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SIG plc
Annual Report and
Accounts 2022
SIG is a leading supplier of specialist
insulation, roofing materials, and sustainable
building products to customers across
Europe, known for our expertise, quality
service, and reliability.
We’ve been supplying the construction
industry for over 65 years and we are proud
of the central role we play in the supply
chain, bringing value to our customers and
manufacturers as a specialist distributor.
“ I’m delighted to have joined SIG.
I’ve been impressed with the
progress that the Group has made
over the last three years and am very
excited about the opportunities for
our businesses in the years ahead.”
Gavin Slark
Chief Executive Officer
2022 highlights
* Refer to pages 24 to 25 for definitions.
Strategic report
2 At a glance
6 Strategic framework
8 Our market
12 Business model
14 Chairman’s statement
17 Chief Executive Officer’s review
20 Our strategy
24 Key performance indicators
26 Environmental, social and governance
55 Non-financial information statement
56 Risk
62 Financial review
Governance
69 Chairman’s introduction
70 Board of Directors
72 Corporate governance report
72 Board activities
76 Engagement with our stakeholders
80 Workforce Engagement
82 Board membership
85 Board arrangements
87 Board evaluation
88 Nominations Committee report
92 Risk management and internal control
94 Audit & Risk Committee report
101 Directors’ remuneration report
127 Directors’ report
131 Directors’ Responsibilities Statement
Financials
133 Consolidated income statement
134 Consolidated statement
ofcomprehensiveincome
135 Consolidated balance sheet
136 Consolidated statement of changes in equity
137 Consolidated cash flow statement
138 Statement of significant accounting policies
149 Critical accounting judgements and key sources
of estimation uncertainty
151 Notes to the consolidated financial statements
194 Non-statutory information
196 Independent auditor’s report
205 Five-year summary
206 Company balance sheet
207 Company statement of changes in equity
208 Company statement of significant
accountingpolicies
211 Notes to the Company financial statements
217 Group companies 2022
220 Company information
Revenue
£ 2,74 4.5m
2021: £2,291.4m
Gross margin*
25.9%
2021: 26.3%
Statutory profit/(loss) before tax
£ 27. 5 m
2021: loss of £15.9m
Lost time injury frequency rate
(“LTIFR”)*
11.1
2021: 11.8
Like-for-like (“LFL”) sales growth*
17%
2021: 24%
Underlying operating profit*
£80.2m
2021: £41.4m
Net debt
£444.0m
2021: £365.0m
Greenhouse gas (“GHG”) emissions
per £m of revenue*
17. 5 metric tonnes
2021: 23.0 metric tonnes
To find out more please go to
sigplc.com
Strategic report
Governance
Financials
1SIG Annual Report and Accounts 2022
Pan-European
presence
At a glance
We are the largest European player
in our chosen interiors and exteriors
markets and the largest partner for many
of our suppliers. We are well diversified
across geography, end-markets and
customer type.
Our empowered local teams and deep
relationships with manufacturers give
us flexibility to respond to changing
customer needs and varied market
conditions, enabling most of our
businesses to out-perform the
market in 2022.
440+
sites
No one supplier
represents more
than 10% of the
Group’s cost
of sales
75k+
customers
7,000+
employees
58%
EU sales
42%
UK sales
2 SIG Annual Report and Accounts 2022
Interiors
Interiors
Trading
sites Employees
Revenue
£m
Underlying
operating
margin %
Market
position
Exteriors
Exteriors
Interiors Exteriors
United Kingdom
France
Germany
Poland
Republic
of Ireland
& Northern
Ireland
Benelux
176
138
52
47
11
3,140
1,372
1,266
884
324
703
218
458
231
445
466
108
2.0
5.6
3.7
4.6
4.1
5.1
5.5
#2
#1
#1
Top
3
Top
3
Top
2
17 219116 (2.6)
Top
3
Top
2
Strategic report
Governance
Financials
3SIG Annual Report and Accounts 2022
Supplying specialist
products key to sustainable
construction
Interiors
At a glance
Revenue split
Revenue (£m)
1,792.1
Underlying operating
margin (before central
costs)
3.2%
Key products
Drylining Floor
coverings
Structural
insulation
Technical
insulation
Construction
accessories and
fixings
Partition walls
and doorsets
Ceiling tiles
and grids
65%
Key brands
Key manufacturers
4 SIG Annual Report and Accounts 2022
Key products
Room-in-roof panel
systems
Photovoltaic panels
Tiles, slates and
membranes
Batten for
pitched roofs
Industrial roofing
Cladding systems
Single-ply flat
roof systems
Exteriors
Revenue split
Revenue (£m)
952.4
Underlying operating
margin (before central
costs)
4.4%
Key brands
Key manufacturers
SIG is a leading supplier of specialist building products and systems
across our core interiors and exteriors categories. We connect over
75,000 customers with thousands of different products, but SIG is
more than a distributor – we provide technical advice, train and
certify installers, and fabricate bespoke solutions in key niches.
35%
5SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Our strategic framework
Our purpose
To enable modern, sustainable and safe living and working
environments in the communities in which we operate
Through seven pillars
Supported by five sustainability commitments
Leading to sustainable market leadership
Grow our
leadership
positions and
marketshare
Trusted and
recommended
Operating margins
trending to 5%
Disciplined capital
allocation
Net zero carbon
by 2035
Health and safety
leader
Zero SIG waste to
landfill by 2025
Employer of
choice
Partner with
manufacturers and
customers
See Our strategy on pages 20 to 23
See ESG section on pages 26 to 54
Responsible
actions
Specialist
expertise
Focused
growth
Winning
branches
Valuable
partnerships
Superior
service
Highest
productivity
Strategic framework
Since 2020, we have executed
on our seven pillar growth
strategy, supporting our
commitment to sustainable
construction and sustainable
market leadership.
A proven growth
strategy
LFL growth since 2020
45%
A strong positive impact on
customers, with
>90%
agreeing in recent surveys
that “SIG is a brand I trust”
2022 underlying operating
margin ahead of plan
2.9%
Improved employee Net Promoter Score
(“eNPS”) over the last two years
+19
Margin accretive acquisitions
in the last two years
+£140m
acquired revenue
6 SIG Annual Report and Accounts 2022
Return to Growth strategy
launched two years ago
− Response to a period of share loss
and profit decline that pre-dated
Covid-19.
− Driving margin uplift through profitable
growth, not short-term cost cutting.
− Decentralisation and empowerment.
− Seven strategic pillars rooted in the
DNA of SIG’s most successful eras.
− Commitment to energy efficiency –
SIG’s heritage and our future.
What’s changed? We... What we’ve achieved
− Doubled underlying operating profit
from 2021 with underlying operating
margin improvement, to nearly 3%,
ahead of plan.
− Sustained gross margins through
successful product inflation
management.
− Continued reduction in operating
costs as a percentage of sales.
− Share gains and improved margins
while investing for the future.
− Improving customer Net Promoter
Score (“NPS”) and employee
engagement scores.
− 12 branch openings in the last
two years (reversing long-term
footprint decline).
− Five margin accretive acquisitions.
− Rejuvenated leadership team with
industry expertise bolstered.
Acquisition of Miers
Construction Products Limited
One of the UK’s leading suppliers of
specialist construction accessories, Miers
broadens SIG’s offering in high-margin
categories and increases our exposure
to growing infrastructure markets.
− Trusted and incentivised branch
managers to make the right decisions
for their local markets.
− Invested in superior inventory range
and availability.
− Hired hundreds of specialists in sales
and category management teams.
− Strengthened strategic partnerships
with significant revenue growth in
products from key suppliers.
− Are redesigning processes to make
SIG easier to buy from, sell to and
work for.
− Executed the strategy consistently,
building customer and supplier loyalty
through a turbulent two years.
As a result SIG is...
...more specialist
...more local
...more productive and engaged
...more valuable to our suppliers
...more flexible.
Strategic report
Governance
Financials
7SIG Annual Report and Accounts 2022
Our market
Benefitting from long-term
growth trends
SIG’s diversification and energy efficiency heritage mean the
Group is well placed to respond to market growth drivers
and changing customer needs.
− Long-term construction industry growth is driven by
macroeconomic factors including population growth, economic
activity and GDP. Industry-specific demand drivers include
governments’ long-term need to tackle housing shortages,
the drive to upgrade energy-inefficient building stock, and
infrastructure investment.
− Looking ahead, while some industry end-markets are expected
to be impacted by near-term weakness, the long-term outlook
for the construction industry remains one of growth.
− Building materials demand can experience cyclicality, but end-
markets within the industry and countries do not move in unison
– diversification matters.
− SIG’s sales are evenly split between new build projects (c50%)
and repair, maintenance and improvement (“RMI”) projects
(c50%). Around 50% of our customers’ end-projects are
residential and 50% non-residential.
Construction industry growth
− Cumulative building materials inflation was more than 25% over
the last two years in some categories, inevitably constraining
near-term market volume growth.
− Inflation in 2021 was impacted by Covid-19-linked supply chain
disruption. In 2022 it was largely driven by rising energy costs
caused by the war in Ukraine (energy accounts for 25% of the
production cost in core SIG products).
− High (and unpredictable) inflation puts stress on the construction
ecosystem – contractors are less willing to commit to lengthy
fixed price contracts with suppliers pausing production when
energy costs make production uneconomic.
− The impact of high inflation on industry input prices is expected
to ease in 2023.
Inflation and energy costs
Together with our presence across six European
geographies, SIG benefits from long-term construction
industry growth with diversified exposure across industry
end-markets.
SIG’s proactive communication of supplier price rises,
and advice to customers on optimising cost and energy
efficiency, enabled us to sustain gross margins despite
high input cost inflation.
8 SIG Annual Report and Accounts 2022
Sustainable construction
− Over 35% of European GHG emissions are linked to
construction. Our industry is centre-stage in enabling UK and
EU governments to reduce carbon emissions and embodied
carbon in buildings and to meet their net zero targets.
− Regulation is being introduced in a number of areas: tightened
standards for insulation performance (e.g. Part L in UK),
embodied carbon and recycled content (e.g. EU Ecodesign for
Sustainable Product Regulation) and roofing mix (e.g. Climate
and Resilience act in France mandates 30%+ coverage of solar
panels or green roofs for buildings over 1,000m
2
).
− Governments are providing sector-specific financial resource,
e.g. Germany has allocated €47bn over three years to improve
the energy efficiency of existing buildings, and in the UK “Eco
Plus” will provide grants of up to £15,000 to help c70,000
homeowners fund insulation renovation.
Digitalisation
− Construction labour productivity fell over the last 35 years
(while doubling in manufacturing sectors) – digitalisation across
the construction value chain is key to addressing this industry
productivity challenge.
− Trade customers increasingly expect distributors to offer
easy-to-use digital services to research, plan, order, track and
manage their accounts, as part of omnichannel relationships.
− Building design processes are utilising digital models of whole
building lifecycle (raising the importance of product data flows),
while modern methods of construction such as modular will
reduce cost and waste.
− Growing attention to lifecycle carbon footprint adds significant
product data complexity.
SIG benefits from European governments’ regulation,
standards and stimulus for energy efficiency and
insulation, as well as demand for more sustainable
building materials.
SIG is transferring learnings from SIG Poland in its
omnichannel approach. Various operating companies
are now investing in product information management
systems, and driving benefits from modernising operational
processes (e.g. warehouse and transport management).
Strategic report
Governance
Financials
9SIG Annual Report and Accounts 2022
Our market
Rising demand for sustainable,
energy efficient buildings
SIG was founded in 1957, a leading force influencing and
responding to evolving energy efficiency standards across
seven decades. As Europe’s leading independent supplier
of insulation, SIG is well placed to benefit from the
European-wide drive to improve energy efficiency
across the built environment.
Why this is important
UK and EU net zero targets require
the housing renovation rate to triple.
Governments are therefore introducing
regulation and support in a number of
areas e.g.
− Building energy performance:
more stringent standards are
being introduced to reduce in-use
emissions, e.g. Part L, Future Homes
Standard, higher EPC standards
(UK), obligations to install photovoltaic
panels (“PV”) (France, Germany),
heating source transition.
− Product sustainability: proposals to
revise the EU Ecodesign Directive and
EU Construction Products Regulation
lead to more recycled content and
packaging and more consistency to
product sustainability claims.
Growth in demand for insulation and
other core SIG products
Distributor expertise in energy and
carbon efficiency increasingly important
Leading to...
10 SIG Annual Report and Accounts 2022
− Energy efficiency is our DNA, from
taking fibreglass into domestic
insulation in the 50s, 60s and 70s,
through to highly efficient modern
insulation systems and low-carbon
materials.
− We are the biggest independent
supplier of insulation in Europe,
and a key customer of our major
manufacturers.
− SIG technical teams advise on
compliance and performance
solutions across thermal and acoustic
insulation, fire protection and
embodied carbon.
− By accelerating access to
environmentally friendly solutions and
providing data and advice on carbon
performance we help customers
achieve their own sustainable
construction goals.
Why SIG? What we’ve achieved
− Market leadership in insulation.
− Growth in our bio-sourced
materials range.
− Launch of solar solutions and training
targeted at small roofers.
− Advice to national housebuilder
project customers on the selection of
products to support overall building
energy efficiency in the context of
ongoing and changing regulations.
− Proactive collection of customer waste
in France.
− Investments and partnerships in early-
stage innovations, including recycled
roofing materials, carbon negative
plasterboard and ultra-light solar.
− A 9% reduction in emissions from
SIG’s own operations in 2022.
SIG’s role in sustainable construction
− Raise awareness of energy efficiency and carbon
regulations.
− Introduce and scale up new lower-carbon solutions.
− Provide transparency to product carbon
performance.
− Help customers optimise between cost, energy
efficiency in use and embodied carbon.
− Coordinate complex logistics to reduce on-site cost
and waste.
− Provide ancillary services such as data, technical
advice and support.
− Backhaul waste from customers’ sites.
− Reduce emissions from our own operations.
11SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Creating value for our stakeholders
Business model
Our resources What we do
Committed and specialised workforce
− Over 7,000 people
− 73% engagement score
− Hundreds of category experts
hired in the last two years
− Over 200 apprentices
Pan-European local footprint
− 440+ branches in six geographies
− 2x revenue of nearest interiors peer,
3x revenue of nearest exteriors peer
Powerful franchise
− >90% of customers say
“SIG is a brand I trust”
− Industry reputation rebuilt
“Born green” DNA
− Seven decades promoting and
advocating for energy efficient solutions
− Largest independent supplier of
insulation in Europe
Innovation ecosystem
− Partnerships with start-ups and research
institutes pioneering sustainable
construction solutions
Financial stability
− £2,744.5m sales with 17% LFL growth
− £80.2m underlying operating profit
− Long-term funding in place, due for
repayment in 2026
− Stable Board and governance structure
Interiors
Revenue
65%
− Structural insulation
− Technical insulation
− Ceiling tiles and grids
− Construction
accessories
and fixings
− Partition walls
and doorsets
− Drylining
− Floor coverings
Exteriors
Revenue
35%
− Tiles, slates and
membranes
− Batten for
pitched roofs
− Single-ply flat
roof systems
− Industrial roofing
− Cladding systems
− Room-in-roof
panel systems
− Photovoltaic panels
Manufacturers
Customers
SIG is a leading supplier of specialist insulation
and sustainable building products and solutions
to business customers across Europe
Developers Contractors
Specialist installers
Across residential, commercial, industrial,
infrastructure; new and RMI
Independent merchants
Multinationals
Distribution
Niche specialists
Technical advice
Innovative start-ups
Fabrication
12 SIG Annual Report and Accounts 2022
Our purpose
To enable modern, sustainable and safe living and working
environments in the communities in which we operate
Through seven pillars
Supported by five sustainability commitments
Leading to sustainable market leadership
Grow our
leadership
positions and
marketshare
Trusted and
recommended
Operating margins
trending to 5%
Disciplined capital
allocation
Net zero carbon
by 2035
Health and safety
leader
Zero SIG waste to
landfill by 2025
Employer of
choice
Partner with
manufacturers and
customers
See Our strategy on pages 20 to 23
See ESG section on pages 26 to 54
Responsible
actions
Specialist
expertise
Focused
growth
Winning
branches
Valuable
partnerships
Superior
service
Highest
productivity
Creating stakeholder valueHow we do it
Valued by employees:
− Motivated employees who are proud to work
for SIG and are highly committed to their work,
the organisation, and their teams
− Improved health and safety performance
against all metrics
Employee NPS +14
Valued by customers:
− Wide range and availability of established and
new products
− Coordinating complex logistics to reduce cost
and waste
− Bespoke solutions and fabrication
− Expert advice on energy and carbon efficiency,
compliance and cost
Customer NPS +46
Valued by manufacturers:
− Access to fragmented customer base
− Energy efficient distribution
− Joined up provision of technical support
Significant revenue growth in products
from key suppliers
Valued by shareholders:
− Well positioned for sustainability tailwinds
− Diversification by country and end-market
− Proven strategy, experienced management
− Successful turnaround, with further
performance upside and growth opportunity
Growth path to 5% margin
Valued by future generations:
− Minimising carbon in SIG’s own operations
− Enabling energy efficient buildings
− Facilitating the circular economy
Net zero carbon by 2035
See Engagement with our stakeholders
on pages 76 to 79
13SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Transformation and
good momentum
Dear Shareholder
The Group continued to make good progress
in 2022 in the execution of our strategy, in
growing the business strongly, improving
margins, partly driven by inflationary
tailwinds, and in demonstrating improved
cash generation. Encouragingly we have
strengthened our market position in most
of our major markets.
The Board would like to thank our outgoing
CEO, Steve Francis, for his significant
contribution to transforming the Group over
the last three years. Steve joined us during a
very difficult period for the Group and, having
led the development of the Return to Growth
strategy, he leaves SIG in a much stronger
position than when he joined. We wish him well
for the future. Steve is succeeded by Gavin
Slark, who has a long track record of success
in the pan-European construction products
distribution industry. We have every confidence
that he will build on our strategic momentum
and ensure SIG is able to take advantage of
the many opportunities we see ahead.
Strategic progress
SIG has been transformed since the launch
of our Return to Growth strategy in 2020.
We have returned to our previously well
established and proven way of doing business,
notably by empowering and trusting our
local teams, and as a result are regaining our
reputation as a trusted network of building
materials specialists across our markets.
Today we have a consistent and resilient
business model, built on diversification,
operational flexibility, and the strength of
a localised and branch-led approach.
We have continued to invest for the future,
opening eight new branches across our
network and acquiring two businesses in the
last year, alongside building experienced teams
who continue to develop strong and proactive
customer and supplier relationships.
“ SIG continued to make good progress in 2022.
I would like to thank Steve Francis, our outgoing
CEO, for his significant contribution to transforming
the Group’s position. I look forward to working with
Gavin Slark, our new CEO, on building on these
foundations and delivering long-term value for all
our stakeholders.”
Andrew Allner
Chairman
Chairman’s statement
14 SIG Annual Report and Accounts 2022
We have been able to manage the significant
inflationary pressures seen in 2022, including
very high increases in input costs, through
improved customer service and product
availability.
We are committed to making SIG easier to buy
from, sell to, and work for, helping us increase
the productivity of our branches and fleet. We
are embracing technology and advancing the
evolution of our business and industry into
omnichannel business models.
A large majority of our products help increase
energy efficiency in buildings, and so we are
well placed to take advantage of what we see
as a strategic tailwind over the coming years.
We have continued to improve our operating
margin, reaching 2.9% in 2022, and, importantly,
returning to positive free cash flow generation.
We have demonstrated the ability to execute
investment-led growth both organically and
through M&A, and both aspects will remain
important in the medium and longer term.
Further details of the strategy and a strategic
update can be found in the Chief Executive
Officer’s review on pages 17 to 19.
Sustainability
The Board believes that sustainable growth
goes beyond strong financial performance.
As a responsible business, our ambition is to
create long-term value and make a positive
impact on our employees, customers,
suppliers, and communities, while helping
to drive profitable economic growth.
We continue to focus on our five Group-wide
sustainability commitments:
• Net zero carbon by 2035
• Sending zero SIG waste to landfill by 2025
• Partnering with manufacturers and
customers to reduce carbon and waste
across the supply chain
• A health and safety leader in building
materials distribution
• An employer of choice in our sector.
Our investment case
Resilient, diversified and high potential franchise
insustainableconstruction
− A unique pan-European platform with
leading positions in fragmented interiors
and exteriors segments.
− Competitively advantaged through scale,
supplier partnerships, local proximity,
logistics excellence and specialist
expertise.
− Resilience through operational
flexibility and diversification by product,
geography, customer and end-user mix.
− “Born green” – decades of experience
as a leading force in energy efficiency,
product focus aligned to sustainability
tailwinds, backed by SIG’s own net zero
commitments.
Proven business model
− The seven pillar model builds on the
decentralisation and empowerment of
entrepreneurial teams that underpinned
SIG’s most successful eras.
− Tried and tested playbook equally
applicable to adjacent specialist
categories with similar characteristics.
− Long history of SIG expansion into new
products and geographies.
Rejuvenated leadership team with a strong track record
− Driven and balanced executive team,
blending deep SIG and industry
experience.
− Smooth transition to highly regarded
CEO in February 2023.
− Strategy execution ahead of
expectations: above market growth,
consistent operating margin uplift,
improving customer, employee and
supplier loyalty.
− Doubled underlying operating profit
in 2022.
Clear path towards 5% operating margin
andopportunitiestoaccelerate
− Supportive long-term structural growth
drivers, despite weaker near-term market
conditions.
− Further “self-help” upside to go for –
portfolio businesses at different stages
in their path to 5%.
− Multiple levers for capital-light growth,
mix improvement and productivity gains.
− Returned to cash generation, with
demonstrated ability to invest in margin
accretive M&A and network expansion.
15SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Chairman’s statement
These commitments underpin our determination
to build modern, sustainable, and safe living
and working environments in the communities
in which we operate. We recognise our
responsibility, as a leading industry player, to
support the construction industry in taking
meaningful steps to protect the environment
and reduce carbon emissions.
The Board was pleased to approve the Group’s
refreshed sustainability policy during the year
which sets out the actions being taken to
achieve net zero carbon by 2035 and zero
SIG waste to landfill by 2025. The policy also
supports our commitment to ensuring our
employees feel safe, valued, and proud to
work for us.
Further information on our progress can
be found on pages 26 to 54.
Group performance
2022 LFL sales growth was strong at 17%
with high levels of price inflation providing a
substantial tailwind to the reported level of
growth throughout the year. Volume growth
was broadly flat with gains in market share
offsetting declines in some of our end-markets,
notably in the second half of the year.
We reported an underlying operating profit of
£80.2m, a £38.8m increase compared with
2021 (2021: £41.4m), and an underlying profit
before tax of £51.6m (2021: £19.3m). This led
to an increase in underlying earnings per share
from 0.3p in 2021 to 3.2p. Statutory profit
before tax was £27.5m (2021: loss of £15.9m),
with a statutory earnings per share of 1.3p
against a loss per share of 2.4p in 2021.
As anticipated, the Group has delivered positive
free cash flow for the year, which was a key
strategic target and milestone set under our
Return to Growth strategy. The £10.6m free
cash flow has helped to further reduce our
post-IFRS 16 leverage from 3.2x in 2021 to 2.8x
in 2022. Post-IFRS 16 net debt has increased
largely due to additional lease liabilities
following lease renewals and additions
across our trading sites and fleet.
No dividend is proposed for 2022. We will
continue to monitor free cash flow generation
and progress toward our target leverage.
The Board remains committed to returning to
paying a dividend when we sensibly can, as
part of our wider capital allocation policy.
Governance and Board
We believe that good corporate governance
comes from an effective Board that provides
strong leadership to the Group and engages
well with both management and stakeholders.
I am pleased to report that a smooth CEO
transition from Steve to Gavin has been
achieved, and I am confident that our new
CEO and the Executive Leadership Team will
build on the significant progress made in the
last three years.
During the year, the Board also placed
significant focus on the development of
succession planning for our senior team to
ensure that the Group is well prepared and
continues to have a stable body of experienced
leaders in place.
I believe the Board continues to operate
effectively across all aspects of its role,
and more details of this can be found in the
Corporate Governance report and particularly
on page 87 where we describe the annual
evaluation exercise undertaken by the Board.
The Board of ten Directors includes two
women and one Director from an ethnic
minority background, and there remains work
to be done to improve the diversity of the
Board. Recognising that during the year the
Nominations Committee’s focus was on CEO
succession and the development of our senior
leadership team, we remain committed to
taking further steps to address Board diversity
in 2023.
The Board firmly believes it is important for
Directors to engage directly with employees to
gain first-hand insight into their challenges and
views. During the year, I am pleased to report
that nominated Board members continued
to deliver our Board Workforce Engagement
programme, meeting face-to-face with a broad
cross-section of employees. You can read
more about this on pages 80 to 81.
Christian Rochat has informed the Group that
due to the recent increase in his commitments
to companies within the CD&R portfolio, he
will not stand for re-election at the AGM on
4 May 2023 and will accordingly step down
as of that date. CD&R is entitled to appoint a
Director to replace him. Christian joined the
Board at the time of CD&R’s investment in July
2020 and I would like to express our gratitude
to him for the role that he played in the Group’s
turnaround and progress since then, to the
benefit of all of SIG’s shareholders.
People and culture
Our people continue to be our biggest strength.
The Board would like to thank employees for
their dedication, commitment, and hard work
throughout the year.
The Board is cognisant of the pressures the
current economic climate, and especially the
increases in the cost of living, place on our
people. As a Group, we will continue to work
hard to provide support to our employees
through these challenging times including
selective one-off cost of living payments.
We continue our efforts to build an inclusive
culture, and our third annual employee
engagement survey, which provides both
qualitative and quantitative data, enables us
to engage and listen directly to employees.
The Board was very encouraged to see
positive feedback and signs of continued
improvement in many areas, and the insight
and recommendations continue to support our
People strategy. You can read more about the
feedback and actions on pages 40 to 44.
The Board is committed to SIG’s ambition
to be an employer of choice in the building
materials sector. Our approach to people and
culture will continue to be a critically important
priority, with an even greater focus on talent,
development, diversity, and succession
planning.
Outlook
We believe that, through the dedication of our
people, SIG is currently in better shape than it
has been for a number of years, to the benefit
of all stakeholders.
We retain strong positions in our core markets
and, while market headwinds remain in 2023,
our scale, diversification, and resilience give the
Board confidence in our ability to deliver the
Group’s medium to longer-term objectives.
I would like to thank our employees and all our
other stakeholders for their ongoing support.
I, along with the rest of the Board, very much
look forward to working with Gavin to build on
the strong foundations established over the last
three years and delivering on our expectations
for the year ahead.
Andrew Allner
Chairman
7 March 2023
16 SIG Annual Report and Accounts 2022
Solid foundations
for further growth
Chief Executive Officer’s review
I am pleased to provide my first report as the
Chief Executive Officer of SIG. Having joined
on 1 February 2023, after the end of the
reporting period, I would like to thank Steve
Francis, the Executive Leadership Team and
all of our people across our businesses who
have contributed to SIG’s strong performance
in 2022.
2022 Results
Our 2022 results demonstrate good progress
against the key growth and development
milestones that the Group set in 2020. LFL
revenue growth of 17% reflected the Group’s
ability to effectively manage input price inflation,
as well as the successful execution of its
strategy and the gaining of market share in
key geographies. The Group also delivered its
targeted step-up in profitability, reaching a 3.1%
underlying operating margin in H1, and closing
the year at 2.9%, a 110 bps improvement over
2021. This performance was achieved despite
a one-off loss of £5m in H2 as a result of
Avonside, a major UK roofing contractor and
one of the Group’s largest customers, going
into administration.
These results reflect the further progress made
under the Return to Growth strategy launched
in 2020. We have empowered branches,
who can respond to local trading conditions
and drive local performance, and we have
businesses that are now more specialist,
flexible, productive, and engaged. Customer
NPS has improved in most geographies and
the Group’s NPS increased from +40 to +46,
meaning that an increasingly high proportion
of our customers are likely to recommend SIG
to others.
SIG’s 2022 results also demonstrate a
significantly improved financial position since
2020. The Group has returned to positive free
cash flow and further reduced its leverage,
which were both key targets set in 2020. As set
out in the Financial review, the financing put in
place during 2021 secured long-term funding
at good pricing until 2026. SIG also now has a
good level of liquidity to support the ongoing
needs of the growing Group. This includes a
revolving credit facility that was increased from
£50m to £90m in late 2022, and which was
undrawn at the year end.
“ 2022 results demonstrate good progress
against the key growth and development
milestones that the Group set in 2020.”
Gavin Slark
Chief Executive Officer
17SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Market dynamics
SIG’s results during 2022, and over the last
two years, also reflect the Group’s successful
management of volatile macroeconomic
conditions to deliver consistent performance
improvement.
The impact of Covid-19 during 2020 and 2021
created unprecedented disruption for the
construction industry with knock-on effects
continuing into 2022. The decline in market
activity during the initial lockdowns in 2020
was followed by higher than usual RMI activity
in many markets, coupled with significant
supply chain and logistics challenges and
labour shortages. As supply chains began
to normalise, the commencement of war in
Ukraine in 2022 created volatile energy and raw
material markets, which drove price inflation
and macroeconomic uncertainty.
SIG has successfully managed through these
market swings. During 2021, the Group took
strong action to ensure stock availability for
customers, prioritising investment in product
inventory and enhancing service levels. In 2022,
the Group was able to unwind some of the
resulting higher inventory to more normalised
levels, with working capital improvement as a
result, whilst ensuring we maintained strong
customer service and prompt delivery times.
While input cost inflation has supported top-line
revenue growth, SIG’s tight focus on product
category management was critical to enabling
effective pass through. Strong relationships
and communication with both suppliers and
customers have also been vital, and I credit
our teams for their ongoing commitment in
this area.
As set out in further detail in the “Our market”
section of this Strategic report the Group’s
trading environment includes the impact of
near-term economic trends and long-term
structural growth drivers. During 2022 we saw
the impact of both trends, from some softening
of trading in the second half in geographies
such as the UK due to weaker economic
conditions, together with the continuation
of long-term trends among governments to
mandate greater sustainability in construction
and the built environment, in particular to
increase the energy efficiency of buildings.
Strategic progress across SIG’s
geographies
In France the operating margin of both the
Interiors and Exteriors businesses now
exceeds 5%, driven by consistent execution
of our strategy. This execution has included
product mix enhancement and a rigorous focus
on branch performance and has led to market
share gains.
In Germany we have delivered a strong
turnaround since the introduction of new
management in Q4 2021, with 16% LFL sales
growth in 2022 and underlying operating
margin improving to 3.7% from 0.9% in 2021.
Progress in Germany has been driven by
an “empower the touchpoints” strategy that
has increased empowerment of local teams,
re-energised the sales force, and bolstered
specialist expertise to strengthen customer
and supplier relationships.
The UK Interiors business has delivered a
successful two-year turnaround, recovering
market share and returning to profitability
through consistent execution of its strategy,
better pricing discipline, and aided by the
pricing tailwind. UK Exteriors had a solid year
albeit with market volumes declining in the
second half in particular. Their margin was
affected by the significant bad debt write-off
referenced on page 17.
Our Benelux business returned to market share
gain in 2022 with some initial improvements
in profitability, and with further aspects of the
turnaround plans to be implemented.
The Group has continued to utilise technology
to support business transformation through
improved productivity and customer experience,
with a focus on making SIG a better place to
buy from, sell to and work for. Further progress
is needed in 2023 to ensure consistent
deployment of these solutions across all
of the Group’s businesses.
In Poland our omnichannel services to
customers and new ways of working have
driven strong sales, profit and productivity
improvement, with sales via our market-
leading e-commerce platform representing
10% of sales. Across our operating companies
we are progressing the transformation of
our warehouse and transport management
systems onto digital platforms for process
optimisation and productivity improvements.
We have also continued to build our digital
leadership capabilities across the business.
During 2022 the Group invested in both
network expansion and two accretive
acquisitions. Eight new branches were opened,
which will continue to bolster organic growth in
the years ahead, and the acquisitions of Miers
Construction Products and Thermodämm
completed successfully. Miers is one of
the UK’s leading suppliers of specialist
construction accessories and increases
our exposure to infrastructure end-markets.
Thermodämm is a specialist interiors business
in Germany, reinforcing our market-leading
position in flooring.
These acquisitions, together with those
completed in 2021, reflect the Group’s
commitment to supplementing organic revenue
growth with selective acquisitions, where these
can boost specialist expertise in high-margin
categories and deliver synergies with our
existing businesses.
Sustainability
The Group has set five commitments against
which it will measure its continuing progress
as a leader in sustainable construction. During
2022 we have reduced emissions (Scope 1,
Scope 2 and business travel emissions) by 10%
to 43,328 metric tonnes as we work towards
our goal of being net zero carbon by 2035 at
the latest. The key drivers were an increased
use of renewable electricity contracts in the UK
and Germany alongside replacing vehicles with
a lower-carbon alternative as leases come up
for renewal. We have also increased the level of
waste that is diverted from landfill to 92% from
86% in 2021.
The Group reinforced its commitment to being
a health and safety leader in our industry,
appointing a new Group Health, Safety and
Environment Director. Our 2022 reported
LTIFR reduced to 11.1 from 11.8 in 2021,
alongside improved near-miss reporting which
encourages all our employees, contractors
and stakeholders to report near misses,
unsafe situations and behaviours for positive
interventions.
Further details of our progress under these and
our other sustainability commitments can be
found on pages 26 to 54.
Chief Executive Officer’s review
18 SIG Annual Report and Accounts 2022
Initial impressions
Over my first five weeks at SIG, I have had
the opportunity to visit many of our teams,
operations and branches. I am greatly looking
forward to spending more time working with
my colleagues and pursuing our opportunities
together. Some of my initial impressions are:
A successful three years
The Group’s progress over the last three
years in improving its operating and financial
performance has been significant, especially
in challenging market conditions. There is a
strong sense of pride among the colleagues I
have met in what has been achieved and there
is a clear appetite to continue that momentum.
Engaged people and culture
Our people are passionate about going the
extra mile for our customers and meeting the
needs of their local markets. SIG branch teams
demonstrated their knowledge of our products,
while our senior leaders (many returning to
SIG in the last three years) carry a depth of
industry expertise that is invaluable. Employee
engagement has further increased in 2022, but
we also know we have further to go to make
SIG easy to buy from, sell to and work for.
Please read more on our People strategy
on pages 40 to 44.
Pan-European diversification and growth
opportunity
As a listed company on the London Stock
Exchange, SIG is perhaps sometimes seen
from a distance as a “UK” business. However,
almost 60% of the Group’s revenue is generated
from the EU with a portfolio of strong positions,
diversified by customer segment and end-
market. This pan-European spread presents a
range of opportunities for profitable growth in
existing and adjacent categories.
Outlook
Looking beyond the impact of the short-
term economic cycle, SIG remains very well
positioned to benefit from long-term structural
growth in our industry, and, as a leading
European supplier of insulation and energy
efficiency solutions, to benefit from structural
tailwinds of decarbonisation.
Through the Group’s good progress over the
last two years, SIG is in a strengthened financial
position. This, together with the growth
opportunities we have across the portfolio and
the opportunity for continued improvement in
operating performance and profitability, gives
me confidence in our ability to deliver long-term
sustainable profitable growth. I am delighted to
have joined a Group with a strong platform for
value creation for our stakeholders, and look
forward to working with all of our teams
in capturing these opportunities.
Gavin Slark
Chief Executive Officer
7 March 2023
19SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
We continue to build on the success of our
Return to Growth strategy and make progress
against each of our seven strategic pillars,
strengthening our position in the market
and building our resilience for the future.
Resilient
and flexible
Our strategy
Responsible
actions
• Our people feel safe, proud and valued
• A greener fleet and estate
• Positive community impact
2022 progress
− Our eNPS rating improved by 11 points in 2022 and has
now improved 19 points since 2020.
− The Group’s health and safety leadership was strengthened
in the year with the appointment of a new Group Health,
Safety and Environment Director.
− The LTIFR reduced to 11.1 from 11.8 in 2021.
− Total carbon emissions were 9% lower than 2021 and 17%
lower than the last pre-Covid-19 “normal” year of 2019,
driven by an increased use of renewable electricity contracts
in the UK and Germany alongside the gradual replacement
of vehicles with a lower-carbon alternative when lease
renewals fall due.
− A new diversity, equality and inclusion (“DEI”) forum
was established with representatives from all operating
companies.
− Wellbeing programmes were enhanced in all businesses
to support employees through the pressure of the current
economic climate and cost of living increases.
− SIG Poland was awarded “Green Company” and
“Good Employer” by the European Business Forum
in November 2022.
Link to KPIs
− Lost time injury frequency rate
− GHG emissions per £m of revenue (metric tonnes)
− Employee engagement result (eNPS)
Link to principal risks
− Health and safety
− Macroeconomic uncertainty
− Environmental, social and governance
− Legal or regulatory compliance
− Change management
Sustainable
construction
Responsible
actions
Winning
branches
Superior
service
Specialist
expertise
Focused
growth
Highest
productivity
Grow our leadership
positions and
marketshare
Trusted and
recommended
Operating margins
trending to 5%
Disciplined capital
allocation
Valuable
partnerships
Our purpose
To enable modern, sustainable andsafe living
and working environments inthecommunities
in which we operate
Sustainable
market
leadership
20 SIG Annual Report and Accounts 2022
Winning
branches
• Local teams trusted and empowered
tosucceed
• Differentiated through expertise,
proximity andservice
2022 progress
− There has been a customer NPS improvement in most
businesses, with particularly strong scores in Poland (+80)
and Germany (+63). Group NPS increased from +40 to
+46 indicating an increased likelihood of our customers
recommending SIG.
− Our decentralised approach has enabled branches to
“go where the growth is”, optimising category mix and
managing margin in volatile market conditions.
− Germany’s “empower the touchpoints” strategy was
implemented, creating a new branch structure and
autonomy and ensuring branches are closer to customers
and suppliers. This has helped to drive an improvement in
Germany’s operating margin to 3.7% from 0.9% in 2021.
− Our branches have remained fundamental to our evolution of
providing omnichannel services to our customers: in person
expertise when required, collection of goods ordered or as a
local hub for delivery.
− LFL sales have increased by 17% from 2021 with gross
margin remaining broadly in line with 2021 at 25.9%.
Link to KPIs
− Net Promoter Score (NPS)
− Like-for-like sales (%)
− Gross margin (%)
− Operating margin (%)
Link to principal risks
− Health and safety
− Attract, recruit and retain our people
− Digitalisation
− Change management
Superior
service
• Agile and entrepreneurial sales teams
• Omnichannel, data-rich customer
journey
2022 progress
− In an ongoing difficult supply environment, the Group has
maintained appropriate investment in inventory to ensure
that there is range and availability for our customers.
− Poland’s customers’ ongoing adoption of omnichannel
drove productivity and margin gains with sales via
e-commerce representing 10% of their total sales during the
year. Our e-commerce platform in Poland continues to be a
great success, winning the award for the “Best e-commerce
B2B” in the e-commerce Polska awards 2022.
− Across the Group, the first steps in leveraging Poland’s
successful omnichannel approach across other operating
companies were taken with the promotion of Poland’s
e-commerce leader to Group Director of Omnichannel.
In addition, Germany hired an experienced e-commerce
director from the industry to lead the drive towards an
omnichannel approach.
Link to KPIs
− Net Promoter Score (NPS)
− Like-for-like sales (%)
Link to principal risks
− Macroeconomic uncertainty
− Attract, recruit and retain our people
− Digitalisation
− Change management
Strategic report
Governance
Financials
21SIG Annual Report and Accounts 2022
Our strategy
Valuable
partnerships
• Win-win strategies with suppliers
• Supporting suppliers’ and customers’
sustainability goals
2022 progress
− Our pan-European supplier relationships and local teams
have ensured we have been able to secure inventory
availability across our branch network whilst negotiating
versatile rebate structures.
− Revenue from products from key suppliers grew significantly
from 2020.
− SIG in the UK has become a partner of the Supply Chain
Sustainability School, which will provide resources to help
the team in the UK lead the conversation on sustainable
building practices both internally and within its supply chain.
− SIG Ireland has become a member of the Irish Green
Building Council; this will allow the business to enhance their
sustainable product offering and technical expertise.
− Our UK MD, Philip Johns, is the Chairman of the CPA
(Construction Products Association) – a leading organisation
that represents and champions construction product
manufacturers and suppliers.
Link to KPIs
− Gross margin (%)
− Operating margin (%)
Link to principal risks
− Data quality and governance
− Environmental, social and governance
Specialist
expertise
• Known for specialist focus and
technicalknowledge
• Advice to optimise cost, performance
andcarbon
2022 progress
− UK Interiors has now delivered its initial turnaround with an
operating margin of 2.0% in 2022 against (12.7)% in 2020
when the rebuild began. Market share has been recaptured,
and margins have improved due to pricing discipline, product
mix and inflation management, all enabled by the return of
expertise into the business. Over the two years from 2020,
the UK have hired over 150 specialists with, on average,
more than 15 years’ experience.
− Our Interiors business in France, LiTT, celebrated its 40th
anniversary, highlighting the heritage and experience we
have in the marketplace.
− SIG’s strong franchise and category expertise across the
business has enabled our ability to pass through inflation in a
challenging macroeconomic climate. Along with the ability of
our local specialists to manage price and demand trade-offs
daily, this has led to a broadly stable gross margin for the
Group of 25.9%.
Link to KPIs
− Net Promoter Score (NPS)
− Like-for-like sales (%)
− Gross margin (%)
− Operating margin (%)
Link to principal risks
− Attract, recruit and retain our people
− Mergers and acquisitions
22 SIG Annual Report and Accounts 2022
Highest
productivity
• Digitalising operational processes
• Lean and effective governance
2022 progress
− Modernisation is a key priority for the Group and the
operating companies have made good progress making
SIG an easier place to buy from, sell to and work for.
− In the UK, a new warehouse management system (“WMS”)
was rolled out in a number of branches and a trial B2B
e-commerce portal was launched for the Interiors and
Exteriors businesses.
− In France, a transport management system has been
rolled out across the Interiors business, while we are
also implementing a WMS in our largest locations. A trial
e-commerce B2B portal was also launched for Larivière.
− Ireland’s continued modernisation of business processes,
enabled by technology, is producing material financial
benefits with the focus this year on the procure to
pay process.
Link to KPIs
− Lost time injury frequency rate
− GHG emissions per £m of revenue (metric tonnes)
− Employee engagement result (eNPS)
− Operating margin (%)
− Average trade working capital to sales ratio (%)
Link to principal risks
− Digitalisation
Focused
growth
• Growing energy efficient and
low-carbon solutions
• Expanding branch network
• Acquisitions
2022 progress
− The strategic acquisitions of Miers in the UK and Thermodämm
in Germany completed in 2022. The five acquisitions since
2020 have brought 15 additional branches into the network
and they continue to perform to expectations. A further
pipeline of attractive UK and EU acquisitions has also been
established.
− We have continued to develop product strategies across our
businesses to ensure that we are able to provide diverse,
informed choices for our customers, and enable access to the
most environmentally friendly materials that are supported by
data and credentials. In France, specific catalogues have been
produced for bio-sourced products and solar solutions. In
Poland, products with an Environmental Product Declaration
(“EPD”) are highlighted online to help customers more readily
understand and compare environmental credentials.
− Excluding acquisitions, the branch network has also
expanded organically since 2020 with three new branches
in UK, one in Ireland, two in France, four in Poland and
two in Benelux. This has reversed the long-term footprint
decline previously seen and we are targeting further branch
openings across SIG in the medium term.
Link to KPIs
− Like-for-like sales (%)
− Gross margin (%)
− Operating margin (%)
− Average trade working capital to sales ratio (%)
Link to principal risks
− Cyber security
− Macroeconomic uncertainty
− Data quality and governance
− Mergers and acquisitions
− Change management
Strategic report
Governance
Financials
23SIG Annual Report and Accounts 2022
How we performed
Key performance indicators
Non-financial KPIs
Definition
The ratio of any injury to an
employee (including a contractor)
resulting in any lost time per
1,000,000 hours worked – on
a 12-month rolling basis.
2022 performance
A continuation of the positive
downward trend with a further 6%
reduction in 2022 leading to a 13%
decrease since 2020. The 2022
ratio has been driven by strong
performances in the UK
and Benelux.
Link to strategy
Link to risks
− Health and safety
− Attract, recruit and retain
our people
− Environmental, social and
governance
Link to remuneration
Health and safety measures in
annual bonus scheme.
Definition
Metric tonnes of GHG emissions per
£m of revenue.
2022 performance
A significant reduction from 2021
driven in part by inflationary tailwinds
in revenue alongside a 9% reduction
in total emissions. Emissions have
reduced due to a gradual migration
of our fleet towards lower carbon
alternatives alongside a move
towards greener energy contracts.
Link to strategy
Link to risks
− Environmental, social and
governance
− Legal or regulatory compliance
Link to remuneration
A carbon reduction measure will be
included in the personal objectives
of certain senior management from
2023 onwards.
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.
2022 performance
2022 sees further progress
on already strong scores with
particularly positive results noted
in Poland and Germany.
Link to strategy
Link to risks
− Digitalisation
− Macroeconomic uncertainty
− Change management
Link to remuneration
Customer engagement progress
forms part of the personal objectives
of senior management.
Definition
eNPS is an employee experience
metric based on their likelihood to
recommend SIG as an employer.
2022 performance
A very encouraging performance,
with a 19 point improvement
since 2020. Improvements were
seen in most of our focus areas
including vision and leadership,
communication, learning and
development and health, safety
and wellbeing.
Link to strategy
Link to risks
− Health and safety
− Attract, recruit and retain
our people
− Environmental, social and
governance
Link to remuneration
Employee engagement progress
forms part of the personal objectives
of senior management.
Lost time injury frequency rate
GHG emissions per £m of revenue (metric tonnes)
Net Promoter Score (NPS)
Employee engagement result (eNPS)
11.1
17.5
+46
+14
2020 2021 2022
12.7
11.8
11.1
2020 2021 2022
25.4
23.0
17.5
2020 2021 2022
(5)
+3
+14
2020 2021 2022
+43
+40
+46
24 SIG Annual Report and Accounts 2022
Financial KPIs
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. See page 195
for the calculation.
2022 performance
A further strong performance that
was aided, in part, by the successful
management and pass-through of
input cost inflation.
Link to strategy
Link to risks
− Macroeconomic uncertainty
− Attract, recruit and retain
our people
− Change management
Link to remuneration
Profit measures in annual
bonus scheme.
Definition
The ratio of underlying operating
profit divided by underlying
revenue. Underlying operating profit
represents operating profit from
continuing operations excluding
amounts from non-core businesses
and Other items. See page 195 for
the calculation.
2022 performance
A strong performance, ahead
of plan, driven by market share
gains and margin uplift across the
businesses.
Link to strategy
Link to risks
− Macroeconomic uncertainty
− Attract, recruit and retain
our people
− Digitalisation
− Change management
Link to remuneration
Profit measures in annual
bonus scheme.
Definition
The calculation of underlying gross
profit divided by underlying revenue.
Underlying revenue and gross
profit represents amounts from
continuing operations excluding
amounts from non-core businesses
and Other items, as shown on the
Consolidated income statement.
2022 performance
Gross margin has remained broadly
stable since 2021; the small decline
in 2022 was driven mostly by strong
comparatives in UK Exteriors.
Link to strategy
Link to risks
− Macroeconomic uncertainty
− Attract, recruit and retain
our people
− Digitalisation
− Change management
Link to remuneration
Profit measures in annual
bonus scheme.
Definition
The average closing trade working
capital balance of each calendar
month of the year, divided by
underlying revenue. Trade working
capital includes net stock, net trade
receivables, gross trade creditors
and supplier rebates due.
2022 performance
A solid performance which highlights
continuing balance sheet discipline
against a backdrop of ongoing
macroeconomic uncertainty.
Link to strategy
Link to risks
− Macroeconomic uncertainty
− Attract, recruit and retain
our people
− Change management
Link to remuneration
Included in operating company
annual bonus schemes.
Like-for-like sales (%)
Operating margin (%)
Gross margin (%)
Average trade working capital to sales ratio (%)
17%
2.9%
25.9%
14.6%
2020 2021 2022
25.1
26.3
25.9
2020 2021 2022
14.3
13.8
14.6
2020 2021 2022
(13)
24
17
2020 2021 2022
(2.8)
1.8
2.9
Our strategic pillars
Responsible
actions
Valuable
partnerships
Specialist
expertise
Superior
service
Focused
growth
Highest
productivity
Winning
branches
25SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Our ESG Approach
Environmental, social and governance
1. Net zero carbon emissions include Scope 1, 2 and business travel.
What does ESG mean to SIG?
Environment
SIG was “born green” and our core products – insulation and roofing – are vital for the optimal
energy efficiency of buildings. Increasing awareness of the need to build sustainably plays to
our strengths and represents a significant opportunity for us.
Our most direct environmental responsibility is to reduce the carbon footprint of our own
operations, most materially the emissions from our fleet, estate, and business travel. We
have committed to making SIG net zero carbon by 2035 at the latest.
1
Own fleet vehicle fuel
represents 80% of total emissions so our biggest lever is transitioning to electric vehicles for
cars and forklifts, and to lower carbon technologies in commercial vehicles.
Alongside net zero carbon by 2035 we have committed to zero SIG waste to landfill by 2025,
through waste segregation, reuse of packaging and paperless processes.
See Environment on pages 28 to 36
E
Social
Our social responsibilities are to our employees, our partners and customers, and the
communities in which we operate. We have committed to being both a health and safety
leader and an employer of choice in building materials distribution. The physical safety of our
employees and anyone who visits our premises is our priority, and we do all we can to protect
the mental wellbeing of everyone who works with us.
We want people to be proud to work for SIG: proud of who we are, our high standards and
our purpose and vision. Everyone is respected for who they are, and we value and promote
diversity throughout the business. We are embedded in the communities we serve and are
committed to contributing to them to earn our place as a valued part of them.
See Social on pages 37 to 44
S
Governance
Our devolved operating model goes hand in hand with robust standards, controls, and
principles. We are proud to be a strongly governed, transparent and fair business. Our
Governance section, set out on pages 68 to 131, provides full details of the governance
frameworks in place within the Group.
Within this section, pages 45 to 54 set out our governance of ESG matters, specifically
including our adherence to climate-related disclosure regulations along with key policies which
enforce the responsible business practices we are committed to.
See Governance on pages 45 to 54
G
26 SIG Annual Report and Accounts 2022
Our sustainability commitments
1. Headcount on 31 December.
2. Data is per s.414C(8) of the Companies Act and includes subsidiary directors – population of 99 employees.
3. Data as per provision 23 of the UK Corporate Governance Code – population of 24 employees.
Commitment Measure 2022 2021
Net zero carbon by
2035 at the latest
(see pages 28 to 32)
Net zero carbon emissions
– covering Scope 1, 2 and
business travel (metric tonnes)
43,328 47,948
Current fleet mix by fuel type
– % electric/hybrid vehicles in
own fleet
24% 19%
Zero SIG waste to
landfill by 2025
(see page 33)
% waste not going to landfill
− Total 92% 86%
− Hazardous 49% 47%
− Non-hazardous 92% 87%
Partner with
manufacturers and
customers to reduce
carbon and waste
across the
supply chain
(see pages 34 to 36)
Case studies and examples
in the long term will inform
Scope 3 emissions
Refer to pages 34 to 36
Health and safety
leader in building
materials distribution
(see pages 37 to 39)
“Our people feel safe” from the
employee engagement survey
92% 91%
Lost time injury frequency rate
(“LTIFR”)
11.1 11.8
Employer of choice
in building materials
distribution
(see pages 40 to 44)
Employee engagement (eNPS) +14 +3
Diversity statistics (male/female split)
1
− Total employees 78%/22% 78%/22%
− Board members 80%/20% 80%/20%
− Senior managers
2
79%/21%
− Senior managers
3
70%/30%
Internal stakeholder priorities
Last year, the Group undertook
an internal stakeholder exercise to
determine those ESG areas that are of
primary significance and importance to
SIG. Through this process, we sought
and considered the views and concerns
of a range of employees throughout the
Group and built a clear picture of where
our collective priorities lie.
The most important priorities
identified were:
• carbon reduction – reflecting the
need to address climate change;
• health and safety – everyone in our
organisation should be safe;
• employee wellbeing – ensuring that
our people continue to feel connected
and valued; and
• management of the supply
chain – in particular, focusing on the
responsible sourcing and human rights
elements of the supply chain.
These priorities were fundamental
to the creation of the sustainability
commitments in 2021 and remain
central to our ESG approach in 2022
and beyond. In the current year, we also
included sustainability and diversity
sections in the employee engagement
survey for the first time to ensure we
continue to understand our employees’
views and concerns in these areas.
Last year we launched our sustainability commitments along with
the framework for how we would measure progress.
UN SDGs
Our approach also considers the impact
of the United Nations Sustainable
Development Goals and the underlying
ESG risks we consider to be important
to the Group. These are detailed further
on pages 46 to 48. We also further
consider the
governance of our
ESG obligations
on pages 45 to 46.
27SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Environment
Environmental, social and governance
2022 net zero carbon
emissions
43,328MT
c70%
carbon reduction at 2030
from baseline (2021)
Our commitment
We have committed to net zero carbon
in SIG’s operations by 2035 at the latest
and as stated in 2021, we aim to achieve
this target by meeting the following
secondary goals:
− 80% reduction against total Scope 1, 2
and business travel emissions by 2035
(using 2021 emissions as a base year)
and offsetting any residual emissions;
− cars and forklifts (“FLTs”) to be 100%
electric by 2030; and
− commercial vehicles to be 100%
electric, hydrogen, or lower-carbon
alternative by 2035 (although this
continues to be dependent on the
pace of progress in the development
of external technology, especially
for HGVs).
2022
2030
Net zero carbon target
Our net zero carbon target includes
Scope1, Scope 2 and business travel
emissions.
We are working to achieve a Scope 3
framework, approach and target by the
end of 2023 with an aim to get SBTi (or
equivalent) approval of our full net zero
carbon plan and targets in 2024.
2022
2029
2032
2030
Net zero
carbon by 2035
During 2022, we have further developed
our path towards net zero carbon,
considering the relative maturities and
readiness of each of our operating
companies to make the changes required
to meet our overall commitment. Our 2022
progress on this pathway is set out on
pages 30 to 32.
FLTs
100% of FLTs will
be electric
Renewables
100% of electricity to be
generated by renewable
sources
Green branches
New branches procured
with sustainable, low-
carbon features
Cars and vans
100% of company cars
and vans with electric or
hydrogen engines
Roadmap
to net zero
28 SIG Annual Report and Accounts 2022
c40%
carbon reduction at 2025
from baseline (2021)
2035 net zero carbon emissions
100%
carbon reduction at 2035 from
baseline (2021) including offset
2025
2035
2035
2025
2023
Focus for 2023:
Further reduction in net zero carbon
emissions driven by:
− Ongoing trials and the subsequent
implementation of alternative fuels in
our large commercial vehicles (e.g.
Hydrotreated Vegetable Oil (“HVO”).
− Increase in lower-carbon car, van
and forklift truck fleet.
− Investigation into renewable energy
contracts in those operating
companies that have not yet
transitioned to one.
− Continued roll-out of sustainability
training and awareness
programmes.
− Introduction of carbon-related
incentivisation into the personal
objectives of senior management.
− Further development of carbon
reporting technology to allow more
real-time analysis of data.
Whole fleet
100% of the fleet to be
electric, hydrogen or
lower-carbon alternative
Product
100% of products to
have EPDs
Employee
engagement and
training
Finish roll-out of sustainability
training and awareness
programmes
LEDs
Replacement of all lights
with LEDs and all electrical
appliances with high
energy class
Waste
Zero SIG waste to landfill
achieved
Offset strategy
Offset strategy defined
29SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
2022 progress
We are committed to providing full and
accurate data for our carbon footprint, with
minimal reliance on estimates. In 2022, 99%
of information is based on actual data (2021:
97%). To provide the appropriate time and
resource to enable more accurate carbon
reporting and auditing of the process, our
emission accounting period is different from
the Group’s financial year. The current data
year is to 30 September 2022. We continue
to improve our data collection and accounting
processes, and the GHG information for the
period October 2021 to September 2022 has
been verified, to a limited level of assurance,
by Carbon Intelligence (third-party specialist
auditors) in accordance with ISO14064-3.
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 and, in 2021, broadened
these emissions to include third-party deliveries
as well as third-party transportation.
CO
2
emissions – Scope 1 – Direct
Metric tonnes
2022
Group
Metric tonnes
2021
Group
Metric tonnes
2020
Group
Metric tonnes
2022
UK
Metric tonnes
2022
Europe
Road vehicle fuel emissions
1
34,119 35,002 36,818 15,611 18,508
Plant vehicle fuel emissions
2
4,328 4,759 4,206 1,870 2,458
Natural gas
3
1,571 2,642 1,488 698 873
Coal/coke for heating
4
101 79 40 — 101
Heating fuels (kerosene and LPG)
5
410 479 490 81 329
Total 40,529 42,961 43,042 18,260 22,269
Data source and collection methods
1. Fuel cards and direct purchase records in litres converted according to Department for Business, Energy and Industrial Strategy (“BEIS”) guidelines.
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.
CO
2
emissions – Scope 2 – Indirect
Metric tonnes
2022
Group
Metric tonnes
2021
Group
Metric tonnes
2020
Group
Metric tonnes
2022
UK
Metric tonnes
2022
Europe
Electricity
6
– location-based 4,454 4,944 4,280 2,162 2,292
Electricity
6
– market-based
7
2,535 4,944 4,280 661 1,874
kWh
2022
Group
kWh
2021
Group
kWh
2020
Group
kWh
2022
UK
kWh
2022
Europe
Electricity consumption 20,475,964 22,795,687 17, 5 0 3 , 8 8 0 10,940,303 9,535,661
Data source and collection methods
6. Consumption in kWh converted according to International Energy Agency (“IEA”) guidelines.
7. Market-based approach reflects emissions from electricity that we have purposefully chosen. In our case this relates to renewable electricity contracts that we have
purchased in the UK and Germany.
Metric tonnes
2022
Group
Metric tonnes
2021
Group
Metric tonnes
2020
Group
Metric tonnes
2022
UK
Metric tonnes
2022
Europe
Total Scope 1 and 2 emissions – location-based 44,983 47, 9 0 5 47,3 2 2 20,422 24,561
Total Scope 1 and 2 emissions – market-based 43,064 47, 9 0 5 47, 3 2 2 18,921 24,14 3
Environmental, social and governance | Environment
30 SIG Annual Report and Accounts 2022
Total emissions on a market basis have fallen
9% from 2021 and 17% from the last pre-
Covid-19 “normal” year of 2019. Scope 1 and 2
emissions have now fallen 25% from 2019. Our
net zero emissions, which include only Scope
1 and 2 emissions plus business travel, have
decreased 10% from our baseline of 2021.
The UK and Germany have primarily driven
the reduction from 2021 with 100% of their
electricity now being provided through
a renewable contract which has a lower
conversion factor than a traditional electricity
contract. 17% of the Group’s electricity has
been generated from renewable energy
contracts in 2022.
Own fleet emissions continue to constitute a
significant portion of our total emissions (80%).
Emissions from this fleet have reduced 3%
from 2021 due to the gradual replacement
of vehicles with an electric/hybrid fleet and
a greater use of telematics throughout the
business. At the start of the year, 19% of all our
fleet were hybrid or electric, however by the
end of the year, this had increased to 24%.
CO
2
emissions – Scope 3 – Other indirect
Metric tonnes
2022
Group
Metric tonnes
2021
Group
Metric tonnes
2020
Group
Metric tonnes
2022
UK
Metric tonnes
2022
Europe
Third-party provided transport
8
5,061 4,866 249 250 4,811
Data source and collection methods
8. Distance travelled converted according to BEIS guidelines.
CO
2
emissions – Total emissions
Metric tonnes
2022
Group
Metric tonnes
2021
Group
Metric tonnes
2020
Group
Metric tonnes
2022
UK
Metric tonnes
2022
Europe
Total Scope 1, 2 and 3 emissions – location-based 50,044 52,771 47, 3 4 6 20,672 29,372
Total Scope 1, 2 and 3 emissions – market-based 48,125 52,771 47, 3 4 6 19,171 28,954
Total energy (MWh)
9
211,197 215,481 86,925 124,272
Conversion factor
9. UK Government GHG Conversion Factors for Company Reporting 2022 according to BEIS guidelines.
Emissions per £m of revenue
Metric tonnes
2022
Group
Metric tonnes
2021
Group
Metric tonnes
2020
Group
Metric tonnes
2022
UK
Metric tonnes
2022
Europe
Scope 1 14.8 18.7 23.0 15.5 14.2
Scope 2 – location-based 1.6 2.2 2.3 1.9 1.5
Scope 2 – market-based 0.9 2.2 2.3 0.6 1.2
Scope 1 and 2 – location-based 16.4 20.9 25.3 17.4 15.7
Scope 1 and 2 – market-based 15.7 20.9 25.3 16.1 15.4
Scope 3 1.8 2.1 0.1 0.2 3.0
Scope 1, 2 and 3 – location-based 18.2 23.0 25.4 17.6 18.7
Scope 1, 2 and 3 – market-based 17.5 23.0 25.4 16.3 18.4
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 2022, provided by BEIS, along with factors from the IEA list for 2022 have been used to calculate our
GHG disclosures. The data relating to CO
2
emissions has been collected, where practicable, from all the Group’s material operations. The 2020 data includes the businesses
classified as non-core in the financial statements for the year ended 31 December 2020 but excludes data relating to the Air Handling business that was disposed of in January 2020.
At a Group level, we have made significant
improvements in our carbon reporting with
monthly reporting now being received from all
businesses (as opposed to annual reporting in
prior years). This reporting covers Scope 1, 2
and 3 emissions (business travel and third-
party logistics) along with other metrics such
as fleet mix by fuel type plus the amount of
electricity which is generated by renewable
sources. This has allowed the businesses
to actively steer their emissions on a more
real-time basis and make timely, informed
decisions. We will continue to develop our
reporting throughout 2023.
31SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Each of our businesses are focused on
reducing carbon emissions and meeting
our net zero commitments.
Environmental, social and governance | Environment
UK
Fleet
The UK are installing HVO tanks at a select
number of sites to trial the use of this fuel
for their large commercial vehicles. HVO
is a lower-carbon alternative to diesel
which can be used in some of our existing
vehicles without any engine adaptations.
Estate
In Q1 2022, the UK switched their
electricity contract to a renewably sourced
energy contract which has a significantly
lower emission factor attached to it.
Poland
Fleet
Poland have used telematics to
communicate fleet vehicle location,
safety metrics, and engine diagnostics in
real-time; optimising the routes taken for
deliveries and ensuring the quickest path
is taken to maximise fuel efficiency whilst
reducing the impact on the environment.
Estate
Poland launched a renewable energy pilot
project to trial photovoltaic installation, the
replacement of gas heating with electric
heating, and the expansion of charging
points for electric cars.
France
Fleet
France have reduced the rotation of their
trucks by optimising loads so there are
fewer journeys needed. They have also
purchased two alternative fuel trucks that
use compressed natural gas as a lower-
carbon alternative to petrol/diesel.
Estate
France regularly hold challenges for
colleagues to educate and increase
awareness of how power consumption
can be reduced.
Republic of Ireland
and Northern Ireland
Fleet
Ireland are no longer accepting new lease
agreements for diesel or petrol cars and
forklift trucks.
Estate
Ireland submitted planning permission for
solar panels across four sites including its
regional distribution centre. This will allow
a portion of their electricity to be renewably
generated on site.
Germany
Fleet
The team in Germany have started to
explore alternative fuel options with a
focus on hydrogen-fuelled vehicles.
Estate
In Q3 2022, Germany switched their
electricity contract to a renewably
sourced energy contract which has
a significantly lower emission factor
attached to it.
Benelux
Fleet
99% of the forklift truck fleet in Benelux
is now electric.
Estate
Benelux are working through their estate,
replacing halogen and fluorescent lighting
with LED lighting.
32 SIG Annual Report and Accounts 2022
Innovative recycling
in Ireland
In the drive to meet our commitment
of zero SIG waste to landfill by 2025,
Ireland have engaged a company
called Envirogreen to propose bespoke
and eco-friendly solutions for waste
management and recycling.
As a recycling company not a waste
company, Envirogreen are able to buy
recyclables at competitive rates and
provide rebates for them, therefore
actively encouraging best recycling
practices across our sites.
Ireland also receive real-time reporting
that details the rebates, carbon savings
and recycling volume per site to detail
their progress and help them make
improvements where necessary.
Zero SIG waste
to landfill by 2025
2022 progress
A total of 14.5m tonnes of waste was reported
throughout 2022, a 3% increase from 2021.
Total waste diverted from landfill has however
increased by 1.1m tonnes with 92% of all SIG
waste now being diverted from landfill – an
increase from 86% in 2021 and 88% in 2020
and 2019.
Waste is measured via reporting from our
waste management companies who, in most
cases, can tell us whether our waste has been
incinerated, recycled or sent to landfill.
All businesses now have over 80% of their
waste diverted from landfill with a significant
increase in our Irish business, moving from
14% in 2021 to 87% in 2022. Our business
in Germany has had 100% of its own waste
diverted from landfill since 2005 following a
landfill ban that means that non-recyclable
waste is required by law to be biologically or
thermally transformed. We expect to see similar
legislation in our other key geographies in the
coming years and would expect to see c95% of
waste being diverted from landfill in 2023 and
c98% in 2024, before hitting 100% by 2025 in
line with our commitment.
Other key initiatives ongoing in the businesses
include:
• The UK initiated product packaging reviews
to reduce surplus and single-use plastic
in preparation for Extended Producer
Responsibility, a regulatory tool that requires
producers to be significantly responsible for
their post-consumer product. This is also
already in place in France and Germany.
• Ireland engaged a market-leading eco-
friendly recycling company to survey all their
sites and propose innovative solutions for
waste management.
• Conscious waste segmentation has been
a focus at our businesses in Poland and
Benelux with active waste segregation where
possible to allow for additional recycling
capability.
Our commitment
Our commitment is for zero SIG
waste to landfill by 2025. Our primary
responsibility is the SIG waste that we
directly control, including monitoring and
validating third-party waste contracts for
our sites. This will be achieved by waste
segregation, reuse of packaging and
paperless processes.
However, the nature of our role as a
distributor in the middle of the supply
chain, handling logistics between
customers and suppliers, means we are
already coordinating complex logistics
and breaking bulk, which helps reduce
on-site waste (both materials and
labour) in construction. We are also well
placed to support a circular economy
by recycling and repurposing materials
to reduce waste and raw materials
extraction.
Sustainable packaging for
a circular economy
Waste statistics
Total waste to landfill
Total waste diverted from landfill
% waste diverted from landfill
Sustainable
crop
Manufacture/
Design
Consumer
Recycle/
Compost
Recycling
sector
20202019
1,344
1,736
1,910
1,202
10,220
12,559
12,138
13,258
2021 2022
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Tonnes (’000)
16,000
60
65
70
75
80
50
55
85
90
95
%
88%
88%
86%
92%
33SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
2022 focus
To distil this broad commitment into an approach that makes sense for SIG, we have focused on
the following areas:
Understanding
the impact of
regulation
− More stringent standards for in-use emissions, e.g. Part L, Future
Homes Standard, higher rental EPC standards (UK), obligations to
install PV (France, Germany) and heat source replacement will lead to
growth in energy efficient categories (e.g. insulation, timberframe, PV
solutions, heatpumps, etc.) and the retrofit market.
− Product sustainability proposals e.g. the revision of the EU Ecodesign
Directive and EU Construction Products Regulation to increase use
of recycled content and sustainable packaging, and to bring more
consistency to product sustainability claims, will lead to medium-term
growth in low-carbon products. The requirement for more product
data points and more complex compliance needs means we need to
be on hand to advise customers on the best product for their needs.
Accelerating
the growth of
new sustainable
products and
solutions
− New and growing sustainable products in the year: light PV panels,
wood fibre and sheep wool insulation, synthetic roof tiles, green roofs.
− France sold €3.3m of bio-sourced insulation in 2022, targeting 10% of
insulation in the medium term.
− E-commerce: Poland launched a sustainability zone on its
e-commerce site.
Piloting new
models for
working with
early-stage
manufacturers
We are partnering with innovative start-ups, leveraging relationships
with research institutions, and investing seed capital to secure exclusive
distribution of new green material technologies.
Defining SIG’s
framework
for product
sustainability
Demand for “sustainable” products is growing but the industry is still
working towards common standards.
During 2022, we have been working on a pragmatic and transparent
approach to defining product sustainability in our range with clear
criteria over three dimensions: minimise embodied carbon, conserve
energy through their lifetime performance in a building and generate or
store renewable energy.
We are seeking feedback from suppliers and customers on the criteria
into 2023, and will use this approach to categorise and promote
sustainable products.
Partner with
manufacturers
and customers
to reduce carbon
and waste across
the supply chain
Our commitment
Our commitment is to partner with
manufacturers and customers to reduce
carbon and waste across the supply chain.
As a specialist distributor of products
central to building energy efficiency,
SIG is at the heart of the supply chain,
uniquely placed to help suppliers and
customers meet their own sustainable
construction ambitions.
SIG’s role is to provide choice, data
transparency and expertise on regulatory
compliance. We are working to identify
and promote more sustainable products
from new and existing suppliers.
Environmental, social and governance | Environment
34 SIG Annual Report and Accounts 2022
Bio-sourced products
Bio-sourced products are made from renewable
sources and are solutions derived from plant, animal
biomass or eco-friendly materials. They are an
alternative to traditional insulation, such as stone and
glass wools, which are very high consumers of CO
2
.
Our team in France are raising awareness and
accessibility of these alternative bio-sourced solutions
by creating bespoke catalogues and communications
outlining their benefits. These products improve
air quality, contribute to noise reduction and have
comparable thermal performance to traditional
products, but are better for the environment.
SIG Facades
During 2022, the Irish Government introduced a
range of grants to encourage citizens to retrofit their
homes to reduce carbon footprint.
One of the main initiatives is to encourage people
in older houses to increase the insulation levels. For
people living in detached houses the installation of
an External Wall Insulation (“EWI”) system is often the
most effective way to do this.
An EWI system involves insulation, reinforcement
mesh, fixings and renders, and SIG Ireland have a
long history of selling these systems to specialist
EWI subcontractors. In 2022, SIG Ireland created
a standalone division called SIG Facades to fully
service the growing requirements of this part of the
market.
35SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Scope 3 approach and framework
Linked to our commitment in this area is the
establishment of a framework for tackling the
Group’s Scope 3 emissions. We currently
report a small portion of Scope 3 emissions,
being business travel and third-party logistics
emissions. However, we are aware, given the
nature of our business, that our total Scope 3
emissions will be very significant and a material
portion of our total emissions.
To ensure that we approach this complex and
multi-layered topic in a structured way, we
will spend 2023 building a plan to articulate
our Scope 3 journey. This will include both
an internal appraisal of the Group’s readiness
to tackle this area as well as an external
assessment of the Scope 3 emissions
landscape, including what our peers and
those in our industry are reporting and
how they are approaching this topic.
By the end of 2023, we hope to have
completed a materiality assessment of those
Scope 3 emissions which are relevant to
SIG’s business, quantified these emissions,
and formulated a plan to capture, collect and
manage this data. Once we have this baseline
data, we expect to be able to articulate our
transition plan and targets along with our
approach to supplier engagement and any
technological enablement required.
Timber sourcing
We are conscious of managing our
supply chain – in particular, focusing on
the responsible sourcing and human
rights elements of the supply chain.
Given this, we ensure that all SIG
timber products in the Group are
FSC or PEFC certified.
SIG Assured
SIG Assured is the UKs compliance
tracking system that ensures that the
products we stock, by participating
suppliers, meet essential regulatory
compliance. Whenever UK customers
see the SIG “shield of assurance” stamp,
they can be confident that their purchase
is fully traceable and supported by SIG’s
compliance tracking system appraisal.
This stamp gives our customers peace
of mind that:
Stock items supplied by the Group’s
participating suppliers have been
considered against various legislative
requirements including:
− Registration, Evaluation, Authorisation
and Restriction of Chemicals (REACH)
− Safety data sheets (SDS)/(eSDS)
− Product safety and handling sheets
(where SDS is not warranted)
− Declarations of performance/
conformity (DoP/DoC)/CE Marking
− Restrictions of Hazardous
Substances (RoHS)
− European Timber Regulations (EUTR)
− Biocidal products
− Poisons and explosive precursors
− Psychoactive substances
− Conflict minerals
− Modern slavery
All products are supported by the
appropriate relevant documentation
All documentation is validated for legal
compliance
Environmental, social and governance | Environment
36 SIG Annual Report and Accounts 2022
Social
Our commitment
We are committed to being a health
and safety leader in building materials
distribution and to providing workplaces
that assure the safety, health and
wellbeing of our employees, contractors,
and stakeholders.
Health and
safety
We believe that a safe, healthy workplace is
the cornerstone of a sustainable, profitable
business. Our aim is to build a culture where
health and safety are an inherent part of our
business activities; where we strive to ensure
that everyone associated with our businesses
goes home safe and well.
Our employees support this, with health and
safety ranking as one of the top ESG priorities
for our internal stakeholders.
Our health and safety highlights for 2022 include:
• The engagement survey shows that 92% of
our employees feel safe at work. This is a 1%
increase on last year’s figures and continues
an upward trend from 2021. It is also higher
than the construction industry benchmark.
• We have reduced our Lost Time Injury
Frequency Rate (“LTIFR”) to 11.1 from
11.8 in 2021.
• Our near miss/hazard reporting has
increased by 17%, demonstrating our
open reporting culture and allowing us
the opportunity to prevent hazards from
becoming incidents.
Governance and structure
The ultimate responsibility for health and safety
rests with the Group CEO, the Board and the
Executive Leadership Team. This responsibility
is cascaded through the organisation via our
operating company Managing Directors and
their leadership teams.
Each operating company has a health and
safety team, supported by a central team of
experts and the Group Health, Safety and
Environment Director. At a Group level, the
Health and Safety policy sets the direction for
our businesses, who manage and monitor
their own objectives, plans and activities in
accordance with this policy.
The health and safety leadership team also
meet on a quarterly basis. This team comprises
the health and safety leaders in each operating
company and our central Group experts,
and is led by our Group Health, Safety and
Environment Director. Updates on progress and
initiatives are discussed with the aim of sharing
best practice and knowledge across the Group.
Regular comprehensive reporting from the
businesses to the Board and the Executive
Leadership Team also details progress on KPIs,
key initiatives and significant incident detail.
We are constantly seeking to strengthen our
health and safety capability and as such,
welcomed new members to our health and
safety leadership team in 2022, including a
new Group Health, Safety and Environment
Director, Julie Westcott. Our appointments this
year have brought significant expertise and
experience to the Group.
37SIG Annual Report and Accounts 2022
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Governance
Financials
Environmental, social and governance | Social
2022 progress
Health and safety performance
We are pleased to report that in 2022 we
achieved a 6% decrease in our LTIFR, with
a reduction to 11.1 from 11.8 in 2021. Our
employee LTIFR (excluding temporary and
agency staff) also reduced to 8.8 in 2022, from
9.2 in 2021. Strong performances in Benelux
and the UK led to both of these improvements.
11.8
12.7
11.3
11.1
LTIFR history
20202019 2021 2022
Correspondingly, we are pleased to report that
our severity rate has reduced by 5% to 33.2
in 2022. This is a good reduction giving us
reassurance that we are managing those risks
which could lead to serious and potentially
fatal injuries.
In addition, the “Total Recordable Incident
Rate” (using OSHA definitions) fell from 2.8 to
2.5, whilst our “Total Incident Rate” increased
by 18% indicating increasing awareness of the
importance of reporting all incidents, including
property and environmental damage.
This open reporting culture also led to a 17%
improvement in near miss/hazard reporting.
While our numbers are not yet at industry
average, we are pleased with this progress
and continue to work to encourage all our
employees, contractors and stakeholders
to report near misses, unsafe situations
and behaviours.
All of the performance data above covers 100%
of the Group’s operations.
The health and safety agenda
Last year, our health and safety agenda
was enhanced and supplemented with two
additional programmes focused on our estate
and leadership.
During the year, the estate programme has
reviewed the safety of our sites including
welfare facilities and traffic flow. Each business
was responsible for assessing its own sites,
allocating investment, and implementing
actions to ensure improvement. Critical site
works were completed during the year and in
the UK alone, over £3m has been spent on
improving our sites.
Poland
Poland have successfully maintained low levels of incident rates throughout
2022, driven by a number of effective programmes and initiatives which reflect
the high level of employee engagement the business has generated in this
area. Poland recorded the highest score in our recent employee survey when
asked whether health and safety was taken seriously in the business:
− Master driver competition – drivers compete to win the title of master driver.
The winner is determined from the telematic information which is fed back to
the fleet team, detailing how safe and energy efficient the driving has been.
This system also provides immediate feedback to the driver, allowing for
corrective action and the reduction of accidents in the future.
− First aid training – all employees were given first aid training, covering vehicle
rescue, emergencies and defibrillators. Poland also offered this training to
their employees’ children, who enjoyed the experience, whilst learning
about safety.
− Perfect warehouse – the distribution branches in Poland competed for the
accolade of the “perfect warehouse”. To win, the team needed to show
visible leadership, housekeeping, promotion of SIG values, compliance with
safe working practices and innovation in health and safety.
− Regular health events and news – the physical and mental health of
employees is supported through organised sport events (such as running
clubs), regular health-focused newsletters, and even special SIG sportswear
to promote inclusion in the events.
The second programme focused on
ensuring that our leadership, at all levels of
the organisation, were actively and visibly
leading by example when it comes to health
and safety. Across the Group a range of
activities have taken place, including initiating
health and safety reviews during regular site
visits, ensuring that employee concerns were
appropriately investigated and attending
relevant behavioural and leadership training.
Operating company highlights
Our businesses are at different stages of health
and safety cultural maturity and as such the
highlights below reflect this.
Germany have implemented a safety
“QuikCheck” process for all branches. This
process includes a list of safety expectations
against which branches will be audited. Actions
from the audit are entered into an application
which tracks the points raised through to
completion.
38 SIG Annual Report and Accounts 2022
Benelux have developed a scorecard of health,
safety and environmental compliance activities
which is completed and then reviewed at monthly
branch meetings. In addition, branch managers
carry out monthly safety toolbox talks and full
health and safety assessments of their branches,
with resulting actions closely tracked until
completion.
Ireland have continued with their behaviour-
based safety culture focusing on leadership,
engagement, communication and planning.
Considerable training has taken place to ensure
all senior leaders understand their roles and
responsibilities regarding safety with each leader
undertaking the Institution of Occupational Safety
and Health “Managing Safely” course. The safety
culture approach has been very successful in
reducing accidents and improving stakeholder
engagement.
The UK have developed a “10 Point Safety
Objective Plan” designed to minimise risks
through effective leadership, engagement and
managing safe workplaces. This process has been
created with the aid of safety workshops in which
leadership personnel listened to the concerns and
ideas of employees across our branches and sites
in the UK.
France have continued to invest in site facilities
and improvements, with specific attention on
racking, repairs and floor markings. In addition,
the focus has been on leadership training and
understanding of roles, responsibilities and
behaviours. This training has been very well
received at a senior management level and will be
cascaded throughout the organisation in 2023.
2023 focus
The success of the initiatives put in place in 2022
will provide the foundation for a new strategy
in 2023, based on active, visible leadership,
employee engagement and systems and
processes that are continually challenged and
improved, driving us towards excellence in our
workplaces and culture. To support the creation
of this culture we have commissioned a study
designed to benchmark us against industry best
practice. The ambition is for this study to be
completed in the first half of 2023, the results
of which will provide significant input into the
development of our new strategy in the second
half of 2023.
UK’s 10 point Safety Objective Plan
1. An engaged leadership team
All leaders within the business are trained to understand their
role in creating and maintaining a safe working environment
and culture.
2. Employee participation
Every employee has the opportunity to contact their regional
safety manager or anonymously report concerns to the safety
team. Outlining safety roles within the business means that
everyone has a way of engaging and being heard.
3. Minimise risk and reduce harm
Our processes are designed and reviewed to reduce risk and
minimise the chance of injury or ill health. Where a new risk
of injury is found we review our safety system and provide an
update to employees. Where risk is increasing as a result of a
change in our operations, this is clearly communicated.
4. Training designed to engage with our risks
Where we provide role-specific training, it is targeted and
focused on the risks as experienced in our operations to
maximise relevance.
5. Utilise our ISO45001 system to maintain
and improve our safety performance
Legal compliance is achieved and provides for the systemic
review, maintenance and management of policies, practices,
training and risk assessment.
6. Personal protective equipment (“PPE”)
Appropriate use and maintenance is the responsibility of those
that use it and their managers. Colleagues regularly check
that their PPE is in a usable condition and managers respond
immediately to any concerns raised, replacing as necessary.
7. Work equipment safety
Each business unit ensures that work equipment safety
is integrated into project plans prior to procurement and
is maintained through a robust, planned and preventative
maintenance schedule as appropriate.
8. Control of contractors
Through the adoption of safety standards in our procurement
of services, we ensure that safety is key to the operation of
any contractor on our sites.
9. Scorecard for safety
We establish clearly identified safety performance standards
with a scorecard of leading and lagging indicators to target the
reduction of incidents and the improvement in engagement
and leadership.
10. All branches and sites reviewed annually at a
minimum, with senior management involvement
In-person assessments take place with members of the safety
team and the results and findings are discussed with senior
management teams. At each board meeting the Business Unit
Director is responsible for providing a performance review.
Regional Directors are invited by rota to provide an update
on performance and celebrate success.
45001
39SIG Annual Report and Accounts 2022
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Governance
Financials
Our commitment
Our commitment is to be an employer
of choice in the building material
distribution business.
Our people
In 2022, our leaders, managers and HR
partners continued, with renewed purpose,
to embrace and respond to the personal and
professional pressures faced by our people
as they manage through an increased cost of
living, the prevailing economic climate and the
continuing impact of the Covid-19 pandemic.
We have been proactive in supporting them
financially where we have been able to, either
in base pay awards and/or through one-off
payments. In all cases, we have challenged
ourselves to provide the best we can for
our people in meeting their personal and
professional needs, from wellbeing and health
and safety, to ensuring effective learning,
career development and engagement at work.
More broadly, we have worked hard to
ensure we develop and maintain a working
environment that is fair and inclusive, so
our people can feel secure, proud and
valued, and empowered to make valuable
contributions to our business, individually and
through the teams of which they form part.
Our commitment to, and investment in, our
employees’ experience in the workplace is the
foundation of being an employer of choice in
the building material distribution industry.
Employee engagement
Our latest annual employee engagement
survey, conducted in October 2022, reflects
the investments we have made in our people.
Results were particularly positive and represent
significant improvement from the previous
year. Our people are proud to work for SIG.
They are highly committed to their work, the
organisation, and their teams.
Our overall engagement score was 73%, an
improvement of 2% from 2021 with a score
of over 80% in many of the countries in which
we operate. The survey was sent to all our
employees with a 73% response rate, which
compares favourably with the sector average
benchmark (67%). We have also improved
in key focus areas, particularly in vision and
leadership, communication and learning and
development. Our highest scoring area, a
reflection of our culture, remains health, safety
and wellbeing.
Alongside our engagement scores, we have
seen an improvement in our eNPS, particularly
important to our growth strategy, as we look
to hire and retain top talent in the industry. We
achieved an improvement in the eNPS score of
11 points from the 2021 survey, and 19 points
from the 2020 survey.
While pleased with these results and the
progress we have made in the last two years,
we know there is much more to do and improve
as we shape the culture, work environment
and employee value proposition that together
ensure the success and wellbeing of our
people, business and customers.
To that end, our leaders collaborated with Non-
Executive Director Simon King to run a second
Board Workforce Engagement programme
again this year. This comprised site visits to
the different businesses with small groups
that included a cross section of employees
from all levels, regions and functions. Over 170
employees participated and provided feedback
on their experience of working for SIG. Key
insights included:
• strong support for SIG as an employer and
as a Group;
• confidence in our locally-led strategy;
• improved communication within the Group;
• continuing push for long-term career
opportunities; and
• employees’ passion for innovation,
particularly in relation to the customer
experience and enabling our vision and
approach to sustainability.
We continue to listen, inform and enable, and
are investing in the channels that help us to
do this well, such as our Group-wide internal
communications platform, Workplace by
Facebook. All employees across the Group
have access to it and are encouraged to use
it to share ideas and experiences, receive
business updates, ask questions or to simply
stay in touch and support colleagues.
Environmental, social and governance | Social
40 SIG Annual Report and Accounts 2022
Employee wellbeing
At the centre of our commitment to employees
is ensuring their wellbeing, particularly in
today’s economic and social environment.
To that end, leaders in each of our operating
companies have introduced wellbeing
programmes and initiatives to support their
employees. These are underpinned by our
Group-wide employee health and wellbeing
policy and training for all employees, aimed
at helping them to embrace their own
responsibilities for keeping themselves and
their colleagues safe and well.
In addition to certain one-off payments, our
operating companies have provided other
means of support to help our people through
challenging times.
These include financial planning advice and
access to employee assistance support and
counselling where required, alongside local
campaigns to raise awareness and provide
advice and training for our people to help them
look after themselves and their colleagues. In
some of our countries, we also have a number
of nominated individuals trained in mental
health first aid training.
Our employee survey indicated a 74% positive
response when our employees were asked
about how the Group supports their health
and wellbeing, a significant improvement on
our 2021 score. We will continue to explore
and innovate in this area in future.
“ Our commitment to our
people is to make sure
they feel safe, proud, and
valued. Their health and
wellbeing are integral to
this. Now more than ever,
we will do what we can
to support, educate and
provide opportunities for
our people to stay happy
and healthy at work.”
Julie Armstrong
Chief People Officer
Health and wellbeing in Poland
In 2022, Poland have developed a wellbeing channel
on their internal communication platform, with the
aim to both educate and promote wellbeing across
the business. The channel communicates daily posts
on topics including stress, emotions, healthy eating,
sleep, exercise, sense of purpose, appreciation,
burnout, talking to others, and social support with
information, tips and contacts for additional support.
There are regular webinars to inform and provide
support and regular opportunities to participate in
team events and charity initiatives. At the end of
2022, Poland have started to implement an externally
provided platform to expand the employee benefits
offering in this area and provide increased support
from subject matter experts.
Poland’s efforts were recognised by colleagues in
the recent employee engagement survey where
Poland scored the highest eNPS score in the Group
(+37) and the highest operating company response
rate (93%), with health, safety and wellbeing being
the highest scoring area. In addition, Poland have
also received a number of awards from external,
well-respected bodies, the most prestigious being
the award for Social Responsibility Leader “Good
Employer 2022”. The judges of the programme
were impressed with SIG’s significant involvement in
activities supporting its colleagues, particularly with
their health and wellbeing, and publicly recognises
SIG as a “reliable company”, sensitive and responsive
to the needs of its colleagues.
41SIG Annual Report and Accounts 2022
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Governance
Financials
Diversity, Equality, and Inclusion
(“DEI”)
As part of our ambition to be an employer of
choice in the building materials distribution
sector, we recently launched our vision
and commitments to diversity, equality and
inclusion. In doing so, we have focused
practically on how to help our leaders put
the relevant level of focus in this area.
Our vision is to develop a culture and working
environment that is fair and inclusive and a
workplace in which our employees can feel
safe, proud, valued and enabled to make
meaningful contributions to our business.
Our DEI commitments help us to deliver our
vision by outlining the key areas in which we
will apply our focus. We want to:
• create an inclusive environment where
everyone is listened to, treated fairly and
with respect;
• ensure our ways of working, processes and
policies are clear, impartial and fair; and
• create opportunities to improve the diversity
of our workforce across all our businesses.
In addressing these objectives this year, we
conducted a Group-wide benchmark review
and a reputational risk analysis to understand
how we compare to industry peers at a Group
level and on an individual country basis. We
have also set up a Group-wide monthly DEI
forum with representation from all areas of the
business. This group developed and launched
our new DEI policy and is responsible, going
forward, for driving our agenda and prioritising
key activities for the business in meeting our
DEI commitments. As part of its remit, the
forum is now championing ways to ensure
we have an inclusive working environment in
all our businesses and locations. It also acts
as a channel to challenge the businesses in
terms of practice, approach and development,
particularly in supporting underrepresented or
disadvantaged groups.
Each business has delivered an initial plan
containing initiatives such as creating their own
DEI forum, employee resource groups, working
with external partners to attract candidates
from particular diverse groups, reviewing
employment policies and processes and
providing communications, tools and
resources to raise awareness from the
wider employee base.
In our latest employee engagement survey,
84% of our colleagues answered positively
when asked if they feel they are treated with
respect regardless of their age, gender, and
cultural background, 3% higher than 2021.
We have made substantial progress this year
from a DEI perspective, improving related
communications, dialogue and engagement
and upgrading our support for international
campaigns and programmes. In 2023, the key
areas for focus will include ensuring better
channels to attract, promote and retain diverse
talent, developing the DEI measures to report
progress, and continuing to deliver appropriate
training to enhance knowledge and support.
All employees
7, 2 0 5
Board members
10
Executive Leadership
Team
13
European Leadership
Group
103
Male
Female
Environmental, social and governance | Social
78%
22%
80%
20%
77%
23%
83%
17%
Gender diversity figures
(as at 31 Dec 2022)
Aligned to the Group’s vision and
commitments, France developed their own
DEI plan and approach with the aim to
really bring to life what diversity, equality
and inclusion means for our people and
celebrate the differences that having a
diverse and inclusive workforce can bring.
A diversity committee was set up, with
representatives from the senior leadership
team and their first achievement was
developing a DEI Charter for all colleagues
to sign up to. The Charter details
six commitments to DEI;
1. Promote non-discrimination principles
in how we work.
2. Communicate our principles internally
and externally.
3. Provide awareness and training in
recruitment processes to ensure open
and inclusive recruitment.
4. Develop the diversity of
employees by increasing the
representation at all levels.
5. Have DEI as an agenda point in
Works Council discussions.
6. Assess and measure progress
of initiatives and commitments.
The charter was launched via a
webinar to over 1,000 employees,
accompanied by a short film
showcasing the power of diversity
within the business which featured
a number of SIG employees in
addition to the Managing Director
and the HR Director. The webinar
also asked for volunteers to be
champions to support the delivery
of the commitments across the
business who will meet regularly and
be empowered to make decisions and
take initiatives forward.
DEI in France
42 SIG Annual Report and Accounts 2022
Talent and succession
Helping colleagues to develop and realise
their potential to deliver success today,
tomorrow and into the future is a crucial
pillar of our People strategy and focus on
growth. Our success results from a profound
commitment to provide our people with the
skills and knowledge they need, and the career
development opportunities they deserve.
Apprenticeship programmes are a key part
of how we both attract and develop talent
and how we ensure we recruit individuals
from different backgrounds with different
experiences and skill sets. Currently we have
over 200 apprentices across the business
and we aim to increase that to over 300
during 2023. We offer technical training,
sales competency learning and leadership
programmes across our businesses. Our
online, virtual, and in-person training platforms
ensure learning for all employees as they seek
new opportunities and develop skills that
benefit them personally and professionally.
In 2022, we used our Group-wide talent
framework to measure the level of capability
in key roles throughout the organisation,
identify employees with high potential, develop
succession plans for critical roles, and
locate candidates for potential development
moves. We have also undertaken a thorough
organisational capability review and established
our critical capabilities to develop a more
relevant and strategic talent framework and
principles to embed within the business moving
into 2023.
This enables us to link capability and potential
to the needs of the business more readily. We
have also recently launched our talent and
development policy which outlines our aims,
guiding principles and approach to all talent
and development activity.
Providing development opportunities is a key
priority as we underpin and support our talent
framework and performance management
processes. In developing our pipeline of
leadership talent to support the Group now
and in the future, the Executive Leadership
Team have each completed a development
and assessment programme consisting of
psychometrics, feedback from colleagues
and an individual leadership session, followed
by feedback and development planning. The
process also helped to develop our Group-
wide leadership competency framework which
articulates what SIG needs from its leaders.
The development programme and competency
framework are currently being rolled out to the
next level of leadership.
Performance Manager, our online platform
for personal development reviews, which
was launched in 2021, has been further
developed to make the process of setting
clear and realistic objectives even easier and
has increased the population of the workforce
using the system.
Apprenticeships in the UK
The UK have been running apprenticeship
programmes for over a decade. 2022 saw 60
apprentices on programmes across a variety of
disciplines, including customer service, business
administration, trade counter, warehouse,
procurement, sales, finance, HR and IT.
Jack Lawless, from our Interiors business in Leeds,
joined the business in August 2021 as an apprentice.
He was offered an extended apprenticeship
programme, with the aim of developing him into
a skilled and valued member of the sales team.
Jack’s development has been so impressive that
his success has been recognised within the
business and externally as he was shortlisted
(one of three from 2,000 applications) for
the Lifetime Training’s
Recruited Apprentice of
the Year 2022 award and
received the Construction
Accessories Rising Star
award 2022.
Apprenticeships in Germany
Germany have once again welcomed apprentices into their
business, with 26 enrolled in their successful apprenticeship
programme in 2022.
The programme starts with a three-day induction whereby the
apprentices have the opportunity to get to know each other, meet
colleagues from the wider business and attend a dinner with the
MD and senior management in order to understand more about
the business.
The programme then covers a number of disciplines ranging
from operational management, sales, office management and
warehouse logistics, with the apprentices working as a key
member of the teams. The programme is for three years and
there is an opportunity for all apprentices to secure permanent
employment at the end of the programme.
43SIG Annual Report and Accounts 2022
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Governance
Financials
Community and charity
We are immensely proud of the part our
colleagues play in both community and
charity work. Our belief is that no one knows a
community better than those who live and work
there, and we actively encourage, support, and
provide resources for our people to take part in
community, local and national charity initiatives.
Developing links with our local communities,
and the people in them, is key as we continue
to enhance the part we play to support them.
We are committed to local employment in the
markets in which we operate, and where we
need to recruit externally we use in-house
or local recruitment firms in that market.
We do not operate an expat-based
employment model.
In 2022, we set up a Charity and Community
network forum in which all of our businesses
are represented. The forum meets bi-monthly
and promotes, champions, and encourages
SIG to be an active member of the communities
in which we operate. It supports the
communication, delivery and measurement
of local and Group initiatives and members
share ideas and initiatives while representing
their businesses on any Group-wide proposals.
The key output of the forum for the year has
been introducing a policy for all employees to
have the opportunity to volunteer for charitable
or community support activities for a minimum
of one day per calendar year.
All of our businesses have been actively
involved in charity and community work this
year – the UK have continued to fundraise
for Cancer Research UK and Rainy Day Trust
and held their second annual charity ball in
November 2022. Germany ran a number of
Christmas campaigns donating monies to local
charities and Poland continued to run learning
sessions for children in the communities in
which we work.
Perhaps the most significant contribution from
colleagues this year has been in support of the
people of Ukraine. Group-wide, we worked
with and donated to the Disasters Emergency
Committee Ukraine humanitarian appeal
through a matched funding scheme. Each of
our businesses has also donated directly to
several front-line agencies. Our colleagues have
provided both financial and practical support,
often on a personal level, to help those who
have been affected. Poland supported a charity
organisation called Siepomagaour and set up
the “SIG for Ukraine” donation account. Each
of our businesses made a significant donation
to the account, along with SIG employees,
customers, and suppliers across the Group.
We will continue to raise awareness of the
fund on Poland’s website and social media
channels.
Priorities for 2023
• We will continue to deepen and broaden our
investment in being an employer of choice.
This is the bedrock of our People strategy
and activities. In particular, we will further
strengthen how we best support the physical
and emotional wellbeing of all our people.
• Attract and retain top talent at all levels and
provide developmental, promotional and
succession opportunities for our people.
• Support the development of further
innovation.
• Recognise and reward strong performance.
• Refresh and sustain a culture of diversity,
equality and inclusion throughout our
organisation.
Finally, as we take action in response to the
feedback from the employee engagement
survey, we will continue to implement improved
systems and processes, further improve our
two-way communications, and continue to
celebrate the success of all our employees.
Environmental, social and governance | Social
Charity fundraising in the UK
The UK held their second annual charity fundraising gala in 2022, raising
£81,000 and taking the total amount raised for nominated charities, Rainy Day
Trust and Cancer Research UK, by SIG initiatives in 2022 to over £100,000.
The share of the money donated to the nation-wide cancer charity is being
used to support research that will help develop new treatments, while the
money donated to Rainy Day Trust is providing immediate financial support for
individuals and families in the construction industry who find themselves simply
unable to manage.
The gala event, which included fire-eating, aerial acrobatics and cabaret
performances, was made a success through the generous support of
hundreds of SIG’s suppliers. It was the culmination of a fundraising year
which had seen numerous events taking place throughout the organisation
at individual branches and offices.
The SIG Fundraising Committee has set the ambitious target of increasing
the fundraising total even further in 2023.
44 SIG Annual Report and Accounts 2022
Governance
Our full governance report can be seen on
pages 68 to 131. This section sets out our
governance of ESG, including climate-related
disclosures and key ESG principles.
Climate-related disclosures
In 2021, the Financial Conduct Authority
introduced the mandatory Task Force on
Climate-related Financial Disclosures (“TCFD”).
The TCFD recommendations are supported by
11 disclosures that require the Group to provide
detailed information on how we are assessing
our climate-related risks and opportunities, what
we are doing to mitigate the risks of climate
change, and also provide transparency about
how the risks and opportunities are governed.
We have addressed how we have complied
with these recommendations on page 53.
Board
Responsible for the establishment and oversight of the Group’s
purpose, strategy, and behaviours, including the associated
climate-related risks and opportunities
Audit & Risk
Committee
Responsible for oversight
and assessment of the
TCFD disclosures
Sustainability
committee
Providing thought
leadership and advice
to the CEO/CFO on
climate-related risks and
opportunities
CEO/CFO
Responsible for proposing
and delivering the Group’s
strategy, including
the management of
climate-related risks and
opportunities
Executive
Leadership Team
(“ELT”)
Responsible for delivery
of the Group strategy
alongside management
of operational issues,
including climate-related
risks and opportunities
Employees
Responsible for adhering to the Group’s strategy on a
day-to-day basis, including ways to manage climate-related
risks and opportunities
Remuneration
Committee
Responsible for setting
relevant climate-related
incentives for the Board
and senior management
Operating
company MDs
Responsible for the
operating company
delivery of the Group’s
strategy, including
management of climate-
related risks and
opportunities
Governance and
management structure
of climate-related
matters
The governance of climate-
related matters, amongst our
broader sustainability
commitments, is as follows:
45SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Governance
The Board recognises the severity and
complexity of climate change and the need for
immediate and meaningful action. Alongside
this, the Board also recognises that the Group
has a long and rich heritage in delivering energy
efficient solutions to customers and that there
are significant opportunities for the Group
from climate-related matters and the drive for
sustainable construction. Its role in the year
has been to ensure that the Group’s approach
to such risks and opportunities is balanced,
measured and appropriate for our business.
In the prior year, the Board approved the five
sustainability commitments discussed on page
27. In the current year, the focus of the Board
and senior management in relation to climate-
related matters has been as follows:
• understanding our progress against our
climate-related commitments, including:
− reviewing the interim targets towards our
carbon reduction and waste reduction
commitments
− understanding the improvements made in
carbon reporting to facilitate better control
and management of our carbon emissions
and waste
− reviewing and challenging operating
company net zero transition plans
towards 2035
• authorising the roll-out of a comprehensive
communications strategy to ensure that the
sustainability commitments are understood
at all levels of the organisation, including
approving a new sustainability policy;
• focusing on our commercial agenda
with respect to sustainability including:
understanding the impact of regulation
on our business; defining a framework
for categorising product sustainability;
accelerating the growth of new sustainable
products and solutions; and piloting new
models for working with innovative early
stage manufacturers;
• reviewing the climate-related risks identified
in the Group and ensuring that there are
appropriate mitigations in place; and
• understanding how our carbon and waste
reduction plans, plus the opportunities we
see from climate-related matters, have been
embedded in the Group’s budgets and
medium-term plans.
In 2023, we will look to further formalise
the reporting that the Board and senior
management see in respect to the progress we
are making against our commitments and the
opportunities we have identified. This will be
done on, at least, a quarterly basis.
The Board continues to ensure that there is
appropriate climate-related expertise within the
business and in 2023 will continue to build on
this level of knowledge and understanding.
The Board is assisted in its duties by the Audit
& Risk Committee and the Remuneration
Committee. The Audit & Risk Committee has
the responsibility to ensure that the Group’s
TCFD reporting is appropriate, transparent and
representative of the position of the Group in
this area. The Remuneration Committee has
decided that, for 2023, there will be an ESG
objective that will be used as part of personal
objectives in the bonus scheme for certain
senior management.
The CEO is ultimately responsible for delivering
the strategy of the Group, including management
of climate-related risks and opportunities. He
is supported by senior management who have
the responsibility to deliver this strategy on a
day-to-day basis and to ensure that climate-
related matters are appropriately cascaded
through the business. This includes:
1. Sustainability committee – this committee
includes the CEO, CFO, Chief People
Officer, Group Strategy Director, Group
Health, Safety and Environment Director,
senior representatives from the operating
companies and sustainability subject matter
experts. This committee, whilst not a Board
Committee, has been instrumental in driving
our sustainability commitments forward and
providing thought leadership and advice
on all areas of climate change risks and
opportunities in the Group. This committee
meets monthly.
2. Operating company MDs – each MD is
responsible for embedding the Group’s
strategy into their operating company. This
includes both understanding and mitigating
the climate-related risks noted in the Group
whilst also harnessing the opportunities that
climate-related matters bring. Each MD is
supported by sustainability specialists who
are driving operating company specific plans
to meet the challenging commitments we
have set ourselves, both in terms of our path
towards net zero, and also ensuring that
we continue our tradition of bringing energy
efficient solutions to the market.
3. ELT – comprised of the Group’s most
senior leaders, the ELT is responsible for
the operational delivery of the Group’s
strategy. They form a key role in developing
the approach, focus and day-to-day
management of climate-related matters
alongside ensuring that the performance
against our commitments is monitored
appropriately and in line with the overall
strategy. The ELT meets regularly.
Strategy
Climate-related risks and opportunities can
include risks and opportunities from physical
events, such as extreme weather events, or
risks and opportunities because of a transition
to a low-carbon economy.
Acute physical risks
The Group does not consider acute physical
risks such as drought, flooding, wildfires and
hurricanes to be material strategic risks given
that the Group, along with the majority of its key
suppliers and customers, operates in the UK
and Ireland, France, Germany, the Netherlands,
Belgium and Poland. Flood risk could be a
consideration but based on an external review
of our branch network, only a small number of
our branches have a high flood risk attached
to them, leading to minimal risk for the Group’s
strategy.
Further analysis on the potential impact of
physical risks on our supply chain confirmed
that the risk to the Group was not material
due to:
• the Group’s ability to pivot to new suppliers
and supply routes should a significant
physical event occur;
• the location of our key suppliers in areas
of Europe that are less exposed to acute
physical risks; and
• the mitigation strategies of our key suppliers
to physical risks, which include:
− ensuring physical risks are built into
forecasts and risk modelling when
considering new expansions or sites;
− implementation of risk prevention policies
that minimise the impact of significant
events should they arise. This includes a
special focus on sites with high exposures
to natural disasters and business continuity
plans; and
− diversified manufacturing sites which allow
supply to be maintained from areas of the
world not impacting by a particular
physical event.
Environmental, social and governance | Governance
46 SIG Annual Report and Accounts 2022
Transition risks and chronic physical risks
In terms of transition and chronic physical risks, the Group considers short, medium and long-term horizons to be as follows: short-term is within the next
3 years (in line with our viability review period); medium-term is 4-10 years; and long-term is over 10 years. The table below sets out the main climate-
related transition and chronic physical risks that the Group faces alongside proposed mitigating strategies and the impact on the Group’s strategy.
Risk Description Mitigation
Impact on
strategy
1
Specific climate-related risks
Removal of fossil
fuels from our fleet
(S/M/L)
Vehicle emissions remain the single largest contributor
to our carbon emissions. There is a significant degree of
uncertainty regarding the optimum future technology for
our heavy-duty fleet and there is therefore risk regarding
what and when any investment in new technologies should
be made.
Pages 28 to 32 set out our progress and future plans for
decarbonising our fleet. Whilst the most cost-effective
route for decarbonising heavy-duty vehicles remains the
biggest uncertainty, we are starting to trial the use of
alternative fuels, i.e. HVO, and will continue to work with
our fleet partners and manufacturers to assess the most
viable long-term alternatives.
High
Waste
management (S)
There is an increased likelihood of greater regulatory
pressure to ensure that, in addition to the management
of SIG’s “own waste”, companies will become liable for
product waste, particularly with regards to “end of life” and
“embedded carbon” obligations. Any such requirement in
the near term would present significant challenges in terms
of reverse logistics processes and costs.
Our commitment to zero SIG waste to landfill by 2025
is driving several waste initiatives in the Group. Whilst
this commitment is currently our focus, in 2023 we will
expand our thinking to include non-SIG waste and ensure
that we are well placed to support the circular economy
by recycling and repurposing materials to reduce waste
and raw materials extraction.
Medium
Product carbon
data (S/M/L)
There is a risk that we either lack or do not have
access to the appropriate degree of detailed product
or manufacturers’ data to satisfy customers’ needs
with regards to their own internal ESG requirements or
sustainability drivers.
Product data quality remains a focus area for our
operating companies, who continue to monitor,
assess and upgrade their product data requirements,
capabilities, and governance considering ongoing
changes in business needs and regulation.
Medium
Energy efficiency
(property portfolio)
(S/M)
There is a risk that the inherent age and construct of
our branch estate impacts our ability to drive enhanced
energy efficiency across our property portfolio. This has
the potential to create reputational impacts and potential
wellbeing issues for the employees in the branches.
We expect that all new branches procured or leased
will have sustainable, low-carbon features included.
For the existing estate, branches are being upgraded in
a controlled manner, where needed, with LED lighting
being used to replace traditional lighting and other energy
initiatives being put in place to reduce energy usage.
Medium
Chronic physical
risks (M/L)
Frequent summer heatwaves restrict or impact summer
construction periods whilst higher winter precipitation
and more intense storm events affect outdoor winter
construction. This may have an impact on how
construction projects are scheduled, planned and
executed.
Chronic physical risks are longer-term shifts in climate
patterns. The relatively long-term nature of the risk will
allow the Group time to formulate a sustainable response
to the changing weather patterns, alongside its suppliers
and customers.
Medium
Use of carbon
offsets (L)
SIG has set net zero carbon targets and may use carbon
offset schemes to balance harder-to-reduce emissions.
There is a risk that sufficient “quality” and economically
viable offset schemes may not be available to meaningfully
mitigate any carbon target shortfalls.
We are committed to achieving our carbon targets and
will identify and prioritise the key enablers to reducing our
carbon emissions and ensure that offsets are utilised only
as a last resort.
Medium
Energy market
volatility (S/M)
Conflict between long-term decarbonisation targets and a
desire to manage uncertainties presented by unpredictable
energy markets results in governments delaying or failing
to make the necessary infrastructure investments to
support the transition to a green economy. This impacts
the industry’s ability to deliver its carbon reduction plans.
While recognising the impacts of government policy and
regulation on our decarbonisation strategies, we continue
to assess our planned contribution to reducing carbon
emissions on the basis of the benefits to SIG and our key
stakeholders and customers. We remain committed to
their execution and the realisation of their benefits.
Medium
Grid electrification
capacity (S/M/L)
According to the World Economic Forum, the electrification
of cars is likely to increase the total electricity demand
upwards by 10-20% globally. There is a risk that local
power grids and transmission network capacity and
infrastructures are unable to accommodate the increased
volume of required charge points or the capacity of local
transmission networks to handle increased peak loads to
support recharging.
While we continue to seek opportunities to utilise
alternative technologies to reduce our carbon footprint,
we recognise that the capacity of local infrastructures
to support the introduction of these technologies may
impact the speed or scope with which these initiatives
are introduced.
We continue to work with key partners and stakeholders
to ensure that any constraints are identified, risk
assessed and, where possible, mitigated prior to the
implementation of new technologies and any additional
costs are considered as part of our investment appraisal
processes.
Medium
1. The risk noted above that has a “High” impact has been referenced as part of the wider ESG risk disclosed in the Group’s principal risks and uncertainties on page 59.
Risk classification and prioritisation has been determined based on complexity and the materiality of the cost of risk reduction. We anticipate the impact of the climate-related
risks to reduce over the medium/long term as we gain more certainty and clarity on our detailed plan to achieve net zero carbon.
(L) Long-term horizon (M) Medium-term horizon (S) Short-term horizon
47SIG Annual Report and Accounts 2022
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Governance
Financials
Risk Description Mitigation
Impact on
strategy
1
Other ESG risks
Health and safety
compliance
There is a risk that poor organisational arrangements
or behavioural culture with regards to health and safety
compliance directly contribute to a significant health and
safety failure, resulting in enforcement action, penalties,
reputational damage, or adverse press coverage.
The Group Health, Safety and Environment Director is a
member of the Executive Leadership Team and provides
strategic leadership for all matters relating to health
and safety. She is supported by local health and safety
managers, embedded in each of our businesses, who
provide leadership and support as well as providing
regular monitoring and reporting of key performance
metrics and the status of local actions and initiatives
(see pages 37 to 39 for further details).
High
Employee
wellbeing
There is an increasing risk regarding how the increased
cost of living, mental health and wellbeing are increasingly
interconnected.
Each of our operating companies has introduced
programmes and initiatives to continually support
employees. These are underpinned by a Group-wide
employee health and wellbeing policy and training
for employees to outline their responsibilities to keep
themselves and their colleagues safe and well
(see page 41 for further details).
High
Diversity and
inclusion
There is a risk that SIG’s relative lack of diversity in the
workforce is a missed opportunity to tap into additional
sources of new employees and talent, in addition to
potentially contributing to adverse reputational risk.
Our DEI policy, which is mandatory for all employees to
review and understand, outlines both management and
employee responsibilities in this area. The policy sets out
our aims to encourage, promote, and maintain an inclusive
and supportive work environment which reflects the rights
of individuals to be treated fairly and with respect and
enables them to fulfil their potential. There is also a Group-
wide DEI forum which comprises senior representatives
across the Group, who are dedicated to progressing the
DEI agenda (see page 42 for further details).
Medium
Capability and
capacity
There is a risk that SIG lacks the necessary capacity,
expertise and capability to manage the full scope of both
external and internal ESG reporting activities and is unable
to provide accurate, complete and timely ESG data. This
risk will be exacerbated by increasing regulatory reporting
requirements due to take effect in the near term.
In 2022, we used our Group-wide talent framework to
measure the level of capability in key roles throughout
the Group, including the ESG organisation. We identified
employees with high potential, developed succession
plans for critical roles, and identified candidates for
potential development moves to ensure we have a talent
and succession plan to meet the current and expected
ESG requirements (see page 43 for further details).
Medium
New and emerging
legislation
There is a risk that SIG fails to effectively scan, impact
assess and scenario plan for new and emerging legislation
or standards. This may result in regulatory censure,
penalties or negative reputational impacts.
The Group operates with a strong governance
framework, with policies and procedures in place to
ensure compliance with all relevant legislation. The Group
has a General Counsel who is a member of the Executive
Leadership Team and who is supported by a dedicated
in-house legal and company secretarial team at a Group
and operating company level. Additionally, use is made of
external legal support where required to ensure all new
and emerging legislation that is relevant to the Group is
understood and responded to appropriately.
Medium
1. The risks noted above that have a “High” impact have been referenced individually or as part of the wider ESG risk disclosed in the Group’s principal risks and uncertainties
on pages 58 and 59. Risk classification and prioritisation has been determined based on complexity and the materiality of the cost of risk reduction.
Environmental, social and governance | Governance
48 SIG Annual Report and Accounts 2022
Opportunities
Climate change presents a significant number
of opportunities for the Group which are
already built into our strategy. As a specialist
distributor with pan-European scale and
heritage in energy efficiency, SIG is uniquely
placed to support sustainable construction by
increasing transparency to carbon efficiency,
accelerating access to low-carbon solutions,
and enabling circularity. Our category mix is
well positioned, with both insulation and roofing
critical to building energy performance and
addressing product sustainability.
Our commercial priorities and opportunities
centre around:
1. Responding to regulations in the energy
performance of buildings and the need
for enhanced building materials product
sustainability – the resulting growth in
the retrofit market and in energy efficient
categories such as insulation, timberframe,
PV and heat pumps, as examples, will lead
to significant tailwinds in many of our core
categories and will accelerate the growth of
lower embodied carbon products, especially
insulation, roofing and plasterboard. It will
also lead to the expansion of our design
and specification advice proposition which
provides data-driven technical advice based
on knowledge of operational and embodied
carbon performance of specific products
across multiple suppliers.
2. Accelerating the growth of new
sustainable products and solutions
a. Insulation – new lower carbon insulation
products have been introduced such as
wood fibre insulation and sheep’s wool
insulation. France, as an example, is
targeting 10% of insulation sales from
bio-sourced products in the medium term.
b. Sustainable roofing solutions – we are
expanding and promoting our sustainable
roofing solutions including lightweight
synthetic roof tiles, natural slate tiles,
green/brown roofs and single ply
membranes.
c. Solar panel market innovation – driven
by legislation in new builds and rising
energy costs, the market for solar panels
will increase significantly. We are building
capability to ensure we have complete
solutions for pitched roofs, flat roofs,
industrial buildings and rainscreens.
d. Small scale drylining options – supporting
and incubating emerging suppliers in
low-carbon plasterboard solutions and
natural alternatives to steel for stud and
track walls.
3. Partnering with early-stage innovators to
develop new products and solutions – we
are partnering with start-ups and academic
institutions, leveraging our network and
customer bases to bring new sustainable
products to market and demonstrating the
Group’s value as an innovation partner.
Impact on financial planning and financial
statements
The largest financial impact from our carbon-
related risks is the cost involved with removing
fossil fuels from our fleet. The strategy for
transitioning the fleet to a lower carbon basis
is to replace aged vehicles with lower carbon
alternatives as and when the leases naturally
renew and to focus on a short to medium-term
transition to lower carbon fuels which can be
used in our existing fleet. There are currently no
plans to accelerate the transition of the fleet to
lower carbon alternatives over and above the
natural lease cycle. This is because:
• the cost to break the leases and accelerate
the renewal of the fleet with lower carbon
options is prohibitive;
• there is also little to no availability for low-
carbon HGVs, at least in the near term;
• the national charging networks are currently
insufficient to support our charging needs –
national infrastructure plans are required to
make the option financially viable;
• many of our branches will not have the
power capacity currently to support charging
requirements or hydrogen provision;
• the currently available electric HGV range
does not support our delivery structure – it
is most suitable for long routes with no stops
which is not common in our business; and
• vehicle solutions are still in development –
OEMs are currently uncertain on whether
electric, hydrogen, battery or hybrids will be
the favoured solution.
Using our strategy, we are forecast to meet our
net zero carbon goals by 2035 and therefore
there is currently no need to accelerate
the replacement of the fleet to meet our
commitments.
The costs of pursuing this strategy over the
short term have been factored into our 2023
budget and medium-term plans by each
operating company. Over this period, these
costs largely relate to the transition of our car
and forklift fleet to lower-carbon alternatives
and the gradual transition to fuels such as
HVO in our large trucks.
Whilst the total cost of novating the fleet on
renewal of the lease is material to the Group,
the incremental cost of choosing to renew with
lower carbon vehicles instead of traditional
vehicles is not material. In the UK (which has
40% of our emissions), the incremental cost
of novating this fleet is c£0.8m in 2023, 2024
and 2025. Similarly, the cost of building the
infrastructure to support the move to HVO fuel
in the UK in some of our trucks is less than
£100k per annum. HVO fuel is not expected to
have any significant incremental cost impact
over the diesel which is currently purchased.
We would expect to see the upside from the
climate-related opportunities noted above
exceed these incremental costs in the short
and medium term.
Given the uncertainty in the optimum future
technology for our heavy-duty fleet, it is not
practicable to quantify the financial impact it
may have on the Group long-term. However,
given the opportunities we see for the business
in response to climate change, we do not
consider there to be a material risk to the long-
term financial health of the Group.
The financial impact of climate-related matters
is further discussed on pages 66 to 67 as part
of our viability and going concern statements
as well as in Note 11 of the financial statements
which details our considerations in respect
of impairment reviews. These statements
conclude that there is not considered to be a
significant risk of climate change causing
a significant downturn in cash flows across
the Group.
49SIG Annual Report and Accounts 2022
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Financials
Scenario analysis
The Group has looked at two climate change scenarios to assess the likely consequences from each scenario as well as the likely directional impact
they will have on the Group’s risks and opportunities. We will continue to review this assessment and work to enhance our reporting on the resilience
of our strategy to these scenarios.
Environmental, social and governance | Governance
Scenario Effective action but implementation delayed (transition scenario)
Late action: The implementation of policy to drive the transition is
delayed until 2031 and is then more sudden and disorderly. Some
government and societal commitment to ongoing enhancements and
improvements to achieve targets and forecasts implemented. Global
warming is limited to 1.8
O
C by the end of the scenario (2050) relative to
pre-industrial levels.
The more compressed nature of the reduction in emissions results in
material short-term macroeconomic disruption. Significant growth
opportunities for SIG in terms of likely increased demand for transitional
technologies and products to support lower carbon construction and
building upgrades.
Ineffective action (physical scenario)
No action: No policies introduced beyond those already implemented.
The absence of transitional policies leads to a growing concentration of
greenhouse gas emissions in the atmosphere and, as a result, global
temperature levels continue to increase, reaching 3.3
O
C relative to
pre-industrial levels by the end of the scenario (2050).
This leads to chronic changes in precipitation, ecosystems and sea levels
leading to permanent impacts on living and working conditions, buildings
and infrastructure. UK and global GDP growth is permanently lower and
macroeconomic uncertainty increases.
Likely impact and consequences
Policy and
regulatory
There will be significant government support for green infrastructure
investments. Mandatory product information will be needed to
support this investment.
Carbon taxes help to drive the transition to sustainable energy,
penalising the use of fossil fuels whilst encouraging investments in
energy efficient infrastructure.
Failure to meet national and global carbon targets will likely result in
more regulatory interventions resulting in some short-term scarcity
in supply chains.
Government policy supports and subsidises investment in lower
carbon intensity fleets.
No additional effective policy action on climate change.
Economy
and market
Likely that there is a climate-related recession in the early 2030s but
that long-term growth continues.
Significant infrastructure investment needed in a drive to develop
non-fossil fuel energy sources and transport networks.
<5% of homes become uninsurable for climate risks.
Banks offer green mortgages and financing products for green
renovations.
Demand for offsets and renewable energy products rises, pushing up
prices and creating a “renewable” gap so that the Group cannot rely
on purchasing green electricity certificates to meet carbon targets.
Economic growth in steady decline and driven by high levels of
economic uncertainty.
UK and global growth are permanently lower.
c10% of homes become un-insurable for climate risks prompting overall
lower investment in affected property.
Infrastructure investments are critical, driven by the need to develop
climate resilience defences.
Technology
Offsite manufacturing is used due to its lower embodied carbon.
Newly built structures will need to be significantly redesigned, with
buildings simultaneously needing to consume less materials in the
build yet be structurally stronger.
Increased investment in digital capabilities to facilitate the modelling
of the build to disclose carbon content.
Products heavily reliant on fossil fuels no longer wanted, leading
to product innovation, rising deconstruction and higher supply
chain costs.
Offsite manufacturing boosted as onsite work impacted by weather
extremes.
Increased focus on resilience of buildings to climate change.
Urgent pressure to decarbonise the construction industry results in
new products which may make existing product obsolete or see new
disruptors entering the market, challenging long-standing relationships
and arrangements.
Physical and
climate
Higher incidence rate of acute physical weather events with some
impact on chronic events such as increased precipitation and
heatwaves.
Global warming relative to pre-industrial times reaches 3.3°C by
2050. Accelerating and widespread climate change manifests itself in
irreversible consequences that will push ecosystems beyond tipping
points.
Frequent summer heatwaves restrict summer construction period.
At a certain level, extreme temperature can stop work on construction
projects for health and safety reasons while also potentially
compromising the structural soundness of materials, causing improper
operation of machinery, and increasing fire risk on the site.
Considerably higher winter precipitation and more intense storm events
affect winter construction.
Extensive flooding with a mean sea level increase of c0.39m in the UK.
UK, Netherlands and Northern Germany particularly exposed to flooding.
Supply chains significantly disrupted in the worst-hit regions.
50 SIG Annual Report and Accounts 2022
Effective action but implementation delayed
(transition scenario) Ineffective action (physical scenario)
Relative likelihood Relative impact Relative likelihood Relative impact
Impact on climate-related risks
Removal of fossil fuels from our fleet
Waste management
Product carbon data
Energy efficiency (property portfolio)
Chronic physical risks
Use of carbon offsets
Energy market volatility
Grid electrification capacity
Impact on climate-related opportunities
Responding to regulations in the energy
performance of buildings and the need
for enhanced building materials product
sustainability
Accelerating the growth of new
sustainable products and solutions
Partnering with early-stage innovators
to develop new products and solutions
Increased likelihood of climate-related risk or opportunity occurring/increased
impact on the climate-related risk or opportunity.
Neutral likelihood of climate-related risk or opportunity occurring/neutral
impact on the climate-related risk or opportunity.
Reduced likelihood of climate-related risk or opportunity occurring/reduced
impact on the climate-related risk or opportunity.
51SIG Annual Report and Accounts 2022
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Risk
The process of identifying and assessing
the climate-related risks noted on pages
46 to 47 follows our overall approach to risk
management set out on pages 56 to 57 in
that we focus on our strategic objectives and
combine a top-down strategic Group-level
view with a bottom-up operational view of the
risks at operating company level. To assess
our risks, we consider the likely financial,
reputational, regulatory and operational
impacts that could have a material financial
impact and the probability that each risk may
materialise. A granular and specific climate
change risk review is also performed with
members of the sustainability committee and
other stakeholders. The outputs from these
risk review exercises have been combined to
consolidate our view of our principal climate-
related risks and will continue to be reviewed
by the Board, Executive Leadership Team and
sustainability committee throughout the annual
risk cycle.
The management of climate-related risks
follows the Group’s overall risk management
principles as set out on page 57 and
encompasses five key areas: the Role of the
Board, Responsibility and accountability,
Transparency and openness, Culture of
continuous improvement and Applicability.
Whilst the Board recognises that in order
to achieve its strategic objectives, it must
accept and manage a certain degree of
risk, it has a low appetite for risks that have
significant negative consequences such as
climate-related risks. It aims to ensure that the
Group either avoids those activities that may
result in climate-related risks accelerating or
eliminate the risks through applied and focused
mitigation efforts.
Metrics and targets
The Group sets out its Scope 1, 2 and 3
emissions on pages 30 to 31; these have
been verified by Carbon Intelligence to ISO
14064-3 to a limited level of assurance.
Page 27 also sets out the additional metrics
that we use to monitor the progress of our
sustainability commitments, from a climate-
related perspective. These include current
fleet mix by fuel type, % waste diverted from
landfill and details on the type of waste we have
i.e. hazardous and non-hazardous. We will
continue to develop metrics throughout 2023
along with further Scope 3 metrics.
Pages 28 to 29 and 33 also set out the interim
targets we have established to manage our
climate-related commitments. These highlight
our transition plan to meeting our net zero
carbon commitment by 2035 as well as our
interim targets to meeting our commitment for
zero SIG waste to landfill by 2025. We have
also established short-term targets for both
commitments for 2023, 2024 and 2025 and will
report on our progress against these targets
to the Board and senior management on a
quarterly basis throughout 2023.
Environmental, social and governance | Governance
52 SIG Annual Report and Accounts 2022
TCFD compliance
Thematic recommendations Recommended disclosures
Where reference can be found
in the report
Governance – Disclose the
organisation’s governance around
climate-related risks and
opportunities.
Describe the Board’s oversight of climate-related risks and opportunities. Pages 45 to 46
Describe management’s role in assessing and managing climate-related
risks and opportunities.
Pages 45 to 46
Strategy – Disclose the actual and
potential impacts of climate-related
risks and opportunities on the
organisation’s businesses, strategy,
and financial planning where such
information is material.
Describe the climate-related risks and opportunities the organisation
has identified over the short, medium, and longterm.
Risks – pages 46 to 48
Opportunities – page 49
Describe the impact of climate-related risks and opportunities on the
organisation’s businesses, strategy, and financial planning.
Risks – pages 46 to 49
Opportunities – page 49
Describe the resilience of the organisation’s strategy, taking into
consideration different climate-related scenarios, including a 2°C
or lower scenario.
Pages 50 to 51. Our review has
concentrated on identifying the
likely consequences and directional
impact of two scenarios on the
Group’s climate-related risks and
opportunities. We will continue to
review this assessment and work
to enhance our reporting on the
resilience of our strategy to these
scenarios over 2023.
Risk – Disclose how the
organisation identifies, assesses,
and manages climate-related risks.
Describe the organisation’s processes for identifying and assessing
climate-related risks.
Page 52
Describe the organisation’s processes for managing climate-related risks. Page 52
Describe how processes for identifying, assessing, and managing
climate-related risks are integrated into the organisation’s overall risk
management.
Page 52
Metrics and targets – Disclose the
metrics and targets used to assess
and manage relevant climate-
related risks and opportunities
where such information is material.
Disclose the metrics used by the organisation to assess climate-related
risks and opportunities in line with its strategy and risk management
process.
Sustainability commitments and
metrics on page 27.
GHG emissions on pages 30 to 31.
Disclose Scope 1, Scope 2, and if appropriate, Scope 3 GHG emissions,
and the related risks.
Disclosed on pages 30 to 31. We
currently report only business travel
and third-party logistics Scope 3
emissions. As discussed on page
36, we will continue to develop our
Scope 3 emissions framework
throughout 2023 and 2024.
Describe the targets used by the organisation to manage climate-
related risks and opportunities and performance against targets.
The interim targets towards our net
zero carbon and zero SIG waste to
landfill commitments are disclosed
on pages 28 to 29 and page 33.
53SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Environmental, social and governance | Governance
ESG principles
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, 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, where possible.
The Code of Conduct can be viewed on our
website (www.sigplc.com).
Diversity, Equality and Inclusion policy
The policy outlines our commitments and
approach across the Group in relation to DEI.
We are committed to developing a working
environment that is fair and inclusive so
employees can feel safe, proud and valued.
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.
The Diversity, Equality and Inclusion policy can
be viewed on our website (www.sigplc.com).
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.
The Ethical Trading and Human Rights
policy can be viewed on our website
(www.sigplc.com).
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; and
• 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 2021 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 on slavery. The 2022 statement will be
published on our website in compliance with
the required deadline.
Payment practices
SIG Trading Limited 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 information
was submitted in January 2023 for the six
months to 31 December 2022.
Group Sustainability policy
It is essential that we support our industry
in a way that protects the environment and
does not contribute to climate change. We
are committed to operating in a responsible
manner that promotes a healthy community
and workforce, supports the conservation of
natural resources and generates enough profit
and cash to remain financially strong for the
long term.
The Group Sustainability policy sets out our
commitment to sustainability and the actions
we are taking to support this. Our sustainability
commitments can be seen on page 27 and will
be achieved through the following principles:
• integrate sustainability considerations into all
our business decisions;
• comply with (at a minimum) all applicable
legislation, regulations, and codes of practice;
• ensure all operations minimise resource
consumption and operate in a sustainable way;
• support employee awareness of, and
commitment and improvement to, our
sustainability policy;
• identify and promote products which support
carbon and circular economy goals;
• promote customer and supplier awareness
of our sustainability policy, encouraging the
adoption of similar sustainable management
practices; and
• review, report and strive for continual
improvements to annual sustainability
performance.
The Group Sustainability policy can be viewed
on our website (www.sigplc.com).
54 SIG Annual Report and Accounts 2022
Non-financial information statement
SIG continues to integrate ESG 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 table below 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 (pages 56 to 61)
Environmental matters
Read more on pages 28 to 36
• Net carbon zero by 2035 at
the latest
• No SIG waste to landfill by 2025
• Partner with manufacturers and
customers to reduce carbon
and waste across the
supply chain
• Sustainability commitments
(page 27)
• Group Sustainability policy
(page 54)
• Waste management (page 33)
• Health and Safety policy (pages
37 to 39)
• Health and safety
• Environment, social and
governance
People and social
Read more on pages 37 to 44
• Annual employee engagement
survey
• Health and safety leader in
building materials distribution
• Employer of choice in building
materials distribution
• Launch of employee wellbeing
training
• Sustainability commitments
(page 27)
• Group Sustainability policy
(page 54)
• Diversity, Equality and Inclusion
policy (pages 42 and 54)
• SIG Code of Conduct (page 54)
• Employee engagement
(page 40)
• Talent and succession
(page 43)
• Attract, recruit and retain
our people
• Environmental, social and
governance
Human rights and anti-bribery
Read more on page 54
• Raise awareness of policies
• Included in mandatory training
• Ethical Trading and Human
Rights policy (page 54)
• Anti-Bribery and Corruption
policy (page 54)
• Legal or regulatory
compliance
Our business model provides insight into our key activities and how we add value to our stakeholders.
Read more on pages 12 to 13
Principal risks and uncertainties are managed through the risk management framework.
Read more on pages 56 to 61
Our KPIs enable us to measure the success of our strategic objectives and performance.
Read more on pages 24 to 25
The Section 172 Statement is set out on pages 76 to 79 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.
55SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Risk
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 their relevant risks, 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, supported by the Audit & Risk
Committee, sets the strategy for the Group
and ensures 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 and
control management 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. An outline of the three lines model is
detailed below.
Our approach to risk management
The ability to effectively manage risks and
uncertainties is at the heart of every successful
organisation and how we identify and respond
to risks and uncertainty will influence business
outcomes and contribute to the quality of our
decisions.
To identify our risks, we focus on our strategic
objectives and consider what might stop us
achieving our plan within our strategic planning
period. The approach combines a top-down
strategic Group-level view and a bottom-up
operational view of the risks at operating
company level. Meetings are held with our
operating company leadership teams to
identify the risks within their operations. These
are consolidated and, in conjunction with a
series of discussions held with the Executive
Leadership Team and Non-Executive Directors,
provide the inputs to identify and validate our
principal risks.
To assess our risks, we consider the likely
financial, reputational, regulatory, and
operational impacts and the probability that
each risk may materialise. This helps us to
assess the nature and extent of internal control
we need to implement to manage the risk to
an acceptable level. For each of the principal
risks, we have considered whether the risk is
increasing, decreasing or remains unchanged.
We have also given an indication of those
elements of our strategic plan which may be
impacted should any of the risks materialise.
To ensure we effectively monitor our risks, the
principal risks are reviewed by the Board, the
Audit & Risk Committee and the Executive
Leadership Team regularly during the year.
Changes to the principal risks and mitigation
activities are considered as part of this review.
The three lines model
Operational management:
Operational management is responsible for identifying
and assessing risks on an ongoing basis, and for
implementing and maintaining appropriate controls
aligned to the organisation’s policies and procedures.
Risk management, internal controls
and compliance functions:
Our compliance, risk management and internal
controls functions support the business in ensuring
effective implementation of, and compliance with,
policies and procedures across the business.
Independent assurance:
Our internal audit function provides independent
assurance to ensure that controls are implemented
and are operating efficiently and effectively across
the organisation.
2
3
1
Second line
Third line
First line
56 SIG Annual Report and Accounts 2022
Our approach to risk management is
supported by the following key risk
management principles:
1. Role of the Board: The Board
is responsible for ensuring there are
adequate procedures to manage
risk, overseeing the internal control
framework, and determining the
nature and extent of the principal risks
the Group is willing to take in order
to achieve its long-term strategic
objectives. The Audit & Risk Committee
has responsibility for reviewing the
overall risk management policy and
ensuring its effective implementation
on an annual basis.
2. Responsibility and accountability:
A fundamental premise of our approach
is that each operating company owns its
risks and works in collaboration with the
Group Risk and Internal Audit function
to ensure it performs regular risk
identification, assessment, mitigation,
monitoring and reporting processes.
3. Transparency and openness:
Risk management activities and
processes are subject to regular
review in order to provide reasonable
assurance of the effectiveness of local
risk management arrangements and
to consider the status of mitigations
or additional controls required.
4. Culture of continuous
improvement: We are committed to
ensuring that we regularly review our
risk management processes and ensure
that they remain relevant and support
our businesses in making risk informed
decisions.
5. Applicability: Our approach to risk
management is applicable to all entities
across the Group. Risks incurred through
contractual relationships that directly
impact the Group’s risk profile are
monitored, as determined by the Board.
Risk appetite
The Board recognises that, in order to achieve
its strategic objectives, it must accept and
manage a certain degree of risk. On at least an
annual basis it considers the nature and level
of risk it is prepared to accept to deliver the
strategy.
Risk appetite is assessed against a suite of
risk categories directly relevant to the Group,
supported by high-level statements which set
out the Board’s expectations with regards to
the accepted level of risk appetite for each
category of risk.
We continue to have a higher appetite for those
risks that present the greatest opportunities
for commercial reward and take a balanced
approach to such opportunities in terms of
assessing potentially higher levels of risk
and return.
We do, however, have a very low tolerance
for risks that have significant negative
consequences, particularly when they
could adversely impact health and safety,
legal compliance, our values and culture,
or our reputation. We aim to either avoid
those activities that may result in these risks
materialising or eliminate these risks with
our mitigation efforts.
Principal risks
The Board regularly monitors 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 matrix above and details of the
risks and current mitigations are included in the
table on the following pages.
Principal risks
1
Cyber security
2
Health and safety
3
Macroeconomic uncertainty
4
Attract, recruit and retain our people
5
Data quality and governance
6
Environmental, social and
governance (ESG)
7
Mergers and acquisitions
8
Legal or regulatory compliance
9
Digitalisation
10
Change management
Likelihood LikelyPossible
CriticalModerate Impact
Our risk
management
principles
21 3
4
5
6 7 8
9
10
1
25
4 3
Risk management
principles
57SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Risk
Risk increased
Risk unchanged
Risk decreased
Risk movement
Risk Description Mitigation
1. Cyber security
Internal or external
cyber-attacks could
result in system
disruption or sensitive
data being compromised
Risk movement:
Link to strategic pillars:
In the context of widespread dependency on increasingly
complex digital systems, growing cyber threats are
outpacing societies’ ability to effectively prevent and
manage them. These risks are also exacerbated by
an increasing willingness of nation states to engage in
asymmetric cyber warfare to achieve geopolitical aims.
There is a risk that we lack the capabilities to effectively
prevent, monitor, respond to, or recover from, suspected
cyber-attacks on our IT infrastructure. Such attacks may
result in a loss of data or disruption to IT services which
may have a significant impact on our ability to operate and
comply with data protection and privacy laws (e.g. GDPR),
and may have a detrimental effect on our reputation.
Cyber security continues to receive Board and Executive
Leadership Team focus with an emphasis on ensuring that
appropriate technologies are deployed across IT infrastructure to
manage cyber threats.
Regular and independent reviews are performed to assess
the nature of potential cyber threats, security processes and
initiatives. They also ensure that we implement appropriate tools
and processes to better identify and remediate new and emerging
cyber risks and vulnerabilities.
Cyber-incident response protocols are in place to support our
ability to effectively respond to and recover from a cyber threat
or incident and ongoing cyber training campaigns and initiatives
ensure employees are alert to the nature and consequences of
cyber-attacks.
2. Health and safety
Danger of incident or
accident, resulting in
injury or loss of life to
employees, customers,
or the general public
Risk movement:
Link to strategic pillars:
There is a risk that poor organisational arrangements
or behavioural culture with regards to health and safety
causes harm to individuals and may result in enforcement
action, penalties, reputational damage, or adverse
press coverage.
The Group Health, Safety and Environment Director is a
member of the Executive Leadership Team and provides
strategic leadership for all matters relating to health, safety and
environmental performance, oversight and strategy. During the
year we appointed a new Group Health, Safety and Environment
Director and she is supported by local health and safety
managers, embedded in each of our businesses, who provide
local leadership and support, and provide regular monitoring
and reporting of key performance metrics and the status of local
actions and initiatives implemented.
A compliance standards framework is in place to ensure the
adequacy of local health and safety standards and arrangements,
with assurance provided through a programme of compliance
audits performed by suitably trained and experienced health and
safety professionals.
3. Macroeconomic uncertainty
Macroeconomic volatility
impacts the Group’s
ability to accurately
forecast and to meet
internal and external
expectations
Risk movement:
Link to strategic pillars:
Geopolitical tensions have been a key feature of 2022 and
are unlikely to disappear in 2023. The ongoing impacts
of restoring post-Covid-19 financial stability, conflict in
Ukraine and the response of Western governments,
particularly regarding the imposition of sanctions on
Russia and retaliatory disruption to energy supplies, has
resulted in unprecedented economic turbulence and
financial uncertainty with significant ongoing inflationary
and cost of living impacts for both the UK and Europe.
This volatility has the potential to impact customer
demand, along with presenting significant challenges to
our financial, operational and commercial resilience, whilst
adding costs to our operations and making planning and
forecasting more difficult. Changes in macroeconomic
conditions may adversely affect the Group’s people,
business, results of operations, financial condition,
or prospects.
We continue to assess inflationary and other supply chain
pressures and impacts on product pricing and will continue to
work with our suppliers to identify opportunities to improve supply
chain resilience and to selectively pre-purchase products in order
to ensure continuity of supply.
The Group’s geographical diversity across Europe reduces the
impact of changes in market conditions in any one country while
industry-based KPIs, monitored monthly at a Group and operating
company level, help to ensure that warnings and indicators of
risk are identified early, and appropriate mitigation strategies
implemented.
Our strategic pillars
Responsible
actions
Valuable
partnerships
Specialist
expertise
Superior
service
Focused
growth
Highest
productivity
Winning
branches
58 SIG Annual Report and Accounts 2022
Risk Description Mitigation
4. Attract, recruit and retain our people
Failure to attract and
retain people with the
right skills, drive and
capability to reshape
and grow the business
Risk movement:
Link to strategic pillars:
A combination of structural labour and vocational skills
shortages in the construction sector, exacerbated by
increased employee concerns regarding post-Covid-19
wellbeing, mental health anxieties and significant wage
inflation pressure resulting from an increased cost of
living, has the potential to negatively impact SIG’s ability
to attract, recruit and retain staff across the full spectrum
of disciplines.
We continue to invest in learning and development programmes
to ensure both vocational and technical training needs are met
whilst retaining an agile workforce.
We ensure accountabilities, responsibilities, and organisational
structures are regularly reviewed and where necessary
restructured to optimise employee motivation and engagement.
Employee engagement is also monitored through the annual
employee engagement survey process and the Workforce
Engagement programme run by the Board.
Ongoing enhancements to pay and conditions, including
benchmarking remuneration packages to ensure market
competitiveness, addressing the financial challenges experienced
by our lower paid colleagues, broadening the scope of variable
elements of remuneration and the development of retention and
succession plans for critical roles helps to mitigate this risk.
5. Data quality and governance
Poor data quality
negatively impacts our
financial management,
fact-based decision-
making, business
efficiency, and credibility
with customers
Risk movement:
Link to strategic pillars:
There is a risk that we lack the necessary quality of
systems and processes to ensure sufficient granularity,
completeness, and accuracy of vendor, product and
pricing master data. This has the potential to impact our
ability to deliver a digital customer experience, provide
enhanced product and customer analytics or insight
and comply with both existing and new regulatory
requirements.
Product and customer data quality remains a focus area for
our operating companies, who continue to monitor, assess
and upgrade their product data requirements, capabilities and
governance considering ongoing changes in business needs
and regulation. We also continue to maintain and upgrade our
ERP systems where relevant to ensure these systems support the
required data quality and governance required.
6. Environmental, social and governance (ESG)
SIG suffers reputational
impacts due to poor
environmental, social
and governance
arrangements and
performance
Risk movement:
Link to strategic pillars:
Public and commercial consciousness has been growing
on a wide range of environmental, social and governance
issues, including climate change, employee wellbeing and
how an organisation contributes to society. Organisations
should not only minimise their negative impacts, but also
contribute positively to both society and the environment.
While SIG has a long and rich heritage in helping the
construction industry deliver energy efficient solutions
and products, risks remain in terms of how we deliver
our ESG agenda. This is particularly the case in how
we ensure we achieve our stated aims with regards
to climate change. These risks include the cost and
complexity of compliance, the challenges presented by
the decarbonisation of our vehicle fleet and estate and
how we engage with the wider industry to reduce product
and supply-chain carbon impacts.
As outlined on page 27, we have set ambitious ESG commitments
and will focus on demonstrating health and safety leadership in
our sector, committing to a net zero carbon target by 2035 at
the latest, sending zero SIG waste to landfill by 2025, partnering
with manufacturers and customers to reduce carbon and waste
across the supply chain, and to being recognised as an employer
of choice in building materials distribution.
These commitments will be supported by verifiable and
evidenced-based data to ensure that progress in achieving these
aims and ambitions is monitored and subject to appropriate
rigour. To do this, we have enhanced our sustainability reporting
and budgeting processes (particularly in relation to carbon
emissions and waste) to ensure that we are able to effectively
track both the progress and financial impacts of commitments.
In terms of employee wellbeing, each of our businesses has
introduced programmes and initiatives to support employees,
underpinned by a Group-wide employee health and wellbeing policy
and training for all employees to understand their responsibilities
to keep themselves and their colleagues safe and well.
59SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Risk
Risk Description Mitigation
7. Mergers and acquisitions
We lack the capabilities
to effectively identify,
acquire and integrate
significant merger and
acquisition opportunities
and ensure deals deliver
desired scalability and
value creation
Risk movement:
Link to strategic pillars:
As part of our growth strategy, we may from time to time
acquire new businesses. Such decisions are based on
detailed plans that assess the value creation opportunity
for the Group. By their nature, there is an inherent risk
that we fail to manage the execution and integration risks
which may result in delays or additional costs and impact
the future value and revenues generated.
We have dedicated M&A Group resource supported by
appropriately skilled in-house expertise and the use of approved
external advisors.
Clear accountability and authority limits for the initiation and
approval of M&A activity are defined in the Group Delegation
of Authority.
Resource is also available in the organisation to ensure that
transactions are subject to post-integration and lessons learnt
exercises and we continue to streamline and enhance our M&A
policies and procedures.
8. Legal or regulatory compliance
We fail to comply with, or
are found to be in breach
of, legal or regulatory
requirements
Risk movement:
Link to strategic pillars:
The Group’s operations are subject to an increasing
and evolving range of regulatory and other requirements
in the markets in which it operates. A major corporate
failure resulting from a non-compliance with legislative,
regulatory or other requirements would impact our brand
and reputation, could expose us to significant operational
disruption or result in enforcement action or penalties.
Our Group General Counsel is a member of the Executive
Leadership Team and is supported by appropriately skilled
in-house legal and company secretarial resource at Group and
operating company level, with further support provided by an
approved panel of external lawyers and advisors.
Policies and procedures are in place to ensure compliance with
legal and regulatory frameworks, including health and safety,
environmental, ethical, fraud, data protection and product safety.
The Group has a dedicated internal controls function to ensure
that appropriate controls are in place and are operating effectively
to mitigate against material financial misstatement, errors,
omissions or fraud.
Our Code of Conduct is available on our website and forms part
of our employee induction programme. E-learning tools are also
deployed across the organisation to ensure employees are aware
of, and understand, their obligations.
A whistleblowing hotline, managed and facilitated by an independent
third party, is in place throughout the Group. All calls are followed
up and investigated fully with all findings reported to the Board.
Risk increased
Risk unchanged
Risk decreased
Risk movementOur strategic pillars
Responsible
actions
Valuable
partnerships
Specialist
expertise
Superior
service
Focused
growth
Highest
productivity
Winning
branches
60 SIG Annual Report and Accounts 2022
Risk Description Mitigation
9. Digitalisation
SIG fails to maintain
or offer the digital
capabilities necessary to
either maintain market
competitiveness or to
support the ongoing
investments required to
modernise and deliver
future efficiency and
productivity gains
Risk movement:
Link to strategic pillars:
Increased technological innovation and change has
accelerated the increasing role digitalisation will have in
the construction materials supply chain. We continue
to seek opportunities to ensure we can deliver digital
solutions to enable a more integrated and frictionless
experience for both customers and suppliers.
This risk may be exacerbated by legacy systems and
technologies which are heavily customised, require
significant system maintenance to prevent outages and
lack the functionality to allow their integration into a more
modern digital infrastructure.
We continue to evaluate new technologies and make investments
in the digital workplace to ensure that we maintain a competitive
digital proposition.
Across our markets each operating company is responsible for
ensuring that it implements the necessary technologies and ways
of working to ensure that it can maximise digital opportunities
in terms of enhancing the customer experience and optimising
transactional, fulfilment or process efficiencies.
During 2022, we identified opportunities for further progress
in digital, particularly with regards to how we can increase our
productivity, optimise process efficiencies and enhance the
customer experience. This will form the basis of how we further
develop our digital capabilities.
10. Change management
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
Risk movement:
Link to strategic pillars:
As we enter the next phase of executing our strategy,
there will be a key focus on identifying and implementing
opportunities to drive efficiency and productivity and to
ensuring that we optimise our service, product offer and
processes, and manage our cost base.
This will inevitably require changes to roles, and ways of
working, while we continue to modernise existing and
implement new IT systems.
There is a risk that these initiatives, allied to the impacts
of an increasingly volatile market and the associated
pressures resulting from an increased cost of living, results
in “change fatigue” and either future changes are not
implemented as planned, or the benefits are not realised.
Operating companies continue to manage change portfolios
through programme management governance committees.
Increased monitoring has been implemented, particularly
regarding progress against growth initiatives, in line with
our strategy.
Monitoring of business growth metrics and early warning
indicators or trends continues as part of business reviews at
both the management and Board level.
Our ongoing employee engagement surveys continue to
facilitate the early identification of change impact in terms of our
employees, and action plans are implemented and monitored
accordingly.
61SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Good financial
progress
Strong commercial execution of the Return to Growth
strategy, together with our ability to manage the volatile
inflationary environment and pass on price increases,
delivered increased profitability, and a return to positive
free cash flow in the year. This was despite some
variability in demand, including increasing softness
in the second half.
The macroeconomic environment, notably the global
increase in energy costs, created significant price
inflation of key materials in the construction industry.
The effects of this were successfully managed, as
noted, with the input price increases passed on to
customers, increasing our reported revenue.
Despite increased leasing renewals during 2022, partly
due to branch expansion but mostly due to timing and
phasing of lease renewals, and a consequent increase
to post-IFRS 16 net debt, we reported further progress
in reducing our leverage towards our target level.
We closed the year with a robust balance sheet
and good liquidity.
Revenue
The Group saw a 17% increase in its LFL revenue
over the year, with revenue up to £2,744.5m (2021:
£2,291.4m) driven by the pass through of product
price inflation in all geographies and the impact of
our strategic growth initiatives. We estimate the impact
of inflation on revenue growth for the full year was
approximately 17%, with this gradually reducing as
the year progressed.
Operating costs and profit
Gross profit increased 18% to £711.0m (2021: £602.1m)
with a gross profit margin of 25.9% (2021: 26.3%).
The reduction in gross margin was primarily driven
by strong comparatives in UK Exteriors.
The Group’s underlying operating costs increased
by 12.5% to £630.8m (2021: £560.7m). Around half
of this was due to inflation, with the balance due to
the additional year-over-year operating costs within
businesses acquired during 2021 and 2022, an increase
in bad debt charges, and selective investments across
the Group, notably in our French businesses.
The Group’s underlying operating profit increased
93.7% to £80.2m (2021: £41.4m), at an underlying
operating margin of 2.9% (2021: 1.8%), an increase of
110 bps on the prior year. Adjusted operating margin
improvement was driven by improved profitability
across the Group’s operating countries.
The Group’s operating profit performance was
achieved despite a one-off loss of £5m in H2 resulting
from the administration of Avonside, a major UK
roofing contractor and one of the Group’s largest
customers. Whilst disappointing, the Group believes
that this situation arose from company-specific
factors. Customer bad debt metrics more broadly
were in line with management’s expectations.
The Group’s statutory operating profit was £56.2m
(2021: £14.0m) after Other items of £24.0m (2021:
£27.4m). Other items are set out later in this report.
“ We are pleased to report further financial progress in
2022, surpassing the profitability and cash generation
milestones that we set in 2020 to finish the year in a
strengthened financial position.”
Ian Ashton
Chief Financial Officer
Financial review
Gross margin
25.9%
2021: 26.3%
Net debt
£444.0m
2021: £365.0m
Revenue
£ 2,74 4.5m
2021: £2,291.4m
Underlying operating profit
£80.2m
2021: £41.4m
62 SIG Annual Report and Accounts 2022
Segmental analysis
UK
Revenue
2022
£m
Revenue
2021
£m
LFL sales
vs 2021
Underlying
operating
profit
2022
£m
Underlying
operating
(loss)/profit
2021
£m
UK Interiors 702.6 507.4 23% 14.3 (2.5)
UK Exteriors 445.2 422.2 7% 18.4 25.0
UK 1,147. 8 929.6 15% 32.7 22.5
Revenue in UK Interiors, a specialist insulation and interiors distribution business, was up 38% to £702.6m (2021: £507.4m). This included an 18%
impact from the acquisition of Miers in July and a full year of trading for Penlaw and F30, both acquired in 2021. LFL revenue grew 23% driven by
good strategic execution and a strengthened market position as well as benefitting from input price inflation. The improved revenue saw the business
successfully return to profitability, generating an underlying operating profit of £14.3m (2021: £2.5m loss), with the business largely delivering the
additional volumes through the existing capacity in the network.
UK Exteriors, a specialist roofing merchant, which also includes our Building Solutions business, traded well despite some softening in the RMI
market through the latter part of the year. Continued high levels of purchase price inflation contributed to revenues of £445.2m (2021: £422.2m), a LFL
increase of 7%. Underlying operating profit of £18.4m (2021: £25.0m) was down 26.4% primarily due to the one-off loss of £5m in H2 resulting from
the administration of Avonside.
France
Revenue
2022
£m
Revenue
2021
£m
LFL sales
vs 2021
Underlying
operating
profit
2022
£m
Underlying
operating
profit
2021
£m
France Interiors 218.4 195.3 12% 12.2 11.2
France Exteriors 465.6 406.0 15% 23.6 17. 4
France 684.0 601.3 14% 35.8 28.6
France Interiors, a structural insulation and interiors business trading as LiTT, saw revenue increase 12% on a reported and LFL basis to £218.4m
(2021: £195.3m) driven by input price inflation pass through and continued strategic execution. Underlying operating profit increased 9% to £12.2m
(2021: £11.2m) driven by revenue growth partially offset by higher operating costs.
Revenue in France Exteriors, a specialist roofing business trading as Larivière, increased 15% to £465.6m (2021: £406.0m), and by 15% on a LFL
basis. Demand remained solid in the French RMI market and revenue also benefitted from pass through of input price inflation. The increase in
revenue together with increased supplier rebates and strict pricing discipline, partially offset by increased costs to fulfil higher trading volumes,
resulted in underlying operating profit increasing 36% to £23.6m (2021: £17.4m).
Germany
Revenue
2022
£m
Revenue
2021
£m
LFL sales
vs 2021
Underlying
operating
profit
2022
£m
Underlying
operating
profit
2021
£m
Germany 457.8 393.2 16% 16.8 3.6
Revenue in Wego/Vti, our specialist insulation and interiors distribution business in Germany, increased 16% on a reported and LFL basis to £457.8m
(2021: £393.2m), with the impact of the acquisition of Thermodämm being under 1%. The German team remained highly focused on their turnaround
initiatives. Revenue growth was driven by improved market performance as a result of these initiatives, as well as benefitting from the pass through of
input price inflation and proactive stock management. The increased revenue resulted in significantly improved operating profit of £16.8m, more than
four times that of 2021 (2021: £3.6m), and with an increase in underlying operating margin to 3.7% (2021: 0.9%).
Poland
Revenue
2022
£m
Revenue
2021
£m
LFL sales
vs 2021
Underlying
operating
profit
2022
£m
Underlying
operating
profit
2021
£m
Poland 230.7 186.7 28% 10.6 6.3
In our Polish business, a market-leading distributor of insulation and interiors, revenue increased to £230.7m (2021: £186.7m), with LFL sales up 28%
due to an increase in market share, branch openings and pass through of significant price inflation. The Polish business also saw further operating
margin improvement and underlying operating profit grew by 68% to £10.6m (2021: £6.3m).
63SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Benelux
Revenue
2022
£m
Revenue
2021
£m
LFL sales
vs 2021
Underlying
operating
loss
2022
£m
Underlying
operating
loss
2021
£m
Benelux 115.9 92.4 25% (3.0) (4.9)
Revenue from the Group’s businesses in Benelux increased 25% to £115.9m (2021: £92.4m), with LFL sales up 25%. Revenue benefitted from
increased volumes, but the turnaround of the business remains in progress and, despite recent market share recovery, it continues to trade with
lower market share than it had previously. Whilst the management team appointed in mid-2021 is making progress regaining market share in the
Netherlands and starting to address the operational issues, this has taken longer than previously anticipated. This progress resulted in a reduced
underlying operating loss of £3.0m (2021: £4.9m loss).
The continued challenges in the Benelux business led to a further impairment charge of £15.8m being recognised at 31 December 2022 (2021:
£9.9m).
Ireland
Revenue
2022
£m
Revenue
2021
£m
LFL sales
vs 2021
Underlying
operating
profit
2022
£m
Underlying
operating
profit
2021
£m
Ireland 108.3 88.2 24% 6.0 2.8
Our business in Ireland is a specialist distributor of interiors and exteriors, as well as a specialist contractor for office furnishing, industrial coatings and
kitchen/bathroom fit out. A strong rebound in the second half of 2021 following the impact of further Covid-19-related Government restrictions in the
Republic of Ireland in H1 2021, continued into 2022, although some demand softening was seen in H2 2022. Revenue increased by 23% to £108.3m
(2021: £88.2m), and by 24% on a LFL basis. Underlying operating profit improved by over 100% to £6.0m (2021: £2.8m), reflecting the increased
revenue and a shift in sales mix towards higher margin offerings.
Reconciliation of underlying to statutory result
Other items, being items excluded from underlying results, amounted to £24.1m for the year (2021: £35.2m) on a pre-tax basis and are summarised in
the table below:
2022
£m
2021
£m
Underlying profit before tax 51.6 19.3
Other items – impacting profit before tax:
Amortisation of acquired intangibles (4.7) (4.7)
Impairment charges (15.8) (10.2)
Cloud computing configuration and customisation costs (2.7) (3.3)
Costs associated with acquisitions (2.5) (1.5)
Net restructuring costs (0.4) (3.7)
Onerous contract costs 1.2 (2.0)
Costs associated with refinancing (0.4) (2.4)
Other specific items 1.3 0.4
Non-underlying finance costs (0.1) ( 7.8 )
Total Other items (24.1) (35.2)
Statutory profit/(loss) before tax 27.5 (15.9)
Further details of Other items are as follows:
• Impairment charge of £15.8m relates to the impairment of goodwill and other non-current assets in Benelux.
• Cloud computing costs relate to project configuration and customisation costs associated with strategic cloud computing arrangements which
are expensed, rather than being capitalised as intangible assets.
• Costs associated with acquisitions relate principally to the acquisition of Miers Construction Products Limited in the UK, including legal and other
advisor costs associated with the acquisition and earnout consideration being accrued over the performance period.
• Other specific items comprises the settlement and/or release of certain historic provisions, including amounts relating to businesses divested in
previous years, impacts of the pensions member options exercise undertaken in the UK during the year, and a £2.0m provision for impairment of
lease receivables.
Financial review
64 SIG Annual Report and Accounts 2022
Taxation
The effective tax rate for the Group on the total profit before tax of £27.5m (2021: £15.9m loss) was 43.6% (2021: negative 78.0%). As the Group
operates in several different countries, tax losses cannot be surrendered or utilised cross border. Tax losses are not currently recognised as deferred
tax assets 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 (2021: four) 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, was £7.4m (2021: £6.9m), of which a charge of £0.2m
(2021: £0.6m) related to defined benefit pension schemes and £7.2m (2021: £6.3m) related to defined contribution schemes.
The total net liability in relation to defined benefit pension schemes at 31 December 2022 was £23.0m (2021: £10.7m). The last triennial actuarial
valuation of the UK scheme as at 31 December 2019 was concluded in March 2021. This showed that the market value of the scheme’s assets had
increased by 20% to £196m and their actuarial value covered 102% of the benefits accrued to members after allowing for expected future increases
in pensionable salaries. As part of the funding discussions, the Company paid an additional one-off contribution of £2.5m into the Plan in July 2021
to accelerate plans to achieve a secondary funding target. The next triennial valuation as at 31 December 2022 will commence shortly. The scheme
remains well funded despite the recent volatility of rates experienced during 2022.
Financial position
Overall, the net assets of the Group increased by £3.1m to £267.8m (2021: £264.7m), with a gross cash position at year end of £130.1m (2021:
£145.1m). The movement in the year end cash balances reflects a positive free cash flow of £10.6m delivered in the year, more than offset by £27.5m
spent on acquisitions and investments. Reported year end net debt on a post-IFRS 16 basis was £444.0m (2021: £365.0m) and £160.3m on a pre-
IFRS 16 basis (2021: £128.6m). The movement in post-IFRS 16 net debt, beyond the change in cash noted above, is due mainly to an increase in
lease liabilities of £46.6m, driven by timing of lease renewals and investments in new branches, and a currency movement of £14m on bond debt.
Leverage continued to come down towards the Group’s medium-term targets and finished the year at 2.8x and 1.8x on post-and pre-IFRS 16 bases
respectively (2021: 3.2x and 2.5x respectively).
Cash flow
2022
£m
2021
£m
Underlying operating profit 80.2 41.4
Depreciation 73.2 68.3
Amortisation 3.2 3.4
Underlying EBITDA 156.6 113.1
Increase in working capital (14.4) (85.4)
Repayment of lease liabilities (60.1) ( 5 7. 3 )
Capital expenditure (14.5) (18.6)
Cash exceptional items (14.7) (10.9)
Other 1.9 (15.0)
Operating cash flow
1
54.8 (74.1)
Interest and financing (28.8) (22.7)
Refinancing cash costs (1.1) (16.9)
Tax (14.3) (10.4)
Free cash flow
1
10.6 (124.1)
Acquisitions and investments (27. 5 ) (10.6)
(Repayment)/drawdown of debt (1.4) 52.0
Total cash flow (18.3) (82.7)
Cash and cash equivalents at beginning of the year
2
14 5.1 235.3
Effect of foreign exchange rate changes 3.3 (7.5)
Cash and cash equivalents at end of the year
2
130.1 145.1
1. Free cash flow represents the cash available after supporting operations, including capital expenditure and the repayment of lease liabilities, and before acquisitions and any
movements in funding. Operating cash flow represents free cash flow before interest, financing, costs of refinancing and tax.
2. Cash and cash equivalents at 31 December 2022 comprise cash at bank and on hand of £130.1m (2021: £145.1m) less bank overdrafts of £nil (2021: £nil).
During the year, the Group reported a free cash inflow of £10.6m (2021: £124.1m outflow) as a result of the increased underlying operating profit
in the year, partially offset by an increase in working capital and after payments in relation to lease liabilities, capital expenditure, interest, tax and
exceptional and other cash flows. Interest and financing costs increased as a result of the full-year impact of interest on the €300m bond and a £1.7m
increase in interest on lease liabilities. Tax paid increased due to increased profits in the tax-paying mainland European businesses. “Other” includes
payments to the Employee Benefit Trust (“EBT”) to fund share plans of £4.0m, and a £2.5m annual payment to the UK pension scheme, offset by
non-cash items and proceeds on sale of property, plant and equipment.
65SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
The increase in working capital was £14.4m of which £13.0m related to
inventory movements, driven mainly by year-over-year inflation.
Other movements in cash below free cash flow include £27.5m cash
outflow primarily in relation to the purchase of businesses in the UK and
Germany (2021: £10.6m outflow), including £1.3m deferred consideration
payments relating to UK acquisitions in previous years.
Financing and funding
The Group’s financing facilities comprise €300m fixed rate secured notes
(due November 2026) and a Revolving Credit Facility (“RCF”) of £90m
(due May 2026). During the second half of the year, the Group extended
its RCF by £40m, utilising the accordion feature of the existing RCF
and bringing the total committed facility to £90m. The increased RCF,
which was entered into on the same terms as the existing £50m facility,
will be used to provide additional committed standby liquidity given
the uncertain macro environment and to potentially take advantage of
additional profit and cash flow enhancing opportunities in the medium
term. The secured notes are subject to incurrence-based covenants only,
and the RCF has a leverage maintenance covenant set at 4.75x which only
applies if the facility is over 40% drawn at a quarter end reporting date.
The RCF was undrawn at 31 December 2022.
The Group has a healthy level of 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 2024.
2022
£m
2021
£m
Cash and cash equivalents at end of the year 130.1 14 5.1
Undrawn RCF at end of the year 90.0 50.0
Liquidity 220.1 19 5.1
Post-IFRS 16 net debt 444.0 365.0
Pre-IFRS 16 net debt 160.3 128.6
Post-IFRS 16 leverage 2.8x 3.2x
Pre-IFRS 16 leverage 1.8x 2.5x
Contingent liability
As noted in Note 21, two of SIG’s wholly owned subsidiaries in Benelux
are subject to legal proceedings brought by a customer in connection
with the installation of insulation at an industrial facility in Belgium. Those
subsidiaries sold an insulation product manufactured by a third party,
and made requested adaptations to the product prior to selling it. The
claim relates to the adaptations.
Subsequent to the year end, the Group has obtained additional
independent technical expert input on the matter, which is currently
being discussed with our customer. This matter may give rise to a
possible further obligation whose existence will be confirmed only by the
occurrence of uncertain future events not wholly within the control of the
Group. Given the outcome of the matter remains highly uncertain at this
stage, the Group cannot estimate the possible further financial impact
in the event that the subsidiaries were determined to have any further
obligation arising from this matter. Further information about the matter
and its possible outcomes are not provided, as such disclosures could
prejudice the position and interests of the Group in this matter.
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. The Group’s
financing facilities and compliance with its banking covenants are
detailed above.
Financial review
The Directors have considered the Group’s forecasts which support the
view that the Group will be able to continue to operate within its banking
facilities and comply with its banking covenants. 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 banking covenants, including:
• high levels of product inflation, and current economic and political
uncertainties across Europe, all potentially impacting market demand;
• potentially recessionary conditions in the coming year; and
• material shortages impacting our ability to meet demand and hence
having an impact on forecast sales.
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 and the Directors have also reviewed mitigating
actions that could be taken. Details are set out in the Viability statement.
The Directors have considered the impact of climate-related matters
on the going concern assessment and this is not expected to have
a significant impact on the Group’s going concern assessment to
31 March 2024.
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 2024 and the Directors therefore consider
it appropriate to adopt the going concern basis in preparing the 2022
financial statements.
Viability statement
In accordance with Provision 31 of the Corporate Governance Code, the
Directors have undertaken an assessment of the viability of the Group.
In making this assessment, 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 as well as a description of the principal risks and
uncertainties facing the Group are included in this Strategic report on
pages 56 to 61. The Directors believe the Group is well placed to manage
these risks successfully.
The Board has determined that a three-year period to 31 December
2025 is the most appropriate period of assessment. Whilst the Board
has no reason to believe the Group will not remain viable over a longer
period, three years has been chosen as this aligns with the Group’s
medium-term planning process and is considered the period over which
it has reasonable visibility of the market and industry characteristics to
be able to develop reasonable forecasting assumptions and perform
a realistic viability assessment.
The assessment process and key assumptions
In making the Viability statement, the Directors are required to consider
the Group’s ability to meet its liabilities as they fall due, taking into
account the Group’s current position and principal risks.
The Group has a strong liquidity position at 31 December 2022 following
the robust trading performance during the year and the availability of
the £90m RCF. In December 2022, the Group extended its RCF by
£40m, utilising the accordion feature of the existing RCF and bringing
the total committed facility to £90m. The increased RCF, which was
entered into on the same terms as the existing £50m facility, will be used
to provide additional committed standby liquidity given the uncertain
macro environment and to potentially take advantage of additional
profit and cash flow enhancing opportunities in the medium term. The
Group has committed facilities in place until 2026, comprising €300m
fixed rate secured notes and the £90m RCF. The secured notes are
66 SIG Annual Report and Accounts 2022
subject to incurrence-based covenants only, and the RCF has a leverage
maintenance covenant set at 4.75x which only applies if the facility is over
40% drawn at a quarter end reporting date. The RCF was undrawn at
31 December 2022.
As part of the Group’s financial and strategic planning process,
the Group has prepared financial forecasts for the three years to
31 December 2025.
The process included a detailed review of the forecasts, led by the Chief
Executive Officer and Chief Financial Officer, with input from operational
and functional management, and these forecasts were approved by
the Board.
In order to assess the resilience of the Group to threats posed by the
principal 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:
Scenario
Link to principal risks and
uncertainties
The implications of a challenging economic
environment, in particular the potential
impacts of continued inflationary pressures,
have been modelled by assuming a severe
but plausible reduction in revenue and gross
margins in each of the three years.
− Macroeconomic
uncertainty
− Change management
The impact of the competitive environment
and softening of the construction market
within which the Group’s businesses operate
and the interaction with the Group’s gross
margin have been modelled by assuming a
severe but plausible reduction in revenue and
gross margins during the three-year period.
− Macroeconomic
uncertainty
− Change management
− Environmental, social
and governance
The impact of completing future acquisitions
which do not deliver desired value creation
or which take place as one or more of the
above scenarios begins to develop has
been modelled by assuming a cash outflow
in conjunction with a downside scenario in
revenue and gross margin.
− Mergers and
acquisitions
− Macroeconomic
uncertainty
The resulting impact on key metrics was considered with particular
focus on solvency measures including liquidity headroom and financial
covenants where relevant. Under each of the scenarios considered, the
forecasts indicate significant headroom during the three-year period.
Under a scenario including a combination of the above resulting in a 75%
reduction in underlying operating profit from base forecasts in 2023,
63% in 2024 and 57% in 2025, the analysis shows that sufficient cash
would be available without the need to draw on the RCF and therefore
no covenant tests would apply. Reverse stress testing has also been
performed to analyse the level of revenue, operating profit and cash
reductions over and above the scenario considered above that could
be experienced before the RCF becomes drawn and there is a potential
breach in the leverage covenant in the period under review.
The Directors have considered the potential impact of climate change
on the viability assessment. At the current time, no legislation has been
passed that will impact the key assumptions used in the forecasts and
there are no overriding changes to key assumptions relating to climate
change built into the forecasts. The costs of implementing the Group’s
strategy of replacing the current fleet with lower carbon alternatives as
and when leases naturally renew are factored into the Group’s forecasts.
Climate change also presents a significant number of opportunities for
the Group which are built into the Group’s strategy. There is therefore not
considered to be a significant risk of climate change causing a significant
downturn in cash flows across the Group over the viability assessment
period and therefore no specific sensitivities relating to climate change
are considered necessary over and above the sensitivities already
performed above.
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 2025.
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 56 to 61 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 up to and including page 67 was
approved by the Board of Directors on 7 March 2023 and signed
on the Board’s behalf by:
Gavin Slark
Chief Executive Officer
Ian Ashton
Chief Financial Officer
7 March 2023
67SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Compliance with the UK Corporate
Governance Code 2018
Our Governance sections, set out over the following pages, explain
how the Group has applied the principles and complied with the
provisions of the Code
1
during the financial year ended 31 December
2022. During 2022 we were fully compliant with the Code with the
exception of Provision 32, which requires the Board to establish a
Remuneration Committee of independent non-executive directors.
Bruno Deschamps was a member of the Remuneration Committee
and, as a nominated Director of CD&R, he was not considered to
be independent under Provision 10. Notwithstanding this, the Board
considered Bruno to be a valuable member of the Committee.
1
Board leadership and Company purpose 69
2
Division of responsibilities 82
3
Composition, succession and evaluation 85
Nomination Committee report 88
4
Audit, risk and internal control 92
Audit & risk committee report 94
5
Remuneration 101
Directors’ remuneration report 101
1. The UK Corporate Governance Code 2018 (the “Code”) can be accessed at
www.frc.org.uk
Governance
69 Chairman’s introduction
70 Board of Directors
72 Corporate governance report
72 Board activities
76 Engagement with our stakeholders
80 Workforce engagement
82 Division of responsibilities
84 Executive Leadership Team
85 Board arrangements
87 Board evaluation
88 Nomination Committee report
92 Risk management and internal control
94 Audit & Risk Committee report
101 Directors’ remuneration report
127 Directors’ report
131 Directors’ Responsibilities Statement
68 SIG Annual Report and Accounts 2022
Chairman’s introduction
Continued focus
Dear Shareholder
On behalf of the Board, I am pleased to present the Group’s Corporate
Governance report on pages 68 to 131.
The Group produced encouraging financial results for 2022, with an
increased profit from the previous year, margins improving towards
our long-term goal of 5% and a positive cash result. On behalf of the
Board, I would like to thank all of our employees for their hard work and
achievements during the year.
In September 2022 we announced that Steve Francis would be stepping
down as Group CEO on 1 February 2023 and that Gavin Slark would
be joining SIG to take up the Group CEO role from that date. I wish to
express my sincere thanks to Steve for the role that he played as Group
CEO from February 2020. Steve oversaw the successful equity raise
in 2020 that recapitalised the balance sheet and from there led the
successful turnaround of the Group, culminating in the return to profit in
2021 and the generation of free cash flow in 2022. We welcomed Gavin
to the Board in February 2023 and I look forward to working with him in
building upon the foundations that Steve laid for SIG for the future.
2022 was marked by stability and continuity in terms of personnel at the
Board and in the ELT. There were no appointments to or resignations
from the Board that took effect during the year. There was only one
change in the ELT, with no changes in the holders of the Managing
Director roles amongst the operating companies. This year the Board
undertook an internal evaluation and I was pleased that this platform of
stability and continuity produced a highly encouraging set of results. The
Board is not complacent as to the challenges that 2023 and beyond will
provide, but shareholders can take assurance that the Board is operating
as a cohesive and effective body. The Board has developed relationships
with the ELT that are challenging, where required, but are respectful and
supportive. Further detail concerning the evaluation exercise can be
found on page 87.
I would also like to take this opportunity to address our relationship with
the Company’s largest shareholder, CD&R. CD&R holds c29% of the
shares in SIG, a stake that it took up in 2020 largely as part of the
equity fundraising. CD&R has two Directors appointed to the Board,
currently being Bruno Deschamps and Christian Rochat. CD&R has
the right to appoint one member of the Remuneration Committee
(currently Bruno Deschamps) and the Nominations Committee (currently
Christian Rochat) and to appoint an observer to the Audit & Risk
Committee. Further details of the relationship with CD&R can be found
on page 83.
The recent Board evaluation exercise demonstrated that the other
Directors recognise and value the contribution made to the Group by
Bruno and Christian: their contributions are not limited to representing
the interests of CD&R’s funds which are invested in SIG. They each bring
a wealth of sector experience and wider knowledge that enhances the
discussions at Board and contributes to the making of better decisions.
The Board is aware that the Code provides for a Remuneration
Committee to consist solely of independent Directors and that Bruno is
deemed to be non-independent by virtue of his relationship with CD&R.
To that extent, the Company is therefore not compliant with this provision
of the Code. However, the Board’s opinion is that the Remuneration
Committee benefits from Bruno being a member of the Committee and
were he not a member the Committee would need to consider how to
replace the contribution that he makes.
As there were no changes in the make up of the Board in 2022, there
is no difference in the gender diversity of the Board from the previous
year. The Board comprises ten Directors of whom two are women, with
one-third of the independent Non-Executive Directors being women.
The Board includes one Director from an ethnic minority background.
The Board is aware of the importance of making progress on diversity
in general and in particular on gender diversity on the Board. The
Nominations Committee commenced steps during the year in this
direction, and further details can be found in the Nominations
Committee report on page 91.
For 2021 SIG reported against eight of the eleven Taskforce on Climate-
related Financial Disclosures (“TCFD”) recommended disclosures. I am
pleased that for 2022 we have reported against all eleven of the TCFD
recommended disclosures. Finally, a year ago we published a set of
focused sustainability commitments and our first report on the progress
we have made towards fulfilling these commitments is contained in the
Strategic report set out at pages 26 to 54.
2023 Annual General Meeting
The Annual General Meeting will be held on 4 May 2023 at the offices
of Allen & Overy LLP, One Bishops Square, London, E1 6AD. If you
are unable to attend and you have any questions, please email them
to [email protected] in advance of the meeting. We will ensure the
answers to your questions are provided at the meeting. Further details
of the arrangements for the AGM will be sent to shareholders shortly.
I warmly extend the invitation to all shareholders to join us in person at
the AGM.
Andrew Allner
Chairman
7 March 2023
69SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Board of Directors
Andrew Allner BA, FCA
Non-Executive Chairman
1
Appointed as Non-Executive Chairman on
1November 2017.
External roles
Andrew is Chairman of Shepherd Building Group
Limited and Fox Marble Holdings plc, an AIM traded
company.
Experience and past roles
Andrew has significant listed company board
experience as Chairman and as a Non-Executive
Director. He was previously Chairman at The Go-
Ahead Group plc and Marshalls plc, and a Non-
Executive Director at Northgate plc, AZ Electronic
Materials SA and CSR plc. Previous executive roles
include Group Finance Director of RHM plc and CEO
of Enodis plc. He has also held senior executive
positions with Dalgety plc, Amersham International plc
and Guinness plc. He also has significant experience
of change and challenging situations.
Key strengths
Substantial board, leadership, strategy, international
and general management, corporate transaction,
governance and accounting expertise.
R N
Gavin Slark
Chief Executive Officer
Appointed as an Executive Director and Chief
Executive Officer on 1 February 2023.
External roles
Gavin is currently a Non-Executive Director of
Galliford Try Holdings plc, a leading UK
construction group. He steps down from
this role on 31 March 2023.
Experience and past roles
Gavin was previously Chief Executive Officer of
Grafton Group plc, the international building materials
distributor and DIY retailer, for 11 years from 2011.
He has also served as Chief Executive Officer of BSS
Group plc, a leading UK distributor to specialist trades
including the plumbing, heating and construction
sectors.
Key strengths
Significant in-depth knowledge and years of
experience in the distribution sector, shaping strategy
and culture, product knowledge, leadership and
management.
Ian Ashton BA, FCA
Chief Financial Officer
Appointed as an Executive Director and Chief
Financial Officer on 1 July 2020.
External roles
Ian does not have any external roles.
Experience and past roles
Prior to joining SIG, Ian was Group Chief Financial
Officer of Low & Bonar plc until its acquisition by
the Freudenberg group. Before that, he was Chief
Financial Officer of Labviva LLC, a US-based
technology company. Ian worked for much of his
career at Smith & Nephew plc, undertaking various
financial roles in the UK, the US and Asia. Ian is a
qualified chartered accountant and began his career
at Ernst & Young LLP.
Key strengths
Broad global experience in a series of financial
leadership roles. A strong track record in corporate
transactions, driving change, accounting/finance and
stakeholder engagement with significant international
experience.
Kath Durrant BA
Non-Executive Director
Appointed as an Independent Non-Executive
Director and Chair of the Remuneration Committee
on 1 January 2021.
External roles
Kath is Non-Executive Director and Remuneration
Chair at Vesuvius plc and Non-Executive Director
at Essentra plc.
Experience and past roles
As well as working in senior roles at GlaxoSmithKline
plc and AstraZeneca plc, Kath has previously served
as the Group Human Resources Director of Rolls
Royce plc, of Ferguson plc, and as Chief Human
Resources Officer of CRH plc. She served as a Non-
Executive Director and Chair of the Remuneration
Committee of Renishaw plc and of Calisen plc.
Key strengths
Human resources across a range of businesses,
transformation and change management,
construction industry and international experience.
Gillian Kent BA,
CIM Diploma in Marketing
Non-Executive Director
Appointed as an Independent Non-Executive Director
on 1 July 2019.
External roles
Gillian holds Non-Executive Director and
Remuneration Chair roles at Mothercare plc and
Marlowe plc, and Non-Executive Director roles at
Ascential plc and THG plc.
Experience and past roles
Gillian has had a broad executive career including
being Chief Executive of real estate portal Propertyfinder
until its acquisition by Zoopla, and 15 years with
Microsoft, including three years as Managing Director
of MSN UK. Gillian was previously a Non-Executive
Director of NAHL Group Plc, Pendragon Plc and of
Dignity plc.
Key strengths
Strong commercial, strategic, change management,
stakeholder engagement, customer and digital/
technology experience across a broad range of
businesses.
Simon King AMP, Insead
Non-Executive Director
Appointed as an Independent Non-Executive Director
on 1 July 2020. Simon is the Designated Non-
Executive Director for Workforce Engagement.
External roles
Simon holds a Non-Executive Director role at James
Donaldson Group Ltd and is Chairman at Smoking
Lobster Restaurants (Isle of Wight).
Experience and past roles
Simon most recently served as a Non-Executive
Director for Headlam Group plc. In his executive
career he served on the Travis Perkins Executive
Board and held the position of CEO for Wickes. Prior
to that, Simon was at Walmart as COO of Asda, CEO
at Savola Group Middle East and held CEO roles for
Tesco in Turkey and South Korea, leading the joint
venture with Samsung. Before Tesco South Korea,
Simon was Chief Commercial Officer for Tesco in
central Europe.
Key strengths
Over 35 years’ experience leading international
teams, building products distribution experience,
change management, retail and distribution,
marketing, technology/digital and stakeholder
engagement experience, particularly the workforce.
Board leadership and Company purpose
21 3 4 5
A A AR R RN N NI I I
70 SIG Annual Report and Accounts 2022
NR RIA
Alan Lovell MA, FCA
Senior Independent Non-Executive
Director
Appointed as an Independent Non-Executive Director
and Senior Independent Director on 1 August 2018.
External roles
Alan is Chairman of Safestyle UK plc and Interserve
Group Limited and was recently appointed Chair of
the Environment Agency.
Experience and past roles
Alan has previously been Chief Executive Officer of six
companies: Tamar Energy Limited, Infinis plc, Jarvis
plc, Dunlop Slazenger Group Ltd, Costain Group
plc and Conder Group plc. Alan was also previously
Chairman of Sepura plc, Flowgroup plc, Progressive
Energy Ltd and the Consumer Council for Water.
Key strengths
Significant listed company Board experience.
Accounting and finance, corporate transactions
and extensive construction industry and turnaround
experience in the UK and Europe.
Christian Rochat BA (Law),
PhD (Law), MBA
2
Non-Executive Director
Appointed as Non-Executive Director on 10 July 2020.
External roles
Christian is a Partner of CD&R. Christian holds
directorships in the following CD&R portfolio
companies: Belron Group SA, Socotec Group,
Westbury Street Holdings Ltd and Wolseley.
Experience and past roles
Christian joined CD&R in 2004 and is a Partner based
in London. He led the CD&R investments in Belron,
Exova, Socotec, SPIE, Westbury Street Holdings
and Wolseley. He also led the sale of Brakes Group
and served as a Director of the company. Prior to
joining CD&R, he was a Managing Director at Morgan
Stanley Capital Partners, and a Director at Schroder
Ventures (now Permira). He also worked in the
London and New York offices of Morgan Stanley’s
mergers and acquisitions department.
Key strengths
Deep industrial knowledge, transformation, change
management, strategy, stakeholder engagement,
corporate transactions and extensive experience
in driving and overseeing improved company
performance.
Shatish Dasani MA, FCA, MBA
Non-Executive Director
Appointed as an Independent Non-Executive
Director and Chair of the Audit & Risk Committee
on 1February 2021.
External roles
Shatish is currently Senior Independent Director and
Chair of the Audit & Risk Committee of Renew Holdings
plc and a Non-Executive Director and Audit & Risk
Committee Chair at each of Speedy Hire plc and Genuit
Group plc. He is also Trustee and Chair of UNICEF UK.
Experience and past roles
Shatish has over 25 years’ experience in senior public
company finance roles across various sectors. He
also has extensive international experience including
as a regional CFO based in South America. He was
previously the Chief Financial Officer of Forterra plc
and TT Electronics plc, and was also an alternate
Non-Executive Director of Camelot Group plc and
Public Member at Network Rail plc.
Key strengths
Strategy development and execution, performance
improvement, financial management, corporate
finance, and mergers and acquisitions (including recent
and relevant financial experience). Sector experience
of building materials, advanced electronics, general
industrial, business services and infrastructure.
Bruno Deschamps ISG Paris
(MBA, marketing, finance)
Non-Executive Director
Appointed as a Non-Executive Director on
10 July 2020.
External roles
Bruno holds directorships in the following CD&R
portfolio companies: Kalle Gmbh, OCS Group and
Wolseley, of which Bruno is also Chairman.
Experience and past roles
Bruno is an Operating Advisor to CD&R LLP. He is
a former Chairman of Diversey (USA), Kloeckner
Pentaplast (Germany). He has served as Managing
Partner of 3i Plc Group, Operating Partner of CD&R
and Chairman of Brakes. Bruno was President and
COO of Ecolab Inc (USA), and President of Henkel
Ecolab, Teroson Gmbh, Henkel Adhesives (Germany),
and Chairman of SAIM (France). Bruno is a Knight of
the Legion d’Honneur (France).
Key strengths
Deep industrial knowledge, corporate transactions,
extensive experience in driving and overseeing
improved company performance.
Committee key
A
Audit & Risk Committee
R
Remuneration Committee
N
Nominations Committee
Chair of Committee
I
Independent Director
1. Independent on appointment.
2. Christian will not be seeking re-election
at the 2023 AGM. CD&R is entitled to
appoint a director to replace him.
A R N NI
71SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Link to strategyLink to strategy
− Regular updates and reviews
throughout the year to monitor the
Group’s financing position, medium-
term plan and business plan.
− Approving the exercise of the
accordion option in the Group’s RCF
to increase the size of the RCF to
maximise available liquidity.
− Consideration of M&A opportunities
to ensure they advance the Group’s
strategy and are earnings enhancing.
− Held a Board strategy day with
the ELT.
− Received regular updates on the
measures being taken to mitigate any
increase in bad credit risk as a result
of economic downturn.
Board activities
Corporate governance report
Board leadership and Company purpose
21 3 4 5
− Approved the 2023 budget and the
three-year financial projections.
− Periodic review of the Group’s ability
to trade as a going concern
and viability.
− Approved the 2021 full-year and 2022
interim results, and ensured work
was on schedule for the production of
the 2022 full-year Annual Report and
Accounts.
− Approved the release of public
announcements in line with the
Disclosure and Transparency Rules,
UK Market Abuse Regulation and
other requirements.
− Received regular investor relations
reports as well as regular updates
from brokers on market conditions
and equity investor sentiment.
− Received regular updates and reports
from the sustainability committee.
− Appointed Investec to act as joint
broker alongside Peel Hunt.
Strategy and financing Corporate reporting and
performance monitoring
Our strategic pillars
Responsible actions
Valuable partnerships
Specialist expertise
Superior service
Focused growth
Highest productivity
Winning branches
72 SIG Annual Report and Accounts 2022
Link to strategy Link to strategy Link to strategy
− Considered the Group’s key
stakeholders.
− Group-wide customer surveys
undertaken and results reported
to the Board.
− Third annual employee engagement
survey undertaken, with feedback
reviewed to ensure any material
concerns were identified and suitably
addressed.
− Reviewed feedback from the
Chairman, Committee Chairs,
Executive Directors and brokers
following meetings with shareholders.
− Appointed a Head of Investor
Relations to further develop and
improve shareholder engagement
and communications.
− Established a DEI forum to promote
DEI in the workplace and support
the communication, delivery and
measurement of local and Group-wide
initiatives.
− Reviewed feedback from the Board
Workforce Engagement sessions
conducted by the Designated Non-
Executive for Workforce Engagement
during the year.
− Reviewed and, where appropriate,
updated the Terms of Reference
for each of the Committees and
the Board.
− Conducted an internal Board
evaluation process and set objectives
for 2023.
− Updated the skills matrix as part of the
Board evaluation to map the skillset of
the Board to ensure it aligns with that
required to execute strategy and meet
future challenges and also to be used
in succession planning.
− Reviewed the report of the Group
Health, Safety and Environment
Director as the first item of business
on the agenda for Board meetings.
− Received regular reports and
presentations during the year relating
to risk management and internal
controls, as well as on sustainability
issues.
− Reviewed the reporting of the
Group against the TCFD pillars and
recommended disclosures.
− Received a legal briefing on directors’
duties regarding UK health and
safety law.
− Received regular updates on
regulatory matters at Board meetings.
− Annual review, update and approval
of key Group-wide policies.
− Reviewed whistleblowing
arrangements and ensured that
arrangements are in place for
proportionate and independent
investigation and follow up action.
− In-depth review of cyber security,
with particular attention paid to
homeworking by employees, to
ensure continued good practice and
enhanced security was in place.
Reviewed mitigation measures
available in the event of a cyber
incident.
− Received regular reports on risk
management and internal controls
from the Chief Financial Officer.
− Approved the Group risk register,
risk appetite and principal risks.
− Reviewed progress on the five
sustainability commitments published
by the Group in March 2022.
− Ongoing review of SIG’s internal
controls framework as part of
preparation for the introduction of
enhanced controls regulations and
reporting.
Stakeholder engagement Governance Risk management and
internal control
73SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Board attendance at meetings
The following table shows the attendance of Directors at meetings of the Board and meetings of the Audit & Risk, Remuneration and Nominations
Committees during the year ended 31 December 2022:
Scheduled
Board
(8 meetings)
1
Additional
Board
(1 meeting)
1
Scheduled
Audit & Risk
(4 meetings)
Scheduled
Remuneration
(5 meetings)
Scheduled
Nominations
(3 meetings)
Additional
Nominations
(2 meetings)²
Andrew Allner
3
8 1 N/A 5 3 2
Ian Ashton
4
8 1 N/A N/A N/A N/A
Shatish Dasani 8 1 4 5 3 2
Bruno Deschamps 8 1 N/A 5 N/A N/A
Kath Durrant 8 1 4 5 3 2
Steve Francis
5
8 1 N/A N/A N/A N/A
Gillian Kent 8 1 4 5 3 2
Simon King
6
7 1 4 5 3 2
Alan Lovell 8 1 4 5 3 2
Christian Rochat 8 1 N/A N/A 3 2
Gavin Slark
7
N/A N/A N/A N/A N/A N/A
1. This year there were eight scheduled Board meetings and one additional Board meeting. The additional Board meeting was held to agree the terms of Steve Francis stepping down
as Group CEO and the appointment of Gavin Slark as Group CEO.
2. This year there were three scheduled Nominations Committee meetings and two additional Nominations Committee meetings. The additional meetings were held in connection
with the Group CEO transition.
3. The Chairman attended all four Audit & Risk Committee meetings.
4. Ian Ashton attended all four Audit & Risk Committee meetings and those sections of the Remuneration Committee meetings to which he was invited by the Chair of the Committee.
5. Steve Francis attended all four Audit & Risk Committee meetings as well as those sections of the Remuneration Committee meetings to which he was invited by the Chair of the
Committee.
6. Simon King was unable to attend one Board meeting due to an engagement which he was unable to reschedule.
7. Gavin Slark was appointed a Director on 1 February 2023, being after the year end, so was not a Director during the period covered by the table.
The table shows those meetings that each Director attended as a
member rather than as an invitee. Where “N/A” appears in the table the
Director is not a member of the Committee although may have attended
the meeting; please see the footnotes to the table. Directors do not
participate in meetings when matters relating to them are discussed.
The Chairman holds meetings with the Non-Executive Directors without
the Executive Directors present. During 2022, several such meetings
were held. The Senior Independent Director also meets with the other
independent Non-Executive Directors without the Chairman present, in
particular when the performance of the Chairman is being considered.
All Directors attended the 2022 AGM. The meeting was open to
shareholders to attend.
Directors’ conflicts
Each Director has a duty under the Companies Act 2006 to avoid any
situation where they have, or can have, a direct or indirect interest
that conflicts, or possibly may conflict, with the Company’s interests.
Provision 7 of the Code also requires the Board to take action to
identify and manage conflicts of interest, including those resulting from
significant shareholdings and to ensure that the influence of third parties
does not compromise or override independent judgement. This duty is
in addition to the obligation that they owe to the Company to disclose to
the Board any transaction or arrangement under consideration by the
Company in which they have, or can have, a direct or indirect interest.
Directors of public companies may authorise conflicts and potential
conflicts, where appropriate, if a company’s Articles of Association
permit and shareholders have approved appropriate amendments.
Procedures have been put in place for the disclosure by Directors of any
such conflicts and also for the consideration and authorisation of any
conflicts by the Board. These procedures allow for the imposition of limits
or conditions by the Board when authorising any conflict, if they think this
is appropriate. These procedures have been applied during the year and
are included as a regular item for consideration by the Board at each of
its meetings. The Board believes that the procedures established to deal
with conflicts of interest are operating effectively, they are periodically
reviewed to ensure they are fully compliant with the Code.
As part of the review of conflicts, the Directors confirmed they have no
connection with the external search firm Korn Ferry whose services
were used in connection with the appointment of the new Group Chief
Executive Officer. The Savannah Group and Odgers Berndtson were
used during the year in connection with other senior recruitment activity.
All Directors are required to complete and disclose a gifts and hospitality
form confirming the offering or receipt of any gifts or hospitality offered or
provided as a result of their directorship of the Company in accordance
with the Group’s Gifts and Hospitality policy.
The Board is aware of the other commitments of the Directors and is
satisfied that these do not conflict with their duties as Directors of the
Company and that the influence of third parties does not compromise
or override their independent judgement.
Culture and purpose
The Board ultimately has responsibility for ensuring that workforce
policies and practices are in line with the Group’s purpose and values,
and support the desired culture throughout the Group. This involves
reviewing policies and practices that have an impact on the experience
of the workforce and drive behaviours e.g. recruitment and retention,
promotion and progression, performance management, training and
development, reskilling and flexible working. The Board considers
that the Group operates a risk-aware culture with an open style of
communication, which seeks to identify problems and issues early
wherever possible. Where issues are identified, the Board endeavours
totake action to remedy any areas of concern.
Corporate governance report | Board activities
Board leadership and Company purpose
21 3 4 5
74 SIG Annual Report and Accounts 2022
Datasets
− Attitudes to regulators, internal audit and employees
− Training data
− Recruitment
− Reward
− Promotion decisions
− Whistleblowing data
− Employee surveys
− Board interaction with senior management and workforce
− Health and safety data including near misses
Each year the Board reviews and amends, if necessary, a suite of policies
across the Group which are published to all employees and contractors.
These include: Health and Safety, Employee Health and Wellbeing,
Whistleblowing, Anti-Bribery and Corruption, Diversity, Equality and
Inclusion, GDPR, and Gifts and Hospitality. All employees, including the
Board, and contractors are asked to complete online training on each
of these policies. Completion of this training is tracked, and reminders
issued when required, to ensure that the training is completed. As new
policies are developed, appropriate training is provided to all employees.
The Board agrees that the right culture is key to future success and
whilst SIG’s culture varies between countries, the goal is to create a
winning, vibrant and modern culture which combines discipline, clear
expectations and effective processes with entrepreneurial spirit. The
Group has made consistent progress with embedding this within the
workforce in recent years.
See page 16 of the Strategic report for more details.
Site visits are invaluable to the Board, enabling the Directors to meet
members of staff and local management and gain a better insight into
not only the culture and purpose in the working environment, but to
also understand the functions of the branches and any restrictions or
opportunities they face. In turn, the decisions made at Board level factor
in all of these considerations and hence are better informed. As a Board,
the Directors visited four sites during the year. The Directors were able to
see first-hand how health and safety, culture and purpose are embedded
and understood within the business. There was positive feedback from
employees and the Board following these visits.
The Group is committed to investing in, and rewarding, its workforce
and accordingly it continues to develop and improve upon local
recognition programmes, which recognise outstanding work, efforts
and achievements that are aligned with Group behaviours. The Group
provides regular training opportunities for its employees and also
operates a share incentive plan for UK employees.
Board engagement with employees
Workforce engagement with Designated Non-Executive Director
(Simon King)
• Site visits took place during 2022 to engage with colleagues around
the Group. Further details can be found on pages 80 and 81.
Workforce engagement during Board visits
• The Board visited colleagues at the SIG Distribution Centre and the
SIG Roofing branch in Leeds, UK. The Directors were given a tour of
the branches following which they joined branch colleagues for lunch
and a presentation on sales performance and logistics.
• Board members also visited the SIG Bedford branch to view the health
and safety procedures in operation at the site. The Directors were
joined by colleagues from the branch for an informal lunch.
• Additionally, Board meetings are principally held at the offices at one
of SIG UK’s principal distribution sites in Colnbrook, Slough.
Annual employee survey
The third employee engagement survey was launched in September
and the results were reported to the Board at its December meeting.
Consistent with the first two surveys, the employee NPS methodology
was used for the 2022 survey. The survey’s principal focus concerned
the question “how likely is it that you would recommend SIG as an
employer?”. There were subsets of the survey which focused on key
themes such as: vision and leadership, culture, management, job
satisfaction, teamwork and collaboration, health and wellbeing, learning
and development, communication, and customer focus. Overall, the
results of the survey were encouraging. The response rate was 73%,
being above the benchmark average, which is a strong indicator of a
workforce’s engagement levels.
During December 2022 the results of the survey were also reported
to the ELT. Thereafter the results were cascaded to local business
management teams to enable plans to be drawn up at branch or
department level (as appropriate). Progress against these plans will be
measured, reported and communicated internally on a regular basis.
Focus on data
To monitor culture and engagement within the business, the Board
receives and reviews reports on the data sets recommended in the
guidelines produced by the Financial Reporting Council. The table below
shows the various datasets that are typically included.
75SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Colleagues
Customers
Suppliers
Lenders
Pension scheme
members and
trustees
Local
community
Our
stakeholders
Shareholders
Environment
Corporate governance report
Engagement with
our stakeholders
Section 172 and stakeholder engagement
SIG seeks to foster flexible and constructive relationships with its key
stakeholder groups and recognises that the vitality of its strategy is
enriched by stakeholder views and feedback.
The Directors consider that they have performed their fiduciary duty,
as stipulated under Section 172 of the Act, in good faith to promote
the success of the Group for the benefit of its members as a whole.
They have taken into consideration, amongst other matters:
• the likely long-term consequences of their decisions;
• the interests of the Group’s employees;
• the need to foster relationships with suppliers, customers and others;
• the desirability of the Group maintaining a reputation for high standards
of business conduct; and
• the need to act fairly between members of the Company.
This Section 172 statement, contained on pages 76 to 79, illustrates
in greater detail some of the significant stakeholder considerations
considered by the Board in its decision-making during 2022.
How the Directors have applied their Section 172
obligations
The Board has considered its key stakeholders and the methods of
engagement with each, both at Board level and across the Group.
It receives regular reports from management to enable it to monitor
the quality and effectiveness of the arrangements for stakeholder
engagement. A more in-depth exploration of how the Directors
discharged their Section 172 obligations is provided on page 79
in relation to the Group’s response to the Russian invasion of Ukraine
in March 2022.
As part of its decision-making process, the Board regularly considers the
principal risks of the Group as set out on pages 58 to 61.
Board leadership and Company purpose
21 3 4 5
The Group recognises the importance of communicating with
its shareholders, including its employee shareholders, to ensure
that its strategy and performance is understood. The CEO and
CFO are primarily responsible for investor relations. This has
been further enhanced during the year with the appointment
of a Head of Investor Relations. The Board is kept informed of
investors’ views through the regular distribution and discussion
of analysts’ and brokers’ briefings and a summary of investor
opinion feedback. In addition, feedback from major shareholders
is reported to the Board by the Chairman, CEO and CFO and
discussed at its meetings. Formal presentations are made to
institutional shareholders following the announcement of the
Group’s annual and interim results.
The Chairman believes in regular and transparent communication
with shareholders and makes himself available as required
during the year. The Chairman held discussions with several of
SIG’s institutional shareholders during the year. These meetings
relayed the strategy and direction of the business, while enabling
him to understand their views on matters such as sustainability,
governance and performance. Contact is also maintained, where
appropriate, with shareholders to discuss overall remuneration
plans and policies. The Chairman and the Senior Independent
Director are available to discuss governance and strategy with
major shareholders if requested, and both are available for contact
with individual shareholders, should any specific areas of concern
or enquiry be raised. The Chair of the Audit & Risk Committee
and the Chair of the Remuneration Committee are also available
for contact with shareholders should there be any matters raised
which are relevant to their area of responsibility and both are
available to answer questions at our AGM. During the year, the
Chair of the Remuneration Committee met with a number of
shareholders to discuss proposed changes to the Directors’
remuneration policy at the next AGM.
The notice of AGM is sent to shareholders at least 21 clear
days before the meeting. The Group provides a facility for
shareholders to vote electronically by proxy, and the form of
proxy provides shareholders with the option of withholding
their vote on a resolution if they so wish. At the AGM in May
2023, shareholders will be asked to vote on a poll, rather than a
show of hands, following best practice. The General Counsel &
Company Secretary ensures that votes are properly received and
recorded. Details of the proxies lodged on all resolutions and of
all abstentions are published on the Group’s website immediately
after the AGM.
Shareholder communication
76 SIG Annual Report and Accounts 2022
Why we engage Engagement activities Actions taken
Shareholders
The Directors’ principal duty
under Section 172 is to act in good
faith to promote the success of
the Group for the benefit of the
Company’s members as a whole. It
therefore follows that the Directors
consider that shareholders’ views
are important as part of their
decision-making process and
welcome discussions with them,
particularly in relation to strategy,
performance, remuneration and
governance.
SIG seeks to ensure that there is active
engagement with all shareholders, which is
achieved through the publication of the annual and
interim reports, Stock Exchange announcements,
the AGM, online presentations of the half-year
and full-year results by the CEO and CFO,
investor roadshows and analyst presentations,
as well as meetings between shareholders and
Directors, including the Chairman and Chairs
of Board committees. During the year there
was specific engagement by the Chairman and
by the Chair of the Remuneration Committee
regarding, respectively, the CEO transition and
the revised Directors’ remuneration policy to be
put to shareholders at the AGM in May 2023. In
addition, there has also been engagement with
various proxy advisors to ensure that shareholder
sentiment regarding a range of issues is also given
due consideration.
• Responding to shareholder feedback in finalising the amended
Directors’ remuneration policy to be put to shareholders at the
upcoming AGM.
• Appointment of a dedicated Head of Investor Relations to
provide improved engagement with investors.
• Continued focus on SIG’s sustainability commitments.
Colleagues
SIG is a people business:
engagement by the Group with
its stakeholders is through its
people. Accordingly, engagement
by the Group with its workforce
underpins SIG’s success. SIG’s
growth and sustainability depends
on having the right company
culture, supported by suitable
behaviours and with a clear
purpose.
The Board Workforce Engagement programme
continued and was expanded in 2022. As Covid-19
restrictions were no longer in place it was possible
to hold in-person meetings in all but one of the
operating companies. The Board-Designated Non-
Executive Director, Simon King, once again led
the programme and participated in every meeting.
These sessions gave opportunity for employees
to raise and discuss in an informal manner their
experiences, both positive and negative, and
to identify key priorities and opportunities for
improvement.
SIG also conducted its annual all-employee
engagement survey. This was the third year of the
survey, meaning that the Board is starting to be
able to identify longer-term trends in employee
sentiment. The results of the survey were reported
to the Board together with an analysis of the results
and a roadmap for how management will be taking
forward its actions in response to the findings.
• The Board was mindful of the impact of high levels of inflation
during the year on the Group’s workforce. The Directors
received regular reports from management as to the actions
being taken in each country of operation to respond to and
mitigate the effects of the high cost of living. Further details of
the financial responses taken by operating companies can be
found on pages 40 and 41.
• The Board also sought assurance from management that
all employees had access to and were aware of the Group’s
wellbeing and mental health services.
• Health and safety continues to be a cornerstone of the Group’s
business. The Board received an update at every meeting from
the Group Health, Safety and Environment Director in order to
monitor the continued improvement of the Group’s health and
safety processes.
• Following feedback from the previous year’s workforce
engagement exercise, the UK business revised its in-house
training programmes to offer greater “hands on” training to
enable colleagues to better advise customers.
Customers
Understanding the needs and
requirements of our customers is
hugely important and the Group
seeks to use this knowledge
to partner effectively with our
customers. Customer service is
vital to maintaining and growing
revenues and profits, and we use
engagement with our customers
to develop and strengthen our
sales capacity and productivity
to improve our service and
continually develop and refresh
our product offering.
Engagement with customers takes place principally
at the local, often branch, level. For larger
customers there is also engagement at a regional
or national level within operating companies. The
Board receives regular updates from management
during the year to enable the Directors to
monitor such engagement and to offer guidance
when appropriate. The Group-wide customer
engagement survey was again conducted in 2022
and the Board received the results of this exercise
together with the action proposed to be taken by
management in response to its findings.
• The Board and the ELT reviewed the actions proposed to be
taken by management in light of the findings of the annual
customer engagement survey.
• The Board monitored engagement between management
and customers where the latter had sought more information
about the Group’s ESG agenda, including in particular the
sustainability of the products sold by the Group and the steps
being taken by the Group to reduce its carbon footprint.
• The Board continued to focus on the steps being taken by
management in progressing the digitalisation and modernisation
of the Group in response to customer requests.
77SIG Annual Report and Accounts 2022
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Governance
Financials
Why we engage Engagement activities Actions taken
Suppliers
SIG enjoys a pivotal position in
industry supply chains: we connect
suppliers and customers in ways
in which they would be unlikely to
achieve without SIG’s presence.
We are a principal route to market
for many of our suppliers and we
seek to add value for our suppliers
by operating as their supply chain
partner of choice. We engage with
our suppliers to understand their
businesses and to identify ways
in which we can work with them
strategically.
Engagement with suppliers most frequently relates
to immediate or short-term trading matters. There
is also engagement that relates to longer-term
issues. During the year, one area of substantial
engagement with suppliers concerned the
availability of certain products in consequence of
the Russian invasion of Ukraine. The disruption
of the supply of certain metal products that were
manufactured in Ukraine, and the impact on
the supply of timber following the imposition of
sanctions on Russia, required some businesses
in the supply chain to seek alternative sources of
supply. A second area of substantial engagement
concerned the continuing long-term trend to
develop and identify products that have a lower
environmental impact.
• Obtaining alternative sources of supplies of products where
the original source of supply was impacted as a consequence
of the Russian invasion of Ukraine.
• In order to comply with good business practice and its ISO
9001:2015 accreditation, SIG UK issued a questionnaire for all
its suppliers. This helped identify existing and new suppliers
who are able to assist SIG UK with maintaining a consistently
high standard of quality throughout the business.
• Continued to evolve and develop the response to, and
partnering with, suppliers to ensure SIG is at the forefront of
sustainability in the construction industry.
Lenders
SIG operates with a level of debt.
Some of this debt is to support the
Group’s short-term working capital
requirements, including seasonal
fluctuations, whilst other elements
of SIG’s debt have a longer-term
profile. Working in partnership with
our lenders is therefore important to
ensure that we have the appropriate
financial structure to support the
Group’s day-to-day business as well
as future growth and expansion.
In November 2021, the Company issued a
€300m bond listed on The International Stock
Exchange in the Channel Islands and entered
into a £50m Revolving Credit Facility (“RCF”) with
a syndicate of banks. During 2022, there was
regular engagement with credit rating agencies on
business performance and with the lenders of the
RCF, particularly in relation to the exercise of the
accordion facility within the RCF.
• In December 2022, the Company exercised the accordion
facility in the RCF to increase the maximum size of the RCF
from £50m to £90m (all of which was undrawn at the year
end). This step was taken as a prudent and cost-effective
measure to provide an enhanced liquidity position for
the Group.
• The Board received regular updates on tax and treasury
matters from the CFO with the Group Head of Tax and
Treasury also presenting an update on key matters to the
Audit & Risk Committee during the year.
Pension scheme members and trustees
The Group operates four pension
schemes which provide defined
benefits based on final pensionable
salary, the largest of which is in
the UK alongside three overseas
schemes. The UK defined benefit
scheme is closed to new members
and has an age profile that is rising.
The overseas book reserve schemes
remain open to new members. We
currently engage with the trustees
of the UK scheme to ensure that
the views and concerns of these
important stakeholders are
considered, and the schemes
are appropriately governed.
The Group has regular dialogue with the trustees
of the UK pension scheme to discuss the ongoing
management of the scheme. Furthermore, SIG
is in contact with scheme members through
the publication of regular newsletters. In 2022,
there was considerable communication with
both the trustees and the members of the UK
scheme in relation to the transition to a sole
trusteeship model. In addition, there was significant
communication with members concerning an
exercise to increase flexibility and options for plan
members around taking their retirement benefits.
• The trustee structure of the UK pension scheme was
amended in the year with a professional trustee firm being
appointed as the sole trustee of the scheme. The Group
engaged with the outgoing trustees and the professional
trustee firm to ensure a smooth and controlled transition. The
members of the scheme were made aware of the transition
through the member newsletter that is routinely circulated.
• A member options exercise was conducted in the year to
allow members to have more options on their retirement
benefits. Through the process, the Group and the trustees
engaged on a very frequent basis to ensure the exercise was
completed thoroughly and in line with scheme rules. Regular
communication was also sent to the members, via individual
letters, to set out their personal retirement benefit options plus
the process they needed to follow if they wished to engage in
the exercise.
Local community
SIG’s businesses operate at the
local level. This is a reason why
the Group’s strategy places strong
emphasis on colleagues who work in
branches and distribution centres,
and who otherwise engage directly
with customers and suppliers on
a daily basis. Accordingly, the
Directors recognise that close
relationships with the communities
in which SIG’s businesses operate
help to foster the long-term success
of the business. SIG is part of its
local communities, and its actions
should have a beneficial impact on
those communities.
There were a great number of collaborations
across the Group, which are too numerous to list
individually.
Please see page 44 for examples of the engagement
activities and actions taken.
Corporate governance report | Engagement with our stakeholders
Board leadership and Company purpose
21 3 4 5
78 SIG Annual Report and Accounts 2022
Why we engage Engagement activities Actions taken
Environment
SIG has a long-standing
environmental heritage. The
Directors appreciate that
environmental matters are
important to all stakeholder
groups who are calling on
companies to do more on key
sustainability topics and to be
more transparent about their
efforts. This resonates with the
Group’s strategic pillar regarding
“responsible actions” under which
SIG seeks to ensure that its people
feel safe, proud and valued. SIG
seeks to operate sustainably for
the benefit of communities and
the environment.
The sustainability committee meets monthly, sponsored
by the CEO. The committee is chaired by the Chief
People Officer and is attended by the CEO and CFO
together with senior representatives from all operating
companies and functional experts from Group. The
sustainability committee’s actions are the groundwork
for the sustainability strategy of the Group, including
the monitoring of performance towards the Group’s
sustainability commitments. Whilst the sustainability
committee is not a formal Board committee, its activities
are reported regularly to the Board, by way of written
Board reports and presentations made to the Board.
See pages 26 to 36 of the Strategic report for details
of the actions taken.
Example of how the Directors applied their Section
172 obligations
Response to the Russian invasion of Ukraine in February 2022
The invasion of Ukraine by Russia in February 2022 had many
consequences that impacted the Group. Some of these were apparent
relatively quickly whilst others were consequences of actions taken by
national governments and the EU in response to the invasion. Examples
of the consequences that were considered by the Board included:
• Disruption of availability of products manufactured in Ukraine.
• Cessation of products from Russia in consequence of sanctions
imposed on Russia.
• Increase in demand for alternative products, with impact on the price
of those products.
• Increase in the cost of products more generally due to impact on
energy prices of the imposition of sanctions on Russian oil and gas.
• Contribution of these factors to increasing inflation, affecting all
employees and especially those on lower salaries.
• Direct humanitarian impact of Ukrainian citizens leaving Ukraine for
security reasons, notably in Poland which shares a land border with
Ukraine.
• Wider humanitarian consequences, through the settling of Ukrainian
citizens across Europe or through the support of Ukrainians remaining
in Ukraine.
The actions taken in response to these matters included:
Risks and mitigation
• Using the WorldCheck One
®
risk intelligence database to screen our
top suppliers and other critical counterparties for sanction risks. This
exercise is performed regularly to ensure our approach remains robust
as sanctions regimes evolve.
• Use of an external Corporate Intelligence and Sanctions team to
provide elevated due diligence where necessary.
• Implementing a specific sanctions policy and rolling out online training
for relevant employees.
• Reviewing cyber risk and scanning third parties for increased risk of
cyber-attack, for example counterparties based in countries such as
Belarus or where the ultimate beneficial owner of a counterparty was
based in such a country.
Colleagues
• Supported the fundraising efforts of colleagues across the Group. SIG
matched all employee donations made to the Disasters Emergency
Committee (“DEC”) Ukraine Humanitarian Appeal.
• In terms of response to the cost of living pressures on employees,
please see the actions described on page 103.
Customers
• To ensure that stock availability was maintained, alternative suppliers
were identified and, following the appropriate sanctions checks, were
engaged.
• There was clear communication with customers regarding SIG’s
policies and procedures with regards to SIG’s approach to sanctions.
Suppliers
• As described in the section headed “Risks and mitigation”, we quickly
devised and implemented arrangements to ensure that appropriate
actions were taken to identify counterparties who were on a relevant
sanctions list.
• This monitoring also identified third parties who were not directly
impacted by sanctions but were relatively high risk. This enabled
management to make decisions as to whether to continue to engage
with those parties.
Communities
• SIG Poland was, through proximity to Ukraine, the most directly
affected operating company. SIG Poland took immediate action to
support the people of Ukraine and set up a funding account with a
local charity organisation, making a significant donation to the account.
SIG Poland, and its employees, also contributed in other ways, such as
donating paint and time to redecorate a hostel used to home families
fleeing the conflict in Ukraine.
• All of the operating companies made contributions to support the
welfare of those seeking refuge in countries outside of Ukraine. In total,
the value of these contributions exceeded £285,000 (€342,000).
Shareholders
• Ultimately, all of the actions taken by SIG were for the benefit of
shareholders and support the Group’s seven-pillar strategy.
• All of the actions are the hallmark of a responsible business.
79SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Corporate governance report
Board leadership and Company purpose
21 3 4 5
Workforce engagement
with Simon King, Designated Non-Executive Director
The Workforce Engagement programme
for 2022 was carried out through site visits
in the UK, Ireland and mainland Europe
with small groups comprising a cross section
of employees, representing all levels, regions
and functions. This allowed for contributions
from all attendees and gave insights into all
areas of the Group. During these meetings
I met with more than 170 colleagues from
across the Group.
The aim is to encourage meaningful dialogue between a Non-
Executive Director and employees. In the sessions everyone has
scope to speak freely and ask questions. The role of the Designated
NED for Workforce Engagement is to offer perspective from the
Board and factor employee feedback into Board level decision-
making where relevant and appropriate. Any issue or escalation
arising in a meeting is addressed attentively but neutrally and
brought to the attention of senior management for follow-up. The
Board receives a regular update on the sessions from me. Feedback
from employees during the sessions is not attributed to individual
employees.
For consistency, I asked the same three questions this year as I had
asked the previous year. The three questions I asked were:
• What has gone well in SIG (locally or corporately) in the last year?
• What has not gone so well in SIG in the last year?
• If you were in charge, and budget was not a constraint, what would
be the one thing you would make happen at SIG?
Each attendee had the opportunity to make their point on each
question. Often the points colleagues made encouraged discussion
which provided a rich source of insight.
Branch visits
It was a privilege to visit a selection of SIG sites across Europe and
the UK in person during 2022. I was delighted to note the rise in
confidence across the teams and it is evident that we have the right
local strategy in place. It was uplifting to hear the teams speak about
winning local business. Trust in the leadership and support from the
Group function and senior leadership is growing and this is further
boosting the growing confidence.
• The French teams from both Larivière and LiTT acknowledge the
strong, diverse leadership that has been consistently developing
over the last five years. They really appreciate the trust given to
branches to make decisions at a local level and several also took
the opportunity to push hard for regional investment to grow the
business further. At a branch in Lille our discussion was followed
by a lunch with the whole team to celebrate their achievement as
the fastest-growing branch in France. During this event it became
apparent that everyone in the team had a voice and heart and
cared deeply about their branch: lorry drivers in the distribution
team made awards to colleagues in the finance team, while one
of the sales team presented an award to a driver for outstanding
customer service, as he had looked after a loyal customer who had
no electricity by taking them coffee and croissants which he had
paid for out of his own pocket!
• In Poland the team are suitably proud of the leap forward they have
made in digitalisation within their business, having spent many
years building the right foundations. They are clearly working in
cross-functional teams to bring efficiency and service enabled by
the digital world for the benefit of both colleagues and customers.
With the evident cooperation between teams, they are a great
example for other SIG teams to learn from.
• The team in Cambuslang (Scotland) made an impression, setting
out their vision for helping to improve SIG’s sustainability credentials
and making sure this was integral to all their local decision-making.
• The Ireland team’s development of their health and safety culture
and wellbeing was great to see and has set an example to the rest
of the Group. A big part of their focus is on self-help; starting each
day with a safety briefing, making sure everyone in their team looks
out for each other.
• Respecting both the customer and the needs of the construction
industry have been brought to a new level in Germany where the
dynamic new leadership team has listened to customer feedback
on how to build a modern business. They are strongly recovering
an old business and are enjoying and celebrating their success step
by step.
I really enjoyed hearing from all our teams across the Group about
their passion for SIG; whether it’s bringing apprentices into SIG
to develop our future teams faster and better, or suggestions
for changes that can be implemented to improve sustainability
credentials.
80 SIG Annual Report and Accounts 2022
The three principal insights I took from these meetings were: the teams were
extremely supportive of SIG, want the Group to succeed and are confident
in our locally-led strategy; staff felt that communication had improved within
the Group; and our peoples’ desire for training and development, so they
can further improve services to customers, remains undimmed.
As in previous years, it was also important for me to hear feedback on areas
where we can improve, and colleagues were encouraged to raise matters
that could be done better and to speak honestly about their constructive
feedback. Many of the comments related to the cost of living pressures
affecting staff and customers. I am pleased that many of these issues are
being addressed within the operating companies and that we are providing
help and support for our colleagues. I was again struck by the fact that
many of the business-related issues raised with me concerned matters
that, if fixed, would provide a better customer experience, or would benefit
the Group in some way.
I greatly enjoyed hearing from my colleagues on their ideas for how
to improve SIG: their passion for our business really shone through.
Even though they were asked to assume no limitation on budget and with
the freedom to do anything, colleagues invariably chose local matters and
to make their part of the business better. This is a great cultural strength from
hard-working, dedicated teams. I was especially encouraged that many of the
suggestions involved sustainability issues. Many were innovative and most
would improve the customer experience, and ESG was a major topic this year
as our colleagues embrace our sustainability messaging and targets.
What has gone
well in SIG?
What has not
gone so well?
What would be
the change you
would make?
I shared these insights with my Board colleagues during the year and we considered this feedback in
conjunction with the results of the employee engagement survey to identify common themes, which the
Board in turn fed back to management.
81SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Division of responsibilities
Evaluation
The Board undertakes an annual assessment of its performance, in
line with the Code. The 2021 assessment was an external exercise
undertaken by Manchester Square Partners. Accordingly the 2022
evaluation was an internal exercise, led by the Chairman and the General
Counsel & Company Secretary. Details of the review can be found on
page 87.
Committees of the Board
The Board has delegated certain responsibilities to its principal
Committees. Each of the Committees operates under written terms of
reference, which are consistent with current best practice. The terms
of reference of each of the Committees were reviewed and updated,
if appropriate, by the Board during the year and can be found on the
Group’s website (www.sigplc.com).
Audit & Risk Committee
Monitors the integrity of financial reporting and the performance of the
external Auditor and reviews the effectiveness of the Group’s systems
of internal control and related compliance activities. During the year, the
remit of the Committee was extended to formally include risk matters
and the Committee’s name was changed from the Audit Committee to
the Audit & Risk Committee.
The Committee’s Report is set out on pages 94 to 100.
Nominations Committee
Regularly reviews the structure, size and composition of the Board and
oversees the development of a diverse pipeline for orderly succession
to the Board and senior management positions. Working with HR, takes
an active role in setting and working towards diversity objectives and
strategies for the Group as a whole.
The Committee’s Report is set out on pages 88 to 91.
Remuneration Committee
Agrees with the Board the framework or broad policy of remuneration for
the Chairman, Executive Directors and senior executives, and sets their
remuneration. Reviews remuneration policies across the Group, ensuring
the alignment of workforce remuneration and incentives with the Group’s
culture and strategy.
The Committee’s Report is set out on pages 101 to 126.
Executive Leadership Team
The ELT addresses operational issues and is responsible for
implementing Group strategy and policies, day-to-day management and
monitoring performance. The ELT meets regularly. Members are those
individuals listed on page 84.
Member Role
Andrew Allner Non-Executive Chairman
Steve Francis Chief Executive Officer (resigned as Group
CEO and a Director on 1 February 2023)
Gavin Slark Chief Executive Officer (appointed as Group
CEO and a Director on 1 February 2023)
Ian Ashton Chief Financial Officer
Shatish Dasani Independent Non-Executive Director
Bruno Deschamps Non-Executive Director appointed by CD&R
Kath Durrant Independent Non-Executive Director
Gillian Kent Independent Non-Executive Director
Simon King Independent Non-Executive Director
Alan Lovell Senior Independent Non-Executive Director
Christian Rochat
1
Non-Executive Director appointed by CD&R
1. Christian will not be seeking re-election at the 2023 AGM. CD&R is entitled to
appoint a director to replace him.
The role of the Board
The primary role of the Board is to promote the long-term sustainable
success of the Company and its subsidiaries, generating value for
shareholders and contributing to wider society. The Group’s purpose is
to enable modern, sustainable and safe living and working environments
in the communities in which we operate. We aspire to be the sustainable
market leader in all our country markets. Consistent with our purpose,
the Board sets the Group’s strategy, which is focused on sustainable
value creation for shareholders, and considers SIG’s wider relationships
with its key stakeholders.
Key responsibilities
• Establishing the Group’s purpose, strategy and behaviours,
and satisfying itself that these and its culture are aligned.
• Ensuring that all Directors act with integrity, lead by example
and promote the desired culture.
Assessing and monitoring culture
• Safeguarding that the matters set out in Section 172 of the Act are
considered in Board discussions and decision-making.
• Ensuring that the necessary resources are in place for the Group
to meet its objectives and assessing the basis on which the Group
generates and preserves value over the long-term.
• Reviewing whistleblowing arrangements and ensuring that
arrangements are in place for proportionate and independent
investigation and follow up action.
Terms of reference and matters reserved
The Board retains a schedule of matters reserved for its decision.
The schedule of matters reserved and the Board’s terms of reference
can be found on the Group’s website at www.sigplc.com.
Division of responsibilities
21 3 4 5
82 SIG Annual Report and Accounts 2022
Board roles
Each of the independent Non-Executive Directors are considered
by the Board to be independent of management and free of any
relationship that could materially interfere with the exercise of their
independent judgement. The two Non-Executive Directors appointed
under the Relationship Agreement with CD&R are not considered to
be independent under Provision 10 of the Code. However, they are
considered as independent of management and are important in
ensuring appropriate independent challenge. The Chairman was judged
by the Board as being independent on appointment. The composition
of the Board is such that it includes an appropriate combination of
Executive Directors, Non-Executive Directors and independent Non-
Executive Directors, and no one individual or group of individuals
dominates the Board’s decision-making. The roles of the Chairman
and Chief Executive Officer are separate and clearly defined, and are
undertaken by different individuals, ensuring that there is a clear division
of responsibilities between the leadership of the Board and the executive
leadership. More details of the roles and responsibilities can be found on
the Group’s website at www.sigplc.com.
Chairman
• Leads the Board, responsible for its overall effectiveness in directing
the Group.
• Shapes the culture in the Boardroom, ensuring that all Directors
contribute effectively, and leads Board succession planning.
Chief Executive Officer
• Responsible for proposing and then delivering the strategy approved
by the Board.
• Responsible for setting an example to the Group’s workforce, for
communicating to them the expectations in respect of the Group’s
culture and for ensuring that operational policies and practices drive
appropriate behaviour.
Senior Independent Director
• Available for approach by (or representations from) shareholders,
where communications through the Chairman or Executive Directors
may not be appropriate.
• Leads the evaluation of the Chairman’s performance at least once a
year, meeting with the Non-Executive Directors, without the Chairman
being present.
Non-Executive Directors
• Appointed for their wide-ranging experience and backgrounds.
• They each provide constructive challenge, strategic guidance and
specialist advice, holding management and individual Executive
Directors to account against agreed performance objectives.
Group General Counsel & Company Secretary
• Independent advisor to the Board.
• Chief Legal officer to the Group.
• Ensures Board procedures and best practice governance
arrangements are followed, and decisions are implemented.
Relationship with CD&R
CD&R invested in SIG in July 2020, taking a stake of approximately
28%. Since then, CD&R has increased its holding and, as at the
date of this report, holds approximately 29% of the shares in SIG.
SIG’s relationship with CD&R is governed by the Relationship
Agreement entered into between SIG and CD&R in 2020. Under
the Relationship Agreement, CD&R has the right to appoint two
non-independent Non-Executive Directors and in July 2020
CD&R appointed Christian Rochat and Bruno Deschamps.
Christian serves on the Nominations Committee and Bruno is a
member of the Remuneration Committee; please see page 102
for further information regarding Bruno’s role as a member of the
Remuneration Committee. An observer from CD&R attends Audit
& Risk Committee meetings.
The Relationship Agreement also provides for the Non-Executive
Directors appointed by CD&R to have a monthly meeting with
the Group CEO and other members of the management team.
In practice this is fulfilled by way of regular operating review
meetings involving the CD&R Non-Executive Directors, the
Audit & Risk Committee observer, the Chairman, the CEO, the
CFO and the Group Strategy Director, together with the General
Counsel & Company Secretary and, attending by invitation, one
of the independent Non-Executive Directors. A typical operating
review meeting is structured as two sections: either as successive
sessions with two operating companies or as one session with an
operating company and a second session dealing with a separate
business matter. All papers produced for the operating review
meetings are made available to the full Board. A debrief on the key
matters discussed at the operating review meetings is provided by
the CEO and a CD&R Non-Executive Director at the subsequent
Board meeting.
During 2022, the operating review meetings included sessions
focused on each of the operating companies. Bruno and
Christian’s deep industry experience and knowledge, as
communicated through the operating review meetings, was
of significant value to the operating companies.
Under the Relationship Agreement, any actual or potential conflict
between the interests of CD&R and/or either of the CD&R Non-
Executive Directors and SIG must be declared, and the relevant
CD&R Non-Executive Directors may be prevented from voting on
any such matter. At each Board meeting all Directors are required
to declare any new conflicts of interest, and the Board manages
such conflicts of interest. CD&R also owns Wolseley and Bruno
acts as Chairman of Wolseley. The Board is satisfied that no
conflicts of interest have arisen during the year and notes that
SIG and Wolseley are engaged in separate markets.
The Board greatly appreciates the contribution made during 2022
by Bruno and Christian, and CD&R more generally, and believes it
significantly benefits all of SIG’s shareholders and stakeholders.
See page 128 for further information on the Relationship Agreement.
Investment by CD&R
83SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Executive Leadership Team
as at 7 March 2023
Gavin Slark
Chief Executive Officer
More than 15 years’ experience as CEO
of listed distribution businesses.
Key career highlights
• CEO, Grafton Group plc
• CEO, BSS Group plc
Ian Ashton
Chief Financial Officer
Over 20 years’ of broad global
experience in financial leadership roles.
Key career highlights
• CFO, Low & Bonar Plc
• CFO, Labiva LLC
• Various senior roles with Smith and
Nephew plc
Alfons Horn
Managing Director Germany
Over 25 years’ experience in the
distribution and building materials
industry.
Key career highlights
• Regional President for BMI
• Managing Director for Contract
Company Holding GmbH & Co
Philip Johns
Managing Director UK
Over 30 years’ experience in the
construction industry specialising in
merchanting and distribution.
Key career highlights
• Chief Commercial Officer, IBMG
Group
• CEO, MKM Building Supplies
• Managing Director, SIGE (2006–15)
• Joined SIG in 1987
Julien Monteiro
Managing Director France
Over 14 years’ global experience in
the specialist industrial distribution
industry.
Key career highlights
• Managing Director, France, Brammer
Group
• Business Director and Sales Director,
Nacco Materials Group
Marcin Szczygiel
Managing Director Poland
Over 23 years’ experience in the
specialist construction distribution
industry.
Key career highlights
• Managing Director for SIG Poland
since 1999
• Managing Director, Sitaco
• Sales and Marketing Director, Isover
Poland
Kevin Windle
Managing Director Ireland
Over 21 years’ experience in finance
leadership roles in the building
merchanting industry.
Key career highlights
• Finance Director, SIG Ireland until
2019
• EMEA Finance Director, Glanbia
Performance Nutrition
• Finance Director, Grafton
Merchanting ROI
Louis van Wijck
Managing Director Benelux
Over 30 years’ experience and
expertise and an extensive network
across the finishing and construction
industry.
Key career highlights
• Founded Wijcks Afbouwmaterialen
in 2002 and sold it to CRH in 2012
Andrew Watkins
Group General Counsel
& Company Secretary
Over 20 years’ experience as
legal counsel across public
and private companies.
Key career highlights
• General Counsel, Hyve
Group plc
• General Counsel & Company
Secretary, Ebiquity plc
• Partner, Trowers & Hamlins
LLP
Julie Armstrong
Chief People Officer
Over 20 years’ experience
both in and outside of HR.
Key career highlights
• Chief People Officer for
Calisen Group Holdings
• Group HR Director for
Thomas Cook
• Customer Services Director
at Manchester Airports
Group
Kate Taylor
Group Communications
Director
Over 20 years’ of both
communication and HR
experience.
Key career highlights
• Previously HR Director
of UK Interiors. In Group
HR & Communications
responsible for the culture
and engagement strategy for
the Group
• Previous roles with Compass
Group
Tim Johnson
Group Strategy Director
Over 20 years’ experience in
strategy, transformation and
M&A from a wide range of
sectors.
Key career highlights
• Group Strategy Director for
Bupa, Countrywide, and
Cancer Research
Division of responsibilities
21 3 4 5
Julie Westcott
Group Health, Safety
and Environment
Director
Over 20 years’ experience
working in HSE in logistics and
manufacturing industries.
Key career highlights
• European EHS Director for
JELD-WEN, Inc
• Group HSE Director for DS
Smith Plc
• HR & Safety Manager at
RPC Group Plc
84 SIG Annual Report and Accounts 2022
Time commitments
The Board has satisfied itself that there is no compromise to the
independence of those Directors who have other appointments in
outside entities. The Board believes each of the Non-Executive Directors
brings his/her own senior level of experience and expertise, and that
the balance between non-executive and executive representation
encourages healthy independent challenge.
Prior to their appointment, Directors are required to disclose any other
significant outside directorships. The Nominations Committee reviews
the other commitments of Directors upon appointment, upon any
proposal for reappointment and following any change in roles, to ensure
that the Board is satisfied that each of the Directors has sufficient time
to undertake their role and responsibilities towards the Group. Directors
are aware that they must not take on additional external appointments
without the prior approval of the Board.
During 2022, approval was given to Gillian Kent prior to taking up the
roles as non-executive director of Marlowe plc and of THG plc. Simon
King was granted approval prior to him taking up the role as non-
executive director of James Donaldson Group Ltd. Board approval
was given to Alan Lovell prior to him being appointed Chair of the
Environment Agency and to Kath Durrant prior to her appointment
as a non-executive director for Essentra plc.
Information and support
To enable the Board to perform its duties efficiently and effectively, the
Directors have full access to all relevant information and to the services
of the General Counsel & Company Secretary, whose responsibility it
is to ensure that Board policies and procedures are followed, including
formal minuting of any unresolved concerns that any Director may have
in connection with the operation of the Group. During the year there were
no such unresolved issues.
There is an agreed procedure whereby Directors wishing to take
independent legal advice in the furtherance of their duties may do so at
the Group’s expense. Further, on resignation, if a Non-Executive Director
had any concerns, the Chairman would invite them to provide a written
statement for circulation to the Board. The appointment and removal of
the Company Secretary is a matter reserved for the Board.
The Board and its Committees are provided with sufficient resources
to undertake their duties. Appropriate training is available to all Directors
on appointment and on an ongoing basis as required.
The Group operates a paperless meeting system for the Board and its
Committees. Using an electronic system for meeting packs supports
our online drive across the Group and is consistent with reducing the
impact of our operations on the environment. It is also more secure
than distribution of paper or via email. The Board receives papers
circulated through the portal in advance of each Board meeting as well
as information between Board meetings on matters such as analyst and
shareholding reports and flash results. There is also a separate “Reading
Room” within the portal where Directors can access information such
as corporate policies, daily sales information, the Articles of Association,
Group and organisational structures, Board dates and contact details.
Board arrangements
The General Counsel & Company Secretary attends all Board meetings
and is at hand to answer questions or offer independent advice or
expertise to Directors, should that be required.
Composition and succession
There were no appointments to or resignations from the Board that took
effect during the year. In September 2022, it was announced that Steve
Francis would step down as Group CEO and a Director on 1 February
2023 and that Gavin Slark would be appointed as his replacement as
Group CEO on that date. Gavin was also appointed a Director on
1 February 2023.
Election and re-election of Directors
Under the Articles of Association, all Directors are subject to election
at the AGM immediately following their appointment and to re-election
every three years. However, in accordance with the Code, all Directors
seek election or re-election at the Company’s AGM each year.
The Board believes the success of the Group going forward will be
achieved by the continued success of the strategy of returning to
profitable growth by maintaining a leading market position, with a
modernised operating model, effective partnerships with customers and
suppliers, developing high-performing people and becoming a more
sustainably responsible business. The contribution of the whole Board is
essential in delivering this strategy. In accordance with Provision 18, the
2023 notice of AGM includes the skills and experience that each Director
has, and a statement as to why their contribution is and continues to be
important to the Group’s long-term sustainable success, which enables
shareholders to make their own informed decisions on the election or
re-election of Directors.
Andrew Allner brings varied and substantial board and general
management experience to the Group. He has an in-depth
understanding of corporate governance having served as a director
and chairman of several listed companies.
Gavin Slark has a long track record of success in the pan-European
construction distribution industry. He also has significant experience as
Group CEO of listed businesses.
Ian Ashton has extensive and broad global experience in financial
leadership roles. He has a strong track record of driving change and
delivering value to stakeholders.
Alan Lovell brings significant listed company board experience, both as
an executive and non-executive director. He has extensive experience in
the UK and in Europe in the Group’s key sector of construction.
Gillian Kent is an experienced non-executive director having served on
a number of listed boards and as a member of audit, remuneration and
nomination committees. She brings a valuable perspective with specialist
knowledge in the development of e-commerce and software businesses
and expertise in building product markets and brands.
85SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Simon King brings extensive, hands-on experience in building products
and distribution businesses from a career spanning over 35 years.
He also has change management, retail, distribution, marketing and
customer proposition, technology, digital and stakeholder engagement
(particularly workforce engagement) experience.
Bruno Deschamps’ skills and experience include deep industrial
knowledge, corporate transactions and extensive experience in driving
and overseeing improved company performance.
Kath Durrant is an experienced Chair of Remuneration. She has
significant international and industry knowledge gained from her roles
at Ferguson and CRH. Kath also has extensive experience of working in
businesses undergoing transformation.
Shatish Dasani is an experienced public company CFO and audit
committee chair as well as having strong international experience across
several sectors relevant to SIG’s business.
Christian Rochat has informed the Company that he will not seek
re-election at the AGM and will therefore stand down as a Director on
4 May 2023.
To enable shareholders to make an informed decision, the 2023 notice
of AGM includes biographical details and a detailed statement as to
why the Group believes that those Directors seeking election/re-election
should be elected/re-elected.
It is the view of the Board that each of the Non-Executive Directors
standing for re-election brings considerable management experience
and an independent perspective to the Board’s discussions and each is
considered independent of management. Each of the independent Non-
Executive Directors standing for re-election is considered free from any
relationship or circumstance that could affect, or appear to affect, the
exercise of their independent judgement.
The Chairman intends to confirm at the AGM that, as evidenced by
the internal 2022 Board evaluation process, the performance of each
individual continues to be effective, that each Director acts with integrity,
leads by example, promotes the desired culture and demonstrates
commitment to the role.
The terms of the Directors’ service contracts are disclosed in the
Directors’ remuneration report on page 119. Full details of Directors’
remuneration, interests in the share capital of the Company and of share
options held are set out on pages 123 in the Directors’ remuneration
report. Directors’ service contracts and the letters of appointment of the
Non-Executive Directors are available for inspection at the Company’s
registered office and will be available at the 2023 AGM.
Skills and experience
The Board evaluation, described on page 87, identified that the
Board encompasses a wide range and combination of different skills,
experience and knowledge, ranging from accounting to strategy and
distribution to stakeholder engagement.
Training and induction
The Chairman reviews with the Board its training and development
needs. During the year, the Directors attended training sessions on
various subjects, including their duties as directors concerning health
and safety under UK law. All Directors receive induction training on their
directors’ duties, the responsibilities of a premium listed issuer, and the
continuing obligations of a company admitted to the premium listing
segment of the Official List of the FCA. The Board also receives regular
presentations from advisors and senior management on a range of
topical issues, such as from the Group’s financial advisors in relation to
the macroeconomic and industry backdrop and sector dynamics that
SIG faces.
On appointment, Directors receive an induction to the Group. This
involves meetings with each Board member, members of the ELT,
external advisors (such as brokers, auditors and financial advisors), visits
to a number of branch locations, and receipt of a pack of corporate
materials including corporate policies and procedures and details
of insurance, financial framework and significant shareholders. The
programme ensures that they are well briefed on current key Board
topic areas, the Group’s strategy, purpose and structure, stakeholder
engagement activities, Group operations, finance and the industry.
Diversity policy
The Board recognises that diversity of gender, social and ethnic
backgrounds and cognitive and personal strengths is important to the
success of the organisation. These areas are matters of key focus for the
Nominations Committee, together with the HR team, as they continue to
develop diversity within the organisation during 2023 and beyond. The
Board recently reviewed and updated its Board Diversity policy, which is
available on the Group’s website (www.sigplc.com).
Corporate governance report | Board arrangements
Composition, succession and evaluation
21 3 4 5
86 SIG Annual Report and Accounts 2022
The Code requires the Company to undertake an annual evaluation
of the performance of the Board and its committees. The Company
undertook an external evaluation in 2021, supported by Manchester
Square Partners, and the exercise in 2022 was conducted on an
internal basis.
The Board approved a questionnaire to be completed by all Directors
with some questions requiring, in addition, open text comment answers.
The questionnaire focused on several key topics aligned to the Code,
including Board leadership and culture; Group purpose and strategy;
and Board and ELT composition and succession, including DEI. There
were subsets of the questionnaire specific to each of the Audit &
Risk Committee, the Remuneration Committee and the Nominations
Committee.
The responses to the questionnaire were reviewed by the General
Counsel & Company Secretary and discussed with the Chairman, and
with the Chairs of each of the Committees regarding the sections of the
questionnaire specific to those Committees. As part of the evaluation,
the Chairman met with the Non-Executive Directors individually to
discuss the feedback on their performance, and the Senior Independent
Director met with the Chairman to discuss his performance.
The principal finding from the review was that the Board and its
Committees were effective and worked well during the year. It was noted
that 2022 was the first year in a considerable period that there had not
been any new appointments to the Board or departures from the Board.
Given the significant turnover in Board representation in the years that
preceded 2022, this stability was most welcome as it enabled the Board
to build further on the foundations that had been laid in 2020 and 2021 in
ensuring that the Board operated in a productive manner.
In establishing its priorities for 2023, the Board was particularly mindful
of two factors. Firstly, the importance of ensuring that the CEO transition
proceeds smoothly and that Gavin Slark’s onboarding as Group CEO
is a success. This onboarding is a priority not only for the initial period
of the handover by Steve Francis, but across the whole year, to ensure
that Gavin is properly established in role. The second factor of which the
Board was mindful is that 2023 will, almost inevitably, present tougher
trading conditions in all of the Group’s countries of operation than
experienced during most of 2022. It is therefore prudent to set objectives
for the Board, and its Committees, that are sensitive to these demands.
Board evaluation
The Board priorities for 2023 include:
• ensuring a smooth transition from Steve Francis to Gavin Slark as
Group CEO and a successful onboarding of Gavin Slark through 2023;
• ensuring an appropriate balance between longer-term vision and
responding to shorter-term volatility; and
• a focus on technology issues and modernisation.
Further information on the objectives set by each Committee for 2023
can be found in their reports.
The Board set a number of objectives for itself and its Committees for
2022. Ongoing progress on these objectives was reported to the Board
by the General Counsel & Company Secretary at each Board meeting,
meaning that the Board was able to review progress on a regular basis.
The Board also reviewed the wider economic circumstances prevailing
during the year, and particularly unforeseen circumstances such as the
Russian invasion of Ukraine, persistent high inflation and rising interest
rates leading to worsening trading conditions, to assess whether the
objectives set at the start of the year remained a priority.
The majority of objectives set for 2022 were addressed either in whole
or in part during the year. Where an objective was satisfied in part during
2022, it is expected that further progress will be made during 2023. For a
small number of objectives, the Board decided during the year that they
would be deprioritised as the time and commitment of the Board or the
appropriate Committee was better used in addressing other matters that
had arisen during the year. The Board is satisfied that in such cases it
was appropriate to take this action, in the best interests of the Company
and its stakeholders.
87SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Composition, succession and evaluation
21 3 4 5
Nominations Committee report
Purpose and aims
To lead the process for Board appointments, ensure plans are in
place for orderly succession to both Board and senior management
positions, and oversee the development of a diverse pipeline for
succession.
The Committee aims to maintain the appropriate balance of skills,
knowledge, experience, diversity and independence of the Board and
its Committees to ensure their continued effectiveness.
Key responsibilities
• To review the structure, size and composition (including the
skills, knowledge, experience and diversity) required of the Board
compared to its current position and in the light of future challenges
affecting the business.
• To make recommendations to the Board regarding any changes,
to ensure that plans are in place for the orderly succession and
development of Directors and other senior executives, and to
oversee the development of a diverse pipeline for succession.
• Working with the Group Chief People Officer, to take an active role in
setting and meeting diversity objectives and strategies for the Group
as a whole.
Terms of reference
During the year the Board reviewed its terms of reference and made a
number of non-material updates to them. These can be found on the
Group’s website at www.sigplc.com.
Evaluation
An internal evaluation was conducted for the Committee in line with
the Code. More details can be found on page 87.
Nominations Committee membership
Member Joined
Andrew Allner
1
Chairman
1 November
2017
Shatish Dasani
Independent Non-Executive Director
1 February
2021
Kath Durrant
Independent Non-Executive Director
1 January
2021
Gillian Kent
Independent Non-Executive Director
1 July
2019
Simon King
Independent Non-Executive Director
1 July
2020
Alan Lovell
Senior Independent Non-Executive Director
1 August
2018
Christian Rochat
Non-Executive Director
10 July
2020
1. Independent on appointment.
Directors’ tenure
as at 7 March 2023
Gavin Slark 0 years 1 month
Ian Ashton 2 years 8 months
Andrew Allner 5 years 4 months
Shatish Dasani 2 years 1 month
Bruno Deschamps 2 years 7 months
Kath Durrant 2 years 2 months
Gillian Kent 3 years 8 months
Simon King 2 years 8 months
Alan Lovell 4 years 7 months
Christian Rochat 2 years 7 months
Corporate governance report
88 SIG Annual Report and Accounts 2022
Dear Shareholder,
I am pleased to present the Nominations Committee Report for the
financial year ended 31 December 2022 on behalf of the Board.
The composition of the Nominations Committee meets with the
requirements of the Code with the majority of members being
independent (five out of seven members were independent and I
was independent on appointment) and, in line with good practice,
membership is reviewed annually.
A principal activity of the Committee during the year was the
announcement in September 2022 that Gavin Slark had been appointed
as the Group’s new Chief Executive Officer with effect from 1 February
2023, replacing Steve Francis who stepped down as Group CEO on
that date. The Committee was delighted to secure Gavin as the Group’s
CEO and the announcement in September was the culmination of
considerable work by the Committee, management and our advisors
in the period leading up to that announcement.
During the year the Committee also progressed its review of succession
for senior roles and of the talent and capabilities of the ELT, as it had
stated last year that it would do.
Recent years have, rightly, seen an increased focus by companies and
their stakeholders on diversity and inclusion. The Committee devoted
attention to this important subject during 2022, as we had said that we
would do, and a revised Diversity, Equality and Inclusion policy was
launched in Q4 of 2022, and a Group-wide DEI forum was established
with representatives from across the business to develop our framework
and deliver actions in this area. The Committee is aware that the
Group remains a work in progress in these areas and is committed
to continuing to seek to make progress in 2023.
As at the year end, my current term of office was due to expire on
31 October 2023. In light of the appointment of a new Group CEO
on 1 February 2023, the Board took the decision in March 2023 to renew
my term for an additional 3 years, to 31 October 2026 to ensure a period
of continuity as Gavin is onboarded as Group CEO.
Andrew Allner
Chair of the Nominations Committee
7 March 2023
Independence of Directors
as at 7 March 2023
Summary of Directors’ skills
1
As at 7 March 2023
Age of Directors
as at 7 March 2023
Board ethnic background
as at 7 March 2023
Board gender diversity
as at 7 March 2023
Independent
Not independent
Male
Female
50%
50%
40%
60%
90%
10%
80%
20%
50–60 years
60+ years
White British/other White
Asian/Asian British
0
5 10 15 20 25 30 0 5 10 15 20 25 30
Strategy
Transformation/Turnaround
Change Management
Stakeholder Engagement
Workforce Engagement
Cultural Engagement
Legal
Retail
Distribution
Information Security
Technology/Digital
Transportation/Fleet Management
Health & Safety
Environmental/ESG
Accounting/Auditing
Treasury Management
Marketing
M&A/Corporate Transactions
Property Management
Listed Company experience
International
26
24
25
27
25
23
13
12
17
18
24
20
12
19
21
18
18
14
23
27
26
The information contained above was sourced directly from each
of the Directors.
1. The Board were asked to score themselves from 0 (no/little experience) to 3 (detailed knowledge/experience) to give a score out of 30 for each topic.
89SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Corporate governance report | Nominations Committee report
Composition, succession and evaluation
21 3 4 5
Meetings and membership
During the year, the Committee met on five occasions, with two of these
meetings comprising additional meetings held in connection with the Group
CEO transition. The quorum for meetings is three members, the majority
of whom must be independent Non-Executive Directors. Members of the
Committee are not involved in matters affecting their own position.
The Committee comprises the Chairman and six Non-Executive
Directors of whom five are independent Non-Executive Directors.
No Executive Directors are appointed to the Committee; however,
they may attend by invitation if the matters to be discussed require
their participation. Attendance at meetings is set out on page 74.
Board balance, composition and skills
The Board comprises ten Directors: the Chairman of the Board, two
Executive Directors, and seven Non-Executive Directors, of whom five
are independent Non-Executive Directors.
A principal activity of the Committee in 2022 was the appointment of
Gavin Slark as Group CEO, replacing Steve Francis who stepped down
as Group CEO on 1 February 2023. The Committee engaged Korn Ferry
to support it during the recruitment process. A long-list of candidates
was prepared and considered by the Committee, from which it felt that
Gavin Slark was the outstanding candidate due to his tenure within the
building materials distribution industry and his previous track record as a
listed-company CEO, notably at Grafton Group plc. The Committee was
delighted that the Group was able to announce in September 2022 that
Gavin would be joining SIG in February 2023.
During the year, and in accordance with its usual practice, the
Committee also reviewed the wider composition and balance of the
Board. The review considered the membership of the Committees of the
Board, the balance on the Board between Executive and Non-Executive
Directors, the tenure of the Directors, diversity on the Board and the
independence of the Non-Executive Directors. The Non-Executive
Directors, other than Bruno Deschamps and Christian Rochat who are
CD&R representatives on the Board, are considered independent as at
the date of this report. On appointment to the Board, the Chairman was
considered independent in accordance with the terms of the Code.
For more information on biographical details for each
Director see pages 70 to 71.
In making recommendations for the annual re-election of the Chairman
and Non-Executive Directors, the Committee considers the skills,
knowledge, experience, independence and the time commitments
of each Director to ensure that they have sufficient time to fulfil their
responsibilities to the business. All Directors will accordingly be put
forward for election or re-election at the 2023 AGM, with the exception
of Christian Rochat who is to stand down and will not seek re-election.
In its most recent report, the Committee stated that it would consider
during 2022 whether to recommend to the Board the adoption of a policy
on external commitments held by Non-Executive Directors. The Committee
was mindful that whilst the Code does not prescribe specific limits on
the number of other directorships a Non-Executive Director may hold, a
number of institutional shareholders and their representative bodies have
issued such guidance. Having considered the matter during the year, the
Committee has concluded at this time not to make any recommendation
that SIG adopts a formal policy on external board appointments.
However, the Committee takes shareholder opinions on over-boarding
seriously and due consideration is always given to such concerns where
a Director requests permission to take up a further appointment.
Executive Leadership Team
There was one appointment made to the ELT during the year. Julie
Westcott joined as Group Health, Safety and Environment Director,
replacing the previous holder of the role, which further strengthened the
leadership in this area while also improving the gender diversity of the ELT.
In its previous report, the Committee stated that during 2022 it would
undertake a review of the talent and capabilities of the ELT. Parsons
Consulting were engaged to support this exercise, which ran through
the year. The results of the exercise were reported to the Committee and
individual plans have been put in place for each ELT member to further
their development. The Committee also said that it would undertake a
similar exercise for colleagues who report to an ELT member and Parsons
Consulting were also engaged to provide support on this exercise.
Board succession planning
During 2022, as it stated it would do, the Committee commenced the
exercise of a more structured and formal review of talent, management,
performance and the capability of the Board. Savannah Group were
engaged to assist in this exercise as it relates to the skills of the Non-
Executive Directors in particular. The majority of the time devoted by the
Committee during the year to Board succession was in relation to the
Group CEO transition, for understandable reasons. The work concerning
broader Board succession planning will continue during 2023.
90 SIG Annual Report and Accounts 2022
Diversity
The Board acknowledges the importance of diversity in its broadest
sense in the Boardroom as a driver of Board effectiveness. The Board
recognises that gender, ethnic, social and cultural diversity of boards are
significant aspects of diversity and acknowledges the role that women
and those of different ethnic, social and cultural backgrounds with the
right skills, experience, cognitive and personal strengths can play in
contributing to diversity of perspective in the Boardroom. The policy on
Board diversity was reviewed and updated by the Board during the year
and is available on the Group’s website (www.sigplc.com).
Gender diversity is a significant aspect of diversity. The Board comprises
ten Directors, of whom two are women. Of the six independent Non-
Executive Directors, one-third are women. CD&R has the right to
appoint two Directors, under the Relationship Agreement, and CD&R’s
two appointees to the Board are both male. On a statistical level, this
makes meeting higher thresholds of gender diversity more challenging.
The Board is compliant with the Parker Review recommendations for
FTSE250 companies as it includes one Director of an ethnic minority
background.
The Committee receives regular information on diversity from across the
Group except from those countries where the law does not permit such
information to be gathered. The Group continues to ensure where possible
that recruitment for any new roles has a short-list of diverse candidates.
Information on the gender balance of senior management is on page 42.
2022 saw SIG establish a Group-wide DEI forum, including
representation from each operating company, which contributed to
the new DEI policy published during the year (and available on the
Company’s website www.sigplc.com). A Group DEI framework was
established to direct and guide activities across the business, while
allowing each operating company flexibility to ensure alignment to local
culture. The aims of the programme are to enhance DEI awareness
across SIG and ultimately to improve the representation of under-
represented groups in SIG.
Committee evaluation and priorities
An internal evaluation of the Committee was conducted for 2022
and further details can be found on page 87. The priorities that the
Committee has established for 2023 include:
• Board composition and Non-Executive Director succession planning;
• ELT succession planning; and
• wider company succession planning.
91SIG Annual Report and Accounts 2022
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Governance
Financials
Risk management and
internal control
The Board has ultimate responsibility for establishing procedures to
manage risk, oversee the internal control framework and determine the
nature and extent of the principal risks the Group is willing to take in
order to achieve its long-term strategic objectives. The Board delegates
responsibility to the Audit & Risk Committee to consider the adequacy of
the risk management and internal control framework, to agree the risk-
based internal audit programme and to ensure the risk management and
internal control structure and frameworks are robust.
The ELT has responsibility for ensuring that risk management is
embedded into all processes and for ensuring that risk profile is in
line with the approved risk appetite. Local controls managers support
process owners to develop controls and to test their effectiveness.
Group Internal Audit is responsible for providing independent assurance
on the quality of the risk management processes, developing a risk-
based internal audit programme and providing independent assurance
to the Board and the Audit & Risk Committee that the controls in place
are designed appropriately and operating effectively.
The Group Internal Audit function comprises an in-house team
supported by external resources, where necessary, to assist in providing
assurance on specialist areas. The Board regularly reviews the need for
the Group Internal Audit function and the effectiveness of the co-source
arrangement.
Information on audit can be found in the Audit & Risk Committee Report
on pages 94 to 100.
Key elements of ongoing process for risk
management and internal control
Group Internal Audit periodically reviews local risk management
arrangements in order to provide reasonable assurance to both the Audit
& Risk Committee and the Board that appropriate internal controls have
been implemented to mitigate the likelihood of risks materialising and
effectively minimising potential impacts arising. In addition, on at least
an annual basis, the Group Director of Audit and Risk meets with the
operating company leadership teams to perform a detailed review of
their key strategic risks and uncertainties, which is used as an input to
the annual Group strategic risk review.
The key elements of the existing systems for risk management and
internal control, in accordance with the FRC’s Guidance on Risk
Management and Internal Control and Related Financial and Business
Reporting (September 2014), are as follows:
Risk management
• The documented Group risk management framework, approved by
the Audit & Risk Committee, provides an overview of the agreed risk
management processes within the Group and gives practical guidance
to operating companies and individual functions on the management
of risk.
• In accordance with the Group risk management framework, the Group
Director of Audit and Risk works with operating companies and central
function leadership teams to ensure appropriate local risk registers are
maintained.
• The Board maintains an overall Group risk register, the content of
which is reviewed and assessed at least twice a year by the Board
and includes regular input from the Audit & Risk Committee. A review
of the Group’s principal risks and how it manages or mitigates them is
presented in the Strategic report on pages 56 to 61.
• The Group risk register has been reviewed and updated and contains
the principal risks faced by the Group, assessing the potential risk
having taken into account likelihood, impact and the current controls
to mitigate an identified risk and any further actions required to bring
the risk to within risk appetite. Once identified, emerging risks are
assessed by identifying and mapping out the core elements of the
risk, identifying owners for each element in the operating companies,
holding workshops with risk owners to assess the level of risk,
identifying potential mitigating actions that reduce the impact of the risk
and seeking external guidance if required. Potential emerging risks are
monitored and assessed regularly during the year by the Audit & Risk
Committee for their relevance and significance.
The Audit & Risk Committee regularly assesses the Group’s emerging
and principal risks and considers that its assessment is robust. The Audit
& Risk Committee reports to the Board following its assessments. A
consolidated Group strategic risk report was prepared for review by the
ELT and was recommended to the Board for approval in early 2023.
Internal control
The Group assurance framework is the basis on which the Group
Controls and Internal Audit teams base their annual plan. The controls
plan for 2022 was defined, communicated and agreed with operating
companies, and the teams made progress on the delivery of the plan.
The teams support the creation and maintenance of a robust financial
control environment, and they raise controls awareness across SIG
by providing operating company and Group functions with practical
and hands-on support and advice. Group Internal Audit proposed and
delivered a rolling audit plan for 2022 across the Group, together with
a branch audit programme. Regular updates were provided through
the year.
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Key control activities include:
• operating company controls reviews: in order to continue to build
up controls documentation across core financial processes within
the operating companies, the 2022 plan contained a number of
controls reviews. The objective of controls reviews is to support the
operating companies in enhancing their control environments and
to build the Risk and Control Matrices (“RACMs”) and process map
documentation;
• entity-level control and Group function reviews: reviews were
performed over Group functions to identify and document process-
level and entity-level controls. These reviews were completed in the
year and no significant gaps in expected controls were identified;
• IT General Controls (“ITGC”): the Group Controls team have worked
with each operating company to identify, document and build out the
ITGC environment. The team then continued to support operating
company IT teams in remediating any control weaknesses identified.
This support will continue until fully remediated;
• Key Control Framework (“KCF”) submissions: on a quarterly basis
operating companies are required to self-certify against 32 areas
covering financial controls, entity-level controls, operational controls
and ITGC. The Group Controls team performs a review of the
responses received to ensure consistency of responses compared
to other sources of assurance, as well as to identify significant issues
or control weaknesses;
• action remediation and tracking: the Group Controls team document
and monitor progress on all remediation actions arising from controls
work. Monthly updates are obtained from operating companies, which
are analysed, investigated and reported to the ELT and the Audit & Risk
Committee;
• the Group Delegation of Authority policy was refreshed and approved
by the Board in September 2022 following which it was communicated
to the operating companies and Group functions during October 2022;
• training and guidance: to raise the awareness of controls across
the business, the Group Controls team delivered a series of training
modules and guidance covering control topics relevant to operating
companies and Group;
• UK SOX update: the Group Controls team considered the final
response of the Department of Business, Energy and Industrial
Strategy (“BEIS”) consultation paper and impact thereof on the controls
programme across the Group. Further information, guidance and
timelines are expected from regulators. The team continues to monitor
and assess the likely impacts, gaps and roadmaps for implementation
and amend the controls programme accordingly;
• as part of the sanctions policy adopted in 2022, Internal Audit
screened the top 20 product suppliers for each operating company
and other strategic suppliers, and no compliance exceptions
were noted;
• a high-level review of capital expenditure investment appraisal
processes was carried out across the operating companies to ensure
that appropriate local processes are in place to provide effective
governance across major investment decisions; and
• to help assess and prioritise investments in IT infrastructure,
applications and services, the Internal Audit team created an IT
capability process assessment methodology. This was rolled out
in Germany and Benelux in 2022.
Financial reporting
• In addition to the general internal controls and risk management
processes described on pages 92 to 93, the Group also has specific
systems and controls to govern the financial reporting process and
preparation of the Annual Report and Accounts.
• These systems include clear policies and the procedures for ensuring
that the Group’s financial reporting processes and the preparation of
its financial statements comply with all relevant reporting requirements.
• Group accounting policies are comprehensively detailed in the Group
accounting policy manual, which all businesses are required to comply
with in the preparation of their results.
• Financial reporting control requirements are set out in relevant RACMs,
which have been reviewed and updated during the current year.
Annual assessment of the effectiveness of systems of risk
management and internal control systems
The Board assessed the effectiveness of the Group’s system of risk
management and internal controls. This assessment covered all controls
including operational, compliance and risk management procedures, as
well as financial controls.
The Board considers that the information that it receives is sufficient to
enable it to review the effectiveness of the Group’s risk management
and internal controls in accordance with the FRC’s guidance. The
Board considers that the framework of controls in place is effective and
enables risk to be assessed and managed. The Board also considers
its risk management and internal control processes provide it with the
assurance that all the necessary resources are in place for the Group to
meet its objectives and to measure performance against them for 2022
and up to and including the date of this report.
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Purpose and aims
To provide effective oversight and governance over the financial
integrity of the Group’s financial reporting so as to ensure that the
interests of the Company’s shareholders and other key stakeholders
are considered and protected.
To make recommendations on the reporting, control, risk management
and compliance aspects of the Directors’ and Group’s responsibilities,
providing independent monitoring, guidance and challenge to senior
management in these areas.
The Committee’s aims are to ensure high standards of corporate and
regulatory reporting; an appropriate control environment; a robust
risk management framework; and effective compliance monitoring.
The Committee believes that excellence in these areas enhances
effectiveness and reduces the risks of the Group to an acceptable level.
Key responsibilities
• The accounting principles, practices and policies applied in, and
the integrity of, the Group’s Consolidated financial statements.
• The adequacy and effectiveness of the internal control environment.
• The effectiveness of the Group’s Internal Audit function.
• The appointment, independence, effectiveness and remuneration
of the Group’s external Auditor including the policy on non-audit
services.
• The conduct of any tender process for the Group’s external Auditor.
• External financial reporting and associated announcements,
including significant financial reporting judgement contained in them.
• The effectiveness of the risk management procedures in place and
the steps being taken to mitigate the Group’s risks.
• The Group’s compliance with the audit-related provisions of the Code.
Terms of reference
During the year the Board carried out a review and updated the
Committee’s terms of reference, principally to reflect the formal
assumption by the Committee of the Board’s responsibility for risk.
These can be found on the Group’s website at www.sigplc.com.
Evaluation
An internal effectiveness review was conducted for the Committee in
line with the Code. More details can be found on page 87.
Audit & Risk Committee membership
Member Joined
Shatish Dasani
Chair & Independent Non-Executive Director
1 February
2021
Kath Durrant
Independent Non-Executive Director
1 January
2021
Alan Lovell
Senior Independent Non-Executive Director
1 August
2018
Gillian Kent
Independent Non-Executive Director
1 July
2019
Simon King
Independent Non-Executive Director
1 July
2020
94 SIG Annual Report and Accounts 2022
Dear Shareholder,
On behalf of the Board, I am pleased to present the Audit & Risk
Committee Report for the financial year ended 31 December 2022.
This report is intended to provide shareholders with an understanding
of the key areas considered by the Committee, together with how the
Committee has discharged its responsibilities and provided assurance
on the integrity of the 2022 Annual Report and Accounts.
The Group has continued to make strong progress on strengthening
its internal control environment and developing a robust internal control
framework. Detailed control frameworks are in place for key processes
and management is actively working to embed these in all parts of
the Group and to enhance our risk-based approach to continuous
monitoring of control effectiveness. I am confident this will continue
into 2023.
The Committee’s terms of delegation from the Board already included
a number of risk matters and, beyond the formal scope of delegation to
the Committee, it has in practice included principal risk areas within its
ambit for some time. During the year the decision was taken to formalise
the Committee’s remit with regard to risk and to update the Committee’s
name accordingly to the “Audit & Risk Committee”.
The Committee held four meetings in 2022. I also had regular meetings
with the CFO, General Counsel & Company Secretary, Group Director
of Audit and Risk, Group Financial Controller, and the external Auditor
to discuss key financial, control and risk issues and to review agenda
items and papers for forthcoming Committee meetings. In addition to
the ongoing review of key judgements applied to financial statements,
assurance reports and risk registers, the Committee’s work during the
year covered the following key areas:
• review of the work of the Group Controls team as it continues to
support development and formalisation of the controls framework
across the Group. The activities of the team in 2022 included the
continued enhancement and documentation of RACMs across the
operating companies covering nine key financial processes (order
to cash; procure to pay; HR & payroll; cash management; inventory
management; supplier rebates; customer rebates; fixed assets;
and financial close), reviews over Group functions to identify and
document process-level and entity-level controls, and working with
each operating company to identify, document and build out the ITGC
environment;
• consideration of the adequacy and robustness of the risk management
framework to ensure that the organisation’s principal risks and
uncertainties are identified and assessed, and actions implemented to
mitigate either the likelihood of risks arising or the potential impact of
risks materialising;
• TCFDs became the standard of climate-related reporting for premium
listed companies with accounting periods beginning on or after
1 January 2021. The Committee has again carefully examined the four
pillars and 11 recommended disclosures to determine the Group’s
ability to report against each of them and I am pleased to say that SIG
has reported against all this year;
• oversight of the development of a standalone sanctions policy to
ensure that the Group was compliant with the sanctions implemented
following the invasion of Ukraine. This also included the development of
protocols and procedures to identify and mitigate potential risk posed
by third parties with whom the Group engaged; and
• the Committee also monitored the increasing risk to cyber security.
Areas under review included business continuity, cyber and data
security and ITGCs. The Committee has monitored the progress made
to ensure that best practices are in place across
the Group.
An internal evaluation of the Committee was conducted for 2022
and further details can be found on page 87. The priorities that the
Committee has established for 2023 include:
• review of the finance functions across the Group, with particular focus
on specific locations;
• ensuring there remains a close focus on risk, particularly during
tougher economic conditions; and
• reviewing the third-party assurance that can be provided for ESG
reporting, as the Group seeks to expand the scope of its ESG
reporting in future years.
Shatish Dasani
Chair of the Audit & Risk Committee
7 March 2023
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Committee membership
The Board considers that each member of the Committee was
independent throughout the year, and remains so, and there are no
circumstances which are likely to impair their independence according
to the factors set out in the Code or otherwise. The knowledge and
experience of the Committee members means that the Committee is
competent in the sector in which the Group operates. Shatish Dasani, as
Chair of the Committee, is a chartered accountant and has recent and
relevant financial experience for the purposes of the Code.
Attendance by individual members of the Committee is disclosed in
the table on page 74. The Committee Chair regularly invites senior
management to attend meetings of the Committee to discuss or present
specific items; the CFO, Ian Ashton, and the CEO in office during the
year, Steve Francis, attended all of the meetings in 2022. The external
Auditor, the Group Director of Audit and Risk and the Group Financial
Controller also attended all meetings of the Committee and have direct
access to the Committee Chair.
The Committee meets regularly with the external Auditor and the Group
Director of Audit and Risk without the Executive Directors being present
and the Committee Chair also meets with the external Auditor, the CFO,
Group Financial Controller and the Group Director of Audit and Risk in
advance of Committee meetings.
In accordance with the Relationship Agreement with CD&R, an observer
nominated by CD&R attended all Committee meetings held this year. As
an observer, the representative is entitled to attend meetings but cannot
affect the decision making of the Committee.
Committee structure
The Committee operates under written terms of reference which can be
found on the Group’s website (www.sigplc.com). They are reviewed
annually by the Committee and changes are recommended to the Board
for approval. The Committee has in its terms of reference the power to
engage outside advisors and to obtain its own independent external
advice at the Group’s expense, should it be deemed necessary.
Meetings
The Committee meets regularly throughout the year, with four meetings
being held during 2022. Key matters considered at meetings of the
Committee are set out on the left of this page.
Key activities during 2022
− Preparation for external Auditor lead partner
rotation (in 2023)
− Cyber risk and mitigation measures
− Sanctions policy
− Review of the 2021 Annual Report and
Accounts
− Risk update and Annual Report disclosure
− Review of half-year results
− Half-year results announcement
− Group Internal Audit and risk strategy
− Extension of the Committee’s remit to formally
include risk
At every meeting the Committee considers:
− Report of the CFO
− Report of the external Auditor
− Report of the Group Director of Audit and Risk
− Minutes and actions from previous meetings
The Committee also considered during the year:
− Audit and risk management team capacity
and resource allocation
− Internal controls
− Senior Accounting Officer annual review
− TCFD reporting
− Annual auditor evaluation
− Report of Group Head of Tax and Treasury
− Review of non-audit services from
external Auditor
− Risk appetite and Group risk register
− Deep-dive risk reviews on people risk and
emerging risk
96 SIG Annual Report and Accounts 2022
Significant financial judgements
The Committee considered a number of significant issues during the year. These related to areas requiring management to exercise particular
judgement or a high degree of estimation. The Committee assesses whether the judgements and estimates made by management are reasonable
and appropriate. The issues and how they were addressed by the Committee are set out below:
Key financial reporting and significant financial judgements
considered in relation to the financial statements How the issue was addressed by the Committee
Carrying value of goodwill
and intangible assets
The carrying value of goodwill and intangible
assets is reviewed at the mid-year point and at
year end. The Group estimates a recoverable
amount for each individual cash-generating unit
(“CGU”) based on forecast revenues, operating
margins and discount rate risk adjusted where
appropriate.
The results of the 2022 impairment review have been reviewed.
The Committee noted the continued increase in headroom due
to the strong trading performance and increased forecast
profits over the next three years for most CGUs. An impairment
was, however, recognised in Benelux given ongoing operational
issues faced and losses incurred during the year. The Committee
considered the appropriateness of the assumptions and the
sensitivity analysis performed.
Recognition of deferred
tax assets
Deferred tax assets are recognised for unused
tax attributes to the extent that it is probable
that taxable profit will be available against which
the attributes can be utilised. The Group has
significant potential deferred tax assets which
are currently unrecognised relating mainly to
cumulative UK tax losses and other deductible
temporary differences.
The Committee considered the judgement made that there is
not sufficient convincing evidence at 31 December 2022 that
sufficient future taxable profits will be available to allow the
utilisation of the deductible temporary differences, considering
the forecast taxable profits of the UK tax group, the timing of
potential unwind of the deductible timing differences and
current macroeconomic uncertainty, and is satisfied with the
judgement made.
Recognition and
measurement of supplier
rebate income
Procedures and controls are in place to ensure
that the reporting, reviewing and accounting for
supplier rebate income is properly managed
and that supplier rebates are recognised
appropriately in the Consolidated financial
statements.
The Committee considered the adequacy of work performed in
the year to gain assurance that procedures and controls in
place were effective.
Disclosure of Other items The Group presents income statement items in
the middle column of the Consolidated income
statement, entitled Other items, when they are
significant in size and nature, and either do not
form part of the trading activities of the Group
or where their separate presentation enhances
understanding of the financial performance
of the Group.
The Committee carefully considered the judgements made
in the separate disclosure of Other items. In particular, the
Committee sought to ensure that the treatment followed
consistent principles and that reporting in the Consolidated
financial statements is suitably clear and understandable.
Going concern basis and
viability statement
The Group is required to assess if it has access
to sufficient resources to continue as a going
concern and assess the period of viability.
The Committee considered the review of going concern and
longer-term viability performed by management and reviewed
the financial statement disclosures. On the basis of the
financing the Group has in place and the Group’s latest
financial forecasts, the Committee is satisfied with the
conclusions over going concern and longer-term viability.
Contingent liability
disclosure
The Group discloses contingent liabilities of
which it is aware at the date of signing the
financial statements. Subsequent to the
year-end, additional independent technical
expert input has been obtained relating to legal
proceedings being brought by a customer in
Belgium, which may give rise to a possible
further obligation and is disclosed as a
contingent liability in Note 29 to the
Consolidated financial statements.
The Committee considered the supporting information in
relation to the ongoing claim, the additional input obtained and
the potential impact this may have. On the basis that this is a
possible future obligation whose existence will be confirmed
only by the occurrence of future events not wholly within the
control of the Group, the Committee is satisfied that the
conclusions reached and the disclosures included in the
Annual Report and Accounts are appropriate.
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Oversight of risk management and internal controls
The Committee reviews and examines the effectiveness of the Group’s
internal controls and risk management systems and advises the Board in
the exercise of its responsibility for maintaining sound risk management
and internal control systems. The Board has approved a set of policies,
procedures and frameworks for effective internal control and risk
management. These procedures are subject to regular review and
provide an ongoing process for identifying, evaluating, and managing
the significant risks faced by the Group. Such a system is designed to
manage, rather than eliminate, the risk of failure to achieve business
objectives and can provide only reasonable and not absolute assurance
against material misstatements or loss.
Risk management
On an annual basis the Committee oversees the review of the Group’s
key strategic risks and uncertainties. In performing this review, the
Committee seeks the opinions, and takes into consideration the inputs,
of a broad range of SIG stakeholders. This included the consideration
of the outputs of individual strategic risk assessments, performed at
each of our operating companies, the insight and views of the ELT and
the outputs of one-to-one meetings held between the Group Director of
Audit and Risk and individual Board members and senior management.
These risks are also subject to review on a periodic basis whereby the
Committee considers the impacts of any changes to SIG’s risk profile
arising from updates from the Group Director of Audit and Risk on
key issues in relation to the Group’s risk management systems and
processes, the outputs of deep-dive risk reviews, updates to individual
operating companies’ strategic risk registers and issues identified
through other assurance activities completed across the Group
during the year.
Risk management roles and responsibilities:
The Committee
• Responsible for reviewing and examining the effectiveness of the risk
management systems, processes and internal controls implemented
by management.
• Reviews and recommends the annual strategic risk reporting process
to the Board for approval. On a periodic basis, it reviews the status
of key risks and uncertainties, the effectiveness of internal controls or
other mitigations implemented and trends and issues arising from key
risk indicators.
Executive Leadership Team
• Each ELT member is responsible for, at least bi-annually, reviewing
the status of strategic risks and uncertainties relevant to their area of
responsibility.
Operating company MDs
• Responsible for ensuring their operating company has an appropriate
and proportionate risk management process which captures, assesses
and prioritises business risks and identifies appropriate mitigation
strategies. This process is reviewed and, if necessary, updated, on a
regular basis or when changes in business activities or external events
are likely to have a reasonable impact on the operating company’s risk
profile. Each operating company’s MD is also responsible for formally
approving and signing-off their operating company’s strategic
risk report.
Group Director of Audit and Risk
• Provides advice and, where requested, support to Group and
operating companies’ management to ensure their completion of risk
management activities.
• Regularly reviews the output of operating companies’ and Group
functions’ risk management activities and processes in order to
provide reasonable assurance to the Committee that appropriate
internal controls have been implemented to mitigate the likelihood of
risks materialising and minimising potential impacts arising.
• Works collaboratively with the Committee, ELT and operating company
MDs to prepare an annual review of strategic risks and uncertainties to
ensure that the nature and treatment of critical risks and uncertainties
(relative to both the Group and each operating company’s strategic
plans) are appropriately articulated, and that appropriate mitigations
are implemented where necessary.
Internal controls
SIG has adopted an assurance framework which provides a structured
means to support the ongoing process of identification, evaluation and
management of significant risks faced by the Group. The aim of the
framework is to ensure that a single easily explainable framework exists
for all aspects of control (financial and non-financial), with individual
elements clearly defined and understood and a clear linkage throughout
the framework from a branch to Board level. The framework is the basis
on which the Group Controls team’s annual plan is built.
Some major activities performed as part of the annual controls plan for
2022 were:
• controls reviews and RACM enhancement;
• ITGC review (UK, France, Germany, Poland);
• credit control reviews in UK, Germany and France to ensure that
fundamental credit management controls are appropriately designed
and operating effectively;
• monitoring actions and supporting owners with remediation activities
with regular reporting to the Committee; and
• control framework assessment and gap analysis in readiness for the
potential introduction of enhanced controls regulations and reporting.
The Committee has responsibility for reviewing the adequacy and
effectiveness of the Group’s internal control systems. Reports on
the findings of the Group Controls team and Internal Audit’s reviews,
investigations and management agreed actions are provided at every
meeting. The Committee receives regular reports on progress and any
issues arising.
98 SIG Annual Report and Accounts 2022
Oversight of internal audit
The Group Internal Audit function provides independent assurance to
senior management and the Board on the adequacy and effectiveness
of SIG’s risk management and controls framework. Internal audit forms
an independent and objective assessment as to whether risks have been
adequately identified, adequate internal controls are in place to manage
those risks, and whether the controls are working effectively.
The Committee reviewed the remit, organisation, and resources of the
function, together with the internal audit plan. The internal audit plan
was regularly reviewed during the year to ensure it remained aligned to
the key risks of the business and that the function was appropriately
resourced.
Group Internal Audit undertakes independent and objective assessments
to determine whether risks had been adequately identified, adequate
internal controls are in place to manage those risks, and those controls
are working effectively. External resources continue to provide co-
sourced support, when necessary, to Group Internal Audit to cover
specialist areas.
Audit reports were presented to the Committee with areas of weakness
resulting in action plans being developed and follow-up reports required
to ensure that actions had been completed appropriately. The results of
all audits have been presented to the Committee during the year, and
follow-up audit checks undertaken to establish that actions have been
completed appropriately.
Examples of internal audit reports issued during the year include:
• UK HR and payroll internal control operational effectiveness testing;
• Group Treasury internal control operational effectiveness testing;
• SIG Poland, capex, investment appraisal process reviews; and
• SIG France SAP S/4HANA project review.
Consistent with previous years, the Committee agreed the process for
the evaluation of the performance of the Group Internal Audit function
which involved the circulation of a questionnaire tailored for several
participating stakeholder groups. The questionnaire was sent to the
Committee, Executive Directors, Managing Directors and Finance
Directors of the operating companies, the external Auditor, and other key
individuals in functional areas. Members of the Internal Audit team were
also asked to complete a questionnaire by way of self-assessment.
The evaluation found that the Group Internal Audit function adds value,
maintains its independence, provides a broad range of assurance and is
effective overall.
The areas of focus for 2023 were agreed by the Committee and include:
1. continued focus on the timeliness of management’s response and
implementation of agreed actions;
2. further develop the team induction process to ensure all team
members are familiar with all business operations across the Group,
including activities conducted only by certain operating companies;
and
3. review potential for greater use of data analytics in internal auditing.
Oversight of external Auditor
Ernst & Young LLP were appointed as the Group’s external Auditor
in July 2018 following a tender. Shareholders formally approved their
re-appointment at the Annual General Meeting in May 2022. There is
no intention to conduct any re-tendering exercise currently, but this
will be reviewed annually, taking into account the performance and
effectiveness of the Auditor, as assessed by the Committee.
The lead audit partner at Ernst & Young LLP completes his maximum
term of office following the conclusion of the audit of the 2022 financial
statements. During the year, meetings were held with other partners at
Ernst & Young LLP following which it was agreed that Mr Adrian Roberts
will replace Mr Colin Brown as the lead audit partner, with effect from
the conclusion of the 2022 audit. Mr Roberts observed a number of key
meetings during the 2022 audit process to ensure he is familiar with the
Group and its business, ahead of assuming the role of lead audit partner.
External Auditor performance evaluation
For the year ended 31 December 2021, the Group assessed the external
Auditor’s performance using a questionnaire sent to key finance and
non-finance stakeholders across the Group, a commentary-based
survey of Committee members and a review of other published
information on audit quality.
The questionnaire was sent to the Finance Director and Financial
Controller of all in-scope operating companies together with all key
members of the Group finance team and others who had involvement
with the Auditor, including Tax and Treasury, Company Secretariat, HR,
Risk and Internal Audit. The questionnaire comprised 38 questions
covering a range of topics including the audit firm itself, the partner role
and involvement, the audit team, audit planning and execution, fees,
communication and governance and independence, with respondents
asked to rate the Auditor on a scale of 1 to 5 and to provide any
additional comments alongside their ratings.
Overall, the ratings were broadly consistent with or slightly higher than
the ratings for the previous year across all areas. The most notable
increase was in the area of the audit fee, which was the lowest scoring
area last year. This is a result of higher ratings at Group level and in the
UK, France and Germany, and a reduced level of overruns for 2021
following smoother audit processes in most locations.
Results from the feedback process have been shared with the external
Auditor and a number of actions taken to address matters raised. The
Committee, having reviewed the performance and effectiveness of
the external Auditor, was satisfied with the independence, objectivity,
expertise, resources and general effectiveness of Ernst & Young LLP
and that the Group is subject to a rigorous audit process.
External Auditor independence assessment
The Committee monitors the need for the external Auditor to have an
appropriate degree of independence and objectivity.
The external Auditor reports to the Committee each year on the actions
taken to comply with professional and regulatory requirements and best
practice designed to ensure its independence, including the rotation of
key members of the external audit team. Ernst & Young LLP has formally
confirmed its independence to the Committee in respect of the period
covered by these Consolidated financial statements.
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Policy on non-audit services
The Group has a policy with regard to the provision of audit and non-
audit services by the external Auditor, which operated throughout 2022.
The policy is based on the principle that the external Auditor should
undertake non-audit services only where they are the most appropriate
and cost-effective provider of the service, and where the provision
of non-audit services does not impair, and could not reasonably be
perceived to impair, the external Auditor’s independence and objectivity.
It categorises such services as auditor-permitted services, auditor-
excluded services and auditor-authorised services. The fees permissible
for non-audit services should not exceed 70% of the average audit fees
paid to the Group’s external Auditor in the last three consecutive financial
years. The policy was reviewed during 2022 and will be reviewed
annually and can be viewed on the Group’s website (www.sigplc.com).
It defines the types of services falling under each category and sets out
the criteria to be met and the internal approvals required prior to the
commencement of any auditor-authorised services. In all cases, any
instruction must be pre-approved by the CFO and the Committee Chair
before the external Auditor is engaged. The external Auditor cannot be
engaged to perform any assignment where the output is then subject
to their review as external Auditor. The Committee regularly reviews
an analysis of all services provided by the external Auditor. The policy
and the external Auditor’s fees are reviewed and set annually by the
Committee and are approved by the Board.
The total fees payable by the Group to its external Auditor for non-audit
services in 2022 were £0.2m, primarily the interim review (2021: £0.4m).
The total fees payable to the external Auditor for audit services in respect
of the same period were £2.7m (2021: £2.6m). Current year costs
include £0.1m in relation to the 2021 audit (2021: £0.3m in relation
to the 2020 audit).
The ratio of audit to non-audit fee was 13:1 in respect of the audit for
the current year. Details of each non-audit service and reasons for using
the Group’s external Auditor are provided in Note 3 to the Consolidated
financial statements on page 157.
A full breakdown of external Auditor fees is disclosed in Note 3 to the
Consolidated financial statements on page 157.
Resolution to reappoint external Auditor
The Committee recommends, and the Board agrees, that a resolution for
the reappointment of Ernst & Young LLP as Auditor of the Company for
a further year will be proposed at the 2023 Annual General Meeting.
Fair, balanced and understandable
The Board had the opportunity to review early drafts of the Annual
Report and Accounts and provided input. Following this, the Committee
has reviewed the contents of this year’s Annual Report and Accounts
and advised the Board that, in its view, the Annual Report and Accounts,
taken as a whole, is fair, balanced and understandable and provides the
necessary information to enable shareholders to assess the position and
performance, strategy and business model of the Group.
In reaching this conclusion the Committee has considered the following:
• the preparation of the Annual Report is a collaborative process
between the Finance, Investor Relations, Legal, Company Secretariat,
Human Resources and Communications functions within the Group,
ensuring the appropriate professional input to each section. External
guidance and advice is sought where appropriate;
• the coordination and project management is undertaken by a central
team to ensure consistency and completeness of the document;
• an extensive review process is undertaken, both internally and using
external advisors;
• a report is prepared internally to assess the Annual Report and how it
addresses the fair, balanced and understandable assertion; and
• a final draft is reviewed by the Committee members prior to
consideration by the Board.
Shatish Dasani
Chair of the Audit & Risk Committee
7 March 2023
Corporate governance report | Audit & Risk Committee report
100 SIG Annual Report and Accounts 2022
Directors’ remuneration report
Directors’ remuneration report
Terms of reference
Revised terms of reference were adopted in December 2020. During
2022 the Committee has reviewed the appropriateness of these terms
and made a number of reasonably minor amendments. The latest
version can be found on the Group’s website at www.sigplc.com.
Evaluation
A review of the Committee’s performance was undertaken in the year.
Feedback on the planning, organisation, information, and decision
quality was considered to be at the appropriate levels. Further details
on the evaluation process can be found on page 87.
The Committee will continue to support the Group’s profitable growth
through the effective deployment of the remuneration policy and its
incentive structures. It remains mindful of the continuing challenges
that Covid-19, inflation and supply chain issues have created for
colleagues, customers, suppliers and shareholders.
Contents
In this report we set out:
1. the Annual statement from the Chair of the Remuneration
Committee;
2. the amended remuneration policy, which is subject to a binding
shareholder vote at the 2023 AGM; and
3. the Annual report on remuneration which explains how we have
paid our Directors under the current policy this year and how our
framework aligns with our wider strategy and corporate governance
best practice, as well as how we consider remuneration of the wider
workforce in relation to executive pay.
As in previous years, the Annual report on remuneration and this
annual statement are subject to an advisory shareholder vote at
the 2023 AGM. In addition, the Directors’ remuneration policy is to
be renewed at the 2023 AGM and will be the subject of a binding
shareholder vote. Only minor changes to the existing policy are
proposed, and the revised policy can be found on pages 110 to 120.
However, the Committee will keep the policy under review during the
policy cycle and, dependent on discussions with the Board and new
CEO on strategy, may return to shareholders with an alternative policy
sooner than 2026.
Remuneration Committee membership
Member Joined
Kath Durrant
Chair & Independent Non-Executive Director
1 January
2021
Andrew Allner
Chairman
1 November
2017
Shatish Dasani
Independent Non-Executive Director
1 February
2021
Bruno Deschamps
Non-Executive Director
10 July
2020
Gillian Kent
Independent Non-Executive Director
1 July
2019
Simon King
Independent Non-Executive Director
1 July
2020
Alan Lovell
Senior Independent Non-Executive Director
1 August
2018
Purpose and aims
To provide effective oversight and governance over the integrity of the
Group’s remuneration arrangements for senior management to ensure
that the interests of the Company’s shareholders are protected at
all times.
The Committee’s aim is to ensure that remuneration arrangements
support the strategic aims of the Group and enable the recruitment,
motivation and retention of senior leaders to deliver sustainable long-term
performance in line with the purpose and culture of the business.
Key responsibilities
The Committee’s key responsibilities are to assist the Board in
discharging its responsibilities for:
• reviewing the broad remuneration policy for the senior management;
• recommending and monitoring the level and structure of remuneration
for senior management;
• governing all share plans; and
• reviewing any major changes in employee remuneration and benefit
structures throughout the Group.
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Dear Shareholder,
On behalf of the Remuneration Committee, I am pleased to present the
Directors’ remuneration report for 2022.
Background
The Return to Growth strategy has continued to progress well during
2022. Continuing market challenges regarding supply shortages
and escalating price inflation have been managed well, although it is
acknowledged that these issues are not yet behind us with inflation
being felt across Europe. Throughout the year the Group has continued
to retain focus on core disciplines which has helped us to grow,
improve margins and regain market share. In addition, the search and
subsequent transition to a new CEO has proceeded smoothly with
Steve Francis stepping down and Gavin Slark taking up the position
from 1 February 2023.
Group performance
Metric 2022 2021
Revenue £2,744.5m £2,291.4m
Like-for-like sales 17% 24%
Gross margin 25.9% 26.3%
Underlying operating profit £80.2m £41.4m
Average trade working capital to sales ratio 14.6% 13.8%
Underlying operating margin 2.9% 1.8%
Performance in 2022
Overall, performance for the year was ahead of plan with the Group
achieving a 2.9% underlying operating margin with momentum to
improve margins towards 5% over the medium term. Underlying
operating profit almost doubled to £80.2m from £41.4m in 2021 and
the Group also delivered a positive free cash flow for the year, an
important milestone.
France once again delivered a strong performance, delivering an
operating margin of 5.2% and £35.8m of underlying operating profit. The
good progress in UK Interiors has continued, with the business delivering
23% LFL revenue growth and moving back to profitability. UK Exteriors
continued to trade well against some strong comparators despite
softening in the RMI market. Underlying operating profit was however
lower than 2021, due primarily to a £5m one-off loss as a result of its
largest customer Avonside going into administration. Germany, under
new, experienced and energetic leadership for well over a year now,
performed well and is creating the conditions for continued profitable
growth. Our Polish business received multiple industry level accolades
and is a standout performer in all respects across the Group. Benelux
reported some good growth and began to recover market share, but
more work remains to be done to get the business fully back on track
and profitable. Ireland delivered a resilient performance in a slightly
weaker market.
The Group has been aided by inflationary tailwinds, but it is to the credit
of our teams, and especially our highly engaged branches, that inflation
has been successfully managed whilst retaining our market position.
Pricing and commercial capability has been enhanced in each operating
company.
Cash flow received much attention during the year and as noted we
delivered positive free cash flow. Working capital management is key to
this, and we focus and incentivise the businesses to ensure a sustainable
and efficient approach. Behaviourally our teams are rightly keen to deliver
for the customer and, cognisant of the recent supply challenges faced
across the industry, they have tended to operate with caution in running
with slightly higher levels of stock. A continuous focus on improving
working capital management capability will remain important in
coming years.
Net debt was well managed during the year, and caution has been
exercised in potential M&A activity. The accretive acquisitions undertaken
in 2022 are performing to plan. Capital has been focused on branch
upgrades and selectively on new branches, and in addition the timing of
lease renewals has influenced post-IFRS 16 net debt. Heading into more
uncertain times management’s focus on the balance sheet will continue
to be important. Leverage continues on its downward trajectory towards
our initial target of <2.5x on a post-IFRS 16 basis.
In the digital and e-commerce arena our Polish business has developed
an outstanding trade-based model for customers to transact online,
with significant effects on typical basket size and volumes. Learnings
from the Polish team are being shared across the Group, and indeed
modernisation in all its forms will be the subject of targets for each of
our operating company MDs in the years to come.
Management across the Group have taken on the sustainability
challenge – not only delivering effective TCFD reporting, but creating net
zero roadmaps at a Group and operating company level and engaging
with local teams to address our sustainability challenges. Further work
is being done to define product and service opportunities within the
sustainability agenda. GHG emissions per £m of revenue decreased to
17.5 metric tonnes from 23.0 metric tonnes in 2021, with total emissions
9% lower than 2021 and 17% lower than the last pre-Covid-19 “normal”
year of 2019. Customer NPS improved again in 2022 with a 6-point
increase to +46, with employee NPS showing an 11-point improvement
to +14. Whilst the LTIFR continues to show a downward trend to 11.1,
there is more work to do in this area and it will continue to be a key focus
in 2023.
Turning to the individual performance of the Chief Executive Officer and
Chief Financial Officer, clear objectives were set at the start of the year
and agreed with the Committee. The Group’s performance management
system supported the Committee’s consideration of personal
performance. More detail can be found on pages 122 and 123.
Corporate governance and remuneration
The Committee sets high standards in corporate governance, and during
the year the Committee:
• wrote to our largest shareholders to understand their views on our
proposed amendments to the remuneration policy and welcomed their
feedback;
• reviewed and approved remuneration proposals for Steve Francis
on his stepping down from the Board in February 2023 and the
recruitment of our new CEO, Gavin Slark;
• reviewed the effectiveness of the advice received from Korn Ferry in
supporting the Committee. The Committee is satisfied with the high-
quality support and advice it receives from Korn Ferry;
• considered the role of Bruno Deschamps, who is a member of the
Committee in line with the Relationship Agreement with CD&R. Whilst
Bruno is not considered independent under the Corporate Governance
Code, the Committee believes Bruno’s contributions to the working of
the Committee are very positive and non-partisan, and demonstrate
his experience in considering remuneration, incentivisation and target-
setting issues for all levels of employees in the workforce – not just the
Executive Leadership Team;
• engaged with employees on executive remuneration, from receiving
feedback via the employee engagement survey and key management
personnel who hold “townhall” meetings and directly engage with
employees on a day-to-day basis;
102 SIG Annual Report and Accounts 2022
• received data, information and analysis on all employee terms and
conditions of employment across the Group and used this information
in making executive remuneration decisions. It noted the areas of
commitment, focus and improvement being led by each operating
company Managing Director and Human Resources Director;
• approved funding for the independently managed Employee Benefit
Trust (“EBT”) to buy shares in the market; and
• formally reviewed an analysis of the underpin and windfall tests that
apply to the Restricted Share Plan (“RSP”) awards.
An internal evaluation of the Committee was conducted for 2022 and
further details can be found on page 87.
Remuneration decisions
There were no matters that the Committee felt warranted the exercise
of its discretion during the year.
Change of CEO
Following three years leading and delivering the turnaround of SIG,
Steve Francis stepped down from the CEO role and from the Board
on 1 February 2023 and was succeeded by Gavin Slark.
Steve Francis has been treated as a good leaver under the incentive
plans by the Committee reflecting the nature of the succession planning
and his departure. Accordingly, his RSP Awards will be pro-rated to
reflect the shortened period of his employment relative to their three-year
term. Annual bonus will be able to be earned for the part of the 2023
financial year that he is an employee and deferred bonuses will also run
their normal course. There will be no acceleration of any vesting periods
and the additional two-year holding periods will continue to apply. His
six-month notice period completed on 8 March 2023, and he will be
available under the terms of a consultancy agreement to assist until
the end of April 2023. This ensures adequate continuity exists as
Gavin settles into his role.
Ahead of the decision to offer the role of CEO to Gavin Slark, the
Remuneration Committee discussed the proposed remuneration
package, with input from our remuneration advisors and the Chair.
Gavin Slark’s remuneration package is in accordance with our
Directors’ remuneration policy and provides incentives that are aligned
to our strategy and commensurate with his role, responsibilities, and
experience. This package was necessary in a competitive market to
secure his recruitment and reflects his previous experience and level of
remuneration. In summary, his base salary has been set at £675,000,
with the next review not expected until 1 January 2024.
Benefits will be aligned with policy, including a car allowance of £23,000
per annum and pension allowances set in line with the workforce rate at
5% of salary.
Incentives will be aligned with our proposed policy with Gavin receiving a
potential annual bonus of up to 150% of base salary, a third of which will
be deferred for three years. The RSP grant will also align with policy at
125% of base salary.
Proposed remuneration policy
At the 2023 AGM, we are proposing an amended remuneration policy. This policy is substantially similar to the previous policy with no material
changes to our approach to remuneration. Our proposed changes and the rationale for each change has been included below.
Element Changes to policy Rationale
Pension
Pension contribution for all Executive Directors aligned at no more than
the rate applicable to the majority of the UK workforce.
Removed reference to a specific rate to clarify that the rate applied will be
no higher than the prevailing workforce rate at the time i.e. it may change as
the workforce rate changes.
Annual
bonus plan
Removal of two-year holding period from deferred shares under the
annual bonus plan.
This will align us with market practice and will ensure Executive Directors
can benefit from their shareholdings in a more timely manner.
Allowing targets to be set for less than a financial year. This flexibility may be useful in periods of significant uncertainty, for example,
but would not be the norm.
Simplification of deferral to represent a third being deferred for
three years.
Simplifying the deferral amounts so they are more easily tracked and are
consistent regardless of the amount of bonus earned in the year.
Malus and
clawback
Revisions to the circumstances and ability to operate through service
contracts (for example) are to be included.
This will align us with market practice and Investment Association guidance.
Notice
periods
Clarification that the notice period for the Executive Directors can be
shortened or lengthened within the 12-month maximum.
This is to clarify that the notice period may be adjusted through a new
service contract during the policy period as long as it does not exceed a
12-month period.
Salary increases
Throughout our businesses we have implemented an annual salary
review. The Committee determined that there would be no salary
increase for the CEO due to his impending departure, and a salary
increase for the CFO for 2023 of 5%. The Committee also determined
that the Chairman’s fee would rise by 4%. The majority of the UK
workforce received a minimum increase of 6%. In consideration of the
prevailing increase in the cost of living, we operated a tapering effect
in the UK with those earning less than £40,000 receiving a minimum of
6% whilst those on minimum wage received 11.37% to take them above
the new national minimum wage rate announced for 2023. The cost of
living impact has been considered in all our geographies and appropriate
adjustments made to annual salary reviews, as well as additional one-off
cash payments to support where possible. In the UK, for example, we
awarded £500 to those earning less than £40,500.
Annual bonus outcomes for 2022
In reviewing the overall remuneration outcomes, the Committee ensured
they were reflective of the business performance and the experience
of our stakeholders. The Committee was comfortable that the bonuses
were appropriate in this context, and we determined that the CEO and
CFO should be awarded 96.5 percent and 94.6 percent of maximum
respectively.
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Annual bonus design for 2023
Financial measures will continue to represent 80% of the overall
opportunity with the remainder reflecting strategic objectives.
However, there will be minor changes to the financial measures for
2023. Underlying operating profit will continue as a measure of profit
representing a 60% weighting. The leverage measure will change
from a 20% weighting to 10%, with a 10% weighting being added in
respect of average Group working capital divided by annual sales. It
is felt that including working capital as a Group measure will ensure
that appropriate additional focus is put on the efficient management of
working capital throughout the business, and is aligned with operating
company bonus design. An ESG measure will also be included in personal
objectives.
RSP awards
Before the RSP awards made in 2020, 2021 and 2022 can vest in 2023,
2024 and 2025 respectively, the Committee will have to determine
whether a windfall gain may have been created and also consider certain
underpinning factors. Following a formal review, the Committee’s view
is that to date neither the underpinning factors nor the windfall gain test
would give rise to a scaling back of any award. From 2023, the underpin
will also include an element for ESG.
The Committee intends to make awards in 2023 of 100% of salary to
the CFO and at the level of 125% of salary to the new CEO.
Focus for the year ahead
The priorities that the Committee has established for 2023 include:
• monitoring the impact of the execution of the Return to Growth
strategy, operational performance, and ensuring that incentive
arrangements and targets remain appropriate in a high-inflation
and potentially recessionary environment;
• reviewing wider workforce remuneration;
• developing ESG-based incentives;
• operating the annual bonus plans and RSP, and assessing
performance against the corresponding targets/underpins. A regular
formal review of underpin and windfall tests will take place; and
• reviewing updates received from the Chief People Officer in relation to
developments in employee reward, incentive, and benefit structures.
Conclusion
In 2023, with the support of the new CEO, we expect the leadership
team to continue to sustain momentum from the successful
implementation of our Return to Growth strategy, with a focus on
modernisation, operational excellence and delivery, while remaining
flexible to respond to the ever-changing economic climate and
inflationary environment.
Looking forward, the Committee remains focused on supporting the
Group to achieve a significant improvement in performance and on
continuing to operate with rigor and transparency.
I hope you find this report clear and useful in explaining our approach
to remuneration. If you have any questions on the policy or the report,
please contact me through the Group General Counsel & Company
Secretary.
Kath Durrant
Chair of the Remuneration Committee
7 March 2023
104 SIG Annual Report and Accounts 2022
How do our incentive performance measures align to our purpose and strategy?
In executing our strategy, we aim to focus on recovering and enhancing value for shareholders and all other stakeholders. As set out in
our remuneration policy, the RSP does not have a primary set of performance targets but operates a general underpin on vesting, allowing
the Committee to review holistically the overall performance of the Group, individual performance, and wider Group considerations. In addition,
we continually consider the performance measures we use for the annual bonus incentives to ensure they support the delivery of our strategy.
Our purpose To enable modern, sustainable and safe living and working environments in the communities in which we operate.
Responsible
actions
• Our people feel
safe, proud and
valued
• A greener fleet
and estate
• Positive
community
impact
Winning
branches
• Local teams
trusted and
empowered
to succeed
• Differentiated
through
expertise,
proximity and
service
Superior
service
• Agile and
entrepreneurial
sales teams
• Omnichannel,
data-rich
customer
journey
Specialist
expertise
• Known for
specialist focus
and technical
knowledge
• Advice to
optimise cost,
performance
and carbon
Valuable
partnerships
• Win-win
strategies with
suppliers
• Supporting
suppliers’ and
customers’
sustainability
goals
Highest
productivity
• Digitalising
operational
processes
• Lean and
effective
governance
Focused
growth
• Growing energy
efficient and
low-carbon
solutions
• Expanding
branch network
• Acquisitions
Our key performance indicators
Like-for-
like sales
Gross
margin
Operating
margin
Average trade
working capital
to sales ratio
LTIFR NPS GHG emissions
per £m of
revenue
eNPS
Annual bonus
Measures Link to strategy Link to KPls
Underlying operating profit • Focus on growth in sales and returns
• Key measure of organic growth
• Linked to shareholder value
Average net debt
Working capital
• Focus on operational efficiency
• Focus on sustainable investment
• Linked to shareholder value
Strategic objectives • Strategic objectives and targets for the bonus are commercially sensitive and will be
disclosed retrospectively
Health and safety override • All employees, customers and suppliers should be able to work in a safely managed
environment across every part of the Group. The Committee looks for evidence of
a positive health and safety culture including visible leadership, sufficient resources,
effective reporting and follow-up, employee feedback, and improvements in metrics
RSP
Measures Link to strategy Link to KPls
General underpin • Focus on long-term sustainable performance, including our ESG strategy and
sustainability commitments
• Allows overall performance of the Group, individual performance and wider Group
considerations such as the level of employee and customer engagement to be taken
into account
Shareholding guidelines • Linked to shareholder value
Our strategic pillars
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Directors’ remuneration report
The Code requires the Committee to determine the policy and practices for Executive Directors in line with a number of factors set out in Provision 40.
The following table sets out how the remuneration policy aligns with the Code.
Provision 40 element How the remuneration policy aligns
Clarity – remuneration
arrangements should be
transparent and promote
effective engagement with
shareholders and the workforce.
• The annual bonus plan performance conditions are based on the core KPIs of the strategy and therefore there
is a clear link to all stakeholders between their delivery and reward provided to management. There is a logical
flow of similar KPIs in the incentive schemes that apply to different parts of the workforce.
• Engagement of Remuneration Committee members with the workforce on a wide range of topics including
remuneration takes place.
Simplicity – remuneration
structures should avoid
complexity and their rationale
and operation should be easy
to understand.
• The performance conditions for the annual bonus plan are based on the Group’s KPIs.
• To ensure simplicity, reward is aligned with the delivery of the key markers that indicate the successful
implementation of strategy.
• Restricted shares are a simple mechanism and avoid the setting of long-term performance conditions which
tend to inherently make remuneration more complex.
Risk – remuneration
arrangements should ensure
reputational and other risks
from excessive rewards, and
behavioural risks that can arise
from target-based incentive
plans, are identified and
mitigated.
The remuneration policy includes:
• setting defined limits on the maximum awards which can be earned;
• requiring the deferral of a substantial proportion of the incentives in shares for a material period of time;
• aligning the performance conditions with the strategy of the Group;
• ensuring a focus on long-term sustainable performance through the RSP; and
• ensuring there is sufficient flexibility to adjust payments through malus and clawback and an overriding
discretion to depart from formulaic outcomes.
These elements mitigate against the risk of target-based incentives by:
• limiting the maximum value that can be earned;
• deferring the value in shares for the long term, which helps ensure that the performance earning the award was
sustainable and thereby discourages short-term behaviours;
• aligning any reward to the agreed strategy of the Group;
• supporting a focus on the sustainability of the performance over the longer term through the use of an RSP;
• reducing the awards or cancelling them if the behaviours giving rise to the awards are inappropriate; and
• reducing the awards or cancelling them, if it appears that the criteria on which the award was based do not
reflect the underlying performance of the Group.
Predictability – the range of
possible values of rewards to
individual directors and any other
limits or discretions should be
identified and explained at the
time of approving the policy.
• The remuneration policy sets out clearly the range of values, limits and discretions in respect of the
remuneration of management.
• The RSP increases the predictability of the rewards received by management.
Proportionality – the link
between individual awards,
the delivery of strategy and
the long-term performance
of the Group should be clear.
Outcomes should not reward
poor performance.
• The remuneration policy sets out clearly the range of values and discretions in respect of the remuneration
of management. In a competitive market for quality leaders the Group pays sufficiently to attract, incentivise
and retain.
• The primary value of an RSP discounted vs a traditional LTIP is in share price appreciation over time and is
therefore aligned with the development of a sustainable business and shareholder value.
Alignment to culture –
incentive schemes should drive
behaviours consistent with
Group purpose, values and
strategy.
• The annual bonus plan drives behaviours consistent with SIG’s strategy and there is a logical flow of similar
KPIs through the incentive schemes that apply to the workforce.
• The RSP drives behaviours consistent with the Group’s purpose and values which are focused on the
long-term future of the business.
106 SIG Annual Report and Accounts 2022
Our remuneration principles remain relevant and are designed to
support and reinforce our culture and behaviours. They provide
a best practice framework for the design, implementation and
operation of Group and local reward policies and practices and
apply across the Group.
Alignment and fairness
In action
• Clear and appropriate governance structures are in place for
decision making at all levels.
• Remuneration programmes and processes are run fairly,
with integrity and are supported with clear communication
to individuals.
• Pay arrangements are fair and equitable across the Group.
Rewarding contribution and performance
In action
• Bonus plans are designed for the Executives and all other
employees to incentivise sustainable profitable growth and cash
generation.
• Incentive plans reward the delivery of our business strategy,
targets are appropriately stretching, and objectives are focused
on value creation.
• Performance measures are reviewed regularly, personal and
strategic objectives are accurately assessed, and targets are set
relative to strategic priorities.
• Health and safety is a feature of all management and
executive plans.
Transparency and participation
In action
• There is a focus on effectively communicating remuneration
decisions through stakeholder engagement.
• Incentive and benefits plans are clear, simple and understood
by participants to maximise engagement.
Wider workforce considerations
The Committee considers the wider workforce when making pay
decisions and it reviews employee policies and practices to ensure
reward and incentives are aligned with SIG’s strategy, vision
and culture.
In addition to the Executive Directors, its remit extends to senior
management teams operating across all countries within the
Group, and the annual bonus plan and share incentive plans
are structurally consistent with those of the Executive Directors,
creating a shared strategic focus. The Committee believes that it
is important to be transparent with how decisions on reward are
made and this section seeks to provide context to our Director pay
by providing information on whether our approach to executive
remuneration is consistent with the wider workforce.
Remuneration principles
Wider workforce remuneration
Delivery of our strategy depends on attracting and retaining an engaged
workforce that has the right skills and demonstrates the right behaviours
to make a valuable contribution to our business. The Board is focused
on employee engagement and the Remuneration Committee specifically
is committed to ensuring that appropriate engagement takes place with
employees to explain how executive remuneration aligns with SIG’s
approach to wider Group pay. The Committee undertook a review of
all workforce pay, terms and conditions, and engaged with the leaders
responsible for townhalls to solicit employee views and sentiment.
Additionally, a review of the Group-wide employee engagement survey
was undertaken by the Board to ensure that employee sentiment was
understood and considered as part of their decision-making.
Engagement with shareholders
We have solicited views from our shareholders on the proposed changes
of the remuneration policy as detailed herein, and we are grateful for their
feedback and support.
Key elements of remuneration
The Committee reviews all key elements of remuneration across the
Group annually. The levels and types of remuneration vary across
the Group depending on the employee’s level of seniority, country of
operation and role. In the UK, the Group operates a broad range of
benefits including an all-employee Share Incentive Plan (“SIP”).
It is important to highlight that the Committee is not looking for a
homogeneous approach across the Group. However, when conducting
its review, it pays particular attention to:
• whether the element of remuneration is consistent with the Group
remuneration principles (see opposite);
• if there are differences, they are objectively justifiable; and
• if the approach seems fair and equitable in the context of other
employees.
107SIG Annual Report and Accounts 2022
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Remuneration
21 3 4 5
Directors’ remuneration report
A summary of the employee remuneration structure and how it compares to the remuneration of the Executive Directors is below:
Pay element Employees Executive Directors
Salary We conduct an annual pay review for all employees.
In setting the budget, many factors are considered, such
as market rates, economic context, business performance
and affordability.
The general workforce increase in the UK for 2022 was 3%.
Salary increases are considered in the context of the wider
workforce review and performance of the Group.
A salary increase was awarded to the Executive Directors
in 2022 of 3%.
Pensions and
benefits
We offer market-aligned benefits packages reflecting
normal practice in each country in which we operate. Where
appropriate, we offer benefit choices to our employees.
Pension contributions are no higher than those provided to
UK employees.
Benefits are aligned to the senior leadership team in the
country of operation.
Bonus plan Over 80% of our workforce participate in a cash bonus
scheme. The level and performance factors differ depending
on the role and country of operation.
CEO annual bonus of up to 150% of base salary, CFO annual
bonus of up to 125% of base salary.
Two-thirds payable in cash and one-third payable in shares
up to 100% of salary; any excess over 100% of salary payable
in shares. From 2023, one-third of the total amount will be
payable in shares, and the remaining two-thirds will be payable
in cash.
RSP 55 senior leaders participated in the RSP in 2022, with a
range of annual awards between 20% to 80%. A holding
period does not apply below the Executive Director level.
Maximum annual award of 125% of salary; three-year vesting
period with underpin on vesting; and a two-year holding period.
Awards of 100% of salary were made in 2022.
SIP All UK employees are invited to participate in the SIP. Executive Directors are invited to participate in the SIP.
In summary, the Committee is satisfied that the approach to remuneration across the Group is consistent with the Group’s principles of remuneration.
Further, in the Committee’s opinion the approach to executive remuneration aligns with the wider Group pay policy, and there are no anomalies
specific to the Executive Directors.
Summary of the application of the remuneration policy
We have set out below how the remuneration policy operated in 2022. You can find the full remuneration policy in the Company’s Notice of General
Meeting dated 29 October 2020 at www.sigplc.com/investors/information-for-shareholders/agm-notices-and-results. Our amended
remuneration policy, which will apply from the 2023 AGM, is detailed in the policy section of this annual report.
The Group’s policy is to provide remuneration packages that fairly reward the Executive Directors for the contribution they make to the business and
that are appropriately competitive to attract, retain and motivate Executive Directors and senior managers of the right calibre. A significant proportion
of remuneration takes the form of variable pay, which is linked to the achievement of specific and stretching targets that align with the creation of
shareholder value and the Group’s strategic goals.
In order to avoid any conflict of interest, remuneration is managed through well-defined processes ensuring no individual is involved in the decision-
making process related to their own remuneration. In particular, the remuneration of all Executive Directors is set and approved by the Committee;
none of the Executive Directors are involved in the determination of their own remuneration arrangements. The Committee also receives support from
external advisors and evaluates the support provided by these advisors annually to ensure that advice is independent, appropriate and cost-effective.
Element and link to strategy How we implemented the policy in 2022 How we will implement the policy in 2023
Base salary
Provides a base level of remuneration to support
recruitment and retention of Executive Directors with
the necessary experience and expertise to deliver the
Group’s strategy.
Executive Director salaries for 2022 were as follows:
• CEO – £564,543
• CFO – £392,044
The general employee base salary increase in the
UK was 3%.
The CFO’s salary for 2023 will increase by 5% to
£411,646.
The CEO’s salary has been set on appointment at
£675,000.
The general UK employee base salary increase was
5.91%. 75% of employees received a minimum increase
of 6%.
Pension
Provides a fair level of pension provision for all
employees.
The Executive Directors received a pension allowance
of 5% of salary. This is 2.5% of salary below what is
permissible under the policy.
No change.
Benefits
Provides a market standard level of benefits.
The benefits received were as follows:
• Car allowance
• Private medical insurance
• Group income protection
• Group life assurance
No change.
108 SIG Annual Report and Accounts 2022
Element and link to strategy How we implemented the policy in 2022 How we will implement the policy in 2023
Annual bonus
The annual bonus plan provides a significant incentive
to the Executive Directors linked to achievement in
delivering goals that are closely aligned with the Group’s
strategy and the creation of value for shareholders.
Bonus operation for 2022:
• one-third of any bonus earned up to 100% of salary is
deferred in shares;
• all bonus earned above 100% of salary is deferred
in shares;
• all shares deferred for three years and subject to
continued employment; and
• two-year holding period following vesting for
deferred shares.
Bonus operation for 2023:
• one-third of any bonus earned is deferred in shares;
and
• all shares deferred for three years. There will be no
additional holding period.
Maximum opportunity in 2022 was as follows:
• CEO – 150% of base salary
• CFO – 125% of base salary
Any bonus is subject to a health and safety override,
where the Committee will review the health and safety
performance of the Group for the year in question.
See page 122 for bonus outcomes for 2022.
No change to opportunity levels. Deferral method
simplified to defer 1/3 of the whole bonus payable for
three years. There will be no additional holding period.
The health and safety override will continue to operate
in 2023.
The performance measures for 2023 are underlying
operating profit (60%), leverage (10%), average Group
working capital divided by annual sales (10%) and
strategic objectives (20%).
It is the view of the Committee that the targets for the
bonus are commercially sensitive as they are primarily
related to budgeted future profit and debt levels in the
Group and therefore their disclosure in advance is not
in the interests of the Group or shareholders.
The Committee will, however, provide full retrospective
disclosure to enable shareholders to judge the level of
award against the targets set.
RSP
Awards are designed to incentivise the Executive
Directors over the longer term to successfully implement
the Group’s strategy.
RSP operation:
• maximum annual award up to 125% of salary based
on the market value at the date of grant;
• awards vest at the end of a three-year period
subject to:
− continued employment to the date of vesting;
− the satisfaction of an underpin (whereby the
Committee can adjust vesting for business,
individual and wider Group performance). Further
details of the underpin test are included in the
remuneration policy section; and
• a two-year holding period will apply following the
three-year vesting period.
RSP awards granted in 2022 were as follows:
• CEO – 100% of base salary
• CFO – 100% of base salary
The Group regularly reviewed Group and individual
performance against the underpin and considered
whether a windfall was felt to be made for all
outstanding awards each year.
No changes in RSP awards are expected for 2023 for
the CFO. The CEO will be granted an award of 125% of
salary reflecting the terms agreed on his appointment
and in line with the policy.
Share ownership requirements
The Group has established the principle of requiring
Executive Directors to build up and maintain a beneficial
holding of shares in the Company. It is expected that
this should be achieved within five years of the relevant
Executive Director’s appointment. Adherence to these
guidelines is a condition of continued participation in
the share incentive arrangements. Executive Directors
will be required to retain 100% of the post-tax amount
of vested shares from the Company incentive plans
until the minimum shareholding requirement is met and
maintained.
Share ownership requirements:
• CEO – 300% of base salary
• CFO – 300% of base salary
This applies for two years post-cessation, or the
actual shareholding on cessation if lower.
No change.
Chairman and Non-Executive Directors’ fees
Provides a level of fees to support recruitment and
retention of a Chair and Non-Executive Directors with
the necessary experience to advise and assist with
establishing and monitoring the Group’s strategic
objectives.
Fees for 2022 were increased by 3%, being the same
as the increase in the Executive Directors’ basic salary.
Fees for 2022 were as follows:
• Chairman – £224,772
• Non-Executive Directors fee – £62,727
• Senior Independent Director – £10,000
• Designated Non-Executive Director for Workforce
Engagement – £10,000
• Remuneration Committee Chair – £12,000
• Audit & Risk Committee Chair – £12,000
Fees were reviewed in January 2023 and it was agreed
that the fees be increased by 4% which is reflective
of the current cost of living challenges and below the
general workforce increase for the UK.
• Chairman – £233,763
• Non-Executive Directors fee – £65,236
• Senior Independent Director – £10,000
• Designated Non-Executive Director for Workforce
Engagement – £10,000
• Remuneration Committee Chair – £12,000
• Audit & Risk Committee Chair – £12,000
109SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Directors’ remuneration report
This section of the report sets out the Company’s amended remuneration policy for Executive and Non-Executive Directors, to be approved by
shareholders at the Annual General Meeting on 4 May 2023. Once approved, the amended remuneration policy may operate for up to three years.
Subject to approval by shareholders at the 2023 AGM, this policy will be effective for the 2023 financial year and so will apply to incentive awards
with performance periods beginning on 1 January 2023. Payments to Directors can only be made if they are consistent with a shareholder approved
policy or amendment to the policy. The amended remuneration policy has been prepared in accordance with the requirements of UK company law
and regulations. It also meets the relevant requirements of the Financial Conduct Authority’s Listing Rules and describes how the Board has applied
the principles of good governance as set out in the 2018 UK Corporate Governance Code.
The Committee has continued with a degree of flexibility to ensure the practical application of the amended remuneration policy. Where such
discretion is reserved, the extent to which it may be applied is described. The purpose of the amended remuneration policy remains to attract, retain
and motivate the Group’s leaders and ensure they are focused on delivering business priorities within a framework designed to promote the long-term
success of the Group, aligned with shareholder interests.
Changes in the amended remuneration policy from the current policy (approved by shareholders in 2020)
The following table sets out the material changes and the rationale:
Element Changes to policy Rationale
Pension Pension contribution for all Executive Directors aligned at
no more than the rate applicable to the majority of the UK
workforce.
Removed reference to a specific rate to clarify that the rate
applied will be no more than the prevailing rate at the time
i.e. it may change as the workforce rate changes.
Annual bonus plan Removal of two-year holding period from deferred shares
under the annual bonus plan.
This will align us with market practice and will ensure Executive
Directors can benefit from their shareholdings in a more
timely manner.
Allowing targets to be set for less than a financial year. This flexibility may be useful in periods of significant uncertainty,
for example, but would not be the norm.
Simplification of deferral to represent a third being deferred
for three years.
Simplifying the deferral amounts so they are more easily
tracked and are consistent regardless of the amount of bonus
earned in the year.
Malus and
clawback
Revisions to the circumstances and ability to operate through
service contracts (for example) are to be included.
This will align us with market practice and the Investment
Association guidance.
Notice periods Clarification that the notice period for the Executive Directors
can be shortened or lengthened within the 12-month
maximum.
This is to clarify that the notice period may be adjusted through
a new service contract during the policy period as long as it
does not exceed a 12-month period.
Considerations when setting the amended remuneration policy
In setting the amended remuneration policy for the Executive Directors and senior management, the Committee has taken into account the following:
• the need to maintain a clear link between the overall reward policy and the specific performance of the Group;
• the need to achieve alignment to the Group’s strategy both in the short and long term;
• the requirement for remuneration to be competitive, with a significant proportion dependent on risk-assessed performance targets;
• the responsibilities of each individual’s role and their individual experience and performance;
• the need to attract, retain and motivate Executive Directors and senior management when determining remuneration packages, including an
appropriate proportion of fixed and variable pay;
• the need to be compliant with the regulatory framework applicable to the Group;
• pay and benefits practice and employment conditions both within the Group as a whole and within the sector in which it operates; and
• periodic external comparisons to examine current market trends and practices and equivalent roles in companies of similar size, business
complexity and geographical scope.
Proposed amendments
to the remuneration policy
Remuneration
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110 SIG Annual Report and Accounts 2022
Directors’ remuneration policy table
Element and link
to strategy Operation Maximum
Performance conditions and
recovery provisions
Salary
Provides a base level
of remuneration to
support recruitment
of Executive Directors
with the necessary
experience and
expertise to deliver
the Group’s strategy.
An Executive Director’s basic salary is set on
appointment and reviewed annually or when
there is a change in position or responsibility.
When determining an appropriate level of
salary, the Committee considers:
• pay increases for other employees;
• remuneration practices within the Group;
• any change in scope, role and
responsibilities;
• the general performance of the Group and
each individual;
• the experience of the relevant Director; and
• the economic environment.
Individuals who are recruited or promoted to
the Board may, on occasion, have their salaries
set below the targeted policy level until they
become established in their role. In such cases
subsequent increases in salary may be higher
than the general rises for employees until the
target positioning is achieved.
The Committee ensures that
maximum salary levels are
positioned in line with companies of
a similar size or sector to SIG and
validated against an appropriate
comparator group, so that they are
competitive against the market.
The Committee intends to review
the comparators each year and will
add or remove companies from the
groups as it considers appropriate.
In general, salary increases for
Executive Directors will be in line
with the increase for employees.
However, larger increases may be
offered if there is a material change
in the size and responsibilities of
the role (which covers significant
changes in Group size and/or
complexity).
A broad assessment of individual
and business performance is used
as part of the salary review.
No recovery provisions apply.
Pension
Provides a fair level of
pension provision for
all employees.
The Group provides a pension contribution
allowance that is fair, competitive and in line
with corporate governance best practice.
Pension contributions will be a non-
consolidated allowance and will not impact
any incentive calculations.
The maximum value of the
pension contribution allowance for
Executive Directors will be aligned
to that available to the majority of
the UK workforce.
No performance or recovery
provisions apply.
Benefits
Provides a market
standard level of
benefits.
Benefits include market standard benefits.
The Committee recognises the need to
maintain suitable flexibility in the benefits
provided to ensure it is able to support its
objective of attracting and retaining personnel
in order to deliver the Group strategy.
Additional benefits which are available to
other employees (including any all-employee
plans) on broadly similar terms may therefore
be offered, such as relocation allowances on
recruitment.
The maximum is the cost of
providing the relevant benefits and
in the case of all-employee plans, in
line with HMRC approved limits.
No performance or recovery
provisions applicable.
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Element and link
to strategy Operation Maximum
Performance conditions and
recovery provisions
Annual bonus plan
The annual bonus plan
provides a significant
incentive to the
Executive Directors
linked to achievement
in delivering goals that
are closely aligned
with the Group’s
strategy and the
creation of value for
shareholders.
In particular, the
annual bonus plan
supports the Group’s
objectives, allowing
the setting of targets
for the year based on
the Group’s strategic
objectives at that time,
meaning that a wider
range of performance
metrics can be used
that are relevant and
achievable.
The Committee will determine the maximum
annual participation in the annual bonus plan
for each year, which will not exceed 150%
of salary.
Details of the performance conditions, targets
and their level of satisfaction for the year being
reported on will be set out in the Annual report
on remuneration.
In extreme circumstances as determined by
the Committee, targets may be established for
periods of less than a full year, for example six
months. At the end of the period, targets will
be reviewed and adjusted for the remainder of
the year.
The Committee can determine that part of the
bonus earned under the annual bonus plan is
provided as an award of deferred shares.
One-third of any bonus earned is deferred
in shares.
The Committee may determine that a greater
portion or in some cases the entire bonus be
paid in deferred shares. The main terms of
these deferred share awards are:
• minimum deferral period of three years; and
• the participant’s continued employment at
the end of the deferral period unless he/she is
a good leaver.
The Committee may award dividend
equivalents on deferred bonus awards to the
extent that these vest.
The Committee will determine the
maximum annual participation in
the annual bonus plan for each
year, which will not exceed 150%
of salary.
Percentage of bonus maximum
earned for levels of performance:
• threshold up to 25%
• target 50%
• maximum 100%
The annual bonus plan is based
on a mix of financial and strategic/
operational conditions. Measures
will normally be set across one
financial year and shall be measured
accordingly. The financial measures
will account for no less than 50% of
the bonus opportunity.
The Committee retains discretion
in exceptional circumstances to
change performance measures and
targets and the weightings attached
to performance measures part-
way through a performance year if
there is a significant and material
event which causes the Committee
to believe the original measures,
weightings and targets are no longer
appropriate.
Discretion may also be exercised
where the Committee believes
that the bonus outcome is not
a fair and accurate reflection of
business, individual and wider Group
performance. The exercise of this
discretion may result in a downward
or upward movement in the amount
of bonus earned resulting from
the application of the performance
measures.
Any adjustments or discretion
applied by the Committee will be
fully disclosed in the following year’s
Directors’ remuneration report.
The Committee is of the opinion
that given the commercial sensitivity
arising in relation to the detailed
financial targets used for the
annual bonus, disclosing precise
targets for the annual bonus
plan in advance would not be in
shareholder interests. Actual targets,
performance achieved, and awards
made will be published in the
Directors’ remuneration report at
the end of the performance periods,
so shareholders can fully assess
the basis for any payouts under the
annual bonus. The annual bonus
plan contains malus and clawback
provisions.
Remuneration
21 3 4 5
112 SIG Annual Report and Accounts 2022
Element and link
to strategy Operation Maximum
Performance conditions and
recovery provisions
RSP
Awards are designed
to incentivise the
Executive Directors
over the longer
term to successfully
implement the Group’s
strategy.
Awards are granted annually to Executive
Directors in the form of conditional awards or
options.
Awards vest at the end of a three-year period
subject to:
• the Executive Director’s continued
employment at the date of vesting; and
• the satisfaction of an underpin as determined
by the Committee whereby the Committee
can adjust vesting for business, individual
and wider Group performance.
A two-year holding period will apply following
the three-year vesting period for all awards
granted to the Executive Directors.
Upon vesting, sufficient shares may be sold to
pay tax on the shares.
The Committee may award dividend
equivalents on RSP awards to the extent that
these vest.
Maximum value of 125% of salary
per annum based on the market
value at the date of grant in
accordance with the rules of
th e R S P.
There are no performance
conditions on grant, however
the Committee will consider
prior year business and personal
performance to determine
whether the level of grant
remains appropriate.
No specific performance conditions
are required for the vesting of RSP
awards but there will be an underpin
as the Committee will have the
discretion to adjust vesting taking
into account business, individual and
wider company performance.
The Committee will take into account
the following factors (amongst
others) when determining whether to
exercise its discretion to adjust the
number of shares vesting:
• whether threshold performance
levels have been achieved for the
performance conditions for the
annual bonus plan for each of the
three years covered by the vesting
period for the restricted shares;
• whether there have been any
sanctions or fines issued by a
regulatory body;
• participant responsibility may be
allocated collectively or individually;
• whether there has been material
damage to the reputation of the
Group;
• the potential for windfall gains;
• whether there has been sufficient
progress against the sustainability
plan approved by the Board; and
• the level of employee and customer
engagement over the period.
Awards are subject to clawback and
malus provisions.
The Committee will operate the annual bonus plan and the RSP within the policy detailed above and in accordance with their respective rules. In
relation to the discretions included within the plan rules, these include, but are not limited to: (i) who participates in the plans; (ii) testing of the relevant
performance targets; (iii) undertaking an annual review of performance targets and weightings; (iv) the determination of the treatment of leavers in
line with the plan rules; (v) adjustments to existing performance targets and/or share awards under the plans if certain relevant events take place
(e.g. a capital restructuring, a material acquisition/divestment etc.) with any such adjustments to result in the revised targets being no more or less
challenging to achieve; and (vi) dealing with a change of control.
Legacy remuneration arrangements
All variable remuneration arrangements previously disclosed in prior years’ Directors’ remuneration reports will remain eligible to vest or become
payable on their original terms and vesting dates, subject to any related clawback provisions.
113SIG Annual Report and Accounts 2022
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Governance
Financials
Directors’ remuneration report | Proposed amendments to the remuneration policy
Shareholding requirement
The Committee already has in place strong shareholding requirements (as a percentage of base salary) that encourage Executive Directors to build
up their holdings over a five-year period. Adherence to these guidelines is a condition of continued participation in the share incentive arrangements.
This amended remuneration policy ensures that the interests of Executive Directors and those of shareholders are closely aligned.
In addition, Executive Directors are required to retain 100% of the post-tax amount of vested shares from the Company incentive plans until the
minimum shareholding requirement is met and maintained. The following table sets out the minimum shareholding requirements:
Role
Shareholding requirement
(percentage of salary)
Executive Directors 300%
The Committee retains the discretion to increase the shareholding requirements.
The post-cessation shareholding requirement is aligned to the full in-employment requirement as listed above (or the executive’s actual shareholding
on cessation if lower) for two years following cessation of employment. In exceptional circumstances the Committee may exercise discretion to
reduce the amount and/or time period for the post cessation of employment requirements. Any exercise of this discretion will be fully disclosed
and explained in the next Directors’ remuneration report.
Non-Executive Director’s remuneration policy table
Chair & Non-Executive
Director fees Operation Maximum
Performance conditions and
recovery provisions
Provides a level of fees to support
recruitment and retention of a Chair
and Non-Executive Directors with
the necessary experience to advise
and assist with establishing and
monitoring the Group’s strategic
objectives.
The Board is responsible for setting
the remuneration of the Non-Executive
Directors.
The Committee is responsible for
setting the Chair’s fees.
Non-Executive Directors are paid an
annual basic fee and additional fees
for chairing of committees. The Group
retains the flexibility to pay fees for the
membership of committees. The Chair
does not receive any additional fees
for membership of committees.
Further, additional fees may be paid
by the Group to the Chair and Non-
Executive Directors for additional time
commitments or roles outside the
normal scope of their appointments.
Fees are reviewed annually based on
equivalent roles in the comparator
group used to review salaries paid to
the Executive Directors.
Non-Executive Directors and the
Chair do not participate in any
variable remuneration or benefits
arrangements.
The fees for Non-Executive Directors
and the Chair are broadly set at
a competitive level against the
comparator group.
In general, the level of fee increase
for the Non-Executive Directors and
the Chair will be set taking account of
any change in responsibility and will
take into account the general rise in
salaries across the UK workforce.
The Group will pay reasonable
expenses incurred by the Non-
Executive Directors and Chair
and may settle any tax incurred
in relation to these.
No performance or recovery
provisions applicable.
Remuneration
21 3 4 5
114 SIG Annual Report and Accounts 2022
Illustration of application of new remuneration policy
The chart below shows an estimate of the remuneration that could be received by Executive Directors under the proposed amended remuneration
policy set out in this report:
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
Maximum with
50% share
price appreciation
MaximumTargetThresholdMaximum with
50% share
price appreciation
MaximumTargetThreshold
Fixed Pay Annual Bonus Restricted Shares 50% share price appreciation
Chief Executive Officer Chief Financial Officer
100%
£741,394
£2,091,394
£2,597,644
£3,019,519
£457,228
£1,126,153
£1,383,432
£1,589,255
35%
24%
41%
29%
39%
32%
25%
34%
27%
14%
29%
32%
26%
13%
33%41%100%
23%
36%
37%
30%
GBP (£)
Scenario charts show “minimum”, “target” and “maximum” scenarios in accordance with the regulations, as well as the impact of a 50% share price
growth on the long-term incentives for the “maximum” scenario. All scenarios do not account for dividend equivalents on deferred bonus shares or
RSP awards.
Assumptions used in determining the level of pay-out under given scenarios are as follows:
Element Minimum Target Maximum
Maximum with 50%
share price growth
Fixed pay Base salary for 2023
CFO based on amount paid in 2022, CEO based on estimates for 2023
Pension contribution 5% for both Executive Directors
Annual bonus Nil 50% of the maximum
opportunity
100% of the maximum
opportunity
100% of the maximum
opportunity
RSP 0% vesting underpins not met
Award levels are 125% for the
CEO and 100% for the CFO
100% vesting of awards
Award levels are 125% for the
CEO and 100% for the CFO
100% vesting of awards
Award levels are 125% for the
CEO and 100% for the CFO
100% vesting of awards
Award levels are 125% for the
CEO and 100% for the CFO
Discretion within the Directors’ remuneration policy
The Committee has discretion in several areas of the amended remuneration policy as set out in this report. These changes mirror the discretion
available under the previous remuneration policy. The Committee may also exercise operational and administrative discretions under relevant plan
rules as set out in those rules. In addition, the Committee has the discretion to amend the amended remuneration policy with regard to minor or
administrative matters where it would be, in the opinion of the Committee, disproportionate to seek or await shareholder approval.
In addition to the performance metrics set by the Committee annually for the incentive plans, the Committee will also assess the overall, or underlying,
performance of the Group and the operating companies. In light of this assessment, the Committee may make a downward adjustment, including to
zero, to the vesting outcome on all or any of the performance metrics.
The Committee will also assess the performance of the Group and the operating companies against the risk metrics, and may make a downward
adjustment, including to zero, to the vesting outcome on all or any of the performance metrics, to take account of any material failures of risk
management or regulatory compliance in the Group and the operating companies.
Additionally, Committee discretion can be applied in implementing the post-employment shareholding requirement including in cases of significant
financial hardship, material ill-health and conflict of interest.
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Malus and clawback
Malus is the adjustment of the annual bonus plan payments or unvested RSP awards or the imposition of additional conditions because of the
occurrence of one or more circumstances listed below. The adjustment may result in the value of an outstanding award being reduced to nil.
Clawback is the recovery of payments made under the annual bonus plan or vested long-term incentive awards (including RSP awards) as a result
of the occurrence of one or more circumstances listed below.
Clawback may apply to all or part of a participant’s payment under the bonus plan or RSP awards and may be effected, among other means,
by requiring the transfer of shares, payment of cash or reduction of awards or bonuses.
The circumstances in which malus and clawback could apply are as follows:
• discovery of a material misstatement resulting in an adjustment in the audited accounts of the Group or any Group company;
• the assessment of any vesting condition or any other condition under the plan was based on error, or inaccurate or misleading information;
• the discovery that any information used to determine the award was based on error, or inaccurate or misleading information;
• action or conduct of a participant which amounts to fraud or gross misconduct;
• events or the behaviour of a participant have led to the censure of a Group company by a regulatory authority or have had a significant detrimental
impact on the reputation of any Group company provided that the Board is satisfied that the relevant participant was responsible for the censure or
reputational damage and that the censure or reputational damage is attributable to the participant;
• material failure of risk management; or
• corporate failure.
Annual bonus (cash) Annual bonus (deferred shares) RSP awards
Malus Up to the date of the cash
payment.
To the end of the three-year
vesting period.
To the end of the three-year vesting period.
Clawback Two years post the date of
any cash payment.
n/a Two years following the end of the vesting period. The
total malus and clawback period may be extended where
there is an ongoing internal or regulatory investigation.
The Committee believes that the rules of the Group’s incentive plans provide sufficient powers to enforce malus and clawback where required.
Loss of office policy
When considering compensation for loss of office, the Committee will always seek to minimise the cost to the Group whilst applying the following
philosophy:
Remuneration element Treatment on cessation of employment
General The Committee will honour Executive Directors’ contractual entitlements. Service contracts do not contain liquidated damages
clauses. If a contract is to be terminated, the Committee will determine such mitigation as it considers fair and reasonable in
each case. There are no contractual arrangements that would guarantee a pension with limited or no abatement on severance
or early retirement. There is no agreement between the Group and its Directors or employees providing for compensation
for loss of office or employment that occurs because of a takeover bid. The Committee reserves the right to make additional
payments where such payments are made in good faith in discharge of an existing legal obligation (or by way of damages for
breach of such an obligation); or by way of settlement or compromise of any claim arising in connection with the termination of
an Executive Director’s office or employment.
Salary, benefits
and pension
These will be paid over the notice period. The Group has discretion to make a lump sum payment in lieu.
Annual bonus plan Good leaver reason Other reason Discretion
Cash Performance conditions
will be measured at the
bonus measurement date.
Bonus will normally be pro-
rated for the period worked
during the financial year.
No bonus payable for the
year of cessation.
The Committee has discretion to determine:
• that an Executive Director is a good leaver. It is the Committee’s
intention to only use this discretion in circumstances where there
is an appropriate business case which will be explained in full to
shareholders; and
• whether to pro-rate the bonus to time. The Committee’s normal
policy is that it will pro-rate bonus for time. It is the Committee’s
intention to use discretion to not pro-rate in circumstances where
there is an appropriate business case which will be explained in
full to shareholders.
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116 SIG Annual Report and Accounts 2022
Deferred share
awards
All subsisting deferred
share awards will vest.
Lapse of any unvested
deferred share awards.
The Committee has discretion to:
• determine that an Executive Director is a good leaver. It is the
Committee’s intention to only use this discretion in circumstances
where there is an appropriate business case which will be explained
in full to shareholders;
• vest deferred shares at the end of the original deferral period or at
the date of cessation. The Committee will make this determination
depending on the type of good leaver reason resulting in the
cessation; and
• determine whether to pro-rate the maximum number of shares
to the time from the date of grant to the date of cessation. The
Committee’s normal policy is that it will not pro-rate awards for time.
The Committee will determine whether or not to pro-rate based on
the circumstances of the Executive Director’s departure.
RSP Good leaver reason Other reason Discretion
For the year of
cessation
The award will normally be
pro-rated for the period
worked during the
financial year.
No award for year
of cessation.
The Committee has discretion to determine:
• that an Executive Director is a good leaver. It is the Committee’s
intention to only use this discretion in circumstances where there
is an appropriate business case which will be explained in full to
shareholders;
• whether to pro-rate the award to time. The Committee’s normal
policy is that it will pro-rate for time. It is the Committee’s intention
to use discretion to not pro-rate in circumstances where there
is an appropriate business case which will be explained in full to
shareholders; and
• whether the award will vest on the date of cessation or the
original vesting date. The Committee will make its determination
based amongst other factors on the reason for the cessation of
employment.
Subsisting awards Awards will be pro-rated
to time and will vest on
their original vesting dates
and remain subject to the
holding period.
Unvested awards will be
forfeited on cessation of
employment.
Vested awards will remain
subject to the holding
period.
The Committee has discretion to determine:
• that an Executive Director is a good leaver. It is the Committee’s
intention to only use this discretion in circumstances where there
is an appropriate business case which will be explained in full to
shareholders;
• whether to pro-rate the award to the date of cessation. The
Committee’s normal policy is that it will pro-rate. The Committee will
determine whether to pro-rate based on the circumstances of the
Executive Director’s departure;
• whether the awards vest on the date of cessation or the original
vesting date. The Committee will make its determination based
amongst other factors on the reason for the cessation of
employment; and
• whether the holding period for awards applies in part or in full. The
Committee will make its determination based amongst other factors
on the reason for the cessation of employment.
Other contractual
obligations
There are no other contractual provisions other than those set out above agreed prior to 27 June 2021.
The following definition of leavers will apply to all the above incentive plans. A “good leaver” is defined as cessation in the following circumstances:
• death;
• ill-health;
• injury or disability;
• retirement with agreement of the employing Group company;
• employing company ceasing to be a Group company;
• transfer of employment to a company which is not a Group company; and
• at the discretion of the Committee (as described above).
Cessation of employment in circumstances other than those set out above is cessation for other reasons.
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Change of control policy
Name of incentive plan Change of control Discretion
Annual bonus plan Pro-rated to time and performance to the date
of the change of control. The assessment is to
take place at the time of the change of control.
The Committee has discretion regarding whether to pro-rate the bonus to
time. The Committee’s normal policy is that it will pro-rate the bonus for
time. It is the Committee’s intention to use its discretion to not pro-rate in
circumstances only where there is an appropriate business case.
Deferred share
awards
Subsisting deferred share awards will vest on
a change of control.
The Committee has discretion regarding whether to pro-rate the award
to time. The Committee’s normal policy is that it will not pro-rate awards
for time. The Committee will make this determination depending on the
circumstances of the change of control.
RSP The number of shares subject to subsisting
RSP awards will vest on a change of control
pro-rated for time and performance against
any underpins.
The Committee has discretion regarding whether to pro-rate the RSP
awards for time. The Committee’s normal policy is that it will pro-rate the
RSP awards for time. It is the Committee’s intention to use its discretion to
not pro-rate in circumstances only where there is an appropriate business
case. The Committee also has discretion to consider attainment of any
underpins.
Recruitment and promotion policy
The Company’s principle is that the remuneration of any new recruit will be assessed in line with the same principles as for the Executive Directors,
as set out in the remuneration policy table. The Committee is mindful that it wishes to avoid paying more than it considers necessary to secure a
preferred candidate with the appropriate calibre and experience needed for the role. In setting the remuneration for new recruits, the Committee will
have regard to guidelines and shareholder sentiment regarding one-off or enhanced short-term or long-term incentive payments, as well as giving
consideration for the appropriateness of any performance measures associated with an award. The Group’s policy when setting remuneration for the
appointment of new Directors is summarised in the table below:
Salary, benefits
and pension
Salary, benefits and pension will be set in line with the policy for existing Executive Directors. Maximum pension
contribution will be aligned to that of the majority of employees.
Annual bonus Maximum annual participation will be set in line with the Group’s policy for existing Executive Directors and will not exceed
150% of salary.
Restricted shares Maximum annual participation will be set in line with the Group’s policy for existing Executive Directors and will not exceed
125% of salary for restricted shares.
Maximum variable The maximum variable remuneration which may be granted is the sum of the annual bonus and restricted shares award
(excluding the value of any buyouts) which is 275% of salary.
“Buy out” of
incentives forfeited
on cessation of
employment
Where the Committee determines that the individual circumstances of recruitment justifies the provision of a buyout, the
equivalent value of any incentives that will be forfeited on cessation of an Executive Director’s previous employment will be
calculated taking into account the following:
• the proportion of the performance period completed on the date of the Executive Director’s cessation of employment;
• the performance conditions attached to the vesting of these incentives and the likelihood of them being satisfied; and
• any other terms and condition having a material effect on their value (“lapsed value”).
The Committee may then grant up to the same value as the lapsed value, where possible, under the Group’s incentive
plans. To the extent that it is not possible or practical to provide the buyout within the terms of the Group’s existing
incentive plans, a bespoke arrangement would be used.
Relocation policies In instances where the new Executive Director is required to relocate or spend significant time away from their normal
residence, the Group may provide one-off compensation to reflect the cost of relocation for the Executive Director. The
level of the relocation package will be assessed on a case-by-case basis but will take into consideration any cost of living
differences/housing allowance and schooling and will not exceed a period of two years from recruitment.
Where an existing employee is promoted to the Board, the remuneration policy set out above would apply from the date of promotion but there would
be no retrospective application of the remuneration policy in relation to subsisting incentive awards or remuneration arrangements. Accordingly,
prevailing elements of the remuneration package for an existing employee would be honoured and form part of the ongoing remuneration of the
person concerned. These would be disclosed to shareholders in the remuneration report for the relevant financial year.
The Group’s policy when setting fees for the appointment of a new Chair or Non-Executive Directors is to apply the policy which applies to the current
Chair or Non-Executive Directors.
Where an interim CEO or deputy CEO are appointed but without being a Director of the Company, the remuneration policy set out above will apply
from appointment but there will be no retrospective application of the remuneration policy, therefore any existing remuneration arrangements,
subsisting incentive awards and notice period are permitted to continue for up to the earlier of 12 months from appointment or the next date of award/
review date. A stepping up allowance may be paid for the duration of their appointment.
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Service contracts and letters of appointments
The Committee’s policy for setting notice periods is that normally they will be a maximum of 12 months. The Committee may in exceptional
circumstances, arising on recruitment, allow a longer period, which would in any event reduce to 12 months following the first year of employment.
The Non-Executive Directors of the Company do not have service contracts. The Non-Executive Directors are appointed by letters of appointment.
Each independent Non-Executive Director’s term of office runs for a three-year period.
The Company follows the UK Corporate Governance Code’s recommendation that all Directors be subject to annual reappointment by shareholders.
The details of the service contracts currently in place are as follows:
Executive Directors
Name Date of contract Company notice Executive notice
Guaranteed payments on
change of control or cessation
Gavin Slark 1 February 2023 12 months 12 months None
Steve Francis 25 February 2020 6 months 6 months None
Ian Ashton 1 July 2020 6 months 6 months None
To the extent amendments are made to the Executives’ contracts in the year this section will be updated in the next annual report to reflect the
changes made in the year.
Terms of appointment of the Non-Executive Directors
Name Date of appointment Date of most recent term Date of expiry
Alan Lovell 1 August 2018 13 May 2021 12 May 2024
Andrew Allner 1 November 2017 1 November 2020 31 October 2026
1
Bruno Deschamps 10 July 2020 10 July 2020 9 July 2026
1
Christian Rochat 10 July 2020 10 July 2020 4 May 2023
2
Gillian Kent 1 July 2019 12 May 2022 11 May 2025
Kath Durrant 1 January 2021 1 January 2021 31 December 2023
Shatish Dasani 1 February 2021 1 February 2021 31 January 2024
Simon King 1 July 2020 1 July 2020 30 June 2026
1
1. Each of these terms of office were renewed for a further three years following the year-end date.
2. Christian Rochat will not be seeking re-election at the 2023 AGM.
Policy on other appointments
Executive Directors are permitted to hold non-executive directorships in a FTSE company and the fees from their appointment may be retained,
provided that the Board considers that this will not adversely affect their executive responsibilities.
Consideration of employment conditions elsewhere in the Group
Each year, prior to reviewing the remuneration of the Executive Directors and the members of the Executive Leadership Team, the Committee
considers a report prepared by the Chief People Officer detailing base pay and share schemes practice across the Group. The report provides an
overview of how employee pay compares to the market and any material changes during the year and includes detailed analysis of basic pay and
variable pay changes within the UK.
While the Group does not directly consult with employees as part of the process of reviewing Executive Director pay and formulating the remuneration
policy, the Group does receive an update and feedback from the broader employee population on an annual basis using an engagement survey,
which collates information relating to remuneration, and consults a representative sample of employees on executive remuneration as part of the
workforce engagement agenda. The Group does not use remuneration comparison measurements.
The Group aims to provide a remuneration package for all employees that is market competitive and operates the same core structure as for the
Executive Directors. The Group operates employee share and variable pay plans, with pension provisions provided for all Executive Directors and
employees. In addition, any salary increases for Executive Directors are expected to be generally in line with those for UK-based employees.
The Committee annually publishes information relating to “Fairness, diversity and wider workforce considerations” as part of the Directors’
remuneration report.
Consideration of shareholder views
The Committee takes the views of shareholders seriously and these views are taken into account in shaping remuneration policy and practice.
Shareholder views are considered when evaluating and setting remuneration strategy and the Committee welcomes an open dialogue with its
shareholders on all aspects of remuneration. The Committee consulted its major shareholders and the main shareholder representative bodies IA, ISS
and Glass Lewis on the proposed amended remuneration policy. The Committee is grateful for the time taken to consider the Committee proposals
and provide feedback. At the end of the consultation the majority of shareholders consulted indicated they were supportive of the amended
remuneration policy.
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Compliance with UK Corporate Governance Code
The following table sets out how the amended remuneration policy aligns with the UK Corporate Governance Code whose objective is to ensure the
remuneration operated by the Group is aligned to all stakeholder interests including those of shareholders:
Key remuneration element of the 2018 UK Corporate Governance Code Alignment with our proposed amendments to the remuneration policy
Five-year period between the date of grant and realisation
for share incentives
The RSP meets this requirement through the implementation of the two-year
post-vesting holding period in the RSP.
Phased release of equity awards The RSP meets this requirement as awards are made in an annual cycle.
Discretion to override formulaic outcomes Included in the terms and conditions of the annual bonus plan and the RSP.
Post-cessation shareholding requirement The full in-employment requirement for two years following cessation of employment.
Pension alignment All Executive Directors aligned with wider employee contributions.
Extended malus and clawback The proposed malus and clawback provisions are formally enhanced to align with the
FRC’s Board Effectiveness Guidance.
Provision 40 element How the amended remuneration policy aligns
Clarity – remuneration
arrangements should be
transparent and promote
effective engagement with
shareholders and the workforce.
• The bonus plan performance conditions are based on the core KPIs of the strategy and therefore there is a clear
link to all stakeholders between their delivery and reward provided to management.
• The RSP provides annual grants of shares which have to be retained for the longer term to ensure a focus on
sustainable performance. This provides complete clarity of the alignment of the interests of management and
shareholders.
Simplicity – remuneration
structures should avoid
complexity and their rationale
and operation should be easy
to understand.
• The performance conditions for the bonus plan are based on the Group’s KPIs. To ensure simplicity, reward is
aligned with the delivery of the key markers that indicate the successful implementation of strategy.
• Restricted shares are a simple mechanism and avoid the setting of long-term performance conditions which
tend to inherently make the remuneration more complex.
Risk – remuneration
arrangements should ensure
reputational and other risks
from excessive rewards, and
behavioural risks that can arise
from target-based incentive
plans, are identified and
mitigated.
The amended remuneration policy includes:
• setting defined limits on the maximum awards which can be earned;
• requiring the deferral of a substantial proportion of the incentives in shares for a material period of time;
• aligning the performance conditions with the strategy of the Group;
• ensuring a focus on long-term sustainable performance through the RSP; and
• ensuring there is sufficient flexibility to adjust payments through malus and clawback and an overriding
discretion to depart from formulaic outcomes.
These elements mitigate against the risk of target-based incentives by:
• limiting the maximum value that can be earned;
• deferring the value in shares for the long term which helps ensure that the performance earning the award was
sustainable and thereby discouraging short-term behaviours;
• aligning any reward to the agreed strategy of the Group;
• the use of an RSP supports a focus on the sustainability of the performance over the longer term;
• reducing the awards or cancelling them if the behaviours giving rise to the awards are inappropriate; and
• reducing the awards or cancelling them, if it appears that the criteria on which the award was based do not
reflect the underlying performance of the Group.
Predictability – the range of
possible values of rewards to
individual directors and any other
limits or discretions should be
identified and explained at the
time of approving the policy.
• The amended remuneration policy sets out clearly the range of values, limits and discretions in respect of the
remuneration of management.
• The introduction of an RSP increases the predictability of the rewards received by management.
Proportionality – the link
between individual awards,
the delivery of strategy and
the long-term performance
of the Group should be clear.
Outcomes should not reward
poor performance.
• The amended remuneration policy sets out clearly the range of values and discretions in respect of the
remuneration of management.
• The introduction of an RSP increases the predictability of the rewards received by Executive Directors, and
the bonus plan, being based on annual targets, operates over a more predictable time cycle compared with
traditional LTIPs thereby allowing the Committee to more effectively ensure desirable remuneration outcomes for
all stakeholders.
Alignment to culture – incentive
schemes should drive behaviours
consistent with Group purpose,
values and strategy.
• The bonus plan drives behaviours consistent with SIG’s strategy.
• The RSP drives behaviours consistent with the Group’s purpose and values which are focused on the long-term
future of the business.
Directors’ remuneration report | Proposed amendments to the remuneration policy
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120 SIG Annual Report and Accounts 2022
The following section provides details of how SIG’s remuneration policy was implemented during the
financial year ended 31 December 2022.
This part of the report has been prepared in accordance with the Companies Act, various companies regulations, and relevant sections of the Listing
Rules. The Annual report on remuneration and the Chair’s statement will be put to an advisory shareholder vote at the 2023 AGM. The information on
pages 101 to 126 has been audited where required under the regulations and indicated as such.
Single total figure of remuneration for Executive Directors (audited)
The table below sets out the single total figure of remuneration received by each Executive Director for the year ended 31 December 2022 and the
prior year.
Executive Director
Base
salary
1
Taxable
benefits
2
£’000
Annual
bonus
3
£’000
LTIP
£’000
Pension
4
£’000
Other
£’000
Total
remuneration
£’000
Total fixed
remuneration
£’000
Total variable
remuneration
£’000
Steve Francis 2022 565 25 817 0 28 0 1,435 618 817
2021 548 25 715 0 27 0 1,315 600 715
Ian Ashton 2022 392 22 464 0 20 0 898 434 464
2021 381 22 412 0 19 0 834 422 412
The figures in the table above have been calculated as follows:
1. Base salary: amount earned for the year as Directors and rounded up.
2. Taxable benefits: include, but are not limited to, car allowance (£15,000), private medical insurance, life assurance, and income protection.
3. Annual bonus: payment for performance during the year (including any deferred portion).
4. Pension: the Company’s pension contribution during the year of 5% of salary.
Payments for loss of office and payments to past Directors (audited)
No payments for loss of office or to past Directors have been made in the year.
Single total figure of remuneration for Non-Executive Directors (audited)
The table below sets out the single total figure of remuneration received by each Non-Executive Director for services rendered to the Group as a Non-
Executive Director for the year ended 31 December 2022 and the prior year.
Base fee
Committee Chair/Senior
Independent Director fees
Additional advisory
board fees Total fees
2022
£’000
2021
£’000
2022
£’000
2021
£’000
2022
£’000
2021
£’000
2022
£’000
2021
£’000
Alan Lovell 63 61 10 10 — — 73 71
Andrew Allner (Chairman) 225 218 — — — — 225 218
Bruno Deschamps
1
63 61 — — — — 63 61
Christian Rochat
1
63 61 — — — — 63 61
Gillian Kent 63 61 — — — — 63 61
Kath Durrant 63 61 12 12 — — 75 73
Shatish Dasani
3
63 56 12 11 — — 75 67
Simon King
2
63 61 10 — — — 73 61
1. The fees paid to Bruno Deschamps and Christian Rochat are not retained by them individually but paid to CD&R.
2. Simon King was paid an additional £10k pa as Designated Non-Executive Director for Workforce Engagement from 1 January 2022.
3. Shatish Dasani was appointed as a Non-Executive Director on 1 February 2021 and his fees for 2021 reflect remuneration earned from that date.
Annual report on remuneration
Directors’ remuneration report
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Remuneration
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Directors’ remuneration report | Annual report on remuneration
2022 bonus out-turn
The maximum potential bonus opportunity for Steve Francis (CEO) was 150% of salary and for Ian Ashton (CFO) was 125% of salary. The table below
sets out the targets and level of achievement that were considered when determining the bonus. The Committee also considered the targets that
would apply to the Executive Leadership Team for 2022, which were based on operating profit and leverage.
Performance condition (weighting) Actual Threshold Interim Maximum Outcome
CEO Actual
£’000
CFO Actual
£’000
Operating profit (60%)
1
25% 50% 100% 100% 508 294
£79.8m 48.2m 60.3 72.3
Leverage
2
(20%) 25% 50% 100% 100% 169 98
2.67x 3.14x 2.99x 2.84x
Strategic objectives (20%)
pay-out level 140 72
Total
3
817 464
1. Group underlying operating profit, adjusted for M&A during the year.
2. Average net debt divided by LTM EBITDA, adjusted for M&A during the year.
3. The Committee reviewed health and safety leadership and performance and determined that there was no requirement to exercise its override discretions.
Chief Executive Officer
CEO bonusable objectives Outcome
Strategy A year of very good progress with the strategy being successfully operationalised and embedded into plans and
KPIs in the organisation. Improved communications with all stakeholders during 2022. Facilitation of cross operating
company networks to provide a platform for sharing learnings on revenue generation levers and opportunities also
delivered during the year.
Operational excellence The architecture of a foundation for more modern productive business has been a focus in 2022. Improved
productivity culture with associated reporting metrics has been delivered along with increased capability on health
and safety providing a strong basis for further improvement; for example, survey results showed an increase of 2% to
84% on health and safety. In addition, progress was made during the year on developing the sustainability agenda as
Chair of the Group-wide committee to put in place the building blocks for a strong carbon performance culture.
Communication and
engagement
Investor awareness, employee engagement and cross operating company cooperation have all moved significantly
during 2022. Employee NPS has increased from +3 to +14 across the Group, and the employee engagement survey
highlighted a 73% positive response when asked about communication in the Group, a 4% increase from 2021.
Corporate development During the year, planned and complementary M&A has been delivered well in the UK and Germany.
Talent management 2022 has been a year of learning and maturing for the senior leadership and strengthening the senior leadership
bench has been a key focus. All senior team members have completed a development assessment and subsequently
have robust and actionable development plans. This process is now being cascaded down to the next level of senior
leadership. The transition to a new CEO has also been managed very well.
The Committee evaluated the performance of the CEO against the above outcomes and awarded a bonus of 16.5% out of the 20% available for these
strategic objectives.
Chief Financial Officer
CFO bonusable objectives Outcome
Business performance Strong focus on cash generation throughout the year. Rigorous forecasting and targets put in place, and drove a
thorough understanding of inventory investment and impact of inflation.
Investor relations Good progress made on building solid communications with stakeholders throughout the year, on both equity and
debt sides. Rigorous and successful process to identify and onboard new joint corporate broker.
People Good progress made in continuing to build talent across finance, and the right level of exposure has been given
to high potentials. Excellent progress made on employee engagement in finance.
Audit and controls Strong delivery again during 2022. Continuing to build teams that provide the right level of support, challenge and
oversight to the organisation. External audit process continues to improve in effectiveness and efficiency.
Financing M&A funding well managed during 2022, along with active management of constraints to support successful
outcomes as required by the business. Smooth process to access £40m additional potential funding via the accordion
feature within the RCF.
The Committee evaluated the performance of the CFO against the above outcomes and awarded a bonus of 14.6% out of the 20% available for these
strategic objectives.
The Committee considered the overall stakeholder experience (in particular employees and shareholders) in the year and was satisfied that the
formulaic outcome from the bonus for both individuals was appropriate.
122 SIG Annual Report and Accounts 2022
Restricted share plan awards vesting during 2022
No RSP awards have vested in the year. The Executive Directors have been granted RSP awards in 2020, 2021 and 2022. The first tranche of these
awards is not due to vest until 2023 subject to continued employment by the participants and assessment of the underpin by the Committee before
vesting can take place. Any shares that vest will subsequently be released following a further two-year holding period.
The Committee has taken an initial assessment of the underpin for awards which are due to vest in future periods. The Committee is currently of the
view that there are no reasons known presently to reduce vesting under the 2020, 2021 and 2022 awards but will keep the position under review
during the remainder of the vesting period. This assessment was made having regard to a number of factors including any movement in share price
from the date of grant of the 2020, 2021 and 2022 RSP awards, the Committee’s views on the reasons for the movement, and wider business and
individual performance.
2022 restricted share plan awards (audited)
Steve Francis and Ian Ashton were granted RSP awards of 100% of salary on 15 March 2022. No consideration was paid for the grant of the awards
which are structured as nil-cost options. The number of ordinary shares over which RSP awards were granted was based on an ordinary share price
of 39.32 pence per share, based on the closing share price of the previous trading day.
The normal vesting date of the awards will be 15 March 2025, being the third anniversary of the award date. The awards will ordinarily vest after three
years subject to continued service and a discretionary underpin that allows the Remuneration Committee to make adjustments to the level of vesting
if it believes due to business performance, individual performance or wider Group considerations that the vesting should be adjusted. This will include
consideration of all relevant factors, including any windfall gains. Once vested, the awards will normally be exercisable until the day before the tenth
anniversary of the award date. The awards are subject to a two-year holding period commencing on vesting. The award for the CEO will be pro-rated
to his leave date of 8 March 2023.
Executive Director Date of grant
% of award for
minimum
performance
Shares subject
to award
Face value at
date of award
Steve Francis 14 March 2022 100 1,435,766 £564,543
Ian Ashton 14 March 2022 100 9 97,0 6 0 £392,044
Directors’ interests in SIG shares (audited)
The interests of the Directors in office during the year ended 31 December 2022, and their families, in the ordinary shares of the Company at the
dates below were as follows:
Shares held Nil-cost options held
Owned
outright or
vested
Vested but
subject to
holding period
Vested but not
exercised
Unvested
subject to
vesting and
holding period
Unvested and
subject to
deferral
Shareholding
required (%
basic salary)
1
Current
shareholding
as a % of
basic salary
2
Requirement
met
2
Steve Francis
3
864,454 — — 5,530,490 — 300 199 No
Ian Ashton
4
166,666 — — 3,706,256 — 300 161 No
Andrew Allner 288,384 — — — — — — —
Kath Durrant 10 0,774 — — — — — — —
Gillian Kent Nil — — — — — — —
Alan Lovell 330,000 — — — — — — —
Bruno Deschamps Nil — — — — — — —
Simon King 166,666 — — — — — — —
Christian Rochat Nil — — — — — — —
Shatish Dasani 250,000 — — — — — — —
1. Executive Directors are expected to achieve target shareholdings within five years of appointment.
2. Based on SIG share price of 29.6p as at 30 December 2022. The post-tax value of the RSP awards granted in December 2020, March 2021 and March 2022 have been included
in the current shareholding figure. The % shareholding will fluctuate due to share price movements at each year end.
3. Steve Francis was appointed as CEO on 25 February 2020.
4. Ian Ashton was appointed as CFO on 1 July 2020.
There have been no changes to shareholdings between 1 January 2023 and the date of this report.
No Directors exercised any share options during the year such that the aggregate gain on exercise was nil (2021: nil).
123SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Remuneration
21 3 4 5
Directors’ remuneration report | Annual report on remuneration
Total Shareholder Return (“TSR”)
The graph below shows the Group’s TSR performance (share price plus dividends paid) compared with the performance of the FTSE All Share
Industrial Support Services Index over the ten-year period to 31 December 2022. This index has been selected because the Group believes that the
constituent companies comprising the FTSE All Share Industrial Support Services Index are the most appropriate for this comparison as they are
affected by similar commercial and economic factors to SIG.
Ten Year Company TSR Performance v FTSE All Share Industrial Support Services
SIG FTSE All Share Industrial Support Services
300
250
200
150
100
50
0
20222012 2013 2014 2015 2016 2017 2018 2019 2020 2021
233.3
30.4
Rebased TSR from 31 December 2012
CEO pay in the last ten years
The table below shows how pay for the CEO role has changed in the last ten years.
Year
2013
£’000
2013
£’000
2014
£’000
2015
£’000
2016
£’000
2016
£’000
2017
£’000
2017
£’000
2018
£’000
2019
£’000
2020
£’000
2020
£’000
2021
£’000
2022
£’000
Incumbent
Chris
Davies
1
Stuart
Mitchell
2
Stuart
Mitchell
Stuart
Mitchell
Stuart
Mitchell
4
Mel
Ewell
5
Mel
Ewell
Meinie
Oldersma
6
Meinie
Oldersma
Meinie
Oldersma
Meinie
Oldersma
7
Steve
Francis
8
Steve
Francis
Steve
Francis
Single figure of
remuneration
1,031 987 968 765 581 100 150 794 669 688 258 850 1,315 1,435
% of max annual
bonus earned
50 60.5 57 0
3
n/a n/a n/a 70 0 0 0 57 87 96.5
% of max LTIP
awards vesting
0 n/a n/a 19.5 n/a n/a n/a n/a n/a 0 n/a n/a n/a n/a
1. The figures shown pertain to the period 1 January 2013 to 31 December 2013 (includes remuneration in lieu of salary, pension and other benefits after 1 March 2013).
2. Stuart Mitchell was appointed to the Board on 10 December 2012 and became the CEO on 1 March 2013. The 2013 figure pertains to the period 1 January 2013 to 31 December 2013.
3. Stuart Mitchell took the decision to waive his entitlement to the 2015 annual bonus.
4. Stuart Mitchell stepped down as CEO with effect from 11 November 2016, and his remuneration relates to the period served. He did not receive a bonus for 2016, and his
outstanding LTIP awards lapsed.
5. Mel Ewell was appointed as Interim CEO with effect from 11 November 2016 and stepped down on 31 March 2017. He continued as an Executive Director until 20 April 2017, and
his remuneration relates to the period served as CEO. Mel Ewell did not participate in any Group incentive schemes.
6. Meinie Oldersma was appointed CEO on 3 April 2017. The 2017 figure pertains to the period 3 April 2017 to 31 December 2017.
7. Meinie Oldersma stepped down as CEO with effect from 24 February 2020, and his remuneration relates to the period served. He did not receive a bonus for 2020, and his
outstanding LTIP awards lapsed.
8. Steve Francis was appointed CEO on 25 February 2020. The 2020 figure pertains to the period 25 February 2020 to 31 December 2020. His single figure reflects the temporary
20% salary reduction between 1 April 2020 and 30 June 2020 as a result of the Covid-19 pandemic as well as the one-off bonus arrangement received for 2020. Steve Francis
stepped down from CEO on 1 February 2023 and was succeeded by Gavin Slark.
124 SIG Annual Report and Accounts 2022
Percentage change in Directors’ remuneration
The Executive Directors are the only employees of SIG plc. The table below shows the annual percentage change in salary/fees, benefits and bonus
between 2022 and 2021 of the Directors of the Group compared to the average for all other UK-based employees. The year-on-year analysis prior to
this is not presented as the comparatives were not meaningful: the Executive Directors joined the Company during 2020 and did not serve a whole
year in office during that year. Over time, the percentage over five years will be disclosed.
% change 2022 v 2021
Salary/fees Benefits Bonus
Steve Francis (CEO) 3 0.8 14.2
Ian Ashton (CFO) 3 0.6 12.4
Andrew Allner (Chairman) 3 — —
Shatish Dasani
1
11.8 — —
Bruno Deschamps 3 — —
Kath Durrant 3 — —
Gillian Kent 3 — —
Simon King
2
19.4 — —
Alan Lovell 3 — —
Christian Rochat 3 — —
Average % increase for employees 5.6 (5.6)
3
(18.3)
4
1. Shatish Dasani joined on 1 February 2021. Increased % change reflects the additional month’s salary for 2022.
2. From 1 January 2022 Simon King was paid an additional fee of £10,000 as Designated Non-Executive Director for Workforce Engagement.
3. The reduction in the UK employee benefits figure reflects a change to the UK car policy and company car fleet review in 2021. Eligible UK employees can now choose between a
company car or cash allowance, whilst more carbon efficient vehicles have been added to the fleet. These changes saw more employees opting for electric vehicles over a cash
allowance, leading to an overall reduction in the cost of the car benefit provision.
4. SIG plc operates a number of bonus schemes with measures and targets aligned to business performance in the relevant operating company. The reduction in the UK employee
bonus figure reflects depressed results for this business, whilst the increase in the Executive Directors bonus figures reflects the results driven by Group business performance.
CEO pay ratio
Financial year Method used
25th percentile
pay ratio
50th percentile
pay ratio
75th percentile
pay ratio
2022 Option B (Gender Pay Data) 46:1 42:1 27:1
2021 Option B (Gender Pay Data) 53:1 45:1 31:1
2020 Option B (Gender Pay data) 44:1 38:1 31:1
2019 Option B (Gender Pay data) 32:1 28:1 20:1
2018 Option B (Gender Pay data) 33:1 27:1 20:1
For 2022, the Company has used Option B given the availability of data, in order that a direct comparison can be shown against last year. Gender Pay
for 2022 has been calculated in line with the guidance and details of the data used in the analysis can be found in the Gender Pay Gap Report which
will be published on our website (www.sigplc.com) in March 2023.
In determining the quartile figures, one UK employee with the relevant hourly rate was chosen for each quartile and the single total remuneration
figure was calculated for them to compare to the CEO.
The Group feels that using Gender Pay Data ensures that these individuals are reasonably representative of pay levels at the 25th, 50th and 75th
percentile as the single total remuneration figure for these individuals is similar to other employees with a similar annual salary.
2022 2021
CEO 25th 50th 75th CEO 25th 50th 75th
Basic salary 564,543 24,046 32,960 41,227 548,100 22,665 27,6 0 0 35,018
Benefits 24,644 131 90 1,001 24,455 126 153 194
Pension 28,227 1,891 805 1,074 27,4 0 5 1,700 1,656 2,626
Bonus plan 817,176 5,251 100 10,500 715,271 200 100 5,253
Total pay 1,434,590 31,319 33,955 53,802 1,315,231 24,691 29,509 43,091
CEO pay for 2022 has been calculated for the period 1 January 2022 to 31 December 2022 based on the single total figure of remuneration table.
The following elements have been used to calculate the single total figure of remuneration for the employee at each quartile; base salary; bonus;
employer pension contribution; car/car allowance; private medical insurance; Group life assurance; Group income protection; and employer share
incentive plan contribution, for the period 1 January 2022 to 31 December 2022.
No pay elements were omitted or adjusted to calculate CEO pay. Non-guaranteed overtime was omitted for employees due to its variable nature.
The Committee continues to be committed to ensuring that CEO pay is commensurate with performance. For 2021 and 2022, the CEO was paid
a bonus in line with the scheme and treatment for all participants.
125SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
To ensure pay is managed appropriately at all levels in the organisation, we regularly review our salaries against those of similar roles in both the
wider market and our sector. We also undertake additional pay analysis, such as gender pay reporting, to ensure we can identify, and, if appropriate,
address any pay issues that arise. The ratio is driven by the differences in the structure of the pay of our CEO, which is made up of a higher proportion
of variable pay, versus that of our wider workforce employees. This reflects the diverse range of roles and skillsets required to effectively operate our
organisation; from the operational employees in our distribution centres, to, for example, specialist technical roles in our IT departments. What is
important from our perspective is that this ratio is influenced only by the differences in structure, and not by divergence in fixed pay between the
CEO and wider workforce.
Relative importance of the spend on pay
The table below shows the percentage change in total employee pay expenditure and shareholder distribution (i.e. dividends and share buybacks)
from the financial year ended 31 December 2021 to the financial year ended 31 December 2022.
2022
£m
2021
£m % Change
Distribution to shareholders — — —
Employee remuneration
1
331.7 303.2 9.4%
1. Continuing operations employee remuneration.
The Company has declared that no final dividend would be paid for 2022 and no interim dividend was paid in 2022 (2021: nil).
Advisors to the Remuneration Committee
External
To ensure that the Group’s remuneration practices are in line with best practice, the Committee appointed independent external remuneration
advisors, Korn Ferry, through a competitive tender process in 2021. Korn Ferry confirms that it has no connection with the Company or its individual
directors.
During the year, the Committee sought advice from Korn Ferry in relation to emerging market practices in CEO recruitment, general matters related to
remuneration and peer group remuneration analysis.
Korn Ferry is a member of the Remuneration Consultants Group and adheres to its Code of Conduct in its dealings with the Committee. The
Committee reviews the objectivity and independence of the advice it receives from its advisor at a private meeting each year. It is satisfied that the
advice received during 2022 was independent, robust, and professional.
The fees for the advice provided by Korn Ferry in 2022 were £114,611 (2021: £52,705) and were based on the time spent during the year. Korn Ferry
also supported SIG in the recruitment of our new CEO Gavin Slark.
Internal
During the year the Committee sought internal support from the CEO, CFO, Chief People Officer, Group Head of Reward, and the Company
Secretary, whose attendance at meetings was by invitation from the Committee Chair, to advise on specific questions raised by the Committee
and on matters relating to the performance and remuneration of the senior management team. Such attendances specifically excluded any matter
concerning their own remuneration. The Company Secretary acts as secretary to the Committee.
Voting outcomes
The following table shows the results of the advisory vote on the 2021 Directors’ remuneration report at the AGM held on 12 May 2022 and the vote
on the remuneration policy at the General Meeting on 17 November 2020.
Resolution
Votes cast
“for” %
Votes cast
“against” %
Votes
“withheld”
To approve the annual statement by the Chair of the Remuneration
Committee and the Directors’ remuneration report 914,475,254 95.22 4 5,9 07,70 3 4.78 29,142
To approve the remuneration policy (as voted in 2020) 831,756,099 92.63 6 6,165,425 7. 3 7 23,395,204
Kath Durrant
Chair of the Remuneration Committee
7 March 2023
Directors’ remuneration report | Annual report on remuneration
Remuneration
21 3 4 5
126 SIG Annual Report and Accounts 2022
Directors’ report
Substantial shareholdings
The Company had received notification of the following shareholdings in its issued share capital pursuant to the Disclosure Guidance and
Transparency Rules (“DTRs”) of the Financial Conduct Authority as at 31 December 2022 and 7 March 2023. Information provided by the Company
pursuant to the DTRs is publicly available via the regulatory information services and on the Company’s website.
Shareholder
Interests disclosed
to the Company as at
31 December 2022 %
Nature of holding
as per disclosure
Interests disclosed
to the Company as at
7 March 2023 %
Nature of holding
as per disclosure
CD&R Sunshine S. a. r. l. 342,220,120 28.96% Direct Interest 342,220,120 28.96% Direct Interest
IKO Enterprises Limited 174,918,8 03 14.8% Direct Interest
(including an
Indirect Interest
of 1.0816%)
174,918,8 03
14.8%
Direct Interest
(including an
Indirect Interest
of 1.0816%)
Aberforth Partners LLP 117,060,429 9.89% Indirect Interest 117,125,42 9 9.91% Indirect Interest
Massachusetts Financial Services Company 36,242,679 3.07% Indirect Interest 36,242,679 3.07% Indirect Interest
Whistleblowing
The Group has in place a Whistleblowing policy under which employees
may, in confidence, raise concerns about possible wrongdoing in
financial reporting or other matters. A copy of this policy is available
on the Group’s website (www.sigplc.com).
The Group also has a confidential hotline in place, which is available to
all Group employees and provides a facility for them to bring matters to
management’s attention on a confidential basis. The hotline is provided
by an independent third party. During 2022, these systems were
operational throughout the Group.
A full investigation is carried out on all matters raised and where a
whistleblowing report has been prepared, an update is provided to the
Board as part of the General Counsel & Company Secretary’s report.
The General Counsel & Company Secretary also reports to the Board
concerning ongoing investigations and conclusions reached. During
2022, Group employees used this system to raise concerns about a
number of separate issues, all of which were appropriately responded to.
Statement of the Directors on the disclosure of
information to the Auditor
The Directors who held office at the date of approval of the Directors’
Report confirm that:
• so far as they are each aware, there is no relevant audit information of
which the Company’s Auditor is unaware; and
• each Director has taken all steps that they ought to have taken as a
Director to make themselves aware of any relevant audit information
and to establish that the Company’s Auditor is aware of that information.
This confirmation is given and should be interpreted in accordance with
the provisions of section 418 of the Act.
Going concern
The going concern statement can be found on page 66 of the
Strategic report.
Viability statement
The Viability statement can be found on pages 66 to 67 of the
Strategic report.
Independent Auditor
On the recommendation of the Audit & Risk Committee (see page
100), in accordance with Section 489 of the Act, resolutions are to be
proposed at the AGM for the reappointment of Ernst & Young LLP as
Auditor of the Company and to authorise the Audit & Risk Committee
to agree its remuneration. The remuneration of the Auditor for the year
ended 31 December 2022 is fully disclosed in Note 3 to the Consolidated
financial statements on page 157.
Publication of Annual Report and notice of AGM
Shareholders are to note that the SIG plc Annual Report 2022 together
with the notice convening the 2023 AGM will be published on the
Group’s website (www.sigplc.com). If shareholders have elected to
receive shareholder correspondence in hard copy, then the Annual
Report and notice convening the AGM will be distributed to them.
Principal activity
The principal activity of the Group is the supply of specialist products to
construction and related markets in the UK, Ireland and mainland Europe.
The Chairman’s statement and Strategic report on pages 1 to 67 contain
a review of these activities and comment on the future outlook and
developments. The financial risk management objectives, policies and key
performance indicators of the Group are also set out in the Strategic report.
Political donations
It is the Group’s policy not to make political donations and no political
donations were made during the year (2021: £nil). Details of the Group’s
policies in relation to corporate governance are disclosed on page 54.
Group results and dividends
The Consolidated income statement for the year ended 31 December
2022 is shown on page 133. The movement in Group reserves during
the year is shown on page 136 in the Consolidated statement of changes
in equity. Segmental information is set out in Note 1 to the Consolidated
financial statements on pages 151 to 156.
Corporate governance
127SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Corporate governance | Directors’ report
The Board has taken the decision not to declare a final dividend for the
year 2022 (2021: nil). No interim dividend was paid in 2022 (2021: nil).
Therefore, the total dividend paid in 2022 was nil (2021: nil).
GHG emissions
Details of the Group’s GHG emissions, energy and carbon reduction
plans are detailed in the Strategic report on page 28 to 36.
Employees
Details of the Group’s policies in relation to employees (including
disabled employees) are disclosed in the Strategic report on pages 40 to
44 and on page 54. Further information on employee engagement and
consultation can be found in the Strategic report on page 40 and the
Corporate Governance report on pages 80 to 81.
Stakeholder engagement
Further information on stakeholder engagement, including on our
business relationships with suppliers, customers and others, can be
found in the Corporate Governance report on pages 76 to 79.
Post balance sheet events
Details of post balance sheet events are included in Note 32 on page 193
of the Consolidated financial statements.
Related party transactions
Except as disclosed in Note 30 to the Consolidated financial statements
on page 193, and except for Directors’ service contracts and the
Relationship Agreement with CD&R, the Company did not have any
material transactions or transactions of an unusual nature with, and did
not make loans to, related parties in the periods in which any Director is
or was materially interested.
Summary of key terms of the CD&R Relationship
Agreement
The Company entered into a Relationship Agreement with CD&R on
29 May 2020, which will remain effective as long as CD&R is entitled to
exercise 10% or more of the votes able to be cast on matters at general
meetings of the Company. The Relationship Agreement regulates the
Company’s relationship with CD&R. It includes agreement by CD&R
that it shall (and ensure that its associates shall), among other things,
conduct all transactions with the Group at arm’s length and on normal
commercial terms, not take actions that would have the effect of
preventing the Group from carrying on its business independently and
not take any action that would prevent the Group from complying with
its obligations under the Listing Rules and other applicable laws and
regulations. More details on the content of the Relationship Agreement
can be found in the prospectus dated 19 June 2020, which is available
on the Group’s website (www.sigplc.com). As far as the Group is aware
the undertakings included in the Relationship Agreement have been
complied with during the period under review.
Further details on the CD&R relationship in practice can be found on
page 83.
Directors’ and officers’ liability insurance and
indemnities
The Company purchases liability insurance cover for Directors and
officers of the Company and its subsidiaries, which gives appropriate
cover for any legal action brought against them. The Company has also
provided an indemnity, which was in force during the financial year for
its Directors to the extent permitted by the law in respect of liabilities
incurred as a result of their office. The indemnity would not provide any
coverage to the extent that a Director is proved to have acted fraudulently
or dishonestly.
No claims or qualifying indemnity provisions and no qualifying pension
scheme indemnity provisions have been made either during the year or
by the date of approval of this Directors’ report.
Financial instruments
Information on the Group’s financial risk management objectives
and policies on the exposure of the Group to relevant risks arising
from financial instruments is in Note 18 to the Consolidated financial
statements on pages 173 to 179.
Future developments
Possible future developments are disclosed in the Strategic report on
pages 16 and 19.
Acquisitions and disposals
Details of acquisitions made, and businesses identified for sale or closure
are covered in Note 13 on pages 167 to 170 of the Consolidated financial
statements.
Group companies
A full list of Group companies (and their registered office addresses) is
disclosed on pages 217 to 219.
Share capital
The Company has a single class of share capital, which is divided into
ordinary shares of 10p each. At 31 December 2022, the Company had a
called-up share capital of £118,155,697.70 divided into ordinary shares of
10p each (2021: £118,155,697.70).
During the year ended 31 December 2022, options over 306,676
ordinary shares vested under the Company’s share option schemes.
No new ordinary shares were allotted to satisfy the vesting of these
options and no new ordinary shares have been allotted under these
schemes since the end of the financial year to the date of this report.
Details of outstanding options under the Group’s employee and
executive schemes are set out in Note 9 on pages 161 to 162, which
also contains details of options granted over unissued share capital.
Rights attaching to shares
The rights attaching to the ordinary shares are defined in the Company’s
Articles of Association. The Articles of Association may be changed by
special resolution of the Company. A shareholder whose name appears
on the Company’s Register of Members can choose whether their shares
are evidenced by share certificates (e.g. in certificated form) or held in
electronic (e.g. uncertificated) form in CREST (the electronic settlement
system in the UK).
Subject to any restrictions below, shareholders may attend any general
meetings of the Company and, on a show of hands, every shareholder
(or their representative) who is present at a general meeting has one
vote on each resolution and, on a poll, every shareholder (or their
representative) who is present has one vote on each resolution for every
ordinary share of which they are the registered shareholder.
A resolution put to the vote of a general meeting is decided on a show
of hands unless before or on the declaration of the result of a vote on
a show of hands, a poll is demanded by the Chairman of the meeting,
or by at least five shareholders (or their representatives) present in
person and having the right to vote, or by any shareholders (or their
representatives) present in person having at least 10% of the total voting
rights of all shareholders, or by any shareholders (or their representatives)
present in person holding ordinary shares in which an aggregate sum
has been paid up of at least one-tenth of the total sum paid up on all
ordinary shares.
Remuneration
21 3 4 5
128 SIG Annual Report and Accounts 2022
Shareholders can declare final dividends by passing an ordinary
resolution, but the amount of such dividends cannot exceed the amount
recommended by the Board. The Board can pay interim dividends on
any class of shares of the amounts and on the dates and for the periods
they decide provided the distributable profits of the Company justify
such payment. The Board may, if authorised by an ordinary resolution
of the shareholders, offer any shareholder the right to elect to receive
new ordinary shares, which will be credited as fully paid, instead of
their cash dividend.
Any dividend that has not been claimed for 12 years after it became due
for payment will be forfeited and will then belong to the Company unless
the Directors decide otherwise.
If the Company is wound up, the liquidator can, with the sanction of an
extraordinary resolution passed by the shareholders, divide among the
shareholders all or any part of the assets of the Company and they can
value any assets and determine how the division shall be carried out as
between the members or different classes of members. The liquidator
can also transfer the whole or any part of the assets to trustees upon any
trusts for the benefit of the members. No shareholders can be compelled
to accept any asset which would give them a liability.
Under the Company’s SIP, the SIP trustee holds shares on behalf of
employee participants. In accordance with the SIP trust deed and rules,
the SIP trustee must act in accordance with any directions given by a
SIP participant in respect of their SIP shares. In the absence of any such
directions from a SIP participant the SIP trustee will not take any action in
respect of SIP shares.
Under the SIG employee benefit trust (the “EBT”), the EBT trustee
holds shares to be used for the settlement of awards granted under the
Company’s incentive plans. The EBT trustee has, under the trust deed
establishing the EBT, waived all rights to vote in respect of any shares
held in the EBT, except any shares participants own beneficially, in
respect of which it will invite participants to direct how the trustee shall
act in relation to the shares held on their behalf. The number of shares
held in the EBT on 7 March 2023 was 33,877,777. The EBT trustee also
waives any dividends on shares held in the EBT.
Further information relating to the change of control provisions under the
Group’s incentive plans appears within the remuneration policy available
on the Group’s website www.sigplc.com.
Voting at general meetings
Any form of proxy sent by the Company to shareholders in relation to any
general meeting must be delivered to the Company, whether in written
or electronic form, no less than 48 hours before the time appointed for
holding the meeting or adjourned meeting at which the person named
in the appointment proposes to vote.
The Board may determine that the shareholder is not entitled to exercise
any right conferred by being a shareholder if they or any person with
an interest in shares has been sent a notice under Section 793 of the
Companies Act 2006 (which confers upon public companies the power
to require information with respect to interests in their voting shares)
and they or any interested person failed to supply the Company with
the information requested within 14 days after delivery of that notice.
The Board may also decide that no dividend is payable in respect of
those default shares and that no transfer of any default shares shall
be registered.
These restrictions end seven days after receipt by the Company of
a notice of an approved transfer of the shares or all the information
required by the relevant Section 793 Notice, whichever is the earlier.
Transfer of shares
The Board may refuse to register a transfer of a certificated share that
is not fully paid, provided that the refusal does not prevent dealings
in shares in the Company from taking place on an open and proper
basis. The Board may also refuse to register a transfer of a certificated
share unless: (i) the instrument of transfer is lodged, duly stamped (if
necessary), at the registered office of the Company or any other place
decided by the Board accompanied by a certificate for the share to
which it relates and such other evidence as the Board may reasonably
require to show the right of the transferor to make the transfer; (ii) is in
respect of only one class of shares; and (iii) is in favour of not more than
four transferees.
Transfer of uncertificated shares must be carried out using CREST and
the Board can refuse to register a transfer of an uncertificated share in
accordance with the regulations governing the operation of CREST.
Variation of rights
If at any time the capital of the Company is divided into different classes
of shares, the special rights attaching to any class may be varied or
revoked either:
i. with the written consent of the holders of at least 75% in nominal
value of the issued shares of the class; or
ii. with the sanction of an extraordinary resolution passed at a separate
general meeting of the holders of the shares of the class.
The Company can issue new shares and attach any rights to them.
If there is no restriction by special rights attaching to existing shares,
rights attaching to new shares can take priority over the rights of
existing shares, or the new shares and the existing shares are deemed
to be varied (unless the rights expressly allow it) by a reduction of paid
up capital, or if another share of that same class is issued and ranks
in priority for payment of dividend, or in respect of capital or more
favourable voting rights.
Election and re-election of Directors
The Company may, by ordinary resolution, of which special notice has
been given in accordance with the Act, remove any Director before
the expiration of their period of office. The office of a Director shall be
vacated if:
i. they cease to be a Director by virtue of any provision of law or are
removed pursuant to the Company’s Articles of Association or they
become prohibited by law from being a Director;
ii. they become bankrupt or compound with their creditors generally;
iii. they become of unsound mind or a patient for any purpose of any
statute relating to mental health and the Board resolves that their
office is vacated;
iv. they resign;
v. they fail to attend Board meetings for six consecutive months without
leave of absence from the Board and the Board resolves that the
office is vacated;
vi. their appointment terminates in accordance with the provisions of the
Company’s Articles;
vii. they are dismissed from executive office;
viii. they are convicted of an indictable offence and the Directors resolve
that it is undesirable in the interests of the Company that they remain
as a Director; or
ix. the conduct of the Director is the subject of an investigation and the
Directors resolve that it is undesirable in the interests of the Company
that they remain a Director.
129SIG Annual Report and Accounts 2022
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Governance
Financials
The Board may, from time to time, appoint one or more Directors
as Managing Director or to fulfil any other executive function within
the Company for such term, remuneration and other conditions of
appointment as it may determine, and it may revoke such appointment
(subject to the provisions of the Companies Act).
Agreements with employees and significant
agreements (contracts of significance)
There are no agreements between the Company and its Directors or
employees providing for compensation for loss of office or employment
(whether through resignation, purported redundancy or otherwise) that
occurs because of a takeover bid.
The Company’s borrowing arrangements are terminable upon a change
of control of the Company.
Fixed assets
In the opinion of the Directors, there is no material difference between
the book value and the current open market value of the Group’s
interests in land and buildings.
CREST
The Company’s ordinary shares are in CREST, the settlement system for
stocks and shares.
2023 Interim Report
Current regulations permit the Company not to send hard copies of its
Interim Reports to shareholders and therefore the Company intends to
publish its Interim Report on its website at www.sigplc.com.
Authority to purchase own ordinary shares
Shareholders’ authority for the purchase by the Company of 118,155,698 of its own shares existed at the end of the year. The Company has made no
purchases of its own ordinary shares pursuant to this authority. The Company will seek to renew this.
For the purposes of LR 9.8.4C R, the information required to be disclosed by LR 9.8.4 R can be found in the following locations:
Section Topic Location
(1) Interest capitalised Not applicable
(2) Publication of unaudited financial information Not applicable
(4) Details of long-term incentive schemes Remuneration Committee Report, page 104
(5) Waiver of emoluments by a Director Not applicable
(6) Waiver of future emoluments by a Director Not applicable
(7) Non pre-emptive issues of equity for cash Not applicable
(8) Item (7) in relation to major subsidiary undertakings Not applicable
(9) Parent participation in a placing by a listed subsidiary Not applicable
(10) Contracts of significance Not applicable
(11) Provision of services by a controlling shareholder Not applicable
(12) Shareholder waivers of dividends Not applicable
(13) Shareholder waivers of future dividends Not applicable
(14) Agreements with controlling shareholders Not applicable
Cautionary statement
The cautionary statement can be found on page 67 of the Strategic report.
Content of Directors’ report
The Corporate Governance report (including the Board biographies)
that can be found on pages 69 to 87, the Audit & Risk Committee Report
on pages 94 to 100, the Nominations Committee Report on pages
88 to 91, and the Directors’ Responsibility Statement on page 131 are
incorporated by reference and form part of this Directors’ report. The
Directors’ report, together with the Directors’ remuneration report on
pages 101 to 126, fulfils the requirements of the Corporate Governance
report for the purposes of DTR 7.2.6.
The Board has prepared a Strategic report (including the Business
review), which provides an overview of the development and
performance of the Group’s business in the year ended 31 December
2022 and its position at the end of the year and covers likely future
developments in the business of the Group. The ESG approach forms
part of the Strategic report.
For the purposes of compliance with DTR 4.1.8 R, the required content
of the management report can be found in the Strategic report and
this Directors’ report, including the sections of the Annual Report and
Accounts incorporated by reference. SIG has been mindful of the best
practice guidance published by Defra and other bodies in relation to
environmental, community and social KPIs when drafting the Strategic
report. The Board has also considered social, environmental and ethical
risks, in line with the best practice recommendations of the Association
of British Insurers. Management, led by the CEO, has responsibility for
identifying and managing such risks, which are discussed extensively in
this Annual Report and Accounts.
All the information cross-referenced is hereby incorporated by reference
into this Directors’ report.
Approval of the Directors’ report
The Directors’ report set out on pages 127 to 130 was approved by the
Board of Directors on 7 March 2023 and signed on its behalf by:
Andrew Watkins
General Counsel & Company Secretary
7 March 2023
Corporate governance | Directors’ report
Remuneration
21 3 4 5
130 SIG Annual Report and Accounts 2022
Directors’ Responsibilities
Statement
The Directors are responsible for preparing the Annual Report and the
Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements
for each financial year. Under that law the Directors are required to
prepare the Group Financial Statements, in accordance with UK adopted
international accounting standards. The Directors have elected to
prepare the Parent Company Financial Statements 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. Under company law
the Directors must not approve the Financial Statements unless they
are satisfied that they give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company for that period.
In preparing the Parent Company Financial Statements, the Directors are
required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable
and prudent;
• state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and explained
in the Financial Statements; and
• prepare the Financial Statements on the going concern basis unless
it is inappropriate to presume that the Company will continue in
business.
In preparing the Group Financial Statements, International Accounting
Standard 1 requires that Directors:
• Properly select and apply accounting policies;
• Present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable
information;
• Provide additional disclosures when compliance with the specific
requirements in IFRS are insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the
entity’s financial position and financial performance; and
• Make an assessment of the Company’s ability to continue as a
going concern.
The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Company’s transactions and
disclose with reasonable accuracy, at any time, the financial position
of the Group at that time and enable them to ensure that the Financial
Statements comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Company and hence for
taking reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company’s website.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in
other jurisdictions.
Responsibility statement
We confirm that to the best of our knowledge:
• The Financial Statements, prepared in accordance with the relevant
financial reporting framework, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and the
undertakings included in the consolidation taken as a whole; and
• The Strategic report includes a fair review of the development and
performance of the business and the position of the Company, and the
undertakings included in the consolidation taken as a whole, together
with a description of the principal risks and uncertainties that they face.
This responsibility statement was approved by the Board of Directors on
7 March 2023 and is signed on its behalf by:
Gavin Slark
Chief Executive Officer
7 March 2023
Ian Ashton
Chief Financial Officer
7 March 2023
Corporate governance
131SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Financial
statements
133 Consolidated income statement
134 Consolidated statement of comprehensive income
135 Consolidated balance sheet
136 Consolidated statement of changes in equity
137 Consolidated cash flow statement
138 Statement of significant accounting policies
149 Critical accounting judgements and key sources of
estimation uncertainty
151 Notes to the consolidated financial statements
194 Non-statutory information
196 Independent auditor’s report
205 Five-year summary
206 Company balance sheet
207 Company statement of changes in equity
208 Company statement of significant accounting policies
211 Notes to the Company financial statements
217 Group companies 2022
220 Company information
Consolidated income statement
for the year ended 31 December 2022
Note
Underlying
1
2022
£m
Other items
2
2022
£m
Total
2022
£m
Underlying
1
2021
£m
Other items
2
2021
£m
Total
2021
£m
Revenue 1 2 , 74 4 . 5 — 2 ,74 4 .5 2 , 2 9 1. 4 — 2, 2 9 1. 4
Cost of sales (2,033.5) — (2,033.5) (1, 6 8 9 . 3) — (1, 6 8 9 . 3)
Gross profit 7 11 . 0 — 7 11. 0 6 0 2 .1 — 6 0 2 .1
Other operating expenses 2 (614 . 3) (22 .0) (636.3) (555.9) (27 .4) (583.3)
Impairment losses on financial assets
3
15 (16 . 5) (2.0) (18 .5) (4 .8) — (4.8)
Operating profit/(loss) 3 8 0 . 2 (24.0) 5 6. 2 41. 4 (27 .4) 14 . 0
Finance income 5 1. 3 — 1. 3 0 .7 — 0 .7
Finance costs 5 (29. 9) (0 .1) (30.0) (22.8) ( 7. 8 ) (3 0.6)
Profit/(loss) before tax 51. 6 (2 4 .1) 2 7. 5 19 . 3 (3 5. 2) (15 . 9)
Income tax (expense)/credit 6 (14 . 4) 2 .4 (12 . 0) (15 . 6) 3.2 (12 . 4)
Profit/(loss) after tax 3 7. 2 (2 1.7) 15 . 5 3.7 (3 2.0) (28 .3)
Attributable to:
Equity holders of the Company 3 7. 2 (2 1.7) 15 . 5 3 .7 (3 2.0) (28.3)
Earnings/(loss) per share
Basic 8 1. 3p (2.4)p
Diluted 8 1. 3p (2.4)p
1. Underlying represents the results before Other items. See the Statement of significant accounting policies for further details.
2. 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 140 and further details are disclosed in Note 2.
3. Impairment losses on financial assets (trade receivables and lease receivables), as determined in accordance with IFRS 9 Financial Instruments (Notes 2 and 15), previously
included in other operating expenses, are shown separately, and the prior year comparative has been updated to present on a consistent basis.
The accompanying Statement of significant accounting policies and Notes to the consolidated financial statements are an integral part of this
Consolidated income statement.
133SIG Annual Report and Accounts 2022
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Governance
Financials
Note
2022
£m
2021
£m
Profit/(loss) after tax for the year 15 . 5 (28 .3)
Items that will not subsequently be reclassified to the Consolidated income statement:
Remeasurement of defined benefit pension liability 28 (14 . 3) 9 .1
Deferred tax movement associated with remeasurement of defined benefit pension liability 22 (0.5) 0 .1
(1 4.8) 9.2
Items that may subsequently be reclassified to the Consolidated income statement:
Exchange difference on retranslation of foreign currency goodwill and intangibles 2 .7 (3. 7)
Exchange difference on retranslation of foreign currency net investments (excluding goodwill and
intangibles) 11 . 5 (10. 7)
Exchange and fair value movements associated with borrowings and derivative financial instruments (13 . 9) 8.6
Gains and losses on cash flow hedges 1. 6 0 .7
Transfer to profit and loss on cash flow hedges 0.2 (3. 1)
2 .1 (8 . 2)
Other comprehensive (expense)/income (12 .7) 1. 0
Total comprehensive income/(expense) 2.8 (2 7. 3 )
Attributable to:
Equity holders of the Company 2 . 8 (2 7. 3)
2 . 8 (2 7. 3)
The accompanying Statement of significant accounting policies and Notes to the consolidated financial statements are an integral part of this
Consolidated statement of comprehensive income.
Consolidated statement of comprehensive income
for the year ended 31 December 2022
134 SIG Annual Report and Accounts 2022
Note
2022
£m
2021
£m
Non-current assets
Property, plant and equipment 10 68.8 66.9
Right-of-use assets 23 2 6 5 . 9 230.9
Goodwill 11 13 4. 2 12 0 .1
Intangible assets 12 2 2 . 8 16 .7
Lease receivables 23 1. 2 2. 9
Deferred tax assets 22 3. 3 4.8
Non-current financial assets 18 0. 4 —
49 6.6 4 42. 3
Current assets
Inventories 14 270.6 242 . 0
Lease receivables 23 0 .1 0.8
Trade and other receivables 15 4 32 .6 3 71. 3
Current tax assets 15 1. 5 —
Current financial assets 18 1. 6 0. 2
Cash at bank and on hand 18 13 0 .1 14 5 .1
836.5 75 9. 4
Total assets 1 ,333. 1 1, 2 0 1. 7
Current liabilities
Trade and other payables 16 42 5.0 3 6 9.7
Lease liabilities 16 5 6 .5 5 0 .7
Interest-bearing loans and borrowings 17 0 . 8 —
Deferred consideration 16 0.7 1 .1
Other financial liabilities 16 — 0.4
Derivative financial instruments 16 — 0.5
Current tax liabilities 16 5 . 8 4.6
Provisions 21 9 .6 12 . 9
49 8 . 4 43 9.9
Non-current liabilities
Lease liabilities 23 2 51. 2 210 .4
Interest-bearing loans and borrowings 17 2 6 6 .1 24 9 .6
Deferred consideration 18 1. 8 0.7
Derivative financial instruments 18 0 .1 —
Other financial liabilities 18 — 0.6
Other payables 7. 4 3.8
Retirement benefit obligations 28 23.0 10 .7
Provisions 21 1 7. 3 21. 3
5 6 6. 9 4 9 7.1
Total liabilities 1, 0 6 5. 3 9 3 7. 0
Net assets 2 6 7. 8 2 6 4.7
Capital and reserves
Called up share capital 24 118 . 2 118 . 2
Share premium account 24 — —
Treasury shares reserve 24 (16 . 4) (1 2.5)
Capital redemption reserve 0. 3 0.3
Share option reserve 8 .6 4.4
Hedging and translation reserves 4. 5 2.4
Cost of hedging reserve 0 .1 0 .1
Merger reserve 92 .5 9 2.5
Retained profits 60.0 59.3
Attributable to equity holders of the Company 2 6 7. 8 2 6 4.7
Total equity 2 6 7. 8 2 6 4.7
Consolidated balance sheet
as at 31 December 2022
The accompanying Statement of significant accounting policies and
Notes to the consolidated financial statements are an integral part of
this Consolidated balance sheet.
The Consolidated financial statements were approved by the Board of
Directors on 7 March 2023 and signed on its behalf by:
Gavin Slark Ian Ashton
Director Director
Registered in England: 00998314
135SIG Annual Report and Accounts 2022
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Governance
Financials
Consolidated statement of changes in equity
for the year ended 31 December 2022
Called up
share
capital
£m
Share
premium
account
£m
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
Retained
(losses)/
profits
£m
Total
£m
At 1 January 2021 118 . 2 4 4 7. 7 (0 .2) 0.3 2. 0 10 . 5 0.2 92.5 (36 9.3) 3 0 1. 9
Loss after tax — — — — — — — — (28.3) (28.3)
Other comprehensive
(expense)/income — — — — — (8 .1) (0 .1) — 9.2 1. 0
Total comprehensive
expense — — — — — (8 .1) (0 .1) — (1 9 .1) (2 7. 3)
Purchase of treasury shares — — (12 . 3) — — — — — — (12 . 3)
Credit to share option
reserve — — — — 2.6 — — — — 2.6
Settlement of share options — — — — (0. 2) — — — — (0. 2)
Capital reduction — (4 47. 7 ) — — — — — — 4 4 7.7 —
At 31 December 2021 118 . 2 — (1 2.5) 0.3 4.4 2.4 0 .1 9 2.5 59.3 2 6 4 .7
Profit after tax — — — — — — — — 15. 5 15 . 5
Other comprehensive
income/(expense) — — — — — 2 .1 — — (1 4.8) (12 .7)
Total comprehensive
income — — — — — 2 .1 — — 0.7 2 . 8
Purchase of treasury
shares — — (4. 0) — — — — — — (4.0)
Credit to share option
reserve — — — — 4 .4 — — — — 4 .4
Settlement of share options — — 0 .1 — (0.2) — — — — (0 .1)
At 31 December 2022 11 8 . 2 — (16 . 4) 0. 3 8 .6 4 . 5 0 .1 9 2 . 5 60 .0 2 6 7. 8
The share option reserve represents the cumulative equity-settled share option charge under IFRS 2 “Share-based payments” 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.
Treasury shares relate to shares purchased by the SIG Employee Benefit Trust (“EBT”) to satisfy awards made under the Group’s share plans which
are not vested and beneficially owned by employees.
The share premium account was cancelled during the prior year through a capital reduction. See Note 24 for further details.
The merger reserve represents the premium on ordinary shares issued in a previous year through the use of a cash box structure.
The accompanying Statement of significant accounting policies and Notes to the consolidated financial statements are an integral part of this
Consolidated statement of changes in equity.
136 SIG Annual Report and Accounts 2022
Note
2022
£m
2021
£m
Net cash flow from operating activities
Cash generated from operating activities 25 13 2 . 3 7. 4
Income tax paid (14 . 3) (10 . 4)
Net cash generated from/(used in) operating activities 118 . 0 (3.0)
Cash flows from investing activities
Finance income received 1. 3 0 .7
Purchase of property, plant and equipment and computer software (14 . 5) (18 .6)
Initial direct costs of right-of-use assets (0.8) —
Proceeds from sale of property, plant and equipment 0. 8 2 .7
Net cash flow on the purchase of businesses 13 (26 .0) (1 0 .1)
Settlement of amounts payable for previous purchases of businesses 13 (1. 3) (0.5)
Investment in financial assets (0. 2) —
Net cash flow from investing activities (4 0 .7) (25.8)
Cash flows from financing activities
Finance costs paid
1
(3 0 .1) (36. 3)
Repayment of lease liabilities (6 0 .1) (5 7. 3)
Repayment of borrowings (1. 4) (200.3)
Proceeds from borrowings — 2 51. 5
Settlement of derivative financial instruments — 0.8
Acquisition of treasury shares (4. 0) (12 . 3)
Net cash flow from financing activities (95.6) (53.9)
Decrease in cash and cash equivalents in the year 26 (18 . 3) (8 2 .7)
Cash and cash equivalents at beginning of the year
2
27 14 5 .1 23 5.3
Effect of foreign exchange rate changes 27 3. 3 (7 .5)
Cash and cash equivalents at end of the year
2
27 13 0 .1 14 5 .1
1. Finance costs paid in the prior year included £1 2.9m make whole payment in connection with the refinancing during the prior year (see Note 5).
2. Cash and cash equivalents comprise cash at bank and on hand of £130. 1m (2021: £1 45. 1m) less bank overdrafts of £nil (2021: £nil).
The accompanying Statement of significant accounting policies and Notes to the consolidated financial statements are an integral part of this
Consolidated cash flow statement.
Consolidated cash flow statement
for the year ended 31 December 2022
137SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Statement of significant accounting policies
for the year ended 31 December 2022
The significant accounting policies adopted in this Annual Report and Accounts for the year ended 31 December 2022 are set out below.
Basis of preparation
The Consolidated financial statements are prepared in accordance with UK adopted international accounting standards.
The Consolidated financial statements have been prepared under the historical cost convention except for derivative financial instruments and
unquoted investments 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 under Regulation 7(1) 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. Advantage has been taken of the exemption conferred by this regulation.
The subsidiary of the Company, SIG Building Systems Limited (registered number 07976470), is entitled to exemption from audit under s479A of the
Companies Act 2006 relating to subsidiary companies.
The Consolidated financial statements have been prepared on a going concern basis as set out below.
In preparing the Consolidated financial statements management has considered the impact of climate change, particularly in the context of the
financial statements as a whole, in addition to disclosures included in the Strategic report this year. This included an assessment of the impact on
the carrying value of non-current assets and the impact on forecasts used in the impairment review and the assessments of going concern and
longer term viability. These considerations did not have a material impact on the financial reporting judgements and estimates, consistent with the
assessment that climate change is not expected to have a significant impact on the Group’s going concern assessment to 31 March 2024 nor the
viability of the Group over the next three years.
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.
The Group’s financing facilities comprise a €300m fixed rate bond (secured notes), due November 2026, and £90m Revolving Credit Facility (“RCF”)
which expires in May 2026. One of the trading businesses also has a £2.9m bank loan repayable over the period to June 2026. The secured notes are
subject to incurrence based covenants only, and the RCF has a leverage maintenance covenant which is only effective if the facility is over 40% drawn
at a quarter end reporting date. The RCF was undrawn at 31 December 2022.
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 2024.
The Directors have considered the Group’s forecasts which support the view that the Group will be able to continue to operate within its banking
facilities and comply with its banking covenants. 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 banking covenants, including:
• high levels of product inflation, and current economic and political uncertainties across Europe, all potentially impacting market demand;
• potentially recessionary conditions in the coming year; and
• material shortages impacting our ability to meet demand and hence having an impact on forecast sales.
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 and the Directors have also reviewed mitigating actions that could be taken. Under a scenario including a combination of the above
resulting in a 73% reduction in underlying operating profit from the base forecast for the going concern period, the analysis shows that sufficient cash
would be available without triggering a covenant breach. Further details are also included in the Viability statement on pages 66 and 67.
The Directors have considered the impact of climate-related matters on the going concern assessment and this is not expected to have a significant
impact on the Group’s going concern assessment to 31 March 2024.
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 2024 and the Directors therefore consider it appropriate to adopt the going concern basis in preparing the 2022 Consolidated
financial statements.
New standards, interpretations and amendments adopted
The following amendments and interpretations apply for the first time in 2022, but have not had a material impact on the Consolidated financial
statements of the Group:
• Amendment to IFRS 3 Business Combinations: reference to the Conceptual Framework
• Amendment to IAS 16 Property, Plant and Equipment: proceeds before intended use
• Amendment to IAS 37 Provisions, contingent liabilities and contingent assets: costs of fulfilling a contract
138 SIG Annual Report and Accounts 2022
New standards, amendments and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2022 reporting periods and
have not been early adopted by the Group. None of these are expected to have a material impact on the Group in the current or future reporting
periods or on foreseeable future transactions.
Disclosure restatements
Disclosure of discount rates used in value in use calculation
During the preparation of the 2022 Annual Report and Accounts an error was identified in the comparative disclosures in relation to pre-tax discount
rates used in the value in use calculation in Note 11. The discount rates disclosed were post-tax rates instead of the pre-tax rates as required by IAS
36 “Impairment of assets”. The prior year comparatives for the pre-tax discount rate assumption used in the value in use calculation and the change
required for carrying value to equal recoverable amount have been restated to show the correct amounts. This does not impact any of the primary
statements or other notes to the Consolidated financial statements.
Aged analysis of expected credit loss provision
An error was also identified in the comparative disclosures in relation to the aged analysis of the expected credit loss provision and expected credit
loss rates in Note 15. The comparative for the analysis of the expected credit loss provision across the aged categories of trade receivables has
been restated to present on a consistent basis with the current year with a corresponding restatement of the expected credit loss rate applied to
each category. This does not impact the total expected credit loss provision and does not impact any of the primary statements or other notes to the
financial statements.
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.
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 cannot be 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.
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.
139SIG Annual Report and Accounts 2022
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Financials
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 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 the current and 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 Consolidated 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 or if significant in size. 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 the end of the reporting period 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 after the period end but before the Consolidated 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 after
signing of the prior year Annual Report and Accounts. There are currently no businesses classified as non-core.
• 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.
• Costs associated with refinancing
Costs associated with the refinancing and changes to debt facility agreements during the current and prior 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.
• Cloud computing customisation and configuration costs
Costs incurred in relation to the implementation of Software as a Service (“SaaS”) arrangements which are recognised as expenses in the
consolidated income statement are included within Other items if they relate to significant strategic projects and are considered to meet the Group’s
definition of Other items.
Statement of significant accounting policies
for the year ended 31 December 2022
140 SIG Annual Report and Accounts 2022
• 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.
• Taxation
The taxation effect of Other Items 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.
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 contracts for the provision of industrial services which fall under the category of “construction contracts”.
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 2022 and £nil in 2021). 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.
141SIG Annual Report and Accounts 2022
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Supplier rebates continued
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 Consolidated 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.
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 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.
Statement of significant accounting policies
for the year ended 31 December 2022
142 SIG Annual Report and Accounts 2022
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 Life of the relationship 7 to 10 years
Non-compete contracts Life of the contract 3 years
Computer software Useful life of the software 3 to 10 years
Assets in the course of construction are carried at cost, with amortisation commencing once the assets are ready for their intended use.
Software as a service (“SaaS”) arrangements
SaaS arrangements are arrangements in which the Group does not currently control the underlying software used in the arrangement. These
arrangements are accounted for as a service contract over the contract period. The Group’s policy in relation to costs incurred to configure or
customise the software to specific requirements is as follows:
• Where costs incurred to configure or customise SaaS arrangements result in the creation of a resource which is identifiable, and where the Group
has the power to obtain the future economic benefit flowing from the underlying resource and to restrict the access of others to those benefits,
such costs are capitalised as separate software intangible assets and amortised over the useful life of the software on a straight-line basis.
• Where costs incurred to configure or customise do not result in the recognition of an intangible software asset then those costs that provide the
Group with a distinct service (in addition to the SaaS access) are recognised as expenses when the supplier provides the services. When such
costs incurred do not provide a distinct service, the costs are expensed as incurred. Costs are included within Other items in the Consolidated
income statement if they relate to significant strategic projects and are considered to meet the Group’s definition of Other items.
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:
Current estimate of useful life
Freehold buildings 50 years
Leasehold properties and improvements Period of lease (3 to 25 years)
Plant and machinery (including motor vehicles) 3 to 8 years or length of lease
Freehold land is not depreciated.
Residual values, which are based on market rates, are reassessed annually.
Assets in the course of construction are carried at cost, with depreciation charged on the same basis as all other assets once those assets are ready
for their intended use.
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.
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.
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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. Certain property leases have a term of 25 years. 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 including
any initial direct costs recognised and depreciated over the lease term. The lease payments are discounted using the lessee’s incremental borrowing
rate or the interest rate implicit in the lease. The Group remeasures lease liabilities and right-of-use assets when there is a change of lease term, lease
payments or a change in the assessment of exercising of a purchase option. The impact of these changes is included within modifications in Note 23.
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:
• 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 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 included within fixed assets 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 2022; 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 Consolidated income statement from Covid-19 related rent concessions during the year.
Statement of significant accounting policies
for the year ended 31 December 2022
144 SIG Annual Report and Accounts 2022
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.
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.
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 (“FVPL”) and unquoted investments
(“FVOCI”).
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.
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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 balance sheet 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.
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.
Statement of significant accounting policies
for the year ended 31 December 2022
146 SIG Annual Report and Accounts 2022
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 probably 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.
147SIG Annual Report and Accounts 2022
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Financials
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. The provision recognised is based on estimated expected value using current cost estimates and therefore the net impact of inflation and
discounting to present value is not considered material.
Onerous contracts
If the Group has a contract that is onerous, the present obligation under the contract is recognised and measured as a provision. An onerous contract
is a contract under which the unavoidable costs of meeting the obligations exceed the economic benefits expected to be received under it.
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 Consolidated financial
statements until they have been approved by the shareholders at the Annual General Meeting.
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. Reported operating segments are
consistent with those reported in the 2021 Annual Report and Accounts.
Statement of significant accounting policies
for the year ended 31 December 2022
148 SIG Annual Report and Accounts 2022
Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group’s accounting policies, which are described on pages 138 to 148, 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 Consolidated 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. 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 Consolidated financial statements.
Recognition of deferred tax assets
Deferred tax assets are recognised for unused tax attributes to the extent that it is probable that taxable profit will be available against which the
attributes can be utilised, after consideration of available taxable temporary differences. The Group has £74.1m (2021: £77.9m) of potential deferred
tax assets relating to cumulative tax losses and other deductible timing differences in the UK and Benelux, which are currently unrecognised as
it is not considered probable that sufficient future taxable profits will be available to allow the utilisation of the deductible temporary differences.
Although the UK trading businesses have returned to profitability in the current year, the UK tax group remains in a taxable loss position and there
is not considered to be sufficient convincing evidence that future taxable profits will be available at 31 December 2022. This required significant
management judgement to determine the likely timing and level of future taxable profits and whether sufficient, convincing evidence was available at
31 December 2022 to recognise the previously unrecognised deferred tax assets. If the Group were able to recognise all unrecognised deferred tax
assets, profit and equity would have increased by £74.1m. Further details are disclosed in Note 22.
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.
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, 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 £1.4m as disclosed in
Note 28. At 31 December 2022 the Group’s retirement benefit obligations were £23.0m (2021: £10.7m).
Impairment of goodwill
The Group tests goodwill annually for impairment, or more frequently if there are indications that an impairment may be required. Determining whether
goodwill is impaired requires an estimation of the value in use of the 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 where considered necessary (for example the turnaround risk associated with achievement of the Return
to Growth strategy in certain CGUs).
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 (1.6%-2.5%) 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 11. Impairments are allocated initially against the value of any goodwill held within a CGU, with any remaining impairment applied to intangible
assets, right-of-use assets and property, plant and equipment on a pro rata basis.
149SIG Annual Report and Accounts 2022
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Governance
Financials
The carrying amount of relevant non-current assets at 31 December 2022 is £491.7m (2021: £434.6.m) including right-of-use assets recognised in
accordance with IFRS 16. The most recent results of the impairment review process are disclosed in Note 11. An impairment charge of £9.9m was
recognised in relation to the Benelux CGU in 2021, but continued operational challenges and a delay in progress from initiatives implemented to
turn the business around has led to a further reduction in forecast future cashflows over the next three years, and as a result an impairment charge
of £15.8m has been recognised at 31 December 2022. The carrying value of non-current assets associated with all the other Group’s CGUs is
considered supportable at 31 December 2022. 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 is £134.2m. Sensitivities are disclosed in Note 11. These indicate reasonably possible scenarios
which could lead to further impairment.
Other areas of estimation uncertainty
The following areas of estimation uncertainty are not presented to comply with the requirements of paragraph 125 of IAS 1 “Presentation of Financial
Statements” as it is not expected there is a significant risk of a material adjustment to the carrying amount of assets and liabilities within the next
financial year. They are presented as additional disclosure of estimates used in the financial statements.
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. At the balance sheet date, the Directors estimate the amount of rebate 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 £349.5m from continuing operations for the year ended 31 December 2022 (2021: £261.4m). At 31 December 2022
trade payables is presented net of £48.4m (2021: £29.8m) 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 £77.5m (2021: £58.2m) 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 £2.0m (2021: £1.0m).
Provisions against receivables
At 31 December 2022 the Group has recognised trade receivables with a carrying value of £324.9m (2021: £287.7m). 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 2022. The total allowance for ECLs recorded at 31 December 2022 is £19.1m (2021: £16.1m). The Group has
experienced a higher bad debt expense in the current year due to the administration of Avonside, a major UK roofing contractor and one of the
Group’s largest customers, together with an increase in loss rates in certain operating companies as a result of applying adjustments to reflect current
and forward looking information given current economic conditions and expectations. The bad debt to sales ratio of the Group has varied by up to
0.2% over recent periods (excluding Avonside), therefore this gives an indication that the bad debt experience could vary by c£5m based on current
year sales. Further detail on trade receivables and the allowance for ECLs recognised is disclosed in Note 15.
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 £24.4m at 31 December 2022 (2021: £22.0m) in relation to this obligation
(see Note 21). 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 c10% based on past experience.
Leases – estimating the incremental borrowing rate
The Group cannot readily determine the interest rate implicit in leases, 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.
Critical accounting judgements and key sources of estimation uncertainty
150 SIG Annual Report and Accounts 2022
Notes to the consolidated financial statements
for the year ended 31 December 2022
1. Revenue and segmental information
Revenue
2022
UK
Interiors
£m
UK
Exteriors
£m
Total
UK
£m
France
Interiors
£m
France
Exteriors
£m
Total
France
£m
Germany
£m
Benelux
£m
Ireland
£m
Poland
£m
Eliminations
£m
Total
Group
£m
Type of product
Interiors 702.6 — 702.6 218.4 — 218.4 457.8 115.9 66.7 230.7 — 1,792.1
Exteriors — 445.2 445.2 — 465.6 465.6 — — 41.6 — — 952.4
Inter-segment revenue
1
5.5 2.7 8.2 0.1 9.7 9.8 0.1 — — 0.1 (18.2) —
Total underlying and
statutory revenue 708.1 447. 9 1,156.0 218.5 475.3 693.8 457.9 115.9 108.3 230.8 (18.2) 2,744.5
Nature of revenue
Goods for resale (recognised
at point in time) 70 8 .1 447.9 1,156.0 218.5 475.3 693.8 457.9 115.9 102.6 230.8 (18.2) 2,738.8
Construction contracts
(recognised over time) — — — — — — — — 5.7 — — 5.7
Total 70 8 .1 447.9 1,156.0 218.5 475.3 693.8 457.9 115.9 108.3 230.8 (18.2) 2,744.5
1. Inter-segment revenue is charged at the prevailing market rates.
2021
UK
Interiors
£m
UK
Exteriors
£m
Total
UK
£m
France
Interiors
£m
France
Exteriors
£m
Total
France
£m
Germany
£m
Benelux
£m
Ireland
£m
Poland
£m
Eliminations
£m
Total
Group
£m
Type of product
Interiors 507. 4 — 5 07.4 195.3 — 195.3 393.2 92.4 51.1 186.7 — 1,426.1
Exteriors — 422.2 422.2 — 406.0 406.0 — — 37.1 — — 865.3
Inter-segment revenue
1
3.4 0.6 4.0 0.1 11.6 11.7 — — 0.1 — (15.8) —
Total underlying and
statutory revenue 510.8 422.8 933.6 195.4 417. 6 613.0 393.2 92.4 88.3 186.7 (15.8) 2,291.4
Nature of revenue
Goods for resale (recognised
at point in time) 510.8 422.8 933.6 195.4 417.6 613.0 393.2 92.4 83.7 186.7 (15.8) 2,286.8
Construction contracts
(recognised over time) — — — — — — — — 4.6 — — 4.6
Total 510.8 422.8 933.6 195.4 417.6 613.0 393.2 92.4 88.3 186.7 (15.8) 2,291.4
1. Inter-segment revenue is charged at the prevailing market rates .
151SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
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
2022
UK
Interiors
£m
UK
Exteriors
£m
Total
UK
£m
France
Interiors
£m
France
Exteriors
£m
Total
France
£m
Germany
£m
Benelux
£m
Ireland
£m
Poland
£m
Eliminations
£m
Total
Group
£m
Revenue
Underlying and statutory
revenue 702.6 445.2 1,147.8 218.4 465.6 684.0 457.8 115.9 108.3 230.7 — 2 ,744.5
Inter-segment revenue
1
5.5 2.7 8.2 0.1 9.7 9.8 0.1 — — 0.1 (18.2) —
Total revenue 708.1 447.9 1,156.0 218.5 475.3 693.8 457.9 115.9 108.3 230.8 (18.2) 2,744.5
Segment result before
Other items 14.3 18.4 32.7 12.2 23.6 35.8 16.8 (3.0) 6.0 10.6 — 98.9
Amortisation of acquired
intangibles (1.4) (3.2) (4.6) — (0.2) (0.2) 0.1 — — — — (4.7)
Impairment charges — — — — — — — (15.8) — — — (15.8)
Acquisition costs (2.2) — (2.2) (0.2) — (0.2) (0.1) — — — — (2.5)
Cloud computing
customisation and
configuration costs — — — (2.0) — (2.0) — (0.7) — — — (2.7)
Net restructuring costs — — — — — — — (0.4) — — — (0.4)
Other specific items 1.0 — 1.0 — — — — — — — — 1.0
Segment operating
profit/(loss) 11.7 15.2 26.9 10.0 23.4 33.4 16.8 (19.9) 6.0 10.6 — 73.8
Parent Company costs (18.7)
Parent Company Other items
2
1.1
Operating profit 56.2
Net finance costs before
Other items (28.6)
Non-underlying finance costs (0.1)
Profit before tax 27.5
Income tax expense (12.0)
Profit for the year 15.5
1. Inter-segment revenue is charged at the prevailing market rates.
2. Parent Company Other items include costs associated with refinancing £0.4m, offset by credits relating to onerous contracts £1.2m and other specific items £0.3m. See Note 2 for
further details .
Notes to the consolidated financial statements
for the year ended 31 December 2022
152 SIG Annual Report and Accounts 2022
2021
UK
Interiors
£m
UK
Exteriors
£m
Total
UK
£m
France
Interiors
£m
France
Exteriors
£m
Total
France
£m
Germany
£m
Benelux
£m
Ireland
£m
Poland
£m
Eliminations
£m
Total
Group
£m
Revenue
Underlying and statutory
revenue 507. 4 422.2 929.6 195.3 406.0 601.3 393.2 92.4 88.2 186.7 — 2,291.4
Inter-segment revenue
1
3.4 0.6 4.0 0.1 11.6 11.7 — — 0.1 — (15.8) —
Total revenue 510.8 422.8 933.6 195.4 417.6 613.0 393.2 92.4 88.3 186.7 (15.8) 2,291.4
Segment result before
Other items (2.5) 25.0 22.5 11.2 17.4 28.6 3.6 (4.9) 2.8 6.3 — 58.9
Amortisation of acquired
intangibles (0.3) (4.0) (4.3) — (0.4) (0.4) — — — — — (4.7)
Impairment charges (0.3) — (0.3) — — — — (9.9) — — — (10.2)
Acquisition costs (1.5) — (1.5) — — — — — — — — (1.5)
Cloud computing
customisation and
configuration costs (0.6) (0.5) (1.1) — (0.8) (0.8) (0.8) (0.6) — — — (3.3)
Net restructuring costs 0.1 (0.6) (0.5) — — — (1.4) (0.4) — — — (2.3)
Segment operating
(loss)/profit (5.1) 19.9 14.8 11.2 16.2 27.4 1.4 (15.8) 2.8 6.3 — 36.9
Parent Company costs (17.5)
Parent Company Other items
2
(5.4)
Operating profit 14.0
Net finance costs before
Other items (22.1)
Non-underlying finance costs ( 7.8 )
Loss before tax (15.9)
Income tax expense (12.4)
Loss for the year (28.3)
1. Inter-segment revenue is charged at the prevailing market rates.
2. Parent Company Other items include costs associated with refinancing £2.4m, onerous contract costs £2.0m, restructuring costs £1.4m offset by other specific items £0.4m
credit. See Note 2 for further details.
153SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
1. Revenue and segmental information continued
2022
UK
Interiors
£m
UK
Exteriors
£m
Total
UK
£m
France
Interiors
£m
France
Exteriors
£m
Total
France
£m
Germany
£m
Benelux
£m
Ireland
£m
Poland
£m
Total
Group
£m
Balance sheet
Assets
Segment assets 287.7 271.9 559.6 81.4 255.2 336.6 150.8 46.7 57.8 82.7 1,234.2
Unallocated assets:
Property, plant and equipment 0.9
Derivative financial instruments 1.8
Cash and cash equivalents 91.1
Other assets 5.1
Consolidated total assets 1,333.1
Liabilities
Segment liabilities 244.2 128.2 372.4 74.4 160.2 234.6 84.3 25.2 31.2 41.4 789.1
Unallocated liabilities:
Interest-bearing loans and borrowings 264.0
Derivative financial instruments 0.1
Other liabilities 12.1
Consolidated total liabilities 1,065.3
2021
UK
Interiors
£m
UK
Exteriors
£m
Total
UK
£m
France
Interiors
£m
France
Exteriors
£m
Total
France
£m
Germany
£m
Benelux
£m
Ireland
£m
Poland
£m
Total
Group
£m
Balance sheet
Assets
Segment assets 222.3 262.6 484.9 69.5 208.0 27 7.5 136.1 53.9 54.2 66.2 1,072.8
Unallocated assets:
Property, plant and equipment 0.3
Derivative financial instruments 0.2
Cash and cash equivalents 126.9
Other assets 1.5
Consolidated total assets 1,201.7
Liabilities
Segment liabilities 204.6 124.1 328.7 54.6 117.8 172.4 74.7 21.7 30.9 33.5 661.9
Unallocated liabilities:
Interest-bearing loans and borrowings 249.6
Derivative financial instruments 0.5
Other liabilities 25.0
Consolidated total liabilities 9 37.0
Notes to the consolidated financial statements
for the year ended 31 December 2022
154 SIG Annual Report and Accounts 2022
2022
UK
Interiors
£m
UK
Exteriors
£m
Total
UK
£m
France
Interiors
£m
France
Exteriors
£m
Total
France
£m
Germany
£m
Benelux
£m
Ireland
£m
Poland
£m
Parent
Company
£m
Total
Group
£m
Other segment information
Capital expenditure on:
Property, plant and equipment 2.7 3.4 6.1 1.0 2.0 3.0 1.4 2.1 1.0 0.4 0.3 14.3
Computer software — — — — 0.2 0.2 — — — — — 0.2
Goodwill and intangible assets
acquired 25.2 — 25.2 — — — 3.7 — — — — 28.9
Non-cash expenditure:
Depreciation of fixed assets 3.4 3.4 6.8 0.7 1.4 2 .1 1.5 1.1 0.6 0.4 0.1 12.6
Depreciation of right-of-use
assets 17.0 8.7 25.7 5.4 8.9 14.3 13.6 3.0 1.8 2.2 — 60.6
Impairment of property, plant
and equipment and computer
software — — — — — — — 2.5 — — — 2.5
Impairment of right-of-use assets — — — — — — — 9.7 — — — 9.7
Amortisation of acquired
intangibles and computer
software 3.3 0.5 3.8 — 0.1 0.1 0.1 — 0.3 0.1 3.5 7.9
Impairment of goodwill and
intangibles (excluding computer
software) — — — — — — — 3.6 — — — 3.6
2021
UK
Interiors
£m
UK
Exteriors
£m
Total
UK
£m
France
Interiors
£m
France
Exteriors
£m
Total
France
£m
Germany
£m
Benelux
£m
Ireland
£m
Poland
£m
Parent
Company
£m
Total
Group
£m
Other segment information
Capital expenditure on:
Property, plant and equipment 5.3 3.1 8.4 1.4 2.6 4.0 0.7 2.9 0.9 0.2 0.1 17. 2
Computer software — 0.4 0.4 0.1 0.5 0.6 0.1 — 0.2 0.1 — 1.4
Goodwill and intangible assets
acquired 9.8 — 9.8 — — — — — — — — 9.8
Non-cash expenditure:
Depreciation of fixed assets 3.1 3.3 6.4 0.6 1.6 2.2 1.1 0.7 0.6 0.3 0.1 11.4
Depreciation of right-of-use
assets 13.5 8.6 22.1 5.9 9.1 15.0 12.8 2.1 1.6 3.2 0.1 56.9
Impairment of property, plant
and equipment and computer
software 0.3 — 0.3 — — — — — — — — 0.3
Impairment of right-of-use assets — — — — — — — 0.1 — — 0.4 0.5
Amortisation of acquired
intangibles and computer
software 2.5 4.5 7.0 — 0.4 0.4 0.1 — 0.2 0.1 0.3 8.1
Impairment of goodwill and
intangibles (excluding computer
software) — — — — — — — 9.9 — — — 9.9
155SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Notes to the consolidated financial statements
for the year ended 31 December 2022
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 financial assets) by geographical location are as follows:
2022
£m
2021
£m
United Kingdom 258.4 228.7
Ireland 16.5 13.1
France 134.7 108.3
Germany 57.6 49.8
Poland 14.5 12.0
Benelux 10.0 22.7
Total 491.7 434.6
2. Other operating expenses
a) Analysis of other operating expenses
2022 2021
Before Other
items
£m
Other items
£m
Total
£m
Before Other
items
£m
Other items
£m
Total
£m
Other operating expenses:
Distribution costs 316.7 0.4 317.1 282.2 3.7 285.9
Selling and marketing costs 180.2 — 180.2 158.0 1.0 159.0
Management, administrative and central costs 117.4 21.6 139.0 115.7 22.7 138.4
Total 614.3 22.0 636.3 555.9 27.4 583.3
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 significant accounting policies):
2022 2021
Other items
£m
Tax impact
£m
Tax impact
%
Other items
£m
Tax impact
£m
Tax impact
%
Amortisation of acquired intangibles (Note 12) (4.7) 0.9 19.1% (4.7) 0.2 4.3%
Impairment charges
1
(15.8) — — (10.2) — —
Costs related to acquisitions (Note 13) (2.5) 0.3 12.0% (1.5) — —
Cloud computing configuration and customisation costs
2
(2.7) 0.7 25.9% (3.3) 0.5 15.2%
Onerous contract costs
3
1.2 — — (2.0) — —
Costs associated with refinancing
4
(0.4) — — (2.4) 0.5 20.8%
Net restructuring costs
5
(0.4) 0.1 25.0% (3.7) 0.5 13.5%
Other specific items
6
1.3 0.4 (30.8)% 0.4 — —
Impact on operating profit/(loss) (24.0) 2.4 10.0% (27.4) 1.7 6.2%
Non-underlying finance costs
7
(0.1) — — (7. 8) 1.5 19.2%
Impact on profit/(loss) before tax (24.1) 2.4 10.0% (35.2) 3.2 9.1%
1. Impairment charges in the current year relate to the Benelux CGU and comprise £3.6m relating to goodwill (Note 11), £2.5m tangible fixed assets (Note 10) and £9.7m right-of-use
assets (Note 23). Impairment charges in the prior year comprised £9.9m relating to goodwill (see Note 11) and £0.3m relating to additional impairment of an investment property
(Note 10).
2. Cloud computing configuration and customisation costs relate to costs incurred on strategic projects involving SaaS arrangements which are expensed as incurred rather than
being capitalised as intangible assets.
3. Onerous contract costs relate to provisions recognised for licence fee commitments where no future economic benefit was expected to be obtained, principally in relation to the
SAP S/4HANA implementation (see Note 21). There is a credit in the current year following recent renegotiation of the total commitment for the remaining year.
4. Costs associated with refinancing in the current year relate to the increase in the RCF (see Note 17) and some ongoing costs relating to the refinancing in the prior year.
Costs associated with refinancing in the prior year included legal and professional fees of £4.9m offset by a £2.5m gain in relation to the termination of the cash flow hedging
arrangements as a result of the refinancing.
5. Net restructuring costs in the year relate to consultancy and redundancy costs in Benelux. Costs in the prior year included property closure costs of £1.2m, redundancy and related
staff costs of £2.4m and restructuring consultancy costs of £0.1m. These costs were incurred principally in connection with the restructuring of corporate functions as part of the
implementation of the Return to Growth strategy, and restructuring in Germany and Benelux.
6. Other specific items comprises the settlement and/or release of historic provisions, including amounts relating to businesses divested in previous years, impacts of the pensions
member options exercise undertaken during the year and £2.0m provision for impairment of lease receivables. The £0.4m credit in 2021 related principally to the transfer from cash
flow hedging reserve to profit and loss in relation to the cash flow hedging arrangements on the private placement notes following partial repayment in 2020.
7. Non-underlying finance costs in the current year relate to the unwinding of the discount on the onerous contract provision. Costs in the prior year comprised a £12.9m make-whole
payment on settlement of the private placement notes, £2.8m write-off of arrangement fees in relation to the previous debt arrangements, offset by £8.0m release of the loss on
modification recognised on amendment of the private placement notes in 2020, together with £0.1m unwinding of the discount on the onerous contract provision.
The total impact of the above amounts on the Consolidated cash flow statement is a cash outflow of £15.8m (2021: £27.8m), including £nil (2021:
£12.9m) within finance costs paid.
156 SIG Annual Report and Accounts 2022
3. Operating profit/(loss)
2022
£m
2021
£m
Operating profit/(loss) is stated after charging/(crediting):
Cost of inventories recognised as an expense 2,022.4 1,680.0
Net decrease in provision for inventories 3.0 0.5
Depreciation of property, plant and equipment 12.6 11.4
Depreciation of right-of-use assets 60.6 56.9
Amortisation of acquired intangibles 4.7 4.7
Amortisation of computer software 3.2 3.4
Loss on disposal of property, plant and equipment (0.4) (0.9)
Impairment charges (Note 2) 15.8 10.7
Expense relating to short term leases (Note 23) 0.3 0.8
Net increase in provision for receivables (Note 15) 16.5 4.8
Foreign exchange rate (gains)/losses (1.0) 0.3
Auditor’s remuneration:
During the year the Group incurred the following costs for services provided by the Company’s Auditor:
2022
£m
2021
£m
Audit of the Company and Group consolidated financial statements 0.9 0.9
Audit of the Company’s subsidiaries 1.8 1.7
Total audit fees
1
2.7 2.6
Audit-related assurance services
2
0.2 0.4
Total non-audit fees 0.2 0.4
Total fees 2.9 3.0
1. The current year costs include £0.1m costs in relation to the 2021 audit (2021: £0.3m in relation to 2020).
2. The audit-related assurance services comprise £0.2m relating to the interim review. The services in the prior year comprised £0.2m relating to the interim review and £0.2m relating
to assurance services in connection with the refinancing during the year. It is usual practice for a company’s Auditor to perform this work.
The Audit and Risk Committee report on pages 94 and 100 provides an explanation of how Auditor objectivity and independence is safeguarded
when non-audit services are provided by the Auditor.
4. Staff costs
Particulars of employees (including Directors) are shown below:
2022
£m
2021
£m
Employee costs during the year amounted to:
Wages and salaries 268.5 247. 6
Social security costs 49.7 44.8
IFRS 2 share option charge 4.4 2.6
Pension costs (Note 28) 7.7 6.7
Redundancy costs 1.4 1.5
Total staff costs 331.7 303.2
Redundancy and related staff costs of £0.1m (2021: £2.4m) have been included within Other items (Note 2).
Of the pension costs noted above, a charge of £0.5m (2021: £0.4m) relates to defined benefit schemes and a charge of £7.2m (2021: £6.3m) relates to
defined contribution schemes. See Note 28 for more details.
157SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Notes to the consolidated financial statements
for the year ended 31 December 2022
4. Staff costs continued
The average monthly number of persons employed by the Group during the year was as follows:
2022
Number
2021
Number
Production 236 229
Distribution 2,605 2,408
Sales 2,971 2,828
Administration 1,331 1,155
Total 7,143 6,620
Directors’ emoluments
Details of the individual Directors’ emoluments are given in the Directors’ remuneration report on page 121.
The employee costs shown above include the following emoluments in respect of Directors of the Company:
2022
£m
2021
£m
Directors’ remuneration (excluding IFRS 2 share option charge but including social security costs) 3.4 3.1
Total 3.4 3.1
5. Finance income and finance costs
2022 2021
Underlying
£m
Other items
£m
Total
£m
Underlying
£m
Other items
£m
Total
£m
Finance income
Interest on bank deposits 1.3 — 1.3 0.7 — 0.7
Total finance income 1.3 — 1.3 0.7 — 0.7
Finance costs
On bank loans, overdrafts and other associated items
1
2.6 — 2.6 4.6 — 4.6
On secured notes
2
14.0 — 14.0 1.7 — 1.7
On private placement notes
3
— — — 4.7 — 4.7
On obligations under lease contracts 13.3 — 13.3 11.6 — 11.6
Total interest expense 29.9 — 29.9 22.6 — 22.6
Unwinding of provision discounting
4
— 0.1 0.1 — 0.1 0.1
Net finance charge on defined benefit pension schemes — — — 0.2 — 0.2
Make-whole payment on settlement of private placement notes — — — — 12.9 12.9
Write off of arrangement fees on extinguished debt
5
— — — — 2.8 2.8
Loss on modification of private placement notes
6
— — — — (8.0) (8.0)
Total finance costs 29.9 0.1 30.0 22.8 7. 8 30.6
Net finance costs 28.6 0.1 28.7 22.1 7.8 29.9
1. Other associated items includes the amortisation of arrangement fees of £0.1m (2021: £0.9m).
2. Included within finance costs on the secured notes is the amortisation of arrangement fees of £0.5m (2021: £0.1m).
3. Included within finance costs on private placement notes in the prior year was the amortisation of arrangement fees of £0.6m and the amortisation of the loss on modification of £2.1m.
4. Relates to the onerous contract provision included within Other items. See Note 2 for further details.
5. As part of the restructuring of the debt agreements in November 2021 the previous debt (private placement notes and term loan) were extinguished and arrangement fees which
were being amortised over the term of the previous facilities were written off.
6. The amendments to the private placement loan notes in 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 in 2020, 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 was included within underlying finance costs on private placement notes in 2020 and 2021, resulting in
a reduction in finance costs compared to the amount paid. On 18 November 2021 the private placement notes were fully repaid and the remaining balance of the loss on
modification was released.
158 SIG Annual Report and Accounts 2022
6. Income tax
The income tax expense comprises:
2022
£m
2021
£m
Current tax
UK & Ireland corporation tax: – charge for the year 0.8 0.3
– adjustments in respect of previous years 0.1 —
0.9 0.3
Mainland Europe corporation tax: – charge for the year 13.4 10.6
– adjustments in respect of previous years 0.3 2.0
13.7 12.6
Total current tax 14.6 12.9
Deferred tax
Current year credit (2.2) (1.1)
Adjustments in respect of previous years (0.3) 0.6
Deferred tax charge in respect of pension schemes — (0.1)
Effect of change in rate (0.1) 0.1
Total deferred tax (2.6) (0.5)
Total income tax expense 12.0 12.4
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:
2022
£m %
2021
£m %
Profit/(loss) before tax 27.5 (15.9)
Expected tax charge/(credit) 8.5 30.9% (1.5) 9.4%
Factors affecting the income tax expense for the year:
Expenses not deductible for tax purposes
1
2.1 7.6% 4.5 (28.3)%
Non-taxable income (1.3) (4.7)% (0.1) 0.6%
Impairment and disposal charges not deductible for tax purposes
2
3.0 10.9% 1.4 (8.8)%
Deductible temporary differences not recognised for deferred tax purposes 2.2 8.0% 5.4 (34.0)%
Utilisation of deferred tax assets not previously recognised (2.5) (9.1)% — —
Other adjustments in respect of previous years 0.1 0.4% 2.6 (16.4)%
Effect of change in rate on deferred tax (0.1) (0.4)% 0.1 (0.6)%
Total income tax expense 12.0 43.6% 12.4 (78.0)%
1. The majority of the Group’s expenses that are not deductible for tax purposes are in relation to acquisition related costs, non-qualifying depreciation and other disallowable
expenditure in the current year. The expenses not deductible for tax purposes in the prior year related to internal restructuring and impairments of property.
2. During the year the Group incurred impairment charges of £15.8m (2021: £9.9m) in relation to goodwill and other non-current assets (as set out in Note 11) which are not
deductible for tax purposes.
The effective tax rate for the Group on the total profit before tax of £27.5m (2021: £15.9m loss) is 43.6% (2021: negative 78%). As the Group operates
in several different countries tax losses cannot be surrendered or utilised cross border. Tax losses are not currently recognised in respect of the UK
business (Note 22) which has the effect of increasing the overall effective tax rate.
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;
• 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 22).
159SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Notes to the consolidated financial statements
for the year ended 31 December 2022
6. Income tax continued
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:
2022
£m
2021
£m
Deferred tax movement associated with re-measurement of defined benefit pension liabilities
1
0.5 (0.1)
Exchange rate movements 0.1 —
Total 0.6 ( 0.1)
1. This item will not subsequently be reclassified to the Consolidated income statement.
7. Dividends
No interim dividend was paid for the year ended 31 December 2022 and no final dividend is proposed. No interim or final dividend was proposed
or paid for the year ended 31 December 2021. No dividends have been paid between 31 December 2022 and the date of signing the Consolidated
financial statements.
At 31 December 2022 the Company has distributable reserves of £247.3m (2021: £190.2m) as set out in Note 14 of the Company financial
statements. In the prior year, on 24 June 2021, the Group completed the cancellation of its share premium account, resulting in the transfer of
£447.7m from share premium to retained profits/(losses) and the creation of distributable reserves. See Note 24 for further details.
8. Earnings/(loss) per share
The calculations of earnings/(loss) per share are based on the following profits/(losses) and numbers of shares:
Basic and diluted
2022
£m
2021
£m
Profit/(loss) attributable to ordinary equity holders of the parent for basic and diluted earnings per share 15.5 (28.3)
Add back:
Other items (Note 2) 21.7 32.0
Profit attributable to ordinary equity holders of the parent for basic and diluted earnings per share
before other items 37. 2 3.7
Weighted average number of shares
2022
Number
2021
Number
For basic and diluted earnings/(loss) per share 1,149,776,931 1,177, 972,6 9 4
Effect of dilution from share options 33,638,307 —
Adjusted for the effect of dilution 1,183,415, 2 3 8 1,17 7,972,6 9 4
Share options were considered antidilutive in the prior year, as their conversion into ordinary shares would decrease the loss per share. The
calculation of diluted earnings/(loss) per share does not assume conversion, exercise, or other issue of potential ordinary shares that would have an
antidilutive effect on earnings/(loss) per share.
The weighted average number of shares excludes those held by the EBT which are not vested and beneficially owned by employees.
2022 2021
Earnings/(loss) per share
Basic earnings/(loss) per share 1.3p (2.4)p
Diluted earnings/(loss) per share 1.3p (2.4)p
Earnings per share before Other items
1
Basic earnings per share before Other items 3.2p 0.3p
1. Earnings per share before Other items (also referred to as underlying earnings per share) has been disclosed in order to present the underlying performance of the Group.
160 SIG Annual Report and Accounts 2022
9. Share-based payments
The Group had four share-based payment schemes in existence during the year ended 31 December 2022 (2021: four). The Group recognised a total
charge of £4.4m (2021: £2.6m) 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 40p (2021: 42p). Details of each of the schemes are provided below.
a) Management Incentive Plan (“MIP”)
On 16 May 2018 the MIP was approved. Under this Plan, senior leadership and wider leadership team members could be awarded an annual grant
of restricted and deferred share options up to a certain percentage of base salary. Restricted share options had no performance conditions other
than the employee remaining in employment for the three year vesting period. The deferred share options were 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 vested after a further two years provided the employee remained in employment. The vesting period for
both options was considered to be the three years from the granting of the restricted share options as this is the date on which both parties had a
shared understanding of the terms and conditions of the arrangement. There were no new awards of restricted and deferred shares in 2022 or 2021.
MIP options
2022
Options
2021
Options
At 1 January 343,045 924,506
Exercised during the year (306,676) (346,684)
Lapsed during the year (36,369) (234,777)
At 31 December — 343,045
There are no remaining share options outstanding at the end of the year. 306,676 options (2021: 346,684) were exercised during the year, of which
8,756 (2021: 328,096) were settled in cash. At 31 December 2021, 8,838 were exercisable, the options outstanding had no exercise price, therefore
a weighted average exercise price of nil, and a weighted average remaining contractual life of 0.3 years.
b) 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
2022
Options
2021
Options
At 1 January 24,674,922 16,548,665
Granted during the year 10,981,472 11,168,431
Lapsed (1,285,700) (3,042,174)
At 31 December 34,370,694 24,674,922
Of the above share options outstanding at the end of the year, nil (2021: nil) were exercisable at 31 December 2022. All options granted during the
current and prior year have no exercise price. The options outstanding at 31 December 2022 therefore have a weighted average exercise price of
nil (2021: nil) and the options outstanding have a weighted average remaining contractual life of 1.4 years (2021: 2.1 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:
20 September
2022
14 March
2022
Share price (on date of official grant) 35p 39p
Exercise price 0.0p 0.0p
Expected volatility 52.2% 52.6%
Actual life 3 years 3 years
Risk free rate 3.2% 1.35%
Dividend 3.2% 3.2%
Expected percentage options to be exercised at date of grant 100% 92%
Revised expectation of percentage of options to be exercised as at 31 December 2022 46% 82%
The weighted average fair value of RSP awards granted during 2022 was 40p (2021: 41p). 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. The awards relating to the previous Chief Executive Officer will vest on a pro-
rata basis to his leave date of 8 March 2023.
161SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Notes to the consolidated financial statements
for the year ended 31 December 2022
9. Share-based payments continued
c) Directors’ deferred shares
1,292,447 awards were also issued during the year in relation to the Directors’ 2021 annual bonus plan which was settled two-thirds in cash and
one-third in deferred shares up to 100% of base salary and the excess deferred in shares. The shares are deferred for three years and are subject to
continued employment. The fair value of these awards was 48p per share. Assumptions used in the Black-Scholes model in relation to these awards
include share price at date of award 47p, risk free rate 0.16%, dividend yield 3.2% and expected volatility 53.7%.
1,713,755 deferred shares have also been accrued in relation to the Directors’ 2022 annual bonus plan, which will be settled two-thirds in cash and
one-third in deferred shares up to 100% of base salary and any excess deferred in shares. The shares are deferred for three years and are subject to
continued employment. The fair value of these awards was 40p per share. Assumptions used in the Black-Scholes model in relation to these awards
are the same as the March 2022 RSP awards on page 123.
Of the above awards outstanding at the end of the year, nil are exercisable at 31 December 2022. The awards have a weighted average exercise price
of nil and the options outstanding have a weighted average remaining contractual life of 2.7 years (2021: 3.1 years).
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. 377,464 matching shares were granted in the year
(2021: 232,081). Given the nature of the scheme, the fair value of the matching shares equates to the cost of the Company acquiring these shares.
10. Property, plant and equipment
The movements in the year and the preceding year were as follows:
Freehold land
and buildings
£m
Leasehold
properties
£m
Plant and
machinery
£m
Total
£m
Cost
At 1 January 2021 39.8 65.7 164.6 270.1
Exchange differences (2.2) (1.3) (4.4) ( 7.9 )
Additions 0.5 6.6 10.1 17. 2
Added on acquisition — — 1.5 1.5
Reclassifications 3.1 (1.6) 2.8 4.3
Disposals (0.5) (5.7) (32.6) (38.8)
At 31 December 2021 40.7 63.7 142.0 246.4
Exchange differences 1.9 1.1 3.9 6.9
Additions 0.2 3.4 10.7 14.3
Added on acquisition — 0.1 0.9 1.0
Reclassifications — (0.1) 0.5 0.4
Disposals — (2.9) (12.5) (15.4)
At 31 December 2022 42.8 65.3 145.5 253.6
Accumulated depreciation and impairment
At 1 January 2021 21.0 46.6 139.3 206.9
Charge for the year 0.7 3.0 7.7 11.4
Impairment charges — 0.3 — 0.3
Exchange differences (1.3) (1.0) (4.3) (6.6)
Reclassifications 0.2 1.2 2.9 4.3
Disposals (0.1) (4.9) (31.8) (36.8)
At 31 December 2021 20.5 45.2 113.8 179.5
Charge for the year 1.2 2.9 8.5 12.6
Impairment charges — — 2.5 2.5
Exchange differences 1.1 0.8 2.9 4.8
Reclassifications — — 0.4 0.4
Disposals — (2.8) (12.2) (15.0)
At 31 December 2022 22.8 4 6.1 115.9 184.8
Net book value
At 31 December 2022 20.0 19.2 29.6 68.8
At 31 December 2021 20.2 18.5 28.2 66.9
162 SIG Annual Report and Accounts 2022
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 (2021:
£nil) has been recognised in rental income and £nil (2021: £0.3m) incurred in Other items during the year. The £0.3m charge in the prior year related to
an impairment of the asset following an increase in future rent. 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 deprecation of £0.3m and impairment of £2.8m on transfer to investment property at the end
of 2018. Subsequent impairments have been recognised and the fair value of the investment property at 31 December 2022 is estimated to be £0.5m
(2021: £0.5m) based on future expected rental returns. No independent third party valuation has been carried out.
Included within additions during the year are assets in the course of construction of £1.3m (2021: £2.3m).
Climate-related matters: The Group monitors the latest legislation in relation to climate-related matters. At the current time no legislation has been
passed that will have a significant impact on the useful economic life of the Group’s tangible fixed assets and the Group has not identified any
principal risks relating to climate change that are considered to have a significant impact on tangible fixed assets.
The impairment charge in the current year is attributable to the impairment in relation to the Benelux CGU (see Note 11). The impairment charge in the
prior year was related to the impairment of the investment property referred to above.
11. Goodwill
£m
Cost
At 1 January 2021 435.6
Acquisitions (Note 13) 4.8
Exchange differences (12.0)
At 31 December 2021 428.4
Acquisitions (Note 13) 15.2
Adjustment in relation to previous acquisition (0.1)
Exchange differences 10.4
At 31 December 2022 453.9
Accumulated impairment losses
At 1 January 2021 306.8
Impairment charges 9.9
Exchange differences (8.4)
At 31 December 2021 308.3
Impairment charges 3.6
Exchange differences 7.8
At 31 December 2022 319.7
Net book value
At 31 December 2022 134.2
At 31 December 2021 120.1
Goodwill acquired in a business combination is allocated at the date of acquisition to the CGUs that are expected to benefit from that business
combination. The Group currently has 10 CGUs (2021: 11). The addition of goodwill in the year relates to the acquisition of Miers Construction
Products in the UK (£13.2m), which is considered as a separate CGU for the current year, and Thermodämm GmbH in Germany (£2.0m), which is part
of the Germany CGU (see Note 13). The Penlaw Group and F30 Building Products were considered as separate CGUs in the prior year but have been
integrated within the UK Interiors business during the current year so are now included within the UK Interiors CGU. Ireland is a CGU of the Group but
does not have any associated goodwill .
163SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Notes to the consolidated financial statements
for the year ended 31 December 2022
11. Goodwill continued
Summary analysis
The carrying value of goodwill in respect of all CGUs is set below. These are fully supported by value in use calculations as explained below.
2022
£m
2021
£m
UK Interiors
1
4.7 —
UK Exteriors 57.4 57.4
Miers Construction Products 13.2 —
Penlaw Group
1
— 2.7
F30 Building Products
1
— 2.1
Building Solutions 11.0 11.0
France Exteriors 36.6 34.8
France Interiors 5.5 5.2
Germany 4.6 2.4
Poland 1.2 1.2
Benelux — 3.3
Total goodwill 134.2 120.1
1. The Penlaw Group and F30 Building Products are included within the UK Interiors CGU in the current year.
Impairment review process
The Group tests goodwill and the associated intangible assets and property, plant and equipment of CGUs annually for impairment, or more
frequently if there are indications that an impairment may be required.
The recoverable amounts of 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 recent trading performance. 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 IFRS 16, 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 for certain CGUs 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 delayed achievement of turnaround
and growth). In respect of the other assumptions, external data and management’s best estimates are applied as described below.
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 (1.6%-
2.5%) applied thereafter and into perpetuity.
The key assumptions used for each CGU are shown in the table on page 165 in the sensitivity analysis section.
Climate-related matters: The Group monitors climate-related risks and opportunities, as described in the principal risks and uncertainties and
Environmental, Social and Governance (“ESG”) sections of the strategic report and has considered the potential impact of climate change on the
impairment review. At the current time, no legislation has been passed that will impact the key assumptions used in the value in use calculations. The
impact on revenue in terms of opportunities from continuing to expand the Group’s product offering in energy-saving products and initiatives such
as developing partnerships with suppliers to encourage uptake of low carbon products and working with large customers such as housebuilders
to support them in their sustainability ambitions is factored into sales forecasts in the short and medium term if applicable and the impact is known
as part of bottom up forecasting procedures, and the impact of transitioning the Group’s fleet to lower carbon fuel alternatives as and when leases
expire is also included in the forecasts, but there are no overriding changes to key assumptions built into the forecasts at the current time. There
is not considered to be a significant risk of climate change causing a significant downturn in cashflows across the Group and therefore no specific
sensitivities relating to climate change are considered necessary over and above the sensitivities already performed below.
2022 impairment review results
The results of the impairment review carried out at 31 December 2022 indicated that the carrying value of goodwill and other assets associated with
the Benelux CGU was not supportable. An impairment charge of £9.9m was recognised in relation to this CGU at 31 December 2021, but continued
operational challenges and delayed progress from initiatives implemented to turn the business around has led to a further reduction in forecast future
cashflows over the next three years for this CGU. As a result, an impairment charge of £15.8m has been recognised at 31 December 2022, which has
been allocated against goodwill (£3.6m), tangible fixed assets (£2.5m) and right-of-use assets (£9.7m). The Benelux CGU is a reportable segment as
disclosed in Note 1, and the charge has been included within Other items in the consolidated income statement. The recoverable amount of the CGU
is £26.3m, based on the value in use calculation. The carrying value of all other CGUs remains supportable.
164 SIG Annual Report and Accounts 2022
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
Benelux 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. Ireland does not
have any goodwill at 31 December 2022 and is therefore not included in the analysis below.
Average revenue growth (%) Pre-tax discount rate (%) Gross margin (%)
Long-term operating
profit growth rate
(average % per annum)
2022 Headroom
1
Assumption
used in value
in use
calculation
2
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
Change
required for
carrying
value to
equal
recoverable
amount
UK Interiors £39.6m 5.5% (3.3)% 14.3% 3.7% 24.7% (0.6)% 2.0% (5.4)%
Miers Construction Products £4.3m 4.1% (3.0)% 14.1% 1.2% 26.8% (0.7)% 2.0% (1.2)%
UK Exteriors £36.3m 6.7% (4.7)% 13.6% 3.3% 28.5% (1.1)% 2.0% (3.8)%
Building Solutions £52.1m 5.1% (29.0)% 13.3% 24.6% 25.0% (6.1)% 2.0% (36.0)%
France Interiors £107.3m 8.3% (19.0)% 13.3% 76.8% 28.9% (4.7)% 1.6% n/m
3
France Exteriors £109.0m 7. 2% (10.9)% 13.4% 12.6% 25.3% (2.2)% 1.6% (20.3)%
Germany £166.7m 4.8% (15.9)% 12.3% 23.0% 28.0% (3.5)% 2.0% (68.6)%
Poland £73.8m 4.8% (23.7)% 14.6% 29.2% 20.2% (3.6)% 2.5% n/m
3
1. Compared to carrying value of goodwill, intangible assets, property, plant and equipment and right-of-use assets.
2. Average growth over the three years.
3. Not meaningful as over 100% reduction required.
The changes required represent the absolute change required to the assumption % used in the value in use calculation.
Of the above sensitivities for 2022, management considers the % changes in revenue growth and gross margin to be reasonably possible scenarios
for the UK Interiors, Miers Construction Products and UK Exteriors CGUs, given current uncertainties regarding demand and inflation. 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 IAS 36 has been included in order to provide a full picture of the level of headroom and sensitivity to changes in assumptions
for each CGU. For the Benelux CGU, recoverable amount is based on average revenue growth over the three years of 7.5%, gross margin of 22.7%,
discount rate of 10.4% and long-term growth rate of 1.9%. As the CGU has been impaired to recoverable value, any change in assumption would
cause further impairment. A 2% reduction in revenue would lead to further impairment of £4.0m.
Average revenue growth (%)
Pre-tax discount rate (%)
(restated)
4
Gross margin (%)
Long-term operating
profit growth rate
(average % per annum)
2021 Headroom
1
Assumption
used in value
in use
calculation
2
Change
required for
carrying
value to
equal
recoverable
amount
Assumption
used in value
in use
calculation
4
Change
required for
carrying
value to
equal
recoverable
amount
4
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
Penlaw £22.6m 5.0% (16.3)% 11.7% 10.9% 21.1% (3.4)% 2.0% (27.7 )%
F30 £11.5m 5.9% (39.6)% 11.7% 34.8% 29.0% (11.4)% 2.0% n/m
3
UK Exteriors £82.3m 5.1% (8.9)% 11.7% 6.0% 29.6% (2.1)% 2.0% (6.6)%
Building Solutions £42.0m 1.7% (24.7)% 11.9% 16.7% 26.7% (5.4)% 2.0% (20.8)%
France Interiors £100.9m 3.8% (20.0)% 11.4% 46.1% 29.3% (5.0)% 1.2% n/m
3
France Exteriors £88.3m 3.6% (10.1)% 11.4% 9.1% 25.3% (2.1)% 1.2% (11.2)%
Germany £21.5m 6.8% (2.1)% 11.2% 2.9% 27.9% (0.5)% 1.9% (3.0)%
Poland £61.2m 2.2% (21.6)% 11.8% 21.9% 21.2% (3.3)% 2.5% (51.6)%
1. Compared to carrying value of goodwill, intangible assets, property, plant and equipment and right-of-use assets.
2. Average growth over the three years.
3. Not meaningful as over 100% reduction required.
4. Amounts have been restated from the prior year to reflect pre-tax discount rates, as disclosed in the Statement of significant accounting policies.
The changes required represent the absolute change required to the assumption % used in the value in use calculation.
165SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Notes to the consolidated financial statements
for the year ended 31 December 2022
11. Goodwill continued
Of the above sensitivities for 2021, management considered the % changes in revenue growth and gross margin to be reasonably possible scenarios
for Germany CGU, although this was not expected based on current trading performance and outlook. The other % changes in assumptions shown
above were not considered to be reasonably possible scenarios, but this additional voluntary information over and above that required by IAS 36 was
included in order to provide a full picture of the level of headroom and sensitivity to changes in assumptions for each CGU. For the Benelux CGU,
recoverable amount was based on average revenue growth over the three years of 7.8%, consistent gross margin with the current year, discount rate
of 9.5% and long term growth rate of 1.9%. A 2% reduction in revenue would have led to further impairment of £4.0m.
The forecasts used in the 2022 impairment review take into account management’s best estimate of future cash flows, reflecting the trading levels
experienced during the year and the positive impact of the strategic actions undertaken to improve performance under the Return to Growth Strategy
but also reflecting current economic conditions and best estimates of inflation and demand.
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 2022.
12. Intangible assets
The intangible assets presented below relate to acquired intangibles that arise as a result of applying IFRS 3 “Business Combinations” (which requires the
separate recognition of acquired intangibles from goodwill) and computer software which is recognised separately from associated hardware.
Customer
relationships
£m
Non-compete
clauses
£m
Computer
software
£m
Total
£m
Cost
At 1 January 2021 206.5 11.7 52.4 270.6
Additions 5.0 — 1.4 6.4
Disposals — — (2.0) (2.0)
Exchange differences — — (1.0) (1.0)
At 31 December 2021 211.5 11.7 50.8 274.0
Additions (Note 13) 13.7 — 0.2 13.9
Disposals — — (7.8) (7.8)
Exchange differences — — 0.6 0.6
At 31 December 2022 225.2 11.7 43.8 280.7
Amortisation
At 1 January 2021 198.0 11.7 42.4 252.1
Charge for the year 4.7 — 3.4 8.1
Disposals — — (2.0) (2.0)
Exchange differences — — (0.9) (0.9)
At 31 December 2021 202.7 11.7 42.9 25 7.3
Charge for the year 4.7 — 3.2 7.9
Disposals — — (7.7) (7.7 )
Exchange differences (0.1) — 0.5 0.4
At 31 December 2022 207.3 11.7 38.9 257.9
Net book value
At 31 December 2022 17.9 — 4.9 22.8
At 31 December 2021 8.8 — 7.9 16.7
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.
Included within computer software additions are assets in the course of construction of £0.2m (2021: £0.4m).
166 SIG Annual Report and Accounts 2022
13. Acquisitions
The Group acquired the following businesses during the year:
% ordinary share
capital acquired Acquisition date Country of incorporation Principal activity
Thermodämm GmbH 100% 14 July 2022 Germany
Distributor of interiors and
insulation products
Miers Construction Products Limited 100% 22 July 2022 United Kingdom
Distributor of specialist
construction materials
The Group acquired the Thermodämm business to enlarge its market share in the German screed flooring business and the acquisition is allocated
to the Germany segment. The Group acquired the Miers business to enlarge the UK Interiors business in terms of product range and geographic
location, and the acquisition is allocated to the UK Interiors segment.
The provisional fair values of the identifiable assets and liabilities of the acquisitions at the date of acquisition are as follows.
2022 2021
Miers (UK)
£m
Thermodämm
£m
Total
£m
Penlaw Group
£m
F30 Building
Products
£m
Total
£m
Assets
Intangible assets (customer relationships) 12.0 1.7 13.7 3.2 1.8 5.0
Property, plant and equipment 0.8 0.2 1.0 1.4 0.1 1.5
Right-of-use asset 2.7 0.6 3.3 7. 2 0.3 7. 5
Cash and cash equivalents 4.1 0.2 4.3 2.0 0.2 2.2
Trade and other receivables 13.0 0.3 13.3 20.6 1.1 21.7
Inventories 7.3 0.6 7.9 3.1 0.2 3.3
Current tax asset 0.3 — 0.3 — — —
40.2 3.6 43.8 37. 5 3.7 41.2
Liabilities
Trade and other payables (12.2) (0.6) (12.8) (20.8) (1.3) (22.1)
Provisions (1.1) — (1.1) (0.6) (0.1) (0.7)
Current tax liability — — — (0.1) (0.1) (0.2)
Deferred tax liability (3.0) (0.7) (3.7) (0.9) (0.4) (1.3)
Bank loan (3.2) — (3.2) — — —
Lease liability (2.7) (0.7) (3.4) ( 7.2) (0.3) (7.5)
(22.2) (2.0) (24.2) (29.6) (2.2) (31.8)
Total identifiable net assets at fair value 18.0 1.6 19.6 7.9 1.5 9.4
Goodwill arising on acquisition (Note 11) 13.2 2.0 15.2 2.7 2.1 4.8
Purchase consideration transferred 31.2 3.6 34.8 10.6 3.6 14.2
The fair value of trade receivables amounts to £12.1m for Miers and £0.3m for Thermodämm. The gross amount of trade receivables is £12.5m for
Miers and £0.3m for Thermodämm.
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 £13.2m relating to Miers comprises the value of expected synergies arising from the acquisition, strategic fit with the UK Interiors
business and geographic location, in particular in relation to developing sales in the construction accessories sector.
The goodwill of £2.0m relating to Thermodämm comprises the value of the strategic fit within the German branch landscape and expected synergies
arising from the acquisition.
From the date of acquisition, Miers contributed £27.6m of revenue and £0.2m to underlying profit before tax of the Group, and Thermodämm
contributed £2.7m of revenue and £0.1m to underlying profit before tax. If the acquisitions had taken place at the beginning of the year, revenue for the
Group would have been £2,783.0m and profit before tax for the Group would have been £30.5m.
Acquisition-related costs of £0.8m for Miers and £0.1m for Thermodämm are recognised within Other items in the Consolidated income statement.
167SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Notes to the consolidated financial statements
for the year ended 31 December 2022
13. Acquisitions continued
Purchase consideration
2022 2021
Miers (UK)
£m
Thermodämm
£m
Total
£m
Penlaw Group
£m
F30 Building
Products
£m
Total
£m
Cash paid on completion 26.9 3.4 30.3 9.8 2.5 12.3
Deferred consideration due within one year — 0.2 0.2 0.2 0.5 0.7
Deferred consideration due after more than one year 1.8 — 1.8 0.1 0.6 0.7
Contingent consideration due within one year — — — 0.1 — 0.1
Contingent consideration due after more than one year 2.5 — 2.5 0.4 — 0.4
Total consideration 31.2 3.6 34.8 10.6 3.6 14.2
The contingent consideration in relation to Miers is payable dependent on future performance of the business based on adjusted EBITDA exceeding
an EBITDA threshold, as defined in the sale and purchase agreement, for the financial year to 31 December 2023, subject to a maximum of £2.6m.
The range of contingent consideration payable is therefore £nil to £2.6m, with £2.5m recognised at the date of acquisition on the basis of current
forecasts and fair value calculation. This is included within other payables due after more than one year on the Consolidated balance sheet. The
liability is remeasured to fair value at subsequent reporting dates with changes in fair value recognised in profit or loss. The fair value is measured
using level 3 inputs and is sensitive to changes in one or more observable inputs.
A further amount of up to £4.0m is also payable in 2024 dependant on the future performance of the business for the financial year to 31 December
2023 and dependent on the vendors remaining within the business. This is therefore treated as remuneration and is being charged to the
Consolidated income statement as earned. £1.2m has been recognised and included within other payables due after more than one year at 31
December 2022.
Analysis of cash flows on acquisition
2022 2021
Miers (UK)
£m
Thermodämm
£m
Total
£m
Penlaw Group
£m
F30 Building
Products
£m
Total
£m
Consideration paid (included in cash flows from investing
activities) (26.9) (3.4) (30.3) (9.8) (2.5) (12.3)
Net cash acquired with the subsidiary (included in cash flows
from investing activities) 4.1 0.2 4.3 2.0 0.2 2.2
Total net cash flow included in cash flows from investing
activities (22.8) (3.2) (26.0) ( 7.8 ) (2.3) (10.1)
Transaction costs (included in cash flows from operating
activities) (0.8) (0.1) (0.9) (0.3) (0.1) (0.4)
Net cash flow on acquisition (23.6) (3.3) (26.9) (8.1) (2.4) (10.5)
Deferred consideration
A reconciliation of the movement in deferred consideration is provided below:
2022
£m
2021
£m
Liability at 1 January 1.8 0.9
Liability arising on acquisitions in the year 2.0 1.4
Amounts paid relating to previous acquisitions (1.3) (0.5)
Liability at 31 December 2.5 1.8
Included in current liabilities 0.7 1.1
Included in non-current liabilities 1.8 0.7
Total 2.5 1.8
168 SIG Annual Report and Accounts 2022
Contingent consideration
A reconciliation of the movement in the fair value measurement of contingent consideration is provided below:
2022
£m
2021
£m
Liability at 1 January 0.5 —
Liability arising on acquisitions in the year 2.5 0.5
Liability at 31 December 3.0 0.5
Included in current liabilities (within accruals and other payables) 0.5 0.1
Included in non-current liabilities (within other payables) 2.5 0.4
Total 3.0 0.5
The £2.5m arising on acquisitions in the year relates to Miers, as set out above. The other amount relates to Penlaw, which was acquired in the prior
year. See below for further details.
Consideration dependent on vendors remaining within the business
Amounts which may be paid to vendors of recent acquisitions who are employed by the Group and are contingent upon the vendors remaining within
the business are, as required by IFRS 3 “Business Combinations”, treated as remuneration and charged to the consolidated income statement as
earned. A reconciliation of the movement in amounts accrued is as follows:
2022
£m
2021
£m
Liability at 1 January 0.6 —
New amounts accrued 1.4 0.6
Amounts paid (included within cash flow from operating activities) (0.8) —
Liability at 31 December 1.2 0.6
Included in current liabilities (within accruals and other payables) — 0.6
Included in non-current liabilities (within other payables) 1.2 —
Total 1.2 0.6
Acquisitions in 2021
In the prior year the Group acquired 100% of the ordinary share capital of F30 Building Products Limited, a UK distributor of construction accessories,
on 10 March 2021 and 100% of the ordinary share capital of the Penlaw Group of companies, a UK distributor of interiors and insulation products, on
26 October 2021. Details of the consideration, fair values of assets and liabilities acquired and cash flows on acquisition are shown above.
The contingent consideration in relation to the Penlaw Group is payable dependent on future performance of the business based on adjusted EBITDA
exceeding an EBITDA threshold, as defined in the sale and purchase agreement, with up to a maximum of £0.6m payable for the first twelve months
from completion and up to a maximum of £1.2m for the second twelve months from completion, subject to a maximum of £1.2m in total. At the
acquisition date, the fair value of contingent consideration was estimated to be £0.5m. No amount was payable in relation to performance for the first
twelve months from completion. On the basis of current forecasts, the fair value of contingent consideration in relation to the second twelve months
from completion continues to be estimated at £0.5m at 31 December 2022. This is included within other payables on the Consolidated balance sheet.
The range of contingent consideration payable is £nil to £1.2m. The fair value is measured using level 3 inputs and is sensitive to changes in one or
more observable inputs.
In relation to F30 Building Products, a further amount of up to £0.8m was also payable over the twelve months from completion dependant on the
future performance of the business and dependent on the vendor remaining within the business. This was therefore treated as remuneration and was
charged to the Consolidated income statement as earned. £0.6m was recognised and included within accruals in relation to this at 31 December
2021, with a further £0.2m recognised and the total amount of £0.8m paid during 2022.
The goodwill of £2.1m relating to F30 Building Products comprised the value of expected synergies arising from the acquisition, strategic fit with the
UK Interiors business and geographic location, in particular the developing sales in the construction accessories sector. The 2021 provisional fair
values of the identifiable assets and liabilities have been finalised during the current year with no further adjustments recognised.
169SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Notes to the consolidated financial statements
for the year ended 31 December 2022
13. Acquisitions continued
The goodwill of £2.7m relating to the Penlaw Group comprised the value of expected synergies arising from the acquisition and the strategic fit with
the UK Interiors business. The 2021 provisional fair values of the identifiable assets and liabilities have been finalised during the current year resulting
in a net £0.1m reduction in the goodwill previously recognised. Trade receivables were reduced by £0.2m, trade and other payables increased by
£0.1m and current tax liability reduced by £0.4m.
From the date of acquisition, the Penlaw Group contributed £9.9m of revenue and £0.4m loss to underlying profit before tax of the Group in 2021, and
F30 Building Products contributed £6.5m of revenue and £0.8m to underlying profit before tax. If the acquisitions had taken place at the beginning of
2021, revenue for the Group would have been £2,349.6m and loss before tax for the Group would have been £13.9m.
14. Inventories
2022
£m
2021
£m
Raw materials and consumables 12.6 7. 0
Work in progress 1.9 2.0
Finished goods and goods for resale 256.1 233.0
Total 270.6 242.0
The estimated replacement cost of inventories is not materially different from the balance sheet value stated above.
15. Trade and other receivables
2022
£m
2021
£m
Trade receivables 324.9 287.7
VAT 6.8 6.2
Other receivables 7.9 5.3
Prepayments and accrued income 93.0 72.1
Trade and other receivables 432.6 371.3
Lease receivables (Note 23) 0.1 0.8
Current tax assets 1.5 —
Total receivables 434.2 372.1
Included within prepayments and accrued income is £77.5m (2021: £58.2m) 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 which range from 8 to 60 days from end of month.
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 £19.1m at 31 December 2022 (2021: £16.1m).
Movement in the allowance for expected credit losses
2022
£m
2021
£m
At 1 January (16.1) (15.3)
Utilised 14.3 3.3
Unused amounts released to the Consolidated income statement 1.7 2.3
Added on acquisition (0.3) —
Charged to the Consolidated income statement (18.2) ( 7.1)
Exchange differences (0.5) 0.7
At 31 December (19.1) (16.1)
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.
170 SIG Annual Report and Accounts 2022
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 2022, 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 ECLs, 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. ECL provisions have been adjusted where relevant to take account of experience during the year and
forward looking information.
The total impairment loss relating to trade receivables recognised in the consolidated income statement is £16.5m (2021: £4.8m). The increase in the
current year is mainly due to the loss from the administration of Avonside, a major UK roofing contractor and one of the Group’s largest customers,
together with an increase in loss rates in certain operating companies as a result of applying adjustments to reflect current and forward looking
information given current economic conditions and expectations.
Days past due
31 December 2022
< 30 days
£m
30-60 days
£m
61-90 days
£m
> 91 days
£m
Total
£m
ECL rate 1.0% 8.2% 17.4% 54.4%
Total gross carrying amount 310.0 34.3 8.6 21.7 374.6
ECL 3.0 2.8 1.5 11.8 19.1
Days past due
31 December 2021 (restated)
1
< 30 days
£m
30-60 days
£m
61-90 days
£m
> 91 days
£m
Total
£m
ECL rate 0.6% 6.5% 15.4% 60.4%
Total gross carrying amount 269.7 30.5 8.9 18.2 3 27.3
ECL 1.7 2.0 1.4 11.0 16.1
1. The prior year comparative for the analysis of the expected credit loss provision and expected credit loss rate across the aged categories of trade receivables has been restated to
present on a consistent basis with the current year, as disclosed in the Statement of Significant Accounting Policies.
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 £52.8m (2021: £41.1m) pledged as security in relation to the asset
backed funding arrangement implemented in relation to the UK defined benefit pension plan. See Note 28 for further details.
Transfer of trade receivables
Consistent with previous years, the Group sold without recourse trade receivables to banks and other financial institutions for cash proceeds. These
trade receivables of £37.8m (2021: £32.8m) 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.
The Group does not have any significant credit risk exposure to any single customer, with no single customer representing more than 1% of the
Group’s revenue.
171SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Notes to the consolidated financial statements
for the year ended 31 December 2022
16. Current liabilities
2022
£m
2021
£m
Trade payables 289.6 229.4
VAT 9.4 15.8
Social security and payroll taxes 14.2 12.9
Accruals and other payables 111. 8 111.6
Trade and other payables 425.0 369.7
Lease liabilities (Note 23) 56.5 50.7
Interest-bearing loans and borrowings (Note 17) 0.8 —
Deferred consideration (Note 13) 0.7 1.1
Other financial liabilities — 0.4
Derivative financial instruments — 0.5
Current tax liabilities 5.8 4.6
Provisions (Note 21) 9.6 12.9
Current liabilities 498.4 439.9
Trade payables is presented net of £48.4m (2021: £29.8m) due from suppliers in respect of supplier rebates where the Group has the right to net
settlement.
Of the above balances, the lease liability contracts are secured on the underlying assets and the remaining balances are unsecured.
Trade payables, accruals and deferred income principally comprise amounts outstanding for trade purchases and ongoing costs.
The Directors consider that the carrying amount of current liabilities approximates to their fair value.
17. Interest-bearing loans and borrowings
2022
£m
2021
£m
Current interest-bearing loans and borrowings
Lease liabilities (Note 23) 56.5 50.7
Bank loan 0.8 —
Other financial liabilities — 0.4
Total current interest-bearing loans and borrowings 57.3 51.1
Non-current interest-bearing loans and borrowings
Lease liabilities (Note 23) 251.2 210.4
Secured notes 264.0 249.6
Bank loan 2.1 —
Other financial liabilities — 0.6
Total non-current interest-bearing loans and borrowings 517.3 460.6
Total interest-bearing loans and borrowings 574.6 511.7
On 18 November 2021 the Group completed a restructuring of its debt arrangements. This comprised the issuance of €300m secured notes at
a coupon of 5.25% and a new RCF of £50m. The proceeds from the secured notes were used to repay the existing private placement notes and
£70m term loan, and the previous revolving credit facility of £25m was cancelled. This was accounted for as en extinguishment of the previous
arrangements, and arrangement fees and the loss on modification which were being amortised over the term of the previous facilities were written off
in the prior year (see Note 5).
Secured notes
The €300m secured notes are repayable on 30 November 2026. The notes are guaranteed by certain subsidiaries of the Group and are secured by a
first priority floating charge over the assets of the Company and the relevant UK subsidiaries and by a security interest over the shares, material bank
accounts and intercompany receivables of the non-UK guarantor subsidiaries. The notes are recognised at amortised cost, net of arrangement fees
of which £2.0m is unamortised at 31 December 2022 (2021: £2.5m). The notes are subject to incurrence based covenants only .
172 SIG Annual Report and Accounts 2022
The contractual repayment profile of the current secured notes is shown below:
2022 2021
£m
Fixed interest
rate
% £m
Fixed interest
rate
%
Total gross amount repayable in 2026 266.0 5.25% 252.1 5.25%
Unamortised fees (2.0) (2.5)
264.0 5.25% 249.6 5.25%
Bank loan
The bank loan was acquired as part of the Miers business acquisition during the year (see Note 13). The loan is repayable in equal monthly
instalments until June 2026, incurs interest at 2.25% above base rate and is secured by way of a fixed and floating charge over certain assets of the
Miers business.
Committed facilities
The Group also has undrawn committed borrowing facilities at 31 December 2022 as follows:
2022
£m
2021
£m
RCF expiring May 2026 90.0 50.0
Total 90.0 50.0
On 7 December 2022 the Group extended its RCF by £40m, utilising the accordion feature of the existing RCF and bringing the total committed
facility to £90m. £26m was drawn on the RCF in July 2022 and was repaid in tranches over subsequent months. The RCF was undrawn at 31
December 2022. The RCF has a leverage maintenance covenant which is only effective if the facility is over 40% drawn at a quarter end reporting
date.
The fair value of borrowings is disclosed in Note 18.
18. Financial assets, liabilities, financial risk management and derivatives
The Group’s principal financial liabilities, other than derivatives, comprise loans and borrowings, lease liabilities, deferred consideration 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 and cash and cash equivalents that derive directly from its operations.
a) Financial assets
The Group holds the following financial assets:
Note
2022
£m
2021
£m
Financial assets at amortised cost:
Trade receivables 15 324.9 2 87.7
Cash at bank and on hand 130.1 14 5.1
Financial asset at fair value through OCI:
Unquoted equity investment 0.2 —
Derivative financial instruments designated as hedging instruments 18d 1.6 0.2
Derivative financial instruments not designated as hedging instruments 0.2 —
Total 457.0 433.0
The interest received on cash deposits is at variable rates of interest of up to 3.42% (2021: 0.17%).
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 15.
Of the above cash at bank on hand, £2.6m (2021: £56.3m) is denominated in Sterling, £110.9m (2021: £79.4m) in Euros, £15.3m (2021: £8.7m) in
Polish Zloty, and £1.3m (2021: £0.7m) in other currencies.
The financial asset at fair value through OCI is an investment in equity shares of a non-listed company. The Group holds a non-controlling interest of
17% in the company. The investment is designated at fair value through OCI as it is considered strategic in nature.
173SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Notes to the consolidated financial statements
for the year ended 31 December 2022
18. Financial assets, liabilities, financial risk management and derivatives continued
b) Financial liabilities
The Group holds the following financial liabilities:
Note
2022
£m
2021
£m
Financial liabilities at amortised cost
Trade and other payables
1
16 401.4 341.0
Interest-bearing loans and borrowings 17 266.9 249.6
Deferred consideration 13 2.5 1.8
Lease liabilities 23 307.7 261.1
Derivative financial instruments designated as hedging instruments 18d 0.1 0.4
Derivative financial instruments not designated as hedging instruments — 0.1
Other financial liabilities — 1.0
Total 978.6 855.0
1. Excluding non-financial liabilities.
The Directors consider that the fair values of trade and other payables and loan notes and deferred consideration approximate their carrying value
due to their short-term nature. The fair value of borrowings is considered below.
2022 interest rate and currency profile
The interest rate and currency profile of the Group’s financial liabilities at 31 December 2022, excluding prepayment of arrangement fees of £2m and
deferred consideration of £2.5m was as follows:
Currency
Total
£m
Floating rate
£m
Fixed rate
£m
Effective fixed
interest rate
%
Weighted
average time
for which rate
is fixed
Years
Amount
secured
£m
Amount
unsecured
£m
Lease contracts Sterling 147.5 — 147.5 1.7% – 12.6% 10.1 147.5 —
Bank loan Sterling 2.9 2.9 — n/a 3.4 2.9 —
Secured notes Euro 266.0 — 266.0 5.25% 3.9 266.0 —
Lease contracts Euro 149.2 — 149.2
0.6%
– 15.4% 6.3 149.2 —
Lease contracts Polish Zloty 11.0 4.3 6.7 2.0% – 7.9% 6.3 11.0 —
Total 576.6 7. 2 569.4 576.6 —
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 secured notes at 31 December 2022 is estimated to be £221.6m (2021: £256.1m) and is classified as a Level
2 fair value measurement for disclosure purposes. The remaining fixed rate debt amounts to £303.4m (2021: £524.1m) and relates to finance lease
contracts and fixed rate loans. The Directors consider the fair value of these remaining fixed rate debts to materially approximate to the book values
shown above.
174 SIG Annual Report and Accounts 2022
2021 interest rate and currency profile
The interest rate and currency profile of the Group’s financial liabilities at 31 December 2021, excluding prepayment of arrangement fees of £1.9m
was as follows:
Currency
Total
£m
Floating rate
£m
Fixed rate
£m
Effective fixed
interest rate
%
Weighted
average time
for which rate
is fixed
Years
Amount
secured
£m
Amount
unsecured
£m
Other borrowings Sterling 0.3 — 0.3 — 0.6 — 0.3
Lease contracts Sterling 134.4 — 134.4 1.7%-5.3% 9.8 134.4 —
Secured notes Euro 252.1 — 252.1 5.25% 4.9 252.1 —
Other borrowings Euro 1.0 — 1.0 2.8% 1.0 1.0 —
Lease contracts Euro 117. 6 — 117.6 0.6%-5.7% 6.2 117.6 —
Lease contracts Polish Zloty 9.1 2.4 6.7 2.1%-8.3% 6.5 9.1 —
Lease contracts Other — — — n/a n/a — —
Total 514.5 2.4 512.1 514.2 0.3
All of the above lease contracts are secured on the underlying assets.
In both 2022 and 2021, the interest rate on floating rate financial liabilities is based upon appropriate local market rates.
c) Financial risk management
The Group’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 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. The key sources of finance are note holders, being professional institutional investors,
and a RCF with principal banks. The Group also maintains 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 good liquidity position and at 31 December 2022 held cash of £130.1m (2021:
£145.1m), and had £90m (2021: £50.0m) additional headroom from the RCF that matures in May 2026.
Foreign currency risk
The Group has a number of overseas businesses whose revenues and costs are denominated in the currencies of the countries in which they
operate. 58.2% of the Group’s 2022 continuing revenues (2021: 59%) were in foreign currencies, being primarily Euros and Polish Zloty. The Group
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, the Group seeks to hold financial liabilities and derivatives in the same currency to partially
hedge the net investment values.
The Group uses foreign exchange forward contracts to manage the exposures arising from cross currency transactions (Note 18d ii).
175SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Notes to the consolidated financial statements
for the year ended 31 December 2022
18. Financial assets, liabilities, financial risk management and derivatives continued
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:
Average rate Closing rate
2022 2021
Movement
(%) 2022 2021
Movement
(%)
Euro 1.171 1.165 0.5% 1.12 8 1.19 0 (5.2)%
Polish Zloty 5.488 5.320 3.2% 5.300 5.460 (2.9)%
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 currently has no commodity derivative contracts in place though is reviewing its approach to fuel hedging in conjunction with the planned
migration of the fleet to electric and lower carbon fuels.
Credit risk
Credit risk is covered in Note 15.
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 at least 50% of its average net debt over the medium term. The percentage of gross debt at fixed rates of interest
at 31 December 2022 is 99.4% (2021: 99.5%). The percentage of available gross debt at fixed rates of interest at 31 December 2022 (including the
undrawn RCF) is 85.3% (2021: 90.7%).
d) Hedging activities and derivatives
The Group is exposed to foreign currency and interest rate risks relating to its ongoing business operations. In order to manage the Group’s exposure
to exchange rate and interest rate changes, the Group utilises currency 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 2022 the Group held €300m (2021: €300m) of direct euro-
denominated debt through its secured notes. 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.
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 euro denominated debt.
176 SIG Annual Report and Accounts 2022
The impact of the hedging instruments on the Consolidated balance sheet is as follows:
Notional
amount
€m
Carrying
amount
(liability)
£m
Line item in the
Consolidated balance sheet
Change in fair
value used for
measuring
ineffectiveness
for the period
£m
As at 31 December 2022
Foreign currency denominated borrowing 300.0 266.0 Secured notes (13.9)
As at 31 December 2021
Cross-currency swap — — Derivative financial instruments 0.5
Foreign currency denominated borrowing 300.0 252.1 Secured notes 1.3
Foreign currency denominated borrowing — — Private placement notes 6.8
The impact of the hedged item on the Consolidated balance sheet is as follows:
31 December 2022 31 December 2021
Change in fair
value used for
measuring
ineffectiveness
£m
Foreign
currency
translation
reserve
£m
Cost of hedging
reserve
£m
Change in fair
value used for
measuring
ineffectiveness
£m
Foreign
currency
translation
reserve
£m
Cost of hedging
reserve
£m
Net investment in foreign subsidiaries (13.9) (13.9) — 8.6 8.6 —
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
2022
£m
2021
£m
Asset at 1 January — 0.1
Fair value gains recognised in equity — 0.5
Cash settlement on partial derecognition — (0.6)
Liability at 31 December — —
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.
Foreign currency risk
The Group previously faced a translation risk from the US dollar on its private placement borrowings in respect of payments of interest and the
principal amount and held two cross-currency interest rate swaps which swapped fixed US dollar-denominated debt (and the associated interest)
held in the UK into fixed Sterling-denominated debt. Following the refinancing in November 2021 the Group no longer has any US dollar denominated
debt and the cross-currency interest rate swaps were terminated on completion of the refinancing.
Hedge of the Group’s functional currency cash flows
2022
£m
2021
£m
Liability at 1 January — (0.4)
Fair value gains recognised in equity — 0.5
Cash settlement on derecognition of cash flow hedges — (0.1)
Liability at 31 December — —
The Group also uses foreign exchange forward contracts to manage the exposures arising from cross currency transactions. At 31 December 2022
the Group held a number of short term forward contracts designated as hedging instruments in cash flow hedges of forecast purchases in US
dollars and euros. 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 £1.5m (2021: £0.2m) relating to forward foreign exchange contracts.
177SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Notes to the consolidated financial statements
for the year ended 31 December 2022
18. Financial assets, liabilities, financial risk management and derivatives continued
The Group is holding the following foreign exchange forward contracts:
Notional
amount
$m
Notional
amount
€m
Notional
amount
£m Maturity
Average
hedged rate
Average
forward rate
As at 31 December 2022
Foreign exchange forward contracts 12.0 49.2 52.4 2023 & 2024 n/a 1.14
As at 31 December 2021
Foreign exchange forward contracts 11.5 27.8 32.2 2022 n/a 1.27
The impact of the hedging instruments on the Consolidated balance sheet is as follows:
Carrying
amount
£m
Line item in the
Consolidated balance
sheet
Change in fair value
used for measuring
ineffectiveness for
the period
£m
As at 31 December 2022
Foreign exchange forward contracts 1.5
Derivative financial
instruments 1.6
As at 31 December 2021
Cross-currency swaps —
Derivative financial
instruments 0.5
Foreign exchange forward contracts (0.2)
Derivative financial
instruments 0.2
The impact of the hedged item on the Consolidated balance sheet is as follows:
As at 31 December 2022 As at 31 December 2021
Change in fair
value used for
measuring
ineffectiveness
£m
Cash flow
hedging
reserve
£m
Cost of
hedging
reserve
£m
Change in fair
value used for
measuring
ineffectiveness
£m
Cash flow
hedging
reserve
£m
Cost of
hedging
reserve
£m
Cross-currency swaps — — — 0.5 0.5 —
Foreign exchange forward contracts 1.6 1.6 — 0.2 0.2 —
The effect of the cash flow hedges in the Consolidated income statement and Consolidated statement of comprehensive income is as follows:
Total hedging
gain/(loss)
recognised
in OCI
£m
Ineffectiveness
recognised
in profit or loss
£m
Line item in
the statement
of profit or loss
Amount
reclassified
from OCI to
profit or loss
£m
Line item in the statement
of profit or loss
As at 31 December 2022
Foreign exchange forward contracts 1.6 — Finance costs 0.2 Operating expenses
As at 31 December 2021
Cross-currency swaps 0.5 — Finance costs — Operating expenses
Foreign exchange forward contracts 0.2 — 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 was one (2021: one) such item with a total carrying amount of £0.2m (2021: £0.1m).
178 SIG Annual Report and Accounts 2022
iii) Impact of hedging on equity
Set below is the reconciliation of each component of equity and the analysis of other comprehensive income:
Retained profits/(losses) Cash flow hedging reserve
Foreign currency
translation reserve Cost of hedging reserve
2022
£m
2021
£m
2022
£m
2021
£m
2022
£m
2021
£m
2022
£m
2021
£m
At 1 January 59.3 (369.3) (0.2) 2.2 2.6 8.4 0.1 0.2
Effective portion of changes in
fair value arising from:
Net investment Swaps — — — — — 0.5 — —
Cross-currency swaps — — — 0.5 — — — —
Foreign exchange forward
contracts — — 1.6 0.2 — — — —
Amount reclassified to profit
or loss — — 0.2 (3.1) — — — (0.1)
Foreign currency revaluation of
foreign currency denominated
borrowing — — — — (13.9) 8.1 — —
Foreign currency revaluation of
net foreign operations — — — — 14.2 (14.4) — —
Tax ef fect — — — — — — — —
Other movements not
associated with hedging 0.7 428.6 — — — — — —
At 31 December 60.0 59.3 1.6 (0.2) 2.9 2.6 0.1 0.1
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.
2022
£m
2021
£m
Gains on derivative financial instruments recognised directly in the Consolidated income statement 0.3 —
Amounts reclassified from OCI to profit and loss on cash flow hedges (0.2) 3.1
Total net gains on derivative financial instruments included in the Consolidated income statement 0.1 3.1
19. Maturity of financial assets and liabilities
Maturity of financial liabilities
The maturity profile of the Group’s financial liabilities (inclusive of derivative financial assets) at 31 December 2022 was as follows:
2022
£m
2021
£m
In one year or less 56.4 51.7
In more than one year but not more than two years 51.5 44.0
In more than two years but not more than five years 368.5 336.4
In more than five years 99.0 81.7
Total 575.4 513.8
The table excludes trade and other payables of £401.4m (2021: £341.0m).
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 on pages 180 and 181 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.
179SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Notes to the consolidated financial statements
for the year ended 31 December 2022
19. Maturity of financial assets and liabilities continued
2022 Analysis
Maturity analysis
Balance
sheet value
£m
< 1 year
£m
1-2 years
£m
2-5 years
£m
> 5 years
£m
Total
£m
Current liabilities
Trade and other payables 401.4 401.4 — — — 401.4
Lease liabilities 56.5 73.3 — — — 73.3
Interest bearing loans 0.8 0.9 — — — 0.9
Deferred consideration 0.7 0.7 — — — 0.7
Total 459.4 476.3 — — — 476.3
Non-current liabilities
Lease liabilities 251.2 — 62.1 126.2 114.8 303.1
Interest-bearing loans 2.1 — 0.9 1.3 — 2.2
Secured notes 264.0 14.0 14.0 293.9 — 321.9
Deferred consideration 1.8 — 1.8 — — 1.8
Derivative financial instruments 0.1 — 0.1 — — 0.1
Total 519.2 14.0 78.9 421.4 114.8 629.1
Total liabilities 978.6 490.3 78.9 421.4 114.8 1,105.4
Other
Derivative financial instrument assets (1.8) (1.5) (0.1) — — (1.6)
Unquoted equity investments (0.2) — — — (0.2) (0.2)
Cash and cash equivalents (13 0.1) (130.1) — — — (130.1)
Trade and other receivables (432.6) (432.6) — — — (432.6)
Total (564.7) (564.2) (0.1) — (0.2) (564.5)
Grand total 413.9 (73.9) 78.8 421.4 114.6 540.9
The table above includes short term derivative financial assets with a fair value at 31 December 2022 of £1.8m and derivative financial liabilities of
£0.1m that will be settled gross, the final exchange on these derivatives will be total receipts of €49.2m, PLN35m, $12m with corresponding payments
totalling £58.8m.
The following financial assets and liabilities are subject to offsetting, enforceable master netting arrangements:
As at 31 December 2022
Gross
amounts of
recognised
financial
assets/
(liabilities)
£m
Amounts
available to
offset through
netting
agreements
£m
Net amount
£m
Derivative financial assets 1.8 — 1.8
Derivative financial liabilities (0.1) — (0.1)
Total 1.7 — 1.7
180 SIG Annual Report and Accounts 2022
2021 Analysis
Maturity analysis
Balance
sheet value
£m
< 1 year
£m
1-2 years
£m
2-5 years
£m
> 5 years
£m
Total
£m
Current liabilities
Trade and other payables 341.0 341.0 — — — 341.0
Lease liabilities 50.7 59.3 — — — 59.3
Deferred consideration 1.1 1.1 — — — 1.1
Derivative financial instruments 0.5 0.5 — — — 0.5
Other financial liabilities 0.4 0.4 — — — 0.4
Total 393.7 402.3 — — — 402.3
Non-current liabilities
Lease liabilities 210.4 — 48.3 95.0 126.2 269.5
Secured notes 249.6 13.7 13.2 291.8 — 318.7
Deferred consideration 0.7 — 0.7 — — 0.7
Other financial liabilities 0.6 — 0.4 0.2 — 0.6
Total 461.3 13.7 62.6 3 87.0 126.2 589.5
Total liabilities 855.0 416.0 62.6 3 87.0 126.2 991.8
Other
Derivative financial instrument assets (0.2) — — — (0.2) (0.2)
Cash and cash equivalents (145.1) (145.1) — — — (145.1)
Trade and other receivables (371.3) (371.3) — — — (371.3)
Total (516.6) (516.4) — — (0.2) (516.6)
Grand total 338.4 (100.4) 62.6 3 87.0 126.0 475.2
The table above includes short term derivative financial assets with a fair value at 31 December 2021 of £0.2m and derivative financial liabilities
of £0.5m that will be settled gross, the final exchange on these derivatives will be total receipts of €27.8m, PLN 32m, $11.5m with corresponding
payments totalling £38.2m.
The following financial assets and liabilities are subject to offsetting, enforceable master netting arrangements:
As at 31 December 2021
Gross
amounts of
recognised
financial
assets/
(liabilities)
£m
Amounts
available to
offset through
netting
agreements
£m
Net amount
£m
Derivative financial assets 0.2 — 0.2
Derivative financial liabilities (0.5) — (0.5)
Total (0.3) — (0.3)
181SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Notes to the consolidated financial statements
for the year ended 31 December 2022
20. Sensitivity Analysis
IFRS 7 requires the disclosure of a sensitivity analysis that details the effects on the Group’s profit or loss and other equity of reasonably possible
fluctuations in market rates.
This sensitivity analysis has been prepared to illustrate the effect of the following hypothetical variations in market rates on the fair value of the Group’s
financial assets and liabilities:
(i) a 1% (100 basis points) increase or decrease in market interest rates; and
(ii) a 10% strengthening or weakening of Sterling against all other currencies to which the Group is exposed.
a) Interest rate sensitivity
The Group is currently exposed to sterling and euro 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.
2022 analysis
GBP EUR Total
+100bp
£m
-100bp
£m
+100bp
£m
-100bp
£m
+100bp
£m
-100bp
£m
Profit or loss 0.1 (0.1) (i) — — (ii) 0.1 (0.1)
Total shareholders’ equity 0.1 (0.1) — — 0.1 (0.1)
2021 analysis
GBP EUR Total
+100bp
£m
-100bp
£m
+100bp
£m
-100bp
£m
+100bp
£m
-100bp
£m
Profit or loss — — (i) — — (ii) — —
Total shareholders’ equity — — — — — —
The movements noted above are mainly attributable to:
(i) floating rate Sterling debt and cash deposits
(ii) floating rate Euro debt and Euro cash deposits
b) Foreign currency sensitivity
The Group is exposed to currency rate changes between sterling and euros, US dollar 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.
2022 analysis
EUR USD PLN Total
+10%
£m
-10%
£m
+10%
£m
-10%
£m
+10%
£m
-10%
£m
+10%
£m
-10%
£m
Assets and liabilities under
the scope of IFRS 7
Profit or loss 1.2 (1.5) (i ) — — (0.6) 0.7 0.6 (0.8)
Other equity 5.6 (6 . 8) ( ii ) (0.9) 1.1 (ii) (0.8) 1.0 (ii) 3.8 (4.7)
Total shareholders’ equity 6.8 (8.3) (0.9) 1.1 (1.4) 1.7 4.4 (5.5)
Total assets and liabilities
1
Profit or loss 1.3 (1.6) (iii ) — — (v) (0.6) 0.7 (vi) 0.7 (0.8)
Other equity (4.0) 4.9 (iv ) (0.9) 1.1 ( i v ) (2.4) 2.9 (iv) (7.3) 8.9
Total shareholders’ equity (2.7) 3.3 (0.9) 1.1 (3.0) 3.6 (6.6) 8.1
182 SIG Annual Report and Accounts 2022
2021 analysis
EUR USD PLN Total
+10%
£m
-10%
£m
+10%
£m
-10%
£m
+10%
£m
-10%
£m
+10%
£m
-10%
£m
Assets and liabilities
under the scope of IFRS 7
Profit or loss — — (i) — — (0.5) 0.7 (0.5) 0.7
Other equity 4.0 (4.9) (ii) (0.8) 0.9 (ii) 0.3 (0.4) (ii) 3.5 (4.4)
Total shareholders’ equity 4.0 (4.9) (0.8) 0.9 (0.2) 0.3 3.0 (3.7)
Total assets and liabilities
1
Profit or loss — — (iii) — — (v) — — (vi) — —
Other equity (4.3) 5.3 (iv) (0.8) 0.9 (iv) (0.5) 0.7 (iv) (5.6) 6.9
Total shareholders’ equity (4.3) 5.3 (0.8) 0.9 (0.5) 0.7 (5.6) 6.9
1. 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 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 net investment hedges.
(v) transaction exposure relating to purchases in US dollars.
(vi) retranslation of Polish zloty profit streams.
21. Provisions
Onerous
leases
£m
Leasehold
dilapidations
£m
Onerous
contracts
£m
Other amounts
£m
Total
£m
At 1 January 2022 1.3 22.0 8.8 2.1 34.2
Unused amounts reversed in the period (0.1) (0.6) (1.2) (0.4) (2.3)
Utilised (1.2) (0.2) (6.8) (1.4) (9.6)
New provisions 0.1 2.1 — 1.1 3.3
Added on acquisition — 1.1 — — 1.1
Unwinding of discount — — 0.1 — 0.1
Exchange differences — — — 0.1 0.1
At 31 December 2022 0.1 24.4 0.9 1.5 26.9
2022
£m
2021
£m
Included in current liabilities 9.6 12.9
Included in non-current liabilities 17.3 21.3
Total 26.9 34.2
Onerous leases
In accordance with IFRS 16, 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 based on expected value of costs to be incurred and assumptions regarding subletting. The
balance at 31 December 2022 is payable over the relevant lease terms, the longest unexpired term being 19 years to 2041.
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 estimated 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 23 (reinstatement) and during the lease term (wear and tear).
Onerous contracts
Onerous contract provisions relate to licence fee commitments where no future economic benefit is expected to be obtained, principally in relation to
the SAP S/4HANA implementation following the change in scope of the project in previous years. The remaining cost will be incurred in 2023.
183SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Notes to the consolidated financial statements
for the year ended 31 December 2022
21. Provisions continued
Other amounts
Other amounts relate principally to claims and warranty provisions based on expected value and past experience. The transfer of economic benefit is
expected to be made between one and four years’ time.
Two of SIG’s wholly owned subsidiaries in Benelux are subject to legal proceedings brought by a customer in connection with the installation of
insulation at an industrial facility in Belgium. Those subsidiaries sold an insulation product manufactured by a third party, and made requested
adaptations to the product prior to selling it. The claim relates to the adaptations. Further information about the matter and its possible outcomes
are not provided, as such disclosures could prejudice the position and interests of the Group in this matter. This matter arose during 2022 and the
provision recognised in the year is included within the “new provisions” charge of £1.1m. This claim is discussed further in Note 29 (c).
22. Deferred tax
The net deferred tax asset at the end of the year is analysed as follows:
2022
£m
2021
£m
Deferred tax assets 3.3 4.8
Net deferred tax asset 3.3 4.8
Summary of deferred tax
The different components of deferred tax assets and liabilities recognised by the Group and movements thereon during the current and prior
reporting period are analysed below:
Goodwill and
intangibles
£m
Property, plant
and equipment
£m
Short term
timing
differences
£m
Retirement
benefit
obligations
£m
Losses
£m
Other
£m
Total
£m
At 1 January 2021 (1.7) 4.7 0.8 3.2 0.6 (1.9) 5.7
Credit/(charge) to income 1.4 (1.8) 1.7 (1.2) 1.5 (1.1) 0.5
Credit/(charge) to equity — — — 0.1 — 0.1
Added on acquisition (1.3) — — — — — (1.3)
Exchange differences — — (0.1) — (0.1) (0.2)
At 31 December 2021 (1.6) 2.9 2.4 2.1 2.0 (3.0) 4.8
Credit/(charge) to income 0.6 2.9 0.5 — (2.0) 0.6 2.6
Charge to equity — — — (0.5) — — (0.5)
Added on acquisition (3.6) (0.1) (0.1) — — — (3.8)
Exchange differences — 0.1 — 0.1 — — 0.2
At 31 December 2022 (4.6) 5.8 2.8 1.7 — (2.4) 3.3
The deferred tax charge within the Consolidated income statement for 2022 includes a credit of £0.1m (2021: £0.1m charge) 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.
The Group has cumulative tax losses and other deductible temporary differences of £289.0m (2021: £258.2m) in the UK and £7.3m (2021: £4.2m) in
Benelux for which no deferred asset is currently recognised as it is not considered probable that sufficient future taxable profits will be available to
allow the utilisation of the deductible temporary differences. For the UK, although the trading businesses have returned to profitability in the current
year, the UK tax group remains in a taxable loss position and there is not considered to be sufficient convincing evidence that future taxable profits
will be available at 31 December 2022. If the Group were to recognise all unrecognised deferred tax assets, profit and equity would have increased by
£74.1m. The deductible temporary differences are available indefinitely.
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 £186m (2021: £143m). 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 announced 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 substantively enacted at 31 December 2021 and were reflected in the measurement of deferred tax balances at the prior period end.
This did not have a significant impact as deferred assets are currently not recognised in the UK as noted above.
The Group has considered the impact of climate-related matters on future taxable profits when assessing the recoverability of deferred tax assets.
At present, the impact of climate-related matters is not considered significant to forecast results and therefore no specific assumptions relating to
climate change are currently built into the forecasts.
184 SIG Annual Report and Accounts 2022
23. 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 significant accounting policies.
Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period:
Buildings
£m
Plant and
equipment
£m
Total
£m
At 1 January 2022 196.3 34.6 230.9
Reclassification
1
(15.8) 15.8 —
Foreign currency movement 6.0 1.9 7.9
Additions 25.1 24.0 49.1
Added on acquisition 2.8 0.6 3.4
Disposals — (0.1) (0.1)
Modifications 45.0 — 45.0
Impairments (9.7) — (9.7)
Depreciation expense (40.7) (19.9) (60.6)
At 31 December 2022 209.0 56.9 265.9
1. Amounts have been reclassified to reflect the correct categorisation of certain assets.
Set out below are the carrying amounts of lease liabilities and the movements during the year:
£m
At 1 January 2022 261.1
Foreign currency movement 7.7
Additions 48.3
Added on acquisition 3.4
Disposals (0.2)
Modifications 47.5
Accretion of interest 13.3
Payments (73.4)
At 31 December 2022 307.7
Current 56.5
Non-current 251.2
307.7
The following are the amounts recognised in profit or loss:
2022
£m
2021
£m
Depreciation expense of right-of-use assets 60.6 56.9
Interest expense on lease liabilities 13.3 11.6
Expense relating to short-term leases (included in operating expenses) 0.3 0.8
Impairment of right-of-use assets (included in other items) 9.7 0.5
Total amount recognised in profit or loss 83.9 69.8
The Group had total cash outflows for leases of £73.4m in 2022 (2021: £68.9m). The Group also had non-cash additions to right-of-use assets and
lease liabilities of £48.3m in 2022 (2021: £48.9m). The future cash outflows relating to leases that have not yet commenced are disclosed in Note 29(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.
185SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Notes to the consolidated financial statements
for the year ended 31 December 2022
23. Leases continued
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.
Within
five years
£m
More than
five years
£m
Total
£m
Extension options expected not to be exercised 36.4 45.6 82.0
Termination options expected to be exercised 0.5 0.4 0.9
36.9 46.0 82.9
The Group as a lessor
The Group is an intermediate lessor of a number of property leases which are subleased to a third party and are classified as finance leases in
accordance with IFRS 16. The Group has lease assets receivable of £1.3m at 31 December 2022 (2021: £3.7m). These leases have terms of between
1 and 7 years. Rental income recognised by the Group during the year is £0.4m (2021: £1.0m).
Future lease payments receivable from sub-leases classified as finance leases are as follows:
2022
£m
2021
£m
Within one year 0.4 1.1
After one year but not more than five years 1.1 2.5
More than five years 0.5 1.0
2.0 4.6
Less: future finance charges (0.7) (0.9)
Lease assets receivable 1.3 3.7
Of the total lease assets receivable, £0.1m (2021: £0.8m) is due within one year and £1.2m (2021: £2.9m) is due after more than one year.
Future minimum rentals receivable under non-cancellable operating leases are as follows:
2022
£m
2021
£m
Within one year 0.3 0.4
After one year but not more than five years 0.9 0.9
More than five years 0.4 0.2
1.6 1.5
24. Called up share capital
2022
£m
2021
£m
Authorised:
1,390,000,000 ordinary shares of 10p each (2021: 1,390,000,000) 139.0 139.0
Allotted, called up and fully paid:
1,181,556,977 ordinary shares of 10p each (2021: 1,181,556,977) 118 . 2 118.2
The Company has one class of ordinary share which carries no right to fixed income. The Company did not allot any shares during the year.
Treasury shares
Treasury shares relate to shares purchased by the EBT to satisfy awards made under the Group’s share plans which are not vested and beneficially
owned by employees. 9,360,742 (2021: 24,708,134) shares were purchased during the year at a weighted average cost of 42.7p per share (2021:
50.5p) and 297,920 shares were issued relating to the settlement of share awards. A total of 33,877,777 own shares are outstanding at 31 December
2022 (2021: 24,814,955).
Capital reduction
On 24 June 2021 the Group completed the cancellation of its share premium account, which was approved by shareholders at the Annual General
Meeting on 13 May 2021 and sanctioned by the High Court of England and Wales on 16 June 2021. The capital reduction resulted in the transfer of
£447.7m from share premium account to retained profits/(losses) and created distributable reserves.
186 SIG Annual Report and Accounts 2022
25. Reconciliation of profit/(loss) before tax to cash generated from operating activities
2022
£m
2021
£m
Profit/(loss) before tax 27.5 (15.9)
Net finance costs (Note 5) 28.7 29.9
Depreciation of property, plant and equipment (Note 10) 12.6 11.4
Depreciation of right-of-use assets (Note 23) 60.6 56.9
Amortisation of computer software (Note 12) 3.2 3.4
Amortisation of acquired intangibles (Note 12) 4.7 4.7
Impairment of property, plant and equipment (Note 10) 2.5 0.3
Impairment of goodwill (Note 11) 3.6 9.9
Impairment of right-of-use asset (Note 23) 9.7 0.5
Impairment of lease receivable (Note 2) 2.0 —
Profit on sale of property, plant and equipment (0.4) (0.9)
Share-based payments 4.4 2.4
Gains on derivative financial instruments — (2.8)
Net foreign exchange differences (1.0) 0.3
Decrease in provisions (11.4) ( 7. 3)
Working capital movements:
– Increase in inventories (13.0) (75.7)
– Increase in receivables (41.6) (6 8.1)
– Increase in payables 40.2 58.4
Cash generated from operating activities 132.3 7.4
Included within the cash generated from operating activities is a defined benefit pension scheme employer’s contribution of £2.5m (2021: £5.0m).
26. Reconciliation of net cash flow to movements in net debt
2022
£m
2021
£m
Decrease in cash and cash equivalents in the year (18.3) (82.7)
Cash flow from decrease in debt 76.1 15.8
Decrease/(increase) in net debt resulting from cash flows 57.8 (66.9)
Deferred consideration added on acquisitions (2.0) (0.9)
Other debt added on acquisitions (6.6) (7.5)
Non-cash movement in lease liabilities and lease receivables (111.3) (68.0)
Other non-cash items
1
1.4 8.0
Exchange differences (18.3) 8.5
Increase in net debt in the year (79.0) (126.8)
Net debt at 1 January (365.0) (238.2)
Net debt at 31 December (444.0) (365.0)
1. Other non-cash items relates to the fair value movement of debt and derivative financial instruments recognised in the year which does not give rise to a cash inflow or outflow.
187SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Notes to the consolidated financial statements
for the year ended 31 December 2022
26. Reconciliation of net cash flow to movements in net debt continued
Net debt is defined as follows:
2022
£m
2021
£m
Non-current assets:
Derivative financial instruments 0.2 —
Lease receivables 1.2 2.9
Current assets:
Derivative financial instruments 1.6 0.2
Lease receivables 0.1 0.8
Cash at bank and on hand 130.1 14 5.1
Current liabilities:
Lease liabilities (56.5) (50.7)
Interest-bearing loans and borrowings (0.8) —
Deferred consideration (0.7) (1.1)
Other financial liabilities — (0.4)
Derivative financial instruments — (0.5)
Non-current liabilities:
Lease liabilities (251.2) (210.4)
Interest-bearing loans and borrowings (266.1) (249.6)
Deferred consideration (1.8) (0.7)
Derivative financial instruments (0.1) —
Other financial liabilities — (0.6)
Net debt (444.0) (365.0)
27. Analysis of net debt
At 31
December
2021
£m
Cash flows
£m
Acquisitions
£m
Non-cash
items
1
£m
Exchange
differences
£m
At 31
December
2022
£m
Cash at bank and on hand 14 5.1 7.7 (26.0) — 3.3 130.1
Lease receivables 3.7 (0.4) — (2.0) — 1.3
148.8 7.3 (26.0) (2.0) 3.3 131.4
Liabilities arising from financing activities
Financial assets – derivative financial instruments 0.2 — — 1.6 — 1.8
Debts due within one year (2.0) 1.8 (1.3) — — (1.5)
Debts due after one year (250.9) 0.9 (3.9) (0.2) (13.9) (268.0)
Lease liabilities (261.1) 73.8 (3.4) (109.3) (7.7) (307.7)
(513.8) 76.5 (8.6) (107.9) (21.6) (575.4)
Net debt (365.0) 83.8 (34.6) (109.9) (18.3) (444.0)
1. 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, movements between debts due within one
year and after one year, and non-cash movements in lease liabilities.
28. Retirement benefit obligations
The Group operates a number of pension schemes, four (2021: four) of which provide defined benefits based on final pensionable salary. Of these
schemes, one (2021: one) has assets held in a separate trustee administered fund and three (2021: three) are overseas book reserve schemes. The
Group also operates a number of defined contribution schemes, all of which are independently managed.
There is one pension plan in The Netherlands which is classified as a multi-employer defined benefit scheme under IAS 19, but is recognised in
the Consolidated 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 (the industry-wide
pension plan for the construction materials industry (“BPF HiBiN”)), is equal to the required contribution each year. The coverage ratio of the multi-
employer union plan increased to 109% as at 31 December 2022 (2021: 102.5%). The pension premium percentage was increased to 25.2% (2021:
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 c0.1% 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, including amounts charged to interest and Other items, was £7.4m (2021: £6.9m), of which a charge of
£0.2m (2021: £0.6m) related to defined benefit pension schemes and £7.2m (2021: £6.3m) related to defined contribution schemes.
188 SIG Annual Report and Accounts 2022
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 which is the
largest scheme of the Group, as at 31 December 2019 was concluded in March 2021 and showed that the market value of the scheme’s assets was
£196.3m and their actuarial value covered 102% of the benefits accrued to members after allowing for expected future increases in pensionable
salaries. As part of the funding discussions the Group paid an additional one-off contribution of £2.5m into the Plan in July 2021 to accelerate plans to
achieve a secondary funding target. On 30 June 2016 the UK defined benefit pension scheme was closed to future benefit accrual. The next triennial
valuation as at 31 December 2022 will commence shortly.
In 2018 an asset-backed funding arrangement was put in place to fund the triennial pension deficit identified by the previous valuation as at 31
December 2016 and to increase security of the Plan. 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 a 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 balance of receivables assigned to the managed pool is disclosed in Note 15. The level of customer receivables
assigned to the managed pool has increased by £10.7m during the year in order to provide additional security to the Trustees following the refinancing
of the Group’s debt in 2021 with associated security changes. This does not change the level of annual distribution or commitment to the Plan.
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 certain
agreed funding levels are reached.
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.
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.
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 £nil (2021: £0.2m) relating to the defined benefit pension schemes, was
£0.2m (2021: £0.6m). This is net of £0.3m credit included within Other items relating to the member options exercise undertaken during the year.
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 2022 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.
189SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Notes to the consolidated financial statements
for the year ended 31 December 2022
28. Retirement benefit obligations continued
Consolidated balance sheet liability
The balance sheet position in respect of the four defined benefit schemes can be summarised as follows:
2022
£m
2021
£m
Pension liability before taxation (23.0) (10.7)
Related deferred tax asset 1.7 2.1
Pension liability after taxation (21.3) (8.6)
The actuarial loss of £14.3m (2021: £9.1m gain) for the year, together with the associated deferred tax charge of £0.5m (2021: £0.1m credit) has been
recognised in the Consolidated statement of comprehensive income. In addition a deferred tax credit of £nil (2021: £0.4m credit) has been recognised
in the Consolidated income statement.
Of the above pension liability before taxation, £15.7m (2021: £2.2m) relates to wholly or partly funded schemes and £7.3m (2021: £8.5m) relates to the
overseas unfunded schemes. The liability in relation to the UK scheme has increased during the year due to an increase in gilt yields causing a loss
on scheme assets, partially offset by a reduction in the liabilities due to an increase in the discount rate, reflecting a significant increase in corporate
bond yields over the period.
The movement in the pension liability before taxation in the year can be summarised as follows:
2022
£m
2021
£m
Pension liability at 1 January (10.7) (25.1)
Current service cost (0.5) (0.4)
Payment of unfunded benefits 0.3 0.3
Contributions 2.5 5.0
Net finance cost — (0.2)
Past service credit – plan amendment (included within Other items) 0.3 —
Actuarial (loss)/gain (14.3) 9.1
Effect of changes in exchange rates (0.6) 0.6
Pension liability at 31 December (23.0) (10.7)
The principal assumptions used for the IAS 19 actuarial valuation of the UK scheme (the largest scheme of the Group) were:
2022
%
2021
%
Rate of increase in salaries
1
n/a n/a
Rate of fixed increase of pensions in payment 1.9% 2.0%
Rate of increase of LPI pensions in payment 3.0% 3.2%
Discount rate 4.9% 1.8%
Inflation assumption 3.2% 3.4%
1. 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 22.5 years (2021: 22.6 years). The life
expectancy on retirement at age 65 of a male employee currently aged 45 years is 22.9 years (2021: 23.1 years). The life expectancy for a female
employee beyond the normal retirement age of 65 is 23.9 years (2021: 24.0 years). The life expectancy on retirement at age 65 of a female employee
currently aged 45 years is 25.5 years (2021: 25.6 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£1.4m. If the rate of inflation increased/decreased by 0.1% this would increase/decrease the
Group’s gross pension scheme deficit by c£0.4m. If the life expectancy for employees increased by one year the Group’s gross pension scheme
deficit would increase by c£4.5m. 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 2022 is 16 years (2021: 17 years).
190 SIG Annual Report and Accounts 2022
The fair value of assets held at the balance sheet date were:
2022
£m
2021
£m
Equities 17.6 43.0
Corporate and government bonds 62.1 89.5
Investment funds 8.8 15.3
Property 6.6 8.1
Cash and net current assets 6.2 16.4
Total fair value of assets 101.3 172.3
All equity and debt instruments have quoted prices in active markets and can be classified as Level 1 and 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:
2022
£m
2021
£m
Fair value of assets 101.3 172.3
Present value of scheme liabilities (124.3) (183.0)
Net liability recognised in the Consolidated balance sheet (23.0) (10.7)
The overall expected rate of return is based upon market conditions at the balance sheet date.
Amounts recognised in the Consolidated income statement in respect of these defined benefit schemes are as follows:
2022
£m
2021
£m
Current service cost 0.5 0.4
Past service credit – plan amendment (included within Other items) (0.3) —
Net finance cost — 0.2
Amounts recognised in the Consolidated income statement 0.2 0.6
Analysis of the actuarial loss/(gain) recognised in the Consolidated statement of comprehensive income in respect of the schemes:
2022
£m
2021
£m
Actual return less expected return on assets (70.4) 0.8
Effect of changes in demographic assumptions 0.8 0.7
Effect of changes in financial assumptions 58.6 8.8
Impact of liability experience (3.3) (1.2)
Remeasurement of the defined benefit liability (14.3) 9.1
The remeasurement of the net defined benefit liability is included within the Consolidated statement of comprehensive income.
191SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Notes to the consolidated financial statements
for the year ended 31 December 2022
28. Retirement benefit obligations continued
Movements in the present value of the schemes’ liabilities were as follows:
2022
£m
2021
£m
Present value of schemes’ liabilities at 1 January (183.0) (198.6)
Current service cost (0.5) (0.4)
Interest on pension schemes’ liabilities (3.1) (2.5)
Benefits paid 6.2 9.3
Payment of unfunded benefits 0.3 0.3
Effect of changes in exchange rates (0.6) 0.6
Past service credit – plan amendment (included within Other items) 0.3 —
Remeasurement gains/(losses):
Actuarial gain arising from changes in demographic assumptions 0.8 0.7
Actuarial loss arising from changes in financial assumptions 58.6 8.8
Actuarial loss due to liability experience (3.3) (1.2)
Present value of schemes’ liabilities at 31 December (124.3) (183.0)
Movements in the fair value of the schemes’ assets were as follows:
2022
£m
2021
£m
Fair value of schemes’ assets at 1 January 172.3 173.5
Finance income 3.1 2.3
Actual return less expected return on assets (70.4) 0.8
Contributions from sponsoring companies 2.5 5.0
Benefits paid (6.2) (9.3)
Fair value of schemes’ assets at 31 December 101.3 172.3
29. Commitments and contingencies
a) Capital commitments
2022
£m
2021
£m
The purchase of property, plant and equipment contracted but not provided for 0.1 0.1
At 31 December 2022 the Group is also committed to further licence costs of £1.9m (2021: £10.1m) in relation to the SAP implementation project and
other licence fees. £0.9m of this commitment has been already recognised as an onerous contract provision at 31 December 2022, with £1.0m in
total remaining to be recognised in the income statement over the period 2022 to 2026.
b) Lease commitments
The Group has various lease contracts that have not yet commenced as at 31 December 2022. The future lease payments for these non-cancellable
lease contracts are £0.3m within one year (2021: £0.9m), £0.1m within five years (2021: £3.4m) and nil thereafter (2021: £1.8m).
Information on the Group’s leasing arrangements is included in Note 23.
c) Contingent liabilities
Legal claim
As noted in Note 21, two of SIG’s wholly owned subsidiaries in Benelux are subject to legal proceedings brought by a customer in connection with
the installation of insulation at an industrial facility in Belgium. Those subsidiaries sold an insulation product manufactured by a third party, and made
requested adaptations to the product prior to selling it. The claim relates to the adaptations.
Subsequent to the year-end, the Group has obtained additional independent technical expert input on the matter, which is currently being discussed
with our customer. This matter may give rise to a possible further obligation whose existence will be confirmed only by the occurrence of uncertain
future events not wholly within the control of the Group. Given the outcome of the matter remains highly uncertain at this stage, the Group cannot
estimate the possible further financial impact in the event that the subsidiaries were determined to have any further obligation arising from this matter.
Further information about the matter and its possible outcomes are not provided, as such disclosures could prejudice the position and interests of the
Group in this matter.
192 SIG Annual Report and Accounts 2022
Other
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 £11.7m (2021: £9.9m). Of this amount, £5.2m (2021: £4.7m) relates to a standby letter of credit issued by HSBC Bank plc in respect of the
Group’s insurance arrangements.
As disclosed in the Statement of significant accounting policies, SIG Building Systems Limited have taken advantage of the exemption available under
Section 479A of the Companies Act 2006 in respect of the requirement for audit. As a condition of the exemption, the Company has guaranteed the
year end liabilities of the entity until they are settled in full.
As part of the disposal of the Building Plastics business in 2017 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 £0.8m (2021: £1.1m). based on the remaining future rent
commitment at 31 December 2022. No provision has been made in these Consolidated financial statements as it is not considered likely that any loss
will be incurred in connection with this.
30. 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 2022, SIG incurred expenses of £0.2m (2021: £0.6m) 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,
is set out below in aggregate for each of the categories specified in IAS 24 “Related Party Disclosures”.
2022
£m
2021
£m
Short term employee benefits 7. 9 6.7
Termination and post-employment benefits 0.1 —
IFRS 2 share option charge 2.9 1.5
10.9 8.2
31. Subsidiaries
Details of the Group’s subsidiaries, all of which have been included in the Consolidated financial statements, are shown on pages 217 to 219.
32. Post balance sheet events
There are no post balance sheet events requiring adjustment or disclosure in the Consolidated financial statements.
193SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
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.
Alternative performance measures are not a substitute for or superior to statutory IFRS measures.
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 the end of the reporting period. Measures presented are aligned with the key performance measures used in the business and as
included in the Strategic Report.
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. Net debt excluding the
impact of IFRS16 is no longer relevant for financial covenant purposes but is still monitored for comparative purposes.
Note
2022
£m
2021
£m
Reported net debt 27 444.0 365.0
Lease liabilities recognised in accordance with IFRS 16 (285.0) (239.1)
Lease receivables recognised in accordance with IFRS 16 1.3 3.7
Other financial liabilities recognised in accordance with IFRS 16 — (1.0)
Net debt excluding the impact of IFRS 16 160.3 128.6
b) Leverage
Leverage is one of the covenants applicable to the Revolving Credit facility and is used as a key performance metric for the Group. It is calculated as
net debt divided by the last twelve months underlying EBITDA.
2022
£m
2021
£m
Underlying operating profit 80.2 41.4
Add back:
Depreciation of right-of-use assets and property, plant and equipment 73.2 68.3
Amortisation of computer software 3.2 3.4
Underlying EBITDA 156.6 113.1
Reported net debt 444.0 365.0
Leverage 2.8x 3.2x
Leverage excluding the impact of IFRS 16 is calculated as follows:
2022
£m
2021
£m
Underlying operating profit 80.2 41.4
Impact of IFRS 16 (8.6) (4.3)
Underlying operating profit excluding impact of IFRS 16 71.6 37.1
Add back:
Depreciation excluding impact of IFRS 16 12.2 11.2
Amortisation of computer software 3.2 3.4
Underlying EBITDA excluding the impact of IFRS 16 87.0 51.7
Net debt excluding the impact of IFRS 16 160.3 128.6
Leverage excluding the impact of IFRS 16 1.8x 2.5x
194 SIG Annual Report and Accounts 2022
c) 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. Underlying revenue is revenue from continuing operations excluding non-core businesses.
UK
Interiors
£m
UK
Exteriors
£m
Total UK
£m
France
Interiors
£m
France
Exteriors
£m
Total
France
£m
Germany
£m
Benelux
£m
Ireland
£m
Poland
£m
Total
Group
£m
Statutory and underlying
revenue 2022 702.6 445.2 1,147. 8 218.4 465.6 684.0 4 57.8 115.9 108.3 230.7 2,744.5
Statutory and underlying
revenue 2021 5 07.4 422.2 929.6 195.3 406.0 601.3 393.2 92.4 88.2 186.7 2,291.4
% change year on year:
Underlying revenue 38.5% 5.4% 23.5% 11. 8% 14.7% 13.8% 16.4% 25.4% 22.8% 23.6% 19.8%
Impact of currency — — — 0.6% 0.6% 0.5% 0.6% 0.7% 0.6% 3.9% 0.6%
Impact of acquisitions (17.0)% — (9.4)% — — — (0.7)% — — — (4.8)%
Impact of working days 1.4% 1.3% 1.3% — (0.5)% (0.3)% — (1.0)% 0.5% 0.5% 1.4%
Like-for-like sales 22.9% 6.7% 15.4% 12.4% 14.8% 14.0% 16.3% 25.1% 23.9% 28.0% 17.0%
d) Operating margin
This is used to enhance understanding and comparability of the underlying financial performance of the Group and is calculated as underlying
operating profit as a percentage of underlying revenue.
2022
£m
2021
£m
Underlying revenue 2 ,744.5 2,291.4
Underlying operating profit 80.2 41.4
Operating margin 2.9% 1.8%
e) Free cash flow
Free cash flow represents the cash available after supporting operations, including capital expenditure and the repayment of lease liabilities, and before
acquisitions and any movements in funding. Operating cash flow represents free cash flow before interest, financing, costs of refinancing and tax.
These measures are used to enhance understanding and comparability of the cash generation of the Group.
2022
£m
2021
£m
Decrease in cash and cash equivalents in the year (18.3) (82.7)
Add back:
Net cash flow on the purchase of businesses 26.0 10.1
Settlement of amounts payable for previous purchases of businesses 1.3 0.5
Investment in financial assets 0.2 —
Repayment of borrowings 1.4 200.3
Proceeds from borrowings — (251.5)
Settlement of derivative financial instruments — (0.8)
Free cash flow 10.6 (124.1)
Add back:
Finance costs paid 30.1 36.3
Finance income received (1.3) (0.7)
Other refinancing cash costs
1
1.1 4.0
Tax paid 14.3 10.4
Operating cash flow 54.8 (74.1)
1. Includes costs accrued in the prior year and paid in the current year. Excludes the make-whole payment in the prior year of £12.9m which is included in the finance costs paid line.
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), underlying net finance
costs (as set out in Note 5) and average trade working capital to sales ratio. Average trade working capital to sales ratio is calculated as the average
trade working capital each month end (net inventory, gross trade creditors, net trade receivables and supplier rebates receivable) divided by
underlying annual revenue.
195SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
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 2022 and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards;
• the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting
Practice; 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 2022
which comprise:
Group Parent company
Consolidated income statement for the year ended 31 December 2022 Company balance sheet as at
31 December 2022
Consolidated statement of comprehensive income for the year ended 31 December 2022 Company statement of changes
in equity for the year ended
31 December 2022
Consolidated balance sheet as at 31 December 2022 Related notes 1 to 16 to the financial
statements including a summary of
significant accounting policies
Consolidated statement of changes in equity for the year ended 31 December 2022
Consolidated cash flow statement for the year ended 31 December 2022
Related notes 1 to 32 to the financial statements, including a summary of significant accounting policies
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and UK adopted
international accounting standards. 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).
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 believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group and parent 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.
The 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.
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:
• Confirming our understanding of management’s going concern assessment which included the preparation of the base case cash forecast and the
reasonable worst-case scenario covering the going concern period until 31 March 2024. We also engaged with management early to ensure all key
risk factors were considered in their assessment;
• Obtaining management’s going concern assessment, including the cash forecast for the going concern period through to 31 March 2024 and
testing this for arithmetical accuracy. Management modelled a downside scenario in its cash forecasts in order to incorporate unexpected changes
to the forecasted liquidity of the Group;
• Checking the consistency of information used in management’s assessment with the annual plan and information obtained from other areas of
the audit;
196 SIG Annual Report and Accounts 2022
• Obtaining agreements for the Secured Notes and Revolving Credit Facility to verify the nature of facilities, repayment terms, covenants, and other
conditions. This included the agreements associated with the increase to the Revolving Credit Facility. Other than the increase to the Revolving
Credit Facility, where the terms remained consistent with the original facility, we confirmed there had been no changes to existing facilities;
• Assessing the continued availability of the facilities to the Group through the going concern period and ensuring completeness of covenants
identified by management;
• Challenging 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 and industry benchmarks;
• Challenging management’s consideration of a reasonable worst-case scenario, evaluating whether the impact of cost-inflation had been
appropriately included and whether climate risk may materially impact the going concern assessment;
• Considering management’s reverse stress test and performing independent reverse stress testing in order to identify and understand what factors
and how severe a downside scenario would have to be to result in the Group utilising all liquidity or breaching a financial covenant during the going
concern period;
• Assessing the plausibility of management’s downside scenarios, including the reverse stress test, by comparing to third-party data, including
industry and broker reports, for indicators of contradictory evidence, including market growth expectations and broker consensus on expected
outturn of the Group and performance of the industry;
• Considering the amount and timing of mitigating factors under the Group’s control that could preserve cash if required; and
• Reviewing the Group’s going concern disclosures included in the annual report in order to assess whether they were appropriate and in conformity
with the reporting standards.
Key Observations
• At 31 December 2022 the Group has committed facilities of €300m Secured Notes and a Revolving Credit Facility of £90m to November 2026
and May 2026 respectively. The Revolving Credit Facility was undrawn at 31 December 2022. The Group also had a cash balance of £130.1m
at 31 December 2022.
• The results from both management’s evaluation and our independent sensitivity analysis and reverse stress testing indicate that a scenario whereby
a decline in performance is severe enough to cause a liquidity issue and covenant breach is considered remote.
• Our consideration of other evidence, including industry and broker reports, did not contradict the assumptions in management’s forecasts.
Additionally, we did not identify events or conditions in the period to 31 March 2024, or in the look-forward period, that may cast doubt on the
Group’s ability to continue as a going concern.
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 for the period to 31 March 2024.
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.
Overview of our audit approach
Audit scope • We performed an audit of the complete financial information of five components and audit procedures on specific balances for
a further three components.
• The components where we performed full or specific audit procedures accounted for 92% of Underlying operating profit, 99%
of Underlying profit before tax, 91% of Revenue and 89% of Total assets.
Key audit matters • Impairment of goodwill, intangible assets, property, plant and equipment (PPE) and Right-of-use assets (ROUA).
• Misstatement of supplier rebate income and the associated receivable.
Materiality • Overall Group materiality of £3.5m which represents 4.4% of underlying operating profit.
197SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Independent auditor’s report
to the members of SIG plc
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, the potential impact of climate change
and other factors such as recent Internal audit results when assessing the level of work to be performed at each component.
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 eight components covering entities within the United Kingdom (including the parent company),
France, Germany, Poland, and Ireland which represent the principal business units within the Group.
Of the eight components selected, we performed an audit of the complete financial information of five components (“full scope components”) which
were selected based on their size or risk characteristics. For the remaining three components (“specific scope components”), 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 92% (2021: 90%) of the Group’s underlying operating profit, being
the measure used to calculate materiality, 99% (2021: 94% of the Group’s underlying loss before tax) of the Group’s underlying profit before tax, 91%
(2021: 92%) of the Group’s Revenue and 89% (2021: 88%) of the Group’s Total assets. For the current year, the full scope components contributed
56% (2021: 40%) of the Group’s underlying operating profit, 48% (2021: 47% of the Group’s underlying loss before tax) of the Group’s underlying profit
before tax, 71% (2021: 72%) of the Group’s Revenue and 69% (2021: 77%) of the Group’s Total assets. The specific scope components contributed
36% (2021: 50%) of the Group’s underlying operating profit, 51% (2021: 47% of the Group’s underlying loss before tax) of the Group’s underlying profit
before tax, 20% (2021: 20%) of the Group’s Revenue and 20% (2021: 11%) 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. We also instructed two locations to perform specified procedures over certain aspects of revenue, receivables, and cash.
Of the remaining components that together represent 8% of the Group’s underlying operating profit, none are individually greater than 5% of the
Group’s underlying operating profit. For these 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 to respond to any potential
risks of material misstatement to the Group financial statements.
Changes from the prior year
The Group scope was consistent with the prior year.
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 five
full scope components, audit procedures were performed on three of these directly by the primary audit team and two by component audit teams.
Of the three specific scope components, audit procedures were performed by component audit teams for all. Where the work was performed by
component auditors, we determined the appropriate level of involvement to enable us to determine that sufficient audit evidence had been obtained
as a basis for our opinion on the Group as a whole.
The Group audit team continued to follow a programme of planned visits that has been designed to ensure that the Senior Statutory Auditor, and
other Group Partners and team members, visit all full scope and other key locations. During the current year’s audit cycle, visits and in-person
meetings were undertaken by the primary audit team with the component teams in France, Germany and Ireland. These visits involved discussing
the audit approach with the component team and any issues arising from their work, meeting with local management, and reviewing relevant audit
working papers on risk areas. The primary team interacted regularly with the component teams, where appropriate, during various stages of the
audit, reviewed relevant working papers and were responsible for the scope and direction of the audit process. At critical periods of the audit, we
increased the use of online collaboration tools to facilitate team meetings, information sharing and the evaluation, review and oversight of component
teams. We requested more detailed deliverables from component teams, and we utilised fully the interactive capability of EY Canvas, our global audit
workflow tool, to review remotely the relevant underlying work performed. The Senior Statutory Auditor is responsible for the UK component teams.
For the UK components, communication has been maintained throughout the audit covering the same areas described above applicable to all non-
UK component teams. This, together with the additional procedures performed at Group level, gave us appropriate evidence for our opinion on the
Group financial statements.
198 SIG Annual Report and Accounts 2022
Climate change
There remains increased interest from stakeholders as to how climate change will impact companies. The Group has determined that the most
significant future impact from climate change on its operations will be the removal of fossil fuels from the Group’s fleet of vehicles. These effects are
explained on pages 47 to 53 in the required Task Force for Climate related Financial Disclosures and on pages 56 to 61 in the principal risks and
uncertainties. They have also explained their climate commitments on pages 26 to 36, including ‘Net zero carbon by 2035 at the latest’ and ‘Zero SIG
waste to landfill by 2025’. All of these disclosures form part of the “Other information,” rather than the audited financial statements. Our procedures
on these unaudited disclosures therefore consisted solely of considering whether they are materially inconsistent with the financial statements or our
knowledge obtained in the course of the audit or otherwise appear to be materially misstated, in line with our responsibilities on “Other information”.
In planning and performing our audit we assessed the potential impacts of climate change on the Group’s business and any consequential material
impact on its financial statements.
The Group has explained in the Statement of significant accounting policies how they have assessed the impact of climate change on the carrying
value of non-current assets and the impact on forecasts used in the impairment review and the assessments of going concern and longer term
viability. Management concluded these considerations did not have a material impact on the Group in the current year or over the next three years.
Our audit effort in considering the impact of climate change on the financial statements was focused on evaluating management’s assessment of
the impact of climate risk, physical and transition, and their climate commitments. As part of this evaluation, we performed our own risk assessment,
supported by our climate change internal specialists, to determine the risks of material misstatement in the financial statements from climate change
which needed to be considered in our audit.
We also challenged the Directors’ considerations of climate change risks in their assessment of going concern and viability and associated
disclosures. Where considerations of climate change were relevant to our assessment of going concern, these are described above.
Based on our work we have not identified the impact of climate change on the financial statements to be a key audit matter or to impact a key
audit matter.
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.
199SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Independent auditor’s report
to the members of SIG plc
Risk Our response to the risk
Key observations communicated
to the Audit and Risk Committee
Impairment of goodwill, intangible
assets, property, plant and
equipment (“PPE”), and right-of-use
assets (“ROUA”)
Refer to Accounting policies (pages
139 and 143); and Note 11 of the
Consolidated financial statements
(pages 163 to 166).
The Group balance sheet includes
goodwill, intangible assets, PPE,
and ROUA totalling £491.7m
(2021: £434.6m).
In accordance 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. Impairment tests can include
significant 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 assumptions or adverse
performance could have a significant
impact on the available headroom and
any impairment that may be required.
In the current year, this risk specifically
relates to the Benelux cash-generating
unit (“CGU”). Additionally, indicators
may exist that reversal of previously
recorded impairment is appropriate.
In the current year, this risk specifically
relates to the UK Interiors CGU.
Indicators of Impairment or Reversal of Impairment
We audited management’s impairment assessment including their consideration of
indicators for impairment or reversal of impairment. We considered whether other
indicators existed which were not identified by management.
Valuation Model
We understood the methodology behind, and tested, the discounted cash-flow
model used by management to perform the impairment test for each of the relevant
CGUs per the requirements of IAS 36 Impairment of Assets.
We tested the clerical accuracy of the model and challenged the allocation of central
assets 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, including the budgeting process.
We challenged whether any ‘indicators’ of impairment reversal exist and whether they
are sufficiently satisfied in order to recognise any reversal of previous impairment
charges.
Key assumptions in the valuation
We evaluated the key underlying assumptions within the VIU calculation including the
forecasts, discount rates, and long-term growth rates.
We evaluated the impact of cost-inflation, the Russian invasion of Ukraine, and
climate risk on the assumptions.
We challenged the underlying forecast in management’s 2023 budgets and 2024-
2025 medium-term plan. Our challenge focused on the cost-inflation pressures and
growth assumptions.
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.
We applied sensitivities to the long-term growth rates used in the model by
benchmarking to alternative source of evidence, we noted management’s rates were
comparable and the model was not overly sensitive to this change.
For the Benelux CGU, we performed our own sensitivities on the key assumptions to
understand whether a reasonable change in assumptions would materially change
the conclusions reached by management.
For the UK Interiors CGU, we challenged management as to whether current
performance, and status of the turnaround plan, represented a reason to reverse
previous impairments of PPE and ROUA recorded in 2020.
Disclosures
We assessed the disclosures 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.
The primary audit team performed audit procedures over this risk area covering
100% of the risk amount.
An impairment charge of £15.8m against
Benelux goodwill, PPE and ROUA has
been appropriately recorded.
Due to the challenging economic
environment, the sensitivity to a
downside case and current profitability
levels not yet reaching pre-impairment
levels, we agree there is insufficient
evidence to support a reversal of
previous impairment in the UK
Interiors CGU.
We reviewed the disclosures included
within the financial statements and
consider them appropriate.
200 SIG Annual Report and Accounts 2022
Risk Our response to the risk
Key observations communicated
to the Audit and Risk Committee
Misstatement of supplier rebate
income and associated receivable
Refer to Accounting policies (pages
141 to 142 and page 150); and Notes
15 and 16 of the Consolidated financial
statements (page 170 to 172)
In 2022, income from Supplier Rebates
totalled £349.5m (2021: £261.4m)
with a receivable balance as at 31
December 2022 of £125.9m (2021:
£88.0m).
The terms of agreements with suppliers
can be complex and varied. Judgement
and estimation uncertainty is present in
relation to supplier rebates, in particular
where amounts receivable are tiered
based on volumes purchased or where
volumes are estimated, for example
where arrangements span the year
end. There is opportunity through
management override of controls or
error to either overstate or understate
the balance of supplier rebates
recognised.
We focused our audit procedures on the areas where management apply judgement
and estimation, where the processing is either manual or more complex, and
where the value is high. In particular, where amounts receivable are tiered based
on volumes purchased or where volumes are estimated, for example where
arrangements span the year end.
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 recognised and the year end receivable.
Using the confirmations received, we reconciled income recognised in the period and
the receivable recorded at the year end.
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.
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 disclosed 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 eight full and specific
scope locations, which covered 97% of the risk amount associated to supplier rebate
income, and 95% of the risk amount associated to supplier rebates receivable.
The income recognised in the year and
the balance sheet position at year end
are appropriately recorded.
We reviewed the disclosures included
within the financial statements and
consider them appropriate.
In the prior year, our auditor’s report included key audit matters in relation to potential impairment of investments in subsidiary undertakings and the
recoverability of receivables due from subsidiary undertakings in the parent company, and classification of Other Items in the Income Statement.
In the current year, we consider these risks to have reduced versus the prior year given the improved financial performance of the Group and the
reduction in the level of Other Items recognised in the Income Statement.
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 £3.5m (2021: £3.0m), which is 4.4% of underlying operating profit (2021: 0.5% of gross margin). We
believe that underlying operating profit provides us with the most relevant performance measures to the stakeholders of the Group and is therefore an
appropriate basis for materiality. The increase in materiality year on year is reflective of the improved financial performance of the Group. The basis of
materiality represents a change versus the prior year and was selected because underlying operating profit is a key focus for management and those
charged with governance and, due to the improvement in operating profit versus the prior year, was a more appropriate measure upon which to base
materiality, and gave a materiality value reflective of the performance of the Group.
We determined materiality for the Parent Company to be £3.5m (2021: £3.0m), which is 1.0% (2021: 1.0%) of equity being £4.3m, however we have
capped this at the materiality for the Group.
During the course of our audit, we reassessed initial materiality but this did not result in any changes.
201SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Independent auditor’s report
to the members of SIG plc
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% (2021: 50%) of our planning materiality, namely £1.75m (2021: £1.5m). We have set performance materiality at this percentage
due to 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 £0.4m to £0.8m (2021: £0.3m to £0.6m).
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit and Risk Committee that we would report to them all uncorrected audit differences in excess of £0.175m (2021: £0.15m),
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 131, including the Strategic Report and the
Governance reports (Corporate Governance Report, Nominations Committee Report, Directors’ Report, Audit and Risk Committee Report, Directors’
Remuneration Report, and Directors’ Responsibilities Statement), 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 this gives rise to 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.
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
202 SIG Annual Report and Accounts 2022
Corporate Governance Statement
We have reviewed 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 Code specified for our review by the Listing
Rules.
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 66;
• 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 pages 66 to 67;
• Directors’ statement on whether it has a reasonable expectation that the Group will be able to continue in operation and meets its liabilities set out
on page 66;
• Directors’ statement on fair, balanced and understandable set out on page 100;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 92;
• The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on page 92; and
• The section describing the work of the Audit and Risk Committee set out on pages 94 to 100.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 131, 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 above, 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.
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,
which are directly relevant to specific assertions in the financial statements, are those that relate to the reporting framework (UK adopted
International Accounting Standards, the Companies Act 2006 and the 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 minutes of meetings of the Board of
Directors, Remuneration Committee, Nominations Committee, and the Audit and Risk Committee (which we also observed in attendance). We also
considered 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.
203SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Independent auditor’s report
to the members of SIG plc
• Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures
involved inquiries of Group management, those charged with governance and legal counsel, as well as journal entry testing, with a focus on manual
consolidation journals and journals indicating significant or unusual transactions based on our understanding of the business. Through our testing
we challenged the assumptions and judgements made by management in respect of significant one-off transactions in the year and significant
accounting estimates as referred to in the key audit matters section above. At a component level, our full and specific scope component audit
team’s procedures included inquiries of component management, journal entry testing, and focused testing, including in respect of the key audit
matter of supplier rebate income and the associated receivable. We also leveraged our data analytics platform in performing our work on the order
to cash processes to assist in identifying higher risk transactions for testing. 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 inquiries were made with the component teams to confirm the details of any instances of non-compliance with laws and regulations.
This was reported via interoffice audit deliverables based on the procedures detailed in the previous paragraph. Additionally, the Group audit
team communicates any instances of non-compliance with laws and regulations to component teams through regular interactions throughout the
audit cycle. There were no instances of non-compliance with laws and regulations that we concluded would have a material impact on the Group
consolidated financial statements.
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 and Risk 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 five years, covering the years ending
31 December 2018 to 31 December 2022.
• The audit opinion is consistent with the additional report to the Audit and Risk 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
7 March 2023
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.
204 SIG Annual Report and Accounts 2022
Five-year summary
Statutory basis
Total
2018
£m
Total
2019
£m
Total
2020
£m
Total
2021
£m
Total
2022
£m
Revenue 2,431.8 2,16 0.6 1,874.5 2,291.4 2,744.5
Operating profit/(loss) 26.2 ( 87.9 ) (160.0) 14.0 56.2
Finance income 0.5 0.5 0.7 0.7 1.3
Finance costs (16.4) (25.3) (35.3) (30.6) (30.0)
Profit/(loss) before tax 10.3 (112.7) (194.6) (15.9) 27.5
Profit/(loss) after tax 4.1 (124.1) (201.2) (28.3) 15.5
Earnings/(loss) per share (p) 3.0 (21.0) (23.1) (2.4) 1.3
Total dividend per share (p) 3.75 1.25 0.0 0.0 0.0
Underlying basis
1
Underlying
2018
£m
Underlying
2019
£m
Underlying
2020
£m
Underlying
2021
£m
Underlying
2022
£m
Revenue 2,3 47.2 2,143.0 1,872.7 2,291.4 2,744.5
Operating profit/(loss) 70.4 42.5 (53.1) 41.4 80.2
Finance income 0.5 0.5 0.7 0.7 1.3
Finance costs (15.9) (25.3) (23.7) (22.8) (29.9)
Profit/(loss) before tax 55.0 17.7 (76.1) 19.3 51.6
Profit/(loss) after tax 40.1 1.4 (8 6 .1) 3.7 37.2
Earnings/(loss) per share 6.8 0.2 (9.9) 0.3 3.2
1. Underlying represents the results before Other items. See the Statement of significant accounting policies for further details.
All underlying numbers are stated excluding the trading results attributable to businesses identified as non-core.
205SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Notes
2022
£m
2021
£m
Fixed assets
Investments 5 2 67.6 267. 6
Tangible fixed assets 6 0.6 0.3
Intangible assets 7 0.3 0.6
268.5 268.5
Current assets
Debtors – due within one year 8 580.8 496.7
Cash at bank and in hand 91.1 119.9
671.9 616.6
Current liabilities
Creditors: amounts falling due within one year 9 245.8 248.3
Provisions: amounts falling due within one year 12 0.9 4.5
246.7 252.8
Net current assets 425.2 363.8
Total assets less current liabilities 693.7 632.3
Creditors: amounts falling due after one year 10 264.1 249.6
Provisions: amounts falling due after one year 12 — 4.0
Net assets 429.6 378.7
Capital and reserves
Called up share capital 14 118.2 118 .2
Treasury shares reserve 14 (16.4) (12.5)
Merger reserve 14 104.0 104.0
Capital redemption reserve 14 0.3 0.3
Share option reserve 14 8.6 4.4
Exchange reserve 14 (0.2) (0.2)
Cash flow hedging reserve 14 1.4 (0.3)
Cost of hedging reserve 14 0.1 0 .1
Retained profits 14 213.6 164.7
Shareholders' funds 429.6 378.7
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 profit after tax for the financial year ended 31 December 2022 of £48.9m (2021: £1.0m).
The financial statements were approved by the Board of Directors on 7 March 2023 and signed on its behalf by:
Gavin Slark Ian Ashton
Director Director
Registered in England: 00998314
Company balance sheet
as at 31 December 2022
206 SIG Annual Report and Accounts 2022
Company statement of changes in equity
for the year ended 31 December 2022
Called up
share
capital
£m
Share
premium
account
£m
Treasury
shares
reserve
£m
Merger
reserve
£m
Capital
redemption
reserve
£m
Share
option
reserve
£m
Exchange
reserve
£m
Cash flow
hedging
reserve
£m
Cost of
hedging
reserve
£m
Retained
(losses)/
profits
£m
Total
equity
£m
At 1 January 2021 118. 2 4 47.7 (0.2) 104 0.3 2.0 (0.2) 2.1 0.1 (284.0) 390.0
Profit after tax — — — — — — — — — 1.0 1.0
Other comprehensive
expense — — — — — — — (2.4) — — (2.4)
Total comprehensive
(expense)/income — — — — — — — (2.4) — 1.0 (1.4)
Purchase of
treasury shares — — (12.3) — — — — — — — (12.3)
Credit to share
option reserve — — — — — 2.6 — — — — 2.6
Settlement of
share options — — — — — (0.2) — — — — (0.2)
Capital reduction — (4 47.7) — — — — — — — 4 47.7 —
At 31 December 2021 118. 2 — (12.5) 104.0 0.3 4.4 (0.2) (0.3) 0.1 164.7 378.7
Profit after tax — — — — — — — — — 48.9 48.9
Other comprehensive
expense — — — — — — — 1.7 — — 1.7
Total comprehensive
(expense)/income — — — — — — — 1.7 — 48.9 50.6
Purchase of
treasury shares — — (4.0) — — — — — — — (4.0)
Credit to share
option reserve — — — — — 4.4 — — — — 4.4
Settlement of
share options — — 0.1 — — (0.2) — — — — (0.1)
At 31 December 2022 118.2 — (16.4) 104.0 0.3 8.6 (0.2) 1.4 0.1 213.6 429.6
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.
207SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
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 derivative financial instruments which are stated at their fair value.
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 pages 145 to 147.
The separate financial statements have been prepared in accordance with Financial Reporting Standard 101, “Reduced Disclosure Framework” (“FRS
101”) and the Companies Acts 2006 as applicable to companies using FRS 101. FRS 101 sets out a reduced disclosure framework for a qualifying
entity that would otherwise apply the recognition, measurement and disclosure requirements of UK adopted 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.
The Company’s financing facilities comprise a €300m fixed rate bond (secured notes), due November 2026, and £90m RCF which expires in May 2026.
The secured notes are subject to incurrence based covenants only, and the RCF has a leverage maintenance covenant which is only effective if the
facility is over 40% drawn at a quarter end reporting date. The RCF was undrawn at 31 December 2022.
The Company 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 2024.
The Company has no trading operations and therefore its ability to continue as a going concern is dependent on the trading of its subsidiaries and the
forecasts for the Group as a whole. The Directors have considered the Group’s forecasts which support the view that the Group and Company will be
able to continue to operate within its banking facilities and comply with its banking covenants. The Directors have considered the following principal
risks and uncertainties that could potentially impact the Group and Company’s ability to fund its future activities and adhere to its banking covenants,
including:
• high levels of product inflation, and current economic and political uncertainties across Europe, all potentially impacting market demand;
• potentially recessionary conditions in the coming year; and
• material shortages impacting our ability to meet demand and hence having an impact on forecast sales.
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 and the Directors have also reviewed mitigating actions that could be taken. Details are set out in the Viability statement review on
pages 66 and 67.
The Directors have considered the impact of climate-related matters on the going concern assessment, but the impact on the Company is not
considered to create any material uncertainties related to events or conditions that could cast significant doubt upon the Company’s ability to
continue as a going concern.
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 2024 and the Directors therefore consider it appropriate to adopt the going concern basis in preparing the 2022 financial statements.
New standards, interpretations and amendments adopted
A number of amendments and interpretations apply for the first time in 2022, 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:
(i) paragraph 79(a)(iv) of IAS 1 and
(ii) (paragraph 73(e) of IAS 16 “Property, Plant and Equipment”
Company statement of significant accounting policies
208 SIG Annual Report and Accounts 2022
• 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 142.
Derivative financial instruments
The accounting policy for derivative financial instruments is consistent with that of the Group as detailed on pages 146 and 147.
Financial assets and liabilities
The accounting policy for financial assets and liabilities is consistent with that of the Group as detailed on pages 145 and 146. The Company has
assessed on a forward looking basis the ECLs 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 143.
Intangible assets
The accounting policy for intangible fixed assets is consistent with that of the Group as detailed on page 143.
Leases
The accounting policy for leases is consistent with that of the Group as detailed on page 144.
Foreign currency
The accounting policy for foreign currency is consistent with that of the Group as detailed on pages 139 and 140.
Taxation
The accounting policy for taxation is consistent with that of the Group as detailed on page 142.
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.
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.
Recognition of deferred tax assets
Deferred tax assets are recognised for unused tax attributes losses to the extent that it is probable that taxable profit will be available against which
the attributes losses can be utilised, after consideration of available taxable temporary differences. The Company has £10.6m (2021: £10.7m) of
potential deferred tax assets relating to cumulative UK tax losses and other deductible timing differences which are currently unrecognised as
there is not considered to be sufficient convincing evidence at 31 December 2022 that sufficient future taxable profits will be available to allow the
utilisation of the deductible temporary differences, in particular given the cumulative historic and current year tax loss position in the UK. This required
significant management judgement to determine the likely timing and level of future taxable profits and whether sufficient, convincing evidence was
available at 31 December 2022 to recognise the previously unrecognised deferred tax assets. If the Company were able to recognise all unrecognised
deferred tax assets, profit and equity would have increased by £10.6m. Further details are disclosed in Note 13.
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.
209SIG Annual Report and Accounts 2022
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Governance
Financials
Company statement of significant accounting policies
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 (2021: £267.6m).
Of the £267.6m net book value at 31 December 2022, £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 2022 the carrying value is supported by the future operating cashflows and no
further impairments are recognised. No reversal of the previous impairment is recognised as there is not sufficient evidence that the factors leading to
the impairment in previous years no longer exist and that the reverse indicators of impairment are sufficiently satisfied at 31 December 2022.
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 Company 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 11 of the Consolidated financial statements.
Impairment of amounts owed by subsidiary undertakings
At 31 December 2022 the Company has recognised amounts owed by subsidiary undertakings of £574.6m (2021: £492.3m). 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 £74.0m has been recognised
at 31 December 2022 (2021: £169.9m) 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 2022 and level of ECL provision required in the future.
210 SIG Annual Report and Accounts 2022
Notes to the Company financial statements
1. Profit for the year
As permitted by Section 408 of the Companies Act 2006 the Company has elected not to present its own Company income statement for the year.
SIG plc reported a profit after tax for the financial year ended 31 December 2022 of £48.9m (2021: £1.0m).
The Auditor’s remuneration for audit services to the Company was £1.1m (2021: £0.6m).
2. Share-based payments
The Company had four share-based payment schemes in existence during the year ended 31 December 2022 (2021: four). The Company recognised
a total credit to equity of £2.0m (2021: £0.7m) 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.
3. Dividends
No interim dividend was paid during 2022 (2021: nil) and the Directors are not proposing a final dividend for the year ended 31 December 2022
(2021: no dividend). Total dividends paid during the year was £nil (2021: £nil). No dividends have been paid between 31 December 2022 and the
date of signing the Company financial statements.
See Note 14 for further details on distributable reserves.
4. Staff costs
Particulars of employees (including Directors and employees recharged to the Company from a UK subsidiary) are shown below:
2022
£m
2021
£m
Employee costs during the year amounted to:
Wages and salaries 7.8 8.2
Social security costs 1.3 1.0
IFRS 2 share option charge 2.0 0.7
Pension costs 0.3 0.3
Total 11.4 10.2
The average monthly number of persons that these costs relate to is as follows:
2022
Number
2021
Number
Administration 63 58
5. Fixed asset investments
Fixed asset investments comprise investments in subsidiary undertakings, as follows:
2022
£m
2021
£m
Cost
At 1 January 650.9 650.9
Additions — —
At 31 December 650.9 650.9
Accumulated impairment charges
At 1 January 383.3 383.3
Impairment charge — —
At 31 December 383.3 383.3
Net book value
At 31 December 267.6 267. 6
At 1 January 267.6 2 6 7. 6
Details of the Company’s subsidiaries are shown on pages 217 to 219.
Of the £267.6m (2021: £267.6m) investment net book value, £263.7m (2021: £263.7m) relates to SIG Trading Limited, the largest UK trading subsidiary.
At 31 December 2022 the carrying value is supported by the future operating cashflows and no further impairments are recognised. No reversal of
the previous impairment is recognised as there is not sufficient evidence that the factors leading to the impairment in previous years no longer exist
and that the reverse indicators of impairment are sufficiently satisfied at 31 December 2022.
A more detailed sensitivity analysis of the Group’s significant CGUs is given in Note 11 of the Consolidated financial statements.
211SIG Annual Report and Accounts 2022
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Notes to the Company financial statements
6. Tangible fixed assets
The movement in the year was as follows:
Land and buildings
Freehold land
and buildings
£m
Leasehold
improvements
£m
Plant and
machinery
£m Total £m
Cost
At 1 January 2021 0.1 0.5 0.6 1.2
Additions — 0.1 — 0.1
Disposals — (0.2) — (0.2)
At 31 December 2021 0.1 0.4 0.6 1.1
Additions — 0.3 0.1 0.4
Disposals — (0.1) — (0.1)
At 31 December 2022 0.1 0.6 0.7 1.4
Depreciation
At 1 January 2021 0.1 0.2 0.6 0.9
Charge for the year — 0.1 — 0.1
Disposals — (0.2) — (0.2)
At 31 December 2021 0.1 0.1 0.6 0.8
Charge for the year — 0.1 — 0.1
Disposals — (0.1) — (0.1)
At 31 December 2022 0.1 0.1 0.6 0.8
Net book value
At 31 December 2022 — 0.5 0.1 0.6
At 31 December 2021 — 0.3 — 0.3
7. Intangible fixed assets
The movement in the year was as follows:
Computer
software
£m
Total
£m
Cost
At 1 January 2021 1.6 1.6
Additions — —
Disposals (0.1) (0.1)
At 31 December 2021 1.5 1.5
Additions — —
Disposals (0.5) (0.5)
At 31 December 2022 1.0 1.0
Depreciation
At 1 January 2021 0.6 0.6
Charge for the year 0.3 0.3
At 31 December 2021 0.9 0.9
Charge for the year 0.2 0.2
Disposals (0.4) (0.4)
At 31 December 2022 0.7 0.7
Net book value
At 31 December 2022 0.3 0.3
At 31 December 2021 0.6 0.6
Included within computer software additions are assets in the course of construction of £nil (2021: £nil).
212 SIG Annual Report and Accounts 2022
8. Debtors
2022
£m
2021
£m
Amounts owed by subsidiary undertakings 574.6 492.3
Derivative financial instruments 1.6 0.2
Prepayments 4.6 4.2
Total 580.8 496.7
The Group recognises an allowance for 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 £74.0m (2021: £169.9m) has been recognised at
31 December 2022 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
2022
£m
2021
£m
Lease liabilities — 0.3
Amounts owed to subsidiary undertakings 235.5 234.7
Derivative financial instruments — 0.5
Accruals and deferred income 10.3 12.8
Total 245.8 248.3
Amounts owed to subsidiary undertakings are measured at amortised cost, are unsecured and bear interest at rates between 0.0% and 7.25%.
10. Creditors: amounts falling due after one year
2022
£m
2021
£m
Secured notes 264.0 249.6
Derivative financial instruments 0.1 —
Total 264.1 249.6
On 18 November 2021 the Company completed a restructuring of its debt arrangements. This comprised the issuance of €300m secured notes at a
coupon of 5.25% and a new revolving credit facility of £50m. The proceeds from the secured notes were used to repay the existing private placement
notes and £70m term loan, and the previous revolving credit facility of £25m was cancelled. This was accounted for as en extinguishment of the
previous arrangements, and arrangement fees and the loss on modification which were being amortised over the term of the previous facilities were
written off in the prior year.
Secured notes
The €300m secured notes are repayable on 30 November 2026. The notes are guaranteed by certain subsidiaries of the Group and are secured by a
first priority floating charge over the assets of the Company and the relevant UK subsidiaries and by a security interest over the shares, material bank
accounts and intercompany receivables of the non-UK guarantor subsidiaries. The notes are recognised at amortised cost, net of arrangement fees
of which £2.0m is unamortised at 31 December 2022 (2021: £2.5m).
The contractual repayment profile of the current secured notes and the previous private placement notes is shown below:
2022 2021
£m
Fixed interest
rate
% £m
Fixed interest
rate
%
Total gross amount repayable in 2026 266.0 5.25% 252.1 5.25%
Unamortised fees (2.0) (2.5)
264.0 5.25% 249.6 5.25%
213SIG Annual Report and Accounts 2022
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Governance
Financials
Notes to the Company financial statements
11. Leases
The Company as a lessee
The Company had a lease contract for a property which was exited from during the year. 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:
Buildings
£m
Total
£m
At 1 January 2021 1.4 1.4
Depreciation expense (0.1) (0.1)
Modification (0.9) (0.9)
Impairment (0.4) (0.4)
At 31 December 2021 — —
Depreciation expense — —
Modification — —
Impairment — —
At 31 December 2022 — —
Set out below is the carrying amount of the lease liability and the movement during the year:
Total
£m
At 1 January 2021 1.6
Accretion of interest —
Payments (0.2)
Modification (1.1)
At 31 December 2021 0.3
Accretion of interest —
Payments (0.1)
Disposals (0.2)
At 31 December 2022 —
2022
£m
2021
£m
Current — 0.3
Non-current — —
— 0.3
The following are the amounts recognised in profit or loss:
2022
£m
2021
£m
Depreciation expense of right-of-use asset — 0 .1
Interest expense on lease liability — —
Impairment of right-of-use asset — 0.4
Total amount recognised in profit or loss — 0.5
The Company had total cash outflows for leases of £0.1m in 2022 (2021: £0.2m). The Company had no non-cash additions to right-of-use assets and
lease liabilities in 2022 (2021: none). There are no future cash outflows relating to leases that have not yet commenced in 2022 (2021: none).
214 SIG Annual Report and Accounts 2022
12. Provisions
Onerous lease
£m
Dilapidations
£m
Onerous
contracts
£m
Total
£m
At 1 January 2022 0.2 0.2 8.1 8.5
Utilised (0.1) — (6.1) (6.2)
Release of unused amounts (0.1) (0.2) (1.2) (1.5)
Unwinding of discount — — 0.1 0.1
At 31 December 2022 — — 0.9 0.9
2022
£m
2021
£m
Amounts falling due within one year 0.9 4.5
Amounts falling due after one year — 4.0
Total 0.9 8.5
The dilapidation provision relates to the contractual obligation to reinstate leasehold property to its original state of repair. During the year a final
settlement was agreed with the Landlord, with the remaining unused provision being released to the profit and loss account.
The onerous lease provision relates to a vacant property. The future rental costs are included in the lease liability, with the right-of-use asset impaired
to reflect the future cost not covered through sublease income. During the year a final settlement was agreed with the Landlord, with the remaining
unused provision being released to the profit and loss account.
The onerous contract provision relates to licence fee commitments where no future economic benefit is expected to be obtained, principally in relation
to the SAP S/4HANA implementation following the change in scope of the project in previous years. The remaining cost will be incurred in 2023.
13. Deferred tax
Deferred tax has not been recognised on trading losses and other deductible temporary differences of £42.4m (2021: £42.2m) carried forward on the
basis that the realisation of their future economic benefit is uncertain. The unrecognised potential deferred tax asset in relation to this is £10.6m (2021:
£10.7m). At the balance sheet date, no deferred tax liability is recognised on temporary differences relating to undistributed profits of the overseas
subsidiaries. The Company 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 value of the losses has increased in the year due to the main rate of UK corporation tax increasing from 19%
to 25%.
14. Capital and reserves
a) Called up share capital
2022
£m
2021
£m
Authorised:
1,390,000,000 ordinary shares of 10p each (2021: 1,390,000,000) 139.0 139.0
Allotted, called up and fully paid:
1,181,556,977 ordinary shares of 10p each (2021: 1,181,556,977) 118 . 2 118.2
During 2022 the Company allotted no shares (2021: no shares) from the exercise of share options.
b) Treasury shares
Treasury shares relate to shares purchased by the EBT to satisfy awards made under the Group’s share plans which are not vested and beneficially
owned by employees. 9,360,742 (2021: 24,708,134) shares were purchased during the year at a weighted average cost of 42.7p (2021: 50.5p) per
share, and 297,920 (2021: 18,608) shares were issued relating to the settlement of share awards. A total of 33,877,777 own shares are outstanding at
31 December 2022 (2021: 24,814,955).
215SIG Annual Report and Accounts 2022
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Governance
Financials
Notes to the Company financial statements
14. Capital and reserves continued
c) Reserves
Details of all movements in reserves are shown in the Company statement of changes in equity.
The share premium represents the amounts above the nominal value received for shares sold.
The share option reserve represents the cumulative equity-settled share option charge under IFRS 2 “Share-based payments” less the value of any
share options that have been exercised.
The cash flow hedging and cost of hedging reserves represents movements in the Consolidated balance sheet as a result of movements in the fair
value of cash flow hedges which are taken directly to reserves as detailed in the Statement of significant accounting policies.
The merger reserve principally represents the premium on ordinary shares issued in a previous year through the use of a cash box structure.
The Company maintains its positive distributable reserves position and continues to review the Group structure to optimise reserves. At 31 December
2022 the Company had distributable reserves of £247.3m (2021: £190.2m).
15. Guarantees and contingent liabilities
a) Guarantees
At 31 December 2022 the Company had provided guarantees of £nil (2021: £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 £5.2m (2021: £4.7m). This standby
letter of credit, issued by HSBC Bank plc, is in respect of the Group’s insurance arrangements.
As disclosed in the Statement of significant accounting policies, SIG Building Systems Limited have taken advantage of the exemption available under
Section 479A of the Companies Act 2006 in respect of the requirement for audit. As a condition of the exemption, the Company has guaranteed the
year end liabilities of the entity until they are settled in full.
16. Related party transactions
Remuneration of key management personnel
The total remuneration of the Directors of the Group Board, who the Company considered to be its key management personnel, is provided in the
audited part of the Directors’ remuneration report on pages 121 to 126. In addition, the Company recognised a share-based payment charge under
IFRS 2 of £2.0m (2021: £0.7m) with a credit to the share option reserve of £2.0m (2021: £0.7m).
216 SIG Annual Report and Accounts 2022
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 2022 is disclosed below. Unless otherwise stated, the share capital disclosed
comprises ordinary or common shares which are held by subsidiaries of SIG plc.
Group companies
Fully owned subsidiaries (United Kingdom)
A. M. Proos & Sons Limited (England) (ii) (xxii)
A. Steadman & Son (Holdings) Limited (England) (ii) (xxii)
A. Steadman & Son Limited (England) (ii) (xxii)
Aaron Roofing Supplies Limited (England) (ii) (xxii)
Acoustic and Insulation Manufacturing Limited (England) (ii) (xxii)
Acoustic and Insulation Materials Limited (England) (ii) (xxii)
Advanced Cladding & Insulation Group Limited (England) (ii) (xxii)
Ainsworth Insulation Limited (England) (ii) (xi)
Ainsworth Insulation Supplies Limited (England) (ii) (xiii)
AIS Insulation Supplies Limited (England) (ii) (xxii)
Alltrim Plastics Limited (England) (ii) (xxii)
Asphaltic Roofing Supplies Limited (England) (ii) (xxii)
Auron Limited (England) (ii) (xix)
BBM (Materials) Limited (England) (ii) (xxii)
Bowller Group Limited (England) (ii) (xxii)
Building Solutions (National) Limited (England) (xxii)
Buildspan Holdings Limited (England) (ii) (vii)
C. P. Supplies Limited (England) (ii) (xxii)
Cairns Roofing and Building Merchants Limited (England) (ii) (xxii)
Ceilings Distribution Limited (England) (i) (ii) (xxii)
Cheshire Roofing Supplies Limited (England) (ii) (xxii)
+Clyde Insulation Supplies Limited (Scotland) (ii) (xxii)
Clydesdale Roofing Supplies (Leyland) Limited (England) (ii) (xxii)
CMS Danskin Acoustics Limited (England) (ii) (xxii)
Coleman Roofing Supplies Limited (England) (ii) (xxii)
Complete Construction Products Limited (England) (xxii)
CPD Distribution Plc (England) (ii) (xxii)
Dane Weller Holdings Limited (England) (ii) (xxii)
+Danskin Flooring Systems Limited (Scotland) (ii) (xxii)
Davies & Tate plc (England) (ii) (xxii)
Drainex Limited (England) (ii) (viii)
Euroform Products Limited (England) (ii) (xxii)
+Fastplas Limited (Scotland) (ii) (xxii)
F30 Building Products Limited (England) (xxii)
Fibreglass Insulations Limited (England) (ii) (xxii)
Fireseal (North West) Limited (England) (ii) (xxii)
Firth Powerfix Limited (England) (ii) (vii)
Flex-R Limited (England) (ii) (ix)
Formerton Limited (England) (ii) (xxii)
Formerton Sheet Sales Limited (England) (ii) (xxii)
Franklin (Sussex) Limited (England) (ii) (xxii)
General Fixings Limited (England) (ii) (xxii)
G.S. Insulation Supplies Limited (England) (ii) (xxii)
Gutters & Ladders (1968) Limited (England) (ii) (xxii)
>HHI Building Products Limited (Northern Ireland) (ii) (xxii)
Hillsborough Investments Limited (England) (i) (ii) (xxiii)
Insulation & Machining Services Limited (England) (ii) (v)
Insulslab Limited (England) (ii) (xxii)
+J. Danskin & Company Limited (Scotland) (ii) (xxii)
John Hughes (Roofing Merchant) Limited (England) (ii) (xxii)
John Hughes (Wigan) Limited (England) (ii) (xxii)
Jordan Wedge Limited (England) (ii) (xxii)
K.D. Insulation Supplies Limited (England) (ii) (xxii)
Kem Edwards Limited (England) (ii) (xxii)
Kesteven Roofing Centre Limited (England) (ii) (xxii)
Kestral Construction Products Limited (England) (xxii)
Kitson’s Thermal Supplies Limited (England) (ii) (v)
Landsdon Holdings Limited (England) (ii) (xv)
Landsdon Limited (England) (ii) (x)
Leaderflush + Shapland Holdings Limited (England) (xxii)
Lifestyle Partitions and Furniture Limited (England) (ii) (vi)
London Insulation Supplies Limited (England) (ii) (xxii)
+MacGregor & Moir Limited (Scotland) (ii) (xxii)
Mayplas Limited (England) (ii) (ix)
MCP Fixings Limited ((England) (xxii)
Miers Construction Products Limited (England) (xxii)
Ockwells Limited (England) (ii) (vii)
Omnico (Developments) Limited (England) (ii) (xxii)
Omnico Plastics Limited (England) (ii) (xxii)
One Stop Roofing Centre Limited (England) (ii) (xxii)
Orion Trent Holdings Limited (England) (ii) (xvii)
Orion Trent Limited (England) (ii) (xi)
Penkridge Holdings Limited (England) (ii) (xxii)
Penlaw & Company Limited (England) (xxii)
Penlaw Fixings Limited (England) (xxii)
Penlaw Norfolk Limited (England) (xxii)
Penlaw Northwest Limited (England) (xxii)
Plastic Pipe Supplies Limited (England) (ii) (xxii)
Pre-Pour Services Limited (England) (ii) (xv)
Roberts & Burling Roofing Supplies Limited (England) (ii) (xxii)
Roof Shop Limited (England) (ii) (xxii)
Roofing Centre Group Limited (England) (ii) (xxii)
Roofing Material Supplies Limited (England) (ii) (xxii)
Roplas (Humberside) Limited (England) (ii) (xxii)
Group companies 2022
217SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Group companies 2022
Roplas (Lincs) Limited (England) (ii) (xxii)
Ryan Roofing Supplies Limited (England) (ii) (viii)
SAS Direct and Partitioning Limited (England) (ii) (xxii)
Scotplas Limited (England) (ii) (xxii)
Sheffield Insulations Limited (England) (i) (ii) (xxiii)
Shropshire Roofing Supplies Limited (England) (ii) (xxii)
SIG Building Solutions Limited (England) (ii) (xxii)
SIG Building Systems Limited (England) (xxii)
SIG Dormant Company Number Eight Limited (England) (ii) (iv)
SIG Dormant Company Number Eleven Limited (England) (ii) (xxii)
SIG Dormant Company Number Fourteen Limited (ii) (xxii)
SIG Dormant Company Number Nine Limited (England) (i) (ii) (xxii)
SIG Dormant Company Number Seven Limited (England) (i) (ii) (xxii)
SIG Dormant Company Number Six Limited (England) (ii) (xxii)
SIG Dormant Company Number Sixteen Limited (England) (ii) (xxii)
SIG Dormant Company Number Ten Limited (England) (i) (ii) (xvii)
SIG Dormant Company Number Three Limited (England) (i) (ii) (xxii)
SIG Dormant Company Number Two Limited (England) (i) (ii) (iv)
SIG EST Trustees Limited (England) (i) (ii) (xxii)
SIG European Holdings Limited (England) (i) (xxii)
SIG European Investments Limited (England) (xxii)
SIG Green Deal Provider Company Limited (England) (i) (ii) (xxii)
SIG Group Life Assurance Scheme Trustees Limited (England) (ii) (xxii)
SIG Hillsborough Limited (England) (xxii)
SIG (IFC) Limited (England) (xxii)
SIG International Trading Limited (England) (i) (xxii)
SIG Logistics Limited (England) (ii) (xxii)
SIG Manufacturing Limited (England) (xxii)
SIG Offsite Limited (England) (ii) (xxii)
SIG Retirement Benefits Plan Trustee Limited (England) (i) (ii) (xxii)
SIG Roofing Supplies Limited (England) (i) (ii) (xxii)
SIG Scots Co Limited (Scotland) (i) (xxii)
SIG Specialist Construction Products Limited (England) (ii) (xxii)
SIG Trading Limited (England) (i) (xxii)
S M Roofing Supplies Limited (England) (xxii)
Solent Insulation Supplies Limited (England) (ii) (xxii)
South Coast Roofing Supplies Limited (England) (ii) (xxii)
Specialised Fixings Limited (England) (ii) (xxii)
Specialist Fixings and Construction Products Limited (ii) (xxii)
Summers PVC (Essex) Limited (England) (ii) (xxii)
Support Site Limited (England) (i) (ii) (xxii)
T.A.Stephens (Roofing) Limited (England) (ii) (xxii)
Tenon Partition Systems Limited (England) (ii) (xxii)
The Coleman Group Limited (England) (ii) (xviii)
The Greenjackets Roofing Services Limited (England) (ii) (xv)
Thomas Smith (Roofing Centres) Limited (England) (ii) (xxii)
Tolway East Limited (England) (ii) (xxii)
Tolway Fixings Limited (England) (ii) (xxii)
Tolway Holdings Limited (England) (ii) (xxiv)
Trent Insulations Limited (England) (ii) (xxii)
Trimform Products Limited (England) (ii) (xxii)
TSS Plastics Centre Limited (England) (ii) (xxii)
Undercover Holdings Limited (England) (ii) (xxii)
Undercover Roofing Supplies Limited (England) (ii) (v)
United Roofing Products Limited (England) (ii) (xxii)
W.W. Fixings Limited (England) (ii) (xvi)
Warm A Home Limited (England) (ii) (xx)
Wedge Roofing Centres Holdings Limited (England) (ii) (xxii)
Wedge Roofing Centres Limited (England) (ii) (xxii)
Westway Insulation Supplies Limited (England) (ii) (xxii)
Weymead Holdings Limited (England) (ii) (xv)
William Smith & Son (Roofing) Limited (England) (ii) (xxii)
Window Fitters Mate Limited (England) (ii) (xxii)
Woods Insulation Limited (England) (ii) (xxii)
Workspace London Limited (England) (ii) (xxii)
Zip Screens Limited (England) (i) (ii) (xxii)
Fully owned limited partnership
+The 2018 SIG Scottish Limited Partnership (Scotland) (xxi)
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)
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
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
218 SIG Annual Report and Accounts 2022
Fully owned subsidiaries (overseas) (including registered office
addresses) continued
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 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 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
Thermodämm GmbH (Germany) – Maybachstrasse 14, 63456 Hanau-
Steinheim, Germany
WeGo Systembaustoffe GmbH (Germany) – Maybachstrasse 14, 63456
Hanau-Steinheim, Germany
Notes
(i) Directly owned by SIG plc
(ii) Dormant company
(iii) Ownership held in cumulative preference shares
(iv) Ownership held in ordinary shares and 12% cumulative
redeemable preference shares
(v) Ownership held in ordinary shares and preference shares
(vi) Ownership held in ordinary shares and deferred ordinary shares
(vii) Ownership held in ordinary shares and class A ordinary shares
(viii) Ownership held in ordinary shares and class B ordinary shares
(ix) Ownership held in ordinary shares, class A ordinary shares and
class B ordinary shares
(x) Ownership held in ordinary shares, class B ordinary shares and
class C ordinary shares
(xi) Ownership held in ordinary shares, class A ordinary shares, class
B ordinary shares and class C ordinary shares
(xii) Ownership held in ordinary shares and class E ordinary shares
(xiii) Ownership held in ordinary shares, class A ordinary shares, class
B ordinary shares, class C ordinary shares, class D ordinary
shares, class E ordinary shares, class F ordinary shares and class
G ordinary shares
(xiv) Ownership held in class A ordinary shares
(xv) Ownership held in class A ordinary shares and class B ordinary
shares
(xvi) Ownership held in class A ordinary shares, class B ordinary shares
and class C ordinary shares
(xvii) Ownership held in class A ordinary shares, class B ordinary shares
and preference shares
(xviii) Ownership held in class A ordinary shares, class B ordinary shares
and cumulative redeemable preference shares
(xix) Ownership held in class B ordinary shares and preference shares
(xx) Ownership held in class AA ordinary shares, class AB ordinary
shares, class AC ordinary shares, class AD ordinary shares, class
AE ordinary shares, class AF ordinary shares, class AG ordinary
shares, class B ordinary shares and class C ordinary shares
(xxi) Limited partner SIG Retirement Benefit Plan Trustee Limited
(xxii) Ownership held in ordinary shares
(xxiii) Ownership held in ordinary shares and cumulative preference
shares
(xxiv) Ownership held in ordinary shares, preference shares and
redeemable preference shares
219SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
Life President
Sir Norman Adsetts OBE, MA
General Counsel & Company Secretary
Andrew Watkins
Registered number
Registered in England
00998314
Corporate and Registered office
Adsetts House
16 Europa View
Sheffield Business Park
Sheffield
S9 1XH
Tel: +44 (0) 114 285 6300
Email: info@sigplc.com
Company website
www.sigplc.com
Listing details
Market Reference Sector
UK Listed
SHI.L Support Services
Registrars and transfer office
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
Auditor
Ernst & Young LLP
1 More London Place
London
SE1 2AF
Solicitors
Allen & Overy LLP
One Bishops Square
London
E1 6AD
Principal bankers
National Westminster Bank plc
250 Bishopsgate
London
EC2M 4AA
Barclays Bank plc
Level 25
1 Churchill Place
London
E14 5HP
BNP Paribas
London Branch
10 Harewood Avenue
London
NW1 6AA
Lloyds Bank plc
1 Lovell Park Road
Leeds
LS2 8DA
HSBC UK Bank plc
4th Floor
City Point
Leeds
LS1 2HL
Joint stockbrokers
Peel Hunt LLP
100 Liverpool Street
London
EC2M 2AT
Investec Bank plc
30 Gresham Street
London
England
EC2V 7QP
Financial public relations
FTI Consulting LLP
200 Aldersgate
Aldersgate Street
London
EC1A 4HD
Financial advisors
Lazard & Co Limited
50 Stratton Street
London W1 J8LL
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.
Company information
220 SIG Annual Report and Accounts 2022
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 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 Thursday 4 May 2023
Interim results 2023 Tuesday 8 August 2023
Full-year results 2023 March 2024
Annual Report and
Accounts 2023
posted to shareholders March/April 2024
Shareholder analysis at 31 December 2022
Size of shareholding
Number of
shareholders %
Number of
ordinary shares %
0 – 999 542 33.29% 212,575 0.02%
1,000 – 4,999 555 34.09% 1,261,462 0.11%
5,000 – 9,999 155 9.52% 1,051,185 0.09%
10,000 – 99,999 181 11.12% 6,244,590 0.53%
100,000 – 249,999 56 3.44% 9,434,465 0.80%
250,000 – 499,999 30 1.84% 10,15 8 , 871 0.86%
500,000 – 999,999 35 2.15% 25,217,621 2.13%
1,000,000+ 74 4.55% 1,12 7, 976, 20 8 95.46%
Total 1,628 100.00% 1,181,556,977 100.00%
221SIG Annual Report and Accounts 2022
Strategic report
Governance
Financials
222 SIG Annual Report and Accounts 2022
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SIG plc Annual Report and Accounts 2022
Registered office
Adsetts House
16 Europa View
Sheffield Business Park
Sheffield S9 1XH
T: +44 (0) 114 285 6300
E: info@sigplc.com
www.sigplc.com
Registered number: 00998314
Registered in England