase)/decrease in net debt in the year
Net debt at 1 January

Net debt at 31 December

2013
£m

(11.9)
4.0

(7.9)
(0.3)
(6.7)
(1.0)

(15.9)
(105.3)

(121.2)

2012
£m

2.0
6.2

8.2
–
(0.8)
3.2

10.6
(115.9)

(105.3)

^ 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.

Net debt is defined as the net of cash and cash equivalents, bank overdrafts, financial derivatives, associate loans and deferred consideration, private placement
debt, bank loans and obligations under finance lease contracts.

118

SIG plc Annual Report and Accounts 201329. ANALYSIS OF NET DEBT

Cash and cash equivalents
Bank overdrafts

Net cash and cash equivalents

Financial assets – derivative financial instruments
Associate loan and deferred consideration
Debts due within one year
Debts due after one year
Finance lease contracts

Net debt

At
31 December
2012
£m

Cash
flows
£m

Debt added
on acquisition
£m

Non-cash

items^
£m

Exchange
differences
£m

At
31 December
2013
£m

128.1
(4.1)

124.0

43.6
2.7
(88.9)
(179.1)
(7.6)

(105.3)

(11.2)
(0.7)

(11.9)

–
(1.2)
87.6
(85.7)
3.3

(7.9)

–
–

–

–
–
–
–
(0.3)

(0.3)

–
–

–

(13.9)
(1.5)
5.7
8.0
(5.0)

(6.7)

1.8
(0.1)

1.7

–
–
(4.8)
2.3
(0.2)

(1.0)

2013
£m

3.1

118.7
(4.9)

113.8

29.7
–
(0.4)
(254.5)
(9.8)

(121.2)

2012
£m

9.8

^ 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.

30. GUARANTEES AND OTHER FINANCIAL COMMITMENTS
(A) CAPITAL COMMITMENTS

Contracted but not provided for

(B) LEASE COMMITMENTS
The Group leases a number of its premises under operating leases which expire between 2014 and 2049. The rentals payable are subject to renegotiation
at various dates. The total future minimum lease rentals under the foregoing leases are as follows:

2013
£m

2012
£m

Minimum lease rentals due:
– within one year
– after one year and within five years
– after five years

46.6
123.4
74.8

244.8

The Group also leases certain items of plant and machinery whose total future minimum lease rentals under the foregoing leases are as follows:
2013
£m

Minimum lease rentals due:
– within one year
– after one year and within five years
– after five years

14.0
19.8
0.4

34.2

45.1
123.9
85.4

254.4

2012
£m

13.8
21.5
0.9

36.2

The German Roofing business which was held for sale at 31 December 2013 has not been included within the 2013 figures.

(C) PENSION SCHEMES
The Group operates a number of pension schemes, five (2012: five) of which provide defined benefits based on final pensionable salary. Of these schemes,
one (2012: one) has assets held in a separate trustee administered fund and four (2012: four) are overseas book reserve schemes. The Group also operates
a number of defined contribution schemes, all of which are independently managed.

The trustees of the pension fund are required by law to act in the interest of the fund and of all relevant stakeholders in the scheme. The trustees of the
pension fund are responsible for the investment policy with regard to the assets of the fund.

In The Netherlands, the Group participates in the industry-wide pension plan for the construction materials industry (“BPF HiBiN”). The pension plan classifies as a
multi-employer defined benefit scheme under IAS 19, but is recognised in the Accounts as a defined contribution scheme since the pension fund is not able to
provide sufficient information to allow SIG’s share of the assets and liabilities to be separately identified. Therefore, the Group’s annual pension expense for this
scheme is equal to the required contribution each year. The coverage ratio of the multi-employer union plan increased to 107.5% as at 31 December 2013 (31
December 2012: 106.2%). As the coverage ratio improved, no change was made to the pension premium percentage of 22.2% (2012: 22.2%). The
coverage ratio is calculated by dividing the fund’s assets by the total sum of pension liabilities and is based upon market interest rates.

The Group’s total pension charge for the year including amounts charged to interest was £8.6m (2012: £2.8m), of which a charge of £3.4m (2012: credit of £1.8m)
related to defined benefit pension schemes and £5.2m (2012: £4.6m) related to defined contribution schemes. Included within the defined benefit pension
scheme credit in 2012 was a curtailment gain of £4.4m.

119

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewNOTES TO THE ACCOUNTS CONTINUED

30. GUARANTEES AND OTHER FINANCIAL COMMITMENTS CONTINUED
(C) PENSION SCHEMES CONTINUED
DEFINED BENEFIT PENSION SCHEME VALUATIONS
In accordance with IAS 19 the Group has recognised all actuarial gains and losses in full in the period in which they arise in the Consolidated Statement
of Comprehensive Income.

The actuarial valuations of the defined benefit pension schemes are assessed by an independent actuary every three years who recommends the rate
of contribution payable each year. The last formal actuarial valuation of the SIG plc Retirement Benefits Plan, the UK scheme, was conducted at 31 December 2010 and
showed that the market value of the scheme’s assets was £98.2m and their actuarial value covered 75% of the benefits accrued to members after allowing for expected
future increases in pensionable salaries.

The other four schemes are book reserve schemes whereby the sponsoring company does not hold any separate assets to fund the pension scheme but makes
a reserve in its accounts. Therefore, these schemes do not hold separate scheme assets. The liabilities of the schemes are met by the sponsoring companies.

The schemes typically expose the Group to actuarial risks such as: investment risk; interest rate risk; longevity risk; and salary risk. The risk relating to benefits to be paid
to the dependants of scheme members on death in service is re-insured by an external insurance company.

Risk

Description

Investment risk

Interest rate
risk

Longevity risk

Salary risk

The present value of the defined benefit plan liability is calculated using a discount rate determined by reference to high quality
corporate bond yields; if the return on plan assets falls below this rate, it will create a plan deficit. Currently the plan has relatively
balanced investments in line with the trustees’ Statement of Investment Principles between equity securities and debt instruments. Due
to the long-term nature of the plan liabilities, the trustees of the pension fund consider it appropriate that a reasonable portion of the
plan assets should be invested in growth assets to leverage the return generated by the fund.

A decrease in the bond interest rate will increase the plan liability but this will be partially offset by an increase in the return on the
plan’s debt investments.

The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants
both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.

The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such,
an increase in the salary of the plan participants will increase the plan’s liability. However, a pensionable salary cap was introduced
from 1 July 2012 of 2.5% per annum.

CONSOLIDATED INCOME STATEMENT CHARGES
The pension charge for the year including amounts charged to interest of £1.1m (2012: £0.5m) relating to the defined benefit pension schemes was £3.4m (2012: credit
of £1.8m). The prior year credit included a curtailment gain of £4.4m which arose following changes to cap the amount by which pensionable pay may increase and to limit
the amount by which all pensionable service earned from 1 July 2012 would change to be the increase in the Consumer Price Index (“CPI”) capped at 2.5% per annum.

In accordance with IAS 19, the charge/(credit) for the defined benefit schemes has been calculated as the sum of the cost of benefits accruing in the year, the
increase in the value of benefits already accrued and the expected return on assets. In accordance with revisions to IAS 19, the calculation and the treatment
of the inherent interest cost are now on a net basis. This has caused both finance income and finance costs to be reduced by £5.3m and £6.0m in the periods
ended 31 December 2013 and 31 December 2012 respectively. The actuarial valuations described previously have been updated at 31 December 2013 by
a qualified actuary using revised assumptions that are consistent with the requirements of IAS 19. Investments have been valued, for this purpose, at fair value.

The UK defined benefit scheme is closed to new members and has an age profile that is rising, and therefore under the projected unit method the current
service cost will increase as the members of the scheme approach retirement. The four overseas book reserve schemes remain open to new members.

CONSOLIDATED BALANCE SHEET LIABILITY
The balance sheet position in respect of the five defined benefit schemes can be summarised as follows:

Pension liability before taxation
Related deferred tax asset

Pension liability after taxation

2013
£m

(25.5)
5.6

(19.9)

2012
£m

(34.4)
8.3

(26.1)

The actuarial gain of £8.3m (2012: loss of £0.2m) for the year, together with the associated deferred tax charge of £2.0m (2012: credit of £0.2m) and deferred
tax charge of £0.9m (2012: £0.8m) in respect of the change in the UK standard rate of corporation tax to 20% effective but not enacted from 1 April 2013, has
been recognised in the Consolidated Statement of Comprehensive Income. In addition a deferred tax credit of £0.2m (2012: charge of £2.3m) has been
recognised in the Consolidated Income Statement. A full reconciliation of the deferred tax movement is shown in Note 24.

The cumulative actuarial gains and losses gross of deferred tax (from 2004 onwards) recognised in the Consolidated Statement of Comprehensive Income
amounted to a loss of £31.9m (2012: £40.2m).

Of the above pension liability before taxation, £16.6m (2012: £26.3m) relates to wholly or partly funded schemes and £8.9m (2012: £8.1m) relates
to the overseas unfunded schemes.

120

SIG plc Annual Report and Accounts 201330. GUARANTEES AND OTHER FINANCIAL COMMITMENTS CONTINUED
(C) PENSION SCHEMES CONTINUED
CONSOLIDATED BALANCE SHEET LIABILITY CONTINUED
The movement in the pension liability before taxation in the year can be summarised as follows:

Pension liability at 1 January
Current service cost
Curtailment gain
Contributions
Net finance cost
Actuarial gain/(loss)

Pension liability at 31 December

2013
£m

(34.4)
(2.3)
–
4.0
(1.1)
8.3

(25.5)

Contributions of approximately £3.5m are expected to be paid to defined benefit pension schemes during the annual period beginning 1 January 2014.
The Group is contracted to pay £2.5m per annum to January 2020 and a final payment of £3m at January 2021.

The principal assumptions used for the IAS 19 actuarial valuation of the schemes were:

Rate of increase in salaries
Rate of fixed increase of pensions in payment
Rate of increase of LPI pensions in payment
Discount rate
Inflation assumption

2013
%

2.5
2.5
3.3
4.5
3.3

2012
%

2.5
2.5
2.9
4.5
2.9

2012
£m

(44.5)
(2.1)
4.4
8.5
(0.5)
(0.2)

(34.4)

2011
%

3.5
3.5
3.0
4.7
3.0

Deferred pensions are revalued to retirement in line with the schemes’ rules and statutory requirements, with the inflation assumption used for LPI revaluation
in deferment.

The life expectancy for a male employee beyond the normal retirement age of 60 is 28.1 years (2012: 28.7 years). The life expectancy on retirement
at age 60 of a male employee currently aged 40 years is 29.8 years (2012: 29.9 years).

If the discount rate were to be increased/decreased by 0.25%, this would decrease/increase the Group’s gross pension scheme deficit by £7.0m. If the rate
of inflation increased/decreased by 0.25% this would increase/decrease the Group’s gross pension scheme deficit by £1.3m. If the life expectancy for employees
increased/decreased by one year the Group’s gross pension scheme deficit would increase/decrease by £4.1m.

The average duration of the defined benefit scheme obligation at 31 December 2013 is 20 years (2012: 21 years).

The fair value of the assets in the schemes at each balance sheet date were:

Equities
Bonds
Other

Total fair value of assets

2013
£m

62.7
44.9
23.5

2012
£m

57.8
44.6
14.8

2011
£m

50.3
40.4
9.5

131.1

117.2

100.2

2010
£m

55.0
37.0
6.2

98.2

2009
£m

50.7
36.7
–

87.4

The amount included in the Consolidated Balance Sheet arising from the Group’s obligation in respect of its defined benefit schemes is as follows:

Fair value of assets
Present value of scheme liabilities

Net liability recognised in the Consolidated Balance Sheet

The overall expected rate of return is based upon market conditions at the balance sheet date.

2013
£m

131.1
(156.6)

(25.5)

2012
£m

117.2
(151.6)

(34.4)

2011
£m

100.2
(144.7)

(44.5)

2010
£m

98.2
(123.4)

(25.2)

2009
£m

87.4
(111.4)

(24.0)

Amounts recognised in the Consolidated Income Statement in respect of these defined benefit schemes are as follows:

Current service cost
Curtailment gain
Net finance cost

Amounts recognised in the Consolidated Income Statement

2013
£m

2.3
–
1.1

3.4

2012
£m

2.1
(4.4)
0.5

(1.8)

All of the current service cost for the year has been included within administrative expenses in the Consolidated Income Statement. The net finance cost has
been included within finance costs (see Note 3).

The actual return on scheme assets was £14.3m (2012: £12.4m).

121

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewNOTES TO THE ACCOUNTS CONTINUED

30. GUARANTEES AND OTHER FINANCIAL COMMITMENTS CONTINUED
(C) PENSION SCHEMES CONTINUED
CONSOLIDATED BALANCE SHEET LIABILITY CONTINUED
Analysis of the actuarial gain/(loss) recognised in the Consolidated Statement of Comprehensive Income in respect of the schemes:

Actual return less expected return on assets
Effect of changes in demographic assumptions
Effect of changes in financial assumptions

Remeasurement of the defined benefit liability

The remeasurement of the net defined benefit liability is included within the Consolidated Statement of Comprehensive Income.

Movements in the present value of the schemes’ liabilities were as follows:

Present value of schemes’ liabilities at 1 January
Current service cost
Interest on pension schemes’ liabilities
Remeasurement gains/(losses):
– actuarial gain arising from changes in demographic assumptions
– actuarial loss arising from changes in financial assumptions
Curtailment gain
Benefits paid

Present value of schemes’ liabilities at 31 December

Movements in the fair value of the schemes’ assets were as follows:

Fair value of schemes’ assets at 1 January
Finance income
Actual return less expected return on assets
Contributions from sponsoring companies
Benefits paid

Fair value of schemes’ assets at 31 December

2013
£m

9.0
0.5
(1.2)

8.3

2013
£m

(151.6)
(2.3)
(6.4)

0.5
(1.2)
–
4.4

2012
£m

6.4
–
(6.6)

(0.2)

2012
£m

(144.7)
(2.1)
(6.5)

–
(6.6)
4.4
3.9

(156.6)

(151.6)

2013
£m

117.2
5.3
9.0
4.0
(4.4)

131.1

2012
£m

100.2
6.0
6.4
8.5
(3.9)

117.2

(D) CONTINGENT LIABILITIES
As at the balance sheet date, the Group had outstanding obligations under customer guarantees, claims, standby letters of credit and discounted bills of up
to £12.9m (2012: £12.2m). Of this amount, £10.0m (2012: £10.0m) related to standby letters of credit issued by The Royal Bank of Scotland plc in respect
of the Group’s insurance arrangements.

31. RELATED PARTY TRANSACTIONS
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and have therefore not been disclosed.

SIG has a shareholding of less than 0.1% in a German purchasing co-operative. Net purchases from this co-operative (on commercial terms) totalled £364m
in 2013 (2012: £405m). At the balance sheet date trade payables in respect of the co-operative amounted to £15m (2012: £12m).

During the year, the Group exercised its option to acquire the remaining 18% non-controlling interest of Air Trade Centre Romania s.r.l. Of the
18% shareholding, 16% was purchased in 2013, with the remaining 2% purchased in 2014. The Group now holds 100% of the ordinary share capital
of Air Trade Centre Romania s.r.l.

Other than the relationship disclosed in Note 11, the Group has not identified any other material related party transactions in the year ended 31 December 2013.

REMUNERATION OF KEY MANAGEMENT PERSONNEL
The total remuneration of the key management personnel of the Group, being the Executive Committee members and the Non-Executive Directors,
(see page 54) was £4.5m (2012: £3.3m). Further details of Directors’ remuneration can be found on pages 72 and 75. In addition, the Group recognised
a share-based payment charge under IFRS 2 in respect of the Directors of £0.1m (2012: credit of £0.1m).

As at 31 December 2013 the Group had accrued for £0.2m of costs relating to Mr. C. J. Davies’ notice period (2012: £0.8m).

32. SUBSIDIARIES
Details of the Group’s principal trading subsidiaries, all of which have been included in the Consolidated Accounts, are shown on page 135.

122

SIG plc Annual Report and Accounts 2013INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF SIG PLC

OPINION ON FINANCIAL STATEMENTS OF SIG PLC
In our opinion:

X the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2013 and of the

Group’s loss for the year then ended;

X the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union;

X the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

X the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial statements,

Article 4 of the IAS Regulation.

The financial statements comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated and Company Balance
Sheets, the Consolidated Cash Flow Statement, the Consolidated Statement of Changes in Equity, the Statements of Significant Accounting Policies, the Critical Accounting
Judgments and Key Sources of Estimation Uncertainty and the related consolidated Notes 1 to 32 and the related Company Notes 1 to 14. The financial reporting
framework that has been applied in the preparation of the Group financial statements is applicable law and IFRSs as adopted by the European Union. The financial
reporting framework that has been applied in the preparation of the Parent Company financial statements is applicable law and United Kingdom Accounting
Standards (United Kingdom Generally Accepted Accounting Practice).

GOING CONCERN
As required by the Listing Rules we have reviewed the Directors’ Statement contained within the Strategic Review on page 37 that the Group is a going concern.
We confirm that:

X we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate; and

X we have not identified any material uncertainties related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern.

However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s ability to continue as a going concern.

OUR ASSESSMENT OF RISKS OF MATERIAL MISSTATEMENT
The assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy, the allocation of resources in the audit
and directing the efforts of the engagement team:

Risk

How the scope of our audit responded to the risk

The assessment of the carrying value of goodwill and intangible assets

The judgments made by management in relation to the financial performance
of the business units, discount rates and perpetuity growth rates are subjective.
As reported previously, reasonably possible downside scenarios would give
rise to an impairment of Larivière and so this is an important judgment
and sensitivity.

The recognition and measurement of supplier rebate income

Rebate income earned by the Group is significant and affects the recorded
value of both cost of sales and inventory. In some cases, rebate calculations
are complex and judgmental especially where they are linked to volume or
other thresholds and are in respect of non-coterminous trading periods.

We assessed management’s assumptions (described in Note 13 to the financial
statements) used in the impairment model for goodwill and intangible assets,
including specifically the cash flow projections, discount rates and perpetuity
rates used. We have compared these to industry forecasts, the Group’s historical
performance, budgeting accuracy, benchmarking against comparator groups and
our understanding of the future prospects of the business. Particular focus has
been given to Larivière.

We carried out testing of the design and implementation of key controls related
to the recognition of supplier rebate income. We circularised suppliers to confirm
a sample of amounts receivable (including high value balances) and checked income
earned by supplier against historical rates achieved and purchasing records.
We assessed whether the income recognition policies and estimates were
appropriate particularly when there were non-coterminous trading periods.

The recognition and presentation of other items in the Consolidated Income Statement

The Group has consistently used a three column approach for the presentation
of the Consolidated Income Statement to separately identify certain income/
costs which are non-underlying in nature. This included certain costs relating to a
significant restructuring programme. The inappropriate inclusion of income/costs
within “Other items” could distort the underlying profit disclosed.

We assessed the nature of the income/costs included in other items and checked
that they met the Group’s definition for separate presentation, set out in the
Statement of Significant Accounting Policies on page 89. Where income/costs
have been presented as other items, we obtained evidence that enabled us to
assess whether this presentation is appropriate. We performed detailed substantive
testing for a sample of the costs/income and checked to supporting documentation.

The recognition and measurement of provisions for trade receivables and inventories

Trade receivables and inventories represent 80% of the Group’s current
assets and therefore the judgments regarding aged or impaired receivables
and slow moving/obsolete inventory provisions are significant.

We considered the appropriateness of management’s assumptions and
estimates in relation to the provisions for trade receivables and inventories.
In assessing completeness and accuracy we have considered evidence of
customer disputes, tested the ageing of the ledgers, checked against subsequent
cash receipts or post year end/historical sales reports.

The Audit Committee’s consideration of these risks is set out on page 61.

Our audit procedures relating to these matters were designed in the context of our audit of the financial statements as a whole, and not to express an opinion on
individual accounts or disclosures. Our opinion on the financial statements is not modified with respect to any of the risks described above, and we do not express
an opinion on these individual matters.

123

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewINDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF SIG PLC

OUR APPLICATION OF MATERIALITY
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable
person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.

When establishing our overall audit strategy, we determined a magnitude of uncorrected misstatements that we judged would be material for the financial statements
as a whole. In line with generally accepted practice, we determined planning materiality for the Group at £6m, which is below 7% of underlying pre-tax profit (as
defined on page 83) and below 1% of equity. We use underlying pre-tax profit to exclude the effect of volatility from our determination and because it represents
one of the primary KPIs referred to both internally and externally. The audit of “Other items” is treated as a significant risk as set out above.

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £120,000, as well as differences below that
threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when
assessing the overall presentation of the financial statements.

AN OVERVIEW OF THE SCOPE OF OUR AUDIT
The Group audit and audit of the consolidation is performed at the Group’s head office in Sheffield. The accounting records of the trading businesses within
the Group are spread across the countries in which the Group operates. We perform audit work in each of the eight principal countries of operation. Full
scope audits were performed for the principal business units covering in excess of 90% of the Group’s total assets, revenue and operating profit. A further 6%
of the Group’s total assets, revenue and operating profit were subject to specified audit procedures where the extent of our testing was based on our
assessment of the risks of material misstatement and of the materiality of the Group’s operations at those locations. They were also selected to provide an
appropriate basis for undertaking audit work to address the risks of material misstatement identified above. Our full scope audits and the specified audit
procedures were executed at levels of materiality applicable to each individual entity which were lower than Group materiality.

The Group audit team continued to follow a programme of planned visits that has been designed so that a senior member of the Group audit team visits
each of the locations where the Group audit scope was focused at least once every two years and the most significant of them at least once a year including
attendance at the close meetings.

OPINION ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion:

X the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and

X the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent

with the financial statements.

MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
ADEQUACY OF EXPLANATIONS RECEIVED AND ACCOUNTING RECORDS
Under the Companies Act 2006 we are required to report to you if, in our opinion:

X we have not received all the information and explanations we require for our audit; or

X adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches

not visited by us; or

X the Parent Company financial statements are not in agreement with the accounting records and returns.

We have nothing to report in respect of these matters.

DIRECTORS’ REMUNERATION
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of Directors’ remuneration have not been made or
the part of the Directors’ Remuneration Report to be audited is not in agreement with the accounting records and returns. Under the Listing Rules we
are required to review certain elements of the Directors’ Remuneration Report. We have nothing to report arising from these matters or our review.

CORPORATE GOVERNANCE STATEMENT
Under the Listing Rules we are also required to review the part of the Corporate Governance Statement relating to the Company’s compliance with the
nine provisions of the UK Corporate Governance Code. We have nothing to report arising from our review.

OUR DUTY TO READ OTHER INFORMATION IN THE ANNUAL REPORT
Under International Standards on Auditing (UK and Ireland), we are required to report to you if, in our opinion, information in the Annual Report is:

X materially inconsistent with the information in the audited financial statements; or

X apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group acquired in the course of performing our audit; or

X otherwise misleading.

In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired during the audit and the Directors’
statement that they consider the Annual Report is fair, balanced and understandable and whether the Annual Report appropriately discloses those matters that
we communicated to the Audit Committee which we consider should have been disclosed. We confirm that we have not identified any such inconsistencies
or misleading statements.

124

SIG plc Annual Report and Accounts 2013RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITOR
As explained more fully in the Directors’ Responsibilities Statement, the Directors are responsible for the preparation of the financial statements and for being
satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law
and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for
Auditors. We also comply with International Standard on Quality Control 1 (UK and Ireland). Our audit methodology and tools aim to ensure that our quality
control procedures are effective, understood and applied. Our quality controls and systems include our dedicated professional standards review team, strategically
focused second partner reviews and independent partner reviews.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has
been undertaken so that we might state to the Company’s members those matters we are required to state to them in an Auditor’s Report and for no
other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s
members as a body, for our audit work, for this report, or for the opinions we have formed.

SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are
appropriate to the Group’s and the Parent Company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness
of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and
non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that
is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become
aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

SIMON MANNING (SENIOR STATUTORY AUDITOR)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
Leeds, UK
12 March 2014

125

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewFIVE YEAR SUMMARY

Revenue
Underlying* operating profit
Operating profit/(loss)
Finance income
Finance costs
Underlying* profit before tax
Profit/(loss) before tax
(Loss)/profit after tax
Underlying* earnings per share
(Loss)/earnings per share
Dividend per share

Total
2009
£m

2,723.1
80.9
(32.5)
11.7
(34.5)
60.6
(55.3)
(45.1)
9.0p
(9.7p)
nil p

Total
2010
£m

2,668.0
76.1
(54.6)
7.8
(34.0)
62.5
(80.8)
(76.8)
7.2p
(13.0p)
nil p

Total
2011
£m

2,808.4
95.9
25.6
7.4
(25.4)
82.0
7.5
(0.0)
9.4p
(0.0p)
2.25p

Continuing^ Continuing^

2012
£m

2,473.9
96.1
57.9
1.9
(15.8)
83.7
43.7
26.6
9.7p
4.5p
3.0p

2013
£m

2,582.4
99.5
15.4
1.6
(14.8)
88.1
2.1
(14.3)
10.4p
(2.5p)
3.55p

* Underlying figures are stated before the amortisation of acquired intangibles, net restructuring costs, other one-off items, loss arising on the sale or agreed sale of businesses,

trading profits and losses associated with disposed businesses, other impairment charges, fair value gains and losses on derivative financial instruments, the defined benefit pension
scheme curtailment gain, the taxation effect of these items and the effect of changes in taxation rates.

^ 2013 and 2012 underlying numvers are stated on a continuing basis (i.e. excluding the sales and trading profits and losses associated with businesses sold or agreed to be sold

in 2013 and 2012).

A more detailed five year summary can be found in the investor section of the Company’s website (www.sigplc.com).

126

SIG plc Annual Report and Accounts 2013COMPANY ACCOUNTS
PREPARED IN ACCORDANCE WITH UK GAAP

127

AccountsDirectors’ reportStrategic reportOverviewSIG plc Annual Report and Accounts 2013COMPANY BALANCE SHEET
AS AT 31 DECEMBER 2013

Fixed assets
Investments
Interest in associate
Tangible fixed assets

Current assets
Debtors – due within one year
Debtors – due after more than one year
Associate loan
Cash at bank and in hand

Creditors: amounts falling due within one year

Net current assets

Total assets less current liabilities

Creditors: amounts falling due after one year

Net assets

Capital and reserves
Called up share capital
Share premium account
Merger reserve
Capital redemption reserve
Share option reserve
Exchange reserve
Profit and loss account

Shareholders’ funds

Note

2013
£m

2012
£m

5
6
7

8
8
8

446.1
–
0.1

446.2

65.6
732.5
–
33.3

831.4

(214.5)

616.9

451.9
1.6
0.1

453.6

129.5
669.1
2.4
46.1

847.1

(197.7)

649.4

1,063.1

1,103.0

(324.1)

739.0

59.1
447.2
21.7
0.3
1.1
(0.2)
209.8

739.0

12
12
12
12
12
12
12

(365.3)

737.7

59.1
447.0
21.7
0.3
0.9
(0.2)
208.9

737.7

The accompanying Statement of Significant Accounting Policies and Notes to the Accounts are an integral part of this Company Balance Sheet.

The Accounts were approved by the Board of Directors on 12 March 2014 and signed on its behalf by:

STUART MITCHELL
Director

DOUG ROBERTSON
Director

Registered in England: 998314

128

SIG plc Annual Report and Accounts 2013
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF ACCOUNTING
The separate Accounts of the Company are presented as required by the Companies Act 2006. They have been prepared under the historical cost
convention and in accordance with applicable United Kingdom Accounting Standards (“UK GAAP”).

The principal accounting policies are summarised below. They have all been applied consistently throughout the year and the preceding year.

The Company has taken the exemption from FRS 29 “Financial Instruments: Disclosures” provided for a Parent Company’s single-entity financial statements.

SHARE-BASED PAYMENTS
The accounting policy for share-based payments (FRS 20) is consistent with that of the Group as detailed on page 90.

FINANCIAL INSTRUMENTS
The accounting policy for financial instruments is consistent with that of the Group as detailed on page 91.

FINANCIAL ASSETS AND LIABILITIES
The accounting policies for financial assets and liabilities are consistent with that of the Group as detailed on pages 90 and 91.

INVESTMENTS
Fixed asset investments in subsidiaries are shown at cost less provision for impairment.

TANGIBLE FIXED ASSETS
The accounting policy for tangible fixed assets is consistent with that of the Group as detailed on page 92.

FOREIGN CURRENCY
Transactions denominated in foreign currencies are recorded in the local currency at actual exchange rates as of the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies at the year end are reported at the rates of exchange prevailing at the year end.

Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss in the Profit
and Loss Account.

INTEREST IN ASSOCIATE
The interest in associate in the prior year is shown at cost less provision for impairment.

RELATED PARTY TRANSACTIONS
The Company has taken advantage of the exemption in FRS 8 “Related Party Disclosures” not to disclose transactions with other members of the Group
100% owned by SIG plc, either directly or indirectly.

129

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewNOTES TO THE COMPANY ACCOUNTS

1. PROFIT FOR THE YEAR
As permitted by Section 408 of the Companies Act 2006 the Company has elected not to present its own Profit and Loss Account for the year. SIG plc
reported a profit for the financial year ended 31 December 2013 of £17.6m (2012: £28.2m).

The Auditor’s remuneration for audit services to the Company was £0.1m (2012: £0.1m).

2. SHARE-BASED PAYMENTS
The Company had four share-based payment schemes in existence during the year ended 31 December 2013. The Company recognised a total charge
of £0.4m (2012: credit of £0.3m) in the year relating to share-based payment transactions issued after 7 November 2002. Details of the valuations of each
of the four share-based payment schemes can be found in Note 9 to the Group Accounts on pages 100 to 102.

3. DIVIDENDS
An interim dividend of 1.15p per ordinary share was paid on 7 November 2013 (2012: 1.0p). The Directors have proposed a final dividend for the year ended
31 December 2013 of 2.4p per ordinary share (2012: 2.0p). The proposed final dividend is subject to approval by Shareholders at the Annual General Meeting
and has not been included as a liability in these financial statements. No dividends have been paid between 31 December 2013 and the date of signing the Accounts.

4. STAFF COSTS
Particulars of employees (including Directors) are shown below:

Employee costs during the year amounted to:
Wages and salaries
Social security costs
FRS 20 share option charge/(credit)
Pension costs

Total

The average monthly number of persons employed by the Company during the year was as follows:

Administration

5. FIXED ASSET INVESTMENTS
Fixed asset investments comprise investments in subsidiary undertakings, as follows:

Cost
At 1 January
Additions

At 31 December

Accumulated impairment charges
At 1 January
Impairment charge

At 31 December

Net book value

At 31 December

At 1 January

2013
£m

3.8
0.4
0.4
0.3

4.9

2012
£m

4.0
0.3
(0.3)
0.4

4.4

2013
Number

2012
Number

2013
£m

2012
£m

659.1
3.2

662.3

(207.2)
(9.0)

(216.2)

659.1
–

659.1

(207.2)
–

(207.2)

446.1

451.9

Details of the Company’s principal trading subsidiaries are shown on page 135. The Group has taken advantage of the exemption in Section 409 of the Companies
Act 2006 whereby the disclosure of a full list of all subsidiary companies would result in information of excessive length being given in the Notes to the Accounts.

ADDITIONS
On 5 March 2013 the Group purchased a further 26% share in Ice Energy Technologies Limited (“Ice”) for a consideration of £1.5m via a debt for equity
exchange. Prior to this purchase the Group held a 25% investment in associate of £1.6m. In accordance with IFRS 3, the 25% holding in Ice is deemed to
have been disposed of and reacquired on the same day, with the result being a £3.1m addition to fixed asset investments.

On 16 October 2013 the Group made an investment in SIG International Trading Limited of £0.1m.

IMPAIRMENT CHARGE
The Group’s UK Energy Management business has undergone significant structural change in recent years, and the outlook for the market in which it operates
continues to be uncertain. As a result an impairment charge of £9.0m has been made to reduce the carrying value of the Company’s investment in SIG Energy
Management Limited to £nil.

130

SIG plc Annual Report and Accounts 20136. INTEREST IN ASSOCIATE
On 5 March 2013 the Group purchased an additional 26% shareholding in its associate, Ice Energy Technologies Limited (“Ice”), for a consideration of £1.5m
(debt for equity exchange), taking its total shareholding to 51%. Following this transaction Ice became a subsidiary of the Group.

The Group’s share of loss after tax arising from its interest in Ice for the period ending 5 March 2013 was £0.1m (31 December 2012: £0.7m, of which
£0.4m was included within “Other items”), which has been recognised on the face of the Consolidated Income Statement. In accordance with IFRS 3, the
25% holding in Ice is deemed to have been disposed of and reacquired on the same day, and as a result a profit on disposal of £0.2m has been recognised
within “Other items” in the Consolidated Income Statement.

The current accounting period for Ice ends on 31 March 2014. Ice does not have the same accounting reference date as SIG plc for commercial reasons.

7. TANGIBLE FIXED ASSETS
The movement in the year was as follows:

Cost
At 1 January 2013
Additions

At 31 December 2013

Depreciation
At 1 January 2013
Charge for the year

At 31 December 2013

Net book value

At 31 December 2013

At 1 January 2013

8. DEBTORS

Amounts owed by subsidiary undertakings
Corporation tax recoverable
Deferred tax assets (Note 11)
Derivative financial instruments
Associate loan
Prepayments and accrued income

Total

Freehold land
and buildings
£m

Plant and
machinery
£m

0.1
–

0.1

0.1
–

0.1

–

0.4
–

0.4

0.3
–

0.3

0.1

Total
£m

0.5
–

0.5

0.4
–

0.4

0.1

2013
£m

766.1
0.6
0.8
29.7
–
0.9

798.1

2012
£m

752.4
–
1.2
43.6
2.4
1.4

801.0

Of the total amount owed to the Company, £732.5m (2012: £669.1m) is due after more than one year. Of the total amount due after more than one year,
£702.0m (2012: £630.5m) relates to amounts owed by subsidiary undertakings, £29.7m (2012: £37.4m) relates to derivative financial instruments and £0.8m
(2012: £1.2m) relates to deferred tax assets.

9. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

Bank overdrafts
Private placement notes
Amounts owed to subsidiary undertakings
Derivative financial instruments
Accruals and deferred income
Corporation tax

Total

All of the Company’s bank overdrafts are unsecured.

2013
£m

54.8
–
150.0
0.1
9.6
–

214.5

2012
£m

29.9
81.8
68.2
5.8
11.5
0.5

197.7

131

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewNOTES TO THE COMPANY ACCOUNTS CONTINUED

10. CREDITORS: AMOUNTS FALLING DUE AFTER ONE YEAR

Private placement notes
Derivative financial instruments
Amounts owed to subsidiary undertakings

Total

Details of the private placement notes (before applying associated derivative financial instruments) are as follows:

2013
£m

252.5
2.0
69.6

324.1

2012
£m

174.2
4.8
186.3

365.3

Repayable in 2013
Repayable in 2016
Repayable in 2018
Repayable in 2020
Repayable in 2021
Repayable in 2023

Total

2013

2012

Fixed
interest
rate
%

n/a
5.9%
5.1%
3.7%
3.9%
4.2%

5.2%

£m

–
146.2
23.0
25.0
16.7
41.6

252.5

£m

81.8
149.5
24.7
–
–
–

256.0

Fixed
interest
rate
%

5.0%
5.8%
4.7%
n/a
n/a
n/a

5.5%

All Group derivative financial instruments disclosed in Note 20 on pages 110 to 112 have been entered into by the Company and therefore disclosures have
not been repeated within this note.

11. DEFERRED TAX

Deferred tax assets

The deferred tax assets above relate to short-term timing differences.

The movement during the year was as follows:

At 1 January
Charge for the year

At 31 December

2013
£m

0.8

2013
£m

1.2
(0.4)

0.8

2012
£m

1.2

2012
£m

1.4
(0.2)

1.2

Given the current profitability of the Company, the Directors consider that the recognition of the deferred tax assets above is appropriate.

The Company has not taken account of excess non-trading losses associated with financial instruments in determining the above deferred tax asset as at
31 December 2013. See Note 24 of the Group Accounts for details.

132

SIG plc Annual Report and Accounts 201312. CAPITAL AND RESERVES

Called up share capital
Share premium account
Merger reserve
Capital redemption reserve
Share option reserve
Exchange reserve
Profit and loss account

Total capital and reserves

The movement in reserves during the year was as follows:

At 1 January 2013
Exercise of share options
Charge to share option reserve
Fair value movement on cash flow hedges
Transfer to profit and loss on cash flow hedges
Issue of share capital
Profit for the period
Dividends

At 31 December 2013

2013
£m

59.1
447.2
21.7
0.3
1.1
(0.2)
209.8

739.0

Share
option
reserve
£m

0.9
(0.2)
0.4
–
–
–
–
–

2012
£m

59.1
447.0
21.7
0.3
0.9
(0.2)
208.9

737.7

Profit and
loss account
£m

208.9
0.2
–
(0.4)
2.1
–
17.6
(18.6)

Called up
share capital
£m

59.1
–
–
–
–
–
–
–

Share
premium
account
£m

447.0
–
–
–
–
0.2
–
–

59.1

447.2

1.1

209.8

There was no movement in the merger reserve, capital redemption reserve and exchange reserve in the year.

Details of the Company’s share capital can be found in Note 26 of the Group Accounts on page 118.

13. GUARANTEES AND OTHER FINANCIAL COMMITMENTS
(A) GUARANTEES
At 31 December 2013 the Company had not guaranteed any overdrafts of subsidiary undertakings (31 December 2012: £nil).

(B) CONTINGENT LIABILITIES
As at the balance sheet date, the Company had outstanding obligations under a standby letter of credit of up to £10.0m (31 December 2012: £10.0m). This
standby letter of credit, issued by The Royal Bank of Scotland plc, is in respect of the Group’s insurance arrangements.

14. RELATED PARTY TRANSACTIONS
On 5 March 2013 the Company acquired an additional 26% shareholding in Ice Energy Technologies Limited, taking its total shareholding to 51%. Further
details of related party transactions in relation to this business are provided in Note 11 of the Group Accounts.

During the year, the Group exercised its option to acquire the remaining 18% non-controlling interest of Air Trade Centre Romania s.r.l. Of the 18%
shareholding, 16% was purchased in 2013, with the remaining 2% purchased in 2014 by another Group company. The Group now holds 100% of the
ordinary share capital of Air Trade Centre Romania s.r.l.

REMUNERATION OF KEY MANAGEMENT PERSONNEL
The total remuneration of the Directors of the Group Board, who the Group considered to be its key management personnel, is provided in Note 31 to the
Group Accounts on page 122. In addition, the Company recognised a share-based payment charge under FRS 20 of £0.4m (2012: credit of £0.3m).

133

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewPRINCIPAL ADDRESSES

CORPORATE

SIG PLC CORPORATE OFFICE
Signet House
17 Europa View
Sheffield Business Park
Sheffield S9 1XH

REGISTERED OFFICE
Hillsborough Works
Langsett Road
Sheffield S6 2LW

UNITED KINGDOM

SIG TRADING LIMITED, CURRENTLY TRADING AS:

REGISTERED NUMBER
Registered in England 998314

SIG TECHNICAL INSULATION
Hillsborough Works
Langsett Road
Sheffield S6 2LW

SIG FIXINGS
Hillsborough Works
Langsett Road
Sheffield S6 2LW

SIG ROOFING SUPPLIES
Harding Way
St Ives
Cambridge PE27 3YJ

CARPET AND FLOORING
Arrow Valley
Claybrook Drive
Redditch B98 0FY

SIG CONSTRUCTION
PRODUCTS
Hillsborough Works
Langsett Road
Sheffield S6 2LW

A STEADMAN & SON
Warnell
Welton
Carlisle
Cumbria CA5 7HH

INSULATION
DISTRIBUTIONS LIMITED
42 O’Casey Avenue
Parkwest Industrial Estate
Nangor Road
Dublin 12
Ireland

SIG SP. Z O.O.
ul. Kamienskiego 51
30-644 Krakow
Poland

LARIVIÈRE SAS
36 bis rue Delaâge
49004 Angers
Cedex 01
France

SIG NEDERLAND B.V.
Bedrijfsweg 15
5061 JX Oisterwijk
The Netherlands

OUEST ISOL SAS
Zone Industrielle de la Rangle
27460 Alizay
France

AIR TRADE CENTRE
INTERNATIONAL B.V.
Eerste Tochtweg 11
2913 LN Nieuwerlerl ad/Ijssel
The Netherlands

SIG INSULATIONS
Hillsborough Works
Langsett Road
Sheffield S6 2LW

SIG INTERIORS
Hillsborough Works
Langsett Road
Sheffield S6 2LW

SIG ENERGY
MANAGEMENT LIMITED
Unit 6 Park Square
Thorncliffe Park
Chapeltown
Sheffield S35 2PH

IRELAND

SIG BUILDING
PRODUCTS LIMITED
42 O’Casey Avenue
Parkwest Industrial Estate
Nangor Road
Dublin 12
Ireland

MAINLAND EUROPE

WEGO SYSTEMBAUSTOFFE
GMBH
Maybachstrasse 14
D-63456 Hanau-Steinheim
Germany

LITT DIFFUSION SAS
8–16 Rue Paul Vaillant
Couturier
92240 Malakoff
France

134

SIG plc Annual Report and Accounts 2013PRINCIPAL TRADING SUBSIDIARIES

The Company’s principal trading subsidiaries, all of which are wholly owned, are currently as follows:

Insulation
and Energy
Management

Exteriors

Interiors

United Kingdom

SIG Trading Limited

SIG Energy Management Limited

Ireland

SIG Building Products Limited

Insulation Distributors Limited

Germany

WeGo Systembaustoffe GmbH

France

Société de l’Ouest des Produits Isolants SAS

LITT Diffusion SAS

Larivière SAS

Benelux

SIG Nederland B.V.

SIG Melderste Plafonneerartikelen N.V.

Air Trade Centre Belgium N.V.

Poland

SIG Sp. Z o.o



All of the above companies are registered in the country referred to above, with the exception of SIG Trading Limited and SIG Energy Management Limited
which are registered in England and Wales.

SIG European Investments Limited and SIG European Holdings Limited together hold the beneficial ownership of SIG Building Products Limited,
WeGo Systembaustoffe GmbH, Société de l’Ouest des Produits Isolants SAS, LITT Diffusion SAS, Larivière SAS, SIG Nederland B.V., SIG Melderste
Plafonneerartikelen N.V., Air Trade Centre Belgium N.V., and SIG Sp. Z o.o.

135

SIG plc Annual Report and Accounts 2013AccountsDirectors’ reportStrategic reportOverviewCOMPANY INFORMATION

PRESIDENT
Sir Norman Adsetts OBE, MA

SECRETARY
Richard Monro FCIS

REGISTERED NUMBER
Registered in England
998314

REGISTERED OFFICE
Hillsborough Works
Langsett Road
Sheffield S6 2LW
United Kingdom

Tel: 0114 285 6300
Fax: 0114 285 6349

Email: info@sigplc.com

CORPORATE OFFICE
Signet House
17 Europa View
Sheffield S9 1XH
United Kingdom

Tel: 0114 285 6300
Fax: 0114 285 6349

COMPANY WEBSITE
www.sigplc.com

LISTING DETAILS
Market
Reference
Sector

UK Listed
SHI.L
Support Services

REGISTRARS AND TRANSFER OFFICE

PRINCIPAL BANKERS

JOINT STOCKBROKERS

COMPUTERSHARE INVESTOR SERVICES PLC
The Pavilions
Bridgwater Road
Bristol BS13 8AE

THE ROYAL BANK OF SCOTLAND PLC
Corporate Banking
3rd Floor
2 Whitehall Quay
Leeds LS1 4HR

AUDITOR

DELOITTE LLP
1 City Square
Leeds LS1 2AL

SOLICITORS

PINSENT MASONS LLP
1 Park Row
Leeds LS1 5AB

BARCLAYS BANK PLC
PO Box 190
1 Park Row
Leeds LS1 5WU

LLOYDS BANK PLC
2nd Floor, Lisbon House
116 Wellington Street
Leeds LS1 4LT

HSBC BANK PLC
Unit 4, Europa Court
Sheffield Business Park
Sheffield S9 1XE

SHAREHOLDERS’ ENQUIRIES

Our share register is managed by Computershare, who
can be contacted by telephone on:

24 hour helpline*
0870 707 1293

Overseas callers
+44 870 707 1148

Text phone
0870 702 0005

* Operator assistance available between
08.30 and 17.30 each business day.

Email: Access the Computershare website
www.uk.computershare.com/investor and
click on “Contact Us”, from where you can
email Computershare.

Post: Computershare, The Pavilions, Bridgwater
Road, Bristol BS99 6ZZ, United Kingdom.

SHAREHOLDER ANALYSIS AT 31 DECEMBER 2013

JEFFRIES HOARE GOVETT
Vintners Place
68 Upper Thames Street
London EC4V 3BJ

PANMURE GORDON (UK) LIMITED
Moorgate Hall
155 Moorgate
London EC2M 6XB

FINANCIAL PUBLIC RELATIONS

FTI CONSULTING LIMITED
Holborn Gate
26 Southampton Buildings
London WC2A 1PB

FINANCIAL CALENDAR

Annual General Meeting
To be held on 16 May 2014

Interim Results 2014
Announcement 12 August 2014

Full Year Results 2014
Announcement March 2015

Annual Report and Accounts 2014
Posted to Shareholders April 2015

Size of Shareholding

0 – 999
1,000 – 4,999
5,000 – 9,999
10,000 – 99,999
100,000 – 249,999
250,000 – 499,999
500,000 – 999,999
1,000,000+

Total

136

Number of Shareholders

Number of ordinary shares

856
1,039
250
313
63
62
31
82

2,696

31.75
38.54
9.27
11.61
2.34
2.30
1.15
3.04

366,456
2,324,500
1,666,178
9,948,766
10,231,231
21,940,798
21,528,484
523,094,034

0.06
0.39
0.28
1.68
1.73
3.72
3.65
88.49

100.00

591,100,447

100.00

SIG plc Annual Report and Accounts 2013

CORPORATE OFFICE
Signet House
17 Europa View
Sheffield Business Park
Sheffield S9 1XH
tel: +44 (0) 114 285 6300
fax: +44 (0) 114 285 6349
e-mail: info@sigplc.com
web: www.sigplc.com

REGISTERED OFFICE
Hillsborough Works
Langsett Road
Sheffield S6 2LW

REGISTERED NUMBER
Registered in England
998314

SIG’s commitment to the environmental issues
is reflected in this Annual Report which is printed
on Revive 100 Silk and Offset, containing 100%
post-consumer reclaimed material. The material
is FSC certified and the report has been Carbon
Balanced. Vegetable based inks have been used
and 95% of all Dry Waste associated with this
production are diverted from landfill.

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