ANNUAL REPORT AND ACCOUNTS
for the year ended 31 December 2020
Return to Growth
strategy on track
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Welcome
SIG is a leading supplier of specialist
building products and solutions to trade
customers across Europe.
Our purpose is to enable safe and
sustainable living and working
environments in the communities in
which we operate.
2020 overview
■ Return to Growth strategy delivering to plan:
- UK business rebuilt and relaunched
- Reconnection with customers, suppliers and employees well advanced
■ Strong finish to 2020, ahead of expectations; like-for-like sales up 4% in Q4, reflecting
broad-based growth across all major markets, including the UK
■ Significantly strengthened balance sheet provides confidence to invest in new growth
strategy and security against short term market uncertainty
■ Group continues to adapt successfully to trade safely to new Covid-19 norms, working
closely and flexibly with our employees, customers and suppliers
■ Full year like-for-like sales down 13%, with a solid recovery in the second half
■ Underlying gross margin down 80bps due to lower sales volumes over the year
■ Underlying operating loss of £53.3m (2019: £42.5m profit)
■ Underlying loss before tax of £76.3m (2019: £17.7m profit before tax), with statutory
loss before tax from continuing operations of £202.3m (2019: £112.7m loss before
tax), reflecting £126.0m of Other items, including £76.1m of impairment charges in
the UK business and £13.2m onerous contract costs
■ Net debt, pre IFRS 16, down to £4.1m (2019: £162.8m), helped by the sale of Air
Handling division in January and £152m capital raise in July; post IFRS 16 net debt
down to £238.2m (2019: £455.4m)
Underlying revenue
£1,872.7m
2019: £2,143.0m
Underlying (loss)/
profit before tax
(£76.3)m
2019: £17.7m
Net debt
£238.2m
2019: £455.4m
Statutory revenue
£1,874.5m
2019: £2,160.6m
Statutory loss
before tax*
(£202.3)m
2019: (£112.7)m
Total recordable
incident rate
8.8
2019: 10.8
Contents
Overview
Welcome
Strategic Report
Chairman’s statement
At a glance
Our business model
Our strategy
Strategy in action
Our KPIs
Market review
Business review
Financial review
Principal risks and uncertainties
Environmental, social and governance:
Framework
Principles
People
Environment, health and safety
Non-financial information statement
Governance
Chairman’s introduction
Board of Directors
Corporate Governance Report
Board Leadership and Company Purpose
Section 172 Statement
Division of Responsibilities
Composition, Succession and Evaluation
Board Evaluation
Audit, Risk and Internal Control
Directors’ Report
Nominations Committee Report
Audit Committee Report
Directors’ Remuneration Report
Directors’ Responsibilities Statement
Financials
Consolidated Income Statement
Consolidated Statement of Comprehensive
Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Statement of Significant Accounting Policies
Critical accounting judgements and key sources
of estimation uncertainty
Notes to the Financial Statements
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
Notes to the Company Financial Statements
Group Companies
Company information
IFC
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* from continuing operations
Our first priority throughout the Covid-19 pandemic was to ensure
the safety of our employees, customers, suppliers and other partners.
Therefore, almost all photography dates from pre-Covid times and may
not reflect the health and safety protocols that were or are in place.
Strategic Report
Chairman’s statement
At a glance
Our business model
Our strategy
Strategy in action
Our KPIs
Market review
Business review
04
06
08
10
12
14
16
18
Financial review
Principal risks and uncertainties
Environmental, social and governance:
Framework
Principles
People
Environment, health and safety
Non-financial information statement
22
30
36
37
38
42
47
Chairman’s statement
The Board believes that we now
have the right strategy and
foundations in place to return the
Group to sustainable profitable
growth and build a great and
growing company for the future.
Andrew Allner, Chairman
Dear Shareholder,
2020 was, of course, an unprecedented
year, presenting circumstances that we
have not encountered before with the
outbreak of the Covid-19 pandemic.
Despite the challenges, I am very proud of
the way in which the Group demonstrated
great resilience and flexibility to continue to
serve its customers and support its people.
There were also significant changes within
SIG. The Group saw senior leadership
changes and the implementation of a new
strategy early in the year, to drive focused
actions to begin the journey to profitable
growth. Fundamental to the new strategy
is the recognition that SIG is a sales-led
organisation. The Company’s ability to
grow its customer base will rely on the
re-establishment of strong customer and
supplier partnerships, the reinstatement of
specialist expertise and superior customer
service, and the improved engagement of
its people.
I am pleased to say that good progress
has been made in the initial delivery of the
new strategy and I am confident that the
Company is now taking the right steps to
build a great and growing company for the
future.
Covid-19
The Board closely monitored the impact of
the pandemic on the business and on our
people, and continues to do so.
Throughout this period, the safety of our
people, customers and suppliers has
been and continues to be our primary
concern. Additional health and safety
measures were quickly implemented at
the beginning of the outbreak and the new
protocols continue to be adhered to across
the Group, in line with the government
guidance across all jurisdictions in which
we operate. To support home working, the
Group’s IT infrastructure was strengthened.
As a result of the quick and agile
response to the pandemic, and with some
government support, the Group was able
to mitigate the impact without reducing
headcount as a result of Covid-19.
The decisive actions taken across
all functions and at all levels in the
business mitigated the initial impact. The
performance in the first half of the year
was materially affected by the different
government lockdown responses to the
pandemic in the countries in which we
operate, notably in the UK and Ireland
during March and April, although less than
we had originally envisaged. With the easing
of lockdown restrictions in May and June,
the Group saw a gradual improvement in
trading performance, accompanied by a
corresponding reduction in losses, and
this continued in the second half. Despite
further lockdowns and restrictions from
October onwards, the business was able
to trade broadly as normal throughout the
second half, albeit within the new operating
norms and protocols.
Strategic progress
Following the appointment of Steve Francis
as CEO in February 2020, which was
made permanent in April, a new strategy
for growth was developed, centred on
leveraging SIG’s key differentiators of
expertise, service and proximity and with
a key emphasis on reconnecting with
customers, suppliers and employees.
The successful restructuring of the Group’s
financing facilities and capital raise of
£165m concluded in July, including an
£83m equity investment by Clayton,
Dubilier & Rice LLC (CD&R). These positive
developments provide both a stable
financial base on which to drive the strategy
for growth forward and security against
ongoing market uncertainty.
Actions were taken to strengthen the
organisation to prioritise greater branch
and customer focus, predominantly with
the restructuring of the UK Distribution
and UK Exteriors businesses under one
divisional leadership. Good progress
has been made throughout the year
in refocusing the business and re-
energising teams, and we continue to gain
momentum.
Strengthening the leadership teams
was the catalyst for greater and more
concentrated focus on re-establishing
customer and supplier partnerships. The
UK leadership team was further enhanced
in the year, bringing significant industry
expertise back into the business and
positive steps have been made to energise
sales and market share recovery.
The Board continues to place importance,
and increase the business’s focus, on
environmental, social and governance (ESG)
initiatives, which we believe will be strategic
value drivers for the Group. In the coming
year we will balance the focus on these
initiatives with a clear near-term direction
on returning the Group to profitability.
Details of the strategy can be found on
page 10 and a strategic update can be
found in the business review on page 18.
Shareholder value
2020 like-for-like (LFL) sales over 2019 was
heavily distorted by the pandemic during
H1 and finished down 13.3% for the year. In
H2 there was solid recovery and in Q4 the
Group reported growth of 4% (compared to
Q4 2019). The underlying result in the profit
and loss account was similarly distorted by
the much lower sales, with an underlying
loss of £76.3m for the year. As such, the
Group saw a decline in underlying earnings
per share from 0.2p to (10.0)p.
Even prior to the pandemic, and despite
the proceeds from the sale of the Air
Handling division in January 2020, it was
clear that the level of net debt in the
business was too high, and that the Group
would need to raise equity and renegotiate
its agreements with its lenders. As noted
above, this was achieved in July. The Group
is now on a solid financial footing, able to
04
SIG plc Annual Report and Accounts for the year ended 31 December 2020 both withstand further market uncertainty
and invest sensibly behind the new growth
strategy. The key now is to return to
growth, profitability, and cash generation,
and I am confident that we are now well
placed to do so.
Governance and Board
The Group supports and requires high
standards in corporate governance, and
this requires a strong and effective Board.
I believe the Board has learnt lessons from
the business issues that arose in 2019 and
the early part of 2020 and is now operating
more effectively.
There have been several changes to the
Board during the year. Meinie Oldersma,
CEO, and Nick Maddock, CFO, resigned
on 24 February 2020 and Steve Francis
joined as CEO with effect from 25 February
2020, initially on an interim basis. The
appointment was made permanent on
24 April 2020. Steve is highly experienced
in returning businesses to growth and
has demonstrated strong leadership in
the most testing circumstances since his
appointment. His ability to navigate the
effects of the Covid-19 pandemic, at the
same time as focusing the leadership
team on the strategic priorities to ensure
the future success of SIG, has been
exceptional.
Kath Kearney-Croft assumed the role of
interim CFO on 25 February 2020 following
the departure of Nick Maddock. Ian
Ashton was then appointed on 1 July 2020,
replacing Kath as the permanent CFO. Ian is
a highly experienced senior executive with
a strong record of driving change and has
already proven to be an extremely valuable
addition to the team as we pursue our new
strategy for growth, as well as improved
financial performance and governance.
Simon King was appointed as Non-
Executive Director on 1 July 2020 and
is a key addition to the Board, bringing
extensive industry experience from his
career spanning over 35 years. Simon
most recently served on the Travis Perkins
Executive Board and held the position of
Chief Executive Officer of Wickes, bringing
invaluable experience in our efforts to
return the business to profitable growth.
We were also delighted to welcome
Bruno Deschamps and Christian Rochat
to the Board as Non-Executive Directors
following the investment by CD&R. Bruno
and Christian bring valuable and relevant
experience and insights to the Board
and have already made a very positive
contribution.
Andrea Abt retired in February 2020. More
recently, Kate Allum decided to step down
as a Non-Executive Director with effect
from 31 December 2020, and Ian Duncan
with effect from 31 January 2021. I would
like to thank Kate and Ian for their support
and contribution during a very challenging
period. We were delighted to welcome Kath
Durrant to the Board as a Non-Executive
Director and Chair of the Remuneration
Committee on 1 January 2021, and Shatish
Dasani as a Non-Executive Director and
Chair of the Audit Committee with effect
from 1 February 2021. Kath has more than
30 years’ Human Resources experience,
with a strong operational and strategic
track record, gained at several large global
companies, including Ferguson plc, and is
an experienced Remuneration Committee
Chair. Shatish has over 20 years’ experience
in senior public company finance roles
across various sectors, including building
materials, and has served as Chief Financial
Officer of both Forterra plc and TT
Electronics plc. He is also an experienced
Audit Committee Chair.
In support of driving the highest standards
in governance and effective leadership,
renewed focus was placed on Board
involvement and engagement with key
stakeholders throughout the year. All
members of the Board are committed to
providing strong and supportive leadership
to achieve the goals set in the strategy.
Board participation in employee
engagement as part of the UK Corporate
Governance Code can be found on page 65.
Independent review by PwC
As noted in the 2019 report, the Board
instigated an independent review of
the Group’s forecasting and monthly
management accounts processes in light
of the shortfall between profit reported
in the trading update in January 2020
and market expectations prior to the
update. The Board took the findings of
the PwC report very seriously. Following
the report, in order to strengthen the
Group’s financial forecasting and internal
reporting, KPMG were appointed to
assist the Audit Committee in ensuring
appropriate improvements have been
implemented to the Company’s financial
systems, procedures and controls. Good
progress has been made in this area and
further details can be found in the Audit
Committee report on pages 104.
Health and safety
We continue to drive action through our
Zero Harm policy, with increased leadership
focus. Enhanced incident reporting across
the Group has been a priority, to establish
better insight and drive key actions, and as
such, the total recorded incidents across
the Group reduced by 26.8% in the year.
We remain committed to delivering the
highest levels of health and safety, which
we intend to improve in 2021 through a
focus on leadership throughout all levels
to increase awareness, engagement and
ownership.
People and culture
The Board believes that the strength of the
business is its people. The Group would like
to thank all employees for their resilience in
what was an extraordinary year, in which all
employees across the Group demonstrated
their flexibility and commitment in striving
to serve customers and, importantly,
support each other.
In concentrated efforts to reconnect with
employees, emphasis was placed on
engagement initiatives, with an objective of
providing effective and frequent feedback
channels and offering employees greater
visibility of senior executives and Board
members.
A Group-wide engagement survey was
conducted, inviting feedback across a range
of topics. The results were presented to
the Board and ongoing action plans are
a priority, led by leaders in all areas. In
addition, a Board workforce engagement
programme was delivered, led by
Simon King following his arrival, which
was positively received by participants,
representing all functions and operating
companies. Plans are in place to continue
each programme in 2021.
Whilst Covid-19 hindered the full
implementation of a Group-wide culture
programme, it did provide the opportunity
to realign and strengthen the framework
comprising a vision, the strategic pillars
and cultural behaviours of the Group.
Work took place to incorporate employee
feedback, and local teams took the
opportunity to improve their understanding
of the behaviours and how they contribute
towards a change in culture. The full roll
out resumed in January 2021.
Outlook
The Group has responded well to
exceptional circumstances over the last
year. The growth strategy continues to
gain momentum, the organisation has
strengthened, and we are beginning to see
the first signs of the return to growth that
is required. We are expecting a return to
profitability in the second half of 2021.
SIG retains strong positions in its core
markets, and the fundamentals of the
markets in which we operate remain
strong. The Board believes that we have
the right strategy and foundations in place
to return to profitable growth and build a
great and growing company for the future.
The Board is grateful for the ongoing
support of shareholders and remains
committed to leading the Group towards its
goals in delivering the strategy.
Andrew Allner
Chairman
25 March 2021
Read about our
strategy on page 10
Read our financial
review on page 22
05
Stock code: SHI www.sigplc.comSTRATEGIC REPORT At a glance
SIG is a leading supplier of specialist
building products and solutions to trade
customers across Europe, with strong
positions in its core markets.
SIG is well-qualified and trusted to
protect and develop the brands
and products of our key suppliers
with our local approach, efficient
branches and high-quality people.
We play an important role in
connecting the construction industry,
ensuring that our customers receive
the right product, in the right
place, at the right time. Our largest
countries of operation are the UK,
France and Germany.
8%
19%
4%
5%
Group
Revenue
17%
20%
9%
18%
UK Distribution
UK Exteriors
France Distribution
France Exteriors
Germany
Benelux
Ireland
Poland
06
SIG plc Annual Report and Accounts for the year ended 31 December 2020 SIG Group
SIG Distribution: A market-leading supplier
of insulation and interiors products and
solutions to the construction industry.
SIG Exteriors: A specialist merchant of
roofing materials to small to medium-sized
construction businesses.
Underlying
group revenue
£1,872.7m
(2019: £2,143.0m)
8
Operating
segments across
Europe
c6,500
Employees
421
Branches
UK Distribution
Revenue
£357.4m
(2019: £534.3m)
UK Exteriors
Revenue
£310.1m
(2019: £346.5m)
www.sigdistribution.co.uk
www.sigroofing.co.uk
Benelux
Revenue
£91.6m
(2019: £103.0m)
www.sigbenelux.com
Poland
Revenue
£149.5m
(2019: £156.1m)
www.sig.pl
Ireland
Revenue
£80.5m
(2019: £94.9m)
www.sig.ie
France Distribution
Revenue
£168.1m
(2019: £184.5m)
France Exteriors
Revenue
£344.8m
(2019: £342.2m)
www.litt.fr
www.lariviere.fr
Germany
Revenue
£370.7m
(2019: £381.5m)
www.wego-vti.de
07
Stock code: SHI www.sigplc.comSTRATEGIC REPORT Our business model
Why our stakeholders choose SIG
SIG plays a critical role in the construction industry. For its customers, SIG provides specialist
expertise to specialist markets. This facilitates one-stop access to an extensive product range,
provides expert technical advice, breaks bulk supplies into suitable quantities and coordinates
often complex delivery requirements, ensuring that customers are supplied with what they need,
when it is needed.
Read about our stakeholder engagement on page 64
As a leading supplier of specialist building
products and solutions to trade customers
across the UK, Ireland and Mainland Europe,
SIG has a strong heritage of specialist
knowledge and expertise and a wide and
integrated network so we can be close to our
customers to meet their needs.
We leverage these strengths to drive
growth, whilst respecting our localised
brand strength and history, and continue
to be a valuable partner in protecting our
customers’ own brands.
What we do
↓
Expertise
Our people are our competitive
advantage, with specialist product
and market knowledge.
Service
Our people go the extra mile to
give our customers the products
they need at the time they
need them. We help our valued
partners deliver and protect their
brands.
Proximity
Our leading branch network
and omnichannel approach
allows greater proximity to our
customers.
08
SIG plc Annual Report and Accounts for the year ended 31 December 2020
For its suppliers, SIG provides a channel through which suppliers can bring their
products to a highly fragmented market of smaller customers conveniently and
efficiently, extends product guidance and support, and provides fulfilment capability
to sites that are of insufficient scale to supply direct. SIG is committed to delivering
the highest levels of customer service.
What we do
How we do it
Expertise
Our people are our competitive
advantage, with specialist product
and market knowledge.
Service
Our people go the extra mile to
give our customers the products
they need at the time they
need them. We help our valued
partners deliver and protect their
brands.
Proximity
Our leading branch network
and omnichannel approach
allows greater proximity to our
customers.
■ Market-leading brands on an
international scale, with local focus
to offer effective solutions
■ Extensive, specialist knowledge to
support projects of every scale
■ Continuous development of
our people and organisation to
ensure capable, engaged and
empowered teams
■ Scale of operations to meet
customer demands
■ Close partnerships with
customers to offer superior
customer service, driven by a
sales-led culture
■ Enhanced supplier partnerships
to strengthen our service to
customers and to build high
quality, value-driven relationships
to leverage joint opportunities
and create value-adding
strategies
■ A strong portfolio of businesses,
with eight operating segments
across Europe
■ A wide network of 421 branches
■ Opportunities for organic
development of the branch
network and acquisitive growth
09
Stock code: SHI www.sigplc.comSTRATEGIC REPORT Our strategy
To reignite
growth,
through our
expertise,
service and
proximity
KPIs key:
1 Total recordable
incident rate
2 Like-for-like sales (%)
3 Net Promoter Score
(NPS)
4 Gross margin (%)
5 Operating margin (%)
6 Operating costs as a
% of revenue
7 Market share growth
Risks key:
A Employee attraction,
retention and
engagement
B Health and safety
C Delivering business
change
D Cyber security
E Data quality
and governance
F Market downturn
G Systems failure
H Business growth
I Delivering the
customer experience
J Environmental, social
and governance
10
Responsible
actions
Winning
branches
Superior
service
Our people feel safe, proud
and valued and we operate
sustainably to benefit
communities and the
environment
Our branch teams are trusted,
capable and empowered to
achieve success
Our strengthened
entrepreneurial and agile sales
teams provide best-in-class
customer service
2020 progress
■ Strengthened the Board
■ Conducted Board Workforce
Engagement programme with
a range of participants across
all operating companies
■ Conducted a Group-wide
employee engagement survey
■ Focused on strengthening
two-way communications
channels, including town
halls and regional and branch
meetings
■ Appointed a new Group HSE
Director to drive greater
focus on safety and reporting
accuracy
■ Implemented strong Covid
protocols and disciplined
operations – rated highly by
employees and regulators
■ Received the Green Economy
Mark from London Stock
Exchange
■ Launched an Employee
Health and Wellbeing
programme
■ France: New ESG programme
and new solar product
offering
Future focus
■ Continue to drive actions
that encourage and drive
sustainable behaviours and
approaches across all of our
business practices
2020 progress
■ Re-established branch level
profit and loss accountability
in all locations
2020 progress
■ Completed first Group-wide
Customer Net Promoter
Score (NPS) survey
■ UK: Re-built distribution
branch structure with
new regional and branch
management in place
■ UK/Germany: Re-established
delegated branch toolkit
including pricing, availability,
local supplier relationships,
local customer relationships
and freight
■ Poland: New SIGup loyalty
program
■ Netherlands: New Wet Plaster
flagship branch in Amsterdam
and Waddinxveen
Future focus
■ Focus on promoting more
winning branches, gaining
share and recovering margin
and with particular focus on
UK Distribution
■ Build a winning franchise
model across the Group
■ De-centralised service
provision
■ Focused on sales productivity,
enhanced tools and training
■ Implemented freight
management software
■ Launched new KPI suite to
focus on customer service
■ Ireland: New electronic proof
of delivery, allowing delivery
notification and remote sales
order processing for field
sales
■ Poland: Renewed inventory
planning and replenishment
module for stock
management and e-invoices;
new automatic purchase
order recording
Future focus
■ Invest in sales training to
strengthen commercial
teams and ensure they
have the right tools to allow
greater focus on customer
relationships
■ Implement e-proof of delivery
in Poland
Specialist
expertise
Valuable
Highest
Focused
partnerships
productivity
growth
Our empowered local branches
We partner closely with
Our efficient support functions
We focus on our core business
are known again for specialist
suppliers to understand our
are consistently productive
to drive growth in branches
focus and expertise acquired
joint opportunities and to
and drive strong standards,
and through acquisition
through long-term experience
create win-win strategies
governance and financial
opportunities
discipline
2020 progress
2020 progress
2020 progress
2020 progress
■ UK/Germany: Focused on re-
■ UK: Re-established key
■ Enhanced financial
■ Merged the UK Distribution
specialising branches
■ UK: Recruited high level
of sales expertise and
experience in rebuilding
relationships with suppliers
including Board-level contacts
governance
■ Invested in LucaNet,
■ UK: Re-launched SIG Alliance,
accounting software to
and Exteriors businesses to
create a single division with a
combined leadership
a network of leading quality
improve financial reporting
■ Growing market share in
the team; Re-built Category
manufacturers
■ UK: New organisational
expertise
■ UK: Held the first live online
structure
■ UK: Renewed focus on
broadcast event, SIG Live
national accounts to provide
value-add solutions
Future focus
■ Drive particular focus on re-
establishing and developing
valued relationships with
key suppliers which are
supported at all levels, from
Board to branch
■ Poland: EDI (electronic data
interchange) connections with
■ Poland: Continued
development of e-commerce
suppliers
platform
■ UK: Launched SIG Assured to
support product and service
compliance in the UK
■ UK: Dedicated training
programmes to strengthen
our specialist knowledge
■ Benelux: New branch
formula focusing on specialist
merchanting
Future focus
■ Continue to re-introduce and
develop industry knowledge
to further enhance specialist
■ Invest in enhanced technical
expertise
training
■ Ireland: Investment in Lean/
Sigma 6 training
Future focus
■ Lean and effective corporate
functions
■ Benelux: Launch ERP
implementation of Microsoft
D365 to significantly enhance
productivity and data quality
France, Poland and UK
Exteriors
■ Investment plan for new
branches in Poland, France,
Germany, Benelux and UK
■ Completed acquisition of S M
Roofing Supplies Limited in
the UK
■ Acquired new exclusive
distributorships in Benelux
■ Poland: E-commerce reached
7% of local revenues
Future focus
■ Return to strong positive
EBITDA
■ Enhance our network and
selective digitisation and
acquisition, to increase
proximity to our customers
and drive organic growth
Link to KPIs
1 3 7
Link to risks
A B D J
Link to KPIs
2 4 7
Link to KPIs
3 5 7
Link to risks
A C F G H I
Link to risks
A E G H I
Link to KPIs
4 5 7
Link to risks
A E I
Link to KPIs
4 5 7
Link to risks
C F G H I J
Link to KPIs
4 6
Link to risks
A B C D G
Link to KPIs
2 3 7
Link to risks
B E F H I J
Read about our KPIs on page 14
Read about our principal risks on page 30
Read about our strategy in action on page 12
SIG plc Annual Report and Accounts for the year ended 31 December 2020
Responsible
actions
Winning
branches
Superior
service
Our people feel safe, proud
Our branch teams are trusted,
Our strengthened
and valued and we operate
capable and empowered to
entrepreneurial and agile sales
achieve success
teams provide best-in-class
customer service
sustainably to benefit
communities and the
environment
Specialist
expertise
Valuable
partnerships
Highest
productivity
Focused
growth
Our empowered local branches
are known again for specialist
focus and expertise acquired
through long-term experience
We partner closely with
suppliers to understand our
joint opportunities and to
create win-win strategies
Our efficient support functions
are consistently productive
and drive strong standards,
governance and financial
discipline
We focus on our core business
to drive growth in branches
and through acquisition
opportunities
2020 progress
2020 progress
2020 progress
■ Strengthened the Board
■ Re-established branch level
■ Completed first Group-wide
2020 progress
■ UK/Germany: Focused on re-
2020 progress
■ UK: Re-established key
a range of participants across
■ UK: Re-built distribution
■ De-centralised service
profit and loss accountability
Customer Net Promoter
in all locations
Score (NPS) survey
■ Conducted Board Workforce
Engagement programme with
all operating companies
■ Conducted a Group-wide
employee engagement survey
■ Focused on strengthening
two-way communications
channels, including town
halls and regional and branch
meetings
■ Appointed a new Group HSE
Director to drive greater
focus on safety and reporting
accuracy
■ Implemented strong Covid
protocols and disciplined
operations – rated highly by
employees and regulators
■ Received the Green Economy
Mark from London Stock
Exchange
■ Launched an Employee
Health and Wellbeing
programme
■ France: New ESG programme
and new solar product
offering
Future focus
■ Continue to drive actions
that encourage and drive
sustainable behaviours and
approaches across all of our
business practices
branch structure with
new regional and branch
management in place
■ UK/Germany: Re-established
delegated branch toolkit
including pricing, availability,
local supplier relationships,
local customer relationships
■ Poland: New SIGup loyalty
and freight
program
and Waddinxveen
Future focus
■ Focus on promoting more
winning branches, gaining
share and recovering margin
and with particular focus on
UK Distribution
■ Build a winning franchise
model across the Group
■ Netherlands: New Wet Plaster
flagship branch in Amsterdam
sales
provision
■ Focused on sales productivity,
enhanced tools and training
■ Implemented freight
management software
■ Launched new KPI suite to
focus on customer service
■ Ireland: New electronic proof
of delivery, allowing delivery
notification and remote sales
order processing for field
■ Poland: Renewed inventory
planning and replenishment
module for stock
management and e-invoices;
new automatic purchase
order recording
Future focus
■ Invest in sales training to
strengthen commercial
teams and ensure they
have the right tools to allow
greater focus on customer
relationships
■ Implement e-proof of delivery
in Poland
relationships with suppliers
including Board-level contacts
■ UK: Re-launched SIG Alliance,
a network of leading quality
manufacturers
■ UK: Held the first live online
broadcast event, SIG Live
Future focus
■ Drive particular focus on re-
establishing and developing
valued relationships with
key suppliers which are
supported at all levels, from
Board to branch
■ Poland: EDI (electronic data
interchange) connections with
suppliers
■ Poland: Continued
development of e-commerce
platform
specialising branches
■ UK: Recruited high level
of sales expertise and
experience in rebuilding
the team; Re-built Category
expertise
■ UK: Renewed focus on
national accounts to provide
value-add solutions
■ UK: Launched SIG Assured to
support product and service
compliance in the UK
■ UK: Dedicated training
programmes to strengthen
our specialist knowledge
■ Benelux: New branch
formula focusing on specialist
merchanting
Future focus
■ Continue to re-introduce and
develop industry knowledge
to further enhance specialist
expertise
■ Invest in enhanced technical
training
2020 progress
■ Enhanced financial
governance
■ Invested in LucaNet,
accounting software to
improve financial reporting
■ UK: New organisational
structure
■ Ireland: Investment in Lean/
Sigma 6 training
Future focus
■ Lean and effective corporate
functions
■ Benelux: Launch ERP
implementation of Microsoft
D365 to significantly enhance
productivity and data quality
2020 progress
■ Merged the UK Distribution
and Exteriors businesses to
create a single division with a
combined leadership
■ Growing market share in
France, Poland and UK
Exteriors
■ Investment plan for new
branches in Poland, France,
Germany, Benelux and UK
■ Completed acquisition of S M
Roofing Supplies Limited in
the UK
■ Acquired new exclusive
distributorships in Benelux
■ Poland: E-commerce reached
7% of local revenues
Future focus
■ Return to strong positive
EBITDA
■ Enhance our network and
selective digitisation and
acquisition, to increase
proximity to our customers
and drive organic growth
Link to KPIs
1 3 7
Link to risks
A B D J
Link to KPIs
2 4 7
Link to risks
Link to KPIs
3 5 7
Link to risks
A C F G H I
A E G H I
Link to KPIs
4 5 7
Link to risks
A E I
Link to KPIs
4 5 7
Link to KPIs
4 6
Link to KPIs
2 3 7
Link to risks
C F G H I J
Link to risks
A B C D G
Link to risks
B E F H I J
Read about our KPIs on page 14
Read about our principal risks on page 30
Read about our strategy in action on page 12
11
Stock code: SHI www.sigplc.comSTRATEGIC REPORT
Strategy in action
Enhanced collaboration
with suppliers
SIG UK have focused on reconnecting
with their partners to improve the
supply chain.
By working closely with valued suppliers, the UK has
secured business with several significant customers as
we continue to drive our ‘Return to Growth’ strategy.
One new main contractor alone, Saint-Gobain, brings
significant opportunities to the SIG UK Distribution
business, secured through the focus on establishing
close relationships with suppliers.
Mark Rapley, UK Sales Director, Saint-Gobain Insulation
UK, commented “Over the last unprecedented and
challenging year, Saint-Gobain Insulation UK and SIG have
forged a partnership based on shared strategic goals
of sustainable growth and new business development,
underpinned by a strong working relationship. Our sales
and marketing teams have collaboratively supported each
other by proactively identifying opportunities with national
housebuilders, contractors and independent merchants,
providing technical, commercial and supply chain solutions
to these new and existing customers. Effective regional
and local engagement has resulted in double digit sales
growth in a highly competitive market for both the Saint-
Gobain Insulation UK brands of ISOVER and Celotex. We
are delighted with the progress that has been made and
the collaborative approach, and it continues to go from
strength to strength”.
Strong collaborative working
with our supplier partners is
key to our future success.
Andy Williamson,
Commercial Director, UK
Providing expertise on
major cityscape projects
SIG’s Wego in Germany were proud
to support the construction of the
country’s highest residential building,
the 180-metre high Grand Tower in
Frankfurt am Main.
We delivered 185,000 square meters of sheetrock panels
over a period of two years, generating a sales volume of
over one million euros.
This was a high profile project and SIG has been at the
forefront of changing the cityscape and supporting the
modernisation of living spaces. Our approach to this
project clearly demonstrates our commitment and drive
to further our growth strategy. Through hard work,
determination and passion for what we do, we were
able to further develop our customer relationships and
position ourselves as a reliable and valuable business
partner on large-scale projects.
Fully aware of the challenges associated with this scale of
project, our sales team focused on working closely with
the customer, at all times ensuring we were making the
right decisions for their success throughout, ultimately
leading to the success of the project.
We are proud to have been
involved in the construction
of such a prestigious property
in the heart of Frankfurt. Our
long-standing customer placed
their trust in us as a team and
we have done everything we
can every day to sustain it.
Marc Betz,
Sales Representative and Project Manager,
Frankfurt am Main programme
12
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Reconnecting with
industry leaders
In July 2020, SIG UK hosted a live virtual
conference to launch the new Return
to Growth strategy.
The virtual conference, ‘SIG Live’, was live streamed from
a fully customisable studio located in Manchester, UK, to
over 1,000 subscribed customers.
During the event, the new SIG UK management team
was introduced, an investment update was provided,
including a virtual tour of the new state-of-the-art SIG
Distribution warehouse near Heathrow, and senior
leaders held discussions on current market trends and
issues with customers, reigniting our active industry
leadership.
Keeping close to our customers is SIG’s priority. We
commit to serving them to the highest standards, and
partner with them to protect and develop their brands
and products. The event provided a forum, at what is
a pivotal time for the industry, and provided a great
opportunity to reconnect with existing customers and
welcome new customers.
SIG Live was a perfect
forum for us to explain the
investment we have put in
place and the changes that
will allow us to service our
customers better.
Phil Johns,
Managing Director, UK
Improved data driving
superior service
An integrated data platform was
introduced to drive efficiency and
improve sales and service.
To support improved usage of data to drive the
highest levels of service to our customers, an in-
house dashboard utilising Power BI was made
available throughout the Group. The platform equips
external sales teams with better tools and more
timely information to drive increased productivity.
Sales representatives can access revenue and margin
against budget, and analyses by customer, product and
individual sales transactions. In addition, stock data
is available across all branches to facilitate improved
sourcing. This enables better communication between
sales teams and branches, allowing for greater autonomy
in driving sales, and contributes towards more efficient
customer service.
At Larivière in France, the team implemented the
performance management capability on Power BI covering
the key strategic levers of business activity, business
development on key accounts, pricing and stock.
With more reliable data, used daily by management,
Power BI facilitates the analysis of performance,
improving the efficiency of knowledge sharing to drive
improved productivity against the specified KPIs, for
example turnover and margin. As a result, we are
attracting more customers and sales performance is
improving year-on-year.
Defining strategy is the first
step; measuring against
performance is what will drive
success.
Nicolas Balland,
Managing Director, Larivière
13
Stock code: SHI www.sigplc.comSTRATEGIC REPORT Our KPIs
The KPIs are calculated based on underlying, continuing operations.
Responsible
actions
Winning
branches
Superior
service
Specialist
expertise
Valuable
Highest
partnerships
productivity
Focused
growth
Total recordable incident
rate (TRIR)
.
4
2
1
.
8
0
1
8
8
.
Like-for-like sales (%)*
Net Promoter Score (NPS)
Gross margin (%)
Operating margin (%)*
Operating costs as a %
Market share growth*
of revenue
)
1
2
(
.
)
4
7
(
.
.
)
3
3
1
(
.
3
5
2
.
9
5
2
.
1
5
2
8
.
2
0
.
2
)
8
.
2
(
5
.
2
2
9
.
3
2
9
.
7
2
43
Work in progress
18
19
20
18
19
20
Definition
The ratio of incidents (injury,
property or environmental
damage) per 200,000 of hours
worked.
Note: replaces Accident Incident
Rate previously reported.
Link to strategy
This measure demonstrates
our focus on safe working
environments.
Definition
The growth/(decline) in sales
per day (in constant currency)
excluding any current and prior
year acquisitions. Sales not
adjusted for branch openings or
closures. 2019 LFL sales differ
from previously reported as a
result of the reclassification of
non-core businesses.
See note 35 for the calculation.
Link to strategy
This measure shows how the
branches have developed
revenue in comparable business
relative to the prior period.
Definition
NPS is a customer experience
metric based on their likelihood
to recommend SIG. It is
calculated by subtracting the
percentage of customers who
answer the question with a 6 or
lower, from the percentage of
customers who answer with a
9 or 10.
This is externally monitored by a
third-party company.
Link to strategy
This measure demonstrates the
high level of customer service
we deliver.
18
19
20
Definition
The calculation of underlying
gross profit, divided by the
underlying revenue.
See note 35 for the calculation.
See note 35 for the calculation.
18
19
20
18
19
20
Definition
Definition
Definition
The ratio of underlying operating
The ratio of underlying operating
We are working on a definition
profit, divided by underlying
costs to underlying revenue.
revenue.
See note 35 for the calculation.
for market share across the
Group, and have started to
review the baseline data. We will
report on this strategic KPI in the
2021 Annual Report.
Link to strategy
This measure shows the success
of our specialist focus, our ability
to optimize our product mix, and
our success at managing both
cost and prices.
Link to strategy
Link to strategy
This measure demonstrates the
This measure enables
overall efficiency of the business,
the business to track the
including our strong relationships
productivity of our supporting
with supplies.
functions.
Read more about our strategy
on page 10
2020 performance
Enhanced incident reporting
across the Group has been
a priority, to establish better
insight and drive key actions,
and as such, the TRIR across the
Group improved to 8.8.
2020 performance
The 13.3% reduction in LFL sales
was driven by the temporary
impact of Covid-19, mainly in the
first half of the year. In H2 there
was solid recovery and in Q4 we
reported growth of 4%.
2020 performance
Our latest Group NPS score was
43 (out of 100). This is a new
measure in 2020 and will be
tracked moving forwards.
2020 performance
Gross margin has decreased by
80bps in the year to 25.1%, due
to lower sales volumes over the
year.
2020 performance
2020 performance
Operating margin has decreased
Underlying costs represented
to (2.8)%, reflecting the lower
sales volumes and impact on
27.9% of underlying revenue,
400bps higher than the prior
operating profit due to Covid-19.
year. This is as a result of
Read our business review on
D Cyber security
page 18
Supporting strategic
measures
■ Employee turnover
■ Incident rate
■ Tonnes/month fuel usage
Supporting strategic
measures
■ % of branches ahead of
YTD sales budget
Supporting strategic
measures
■ Number of new customers
■ Total active customers v PY
Supporting strategic
measures
■ Average experience of
commercial teams (years’
tenure) v PY
■ Hours of sales/product
training in month
Link to risks
A
B
J
Link to risks
H
I
Link to risks
C
D
G
I
Link to risks
A
C
Link to risks
C
H
J
Link to risks
C
E
Link to remuneration
■ Health and safety measures
in annual bonus scheme
Link to remuneration
■ Profit measures in annual
Link to remuneration
■ Strategic objectives in annual
Link to remuneration
■ Profit measures in annual
bonus scheme
bonus scheme
bonus scheme
Link to remuneration
Link to remuneration
■ Profit measures in annual
■ Average net debt measures
bonus scheme
in annual bonus scheme
Read more about our
risks on page 30
Read more about our
remuneration on page 107
14
inflation, foreign currency
movement, and bad debt
relating to Covid-19 uncertainty,
partially offset against
government support.
Supporting strategic
Supporting strategic
measures
■ Value add sales
measures
■ Cash conversion
■ YTD sales/FTE v PY
■ YTD sales/sales FTEs v PY
*Strategic KPIs
As announced in the 2019
Annual Report, we are
adopting new KPIs to align
the business to our seven
strategic pillars.
Progress has been
slowed given the Covid-19
pandemic. The strategic
KPIs will continue to be
updated during 2021, and
more specific measures
will be defined. These will
be reported in the 2021
Annual Report.
Risks key:
A Employee attraction,
retention and engagement
B Health and safety
C Delivering business
change
E Data quality
and governance
F Market downturn
G Systems failure
H Business growth
I Delivering the
customer experience
J Environmental, social and
governance
SIG plc Annual Report and Accounts for the year ended 31 December 2020
Responsible
actions
Winning
branches
Superior
service
Specialist
expertise
Valuable
partnerships
Highest
productivity
Focused
growth
Total recordable incident
Like-for-like sales (%)*
Net Promoter Score (NPS)
Gross margin (%)
Operating margin (%)*
Operating costs as a %
of revenue
Market share growth*
*Strategic KPIs
The KPIs are calculated based on underlying, continuing operations.
rate (TRIR)
4
.
2
1
8
.
0
1
8
.
8
)
1
.
2
(
)
4
.
7
(
)
3
.
3
1
(
43
Definition
Definition
Definition
Definition
The ratio of incidents (injury,
The growth/(decline) in sales
NPS is a customer experience
The calculation of underlying
property or environmental
per day (in constant currency)
metric based on their likelihood
gross profit, divided by the
damage) per 200,000 of hours
excluding any current and prior
to recommend SIG. It is
underlying revenue.
worked.
Note: replaces Accident Incident
Rate previously reported.
year acquisitions. Sales not
calculated by subtracting the
adjusted for branch openings or
percentage of customers who
closures. 2019 LFL sales differ
answer the question with a 6 or
from previously reported as a
lower, from the percentage of
result of the reclassification of
customers who answer with a
non-core businesses.
9 or 10.
See note 35 for the calculation.
third-party company.
This is externally monitored by a
Link to strategy
Link to strategy
Link to strategy
Link to strategy
This measure demonstrates
This measure shows how the
This measure demonstrates the
This measure shows the success
our focus on safe working
branches have developed
high level of customer service
of our specialist focus, our ability
environments.
revenue in comparable business
we deliver.
relative to the prior period.
to optimize our product mix, and
our success at managing both
cost and prices.
2020 performance
2020 performance
2020 performance
2020 performance
Enhanced incident reporting
The 13.3% reduction in LFL sales
Our latest Group NPS score was
Gross margin has decreased by
across the Group has been
a priority, to establish better
insight and drive key actions,
was driven by the temporary
43 (out of 100). This is a new
80bps in the year to 25.1%, due
impact of Covid-19, mainly in the
measure in 2020 and will be
to lower sales volumes over the
first half of the year. In H2 there
tracked moving forwards.
year.
and as such, the TRIR across the
was solid recovery and in Q4 we
Group improved to 8.8.
reported growth of 4%.
Supporting strategic
Supporting strategic
Supporting strategic
Supporting strategic
measures
measures
measures
measures
■ Employee turnover
■ % of branches ahead of
■ Number of new customers
■ Average experience of
YTD sales budget
■ Total active customers v PY
■ Incident rate
■ Tonnes/month fuel usage
commercial teams (years’
tenure) v PY
■ Hours of sales/product
training in month
3
.
5
2
9
.
5
2
1
.
5
2
8
2
.
0
2
.
)
8
2
(
.
.
5
2
2
.
9
3
2
.
9
7
2
18
19
20
18
19
20
18
19
20
18
19
20
18
19
20
See note 35 for the calculation.
See note 35 for the calculation.
Definition
The ratio of underlying operating
profit, divided by underlying
revenue.
Definition
The ratio of underlying operating
costs to underlying revenue.
See note 35 for the calculation.
Work in progress
Definition
We are working on a definition
for market share across the
Group, and have started to
review the baseline data. We will
report on this strategic KPI in the
2021 Annual Report.
Link to strategy
This measure demonstrates the
overall efficiency of the business,
including our strong relationships
with supplies.
Link to strategy
This measure enables
the business to track the
productivity of our supporting
functions.
Read more about our strategy
on page 10
Read our business review on
page 18
2020 performance
Operating margin has decreased
to (2.8)%, reflecting the lower
sales volumes and impact on
operating profit due to Covid-19.
Supporting strategic
measures
■ Value add sales
2020 performance
Underlying costs represented
27.9% of underlying revenue,
400bps higher than the prior
year. This is as a result of
inflation, foreign currency
movement, and bad debt
relating to Covid-19 uncertainty,
partially offset against
government support.
Supporting strategic
measures
■ Cash conversion
■ YTD sales/FTE v PY
■ YTD sales/sales FTEs v PY
As announced in the 2019
Annual Report, we are
adopting new KPIs to align
the business to our seven
strategic pillars.
Progress has been
slowed given the Covid-19
pandemic. The strategic
KPIs will continue to be
updated during 2021, and
more specific measures
will be defined. These will
be reported in the 2021
Annual Report.
Risks key:
A Employee attraction,
retention and engagement
B Health and safety
C Delivering business
change
D Cyber security
E Data quality
and governance
F Market downturn
G Systems failure
H Business growth
I Delivering the
customer experience
J Environmental, social and
governance
Link to risks
A
B
J
Link to risks
H
I
Link to risks
C
D
G
I
Link to risks
A
C
Link to risks
C
H
J
Link to risks
C
E
Link to remuneration
Link to remuneration
Link to remuneration
Link to remuneration
■ Health and safety measures
■ Profit measures in annual
■ Strategic objectives in annual
■ Profit measures in annual
in annual bonus scheme
bonus scheme
bonus scheme
bonus scheme
Link to remuneration
■ Profit measures in annual
bonus scheme
Link to remuneration
■ Average net debt measures
in annual bonus scheme
Read more about our
risks on page 30
Read more about our
remuneration on page 107
15
Stock code: SHI www.sigplc.comSTRATEGIC REPORT
Market review
SIG is a leading supplier of specialist building materials products and solutions
to trade customers across Europe, with our largest countries of operation being
the UK, France and Germany. Our response to market conditions varies across
geography and sector. Growth within the construction industry, linked to
economic growth, is an important driver.
Global trends
1 Economic backdrop
■ During the year, particularly in the UK, we continued to
see economic uncertainty, which impacted customer
confidence and affected construction output.
■ In the short term, economic uncertainty remains, but
long-term fundamentals remain sound in the Group’s
markets.
2 Sustainability
■ Stakeholders have an increasing awareness of
environmental matters and the industry is seeing
increasing levels of sustainability legislation.
■ Therefore, companies are required more than ever to
address key sustainability issues and pledge to minimise
their environmental footprint.
■ Our response: In July, the Group concluded the
■ Our response: SIG is committed to creating long-
successful renegotiation of its debt arrangements
and equity raise. These actions, along with careful
management of working capital and cash, created a
sound financial base for the business to withstand the
economic uncertainty.
term sustainable value for our stakeholders, and we
have aligned our operations against the Sustainable
Development Goals. See page 36.
3 Impact of Covid-19
■ Covid-19 is impacting the global construction industry
with projects facing supply chain delays and the
introduction of new measures to safeguard the health
and safety of the workforce.
■ Our response: We acted quickly to develop a
coordinated and decisive response to Covid-19 to
support our operating companies, to ensure the health
and safety of our people, customers, suppliers and local
communities within which we operate and to minimise
the adverse impacts on our businesses.
4 Technological developments
■ Customer needs are changing in line with the pace of
technological advances, and they are expecting ease,
speed and transparency when ordering.
■ Companies are investing in digitalisation and technology
to improve how they operate and to generate efficiencies.
■ Our response: We have invested in software tools and
technology during the year to support growth, including
Pixsell and Power BI for our sales team. We also continue
to develop the e-commerce platform across the Group to
offer customers an omnichannel experience.
16
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Geographic outlook
Total construction output fell during 2020, as a result of Covid-19. However, growth is expected in all of our markets over the next two years.
Total construction output – annual % change
UK
France
Germany
Benelux
Ireland
Poland
)
.
%
5
9
1
(
%
6
2
1
.
%
4
8
.
)
.
%
8
5
1
(
%
6
3
1
.
%
7
4
.
)
%
6
1
(
.
)
%
2
0
(
.
%
4
0
.
)
%
9
3
(
.
)
%
0
1
(
.
%
0
4
.
)
.
%
0
6
1
(
%
1
8
.
%
8
3
.
)
%
1
3
(
.
%
3
0
.
%
0
3
.
20
21
22
20
21
22
20
21
22
20
21
22
20
21
22
20
21
22
Data source: Euroconstruct database, Nov 2020
Distribution
Exteriors
1 Level of construction activity
Trend: The level of construction activity fell during 2020 but
is expected to rise over the next two years.
Our response: Our extensive range of specialist products,
coupled with superior expertise and an expansive network,
means SIG is equipped for growth and responding to
industry demands.
2 Changes in legislation
Trend: Higher energy efficiency standards and
environmental legislation across all geographical
markets, with increasing focus on repair, maintenance
and improvement (RMI) investment to meet updated fire
regulations.
Our response: Non-residential renovation projects provide
opportunities in the RMI market. In the UK, SIG is also proud
to support the Green Homes Scheme.
3 Government infrastructure spending
Trend: Government investment is driving a solid pipeline of
large projects, including green economy initiatives.
Our response: Our extensive network and specialist
expertise allows us to partner large-scale projects at the
forefront of the industry.
1 Investment in new build schemes
Trend: The backlog of new housing requires investment,
amplified by the steep fall in activity during 2020, due to the
effects of Covid-19.
Our response: c40% of revenue in our Exteriors business
is from new residential activity, which is therefore a
significant market for SIG.
2 Regulatory changes
Trend: Increasing number, and added stringency, of
regulatory changes in the industry.
Our response: Our key differentiator is the specialist
knowledge and expertise of roofing materials, to provide
technical advice and support specifications.
3 Post-Brexit
Trend: The UK’s departure from the European Union could
bring unexpected challenges and supply chain disruption.
Our response: Supply chain delays were experienced prior
to and after Brexit, exacerbated by some Covid-related
delays in logistics. Where these were anticipated, stock
holdings were increased to ensure consistency of supply. We
continue to monitor the risks and supply chain availability.
Revenue by market
Revenue by market
12%
18%
9%
1%
New residential
New non-residential
RMI residential
RMI non-residential
New and RMI industrial
40%
24%
32%
14%
New residential
39%
New non-residential
RMI residential
RMI non-residential
New and RMI industrial
11%
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Stock code: SHI www.sigplc.comSTRATEGIC REPORT Business review
Our teams have shown great resilience and
commitment in the face of the challenging
circumstances for much of the year, the
effects of which clearly impacted our first
half, and hence full year, results. Providing
a safe environment and instilling an even
greater focus on good health and safety
behaviours has been and will remain a major
focus of the new management team.
I am delighted that due to our Return to
Growth strategy we delivered a solid second
half and have begun to return the business
to growth after a long period of decline. On
behalf of the whole Board I would like to
thank all our employees for their significant
efforts, and successes, during the year.
The new UK management team has rebuilt
its business and, everywhere we operate,
we have reconnected with our employees,
customers and suppliers. Their response has
reaffirmed that we are at our best when we
are a local, sales and technical service-driven
business, partnering closely with our key
suppliers and operating with empowered and
entrepreneurial branch teams. That is our
strategy for growth and the basis for playing
a leading role in our industry in the years to
come.
This, coupled with a strong balance sheet,
gives us the right foundations for the business
to grow.
Steve Francis,
Chief Executive
Officer
Strategy update
On 29 May, the Group launched its Return
to Growth strategy. The restructuring
of its debt facilities and the successful
capital raise provide firm and stable
foundations for this strategy to be
delivered. Fundamental to the new strategy
is the recognition that SIG is a sales-led
organisation, where the ability to grow
its customer base through the provision
of high levels of customer service, deep
technical expertise and disciplined pricing
are critical. The establishment of strong
customer relationships, by empowering
and energising key account and branch
teams, and promoting an entrepreneurial
spirit throughout the company’s extensive
branch network, is key to this objective.
The implementation of the strategy is
now well underway. In the UK, where
the Group’s operational and financial
performance had seen greatest
deterioration, the new strategy is initially
focusing on de-centralising accountability
to branch level and upgrading operational
processes, systems and controls to
provide the appropriate platform from
which market share can be recaptured
and profitable growth restored. In the EU
businesses, where the Group’s operational
and financial performance has in general
been more stable, the new strategy
is empowering the Group’s operating
companies to move onto a growth footing.
Through the implementation of this
strategy, supported by the strengthened
balance sheet and strong leadership teams
now in place across the organisation,
the Board is confident that the Group
will return to sustainable and long term
profitable growth and achieve its vision of
being the leading B2B supplier of specialist
construction products and solutions in the
markets in which it operates.
The delivery of these strategic objectives
will, in turn, enable the Group to achieve
its key stated medium term financial goals,
being:
■ A Group operating margin of
approximately 3%, trending towards
approximately 5% in the longer term;
underpinned by target operating margin
of approximately 5% within the Group’s
operating companies
■ Leverage of <1.5x (pre IFRS 16 basis)
■ A progressive dividend covered 2.0-3.0x
by underlying earnings
Market share recapture plan
The Group’s market share recapture
plan, particularly for its UK businesses,
Distribution and Exteriors, as well as for its
Germany and Benelux businesses, is built
upon some key enablers.
Merger of leadership of UK
Distribution and Exteriors
The UK’s Distribution and Exteriors
businesses have now been merged to
create a single UK division, with a combined
leadership team replicating the model
already successfully deployed in SIG France,
which will leverage potential synergies
in support functions whilst maintaining
separate commercial organisations and
footprints (primarily branches). The new
regional structure of the combined UK
business is focusing on promoting local
entrepreneurship, accountability and P&L
account responsibility.
More expansive growth strategy
As part of the Return to Growth strategy,
the Group has commenced a review to
refine the definitions of its marketplace and
thereby revise and expand the definition
of “core” business. This is designed to
facilitate the development of a more
expansive growth strategy in each of
the Group’s countries of operation. The
Company expects this review to highlight
opportunities, consistent with the Group’s
USPs (Expertise, Proximity, Service), to
widen its product offering and expand its
geographic coverage in areas where the
greatest returns can be realised.
18
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Energise sales, market share recovery
and growth efforts
The Group is improving proximity to its
customers by identifying and filling gaps
in its geographical coverage. Sales forces
are being expanded and up-skilled by
restoring their historic industry-leading,
bench-strength of specialist local expertise
in areas such as fire protection, energy
efficiency and sustainable materials. Sales
force productivity is also being increased
through enhanced sales management
and training, supported by sales force
management tools, disciplines and aligned
incentives, with customer reconnection a
top priority.
Facilitate growth through better
operations
A number of actions are well advanced
in the Group’s operations to increase
efficiency and service levels to boost the
sales effort, including:
■ pricing tools and training for key
account and branch managers,
providing enhanced visibility and
autonomy to set pricing quickly and
competitively;
■ improved product availability through
the use of enhanced systems and more
accurate operational key performance
indicators, such as stock availability;
■ enhanced on time and in full delivery;
and
■ additional training, which is being
provided to the Group’s workforce in
order to promote operational excellence
and customer service.
Liquidity and balance sheet
strengthening
The successful renegotiation of the Group’s
debt facilities during the summer resulted
in a resetting of its covenant requirements,
with additional minor amendments made
in early March 2021 to better align the
different tests. Consolidated liquidity
covenants are to be tested monthly
through to the maturity of the facilities,
with net borrowings tested monthly until
December 2022. From March 2022,
leverage will be tested on a quarterly basis,
and interest cover will be tested from June
2022. Consolidated net worth will also be
tested each quarter through to maturity of
the facilities.
The significant loss of revenues in H1 2020
impacted profitability, cash generation
and therefore debt levels, though the
immediate and comprehensive set of
actions enacted across the business
around cash conservation, coupled with
the receipt of the sale proceeds of the
Air Handling business, meant that the
Group was able to preserve its liquidity
throughout the period.
In mid-July, the Group completed a
successful capital raise, as previously
announced, raising gross proceeds of
£165m (c£152m net of related costs).
At the same time, approximately £13m
costs were paid in relation to the debt
refinancing.
As at the year-end, the Group had net
debt on a pre IFRS 16 basis of £4.1m. By
the end of February 2021 this number
had increased to £36.4m, reflecting the
expected seasonal increase in working
capital, as well as some payments of annual
commitments. We expect a net cash
outflow during the first half and a modest
cash inflow in H2.
Dividend
In line with the terms of the Group’s
amended debt arrangements, the Board
did not declare or pay an interim dividend
for the 2020 financial year, and nor will a
final dividend be declared.
Successful execution of the Return to
Growth strategy will return the Group
to sustainable, profitable growth and
cash generation, capable of supporting
a range of capital allocation priorities. As
such, the Board retains its medium term
commitment to return to a progressive
dividend policy, appropriately covered by
underlying earnings.
People
The Board would like to thank all
employees of SIG for their continued
commitment and resilience in 2020, which
was a particularly challenging year as a
result of Covid-19. Whilst the trading results
were affected by the pandemic, their efforts
have laid a strong foundation for the next
phase of SIG’s evolution as we focus on
building a stronger business with a high
performing workforce that is rewarded for
making a positive difference.
The Board recognises that safety must
always be its number one priority - for its
employees, its suppliers, its customers,
and within the communities where we
operate. A key focus for the Group since
the outbreak of the Covid-19 pandemic
has been to ensure that within those
operations that remained open for
business, all necessary measures were
taken in line with government safety
guidelines to protect the health and safety
of employees, suppliers and customers.
To further strengthen engagement with
colleagues, the Board appointed Simon
King as the designated Non-Executive
Director for workforce engagement with
effect from 1 October 2020. In addition,
in early 2020, a new culture programme
was launched to develop a culture aligned
to shared behaviours and encourage
openness and transparency.
Whilst Covid-19 hindered the full
implementation of a Group-wide culture
programme, it did provide the opportunity
to realign and strengthen the framework
comprising a vision, the strategic pillars
and cultural behaviours of the Group.
Work took place to incorporate employee
feedback, and local teams took the
opportunity to improve their understanding
of the behaviours and how they contribute
towards a change in culture. The full roll
out resumed in January 2021.
Covid-19
The Board closely monitored the impact
of the pandemic on the business and
on our people, and continues to do so.
Throughout the last twelve months,
the safety of our people, customers
and suppliers has been, and continues
to be, our primary concern. Additional
health and safety measures were quickly
implemented at the beginning of the
outbreak, and the new protocols continue
to be adhered to across the Group, in
line with the government guidance across
all jurisdictions in which it operates. To
support home working, the Group’s IT
infrastructure was strengthened. As a
result of the quick and agile response to
the pandemic, and from some government
support, the Group was able to mitigate the
impact without reducing headcount as a
result of Covid-19.
The specific actions taken included, but
were not limited to:
i. Employees: Over 2,000 employees were
furloughed under the UK Government’s
scheme and the majority of trading
sites across the UK and Ireland were
temporarily closed. Remaining staff
agreed to take up to 20% temporary
pay reductions, with the salaries of all
members of the Board temporarily
reduced by 50% from 1 April to 30
June 2020. In mid-May, the Company
reinstated the Executive Directors’ pay
to 80% at the same time as other Group
employees were returning to work on
full pay.
ii. Government support: Relevant
government support was accessed
in all countries of operation, across
employment support, tax and social
security deferrals. In aggregate, use of
government support schemes enabled
the Group to defer approximately £21m
of cash payments to points later within
2020, with another c£4m deferred into
2021, and to support the retention of
jobs through the receipt of c£11m of
furlough monies and other forms of
support.
iii. Capital expenditure: Programmes that
required significant cash investment
or did not provide near-term business
benefits were paused.
19
Stock code: SHI www.sigplc.comSTRATEGIC REPORT Business review
iv. Customers: The Group remained
very diligent in proactively managing
collections and monitoring overdue
payments.
v. Trade suppliers: The Group conducted
active discussions with large trade
suppliers in order to maintain continuity
of supply, and in some cases was able to
net rebates off against payments earlier
than scheduled.
vi. Non-trade suppliers: Deferral and terms
extension requests were managed
across non-trade suppliers, with a
significant focus on IT, services and
property, with property rates being
deferred on UK properties.
vii. Dividend: As noted above, the Board did
not declare a full year 2019 dividend or
interim 2020 dividend.
The decisive actions taken across all
functions and at all levels in the business
mitigated the initial impact of the global
pandemic. The performance in the first half
of the year was materially affected by the
different government lockdown responses
to the pandemic in the countries in which
we operate, notably in the UK and Ireland
during March and April, although less than
we had originally envisaged. With the easing
of lockdown restrictions in May and June,
the Group saw a gradual improvement
in trading performance, accompanied by
a corresponding reduction in losses and
this continued in the second half. Despite
further lockdowns and restrictions from
October onwards, the business was able
to trade broadly as normal throughout the
second half, albeit within the new operating
norms and protocols.
Portfolio management
As announced on 3 February 2020, the
Company completed the sale of its Air
Handling Division to France Air Management
SA for an enterprise value of €222.7m
(c£187.0m) on a cash free, debt free
basis on 31 January 2020. After payment
of transaction costs and other agreed
adjustments to the consideration, the net
cash inflow totalled c£148m. The results
from this business have been excluded from
the reported underlying results and are
shown as a discontinued operation in both
FY 2020 and the prior year.
The Building Solutions business was
classified as held for sale at 31 December
2019 as a sale had been agreed and
was due to complete in the first half of
2020, subject to approval from the UK
Competition and Markets Authority (CMA).
As announced in May 2020, the parties
agreed to terminate the sales agreement as
terms could not be agreed for the extension
of the agreement to enable the completion
of the CMA phase 2 investigation. During the
second half of the year the Board decided
to retain and develop the business, and
it is now reported as part of underlying
operations. Prior year comparatives have
been restated to present numbers on a
consistent basis with the current year.
Trading overview
Despite the materially adverse impacts on
trading from Covid-19, the Group’s results
for the year were better than initial internal
estimates that were made at the onset of
the pandemic early in the year.
The year commenced with a like-for-like
decline in underlying revenues of c11% for
the first two months of trading, reflecting
the continuation of the challenging trends
experienced during the final quarter of
2019 in the UK and Germany. Trading
activity across the Group’s other end
markets remained relatively stable.
The onset of the pandemic led to a period
of temporary lockdown in a number of
the markets in which the Group operates,
significantly impacting revenue streams
during March and April in France, and
April and May in the UK and Ireland, in
common with the broader construction
industry. The Group’s operating companies
in Germany, Poland and Benelux were also
impacted by local government containment
measures, although to a lesser extent.
Despite the lockdowns, parts of our UK
and Ireland businesses did remain open
to service critical and emergency projects
only, such as for the NHS, energy and
food sectors. After rapidly enhancing our
health and safety protocols across all
of the Group’s branches and offices we
were able to operate a staged reopening
of our branch network through April and
May, in conjunction with local government
guidelines. Underlying revenues during the
second quarter declined 33% on a like-for-
like basis.
The material drop in sales volumes across
our end markets throughout the first half
led to reductions in underlying gross profit
margins, principally driven by reduced
levels of supplier rebates, and hence
reduced profitability. To partly offset the
adverse impacts, the Group initiated a
number of decisive actions that not only
reduced its cost base but also supported
its liquidity position. Additionally, the Group
accessed government-supported job
retention schemes.
Trading over the summer months
continued to show signs of improvement
as local restrictions across a number of
the Group’s trading markets were relaxed,
coupled with a strong consumer demand in
the repair, maintenance and improvement
(“RMI”) market segment, benefiting our UK
and France Exteriors businesses.
Despite improving conditions, trading
continued to be challenging as we moved
into the second half of 2020, particularly
in UK Distribution, Ireland and Benelux
where various levels of local government-
imposed trading restrictions were still in
force. However, whilst the Group’s LFL sales
in the third quarter continued to be down
year-on-year, the trajectory improved, with
all operating companies, except Poland,
witnessing an increase in trading volumes.
Underlying revenues in the third quarter
finished 8% behind prior year on a like-for-
like basis. Margins, and hence profitability,
in quarter three showed an improvement
on the previous quarter, with a revenue
uplift of 38% coming principally from
reduced effects of Covid-19, particularly in
the UK businesses, resulting in higher levels
of supplier rebates.
The fourth quarter saw a return to positive
LFL sales at a Group level (+4%), with
strength in the RMI markets continuing
to assist our exteriors businesses in the
UK and France and underpinned by early
signs of progress coming from the Group’s
Return to Growth strategy, which started
to deliver an improved organic sales
performance. The fourth trading quarter
volumes also saw further improvement in
gross margins and profitability, providing
solid momentum as we entered 2021.
Outlook
Trading in 2021 to date is in line with
management expectations, continuing on
a similar trajectory to Q4 2020. The market
fundamentals for SIG remain strong and
we are benefiting from good RMI growth
in UK and France. We now have the right
structure in place for UK Distribution and
revenue growth is starting to emerge as
planned.
Continued uncertainty remains regarding
Covid-19, as well as rising input prices and
early signs of some potential materials
shortages. However, providing there is
no further material disruption to either
our business or end markets as a result
of the pandemic, the Board expects the
near-term benefits of the actions taken in
2020 to deliver organic revenue growth in
2021, including market share gains. The
benefits of this will become increasingly
evident as the year progresses and should
enable us to return to underlying operating
profitability and cash generation during the
second half.
20
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Rebuilding the UK business
As part of our overall strategy for growth, the
rebuild of the UK business was fundamental to
re-establish our core business and expertise.
With the joining of Phil Johns as Managing
Director, who returned to the business after
several years, we made significant progress
quickly.
With the aim of restoring expertise, significant organisational
changes took place, beginning with the reorganisation of the
senior leadership team; 5 of 7 market-facing UK Directors
joined in 2020, bringing back an average of 27 years’
experience, with the majority being SIG alumni, re-joining the
business. The newly strengthened leadership team put the
subsequent merge of the two UK businesses, distribution and
roofing, under one leadership team, creating a more effective
structure and generating a cost saving of £4m.
Through re-investment, the UK Distribution business began
its rebuild and commenced a major project to enhance our
sales and branch teams. Over 6 months, a total of 380 roles
were redeployed or recruited; 26% of the total were sales and
category roles.
In addition, our branch teams were enhanced, with a
reintroduction of 32 new branch manager positions, providing
enhanced local leadership and accountability.
In line with the new strategy to re-establish local focus, steps
were taken to empower branches and maximise specialist
central support. Focus was placed on building margin, price
management, stock control and localised transport. To drive
improved customer service, an enhanced CRM platform was
launched. With these enhanced tools and re-prioritisation
measures, the re-establishment of customer and supplier
engagement was enabled.
With solid foundations in place, the business is making
significant initial steps into its footprint growth, with a
new branch opening in Scotland, strengthening our local
market presence and the first acquisitions made since
2015. S M Roofing, a roofing supplies merchant, and F30
Building Products, a building products merchant (2021) were
integrated into the Distribution business strengthening our
offering and portfolio.
In 2021, the UK business will continue to focus on returning
the UK back to profit, gaining market share and recovering
gross margin. Further actions will be taken to maximise the
decentralised, branch-led model, supported by selective
acquisitions, to drive the business towards growth.
21
Stock code: SHI www.sigplc.comSTRATEGIC REPORT Financial review
The financial performance in 2020 was severely
affected by restrictions on trading in response to
Covid-19, particularly in March and April during the
most severe lockdown period in the majority of
markets. As restrictions eased and trading returned
to relative normality from May onwards, the Group
also saw a gradual improvement in underlying trading
performance, notably the early stages of recovery in the
UK Distribution business late in H2. The Group finished
the year with substantial liquidity headroom.
Ian Ashton, Chief Financial Officer
Revenue and gross margin
The Group saw a 13% decline in its
LFL revenue over the year, with Group
underlying revenue down to £1,872.7m
(2019: £2,143.0m), principally as a result
of the Covid-19 impact. Underlying results
exclude the results from the businesses
that are classified as non-core and
Other items, in order to provide a better
understanding of the performance of the
Group on a continuing basis. On a statutory
basis, Group revenue was £1,874.5m (2019:
£2,160.6m), with non-core businesses
reporting sales of £1.8m (2019: £17.6m).
Underlying gross profit decreased 15.4%
to £470.0m (2019: £555.4m) with a gross
profit margin of 25.1% (2019: 25.9%). This
primarily reflects lower rebate receipts due
to decreased sales volumes. On a statutory
basis, gross profit fell from £559.1m to
£470.5m with gross margin decreasing by
80bps to 25.1% (2019: 25.9%).
Operating costs and profit
The Group’s underlying operating costs
were £523.3m (2019: £512.9m). The
increase was primarily due to the release
of a number of one-off accruals and
provisions in 2019, some temporary
costs related to the UK and broader
Group reorganisations, normalisation of
incentives, increases to bad debt expense
in response to Covid-19 uncertainty,
cost inflation, and movements in foreign
currency. These increases were partially
offset by c£12m benefit from furlough
schemes, other government support,
and wage saving initiatives. The Group’s
underlying operating loss was £53.3m
(2019: £42.5m profit) and at a statutory
level, the Group’s operating loss was
£167.7m (2019: £87.9m) after Other items
of £114.4m (2019: £130.4m). The latter
included £76.1m of impairment charges,
£13.2m of onerous contract costs, £7.4m
costs associated with refinancing, and
£6.7m costs relating to restructuring
activities.
Segmental analysis
UK
Underlying
revenue
2020
£m
357.4
310.1
667.5
–
667.5
Underlying
revenue1
2019
£m
534.3
346.5
880.8
1.2
882.0
UK Distribution
UK Exteriors
UK before non-core
Non-core businesses
UK
1. 2019 restated to include Building Solutions, reported as non-core in 2019.
LFL sales
H1
(48)%
(27)%
(40)%
–
(40)%
H2
(15)%
5%
(7)%
–
(7)%
Underlying
operating loss
2020
£m
(45.4)
(7.4)
(52.8)
–
(52.8)
FY2020
(33)%
(11)%
(25)%
–
(25)%
Underlying
operating
profit/(loss)1
2019
£m
7.9
11.8
19.7
(0.8)
18.9
Underlying revenue in UK Distribution, a specialist insulation and interiors distribution business, was down 33.1% to £357.4m (2019:
£534.3m). Underlying gross margin dropped 370bps to 22.5% (2019: 26.2%). The lockdown during March and April severely impacted UK
trading and as a result, combined with some continued underlying weakness in performance, underlying operating loss was £45.4m (2019:
£7.9m profit).
22
SIG plc Annual Report and Accounts for the year ended 31 December 2020
Underlying
revenue
£1,872.7m
2019: £2,143.0m
Underlying
(loss)/profit
before tax
(£76.3)m
2019: £17.7m
Statutory loss
before tax
(£202.3)m
2019: (£112.7)m
Net debt
£238.2m
2019: £455.4m
Despite a strong second half recovery, helped by a robust RMI market, UK Exteriors, a specialist roofing merchant, which also includes our
Building Solutions business, saw underlying revenue fall by 10.5% to £310.1m (2019: £346.5m) for the full year. Gross margin decreased
100bps to 27.3% (2019: 28.3%). As a result of these decreases, driven by the impact of Covid-19, the business recorded an underlying
operating loss of £7.4m (2019: £11.8m profit).
France
Underlying
revenue
2020
£m
168.1
344.8
512.9
1.8
514.7
Underlying
revenue
2019
£m
184.5
342.2
526.7
1.9
528.6
France Distribution
France Exteriors
France before non-core
Non-core businesses
France
LFL sales
H1
(21)%
(11)%
(14)%
–
(14)%
H2
1%
12%
8%
–
8%
FY2020
(10)%
0%
(3)%
–
(3)%
Underlying
operating
profit/(loss)
2020
£m
7.1
8.3
15.4
(0.3)
15.1
Underlying
operating
profit/(loss)
2019
£m
11.2
8.6
19.8
(0.9)
18.9
Trading activity suffered a temporary setback in France following the short term closure of all branches for three days in mid-March. The
businesses then commenced a staged reopening through into April.
France Distribution, trading as LiTT, a structural insulation and interiors business, saw underlying revenue decrease by 8.9% to £168.1m
(2019: £184.5m), and by 10% on a LFL basis after adjusting for foreign exchange movements. Within this, the second half of the year
showed clear signs of recovery, with LFL sales for the six months up 1%. Underlying gross margin remained flat at 27.4% (2019: 27.4%), with
the reduction in revenue resulting in a £4.1m decrease in underlying operating profit to £7.1m (2019: £11.2m).
Underlying revenue in France Exteriors, trading as Larivière, a specialist roofing business, increased by 0.8% to £344.8m (2019: £342.2m),
with H1 revenues down on prior year, though ahead in H2 on the back of strong demand in the RMI market, similar to that witnessed in the
UK. Helped by a new pricing framework introduced during the latter stages of 2019, underlying gross margin improved 90bps in the period
to 24.3% (2019: 23.4%). After taking into account inflationary cost increases and foreign currency movement, underlying operating profit
reduced by £0.3m to £8.3m (2019: £8.6m).
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Stock code: SHI www.sigplc.comSTRATEGIC REPORT Financial review
Germany and Benelux
LFL sales
Underlying
revenue
2020
£m
370.7
91.6
Underlying
revenue
2019
£m
381.5
103.0
462.3
–
462.3
484.5
14.5
499.0
Germany
Benelux
Germany and Benelux
before non-core
Non-core businesses
Germany and Benelux
H1
(9)%
(12)%
(9)%
–
(9)%
H2
(1)%
(14)%
(4)%
–
(4)%
FY2020
(5)%
(13)%
(7)%
–
(7)%
Underlying
operating
profit
2020
£m
0.4
2.5
Underlying
operating
profit
2019
£m
4.4
5.2
2.9
–
2.9
9.6
0.8
10.4
The Group’s operating companies in Germany and Benelux were impacted by government measures due to Covid-19, but to a lesser
extent than in the UK, Ireland and France, and trading continued from all sites throughout the period.
Underlying revenue in WeGo/VTi, our specialist insulation and interiors distribution business in Germany, fell by 2.8% to £370.7m (2019:
£381.5m) and by 5% on a LFL basis. In addition to the challenges faced due to Covid-19, H1 trading in Germany also saw a continuation
of the weaker trends experienced in the last quarter of 2019. However, underlying gross margin increased 30bps to 28.0% (2019:
27.7%), reflecting a number of renegotiated contracts with suppliers whereby thresholds have been reduced, and assisted by further
enhancements around pricing controls. Underlying operating profit for the period was £0.4m (2019: £4.4m).
Underlying revenue from the Group’s business in the Benelux region fell by 11.1% to £91.6m (2019: £103.0m), with the impacts of Covid-19
being exacerbated by a reduction in construction output in the Netherlands following changes in environmental restrictions in 2019.
Despite a very competitive marketplace, underlying gross margin decreased only 10bps to 24.6% (2019: 24.7%). As a result of the drop in
revenue, operating profit decreased to £2.5m (2019: £5.2m).
Ireland
Ireland
Underlying
revenue
2020
£m
80.5
Underlying
revenue
2019
£m
94.9
LFL sales
H1
(31)%
H2
(3)%
FY2020
(17)%
Underlying
operating
profit
2020
£m
0.8
Underlying
operating
profit
2019
£m
6.8
In Ireland, a specialist distributor of interiors, insulation and construction accessories, revenues in March to April were significantly
impacted by the Covid-19 pandemic, with a gradual improvement in performance in May to June as branches began to reopen. Underlying
revenue declined by 15.2% to £80.5m (2019: £94.9m), and by 17% on a LFL basis after adjusting for working days and foreign currency
movements. Underlying gross margin dropped to 23.4% (2019: 25.0%) as the business saw a shift in sales mix away from its higher margin
offerings, with underlying operating profit for the period of £0.8m (2019: £6.8m).
Poland
Poland
Underlying
revenue
2020
£m
149.5
Underlying
revenue
2019
£m
156.1
LFL sales
H1
(0)%
H2
(5)%
FY2020
(3)%
Underlying
operating
profit
2020
£m
2.0
Underlying
operating
profit
2019
£m
4.3
In Poland, a market leading distributor of insulation and interiors, underlying revenue fell to £149.5m (2019: £156.1m), with LFL sales
down 3%. Whilst also impacted by government measures, trading continued from all sites throughout the period. Underlying gross margin
decreased slightly to 20.0% (2019: 20.3%), with the business delivering an underlying profit of £2.0m (2019: £4.3m) in the period, driven by
the drop in revenue and a small increase in operating costs.
24
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Reconciliation of underlying to statutory result
Other items, being items excluded from underlying results, during the period amounted to £126.0m (2019: £130.4m) on a pre-tax basis
and are summarised in the table below:
Underlying (loss)/profit before tax
Other items – impacting (loss)/profit before tax:
Amortisation of acquired intangibles
Impairment charges
Profit on agreed sale or closure of non-core businesses and associated impairment charges
Net operating losses attributable to businesses identified as non-core
Net restructuring costs
Investment in omnichannel retailing
Onerous contract costs
Costs associated with refinancing
Non-underlying finance costs
Other specific items
Total Other items
Statutory loss before tax
Further details of Other items are as follows:
2020
£m
(76.3)
(5.6)
(76.1)
0.6
(0.3)
(6.7)
(4.2)
(13.2)
(7.4)
(11.6)
(1.5)
(126.0)
(202.3)
2019
£m
17.7
(6.2)
(90.9)
0.1
(0.9)
(27.1)
(5.7)
–
–
–
0.3
(130.4)
(112.7)
■ The impairment charges of £76.1m (2019: £90.9m) comprise £45.4m related to goodwill, £1.9m customer relationships in intangibles,
£13.7m implementation costs of ERP systems (“SAP 1HANA”) in Germany and France, £1.4m other software costs, £3.5m tangible fixed
assets, and £10.2m right-of-use assets.
■ Net restructuring costs of £6.7m (2019: £27.1m) were incurred in connection with the prior year target operating model projects in the
UK, Germany and France, the current year restructuring of the UK businesses as part of the implementation of the Return to Growth
strategy, and restructuring in Benelux.
■ Onerous contract costs of £13.2m (2019: £nil) related to provisions recognised for licence fee commitments where no future economic
benefit is expected, principally in relation to the SAP 1HANA implementation.
■ Costs associated with refinancing of £7.4m (2019: £nil) includes legal and professional fees of £8.3m offset by a £0.9m gain in relation to
the partial derecognition of a cash flow hedging arrangement as a result of the change in debt facility agreements.
■ Non-underlying finance costs of £11.6m (2019: £nil) comprise £11.3m loss on modification recognised in relation to the private
placement notes and £0.3m write-off of arrangement fees in relation to the previous Revolving Credit Facility which has been
extinguished.
Taxation
The effective tax rate for the Group on the total loss before tax of £130.3m (2019: £108.9m) is negative 6.8% (2019: negative 14.3%). As the
Group operates in several different countries, tax losses cannot be surrendered or utilised cross border and the Group therefore pays tax
in some countries and not in others. Tax losses are not currently recognised in respect of the UK business, which also impacts the overall
effective tax rate. The combination of these factors means that the effective tax rate is less meaningful as an indicator or comparator for
the Group.
In accordance with UK legislation, the Group publishes an annual tax strategy, which is available on our website (www.sigplc.com).
Pensions
The Group operates four (2019: six) defined benefit pension schemes and a number of defined contribution pension schemes. The largest
defined benefit scheme is a UK scheme, which was closed to further accrual in 2016.
The Group’s total pension charge for the year, including amounts charged to interest and Other items, was £6.9m (2019: £7.0m), of which
a charge of £0.7m (2019: £0.7m) related to defined benefit pension schemes and £6.2m (2019: £6.3m) related to defined contribution
schemes.
The overall defined benefit pension schemes’ liabilities before taxation increased marginally during the year to £25.1m (2019: £24.8m).
Financial position
In July 2020, we concluded the successful restructure of our financing facilities and a £165m capital raise (c£152m net of related costs).
These, along with our careful management of working capital and cash in the year, have strengthened the balance sheet and created a
sound financial base on which we can rebuild the business. Overall, the net assets of the Group have increased by 4.1% to £306.3m (2019:
£294.2m), with a cash position at year-end of £235.3m (2019: £110.0m, excluding cash from businesses held for sale) and net debt of
£238.2m (2019: £455.4m).
25
Stock code: SHI www.sigplc.comSTRATEGIC REPORT Financial review
Group structure
The results at FY 2019 have been restated to reflect the change to core businesses subsequent to the year-end announcement. Please
refer to the table below:
As reported at FY 2019 results
Building Solutions
Restated at FY 2020 results
Cash flow
Total operating loss, excluding gain on sale from Air Handling
Depreciation and non-cash items
(Increase)/decrease in working capital and provisions
Interest and tax
Capital expenditure
Proceeds from sale of property, plant and equipment
Free cash flow
Sale and purchase of businesses
Payment of lease liabilities
(Repayment)/drawdown of debt
Dividends paid to equity holders of the Company
Net proceeds from capital raise
Change in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Effect of foreign exchange rate changes
Cash and cash equivalents at end of the year
Underlying
revenue
£m
2,084.7
58.3
Underlying
PBT
£m
15.6
2.1
2,143.0
17.7
2020
£m
(166.6)
154.4
(30.8)
(32.3)
(20.8)
5.6
(90.5)
147.0
(54.8)
(85.2)
–
151.9
68.4
145.1
21.8
235.3
2019
£m
(82.9)
177.9
71.0
(35.3)
(34.5)
7.6
103.8
7.5
(59.9)
42.4
(22.2)
–
71.6
78.8
(5.3)
145.1
During the year, the Group reported a free cash outflow of £90.5m (2019: £103.8m inflow) as a result of the loss in the year and an
increase in working capital, together with payments in relation to interest, tax and capital expenditure. Other movements in cash relate
to £147.0m cash inflow from the sale and purchase of businesses (2019: £7.5m), £151.9m net proceeds from the capital raise (2019: nil),
£85.2m repayments of debt (2019: £42.4m drawdown) and £54.8m payment of lease liabilities (2019: £59.9m).
Free cash flow represents the cash available after supporting operations and maintaining capital assets, and before financing and investing
activities.
Financing and funding
On 18 June 2020, the Group agreed amended debt facility agreements in respect of its Revolving Credit Facility and private placement
notes. On 10 July 2020, the Group also completed the successful raising of £165m (c£152m net of related costs) equity through a firm
placing, and placing and open offer, in order to reduce the Group’s net debt and strengthen its balance sheet.
The Group has significant available liquidity and on the basis of current forecasts is expected to remain in compliance with all banking
covenants throughout the forecast period to 31 March 2022. On 1 March 2021, the Group agreed with its lending banks and private
placement noteholders to amend certain financial covenants to better align the different tests and to provide additional headroom on the
interest cover covenant under stress test scenarios from March 2022.
26
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Viability statement
In accordance with the requirements of the 2018 UK Corporate
Governance Code (the Code), the Directors confirm that they 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 process and a description of the
principal risks and uncertainties facing the Group are included in
this Strategic report on pages 30 to 35. As such, the key factors
affecting the Group’s prospects are:
■ Market positions: SIG retains strong market positions in its two
core businesses, which the Board believes will continue to offer
sustainable positions over the medium term;
■ Specialist business model: SIG is focused on specialist
distribution and merchanting of specialist products for our
customers. A defined product focus means SIG occupies a key
supply niche, partnering both suppliers and customers to add
value;
■ Sales mix: a diversified portfolio of products, market sectors and
geographies means SIG has a resilient underlying portfolio of
customers, diversifying the risk around sales for the Group; and
■ Delivery of the Return to Growth strategy: good early progress
has been made in implementing the new strategy introduced
in 2020 to drive a return to profitable growth, with a clear focus
on growing the customer base through the re-establishment of
strong customer and supplier partnerships, specialist expertise
and superior customer service.
The Board has determined that a three-year period to
31 December 2023 is the most appropriate time period for
its viability review. This period has been selected since it gives
the Board sufficient visibility into the future, due to industry
characteristics, business cycle and the tenor of the Group’s
financing, to make a realistic viability assessment. This also aligns
with the new growth plan for the business.
The assessment process and key assumptions
As part of the Group’s financial planning process, financial forecasts
for the first three years were produced covering the period to 31
December 2023. The process included a detailed review of the
forecasts, led by the Chief Executive Officer and Chief Financial
Officer in conjunction with input from divisional and functional
management.
The key assumptions within the Group’s financial forecasts include:
■ Turnaround for the business: continued focus on the new
strategy for growth implemented in 2020 to grow the EU
businesses whilst maintaining or improving margin, and
delivering a market share recapture plan in the UK. The
turnaround in the UK is focused on re-establishing valuable
customer and supplier relationships, with clear accountability at
branch level;
■ Return to profitable growth: early progress has been made on
delivering the new strategy, centred on leveraging SIG’s key
differentiators of expertise, service and proximity to reignite
growth through focusing on:
− Specialist expertise: branches and regions re-establishing
specialist focus and expertise, continuing to re-introduce
and develop industry knowledge and investing in enhanced
technical training;
− Superior service: our sales capacity and productivity is being
strengthened, to provide the best customer service, with
investment in sales training to strengthen commercial teams
and ensure they have the right tools to allow greater focus
on customer relationships;
− Winning branches: branch teams are trusted, capable and
empowered to achieve success, with a focus on building a
winning franchise model across the Group; and
− Valuable partnerships: partnering closely with suppliers to
understand our joint opportunities and to create win-win
strategies.
■ Impact of Covid-19: the forecasts assume that there will be
sustained growth in the economy and in the construction
industry in particular, and, given that the Group has adapted
working practices to align with the Covid-19 restrictions, that
no further significant reductions in trading such as that seen in
the Spring of 2020 will occur. The recent commencement and
rate of success of vaccination programmes, notably in the UK,
reduces the risk of further impact from Covid-19; and
■ Dividends: no dividend for 2020, as previously announced.
Additionally, during 2020 the Group obtained new financing and
strengthened the balance sheet, as follows:
■ On 31 January 2020 the Group completed its disposal of its Air
Handling Division with net proceeds of £155.1m;
■ On 18 June 2020 the Group completed its renegotiation of its
banking facilities;
■ On 10 July 2020 the Group completed its equity raise with
proceeds of £165m; and
■ On 1 March 2021 the Group agreed with its lenders to amend
certain covenants to better align the different tests.
In order to assess the resilience of the Group to threats posed
by those risks in severe but plausible scenarios, the Group’s
financial forecasts were subjected to thorough multi-variant stress
and sensitivity analysis together with an assessment of potential
mitigating actions. This multi-variant stress and sensitivity analysis
included scenarios arising from combinations of the following:
Variant
Sensitivity analysis has been
modelled on the basis that the
Return to Growth strategy may take
longer than expected to fully deliver,
with downside scenarios modelled
on the medium term plan for 2021,
2022 and 2023.
The implications of a challenging
economic environment, in particular
a lower than expected recovery in
the construction industry and the
wider economy following the removal
of the current restrictions in relation
to Covid-19, have been modelled
by assuming a severe but plausible
reduction in revenue and gross
margins in each of the three years.
The impact of the competitive
environment within which the
Group’s businesses operate and
the interaction with the Group’s
gross margin has been modelled
by assuming a severe but plausible
reduction in revenue and gross
margins during the three year period.
Link to principal risks
and uncertainties
Delivering business
change
Market downturn
Business growth
Delivering business
change
Market downturn
Delivering business
change
Market downturn
Business growth
27
Stock code: SHI www.sigplc.comSTRATEGIC REPORT Financial review
The resulting impact on key metrics was considered with particular
focus on solvency measures including liquidity headroom and other
covenants. The forecasts show headroom against all covenants
during the three year period under the downside scenarios
considered, including consideration of the impact of potential
further impairments of goodwill and other non-current assets on
the consolidated net worth covenant. In the case of these scenarios
arising, various mitigating actions are also available to the Group,
including further cost reduction programmes, a reduction in non-
essential capital expenditure, seeking support from the RCF lenders
and the private placement noteholders, seeking alternative sources
of finance and making further business disposals.
This assessment is based on the assumption that the Group’s
£70m term loan/£25m Revolving Credit Facility, which have 31
May 2023 end dates, together with the c£145m Private Placement
Notes with 2023-2026 maturities (containing May 2023 put options
for early repayment), will be refinanced in advance of these
maturities. Following the recent successful amendment of the
covenants the Group is confident in ongoing lender support, and
also plans to refinance the facilities well in advance of the May 2023
facility end dates.
After conducting their viability review, and taking into account the
Group’s current position and principal risks, 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 31 December 2023.
Going concern
The Group closely monitors its funding position throughout the
year, including monitoring compliance with covenants and available
facilities to ensure it has sufficient headroom to fund operations.
On 18 June 2020, the Group agreed amended debt facility
agreements in respect of its Revolving Credit Facility (RCF) and
private placement notes, with key changes as set out in Note 19 of
the Consolidated Financial Statements. On 10 July 2020 the Group
also completed the successful raising of £165m of equity through a
firm placing and placing and open offer, in order to reduce net debt
and strengthen the Group’s balance sheet.
Under the June 2020 revised debt facility agreements the Group
was subject to covenant testing as follows:
■ Leverage (net debt/EBITDA) and interest cover (EBITA/interest)
not tested until March 2022, after which tested every quarter,
the tests being applied to the prior 12 months;
■ Until 28 February 2022 the Group has to ensure that
Consolidated Net Debt (CND) does not exceed £225m for each
quarterly test date in 2021 (2020: £125m);
■ Minimum Liquidity (available cash and undrawn revolving credit
facility commitments) of £40m at all times; and
■ Consolidated Net Worth (CNW) must at all times not be less
than £250m.
The Group was in compliance with these covenants at 31
December 2020.
Whilst the Group has significant available liquidity, and on the basis
of current forecasts is expected to remain in compliance with all
banking covenants throughout the forecast period to 31 March
2022, on 1 March 2021 the Group agreed with its lending banks
and private placement noteholders to amend certain financial
covenants to better align the tests and to provide additional
headroom on the interest cover covenant under stress test
scenarios from March 2022. The amended covenants under the
28
revised agreements are as follows:
■ The interest cover testing does not start until June 2022 and is
at lower levels than previously until December 2022;
■ The leverage covenant threshold is now slightly lower than
previously at March 2022 and June 2022;
■ The Consolidated Net Debt threshold is lowered to £200m and
extended to December 2022; and
■ No change to the CNW or Minimum Liquidity covenants.
In arriving at their opinion on going concern, the Directors have
considered the Group’s forecasts for the period to 31 March 2022,
and specifically the ability to meet the covenant tests above. These
forecasts reflect the assumption of more normal trading levels
since the worst of the Covid-19 impact, as well as the expected
positive impact of the strategic actions being undertaken to
improve future performance under the Return to Growth strategy.
Management have continued to manage liquidity very closely, such
that cashflow performance was better than initial expectations
throughout 2020. The base forecasts indicate that the Group will
be able to operate within the covenants for the forecast period to
31 March 2022.
The Directors have considered the following principal risks and
uncertainties that could potentially impact the Group’s ability to
fund its future activities and adhere to its future banking covenants,
including:
■ A decline in market conditions resulting in lower than forecast
sales;
■ Implementation of the new strategy taking longer than
anticipated to deliver forecast increases in revenue and profit;
■ A further wave of the Covid-19 pandemic; and
■ The terms of the Group’s revised lending arrangements and
whether these could limit investment in growth opportunities.
The forecasts on which the going concern assessment is based
have been subject to sensitivity analysis and stress testing to
assess the impact of the above risks. The Group has considered
a plausible downside scenario, factoring in a reduction in sales
volumes and a reduction in gross margin, offset by reductions in
direct expenditure and discretionary operating costs. The results
showed that under this scenario the Group will still be able to
operate within the covenants with adequate headroom for the
forecast period to 31 March 2022.
In considering the impact of these stress test scenarios the
Directors have also reviewed realistic additional mitigating actions
that could be taken over and above those already included in
the downside scenario forecast to avoid or reduce the impact
or occurrence of the underlying risks. These include further
reductions to operating costs, cutting discretionary capital
expenditure and disposing of non-core assets.
On consideration of the above, the Directors believe that the Group
has adequate resources to continue in operational existence for
the forecast period to 31 March 2022 and the Directors therefore
consider it is appropriate to adopt the going concern basis in
preparing the 2020 financial statements.
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Cautionary statement
This Strategic Report has been prepared to provide the Company’s
shareholders with a fair review of the business of the Group and
a description of the principal risks and uncertainties facing it.
It may not be relied upon by anyone, including the Company’s
shareholders, for any other purpose.
This Strategic Report and other sections of this report contain
forward-looking statements that are subject to risk factors including
the economic and business circumstances occurring from time to
time in countries and markets in which the Group operates and
risk factors associated with the building and construction sectors.
By their nature, forward-looking statements involve a number of
risks, uncertainties and assumptions because they relate to events
and/or depend on circumstances that may or may not occur in
the future and could cause actual results and outcomes to differ
materially from those expressed in or implied by the forward-
looking statements.
No assurance can be given that the forward-looking statements
in this Strategic Report will be realised. Statements about the
directors’ expectations, beliefs, hopes, plans, intentions and
strategies are inherently subject to change and they are based on
expectations and assumptions as to future events, circumstances
and other factors which are in some cases outside the Group’s
control. Actual results could differ materially from the Group’s
current expectations. It is believed that the expectations set out
in these forward-looking statements are reasonable but they may
be affected by a wide range of variables, which could cause actual
results or trends to differ materially, including but not limited
to, changes in risks associated with the level of market demand,
fluctuations in product pricing and changes in foreign exchange
and interest rates.
The forward-looking statements should be read in particular in the
context of the specific risk factors for the Group identified on pages
30 to 35 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 (comprising pages 04 to 47) was approved by
a duly authorised committee of the Board of Directors on 25 March
2021 and signed on the Board’s behalf by:
Steve Francis
Chief Executive Officer
25 March 2021
Ian Ashton
Chief Financial Officer
25 March 2021
29
Stock code: SHI www.sigplc.comSTRATEGIC REPORT Principal risks and uncertainties
Risk management plays an integral part in SIG’s planning, decision making and management
processes. All employees have a responsibility to ensure they understand the risks in their area of
activity, that appropriate controls are in place and that they are operating effectively to manage
these risks. The Board maintains overall responsibility for ensuring risk management and internal
control systems are robust.
The Board
Accountability to stakeholders for
organisational oversight
SIG BOARD ROLES:
Establish risk management structure, set strategic objectives, set
risk appetite and ensure robustness of control structure
↓
Audit Committee
Accountability to
stakeholders and the Board
for organisational oversight
↓
↓
SIG AUDIT COMMITTEE ROLES:
Consider risk management and
control framework adequacy and
agree audit plan
↓
↓
Executive Leadership Team
Achievement of organisational objectives,
including managing risk
Internal Audit
Independent assurance
↓↓
FIRST LINE ROLES:
Business operations
Operating Companies and
Support Functions
(HR, Finance, IT)
■ Provision of products /
services
■ Management controls
■ Internal control
measures
■ Ownership of risk
SECOND LINE ROLES:
Oversight functions
Legal, Health, Safety and
Environment, Group
Risk, Group Controls,
Compliance and
Information Security
■ Expertise and support
■ Monitoring, challenge
and advice on risk-
related matters
THIRD LINE ROLES:
Group Internal Audit
■ Independent and objective
assurance
s
r
e
d
i
v
o
r
p
e
c
n
a
r
u
s
s
a
l
a
n
r
e
t
x
e
d
n
a
s
r
o
t
a
l
u
g
e
R
Key: ↓ Accountability / reporting
↓ Delegation, direction, resources oversight
↓↓ Alignment, communication, coordination, collaboration
The Board sets the strategy for the Group and ensures the associated risks are effectively identified and managed through the
implementation of the risk management and control frameworks.
The Group employs a three lines model to provide a simple and effective way to enhance risk management and control processes and
ensure roles and responsibilities are clear. The Board maintains oversight to ensure risk management and control activities carried out by
the three lines are proportionate to the perceived degree of risk and its own risk appetite across the Group.
30
SIG plc Annual Report and Accounts for the year ended 31 December 2020
Risk category
Risk appetite statement
Financial
Operational
Health and safety
Regulatory and
compliance
People
Strategy
Transformation
Reputation
SIG prefers options in its everyday business that limit the
possibility of financial loss even though rewards may be
restricted as a result.
SIG is prepared to accept some adverse impact on
operational performance in the short term if there is a
clear business case with defined benefits that will help
achieve its objectives.
SIG has a commitment to ensuring that no harm comes
to colleagues, customers and suppliers, and that there
are zero health and safety reportable incidents. It invests
appropriately to achieve this.
SIG is a compliant organisation and invests to ensure that
there is a robust control environment to maintain a high
level of compliance.
SIG will seek to meet current workforce requirements
through existing structures but may change the
organisational model or seek new skills when there is a
clear cost or efficiency benefit from doing so. Employee
dissatisfaction is limited wherever possible.
SIG has a balanced approach towards taking risk through
strategic initiatives and will maintain a portfolio of
initiatives with a range of risk profiles, including those that
present higher risk and reward.
SIG will balance the potential reward from transformation
activity with the likelihood of risk to delivery. Some activity
that has the potential to disrupt underlying business may
be undertaken if the potential rewards outweigh the risk.
SIG will seek to avoid actions that present a risk of
reputational damage and will consider the likely views
of its stakeholders, including its customers, suppliers,
shareholders, employees and communities in which it
operates, ensuring risk is minimised prior to approval of
an initiative or activity.
Risk management framework
The SIG risk management framework is
based on the identification of risks through
regular discussion at local operating
company leadership and Executive
Leadership Team (ELT) meetings. New and
emerging risks are identified through the
use of horizon scanning, regular exercises
with first and second line teams and
attendance at relevant forums. These risks
are monitored on an ongoing basis with
thorough risk assessments completed
where needed, to ensure that the Group
is well positioned to manage these risks
should they materialise.
Group risks are owned by an Executive
Leadership Team member and sponsored
by either the CEO or CFO. These risks are
assessed at both a gross and net level
using an agreed risk scoring methodology.
Mitigating controls currently in place are
documented and regularly reviewed, and
any further actions required to bring the
risk within risk appetite are agreed with risk
owners with clear dates for completion.
Group risks are formally reviewed by
risk owners with updates reported back
to the Executive Leadership Team and
Board bi-annually. This includes a review
of the completeness of risk registers and
the appropriateness of risk scoring. For
example, the risk rating for delivering
business change increased, following
a review of the risk scoring and clarity
regarding transformation activity due to
occur across the Group over the strategic
timeframe.
A similar risk management process occurs
at the operating company level where
the risk register contains risks to the
achievement of the local medium-term
plan. The Group Risk team periodically
review these risks with local management
and perform a reconciliation with the
Group risk register. Details of spotlight risks
are presented at each Audit Committee
meeting, with a focus on health and safety,
business growth and cyber security in 2020.
31
Stock code: SHI www.sigplc.comSTRATEGIC REPORT Principal risks and uncertainties
Assurance activity
First and second line functions provide
comfort to management that controls are
designed appropriately and are working
effectively to mitigate the principal risks.
Examples include the programme of
branch inspections by the Health and
Safety team and the review of the key
financial controls framework in each
operating company by the Group Controls
team.
Internal Audit provides independent
assurance on both control design and
effectiveness and, where relevant, the
activity conducted by first and second line
functions. The annual internal audit plan
comprises of a core cyclical plan (which
mandates a review of key financial and IT
controls on an annual basis) and a risk-
based plan that is aligned to Group risks.
Whilst most of the work is performed by
an in-house team of qualified auditors,
expertise for specialist areas such as IT is
obtained through a co-source arrangement
with KPMG.
The Internal Audit team agree a set of
control improvements with executive
stakeholders for each assignment and
obtains regular updates on progress
towards completion. All actions completed
by management are verified by the Internal
Audit team to ensure they mitigate the risk
originally identified. The status of all actions
are communicated each month to action
owners and the Executive Leadership
Team, and presented on a quarterly basis
to the Audit Committee.
Developments in 2020
Key developments in risk management and
internal control in 2020 included:
■ Updates to the risk management
framework.
■ Updates to the Group’s risk appetite.
■ Incorporation of standard tests in all
risk-based audits, such as for IT general
controls and fraud.
■ Continued improvements in
documenting sources of assurance.
■ Further development by the Group
Controls team of the key controls
framework to include more detailed risk
and control matrices for significant risk
areas.
■ Roll out of an action tracking tool for
internal controls.
■ Improvements to the cyber security
control environment.
■ Improvements to the Group’s
forecasting process to establish greater
control, accountability and transparency.
Improvements planned for 2021
SIG will continue to improve its risk
management processes with a number of
initiatives in 2021:
■ Further refinement, automation and
development of Key Risk Indicators (KRI)
reporting.
■ Documentation of risk and controls
matrices for remaining key control
areas.
■ Implementation of an integrated
assurance framework for enhanced
governance of risk and control.
Brexit risk
Following the UK’s exit from the European
Union, the Group has made a number of
adjustments to its business operations
in order to maintain continuity of supply
and ensure ongoing legal and regulatory
compliance. As the industry adjusts to the
post-Brexit operating environment, the
Board continues to monitor the potential
financial, operational and legislative
impacts, particularly with regards to its
UK and Ireland businesses, to ensure
assessments remain appropriate. The main
areas of ongoing focus are:
■ Supply shortages and border delays
– the Group has adjusted and
maintained stock levels in anticipation
of potential shortages in key product
lines, some of which materialised as
a result of the Covid-19 pandemic.
With the deal clarifying the UK-Ireland
border arrangements, supply and sale
arrangements have been amended
accordingly.
■ Tax and customs – Group Tax and
operating company Finance teams
performed a review and identified
necessary changes to SIG’s sale
arrangements. Amendments to terms of
sale are being made, where necessary,
to ensure ongoing compliance.
■ Disclosures – the Group is working
with suppliers and industry bodies to
ensure adequate arrangements are in
place in anticipation of changes to safety
and security disclosures due in 2021,
resulting from Brexit.
The business will maintain ongoing
dialogue with suppliers, customers and
regulators and update its assessments
accordingly.
32
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Covid-19
Since the outbreak of Covid-19 in Q1
2020, we have continued to monitor the
impact of the unfolding situation and has
implemented mitigating measures to act
in accordance with government guidance
and to protect customers, employees and
suppliers.
The Board and Executive Leadership
Team’s continued focus is on ensuring
measures are in place to manage the
Group’s risks across a range of areas,
including liquidity, people, supply chain
and regulations. The Executive Leadership
Team meet regularly to provide updates on
the situation and to ensure that the actions
that have been taken are appropriate to
the evolving threat.
Additional business continuity plans are in
place in each operating company in order
for local leadership teams to ensure they
are responding quickly and effectively to
the local situation.
To ensure the business remains Covid-
safe, the measures we have taken to date
include:
■ Actions to manage the Group’s cash
requirements such as leveraging
governmental support (in the form
of deferred payments or grants),
prioritisation of capital expenditure
projects, and liaising with customers to
more closely manage credit control and
cash collection.
■ Enhancing the Group’s cash flow
forecast model, accommodating a
range of scenarios that vary both in
time and severity to ensure it has the
most accurate view possible of future
cashflows.
■ Implementation of processes and
procedures to allow the safe closure
and reopening of branches, according to
government guidance. We temporarily
closed our UK and Irish businesses and
selected branches of other operating
companies in line with local government
advice, to protect our people and to
conserve cash. Across the Group and
where allowed under local regulations, a
limited branch network was maintained
in order to service critical projects
essential to frontline services. In the UK,
we reopened all sites by the end of June
and ensured Covid-safe measures were
in place in all branches across operating
companies.
■ Adapting to a remote working model,
increasing VPN licences and computer
hardware to support as many as
people as possible to work from home.
Enhanced anti-fraud measures have
also been implemented in response
to the proliferation of organised crime
activity that was observed.
The Group continues to model a range of
scenarios and refine its contingency plans
in line with the latest information available
regarding recovery.
Principal risks
The Board monitors 16 risks on the Group risk register, which includes the ten principal risks to the Group set out in this Report.
These risks, if they materialise, could have a significant impact on the Group’s ability to meet its strategic objectives. The assessed net
risk scores (likelihood and impact of the risk occurring after taking account of mitigating controls) are outlined in the below matrix and
details of the risks, current mitigations and planned improvements are included in the table on the next page.
Principal risks
A
B
Employee attraction, retention and engagement
Health and safety
C Delivering business change
D
Cyber security
E Data quality and governance
F
Market downturn
G Systems failure
H Business growth
I
J
Delivering the customer experience
Environmental, social and governance
l
a
c
i
t
i
r
C
t
c
a
p
m
I
CB
D
E
F
G H I
A
J
w
o
L
Remote
Likelihood
Likely
33
Stock code: SHI www.sigplc.comSTRATEGIC REPORT Principal risks and uncertainties
Risk
Description
Change in the year
Mitigations
A
Employee
attraction,
retention and
engagement
Failure to attract and
retain people with the
right skills, drive and
capability to reshape
and grow the business.
SIG’s people risk profile remains unchanged despite
challenges posed by Covid-19. We responded to
the pandemic with a mental health and wellbeing
programme, which included a new Employee
Assistance Programme (EAP) in the UK and mental
health first aider training.
We continued to roll out the culture programme
and delivered a Group-wide Board engagement
programme and employee engagement survey. Action
plans from both will be followed through to completion
in 2021.
■ Engagement survey completed with
associated action plan developed.
■ Improved remuneration packages and
retention plans for critical roles.
■ Launch of commitment culture.
■ Launch of mental health and wellbeing
policy.
■ Monthly tracking of staff turnover and
key indicators.
B
Health and
safety
Danger of incident or
accident, resulting in
injury or loss of life to
employees, customers
or the general public.
The Covid-19 pandemic increased the risk of a health
and safety event occurring, with both the gross and net
risk rising in the year.
■ Integrated Safety management system
being implemented.
■ Framework of compliance standards in
New ways of working were introduced to ensure
ongoing compliance with laws and regulations and
the safeguarding of health and wellbeing. These
included revised in-branch pick-up processes and the
introduction of screens and revised branch layouts.
place.
■ Regular monitoring and reporting of key
metrics.
■ HSE managers visibility raised by joining
Group Senior Leadership Team.
C
Delivering
business
change
Failure to deliver the
change and growth
agenda in an effective
and efficient manner,
resulting in management
stretch, compromised
quality and inability to
meet growth targets.
Delivery of the new strategy has increased the type and
level of change initiatives underway at SIG, leading to
an increase in risk profile.
■ Project Delivery Framework in place for IT
enabled projects.
■ Governance process in place for delivery
Operating companies continue to manage change
portfolios through programme management
governance committees. Increased monitoring has
been implemented, in particular over progress against
growth initiatives, in line with our strategy.
of major projects.
■ Benefits tracking.
■ Monitoring of KPIs relating to key
business change programmes.
D
Cyber security
Internal or external
cyber attack could result
in system disruption or
loss of sensitive data.
The cyber security risk profile remains in line with
prior year. Additional measures have been deployed
to counteract the increased cyber risk observed
throughout the pandemic.
E
Data
quality and
governance
N
F
Market
downturn
Poor data quality
negatively impacts our
financial management,
fact-based decision
making, business
efficiency, and credibility
with customers.
Volatility in the market
impacts the Group’s
ability to accurately
forecast and to meet
internal and external
expectations.
We deployed more stringent access controls to critical
systems, giving greater security to our infrastructure
and data. Awareness campaigns were delivered across
the business and continue on a regular basis, with the
results of simulated phishing exercises reported to the
Executive Leadership Team and Board regularly.
With our return to profitability underpinned by
accurate and timely data, this risk area is now reflected
as a principal risk for the organisation.
Investment in a new financial consolidation tool will
provide deeper and more readily available insight into
forecasts.
Product and customer data quality remain a focus
area for our operating companies, who continue to
liaise with local industry bodies to obtain and leverage
market data.
The risk to SIG of market downturn has remained
broadly in line with prior year and market monitoring
continues to ensure timely and appropriate responses
are put in place in relevant operating companies.
Uncertainty regarding Brexit remained, with additional
concerns regarding construction activity under
Covid-19. Government support for the construction
industry in the UK during periods of lockdown resulted
in higher levels of market activity than worst-case
scenario models.
■ Training and communication schedule to
ensure employee awareness of risks.
■ Disaster recovery plans in place and
secure backups conducted to ensure
continuity of service.
■ Endpoint encryption installation.
■ Enhanced cyber attack monitoring.
■ Monthly tracking of key indicators in
management accounts.
■ Regulatory policies in place to govern
compliance.
■ Delivery of training and awareness
campaigns.
■ IT upgrade projects in key locations.
■ The Group’s geographical diversity across
Europe reduces the impact of changes in
market conditions in any one country.
■ Industry based KPIs monitored monthly
at a Group and operating company level.
■ Regular and ongoing business
performance reviews are conducted.
■ Brexit monitoring.
■ Enhanced forecasting with Group
visibility.
■ Business growth plans in place.
34
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Risk
Description
Change in the year
Mitigations
G
Systems failure
Systems become
heavily customised
and outdated and are
unable to support
critical business activity
and decision making.
H
Business
growth
SIG is unable to grow
sales and/or land new
market opportunities to
grow market share in
line with strategy.
I
Delivering
the customer
experience
Failure to deliver
consistent, high-quality
service to customers
and/or strengthen
relationships with
customers.
J
Environmental,
social and
governance
N
SIG suffers financial
and/or reputational
losses as a result of
poor environmental,
social and governance
performance and/or
disclosure.
Systems failure remains a principal Information
Technology risk, with monitoring continuing
throughout the year.
Enhancements to our infrastructure and control
environment strengthened our defence against this
risk; SIG France moved to a state-of-the-art data
centre and team capabilities were enhanced through
specialist hires.
The business continues to deliver against plans to
return to profitable growth, with the risk rating in line
with prior year.
Our physical branch network was reimagined to ensure
proximity to customers and the completion of new
flagship distribution centres, such as Valor Park near
Heathrow, to allow the business greater scope and
scale of sales delivery. Monitoring of business growth
metrics continues as part of business reviews at both
the management and Board level.
■ Support from specialised third-party
experts.
■ Business continuity and disaster recovery
capabilities.
■ IT upgrade projects in key locations.
■ Growth targets included in budgets for all
business areas.
■ Business performance is reported and
monitored regularly in management
accounts and at management meetings.
■ Bespoke technical offerings and diverse
specialist product ranges give access to
specialist markets.
Delivering superior value remains one of our principal
risks, with a risk profile in line with prior year.
■ Customer-centric training and
development programmes.
Challenging working and trading conditions resulting
from the Covid-19 pandemic were offset by
investment in a strengthened sales capacity, including
a programme of strategic appointments to our
salesforce. Customer satisfaction and Net Promoter
Score (NPS) surveys were performed throughout the
year, with action plans identified for areas where we
can better serve our customers.
Environmental, social and governance (ESG) risk is
reflected as a new principal risk for 2020. Action
plans identified through a detailed assessment will be
implemented in 2021 and beyond.
■ Customer segmentation analysis.
■ Development of loyalty programmes.
■ Customer metrics reported and
monitored regularly in management
accounts and at management meetings.
■ Customer satisfaction and NPS surveys.
■ ESG roadmap in development for rollout
prior to upcoming disclosure obligation
deadlines.
■ Employee mental health and wellbeing
programme.
■ Development of a ten-year de-
carbonisation plan.
■ ISO14001 Environmental Management
Systems accreditation rollout plan.
Relevance to strategy
Understanding movements in business risks
Responsible actions
Specialist expertise
Highest productivity
Winning branches
Valuable partnerships
Focused growth
Increase
Decrease
No change
N
New
Superior service
35
Stock code: SHI www.sigplc.comSTRATEGIC REPORT Environmental, social
and governance: Framework
Commitment to Environmental, Social and
Governance (ESG) matters is central to
pillar one of our Return to Growth strategy.
E
Environmental
The environmental factor is primarily concerned with the
company’s influence on the environment and its ability to
mitigate various risks that could harm the environment.
Generally, a company is assessed by its use of energy,
waste generation, level of pollution produced, utilisation of
resources and treatment of animals.
S
Social
The social factor investigates the company’s relationships
with other businesses and communities. Social factor
considers the attitudes towards diversity, human rights and
consumer protection.
G
Governance
Corporate governance is concerned with the internal
company affairs and its relationships with the company’s
main stakeholders, including its employees and
shareholders.
SIG is committed to creating long-term sustainable
value for our stakeholders. To achieve this goal, we
have aligned our operations with the United Nations
Sustainable Development Goals (SDGs), providing us
with a framework against which to map our ESG and
business activities.
The SDGs are the blueprint to achieve a better and
more sustainable future for all. They address the
global challenges we face, including those related
to inequality, climate change and responsible
consumption and production.
This is the second year SIG has reported against the
SDGs. We welcome the framework as it is committed
to solving global issues, and these universal
principles support our commitment to responsible
business operations. Our ESG report details the
work undertaken by the Group and highlights our
commitment to the SDGs.
SGDs include:
Good health and wellbeing
Ensure healthy lives and promote wellbeing
for all at all ages.
Quality Education
Ensure inclusive and equitable quality education
and promote lifelong learning opportunities for all.
Gender equality
Achieve gender equality and empower all women
and girls.
Decent work and economic growth
Promote sustained, inclusive and sustainable
economic growth, full and productive
employment and decent work for all.
Industry, innovation and
infrastructure
Build resilient infrastructure, promote inclusive
and sustainable industrialisation and foster
innovation.
Reduced inequalities
Reduce inequality within and among countries.
Responsible consumption and
production
Ensure sustainable consumption and production
patterns.
Climate action
Take urgent action to combat climate change
and its impacts.
Peace, justice and strong institutions
Promote peaceful and inclusive societies for
sustainable development, provide access to
justice for all and build effective, accountable and
inclusive institutions at all levels.
36
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Environmental, social
and governance: Principles
Links to SDGs
Sustainability
SIG recognises its corporate responsibilities
towards its shareholders, employees,
customers and suppliers and is committed
to socially responsible business practice.
We are committed to creating long-term
sustainable value for our stakeholders, and
to achieve this, we have utilised the SDG
framework.
The Group considers policies that include
social and environmental issues in its
decision making processes 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 corporate responsibility,
including how it monitors and improves
performance reporting.
SIG Code of Conduct
SIG has a Code of Conduct that sets
out our ethical standards and expected
behaviours from all employees of the
Group. The Code of Conduct provides
guidance on how to manage certain
situations and where to go for advice, and
outlines our obligations across a number
of business policies, including anti-bribery,
corruption, ethical trading and human
rights. The Code of Conduct is supported
by our Group and local policies, procedures
and guidelines that are designed to protect
the business and our employees from legal,
financial and reputational risk.
A confidential and independent hotline
service is available to all employees so
that they can raise any concerns 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.
The Code of Conduct can be viewed on our
website (www.sigplc.com).
Diversity and equal opportunities
The Group has policies that promote
equality and diversity in the workforce
as well as prohibiting discrimination in
any form. SIG encourages and considers
all applications from individuals with
recognised disabilities to ensure they
have equal opportunity for employment
and development within the business. If
an employee becomes disabled during
employment, every effort is made to
ensure they can continue in employment,
by making reasonable adjustments in the
workplace or by providing retraining for
alternative work where necessary.
Ethical Trading and Human
Rights policy
The Ethical Trading and 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 that should
be maintained by employees in all Group
operations worldwide.
The policy sets out standards concerning:
■ Safe and fair working conditions for
employees;
■ Responsible management of social and
environmental issues within the Group;
and
■ Standards in the international supply
chain.
SIG promotes human rights through its
employment policies and practices, supply
chain, and the responsible use of its
products and services.
Anti-bribery and Corruption policy
SIG has a number of fundamental
principles 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 and Corruption policy
clearly sets out the ethical standards
required to ensure compliance with legal
obligations within the countries in which
SIG and its subsidiary companies operate.
Anti-bribery and corruption training is
provided to all employees across the
Group. This online training 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.
Its aim, therefore, is to limit its exposure to
bribery and corruption by:
■ Setting out a clear policy on anti-bribery
and corruption.
■ Training all employees so that they can
recognise and avoid the use of bribery
by themselves and others.
■ 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.
■ Rigorously investigating instances of
alleged bribery and assisting the police
and other appropriate authorities in any
resulting prosecution.
■ Taking firm and vigorous action against
any individual(s) involved in bribery or
corruption.
A copy of the Anti-bribery and Corruption
policy is available to view on our website
(www.sigplc.com).
Modern Slavery Act 2015
The Group has published its Group Modern
Slavery statement in respect of the year
ended 31 December 2019 on our website
(www.sigplc.com), in line with Home
Office guidance. The Group continues to
work with its supply chain to ensure there
is a zero-tolerance policy to slavery. The
2020 statement will be published on our
website in compliance with the required
deadline.
Payment practices
SIG publishes information about payment
practices and reporting as required by
the Reporting on Payment Practices and
Performance Regulations 2017 in the UK.
This is published on a government website
check-payment-practices.service.gov.uk.
This report is published every six months
as per the requirements and the most
recent was submitted in January 2021 for
the six months to 31 December 2020.
37
Stock code: SHI www.sigplc.comSTRATEGIC REPORT Environmental, social
and governance: People
Introduction
We believe that our people are our greatest strength. In what was a particularly challenging
year, the resounding sense of pride and collaboration was apparent across the Group and we
saw teams making extraordinary efforts to serve our customers and support each other.
Links to SDGs
A culture built on commitment to
our actionable behaviours
Placing greater focus on reconnecting with
our people is a fundamental part of our
strategy. It is our aim to ensure that our
people feel safe, proud and valued. We also
aim to reconnect with our partners and
stakeholders to create value for all, and a
business where we operate sustainably to
benefit our communities.
Our people strategy is to create value
and enable growth through developing
employee expertise, fostering the
right behaviours to drive a culture of
commitment, and enhancing contribution.
In 2020, we launched our new culture
programme, underpinned by three key
behaviours that drive shared, sustainable
actions. The SIG behaviours have been
articulated as “Be bold in what you do”,
“Be flexible and agile” and “Make a positive
difference”.
To embed the understanding of
these behaviours, we developed our
supplementary ‘Behaviours in Action’
which further defines the meaning of each
and how our people demonstrate and
drive each.
Following the significant leadership
changes and subsequent launch of a
new vision and strategy in May 2020, the
programme was developed further to
clarify how this change in culture supports
our new goals. Several feedback sessions
were held with employees from all areas
and levels of the business, to further define
the framework, alongside the development
of a new internal visual identity based on
our three behaviours to support visual
recognition and reinforcement, and drive
employee morale.
Across our operating companies,
further activity took place to embed the
understanding of our behaviours and how
these can be demonstrated and drive
positive action towards achieving our
strategic goals. Facilitated sessions with
the senior leadership teams were held to
focus on activating the behaviours and
implementation plans, and engagement
sessions with management teams and
employees allowed discussion and sharing
of examples of where the behaviours have
been demonstrated.
38
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Gender diversity
SIG is committed to equality and
recognises the value that can be created
from diversity. As is typical within the
construction industry, SIG has historically
had a higher proportion of male
employees, but it intends to reduce the
imbalance in the future.
Total
employees
Board
members
Senior
managers2
Senior
management3
Total1
6,446
Female
Total1
10
Total1
17
Total1
84
21%
1,370
20%
2
24%
4
23%
19
Male
79%
5,076
80%
8
76%
13
77%
65
1. Headcount as at 31 December 2020
2. Data is as per s.414C(8) of the Companies Act and
includes subsidiary Directors
3. Data is as per provision 23 of the UK Corporate
Governance Code
Moving into 2021, plans are in place
to drive the implementation through
regular communications campaigns, and
embedding the behaviours into our routine
programmes and operations.
Embedding our behaviours
through our people processes
The behaviours underpin our people
practices, therefore during the year we
developed our people programmes to align
to our new culture.
Our recruitment processes reflect the
requirement to assess potential new
employees in both competency and
cultural fit, and recruiting managers
are provided with a number of tools to
assess alignment to the behaviours. In
addition, our induction and on-boarding
programmes have been reviewed and
updated to allow the quick integration
of new recruits into the business, both
operationally and culturally.
Local recognition programmes were
developed to align to the new behaviours,
and replace the previous, values-
based schemes. Our teams use these
programmes to recognise outstanding
work, efforts or achievements that are
aligned to the behaviours. Moving into
2021, there are plans to develop our
recognition schemes further and on a
Group-wide basis.
In addition, our performance management
process, which has undergone extensive
review and development throughout the
year, now includes the measurement of
the behaviours alongside operational
achievements, driving the key message that
not only are our results vital to our success,
but also the way in which we achieve them.
Incorporating the cultural aspect into
the Performance Development Review
(PDR) allows us to focus on all areas for
development and recognition.
Reconnecting with our people
Our strategy for growth focuses on
reconnecting with our people, to build a
great company that our employees can
be proud of and where they feel valued.
Throughout 2020, we have taken steps
to re-engage our people, and develop
the programmes and resources that
provide better support, communication
and guidance to create an open and
constructive environment.
Diversity and inclusion
Creating a diverse and inclusive workforce
is a priority and we are committed to
developing a culture where individual,
valuable contributions are actively
encouraged to the benefit of the business
and our people. We are also committed to
ensuring that we extend this same principle
to all our customers, suppliers, business
partners and the communities in which we
operate.
Our 2019 Diversity and Inclusion
programme, where we set the foundations
in place by mapping our legal requirements
globally and defining key actions, provided
a base for our progression towards our
objectives:
■ To develop diverse and inclusive
approaches to attract and secure talent
from diverse backgrounds.
■ To develop our ways of working to
ensure SIG is an inclusive place to work.
■ To develop our opportunities for all
to enable long-term development,
progression and succession planning.
To achieve these, we developed the
measurement tools through a monthly
dashboard covering key data on gender,
age, disability, ethnicity, and by role,
function and salary, where applicable, in
our countries of operation. This information
was shared with senior leaders to increase
understanding of the demographics across
the business. In addition, a new Group
Diversity and Inclusion policy was launched,
supplemented by online training.
A key aspect of promoting diversity
depends on working with our external
partners. As such, we engaged with
recruitment suppliers to agree upon a
more diverse approach in the search and
selection of new employees. We introduced
more robust exit interviews with senior
employees to identify any issues in relation
to diversity and inclusion that may have
arisen.
Throughout 2020, we developed our
approach to diversity and inclusion for
2021, working with a specialist external
partner. Our approach will be phased.
Phase 1 will see us establish buy-in and
develop the foundations for diversity
and inclusion throughout SIG, including
further senior leadership engagement,
auditing of existing positions, policies,
data and activities to identify areas to
address. Phase 2 will involve further
development of the strategic approach
to diversity and inclusion, in line with our
overarching strategy. Continued and wider
leadership awareness and education will
be fundamental, and our approach for
demographic data gathering and narrative
will continue to be expanded.
We are committed to supporting and
promoting better diversity and inclusion
across all areas of the business, from Board
level to throughout the business.
39
Stock code: SHI www.sigplc.comSTRATEGIC REPORT An Employee Health and Wellbeing working
forum was introduced on a quarterly
basis with representatives from all
countries, creating a network of champions
supporting mental health and wellbeing.
The purpose of the group is to discuss
ideas, share best practice and drive activity.
Whistleblowing policy
and procedure
We are committed to achieving and
maintaining high standards regarding
behaviour at work, service to the public
and ethical working practices. Employees
are expected to conduct themselves
with integrity, impartiality and honesty,
and are empowered and encouraged
to challenge inappropriate behaviour or
unethical practice at all levels. As such,
we operate a Whistleblowing policy and
procedure for reporting genuine concerns
about malpractice, illegal acts or failures to
comply with recognised standards of work.
In the year, we updated and relaunched
our Whistleblowing policy, supported by
online training and a communications
campaign across the Group. We offer a
number of ways to report any concerns,
including an impartial, global hotline
provided by Navex Global. Employees,
customers or members of the public can
confidentially raise concerns from any of
our operating companies, and issues are
investigated thoroughly.
Environmental, social
and governance: People
Employee engagement survey
Listening to the experiences and views of
our people is fundamental in driving the
right actions for the Company and for our
people.
We launched our new engagement
survey programme, ‘Our SIG, Your Voice’
in September 2020 to all employees
across the Group. The survey provides
the opportunity to provide honest and
open feedback across several areas in the
organisation including vision and strategy,
culture and environment, management and
leadership, health, safety and wellbeing,
communication, customer focus, leadership
and development.
From the results, planning has taken place
to drive actions across the operating
companies to improve in our key areas
of focus. The survey will be conducted
again in 2021 for consistent and ongoing
measurement.
Board workforce engagement
programme
As part of our obligation under the UK
Corporate Governance Code, and in
support of our ongoing priority to provide
regular and varied feedback channels, we
launched our Board workforce engagement
programme, delivered by Simon King,
Non-Executive Director. This programme is
aimed at providing a direct communication
channel between the Board and our people
to gain further insights from all levels of the
business, complementing our employee
engagement survey. For more detail, please
see page 62.
Representatives from all operating
companies and our central functions
were given the opportunity to participate
in sessions, offering opinions, feedback
and suggestions from branches and head
offices. The response to the programme
was hugely positive, with many employees
expressing their appreciation of the chance
to meet with a Board member and their
sentiment of being listened to and valued
by the organisation.
During the year, Simon also visited a
number of sites across the UK, prior to
the Covid-19 outbreak, including Sheffield,
St Ives, Edmonton, Waltham Cross and
Bedford, where he met a number of the
teams.
Reconnecting with our employees is an
ongoing strategic priority and engagement
actions from each programme will continue
to be rolled out throughout 2021 and
beyond.
Employee health and wellbeing
Our primary concern is ensuring that our
people feel safe, valued and supported.
During what was an exceptional year, we
recognised the potential impact on health
and wellbeing, both physical and mental. As
a result of the changing working practices,
home-working and macro-level uncertainty
due to Covid-19, this concern came to the
forefront more than ever and highlighted
the need to review our approach to
supporting and protecting the health and
wellbeing of our people.
A full programme was developed in July
2020 comprising immediate actions to take
place throughout the year and ongoing
actions into 2021, with the objectives of:
■ Raising awareness and commitment
across the organisation, at all levels,
about the importance of promoting
and supporting mental health in the
workplace;
■ Helping all employees learn how to
manage their own mental health and
wellbeing effectively and learn how they
can support that of others;
■ Eliminating or reducing organisational
risk factors in relation to mental health,
for example, stress, working excessive
hours, discrimination, bullying or
harassment, wherever possible; and
■ Providing timely and appropriate
support for individuals who are
experiencing mental health issues.
During the year, we updated and launched
our Employee Health and Wellbeing
policy, in line with World Mental Health
Day. Developed with our Health and
Safety and HR teams, the policy outlines
the Company’s provisions to prevent
mental health issues and support our
employees. The policy was launched with
supplementary compulsory training for
all. In addition, further training resources
will be made available in 2021 to support
managers, HR and Health and Safety
colleagues, and mental health first aiders.
In the UK, Northern Ireland and parts of
Benelux, employees gained access to an
Employee Assistance Programme (EAP)
throughout the year to access support,
advice and counselling for any issues they
may be experiencing – at home or at work.
The service is available 24/7.
Regular communication campaigns were
issued, commencing in the second half
of the year across the Group and locally,
offering a monthly focus on different topics
and relevant to current worldwide and local
trends and activities. A calendar of events
and communications is planned for 2021.
40
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Covid-19
The ongoing challenges that we
face as a result of the Covid-19
pandemic have changed work
routines for all of our people.
The Group is proud of the
flexibility and commitment
that has been demonstrated
by all of its people, and,
importantly, how teams have
come together to support each
other during this time.
Colleagues in Germany
launched an internal campaign
‘#webuilduponeachother’, to encourage
people to share tips, experiences and
motivational stories during lockdown
periods via the internal social media
platform.
Our Germany business also made a
donation to a non-profit organisation
that distributes food parcels, helping
the charity purchase a specialised
refrigerated vehicle to carry out
deliveries during the pandemic.
In the UK, James Jackson (Internal Sales
Executive, Oxford) took annual leave
and volunteered as a driver during
the lockdown periods to deliver PPE
products to the NHS and food parcels
to people in need, as well as supporting
Oxford Mutual Aid.
Every year, our team in the French
distribution business LiTT create and
commission T-shirts for our customers
and colleagues across the office.
This year, they focused the design
on reminding everyone of the safety
protocols related to Covid-19, with the
message: “The LiTT team takes care of
you”.
Our teams continue to demonstrate
great resilience and care in supporting
our partners, communities and each
other.
41
Stock code: SHI www.sigplc.comSTRATEGIC REPORT Environmental, social
and governance: Environment, health and safety
Links to SDGs
Internal
■ Greenhouse gas emissions: We target
efficiencies in vehicle fuel consumption
which contributes to 77.4% of our
carbon footprint, through vehicle
selection, driver training and efficient
driving assessment.
■ Emissions: Our emissions to the
atmosphere from our manufacturing
businesses are minimised by use of
water-based solvents where practicable
and filtered ventilation systems.
Carbon management
The aim of our Low Carbon Sustainability
policy is to minimise the impact of our
operation on the environment. This
is achieved by minimising our carbon
emissions through reductions in energy
and fuel consumption and by minimising
waste and water consumption.
We measure and report on our carbon
footprint in accordance with the
Streamlined Energy and Carbon Reporting
Regulations (SECR), and the accounting
process has been externally assessed to
the ISO14064-3 standard.
Our carbon management KPIs and
performance are externally published
through the annual voluntary submission to
the Carbon Disclosure Project (CDP).
Through our ongoing consolidation
programme, investment in new buildings
and refurbishment of existing buildings, we
have introduced energy efficient lighting
and heating facilities. As a result of this
strategy and the progressive upgrading of
our road vehicle fleet, our greenhouse gas
emissions continue to reduce.
Climate change and sustainability
SIG has held accreditation to the
ISO14001 environmental management
standard for its UK operations since
2006. This accreditation has provided us
with a framework for our environmental
management system and helped
us develop our climate change and
sustainability strategy. The Board has also
considered the impact of climate change
on the Group’s business model. Some of
our risks and opportunities are detailed
later and include:
External
■ Political and legal: Potential liability or
effects of forthcoming new and revised
legislation. Regulation and guidance
is assessed by senior management to
develop policy.
■ Technological changes: We strive
to be the market leader in new
technologies and advancements in
products and materials. This includes
green and environmentally sound
technology to support suppliers,
customers and enhance SIG’s place in
the market.
■ Physical risk: The potential impact of
more extreme weather events on our
facilities due to changes in weather
patterns is reviewed through our
aspects and impact assessments for
new and existing premises.
Transport
Emissions from road vehicle fuel
consumption makes up 77.4% of the
Group’s total carbon footprint and is our
primary KPI for reduction. Through the
introduction of energy-efficient vehicles, the
continual focus on driver assessment and
training, and efficient vehicle routing, we
continue to achieve annual reductions in
emissions.
We have continued to focus on projects
designed to maximise the efficient use
of delivery vehicles, consolidate our
vehicle fleet, and through better use of
communication technology, reduce the
miles travelled by colleagues.
This year, we have reduced our emissions
from road vehicle fuel by 14.7%.
Energy
Carbon emissions from electricity
consumption accounted for 9% of our
Scope 1 and 2 emissions in 2020 (2019:
11.5%). This is our second highest priority
for carbon management, with a focus
on energy efficient choices for new and
refurbished facilities, including installing
movement and daylight sensor LED lighting
systems, efficient heating and cooling
systems, and efficient hand driers.
We audit our energy consumption and
work in close partnership with our external
partners to reduce our environmental
impact. In 2020, this process was enhanced
by the in-depth audits conducted through
our Energy Saving Opportunity Scheme
(ESOS) compliance. The opportunities for
improvement have been communicated
across the Group.
In 2020, our emissions from electricity
consumption reduced by 35.4% (partly due
to a reduction in the number of branches
open during the Covid-19 pandemic).
42
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Greenhouse gas (GHG) emissions
We are committed to providing full and
accurate data for our carbon footprint, with
minimal reliance on estimates. In 2020,
93.2% of information is based on actual
data (2019: 92.8%). Estimates are prepared
based on agreed and verified accounting
processes. We continue to improve our
data collection and accounting processes,
and the GHG information for the period
October 2019 to September 2020 has
been verified by Carbon Intelligence to
ISO14064-3 to a limited level of assurance.
Our carbon footprint includes emissions
for which we are directly responsible,
such as vehicle and heating fuel (Scope
1) and emissions by third parties from
the generation of electricity (Scope 2). We
have also disclosed Scope 3 emissions
over which the business has limited
control, including third-party air and rail
transportation.
In order to provide the appropriate time
and resource to enable more accurate
carbon reporting and auditing of the
process, our emission accounting period
is non-coterminous with the Group’s
financial year. The current data year is to
30 September 2020.
We reported a decrease of 17.8% in Scope
1 and 2 emissions in the last reporting
year, mainly as a result of the trading
conditions due to Covid-19. Our overall
footprint for Scope 1, 2 and 3 emissions
showed a decrease of 18.1% in the last
reporting year.
Our absolute emissions for 2020 have
reduced compared to 2019; and the rate
per £m revenue has decreased by 5.6%
to 25.4.
Our carbon footprint includes all emission
sources as required under The Companies
Act 2006 (Strategic Report and Directors’
Report) 2013 Regulations. Emission
factors from the UK Government’s
GHG Conversion Factors for Company
Reporting 2019, along with factors from
The International Energy Agency (IEA) list
for 2019 have been used to calculate our
GHG disclosures. The data relating to
CO2 emissions has been collected, where
practicable, from all the Group’s material
operations and is based on a combination
of actual and estimated results where
actual data is not available. The 2020 data
includes the businesses classified as non-
core in the Financial Statements for the
year ended 31 December 2020.
CO2 emissions – Scope 1 – Direct
Metric
tonnes
2020
Group
Metric
tonnes
2019
Group
Metric
tonnes
2018
Group
Metric
tonnes
2020
UK
Metric
tonnes
2020
Europe
Road vehicle fuel
emissions1
Plant vehicle fuel
emissions2
Natural gas3
Coal/coke for heating4
Heating fuels (Kerosene
and LPG)5
Total
Data source and collection methods
36,818
43,160
51,497
14,754
22,064
4,206
1,488
40
490
43,042
4,858
2,024
37
4,894
2,560
56
849
632
2,066
2,140
507
0
115
981
40
375
50,928
59,639
17,442
25,600
Fuel cards and direct purchase records in litres converted according to BEIS guidelines.
1.
2. Direct purchase records in litres converted according to BEIS guidelines.
3. Consumption in kWh converted according to BEIS guidelines.
4. Purchases in tonnes converted according to BEIS guidelines.
5. Purchases in litres converted according to BEIS guidelines.
CO2 emissions – Scope 2 – Indirect
Metric
tonnes
2020
Group
Metric
tonnes
2019
Group
Metric
tonnes
2018
Group
Metric
tonnes
2020
UK
Metric
tonnes
2020
Europe
Electricity1
4,280
6,622
8,042
1,722
2,558
kWh
2020
Group
Electricity
17,503,880
Data source and collection methods
1. Consumption in kWh converted according to BEIS guidelines.
CO2 emissions – Scope 3 – Other indirect
kWh
2020
UK
kWh
2020
Europe
7,352,079 10,151,801
Metric
tonnes
2020
Group
Metric
tonnes
2019
Group
Metric
tonnes
2018
Group
Metric
tonnes
2020
UK
Metric
tonnes
2020
Europe
249
541
454
136
113
Third-party provided
transport (air and rail)1
Data source and collection methods
1. Distance travelled converted according to BEIS guidelines.
Emission per £m of revenue
Metric
tonnes
2020
Group
Metric
tonnes
2019
Group
Metric
tonnes
2018
Group
23.0
2.3
25.3
0.1
25.4
23.5
3.1
26.6
0.3
26.9
24.5
3.3
27.8
0.2
28.0
Metric
tonnes
2020
UK
26.1
2.6
Metric
tonnes
2020
Europe
21.2
2.1
28.7
0.2
28.9
23.4
0.1
23.5
Scope 1
Scope 2
Scopes 1 and 2 as
required by GHG
Protocol
Scope 3
Scopes 1, 2 and 3
All CO2 data is with Air Handling removed
43
Stock code: SHI www.sigplc.comSTRATEGIC REPORT Environmental, social
and governance: Environment, health and safety
Environment
Our environmental management system
for UK operations has been accredited
to ISO14001 standard since 2006.
Accreditation is externally verified by
Intertek. We operate an integrated Health
Safety and Environmental (HSE) policy.
We commit to maintaining appropriate
environmental management standards
across our operations to meet both our
statutory and moral obligations.
Waste management
Our aim is to reduce the amount of waste
we generate through our operations and
reduce the amount we send to landfill.
We achieve this by reusing or returning
used packaging to our suppliers, and
encouraging waste segregation and
recycling at each of our locations.
Our waste contracts are managed and
monitored centrally in each business.
Waste bailers and compactors are
provided, where practicable, to maximise
waste segregation and recycling
opportunities, and minimise storage and
welfare hazards.
Office waste is minimised through the
adoption of paperless delivery processes,
online activity reports and consolidating
printing and photocopying facilities. We
have provided segregated waste bins
in our head office locations to ensure
that waste is diverted from landfill where
appropriate.
As it is difficult to measure and quantify the
amount of waste disposed of in a year, the
KPI for waste management remains the
percentage of waste diverted from landfill.
We are a member of the Valpak
compliance scheme and we comply with
our commitments under the Producer
Responsibility Obligations (Packaging
Waste) Regulations 2007.
Hazardous
waste
Hazardous waste
per £m of revenue
Non-hazardous
waste
Non-hazardous
waste per £m
of revenue
6
6
1
5
1
7
4
2
0
0
.
6
0
0
.
3
0
0
.
3
3
7
3
,
1
3
0
3
,
7
4
3
3
,
9
3
.
3
4
.
3
2
.
0
3
1
*
s
e
n
n
o
t
e
t
u
o
s
b
A
l
1
4
5
2
1
2
7
4
3
7
0
2
,
0
6
6
1
,
9
5
6
1
,
8
8
6
1
,
7
5
6
1
,
4
7
3
1
,
18
19
20
18
19
20
18
19
20
18
19
20
Landfill
Recycled
Landfill
Incinerated
Other waste diverted from landfill
WEEE (Waste, Electrical and
Electronic Equipment)
Glass
Wood
Metal
Plasterboard
Paper/cardboard
Plastic
Other
Total
* Volume per annum converted to tonnes.
Water consumption
Absolute
tonnes*
2020
Absolute
tonnes*
2019
Absolute
tonnes*
2018
0.0
0.0
1,045.9
408.4
98.2
540.6
359.0
0.8
5.1
1,649.2
1,246.3
128.5
908.4
252.3
1.0
4.2
1,735.0
1,459.1
293.7
723.5
208.4
1,935.3
6,358.2
6,167.2
4,387.4
10,548.8
10,592.1
Litres
(‘000)
2020
Litres
(‘000)
2019
Litres
(‘000)
2018
Third-party provided water supply from
national network for processes and welfare
86,674
89,448
113,306
The above data is based on a combination of actual and estimated data
44
SIG plc Annual Report and Accounts for the year ended 31 December 2020
Covid-19 response
The Covid-19 pandemic has provided new
challenges for SIG. We have implemented
Covid-19 specific risk assessments, along
with safe systems of work, and specific
reporting procedures have been put
in place. We have invested in signage,
PPE, testing equipment, home working
equipment, large area disinfecting
equipment and hygiene stations to ensure
the safety of our stakeholders.
Sites are audited for compliance with
Covid-19 procedures on a regular basis
with continual support given to branch
managers. All employees are temperature
checked when they attend company
premises and Covid-19 Return to Work
meetings have been undertaken with
all staff to ensure they are aware of the
enhanced procedures, symptomology
and social distancing regulations. We have
conducted home working assessments to
ensure that the new environment for our
employees is suitable, ensured regular
contact and wellbeing measures, and
launched a Social Spotlight campaign to
allow home working employees to keep in
touch with colleagues and the business.
When an individual has symptoms of
Covid-19, we ask that they self isolate as
mandated by the relevant authorities.
SIG have made the decision to pay any
employees absent due to Covid-19 related
symptoms, infection or government
sanctioned reason, in full for the period of
their self isolation, to support compliance
with the regulations in the territory they
reside.
Health and safety
SIG operates an integrated HSE policy
aligned to the ISO45001 standard, with the
UK health and safety management system
accredited to the equivalent standard
since 2006, through external verification
by Intertek. SIG migrated to ISO45001 in
January 2020.
The Board member responsible for HSE
is the CEO who is the signatory to our
HSE Policy statement; a copy of which
is required to be displayed in the local
language at each operating branch.
Accreditation and the development of
our Charter for the Zero Harm Health
and Safety Management Programme has
enabled us to develop our operations
to be compliant with legislation, industry
standards and best practice, and deliver
continuous improvement.
Our dedicated HSE professionals assist
in delivering the risk assessment and
management review programme. Our risk
profile is reviewed annually and informs
our HSE plan.
Our vision is to be the best-in-class for
the distribution industry, and through our
Zero Harm Health and Safety Management
Programme we aim to eliminate accidents
from our four critical hazards of pedestrian
and forklift truck interaction, road travel,
work at height, and contact with machinery.
Our objectives to achieve this aim
are: to improve the standard of traffic
management in operational areas; target
culture and positive behaviour through
management and colleague interactions;
improve the management of the outcomes
of incidents and learnings; and focus on
the common Group standards across all
operating companies.
Management and worker awareness of
responsibilities, the hazards and risks
associated with the operation, and safe
ways of working are promoted through the
delivery of training and communication
programmes managed locally in each
country. These include bespoke e-learning
packages.
We have moved away from our previous
reporting metric of the accident incident
rate, to the Lost Time Injury Frequency Rate
(LTIFR) and Total Recordable Incident Rate
(TRIR) recording method. This allows us to
better compare our performance against
similar industries and our competitors, and
allows for more transparency within the
reporting system.
The number of lost time incidents across
the Group has reduced by 9.2% from 2019
to 2020. The LTIFR, which is calculated as
any injury resulting in any lost time per
1,000,000 hours worked, has remained at
11.3 from 2019 to 2020, with a reduction of
6.6% from 12.1 in 2018.
The total recorded incidents across the
Group have reduced by 26.8% from 2019
to 2020. The TRIR, which is calculated as
an incident resulting in injury or medical
treatment being required, environmental
detriment or property damage per 200,000
hours worked has reduced by 18.5% to 8.8
(2019: 10.8).
We have been awarded the RoSPA Silver
Award for Occupational Health and Safety
in 2020.
We maintain our zero tolerance approach
to anyone being unfit for work due to
alcohol or substance misuse and mandate
for testing of individuals subject to the
legislative constraints within our operating
companies.
Throughout 2020, investment has been
made in strengthening the Company’s
HSE team. We have recruited a highly
experienced Health and Safety Director
who has developed an energetic and
forward-thinking strategy. The HSE team
has been further strengthened by the
expansion of operating company teams
in a number of territories to ensure more
in-depth investigation, support and training.
Work is ongoing to redraft and improve
policies both on a Group and operating
company level, identify risk, to update the
Safety Management System and ensure it
meets the needs of all stakeholders.
During 2020, operating company HSE
managers have been made part of the
operating company Executive Leadership
Team. This allows them to be an integral
part of decision making within the
operating company and enshrines health
and safety within operating company
leadership discussions.
Total Recordable Incident Rate (TRIR)
Group TRIR
.
4
2
1
.
8
0
1
8
8
.
18
19
20
45
Stock code: SHI www.sigplc.comSTRATEGIC REPORT
Environmental, social
and governance: Environment, health and safety
Occupational road risk
We recognise that our drivers act as
representatives for our business whilst they
are on the road and we promote a culture
of safe and courteous driving through our
training programmes. Driving is among the
most hazardous tasks performed by our
employees and is one of the critical hazards
in our Safety Management Programme.
The competence of our drivers and the
condition of our vehicles are crucial to the
safety of our drivers and other road users.
Drivers are assessed for competence and
selected through an authorisation and
licence check procedure.
Our drivers, vehicles and fleet management
are audited to ensure business compliance
with fleet procedures. Significant issues
are communicated to the Board and our
insurers. We work in partnership with our
vehicle designers and manufacturers to
develop effective safety features for our
vehicles; this and the effective management
of the routine maintenance and inspection
process are key to vehicle safety.
The Group’s fleet of vehicles are fitted
with vehicle management systems. The
information obtained is used to educate
and support drivers to improve their
standard of driving and fuel efficiency.
Driver alcohol and substance testing is
conducted within the Group.
46
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Non-financial
information statement
SIG continues to integrate corporate
responsibility across the Group, and we are
committed to socially responsible business
practices for our shareholders, employees,
customers and suppliers.
In compliance with the non-financial
reporting directive, the below table
summarises the requirements and where
relevant information can be found within
the Annual Report and Accounts.
Further information on our sustainability
policies and corporate responsibility can be
found on our website (www.sigplc.com).
Reporting requirement
Our response
Relevant policies and
frameworks
Relevant risks
Environmental matters
■ Committed to reducing carbon
■ Low Carbon Sustainability
■ Health and safety
footprint
policy
■ Investment in safety initiatives
■ Waste management
Read more on page 42
■ Zero Harm programme
■ Health, Safety and Environment
People and social
■ Maintain ISO accreditation
policy
■ ISO14001 accreditation
■ Annual employee engagement
■ Diversity and equal
survey
opportunities
■ Responsible actions is a key
■ SIG Code of Conduct
Read more on page 38
strategic pillar
■ Operate sustainably to benefit
communities and environment
■ Launch of new behaviour
framework
■ Diversity and Inclusion policy
■ Gender diversity
■ Employee engagement
■ Environmental,
social and
governance
■ Employee
attraction,
retention and
engagement
■ Environmental,
social and
governance
Human rights and
anti-bribery
Read more on page 37
■ Raise awareness of policies
■ Ethical Trading and Human
■ Legal and
■ Included in mandatory training
Rights policy
■ Anti-Bribery and Corruption
policy
regulatory change
and compliance
(non-principal risk)
Our business model provides insight
into our key activities and how we
add value to our stakeholders.
Principal risks and uncertainties
are managed through the risk
management framework.
Our KPIs enable us to measure the
success of our strategic objectives
and performance.
Read more on page 08
Read more on page 30
Read more on page 14
The Section 172(1) Statement is set out on pages 64 to 71 of the Corporate Governance Report (providing information on
how the directors have performed their duty to promote the success of the Company) and is incorporated by reference
into the Strategic Report.
Approval of the Strategic Report
The Strategic Report set out on pages 04 to 47 was approved by the Board of Directors on 25 March 2021 and signed on its behalf by:
Steve Francis
Chief Executive Officer
25 March 2021
Ian Ashton
Chief Financial Officer
25 March 2021
47
Stock code: SHI www.sigplc.comSTRATEGIC REPORT Governance
Nominations Committee Report
AuditCommitteeReport
Directors’ Remuneration Report
Directors’ResponsibilitiesStatement
90
96
107
132
Chairman’s Introduction
Board of Directors
Corporate Governance Report
BoardLeadershipandCompany
50
54
57
Purpose
57
Section172Statement
64
DivisionofResponsibilities
72
Composition,SuccessionandEvaluation 75
BoardEvaluation
78
Audit,RiskandInternalControl
81
Directors’Report
83
Chairman’s introduction
Board Membership (during 2020 & 2021)
Andrew Allner
Non-ExecutiveChairman
Steve Francis
ChiefExecutiveOfficer
(appointed25February2020)
Ian Ashton
ChiefFinancialOfficer
(appointed1July2020)
Kath Kearney-Croft
Interim ChiefFinancialOfficer
(appointed25February2020
andresignedasCFOon
30June2020andasa
Directoron31July2020)
Meinie Oldersma
ChiefExecutiveOfficer
(resigned24February2020)
Nick Maddock
ChiefFinancialOfficer
(resigned24February2020)
Andrea Abt
Independent Non-
ExecutiveDirector
(retired12February2020)
Kate Allum
Independent Non-
ExecutiveDirector(resigned
31 December2020)
Bruno Deschamps (CD&R)
Non-ExecutiveDirector
(appointed10July2020)
Shatish Dasani
Independent Non-
ExecutiveDirector
(appointed1February2021)
Kath Durrant
Independent Non-
ExecutiveDirector
(appointed1January2021)
Ian Duncan
Independent Non-
ExecutiveDirector
(resigned31January2021)
Gillian Kent
IndependentNon-Executive
Director
Simon King
IndependentNon-Executive
Director(appointed1July2020)
Alan Lovell
SeniorIndependentNon-
ExecutiveDirector
Christian Rochat (CD&R)
Non-ExecutiveDirector
(appointed10July2020)
Purpose and aims
Promotethelong-termsustainablesuccessoftheCompanyandits
subsidiaries,generatingvalueforShareholdersandcontributingto
widersociety.Thepurposeistoenablemodernlivingandworking
environmentsinthecommunitiesinwhichweoperate.Ourvisionis
tobeEurope’sleadingbusinessdistributorofspecialistconstruction
products.
Key responsibilities
EstablishingtheCompany’spurpose,vision,strategyandbehaviours,
andsatisfyingitselfthattheseanditsculturearealigned.Ensuring
thatallDirectorsactwithintegrity,leadbyexampleandpromotethe
desiredculture.
Assessing and monitoring culture
EnsuringthatthematterssetoutinSection172oftheCompanies
Act2006areconsideredinBoarddiscussionsanddecisionmaking.
EnsuringthatthenecessaryresourcesareinplacefortheCompany
tomeetitsobjectivesandassessingthebasisonwhichthe
Companygeneratesandpreservesvalueoverthelongterm.
Reviewingwhistleblowingarrangementsandensuringthat
arrangementsareinplaceforproportionateandindependent
investigationandfollowupaction.
Terms of reference and matters reserved
Duringtheyear,theBoarddevelopedandadoptedtermsof
referenceandrevisedthemattersreservedforitsdecision.
Both can befoundontheCompany’swebsiteatwww.sigplc.com.
Evaluation
AninternalevaluationwasconductedfortheBoard,individual
DirectorsanditsCommitteesinlinewiththe2018UKCorporate
GovernanceCode(the“Code”).Moredetailscanbefoundonpage 78.
50
High standards of corporate
governance have never been more
important than during 2020. This
has been an unprecedented year
as the Company navigated its way
through the Covid-19 pandemic,
changes in leadership, raising
funds from Shareholders including
the investment by CD&R and
restructured its debt and, at the
same time, building on its leading
market positions and positioning the
business for a return to profitable
growth.
Andrew Allner, Chairman
Dear Shareholder,
IampleasedtopresentSIG’sCorporateGovernanceReportfor
thefinancialyearended31December2020.AtSIG,webelieve
that good governance comes from an effective and committed
Board,whichprovidesclearleadershipandisfullyengagedwithits
workforceandallstakeholders.
TheBoardbelievesthatgoodgovernanceiscrucialtothe
successfuldeliveryofSIG’sstrategicobjectives.TheBoard’s
governanceframework,whichstartswiththeBoardandruns
throughoutthebusiness,supportswell-informeddecision
makingandthedevelopmentanddeliveryofourstrategyandrisk
management.ThissectionoftheReportoutlineshowtheBoard
ensuresthehighstandardsofcorporategovernancearemet.
TheBoardrecognisesthatstronggovernancealsounderpins
ahealthyculture.This,inturn,bringsbenefitstotheGroup
anditsemployeesaswellastoallourstakeholders.TheBoard
iscommittedtoleadingbyexampleandensuringthatgood
standardsofbehaviourspermeatethroughoutalllevelsofthe
organisation.
SIG plc Annual Report and Accounts for the year ended 31 December 2020 2020hasbeenanunprecedentedyearandthepandemichas
hamperedsomeoftheprogresswehadbeenhopingtomakethis
year.Nevertheless,wehavecontinuedthejourneywestartedlast
year.TheBoard,asaresultofCovid-19,metmorefrequentlyto
considertheneedsofallstakeholdersasthesituationunfolded,
aswellasthelong-termsuccessoftheCompany.TheBoardwas
effectiveinmanagingthesedifficulttimesandhaslearntlessons
fromthebusinessissuesthatarosein2019andtheearlypartof
2020,whichresultedintheneedtotakepromptaction.Intheearly
partoftheyear.CEO,MeinieOldersma,andCFO,NickMaddock,
resignedon24February2020andwerecruitedSteveFrancisas
CEOwitheffectfrom25February2020,initiallyonaninterimbasis,
andtheappointmentwasmadepermanenton24April2020.Steve
ishighlyexperiencedinreturningbusinessestogrowthandhas
demonstratedstrongleadershipinthemosttestingcircumstances
sincehisappointment.Hisabilitytonavigatetheeffectsofthe
Covid-19environment,atthesametimeasgettingtheleadership
team focused on the strategic priorities to ensure the future
successofSIG,hasbeenexceptional.
KathKearney-CroftassumedtheroleofinterimCFOon25February
2020followingthedepartureofNickMaddock.IanAshtonwas
appointedon1July2020replacingKathasthepermanentCFO.
Ianisahighlyexperiencedseniorexecutivewithastrongrecordof
drivingchangeandisanextremelyvaluableadditiontotheteamas
wepursuethenewstrategyforgrowthaswellasimprovedfinancial
performanceandgovernance.
TheBoardbelievesthenewleadershiphasbroughtskillsthat
driverapidoperationalperformanceimprovement,excellencein
customerserviceandcreateshighlyengagedteams.
Followingthe2019Boardevaluationandassessmentofboard
skillsandexperience,itwasacknowledgedthattherewasaneed
formorebuildingproductsdistributionexperienceandasaresult
SimonKingwasappointedasaNon-ExecutiveDirectoron1July
2020.Simonbringsextensivehands-onexperiencefromacareer
spanningover35years,mostrecentlyservingontheTravisPerkins
ExecutiveBoardandholdingthepositionofChiefExecutiveOfficer
forWickes.Simon’sappointmenthasbeenvaluableinourefforts
tobuildonSIG’sleadingmarketpositionsandreturnthebusiness
toprofitablegrowth.Additionally,Simonhasalsotakenoverfrom
KateAllumasthedesignatedNon-ExecutiveDirectorforworkforce
engagementandthewhistleblowingchampionwitheffectfrom1
October2020.
WeweredelightedtowelcomeBrunoDeschampsandChristian
RochatasNon-ExecutiveDirectors,(theCD&RDirectors)appointed,
witheffectfrom10July2020inaccordancewiththetermsof
therelationshipagreementdated29May2020betweenCD&R
SunshineS.a.r.l.(CD&R)andtheCompany.BothBrunoand
Christian’sdeepindustrialknowledge,alliedtotheirextensive
experienceindrivingandoverseeingimprovedcompany
performance,bringsvaluableandrelevantexperienceandinsights
totheBoardandtheyhavealreadymadeasignificantcontribution.
AndreaAbtretiredinFebruary2020andbothIanDuncanand
KateAllumexpressedawishtostepdownfromtheBoard.
Therefore,attheendofDecember,KateAllumsteppeddownas
Non-ExecutiveDirectorandChairoftheRemunerationCommittee;
shewasreplacedbyKathDurrantwhojoinedtheBoardon
1January2021.IamdelightedtowelcomeKathwhohasmorethan
30years’humanresourcesexperiencewithastrongoperational
andstrategictrackrecordandisanexperiencedChairof
Remuneration.Shehassignificantindustryknowledgegainedfrom
herrolesatFergusonandCRH.Kathalsohasextensiveexperience
ofworkinginbusinessesundergoingtransformation,whichwillbe
valuableasweseektorestructureourUKoperation.
IanDuncansteppeddownasaNon-ExecutiveDirectorandChair
oftheAuditCommitteeon31January2021,andwasreplacedby
ShatishDasani,whojoinedtheBoardon1February2021.Shatish
isanexperiencedseniorpubliccompanyfinanceprofessionaland
ChairofAuditCommittee.Hehasstronginternationalexperience
acrossseveralsectorsincludingindustrial,buildingmaterials,
technology,constructionandinfrastructure.Shatishhasaproven
trackrecordofdrivingShareholdervalue,whichwillbeimportantas
weseektoreturntheCompanytoprofitablegrowth.
IwouldliketothankIanDuncanandKateAllumfortheirsupport
andcontributionduringaverychallengingperiod.
During2020,femalerepresentationontheBoardfluctuated
asAndreaAbtsteppeddown,KathKearney-Croftjoinedthe
Boardon25Februaryandsubsequentlysteppeddownwhena
permanentCFOwasappointed.Foraperiodoftime,wehad43%
femalerepresentationontheBoard;however,withtheaddition
oftheCD&RDirectorswearenowat20%.Ouraspirationisto
endeavourtohaveatleast33%femalerepresentationinlinewith
theHampton-AlexanderReviewonFTSEWomenleaders.Weare
delightedtoreportthat,for2021,wehaveatleastoneDirector
ofcolourwiththeappointmentofShatish,inlinewiththeParker
ReviewCommitteerecommendations.Weacknowledgethatthe
Hampton-Alexanderreviewtargetof33%femalerepresentationin
ourExecutiveLeadershipTeam(“ELT”)anddirectreportstotheELT
hasnotyetbeenmetbutouraspirationistomeetthattargetover
thecourseofthenextfewyears.Thiswillbeakeyaspectofthe
focus of our Nominations Committee as it continues its review of
successionplanninganddiversitywithinthebusiness.
Compliance with the UK
Corporate Governance Code 2018
TheUKCorporateGovernanceCode2018(the“Code”)can
beaccessedatwww.frc.org.uk.During2020,theBoardhas
focusedonembeddingtheCodeandbuildingontheactivitiesthat
werecommencedduring2019.Atalllevelsoftheorganisation
wehavebeencontinuingtobuildonourengagementactivities
withcolleaguesandotherstakeholders.AGroup-widecustomer
engagementsurveywasconductedforthefirsttime,which
indicatedthatthenetpromoterscoreforSIGwasbetterthanthe
averagefortheconstructionandlogisticsindustry.Afurthersurvey
willbeconductedin2021andwillbemorelocallyfocused.
Duringtheyear,theBoardagreedarevisedpurpose/visionand
anewstrategyfollowingtheappointmentofSteveFrancis.The
MattersReservedfortheBoardandtermsofreferenceforall
CommitteeswerereviewedinJuly2020followinganannualreview
andtheappointmentoftheCD&RDirectors.Additionally,the
BoardagreedandpublishedaBoardMandatethatarticulates
theBoard’srole;theCompany’spurpose,visionandstrategy;the
Company’smedium-termvision;theCompany’shealthandsafety
goals;theCompany’sstakeholders;theGovernancearrangements;
thecultureanddesiredbehaviours;anditsriskappetite.TheBoard
Mandatecanbefoundonourwebsiteatthefollowinglocation
investors/corporategovernance/termsofreferenceandpolicies.
OurfollowinggovernancesectionsexplainhowtheGrouphas
appliedtheprinciplesandcompliedwiththeprovisionsofthe
Codeandtheworkwehaveundertakenduringtheyear.Wealso
explainhowtheBoardhascompliedwiththedutiesofDirectors
underSection172oftheCompaniesAct2006.Myco-Directorsand
ItakeourresponsibilitiesunderSection172veryseriouslyand,in
undertakingourdutiesasDirectors,wearealwaysmindfulofthe
needtoensurethatdecisionsaremadeforthelongterm,thatthe
interestsofourvariousstakeholdersaretakenintoconsideration
andthatourhighstandardsofconductaremaintained.
51
Stock code: SHI www.sigplc.comGOVERNANCE Chairman’s introduction
During2020wewerefullycompliantwiththeCodeexceptfor
Provision32,thattheBoardshouldestablishaRemuneration
CommitteeofindependentNon-ExecutiveDirectors.Following
the appointment of Bruno Deschamps to the Remuneration
Committeeonthe10July2020byCD&R,inaccordancewith
theRelationshipAgreementaspartofthefirmplacing,placing
andopenofferundertakeninJuly2020,thishasnotbeenthe
case.InaccordancewithProvision10oftheCode,Brunoisnot
consideredtobeindependentasherepresentsasignificant
Shareholder.Nevertheless,theBoardbelievesthatBruno’s
contributionhasbeenvaluableandbringsindependentthought
andchallengetotheRemunerationCommittee.Similarly,Christian
Rochat,appointedbyCD&RinaccordancewiththeRelationship
Agreement,isamemberoftheNominationsCommittee;the
majorityofthemembersareindependent,andIwasindependent
onappointment,thereforetheCompanycomplieswithProvision
17oftheCode.
In support of driving the highest standards in governance and
effectiveleadership,arenewedfocuswasplacedonBoard
involvementandengagementwithkeystakeholdersthroughoutthe
year.AllmembersoftheBoardarecommittedtoprovidingstrong
andsupportiveleadershiptoachievethegoalssetinthestrategy.
TheBoardisstrivingtocontinuouslyimproveandin2021wewill
ensuretherearefurthermeasuresofimprovement.
Inparticular,wewishtocontinuetobuildonourengagementwith
colleaguesandthiswillcontinuetoremainakeyfocusoverthe
nextyear.Asmentionedearlier,SimonKinghastakenoverfrom
KateAllumasthedesignatedNon-ExecutiveDirectorforworkforce
engagementandheldinauguralsessionswithallpartsofthe
GroupduringOctoberandNovemberbyvideocalls.Face-to-face
sessionshadbeenscheduledbyKateAlluminAprilandMay,but
thepandemicpreventedthesefromtakingplaceasplanned.We
alsohavefurtherworktodoinembeddingournewvision,purpose,
cultureandrequiredbehaviourswithinthebusinessandplansto
dothishavebeenrestartedfollowingthesuccessfulcapitalraise.
AstherewereanumberofnewmembersontheBoardandELT,
eachgroupparticipatedinasessiononthecommitmentculture
inSeptemberpriortothecultureprogrammerestartingfollowing
itsintroductionattheSeniorLeadershipTeam(“SLT”)conference
inJanuary2020.ItwasfurtheragreedthattheannualBoard
effectivenesssurveywouldincludespecificquestionstoassesshow
theBoarddemonstratestheSIGbehaviours(seepage78formore
details).
Board evaluation
For2020,theevaluationwasconductedinternallyandledby
ourCompanySecretary.Detailsoftheprocessconcerningthis
evaluationanditsoutcomearecoveredonpage78ofthis
CorporateGovernanceReport.
Covid-19
TheBoardcloselymonitoredtheCovid-19outbreakandthe
potentialimpactontheCompany’sbusinessesacrosstheGroup
andonourpeopleandcontinuestodoso.Regularupdateswere
providedbymanagementandtheBoardalsoheldadditional
meetingsduringthefirstlockdowntoensurethatitwaskept
abreastofthesituationonanongoingbasis.Theneedtopreserve
thehealthandsafetyofourcolleagues,customersandsuppliers
hasremainedourprimaryconcernduringtheoutbreak.TheBoard
ensuredthattheGroupfollowedalllocalandnationalinstructions
issuedbygovernmentauthoritiesinitsmarketstocurtailthe
spreadandimpactofCovid-19.TheGrouphasbeenregularly
reviewingthisineveryjurisdictioninwhichitoperates.
Duringthepandemic,tosupporthomeworking,theGroup’sIT
infrastructurewasstrengthened,andwherehomeworkingis
possible,colleagueshavebeeninstructedtoremainathome.
MostmeetingshavebeenheldbyvideocallsandtheBoard,the
ELTandtheSLTholdregularvideoandtelephonecallstomonitor
theposition.Allmeetingscontinuedtobeheldinthismanner
duringthefirstlockdown,andface-to-facemeetingswereheld
whenrestrictionswereliftedforashortperiodadheringtostrict
socialdistancingmeasures.Duringthesecondlockdown,meetings
resumedbyvideocall.
Wherehomeworkingwasnotpossibleinthemajorityofour
branchesandoperationalpartsofourbusiness,stringent
measureshavebeenputinplacetomaintainstricthygieneand
socialdistancingrulesineachofourlocations.Policiesareinplace
intheeventthatacolleaguecontractsthevirusorhasafamily
membershowingsymptomsofthevirus.Policiesandprocedures
havealsobeenputinplaceforthosethatneedtocarefor
dependents,especiallywithschoolclosures.
Asaresultofthequickandagileresponsetothepandemic,the
GroupwasabletomitigatethedirectimpactofCovid-19.The
decisiveactionstakenacrossallfunctionsandatalllevelsinthe
businessmitigatedtheinitialimpact.TheperformanceinH1was
materiallyaffectedbygovernmentlockdownresponsestothe
pandemicinthecountriesweoperate,notablyintheUKand
IrelandduringMarchandApril,althoughlessthanwehadoriginally
envisaged.WiththeeasingofthelockdownrestrictionsinMay
andJune,theGroupsawagradualimprovementinthetrading
performance,accompaniedbyacorrespondingimprovementin
profitabilityandthiscontinuedinH2.Despitefurtherlockdowns
andrestrictionsfromOctoberonwards,thebusinesswasableto
tradenormallythroughoutH2,albeitwithnewoperatingnorms
andprotocols.
Wesupportedourcolleaguesduringtheperiodoftemporary
closureandensuredthatourUKcolleaguescontinuedtoreceive
aproportionoftheirpayduringaperiodoffurloughand,inthat
context,wewelcomedtheintroductionoftheUKGovernment’s
CoronavirusJobRetentionScheme,whichhelpedtosupportthis.
SimilargovernmentassistancetoretainjobsinIrelandwasalso
welcomed.However,weaskedourUKandIrelandemployeesto
takelowerpayduringthefirstlockdownanditwas,therefore,
alsodeemedappropriateforallmembersoftheBoardtotakea
payreductionofupto50%atthistime,andfortheGroupELTto
takeapayreductionofupto20%from1April2020.Themajority
ofsitesreopenedinmid-May,anditwasdeemedappropriateto
reinstatetheExecutiveDirectors’payto80%(backdatedto1 April
2020)atthesametimeascolleagueswerereturningtowork onfull
pay,andtoreinstatetofullpayfrom1July2020.Thefeesforthe
Non-ExecutiveDirectorsincludingtheChairmanwerereturnedto
normallevelson1July2020.
52
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Independent Review by PwC
Asalreadymentionedonpage5,theBoardinstigatedan
independentreviewthroughtheGroupInvestigationCommittee,
commissioningPwCtoundertakeanindependentreviewofthe
Group’sforecastingandmonthlymanagementaccountsprocesses
inlightofthedisparitybetweentheforecastlevelofunderlying
profitbeforetaxforthefinancialyear2019setoutintheJanuary
2020TradingUpdateandmarketconsensusofforecastprofitprior
tothatannouncement.TheBoardtakesthefindingsofthePwC
reportveryseriously.TheCompanyvoluntarilynotifiedtheFCAof
the progress of the PwC review and has shared the PwC report with
theFCA.TheFCAconfirmedtotheCompanyon6October2020
thattheyhadclosedtheirenquiryanddidnotintendtotakeany
furtheraction.SinceSIG’sreceiptofthePwCreport,inorderto
strengthentheGroup’sfinancialforecastingandinternalreporting,
KPMGwasappointedtoassisttheAuditCommitteeinensuring
appropriateimprovementshavebeenimplementedtothe
Company’sfinancialsystems,proceduresandcontrols,including
thoserecommendedinthePwCreport.
Furtherdetailsontheactionstaken(includingactionstaken
duringtheyearinrelationtoculturalchanges)areincludedin
theCorporateGovernanceReportonpage59.TheBoardhad
alreadyagreedthatadditionalfocuswasrequiredduring2020to
embedthecommitmentculture,improveemployeeengagement
andmorale.Thisworkalsoincludedtheactionsarisingfromthe
review.FurtherinformationonthePwCreviewandtheactionsthe
CompanyhasimplementedinresponsearesetoutintheAudit
CommitteeReportonpage104.
2021 Annual General Meeting
InlightofCovid-19restrictions,itwillnotbepossibletomeetour
ShareholdersattheAnnualGeneralMeeting(“AGM”)on13May
2021,therefore,ifyouhaveanyquestions,pleaseemailthem
tocosec@sigplc.cominadvanceofthemeeting.Wewillensure
theanswerstoyourquestionsareprovidedatthemeetingand
furtherdetailsforthearrangementsoftheAGMwillbesentto
shareholdersshortly.
AnychangestotheAGM2021arrangementswillbepublishedon
ourwebsite.
Andrew Allner
Chairman
25March2021
Compliance with the UK
Corporate Governance Code 2018
OurGovernancesectionssetoutoverthefollowing
pages,explainhowtheGrouphasappliedtheprinciples
andcompliedwiththeprovisionsoftheCodeduringthe
financialyearended31December2020.During2020we
werefullycompliantwiththeCodeexceptforProvision
32,whichrequirestheBoardtoestablishaRemuneration
Committeeofindependentnon-executivedirectors.
However,sincetheappointmentofBrunoDeschampson
10July2020asthenominatedDirectorforCD&R,heisnot
consideredtobeindependentunderprovision10.Further
detailscanbefoundonpage52.
1. Board Leadership and
Company Purpose
See pages 57 to 63
2. Division of Responsibilities
See pages 72 to 74
3. Composition, Succession
and Evaluation
See pages 75 to 80
Nominations Committee Report
See pages 90 to 95
4. Audit, Risk and Internal Control
See pages 81 to 83
Audit Committee Report
See pages 96 to 106
5. Remuneration
Directors’ Remuneration Report
See pages 107 to 131
53
Stock code: SHI www.sigplc.comGOVERNANCE Board of Directors
Andrew Allner
BA, FCA
Non-Executive
Chairman1
Appointed as Non-
Executive Chairman on
1 November 2017.
External roles
AndrewisChairmanofShepherd
BuildingGroupLimitedandFox
MarbleHoldingsplc,anAIMtraded
company.
Experience and past roles
AndrewhassignificantcurrentlistedcompanyBoardexperience
asChairmanandasaNon-ExecutiveDirector.Hewaspreviously
ChairmanatTheGo-AheadGroupplcandMarshallsplc,andaNon-
ExecutiveDirectoratNorthgateplc,AZElectronicMaterialsSAand
CSRplc.PreviousexecutiverolesincludeGroupFinanceDirectorof
RHMplcandCEOofEnodisplc.Hehasalsoheldseniorexecutive
positionswithDalgetyplc,AmershamInternationalplcandGuinness
plc.Significantexperienceofchangeandchallengingsituations.
Key strengths
SubstantialBoard,leadership,strategy,internationalandgeneral
management,corporatetransaction,governanceandaccounting
expertise.
1TheChairmanwasindependentonappointment
Steve Francis
MA
Chief Executive
Officer
Appointed as an Executive
Director and Chief Executive
Officer on 25 February 2020.
External roles
SteveisaNon-ExecutiveDirector
ofStructuredSoftwareLimited
andFellowofTheInstituteof
Turnaround.
Experience and past roles
StevehaspreviouslybeenChiefExecutiveOfficerofPatisserie
HoldingsPLC,TulipLtdandDanwoodGroupHoldingsLimited.He
wastheChiefFinancialOfficerandsubsequentlyManagingDirector
ofthelargestdivisionofVion(formerlyGrampian)FoodGroupLtd
andChiefFinancialOfficerandmemberofthemanagementbuy-in
teamofBritishVitaplc.HehasworkedwithMcKinsey,wasapartner
atPwCandabankeratBarclaysCapitalandNatWestInvestment/
CountyBank.
Ian Ashton
BA, ACA
Chief Financial
Officer
Appointed as an Executive
Director and Chief Financial
Officer on 1 July 2020.
External roles
Iandoesnothaveanyexternal
roles.
Key strengths
Significantturnaroundandleadershipexperienceacrossarange
ofmulti-siteinternationalbusinesses,considerableexecutive
managementexperienceincludingstrategicconsultancy,mergers
andacquisitions,corporatefinanceandbanking.
Experience and past roles
PriortojoiningSIG,IanwasGroupChiefFinancialOfficerofLow&
BonarplcuntilitsacquisitionbytheFreudenberggroup.Beforethat,
hewasChiefFinancialOfficerofLabvivaLLC,aUS-basedtechnology
company.IanworkedformuchofhiscareeratSmith&Nephewplc,
undertakingvariousfinancialrolesintheUK,theUSandAsia.Ian
isaqualifiedcharteredaccountantandbeganhiscareeratErnst&
YoungLLP.
Key strengths
Highlyskilledwithbroadglobalexperienceinaseriesoffinancial
leadershiproles.Astrongtrackrecordincorporatetransactions,
drivingchange,accounting/financeandstakeholderengagementwith
significantinternationalexperience.
MeinieOldersmaandNickMaddockwereExecutiveDirectors
forpartof2020andresignedasDirectorsandasChief
ExecutiveOfficerandChiefFinancialOfficerrespectivelyon
24February2020.
KathKearney-CroftwasanExecutiveDirectorduringthe
FinancialyearandsteppeddownasaDirectoron31July2020
andasInterimChiefFinancialOfficeron30June2020.
AndreaAbtwasanindependentNon-ExecutiveDirectorduring
thefinancialyearandsteppeddownon12February2020.
KateAllumwasanindependentNon-ExecutiveDirectorand
ChairoftheRemunerationCommitteeduringthefinancialyear
andsteppeddownon31December2020.
IanDuncanwasanindependentNon-ExecutiveDirectorand
ChairoftheAuditCommitteeduringthefinancialyearand
steppeddownon31January2021.
54
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Key:
AuditCommittee
Remuneration Committee
Nominations Committee
Chair of Committee
I
Independent
Shatish Dasani
MA, FCA, MBA
Non-Executive
Director
I
Appointed as a Non-Executive
Director and Chair of the
Audit Committee on
1 February 2021.
External roles
ShatishiscurrentlyaNon-Executive
DirectorandChairoftheAudit&
RiskCommitteeofRenewHoldings
plcandSpeedyHirePlc,and
TrusteeandInterimChairof
UnicefUK.
Experience and past roles
Shatishhasover20years’experienceinseniorpubliccompany
financerolesacrossvarioussectors.Healsohasextensive
internationalexperienceincludingasregionalCFObasedinSouth
America.HewaspreviouslytheChiefFinancialOfficerofForterra
plcandTTElectronicsplc,andwasalsoanalternateNon-Executive
DirectorofCamelotGroupplcandPublicMemberatNetworkRailplc.
Key strengths
Strategydevelopmentandexecution,performanceimprovement,
financialmanagement,corporatefinance,mergersandacquisitions.
(includingrecentandrelevantfinancialexperience).Sectorexperience
ofbuildingmaterials,advancedelectronics,generalindustrial,
businessservicesandinfrastructure.
Bruno
Deschamps
ISG Paris (MBA,
marketing, finance)
Non-Executive
Director
Appointed as a Non-Executive
Director on 10 July 2020.
External roles
CD&RDirectorships:KalleGroup,
SOCOTEC,WestburyStreet
HoldingsandChairmanofWolseley
Limited.
Experience and past roles
BrunoistheChairman&CEOofEntrepreneursLLPbasedinLondon.
HeisaBoardmemberofDiversey(formerChairman),agloballeader
ofhygiene&sanitationproducts,servicesandsolutionstothe
institutionalandindustrialmarkets.Previously,he servedasChairman
oftheAdvisoryBoardofKloecknerPentaplast,oneoftheworld’s
largestsuppliersoffilmsforpharmaceuticals,medicaldevices,food,
electronicsandgeneralpackagingand,from2008to2011,asGroup
ManagingPartnerof3iplc(London).HeservedasaCD&ROperating
Partnerfrom2002to2007duringwhichhewasChairmanandCEO
ofBrakesandwasinvolvedinseveralportfoliocompanies(Revel,VWR
&Culligan).
Key strengths
Deepindustrialknowledge,corporatetransactions,extensive
experienceindrivingandoverseeingimprovedcompany
performance.
Kath Durrant
BA
Non-Executive
Director
I
Appointed as Independent
Non-Executive Director and
Chair of the Remuneration
Committee on 1 January 2021.
External roles
Non-ExecutiveDirectorandChair
of the Remuneration Committee
ofCalisenplcandNon-Executive
DirectorofVesuviusplc.
Experience and past roles
Kathhasmorethan30years’HumanResourcesexperience,witha
strongoperationalandstrategictrackrecord,gainedatanumber
oflargeglobalmanufacturingcompanies.Aswellasworkingat
GlaxoSmithKlineplcandAstraZenecaplc,shehasservedasthe
GroupHumanResourcesDirectorofRolls-Royceplc,andwasmost
recentlyGroupHRDirectorofFergusonplcandChiefHROfficerof
CRHplc.SheservedasaNon-ExecutiveDirectorandChairofthe
RemunerationCommitteeofRenishawplcfrom2015to2018.
Key strengths
HumanResourcesacrossarangeofbusinesses,transformation
andchangemanagement,constructionindustryandinternational
experience.
55
Stock code: SHI www.sigplc.comGOVERNANCE Board of Directors
Key:
AuditCommittee
Remuneration Committee
Nominations Committee
Chair of Committee
I
Independent
Gillian Kent
BA, CIM Diploma in
Marketing
Non-Executive
Director
I
External roles
GillianholdsNon-Executive
DirectorrolesatDignityPlc,
Mothercareplc,Ascentialplc,
NAHLGroupplcandwiththree
privatecompanies,Portswigger
Ltd,KRGroupandHowsy
Limited.
Experience and past roles
GillianhashadabroadexecutivecareerincludingbeingChiefExecutive
ofrealestateportalPropertyfinderuntilitsacquisitionbyZoopla,and15
yearswithMicrosoftincludingthreeyearsasManagingDirectorofMSN
UK.GillianwasaNon-ExecutiveDirectorofPendragonPLCuntilApril
2019.
Key strengths
Strongcommercial,strategic,changemanagement,stakeholder
engagement,customeranddigital/technologyexperienceacrossa
broadrangeofbusinesses.
Simon King
AMP, Insead
Non-Executive
Director
I
Appointed as a Non-
Executive Director on
1 July 2020.
External roles
Simondoesnothaveany
externalroles.
Experience and past roles
SimonmostrecentlyservedontheTravisPerkinsExecutiveBoardand
heldthepositionofCEOforWickes.Priortothat,SimonwasatWalmart
asCOOofAsda,CEOatSavolaGroupMiddleEastandheldCEOrolesfor
TescoinTurkeyandSouthKorea,leadingthejointventurewithSamsung.
BeforeTescoSouthKorea,SimonwasChiefCommercialOfficerforTesco
incentralEurope.
Key strengths
Over35years’experienceleadinginternationalteams,buildingproducts
distributionexperience,changemanagement,retail,distribution,
marketing,technology/digitalandstakeholderengagementexperience
particularlytheworkforce.
Alan Lovell
MA, FCA
Senior Independent
Non-Executive
Director
I
Appointed as a Non-
Executive Director and
Senior Independent
Director on 1 August 2018.
External roles
AlanisNon-ExecutiveChairmanof
SafestyleUKplc,InterserveGroup
LimitedandProgressiveEnergy
Limited.
Experience and past roles
AlanhaspreviouslybeenChiefExecutiveOfficerofsixcompanies:Tamar
EnergyLimited,Infinisplc,Jarvisplc,DunlopSlazengerGroupLtd,Costain
GroupplcandConderGroupplc.AlanwasalsopreviouslyChairmanof
Sepuraplc,FlowgroupplcandChairoftheConsumerCouncilforWater.
Key strengths
SignificantlistedcompanyBoardexperience.Accounting/finance,
corporatetransactionsandextensiveconstructionindustryand
turnaroundexperienceintheUKandEurope.
Christian Rochat
BA, PhD, MBA
Non-Executive
Director
Appointed as Non-
Executive Director
on 10 July 2020.
External roles
ChristianisaPartnerofCD&R
LLP.HeisaNon-Executive
DirectorofBelronGroupSA,
SocotecGroup,WSHLimited
andWolseleyGroupLimited.
Experience and past roles
ChristianjoinedCD&Rin2004andisaPartnerbasedinLondon.Heled
theCD&RinvestmentsinBelron,Exova,Socotec,SPIEandWestbury
StreetHoldings.HealsoledthesaleofBrakesGroupandservedas
aDirectorofthecompany.PriortojoiningCD&R,hewasaManaging
DirectoratMorganStanleyCapitalPartners,andaDirectoratSchroder
Ventures(now Permira).HealsoworkedintheLondonandNewYork
officesofMorganStanley’smergersandacquisitionsdepartment.Heisa
DirectorofBelron,SocotectandWSH.
Key strengths
Deepindustrialknowledge,transformation,changemanagement,
strategy,stakeholderengagement,corporatetransactionsand
extensiveexperienceindrivingandoverseeingimprovedcompany
performance.
56
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Corporate Governance Report
BOARD LEADERSHIP AND COMPANY PURPOSE
Board activities
Strategy and financing
Stakeholder engagement
■ FollowingtheCovid-19outbreak,theBoardmetmorefrequently
toreviewactionsrequiredtoensurethesafetyofemployeesand
customerswhileallowingessentialbusinesstocontinueatlocal
branches
■ Consideredanalystfeedbackfollowingtheannouncementofthe
Company’s2019full-yearresultsinMay,theInterims(September2020)
and various trading updates
■ AppointedSimonKingasthedesignatedNon-Executiveforworkforce
■ Regularupdatesandreviewsthroughouttheyear,tomonitortheshort-
engagementandwhistleblowingchampion
termcashposition,medium-termplanandbusinessplan
■ EmployeesurveydoneinSeptember2020withthefeedbackreviewed
■ Group’sfinancialpositionandtheongoingliquidityoftheCompany
toensureanyconcernsraisedweresuitablyaddressed
especiallyfollowingtheCovid-19outbreak
■ Approvalfortheadoptionofthenewstrategyandsevenstrategicpillars
fortheCompanydesignedtoreturnthebusinesstoprofitablegrowth,
includingthestrategicKPIsthatsitbeneatheachpillar
■ Monitoredprogressagainstthenewstrategywithpresentationsfrom
theUK,FranceandGermany
■ Approvalofthedebtrestructureprojectandassociateddocumentation
■ OversawaprocesstoraisenewcapitalwithaFirmPlacing,Placingand
OpenOfferthatsuccessfullycompletedinJuly2020,whichincluded
approving a prospectus and the associated documents
■ Presentationsfromseniormanagementonthedigitalstrategyand
health,safetyandenvironment,aswellasupdatesfromexternal
advisors
■ ReviewedExecutiveandNon-Executiveremunerationduringlockdown
andassociatedreductioninfees/salary
■ Reviewed and approved actions from the independent PwC investigation
■ HeldaculturesessiononthecommitmentcultureandSIGbehaviours
toensurethenewBoardmembersunderstoodtheprioritiesandfocus
of the programme
Corporate reporting and
performance monitoring
■ Heldadditionalmeetingstomonitortheongoingcashflowand
liquidityduringthepandemic
■ Continuallyreviewedtherevisedsalesperformanceagainsttargets
andthetradingperformanceoftheCompany
■ Reviewedtherollingforecastagainsttheapproved2020budgetand
thefull-yearforecast
■ Approvedthe2021budgetandthethree-yearfinancialprojections
■ Implementingimprovedenvironmentalreportingandreviewing
methodstoreduceenvironmentalimpactacrosstheGroup
■ OngoingreviewoftheCompany’sabilitytotradeasgoingconcernand
viability
■ Approvedthe2019full-yearand2020InterimResults,andensured
workwasonschedulefortheproductionofthe2020year-endReport
andAccounts
■ Approvedthereleaseofvarioustradingupdatesinlinewiththe
GovernanceCodeandCompaniesActrequirements
■ IntroducedanewGroupreportingsystemwitheffectfrom
January2021.
Link to strategy:
Responsible actions
Valuable partnerships
Winning branches
Highest productivity
Superior service
Focused growth
Specialist expertise
■ ReviewedfeedbackfromtheBoardworkforceengagementsessionsheld
bySimonKingandhissitevisitsduringthefirstthreemonthsoftheyear
■ Receivedregularinvestorrelationsreports
■ RegularupdatesfromBrokersonmarketstatusandreceivedfeedback
duringtheFirmPlacing,PlacingandOpenOffer
■ FeedbackonthefirstGroup-widecustomerengagementsurvey
undertaken
■ ConsideredinitiativesforcollaborativeworkingwithsuppliersinUK
Distribution
■ Reviewedthe2020GroupHRStrategy,includingproposalsfor
engagementwithcolleagues
■ ReviewedtheSIGWellbeingandMentalHealthpolicyincludingthe
actionbeingtakentosupportemployeesparticularlyduringthe
pandemicandremoteworking
■ ConsultedwithShareholdersfollowingthevoteonExecutive
RemunerationattheGeneralMeetinginJulytofullyunderstandand
address their concerns
■ ReceivedreportsfromtheCompany’sfinancialadvisorsinrelationtoits
debtstructureandthemacrobackdropandsectordynamicsthatSIG
was facing
Governance
■ ApprovedarevisedscheduleofMattersReservedfortheBoard
■ ApprovedupdatedTermsofReferenceforallCommittees
■ EvaluatedtheperformanceoftheBoardanditsCommitteesandall
DirectorsfacilitatedinternallyandagreedBoardobjectivesfor2021
■ ApprovedaBoardMandateandtheProvision4statementofthe2018Code
■ ReviewedtalentandcapabilityoftheExecutiveTeamresultinginkey
appointmentsintheUKandGermany
■ ReceivedregularupdatesfromthechairsoftheAudit,Nominations
and Remuneration Committees
■ Approvedanumberofpolicies:DelegationofAuthority,thetax
strategy,whistleblowingandthecorporatecriminaloffence,non-audit
servicesandemploymentofformerExternalAuditoremployeespolicy
Risk management and
internal control
■ RegularlyreviewedthelatestgovernmentadviceregardingCovid-19
safetymeasurestoensurethatthesewerecorrectlyimplemented
Group-wide,takingonboardthevariousdifferencesinapproach
betweencountries
■ Reviewedandstrengthenedfinancialreportingprotocols
■ MonitoredthepotentialrisksarisingfromBrexitandinparticulara‘no
deal’exittoensurethecorrectmeasureswereinplace
■ Continuedthereviewofcybersecurity,withparticularattentionpaid
totheincreaseinofficestaffhomeworking,toensurecontinuedgood
practiceandenhancedsecurity
■ ReceivedregularupdatesfromtheAuditCommitteeChaironthekey
areas discussed at those meetings
■ Receivedregularreportsonriskmanagementandinternalcontrols
fromtheChiefFinancialOfficer
■ Approvedtheyear-endriskregister,riskappetiteandemergingrisks
■ ReviewedtheframeworkforanEnvironment,SocialandGovernance
planforimplementationin2021
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Corporate Governance Report
BOARD LEADERSHIP AND COMPANY PURPOSE
Board attendance at meetings
ThefollowingtableshowstheattendanceofDirectorsatmeetingsoftheBoard,Audit,RemunerationandNominationsCommitteesduring
theyearto31December2020:
Scheduled Board
(9 meetings)1
Additional Board
(8 meetings)1
Audit
(5 meetings)
Remuneration
(9 meetings)
Nominations
(9 meetings)
AndreaAbt2
AndrewAllner3
KateAllum
IanAshton4
Bruno Deschamps5
Ian Duncan6
SteveFrancis7
KathKearney-Croft8
GillianKent6
SimonKing9
AlanLovell
NickMaddock10
MeinieOldersma10
Christian Rochat5
0
9
9
5
4
9
8
5
9
4
9
1
1
4
N/A
8
8
1
0
8
8
8
8
1
8
N/A
N/A
0
N/A
N/A
5
N/A
N/A
5
N/A
N/A
5
3
5
N/A
N/A
N/A
N/A
9
9
N/A
5
8
N/A
N/A
8
5
8
N/A
N/A
N/A
N/A
9
9
N/A
N/A
9
N/A
N/A
9
3
9
N/A
N/A
3
1.
ThisyeartherewereninescheduledBoardmeetingsandeightadditionalBoardmeetings.TheincreasednumberofBoardmeetingswerenecessaryduetothefirmplacing,placing
andopenoffer,whichtookplaceinJuly2020,andtheCovidpandemic
2. AndreaAbtretiredon12February2020anddidnotattendthemeetingon29January2020
3.
4.
TheChairmanattendedallfiveAuditCommitteemeetings
IanAshtonwasappointedon1July2020andattendedallscheduledmeetingshewasentitledtoattend.Inadditiontothis,heattendedoneBoardmeetingasaguestpriortohis
formalappointmentandattendedthreeAuditCommitteemeetings
5. BrunoDeschampsandChristianRochatwereappointedtotheBoardon10July2020andattendedscheduledmeetingstheywereentitledtoattend
6.
IanDuncanandGillianKentwereunabletoattendtheRemunerationCommitteemeetingon4November2020asitwascalledatveryshortnoticeandwereupdatedbyemail
7. SteveFranciswasappointedon25February2020andattendedallscheduledmeetingshewasentitledtoattend.Inaddition,healsoattendedallfiveAuditCommitteemeetings
8. KathKearney-Croftwasappointedon25February2020andresignedon31July2020.DuringhertimewiththeCompany,sheattendedallscheduledmeetingsshewasentitledto
attendaswellasattendingtwoAuditCommitteemeetings
9. SimonKingwasappointedtotheBoardon1July2020andattendedallscheduledmeetingshewasentitledtoattend
10. NickMaddockandMeinieOldersmaresignedfromtheCompanyon24February2020
ThistableshowsthosemeetingsthateachDirectorattendedasamemberratherthanasaninvitee.Where“N/A”appearsinthetable
theDirectorlistedisnotamemberoftheCommitteealthoughmayhaveattendedthemeeting.Forexample,theChairmanattendedall
fiveAuditCommitteemeetings.Directorsdonotparticipateinmeetingswhenmattersrelatingtothemarediscussed.
TheChairmanalsoholdsmeetingswiththeNon-ExecutiveDirectorswithouttheExecutiveDirectorspresent.During2020,tensuch
meetingswereheld.TheSeniorIndependentDirectoralsomeetswiththeotherindependentNon-ExecutiveDirectorswithoutthe
Chairmanpresent,inparticularwhentheperformanceoftheChairmanisbeingconsidered.During2020,thismeetingwasheldin
November2020.AllDirectorsattendedthe2020AGM,9July2020GeneralMeetingheldtoapprovetheFirmPlacing,PlacingandOpen
Offerandthe17November2020GeneralMeetingheldtoapprovethenewRemunerationPolicy.Inlightofthepandemic,allmeetings
wereheldasclosedmeetings;Shareholderswereinvitedtosubmitquestionsinadvanceofthemeetingsandallquestionswereaddressed
inadvanceofthemeetings.Shareholderswereabletolistenintoallthreemeetings.
58
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Pulsesurveyswillbeconductedthroughout2021forconsistentand
ongoingmeasurementtotakeplace.
Focus following the survey
Mostcountriesareholdingfocusgroupswithacrosssection
ofemployeesfromacrosstheirbusinesstohavemeaningful
discussionswithemployees.Actionswillbeagreedpercountryand
monitoredmonthly.
Focus on data
TheBoardreceivedreportsonthedatasetsrecommendedinthe
guidelinesproducedbytheFRCtoreviewtomonitorcultureand
engagementwithinthebusiness.Theseregularreportsincluded
thefollowinginformation:
■ trainingdata;
■ recruitment;
■ exitinterviews;
■ reward;
■ promotiondecisions;
■ whistleblowingdata;
■ employeesurveys;
■ Boardinteractionwithseniormanagementandworkforce;
■ healthandsafetydata,includingnearmisses;and
■ attitudestoregulators,internalauditandemployees.
TheBoardreceivesreportsasamatterofitsregularroutine
businessateachmeetingondiversitydata,compliancetraining
completionratesperoperatingcompanyandGroup,headcount,
turnoverandabsencerates,recruitment,whistleblowingdata,
healthandsafetydataincludingnearmisses,andCovid-19cases.It
alsoreceivesreportsfromindividualBoardmembersandoperating
companyManagingDirectorsontheirmeetingswithemployees.
TheBoardalsoreceivedfeedbackimmediatelyafterthelaunchof
thecommitmentcultureprogrammeattheSLTconferencein
January2020.
Culture programme
TheBoard,withtheassistanceofmembersoftheELT,articulated
anewSIGpurposeandvision,andreviewedSIG’scultureand
behaviours.TherevisedpurposeagreedbytheBoardisarticulated
as“Toenablemodernlivingandworkingenvironmentsinthe
communitiesweoperate”.
Work on a commitment culture
Throughouttheyear,extensiveworktookplacetodefinea
supportingcultureframework.Thedefinedbehaviourswilldrive
the consistent and shared actions to advance performance and
conduct.Thelaunchandimplementationofthenewculture
programmebeganinJanuary2020andwasrestartedinSeptember
2020followingthechangesinmanagementandthesuccessful
refinancingoftheCompany.
Thecommitmentcultureisonedrivenbyaclearsenseofpurpose
withclearlydefinedbehavioursthatunderpinit.
TheSIGbehaviourshavebeenarticulatedas“Beboldinwhatyou
do”,“Beflexibleandagile”and“Makeapositivedifference”.Read
moreonpage39.
Directors’ conflicts
EachDirectorhasadutyundertheCompaniesAct2006(the“Act”)
toavoidanysituationwheretheyhave,orcanhave,adirector
indirectinterestthatconflicts,orpossiblymayconflict,withthe
Company’sinterests.Provision7oftheCodealsorequiresthe
Boardtotakeactiontoidentifyandmanageconflictsofinterest,
includingthoseresultingfromsignificantshareholdingsandto
ensurethattheinfluenceofthirdpartiesdoesnotcompromise
oroverrideindependentjudgement.Thisdutyisinadditionto
theobligationthattheyowetotheCompanytodisclosetothe
Boardanytransactionorarrangementunderconsiderationby
theCompanyinwhichtheyhave,orcanhave,adirectorindirect
interest.Directorsofpubliccompaniesmayauthoriseconflictsand
potentialconflicts,whereappropriate,ifacompany’sArticlesof
AssociationpermitandShareholdershaveapprovedappropriate
amendments.
Procedureshavebeenputinplaceforthedisclosureby
Directorsofanysuchconflictsandalsofortheconsiderationand
authorisationofanyconflictsbytheBoard.Theseprocedures
allowfortheimpositionoflimitsorconditionsbytheBoardwhen
authorisinganyconflict,iftheythinkthisisappropriate.These
procedureshavebeenappliedduringtheyearandareincluded
asaregularitemforconsiderationbytheBoardateachofits
meetings.TheBoardbelievesthattheproceduresestablishedto
dealwithconflictsofinterestareoperatingeffectively.
Aspartofthereviewofconflictsthisyear,Directorshavealso
confirmedtheyhavenoconnectionwiththefollowingexternal
searchfirms:
■ SavannahGroup–initialappointmentofSteveFrancis;
■ OdgersBerndtson–appointmentofIanAshton;
■ BarryGouldConsulting–appointmentofSimonKingandthe
searchprocessforapermanentCEO;and
■ RidgewayPartners–appointmentofShatishDasaniandKath
Durrant.
TheSavannahGroupandOdgersBerndtsonareusedforother
seniorexecutiveappointments.
AllDirectorswererequiredtocompleteagiftsandhospitalityform
confirmingreceiptofgiftsorhospitalityprovidedasaresultoftheir
directorshipoftheCompany.
TheBoardisawareoftheothercommitmentsofitsDirectorsand
issatisfiedthatthesedonotconflictwiththeirdutiesasDirectors
oftheCompanyandthattheinfluenceofthirdpartiesdoesnot
compromiseoroverridetheirindependentjudgment.
Culture and purpose
TheBoardconsidersthattheGroupoperatesarisk-awareculture
withanopenstyleofcommunication,whichseekstoidentify
earlyproblemsandissueswhereverpossible.Whereissuesare
identified,theBoardendeavourstotakeactiontoremedyany
areasofconcern.
Annual employee survey
AnemployeeengagementsurveywaslaunchedinSeptember
2020andanewproviderwasappointed.TheNetPromoterScore
methodologywasused,whichfocusesaround“howlikelyisit
thatyouwouldrecommendSIGasanemployer?”.Afurtherset
ofstatementswerealsoincludedaroundkeythemes:visionand
strategy,cultureandenvironment,managementandleadership,
jobsatisfaction,health,safetyandwellbeing,communication
andcustomerfocus.Thescoresvariedacrosscountriesbutthe
improvementareaswereconsistent,theseweremanagementand
leadership,theCompany’svisionandstrategy,communicationand
informationandcompensationandbenefits.Thehighestscoring
areasacrosstheGroupwerehealth,safetyandwellbeing,teamwork
andcollaboration.
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Stock code: SHI www.sigplc.comGOVERNANCE Corporate Governance Report
BOARD LEADERSHIP AND COMPANY PURPOSE
Engagement with employees
Therevisedorganisationalcultureandbehavioursweredefined
during2019bytheBoard,ELTandfocusgroupsfromacross
thebusiness,andlaunchedinJanuary2020viatheSLTbusiness
conferenceandoperatingcompanyroadshows.
FollowingtheappointmentofSteveFrancis,anewstrategywas
launched.Aspartofthisnewstrategyforgrowth,therewasgreater
focusonreconnectingwithemployeesacrosstheGroup,the
BoardWorkforceEngagementprogrammesoughttoaugment
theexistingemployeeengagementactivities,forexample,the
EmployeeEngagementSurvey,whichwaslaunchedinSeptember
2020,toprovidefurtherinsightsandprovideouremployeeswith
theopportunitytoofferopinions,feedbackandsuggestionsand
driveactionableimprovements.
SimonKingreplacedKateAllumasthedesignatedNon-Executive
Directorforworkforceengagementwitheffectfrom1October
2020.HeheldvirtualsessionsinOctoberandNovemberwithall
operatingcompaniesandGroupemployees.Seemoreaboutthis
onpage62.
Further work
AstherewereseveralnewmembersoftheBoardandELT,
bothgroupsparticipatedinthecommitmentculturesessionsin
Septemberpriortotherestartofthecultureprogrammefollowing
itsinitialintroductioninJanuary2020.Itwasalsoagreedthatthe
annualBoardeffectivenesssurveywouldhavespecificquestions
includedtospecificallyassesshowtheBoarddemonstratestheSIG
behaviours(seepage78formoredetails).
Followingthis,”takingaleap”sessionstookplaceinalloperating
companiesduringOctober/November.Thesesessionsprovidea
reminderofthecommitmentcultureandSIGbehavioursfocusing
onactivatingthebehavioursandagreeingactionstoembedthe
culture.Therehasbeenpositivefeedbackfromallteams.The
cultureframework,includingthepurpose,visionandstrategic
pillars,havebeenrefinedfurtherasresultoffeedbackfrom
colleaguesacrosstheGroup.Newinternalbrandingandfurther
communicationmaterialswerelaunchedinJanuary2021.Seepage
38formoredetails.
Picturetakenbeforelockdownrestrictionswereinplace.
60
SIG plc Annual Report and Accounts for the year ended 31 December 2020 TheBoardisaware,fromitsregularreports,thatretentionfigures
requireimprovementandincertainareasthereislowmorale
afterthreeyearsoftransformationwithinthebusiness.The Board
recognisesthatthereisfurtherworktobedonetoimproveculture,
moraleandengagementwithinthebusiness,andembedthe
commitmentcultureandalignittothenewvisionandpurpose.
ThiswillcontinuetobeanimportantareaoffocusfortheBoard
during2021andtheBoardwillbecloselymonitoringkeydata
setstoensurethatthenecessaryimprovementsaremadetothe
cultureandtomonitorthebehavioursrolledouttotheGroup,to
settheappropriatetonefromthetop.
Seepage104oftheAuditCommitteeReportforotheractionsthe
CompanyhasimplementedasaresultofthePwCreport.
Followinghisappointment,theCEOcommencedanin-depth
reviewofcustomer,supplierandemployeefeedbackbasedupon
structuredinterviewswithcustomersandsuppliers,andfeedback
fromemployeesatbranchroadshows.
Pricingandlossofkeyrelationshipswereraisedaskeyissues
forcustomers,whilstcustomerfocusandproductrangewere
highlightedbysuppliers.Feedbackfromemployeesalsohighlights
aneedforincreasedfocusonbuildingcustomerrelationshipsand
serviceproposition.Thenewstrategyandstrategicpillarsfocuson
customers,suppliersandemployeesbyreignitinggrowththrough
SIG’sexpertise,serviceandproximitytocustomers.
Workforce engagement
TheDirectorsconsiderthat,whilstworkforceengagement
improvedduring2019,morecouldbedone.InDecember2019,
weannouncedtheappointmentofKateAllumasNon-Executive
Directorresponsibleforworkforceengagementwitheffectfrom
1January2020.WiththeassistanceoftheCompanySecretary,
KatehadplannedtoholdsessionswithcolleaguesduringApriland
May2020,butthesecouldnotgoaheadbecauseofCovid-19.On
1October2020,SimonKingreplacedKateAllumasthedesignated
Non-ExecutiveDirectorforworkforceengagement.Withthe
assistanceoftheCompanySecretary,virtualengagementsessions
wereheldwithalloperatingcompaniesandGroupemployees.
Furtherdetailscanbefoundonpage62.
During2020,theBoardhadplannedtorotatemeetingsand
hadscheduledtovisitsitesinManchester,DublinandHanau
(Germany).However,asaresultofCovid-19,theplannedmeetings
couldnotgoahead.VisitsbytheBoardandindividualoneswill
bereinstatedattheearliestopportunitysubjecttoongoing
restrictions.
Moredetailsonemployeeengagementactivitiesineachoperating
companyaresetoutonpage65.
InOctober2019,theCompanycommencedtheprocessof
publishingtoallemployeesandcontractorsafullsuiteofupdated
policies.Theseincludeourhealthandsafetyprocedures,GDPR,
codeofconduct,anti-briberyandcorruption,alcoholand
substancemisuse,andgiftsandhospitality.Usefulvideoswere
producedalongsidethese.Allemployees,includingtheBoard,and
contractorswerethenaskedtocompleteonlinetrainingoneachof
thepolicies.
Completionofthemodulesistrackedwithremindersbeingissued
toensurethattrainingiscompleted.Asnewpoliciesaredeveloped,
suchastheWhistleblowingpolicythatwaslaunchedinJanuary
2021,trainingisprovidedtoallemployees.
TheCompanyiscommittedtoinvestinginandrewardingits
workforce.Itoperatesashareincentiveplanschemeandprovides
regulartrainingopportunities.Inaddition,localrecognition
programmesweredevelopedtoalignwiththenewbehaviours,
andreplacethepreviousvalues-basedschemes.Ourteamsuse
theseprogrammestorecogniseoutstandingwork,effortsor
achievementsthatarealignedtothebehaviours.Movinginto2021,
thereareplanstodevelopourrecognitionschemesfurtherandon
aGroup-widebasis.
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Stock code: SHI www.sigplc.comGOVERNANCE Corporate Governance Report
BOARD LEADERSHIP AND COMPANY PURPOSE
I am looking forward to meeting many more
colleagues from across the business. My
initial impression is that there is a great
sense of pride about working for SIG and I
would like to see what we can do to improve
and build on that to make SIG a truly great
business.
Simon King,
Designated Non-Executive Director
for workforce engagement
Branch visits
AsanewNon-ExecutiveDirectorjoiningSIG,Ihadplannedtovisit
eachofourmajoroperatingcompaniesincludinganumberofthe
UKsites.However,wewerejustcomingoutofthefirstCovid-19
lockdownacrossEuropeand,therefore,IfocusedontheUKwhere
travelwaspermitted.
Thepurposeofthesevisitswastomeetmembersofthelocal
managementteamsandcolleaguesatalllevelsintheorganisation
andtohearfirst-handhowemployeeswerefeelingandtheirviews
onthenewstrategyforgrowthcenteredonexpertise,service
andproximitywithakeyemphasisoncustomers,suppliersand
employees.Thishelpedmelearnaboutouroperationsindetail
andtolistentotheopportunities,risksandchallengesthebusiness
facesinthecurrentenvironment.
InJuly,followingavisittotheSheffieldheadoffice,Ialsovisitedthe
SheffieldDistributionbranch.Imetwiththeteamthatincludeda
tourofthebuildingandtheyard.Itwasabundantlyclearthatthere
wasarealteamspiritaboutmakingsureeachoftheircolleagues
weresafeandhealthy.Anotherobservationwasthebreadthof
serviceandexperienceinthisbranch,therewerepeoplewith
30years’service,somerecentarrivalsfromcompetitorsand
newstartersintheirfirstjobs.Thiscreatedadynamicdiscussion
aboutourbusinessandthesector,withmanygreatideasfor
improvement.AvisitingmanagerfromLeicesterwasveryhelpful
inprovidingsomehistoricalcontextandstimulatingthediscussion
aboutwhatneededtobedonetobemoresuccessfulinthefuture.
Therewasasenseofconfidencethatamorelocal,customer-
centricstrategyprevailedthroughoutallmyothervisits.
InmysubsequentvisitstoStIves,EdmontonandManchester,
colleaguesweremorefocusedondiscussingcustomersandtheir
desiretowinthembackwithnew,improvedlevelsofcustomer
service.Again,Isensedariseinconfidenceinthestrategyandthe
energyPhilJohnswaspersonallybringingbacktothebusiness.I
learnedhowasignificantincreaseinvolumecouldbemanaged
bytheexistingteamandequipmentacrossthreeverydifferent
formats.ThechangeinleadershipoftheUKbusinesswashavinga
positiveimpact.
OnmyvisitstoValorPark,BarkingandAshVale,Iwasheartened
bythediscussionsanddesiretohavetherightbehavioursacross
thebusiness.ThisconfirmedthattheCompanywasmaking
goodprogressonensuringallemployeesunderstoodthenew
frameworkforbehavioursacrosstheGroup.
Theseteamswerealsopassionateaboutachievinggrowththrough
improvedcustomerservice.Theirdrivetogivebetterservicewith
therightstocklevelsforexample,againdemonstratedthedriveand
commitmentinthebusinesstolookaftercustomersandcolleagues.
Furthermore,Iwasgratefulfortheirideasandsuggestionsfor
improvingthebusiness,whichIwasabletorelaytomyBoard
colleagues.OnesuchideathatIcouldtaketotheBoardwasfor
asimpleintranet/platformforconnectivityandcommunication
betweenbranchesandcountries,whichwasbeingexploredbythe
CorporateAffairsteam.
Additionally,italsobecameapparentthatthereweredifferent
issuesfacingteamswhowerecustomerfacingworkinginbranches
andthosewhowereabletoworkfromhome.SIGhaslaunched
aWellbeingandMentalHealthpolicytoprovidesupportto
employeesandtoensurethattheyknowwheretheycangofor
help.
Workforce engagement
AfterjoiningtheSIGBoardinJuly2020,Iwasdelightedtobe
appointedastheNon-ExecutiveDirectorresponsibleforworkforce
engagementandthewhistleblowingchampionwitheffectfrom
1October2020.
AsidefromourobligationsaspartoftheCodeandpartofthe
newstrategyforgrowth,andgreaterfocusonreconnectingwith
colleaguesacrosstheGroup,theBoardWorkforceEngagement
programmeseekstoaugmenttheexistingemployeeengagement
activities,forexample,theEmployeeEngagementSurveylaunched
inSeptember2020,toprovidefurtherinsightsandprovideour
employeeswiththeopportunitytoofferopinions,feedbackand
suggestionsanddriveactionableimprovements.
KateAllumwasoriginallyappointedasthedesignatedNon-
ExecutiveDirectorforworkforceengagementinJanuary2020.
Duringthefirstquarterof2020,herintentionhadbeentovisitsites
intheUK,France,Germany,Poland,BeneluxandIreland.However,
duetotheCovid-19pandemicthesesessionswereunabletogo
aheadasplanned.
62
SIG plc Annual Report and Accounts for the year ended 31 December 2020 ItookovertherolefromKateand,withtheassistanceofthe
CompanySecretary,weheldvideoconferencingsessionsduring
OctoberandNovemberwithemployeesfromtheUK,Germany,
France,Benelux,Poland,IrelandandCorporateFunctions.
Acrosssectionofemployeeswereinvitedtoparticipateinthe
programme,representingalllevels,regionsandfunctionsto
supportourstrategicpriorityofreconnectingwithemployees.The
formatofthemeetingswasinformal,withdiscussiontakingplace
onthepositivesandnegativesfromaroundthebusinesscovering
thelastsixmonths,andthekeyprioritiesandopportunitiesfor
improvements.Whererequired,inordertoincreaseinclusivity,the
sessionsweretranslated.
Iwasdelightedwiththehugelypositiveresponsefromcolleagues
withmanyofthemexpressingtheirappreciationofachanceto
meetwithaBoardmemberandtheirsentimentofbeinglistened
toandvaluedbytheorganisation.
IreportedtotheBoardinNovemberthekeythemesraisedby
employeeswhichcanbesummarisedasfollows:
■ Employeesfeltthattheresponsetothepandemicwashandled
positively;
■ Teamworkandcollaborationhadimprovedandatbranchlevel
teamsweresupportingeachother;
■ Themessagingaroundtherefocusoncustomerswaspositive;
and
■ Communicationoverthelastsixmonthshadimproved
particularlyonhealthandsafety.
Someareasforimprovementwerealsohighlightedasfollows:
Investment by CD&R
Atthedateofthisreport,CD&Rholdjustover28%of
SIGsharesandweweredelightedtowelcomethemto
theGroupinJuly.Asummaryofthekeytermsofthe
RelationshipAgreementissetoutbelowincludingthe
involvementoftheCD&RnominatedDirectorsinour
business.
InvolvementgovernedbytheRelationshipAgreement:
■ CD&Rhavetherighttonominatetwonon-independent
Non-ExecutiveDirectors(“NED”)andon10July2020we
welcomedBrunoDeschampsandChristianRochatto
theBoard;
■ BrunoservesontheRemunerationCommittee,while
ChristianservesontheNominationsCommittee.An
observerfromCD&RattendsAuditCommitteemeetings;
■ theAgreementregulatestheappointmentandremoval
■ Employeesrequestedmorelearninganddevelopment
ofsuchnomineesorobserver;and
opportunities;
■ Increasedsupportonwellbeingandmentalhealth;
■ Abetterinductionframeworkfornewhires;and
■ Morefocusonimprovingthedeliveryandcustomerexperience.
InDecember,Iprovidedthekeyprioritiesandopportunitiesfor
improvementtoensuretheBoardreflectsthefeedbackinits
decision-makingprocess.Ihavealsotakentheopportunityto
providehighlevelfeedbacktoeachoftheoperatingcompany
ManagingDirectorstoenablethemtomakeadifferenceonamore
locallevel.Ofcourse,anyplansforengagementwillonlytrulywork
iftherearefollowedupwithactionsandoutcomes.
IampleasedtosaythatworkhasstartedonaGroupinduction
frameworktoensurenewemployeesareprovidedwiththe
relevanttoolsandinformationtosupportthembeingableto
beeffectiveintheirrolesasquicklyaspossible.Thisinduction
frameworkwillcontinuetobeenhancedandrefinedfollowing
feedbackfromrecenthires.Wellbeinghasalsobeenhighlighted
bycolleaguesasincreasinglyimportantandaGroup-widepolicy
waslaunchedinOctober2020.Theseactions,togetherwithall
theotherworkonthecultureandnewstrategy,willmakeahuge
differencetomakingSIGareallygreatbusiness.
Reconnectingwithouremployeesisanongoingstrategicpriority
andengagementactionsfromeachprogrammewillcontinuetobe
rolledoutthroughout2021andbeyond.
■ whereanyconflictsarise(actualorpotential)between
theGroupandthenomineedirectororobserver,the
conflictmustbedeclaredandthenomineedirector/
observermayalsobepreventedfromvotingonsuch
matter(s).
ThekeymechanismfortheCD&RDirectorstoprovide
insightandexperienceisthroughmonthlyOperating
ReviewmeetingsattendedbytheChairman,CD&RNEDs
andtheAuditobserver,CEO,andCFO.Thesemeetings
areveryusefulandenabledeepdivesintotheoperations
oftheGroup’smajorsubsidiaries.OperatingCompany
management are invited to attend and present progress
theyaremakingagainsttheirstrategy,budgetsandtargets.
BrunoandChristianalsohavebeenideallyplacedasa
furthersoundingboardandconstructivechallengetothe
CEOandExecutiveteam.
Howitworksinpractice:
■ PapersfortheOperatingReviewmeetingsare
circulatedtoallBoardmembersandmattersarising
fromthesemeetingsaresubsequentlyreportedtothe
Board;
■ CD&RmakeapositivecontributiontotheBoard.They
understandandaresensitivetotheresponsibilitiesof
theBoardandasDirectorstoallshareholdersandto
complywithPLCCorporateGovernancerules;and
■ CD&RalsoownWolseley.WhilstBrunoactsas
ChairmanofWolseleythiscompanycompetesina
differentmarkettoSIGandnoareasofconflicthave
arisentodate.
Overall,theBoardbelievesthatCD&Rhaveprovideda
veryvaluablecontributiontodatetotheCompanyfor
thebenefitofallshareholders.Seepage85forfurther
informationontheRelationshipAgreement.
63
Stock code: SHI www.sigplc.comGOVERNANCE Corporate Governance Report
SECTION 172 STATEMENT
Section 172 and Stakeholder
Engagement
TheDirectorsconsiderthatthey
haveperformedtheirfiduciaryduty,
asstipulatedunderSection172of
theCompaniesAct2006,ingood
faith to promote the success of the
Companyforthebenefitofitsmembers
asawhole.Theyhavetakeninto
consideration,amongstothermatters:
■ Thelikelyconsequencesofany
decisioninthelongterm;
■ TheinterestsoftheCompany’s
employees;
■ Theneedtofosterrelationshipswith
suppliers,customersandothers;
■ ThedesirabilityoftheCompany
maintaining a reputation for high
standardsofbusinessconduct;and
■ Theneedtoactfairlybetween
membersoftheCompany.
How the Directors have applied
their Section 172 duties
TheBoardhasconsidereditskey
stakeholdersandthemethodsof
engagement with each of those
stakeholders,bothatBoardleveland
acrossthebusiness.Itreceivesregular
reportsfrommanagementtoenableit
tomonitorthequalityandeffectiveness
ofthearrangementsforstakeholder
engagement.Specificexamplesof
thewayinwhichtheDirectorshave
performedtheirfiduciarydutyunder
Section172areprovidedinrelationto
thepreparationsforthecapitalraise
aswellastheBoard’sactionsand
decisionsduringCovid-19.
TheBoardhasapprovedatraining
programmetoensurethat,inpreparing
proposalsforBoardconsideration,
managersareawareoftheSection
172requirementsinDirectordecision
making,ensuringthatDirectorswill
havetheassurancethatallrelevant
stakeholderinterestsandotherrelevant
matters,arebeingsetoutfortheir
consideration.Asindicatedonpage76,
theBoardalsoreceivedtrainingfrom
AllenandOveryandtheCompany’s
Brokers.
Inaddition,aspartoftheirdecision-
makingprocess,theBoardalsocarefully
considertheprincipalrisksofthe
Companyashighlightedonpages34
and35.
Shareholders
Why we engage
TheDirectorsconsiderthat
Shareholders’viewsareimportantas
partoftheirdecision-makingprocess
andwelcomediscussionswiththem,
particularlyinrelationtostrategy,
remunerationandgovernance.
Engagement activities
Annualandinterimreports,
announcements,AGMandgeneral
meetings,roadshows,analyst
presentations,individualmeetingswith
Directors.
Issues raised
■ SupportforstrategyofUK
transformation and return to
profitablegrowth
■ Encouragementforcontinuingprofit
improvement
■ Concernoverweakermarket
conditions
■ Concernoverdeteriorationinsales,
especiallyintheUK
■ ProposalfornewRestrictedShare
PlanandExecutiveDirectors’
remuneration
Actions taken subsequently
■ Feedbackreflectedinemerging
strategy,focusingoncore
operationsanddevelopinginvestor
communications
■ Listenedtofeedbackfrom
Shareholdersregardingtheone-off
cashpaymentmadetotheCEO
andtheRestrictedSharePlan,and
workedwiththemtofindasolution
acceptabletoallpartiesandresulted
inoverwhelmingShareholder
approvalofthenewRemuneration
policyinNovember2020
■ Successfulcapitalraiseundertaken
toenabledeliveryoftheGroup’s
objectives
64
SIG plc Annual Report and Accounts for the year ended 31 December 2020
Colleagues
Why we engage
TheDirectorsconsiderthatacommitment
culture,underpinnedbydefinedbehaviours
withaclearvisionandpurposeforthefuture,
isvitalforthefuturegrowthofthebusiness,
andthatengagementwiththeworkforce
iskeytosuccessofthebusiness.Thisis
reflectedacrossthestrategicpillarswith
colleaguesencouragedtodemonstratethe
SIG’sbehaviours“Beboldinwhatyoudo”,
“Beflexibleandagile”,and“Makeapositive
difference”.
Engagement activities
Whilstoriginallyplannedtolaunchinearly
2020,theBoardWorkforceEngagement
programmewasdelayedduetotheCovid-19
restrictions.However,goodprogresswas
madefromSeptember2020withthelaunch
oftheEmployeeEngagementSurveyandthe
BoardWorkforceEngagementprogramme
recommencedinOctober2020.Across
sectionofemployeesacrosstheGroupwere
invitedtoparticipateintheprogramme,
representingalllevels,regionsandfunctions
togetherwiththeBoard-designatedNEDto
meetanddiscussinformallythepositives
andnegativesfromaroundthebusiness,
coveringtheprevioussixmonthsto
identifykeyprioritiesandopportunitiesfor
improvement.Inadditiontothis,therewere
alsocommunicationcascades,SLTbroadcasts
foronwardtransmissiontoemployees,Group-
widebroadcastsbytheCEOandinternal
newsletters.
Issues raised
■ PeoplefeltthattheCompany’sresponse
totheCovid-19outbreakhad,ingeneral,
beenverygood,particularlyinbeing
flexiblebothinservingcustomersandthe
flexibilityofferedtoemployee
■ Peoplewerekeentorolloutthe
behaviours/cultureprogramme
■ Peopleappreciatedthenewemployee
broadcastsasagooduseoftechnology
andagoodwaytoshareinformation
■ LearningandDevelopmentneedsmore
investment,particularlyatbranchlevel,as
some staff had not received training for
severalyears
■ Bettersalesandproducttrainingwas
neededsothatcustomerscouldbe
offeredthebestservice
■ Therewasaneedtoprioritisewhatismost
importantandfocusondeliveringthose
projectswell
Actions taken subsequently
■ Employeesurveylaunchedacrossthe
Group to demonstrate commitment to
listeningtoemployees
■ NewinternalbrandingtobuildSIGteam
cultureandalignmenttonewstrategy
■ Establishmentandcommunicationofa
newpurpose,cultureandvisionforthe
Company
■ Investmentsmadeincompliancetraining
andstaffdevelopment,especiallyat
branchlevel
■ Investmentsinhealthandsafetyapproved
■ NewWellbeingandMentalHealthpolicy
launched
■ ProvisionofaglobalEmployeeAssistance
Programme
■ UpdatedWhistleblowingpolicylaunched
includinganewsystemimplementedin
January2021
■ InvestmentinsitesinUKandEurope
■ Communications improved with
comprehensiveemployeeengagement
planandgreaterDirectorvisibilityusing
videocallsduringthepandemicto
continueengagementwithbranchstaff
■ Induction process improved and new
frameworkintroduced
■ Restartedthecommitmentculturerollout
followingthenewleadershipappointments
■ AppointedSimonKingasdesignated
Non-ExecutiveDirectorforworkforce
engagementandwhistleblowingchampion
Employee engagement activities by operating
company are set out below:
UKDistribution
UKExteriors
Ireland
Corporate
Benelux
Germany
France
Poland
Buildingsolutions
Newsletters, bulletins
and personal briefings
Annual roadshows, town halls and
conferences
People - annual and quartery performance
appraisals, vip awards, employee focus
groups and charity days
Newsletters, bulletins
and personal briefings
Annual roadshows, town halls and
conferences
People - annual and quartery performance
appraisals, vip awards, employee focus
groups and charity days
Newsletters, bulletins
and personal briefings
Annual roadshows, town halls and
conferences
People - annual and quartery performance
appraisals, vip awards, employee focus
groups and charity days
Newsletters, bulletins
and personal briefings
Annual roadshows, town halls and
conferences
People - annual and quartery performance
appraisals, vip awards, employee focus
groups and charity days
Newsletters, bulletins
and personal briefings
Annual roadshows, town halls and
conferences
People - annual and quartery performance
appraisals, vip awards, employee focus
groups and charity days
Newsletters, bulletins
and personal briefings
Annual roadshows, town halls and
conferences
People - annual and quartery performance
appraisals, vip awards, employee focus
groups and charity days
Newsletters, bulletins
and personal briefings
Annual roadshows, town halls and
conferences
People - annual and quartery performance
appraisals, vip awards, employee focus
groups and charity days
Newsletters, bulletins
and personal briefings
Annual roadshows, town halls and
conferences
People - annual and quartery performance
appraisals, vip awards, employee focus
groups and charity days
Newsletters, bulletins
and personal briefings
Annual roadshows, town halls and
conferences
People - annual and quartery performance
appraisals, vip awards, employee focus
groups and charity days
Key:
Newsletters, bulletins
and personal briefings
Annual roadshows, town halls and
conferences
People - annual and quartery performance
appraisals, vip awards, employee focus
groups and charity days
Newsletters, bulletins and
personal briefings
Social engagements
Workers council meetings
Branch manager meetings
Cross functional forums
Sales communication
Annual roadshows, town
halls and conferences
People – annual and
quarterly performance
appraisals, VIP award,
employee focus groups and
charity days
65
Stock code: SHI www.sigplc.comGOVERNANCE
Corporate Governance Report
SECTION 172 STATEMENT
Lenders
Why we engage
TheDirectorsrecognisethevalueofworking
inpartnershipwithourLenderstoensure
thatwehavethenecessaryfinancialcapital
andresilience.
Engagement activities
Regulartradingupdates,meetingswiththe
CFOandGroupTreasurer,andonoccasions
theCEO.
Issues raised
■ Supportforstrategyoftransformation
andreturntoprofitablegrowth
■ Encouragementforcontinuingprofit
improvement
■ Concernoverweakermarketconditions
asaresultofCovid-19
■ Concernoverdeteriorationinsales,
especiallyintheUK
■ Concernoverliquidityposition,cashand
covenant headroom
■ Appetitefordebtreductionand
reductionrevolvingcreditfacility
commitments
Actions taken subsequently
■ Feedbackreflectedinemergingstrategy
anddevelopinglendercommunications
■ Engagedequityadvisorsandraised
capitalviaaplacingandopenoffer
■ Reductioninrevolvingcreditfacility
commitmentsandrepaymentsofprivate
placementnotes
■ Engageddebtadvisorsandrenegotiated
andrestructureddebtfacilitiesincluding
extendedmaturitiesandrelaxationof
covenants
■ Enhancedcashflowcovenantheadroom
forecasting,monitoringandreporting
Customers
Why we engage
Theprofitabilityofthebusinessis
underpinnedbyprovidingeffective
partnershipswithcustomers,so
understandingtheirneedsandrequirements
isextremelyimportant.Customersare
recognisedwithinthestrategicpillarsand,
asaresult,theGroup’ssalescapacityand
productivityisbeingstrengthenedtoprovide
thebestcustomerservice.
Engagement activities
Duringthepandemic,theGrouphastaken
caretocommunicatethesafetymeasures
implementedtokeepcustomerssafe.SIG
Polandhaslaunchedacomprehensive
SIGupmarketingprogrammerewarding
customersforpurchasesandloyalty.
CustomerserviceteamsinIrelandcontact
topcustomersonaregularbasistocheck
servicelevelsandcontactdormantaccounts
quarterly.ManyactivitiesacrossFrance,
BeneluxandGermanyhavebeenpaused
duetothecurrentrestrictions,suchas
branchtrainingcoursesforcustomers
onnewproducts,in-branchsocialevents.
However,regularcontacthasbeen
maintainedviatelephoneandvideocalls
wherepossible.TheGroupalsocarriedout
acustomersurveyseepage14.
Issues raised
■ Fastandeasypurchasingprocesses,
makingiteasyforcustomerstoplace
orders
■ Makeiteasiertoobtainadvicebyphone
and ensure staff on site are trained to
advisecustomersappropriately
■ Improvedeliveryofproductstoavoid
delays
Suppliers
Why we engage
TheDirectorsunderstandthatSIGadds
valuebyoperatingasthesupplychain
partnerofchoice.ValuablePartnerships
isoneofthekeystrategicpillarsforthe
Grouptopartnercloselywithsuppliersto
understandourjointopportunitiesandto
createwin-winstrategies.
Engagement activities
Strategymeetingswereheldwiththetop20
suppliersintheUK.Weareintheprocessof
settingupanInfrastructureAlliance,where50
suppliershavealreadysignedup,andthefirst
conferencewasheldvirtually.Wehavealso
strengthenedtheCategoryteamwithindustry
expertiseandrelationships.Therehasbeenactive
participationinonlinesuppliereventsandtraining
coursesinIrelandandPoland.InGermanyand
Benelux,connectionswithallmajorsuppliers
havebeenre-establishedatthetopleveland
dedicatedcategorymanagersareresponsible
formaintainingrelationships.InFrance,regular
meetingshavebeensetupandtherearehopes
thatthebi-annualsaleseventwillbeabletotake
placeoncerestrictionshavebeenlifted.
Issues raised
■ Lackofseniormanagementpersonal
contactwithsuppliers
■ Lookingformoresupportwhen
introducing new products
■ Needtoimprovelevelsoftrustand
willingnesstoco-operate
Actions taken subsequently
■ Follow-upmeetingsforsenior
managementscheduledtomaintain
relationships
■ Rangeandavailabilityofproduct;requires
■ Reconnectingwithallmajorsuppliers
andactiveparticipation,wherepossible,
tosuppliereventstobuildrelationships
■ Ongoingcontactbetweensuppliersand
SIGsharingprojectinformation
■ DevelopmentofEDIsolutiontoreduce
administrativecostsforbothparties
■ Preparationofregionalplanstogrow
productofferingandavailability
■ Introduction of new products
focuswithalargerstockofmaterials
■ Sensethatloyaltyisvaluedand
rewarded;wanttofeelappreciated
Actions taken subsequently
■ Introducedonlinepurchasing,dedicated
pointsofcontact,customerspecific
portalsforpricing
■ Producttraining,coachingbymanagers,
improved recruitment and retention of
knowledgeablestafftomakebranchstaff
moreresponsivetokeyrelationships
■ Measured“ontime,infull”differentlyto
increaseproductivityandincreaseuse
ofthedeliveryapptokeepcustomers
betterinformed
■ Reviewingbranchstocklevelsandgiving
branchdirectorsmoreinput
■ Moresocialeventsarebeingplannedat
branchesforcustomerspost-Covid
■ Improvementsbeingmadeto
recruitment and training processes
■ AcquisitionofSMRoofingSuppliesLtdto
extendSIG’sgeographicalreach
66
SIG plc Annual Report and Accounts for the year ended 31 December 2020
Pension scheme members
and trustees
Why we engage
TheDirectorsunderstandtheimportance
ofkeepingpensionschemetrustees
andmembersadvisedandconsultedon
significantdevelopments.
Engagement activities
Newsletter,circulationofannualaccounts,
anddialoguebetweentheCompanyandthe
ChairofthePensionTrustees.
Issues raised
■ Dialoguewelcomed.Memberskeen
to maintain ongoing communication
aroundimplicationsforCompany’s
covenantoftransformationalchange
andbusinessdisposalsinparticularthe
useofAirHandlingproceeds
■ Concernovervalueofsecurityheldby
pensionschemeviatheasset-backed
arrangementasaresultofCovid-19and
temporaryclosureofbranchesintheUK
Actions taken subsequently
■ Maintainingregularandmorefrequent
dialogueduringCovid-19
■ Consultedontemporaryamendments
totheterms&conditionsintheasset-
backedarrangement(thesewerenot
required)
Local community
Why we engage
TheDirectorsappreciatethatclose
relationshipswithcommunitieswherethe
businessoperateswillfosterthelong-term
successofthebusinessandrecognise
that the actions of the Group can have a
beneficialimpactonlocalcommunities.
Engagement activities
Therehavebeenvariouscollaborations
acrosstheGroupwithlocalschooland
sportsclubprojects,suchastraining
andworkshopsforyoungpeopleduring
Covid-19lockdown,trafficawareness
initiatives,assistanceforcharitiessupporting
theelderlyandotherlocalcommunity
charityevents.
Issues raised
■ Engagementhasbeendifficultduring
lockdown
■ Positivefeedbackbutacknowledgement
thatneedtodomoreasabusiness
■ Amoresystematicapproachwouldbe
helpfulacrosstheGroup
■ Acknowledgedthatrealhelphadbeen
providedforyoungpeopleduring
difficulttimes
■ Appreciationforsupportgiven
Actions taken subsequently
■ ESGstrategydevelopedfor
implementationduring2021
■ PlantosetupaUKCharityCommittee
■ Continuing safe driving training
■ Continuingcommunityfirstaidtraining
■ Developmentandwellbeingactivitiesfor
localcommunityandemployees’families
Environment
Why we engage
TheDirectorsappreciatethatenvironmental
mattersareincreasinglyimportanttoall
stakeholdersandlinkswiththeGroup’s
strategicpillar“ResponsibleActionswhere
ourpeoplefeelsafe,proudandvalued
andweoperatesustainablytobenefit
communitiesandtheenvironment”.
Engagement activities
2020sawthestartofareviewofthe
environmentalimpactoftheGroupaspart
ofawiderESGreviewandthiswillcontinue
into2021.
Issues raised
■ Carbonemissions
■ Sustainabilityofmaterials
■ Recyclingofmaterials
Actions taken subsequently
■ ESGstrategywasbeingdevelopedfor
implementationduring2021
■ Developingafleetdecarbonisationplan
with operating companies
■ Developingcleanenergysupplymethods
■ Developingend-to-endwaste
management processes
■ DevelopingaGreenSupplyChain
Methodology
67
Stock code: SHI www.sigplc.comGOVERNANCE
Corporate Governance Report
SECTION 172 STATEMENT
Government
Why we engage
Regularengagementwithgovernmentand
regulatorybodiesisimportanttoensure
thatthestrategyremainsappropriate
andthattheCompanyisoperating
appropriately.
Engagement activities
EngagementwithDVLA(roadsafety),
lobbyingasamemberoftheConsumer
ProtectionAssociation(CPA),input
intoinsulationandqualitystandards.
ApplicationtoMinistryofFinanceinPoland
forparticipationinapilotprogrammeof
monitoring;thisinvolvedseveralmeetings
withMinistryrepresentativesviavideocalls
andonewiththeMinisterhimself.Final
participationinthiswillmakeitpossibleto
helpinfluencetheshapingoftaxlawand
reducesanctions/penaltiesforerrorsintax
computations/returns.Occasionalcontact
withFRCandFCAinrelationtoregulatory
matters.
Issues raised
■ Companyperformancenotconsistent
■ Valuepropositionnotalwaysunderstood
Actions taken subsequently
■ Routestomarketimproved
■ Ongoingdialogue
68
SIG plc Annual Report and Accounts for the year ended 31 December 2020
Examples of how the Directors have applied their Section 172 duties
Capital Raise
InconsideringtheundertakingofaCapitalRaise,theDirectorshadregardtotheirdutiesunderSection172oftheAct.They
consideredtheinterestsofanumberofdifferentstakeholders,maintainingtheCompany’sreputationforhighstandardsofbusiness
conduct,relevantrisksandtodelivertheCompany’sobjectives.Thesebeingto(a)provideongoingsupporttocustomersand
suppliersandtopreserveemploymentinaviablebusiness;(b)emergefromtheCovid-19crisiswiththefinancialresourcesrequired
todeliveritsnewstrategy,recapturemarketshareandstrengthentheGroup’spositionasamarketleaderacrossitsoperating
businesses;(c)ensureaccesstocapitalthatwillprovidetheGroupwithgreatercertainty,flexibilityandbalancesheetstrengthto
pursuefuturegrowthopportunities;(d)supportthedeleveragingoftheGroup’sbalancesheet,inlinewiththeBoard’smedium-term
targetofcovenantleverageofbelow1.5x;and(e)avoidanEquityFailureEvent–EventofDefaultundertheAmendedDebtFacilities
Agreements.
Theyconsideredtheinterestsofdifferentstakeholdersinthefollowingmanner:
Shareholders
Developmentofalonger-termbusinesswiththenew
strategyforgrowth.Therestructuringofthedebtfacilities
togetherwiththesuccessfulcapitalraiseprovidesafirm
andstablefoundationforthedeliveryofthestrategy.
Shareholderswereconsultedandfeedbackconsidered
bytheBoard.
Financial Advisors and Brokers
TheBoardworkedcloselywiththeCompany’sFinancial
AdvisorsandBrokerstoensurethatthecapitalraisewas
undertakeninamannerthatwouldgivethebestresults
fortheGroup.Oversawandgaveconsiderationtothe
Prospectusthrougheverystepofitsproduction.
Colleagues
Communicationofthestrategythatthecapitalraised
willallowandthelong-termbenefitsforthesuccessof
theGroup.Buildingsustainablewinningsalesteamsthat
havethenecessaryautonomy,incentivesandsupportto
succeed.Revisedpeoplestrategytoencourageaculture
ofentrepreneurship,commitmentandempowerment
Customers
Thenewstrategywillhavearenewedfocuson
strengtheningcustomerrelationships.Maintaining
andimprovinggeographicalcoverageforcustomers.
Continuetoprovidecustomerswithasystemof
products,alongsidedeeptechnicalexpertisethatcanbe
leveragedtodeliverinnovativesolutionstocustomers.
Re-establishtheGroup’sspecialistfocusandexpertise
Suppliers
ReassuranceforsuppliersthattheGroupremains
creditworthy.Strengtheningpartnershipswithsuppliers.
Beingaprimarycustomertokeysuppliersthroughscale,
coverageandintimateknowledgeoftheirbusinessand
ourmarkets
Pension trustees
Engagedandkeptinformedofthereasonsforthecapital
raiseandtheaimsofthenewstrategy.
Risks and mitigation
TherewasariskthatthesignificantinvestmentproposedfromCD&RwouldberejectedbyotherShareholders.Stepsweretaken,
withtheassistanceoftheBrokers,toensurethatthisstepwasproperlyexplainedsothatallShareholdersandstakeholders
remainedwellinformedandreassured.Furthermore,theCompanyprovideddetailedinformationontherisksfactorsassetoutin
parttwooftheprospectusonpages15to37.
69
Stock code: SHI www.sigplc.comGOVERNANCE Corporate Governance Report
SECTION 172 STATEMENT
Covid-19
DuringtheCovid-19pandemic,theBoardmetmorefrequently
(twiceweekly)duringthefirstlockdownandconsidered
theneedsofallstakeholdersasthesituationunfolded.
Managementwasinitiallymeetingonadailybasis,movingto
bi-weeklythenweekly;feedbackonthesemeetingswasbeing
providedtotheBoardonanongoingbasis.TheBoardregularly
reviewedthepositionkeepingattheforefrontoftheirmind
theneedtopreservethesafetyofemployees,suppliersand
customers.Inmakinganydecisions,theBoardalsoconsidered
maintainingtheCompany’sreputationforhighstandardsof
businessconductaswellasitssuccessinthelongerterm.The
Grouphasbeenabletotradesafely,workingcloselyandflexibly
withemployees,customersandsupplierstoadapttonew
Covid-19norms.
Stakeholders and matters considered during
the decision-making process:
■ Healthandwellbeingofcolleagues,customersand
suppliers
■ Furloughedc.2,070colleaguesbutcommittedtomaintaina
proportionofpay.Colleaguestookapayreductionofupto
20%andtheBoardagreedtotakeupto50%from1April
2020forthreemonthsuntil30June2020.Inmid-Maywhen
colleaguesreturnedtoworkonfullpaytheCEOandCFO
werereinstatedto80%from1April2020.
■ IntheUK,helplineshavebeensetupsocolleaguescanget
freeadviceandsupportonmentalhealth,financialandlegal
issues.IntroducedanewWellbeingandMentalHealthpolicy
andassociatedtraining.
■ EngagementwithsomeoftheCompany’smajor
ShareholdersbytheChairmanontheimpactofthecrisis
andthestepsithastakenasaresult.Announcedthat
theCompanywouldnotbedeclaringafinaldividendfor
2019,nortoconsideranyreturntoShareholdersfromthe
proceedsoftherecentAirHandlingdisposal.
■ Engagementwithcustomersandsuppliersbyoperating
companiestodiscussthemarketenvironment,theirneeds/
concernsandstockdemandandavailability.
■ Governmentguidanceandsupportavailable
■ TheBoardreceivedupdatesfromitsfinancialadvisors,
■ Shareholders
■ Banksandlenders
■ Thelocalcommunity
Summary of actions taken as a result of Covid-19
are as follows:
■ InstigatedhomeworkingandenhancedtheITcapabilityby
purchasingadditionallaptopsandVPNlicencestofacilitateas
manypeopleaspossibletoworkfromhome.Additionalfraud
measureswereputinplacetofurtherprotectSIGsystems
fromoutsidepartiesgainingaccess.Movedallmeetingsto
videocalls.
■ Enforcedandadheredtothegovernment’sstricthygiene,
socialdistancingandcleaningstandardsinallcountrieswhere
branches/sitesremainedopen.
■ TemporarilyclosedthemajorityofUKandIrelandoperations
butremainedopentoservicecriticalandemergencyprojects
only,suchasfortheNHS,energyandfoodsectors,and
toensurethattherewasanorderlyclosureprogramme.
Reopenedthemajorityofsitesbymid-May.
lawyersandbrokers.
■ GroupRiskdesignedandrolledoutacrisisresponse
checklisttoeachoperatingcompany.Thechecklistcomprises
asetofshort,mediumandlong-termriskswithactivitiesfor
considerationbymanagement.Eachoperatingcompany
hasbeenabletousethechecklisttoensureithascoverage
ofthefullerspectrumofrisksandtopromptconsideration
ofadditionalactivity,especiallyinrelationtochangesin
responsebygovernments.
■ TheBoardalsoregularlymonitoredtheliquidityoftheGroup
andputinplacestrengthenedcashcontrolmeasures.The
Grouphasbeenabletopreserveitsliquiditypositionand
hasremainedindialoguewithitslendinggroupinorderto
releaseadditionalliquidityasrequired.
■ SIGalsomadeuseoftaxrelief,aswellasaccessingother
availablegovernmentmeasures.
■ FormoreinformationonCovid-19risksandmitigating
actionsseepage33.
70
SIG plc Annual Report and Accounts for the year ended 31 December 2020 TheBoardwelcomedmajoritysupportattheGeneralMeeting
inJuly2020forresolution5(the“Resolution”)butacknowledged
thatasignificantnumberofvotes(44.07%)werecastagainstit.
Resolution5wasseekingapprovalofthepaymentofaone-off
bonustotheCEO.FollowingtheGeneralMeetinginJuly,andat
thesametimeasconsultingonournewDirectors’Remuneration
Policy,theRemunerationCommittee(“theCommittee”)consulted
withourlargestinstitutionalShareholdersinordertounderstand
thereasonsbehindthevotingresult.Shareholdersindicatedthat
themainreasonsforthevotesagainsttheResolutionwere:(i)a
policyofopposingone-offawards;and(ii)questionsaroundthe
timingofthepaymentandwhetheritwouldhavebeenmore
prudenttowaituntiltheendoftheyeartodeterminewhetherthe
paymentwaswarranted.Inaddition,someShareholdersexpressed
disappointmentthattheCommitteehadstillmadethepayment
giventhenumberofvotesagainsttheResolutionandsaidthey
wouldhaveexpectedtheCompanytoreconsideritsposition.The
Committeelistenedcloselytothefeedbackandconsideredthe
concernsraised.
Asaresult,theCommitteeincorporatedanumberofchanges
intothenewDirectors’RemunerationPolicy,thatwastabledat
theCompany’smostrecentGeneralMeetinginNovember2020,
andfollowingfurtherconsultationwiththelargestinstitutional
Shareholders,somefurtherchangesweremadetoreflect
shareholderviewsandthenewDirectors’RemunerationPolicywas
approvedbyamajorityof92.63%ofShareholdersvotingandthis
isnowinplace.ThisstatementinaccordancewithProvisionfourof
theCodewaspublishedontheCompany’swebsiteon9December
2020.
TheAGMnoticeofmeetingissenttoShareholdersatleast21
daysbeforethemeeting.TheCompanyprovidesafacilityfor
Shareholderstovoteelectronicallyandtheformofproxyprovides
Shareholderswiththeoptionofwithholdingtheirvoteona
resolutioniftheysowish.AttheAGMinMay2021Shareholderswill
beaskedtovoteonapoll,ratherthanashowofhands,following
bestpractice.Thisalsoallowsthemeetingtobeheldvirtually,
inlinewiththeCompany’sArticles,shouldCovid-19lockdown
restrictionsstillbeinplace,withoutanysignificantalterationin
votingprocedure.TheCompanySecretaryensuresthatvotesare
properlyreceivedandrecorded.Detailsoftheproxieslodgedonall
resolutionsandofallabstentionsarepublishedontheCompany’s
websiteimmediatelyaftertheAGM.
TheCompanyrecognisestheimportanceofcommunicatingwith
itsShareholders,includingitsemployeeShareholders,toensure
thatitsstrategyandperformanceisunderstood.Thisisachieved
principallythroughtheAnnualReportandAccountsandtheAGM,
whichallDirectorsattend.
TheCEOandCFOareprimarilyresponsiblefordirectinvestor
relations.TheBoardiskeptinformedofinvestors’viewsthrough
distributionandregulardiscussionofanalysts’andbrokers’
briefingsandasummaryofinvestoropinionfeedback.Inaddition,
feedbackfrommajorShareholdersisreportedtotheBoardby
theChairmanandtheCFOanddiscussedatitsmeetings.Formal
presentationsaremadetoinstitutionalShareholdersfollowingthe
announcementoftheCompany’sannualandinterimresults.
FollowingtheCompany’stradingupdateinSeptember2020,when
theGroupreportedlowerlikeforlikesalesonprioryearandaloss
beforetax,bothwereimpactedbyCovid-19.Netdebtwasdown
havingbeenhelpedbythesaleoftheAirHandlingdivisionatthe
endofthepreviousyear.Anewleadershipteamwasappointed
andarestructuringoftheGroup’sfinancingfacilitiesandcapital
raisehadsuccessfullyconcludedinJuly(seepage69formore
details)andincludedasignificantequityinvestmentfromCD&R.
Thesubstantialliquidityheadroomprovidedsecurityagainst
ongoingmarketuncertaintyandconfidencetoinvestinthenew
growthstrategy.TheCEOandCFOupdatedmajorShareholderson
thesematters,aswellasprovidinganupdateonthebranchand
customer-centricrestructuringintheUKwhichwereprogressing
toplan.Inaddition,GermanyandBeneluxwererefocusingundera
newcombinedmanagementteam.TheCEOandCFOalsoupdated
majorShareholdersfollowingtheTradingUpdateinJanuary2021.
TheChairmanbelievesinregularandtransparentcommunication
withShareholdersandmakeshimselfavailableasrequired
duringtheyear.TheChairmanhasheldnumerousdiscussions
withSIG’slargeinstitutionalShareholdersduringtheyear.His
meetingswithShareholdershaveenabledhimtounderstandtheir
viewsongovernanceandperformanceagainstthestrategyof
thebusinessaswellasrelayingthedirectionandstrategyofthe
business,particularlyintheperiodleadinguptotherefinancing
oftheCompany.Contactisalsomaintained,whereappropriate,
withShareholderstodiscussoverallremunerationplansand
policies.TheChairmanandtheSeniorIndependentDirector
areavailabletodiscussgovernanceandstrategywithmajor
Shareholdersifrequested,andbothareavailableforcontactwith
individualShareholders,shouldanyspecificareasofconcernor
enquiryberaised.TheChairoftheAuditCommitteeandtheChair
oftheRemunerationCommitteearealsoavailableforcontact
withShareholdersshouldtherebeanymattersraisedwhichare
relevanttotheirareaofresponsibilityandbothareavailableto
answerquestionsatourAGM.
Throughouttheyear,theCompanyrespondstocorrespondence
receivedfromShareholdersonawiderangeofissuesandalso
participatesinanumberofsurveysandquestionnairessubmitted
byavarietyofinvestorresearchbodies.WhilstNon-Executive
DirectorsmakethemselvesavailabletomeettheCompany’s
Shareholders,nosuchmeetingshavebeenrequestedduring
theyear.Additionally,theyregularlyreviewthepresentationsof
theannualandinterimresults.TheChairmanalsoensuresthat
theBoardasawholehasaclearunderstandingoftheviewsof
ShareholdersandaregularreportisprovidedbytheCFOon
investorrelationsateachBoardmeeting.
71
Stock code: SHI www.sigplc.comGOVERNANCE Corporate Governance Report
DIVISION OF RESPONSIBILITIES
Board and Committees
TheBoardhasdelegatedcertainresponsibilitiestoitsprincipalCommittees.EachoftheCommitteesoperatesunderwrittentermsof
reference,whichareconsistentwithcurrentbestpractice.ThetermsofreferenceofeachoftheCommitteeswerereviewedandupdated
bytheBoardduringtheyearandcanbefoundontheCompany’swebsite(www.sigplc.com).TheBoardalsoappointsCommitteesto
approvespecificprocessesasdeemednecessary.Forexample,duringtheyear,BoardCommitteeswereestablishedtoapprovethe
preliminaryandinterimresultsannouncements,thefirmplacingandopenoffer,debtrefinancingandacquisitions.
The Board
■ Promotesthelong-termsustainablesuccessofthe
Companyanditssubsidiaries,generatingvaluefor
Shareholdersandcontributingtowidersociety.
■ EstablishestheCompany’spurpose,visionandstrategy
andsatisfyingitselfthattheseanditsculturearealigned.
■ Assessesandmonitorscultureandbehaviours.
■ EnsuresthatthematterssetoutinSection172ofthe
CompaniesAct2006areconsideredinBoarddiscussions
anddecisionmaking.
■ EnsuresthatallDirectorsactwithintegrity,leadby
exampleandpromotethedesiredculture.
■ Ensuresthatthenecessaryresourcesareinplaceforthe
Companytomeetitsobjectivesandassessesthebasison
whichtheCompanygeneratesandpreservesvalueover
thelongterm.
■ Reviewswhistleblowingarrangements,ensuringthat
arrangementsareinplaceforproportionateand
independentinvestigationandfollow-upaction(anew
policy,associatedtrainingandanewplatformwere
launchedinearlyJanuary2021).
↓
Audit
Committee
Nominations
Committee
Remuneration
Committee
Monitorstheintegrityoffinancial
reporting,theperformanceofthe
externalAuditorandreviewsthe
effectivenessoftheGroup’ssystems
ofinternalcontrolandrelated
complianceactivities.
TheCommitteecomprisesonly
independentNon-Executive
Directors.TheChairofthe
CommitteeattendstheAGM
torespondtoanyShareholder
questionsthatmightberaised
ontheCommittee’sactivities.The
Committee’s Report is set out on
pages96to106.
Regularlyreviewsthestructure,
sizeandcompositionoftheBoard
andoverseesthedevelopment
ofadiversepipelinefororderly
succession to the Board and senior
executivepositions.Workingwith
HR,takesanactiveroleinsetting
andmeetingdiversityobjectives
andstrategiesfortheCompanyasa
whole.
TheCommitteecomprisesthe
Chairman,theindependentNon-
ExecutiveDirectorsandoneother
Non-ExecutiveDirector(from
10July2020).Themeetingsof
theCommitteearechairedby
theChairman.TheChairofthe
CommitteeattendstheAGM
torespondtoanyShareholder
questionsthatmightberaised
ontheCommittee’sactivities.The
Committee’s Report is set out on
pages90to95.
AgreeswiththeBoardthe
frameworkorbroadpolicy
of remuneration for the
Chairman,ExecutiveDirectors
andseniorexecutives,andsets
theirremuneration.Reviews
remunerationpoliciesacrossthe
Group,ensuringthealignment
ofworkforceremunerationand
incentiveswiththeGroup’sculture
andstrategy.
TheCommitteecomprisesfour
independentNon-Executive
Directors,oneotherNon-Executive
Director(from10July2020)andthe
Chairman(from1January2020),who
wasindependentonappointment.
TheChairoftheCommittee
attendstheAGMtorespondtoany
Shareholderquestionsthatmightbe
raisedontheCommittee’sactivities.
TheCommittee’sReportissetouton
pages107to131.
↓
↓
↓
Executive Leadership Team Committee
TheCommitteeaddressesoperationalissuesandisresponsibleforimplementingGroupstrategyandpolicies,day-to-day
managementandmonitoringperformance.TheCommitteemeetsweeklyandhasmorein-depthmonthlymeetings.Members
includethoseindividualslistedonpage74.
72
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Board roles
EachoftheIndependentNon-ExecutiveDirectorsareconsideredbytheBoardtobeindependentofmanagementandfreeofany
relationshipthatcouldmateriallyinterferewiththeexerciseoftheirindependentjudgement.TheNon-ExecutiveDirectors,appointedunder
theRelationshipAgreementwithCD&R,arenotconsideredtobeindependentunderProvision10oftheCode,however,areconsidered
tobeindependentofmanagementandareimportantinensuringappropriateindependentchallenge.TheChairmanwasassessedbythe
Boardasbeingindependentonappointment.ThecompositionoftheBoardissuchthatitincludesanappropriatecombinationofExecutive,
Non-ExecutiveDirectors(CD&RDirectors)andindependentNon-ExecutiveDirectors,andnooneindividualorgroupofindividualsdominates
theBoard’sdecisionmaking.TherolesoftheChairmanandChiefExecutiveOfficerareseparateandclearlydefined,andareundertaken
bydifferentindividuals,ensuringthatthereisacleardivisionofresponsibilitiesbetweentheleadershipoftheBoardandtheexecutive
leadership.Moredetailsoftherolesandresponsibilitiescanbefoundonthecompany’swebsiteat www.sigplc.com.
Chairman
Chief Executive
Officer
Senior Independent
Director
■ LeadingtheBoard,responsible
foritsoveralleffectivenessin
directingtheCompany.
■ Shapingthecultureinthe
boardroom,ensuringthatall
Directors,particularlytheNon-
ExecutiveDirectors,makean
effectivecontribution.
■ Responsibleforproposingand
thendeliveringthestrategy
approvedbytheBoard.
■ Responsibleforsettingan
exampletotheCompany’s
workforce,forcommunicatingto
themtheexpectationsinrespect
oftheCompany’scultureandfor
ensuringthatoperationalpolicies
and practices drive appropriate
behaviour.
■ Availableforapproach
by(orrepresentations
from)Shareholders,where
communications through the
ChairmanorExecutiveDirectors
maynotseemappropriate.
■ Leadstheevaluationofthe
Chairman’sperformanceatleast
onceayear,meetingwiththe
Non-ExecutiveDirectors,without
theChairmanbeingpresent.
Non-Executive Directors
Group Company Secretary
■ Appointedfortheirwide-rangingexperienceand
■ IndependentadvisortotheBoard.
backgrounds.
■ EnsuresBoardproceduresarefollowedanddecisions
■ Theyeachprovideconstructivechallenge,strategic
implemented.
guidanceandspecialistadvice,holdingmanagementand
individualExecutiveDirectorstoaccountagainstagreed
performanceobjectives.
■ Ensuresbestpracticegovernancearrangementsare
followed.
73
Stock code: SHI www.sigplc.comGOVERNANCE Corporate Governance Report
DIVISION OF RESPONSIBILITIES
Executive Leadership Team as at 25 March 2021
Ian Ashton
Chief Financial Officer
Steve Francis
Chief Executive Officer
Highlyskilledseniorexecutivewith
broad globalexperienceinfinancial
leadershiproles.
SeasonedCEOinturbulenttimes.
Key career highlights
■ CEO,PatisserieHoldingsPLC
Key career highlights
■ CFO,Low&BonarPlc
■ CFO,LabivaLLC
■ VariousseniorroleswithSmith
andNephewplc
■ CEO,TulipLtd
■ CEO,DanwoodGroup
HoldingsLtd
Ronald Hoozemans
Managing Director Germany
and Benelux
Over16years’experiencein
leadershipacrosstheconstruction
andhealthcareindustry.
Key career highlights
■ ManagingDirector,Mediq
■ ManagingDirector,Nutrica
AdvancedMedicalNutrition
(Danone)
■ OperatingDirector,Nutrica
Philip Johns
Managing Director SIG UK
Julien Monteiro
Managing Director France
Marcin Szczygiel
Managing Director Poland
Kevin Windle
Managing Director Ireland
Over30years’experienceinthe
constructionindustryspecialisingin
merchantinganddistribution.
Over13years’globalexperiencein
thespecialistindustrialdistribution
industry.
Over22years’experienceinthe
specialistconstructiondistribution
industry.
Over21years’experienceinfinance
leadershiprolesinthebuilding
merchantingindustry.
Key career highlights
■ ChiefCommercialOfficer,
IBMGGroup
Key career highlights
■ ManagingDirector,France,
Brammer Group
Key career highlights
■ ManagingDirectorforSIG
Polandsince1999
■ CEO,MKMBuildingSupplies
■ ManagingDirector,SIGE
■ BusinessDirectorandSales
Director,NaccoMaterialsGroup
■ ManagingDirector,Sitaco
■ SalesandMarketingDirector,
(2006–15)
■ JoinedSIGin1987
IsoverPoland
Key career highlights
■ FinanceDirector,SIGIreland
until2019
■ EMEAFinanceDirector,Glanbia
Performance Nutrition
■ FinanceDirector,Grafton
MerchantingROI
David Clegg
Group Health, Safety and
Environment Director
Kulbinder Dosanjh
Group Company Secretary
Andrew Watkins
Group General Counsel
DavidisanaccomplishedHSEand
Operationsexecutivewith40years
internationalexperience.
Over21years’globalexperiencein
businessadministrationacrossboth
publicandprivatecompanies.
Over18years’experienceinlegal
counselacrossbothpublicand
privatecompanies.
Key career highlights
■ DirectorHSSE,LogisticsandRisk,
Key career highlights
■ GroupCompanySecretary,
MOLPakistan
RoyalMail
Key career highlights
■ GeneralCounsel,HyveGroup
■ GeneralCounselandCompany
■ DirectorHSSEandRisk,Daewoo
■ GroupCompanySecretary,
Secretary,Ebiquityplc
E&PMyanmar
BritishAirways
■ DirectorHSSEandRiskSub-
SaharanAfrica,WorleyParsons
■ GeneralCounsel,AdaptServices
Ltd
■ Partner,TrowersandHamlinsLLP
74
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Corporate Governance Report
COMPOSITION, SUCCESSION AND EVALUATION
Time commitments
TheBoardhassatisfieditselfthatthereisnocompromisetothe
independence of those Directors who have other appointments
inoutsideentities.TheBoardconsidersthateachoftheNon-
ExecutiveDirectorsbringtheirownseniorlevelofexperience
andexpertise,andthatthebalancebetweennon-executive
andexecutiverepresentationencourageshealthyindependent
challenge.Priortotheirappointment,Directorsarerequiredto
disclosetheirsignificantotherappointmentsandtheBoardis
satisfiedthateachoftheNon-ExecutiveDirectorscandedicate
sufficienttimetotheirroleandresponsibilities.Directorsare
awarethattheymustnottakeonadditionalexternalappointments
withoutthepriorapprovaloftheBoard.During2020,approvalwas
giventoGillianKentpriortohertakinguptheroleofNon-Executive
DirectorofDignityplcon11June2020andtoAlanLovellbefore
hejoinedMitieGroupplcasaNon-ExecutiveDirectoron1January
2021.TheExecutiveDirectorsdonothaveanyFTSEcompanyNon-
ExecutiveDirectorappointmentsorothersignificantappointments.
TheNominationsCommitteeregularlyreviewstheother
commitmentsofDirectorsonappointment,onanyproposalfor
reappointmentandfollowinganychangeinroles,toensurethat
theDirectorshavesufficienttimetoundertaketheirroleand
responsibilitiestowardstheCompany.
Information and support
ToenabletheBoardtoperformitsdutiesefficientlyandeffectively,
allDirectorshavefullaccesstoallrelevantinformationandtothe
servicesoftheCompanySecretary,whoseresponsibilityitisto
ensurethatBoardproceduresarefollowed.Theappointmentand
removaloftheCompanySecretaryisamatterreservedforthe
Board.ThereisanagreedprocedurewherebyDirectorswishing
totakeindependentlegaladviceinthefurtheranceoftheirduties
maydosoattheCompany’sexpense.
TheCompanySecretaryisresponsibleforensuringthatBoard
policiesandprocessesarefollowedincludingtheformalminuting
ofanyunresolvedconcernsthatanyDirectormayhavein
connectionwiththeoperationoftheCompany.Duringtheyear,
therewerenosuchunresolvedissues.Further,onresignation,if
aNon-ExecutiveDirectorhadanysuchconcerns,theChairman
wouldinvitethemtoprovideawrittenstatementforcirculationto
theBoard.
TheBoardanditsCommitteesareprovidedwithenoughresources
toundertaketheirduties.Appropriatetrainingisavailabletoall
Directorsonappointmentandonanongoingbasisasrequired.
TheGrouphasoperatedapaperlessmeetingsystemfortheBoard
anditsCommitteesforanumberofyearsandcurrentlyuses
Diligentsoftware.Usinganelectronicsystemformeetingpacks
supportsouronlinedriveacrosstheGroupandisconsistentwith
reducingtheimpactofouroperationsontheenvironment.
TheBoardreceivespaperscirculatedthroughtheDiligentportal
inadvanceofeachBoardmeetingaswellasinformationbetween
Boardmeetingsonmatterssuchasanalystandshareholding
reportsandflashresults.Thereisalsoaseparate‘ReadingRoom’
withintheportalwhereDirectorscanaccessinformationsuch
ascorporatepolicies,dailysalesinformation,theArticlesof
Association,Groupandorganisationalstructure,Boarddatesand
contactdetails.
TheCompanySecretaryattendsallBoardmeetingsandisalwaysat
handtoanswerquestionsorofferindependentadviceorexpertise
toDirectors,shouldthatberequired.
Composition and succession
Duringtheyear,anumberofnewDirectorsjoinedtheBoard
asfollows.FurtherdetailscanbefoundintheNominations
CommitteeReportonpages91to92.
■ TwonewExecutiveDirectors,SteveFrancis(CEO)andKath
Kearney-Croft(interimCFO),joinedtheBoardreplacingMeinie
OldersmaandNickMaddockrespectivelyon25February2020;
■ IanAshtonwasappointedasthepermanentCFOon1July2020;
replacingKathKearney-Croft;
■ SimonKingwasappointedasanindependentNon-Executive
Directoron1July2020;
■ Bruno Deschamps and Christian Rochat were appointed as
theCD&RnominatedNon-ExecutiveDirectorson10July2020
inaccordancewiththeRelationshipAgreementsignedon
29 May 2020;
■ KathDurrantwasappointedasanindependentNon-Executive
DirectorandChairoftheRemunerationCommittee,replacing
KateAllumwitheffectfrom1January2021;and
■ ShatishDasaniwasappointedasanindependentNon-Executive
DirectorandChairoftheAuditCommittee,replacingIanDuncan
witheffectfrom1February2021.
Furtherdetailsofthisprocess,whichtheBoardregardsasformal,
rigorousandtransparent,areincludedonpages92to93.
TheBoardhasalsofocusedonensuringthatsuccessionplans
fortheBoardandseniormanagementwereappropriate.The
Board,throughtheNominationsCommittee,givesappropriate
considerationtotheskillsandexpertiserequiredontheBoardnow
andinthefuture.TheNominationsCommitteealsoreviewssenior
managementsuccessionanddevelopmentbutrecognisesthat
developmentofamoreformaltalentpipeline(includingdiversity)
shouldcontinuetobeafocusduring2021.For furtherdetailssee
page94.
Election and re-election of Directors
UndertheArticlesofAssociation,allDirectorsaresubjectto
electionattheAGMimmediatelyfollowingtheirappointment
andtore-electioneverythreeyears.However,inaccordance
withtheCode,allDirectorswillseekelectionorre-electionatthe
Company’sAGMeachyear.InaccordancewithProvision18,the
BoardshouldsetouttheskillsandexperiencethateachDirector
has,andwhytheircontributionisandcontinuestobeimportantto
theCompany’slong-termsustainablesuccess.TheBoardbelieves
thesuccessoftheCompanygoingforwardwillbeachievedbythe
new2020strategyofreturningtoprofitablegrowthbymaintaining
aleadingmarketposition,withamodernisedoperatingmodel,
effectivepartnershipswithcustomersandsuppliers,developing
high-performingpeopleandbeingaresponsiblebusiness.The
contributionofthewholeBoardisessentialindeliveringthenew
strategywithanumberofveryexperiencedNon-ExecutiveDirectors
andExecutiveDirectors.
Andrew Allnerbringsvariedandsubstantialboardandgeneral
managementexperiencetotheGroup.Hehasanin-depth
understanding of corporate governance having served as a director
andchairmanofseverallistedcompanies.Sincehisappointment
inNovember2017,hehasledtheprocessfortheappointmentof
anumberofnewNon-ExecutiveDirectorsandtwonewExecutive
Directors.HehasmanagedtheCEOandCFOsuccessionand
workedverycloselywiththenewCEOinthedevelopmentofthe
strategy,peopleandorganisationalchanges,asuccessfulcapital
raiseincludingtheCD&Rinvestmentandrefinancingdebt.
75
Stock code: SHI www.sigplc.comGOVERNANCE Corporate Governance Report
COMPOSITION, SUCCESSION AND EVALUATION
Steve Francisbringssignificantturnaroundandleadership
experienceacrossarangeofmulti-siteinternationalbusinesses
togetherwithconsiderableexecutivemanagementexperience
includingstrategicconsultancy,mergersandacquisitions,
corporatefinanceandbanking.Hehasexpertiseindrivingrapid
operationalandperformanceimprovementsandrestoring
profitablegrowth.
Ian Ashtonisahighlyskilledseniorexecutivewithbroadglobal
experienceinfinancialleadershiproles.Hehasastrongtrack
recordofdrivingchangeandisavaluableadditiontotheteamas
SIGpursuesitsnewstrategyforgrowth.
Alan Lovellbringssignificantlistedcompanyboardexperience,
bothasanexecutiveandnon-executivedirector.Hehasextensive
experienceintheGroup’skeysectorofconstructionbothinthe
UKandEurope,theGroup’skeymarkets.Heisalsoaturnaround
expert,allofwhichispertinenttotheGroup’sstrategyofimproving
theperformanceintheUKandreturningthebusinesstoprofitable
growth.
Gillian Kentisanexperiencednon-executivedirectorhaving
servedonanumberoflistedboardsandasamemberofaudit,
remunerationandnominationcommittees.Shebringsavaluable
perspectivewithspecialistknowledgeinthedevelopmentof
e-commerceandsoftwarebusinessesandexpertiseinbuilding
productmarketsandbrands,whichwillbeimportantindriving
innovationanddigitisingourbusiness.
Simon Kingbringsextensive,hands-onexperienceinbuilding
productsanddistributionbusinessesfromacareerspanningover
35years.Healsohaschangemanagement,retail,distribution,
marketingandcustomerproposition,technology,digitaland
stakeholderengagement(particularlyworkforceengagement)
experience.Simon’sskillsandexperiencewillbevaluableinour
effortstobuildonSIG’sleadingmarketpositionsandreturningthe
businesstoprofitablegrowth.
Bruno Deschamps’skillsandexperienceincludedeepindustrial
knowledge,corporatetransactions,extensiveexperiencein
drivingandoverseeingimprovedcompanyperformance,whichis
importantasSIGimprovestheperformanceintheUK.
Christian Rochat’sskillsandexperienceincludedeepindustrial
knowledge,transformation,changemanagement,strategy,
stakeholderengagement,corporatetransactionsandextensive
experienceindrivingandoverseeingimprovedcompany
performance.HisexperienceandknowledgewillbeofvalueasSIG
seekstoimproveitstradingperformanceandreturntoprofitable
growth.
Kath DurrantisanexperiencedChairofRemuneration.Shehas
significantinternationalandindustryknowledgegainedfromher
rolesatFergusonandCRH.Kathalsohasextensiveexperienceof
workinginbusinessesundergoingtransformation,whichwillbe
valuableasweseektorestructureourUKoperation.
Shatish Dasani isanexperiencedpubliccompanyCFOandChair
ofAuditCommitteeaswellhavingstronginternationalexperience
acrossseveralsectorsrelevanttothebusiness.Hehasaproven
trackrecordofdrivingshareholdervalue,whichwillbeimportantas
weseektoreturntheCompanytoprofitablegrowthandcontinue
toenhancethefinancialperformanceandmeasurementwithinthe
Company.
Therefore,toenableShareholderstomakeaninformeddecision,
the2021noticeofAGMincludesbiographicaldetailsandadetailed
statementastowhytheCompanybelievesthattheDirectors
shouldbeelected/re-elected.
ItistheviewoftheBoardthateachoftheNon-ExecutiveDirectors
standingforelectionorre-electionbringsconsiderablemanagement
experienceandanindependentperspectivetotheBoard’s
discussions,andisconsideredtobeindependentofmanagement
andfreefromanyrelationshiporcircumstancethatcouldaffect,or
appeartoaffect,theexerciseoftheirindependentjudgement.
TheChairmanintendstoconfirmattheAGMthat,asconfirmed
bythe2020Boardevaluationprocess,theperformanceofeach
individualcontinuestobeeffective,thateachDirectoractswith
integrity,leadsbyexample,promotesthedesiredcultureand
demonstratescommitmenttotherole.
ThetermsoftheDirectors’servicecontractsaredisclosedin
theDirectors’RemunerationReportonpage131.Fulldetails
ofDirectors’remuneration,interestsinthesharecapitalofthe
Companyandofshareoptionsheldaresetoutonpage130inthe
Directors’RemunerationReport.
Directors’servicecontractsandthelettersofappointmentof
theNon-ExecutiveDirectorsareavailableforinspectionatthe
Company’sregisteredofficeandwillbeavailableatthe2021AGM.
Skills and experience
TheBoardevaluationreviewprocess,detailedonpages78to
80,identifiedthattheBoardencompassesawiderangeand
combinationofdifferentskills,experienceandknowledge,ranging
fromaccountingtosalesandmarketingtodigital.Followingthe
2019evaluation,theBoarddecidedthattheywouldseekto
enhancetheBoardin2020withtheappointmentofanadditional
Non-ExecutiveDirectorwhowouldbringmorebuildingproducts
distributionsexperience.Areviewofskillswasundertakenin
November2020andtheBoardconcludednospecificskillswere
requiredtobeenhancedduring2021.
Training and induction
TheChairmanregularlyreviewsandagreeswitheachDirectortheir
traininganddevelopmentneeds.Duringtheyear,anumberof
the Directors attended training courses and seminars on various
subjects.TheBoardasawholereceivedtrainingfromAllen&
OveryontheirDirectors’duties,responsibilitiesofapremiumlisted
issuerandtheirliabilityforthecontentsofaprospectus,aswell
ascontinuingobligationsofacompanyadmittedtothepremium
listingsegmentoftheOfficialListoftheFCA.TheCompany’s
brokers,assponsorsofthe2020capitalraise,alsoprovideda
sessiononthecontinuingobligationsofapremiumlistedcompany.
TheBoardreceivesregularpresentationsfromadvisorsand
seniormanagementonarangeoftopicalissuessuchasfromthe
Company’sfinancialadvisorsinrelationtoitsdebtstructureand
themacrobackdropandsectordynamicsthatSIGfaces.
Aspartoftherolloutofupdatedcorporatepolicies,theBoard
completedonlinetrainingtoenhancetheirawarenessofthe
variousrequirementsofourcorporatepolicies.TheDirectors
alsoreporttotheBoardonanyothertrainingundertakenanda
scheduleofDirectortrainingiskeptbytheCompanySecretary.
76
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Onappointment,DirectorsreceiveafullinductiontotheCompany.
ThisinvolvesmeetingswitheachoftheBoardmembers,members
oftheELT,externaladvisors(suchasBrokers,Auditorsand
FinancialAdvisors)ordinarilyvisitstoanumberofbranchlocations
(lockdownrestrictionshavehamperedthese)andreceiptofa
fullpackofcorporatematerialsincluding,corporatepolicies
andprocedures,detailsofinsurance,financialframeworkand
Shareholders.Theprogrammeensuresthattheyarefullybriefed
oncurrentkeyBoardtopicareas,theCompanystrategy,visionand
structure,stakeholderengagementactivities,Groupoperations,
financeandtheindustry.
Diversity Policy
Whilstsuccessionwithintheorganisationisbasedonobjective
performancecriteria,theBoardrecognisesthatdiversityof
gender,socialandethnicbackgroundsandcognitiveandpersonal
strengthsarehugelyimportanttothesuccessoftheorganisation
andakeyfocusoftheNominationsCommitteeworkingwiththe
HRteamwillbetodevelopdiversitywithintheorganisationgoing
forward.InrelationtoBoardsuccessionplanning,theBoard
recentlyreviewedandupdateditsBoardDiversitypolicyand
reviewedtheBoardsuccessionplan.TheBoardDiversitypolicyis
availableontheCompany’swebsite(www.sigplc.com).Further
detailscanbefoundonpage94.
Induction undertaken with Kath Durrant
Meetings with Board, key members
of management team and external
advisors covering:
■ KeyBoardtopics
■ Long-termstrategy
■ Commitmentculture,purposeandvision
■ Groupoperations,financeandperformance
■ Executiveandseniormanagementremunerationandpolicy
■ Industryandstakeholderengagement
■ Seniormanagementteam
■ Governanceframework
*Sitevisitswillberesumedattheearliestopportunitypostlockdown
andinlinewithCovid-19protocols.
The induction programme was
thorough and comprehensive
and provided me with
valuable insight into our
business and strategic
direction.
Kath Durrant
77
Stock code: SHI www.sigplc.comGOVERNANCE Corporate Governance Report
BOARD EVALUATION
Board evaluation
TheeffectivenessoftheBoardanditsCommitteesandtheskills,
experienceanddiversityofourDirectorsarevitaltothelong-
termsustainablesuccessoftheCompany.Duringtheyear,the
Boardundertookanevaluationprocesstoassessitsperformance,
thatofitsthreeprincipalCommittees(Audit,Remunerationand
Nominations),theChairmanandindividualDirectors.
Process
TheCompanySecretarypreparedaquestionnairethatwasmade
availabletoDirectorsthroughtheBoardportal.TheCompany
SecretaryalsointerviewedallBoardmemberstogatherfurther
insights.Directorswereaskedabouttheperformanceofthe
Board,theAudit,RemunerationandNominationsCommittees
andindividualDirectors.TheBoardwasaskedtoconfirmwhether
theChairmanpromotesrelationshipsandopencommunication
bothinsideandoutsidetheboardroombetweenNon-Executive
DirectorsandtheExecutiveteam.Theywerealsoaskedto
considerwhatfurthercouldbedonetopromoteandencourage
equalcontribution,candiddiscussionandcriticalthinkinginthe
boardroom.Additionally,questionswerealsoaskedonhowwell
theBoardunderstandswhattheexpectedbehavioursarein
SIG(launchedaspartofthecommitmentculture)andwhether
theBoarddemonstratesthemandtoalsomakesuggestionsfor
improvementtosettheappropriatetonefromthetop.
Skills matrix
Eachyear,Directorscompleteamatrixdetailingtheirskills
andexperiencecoveringanumberofdifferentareasincluding
stakeholderandworkforceengagement,technology,digital,health
andsafety,treasurymanagement,accounting,environmental/ESG,
international,propertymanagementandcorporatetransactions.
Responseswerecollated,inanunattributedmanner,intoareport
producedbytheCompanySecretary.TheChairmanalsoheld
individualone-to-onediscussionswitheachoftheDirectorsto
discusstheirindividualperformanceandappraisal.
Assessment of Chairman’s performance
TheNon-ExecutiveDirectors,chairedbytheSeniorIndependent
DirectorAlanLovell,metwithouttheChairmanpresenttoassess
hisperformance,takingintoaccounttheviewsoftheExecutive
Directors.FollowinghisconversationswithotherBoardmembers,
theSeniorIndependentDirectorthenmetwiththeChairman
toreviewhisperformance.Overall,Directorsconcludedthat
theChairmandemonstratedgoodjudgement,workedtirelessly
tosteerSIGthroughachallengingperiodandencouragesthe
contributionofallNon-ExecutiveDirectors.Lockdownrestrictions
havehamperedface-to-facemeetings,whichwouldfurther
enhancecollaborativerelationshipsamongsttheBoardgiventhe
numberofnewmembersthathavejoinedtheBoardin2020and
theearlypartof2021.
Progress with 2020 priorities
Aspartofthereviewprocess,theBoardconsideredtheprogress
madeagainstBoardprioritiesin2020,goodprogresswasmade
onalloftheprioritiessetoutbelow.Nevertheless,theBoard
recognisesthatenhancingBoardeffectivenesswasacontinuous
journeyandfurtherimprovementscouldbemadegoingforward.
Priorities 2020
Progress Made
1. Culture
Althoughgoodprogresshasbeenmade,morecouldbe
achievedinembeddingthecultureacrosstheorganisation
andsettingthetonefromthetop.Stepshadbeentakento
developadashboardtomonitorculturein2019,whichwould
beenhancedfurtherin2020.
ThishasbeenanunprecedentedyearfortheCompanyfroma
leadership,strategyandcultureperspectiveaswellasdealing
withtheCovid-19pandemic.
Acommitmentculturewaslaunchedin2020atthetwo-day
SLTconferenceheldinJanuary2020,whichwasattended
bysomeBoardmembers.Immediatelyaftertheconference,
theBoardwasprovidedwiththeresultsofthepulsesurvey,
whichindicatedthatthecommitmentculturewasanextremely
positivestepforwardfortheCompany.Acommitmentculture
sessionwasalsoheldwiththeBoardandELTtoensureall
newmembersunderstoodthecommitmentcultureandthe
behavioursthateveryoneintheCompanywasexpectedto
demonstrate.
ThecommitmentculturewasrestartedinQ4withnewbranding
launchedinJanuary2021.
Tomonitorculture,regularreportshavealsobeenprovided
totheBoardonGroupturnoverratesbyoperatingcompany
andfunction.Dataisalsoprovidedonheadcount,recruitment,
diversity,genderbreakdown,ageandtenureacrosstheGroup
andSeniorLeadershippopulation.Thejourneytoembedthe
culturewasacontinuousoneandwillcontinuetobeapriority
fortheBoardgoingforward.
78
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Priorities 2020
Progress Made
2. Composition, talent, succession
AlthoughtheBoardhasbeenenhancedsignificantlyduring
2019,theplanhadbeentoenhancethecompositionfurther
in2020.TwonewExecutiveDirectorshavejoinedgiven
thattheessentialrestructuringoftheGrouphadlargely
beencompleted,theBoardbelievedthatitwastimefora
newleadershipteam,withskillsindrivingrapidoperational
performance improvements through strong customer
relationships,excellenceincustomerserviceandcreating
highlyengagedteams.TheBoard,throughtheNominations
Committee,wouldfocusmoreontalent,capabilityand
successionoftheManagingDirectorsoftheoperating
companiesandtheirdirectreports.Improvetherecruitment,
retentionoftalentandsupporttheCompany’sdiversityand
inclusionaims.
3. Employee and stakeholder engagement
Moreinformationanddebatearoundpeopleissues.The
appointmentofadesignatedNon-ExecutiveDirectorfor
workforceengagementshouldformalisetheprocessand
assisttheBoardtogainadeeperunderstandingofcolleague
feedback.ContinuewithBoardvisitsandmeetingswiththe
management teams of the operating companies in addition to
engagingmorewithsuppliersandcustomers.Developmore
understandingofwhotheyare,ensureeffectiveunderstanding
oftheirviewsanddevelopKPIs/dashboardtomonitorprogress.
4. Board information and support
Tocontinuetoimprovetherigouranddisciplinearound
Boardinformationandsupport.Ensurepapersareconcise,
distributedinatimelyanduser-friendlymannerthrough
thedigitalportal.Continueembeddingthearrangements
developedasaresultoftheCode.Developmorerobust
proceduresaroundBoardandCommitteemeetings.
5. Environment and sustainability strategy
WhilstSIGhadagainbeenrecognisedasaconstituent
memberoftheFTSE4GoodIndexSeries,demonstrating
strongenvironmental,socialandgovernancepractices,there
isaneedforfurtherclarityontheGroup’sprioritiesaround
environmental,socialandgovernanceandsustainabilitymatters
andtherationalebehindthedirectionoftravel.
Duringtheyear,theBoardfocusedonsuccessionplanningfor
ExecutiveDirectorswiththeappointmentofanewpermanent
CEOandCFO.Inaddition,theBoardreviewedthetalent,
capabilityandsuccessionoftheManagingDirectorsofthe
operatingcompanies.Severalsignificantappointmentswere
madetostrengthentheleadershipoftheoperatingcompanies.
AnewhighlyexperiencedManagingDirectorwith30years
industryexperiencewashiredfortheUK,amalgamatingthe
leadershipofUKDistributionandExteriorsbusinesses.The
Boardsoughttoimproveretentionoftalentandexpandedthe
roleoftheManagingDirectoroftheBeneluxtoalsoincludethe
leadershipoftheGermanbusiness.
SimonKingwasappointedasaresultoftheskillsreview
undertakenattheendof2019.TwonewindependentNon-
ExecutiveDirectorswereappointedattheendof2020and
early2021.
TheimpactofCovid-19hashinderedtheWorkforce
Engagementprogrammethathadbeenenvisagedfor2020.
ThiswasrestartedinQ4throughvideocalls.Initialfeedback
totheBoardwasprovidedinNovemberandideassuggested
byemployeeswereprovidedinDecember.AGroup-wide
employmentengagementsurveywaslaunchedinSeptember
andfeedbackwasprovidedtotheBoardinJanuary2021.
AGroup-widemulti-lingualcustomersurveywaslaunchedin
SeptemberandfeedbackwasprovidedtotheBoardinJanuary
2021.Dashboards/KPIsareprovidedforSIG’stopcustomersby
alloperatingcompanies.
Newstrategicfocustopartnerwithsupplierstodevelopjoint
strategieshasbeencommencedbyalloperatingcompanies
andtheyallprovideregularupdatesagainstthesevenstrategic
pillars.
MeetingsandvisitsbyBoardmemberswerehamperedbythe
pandemic,andsomevisitswereundertakenwherepermitted
inlinewithsocialdistancingprotocols.Visitsandmeetingswill
bereinstatedattheearliestopportunity,subjecttoongoing
restrictions.
TherigouranddisciplinearoundBoardinformationhas
improvedandcontinuestoimprove.Papersarebeing
distributedinatimelierfashion.Boardpaperguidelineshave
beendevelopedduring2020anddistributedtotheELT.
ESGisakeypriorityfortheBoard.AnESGframeworkforSIG
hasbeendevelopedtogetherwiththeGroupprioritiesforthe
nextfewyears.Aplanandwayforwardwerepresentedtothe
BoardinJanuary2021.
79
Stock code: SHI www.sigplc.comGOVERNANCE Corporate Governance Report
BOARD EVALUATION
2020 annual effectiveness findings and Board objectives for 2021
Key Strengths
Objectives for 2021
1. The Board continued to operate effectively
in a challenging year
TheChairmanleadstheBoardwellandsetsagoodtoneat
meetings,encouragesequalparticipation.ThenewDirectors
appointedduringtheyearhaveaddednewskillsand
insights,suchasexperienceinbuildingproductsdistribution,
transformationandstakeholderengagement.TheBoard
understoodtheexpectedbehavioursanddemonstratedthem
toanappropriatelevel.
1. Focus on delivering the turnaround plan
DevelopapositiveandcollegiateBoardcultureanda
disciplinedagendathatsupportstheExecutiveDirectorsand
managementacrosstheorganisationtofocusonanddeliver
theUKturnaroundplan.EnsureBoardprocessesareefficient,
reducethenumberofprojectsandpriorities,anddemonstrate
thattheBoardlivestheGroup’sbehaviourstosetthe
appropriatetonefromthetop.
2. Purpose, vision, strategic direction
understood and supported
TheBoardwasextremelysupportiveandunderstoodthe
strategywell.Theabilityandcapabilityofmanagementto
executethestrategywaseffective.
2. Develop best-in-class leadership and
management capability
Monitorresultsandleadershipstyle,coachanddevelop
managementandcontinuallychallengethemtoundertake
meaningfultalentassessmentsinallareasofthebusinessand
acrossallgeographies.
3. Board information and governance
TheBoardhasreceivedmoredetailedinformationonhowthe
businessisperformingandtheissuesfacingtheCompany.
Boardpapersandsupportaroundmeetingshasimproved.
Drivingstronggovernancewasafocusandincludedunderpillar
oneoftheCompany’sstrategy.Thishasbeenaparticularfocus
oftheCEOandCFOandhasseenamateriallevelofchange
andimprovementduring2020.
3. Improve employee engagement and promote
new winning entrepreneurial culture
Employeesshouldfeelsafe,valuedandproudthatSIGoperates
tohighstandardsandisawinner.
Compensationpoliciesshouldbecompetitive(particularly
incentives)andshouldbehonestandmotivatingforcolleagues
atalllevelsintheCompany.
4. Board Committees are all considered
to be operating broadly effectively
TheCommitteesareinthemaineffectivelychairedand
managed.TheBoardconsidersthattheCommitteesare
effectiveatdealingwithmattersdelegatedtothem.However,
allCommitteescouldmakeimprovementsonhowtheyareled
andmanaged.TwonewChairshavebeenappointedforthe
RemunerationandAuditCommittees,whichshouldprovidea
fresh perspective on how these Committees are managed and
ledgoingforward.
4. Regularly review strategic challenges and
opportunities and build a business for the future
Astheyearprogressesandwhentheturnaroundiswell
underway,theBoardwillseektoreviewopportunitiestofurther
growandimprovethebusiness,includinginareassuchas
digital,e-commerce,newproductsandserviceopportunities.
Beyond2021,theBoardwillfocusfurtheronenvironmental,
sustainabilityanddiversityplansandstrategicdigitisation.
80
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Corporate Governance Report
AUDIT, RISK AND INTERNAL CONTROL
Risk management and Internal Control
TheBoardhasultimateresponsibilityfortheGroup’srisk
managementandsystemofinternalcontrolandforreviewingits
effectiveness.Itestablishesthestructureforriskmanagement,sets
strategicobjectives,setstheriskappetiteandensuresthatrisk
managementandinternalcontrolstructureandframeworksare
robust.TheBoarddelegatesresponsibilitytotheAuditCommitteeto
considertheadequacyoftheriskmanagementandinternalcontrol
frameworkandtoagreetherisk-basedinternalauditprogramme.
TheELThasresponsibilityforensuringthatriskmanagementis
embeddedintoallprocessesandforensuringthatriskprofileisin
linewiththeapprovedriskappetite.Localcontrolsmanagerssupport
processownerstodevelopcontrolsandtotesttheireffectiveness.
GroupInternalAuditisresponsibleforprovidingindependent
assuranceonthequalityoftheriskmanagementprocesses,
developingarisk-basedinternalauditprogrammeandproviding
independentassurancetotheBoardandtheAuditCommitteethat
controlsinplacearedesignedappropriatelyandoperatingeffectively.
TheGroupInternalAuditfunctioncomprisesofanin-houseteam
supportedbyaco-sourcearrangementwithKPMGLLPwho
provideinputonspecialistareas.TheBoardregularlyreviewsthe
needfortheGroupInternalAuditfunctionandtheeffectivenessof
theco-sourcearrangement.
InformationonauditcanbefoundintheAuditCommitteeReport
onpages96to106.
Key elements of ongoing process for risk
management and internal control
Thekeyelementsoftheexistingsystemsforriskmanagement
andinternalcontrol,inaccordancewiththeFRC’sGuidanceon
RiskManagementandInternalControlandRelatedFinancialand
BusinessReporting(September2014)(“FRC’sGuidance”),are
asfollows:
Risk management:
■ ThedocumentedGroupriskmanagementframework,approved
bytheAuditCommittee,providesanoverviewoftheagreedrisk
managementprocesseswithintheGroupandgivespractical
guidancetooperatingcompaniesandindividualfunctionson
themanagementofrisk.Essentially,itisatoolkittohelpmanage
strategic,financial,operational,peopleandcompliancerisk.The
Groupriskmanagementframeworkissupportedbyasimple
packofslides(ManagingYourRisks)whichhelpsmanagement
toexplaintheriskmanagementsystemtotheirteams.The
GroupRiskfunctionsupportswithpracticalassistancewhere
required.TheGroupriskmanagementframeworkwasformally
issuedtoleadershipteamsinFebruary2019andrevisedand
updatedinDecember2020.
■ InaccordancewiththeGroupriskmanagementframework,
operatingcompaniesandcentralfunctionleadershipteams
maintaintheirownlocalriskregisters.
■ TheBoardmaintainsanoverallGroupriskregister,thecontent
ofwhichisdeterminedandassessedthroughregularinputfrom
theAuditCommittee.AreviewoftheGroup’sprincipalrisksand
howitmanagesormitigatesthemispresentedintheStrategic
Reportonpages30to35.
■ TheGroupriskregistercontainstheprincipalrisksfacedbythe
Groupandassessesthepotentialimpactandlikelihoodatboth
agrosslevel(beforeconsiderationofmitigatingcontrols)and
netlevel(afterconsiderationofmitigatingcontrols).Itoutlines
thecurrentcontrolsinplacetomitigatetheriskandanyfurther
actionsrequiredtobringtherisktowithinriskappetite.Each
GroupriskisownedbyamemberoftheELTandsponsoredby
eithertheCEOorCFO.Newandemergingrisksareidentified
throughhorizonscanning,reviewofrelevantmediapublications,
externalinsights,riskworkshopsheldwithmanagementteams
anddiscussionwithseniormanagementandexternaladvisors.
Onceidentified,emergingrisksareassessedbyidentifyingand
mappingoutthecoreelementsoftherisk,identifyingownersfor
eachelementintheoperatingcompanies,holdingworkshops
withriskownerstoassessthelevelofrisk,identifyingpotential
mitigatingactionsthatreducetheimpactoftheriskand
seekingexternalguidanceifrequired.Potentialemergingrisks
aremonitoredandassessedatleasttwiceayearbytheAudit
CommitteeandBoardfortheirrelevanceandsignificance.
TheBoardregularlyassessestheGroup’semergingandprincipal
risksandconsidersthatitsassessmentisrobust.
Internal control:
Keycontrolactivitiesinclude:
■ Adefinedorganisationstructurewithlevelsofapproval
governedbytheGroupDelegationofAuthoritypolicy.Thiswas
updatedinJanuary2020toaccommodatechangesinoperating
modelsandorganisationalstructuresacrosstheGroupand
refreshedfollowingtheannualreviewinDecember2020.
■ Inlightofthechangestobusinesspracticesasanimpactof
Covid-19,therewasafurthertighteningofapprovallevelsfor
thepaymentofinvoicesrelatingtonon-trade,government
paymentsandcapexprojects.Thiswasincludedasachangeto
theDelegatedAuthoritiespolicyupdatedinSeptember2020.
■ Clearresponsibilitiesonthepartoffinancialmanagement
forthemaintenanceofgoodfinancialcontrolsandthe
productionandreviewofdetailed,accurateandtimelyfinancial
managementinformation.
■ Acomprehensivesystemoffinancialreporting,whichincludes
anannualprocessforoperatingcompanybudgets,tobe
approvedbytheCEO.
■ In-depthreviewsofoperatingcompanyperformancecompleted
withtheCEOandCFOattendinglocalmanagementmeetingsto
discussanysignificantchangesandadversevariancesagainst
budget.
■ MonthlyprovisiontotheBoardofrelevant,accurateandtimely
informationincludingrelevantkeyperformanceindicators.
■ TheKeyControlsFramework(KCF)launchedin2018utilised
acrosstheGroupsettingout33controlassertionsacrossa
numberofentity-level,financial,operationalandITcontrolareas
againstwhichoperatingcompaniesarerequiredtoself-certify
onaquarterlybasisusingaRed,AmberorGreen(RAG)rating.
DesignandimplementationoftheKCFcontrolsbyleadersinthe
businessrepresentthefirstlineofdefenceintheorganisation.
TheyrelyontheGroupcontrolsmanagers,thesecondlineof
defenceandsomeofwhomarealignedtoOperatingCompanies,
toadviseoncontrolsandtotesttheseonarollingbasis.Group
InternalAudit,asthethirdlineofdefence,providesindependent
assuranceoverthosecontrols.Thisself-certificationprocessis
reportedtotheAuditCommitteeonaquarterlybasis.Thethree
linesofthedefencemodelareaddressedinfurtherdetailinthe
StrategicReportonpage30,andfurtherdetailinrelationtothe
KCFisprovidedintheAuditCommitteeReportonpage102.
■ TheKCFself-certificationsreceivedfromoperatingcompanies
havebeenreviewedtounderstandthepotentialheightening
ofriskduetoCovid-19anditsimpactonworkingpractices,i.e.
relocationofstaffandinaccessibilityofsomelocations.This
reviewalsolookedtounderstandthemeasuresimplemented
acrosstheGrouptoensureanadequateandappropriatelevel
ofcontrol.
81
Stock code: SHI www.sigplc.comGOVERNANCE Corporate Governance Report
AUDIT, RISK AND INTERNAL CONTROL
■ Theinterimmeasuresimplementedincludedcommunication
withsuppliersandadditionalsupportprovidedbytheUK
SharedServiceCentretoensurethatsupplierinvoicesare
receivedandprocessedswiftly,inlightofbranchclosures,anda
reviewofcustomercreditlimitstoreflecttheuncertaintyaround
cashcollectionsfromcustomersandthusmitigatetheriskof
baddebts.Somecustomercreditlimitshavebeensettozero,
socustomersarerequiredtomakeadvancepaymentsbefore
orderscanberaised.
■ Regularmonthlyreportsonriskmanagement,KCFandinternal
controlsateachBoardandAuditCommitteemeetingfrom
theCFO.
■ RegularcashandtreasuryreportingtotheCFOandperiodic
reportingtotheBoardontheGroup’staxandtreasury
position.SinceCovid-19,theBoardhasbeenreviewingregular
cashforecastsateverymeeting;anupdateoncashhasbeen
providedaspartofthemonthlymanagementaccountssince
July.
■ Anysignificantissuesorcontrolweaknessesidentifiedare
■ Group-wideCovid-19responsechecklistwasdevelopedand
deployedtoaddresskeyriskspresentedbythepandemicin
theshort,mediumandlongterm,givingtheAuditCommittee
visibilityintomeasuresimplemented.Theareascovered
weresupplychainfailure,people,liquidityandfinance,legal
andregulatory,healthandsafety,customerservice,change
managementandgovernanceandbusinesscontinuityriskand
IT(includingfraud).
Inadditiontothesenewmeasures,financeteamshavefocusedon
improvingtheaccuracyofweeklycashforecastingandthelimitson
theDelegationofAuthorityhavebeendecreasedsothatpayments
areauthorisedatmoreseniorlevels.Controlshavealsobeen
strengthenedovercustomercreditlimits.
Financial reporting:
■ Inadditiontothegeneralinternalcontrolsandriskmanagement
processesdescribedonpages81to83,theGroupalsohas
specificsystemsandcontrolstogovernthefinancialreporting
processandpreparationoftheAnnualReportandAccounts.
reportedtotheELT,AuditCommitteeandtheBoard.
■ Thesesystemsincludeclearpoliciesandtheproceduresfor
■ Theoverallinternalcontrolsframeworkisregularlymonitored
bytheAuditCommitteeonbehalfoftheBoardtoensure
continuousimprovement.
■ Astructuredandapprovedprogrammeofauditsundertaken
byGroupInternalAudit,wouldordinarilyincluderegularsite
visits to and interaction with the operating companies across the
Group,however,asaresultofthelockdownrestrictionsthishas
beendonebyvideocall.Theimplementationofrecommended
actions is monitored as part of a continuous programme of
improvement.TheGroupInternalAuditmanualapprovedby
theAuditCommitteeinMarch2019wasnotupdatedduringthe
year,astheoverallmethodologyforidentifyingaudits,testingand
reportingoncontrolswasworkingeffectively.AGroupInternal
AuditeffectivenesssurveywasconductedinJanuary2021forthe
yearended31December2020andfurtherdetailscanbefound
intheAuditCommitteeReportonpage105.
Covid-19 controls
DuetotheimpactoftheglobalCovid-19pandemic,theBoardand
ELTtookswiftactiontoputinplaceanumberofnewcontrolsto
complywithgovernmentaladvice,protectthebusinessandits
peopleandmitigateagainsttherisksarisingfromremoteworking.
Theseinclude:
■ ImprovedgovernancearrangementsinitiallythroughdailyELT
calls(movedtoweekly)toidentifyandresolvecommonissues
inordertobuildresilience.Instigationofbi-monthlyBoard
meetingswhichreturnedtoapproximatelymonthlyfromJuly.
OperatingcompanyLeadershipteamsalsometseveraltimesa
weektorespondtolocalissues.
■ Strengtheningofcybersecuritycontrolsthroughaccelerationof
planstodefendagainsttheincreasedriskofphishingattacks.
■ Measuresinplaceinbranchestoprotectemployees,customers
andsuppliersfromriskofinfection.Headofficelocationswere
closedwithmanyemployeesworkingremotely.Reportingof
confirmedCovid-19casesandthoseemployeeswhowereself-
isolating.
■ IntroductionofaHomeworkingpolicytoensurethesafety
andwellbeingofemployeesworkingremotely.Alloperating
companiesputinplacedetailedcommunicationplansandhave
establishedclearlinesofcommunicationwithregularGroupand
individualcontactpoints.Mostoperatingcompanieshaveput
asupporthotlineinplaceforemployeeswhohavequeriesor
requiresupport.
ensuringthattheGroup’sfinancialreportingprocessesandthe
preparationofitsFinancialStatementscomplywithallrelevant
reportingrequirements.
■ Thepoliciesandproceduresarecomprehensivelydetailedinthe
GroupFinancemanual,whichisusedbyallbusinessesinthe
preparationoftheirresults.
■ Financialreportingcontrolrequirementsarealsosetoutinthe
GroupFinancemanual,whichisregularlyupdatedtoinclude
changestoaccountingandreportingpoliciessuchasIFRS16.
Independent review by PwC
Asalreadymentionedonpage5,theBoardinstigatedanindependent
review through the Group Investigation Committee commissioning
PwCtoundertakeanindependentreviewoftheGroup’sforecasting
andmonthlymanagementaccountsprocessesinlightofthedisparity
betweentheforecastlevelofunderlyingprofitbeforetaxforthe
financialyear2019setoutintheJanuary2020TradingUpdateand
marketconsensusofforecastprofitpriortothatannouncement.
TheBoardtakesthefindingsofthePwCreportveryseriously.
TheCompanyvoluntarilynotifiedtheFCAoftheprogressofthe
PwCreportandhassharedthePwCreportwiththeFCA.TheFCA
confirmedtotheCompanyinOctober2020thattheywouldbetaking
nofurtheraction.FollowingSIG’sreceiptofthePwCreport,inorder
tostrengthentheGroup’sfinancialforecastingandinternalreporting,
KPMGwasappointedtoassisttheAuditCommitteeinensuing
appropriateimprovementswereimplementedtotheCompany’s
financialsystems,proceduresandcontrolsrecommendedinthePwC
report.
Furtherdetailsontheactionstaken(inrelationtoculturechanges)
areincludedintheCorporateGovernanceReportonpages59
to60.TheBoardhadalreadyagreedthatadditionalfocuswas
requiredduring2020toembedthecommitmentculture,improve
employeeengagementandmoraleandalsoincludedtheactions
arisingfromthereview.Furtherbackgroundonthescopeofthe
PwCreviewandtheactionstheCompanyimplementedinresponse
aresetoutintheAuditCommitteeReportonpage104.
82
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Annual assessment of the effectiveness of systems of
risk management and internal control systems
During2020,theBoardconductedareviewoftheeffectivenessof
theGroup’ssystemofriskmanagementandinternalcontrols.This
reviewcoveredallcontrolsincludingoperational,complianceand
riskmanagementprocedures,aswellasfinancialcontrols.
Tocompletethereview,theBoardandAuditCommitteerequested,
receivedandreviewedreportsfromtheDirectorofRiskand
InternalAudit(includingfromthein-houseteamandco-source
partnerKPMG),theCFOandtheExternalAuditor.
SaveasidentifiedbythePwCreportandthefindingsthathave
beenaddressed,theBoardconsidersthattheinformationthat
itreceivesissufficienttoenableittoreviewtheeffectivenessof
theGroup’sriskmanagementandinternalcontrolsinaccordance
withtheFRC’sguidance.TheBoardconsidersthattheframework
ofcontrolsinplaceiseffectiveandenablesrisktobeassessed
andmanaged.TheBoardalsoconsidersitsriskmanagementand
internalcontrolprocessesprovideitwiththeassurancethatall
thenecessaryresourcesareinplacefortheCompanytomeetits
objectivesandtomeasureperformanceagainstthemfor2020and
uptoandincludingthedateofthisreport.
Asnotedinthe2019AnnualReporttheBoardwasnotfullysighted
ofalloftheriskstothefullyearprofitforecastin2019,however,
itconsidersthatithastakentheappropriatestepstoimprove
forecastingcontrolsandtheculturewithinwhichtheyoperate.The
approachtoimprovingcultureisoutlinedinthissectiononpages
59to60andtheactionplaninrelationtoPwC’sfindingsaswellas
theGroup’sapproachtoitscontinuedfocusoncontrolsisgivenin
theAuditCommittee’sReportonpages103to104.
Otherimprovementsininternalcontrolshavebeenidentified
throughouttheyearandactionplansdevisedandputinplace.
Progresstowardscompletionofactionsisregularlymonitoredby
managementandtheBoard.
Directors’ Report
Substantial shareholdings
Atthedateofapprovalofthe2020AnnualReportandAccounts,
theCompanyhadreceivednotificationofthefollowing
shareholdingsinitsissuedsharecapitalpursuanttothe
Disclosure Guidanceand TransparencyRules(“DTRs”)ofthe
FinancialConductAuthorityasat31 December2020and25March
2021.InformationprovidedbytheCompanypursuanttotheDTRs
ispubliclyavailableviatheregulatory informationservicesandon
theCompany’swebsite.
Substantial Shareholdings
Interests disclosed
to the Company
as at
31 December 2020
%
Nature of holding as per
disclosure
Interests disclosed
to the Company
as at
25 March 2021
Shareholder
Nature of holding as per
disclosure
%
CD&RSunshineS.a.r.l.
331,577,934
28.06%
Direct Interest
331,577,934 28.06%
Direct Interest
IKOEnterprisesLimited
174,743,803
14.79% IndirectInterest(1.0816%)
174,743,803
14.79% IndirectInterest(1.0816%)
TamesideMBCre
GreaterManchester
Pension Fund
43,779,826
3.71%
Direct Interest
43,779,826
3.71%
Direct Interest
AberforthPartnersLLP
38,723,309
3.28%
Indirect Interest
38,723,309
3.28%
Indirect Interest
GoldmanSachs
International
TempletonInvestment
CounselLLP
ArtemisInvestment
ManagementLLP
MassachusettsFinancial
ServicesCompany
SchroderInvestment
ManagementLimited
IndirectInterest(0.005%)
SecuritiesLending(1.24%)
Swap(1.16%)
CFD(0.48%)
34,049,953
2.88%
IndirectInterest(0.005%)
SecuritiesLending(1.24%)
Swap(1.16%)
CFD(0.48%)
34,049,953
2.88%
29,358,556
2.48%
Indirect Interest
29,358,556
2.48%
Indirect Interest
28,820,324
2.44%
Indirect Interest
28,820,324
2.44%
Indirect Interest
26,799,365
2.27%
Indirect Interest
26,799,365
2.27%
Indirect Interest
23,005,522
1.95%
Indirect Interest
23,005,522
1.95%
Indirect Interest
NorgesBank
16,746,018
1.42%
DirectInterest(1.33%)
Sharesonloan(rightto
recall)(0.09%)
16,746,018
1.42%
DirectInterest(1.33%)
Sharesonloan(rightto
recall)(0.09%)
JPMorganSecuritiesplc
LeucadiaInvestment
ManagementLimited
Less
than5%
Less
than5%
Less
than5%
Less
than5%
Indirect Interest
Lessthan5%
Indirect Interest
(0.005%)
Lessthan5%
Less
than5%
Less
than5%
Indirect Interest
SecuritiesLending
(1.24%)
83
Stock code: SHI www.sigplc.comGOVERNANCE
Corporate Governance Report
DIRECTORS’ REPORT
Whistleblowing
TheGrouphasinplaceaWhistleblowingpolicyunderwhich
employeesmay,inconfidence,raiseconcernsaboutpossible
wrongdoinginfinancialreportingorothermatters.Acopyofthis
policyisavailableontheCompany’swebsite(www.sigplc.com).
TheGroupalsohasaconfidentialhotlineinplace,whichisavailable
toallGroupemployeesandprovidesafacilityforthemtobring
matterstomanagement’sattentiononaconfidentialbasis.The
hotlineisprovidedbyanindependentthirdparty.During2020,
thesesystemswereoperationalthroughouttheGroup.
Afullinvestigationiscarriedoutonallmattersraisedanda
reportispreparedforfeedbacktothecomplainant.Wherea
whistleblowingreporthasbeeninvestigated,anupdateisprovided
totheAuditCommitteeaspartoftheDirectorofRiskandInternal
Audit’sreport.
TheGeneralCounselalsoreportstotheBoardeachmonth
onreportsmadeunderthepolicyandthestateofongoing
investigationsandconclusionsreached.During2020Group
employeesusedthissystemtoraiseconcernsaboutanumber
ofseparateissues,allofwhichwereappropriatelyrespondedto.
Additionally,followingrecommendationsfromthePwCreport,the
BoardinitiallyappointedKateAllumastheBoardwhistleblowing
champion(witheffectfrom27April2020),whowasthenreplaced
bySimonKingon1October2020.Awrittenremitwasagreed,
arevisedWhistleblowingpolicywaslaunchedinJanuary2021
togetherwithmigrationtoanewexternalwhistleblowingplatform
withenhancedfeatures.Aplanwasputinplacetofurther
enhanceawarenessandeffectivenessofthenewwhistleblowing
arrangements.TheELTandfinancefunctionsacrosstheGroup
weregivenspecificawarenesstraining.Trainingforthenew
WhistleblowingpolicyhasbeenrolledoutGroup-widethrough
SIG’s onlinecomplianceplatform.
Statement of the Directors on the disclosure of
information to the Auditor
TheDirectorswhoheldofficeatthedateofapprovalofthe
Directors’Reportconfirmthat:
■ Sofarastheyareeachaware,thereisnorelevantaudit
informationofwhichtheCompany’sAuditorisunaware;and
■ EachDirectorhastakenallstepsthattheyoughttohavetaken
asaDirectortomakethemselfawareofanyrelevantaudit
informationandtoestablishthattheCompany’sAuditoris
awareofthatinformation.
Thisconfirmationisgivenandshouldbeinterpretedinaccordance
withtheprovisionsofsection418oftheCompaniesAct2006.
Going concern
Thegoingconcernstatementcanbefoundonpage28ofthe
StrategicReport.
Viability statement
Theviabilitystatementcanbefoundonpages27to28ofthe
StrategicReport.
Independent Auditor
OntherecommendationoftheAuditCommittee(seepage106),
inaccordancewithSection489oftheCompaniesAct2006,
resolutionsaretobeproposedattheAGMforthereappointment
ofErnst&YoungLLPasAuditoroftheCompanyandtoauthorise
theAuditCommitteetofixitsremuneration.Theremunerationof
theAuditorfortheyearended31December2020isfullydisclosed
innote4totheFinancialStatementsonpage161.
Publication of Annual Report and notice of AGM
ShareholdersaretonotethattheSIGplcAnnualReport2020
togetherwiththenoticeconveningtheAGMhavebeenpublished
ontheCompany’swebsite(www.sigplc.com).IfShareholdershave
electedtoreceiveShareholdercorrespondenceinhardcopy,then
theAnnualReportandnoticeconveningtheAGMwillbedistributed
tothem.
Principal activity
TheprincipalactivityoftheGroupisthesupplyofspecialist
productstoconstructionandrelatedmarketsintheUK,Ireland
and mainlandEurope.Themainproductsectorssuppliedduring
theyearareinsulationandinteriors,roofingandexteriors.
TheChairman’sStatementandStrategicReportonpages4
to 47 contain a review of these activities and comment on the
futureoutlookanddevelopments.Thefinancialriskmanagement
objectives,policiesandkeyperformanceindicatorsoftheCompany
arealsosetoutintheStrategicReport.
Political donations
ItistheGroup’spolicynottomakepoliticaldonationsandno
politicaldonationsweremadeduringtheyear(2019:£nil).Details
oftheGroup’spoliciesinrelationtoCorporateGovernanceare
disclosedonpage37.
Group results and dividends
TheConsolidatedIncomeStatementfortheyearended
31December2020isshownonpage136.ThemovementinGroup
reservesduringtheyearisshownonpage139intheConsolidated
StatementofChangesinEquity.Segmentalinformationissetoutin
Note1totheFinancialStatementsonpages153to158.
TheBoardhastakenthedecisionnottodeclareafinaldividendfor
theyear(2019:nil),recognisingthatthisisinthebestinterestof
preservingtheGroup’sliquidityposition.Aninterimdividendwas
notpaidin2020(2019:1.25p).Therefore,thetotaldividendpaidin
2020wasnil(2019:1.25p).
Greenhouse gas emissions
DetailsoftheGroup’sgreenhousegasemissionsaredetailedinthe
StrategicReportonpage43oftheSustainabilityReport.
Employees
DetailsoftheGroup’spoliciesinrelationtoemployees(including
disabledemployees)aredisclosedintheSustainabilityReporton
pages38to41.Furtherinformationonemployeeengagementand
consultationcanbefoundintheStrategicReportonpage40and
theCorporateGovernanceReportonpages59to60.
Stakeholder engagement
Furtherinformationonstakeholderengagement,includingonour
businessrelationshipswithsuppliers,customersandothers,canbe
foundintheCorporateGovernanceReportonpages64to71.
Post balance sheet events
DetailsofpostbalancesheeteventsareincludedinNote36on
page205oftheFinancialStatements.
Related party transactions
ExceptasdisclosedinNote33totheFinancialStatementson
page202,andexceptforDirectors’servicecontractsandthe
RelationshipAgreementwithCD&R,theCompanydidnothaveany
materialtransactionsortransactionsofanunusualnaturewith,and
didnotmakeloansto,relatedpartiesintheperiodsinwhichany
Directorisorwasmateriallyinterested.
84
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Summary of key terms of the CD&R
Relationship Agreement
TheCompanyenteredintoaRelationshipAgreementwithCD&Ron
29May2020,whichwillremaineffectiveaslongasCD&Risentitled
toexercise10%ormoreofthevotesabletobecastonmatters
atgeneralmeetingsoftheCompany.TheRelationshipAgreement
regulatestheCompany’srelationshipwithCD&R.Itincludes
agreementbyCD&Rthatitshall(andensurethatitsassociates
shall),amongotherthings,conductalltransactionswiththe
Groupatarm’slengthandonnormalcommercialterms,nottake
actionsthatwouldhavetheeffectofpreventingtheGroupfrom
carryingonitsbusinessindependentlyandnottakeanyactionthat
wouldpreventtheCompanyfromcomplyingwithitsobligations
undertheListingRulesandotherapplicablelawsandregulations.
MoredetailsonthecontentoftheRelationshipAgreementcan
befoundintheprospectus,whichisavailableontheCompany’s
website(www.sigplc.com).AsfarastheCompanyisawarethe
undertakingsincludedintheRelationshipAgreementhavebeen
compliedwithduringtheperiodunderreview.
FurtherdetailsontheCD&Rrelationshipinpracticecanbefound
onpage63.
Directors’ and officers’ liability insurance
and indemnities
TheCompanypurchasesliabilityinsurancecoverforDirectors
andofficersoftheCompanyanditssubsidiaries,whichgives
appropriatecoverforanylegalactionbroughtagainstthem.The
Companyhasalsoprovidedanindemnity,whichwasinforceduring
thefinancialyearforitsDirectorstotheextentpermittedbythe
lawinrespectofliabilitiesincurredasaresultoftheiroffice.The
indemnitywouldnotprovideanycoveragetotheextentthata
Directorisprovedtohaveactedfraudulentlyordishonestly.
Noclaimsorqualifyingindemnityprovisionsandnoqualifying
pensionschemeindemnityprovisionshavebeenmadeeither
duringtheyearorbythedateofapprovalofthisDirectors’Report.
Financial instruments
InformationontheGroup’sfinancialriskmanagementobjectives
andpoliciesontheexposureoftheGrouptorelevantrisksarising
fromfinancialinstrumentsisinNote20totheFinancialStatements
onpages182to188.
Future developments
Possiblefuturedevelopmentsaredisclosedinourstrategysection
oftheStrategicReportonpages10to15.
Acquisitions and disposals
Detailsofacquisitionsmade,andbusinessesidentifiedforsaleor
closurearecoveredinNote15onpage177andNote11onpage
169oftheFinancialStatements.
Group companies
AfulllistofGroupcompanies(andtheirregisteredofficeaddresses)
isdisclosedonpages232to233.
Stock code: SHI www.sigplc.com
85
Corporate Governance Report
DIRECTORS’ REPORT
Share capital
TheCompanyhasasingleclassofsharecapital,whichisdivided
intoordinarysharesof10peach.At31December2020,the
Companyhadacalled-upsharecapitalof1,181,556,977divided
intoordinarysharesof10peach(2019:591,556,982).
During2020,589,999,995ordinarysharesof10peachwere
allottedwithanaggregatenominalvalueof£58,999,999.50andthe
considerationreceivedforthisallotmentwas£165m.
Duringtheyearended31December2020,optionswereexercised
pursuanttotheCompany’sshareoptionschemes.Nonewordinary
shareshavebeenallottedundertheseschemessincetheendof
thefinancialyeartothedateofthisreport.Detailsofoutstanding
optionsundertheGroup’semployeeandexecutiveschemesare
setoutinNote27onpages195to196,whichalsocontainsdetails
ofoptionsgrantedoverunissuedsharecapital.
Rights attaching to shares
Therightsattachingtotheordinarysharesaredefinedinthe
Company’sArticlesofAssociation.TheArticlesofAssociationmay
bechangedbyspecialresolutionoftheCompany.AShareholder
whosenameappearsontheCompany’sRegisterofMemberscan
choosewhethertheirsharesareevidencedbysharecertificates
(e.g.incertificatedform)orheldinelectronic(e.g.uncertificated)
forminCREST(theelectronicsettlementsystemintheUK).
Subjecttoanyrestrictionsbelow,Shareholdersmayattendany
generalmeetingoftheCompanyand,onashowofhands,every
Shareholder(ortheirrepresentative)whoispresentatageneral
meetinghasonevoteoneachresolutionand,onapoll,every
Shareholder(ortheirrepresentative)whoispresenthasonevote
oneachresolutionforeveryordinaryshareofwhichtheyarethe
registeredShareholder.
Aresolutionputtothevoteofageneralmeetingisdecidedona
showofhandsunlessbeforeoronthedeclarationoftheresultofa
voteonashowofhands,apollisdemandedbytheChairmanofthe
meeting,orbyatleastfiveShareholders(ortheirrepresentatives)
presentinpersonandhavingtherighttovote,orbyany
Shareholders(ortheirrepresentatives)presentinpersonhaving
atleast10%ofthetotalvotingrightsofallShareholders,orbyany
Shareholders(ortheirrepresentatives)presentinpersonholding
ordinarysharesinwhichanaggregatesumhasbeenpaidupofat
leastone-tenthofthetotalsumpaiduponallordinaryshares.
Shareholderscandeclarefinaldividendsbypassinganordinary
resolution,buttheamountofsuchdividendscannotexceedthe
amountrecommendedbytheBoard.TheBoardcanpayinterim
dividendsonanyclassofsharesoftheamountsandonthedates
andfortheperiodstheydecideprovidedthedistributableprofitsof
theCompanyjustifysuchpayment.TheBoardmay,ifauthorisedby
anordinaryresolutionoftheShareholders,offeranyShareholder
therighttoelecttoreceivenewordinaryshares,whichwillbe
creditedasfullypaid,insteadoftheircashdividend.
Anydividendthathasnotbeenclaimedfor12yearsafteritbecame
dueforpaymentwillbeforfeitedandwillthenbelongtothe
Company,unlesstheDirectorsdecideotherwise.
IftheCompanyiswoundup,theliquidatorcan,withthesanction
ofanextraordinaryresolutionpassedbytheShareholders,
divideamongtheShareholdersalloranypartoftheassetsofthe
Companyandtheycanvalueanyassetsanddeterminehowthe
divisionshallbecarriedoutasbetweenthemembersordifferent
classesofmembers.Theliquidatorcanalsotransferthewholeor
anypartoftheassetstotrusteesuponanytrustsforthebenefit
ofthemembers.NoShareholderscanbecompelledtoacceptany
assetwhichwouldgivethemaliability.
UndertheCompany’sShareIncentivePlan(the“SIP”),theSIP
trusteeholdssharesonbehalfofemployeeparticipants.In
accordancewiththeSIPtrustdeedandrules,theSIPtrusteemust
actinaccordancewithanydirectionsgivenbyaSIPparticipantin
respectoftheirSIPshares.Intheabsenceofanysuchdirections
fromaSIPparticipanttheSIPtrusteewillnottakeanyactionin
respectofSIPshares.
UndertheSIGemployeebenefittrust(the“EBT”),theEBTtrustee
holdssharesonbehalfofemployeeparticipants,tobeusedfor
thesettlementofawardsgrantedundertheCompany’sincentive
plans.TheEBTtrusteehas,underthetrustdeedestablishingthe
EBT,waivedallrightstovoteinrespectofanysharesheldinthe
EBT,exceptanysharesparticipantsownbeneficially,inrespectof
whichitwillinviteparticipantstodirecthowthetrusteeshallactin
relationtothesharesheldontheirbehalf.Thenumberofshares
heldintheEBTon25Marchwas125,429.TheEBTtrusteehasalso
waiveddividendsonsharesheldintheEBT.
Furtherinformationrelatingtothechangeofcontrolprovisions
undertheCompany’sincentiveplansappearswithinthe
RemunerationpolicyavailableontheCompany’swebsite.
Voting at general meetings
AnyformofproxysentbytheCompanytoShareholdersinrelation
toanygeneralmeetingmustbedeliveredtotheCompany,whether
inwrittenorelectronicform,nolessthan48hoursbeforethetime
appointedforholdingthemeetingoradjournedmeetingatwhich
thepersonnamedintheappointmentproposestovote.
TheBoardmaydeterminethattheShareholderisnotentitledto
exerciseanyrightconferredbybeingaShareholderiftheyorany
personwithaninterestinshareshasbeensentanoticeunder
Section793oftheCompaniesAct2006(whichconfersupon
publiccompaniesthepowertorequireinformationwithrespectto
interestsintheirvotingshares)andtheyoranyinterestedperson
failedtosupplytheCompanywiththeinformationrequestedwithin
14daysafterdeliveryofthatnotice.TheBoardmayalsodecidethat
nodividendispayableinrespectofthosedefaultsharesandthat
notransferofanydefaultsharesshallberegistered.
TheserestrictionsendsevendaysafterreceiptbytheCompanyof
anoticeofanapprovedtransferofthesharesoralltheinformation
requiredbytherelevantSection793Notice,whicheveristheearlier.
Transfer of shares
TheBoardmayrefusetoregisteratransferofacertificatedshare
thatisnotfullypaid,providedthattherefusaldoesnotprevent
dealingsinsharesintheCompanyfromtakingplaceonanopen
andproperbasis.TheBoardmayalsorefusetoregisteratransfer
ofacertificatedshareunless:(i)theinstrumentoftransferis
lodged,dulystamped(ifnecessary),attheregisteredofficeofthe
CompanyoranyotherplacedecidedbytheBoardaccompanied
byacertificateforthesharetowhichitrelatesandsuchother
evidenceastheBoardmayreasonablyrequiretoshowtheright
ofthetransferortomakethetransfer;(ii)isinrespectofonly
oneclassofshares;and(iii)isinfavourofnotmorethanfour
transferees.
TransferofuncertificatedsharesmustbecarriedoutusingCREST
and the Board can refuse to register a transfer of an uncertificated
shareinaccordancewiththeregulationsgoverningtheoperation
ofCREST.
86
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Corporate Governance Report
DIRECTORS’ REPORT
Variation of rights
IfatanytimethecapitaloftheCompanyisdividedintodifferent
classesofshares,thespecialrightsattachingtoanyclassmaybe
variedorrevokedeither:
(i) Withthewrittenconsentoftheholdersofatleast75%in
nominalvalueoftheissuedsharesoftheclass;or
(ii) Withthesanctionofanextraordinaryresolutionpassedat
aseparategeneralmeetingoftheholdersofthesharesof
theclass.
TheCompanycanissuenewsharesandattachanyrightstothem.
Ifthereisnorestrictionbyspecialrightsattachingtoexisting
shares,rightsattachingtonewsharescantakepriorityoverthe
rightsofexistingshares,orthenewsharesandtheexistingshares
aredeemedtobevaried(unlesstherightsexpresslyallowit)bya
reductionofpaidupcapital,orifanothershareofthatsameclass
isissuedandranksinpriorityforpaymentofdividend,orinrespect
ofcapitalormorefavourablevotingrights.
Election and re-election of Directors
TheCompanymay,byordinaryresolution,ofwhichspecialnotice
hasbeengiveninaccordancewiththeCompaniesAct,removeany
Directorbeforetheexpirationoftheirperiodofoffice.Theofficeof
aDirectorshallbevacatedif:
(i)
TheyceasetobeaDirectorbyvirtueofanyprovisionoflawor
isremovedpursuanttotheCompany’sArticlesofAssociation
orhe/shebecomesprohibitedbylawfrombeingaDirector;
(ii) Theybecomebankruptorcompoundswiththeircreditors
generally;
(iii) Theybecomeofunsoundmindorapatientforanypurposeof
anystatuterelatingtomentalhealthandtheBoardresolves
thattheirofficeisvacated;
(iv) Theyresign;
(v) TheyfailtoattendBoardmeetingsforsixconsecutivemonths
withoutleaveofabsencefromtheBoardandtheBoard
resolvesthattheofficeisvacated;
(vi) Theirappointmentterminatesinaccordancewiththe
provisionsoftheCompany’sArticles;
(vii) Theyaredismissedfromexecutiveoffice;
(viii) TheyareconvictedofanindictableoffenceandtheDirectors
resolvethatitisundesirableintheinterestsoftheCompany
thattheyremainasaDirector;or
(ix) TheconductoftheDirectoristhesubjectofaninvestigation
andtheDirectorsresolvethatitisundesirableintheinterests
oftheCompanythattheyremainaDirector.
TheBoardmay,fromtimetotime,appointoneormoreDirectors
asManagingDirectorortofulfilanyotherexecutivefunctionwithin
theCompanyforsuchterm,remunerationandotherconditions
ofappointmentasitmaydetermine,anditmayrevokesuch
appointment(subjecttotheprovisionsoftheCompaniesAct).
Agreements with employees and significant
agreements (contracts of significance)
TherearenoagreementsbetweentheCompanyanditsDirectors
oremployeesprovidingforcompensationforlossofofficeor
employment(whetherthroughresignation,purportedredundancy
orotherwise)thatoccursbecauseofatakeoverbid.
TheCompany’sbankingarrangementsareterminableupona
changeofcontroloftheCompany.Certainotherindebtedness
becomesrepayableifachangeofcontrolleadstoadowngradein
thecreditratingoftheCompany.Bankconsentisrequiredforany
majoracquisitionordisposalofassets.
Fixed assets
IntheopinionoftheDirectors,thereisnomaterialdifference
betweenthebookvalueandthecurrentopenmarketvalueofthe
Group’sinterestsinlandandbuildings.
CREST
TheCompany’sordinarysharesareinCREST,thesettlement
systemforstocksandshares.
2021 Interim Report
CurrentregulationspermittheCompanynottosendhard
copiesofitsInterimReportstoShareholdersandthereforethe
CompanyintendstopublishitsInterimReportonitswebsiteat
www.sigplc.com.
88
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Authority to purchase own ordinary shares
Shareholders’authorityforthepurchasebytheCompanyof
59,155,698ofitsownsharesexistedattheendoftheyear.
The Companyhasmadenopurchasesofitsownordinaryshares
pursuanttothisauthority.TheCompanywillseektorenewthis.
ForthepurposesofLR9.8.4CR,theinformationrequiredtobe
disclosedbyLR9.8.4Rcanbefoundinthefollowinglocations:
Section
Topic
Location
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
Interestcapitalised
Notapplicable
Publicationofunaudited
financialinformation
Detailsoflong-term
incentive schemes
Waiverofemolumentsby
a Director
Waiver of future
emolumentsbyaDirector
Non pre-emptive issues
ofequityforcash
Item(7)inrelation
tomajorsubsidiary
undertakings
Parent participation
inaplacingbyalisted
subsidiary
Notapplicable
Remuneration
CommitteeReport,
page119
Notapplicable
Remuneration
CommitteeReport,
page118
Notapplicable
Notapplicable
Notapplicable
Contracts of significance
Notapplicable
Provisionofservicesby
a controllingShareholder
Shareholderwaivers
of dividends
Shareholderwaiversof
future dividends
Agreementswith
controllingShareholders
Notapplicable
Notapplicable
Notapplicable
Notapplicable
Cautionary statement
Thecautionarystatementcanbefoundonpage29oftheStrategic
Report.
Content of Directors’ Report
TheCorporateGovernanceReport(includingtheBoardbiographies)
canbefoundonpages50to89,theAuditCommitteeReporton
pages95to106,theNominationsCommitteeReportonpages90
to97,andtheDirectors’ResponsibilityStatementonpage132are
incorporatedbyreferenceandformpartofthisDirectors’Report.
TheDirectors’Report,togetherwiththeDirectors’Remuneration
Reportonpages107to131,fulfilstherequirementsofthe
CorporateGovernanceStatementforthepurposesofDTR7.2.6.
TheBoardhaspreparedaStrategicReport(includingtheBusiness
review),whichprovidesanoverviewofthedevelopmentand
performanceoftheCompany’sbusinessintheyearended
31 December2020anditspositionattheendoftheyearand
coverslikelyfuturedevelopmentsinthebusinessoftheCompany
andGroup.TheSustainabilityReportformspartofthe Strategic
Report.
ForthepurposesofcompliancewithDTR4.1.8R,therequired
contentoftheManagementReportcanbefoundintheStrategic
ReportandthisDirectors’Report,includingthesectionsofthe
AnnualReportandAccountsincorporatedbyreferenceSIGhas
beenmindfulofthebestpracticeguidancepublishedbyDefra
andotherbodiesinrelationtoenvironmental,communityand
socialKPIswhendraftingtheStrategicReport.TheBoardhas
alsoconsideredsocial,environmentalandethicalrisks,inline
withthebestpracticerecommendationsoftheAssociationof
BritishInsurers.Management,ledbytheCEO,hasresponsibility
foridentifyingandmanagingsuchrisks,whicharediscussed
extensivelyinthisAnnualReportandAccounts.
Alltheinformationcross-referencedisherebyincorporatedby
referenceintothisDirectors’Report.
Approval of the Directors’ Report
TheDirectors’Reportsetoutonpages84to89wasapprovedby
theBoardofDirectorson25March2021andsignedonitsbehalf
by:
Kulbinder Dosanjh
Company Secretary
25March2021
89
Stock code: SHI www.sigplc.comGOVERNANCE Nominations Committee Report
Committee
Membership
(during 2020 & 2021)
Andrew Allner1
Chairman
Andrea Abt
IndependentNon-Executive
Director(resigned12February
2020)
Kate Allum
IndependentNon-Executive
Director (resigned
31December2020)
Ian Duncan
IndependentNon-Executive
Director(resigned31January
2020)
1.
Independent on appointment
Gillian Kent
IndependentNon-Executive
Director
Simon King
IndependentNon-Executive
Director(appointed1July
2020)
Alan Lovell
SeniorIndependent
Non-ExecutiveDirector
Christian Rochat
Non-ExecutiveDirector
(appointed10July2020)
Kath Durrant
Independent Non-
ExecutiveDirector
(appointed1January2021)
Shatish Dasani
Independent Non-
ExecutiveDirector
(appointed1February2021)
Purpose and aims
ToleadtheprocessforBoardappointments,ensureplans
areinplacefororderlysuccessiontobothBoardandsenior
managementpositionsandoverseethedevelopmentofa
diversepipelineforsuccession.
TheCommitteeaimstomaintaintheappropriatebalanceof
skills,knowledge,experience,diversityandindependence
of the Board and its Committees to ensure their continued
effectiveness.
Key responsibilities
■ Toreviewthestructure,sizeandcomposition(includingthe
skills,knowledge,experienceanddiversity)requiredofthe
Boardcomparedtoitscurrentpositionandinthelightof
futurechallengesaffectingthebusiness.
■ TomakerecommendationstotheBoardregardingany
changes,toensurethatplansareinplacefortheorderly
successionanddevelopmentofDirectorsandothersenior
executivesandtooverseethedevelopmentofadiverse
pipelineforsuccession.
■ WorkingwiththeGroupHRDirector,totakeanactiverole
insettingandmeetingdiversityobjectivesandstrategiesfor
theGroupasawhole.
Terms of reference
DuringtheyeartheBoardreviewedandagreedtermsof
reference.ThesecanbefoundontheCompany’swebsiteat
www.sigplc.com.
Evaluation
AninternalevaluationwasconductedfortheCommitteeinline
withtheCode.Moredetailscanbefoundonpage78.
90
The Committee understands the
importance of its role in ensuring
the Board has the right mix of
skills, experience and behaviours to
support the business strategy.
Andrew Allner,
Chair of the Nominations Committee
Dear Shareholder,
IampleasedtopresentSIG’sNominationsCommitteeReportfor
thefinancialyearended31December2020onbehalfoftheBoard.
ThecompositionoftheNominationsCommitteemeetswiththe
requirementsoftheCodewiththemajorityofmembersbeing
independent(fiveoutofsevenmemberswereindependentandI
wasindependentonappointment)but,inlinewithgoodpractice,
membershipisreviewedannually.TheCommitteereviewedthe
structureandcompositionoftheBoardandmadeseveralchanges
totheBoardduring2020assetoutbelow.
During2020,theCommitteedealtwiththeresignationofthe
ExecutiveDirectors,MeinieOldersmaandNickMaddockon
24February2020followedbytherecruitmentoftwonewExecutive
Directors,SteveFrancisandKathKearney-Croftonaninterimbasis.
Weannouncedon24April2020thatStevewouldbecometheChief
Executiveonapermanentbasis.
Inaddition,IanAshtonwasappointedaspermanentGroupCFO
witheffectfrom1July2020.Ianisahighlyexperiencedsenior
executivewithastrongtrackrecordofdrivingchangeandisa
valuableadditiontotheteamaswepursueournewstrategyfor
growth.IanreplacedKathKearney-Croft,whoassumedtheroleof
InterimCFOon25February2020.
TheCommitteeundertakesaregularreviewofskills,experience
andbehavioursandacknowledgedthatmorebusinessexperience
inbuildingproductsdistributionwasrequiredontheBoard.
AsearchwasundertakenwhichresultedinSimonKingbeing
appointedon1July2020.
Simonbringsextensive,hands-onexperiencefromacareer
spanningover35years,mostrecentlyservingontheTravisPerkins
ExecutiveBoardandholdingthepositionofChiefExecutiveOfficer
forWickes.Simon’sappointmentisvaluableinoureffortsto
buildonSIG’sleadingmarketpositionsandreturnthebusiness
toprofitablegrowth.Furtherdetailonourrecruitmentprocessis
providedlaterinthisreport.
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Furthermore,inaccordancewiththetermsoftheRelationship
Agreementdated29May2020betweenCD&RandtheCompany,
Bruno Deschamps and Christian Rochat were appointed as
Non-ExecutiveDirectorswitheffectfrom10July2020.Both
Bruno’sandChristian’sdeepindustrialknowledge,alliedtotheir
extensiveexperienceindrivingandoverseeingimprovedcompany
performance,isprovingtobeofgreatbenefittotheGroupand
theyaremakinganextremelypositivecontributiontotheBoard.
Onappointment,ChristianbecameamemberoftheNominations
CommitteeandBrunoamemberoftheRemunerationCommittee.
TheCommitteealsocommencedtherecruitmentoftwonew
Non-ExecutiveDirectors,andIwasdelightedtowelcomeKath
DurrantandShatishDasani.KathreplacedKateAllumasChairof
theRemunerationCommitteeon1January2021.Katestepped
downfromtheBoardon31December2020.ShatishreplacedIan
DuncanasChairoftheAuditCommitteeon1February2021.Ian
steppeddownfromtheBoardon31January2021.BothKathand
ShatishbecamemembersoftheCommitteeonappointment.
InlinewithbestpracticetheCommitteerecommendedtothe
BoardmyappointmenttotheRemunerationCommitteetoensure
adequateBoardoversighteffectivefrom1January2020.
TheCommittee’sworkfor2021overandaboveitsnormalduties,
willcontinuetofocusonsupportingthereturntoprofitbyensuring
itundertakesappropriatesuccessionplanningandhaveamore
structuredreviewoftalentmanagement,performanceand
capability,whichincludesdiversityinthebroadestsense.
Andrew Allner
Chair of the Nominations Committee
25March2021
Meetings and membership
Duringtheyear,theCommitteemetonnineoccasions.The
quorumisthreemembers,themajorityofwhommustbe
independentNon-ExecutiveDirectors.MembersoftheCommittee
arenotinvolvedinmattersaffectingtheirownposition.
Asat10July2020,theCommitteecomprisedtheChairmanandthe
fiveindependentNon-ExecutiveDirectorsandoneNon-Executive
DirectoroftheCompany.NoExecutiveDirectorsareappointed
totheCommittee;however,theymayattendbyinvitationifthe
matterstobediscussedrequiretheirparticipation.
Attendanceatmeetingsissetoutonpage58.
Board succession planning
TheNominationsCommitteegivesfullconsiderationtosuccession
planningforDirectors,bothNon-ExecutiveandExecutive,and
otherseniormanagementoftheCompanyinthecourseofitswork,
takingintoaccountthechallengesandopportunitiesfacingthe
Companyanddeterminingwhatskills,knowledgeandexpertise
willberequiredontheBoardinthefuture.Duringtheyear,the
Committeealsoreviewedtheseniormanagementsuccessionand
leadershipdevelopmentbutrecognisesthatdevelopmentofa
moreformaltalentpipeline(includingdiversity)shouldcontinueto
beafocusduring2021.
Areviewofskillsandexperiencewasundertaken,whichhighlighted
thatmorebusinessexperienceofbuildingproductsdistribution
wasrequiredontheBoard.SimonKingwasappointedandis
invaluableinoureffortstobuildonSIG’sleadingmarketpositions
andreturnthebusinesstoprofitablegrowth.Simondoesnot
haveanyotherappointmentsand,therefore,theCommitteewas
confidenthewouldbeabletodevotesufficienttimetoSIG.
BrunoandChristianjoinedtheBoardasNon-ExecutiveDirectors
followingtheinvestmentfromCD&Rinaccordancewiththe
RelationshipAgreement.
TheCommitteealsoconsideredthereplacementofbothKateAllum
andIanDuncanwhoindicatedtheywishedtostepdownfromthe
Board.Ianwantedtoreducehistimecommitments.Asearchwas
commencedin2020.KathDurrantreplacedKateAllumasChair
oftheRemunerationCommitteewitheffectfrom1January2021.
Kathhasmorethan30years’HumanResourcesexperience,witha
strongoperationalandstrategictrackrecord,gainedatanumber
oflargeglobalcompanies.Shealsohasextensiveexperienceof
workinginbusinessesundergoingtransformation,whichwillbe
valuableasSIGseekstorestructureitsUKoperations.
ShatishDasanireplacedIanDuncanwitheffectfrom1February
2021asChairoftheAuditCommittee.Shatishhasover20
years’experienceinseniorpubliccompanyfinancerolesacross
varioussectorsincludingbuildingmaterials,advancedelectronics,
engineering,generalindustrial,businessservices,construction
andinfrastructure.Healsohasaproventrackrecordofdriving
shareholdervaluewhichwillbeimportantasSIGseekstoreturn
theCompanytoprofitablegrowth.
FormoreinformationonbiographicaldetailsforeachDirectorsee
pages54to56.
91
Stock code: SHI www.sigplc.comGOVERNANCE Nominations Committee Report
Board recruitment
Ingeneralterms,whenconsideringcandidatesforappointment
asDirectorsoftheCompany,theNominationsCommittee,in
conjunctionwiththeBoard,draftsajobspecificationandcandidate
profile.Indraftingthis,considerationwouldbegiventotheexisting
experience,knowledgeandbackgroundofBoardmembersaswell
asthestrategicandbusinessobjectivesoftheGroup.
OnceadetailedspecificationhasbeenagreedwiththeBoard,the
Committeewouldthenworkwithanappropriateexternalsearch
andselectionagencytoidentifycandidatesoftheappropriate
calibreandwithwhomaninitialcandidateshortlistcouldbeagreed.
Theconsultantsarerequiredtoworktoaspecificationthatincludes
thestrongdesirabilityofproducingafulllistofcandidateswho
meettheessentialcriteria,whilstreflectingthebenefitsofdiversity
inthebroadestsenseandgoesbeyondethnicityandgender.The
Boardwillonlyengagesuchconsultantswhoaresigneduptothe
voluntarycodeofconductongenderdiversityoncorporateboards.
Shortlistedcandidateswouldthenbeinvitedtointerview
withmembersoftheCommitteeand,ifrecommendedbythe
CommitteewouldordinarilybeinvitedtomeettheentireBoard
beforeanydecisionistakenrelatingtotheirappointment.
Theprocess,inconnectionwiththeappointmentofSimonKing,
KathDurrantandShatishDasaniisdescribedindetailonpage93.
BarryGouldConsultingwasengagedfortheappointmentofSimon
KingandRidgewayPartnerswasengagedfortheappointmentof
KathDurrantandShatishDasani.
TheprocessfortheappointmentofSteveFranciswasbroadlythe
same,theSavannahGroupwasinvolvedinleadingthesearchfor
aninterimCEO.Interviewsfortheinterimcandidateswereheld
onthisoccasionwiththeChairmanandtheSeniorIndependent
Director.BarryGouldConsultingwasengagedtoleadthesearch
processforapermanentCEO,bothproducingashort-listof
candidatesmatchingtherequiredskills.Thissearchprocess,led
bytheChairman,assessedbothexternalandinternalcandidates
andconcludedthatStevewastheoutstandingcandidateforthe
roleofCEO.OdgersBerndtsonwasengagedfortheappointment
ofIanAshtonfortheroleofCFO.BarryGouldConsultingGroup
andRidgewayPartnersdonothaveanyotherconnectionswiththe
CompanywhereastheSavannahGroupandOdgersBerndtson
havebeenemployedforseniorexecutiveappointments.Allthe
recruitmentfirmshavesigneduptotheExecutiveSearchFirms’
VoluntaryCodeofConduct.
Atthetimeoftheirappointments,areviewoftheiroutside
appointmentswasundertakentoensuretheywouldbothhave
sufficienttimetodedicatetoSIG.
Simon,Bruno,Christian,KathandShatishwillofferthemselvesfor
electionatthe2021AnnualGeneralMeeting.
Inmakingrecommendationsfortheannualre-electionofthe
ChairmanandNon-ExecutiveDirectors,theCommitteeconsiders
theskills,knowledge,experience,independenceandalsothetime
commitmentsofeachDirectortoensurethattheyhavesufficient
timetofulfiltheirresponsibilitiestothebusiness.
2020wasanunprecedentedyearastheCompanynavigatedits
waythroughtheCovid-19pandemic,changesintheleadership,
raisingfundsfromShareholdersincludingtheinvestmentby
CD&Randrestructureditsdebtand,atthesametime,building
onitsleadingmarketpositionsandpositioningthebusinessfora
returntoprofitablegrowth.TheChairmanhasalsodemonstrated
asignificanttimecommitmenttoSIGduringtheyearoverand
abovehisnormaldutiesasChairmanforaperiodofsixmonthsin
ordertosecurethestabilityoftheCompany,aswellasproviding
additionalsupportduringtheperiodofabsenceoftheprevious
CEO.AndrewalsoprovidedextrasupporttothetwonewExecutive
Directors,SteveFrancisandKathKearney-Croftappointedon25
February2020,andtoIanAshtonduringtheCovid-19pandemic
alongwithallotherBoardmembers.HeassistedtheCEOandCFO
withengagementwithShareholdersontheFirmPlacing,Placing
andOpenOfferandrestructuringtheCompany’sdebt,leadingto
dailycallswithkeyadvisorsduringthistime.TheBoardconfirmed
theChairmanretainedhisnon-executivestatusduringtheperiod
heprovidedsignificantsupport.
Attheendof2019,theCommitteeconsideredaproposalto
appointKateAllumasthedesignatedNon-ExecutiveDirectorwith
responsibilityforworkforceengagement.During2020,Katewas
alsoappointedaswhistleblowingchampion.However,following
theappointmentofSimonKingandhiskeeninterestinworkforce
engagementitwasagreedthathewouldreplaceKate.Inaddition,
hewasalsoappointedastheBoard’swhistleblowingchampionin
October2020whichwillcomplementhisroleasthedesignated
Non-ExecutiveDirectorforworkforceengagement.Again,the
CommitteereviewedSimon’stimecommitmentstoensurehe
wouldbeabletodischargethedutiesundertheserolesadequately
andthereforerecommendedtheappointmenttotheBoard.
TheCommitteealsoconsideredthereappointmentofAndrewAllner
totheBoard.Andrewwasoriginallyappointedon1November2017
foraninitialthree-yeartermuntil31October2020.Havingconsidered
hisothertimecommitments,theCommitteerecommendedhis
reappointmenttotheBoardforafurtherthree-yeartermuntil
November2023.
Takingintoaccounttheaboveandhavingconsideredthetime
commitmentsoftheotherNon-ExecutiveDirectors,inaddition
totheBoardevaluationreviewprocessdetailedonpage78,the
CommitteeandtheBoardhaveconfirmedtheyaresatisfiedthat
boththeChairmanandtheotherNon-ExecutiveDirectorshave
sufficienttimeandthenecessaryskillsandexperiencetofulfil
ourresponsibilitiestothebusiness.Furtherdetailsonskillsand
experienceofeachDirectorandwhytheBoardbelievestheir
contributionisandcontinuestobeimportanttotheCompanyisset
outonpages75to76.
AllDirectorswillaccordinglybeputforwardforelectionorre-election
atthe2021AGM.
92
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Key activities during 2020
Process for recruitment of two additional
Non-Executive Directors*
■ ResignationofMeinieOldersmaandNickMaddockin
February2020
■ RecommendationoftheappointmentofSteveFrancisas
ExecutiveDirectorandinterimthenpermanentCEOandIan
AshtonasanExecutiveDirectorandCFO
■ RecommendationofreappointmentofAndrewAllneras
Chairmanattheendofhisinitialthree-yeartermofoffice,
includingreviewinghisothertimecommitments
■ ApprovalofupdatedCommitteetermsofreference,taking
intoaccounttheappointmentofCD&Rnomineesandthe
revisedICSAmodelTermsofReferenceforrecommendation
to the Board
■ ReviewofBoardsuccessionplansfor2020/2021andsenior
managementsuccessionandleadershipdevelopment
■ Recommendationforre-electionofDirectorsat2020AGM
■ GaveapprovalforGillianKenttojointheBoardofDignity
plcandAlanLovelltojointheBoardofMitieGroupplcas
aNon-ExecutiveDirectorsfollowingareviewoftheirtime
commitments
■ RecommendationofappointmentofSimonKing,Kath
DurrantandShatishDasaniasNon-ExecutiveDirectors
■ RecommendationofappointmentofSimonKingas
designatedNon-ExecutiveDirectorresponsibleforworkforce
engagementandwhistleblowingchampion,including
reviewing his other time commitments
■ ReviewoftheanalysisofBoardskills
■ ReviewedandagreedtheBoarddiversityandinclusionpolicy
for recommendation to the Board
■ ReviewofCommitteeevaluationreportandagreedareasof
focusfor2021
■ StructureandcompositionoftheBoardanditsCommittees,
takingaccountofsuccessionplanningfortheBoard,
Directors’othertimecommitmentsandtheskills,knowledge
andexperienceofDirectors
■ TalentmanagementwithintheGrouptakingintoaccount,
Groupstrategyandthechallengesandopportunitiesfacing
the Group
Areas of focus in 2021
In2021,theCommitteeinadditiontoitsnormaldutieswillbeto:
■ ContinueitsfocusonsuccessionplanningfortheBoard,
ExecutivesandSeniorLeadershipteam;and
■ Undertakeamorestructuredandformalreviewoftalent
management,performanceandcapabilityagainstthe
Company’sstrategicgoals.
The objective
TheCommitteehadbeenadvisedthatbothKateAllumandIan
Duncanwishedtostepdownandthereforetheobjectivewasto
recruitreplacementsfortheChairoftheAuditandRemuneration
Committees.
↓
The brief
Weconstructedadetailedbriefforrecruitmentconsultants,including
adetailedcandidateprofileandjobspecification,identifyingthe
skillsrequiredofthenewNon-ExecutiveDirectors,havingregardto
thebalanceofskills,knowledgeandexperienceofexistingBoard
membersandthestrategyandfuturechallengesandobjectivesof
thebusiness.TheimportanceweplaceondiversitywithinourBoard
wasstressedwithinthebrief.
↓
The engagement
RidgewayPartnerswasengagedtoleadthesearchprocess.They
have no other connection to the Group and are signatories to the
LordDavies’VoluntaryCodeofConductforExecutivesearchfirms
promotingdiversityinrecruitment.
↓
The search
TheChairmanandSeniorIndependentDirectorreviewedalong-list,
preparedbyRidgewayPartners,ofpotentialcandidateswhoseskills
matchedthecriteriawithinthebrief.Thiscontainedahighproportion
offemalecandidates,diverseeducationalbackgroundsandpeopleof
colour.Thereafter,ashortlistofcandidateswaspreparedcontaining
onlywomenand/orpeopleofcolour.
↓
The interviews
InterviewswereheldwiththeChairmanandSeniorIndependent
Director.FollowedbyinterviewswiththeCEOandtheCD&R
Directors.Thefinaltwocandidatesthenmetwithmembersofthe
widerBoardandfollowingthereceiptofsuitablereferences,were
thereafterrecommendedtotheBoardforappointment.
↓
The induction
Astructuredandtailoredinductiontookplaceforbothofthenewly
appointedDirectors.Detailsoftheinductionareincludedonpage77.
*AsimilarprocesswasundertakenfortheappointmentofSimonKingwherethebrief
forBarryGouldConsultinghadbeentofindsomeonewithexperienceofbuilding
productsdistributionandagaintheimportanceofdiversitywasstressed.Theshort
list,however,wasnotasdiverseaswewouldhaveliked,butwearedelightedto
havesecuredsomeonewithSimon’srelevantexpertiseastheex-CEOofWickes.
93
Stock code: SHI www.sigplc.comGOVERNANCE Nominations Committee Report
Diversity
Within the Board
TheBoardacknowledgestheimportanceofdiversityinitsbroadest
senseintheboardroomasadriverofBoardeffectiveness.The
Boardrecognisesthatgender,ethnic,socialandculturaldiversity
ofBoardsaresignificantaspectsofdiversityandacknowledgesthe
rolethatwomenandthoseofdifferentethnic,socialandcultural
backgroundswiththerightskills,experience,cognitiveandpersonal
strengthscanplayincontributingtodiversityofperspectiveinthe
boardroom.
ThepolicyonBoarddiversitywasreviewedbytheBoardduringthe
yearandisavailableontheCompany’swebsite(www.sigplc.com).
AnexampleofhowtheBoarddiversitypolicywasimplemented
during2020istheprocessthatledtotheappointmentofthenew
Non-Executive,KateDurrantwhojoinedtheBoardon1January
2021andreplacingKateAllumasChairoftheRemuneration
Committee.
Diversityinthebroadestsensewasakeyelementinthebrief
providedtothesearchfirmwhichresultedinashort-listthat
containedonlywomen,andthosewithawithadiverseeducational
background.TheBoardrecognisesthatgenderdiversityisa
significantaspectofdiversityandacknowledgestheHampton-
AlexanderReviewrecommendations,whichaimtoincreasethe
numberofwomeninleadershippositionsinFTSE350companies,
includingatargetof33%representationofwomenonFTSE350
companyboardsby2020.In2020,femalerepresentationonthe
BoardfluctuatedduringtheyearasAndreaAbtsteppeddown,Kath
Kearney-CroftjoinedtheBoardon25Februaryandsubsequently
steppeddownwhenapermanentCFOwasappointed.Foraperiod,
wehad43%femalerepresentationontheBoardbutwiththe
additionoftheCD&RDirectorsandSimonKingwearenowat20%.
Furthermore,duringtheprocesstoreplaceIanDuncanasChair
oftheAuditCommittee,againdiversitywasakeyelementinthe
briefprovidedtothesearchfirmandwewerepleasedtoseea
shortlistthatcontainedamixtureofwomenandpeopleofcolour.
In2019,theBoardmadeitclearitwouldaspiretoachievethe
recommendationoftheParkerReviewCommitteetohaveatleast
oneDirectorofcolourby2024.Wearedelightedthatinfindingthe
bestcandidatefortherolewehavemetthisaspirationwiththe
appointmentofShatishDasani.
Ouraspirationistoendeavourtohaveatleast33%female
representationinlinewiththeHampton-AlexanderReviewandwill
considerthisforanyfutureBoardappointments.
Within the Group
TheCommitteecontinuestomonitordiversityandinclusionmore
widelywithintheGroupandparticularlyatseniormanagement
level.Informationonthegenderbalanceofseniormanagement
andtheirdirectreportsisonpage39.
Duringtheyear,theCommitteeinitiatedareviewoftheCompany’s
approachtodiversityandinclusiontounderstandwhereactivity
needstobeincreasedandtheeffortsbeingundertakentofurther
promotediversityacrosstheGroup.Furtherdetailscanbefound
onpage39.TheCommitteereceivesregularinformationon
diversityfromacrosstheGroupexceptfromthosecountrieswhere
thelawdoesnotpermitsuchinformationtobegathered.
TheGroupdiversityandinclusionpolicydefiningtheGroup’s
standardsandexpectationswasupdatedandissuedtoemployees
inDecember2019andcanbefoundatwww.sigplc.com.The
Companycontinuestoensurewherepossiblethatrecruitmentfor
anynewroleshasashortlistofdiversecandidates.
Asat31December2020,20%oftheExecutiveCommitteewere
femaleandwehaveonepersonofcolour.Weacknowledgethatthe
Hampton-AlexanderReviewtargetof33%femalerepresentation
inourELTanddirectreportstotheELThasnotyetbeenmetbut
ouraspirationistomeetthattargetoverthecourseofthenextfew
years.
BoarddiversitywillbeakeyaspectandfocusoftheNominations
Committeeasitcontinuesitsreviewofsuccessionplanningand
diversitywithinthebusiness.
TheCommitteealsonotedthatthenewcommitmentculture
programmeapprovedbytheBoardandlaunchedinJanuary2020
andrestartedinSeptember2020,includesbehavioursdesignedto
fosteracommitmenttodiversityandinclusion.Thesebehavioural
expectationswillbeintegratedintokeypeopleprocessessuch
astheperformancemanagement,recruitment,recognition,and
inductionprogrammes.Furtherdetailsofthecultureprogramme
canbefoundonpage38.
Committee performance
Aspartofcorporategovernance,theCommitteereviewsitsown
performanceannuallyandconsiderswhatimprovementscan
bemade.TheCommittee’sperformanceandeffectivenesswas
reviewedinDecember2020aspartoftheannualevaluationof
theBoardandCommitteeeffectiveness,whichwasundertakenby
theCompanySecretaryandfurtherdetailscanbefoundonpage
78.Thequestionnairefocusedonthefollowingkeyareas:(1)the
effectivenessoftheCommitteeinmanagingtalentandsuccession
planningfortheExecutiveDirectorsandseniormanagement;and
(2)theperformanceoftheCommitteeChair.
TheevaluationconcludedthattheCommitteehadbeeneffective
indealingwiththemattersdelegatedtoitbytheBoardinvery
challengingandunprecedentedcircumstances.Inmorenormal
timesandwithtimeavailable,theCommitteeacknowledgedthat
matterswouldbemanageddifferentlyandmoreinlinewithbest
practice.Progresshadbeenmadeagainstthe2020areasoffocus;
the Committee had reviewed the structure and composition of the
Boardandmadeanumberofappointmentsassetoutearlierin
thisreport.TheCommitteereceivedregularreportsondiversity
throughBoardreportsfromtheChiefPeopleOfficerandtalent
withinGroupwasreviewedinlightoftheintroductionofanew
customer-centricstrategytoreturntheGrouptoprofitablegrowth
andwinbackmarketshare.Anumberofsignificantappointments
weremadeduring2020.TheUKbusinesseswereamalgamated
underahighlyexperiencedManagingDirector.TheBeneluxand
GermanbusinesseswerealsoamalgamatedunderoneManaging
DirectorandanewhighlyexperiencedGroupHealth,Safetyand
EnvironmentDirectorwasappointed.
Followingthisreview,theCommitteedeterminedthatduring2021
itwould:
■ HaveacontinuedfocusonsuccessionplanningfortheBoard,
ExecutivesandSeniorLeadershipteam;and
■ Haveamorestructuredandformalreviewoftalent
management,performanceandcapabilityagainsttheCompany’s
strategicgoals.
94
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Directors’ tenure (as at 31 December 2020)
2017
2018
2019
2020
KateAllum
AndrewAllner
IanAshton
Bruno Deschamps
Ian Duncan
SteveFrancis
GillianKent
SimonKing
AlanLovell
Christian Rochat
1year6months
3years1months
6months
6months
4years
10months
1year6months
6months
2year5months
6months
Independence of Directors
as at 31 December 2020
Board gender diversity
as at 31 December 2020
Age of Directors
as at 31 December 2020
2
5
5
5
5
8
Independent Not Independent
1TheChairmanwasindependentonappointment
Female Male
50–59 60–70
Summary of Directors’ skills as at 31 December 2020
Strategy
Transformation/turnaround
Change management
Stakeholder engagement
Workforce engagement
Cultural engagement
Retail
Distribution
10
10
10
9
Transportation/fleet management
Health and safety
Accounting/auditing
Treasury management
10
Marketing
9
Corporate transactions
6
Property management
10
International
Technology/digital
8
Environmental/ESG
Number of Directors possessing relevant skill
8
8
10
10
10
9
10
10
9
95
Stock code: SHI www.sigplc.comGOVERNANCE Audit Committee Report
Committee
Membership
(during 2020 & 2021)
Shatish Dasani
Committee Chair and
IndependentNon-Executive
Director (appointed 1
February2021)
Ian Duncan
Former Committee Chair and
IndependentNon-Executive
Director (resigned
31January2021)
Andrea Abt
IndependentNon-Executive
Director (resigned
12February2020)
Purpose and aims
Kate Allum
IndependentNon-Executive
Director (resigned
31December2020)
Alan Lovell
SeniorIndependent
Non-ExecutiveDirector
Gillian Kent
IndependentNon-Executive
Director
Simon King
IndependentNon-Executive
Director (appointed
1July2020)
Kath Durrant
IndependentNon-Executive
Director (appointed
1January2021)
Toprovideeffectiveoversightandgovernanceoverthefinancial
integrityoftheGroup’sfinancialreportingtoensurethat
theinterestsoftheCompany’sShareholdersandotherkey
stakeholdersareconsideredandprotected.
Tomakerecommendationsonthereporting,control,risk
managementandcomplianceaspectsoftheDirectors’and
Group’sresponsibilities,providingindependentmonitoring,
guidanceandchallengetoexecutivemanagementintheseareas.
TheCommittee’saimistoensurehighstandardsofcorporate
andregulatoryreporting,anappropriatecontrolenvironment,
arobustriskmanagementframeworkandeffectivecompliance
monitoring.TheCommitteebelievesthatexcellenceinthese
areasenhancestheeffectivenessandreducestherisksofthe
business.
Key responsibilities
■ Theaccountingprinciples,practicesandpoliciesappliedin,
andtheintegrityof,theGroup’sFinancialStatements.
■ TheadequacyandeffectivenessoftheInternalControl
environment.
■ TheeffectivenessoftheGroup’sInternalAuditfunction.
■ Theappointment,independence,effectivenessand
remunerationoftheGroup’sExternalAuditor,includingthe
policyonnon-auditservices.
■ TheconductofanytenderprocessfortheGroup’sExternal
Auditor.
■ Externalfinancialreportingandassociatedannouncements,
includingsignificantfinancialreportingjudgementcontained
inthem.
■ TheGroup’sriskmanagementsystems,processesand
performance.
■ TheGroup’scompliancewiththeauditrelatedprovisionsof
theUKCorporateGovernanceCode.
Terms of reference
Duringtheyear,theBoardcarriedoutareviewandadopted
revisedtermsofreference.Thesecanbefoundonthe
Company’swebsitewww.sigplc.com.
Evaluation
AninternalevaluationwasconductedfortheCommitteeinline
withtheCode.Moredetailscanbefoundonpage78.
96
During 2020, continuing progress
was made in improving the control
environment, which included
addressing the majority of the
deficiencies highlighted by the
PwC report.
Shatish Dasani,
Chair of the Audit Committee
Dear Shareholder,
IampleasedtopresentSIG’sAuditCommitteeReportforthe
financialyearended31December2020onbehalfoftheBoard.
TheCommitteewaschairedduringtheyearbyIanDuncanandI
replacedhimfrom1February2021.
TheGroupcontinuestostrengthenitsinternalcontrolenvironment
andismakingsteadyprogressinthedevelopmentofarobust
internalcontrolframework.Themanagementteamareactively
workingtowardsensuringthatdetailedcontrolframeworksarein
placetoenablearisk-basedapproachtocontinuousmonitoringof
controlimplementationandeffectiveness.
TheCovid-19pandemicdelayedthecompletionofthe2020Group
InternalAuditplanbutgoodrecoverywasmadeinthesecondhalf
oftheyear;ofthe32auditsplannedforcompletionin2020,20
havebeencompletedandissued,and12wereinprogressat31
December2020anddueforcompletioninthefirstquarterof2021.
Inaddition,Covid-19hasalteredthedeliveryoftheauditwork
withfieldworkbeingconductedremotely.Thishastakenlongerto
completeand,insomecases,theapproachhasbeenaltered,for
example,OperatingCompanybranchstockmanagementaudits
havebeenconductedviavideocallsason-sitevisitshavebeen
restricted.
During2020,theGroupControlsteam’sprioritiesincluded:
■ ThedevelopmentofcontrolframeworkscoveringOrdertoCash
(“O2C”)andProcuretoPay(“P2P”)processesacrosstheGroup;
■ Continuingtodevelopadditionalcontrolframeworksforkey
financialprocesseswiththeaimthattheGrouphasafullsuiteof
financialcontrolframeworks;
■ DevelopmentofarollingprogrammeofreviewagainstaKey
ControlFramework(“KCF”);
■ Aprogrammeof‘lighttouch’testingagainstthecontrol
frameworksdevelopedin2019andtheframeworksthatwere
finalisedduring2020;
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Inadditiontothis,aGroupInternalAuditPlanfor2021hasbeen
approvedandwillcontinuetofocusonkeyinternalcontrols,with
morethanhalfofthe2021plandedicatedtothesetypesofaudits.
The2021planalsoincludesrisk-basedauditswithaproportion
reservedformanagementrequestsandinvestigations.Inaddition,
the2021planwillconsiderthepotentialongoingimpactof
Covid-19onkeybusinessprocessesandincluderelevantauditsto
swiftlyprovidetheCommitteewithadequateassuranceoverany
modifiedcontrolsandprocedures.
AlthoughgoingconcernisamatterforthewholeBoard(seepage
28),areviewisundertakenbytheAuditCommitteeoftheGroup’s
headroomunderitscovenantsandundrawnfacilitiesinrelationto
theGroup’sfinancialforecastsandsensitivityanalysis.
TheCommitteehassoughttoensurethattheauditprocesswith
theExternalAuditor,Ernst&YoungLLP,isconductedandmanaged
smoothlyandefficiently,thatthereiscollaborativecommunication
andengagementbetweenmanagementandtheExternalAuditor
andthatrequiredinformationisprovidedinatimelyfashionto
enableappropriateauditevidencetobecompiled.
DuringtheyearwewelcomedKathKearney-Croftwhowas
appointedastheinterimCFOon25February2020replacing
NickMaddockwhoresignedon24February2020.IanAshton
subsequentlyreplacedKathfollowinghisappointmentasthe
permanentCFOon1July2020.Additionally,weappointedanew
GroupFinancialControllerduring2020.
TheCompanyhascompliedduringthefinancialyearended
31December2020withtheprovisionsofTheStatutoryAudit
ServicesforLargeCompaniesMarketInvestigation(Mandatory
UseofCompetitiveTenderProcessesandAuditCommittee
Responsibilities)Order2014thatareapplicabletoit.
Shatish Dasani
Chair of the Audit Committee
25March2021
■ Developmentofaframeworkencompassingentitylevelcontrols
suchasperformancemanagement,DelegationofAuthority,
GDPR,anti-briberyandcorruption,employeeattractionand
retention,andbusinesscontinuity;and
■ DevelopmentofanITgeneralcontrolsframework.
TheCommitteehasworkedtoensurethat:
■ BrexitpreparationswereinplaceforimpactedOperating
Companies.Risksassessedwerelargelyinlinewiththeprior
assessmentsubmittedtotheCommittee,withincreasedtariffs,
supplyshortages,delaysatbordersandclarityoverprocedures
attheRepublicofIreland/NorthernIrelandborderthemain
potentialrisks.Mitigationswereimplementedtoaddressthese
risks,includingchangestoinventoryholdings,amendments
toimporttermsandtheengagementofathird-partycustoms
servicesprovidertoensurecompliancewiththenewregulation;
■ TheannualreviewoftheRiskmanagementframeworkwas
completed.Keyupdatesincluded:
− Arefreshedapproachtoriskreviewsandtimetablewiththe
scheduledtwice-yearlyplannedreviewsoflargerOperating
Companyriskregisterstobereducedtoannualandin-depth
reviewsofselectedGroupriskstobeintroduced;and
− Theupdateofriskappetitestatementsasproposedbythe
ELT.Actionsplanshavebeenputinplacetoimprovethe
Group’sresponsetorisksandtobringthenetriskwithin
appetite;
■ Apolicymanagementprocesswasintroduced,includinga
centralpolicyrepository.ThiswasrequiredaspartoftheFPPP
reviewperformedbyKPMGduringtheequityraise.Through
collaborationwiththeGroupCommunicationsteam,aGroup
policyrepositoryisnowhostedonSharePoint,withaselection
ofGrouppoliciesnowavailableinfivedifferentlanguages.
Groupfinancepoliciesarealsoincluded,aswellastherecently
updatedGroupDelegationofAuthoritypolicy;
■ Thebusinesscontinuestoself-assessthecontrolenvironment
usingtheKCF,withOperatingCompaniesrequiredtoself-certify
onaquarterlybasisagainsttheassertionsusinganagreed
RAGcriteria.Thisframeworkissupportedbydetailedcontrol
frameworksunderpinnedbydetailedriskandcontrolmatrices;
■ Environmental,SocialandGovernance(“ESG”)hasbeen
identifiedasstrategicallyimportant,andworkisongoingwith
theGroupHealth,SafetyandEnvironmentalDirectortofinalisea
formalassessmentofthisriskandstepstomitigateit;
■ Followingtheimplementationin2019oftheRiskmanagement
framework,thishasbeenreviewedinDecember2020and
updatedtoreflectchangesinpersonnelandcoverageoftheELT
meetingsatwhichriskmattersarepresented.Wereportfurther
onemergingrisksidentifiedduringtheyearonpage31;
■ Groupfunctionriskregistershavebeencompleted,following
riskworkshopswithkeystakeholders.Mitigatingcontrolshave
beendocumentedandactionplansidentified;and
■ Areviewofthemeasuresputinplacetosupportemployees
duetotheCovid-19outbreak.Thisresultedinanupdatetothe
GroupWellbeingandMentalHealthPolicyandanassociated
actionplan.Aten-stepactionplanforwellbeingandmental
healthwasidentifiedandkeyactionsincludedtheprovisionofa
newEmployeeAssistanceProgramme(EAP),trainingonmental
healthfirstaidandacommunicationscampaign.
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Stock code: SHI www.sigplc.comGOVERNANCE Audit Committee Report
Key activities during 20201
April
■ Reviewedprogressofannualyear-endaudit
May
■ Impairment review
■ TheGroupInternalAuditEffectivenessReportwaspresented,
■ Going concern assessment
and actions agreed
■ Reviewofspendonprofessionalfees
■ ExternalAuditorReportreviewedinparticularwhatmatters
■ Internalcontrolsupdate
hadbeenconcludedfortheyearandthosethatwere
outstanding
Spotlight risk review:
■ Covid-19andconsequencesfortheGroup
July
■ UpdateonKPMGFPPPReportandProjectSteelactionplan
■ Contingentliabilityreview
■ ReviewofAnnualReportandAccounts2019
■ Reviewofprincipalrisks
■ ReviewofAuditCommitteereport
■ ReviewofproceduresforconfirmingDisclosuresofInformation
toAuditor’sStatementforrecommendationtotheBoard
■ Annualreviewofeffectivenessofriskmanagementand
■ Rolling12-monthinternalauditprogrammereviewedand
Provision29oftheCode
approved
■ ReviewofGroupriskregister
■ UpdateonresponsetoPwCProjectSteelactionsandKPMG
FPPP Report
■ ReviewofEY’syear-endcontrolobservations
■ InternalControlsupdate
■ Annualreviewandassessmentof2019AuditandExternal
Auditor
■ ApprovalofAuditfees
■ SeniorAccountingOfficerReviewfor2019
■ 2020AnnualPlannerandupdatedTermsofReferencefor
approval
■ ReviewedtheperiodicassessmentofIIAstandards
■ ReviewedQ2KCFself-assessments
December
■ ReviewofGroupriskregisterwhichincludestheriskappetite,
emergingrisksandriskmanagementframework
■ AssessmentofcomplianceagainstProvision29oftheCode
■ ApprovedEYdraftengagementletter
■ ReviewedQ3KCFself-assessments
■ Reportoncreditcardcontrols
■ Reviewoftheproposed2021GroupInternalAuditPlan(partof
therolling12-monthplan)
■ ReviewpoliciesonAuditornon-auditfeesandemploymentof
formeremployeesofAuditor
■ AnnualTaxandTreasuryupdate(includingtheannualtax
strategy)
■ CorporateCriminalOffencepolicyreviewed
■ AccountingandReportingupdatewhichincludesImpairment
year-endindicators
■ BrexitUpdate
■ Employeesupportreview
■ Updateonannualauditprocess
■ ProposalfortheannualGroupInternalAuditEffectiveness
review
■ Review of Committee effectiveness
Spotlight risk review:
■ CyberSecurity
98
■ ActionplanpresentedontheannualGroupInternalAudit
Effectivenesssurvey
■ Fraudriskassessment
September
■ Review of going concern and significant accounting matters and
judgementareasforinterimresults
■ ReviewofInterimResultsfor2020forrecommendationtothe
Board
■ Auditfeesfor2020
■ Year-end2020Auditplanning
■ Principalrisks–half-yearreview
■ InternalControlsupdate
Spotlight risk review:
■ Business growth
At every main meeting the Audit
Committee also considers:
■ ReportoftheChiefFinancialOfficer
■ ReportoftheExternalAuditor
■ ReportoftheDirectorofRiskandInternalAudit,
updatingonrisk,internalauditandcontrols
■ Minutesandactionsfrompreviousmeetings
1.
Fivemeetingswereheldintheyear.Given2020wasanexceptionalyear,the
normalmeetingprogrammehadtobeadjustedaccordingly.
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Boardinidentifyingandevaluatingsignificantrisks;(3)Leadership
oftheAuditCommittee;and(4)theAuditCommittee’srelationship
withkeypersonnelandtheExternalAuditors.
TheCommitteewasratedwellinmostareasandthereforecould
concludethatitisbeingeffectivelychairedandmanaged.The
strengthsoftheCommitteewereconsideredtobe:
■ Leadership–theChairoftheCommitteeiswellprepared,
considerateandfocusesonthekeyareas;and
■ Relationships–theCommitteehasagoodrelationshipwith
theExternalAuditors.
Itwasagreedthatthekeyprioritiesfor2021shouldincludethe
continuedimprovementintheinternalcontrolenvironment;
ensuringthatthereisaneffectiveexternalauditprocess;the
continuedimprovementinthewaytheBoardidentifiesand
evaluatessignificantrisks;andprioritisinghowresourceisdeployed
intherisk,auditandcontrolfunctions.
Meetings
TheCommitteemeetsregularlythroughouttheyear,withfive
meetingsbeingheldduring2020alongwiththeauditclose
meeting.Theauditclosemeetingisnormallyheldintheearlypart
oftheyearfollowingtheyear-end;however,thiswasdonelater
thanplannedduetotheoutbreakofCovid-19andthedelaytothe
publicationofthe2019results.Inaddition,afurthermeetingwas
heldattheendofApril2020toreviewtheprogressoftheaudit.Its
agendaislinkedtoeventsintheCompany’sfinancialcalendar.Key
mattersconsideredatmeetingsoftheAuditCommitteeduringthe
yeararelistedonpage98.
Audit Committee membership
TheBoardconsidersthateachmemberoftheCommitteewas
independentthroughouttheyear,andremainsso,andthereare
nocircumstancesthatarelikelytoimpairtheirindependence
accordingtothefactorssetoutintheCodeorotherwise.The
knowledgeandexperienceoftheCommitteemembersmeans
thattheCommitteeasawholeiscompetentinthesectorinwhich
theCompanyoperates.IanDuncan,asChairoftheCommittee
during2020,isacharteredaccountantandhadrecentandrelevant
financialexperienceforthepurposesoftheCode.ShatishDasani
asthenewChairoftheAuditCommitteefrom1February2021
isacharteredaccountantandhasrecentandrelevantfinancial
experienceforthepurposesoftheCode.
AttendancebyindividualmembersoftheCommitteeisonpage58.
TheCommitteeChairregularlyinvitesseniorcompanyexecutives
to attend meetings of the Committee to discuss or present specific
items.TheinterimCFO,KathKearney-Croft,andthenewCFO,Ian
Ashtonattendedallmeetingsin2020thattheywereentitledto
attend.TheExternalAuditorandtheDirectorofRiskandInternal
Audit(ortheirreports)alsoattendedallmeetingsoftheCommittee
in2020andhavedirectaccesstotheCommitteeChair.
TheCommitteemeetsregularlywiththeExternalAuditorand
theDirectorofRiskandInternalAudit(orhisreports)withoutthe
ExecutiveDirectorsbeingpresentandtheCommitteeChairalso
meetswiththeExternalAuditor,CFOandDirectorofRiskand
InternalAuditinadvanceofCommitteemeetings.
InaccordancewiththerelationshipagreementwithCD&Raspart
ofthefirmplacing,placingandopenofferundertakeninJuly2020,
theyareentitledtonominateanobservertotheAuditCommittee.
Since10July2020,DiegoStraziotahasattendedallmeetingsheis
entitledto.AsanobserverDiegoisentitledtoattendmeetingsbut
cannotinfluencethedecisionmakingoftheCommittee.
Audit Committee structure
TheCommitteeoperatesunderwrittentermsofreference,which
canbefoundontheCompany’swebsite(www.sigplc.com).
TheyarereviewedannuallybytheCommitteeandchangesare
recommendedtotheBoardforapproval.Thetermsofreference
arereviewedatleastannuallyandwereupdatedinJuly2020,
followingtheannualreviewandtoreflecttheRelationship
AgreementsignedwithCD&R.
TheCommitteehasinitstermsofreferencethepowertoengage
outsideadvisorsandtoobtainitsownindependentexternaladvice
attheCompany’sexpense,shoulditbedeemednecessary.During
2020,theCommitteeengagedtheservicesofKPMGLLPtoprovide
adviceontheCompany’sapproachtoriskappetite.KPMGLLPalso
supporttheGroup’sInternalAuditfunctionprovidingspecialist
supportwithtargetedaudits.TheChairoftheCommitteereports
tothesubsequentmeetingoftheBoard(unlessallBoardmembers
attendedtheCommitteemeeting)onthekeyissuescoveredbythe
Committee,identifyinganymattersonwhichitconsidersthataction
orimprovementisneeded,andmakesrecommendationsonthe
stepstobetaken.
Audit Committee evaluation
Aspartofcorporategovernance,theCommitteereviewsitsown
performanceannuallyandconsiderswhereimprovementscan
bemade.TheCommittee’sperformanceandeffectivenesswas
reviewedinNovemberandDecember2020aspartofthereview
ofBoardandCommitteeeffectivenessconductedbytheCompany
Secretary,furtherdetailsareonpages78to80.Thequestionnaire
focusedonthefollowingkeyareas:(1)theAuditCommittee’sability
tounderstandandgiveappropriateconsiderationtointernal
controltestingconductedbymanagement;(2)theabilityofthe
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Stock code: SHI www.sigplc.comGOVERNANCE Audit Committee Report
Significant financial judgements
TheCommitteeconsideredanumberofsignificantissuesduringtheyear.Theserelatedtoareasrequiringmanagementtoexercise
particularjudgementorahighdegreeofestimation.TheCommitteeassesseswhetherthejudgementsandestimatesmadeby
managementarereasonableandappropriate.TheissuesandhowtheywereaddressedbytheCommitteearesetoutbelow:
Key financial reporting and significant financial judgements
considered in relation to the Financial Statements
Going concern
basis and
viability
statement
TheGroupisrequiredtoassessifithasaccessto
sufficient resources to continue as a going concern
andassesstheperiodofviability.
Discontinued
operations
FollowingtheannouncementinOctober2019to
selltheAirHandlingbusinessthesalecompleted
inJanuary2020.ThesaleofBuildingSolutionswas
abortedinMay2020,andtheCommitteeconsidered
the accounting treatment and presentation for each
oftheseinthefinancialstatements.
Recognition and
measurement
of supplier
rebate income
Proceduresandcontrolsareinplacetoensurethat
thereporting,reviewingandaccountingforsupplier
rebateincomeisproperlymanagedandthat
supplierrebatesarerecognisedappropriatelyinthe
GroupFinancialStatements.
Carrying value
of goodwill
and intangible
assets
Thecarryingvalueofgoodwillandintangibleassets
issystematicallyreviewedateachmid-yearpoint
andatyear-end.TheGroupestimatesarecoverable
amountforeachindividualcash-generatingunit
basedonforecastrevenues,operatingmargins
andappropriatediscountrateriskadjustedwhere
appropriate.
How the issue was addressed by the Committee
Thegoingconcerndisclosureswerecarefully
consideredandtheGroupnolongerconsideredit
necessarytoincludeanymaterialuncertainties.The
Grouphadsuccessfullyagreedamendedfacilitieswith
itsRCFlendersandprivateplacementnoteholders
inJune2020,togetherwithasuccessfulequityraise
of£165minJuly2020.TheGrouphadalsoseenan
improvedtradingperformancesincethemostextreme
Covid-19restrictionshavebeenlifted.TheCommittee’s
reviewandconclusionsinthisareaaresetout
separatelyonpages27to28.
Consistentwiththetreatmentadoptedinthe2019
AnnualReportandAccounts,AirHandlingispresented
asadiscontinuedoperationinaccordancewithIFRS5,
asithadbeenaseparatemajorlineofbusinessofthe
Group.
AsasaleoftheBuildingSolutionsbusinessisnolonger
beingpursued,thebusinessisnowconsideredtoform
partoftheongoingtradingactivitiesoftheUKbusiness
underthecombinedUKmanagementstructureand
strategy.Itisthereforenolongerconsideredtobenon-
coreandwillbepresentedwithintheunderlyingresults
forthefullyear2020.
TheCommitteeconsideredtheadequacyofwork
performedintheyeartocontinuetostrengthenthe
wayinwhichtherecoverabilityofsupplierrebatesis
controlled,includingtheinternalreviewprocessesand
thetechnologyinplacetoassistinthecalculationof
supplierrebateincome.
Theforecastsusedintheimpairmentreviewat31
December2019werebeforeCovid-19,asthiswasa
non-adjustingpostbalancesheetevent.Animpairment
wasrequiredat30June2020toreflectthelossthat
wasforecastinUKDistributionandUKExteriorsfor
theH2period,andafurtherimpairmentisrecognised
inUKDistributionat31December2020reflectingthe
slowerreturntogrowthasthebusinesscontinuesto
recoverfromtheimpactofCovid-19andcontinuesthe
implementationofthenewstrategy.TheCommittee
considered the appropriateness of the assumptions
andthesensitivityanalysisperformed.
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SIG plc Annual Report and Accounts for the year ended 31 December 2020 Key financial reporting and significant financial judgements
considered in relation to the Financial Statements
Followingaperiodofpauseandachange
indirectionandscopeoftheSAP1HANA
implementationprojectasagreedinDecember
2020,costsincurredandrecognisedonthebalance
sheettodatehavebeenreviewedtoassesswhether
theycontinuetohaveanyfutureeconomicbenefit.
Futurecontractualcommitmentshavealsobeen
reviewedtoassesstowhatextenttheGroupwill
derivefuturebenefitorwhethertheyrepresentan
onerouscontract.
TheGrouprenegotiateditsborrowingfacilitiesand
newagreementsweresignedinJune2020.TheRCF
wastreatedasanextinguishmentoftheprevious
agreementandrecognitionofanewliability.The
amendmentstotheprivateplacementnotes(“PPN”)
havebeentreatedasamodificationoftheexisting
agreement,whichresultedintherecognitionof
alossonmodification,effectivelyrecognisingthe
increasedfinancecostsonthePPNsimmediately
ratherthanovertheremainingtermofthedebt.
Impairment
of SAP
implementation
costs
Accounting
for the Debt
Refinancing
Covid-19
schemes and
deferrals
How the issue was addressed by the Committee
TheCommitteeconsideredthereviewundertaken
andtheconclusionsreachedinlightoftherevised
projectscopeandtiming.TheCommitteeconsidered
thatitwasappropriatetofullyimpairthe£13.6mcosts
previouslyrecognisedonthebalancesheetandto
recogniseonerouscontractprovisionof£11.4min
relationtofuturecommittedcostsforSAPandother
licencefees.
TheCommitteeconsideredtheaccountingforthe
amendmentstotheborrowingfacilitiesandconcluded
thatthetreatmentadoptedisappropriateandinline
withtheaccountingstandards.
AsaresultofCovid-19,theGrouphasreceiveda
numberofgovernmentsupportpackagesandother
formsofassistance.TheseincludetheCoronavirus
JobRetentionScheme(furlough)supportintheUK,
Ireland,FranceandBenelux;socialtaxsavingsin
France;andpaymentdeferralsinrelationtoVAT,
socialtaxes,corporationtaxandrentincertain
operatingcompanies.
ThemainaccountingconsiderationfortheCommittee
was whether the measures met the definition of
GovernmentgrantsinaccordancewithIAS20
“AccountingforGovernmentGrantsandDisclosureof
GovernmentAssistance”.ItwasdeterminedthattheJob
RetentionSchemeinvolvesatransferofresourcesfrom
government to the entities concerned and therefore
metthedefinitionofagrant.
Disclosure of
other items
TheGrouppresentsIncomeStatementitemsin
themiddlecolumnoftheConsolidatedIncome
StatemententitledOtheritemswheretheyare
significantinsizeandnature,andeitherdonotform
part of the trading activities of the Group or their
separate presentation enhances understanding of
thefinancialperformanceoftheGroup.
Disclosureofthenatureandextentofgovernment
grantsisrequiredintheFinancialStatements,together
withanindicationofanyotherformsofgovernment
assistance,suchastaxandVATpaymentdeferrals
andtheCommitteeissatisfiedthatthesearebeing
sufficientlycoveredintheFinancialStatements.
TheCommitteecarefullyconsideredthejudgements
madeintheseparatedisclosureofOtheritems.In
particular,theCommitteesoughttoensurethatthe
treatmentfollowedconsistentprinciplesandthat
reportingintheGroupFinancialStatementsissuitably
clearandunderstandable.
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Internal controls
Internalcontrolissuesarepresentedtoanddiscussedatevery
AuditCommitteemeetingandreportedtoeachBoardmeeting,
andanactivefocusonthemhasbeencontinuedthroughoutthe
year.Thecontrolsremediationdashboardreceivedasaregular
reporttotheAuditCommitteeallowsthemtoidentifyandassess
progressagainstanycontrolweaknessesidentifiedbytheExternal
Auditor,throughtheauditprocessortheKCF.
KCFself-certificationsarereceivedfromalloperatingcompanies
andallcontrolimprovementactionsareloggedon4Action,the
Group’saction-trackingsoftware.Theresultsarepresentedto
theBoardinsummaryformandreviewedbytheCommitteeona
quarterlybasis.
Allhigh-priorityandoverdueactionsarereportedthroughthe
controlsactiondashboardtotheactionownersandthrough
regularreportingtotheCommittee.
Inadditiontotheinternalcontrols’improvementplanendorsed
bytheAuditCommittee,detailedcontrolframeworksdeveloped
duringtheyearunderpinthekeyassertionsintheKCF,comprising
operatingcompanyspecificRACMs.Theseframeworksnowensure
thatownershipofspecificcontrolssitswithidentifiedindividuals,
increasingaccountabilityandimprovingbothcontrolawareness
andcontrolimplementationacrosstheGroup.Inparticular,
detailedframeworksforcashmanagement,supplierrebatesand
financialclosehavebeendevelopedtomapcontrolsagainstthe
Grouprisksschedulesandaprogrammeoftestingagainstthecash
managementandsupplierrebatecontrolframeworkshasbeen
completedacrosstheGroup.TestingoffurtherRACMsisplanned.
NewControlsManagershavebeenrecruitedinthemainoperating
companiestofurtherdevelopandstrengthentheirlocalcontrols.
TheGroupInternalAuditteamhasbeenstrengthenedtohelp
implementandmonitorthelocalcontrols.
Going concern basis and viability statement
TheGroupissubjecttofinancialcovenantsrelatedtoitscommitted
bankfacilitiesandprivateplacementnotesassetoutonpage28.
InJune2020theGroupsuccessfullyrenegotiatedthedebtfacility
arrangementswithitslenders.Undertherevisedagreementsthe
Groupwouldbesubjecttocovenanttestingasfollows:
■ Leverage(netdebt/EBITDA)andinterestcover(EBITA/interest)
nottesteduntilMarch2022,afterwhichtestedeveryquarter,
thetestsbeingappliedtotheprior12months;
■ Until28February2022theGrouphastoensurethat
ConsolidatedNetDebt(CND)doesnotexceed£225mforeach
quarterlytestdatein2021(2020:£125m);
■ MinimumLiquidity(availablecashandundrawnrevolvingcredit
facilitycommitments)of£40matalltimes;and
■ ConsolidatedNetWorth(CNW)mustatalltimesnotbeless
than£250m.
WhilsttheGrouphassignificantavailableliquidity,andonthebasis
ofcurrentforecastsisexpectedtoremainincompliancewithall
bankingcovenantsthroughouttheforecastperiodto31March
2022,on1March2021theGroupagreedwithitslendingbanks
andprivateplacementnoteholderstoamendcertainfinancial
covenantstobetteralignthetestsandtoprovideadditional
headroom on the interest cover covenant under stress test
scenariosfromMarch2022.Theamendedcovenantsunderthe
revisedagreementsareasfollows:
■ TheinterestcovertestingdoesnotstartuntilJune2022andis
atlowerlevelsthanpreviouslyuntilDecember2022;
■ Theleveragecovenantthresholdisnowslightlylowerthan
previouslyatMarch2022andJune2022;
■ TheConsolidatedNetDebtthresholdisloweredto£200mand
extendedtoDecember2022;and
■ NochangetotheCNWorMinimumLiquiditycovenants.
InJuly2020theGroupsuccessfullycompletedanequityraisefor
proceedsof£165m.
Duringtheyear,theGrouprespondedeffectivelytotheCovid-19
pandemic,andcontinuestodoso,tomaintainitsliquidityposition.
TheCommitteereviewedmanagement’sassessmentofgoing
concernwithconsiderationofforecastcashflows,including
sensitivitytoCovid-19andsalesimprovementplans.The
Committee reviewed the Group’s forecast adherence to the
financialcovenantsupto31March2022,includingconsideration
ofreasonablypossibledownsidesscenariostotheforecasts.The
Committeereviewedthelong-termviabilitystatementassetouton
pages27to28.
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SIG plc Annual Report and Accounts for the year ended 31 December 2020 InforminganassessmentoftheGroup’sabilitytocontinueasa
goingconcernandrecommendapprovaloftheviabilitystatement,
theGroupnolongerconsidereditnecessarytoincludeany
materialuncertainties.TheCommitteehasconsideredallofthe
abovefactorsandbelieveitisappropriatetopreparetheFinancial
Statementsonagoingconcernbasis,togetherwithapprovalofthe
viabilitystatement.
Corporate culture
TheCommitteeconsideredmeasuresundertakentotransform
thecultureofthebusinessin2019includingstrengtheningofthe
seniormanagementteamandremovalofhistoricworkingsilosand
hierarchy.During2020,theCommitteeendorsedfurtheractions
toensurethatthenecessaryresourceswereinplacetoimprove
controls.AnewGroupFinancialControllerandGroupHeadofTax
andTreasurywereappointedduringtheyearreportingtotheCFO,
IanAshton,whojoinedinJuly2020.During2020,theresourcein
thefinanceteamandUKsharedservicecentrehadbeenincreased
toenablefocusonthecontrolenvironment.TheCommittee
endorsedthestrengtheningofbothteamsandtheimportance
ofbuildingastrongandsustainableSeniorLeadershipteam.
SincetheintroductionofthenewExecutiveManagementteam
thequalityandexpertiseoftheFinanceteamhadbeenenhanced
further,withprogresstocontinueduring2021.
Oversight of risk management and internal controls
TheAuditCommitteehasresponsibilityforreviewingtheadequacy
andeffectivenessoftheGroup’sriskmanagementsystems.The
CommitteereceivesreportsfromtheDirectorofRiskandInternal
AuditonkeyissuesinrelationtotheGroup’sriskmanagement
systemsandprocessesateverymeeting.Theseupdatesinclude
commentaryonriskappetite,emergingrisks,significantchanges
toriskscores(andactions)andsignificantchangestotherisk
managementframeworkitself.AllGrouprisksareassessed
systematicallyagainstthe4x4riskmatrix,aspartoftheGroup’s
riskmanagementframeworkandanassurancemappingexercise
iscompletedtoidentifyassurancegapsforprincipalrisks.Anyrisk
wherethenetscoreisabovetheagreedriskappetitehasanaction
plandocumentedtobringtheriskwithinappetiteandareviewof
thecompletionoftheseactionplansisreportedannuallytothe
Committee.
Theprocessforidentifying,assessingandreportingonemerging
riskswasreviewedbytheCommitteeinMay2020toalignwith
year-endreporting.Anypotentialemergingrisksareincludedina
trackerand,whererequired,assessedinmoredetailandadded
totheGroupriskregisterforregularreviewandupdating.Atits
meetinginJuly2020,theimpactofasecondCovid-19lockdown
was reviewed from a reforecasting perspective together with the
practicalsafetyriskstoemployeesandcustomers.Anewinternal
auditwasaddedtothe2020GroupInternalAuditPlantoreview
theoperationalhealthandsafetycontrolsrelatingtoCovid-19.
TheCovid-19riskwasalsoreviewedwithadditionalauditsadded
totheplantomorebroadlyassesstheimpactonareassuchas
thesupplychain,receivables,andfurloughedemployeesamongst
others.HealthandSafetyhasseenitsriskratingincreaseduring
theyearfollowingareview,whichhighlightedgapsacrossthe
Groupthatwillbeaddressedgoingforward.Theseconcerns
overlapwiththeexpectationscoveredbytheHealthandSafety
teamundertheleadershipofthenewHealth,Safetyand
EnvironmentDirectorandsignificantprogressisexpectedduring
2021.
Inordertoenhancevisibilityintoassuranceprocessesacrossthe
Group,anIntegratedAssuranceFrameworkisbeingdeveloped,for
whichamappingexerciseofassuranceactivityisbeingundertaken.
Aspartofthis,sourcesofassuranceacrosstheGrouphave
beendocumented.Thisincludes,butisnotlimitedto,controls
monitoring,riskassessments,managementofself-certification,
internalauditsandreporting.Wheregapshavebeenidentified,
thesewillbeflagged,andappropriateactivityintroduced.This
AssuranceFrameworkwilllinkdirectlyintoactivitiesplannedfor
2021.TheAssuranceFrameworkwillsupporttheongoingprocess
ofidentification,evaluationandmanagementofsignificantrisks
facedbytheGroupandprovidesastructuredmeansforillustrating
theassuranceactivitiesunderpinningDirector’skeydisclosure
statementoninternalcontrolandriskmanagement.Theaimofthe
frameworkistoensurethat:
■ Individualsourcesofassuranceareclearlyunderstood;
■ Anappropriatelevelofconsistencyisachievedacrossthe
Group;
■ Existingactivitiesandtoolsareconsolidatedormergedwhere
practical;
■ Theindividualsourcesofassurancelinktogetherandthereis
clearoversightfromactivitiesconductedfrombranchtoSIG
Boardlevel;and
■ Allaspectsofcontrol(financialandnon-financial)areconsidered
sothatrisksaremanagedacrossallOperatingCompaniesand
businessfunctions.
TheGroupChiefInformationSecurityOfficer(CISO)hasbeen
workingwithGroupInternalAudit,withassistancefromKPMGas
theco-sourcepartner,todevelopandimplementanITControl
Framework.ThisFrameworkhasnowbeencompletedandisin
place.TheGroupCISOwillworkwiththeoperatingcompanyIT
teamsin2021onanappropriatescopeofreview.
AspartoftheFPPPreviewperformedbyKPMGin2020,anaction
toimplementapolicymanagementprocesswasagreed,including
acentralpolicyrepository.ThroughcollaborationwiththeGroup
Communicationsteam,aGrouppolicyrepositoryisnowbeing
hostedinSharePoint,withaselectionofGrouppoliciesnow
availableinfivedifferentlanguages.Goingforward,theGroup
Controlsteamwillperformongoingmonitoringtoensurethat
policiesarereviewedandupdatedinlightofbusinesschangeor
alternatively,aspartofanannualreviewprocess.
TheBoardreviewstheGroupriskstwiceyearlyforthelevelofand
typeofrisk,suitabilityofcontrolstomanagethoserisksandthe
actionsplannedtobringnetrisktowithinappetite.Theoverallrisk
appetiteisreviewedfortheGroupatthehalfandfullyear.Group
risksfeedintothecreationoftheannualGroupInternalAuditplan.
SpecificspotlightGrouprisks(suchasCovid-19,BusinessGrowth:
Franceandcybersecurity)arenormallypresentedquarterlyto
theCommitteebutthisyearthistimetablewasimpactedbythe
pandemicandfollowedwithareporttotheBoardaspartofthe
CFO’sBoardreport.Furtherdetailinrespectofriskmanagement
processesandassuranceisprovidedseparatelyonpage81.
TheBoardreviewedandapprovedtherevisionstotheGroup’s
DelegationofAuthoritypolicyinboth2019andduringQ12020
anddeemedtheapprovallevelssetbythisdocumenttobe
appropriatefortheGroup’sday-to-dayoperations.TheGroup’s
DelegationofAuthoritypolicywasreviewedandupdatedagainin
SeptemberandapprovedinDecemberbytheBoard,toreflectthe
changestotheUKorganisationalstructureandtoupdateapproval
limitsafterinputfromtheGroup’snewCFO.Recommendations
fromtheGroupInternalAuditfunctionwerealsoincluded,andalso
clearlysetsoutthosemattersthatrequireBoardapproval.
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TheCommitteeconsideredareportfromtheDirectorofRisk
andInternalAuditinrelationtoProvision29oftheUKCorporate
GovernanceCodeassessingtheeffectivenessofriskmanagement
andinternalcontrolsinDecember2020.
TheCommitteealsohasresponsibilityforreviewingtheadequacy
andeffectivenessoftheGroup’sinternalcontrolsystems.Reports
onthefindingsfromGroupInternalAuditreviews,investigations
andmanagementagreedactionsareprovidedateverymeeting.As
partoftheCommittee’sroleinapprovinganannualGroupInternal
Auditplan,itnowapprovesarollingGroupInternalAuditplan.This
providesgreatervisibilityofauditstotheCommitteeanditreceives
regularprogressreportsandanyissuesarisingarehighlighted.
PwC report
PwCwerecommissionedtoundertakeanindependentreview
ofthecommunicationandlevelofexplanationoftheGroup’s
underlyingfinancialforecastsandtheassociatedrisksand
opportunities,inlightofthedisparitybetweentheforecastlevelof
underlyingprofitbeforetaxforthefinancialyear2019setoutin
theJanuary2020TradingUpdateandmarketconsensusofforecast
profitpriortothatannouncement.Followingathoroughand
detailedreviewofinternaldocumentsandinterviewswithrelevant
employees,PwCdelivereditsconfidentialwrittenreporttothe
Companyon21April2020.
ThePwCreportmaderecommendationsastheyrelatetothe
Group’sprocesses,controlsandwiderorganisationalenvironment
inrelationtofourkeyareaslinkedtotheirfindings.
TheactionstheCompanyhastakentoimplementthe
recommendationsareasfollows:
■ Better availability and consistency of data.TheGroup
producesdailysalesinformationagainstphasedforecastsin
ordertoclearlyunderstandGroupperformancewithinthe
month.Dailycashanddebtbalancesarealsoreported.From
1January2021,theGroupdeployedanewconsolidation
andreportingtool,whichwillimprovetheefficiencyand
effectivenessofreportingandbudgeting.Financialforecastsare
updatedregularly,andriskandopportunitiesagainstforecasts
clearlyreported.
■ A continued embedding of the Group’s commitment
culture where people are encouraged to be bold and
‘call out’ behaviours that are not consistent with the
expectations of the Group.Thenewseniormanagement
teamarecommittedtodrivethroughnecessarychangesand
settheright‘tonefromthetop’.Group-widewebcastsbythe
CEOhavereinforcedtheexpectationofemployeestobehave
in a manner consistent with the Group’s commitment to its
culturalvalues.
■ A refreshed approach to whistleblowing through
appointment of a Board-level whistleblowing champion.
AnewBoardwhistleblowingchampionhasbeenappointed
andasimplifiedandmoreaccessibleWhistleblowingpolicy
hasbeendrafted.Allemployeesreceivedtrainingwithmore
targetedinputforspecificfunctions/individuals.Therehas
beenimprovedreportingofwhistleblowingincidentsandtrend
analysisofsuchincidentstotheBoard.AnewGroup-wide
policy,trainingandsystemwaslaunchedinJanuary2021.
TheAuditCommitteetrackedtheseactions,andthefurther
recommendationsfromKPMG,throughtheGroup’sstandard
processtoensurethattheyweredeliveredfully.
104
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Covid-19
InresponsetotheCovid-19pandemic,GroupRiskdesigned
androlledoutacrisisresponsechecklisttoeachOperating
Company.Thechecklistcomprisedasetofshort,mediumand
long-termmitigatingactivitiesforconsiderationbymanagementin
responsetooperational,financialandpeoplerisksposedbythe
pandemic.EachOperatingCompanyhasleveragedthechecklist
toensurecoverageofthefullerspectrumofrisksandtoprompt
considerationofadditionalactivity,especiallyinrelationtochanges
inresponsebygovernments.Keyareasoffocusincludedliquidity
andfinance,supplychain,healthandsafetyandcyberrisk.The
Group’sriskshavealsobeenre-evaluatedinlightofCovid-19,with
anewlydefinedriskforaccesstofinanceandliquidityidentified
inearly2020andanincreaseinthenetriskratingforhealthand
safety.Furtherdetailscanbefoundonpage33.
GroupInternalAudithastargetedtestingonpaymentcontrols
(includinganalyticsforfraudulentpayments),cybersecurity,health
andsafety,theUKCoronavirusJobRetentionScheme,generalIT
Controlsandmaintainedafocusonkeyfinancialcontrolssuch
asbalancesheetreconciliations.TheGroupInternalAuditplan
hasbeenkeptunderreviewandadjustedtotakeintoaccount
theeffectsofthepandemicwiththeauditprocessbeingadapted
whilsttravelrestrictionsremaininplace.
Inaddition,GroupInternalAudithascontinuedtotakeadvicefrom
professionalservicesfirmsonhowbesttoadaptitsauditplanto
thepandemic.
Brexit
TheUnitedKingdomendedthetransitionperiodforitsexitfrom
theEUwithatradedealwhichwillrequirerenegotiationeveryfive
years.Therewasarigorousriskassessmentcarriedouttocover
bothleavingwithandwithoutadealinplace.Theriskidentified
asthegreatestpotentialrisktoSIGremainedtheuncertaintyover
theRepublicofIreland/NorthernIrelandborderandpotential
delaysattheUKbordergenerally.Additionaladministrative
taxmeasureshavebeenidentifiedandmitigated,through
amendmentstothetermsinplacewithSIGUKsuppliersfromthe
EUandtheappointmentofanagency.TheCommitteecontinues
tomonitorthechangesastheyarerolledoutandfurtherspecific
taxconsiderationswillbeassessedfollowingdetailedanalysis
performedbytheGroupHeadofTaxandTreasury.
Oversight of Internal Audit
TheGroupInternalAuditfunctionprovidesindependentassurance
toseniormanagementandtheBoardontheadequacyand
effectivenessofSIG’sriskmanagementframework.GroupInternal
Auditformsanindependentandobjectiveassessmentasto
whetherriskshavebeenadequatelyidentified,adequateinternal
controlsareinplacetomanagethoserisks,andthosecontrolsare
workingeffectively.KPMGLLPcontinuetoprovideadditionalco-
sourcedsupporttoGroupInternalAudittocoverspecialistareas.
TheDirectorofRiskandInternalAuditandtheGroupHeadof
InternalAuditwerealsoaskedtocompleteaquestionnaireby
wayofself-assessment.TheevaluationconfirmedthattheGroup
InternalAuditfunctionwascompetent,addsvalue,reportsonthe
rightthings,maintainsitsindependence,providesabroadrangeof
assuranceandiseffectiveoverall.
However,afewareasoffocusfor2021wereagreedbythe
Committeeasfollows:
1. Auditplanfor2021andbeyondtobebasedonrisk
assessment,businessneedsandcontrolsfindingsfromprior
internalandexternalaudits;
2. Focusauditstodemonstratebenefitsobtainedbyoperating
companiesaswellasprovidingreassurancetomanagement
andtheBoard;and
3. Reportstoprovideaclearersummaryofkeyfindingsand
actions,withconsiderationofintroducinganoverallcontrol
rating.
Oversight of External Auditor
Ernst&YoungLLPwereappointedastheGroup’sExternalAuditor
inJuly2018followingatenderprocessinitiatedinMay2018.
ShareholdersformallyapprovedtheirappointmentattheJune
2020AnnualGeneralMeeting.Thereisnointentiontoconductany
retenderingexercisecurrently,butthiswillbereviewedannually,
takingintoaccounttheperformanceandeffectivenessofthe
Auditor,asassessedbytheCommittee.
External Auditor performance evaluation
Fortheyearended31December2019,theGroupassessedthe
ExternalAuditor’sperformanceusingaquestionnaireissued
toOperatingCompanyFinanceDirectorstogetherwithcertain
membersoftheGroupFinanceteam,andallmembersofthe
Board(asat30June2020).Thequestionnairecomprisedof34
questionscoveringdifferenttopicsrangingfromperformance,
communication,governanceandefficiency.Theassessment
askedindividualstorateEYonascaleof1to5where“1”was
veryunsatisfiedand“5”verysatisfiedortheycouldrespond“n/a”.
Individualsalsohadtheopportunitytoaddcommentsalongside
theirscore.Intotal,25completedreturnswerereceived(seven
fromtheBoard),withanaverageof76%ofallquestionsbeing
ratedwitharesponseotherthan“n/a”.
Overall,theExternalAuditor’sperformanceandeffectivenesswas
ratedatasimilarlevelasthepreviousyear,performingbestinthe
areasofgovernanceandindependence,partnersandreputation.
Auditfees,teamandcommunicationwereareaswhichreceived
thelowestscoresandwereidentifiedthereforeasareasfor
improvement.TheCommitteehavingreviewedtheperformance
andeffectivenessoftheExternalAuditor,weresatisfiedwith
theindependence,objectivity,expertise,resourcesandgeneral
effectivenessofErnst&YoungLLP,andthattheGroupwas
subjectedtoarigorousauditprocess.
TheresultsofallauditshavebeenpresentedtotheAudit
Committeeduringtheyear.Areasofweaknessidentifiedduringthe
yearresultinadetailedactionplanandafollow-upauditcheckto
establishthatactionshadbeencompletedappropriately.
External Auditor independence assessment
TheBoardisawareoftheneedtomaintainanappropriatedegree
ofindependenceandobjectivityonthepartoftheGroup’sExternal
Auditor.
Asper2019,theCommitteeagreedtheprocessfortheevaluation
oftheperformanceoftheGroup’sInternalAuditfunctionin
December2020.Aquestionnairetailoredforparticipantswasused
andthesurveywascompletedinJanuary2021.Thequestionnaire
wassenttotheCommittee,ExecutiveDirectors,Managing
DirectorsandFinanceDirectorsoftheoperatingcompanies,the
ExternalAuditors,andotherkeyindividualsinfunctionalareas.
TheExternalAuditorreportstotheCommitteeeachyearon
theactionstakentocomplywithprofessionalandregulatory
requirementsandbestpracticedesignedtoensureits
independence,includingtherotationofkeymembersofthe
externalauditteam.Ernst&YoungLLPhasformallyconfirmedits
independencetotheBoardinrespectoftheperiodcoveredby
theseFinancialStatements.
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Stock code: SHI www.sigplc.comGOVERNANCE Audit Committee Report
Fair, balanced and understandable
TheBoardhadtheopportunitytoreviewearlydraftsoftheAnnual
ReportandAccountsandprovidedinput.Followingthisthe
Committeehasreviewedthecontentsofthisyear’sAnnualReport
andAccountsandadvisedtheBoardthat,initsview,theAnnual
ReportandAccounts,takenasawhole,isfair,balancedand
understandableandprovidesthenecessaryinformationtoenable
Shareholderstoassessthepositionandperformance,strategyand
businessmodeloftheCompany.
InreachingthisconclusiontheCommitteehasconsideredthe
following:
■ ThepreparationoftheAnnualReportisacollaborative
processbetweenFinance,Legal,CompanySecretariat,Human
ResourcesandCommunicationsfunctionswithinSIG,ensuring
theappropriateprofessionalinputtoeachsection.External
guidanceandadvicearesoughtwhereappropriate.
■ Theco-ordinationandprojectmanagementareundertakenby
acentralteamtoensureconsistencyandcompletenessofthe
document.
■ Anextensivereviewprocessisundertaken,bothinternallyand
usingexternaladvisors.
■ AfinaldraftisreviewedbytheAuditCommitteemembersprior
toconsiderationbytheBoard.
Shatish Dasani
Chair of the Audit Committee
25March2021
Policy on non-audit services
TheGrouphasanagreedpolicywithregardtotheprovision
ofauditandnon-auditservicesbytheExternalAuditor,which
operatedthroughout2020.Thepolicyisbasedontheprinciple
thattheyshouldundertakenon-auditservicesonlywherethey
are the most appropriate and cost-effective provider of the
service,andwheretheprovisionofnon-auditservicesdoesnot
impair,andcouldnotbereasonablyperceivedtoimpair,the
ExternalAuditor’sindependenceandobjectivity.Itcategorises
suchservicesasauditor-permittedservices,auditor-excluded
servicesandauditor-authorisedservices.Thefeespermissible
fornon-auditservicesshouldnotexceed70%oftheaverage
auditfeespaidtotheGroup’sExternalAuditorinthelastthree
consecutivefinancialyears.Thepolicywasreviewedduring2020
andwillbereviewedannuallyandcanbeviewedontheCompany’s
website(www.sigplc.com).Itdefinesthetypesofservicesfalling
undereachcategoryandsetsoutthecriteriatobemetandthe
internalapprovalsrequiredpriortothecommencementofany
auditor-authorisedservices.Inallcases,anyinstructionmustbe
pre-approvedbytheCFOandtheAuditCommitteeChairbefore
theExternalAuditorsareengaged.TheExternalAuditorcannot
beengagedtoperformanyassignmentwheretheoutputis
thensubjecttotheirreviewasExternalAuditor.TheCommittee
regularlyreviewsananalysisofallservicesprovidedbytheExternal
Auditor.ThepolicyandtheexternalAuditor’sfeesarereviewed
andsetannuallybytheCommitteeandareapprovedbytheBoard.
ThetotalfeespayablebytheGrouptoitsExternalAuditorfornon-
auditservices(relatingtotheInterimReview)in2020were£0.2m
(2019:£0.2m).Thetotalfeespayable,includingdiscontinued
operations,totheExternalAuditorforauditservicesinrespectof
thesameperiodwere£3.3m(2019:£2.3m).Thecurrentyearcosts
include£0.7mcostsinrelationtothe2019audit.
Theratioofaudittonon-auditfeewas13:1.Detailsofeachnon-
auditserviceandreasonsforusingtheGroup’sExternalAuditor
areprovidedinNote4totheFinancialStatementsonpage161.
AfullbreakdownofExternalAuditorfeesaredisclosedinNote4to
theFinancialStatementsonpage161.
Resolution to reappoint External Auditor
TheCommitteerecommends,andtheBoardagrees,thata
resolutionforthereappointmentofErnst&YoungLLPasAuditor
oftheCompanyforafurtheryearwillbeproposedatthe2021
AnnualGeneralMeeting.
106
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Directors’ Remuneration Report
Committee
Membership
(during 2020 & 2021)
Kath Durrant
Chair and Independent
Non-ExecutiveDirector
(from1January2021)
Kate Allum
Chair and Independent
Non-ExecutiveDirector
(until31December2020)
Andrew Allner
Chairman
Bruno Deschamps
Non-ExecutiveDirector
(from10July2020)
Ian Duncan
IndependentNon-Executive
Director
(until31January2021)
Gillian Kent
IndependentNon-Executive
Director
Simon King
IndependentNon-Executive
Director(from1July2020)
Alan Lovell
SeniorIndependentNon-
ExecutiveDirector
Shatish Dasani
IndependentNon-Executive
Director(from1February
2021)
Attendanceatmeetings
isonpage58.
Purpose and aims
Toprovideeffectiveoversightandgovernanceovertheintegrity
oftheGroup’sremunerationarrangementsforseniorexecutives
toensurethattheinterestsoftheCompany’sShareholdersare
protectedatalltimes.
TheCommittee’saimistoensurethatremuneration
arrangementssupportthestrategicaimsoftheCompanyand
enabletherecruitment,motivationandretentionofsenior
leaderstodeliversustainablelong-termperformanceinlinewith
thepurposeandcultureofthebusiness.
Key responsibilities
TheCommittee’skeyresponsibilitiesaretoassisttheBoardin
dischargingitsresponsibilitiesfor:
■ Reviewingthebroadpolicyfortheseniormanagement;
■ Recommendingandmonitoringthelevelandstructureof
remunerationforseniormanagement;
The Committee is committed to
supporting the business return
to profitable growth through
the effective deployment of the
remuneration policy and its
incentive structures. It remains
mindful of the challenges Company
performance and Covid-19 have
created for colleagues, customers,
suppliers and shareholders.
Kath Durrant
Chair of the Remuneration Committee
Contents
Inthisreportwesetout:
1. TheAnnualStatementfromtheChairoftheRemuneration
■ Governingallshareplans;and
Committee.
■ Reviewinganymajorchangesinemployeecompensationand
benefitstructuresthroughouttheCompanyorGroup.
Terms of reference
Duringtheyear,theCommitteeadoptedrevisedtermsof
referenceinJuly2020andinDecember2020.Thelatestversion
canbefoundontheCompany’swebsiteatwww.sigplc.com.
Evaluation
AninternalevaluationofthefunctioningoftheCommittee
wasconductedinlinewiththeCode.Moredetailscanbefound
onpage78.
2. TheAnnualReportonRemunerationwhichexplainshowwe
havepaidourDirectorsunderthepreviousandnewpoliciesthis
yearandhowourframeworkalignswithourwiderstrategyand
corporategovernancebestpractice,aswellashowweconsider
remunerationofthewiderworkforceinrelationtoExecutivePay.
Asinpreviousyears,theAnnualReportonRemunerationandthis
AnnualStatementaresubjecttoanadvisoryshareholdervoteat
the2021AGM.
Dear Shareholder,
OnbehalfoftheRemunerationCommittee,Iampleasedtopresent
theDirectors’RemunerationReportfor2020.
Ifindmyselfintheunusualpositionofpresentingthisreport
havingjoinedtheBoardon1January,2021,followingKateAllum’s
decisiontostepdownfromtheBoardandherroleasChairofthe
RemunerationCommitteeattheendof2020.
Background
TheyearwastumultuousforSIGstartingwithasignificantprofit
warning,andthedepartureofboththeCEO,MeinieOldersma,
andCFO,NickMaddock,inFebruary.Keystepsweretakento
addresscriticalissuesincludingtheappointmentofSteveFrancis
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Stock code: SHI www.sigplc.comGOVERNANCE Directors’ Remuneration Report
initiallyasinterimCEO,ofKathKearney-CroftasinterimCFO,and
therequirementoftheChairman,AndrewAllnertostepinto
ensurestabilisationofthebusinessoverasixmonthperiod.Ian
AshtonwasappointedasthepermanentCFOinJuly2020.Thenew
leadershipteamoperateddecisivelytore-establishafirmerfooting
forthebusiness.
Thisincluded:
■ Asuccessfulrefinancingofthebusiness,withacapitalraiseof
£165m,puttingthebusinessinamoresecurefinancialposition
andhelpingtoaddressthenetdebtposition;
■ TheimplementationofcorrectiveactionsfollowingaPwC
investigationcommissionedbytheBoardintothedisparity
betweentheforecastlevelofunderlyingprofitbeforetaxfor
2019setoutintheJanuary2020TradingUpdateandmarket
consensusofforecastprofitpriortothatannouncement;
■ TheappointmentofKPMGtosupporttheimplementationof
therequiredimprovementsinfinancialprocesses,reportingand
communications;
■ TheappointmentofnewleadershipfortheUKbusinesswith
deepsectorexperience;
■ Thedevelopmentofanewstrategyfocusedonexcellence
incoreoperationaldisciplines,customerandemployee
engagement,strengtheningsupplierrelationshipsandreturning
keybusinessestogrowth;and
■ EffectivemanagementoftheeffectsoftheCovid-19pandemic.
ShareholderswillunderstandthattheeffectsoftheCovid-19
pandemiccompoundedanalreadychallengingsituation,providing
anunprecedentedandcomplexbackdropforthenewleadership
team.AssetoutintheCEO’sReport(onpages19)thehealth
andsafetyofcolleagues,andotherkeystakeholdershashadthe
highestpriority.AppropriatePPE,enhancedcleaningregimes,and
additionaltraininghavebeenprovided.Awellbeingprogramme
operatestosupportthementalhealthofallcolleagues.Itisnotable
inabusinessthathascontinuedtooperateformuchoftheyear
thattheinstancesofCovid-19infectionhavebeenconsistently
lowerthannationalaveragesinallGroupcompanies.Theeffortsof
allcolleaguesinassuringCovid-19secureoperations,maintaining
customerdeliveryandimprovingcustomersatisfactionthroughthe
yearisrecognisedbytheCommittee,andpointstotheresilience
referredtointheChairman’sstatement.
WhereavailabletheCompanyaccessedgovernmentassistanceto
protectjobs,forexampleintheUKwherethegovernment’sfurlough
schemewasusedforapartoftheyearforcolleaguesunabletowork
fromhome.Duringtheyear,approximately2,000employeeswere
furloughedandnoemployeesweremaderedundantbecauseof
thepandemic.Duringthisperiod,furloughedcolleaguesreceived
80%ofbaseremunerationunlesstheirpaywas£30,000orlessin
whichcase,theCompanytoppedpayupto100%.Othercolleagues,
includingtheExecutiveDirectors,voluntarilyreceived80%ofpay.
Non-ExecutiveDirectorsincludingtheChairmanreceived50%
ofnormalfeesfortheperiodApriltoJune.TheCompanyalso
tookadvantageofbusinessratesreliefandHMRCtaxdeferral
arrangements,thoughasatthedateofthisreportnotaxis
outstanding.
Duringtheyeartherewasafocusoncostsavingmeasuresand
workingcapitalandcashmanagement,whilsttargetinginvestment
inessentialcapabilitiesandastrategiccommitmenttonormalise
paymentarrangementswithsuppliers,avoidingdelaysinpayments
atmid-yearandfullyearpointsasinthepast.
AsShareholdersyouwillbeawarethatafinaldividendwasnotpaid
inrespectof2019,andadividendfor2020willnotbepaid.
108
SIG plc Annual Report and Accounts for the year ended 31 December 2020 AlltheaboveinformedthedecisionsofCommitteeatvarious
pointsduringandattheendoftheyear,withanoverriding
concerntoensuretheappropriateleadershipofthebusiness
wasinplaceandthebasisforareturntoprofitablegrowthwas
established.
Company Performance
Strategic and operational highlights
■ ReturntoGrowthstrategydeliveringtoplan:
− UKbusinessrebuiltandrelaunched
− Reconnectionwithcustomers,suppliersandemployeeswell
advanced
■ Strongfinishto2020,aheadofexpectations;like-for-likesales
up4%inQ4,reflectingbroad-basedgrowthacrossallmajor
markets,includingtheUK
■ Significantlystrengthenedbalancesheetprovidesconfidence
toinvestinnewgrowthstrategyandsecurityagainstshortterm
marketuncertainty
■ Groupcontinuestoadaptsuccessfullytotradesafelyto
newCovid-19norms,workingcloselyandflexiblywithour
employees,customersandsuppliers
Financial results
■ Fullyearlike-for-likesalesdown13%,withasolidrecoveryinthe
secondhalf
■ Underlyinggrossmargindown80bpsduetolowersales
volumesovertheyear
■ Underlyingoperatinglossof£53.3m(2019:£42.5mprofit)
■ Underlyinglossbeforetaxof£76.3m(2019:£17.7mprofit
beforetax),withstatutorylossbeforetaxfromcontinuing
operationsof£202.3m(2019:£112.7mlossbeforetax),
reflecting£126.0mofOtherItems,including£76.1mof
impairmentchargesintheUKbusinessand£13.2monerous
contract costs
■ Netdebt,preIFRS16,downto£4.1m(2019:£162.8m),helped
bythesaleofAirHandlingdivisioninJanuaryand£152mcapital
raiseinJuly;postIFRS16netdebtdownto£238.2m(2019:
£455.4m)
New 2020 Remuneration policy
TheCompanyobtainedShareholderapprovalforanew2020
RemunerationpolicyataGeneralMeetingoftheCompanyon
17November2020withavoteof92.63%infavour.
Inthenormalcourseofevents,wewouldhavebeenseeking
shareholderapprovalforanewRemunerationpolicyin2021,three
yearsaftertheapprovalofthecurrentpolicyin2018.However,
therewereanumberofreasonsthattheCommitteefeltthatitwas
appropriatetobringforwardanewpolicyin2020:
■ TosupporttherefocusingoftheCompanystrategy;
■ ToreflectournewteamofExecutiveDirectorsandadesireto
aligntheirinterestswithShareholdersassoonaspossible;
■ Adesiretosimplifyourremuneration;and
■ Adesiretoincentivisethecreationoflong-termshareholder
returnsthroughsustainablelong-termperformanceofthe
Company.
Themainchangebetweenthe2018Remunerationpolicyandthe
new2020RemunerationpolicywasthereplacementoftheSIG
plcLong-TermIncentivePlan(the“LTIP”)withtheSIGplc2020
RestrictedSharePlan(the“RSP”).
Restricted Share Plan (“RSP”)
■ Reductioninmaximumawardfrom300%ofsalaryunderthe
LTIPto125%ofsalaryundertheRSP;
■ TheinitialawardforboththeCEOandCFOwas100%ofsalary
undertheRSPusingasharepriceof30pence(theplacement
price);
■ TheintentionoftheCommitteeistomakefutureawardsby
referencetothesharepriceatthetimeofgrantandfrom2022
toreviewwhethertoincreasethegrantleveltothemaximum
underthePolicy;
■ Three-yearvestingperiodandtwo-yearholdingperiod;and
■ UnderpinfortheCommitteetoadjustvestingifbusiness
performance,individualperformance,windfallgainsorwider
Companyconsiderationsmeanintheirviewthatanadjustment
isrequired.
Other policy changes
■ AlignmentofExecutiveDirectorpensioncontributionswiththe
widerworkforceatamaximumof7.5%ofsalary;
■ Introductionofpost-cessationofemploymentshareholding
requirement(300%ofsalaryfortheExecutiveDirectors)to
applyfortwoyearsfollowingcessation;and
■ Expansionofthemalusandclawbackprovisionstorefer
specificallytoriskmanagementfailureandcorporatefailure.
Why did the Committee believe that the 2020 Remuneration
policy was right for the Company and, in particular, the RSP?
The introduction of the RSP:
■ Enablesthebuild-upandmaintenanceofalong-term
shareholding,whichensuresExecutiveDirectorsfocuson
recoveringandenhancingShareholdervalue;
■ Ensuresmanagementhavethesameownershipexperienceas
Shareholders;
■ Ensuresafocusonthelong-termsustainableperformanceof
theCompanyreflectingtheoutputsofthestrategyallowinga
flexibleandnimbleapproachtomanagingthebusiness;and
■ SimplifiestheremunerationfortheExecutiveDirectors.
Youcanfindthefull2020RemunerationpolicyintheCompany’s
NoticeofGeneralMeetingdated29October2020at
www.sigplc.com/investors/information-for-shareholders/
AGM-notices-and-results.
Remuneration Decisions in respect of FY2020
Departures
BoththeCEO,MeinieOldersma,andCFO,NickMaddock,left
thebusinessandtheBoardinFebruary2020andcommenceda
periodofgardenleave.Theywereprovidedwiththecontractual
entitlementsrelatingtotheircessationofemployment.This
comprisedsalary,benefitsandpensioncontributionfortheirnotice
period.Itmeantthat:
■ Nobonuswaspaidinrespectofthefinancialyearinwhichthey
departed;
■ Deferredbonussharesfrompreviousyearslapsed;and
■ SubsistingLTIPawardsalsolapsed.
KathKearney-Croft,interimCFO,leftinAugust2020,followinga
handoverduringJulyandAugusttoIanAshton.Kathleftwithgood
leaverstatus,whichmeant:
■ Paymentinlieuofnotice(salaryandbenefits);
■ Anamountequaltotargetbonus(halfofthemaximumbonus),
proratedforfourmonthsof2020;and
■ NoLTIPsweregranted.
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Stock code: SHI www.sigplc.comGOVERNANCE Directors’ Remuneration Report
Salary Increases
TheCommitteedeterminedthattherewouldbenosalaryincreases
fortheExecutiveDirectorsduringFY2020.
Chairman’s Fees
TheCommitteedeterminedthatinaccordancewiththe
RemunerationPolicy,theChairmanshouldbepaidanadditionalfee,
fortheperiodwhereheworkedsignificantlyinexcessofthenormal
expectationsofaChairmanforsixmonthswhilsttheCompanywas
stabilised,thenewleadershipappointedandnewcapitalraised.
TheCommitteeapprovedanadditional6monthsoffeeswhich
aftertakingintoaccountthe50%reductionfromApriltoJune
resultedinanadditionalfeeoffourandahalfmonths(£81,850).
Hechosetoinvestthemajorityoftheadditionalfee(97%)aftertax
intheCompany’ssharesaspartoftheplacingandopenoffer.He
subsequentlypurchasedafurther40,000sharesinSeptember.
Pension
Thereisnowapolicyalignmentbetweenthepensioncontribution
ratesforthemajorityofUKemployeesandtheExecutiveDirectors
at7.5%ofsalary.A5%contributionisactuallypaidwhichislower
thanthemaximumpermissible.
Annual bonus outcomes for 2020
TheRemunerationCommitteefollowedthestructuredapproach
setoutbelowwhenconsideringtheannualbonusoutcomesfor
FY2020:
Step
Element
Committee Decision
Performance Conditions and Targets
Setting
performance
conditions
TheCommitteesetoutintheshareholderconsultation
andtheNoticeofMeetingseekingapprovalthe2020
RemunerationPolicy,thetypeofperformanceconditions
whichwouldbeusedfortheBonus.Theactualtargets
weresetatthepointtheCommitteefeltthatithad
sufficientclarityonthefuturestateofthebusinesslaterin
thefinancialyear.
TheCommitteehasmeasuredthesatisfactionofthese
targetstoestablishwhetheranybonuswouldhavebeen
earnedontheapplicationoftheformulaicapproachtotheir
measurement.
TheCommitteeexercisedadownwarddiscretiononformulaic
outcomesinrespectofitsdeterminationregardingtheCFO’s
bonus.
ThebonusdeterminationonlyappliedtotheCFOasthe
Committeehaddeterminedthatfollowingthebonuspayment
totheCEOof£375,000followingShareholderapprovalon
9July2020,thatnofurtherbonuspaymentwouldbemadeto
theCEOinrespectofFY2020.
Seebelowforadditionalinformation.
Shareholder Experience
Share price
TheCommitteeconsideredthereasonsbehindthe
substantialfallinthesharepriceanddeterminedthatthis
wasaresultof:
■ Thesignificantprofitwarningearlyintheyear,andin
theprioryear;
TheCommitteedeterminedthatthefallinsharepricewas
notdrivenbytheactionsoromissionsofthenewExecutive
Directors,whowereappointedtoprovidetheappropriate
leadershiptoreturntheCompanytoprofitablegrowth.
Therefore,thiswouldnotbeconsideredinthefinalbonus
determination.
■ ThedepartureofthepreviousCEOandCFO;
■ Decisionswhichnegativelyaffectedoperational
performanceinkeymarkets;and
■ MarketsimpactedbyCovid-19.
andwasnotbecauseofomissionsordecisionsmadeby
thenewExecutiveDirectors.
Dividends
TheCompanydidnotpayafinaldividendinrespectof
2019anddoesnotintendtopayadividendfor2020.
Capital
Raising July
2020
TheCommitteerecognisesthattheadditionalfundsfrom
shareholderswereessentialtoensuretheCompany’s
ongoingviability.
TheCommitteeagreedthatasnodividendwasdeclared
forShareholders,thatthisshouldbereflectedinanybonus
payabletotheExecutiveDirectors.
TheCommitteeconsidersthatthenewCEOwasfundamental
tothecapitalraisingprocessandthenewCFOtothe
stabilisationofthebusinessandimprovementinitsaccounting
practices.Therequirementtoraisefundswasnotbecauseof
omissionsordecisionsmadebythenewExecutiveDirectors.
110
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Step
Element
Committee Decision
Government assistance
CJRS support
TheCompanyparticipatedintheCJRSwithapproximately
2,000peoplefurloughedintheUK.Themajorityof
employeesreturnedtoworkby18May.Atthedateofthis
Reportnoemployeesarefurloughedandallemployees
arebeingpaidsolelybytheCompany.
TheExecutiveDirectorstooka20%reductionintheirsalaries
fromApril2020toJune2020todemonstratecommitmentand
reflectanalignmentwiththegeneralemployeeexperience.As
theUKreopenedinmid-MayitwasagreedthattheExecutive
Directorswouldbepaidtheirfullsalaryfrom1July.
ThefeesoftheNon-ExecutivesDirectorsincludingthe
Chairmanwerereducedby50%toreflectanalignmentwith
thegeneralemployeeexperiencefortheperiodApril2020to
June2020.
AllemployeestookapayreductionforthemonthofApril
unlesstheyearned£30,000orless,inwhichcasetheCompany
maintainedpayat100%.
TheCommitteetookintoaccounttheexperienceofthe
workforceduringthisperiod.
TheCommitteedeterminednottomakeanyadjustmenttothe
bonusbecauseofbusinessratesrelief.
TheCommitteebelievesthat,becausethepaymentshavenow
beenmade,theyarenotrelevantforthebonusdetermination
for2020.
Business
rates relief
TheCompanybenefitedfromthebusinessratesreliefas
didallqualifyingcompanies.Therefore,theCommittee
doesnotfeelthatthisisaparticularfactorforSIGtotake
intoaccountinanybonusdetermination.
Deferral of
the payment
of tax
TheCompanytookadvantageofthetermsofferedby
HMRCtodefervarioustaxpayments.Atthedateofthis
ReportallamountsowingtoHMRChavebeenpaidand
thereforetheCommitteedoesnotbelievethisisrelevant
tothebonusoutcomefor2020.
Other Stakeholders
Employees
TheobjectiveoftheBoardhasbeentoretainandsupport
ouremployeesthroughthischallengingperiodandno
redundancieshavebeenmadeasaresultofCovid-19.
TheCommitteebelievesthattheemployeeexperiencewas
relevanttothefinalbonusdeterminationsfortheExecutive
Directors.
Inaddition,itisintendedtopaybonusestoeligible
employeesfor2020.
Customers
TheCompanyhasprovidedgoodcustomerservice
duringthisperiodasevidencedbyourrecentcustomer
satisfactionNPSscoreof43.
TheCommitteewouldhaveconsideredpoorcustomerservice
overtherecentperiodasafactorthatwasrelevanttothefinal
bonusdeterminationsfortheExecutiveDirectors.
Other
Company’s
reputation
TheCommitteerecognisesthestrongbrandtheCompany
hasintheeyesofthepublicandthishasbeenakey
consideration of the Committee when determining the
remunerationforExecutiveDirectors.TheCommitteeand
theBoarddonotwanttomakeremunerationdecisions
thatnegativelyimpactontheSIGbrand.
Thiswasanunderlyingconsiderationbehindallthe
Committee’sremunerationdecisionsinrespectof2020
includingthebonusdetermination.
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Stock code: SHI www.sigplc.comGOVERNANCE Directors’ Remuneration Report
TheCommitteerecognisedthechallengingpositionitfounditself
inwhenlookingattheabovefactorsanddeterminingwhetherany
bonusshouldbeprovidedtotheExecutiveDirectors:-
CEO
TheCommitteerecognisedthatanumberoftheCompany’s
ShareholderswouldnotsupportabonuspaidtotheCEOin
recognitionofthehardworkheputintostabilisetheCompany
onthebasisofthefactorssetoutinthetableaboveandthatit
wouldalsobeviewedasatransactionbonus,whichanumber
ofShareholdersdonotsupportasamatterofprinciple.The
Committee,however,feltmorallyandlegallyobligedtopaya
bonusonthesuccessfulfundraisingasitwasatermoftheoriginal
interimagreementonwhichtheCEOwasappointed.Inaddition,
theCommitteetookthefollowingmitigatingsteps:
−
Itdidnotmakethebonusdeterminationunderthe
existing2018Remunerationpolicy,butmadethepayment
ofthebonusof£375,000subjecttoaseparatebinding
ShareholdervoteattheGeneralMeetingoftheCompanyon
9July2020.Theresolutionwassubsequentlypassedwith
55.93%ofShareholderssupportive;
− TheCEOinvested£150,000(75%)ofthenetoftaxsum
receivedinsharesintheCompanyandretainstheseshares
againsthisminimumShareholdingrequirement;and
− TheCommitteedeterminedthattherewouldbenofurther
bonusentitlementfortheCEOfortheremainderofFY2020.
CFO
AgaintheCommitteerecognisedthatanumberoftheCompany’s
Shareholderswouldtaketheviewthatnobonusshouldbepaid
becauseofthefactorssetoutintheabovetable.TheCommittee,
however,tooktheviewthatitwouldbeinequitablefortheCFO
whojoinedafterthemajorityofemployeeshadreturnedtowork,
tobetheonlymemberoftheSeniorManagementteamofthe
Companynottoreceiveapro-ratedbonusfortheperiodoftime
heworkedduringtheyear.TheCommitteeunderstandsand
sympathiseswiththeviewofanumberofShareholdersandtheir
representativebodiesthatbonusesshouldnotbepaidinthe
currentcircumstances.However,theCommittee’soverarchingview
wasthatwithoutthehardworkandeffortofthenewExecutive
DirectorstherewasarealpossibilitythatSIGwouldhavebeena
corporatefailurewiththesignificanteffectthatthiswouldhave
hadonallStakeholders.ItwasbecauseofthisthattheCommittee
becamecomfortablewiththebonusespaidtotheExecutive
Directors.However,theCommitteedeterminedthatitwoulduse
itsdiscretiontoreducethebonusbasedonformulaicoutcomes.
Intheordinarycourseofeventsamaximumbonusof100%or
50%proratedfortime,wouldhavebeenpayabletotheCFO.
TheCompanydecidedthatapaymentofjustunderhalfofthe
opportunitypro-ratedfortimeshouldbepaidtotheCFO.TheCFO
receivedabonusinrespectofFY2020of£93,750(25%)ofsalary.
Seepage117fordetailsofthebonusperformanceconditionsand
theirlevelofsatisfactionusedtodeterminethebonuspayableto
theCFO.
Long-term incentive awards vesting during 2020
ThenewExecutiveDirectorshavenoLTIPawards.Thefirstawards
underthenewRSPweregrantedduringtheyear.Theseawardswill
vestin2023subjecttocontinuedemploymentbytheparticipant
andassessmentoftheunderpinbytheCommitteebeforevesting
cantakeplace.Anysharesthatvestwillsubsequentlybereleased
followingafurthertwo-yearholdingperiod.
Covid-19 Remuneration Decisions
Thefollowingtablesummarisesthekeycomponentsofexecutive
remunerationandthedecisionsmadebytheCommittee:
Element of
Remuneration
Committee Decision
Rationale
FY2019
bonus
Therewasnobonusearnedbytheformer
ExecutiveDirectorsinrespectofFY2019.
FY2020 salary
rises
Therewerenosalaryrisesmadetothenew
ExecutiveDirectorsinrespectofFY2020.
FY2020
salaries
TheExecutiveDirectorstooka20%reductionin
theirsalariesfrom1April2020to30June2020
toreflectanalignmentwiththegeneralemployee
experience.
ThefeesoftheNon-ExecutivesDirectorsincluding
theChairmanhada50%reductiontoreflectan
alignmentwiththegeneralemployeeexperience
overtheperiodApril2020toJune2020.
Theperformanceconditionswerenotmet.
ThenewExecutiveDirectorswerehiredduringtheyear
atbasesalariesof94%(CEO)and101%(CFO)oftheprior
incumbents.
TheCommitteefeltthatthiswasafairalignmentofthe
ExecutiveDirectorswiththebroaderemployeepopulation.
ThesalariesoftheExecutiveDirectorsrevertedtotheir
normallevelfrom1Julywhenthevastmajorityofemployees
hadreturnedtowork.
FY2020
bonus
TheCommitteedeterminedthebonusoutcomeas
setoutinthetableabove.
TheCommitteefeltthatthiswasanequitableoutcome
consideringallthefactorsconsidered.
FY2020 RSP
Award
TheCommitteedeterminedtomaketheawardto
theExecutiveDirectorsinlinewiththenew2020
Remunerationpolicy.Theawardsweremadeata
levelof100%,lowerthanthenewPolicypermits.
TheCommitteefeltitwasimportanttograntthefirstaward
followingShareholderapprovaltoprovidesomelockinand
incentivisationfortheExecutiveDirectorsgiventhattheywere
newlyappointed.
TheCommitteewillreviewonaregularbasistheunderpin
tests,includingwindfallprovisions,andhastheflexibilityto
amendtheawardatorbeforevesting.
112
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Element of
Remuneration
FY2021 salary
rises
FY2021
bonus
Committee Decision
Rationale
Salaryrisesof1.5%forExecutiveDirectors.
Averageemployeesalaryrisesof1.5%.
TheCommitteefeltitwasappropriatetoincreasethesalaries
fortheExecutiveDirectorsinlinewiththegeneralworkforce
increase.
TheCommitteeisproposingtooperatethe2021
bonusinlinewiththenew2020Remuneration
Policyapplyingtheperformanceconditionssetout
onpage117.ThebonusopportunityoftheCFOwill
increaseto125%ofsalary.
TheCommitteefeelsthatitisappropriatetouseperformance
conditionswhichrewardtheExecutiveDirectorsforthe
successfulimplementationofthenewCompanystrategy.
TheCFOwasrecruitedonthebasisofabonusopportunity
for2020of100%,duringaperiodwherearevisedpolicy
wasinconsultationwithshareholders.Theapprovedpolicy
allowsforabonusopportunityupto150%.TheRemuneration
Committeebelievesanopportunityof125%isappropriate
fortheCFOroleandprovidesacompetitiveopportunitylevel
thatensuresheisfairlyrewardedinhisroleasthebusiness
returnstoprofitability.
FY2021 RSP
Award
TheCommitteeintendstocontinuetomakeawards
inlinewiththenew2020RemunerationPolicy.
TheCommitteewillreviewthesizeofgrantstakinginto
accountbusinessandindividualperformanceandother
factorstheCommitteeconsidersrelevant.
Company Stakeholders
TheCompanyhasbeenkeentoensurethatitskeystakeholdershavebeenconsideredinallitsremunerationdecisionsduringFY2020.The
followingsummariseshowtheCompanyhastakenintoaccounteachofitsmainstakeholders:
Stakeholder
Decision
Employees
■ TheprimaryfocusoftheCompanyhasbeentomaintainjobsoverthisperiod.Amodestadditionalrecruitmentof
employeesresultedinanoverallincreaseinemployeesdespitethechallengesthebusinessfaced.
■ Allemployeeshavebeentreatedconsistently:
− ThoseonfurloughintheUKreceived80%or100%oftheirsalarysupportedbytheCJRS(foremployeeswho
earned£30,000orless,theCompanymaintained100%ofsalary),thiswasrecognisedbytheBoardthrough
reductionsinBoardsalariesandfeesoverthisperiod;
− Bonuseswerepaidtoalleligiblestaff;and
− Termsandconditionsofemploymenthavebeenmaintained.
Customers
■ Customershavebeensupportedthroughourtechnologyandremoteworkingteamsandourfrontlinestaff
keepingourpremisesopenforbusiness.OurplanshavebeencenteredaroundprovidingthenormalSIG
customerexperiencewhereverpossible.
Shareholders
■ TheobjectiveoftheBoardhasbeentomaintainourcorebusinessoverthischallengingperiodanditsscalability
toensureSIGhasaleadingpositionwhenthemarketrecoversandisthereforeabletogeneratetheShareholder
returnsoverthelongertermexpectedbyourinvestors.
■ TheRemunerationCommitteehastakenintoaccounttheexperienceofShareholdersoverthisperiodinallits
determinationsinrelationtoExecutiveremunerationforFY2020.
Itshouldbenotedthat,priortointroducingthenew2020Remunerationpolicy,theCommitteeconsultedwiththe
Company’stop20Shareholders,GlassLewis,theIAandISSonthenewpolicy.Detailsofthemainareasofdiscussion,
commentsoramendmentssuggestedbyShareholders,theCommittee’sresponseandrationaleforthefinalposition
setoutinthenew2020RemunerationpolicycanbefoundintheNoticeofGeneralMeetingissuedon29October
2020.TheCommitteeatthesametimeasthenewPolicywasdiscussedwiththeCompany’sshareholdersalso
consulted44.07%voteagainsttheCEO’sbonusthatsoughshareholderapprovalinJuly.Thereasonsforthevote
againstandchangestheCompanymadeasaresultaresetoutonpage109oftheCorporateGovernanceReport.
DuringFY2020,nofurtherconsultationwasundertakenbytheRemunerationCommittee.
113
Stock code: SHI www.sigplc.comGOVERNANCE Directors’ Remuneration Report
Concluding remarks
TheGrouphasfacedsignificantheadwindsduringFY2020buthas
weathered the storm with grit and determination from a dedicated
workforceandnewleadershipteam.TheCommitteeappreciates
thatnotalldecisionsmadeduringtheyearreceivedunanimous
supportfromShareholders.Itisgratefulforthefeedback
receivedandthesignificantsupportgarneredforthenew2020
RemunerationpolicyattheGeneralMeetingoftheCompanyheld
on17November2020.Lookingforward,theCommitteeremains
focusedonsupportingthebusinesstoachieveasignificant
improvement in performance and continuing to operate with
rigourandtransparency.Wetrustthatthisreportwillanswerany
questionsyoumayhaveinrespectofremuneration,andwewould
begladtoreceiveyoursupportatthe2021AGMinrespectofthe
advisoryvoteontheAnnualReportonRemuneration.
Kath Durrant
Chair of the Remuneration Committee
25March2021
Advisers to the Remuneration Committee
External
ToensurethattheGroup’sremunerationpracticesareinlinewith
bestpractice,theCommitteeappointedindependentexternal
remunerationadvisers,PricewaterhouseCoopersLLP(“PwC”),
throughacompetitivetenderprocessin2018.PwCattends
meetingsoftheCommitteebyinvitationandcontinuedasexternal
advisorsthroughout2020.
Duringtheyear,theCommitteesoughtadvicefromPwCinrelation
toemergingmarketpractices,especiallyinrelationtotheimpact
ofCovid-19onexecutiveremuneration,generalmattersrelatedto
remunerationandinrelationtopeergroupremunerationanalysis.
PwCisoneofthefoundingmembersoftheRemuneration
ConsultantsGroupandadherestoitsCodeofConductinits
dealingswiththeCommittee.TheCommitteereviewstheobjectivity
and independence of the advice it receives from PwC at a private
meetingeachyear.ItissatisfiedthatPwCisprovidingindependent,
robustandprofessionaladvice.Thefeesfortheadviceprovidedby
PwCin2020were£58,250(2019:£55,500).Thefeeswerefixedon
thebasisofagreedprojects.OtherservicesprovidedbyPwCinthe
yearincludedsupportandadviceontheNewRemunerationpolicy
2020.
TheCompanyalsousesPwCforunrelatedpensions,tax,mobility
andpayrolladviceaswellasforanindependentinvestigation.
Internal
DuringtheyeartheCommitteesoughtinternalsupportfromthe
CEO,CFO,ChiefPeopleOfficerandtheCompanySecretary,whose
attendanceatmeetingswasbyinvitationfromtheCommittee
Chair,toadviseonspecificquestionsraisedbytheCommitteeand
onmattersrelatingtotheperformanceandremunerationofthe
seniormanagementteam.Suchattendancesspecificallyexcluded
anymatterconcerningtheirownremuneration.TheCompany
SecretaryactsassecretarytotheCommittee.
Focus for the year ahead
Lookingahead,theCommitteewill:
■ Monitor:
− Theimpactoftheturnaroundplan,executionofthestrategy,
operationalperformance,andachievementofbonustargets;
and
− TheimpactoftheCovid-19pandemicontheGroupand
itsimpactontheoutcomesofExecutiveRemuneration,
particularlyinthecontextof2020RSPawards.
■ Continuetoensure:
− Consistencyofapproachandfairpayconditionsacrossthe
Group;
− High-qualityremunerationadviceandinformationtoinform
decisions;
− Companyperformanceisappropriatelyreflectedinany
performance-relatedpayelementofremuneration;and
− CompliancewiththeCode.
■ Approve:
− AnnualBonusPlansandcorrespondingtargets;and
− LeveloftheRSPgrant.
■ Review:
− UpdatesreceivedfromtheGroupDirectorofRewardin
relationtodevelopmentsinemployeereward,incentive,and
benefitstructures;and
− Ongoingassessmentofallunderpinrequirementsofthe
futurevestingofRSPs.
114
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Directors’ Remuneration Report
ANNUAL STATEMENT
At a glance
Voting outcomes
Thefollowingtableshowstheresultsoftheadvisoryvoteonthe
2019Directors’RemunerationReportattheAGMheldon30June
2020andtheresultsofthebindingvoteontheRemuneration
PolicyattheGeneralMeetingheldon17November2020:
2019Directors’
Remuneration Report*
Current Directors’
RemunerationPolicy*
0.02%
51,589
7.37%
66,165,425
98.98%
326,158,888
92.63%
831,756,099
Total votes for Total votes against
*Thetotalvotescastincludesforandagainst,avotewithheldisnotavoteinlaw
andnotcounted.Atotalof27,892,813voteswerewithheldforthe2019Directors’
Remuneration(DR)Reportand23,395,204voteswerewithheldforthecurrent2020
DRPolicy.
SIG Executive pay
SIG Executive
pay Components
of Remuneration
The Directors’ Remuneration Report
is colour coded as follows:
Salary
Pension
Benefits
Bonus
RestrictedSharePlan
ShareholdingOwnership
Requirements
l
l
l
l
l
l
Business Context
2020 out-turns
against KPIs
KPI and Out-turn
Like-for-LikeSales
Operatingmargin
Gross margin
Operatingcostsasa%ofsales
Totalrecordableincidentrate
13.3%
(2.8)%
25.1%
27.9%
8.8
115
Stock code: SHI www.sigplc.comGOVERNANCE Directors’ Remuneration Report
ANNUAL STATEMENT
How do our incentive performance measures align to our strategy?
Inexecutingourstrategy,weaimtofocusonrecoveringandenhancingvalueforShareholdersandallotherstakeholders.Assetoutin
ournew2020Remunerationpolicy,theRSPdoesnothaveaprimarysetofperformancetargetsbutoperatesageneralunderpinon
vestingallowingtheCommitteetoreviewholisticallytheoverallperformanceoftheCompany,individualperformance,andwiderCompany
considerations.Inaddition,wecontinuallyconsidertheperformancemeasuresweusefortheannualbonusincentivestoensurethey
supportthedeliveryofourstrategy.
Our strategic pillars
To re-ignite growth, through our expertise, service and proximity
Responsible
actions
Winning
branches
Superior
service
Specialist
expertise
Valuable
partnerships
Highest
productivity
Focused
growth
Ourpeople
feelsafe,proud
andvaluedand
we operate
sustainably
tobenefit
communities and
the environment
Ourbranchteams
aretrusted,
capable,and
empowered to
achieve success
Ourstrengthened
entrepreneurial
andagilesales
teams provide
best-in-class
customer service
Ourempowered
localbranchesare
knownagainfor
specialistfocus
andexpertise
acquiredthrough
long-term
experience
↓
Wepartnerclosely
withsuppliersto
understand our
jointopportunities
and to create win-
win strategies
Ourefficient
support functions
areconsistently
productive and
drive strong
standards,
governance and
financialdiscipline
We focus on our
corebusiness
to drive growth
inbranches
and through
acquisition
opportunities
Our key performance indicators
Like-for-Like
sales
Operating
margin
Gross
margin
Operatingcosts
asa%ofsales
Totalrecordable
incident rate
Net promoter
score(NPS)
Marketshare
growth
↓
↓
Annual bonus
Measures
Link to strategy
Link to KPls
EBIT
■ Focusongrowthinsalesandreturns
■ Keymeasureoforganicgrowth
■ LinkedtoShareholdervalue
Average net debt
■ Focusonoperationalefficiency
■ Focusonsustainableinvestment
■ LinkedtoShareholdervalue
Strategic
Objectives
Health and safety
override
■ Strategicobjectivesforthebonusarecommerciallysensitiveandwill
bedisclosedretrospectively
■ Allemployees,customersandsuppliersshouldbeabletoworkinasafelymanaged
environmentacrosseverypartoftheSIGGroup
Restricted Share Plan
✓
✓
✓
✓
✓
✓
✓
✓
Measures
Link to strategy
Link to KPls
General underpin
■ Focusonlong-termsustainableperformance.
■ AllowsoverallperformanceoftheCompany,individualperformanceandwider
Companyconsiderationssuchasthelevelofemployeeandcustomerengagementto
betakenintoaccount.
Shareholding
guidelines
■ LinkedtoShareholdervalue.
✓
✓
✓
116
SIG plc Annual Report and Accounts for the year ended 31 December 2020
Remuneration in respect of 2020
What did our Executive Directors earn during the year?
Steve Francis
Ian Ashton
Kath Kearney-Croft
Meinie Oldersma
Nick Maddock
Salary:
£436,303
Salary:
£187,500
Salary:
£156,485
Salary:
£86,550
Salary:
£55,650
Pension:
£21,818
Pension:
£9,375
Pension:
£5,179
Pension:
£12,983
Pension:
Benefits:
£16,726
Benefits:
£10,841
Benefits:
N/A
Benefits:
£3,693
Benefits:
Bonus:
£375,000
Bonus:
£93,750
Bonus:
£61,384
Bonus:
£0
Bonus:
£6,848
£3,363
£0
Note:MeinieOldersmaandNickMaddocksteppeddownfromtheirrespectiverolesasCEOandCFOon24February2020andlefttheBoardatthattimeandcommencedaperiodof
gardenleaveuntil30June2020and3July2020respectively.PaymentsinrespectoftheirtimeasExecutiveDirectorsareshownaboveandpaymentsinrespectoftheirgardenleaveare
shownonpage129.SteveFranciswasappointedasinterimCEOon25February2020atasalaryof£568,400andbecamethepermanentCEOfrom24Aprilatasalaryof£540,000.Ian
AshtontookoverfromKathKearney-Croft(whoactedasInterimCFOfollowingthedepartureofNickMaddock)asCFOon1July2020.PaymentsforKathKearney-Croftareshownabove
andpaymentsinrespectoflieuofnoticeareshownonpage129.
2020 bonus out-turn
In2020,SteveFrancis(CEO)receivedaone-offcashpaymentof£375,000(representing86%ofsalaryearnedduringtheyearand57%ofhis
ongoingbonusopportunity)forhissupportindevelopinganewstrategyfortheGroupandleadingtheCompanythroughtheCapitalRaising
inhisroleasinterimCEO.ThetermsonwhichtheCEOwasemployedonaninterimbasispriortohisfullappointmentasCEOprovidedfor
abonus.Shareholdersapprovedthispaymentviaanordinaryresolutionon9July2020.TheCommitteedeterminedatthesametimeasthis
paymentwasmade,thatnofurtherbonuswouldbepayabletotheCEOforthefinancialyear2020irrespectiveofperformance.Themaximum
potentialbonusopportunityforSteveFrancis(CEO)was150%ofsalary.SeetheChair’sAnnualStatementforfurtherinformationonthe
Committee’sconsiderations.
ThemaximumpotentialbonusopportunityforIanAshton(CFO)was100%ofsalaryandforKathKearney-Croft(interimCFO)was100%of
salaryandthetablebelowsetsoutthePBTtargetsandlevelofsatisfactionthatwereconsideredwhendeterminingthebonus.TheCommittee
alsoconsideredthetargetsthatwouldapplytotheSeniorLeadershipTeamforFY2020,whichwerebasedonEBITratherthanPBT.
Performance
condition
Actual
Threshold
Target
Maximum
Outcome
CFO (IA) Actual
£’000
Interim
CFO (KKC) Actual
£’000
UnderlyingPBT
£(76.3)m
Health&Safety
gateway
Met
30% payable
£(102.0)m
65% payable
£(90.0)m
100% payable
£(78.0)m
100%
Total
94
61
Intheordinarycourseofeventsabonusof100%(or50%pro-ratedfortime)wouldhavebeenpayabletotheCFO.TheCommittee
determinedthatitwoulduseitsdiscretiontoreducethebonusbasedonformulaicoutcomes.TheCommitteetookintoaccountthepace
withwhichtheCFOgotuptospeedafterjoininginJuly2020,theimprovedperformanceinthesecondhalfoftheyear,thepositiverole
hehasplayedinstabilisingthebusiness,extensiveworkwithregardtoongoingfinancing,theimprovementsmadeinthefinancefunction
andworkundertakentoaddressandimproveaccountingpractices.Ianjoinedatatimewherehisskillswereessentialandaspartofanew
leadershipteamcreatedtoresolvetheseriesofissuesthatexistedinearly2020andreturnthebusinesstoprofitablegrowth.However,
giventheexperienceofotherstakeholders,particularlyemployeesandShareholders,itdecidedthatapaymentnogreaterthanthe
amountpayablefortargetperformanceshouldbepaid.Furthermore,theCommitteedecidedtoexercisetheirdiscretiontoreducethe
paymentfurtherto50%ofsalary(£375,000).Thismeanswhenpro-ratedfortimeabonusof25%ofhisannualsalarywillbepaid.Payment
willbemadeinlinewiththeRemunerationpolicy,two-thirdsincashandone-thirdindeferredshares.
MeinieOldersma(outgoingCEO)andNickMaddock(outgoingCFO)werenotentitledtoanannualbonusfor2020.
2018 LTIP out-turn
Asdisclosedinour2019Directors’RemunerationReport,allin-flightLTIPawardslapsedoncessationofemploymentoftheoutgoingCEO
andCFOandsonoLTIPawardvestedduringtheyear.
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Stock code: SHI www.sigplc.comGOVERNANCE Directors’ Remuneration Report
ANNUAL STATEMENT
What is our new 2020 Remuneration policy?
Inthissectionweprovideasummaryofthekeyelementsofthenew2020RemunerationpolicyforExecutiveDirectorsapprovedby
ShareholdersatourGeneralMeetingon17November2020.Inaddition,wehavesetouthowthepreviousandthenewpolicieswere
operatedin2020andhowitisintendedthatthenewpolicywillbeoperatedin2021.YoucanfindthefullcurrentRemunerationpolicyin
theCompany’sNoticeofGeneralMeetingdated29October2020atwww.sigplc.com/investors/information-for-shareholders/agm-
notices-and-results.
TheCompany’spolicyistoprovideremunerationpackagesthatfairlyrewardtheExecutiveDirectorsforthecontributiontheymaketothe
businessandthatareappropriatelycompetitivetoattract,retainandmotivateExecutiveDirectorsandseniormanagersoftherightcalibre.
Asignificantproportionofremunerationtakestheformofvariablepay,whichislinkedtotheachievementofspecificandstretchingtargets
thatalignwiththecreationofShareholdervalueandtheCompany’sstrategicgoals.
Element and
link to strategy
Period over
which earned
How we implemented the
current policy in 2020
Salary
Providesabaselevelof
remuneration to support
recruitment and retention of
ExecutiveDirectorswiththe
necessaryexperienceand
expertisetodelivertheGroup’s
strategy.
2020
Executive Director salaries for 2020 were
as follows:
■ OutgoingCEO–£577,000
■ OutgoingCFO–£371,000
■ InterimCEO(SF)-£568,400
■ InterimCFO(KKC)–£371,000
■ IncomingCEO(SF)–£540,000
■ IncomingCFO(IA)–£375,000
InlightofCovid-19,theCompanyannounced
thatallBoardmemberswouldtakea
reductioninsalaryof50%witheffectfrom1
April2020until30June2020.Subsequently,
theCompanyannouncedon30Aprilthatthe
majorityofsitesintheUKwouldbeopenby
mid-May,therefore,theExecutiveDirectors’
paywasreinstatedto80%from1April2020.
How we will implement the
new policy in 2021
ExecutiveDirectorsalariesfor
2021areasfollows:
■ CEO-£548,100
■ CFO-£380,625
Thegeneralemployeebase
salaryincreasewas1.5%.
Pension
Providesafairlevelofpension
provisionforallemployees.
2020
From1Januaryto24February,theformer
ExecutiveDirectorsreceivedapension
allowanceof15%ofsalary.
Nochange.
Benefits
Providesamarketstandardlevel
ofbenefits.
From25February,thenewExecutive
Directorsreceivedapensionallowanceof5%
ofsalary.Thisis2.5%ofsalarybelowwhatis
permissibleunderthePolicy.
2020
Nochange.
Nochange.
Thebenefitsreceivedwereasfollows:
■ CarAllowance
■ PrivateMedicalInsurance
■ Group Income Protection
■ GroupLifeAssurance
118
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Element and
link to strategy
Period over
which earned
How we implemented the
current policy in 2020
Annual bonus
TheAnnualBonusPlanprovides
a significant incentive to the
ExecutiveDirectorslinked
toachievementindelivering
goalsthatarecloselyaligned
withtheCompany’sstrategy
andthecreationofvaluefor
Shareholders.
Bonusoperationfor2020and
2021:
■ 1/3rdofanybonusearnedup
to100%ofsalaryisdeferred
inshares.
■ Allbonusearnedabove100%
ofsalaryisdeferredinshares.
■ Allsharesdeferredfor3years
andsubjecttocontinued
employment;
■ 2yearholdingperiodfollowing
vestingfordeferredshares.
Restricted Share Plan (RSP)
Awardsaredesignedto
incentivisetheExecutive
Directorsoverthelonger-term
tosuccessfullyimplementthe
Company’sstrategy.
RSPoperation:
■ Maximumannualawardup
to125%ofsalarybasedon
themarketvalueatthedate
ofgrant.
■ Awardsvestattheendofa
three-yearperiodsubjectto:
− continuedemploymentto
thedateofvesting;and
− the satisfaction of an
underpin(wherebythe
Committeecanadjust
vestingforbusiness,
individualandwider
companyperformance).
■ Atwo-yearholdingperiodwill
applyfollowingthethree-year
vestingperiod.
How we will implement the
new policy in 2021
Maximumopportunityin2021
willbeasfollows:
2021–2024
deferralperiod
2024–2026
holdingperiod
Maximumopportunityin2020wasasfollows:
■ OutgoingCEOandCFO–n/a
■ InterimCFO–100%ofbasesalary
■ CEO–150%ofbasesalary
■ IncomingCEO–n/a(seenotebelowtable)
■ CFO–125%ofbasesalary
■ IncomingCFO–100%ofbasesalary
Anybonusissubjecttoahealthandsafety
override,wheretheCommitteewillreview
theH&Sperformanceofthebusinessforthe
yearinquestion.
Seepage117forbonusoutcomesfor2020.
2020–2023
vesting period
2023–2025
holdingperiod
RSPawardsgrantedin2020wereasfollows:
■ CEO–100%ofbasesalary
■ CFO–100%ofbasesalary
Theperformancemeasuresfor
2021areEBIT(60%),Average
NetDebt(20%)andStrategic
Objectives(20%).
It is the view of the Committee
thatthetargetsforthebonus
arecommerciallysensitiveas
theyareprimarilyrelatedto
budgetedfutureprofitand
debtlevelsintheCompany
andthereforetheirdisclosure
in advance is not in the
interestsoftheCompanyor
Shareholders.TheCommittee
will,however,providefull
retrospectivedisclosureto
enableShareholderstojudge
thelevelofawardagainstthe
targetsset.
If the share price remains at
itspresentlevelatthedateof
grantthentheRSPawardsfor
2021areanticipatedtobe:
■ CEO–100%ofbasesalary
■ CFO–100%ofbasesalary
TheCommitteewillreview
whethertomakeawardsupto
themaximumpermittedunder
thePolicyastheshareprice
recovers.
119
Stock code: SHI www.sigplc.comGOVERNANCE Directors’ Remuneration Report
ANNUAL STATEMENT
Element and
link to strategy
Period over
which earned
How we implemented the
current policy in 2020
How we will implement the
new policy in 2021
Share ownership
requirements
TheCompanyhasestablished
theprincipleofrequiring
ExecutiveDirectorstobuildup
andmaintainabeneficialholding
ofsharesintheCompany.It
isexpectedthatthisshould
beachievedwithinfiveyears
oftheapprovalofthenew
Policy.Adherencetothese
guidelinesisaconditionof
continued participation in the
equityincentivearrangements.
ExecutiveDirectorswillbe
requiredtoretain100%of
thepost-taxamountofvested
SharesfromtheCompany
incentiveplansuntiltheminimum
shareholdingrequirementismet
andmaintained.
Chairman and NED fees
Providesaleveloffeestosupport
recruitment and retention of
aChairandNon-Executive
Directorswiththenecessary
experiencetoadviseandassist
withestablishingandmonitoring
theGroup’sstrategicobjectives.
n/a
Shareownershiprequirements:
Nochange.
■ CEO–300%ofbasesalary
■ CFO–300%ofbasesalary
TheCommitteeintroducedapost-cessation
shareholdingrequirementofthefullin-
employmentrequirement(ortheExecutive’s
actualshareholdingoncessationiflower)for
twoyearsfollowingcessationofemployment.
FeeswerereviewedinJanuary
2021anditwasagreedthat
therewouldbenoincreasein
feesfor2021.
2020
Therewerenoincreasesinfeesin2020.Fees
for2020wereasfollows:
■ Chairman-£218,255
■ NEDfee-£60,900
■ SeniorIndependentDirector-£10,000
■ RemunerationCommitteeChair-£12,000
■ AuditCommitteeChair-£12,000
InlightofCovid-19,allNon-Executive
DirectorsincludingtheChairmanhada
reductionof50%intheirfeesfrom1April
2020foraperiodofthreemonthsuntil30
June2020.
Foractualfeespaidduringtheyearplease
refertothesinglefiguretableonpage128.
Note–TheincomingCEOreceivedaone-offcashpaymentof£375,000forhissupportindevelopinganewstrategyfortheGroupandleadingtheCompanythroughthecapitalraisingin
hisroleasinterimCEO.ThispaymentwassubjecttoShareholderapproval.SeetheChair’sAnnualStatementformoredetail.
120
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Additional context to our Executive Directors’ pay
How does our target total compensation compare to our peers?
ThefollowingchartsshowstherelativepositionofsalaryandtargettotalcompensationofthenewpolicyforourExecutiveDirectorsinrole
during2020comparedtoourpeers.
Expected value of new policy vs FTSE 250
£2,500
£2,000
s
0
0
0
£
£1,500
£1,000
£500
£0
CEO Salary
CEO Total Compensation
CFO Salary
CFO Total Compensation
Expected value of new policy vs FTSE SmallCap
£2,500
£2,000
s
0
0
0
£
£1,500
£1,000
£500
£0
Upper Quartile
Median
Lower Quartile
SIG
Upper Quartile
Median
Lower Quartile
SIG
CEO Salary
CEO Total Compensation
CFO Salary
CFO Total Compensation
WhenwesetthetargettotalcompensationfortheExecutiveDirectors,oneofthefactorstheCommitteeconsidersisthecompetitive
marketforourExecutiveDirectors,whichwebelieveisboththeFTSE250andtheFTSESmallCap.
ThechartsabovedemonstratestheCommittee’sapproachofhavingregardtotheFTSE250andFTSESmallCapwhensettingtotal
compensation.
121
Stock code: SHI www.sigplc.comGOVERNANCE
Directors’ Remuneration Report
DIRECTORS’ REMUNERATION POLICY
What is our minimum share ownership requirement, and has it been met?
GiventhatourcurrentExecutiveDirectorsonlyjoinedthebusinessin2020,neitherasyethavemettheirshareownershiprequirements.
Thechartbelowshowstheshareholdingvaluesasat31December2020forthecurrentCEOandCFO.
Minimum
Shareholding
Requirement
I. Ashton
S. Francis
0%
50%
100%
150%
200%
250%
300%
Current Shareholding
Post tax value of unvested share awards
122
SIG plc Annual Report and Accounts for the year ended 31 December 2020
Remuneration principles
Ourremunerationprinciplesremainrelevantandaredesignedtosupportandreinforceourcommitmentcultureandbehaviours.They
provideabestpracticeframeworkforthedesign,implementationandoperationofGroupandlocalrewardpoliciesandpracticesand
applyacrosstheGroup.
Alignment and fairness
In action
■ Clearandappropriategovernancestructuresareinplacefordecisionmakingatalllevels;
■ Remunerationprogrammesandprocessesarerunfairly,withintegrityandaresupportedwithclearcommunicationtoindividuals;and
■ PayarrangementsarefairandequitableacrosstheGroup.
Rewarding contribution and performance
In action
■ BonusplansaredesignedfortheExecutivesandallotheremployeestoincentivisetheturnaroundofthebusinessandhelpusto
returntoprofitablegrowth;
■ Incentiveplansrewardthedeliveryofourbusinessstrategy,targetsareappropriatelystretching,andobjectivesarefocusedonvalue
creation;
■ Performancemeasuresarereviewedregularly,personalandstrategicobjectivesareaccuratelyassessed,andtargetsaresetrelative
tostrategicpriorities;and
■ Healthandsafetyisafeatureofallmanagementandexecutiveplans.
Transparency and participation
In action
■ Thereisafocusoneffectivelycommunicatingremunerationdecisionsthroughstakeholderengagement;and
■ Incentiveandbenefitsplansareclear,simpleandunderstoodbyparticipantstomaximiseengagement.
TheCoderequirestheCommitteetodeterminethePolicyandpracticesforExecutiveDirectorsinlinewithanumberoffactorssetoutin
Provision40,andfurtherdetailsonourremunerationprinciplesandhowwehaveaddressedtherequirementsaresetoutintheNoticein
whichthe2020RemunerationPolicyissetoutinfull:www.sigplc.com/~/media/Files/S/SIG-Corp/SIG%20General%20Meeting%20
Circular-2020%20Final.pdf.
Wider Workforce Considerations
TheCommitteeconsidersthewiderworkforcewhenmakingpaydecisionsanditreviewsemployeepoliciesandpracticestoensurereward
andincentivesarealignedwithSIG’sstrategy,vision,andculture.
InadditiontotheExecutiveDirectors,itsremitextendstoSeniorManagementteamsoperatingacrossallcountrieswithintheGroupand
theannualbonusplanandshareincentiveplansarestructurallyconsistentwiththeExecutiveDirectors,creatingasharedstrategicfocus.
TheCommitteebelievesthatitisimportanttobetransparentwithhowdecisionsonrewardaremadeandthissectionseekstoprovide
contexttoourDirectorpaybyprovidinginformationonwhetherourapproachtoExecutiveremunerationisconsistentwiththewider
workforce.
Wider workforce remuneration
Deliveryofourstrategydependsonattractingandrecruitinganengagedworkforcethathastherightskillsanddemonstratestheright
behaviourstomakeavaluablecontributiontoourbusiness.TheBoardisfocusedonemployeeengagementandtheRemuneration
Committeespecificallyiscommittedtoensuringthatappropriateengagementtakesplacewithemployeestoexplainhowexecutive
remunerationalignswithSIG’sapproachtowiderCompanypay.Thisprovedchallengingin2020aswerespondedtochangesinworking
practicesbroughtaboutbythepandemic.However,Executiveremunerationwasdiscussedwithemployeesaspartoftheworkforce
engagementsessionsledbySimonKing,seepage62forfurtherdetailsonthesesessions.Itwillbeakeyfocusin2021andwewillexplain
howthishasbeenundertakeninnextyear’sreport.
123
Stock code: SHI www.sigplc.comGOVERNANCE Directors’ Remuneration Report
DIRECTORS’ REMUNERATION POLICY
Incentives
OverhalfofouremployeescanshareinthesuccessoftheCompanythroughincentivearrangements.Inlinewithmarketpractice,thelevel
ofincentivecompensationandwhetheritispaidsolelyincashorinamixtureofcashandsharesdependsonthelevelofseniorityofthe
employee.TheincentiveapproachappliedtotheExecutiveDirectorsalignswiththewiderCompanypolicyonincentives,whichistohave
ahigherpercentageofat-riskperformancepaywithseniorityoftherole,andtoincreasetheamountofincentivedeferred,providedin
equityand/ormeasuredoverthelongertermforroleswithgreaterseniority.TheGroupbelievesthatitisnecessarytooperateonthis
basistoattractandretainhigh-qualityleaders.
Key elements
TheCommitteereviewsallkeyelementsofremunerationacrosstheGroupannually.Thelevelsandtypesofremunerationvaryacrossthe
Companydependingontheemployee’slevelofseniority,countryofoperationandrole.IntheUK,theCompanyoperatesabroadrangeof
benefitsincludinganall-employeeShareIncentivePlan.InJune2020,SIGlaunchedBenefitsConnect,anemployeebenefitshuballowing
employeestomanagetheirbenefitsonline.ThisprovidedanexcellentopportunitytoreviewourofferingandthroughBenefitsConnect,we
significantlyexpandedtherangeofbenefitsonoffer,streamlinedouradministrationandenhancedourcommunicationtoUKemployees.
ItisimportanttohighlightthattheCommitteeisnotlookingforanhomogeneousapproachacrosstheGroup;however,whenconducting
itsreview,itpaysparticularattentionto:
■ WhethertheelementofremunerationisconsistentwiththeCompanyRemunerationPrinciples(seepage123);
■ Iftherearedifferences,theyareobjectivelyjustifiable;and
■ Iftheapproachseemsfairandequitableinthecontextofotheremployees.
AsummaryoftheremunerationstructureandhowitcomparestotheExecutiveDirectorsisbelow:
Pay Element
Employees
Executive Directors
Salary
Weconductanannualpayreviewforallemployees.
Insettingthebudget,manyfactorsareconsidered
suchasmarketrates,economiccontext,business
performanceandaffordability.
Thegeneralworkforceincreasefor2020was1.5%.
Salaryincreasesareconsideredinthecontextof
thewiderworkforcereviewandperformanceofthe
Company.
NoincreasewasawardedtotheExecutiveDirectors
in2020.
Pensionsandbenefits
Weoffermarket-alignedbenefitspackagesreflecting
normalpracticeineachcountryinwhichweoperate.
Whereappropriate,weofferbenefitchoicestoour
employees.
For2020,pensioncontributionswerealignedwith
thoseprovidedtoUKemployees.
BenefitsarealignedtotheSeniorLeadershipTeamin
thecountryofoperation.
BonusPlan
Justoverhalfofourworkforceparticipateinacash
bonus.Thelevelandperformancefactorsdiffer
dependingontheroleandcountryofoperation.
CEOannualbonusofupto150%ofbasesalary,
CFOannualbonusofupto100%ofbasesalary(125%
for2021).
RestrictedSharePlan
TheSeniorLeadershipteam(44employees)anda
further60keyroleswereinvitedtoparticipateinthe
RSPin2020,witharangeofannualawardsbetween
20%to100%.Aholdingperioddoesnotapplybelow
thelevelofExecutiveDirectors.
2/3rdspayableincashupto100%ofsalary;1/3rd
payableinsharesupto100%ofsalaryandallbonus
inexcessof100%ofsalarypaidinshares.
Maximumannualawardof125%ofsalary;three-year
vestingperiod;two-yearholdingperiodwithunderpin
onvesting.
ShareIncentivePlan
AllUKemployeesareinvitedtoparticipateintheSIP.
ExecutiveDirectorsareinvitedtoparticipateintheSIP.
InsummarytheCommitteeissatisfiedthattheapproachtoremunerationacrosstheCompanyisconsistentwiththeCompany’sprinciples
ofremuneration.Further,thatintheCommittee’sopiniontheapproachtoexecutiveremunerationalignswiththewiderCompanypay
policyandthattherearenoanomaliesspecifictotheExecutiveDirectors.
CEO pay ratio
Financial Year
2020
Method Used
OptionB(GenderPaydata)
25th
percentile
pay ratio
44:1
50th
percentile
pay ratio
38:1
75th
percentile
pay ratio
31:1
124
SIG plc Annual Report and Accounts for the year ended 31 December 2020 IndeterminingthequartilefiguresthehourlyrateswereannualisedusingthesamenumberofcontractualhoursastheCEO.OneUK
employeewiththerelevantannualsalarywasthenchosenforeachquartileandthesingletotalremunerationfigurewascalculatedfor
themtocomparetotheCEO.
For2020,theCompanyhasusedOptionBgiventheavailabilityofdata,inorderthatadirectcomparisoncanbeshownagainstlastyear.
GenderPayfor2020hasbeencalculatedinlinewiththeguidanceanddetailsofthedatausedintheanalysiscanbefoundintheGender
PayGapReportwhichispublishedonourwebsite(www.sigplc.com).
TheCompanyfeelsthatusinggenderpaydataensuresthattheseindividualsarereasonablyrepresentativeofpaylevelsatthe25th,50th
and75thpercentileasthesingletotalremunerationfigurefortheseindividualsissimilartootheremployeeswithasimilarannualsalary.
Itdeterminesthattheincreaseinratiofor2020isdirectlyasaresultofthebonuspaidtotheCEOforhissupportindevelopinganew
strategyfortheGroupandleadingtheCompanythroughthecapitalraising.
Basicsalary
Benefits
Pension
BonusPlan
TotalPay
CEO
522,853
20,419
34,801
375,000
953,073
25th
20,250
111
1,215
0
21,576
2020
50th
23,063
63
619
1,153
24,898
75th
28,730
157
1,724
143
30,994
CEO
577,000
24,435
86,550
–
687,985
25th
19,759
89
1,482
–
21,330
2019
50th
23,696
53
711
–
24,460
75th
31,842
383
2,388
–
34,613
CEOPayfor2020hasbeencalculatedfortheperiod1Januaryto31December(MeinieOldersmafrom1Januaryto24FebruaryandSteve
Francisfrom25Februaryto31December)
Forthepurposeofthecalculationsthefollowingelementsofpaywereincludedinthesingletotalremunerationfigurefortheemployeeat
eachquartileintheyearto31December2020:
■ Annualbasicsalary
■ Bonusearnedintheyearinquestion
■ EmployerPensioncontribution
■ Car/CarAllowance
■ PrivateMedicalInsurancevalue
■ GroupLifeAssurancevalue
■ GroupIncomeProtectionvalue
■ EmployerShareIncentivePlancontribution
NopayelementswereomittedoradjustedtocalculateCEOpay.Non-guaranteedovertimewasomittedforemployeesduetoitsvariable
nature.
Wesetoutbelowatableshowingchangesintheratiosfrom2018onwards,whichiswhenwefirstdisclosedtheratios.
Financial Year
2020
2019
2018
25th
percentile
pay ratio
44:1
32:1
33:1
50th
percentile
pay ratio
38:1
28:1
27:1
75th
percentile
pay ratio
31:1
20:1
20:1
Method
B
B
B
TheCommitteecontinuestobecommittedtoensuringthatCEOpayiscommensuratewithperformance.In2018and2019theratioswere
relativelystableasaresultofnilincentiveoutcomes.For2020,theCEOwaspaidabonusasitwaspartoftheinitialinterimagreementon
whichtheCEOwasappointed.Infutureyearsweexpecttheretobesignificantvolatilityinthisratioovertimeandwebelievethatthiswill
becausedbythefollowing:
■ OurCEOpayismadeupofahigherproportionofincentivepaythanthatofouremployees,inlinewiththeexpectationsofour
Shareholders.Successinexecutingtheturnaroundstrategywillresultinanincreasedlevelofbonuspayments.Boththestructureof
remunerationandtheintentiontorewardsuccessintroducesahigherdegreeofvariabilityinpayeachyearwhichaffectstheratio.
■ WerecognisethattheratioisdrivenbythedifferentstructureofthepayofourCEOversusthatofouremployees,aswellasthemake-
upofourworkforce.Thisratiovariesbetweenbusinesseseveninthesamesector.Whatisimportantfromourperspectiveisthatthis
ratioisinfluencedonlybythedifferencesinstructure,andnotbydivergenceinfixedpaybetweentheCEOandwiderworkforce.
■ Wherethestructureofremunerationissimilar,forexamplefortheExecutiveCommitteeandtheCEO,theratioismuchmorestable
overtime.
125
Stock code: SHI www.sigplc.comGOVERNANCE Directors’ Remuneration Report
DIRECTORS’ REMUNERATION POLICY
CEO pay in the last 10 years
ThetablebelowshowshowpayfortheCEOrolehaschangedinthelast10years.
Year
Incumbent
2011
2013
2012
£’000 £’000 £’000
Chris
Chris
Chris
Davies Davies Davies1 Mitchell2 Mitchell Mitchell Mitchell4 Ewell5 Ewell Oldersma6 Oldersma Oldersma Oldersma7 Francis8
2016 2016 2017
£’000 £’000 £’000
Stuart Mel Mel
2019
£’000
Meinie Meinie
2020
£’000
Steve
2014
£’000
Stuart
2013
£’000
Stuart
2015
£’000
Stuart
2017
£’000
2018
£’000
2020
£’000
Meinie
Meinie
Singlefigureof
Remuneration 1,065 1,024 1,031
%ofmax
annualbonus
earned
%ofmaxLTIP
awards vesting
50
54
96
0
0
0
987
968
765
581
100
150
794
669
688
258
850
60.5
57
03
n/a
n/a
n/a
n/a
n/a
19.5
n/a
n/a
n/a
70
n/a
0
n/a
0
0
0
n/a
57
n/a
1. Thefiguresshownpertaintotheperiod1January2013to31December2013(includesremunerationinlieuofsalary,pensionandotherbenefitsafter1March2013).
2. StuartMitchellwasappointedtotheBoardon10December2012andbecametheCEOon1March2013.The2013figurepertainstotheperiod1January2013to31December
2013.
3. StuartMitchelltookthedecisiontowaivehisentitlementtothe2015annualbonus.
4. StuartMitchellsteppeddownasCEOwitheffectfrom11November2016,andhisremunerationrelatestotheperiodserved.Hedidnotreceiveabonusfor2016,andhis
outstandingLTIPawardslapsed.
5. MelEwellwasappointedasInterimCEOwitheffectfrom11November2016andsteppeddownon31March2017.HecontinuedasanExecutiveDirectoruntil20April2017,andhis
remunerationrelatestotheperiodservedasCEO.MelEwelldidnotparticipateinanyGroupincentiveschemes.
6. MeinieOldersmawasappointedCEOon3April2017.The2017figurepertainstotheperiod3April2017to31December2017.
7. MeinieOldersmasteppeddownasCEOwitheffectfrom24February2020,andhisremunerationrelatestotheperiodserved.Hedidnotreceiveabonusfor2020,andhis
outstandingLTIPawardslapsed.
8. SteveFranciswasappointedCEOon25February2020.The2020figurepertainstotheperiod25February2020to31December2020.Hissinglefigurereflectsthetemporary20%
salaryreductionbetween1April2020and30June2020asaresultoftheCovid-19pandemicaswellastheone-offbonusarrangementreceivedfor2020.
Total Shareholder Return (TSR)
ThegraphbelowshowstheCompany’s(TSR)performance(sharepriceplusdividendspaid)comparedwiththeperformanceoftheFTSEAll
ShareSupportServicesIndexovertheten-yearperiodto31December2020.ThisindexhasbeenselectedbecausetheCompanybelieves
thattheconstituentcompaniescomprisingtheFTSEAllShareSupportServicesIndexarethemostappropriateforthiscomparisonasthey
areaffectedbysimilarcommercialandeconomicfactorstoSIG.
300
250
200
150
100
50
0
0
1
0
2
r
e
b
m
e
c
e
D
1
3
m
o
r
f
R
S
T
d
e
s
a
b
e
R
10 Year Company TSR Performance v FTSE All Share Support Services
275.8
31.4
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
SIG
FTSE All Share Support Services
Percentage change in Directors’ remuneration
ThetablebelowshowshowthepercentageincreaseineachDirector’ssalary/fees,benefitsandbonusbetween2020and2019compared
withtheaveragepercentageincreaseineachofthosecomponentsofpayfortheUK-basedemployeesoftheGroupasawhole.Disclosure
forallDirectorsinadditiontotheCEOhasbeenaddedthisyearinlinewithnewrequirementsundertheEUShareholderRightsDirectiveII
andovertimeafive-yearcomparisonwillbebuiltup.
126
SIG plc Annual Report and Accounts for the year ended 31 December 2020
Year-on-year increase in pay for Directors compared to the average employee increase
% change
Director
SteveFrancis
IanAshton
KathKearney-Croft
MeinieOldersma
NickMaddock
AndrewAllner
Ian Duncan
AlanLovell
KateAllum
GillianKent
Bruno Deschamps
SimonKing
Christian Rochat
AndreaAbt
Averagepercentageincreaseforemployees
Salary/fees
–
–
–
–
–
FY2020 vs FY2019
Benefits
–
–
–
–
–
38
(15)
(14)
–
–
–
–
–
–
(1)
–
–
–
–
–
–
–
–
–
(4)
Bonus
–
–
–
–
–
–
–
–
–
–
–
–
–
–
40
■ ThebonusfiguresareforUK-basedemployeeswhoparticipateinabonusarrangement.
■ SteveFrancis,IanAshtonandKathKearney-Croftcommencedemploymenton25February2020,1July2020and20January2020respectivelysonochangesareavailableforthisyear.
■ KateAllumandGillianKentwereappointedasNEDson1July2019andAndreaAptretiredon12February2020thereforefeechangesarenotrepresentativeforcomparisonpurposes.
■ BrunoDeschamps,SimonKingandChristianRochatwereappointedasNEDson10July2020,1July2020and10July2020respectivelysonofeechangesareavailableforthisyear.
■ TheincreaseinfeesforAndrewAllnerisduetotheadditionalfeehereceivedfortheperiodwhereheworkedinexcessofthenormalexpectationsofaChairmanwhilstthe
Companywasstabilised,newleadershipappointedandnewcapitalraised.
■ ThepercentagechangeforDirectorsandemployeesisduetoreducedfees/salariesduringthepandemicandresultinglowerpensioncontributionsforemployees.
TheCommitteemonitorsthechangesyear-on-yearbetweenourDirectorpayandtheaverageemployeeincrease,showninthetable.As
perourpolicy,salaryincreasesappliedtoExecutiveDirectorswilltypicallybeinlinewiththoseofthewiderworkforce.
Annual Report on remuneration
ThefollowingsectionprovidesdetailsofhowSIG’s2018and2020Remunerationpolicieswereimplementedduringthefinancialyear
ended31December2020.
Single total figure of remuneration for Executive Directors (Audited)
ThetablebelowsetsoutthesingletotalfigureofremunerationreceivedbyeachExecutiveDirectorfortheyearto31December2020and
theprioryear.
Executive Director
SteveFrancis7
IanAshton8
KathKearney-Croft9
MeinieOldersma10
NickMaddock10
Base
salary1
436
–
188
–
156
–
87
577
56
371
Taxable
benefits2
£’000
17
–
11
–
0
–
4
24
3
21
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Annual
bonus4
£’000
0
–
94
–
61
–
0
0
0
0
LTIP3
£’000
0
–
0
–
0
–
0
0
0
0
Pension5
£’000
22
–
9
–
5
–
13
87
7
56
Other6
£’000
375
–
0
–
0
–
0
0
–
0
Total
remuneration
£’000
850
–
302
–
222
–
103
688
66
448
Total fixed
remuneration
£’000
475
–
208
–
161
–
103
688
66
448
Total variable
remuneration
£’000
375
–
94
–
61
–
0
0
0
0
Thefiguresinthetableabovehavebeencalculatedasfollows:
1. Basesalary:amountearnedfortheyearasDirectors,takingaccountofanywaiverbetween1April2020and30June2020.
2. Benefits:include,butarenotlimitedto,companycar,carallowance(£15,000)andprivatemedicalinsurance,lifeassurance,incomeprotection.
3. LTIP:Thereisnovestinginrespectofeither2019or2020.
4. Annualbonus:paymentforperformanceduringtheyear(includinganydeferredportion).
5. Pension:TheCompany’spensioncontributionduringtheyearof15%ofsalaryand5%ofsalaryforoutgoingandincomingExecutiveDirectorsrespectively,anamountofwhichwas
paidbysalarysupplement.
6. Other:includesSIP,valuebasedonthefacevalueofmatchingsharesatgrant.AsperHMRCguidance,therearenoperformancemeasuresrelatingtotheSIP.FortheincomingCEO,
‘Other’alsoincludestheone-offcashpaymentreceivedforhissupportindevelopinganewstrategyfortheGroupandleadingtheCompanythroughtheCapitalRaisingfrom25
February2020to23April2020andsubsequentlyasCEOoftheCompany.Seepage112fordetails.
7. SteveFrancisbecameinterimCEOon25February2020withasalaryof£568,400andongoingCEOon24Aprilwithasalaryof£540,000andhisremunerationreflectspayments
earnedfrom25February.
IanAshtonbecameCFOon1July2020andhisremunerationreflectspaymentsearnedfromthatdate.
8.
9. KathKearney-CroftwasappointedinterimCFOon25February2020andsteppeddownfromtheBoardon31July2020.Her2020remunerationreflectspaymentsearnedbetween
thesedates.Paymentsmadeinlieuofnoticeareshownonpage129.
10. MeinieOldersmaandNickMaddockresignedfromtheBoardon24February2020.Their2020remunerationreflectspaymentsearnedtothatdate.Paymentsinrespectofgarden
leaveareshownonpage129.
127
Stock code: SHI www.sigplc.comGOVERNANCE Directors’ Remuneration Report
DIRECTORS’ REMUNERATION POLICY
Totalsinglefigureofremuneration
2020
2019
2018
2017
2020 Restricted Share Plan Awards (Audited)
CEO
£’000
850
688
677
794
CFO
£’000
302
448
441
626
SteveFrancisandIanAshtonweregrantedrestrictedshareawardsof100%ofsalaryon1December2020underthenew2020
RemunerationpolicyapprovedattheGeneralMeetingon17November2020.Noconsiderationwaspaidforthegrantoftheawardswhich
arestructuredasnilcostoptions.ThenumberofOrdinarySharesgrantedwasbasedonanOrdinarySharepriceof30pencepershare
(therecentplacingandopenofferprice)assetoutintheGeneralMeetingCircularandNoticeofMeeting.
Thenormalvestingdateoftheawardswillbe1December2023,beingthethirdanniversaryoftheawarddate.Theawardswillordinarily
vestafterthreeyearssubjecttocontinuedserviceandadiscretionaryunderpinthatallowstheRemunerationCommitteetomake
adjustmentstothelevelofvestingifitbelievesduetobusinessperformance,individualperformanceorwiderCompanyconsiderations
thatthevestingshouldbeadjusted.Thiswillincludeconsiderationofallrelevantfactors,includinganywindfallgains.Oncevested,the
awardswillnormallybeexercisableuntilthedaybeforethetenthanniversaryoftheawarddate.Theawardsaresubjecttoatwo-year
holdingperiodcommencingonvesting.
Executive Director
SteveFrancis
IanAshton
Date of grant
1December2020
1December2020
% of award
for minimum
performance
100%
100%
Shares subject
to award
1,800,000
1,250,000
Face value at
date of award
£600,840
£417,250
Itshouldbenotedthatthe2018and2019LTIPawardslapsedonthecessationofemploymentofMeinieOldersmaandNickMaddock.
The2020RSPawardwasgrantedatasharepriceof30p,howeverthesharepriceonthedateofawardwas33.38pwhichhasbeenused
tocalculatethefacevalue.
Single total figure of remuneration for NEDs (Audited)
ThetablebelowsetsoutthesingletotalfigureofremunerationreceivedbyeachNEDforservicesrenderedtotheCompanyasaNEDfor
theyearto31December2020andtheprioryear.
Base fee
Committee Chair / Senior
Independent Director
fees
2020
£’000
191
53
53
53
53
7
29
30
29
2019
£’000
217
61
61
30
30
61
–
–
–
2020
£’000
–
9
8
9
–
–
–
–
–
2019
£’000
–
12
10
6
–
–
–
–
–
AndrewAllner(Chairman)1
Ian Duncan
AlanLovell
KateAllum2
GillianKent3
AndreaAbt4
Bruno Deschamps5
SimonKing6
Christian Rochat5
Additional Advisory
Board fees
2020
£’000
109
–
–
–
–
–
–
–
2019
£’000
–
–
–
–
–
–
–
–
–
–
Total fees
2020
£’000
300
62
61
62
53
7
29
30
29
2019
£’000
217
73
71
36
30
61
–
–
–
1.
TheChairmantooka50%reductionalongwiththeotherNon-ExecutiveDirectorsfromApriltoJune2020whichpartiallyoffsettheamountofadditionalfeeawardedduetohis
exceptionaltimecommitment.
2. KateAllumwasappointedChairoftheRemunerationCommitteewitheffectfrom1July2019.
3. GillianKentwasappointedasaNEDon1July2019.
4. AndreaAbtretiredasaNEDon12February2020.
5. BrunoDeschampsandChristianRochatwereappointedasNEDson10July2020.ThefeespaidtoBrunoandChristianarenotretainedbythemindividuallybutpaidtoCD&R.
6. SimonKingwasappointedasaNEDon1July2020.
128
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Payments for loss of office (Audited)
Payments to outgoing CEO
MeinieOldersmasteppeddownfromhisroleasCEOon24February2020.InlinewithSIG’spolicyforlossofoffice,inforceatthattime,
andtherulesoftheannualbonusandtheLTIP,hewasentitledtohissalaryandbenefitsonlyforhiscontractualnoticeperiod.Allin-flight
LTIPslapsedoncessationofemploymentandnobonuswaspaidforFY2019orFY2020.TheCommitteedeterminedthatthedeferred
sharebonusshouldalsolapse.ThetablebelowsummariseswhattheoutgoingCEOwasentitledto:
Element
Paymentforgardenleave
Annualbonus–cashawards
Annualbonus–shareawards
LTIP
Treatment applied
Salaryandbenefitspaidduringnoticeperiod-£158,036
NobonusawardedforFY19orFY20
Deferredbonusshareawardslapsed
Allin-flightLTIPslapsedoncessationofemployment
Payments to outgoing CFO
NickMaddocksteppeddownfromhisroleasCFOon24February2020.InlinewithSIG’spolicyforlossofoffice,inforceatthattime,and
therulesoftheannualbonusandtheLTIP.Asaresult,hewasentitledtohissalaryandbenefitsonlyforhiscontractualnoticeperiod.
Allin-flightLTIPslapsedoncessationofemploymentandnobonuswaspaidforFY2019orFY2020.TheCommitteedeterminedthatthe
deferredsharebonusshouldalsolapse.ThetablebelowsummariseswhattheoutgoingCFOwasentitledto:
Element
Paymentforgardenleave
Annualbonus–cashawards
Annualbonus–shareawards
LTIP
Treatment applied
Salaryandbenefitspaidduringnoticeperiod-£158,152
NobonusawardedforFY19orFY20
Deferredbonusshareawardslapsed
Allin-flightLTIPslapsedoncessationofemployment
Payments to outgoing interim CFO
KathKearney-CroftwasappointedinterimCFOon25February2020andsteppeddownfromthisroleon30June2020andfromtheBoard
on31July2020butremainedavailabletotheCompanyuntil31August2020toensureorderlyhandover.InlinewithSIG’spolicyforlossof
officeandtherulesoftheannualbonus,theCommitteedeterminedshewasagoodleaverandthereforeentitledtothefollowing:
Element
Paymentinlieuofnotice
Annualbonus–cashawards
Annualbonus–shareawards
LTIP
Treatment applied
Salaryandbenefitspaidfornoticeperiod-£97,388
50%ofmaxbonuspaid,pro-rataforfourmonthsof2020–£61,384toreflecttimeasCFOduring
thefinancialyear
Nonegranted.
Nonegranted.
Relative importance of spend on pay
ThetablebelowshowsthepercentagechangeintotalemployeepayexpenditureandShareholderdistribution(i.e.dividendsandshare
buybacks)fromthefinancialyearended31December2019tothefinancialyearended31December2020.
DistributiontoShareholders
Employeeremuneration*
*Continuingoperationsemployeeremuneration.
2020
£m
-
267.4
2019
£m
22.2
268.2
% change
n/a
0.3%
TheCompanyhasdeclaredthatnofinaldividendwouldbepaidfor2020andnointerimdividendwaspaidin2020(2019:1.25p).
129
Stock code: SHI www.sigplc.comGOVERNANCE Directors’ Remuneration Report
DIRECTORS’ REMUNERATION POLICY
Directors’ interests in SIG shares (Audited)
TheinterestsoftheDirectorsinofficeduringtheyearto31December2020,andtheirfamilies,intheordinarysharesoftheCompanyat
thedatesbelowwereasfollows:
Owned
outright or
vested
815,769
166,666
66,666
371,388
154,072
238,800
Nil
Nil
Nil
250,000
Steve.Francis3
IanAshton4
KathKearney-Croft5
(interimCFO)
MeinieOldersma6
(outgoingCEO)
NickMaddock6
(outgoingCFO)
AndrewAllner
KateAllum
Ian Duncan
GillianKent
AlanLovell
Bruno Deschamps7
Nil
SimonKing8
166,666
Christian Rochat7
AndreaAbt9
Nil
8,500
Shares held
Vested but
subject
to holding
period
Nil-cost options held
Unvested
subject to
Vesting and
holding
period
Vested
but not
exercised
Unvested
and
subject
to deferral
Shareholding
required
(% basic
salary)1
Current
shareholding
as a %
of basic
salary2
Requirement
met2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,800,000
–
1,250,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
300
300
300
300
300
–
–
–
–
–
–
–
–
–
103
70
N/A
–
–
–
–
–
–
–
–
–
–
–
No
No
N/A
N/A
N/A
–
–
–
–
–
–
–
–
–
1. ExecutiveDirectorsareexpectedtoachievetargetshareholdingwithinfiveyearsofappointment.
2. BasedonSIGsharepriceof31.49pasat31December2020.TheposttaxvalueoftheRSPgrantedinDecember2020hasbeenincludedinthecurrentshareholdingfigure.Note
thatboththecurrentExecutiveDirectorswereappointedin2020,consequentlytheyhavenotyetbuiltuptherequiredholding.
3. SteveFranciswasappointedasCEOon25February2020.
4.
IanAshtonwasappointedasCFOon1July2020.
5. KathKearney-CroftwasappointedasinterimCFOon25February2020.
6. MeinieOldersmaandNickMaddocksteppeddownasCEOandCFOrespectivelyon24February2020.
7. BrunoDeschampsandChristianRochatwereappointedasDirectorson10July2020.
8. SimonKingwasappointedasDirectoron1July2020.
9. AndreaAbtretiredasaDirectoron12February2020.
Therehavebeennochangestoshareholdingsbetween1January2021and25March2021.
NoDirectorsexercisedanyshareoptionsduringtheyearsuchthattheaggregategainonexercisewasnil(2019:nil).
ItshouldbenotedthatrightstounvestedshareslapsedonthecessationofemploymentofMeinieOldersmaandNickMaddockon
24February2020.
130
SIG plc Annual Report and Accounts for the year ended 31 December 2020
Additional information
ThefollowingtablesetsouttheadditionalinformationrequiredintheAnnualReportonRemunerationandwhererelevantitslocation:
Element
Annualbonusinrespectof2020(Audited)
RSP:2020awards(Audited)
Paymentsforlossofoffice
PaymenttoFormerDirectors
ImplementationofRemunerationpolicyin2021
PercentagechangeinCEORemuneration
TSRperformancegraph
Executive Director service contracts
Information/Page
Seepage117
Seepage128
Seepage129
None
Seepages118to120
Seepage126
Seepage126
ExecutiveDirectorshaveserviceagreementswithanindefiniteterm,andwhichareterminablebyeithertheGrouportheExecutive
Directoronsixmonths’noticeinthecaseoftheChiefExecutiveOfficerandtheChiefFinancialOfficer.
Executive Director
SteveFrancis
IanAshton
Date of service contract
24April2020
1July2020
NEDs
TheNEDsincludingtheChairman,donothaveservicecontracts.TheCompany’spolicyisthatNEDsareappointedforspecifictermsof
threeyearsunlessotherwiseterminatedearlierinaccordancewiththeArticlesofAssociationorby,andatthediscretionof,eitherparty
uponthreemonths’writtennotice.NEDappointmentsarereviewedattheendofeachthree-yearterm.NEDswillnormallybeexpectedto
servetwothree-yearterms,althoughtheBoardmayinvitethemtoserveforanadditionalperiod.NEDlettersofappointmentareavailable
toviewattheCompany’sregisteredoffice.SummarydetailsoftermsandnoticeperiodsforNEDsareincludedbelow:
Date of current letter
of appointment
7April2020
7April2020
28June2018
5June2019
5June2019
10July2020
22May2020
10July2020
5March2015
Effective date of
appointment
1November2020
29June2020
1August2018
1July2019
1July2019
10July2020
1July2020
10July2020
12March2015
Expiry of
current term
31October2023
N/A
May2021
N/A
May2022
10July2023
30June2023
10July2023
N/A
NED
AndrewAllner
Ian Duncan1
AlanLovell
KateAllum2
GillianKent
Bruno Deschamps
SimonKing
Christian Rochat
AndreaAbt3
1.
IanDuncanresignedon31January2021
2. KateAllumresignedon31December2020
3. AndreaAbtretiredasaDirectoron12February2020
Kath Durrant
Chair of the Remuneration Committee
25March2021
131
Stock code: SHI www.sigplc.comGOVERNANCE Directors’ Responsibilities
Statement
TheDirectorsareresponsibleforpreparingtheAnnualReportand
theFinancialStatementsinaccordancewithapplicablelawand
regulations.
Responsibility statement
Weconfirmthattothebestofourknowledge:
■ TheFinancialStatements,preparedinaccordancewiththe
relevantfinancialreportingframework,giveatrueandfairview
oftheassets,liabilities,financialpositionandprofitorlossofthe
Companyandtheundertakingsincludedintheconsolidation
takenasawhole;and
■ TheStrategicreportincludesafairreviewofthedevelopment
andperformanceofthebusinessandthepositionofthe
Companyandtheundertakingsincludedintheconsolidation
takenasawhole,togetherwithadescriptionoftheprincipal
risksanduncertaintiesthattheyface.
ThisresponsibilitystatementwasapprovedbytheBoardof
Directorson25March2021andissignedonitsbehalfby:
Steve Francis
Chief Executive Officer
25 March 2021
Ian Ashton
Chief Financial Officer
25 March 2021
CompanylawrequirestheDirectorstoprepareFinancial
Statementsforeachfinancialyear.UnderthatlawtheDirectors
arerequiredtopreparetheGroupFinancialStatementsin
accordancewithinternationalaccountingstandardsinconformity
withtherequirementsofCompaniesAct2006andinternational
financialreportingstandardsadoptedpursuanttoRegulation(EC)
No.1606/2002asitappliesintheEuropeanUnion.TheDirectors
haveelectedtopreparetheParentCompanyFinancialStatements
inaccordancewithUnitedKingdomAccountingStandards,
includingFinancialReportingStandard101,“ReducedDisclosure
Framework”(UnitedKingdomGenerallyAcceptedAccounting
Practice)asappliedinaccordancewiththeprovisionsofthe
CompaniesAct2006.UndercompanylawtheDirectorsmustnot
approvetheFinancialStatementsunlesstheyaresatisfiedthatthey
giveatrueandfairviewoftheassets,liabilities,financialposition
andprofitorlossoftheCompanyforthatperiod.
InpreparingtheParentCompanyFinancialStatements,the
directorsarerequiredto:
■ Selectsuitableaccountingpoliciesandthenapplythem
consistently;
■ Makejudgementsandaccountingestimatesthatarereasonable
andprudent;
■ StatewhetherapplicableUKAccountingStandardshavebeen
followed,subjecttoanymaterialdeparturesdisclosedand
explainedintheFinancialStatements;and
■ PreparetheFinancialStatementsonthegoingconcernbasis
unlessitisinappropriatetopresumethattheCompanywill
continueinbusiness.
InpreparingtheGroupFinancialStatements,International
AccountingStandard1requiresthatdirectors:
■ Properlyselectandapplyaccountingpolicies;
■ Presentinformation,includingaccountingpolicies,inamanner
thatprovidesrelevant,reliable,comparableandunderstandable
information;
■ Provideadditionaldisclosureswhencompliancewiththe
specificrequirementsinIFRSareinsufficienttoenableusersto
understandtheimpactofparticulartransactions,otherevents
andconditionsontheentity’sfinancialpositionandfinancial
performance;and
■ MakeanassessmentoftheCompany’sabilitytocontinueasa
goingconcern.
TheDirectorsareresponsibleforkeepingadequateaccounting
recordsthataresufficienttoshowandexplaintheCompany’s
transactionsanddisclosewithreasonableaccuracy,atanytime,
thefinancialpositionoftheGroupatthattimeandenablethemto
ensurethattheFinancialStatementscomplywiththeCompanies
Act2006.Theyarealsoresponsibleforsafeguardingtheassets
oftheCompanyandhencefortakingreasonablestepsforthe
preventionanddetectionoffraudandotherirregularities.
TheDirectorsareresponsibleforthemaintenanceandintegrityof
thecorporateandfinancialinformationincludedontheCompany’s
website.LegislationintheUnitedKingdomgoverningthe
preparationanddisseminationoffinancialstatementsmaydiffer
fromlegislationinotherjurisdictions.
132
SIG plc Annual Report and Accounts for the year ended 31 December 2020 133
Stock code: SHI www.sigplc.comGOVERNANCE Financial Statements
Consolidated Income Statement
Consolidated Statement of
Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of
Changes in Equity
Consolidated Cash Flow Statement
Statement of Significant
Accounting Policies
Critical accounting judgements and key
sources of estimation uncertainty
Notes to the Financial Statements
Independent Auditor’s Report
136
137
138
139
140
141
150
153
206
Five-Year Summary
Company Statement of
Comprehensive Income
Company Balance Sheet
215
217
218
Company Statement of Changes in Equity 219
Company Statement of Significant
Accounting Policies
220
Notes to the Company Financial
Statements
Group Companies
Company information
224
232
234
Consolidated Income Statement
FOR THE YEAR ENDED 31 DECEMBER 2020
Continuing operations
Revenue
Cost of sales
Gross profit
Other operating expenses
Operating (loss)/profit
Finance income
Finance costs
(Loss)/profit before tax from
continuing operations
Income tax (expense)/credit
(Loss)/profit after tax from
continuing operations
Discontinued operations
Profit/(loss) after tax from
discontinued operations
(Loss)/profit after tax for the year
Attributable to:
Equity holders of the Company
Underlying*
2020
£m
Other items**
2020
£m
Note
Total
2020
£m
Underlying*
2019
Restated^
£m
Other items**
2019
Restated^
£m
1
2
3
3
4
6
1,872.7
(1,402.7)
470.0
(523.3)
(53.3)
0.7
(23.7)
(76.3)
(10.7)
1.8
(1.3)
0.5
(114.9)
(114.4)
–
(11.6)
(126.0)
4.1
1,874.5
(1,404.0)
470.5
(638.2)
(167.7)
0.7
(35.3)
(202.3)
(6.6)
2,143.0
(1,587.6)
555.4
(512.9)
42.5
0.5
(25.3)
17.7
(16.3)
17.6
(13.9)
3.7
(134.1)
(130.4)
–
–
(130.4)
4.9
Total
2019
£m
2,160.6
(1,601.5)
559.1
(647.0)
(87.9)
0.5
(25.3)
(112.7)
(11.4)
(87.0)
(121.9)
(208.9)
1.4
(125.5)
(124.1)
12
–
(87.0)
69.7
(52.2)
69.7
(139.2)
–
1.4
(0.4)
(125.9)
(0.4)
(124.5)
(87.0)
(52.2)
(139.2)
1.4
(125.9)
(124.5)
Loss per share
From continuing operations:
Basic
Diluted
Total:
Basic
Diluted
8
8
8
8
(24.0)p
(23.9)p
(16.0)p
(15.9)p
(21.0)p
(21.0)p
(21.0)p
(21.0)p
^ The 2019 comparatives have been restated to include Building Solutions within underlying results consistent with the current year. See the Statement of Significant Accounting Policies
for further details.
* Underlying represents the results before Other items. See the Statement of Significant Accounting Policies for further details.
** Other items have been disclosed separately in order to give an indication of the underlying earnings of the Group. Other items are defined in the Statement of Significant Accounting
Policies on page 141 and further details are disclosed in Note 2.
The accompanying Statement of Significant Accounting Policies and Notes to the Financial Statements are an integral part of this
Consolidated Income Statement.
136
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Consolidated Statement of Comprehensive Income
FOR THE YEAR ENDED 31 DECEMBER 2020
Loss after tax for the year
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
Current tax movement associated with remeasurement of defined benefit pension liability
Note
31
24
6
Items that may subsequently be reclassified to the Consolidated Income Statement:
Exchange difference on retranslation of foreign currency goodwill and intangibles
Exchange difference on retranslation of foreign currency net investments (excluding goodwill and
intangibles)
Exchange and fair value movements associated with borrowings and derivative financial
instruments
Tax credit on fair value movements arising on borrowings and derivative financial instruments
Exchange differences 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 expense
Attributable to:
Equity holders of the Company
2020
£m
(139.2)
2019
£m
(124.5)
(1.7)
0.3
0.4
(1.0)
5.1
13.2
(11.0)
–
(5.9)
(0.5)
(0.7)
0.2
(0.8)
(140.0)
(140.0)
(140.0)
(1.8)
(6.6)
0.4
(8.0)
(7.4)
(16.1)
10.9
(2.1)
(0.1)
0.4
0.9
(13.5)
(21.5)
(146.0)
(146.0)
(146.0)
The accompanying Statement of Significant Accounting Policies and Notes to the Financial Statements are an integral part of this
Consolidated Statement of Comprehensive Income.
137
Stock code: SHI www.sigplc.comFINANCIALS Consolidated Balance Sheet
AS AT 31 DECEMBER 2020
Non-current assets
Property, plant and equipment
Right-of-use assets
Goodwill
Intangible assets
Lease receivables
Deferred tax assets
Derivative financial instruments
Current assets
Inventories
Lease receivables
Trade and other receivables
Current tax assets
Derivative financial instruments
Cash at bank and on hand
Assets classified as held for sale
Total assets
Current liabilities
Trade and other payables
Lease liabilities
Bank loans
Private placement notes
Deferred consideration
Other financial liabilities
Derivative financial instruments
Current tax liabilities
Provisions
Liabilities directly associated with assets classified as held for sale
Non-current liabilities
Lease liabilities
Bank loans
Private placement notes
Deferred consideration
Derivative financial instruments
Other financial liabilities
Other payables
Retirement benefit obligations
Provisions
Total liabilities
Net assets
Capital and reserves
Called up share capital
Share premium account
Treasury shares reserve
Capital redemption reserve
Share option reserve
Hedging and translation reserves
Cost of hedging reserve
Merger reserve
Retained losses
Attributable to equity holders of the Company
Total equity
Note
10
25
13
14
25
24
20
16
25
17
17
20
20
11
18
18
18
18
18
18
18
18
23
11
19
19
19
19
19
19
19
31
23
27
2020
£m
63.2
229.6
128.8
22.9
3.6
5.7
0.1
453.9
170.3
0.7
294.4
–
–
235.3
–
700.7
1,154.6
301.4
50.6
–
–
0.5
0.5
0.5
4.2
10.5
–
368.2
211.6
67.7
144.5
0.4
0.4
1.2
3.5
25.1
25.7
480.1
848.3
306.3
118.2
447.7
(0.2)
0.3
2.0
10.5
0.2
92.5
(364.9)
306.3
306.3
2019
£m
58.6
255.2
159.0
42.3
4.4
4.4
1.7
525.6
156.5
0.8
294.7
0.9
0.9
110.0
258.4
822.2
1,347.8
327.4
51.5
99.6
175.5
–
1.5
0.2
3.7
6.7
115.7
781.8
224.1
–
–
–
1.9
1.4
1.0
24.8
18.6
271.8
1,053.6
294.2
59.2
447.3
–
0.3
1.8
10.2
0.3
–
(224.9)
294.2
294.2
The accompanying Statement of Significant Accounting Policies and Notes to the Financial Statements are an integral part of this
Consolidated Balance Sheet.
The Financial Statements were approved by the Board of Directors on 25 March 2021 and signed on its behalf by:
Steve Francis
Director
Ian Ashton
Director
Registered in England: 00998314
138
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 31 DECEMBER 2020
Treasury
shares
reserve
£m
Capital
redemption
reserve
£m
Share
option
reserve
£m
Hedging
and
translation
reserves
£m
Cost of
hedging
reserve
£m
Merger
reserve
£m
Called up share
capital
£m
59.2
–
59.2
–
–
–
–
–
–
59.2
–
–
–
59.0
Share
premium
account
£m
447.3
–
447.3
–
–
–
–
–
–
447.3
–
–
–
0.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.2)
21.7
–
21.7
–
(12.8)
(12.8)
1.3
–
–
10.2
–
1.0
–
1.0
–
(0.7)
(0.7)
–
–
–
0.3
–
0.3
(0.1)
–
–
–
–
–
–
–
–
–
–
–
–
Retained
(losses)/
profits
£m
(68.3)
(0.6)
Total
£m
462.9
(0.6)
(68.9)
(124.5)
462.3
(124.5)
(8.0)
(132.5)
(1.3)
–
(22.2)
(224.9)
(139.2)
(21.5)
(146.0)
–
0.1
(22.2)
294.2
(139.2)
(1.0)
(0.8)
0.3
–
(0.1)
–
–
92.5
(140.2)
–
(140.0)
151.9
–
–
–
0.2
–
0.3
–
0.3
–
–
–
–
–
–
0.3
–
–
–
–
–
1.7
–
1.7
–
–
–
–
0.1
–
1.8
–
–
–
–
–
–
118.2
–
447.7
–
(0.2)
–
0.3
0.2
2.0
–
10.5
–
0.2
–
92.5
–
(364.9)
0.2
306.3
At 31 December 2018
Impact of adoption of IFRS 16
Adjusted balance at
1 January 2019
Loss after tax
Other comprehensive
expense
Total comprehensive expense
Transfer of reserves
Credit to share option reserve
Dividends paid to equity
holders of the Company
At 31 December 2019
Loss after tax
Other comprehensive
income/(expense)
Total comprehensive income/
(expense)
Issue of share capital
Transfer of unallocated
treasury shares
Credit to share option
reserve
At 31 December 2020
The share option reserve represents the cumulative equity-settled share option charge under IFRS 2 “Share-based payment” less the value
of any share options that have been exercised.
The hedging and translation reserves represents movements in the Consolidated Balance Sheet as a result of movements in exchange
rates and movements in the fair value of cash flow hedges which are taken directly to reserves as detailed in the Statement of Significant
Accounting Policies on page 141. Amounts were reclassified during the prior year to clarify the effects of hedging between retained (losses)/
profits and the cash flow hedging reserve and to separately identify the cash flow hedging reserve and foreign currency retranslation
reserve. See Note 20 for further details.
The treasury shares reserve relates to shares purchased by the SIG Employee Share Trust to satisfy awards made under the Group's share
plans which are not vested and beneficially owned by employees. Shares have become unallocated during the year and have therefore
been transferred to the treasury share reserve.
The merger reserve represents the premium on ordinary shares issued during the year through the use of a cash box structure. See Note
27 for further details.
The accompanying Statement of Significant Accounting Policies and Notes to the Financial Statements are an integral part of this
Consolidated Statement of Changes in Equity.
139
Stock code: SHI www.sigplc.comFINANCIALS Consolidated Cash Flow Statement
FOR THE YEAR ENDED 31 DECEMBER 2020
Net cash flow from operating activities
Cash (used in)/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 the purchase of businesses
Net cash flow arising on the sale of businesses
Net cash flow from investing activities
Cash flows from financing activities
Finance costs paid
Repayment of lease liabilities
Acquisition of non-controlling interests
Repayment of loans/settlement of derivative financial instruments
Additional drawdown/(repayment) of revolving credit facility*
Net proceeds from equity raise
Dividends paid to equity holders of the Company
Net cash flow from financing activities
Increase in cash and cash equivalents in the year
Cash and cash equivalents at beginning of the year
Effect of foreign exchange rate changes
Cash and cash equivalents at end of the year**
Note
28
15
11
27
7
29
30
30
30
2020
£m
(43.0)
(9.7)
(52.7)
0.7
(20.8)
5.6
(0.8)
147.8
132.5
(23.3)
(54.8)
–
(55.2)
(30.0)
151.9
–
(11.4)
68.4
145.1
21.8
235.3
2019
£m
166.0
(10.8)
155.2
0.6
(34.5)
7.6
–
8.4
(17.9)
(25.1)
(59.9)
(0.9)
–
42.4
–
(22.2)
(65.7)
71.6
78.8
(5.3)
145.1
* As part of the changes to the debt facility agreements on 18 June 2020 (see Note 18), £70.0m drawn under the existing revolving credit facility was converted into a £70.0m term
facility, with no additional repayment or drawdown made.
** Cash and cash equivalents comprise cash at bank and on hand of £235.3m (2019: £145.1m) less bank overdrafts of £nil (2019: £nil).
The accompanying Statement of Significant Accounting Policies and Notes to the Financial Statements are an integral part of this
Consolidated Cash Flow Statement.
140
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Statement of Significant Accounting Policies
The significant accounting policies adopted in this Annual Report and
Accounts for the year ended 31 December 2020 are set out below.
■ The Consolidated Net Debt threshold is lowered to £200m and
extended to December 2022; and
Basis of preparation
The Consolidated Financial Statements are prepared in accordance
with international accounting standards in conformity with the
requirements of the Companies Act 2006 and international
financial reporting standards adopted pursuant to Regulation (EC)
No. 1606/2002 as it applies in the European Union.
The Financial Statements have been prepared under the historical
cost convention except for derivative financial instruments which are
stated at their fair value. The principal accounting policies applied in
the preparation of these consolidated financial statements are set
out below. These policies have been consistently applied to all the
years presented, unless otherwise stated.
The qualifying partnership, The SIG 2018 Scottish Limited
Partnership, which is included in these consolidated financial
statements, is entitled to exemption from the requirements
of Regulations 4 to 6 of Part 2 of The Partnerships (Accounts)
Regulations 2008 in relation to preparation and audit of annual
financial statements of the partnership.
The Financial Statements have been prepared on a going concern
basis as set out below.
Going concern
The Group closely monitors its funding position throughout the
year, including monitoring compliance with covenants and available
facilities to ensure it has sufficient headroom to fund operations.
On 18 June 2020, the Group agreed amended debt facility
agreements in respect of its Revolving Credit Facility (RCF) and
private placement notes, with key changes as set out in Note 19 of
the Consolidated Financial Statements. On 10 July 2020 the Group
also completed the successful raising of £165m of equity through a
firm placing and placing and open offer, in order to reduce net debt
and strengthen the Group’s balance sheet.
Under the June 2020 revised debt facility agreements the Group
was subject to covenant testing as follows:
■ Leverage (net debt/EBITDA) and interest cover (EBITA/interest)
not tested until March 2022, after which tested every quarter,
the tests being applied to the prior 12 months;
■ Until 28 February 2022 the Group to ensure that Consolidated
Net Debt (CND) does not exceed £225m for each quarterly test
date in 2021 (2020: £125m);
■ Minimum Liquidity (available cash and undrawn revolving credit
facility commitments) of £40m at all times; and
■ Consolidated Net Worth (CNW) must at all times not be less
than £250m.
The Group was in compliance with these covenants at 31
December 2020.
Whilst the Group has significant available liquidity, and on the basis
of current forecasts is expected to remain in compliance with all
banking covenants throughout the forecast period to 31 March
2022, on 1 March 2021 the Group agreed with its lending banks
and private placement noteholders to amend certain financial
covenants to better align the tests and to provide additional
headroom on the interest cover covenant under stress test
scenarios from March 2022.The amended covenants under the
revised agreements are as follows:
■ The interest cover testing does not start until June 2022 and is
at lower levels than previously until December 2022;
■ The leverage covenant threshold is now slightly lower than
previously at March 2022 and June 2022;
■ No change to the CNW or Minimum Liquidity covenants.
In arriving at their opinion on going concern, the Directors have
considered the Group’s forecasts for the period to 31 March 2022,
and specifically the ability to meet the covenant tests above. These
forecasts reflect the assumption of more normal trading levels
since the worst of the Covid-19 impact, as well as the expected
positive impact of the strategic actions being undertaken to
improve future performance under the “Return to Growth” strategy.
Management have continued to manage liquidity very closely, such
that cashflow performance was better than initial expectations
throughout 2020. The base forecasts indicate that the Group will
be able to operate within the covenants for the forecast period to
31 March 2022.
The Directors have considered the following principal risks and
uncertainties that could potentially impact the Group’s ability to
fund its future activities and adhere to its future banking covenants,
including:
■ A decline in market conditions resulting in lower than forecast
sales;
■ Implementation of the new strategy taking longer than
anticipated to deliver forecast increases in revenue and profit;
■ A further wave of the Covid-19 pandemic; and
■ The terms of the Group’s revised lending arrangements and
whether these could limit investment in growth opportunities.
The forecasts on which the going concern assessment is based
have been subject to sensitivity analysis and stress testing to
assess the impact of the above risks. The Group has considered
a plausible downside scenario, factoring in a reduction in sales
volumes and a reduction in gross margin, offset by reductions in
direct expenditure and discretionary operating costs. The results
showed that under this scenario the Group will still be able to
operate within the covenants with adequate headroom for the
forecast period to 31 March 2022.
In considering the impact of these stress test scenarios the
Directors have also reviewed realistic additional mitigating actions
that could be taken over and above those already included in
the downside scenario forecast to avoid or reduce the impact
or occurrence of the underlying risks. These include further
reductions to operating costs, cutting discretionary capital
expenditure and disposing of non-core assets.
On consideration of the above, the Directors believe that the Group
has adequate resources to continue in operational existence for
the forecast period to 31 March 2022 and the Directors therefore
consider it is appropriate to adopt the going concern basis in
preparing the 2020 Financial Statements.
New standards, interpretations
and amendments adopted
The following amendments and interpretations apply for the first
time in 2020, but have not had a material impact on the Financial
Statements of the Group:
■ Amendments to IFRS 3: Definition of a Business
■ Amendments to IFRS 7, IFRS 9 and IAS 39 Interest Rate
Benchmark Reform
■ Amendments to IAS 1 and IAS 8 Definition of Material
■ Conceptual Framework for Financial Reporting issued on 29
March 2018
■ Amendments to IFRS 16 Covid-19 Related Rent Concessions
141
Stock code: SHI www.sigplc.comFINANCIALS Statement of Significant Accounting Policies continued
New standards, amendments and
interpretations not yet adopted
At the date of authorisation of these Financial Statements, the only
standard or interpretation which is in issue but not yet effective is
Interest Rate Benchmark Reform — Phase 2 (Amendments to IFRS
9, IAS 39, IFRS 7, IFRS 4 and IFRS 16). This is not expected to have a
material impact on the Group and has not been early adopted by
the Group.
Basis of consolidation
The Consolidated Financial Statements incorporate the Financial
Statements 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.
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.
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. Right-of-use assets recognised on adoption
of IFRS 16 are included in the carrying amount of the CGU, with
cash flows and discount rates adapted accordingly to calculate
value in use on a consistent basis. 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.
Non-current assets (or disposal groups)
held for sale and discontinued operations
Non-current assets (or disposal groups) classified as held for sale are
measured at the lower of carrying amount and fair values less costs
to sell. Assets and liabilities classified as held for sale are presented
separately as current items in the Consolidated Balance Sheet.
Non-current assets (or disposal groups) are classified as held
for sale if their carrying amount will be recovered through a sale
transaction rather than through continuing use. This condition
is regarded as met only when the sale is highly probable and
the asset (or disposal group) is available for immediate sale in its
present condition. Management must be committed to the sale,
which should be expected to qualify for recognition as a completed
sale within one year from the date of classification.
A disposal group qualifies as a discontinued operation if it is a
component of an entity that has either been disposed of, or is
classified as held for sale, and:
■ Represents a separate major line of business or geographical
area of operations;
■ Is part of a single co-ordinated plan to dispose of a separate
major line of business or geographical area of operations; or
■ Is a subsidiary acquired exclusively with a view to resale.
Discontinued operations are excluded from the results of
continuing operations and are presented as a single amount
as profit or loss after tax from discontinued operations in the
statement of profit or loss. Additional disclosures are provided
in Note 12. All other notes to the Financial Statements include
amounts for continuing operations, unless indicated otherwise. The
Air Handling business met the criteria above as it was a separate
major line of business of the Group and is therefore classified as a
discontinued operation in the current and prior year.
The Building Solutions business was classified as held for sale at
31 December 2019, as a sale had been agreed and was due to
complete in the first half of 2020 subject to approval from the
UK Competition & Markets Authority (CMA). On 21 May 2020, the
Group announced that the parties had agreed to terminate the
sales agreement as terms could not be agreed for the extension
of the agreement to enable the completion of the CMA phase
2 investigation. The business no longer meets the criteria to be
presented as held for sale at 31 December 2020 and is no longer
classified as non-core. The comparatives for the year ended 31
December 2019 have been re-analysed to present net operating
profits of £2.9m attributable to the Building Solutions business
within underlying results, consistent with the current year.
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.
On consolidation, assets and liabilities of overseas subsidiary
undertakings are translated into Sterling at the rate of exchange
prevailing at the balance sheet date. Income and expense items
are translated into Sterling at the average rate of exchange for
142
SIG plc Annual Report and Accounts for the year ended 31 December 2020 the year as an approximation where actual rates do not fluctuate
significantly.
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.
Consolidated income statement disclosure
Income statement items are presented in the middle column of the
Consolidated Income Statement entitled Other items where they
are significant in size and nature, and either they do not form part
of the trading activities of the Group or their separate presentation
enhances understanding of the financial performance of the Group.
Items classified as Other items are as follows:
■ Costs related to acquisitions
The Group has made a number of acquisitions in previous
years. There are a number of specific costs relating to these
acquisitions which make comparison of performance of the
businesses and segments difficult. Therefore the following items
are recorded as Other items to provide a more comparable view
of the businesses and enhance the clarity of the performance
of the Group and its businesses to the readers of the Financial
Statements:
(i) amortisation of intangible assets acquired through business
combinations;
(ii) expenses related to contingent consideration required to be
treated as remuneration for acquired businesses;
(iii) costs and credits arising from the re-estimation of deferred
and contingent consideration payable in respect of acquisitions;
and
(iv) costs related to the acquisition of businesses.
■ Impairment charges
Impairment charges related to non-current assets are non-cash
items and tend to be significant in size. The presentation of
these as Other items further enhances the understanding of the
ongoing performance of the Group. Impairments of property,
intangible assets and other tangible fixed assets are included in
Other items if related to a fundamental restructuring project or
other fundamental project. Other impairments are included in
underlying results.
■ Profits and losses on agreed sale or closure of non-core
businesses and associated impairment charges
The gain or loss on the sale or closure of businesses tends
to be significant in size and irregular in nature and is related
to businesses that will not be part of the continuing Group.
The gain or loss on the sale or closure of these businesses is
therefore included within Other items.
■ Net operating losses attributable to businesses identified
as non-core
Operating results from businesses identified as non-core do
not form part of the ongoing trading activities of the Group
and they are therefore recorded separately in Other items in
order to enhance the understanding of the ongoing financial
performance of the Group and its businesses. Non-core
businesses are those businesses that have been closed or
disposed of or where the Board has resolved to close or dispose
of the business by 31 December 2020 and which don’t meet
the criteria to be classified as a discontinued operation. The
presentation is applied retrospectively, so businesses classified
as non-core subsequent to the period end before the Financial
Statements are signed are included in the Other items column
in the reporting period, and prior year comparatives are
restated for businesses identified as non-core subsequent to
signing of the prior year Annual Report and Accounts.
■ Net restructuring costs
Restructuring costs are classified as Other items if they relate
to a fundamental change in the organisational structure of
the Group or a fundamental change in the operating model of
a business within the Group. Costs may include redundancy,
property closure costs and consultancy costs, which are
significant in size and will not be incurred under the ongoing
structure or operating model of the Group. These costs are
therefore recorded as Other items in order to provide a
better understanding of the ongoing financial performance of
the Group. Careful consideration is applied by management
in assessing whether these costs relate to fundamental
restructuring and changing the structure and operating model
of the business as opposed to costs incurred in the normal
course of business.
■ Investment in omnichannel retailing
Costs incurred in the year in relation to the Group’s investment
in developing an omnichannel retailing platform have been
included within Other items as they are significant in size and do
not relate to the ongoing trading activities of the Group
■ Costs associated with refinancing
Costs associated with the refinancing and changes to debt
facility agreements during the year are included within Other
items as they are significant in size, do not form part of the
underlying trading activities and will not be incurred on an
ongoing basis. This includes the loss on modification of the
private placement notes and the write-off of arrangement fees
in relation the previous RCF which has been extinguished, which
are included within non-underlying finance costs.
■ Onerous contract costs
Onerous contract costs in relation to the SAP 1HANA
implementation and other licence fee commitments are
included within Other items as they are significant in size and do
not relate to the ongoing trading activities of the Group.
■ Other specific items
Other specific items are recorded in Other items where they
do not form part of the underlying trading activities of the
Group in order to enhance the understanding of the financial
performance of the Group. This includes, for example, profit on
sale of property not related to ongoing operations (i.e. related
to a branch or business closure) or property sold as part of
a fundamental restructuring programme. Profit on the sale
of property in connection with branch or office moves in the
normal course of business is included within underlying results.
A full breakdown of other specific items is included in Note 2 to
the Consolidated Financial Statements.
■ Other items within finance income and finance costs
The unwinding of provision discounting for provisions that
have been included as Other items is included within Other
items consistent with the classification of the provision. Other
provision discounting is included within underlying finance costs.
The loss on modification in relation to the private placement
notes and the write-off of the arrangement fees in relation the
previous RCF, both incurred in relation to the refinancing during
the year, are also included within Other items.
■ Taxation
The taxation effect of Other items, the effect of the change in
rates of taxation on deferred tax and tax adjustments in respect
of previous years’ Other items are shown within Other items
in order to enhance the understanding of the underlying tax
position of the Group.
143
Stock code: SHI www.sigplc.comFINANCIALS Statement of Significant Accounting Policies continued
Revenue from contracts with customers
Revenue is measured based on the consideration specified in
a contract with a customer and excludes amounts collected on
behalf of third parties. The Group recognises revenue when it
transfers control over a product or service to a customer.
a) Sale of goods
The majority of the Group’s revenue arises from contracts
with customers for the sale of goods, with one performance
obligation. Revenue is recognised at the point in time that
control of the goods passes to the customer, usually on delivery
to the customer. Standard payment terms vary across the
different businesses but generally range from 8 to 60 days from
end of month. The amount of revenue recognised is impacted
by the following:
Volume rebates
The Group provides retrospective volume rebates to certain
customers, which give rise to variable consideration.
The Group estimates the expected volume rebates using an
expected value approach based on expected volumes and
thresholds in the contracts. The Group then applies the constraint
regarding variable consideration and revenue is only recognised
to the extent that it is highly probable that a significant reversal
will not occur. Expected volume rebates due to customers are
recognised as a reduction to trade receivables.
Early settlement discounts
Early settlement discounts are estimated using the expected value
approach based on past experience and are recognised at the time
of recognising the revenue, subject to the constraint regarding
variable consideration that it is highly probable that a change in
estimate would not result in a significant reversal of the cumulative
revenue recognised.
b) Construction contracts
The Group has the following revenue streams which fall under the
category of “construction contracts”:
i) Air Handling projects (discontinued operations)
The goods and services supplied as part of an air handling
contract are significantly integrated and considered to be one
performance obligation. The criteria for recognition over time
are considered to apply as the entity’s performance creates and/
or enhances an asset controlled by the customer, the assets
created do not have an alternative use as the installations are
on the customers’ premises, and the entity has an enforceable
right to payment for performance completed to date. Progress
towards completion is measured on the basis of costs incurred
as this reflects the progress towards satisfaction of the
performance obligation.
ii) Contracts for provision of industrial services
The Group’s business in Ireland provides industrial painting,
coating and repair services. Revenue from these contracts is
recognised over time, as the entity’s performance enhances a
customer-controlled asset, using an output method to measure
progress towards completion, based on agreed rates and/or
valuation schedules agreed with the customer which confirm
the amounts invoiced each month, depending on individual
contract terms.
Any earned consideration that is conditional is recorded as a
contract asset. A contract asset becomes a receivable when
receipt is conditional only on the passage of time. Therefore,
revenue recognised from construction contracts described
above which has not yet been invoiced is recognised as a
contract asset, which is shown as a separate line item on the
Consolidated Balance Sheet rather than as part of trade and
other receivables (£nil in 2020 and 2019). Invoices are raised
as the contract progresses based on agreed milestones, rates
or valuation schedules depending on the terms of individual
contracts, with subsequent payment in accordance with agreed
payment terms.
c) Presentation and disclosure requirements
The Group has disaggregated revenue recognised from
contracts with customers into categories that depict how
the nature, amount, timing and uncertainty of revenue and
cash flows are affected by economic factors. The Group has
also disclosed information about the relationship between
the disclosure of disaggregated revenue and the revenue
information disclosed for each reportable segment. Refer to
Note 1 for the disclosure on disaggregated revenue.
Supplier rebates
Supplier rebate income is significant to the Group’s results, 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 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.
Outstanding amounts at the balance sheet date are included in
trade payables when the Group has the right to offset against
amounts owing to the supplier and therefore settles on a net
basis, in line with IAS 32 criteria. Where the supplier rebates are
not netted off the amounts owing to that supplier, the outstanding
amount is included within prepayments and accrued income. The
carrying value of inventory is reduced by the associated amount
where the inventory has yet to be sold at the balance sheet date.
Operating profit
Operating profit is stated after charging distribution costs, selling
and marketing costs and administrative expenses, but before
finance income and finance costs.
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 or the Statement of Changes in Equity.
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.
Current 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.
Uncertain tax treatments are accounted for in accordance
with IFRIC 23. The Group determines whether to consider each
uncertain tax treatment separately or together with one or more
other uncertain tax treatments and uses the approach that better
predicts the resolution of the uncertainty.
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.
144
SIG plc Annual Report and Accounts for the year ended 31 December 2020 In accordance with IAS 12, the following temporary differences are
not provided for:
■ goodwill not deductible for taxation purposes;
■ the initial recognition of assets or liabilities that affect neither
accounting nor taxable profit; or
■ differences relating to investments in subsidiaries to the extent
that they will probably not reverse in the foreseeable future and
the Group is able to control the reversal
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.
Share-based payment transactions
Employees (including senior executives) of the Group receive
remuneration in the form of share-based payments, whereby
employees render services as consideration for equity instruments
(equity-settled transactions). Equity settled share-based payments
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. The fair value of the
options is measured using the Black-Scholes or Monte Carlo option
pricing model as appropriate.
The amount recognised as an expense is adjusted to reflect the
actual number of share options that vest.
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.
Service and non-market performance conditions are not taken into
account when determining the grant date fair value of awards, but
the likelihood of the conditions being met is assessed as part of the
Group’s best estimate of the number of equity instruments that
will ultimately vest. Market performance conditions are reflected
within the grant date fair value. Any other conditions attached
to an award, but without an associated service requirement, are
considered to be non-vesting conditions. Non-vesting conditions
are reflected in the fair value of an award and lead to an immediate
expensing of an award unless there are also service and/or
performance conditions.
No expense is recognised for awards that do not ultimately vest
because non-market performance and/or service conditions have
not been met. Where awards include a market or non-vesting
condition, the transactions are treated as vested irrespective of
whether the market or non-vesting condition is satisfied, provided
that all other performance and/or service conditions are satisfied.
The SIG Employee Share Trust (“the EBT”) purchases shares in the
Company in order to satisfy awards made under the Company’s
share plans. The EBT is included in the Consolidated Financial
Statements of the Group. Shares held by the EBT which are
not vested and beneficially owned by employees are treated as
treasury shares and a deduction is computed in the Company’s
issued share capital for the purpose of calculating earnings per
share.
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:
Amortisation period
Current average
useful life
Customer relationships
Non-compete contracts
Computer software
Life of the relationship
Life of the contract
Useful life of the software 3-10 years
7 years
3 years
Assets in the course of construction are carried at cost, with
amortisation commencing once the assets are ready for their
intended use.
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 average useful life
50 years
Period of lease
3-8 years or length of lease
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.
Investment property
Investment properties are measured initially at cost, including
transaction costs. Subsequent to initial recognition the Group
has chosen to apply the cost model. Investment properties are
therefore recognised at cost and depreciated over the useful life
and are impaired when appropriate in accordance with IAS 16
“Property, plant and equipment”.
Transfers are made to or from investment property only when
there is a change in use. If owner-occupied property becomes
an investment property, the Group accounts for such property
in accordance with the policy stated under property, plant and
equipment up to the date of change in use.
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Stock code: SHI www.sigplc.comFINANCIALS Statement of Significant Accounting Policies continued
Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets, which are assets
that necessarily take a substantial period of time to get ready for
their intended use or sale, are added to the cost of those assets,
until such a time as the assets are substantially ready for their
intended use or sale. All other borrowing costs are recognised in
the Consolidated Income Statement in the period in which they are
incurred.
Interest income is recognised when it is probable that the
economic benefits will flow to the Group and the amount of
revenue can be measured reliably. Interest income is accrued on
a time basis, by reference to the principal outstanding and at the
effective interest rate applicable, which is the rate that exactly
discounts estimated future cash receipts through the expected life
of the financial asset to that asset’s net carrying amount on initial
recognition.
Leases and hire purchase agreements
Leases and hire purchase agreements are recognised in
accordance with IFRS 16 “Leases”.
a) The Group’s leasing activities
The Group leases various offices, warehouses, branches,
equipment and cars. Rental contracts are typically made for
fixed periods of 3 to 10 years but may have extension or
early termination options. Lease terms are negotiated on an
individual basis and contain a wide range of different terms and
conditions. The lease agreements do not impose any covenants.
b) How leases are accounted for
A lease liability is recognised based on the discounted present
value of total future lease payments, with a corresponding
right-of-use asset recognised and depreciated over the lease
term. The lease payments are discounted using the interest rate
implicit in the lease, or, if that rate cannot be determined, the
lessee’s incremental borrowing rate.
Where a lease liability relates to an onerous lease contract the
right-of-use asset is assessed for impairment. Payments due under
the lease continue to be included in the lease liability, therefore
a separate provision is no longer required. The lease liability is
also remeasured upon the occurrence of certain events, which
is generally also recognised as an adjustment to the right of-use
asset. Provisions for short-term onerous lease contracts continue
to be recognised.
i) Definition of a lease
A lease is a contract (i.e. an agreement between two or more
parties that creates enforceable rights and obligations), or part of
a contract, that conveys the right to control the use of an identified
asset for a period of time in exchange for consideration. It is
determined whether a contract is a lease or contains a lease at the
inception of the contract.
Under IFRS 16, an identified asset can be either implicitly or
explicitly specified in a contract.
ii) Lease term
In accordance with IFRS 16, the lease term is defined as the non-
cancellable period of the lease, together with:
using the index or the rate at the commencement date. Forecast
future changes in rates are not included; these are only taken into
account at the point in time at which lease payments change.
The Group has a few property leases where rentals are based
on an index but with a cap and collar, and for such leases the
minimum future increase is included in the initial recognition of the
lease liability where relevant.
Other variable payments, for example additional costs based on
usage or vehicle mileage, are not included in the lease liability.
iv) Asset restoration costs
Where there is an obligation under a lease contract to dismantle
and/or restore the asset to its original condition, provision is made
for this in accordance with IAS 37, and the initial carrying amount of
this provision is added to the right-of-use asset on inception of the
lease. The liability continues to be recorded as a separate provision
on the balance sheet (i.e. it is not included in the IFRS 16 lease
liability).
v) Exemptions
The Group has certain assets with lease terms of 12 months or
less and leases of equipment with low value. The Group applies
the ‘short-term lease’ and ‘lease of low-value assets’ recognition
exemptions for these leases.
The Group has considered the amendments within the Covid-
19-Related Rent Concessions (Amendment to IFRS 16) Standard
allowing companies with rent concessions meeting the criteria
in the amendment to choose to take advantage of the practical
expedient not to assess whether a rent concession is a lease
modification as all of the following conditions were met:
■ the change in lease payments results in revised consideration
for the lease that is substantially the same as, or less than, the
consideration for the lease immediately preceding the change;
■ any reduction in lease payments affects only payments due on
or before 30 June 2021; and
■ there is no substantive change to other terms and conditions of
the lease.
The only changes as a result of Covid-19 have been changes in
the timing of payments (for example from quarterly to monthly)
and there are therefore no significant amounts recognised in the
Income Statement from Covid-19-related rent concessions during
the year.
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. Most businesses use weighted average,
with the exception of Poland and Ireland, where first in first out is
used.
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.
■ periods covered by an option to extend the lease if the lessee is
reasonably certain to exercise that option; and
■ periods covered by an option to terminate the lease if the lessee
is reasonably certain not to exercise that option.
iii) Variable lease payments
Variable lease payments based on an index or a rate are part of
the lease liability. Variable lease payments are initially measured
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.
146
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Cash held but not available for use by the Group is disclosed as
restricted cash within Note 29.
Lease payments are presented as follows in the Consolidated Cash
Flow Statement:
■ Short term lease payments and payments for leases of low-
value assets that are not included in the measurement of the
lease liabilities are presented within cash flows from operating
activities;
■ Payments for the interest element of recognised lease liabilities
are included in ‘Finance costs paid’ within cash flows from
financing activities; and
■ Payments for the principal element of recognised lease liabilities
are presented within cash flows from financing activities.
Cash flows in relation to the settlement of amounts payable
for previous purchases of businesses related to consideration
dependent on vendors remaining within the business are classified
as an operating cash flow. Cash flows in relation to contingent
or deferred consideration not dependent on vendors remaining
within the business are classified as a cash flow from investing
activities.
Financial assets
Financial assets are classified as either financial assets
subsequently measured at amortised cost, fair value through profit
and loss (“FVPL”) or fair value through other comprehensive income
(“FVOCI”).
The classification at initial recognition depends on the financial
asset’s contractual cash flow characteristics and the Group’s
business model for managing them. With the exception of trade
receivables that do not contain a significant financing component
or for which the Group has applied the practical expedient, the
Group initially measures a financial asset at its fair value plus,
in the case of a financial asset not at fair value through profit or
loss, transaction costs. Trade receivables that do not contain a
significant financing component or for which the Group has applied
the practical expedient are measured at the transaction price
determined under IFRS 15.
The Group measures financial assets at amortised cost if both the
following conditions are met:
■ The financial asset is held within a business model with the
objective to hold financial assets in order to collect contractual
cash flows; and
■ The contractual terms of the financial asset give rise on specified
dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
The Group’s financial assets are all measured at amortised cost,
except for derivative financial instruments.
Financial assets at amortised cost are subsequently measured
using the effective interest method and are subject to impairment.
Gains and losses are recognised in profit or loss when the asset is
derecognised, modified or impaired. The Group’s financial assets
include trade receivables, deferred consideration and cash and
cash equivalents.
Impairment of financial assets
The Group recognises an allowance for expected credit losses
(ECLs) for all debt instruments held at amortised cost. ECLs are
based on the difference between the contractual cash flows due
in accordance with the contract and all the cash flows that the
Group expects to receive, discounted at an approximation of the
original effective interest rate. For trade receivables and contract
assets, the Group applies the standard’s simplified approach and
calculates ECLs based on lifetime expected credit losses. The
Group has established a provision matrix that is based on the
Group’s historical credit loss experience, adjusted for forward
looking factors specific to the debtors and economic environment.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or
part of a group of similar financial assets) is primarily derecognised
(i.e. removed from the Group’s Consolidated Statement of Financial
Position) when:
■ The rights to receive cash flows from the asset have expired; or
■ The Group has transferred its rights to receive cash flows from
the asset or has assumed an obligation to pay the received cash
flows in full without material delay to a third party under a ‘pass-
through’ arrangement; and either (a) the Group has transferred
substantially all the risks and rewards of the asset, or (b) the
Group has neither transferred nor retained substantially all the
risks and rewards of the asset, but has transferred control of
the asset.
Trade receivables that are factored out to banks and other financial
institutions without recourse to the Group are derecognised at
the point of factoring as the risks and rewards of the receivables
have been fully transferred. In assessing whether the receivables
qualify for derecognition the Group has considered the receivables
and receivable insurance contracts as two separate units of
account. Therefore, the insurance is not included as part of the
derecognition assessment on the basis that the insurance is not
similar to the receivables. The Group has elected to recognise cash
inflows from the sale of factored receivables as an operating cash
flow.
Financial liabilities
Financial liabilities are classified at initial recognition as financial
liabilities at fair value through profit or loss, loans and borrowings,
payables, or as derivatives designated as hedging instruments in
an effective hedge, as appropriate. All financial liabilities, except
for derivative financial instruments (see below), are recognised
initially at fair value, net of transaction costs, and are subsequently
measured at amortised cost using the effective interest rate (EIR)
method.
A financial obligation is derecognised when the obligation under
the liability is discharged, cancelled or expires. When an existing
financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability are
substantially modified, such an exchange or modification is treated
as the derecognition of the original liability and the recognition of
a new liability. Where a modification of a financial liability does not
result in derecognition, the amortised cost of the financial liability
is recalculated by computing the present value of estimated future
contractual cash flows that are discounted at the loan’s original
EIR. Any consequent adjustment (gain or loss on modification)
is recognised immediately in profit or loss. The gain or loss on
modification will unwind over the remaining term of the liability,
with the movement recognised in finance costs.
Financial liabilities designated upon initial recognition at fair
value through profit or loss are designated at the initial date of
recognition and only if the criteria in IFRS 9 are satisfied. The Group
has not designated any financial liability as at fair value through
profit or loss.
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.
147
Stock code: SHI www.sigplc.comFINANCIALS Statement of Significant Accounting Policies continued
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net
amount is reported in the Consolidated Balance Sheet if there is a
currently enforceable legal right to offset the recognised amounts
and there is an intention to settle on a net basis, to realise the
assets and settle the liabilities simultaneously.
Derivative financial instruments
The Group uses derivative financial instruments including interest
rate swaps, forward foreign exchange contracts, and cross-currency
swaps to hedge its exposure to foreign currency exchange and
interest rate risks arising from operational and financing activities.
In accordance with its Treasury Policy, the Group does not hold
or issue derivative financial instruments for trading purposes.
However, any derivative financial instruments 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
12 months and they are not expected to be otherwise realised
or settled within 12 months. Other derivatives are presented as
current assets or current liabilities.
Derivative financial instruments are recognised immediately at fair
value. 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 Other items in the Consolidated Income Statement.
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.
For the purposes of hedge accounting, hedges are classified as:
■ Fair value hedges when hedging the exposure to changes in the
fair value of a recognised asset or liability or an unrecognised
commitment;
■ Cash flow hedges when hedging the exposure to variability
in cash flows that is either attributable to a particular risk
associated with a recognised asset or liability or a highly
probable forecast transaction or the foreign currency risk in an
unrecognised firm commitment; or
■ Hedges of a net investment in a foreign operation.
At the inception of the hedge relationship the Group formally
designates and documents the hedge relationship to which it
wishes to apply hedge accounting, along with its risk management
objectives and its strategy for undertaking the hedging transaction.
The documentation includes identification of the hedging
instrument, the hedged item, the nature of the risk being hedged
and how the Group will assess whether the hedging relationship
meets the hedge effectiveness requirements (including the analysis
of sources of hedge ineffectiveness and how the hedge ratio is
determined). A hedging relationship qualifies for hedge accounting
if it meets all of the following effectiveness requirements:
■ There is ‘an economic relationship’ between the hedged item
and the hedging instrument;
■ The effect of credit risk does not ‘dominate the value changes’
that result from that economic relationship; and
■ The hedge ratio of the hedging relationship is the same as that
resulting from the quantity of the hedged item that the Group
actually hedges and the quantity of the hedging instrument that
the Group actually uses to hedge that quantity of hedged item.
Hedges that meet all the qualifying criteria for hedge accounting
are accounted for as described below:
Fair value hedges
The change in the fair value of the hedged item attributable to
the risk being hedged is recorded as part of the carrying value of
the hedged item and is recognised in the Consolidated Income
Statement within Other items. The change in the fair value of the
hedging instrument is also recognised in the Consolidated Income
Statement within Other items.
Cash flow hedges
The effective part of any gain or loss on the hedging instrument
is recognised directly in the Consolidated Statement of
Comprehensive Income in the cash flow hedging reserve. 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 Other items in the Consolidated Income
Statement. The Group designates only the spot element of
forward contracts as a hedging instrument. The forward element is
recognised in Other Comprehensive Income and accumulated in a
separate component of equity under cost of hedging reserve.
Hedges 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 Other items within the Consolidated Income
Statement. Gains and losses deferred in the foreign currency
translation reserve are recognised immediately in the Consolidated
Income Statement when foreign operations are disposed of.
Provisions
Provisions are recognised when the Group has a present obligation
(legal or constructive) as a result of a past event, it is probable
that a transfer of economic benefit will be required to settle the
obligation and a reliable estimate can be made of the obligation.
If the effect of the time value of money is material, provisions
are discounted using a current pre-tax rate that reflects, when
appropriate, the risks specific to the liability. When discounting is
used, the increase in the provision due to the passage of time is
recognised as a finance cost.
148
SIG plc Annual Report and Accounts for the year ended 31 December 2020 “Accounting for government grants and disclosure of government
assistance”. Income received is netted off the related staff costs in
the relevant period.
Segmental reporting
In accordance with IFRS 8 “Operating Segments”, the Group
identifies its reportable segments based on the components of
the business on which financial information is regularly reviewed
by the Group’s Chief Operating Decision Maker (‘CODM’) to assess
performance and make decisions about how resources are
allocated. For SIG, the CODM is considered to be the Executive
Leadership Team.
In 2019, the reportable operating segments were grouped on a
line of business basis with subtotals for Specialist Distribution and
Roofing Merchanting. There is no change to the reported operating
segments from those reported in the 2019 Annual Report and
Accounts, but the segments are now grouped on a geographical
basis instead of on a line of business basis. This reflects the way in
which information is reported and reviewed by the Chief Operating
Decision Maker (CODM) following the change in management and
strategy during 2020. Prior year comparatives have been restated
to be consistent with the current year presentation.
Leasehold dilapidations
Provisions are recognised in relation to contractual obligations
to reinstate leasehold properties to their original state of repair.
The provision is calculated based on both the liability to rectify
or reinstate leasehold improvements and modifications carried
out on the inception of the lease, recognised on inception with a
corresponding fixed asset, and the liability to rectify general wear
and tear which is recognised as incurred over the life of the lease.
Pension schemes
SIG operates four 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,
at the earlier of when the plan amendment or curtailment occurs
and when the entity recognises related restructuring costs or
termination benefits.
The full service cost of the pension schemes is charged to
operating profit. Net interest 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 comprises
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.
Dividends
Dividends proposed by the Board of Directors that have not been
paid by the end of the year are not recognised in the Financial
Statements until they have been approved by the Shareholders at
the Annual General Meeting.
Government grants
Government grants are recognised where there is reasonable
assurance that the grant will be received and all attached
conditions will be complied with. When the grant relates to an
expense item, it is recognised as income on a systematic basis
over the periods that the related costs, for which it is intended
to compensate, are expensed. The Group considered that the
Coronavirus Job Retention Scheme in the UK and similar schemes
in Ireland, France and Benelux in relation to Covid-19 during 2020
met the definition of government grants in accordance with IAS 20
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Stock code: SHI www.sigplc.comFINANCIALS Statement of Significant Accounting Policies continued
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group’s accounting policies, which are
described on pages 141 to 149, the Directors are required to
make judgements (other than those involving estimates) that
have a significant impact on the amounts recognised and to make
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 judgements in applying the
Group’s accounting policies
The following are the critical judgements that the Directors have
made in the process of applying the Group’s accounting policies
and that have had a significant effect on the amounts recognised in
the Financial Statements. The judgements involving estimations are
dealt with separately below.
Classification of Other items in the
Consolidated Income Statement
As described in the Statement of Significant Accounting Policies,
certain items are presented in the separate column of the
Consolidated Income Statement entitled Other items where they
are significant in size or nature, and either they do not form part of
the trading activities of the Group or their separate presentation
enhances understanding of the financial performance of the Group.
Operating results from businesses identified as non-core (see Note
11 of the Financial Statements) do not form part of the ongoing
trading activities of the Group and are therefore also recorded
separately in Other items in order to enhance the understanding
of the ongoing financial performance of the Group. The nature and
amounts of the items included in Other items, together with the
overall impact on the results for the year, is disclosed in Note 2 of
the Financial Statements.
Discontinued operations and assets held for sale
On 7 October 2019 the Group announced the sale of the Air
Handling and Building Solutions businesses. The sale of the Air
Handling business completed on 31 January 2020. The business
was considered to meet the criteria to be classified as held for sale
at 31 December 2019 on the basis that a sale had been agreed
and was considered highly probable, which was confirmed by
completion of the sale in January 2020. The Air Handling business
was also considered to meet the definition of a discontinued
operation as it was a major line of business of the Group. The
results of the business in 2019 and for the period until sale in 2020
are therefore presented separately on the face of the Consolidated
Income Statement. Further information on the discontinued
operation is included in Note 12 of the Financial Statements.
The Building Solutions business was also classified as held for sale
at 31 December 2019 as a sale had been agreed and was due to
complete in the first half of 2020 subject to approval from the UK
Competition & Markets Authority (CMA). The business was not
considered to meet the definition of a discontinued operation as it
was not a major line of the business of the Group. On 21 May 2020
it was announced that the parties had agreed to terminate the sale
agreement as terms could not be agreed for the extension of the
agreement to enable the completion of the CMA investigation. The
business no longer meets the criteria to be presented as held for
sale at 31 December 2020, and is no longer classified as non-core.
Amendments to financing arrangements
On 18 June 2020 the Group amended the terms of its financing
arrangements, involving both the Revolving Credit Facility (RCF) and
private placement notes (PPNs). The Group has assessed whether
the amendments to the facilities represents either a modification
of the existing arrangement or an extinguishment of the previous
arrangement and refinancing in accordance with IFRS 9.
The Group has determined the amendments to the RCF to be
an extinguishment and new facility, as the present value of the
estimated future cash flows discounted at the loan’s original
effective interest rate (EIR) differed by more than 10% compared to
the previous cash flows. The balance of unamortised arrangement
fees as at 18 June 2020 of £0.3m has therefore been written off in
full through Finance costs within Other items, and the fees payable
in relation to the new agreement are being amortised over the new
term of the facility.
The Group has determined that amendments to the terms of
the PPNs (see Note 19 for further details) meet the criteria to be
accounted for as a modification of the existing arrangements,
with the present value of future cash flows considered separately
for each PPN, discounted at the original effective interest rate
for the relevant PPN. A loss on modification of £11.3m has been
recognised, reflecting the difference in the present value of future
cash flows discounted at each loan note’s original EIR, which has
been recognised within finance costs within Other items (see Note
3). This will unwind over the remaining term of the PPNs, resulting
in the finance cost recognised in future periods being lower than
the actual amounts paid. The existing prepaid arrangement fees
of £0.3m at the date of the new agreement will continue to be
amortised over the original term.
Professional fees incurred in concluding the above amendments
have been recognised as operating expenses within Other items
within the Consolidated Income Statement.
Impairment of intangible assets in relation
to SAP 1HANA implementation
As disclosed in the 2019 Annual Report and Accounts, the project
to implement SAP 1HANA in France and Germany was paused
in April 2020 in light of the Covid-19 situation and the change in
senior management. In the final quarter of 2020 a decision was
made to recommence the project in 2021, but with a change in
scope and direction and a locally managed implementation. Costs
incurred and recognised on the balance sheet as at the date of
pause have been reviewed to assess whether they continue to
have any future economic benefit in relation to the implementation
going forward. Following this review, an impairment of £13.7m has
been recognised and no asset value is carried forward. An onerous
contract provision of £9.6m has also been recognised in relation
to future contracted licence fees which the Group believes have
no future economic benefit. Both these items involved significant
management judgement in terms of the level of future economic
benefit to be derived in relation to the future project.
Key sources of estimation uncertainty
The key estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying value of the assets
and liabilities within the next financial year are detailed below.
150
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Rebates 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, trade and other receivables, and inventories. The
amounts payable 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
estimation over the level of future purchases and sales. At the
balance sheet date, the Directors estimate the amount of rebates
that will become payable by and due to the Group under these
agreements based upon prices, volumes and product mix. The
Group has recognised income from supplier rebates of £198.5m
from continuing operations for the year ended 31 December 2020
(2019: £245.2m). At 31 December 2020 trade payables is presented
net of £29.9m (2019: £38.0m) due from suppliers in respect of
supplier rebates where the Group has the right to net settlement,
and included within prepayments and accrued income is £36.7m
(2019: £42.4m) due in relation to supplier rebates where there
is no right to offset against trade payable balances. The majority
of these balances relate to agreements which are coterminous
with the financial year end and therefore this reduces the level of
estimation involved. Based on experience in the current year, the
amount received is not expected to vary from the amount recorded
by more than £1.0m (2019: £1.0m)
Post-employment benefits
The Group operates four 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 141, 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 have been made to determine the defined
benefit obligation, in particular with regard to discount rate,
inflation and mortality. Management considers the key assumption
to be the discount rate applied. In determining the appropriate
discount rate, the Group considers the interest rates of high quality
corporate bonds excluding university bonds. If the discount rate
were to be increased/decreased by 0.1%, this would decrease/
increase the Group’s gross pension scheme deficit by £3.0m as
disclosed in Note 31. At 31 December 2020 the Group’s retirement
benefit obligations were £25.6m (2019: £24.8m).
Impairment of goodwill
The Group tests goodwill annually for impairment, or more
frequently if there are indications that an impairment may be
required. The impact of the Covid-19 pandemic led to indications
of an impairment as at 30 June 2020 and therefore a full
reassessment of the trading expectations of the Group was carried
out leading to an impairment of goodwill in the UK businesses.
Determining whether goodwill is impaired requires an estimation
of the value in use of the Cash Generating Units (CGUs) to which
goodwill has been allocated, including all related assets. The key
estimates made in the value in use calculation are those regarding
discount rates, sales growth rates, and expected changes to selling
prices and direct costs to reflect the operational gearing of the
business. The Directors estimate discount rates using pre-tax rates
that reflect current market assessments of the time value of money
for the Group and that also include a risk premium to factor in a
certain element of risk over and above that already included in the
forecast cash flows (for example the risk of historical accuracy of
forecasting or the risk of delayed achievement of the “Return to
Growth” strategy).
The Group performs goodwill impairment reviews by forecasting
cash flows based upon management’s three year projections,
which include forecast sales growth based on management’s
best estimates and external data (construction PMI data and
construction market growth forecasts), gross margin assumptions
based on management’s best estimates and previous experience,
with annual growth rates based upon country specific inflation
expectations (1.5%-2.3%) applied thereafter into perpetuity.
Assumptions regarding sales and operating profit growth, gross
margin, and discount rate are considered to be the key areas of
estimation in the impairment review process, and appropriate
sensitivities have been performed and disclosed in Note 13.
Impairments are allocated initially against the value of any goodwill
and intangible assets held within a CGU, with any remaining
impairment applied to property, plant and equipment on a pro rata
basis.
The carrying amount of relevant non-current assets at 31
December 2020 is £444.5m (2019: £515.1m) including right-of-use
assets recognised in accordance with IFRS 16. The most recent
results of the impairment review process are disclosed in Note 13.
An impairment charge of £60.3m has been recognised in relation
to the UK Distribution and UK Exteriors CGUs. The carrying value
of non-current assets associated with the Group’s other CGU’s
is considered supportable. Whilst the Directors consider the
assumptions used in the impairment review to be realistic, if actual
results are different from expectations then it is possible that the
value of goodwill included in the Consolidated Balance Sheet could
become impaired further. The remaining carrying value of goodwill
after recognition of the impairment charge is £128.8m. Sensitivities
are disclosed in Note 13. These indicate reasonably possible
scenarios which could lead to further impairment.
Provisions against receivables
At 31 December 2020 the Group has recognised trade receivables
with a carrying value of £232.7m (2019: £226.4m). The Group
recognises an allowance for expected credit losses (ECLs) in
relation to trade receivables. The Group has established a provision
matrix that is based on the Group’s historical credit loss experience,
adjusted for forward looking factors specific to the debtors and
economic environment. Changes in the economic environment
or customer-specific circumstances could have an impact on the
recoverability of amounts included on the Consolidated Balance
Sheet at 31 December 2020. The total allowance for expected
credit losses recorded at 31 December 2020 is £15.3m (2019:
£19.5m). The bad debt to sales ratio of the Group has varied by
up to 0.1% over recent periods, therefore this gives an indication
that the bad debt experience could vary by c.£2m. Further detail
on trade receivables and the allowance for expected credit losses
recognised is disclosed in Note 17.
151
Stock code: SHI www.sigplc.comFINANCIALS Statement of Significant Accounting Policies continued
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
Dilapidations provisions
The Group has a significant number of leasehold properties
with contractual obligations to reinstate the properties to their
original state of repair at the end of the lease contract. The Group
has recognised a provision of £22.1m at 31 December 2020
(2019: £21.8m) in relation to this obligation (see Note 23). The
total provision includes both the estimated cost of rectifying or
reinstating leasehold modifications and improvements carried
out, which is recognised at the inception of the lease with a
corresponding asset recognised in fixed assets and depreciated
over the term of the lease, together with the estimated cost of
rectifying general wear and tear which is recognised as incurred
over the life of the lease. Estimates are based on a combination
of a sample of assessments by third party independent property
surveyors, internal assessments by the Group’s property experts
and previous settlement history. Whilst the Directors consider the
estimates to be reasonable based on latest available information,
actual amounts payable could be different to the amount provided
depending on specific circumstances of individual properties and
counterparties at the expiry of each lease contract. The amount
payable is not expected to be materially different to the amount
provided in the following year but there could be a material
adjustment over a longer timescale. The provision is reassessed
each year on the basis of latest information, which could also result
in a change in the value of the provision year on year of up to c.10%
based on past experience.
Leases – estimating the incremental borrowing rate
The Group cannot readily determine the interest rate implicit in
the lease, therefore, it uses its incremental borrowing rate (IBR)
to measure lease liabilities. The IBR is the rate of interest that the
Group would have to pay to borrow over a similar term and with a
similar security, the funds necessary to obtain an asset of a similar
value to the right-of-use asset in a similar economic environment.
The IBR therefore requires estimation when no observable
rates are available, such as for subsidiaries that do not enter
into financing transactions. The Group estimates the IBR using
observable inputs, such as market interest rates, when available
and is required to make certain entity-specific estimates, such as
the subsidiary’s stand-alone credit rating.
152
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Notes to the Financial Statements
1. Revenue and segmental information
Revenue
2020
Type of product
Interiors
Exteriors
Heating, ventilation
and air conditioning
Inter-segment revenue^
Total underlying
revenue
Revenue attributable to
businesses identified
as non-core
Total
Nature of revenue
Goods for resale
Construction contracts
Total
Timing of revenue
recognition
Goods transferred at
a point in time
Goods and services
transferred over time
Total
UK
Distribution
£m
UK
Exteriors Total UK
£m
£m
France
Distribution
£m
France
Exteriors
£m
Total
Total
Germany
and
France Germany Benelux
£m
£m
£m
Benelux Ireland Poland Eliminations
£m
£m
£m
£m
Total
Group
£m
357.4
–
–
310.1
357.4
310.1
168.1
–
– 168.1
344.8 344.8
370.7
–
91.6
–
462.3
–
46.3 142.6
–
34.2
– 1,176.7
689.1
–
–
1.5
–
0.5
–
2.0
–
0.9
–
7.6
–
8.5
–
0.1
–
0.1
–
0.2
–
0.1
6.9
–
–
(10.8)
6.9
–
358.9
310.6
669.5
169.0
352.4 521.4
370.8
91.7
462.5
80.6 149.5
(10.8) 1,872.7
–
358.9
–
310.6
–
669.5
–
169.0
1.8
1.8
354.2 523.2
–
370.8
–
91.7
–
462.5
–
–
80.6 149.5
–
1.8
(10.8) 1,874.5
358.9
–
358.9
310.6
–
310.6
669.5
–
669.5
169.0
–
169.0
354.2 523.2
–
354.2 523.2
–
370.8
–
370.8
91.7
–
91.7
462.5
–
462.5
75.2 149.5
–
80.6 149.5
5.4
(10.8) 1,869.1
5.4
(10.8) 1,874.5
–
358.9
310.6
669.5
169.0
354.2 523.2
370.8
91.7
462.5
75.2 149.5
(10.8) 1,869.1
–
358.9
–
310.6
–
669.5
–
169.0
–
–
354.2 523.2
–
370.8
–
91.7
–
462.5
5.4
–
80.6 149.5
–
5.4
(10.8) 1,874.5
^ Inter-segment revenue is charged at the prevailing market rates.
2019
Type of product
Interiors
Exteriors
Heating, ventilation
and air conditioning
Inter-segment revenue^
Total underlying
revenue
Revenue attributable to
businesses identified
as non-core
Total
Nature of revenue
Goods for resale
Construction contracts
Total
Timing of revenue
recognition
Goods transferred at
a point in time
Goods and services
transferred over time
Total
UK
Distribution
£m
UK
Exteriors
£m
Total UK
£m
France
Distribution
£m
France
Exteriors
£m
Total
Total
Germany
and
France Germany Benelux
£m
£m
£m
Benelux Ireland Poland
£m
£m
£m
Eliminations
£m
Total
Group
£m
515.4
–
–
346.5
515.4
346.5
184.5
–
– 184.5
342.2 342.2
381.5 103.0
–
–
484.5
–
56.4 149.6
–
38.5
– 1,390.4
727.2
–
18.9
11.9
–
9.1
18.9
21.0
–
0.1
–
0.2
–
0.3
–
1.0
–
0.1
–
1.1
–
–
6.5
–
–
(22.4)
25.4
–
546.2
355.6
901.8
184.6
342.4 527.0
382.5 103.1
485.6
94.9 156.1
(22.4) 2,143.0
1.2
547.4
–
355.6
1.2
903.0
–
184.6
1.9
1.9
344.3 528.9
14.5
–
397.0 103.1
14.5
500.1
–
–
94.9 156.1
–
17.6
(22.4) 2,160.6
547.4
–
547.4
355.6
–
355.6
903.0
–
903.0
184.6
–
184.6
344.3 528.9
–
344.3 528.9
–
397.0 103.1
–
397.0 103.1
–
500.1
–
500.1
88.7 156.1
–
94.9 156.1
6.2
(22.4) 2,154.4
6.2
(22.4) 2,160.6
–
547.4
355.6
903.0
184.6
344.3 528.9
397.0 103.1
500.1
88.7 156.1
(22.4) 2,154.4
–
547.4
–
355.6
–
903.0
–
184.6
–
–
344.3 528.9
–
–
397.0 103.1
–
500.1
6.2
–
94.9 156.1
–
6.2
(22.4) 2,160.6
^ Inter-segment revenue is charged at the prevailing market rates.
153
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Financial Statements
1. Revenue and segmental information continued
Segmental Information
In accordance with IFRS 8 "Operating Segments", the Group identifies its reportable operating segments based on the way in which financial
information is reviewed and business performance is assessed by the CODM. Reportable operating segments are grouped on a geographical
basis as explained in the Statement of Significant Accounting Policies.
a) Segmental analysis
2020
Revenue
Underlying revenue
Revenue attributable to
businesses identified
as non-core
Inter-segment revenue^
Total revenue
Segment result
before Other items
Amortisation of
acquired intangibles
Impairment charges
Acquisition costs
Profits and losses on
agreed sale or closure
of non-core businesses
(Note 11)
Net operating losses
attributable to
businesses identified
as non-core (Note 11)
Onerous contract costs
Net restructuring costs
Other specific items
Segment operating
profit/(loss)
Parent Company costs
Parent Company Other
items*
Operating loss
Net finance costs
before Other items
Non-underlying finance
costs
Loss before tax
and discontinued
operations
Income tax expense
Profit from
discontinued
operations
Loss for the year
UK
Distribution
£m
UK
Exteriors Total UK
£m
£m
France
Distribution
£m
France
Exteriors
£m
Total
Total
Germany
and
France Germany Benelux
£m
£m
£m
Benelux Ireland Poland Eliminations
£m
£m
£m
£m
Total
Group
£m
357.4 310.1
667.5
168.1 344.8 512.9
370.7
91.6
462.3
80.5 149.5
– 1,872.7
–
1.5
–
0.5
358.9 310.6
–
2.0
669.5
–
0.9
1.8
8.5
169.0 354.2 523.2
1.8
7.6
–
0.1
370.8
–
0.1
91.7
–
0.2
462.5
–
0.1
–
–
80.6 149.5
–
1.8
–
(10.8)
(10.8) 1,874.5
(45.4)
(7.4)
(52.8)
7.1
8.3
15.4
0.4
2.5
2.9
0.8
2.0
–
(31.7)
(0.9)
(50.6)
–
(4.3)
(11.8)
(0.2)
(5.2)
(62.4)
(0.2)
–
–
–
(0.4)
–
–
(0.4)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(5.6)
(62.4)
(0.2)
(0.3)
–
(0.3)
–
(0.9)
(0.9)
–
–
–
–
–
–
(1.2)
–
(1.0)
(4.0)
(0.1)
–
–
(1.7)
–
–
(1.0)
(5.7)
(0.1)
–
–
–
–
(0.3)
–
(0.1)
0.1
(0.3)
–
(0.1)
0.1
–
–
(0.5)
0.2
–
–
(0.4)
–
–
–
(0.9)
0.2
–
–
–
–
–
–
–
–
(102.3)
(25.4)
(127.7)
7.1
6.7
13.8
0.1
2.1
2.2
0.8
2.0
–
–
–
–
–
(0.3)
(1.0)
(6.7)
0.2
(108.9)
(21.6)
(37.2)
(167.7)
(23.0)
(11.6)
(202.3)
(6.6)
69.7
(139.2)
^ Inter-segment revenue is charged at the prevailing market rates.
* Parent company Other items include impairment charges £13.7m, investment in omnichannel retailing £4.2m, costs associated with refinancing £7.4m, onerous contract costs £12.2m
and other specific items £1.6m, offset by profit on agreed sale or closure of non-core businesses of £1.9m. See Note 2 for further details.
154
SIG plc Annual Report and Accounts for the year ended 31 December 2020 1. Revenue and segmental information continued
UK
Distribution
£m
UK
Exteriors
£m
Total UK
£m
France
Distribution
£m
France
Exteriors
£m
Total
Total
Germany
and
France Germany Benelux
£m
£m
£m
Benelux Ireland Poland
£m
£m
£m
Eliminations
£m
Total
Group
£m
534.3
346.5
880.8
184.5 342.2 526.7
381.5 103.0 484.5
94.9 156.1
– 2,143.0
1.2
11.9
547.4
–
9.1
355.6
1.2
21.0
903.0
–
0.1
1.9
0.3
184.6 344.3 528.9
1.9
0.2
14.5
1.0
14.5
1.1
397.0 103.1 500.1
–
0.1
–
–
–
–
94.9 156.1
17.6
–
–
(22.4)
(22.4) 2,160.6
7.9
11.8
19.7
11.2
8.6
19.8
4.4
5.2
9.6
6.8
4.3
(0.9)
(58.2)
(4.4)
(0.5)
(5.3)
(58.7)
–
–
(0.7)
(32.2)
(0.7)
(32.2)
–
–
(0.2)
–
(0.2)
–
–
–
–
–
–
–
–
60.2
(6.2)
(90.9)
(0.9)
(1.6)
(2.5)
–
(1.6)
(1.6)
6.0
–
6.0
(1.8)
–
–
0.1
(0.8)
(10.2)
0.2
–
(8.0)
–
(0.8)
(18.2)
0.2
–
–
–
(0.9)
(2.1)
(0.2)
(0.9)
(2.1)
(0.2)
0.8
(6.6)
(0.1)
–
(0.2)
–
0.8
(6.8)
(0.1)
–
–
(0.3)
–
–
–
(62.9)
(2.7)
(65.6)
11.2
(29.1)
(17.9)
4.5
4.8
9.3
4.7
4.3
2019
Revenue
Underlying revenue
Revenue attributable to
businesses identified
as non-core
Inter-segment revenue^
Total revenue
Segment result
before Other items
Amortisation of
acquired intangibles
Impairment charges
Profits and losses on
agreed sale or closure
of non-core businesses
and associated
impairment charges
(Note 11)
Net operating losses
attributable to
businesses identified
as non-core (Note 11)
Net restructuring costs
Other specific items
Segment operating
profit/(loss)
Parent Company costs
Investment in
omnichannel retailing
Gain in fair value of
forward currency
option
Operating loss
Net finance costs
before Other items
Loss before tax
and discontinued
operations
Income tax expense
Loss from discontinued
operations
Loss for the year
^ Inter-segment revenue is charged at the prevailing market rates.
–
–
–
–
(0.9)
(27.1)
(0.4)
(65.2)
(17.7)
(5.7)
0.7
(87.9)
(24.8)
(112.7)
(11.4)
(0.4)
(124.5)
155
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Financial Statements
1. Revenue and segmental information continued
UK
Distribution
£m
UK
Exteriors
£m
Total
UK
£m
France
Distribution
£m
France
Exteriors
£m
Total
France Germany Benelux
£m
£m
£m
Total
Germany
and
Benelux
£m
Ireland
£m
Poland
£m
Total
Group
£m
153.2
242.8 396.0
67.6
210.6
278.2
138.1
48.7
186.8
52.6
59.5
973.1
188.3
112.1 300.4
48.8
104.9
153.7
79.5
9.6
89.1
31.9
28.3
603.4
1.4
0.3
0.1
174.9
4.8
1,154.6
UK
Distribution
£m
UK
Exteriors
£m
Total
UK
£m
France
Distribution
£m
France
Exteriors
£m
Total
France Germany Benelux
£m
£m
£m
144.5
67.7
0.9
31.8
848.3
Total
Germany
and
Benelux
£m
Ireland
£m
Poland
£m
Total
Group
£m
268.3
204.1 472.4
57.5
211.1
268.6
154.0
51.6 205.6
56.0
66.5 1,069.1
2.9
0.4
2.6
(3.6)
4.4
258.4
13.6
1,347.8
196.9
83.5 280.4
54.8
97.4
152.2
96.4
16.4 112.8
36.1
35.7
617.2
175.5
99.6
2.1
115.7
43.5
1,053.6
2020
Balance sheet
Assets
Segment assets
Unallocated assets:
Right-of-use assets
Property, plant and equipment
Derivative financial instruments
Cash and cash equivalents
Other assets
Consolidated total assets
Liabilities
Segment liabilities
Unallocated liabilities:
Private placement notes
Bank loans
Derivative financial instruments
Other liabilities
Consolidated total liabilities
2019
Balance sheet
Assets
Segment assets
Unallocated assets:
Right-of-use assets
Property, plant and equipment
Derivative financial instruments
Cash and cash equivalents
Deferred tax assets
Assets held for sale
Other assets
Consolidated total assets
Liabilities
Segment liabilities
Unallocated liabilities:
Private placement notes
Bank loans
Derivative financial instruments
Liabilities held for sale
Other liabilities
Consolidated total liabilities
156
SIG plc Annual Report and Accounts for the year ended 31 December 2020 1. Revenue and segmental information continued
2020
Other segment
information
Capital expenditure
on:
Property, plant and
equipment
Computer software
Goodwill and
intangible assets
(excluding computer
software)
Non-cash expenditure:
Depreciation of fixed
assets
Depreciation of right-
of-use assets
Impairment of right-
of-use assets
Impairment of
property, plant and
equipment and
computer software
Amortisation of
acquired intangibles
and computer
software
Impairment of
goodwill and
intangibles
(excluding computer
software)
2019
Other segment
information
Capital expenditure
on:
Property, plant and
equipment
Computer software
Non-cash expenditure:
Depreciation
Impairment of right-
of-use assets
Impairment of
property, plant and
equipment and
computer software
Amortisation of
acquired intangibles
and computer
software
Impairment of
goodwill and
intangibles
(excluding computer
software)
UK
Distribution
£m
UK
Exteriors
£m
Total
UK
£m
France
Distribution
£m
France
Exteriors
£m
Total
France Germany
£m
£m
Benelux
£m
Total
Germany
and
Benelux
£m
Ireland
£m
Poland
£m
Parent
company
£m
Total
Group
£m
4.4
1.9
3.9
1.2
8.3
3.1
0.3
–
2.4
–
2.7
–
0.9
0.2
0.7
–
1.6
0.2
0.4
0.3
0.2
–
0.1
5.1
13.3
8.7
–
1.8
1.8
–
–
–
–
–
–
–
–
–
1.8
3.3
2.5
5.8
0.6
1.5
2.1
1.7
0.6
2.3
0.5
0.4
0.1
11.2
15.2
8.0 23.2
5.1
8.6
13.7
12.9
1.6
14.5
1.7
3.2
0.3
56.6
10.2
– 10.2
–
–
–
–
–
–
–
–
–
10.2
4.9
–
4.9
–
–
–
–
–
–
–
–
13.7
18.6
4.5
4.9
9.4
–
0.4
0.4
–
–
–
0.2
0.1
0.9
11.0
35.5
11.8 47.3
–
–
–
–
–
–
–
–
–
47.3
UK
Distribution
£m
UK
Exteriors
£m
Total
UK
£m
France
Distribution
£m
France
Exteriors
£m
Total
France
£m
Germany
£m
Benelux
£m
Total
Germany
and
Benelux
£m
Ireland
£m
Poland
£m
Parent
company
£m
Total
Group
£m
2.4
5.1
6.5
1.2
8.9
6.3
0.8
–
0.9
–
1.7
–
1.3
0.1
0.3
–
1.6
0.1
0.7
0.4
2.2
–
–
9.9
15.1
16.7
19.1
10.6 29.7
5.2
10.0
15.2
13.8
2.4
16.2
2.8
3.5
0.4
67.8
0.5
0.5
1.0
–
0.5
0.5
–
–
–
–
–
–
1.5
0.9
–
0.9
–
–
–
–
–
–
–
–
–
0.9
3.5
4.5
8.0
–
0.7
0.7
0.1
0.2
0.3
–
0.1
0.8
9.9
57.4
– 57.4
–
33.3
33.3
–
–
–
–
–
–
90.7
157
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Financial Statements
1. Revenue and segmental information continued
b) Geographic information
The Group's non-current operating assets (including property, plant and equipment, right-of-use assets, goodwill and intangible assets but
excluding lease receivables, deferred tax and derivative financial instruments) by geographical location are as follows:
Country
United Kingdom
Ireland
France
Germany
Poland
Benelux
Total underlying
Attributable to businesses identified as non-core
Attributable to businesses held for sale (Note 11)
Total
2. Other operating expenses
a) Analysis of other operating expenses
Other operating expenses:
– distribution costs
– selling and marketing costs
– management, administrative
and central costs
– property profits
Total
Before Other
items
£m
2020
Other items
£m
Total
£m
Before Other
items
£m
261.4
138.8
123.3
(0.2)
523.3
7.1
0.4
107.6
(0.2)
114.9
268.5
139.2
230.9
(0.4)
638.2
207.6
179.6
126.0
(0.3)
512.9
2020
Non-current
assets
£m
2019
Non-current
assets
£m
222.0
14.6
113.4
59.5
13.4
21.6
444.5
–
–
444.5
2019
Other items
£m
27.5
3.0
103.6
–
134.1
283.4
15.7
112.0
66.2
14.2
23.4
514.9
0.2
112.9
628.0
Total
£m
235.1
182.6
229.6
(0.3)
647.0
158
SIG plc Annual Report and Accounts for the year ended 31 December 2020 2. Other operating expenses continued
b) Other items
Profit/(loss) 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 (as explained in the Statement of Accounting
Policies):
Other items
£m
2020
Tax impact
£m
Tax impact
%
Other items
£m
2019
Tax impact
£m
Amortisation of acquired intangibles
(Note 14)
Impairment charges1
Profits and losses on agreed sale or closure
of non-core businesses (Note 11)
Net operating profits/(losses) attributable to
businesses identified as non-core2 (Note 11)
Net restructuring costs3
Investment in omnichannel retailing
Costs associated with refinancing4
Onerous contract costs5
Other specific items6
Impact on operating profit/(loss)
Non-underlying finance costs7
Impact on profit/(loss) before tax
Other tax adjustments in respect of
previous years
Impact on profit/(loss) after tax
(5.6)
(76.1)
0.6
(0.3)
(6.7)
(4.2)
(7.4)
(13.2)
(1.5)
(114.4)
(11.6)
(126.0)
–
(126.0)
1.1
–
–
–
1.0
–
1.4
0.3
0.2
4.0
0.1
4.1
–
4.1
19.6%
–
–
–
14.9%
–
18.9%
2.3%
13.3%
3.5%
0.9%
3.3%
–
3.3%
(6.2)
(90.9)
0.1
(0.9)
(27.1)
(5.7)
–
–
0.3
(130.4)
–
(130.4)
–
(130.4)
1.4
0.2
(0.8)
0.1
4.4
–
–
–
–
5.3
–
5.3
(0.4)
4.9
Tax impact
%
22.6%
0.2%
800.0%
11.1%
16.2%
–
–
–
–
4.1%
–
4.1%
–
3.8%
1 Impairment charges comprises £45.4m (2019: £89.6m) related to goodwill (Note 13), £1.9m customer relationships in intangibles (Note 14), £13.7m related to SAP 1HANA
implementation costs (Note 14), £1.4m (2019: £0.3m) other software costs (Note 14), £3.5m tangible fixed assets (Note 10) and £10.2m (2019: £1.0m) right-of-use assets (Note 25).
2 The comparatives for 31 December 2019 for net operating profit/(losses) attributable to businesses identified as non-core are updated to reflect non-core businesses on a consistent
basis with the current year.
3 Included within net restructuring costs are property closure costs of £0.8m (2019: £6.0m), redundancy and related staff costs of £2.8m (2019: £9.5m), £2.9m (2019: £9.6m) in relation
to restructuring consultancy costs and £0.2m (2019: £2.0m) other costs. These costs have been incurred in connection with the prior year target operating model projects in the UK,
Germany and France, the current year restructuring of the UK businesses as part of implementation of the “Return to Growth” strategy, and restructuring in Benelux.
4 Costs associated with refinancing includes legal and professional fees of £8.3m offset by £0.9m gain in relation to the partial derecognition of a cash flow hedging arrangement as a
result of the change in debt facility agreements.
5 Onerous contract costs includes £11.4m (2019: £nil) relating to provisions recognised for licence fee commitments where no future economic benefit is expected to be obtained,
principally in relation to the SAP 1HANA implementation (see Note 23) together with £1.8m licence fees recognised in the consolidated income statement during the year whilst the
project was on hold.
6 Other specific items comprises the following:
PwC investigation costs
Gain on fair value of forward currency option not hedged
Costs in relation to the cyber attack in France
GMP equalisation (Note 31)
Acquisition costs
Other specific items
Total other specific items
2020
£m
(1.8)
0.6
0.1
(0.4)
(0.2)
0.2
(1.5)
2019
£m
–
0.7
(0.6)
–
–
0.2
0.3
7 Non-underlying finance costs comprise £11.3m loss on modification recognised in relation to the private placement notes and £0.3m write-off of arrangement fees in relation to the
previous RCF which has been extinguished.
159
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Financial Statements
3. Finance income and finance costs
2020
Underlying
£m
Other items
£m
Finance income
Interest on bank deposits
Total finance income
Finance costs
On bank loans, overdrafts and other
associated items1
On private placement notes2
On obligations under lease contracts
Total interest expense
Write off of arrangement fees on
extinguished RCF3
Loss on modification of private placement
notes4
Net finance charge on defined benefit
pension schemes
Total finance costs
Net finance costs
0.7
0.7
4.3
6.8
12.3
23.4
–
–
0.3
23.7
23.0
–
–
–
–
–
–
0.3
11.3
–
11.6
11.6
Total
£m
0.7
0.7
4.3
6.8
12.3
23.4
0.3
11.3
0.3
35.3
34.6
Underlying
£m
2019
Other items
£m
0.5
0.5
5.5
6.9
12.4
24.8
–
–
0.5
25.3
24.8
–
–
–
–
–
–
–
–
–
–
–
Total
£m
0.5
0.5
5.5
6.9
12.4
24.8
–
–
0.5
25.3
24.8
1 Other associated items includes the amortisation of arrangement fees of £0.7m (2019: £0.7m).
2 Included within finance costs on private placement notes is the amortisation of arrangement fees of £0.4m (2019: £0.1m) and the amortisation of the loss on modification of £1.2m
(2019: £nil).
3 As part of the changes to debt facility agreements on 18 June 2020, £70.0m drawn under the existing revolving credit facility was converted into a £70.0m term facility. This has been
accounted for as an extinguishment of the previous facility and new arrangement, therefore arrangement fees which were being amortised over the term of the previous facility have
been written off.
4 The amendments to the private placement loan notes on 18 June 2020 met the criteria for a modification of the existing arrangements rather than an extinguishment and refinancing,
resulting in the recognition of a loss on modification of £11.3m, reflecting the difference in the present value of the future cashflows discounted at the loans' original effective interest
rates. The amortisation of this loss on modification is included within underlying finance costs on private placement notes over the remaining term of the notes, resulting in a reduction
in finance costs compared to the amount paid.
160
SIG plc Annual Report and Accounts for the year ended 31 December 2020 4. Profit/(loss) before tax
Profit/(loss) before tax is stated after crediting:
Net decrease in provision for inventories
Gains on disposal of property, plant and equipment
Profits and losses on agreed sale or closure of non-core businesses and associated impairment charges
(Note 11)
Other specific 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
Depreciation of right-of-use assets
Amortisation of acquired intangibles
Amortisation of computer software
Loss on disposal of property, plant and equipment
Expense relating to short term leases (Note 25)
Auditor remuneration for audit services
Non-audit fees
Net increase in provision for receivables (Note 17)
Foreign exchange rate losses/(gains)
Impairment charges (Note 2)
Net operating losses attributable to businesses identified as non-core (Note 11)
Net restructuring costs (Note 2)
Other specific items (Note 2)
Staff costs (Note 5)
A more detailed analysis of Auditor remuneration is provided below (continuing operations):
Fees payable to the Company’s Auditor and their associates for the audit of the Company and Group
Financial Statements
Fees payable to the Company's Auditor and their associates for other services to the Group:
– The audit of the Company's subsidiaries
Total audit fees (continuing operations)*
– Audit-related assurance services^
Total non-audit fees
Total fees
2020
£m
–
–
0.6
0.9
1,888.2
2.7
11.2
56.6
5.6
5.4
0.9
0.8
3.3
0.2
8.2
0.2
76.1
0.3
6.7
2.4
267.4
2020
£m
1.3
2.0
3.3
0.2
0.2
3.5
2019
£m
0.9
1.4
0.1
0.9
2,116.8
–
13.1
54.4
6.2
3.9
–
1.4
2.1
0.2
2.7
(1.3)
90.9
0.9
27.1
0.6
268.2
2019
£m
0.6
1.5
2.1
0.2
0.2
2.3
* Total audit fees including discontinued operations are £3.3m (2019: £2.3m). The current year costs include £0.7m costs in relation to the 2019 audit.
^ The audit-related assurance services relate to the interim review, it is usual practice for a company's Auditor to perform this work.
The Audit Committee Report on pages 105 and 106 provides an explanation of how Auditor objectivity and independence is safeguarded
when non-audit services are provided by the Auditor.
161
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Financial Statements
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 31)
Redundancy costs
Total staff costs
2020
£m
218.3
41.5
0.2
6.2
1.2
267.4
2019
£m
217.5
42.3
0.1
6.5
1.8
268.2
Amounts received from furlough schemes in relation to Covid-19 of £8.1m have been deducted from staff costs reported above (see Note
26). In addition to the above, redundancy and related staff costs of £2.8m (2019: £9.5m) have been included within Other items (Note 2).
Of the pension costs noted above, a charge of £nil (2019: £0.2m) relates to defined benefit schemes and a charge of £6.2m (2019: £6.3m)
relates to defined contribution schemes. See Note 31 for more details.
The average monthly number of persons employed by the Group during the year was as follows:
Production
Distribution
Sales
Administration
Total
The average numbers above include 18 staff that were employed in businesses classified as non-core (2019: 70).
Directors’ emoluments
Details of the individual Directors' emoluments are given in the Directors' Remuneration Report on page 117.
The employee costs shown above include the following emoluments in respect of Directors of the Company:
Directors' remuneration (excluding IFRS 2 share option charge)
Total
– charge for the year
– adjustments in respect of previous years
– charge for the year
– adjustments in respect of previous years
6. Income tax
The income tax expense comprises:
Current tax
UK & Ireland corporation tax:
Mainland Europe corporation tax:
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
162
2020
Number
242
2,314
2,791
1,101
6,448
2019
Number
170
2,555
2,686
1,660
7,071
2020
£m
2.2
2.2
2020
£m
0.5
–
0.5
5.6
(0.1)
5.5
6.0
(2.2)
2.6
–
0.2
0.6
6.6
2019
£m
1.7
1.7
2019
£m
0.8
(0.1)
0.7
6.8
2.7
9.5
10.2
5.3
0.8
(3.9)
(1.0)
1.2
11.4
SIG plc Annual Report and Accounts for the year ended 31 December 2020 6. Income tax continued
As the Group’s profits and losses are earned across a number of tax jurisdictions an aggregated income tax reconciliation is disclosed,
reflecting the applicable rates for the countries in which the Group operates.
The total tax charge for the year differs from the expected tax using a weighted average tax rate which reflects the applicable statutory
corporate tax rates on the accounting profits/losses in the countries in which the Group operates. The differences are explained in the
following aggregated reconciliation of the income tax expense:
2020
2019
Loss before tax from continuing operations
Profit before tax from discontinued operations (Note 12)
Loss before tax
Expected tax credit
Factors affecting the income tax expense for the year:
- expenses not deductible for tax purposes^
- non-taxable income*
- impairment and disposal charges not deductible for tax purposes**
- deductible temporary differences not recognised for deferred tax purposes
- other adjustments in respect of previous years
- tax on branch profits
- effect of change in rate on deferred tax
Total income tax expense
Income tax expense reported in the consolidated income statement
Income tax attributable to discontinued operations (Note 12)
£m
(202.3)
72.0
(130.3)
(14.2)
19.6
(33.2)
15.9
18.1
2.5
–
0.2
8.9
6.6
2.3
8.9
%
10.9%
(15.0)%
25.5%
(12.2)%
(13.9)%
(1.9)%
–
(0.2)%
(6.8)%
£m
(112.7)
3.8
(108.9)
(23.2)
7.5
(4.5)
22.4
10.5
3.7
0.1
(0.9)
15.6
11.4
4.2
15.6
%
21.3%
(6.9)%
4.1%
(20.6)%
(9.6)%
(3.4)%
(0.1)%
0.8%
(14.3)%
^ The majority of the Group’s expenses that are not deductible for tax purposes are in relation to the divestments of businesses, internal restructuring and impairments of property.
* The majority of the Group’s non-taxable income relates to the divestments of businesses.
** During the year the Group incurred impairment charges of £45.4m in relation to goodwill (as set out in Note 13) which are not deductible for tax purposes.
The effective tax rate for the Group on the total loss before tax of £130.3m (2019: £108.9m) is negative 6.8% (2019: negative 14.3%). As
the Group operates in several different countries tax losses can not be surrendered or utilised cross border, and the Group therefore is
subject to tax in some countries and not in others. Tax losses are not currently recognised in respect of the UK business (see Note 24)
which impacts the overall effective tax rate. The combination of these factors means that the effective tax rate is less meaningful as an
indicator or comparator for the Group.
Factors that will affect the Group's future total tax charge as a percentage of underlying profits are:
■ the mix of profits and losses between the tax jurisdictions in which the Group operates; in particular the tax rates in France, Germany
and Belgium are relatively high when compared to the UK and so a higher proportion of profits in these jurisdictions could result in a
higher Group tax charge;
■ the impact of non-deductible expenditure and non-taxable income;
■ agreement of open tax computations with the respective tax authorities; and
■ the recognition or utilisation (with corresponding reduction in cash tax payments) of unrecognised deferred tax assets (see Note 24).
On 25 April 2019, the European Commission ('EC') concluded its investigation into the UK’s controlled foreign company ('CFC') tax rules.
The EC concluded that the UK’s CFC rules, which provide an exemption for 75% of the CFC charge where the CFC is carrying out financing
activities, were in breach of EU State Aid. The UK Government disagrees with this conclusion and has applied to have this judgement
annulled. In the meantime, the Group is continuing to review the specific facts and circumstances of its position in conjunction with
professional advisors (having claimed the exemption in historic periods). Based on the initial assessment undertaken to date, a provision is
not deemed to be required. However, should the UK Government be unsuccessful in appeal and all CFC profits deemed taxable in the UK,
this would give rise to additional UK tax payable of up to a maximum of £5m (before interest and penalties).
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 re-measurement of defined benefit pension liabilities*
Tax credit associated with re-measurement of defined benefit pension liabilities*
Tax charge on fair value movements arising on borrowings and derivative financial instruments
Total
*These items will not subsequently be reclassified to the Consolidated Income Statement.
2020
£m
0.3
0.4
–
0.7
2019
£m
(6.6)
0.4
(2.1)
(8.3)
163
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Financial Statements
7. Dividends
No interim dividend was paid for the year ended 31 December 2020 (2019: 1.25p per share amounting to £7.4m) and no final dividend
proposed. No final dividend was proposed or paid for the year ended 31 December 2019. Total dividends paid during the year were £nil
(2019: £22.2m). No dividends have been paid between 31 December 2020 and the date of signing the Financial Statements.
At 31 December 2020 the Company has negative distributable reserves of £217.1m as set out in Note 14 of the Company Financial
Statements. This means that the Company is currently unable to pay a dividend or make any other distribution to shareholders. A
resolution will be put to shareholders at the AGM to approve the cancellation of the Company's share premium account in order to
eliminate these losses and to create reserves available for distribution. Under the terms of the Group's borrowing arrangements, the
payment of dividends is also subject to a number of conditions, including that at the relevant time the Group's leverage is less than 2.25x
(including on a look-forward basis). Additionally, even where such conditions are satisfied, any interim dividend for 2021 is limited to £3.0m.
8. Earnings/(loss) per share
The calculations of earnings/(loss) per share are based on the following profits/(losses) and numbers of shares:
Loss attributable to ordinary equity holders of the parent for basic and diluted earnings per share from
continuing operations
Profit/(loss) attributable to ordinary equity holders of the parent from discontinued operations
Loss attributable to ordinary equity holders of the parent for basic and diluted earnings per
share
Loss attributable to ordinary equity holders of the parent for basic and diluted earnings per share from
continuing operations
Add back:
Other items (Note 2)
(Loss)/profit attributable to ordinary equity holders of the parent for basic and diluted earnings
per share from continuing operations before Other items
Weighted average number of shares
For basic and diluted earnings/(loss) per share
Effect of dilution from share options
Adjusted for the effect of dilution
Basic and diluted
2020
£m
(208.9)
69.7
2019
£m
(124.1)
(0.4)
(139.2)
(124.5)
Basic and diluted before
Other items
2020
£m
2019
£m
(208.9)
(124.1)
121.9
125.5
(87.0)
1.4
2020
Number
2019
Number
871,941,603
591,556,982
1,405,503
–
873,347,106
591,556,982
The weighted average number of shares excludes those held by the SIG Employee Share Trust ("the EBT") which are not vested and
beneficially owned by employees. The weighted average number of shares has increased due to the equity raise which completed on 10
July 2020 with 589,999,995 new ordinary shares issued for gross proceeds of £165m.
Loss per share
From continuing operations:
Basic loss per share
Diluted loss per share
Total:
Basic loss per share
Diluted loss per share
(Loss)/earnings per share before Other items^
Basic (loss)/earnings per share from continuing operations before Other items
2020
2019
(24.0)p
(23.9)p
(16.0)p
(15.9)p
(21.0)p
(21.0)p
(21.0)p
(21.0)p
(10.0)p
0.2p
^ (Loss)/earnings per share before Other items (also referred to as underlying (loss)/earnings per share) has been disclosed in order to present the underlying performance of the Group.
164
SIG plc Annual Report and Accounts for the year ended 31 December 2020 9. Share-based payments
The Group had five share-based payment schemes in existence during the year ended 31 December 2020 (2019: four). The Group
recognised a total charge of £0.2m (2019: £0.1m) in the year relating to share-based payment transactions with a corresponding entry to
the share option reserve. The weighted average fair value of each option granted in the year was 34p (2019: 103p). Details of each of the
schemes are provided below.
a) Long Term Incentive Plan ('LTIP')
There are no remaining LTIP options outstanding at 31 December 2020. Information included in the prior year in relation to the options
outstanding at 31 December 2019 is as follows:
On 8 November 2018, the 2018 Long Term Incentive Plan was approved ('2018 LTIP'). Under this plan Executive Directors can be awarded
an annual grant of nil paid shares, with a maximum initial award of 200% and a potential multiplier on vesting of up to 300% of base salary.
In 2019, 1,958,676 awards were granted under the 2018 LTIP. The initial award will vest at the end of a three year performance period
provided that the director remains employed at that date and the primary performance conditions are satisfied. The two primary
performance conditions are median TSR performance against the FTSE 250 and average Return on Capital Employed ("ROCE") of 10.3%
per annum over the three year period. Once the ROCE and relative TSR gateways have been achieved, the vesting of the initial award is
determined based on the Company's absolute TSR performance as follows:
Vesting level of initial award:
– Does not vest
– Vests proportionately (25%)
– Vests in full
Straight line vesting between 8% p.a. and 14% p.a.
Exercise period
* The awards vest after three years and are then subject to a further two year holding period.
LTIP options
At 1 January
Granted during the year
Lapsed during the year
At 31 December
2019 Awards
Absolute TSR
growth:
Below 8% p.a.
8% p.a.
14% p.a. or above
3 - 10 years*
2020
2019
Weighted
average
exercise price
(p)
0.0
0.0
0.0
0.0
Options
5,827,857
–
(5,827,857)
–
Weighted
average
exercise price
(p)
0.0
0.0
0.0
0.0
Options
3,869,181
1,958,676
–
5,827,857
Of the above share options outstanding at 31 December 2019 nil were exercisable at 31 December 2019. The options outstanding at
31 December 2019 had a weighted average exercise price of nil p and a weighted average remaining contractual life of 1.6 years.
No options were exercised during 2019 or 2020.
The assumptions used in the models used to calculate the fair value of the LTIP options are as follows:
Share price (on date of official grant 21 March 2019)
Exercise price
Expected volatility
Actual life
Risk free rate
Dividend yield
Model used
Expected percentage options exercised versus granted at date of grant
Revised expectation of percentage of options to be exercised as at 31 December 2020
2019 LTIP
Award
145p
0.0p
36.3%
3-5 years
0.7%
0.0%
Monte Carlo
100%
0%
The weighted average fair value of LTIP options granted during 2019, on a maximum number of awards basis, was 59p. The expected
volatility was determined by calculating the historical volatility of the Group’s share price over the previous two years. The expected
percentage of total options exercised was based on the Directors' best estimate for the effects of behavioural considerations.
165
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Financial Statements
9. Share-based payments continued
b) Management Incentive Plan (‘MIP’)
On 16 May 2018 the Management Incentive Plan ('MIP') was approved. Under this Plan, senior leadership and wider leadership team
members can be awarded an annual grant of restricted and deferred share options up to a certain percentage of base salary. Restricted
share options have no performance conditions other than the employee remaining in employment for the three year vesting period. The
deferred share options are formally granted 12 months after the granting of the restricted share options, with the number of options
granted based on the achievement of certain performance criteria for the relevant financial year. The deferred share options vest after a
further two years provided the employee remains in employment. The vesting period for both options is considered to be the three years
from the granting of the restricted share options as this is the date on which both parties have a shared understanding of the terms and
conditions of the arrangement. There were no new awards of restricted and deferred shares in 2020 (2019: 2,287,530), but there was an
uplift to previously issued awards to reflect the increased number of shares following the equity raise resulting in a further 30,020 awards
being issued.
The criteria and vesting conditions of the MIP deferred share options granted in 2019 are as follows:
Weighting of criteria
Vesting conditions:
- Does not vest
- Vests proportionately
- Vests in full
Proportion that vests at entry level
Exercise period
Local EBIT and
ROCE
50%
Various*
Various*
Various*
25%
2019 Awards
Group PBT
Group ROCE
25%
25%
<£90.0m
<12.2%
£90.0m - £120.0m 12.2% - 15.6%
≥15.6%
25%
≥£120.0m
25%
3 - 10 years
* There are different local targets for EBIT and ROCE for different businesses within the Group based on local budgets.
MIP options
At 1 January
Granted during the year
Lapsed during the year
At 31 December
2020
2019
Options
1,800,019
30,020
(905,533)
924,506
Weighted average
exercise price (p)
–
–
–
–
Options
1,529,155
2,287,530
(2,016,666)
1,800,019
Weighted average
exercise price (p)
–
–
–
–
Of the above share options outstanding at the end of the year, nil (2019: nil) are exercisable at 31 December 2020. The options outstanding
at 31 December 2020 had a weighted average exercise price of nil p (2019: nil) and a weighted average remaining contractual life of 0.8
years (2019: 1.8). In the year, no options were exercised.
The assumptions used in the Black-Scholes model in relation to the MIP 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 2020
2019 MIP Awards
9 October 2019
20 March 2019
101p
0.0p
32.5%
3 years
0.3%
3.7%
94%
60%
145p
0.0p
35.5%
3 years
0.7%
3.4%
94%
39%
The weighted average fair value of MIP options granted during 2019 was 141p. The expected volatility was determined by calculating the
historical volatility of the Group’s share price over the previous two years. The expected percentage of total options exercised is based on
the Directors’ best estimate for the effects of behavioural considerations.
166
SIG plc Annual Report and Accounts for the year ended 31 December 2020 9. Share-based payments continued
c) Restricted Share Plan ('RSP')
On 17 November 2020 the SIG plc Restricted Share Plan was approved. Under this Plan, executive directors and eligible employees
can be awarded an annual grant of restricted share awards up to a certain percentage of base salary. Restricted share awards have no
performance conditions other than the employee remaining in employment for the three year vesting period.
Restricted share awards
At 1 January
Granted during the year
At 31 December
2020
Weighted
average
exercise price
(p)
–
–
–
Options
–
16,548,665
16,548,665
Of the above share options outstanding at the end of the year, nil are exercisable at 31 December 2020. The options outstanding at
31 December 2020 had a weighted average exercise price of nil p and a weighted average remaining contractual life of 2.9 years. In the
year, no options were exercised.
The assumptions used in the Black-Scholes model in relation to the restricted share awards 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 2020
2020 RSP Awards
1 December
2020
33p
0.0p
54.1%
3 years
(0.01)%
3.3%
92%
92%
The weighted average fair value of RSP awards granted during 2020 was 34p. The expected volatility was determined by calculating the
historical volatility of the Group’s share price over the previous two years. The expected percentage of total options exercised is based on
the Directors' best estimate for the effects of behavioural considerations.
d) Share Incentive Plan ('SIP')
The SIP is offered to UK employees. The SIP is a HM Revenue & 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 2020, 296,162
(2019: 46,822) 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.
167
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Financial Statements
10. Property, plant and equipment
The movements in the year and the preceding year were as follows:
Freehold land
and buildings
£m
Leasehold
properties
£m
Plant and
machinery
£m
Cost
At 1 January 2019
Exchange differences
Additions
Reclassified as held for sale
Reclassifications
Disposals
At 31 December 2019
Exchange differences
Additions
Transferred from held for sale
Reclassifications
Disposals
At 31 December 2020
Accumulated depreciation and impairment
At 1 January 2019
Charge for the year
Impairment charges
Exchange differences
Reclassifications
Reclassified as held for sale
Disposals
At 31 December 2019
Charge for the year
Impairment charges
Exchange differences
Reclassifications
Transferred from held for sale
Disposals
At 31 December 2020
Net book value
At 31 December 2020
At 31 December 2019
42.9
(2.8)
2.6
(11.6)
11.1
(0.4)
41.8
1.8
0.2
0.2
(3.3)
(0.9)
39.8
17.7
1.0
–
(1.3)
9.3
(4.7)
(0.2)
21.8
0.4
–
0.9
(1.1)
–
(1.0)
21.0
18.8
20.0
60.6
(1.5)
3.1
(3.0)
(1.5)
(0.4)
57.3
1.1
6.3
0.6
6.1
(5.7)
65.7
39.3
2.7
0.6
(1.2)
1.3
(2.0)
(0.3)
40.4
2.4
2.8
1.0
2.1
0.4
(2.5)
46.6
19.1
16.9
166.6
(5.8)
11.4
(42.8)
38.3
(19.1)
148.6
4.2
6.8
15.1
(1.4)
(8.7)
164.6
125.6
11.5
–
(4.6)
37.7
(29.3)
(14.0)
126.9
8.4
0.7
2.8
(1.2)
9.2
(7.5)
139.3
25.3
21.7
Total
£m
270.1
(10.1)
17.1
(57.4)
47.9
(19.9)
247.7
7.1
13.3
15.9
1.4
(15.3)
270.1
182.6
15.2
0.6
(7.1)
48.3
(36.0)
(14.5)
189.1
11.2
3.5
4.7
(0.2)
9.6
(11.0)
206.9
63.2
58.6
Leasehold properties includes leasehold improvements. Also included is a property held under a lease which is classified as an investment
property as it is no longer being occupied for use by the Group. The Group has chosen to account for investment property using the
cost model. £nil (2019: £nil) has been recognised in rental income and £0.6m (2019: £nil) incurred in Other items during the year due to
impairment of the asset. The property is being depreciated on a straight-line basis over the term of the lease (25 years). The property had
a cost of £4.2m, accumulated depreciation of £0.3m and impairment of £2.8m on transfer to investment property at the end of 2018.
The fair value of the investment property at 31 December 2020 is estimated to be £0.5m (2019: £1.1m) based on future expected rental
returns. No independent third party valuation has been carried out.
Included within plant and machinery additions are assets in the course of construction of £nil (2019: £nil).
£2.4m of the impairment charge in 2020 is attributable to the impairment in relation to the UK Distribution CGU (see Note 13). £1.1m is
related to the impairment of the investment property referred to above and other assets.
Amounts included in software costs at 31 December 2019 with cost and net book value of £1.4m have been reclassified to tangible fixed
assets during the year (see Note 14).
168
SIG plc Annual Report and Accounts for the year ended 31 December 2020 11. Divestments and exit of non-core businesses
The Group has recognised a net gain of £0.6m (2019: gain of £0.1m) in respect of profits and losses on agreed sale or closure of non-core
businesses within Other items of the Consolidated Income Statement. This consists of £2.0m gain in relation to the disposal of the Middle
East entity in the current year, offset by costs of £0.2m in relation to the disposal of Building Solutions which was due to complete in the
first half of 2020 but was terminated in May 2020, a loss on the sale of the Maury business of £0.9m and other costs in relation to previous
disposals of £0.3m. These are explained further below.
The sale of the Air Handling business also completed in the period and the gain on sale is included with the results from discontinued
operations (Note 12).
Businesses disposed during the year
As disclosed in the 2019 Annual Report and Accounts, the Middle East business, which was in the process of being closed, was sold on
22 January 2020 for AED1. A gain on sale of £2.0m has been recognised, in relation to the reclassification to the Consolidated Income
Statement of the cumulative exchange differences on the retranslation of the net assets of the business previously recognised in other
comprehensive income in accordance with IAS 21 "The effects of foreign exchange rates".
On 10 September 2020 the Group completed the sale of Maury NZ SAS ('Maury'), the Group's high-end fabrication business in France
and part of the France Exteriors (Larivière) segment, for proceeds of €25,000. An overall loss on sale of £0.9m has been recognised within
Other items, including the reclassification of the cumulative exchange differences on the retranslation of the net assets from equity to the
Consolidated Income Statement, in accordance with IAS 21 "The effects of changes in foreign exchange rates". Net assets at the date of
disposal were £0.9m and costs of less than £0.1m were incurred, resulting in the overall loss on sale of £0.9m.
Costs of £0.2m have also been recognised during the period in relation to the disposal of the Building Solutions business, which was
classified as held for sale at 31 December 2019 as a sale had been agreed and was due to complete in the first half of 2020 subject to
approval from the UK Competition and Markets Authority (CMA). As disclosed in the 2019 Annual Report and Accounts, on 21 May 2020
it was announced that the parties had agreed to terminate the sales agreement as terms could not be agreed for an extension to enable
completion of the CMA investigation and the disposal is no longer proceeding. The business no longer meets the criteria to be presented
as held for sale at 31 December 2020 and is now included within underlying operations. £0.3m costs have also been incurred and
recognised within Other items in relation to the Commercial Drainage business which was closed in the prior year.
Prior year divestments
WeGo FloorTec
On 13 August 2019 the Group completed the sale of WeGo FloorTec GmbH, the German raised access flooring division, for proceeds of
€13.5m plus settlement of intercompany balances. An overall gain on sale of £6.0m has been recognised within Other items, including
the reclassification of the cumulative exchange differences on the retranslation of the net assets from equity to the Consolidated Income
Statement, in accordance with IAS 21 "The effects of changes in foreign exchange rates".
The net assets at the date of disposal were as follows:
Attributable goodwill and intangible assets
Property, plant and equipment
Cash
Inventories
Trade and other receivables
Trade and other payables
Net assets
Other costs
Gain on disposal
Sale proceeds
Satisfied by:
Cash and cash equivalents
At date of
disposal
£m
0.4
0.8
0.4
3.3
2.4
(2.4)
4.9
0.9
6.0
11.8
11.8
Commercial Drainage
The Group closed its Commercial Drainage business, part of the UK Distribution segment, in 2019. Operating losses for the year were included
in Other items in the Consolidated Income Statement and £0.9m of costs were also incurred in 2019 and included in Other items.
Disposal groups held for sale at 31 December 2019
Building Solutions
On 7 October 2019, the Group announced the sale of Building Solutions (National) Limited ("Building Solutions"), a subsidiary of SIG Trading
Limited, for proceeds of £37.5m. At 31 December 2019 the assets and liabilities were classified as held for sale on the Consolidated
Balance Sheet, as shown below. Costs of £1.6m in relation to the disposal are included in Other items in the Consolidated Income
Statement. The sale was subsequently terminated as disclosed in Note 34 of the 2019 Annual Report and Accounts.
169
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Financial Statements
11. Divestments and exit of non-core businesses continued
Air Handling
On 7 October 2019, the Group announced that it had agreed a sale of the Air Handling business and the sale completed on 31 January
2020. This business was a major line of business of the Group and is therefore classified as a discontinued operation. See Note 12 for
further details.
Total assets and liabilities held for sale at 31 December 2019 comprised the following:
Goodwill and intangible assets
Property, plant and equipment
Right-of-use assets
Inventories
Trade and other receivables
Contract assets
Deferred tax asset
Deferred consideration
Cash at bank and on hand
Assets held for sale
Trade and other payables
Contract liabilities
Lease liabilities
Deferred tax liability
Corporation tax liability
Retirement benefit obligations
Provisions
Liabilities directly associated with assets held for sale
Net assets directly associated with disposal groups
Air Handling
£m
Building
Solutions
£m
Other
£m
33.2
15.1
31.5
33.9
58.9
1.5
1.3
0.8
28.8
205.0
(46.0)
(1.5)
(31.9)
(1.0)
(1.2)
(3.4)
(1.5)
(86.5)
118.5
12.5
6.2
12.5
3.8
8.5
–
1.7
–
6.3
51.5
(15.3)
–
(13.4)
–
–
–
(0.5)
(29.2)
22.3
–
1.9
–
–
–
–
–
–
–
1.9
–
–
–
–
–
–
–
–
1.9
Total
£m
45.7
23.2
44.0
37.7
67.4
1.5
3.0
0.8
35.1
258.4
(61.3)
(1.5)
(45.3)
(1.0)
(1.2)
(3.4)
(2.0)
(115.7)
142.7
Contribution to revenue and operating loss
The results of the above businesses for the current and prior periods have been disclosed within Other items in the Consolidated Income
Statement in order to provide an indication of the underlying earnings of the Group. The revenue and net operating profit/(loss) of the non-
core businesses for the years ended 31 December 2020 and 31 December 2019 are as follows:
2020
Revenue
£m
Net operating
profit/(loss)
£m
2019
Revenue
£m
Net operating
profit/(loss)
£m
Commercial Drainage
WeGo FloorTec
Building Solutions
Maury
Businesses classified as non-core in 2019
Reclassification of Building Solutions
Total attributable to non-core businesses in 2020
–
–
–
1.8
1.8
–
1.8
–
–
–
(0.3)
(0.3)
–
(0.3)
1.2
14.5
58.3
1.9
75.9
(58.3)
17.6
Cash flows associated with divestments and exit of non-core businesses
The net cash inflow in the year ended 31 December 2020 in respect of divestments and the exit of non-core businesses is as follows:
Cash consideration received for divestments
Cash at date of disposal
Disposal costs paid
Net cash inflow
2020
Other non-core
businesses
£m
0.7
(0.2)
(0.3)
0.2
Air Handling
£m
189.7
(29.2)
(12.9)
147.6
Total
£m
190.4
(29.4)
(13.2)
147.8
(0.8)
0.8
2.9
(0.9)
2.0
(2.9)
(0.9)
2019
Total
£m
12.6
(0.5)
(3.7)
8.4
Included within 'Other non-core businesses' is £0.7m received during the year in relation to contingent consideration on the sale of the
Building Plastics division in 2017.
The losses arising on the agreed sale or closure of non-core businesses and associated impairment charges, along with their results for the
current and prior periods have been disclosed within Other items in the Consolidated Income Statement in order to present the underlying
earnings of the Group.
170
SIG plc Annual Report and Accounts for the year ended 31 December 2020 12. Discontinued operations
On 7 October 2019, the Group announced that it had agreed a sale of the Air Handling business for consideration of €222.7m on a cash free,
debt free basis. The sale was approved by shareholders at a general meeting on 23 December 2019 and completed on 31 January 2020. At
31 December 2019, Air Handling was classified as a disposal group held for sale and as a discontinued operation as it represented a major line
of business of the Group. With Air Handling being classified as a discontinued operation, the Air Handling segment is no longer presented in
the segment note.
The results of the Air Handling business for the year are presented below:
Revenue
Cost of sales
Gross profit
Other operating expenses
Underlying operating profit
Other items
Operating profit
Finance income
Finance costs
Profit before tax from discontinued operations before group Other items
Costs incurred in connection with the disposal of discontinued operation
Amortisation of acquired intangibles
Profit before tax from discontinued operations
Income tax expense
Profit/(loss) after tax from discontinued operations
Gain on sale of subsidiary after income tax (see below)
Profit/(loss) from discontinued operations
Amounts included in accumulated OCI are as follows:
Remeasurement of defined benefit pension liability
Deferred tax movement associated with remeasurement of defined benefit pension liability
Reserve of disposal group classified as held for sale
The net cash flows incurred by Air Handling are as follows:
Operating
Investing
Financing
Net cash inflow
Earnings per share:
Basic earnings/(loss) per share from discontinued operations
Diluted earnings/(loss) per share from discontinued operations
2020
£m
25.4
(15.0)
10.4
(9.3)
1.1
–
1.1
–
(0.1)
1.0
–
–
1.0
(0.3)
0.7
69.0
69.7
2020
£m
–
–
–
2020
£m
1.1
147.6
–
148.7
2020
8.0p
8.0p
2019
£m
323.1
(202.0)
121.1
(101.3)
19.8
(0.7)
19.1
0.1
(1.3)
17.9
(12.2)
(1.9)
3.8
(4.2)
(0.4)
–
(0.4)
2019
£m
(0.5)
0.1
(0.4)
2019
£m
26.5
(5.1)
(9.4)
12.0
2019
(0.0)p
(0.1)p
171
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Financial Statements
12. Discontinued operations continued
Gain on sale
Consideration received1 :
Cash
Adjustment to consideration
Final consideration
Carrying amount of net assets sold2
Gain on sale before costs, income tax and reclassification of foreign currency translation reserve
Costs incurred in connection with the agreed disposal of the Air Handling business3
Reclassification of foreign currency translation reserve
Income tax expense on gain
Gain on sale after income tax
2020
£m
191.9
(2.2)
189.7
(118.1)
71.6
(4.3)
3.7
(2.0)
69.0
1 Consideration received was based on an enterprise value of €222.7m on a cash free, debt free basis, adjusted for actual levels of cash, debt and working capital in the Air Handling
division at completion to give proceeds received of €228.6m (£191.9m). Net proceeds received exclusive of amounts repaid in relation to debt owed to the Group by the Air Handling
division were €187.4m (£157.3m). As part of the completion process, further adjustments to the consideration were agreed and repaid by the Group, together with settlement of tax
payments, reducing total consideration by £2.2m.
2 The carrying amount of net assets sold is the net assets held for sale at 31 December 2019 shown below plus £0.4m relating to the net profit for the month of January 2020 less tax
payments and working capital movements.
3 £12.2m of costs were also incurred and recognised in 2019 in connection with the sale. Including these in the overall calculation of the gain on sale above would give a gain on sale after
income tax of £57.0m.
The major classes of assets and liabilities of the Air Handling business classified as held for sale as at 31 December 2019 were as follows:
2019
£m
33.2
15.1
31.5
33.9
58.9
1.5
1.3
0.8
28.8
205.0
(46.0)
(1.5)
(31.9)
(1.0)
(1.2)
(3.4)
(1.5)
(86.5)
118.5
Goodwill and intangible assets
Property, plant and equipment
Right-of-use assets
Inventories
Trade and other receivables
Contract assets
Deferred tax asset
Deferred consideration
Cash at bank and on hand
Assets held for sale
Trade and other payables
Contract liabilities
Lease liabilities
Deferred tax liability
Corporation tax liability
Retirement benefit obligations
Provisions
Liabilities directly associated with assets held for sale
Net assets directly associated with disposal group
172
SIG plc Annual Report and Accounts for the year ended 31 December 2020 13. Goodwill
Cost
At 1 January 2019
Business disposed
Reclassified as held for sale
Exchange differences
At 31 December 2019
Business disposed
Acquisitions (Note 15)
Reclassified from held for sale
Exchange differences
At 31 December 2020
Accumulated impairment losses
At 1 January 2019
Impairment charges
Exchange differences
At 31 December 2019
Impairment charges
Business disposed
Exchange differences
At 31 December 2020
Net book value
At 31 December 2020
At 31 December 2019
£m
475.6
(0.3)
(37.2)
(24.5)
413.6
(0.7)
1.0
11.0
10.7
435.6
181.7
90.3
(17.4)
254.6
45.4
(0.7)
7.5
306.8
128.8
159.0
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 9 CGUs (2019: 10) following the sale of the Air Handling business. The
addition of goodwill in the year of £1.0m relates to the acquisition of S M Roofing Supplies Limited, allocated to the UK Exteriors CGU (see
Note 15). Ireland is a CGU of the Group but does not have any associated goodwill, and UK Distribution has no remaining goodwill balance
following the impairment recognised during the year.
Summary analysis
The carrying value of goodwill in respect of all CGUs is set below. These are fully supported by either value in use calculations in the year or
the fair value less cost to sell for CGUs held for sale, as explained below.
UK Distribution
UK Exteriors
Building Solutions*
Ireland
France Exteriors (Larivière)
France Distribution (LiTT)
Germany (WeGo/VTi)
Poland
Benelux
Total goodwill
2020
£m
–
57.4
11.0
–
37.1
5.5
2.5
1.2
14.1
128.8
2019
£m
33.5
68.2
–
–
35.1
5.2
2.4
1.2
13.4
159.0
* The Building Solutions balance in the prior year (£11.0m) was included within assets held for sale
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 Group undertook an additional assessment at 30 June 2020 to
take into account the impact of Covid-19 on the Group's forecasts.
The recoverable amounts of all CGUs are determined from value in use calculations. The key assumptions for these calculations are those
regarding discount rates, sales growth, gross margin and operating profit growth rates. These assumptions have been revised in the
year in light of the current economic environment and the Covid-19 pandemic in particular. Discount rates represent the current market
assessment of the risks specific to each CGU, taking into consideration the time value of money and individual risks of the underlying
assets that have not been incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances of
the Group and its operating segments and is derived from its weighted average cost of capital (WACC), including the cost of lease debt in
accordance with IFRS16, with adjustments made to factor in the amount and timing of future tax flows in order to reflect a pre-tax discount
rate. Discount rates also include a risk premium to factor in a certain element of risk over and above that already included in the forecast
cash flows (for example the risk of historical accuracy of forecasting or the risk of delayed achievement of the “Return to Growth” strategy).
In respect of the other assumptions, external data and management's best estimates are applied as described below.
173
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Financial Statements
13. Goodwill continued
Value in use is determined by forecasting cash flows based upon management's three year projections, which include forecast sales growth
based on management's best estimates and external data (construction PMI data and construction market growth forecasts), gross margin
assumptions based on management's best estimates and previous experience, with annual growth rates based upon country specific
inflation expectations (1.5%-2.3%) applied thereafter and into perpetuity.
The key assumptions used for each CGU are shown in the table below.
2020 impairment review results
In the prior year, a goodwill impairment charge of £57.4m was recognised in relation to the UK Distribution CGU and £32.2m in relation to
France Exteriors (Larivière). This was due to a lowering of expectations for future sales and profitability of these two CGUs. An impairment
charge of £0.7m was also recognised in relation to the Maury business, part of the Larivière CGU, based on fair value less cost to sell, as
the business was in the process of being sold or closed (subsequently sold in 2020). The 2019 impairment review was carried out before
considering the impact of Covid-19 on the forecasts for all CGUs, as the pandemic was a non-adjusting post balance sheet event.
An impairment review was carried out at 30 June 2020, taking into account the impact of Covid-19 on the Group's forecasts. As a result of
this review, a further impairment charge of £31.0m was recognised in relation to the UK Distribution CGU and £11.8m in relation to the UK
Exteriors CGU, as included in the Group's interim results to 30 June 2020.
The impairment review has been updated at 31 December 2020 to reflect management's latest forecasts and current economic conditions.
The results of this review indicated that the carrying value of goodwill and other assets associated with the UK Distribution CGU was further
impaired by £17.5m. This impairment has been allocated against goodwill (£2.6m), customer relationships intangible assets (£1.9m), taking
both of these to a carrying value of £nil, right-of-use assets (£10.1m), tangible fixed assets (£2.4m) and software (£0.5m). Both the UK
Distribution and UK Exteriors CGUs are reportable segments as disclosed in Note 1, and the charge has been included within Other items in
the Consolidated Income Statement. The recoverable amount of the UK Distribution CGU is £98.3m and the UK Exteriors CGU is £137.0m .
The existing carrying value of all other CGUs remained supportable.
Sensitivity analysis
A number of sensitivities have been performed on the Group's CGUs to highlight the changes in market conditions that would lead to
the value in use equalling the carrying value. The table below sets out the amount that each assumption would have to change by, all
other assumptions remaining the same, for the carrying value of goodwill, intangible assets and property, plant and equipment to equal
recoverable amount for each CGU. The UK Distribution CGU has been impaired to recoverable amount based on the assumptions applied,
therefore any change in a key assumption would cause further impairment of the carrying value of non-current assets for this CGU.
Separate analysis is provided below of the key assumptions applied in the calculation of recoverable amount and the additional impairment
that could arise from a reasonably possible change in assumption.
2020
Average revenue growth (%)
Pre-tax discount rate (%)
Gross margin (%)
Long-term operating profit
growth rate (average % per
annum)
UK Exteriors
Building Solutions1
Ireland2
France Distribution (LiTT)
France Exteriors (Larivière)3
Germany (WeGo/VTi)
Poland
Benelux
Headroom*
£6.6m
£26.1m
£49.8m
£80.2m
£6.7m
£64.4m
£8.2m
£27.5m
Change
required
for carrying
value to
equal
recoverable
amount
Assumption
used in
value in use
calculation
Change
required
for carrying
value to
equal
recoverable
amount
Assumption
used in
value in use
calculation
Change
required
for carrying
value to
equal
recoverable
amount
Assumption
used in
value in use
calculation
Assumption
used in
value in use
calculation**
4.1%
9.0%
7.9%
0.8%
1.0%
5.7%
3.2%
10.7%
(1.0)%
(20.2)%
(21.7)%
(20.0)%
(1.1)%
(7.3)%
(4.0)%
(12.2)%
12.5%
12.5%
10.4%
11.9%
11.9%
11.7%
12.7%
12.3%
0.5%
9.5%
17.5%
37.8%
0.5%
6.0%
3.1%
9.4%
29.4%
24.8%
24.5%
28.1%
23.5%
28.1%
19.9%
24.3%
(0.3)%
(4.1)%
(4.3)%
(4.7)%
(0.2)%
(1.7)%
(0.6)%
(2.4)%
2.0%
2.0%
2.0%
1.6%
1.6%
1.9%
2.3%
1.6%
Change
required
for carrying
value to
equal
recoverable
amount
(1.3)%
(16.7)%
(70.3)%
(115.1)%
(2.6)%
(16.0)%
(12.4)%
(33.5)%
* compared to carrying value of goodwill, intangible assets, property, plant and equipment and right-of-use assets
** average growth in years 2 and 3 of the 3 year plan. Growth from 2020 to 2021 not considered meaningful given the impact of Covid-19 on 2020
1 Building Solutions was held for sale at 31 December 2019 and was therefore not included in the 2019 table below
2 Ireland does not have any goodwill but is included in the current year for information
3 France Exteriors (Larivière) was impaired to recoverable amount at December 2019 and therefore is not in the comparative 2019 table below.
174
SIG plc Annual Report and Accounts for the year ended 31 December 2020 13. Goodwill continued
2019
Average revenue growth (%)
Pre tax discount rate (%)
Gross margin (%)
Long-term operating profit
growth rate (average % per
annum)
Headroom*
£20.4m
£92.8m
£10.5m
£22.4m
£26.7m
Assumption
used in value in
use calculation
(0.1)%
0.1%
0.5%
0.7%
0.6%
Change
required
for carrying
value to
equal
recoverable
amount
Assumption
used in
value in use
calculation
(2.4)%
(19.9)%
(1.2)%
(8.0)%
(11.1)%
9.9%
9.9%
10.0%
10.2%
10.5%
Change
required
for carrying
value to
equal
recoverable
amount
1.4%
41.2%
1.3%
10.3%
21.1%
Assumption
used in
value in use
calculation
29.3%
28.0%
27.4%
20.3%
24.8%
Change
required
for carrying
value to
equal
recoverable
amount
Assumption
used in
value in use
calculation
(0.6)%
(4.7)%
(0.3)%
(1.3)%
(2.2)%
2.0%
1.7%
2.1%
2.7%
1.9%
Change
required
for carrying
value to
equal
recoverable
amount
(3.4)%
(180.3)%
(1.5)%
(30.8)%
(8.5)%
UK Exteriors
France Distribution (LiTT)
Germany (WeGo/VTi)
Poland
Benelux
*compared to carrying value of goodwill, intangible assets, property, plant and equipment and right-of-use assets
Of the above sensitivities for 2020, management considers the % changes in revenue growth and gross margin to be reasonably possible
for the UK Exteriors and France Exteriors (Larivière) CGUs, which would lead to an impairment of goodwill of £6.6m for UK Exteriors and
£6.7m for Larivière. The other % changes in assumptions shown above are not considered to be reasonably possible scenarios, but this
additional voluntary information over and above that required by IAS36 has been included in order to provide a full picture of the level of
headroom and sensitivity to changes in assumptions for each CGU.
In 2019 the above assumption for sales growth related to the forecasts for 2020. For UK Exteriors and Germany (WeGo/VTi) CGUs the
detailed forecasts for 2021 and 2022 included further sales growth, with other assumptions remaining consistent with the above. For UK
Exteriors the forecasts included further revenue growth from 2020 of 6.2% in 2021 and 6.3% in 2022. If the sales growth in 2021 is reduced
to 4.4% this would cause the recoverable amount of the CGU to equal carrying value. For Germany (WeGo/VTi) revenue growth of 3.3% and
6.8% is included for 2021 and 2022. If the revenue growth in 2021 is only 2.3%, this would cause the recoverable amount of the CGU to
equal carrying amount. These changes in revenue growth assumptions were considered to be reasonably possible scenarios.
UK Distribution
The UK Distribution CGU has been impaired to recoverable amount. The table below sets out the key assumptions used in the value in use
calculation and the additional impairment that could arise from a reasonably possible change in each of the key assumptions:
2020
Revenue growth (average of year 2 and 3 growth)
Pre tax discount rate
Gross margin
Long-term operating profit growth rate (average % per annum)
UK Distribution
Assumption
used in
value in use
calculation
(%)
Reasonably
possible
change in
assumption
(%)
Additional
impairment
caused by
reasonably
possible
change
11.5%
12.6%
23.3%
2.0%
(1.0)%
(0.5)%
(0.3)%
(0.2)%
£15.1m
£4.3m
£11.3m
£1.2m
Covid-19 has had a significant impact on the Group's results for 2020. The forecasts used in the above impairment review take into account
management's best estimate of future cash flows, reflecting the assumption of more normal trading levels since the worst of the Covid-19
impact, as well as the expected positive impact of the strategic actions being undertaken to improve future performance under the “Return
to Growth” strategy. A worsening of the current Covid-19 situation or further waves could adversely impact the Group's markets and trading
performance which could lead to further impairment of non-current assets in future periods.
The Board has actively reviewed the forecasts associated with the CGUs noting the assumptions used, the sensitivity analysis performed
and the ability of the businesses to adapt to challenging economic environments in which they operate, and is satisfied that no further
impairments are necessary at 31 December 2020.
175
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Financial Statements
13. Goodwill continued
UK Distribution and France Exteriors (Larivière)
The table below sets out the key assumptions used in the value in use calculation in 2019 and the additional impairment that could have
arisen from a reasonably possible change in each of the key assumptions:
2019
Like-for-like market volume
growth
Pre tax discount rate
Gross margin
Long-term operating profit growth rate
(average % per annum)
UK Distribution
France Exteriors (Larivière)
Assumption
used in
value in use
calculation
(%)
Reasonably
possible
change in
assumption
(%)
Additional
impairment
caused by
reasonably
possible
change
(%)
Assumption
used in
value in use
calculation
(%)
Reasonably
possible
change in
assumption
(%)
Additional
impairment
caused by
reasonably
possible
change
(%)
(12.6)
10.9
22.7
(2.0)
1.0
(0.3)
20.7
17.1
14.3
3.3
11.0
23.4
(2.0)
1.0
(0.3)
12.8
12.9
8.2
2.0
(0.2)
2.6
1.7
(0.2)
2.0
The above assumption for sales growth related to the forecasts for 2020. For UK Distribution the forecasts included further revenue growth
of 16.8% in 2021 and 14.4% in 2022 following a year of a reduced revenue base in 2020. If sales growth of only 12.9% was achieved from
budget 2020 to 2021 this would have caused the remaining value of goodwill of £33.5m to be fully impaired. For France Exteriors (Larivière),
the forecast revenue growth included was 1.2% for 2021 and 1.5% for 2022. If no revenue growth was included for 2021 this would have
resulted in additional impairment of £16.4m. These were considered reasonably possible scenarios.
14. 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 which is recognised separately from
associated hardware.
Cost
At 1 January 2019
Additions
Disposals
Reclassifications
Exchange differences
Assets transferred to held for sale (Note 11)
At 31 December 2019
Additions
Disposals
Reclassifications
Exchange differences
Assets transferred from held for sale
At 31 December 2020
Amortisation
At 1 January 2019
Charge for the year
Impairment charges
Disposals
Reclassifications
Exchange differences
Assets transferred to held for sale (Note 11)
At 31 December 2019
Charge for the year
Impairment charges
Disposals
Exchange differences
Assets transferred from held for sale
At 31 December 2020
Net book value
At 31 December 2020
At 31 December 2019
176
Customer
relationships
£m
Non-compete
clauses
£m
Computer
software
£m
228.1
–
(0.1)
–
–
(38.9)
189.1
0.8
–
–
–
16.6
206.5
198.3
8.1
0.4
–
–
0.3
(31.9)
175.2
5.6
1.9
–
–
15.3
198.0
8.5
13.9
11.7
–
–
–
–
–
11.7
–
–
–
–
–
11.7
11.7
–
–
–
–
–
–
11.7
–
–
–
–
–
11.7
–
–
58.7
17.5
(0.2)
(3.7)
(1.1)
(4.7)
66.5
8.7
(3.1)
(1.4)
0.8
0.6
72.1
42.3
4.5
0.3
(0.1)
(4.9)
(0.8)
(3.2)
38.1
5.4
15.1
(2.0)
0.7
0.4
57.7
14.4
28.4
Total
£m
298.5
17.5
(0.3)
(3.7)
(1.1)
(43.6)
267.3
9.5
(3.1)
(1.4)
0.8
17.2
290.3
252.3
12.6
0.7
(0.1)
(4.9)
(0.5)
(35.1)
225.0
11.0
17.0
(2.0)
0.7
15.7
267.4
22.9
42.3
SIG plc Annual Report and Accounts for the year ended 31 December 2020
14. Intangible assets continued
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 145.
Included within computer software additions are assets in the course of construction of £1.4m (2019: £11.1m). £1.4m of the amount
included at 31 December 2019 has been reclassified to tangible fixed assets during the year (see Note 10).
The impairment charge in relation to customer relationships relates to the impairment recognised in relation to the overall impairment
review of non-current assets of UK Distribution CGU (see Note 13). The impairment charge in relation to software relates mainly to the
impairment of SAP implementation costs following the period of pause and change in scope of the project. £0.5m of the impairment also
relates to the overall impairment of UK Distribution non-current assets. These charges are included within 'Impairment charges' within
Other items in the Consolidated Income Statement (see Note 2).
The impairment charge in relation to customer relationships in 2019 related to the impairment of intangible assets associated with
the Maury business which was classified as non-core and was included within 'Profits and losses on agreed sale or closure of non-core
businesses and associated impairment charges' within Other items (see Note 11). The impairment of computer software related to the SK
Sales business which has been sold as part of the Air Handling business and was included in 'Impairment charges' within Other items in the
prior year.
15. Acquisitions
On 17 October 2020 the Group acquired 100% of the share capital of S M Roofing Supplies Limited, a non-listed company based in the
UK, for an enterprise value of £1.9m on a debt free cash free basis. Total consideration was £4.9m, including £3.2m for cash within the
business on completion. £4.0m was paid in cash on completion and two further amounts totalling £0.9m are payable in equal instalments
in one and two years' time (not subject to performance criteria and not conditional upon vendors remaining within the business).
The provisional fair values of the identifiable assets and liabilities of S M Roofing Supplies Limited as at the date of acquisition were:
Assets
Intangible assets (customer relationships)
Property, plant and equipment
Right-of-use asset
Cash and cash equivalents
Trade and other receivables
Inventories
Liabilities
Trade and other payables
Provisions
Current tax liability
Deferred tax liability
Lease liability
Total identifiable net assets at fair value
Goodwill arising on acquisition (Note 13)
Purchase consideration transferred
2020
£m
0.8
0.1
0.2
3.2
0.7
0.4
5.4
(0.8)
(0.2)
(0.2)
(0.1)
(0.2)
(1.5)
3.9
1.0
4.9
177
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Financial Statements
15. Acquisitions continued
The fair value of trade receivables amounts to £0.7m. The gross amount of trade receivables is £0.7m.
The Group measures the acquired lease liabilities using the present value of the remaining lease payments at the date of acquisition. The
right-of-use asset was measured at an amount equal to the lease liability.
The goodwill of £1.0m comprises the value of expected synergies arising from the acquisition (e.g. overhead costs in relation to finance,
administration and management), strategic fit with the UK Exteriors business and geographic location, and is allocated entirely to the UK
Exteriors segment.
From the date of acquisition, S M Roofing Supplies Limited contributed £1.0m of revenue and £nil to underlying profit before tax from
continuing operations of the Group. If the combination had taken place at the beginning of the year, revenue from continuing operations
for the Group would have been £1,877.8m and loss before tax from continuing operations for the Group would have been £76.4m.
Purchase consideration
Cash paid on completion
Deferred consideration due within one year
Deferred consideration due after more than one year
Total consideration
Analysis of cash flows on acquisition
Consideration paid (included in cash flows from investing activities)
Transaction costs (included in cash flows from operating activities)
Net cash acquired with the subsidiary (included in cash flows from investing activities)
Net cash flow on acquisition
16. Inventories
Raw materials and consumables
Work in progress
Finished goods and goods for resale
At 31 December
2020
£m
4.0
0.5
0.4
4.9
2020
£m
(4.0)
(0.2)
3.2
(1.0)
2019
£m
–
0.3
156.2
156.5
2020
£m
3.1
1.2
166.0
170.3
The estimated replacement cost of inventories is not materially different from the balance sheet value stated above.
178
SIG plc Annual Report and Accounts for the year ended 31 December 2020 17. Trade and other receivables
Trade receivables
VAT
Other receivables
Prepayments and accrued income
Trade and other receivables
Lease receivables (Note 25)
Current tax assets
Assets classified as held for sale (Note 11)
Total receivables
2020
£m
232.7
3.8
7.5
50.4
294.4
0.7
–
–
295.1
2019
£m
226.4
6.8
4.4
57.1
294.7
0.8
0.9
258.4
554.8
Included within prepayments and accrued income is £36.7m (2019: £42.4m) due in relation to supplier rebates where there is no right to
offset against trade payable balances. The remainder of the balance relates to prepayments.
Trade receivables are non-interest bearing and are generally on terms of 30 to 90 days. The average credit period on sale of goods and
services for underlying operations on a constant currency basis is 45 days (2019: 42 days).
Trade receivables are stated net of allowance for estimated credit losses and provisions for sales credit notes and customer rebates. An
allowance has been made for estimated credit losses from trade receivables of £15.3m at 31 December 2020 (2019: £19.5m). On a like-for-
like basis the allowance for expected credit losses is consistent with the prior year, with increases in certain entities offset by decreases in
others.
Movement in the allowance for expected credit losses
At 1 January
Utilised
Unused amounts released to the Consolidated Income
Statement
Classified as held for sale (Note 11)
Transferred from held for sale
Disposal of non-core businesses
Charged to the Consolidated Income Statement
Exchange differences
At 31 December
2020
£m
(19.5)
8.8
1.3
–
(0.2)
4.5
(9.5)
(0.7)
(15.3)
2019
£m
(31.4)
8.9
8.3
4.0
–
–
(10.5)
1.2
(19.5)
The group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all
trade receivables and contract assets.
The expected loss rates have been assessed by each operating segment and are based on the payment profiles of sales over a period
prior to 31 December 2020, the availability of credit insurance and the historical credit losses experienced within this period. The historical
loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers
to settle the receivables and 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. In calculating expected credit losses, a loss is either a debt written off
or overdue by more than 12 to 24 months depending on the business and/or expected likelihood of recovery. Debts are generally written
off following official notice of insolvency, conclusion of legal proceedings or when there is no reasonable expectation of recovery. Expected
credit loss provisions have been adjusted where relevant to take account of experience during the year and forward looking information,
considering the impact of Covid-19 in particular. There has been an increase in the bad debt expense in certain entities as a result of
Covid-19.
The concentration of credit risk is limited due to the customer base being large and unrelated.
31 December 2020
Expected credit loss rate
Total gross carrying amount
Expected credit loss
< 30 days
£m
0.8%
219.7
1.8
Days past due
30-60 days
£m
61-90 days
£m
4.0%
22.7
0.9
17.0%
4.7
0.8
> 91 days
£m
61.1%
19.3
11.8
Total
£m
266.4
15.3
179
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Financial Statements
17. Trade and other receivables continued
The 2019 expected credit loss was as follows:
31 December 2020
Expected credit loss rate
Total gross carrying amount
Expected credit loss
< 30 days
£m
0.7%
214.6
1.6
Days past due
30-60 days
£m
61-90 days
£m
10.6%
16.0
1.7
10.0%
4.0
0.4
> 91 days
£m
51.0%
31.0
15.8
Total
£m
265.6
19.5
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
Included within trade receivables is a managed pool of customer balances of £41.1m (2019: £34.5m) pledged as security in relation to the
asset backed funding arrangement implemented in relation to the UK defined benefit pension plan. See Note 31 for further details.
Transfer of trade receivables
The Group sold without recourse trade receivables to banks and other financial institutions for cash proceeds. These trade receivables of
£25.2m (2019: £35.0m) have been derecognised from the Consolidated Balance Sheet, because the Group has transferred the risks and
rewards.
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 to determine
whether the credit risk has increased since initial recognition. Where appropriate, credit guarantee insurance cover is purchased. There
has been no significant change to credit risk management as a result of Covid-19.
The Group does not have any significant credit risk exposure to any single customer.
18. Current liabilities
Trade payables
VAT
Social security and payroll taxes
Accruals and other payables
Trade and other payables
Lease liabilities (Note 25)
Bank loans
Private placement notes (Note 19)
Deferred consideration
Other financial liabilities
Derivative financial instruments
Current tax liabilities
Provisions (Note 23)
Liabilities directly associated with assets classified as held for sale (Note 11)
Current liabilities
2020
£m
187.1
13.6
12.2
88.5
301.4
50.6
–
–
0.5
0.5
0.5
4.2
10.5
–
368.2
2019
£m
239.3
11.8
18.0
58.3
327.4
51.5
99.6
175.5
–
1.5
0.2
3.7
6.7
115.7
781.8
Trade payables is presented net of £29.9m (2019: £38.0m) due from suppliers in respect of supplier rebates where the Group has the right
to net settlement.
£nil (2019: £nil) of the above bank loans and overdrafts are secured on the assets of subsidiary undertakings, all of the lease liabilities
(2019: all of the above finance lease contracts) are secured on the underlying assets and the remaining balances are unsecured. In 2019
all of the above private placement notes, derivative financial instruments, and bank loans were guaranteed by certain companies of the
Group.
On 18 June 2020 the Group amended the terms of its financing arrangements. The bank loan balance at 31 December 2019 related to the
amount drawn under the Revolving Credit Facility ('RCF'). As part of the amendments to the financing arrangements the amount drawn on
the RCF on 18 June 2020 of £70.0m was converted into a term facility due for repayment on 31 May 2023 and a working capital facility of
£25.0m. The £70.0m term facility is included within non-current liabilities (see Note 19). The amount drawn under the working capital facility
at 31 December 2020 is £nil.
In 2019 £69.6m of the bank loans (after taking into account derivative financial instruments) were at variable rates of interest.
In 2019 £30.0m of the bank loans (after taking into account derivative financial instruments) attracted an average fixed interest rate of 1.58%.
180
SIG plc Annual Report and Accounts for the year ended 31 December 2020 18. Current liabilities continued
The private placement notes were classified as a current liability at 31 December 2019. The terms of the private placement notes were
amended on 19 June 2020 and have been classified in accordance with the revised terms at 31 December 2020. See Note 19 for further
details.
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 underlying operations on a constant currency basis is 48 days (2019: 56 days).
The Directors consider that the carrying amount of current liabilities approximates to their fair value.
19. Non-current liabilities
Lease liabilities (Note 25):
–due after one and within two years
–due after two and within five years
–due after five years
Bank loan
Private placement notes
Deferred consideration
Derivative financial instruments
Other financial liabilities
Other payables
Retirement benefit obligations (Note 31)
Provisions (Note 23)
Non-current liabilities
2020
£m
41.9
81.7
88.0
67.7
144.5
0.4
0.4
1.2
3.5
25.1
25.7
480.1
2019
£m
48.3
94.1
81.7
–
–
–
1.9
1.4
1.0
24.8
18.6
271.8
All of the above private placement notes, bank loan and derivative financial instruments are guaranteed by certain companies of the Group.
Bank loan
As part of the amendments to the financing arrangements on 18 June 2020, the amount drawn on the RCF at that date of £70.0m was
converted into a term facility due for repayment on 31 May 2023 and a working capital facility of £25.0m. The £70.0m term facility is included
within non-current liabilities above, net of arrangement fees paid (of which £2.3m remains unamortised at 31 December 2020). This has been
accounted for as an extinguishment of the previous facility and new arrangement, therefore arrangement fees which were being amortised
over the term of the previous facility have been written off (see Note 3).
Private Placement Notes
On 18 June 2020 the Group concluded changes to its agreements with existing private placement notes holders with the following key
changes:
■ repayment of €30m of notes previously due on 31 October 2020 and €20m of notes previously due on 31 October 2021 deferred to 31
May 2023;
■ £48.9m repaid on completion of the Group’s equity raise in July 2020, split across each of the individual notes on a pro-rata basis;
■ holders of the existing 2023 notes (due 31 October 2023) and 2026 notes (due 12 August 2026) granted a put option for those notes
to be redeemed on 31 May 2023 at a price equal to 100% of the aggregate outstanding principal together with a make-whole amount
calculated as specified in the agreement;
■ additional fee of 2% per annum to be paid on the outstanding principal; and
■ financial covenants were reset.
The loan notes have been considered separately to determine whether the changes should be accounted for as a modification of the
existing arrangement or as an extinguishment and refinancing. The Group has concluded that each loan note meets the criteria to be
accounted for as a modification. Previous arrangement fees therefore continue to be amortised over the remaining term (£0.3m at the
date of modification) together with arrangement fees incurred in relation to the new agreement (£1.9m). A loss on modification of £11.3m
has also been recognised, reflecting the difference in the present value of the future cash flows discounted at each loan note's original EIR.
This has been recognised within finance costs within Other items (see Note 3). This will unwind over the remaining term of the loan notes,
resulting in the finance cost recognised in future periods being lower than the actual amounts paid.
At 31 December 2019 the private placement notes were reclassified as a current liability on the balance sheet because the covenant test
of consolidated net worth at 31 December 2019 was below the threshold of £400m and therefore at the balance sheet date the Group did
not have an unconditional right to defer settlement of the liability for at least 12 months.
181
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Financial Statements
19. Non-current liabilities continued
The contractual repayment profile (before applying associated derivative financial instruments and prepaid arrangement fees) under both
the current and previous arrangements are shown below:
Repayable in 2020
Repayable in 2021
Repayable in 2023
Repayable in 2026*
Total
2020
2019
Fixed interest
rate
%
–
–
6.0%
5.3%
5.6%
£m
–
–
66.2
70.0
136.2
Fixed interest
rate
%
3.7%
3.9%
4.2%
3.3%
3.6%
£m
25.4
16.9
42.3
91.2
175.8
* If the lenders exercise the put option as referred to above, this amount will become due and payable in 2023
£16.3m (2019: £22.6m) of private placement debt repayable in 2026 that was denominated in US Dollar was swapped into Sterling through
the use of cross-currency swaps. The remainder of the private placement debt at 31 December 2020 is denominated in Euros. The private
placement debt in the table above is valued before application of the cross-currency swaps associated with the US Dollar denominated debt.
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 20.
20. Financial assets, liabilities, financial risk management and derivatives
The Group's principal financial liabilities, other than derivatives, comprise loans and borrowings and trade and other payables. The main
purpose of these financial liabilities is to finance the Group's operations. The Group's principal financial assets include trade receivables,
deferred consideration and cash and cash equivalents that derive directly from its operations.
a) Financial assets
The Group holds the following financial assets:
Financial assets at amortised cost
Trade receivables
Cash at bank and on hand
Derivative financial instruments designated as hedging instruments
Derivative financial instruments not designated as hedging instruments
Total
Note
17
20d
2020
£m
232.7
235.3
0.1
–
468.1
2019
£m
226.4
110.0
1.9
0.7
339.0
Included within cash at bank and on hand is cash restricted for use of £nil (2019: £0.8m) relating to cash received from customers in
relation to trade receivable balances derecognised under factoring arrangements and which is therefore owed to the factor. Nothing
is included in the above cash balance in 2020 (2019: £8.1m) relating to cash held and restricted for use in relation to the asset backed
funding arrangement in connection with the UK defined benefit pension scheme. The interest received on cash deposits is at variable rates
of interest of up to 0.2% (2019: 1.5%).
The Directors consider that the fair values of cash at bank and on hand and trade receivables approximate their carrying value, largely due
to the short-term maturities of these instruments. The fair value is not significantly different to the carrying amount.
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. Information about the Group's exposure to credit risk in relation to trade
receivables is given in Note 17.
Of the above cash at bank on hand, £137.6m (2019: £14.5m) is denominated in Sterling, £83.1m (2019: £76.9m) in Euros, £12.7m (2019:
£17.2m) in Polish Zloty, and £1.9m (2019: £1.4m) in other currencies.
b) Financial liabilities
The Group holds the following financial liabilities:
Financial liabilities at amortised cost
Trade and other payables*
Borrowings
Deferred consideration
Lease liabilities
Derivative financial instruments designated as hedging instruments
Total
* Excluding non-financial liabilities
182
Note
18
20d
2020
£m
275.6
145.5
0.5
262.2
0.9
684.7
2019
£m
297.6
278.0
–
275.6
2.1
853.3
SIG plc Annual Report and Accounts for the year ended 31 December 2020
20. Financial assets, liabilities, financial risk management and derivatives continued
The directors consider that the fair values of trade and other payables, loan notes and deferred consideration approximate their carrying
value due to their short-term nature. The fair value of borrowings is considered below.
2020 interest rate and currency profile
The interest rate and currency profile of the Group’s financial liabilities at 31 December 2020, after taking account of interest rate and
currency derivative financial instruments (including derivative assets of £0.1m as noted above) but excluding prepayment of arrangement
fees of £1.8m was as follows:
Private placement notes
Other borrowings
Lease contracts
Private placement notes
Other borrowings
Lease contracts
Other borrowings
Lease contracts
Lease contracts
Total
Currency
Sterling
Sterling
Sterling
Euro
Euro
Euro
Polish Zloty
Polish Zloty
Other
Total
£m
16.6
69.6
131.9
120.0
1.5
120.5
0.1
9.8
–
470.0
Floating
rate
£m
Fixed rate
£m
Effective
fixed interest
rate
%
Weighted
average time
for which
rate is fixed
Years
–
70.0
–
–
–
–
0.1
3.0
–
73.1
6.2%
–
16.6
(0.4)
5.6
0.6
131.9 0.0% – 7.7% 8.7 – 22.3
4.0
5.5%
120.0
2.0
2.8%
1.5
120.5 0.1% – 5.7% 1.1 – 120.1
n/a
n/a
6.8 1.9% – 8.3% 1.0 – 7.2
n/a
n/a
–
–
396.9
Amount
secured
£m
–
–
131.9
–
1.5
120.5
0.1
9.8
–
263.8
Amount
unsecured
£m
16.6
69.6
–
120.0
–
–
–
–
–
206.2
In addition to the currency exposures above, the Group held two cross-currency derivative financial instruments for 2020 which alter the
currency profile of the Group’s financial liabilities. These amount to an asset of £16.6m and a liability of €18.3m. These derivatives also
further reduce the fixed interest payable of the Sterling private placement notes from 6.2% to 5.5 - 5.7%. The fair value of these derivatives
was a net liability of £0.4m which is included in the Sterling value of other borrowings in the table above. The Group’s net debt at
31 December 2020 was £238.2m and, after taking account of these cross-currency derivatives, the Group had net Euro financial liabilities
of £54.6m.
All of the above lease contracts 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 2020 is estimated to be £164.7m (2019: £200.2m) and is
classified as a Level 2 fair value measurement for disclosure purposes. The remaining fixed rate debt amounts to £260.3m (2019: £305.7m)
and relates to finance lease contracts, fixed rate loans (after applying derivative 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.
2019 interest rate and currency profile
The interest rate and currency profile of the Group’s financial liabilities at 31 December 2019, after taking account of interest rate and
currency derivative financial instruments (including derivative assets of £2.6m as noted above) but excluding prepayment of arrangement
fees of £0.7m was as follows:
Private placement notes
Other borrowings
Lease contracts
Private placement notes
Other borrowings
Lease contracts
Other borrowings
Lease contracts
Lease contracts
Total
Currency
Sterling
Sterling
Sterling
Euro
Euro
Euro
Polish Zloty
Polish Zloty
Other
Total
£m
20.9
101.2
136.8
153.2
2.8
128.2
0.1
9.0
1.4
553.6
Floating
rate
£m
Fixed rate
£m
Effective fixed
interest rate
%
Weighted
average time
for which rate
is fixed
Years
–
70.0
–
–
1.0
–
0.1
2.6
–
73.7
20.9
31.2
6.6
4.2%
0.6
1.6%
136.8 0.0% – 6.2% 0.1 – 88.7
3.5%
153.2
4.4
3.0
2.8%
1.8
128.2 1.7% – 7.3% 0.1 – 9.5
n/a
n/a
6.4 3.2% – 8.3% 0.1 – 75.6
6.0
3.9%
1.4
479.9
–
Amount
secured
£m
–
–
136.8
–
2.8
128.2
0.1
9.0
1.4
278.3
Amount
unsecured
£m
20.9
101.2
–
153.2
–
–
–
–
–
275.3
In addition to the currency exposures above, the Group held two cross-currency derivative financial instruments for 2019 which alter the
currency profile of the Group’s financial liabilities. These amount to an asset of £20.9m and a liability of €26.6m. These derivatives also
further reduce the fixed interest payable of the Sterling private placement notes from 4.2% to 2.9%. The fair value of these derivatives was
a net liability of £1.9m which is included in the Sterling value of other borrowings in the table above. The Group’s net debt at 31 December
2019 was £455.4m (including IFRS16 adjustments) and, after taking account of these cross-currency derivatives, the Group had net Euro
financial liabilities of £229.7m.
In both 2020 and 2019, the interest rate on floating rate financial liabilities is based upon appropriate local market rates.
183
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Financial Statements
20. Financial assets, liabilities, financial risk management and derivatives continued
c) Financial risk management
SIG’s finance and treasury policies set out the Group’s approach to managing treasury risk. The objectives of the Group’s financial risk
management policies are to ensure sufficient liquidity to meet the Group’s operational and strategic needs and the management of
financial risk at optimal cost.
The Group is exposed to credit risk, liquidity risk, interest rate risk and foreign currency risk. The Group Board oversees the management of
these risks. The Board manages the risks through implementation of the Group Treasury Policy, supported by the Group Tax and Treasury
Committee, which monitors and reviews the activities of the Group Treasury Function to ensure they are performed in accordance with
the policy and reports to the Group Board on a regular basis. It is Group policy that no trading in financial instruments or speculative
transactions be undertaken.
Liquidity risk
Liquidity risk is the risk that SIG is unable to meet its financial obligations as they fall due. In order to minimise this risk, SIG seeks to
balance certainty of funding and a flexible, cost-effective borrowing structure. This is achieved by using a range of sources of funding,
preventing over-reliance on any single provider. The key sources of finance are private placement note investors, being mainly US-based
pension funds, and principal bank debt. The Group also maintains significant cash balances which are more than sufficient to meet the
requirements of the working capital cycle taking into account the seasonality of the business.
To manage liquidity risk the Group prepares and reviews rolling weekly cash flow forecasts, actual cash and debt positions along with
available facilities and headroom which are reported weekly and monitored by Group management. In addition, full annual three-year
forecasts are prepared including cash flow and headroom forecasts. The Group is in a strong liquidity position and at 31 December 2020
held cash of £235.3m (2019: £145.1m), and had £25.0m (2019: £133.3m) additional headroom from the £25.0m (2019: £233.3m) revolving
credit facility that matures in May 2023.
Foreign currency risk
SIG has a number of overseas businesses whose revenues and costs are denominated in the currencies of the countries in which they
operate. 65% of SIG’s 2020 continuing revenues (2019: 61%) were in foreign currencies, being primarily Euros and Polish Zloty. SIG faces
a translation risk in respect of changes to the exchange rates between the reporting currencies of these operations and Sterling and has
decided not to hedge the income statement translational risk arising from these income streams.
The Consolidated Balance Sheet of the Group is inherently exposed to movements in the Sterling value of its net investments in foreign
businesses. For currencies where the Group has significant exposure, SIG seeks to hold financial liabilities and derivatives in the same
currency to partially hedge the net investment values.
The Group uses cross-currency interest rate swaps and foreign exchange forward contracts to manage the exposures arising from cross
currency transactions (Note 20d ii).
Overseas earnings streams are translated at the average rate of exchange for the year whilst balance sheets are translated using closing
rates. The table below sets out the principal exchange rates used:
Euro
Polish Zloty
Average rate
Closing rate
2020
2019
Movement
(%)
2020
2019
Movement
(%)
1.1
5.0
1.1
4.9
–
0.1%
1.1
5.1
1.2
5.0
(0.1)%
0.1%
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 exposures where it makes commercial and economic
sense to do so. The Group currently has no commodity derivative contracts in place.
Credit risk
Credit risk is covered in Note 17.
184
SIG plc Annual Report and Accounts for the year ended 31 December 2020 20. Financial assets, liabilities, financial risk management and derivatives continued
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 and 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 regular basis. Sovereign credit ratings are also monitored, and country limits for investment assets are in place. If necessary,
funds are repatriated to the UK.
Interest rate risk
The Group has exposure to movements in interest rates on its outstanding debt, financial derivatives and cash balances. To reduce this
risk the Group monitors its mix of fixed and floating rate debt and, if required, transacts 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. The percentage
of gross debt at fixed rates of interest at 31 December 2020 is 84% (2019: 87%).
d) Hedging activities and derivatives
The Group is exposed to foreign currency and interest rate risks relating to its ongoing business operations. The Group's risk management
strategy and how it is applied to manage risk is explained in the 'Management of treasury risks' section of the Financial Review.
In order to manage the Group's exposure to exchange rate and interest rate changes, the Group utilises both currency and interest rate
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 does not trade in derivative financial instruments for speculative purposes. Where derivatives meet the hedge accounting
criteria under the rules of IFRS 9, movements in the fair values of these derivative financial instruments are recognised in the Consolidated
Statement of Comprehensive Income. Where the criteria for hedge accounting are not met, movements are accounted for at fair value
through profit or loss. Financial instruments are presented as current assets or liabilities to the extent they are expected to be settled
within 12 months after the end of the reporting period.
The Group is required to analyse financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels
1 to 3 based on the degree to which the fair value is observable:
■ Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.
■ Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for
the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
■ Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not
based on observable market data (unobservable inputs).
All of the financial instruments below are categorised as Level 2.
i) Net investment hedges
The Group has investments in Euro denominated subsidiaries. At 31 December 2020 the Group held €134m (2019: €181m) of direct Euro-
denominated debt through its private placement debt. This borrowing is being used to hedge the Group's exposure to the Euro foreign
exchange risk on investments in Euro denominated subsidiaries. Gains or losses on retranslation of the borrowing are transferred to OCI
to offset any gains or losses on translation of the net investments in the subsidiaries.
As at 31 December 2020 the Group held two (31 December 2019: two) cross-currency derivative financial instruments which receive fixed
£16.6m and pay fixed €18.3m. These derivative financial instruments were designated as hedging instruments as part of the net investment
hedge of the Group’s Euro-denominated net assets. Fair value changes on these derivatives are recognised in other comprehensive income
(in the hedging and translation reserve) to offset any gains or losses on translation of the net investments in the subsidiaries.
There is an economic relationship between the hedged item and the hedging instruments as the net investment in Euro denominated assets
creates a translation risk that will match the foreign exchange risk on the Euro denominated debt. The Group has established a hedge ratio
of 1:1 as the underlying risk of the hedging instrument is identical to the hedged risk component. Hedge ineffectiveness will arise when the
amount of the investment in Euro denominated subsidiaries becomes lower than the amount of the cross currency derivative.
The impact of the hedging instruments on the statement of financial position is as follows:
Notional
amount
€m
Carrying
amount
(asset)/liability
£m
Line item in the statement of
financial position
Change in fair value used for
measuring ineffectiveness for the
period
£m
At 31 December 2020
Cross-currency swap
Foreign currency denominated borrowing
At 31 December 2019
Cross-currency swap
Foreign currency denominated borrowing
18.3
134.0
26.6
181.0
(0.1) Derivative financial instruments
Private placement notes
120.0
1.9 Derivative financial instruments
Private placement notes
153.2
(1.4)
(9.5)
1.6
9.3
185
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Financial Statements
20. Financial assets, liabilities, financial risk management and derivatives continued
The impact of the hedged item on the statement of financial position is as follows:
31 December 2020
31 December 2019
Net investment in foreign subsidiaries
(10.9)
(10.7)
Change in fair value
used for measuring
ineffectiveness
£m
Foreign
currency
translation
reserve
£m
Cost of
hedging
reserve
£m
(0.2)
Change in fair value
used for measuring
ineffectiveness
£m
Hedging and
translation
reserve
£m
10.9
8.7
Cost of
hedging
reserve
£m
0.2
The hedging gain recognised in Other Comprehensive Income before tax is equal to the change in fair value used for measuring
effectiveness. There is no ineffectiveness recognised in profit or loss.
Hedge of the Group's Euro denominated assets
Liability at 1 January
Fair value losses recognised in equity
Cash settlement on partial derecognition
Liability at 31 December
2020
£m
(1.9)
(1.4)
3.4
0.1
2019
£m
(3.5)
1.6
–
(1.9)
ii) 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 that 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.
Foreign currency risk
The Group faces a translation risk from the US Dollar on its private placement borrowings in respect of payments of interest and the
principal amount. As at 31 December 2020, the Group held two (31 December 2019: two) cross-currency interest rate swaps which swap
fixed US Dollar-denominated debt (and the associated interest) held in the UK into fixed Sterling-denominated debt. These derivative
financial instruments form a cash flow hedge as they fix the functional currency cash flows of the Group. 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 2020, the weighted average maturity date of these swaps is 5.6 years
(2019: 6.6 years).
Hedge of the Group's functional currency cash flows
Asset at 1 January
Fair value losses recognised in equity
Cash settlement on partial derecognition of cash flow hedges
Liability at 31 December
2020
£m
1.7
(0.1)
(2.0)
(0.4)
2019
£m
1.9
(0.2)
–
1.7
The cash flows associated with the cross-currency interest rate swaps are expected to occur every six months in line with the underlying
interest payments on the loans which are recorded in the Consolidated Income Statement.
The Group also uses foreign exchange forward contracts to manage the exposures arising from cross currency transactions. At 31
December 2020 the Group held a number of short term forward contracts designated as hedging instruments in cash flow hedges of
forecast purchases in US Dollars. The forecast transactions are highly probable. Foreign exchange forward contract balances vary with the
level of expected foreign currency transactions and changes in foreign exchange forward rates.
Included within derivative financial instruments is £0.1m (2019: £0.2m) relating to forward foreign exchange contracts.
Interest rate risk
The Group has floating rate debt as part of the revolving credit facility which means interest rate costs will increase in the event of rising
interest rates. As at 31 December 2019, the Group held one interest rate derivative financial instrument which swapped variable rate
debt into fixed rate debt thereby fixing the functional currency cash flows of the Group. This interest rate derivative financial instrument
was designated and effective as a cash flow hedge and the fair value movement was therefore deferred in equity via the Consolidated
Statement of Comprehensive Income. This swap expired in August 2020.
Hedge of the Group's interest cash flows
Liability at 1 January
Fair value gains recognised in equity
Liability at 31 December
2020
£m
(0.2)
0.2
–
2019
£m
(0.3)
0.1
(0.2)
186
SIG plc Annual Report and Accounts for the year ended 31 December 2020 20. Financial assets, liabilities, financial risk management and derivatives continued
For the cash flow hedges, there is an economic relationship between the hedged items and hedging instruments as the terms of the
cross-currency and interest rate swaps match the terms of the debt (i.e. notional amount, maturity and payment dates). The Group has
established a hedge ratio of 1:1 for the hedging relationships as the underlying risk of the cross-currency swaps, interest rate swap and
foreign exchange forward contracts are identical to the hedged risk components. To test the hedge effectiveness, the Group uses the
hypothetical derivative method and compares the changes in fair value of the hedging instruments against the changes in fair value of the
hedged items.
Hedge ineffectiveness can arise from differences in the timing of the cash flows of the hedged items and the hedging instruments; the
counterparties' credit risk differently impacting the fair value movements of the hedging instruments and hedge items; and changes to the
forecasted amount of cash flows of hedged items and hedging instruments.
The Group is holding the following cross-currency swaps, interest rate swaps and foreign exchange forward contracts:
At 31 December 2020
Cross-currency swaps
Interest rate swaps
Foreign exchange forward contracts
At 31 December 2019
Cross-currency swaps
Interest rate swaps
Foreign exchange forward contracts
Notional
amount
$m
Notional
amount
€m
Notional
Amount
£m
Maturity
Average
hedged rate
22.2
n/a
6.0
30.0
n/a
n/a
n/a
n/a
20.0
n/a
n/a
30.5
16.5
n/a
22.8
20.9
30.0
25.7
2026
n/a
2021
2026
2020
2020
6.25%
n/a
n/a
4.17%
1.58%
n/a
Average
forward
rate
1.34
n/a
1.34
1.44%
n/a
1.19%
The impact of the hedging instruments on the statement of financial position is as follows:
Carrying
amount
£m
Line item in the statement of
financial position
Change in fair value used for
measuring ineffectiveness for
the period
£m
At 31 December 2020
Cross-currency swaps
Interest rate swap
Foreign exchange forward contracts
At 31 December 2019
Cross-currency swap
Interest rate swap
Foreign exchange forward contracts
(0.4) Derivative financial instruments
– Derivative financial instruments
(0.4) Derivative financial instruments
1.7 Derivative financial instruments
(0.2) Derivative financial instruments
0.2 Derivative financial instruments
The impact of the hedged item on the statement of financial position is as follows:
Cross-currency swaps
Interest rate swap
Foreign exchange forward contracts
31 December 2020
31 December 2019
Change in fair value
used for measuring
ineffectiveness
£m
Cash flow
hedging
reserve
£m
(0.1)
0.2
(0.6)
(0.2)
0.2
(0.6)
Cost of
hedging
reserve
£m
0.1
–
–
Change in fair value
used for measuring
ineffectiveness
£m
Hedging and
translation
reserve
£m
(0.1)
0.1
0.4
0.8
0.1
0.4
(0.1)
0.2
(0.6)
(0.1)
0.1
0.4
Cost of
hedging
reserve
£m
(0.9)
–
–
187
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Financial Statements
20. Financial assets, liabilities, financial risk management and derivatives continued
The effect of the cash flow hedges in the statement of profit or loss and other comprehensive income is as follows:
Amount
reclassified from
OCI to profit or
loss
€m
Total hedging
gain/(loss)
recognised in OCI
€m
Ineffectiveness
recognised in
profit or loss
€m
Line item in the
statement of
profit or loss
Line item in the statement of
profit or loss
€m
At 31 December 2020
Cross-currency swaps
Interest rate swap
Foreign exchange forward contracts
At 31 December 2019
Cross-currency swap
Interest rate swap
Foreign exchange forward contracts
(0.1)
0.2
(0.6)
(0.1)
0.1
0.4
–
–
–
–
–
–
Finance costs
Finance costs
Finance costs
Finance costs
Finance costs
Finance costs
–
–
–
–
–
–
Operating expenses
Finance costs
Operating expenses
Operating expenses
Finance costs
Operating expenses
Derivatives not designated as hedging instruments
The Group also uses some foreign exchange forward contracts which are not designated as cash flow hedges to manage some of its
transaction exposures and are entered into for periods consistent with foreign currency exposure of the underlying transactions, generally
within one month. As at the year end there were no (2019: two) such items with a total carrying amount of £nil (2019: £0.7m). This primarily
related to an option to pay Euros at a fixed rate to coincide with the receipt of the proceeds from the Air Handling sale.
iii) Impact of hedging on equity
Set below is the reconciliation of each component of equity and the analysis of other comprehensive income:
At 1 January
Transfer to cash flow hedging reserve*
Effective portion of changes in fair value
arising from:
Net Investment Swaps
Cross-currency swaps
Interest rate swaps
Foreign exchange forward contracts
Amount reclassified to profit or loss
Foreign currency revaluation of foreign
currency denominated borrowing
Foreign currency revaluation of net foreign
operations
Tax effect
Exchange differences reclassified to the
Consolidated Income Statement in respect
of the disposal of foreign operations
Other movements not associated with
hedging
At 31 December
Retained
(losses)/profits
Cash flow
hedging reserve
Foreign currency
translation reserve
Cost of hedging
reserve
2020
£m
(224.9)
2019
£m
(68.9)
(1.3)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2020
£m
3.5
–
–
(0.2)
0.2
(0.6)
(0.7)
–
–
–
–
2019
£m
–
1.3
–
0.8
0.1
0.4
0.9
–
–
–
–
2020
£m
6.7
–
(1.2)
–
–
–
–
2019
£m
21.7
–
1.4
–
–
–
–
(9.5)
9.3
18.3
–
(23.5)
(2.1)
(5.9)
(0.1)
(140.0)
(364.9)
(154.7)
(224.9)
–
2.2
–
3.5
–
8.4
–
6.7
2020
£m
0.3
–
(0.2)
0.1
–
–
–
–
–
–
–
–
0.2
2019
£m
1.0
–
0.2
(0.9)
–
–
–
–
–
–
–
–
0.3
* Amounts were reclassified during the prior year to clarify the effects of hedging and separately identify the cash flow hedging reserve and foreign currency retranslation reserve. The
cash flow hedging reserve and foreign currency translation reserve are included together as "Hedging and translation reserves" in the Consolidated Statement of Changes in Equity.
The following table reconciles the net losses on derivative financial instruments recognised directly in the Consolidated Income Statement,
to the movements in derivative financial instruments noted above.
Gains on derivative financial instruments recognised directly in the Consolidated Income Statement
Amounts reclassified from OCI to profit and loss on cash flow hedges
Total net losses on derivative financial instruments included in the Consolidated Income Statement
2020
£m
0.7
0.8
1.5
2019
£m
0.7
–
0.7
188
SIG plc Annual Report and Accounts for the year ended 31 December 2020 21. 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 2020 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
2020
£m
51.3
43.4
294.5
88.3
477.5
2019
£m
327.4
48.8
95.0
81.9
553.1
The table above is presented consistent with the balance sheet presentation and includes the private placement notes as a non current
liability. This is contrast to 31 December 2019 where rather than being based on contractual maturity, the amounts were classified as a
current liability. See note 19 for further detail. The table excludes trade payables of £175.1m (2019: £235.6m).
Borrowing facilities
The Group had undrawn committed borrowing facilities at 31 December 2020 as follows:
Expiring in more than one year but not more than two years
Expiring in more than two years but not more than five years
Total
2020
£m
–
25.0
25.0
2019
£m
133.3
–
133.3
As part of the amendments to the financing arrangements on 18 June 2020 (see Note 18), the previous Revolving Credit Facility (RCF) of
£233.0m was converted into a £70.0m term facility (included in non-current liabilities (Note 19)) and a £25.0m working capital facility. No
amounts have been drawn on the working capital facility during the period to 31 December 2020, and no amounts have been drawn
subsequent to 31 December 2020.
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 below have been drawn up
based on the undiscounted contractual maturities of the Group's financial assets and liabilities including interest that will accrue to those
assets and liabilities except where the Group is entitled and intends to repay the liability before its maturity. Both the inclusion of future
interest and the values disclosed being undiscounted results in the total position being different to that included in the Consolidated
Balance Sheet. Given this is a maturity analysis all trade payables (including amongst other items payroll and sales tax accruals which are
not classified as financial instruments) have been included.
2020 analysis
Current liabilities
Trade and other payables
Lease liabilities
Deferred consideration
Derivative financial instruments
Other financial liabilities
Total
Non-current liabilities
Lease liabilities
Bank loans
Private placement notes
Deferred consideration
Derivative financial instruments
Other financial liabilities
Total
Total liabilities
Other
Derivative financial instrument assets
Cash and cash equivalents
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
275.6
50.6
0.5
0.5
0.5
327.7
211.6
67.7
144.5
0.4
0.4
1.2
425.8
753.5
(0.1)
(235.3)
(294.4)
(529.8)
223.7
275.6
61.5
0.5
0.5
0.5
338.6
–
2.7
7.6
–
(0.1)
–
10.2
348.8
–
(235.3)
(294.4)
(529.7)
(180.9)
–
–
–
–
–
–
51.8
2.7
7.6
0.4
(0.1)
1.2
63.6
63.6
–
–
–
–
63.6
–
–
–
–
–
–
101.5
71.6
89.3
–
(0.3)
–
262.1
262.1
–
–
–
–
262.1
–
–
–
–
–
–
144.0
–
77.6
–
1.2
–
222.8
222.8
(0.1)
–
–
(0.1)
222.7
Total
£m
275.6
61.5
0.5
0.5
0.5
338.6
297.3
77.0
182.1
0.4
0.7
1.2
558.7
897.3
(0.1)
(235.3)
(294.4)
(529.8)
367.5
189
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Financial Statements
21. Maturity of financial assets and liabilities continued
The table above includes: cross-currency interest rate swaps in relation to derivative financial assets with a fair value at 31 December 2020
of £0.1m (2019: £1.7m) and derivative financial liabilities of £0.3m (2019: £1.9m) that will be settled gross, the final exchange on these
derivatives will be a payment of €18.3m and receipt of $22.2m in August 2026; and other derivative financial assets with a fair value at
31 December 2020 of £nil (2019: £0.9m) and derivative financial liabilities of £0.5m (2019: £0.2m) that will be settled gross, the final
exchange on these derivatives will be total receipts of €20m (2019: €30.5m), PLN 32m (2019: PLN 31m), $3.0m (2019: nil) and £nil (2019:
£62.3m) and corresponding payments of £29.2m (2019: £31.8m) and €nil (2019: €72.5m).
The following financial assets and liabilities are subject to offsetting, enforceable master netting arrangements:
As at 31 December 2020
Derivative financial assets
Derivative financial liabilities
Total
2019 analysis
Current liabilities
Trade and other payables
Lease liabilities
Bank loans
Private placement notes
Derivative financial instruments
Other financial liabilities
Total
Non-current liabilities
Lease liabilities
Derivative financial instruments
Other financial liabilities
Total
Total liabilities
Other
Derivative financial instrument assets
Cash and cash equivalents
Trade and other receivables
Total
Grand total
Gross amounts
of recognised
financial assets/
(liabilities)
£m
Amounts
available to
offset through
netting
agreements
£m
0.1
(0.9)
(0.8)
(0.1)
0.1
–
Net amount
£m
–
(0.8)
(0.8)
Balance sheet
value
£m
< 1 year
£m
1-2 years
£m
2-5 years
£m
> 5 years
£m
Maturity analysis
297.6
51.5
99.6
175.5
0.2
1.5
625.9
224.1
1.9
1.4
227.4
853.3
(2.6)
(110.0)
(294.7)
(407.3)
446.0
297.6
62.4
100.4
31.8
0.2
1.5
493.9
0.5
(0.2)
–
0.3
494.2
(1.4)
(110.0)
(294.7)
(406.1)
88.1
–
–
–
22.4
–
–
22.4
55.0
(0.2)
0.4
55.2
77.6
(0.2)
–
–
(0.2)
77.4
–
–
–
54.9
–
–
54.9
110.3
(0.6)
1.0
110.7
165.6
(0.6)
–
–
(0.6)
165.0
–
–
–
97.1
–
–
97.1
114.8
1.2
–
116.0
213.1
(2.1)
–
–
(2.1)
211.0
Total
£m
297.6
62.4
100.4
206.2
0.2
1.5
668.3
280.6
0.2
1.4
282.2
950.5
(4.3)
(110.0)
(294.7)
(409.0)
541.5
At 31 December 2019, the private placement notes have been reclassified in the balance sheet as a current liability as explained in Note 19.
The contractual maturity profile is unaffected and details of the contractual repayment profile of the private placement notes are shown in
Note 19. The table above reflects the contractual maturity for repayments of principal and interest.
The following financial assets and liabilities are subject to offsetting, enforceable master netting arrangements:
Gross amounts
of recognised
financial assets/
(liabilities)
£m
Amounts
available to offset
through netting
agreements
£m
2.6
(2.1)
0.5
(1.7)
1.7
–
Net amount
£m
0.9
(0.4)
0.5
As at 31 December 2019
Derivative financial assets
Derivative financial liabilities
Total
190
SIG plc Annual Report and Accounts for the year ended 31 December 2020 22. Sensitivity Analysis
IFRS 7 requires the disclosure of a sensitivity analysis that details the effects on the Group's profit or loss and other equity of reasonably
possible fluctuations in market rates.
This sensitivity analysis has been prepared to illustrate the effect of the following hypothetical variations in market rates on the fair value of
the Group's financial assets and liabilities:
i) a 1% (100 basis points) increase or decrease in market interest rates; and
ii) a 10% strengthening or weakening of Sterling against all other currencies to which the Group is exposed.
a) Interest rate sensitivity
The Group is currently exposed to Sterling, Euro and US Dollar interest rates. 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.
2020 analysis
GBP
EUR
USD
Total
+100bp
£m
-100bp
£m
+100bp
£m
-100bp
£m
+100bp
£m
-100bp
£m
Profit or loss
Other equity
Total Shareholders' equity
0.4
–
0.4
(0.4) (i)
– (ii)
(0.4)
–
1.1
1.1
– (iii)
(1.2) (iv)
(1.2)
–
(1.1)
(1.1)
–
1.1 (ii)
1.1
+100bp
£m
0.4
–
0.4
2019 analysis
GBP
EUR
USD
Total
+100bp
£m
-100bp
£m
+100bp
£m
-100bp
£m
+100bp
£m
-100bp
£m
Profit or loss
Other equity
Total Shareholders' equity
(1.1)
0.1
(1.0)
1.1 (i)
– (ii)
1.1
–
1.7
1.7
– (iii)
(1.7) (iv)
(1.7)
–
(1.5)
(1.5)
–
1.6 (ii)
1.6
+100bp
£m
(1.1)
0.3
(0.8)
-100bp
£m
(0.4)
(0.1)
(0.5)
-100bp
£m
1.1
(0.1)
1.0
The movements noted above are mainly attributable to:
(i) floating rate Sterling debt and cash deposits
(ii) mark-to-market valuation changes in the fair value of effective cash flow hedges
(iii) floating rate Euro debt and Euro cash deposits
(iv) changes in the value of the Group's Euro-denominated assets and liabilities
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.
2020 analysis
Assets and liabilities under
the scope of IFRS 7
Profit or loss
Other equity
Total Shareholders' equity
Total assets and liabilities*
Profit or loss
Other equity
Total Shareholders' equity
EUR
+10%
£m
-10%
£m
USD
+10%
£m
-10%
£m
PLN
+10%
£m
-10%
£m
Total
+10%
£m
–
0.8
0.8
–
(4.8)
(4.8)
– (i)
(1.0) (ii)
(1.0)
– (iii)
5.8 (iv)
5.8
–
(0.4)
(0.4)
–
(0.4)
(0.4)
–
0.5 (ii)
0.5
– (v)
0.5 (iv)
0.5
(0.1)
0.3
0.2
(0.1)
(0.1)
(0.2)
0.1
(0.4) (ii)
(0.3)
0.1 (vi)
0.1 (iv)
0.2
(0.1)
0.7
0.6
(0.1)
(5.3)
(5.4)
-10%
£m
0.1
(0.9)
(0.8)
0.1
6.4
6.5
191
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Financial Statements
22. Sensitivity Analysis continued
2019 analysis
Assets and liabilities under
the scope of IFRS 7
Profit or loss
Other equity
Total Shareholders' equity
Total assets and liabilities*
Profit or loss
Other equity
Total Shareholders' equity
EUR
+10%
£m
-10%
£m
USD
+10%
£m
-10%
£m
PLN
+10%
£m
-10%
£m
Total
+10%
£m
(0.7)
0.1
(0.6)
–
(6.0)
(6.0)
0.9 (i)
(1.3) (ii)
(0.4)
– (iii)
7.3 (iv)
7.3
–
–
–
–
(2.0)
(2.0)
–
– (ii)
–
– (v)
2.5 (iv)
2.5
–
(1.4)
(1.4)
–
(3.5)
(3.5)
–
1.8 (ii)
1.8
– (vi)
4.4 (iv)
4.4
(0.7)
(1.3)
(2.0)
–
(11.5)
(11.5)
-10%
£m
0.9
0.5
1.4
–
14.2
14.2
* Certain assets and liabilities such as inventories, non-current assets and provisions do not come under the scope of IFRS 7. Therefore, in order to present a complete analysis of the
Group's exposure to movements in foreign currency exchange rates, the exposure on the Group's total assets and liabilities has been disclosed.
The movements noted above are mainly attributable to:
(i) retranslation of Euro interest flows
(ii) mark-to-market valuation changes in the fair value of effective cash flow and net investment hedges and retranslation of assets and
liabilities under the scope of IFRS 7
(iii) retranslation of Euro profit streams and transaction exposure relating to purchases in Euros
(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
(v) transaction exposure relating to purchases in US Dollars
(vi) retranslation of Polish Zloty profit streams
23. Provisions
At 1 January 2020
Unused amounts reversed in the period
Utilised
Reclassified
New provisions
Exchange differences
Transferred from held for sale
At 31 December 2020
Included in current liabilities
Included in non-current liabilities
Total
Onerous
leases
£m
Leasehold
dilapidations
£m
Other
amounts
£m
2.3
–
(2.1)
–
0.4
–
–
0.6
21.8
(1.6)
(2.1)
(0.1)
3.5
0.1
0.5
22.1
1.2
(0.1)
(0.5)
–
12.8
0.1
–
13.5
2020
£m
10.5
25.7
36.2
Total
£m
25.3
(1.7)
(4.7)
(0.1)
16.7
0.2
0.5
36.2
2019
£m
6.7
18.6
25.3
Onerous leases
Since adoption of IFRS 16 on 1 January 2019, the future rental payments due over the remaining term of existing lease contracts is included
in the lease liability, with the right-of-use asset impaired to reflect the future cost not covered through sublease income. The remaining
onerous lease provision relates to other non-rental costs due over the remaining lease term.
Leasehold dilapidations
This provision relates to contractual obligations to reinstate leasehold properties to their original state of repair. The provision is calculated
based on both the liability to rectify or reinstate leasehold improvements and modifications carried out on the inception of the lease
(recognised on inception with corresponding fixed asset) and the liability to rectify general wear and tear which is recognised as incurred
over the life of the lease. The costs will be incurred both at the end of the leases as set out in Note 25 (reinstatement) and during the lease
term (wear and tear).
Other amounts
Included within other amounts is £11.4m (2019: £nil) relating to onerous contract provisions for licence fee commitments where no future
economic benefit is expected to be obtained, principally in relation to the SAP 1HANA implementation following the change in scope of
the project. The costs will be incurred over the next three years. Other amounts relate principally to claims and warranty provisions. The
transfer of economic benefit is expected to be made between one and four years' time.
192
SIG plc Annual Report and Accounts for the year ended 31 December 2020 24. Deferred tax
The net deferred tax asset at the end of the year is analysed as follows:
Deferred tax assets:
– Continuing operations
– Disposal groups held for sale (Note 11)
Deferred tax liabilities:
– Disposal groups held for sale (Note 11)
Net deferred tax asset
2020
£m
5.7
–
–
5.7
2019
£m
4.4
3.0
(1.0)
6.4
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:
At 1 January 2019
Credit/(charge) to income
Charge to equity
Exchange differences
Attributable to discontinued operations
At 31 December 2019
Credit/(charge) to income
Credit to equity
Added on acquisition
Exchange differences
Attributable to discontinued operations
At 31 December 2020
Goodwill and
intangibles
£m
Property,
plant and
equipment
£m
Short term
timing
differences
£m
Retirement
benefit
obligations
£m
Losses
£m
Other
£m
(6.1)
1.4
–
–
0.6
(4.1)
1.1
–
(0.1)
–
1.4
(1.7)
10.2
(5.3)
–
–
0.1
5.0
(1.0)
–
–
–
0.7
4.7
3.5
(1.4)
–
(0.1)
0.3
2.3
–
–
–
0.1
(1.6)
0.8
5.4
3.9
(6.6)
(0.1)
0.1
2.7
–
0.3
–
0.2
–
3.2
3.3
–
–
(0.1)
–
3.2
(2.0)
–
–
0.1
(0.7)
0.6
(3.1)
0.2
–
0.2
–
(2.7)
1.3
–
–
(0.5)
–
(1.9)
Total
£m
13.2
(1.2)
(6.6)
(0.1)
1.1
6.4
(0.6)
0.3
(0.1)
(0.1)
(0.2)
5.7
The deferred tax charge within the Consolidated Income Statement for 2020 includes a credit of £0.2m (2019: £1.0m) 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.
The majority of the deferred tax asset associated with the retirement benefit obligations is in respect of the French and German defined
benefit schemes. Payments against the deficit will be deductible for tax purposes on a paid basis and the Group expects to receive the tax
benefit, therefore the associated deferred tax asset has been recognised.
Deferred tax has not been recognised on deductible temporary differences relating to property, plant and equipment; short term timing
differences; UK retirement benefit obligations and tax losses being carried forward on the basis that the realisation of their future
economic benefit is uncertain. The unrecognised potential deferred tax asset in relation to these items is £57.0m (2019: £15.2m).
At the balance sheet date, no deferred tax liability is recognised on temporary differences relating to undistributed profits of the overseas
subsidiaries which aggregate to £280m (2019: £204m). 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.
The UK Budget 2021 announcements on 3 March 2021 included measures to support economic recovery as a result of the ongoing
Covid-19 pandemic. These included an increase to the UK’s main corporation tax rate to 25%, which is due to be effective from 1 April
2023. These changes were not substantively enacted at the balance sheet date and hence have not been reflected in the measurement of
deferred tax balances at the period end. If the Group’s deferred tax balances at the period end were remeasured at 25% this would result
in a deferred tax credit of £0.4m.
193
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Financial Statements
25. Leases
The Group as a lessee
The Group has lease contracts for various properties, vehicles and other equipment used in its operations. Information on the nature and
accounting for lease contracts is provided in the Statement of Accounting Policies.
Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period:
At 1 January 2020
Transferred from held for sale
Foreign currency movement
Additions
Disposals
Modifications
Impairments
Depreciation expense
At 31 December 2020
Set out below are the carrying amounts of lease liabilities and the movements during the year:
Buildings
£m
221.2
12.0
3.6
12.6
(0.1)
8.1
(10.2)
(45.0)
202.2
Plant and
equipment
£m
34.0
0.5
0.7
6.2
(0.4)
(2.0)
–
(11.6)
27.4
At 1 January 2020
Transferred from held for sale
Foreign currency movement
Additions
Disposals
Modifications
Accretion of interest
Payments
At 31 December 2020 (Note 21)
Current
Non-current
The following are the amounts recognised in profit or loss (from continuing operations):
Depreciation expense of right-of-use assets
Interest expense on lease liabilities
Expense relating to short-term leases (included in operating expenses)
Impairment of right-of-use assets (included in Other items)*
Total amount recognised in profit or loss
2020
£m
56.6
12.5
0.8
10.2
80.1
Total
£m
255.2
12.5
4.3
18.8
(0.5)
6.1
(10.2)
(56.6)
229.6
2020
£m
275.6
13.3
6.4
18.7
(3.8)
6.0
12.5
(66.5)
262.2
50.6
211.6
262.2
2019
£m
54.4
12.0
1.4
1.5
69.3
* £10.1m is included within 'Impairment charges' within Other items relating to the impairment of the right-of-use assets within SIG Distribution and £0.1m is included within net
restructuring costs within Other items. In the prior year, £1.0m was included within 'Impairment charges' and £0.5m relating to the Maury business was included within 'Profits and
losses on agreed sale or closure of non-core businesses and associated impairment charges' within Other items.
The Group had total cash outflows for leases of £66.5m in 2020 (2019: £67.8m). The Group also had non-cash additions to right-of-use
assets and lease liabilities of £38.5m in 2020 (2019: £3.5m). The future cash outflows relating to leases that have not yet commenced are
disclosed in Note 32(b).
The Group has several lease contracts that include extension and termination options. These options are negotiated by management to
provide flexibility in managing the lease-asset portfolio and align with the Group's business needs.
Set out below are the undiscounted potential future rental payments relating to periods following the expiry date of extension and
termination options that are not included in the lease term.
Extension options expected not to be exercised
Termination options expected to be exercised
194
Within five years
£m
86.5
23.8
110.3
More than
five years
£m
–
2.1
2.1
Total
£m
86.5
25.9
112.4
SIG plc Annual Report and Accounts for the year ended 31 December 2020 25. Leases continued
The Group has considered the impact of any rent concessions as a result of Covid-19. The only changes as a result of Covid-19 have been
changes in the timing of payments (for example from quarterly to monthly) and there are therefore no significant amounts recognised in
the Income Statement from Covid-19 related rent concessions during the year.
The Group as a lessor
The Group is an intermediate lessor of a number of property leases which are subleased to a third party. In accordance with IFRS 16 these
subleases have been reassessed and a number that were previously classified as operating leases are now classified as finance leases. This
resulted in recognition of lease assets receivable of £4.3m at 31 December 2020 (2019: £5.2m). These leases have terms of between 1 and
11 years. Rental income recognised by the Group during the year is £1.0m (2019: £1.0m).
Future lease payments receivable from sub-leases classified as finance leases at 31 December 2020 are as follows:
Within one year
After one year but not more than five years
More than five years
Less: future finance charges
Lease assets receivable
2020
£m
0.9
3.0
1.2
5.1
(0.8)
4.3
2019
£m
1.0
3.7
1.5
6.2
(1.0)
5.2
Of the total lease assets receivable, £0.7m (2019: £0.8m) is due within one year and £3.6m (2019: £4.4m) is due after more than one year.
Future minimum rentals receivable under non-cancellable operating leases at 31 December 2020 are as follows:
Within one year
After one year but not more than five years
More than five years
26. Government grants
2020
£m
0.3
1.0
–
1.3
2019
£m
0.2
0.8
0.2
1.2
The Group has benefited from a number of government support packages during 2020 in relation to the Covid-19 pandemic. Income
received under furlough support schemes (Coronavirus Job Retention Scheme in the UK and similar in Ireland, France and Benelux),
amounting to £8.1m, meets the definition of government grants and has been netted off the related staff costs, and other business grants
of £0.7m have also been received and deducted from related costs. Amounts received in the year are shown below:
At 1 January
Received during the year
Released to the profit and loss account
At 31 December
2020
£m
–
8.8
(8.8)
–
2019
£m
–
–
–
–
The Group also benefited from business rate savings in the UK and social tax savings in France, amounting to £2.1m, which represents a
form of government assistance, but not a grant as there was no transfer of resources. Payment deferrals in relation to VAT, employment
taxes and corporate tax did not have an impact on the profit and loss account. The majority of these have been repaid by 31 December
2020, with any outstanding amounts included in the relevant liability on the consolidated balance sheet.
27. Called up share capital
Authorised:
1,390,000,000 ordinary shares of 10p each (2019: 800,000,000)
Allotted, called up and fully paid:
1,181,556,977 ordinary shares of 10p each (2019: 591,556,982)
2020
£m
2019
£m
139.0
80.0
118.2
59.2
On 10 July 2020 the Group completed an equity raise, with 589,999,995 new ordinary shares issued for gross proceeds of £165m.
587,901,900 of the shares were issued using a cash box structure, such that merger relief was available under the Companies Act 2006,
section 612. In this circumstance, no share premium is recorded and the £105.6m excess of the net proceeds over the nominal value of
the share capital issue has been recorded as a merger reserve. The proceeds of this issue were used to partially prepay private placement
notes (see Note 19), to pay professional and lender fees relating to the equity raise and debt restructuring and to provide working capital
flexibility. Consequently, the merger reserve will qualify as distributable.
195
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Financial Statements
27. Called up share capital continued
The other 2,098,095 of shares were issued directly to senior management, not within the cash box structure, and the excess of the
proceeds over the nominal value of the share capital of £0.4m has been credited to the share premium account.
Professional fees of £13.1m incurred and directly related to the equity raise have been deducted from the merger reserve (as no share
premium recorded due to the use of the cash box structure as noted above), resulting in a net increase to the merger reserve of £92.5m.
The Company has one class of ordinary share which carries no right to fixed income.
28. Reconciliation of loss before tax to cash generated from operating activities
Loss before tax from continuing operations
Profit before tax from discontinued operations
Loss before tax
Depreciation of property, plant and equipment (Note 10)
Depreciation of right-of-use assets (Note 25)
Net finance costs (Note 3)
Amortisation of computer software (Note 14)
Amortisation of acquired intangibles (Note 14)
Impairment of computer software (Note 14)
Impairment of property, plant and equipment (Note 10)
Impairment of goodwill (Note 13)
Impairment of acquired intangibles (Note 14)
Impairment of right-of-use asset (Note 25)
Profit on agreed sale or closure of non-core businesses (Note 11)
Loss/(profit) on sale of property, plant and equipment
Share-based payments
Gains on derivative financial instruments
Net foreign exchange differences
Increase/(decrease) in provisions
Working capital movements:
- (Increase)/decrease in inventories
- Decrease in receivables
- Decrease in payables
Cash (used in)/generated from operating activities
2020
£m
(202.3)
72.0
(130.3)
11.2
57.2
34.6
5.4
5.6
15.1
3.5
45.4
1.9
10.2
(71.6)
0.7
0.2
(1.5)
0.2
11.3
(5.4)
19.7
(56.4)
(43.0)
2019
£m
(112.7)
3.8
(108.9)
15.2
61.0
26.3
4.5
8.1
0.3
0.6
89.6
–
1.0
(0.1)
(1.4)
0.1
–
(1.3)
(2.9)
1.7
95.6
(23.4)
166.0
Included within the cash (used in)/generated from operating activities is a defined benefit pension scheme employer's contribution of
£2.5m (2019: £2.5m).
Of the total loss on sale of property, plant and equipment, £0.2m profit (2019: £nil) has been included within Other items in the
Consolidated Income Statement (see Note 2).
29. Reconciliation of net cash flow to movements in net debt
Increase in cash and cash equivalents in the year
Cash flow from decrease in debt
Decrease in net debt resulting from cash flows
Recognition of deferred consideration
Non-cash items^
Exchange differences
Decrease in net debt in the year
Net debt at 1 January
Impact of adoption of IFRS 16 at 1 January 2019
Net debt at 31 December
2020
£m
68.4
183.0
251.4
(0.9)
(39.3)
6.0
217.2
(455.4)
–
(238.2)
2019
£m
71.6
(37.6)
34.0
–
(6.4)
6.8
34.4
(189.4)
(300.4)
(455.4)
^ Non-cash items include the fair value movement of debt recognised in the year which does not give rise to a cash inflow or outflow, the movement in cash restricted for use in relation
to the asset backed funding arrangement implemented in relation to the UK defined benefit pension plan and non-cash movements in relation to lease liabilities. In 2019 the £8.1m
restricted cash was included within cash and cash equivalents on the consolidated balance sheet but deducted in arriving at net debt above as shown below. The balance at 31
December 2020 is £nil. See Note 31 for further details.
196
SIG plc Annual Report and Accounts for the year ended 31 December 2020 29. Reconciliation of net cash flow to movements in net debt continued
Net debt is defined as follows:
Non-current assets
Derivative financial instruments
Lease receivables
Current assets
Derivative financial instruments
Lease receivables
Cash at bank and on hand
Less restricted cash in relation to asset backed funding arrangement
Financial assets held for sale
Current liabilities
Lease liabilities
Bank loans
Private placement notes
Deferred consideration
Other financial liabilities
Derivative financial instruments
Lease liabilities directly associated with liabilities classified as held for sale
Non-current liabilities
Lease liabilities
Bank loans
Private placement notes
Deferred consideration
2020
£m
0.1
3.6
–
0.7
235.3
–
–
(50.6)
–
–
(0.5)
(0.5)
(0.5)
–
(211.6)
(67.7)
(144.5)
(0.4)
(0.4)
(1.2)
(238.2)
2019
£m
1.7
4.4
0.9
0.8
110.0
(8.1)
35.9
(51.5)
(99.6)
(175.5)
–
(1.5)
(0.2)
(45.3)
(224.1)
–
–
–
(1.9)
(1.4)
(455.4)
Derivative financial instruments
Other financial liabilities
Net debt
30. Analysis of net debt
Cash at bank and on hand
Other financial assets and deferred
consideration
Liabilities arising from financing activities
Financial assets – derivative financial
instruments
Debts due within one year
Debts due after one year
Lease liabilities
Net debt
At
31 December
2019
£m
137.0
137.0
6.0
6.0
2.6
(277.0)
(3.2)
(320.8)
(598.4)
(455.4)
Cash
flows
£m
(78.6)
(78.6)
–
–
(3.3)
80.3
8.2
67.2
152.4
73.8
Divestments
£m
Acquisitions
£m
Non-cash
items*
£m
Exchange
differences
£m
147.8
147.8
(0.8)
(0.8)
–
–
–
31.6
31.6
178.6
(0.8)
(0.8)
–
–
–
(0.5)
(0.4)
(0.2)
(1.1)
(1.9)
8.1
8.1
(0.9)
(0.9)
0.8
195.7
(209.4)
(33.6)
(46.5)
(39.3)
21.8
21.8
–
–
–
–
(9.4)
(6.4)
(15.8)
6.0
At
31 December
2020
£m
235.3
235.3
4.3
4.3
0.1
(1.5)
(214.2)
(262.2)
(477.8)
(238.2)
* Non-cash items includes to the fair value movement of debt recognised in the year which does not give rise to a cash inflow or outflow, the movement in cash restricted for use in
relation to the asset backed funding arrangement implemented in relation to the UK defined benefit pension plan, movements between debts due within one year and after one year,
and non-cash movements in lease liabilities.
197
Stock code: SHI www.sigplc.comFINANCIALS
Notes to the Financial Statements
31. Retirement benefit obligations
The Group operates a number of pension schemes, four (2019: six) of which provide defined benefits based on final pensionable salary. Of
these schemes, one (2019: one) has assets held in a separate trustee administered fund and three (2019: five) are overseas book reserve
schemes. Two of the overseas schemes in the prior year were within the Air Handling business and were therefore classified within assets
and liabilities held for sale at 31 December 2019 and not included below. The Group also operates a number of defined contribution
schemes, all of which are independently managed.
The Trustees of the pension fund are required by law to act in the interest of the fund and of all relevant stakeholders in the scheme. The
Trustees of the pension fund are responsible for the investment policy with regard to the assets of the fund.
In The Netherlands, the Company participates in the industry-wide pension plan for the construction materials industry ('BPF HiBiN'). The
pension plan is classified as a multi-employer defined benefit scheme under IAS 19, but is recognised in the Financial Statements 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 94.8% as at 31 December 2020 (2019: 97.7%). No change
was made to the pension premium percentage of 22.2% (2019: 22.2%). The coverage ratio is calculated by dividing the fund’s assets by
the total sum of pension liabilities and is based upon market interest rates. The Company's participation in this scheme represents c.0.1%
of the total members. The Company is not liable for other participants' obligations, and there is no agreed allocation of surplus or deficit
on withdrawal from the scheme or on winding up of the scheme. The Company is not aware of any planned changes to contributions or
benefits at the current time.
The Group's total pension charge for the year (from continuing operations), including amounts charged to interest and Other items, was
£6.9m (2019: £7.0m), of which a charge of £0.7m (2019: £0.7m) related to defined benefit pension schemes and £6.2m (2019: £6.3m)
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 2016 and showed that the market value of the scheme’s assets was £164.1m and their actuarial
value covered 97% of the benefits accrued to members after allowing for expected future increases in pensionable salaries. On 30 June
2016 the UK defined benefit pension scheme was closed to future benefit accrual. The next triennial valuation as at 31 December 2019 is
in the process of being finalised and is expected to be concluded by the end of March 2021.
Following the last triennial valuation of the UK scheme ("the Plan"), the Company and the Trustees agreed to fund the triennial pension
deficit and increase security of the Plan using an asset backed funding arrangement under a partnership arrangement, which was
implemented in March 2018. The asset backed funding arrangement transfers certain rights over a managed pool of certain customer
receivables of one of the Group's subsidiary companies to the partnership and provides a mechanism to settle future funding
commitments from receipts from higher quality trade receivables to ensure contributions to the Plan of £2.5m per annum for up to 20
years (as may be required and subject to certain discretions). The partnership is controlled by the Group and is therefore included within
the consolidated financial statements. The receivables continue to be recognised on the consolidated balance sheet, and the Plan’s interest
in the partnership is a non-transferable financial asset issued by the Group, and therefore does not constitute a plan asset for the Group.
Distribution of income to the partners of the partnership, which forms the contribution to the Plan, is at the discretion of the General
Partner, a subsidiary of the Group. There is however a guarantee in place which ensures that the Group's subsidiary, SIG Trading Limited,
will make an equivalent contribution to the Plan if the partnership does not effect the discretionary distribution. The Group is therefore
committed to making a contribution of £2.5m per annum until the structure terminates at the end of 20 years or earlier if the funding level
of the Plan increases to greater than 115% of Technical Provisions before the end of the term.
The other three 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 reinsured by an external insurance company.
198
SIG plc Annual Report and Accounts for the year ended 31 December 2020 31. Retirement benefit obligations continued
Investment 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.
Interest rate risk
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 bond holdings.
Longevity risk
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.
Salary risk
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 £0.3m (2019: £0.5m) relating to the defined benefit pension
schemes, was £0.7m (2019: £0.7m). The charge for the current year includes £0.4m (2019: £nil) in relation to the estimated liability impact
of equalising Guaranteed Minimum Pensions (GMP) in relation to past transfer values, following the High Court ruling in November 2020.
This estimated increase in the liability has been charged to Other items within the Consolidated Income Statement, consistent with the
original GMP liability estimate of £1.0m in 2018.
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 2020 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. The three overseas book reserve schemes
remain open to new members.
Consolidated Balance Sheet liability
The balance sheet position in respect of the four defined benefit schemes can be summarised as follows:
Pension liability before taxation
Related deferred tax asset
Pension liability after taxation
2020
£m
(25.1)
3.2
(21.9)
2019
£m
(24.8)
2.7
(22.1)
The actuarial loss of £1.7m (2019: £1.8m loss) for the year, together with the associated deferred tax credit of £0.4m (2019: £6.6m charge)
has been recognised in the Consolidated Statement of Comprehensive Income. In addition a deferred tax credit of £nil (2019: £3.9m credit)
has been recognised in the Consolidated Income Statement.
Of the above pension liability before taxation, £15.6m (2019: £15.9m) relates to wholly or partly funded schemes and £9.5m (2019: £8.9m)
relates to the overseas unfunded schemes.
199
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Financial Statements
31. Retirement benefit obligations continued
The movement in the pension liability before taxation in the year can be summarised as follows:
Pension liability at 1 January
Current service cost
Contributions
Net finance cost
GMP equalisation ruling
Actuarial loss
Transfer to liabilities associated with assets held for sale
Business disposals
Effect of changes in exchange rates
Pension liability at 31 December
The principal assumptions used for the IAS 19 actuarial valuation of the UK scheme 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
2020
£m
(24.8)
–
2.5
(0.3)
(0.4)
(1.7)
–
0.1
(0.5)
(25.1)
2020
%
n/a
1.8%
2.8%
1.4%
2.9%
2019
£m
(28.7)
(0.5)
2.6
(0.5)
–
(1.8)
3.4
–
0.7
(24.8)
2019
%
n/a
1.6%
2.9%
2.1%
3.0%
* Upon closure of the UK defined benefit scheme to future benefit accrual the accrued benefits of active members ceased to be linked to their final salary and will instead revalue in
deferment broadly in line with movements in the Consumer Price Index.
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.
Within the principal plan the life expectancy for a male employee beyond the normal retirement age of 65 is 22.6 years (2019: 21.8 years).
The life expectancy on retirement at age 65 of a male employee currently aged 45 years is 23.1 years (2019: 23.1 years). The life expectancy
for a female employee beyond the normal retirement age of 65 is 24.0 years (2019: 23.6 years). The life expectancy on retirement at age 65
of a female employee currently aged 45 years is 25.6 years (2019: 25.2 years).
The sensitivity analyses below have been determined based on reasonably possible changes of the respective assumptions occurring at
the end of the reporting period, while holding all other assumptions constant. If the discount rate were to be increased/decreased by 0.1%,
this would decrease/increase the Group's gross pension scheme deficit by c£3.0m. If the rate of inflation increased/decreased by 0.1% this
would increase/decrease the Group's gross pension scheme deficit by c£1.0m. If the life expectancy for employees increased by one year
the Group's gross pension scheme deficit would increase by c£8.9m. The sensitivity analysis presented above may not be representative of
the actual change in the defined benefit obligation as it is unlikely that the changes in assumptions would occur in isolation of one another
as some of the assumptions may be correlated.
The average duration of the defined benefit scheme obligation at 31 December 2020 is 18 years (2019: 19 years).
The fair value of assets held at the balance sheet date were:
Equities
Corporate and government bonds
Investment funds
Property
Cash and net current assets
Total fair value of assets
2020
£m
40.9
93.2
14.8
7.4
17.2
173.5
2019
£m
59.6
80.1
15.3
7.6
0.9
163.5
All equity and debt instruments have quoted prices in active markets and can be classified as Level 2 instruments, other than property
which is Level 3.
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
2020
£m
173.5
(198.6)
(25.1)
2019
£m
163.5
(188.3)
(24.8)
200
SIG plc Annual Report and Accounts for the year ended 31 December 2020 31. Retirement benefit obligations continued
The overall expected rate of return is based upon market conditions at the balance sheet date.
Amounts recognised in the Consolidated Income Statement (from continuing operations) in respect of these defined benefit schemes are
as follows:
Current service cost
GMP equalisation ruling
Net finance cost
Amounts recognised in the Consolidated Income Statement
2020
£m
–
0.4
0.3
0.7
Analysis of the actuarial 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
2020
£m
12.9
4.0
(24.2)
5.6
(1.7)
The remeasurement of the net defined benefit liability is included within the Consolidated Statement of Comprehensive Income.
Movements in the present value of the schemes' liabilities were as follows:
Present value of schemes' liabilities at 1 January
Current service cost
Interest on pension schemes' liabilities
Benefits paid
Payment of unfunded benefits
Effect of changes in exchange rates
GMP equalisation ruling
Remeasurement gains/(losses):
Actuarial gain arising from changes in demographic assumptions
Actuarial loss arising from changes in financial assumptions
Actuarial loss due to liability experience
Business disposals
Transfer of liabilities associated with assets held for sale
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
Transfer of assets held for sale
Fair value of schemes' assets at 31 December
2020
£m
(188.3)
–
(3.7)
8.8
–
(0.5)
(0.4)
4.0
(24.2)
5.6
0.1
–
(198.6)
2020
£m
163.5
3.4
12.9
2.5
(8.8)
–
173.5
2019
£m
0.2
–
0.5
0.7
2019
£m
18.9
1.8
(22.5)
–
(1.8)
2019
£m
(174.8)
(0.5)
(4.7)
7.3
–
0.7
–
1.8
(22.5)
–
–
4.4
(188.3)
2019
£m
146.1
4.2
18.9
2.6
(7.3)
(1.0)
163.5
201
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Financial Statements
32. Commitments and contingencies
a) Capital commitments
The purchase of property, plant and equipment contracted but not provided for
2020
£m
0.3
2019
£m
6.3
At 31 December 2020 the Group is also committed to further licence costs of £14.8m (2019: £12.3m) in relation to the SAP implementation
project and other licence fees. £11.4m of this commitment has been already recognised as an onerous contract provision at 31 December,
with £3.4m remaining to be recognised in the income statement over the period 2021 to 2023.
b) Lease commitments
The Group has various lease contracts that have not yet commenced as at 31 December 2020. The future lease payments for these non-
cancellable lease contracts are £1.0m within one year (2019: £0.9m), £3.8m within five years (2019: £1.0m) and £4.7m thereafter (2019:
£0.7m).
Information on the Group's leasing arrangements is included in Note 25.
c) 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 £14.1m (2019: £13.4m). Of this amount, £5.0m (2019: £8.0m) relates to a standby letter of credit issued by HSBC
Bank plc in respect of the Group's insurance arrangements.
As part of the disposal of Building Plastics a guarantee was provided to the landlord of the leasehold properties transferred with the
business covering rentals over the remaining term of the leases in the event that the acquiring company enters into administration before
the end of the lease term. The maximum liability that could arise from this would be approximately £1.5m (2019: £2.1m). No provision has
been made in these financial statements as it is not considered likely that any loss will be incurred in connection with this.
33. 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.
In 2020, SIG incurred expenses of £0.5m (2019: £0.4m) 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 Leadership Team members and the Non-
Executive Directors (see page 74), is set out below in aggregate for each of the categories specified in IAS 24 "Related Party Disclosures".
Short term employee benefits
Termination and post-employment benefits
IFRS 2 share option charge
2020
£m
5.8
0.1
–
5.9
2019
£m
4.3
0.4
0.1
4.8
34. Subsidiaries
Details of the Group's subsidiaries, all of which have been included in the Financial Statements, are shown on pages 232 to 233.
202
SIG plc Annual Report and Accounts for the year ended 31 December 2020 35. Non-statutory information
The Group uses a number of alternative performance measures, which are non-IFRS, to describe the Group's performance. The Group
considers these performance measures to provide useful historical financial information to help investors evaluate the underlying
performance of the business.
These measures, as shown below, are used to improve the comparability of information between reporting periods and geographical units,
to adjust for Other items (as explained in further detail within the Statement of Significant Accounting Policies) or to adjust for businesses
identified as non-core to provide information on the ongoing activities of the Group. This also reflects how the business is managed and
measured on a day-to-day basis. Non-core businesses are those businesses that have been closed or disposed of or where the Board has
resolved to close or dispose of the businesses by 31 December 2020.
a) Net debt
Net debt is a key metric for the Group, and monitoring it is an important element of treasury risk management for the Group. In addition,
maximum net debt is one of the primary covenants applicable to the Group's debt facilities. For the purpose of covenant calculations, net
debt is stated before the impact of IFRS 16. The different net debt definitions used are as follows:
Reported net debt
Lease liabilities recognised in accordance with IFRS 16
Lease receivables recognised in accordance with IFRS 16
Other financial liabilities recognised in accordance with IFRS 16
Net debt excluding the impact of IFRS 16
Loss on debt modification recognised in accordance with IFRS 9
Net debt on frozen GAAP basis
Other covenant financial indebtedness
Foreign exchange adjustment*
Covenant net debt
Note
29
2020
£m
238.2
(237.0)
4.3
(1.4)
4.1
(10.1)
(6.0)
5.1
(0.5)
(1.4)
2019
£m
455.4
(296.0)
5.2
(1.8)
162.8
–
162.8
5.4
0.3
168.5
* For the purpose of covenant calculations, net debt is calculated using net debt translated at average rather than period end rates.
b) Like-for-like sales
Like-for-like sales is calculated on a constant currency basis, and represents the growth in the Group's sales per day excluding any
acquisitions or disposals completed or agreed in the current and prior year. Revenue is not adjusted for branch openings and closures.
This measure shows how the Group has developed its revenue for comparable business relative to the prior period. As such it is a key
measure of the growth of the Group during the year.
UK
Distribution
£m
UK
Exteriors Total UK
£m
£m
France
Distribution
(LiTT)
£m
France
Exteriors
(Larivière)
£m
Total
France Germany
£m
£m
Benelux
£m
Statutory revenue 2020
Non-core businesses
Underlying revenue 2020
357.4
–
357.4
310.1 667.5
–
310.1 667.5
–
168.1
–
168.1
346.6 514.7
(1.8)
344.8 512.9
(1.8)
370.7
–
370.7
91.6
–
91.6
Total
Germany
and
Benelux
£m
462.3
–
462.3
Ireland
£m
Poland
£m
Total
Group
£m
80.5
–
80.5
149.5 1,874.5
(1.8)
149.5 1,872.7
–
Statutory revenue 2019
Non-core businesses
Underlying revenue 2019
% change year on year:
Underlying revenue
Impact of currency
Impact of acquisitions
Impact of working days
Like-for-like sales
535.5
(1.2)
534.3
346.5 882.0
(1.2)
346.5 880.8
–
184.5
–
184.5
344.1 528.6
(1.9)
342.2 526.7
(1.9)
396.0
(14.5)
381.5
103.0
–
103.0
499.0
(14.5)
484.5
94.9
–
94.9
156.1 2,160.6
(17.6)
156.1 2,143.0
–
(33.1)% (10.5)% (24.2)%
–
–
–
–
(8.9)% 0.8%
(1.4)% (1.6)% (1.6)% (1.6)% (1.4)% (1.5)% (1.3)% 2.3%
–
(2.6)% (2.8)% (11.1)% (4.6)% (15.2)% (4.2)% (12.6)%
(0.6)%
–
–
–
–
–
–
(0.3)% (0.1)%
(0.3)% (0.4)% (0.3)%
–
–
–
1.2% 0.7%
(0.8)% (0.4)% (0.7)% (0.3)% (0.8)% (0.1)%
(3.4)% (5.1)% (12.8)% (6.8)% (16.8)% (2.7)% (13.3)%
(33.4)% (11.1)% (24.6)% (10.3)% 0.4%
203
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Financial Statements
35. Non-statutory information continued
c) Gross margin
Gross margin is the ratio of gross profit to revenue and is used to understand the value the Group creates from its trading activities.
UK
Distribution
%
UK
Exteriors Total UK
%
%
France
Distribution
(LiTT)
%
France
Exteriors
(Larivière)
%
Total
France
%
Germany
(WeGo/
VTi)
%
Benelux
%
Total
Germany
and
Benelux
%
Ireland
%
Poland
%
Total
Group
%
Statutory gross margin
2020
Impact of non-core
businesses
Underlying gross margin
2020
Statutory gross margin
2019
Impact of non-core
businesses
Underlying gross margin
2019
22.5% 27.3% 24.7%
27.4% 24.3% 25.3% 28.0% 24.6% 27.3% 23.4% 20.0% 25.1%
–
–
–
–
–
–
–
–
–
–
–
–
22.5% 27.3% 24.7%
27.4% 24.3% 25.3% 28.0%
24.6% 27.3% 23.4% 20.0% 25.1%
26.1% 28.3% 27.0%
27.4% 23.3% 24.8% 27.6% 24.7% 27.0% 25.0% 20.3% 25.9%
0.1%
–
0.1%
–
0.1%
–
0.1%
–
–
–
–
–
26.2% 28.3% 27.1%
27.4% 23.4% 24.8% 27.7% 24.7% 27.0% 25.0% 20.3% 25.9%
d) Operating cost as a percentage of sales
This is a measure of how effectively the Group's operating cost base is being used to generate revenue.
Statutory revenue
Non-core businesses
Underlying revenue
Operating costs (statutory)
Other items
Underlying operating costs
Six months
ended 30 June
2020
£m
Six months
ended 31
December 2020
£m
Year ended
31 December
2020
£m
Six months ended
30 June
2019
£m
Six months ended
31 December
2019
£m
Year ended
31 December
2019
£m
840.1
(1.2)
838.9
312.4
(60.4)
252.0
1,034.4
(0.6)
1,033.8
325.8
(54.5)
271.3
1,874.5
(1.8)
1,872.7
638.2
(114.9)
523.3
1,113.3
(13.4)
1,099.9
267.9
(19.5)
248.4
1,047.3
(4.2)
1,043.1
379.1
(114.6)
264.5
2,160.6
(17.6)
2,143.0
647.0
(134.1)
512.9
Operating costs as a percentage of
statutory revenue
Underlying operating costs as a percentage
of underlying revenue
37.2%
31.5%
34.0%
24.1%
36.2%
29.9%
30.0%
26.2%
27.9%
22.6%
25.4%
23.9%
204
SIG plc Annual Report and Accounts for the year ended 31 December 2020 35. Non-statutory information continued
e) Operating margin
This is used to enhance understanding and comparability of the underlying financial performance of the Group by period and segment,
excluding the benefit of property profits which can have a significant effect on results in a particular period.
UK
Distribution
£m
UK
Exteriors Total UK
£m
£m
France
Distribution
(LiTT)
£m
France
Exteriors
(Larivière)
£m
Total
France Germany Benelux
£m
£m
£m
Total
Germany
and
Benelux
£m
Ireland
£m
Poland
£m
Parent
company
costs
£m
Total
Group
£m
2020
Underlying revenue
(Note 1)
Underlying operating
profit (Note 1)
Operating margin
2019
Underlying revenue
(Note 1)
Underlying operating
profit (Note 1)
Operating margin
357.4
310.1 667.5
168.1
344.8 512.9
370.7
91.6
462.3
80.5 149.5
– 1,872.7
(45.4)
(52.8)
(12.7)% (2.4)% (7.9)%
(7.4)
7.1
4.2%
8.3
15.4
2.0
2.5
2.4% 3.0% 0.1% 2.7% 0.6% 1.0% 1.3%
2.9
0.8
0.4
(21.6)
(53.3)
n/a (2.8)%
534.3
346.5 880.8
184.5
342.2 526.7
381.5 103.0
484.5
94.9 156.1
– 2,143.0
7.9
1.5%
11.8
19.7
3.4% 2.2%
11.2
6.1%
8.6
19.8
2.5% 3.8%
4.4
5.2
1.2% 5.0%
9.6
6.8
4.3
2.0% 7.2% 2.8%
(17.7)
n/a
42.5
2.0%
f) Other non-statutory measures
In addition to the alternative performance measures noted above, the Group also uses underlying EPS (as set out in Note 8) and underlying
net finance costs (as set out in Note 3).
36. Post balance sheet events
On 1 March 2021 the Group agreed with its lending banks and private placement noteholders to amend certain financial covenants, as
described in the Going concern section of the Statement of Significant Accounting Policies.
On 10 March 2021 the Group completed the acquisition of 100% of the equity share capital of F30 Building Products Limited, a non-listed
UK business, for total estimated consideration of £4.4m. £2.5m of the consideration was payable in cash on completion with the remaining
£1.9m split between deferred and contingent consideration based upon the future performance of the business. The initial accounting for
the acquisition, including the calculation of the fair value of assets and liabilities acquired, is in progress and all numbers remain provisional.
The acquisition is expected to contribute c£6m revenue and £0.9m underlying profit before tax to the Group on an annualised basis.
205
Stock code: SHI www.sigplc.comFINANCIALS
Independent Auditor’s Report
TO THE MEMBERS OF SIG PLC
Opinion
In our opinion:
■ SIG plc’s group financial statements and parent company financial statements (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 2020 and of the group’s loss for the year then ended;
■ the group financial statements have been properly prepared in accordance with International Accounting Standards in conformity with
the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation (EC) No.
1606/2002 as it applies in the European Union;
■ the parent company financial statements have been properly prepared in accordance with United Kingdom Accounting Standards,
including FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice) as applied in accordance
with the provisions of the Companies Act 2006; and
■ the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of SIG plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 31
December 2020 which comprise:
Group
Parent company
Consolidated income statement for the year ended 31 December 2020
Consolidated statement of comprehensive income for the year ended
31 December 2020
Consolidated balance sheet as at 31 December 2020
Company statement of comprehensive income for the year
ended 31 December 2020
Company balance sheet as at 31 December 2020
Company statement of changes in equity for the year ended
31 December 2020
Consolidated statement of changes in equity for the year ended
31 December 2020
Related notes 1 to 16 to the financial statements including a
summary of significant accounting policies
Consolidated cash flow statement for the year ended 31 December 2020
Related notes 1 to 36 to the financial statements, including a summary of
significant accounting policies
The financial reporting framework that has been applied in the preparation is applicable law and International Accounting Standards in
conformity with the requirements of the Companies Act 2006 and, of the group financial statements, International Financial Reporting
Standards adopted pursuant to Regulation (EC) No. 1606/2002 as it applies in 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, including FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice) and in
accordance with the provisions of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our
report. We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation
of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group and parent company’s ability to
continue to adopt the going concern basis of accounting included:
206
SIG plc Annual Report and Accounts for the year ended 31 December 2020 How we evaluated management’s assessment
■ In conjunction with our walkthrough of the group’s financial statement close process, we confirmed our understanding of management’s
Going Concern assessment process and also engaged with management early to ensure all key risk factors were considered in their
assessment;
■ We obtained management’s going concern assessment, including the cash forecast and covenant calculation for the going concern
period through to 31 March 2022 and tested this for arithmetical accuracy. Management has modelled a downside scenario in its cash
forecasts and covenant calculations in order to incorporate unexpected changes to the forecasted liquidity of the group,
■ We obtained agreements for the Revolving Credit Facility, Term Loan and the Private Placement Notes and reviewed the nature of
facilities, repayment terms, covenants and attached conditions. We assessed their continued availability to the group through the going
concern period and ensured completeness of covenants identified by management,
■ For covenant amendments agreed subsequent to the refinancing with lenders for 2022 we inspected the agreements to understand
the revised covenant levels,
■ We challenged the appropriateness of the key assumptions in management’s forecasts including revenue growth and gross margin
percentage, by comparing these to year to date performance, industry benchmarks and through consideration of historical forecasting
accuracy,
■ We challenged management’s consideration of a reasonable worst-case scenario, including comparing this to the actual impact to date
of Covid-19,
■ We performed reverse stress testing in order to identify and understand what factors and how severe the downside scenarios would
have to be to result in the group utilising all liquidity or breaching a financial covenant during the going concern period,
■ We considered the quantum and timing of mitigating factors included in the cash forecasts and covenant calculations and whether
these are within the control of the group. We reviewed the group’s capital expenditure and business acquisition plans,
■ We assessed the plausibility of management’s downside scenarios by corroborating to third party data including industry and broker
reports for indicators of contradictory evidence, including evidence of market instability and broker consensus on expected outturn of
the group and the industry,
■ We reviewed the group’s going concern disclosures included in the annual report in order to assess whether the disclosures were
appropriate and in conformity with the reporting standards.
Our key observations
Following the successful completion of the debt refinancing in June 2020 and the £165m equity raise in July 2020 the group has £235m of
cash at the Balance Sheet date and access to committed facilities until at least May 2023.
The group initially experienced high levels of disruption in Q2 2020 as a result of Covid-19. However, these short-term impacts reduced
through the second half of 2020 and the group is now returning towards pre-Covid trading levels. Management does not expect the
forecasts supporting the going concern assessment to be significantly impacted by Covid-19 given the essential nature of services and that
they are now able to trade through lockdowns. However, achieving the forecasts remains dependent on the group’s turnaround plans. This
is particularly sensitive in the UK Distribution business.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the group and parent company’s ability to continue as a going concern over the forecast
period to 31 March 2022. Going concern has also been determined to be a key audit matter.
In relation to the group and parent company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors
considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this
report. 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.
207
Stock code: SHI www.sigplc.comFINANCIALS Independent Auditor’s Report
TO THE MEMBERS OF SIG PLC
Overview of our audit approach
Audit scope
We performed an audit of the complete financial information of seven components and audit procedures on
specific balances for one further component.
The components where we performed full or specific audit procedures accounted for 89% of Gross Margin, 89% of
Revenue and 80% of Total assets.
Key audit matters
Going Concern
Impairment of Goodwill, Intangible assets, Property, Plant and Equipment (PPE), and Right-of-use assets (ROUA)
Supplier rebates
Classification of Other items in the income statement
Materiality
Overall group materiality of £1.8m which is based on 0.5% of Gross Margin
An overview of the scope of the parent company and group audits
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for
each company within the group. Taken together, this enables us to form an opinion on the consolidated financial statements. We consider
size, risk profile, the organisation of the group and effectiveness of group-wide controls, changes in the business environment and other
factors such as recent Internal audit results when assessing the level of work to be performed at each company.
In assessing the risk of material misstatement to the group financial statements, and to ensure we had adequate quantitative coverage
of significant accounts in the financial statements, we selected 8 components covering entities within the United Kingdom (including the
parent company), France, Germany, Poland and Ireland which represent the principal countries within which the group operates.
Of the 8 components selected, we performed an audit of the complete financial information of 7 components (“full scope components”)
which were selected based on their size or risk characteristics. For the remaining component (“specific scope component”), we performed
audit procedures on specific accounts within that component that we considered had the potential for the greatest impact on the
significant accounts in the financial statements either because of the size of these accounts or their risk profile.
The reporting components where we performed audit procedures accounted for 89% (2019: 94%) of the group’s Gross Margin, being the
basis for our materiality, 89% (2019: 94%) of the group’s Revenue, 97% of the group’s Underlying Loss Before Tax (2019: 90% of the group’s
Underlying Profit Before Tax), and 80% (2019: 89%) of the group’s Total Assets. For the current year, the full scope components contributed
85% (2019: 82%) of the group’s Gross Margin, 85% (2019: 82%) of the group’s Revenue, 96% of the group’s Underlying Loss Before Tax
(2019: 75% of the group’s Underlying Profit Before Tax), and 79% (2019: 77%) of the group’s Total Assets. The specific scope component
(2019: 3 components) contributed 4% (2019: 12%) of the group’s Gross Margin, 4% (2019: 12%) of the group’s Revenue, 1% of the group’s
Underlying Loss Before Tax (2019: 15% of the group’s Underlying Profit Before Tax), and 1% (2019: 12%) of the group’s Total Assets. The
audit scope of these components may not have included testing of all significant accounts of the component but will have contributed to
the coverage of significant accounts tested for the group.
With respect to the remaining 39 components that together represent 11% of the group’s Gross Margin, none are individually greater
than 3% of the group’s Gross Margin. For these other procedure components, we performed other procedures, including analytical
review, review of internal audit reports, testing of consolidation journals and intercompany eliminations and foreign currency translation
recalculations at the group level to respond to any potential risks of material misstatement to the group financial statements.
Changes from the prior year
Following the disposal of the Air Handling division in January 2020, 3 components are no longer part of the group (1 full scope and 2
specific scope components). Additionally, 2 other components that were specific scope in 2019 have been reduced to other procedures
scope in the current year and 1 full scope component has reduced to specific scope, due to reductions in their size relative to the group.
As a result of the Covid-19 outbreak and resulting lockdown restrictions in all of the countries where full or specific scope audit procedures
have been performed, we have modified our audit strategy to allow for the audit to be performed remotely at group level and also across
certain component locations. This approach was supported by the use of EY software collaboration platforms for the secure and timely
delivery of requested audit evidence. Inventory counts were performed in person across all component locations.
Involvement with component teams
In establishing our overall approach to the group audit, we determined the type of work that needed to be undertaken at each of the
components by us, as the primary audit engagement team, or by component auditors from other EY global network firms operating
under our instruction. Of the 7 full scope components, audit procedures were performed on 6 of these directly by the component audit
teams with oversight from the primary team. Testing on the 7th full scope component, the parent company, was completed directly by
the primary team. For the 1 specific scope component, the accounts in scope were determined by the primary team and performed by a
component team.
At the start of the audit, a group wide team briefing call was held, with representatives from all full and specific scope component teams
in attendance through video conferencing. Detailed instructions were issued to each team. Planned visits to full scope components were
cancelled due to travel restrictions as a result of the COVID-19 pandemic. In response, we increased the frequency of calls with each team
to discuss the audit approach and any issues arising from their work. We attended all component team closing meetings via video-call and
reviewed key audit papers on risk areas through a combination of direct access to audit files, and through electronic and video reviews.
This, together with the additional procedures performed at group level, gave us appropriate evidence for our opinion on the group financial
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SIG plc Annual Report and Accounts for the year ended 31 December 2020 statements.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we
identified. These matters included those which had the greatest effect on; the overall audit strategy, the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as
a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.
Risk
Our response to the risk
Impairment of Goodwill,
Intangible assets, Property,
Plant and Equipment (PPE), and
right-of-use assets (ROUA)
Refer to Accounting policies (page
142 and 150); and Notes 13 and
14 of the Consolidated Financial
Statements (pages 173 to 177)
The group’s balance sheet includes
goodwill, intangible assets, PPE
and ROUA totalling £444.5m at
31 December 2020 (2019: £515.1m).
In line with the requirements of
IAS 36: “Impairment of Assets”,
management test goodwill balances
annually for impairment. This
assessment includes intangible
assets, PPE and ROUA.
Impairment tests are performed
where indicators of impairment
exist. They can include areas
of estimation uncertainty and
judgement over the future
performance of the business for
example forecast future trading
results and cashflows and specific
assumptions such as discount rates
and long-term growth rates.
Changes to these assumptions
or adverse performance could
have a significant impact on the
available headroom and any
impairment that may be required.
Particularly sensitive are the CGUs;
UK Distribution, UK Exteriors, and
Lariviere.
There is also an associated risk in
the company only balance sheet
over the potential impairment
of investments in subsidiary
undertakings and the recoverability
of receivables due from subsidiary
undertakings.
Indicators of impairment
We assessed management’s impairment assessment including their
consideration of indicators for impairment. We considered whether
other indicators existed which were not identified by management.
Valuation model
We evaluated the identification of CGUs against the requirements
of IAS 36.
We understood the methodology behind, and tested, the model
used by management to perform the impairment test for each of
the relevant Cash Generating Units (“CGUs”) per the requirements
of IAS 36, Impairment of Assets. We tested the clerical accuracy of
the model and challenged the allocation of central overheads and
forecasting risk adjustments through understanding the rationale
for their inclusion and reviewing management’s calculations. We
identified and walked through key controls in the impairment
process identified by management.
We analysed the budget and medium-term plan, considering
historical accuracy of forecasting and the impact of Covid-19,
and compared to actual results and other forecast risk factors to
determine whether forecast cash flows are reliable.
Key assumptions in the valuation
We evaluated the key underlying assumptions within the value in use
calculation including the discount rates and long-term growth rates.
We inspected CGU business plans, focusing on the recovery from
Covid-19, and the impact on the turnaround of the UK Distribution
business. We challenged key features such as recovering market
share losses, maintaining margin, and corroborated the plans to
previous performance, underlying data and progress reporting of
initiatives.
We benchmarked the discount rate calculation and long-term
growth rates applied, using our internal valuation experts. We
considered if management’s assumptions are within an acceptable
range based on comparative market data and with reference to
independently calculated forecast risk premiums.
For CGUs with the lowest headroom levels we calculated the degree
to which the key inputs and assumptions would need to fluctuate
before an impairment was triggered and considered the likelihood of
this occurring. We performed our own sensitivities on the forecasts
for each CGU and determined whether adequate headroom
remained, with a focus on the assumptions regarding the capability
of the CGU to return to pre-COVID revenue and margin levels.
Impairment of SAP
We reviewed Management’s paper in relation to the impairment of
the £13.7m IT module asset. We challenged the initial assessment
that a residual asset value of £3.7m should remain and reviewed
management’s revised position.
We understood the change in management’s plan for the project as
discussed in board meetings, and reviewed the latest deployment
plans for France and Germany to identify the trigger event for the
impairment.
Continued overleaf
Key observations communicated
to the Audit Committee
Management performed an impairment
assessment at 30 June 2020 to take into account
the impact of Covid-19 on the forecasts. As
a result, impairment charges on goodwill and
intangible assets were recognised in relation to
the UK Distribution (£31.0m) and UK Exteriors
(£11.8m) CGUs.
At 31 December 2020, a further impairment
charge of £17.5m has been recognised against
the UK Distribution CGU, due to further
reductions in the forecast cash flows due to
slower recovery following the Covid-19 pandemic.
This brings the total impairment charge to CGUs
of £60.3m
We have challenged the input assumptions in
the forecasts, including revenue and margin
growth and concluded these are appropriate.
Group costs have been allocated to CGUs on a
reasonable basis. The discount rates applied in
the final model are within an acceptable range
determined by our internal valuation experts.
Goodwill relating to the UK Exteriors, and
Lariviere CGUs is sensitive to reasonably possible
changes in key assumptions. These sensitivities
have been appropriately disclosed in Note 13.
Impairment of SAP
Management’s decision to change the scope of
the IT module rollout, and timeline for it, results
in an impairment of the previously capitalised
assets. Following our challenge an additional
impairment of £3.7m was recognised.
Impairment of investments and recoverability
of intercompany in the parent company
accounts
The investment carrying value for the main UK
trading company could not be supported given
the impact of Covid-19, giving rise to a £106.3m
impairment identified by management.
Management’s assessment of the recoverability
of intercompany receivables from European
Investments Limited (£363.4m) and European
Holdings Limited (£137.7m) indicates that
the balances cannot be settled in full on
demand. Management continue to recognise
an appropriate level of expected credit loss
provision totalling £193.9m (2019: £190.6m).
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Risk
Our response to the risk
Key observations communicated
to the Audit Committee
The income recognised in the year and
the balance sheet position at year end are
appropriately recorded.
We consider the disclosures in the financial
statements to be appropriate.
Disclosures
We assessed the disclosures in the intangible assets note against
the requirements of IAS 36 Impairment of Assets, in particular
the requirement to disclose further sensitivities for CGUs where a
reasonably possible change in a key assumption would cause an
impairment.
We also assessed the disclosure within the key judgements and
estimation uncertainty section of the financial statements.
Impairment of investments and recoverability of
intercompany in the parent company accounts
We compared the forecasts and discount rates to our Goodwill
testing to confirm these had been consistently applied.
We compared the investment carrying value to the net assets of the
subsidiary and the discounted future cashflow forecasts. Where a
shortfall was noted we confirmed that an impairment was posted
through the parent company accounts.
We compared the intercompany receivables to the ability of the
counterparty to settle on demand. Where a shortfall in liquid assets
was identified we assessed the future cashflows and the discounting
of these to account for the timing of settlement
We completed these procedures at group level addressing 100% of
the risk through our testing.
We focused our audit procedures on the areas where management
apply judgement and estimation, where the processing is either
manual or more complex and on suppliers where the year-end
rebate value is high due to non-coterminous year ends.
We performed walkthroughs to understand the key processes used
to record supplier rebate transactions and identified key controls.
We performed analytical reviews to understand unusual movements
in income statement and balance sheet accounts period on period,
including ageing analysis.
We selected a sample of suppliers in order to obtain independent
confirmations to confirm key terms, income and year end receivable.
We reconciled income recognised in the period, for the sample
of suppliers, based on agreed arrangement terms, income and
receivable as confirmed by the supplier. Using confirmed amounts,
we ensured the appropriate rebate tier was applied.
Where third party vendor confirmations could not be obtained for
the sample, we:
■ Obtained and reviewed the agreement signed by both parties.
■ Validated the purchase volumes used in the calculation of
income through sample testing to supporting documentation.
■ Recalculated the year-end rebate receivable and income
recognised in the year based on the validated volumes and the
terms of the signed agreement.
For new agreements, or amendments to existing agreements, signed
in the year, we obtained copies of the agreements and reviewed
management’s delegation of authority to confirm that these were
approved in line with group’s policy.
Using data extracted from the accounting system, we tested
the appropriateness of a sample of journal entries and other
adjustments to supplier rebate accounts in the balance sheet and
income statement.
We reviewed the appropriateness of the critical accounting
judgements and key sources of estimation uncertainty disclosure
in respect of supplier rebate amounts recorded in the income
statement and balance sheet.
We performed the above audit procedures over this risk area at
7 full and specific scope locations, which covered 96% of the risk
amount associated to supplier rebate income and 95% of the risk
amount associated to supplier rebates receivable.
Supplier Rebates
Refer to Accounting policies (page
144); and Note 17 & 18 of the
Consolidated Financial Statements
(pages 179 to 181)
The group recognised supplier
rebate income from continuing
operations in the year of £198.5m
(2019: £245.2m) with a receivable
balance as at 31 December 2020
of £66.6m (2019: £80.4m).
The terms of rebate agreements
with suppliers can be complex and
varied. Judgement and Estimation
uncertainty is present in relation
to supplier rebates, in particular
where the amounts receivable are
tiered based on purchase volumes
or where volumes are estimated,
for example where arrangements
span the year end. There is
opportunity through management
override of controls or error to
overstate the balance of supplier
rebates recognised.
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SIG plc Annual Report and Accounts for the year ended 31 December 2020 Risk
Our response to the risk
Key observations communicated
to the Audit Committee
Classification of Other items in
the income statement
Refer to Accounting policies
(page 143); and Note 2b of the
Consolidated Financial Statements
(page 159)
Other items in 2020 totals
£126.0m (2019: £130.4m). Key
components include; impairment
charges £76.1m, onerous contract
provisions £13.2m, finance costs
£11.6m, refinancing costs £7.4m
and restructuring costs £6.7m.
Other items are not defined by
IFRS and therefore judgement
is required in determining
the appropriateness of such
classification guided by IAS 1.
Consistency in items treated as
separately disclosed is important
to maintain comparability of
reporting year-on-year.
Underlying profitability is a key
performance measure of the
group. There exists a risk of
incorrect classification of Other
items through management
override of controls and bias in
judgement.
We performed walkthroughs to understand the key processes used
to record Other items and identify key controls.
Other items are recorded in line with the group’s
policy and the guidance in IAS 1.
We reviewed management’s accounting policy disclosure in respect
of Other items classification in the income statement and challenged
the appropriateness of separately presenting these items within
Other items.
We obtained evidence for a sample of the Other items to
understand the nature of these items and whether these are
presented in line with the group’s accounting policy.
We have considered the consistency of SIG plc’s approach with
reference to Other items in the prior year.
We agree with management’s conclusion that
the refinancing of the Private Placement Notes
results in a modification and a loss of £11.6m has
been appropriately recorded due to changes in
the net present value of cashflows.
Following our challenge, management corrected
audit adjustments to Other items, including
additional impairment to IT assets (£3.7m) and
additional onerous contract provisions (£1.2m).
Where an item related to impairment charges testing was performed
in line with our response to the risk set out in the Key Audit Matter
relating to the impairment of goodwill, intangible assets, PPE and
ROUA on page 209.
Where an item related to onerous contract provisions, we agreed
future committed costs to signed agreements. We reviewed
management’s paper in relation to the IAS 37 onerous contract costs
and performed a sample test on the underlying costs, including
agreement to latest deployment plans for operating companies.
For finance costs included within Other items, we confirmed the
accounting treatment of the amendments to the RCF and PPN
(term length, interest rates, value) and considered whether they
met the definition of modifications to, or extinguishments of, the old
agreements, paying particular attention to the treatment of historic
debt issue costs and the calculation of any modification gain or loss.
We assessed the impact of the partial derecognition of the cash flow
hedge on the related $30m Private Placement Note.
Where refinancing costs were classified within Other items,
we obtained a listing of transaction costs associated with the
debt refinancing, challenged management’s cost allocation and
performed a sample test to confirm the appropriate classification of
the costs.
Where an item related to a restructuring project, we inspected the
build-up to ensure that the costs were:
■ Attributable to the restructuring project;
■ Incremental in nature, either directly or indirectly;
■ Qualify for recognition in the financial statements for the period;
■ Have been correctly categorised as a cost or as Other items in
line with the accounting policy.
We performed the above audit procedures over this risk area at
all full and specific scope locations and additional testing by the
primary team to cover 100% of the balance.
In the prior year, our auditor’s report included key audit matters in relation to the Independent review by PwC and cash cut-off. In the
current year, these were no longer identified as key audit matters as they are no longer deemed to have the greatest effect on overall audit
strategy, the allocation of resources or directing the efforts of the engagement team. This was due to the experience gained from prior
audits and the resolution, and conclusion, of the independent review by PwC.
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Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit
and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the
economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit
procedures.
We determined materiality for the group to be £1.8m (2019: £2.0m). This is based on 0.5% of Gross Margin (2019: 5% of adjusted
underlying Profit before tax), which provides a materiality value comparable to both those used in the previous year and forecast to be
used in future years when the group’s turnaround is expected to complete. We believe that this basis provides one of the most relevant
performance measures to the stakeholders of the group and is therefore an appropriate basis for materiality. The reduction in materiality
from the prior year is primarily due to the negative impact of Covid-19 on the profitability of the business in 2020 and the sale of the Air
Handling component in the year.
We determined materiality for the parent company to be £1.8m (2019: £2.0m), which is 1% of Equity, capped at the materiality of the group.
During the course of our audit, we reassessed initial materiality based on the final Gross Margin outturn. This indicated a materiality higher
than the prior year, which does not appropriately reflect the increased volatility in the financial performance arising due to the Covid-19
pandemic. As a result, we have maintained our materiality at the planned, and lower, amount above.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the group’s overall control environment, our judgement was
that performance materiality was 50% (2019: 50%) of our planning materiality, namely £0.9m (2019: £1.0m). We have set performance
materiality at this percentage due our assessment of the control environment, the level of misstatements in the prior year and the outcome
of our risk assessment.
Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts is undertaken
based on a percentage of total performance materiality. The performance materiality set for each component is based on the relative scale
and risk of the component to the group as a whole and our assessment of the risk of misstatement at that component. In the current year,
the range of performance materiality allocated to components was £0.2m to £0.4m (2019: £0.2m to £0.4m).
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £0.1m (2019: £0.1m),
which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative
grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other
relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report, set out on pages 1 to 133, other than the financial
statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this
report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If
we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material
misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
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SIG plc Annual Report and Accounts for the year ended 31 December 2020 Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies
Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
■ 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
■ the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the
audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in
our opinion:
■ 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
■ the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with
the accounting records and returns; or
■ certain disclosures of directors’ remuneration specified by law are not made; or
■ we have not received all the information and explanations we require for our audit
Corporate Governance Statement
The Listing Rules require us to review the directors’ statement in relation to going concern, longer-term viability and that part of the
Corporate Governance Statement relating to the group and company’s compliance with the provisions of the UK Corporate Governance
Statement specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance
Statement is materially consistent with the financial statements or our knowledge obtained during the audit:
■ Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material
uncertainties identified set out on page 28;
■ Directors’ explanation as to its assessment of the company’s prospects, the period this assessment covers and why the period is
appropriate set out on page 27;
■ Directors’ statement on fair, balanced and understandable set out on page 106;
■ Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 81;
■ The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on
page 81; and;
■ The section describing the work of the audit committee set out on pages 96 to 106.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 132 the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group and parent company’s ability to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined below, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is
higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or
intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities, including
fraud is detailed below.
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However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the
company and management.
■ We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and determined that the most
significant frameworks, which are directly relevant to specific assertions in the financial statements, are those that relate to the reporting
framework (IFRS, the Companies Act 2006 and UK Corporate Governance Code) and the relevant tax compliance regulations in the
jurisdictions in which the group operates.
■ We understood how SIG plc is complying with those frameworks by making enquiries of management, internal audit, those responsible
for legal and compliance procedures and the Company Secretary. We corroborated our enquiries through our review of Board minutes
and papers provided to the Audit Committee as well as observation in Audit Committee meetings, as well as consideration of the results
of our audit procedures across the group.
■ We assessed the susceptibility of the group’s financial statements to material misstatement, including how fraud might occur by
meeting with management from various parts of the business to understand where it considered there was a susceptibility to fraud.
We also considered performance targets and their propensity to influence efforts made by management to manage earnings. We
considered the programmes and controls that the group has established to address risks identified, or that otherwise prevent, deter
and detect fraud; and how senior management monitors those programmes and controls. Where the risk was considered to be higher,
we performed audit procedures to address each identified fraud risk. These procedures included testing manual journals and were
designed to provide reasonable assurance that the financial statements were free from fraud and error.
■ Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our
procedures involved journal entry testing, with a focus on manual consolidation journals, and journals indicating large or unusual
transactions based on our understanding of the business; enquiries of legal counsel, group management, internal audit, subsidiary
management at all full and specific scope components; and focused testing, including the procedures referred to in the key audit
matters section above. In addition, we completed procedures to conclude on the compliance of the disclosures in the Annual Report
and Accounts with the requirements of the relevant accounting standards, UK legislation and the UK Corporate Governance Code.
■ Specific enquiries were made with the component teams to confirm any non-compliance with laws and regulations and this was
reported through their audit deliverables based on the procedures detailed in the previous paragraph. Further, the group team
communicated any instances of non-compliance with laws and regulations to component teams through regular interactions with local
EY teams. There were no significant instances of non-compliance with laws and regulations.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website
at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Other matters we are required to address
■ Following the recommendation from the audit committee, we were appointed by the company on 4 July 2018 to audit the financial
statements for the year ending 31 December 2018 and subsequent financial periods.
■ The period of total uninterrupted engagement including previous renewals and reappointments is three years, covering the years
ending 31 December 2018 to 31 December 2020.
■ Non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent company and we remain
independent of the group and the parent company in conducting the audit.
■ The audit opinion is consistent with the report to the audit committee
Use of our report
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.
Colin Brown
(Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
25 March 2021
Notes:
1. The maintenance and integrity of the SIG plc web site is the responsibility of the directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to
the financial statements since they were initially presented on the web site.
2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in
other jurisdictions.
214
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Five-Year Summary
Statutory basis
Revenue
Operating (loss)/profit
Finance income
Finance costs
(Loss)/profit before tax
(Loss)/profit after tax
(Loss)/earnings per share
Total dividend per share
Underlying basis*
Revenue
Operating profit/(loss)
Finance income
Finance costs
Profit/(loss) before tax
Profit/(loss) after tax
(Loss)/earnings per share
Total
2016
£m
2,845.2
(96.0)
1.7
(17.0)
(111.3)
(122.9)
(20.9)
3.66
Underlying
2016
£m
2,532.0
81.1
1.2
(14.8)
67.4
49.3
8.3
Total
2017
£m
2,878.4
(36.3)
0.6
(19.0)
(54.7)
(59.2)
(10.2)
3.75
Underlying
2017
£m
2,714.3
85.3
0.5
(16.6)
69.2
51.5
8.7
Total
2018^
£m
2,431.8
26.2
0.5
(16.4)
10.3
4.1
3.0
3.75
Underlying
2018^
£m
2,347.2
70.4
0.5
(15.9)
55.0
40.1
6.8
Total
2019^
£m
2,160.6
(87.9)
0.5
(25.3)
(112.7)
(124.1)
(21.0)
1.25
Total
2020^
£m
1,874.5
(167.7)
0.7
(35.3)
(202.3)
(208.9)
(23.9)
0.0
Underlying
2019^
£m
Underlying
2020^
£m
2,143.0
42.5
0.5
(25.3)
17.7
1.4
0.2
1,872.7
(53.3)
0.7
(23.7)
(76.3)
(87.0)
(10.0)
^ Results for 2020, 2019 and 2018 reflect continuing operations only with the Air Handling business classified as a discontinued operation in these periods. See Note 12 for further
information.
* Underlying figures are stated before the amortisation of acquired intangibles, impairment charges, profits and losses on agreed sale or closure of non-core businesses and associated
impairment charges, net operating losses attributable to businesses identified as non-core, net restructuring costs, other specific items, unwinding of provision discounting, fair value
gains and losses on derivative financial instruments, the taxation effect of Other items and the effect of changes in taxation rates.
All underlying numbers are stated excluding the trading results attributable to businesses identified as non-core.
215
Stock code: SHI www.sigplc.comFINANCIALS Company Statement of Comprehensive Income
FOR THE YEAR ENDED 31 DECEMBER 2020
Loss 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)/income
Total comprehensive expense
Attributable to:
Equity holders of the Company
2020
£m
(164.6)
(0.5)
(0.7)
(1.2)
(165.8)
2019
£m
(259.8)
0.4
0.9
1.3
(258.5)
(165.8)
(258.5)
The accompanying Statement of Significant Accounting Policies and Notes to the Company Financial Statements are an integral part of this
Company Statement of Comprehensive Income.
217
Stock code: SHI www.sigplc.comFINANCIALS Company Balance Sheet
AS AT 31 DECEMBER 2020
Fixed assets
Investments
Tangible fixed assets
Right-of-use assets
Intangible assets
Current assets
Debtors - due within one year
Debtors - due after more than one year
Cash at bank and in hand
Current liabilities
Creditors: amounts falling due within one year
Provisions: amounts falling due within one year
Net current assets
Total assets less current liabilities
Creditors: amounts falling due after one year
Provisions: amounts falling due after one year
Net assets
Capital and reserves
Called up share capital
Share premium account
Treasury shares reserve
Merger reserve
Capital redemption reserve
Share option reserve
Exchange reserve
Cash flow hedging reserve
Cost of hedging reserve
Retained profits
Shareholders' funds
Note
5
6
11
7
8
8
9
12
10
12
14
14
14
14
14
14
14
14
14
14
2020
£m
267.6
0.3
1.4
1.0
270.3
405.7
–
174.0
579.7
235.6
4.3
239.9
339.8
610.1
213.9
6.2
390.0
118.2
447.7
(0.2)
104.0
0.3
2.0
(0.2)
2.1
0.1
(284.0)
390.0
2019
£m
376.8
0.4
1.6
11.6
390.4
539.3
1.7
9.1
550.1
533.1
–
533.1
17.0
407.4
3.5
0.2
403.7
59.2
447.3
–
11.5
0.3
1.8
(0.2)
3.5
(0.1)
(119.6)
403.7
The accompanying Statement of Significant Accounting Policies and Notes to the Company Financial Statements are an integral part of this
Company Balance Sheet.
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 loss after tax for the financial year ended 31 December 2020 of £164.6m (2019: £259.8m loss).
The Financial Statements were approved by the Board of Directors on 25 March 2021 and signed on its behalf by:
Steve Francis
Director
Registered in England: 00998314
Ian Ashton
Director
218
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Company Statement of Changes in Equity
FOR THE YEAR ENDED 31 DECEMBER 2020
Called
up share
capital
£m
59.2
–
Share
premium
account
£m
447.3
–
–
–
–
–
–
–
–
–
–
–
–
59.2
–
–
447.3
–
–
–
–
–
–
–
–
–
Treasury
shares
reserve
£m
–
–
–
–
–
–
–
–
–
–
–
–
(0.2)
–
–
–
(10.2)
–
–
–
11.5
–
–
–
–
–
59.0
118.2
0.4
447.7
–
(0.2)
92.5
104.0
At 1 January 2019
Loss after tax
Total comprehensive
income/(expense)
Total comprehensive
income
Transfer of merger
reserve
Transfer of hedging
reserves
Credit to share option
reserve
Dividends paid to equity
holders of the Company
At 31 December 2019
Loss after tax
Total comprehensive
income/(expense)
Total comprehensive
income/(expense)
Transfer of unallocated
treasury shares
Credit to share option
reserve
Share capital issued in
the year
At 31 December 2020
Merger
reserve
£m
21.7
–
Capital
redemption
reserve
£m
0.3
–
Share
option
reserve
£m
1.7
–
Exchange
reserve
£m
(0.2)
–
Cash
flow
hedging
reserve
£m
–
–
Cost of
hedging
reserve
£m
–
–
Retained
profits/
(losses)
£m
Total
Equity
£m
154.3 684.3
(259.8)
(259.8)
–
–
–
–
–
–
0.3
–
–
–
–
–
–
0.3
–
–
–
–
0.1
–
1.8
–
–
–
–
0.2
–
2.0
–
–
–
–
–
2.2
(0.9)
–
1.3
2.2
(0.9)
(259.8)
(258.5)
–
–
10.2
1.3
0.8
(2.1)
–
–
–
–
–
0.1
–
(0.2)
–
–
3.5
–
–
(0.1)
–
(22.2)
(119.6)
(164.6)
(22.2)
403.7
(164.6)
–
–
–
–
–
(0.2)
(1.4)
0.2
–
(1.2)
(1.4)
0.2
(164.6)
(165.8)
–
–
–
2.1
–
–
0.2
–
–
0.2
–
0.1
–
151.9
(284.0) 390.0
There was no movement in the capital redemption reserve and exchange reserve in the current or prior year. During 2020 the Company
allotted no shares (2019: no shares) from the exercise of share options.
Amounts were reclassified during the prior year to clarify the effects of hedging between retained (losses)/profits, the cash flow hedging
reserve and the cost of hedging reserve.
The accompanying Statement of Significant Accounting Policies and Notes to the Company Financial Statements are an integral part of this
Company Statement of Changes in Equity.
219
Stock code: SHI www.sigplc.comFINANCIALS 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. They 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
147). 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
Consolidated Financial Statements on page 147.
The separate Financial Statements have been prepared in accordance with United Kingdom Accounting Standards, including Financial
Reporting Standard 101, “Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice) as applied in
accordance with the provisions of the Companies Act 2006. FRS 101 sets out a reduced disclosure framework for a qualifying entity that
would otherwise apply the recognition, measurement and disclosure requirements of international accounting standards in conformity
with the requirements of the Companies Act 2006. The Company is a qualifying entity for the purposes of FRS 101.
Going concern
The Company closely monitors its funding position throughout the year, including monitoring compliance with covenants and available
facilities to ensure it has sufficient headroom to fund operations.
On 18 June 2020, the Group agreed amended debt facility agreements in respect of its Revolving Credit Facility (RCF) and private placement
notes, with key changes as set out in Note 19 of the Consolidated Financial Statements. On 10 July 2020 the Group also completed the
successful raising of £165m of equity through a firm placing and placing and open offer, in order to reduce net debt and strengthen the
Group’s balance sheet.
Under the June 2020 revised debt facility agreements the Group was subject to covenant testing as follows:
■ Leverage (net debt/EBITDA) and interest cover (EBITA/interest) not tested until March 2022, after which tested every quarter, the tests
being applied to the prior 12 months;
■ Until 28 February 2022 the Group to ensure that Consolidated Net Debt (CND) does not exceed £225m for each quarterly test date in
2021 (2020: £125m);
■ Minimum Liquidity (available cash and undrawn revolving credit facility commitments) of £40m at all times; and
■ Consolidated Net Worth (CNW) must at all times not be less than £250m.
The Group was in compliance with these covenants at 31 December 2020.
Whilst the Group has significant available liquidity, and on the basis of current forecasts is expected to remain in compliance with all banking
covenants throughout the forecast period to 31 March 2022, on 1 March 2021 the Group agreed with its lending banks and private placement
noteholders to amend certain financial covenants to better align the tests and to provide additional headroom on the interest cover covenant
under stress test scenarios from March 2022. The amended covenants under the revised agreements are as follows:
■ The interest cover testing does not start until June 2022 and is at lower levels than previously until December 2022;
■ The leverage covenant threshold is now slightly lower than previously at March 2022 and June 2022;
■ The Consolidated Net Debt threshold is lowered to £200m and extended to December 2022; and
■ No change to the CNW or Minimum Liquidity covenants.
In arriving at their opinion on going concern, the Directors have considered the Group’s forecasts for the period to 31 March 2022, and
specifically the ability to meet the covenant tests above. These forecasts reflect the assumption of more normal trading levels since
the worst of the Covid-19 impact, as well as the expected positive impact of the strategic actions being undertaken to improve future
performance under the “Return to Growth” strategy.
Management have continued to manage liquidity very closely, such that cashflow performance was better than initial expectations
throughout 2020. The base forecasts indicate that the Group will be able to operate within the covenants for the forecast period to 31
March 2022.
The Directors have considered the following principal risks and uncertainties that could potentially impact the Group’s ability to fund its
future activities and adhere to its future banking covenants, including:
■ A decline in market conditions resulting in lower than forecast sales;
■ Implementation of the new strategy taking longer than anticipated to deliver forecast increases in revenue and profit;
■ A further wave of the Covid-19 pandemic; and
■ The terms of the Group’s revised lending arrangements and whether these could limit investment in growth opportunities.
The forecasts on which the going concern assessment is based have been subject to sensitivity analysis and stress testing to assess
the impact of the above risks. The Group has considered a plausible downside scenario, factoring in a reduction in sales volumes and a
reduction in gross margin, offset by reductions in direct expenditure and discretionary operating costs. The results showed that under this
scenario the Group will still be able to operate within the covenants with adequate headroom for the forecast period to 31 March 2022.
220
SIG plc Annual Report and Accounts for the year ended 31 December 2020 In considering the impact of these stress test scenarios the Directors have also reviewed realistic additional mitigating actions over and
above those included in the downside scenario forecast that could be taken to avoid or reduce the impact or occurrence of the underlying
risks. These include further reductions to operating costs, cutting discretionary capital expenditure and disposing of non-core assets.
On consideration of the above, the Directors believe that the Company has adequate resources to continue in operational existence for
the forecast period to 31 March 2022 and the Directors therefore consider it is appropriate to adopt the going concern basis in preparing
the 2020 financial statements.
New standards, interpretations and amendments adopted
A number of amendments and interpretations apply for the first time in 2020, but do not have an impact on the financial statements of
the Company. The Company has not early adopted any standards, interpretations or amendments that have been issued but are not yet
effective.
Exemptions applied in accordance with FRS 101
The following exemptions from the requirements of IFRS have been applied in the preparation of these Financial Statements, in accordance
with FRS 101:
■ the requirements of paragraphs 45(b) and 46 to 52 of IFRS 2 “Share-based Payment”
■ the requirements of IFRS 7 “Financial Instruments: Disclosures”
■ the requirements of paragraphs 91 to 99 of IFRS 13 ”Fair Value Measurement”
■ the requirement in paragraph 38 of IAS 1 “Presentation of Financial Statements” to present comparative information in respect of:
■ paragraph 79(a)(iv) of IAS 1 and
■ paragraph 73(e) of IAS 16 “Property, Plant and Equipment”
■ 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”
■ the requirements of IAS 7 “Statement of Cash Flows”
■ the requirements of paragraphs 30 and 31 of IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”
■ the requirements of paragraph 17 of IAS 24 “Related Party Disclosures”
■ the requirements in IAS 24 “Related Party Disclosures” to disclose related party transactions entered into between two or more
members of a group
■ 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”.
Share-based payments
The accounting policy for share-based payments (IFRS 2) is consistent with that of the Group as detailed on page 145.
Derivative financial instruments
The accounting policy for derivative financial instruments is consistent with that of the Group as detailed on page 148.
Financial assets and liabilities
The accounting policy for financial assets and liabilities is consistent with that of the Group as detailed on pages 147. The Company has
assessed on a forward looking basis the expected credit losses associated with amounts owed by subsidiary undertakings. The impairment
methodology applied depends on the ability to repay amounts repayable on demand and whether there has been any significant change in
credit risk.
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 145.
Intangible assets
The accounting policy for tangible fixed assets is consistent with that of the Group as detailed on page 145.
Leases
The accounting policy for leases is consistent with that of the Group as detailed on page 146.
Foreign currency
The accounting policy for foreign currency is consistent with that of the Group as detailed on page 142.
Taxation
The accounting policy for taxation is consistent with that of the Group as detailed on page 144.
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.
221
Stock code: SHI www.sigplc.comFINANCIALS Company Statement of
Significant Accounting Policies
CRITICAL ACCOUNTING JUDGEMENTS 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 judgements (other
than those involving estimates) that have a significant impact on the amounts recognised and to make estimates and assumptions about
the carrying amounts of assets and liabilities that are not readily apparent from other sources.
The following are the critical judgements that the Directors have made in the process of applying the Company’s accounting policies and
that have had a significant effect on the amounts recognised in the Financial Statements. The judgements involving estimations are dealt
with separately below.
Amendments to financing arrangements
On 18 June 2020 the Company amended the terms of its financing arrangements, involving both the Revolving Credit Facility (RCF) and
private placement notes (PPNs). The Company has assessed whether the amendments to the facilities represents either a modification of
the existing arrangement or an extinguishment of the previous arrangement and refinancing in accordance with IFRS 9.
The Company has determined the amendments to the RCF to be an extinguishment and new facility, as the present value of the estimated
future cash flows discounted at the loan’s original effective interest rate (EIR) differed by more than 10% compared to the previous cash
flows. The balance of unamortised arrangement fees as at 18 June 2020 of £0.3m has therefore been written off in full through finance
costs, and the fees payable in relation to the new agreement are being amortised over the new term of the facility.
The Company has determined that amendments to the terms of the PPNs (see Note 19 of the Consolidated Financial Statements for
further details) meet the criteria to be accounted for as a modification of the existing arrangements, with the present value of future cash
flows considered separately for each PPN, discounted at the original effective interest rate for the relevant PPN. A loss on modification of
£11.3m has been recognised, reflecting the difference in the present value of future cash flows discounted at each loan note’s original EIR,
which has been recognised within finance costs within Other items. This will unwind over the remaining term of the PPNs, resulting in the
finance cost recognised in future periods being lower than the actual amounts paid. The existing prepaid arrangement fees of £0.3m at the
date of the new agreement will continue to be amortised over the original term.
Impairment of intangible assets in relation to SAP 1HANA implementation
As disclosed in the 2019 Annual Report and Accounts, the project to implement SAP 1HANA in France and Germany was paused in April
2020 in light of the Covid-19 situation and the change in senior management. A decision has been taken to recommence the project in
2021, but with a change in scope and direction and a locally managed implementation. Costs incurred to date had been recognised in
the Company financial statements (to be allocated appropriately once the project went live), and costs recognised on the balance sheet
as at the date of pause have been reviewed to assess whether they continue to have any future economic benefit in relation to the
implementation going forward. Following this review, an impairment of £13.7m has been recognised with no remaining asset value carried
forward. An onerous contract provision of £9.6m has also been recognised in relation to future contracted licence fees which the Company
believes have no future economic benefit. Both these items involved significant management judgement in terms of the level of future
economic benefit to be derived in relation to the future project.
The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying value of the assets and
liabilities recognised by the Company within the next financial year are detailed below.
222
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Impairment of fixed asset investments
Determining whether the Company’s investments are impaired requires an estimation of the investments’ value in use. The key estimates
made in the value in use calculation in relation to trading subsidiaries are those regarding discount rates, sales growth rates, gross margin
and long term operating profit growth. The Directors estimate discount rates using pre-tax rates that reflect current market assessments of
the time value of money for the Group.
The Company performs investment impairment reviews by forecasting cash flows based upon the following year’s budget as a base, taking
into account current economic conditions. The carrying amount of investments in subsidiaries at the balance sheet date was £267.6m
(2019: £376.8m) after an impairment loss recognised in 2020 of £109.3m (2019: £66.8m). Of the £267.6m net book value at 31 December
2020, £263.7m relates to the Company’s investment in SIG Trading Limited, the largest UK trading subsidiary, and therefore assumptions
regarding sales, gross margin and operating profit growth of this subsidiary are considered to be the key areas of estimation in the
impairment review process. At 31 December 2020, a review of the future operating cashflows of SIG Trading Limited using the following
year’s budget as a base indicated that the carrying value of the investment was not recoverable, resulting in the impairment charge
recognised.
Whilst the Directors consider the assumptions used in the impairment review to be realistic, if actual results are different from expectations
then it is possible that the value of the investment included in the Balance Sheet could become impaired further. Further details on the
assumptions and sensitivities in relation to the forecast future cash flows of this subsidiary are provided in Note 13 of the Consolidated
Financial Statements.
Impairment of amounts owed by subsidiary undertakings
At 31 December 2020 the Company has recognised amounts owed by subsidiary undertakings of £402.5m (2019: £537.0m). The Company
recognises an allowance for expected credit losses (ECLs) in relation to amounts owed by subsidiary undertakings based on the ability to
repay amounts repayable on demand and whether there has been any significant change in credit risk. An ECL provision of £193.9m has
been recognised at 31 December 2020 (2019: £190.6m) based on estimates regarding the future cash flows from subsidiaries and taking
account of the time value of money. Changes in the economic environment or circumstances specific to individual subsidiaries could have
an impact on recoverability of amounts included on the Company Balance Sheet at 31 December 2020 and level of ECL provision required
in the future.
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. Deferred tax assets have not been recognised at 31 December 2020 on the basis that the realisation of their future
economic benefit is uncertain.
223
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Company Financial Statements
1. Loss 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 loss after tax for the financial year ended 31 December 2020 of £164.6m (2019: £259.8m loss).
The Auditor's remuneration for audit services to the Company was £0.6m (2019: £0.6m).
2. Share-based payments
The Company had four share-based payment schemes in existence during the year ended 31 December 2020. The Company recognised a
total credit to equity of £0.2m (2019: credit of £0.2m) in the year relating to share-based payment transactions. Details of each of the share-
based payment schemes can be found in Note 9 to the Consolidated Financial Statements on pages 165 to 167.
3. Dividends
No interim dividend was paid during 2020 (2019: 1.25p per ordinary share). The Directors are not proposing a final dividend for the year
ended 31 December 2020 (2019: no dividend). Total dividends paid during the year was £nil (2019: £22.2m). No dividends have been paid
between 31 December 2020 and the date of signing the Financial Statements.
See Note 14 for further details on distributable reserves.
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
Additions
At 31 December
Accumulated impairment charges
At 1 January
Impairment charge
At 31 December
Net book value
At 31 December
At 1 January
2020
£m
11.2
1.1
–
0.3
12.6
2019
£m
5.3
1.0
(0.2)
0.3
6.4
2020
Number
69
2019
Number
56
2020
£m
650.8
0.1
650.9
274.0
109.3
383.3
267.6
376.8
2019
£m
650.4
0.4
650.8
207.2
66.8
274.0
376.8
443.2
Details of the Company's subsidiaries are shown on pages 232 and 233.
The £0.1m (2019: £0.4m) addition of investments in the year relates to the share based payment charge settled by SIG plc but relating to
other subsidiary companies.
Of the £267.6m (2019: £376.8m) investment net book value, £263.7m (2019: £370.0m) relates to SIG Trading Limited, the largest UK trading
subsidiary. At 31 December 2020, a review of the future operating cashflows of SIG Trading Limited using the following year's budget as
a base, taking into account current economic conditions, indicated that the carrying value of the investment was not recoverable and an
impairment charge of £106.3m has been recognised. £3.0m impairment has also been recognised in relation to the Company's investment in
Freeman Group Limited following the settlement of intercompany balances and distribution of remaining reserves during the year.
A more detailed sensitivity analysis of the Group's significant CGUs is given in Note 13 of the Consolidated Financial Statements.
224
SIG plc Annual Report and Accounts for the year ended 31 December 2020 6. Tangible fixed assets
The movement in the year was as follows:
Cost
At 1 January 2019
Reclassifications
At 31 December 2019 and 2020
Depreciation
At 1 January 2019
Reclassifications
Charge for the year
At 31 December 2019
Charge for the year
At 31 December 2020
Net book value
At 31 December 2020
At 31 December 2019
Freehold
land and
buildings
£m
Leasehold
improvements
£m
Plant and
machinery
£m
Total
£m
0.1
–
0.1
0.1
–
–
0.1
–
0.1
–
–
0.5
–
0.5
–
–
0.1
0.1
0.1
0.2
0.3
0.4
3.1
(2.5)
0.6
0.7
(0.1)
–
0.6
–
0.6
–
–
3.7
(2.5)
1.2
0.8
(0.1)
0.1
0.8
0.1
0.9
0.3
0.4
In 2019 software costs previously included within plant and machinery with cost of £2.5m and accumulated depreciation of £0.1m at
31 December 2018 were reclassified as intangible assets during the year (see Note 7).
7. Intangible fixed assets
The movement in the year was as follows:
Cost
At 1 January 2019
Reclassifications (Note 6)
Additions
At 31 December 2019
Additions
Disposals
At 31 December 2020
Depreciation
At 1 January 2019
Reclassifications (Note 6)
Charge for the year
At 31 December 2019
Charge for the year
Disposals
Impairment
At 31 December 2020
Net book value
At 31 December 2020
At 31 December 2019
Computer
software
£m
–
2.5
10.0
12.5
5.1
(2.3)
15.3
–
0.1
0.8
0.9
0.9
(1.3)
13.8
14.3
1.0
11.6
Total
£m
–
2.5
10.0
12.5
5.1
(2.3)
15.3
–
0.1
0.8
0.9
0.9
(1.3)
13.8
14.3
1.0
11.6
Included within computer software additions are assets in the course of construction of £nil (2019: £9.4m).
The impairment charge in relation to software relates mainly to the impairment of SAP implementation costs following the period of pause
and change in scope of the project.
225
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Company Financial Statements
8. Debtors
Amounts owed by subsidiary undertakings
Derivative financial instruments
Current tax asset
Prepayments
Debtors - due within one year
Derivative financial instruments
Debtors - due after more than one year
Total
31 December
2020
£m
402.5
–
–
3.2
405.7
–
–
405.7
31 December
2019
£m
537.0
0.9
0.4
1.0
539.3
1.7
1.7
541.0
The Group recognises an allowance for expected credit losses (ECLs) in relation to amounts owed by subsidiary undertakings based on
the ability to repay amounts repayable on demand and whether there has been any significant change in credit risk. An ECL provision
of £193.9m (2019: £190.6m) has been recognised at 31 December 2020 based on estimates regarding the future cash flows from
subsidiaries and taking account of the time value of money.
Amounts owed by subsidiary undertakings are measured at amortised cost and bear interest at rates between 0.0% and 8.0%.
9. Creditors: amounts falling due within one year
Lease liabilities
Private placement notes (Note 10)
Bank loans
Bank overdrafts
Amounts owed to subsidiary undertakings
Derivative financial instruments
Accruals and deferred income
Total
31 December
2020
£m
0.2
–
–
–
219.3
0.5
15.6
235.6
31 December
2019
£m
0.2
175.5
99.5
12.7
218.4
0.2
26.6
533.1
All of the Company's bank loans and overdrafts are unsecured. The bank loans are guaranteed by certain companies of the Group.
The private placement notes were classified as a current liability at 31 December 2019. The terms of the private placement notes were
amended on 19 June 2020 and have been classified in accordance with the revised terms at 31 December 2020. See Note 10 for further
details.
On 18 June 2020 the Group amended the terms of its financing arrangements. The bank loan balance at 31 December 2019 related to the
amount drawn under the Revolving Credit Facility ('RCF'). As part of the amendments to the financing arrangements the amount drawn on
the RCF on 18 June 2020 of £70.0m was converted into a term facility due for repayment on 31 May 2023 and a working capital facility of
£25.0m. The £70.0m term facility is included within non-current liabilities (see Note 10). The amount drawn under the working capital facility
at 31 December 2020 is £nil.
Amounts owed to subsidiary undertakings are measured at amortised cost, are unsecured and bear interest at rates between 0.0% and 4.0%.
226
SIG plc Annual Report and Accounts for the year ended 31 December 2020 10. Creditors: amounts falling due after one year
Lease liabilities
Private placement notes
Bank loans
Derivative financial instruments
Total
31 December
2020
£m
1.4
144.5
67.7
0.3
213.9
31 December
2019
£m
1.6
–
–
1.9
3.5
Amounts owed to subsidiary undertakings are measured at amortised cost, are unsecured and bear interest at rates between 0.0% and 4.0%.
Bank loan
As part of the amendments to the financing arrangements on 18 June 2020, the amount drawn on the RCF at that date of £70.0m was
converted into a term facility due for repayment on 31 May 2023 and a working capital facility of £25.0m. The £70.0m term facility is
included within non-current liabilities above, net of arrangement fees paid (of which £2.3m remains unamortised at 31 December 2020).
This has been accounted for as an extinguishment of the previous facility and new arrangement, therefore arrangement fees which were
being amortised over the term of the previous facility have been written off.
Private Placement Notes
On 18 June 2020 the Group concluded changes to its agreements with existing private placement notes holders with the following key
changes:
■ Repayment of €30m of notes previously due on 31 October 2020 and €20m of notes previously due on 31 October 2021 deferred to 31
May 2023;
■ £48.9m repaid on completion of the Group’s equity raise in July 2020, split across each of the individual notes on a pro-rata basis;
■ holders of the existing 2023 notes (due 31 October 2023) and 2026 notes (due 12 August 2026) granted a put option for those notes
to be redeemed on 31 May 2023 at a price equal to 100% of the aggregate outstanding principal together with a make-whole amount
calculated as specified in the agreement;
■ additional fee of 2% per annum to be paid on the outstanding principal; and
■ financial covenants were reset.
The loan notes have been considered separately to determine whether the changes should be accounted for as a modification of the
existing arrangement or as an extinguishment and refinancing. The Group has concluded that each loan note meets the criteria to be
accounted for as a modification. Previous arrangement fees therefore continue to be amortised over the remaining term (£0.3m at the
date of modification) together with arrangement fees incurred in relation to the new agreement (£1.9m). A loss on modification of £11.3m
has also been recognised, reflecting the difference in the present value of the future cash flows discounted at each loan note's original
EIR. This has been recognised within finance costs. This will unwind over the remaining term of the loan notes, resulting in the finance cost
recognised in future periods being lower than the actual amounts paid.
At 31 December 2019 the private placement notes were reclassified as a current liability on the balance sheet because the covenant test of
consolidated net worth at 31 December 2019 was below the threshold of £400m (see Note 35 of the Consolidated Financial Statements) and
therefore at the balance sheet date the Group did not have an unconditional right to defer settlement of the liability for at least 12 months.
The contractual repayment profile (before applying associated derivative financial instruments and prepaid arrangement fees) under both
the current and previous arrangements are shown below:
Repayable in 2020
Repayable in 2021
Repayable in 2023
Repayable in 2026*
Total
31 December 2020
31 December 2019
Fixed
interest rate
%
–
–
6.2
5.3
5.6
£m
–
–
66.2
70.0
136.2
Fixed interest
rate
%
3.7
3.9
4.2
3.3
3.6
£m
25.4
16.9
42.3
91.2
175.8
* If the lenders exercise the put option as referred to above, this amount will become due and payable in 2023
227
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Company Financial Statements
11. Leases
The Company as a lessee
The Company has a lease contract for a property. Information on the nature and accounting for lease contracts is provided in the
Statement of Significant Accounting Policies.
Set out below is the carrying amount of the right-of-use asset recognised and the movement during the period:
On adoption at 1 January 2019
Depreciation expense
At 31 December 2019
Depreciation expense
At 31 December 2020
Set out below is the carrying amount of the lease liability and the movement during the year:
On adoption at 1 January 2019
Accretion of interest
Payments
At 31 December 2019
Accretion of interest
Payments
At 31 December 2020
Current
Non-current
The following are the amounts recognised in profit or loss:
Depreciation expense of right-of-use asset
Interest expense on lease liability
Total amount recognised in profit or loss
Buildings
£m
1.8
(0.2)
1.6
(0.2)
1.4
Total
£m
1.8
(0.2)
1.6
(0.2)
1.4
Total
£m
2.0
0.1
(0.3)
1.8
0.1
(0.3)
1.6
31 December
2020
£m
0.2
1.4
1.6
31 December
2019
£m
0.2
1.6
1.8
2020
£m
0.2
0.1
0.3
2019
£m
0.2
0.1
0.3
The Company had total cash outflows for leases of £0.3m in 2020 (2019: £0.3m). The Company had no non-cash additions to right-of-use
assets and lease liabilities in 2020 (2019: none). There are no future cash outflows relating to leases that have not yet commenced in 2020
(2019: none).
228
SIG plc Annual Report and Accounts for the year ended 31 December 2020 12. Provisions
At 1 January 2019
Released
Utilised
At 31 December 2019
New provisions
At 31 December 2020
Amounts falling due within one year
Amounts falling due after one year
Total
Warranty
claims Dilapidations
£m
0.4
–
(0.2)
0.2
–
0.2
£m
0.2
(0.2)
–
–
–
–
Onerous
contracts
£m
–
–
–
–
10.3
10.3
Total
£m
0.6
(0.2)
(0.2)
0.2
10.3
10.5
31 December
2020
£m
4.3
6.2
10.5
31 December
2019
£m
–
0.2
0.2
The transfer of economic benefit in respect of the dilapidations provision is expected to be made on expiry of the lease in seven years time.
The onerous contract provisions relate to licence fee commitments where no future economic benefit is expected to be obtained,
principally in relation to the SAP 1HANA implementation following the change in scope of the project. The costs will be incurred over the
next three years.
13. Deferred tax
Deferred tax assets
31 December
2020
£m
–
31 December
2019
£m
–
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 2019
Credit to income
At 31 December 2019
Charge to income
At 31 December 2020
Losses
£m
0.1
(0.1)
–
–
–
Other
£m
0.3
(0.3)
–
–
–
Total
£m
0.4
(0.4)
–
–
–
Deferred tax has not been recognised on £2.7m of trading losses and deductible temporary differences relating to property, plant and
equipment. This is on the basis that the realisation of their future economic benefit is uncertain. At the balance sheet date, no deferred tax
liability is recognised on temporary differences relating to undistributed profits of the overseas subsidiaries. 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.
229
Stock code: SHI www.sigplc.comFINANCIALS Notes to the Company Financial Statements
14. Capital and Reserves
Called up share capital
Share premium account
Treasury shares reserve
Merger reserve
Capital redemption reserve
Share option reserve
Exchange reserve
Cash flow hedging reserve
Cost of hedging reserve
Retained profits
Total reserves
The movements in reserves during the year were as follows:
At 1 January 2019
Credit to share option reserve
Exercise of share options
Transfer of hedging reserves
Transfer from Merger reserve
Fair value movement on cash
flow hedges
Transfer to profit and loss on
cash flow hedges
Loss for the year
Dividends
At 31 December 2019
Issue of share capital
Credit to share option reserve
Transfer of unallocated treasury
shares
Fair value movement on cash
flow hedges
Transfer to profit and loss on
cash flow hedges
Loss for the year
At 31 December 2020
Called
up share
capital
£m
59.2
–
–
–
–
Share
premium
account
£m
447.3
–
–
–
–
Treasury
shares
reserve
£m
–
–
–
–
–
–
–
–
–
–
59.2
59.0
–
–
–
–
–
–
447.3
0.4
–
–
–
–
–
118.2
–
–
447.7
–
–
–
–
–
–
–
(0.2)
–
–
–
(0.2)
Merger
reserve
£m
21.7
–
–
–
(10.2)
–
–
–
–
11.5
92.5
–
–
–
–
–
104.0
Share
option
reserve
£m
1.7
0.1
–
–
–
Cash flow
hedging
reserve
£m
–
–
–
1.3
–
–
–
–
–
1.8
–
0.2
–
–
–
–
2.0
1.3
0.9
–
–
3.5
–
–
–
(0.7)
(0.7)
–
2.1
31 December
2020
£m
31 December
2019
£m
118.2
447.7
(0.2)
104.0
0.3
2.0
(0.2)
2.1
0.1
(284.0)
390.0
Cost of
hedging
reserve
£m
–
–
–
0.8
–
(0.9)
–
–
–
(0.1)
–
–
–
0.2
–
–
0.1
59.2
447.3
–
11.5
0.3
1.8
(0.2)
3.5
(0.1)
(119.6)
403.7
Retained
profits
£m
154.3
–
–
(2.1)
10.2
–
–
(259.8)
(22.2)
(119.6)
–
–
0.2
–
–
(164.6)
(284.0)
230
SIG plc Annual Report and Accounts for the year ended 31 December 2020 14. Capital and Reserves continued
There was no movement in the capital redemption reserve and exchange reserve in the year. During 2020 the Company allotted no shares
(2019: no shares) from the exercise of share options.
Amounts were reclassified during the prior year to clarify the effects of hedging between retained (losses)/profits, the cash flow hedging
reserve and cost of hedging reserve.
The treasury shares reserve relate to shares purchased by the SIG Employee Share Trust to satisfy awards made under the Group’s share
plans which are not vested and beneficially owned by employees. Shares have become unallocated during the year and have therefore
been transferred to the treasury share reserve.
At 31 December 2020 the Company has negative distributable reserves of £217.1m. This means that the Company is currently unable
to pay a dividend or make any other distribution to shareholders. A resolution will be put to shareholders at the AGM to approve the
cancellation of the Company’s share premium account in order to eliminate these losses and to create reserves available for distribution.
Under the terms of the Group’s borrowing arrangements, the payment of dividends is also subject to a number of conditions, including
that at the relevant time the Group’s leverage is less than 2.25x (including on a look-forward basis). Additionally, even where such
conditions are satisfied, any interim dividend for 2021 is limited to £3.0m.
Details of the Company’s share capital and the equity raise during the year can be found in Note 26 of the Consolidated Financial
Statements. Movements in the share premium account and merger reserve are related to the equity raise as also explained in Note 26.
15. Guarantees and other financial commitments
a) Guarantees
At 31 December 2020 the Company had provided guarantees of £nil (2019: £nil) 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 £5.0m (2019: £8.0m). This
standby letter of credit, issued by HSBC Bank plc, is in respect of the Group’s insurance arrangements.
16. 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 107 to 133. In addition, the Company recognised a share-based
payment charge under IFRS 2 of £nil (2019: £0.1m) with a credit to the share option reserve of £nil (2019: £0.2m).
231
Stock code: SHI www.sigplc.comFINANCIALS Group Companies 2020
This note provides a full list of the related undertakings of SIG plc in line with Companies Act requirements. In accordance with Section
409 of the Companies Act 2006 a full list of related undertakings, the country of incorporation, registered office address and the effective
percentage of equity owned, as at 31 December 2020 is disclosed below. Unless otherwise stated, the share capital disclosed comprises
ordinary or common shares which are held by subsidiaries of SIG plc.
Fully owned subsidiaries
(United Kingdom)
A. M. Proos & Sons Limited (England) (ii)
A. Steadman & Son (Holdings) Limited (England) (ii)
A. Steadman & Son Limited (England) (ii)
Aaron Roofing Supplies Limited (England) (ii)
Acoustic and Insulation Manufacturing Limited
(England) (ii)
Acoustic and Insulation Materials 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 UK Limited (England) (ii)
AIS Insulation Supplies Limited (England) (ii)
Alltrim Plastics Limited (England) (ii)
Asphaltic Properties Limited (England) (ii)
Asphaltic Roofing Supplies Limited (England) (ii)
Auron Limited (England) (ii) (xix)
BBM (Materials) Limited (England) (ii)
Blueprint Construction Supplies Limited (England) (ii)
Bondec Boards Limited (England) (ii)
Bowller Group Limited (England) (ii)
Building Solutions (National) Limited (England)
Buildspan Holdings Limited (England) (ii) (vii)
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 Slate & Tile Limited (England) (ii)
Ceilings Distribution Limited (England) (i) (ii)
Cheshire Roofing Supplies Limited (England) (ii)
+Clyde Insulation Supplies Limited (Scotland) (ii)
Clydesdale Roofing Supplies (Leyland) Limited
(England) (ii)
C.M.S. Acoustic Solutions Limited (England) (ii) (x)
C.M.S. Danskin Acoustics Limited (England) (ii)
C.M.S. Vibration Solutions Limited (England) (ii) (xv)
Coleman Roofing Supplies Limited (England) (ii)
Construction Material Specialists Limited (England)
(ii) (xvi)
Coxbench IP Limited (England) (ii)
CPD Distribution Plc (England) (ii)
Dane Weller Holdings Limited (England) (ii)
+Danskin Flooring Systems Limited (Scotland) (ii)
Davies & Tate plc (England) (ii)
Drainex Limited (England) (ii) (viii)
Eurisol Limited (England) (ii)
Euroform Products Limited (England) (ii)
+Fastplas Limited (Scotland) (ii)
Fibreglass Insulations Limited (England) (ii)
Fireseal (North West) Limited (England) (ii)
Firth Powerfix Limited (England) (ii) (vii)
Flex-R Limited (England) (xv)
Formerton Limited (England) (ii)
Formerton Sheet Sales Limited (England) (ii)
Franklin (Sussex) Limited (England) (ii)
Freeman Group Limited (England) (i) (ii)
Freeman Holdings Limited (England) (ii)
General Fixings Limited (England) (ii)
G.S. Insulation Supplies Limited (England) (ii)
Gutters & Ladders (1968) Limited (England) (ii)
>HHI Building Products Limited (Northern Ireland) (ii)
Hillsborough Investments Limited (England) (i) (ii) (iii)
Impex Avon Limited (England) (ii) (xv)
Insulation and Machining Services Limited (England) (ii)
Insulslab Limited (England) (ii)
+J. Danskin & Company Limited (Scotland) (ii)
John Hughes (Roofing Merchant) Limited (England) (ii)
John Hughes (Wigan) Limited (England) (ii)
Jordan Wedge Limited (England) (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)
Kitson’s Thermal Supplies Limited (England) (ii) (v)
Landsdon Holdings Limited (England) (ii) (xv)
Landsdon Limited (England) (ii) (x)
Leaderflush + Shapland Holdings Limited (England)
Lee and Son Limited (England) (ii)
Lifestyle Partitions and Furniture Limited (England)
(ii) (vi)
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)
Mayplas Limited (England) (ii) (ix)
M.C. Insulation Supplies Limited (England) (ii)
Metechno Limited (England)
Ockwells Limited (England) (ii) (vii)
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) (xvii)
Penkridge Holdings Limited (England) (ii)
Plastic Pipe Supplies Limited (England) (ii)
Polytech Systems Limited (England) (ii) (xvii)
Pre-Pour Services Limited (England) (ii) (xv)
Rinus International 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)
Roplas (Humberside) Limited (England) (ii)
Roplas (Lincs) Limited (England) (ii)
Ryan Roofing Supplies Limited (England) (ii) (viii)
Safety Direct Limited (England) (ii)
SAS Direct and Partitioning Limited (England) (ii)
Scotplas Limited (England) (ii)
Scotwarm Insulations Limited (England) (i)
S.G. Insulation Supplies Limited (England) (ii)
Sheffield Insulations Limited (England) (i) (ii) (iii)
Shropshire Roofing Supplies Limited (England) (ii)
SIG Building Solutions Limited (England) (ii)
SIG Building Systems Limited (England)
SIG Digital Limited (England)
SIG Dormant Company Number Eight Limited
(England) (ii) (iv)
SIG Dormant Company Number Eleven Limited
(England) (ii)
SIG Dormant Company Number Fourteen Limited (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 Sixteen Limited
(England) (ii)
SIG Dormant Company Number Ten Limited
(England) (i) (ii) (xvii)
SIG Dormant Company Number Three Limited
(England) (i) (ii)
SIG Dormant Company Number Two Limited
(England) (i) (ii) (iv)
SIG Energy Management Limited (England) (i) (ii)
SIG EST Trustees Limited (England) (i) (ii)
SIG European Holdings Limited (England) (i)
SIG European Investments Limited (England)
SIG Green Deal Provider Company Limited (England)
(i) (ii)
SIG Group Life Assurance Scheme Trustees Limited
(England) (ii)
SIG Hillsborough Limited (England)
SIG (IFC) Limited (England)
SIG Insulations Limited (England) (ii)
SIG International Trading Limited (England) (i)
SIG Logistics Limited (England) (ii)
SIG Manufacturing Limited (England)
SIG Offsite Limited (England) (ii)
SIG Retirement Benefits Plan Trustee Limited
(England) (i) (ii)
SIG Roofing Supplies Limited (England) (i) (ii)
SIG Scots Co Limited (Scotland) (i)
SIG Specialist Construction Products Limited
(England) (ii)
SIG Trading Limited (England) (i)
Solent Insulation Supplies Limited (England) (ii)
South Coast Roofing Supplies Limited (England) (ii)
Southwest Roofing Supplies Limited (England) (ii) (viii)
Specialised Fixings Limited (England) (ii)
Specialist Fixings and Construction Products Limited
(ii)
Summers PVC (Essex) Limited (England) (ii)
Summers PVC Limited (England) (ii)
Support Site Limited (England) (i) (ii)
T A Stephens (Roofing) Limited (England) (ii)
TD Insulation Supplies Limited (England) (ii)
Tenon Partition Systems Limited (England) (ii)
The Coleman Group Limited (England) (ii) (xviii)
The Greenjackets Roofing Services Limited (England)
(ii) (xv)
Thomas Smith (Roofing Centres) Limited (England) (ii)
Tolway East Limited (England) (ii)
Tolway Fixings Limited (England) (ii)
Tolway Holdings Limited (England) (ii)
Trent Insulations Limited (England) (ii)
Trimform Products Limited (England) (ii)
TSS Plastics Centre Limited (England) (ii)
Undercover Holdings Limited (England) (ii)
Undercover Roofing Supplies Limited (England) (ii)
United Roofing Products Limited (England) (ii)
United Trading Company (UK) Limited (England) (ii) (vii)
W.W. Fixings Limited (England) (ii) (xvi)
Warm A Home Limited (England) (ii) (xx)
Warren Insulation plc (England) (ii)
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)
William Smith & Son (Roofing) Limited (England) (ii)
Window Fitters Mate 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)
Fully owned limited partnership
+ The 2018 SIG Scottish Limited Partnership
(Scotland) (xxi)
232
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Controlling interests
(United Kingdom)
Passive Fire Protection (PFP) UK Limited (England)
(51%) (ii)
+ Registered Office Address: Coddington Crescent,
Holytown, Motherwell, ML1 4YF, United Kingdom
> Registered Office Address: 6-8 Balmoral Road,
Balmoral Industrial Estate, Belfast, Northern Ireland,
BT12 6QA, United Kingdom
Fully owned subsidiaries (overseas)
(including registered office addresses)
Asimex Klimaattechniek B.V. (The Netherlands) -
Leeghwaterstraat 12, 3316 EC Dordrecht, The
Netherlands – merged with Interland Teknik
Gate Pizzaras SL (Spain) – Ponferrada, Villamartin
Leon, Spain
Hillsborough (Guernsey) Limited (Guernsey) –
Martello Court, PO Box 119, Admiral Park, St Peter
Port, HY1 3HB, Guernsey
Hillsborough Investments (Guernsey) Limited
(Guernsey) – Martello Court, PO Box 119, Admiral
Park, St Peter Port, HY1 3HB, Guernsey
Isolatec b.v.b.a. (Belgium) – Scheepvaartkaai 5,
Hasselt 3500, Belgium
J S McCarthy Limited (Ireland) - Ballymount Retail
Centre, Ballymount Road Lower, Dublin 24, Ireland
Larivière S.A.S. (France) - 36 bis rue delaage, 49100
Angers, France
LITT Diffusion S.A.S. (France) - 8-16 rue Paul Vaillant
Couturier, 92240 Malakoff, France
Meldertse Plafonneerartikelen N.V. (Belgium) -
Bosstraat 60, 3560 Lummen, Belgium
MIT International Trade S.L (Spain) – Carretera Sarria
a Vallvidrera 259, Local 08017, Barcelona, Spain
MPA BXL N.V. (Belgium) - Bosstraat 60, 3560
Lummen, Belgium
Project Galilee (Jersey) Limited (Jersey) = 47
Esplanade, St Helier, Jersey JE1 0BD
SIG Aftbouwspecialist B.V. (The Netherlands) Het
Sterrenbeeld 52, 5215 ML ‘s-Hertogenbosch, The
Netherlands
SIG Belgium Holdings N.V. (Belgium) - Bosstraat 60,
3560 Lummen, Belgium
SIG Building Products Limited (Ireland) (ii) -
Ballymount Retail Centre, Ballymount Road Lower,
Dublin 24, Ireland
SIG Central Services B.V. (The Netherlands) -
Bedrijfweg 15, 5061 JX Oisterwijk, The Netherlands
SIG Construction GmbH (Germany) - Maybachstrasse
14, 63456 Hanau-Steinheim, Germany
SIG Financing (Jersey) Limited (Jersey) - 44 Esplanade,
St Helier, JE4 9WG, Jersey
SIG France S.A.S. (France) - 8-16 rue Paul Vaillant
Couturier, 92240 Malakoff, France
SIG Germany GmbH (Germany) - Maybachstrasse 14,
63456 Hanau-Steinheim, Germany
SIG Holdings B.V. (The Netherlands) - Bedrijfweg 15,
5061 JX Oisterwijk, The Netherlands
SIG International Trading FZE (Dubai) - Jabel Ali, Dubai
SIG Nederland B.V. (The Netherlands) - Bedrijfweg 15,
5061 JX Oisterwijk, The Netherlands
SIG Property GmbH (Germany) - Maybachstrasse 14,
63456 Hanau-Steinheim, Germany
SIG Technische Isolatiespecialist B.V. (The
Netherlands) - Touwbaan 24-26, 2352 TZ Leiderdorp,
The Netherlands
SIG Services Limited (Jersey) - 44 Esplanade, St Helier,
JE4 9WG, Jersey
SIG Stukadoorsspecialist B.V. (The Netherlands) -
Hoogeveenenweg 160, Nieuwerkerk a.d. Ussel, 2913
LV, The Netherlands
SIG Trading (Ireland) Limited (Ireland) (viii) -
Ballymount Retail Centre, Ballymount Road Lower,
Dublin 24, Ireland
SIG Sp. z.o.o. (Poland) - ul. Kamienskiego 51, 30-644
Krakow, Poland
Sitaco Sp. z.o.o. (Poland) - ul. Kamienskiego 51, 30-
644 Krakow, Poland
Sitaco Sp. z.o.o. Spolka Komandytowa (Poland) - ul.
Kamienskiego 51, 30-644 Krakow, Poland
WeGo Systembaustoffe GmbH (Germany) -
Maybachstrasse 14,
63456 Hanau-Steinheim, Germany
Notes
(i)
(ii)
(iii)
Directly owned by SIG plc
Dormant company
Ownership held in cumulative preference
shares
Ownership held in ordinary shares and 12%
cumulative redeemable preference shares
Ownership held in ordinary shares and
preference shares
(iv)
(v)
(vi) Ownership held in ordinary shares and
(vii)
(viii)
(ix)
(x)
(xi)
(xii)
(xiii)
(xiv)
(xv)
(xvi)
(xvii)
deferred ordinary shares
Ownership held in ordinary shares and class A
ordinary shares
Ownership held in ordinary shares and class B
ordinary shares
Ownership held in ordinary shares, class A
ordinary shares and class B ordinary shares
Ownership held in ordinary shares, class B
ordinary shares and class C ordinary shares
Ownership held in ordinary shares, class A
ordinary shares, class B ordinary shares and
class C ordinary shares
Ownership held in ordinary shares and class E
ordinary shares
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
Ownership held in class A ordinary shares
Ownership held in class A ordinary shares and
class B ordinary shares
Ownership held in class A ordinary shares,
class B ordinary shares and class C ordinary
shares
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
Ownership held in class B ordinary shares and
preference shares
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
Limited partner SIG Retirement Benefit Plan
Trustee Limited
(xix)
(xx)
(xxi)
233
Stock code: SHI www.sigplc.comFINANCIALS
Company information
Life President
Sir Norman Adsetts OBE, MA
Registrars and transfer office
Computershare Investor Services PLC
Secretary
Kulbinder Dosanjh
Registered number
Registered in England
0099814
Registered office
10 Eastbourne Terrace
London W2 6LG
United Kingdom
Tel: 0114 285 6300
Fax: 0114 285 6349
Email: info@sigplc.com
Corporate office
Adsetts House
16 Europa View
Sheffield Business Park
Sheffield S9 1XH
United Kingdom
Tel: 0114 285 6300
Fax: 0114 285 6349
Company website
www.sigplc.com
Listing details
Market Reference Sector
UK Listed
SHI.L Support Services
The Pavilions
Bridgwater Road
Bristol BS13 8AE
Auditor
Ernst & Young LLP
1 More London Place
London SE1 2AF
Solicitors
Allen & Overy LLP
1 Bishops Square
London
E1 6AD
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
London EC2P 2XY
Lloyds Bank plc
2nd Floor, Lisbon House
116 Wellington Street
Leeds LS1 4LT
HSBC Bank plc
4th Floor
City Point
Leeds LS1 2HL
Joint stockbrokers
Jefferies Hoare Govett
Vintners Place
68 Upper Thames Street
London EC4V 3BJ
Peel Hunt LLP
Moor House
120 London Wall
London EC2Y 5ET
Financial public relations
FTI Consulting Limited
200 Aldersgate
Aldersgate Street
London EC1A 4HD
Financial advisers
Lazard & Co Limited
50 Stratton Street
London W1 J8LL
234
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Shareholder enquiries
Our share register is managed by Computershare, who can be
contacted by telephone on:
24 hour helpline* 0370 707 1293
Overseas callers* +44 370 707 1293
Text phone
0370 702 0005
* Operator assistance available between 08:30 and 17:30 GMT 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 2020 the annual tax-free
allowance on dividend income across an individual’s entire share
portfolio has remained at £2,000. Above this amount, individuals
pay tax on their dividend income at a rate dependent on their
income tax bracket and personal circumstances. Shareholders
should seek independent financial advice as to how this change will
impact their personal tax obligations. 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.
If you have any tax queries, please contact a financial advisor.
Website and electronic communications
Shareholders receive notification of the availability of the results to
view or download on the Group’s website www.sigplc.com, unless
they have elected to receive a printed version of the results.
We encourage our shareholders to accept all shareholder
communications and documents electronically instead of receiving
paper copies by post as this helps to reduce the environmental
impact by saving on paper and also reduces distribution costs.
If you sign up to electronic communications, instead of receiving
paper copies of the annual and half-yearly financial results, notices
of shareholder meetings and other shareholder documents
through the post, you will receive an email to let you know this
information is on our website.
If you would like to sign up to receive all future shareholder
communications electronically, please register through our
registrars Computershare at www.investorcentre.co.uk/ecomms.
Financial calendar
Annual General Meeting
13 May 2021
Interim Results 2021
September 2021
Full Year Results 2021
March 2022
Annual Report and
Financial Statements 2021
posted to shareholders March/April 2022
Final Dividend payment for 2020 n/a
Shareholder analysis at 31 December 2020
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
603
649
174
223
54
34
33
81
1,851
Number of
Ordinary
Shares
%
243,452
32.58
1,484,962
35.06
1,173,368
9.40
7,181,823
12.05
8,466,292
2.92
11,573,426
1.84
1.78
23,086,136
4.37 1,128,347,518
100.00 1,181,556,977
%
0.02
0.12
0.10
0.61
0.72
0.98
1.95
95.50
100.00
235
Stock code: SHI www.sigplc.comFINANCIALS Shareholder notes
236
SIG plc Annual Report and Accounts for the year ended 31 December 2020 Printed on Revive™ 100 Silk.
A recycled paper manufactured from paper fibres derived from pre and
post consumer waste and manufactured at a mill certified with ISO 14001
environmental management standard.
CORPORATE OFFICE
Adsetts House
16 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
10 Eastbourne Terrace
London W2 6LG
REGISTERED NUMBER
Registered in England
0099814
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