Annual Report
and Accounts
FOR ThE yEAR ENDED 31 DECEMBER 2015
STRONGER
TOGETHER
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24298.02 30 March 2016 2:38 PM PROOF1
Our strategy
SiG iS A LEADING DISTRIBUTOR OF SPECIALIST BUILDING
PRODUCTS iN EUROPE, WiTH STRONG POSiTiONS iN iTS CORE
MARKETS OF iNSULATiON AND ENERGY MANAGEMENT, iNTERiORS
AND EXTERiORS.
The Group plays an important role in the construction supply chain, both in the New
Build, and Repairs, Maintenance and improvement (“RMi”) sectors, with its largest
markets being the UK, France and Germany, which together account for 87% of sales.
Our goal is to be the leading specialist
solutions provider to the construction industry
CUSTOMERS
OPERATIONAl EFFICIENCy
Æ Partner of choice for customers and suppliers
Æ Develop end-to-end solutions across the
construction value chain
Æ Specialist with unique expertise, providing
innovation, differentiated services, technical
advice and eCommerce offering
Æ People with the right skills, ethics & pride in
SiG are recognised and rewarded for high
performance
Æ Leverage strength and scale of SiG through
Procurement and Supply Chain
Æ Resilient, scalable and repeatable iT model
driving value for the business
Æ Zero harm for employees and customers
GROwTh
FINANCIAlS
Æ Focus on synergistic specialist construction
Æ Focus on gross margin, quality of earnings
markets of insulation and Energy Management,
interiors and Exteriors in existing territories
Æ Balanced portfolio of Residential / Non-
residential and RMi / New Build
Æ Balanced mix of organic growth and infill
acquisitions
Æ Develop value added sales offering, particularly
Air Handling and Offsite Construction
and cash flow
Æ Strong balance sheet
Æ Continuously increase ROCE
Æ ROCE as the primary financial hurdle for
investment decisions
Read about our Strategic Priorities
from page 13
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI Highlights
Group sales
UP 3.7%
in constant currency
£78.1m
Expenditure on
infill acquisitions
Reshaping
of supply
chain underway
Encouraging
growth in value
added businesses
Incremental
net benefit of
£12.6m
from Strategic initiatives
Navigating this report
Visit us online
For further information within
this document and relevant
page numbers
For more information on SiG
plc’s operations please visit our
website at www.sigplc.com
WHAT’S IN OUR REPORT
STRATEGIC REPORT
02
04
06
07
10
12
13
18
20
24
30
37
41
56
58
59
72
78
80
99
SiG at a glance
Our marketplace
Chairman’s Statement
Chief Executive’s Statement
Business model
Our Strategic Pillars
Our Strategic Priorities
Our KPis
Principal Risks and Uncertainties
Our performance
Financial Review
Treasury risk management
Corporate Responsibility
GOVERNANCE
Board of Directors
introduction to Governance
Corporate Governance
Audit Committee Report
Nominations Committee Report
Directors’ Remuneration Report
Directors’ Responsibility Statement
FINANCIAlS
102 Consolidated income Statement
103 Consolidated Statement of
Comprehensive income
104 Consolidated Balance Sheet
105 Consolidated Cash Flow Statement
106 Consolidated Statement of
Changes in Equity
107 Statement of Significant Accounting
Policies
Critical Accounting Judgments
and Key Sources of Estimation
Uncertainty
114
115 Notes to the Accounts
153 independent Auditor’s Report
158 Five-Year Summary
160 Company Statement of
Comprehensive income
161 Company Balance Sheet
162 Company Statement of Changes
163 Company Statement of Significant
in Equity
Accounting Policies
165 Notes to the Company Accounts
170 Group Companies 2015
173 Company information
01
24298.02 30 March 2016 2:38 PM PROOF1
SIG plc Annual Report and Accounts for the year ended 31 December 2015STRATEGIC REPORT
SIG at a glance
Our product and service areas
INSUlATION AND
ENERGy MANAGEMENT
ExTERIORS
INTERIORS
45%
OF GROUP REVENUE
£1,158m
(2014: £1,195m)
31%
OF GROUP REVENUE
£792m
24%
OF GROUP REVENUE
£616m
(2014: £808m)
(2014: £600m)
sIG is the largest supplier of
insulation products in europe.
the Group is the market
leader in the uK, Ireland,
Germany and poland and the
leader in technical insulation
in France. sIG is also the
largest pure-play specialist
distributor of air handling
products in europe.
sIG is the largest and only
national specialist supplier
of roofing products in the
uK and the largest specialist
supplier in France.
sIG is a leading supplier
of interior fit out products
in europe. It is the market
leader in the uK and
Germany, and the leading
specialist in France.
NUMBER OF
TRADING SITES
280
NUMBER OF
TRADING SITES
326
(of which 109 also supply interior fit out products)
NUMBER OF
TRADING SITES
187
(of which 109 also supply insulation products)
Key products
Æ Structural insulation
Æ Technical insulation
Æ Dry lining
Æ Construction accessories
Æ Fixings
Æ Air handling systems
Æ insulated panels and modular
housing systems
Key products
Æ Tiles, slates, membranes and
battens for pitched roofs
Æ Single-ply flat roofing systems
Æ Plastic building products including
fascias, soffits and guttering
Æ industrial roofing and
cladding systems
Æ Room-in-roof panel systems
Key products
Æ Dry lining
Æ Ceiling tiles and grids
Æ Doorsets
Æ Partition walls
Æ Floor coverings
Æ Washrooms
For a detailed list go to
www.siginsulation.co.uk
For a detailed list go to
www.sigroofing.co.uk
For a detailed list go to
www.siginteriors.co.uk
02
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI Our locations
TOTAL GROUP
REVENUE
£2.6bn
BRANCHES
684
UK & IRELAND
MAINLAND EUROPE
REVENUE £1.2bn BRANCHES 359
UK & IRELAND
GERMANY
FRANCE
BENELUX*
POLAND
REVENUE
£1.4bn
325
BRANCHES
REVENUE
£368m
59
BRANCHES
REVENUE
£517m
213
BRANCHES
REVENUE
£164m
38
BRANCHES
*includes Air Trade Centre
REVENUE
£104m
49
BRANCHES
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No.1
No.1
No.1
No.1
No.1
No.1
No.3
No.2
N/A
No.1
No.1
No.1
No.1
SPECIAlIST
No.1
No.1
No.1
SPECIAlIST
N/A
No.1
SPECIAlIST
N/A
lEADING
NATIONAl
SPECIAlIST
24298.02 30 March 2016 2:38 PM PROOF1
03
SIG plc Annual Report and Accounts for the year ended 31 December 2015STRATEGIC REPORT Our marketplace
GROUP
REVENUE
11%
19%
27%
22%
12%
17%
23%
25%
11%
43%
46%
INDUSTRIAL
RESIDENTIAL
NON-RESIDENTIAL
21%
23%
8%
9%
22%
32%
29%
16%
29%
31%
11%
13%
11%
11%
53%
8%
17%
5%
35%
30%
18%
12%
5%
29%
28%
23%
15%
50%
50%
GROUP
UK
FRANCE
GERMANY
POLAND
BENELUX
IRELAND
AIR
HANDLING
New build residential
RMI residential
New build non-residential
RMI non-residential
Industrial
NON-RESIDENTIAL SECTOR
The non-residential market accounts
for 46% of Group sales and includes
expenditure on:
Æ Commercial buildings
Æ Retail developments and
warehouses
Æ Education, hospitals and leisure
complexes
united Kingdom
in 2015 the non-residential sector in
the UK was broadly flat compared to
prior year, mainly due to weakness in
the retail and entertainment sectors.
Growth is expected to return in 2016,
driven by stronger output in the new
build commercial market, the largest
component of the non-residential
sector. For example, office vacancy
rates in London are now at a 14 year
low.
For 2016 the Construction Products
Association (“CPA”) is forecasting
growth at a rate of 4.2% in the
commercial sector and 3.2% for the
UK non-residential market in total.
Mainland europe
The non-residential sector in SiG’s
major markets of operation in
Mainland Europe performed poorly
in 2015, particularly in Germany
where the market declined by 1.8%
according to Euroconstruct.
This impacted the performance of the
Group’s German business, which has
a high degree of exposure to the non-
residential sector, with 60% of sales
being derived from this market.
The outlook for 2016 is more positive,
with Euroconstruct forecasting growth
rates of 3.2% in France and 1.2% in
Germany. This is based on improved
macroeconomic lead indicators and
a reduction in government austerity
measures.
RESIDENTIAL SECTOR
The residential market accounts for
43% of Group sales and includes
private and public sector expenditure
on houses and apartments.
united Kingdom
The UK new build residential sector
performed well during 2015, led by
strong growth in the private housing
market, which increased by 7%
compared to prior year.
This was driven by growth in the
wider economy and government
policies such as Help to Buy. in
contrast, output in the public sector
declined by 10% as activity was
constrained by reduced grant funding
and near-term uncertainty over
the implementation of government
housing policies.
The UK RMi market was weaker
than anticipated, particularly in the
third quarter, most probably due to
a lagged effect from a slowdown
in mortgage lending and property
transactions in the second half of
2014.
in 2016 the Group expects the private
new build housing market to continue
to exhibit strong growth, albeit likely
at a lower rate than in 2015.
RMi housing expenditure is expected
to pick up later in 2016 as an
improvement in lead indicators feeds
through to higher activity in the
sector.
Mainland europe
The residential construction market in
France was challenging in 2015.
This weakness affected the
performance of the Group’s French
business, which has a high degree
04
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI 2.6
3.2
2.9
14.6
6.4
6.6
RESIDENTIAL
FORECAST GROWTH
2016
%
2.3
4.0
2.6
12.0
3.2
1.2
NON
RESIDENTIAL
FORECAST GROWTH
2016
%
3.3
TOTAL
MARKET
FORECAST GROWTH
2016
%
5.2
1.9
3.6
6.7
(3.1)
5.5
4.8
0.6
UK*
FRANCE**
GERMANY**
POLAND**
BELGiUM**
THE NETHERLANDS**
iRELAND**
of exposure to the residential sector,
with 61% of sales being derived from
this market.
The German residential market
performed better, and was up by
2.0% in 2015, although this only
accounts for around a quarter of the
Group’s sales in this country.
For 2016 Euroconstruct are
forecasting a recovery in the French
housing market as housing permits
have stabilised and government
measures such as the extension of
zero-interest loans and continued
“Pinel” programme for rental
investments boost growth.
INDUSTRIAL
This market accounts for 11% of
Group sales and typically includes
products such as technical insulation
which are supplied to the industrial
sector; for example, power stations or
petrochemical works, where heat is
an important part of the process.
The industrial sector performed well
in the UK in 2015, growing by 11.5%
according to the CPA*, as it continued
to recover from a historical low in
2013. The CPA expects growth of
7.8% in 2016.
in France the industrial sector is
expected to recover during 2016 as
the combined effect of a decrease in
oil prices and weakening of the Euro
stimulate demand.
The outlook in Germany is less
positive due to lower corporate
investment.
MARKET DRIVERS
Economic growth is an important
demand driver in all of SiG’s markets
as it stimulates building activity and
industrial output.
in addition, the following specific
factors are also relevant to each
segment of the Group’s business:
Insulation and energy
Management
Æ Recognising that 40% of energy
consumed relates to buildings,
the European Union enacted the
Energy Performance of Buildings
Directive in 2003;
Æ This Directive requires all EU
countries to improve energy
efficiency and in the UK is covered
under Part L of the Building
Regulations; in France by the
Réglementation Thermique (“RT”)
and in Germany by the Energy
Saving Ordinance (“EnEV”);
Æ These standards are typically
tightened every three to four
years, usually leading to increased
use of insulation to cut energy
consumption; and
Æ Furthermore, demand for offsite
panelised systems and modular
housing such as insulshell
is expanding significantly as
customers increasingly desire
complete managed solutions,
which reduce build time, lower risk
and help address skills shortages
in the sector.
exteriors
Æ Replacement of old/damaged
roofs gives rise to a core demand
for RMi expenditure. in the UK,
for example, around two-thirds of
the housing stock is more than 40
years old;
Æ Product innovation to reduce
construction and exterior
maintenance costs;
Æ Growth of specialist distribution as
the main supply route to market,
gaining market share from the
generalists and manufacturers; and
Æ increasing demand for offsite
roofing systems such as
RoofSpace, which designs,
manufactures and installs rooms-
in-roofs in residential properties.
Similarly to insulshell, this solution
reduces cost, build time and risk
for contractors.
Interiors
Æ increasingly stringent regulation,
for example with regard to fire
and acoustics. As well as driving
demand for new products,
this also benefits the specialist
who can provide the necessary
technical expertise;
Æ increased demand for integrated,
manufactured offsite solutions; and
Æ Demand for higher standards of
internal fit outs.
Sources:
* Construction Products Association (“CPA”)
** Euroconstruct
24298.02 30 March 2016 2:38 PM PROOF1
05
SIG plc Annual Report and Accounts for the year ended 31 December 2015STRATEGIC REPORT Chairman’s Statement
While 2015 was a challenging year for the Group, we
made good progress on the Strategic initiatives and our
infill acquisition programme.
Going forward we are determined to get performance
back on track by refocusing on sales, reducing our cost
base and growing our value added businesses.
STRATEGY
Our goal is to be the leading specialist solutions provider
to the construction industry. To achieve this we are
focused on three key strategic priorities.
First, we are seeking to continuously improve our
procurement function. The Group has made excellent
progress over the last two years, but there is much more
to do. This initiative is also gathering additional impetus
through the appointment of our new Group Procurement
Director, Ruxandra ispas, who is providing fresh thinking.
Second, we are reshaping our supply chain by adopting
a two-step change strategy, with an ultimate goal of
reducing our cost to serve by £50m.
Finally, we are continuing to grow our value added
sales, which currently account for 18% of sales. Offsite
Construction and Air Handling will be important growth
drivers of this category.
Determined to get
performance back on track by
refocusing on sales, reducing
our cost base and growing our
value added businesses
lESlIE VAN DE wAllE Chairman
Following the appointment of Andrea Abt as a Non-
Executive Director on 12 March 2015, i am pleased to
report that we achieved our aim to reach 25% female
representation among the Board’s membership.
As part of the Board succession plan, the Nominations
Committee has reviewed the positions of Chris
Geoghegan and Jonathan Nicholls.
Having noted their significant experience and
contributions to the Board, the Committee concluded that
they be invited to serve for a further term of office until the
May 2017 AGM, prior to which a search for new Non-
Executive Directors will take place.
OUR PEOPLE
On behalf of the Board and Shareholders i would like to
thank our employees for their dedication and continued
hard work during the year.
i would also like to welcome Christian Horn to SiG as its
new Group Operations Director, a role which sits on the
Group’s Executive Committee. Christian joined SiG in
December 2015 and was previously Senior Vice President
for Staples Europe.
DIVIDEND
The Board has proposed a final dividend of 2.91p per
ordinary share. Taken together with the interim dividend
of 1.69p per ordinary share, this provides a total dividend
of 4.60p per ordinary share for the year (2014: 4.40p), an
increase of 4.5%.
Going forward the Board remains committed to a
progressive dividend policy while maintaining a dividend
cover of 2-3x on an underlying basis over the medium-
term.
GOVERNANCE AND BOARD
As Chairman i am responsible for ensuring good corporate
governance and that we continually aspire to meet the
highest standards possible at SiG. Further details can be
found in the Corporate Governance Report on pages 59
to 71.
lESlIE VAN DE wAllE
Chairman
06
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI
Chief Executive’s Statement
We continue to make good
progress on our Strategic
Initiatives to improve business
performance
STUART MITChEll Chief Executive
2015 PERFORMANCE
Having been adversely affected by weak trading
conditions in Mainland Europe and the UK RMi market,
together with a significant deterioration in the Euro, we
were disappointed in the Group’s 2015 performance.
By working together more and better leveraging our
buying power and Group synergies, we have delivered a
total cumulative net saving of £22.7m from the Strategic
initiatives since the programme began, and are well ahead
of our original schedule.
However, there is more to do and we are targeting to
achieve at least another £10m incremental net benefit
from the Strategic initiatives in 2016.
OUTLOOK
This year the Group continues to expect good growth in
the UK new build construction market, primarily driven
by the residential segment. Lead indicators also suggest
that demand should pick up in the UK RMi sector as 2016
progresses.
in Mainland Europe, while the trajectory of any recovery at
this stage remains uncertain, trading conditions in France
have improved, with the housing market stabilising and a
return to growth for SiG in Q4 2015.
Following an encouraging start to the year, with positive
LFLs in both the UK & ireland and Mainland Europe, the
scope for further cost savings and growth opportunities
within the Group mean that it expects to make progress in
2016.
STUART MITChEll
Chief Executive
Group sales from continuing operations increased by
3.7% in constant currency but were down 1.4% in
Sterling. With acquisitions contributing 3.4% to revenue
growth, on a like-for-like (“LFL”) basis, sales were
marginally ahead, by 0.3%.
Underlying profit before tax decreased by 11.8% to
£87.4m (2014: £99.1m), although on a constant currency
basis was only down by 7.0%.
We continue to make good progress on our Strategic
initiatives to improve business performance, delivering
an incremental net benefit after costs of £12.6m in 2015,
mainly sourced from procurement.
SiG’s post-tax Return on Capital Employed (“ROCE”), our
key financial metric, decreased by 110bps to 9.3% (2014:
10.4%) in 2015 mainly due to weaker trading conditions.
Going forward SiG remains committed to increasing
its returns on capital. As well as taking a disciplined
approach to its capital management, SiG seeks to achieve
this target through further improvements in its gross and
operating margins.
STRONGER TOGETHER
Historically SiG’s businesses have tended to operate
independently of one another, like a loose federation. in
addition, following a period of underspend during the
economic downturn, we also needed to reinvest in our
asset base and people.
To address these challenges, and improve the way we
work, two years ago the Group launched its Stronger
Together culture change programme with the aim of
making SiG’s whole greater than the sum of the parts.
This programme also underpins the delivery of our Strategic
initiatives to improve business performance where we have
targeted £30m of net savings to be achieved by 2016.
24298.02 30 March 2016 2:38 PM PROOF1
07
SIG plc Annual Report and Accounts for the year ended 31 December 2015STRATEGIC REPORT Strategic Report
STRONGER
TOGETHER
08
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI STRONGER
TOGETHER
STRATEGIC REPORT
10
12
13
18
20
24
30
37
41
Business model
Our Strategic Pillars
Our Strategic Priorities
Our KPis
Principal Risks and
Uncertainties
Our performance
Financial Review
Treasury risk management
Corporate Responsibility
24298.02 30 March 2016 2:38 PM PROOF1
09
SIG plc Annual Report and Accounts for the year ended 31 December 2015 Business model
SiG PLAYS A CRITICAL ROLE iN THE CONSTRUCTiON
iNDUSTRY SUPPLY CHAiN, ENSURiNG THAT iTS
CUSTOMERS RECEiVE THE RIGHT PRODUCT AT THE
RIGHT PLACE AT THE RIGHT TIME.
10
24298.02 1 April 2016 2:02 PM PROOF1
www.sigplc.com Stock code: ShI The Group’s position as a specialist means it is able to provide
customers with a more comprehensive product range than a
typical general builders’ merchant. Furthermore, with environmental
regulations becoming more complex and onerous, customers
are increasingly reliant upon the expert advice only a specialist
distributor such as SiG can provide.
Value added sales
in addition to growing its core distribution
businesses, SiG is increasingly focusing on
developing its value added sales offering,
which it defines as products that are own label
or where SiG controls the design, fabrication
or component assembly. These products are
typically higher margin and are increasingly
being demanded by customers, as they save
them time, money and reduce risk. Value added
sales now account for 18% of Group revenues,
and are growing rapidly, up from 14% in 2014.
24298.02 30 March 2016 2:38 PM PROOF1
11
SIG plc Annual Report and Accounts for the year ended 31 December 2015STRATEGIC REPORT Our Strategic Pillars
SiG HAS A CLEAR STRATEGY TO GROW iN iTS THREE CORE
MARKETS OF iNSULATiON AND ENERGY MANAGEMENT, iNTERiORS
AND EXTERiORS BY COMBiNiNG THE REPUTATiONAL STRENGTHS
OF iTS LOCAL BRANDS WiTH THE SCALE EFFiCiENCiES AND
KNOW-HOW OF A MULTiNATiONAL 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.
SiG’s strategy is underpinned by the following six pillars which the Group is focused on to improve profitability, and
these are supported by three key strategic priorities.
STRATEGIC PIllAR
OBJECTIVES
lINK TO PRIORITIES
1 OUTSTANDiNG
CUSTOMER SERViCE
2 SALES
OUTPERFORMANCE
3 GROSS MARGiN
ENHANCEMENT
Æ Speed and reliability of service
Æ Provision of technical advice
Æ Availability and range of stock
Æ Competitive pricing
Æ Focus on core markets
Æ Benefit from legislative change
Æ UK national sales team
Æ Expand network and product range
Æ Category management
Æ improved iT systems
Æ Price management programmes
Æ Growth of higher margin businesses
4 OPERATiONAL
EFFiCiENCY
Æ Better leverage network
Æ improve fleet utilisation
Æ Tight control of cost inflation
5 FiNANCiAL
RETURNS
Æ Rebuild ROCE
Æ Focus on cash conversion
Æ Target improvement in operating margin
6 EXCEPTiONAL
PEOPLE
Æ Training and development
Æ improved communications
Æ Employee engagement
Æ Health and Safety
12
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI Our Strategic Priorities
WHiCH ARE BASED ON WORKiNG MORE CLOSELY TOGETHER
AS A GROUP SO THAT SiG’S WHOLE iS GREATER THAN THE
SUM OF THE PARTS.
CONTINUOUSLY
IMPROVE OUR
PROCUREMENT
FUNCTION
Æ Category management now embedded within SiG and is
business as usual
Æ Delivered £22.7m net cumulative savings from Strategic initiatives
to date, mainly sourced from procurement
Æ Targeting additional £10m efficiencies in 2016 and further savings
thereafter
Æ Group Procurement Director appointed for the first time in the
Procurement
Group’s history
Read more on page 14
RESHAPE
SUPPLY
CHAIN
Supply Chain
GROW VALUE
ADDED SALES
Value Added Sales
Æ Appointed new team with experience of construction sector and
other industries
Æ Reviewed current supply chain model
Æ Two-step strategy with ultimate goal of delivering £50m savings
Æ First step: move to regional hubs utilising existing network
Æ Second step: roll out Regional Distribution Centres across the
Group
Read more on page 15
Æ Defined as products which are own label or where SiG controls
the design, fabrication or component assembly
Æ Typically higher margin than SiG’s distribution businesses
Æ Currently accounts for 18% of Group sales
Æ Target to double that proportion as a percentage of sales by 2018
Æ Air Handling and Offsite Construction are important growth
drivers within this category
Read more on pages
16 and 17
24298.02 30 March 2016 2:38 PM PROOF1
13
SIG plc Annual Report and Accounts for the year ended 31 December 2015STRATEGIC REPORT
strateGIc prIorItIes:
Procurement
SiG HAS CHANGED
iTS APPROACH TO
PROCUREMENT BY
iNCREASiNG CO-ORDiNATiON
ACROSS THE GROUP,
PROFESSiONALiSiNG THE
FUNCTiON AND iNVESTiNG iN
TRAiNiNG AND RESOURCES.
Procurement
BENEFITS
SiG has delivered a net cumulative
saving of £22.7m from its Strategic
initiatives over the last two years,
mainly sourced from procurement.
The Group has also reduced its
supplier numbers by 48% since
2013, meaning that the Group
has exceeded its target of a 33%
reduction by the end of 2015.
SiG is also making good progress
towards its target of growing sales
of its own label products by 50% by
the end of 2016, having increased its
own-label sales by 42% since 2013.
TARGETED SAVINGS
The Group is seeking an additional
£10m net savings in 2016, with
further efficiencies thereafter.
HISTORICAL POSITION
Procurement was decentralised and
conducted at multiple levels across
the Group.
This meant that SiG was not fully
leveraging its size in the marketplace
and had a long tail of suppliers.
PROGRESS
SiG has transformed its procurement
function by increasing co-ordination
across the Group and investing in
people, training and resources.
Category management is now fully
embedded in the Group and is
business as usual. Purchasing is now
the responsibility of procurement
professionals and is conducted
through six international category
forums covering roofing, ceilings,
technical insulation, structural
insulation, air handling and dry lining.
This has enabled SiG to consolidate
volumes and better leverage its size.
Supplier base
48% reduction
Own label sales
42% increase
14
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI strateGIc prIorItIes:
Supply Chain
SiG HAS BEEN WORKiNG
ON PLANS TO iMPROVE
iTS SUPPLY CHAiN OVER
THE PAST 12 MONTHS,
HAViNG iDENTiFiED
iT AS THE NEXT AREA
OF FOCUS AFTER
PROCUREMENT.
HISTORICAL POSITION
SiG’s supply chain is reflective of the
way it has historically operated as a
loose federation of businesses, with
responsibility for logistics and stock
being held at a local level.
While this approach has served SiG
well in the past, and met the majority
of its customers’ needs, the Group’s
operating practices are expensive
and have become outdated.
Taking an ‘all in cost’, SiG spends
around 11% of its sales on property,
delivery, labour and warehousing.
Furthermore, the Group also needs
to address changing demands of
its customers, who are increasingly
asking for a broader product range,
often requiring deliveries from
multiple locations.
PROGRESS SO FAR
SiG has conducted a thorough review
of its supply chain, concluding that
its model would see a shift towards
Regional Distribution Centres
(“RDCs”).
RDCs would manage the inbound
supply of products and take
ownership for co-ordinating the
majority of our customer deliveries
direct to site.
The role of the branch would change
and become more focused on serving
collect customers.
However, before moving to this model
the Group needs to take into account
the practical considerations of its
existing network, such as existing
Supply Chain
property leases, and the availability
and investment requirements of new
RDCs.
Moving to a fully integrated RDC
model requires careful planning and
execution.
Therefore, SiG has decided to adopt
a two-step supply chain strategy.
This will maximise returns whilst
minimising risk.
The first step is centred around
utilising the Group’s existing network
and moving towards a hub and
spoke model. The role of SiG’s larger
branches will be expanded, with
logistics professionals co-ordinating
stock and deliveries for the region.
The second step involves trialling
RDCs in its main markets. This will
enable the Group to get a better
understanding of the key capabilities
essential to underpinning its future
supply chain.
TARGETED SAVINGS
The Group is targeting annual savings
of at least £20m from this first step of
the programme by 2018.
Assuming the RDC trials are
successful, SiG believes it could
secure an additional £30m in savings
from step two of this strategy.
CASE STUDy
TIlBURG
SiG has successfully been operating an RDC
in Tilburg, The Netherlands for the last three
years.
Suppliers deliver into this one location and
customer deliveries are planned and executed
using outsourced third-party hauliers.
Local branches therefore do not have to
worry about checking that they have enough
stock, transport or drivers to meet delivery
requirements.
instead they are able to focus on understanding
their customers’ needs and selling products.
This gives customers better service and a more
consistent and reliable delivery experience.
in addition, this has enabled the Group to
reduce its cost to serve by 2% and stock days
by a third in The Netherlands.
The next step is to trial this model in the
Group’s larger markets.
Targeted savings
by 2018
£20m
Potential savings
from RDC model
£30m
24298.02 30 March 2016 2:38 PM PROOF1
15
SIG plc Annual Report and Accounts for the year ended 31 December 2015STRATEGIC REPORT strateGIc prIorItIes:
Value Added Sales
SiG iS FOCUSED ON GROWiNG iTS VALUE ADDED SALES
OFFERiNG. THiS iS DEFiNED AS PRODUCTS WHiCH ARE
OWN LABEL OR WHERE SiG CONTROLS THE DESiGN,
FABRiCATiON OR COMPONENT ASSEMBLY.
They are higher margin than the Group’s distribution businesses and are products that are
increasingly being demanded by customers, as they save them time, money and reduce their
risk. Value added sales now account for 18% of Group revenues, and are growing rapidly, up
from 14% in 2014.
Air Handling and Offsite Construction are two examples of businesses that sell a high
proportion of value added sales.
Value Added Sales
Air handling
Air Handling covers the Ventilation section of the Heating,
Ventilation and Air Conditioning (“HVAC”) market.
it is an attractive market which suits specialist distribution,
is worth an estimated €6–8bn and is growing at c.3-5%
per annum, outperforming the general construction sector.
There are strong demand drivers which are similar to the
Group’s insulation and Energy Management business
such as energy efficiency and legislation, leading to higher
value products and systems, increasing focus on indoor
air quality to improve comfort and health, and better fire
protection and smoke control.
There is also a trend towards the design and supply of
complete system solutions, which a specialist like SiG
is well positioned to fulfil, particularly through its recent
acquisition of HC Groep.
There are three elements to SiG’s air handling proposition:
Distribution, where SiG is a ‘one stop shop’ for the
specialist contractor, with a broad product range and the
provision of technical advice;
Projects, where SiG designs and delivers complete
system solutions based on customer specifications, taking
into account the latest environmental regulations; and
Services, which is the smallest of the three strands and
is related to Projects. Following the commissioning of the
installed equipment, SiG will provide maintenance and
repair services.
SiG Air Handling has grown rapidly over recent years and
on a pro forma basis including full year contributions from
recently acquired businesses, now has sales of c.€250m.
CASE STUDy
hC GROEP
To support this strategy, in September 2015, SiG
acquired the HC Groep B.V., a specialist Air Handling
systems provider based in The Netherlands with annual
revenues of c.€45m. This acquisition will enhance SiG’s
customer proposition by extending its product and
system offering, including climate ceilings, car park and
tunnel ventilation, plus adding new service capabilities.
The Group’s vision for its
Air handling business is:
1 to build a leading position in Europe by
growing organically and by consolidating a
fragmented market;
2 to achieve €400m of sales by 2018, increasing
project offering and own-label sales
components; and
3 to further increase current operating
margin of 7-8%.
16
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI Offsite Construction
Offsite Construction is the pre-assembly of building
products in a factory environment for onsite installation. it
is generally a faster, cheaper and lower risk alternative to
traditional building methods.
To be successful in this market, businesses need to be
able to provide a full service offering and have strong
customer relationships, all of which SiG already has in
place.
This market is rapidly growing in response to customer
demand, with a compound annual growth rate of 16% per
annum since 2008.
it also requires significant technological and design
expertise, in which each of SiG’s offsite businesses have
invested heavily.
SiG has three businesses which together provide a single
offsite construction proposition. They are:
Æ Insulshell, which designs, assembles and installs
insulated panels and, increasingly, complete modular
units;
Æ RoofSpace, which designs, assembles and installs
panelised roofing systems for residential properties;
and
Æ Metechno*, which designs and assembles modular
and flat-pack washroom solutions.
Offsite Construction shares a common customer base and
end markets with the Group’s distribution businesses, and
uses products that are supplied by other SiG businesses.
*acquired in 2016
Offsite Construction enhances the Group’s value added
proposition and provides the Group with a higher margin
and return on capital than its distribution businesses.
SiG has set demanding goals for this business and is
targeting to grow sales to at least £150m by 2018, and
beyond that in future years.
Offsite target market worth
£1.1bn per annum
Grow sales to
£150m by 2018
24298.02 30 March 2016 2:38 PM PROOF1
17
SIG plc Annual Report and Accounts for the year ended 31 December 2015STRATEGIC REPORT our KpIs:
How we measure performance
Key performance indicators
iN ORDER TO EVALUATE SUCCESS AGAiNST THE GROUP’S
FiNANCiAL AND STRATEGiC OBJECTiVES, THE BOARD HAS
iDENTiFiED SiX KEY PERFORMANCE iNDiCATORS AGAiNST WHiCH
iT MONiTORS AND ASSESSES THE GROUP’S PERFORMANCE.
LIKE-FOR-LIKE SALES
3.8%
UNDERLYING GROSS
MARGIN
26.9%
26.8%
26.4%
UNDERLYING OPERATING
MARGIN
4.3%
4.0%
3.8%
0.3%
0.3%
2013
2014
2015
2013
2014
2015
2013
2014
2015
The percentage growth/(decline) in the Group’s
sales per day (in constant currency) excluding
any current and prior year acquisitions and
disposals. Sales are not adjusted for organic
branch openings and closures.
The ratio of underlying gross profit to underlying
sales (excluding divested businesses).
The ratio of underlying operating profit
to underlying sales (excluding divested
businesses).
SiG’s sales were adversely affected by weak
trading conditions in Mainland Europe and the
UK RMi sector. As a result, SiG estimates that
overall its markets declined by c.1.3% in 2015.
Like-for-like sales grew by 0.3% when compared
to the prior year, which equates to a market
outperformance of c.1.6%.
increased competition, particularly in the UK,
resulted in a slight shortfall to the 2.0%-3.0%
market outperformance target set for 2015.
Although the Strategic initiatives added 50bps
to SiG’s gross margin in 2015, weak trading
conditions, which particularly impacted the
Group’s higher margin UK Exteriors business,
changes in product mix and competitive
pressures offset this improvement, resulting in
the Group’s gross margin declining by 10bps to
26.8% (2014: 26.9%).
Despite the protective measures undertaken,
gross margin being 10bps lower than the
prior year fell slightly short of the continuous
improvement target set for 2015.
The operating margin for the Group decreased
by 50bps when compared to the prior year.
This was due to an 11.2% decline in operating
profit as a result of the weak trading conditions
and the impact of adverse foreign exchange rate
movements.
in order to provide the required infrastructure
to support the continued organic growth of the
business, the Group has invested in a number
of initiatives and new branch openings, which
increased the Group’s operating costs by £5.0m
year-on-year.
On a statutory basis, the Group’s operating
margin increased by 60bps to 2.6% (2014:
2.0%).
Æ Market outperformance
of c.1.0%-2.0%
Æ Continuous improvement
Æ Continuous improvement
1
2
6
1
2
3
5
6
1
2
3
4
5
6
N
O
I
T
I
N
I
F
E
D
5
1
0
2
E
C
N
A
M
R
O
F
R
E
P
6
1
0
2
T
E
G
R
A
T
I
C
G
E
T
A
R
T
S
S
U
C
O
F
Æ Market conditions
Æ Competitors and margin management
Æ iT infrastructure and cybersecurity
S
K
S
R
I
Æ Government legislation
Æ Commercial relationships
Æ Commercial relationships
I
l
A
P
C
N
R
P
I
18
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI
Their relevance to our strategy and our performance against these measures are explained below:
Links to our Strategic Pillars
1
2
3
Outstanding customer service
Sales outperformance
Gross margin enhancement
4
5
6
Operational efficiency
Financial returns
Exceptional people
Read more about our Strategic Pillars on page 12
Remuneration
Certain KPis are used as a measure in the
incentives plans for the remuneration of
executives.
For 2015 this includes Return on Capital
Employed, identified below with the
symbol ®.
LIKE-FOR-LIKE WORKING
CAPITAL TO SALES
RETURN ON CAPITAL
EMPLOYED®
8.8%
9.1%
8.0%
10.4%
9.4%
9.3%
EMPLOYEE
ENGAGEMENT
77%
72%
70%
OVERALL
ENGAGEMENT
2015:
73%
2013
2014
2015
2013
2014
2015
Say
Stay
Strive
Working capital to sales is defined as the ratio
of closing working capital (including provisions
but excluding pension scheme obligations)
to annualised sales (after adjusting for any
acquisitions and disposals in the current and
prior year) on a constant currency basis.
The Group recorded a working capital to sales
ratio of 9.1% in 2015 (2014: 8.0%). The ratio was
slightly in excess of the target of no more than
9% due to the lower overall sales volumes in the
third quarter combined with a relatively strong
final quarter.
The ratio of underlying operating profit less
taxation divided by average capital employed
(average net assets plus average net debt).
The delivery of SiG’s strategy depends on our people
and their level of engagement is a key measure of the
Group’s performance.
ROCE is then compared to the Weighted
Average Cost of Capital (“WACC”). The
difference between ROCE and WACC
determines whether the Company is creating an
economic profit for its Shareholders.
The Group recorded a post-tax ROCE of 9.3%
in 2015, 110bps below prior year (10.4%) and
170bps below the 2015 target (11.0%) but
220bps above WACC (7.1%).
Assuming a full year contribution from
acquisitions completed in the year, ROCE would
have been 40bps higher.
Going forward SiG is committed to increasing
ROCE. SiG seeks to achieve this by taking a
disciplined approach to capital management and
by further improvements in gross and operating
margins.
Engagement is measured by considering what our
people say about SiG, their commitment to stay in
SiG and whether they strive to go the extra mile.
SiG performed its second Group-wide employee
engagement survey during 2015. Overall, 78% of
employees took part in the survey (81% in 2014),
with 76% participation in UK & ireland and 80% in
Mainland Europe.
Of the responses, 73% of all employees reported as
“being engaged” (2014: 74%), which aligns to industry
benchmarks, although slightly below the prior year target
of maintaining the overall level of engagement. in a year
of significant change for SiG, this is a positive result.
Following the survey, working groups have been
established at Group and local level. Group-wide
actions are focusing on the key areas of connecting
our people with the Group’s strategy and goals, and
communicating successes as part of recognising
people’s achievements. Local teams are acting to
improve employee engagement within their respective
branches and departments by responding to local
drivers of engagement.
Æ Working capital to sales of no
Æ To drive improvements in the Group’s
Æ Continuous improvement in overall
more than 9%
ROCE
engagement
4
5
6
1
2
3
4
5
6
6
Æ Working capital and credit management
Æ Market conditions
Æ Availability and quality of key resource
Æ Competitors and margin management
Æ Working capital and credit management
24298.02 30 March 2016 2:38 PM PROOF1
19
SIG plc Annual Report and Accounts for the year ended 31 December 2015STRATEGIC REPORT Principal Risks and
Uncertainties
Risk management involves the identification and evaluation of risks and is the responsibility of the Group Board. The
Group’s ability to manage risk is continually improving through the focus on risk management capability to ensure that it
remains robust and that emerging risks are identified, assessed and managed effectively.
The risk management process incorporates both top-down and bottom-up elements to the identification, evaluation
and management of risks, and all risks evaluated are referenced to the achievement of the Group’s Strategic
initiatives. 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 the Group’s risk management procedures is included in the Corporate Governance section on
pages 64 to 66.
There are a number of potential risks and uncertainties which 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:
RISK IDENTIFICATION, MONITORING AND REPORTING FRAMEWORK
Æ Sets strategic objectives
Æ Approves risk governance structure and
agrees risk appetite
Æ Sets delegation of authority
The Board
Æ Receives and reviews Group Risk Register
Æ Receives and reviews Audit Committee reports
on risk governance and internal controls
Æ Considers adequacy of risk management
Æ Receives and reviews reports from independent
Audit Committee
and internal control framework
Æ Receives and reviews reports from the
Group Risk Function
Group Executive Committee
Æ Ensures risk management is embedded
into all processes
Æ Reviews Group Risk Profile
assurance providers
Æ Sets Audit Programme
Group Risk Function
Æ Conducts continual review of risks and risk controls
Æ Concludes on treatment of risks
Æ Reviews and reports on risk to the Audit Committee
and Board
Operating Company Management
Æ Management and employees are responsible for the
Æ Formulation of strategy & policy
Æ Tracks risk management activity in the operating
identification, management and reporting of local risks
companies
Æ Maintenance of local risk registers
Æ implementation of control framework and
risk mitigation plans
Central Support
Æ Provides targeted expertise and support to risk owners
Æ Develops and maintains risk specific controls
g
n
i
t
n
e
m
e
p
m
l
i
r
o
f
y
t
i
l
i
i
b
s
n
o
p
s
e
r
g
n
i
r
o
t
i
n
o
m
r
o
f
y
t
i
l
i
b
a
t
n
u
o
c
c
a
Æ internal audit
Æ External audit
Æ Quality standards audit
Independent Assurance
Æ insurer and property risk surveyors
Æ Audit Committee and Board
2015 DEVELOPMENTS
Throughout 2015 SiG has continued to develop an
integrated approach to its risk and assurance activities.
Specifically, the following improvements have been
implemented:
practices throughout the business as well as educating
employees on the importance of these disciplines;
Æ review of self-certification processes;
Æ extended participation with external risk and fraud
forums;
Æ continued review of the internal control and risk
Æ continued development of Group-wide control
framework;
Æ review of risk management software to help improve
framework forums to identify and drive best practice;
and
risk identification and drive consistency;
Æ development of a multifunctional information security
Æ external review of fraud risk management framework
including fraud awareness policies and controls;
Æ delivery of risk management and fraud awareness
training across the Group to help confirm a consistent
approach in embedding risk and fraud awareness
council to enhance the Group’s cyber security structure
in order to ensure that it remains resilient and able to
evolve to counter the increasing complexity and volume
of information security threats to the wider business
community.
20
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI
Links to our Strategic Pillars
1
2
3
Outstanding customer service
Sales outperformance
Gross margin enhancement
STRATEGIC REPORT
Understanding movements
in business risk:
4
5
6
Operational efficiency
Financial returns
Exceptional people
increase
No change
Decrease
Read more about our Strategic Pillars on page 12
PLANNED IMPROVEMENTS FOR 2016
SiG will continue to improve its risk management
processes with a number of initiatives:
Æ introduction of data warehousing, reporting of
financial analysis and other tools which will improve
data security, and the control framework, allowing
for improved disaster recovery and better quality of
reporting;
Æ extend scope of risk management and fraud awareness
training to help confirm a consistent approach in
embedding risk and fraud awareness throughout the
business;
Æ review of risk management framework to refresh risk
architecture, strategy and protocols;
Æ enhancement of self-certification processes to ensure
they remain consistent with the dynamic risk and fraud
environment; and
Æ defining a complete cyber strategy framework for the
Group with a programme of activity which includes
“Cyber Essentials” certification and working closely
with KPMG and other third-party security specialists,
government and local law enforcement though CiSP
and UK CERT.
Throughout the year the risks that SiG faces have been critically reviewed and evaluated. The assessment of the most
significant risks and uncertainties that could impact SiG’s long-term performance are outlined in this section of the
report. These risks are not set out in any order or priority and they do not comprise all the risks and the uncertainties
that SiG faces. This list has the potential to change as some risks assume greater importance than others during the
course of the year.
RISK AND lINK TO
STRATEGIC PIllARS
TREND
KEy MITIGATION ACTIVITIES INClUDE:
OUR FOCUS IN 2015
MARKET CONDITIONS 2
3
The Group is exposed to
changes in the level of activity
and therefore demand from
the building, construction and
civil engineering industries.
Government policy and
expenditure plans, private
investor decisions, the general
economic climate and both
business and (to a lesser extent)
consumer confidence are all
factors which can influence the
level of building activity and
therefore the demand for many of
the Group’s products.
Æ Maintain a broad spread of markets, products and
customers to limit risks within any given territory
Æ The Group Board’s portfolio review ensures that
the Group’s capital is appropriately allocated to the
geographies and markets which remain core
Æ Continual review of all available indicators of
market activity and regular communication with key
suppliers and customers to ensure that any change
in market demand is anticipated as early as possible
Æ Ensure the Group remains structured in a way that
enables it to take prompt action in the event of a
material change in the trading environment
Æ Ensure the Group maintains a strong balance sheet
and financial position
Æ Restructuring actions
Æ Strategic initiatives
Æ Selected ROCE-enhancing
acquisitions
Æ Further diversification
through investment in
specialist niche markets
Æ Rebranding
COMPETITORS AND MARGIN MANAGEMENT 2
3
5
Challenging market trading
conditions mean that competition
pressures from direct specialist
competition and the overlap with
general suppliers remain high,
which in turn results in continued
margin pressures being faced by
the Group.
Æ Strong trading presence and positions in the majority
Æ Specialist training
of the markets in which the Group trades
Æ initiatives designed to improve the Group’s core
competencies surrounding customer service, sales
support and training
Æ Ongoing pricing and purchasing initiatives, including
supplier rebates, designed to improve gross margin
Æ Tight control of operating costs
Æ Significant investment in the branch network and
distribution capability, people, iT infrastructure and
product offering
Æ Diversified portfolio of products, customers and
markets limits the risk from any single competitor
Æ investment in iT
Æ Professionalising
procurement and pricing
management
Æ Development of category
forums
Æ Appointment of Group
Operations Director, Group
Supply Chain Director and
Group Procurement Director
24298.02 30 March 2016 2:38 PM PROOF1
21
SIG plc Annual Report and Accounts for the year ended 31 December 2015 Principal Risks and
Uncertainties CONTiNUED
RISK AND lINK TO
STRATEGIC PIllARS
TREND
KEy MITIGATION ACTIVITIES INClUDE:
OUR FOCUS IN 2015
COMMERCIAL RELATIONSHIPS 1
2
Failure to negotiate competitive
terms of business with suppliers
or failure to satisfy the needs
of customers could harm the
Group’s business.
Customer or supplier
consolidation and/or
manufacturers dealing directly
with customers.
GOVERNMENT LEGISLATION 5
6
SiG operates in a number of
countries, each with its own laws
and regulations, encompassing
environmental, legal, health and
safety, employment and tax
matters. Changes in these laws
and regulations, including a
potential “Brexit”, could impact
on SiG’s ability to conduct its
business, or make the conduct of
such business more expensive.
There is also the reputational and
financial cost of being penalised
for non-compliance.
DEBT 5
Group net debt at 31 December
2015 amounted to £235.9m.
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.
Æ Ongoing pricing and purchasing initiatives designed
Æ Procurement initiative
to improve gross margin
Æ The Group has extensive and regular dialogue
with all commercial partners to maintain strong
relationships
Æ Key supplier/customer harmonisation and national
account strategy planning
Æ The Group is not overly reliant on any one supplier
and all businesses undergo alternative key supplier
scenario planning
Æ Strategically important suppliers are reviewed
globally to assess their financial health
Æ Monitoring of customer behaviour and performance
Æ Commercial partner
relationship and
rationalisation
Æ Appointment of Group
Supply Chain Director and
Group Procurement Director
Æ Dedicated resource to monitor compliance with legal
Æ ‘Zero Harm’ programme
and regulatory matters
Æ Active monitoring of relevant laws and regulations to
ensure that any changes to the legal framework are
identified and effects minimised
Æ Review of policies and procedures with reference to
changing legislative requirements and the provision
of associated training
Æ Training and development
programmes
Æ Anti-Bribery & Corruption
and Competition Policies
Æ Data protection audits and
training
Æ Affiliation with regulatory bodies and trade
associations
Æ Strong internal control framework, policies
and culture supported by strong leadership,
accountability and commitment throughout the
organisation
Æ Continuous monitoring of political environment
Æ Continuous review of business plans in order to
minimise SiG’s exposure to potential changes in
Government policy
Æ Comprehensive Treasury Policy (please see Treasury
Risk Management section on pages 37 to 40)
Æ Regular meetings of the Tax
and Treasury Committee
Æ Regular monitoring, including sensitivity analysis, to
understand the impact of interest rate and exchange
rate movements
Æ Active hedging programme in place
Æ Monitor performance against covenants on the
Group’s Revolving Credit Facility and private
placement notes
Æ Regular discussion with banking and private
placement partners
Æ integration of new
acquisitions into SiG
banking arrangements
and cash management
processes
Æ introduction of additional
modelling and stress testing
in relation to the longer-
term viability reporting
requirements
Æ Early consideration of
the refinancing of the
2016 private placement
maturity of c.£130m (net of
associated derivatives)
22
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI Links to our Strategic Pillars
1
2
3
Outstanding customer service
Sales outperformance
Gross margin enhancement
Understanding movements
in business risk:
4
5
6
Operational efficiency
Financial returns
Exceptional people
increase
No change
Decrease
Read more about our Strategic Pillars on page 12
RISK AND lINK TO
STRATEGIC PIllARS
TREND
KEy MITIGATION ACTIVITIES INClUDE:
OUR FOCUS IN 2015
WORKING CAPITAL AND CASH MANAGEMENT 1
4
5
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.
Æ Post-tax Return on Capital Employed is a Key
Æ Branch reviews
Performance indicator of the Group
Æ Cash flow targets are agreed with each business unit
as part of the annual budget process and reviewed
on a monthly basis
Æ Stringent authorisation procedures to control capital
expenditure
Æ Strategic initiatives
Æ Credit management: UK
roll out of unique customer
finance and customer risk
management tools to help
customers
Æ Proactive credit management systems supported by
Æ investment in iT
daily customer monitoring systems
IT INFRASTRUCTURE AND CYBERSECURITY 4
5
SiG uses a range of computer
systems across the Group.
Outages and interruptions could
affect the ability to conduct day-
to-day operations, which could
result in loss of sales and delays
to cash flow.
Key systems are breached
causing financial loss, data loss,
disruption or damage.
A new ERP system is currently
being implemented within the UK
distribution businesses.
Æ Continual review of iT strategies to ensure they
Æ Roll out of the new
remain appropriate
Æ Business continuity framework
Æ Dedicated internal iT support team together with
external support providers
ERP system for the UK
distribution businesses has
continued during the course
of 2015 and this will be
completed in 2016
Æ Regular updates to technology, infrastructure,
communications and application systems
Æ Group Chief information
Officer (“CiO”) appointed
Æ The Group has advanced hardware and software
security in place to ensure protection of commercial
and sensitive data
Æ For new iT projects, external consultants are utilised
in conjunction with internal project management
teams
Æ Collaborative cross-functional risk group in place
Æ Awareness of increased
exposure to cyber crime
and creation of information
Security Council
Æ Appointment of Group iT
Service Delivery Director,
Group iT Systems
Development Director
and Group iT Commercial
Director
AVAILABILITY AND qUALITY OF KEY RESOURCES 4
6
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 attract and retain key
individuals, strong management
and technical staff in the future
could have an adverse effect
upon the Group’s business.
Æ Strategic and budget reviews ensure all key resource
Æ Employee engagement
requirements are identified and managed
survey
Æ Senior management succession planning
Æ Continue to evolve a defined people strategy based
on culture and engagement, talent management,
training and reward recognition
Æ Provision of channels for employees to raise
concerns to promote an environment of honesty and
trust
Æ increased employee
communication and
engagement
Æ Appointed Group Head of
Resourcing
Æ implemented detailed
succession planning for
senior management
Æ increased training
through “Raising the Bar”
programme for Senior
Leadership Team
24298.02 30 March 2016 2:38 PM PROOF1
23
SIG plc Annual Report and Accounts for the year ended 31 December 2015STRATEGIC REPORT Our performance
The Group continues to
make good progress on its
Strategic Initiatives to improve
business performance.
STUART MITChEll Chief Executive
Revenues from continuing operations decreased 1.4%
to £2,566.4m (2014: £2,602.9m), having been adversely
affected by foreign exchange translation, with the average
Euro to Sterling exchange rate depreciating by 10.9%
to €1.383 in 2015 from €1.247 in 2014. Group sales
increased 3.7% in constant currency and were ahead
by 0.3% on a like-for-like (“LFL”) basis, with acquisitions
contributing 3.4% to revenue growth.
The Group continues to make good progress on its
Strategic initiatives to improve business performance,
delivering an incremental net benefit of £12.6m in 2015.
This gives a total cumulative net saving of £22.7m since
the programme began, mainly sourced from procurement,
and is ahead of schedule. SiG continues to expect to
achieve at least another £10m incremental net benefit in
2016.
SiG experienced product price inflation of 0.5% and a
0.2% volume decrease in 2015. SiG estimates that its
overall market, weighted according to the sectors in which
it operates, declined by 1.3% in the period, corresponding
to an outperformance of 1.6% by the Group.
in UK & ireland revenues from continuing operations
increased 5.7% to £1,412.9m (2014: £1,336.2m), and
were up 1.5% on a LFL basis, with the UK up 0.8% and
ireland ahead by 12.7%.
Sales in Mainland Europe from continuing operations
decreased 8.9% to £1,153.5m (2014: £1,266.7m), mainly
due to movements in foreign exchange rates. On a LFL
basis sales in Mainland Europe fell by 0.9% for the year,
but showed an improved performance in Q4, increasing
by 1.8%.
Although the Strategic initiatives added 50bps to
SiG’s gross margin in 2015, weak trading conditions,
which particularly impacted the Group’s higher margin
UK Exteriors business, changes in product mix and
competitive pressures offset this improvement, resulting
in the Group’s gross margin declining by 10bps to 26.8%
(2014: 26.9%).
Underlying operating profit declined 11.2% to £98.7m
(2014: £111.2m) having been impacted by movements
in foreign exchange rates and weak trading conditions,
with underlying operating margin declining 50bps to 3.8%
(2014: 4.3%). Underlying net finance costs decreased
slightly to £11.3m (2014: £12.1m), which together with
the decline in operating profit resulted in underlying profit
before tax decreasing 11.8% to £87.4m (2014: £99.1m).
Despite benefiting from a lower tax rate underlying basic
earnings per share from continuing operations declined by
6.7% to 11.2p (2014: 12.0p).
On a statutory basis profit before tax increased 31.5%
to £51.3m (2014: £39.0m) mainly due to a reduction in
amortisation of acquired intangibles, and the prior year
including costs associated with the sale of businesses,
offset by business termination costs. Basic earnings per
share increased 8.9% to 6.1p (2014: 5.6p).
Net debt at 31 December 2015 increased to £235.9m
(31 December 2014: £126.9m) following net acquisition
expenditure of £75.3m (2014: £21.0m) and net capital
expenditure (excluding one-off sale of land) of £46.3m
(2014: £36.6m). Net capital expenditure was 1.8x
depreciation of £26.0m (2014: £24.0m), as the Group
reinvested in the business, particularly iT and fleet.
24
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI GROUP
SAlES
£2,566.4m
GROSS
MARGIN
26.8%
PROFIT
BEFORE TAx
£87.4m
24298.02 30 March 2016 2:38 PM PROOF1
25
SIG plc Annual Report and Accounts for the year ended 31 December 2015STRATEGIC REPORT Our performance CONTiNUED
ACqUISITIONS
in 2015 SiG acquired 12 infill businesses for a gross
cash consideration of £78.1m, together with a contingent
consideration of up to £14.2m providing future
performance enhances Group returns.
SUPPLY CHAIN
One of the key themes of the Group’s Capital Markets
Day in November 2015 was the reshaping of SiG’s supply
chain by centralising supplier and customer deliveries to
larger branches or Regional Distribution Centres (“RDCs”).
Five of the acquisitions were regional infills in the UK
roofing sector and one was a specialist in the UK technical
insulation market. Five acquisitions were geographic and
product infills in Mainland Europe, with activities in the air
handling, interiors and insulation sectors. The Group also
acquired an interiors business in the Middle East.
in order to maximise returns whilst minimising risk to
the business, SiG set out a two-step strategy to achieve
these savings, with the first step involving a move to
regional hubs utilising the Group’s existing network where
possible. SiG is targeting £20m savings from this first
step, with a resulting exceptional charge of c.£10m.
in the UK, the Group’s Exteriors business is currently
rolling out its hub and spoke model with a target
completion date of the end of Q2 2016. SiG Distribution
is finalising plans to deliver the cultural and behavioural
change programme that underpins its change plan and
is rolling out improved functionality of the new K8 ERP
system in forecasting, replenishment and warehouse
management.
A Group-wide review of transport planning has also
commenced to secure savings through improved vehicle
scheduling and routing.
The second step of the Group’s supply chain strategy is
to trial RDCs, potentially working with third-party logistics
providers. SiG is on track to open three new RDCs this
year in the UK, France and ireland.
Read more about our
Supply Chain on page 15
To date in 2016 SiG has acquired a further five infill
businesses for a gross cash consideration of £14.6m in
the air handling, exteriors and interiors sectors.
As previously stated going forward SiG is aiming to return
leverage to c.1.5x in the medium-term by slowing the
pace of acquisitions and moderating capital expenditure.
RETURN ON CAPITAL EMPLOYED
Post-tax Return on Capital Employed (“ROCE”) is the
key metric for the Group and is calculated as underlying
operating profit less tax, divided by average net assets
plus average net debt.
in 2015 SiG’s ROCE decreased by 110bps to 9.3%
(2014: 10.4%) mainly due to weaker trading conditions.
Assuming a full year contribution from acquisitions
completed in the year, ROCE would have been 40bps
higher.
Going forward SiG remains committed to increasing
ROCE. As well as taking a disciplined approach to its
capital management, SiG seeks to achieve this through
further improvements in its gross and operating margins.
STRATEGIC INITIATIVES
SiG continues to make good progress on its Strategic
initiatives to improve business performance, delivering
gross cumulative savings of £33.6m in 2015, of which
£18.8m was in the UK & ireland and £14.8m was in
Mainland Europe. These savings were almost all sourced
from its procurement initiative and are ahead of the
Group’s original schedule.
The net cumulative benefit to the Group, after costs of
£10.9m to deliver the programme, was £22.7m. Following
a net benefit of £10.1m in 2014, the net incremental
benefit to the Group of the Strategic initiatives in 2015
was £12.6m. in constant currency the net benefit was
£14.1m. SiG continues to expect to achieve at least
another £10m incremental net benefit in 2016.
26
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI
AIR HANDLING
The Group’s first significant move into air handling came
through the acquisition of Air Trade Centre in 2007, with
the rationale being that this is an adjacent specialist
distribution market, with similar environmental drivers as
SiG’s insulation and energy management business.
The business has grown rapidly over recent years, and
increased sales by 17% in 2015 to €214m. On a pro
forma basis, including full year contributions from the infill
acquisitions the Group made in H2 2015 and January
2016, sales in this division would be c.€250m.
SiG is targeting sales of at least €400m by 2018, mainly
through organic growth, with an operating margin in the
range of 7-8%. in doing so the Group is aiming to increase
its project offering of designing and delivering complete
system solutions to customers.
OFFSITE CONSTRUCTION
The Group has three businesses, insulshell, RoofSpace
and Metechno (acquired 2016), which together provide a
compelling single offsite construction proposition.
The segment of the offsite market which SiG is targeting
is already worth over £1bn and is fast growing, having
increased at a compound annual rate of 16% since
2008. This is due to strong customer demand drivers
as traditional construction methods are displaced.
Furthermore, it has the same customer base and end-
markets as SiG’s distribution businesses, and uses
products that are supplied from the rest of the Group.
The Group is aiming to increase sales to at least £150m
by 2018, with a double-digit operating margin, and is
targeting a number one position in each of its markets.
UK & IRELAND TRADING REVIEW
Æ Sales from continuing operations increased 5.7% to
£1,412.9m (2014: £1,336.2m)
Æ Gross margin from continuing operations down 10bps
to 26.6% (2014: 26.7%)
Æ Underlying operating profit down 8.8% to £61.0m
(2014: £66.9m)
Æ Underlying operating margin declined 70bps to 4.3%
(2014: 5.0%)
Æ Statutory operating profit of £38.6m (2014: £18.8m)
Continuing
operations
2015 Sales
Change
lFl change
Change in
gross margin
United Kingdom £1,340.8m
ireland
£72.1m
UK & Ireland
£1,412.9m
6.0%
1.5%
5.7%
0.8%
12.7%
1.5%
(20)bps
150bps
(10)bps
Sales from continuing operations in the UK increased
6.0%, benefiting from acquisitions, which added £63.9m
of revenues in the period. Excluding acquisitions, on a LFL
basis sales were ahead 0.8%.
The private new build residential sector was the strongest
segment of the UK construction market in 2015, up 7.0%
compared to prior year according to the Construction
Products Association (“CPA”). SiG continues to expect
robust growth in this sector in 2016, although the rate of
expansion is likely to slow somewhat compared to 2015,
with the CPA forecasting a growth rate of 5.0%.
in contrast the UK Repairs, Maintenance and
improvement (“RMi”) residential sector was challenging
during 2015, particularly in the second half of the year.
This adversely affected the Group’s Exteriors business,
which has a relatively high exposure to this segment of the
market, recording a LFL sales decline of 2.9% in the year,
and down by 4.3% in H2 2015.
24298.02 30 March 2016 2:38 PM PROOF1
27
SIG plc Annual Report and Accounts for the year ended 31 December 2015STRATEGIC REPORT Our performance CONTiNUED
France
Although sales in France decreased by 2.8% on a LFL
basis, and were down by 11.7% in Sterling due to
movements in foreign exchange, SiG outperformed the
market by 2.1%.
The French construction market remained challenging
during 2015, with the residential market, to which the
Group has a high exposure, accounting for 61% of
revenues, particularly weak. Activity in the non-residential
sector also continued to decline, although not to the same
degree as the housing market.
There were signs that French market conditions were
beginning to improve towards the end of 2015, with SiG
recording LFL sales growth of 2.5% in Q4. This was the
Group’s first positive LFL quarterly performance in France
since Q1 2014. Furthermore, new housing starts have
stabilised at around 350,000 on a rolling twelve month
basis, following double-digit declines earlier in the year.
Given the improving housing data and a return to growth
for SiG, the outlook for France is more positive although
the trajectory of any recovery remains uncertain at this
early stage. Euroconstruct is forecasting a strong bounce
back in the French construction market in 2016, with total
building output expected to increase by 5.2%.
SiG believes that the weakness in the UK RMi market is
correlated, with a time lag, with housing transactions and
mortgage approvals, which declined during 2014 and
into the first quarter of 2015. Since then transactions and
approval rates have begun to recover, suggesting that the
UK RMi market is likely to pick up as 2016 progresses.
SiGD’s LFL sales were up 2.1% despite increased
competition in the UK insulation and interiors market
during 2015, particularly in more commoditised product
areas. in order to improve performance in this market the
Group has taken a number of actions aimed at further
increasing its customer focus, and is already benefiting
from these changes.
The Group’s outlook for the UK market in 2016 is positive,
with growth expected to continue to be driven by the
residential sector, particularly in new build. While trading
conditions in the non-residential sector are improving, SiG
has not yet benefited from this growth mainly due to its
later cycle exposure. Assuming this continues, the Group
anticipates that this should start to feed through into its
sales performance during 2016. The CPA is forecasting an
increase in UK building output of 2.9% in 2016.
SiG recorded a very strong performance in ireland in 2015
with LFL sales up 12.7% and gross margin ahead by
150bps. However, having been adversely affected by the
weakening Euro, sales in Sterling were only up 1.5%. The
Group’s growth was driven by a recovering irish residential
market, along with some more limited recovery in activity
in the non-residential sector. Euroconstruct expects this
strong recovery to continue in 2016.
MAINLAND EUROPE TRADING REVIEW
Æ Sales from continuing operations decreased 8.9% to
£1,153.5m (2014: £1,266.7m)
Æ Gross margin from continuing operations increased
10bps to 27.2% (2014: 27.1%)
Æ Underlying operating profit declined 16.8% to £45.1m
(2014: £54.2m)
Æ Underlying operating margin down 40bps to 3.9%
(2014: 4.3%)
Æ Statutory operating profit of £34.7m (2014: £44.3m)
Continuing
operations
France
2015 Sales
Change
lFl change
£517.3m
(11.7)% (2.8)%
Germany & Austria
£368.3m
(10.7)% (2.3)%
Benelux*
Poland
£164.3m
£103.6m
5.1%
(7.5)%
7.8%
2.3%
Mainland Europe
£1,153.5m
(8.9)% (0.9)%
Change in
gross margin
(20)bps
(10)bps
120bps
(30)bps
10bps
* includes Air Trade Centre
28
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI poland
in Poland, following a challenging 2014, when LFL sales
decreased 5.7%, the construction market recovered in
2015, with SiG recording a LFL sales growth of 2.3% and
by 4.2% in the second half of the year. However, following
a 160bps improvement last year, gross margin fell back by
30bps mainly due to changes in sales mix.
Euroconstruct expect the recovery in the Polish market to
continue in 2016 and is forecasting a growth rate of 3.6%.
GROUP OUTLOOK
This year the Group continues to expect good growth in
the UK new build construction market, primarily driven
by the residential segment. Lead indicators also suggest
that demand should pick up in the UK RMi sector as 2016
progresses.
in Mainland Europe, while the trajectory of any recovery at
this stage remains uncertain, trading conditions in France
have improved, with the housing market stabilising and a
return to growth for SiG in Q4 2015.
Following an encouraging start to the year, with positive
LFLs in both the UK & ireland and Mainland Europe, the
scope for further cost savings and growth opportunities
within the Group mean that it expects to make progress in
2016.
Germany & austria
Sales in Germany & Austria decreased by 2.3% on a LFL
basis and were down 10.7% in Sterling.
While the new build residential sector was the strongest
performing market in Germany, increasing by 5.5%, this
sector only accounts for 13% of SiG’s sales in the country.
SiG has a high exposure to the weaker non-residential
and industrial sectors in Germany, which account for
76% of revenues. in particular SiG’s technical insulation
business, VTi, was adversely affected by the challenging
trading conditions in the industrial sector, with LFL sales
declining by 7.8%.
LFL sales in WeGo, the Group’s interior and structural
insulation business, decreased 1.5% in the year. This
compares to a 1.8% decline in the non-residential market,
according to Euroconstruct.
Looking ahead to 2016, Euroconstruct is forecasting a
1.9% increase in building output in Germany, with the
residential sector (up 2.3%) again outperforming the non-
residential market (up 1.2%).
Benelux
Sales in Benelux (which includes Air Trade Centre) were up
5.1% and by 7.8% on a LFL basis. While the construction
market in Belgium remains challenging in both the
residential and non-residential sectors, The Netherlands
continued to improve. This was led by growth in the
residential sector, with the non-residential market, which
had been in decline for a number of years, now stable.
For 2016 Euroconstruct is forecasting continued good
growth in The Netherlands, with building output up by
4.8%, but Belgium continuing to be relatively weak, with
output increasing by only 0.6%.
24298.02 30 March 2016 2:38 PM PROOF1
29
SIG plc Annual Report and Accounts for the year ended 31 December 2015STRATEGIC REPORT Financial Review
The Group has exceeded
its stated objective of delivering
£20m of net benefit through its
Strategic Initiatives programme
DOUG ROBERTSON FiNANCE DiRECTOR
GROUP PERFORMANCE
Sales
Gross margin
Operating profit
Profit before tax
Basic earnings per share (pence)
Total dividend per share (pence)
Working capital to sales
ROCE
Underlying*
Statutory
2015
£m
2,566.4
26.8%
98.7
87.4
11.2p
n/a
9.1%
9.3%
2014
£m
2,602.9
26.9%
111.2
99.1
12.0p
n/a
8.0%
10.4%
Change
(1.4)%
(10)bps
(11.2)%
(11.8)%
(0.8)p
n/a
110bps
(110)bps
2015
£m
2,566.4
26.8%
65.9
51.3
6.1p
4.60p
n/a
n/a
2014
£m
2,633.9
26.7%
53.2
39.0
5.6p
4.40p
n/a
n/a
Change
(2.6)%
10bps
23.9%
31.5%
0.5p
0.20p
n/a
n/a
* Underlying is before the amortisation of acquired intangibles, restructuring costs, acquisition expenses and contingent consideration, other one-off
items, profits and losses arising on the sale of businesses and associated impairment charges, trading profits and losses associated with disposed
businesses, unwinding of provision discounting, fair value gains and losses on derivative financial instruments, one-off recognition of deferred tax assets,
the taxation effect of “Other items” and the effect of changes in taxation rates.
OVERVIEW
The Group has made good progress in the delivery of its
Strategic initiatives despite difficult market conditions,
and has continued to successfully implement its infill
acquisition programme. The Group has exceeded its
stated objective of delivering a cumulative net benefit of
£20m through its Strategic initiatives programme in 2015,
and acquisitions in 2015 and 2014 added an additional
£8.8m of operating profit compared to 2014.
in a year that saw challenging market conditions,
particularly in the second half, a ROCE of 9.3% (2014:
10.4%) falls some way short of SiG’s target, which was for
ROCE to exceed 11% in 2015. However, ROCE remains
comfortably ahead of SiG’s Weighted Average Cost of
Capital (“WACC”), which for the year ended 31 December
2015 was 7.1%, and therefore creates economic profit for
Shareholders.
REVENUE
Group sales from continuing operations fell in Sterling by
1.4%, but increased 3.7% on a constant currency basis.
The incremental impact of acquisitions made in the current
and prior year contributed 3.4% of this sales growth in the
year; excluding 2015 and 2014 acquisitions the Group’s
sales on a constant currency basis were up 0.3%.
The weighted number of trading days in the year ended 31
December 2015 had no impact compared to the prior year.
Total Group sales in Sterling fell by 2.6% to £2,566.4m
(2014: £2,633.9m).
Like-for-like
constant currency
sales performance^
First half
Second half
Full year
Group
0.6%
0.0%
0.3%
UK &
Ireland
2.8%
0.2%
1.5%
Mainland
Europe
(1.5)%
(0.3)%
(0.9)%
^ Like-for-like constant currency sales performance represents the growth/
(decline) in the Group’s sales per day excluding any acquisitions and
disposals completed or agreed in the current and prior year. Sales are
not adjusted for organic branch openings and closures.
SiG estimates that overall its markets contracted by
c.1.3% in 2015. Given that the Group achieved a like-
for-like constant currency sales growth of 0.3%, this
equates to a market outperformance of c.1.6%. This has
been achieved against a backdrop of strong competition
in SiG’s core markets in 2015. in delivering this
outperformance, the Group has opened a further seven
branches in high-potential locations (2014: nine openings),
three in the UK & ireland, two in Germany and one each in
France and Belgium. As part of its Supply Chain initiative,
the Group also closed 16 branches in 2015, ten in the UK,
four in Germany and two in Poland.
30
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI GROSS MARGIN
26.1%
26.4%
26.4%
26.9%
26.8%
2011
2012
2013
2014
2015
The Group’s underlying gross profit margin at 26.8% was
down 10bps on the prior year (2014: 26.9%), with the UK
& ireland down 10bps and Mainland Europe marginally
ahead of prior year. The Group’s Procurement Strategic
initiative delivered significant benefit in the year and was
instrumental in protecting gross margins against strong
pricing competition in many of SiG’s core markets.
Maximising returns remains a fundamental component
of SiG’s strategy. SiG intends to continue to target gross
margin improvement through further development of its
Procurement initiative, reshaping of its Supply Chain and
greater focus on value added sales.
OPERATING COSTS
2015 v 2014 operating cost bridge (£m)
(30.7)
589.4
(10.6)
2.9
19.3
4.7
12.6
2.1
The Group has continued to review its operational
efficiency in 2015, including a comprehensive review
of its Supply Chain in the United Kingdom, France and
Germany, and has initiated actions which are expected to
deliver annualised cost savings of c.£5.4m with associated
restructuring costs of £8.3m. Approximately £4.3m of
these savings are expected to be realised in 2016.
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) was
maintained at 0.3% of sales (2014: 0.3% of sales), an
exceptional performance in difficult trading conditions.
This is testament to the quality and strength of our credit
control teams and the Group’s credit control policies and
procedures, supported by credit insurance policies where
appropriate.
Taking into account the factors noted above, the Group
experienced operating cost inflation in the year of 2.1%.
OTHER ITEMS
in order to provide an indication of its continuing earnings,
the Group separately identifies “Other items” on the face
of its Consolidated income Statement. These items are
separately reported due to their non-recurring, significant
or unusual nature.
Underlying profit before tax
Other items
Amortisation of acquired
intangibles
Profits and losses on sale of
businesses and associated
impairment charges
589.7
Net operating losses attributable
to businesses divested in 2014
Acquisition expenses and
contingent consideration
2015
£m
87.4
2014
£m
99.1
(10.3)
(19.6)
-
-
(14.3)
(8.3)
0.1
(3.3)
(36.1)
51.3
(14.0)
(6.7)
(3.9)
(9.2)
(4.6)
(2.1)
(60.1)
39.0
2014
Operating
costs
Currency
impact
Incentives
Other
Acquisitions
& new
branches
Strategic
Initiatives
Volume
Inflation
2015
Operating
costs
Restructuring costs
Other one-off items
Fair value gains and losses on
derivative financial instruments
and unwinding of provision
discounting
Total Other items
Statutory profit before tax
Underlying operating costs increased by £0.3m (0.1%) in
2015; on a constant currency basis, underlying operating
costs increased by £31.0m (5.3%).
The biggest impact on operating costs in the year has
come from the movement in foreign exchange rates,
which have reduced costs in Sterling by £30.7m. During
the year SiG has continued to invest in its branch network
and other local initiatives (£5.0m), acquisitions (£14.3m)
and Strategic initiatives (£2.1m). The Group’s incentive
charge has fallen by £10.6m in 2015. The lower sales
volumes experienced in 2015 have also reduced variable
costs by £4.7m.
24298.02 30 March 2016 2:38 PM PROOF1
31
SIG plc Annual Report and Accounts for the year ended 31 December 2015STRATEGIC REPORT Financial Review CONTiNUED
Amounts reported in the “Other items” column of the
Consolidated income Statement, which in total amounted
to a loss before tax of £36.1m (2014: £60.1m), are as
follows:
Æ Amortisation of acquired intangibles – £10.3m
(2014: £19.6m). intangible amortisation is expected
to vary significantly over time, and is dependent upon
the number and value of acquisitions made by the
Company over time. The Statement of Significant
Accounting Policies section on page 108 and Note 12
to the Accounts on page 129 provide details of what is
included within intangible assets and over what periods
the assets are amortised;
Æ Profits and losses on sale of businesses and
associated impairment charges – £nil (2014: £14.0m).
The non-recurring charge in 2014 was recognised
in respect of the divestment of the Group’s German
Roofing, Miller Pattison and ice Energy operating
businesses;
Æ Net operating losses attributable to businesses
divested in 2014 – £nil (2014: £6.7m). The 2014 results
of German Roofing, Miller Pattison and ice Energy were
reported as “Other items” on the basis of their non-
recurring nature;
Æ Acquisition expenses (£1.9m) and contingent
consideration (£12.4m) - £14.3m (2014: £3.9m).
Acquisition expenses and contingent consideration
linked to employment contracts vary depending on the
number, size and future profitability of acquisitions;
Æ Restructuring costs – £8.3m (2014: £9.2m). The
Group has taken a number of actions during the year
to improve the efficiency of its fixed cost base. These
one-off actions have resulted in redundancy costs of
£0.9m (2014: £3.9m), property closure costs of £4.6m
(2014: £3.1m), rebranding of £0.2m (2014: £2.2m) and
supply chain consultancy costs of £2.6m (2014: £nil);
Æ Other one-off items – credit of £0.1m (2014: charge
of £4.6m). Other one-off items include operating
losses and closure costs associated with the Group’s
operations in the Kingdom of Saudi Arabia of £3.6m
(2014: £1.0m), fair value losses on fuel hedging
contracts of £0.4m (2014: £nil), and income from the
sale of land of £1.1m (following the related impairment
charge in 2014 of £6.1m). They also include credits
arising on the discounting of provisions of £nil (2014:
£0.5m), the reversal of property provisions of £2.4m
(2014: £1.6m) previously provided through “Other
items” whereby the Group has negotiated the surrender
of the leases in 2015, and other one-off credits of
£0.6m (2014: £0.4m); and
Æ Fair value gains and losses on derivative financial
instruments and unwinding of provision discounting
– £3.3m (2014: £2.1m). The finance costs section below
explains these items in more detail.
OPERATING PROFIT AND
OPERATING MARGIN
Underlying
UK & ireland
Mainland Europe
Head office costs
Group
2015
£m
61.0
45.1
(7.4)
98.7
2014
£m
66.9
54.2
(9.9)
111.2
Change
(8.8)%
(16.8)%
25.3%
(11.2)%
On an underlying basis, operating profit decreased by
£12.5m (11.2%) to £98.7m (2014: £111.2m). Foreign
exchange rate movements decreased the Group’s
operating profit by £5.1m year-on-year. Therefore, on
a constant currency basis underlying operating profit
decreased by £7.4m.
Acquisitions completed during 2015 and 2014 made
a contribution of £10.4m to operating profit in the year
(2014: £1.6m).
underlying operating margin
4.3%
4.0%
3.8%
2013
2014
2015
Overall, the Group’s underlying operating profit margin at
3.8% was 50bps lower than the prior year (2014: 4.3%).
Given the operational gearing of the business, with the
majority of operating costs being fixed, it is envisaged that
operating margins will improve as the Group’s sales grow.
The Group recorded a statutory operating profit of £65.9m
(2014: £53.2m) after recognising a number of “Other
items” that are described above.
FINANCE COSTS
Net finance costs on a statutory basis increased by £0.4m
to £14.6m in 2015 (2014: £14.2m).
Net finance costs included in the “Other items” column of
the Consolidated income Statement amounted to £3.3m
(2014: £2.1m).
32
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI 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 £1.9m (2014:
£2.0m). 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 three years, is £3.6m
(2014: £5.5m).
in February 2014 the Group cancelled a further two
interest rate derivative contracts that swapped floating
rate debt into fixed rate debt at a cash cost of £2.0m.
The amounts previously recorded in reserves are being
amortised through the Consolidated income Statement
as an underlying item over the life of the associated
debt to 2018 as this cancellation reflects the ongoing
management of the Group’s interest rate hedging policy.
The amount amortised in 2015 was £0.4m (2014: £0.3m).
Also included within finance costs is a credit of less than
£0.1m (2014: £0.1m) relating to hedge ineffectiveness
incurred on the Group’s financial instruments and a charge
of £1.5m in respect of unwinding of provision discounting
(2014: £0.2m). £1.4m of the unwinding of provision
discounting has been included within “Other items”
to reflect the fact that the related provisions are non-
underlying in their nature.
Net finance costs before gains and losses on derivative
financial instruments, unwinding of provision discounting
and financing items relating to defined benefit pension
schemes (i.e. net borrowing costs) decreased by £1.1m to
£10.1m in 2015 (2014: £11.2m).
Further details of SiG’s interest rate policies are provided
in the interest rate risk section on page 37.
PROFIT BEFORE TAX
Underlying profit before tax decreased by £11.7m, or
11.8%, to £87.4m (2014: £99.1m). On a constant currency
basis, underlying profit before tax decreased by £6.9m to
£92.2m.
On a statutory basis, profit before tax increased by £12.3m
to £51.3m (2014: £39.0m).
TAXATION
The Group’s approach to tax matters is to comply with all
relevant tax laws and regulations, wherever it operates,
while managing its overall tax burden. The Group seeks
to pay the correct amount of taxes due, both direct and
indirect, in accordance with the laws of the territories in
which it operates.
The Group takes appropriate advice from reputable
professional advisers to ensure compliance with
applicable rules and regulations, and to consider potential
mitigating actions in order to manage tax risks. The Group
seeks to be transparent in its dealings with local tax
authorities; where differences of opinion do arise, these
are dealt with in a professional, co-operative manner.
The Board has overall responsibility for managing and
controlling risk, including tax risk, within the Group. The
Group has a Tax and Treasury Committee that provides
regular updates to the Board, and this enables the Board
to consider the tax implications of significant strategic
decisions on a timely basis.
The Group recorded an income tax charge on underlying
profits from continuing operations amounting to £21.0m
(2014: £27.8m), which represents an underlying effective
rate of 24.0% (2014: 28.1%). Excluding the effect of prior
year credits, the effective tax rate was 24.8%. On the
statutory profit before tax of £51.3m (2014: £39.0m), the
income tax charge of £15.0m (2014: £4.5m) represents an
effective rate of 29.2% (2014: 11.5%). These differences
arise as a result of amounts included in “Other items” in
the year.
Cash tax payments amounted to £11.1m, £9.9m below
the £21.0m 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 UK non-trading
losses (c.£27m gross utilised in the year). The Group’s
underlying effective tax rate in 2016 will be determined
by the mix of profits from different jurisdictions. it is
anticipated that the underlying effective tax rate in 2016
(excluding any prior year effects) will be c.24%, due to
the full year impact of the reduction in the UK domestic
corporation tax headline rate to 20% from April 2015,
and the removal of the surcharge applied to the French
domestic corporation tax rate.
24298.02 30 March 2016 2:38 PM PROOF1
33
SIG plc Annual Report and Accounts for the year ended 31 December 2015STRATEGIC REPORT Financial Review CONTiNUED
EARNINGS PER SHARE (“EPS”)
Underlying basic EPS
Statutory basic EPS
2015
11.2p
6.1p
2014
12.0p
5.6p
Change
(0.8)p
0.5p
Underlying basic EPS from continuing operations
amounted to 11.2p (2014: 12.0p), which represents a
decrease of 0.8p. Total basic EPS amounted to 6.1p
(2014: 5.6p), taking into account a number of “Other
items” as described on pages 31 and 32. The weighted
average number of shares in issue in the period was
591.2m (2014: 591.1m).
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. SiG continued
to increase its dividend payments in 2015 with an
interim dividend of 1.69p per share (2014: 1.42p). SiG
has proposed a final dividend of 2.91p per share (2014:
2.98p), taking the 2015 full year dividend to 4.60p per
share (2014: 4.40p), representing a 4.5% increase in total
dividend year on year. A total dividend of 4.60p represents
a dividend cover of 2.43x in 2015 on an underlying basis.
The Company has sufficient distributable reserves to pay
dividends for a number of years, and when required the
Company can receive dividends from its subsidiaries to
further increase distributable reserves.
SHAREHOLDERS’ FUNDS
Shareholders’ funds decreased by £15.0m to £648.7m
(2014: £663.7m). The decrease comprised the following
elements:
Profit after tax attributable to equity holders of the
Company
Exchange differences on assets and liabilities after tax
Gains and losses on cash flow hedges
Movements attributable to share options
issue of share capital
Actuarial gain on pensions schemes (net of deferred tax)
Effect of change in tax rates on deferred tax
Dividends paid to equity holders of the Company
Decrease in Shareholders’ funds
£m
36.0
(22.1)
(1.9)
(0.5)
0.1
1.7
(0.7)
(27.6)
(15.0)
CASH FLOW AND FINANCIAL POSITION
in 2015, the Group generated £61.6m 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
Sale of land
Acquisition investment (including
deferred consideration)
Movements relating to the sales
of businesses
Foreign exchange 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
2015
£m
61.6
(20.6)
(26.0)
15.0
(20.3)
1.1
(75.3)
-
0.8
0.1
2014
£m
95.6
(28.5)
(24.0)
43.1
(12.6)
8.1
(19.0)
(2.6)
0.2
-
(27.6)
(22.6)
(2.8)
(109.0)
(126.9)
(235.9)
(0.3)
(5.7)
(121.2)
(126.9)
* Where net capital expenditure is equal to or less than depreciation
(including amortisation of computer software), all such net capital
expenditure is assumed to be maintenance capital expenditure. To the
extent that net capital expenditure exceeds depreciation, the balance is
considered to be investment capital expenditure.
Working capital
The key working capital measures are set out below on a
constant currency basis (continuing operations):
inventory days
Trade receivable days
Trade payable days
Working capital to sales
2015
£m
46
45
39
2014
£m
43
43
36
9.1%
8.0%
The Group’s working capital to sales ratio (on a constant
currency basis for continuing operations) at 31 December
2015 was 9.1% (2014: 8.0%), 10bps above the Group’s
target. Working capital days increased by two days to
52 days (2014: 50 days). in part, this increase arises as a
result of a stronger sales performance in the final quarter
compared to the prior year.
Fixed assets
Net capital expenditure (including computer software)
increased in the year by £16.7m to £45.2m (2014:
£28.5m), representing a capex to depreciation ratio of
1.74x (2014: 1.19x). Capital expenditure includes new
vehicles, new brownfield sites, investment in plant and
machinery and in the new UK iT platform.
it is anticipated that the level of capital expenditure will
be in the region of 1.0x-1.5x of depreciation in 2016,
reflecting the Group’s continuing investment in the
business.
34
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI 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
Closing rate
2015
1.38
5.78
2014
1.25
5.23
2015
1.36
5.82
2014
1.28
5.54
Euro
Polish Zloty
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:
Continuing sales
Underlying operating profit
Underlying PBT
Consolidated net assets
Net debt
Impact of currency movements
in 2015
£m
(131.6)
(5.1)
(4.8)
(22.1)
(0.8)
%
(5.1)%
(5.2)%
(5.5)%
(3.4)%
(0.3)%
As demonstrated 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 pages 37 and 38.
PENSION SCHEMES
in total, the Group operates six (2014: six) defined benefit
pension schemes, the largest of which is a funded scheme
held in the UK. The remaining five 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 five book reserve
schemes are referred to as “defined benefit pension
schemes”.
The overall gross defined benefit pension schemes’
liability decreased during the year by £4.9m to £23.8m
(31 December 2014: £28.7m). This can be broken down
as follows:
Actual return below expected return on assets
Change in financial and demographic
assumptions in all schemes
Amounts recognised in the income Statement
Cash contributions to the schemes and other
movements
Effect of change in exchange rates
Decrease in pension scheme liability
Decrease/
(increase)
in pension
scheme liability
£m
(2.7)
4.6
(2.2)
4.7
0.5
4.9
in addition to the defined benefit pension schemes, the
Group also operates a number of defined contribution
pension schemes. Further details of the pension schemes
operated by SiG are set out in Note 28c to the Accounts
on pages 148 to 152.
24298.02 30 March 2016 2:38 PM PROOF1
35
SIG plc Annual Report and Accounts for the year ended 31 December 2015STRATEGIC REPORT Financial Review CONTiNUED
ACqUISITIONS
Acquisitions are a key component of SiG’s growth
strategy, supplementing organic growth. A total of
twelve acquisitions were completed in the year for a net
consideration of £68.5m. Six of those acquisitions were
in the United Kingdom, two were in The Netherlands
and there were also acquisitions in France, Germany,
Switzerland and Qatar. Consideration of £4.1m was paid
during the year in respect of prior period acquisitions.
Contingent and deferred consideration relating to the
2015 acquisitions not specific to employment criteria of
£8.9m has been recognised and included within goodwill.
Contingent consideration of £12.4m, which is in part
conditional on the continued employment of specific
individuals, has not been recognised as an investment
cost but instead is accounted for as an employment cost
in the Consolidated income Statement as earned.
Acquisitions remain subject to strict financial return
criteria, with all acquisitions required to achieve a post-
tax ROCE of at least 300 basis points in excess of the
Group’s WACC in the first full year of ownership. Recently
acquired infill businesses are performing well and meeting
their targets, and collectively are delivering returns that are
higher than the Group’s ROCE.
Further details of the Group’s acquisitions can be found in
Note 13 to the Accounts on pages 130 to 132.
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 Shareholders
through the optimisation of the debt and equity balance.
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 2015 was 1.78x (31 December
2014: 0.98x). Gearing, being net debt divided by net
assets, increased during the year from 19.1% to 36.3%.
As at 8 March 2016, SiG’s share price closed at
144.7p per share, representing a market capitalisation
of £855.7m at that date. SiG monitors relative Total
Shareholder Return (“TSR”) for assessing relative financial
performance. This has been detailed in the Directors’
Remuneration Report on page 96.
OUTLOOK
The Directors’ view of the outlook and prospects for the
Group is set out in the Chief Executive’s Statement on
page 7.
36
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI Treasury risk management
TREASURY RISK – INTRODUCTION
SiG’s Finance and Treasury Policies set out the Group’s
approach to managing treasury risk. These policies are
reviewed and approved by the Group Board on a regular
basis. it is Group policy that no trading in financial
instruments or speculative transactions be undertaken.
FUNDING OF OPERATIONS
SiG finances its operations through a mixture of retained
profits, Shareholders’ equity, bank funding, private
placement and other borrowings. A small proportion of SiG’s
assets are funded using fixed rate finance lease contracts.
The Group’s net debt is made up of the
following categories:
Obligations under finance lease
contracts
Bank overdrafts
Bank loans
Private placement notes
Loan notes and deferred
consideration
Derivative financial instruments
(liabilities)
2015
£m
10.0
2.3
91.3
255.9
3.0
2.0
2014
£m
10.5
4.4
1.3
254.3
1.9
1.1
Total
364.5
273.5
Derivative financial instruments
(assets)
Gross debt (after derivative
financial assets)
Cash on deposit
Other financial assets
Deferred consideration
Net debt
(36.8)
(33.9)
327.7
(89.0)
(1.3)
(1.5)
235.9
239.6
(110.3)
(0.9)
(1.5)
126.9
The Group’s gross financial liabilities can be further
analysed as follows:
2015
£m
2015
%
2014
£m
2014
%
Gross financial liabilities with a
maturity profile of greater than five
years
Gross financial liabilities held on
an unsecured basis
52.0
16% 78.8
33%
314.9
96% 227.5
95%
Details of derivative financial instruments are shown in
Note 18 to the Accounts on pages 136 to 139.
MANAGEMENT OF TREASURY RISKS
Treasury risk management incorporates liquidity risk,
interest rate risk, foreign currency risk, commodity
risk, counterparty credit risk and the risk of breaching
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 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 prevent over-reliance on any single provider.
The key sources of finance are private placement note
investors, being mainly US-based funds, and principal
bank debt.
The maturity profile of the Group’s debt facilities at 31
December 2015 is as follows:
Bank debt
Private placement
loan notes
Private placement
loan notes
Private placement
loan notes
Private placement
loan notes
Private placement
loan notes
Facility
amount
£m
250.0
Amount
drawn
£m
Amount
undrawn
£m
Date of expiry
90.0
160.0
October 2019
130.6
130.6
— November 2016
20.0
20.0
— November 2018
22.0
22.0
14.7
14.7
36.7
36.7
—
—
—
October 2020
October 2021
October 2023
474.0
314.0
160.0
The Group has in place a £250m committed Revolving
Credit Facility (“RCF”) provided by its five key relationship
banks, which matures in October 2019. This facility was
just over one-third drawn at 31 December 2015 and
represents the committed funding headroom of the Group.
Maturing in November 2016 is c.£130.6m of the private
placement notes. The Group considers it has a number of
options with regard to the refinancing of these notes, and
is confident that this will be achieved on similar terms to
existing facilities.
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. SiG has a policy
of aiming to fix between 50% and 75% of its average net
debt over the medium-term.
in order to manage its interest exposure within this policy,
£30m of floating to fixed interest rate swaps were entered
into in August 2015. The percentage of net debt at fixed
rates of interest at 31 December 2015 is 57% (2014: 72%)
and on a gross debt basis is 55% (2014: 64%), which is
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. 48%
of SiG’s 2015 continuing revenues (2014: 51%) were in
foreign currencies, being primarily Euros and Polish Zloty.
24298.02 30 March 2016 2:38 PM PROOF1
37
SIG plc Annual Report and Accounts for the year ended 31 December 2015STRATEGIC REPORT Treasury risk management CONTiNUED
Less than 2% of SiG’s sales and purchases are cross-
currency. When cross-currency 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 interest on 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 holding financial liabilities and derivatives in the same
currency to 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 Group ratio of net debt to capital
employed.
SiG had the following net debt denominated in foreign
currencies, held partially to hedge the assets of overseas
businesses (including cash and cash equivalents):
2015
local
currency net
borrowings/
(cash)
lCm
135.4
(62.2)
2015
Sterling
equivalent
borrowings/
(cash)
£m
99.4
(10.7)
(1.6)
87.1
37%
2014
Sterling
equivalent
borrowings/
(cash)
£m
61.0
(11.5)
(1.9)
47.6
38%
Euro
PLN
Other currencies
Total
% of net debt
Euro net debt at 31 December 2015 represented 42% of
Group net debt (2014: 48%).
impact of foreign currency movements in 2015
The overall impact of foreign exchange rate movements
on the Group’s Consolidated income Statement and
Consolidated Balance Sheet is disclosed on page 35
of this Strategic Report.
commodity risk
The nature of the Group’s operations creates an ongoing
demand for fuel and therefore the Group is exposed to
movements in market fuel prices. The Group enters into
commodity derivative instruments to hedge such exposure
where it makes commercial and economic sense to do so.
in Q1 2015 the Group entered into four commodity
derivative instruments to hedge a portion of the UK,
Polish and French fuel requirements for 2015 and 2016.
At 31 December 2015 two of these commodity derivative
instruments had matured and two remain outstanding,
hedging c.59% of the Group’s 2016 anticipated variable
fuel cost. There were no commodity instruments
outstanding at 31 December 2014.
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 in place. 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
The Company’s debt facilities in place at 31 December
2015 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 and interest cover.
The ratio for each of the debt covenants is set out below:
Requirement
year ended
31 December
2015
Year ended
31 December
2014
interest cover
ratio*
Leverage ratio^
>3.0x
<3.0x
8.1x
1.78x
8.9x
0.98x
* Covenant interest cover is the ratio of the previous twelve months’
underlying operating profit (including the trading losses and profits
associated with divested businesses) to net financing costs (excluding
pension scheme finance income and finance costs).
^ Covenant leverage is the ratio of closing net debt (at average exchange
rates) to the underlying operating profit before depreciation, adjusted
if applicable for the impact of acquisitions and disposals during the
previous twelve months (“EBiTDA”).
As can be seen in the table above, the Group is in
compliance with its financial covenants and is forecast to
maintain a comfortable headroom.
The 2015 year-end leverage ratio has increased following
net acquisition expenditure of £75.3m and as a result of
the weaker than anticipated trading conditions during the
year. Excluding acquisitions, leverage would have been
less than 1.5x. Going forward SiG is aiming to return
leverage to its target range of 1.0-1.5× by slowing the
pace of its acquisition expenditure and moderating capital
expenditure.
38
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI GOING CONCERN BASIS
in determining whether the Group’s 2015 Annual
Report and Accounts can be prepared on a going
concern basis, the Directors have considered
all factors likely to affect its future development,
performance and 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 Strategic Report on
pages 1 to 40 and in the Notes to the Consolidated
Financial Statements.
The key factors considered by the Directors were as
follows:
Æ 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;
Æ projections of working capital requirements;
Æ the impact of the competitive environment within
which the Group’s businesses operate;
Æ the availability and market prices of the goods that
the Group sells;
Æ the credit risk associated with the Group’s trade
receivable balances;
Æ 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
Æ the committed finance facilities available to the
Group and the ability of the Group to refinance the
c.£130m of maturing private placement notes, as
set out in the Viability Statement.
Having considered all the factors above, 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, and
have adequate resources to continue in operational
existence for the foreseeable future. Accordingly, the
Group continues to adopt the going concern basis
in preparing the Group’s 2015 Annual Report and
Accounts.
VIABILITY STATEMENT
in accordance with the requirements of the 2014
amendments to the UK Corporate Governance Code
(“the Code”), the Directors have performed a robust
assessment of the principal risks facing the Group,
including those that would threaten its business model,
future performance, solvency or liquidity. Details of the
risk identification and management processes and a
description of the principal risks and uncertainties facing
the Group are included in this Strategic Report on pages
20 to 23. The Group’s control processes are included in
the Corporate Governance report on pages 64 to 66.
While the Board has no reason to believe the Group will
not be viable over a longer period, it has determined
that the three years to 31 December 2018 is the most
appropriate time period for its viability review. This period
reflects the forecast period for the Group’s strategic plans
and industry forecasts. This gives the Board sufficient
visibility of the future to make a realistic and reasonable
assessment of longer-term viability.
As part of the Group’s strategic planning process a three
year business model was produced covering the period
to December 2018. in order to assess the resilience of
the Group to risks in severe but plausible scenarios,
the model was subject to thorough multi-variant stress
and sensitivity analysis, together with an assessment of
potential mitigating actions. The resulting impact on key
metrics, such as debt headroom and covenants, was
considered.
in making this statement the Directors have also made the
following key assumptions:
Æ The Group will be required to refinance at least a
portion of the c.£130m of private placement notes
that mature in November 2016, in order to provide
the appropriate funding headroom. The Directors
have concluded that they will be able to successfully
refinance, on the basis of recent successful refinancing
processes and the current and forecast position of
bank debt and debt capital markets in 2016;
Æ There will be no severe prolonged downturn in the
markets in which the Group operates; and
Æ in the event that the UK votes to leave the European
Union, given the nature of SiG’s operations, it would
not be expected to have a direct, material adverse
effect on performance.
After conducting their viability review, the Directors
confirm that they have a reasonable expectation that the
Group will be able to continue in operation and meet its
liabilities as they fall due over the three year period of their
assessment to December 2018.
24298.02 30 March 2016 2:38 PM PROOF1
39
SIG plc Annual Report and Accounts for the year ended 31 December 2015STRATEGIC REPORT Treasury risk management CONTiNUED
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 it faces. it may not be relied upon by anyone,
including the Company’s Shareholders, for any other
purpose.
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.
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.
The forward-looking statements should be read in particular
in the context of the specific risk factors for the Group
identified on pages 20 to 23 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 Strategic Report set out on pages 1 to 52 was
approved by the Board of Directors on 8 March 2016 and
signed on its behalf by Stuart Mitchell and Doug Robertson.
STUART MITChEll
Chief Executive
8 March 2016
DOUG ROBERTSON
Group Finance Director
8 March 2016
40
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI
Corporate Responsibility
SiG RECOGNiSES iTS CORPORATE RESPONSiBiLiTiES TOWARDS
iTS SHAREHOLDERS, EMPLOYEES, CUSTOMERS AND SUPPLiERS
AND iS COMMiTTED TO SOCiALLY RESPONSiBLE BUSiNESS
PRACTiCE. iN 2015 SiG CONTiNUED TO iNTEGRATE CORPORATE
RESPONSiBiLiTY (“CR”) ACROSS THE GROUP.
The Group implements policies that include social and
environmental issues in our decision-making process, and
is investing in the development and wellbeing of its people
and communities. SiG believes this approach supports the
Group in achieving its business goals as well as growing
shareholder value. As a constituent of the FTSE4Good
index of socially responsible companies, SiG is pleased
to inform stakeholders of the measures it is taking to
continually develop its approach to CR, including how it
monitors and improves performance reporting.
BUSINESS PRINCIPLES AND CODE
OF ETHICS
The Group has in place Group-wide Ethics, Anti-Bribery &
Corruption and Ethical Trading & Human Rights policies.
These policies, which are regularly reviewed, underpin the
Group’s CR programme and support its business integrity.
ethics policy
SiG issues to all employees a Group-wide Ethics Policy
which sets out the standards and behaviours that are
expected throughout the Group’s operations. The policy
is designed to ensure that the business conforms to the
highest ethical standards. The policy can be viewed on
the Company’s website (www.sigplc.com).
The policy sets out the following key principles:
Æ To abide by the laws applicable to each country of
operation;
Æ Not to tolerate any kind of discrimination or
harassment;
Æ To be a responsible partner within local communities;
Æ To take into account the legal and moral rights of others
in business transactions;
Æ To maintain a safe and healthy working environment;
Æ To be proactive in managing responsibilities to the
environment;
Æ Not to knowingly make misrepresentations;
Æ Not to make political donations;
Æ Not to give or receive bribes;
Æ To avoid, and in all cases report conflicts of interest;
and
Æ Encourage employees to report any suspected
wrongdoing.
A confidential and independent hotline service is available
to all employees so that they can raise any concerns they
have about how the Group conducts its business. SiG
believes 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 concerned party.
ethical trading & Human rights policy
The Ethical Trading & Human Rights Policy covers
the main issues that may be encountered in relation
to product sourcing and sets out the standards of
professionalism and integrity which should be maintained
by employees in all Group operations worldwide.
The policy expresses the standards concerning: safe
and fair working conditions for employees; responsible
management of social and environmental issues within the
Group; and the international supply chain.
SiG promotes human rights through its employment
policies and practices, through its supply chain and
through the responsible use of its products and services.
There is no separate policy in place which deals
specifically with human rights; however, SiG will keep
under review the need for a specific human rights policy
over and above its existing policies.
anti-Bribery & corruption policy
SiG has a number of fundamental principles and values
that it believes are the foundation of sound and fair
business practice, one of which is a zero tolerance
position on bribery and corruption. The Group’s Anti-
Bribery & Corruption Policy clearly sets out the ethical
values required to ensure compliance with legal
requirements within countries in which SiG and its
subsidiary companies operate.
Anti-bribery and corruption training is provided across
the Group to all senior management through to branch
managers and external salespeople. This training is
provided via our online training resource, and also
includes modules on competition law.
SiG 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.
24298.02 30 March 2016 2:38 PM PROOF1
41
SIG plc Annual Report and Accounts for the year ended 31 December 2015STRATEGIC REPORT Corporate Responsibility CONTiNUED
its aim therefore is to limit its exposure to bribery and
corruption by:
Æ Setting out a clear policy on anti-bribery and
corruption;
Æ Training all employees so that they can recognise and
avoid the use of bribery by themselves and others;
Æ Encouraging 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;
Æ Rigorously investigating instances of alleged bribery
and assisting the police and other appropriate
authorities in any resultant prosecution; and
Æ Taking firm and vigorous action against any individual(s)
involved in bribery or corruption.
A copy of the Anti-Bribery & Corruption Policy is available
to view on the Company’s website (www.sigplc.com).
Modern slavery act 2015
The Modern Slavery Act came into force in 2015 and the
requirement to publish an anti-slavery statement applies
to companies with financial years ending on or after 31
March 2016. SiG plc is subject to these new disclosure
requirements for its 2016 financial year end and will
therefore publish its anti-slavery statement in respect of
2016 on its website (www.sigplc.com) within six months
of the year ending 31 December 2016.
ENVIRONMENT
environmental management
SiG’s Environmental Policy and management system is
combined with the Health and Safety management system
to maximise the opportunities for continual improvement
that an integrated system provides. The programme
optimises resources to ensure that communication and
auditing programmes are focused and targeted to support
the business.
The Chief Executive is the Board Director responsible for
implementation of the Policy and is the signatory on the
Group’s Health, Safety & Environment Policy, which is
displayed at each location throughout the Group in the
local language.
SiG’s management system is in its tenth year of
accreditation with the international environment standard
iSO14001 within SiG’s UK operations. Registration to
the standard was successfully renewed in 2015. Having
an externally verified management system provides
the Group with a continuous programme of review and
improvement for its businesses with a roll-out programme
for new business within three months of acquisition and a
target of full accreditation within twelve months.
The key elements of the management system standard
are at the heart of SiG’s approach to its Group-wide
strategy for environmental matters which demonstrates
the Group’s commitment to environmental management
and best practice.
SiG maintains its Environmental Aspects and impacts
Register and Corporate Environmental Risk Assessment
to record and assess the principal environmental hazards
within the Group. These evaluations formed part of the
2015 Management Review process for each business.
The Group has continued its excellent record of legal
compliance and environmentally sound operations
throughout 2015 with no prosecutions or actions from the
authorities.
The emphasis for the Group’s environmental objectives
for 2015 are derived from its Low Carbon Business Policy,
which sets out its aim to reduce the amount of fuel, energy
and water consumption as well as reduce the waste it
produces. The progress made by the business is covered
in this report.
carbon management
The Chief Executive is responsible for the Group’s
environmental performance and for the Group’s Low
Carbon Policy.
SiG’s carbon footprint accounting process has been
verified since 2009 through the achievement of the Carbon
Trust Standard (“CTS”) and independent auditing on
behalf of the Environment Agency for the CRC Energy
Efficiency Scheme (“CRC”). SiG is no longer included
in the CRC and made its final submission in 2014. The
Group however continues to publish its carbon footprint
through the Carbon Disclosure Project (“CDP”).
in order to broaden the scope of its verification to all
Group activities, SiG set an objective for 2015 to achieve
an internationally recognised verification standard. The
Group’s partnership with Carbon Credentials culminated in
the achievement of “limited verification” to iSO 14064-3.
This accreditation has been achieved through a detailed
assessment, both qualitative and quantitative, of the
Group’s Greenhouse Gas (“GHG”) emissions assertions.
SiG is committed to maintaining the iSO standard and as
such the Carbon Trust Standard accreditation was allowed
to lapse at the end of 2015.
Adoption of this standard has provided the Group with a
renewed framework for its energy reduction programme.
The achievement and the continuous strive towards
42
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI improving carbon emissions has resulted in a significant
improvement in the business’ standing in the Carbon
Disclosure Project from 73 and “C” in 2014 to 95 and
“C” in 2015. SiG also discloses its Carbon Footprint and
emissions annually in this report.
and invited cyclists and other members of the public to
sit in the vehicle to gain an understanding of the driver’s
field of vision. The work in this field led to SiG being part
of Transport for London’s finalised bid in the Partnership
Award at the Motor Transport Awards in 2015.
Continuing this work on safety with vulnerable roads users
in mind, SiG has designed a new Urban Delivery Vehicle
with features designed to greatly enhance the driver’s
primary vision of critical areas of the vehicle and to reduce
blind spots. The vehicle was launched at the CLOCS
progress event in February 2015 and is believed to be the
first of its kind in its sector. Following the success of the
first vehicle, a second Urban Delivery Vehicle went into
operation at one of SiG’s London locations in November
2015.
The work carried out on these vehicles resulted in SiG
winning the Fleet innovation Award at the Brake Fleet
Safety Awards in 2015.
TRANSPORT
Along with electricity, road vehicle fuel consumption
makes up 89.8% of the Group’s total carbon footprint
emissions (2014: 90.5%). SiG has targeted an absolute
reduction year-on-year in fuel consumption since the base
year of 2010. Due to the growth of the business through
acquisition, the number of vehicles and delivery miles
has increased in 2015 compared to 2014. However, the
business has maintained an overall reduction in its fuel
consumption against the base year of 2010 of 16.5%.
The continued reduction in the Group’s GHG emissions
has been brought about by investment in energy efficient
technology installations across the property portfolio,
including refurbishment of existing buildings along with
the fit-out of new sites. This has been supplemented with
the continued consolidation and upgrade of the Group’s
road vehicle fleet.
ROAD RISK POLICY
SiG recognises that driving is among the most hazardous
tasks performed by its employees and that its vehicles
and drivers represent SiG and its values whilst they are on
the road. The Group also recognises the potential impact
that driving has on the local and global environment.
Because of this, SiG has worked hard to drive the
Occupational Road Risk Policy across the Group, with
strong local focus on key elements of the Policy.
This process resulted in SiG being “Highly Commended”
in the Safe Vehicles Award section at the Brake Fleet
Safety Awards in 2015.
The Occupational Road Risk Policy is a key element
of the accident review process across the Group, with
Accident Review Panels (“ARPs”) meeting regularly
throughout the year in each country. in the UK this is
carried out in partnership with the Group’s insurers and
brokers. The purpose of the ARPs is to reduce the risk of
accidents and minimise the cost to the business. This is
achieved by: raising awareness across the Group of the
outcomes of accidents; targeting improvements in the
speed of reporting; improving the quality of investigations
to identify the causes of specific accidents or trends;
and recommending action and further training where
appropriate.
The Fleet Operator Recognition Scheme (“FORS”) is an
over-arching scheme that encompasses all aspects of
safety, fuel efficiency, economical operations and vehicle
emissions. FORS is a voluntary scheme for commercial
vehicle operators, which is designed to help improve
operators’ performance in each of these areas. SiG has
adopted the scheme across its UK businesses. in 2015,
SiG was awarded Whole Fleet Accreditation status, one
of the first large fleets in the UK to do so. The branch
network has a combination of Gold, Silver and Bronze
accreditation statuses nationwide for sites operating
commercial vehicles.
Work continued in 2015 to minimise the risk to vulnerable
road users such as cyclists and pedestrians. SiG are
active champions of the Construction Logistics and
Cyclist Safety (“CLOCS”) group. SiG also initiated an
“Exchanging Places” campaign in which employees
exhibited a commercial vehicle at various cycling events
24298.02 30 March 2016 2:38 PM PROOF1
43
SIG plc Annual Report and Accounts for the year ended 31 December 2015STRATEGIC REPORT Corporate Responsibility CONTiNUED
Early gains were made largely through: greater efficiency
in journey planning and the replacement of older vehicles
with new vehicles; the introduction of vehicles fitted with
energy reducing features; the introduction of the driver eco
training programmes; and accurate efficiency measurement
through the Masternaught telematics programme. These
have enabled the business to maintain the downward trend
during a period of expansion.
SiG continued in 2015 to measure absolute consumption
and target reductions across the core business. This was
achieved through further consolidation of its branches and
sharing of its fleet, whilst targeting efficiencies across the
broader business in terms of improved km per litre ratios
to take account of the impact of SiG’s plans for business
growth.
The Driver Certificate of Professional Competence (“CPC”)
training programme continued in 2015 across the UK &
ireland and similar programmes are in place across the
Mainland European businesses in compliance with EU
Legislation. The Group maintains its policy to purchase
commercial vehicles to the latest Euro standard, and
low emissions vehicles to facilitate deliveries into “Low
Emission” zones across Europe.
in order to further improve the efficiency of vehicle
routing, fuel consumption and enable accurate mileage
measurement, the programme to install Telematics in
commercial vehicles has now been completed in all
commercial vehicles under operational control across the
Group.
SiG is keen to promote driver efficiency and driver safety
across its fleet. in support of its EKO efficient driving
programme, SiG Poland has continued to deliver its
comprehensive in-vehicle driver training programme
for both commercial and business drivers. SiG France
delivered a “Twelve Actions in Twelve Months” information
and instruction programme over 2015, including
topics such as Access to Vehicle, Load Security and
Tachographs.
SiG UK continued to deliver the CPC training programme
to its workforce in partnership with Mercedes and
bolstered its support for drivers with an auditing and advice
programme through its Fleet Management Trainers. The
highlight of this year’s programme was the Driver of the
Year competition which reached its conclusion in June
2015. Awards were issued in several categories and the
overall winner was Michal Paszt from SiGD Croydon.
ENERGY
Emissions from electricity consumption account for 14.7%
of the Group’s Scope 1 and 2 emissions (2014: 14.8%).
SiG is committed to taking action to improve the efficiency
of its properties through the capital projects scheme for
replacing inefficient lighting with energy efficient daylight
and movement sensored systems. SiG has invested over
£750,000 in capital projects since the base year of 2010.
This has not only improved the efficiency of the building
stock, but has also provided a safer working environment.
A key element of the Group’s compliance with the Energy
Saving Opportunities Scheme (“ESOS”) scheme in 2015
was the reintroduction of the buildings energy audit, which
has identified a range of opportunities to improve energy
efficiency which will feed into the objectives for 2016 and
beyond. These initiatives along with the earlier “Switch
Off” campaigns and printer/copier/fax consolidation have
enabled the Group to achieve a further absolute reduction
of 4.4% in 2015.
The projects completed under the Low Carbon Policy since
the base year of 2010 have generated annual savings in
excess of 1.85 million kWh of electricity, and 850 tonnes
of CO2 emissions, with a payback period for the capital
projects of less than four years.
in 2016 the business will continue with its programme
for replacing inefficient lighting with low energy systems,
installing energy efficient hand dryers and providing water
heaters to replace inefficient kettles.
GREENHOUSE GAS EMISSIONS
SiG is committed to providing full and accurate data for its
carbon footprint across all of its operational businesses.
SiG reports on all emission sources as required under
the Large and Medium-Sized Companies and Groups
(Accounts and Reports) Regulations 2008 as amended in
August 2013. The achievement and maintenance of this
objective is evident by the achievement of the iSO 14064-3
standard in 2015.
SiG uses the emission factors from the UK Government’s
GHG Conversion Factors for Company Reporting 2014 to
calculate its GHG disclosures.
in order to provide for auditing and assessment of the
Group’s carbon footprint accounting process, SiG has used
a period non-coterminous with the Group’s financial year,
with current year data reflecting the year to 30 September
2015. The adoption of this process enables more accurate
carbon reporting, enabling actual data to be used as
opposed to estimates. in 2015, 95.2% of calculations 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 prior to 2013 are also for a twelve month
period, but are based on the calendar year. However,
the method of collecting data on CO2 emissions has not
changed; 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 Group’s carbon footprint includes Scope 1 CO2
emissions, for which businesses are directly responsible,
and Scope 2 CO2 emissions from the generation of
electricity by a third party resulting in indirect emissions.
The Group has also disclosed Scope 3 CO2 emissions over
which the business has limited control, being third party air
and rail transportation.
44
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI in 2015 the processes and procedures used in the UK
have been audited and assessed by Carbon Credentials
who have provided a “limited verification” to iSO 14064-
3. Previously the accounting process was audited by the
Carbon Trust with the achievement of the Carbon Trust
Standard for the UK element only. The achievement of the
iSO standard is for the full Group footprint.
As a result, the Group’s carbon footprint for the year ended
30 September 2015 has been externally audited by Carbon
Credentials, to iSO 14064-3 at a level of limited assurance.
This process has highlighted the continuous improvement
in systems and procedures related to carbon management
and reporting along with identifying areas where further
improvements can be made.
SiG is a participant in the statutory ESOS, which is the UK
Government’s approach to implementing Article 8 of the
EU Energy Efficiency Directive (2012/27/EU). Through its
work to gain iSO 14064-3 verification and its energy audit
process, SiG achieved full compliance with ESOS ahead
of the December deadline. This achievement is testimony
to the Group’s self-auditing programme and Low Carbon
Policy.
The Group achieved an absolute reduction of 3.5% in
Scope 1 and 2 emissions combined year-on-year, with
an overall reduction of 16.7% compared to the base year
(2010).
The overall footprint of the business for Scope 1, 2 and
3 emissions improved, with a reduction of 3.6% year-on-
year. The figures represent an overall reduction of 1.7% in
emissions per £m of revenue in 2015 compared to 2014 as
a result of the measures taken to reduce road vehicle fuel
and energy consumption.
CO2 EMISSIONS – SCOPE 1 – DIRECT
Metric
Metric
tonnes
tonnes
2013
2015
Metric
tonnes
2014
Metric
tonnes
2012
Road vehicle fuel
emissions1
Plant vehicle fuel
emissions2
Natural gas3
Coal/coke for
heating4
Heating fuels
(Kerosene & LPG)5
63,352
65,686
68,560
72,223
4,562
2,772
4,993
2,452
4,934
3,372
5,369
2,999
45
55
52
70
801
832
1,313
943
Total
71,532
74,018
78,231
81,604
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
2015
Metric
tonnes
2013
Metric
tonnes
2014
Metric
tonnes
2012
Electricity1
12,307
12,870
13,142
14,346
Data source and collection methods
1. Consumption in kWh converted according to Defra guidelines.
CO2 EMISSIONS – SCOPE 3 – OTHER
INDIRECT
Metric
tonnes
2015
Metric
tonnes
2014
Metric
tonnes
2013
Metric
tonnes
2012
Third-party provided
transport (air and rail)1
352
405
308
349
Data source and collection methods
1. Distance travelled converted according to Defra guidelines.
Emission per £m of
revenue
Scope 1
Scope 2
Scopes 1 & 2 as
required by GHG
Protocol
Scope 3
Scopes 1, 2 & 3
Metric
tonnes
2015
27.9
4.8
32.7
0.1
32.8
Metric
tonnes
2014
28.0
4.9
32.9
0.2
33.1
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
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. The data excludes the impact
of businesses divested during 2014.
WATER CONSUMPTION
The Group uses an estimated 1% of its water
consumption for manufacturing processes with the
remainder used for welfare purposes. However, SiG
does recognise that potable water is a precious resource
and continues to maintain its water recycling and reuse
practices for the processes in Southport (UK) and Alizay
(France).
SiG continues to identify significant opportunities for
water consumption efficiencies through the branch
audit and bill validation process. Water efficiency is a
key element of the specification for new and refurbished
properties and facilities. All Group companies now report
their water consumption.
litres
(’000)
2015
Litres
(’000)
2014
Litres
(’000)
2013
Litres
(’000)
2012
Third-party provided
water supply from
national network for
processes and welfare
104,999
106,546
107,604
108,201
The above data is based on a combination of actual and
estimated data.
24298.02 30 March 2016 2:38 PM PROOF1
45
SIG plc Annual Report and Accounts for the year ended 31 December 2015STRATEGIC REPORT Corporate Responsibility CONTiNUED
WASTE MANAGEMENT
The Group continues its programme to reduce the
amount of waste generated, with the introduction of
paperless delivery processes, online activity reports and
the consolidation of photocopying facilities. However,
SiG’s key measurement of performance for waste
management is the percentage of waste diverted from
landfill. Each business within the Group partners with a
waste management provider to provide waste segregation
and recycling facilities. These are monitored centrally
and through the health, safety and environmental audit
and inspections process. To maximise opportunities and
minimise storage and welfare risks, waste bailers and
compactors are provided where practicable.
SiG has partnered with its suppliers to provide for waste
take-back schemes for its customers for materials
including: plasterboard and plaster products, uPVC
windows, fibre ceiling tiles, vinyl floor covering materials
and batteries. This enables the business to comply with
their Producer Responsibility Obligations under waste
management legislation.
As a break bulk supplier of products, the greatest
potential for waste production is packaging materials. By
re-using opened packaging products, purchasing second-
hand pallets and bearers, and the operation of packaging
return schemes for items like pallets and bearers,
branches actively minimise their backdoor waste.
Given the difficulty in measuring the amount of waste
produced, SiG ensures wherever possible that the data is
accurate by working with its waste management recycling
provider in order to produce its best estimates.
SiG is a member of the Valpak compliance scheme and
continues to comply with its commitments under the
Producer Responsibility Obligations (Packaging Waste)
Regulations.
Hazardous waste
Landfill
Recycled
incinerated
Total
Absolute
tonnes*
2015
Absolute
tonnes
2014
Absolute
tonnes
2013
Absolute
tonnes
2012
2
28
—
30
60
41
—
101
13
139
65
217
21
279
72
372
Absolute
tonnes*
2015
Absolute
tonnes
2014
Absolute
tonnes
2013
Absolute
tonnes
2012
Hazardous waste
per £m of revenue
0.01
0.04
0.08
0.14
Non-hazardous waste
Absolute
tonnes*
2015
Absolute
tonnes
2014
Absolute
tonnes
2013
Absolute
tonnes
2012
4,469
15
4,484
5,626
4,283
8,743
12
12
—
5,638
4,295
8,743
Landfill
incinerated
Total
other waste diverted from landfill
Absolute
tonnes*
2015
Absolute
tonnes
2014
Absolute
tonnes
2013
Absolute
tonnes
2012
WEEE (Waste,
Electrical and
Electronic
Equipment)
Glass
Wood
Metal
Plasterboard+
Paper/cardboard
Plastic
Other
Total
2
1
1,145
1,249
973
747
353
8
3
904
1,098
2,502
588
383
5
3
1,324
977
1,258
1,024
440
8,284
6,573
12,754
12,059
10,860
15,891
3
3
2,058
1,234
390
1,165
762
8,250
13,865
Absolute
tonnes*
2015
Absolute
tonnes
2014
Absolute
tonnes
2013
Absolute
tonnes
2012
Non-hazardous and
other waste per £m
of revenue
5.0
6.7
7.4
8.7
* Volume per annum converted to tonnes.
+Recycling facility withdrawn in 2015.
The above data is based on a combination of actual and
estimated data.
HEALTH, SAFETY AND ENVIRONMENT
The Chief Executive is the Board member responsible for
health and safety and is signatory to the Group’s Health,
Safety and Environmental Policy, which is displayed in the
local language at each operating branch.
The Zero Harm health and safety programme, which was
launched in 2014 and headed by the Chief Executive, is
now fully embedded in the business’ structure. The initial
aim of the programme was to provide management with
a renewed understanding of the programme and their
responsibilities, and to provide them with the tools to
enable them to achieve the objective of the programme,
being “the health, safety and wellbeing of employees
and others is the primary consideration for management
at all levels in the development, growth and day-to-day
operation of the business, products and services.”
46
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI The RoSPA accredited SiG Certificate in Health, Safety
and Environmental Management programme continues
to be delivered across the business, with regionally
based training events provided across the UK in 2015
including managers new to the business. The Zero Harm
programme is managed and supported by the Group
HS&E Manager and a team of directly employed Health,
Safety and Environment professionals in each part of the
Group. The Group’s Health & Safety management system
is modelled on the internationally recognised Health &
Safety Standard BS-OHSAS 18001:2007, with the SiG
UK businesses enjoying their tenth year of certification
following a three year renewal by its partner intertek in
2015.
The provision of dedicated HS&E professionals enables
the implementation of a robust Risk Assessment and
Management Review process through which the key
health and safety risks have been identified. The Risk
Profile of the Group is reviewed annually to inform the
Group’s Health & Safety Plan. For 2016 the principal
risk areas in terms of numbers of incidents and potential
severity of the risk remain: Occupational Road Risk,
Traffic Management, Loading and Unloading and Storage
Operations.
Although an area for growth, manufacturing sites make
up less than 5% of the business’ locations. However, SiG
recognises the potential for serious harm and a suitably
qualified dedicated Health & Safety Manager remains a
key post to provide advice and support to the businesses
and to manage the plan for continuous improvement.
SiG’s offsite activities continued to expand in 2015 and
were successfully supported by the existing HS&E Team.
This included the achievement of industry accreditations
to: Achilles, CHAS, and BOPAS and SiG’s offsite business,
RoofSpace receiving the Health & Safety achievement
award from housebuilding contractor Barratt Homes at
their Partners Awards Event.
The aim was re-emphasised at the 2015 Annual Senior
Leadership Conference, where the Chief Executive gave
a clear instruction that the Zero Harm message must be
cascaded to all employees and that managers must take
personal ownership and accountability for health and
safety and in creating a safe working environment.
The success of Zero Harm is endorsed by SiG’s
achievement for the first time of the Gold RoSPA
Occupational Health & Safety award in 2015. The award
recognises SiG’s ongoing commitment to raising the
standards for health and safety management across
the Group. Despite this being a UK award scheme, the
submission represents the Group’s Health & Safety
programme and the achievement reflects on the hard
work and dedication of the Health & Safety Team across
the Group as well as the leadership of management at all
levels in taking ownership of health and safety and driving
the key initiatives.
The “Safety Walks” programme for 2015 continued with
Senior Leaders led by the Chief Executive carrying out
420 formal branch inspections and support visits with
branch managers. This initiative supported the cascade
and accountability element of Zero Harm. The programme
will continue in 2016 with a move away from the check-
list, tick-box process to an emphasis on engagement
with operational personnel to support the drive for a safe
culture.
in recognition of the level of risk posed by road travel
and deliveries, the Safety Walk programme in 2015 was
broadened to include the accompanying of commercial
vehicle drivers on scheduled delivery runs.
A range of local initiatives were delivered in 2015 in
support of the Zero Harm programme, including:
Æ Branch Safety Days including interactive toolbox talks
and “listening” programmes delivered by Regional
management in the UK and “Safety Walls” which were
Zero Harm branded focal points for Health & Safety
information and advice.
Æ Safety information, Personal Protective Equipment
dispenser and restricted access stations made from
stock products in SiG France along with a Twelve
Actions in Twelve Months programme dedicated to
improving safety on “Loading and Deliveries”.
Æ A Safety Week in SiG Poland in collaboration with
the construction industry’s “Agreement for Safety in
Construction” project and a “Perfect Warehouse” safety
performance competition with the award presented by
the business’ Managing Director.
Æ SiG Germany & Austria’s targeted actions to improve
access onto vehicles to reduce the accident rate for
drivers.
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47
SIG plc Annual Report and Accounts for the year ended 31 December 2015STRATEGIC REPORT Corporate Responsibility CONTiNUED
There continues to be significant improvement in the
Accident incident Rate for SiG in both major accidents
and lost time accidents (both “over three day” accidents
and RiDDOR (or equivalent)). Unfortunately, there was an
increase in the UK & ireland’s “over three day” accident
incident rate. This increase was due to an unusually high
number of incidents occurring in December 2015. Some
caution is advised when comparing RiDDOR rates as the
data for 2012 has not been adjusted for the revised “over
seven day incapacity” definition.
The Group has a Zero Tolerance to any employee being
unfit for work due to drugs or alcohol. in 2015 the UK &
ireland business revised its Alcohol & Substance Misuse
Policy. Although the Company already had in place a
procedure for “for cause” testing, the revised policy
now provided for random testing of employees and
sub-contractors engaged in safety critical roles. The
purpose of the policy is to minimise the risk of injury due
to alcohol and substance misuse. in order to support this,
an information and education programme was cascaded
to all employees in the second half of the year and the
random testing programme commenced in January 2016.
A number of tests have already been carried out.
ACCIDENTS AND INCIDENTS
uK & Ireland
Major injury
injury resulting in
over three absence
days from work
All RiDDORs
Average UK & 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
2015
2.3
10.8
10.6
2014
2.8
12.0
11.4
2013
3.6
11.2
13.4
2012
2.7
11.2
14.1
5,174
4,984
5,070
5,261
26.8
35.8
23.3
29.6
Rate per 1,000 employees
2015
2.2
2014
2.2
2013
2.8
2012
2.2
12.0
15.0
16.7
17.1
12.0
13.3
16.5
17.9
9,641
9,454
9,806
10,228
* This includes accidents in non-UK businesses that would meet the
criteria for reporting in the UK under RiDDOR.
qUALITY ASSURANCE AND MANAGEMENT
SYSTEMS
The Group’s management systems are maintained
to a high standard through management review and
internal auditing. A supplier audit programme is in place,
conducted by way of a questionnaire, and includes
questions regarding the health, safety and environmental
credentials of the supplier. Where it is commercially
advantageous the quality and chain of custody
management systems are externally certificated to iSO
9001, with Sitaco Poland and certificated branches in the
UK achieving continued certification in 2015.
COMMUNITY
As a large organisation employing thousands of people
across hundreds of local communities, we recognise that
we have a duty to actively support those communities.
in Poland, for example, SiG colleagues took part in the
Topacz Kids City project, which helps educate children
at risk of social exclusion about how to function in a
community and be a good citizen. Working closely
with Caparol, a leading producer of building paints, our
volunteers taught the children how to be “professional”
painters so they could earn virtual money to spend in the
city shop.
in the UK, we facilitate our community work through our
membership of Business in the Community (“BiTC”). We
have worked with BiTC for a number of years and the
partnership enables us to ensure we are adopting best
practice in all our community interactions.
Through BiTC, we partner with Fir Vale School in Sheffield.
During the 2014/15 academic year, we delivered 310
volunteer hours that reached a total of nearly 700 pupils
through a variety of activities, providing them with vital
business skills for life beyond school. As a result, over
80% of the students involved said they understood more
about the subjects and skills needed to follow different
career paths and were better equipped to complete an
application form or write a CV.
Also in 2015, one of our Roofing and Roofline businesses
took part in the well-known UK TV programme DiY SOS:
The Big Build. The one hour programme sees the DiY SOS
team enlist the help of local tradesmen, suppliers and
the wider community to support deserving families. One
episode featured a family living with the consequences of
a stroke, and we helped by providing roofing products for
a much needed extension to the family’s home.
CHARITABLE DONATIONS
SiG employees take part in a wide range of charitable
activities to support both local communities and national
charities. During the year, employees across the Group
raised more than £45,000 through a wide range of events,
from bake sales to cycle rides across Europe. Particularly
notable examples include: an employee in the UK who ran
13 marathons and raised over £3,000 for a local hospice;
colleagues in France who took part in the Odyssea race,
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24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI raising money for leading cancer research organisation
institut Gustave Roussy; and two of our senior leaders in
Germany who dyed their beards to raise almost €5,000 for
a Hamburg Children’s Hospice. As a Group, we operate a
matched funding scheme, which matches up to £500 (or
equivalent) raised by employees through charitable efforts
like these. We also support our people in their activities in
other ways, like hosting charity dress-down days at work
or helping to publicise employee’s fundraising through
notice boards.
We also make charitable donations as an organisation.
in Poland, as well as our people giving their time to the
Topacz Kids City project, we donated 5,000 PLN to the
cause (see the “Community” section for more information
about this project). At a Group level, meanwhile, we
continued with an initiative we started last year, donating
either £1 or €1 to the British Red Cross and UNiCEF for
every completed response to our employee engagement
survey, SiG Listens. Our 78% response rate meant that, in
October, we were able to donate £6,222 to the charities.
in light of the crisis in Syria, we decided to add a further
£10,000 to this amount, requesting that the two charities
put the total funds towards their Syrian refugee appeals.
in 2015, the Group made total charitable donations of
£99,451 (2014: £111,000), including through our matched
funding scheme.
it is the Group’s policy not to make political donations and
no such donations were made in the year (2014: £nil).
Employees in the UK can also make charitable donations
through our payroll giving scheme.
OUR PEOPLE
One of the key strategic areas of focus across SiG is
improving the performance, engagement and well-being
of all our people.
SIG VALUES
Our values are: Trust, Respect, integrity, Commitment,
Teamwork and Fun.
These values were developed by our people and are the
guiding principles by which we work with our customers,
our suppliers, our communities and each other. They are
the bedrock of our Stronger Together vision and we bring
them to life in everything we do.
DEVELOPING OUR PEOPLE
The skill and expertise of our people is one of our key
differentiators in the marketplace; developing employees
is therefore a core part of our strategy.
We want our new joiners to learn as much about SiG as
possible from the moment they arrive. This year, we have
created a Group induction Programme that will give new
employees a consistent view of our values, our business
and our strategy, regardless of where in the world they
are based. it is part of embedding our Stronger Together
ethos across the Group.
Throughout people’s careers, the Performance
Development Review (“PDR”) process, launched in 2013,
ensures all managers and employees know what is
expected of them in their roles and that performance is
measured and managed. it also provides an opportunity
for employees to discuss their career aspirations with their
manager, set development plans and take action on those
plans during the year. in 2015, we trained almost 450
managers in how to run effective performance reviews,
and 79% of our people had a PDR discussion (compared
to 65% in 2014). Our goal is to make sure all employees
have this opportunity.
We recognise that developing our leaders is important,
too. Throughout 2015, our Senior Leadership Team (“SLT”)
participated in the “Raising the Bar” programme. The
programme addresses key topics, and, through facilitated
training sessions, enables our leaders to learn, share
knowledge and shape action-planning. Topics covered to
date include PDRs, Maximising Finance Performance and
Leading Change.
Some development initiatives are locally focused. in the
UK, for example, our partnership with Sheffield Hallam
University continues to give our leaders the opportunity
to develop their management skills while also gaining
an academic accreditation, either at advanced Diploma
or Bachelor Degree level. in Poland, courses to grow
managers’ coaching capability have been developed, as
has training to improve knowledge-sharing. in Germany,
a programme of leadership and management training
is ongoing, with modules including leading self, leading
others and leading change. in France, the introduction
of a new Learning Management System as part of the
Group-wide training and development strategy is helping
employees to manage their development and grow in their
career. Similarly, the Learning Management System in the
UK & ireland has been updated, giving people access
to more training and introducing self-enrolment so that
people have more control of their personal development.
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49
SIG plc Annual Report and Accounts for the year ended 31 December 2015STRATEGIC REPORT Corporate Responsibility CONTiNUED
Developing high-potential individuals for succession
planning purposes is vital to our future growth. Early in
2015, we conducted a review of successors for Executive
and Senior Leader levels across the business. A further
review, started later in 2015, is helping to identify high-
potential people at other levels. From the reviews
conducted, new development programmes have been
designed and new talent pipeline programmes – including
Graduates and Apprentices – have been implemented.
Through these programmes, we will not only be able
to create a recruitment pipeline of talented individuals
entering the business, but we will also be able to
accelerate the development and progression of those
already with us.
RECOGNISING OUTSTANDING
PERFORMANCE
We remain committed to recognising excellent
performance and celebrating the success of our people.
One way we do this is through the annual, Group-wide
SiG Awards. These awards give our leaders the chance
to nominate employees at all levels for ideas, actions
and behaviours that help us live our values as well as
delivering financial results. Shortlisted nominees attend
an awards dinner at the Senior Leadership Conference.
During the ceremony, awards are presented in several
categories, and a special Chief Executive’s Award for
Excellence is given to one outstanding individual who
embodies our values, has shown consistently excellent
personal performance and has had a transformational
effect on their business area or function.
ENGAGED EMPLOYEES
During September 2015, we ran our employee
engagement survey, SiG Listens, for the second time (the
first was in March 2014). The survey gives our people the
chance to tell us what we are doing well and how we can
improve to make SiG a great place to work.
78% of employees responded and our overall engagement
score, at 73%, remained stable compared with the 2014
survey. it was also in line with the global benchmark for
private enterprises.
This year saw a marked rise in scores across a number of
areas. These increases show that our people are feeling
even more positive about:
Æ the importance we place on health and safety (up four
percentage-points)
Æ our approach to caring for their well-being (up five
percentage-points)
Æ receiving regular and constructive feedback on their
performance (up seven percentage-points)
Æ how fairly their performance is reviewed (up five
percentage-points)
This improvement is testament to the actions we have
taken since the last survey, particularly in relation to our
Zero Harm initiatives for health and safety and the training
we have given to managers about running effective
Performance Development Reviews (see the section
“Developing our people” for more about these reviews).
We are also delighted to see a three percentage-point
rise in the “management index”. This a measure of the
way our people view the effectiveness of their managers
in areas like delivering feedback, recognising good work,
encouraging innovation and handling poor performance.
Of course, there are areas for improvement. The results
show that we need to do more to convince our employees
that we will act on their feedback from the survey. Our
aim, therefore, is to make sure that all our managers share
the results of the survey with their teams and that action
planning and implementation at a Group and local level
continues throughout the year. The results also indicate
that we need to: provide greater clarity on our vision and
strategy; keep helping our people to develop and progress
in their careers; maintain focus on customer service; and
improve the way we recognise our people’s performance
and celebrate success. You can read about how we are
addressing these needs in the “internal communications”,
“Developing our people” and “Recognising outstanding
performance” sections of this report.
INTERNAL COMMUNICATIONS
Communicating with our people is a key priority for us. We
want to make sure everyone understands our vision for
SiG and our strategy for realising that vision. We are also
keen for our people to share their views and opinions, so
two-way communication is very important.
Our communications normally start with our senior
leaders. Our channels for reaching them currently include
email bulletins, web broadcasts, conference calls and
face-to-face briefings. Often, we then ask our leaders to
cascade the messages to their teams via emails and team
meetings. To support this cascade, we provide briefing
packs for leaders and managers, which help them share
news and also gather feedback. Where appropriate, we
also use intranet articles and updates, posters and desk
drops to keep employees informed.
As our organisation develops, we are continually
evaluating our communications and looking for more
innovative ways to reach our people. We are currently
exploring new electronic channels, such as instant
messenger, internal social media and other collaboration
tools. We are also increasing face-to-face contact
between our operational employees and our leaders
through “Meet the COMEX” events and our annual
programme of roadshows. in addition, we have introduced
new communication guidelines that will help bring
consistency to the way our communications look, read
and sound. This is part of how we are helping employees
to feel stronger together, wherever they are.
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www.sigplc.com Stock code: ShI Finally, our employee engagement survey and our
performance review process for employees both facilitate
meaningful two-way communication between us and our
people. There is more information about both of these
elsewhere in this report (see “Developing our people” and
“Engaged employees”).
EMPLOYEE BENEFITS
We aim to attract and retain the best talent with a fair and
consistent approach to both fixed and variable pay, which
is regularly benchmarked, both externally and internally.
Reward and benefits play a key role in supporting
employee engagement and performance.
Our bonus schemes are designed to reward exceptional
performance. For our Senior Leadership population,
the bonus operates to an aligned framework across the
Group, specifically focusing on Group-wide deliverables
and outcomes. Bonus awards are also made in the local
operating businesses aligned to local performance results.
These are key in driving and rewarding performance at
this level.
We also encourage our employees to become
Shareholders in the Company. At the senior level, we
operate a Long Term incentive Plan for our leaders and
across our whole business we operate a Share incentive
Plan (SiP). This gives one matching share for each share
purchased by the employee up to a maximum of £20
per month. As at 31 December 2015, there were 971
employees participating in the SiP.
SiG will implement the UK Government’s National
Living Wage from 1 April 2016, going beyond the legal
requirement and adopting the rate for all employees
from age 21 to enhance our Employee Value Proposition.
in SiG, we feel that it is important to properly reward
our people for helping to support our customers and
ensuring the success of our business. Our decision to go
beyond the legal requirement on the National Living Wage
reinforces our commitment to do this.
GROWING OUR TALENT
The growth and development of talent is key to our
future success. Throughout 2015, we have remained
committed, across the Group, to recruiting and developing
people who are starting their careers, whether they are
apprentices or university graduates.
apprenticeships
Our apprenticeship programmes are going from strength
to strength. in Germany, 25 new apprentices joined us
in 2015, across two of our Group companies. These
high-calibre individuals were selected from around
1,500 applicants. Fourteen of them are fulfilling roles as
management assistants, while the rest are working as
warehouse/logistics specialists. All receive advanced
training, including a new eLearning module focusing on
workplace safety training.
As in previous years, we ran the annual Apprentice Forum
in 2015. Attended by representatives from our industrial
partner, Rockwool, the forum enabled all the apprentices
in Germany to gather together for networking, knowledge
sharing and technical presentations.
We have also created a new training programme in the
past year, entitled Handel Trifft Handwerk (“Retail Meets
Trade”). it gives our apprentices the chance to spend
two to four weeks at a construction site, learning about
our products and the way they are used by our industrial
partners and customers.
As well as investing in our apprentices, we have spent
time developing our apprenticeship supervisors in
Germany. The inaugural Apprenticeship Conference for
Supervisors was held in 2015, with a range of workshops,
presentations and discussion sessions focusing on
how SiG, the apprentices and those supervising them
can derive the most benefit from the apprenticeship
programme.
in the UK, our apprenticeship offering has been running
for three years and 2015 saw the continuation of the
Apprenticeship Development Programme, which brings
the apprentices together to develop their key skills and
business understanding. Twenty-five new apprentices
joined through the 2015 intake. Apprentices who have
completed this programme in the past are now employed
in various roles across our head office, central services
and branch network.
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51
SIG plc Annual Report and Accounts for the year ended 31 December 2015STRATEGIC REPORT Corporate Responsibility CONTiNUED
Graduates
in 2015, we launched our new international Graduate
Programme. While we continue to recruit graduates into
specific functional areas on a country-by-country basis,
the new programme provides successful applicants
with insight and exposure across our UK, ireland and
Mainland European businesses. As our first Group-wide
talent initiative, the programme focuses on attracting,
developing and deploying high-calibre people who are
capable of developing into SiG’s future leaders. During
the two-year programme, graduates will undertake
four rotations of six months, and attend five extensive
development modules. Each module will concentrate on
different leadership attributes such as understanding self,
emotional intelligence, understanding the business and
key financial skills.
The first cohort of nine graduates joined us in September
2015 through a re-designed recruitment and selection
process. Application criteria included a requirement for
a specific degree background, such as business studies
or international business, and a second language. The
selection process involved video interviews, psychometric
assessments and an extensive assessment centre
encompassing case studies, group presentations
and competency-based interviews. Key stakeholders
from across SiG internationally were invited to attend
the assessment centres to help select the successful
applicants. The programme’s next cohort is due to arrive
in September 2016.
Alongside our internal work with graduates, we continue
to support Enactus, as a Gold Sponsor. Enactus is a
community of students, academics and business leaders
that develops outreach projects to improve the lives of
people across the world. in 2015, we were again involved
in the judging process for the Enactus UK National
Competition, with more representatives from SiG than
ever before taking part in the judging. Furthermore,
we have established a network of business advisors
throughout SiG in the UK who support individual Enactus
teams. These advisors act as mentors for the teams’
projects during the year. in 2016, we will continue to build
our group of business advisors to support more Enactus
university teams and, over time, we hope to establish
relationships with the Enactus programme in other SiG
countries.
We will also continue our support for the Association
of Graduate Recruiters (“AGR”) in 2016, having been
members for the last several years. in 2015, we were
involved in sharing best practice ideas across the
AGR membership, and we attended AGR events and
discussion groups. A number of SiG representatives from
the Talent and Resourcing teams were also invited to be
part of the judging panel for the AGR Awards.
EqUAL OPPORTUNITIES
Our policy is to provide equal opportunities to all existing
and prospective employees. Across the Group, we
recognise that our reputation is dependent upon fair and
equitable treatment of all our employees and we prohibit
discrimination on the grounds of race, religion, gender,
disability, sexual orientation, age, nationality or ethnic
origin. Employment opportunities are equally available to
all.
We value diversity of thinking and see this as critical 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, we
at SiG make every effort to enable them to continue in
employment by making reasonable adjustments in the
workplace and providing retraining for alternative work
where necessary.
GENDER DIVERSITY
At 31 December 2015, across the total workforce, 2,036
(21%) of all employees are female and 7,787 (79%) are
male. Two Board members (25%) are female and six
(75%) Board members are male. Six senior managers
(9%) are female and 63 senior managers (91%) are male.
SiG continues to work towards improving its workforce
diversity and this will be an ongoing area of focus in 2016.
DIRECTORS
SENIOR MANAGERS
Male (6)
75%
25%
Female (2)
Male (63)
91%
9%
Female (6)
ALL EMPLOYEES
Male (7,787)
79%
21%
Female (2,036)
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53
SIG plc Annual Report and Accounts for the year ended 31 December 2015 Governance
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www.sigplc.com Stock code: ShI GOVERNANCE
56
58
59
72
78
80
99
Board of Directors
introduction to Governance
Corporate Governance
Audit Committee Report
Nominations Committee
Report
Directors’ Remuneration
Report
Directors’ Responsibility
Statement
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55
SIG plc Annual Report and Accounts for the year ended 31 December 2015 Board of Directors
LesLIe VaN de WaLLe Hec
Non-Executive Chairman (59)
Became a Non-Executive Director in
October 2010 and became Non-Executive
Chairman on 1 February 2011.
External roles
Leslie is Non-Executive Chairman of
Robert Walters plc and a Non-Executive
Director of DCC plc.
Experience and past roles
Previously, Leslie was 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,
Aviva plc and Cape plc. He formerly held
a number of senior management positions
with Cadbury Schweppes plc and United
Biscuits Limited.
Key strengths
Extensive board and general management
experience.
stuart MItcHeLL Bsc (HoNs)
Chief Executive (55)
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
External roles
Stuart is a Non-Executive Director of
Enactus UK (formerly SiFE - Students in
Free Enterprise UK).
Experience and past roles
Most recently, Stuart 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.
Key strengths
Extensive operational and general
management experience in retail.
douG roBertsoN Ba (HoNs), Fca
Finance Director (62)
Joined the Group in November 2011 and
was appointed Finance Director on
1 December 2011.
External roles
Doug is a Non-Executive Director of HSS
Hire Group plc.
Experience and past roles
Doug 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.
Key strengths
Extensive financial management
experience.
Board coMMIttees
Audit Committee
Mr J. C. Nicholls – Chairman
Ms J. E. Ashdown
Mr C. V. Geoghegan
Mr M. Ewell
Ms A. Abt
Remuneration Committee
Mr C. V. Geoghegan – Chairman
Ms J. E. Ashdown
Mr M. Ewell
Mr J. C. Nicholls
Ms A. Abt
Nominations Committee
Mr L. Van de Walle – Chairman
Ms J. E. Ashdown
Mr C. V. Geoghegan
Mr M. Ewell
Mr J. C. Nicholls
Ms A. Abt
Mr S. R. Mitchell
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www.sigplc.com Stock code: ShI cHrIs GeoGHeGaN Ba
(HoNs), Fraes
Senior Independent Non-Executive
Director (61)
Became a Non-Executive Director in July
2009.
External roles
Chris is a Non-Executive Director of
Lakehouse plc. He is a Fellow of the Royal
Aeronautical Society.
Experience and past roles
Previously and prior to his retirement, Chris
was Chief Operating Officer of BAE Systems
plc with responsibility for all European joint
ventures and UK defence electronics assets.
He is past President of the Society of British
Aerospace companies.
Key strengths
Considerable commercial European business
experience.
JaNet asHdoWN Bsc (HoNs)
Non-Executive Director (56)
Became a Non-Executive Director in July
2011.
External roles
Janet is a Non-Executive Director of
Coventry Building Society, the Nuclear
Decommissioning Authority and Marshalls
plc. She is also Chair of the charity ‘Hope in
Tottenham’.
Experience and past roles
Previously and until the end of 2012, Janet
was the Chief Executive Officer of Harvest
Energy Limited and Blue Ocean Oil Trading
Limited. She previously worked for BP p.l.c.
for 30 years where her last role was as
Head of BP’s Retail and Commercial Fuels
business in the UK.
Key strengths
Strong commercial experience within global
businesses.
MeL eWeLL Bsc (HoNs)
Non-Executive Director (57)
Became a Non-Executive Director on
1 August 2011.
External roles
Mel is currently Chief Executive and an
Executive Director of Amey Plc, one of
the UK’s leading infrastructure services
providers. Mel will retire as Chief Executive of
Amey plc at the end of March 2016.
JoNatHaN NIcHoLLs Ba, aca,
Fct
Non-Executive Director (58)
Became a Non-Executive Director in
November 2009.
External roles
Jonathan is a Non-Executive Director of DS
Smith Plc, Great Portland Estates plc and
ibstock plc.
Experience and past roles
Mel previously held a number of senior
management positions for TNT international,
Xerox and ADi Group.
Key strengths
Considerable executive management
experience.
Experience and past roles
Previously and most recently, Jonathan was
Group Financial Director of Old Mutual plc.
Prior to that he was Group Finance Director
of Hanson plc.
Key strengths
Extensive financial management experience
(including recent financial experience).
aNdrea aBt MBa
Non-Executive Director (55)
Became a Non-Executive Director on
12 March 2015.
External roles
Andrea is a Non-Executive Director of
Brammer plc and is a member of the
supervisory board of Gerresheimer AG.
Andrea is to be appointed a Non-Executive
Director of Petrofac Limited on 19 May 2016.
Experience and past roles
Previously, Andrea has been Head of
Supply Chain Management and Chief
Procurement Officer of the Siemens sector
for infrastructure & Cities from 2011 to 2014.
Since joining Siemens in 1997, she held
numerous positions of Finance, Productivity
and Supply Chain Management in Germany
and internationally. Andrea started her career
in industry in the Daimler Benz Group where
she was responsible for different teams in
aircraft and postal automation service sales.
Key strengths
Specialist knowledge of the European
market, together with considerable
knowledge of supply chain and procurement.
24298.02 30 March 2016 2:38 PM PROOF1
57
SIG plc Annual Report and Accounts for the year ended 31 December 2015GOVERNANCE Introduction to Governance
The Group supports the
highest standards of corporate
governance.
lESlIE VAN DE wAllE Chairman
in last year’s Annual Report i reported that the Board had
discussed in December 2013 the matter of women on
Boards and had set out the aim of achieving at least 25%
female representation among the Board’s membership by
2015. i am pleased to be able to report that, following the
appointment of Ms A. Abt on 12 March 2015, that female
representation on the Board has risen to 25%.
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.
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
80 to 98, the Audit Committee Report on pages 72 to 77
and the Nominations Committee Report on pages 78 to
79 describe how the principles of good governance set
out in the Code are applied within SiG.
The Company’s Auditor, Deloitte LLP, is required to review
whether the above statement reflects the Company’s
compliance with the ten 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.
lESlIE VAN DE wAllE
Chairman
8 March 2016
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 Group and
engages well with both management and stakeholders. As
an essential part of this commitment, the Group supports
the highest standards in corporate governance. This
section of our report outlines how the Board ensures that
high standards of corporate governance are maintained.
compliance with the uK corporate Governance
code
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 2014 issued by the
Financial Reporting Council (”FRC”).
The Code can be accessed at www.frc.org.uk.
Board evaluation
The Board is required, under the Code, to undertake
a formal and rigorous annual evaluation of its own
performance and that of its Committees and individual
Directors. in December 2015 the Board conducted an
internally facilitated evaluation. Details of the process
concerning this evaluation and its outcome are covered on
page 64 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
(www.sigplc.com).
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www.sigplc.com Stock code: ShI Introduction to Governance
Corporate Governance
LEADERSHIP
the Board
At 31 December 2015, the Board was made up of eight
members comprising the Chairman, two Executive
Directors and five Non-Executive Directors. The Directors
who held office during the year were:
MR l. VAN DE wAllE
MR S. R. MITChEll
MR D. G. ROBERTSON
MS A. ABT
MS J. E. AShDOwN
MR M. EwEll
MR C. V. GEOGhEGAN
Non-Executive Chairman
Chief Executive
Group Finance Director
independent Non-Executive Director
(appointed 12 March 2015)
independent Non-Executive Director
independent Non-Executive Director
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 pages 56 and 57. Details of
Committee memberships are set out on page 63.
At 31 December 2015, SiG had two female Board
members, equating to 25% 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 bring 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 of SiG
against objectives set out by the Board. Biographical
details of each of the Directors, which illustrate their range
of experience, are set out on pages 56 and 57.
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 80 to 98.
The roles of the Chairman and Chief Executive
are separate and clearly defined. The division of
responsibilities is set out in writing, reviewed by the
Company Secretary and agreed by the Board 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’s Strategy
and policies approved by the Board.
The roles for the Chairman, Chief Executive and the
Senior independent Director are agreed and set out
in writing; a summary of their roles and division of
responsibility is set out below:
chairman
Æ Responsible for overall leadership and governance
of the Board (including induction, development and
performance evaluation);
Æ Ensures that the Directors have an understanding of
the views of the Company’s major shareholders; and
Æ Ensures a healthy culture of challenge and debate at
Board and Committee meetings.
The Chairman, at the time of his appointment, met and
continues to meet the independence criteria set out in
the Code.
chief executive
Æ Responsible for the effective leadership of the
Group;
Æ Strong and focused management and development
of the Group’s operations;
Æ implementation of the Group’s objectives and
strategy as agreed by the Board;
Æ Maintains good relationships and communications
with investors;
Æ Works closely with the Group Finance Director to
ensure appropriate financial controls are in place;
and
Æ Develops and implements policies integral to
improving the business, including in relation to
Health & Safety and Corporate Responsibility.
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59
SIG plc Annual Report and Accounts for the year ended 31 December 2015GOVERNANCE
Corporate Governance CONTiNUED
senior Independent director
Æ Available for approach by (or representations from)
investors and Shareholders, where communications
through the Chairman or Executive Directors may
not seem appropriate;
Æ A sounding board for the Chairman and an
intermediary for the other Directors when necessary;
and
Æ Available to chair the Board in the absence of the
Chairman.
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
it may determine, and it may revoke such appointment
(subject to the provisions of the Companies Act).
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 2016 Notice of AGM includes biographical
details and a statement as to why the Company believes
that the 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 is 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 on pages 85 to
86. Full details of Directors’ remuneration, interests in
the share capital of the Company and of share options
held are set out on pages 90 to 98 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 12 May 2016.
BOARD PROCEDURES AND
RESPONSIBILITIES
The Board meets regularly during the year, as well as
on an adhoc basis as required by time-critical business
needs. The Board met formally on ten occasions during
the year and individual attendance at those and the Board
Committee meetings is set out in the table on page 62. 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 for the Board for collective
decision (which can be viewed on the Company’s website,
www.sigplc.com). These matters include:
Æ Determining the strategy and control of the Group;
Æ Amendments to the structure and capital of the
Company and Group;
Æ Approval of financial reporting;
Æ Oversight of the Group’s internal controls;
Æ Approval of capital and revenue expenditure of a
significant size;
Æ Board membership and appointments;
Æ Acquisitions and disposals above a prescribed limit;
Æ Corporate governance matters; and
Æ 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 also
appoints Committees to approve specific processes
as deemed necessary. For example, during the year,
Board Committees were established to approve bank
documentation, share allotments, 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
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www.sigplc.com Stock code: ShI 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 BoardPad, 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 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 any 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 in which they have,
or can have, a direct or indirect interest. 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.
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61
SIG plc Annual Report and Accounts for the year ended 31 December 2015GOVERNANCE Corporate Governance CONTiNUED
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 to 31 December 2015:
Ms A. Abt1
Ms J. E. Ashdown
Mr M. Ewell
Mr C. V. Geoghegan
Mr S. R. Mitchell
Mr J. C. Nicholls
Mr D. G. Robertson
Mr L. Van de Walle
Board
Meetings eligible to
attend
(10 maximum)2
Audit Committee
Meetings eligible to
attend
(5 maximum)
Remuneration
Committee
Meetings eligible to
attend
(4 maximum)
Nominations
Committee
Meetings eligible to
attend
(4 maximum)
8
10
10
10
10
10
10
10
4
5
5
5
N/A
5
N/A
N/A
3
4
4
4
N/A
4
N/A
N/A
2
4
4
4
4
4
N/A
4
1. Ms A. Abt was appointed to the Board on 12 March 2015 and attended all meetings to which she was entitled to attend.
2. There were two unscheduled Board meetings in 2015 relating to the consideration of acquisitions and consideration of trading conditions.
Of the ten Board meetings held in 2015, two were held by telephone conference call.
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. All of the 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.
in general, the Board endeavours to hold at least two Board meetings each year at Group business locations both in
the UK & 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 with 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.
All Directors attended the 2015 AGM and were available to answer any questions raised by the Shareholders.
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24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI GROUP BOARD
audIt coMMIttee
NoMINatIoNs coMMIttee
reMuNeratIoN 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 72
to 77.
The Group operates an outsourced internal
Audit function, undertaken by KPMG LLP.
The Board annually reviews the need for
such a function and the effectiveness of the
outsourced 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 A. Abt
Ms J. E. Ashdown
Mr M. Ewell
Mr C. V. Geoghegan
The Nominations Committee operates
under written Terms of Reference, which
are consistent with current best practice.
The Committee comprises the Chairman,
the 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 pages 78
to 79.
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 A. Abt
Ms J. E. Ashdown
Mr M. Ewell
Mr C. V. Geoghegan
Mr S. R. Mitchell
Mr J. C. Nicholls
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 80
to 98.
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 of Executive remuneration.
Members:
Mr C. V. Geoghegan (Chairman)
Ms A. Abt
Ms J. E. Ashdown
Mr M. Ewell
Mr J. C. Nicholls
Group eXecutIVe coMMIttee
Group taX aNd treasury coMMIttee
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.
The Treasury Committee operates under the terms set out in the
written Treasury Policy Manual. The Committee considers liquidity
and funding, interest rate risk management, foreign exchange risk
management, counterparty credit risk management and any other
current Group Treasury issues.
Members:
Mr s. r. Mitchell (chairman)
Chief Executive
Mr d. G. robertson
Group Finance Director
Mrs L. H. Kennedy-Mccarthy
Group Human Resources
Director
Mr L. Lvovich
Corporate Development
Director
(from 1 January 2015)
Mr M. pearson
Group Chief information
Officer
Mr c. Horn
Group Operations Director
(from 1 December 2015)
Mr r. t. Barclay
Managing Director,
UK & ireland
Mr p. denece
Managing Director, France
(from 1 March 2016)
Mr M. Hamori
Managing Director, Germany
(from 1 March 2016)
Members:
Mr I. Jackson (chairman)
Group Financial Controller
Mr d. G. robertson
Group Finance Director
Mr r. c. Monro
Company Secretary
Mrs s. clarke
Group Treasurer
Mr I. Norris
Risk & Financial Controller
24298.02 30 March 2016 2:38 PM PROOF1
63
SIG plc Annual Report and Accounts for the year ended 31 December 2015GOVERNANCE Corporate Governance CONTiNUED
EFFECTIVENESS AND EVALUATION
Board effectiveness and performance evaluation
The effectiveness of the Board and its Committees is vital
to the success of the Company. During the year the Board
continued its ongoing evaluation process to assess its
performance and that of its three principal Committees
(Audit, Remuneration and Nominations).
in December 2014, as part of this programme, the Board
commissioned Equity Communications Limited, an
independent third party with no other connection to the
Company, to prepare a tailored Board Evaluation process.
This was facilitated by way of a 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 succession planning and performance,
strategy development and delivery, and Board skills and
composition. 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 January 2015 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 2015, by way of follow up to the formal
evaluation process completed in December 2014, 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 2015 survey were presented to the Board in
January 2016, with suggested improvement actions.
Whilst concluding that the Board and its Committees
continue to improve their effectiveness and are perceived
to be working well, the evaluation identified a number
of areas for improvement in connection with Board
succession planning and further sharing of best practices
between the Directors. There is also scope to improve
the monitoring, testing and adaptation of business
performance and strategy implementation. With regard to
markets, areas for improvement are to better understand
the development of the market and benchmarking against
key competitors, together with identification of market
trends and forecasting.
The proposed Board priorities for 2016 will cover:
Æ Closely monitoring performance and delivery
against 2016 to 2018 targets and performance of its
competitors;
Æ Obtaining a better understanding and anticipating more
actively the development of the market, customers and
competitors;
Æ improving cost management culture and driving the
structural costs review;
Æ Continuing focus and progress on the Company’s
Health & Safety Zero Harm campaign; and
Æ Progressing an enhanced people agenda,
including succession planning, strengthening front
line management and reviewing organisational
effectiveness.
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 2014, the
Board intends to conduct a formal externally facilitated
effectiveness and evaluation process in 2017.
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 various subjects, 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
revisions to the 2014 UK Corporate Governance Code,
the Longer-Term Viability Statement and Auditor reporting
requirements. Further training is programmed for 2016.
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.
64
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI Æ 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
with remedial action taken where appropriate. There is
also regular cash and treasury reporting to the Group
Finance Director and periodic reporting to the Board on
the Group’s tax and treasury position;
Æ 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;
Æ Monthly reports to the Board from the Chief Executive
and Group Finance Director;
Æ 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;
Æ 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;
Æ 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
Æ 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.
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.
The key elements of the existing systems of internal
control, which accord with the FRC’s Guidance on Risk
Management and internal Control and Related Financial
and Business Reporting (the “Risk Guidance”), are as
follows:
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
This process includes the following:
Æ 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 20 to 23;
Æ The risk management process is cascaded throughout
the Group, with operating subsidiary boards
responsible for maintaining their own risk registers and
assessing their internal control systems;
Æ A defined organisation structure with appropriate
delegation of authority;
Æ Formal authorisation procedures for all investments
with clear guidelines on appraisal techniques and
success criteria;
Æ 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;
24298.02 30 March 2016 2:38 PM PROOF1
65
SIG plc Annual Report and Accounts for the year ended 31 December 2015GOVERNANCE Corporate Governance CONTiNUED
Financial reporting
in addition to the general internal controls and risk
management processes described on pages 64 to 66, the
Group also has specific systems and controls to govern
the financial reporting process and preparation of the
Annual Report and Accounts. 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.
Annual assessment of the effectiveness of systems of
internal control
During 2015 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 Board and Audit Committee requested, received and
reviewed reports from senior management, its advisers,
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 control. Through the ongoing processes outlined
on pages 64 to 66, improvements 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 FRC.
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 (www.sigplc.com).
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
2015 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 semi-annually on the integrity of these
procedures, the state of ongoing investigations and
conclusions reached. During 2015 Group employees used
this system to raise concerns about a number of separate
issues, all of which were appropriately responded to.
Overall assessment
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 and 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 Accounts 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 (www.
sigplc.com).
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 Group 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.
The Company hosted a Capital Markets Day in London
on 16 November 2015. The presentation can be viewed at
www.sigplc.com.
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. The
Chairman also offers to meet with major Shareholders
each year.
66
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI Throughout the year, the Company responds to
correspondence received from Shareholders on a wide
range of issues and also participates 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 review the
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 abstentions 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.
SUBSTANTIAL SHAREHOLDINGS
At the date of approval of the 2015 Annual Report and Accounts, the Company had received notification of the
following shareholdings in excess of 3% of its issued share capital pursuant to the Disclosure and Transparency Rules
of the Financial Conduct Authority as at 31 December 2015 and 8 March 2016:
Shareholder
BlackRock, inc.
Aviva plc
Schroder investment Management Limited
Massachusetts Financial Services Company
Lancaster investment Management LLP
iKO Enterprises Limited
Tameside MBC re Greater Manchester Pension Fund
Voting Rights as at
31 December 2015
45,618,814
36,299,012
33,016,449
-
29,975,100
25,760,891
17,765,599
%
7.71%
6.14%
5.58%
-
5.07%
4.36%
3.00%
Voting Rights as at
8 March 2016
Below 5%
36,299,012
33,016,449
29,984,285
29,975,100
25,760,891
17,765,599
%
N/A
6.14%
5.58%
5.07%
5.07%
4.36%
3.00%
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:
Æ So far as they are each aware, there is no relevant
audit information of which the Company’s Auditor is
unaware; and
Æ 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 statement
The Going Concern Statement can be found on page 39
of the Strategic Report.
Viability statement
The Viability Statement can be found on page 39 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 reappointment of Deloitte LLP as Auditor of the
Company and to authorise the Audit Committee to fix its
remuneration. The remuneration of the Auditor for the year
ended 31 December 2015 is fully disclosed in Note 4 to
the Consolidated Financial Statements on page 120.
publication of annual report and Notice of aGM
Shareholders are to note that the SiG plc Annual Report
2015, together with the Notice convening the AGM have
been published on the Company’s website (www.sigplc.
com). if Shareholders have elected to receive Shareholder
correspondence in hard copy, then the Annual Report and
Notice convening the AGM will be distributed to them.
24298.02 30 March 2016 2:38 PM PROOF1
67
SIG plc Annual Report and Accounts for the year ended 31 December 2015GOVERNANCE Corporate Governance CONTiNUED
annual General Meeting
The Notice convening the AGM, which is to be held at the
Mercure Sheffield Parkway Hotel, Britannia Way, Catcliffe,
Sheffield S60 5BD at 12 noon on Thursday 12 May 2016,
together with explanatory notes on the resolutions to be
proposed and full details of the deadlines for exercising
voting rights, will be circulated to all Shareholders that
have elected to receive Shareholder correspondence in
hard copy at least 20 working days before the meeting
along with this Report. This document will also be
available on the SiG plc website (www.sigplc.com). All
Shareholders are invited to the Company’s AGM, at which
they will have the opportunity to put questions to the
Board.
OTHER STATUTORY DISCLOSURES
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
1 to 52 contain a review of these activities and comment
on the future outlook and developments. The financial risk
management objectives, policies and key performance
indicators of the Company are also set out in the Strategic
Report.
As at the date of this report, there have been no important
events affecting the business of the Company, or any of
its subsidiaries, which 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 donations are disclosed in the Corporate
Responsibility Report on pages 41 to 52 . it is the Group’s
policy not to make political donations and no political
donations were made during the year (2014: £nil).
Details of the Group’s policies in relation to Corporate
Governance are disclosed on pages 59 to 71.
Group results and dividends
The Consolidated income Statement for the year
ended 31 December 2015 is shown on page 102. The
movement in Group reserves during the year is shown on
page 106 in the Consolidated Statement of Changes in
Equity. Segmental information is set out in Note 1 to the
Consolidated Financial Statements on pages 115 to 117.
The Board is recommending a final dividend of 2.91p
per share (2014: 2.98p) which, together with the interim
dividend of 1.69p per share (2014:1.42p), makes a total for
the year ended 31 December 2015 of 4.60p (2014: 4.40p).
Payment of the final dividend, if approved at the AGM, will
be made on 27 May 2016 to Shareholders registered at
the close of business on 29 April 2016.
Greenhouse gases
Details of the Group’s greenhouse gas emissions are
detailed on pages 44 to 45 of the Corporate Responsibility
Report.
employees
Details of the Group’s policies relating to employees are
detailed on pages 41 to 52 of the Corporate Responsibility
Report.
post balance sheet events
Details of post balance sheet events (including details of
any acquisitions and disposals in the year) are included
in Note 13 on pages 130 to 132 of the Consolidated
Financial Statements.
related party transactions
Save as disclosed in Note 29 to the Consolidated
Financial Statements on page 152 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.
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 on the exposure of the Group to
relevant risks arising from financial instruments is set out
on pages 37 and 38 and in Note 18 to the Consolidated
Financial Statements on pages 136 to 139.
acquisitions and disposals
Details of acquisitions made and businesses sold during
the year and subsequently are covered in Note 13 to the
Consolidated Financial Statements on pages 130 to 132.
68
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI Group companies
A full list of Group Companies is disclosed on pages 170
to 172.
share capital
The Company has a single class of share capital which
is divided into ordinary shares of 10p each. At 31
December 2015, the Company had a called up share
capital of 591,347,148 ordinary shares of 10p each (2014:
591,137,803).
During the year ended 31 December 2015, options
were exercised pursuant to the Company’s share
option schemes, resulting in the allotment of 209,345
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 124 to
126 which also contains details of options granted over
unissued share capital.
rights attaching to shares
The rights attaching to the ordinary shares are defined
in the Company’s Articles of Association. The Articles of
Association may be changed by special resolution of the
Company. 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 representative)
who is present at a general meeting has one vote on
each resolution and, on a poll, every Shareholder (or
his 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.
Shareholders can declare final dividends by passing an
ordinary resolution but the amount of such 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 which 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.
The Board may determine that the Shareholder is not
entitled to exercise any 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.
24298.02 30 March 2016 2:38 PM PROOF1
69
SIG plc Annual Report and Accounts for the year ended 31 December 2015GOVERNANCE Corporate Governance CONTiNUED
transfer of 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:
(i) the instrument of transfer 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 to 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.
Variation of rights
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
(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.
election and re-election of directors
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 (contracts of significance)
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.
2016 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.
acquisition by the company of its own ordinary
shares
Shareholders’ authority for the purchase by the Company
of 59,113,780 of its own shares existed at the end of the
year. The Company has made no purchases of its own
ordinary shares pursuant to this authority. The Company
will seek to renew this authority at the 2016 AGM.
70
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI authority to allot ordinary shares
Shareholders’ authority to allot ordinary shares up to an
aggregate nominal amount of £19,704,593 existed at the
end of the year. The Company has not issued any ordinary
shares pursuant to this authority. The Company will seek
to renew this authority at the 2016 AGM.
During the year ended 31 December 2015, options
were exercised pursuant to the Company’s share
option schemes, resulting in the allotment of 209,345
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 124 to
126 which also contains details of options granted over
unissued share capital.
Fair, balanced and understandable
The Directors have a responsibility for preparing the 2015
Annual Report and Accounts and for making certain
confirmations concerning it. in accordance with C.1 of
the Code, the Board has reviewed the contents of this
year’s Annual Report and Accounts and it considers
that the Annual Report and Accounts, taken as a whole
is fair, balanced and understandable, and provides the
information necessary for Shareholders to assess the
Company’s position and performance, business model
and strategy. More information can be found in the Audit
Committee Report on page 77.
cautionary statement
The cautionary statement can be found on page 40 of the
Strategic Report.
content of directors’ report
The Corporate Governance Report (including the Board
biographies), which can be found on pages 56 to 71,
the Audit Committee Report on pages 72 to 77, the
Nominations Committee Report on pages 78 to 79, and
the Directors’ Responsibility Statement on page 99 are
incorporated by reference and form part of this Directors’
Report.
The Board has prepared a Strategic Report (including the
Chief Executive’s Statement) which provides an overview
of the development and performance of the Company’s
business in the year ended 31 December 2015 and its
position at the end of the year, and which covers likely
future developments in the business of the Company and
Group. The Corporate Responsibility Report forms part of
the Strategic Report.
For the purposes of compliance with DTR 4.1.8R, the
required content of the “Management Report” can be
found in the Strategic Report and this Directors’ Report,
including the sections of the Annual Report and Accounts
incorporated by reference.
For the purposes of LR 9.8.4C R, the information required
to be disclosed by LR 9.8.4R can be found in the following
locations:
Section
Topic
Location
(1)
(2)
(4)
(5)
(6)
(7)
(8)
(9)
interest capitalised
Publication of unaudited
financial information
Financial Statements,
page 129, Note 12
Not applicable
Details of long-term incentive
schemes
Directors’ Remuneration
Report, pages 91 to 93
Waiver of emoluments by a
director
Waiver of future emoluments
by a director
Non pre-emptive issues of
equity for cash
item (7) in relation to major
subsidiary undertakings
Parent participation in a
placing by a listed subsidiary
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
(10)
Contracts of significance
Corporate Governance
Report, page 70
Not applicable
Not applicable
(11)
(12)
(13)
(14)
Provision of services by a
controlling shareholder
Shareholder waivers of
dividends
Shareholder waivers of future
dividends
Not applicable
Agreements with controlling
shareholders
Not applicable
SiG has been mindful of the best practice guidance
published by Defra and other bodies in relation to
environmental, community and social KPis when drafting
the Strategic Report. The Board has also considered
social, environmental and ethical risks, in line with the
best practice recommendations of the Association of
British insurers. Management, led by the Chief Executive,
has responsibility for identifying and managing such risks,
which are discussed extensively in this Annual Report and
Accounts.
All the information cross-referenced is hereby
incorporated by reference into this Directors’ Report.
approval of the directors’ report
The Directors’ Report set out on pages 56 to 99 was
approved by the Board of Directors on 8 March 2016 and
signed on its behalf by Richard Monro.
RIChARD MONRO
Company Secretary
8 March 2016
24298.02 30 March 2016 2:38 PM PROOF1
71
SIG plc Annual Report and Accounts for the year ended 31 December 2015GOVERNANCE Audit Committee Report
The Committee aims to
ensure high standards of corporate
and regulatory reporting, an
appropriate control environment,
risk management framework and
compliance monitoring.
JONAThAN NIChOllS
Chairman of the Audit Committee
PURPOSE AND AIM
The purpose of the Audit Committee (“the Committee”) is
to make recommendations on the reporting, control, 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 the Committee’s aim is to ensure
high standards of corporate and regulatory reporting,
an appropriate control environment, risk management
framework and compliance monitoring. The Committee
believes that excellence in these areas enhances the
effectiveness and reduces the risks of the business.
KEY RESPONSIBILITIES
Æ The accounting policies applied in, and the integrity of,
the Group’s accounts;
Æ The effectiveness of the internal control and risk
management systems;
Æ The effectiveness of Whistleblowing procedures;
Æ The effectiveness of the Group’s outsourced internal
Audit function;
Æ The appointment, independence, remuneration and
effectiveness of the Group’s external Auditor; and
Æ The supervision of any tender process for the Group’s
internal and external Auditor.
The Audit Committee’s Terms of Reference are available
on the Company’s website (www.sigplc.com).
DEAR SHAREHOLDER,
On behalf of the Board i am pleased to present the Audit
Committee Report for 2015.
KPMG LLP was appointed as the Group’s outsourced
internal Audit function with effect from 1 January 2014,
and their work continues to provide a fresh focus to key
areas of risk and control.
KPMG’s internal Control Review undertaken in December
2014 supports the view that the Group has an effective
system of internal financial control. Management actions
continued to be taken to improve controls and bring
efficiencies across the business in 2015. in 2014 KPMG
performed an implementation review and there has
been further focus this year on iT, in particular a post
implementation review of the ERP system in the UK.
Reviews were undertaken in iT performance management
and Group iT strategy, to identify improvements to the
control environment. As a result of the creation of the new
role of Chief information Officer in 2014 (giving further
focus to iT strategy and controls across the Group), iT and
cyber security will continue to be a key area of focus in
2016.
Although going concern is a matter for the whole Board
(see page 39), a review is made by the Audit Committee of
the Group’s headroom under its covenants and undrawn
facilities in relation to the Group’s financial forecasts and
sensitivity analyses.
The Committee has again considered the issue of external
Auditor rotation and, although continuing to keep this
under review, currently intends to next tender the Audit in
2018. Further detail is provided in this Report.
The Company has complied during the financial year
ended 31 December 2015 with the provisions of The
Statutory Audit Services for Large Companies Market
investigation (Mandatory Use of Competitive Tender
Processes and Audit Committee Responsibilities) Order
2014 that are applicable to it.
JONAThAN NIChOllS
Chairman of the Audit Committee
8 March 2016
72
PURPOSE AND AIM
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI AUDIT COMMITTEE MEMBERSHIP
As at 31 December 2015, the Committee comprised
the five independent Non-Executive Directors of the
Company.
MEETINGS
The Committee meets regularly throughout the year, with
five meetings being held during 2015. its agenda is linked
to events in the Company’s financial calendar.
Attendance by individual members of the Committee
is disclosed in the table on page 62. The Committee
Chairman regularly invites senior Company executives to
attend meetings of the Committee to discuss or present
specific items, and in particular the Group Finance
Director, Mr D.G. Robertson, attended all five of the
meetings in 2015. The external Auditor attended meetings
of the Committee on four occasions and has direct access
to the Committee Chairman. The external Auditor meets
periodically, and in between Committee meetings, with
members of the Committee without the Chairman of the
Board and the Executive Directors being present. KPMG
LLP, who provides an outsourced internal Audit function
for the Group, attends meetings to present its reports. The
Committee also meets with KPMG without the Executive
Directors being present, and the Committee Chairman
meets regularly with KPMG outside of the formal
meetings.
Chairman of the Committee
Members
Mr J.C. Nicholls
Ms J.E. Ashdown, Mr M. Ewell,
Mr C.V. Geoghegan and Ms A. Abt
The Board considers that each member of the Committee
is independent within the definition set out in the
Code. The combined relevant commercial and financial
knowledge and experience of the Committee members
satisfies compliance with the UK Corporate Governance
Code (“the Code”) provision C.3.1.
AUDIT COMMITTEE STRUCTURE
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 Committee has in its Terms of Reference the power
to engage outside advisors and to obtain its own
independent external advice at the Company’s expense,
should it be deemed necessary. During 2015 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 KPMG 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 2015 and the results of
this review were reported to the Board.
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.
24298.02 30 March 2016 2:38 PM PROOF1
73
SIG plc Annual Report and Accounts for the year ended 31 December 2015GOVERNANCE Audit Committee Report CONTiNUED
The Committee addressed the following key agenda items during its five meetings in 2015:
6 March 2015
1 June 2015
29 June 2015
5 August 2015
10 December 2015
Æ internal Audit
update
Æ Review of Going
Concern basis of
accounting
Æ Goodwill and
intangible assets
impairment review
Æ Consideration
of the risk
management
review process
Æ internal control
Æ Review of the
internal Audit
report
Æ Risk Register
update
Æ Review of the
Committee’s
Terms of
Reference
Æ Review of
whistleblowing
and non-audit
services policies
review
Æ Discussion of
Æ Consideration
of 2015 interim
results (including
Goodwill and
Going Concern)
Æ Review
programme for
2015 interim Audit
review
Æ Updates on
Audit Quality and
external Auditor
rotation
the 2014 Annual
Report compared
to best and
emerging practice
Æ Review of
performance of
Committee and
identification
of training
requirements
Æ Review of 2014
audit process
and results,
and discussion
of significant
accounting
matters
Æ Review of the
2014 external
Auditor report
Æ Review of the
2014 Annual
Report (including
fair, balanced and
understandable)
and Preliminary
Results
Announcement
Æ Review of the
internal Audit
report
Æ Review of 2015
interim results
Æ Goodwill and
intangible assets
impairment review
Æ Review of Going
Concern basis of
accounting
Æ Review of the
external Auditor’s
interim work and
report
Æ Review of the
external Auditor’s
year end audit
plan
Æ Assessment of
performance of
external Auditor
Æ Corporate
Governance
update by
external Auditor
(including
updates on risk
management
and the Longer-
Term Viability
Statement)
Æ Review of the
internal control
report
Æ Consideration
of the risk
management
review process
Æ Review and
approve the 2016
internal Audit
report
Æ Review of
audit pre-close
accounting and
reporting issues
Æ Review of the
updated year end
external audit
planning report
Æ Agreement of
2015 audit fee
and review
of Auditor
independence
Æ Discussions
regarding Going
Concern and
the Longer-
Term Viability
Statement
Æ Review of
paper regarding
disclosure of
distributable
reserves
74
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI FINANCIAL REPORTING AND SIGNIFICANT
ACCOUNTING MATTERS
The Committee considered the following financial
reporting and key accounting issues with regard to the
financial statements:
Recognition and measurement of supplier rebate income
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 that supplier rebates are recognised
appropriately in the Group financial statements.
Carrying value of goodwill and intangible assets
The carrying value of goodwill is systematically reviewed
at each mid-year point and at 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.
Disclosure of “Other items”
The Committee gave careful consideration to the
judgments made in the separate disclosure of “Other
items”. in particular, the Committee sought to ensure
that the treatment followed consistent principles and that
reporting in the Group financial statements is suitably
clear and understandable.
Recognition and measurement of trade receivables
Methodologies and judgments applied in establishing
provisions for trade receivables were examined to ensure
consistent application and appropriateness to the trading
position of the Group.
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 Company’s financial
performance.
The Audit Committee notes that the Company 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
pages 65 and 66.
KPMG LLP was appointed on 1 January 2014 in place of
EY LLP to provide the outsourced internal Audit function.
The appointment followed a full review process which
involved tenders being made by five accountancy firms
leading to a shortlist of three firms from which a candidate
was recommended. The process was carried out by
the Group Finance Director and the Chairman of the
Audit Committee who then recommended KPMG to the
Audit Committee as the selected internal audit provider.
Their appointment was then recommended by the Audit
Committee to the Board, and was approved by the Board.
24298.02 30 March 2016 2:38 PM PROOF1
75
SIG plc Annual Report and Accounts for the year ended 31 December 2015GOVERNANCE Audit Committee Report CONTiNUED
AUDIT TENDER
During the year, the Committee considered the Group’s
position on its Auditor services, taking into account the
UK Corporate Governance Code, together with the EU
Audit Directive and Regulation and the Statutory Audit
Services for Large Companies Market investigation
(Mandatory Use of Competitive Tender Processes and
Audit Committee Responsibilities) Order 2014.
Having previously acted as Auditor to parts of the Group
since 2003, Deloitte LLP was invited to tender for the
entire Group audit in 2005 and this resulted in their
appointment as the Group’s external Auditor.
As noted previously, the Committee continues to review
the performance of the external Auditor and has been
satisfied with the independence, objectivity, expertise,
resources and general effectiveness of Deloitte LLP, and
that the Group is subjected to a rigorous audit process.
The Committee does not consider it necessary to conduct
a tender process for the appointment of the Company’s
Auditor at this time, although the Committee will continue
to keep this under review.
The current lead audit partner took over the audit for
the year ended 31 December 2013. 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, by
making use of the transition arrangements outlined by
the Financial Reporting Council in relation to the Code
and retaining the Company’s existing audit firm until
conclusion of the term of its current lead partner.
The Committee recommends, and the Board agrees,
that a resolution for the reappointment of Deloitte LLP
as Auditor of the Company for a further year will be
proposed at the forthcoming Annual General Meeting. The
Committee intends that the audit contract will be put out
to tender in 2017, in order that a decision can be taken
and communicated to Shareholders at the 2018 AGM,
with the new audit contract being effective for the 2018
interim Review and final audit.
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 throughout 2015. 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 as 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 and the external Auditor’s fees are
reviewed and set annually by the Committee and are
approved by the Board.
The total sum invoiced to the Group by its external Auditor
for non-audit services in 2015 was £0.1m, primarily the
interim Review (2014: £0.1m). The total sum invoiced by
them for audit services in respect of the same period was
£1.4m (2014: £1.3m). A full breakdown of Auditor fees
are disclosed in Note 4 to the Consolidated Financial
Statements on page 120.
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.
in August 2015, the Committee undertook its annual
review of the effectiveness of the external Auditor
and considered the reappointment 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. From
this questionnaire and further discussions, the Committee
is satisfied that Deloitte LLP continues to provide an
effective audit service.
76
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI 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 Annual Report and Accounts, taken as a
whole, is fair, balanced and understandable and provides
the necessary information to enable Shareholders to
assess the position and performance, strategy and
business model of the Company.
in reaching this conclusion the Committee has considered
the following:
Æ The preparation of the Annual Report is a collaborative
process between Finance, Legal, Human Resources,
investor Relations and Communications functions
within SiG, ensuring the appropriate professional
input to each section. External guidance and advice is
sought where appropriate;
Æ The coordination and project management is
undertaken by a central team to ensure consistency
and completeness of the document;
Æ An extensive review process is undertaken, both
internally and through the use of external advisors; and
Æ A final draft is reviewed by the Audit Committee
members prior to consideration by the Board.
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 of the Audit Committee
8 March 2016
24298.02 30 March 2016 2:38 PM PROOF1
77
SIG plc Annual Report and Accounts for the year ended 31 December 2015GOVERNANCE Nominations Committee Report
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 are considered in determining the optimum
composition of the Board, with the aim to balance them
appropriately.
BOARD SUCCESSION PLANNING
in accordance with best practice and The Financial
Reporting Council’s (“FRC”) discussion paper entitled ‘UK
Board Succession Planning’, the Committee continues
to review and monitor its Board succession planning
process, in particular by rigorously reviewing and
taking into account the need for progressive refreshing
of the Board. The Committee carefully reviews and
makes recommendations to the Board concerning the
re-appointment of any Non-Executive Director at the
conclusion of their specified terms of office.
The Committee considered the positions of Mr C.V.
Geoghegan and Mr J.C. Nicholls, both of whom
completed their second three year periods of office
in July and November 2015 respectively, and both of
whom were appointed to serve for a further term of office
expiring at the May 2016 Annual General Meeting. it
was the Committee’s view that, noting the experience
and tenure of the Non-Executive Directors, together with
the Company’s ongoing implementation of its strategic
initiatives and the focus on achieving a strong recovery in
2016, it would be in the best interests of the Company’s
Shareholders, subject to careful and rigorous review,
for Mr Geoghegan and Mr Nicholls to offer themselves
for re-election at the 2016 Annual General Meeting. in
the Committee’s view, Mr Geoghegan and Mr Nicholls
bring considerable management experience and an
independent perspective to the Board’s discussions and
are considered to be independent of management and
free from relationship or circumstance that could affect
or appear to affect, the exercise of their independent
judgment, thereby providing continued valuable support.
Therefore, Mr Geoghegan and Mr Nicholls have, subject
to their re-election by Shareholders at the Annual General
Meeting in May 2016, been invited to serve for a further
term of office expiring at the May 2017 Annual General
Meeting.
As part of the Board succession planning process,
which was discussed at the Committee’s December
2015 meeting, a search and selection procedure
for independent Non-Executive Directors would be
undertaken prior to the 2017 Annual General Meeting.
PURPOSE AND AIM
The Nominations Committee has an important role to
play in ensuring that the Board has the right balance of
experience and skills to support the Group’s strategy. its
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.
The Committee keeps under review and evaluates the
composition of the Board and its Committees to maintain
the appropriate balance of skills, knowledge, experience
and independence to ensure their continued effectiveness.
Appropriate succession plans for the Non-Executive
Directors, Executive Directors and the Group’s Senior
Management are also kept under review.
MEETINGS AND MEMBERSHIP
During the year the Committee met on four occasions. A
quorum is three members, the majority 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 (www.sigplc.com).
As at 31 December 2015, the Committee comprised the
Chairman, the Chief Executive and the five independent
Non-Executive Directors of the Company.
Chairman of the Committee
Members
Mr L. Van de Walle
Ms J.E. Ashdown, Mr M. Ewell,
Mr C.V. Geoghegan, Mr J.C. Nicholls,
Ms A. Abt and Mr S.R. Mitchell
RESPONSIBILITIES AND ACTIVITIES
DURING THE YEAR
The Committee reviews the structure, size, diversity and
composition of the Board and makes recommendations
concerning the reappointment 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
78
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI The Committee also carefully reviews and makes
recommendations concerning the reappointment of any
Non-Executive Director at the conclusion of their specified
terms of office.
in December 2013, the Board had discussed the matter of
women on boards, and had set out the aim of achieving
at least 25% female representation among the Board’s
membership by 2015. Following the appointment of Ms
A. Abt on 12 March 2015, female representation on the
Board has risen to 25%. The Committee will continue to
consider gender diversity when recommending any future
Board appointments. Final appointments will always be
made on merit.
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 2015 and the results of
this review were reported to the Board.
The proposed activities for the Committee in 2016
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, in conjunction with The FRC’s
discussion paper on UK Board Succession Planning.
lESlIE VAN DE wAllE
Chairman of the Nominations Committee
8 March 2016
in June 2015, the Committee undertook a Talent &
Succession Review which encompassed the Group’s
senior management. This was undertaken in conjunction
with the Group Human Resources Director and was
intended to support the Group’s strategy and growth
plans. The review covered: purpose and focus; bench
strength and pipeline assessment; and workforce profile
assessment and actions. This review forms part of the
Committee’s annual agenda.
GENERAL
in general terms, when considering candidates
for appointment as Directors of the Company, the
Nominations 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 shortlist could be agreed.
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. The policy on Board Diversity is
available on the Company’s website (www.sigplc.com).
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.
During the year under review, in connection with the
appointment of Ms A. Abt, the Committee used the
services of Ridgeway Partners (who have no other
connection with the Company).
This process was followed in respect of the appointment
of Ms Abt as a Non-Executive Director with effect from
12 March 2015.
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. Although not an
exhaustive list, the induction includes one-to-one
meetings with key management (including HR, Finance,
Risk, investor Relations and Corporate Development)
and an overview of the Group’s structure and strategy
(including site visits and an overview of operations).
24298.02 30 March 2016 2:38 PM PROOF1
79
SIG plc Annual Report and Accounts for the year ended 31 December 2015GOVERNANCE
Directors’ Remuneration Report
Directors’ Remuneration Report
Remuneration Report – Annual Statement
Directors’ Remuneration Policy
annual bonus
For the year ended 31 December 2015, underlying
profit before tax (“PBT”) was £87.4m and Return on
Capital Employed (“ROCE”) was 9.3%. The objective
linked to savings from the Group Strategic initiatives
was partially achieved and the Health & Safety target
was achieved. The resulting annual bonus outcome was
therefore 17.7%of salary for both the Chief Executive
and Group Finance Director. However, in the context of
the challenging operating conditions and the Group’s
performance in 2015, both the Chief Executive and Group
Finance Director have taken the decision to waive their
entitlement to the 2015 annual bonuses.
Following a review of the annual bonus in 2014, the
Committee made an evolutionary change to the mix of
performance measures to better support the Company
ethos of “Stronger Together”, as reflected in the 2015
bonus metrics. The metrics for the 2016 annual bonus
will remain unchanged from 2015, and will be linked 55%
to Group underlying PBT, 20% to ROCE, 15% to savings
from the Group Strategic initiatives and 10% to Health &
Safety.
LtIp
Awards granted in 2013 under the Long-Term incentive
Plan (“LTiP”) will vest in early 2016 based on performance
to 31 December 2015. These awards were based two-
thirds on ROCE and one-third on underlying earnings per
share (“EPS”); the performance conditions were partially
met to the extent that 19.5% of the awards will vest.
For 2016, the LTiP will continue to be linked to ROCE and
EPS, have a three year performance period plus a two
year holding period on vested shares, and remain subject
to clawback and malus provisions.
Malus and clawback
Last year, the Committee noted the requirement for
both malus and clawback provisions to be included in
incentives under the updated UK Corporate Governance
Code. i am pleased to report that the Committee
took action in 2015 in order to implement clawback
provisions in the Company’s incentive schemes. Malus
and clawback provisions are in place for awards made
in or after September 2015 in respect of the LTiP, and for
awards made on or after 1 January 2016 in respect of the
Deferred Share Bonus Plan (“DSBP”) and annual bonus.
The Committee reviewed the Remuneration Policy during
the year, and determined that it remained appropriately
aligned with strategy and fit for purpose. The policy will be
reviewed comprehensively later in the year, ahead of the
2017 AGM.
The Annual Report on Remuneration will be subject to
an advisory vote at the forthcoming AGM. We continue
to value any feedback from Shareholders and hope to
receive your support at the AGM.
ChRIS GEOGhEGAN
Chairman of the Remuneration Committee
8 March 2016
DEAR SHAREHOLDER,
On behalf of the Board, i am pleased to present the
Remuneration Committee’s (“the Committee”) Directors’
Remuneration Report for 2015.
Similarly to last year, this report is split into three sections:
the Annual Statement; the Directors’ Remuneration Policy;
and the Annual Report on Remuneration (with the Annual
Statement and Annual Report on Remuneration being
subject to an advisory Shareholder vote at the 2016 AGM).
Our Remuneration Policy, detailed on pages 81 to 88,
remains consistent with that approved by Shareholders at
the 2014 AGM, and is reproduced in full for both ease of
reference and in order to provide context to the decisions
taken by the Committee during the year.
SiG’s strategy over 2015 has been 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 multinational 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. SiG’s goal is
to be the leading specialist solutions provider to the
construction industry.
KEY ACTIVITIES
The activities of the Committee and key decisions taken
in 2015 are set out on page 89 and are summarised
below. During the year, the Committee considered SiG’s
Remuneration Policy and concluded that the current
structure – made up of base salary and benefits, an
annual bonus plan and a single long-term incentive plan –
continues to be appropriate.
review of base salaries
Towards the end of the year the Committee reviewed the
salaries of our Executive Directors. This review took into
account a number of factors including an assessment of
individual experience and performance, pay conditions
across the Group, economic factors and the Group’s
environment. Following this review, the Committee agreed
that base salaries for the Chief Executive, Group Finance
Director and members of the Senior Leadership Team
would not increase for 2016, whilst the average increase
across the remainder of the Group, effective 1 January
2016 was 1.5%.
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Headingwww.sigplc.com Stock code: ShI Directors’ Remuneration Report
Directors’ Remuneration Policy
Directors’ Remuneration Report
Directors’ Remuneration Report
Directors’ Remuneration Policy
Directors’ Remuneration Policy
COMPLIANCE STATEMENT
This report, prepared by the Committee on behalf of the
Board, takes full account of the UK Corporate Governance
Code (“the Code”) and the latest ABi/PLSA guidelines
and has been prepared in accordance with the provisions
of the Companies Act 2006 (“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 153 to 157 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.
This section of the report sets out the Remuneration
Policy for Executive Directors in accordance with Section
439A of the Act. The Remuneration Policy was approved
by Shareholders at the AGM on 16 May 2014, and
took effect from that date. The report that follows is as
disclosed in the 2013 Directors’ Remuneration Report
save a number of non-significant changes (as permitted
by the terms of the Remuneration Policy approved by
Shareholders) as follows:
Æ References to financial years have been updated where
appropriate;
Æ Pay-for-performance scenario charts have been
updated to reflect 2016 salaries;
Æ Current Non-Executive Director appointment expiry
dates have been updated; and
Æ Malus provisions have been clarified with respect to
incentives awarded in respect of 2015 and previous
years, and clawback has been introduced, and was
applied from 1 January 2016 in respect of the annual
bonus and DSBP, and from September 2015 awards in
respect of the LTiP.
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.
CONSIDERATION 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 undertaking Shareholder
consultation in advance of any significant changes to the
Remuneration Policy. Further detail on the votes received
on the 2014 Directors’ Remuneration Report and the
Committee’s response are provided in the Annual Report
on Remuneration.
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 12 to 19. The Remuneration
Policy for Executive Directors is summarised in the table
overleaf:
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SIG plc Annual Report and Accounts for the year ended 31 December 2015GOVERNANCE Directors’ Remuneration Report CONTiNUED
Directors’ Remuneration Policy
Operation and process
Opportunity
Performance metrics
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.
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.
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.
Not applicable.
Not applicable.
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 may vary by role.
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).
Pension
Share
Incentive Plan
(“SIP”)
To provide
retirement
benefits that are
appropriately
competitive
within the
relevant labour
market.
To encourage
share ownership
across all
UK-based
employees
using HMRC
tax-advantaged
schemes.
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 tax-advantaged
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 £20
each month.
Defined contribution: SiG
contributes 15% of base
salary.
Not applicable.
Maximum opportunity is
in line with HMRC limits.
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.
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www.sigplc.com Stock code: ShI Variable remuneration
Element
Annual
performance
bonus
(“annual
bonus”)
Purpose and link to
strategy
To provide an
incentive to
achieve annual
performance
targets, which
are set at the
beginning of
the financial
year in line with
the Group’s
strategy.
Operation and process
Opportunity
Performance metrics
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 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 DSBP.
Effective from the 2015 performance
year (i.e. payments from 1 January
2016), the bonus is subject to
malus and clawback, i.e. forfeiture
or reduction of the deferred portion
or recovery of paid amounts, in
exceptional circumstances. Such
circumstances may include (but are
not limited to) material misstatement
of the Group’s financial results or
gross misconduct. in respect of
bonuses up to the 2014 performance
year, only malus provisions apply.
Dividend equivalents are payable over
the vesting period in respect of the
awards which vest.
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.
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.
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.
To encourage long-term decision
making and further improve
Shareholder alignment, the Committee
introduced 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.
From 2015, awards are subject to
malus and clawback, i.e. forfeiture
or reduction of unvested awards
or recovery of vested awards, 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.
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83
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 PBT
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.
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 EPS
growth and ROCE.
Details of the
measures, weightings
and performance
targets used for
specific LTiP grants
are included in the
Annual Report on
Remuneration.
SIG plc Annual Report and Accounts for the year ended 31 December 2015GOVERNANCE Directors’ Remuneration Report CONTiNUED
Directors’ Remuneration Policy
The Committee is satisfied that the Remuneration Policy
on pages 81 to 88 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 on page 83.
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 within SiG. Executive
Directors participate in the same pension scheme as other
senior managers.
APPROACH 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.
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.
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www.sigplc.com Stock code: ShI 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
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.
Benefits
Pension
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.
n/a
n/a
n/a
n/a
Annual bonus The plan as described in the policy table will apply to new appointees with the relevant maximum
100% of salary
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.
LTIP
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.
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.
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85
SIG plc Annual Report and Accounts for the year ended 31 December 2015GOVERNANCE Directors’ Remuneration Report CONTiNUED
Directors’ Remuneration Policy
EXECUTIVE DIRECTOR SERVICE CONTRACTS AND LEAVER/CHANGE OF CONTROL
PROVISIONS AND POLICY FOR LOSS OF OFFICE (CONTINUED)
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.
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 a 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 or her 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
10 December 2012
D. G. Robertson
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 overleaf summarises how the awards under the
annual bonus, the DSBP, the 2004 LTiP and the 2014 LTiP are typically treated in specific circumstances, with the final
treatment remaining subject to the Committee’s discretion.
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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
n/a
n/a
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.
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
2014 LTIP
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 (unchanged),
applied to salaries as at 1 January 2016. Note that the projected values exclude the impact of any share price
movements.
Chief Executive
Finance Director
Maximum
32%
27%
41%
£2,059k
Maximum
33%
27%
40%
£1,246k
On-target
66%
27%
7%
£1,012k
On-target
66%
27%
7%
£616k
Minimum
100%
£663k
Minimum
100%
£406k
Salary, pension and benefits
Annual bonus
Long-term incentives
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SIG plc Annual Report and Accounts for the year ended 31 December 2015GOVERNANCE
Directors’ Remuneration Report CONTiNUED
Directors’ Remuneration Policy
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 on page
87, 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. NED 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
Date of current letter of appointment
Effective date of appointment
Expiry of current term
Mr L. Van de Walle
16 September 2013
Ms A. Abt
5 March 2015
Ms J. E. Ashdown
16 May 2014
Mr M. Ewell
16 May 2014
Mr C. V. Geoghegan 6 May 2015
Mr J. C. Nicholls
6 May 2015
1 October 2010
12 March 2015
11 July 2011
1 August 2011
1 July 2009
6 November 2009
12 May 2016
10 May 2018
11 May 2017
11 May 2017
12 May 2016
12 May 2016
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 share incentive plan. Any reasonable expenses that they incur in the furtherance of their
duties are reimbursed by the Company.
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.
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.
Any fee increases are applied in line with
the outcome of the review.
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.
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.
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Annual Report on Remuneration
ANNUAL REPORT ON REMUNERATION
The following section provides details of how SiG’s Remuneration Policy was implemented during the financial year
ended 31 December 2015 and how it will be implemented in 2016.
THE REMUNERATION COMMITTEE
The key responsibilities of the Remuneration Committee are to:
Æ Determine the Remuneration Policy for Executive Directors and such other members of the Executive Management
as it is designated to consider;
Æ Design specific remuneration packages which include salaries, bonuses, equity incentives, pension rights and
benefits;
Æ Review the Executive Directors’ service contracts;
Æ Ensure that failure is not rewarded and that steps are always taken to mitigate loss on termination, within contractual
obligations;
Æ Review remuneration trends across the Group; and
Æ 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 at 31 December 2015, the Committee comprised the five independent Non-Executive Directors of the Company,
all of whom are considered to be independent within the definition set out in the Code.
Chairman of the Committee
Members
Mr C.V. Geoghegan
Ms J.E. Ashdown, Mr M. Ewell,
Mr J.C. Nicholls and Ms A. Abt
During the year the Committee met four times. Attendance by individual members of the Committee is disclosed in the
Corporate Governance section of the Directors’ Report on page 62.
Only members of the Committee have the right to attend Committee meetings. The Chairman of the Board, Chief
Executive, Group Human Resources 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 page 90 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 2015
The Committee met four times in 2015. its key activities included:
Æ Annual review of Executive Director salaries;
Æ Considering performance outcomes for the annual bonus and long-term incentives in respect of performance to
31 December 2014 and 2015;
Æ Calibration of award levels and targets for the 2015 LTiP awards for the Executive Directors;
Æ Review of the Non-Executive Chairman’s fees;
Æ Review of the Committee’s Terms of Reference;
Æ Preparation of the 2014 and 2015 Directors’ Remuneration Report;
Æ implementation of clawback provisions in respect of the annual bonus scheme, deferred bonus scheme and LTiP;
Æ Review and approval of performance outcomes and vesting of LTiP awards granted in 2012;
Æ Review of the LTiP, consideration of potential revisions and related Shareholder consultation; and
Æ Preparation for the 2015 AGM.
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89
SIG plc Annual Report and Accounts for the year ended 31 December 2015GOVERNANCE Directors’ Remuneration Report CONTiNUED
Annual Report on Remuneration
EXTERNAL ADVISORS
Kepler (a brand of Mercer), 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, and abides by the Code of Conduct for Remuneration Consultants of UK-listed companies (which
can be found at www.remunerationconsultantsgroup.com). Kepler’s parent, Mercer, does not provide any other services
to the Company. The Committee is satisfied that the advice it receives from Kepler is independent. Kepler’s fees for
the year in relation to advice to the Committee were charged on a time and materials basis and totalled £10,750 (2014:
£20,300).
Deloitte LLP, external Auditor to the Group, has, when requested, performed specific procedures on the LTiP
calculations at the end of the respective performance periods. Deloitte LLP was asked to perform this service in 2015
and received fees for this service which totalled £2,000 (2014: £nil).
SHAREHOLDER VOTE AT THE 2015 AGM
The following table shows the results of the advisory vote on the Annual Report on Remuneration of the 2014 Directors’
Remuneration Report at the 14 May 2015 AGM:
For
Against
Total votes cast
Votes Withheld
Annual Report on Remuneration
Total number of votes
465,616,304
1,185,417
466,801,721
936,099
% of votes cast
99.7%
0.2%
100%
0.2%
The current Remuneration Policy was approved by Shareholders with a 99.7% vote ‘for’ at the 2014 AGM.
SINGLE TOTAL FIGURE OF REMUNERATION FOR EXECUTIVE DIRECTORS (AUDITED)
The table below sets out the single total figure of remuneration received by each Executive Director for the year to
31 December 2015 and the prior year:
Executive Director
Mr S. R. Mitchell
Mr D. G. Robertson
2015
2014
2015
2014
Base salary1
£000
Taxable
Benefits2
£000
Pension
Benefits3
£000
Annual bonus4
£000
558
550
336
331
26
21
29
26
83
83
50
50
–
314
–
189
LTIP5
£000
101
–
59
53
Other6
£000
Total
Remuneration
£000
–
–
–
–
768
968
474
649
The figures in the table above have been calculated as follows:
1. Base salary/fee: amount earned for the year.
2. Benefits: comprising company car, medical and permanent health insurance.
3. Pension: the Company’s pension contribution during the year of 15% of salary, an amount of which was paid by salary supplement.
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 2015 and 31 December 2014. For the
2015 figure, given that vesting occurs in April 2016, after the Directors’ Remuneration Report is finalised, the figures are based on the average share
price in the last three months of 2015 of 143.6p.
6. Other: includes SiP, value based on the face value of matching shares at grant.
7. During 2015 Mr C. J. Davies, who retired from the Board on 28 February 2013, received £65,000 on the exercise of his outstanding LTiP awards.
8. Both S.R. Mitchell and D.G. Robertson have taken the decision to waive their entitlement to their 2015 annual bonuses.
90
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www.sigplc.com Stock code: ShI INCENTIVE OUTCOMES FOR 2015
annual bonus in respect of 2015
in 2015, the maximum bonus opportunity for Executive Directors was 100% of salary. 90% of bonus was based on
financial performance (of which 15% related to savings from the Group Strategic initiatives), and 10% on Health &
Safety. For the financial performance element, 55% of bonus was linked to underlying PBT, 20% of bonus to the
Group’s Return on Capital Employed (“ROCE”) and 15% to savings from the Group Strategic initiatives.
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 PBT
ROCE (%)
Year to 31 Dec 15
Cumulative savings from the Group
Strategic initiatives
Total
Non-financial element outcomes
Executive Director
Objectives for the year
Weighting
(% of salary)
55%
20%
15%
90%
Performance targets
Target
Stretch
Actual
performance
Payout
(% of salary)
Threshold
£105.0m
n/a
£113.0m
11.6%
£20.0m
£30.0m
£118.0m
n/a
n/a
£87.4m
9.3%
£22.7m
0%
0%
7.7%
7.7%
Payout (% of salary)
10% (out of 10%)
10% (out of 10%)
Mr S. R. Mitchell
Target against the delivery of the Health & Safety objective
Mr D. G. Robertson
Target against the delivery of the Health & Safety objective
The Committee reviewed Health & Safety performance during the year, focusing on the Group’s Accident incident Rate
(“AiR”) and Health & Safety initiatives, and determined that the targets were achieved in full, and 10% of bonus (out of a
maximum of 10%) was payable.
Therefore, based on performance, an outcome of 17.7% (out of a maximum of 100%) in respect of both financial and
non-financial elements was warranted for both Executive Directors.
The Executive Directors have taken the decision to waive their 2015 bonuses in light of Group financial performance.
overall bonus outcomes
Executive Director
Mr S. R. Mitchell
Mr D. G. Robertson
Financial element bonus outcome
(% of salary)
Personal element bonus outcome (% of
salary)
Overall bonus outcome
(% of salary)
7.7%
7.7%
10%
10%
0% (waived)
0% (waived)
As stated earlier, as a result of 2015 Group financial performance, both S.R. Mitchell and D.G. Robertson have taken the
decision to waive their 2015 annual bonuses.
Long-term Incentive plan: 2013 awards
On 18 April 2013, Mr S. R. Mitchell and Mr. D. G. Robertson received an award of 363,036 and 214,191 nil-cost
options respectively under the 2004 LTiP. Vesting of the award was dependent 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 performance (representing the remaining one-third of the award).
There was no re-testing of performance. The performance targets are illustrated overleaf:
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91
SIG plc Annual Report and Accounts for the year ended 31 December 2015GOVERNANCE Directors’ Remuneration Report CONTiNUED
Annual Report on Remuneration
ROCE element of the award (2/3rd)
EPS element of the award (1/3rd)
100%
g
n
i
t
s
e
v
%
0%
100%
g
n
i
t
s
e
v
%
0%
9%
13%
30p
40p
Average ROCE 2013-2015
(operating profit after tax divided by the sum of total
equity plus net debt)
Cumulative underlying EPS 2013-2015
(pence)
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.
Actual average ROCE was 9.47% and cumulative underlying EPS was 33.5p, which resulted in the vesting of c. 7.78%
and c. 11.67% of the maximum award respectively. 19.5% of the total award will therefore vest on 18 April 2016,
subject to continued employment.
Performance measure
Actual performance
Vesting outcome (% of maximum)
Three year average ROCE
Three year cumulative underlying EPS
9.47%
33.5p
7.78%
11.67%
As disclosed in the Remuneration Policy, 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 Directors’ current holdings as measured against the guideline is disclosed on page 97.
LONG-TERM INCENTIVE PLAN: 2015 AWARDS
On 17 September 2015, Mr S. R. Mitchell and Mr D. G. Robertson were granted awards under the LTiP of 455,838 and
274,323 shares respectively; details are provided in the table below. The three year period over which performance
will be measured will be 1 January 2015 to 31 December 2017. The award is eligible to vest in its entirety on the third
anniversary of the date of grant (i.e. 16 September 2018), subject to ROCE and EPS performance. Executive Directors
will additionally be required to hold any vested awards for a further two year period, to encourage long-term decision-
making and further improve shareholder alignment.
Executive Director
Date of grant
Mr S. R. Mitchell
17 September 2015
Mr D. G. Robertson
17 September 2015
Awards made
during the year
455,838
274,323
Market price
at date of award
183.7p
183.7p
Face value
at date of award
£837,375
£503,932
Face value
at date of award
(% of salary)
150%
150%
These awards will vest based on three year average ROCE (representing two-thirds of the award) and three year
cumulative underlying EPS (representing one-third of the award). The performance targets are illustrated overleaf:
92
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www.sigplc.com Stock code: ShI
ROCE element of the award (2/3rd)
EPS element of the award (1/3rd)
100%
g
n
i
t
s
e
v
%
0%
100%
g
n
i
t
s
e
v
%
25%
0%
11%
14%
38p
48p
Average ROCE 2015-2017
(operating profit after tax divided by the sum of total
equity plus net debt)
Cumulative underlying EPS 2015-2017
(pence)
For the ROCE element, if three year average ROCE over the three financial years ending 31 December 2017 is less than
or equal to 11%, no shares will vest. Awards vest in full for ROCE of 14% 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 2017 is less
than or equal to 38p, no shares will vest. 25% of the award will vest for EPS of 38p, and the award will vest in full for
cumulative EPS of 48p or higher; 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, merger and acquisition 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.
SINGLE TOTAL FIGURE OF REMUNERATION FOR NON-EXECUTIVE DIRECTORS
The table below sets out the single total figure of remuneration received by each NED for the year to 31 December 2015
and the prior year:
Non-Executive Director
Mr L. Van de Walle (Chairman)
Ms A. Abt (appointed 12 March 2015)
Ms J. E. Ashdown
Mr M. Ewell
Mr C. V. Geoghegan
Mr J. C. Nicholls
Base fee £’000
Additional fees £’000
Total fees £’000
2015
167
38
48
48
48
48
2014
164
–
47
47
47
47
2015
2014
–
–
–
–
10
10
–
–
–
–
10
10
2015
167
38
48
48
58
58
2014
164
–
47
47
57
57
EXIT PAYMENTS
No exit payment was made to any Director during the year (2014: £nil).
PAYMENTS TO FORMER DIRECTORS
During 2015, Mr C.J. Davies, who retired from the Board on 28 February 2013, received £65,000 on the exercise
of his outstanding LTiP awards. These awards vested on 26 April 2015 based on performance over the three year
performance period pro-rated to his period of service.
in 2014, Mr C.J. Davies received £85,000 in salary and £3,000 in benefits in the period to 28 February 2014.
24298.02 30 March 2016 2:38 PM PROOF1
93
SIG plc Annual Report and Accounts for the year ended 31 December 2015GOVERNANCE
Directors’ Remuneration Report CONTiNUED
Annual Report on Remuneration
IMPLEMENTATION OF REMUNERATION POLICY FOR 2016
Base salary
The Committee agreed that base salaries for the Chief Executive, Group Finance Director and Senior Leadership Team
(“SLT”) would remain unchanged and would not increase for 2016. The average salary increase across the remainder of
the Group for each territory/business for 2016 is 1.5%.
Executive Director
S. R. Mitchell
D. G. Robertson
2016 salary
£
558,250
335,955
2015 salary
£
558,250
335,955
% change
0%
0%
Pension and benefits The Executive Directors will continue to receive pension contributions of 15% of base salary and
receive benefits in line with the policy.
annual bonus
The maximum annual bonus opportunity for Executive Directors in 2016 will remain unchanged from the opportunity in
2015 of 100% of salary.
As in 2015, the 2016 bonus will be linked 55% to Group underlying PBT, 20% to ROCE, 15% to savings from the
Group Strategic initiatives and 10% to Health & Safety. As was the case last year, 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 the following year’s report. in 2016, financial performance objectives in respect of
the bonus, will be measured based on budgeted exchange rates at the start of the year. This approach is in line with
prevailing market practice, was applied in 2015 (in respect of financial performance) and will be consistently applied in
2016 and future years. Financial performance in respect of the LTiP will continue to be based on actual exchange rates,
in line with market practice.
As in 2015 and in line with the Remuneration Policy, one-third of the annual bonus will be deferred in SiG shares for a
period of three years.
As set out in last year’s report, malus and clawback provisions apply to the annual bonus from the performance year
ending 31 December 2015 (i.e. payments from 1 January 2016).
LtIp
in advance of each LTiP cycle, the Committee reviews the performance measures and corresponding targets to
ensure they are appropriately stretching over the performance period. The Committee intends to make LTiP awards in
September 2016, and will determine the appropriate measures and targets closer to the time and disclose them in the
2016 Annual Report on Remuneration.
Malus and clawback
As mentioned in the Chairman’s Letter, the Committee last year noted the requirement for both malus and clawback
provisions to be included in incentives under the updated UK Corporate Governance Code. The Committee took
action in 2015 in order to implement clawback provisions in the Company’s incentive schemes. Malus and clawback
provisions are in place for awards made in and after September 2015 in respect of the LTiP, and for awards made on or
after 1 January 2016 in respect of the Deferred Share Bonus Plan (“DSBP”) and annual bonus.
chairman and Non-executive director fees
With effect from 1 May 2015, the fee payable to the Chairman of the Board is £168,000 p.a. and the basic fee payable
to each Non-Executive Director is £48,204 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.
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www.sigplc.com Stock code: ShI
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 SLT. 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 2015 and 2014 populations.
Given that the Company operates across a number of diverse economies with pay levels and structures reflecting local
market conditions, the Committee believes that using the SLT as a subset for purposes of comparing Chief Executive
pay against wider employee pay provides a more meaningful comparison than using pay data for all employees.
Salary1
Taxable benefits
Annual performance bonus (including deferred element)
Total
1 The Chief Executive will not receive a salary increase for 2016.
Chief Executive £’000
2015
558
26
–
584
2014
550
21
314
885
Other
employees
% change
% change
1.5%
23.8%
(100.0)%
(34.0)%
1.7%
(2.5)%
(71.7)%
(20.6)%
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 2014 to the financial year ended 31
December 2015.
Distribution to Shareholders
Employee remuneration
2015
£m
27.6
332.0
2014
£m
26.0
331.2
% change
6.2%
0.2%
The Directors are proposing a final dividend for the year ended 31 December 2015 of 2.91p per share (2014: 2.98p).
PAY-FOR-PERFORMANCE
The graph overleaf 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 six year period to
31 December 2015. 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 overleaf details the Chief Executive’s single
figure of remuneration and actual variable pay outcomes over the same period.
24298.02 30 March 2016 2:38 PM PROOF1
95
SIG plc Annual Report and Accounts for the year ended 31 December 2015GOVERNANCE Directors’ Remuneration Report CONTiNUED
Annual Report on Remuneration
HISTORICAL TSR PERFORMANCE
Growth in value of a hypothetical £100 holding over the seven years to 31 December 2015.
300
250
200
150
100
50
8
0
0
2
r
e
b
m
e
c
e
D
1
3
t
a
d
e
t
s
e
v
n
i
0
0
1
£
f
o
e
u
a
l
0V
31 Dec 08
31 Dec 09
31 Dec 10
31 Dec 11
31 Dec 12
31 Dec 13
31 Dec 14
31 Dec 15
SIG FTSE All Share Support Services Index
incumbent
Chief Executive
single figure of
remuneration
(£000)
Annual bonus
outcome
(% of maximum)
LTiP vesting
outcome
(% of maximum)
2009
2010
2011
2012
2013
2014
2015
2013
2014
2015
C.J. Davies C.J. Davies C.J. Davies C.J. Davies C.J. Davies1 C.J. Davies C.J. Davies S.R. Mitchell2 S.R. Mitchell S.R. Mitchell3
1,354
1,087
1,065
1,024
1,031
88
n/a
987
968
768
45%
59%
96%
54%
50%
n/a
n/a
60.5%
57.0%
0%
0%
0%
0%
0%
0%
0%
10.5%
n/a
n/a
10.5%
1. The figures shown pertain to the period 1 January 2013 to 31 December 2013 (includes remuneration in lieu of salary, pension and other benefits after
1 March 2013).
2. Mr S. R. Mitchell was appointed to the Board on 10 December 2012 and became the Chief Executive on 1 March 2013. The 2013 figure pertains to the
period 1 January 2013 to 31 December 2013.
3. Mr S.R. Mitchell has taken the decision to waive his entitlement to the 2015 annual bonus.
96
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI
DIRECTORS’ INTERESTS IN SIG SHARES (AUDITED)
The interests of the Directors in office at 31 December 2015, and their families, in the ordinary shares of the Company at
the dates below were as follows:
Ms A. Abt (appointed 12 March 2015)
Ms J. E. Ashdown
Mr M. Ewell
Mr C. V. Geoghegan
Mr J. C. Nicholls
Mr S. R. Mitchell
Mr D. G. Robertson
Mr L. Van de Walle
* includes shares purchased under the SiP.
31 December
2015
1 January
2015 or date of
appointment
8,500
33,450
16,450
40,000
14,200
176,474*
112,586*
75,000
—
21,700
8,600
40,000
14,200
165,460*
61,489*
50,000
There have been no changes to shareholdings between 1 January 2016 and 8 March 2016 save that on 15 January
2016 when Mr S. R. Mitchell and Mr D. G. Robertson acquired a further 111 shares each under the SiG plc Share
incentive Plan (“SiP”), and on 15 February 2016 when Mr S. R. Mitchell and Mr D. G. Robertson acquired a further 119
shares each under the 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 pages 97 and 98.
DIRECTORS’ SHAREHOLDING (AUDITED)
The table below shows the shareholding of each Director against their respective shareholding requirement as at 31
December 2015:
Shares held
Nil-cost options held
Owned
outright or
vested
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)
Current
shareholding/
potential
(% of basic
salary/basic
fee)
S. R. Mitchell
D. G. Robertson
176,474
112,586
–
–
–
–
1,285,502
769,331
106,938
99,568
200
200
A. Abt
J. E. Ashdown
M. Ewell
C. V. Geoghegan
J. C. Nicholls
L. Van de Walle
8,500
33,450
16,450
40,000
14,200
75,000
* Based on SiG share price of 143.6p as at 31 December 2015.
45
48
25
100
49
120
42
64
Requirement*
met
No
No
24298.02 30 March 2016 2:38 PM PROOF1
97
SIG plc Annual Report and Accounts for the year ended 31 December 2015GOVERNANCE Directors’ Remuneration Report CONTiNUED
Annual Report on Remuneration
DIRECTORS’ INTERESTS IN SIG SHARE AND OPTION PLANS (AUDITED)
Date of
grant
Share
price
LTIP
Mr S. R. Mitchell
17/09/2015
18/09/2014
18/04/2013
Mr D. G. Robertson
17/09/2015
Deferred Bonus Plan
Mr S. R. Mitchell
18/09/2014
18/04/2013
31/03/2015
31/03/2014
Mr D. G. Robertson
31/03/2015
31/03/2014
183.7p
176.8p
151.5p
183.7p
176.8p
151.5p
202.3p
201.1p
202.3p
201.1p
18/04/2013
149.95p
Number
of nil-cost
options
awarded
455,838
466,628
363,036
274,323
280,817
214,191
51,646
55,292
31,081
32,078
36,409
Face value
at grant
£
Performance period
Exercise
period
837,375
01/01/2015 – 31/12/2017
17/09/2020 – 16/09/2025
825,000
01/01/2014 – 31/12/2016
18/09/2019 – 17/09/2024
550,000
01/01/2013 – 31/12/2015
18/04/2016 – 17/04/2023
503,932
01/01/2015 – 31/12/2017
17/09/2020 – 16/09/2025
496,485
01/01/2014 – 31/12/2016
18/09/2019 – 17/09/2024
324,500
01/01/2013 – 31/12/2015
18/04/2016 – 17/04/2023
104,499
111,192
62,889
64,509
54,594
n/a
n/a
n/a
n/a
n/a
31/03/2018 – 30/03/2025
31/03/2017 – 30/03/2024
31/03/2018 – 30/03/2025
31/03/2017 – 30/03/2024
18/04/2016 – 17/04/2023
Under the SiP, the Company matches up to the first £20 of savings made each month by the employee which is used to
purchase matching shares on a monthly basis. Mr S. R. Mitchell and Mr D. G. Robertson participated in the SiP in 2015.
The market price of the shares at 31 December 2015 was 143.6p and the range during 2015 was 119.0p to 211.2p.
There were 40,083 options exercised by the Directors in 2015 (2014: nil) and the aggregate of the total theoretical gains
on option exercised by the Directors during 2015 amounted to £68,141 (2014: £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.
EXTERNAL DIRECTORSHIPS
Mr D. G. Robertson was appointed a Non-Executive Director of HSS Hire Group plc on 12 January 2015. He receives
a fee of £50,000 per annum which he retains. Mr S.R. Mitchell does not receive a fee for his position of Non-Executive
Director with Enactus UK.
APPROVAL OF THE DIRECTORS’ REMUNERATION REPORT
The Directors’ Remuneration Report set out on pages 80 to 98 was approved by the Board of Directors on 8 March
2016 and signed on its behalf by Chris Geoghegan, Chairman of the Remuneration Committee.
ChRIS GEOGhEGAN
Chairman of the Remuneration Committee
8 March 2016
98
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI Directors’ Responsibility
Statement
The Directors are responsible for preparing the Annual Report and Accounts in accordance with applicable law and
regulations.
Company law requires the Directors to prepare Accounts for each financial year. Under that law the Directors are
required to prepare the Group Accounts in accordance with international Financial Reporting Standards (“iFRSs”) as
adopted by the European Union and Article 4 of the iAS Regulation and have elected to prepare the Parent Company
Accounts in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting
Standards and applicable law) including FRS 101 “Reduced Disclosure Framework”. 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 Accounts, the Directors are required to:
Æ Select suitable accounting policies and then apply them consistently;
Æ Make judgments and accounting estimates that are reasonable and prudent;
Æ State whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed
and explained in the Accounts; and
Æ Prepare the Accounts on the going concern basis unless it is inappropriate to presume that the Company will
continue in business.
in preparing the Group Accounts, international Accounting Standard 1 requires that Directors:
Æ Properly select and apply accounting policies;
Æ Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information;
Æ Provide additional disclosures when compliance with the specific requirements in iFRSs 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
Æ 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 Accounts 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 Accounts
may differ from legislation in other jurisdictions.
Directors’ Responsibility Statement
We confirm that to the best of our knowledge:
Æ The Accounts, 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;
Æ The Strategic Report, which is incorporated into the Statutory information, 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
Æ The Annual Report and Accounts, 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.
This Responsibility Statement was approved by the Board of Directors on 8 March 2016 and is signed on its behalf by:
STUART MITChEll
Chief Executive
8 March 2016
DOUG ROBERTSON
Group Finance Director
8 March 2016
24298.02 30 March 2016 2:38 PM PROOF1
99
SIG plc Annual Report and Accounts for the year ended 31 December 2015GOVERNANCE
Financials
STRONGER
TOGETHER
100
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI STRONGER
TOGETHER
FINANCIAlS
102
103
104
105
106
107
114
115
153
158
160
161
162
163
Consolidated income
Statement
Consolidated Statement of
Comprehensive income
Consolidated Balance Sheet
Consolidated Cash Flow
Statement
Consolidated Statement of
Changes in Equity
Statement of Significant
Accounting Policies
Critical Accounting
Judgments and Key Sources
of Estimation Uncertainty
Notes to the Accounts
independent Auditor’s Report
Five-Year Summary
Company Statement of
Comprehensive income
Company Balance Sheet
Company Statement of
Changes in Equity
Company Statement of
Significant Accounting
Policies
165
Notes to the Company
Accounts
170 Group Companies 2015
173
Company information
24298.02 30 March 2016 2:38 PM PROOF1
101
SIG plc Annual Report and Accounts for the year ended 31 December 2015 Consolidated Income Statement
for the year ended 31 December 2015
Revenue
Cost of sales
Gross profit
Other operating expenses
Operating profit
Finance income
Finance costs
Profit before tax
income tax expense
Profit after tax
Attributable to:
Equity holders of the Company
Non-controlling interests
Earnings per share
Basic earnings per share
Diluted earnings per share
Before Other
items*
2015
£m
2,566.4
(1,878.0)
688.4
(589.7)
98.7
1.0
(12.3)
87.4
(21.0)
66.4
66.1
0.3
Other items*
2015
£m
–
–
–
(32.8)
(32.8)
–
(3.3)
(36.1)
6.0
(30.1)
(30.1)
–
Total
2015
£m
2,566.4
(1,878.0)
688.4
(622.5)
65.9
1.0
(15.6)
51.3
(15.0)
36.3
36.0
0.3
Before Other
items*
2014
£m
2,602.9
(1,902.3)
700.6
(589.4)
111.2
0.9
(13.0)
99.1
(27.8)
71.3
70.9
0.4
Other items*
2014
£m
31.0
(27.5)
3.5
(61.5)
(58.0)
0.1
(2.2)
(60.1)
23.3
(36.8)
(37.9)
1.1
Total
2014
£m
2,633.9
(1,929.8)
704.1
(650.9)
53.2
1.0
(15.2)
39.0
(4.5)
34.5
33.0
1.5
11.2p
11.2p
(5.1)p
(5.1)p
6.1p
6.1p
12.0p
12.0p
(6.4)p
(6.4)p
5.6p
5.6p
Note
1
2
2
3
3
4
6
8
8
* “Other items” relate to the amortisation of acquired intangibles, restructuring costs, acquisition expenses and contingent consideration, other one-off
items, profits and losses arising on the sale of businesses and associated impairment charges, trading profits and losses associated with disposed
businesses, unwinding of provision discounting, fair value gains and losses on derivative financial instruments, one-off recognition of deferred tax
assets, 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 108.
The accompanying Statement of Significant Accounting Policies and Notes to the Accounts are an integral part of this Consolidated
income Statement.
102
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI Consolidated Income Statement
for the year ended 31 December 2015
Consolidated Statement of
Comprehensive Income
for the year ended 31 December 2015
Note
28c
22
22
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 charge on exchange and fair value movements arising on borrowings and derivative
financial instruments
Exchange difference reclassified to the Consolidated income Statement in respect of the
disposal of foreign operations
Gains and losses on cash flow hedges
Transfer to profit and loss on cash flow hedges
Other comprehensive expense
Total comprehensive income/(expense)
Attributable to:
Equity holders of the Company
Non-controlling interests
2015
£m
36.3
1.9
(0.2)
(0.7)
1.0
(11.7)
(16.2)
7.3
(1.5)
–
(4.2)
2.3
(24.0)
(23.0)
13.3
13.0
0.3
13.3
2014
£m
34.5
(7.7)
1.7
(0.1)
(6.1)
(14.3)
(18.9)
8.9
(1.9)
(6.7)
(3.7)
2.3
(34.3)
(40.4)
(5.9)
(7.4)
1.5
(5.9)
The accompanying Statement of Significant Accounting Policies and Notes to the Accounts are an integral part of this Consolidated
Statement of Comprehensive income.
24298.02 30 March 2016 2:38 PM PROOF1
103
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Consolidated Balance Sheet
as at 31 December 2015
Non-current assets
Property, plant and equipment
Goodwill
intangible assets
Deferred tax assets
Derivative financial instruments
Deferred consideration
Current assets
inventories
Trade and other receivables
Current tax assets
Derivative financial instruments
Deferred consideration
Other financial assets
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Obligations under finance lease contracts
Bank overdrafts
Bank loans
Private placement notes
Loan notes and deferred consideration
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
10
11
12
22
18
18
14
15
15
18
18
18
18
16
16
16
16
16
16
16
16
16
17
17
17
17
17
17
17
17
24
2015
£m
142.7
437.5
88.2
21.0
2.4
–
691.8
242.9
414.9
4.3
34.4
1.5
1.3
89.0
788.3
1,480.1
364.5
2.5
2.3
90.9
160.1
3.0
1.3
8.4
9.7
642.7
7.5
0.4
95.8
0.7
18.2
3.8
23.8
37.6
187.8
830.5
649.6
59.1
447.3
0.3
1.4
(42.4)
183.0
648.7
0.9
649.6
2014
£m
127.2
419.2
49.6
29.0
33.9
1.5
660.4
225.4
381.7
5.6
–
–
0.9
110.3
723.9
1,384.3
349.2
2.5
4.4
0.7
–
1.9
0.5
8.3
14.6
382.1
8.0
0.6
254.3
0.6
12.1
4.3
28.7
29.3
337.9
720.0
664.3
59.1
447.2
0.3
1.8
(20.3)
175.6
663.7
0.6
664.3
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 8 March 2016 and signed on its behalf by:
STUART MITChEll
Director
DOUG ROBERTSON
Director
Registered in England: 998314
104
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI Consolidated Cash
Flow Statement
for the year ended 31 December 2015
Net cash flow from operating activities
Cash generated from operating activities
income tax paid
Net cash generated from operating activities
Cash flows from investing activities
Finance income received
Purchase of property, plant and equipment and computer software
Proceeds from sale of property, plant and equipment
Net cash flow arising on sale of businesses
Settlement of amounts payable for purchase of businesses
Net cash used in investing activities
Cash flows from financing activities
Finance costs paid
Capital element of finance lease rental payments
issue of share capital
Repayment of loans/settlement of derivative financial instruments
New loans/settlement of derivative financial instruments
Dividends paid to equity holders of the Company
Net cash generated from/(used in) financing activities
Decrease 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
25
13
24
7
26
27
27
27
2015
£m
61.6
(11.1)
50.5
1.2
(49.0)
4.9
–
(70.1)
(113.0)
(10.7)
(2.4)
0.1
(2.5)
91.5
(27.6)
48.4
(14.1)
105.9
(5.1)
86.7
2014
£m
95.6
(16.9)
78.7
0.9
(38.1)
13.2
(2.6)
(19.0)
(45.6)
(12.5)
(2.3)
–
(2.7)
4.3
(22.6)
(35.8)
(2.7)
113.8
(5.2)
105.9
The accompanying Statement of Significant Accounting Policies and Notes to the Accounts are an integral part of this Consolidated
Cash Flow Statement.
24298.02 30 March 2016 2:38 PM PROOF1
105
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Consolidated Statement of
Changes in Equity
for the year ended 31 December 2015
Called up
share
capital
£m
Share
premium
account
£m
Capital
redemption
reserve
£m
Share
option
reserve
£m
Hedging and
translation
reserve
£m
Retained
profits
£m
Total
£m
At 31 December 2013
59.1
447.2
0.3
1.1
12.6
172.2
692.5
Non-
controlling
interests
£m
0.6
1.5
Total
equity
£m
693.1
34.5
Profit after tax
Other comprehensive income/
(expense)
Total comprehensive income/
(expense)
Derecognition of non-controlling
interest
Share capital issued in the year
Credit to share option reserve
Exercise of share options
Deferred tax on share options
Dividends paid to equity holders of
the Company
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Profit after tax
Other comprehensive income/
(expense)
Total comprehensive income/
(expense)
Share capital issued in the year
Debit to share option reserve
Exercise of share options
Deferred tax on share options
Dividends paid to equity holders of
the Company
–
–
–
–
–
–
–
–
–
–
–
0.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
33.0
33.0
–
(32.9)
(7.5)
(40.4)
–
(40.4)
–
(32.9)
25.5
(7.4)
1.5
(5.9)
–
–
0.7
–
–
–
–
–
–
–
–
–
–
–
–
0.5
–
–
0.7
–
0.5
(1.5)
–
–
–
–
(1.5)
–
0.7
–
0.5
–
(22.6)
(22.6)
–
(22.6)
–
–
36.0
36.0
0.6
0.3
664.3
36.3
–
(22.1)
(0.9)
(23.0)
–
(23.0)
–
–
(0.3)
(0.1)
–
–
(22.1)
35.1
13.0
0.3
13.3
–
–
–
–
–
–
–
(0.1)
0.1
(0.3)
(0.1)
(0.1)
–
–
–
–
0.1
(0.3)
(0.1)
(0.1)
–
(27.6)
(27.6)
–
(27.6)
At 31 December 2014
59.1
447.2
0.3
1.8
(20.3)
175.6
663.7
At 31 December 2015
59.1
447.3
0.3
1.4
(42.4)
183.0
648.7
0.9
649.6
The share option reserve represents the cumulative equity-settled 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 pages 110 to 111.
The accompanying Statement of Significant Accounting Policies and Notes to the Accounts are an integral part of this Consolidated
Statement of Changes in Equity.
106
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI Statement of Significant
Accounting Policies
The significant accounting policies adopted in this Annual Report and Accounts for the year ended 31 December 2015 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 39.
The following standard was amended in the current period:
Æ iAS 19 “Employee Benefits” (amended).
Adoption of the above standard has not had a material impact on the Accounts of the Group.
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):
Æ iAS 1 “Disclosure initiative” – effective for accounting periods beginning on or after 1 January 2016;
Æ iAS 16 and iAS 38 “Clarification of Acceptable Methods of Depreciation and Amortisation” – effective for accounting periods
beginning on or after 1 January 2016;
Æ iAS 27 “Equity Method in Separate Financial Statements” (amendments) – effective for accounting periods beginning on or after
1 January 2016;
Æ iFRS 11 “Joint Arrangements” (amended) – effective for accounting periods beginning on or after 1 January 2016;
Æ iFRS 9 “Financial instruments” – effective for accounting periods beginning on or after 1 January 2018;
Æ iFRS 15 “Revenue from Contracts with Customers” – effective for accounting periods beginning on or after 1 January 2018; and
Æ iFRS 16 “Leases” – effective for accounting periods beginning on or after 1 January 2019.
The Directors do not expect that the adoption of the standards and interpretations listed above will have a material impact on the
Accounts of the Group in future periods, except that iFRS 9 will impact upon both the measurement and disclosure of financial
instruments, iFRS 15 will impact upon disclosures given in relation to revenue and trade receivables, and iFRS 16 will impact the
assets, liabilities and income Statement charges in respect of leases.
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 intercompany 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 interests’ 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 Shareholders 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 2014 and operations closed in 2015 did not
meet the disclosure criteria of iFRS 5 “Discontinued Operations” as they did not individually or in aggregate 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”.
24298.02 30 March 2016 2:38 PM PROOF1
107
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Statement of Significant
Accounting Policies CONTiNUED
CONSOLIDATED 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:
Æ amortisation of acquired intangibles;
Æ restructuring costs;
Æ acquisition expenses and contingent consideration;
Æ other one-off items;
Æ profits and losses arising on the sale of businesses and associated impairment charges;
Æ trading profits and losses associated with disposed businesses;
Æ unwinding of provision discounting;
Æ fair value gains and losses on derivative financial instruments;
Æ one-off recognition of deferred tax assets;
Æ the taxation effect of “Other items”; and
Æ the effect of the change in taxation rates.
The prior year comparatives have been re-analysed to present the results of the operations closed in 2015 within other one-off items.
OPERATING PROFIT
Operating profit is stated after charging distribution, selling and marketing costs and administrative expenses but before finance
income and finance costs.
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 on 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 “Business
Combinations” 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:
Customer relationships
Non-compete contracts
Computer software
Amortisation period
Current estimate of useful life
Life of the relationship
Life of the contract
Useful life of the software
7.4 years
3.0 years
7.0–10.0 years
Assets in the course of construction are carried at cost, with amortisation commencing once the assets are ready for their
intended use.
108
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI 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 customer rebates, VAT and other sales-related taxes. The
Group principally earns revenue from the distribution of construction products and is able to recognise revenue on receipt of the goods
by the customer. Customer rebates are accounted for as a separate component of the sales transaction in which they are granted.
A portion of the fair value of the consideration received is allocated to customer rebates and recognised in the period as earned.
Wherever revenue is generated from a contract to provide services, it is recognised by reference to the stage of completion of the
contract.
CONSTRUCTION CONTRACTS
Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage
of completion of the contract activity at the reporting date. This is normally measured by the proportion that contracts costs incurred
for work performed to date bear to the estimated total contract costs, except where this would not be representative of the stage
of completion. Variations in contract work, claims and incentive payments are recognised only to the extent that the amount can be
measured reliably and its receipt is considered probable.
Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract
costs incurred where it is probable they will be recoverable. Contract costs are recognised as expenses in the period in which they are
incurred.
When it is probable that total contract costs will exceed total contract revenue, the total expected loss is recognised as an expense
immediately.
When contract costs incurred to date plus recognised profits less recognised losses exceed progress billings, the surplus is shown as
amounts due from contract customers. For contracts where progress billings exceed contract costs incurred to date plus recognised
profits less recognised losses, the surplus is shown as amounts due to contract customers.
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 six 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 vest. 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. Discretionary contributions made by employees or third parties reduce service
costs upon payment of these contributions into the plan.
Any actuarial gain or loss arising is charged through the Consolidated Statement of Comprehensive income and is made up of
the difference between the expected returns on assets and those actually achieved, any changes in 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.
24298.02 30 March 2016 2:38 PM PROOF1
109
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Statement of Significant
Accounting Policies CONTiNUED
SHARE-BASED PAYMENT TRANSACTIONS CONTiNUED
For equity-settled share options, 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.
For cash-settled share options, 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, with a corresponding adjustment to liabilities.
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.
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 prevailing 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.
On the disposal of a foreign operation, all of the exchange differences accumulated in equity in respect of that operation are
reclassified to the Consolidated income Statement.
FINANCIAL ASSETS
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.
Financial assets 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. When determining the fair value of financial assets, the expected future
cash flows are discounted using an appropriate discount rate.
Loans and receivables are measured initially at fair value and then subsequently at amortised cost using the effective interest rate
method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the
debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
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 considered to be 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.
110
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI FINANCIAL 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.
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.
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual
arrangement.
DERIVATIVE FINANCIAL INSTRUMENTS
The Group uses derivative financial instruments including interest rate swaps, forward foreign exchange contracts, cross currency
swaps and commodity hedging instruments to hedge its exposure to foreign currency exchange, interest rate and fuel price risks
arising from operational and financing 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 that do not qualify for hedge accounting,
are accounted for as trading instruments. Derivatives are classified as non-current assets or non-current liabilities if the remaining
maturity of the derivatives is more than twelve months and they are not expected to be otherwise 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.
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 associated with 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 foreign operations are
disposed of.
24298.02 30 March 2016 2:38 PM PROOF1
111
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Statement of Significant
Accounting Policies CONTiNUED
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”.
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:
Æ goodwill not deductible for taxation purposes;
Æ the initial recognition of assets or liabilities that affect neither accounting nor taxable profit; and
Æ 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.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax
assets and liabilities on a net basis.
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
Plant and machinery (including motor vehicles)
Freehold land is not depreciated.
Current estimate of useful life
50 years
Period of lease
3–8 years
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.
112
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI 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.
SUPPLIER REBATES
Supplier rebate income is significant to the Group’s result, with a substantial proportion of purchases covered by rebate agreements.
Some supplier rebate agreements are non-coterminous with the Group’s financial year, and firm confirmation of amounts due may not
be received until six months after the balance sheet date.
Where the Group relies on estimates, these are made with reference to contracts or other agreements, management forecasts and
detailed operational workbooks. Supplier rebate income estimates are regularly reviewed by senior management.
24298.02 30 March 2016 2:38 PM PROOF1
113
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Critical Accounting Judgments
and Key Sources of Estimation
Uncertainty
in the application of the Group’s accounting policies, which are described on pages 107 to 113, the Directors are required to make
judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be
relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the change takes place if the revision affects only that period,
or in the period of the revision and future periods if the revision affects both current and future periods.
CRITICAL JUDGMENTS IN APPLYING THE GROUP’S ACCOUNTING POLICIES
The following are critical judgments, apart from those involving estimations (which are dealt with separately below), 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 Group Accounts.
REBATES PAYABLE AND RECEIVABLE
Supplier rebate income is significant to the Group’s result, with a substantial proportion of purchases covered by rebate agreements.
Supplier rebate income affects the recorded value of cost of sales, trade payables and inventories. Customer rebates affect the
recorded value of revenue and trade receivables. The amounts payable and receivable under rebate agreements are often subject
to negotiation after the balance sheet date. A number of agreements are non-coterminous with the Group’s financial year, requiring
judgment over the level of future purchases and sales. At the balance sheet date the Directors make judgments on the amount of
rebate that will become both payable by and due to the Group under these agreements based upon prices, volumes and product mix.
PROVISIONS AGAINST RECEIVABLES
Using information available at the balance sheet date, the Directors make judgments based on experience regarding the level of
provision required to account for potentially uncollectible receivables.
POST-EMPLOYMENT BENEFITS
The Group operates six defined benefit pension schemes. All post-employment benefits associated with these schemes have been
accounted for in accordance with iAS 19 “Employee Benefits”. As detailed within the Statement of Significant Accounting Policies
on page 109, 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, significant actuarial assumptions and judgments have been made to determine the
defined benefit obligation, in particular with regard to discount rate, inflation and mortality.
KEY SOURCES OF ESTIMATION UNCERTAINTY
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that may
have a significant risk of causing a material adjustment to the carrying values of assets and liabilities within the next financial year, are
discussed below.
IMPAIRMENT OF NON-CURRENT ASSETS
Determining whether goodwill is impaired requires an estimation of the value in use of the CGUs to which goodwill has been allocated.
The key estimates made in the value in use calculation are those regarding discount rates, sales and operating profit growth rates. 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
that individual CGU.
For the majority of the 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% in perpetuity. The discount rates applied to all CGUs represent pre-tax rates and range between 7.9% and 10.8%.
Assumptions regarding sales and operating profit growth are considered to be the key area of estimation in the impairment review
process, and appropriate sensitivities have been performed and disclosed in Note 11.
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 2015 is £668.4m (2014: £596.0m). impairment reviews performed
during the year indicated that the carrying value of all of the Group’s non-current assets at 31 December 2015 is considered
supportable.
TAXATION
Accruals for corporation tax contingencies require the Directors to estimate 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.
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 at 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. Therefore, estimates are
made to establish whether deferred tax balances should be recognised, in particular in respect of non-trading losses.
114
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI Notes to the Accounts
1. REVENUE AND SEGMENTAL INFORMATION
revenue
An analysis of the Group’s revenue is as follows:
Sale of goods
Revenue from construction contracts
Total revenue
Finance income
Total income
segmental Information
2015
£m
2014
£m
2,533.4
2,620.6
33.0
13.3
2,566.4
2,633.9
1.0
1.0
2,567.4
2,634.9
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 & 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.
Revenue
Continuing sales
Sales attributable to businesses divested
in 2014
inter-segment sales^
Total revenue
Result
Segment result before Other items
Amortisation of acquired intangibles
Restructuring costs
Acquisition expenses and contingent
consideration (Note 13)
Other one-off items
Profits and losses on sale of businesses
and associated impairment charges
Net operating losses attributable to
businesses divested in 2014
Segment operating profit
Parent Company costs
Operating profit
Net finance costs before Other items
Net fair value losses on derivative financial
instruments
Unwinding of provision discounting
Profit before tax
income tax expense
Non-controlling interests
Profit for the year
2015
UK &
Ireland
£m
2015
Mainland
Europe
£m
2015
Eliminations
£m
2015
Total
£m
2014
UK &
Ireland
£m
2014
Mainland
Europe
£m
2014
Eliminations
£m
2014
Total
£m
1,412.9
1,153.5
–
2,566.4
1,336.2
1,266.7
–
2,602.9
–
2.3
–
11.4
–
(13.7)
–
–
18.6
2.4
12.4
11.2
–
31.0
(13.6)
–
1,415.2
1,164.9
(13.7)
2,566.4
1,357.2
1,290.3
(13.6)
2,633.9
61.0
(8.3)
(5.2)
(8.6)
(0.3)
–
–
45.1
(2.0)
(3.1)
(5.7)
0.4
–
–
38.6
34.7
–
–
–
–
–
–
–
–
106.1
66.9
54.2
(10.7)
(2.1)
(0.1)
–
(8.9)
(7.1)
(3.8)
(4.6)
(19.0)
5.0
(4.7)
18.8
(2.0)
44.3
(10.3)
(8.3)
(14.3)
0.1
–
–
73.3
(7.4)
65.9
(11.3)
(1.9)
(1.4)
51.3
(15.0)
(0.3)
36.0
–
–
–
–
–
–
–
–
121.1
(19.6)
(9.2)
(3.9)
(4.6)
(14.0)
(6.7)
63.1
(9.9)
53.2
(12.1)
(1.9)
(0.2)
39.0
(4.5)
(1.5)
33.0
^ inter-segment sales are charged at the prevailing market rates.
24298.02 30 March 2016 2:38 PM PROOF1
115
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Notes to the Accounts CONTiNUED
1. REVENUE AND SEGMENTAL INFORMATION CONTiNUED
a) Segmental results continued
Balance sheet
Assets
Segment assets
Unallocated assets:
Property, plant and equipment
Derivative financial instruments
Deferred consideration
Other financial assets
Cash and cash equivalents
Deferred tax assets
Other assets
Consolidated total assets
Liabilities
Segment liabilities
Unallocated liabilities:
Private placement notes
Bank loans
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)
2015
UK &
Ireland
£m
2015
Mainland
Europe
£m
2015
Total
£m
2014
UK &
Ireland
£m
2014
Mainland
Europe
£m
2014
Total
£m
771.5
649.0
1,420.5
666.4
645.6
1,312.0
1.0
36.8
1.5
0.3
12.8
4.0
3.2
0.1
33.9
1.5
–
25.8
9.6
1.4
1,480.1
1,384.3
305.4
164.8
470.2
283.9
165.4
449.3
255.9
88.1
2.0
14.3
830.5
254.3
–
1.1
15.3
720.0
30.6
8.4
10.3
0.8
40.9
9.2
16.5
10.1
14.8
0.3
31.3
10.4
60.0
12.7
72.7
23.1
8.5
31.6
13.5
9.5
23.0
11.4
9.8
21.2
–
–
–
6.1
–
6.1
10.8
2.5
13.3
10.8
11.6
22.4
–
–
–
3.3
–
3.3
116
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI 1. REVENUE AND SEGMENTAL INFORMATION CONTiNUED
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 2.
The following table provides an analysis of Group sales by type of product:
insulation and Energy Management
Exteriors
interiors
Total continuing
Sales attributable to businesses divested in 2014
Total
2015
£m
2014
£m
1,157.8
1,195.0
792.6
616.0
807.6
600.3
2,566.4
2,602.9
–
31.0
2,566.4
2,633.9
c) Geographic information
The Group’s revenue from external customers and its non-current assets (including property, plant and equipment, goodwill and
intangible assets but excluding deferred tax, deferred consideration and derivative financial instruments) by geographical location are
as follows:
Country
United Kingdom
ireland
France
Germany & Austria
Poland
Benelux*
Total continuing
Attributable to businesses divested in 2014
Total
* includes Air Trade Centre.
2015
Revenue
£m
1,340.8
72.1
517.3
368.3
103.6
164.3
2015
Non-current
assets
£m
397.5
1.1
194.5
19.0
15.4
40.9
2014
Revenue
£m
1,265.2
71.0
586.1
412.2
112.0
156.4
2,566.4
668.4
2,602.9
–
–
31.0
2,566.4
668.4
2,633.9
2014
Non-current
assets
£m
323.2
0.8
205.7
17.8
16.8
31.7
596.0
–
596.0
There is no material difference between the basis of preparation of the information reported above and the accounting policies adopted
by the Group.
24298.02 30 March 2016 2:38 PM PROOF1
117
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Notes 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
1,878.0
219.1
213.7
156.9
589.7
2015
Other items
£m
Total
£m
Before Other
items
£m
2014
Other items
£m
Total
£m
–
1,878.0
1,902.3
27.5
1,929.8
8.1
1.3
23.4
32.8
227.2
215.0
180.3
622.5
216.6
223.4
149.4
589.4
1.7
3.0
56.8
61.5
218.3
226.4
206.2
650.9
Profit after tax 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:
Amortisation of acquired intangibles (Note 12)
Profits and losses arising on sale of businesses and associated impairment charges
Net operating losses attributable to businesses divested in 2014
Restructuring costs^
Acquisition expenses and contingent consideration (Note 13)
Other one-off items*
Impact on operating profit
Net fair value losses on derivative financial instruments
Unwinding of provision discounting
Impact on profit before tax
income tax credit on Other items
One-off recognition of deferred tax assets (Note 22)
Utilisation of losses not previously recognised
Effect of change in rate on deferred tax
Impact on profit after tax
2015
£m
(10.3)
–
–
(8.3)
(14.3)
0.1
(32.8)
(1.9)
(1.4)
(36.1)
4.2
0.7
0.3
0.8
(30.1)
2014
£m
(19.6)
(14.0)
(6.7)
(9.2)
(3.9)
(4.6)
(58.0)
(1.9)
(0.2)
(60.1)
8.1
14.9
0.1
0.2
(36.8)
^ included within restructuring costs are redundancy costs of £0.9m (2014: £3.9m), property closure costs of £4.6m (2014: £3.1m), rebranding costs of
£0.2m (2014: £2.2m), and supply chain consultancy costs of £2.6m (2014: £nil).
* Other one-off items include operating losses and closure costs associated with the Group’s operations in the Kingdom of Saudi Arabia of £3.6m, fair
value losses on fuel hedging contracts of £0.4m, credits arising on the reversal of provisions made in prior periods of £2.4m and other credits of £0.6m,
and the profit on sale of property of £1.1m.
118
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI
3. FINANCE INCOME AND FINANCE COSTS
Before
Other Items
£m
2015
Other
items
£m
Finance income
interest on bank deposits
Fair value gains on derivative financial
instruments
Total finance income
Finance costs
On bank loans, overdrafts and other associated
items^
On private placement notes
On obligations under finance lease contracts
Total interest expense
Net finance charge on defined benefit pension
schemes
Unwinding of provision discounting
Fair value losses on derivative financial
instruments*
Total finance costs
Net finance costs
1.0
–
1.0
2.8
7.8
0.5
11.1
0.7
0.1
0.4
12.3
11.3
–
–
–
–
–
–
–
–
1.4
1.9
3.3
3.3
Total
£m
1.0
–
1.0
2.8
7.8
0.5
11.1
0.7
1.5
2.3
15.6
14.6
2014
Before
Other Items
£m
0.9
–
0.9
3.4
8.0
0.7
12.1
0.6
–
0.3
13.0
12.1
Other
items
£m
–
0.1
0.1
–
–
–
–
–
0.2
2.0
2.2
2.1
Total
£m
0.9
0.1
1.0
3.4
8.0
0.7
12.1
0.6
0.2
2.3
15.2
14.2
^ Other associated items includes the amortisation of arrangement fees of £0.5m (2014: £0.9m).
* Fair value losses on derivative financial instruments before Other items includes £0.4m (2014: £0.3m) relating to the recycling of amounts previously
recorded in reserves in respect of two interest rate derivative contracts cancelled in 2014 as part of the ongoing management of the Group’s interest
rate hedging policy.
24298.02 30 March 2016 2:38 PM PROOF1
119
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Notes to the Accounts CONTiNUED
4. PROFIT BEFORE TAX
Profit before tax is stated after crediting:
Foreign exchange rate gains*
Discounting of provisions
Fair value gains on derivative financial instruments
Net decrease in provision for inventories
Gains on disposal of property, plant and equipment
Other one-off items (Note 2)
And after charging:
Cost of inventories recognised as an expense
Net increase in provision for inventories
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 (Note 15)
Foreign exchange rate losses*
Fair value losses on derivative financial instruments
Unwinding of provision discounting
Profits and losses arising on sale of businesses and associated impairment charges
impairment of property, plant and equipment (Note 10)
Restructuring costs (Note 2)
Acquisition expenses and contingent consideration (Note 13)
Other one-off items (Note 2)
2015
£m
0.1
–
–
1.4
2.4
0.1
2014
£m
0.3
1.4
0.1
–
2.2
–
1,916.0
1,944.5
–
0.5
20.1
2.9
10.3
3.0
49.7
14.4
1.4
0.1
6.0
0.3
2.3
1.5
–
–
8.3
14.3
–
18.7
2.5
19.6
2.8
48.3
16.3
1.3
0.1
6.9
0.2
2.3
0.2
14.0
6.1
9.2
3.9
4.6
Staff costs excluding contingent consideration treated as remuneration (Note 5)
321.8
328.3
* 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
2015
Deloitte llP
£m
2014
Deloitte LLP
£m
0.1
1.3
1.4
0.1
0.1
1.5
0.1
1.2
1.3
0.1
0.1
1.4
The Audit Committee Report on pages 72 to 77 provides an explanation of how auditor objectivity and independence is safeguarded
when non-audit services are provided by the Auditor.
120
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI 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
Pension costs (Note 28c)
Total staff costs excluding contingent consideration
Contingent consideration treated as remuneration (Note 13)
Total staff costs including contingent consideration
2015
£m
270.3
44.3
0.1
7.1
321.8
10.2
332.0
2014
£m
274.0
46.8
0.7
6.8
328.3
2.9
331.2
Of the pension costs noted above, a charge of £1.5m (2014: £1.3m) relates to defined benefit schemes and a charge of £5.6m (2014:
£5.5m) relates to defined contribution schemes. See Note 28c for more details.
The average monthly number of persons employed by the Group during the year was as follows:
Production
Distribution
Sales
Administration
Total
2015
Number
704
3,050
4,243
1,644
9,641
2014
Number
681
3,588
3,864
1,321
9,454
included within the prior year average monthly numbers above were 231 staff employed by businesses divested in 2014.
Directors’ emoluments
Details of the individual Directors’ emoluments are given in the Directors’ Remuneration Report on pages 90 to 96.
The employee costs shown above include the following emoluments in respect of Directors of the Company:
Directors’ remuneration (excluding iFRS 2 share option charge)
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
* includes a credit of £0.5m (2014: £0.1m) in respect of the change in rate.
2015
£m
1.5
2015
£m
–
–
–
10.8
(0.4)
10.4
5.7
(1.0)
0.2
(0.3)
4.6
15.0
2014
£m
2.0
2014
£m
–
–
–
14.7
0.9
15.6
3.4
(15.1)
0.7
(0.1)
(11.1)
4.5
24298.02 30 March 2016 2:38 PM PROOF1
121
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS
Notes to the Accounts CONTiNUED
6. INCOME TAX CONTiNUED
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
2015 of 20.0% (31 December 2014: 21.0%). The differences are explained in the following reconciliation:
Profit on ordinary activities before tax
Tax at 20.0% (2014: 21.0%) thereon
Factors affecting the income tax expense for the year:
– non-deductible and non-taxable items
– 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
2015
£m
51.3
10.3
4.8
–
(0.3)
(1.4)
2.4
(0.8)
%
20.0
9.4
–
(0.6)
(2.7)
4.7
(1.6)
15.0
29.2
2014
£m
39.0
8.2
6.2
0.4
(0.1)
(14.2)
4.2
(0.2)
4.5
%
21.0
15.9
1.0
(0.3)
(36.4)
10.8
(0.5)
11.5
The effective tax rate for the Group on the total profit before tax of £51.3m is 29.2% (2014: 11.5%). The effective tax charge for the
Group on profit before tax, before amortisation of acquired intangibles, restructuring costs, acquisition expenses and contingent
consideration, other one-off items, profits and losses arising on the sale of businesses and associated impairment charges, trading
profits and losses associated with disposed businesses, unwinding of provision discounting and fair value gains and losses on
derivative financial instruments, of £87.4m is 24.0% (2014: 28.1%), which comprises a tax charge of 24.8% (2014: 27.3%) in respect of
current year profits and a tax credit of 0.8% (2014: charge of 0.8%) in respect of prior years.
in 2014, a deferred tax asset of £14.9m was recognised in respect of previously unrecognised UK excess non-trading losses incurred
in 2008 (see Note 22).
The following factors will affect the Group’s future total tax charge as a percentage of underlying profits:
Æ the mix of profits between the UK and overseas; in particular, France/Germany/Belgium/Netherlands (corporate tax rates greater
than 20%) and ireland/Poland (corporate tax rates less than 20%). if the proportion of profits from these jurisdictions changes, this
could result in a higher or lower Group tax charge;
Æ the impact of non-deductible expenditure and non-taxable income;
Æ the agreement of open tax computations with the respective tax authorities; and
Æ the recognition or utilisation (with a corresponding reduction in cash tax payments) of unrecognised deferred tax assets (see
Note 22).
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 pension liabilities*
Deferred tax on share options
Tax 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.
2015
£m
(0.2)
(0.1)
(1.5)
(0.7)
(2.5)
2014
£m
1.7
0.5
(1.9)
(0.1)
0.2
7. DIVIDENDS
An interim dividend of 1.69p per ordinary share was paid on 7 November 2015 (2014: 1.42p). The Directors have proposed a final
dividend for the year ended 31 December 2015 of 2.91p per ordinary share (2014: 2.98p). 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 2015 and the date of signing the Accounts.
122
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI 8. EARNINGS PER SHARE
The calculations of earnings per share are based on the following profits and numbers of shares:
Profit after tax
Non-controlling interests
Profit after tax
Non-controlling interests
Other items:
Amortisation of acquired intangibles (Note 12)
Profits and losses arising on the sale of businesses and associated impairment charges
Net operating losses attributable to businesses divested in 2014
Restructuring costs
Acquisition expenses and contingent consideration (Note 13)
Other one-off items
Net fair value losses on derivative financial instruments
Unwinding of provision discounting
Tax credit relating to Other items
One-off recognition of deferred tax assets (Note 22)
Utilisation of losses not previously recognised
Effect of change in rate on deferred tax
Other items attributable to non-controlling interests
Weighted average number of shares
For basic earnings per share
Exercise of share options
For diluted earnings per share
Earnings per share
Basic earnings per share
Diluted earnings per share
Earnings per share before Other items^
Basic earnings per share
Diluted earnings per share
Basic and diluted
2015
£m
36.3
(0.3)
36.0
2014
£m
34.5
(1.5)
33.0
Basic and diluted before
Other items
2015
£m
36.3
(0.3)
10.3
–
–
8.3
14.3
(0.1)
1.9
1.4
(4.2)
(0.7)
(0.3)
(0.8)
–
66.1
2014
£m
34.5
(1.5)
19.6
14.0
6.7
9.2
3.9
4.6
1.9
0.2
(8.1)
(14.9)
(0.1)
(0.2)
1.1
70.9
2015
Number
2014
Number
591,183,300
591,112,524
–
99,237
591,183,300
591,211,761
2015
6.1p
6.1p
11.2p
11.2p
2014
5.6p
5.6p
12.0p
12.0p
^ Earnings per share before Other items has been disclosed in order to present the underlying performance of the Group.
24298.02 30 March 2016 2:38 PM PROOF1
123
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Notes to the Accounts CONTiNUED
8. EARNINGS PER SHARE CONTiNUED
The impact of Other items on the Consolidated income Statement, along with their associated tax impact, is disclosed in the table
below:
Amortisation of acquired intangibles (Note 12)
10.3
2.2
21.4
19.6
5.3
27.0
Other items
£m
2015
Tax impact
£m
Tax impact
%
Other items
£m
2014
Tax impact
£m
Tax impact
%
Profits and losses arising on the sale of
businesses and associated impairment charges
Net operating losses attributable to businesses
divested in 2014
Restructuring costs
Acquisition expenses and contingent
consideration (Note 13)
Other one-off items
Impact on operating profit
Net fair value losses on derivative financial
instruments
Unwinding of provision discounting
Impact on profit before tax
One-off recognition of deferred tax assets
Utilisation of losses not previously recognised
Effect of change in rate on deferred tax
Impact on profit after tax
Other items attributable to non-controlling
interests
Impact on profit attributable to equity holders
of the Company
–
–
8.3
14.3
(0.1)
32.8
1.9
1.4
36.1
–
–
–
36.1
–
–
–
–
–
1.7
20.5
–
–
11.6
21.1
–
11.6
–
–
–
–
(0.1)
3.8
0.4
–
4.2
0.7
0.3
0.8
6.0
–
14.0
6.7
9.2
3.9
4.6
58.0
1.9
0.2
60.1
–
–
–
–
0.4
1.5
–
0.5
7.7
0.4
–
8.1
14.9
0.1
0.2
23.3
–
6.0
16.3
–
10.9
13.3
21.1
–
13.5
–
–
–
38.8
16.6
60.1
–
1.1
–
–
36.1
6.0
16.6
61.2
23.3
38.1
9. SHARE-BASED PAYMENTS
The Group had three share-based payment schemes in existence during the year ended 31 December 2015 (2014: three). The Group
recognised a total charge of £0.1m (2014: £0.7m) 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
163p (2014: 160p). Details of each of the schemes are provided below.
a) save as you earn (“saye”) scheme
The Company operated a SAYE scheme within the Republic of ireland which was open to all employees and was linked to a monthly
savings contract over a five year period. The remaining options were either exercised or lapsed during 2015.
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.
SAYE options (issued after 7 November 2002)
At 1 January
Lapsed during the year
Exercised during the year
At 31 December
2015
2014
weighted
average
exercise
price (p)
95.0
95.0
95.0
–
Options
154,065
(17,472)
(37,356)
99,237
Weighted
average
exercise
price (p)
95.0
95.0
95.0
95.0
Options
99,237
(14,305)
(84,932)
–
124
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI 9. SHARE-BASED PAYMENTS CONTiNUED
b) 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
150% of base salary.
The criteria and vesting conditions of the LTiP options are as follows:
Weighting of criteria
Vesting Conditions:
Does not vest
2015 Awards
EPS
33%
ROCE
67%
2014 Award
2013 Award
EPS
33%
ROCE
67%
EPS
33%
ROCE
67%
< 38p
< 11.0%
< 35p
< 9.2%
< 30p
< 9.0%
Vests proportionately
38p — 48p
11.0% — 14.0% 35p — 45p
9.2% — 13.0%
30p — 40p
9.0% — 13.0%
Vests in full
≥ 48p
≥ 14.0%
≥ 45p
≥ 13.0%
≥ 40p
≥ 13.0%
Proportion that vests at
entry level
Exercise period
25%
0%
25%
0%
0%
0%
3 – 10 years
3 – 10 years
3 – 10 years
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
2015
2014
weighted
average exercise
price (p)
0.0
0.0
0.0
0.0
0.0
Options
4,840,049
2,408,985
(124,413)
(1,686,833)
5,437,788
Options
4,028,642
2,077,819
–
(1,266,412)
4,840,049
Weighted
average exercise
price (p)
0.0
0.0
0.0
0.0
0.0
Of the above share options outstanding at the end of the year, 15,533 (2014: none) are exercisable at 31 December 2015.
The options outstanding at 31 December 2015 had a weighted average exercise price of nil p (2014: nil p) and a weighted average
remaining contractual life of 1.9 years (2014: 1.6 years). in the year, 124,413 options were exercised.
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 2015
2015 Awards
2014 Award
2013 Award
138p
(4 December
2015)
184p
(17 September
2015)
177p
(18 September
2014)
0.0p
25.4%
0.0p
25.4%
3 – 5 years
3 – 5 years
1.8%
4.67p
12%
12%
1.8%
4.67p
50%
12%
0.0p
32.3%
3 years
1.8%
3.82p
50%
23%
152p
(18 April
2013)
0.0p
185.7%
3 years
4.5%
3.15p
35%
19.5%
The weighted average fair value of LTiP options granted during the year was 163p.
24298.02 30 March 2016 2:38 PM PROOF1
125
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Notes to the Accounts CONTiNUED
9. SHARE-BASED PAYMENTS CONTiNUED
b) Long-term Incentive plan (“LtIp”) continued
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.
c) 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. The Company gives
one matching share for each share purchased by the employee up to a maximum of £20 each 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 2015, 108,120 (2014: 72,238) 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 2014
Exchange differences
Additions
Added on acquisition
Disposals
At 31 December 2014
Exchange differences
Additions
Added on acquisition
Disposals
At 31 December 2015
Accumulated depreciation and impairment
At 1 January 2014
Charge for the year
impairment charges
Exchange differences
Disposals
At 31 December 2014
Charge for the year
Exchange differences
Disposals
At 31 December 2015
Net book value
At 31 December 2015
At 31 December 2014
Land and buildings
Freehold
£m
Short
leasehold
£m
Plant and
machinery
£m
Total
£m
88.3
(3.9)
1.9
1.2
(17.3)
70.2
(3.0)
4.7
1.7
(10.2)
63.4
27.7
1.4
6.1
(1.8)
(9.6)
23.8
1.2
(1.2)
(8.2)
15.6
47.8
46.4
40.9
204.4
333.6
(1.2)
3.3
–
(4.9)
38.1
(0.9)
4.6
0.2
(0.4)
41.6
23.1
2.7
–
(1.0)
(4.2)
20.6
3.0
(0.7)
(0.4)
22.5
19.1
17.5
(8.9)
26.1
0.6
(31.7)
190.5
(7.1)
31.6
2.1
(13.8)
203.3
147.2
17.1
–
(7.0)
(30.1)
127.2
18.8
(5.2)
(13.3)
127.5
75.8
63.3
(14.0)
31.3
1.8
(53.9)
298.8
(11.0)
40.9
4.0
(24.4)
308.3
198.0
21.2
6.1
(9.8)
(43.9)
171.6
23.0
(7.1)
(21.9)
165.6
142.7
127.2
The net book value of plant and machinery at 31 December 2015 includes an amount of £9.5m (2014: £9.9m) in respect of assets held
under finance lease contracts.
included within plant and machinery additions are assets in the course of construction of £8.6m (2014: £1.8m).
126
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI
11. GOODWILL
Cost
At 1 January 2014
Exchange differences
Acquisitions
Adjustments in respect of prior period acquisitions
Disposals
At 31 December 2014
Exchange differences
Acquisitions
Adjustments in respect of prior period acquisitions
At 31 December 2015
Accumulated impairment losses
At 1 January 2014
impairment charges
Disposals
Exchange differences
At 31 December 2014
Exchange differences
At 31 December 2015
Net book value
At 31 December 2015
At 31 December 2014
£m
508.0
(14.4)
18.6
0.3
(24.9)
487.6
(11.7)
29.4
0.2
505.5
90.4
3.3
(24.9)
(0.4)
68.4
(0.4)
68.0
437.5
419.2
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. The Group currently has ten CGUs.
summary analysis
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
Other CGUs
Total goodwill
2015
£m
115.4
128.6
144.7
48.8
437.5
2014
£m
108.9
112.3
153.6
44.4
419.2
24298.02 30 March 2016 2:38 PM PROOF1
127
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Notes to the Accounts CONTiNUED
11. GOODWILL CONTiNUED
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 be required.
The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for these calculations are
those regarding discount rates, sales and operating profit growth rates. 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.
The forecasts used in the annual impairment reviews have been prepared taking into account current economic conditions. 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% in
perpetuity. The discount rates applied to all impairment reviews represent pre-tax rates and range between 7.9% and 10.8%.
2015 impairment review results
The carrying value of the Group’s CGUs remain supportable.
sensitivity analysis
A number of sensitivities have been performed on the Group’s significant CGUs to highlight the changes in market conditions that
would lead to verge of impairment. The results are as follows:
2015
CGU
UK Distribution
UK Exteriors
Larivière
2014
like-for-like market volume
(average % per annum)
Discount rate (%)
long-term operating profit growth
rate (average % per annum)
headroom
Assumption
Sensitivity
Assumption
Sensitivity
Assumption
Sensitivity
£520.5m
£545.4m
€48.6m
0.6
0.9
1.4
(15.1)
(22.4)
(4.8)
8.9
8.9
10.8
19.1
16.4
1.7
3.0
3.0
2.0
(13.9)
(12.0)
(1.5)
Like-for-like market volume
(average % per annum)
Discount rate (%)
Long-term operating
profit growth rate
(average % per annum)
CGU
Headroom
Assumption
Sensitivity
Assumption
Sensitivity
Assumption
Sensitivity
UK Distribution
UK Exteriors
Larivière
£678.7m
£565.1m
€90.3m
0.7
0.9
0.4
(20.2)
(25.9)
(9.3)
9.2
9.2
11.0
30.4
24.8
2.9
3.0
3.0
2.2
(21.2)
(17.6)
(1.6)
The sensitivities noted above are the amounts by which the related assumption would have to vary before an impairment is indicated.
Revenue is the key assumption in the forecasts used in the goodwill impairment reviews, and therefore a 5% reduction in revenue 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 the forecast used in the goodwill impairment reviews, an impairment of £1.8m
would arise in one CGU, Larivière. The Board has actively reviewed the forecast associated with Larivière, noting the conservative
assumptions used and, in a challenging economic environment, its continued outperformance of the markets in which it operates, and
is satisfied that no impairment is necessary. if revenues fell by 4.8% then the recoverable amount of the CGU would equal its carrying
value. The current forecasts provide headroom of £35.7m.
128
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI 12. INTANGIBLE ASSETS
The intangible assets presented below relate to acquired intangibles that arise as a result of applying iFRS 3 “Business Combinations”
(which requires the separate recognition of acquired intangibles from goodwill) and computer software (separable from any associated
hardware).
Cost
At 1 January 2014
Acquisitions
Additions
Disposals
Exchange differences
At 31 December 2014
Acquisitions
Additions
Exchange differences
At 31 December 2015
Amortisation
At 1 January 2014
Charge for the year
Disposals
Exchange differences
At 31 December 2014
Charge for the year
Exchange differences
At 31 December 2015
Net book value
At 31 December 2015
At 31 December 2014
Customer
relationships
£m
Non-compete
clauses
£m
Computer
software
£m
185.7
12.2
–
(7.3)
(9.0)
181.6
42.3
–
(4.0)
11.6
0.5
–
(0.8)
–
11.3
0.8
–
–
219.9
12.1
155.2
18.9
(7.3)
(8.7)
158.1
9.4
(3.6)
163.9
56.0
23.5
10.4
0.7
(0.8)
–
10.3
0.9
–
11.2
0.9
1.0
28.5
–
10.4
(0.3)
–
38.6
–
9.2
–
47.8
10.9
2.8
(0.2)
–
13.5
3.0
–
16.5
31.3
25.1
Total
£m
225.8
12.7
10.4
(8.4)
(9.0)
231.5
43.1
9.2
(4.0)
279.8
176.5
22.4
(8.3)
(8.7)
181.9
13.3
(3.6)
191.6
88.2
49.6
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 108.
included within additions are £0.2m (2014: £nil) of borrowing costs which were capitalised in accordance with iAS 23 “Borrowing
Costs”.
included within computer software additions are assets in the course of construction of £4.7m (2014: £2.0m).
24298.02 30 March 2016 2:38 PM PROOF1
129
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Notes to the Accounts CONTiNUED
13. ACqUISITIONS
During the period SiG acquired the following:
Acquisition name
Advanced Cladding &
insulation Group Limited
Gutters & Ladders (1968)
Limited
% of
ordinary
share
capital
acquired
Acquisition date
Country of
incorporation
Principal activity
100% 30 January 2015
100%
7 March 2015
United
Kingdom
United
Kingdom
Distributor of roofing and cladding materials and
associated products
Distributor of building plastics and associated
products
Multijoint SA
100%
30 April 2015
Switzerland
Undercover Holdings Limited
100%
30 April 2015
Flex-R Limited
100%
1 May 2015
KG SML System und
Metallbau GmbH & Co.
Drywall Qatar LLC
Ainsworth Group
100%
7 May 2015
49%*
100%
28 May 2015
31 July 2015
Weymead Holdings Limited
100% 4 September 2015
HC Groep B.V.
100%
23 September
2015
interland Techniek B.V.
100% 22 October 2015
Distributor of insulating materials and associated
products
Distributor of roofing materials and associated
products
Distributor of flat roofing materials
Distributor of commercial interiors products
United
Kingdom
United
Kingdom
Germany
Qatar
Distributor of commercial interiors products
United
Kingdom
United
Kingdom
The
Netherlands
The
Netherlands
Distributor of insulating materials and associated
products
Distributor of roofing materials and associated
products
Design, supply and distribution of air handling
products and systems
Distributor of air handling products
* Although the Group owns less than 50% of the ordinary share capital of Drywall Qatar LLC it has full operational control of the business; therefore the
assets, liabilities and results of the business are consolidated in full in the Group’s Financial Statements.
The Group also acquired the trade and certain assets and liabilities of the following business:
Acquisition name
Airtech
Acquisition date
Country of
operation
Principal activity
23 March 2015
France
Distributor of air handling products
130
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI 13. ACqUISITIONS CONTiNUED
The provisional fair value of the net assets of these businesses at acquisition (in aggregation) were as follows:
Property, plant and equipment
inventories
Trade and other receivables
Cash acquired
Debt acquired
Trade and other payables
Net corporation tax and deferred tax liability
Finance leases and other debt items
Net assets acquired
intangible assets - customer relationships
intangible assets - non-compete clauses
Deferred tax liability on acquired intangible assets
Goodwill
Total consideration
Consideration is represented by:
Cash
Deferred consideration
Contingent consideration
Total consideration
Cash (per above)
Cash acquired
Settlement of loan notes and contingent consideration in respect of acquisitions
Settlement of amounts payable for purchase of businesses
£m
4.0
8.6
22.9
12.1
(1.5)
(20.2)
(2.3)
(0.7)
22.9
42.3
0.8
(8.4)
29.4
87.0
78.1
0.3
8.6
87.0
78.1
(12.1)
4.1
70.1
in accordance with iFRS 3 “Business Combinations”, acquisition expenses of £1.9m in relation to the above acquisitions have been
recognised within the Consolidated income Statement and have been presented within “Other items”.
it is currently expected that, dependent upon future profits, a further £30.9m may 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, this will be treated as remuneration and will be charged to the Consolidated income Statement as earned. The related accrual
of potential consideration in the year to 31 December 2015 is £10.2m (31 December 2014: £2.9m). Added to the £1.9m acquisition
expenses is a £2.2m increase in contingent consideration based solely on a reassessment of post-acquisition performance of
the acquired businesses outside of the hindsight period, this has led to a charge within “Other items” in the Consolidated income
Statement of £14.3m in respect of acquisitions (see Note 2).
in addition, £8.9m of deferred and contingent consideration (not subject to the vendors remaining within the business) has been
recognised within goodwill and intangible assets in the year.
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 2016. 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.
The fair value of financial assets includes trade receivables with a fair value of £20.9m and a gross contractual value of £21.4m. The
best estimate at the date of acquisition of the contractual cash flows not able to be collected is £0.5m.
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. The goodwill of
£29.4m arising from the acquisitions is not expected to be deductible for income tax purposes.
Post-acquisition revenue and operating profit for the year ended 31 December 2015 for all 2015 acquisitions amounted to £57.6m and
£7.5m respectively.
The Directors estimate that the combined pre-acquisition revenue and operating profit of the 2015 acquisitions for the period from 1
January 2015 to the acquisition dates was £61.4m and £8.4m respectively.
24298.02 30 March 2016 2:38 PM PROOF1
131
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Notes to the Accounts CONTiNUED
13. ACqUISITIONS CONTiNUED
post balance sheet events
On 5 January 2016, the Group acquired 100% of the issued share capital of Metall Architektur Limited and the trade and certain assets
of KME Yorkshire Limited, fabricators of high performance facade panels in the United Kingdom, for a total initial consideration of
£4.4m, with net assets acquired of £1.4m.
On 11 January 2016 the Group acquired 100% of the issued share capital of Profant Lufttechnik HandelsgmbH, a distributor and
fabricator of premium air handling systems in Austria, for an initial consideration of €2.2m, with net assets acquired of €1.7m.
On 20 January 2016, the Group acquired 100% of the issued share capital of Maury SAS, a specialist converter of metal serving high-
end roofing and facade markets in France, for an initial consideration of €2.2m, with net assets acquired of €0.9m.
On 1 March 2016, the Group acquired 100% of the issued share capital of Metechno Limited, a designer and fabricator of offsite
manufactured technologies in the United Kingdom, for an initial consideration of £1, with net liabilities acquired of £1.1m.
On 5 March 2016, the Group acquired 100% of the issued share capital of SAS Direct & Partitioning Limited, a distributor of
partitioning systems and associated products in the United Kingdom, for an initial consideration of £6.8m, with net assets acquired of
£3.4m.
14. INVENTORIES
Raw materials and consumables
Work in progress
Finished goods and goods for resale
Total inventories
2015
£m
3.6
1.1
238.2
242.9
2014
£m
3.9
1.0
220.5
225.4
The estimated replacement cost of inventories is not materially different from the balance sheet value stated above.
15. TRADE AND OTHER RECEIVABLES
Trade receivables
Amounts due from contract customers
VAT
Other receivables
Prepayments and accrued income
Trade and other receivables
Current tax assets
Total receivables
2015
£m
2014
£m
386.9
362.1
3.9
3.2
3.2
17.7
414.9
4.3
419.2
–
1.2
2.6
15.8
381.7
5.6
387.3
The average credit period on sale of goods and services for continuing operations on a constant currency basis is 45 days (2014:
43 days). No interest is charged on receivables. An allowance has been made for estimated irrecoverable amounts from the sale of
goods of £18.8m at 31 December 2015 (2014: £20.7m). 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 £138.6m (2014: £130.5m) 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 34 days overdue (2014: 31 days).
132
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI 15. 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
Added on acquisition
Charged to the Consolidated income Statement
Exchange differences
At 31 December
2015
£m
240.4
1.0
90.2
29.7
8.9
4.5
2.8
2.5
138.6
380.0
2015
£m
(20.7)
6.9
–
(0.5)
(6.0)
1.5
(18.8)
2014
£m
220.3
0.3
87.1
29.8
8.6
1.7
1.4
1.9
130.5
351.1
2014
£m
(27.7)
11.4
0.1
(0.1)
(6.9)
2.5
(20.7)
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 £25.7m (2014: £31.7m) and a provision for
impairment of £18.8m (2014: £20.7m). 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.
24298.02 30 March 2016 2:38 PM PROOF1
133
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Notes to the Accounts CONTiNUED
16. CURRENT LIABILITIES
Trade payables
Bills of exchange payable
VAT
Social security and payroll taxes
Accruals and deferred income
Trade and other payables
Obligations under finance lease contracts (Note 23)
Bank overdrafts
Bank loans
Private placement notes
Loan notes and deferred consideration
Derivative financial instruments
Current tax liabilities
Provisions (Note 21)
Current liabilities
2015
£m
2014
£m
234.4
206.3
12.7
15.9
13.3
88.2
16.9
17.1
14.0
94.9
364.5
349.2
2.5
2.3
90.9
160.1
3.0
1.3
8.4
9.7
642.7
2.5
4.4
0.7
–
1.9
0.5
8.3
14.6
382.1
£2.5m (2014: £1.0m) of the above Group bank loans and overdrafts are secured on the assets of subsidiary undertakings. All of
the finance lease contracts are secured on the underlying assets. The remaining balances are unsecured. All of the above private
placement notes, financial instruments and £90.0m of the bank debt are guaranteed by certain companies of the Group.
The bank overdrafts are repayable on demand and attract floating rates of interest, which at 31 December 2015 ranged from 0.2% to
3.0% (2014: between 0.4% and 3.0%).
£50.5m (2014: £0.4m) of the bank loans and deferred consideration due within one year (after taking into account derivative financial
instruments) are at variable rates of interest.
£43.4m (2014: £2.2m) of the bank loans and deferred consideration due within one year (after taking into account derivative financial
instruments) attract an average fixed interest rate of 2.7% (2014: 0.9%).
£92.3m (2014: £nil) of the private placement notes due within one year (after taking into account derivative financial instruments) are at
variable rates of interest.
£67.8m (2014: £nil) of the private placement notes due within one year (after taking into account derivative financial instruments) attract
an average fixed interest rate of 5.9%.
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 39 days (2014: 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, with the exception of the private
placements notes, the fair value of which is disclosed in Note 18 on page 136.
134
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI 17. NON-CURRENT LIABILITIES
Obligations under finance lease contracts (Note 23):
– 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 22)
Other payables
Retirement benefit obligations (Note 28c)
Provisions (Note 21)
Non-current liabilities
The bank loans included above are repayable as follows:
– due after one and within two years
– due after two and within five years
Total
2015
£m
2.4
4.5
0.6
0.4
95.8
0.7
18.2
3.8
23.8
37.6
2014
£m
2.2
4.9
0.9
0.6
254.3
0.6
12.1
4.3
28.7
29.3
187.8
337.9
2015
£m
0.2
0.2
0.4
2014
£m
0.2
0.4
0.6
All of the bank loans noted above due after more than one year are secured on certain assets of subsidiary undertakings. All of the
above private placement notes and derivative financial instruments are guaranteed by certain companies of the Group.
The bank loans due after more than one year attract variable rates of interest.
Details of the private placement notes (before applying associated derivative financial instruments) are as follows:
Repayable in 2016*
Repayable in 2018
Repayable in 2020
Repayable in 2021
Repayable in 2023
Total
2015
2014
Fixed
interest rate
%
5.9
5.2
3.7
3.9
4.2
5.3
£m
160.1
22.4
22.0
14.7
36.7
255.9
Fixed
interest rate
%
5.9
5.1
3.7
3.9
4.2
5.2
£m
153.3
23.1
23.4
15.6
38.9
254.3
* The private placement notes repayable in 2016 are included within current liabilities in 2015.
The Directors consider that the carrying amount of non-current liabilities approximates to their fair value, with the exception of the
private placements notes, the fair value of which is disclosed in Note 18 on page 136.
24298.02 30 March 2016 2:38 PM PROOF1
135
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Notes to the Accounts CONTiNUED
18. FINANCIAL INSTRUMENTS
The Treasury Risk Management section of the Strategic Report on pages 37 to 40 includes a review of all liquidity, interest rate and
foreign currency risks, and provides an explanation of the role that derivative financial instruments have had during the year in creating
or changing the risks the Group faces in its activities. The capital structure of the Group is outlined in the Strategic Report on page 36.
The Group’s financial assets consist of trade and other receivables, cash at bank 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)
Other financial assets
Deferred consideration
Derivative financial instruments
Total
2015
£m
89.0
1.3
1.5
36.8
128.6
2014
£m
110.3
0.9
1.5
33.9
146.6
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 1.4% (2014: 2.0%).
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 at bank, £17.3m (2014: £15.9m) is denominated in Sterling, £55.0m (2014: £78.1m) in Euros, £12.9m (2014: £14.1m)
in Polish Zloty, and £3.8m (2014: £2.2m) in other currencies. Of the other financial assets, £1.3m (2014: £0.7m) is denominated in
Sterling, and £nil (2014: £0.2m) in Euros. The deferred consideration is denominated in Sterling.
2015 interest rate and currency profile
The interest rate and currency profile of the Group’s borrowings at 31 December 2015, after taking account of interest rate and
currency derivative financial instruments (including derivative assets of £36.8m as noted above) was as follows:
Currency
Sterling
Sterling
Sterling
Euro
Euro
Euro
Polish Zloty
Polish Zloty
US Dollar
Total
£m
145.8
68.1
0.4
73.4
27.9
7.6
0.3
2.0
2.2
Floating
rate
£m
92.8
25.0
–
–
27.9
–
0.3
–
–
Effective
fixed interest
rate
%
weighted
average
time for
which
rate is fixed
years
5.8
1.8
6.2
4.0
n/a
5.9
n/a
3.3
1.8
0.8
0.2
3.7
6.5
n/a
6.0
n/a
4.3
1.1
Fixed
rate
£m
53.0
43.1
0.4
73.4
–
7.6
–
2.0
2.2
Amount
secured
£m
Amount
unsecured
£m
–
–
0.4
–
0.6
7.6
0.3
2.0
1.9
145.8
68.1
–
73.4
27.3
–
–
–
0.3
327.7
146.0
181.7
12.8
314.9
Private placement notes
Other borrowings
Finance lease contracts
Private placement notes
Other borrowings
Finance lease contracts
Other borrowings
Finance lease contracts
Other borrowings
Total
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 £45.5m and a liability of
€62.0m was entered into on 31 December 2015 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 2015 was £235.9m, of which £99.4m is denominated in Euros.
All of the above finance lease contracts, totalling £10.0m, 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 value shown
in the table above. The fair value of the Group’s private placement notes at 31 December 2015 is estimated to be c.£248m and is
classified as a Level 2 fair value measurement for disclosure purposes. The remaining fixed rate debt amounts to £55.3m and relates to
finance lease contracts, fixed rate loans and loan notes (after applying financial instruments) and deferred consideration. The Directors
consider the fair value of these remaining fixed rate debts to materially approximate to the book values shown above.
136
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI 18. FINANCIAL INSTRUMENTS CONTiNUED
2014 interest rate and currency profile
The interest rate and currency profile of the Group’s borrowings at 31 December 2014, after taking account of interest rate and
currency derivative financial instruments (including derivative assets of £33.9m as noted on page 136), was as follows:
Currency
Sterling
Sterling
Sterling
Euro
Euro
Euro
Polish Zloty
Polish Zloty
US Dollar
Total
£m
143.1
2.4
0.2
77.9
5.1
8.0
0.2
2.3
0.4
Floating
rate
£m
80.0
0.1
–
–
5.1
–
0.2
–
–
Fixed
rate
£m
63.1
2.3
0.2
77.9
–
8.0
–
2.3
0.4
Weighted
average
time for
which
rate is
fixed
Years
Effective
fixed
interest
rate
%
5.2
0.4
7.8
4.0
n/a
6.6
n/a
4.3
3.0
2.1
0.5
1.4
7.5
n/a
4.9
n/a
4.4
0.1
Amount
secured
£m
Amount
unsecured
£m
–
–
0.2
–
1.0
8.0
0.2
2.3
0.4
143.1
2.4
–
77.9
4.1
–
–
–
–
239.6
85.4
154.2
12.1
227.5
Private placement notes
Other borrowings
Finance lease contracts
Private placement notes
Other borrowings
Finance lease contracts
Other borrowings
Finance lease contracts
Other borrowings
Total
in addition to the currency exposures above, the Group 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 £48.3m and a liability of
€62.0m was entered into on 31 December 2014 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 2014 was £126.9m, of which £61.0m was denominated in Euros.
All of the above finance lease contracts, totalling £10.5m, were secured on the underlying assets.
in both 2015 and 2014, 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 £36.8m
(2014: £33.9m) and loans and receivables (including cash and cash equivalents) of £485.8m (2014: £477.4m).
included within financial liabilities are derivative financial instruments in designated hedge accounting relationships amounting to
£1.6m (2014: £1.1m) and liabilities (including trade payables) at amortised cost of £685.1m (2014: £573.6m).
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”.
in order to manage the Group’s exposure to interest rate, exchange rate, and commodity price changes, the Group utilises interest rate,
currency, and commodity derivative financial instruments. The fair values of these derivative financial instruments 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:
Æ Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or
liabilities;
Æ 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
Æ 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 on pages 138 and 139 are categorised as Level 2.
24298.02 30 March 2016 2:38 PM PROOF1
137
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Notes to the Accounts CONTiNUED
18. FINANCIAL INSTRUMENTS CONTiNUED
a) Net investment hedges
As at 31 December 2015, the Group had entered into one (31 December 2014: one) cross-currency forward contract which swaps
Sterling denominated debt into Euro denominated debt. This derivative financial instrument is a net investment hedge of the Group’s
Euro denominated assets and is designated and effective as a net investment hedge. The fair value of this derivative was £nil at 31
December 2013, 31 December 2014 and 31 December 2015, therefore the fair value movement to be recognised in the Consolidated
Statement of Comprehensive income in both 2014 and 2015 is £nil.
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 2015, the Group had entered into two (31 December 2014: two) 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 2015, the Group had entered into one (31 December 2014: 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 2015, the weighted average maturity date of these swaps is
0.8 years (2014: 1.8 years).
Hedge of the Group’s functional currency cash flows
Asset at 1 January
Fair value gains recognised in equity
Asset at 31 December
2015
£m
29.0
4.4
33.4
2014
£m
24.4
4.6
29.0
Of the above derivative financial instruments, £33.4m matures within one year (2014: £nil).
As at 31 December 2015, the Group had entered into two (31 December 2014: one) interest rate derivative financial instruments which
swap variable rate debt into fixed rate debt thereby fixing the functional currency 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 2015, the weighted average maturity
date of these swaps is 4.1 years (2014: 3.6 years).
Hedge of the Group’s interest cash flows
Liability at 1 January
Fair value losses recognised in equity
Cancellation of cash flow hedges
Liability at 31 December
2015
£m
(0.6)
(0.1)
–
(0.7)
2014
£m
(2.0)
(0.6)
2.0
(0.6)
None of the above derivative financial instruments matures within one year (2014: £nil).
The Group purchases diesel fuel on a floating price basis and therefore is exposed to changes in diesel prices, of which the most
significant element is crude oil price risk. As at 31 December 2015 the Group had entered into two (31 December 2014: nil) fuel price
derivative financial instruments which swap variable price fuel into fixed price fuel, thereby creating an element of fuel cost certainty for
the Group. One of these fuel price derivative financial instruments is designated and effective as a cash flow hedge and the fair value
movement has therefore been deferred in equity via the Consolidated Statement of Comprehensive income. At 31 December 2015, the
maturity date of this swap is one year.
Hedge of the Group’s fuel costs
Liability at 1 January
Fair value losses recognised in equity
Liability at 31 December
Of the above derivative financial instrument, £0.9m matures within one year (2014: £nil).
2015
£m
–
(0.9)
(0.9)
2014
£m
–
–
–
138
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI 18. FINANCIAL INSTRUMENTS CONTiNUED
b) Cash flow hedges continued
The remaining fuel price derivative financial instrument had not been designated as a cash flow hedge and the fair value movement of
£0.4m has therefore been charged through “Other items” in the Consolidated income Statement. At 31 December 2015, the maturity
date of this swap is one year, and therefore £0.4m of this derivative financial instrument matures within one year (2014: £nil).
The following table reconciles the net fair value gain recognised in equity on cash flow hedges as noted on page 138 of £3.4m (2014:
£4.0m) to the loss on cash flow hedges recorded in the Consolidated Statement of Comprehensive income of £1.9m (2014: £1.4m).
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
2015
£m
3.4
(7.6)
(4.2)
2.3
(1.9)
2014
£m
4.0
(7.7)
(3.7)
2.3
(1.4)
Of the £2.3m spreading charge associated with cancellation of cash flow hedges in 2015, £1.9m is reported in “Other items” in the
Consolidated income Statement (2014: £1.9m).
c) Fair value hedges
As at 31 December 2015, the Group had entered into two (31 December 2014: two) 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
Of the above derivative financial instruments, £1.0m matures within one year (2014: £nil).
2015
£m
4.9
(1.5)
3.4
2014
£m
5.3
(0.4)
4.9
The following table reconciles the losses on derivative financial instruments recognised directly in the Consolidated income Statement,
to the movements in derivative financial instruments noted above and on page 138.
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 credit recognised in the Consolidated income Statement
Spreading charges associated with cancellation of cash flow hedges*
Total losses on derivative financial instruments included in the Consolidated Income Statement
* £0.4m of the £2.3m spreading charge has been recognised within finance costs before Other items (2014: £0.3m).
2015
£m
1.5
(1.5)
–
2.3
2.3
2014
£m
0.5
(0.5)
(0.1)
2.3
2.2
24298.02 30 March 2016 2:38 PM PROOF1
139
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Notes to the Accounts CONTiNUED
19. 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 2015 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 £234.4m (2014: £206.3m).
Borrowing facilities
The Group had undrawn committed borrowing facilities at 31 December 2015 as follows:
Expiring in more than two years but not more than five years
Total
2015
£m
225.7
2.6
47.4
52.0
327.7
2014
£m
9.9
124.9
26.0
78.8
239.6
2015
£m
160.0
160.0
2014
£m
250.0
250.0
At 31 December 2015 the Group had £474m of committed facilities, of which £160m were undrawn as disclosed above. Since
31 December 2015, a maximum of £166m has been drawn down against the £250m Revolving Credit Facility.
contractual maturity analysis of the Group’s financial liabilities, derivative financial instruments, other
financial assets, deferred consideration and cash and cash equivalents
iFRS 7 requires disclosure of the maturity of the Group’s remaining contractual financial liabilities. The tables overleaf 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 and receivables (including amongst other items
payroll and sales tax accruals which are not classified as financial instruments) have been included.
140
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www.sigplc.com Stock code: ShI 19. MATURITY OF FINANCIAL ASSETS AND LIABILITIES CONTiNUED
2015 analysis
Current liabilities
Trade and other payables
Obligations under finance lease
contracts
Bank overdrafts
Bank loans
Private placement notes
Derivative financial instruments
Loan notes and deferred consideration
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
Cash and cash equivalents
Other financial assets
Deferred consideration
Trade and other receivables
Total
Grand total
2014 analysis
Current liabilities
Trade and other payables
Obligations under finance lease
contracts
Bank overdrafts
Bank loans
Loan 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
Cash and cash equivalents
Other financial assets
Deferred consideration
Trade and other receivables
Total
Grand total
Balance sheet
value
£m
< 1 year
£m
1-2 years
£m
2-5 years
£m
> 5 years
£m
Maturity analysis
335.3
335.3
2.5
2.3
90.9
160.1
1.3
3.0
595.4
7.5
0.4
95.8
0.7
104.4
699.8
(36.8)
(89.0)
(1.3)
(1.5)
(411.7)
(540.3)
159.5
2.6
2.3
91.1
167.0
1.3
3.0
602.6
0.4
–
4.1
0.5
5.0
607.6
(34.4)
(89.0)
(1.3)
(1.5)
(411.7)
(537.9)
69.7
–
–
–
–
–
–
–
–
2.8
0.2
4.1
0.5
7.6
7.6
(1.0)
–
–
–
–
(1.0)
6.6
–
–
–
–
–
–
–
–
5.0
0.2
51.7
0.4
57.3
57.3
(0.9)
–
–
–
–
(0.9)
56.4
–
–
–
–
–
–
–
–
0.6
–
56.3
–
56.9
56.9
–
–
–
–
–
–
56.9
Balance sheet
value
£m
< 1 year
£m
1–2 years
£m
2–5 years
£m
> 5 years
£m
Maturity analysis
318.1
318.1
2.5
4.4
0.7
1.9
0.5
328.1
8.0
0.6
254.3
0.6
263.5
591.6
(33.9)
(110.3)
(0.9)
(1.5)
(380.5)
(527.1)
64.5
2.6
4.4
0.7
1.9
0.5
328.2
0.4
–
13.3
0.2
13.9
342.1
(5.7)
(110.3)
(0.9)
–
(380.5)
(497.4)
(155.3)
–
–
–
–
–
–
–
2.5
0.2
164.8
0.2
167.7
167.7
(25.8)
–
–
(1.5)
–
(27.3)
140.4
–
–
–
–
–
–
–
5.3
0.4
31.5
0.4
37.6
37.6
(1.6)
–
–
–
–
(1.6)
36.0
–
–
–
–
–
–
–
0.8
–
86.0
–
86.8
86.8
–
–
–
–
–
–
86.8
Total
£m
335.3
2.6
2.3
91.1
167.0
1.3
3.0
602.6
8.8
0.4
116.2
1.4
126.8
729.4
(36.3)
(89.0)
(1.3)
(1.5)
(411.7)
(539.8)
189.6
Total
£m
318.1
2.6
4.4
0.7
1.9
0.5
328.2
9.0
0.6
295.6
0.8
306.0
634.2
(33.1)
(110.3)
(0.9)
(1.5)
(380.5)
(526.3)
107.9
24298.02 30 March 2016 2:38 PM PROOF1
141
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Notes to the Accounts CONTiNUED
20. 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. The Group also has a minimal exposure 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.
2015 analysis
Profit or loss
Other equity
Total Shareholders’ equity
2014 analysis
Profit or loss
Other equity
Total Shareholders’ equity
GBP
EUR
USD
Total
+100bp
£m
-100bp
£m
+100bp
£m
-100bp
£m
+100bp
£m
-100bp
£m
+100bp
£m
-100bp
£m
(1.3)
2.2
0.9
1.3 (i)
(2.2)(ii)
(0.9)
0.2
–
0.2
(0.2)(iii)
–
(0.2)
–
(1.2)
(1.2)
–
1.2 (ii)
1.2
(1.1)
1.0
(0.1)
1.1
(1.0)
0.1
GBP
EUR
USD
Total
+100bp
£m
-100bp
£m
+100bp
£m
-100bp
£m
+100bp
£m
-100bp
£m
+100bp
£m
-100bp
£m
(0.6)
1.6
1.0
0.6 (i)
(1.6)
(ii)
(1.0)
0.3
(0.3) (iii)
–
–
–
–
0.3
(0.3)
(2.6)
(2.6)
2.6 (ii)
2.6
(0.3)
(1.0)
(1.3)
0.3
1.0
1.3
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; and
iii) floating rate Euro debt and Euro 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.
142
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www.sigplc.com Stock code: ShI 20. SENSITIVITY ANALYSIS CONTiNUED
b) Foreign currency sensitivity continued
2015 analysis
EUR
+10%
£m
-10%
£m
USD
+10%
£m
-10%
£m
PlN
+10%
£m
-10%
£m
Total
+10%
£m
-10%
£m
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
2014 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
0.4
(4.0)
(3.6)
(0.5) (i)
4.9 (ii)
4.4
(0.5)
(0.5)
0.6 (ii)
0.6
–
–
–
–
1.7 (ii)
1.7
0.4
(5.9)
(5.5)
(0.5)
7.2
6.7
(2.9)
(29.2)
(32.1)
3.3 (iii)
36.0 (iv)
39.3
–
–
(0.5)
(0.5)
0.6 (iv)
0.6
0.2 (v)
3.9 (iv)
4.1
(3.0)
(34.5)
(37.5)
3.5
40.5
44.0
(1.4)
(1.4)
(0.1)
(4.8)
(4.9)
EUR
USD
PLN
Total
+10%
£m
-10%
£m
+10%
£m
-10%
£m
+10%
£m
-10%
£m
+10%
£m
-10%
£m
0.4
(3.5)
(3.1)
(0.5) (i)
4.3 (ii)
3.8
(3.0)
(27.5)
3.4 (iii)
33.9 (iv)
(30.5)
37.3
–
(1.1)
(1.1)
–
(1.1)
(1.1)
–
1.4 (ii)
1.4
–
1.4 (iv)
1.4
–
(0.9)
(0.9)
(0.1)
(2.8)
(2.9)
–
1.1 (ii)
1.1
0.4
(5.5)
(5.1)
0.1 (v)
(3.1)
3.5 (iv)
(31.4)
3.6
(34.5)
(0.5)
6.8
6.3
3.5
38.8
42.3
* 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:
retranslation of Euro interest flows;
i)
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;
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 effective cash flow and net investment hedges; and
retranslation of Polish Zloty profit streams.
v)
24298.02 30 March 2016 2:38 PM PROOF1
143
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Notes to the Accounts CONTiNUED
21. PROVISIONS FOR LIABILITIES AND CHARGES
At 1 January 2015
Unused amounts reversed in the period
Utilised
New provisions
Unwinding of provision discounting
Transferred (to)/from accruals
Exchange differences
At 31 December 2015
included in current liabilities
included in non-current liabilities
Total
Onerous
leases
£m
10.1
(1.1)
(3.5)
2.6
0.1
(0.4)
(0.2)
7.6
Leasehold
dilapidations
£m
Contingent
consideration
£m
Other
amounts
£m
14.1
–
(0.5)
0.8
0.1
0.6
(0.1)
12.6
(0.4)
(4.9)
11.1
0.8
–
–
15.0
19.2
7.1
(0.6)
(1.9)
1.3
0.1
(0.3)
(0.2)
5.5
2015
£m
9.7
37.6
47.3
Total
£m
43.9
(2.1)
(10.8)
15.8
1.1
(0.1)
(0.5)
47.3
2014
£m
14.6
29.3
43.9
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 28.
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 benefits will be made at the end of the leases as set out in Note 28.
contingent consideration
Contingent consideration relates to the amounts due to vendors of completed acquisitions providing certain future profit targets are
met. The utilisation of the contingent consideration provision includes the recognition of £2.7m of loan notes payable within one year.
other amounts
Other amounts relate principally to claims and warranty provisions. The transfer of economic benefit is expected to be made between
one and twenty three years’ time.
144
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI 22. 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
2015
£m
21.0
(18.2)
2.8
2014
£m
29.0
(12.1)
16.9
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 reporting period are analysed below:
Goodwill
and
intangibles
£m
Property,
plant and
equipment
£m
At 31 December 2013
Credit/(charge) to
income
Credit to equity
Added on acquisition
Removed on disposal
Exchange differences
Change of rate charged
to equity
At 31 December 2014
Credit/(charge) to
income
Charge to equity
Added on acquisition
Exchange differences
Change of rate charged
to equity
At 31 December 2015
(7.9)
5.3
–
(3.1)
–
0.1
–
(5.6)
2.6
–
(8.4)
0.1
–
(11.3)
1.2
(1.2)
–
(0.2)
–
0.3
–
0.1
(1.3)
–
(0.2)
0.2
–
(1.2)
Tax
assets
£m
8.5
(1.1)
–
–
–
(0.4)
–
7.0
(1.7)
–
–
(0.3)
–
5.0
Retirement
benefit
obligations
£m
Losses
£m
Other
£m
5.6
(0.7)
1.7
–
–
(0.1)
(0.1)
6.4
(0.2)
(0.2)
–
(0.1)
(0.7)
5.2
1.0
8.9
–
–
(0.4)
(0.1)
–
9.4
(3.9)
–
0.1
–
–
5.6
(0.9)
(0.1)
0.5
–
–
0.1
–
(0.4)
(0.1)
(0.1)
–
0.1
–
(0.5)
Total
£m
7.5
11.1
2.2
(3.3)
(0.4)
(0.1)
(0.1)
16.9
(4.6)
(0.3)
(8.5)
–
(0.7)
2.8
During 2015, the Group recognised deferred tax assets of £0.9m (net) relating to previously unrecognised trading losses incurred in
prior periods in ireland (£0.7m net) and Belgium (£0.2m net). in prior periods these trading losses were not recognised on the grounds
of uncertainty. Following utilisation in the current and prior periods, the Directors now feel that the remaining amount is recoverable
and therefore the asset has been recognised in full in the period. The £0.7m net tax credit relating to historical trading losses in ireland
has been recognised as a non-underlying credit in line with where the trading losses (restructuring costs) were previously recorded,
whereas the £0.2m net tax credit relating to Belgium has been recorded as an underlying tax credit.
During 2014, the Group recognised deferred tax assets of £14.9m (net) relating to c.£72m (gross) of previously unrecognised excess
non-trading losses incurred in 2008 associated with the derivative financial instruments and included within “Other items” in the
Consolidated income Statement. For the year ended 31 December 2015, c.£27m (gross) or £5.5m (net) of these non-trading losses
were utilised, together with a prior year net tax credit of £0.7m (c.£2.7m gross).
The deferred tax charge within the Consolidated income Statement for 2015 includes a credit of £0.8m (2014: £0.2m) arising from the
change in domestic tax rates in the countries in which the Group operates.
Given current and forecast trading the Directors consider that recognition of the deferred tax assets above is appropriate.
There are other potential deferred tax assets in relation to tax losses totalling £3m (2014: £5m) that have not been recognised on the
basis that the realisation of their future economic benefit is uncertain. The tax losses in The Netherlands of c.£2.6m expire after eight
years. The remaining tax losses may be carried forward indefinitely.
At the balance sheet date, no deferred tax liability is recognised on temporary differences of £22m (2014: £18m) relating to unremitted
earnings of overseas subsidiaries as the Group is in a position to control the timing of the reversal of these temporary differences and it
is probable that they will not reverse in the foreseeable future.
24298.02 30 March 2016 2:38 PM PROOF1
145
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Notes to the Accounts CONTiNUED
23. OBLIGATIONS UNDER FINANCE LEASE CONTRACTS
Minimum lease payments
Present value of minimum
lease payments
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
2015
£m
3.0
7.8
0.6
11.4
(1.4)
10.0
2014
£m
2.6
8.0
1.0
11.6
(1.1)
10.5
2015
£m
2.5
6.9
0.6
10.0
The Group leases certain of its motor vehicles, fixtures and equipment under finance lease contracts, which are denominated in
Sterling, Euros and Polish Zloty.
The average remaining lease term is 5.6 years (2014: 4.8 years). For the year ended 31 December 2015, the average effective
borrowing rate was 5.4% (2014: 6.1%). interest rates are fixed at the contract date.
The carrying amount of the Group’s lease obligations approximates to their fair value.
24. CALLED UP SHARE CAPITAL
Authorised:
800,000,000 ordinary shares of 10p each (2014: 800,000,000)
Allotted, called up and fully paid:
591,347,148 ordinary shares of 10p each (2014: 591,137, 803)
2015
£m
80.0
59.1
2014
£m
2.5
7.1
0.9
10.5
2014
£m
80.0
59.1
There were 209,345 shares allotted during 2015 (2014: 37,356). The Company has one class of ordinary share which carries no right to
fixed income.
At 31 December 2015 the following share options were outstanding:
Number of shares
Exercise dates
Granted
Exercised
Lapsed
At 31
December
2015
Original
Option
price
per 10p
share
Date from
which option
may be
exercised
Date on
which option
expires
–
–
–
–
(121,930)
(1,302,672)
–
0.00p 26/04/2015 25/04/2022
(2,483)
(167,652)
15,533
0.00p 03/10/2015 02/10/2022
–
–
–
(62,818)
1,089,142
0.00p 18/04/2016 17/04/2023
(127,562)
1,950,257
0.00p 18/09/2017 17/09/2024
(26,129)
2,382,856
0.00p 17/09/2018 16/09/2025
– 2,408,985
At
31 December
2014
1,424,602
185,668
1,151,960
2,077,819
99,237
–
(84,932)
(14,305)
–
95.0p 01/12/2013 30/06/2015
4,939,286 2,408,985
(209,345)
(1,701,138) 5,437,788
Scheme and date of grant
Long-Term Incentive Plan
26/04/2012
03/10/2012
18/04/2013
18/09/2014
17/09/2015
Savings Related Scheme
20/10/2010
Total
146
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI 25. RECONCILIATION OF OPERATING PROFIT TO CASH GENERATED FROM OPERATING
ACTIVITIES
Operating profit
Depreciation (Note 10)
Amortisation of computer software (Note 12)
impairment of property, plant and equipment (Note 10)
Profits and losses arising on sale of businesses and associated impairment charges
Amortisation of acquired intangibles (Note 12)
Profit on sale of property, plant and equipment
Share-based payments
Working capital movements:
increase in inventories
increase in receivables
Decrease in payables
Cash generated from operating activities
2015
£m
65.9
23.0
3.0
–
–
10.3
(2.4)
–
(15.8)
(9.0)
(13.4)
61.6
2014
£m
53.2
21.2
2.8
6.1
14.0
19.6
(2.2)
0.7
(9.0)
(0.4)
(10.4)
95.6
included within the cash generated from operating activities is a defined benefit pension scheme employer’s special contribution of
£2.5m (2014: £2.5m).
26. RECONCILIATION OF NET CASH FLOW TO MOVEMENTS IN NET DEBT
Decrease in cash and cash equivalents in the year
Cash flow from (increase)/decrease in debt
increase in net debt resulting from cash flows
Debt added on acquisition
Recognition of loan notes
Non-cash items^
Exchange differences
increase in net debt in the year
Net debt at 1 January
Net debt at 31 December
2015
£m
(14.1)
(86.6)
(100.7)
(2.5)
(2.7)
(3.9)
0.8
(109.0)
(126.9)
(235.9)
2014
£m
(2.7)
0.7
(2.0)
(0.1)
–
(3.8)
0.2
(5.7)
(121.2)
(126.9)
^ 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, deferred consideration, other financial assets, bank overdrafts, derivative
financial instruments, loan notes, private placement notes, bank loans and obligations under finance lease contracts.
24298.02 30 March 2016 2:38 PM PROOF1
147
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Notes to the Accounts CONTiNUED
27. ANALYSIS OF NET DEBT
Cash and cash equivalents
Bank overdrafts
Financial assets – derivative
financial instruments
Other financial assets and
deferred consideration
Debts due within one year*
Debts due after one year
Finance lease contracts
Net debt
At
31 December
2014
£m
110.3
(4.4)
105.9
Cash
flows
£m
(28.1)
1.9
(26.2)
33.9
(0.5)
2.4
(3.1)
(255.5)
(10.5)
(126.9)
0.1
(88.6)
–
2.4
(112.8)
Net cash
added
on acquisition
£m
Reclassification
of debts
£m
Recognition
of loan notes
£m
Non-cash
items^
£m
Exchange
difference
£m
At
31 December
2015
£m
12.1
–
12.1
–
–
(1.8)
–
(0.7)
9.6
–
–
–
–
–
(160.3)
160.3
–
–
–
–
–
–
–
(2.7)
–
–
(2.7)
–
–
–
(5.3)
0.2
(5.1)
89.0
(2.3)
86.7
(1.7)
5.1
36.8
–
(1.8)
1.4
(1.8)
(3.9)
0.3
3.0
(3.1)
0.6
0.8
2.8
(255.3)
(96.9)
(10.0)
(235.9)
^ 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.
* Debts due within one year added on acquisition includes £0.3m of deferred consideration.
28. 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 2015 and 2049.
2015
£m
7.7
2014
£m
15.8
The rentals payable are subject to renegotiation at various dates. The total future minimum lease rentals under the foregoing leases are
as follows:
Minimum lease rentals due:
– within one year
– after one year and within five years
– after five years
2015
£m
49.5
129.2
60.6
239.3
2014
£m
45.1
113.5
56.2
214.8
The Group also leases certain items of plant and machinery whose total future minimum lease rentals under the foregoing leases are as
follows:
Minimum lease rentals due:
– within one year
– after one year and within five years
– after five years
2015
£m
14.1
19.2
0.2
33.5
2014
£m
12.9
17.9
1.0
31.8
c) pension schemes
The Group operates a number of pension schemes, six (2014: six) of which provide defined benefits based on final pensionable salary.
Of these schemes, one (2014: one) has assets held in a separate trustee administered fund and five (2014: 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.
148
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI 28. GUARANTEES AND OTHER FINANCIAL COMMITMENTS CONTiNUED
c) pension schemes continued
in The Netherlands, the Company 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 decreased to 105.3% as at 31 December 2015 (2014: 112.2%). No change
was made to the pension premium percentage of 22.2% (2014: 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.
in Belgium, the Company provides pensions for employees through a defined contribution scheme which, following a change in
Belgian legislation, has a minimum guaranteed rate of return and is accounted for as a defined benefit scheme under iAS 19. The
Company has insured its liabilities. At 31 December 2015 the scheme has gross assets and liabilities of £0.4m (2014: £nil).
The Group’s total pension charge for the year including amounts charged to interest was £7.8m (2014: £7.4m), of which a charge of
£2.2m (2014: £1.9m) related to defined benefit pension schemes and £5.6m (2014: £5.5m) related to defined contribution schemes.
Defined benefit pension scheme valuations
in accordance with iAS 19 the Group recognises 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 2013 and showed that the market value of the scheme’s assets was £131.4m and their
actuarial value covered 90% of the benefits accrued to members after allowing for expected future increases in pensionable salaries.
The other five 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.
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 £0.7m (2014: £0.6m) relating to the defined benefit pension
schemes was £2.2m (2014: £1.9m).
in accordance with iAS 19, the charge 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. The actuarial valuations described
previously have been updated at 31 December 2015 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.
24298.02 30 March 2016 2:38 PM PROOF1
149
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Notes to the Accounts CONTiNUED
28. GUARANTEES AND OTHER FINANCIAL COMMITMENTS CONTiNUED
c) pension schemes continued
Consolidated Balance Sheet liability
The balance sheet position in respect of the six defined benefit schemes can be summarised as follows:
Pension liability before taxation
Related deferred tax asset
Pension liability after taxation
2015
£m
(23.8)
5.2
(18.6)
2014
£m
(28.7)
6.4
(22.3)
The actuarial gain of £1.9m (2014: loss of £7.7m) for the year, together with the associated deferred tax charge of £0.2m (2014: credit
of £1.7m) and deferred tax charge of £0.7m (2014: £0.1m) in respect of the change in the UK standard rate of corporation tax to 19%
from 1 April 2017 and 18% from 1 April 2020, has been recognised in the Consolidated Statement of Comprehensive income. in
addition a deferred tax charge of £0.2m (2014: £0.7m) has been recognised in the Consolidated income Statement. A full reconciliation
of the deferred tax movement is shown in Note 22.
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 £37.7m (2014: £39.6m).
Of the above pension liability before taxation, £15.4m (2014: £19.4m) relates to wholly or partly funded schemes and £8.4m (2014:
£9.3m) relates to the overseas unfunded schemes.
The movement in the pension liability before taxation in the year can be summarised as follows:
Pension liability at 1 January
Current service cost
Transfer to accruals
Payment of unfunded benefits
Contributions
Net finance cost
Actuarial gain/(loss)
Effect of changes in exchange rates
Pension liability at 31 December
2015
£m
(28.7)
(1.5)
1.0
0.2
3.5
(0.7)
1.9
0.5
2014
£m
(25.5)
(1.3)
–
2.4
3.4
(0.6)
(7.7)
0.6
(23.8)
(28.7)
Contributions of approximately £3.4m are expected to be paid to defined benefit pension schemes during the annual period beginning
1 January 2016. The Group is contracted to pay £2.5m per annum to January 2019. 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
2015
%
2.5
1.7
3.0
3.9
3.1
2014
%
2.5
1.6
2.9
3.6
3.0
2013
%
2.5
2.5
3.3
4.5
3.3
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 27.4 years (2014: 27.4 years). The life expectancy
on retirement at age 60 of a male employee currently aged 40 years is 29.2 years (2014: 29.1 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 £7.1m. if the rate of inflation increased/decreased by 0.25% this would increase/decrease the Group’s gross pension scheme deficit
by £1.6m. if the life expectancy for employees increased/decreased by one year the Group’s gross pension scheme deficit would
increase/decrease by £6.3m.
150
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI 28. GUARANTEES AND OTHER FINANCIAL COMMITMENTS CONTiNUED
c) pension schemes continued
The average duration of the defined benefit scheme obligation at 31 December 2015 is 18 years (2014: 18 years).
The fair value of the assets in the schemes at each balance sheet date were:
Equities
Bonds
Other
Total fair value of assets
2015
£m
65.5
55.5
21.8
142.8
2014
£m
74.7
51.5
16.8
2013
£m
62.7
44.9
23.5
2012
£m
57.8
44.6
14.8
2011
£m
50.3
40.4
9.5
143.0
131.1
117.2
100.2
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
2015
£m
142.8
(166.6)
2014
£m
143.0
(171.7)
2013
£m
131.1
(156.6)
2012
£m
117.2
(151.6)
2011
£m
100.2
(144.7)
(23.8)
(28.7)
(25.5)
(34.4)
(44.5)
The overall expected rate of return is based upon market conditions at the balance sheet date.
Amounts recognised in the Consolidated income Statement in respect of these defined benefit schemes are as follows:
Current service cost
Net finance cost
Amounts recognised in the Consolidated Income Statement
2015
£m
1.5
0.7
2.2
2014
£m
1.3
0.6
1.9
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 £2.5m (2014: £12.6m).
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
impact of liability experience
Remeasurement of the defined benefit liability
2015
£m
(2.7)
–
3.9
0.7
1.9
2014
£m
6.7
5.2
(21.7)
2.1
(7.7)
The remeasurement of the net defined benefit liability is included within the Consolidated Statement of Comprehensive income.
24298.02 30 March 2016 2:38 PM PROOF1
151
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Notes to the Accounts CONTiNUED
28. GUARANTEES AND OTHER FINANCIAL COMMITMENTS CONTiNUED
c) pension schemes continued
Movements in the present value of the schemes’ liabilities were as follows:
Present value of schemes’ liabilities at 1 January
Current service cost
Transfer to accruals
interest on pension schemes’ liabilities
Benefits paid
Payment of unfunded benefits
Effect of changes in exchange rates
Remeasurement gains/(losses):
Actuarial gain arising from changes in demographic assumptions
Actuarial gain/(loss) arising from changes in financial assumptions
Actuarial gain due to liability experience
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
2015
£m
2014
£m
(171.7)
(156.6)
(1.5)
1.0
(5.8)
6.1
0.2
0.5
–
3.9
0.7
(166.6)
2015
£m
143.0
5.1
(2.7)
3.5
(6.1)
(1.3)
–
(6.5)
4.1
2.4
0.6
5.2
(21.7)
2.1
(171.7)
2014
£m
131.1
5.9
6.7
3.4
(4.1)
Fair value of schemes’ assets at 31 December
142.8
143.0
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 £12.5m (2014: £11.0m). Of this amount, £9.0m (2014: £9.0m) relates to a standby letter of credit issued by
HSBC Bank plc in respect of the Group’s insurance arrangements.
29. 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 £251m in 2015 (2014: £282m). At the balance sheet date net trade payables in respect of the co-operative amounted to
£1m (2014: £3m).
in 2015, SiG incurred expenses of £0.3m (2014: £0.3m) on behalf of the SiG plc Retirement Benefits Plan, the UK defined benefit
pension scheme.
remuneration of key management personnel
The total remuneration of key management personnel of the Group, being the Executive Committee members and the Non-Executive
Directors, (see page 93) was £2.5m (2014: £4.3m). Further details of Directors’ Remuneration can be found on page 89 to 98. in
addition, the Group recognised a share-based payment charge under iFRS 2 in respect of the Directors of less than £0.1m (2014:
£0.1m).
30. SUBSIDIARIES
Details of the Group’s subsidiaries, all of which have been included in the Consolidated Accounts, are shown on pages 170 to 172.
152
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www.sigplc.com Stock code: ShI Independent Auditor’s Report
TO ThE MEMBERS OF SIG PlC
OPINION ON FINANCIAL STATEMENTS OF SIG PLC
In our opinion:
Æ 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
2015 and of the Group’s profit for the year then ended;
Æ the Group financial statements have been properly prepared in accordance with international Financial Reporting Standards (iFRSs)
as adopted by the European Union;
Æ the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice including, Financial Reporting Standard 101 “Reduced Disclosure Framework”; and
Æ 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 and Company Statements of Comprehensive
income, the Consolidated and Company Balance Sheets, the Consolidated Cash Flow Statement, the Consolidated and Company
Statements of Changes in Equity, the Statements of Significant Accounting Policies, the Critical Accounting Judgments and Key
Sources of Estimation Uncertainty and the related Group Notes 1 to 30 and the related Parent 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)
including, Financial Reporting Standard 101 “Reduced Disclosure Framework”.
GOING CONCERN AND THE DIRECTORS’ ASSESSMENT OF THE PRINCIPAL RISKS THAT
WOULD THREATEN THE SOLVENCY OR LIqUIDITY OF THE GROUP
As required by the Listing Rules we have reviewed the Directors’ statement regarding the appropriateness of the going concern basis
of accounting contained within the Strategic Report on page 39 and the Directors’ statement on the longer-term viability of the Group
contained within the Strategic Report, on page 39.
We have nothing material to add or draw attention to in relation to:
Æ the Directors’ confirmation on page 39 that they have carried out a robust assessment of the principal risks facing the Group,
including those that would threaten its business model, future performance, solvency or liquidity;
Æ the disclosures on pages 20 to 23 that describe those risks and explain how they are being managed or mitigated;
Æ the Directors’ statement on page 39 about whether they considered it appropriate to adopt the going concern basis of accounting
in preparing them and their identification of any material uncertainties to the Group’s ability to continue to do so over a period of at
least twelve months from the date of approval of the financial statements; and
Æ the Directors’ explanation on page 39 as to how they have assessed the prospects of the Group, over what period they have done
so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that
the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including
any related disclosures drawing attention to any necessary qualifications or assumptions.
We agreed with the Directors’ adoption of the going concern basis of accounting and we did not identify any such material
uncertainties. 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.
INDEPENDENCE
We are required to comply with the Financial Reporting Council’s Ethical Standards for Auditors and we confirm that we are
independent of the Group and we have fulfilled our other ethical responsibilities in accordance with those standards. We also confirm
we have not provided any of the prohibited non-audit services referred to in those standards.
24298.02 30 March 2016 2:38 PM PROOF1
153
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Independent Auditor’s Report CONTiNUED
TO ThE MEMBERS OF SIG PlC
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 recognition and measurement of supplier rebate income
Rebate income earned by the Group is significant to the Group’s
result and affects the recorded value of cost of sales, trade
payables and inventory. in some cases, rebate calculations
are complex and judgmental, particularly at a time of uncertain
demand and difficult trading conditions, being based on
estimates of purchases and/or non-coterminous trading periods.
Further explanation is given on page 114 Critical Accounting
Judgments and Key Sources of Estimation Uncertainty.
The consideration made by the Audit Committee is set out on
page 75.
The assessment of the carrying value of goodwill and
intangible assets
The goodwill and intangible assets (excluding computer
software) of £494.4m represent 33% of total assets and 71% of
non-current assets and therefore the judgments over the carrying
value are significant.
Management’s judgments in relation to the financial forecasts of
the business units, discount rates and perpetuity growth rates
used to determine the value in use of the CGUs are subjective
and are described in the Critical Accounting Judgments and Key
Sources of Estimation Uncertainty on page 114 and Note 11 to
the financial statements.
We evaluated the design and implementation of key controls
related to the recognition of supplier rebate income where
income is significant. We discussed significant rebate contracts
with the commercial managers to understand the complexities
and judgments that may exist over income recognition.
We circularised suppliers in business units where rebate income
is significant to confirm a sample of amounts receivable,
including high value balances. Where supplier responses were
not returned, we reviewed further correspondence between
the Group and the supplier to verify the position taken. We also
considered post year end recoveries against receivables.
We re-performed a sample of management’s calculations of
rebate income, agreeing volumes to purchasing records and
correspondence from suppliers where available or to other
available documentation, and agreeing the rebate percentages
applied to a signed contract where available or to other
supplier correspondence. We compared rebate income earned
by supplier against historical rates achieved and considered
previous estimation accuracy to identify significant movements
for further testing or enquiries.
We challenged whether the recognition policies and estimates
were appropriate, particularly when there were non-coterminous
trading periods, renegotiated rebate agreements and buy-ins,
and we performed detailed testing to determine whether an
appropriate level of rebate had been adjusted against stock to
reflect the net cost of the related items.
We evaluated the design and implementation of key controls
related to the assessment of the carrying value of goodwill and
intangible assets.
We challenged management’s assumptions used in the
impairment model for goodwill and intangible assets,
including specifically the cash flow projections, changes to
the discount rates applied and perpetuity rates used. We
performed sensitivity analysis against these assumptions.
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. We tested the integrity of the model
using our computer assisted analytical tools.
Particular focus has been given to Larivière given its carrying
value of goodwill of £144.7m and the difficult trading conditions
in France. As a result we applied a greater level of verification
to the growth rates and additional sensitivity analysis over the
trading performance and judgments taken.
154
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www.sigplc.com Stock code: ShI Risk
How the scope of our audit responded to the risk
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 includes certain costs relating to
a significant restructuring programme. The inappropriate or
inconsistent inclusion of income/costs within Other items could
distort the underlying profit disclosed. The Group’s definition
for separate presentation within Other items is set out in the
Statement of Significant Accounting Policies on page 108. The
net loss associated with Other items is £36.1m and reduces the
Group’s underlying profit before tax by 41%.
This is on the face of the Consolidated income Statement on
page 102 and also Note 2.
The recognition and measurement of provisions for trade
receivables
Trade receivables represent 49% of the Group’s current
assets. The judgments regarding aged or impaired receivables
are significant and are subjective with respect to the trading
conditions in some of the countries in which the Group operates,
particularly in ireland.
Further explanation is given on page 114 Critical Accounting
Judgments and Key Sources of Estimation Uncertainty and Note
15 in the Annual Report and Accounts.
We evaluated the design and implementation of key controls
related to the recognition and presentation of Other items. We
assessed the nature of the income/costs included in Other
items and challenged whether they met the Group’s definition
for separate presentation. 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 by verifying these against supporting invoices,
agreements and other records as appropriate. Particular focus
has been given to net restructuring costs of £8.3m as set out
on page 118 to determine whether they arise from significant
restructuring and changing the shape of the business rather
than minor changes to the Group’s structure.
We evaluated the design and implementation of key controls
related to the recognition and measurement of provisions
for trade receivables. We challenged the appropriateness
of management’s assumptions and estimates in relation to
the provisions for trade receivables through discussions
with local management who are the most knowledgeable of
the customers themselves. in assessing completeness and
accuracy we have reviewed evidence of customer disputes and
defaults and whether this indicates that a provision is required.
We have tested the ageing of the ledgers through agreement
of ageing date to proof of customer delivery and recalculated
the provision based upon this. We have assessed the
appropriateness of provisions by considering subsequent cash
receipts, past payment practices and the initial assessment of
customer viability.
The risks noted above remain unchanged from the audit report in the prior year.
The description of risks above should be read in conjunction with the significant issues considered by the Audit Committee discussed
on page 75.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
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.
We determined materiality for the Group to be £4.25m (2014: £5m), which is below 5% (2014: approximately 5%) of underlying pre-tax
profit (as defined on page 102), and below 1% (2014: 1%) of equity. Deteriorating market conditions have had an adverse impact on
sales, driving a lower underlying pre-tax profit resulting in a lower materiality being determined. 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 recognition and presentation of Other items is treated as a significant risk as set out above.
Component materiality ranges between 50% and 95% of Group materiality (£2.1m to £4.0m) based on the components’ blended
revenue and underlying pre-tax profit contribution.
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £85,000 (2014:
£100,000), 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.
24298.02 30 March 2016 2:38 PM PROOF1
155
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Independent Auditor’s Report CONTiNUED
TO ThE MEMBERS OF SIG PlC
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide controls, and
assessing the risks of material misstatement at the Group level. 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 including the United Kingdom, Germany, France, Poland, and
ireland covering 75% of the Group’s total assets (2014: 88%), 90% of revenue (2014: 91%) and 84% of pre-tax profit (2014: 89%).
A further 17% of the Group’s total assets (2014: 9%), 5% of revenue (2014: 6%) and 6% of pre-tax profit (2014: 9%) 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 on pages 154 and 155. 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.
At the Parent Company level we also tested the consolidation process, including testing on the acquisitions which are significant to
the Group’s results and carried out analytical procedures to confirm our conclusion that there were no significant risks of material
misstatement of the aggregated financial information of the remaining components not subject to audit or audit of specified account
balances.
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 once every year and the most significant of them at
least twice a year. During 2015 and 2014 a senior member of the Group audit team visited Germany, France, ireland and the United
Kingdom at least twice, and also Poland once.
OPINION ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion:
Æ the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act
2006;
Æ 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; and
Æ the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
in the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not
identified any material misstatements in the Strategic Report and the Directors’ Report.
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:
Æ we have not received all the information and explanations we require for our audit; or
Æ 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
Æ 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. We have nothing to report arising from these matters.
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 certain provisions of the UK Corporate Governance Code. We have nothing to report arising from our review.
156
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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:
Æ materially inconsistent with the information in the audited financial statements; or
Æ apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group acquired in the course of
performing our audit; or
Æ 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.
RESPECTIVE 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). 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 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 FCA (Senior statutory auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
Leeds, UK
8 March 2016
24298.02 30 March 2016 2:38 PM PROOF1
157
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Five-Year Summary
Statutory basis
Revenue
Operating profit
Finance income
Finance costs
Profit before tax
Profit/(loss) after tax
Earnings/(loss) per share
Total dividend per share
Continuing basis^
Revenue
Operating profit
Finance income
Finance costs
Profit before tax
Profit after tax
Earnings per share
Total
2011
£m
Total
2012
£m
Total
2013
£m
Total
2014
£m
Total
2015
£m
2,808.4
2,635.5
2,719.8
2,633.9
2,566.4
25.6
7.4
(25.4)
7.5
(0.0)
(0.0p)
2.25p
Underlying*
2011
£m
2,499.6
95.2
7.4
(21.2)
81.4
55.8
9.4p
57.9
1.9
(15.8)
43.7
26.6
4.5p
3.00p
Underlying*
2012
£m
2,413.0
93.0
1.5
(13.6)
80.9
55.7
9.4p
15.4
1.6
(14.8)
2.1
(14.3)
(2.5p)
3.55p
Underlying*
2013
£m
2,539.7
101.3
1.4
(12.7)
90.0
63.4
10.7p
53.2
1.0
(15.2)
39.0
34.5
5.6p
4.40p
Underlying*
2014
£m
2,602.9
111.2
0.9
(13.0)
99.1
71.3
12.0p
65.9
1.0
(15.6)
51.3
36.3
6.1p
4.60p
Underlying*
2015
£m
2,566.4
98.7
1.0
(12.3)
87.4
66.4
11.2p
* Underlying figures are stated before the amortisation of acquired intangibles, restructuring costs, acquisition expenses and contingent consideration,
other one-off items, profits and losses arising on the sale or agreed sale of businesses and associated impairment charges, trading profits and losses
associated with disposed businesses, unwinding of provision discounting, fair value gains and losses on derivative financial instruments, one-off
recognition of deferred tax assets, the taxation effect of these items and the effect of changes in taxation rates.
^ All underlying numbers are stated on a continuing basis (i.e. excluding the trading results associated with businesses divested or closed before
31 December 2015).
A more detailed five-year summary can be found in the investor section of the Company’s website (www.sigplc.com).
STRONGER
TOGETHER
158
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www.sigplc.com Stock code: ShI Company Accounts
Prepared Under United Kingdom
Generally Accepted Accounting Practice
(including Financial Reporting Standard 101)
STRONGER
TOGETHER
24298.02 30 March 2016 2:38 PM PROOF1
159
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Company Statement of
Comprehensive Income
for the year ended 31 December 2015
Profit after tax
Items that may subsequently be reclassified to the Company Income Statement
Gains and losses on cash flow hedges
Transfer to profit and loss on cash flow hedges
Other comprehensive expense
Total comprehensive income
Attributable to:
Equity holders of the Company
2015
£m
20.5
(3.3)
2.3
(1.0)
19.5
2014
£m
26.2
(3.7)
2.3
(1.4)
24.8
19.5
24.8
The accompanying Statement of Significant Accounting Policies and Notes to the Accounts are an integral part of this Company
Statement of Comprehensive income.
160
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www.sigplc.com Stock code: ShI Company Balance Sheet
as at 31 December 2015
FINANCIAlS
Fixed assets
investments
Tangible fixed assets
Current assets
Debtors – due within one year
Debtors – due after more than one year
Deferred tax assets
Other financial assets
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
Provisions
Net assets
Capital and reserves
Called up share capital
Share premium account
Merger reserve
Capital redemption reserve
Share option reserve
Exchange reserve
Retained profits
Shareholders’ funds
Note
2015
£m
2014
£m
2013
£m
5
6
7
7
11
8
9
10
12
12
12
12
12
12
12
443.0
1.0
444.0
188.2
683.3
4.0
0.3
12.8
888.6
439.3
449.3
893.3
157.8
2.0
733.5
59.1
447.3
21.7
0.3
1.4
(0.2)
203.9
733.5
443.0
0.1
443.1
90.7
737.3
9.6
–
25.8
863.4
241.1
622.3
446.1
0.1
446.2
65.6
731.7
0.8
–
33.3
831.4
214.5
616.9
1,065.4
320.1
3.4
741.9
1,063.1
324.1
–
739.0
59.1
447.2
21.7
0.3
1.8
(0.2)
212.0
741.9
59.1
447.2
21.7
0.3
1.1
(0.2)
209.8
739.0
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 8 March 2016 and signed on its behalf by:
STUART MITChEll
Director
DOUG ROBERTSON
Director
Registered in England: 998314
24298.02 30 March 2016 2:38 PM PROOF1
161
SIG plc Annual Report and Accounts for the year ended 31 December 2015 Company Statement of
Changes in Equity
year ended 31 December 2015
Called up
share
capital
£m
59.1
Share
premium
account
£m
447.2
Merger
reserve
£m
21.7
Capital
redemption
reserve
£m
0.3
Share
option
reserve
£m
1.1
Exchange
reserve
£m
(0.2)
At 1 January 2014
Profit after tax
Other comprehensive
income/(expense)
Total comprehensive
income/(expense)
Exercise of share options
Credit to share option
reserve
Share capital issued in
the year
Dividends paid to equity
holders of the Company
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
At 31 December 2014
59.1
447.2
21.7
0.3
Profit after tax
Other comprehensive
income/(expense)
Total comprehensive
income/(expense)
Share capital issued in
the year
Debit to share option
reserve
Exercise of share options
Dividends paid to equity
holders of the Company
–
–
–
–
–
–
–
–
–
–
0.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
At 31 December 2015
59.1
447.3
21.7
0.3
Retained
profits
£m
209.8
26.2
Total
Equity
£m
739.0
26.2
(1.4)
(1.4)
24.8
–
–
–
(22.6)
212.0
20.5
24.8
–
0.7
–
(22.6)
741.9
20.5
(1.0)
(1.0)
19.5
19.5
–
–
–
0.1
(0.3)
(0.1)
(27.6)
203.9
(27.6)
733.5
–
–
–
–
0.7
–
–
1.8
–
–
–
–
(0.3)
(0.1)
–
1.4
–
–
–
–
–
–
–
(0.2)
–
–
–
–
–
–
–
(0.2)
There was no movement in the merger reserve, capital redemption reserve and exchange reserve in the year. During 2015 the
Company allotted 209,345 shares (2014: 37,356) following the exercising of share options.
The accompanying Statement of Significant Accounting Policies and Notes to the Accounts are an integral part of this Company
Statement of Changes in Equity.
162
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI Company Statement of
Changes in Equity
year ended 31 December 2015
Company Statement of
Significant Accounting Policies
BASIS OF ACCOUNTING
The separate financial statements of the Company are presented as required by the Companies Act 2006. The Company is exempt
from the preparation of consolidated financial statements because it is included in the Group Accounts of SiG plc as detailed on pages
102 to 152. The separate financial statements have been prepared under the historical cost convention (except for the revaluation of
financial instruments which are held at fair value as disclosed on page 164). Historical cost is generally based on the fair value of the
consideration given in exchange for the goods and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation
technique. in estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or
liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.
Fair value for measurement purposes in these financial statements is determined on such a basis, except for share-based payment
transactions that are within the scope of iFRS 2, leasing transactions that are within the scope of iAS 17, and measurements that have
some similarities to fair value but are not fair value, such as net realisable value in iAS 2 or value in use in iAS 36. Categorisation of fair
value is set out in the Group Accounts on page 137.
The separate financial statements have been prepared in accordance with Financial Reporting Standard 101 “Reduced Disclosure
Framework” (FRS 101). For periods up to and including the year ended 31 December 2014, the Company prepared its financial
statements in accordance with United Kingdom Generally Accepted Accounting Practice (UK GAAP). These financial statements, for
the year ended 31 December 2015, are the first the Company has prepared in accordance with FRS 101.
FRS 101 sets out a reduced disclosure framework for a qualifying entity that would otherwise apply the recognition, measurement and
disclosure requirements of EU-adopted iFRS. The Company is a qualifying entity for the purposes of FRS 101.
As explained above, the Company has adopted FRS 101 for the first time in the current year. As part of this adoption, the following
new and revised Standards and interpretations have been adopted in the current year:
Æ Amendments to iAS 1 “Presentation of Financial Statements” (as part of the Annual improvements to iFRSs 2009 – 2011 Cycle
issued in May 2012); and
Æ iFRS 13 “Fair Value Measurement”.
The application of these specific Standards and interpretations has not had a material effect on the Company.
in preparing these financial statements, the Company has started from an opening Balance Sheet as at 1 January 2014, the
Company’s date of transition to FRS 101, and made those changes in accounting policies and other restatements required by FRS 101
for the first time adoption of FRS 101.
The impact of these amendments to the Company’s previously adopted accounting policies was not material to the Shareholders’
equity as at the date of transition and as at 31 December 2014 and on the profit for the year ended 31 December 2015.
The following exemptions from the requirements of iFRS have been applied in the preparation of these financial statements, in
accordance with FRS 101:
Æ the requirements of paragraphs 45(b) and 46 to 52 of iFRS 2 “Share-based Payment”;
Æ the requirements of iFRS 7 “Financial instruments: Disclosures”;
Æ the requirements of paragraphs 91 to 99 of iFRS 13 “Fair Value Measurement”;
Æ the requirement in paragraph 38 of iAS 1 “Presentation of Financial Statements” to present comparative information in respect of:
i) paragraph 79(a)(iv) of iAS 1;
ii) paragraph 73(e) of iAS 16 “Property, Plant and Equipment”;
Æ the requirements of paragraphs 10(d), 10(f), 16, 38A to 38D, 40A to 40B, 111, and 134 to 136 of iAS 1 “Presentation of Financial
Statements”;
Æ the requirements of iAS 7 “Statement of Cash Flows”;
Æ the requirements of paragraphs 30 and 31 of iAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”;
Æ the requirements of paragraph 17 of iAS 24 “Related Party Disclosures”;
Æ the requirements in iAS 24 “Related Party Disclosures” to disclose related party transactions entered into between two or more
members of a group; and
Æ the requirements of paragraphs 130(f)(ii), 130(f)(iii), 134(d) to 134(f) and 135(c) to 135(e) of iAS 36 “impairment of Assets”.
The Company has notified its Shareholders in writing, and they do not object to the use of the disclosure exemptions used by the
Company in these financial statements. Where required, equivalent disclosures are given in the Group Accounts.
24298.02 30 March 2016 2:38 PM PROOF1
163
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Company Statement of
Significant Accounting Policies CONTiNUED
share-based payments
The accounting policy for share-based payments (iFRS 2) is consistent with that of the Group as detailed on pages 109 and 110.
derivative financial instruments
The accounting policy for derivative financial instruments is consistent with that of the Group as detailed on page 111.
Financial assets and liabilities
The accounting policy for financial assets and liabilities is consistent with that of the Group as detailed on pages 110 and 111.
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 112.
Foreign currency
The accounting policy for foreign currency is consistent with that of the Group as detailed on page 110.
taxation
The accounting policy for taxation is consistent with that of the Group as detailed on page 112.
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.
CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
in the application of the Company’s accounting policies, which are described above, the Directors are required to make judgments,
estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual
results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the change takes place if the revision affects only that period, or in the period of the revision and future periods if the
revision affects both current and future periods.
critical judgments in applying the company’s accounting policies
The critical accounting judgments are consistent with that of the Group as detailed on page 114.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that may have
a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are
discussed below.
Impairment of fixed asset investments
Determining whether the Company’s investments in subsidiaries have been impaired requires estimations of the investments’ values
in use. The value in use calculations require the entity to estimate the future cash flows expected to arise from the investments and
suitable discount rates in order to calculate present values. The carrying amount of investments in subsidiaries at the balance sheet
date was £443m (2014: £443m) with no impairment loss recognised in 2015 or 2014.
deferred tax assets
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, estimates are made to establish whether deferred tax balances should be recognised, in particular in
respect of non-trading losses.
164
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI Notes 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 Company income Statement
for the year. SiG plc reported a profit after tax for the financial year ended 31 December 2015 of £20.5m (2014: £26.2m).
The Auditor’s remuneration for audit services to the Company was £0.1m (2014: £0.1m).
2. SHARE-BASED PAYMENTS
The Company had three share-based payment schemes in existence during the year ended 31 December 2015. The Company
recognised a total charge of £0.1m (2014: £0.7m) in the year relating to share-based payment transactions issued after 7 November
2002. Details of each of the three share-based payment schemes can be found in Note 9 to the Group Accounts on pages 124 to 126.
3. DIVIDENDS
An interim dividend of 1.69p per ordinary share was paid on 7 November 2015 (2014: 1.42p). The Directors have proposed a final
dividend for the year ended 31 December 2015 of 2.91p per ordinary share (2014: 2.98p). 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 2015 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
iFRS 2 share option charge
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
Disposals
At 31 December
Accumulated impairment charges
At 1 January
impairment charge
Disposals
At 31 December
Net book value
At 31 December
At 1 January
Details of the Company’s subsidiaries are shown on pages 170 to 172.
2015
£m
4.7
0.6
0.1
0.3
5.7
2014
£m
5.1
0.7
0.7
0.3
6.8
2015
Number
49
2014
Number
25
2015
£m
650.2
–
650.2
207.2
–
–
207.2
443.0
443.0
2014
£m
662.3
(12.1)
650.2
216.2
3.1
(12.1)
207.2
443.0
446.1
24298.02 30 March 2016 2:38 PM PROOF1
165
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Notes to the Company Accounts CONTiNUED
6. TANGIBLE FIXED ASSETS
The movement in the year was as follows:
Cost
At 1 January 2014
Additions
Disposals
At 1 January 2015
Additions
Disposals
At 31 December 2015
Depreciation
At 1 January 2014
Charge for the year
Disposals
At 1 January 2015
Charge for the year
Disposals
At 31 December 2015
Net book value
At 31 December 2015
At 31 December 2014
Land and buildings
Freehold
land and
buildings
£m
Short
leasehold
£m
Plant and
machinery
£m
0.1
–
–
0.1
–
–
0.1
0.1
–
–
0.1
–
–
0.1
–
–
–
–
–
–
0.8
–
0.8
–
–
–
–
0.1
–
0.1
0.7
–
0.4
0.1
(0.1)
0.4
0.3
–
0.7
0.3
–
–
0.3
0.1
–
0.4
0.3
0.1
Total
£m
0.5
0.1
(0.1)
0.5
1.1
–
1.6
0.4
–
–
0.4
0.2
–
0.6
1.0
0.1
No impairment review was performed in 2015 or 2014 as there were no indications of impairment.
7. DEBTORS
Amounts owed by subsidiary undertakings
Corporation tax recoverable
Derivative financial instruments
Prepayments and accrued income
Deferred consideration
Debtors - due within one year
Amounts owed by subsidiary undertakings
Derivative financial instruments
Deferred consideration
Debtors - due after more than one year
Total
31 December
2015
£m
31 December
2014
£m
1 January
2014
£m
150.1
1.0
34.4
1.2
1.5
188.2
680.9
2.4
–
683.3
871.5
89.8
–
–
0.9
–
90.7
701.9
33.9
1.5
737.3
828.0
64.1
0.6
–
0.9
–
65.6
702.0
29.7
–
731.7
797.3
166
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI
8. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Private placement notes
Bank loans
Bank overdrafts
Amounts owed to subsidiary undertakings
Derivative financial instruments
Accruals and deferred income
Corporation tax
Total
31 December
2015
£m
31 December
2014
£m
160.1
88.1
69.8
109.2
1.3
8.0
2.8
–
–
40.4
189.7
0.5
9.3
1.2
1 January
2014
£m
–
–
54.8
150.0
0.1
9.6
–
439.3
241.1
214.5
All of the Company’s bank loans and overdrafts are unsecured. The bank loans are guaranteed by certain companies of the Group.
9. CREDITORS: AMOUNTS FALLING DUE AFTER ONE YEAR
Private placement notes
Derivative financial instruments
Amounts owed to subsidiary undertakings
Total
31 December
2015
£m
31 December
2014
£m
95.8
0.7
61.3
157.8
254.3
0.6
65.2
320.1
1 January
2014
£m
252.5
2.0
69.6
324.1
Details of the private placement notes (before applying associated derivative financial instruments) are as follows:
Repayable in 2016*
Repayable in 2018
Repayable in 2020
Repayable in 2021
Repayable in 2023
Total
31 December 2015
31 December 2014
1 January 2014
Fixed interest rate
Fixed interest rate
Fixed interest rate
£m
160.1
22.4
22.0
14.7
36.7
255.9
%
5.9
5.2
3.7
3.9
4.2
5.3
£m
153.3
23.1
23.4
15.6
38.9
254.3
%
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
%
5.9
5.1
3.7
3.9
4.2
5.2
* The private placement notes repayable in 2016 are included within creditors: amounts falling due within one year in 2015.
All Group derivative financial instruments entered into by the Company have been disclosed in Note 18 of the Group Accounts on
pages 136 to 139.
10. PROVISIONS
At 1 January 2014
New provisions
Transferred in from accruals
Utilised
At 31 December 2014
Unwinding of provision discounting
Utilised
At 31 December 2015
Warranty Claims
£m
–
3.7
0.7
(1.0)
3.4
0.1
(1.5)
2.0
24298.02 30 March 2016 2:38 PM PROOF1
167
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Notes to the Company Accounts CONTiNUED
10. PROVISIONS CONTiNUED
Amounts falling due within one year
Amounts falling due after one year
Total
31 December
2015
£m
31 December
2014
£m
1 January
2014
£m
0.7
1.3
2.0
1.4
2.0
3.4
–
–
–
The transfer of economic benefit in respect of the warranty provision is expected to be made between one and twenty three years’
time.
11. DEFERRED TAX
Deferred tax assets
31 December
2015
£m
31 December
2014
£m
1 January
2014
£m
4.0
9.6
0.8
The different components of deferred tax assets and liabilities recognised by the Company and movements thereon during the current
and prior reporting period are analysed below:
At 1 January 2014
Credit to income
Utilised
At 31 December 2014
Credit/(charge) to income
Utilised
At 31 December 2015
Losses
£m
–
14.8
(6.1)
8.7
0.7
(5.5)
3.9
Other
£m
0.8
0.1
–
0.9
(0.8)
–
0.1
Given the current profitability of the Company, the Directors consider that the recognition of the deferred tax assets above is
appropriate.
12. CAPITAL AND RESERVES
Called up share capital
Share premium account
Merger reserve
Capital redemption reserve
Share option reserve
Exchange reserve
Retained profits
Total reserves
31 December
2015
£m
31 December
2014
£m
59.1
447.3
21.7
0.3
1.4
(0.2)
203.9
733.5
59.1
447.2
21.7
0.3
1.8
(0.2)
212.0
741.9
Total
£m
0.8
14.9
(6.1)
9.6
(0.1)
(5.5)
4.0
1 January
2014
£m
59.1
447.2
21.7
0.3
1.1
(0.2)
209.8
739.0
168
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI 12. CAPITAL AND RESERVES CONTiNUED
The movement in reserves during the year was as follows:
At 1 January 2014
Exercise of share options
Credit 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 2014
issue of share capital
Debit to share option reserve
Exercise of share options
Fair value movement on cash flow hedges
Transfer to profit and loss on cash flow hedges
Profit for the period
Dividends
At 31 December 2015
Called up
share
capital
£m
59.1
–
–
–
–
–
–
–
59.1
–
–
–
–
–
–
–
Share
premium
account
£m
447.2
–
–
–
–
–
–
–
447.2
0.1
–
–
–
–
–
–
Share
option
reserve
£m
1.1
–
0.7
–
–
–
–
–
1.8
–
(0.3)
(0.1)
–
–
–
–
Retained
profits
£m
209.8
–
–
(3.7)
2.3
–
26.2
(22.6)
212.0
–
–
–
(3.3)
2.3
20.5
(27.6)
59.1
447.3
1.4
203.9
There was no movement in the merger reserve, capital redemption reserve and exchange reserve in the year. During 2015 the
Company allotted 209,345 shares (2014: 37,356) following the exercising of share options.
The Company has sufficient distributable reserves to pay dividends for a number of years, and when required the Company can
receive dividends from its subsidiaries to further increase distributable reserves.
Details of the Company’s share capital can be found in Note 24 of the Group Accounts on page 146.
13. GUARANTEES AND OTHER FINANCIAL COMMITMENTS
a) Guarantees
At 31 December 2015 the Company had provided guarantees of £9.0m (2014: £5.5m) on behalf of its subsidiary undertakings.
b) contingent liabilities
As at the balance sheet date, the Company had outstanding obligations under a standby letter of credit of up to £9.0m (2014: £9.0m).
This standby letter of credit, issued by HSBC Bank plc, is in respect of the Group’s insurance arrangements.
14. RELATED PARTY TRANSACTIONS
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 the audited part of the Directors’ Remuneration Report on pages 89 to 98. in addition, the Company recognised a share-
based charge under iFRS 2 of £0.1m (2014: £0.7m).
24298.02 30 March 2016 2:38 PM PROOF1
169
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Group Companies 2015
Full list of subsidiary undertakings
The SiG Group comprises a large number of companies. A full list of subsidiary undertakings in which an SiG Group Company has a
controlling interest as at 31 December 2015 is detailed below. The list includes those subsidiaries which in the Directors’ opinion affect
the figures shown in the consolidated financial statements. The country of incorporation and the effective percentage of equity owned
(if less than 100 per cent) is also detailed. Unless otherwise noted, the share capital comprises shares which are indirectly held by SiG
plc. Unless otherwise stated, the share capital disclosed comprises ordinary shares.
Fully owned subsidiaries
A. M. Proos & Sons (Birmingham) Limited (England) (ii)
A. M. Proos & Sons Limited (England) (ii)
A. M. Proos (South) Limited (England) (ii)
A. Steadman & Son (Holdings) Limited (England) (ii)
A. Steadman & Son Limited (England) (ii)
Aaron Roofing Supplies Limited (England) (ii)
Accurate Roofing Supplies Limited (England) (ii)
Acoustic and Insulation Manufacturing Limited (England) (ii)
Acoustic and Insulation Materials Limited (England) (ii)
ADB Industrial Gloves & Clothing Limited (England) (ii)
Advanced Cladding & Insulation Group Limited (England) (ii)
Ainsworth Insulation Limited (England) (ii) (xi)
Ainsworth Insulation Supplies Limited (England) (ii) (xiii)
Air Trade Centre Hungary Kft (Hungary)
Air Trade Centre International B.V. (The Netherlands)
Air Trade Centre Netherlands B.V. (The Netherlands)
Air Trade Centre Poland Sp. z.o.o. (Poland)
Air Trade Centre SRL Romania (Romania)
Air Trade Centre UK Limited (England) (ii)
AIS Insulation Supplies Limited (England) (ii)
Alltrim Plastics (Stoke) Limited (England) (ii)
Alltrim Plastics Limited (England) (ii)
Asphaltic Properties Limited (England) (ii)
Asphaltic Roofing Supplies Limited (England) (ii)
Asimex Klimaattechniek B.V. (The Netherlands)
Auron Limited (England) (ii) (xix)
BBM (Materials) Limited (England) (ii)
Beleggingsmij Interland Techniek B.V. (The Netherlands)
Blueprint Construction Supplies Limited (England) (ii)
Bondec Boards Limited (England) (ii)
Border Slate Suppliers Limited (Scotland) (ii)
Bowller Group Limited (England) (ii)
Builders-Express Limited (England) (ii)
Buildspan Holdings Limited (England) (ii) (vii)
Buildspan Limited (England) (ii)
C. P. Supplies Limited (England) (ii)
Cairns Roofing and Building Merchants Limited (England) (ii)
Capco (Northern Ireland) Limited (Northern Ireland) (ii) (vii)
Capco Interior Supplies Limited (England) (ii) (xv)
Capco Interior Supplies Limited (Ireland) (ii)
Capco Slate & Tile Limited (England) (ii)
Capco Slate & Tile Limited (Ireland) (ii)
Capco UK Holdings Limited (England) (ii) (xiv)
Capco UK Holdings Limited (Ireland)
Carpet and Flooring (Midlands) Limited (England) (ii)
Carpet and Flooring (South West) Limited (England) (ii)
Ceiling System Supplies Limited (England) (ii) (xv)
Ceilings Distribution Limited (England) (i) (ii)
Central Refractories Scotland Limited (Scotland) (ii)
CH Insulation Products Limited (England) (ii) (viii)
Cheshire Roofing Supplies Limited (England) (ii)
Cladding and Fascia Supplies Limited (England) (ii)
Classicbond Limited (England) (ii)
Clyde Insulation (Contracts) Limited (Scotland) (ii)
Clyde Insulation Supplies Limited (Scotland) (ii)
Clydesdale Roofing Supplies (Leyland) Limited (England) (ii)
C.M.S. Acoustic Solutions Limited (England) (ii) (x)
CMS Danskin Acoustics Limited (England) (ii)
C.M.S. Vibration Solutions Limited (England) (ii) (xv)
Coleman Group Limited (England) (ii) (xviii)
Coleman Roofing Supplies Limited (England) (ii)
Conservatory Village Limited (England) (ii)
Construction Material Specialists Limited (England) (ii) (xvi)
Coolag Hamar B.V. (The Netherlands)
Coxbench IP Limited (England) (ii)
CPD Distribution Plc (England) (ii)
Dane Weller Glass and Blinds Limited (England) (ii)
Dane Weller Holdings Limited (England) (ii)
Danskin Flooring Systems Limited (Scotland) (ii)
Dataplus Software Limited (England) (ii)
Davies & Tate Installations Limited (England) (ii)
Davies & Tate Replacement Window Systems Limited
(England) (ii)
Davies and Tate plc (England) (ii)
Daylight Domes Limited (England) (ii)
Direct Roofing Supplies Limited (England) (ii)
Drainage Online Limited (England) (ii)
Drainex Limited (England) (ii) (viii)
Drywall Qatar LLC (Qatar)
Dyfed Roofing Centre Limited (England) (ii)
Elthisol S.A.R.L. (France)
Eurisol Limited (England) (ii)
Euroform Products Limited (England) (ii)
Eviee Limited (England) (ii)
Exton Construction Supplies Limited (England) (ii)
Fastplas Limited (Scotland) (ii)
Fibreglass Insulations Limited (England) (ii)
Fireseal (North West) Limited (England) (ii)
Firth Powerfix Limited (England) (ii) (vii)
Footitts Roofing Supplies Limited (England) (ii)
Formerton Limited (England) (ii)
Formerton Sheet Sales Limited (England) (ii)
Frankin (Sussex) Limited (England) (ii)
Freeman Group Limited (England) (i) (ii)
Freeman Holdings Limited (England) (ii)
Gate Pizzaras SL (Spain)
General Fixings Limited (England) (ii)
The Greenjackets Roofing Services Limited (England) (ii) (xv)
GRM Distribution Limited (England) (ii)
G.S. Insulation Supplies Limited (England) (ii)
Gutters & Ladders (1968) Limited (England) (ii)
Hamar B.V. (The Netherlands)
Handelmaatschappij Bracol Nederland B.V. (The Netherlands)
Harris Roofing Supplies Gloucester Limited (England) (ii)
HC Barcol Air B.V. (The Netherlands)
HC Groep B.V. (The Netherlands)
HCKP B.V. (The Netherlands)
HCPS B.V. (The Netherlands)
HHI Building Products Limited (Northern Ireland) (ii)
Hillsborough (Guernsey) Limited (Guernsey)
Hillsborough Investments Limited (England) (i) (ii) (iii)
Hillsborough Investments (Guernsey) Limited (Guernsey) (ii)
Holland Conditioning B.V. (The Netherlands)
Homewarm Insulation Limited (England) (i) (ii)
Houdstermaatschappij Gisama B.V. (The Netherlands)
IBSL Group Limited (England) (ii)
Idencourt Limited (England) (ii)
Impex Avon Limited (England) (ii) (xv)
IMS Asia-Pacific Pty (Australia) (ii)
Isolatec b.v.b.a. (Belgium)
Insulation & Buoyancy Services Limited (England) (ii)
Insulation and Machining Services Limited (England) (ii)
Insulation Express Limited (England) (ii)
Insulation Products & Systems B.V. (The Netherlands)
Insulslab Limited (England) (ii)
Interland Techniek B.V. (The Netherlands)
J. Danskin & Company Limited (Scotland) (ii)
J S McCarthy Limited (Ireland)
John Hughes (Roofing Merchant) Limited (England) (ii)
John Hughes (Wigan) Limited (England) (ii)
Jordan Wedge Limited (England) (ii)
JP Fixings Limited (Scotland) (ii)
K.D. Insulation Supplies Limited (England) (ii)
Kem Edwards Limited (England) (ii)
Kent Flooring Supplies Limited (England) (ii)
Kesteven Roofing Centre Limited (England) (ii)
KG SML System and Metallbau GmbH & Co. (Germany)
Kitson’s Thermal Supplies Limited (England) (ii) (v)
Landsdon Holdings Limited (England) (ii) (xv)
Landsdon Limited (England) (ii) (x)
Lariviere SAS (France)
Leaderflush + Shapland Holdings Limited (England)
Lee and Son Limited (England) (ii)
Leicester Ceiling Supplies Limited (England) (ii)
Lifestyle Partitions and Furniture Limited (England) (ii) (vi)
LITT Diffusion SAS (France)
London Insulation Supplies Limited (England) (ii)
Long Construction Services (Northern Ireland) Limited
(Northern Ireland) (ii)
MacGregor & Moir Limited (Scotland) (ii)
Marvellous Fixings Limited (England) (ii)
Max Wilson Fasteners Limited (England) (ii)
Mayplas Limited (England) (ii) (ix)
M.C. Insulation Supplies Limited (England) (ii)
Megawand B.V. (The Netherlands)
Meldertse Plafonneerartikelen N.V. (Belgium)
MIT International Trading S.L. (Spain)
Modulus B.V. (The Netherlands)
170
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI Tooltray.com Limited (England) (ii)
Trent Insulations Limited (England) (ii)
Trimform Products Limited (England) (ii)
TSS Plastics Centre Limited (England) (ii)
Turner Fixings Limited (England) (ii)
U.M.B. Amersfoort B.V. (The Netherlands)
U.M.B. Tiel B.V. (The Netherlands)
Undercover Holdings Limited (England) (ii)
Undercover Insulations Limited (England) (ii)
Undercover Roofing Supplies Limited (England) (ii)
United Roofing Products Limited (England) (ii)
United Trading Company (UK) Limited (England) (ii) (vii)
Universal Roofing Supplies Limited (England) (ii)
Valley Sealants Limited (England) (ii)
V.J. Technology Limited (England) (ii)
W.W. Fixings Limited (England) (ii) (xvi)
Walkwell Flooring Supplies Limited (England) (ii)
Warm A Home Limited (England) (ii) (xx)
Warren Insulation plc (England) (ii)
Warwickshire Roofing Centre Limited (England) (ii)
WeGo Systembaustoffe GmbH (Germany)
WeGo Systembaustoffe Austria GmbH (Austria)
Weymead Holdings Limited (England) (ii) (xv)
Wedge Roofing Centres Holdings Limited (England) (ii)
Wedge Roofing Centres Limited (England) (ii)
Westway Insulation Supplies Limited (England) (ii)
White & Taylor (Tunstall) Limited (England) (ii) (xii)
White & Taylor (Tunstall) Limited (Ireland) (ii)
William Smith & Son (Roofing) Limited (England) (ii)
Window Fitters Mate Limited (England) (ii)
Window Village Limited (England) (ii)
Wood Floor Sales Limited (England) (ii)
Woods Insulation Limited (England) (ii)
Workspace London Limited (England) (ii)
Zip Screens Limited (England) (i) (ii)
controlling interests
Air Trade Centre Bulgaria Limited (Bulgaria) (60%)
Air Trade Centre East B.V. (The Netherlands) (80%)
Air Trade Centre Limited Sti Turkey (Turkey) (70%)
Drywall Qatar UK Limited (England) (51%)
Flex-R Limited (England) (53%) (xv)
Passive Fire Protection (PFP) UK Limited (England) (ii) (51%)
SIG Building Systems Limited (England) (51%)
SIG Middle East LLC (Dubai) (49%)
SIG Roofspace Limited (England) (80%) (xv)
For related notes please see overleaf.
Monofix Limited (England) (ii)
MP Acoustics Solutions Limited (England) (ii)
MPA BXL N.V. (Belgium)
Multijoint SA (Switzerland)
M. Van Tol B.V. (The Netherlands)
Netherlands Financing B.V. (The Netherlands)
Ockwells Limited (England) (ii) (vii)
Omni Plastics Limited (England) (ii)
Omnico (Developments) Limited (England) (ii)
Omnico Plastics Limited (England) (ii)
One Stop Roofing Centre Limited (England) (ii)
Orion Trent Holdings Limited (England) (ii) (xvii)
Orion Trent Limited (England) (ii) (xvi)
Parking Ventilation Equipment Limited (England) (xv)
Penkridge Holdings Limited (England) (ii)
Plastic Pipe Supplies Limited (England) (ii)
Polytech Systems Limited (England) (ii) (xvi)
Premier Fixings (UK) Limited (England) (ii)
Pre-Pour Services Limited (England) (ii) (xv)
Procurewide Limited (England) (ii)
Proos Roofing Centres Limited (England) (ii)
Rinus International Limited (England) (ii)
R.J. & T. Wormwell Limited (England) (ii)
Roberts & Burling Roofing Supplies Limited (England) (ii)
Roof Care (Northern) Limited (England) (ii)
Roof Fitters Mate Limited (England) (ii)
Roof Shop Limited (England) (ii)
Roofers Mate Limited (England) (ii)
Roofing Centre Group Limited (England) (ii)
Roofing Material Supplies Limited (England) (ii)
Roofspace Solutions Limited (England) (ii)
Roplas (Humberside) Limited (England) (ii)
Roplas (Lincs) Limited (England) (ii)
Rubberbond Roofing Systems Limited (England) (ii)
Ryan Roofing Supplies Limited (England) (ii) (viii)
S.K. (Sales) Limited (England) (ii)
Safety & Workwear Limited (England) (ii)
Safety Direct Limited (England) (ii)
Saftair Ventilation S.A.S. (France)
Scotplas Limited (England) (ii)
Scotwarm Insulations Limited (England) (i)
Sebemex S.A.S. (France)
S.G. Insulation Supplies Limited (England) (ii)
Sheffield Insulations Limited (England) (i) (ii) (iii)
Shropshire Roofing Supplies Limited (England) (ii)
SIG Air Handling N.V. (Belgium)
SIG Belgium Holdings N.V. (Belgium)
SIG Building Products Limited (Ireland) (ii)
SIG Building Solutions Limited (England) (ii)
SIG Central Services B.V. (The Netherlands)
SIG Construction GmbH (Germany)
SIG Construction Accessories Limited (England) (ii)
SIG Distribution Limited (England) (ii)
SIG Dormant Company Number Eight Limited (England)
(ii) (iv)
SIG Dormant Company Number Eleven Limited (England) (ii)
SIG Dormant Company Number Nine Limited (England) (i) (ii)
SIG Dormant Company Number Seven Limited (England) (i) (ii)
SIG Dormant Company Number Six Limited (England) (ii)
SIG Dormant Company Number Ten Limited (England) (i) (xvii)
SIG Dormant Company Number Three Limited (England) (i) (ii)
SIG Dormant Company Number Twelve Limited (England) (ii)
SIG Dormant Company Number Two Limited (England) (i)
(ii) (iv)
SIG Dormant Number 4 Limited (England) (ii)
SIG Energy Management Limited (Dormant) (i) (ii)
SIG EST Trustees Limited (Dormant) (i) (ii)
SIG European Holdings Limited (England) (i)
SIG European Investments Limited (England)
SIG Express Limited (England) (ii)
SIG Finance Limited (England) (ii)
SIG Financing (Jersey) Limited (Jersey)
SIG Fixings Limited (England) (ii)
SIG France S.A.S. (France)
SIG Germany GmbH (Germany)
SIG GBT Machines B.V. (The Netherlands) (ii)
SIG Glazing Services Limited (England) (ii)
SIG Green Deal Provider Company Limited (England) (i) (ii)
SIG Group Life Assurance Scheme Trustees Limited
(England) (ii)
SIG Hillsborough Limited (England)
SIG Insulations Limited (England) (ii)
SIG International Trading FZE (Dubai)
SIG International Trading Limited (Dormant) (i) (ii)
SIG International Trading (HK) Limited (China)
SIG Logistics Limited (England) (ii)
SIG Manufacturing Limited (England)
SIG Nederland B.V. (The Netherlands)
SIG Netherlands Holdings Cooperatief W.A. (The Netherlands)
SIG Property GmbH (Germany)
SIG Retirement Benefits Plan Trustee Limited (England) (i) (ii)
SIG Roofing Supplies Limited (England) (i) (ii)
SIG Services Limited (Jersey)
SIG Specialist Construction Products Limited (England) (ii)
SIG Stukadoorsspecialist B.V. (The Netherlands)
SIG Sustainable Solutions Limited (England) (ii)
SIG Trading Limited (i)
SIG Trading (Ireland) Limited (Ireland) (viii)
SIG Trading (Guangzhou) Limited (China) (ii)
SIG Trading (KSA) Limited (England) (ii)
SIG Sp. Z o.o. (Poland)
Sitaco Sp. z.o.o. (Poland)
Sitaco Sp. z.o.o. Spolka Komandytowa (Poland)
SML System und Verwaltungs GmbH (Germany)
Societe Industrielle de l’Ouest des Produits Isolants SAS
(France)
Solent Insulation Supplies Limited (England) (ii)
South Coast Roofing Supplies Limited (England) (ii)
Southern Roofing Warehouse Limited (England) (ii)
Southwest Roofing Supplies Limited (England) (ii) (viii)
Specialised Fixings (East Anglia) Limited (England) (ii)
Specialised Fixings Limited (England) (ii)
Summers PVC (Essex) Limited (England) (ii)
Summers PVC Limited (England) (ii)
Support Site Limited (England) (i) (ii)
Swindon Roofing Centre Limited (England) (ii) (xv)
T A Stephens (Roofing) Limited (England) (ii)
TD Insulation Supplies Limited (England) (ii)
Technische Handelmaatschappij “Inatherm” B.V.
(The Netherlands)
Tenon Partition Systems Limited (England) (ii)
Thomas Smith (Roofing Centres) Limited (England) (ii)
Tolway East Limited (England) (ii)
Tolway Fixings Limited (England) (ii)
Tolway Holdings Limited (England) (ii)
24298.02 30 March 2016 2:38 PM PROOF1
171
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Group Companies 2015 CONTiNUED
Notes
(i) Directly owned by SiG plc
(ii) Dormant company
(iii) Ownership held in cumulative preference
shares
(iv) Ownership held in ordinary shares and 12%
cumulative redeemable preference shares
(v) Ownership held in ordinary shares and
preference shares
(vi) Ownership held in ordinary shares and
deferred ordinary shares
(vii) Ownership held in ordinary shares and class
A ordinary shares
(viii) Ownership held in ordinary shares and class
B ordinary shares
(ix) Ownership held in ordinary shares, class A
ordinary shares and class B ordinary shares
(x) Ownership held in ordinary shares, class B
ordinary shares and class C ordinary shares
(xi) Ownership held in ordinary shares, class A
ordinary shares, class B ordinary shares and
class C ordinary shares
(xii) Ownership held in ordinary shares and class
E ordinary shares
(xiii) Ownership held in ordinary shares, class A
ordinary shares, class B ordinary shares,
class C ordinary shares, class E ordinary
shares, class F ordinary shares and class G
ordinary shares
(xiv) Ownership held in class A ordinary shares
(xv) Ownership held in class A ordinary shares
and class B ordinary shares
(xvi) Ownership held in class A ordinary shares,
class B ordinary shares and class C ordinary
shares
(xvii) Ownership held in class A ordinary shares,
class B ordinary shares and preference
shares
(xviii) Ownership held in class A ordinary shares,
class B ordinary shares and cumulative
redeemable preference shares
(xix) Ownership held in class B ordinary shares
and preference shares
(xx) Ownership held in class AA ordinary shares,
class AB ordinary shares, class AC ordinary
shares, class AD ordinary shares, class AE
ordinary shares, class AF ordinary shares,
class AG ordinary shares, class B ordinary
shares and class C ordinary shares
172
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI Company 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:
Fax:
Email: info@sigplc.com
0114 285 6300
0114 285 6349
Corporate Office
Signet House
17 Europa View
Sheffield Business Park
Sheffield S9 1XH
United Kingdom
Tel:
Fax:
0114 285 6300
0114 285 6349
Company Website
www.sigplc.com
Listing details
Market
Reference SHi.L
Sector Support Services
UK Listed
Lloyds Bank plc
2nd Floor, Lisbon House
116 Wellington Street
Leeds LS1 4LT
HsBc Bank plc
4th Floor
City Point
Leeds LS1 2HL
Registrars and
Transfer Office
computershare
Investor services plc
The Pavilions
Bridgwater Road
Bristol BS13 8AE
Auditor
deloitte LLp
1 City Square
Leeds LS1 2AL
Solicitors
pinsent Masons LLp
1 Park Row
Leeds LS1 5AB
Principal Bankers
the royal Bank
of scotland plc
Corporate Banking
3rd Floor
2 Whitehall Quay
Leeds LS1 4HR
Barclays Bank pLc
PO Box 190
1 Park Row
Leeds LS1 5WU
commerzbank
aktiengesellschaft aG
London Branch
PO Box 52715
30 Gresham Street
London EC2P 2XY
Joint Stockbrokers
Jefferies Hoare Govett
Vintners Place
68 Upper Thames Street
London EC4V 3BJ
panmure Gordon (uK)
Limited
One New Change
London EC4M 9AF
Financial Public
Relations
FtI consulting Limited
200 Aldersgate
Aldersgate Street
London EC1A 4HD
24298.02 30 March 2016 2:38 PM PROOF1
173
SIG plc Annual Report and Accounts for the year ended 31 December 2015FINANCIALS Company information CONTiNUED
Shareholders’ enquiries
Our share register is managed by Computershare, who can be contacted by telephone on:
24 hour helpline*
Overseas callers
Text phone
0370 707 1293
+44 370 707 1293
0370 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.
Dividend Tax Allowance
in respect of UK Shareholders, from April 2016 dividend tax credits will be replaced by an annual £5,000 tax-free allowance on
dividend income across an individual’s entire share portfolio. Above this amount, individuals will pay tax on their dividend income
at a rate dependent on their income tax bracket and personal circumstances. The Company will continue to provide registered
shareholders with a confirmation of the dividends paid by SiG plc and this should be included with any other dividend income received
when calculating and reporting total dividend income received. it is the shareholder’s responsibility to include all dividend income when
calculating any tax liability.
This change was announced by the Chancellor, as part of the UK government budget in July 2015. if you have any tax queries, please
contact a Financial Advisor.
Financial calendar
Annual General Meeting
interim Results 2016
Full Year Results 2016
Annual Report and Accounts 2016
– To be held on 12 May 2016
– Announcement August 2016
– Announcement March 2017
– Posted to Shareholders April 2017
Shareholder Analysis at 31 December 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
Number of
Shareholders
756
967
230
296
59
49
28
85
%
30.61
39.16
9.31
11.98
2.39
1.98
1.13
3.44
Number of
Ordinary Shares
318,761
2,173,214
1,527,240
9,722,513
9,339,027
16,518,739
20,004,870
531,742,784
2,470
100.00
591,347,148
%
0.06
0.37
0.26
1.64
1.58
2.79
3.38
89.92
100.00
174
24298.02 30 March 2016 2:38 PM PROOF1
www.sigplc.com Stock code: ShI
24298.02 30 March 2016 2:38 PM PROOF1
SIG plc Annual Report and Accounts for the year ended 31 December 2015 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
email: info@sigplc.com
web: www.sigplc.com
REGISTERED OFFICE
Hillsborough Works
Langsett Road
Sheffield S6 2LW
REGISTERED NUMBER
Registered in England
998314
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