A pivotal year:
accelerating to
the next level
Annual Report and Accounts 2021
1X_SRXpart1X_toXBusinessXModel_v122.indd 11X_SRXpart1X_toXBusinessXModel_v122.indd 1 11/03/2022 09:2411/03/2022 09:24
Revenue
£2,291.4m
2020: £1,874.5m
Like-for-like (“LFL”) sales growth*
24%
2020: 13% decline
Gross margin*
26.3%
2020: 25.1%
Underlying operating profit/(loss)*
£41.4m
2020 (restated): loss of £53.1m
Statutory loss before tax
(£15.9m)
2020 (restated): loss of £194.6m
Net debt (post-IFRS 16)
£365.0m
2020: £238.2m
Lost time injury frequency rate
(“LTIFR”) – 12m rolling basis*
11.8
2020: 12.7
Greenhouse gas (“GHG”)
emissions per £m of revenue*
23.0 metric tonnes
2020: 25.4 metric tonnes
*Refer to pages 28 to 29 for definition
Return to winning ways
• Group back to underlying profitability with
underlying operating profit of £41.4m vs
£53.1m loss in 2020, driven by market share
gains and margin discipline in challenging
supply markets.
• Strategy developing ahead of expectations,
reinforcing the value of SIG’s core model.
• Strength of the franchise enables our ability
to manage supply chain disruption and pass
through inflation.
• Leadership team further strengthened.
• €300m bond issue in November 2021 further
increases financial stability and flexibility.
Accelerating sales growth and
consistent margin progression
• Group LFL sales up 24%, and 8% on
non-Covid-19 affected 2019; H2 2021
LFL sales 15% above 2019.
• H2 2021 gross margin of 26.6%, 70bps up
on H1 2021 and 120bps up on H2 2020.
• Underlying operating profit margin of 1.8%;
rose consistently throughout 2021.
Relationships and reputation
regained
• Supplier partnerships helped secure scarce
inventory; availability and superior service
was reflected in a favourable customer
Net Promoter Score of 40.
• Empowered branches with flexibility and
tools to trade – rising people engagement
and growth go hand in hand.
• UK Interiors “Distributor of the year” in the
supply category (Builders Merchants Journal
(“BMJ”) awards); Larivière (France) “2021
Best Specialist Distributor” (Geste D’Or).
• SIG appointments made to key industry
association roles.
Net zero commitments set
• Net zero carbon by 2035: to be achieved by
migrating our fleet to electric and low-carbon
fuels and moving to greener energy suppliers.
• Zero SIG waste to landfill by 2025: through
reuse, recycling and reduction.
• SIG announced as a Zero Carbon Business
champion with CO
2
nstruct Zero.
EU strength shows
• EU sales represent c60% of the Group, with
2021 LFL sales up 17% vs 2020 and 11%
vs 2019.
• Particularly strong growth in France Exteriors
and Poland, LFL sales up 22% and 29%
respectively vs 2019.
UK turnaround faster than
forecast
• UK Exteriors LFL sales grew 21% vs 2019,
returning to an operating margin of >5%.
• 38% LFL sales growth and 2.5% gross
margin increase vs 2020 brought UK
Interiors back to profit in H2 2021.
• Decentralised operating model and branch
P&L accountability re-established;
experienced industry hires and return of
expertise drove improved product mix,
pricing and terms.
Acceleration of our strategy
• Confidence in achieving 3% operating
margin for 2023, which enables meaningful
cash generation.
• Clear path towards 5% operating margin in
the medium-term.
• Further investment in expertise, network,
digitalisation and modern fleet.
• “Born Green” – well positioned to capitalise
on the industry shift to sustainable
construction, backed by the progress on our
own carbon emissions – Scope 1 and 2
GHG emissions c17% lower than 2019.
Accelerating to
the next level
A pivotal year for SIG…
1X_SRXpart1X_toXBusinessXModel_v122.indd 21X_SRXpart1X_toXBusinessXModel_v122.indd 2 11/03/2022 09:2411/03/2022 09:24
Strategic report
2 Sustainability timeline
4 Our investment case
5 Chairman’s statement
8 At a glance
8 Where we are
10 What we do
12 Market review
14 Sustainability life cycle
16 Our business model
18 Chief Executive Officer’s review
28 Key performance indicators
30 Environmental, social and governance
53 Non-financial information statement
54 Risk
60 Financial review
Governance
68 Chairman’s introduction
70 Board of Directors
72 Corporate governance report
72 Board Leadership and
Company Purpose
84 Division of Responsibilities
88 Composition, Succession
and Evaluation
96 Audit, Risk and Internal Control
112 Directors’ Remuneration Report
128 Directors’ Responsibilities Statement
Financials
129 Consolidated income statement
130 Consolidated statement of
comprehensive income
131 Consolidated balance sheet
132 Consolidated statement of changes
in equity
133 Consolidated cash flow statement
134 Statement of significant accounting
policies
147 Critical accounting judgements and key
sources of estimation uncertainty
149 Notes to the consolidated financial
statements
200 Non-statutory information
202 Independent auditor’s report
213 Five-year summary
214 Company balance sheet
215 Company statement of changes in equity
216 Company statement of significant
accounting policies
219 Notes to the Company financial
statements
227 Group companies 2021
231 Company information
…in an eventful year
for our world…
…and in an important
year for the construction
industry
• The Covid-19 pandemic, unpredictable
lockdowns, workplace relocation and
constraints on travel and workforce
movement triggered broad supply and
demand shocks alongside significant
inflation in commodity prices.
• COP26 was significant, not just for
formalising governments’ net zero carbon
commitments, but effectively signalling the
end of coal-fired energy through the phasing
out of fossil fuel subsidies.
• Covid-19 induced remote working, combined
with growing recognition of the climate
emergency, shifted attitudes away from
carbon-intensive ways of doing business,
and accelerated the shift to digitalisation and
ecommerce.
• The after-effects of 2020-21 are likely to be
felt for years to come, potentially impacting
inflation and interest rates, disrupting politics
and industry structures, and changing
attitudes to energy cost and conservation.
See pages 12 to 13 for more details
• Demand and supply imbalances were the
most immediate impact – manufacturers
adjusted capacity, logistics networks were
disrupted and workforce migration was
constrained. Supply chains were caught
out by the initial 2020 lockdowns, then by
under-estimating the strength and length
of the rebound through 2021, resulting in
unusually high materials inflation and
“allocation” of limited supply.
• The diversion of spend from leisure to
renovation outlasted initial expectations.
This added to a longer-term structural
demand shift to replace or retrofit out-of-date
or non-compliant buildings – imperative
since it is estimated that >35% of European
emissions relate to buildings and
construction.
• Recognising this long-term demand shift,
suppliers have announced significant new
capacity plans in insulation and plasterboard,
implying the largest capacity changes in
a decade.
• With the increasing focus on sustainable
construction, a growing number of SIG’s
large suppliers and customers launched or
brought forward net zero carbon ambitions.
This will bring growing scrutiny to the carbon
intensity of products and supply chains, and
accelerate product innovation from new
technologies and new players e.g. in
non-traditional insulation materials.
• Digitalisation in construction continues to lag
other industries. However, labour shortages
increase the importance of offsite
construction and robotics. Adoption of
Building Information Modelling (“BIM”)
continues to grow, attention to lifecycle
carbon footprint adds significant product
data complexity, and customers’ desire for
multichannel distribution is increasing.
See pages 12 to 13 for more details
01SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
1X_SRXpart1X_toXBusinessXModel_v122.indd 11X_SRXpart1X_toXBusinessXModel_v122.indd 1 11/03/2022 09:2411/03/2022 09:24
Born Green
Sustainability and energy
efficiency have been central
to SIG for over 60 years.
SIG was founded by Ernest Adsetts in the
1950s and was born as a specialist insulation
marketing and distribution business. Energy
conservation is in our DNA, from taking
fibreglass into domestic housing insulation in
the 1950s, 60s and 70s, through to our current
product range which is meeting the ever
evolving needs of energy efficiency.
Over seven decades, SIG has been a leading
force for higher standards and greater focus
on the environment – our “Born Green”
heritage is never more relevant than today
and in the decade ahead.
Likewise, the commercial success factors
throughout our history – deep supplier
partnerships, specialist expertise,
empowered local teams, value-creating
M&A – remain fundamental to how we
will win in the future.
2007 – SIG began collecting and
reporting on carbon consumption and
disclosed environmental stewardship as
one of its core principles. In the 2007
annual report, our first environmental
report included environmental objectives
established at relevant levels within the
organisation, along with adetailed
policy statement.
1973–1979 – SIG led the UK construction
industry’s response to the energy crisis,
entering the new arena of energy
conservation. The Group seized the
opportunity presented by this and the
Government’s “Save it” campaign.
1981 – Sir Norman Adsetts joined, and
subsequently became Chairman of, the
Association for the Conservation of
Energy which proved to have great
success in increasing the awareness
of the need to save energy.
1987 – In the year coined the “Energy
efficiency year” by the Secretary of State
for Energy, Sir Norman was made an OBE
for his services to energy conservation.
1990s – Continual focus on energy
conservation drove higher insulation
standards and robust demand.
The Group benefitted from the UK
government’s allocation of finance for
the Home Energy Efficiency Scheme.
1957–1981
“Born Green” growing
federation of local branches
CEO, Sir Norman Adsetts,
focused on developing “New
technologies for insulation”
1982–2001
Flotation and international
expansion
During this period, the
Group grew from £30m
to £1bn revenue
2002–2008
Rapid growth and
diversification
The business tripled in size to
revenue of £3bn, with over
£0.5bn invested in acquisitions
1990: entered the UK Interiors market
1994: entered the mainland European
market with an acquisition in France
1996: entered the German
and Polish markets
1997: entered the UK roofing
and Irish markets
2000: entered the Dutch market
2007: entered the French
Exteriorsmarket
Sustainability timeline
02 SIG Annual Report and Accounts 2021
1X_SRXpart1X_toXBusinessXModel_v122.indd 21X_SRXpart1X_toXBusinessXModel_v122.indd 2 11/03/2022 09:2411/03/2022 09:24
2010 – Introduction of the UK Carbon
Reduction Commitment Energy Efficiency
Scheme (“CRC”).
2012 – SIG finished in the top 2% of
the published CRC league tables, for
reducing its carbon emissions 2011/2012.
2015-2019 – Divergence from
our traditional models in certain markets
and subsequent restructurings distracted
from our sustainability focus.
2021 – Sustainability commitments
launched (refer to page 30):
• Net zero carbon by 2035 at the latest
• Zero SIG waste to landfill by 2025
• Partner with manufacturers and
customers to reduce carbon
• Health & Safety leader
• Employer of choice
2009–2014
Restructuring and
constrained investment
Major restructuring undertaken
in 2009 alongside an equity
raise with a focus on cash
generation, debt reduction
and non-coredivestments
2015–2019
Change of strategic direction
The Group’s strategy was
focused on debt reduction with
a retail-like emphasis on
managing costs and inventory
2020–present day
Return to Growth strategy
based on time-honoured but
modernised SIG formula
2021 brings market share
recovery, rapid profit
turnaround and renewed focus
on sustainable construction
03SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
1X_SRXpart1X_toXBusinessXModel_v122.indd 31X_SRXpart1X_toXBusinessXModel_v122.indd 3 11/03/2022 09:2411/03/2022 09:24
Our purpose: to enable modern, sustainable
andsafe living and working environments
in thecommunities in which we operate.
Resilient, diversified and high potential franchise
in sustainable construction
New leadership team building a strong track
record
Proven business model
Clear path towards 5% operating margin and
opportunities to accelerate
• For 25 years a leading pan-European specialist provider of
selected interiors and exteriors solutions to the construction
industry, competitively advantaged through scale and expertise.
• “Born Green” in 1957 with decades of experience as a leading
force in energy efficient construction, well placed to benefit from
sustainability tailwinds and market growth in energy efficient
solutions, backed up by SIG’s own commitments to be net zero
carbon by 2035 at the latest.
• Rare multi-national platform, highly diversified by product,
geography, customer base and end-user mix, with leading
positions in relatively fragmented market segments.
• Experienced and motivated management team with strong track
records inside and outside SIG.
• Backed by a supportive shareholder base, with a successful
maiden bond issue in November 2021 providing additional
financial stability and flexibility.
• Strategy execution ahead of expectations, delivering above
market growth and consistent operating margin uplift since its
launch in mid-2020.
• Performance momentum into 2022.
• The seven pillar model of decentralised, entrepreneurial branch-
based teams, delivering superior service through deep supplier
partnerships, specialist expertise and logistics excellence, has
underpinned SIG’s success since our foundation.
• Tried and tested playbook in SIG’s core categories is also
applicable to adjacent specialist building materials markets
with similar characteristics.
• Long-run track record of profitable growth, scale-up and
expansion into new categories and geographies.
• Supportive structural market growth drivers: energy efficiency
categories likely to outpace construction.
• Step-change potential from portfolio businesses at different
stages in their path towards operating margins of 5%.
• Relentless focus on operational excellence underpinned by
capital-light investment and digitalisation.
• Fast-approaching cash generation with an increasing number
of attractive acquisition opportunities to accelerate growth.
Diversified growth potential with
a tried and tested business model
04 SIG Annual Report and Accounts 2021
Our investment case
1X_SRXpart1X_toXBusinessXModel_v122.indd 41X_SRXpart1X_toXBusinessXModel_v122.indd 4 11/03/2022 09:2411/03/2022 09:24
A strong Return to Growth
“2021 saw a step change in the Group’s
performance, driven by major strategic
initiatives initiated at the outset of the
Return to Growth strategy”
The Board is delighted with
the progress that has been
made under the Return to
Growth strategy and is
confident of further progress
in 2022 to the benefit of
all stakeholders.
Dear Shareholder,
2021 was a pivotal year for SIG, with the
Return to Growth strategy gathering
momentum and the Group returning to
underlying profitability. Our customers, supplier
partners and colleagues continue to affirm that
our focus on empowered and entrepreneurial
local teams, offering exceptional service and
expertise to our customers, is a successful
approach for building back our market share
and profitability.
The Group finished well ahead of the
expectations set at the beginning of the year.
Strong execution of the strategy across
the business, combined with a generally
favourable market backdrop, enabled the
Group to deliver a very encouraging set of
results, and to put solid foundations in place
for sustainable future growth.
The Executive Leadership Team now consists
of operating company leaders who all
have deep industry experience, and this is
complemented by strong central support from
functional leaders. I am very confident there
is a strong and balanced leadership team in
place to take the business further on its
growth journey.
The Board is pleased with the progress that
has been made and is confident that the
business will continue to deliver value for all
stakeholders as we move into the next phase
of the strategy.
Revenue
£2,291.4m
2020: £1,874.5m
Underlying profit/(loss)
before tax
£19.3m
2020 (restated): (£76.1m)
05SIG Annual Report and Accounts 2021
Strategic report Governance Financials
Chairman’s statement
1X_SRXpart1X_toXBusinessXModel_v122.indd 51X_SRXpart1X_toXBusinessXModel_v122.indd 5 11/03/2022 09:2411/03/2022 09:24
Strategic progress
Throughout the year, the Group has made
excellent progress in implementing a
consistent business model in all operating
companies and has ensured central functions
remain streamlined in line with our de-
centralised approach. The business has
continued to make great strides in re-
connecting with customers, driving a stronger,
local branch-led approach and restoring an
entrepreneurial and customer facing culture,
particularly across front-line teams. In addition,
efforts to strengthen supplier partnerships and
investment in local category expertise has
been crucial in mitigating and managing the
supply chain issues the industry experienced
throughout the year.
Greater focus on investment for growth,
including opening new branches in several
operating countries, upgraded ecommerce
capabilities and highly selective acquisitions,
coupled with enhanced operational processes,
systems and controls, has strengthened the
foundations for further market share recapture
and profitable growth.
As a result, the Group is back to profitability
earlier than expected on an underlying basis,
reporting an underlying profit before tax of
£19.3m. Notably, the UK business is once
again profitable, and France and Poland have
delivered record years. Group like-for-like sales
were up 24% on the prior year, and 8% up on
2019. The Board is increasingly confident that
the Group will reach 3% operating margin in
2023, trending to 5% in the medium-term.
We were delighted to complete a successful
refinancing in November 2021, which included
the Group’s first public bond issue, specifically
€300m of 5.25% fixed rate secured notes. This
transaction enabled us to refinance our
existing facilities well ahead of their maturity
dates and on more attractive terms. Together
with a new Revolving Credit Facility (“RCF”),
the notes further improve the Group’s financial
flexibility by extending the maturity profile of
the Group’s borrowings and increasing its
available liquidity.
Details of the strategy and a strategic update
can be found in theChief Executive Officer’s
review on pages 18 to 27.
Sustainability
During the year, a newly defined set of
sustainability commitments were developed
and approved at Board level. Our principles are
clear: we need to do the right thing for all
stakeholders and focus on where SIG can
make a positive difference both within our own
operations and in the industry as a whole. We
intend to focus on five fundamental areas:
Health & Safety, net zero carbon, zero SIG
waste to landfill, the reduction in carbon and
waste across our supply chain and becoming
an employer of choice in the building materials
distribution industry. The Board considers
these initiatives to be particularly important
for the long-term development and success
of the Group.
Further information can be found
on pages 30 to 52.
Governance and Board
The Group supports and sets high standards
in corporate governance, and this requires a
strong and effective Board. After the many
changes to Board membership in 2020 and
very early 2021, as set out in last year’s report,
we have had a year of greater stability, and I
believe the Board is operating effectively. This
is supported by the conclusions from our
external Board evaluation exercise conducted
in Autumn 2021. The relationship with Clayton,
Dubilier & Rice (“CD&R”) also continues
to work well and we benefit greatly from
their input.
Despite the ongoing challenges that this
year has presented and the restrictions on
physically meeting on a regular basis, the
Board continued its commitment to support
the Executive Leadership Team in the ongoing
execution of the Return to Growth strategy.
During the year, nominated Board members
also continued to fulfil the Board Employee
Engagement programme, hosting focus
groups with employees from across the Group
in order to gain greater understanding of
challenges and further insights into key areas
of focus. The programme continues to be a
valuable engagement tool benefitting both
employees and the Board.
The Board currently comprises ten Directors,
including two women, one man from a
non-white ethnic background, and two male
CD&R nominated Directors. This places us
significantly below our aspiration to achieve at
least the Hampton-Alexander target of 33%
women and this is something we will address
in our Board succession planning going
forward.
Further information can be found
on pages 68 to 128.
People and culture
People are integral to the delivery of our Return
to Growth strategy and sustainability
commitments.
The Board would like to thank all employees
for their continued commitment, resilience and
hard work throughout the year. Teams have
responded flexibly to changing Covid-19
circumstances and macro industry challenges,
always with a clear commitment to serving
customers. Throughout the pandemic, the
highest priority for the business has been to
ensure the safety and wellbeing of our people.
In line with our commitment to reconnect with
employees and provide greater opportunity
for communication and engagement across
the Group, a second annual employee
engagement survey was conducted, and the
Board was delighted to see improvements
across many focus areas. Inaddition, the
introduction of a Group-wide communications
platform has provided greater visibility between
operating countries, across all levels in
the Group, and increased peer to peer
engagement.
We remain focused on ensuring SIG is a fair,
inclusive and supportive working environment
for our people, and also for our customers,
suppliers, business partners and the
communities in which we work. We are
pleased that 81% of the respondents to our
recent employee survey answered positively
when asked if they feel that employees are
treated with respect regardless of their age,
gender, and cultural background. However,
we accept there is more we can do in this
area and are reviewing our approach for
2022 and beyond.
As the business focuses on strengthening
the foundations for growth, renewed emphasis
is being placed on the recruitment and
development of high-quality talent, measuring
and managing performance and ensuring
robust succession planning is in place to
ensure we have the right talent at all levels
to continue to deliver our strategy.
Further information can be found
on pages 40 to 47.
Group performance
2021 LFL sales over 2020 were heavily
distorted by the impact of the pandemic during
H1 2020, finishing up 24%. LFL sales were up
8% on 2019, a more meaningful comparator.
From the Spring onwards, the construction
industry was severely affected by well
publicised shortages of certain materials.
This constrained our ability to fully meet
customer demand, however, the impact of
input cost inflation, which we were largely able
LFL sales
24%
2020: (13%)
Underlying operating margin
1.8%
2020: (2.8%)
06 SIG Annual Report and Accounts 2021
Chairman’s statement
1X_SRXpart1X_toXBusinessXModel_v122.indd 61X_SRXpart1X_toXBusinessXModel_v122.indd 6 11/03/2022 09:2411/03/2022 09:24
Partner with manufacturers and customers
to reduce carbon
Our strategy
Our sustainability commitments
Responsible
actions
Winning
branches
Superior
service
Specialist
expertise
Valuable
partnerships
Highest
productivity
Focused
growth
See pages 18 to 27 for more details
See page 30 to 52 for more details
Health & Safety leader
Net zero carbon by 2035
Zero SIG waste to landfill
by 2025
Employer of choice
Sustainable construction
To enable modern, sustainable and safe living and working environments
inthecommunities in which we operate
Sustainable market leadership
• Grow our leadership positions and marketshare
• Operating margin of 3%, trending towards 5% in the medium-term
• Cash generation to reinvest in growth and support progressive dividend policy
to pass on to customers, provided a strong
tailwind to the reported level of growth in H2.
We reported an underlying operating profit of
£41.4m and underlying profit after tax of £3.7m.
This led to an increase in underlying earnings
per share from (10.0p) in 2020 to 0.3p.
Statutory loss after tax was £28.3m, with
a statutory loss per share of 2.4p.
As part of the Return to Growth strategy, the
Group always planned to revisit the financing
arrangements put in place in mid-2020. As
noted previously, we were delighted to be able
to conclude a successful refinancing in
November 2021, which provides the Group
increased flexibility as we execute the strategy.
No dividend is proposed for 2021. The next
key step for the business is to continue to
increase operating margin and, with that, also
return to sustainable cash generation. I am
confident that we are now very well placed
to do both.
Outlook
The Group continued to respond well to
exceptional circumstances over the last year.
With no direct exposure to Russia or Ukraine,
we are currently not seeing any significant
impact on our business arising from the
current conflict in Ukraine, but we will continue
to closely monitor that rapidly evolving situation.
Our deepest sympathies go out to the people
of Ukraine, and we are working on ways on
how best we can provide financial
and practical support to those affected.
As regards SIG and our outlook, the Return to
Growth strategy continues to gain momentum,
the organisation has further strengthened, and
we are seeing the results coming through.
SIG retains strong positions in its core markets,
and, notwithstanding the evolving geopolitical
uncertainties, the fundamentals of the markets
in which we operate remain robust. The Board
is delighted with the progress that has been
made under the Return to Growth strategy and
is confident of further progress in 2022 to the
benefit of all stakeholders.
The Board is grateful for the ongoing support
of shareholders and employees and remains
committed to leading the Group towards
its goals in delivering the strategy.
Andrew Allner
Chairman
10 March 2022
07SIG Annual Report and Accounts 2021
Strategic report Governance Financials
1X_SRXpart1X_toXBusinessXModel_v122.indd 71X_SRXpart1X_toXBusinessXModel_v122.indd 7 11/03/2022 09:2411/03/2022 09:24
Where we are
SIG is a leading supplier of
specialist insulation and
sustainable building products
and solutions to business
customers across Europe.
In our chosen interiors and exteriors markets
we are twice the size of the next largest
European player and the largest partner
for many of our suppliers.
We have a long history in categories and
segments that help to drive industry
sustainability trends, with >50% of Group
sales exposed to tightening energy
efficiency regulation.
Sustainable market leadership
We aspire to sustainable market
leadership in all our country markets:
• #1 or 2 market position;
• gaining share in priority categories;
• strong brand reputation and trust;
• leading net promoter scores;
• influencing the sector’s sustainability
agenda and fostering innovation; and
• operating margins at, or trending
towards, 5%.
Business overview markets
Market position
• In France, UK Exteriors and Poland we
have strong market positions, healthy
margins and gained share in 2021.
• In Ireland we have a strong business
which rebounded well from further
Covid-19 restrictions imposed in H1 2021.
• UK Interiors is recovering from a
period of share loss and profit decline,
posting 38% full-year LFL growth and
returning to profitability in H2 2021.
• Germany and Benelux have new and
highly experienced management and
are poised for profitable growth.
Sites
432
Employees
>6,800
Revenue
£2,291.4m
Underlying operating profit
£41.4m
08 SIG Annual Report and Accounts 2021
At a glance
1X_SRXpart1X_toXBusinessXModel_v122.indd 81X_SRXpart1X_toXBusinessXModel_v122.indd 8 11/03/2022 09:2411/03/2022 09:24
United Kingdom
France
Insulation and interiors Exteriors
Market
position
Revenue
£m
Underlying
operating
margin %
Share
gain
Trading
sites
Employees
Insulation and interiors #2
168 2,865
144 1,286
51 1,302
45 864
9 312
15 219
#2
#1
#1
507 (0.5)
195 5.7
393 0.9
187 3.4
88 3.2
92 (5.3)
422 5.9
406 4.3
Top
3
#1
Top
3
Top
3
Leading national
roofingspecialist
LiTT Insulation and
interiors
Larivière Exteriors
Roofing and Accessories
Germany
Poland
Rep of Ireland & NI
Benelux
09SIG Annual Report and Accounts 2021
Strategic report Governance Financials
2021
1X_SRXpart1X_toXBusinessXModel_v122.indd 91X_SRXpart1X_toXBusinessXModel_v122.indd 9 11/03/2022 09:2411/03/2022 09:24
What we do
We play a critical role in the construction industry,
providing local expertise alongside the highest levels
of customer service.
Expertise
Proximity
Service
SIG has established leading positions and an extensive
branch network across its core markets. Our integrated
networks and multichannel approach allow us greater
proximity to our customers to meet their needs. We
offer market-leading brands on an international scale
alongside a local focus on providing effective solutions.
SIG has a strong heritage of quality and reliability.
91% of customers agree that “SIG is a brand I trust”.
Our people go the extra mile to get our customers
the right product in the right place at the right time.
We help our valued partners deliver on their
promises, protect their brands and increase
their productivity.
Our USPs
SIG has decades of “specialist to specialist” expertise
from deep partnerships with suppliers, in-house
technical teams and specialist fabrication capabilities.
Our people’s product and market knowledge is our
competitive advantage.
We help tackle the complexities of building standards
and sustainability objectives across energy efficiency
standards, fire protection and acoustic performance.
10 SIG Annual Report and Accounts 2021
At a glance
1X_SRXpart1X_toXBusinessXModel_v122.indd 101X_SRXpart1X_toXBusinessXModel_v122.indd 10 11/03/2022 09:2411/03/2022 09:24
Interiors
Exteriors
Revenue split
Revenue split
Key brands
Key suppliers
Key suppliers
Key brands
Key products
Key products
Revenue (£m)
1,426.1
Revenue (£m)
865.3
Dry lining
Floor coverings
Structural
insulation
Technical
insulation
Construction
accessories and
fixings
Partition walls
and doorsets
Ceiling tiles and
grids
Cladding systems Room-in-roof
panel systems
Tiles, slates and
membranes
Batten for
pitched roofs
Single-ply flat
roof systems
Industrial roofing
PV panels
62%
38%
11SIG Annual Report and Accounts 2021
Strategic report Governance Financials
1X_SRXpart1X_toXBusinessXModel_v122.indd 111X_SRXpart1X_toXBusinessXModel_v122.indd 11 11/03/2022 09:2411/03/2022 09:24
2021 was an eventful year for
our world and an important
year for the construction
industry, pointing to a decade
of accelerating change ahead.
• Structural trends support robust
underlying growth.
• Energy efficiency and sustainability focus
create commercial opportunities for SIG,
while in parallel we reduce our own
carbon footprint.
• Digitalisation for SIG is a route to productivity
enhancement and growth while our focus on
specialist markets offers some protection
against pure-play “digital” models.
Our market environment
Sustainable construction
• COP26 saw governments firm up their
commitments to net zero carbon by
2050 (UK, France, Netherlands, Ireland)
and 2045 (Germany) and, with an
estimated >35% of European GHG
emissions linked to construction, our
industry is centre-stage.
• Fiscal stimulus to support new build and
renovation includes the European Green
Deal with a budget of c€1 trillion, while
the UK’s “Build back better” programme
has an added sustainability focus;
across our markets a range of grants,
loans and subsidies are being deployed
to drive demand.
• Building standards are being revised
upwards e.g. in December 2021 the EU
Commission proposed mandatory
energy efficiency upgrades to at least
E by 2030.
• Industry-wide, c30% of construction
materials are wasted. This is being tackled
by growth in offsite manufacturing (more
energy and material efficient) and new
technologies to recycle and convert waste
to useable products.
• In 2021, a growing number of our large
manufacturers and customers (e.g.
house-builders, master contractors) adopted
or strengthened their own net zero carbon
commitments and waste and circularity
goals. These ambitions will shape the
solutions and materials they make and
buy in the future, as well as framing their
expectations of distributors as partners
in this journey.
• The increasing need and investment
to enhance energy efficiency across
construction drives greater demand for
SIG’s core products (such as insulation and
roofing), raises the importance of distributor
expertise in energy and carbon efficiency,
and reinforces the imperative of reducing
emissions from our own operations.
Industry focus on sustainable
construction creates five
opportunities for SIG to
capture commercial benefit
and reduce carbon footprint
along the value chain
1
Increase exposure to green trends
2
Partner with suppliers to accelerate
uptake of low-carbon products
3
Reframe the strategic conversation
with large accounts
4
Facilitate growth in the circular
economy
5
Provide value-added services
12 SIG Annual Report and Accounts 2021
Market review
1X_SRXpart1X_toXBusinessXModel_v122.indd 121X_SRXpart1X_toXBusinessXModel_v122.indd 12 11/03/2022 09:2411/03/2022 09:24
Demand/supply shock Structural RMI demand Digitalisation
• Throughout 2020 and 2021, Covid-19
created a level of disruption in the
construction industry, and it will be some
time before this is fully resolved.
• Huge demand uncertainty at the time of
thefirst wave of national lockdowns led
totemporary supply shutdown, with
construction labour constraints exacerbated
by material shortages as manufacturers
reduced capacity and logistics networks
were disrupted. A renovation, maintenance
and improvement (“RMI”) spike followed the
initial demand shock, with home-working
driving reconsideration of DIY and renovation
priorities, adding to long-term sustainability
driven growth tailwinds.
• In 2021, global economic and supply chain
factors contributed to a combination of
shortages in some products (with
manufacturers resorting to an “allocation”
of limited supply between customers and
distributors) and high and volatile inflation,
particularly in steel and wood.
• Manufacturers have pushed ahead with
capacity increases, confirming confidence
in the robustness of medium-term demand.
• Renovation of existing housing stock is key
to reaching governments’ net zero goals:
70% of EU homes need to be renovated and
the EU renovation rate needs to double.
• The shift to home-working that accelerated
in the pandemic has increased consumer
intent for home renovation, and the diversion
of spend from leisure to renovation outlasted
initial expectations.
• Rises in gas prices shine a spotlight on the
cost (and energy efficiency) of both
residential and commercial heating.
• Energy efficiency tailwinds support long-term
structural growth in RMI, albeit in an
uncertain near-term macroeconomic
environment.
• With c50% of sales in RMI, and concentration
in energy efficiency categories expected to
grow ahead of overall construction activity,
SIG is well placed.
• Digital adoption in construction lags some
other industries, but the direction is clear and
accelerating, driven by sustainability trends,
pandemic disruption, and inflation.
• In building materials distribution, specialist
trade customers increasingly demand easy
to use digital services to research, plan,
order and manage their accounts. But these
capabilities are complementary to telephone,
email and in-branch i.e. multi-channel rather
than online pure-play.
• Growing attention to lifecycle carbon
footprint adds significant product data
complexity (e.g. Environmental Product
Declarations for a standard plasterboard
have five impact measures across five
stages with hundreds of subsidiary data
points). Helping customers understand
thermal insulation performance, embodied
carbon and other environmental factors
requires data integration across multiple
suppliers and specialist category expertise.
• Labour shortages and high energy
prices increase the importance of offsite
construction and robotics (which also cuts
waste significantly vs traditional methods).
• Growing technologies such as BIM, 3D
printing and robotics will have applications
throughout the value chain from design, to
construction, to maintenance, through to
renovation and end of life; however common
standards remain elusive.
13SIG Annual Report and Accounts 2021
Strategic report Governance Financials
1X_SRXpart1X_toXBusinessXModel_v122.indd 131X_SRXpart1X_toXBusinessXModel_v122.indd 13 11/03/2022 09:2411/03/2022 09:24
The transition to more
sustainable construction
Sustainability life cycle
In SIG’s categories, sustainability is
multi-dimensional– itisnotas simple
as green vs non-green products.
To truly understand sustainability
over the life-cycle of a product
requires considering, and
sometimes trading-off:
• the carbon intensity of raw
material sourcing and extraction;
• energy use (and electricity source)
during manufacturing;
• road miles and vehicle fuel type
at each stage of logistics;
• energy expended during
installation;
• waste (product and packaging)
generated across manufacturing,
distribution and construction sites;
• in-use performance e.g. thermal
insulation, acoustic insulation and
fire safety; and how these
properties sustain over time;
• end-of-life impact of dismantling,
reuse, recycling or disposal;
• …and the difficulty multiplies
when taking into account not just
GHG emissions, but also water
consumption, hazardous
chemicals, biodiversity impact
and modern slavery risk.
As one of the largest European
specialist distributors in our markets,
SIG has several roles to play in
partnership withcustomers and
suppliers, including:
• raising awareness of energy
efficiency and carbon regulations;
• scaling up new lower-carbon
solutions;
• helping customers optimise
across cost, insulation
performance and embodied
carbon;
• coordinating complex logistics to
reduce on-site cost and waste;
• providing ancillary services such
as data, technical advice
and support;
• backhauling waste from
customers to supplier; and
• reducing emissions from our
own operations.
Construction
Industry-wide, c30% of construction
materials are wasted
• Growth in offsite manufacturing – more
energy and material efficient.
• New technologies recycle and convert
waste into useable products.
14 SIG Annual Report and Accounts 2021
1X_SRXpart1X_toXBusinessXModel_v122.indd 141X_SRXpart1X_toXBusinessXModel_v122.indd 14 11/03/2022 09:2411/03/2022 09:24
Raw materials
and manufacturing
Significant variation across
material type
• Raw material extraction and
manufacturing is often 80%
of lifecycle emissions.
• Extruded polystyrene insulation has
5x the embodied carbon of mineral
wool or fibreglass…
• ...while hempcrete or dense pack
cellulose naturally sequester carbon.
• Bio-sourced materials are currently
only 1-2% of the insulation market.
Logistics
Fuel is the biggest factor in emissions from logistics
• Transport emissions depend on road miles, capacity
utilisation and fuel type.
• HGVs are behind cars and forklifts in electric technology.
Building lifetime
Trade-offs between in-use energy conservation and embodied carbon
• Extruded polystyrene insulation, for example, has 5x the embodied carbon of
hemp-based but 25% better thermal insulation.
• Net carbon impact depends on application and building lifetime.
15SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
1X_SRXpart1X_toXBusinessXModel_v122.indd 151X_SRXpart1X_toXBusinessXModel_v122.indd 15 11/03/2022 09:2411/03/2022 09:24
SIG’s pivotal role in sustainable
construction creates value for
all our stakeholders
SIG is a leading supplier of specialist insulation and sustainable building
products and solutions, differentiated through expertise, service and proximity
Valued by future generations
• Minimising carbon in SIG’s own operations
• Partnering with suppliers and customers to reduce carbon across the supply chain
• Facilitating the circular economy
Valued by manufacturers
• Access to a fragmented customer base
• Energy efficient path for small orders
• Scale-up of new low-carbon solutions
• Provision of technical advice
and support
Valued by customers
• One stop access to wide range of
established and new products
• Helping customers trade-off cost,
performance and carbon footprint
• Breaking bulk, bespoke fabrication
• Coordinating complex logistics,
to reduce on-site cost and waste
Valued by long-term
Shareholders
• Sustainable advantage
• Path to attractive returns
• Unique platform for growth
Valued by colleagues and our communities
• Safe and sustainable working environments
• Pride in SIG’s purpose, values and standards
• Job creation and active community contribution
Manufacturers
Developers
Contractors
Specialist installers
Independent
merchants
End user
16 SIG Annual Report and Accounts 2021
Our business model
1X_SRXpart1X_toXBusinessXModel_v122.indd 161X_SRXpart1X_toXBusinessXModel_v122.indd 16 11/03/2022 09:2411/03/2022 09:24
SIG’s pivotal role in sustainable
construction creates value for
all our stakeholders
Our specialist expertise supports customers and suppliers
totake tangible steps towards more sustainable construction
Easy-kit
solar panels
SIG
Technical
Services
Bio-sourced
insulation
Larivière has been a market leader in
the supply of solar panels for a decade,
with supply mainly to larger companies
and key accounts. Our easy-kit solar
panel solution, with accessible and
straightforward installation, allows
our roofing customers, of all sizes,
to offer solar panel installation as part
of their portfolio.
Drawing on 60 years of experience, SIG
Technical Services in the UK offers the
construction industry a selection of
energy saving insulation products and
guidance on building regulation
compliance. Through its own in-house
energy assessors, a complete and
integrated service ensures unbiased
access to thousands of market leading
insulation products and solutions.
Traditional insulation, such as stone and
glass-wools are very high consumers of
CO
2
. Therefore our team in France are
raising awareness and accessibility of
alternative bio-sourced solutions such
as wood, linen, hemp and straw-wool.
17SIG Annual Report and Accounts 2021
Strategic report Governance Financials
1X_SRXpart1X_toXBusinessXModel_v122.indd 171X_SRXpart1X_toXBusinessXModel_v122.indd 17 11/03/2022 09:2511/03/2022 09:25
Acceleration of
ReturntoGrowthstrategy
Return to winning ways
In H2 2020, we launched our Return to Growth
strategy after a period of falling market share
and profitability, especially in the UK. I am
delighted with our progress in 2021, with the
Group returning to underlying profitability
and reporting an underlying operating profit
of £41.4m and 1.8% operating margin.
Our market share gains and margin uplift,
in challenging supply markets, reinforce the
value of the core model that has underpinned
decades of SIG success: entrepreneurial local
teams delivering exceptional service based
on specialist category expertise and deep
partnership with our suppliers.
We empowered branches with the flexibility
and tools to trade effectively, and significant
improvements in staff engagement went hand
in hand with accelerating sales growth. Supply
partnerships helped secure scarce inventory,
with product availability and service reflected in
a favourable customer Net Promoter Score of
40. Our people remain very engaged, with our
annual employee survey highlighting positive
feedback on our vision, leadership, culture and
safety practices. Our people feel valued,
committed and are happy to work for SIG.
Connecting with our stakeholders
Colleagues
Engagement with our
colleagues is vital for
the future growth of
the Group. Our annual
engagement survey
gives our people a
voice and allows us
todrive actions that
make our colleagues
feel increasingly
proud and valued.
Customers
Our extensive branch
network provides
unrivalled coverage
and proximity to
customers in an
industry where branch
level relationships
remain key.
Suppliers
Constructive and
collaborative supplier
partnerships are
fostered at every
levelfrom the Board
tothebranches,
strengthening
ourservice to our
customers and allowing
us to create win-win
strategies for all parties.
Our world
The climate change
emergency that came
sharply into focus in
2021 shapes the
purpose and strategy
of the Group and will
continue to do so as
solutions to address
this issue arerefined.
Investors
The views of our
investors are an integral
part of our decision-
making process,
andwe engage in
frequent and open
communication on a
wide range of topics.
Further information can be found in the Section 172 statement on pages 78 to 83.
18 SIG Annual Report and Accounts 2021
Chief Executive Officer’s review
2X_SRXpart2X_CEOXrevXandXKPIs_v78.indd 182X_SRXpart2X_CEOXrevXandXKPIs_v78.indd 18 10/03/2022 16:5110/03/2022 16:51
Investment behind our strategy
ispaying off and lays the
foundations for future growth
We invested in stock availability, more
expertise and people in the field, better
training and incentives, modernising and
decarbonising our fleet, digitalising processes
across our supply chain, improving our
branches and expanding the network.
We strengthened our leadership bench
in all countries and central functions in
preparation for accelerated growth.
Reputation and
influence regained
UK Interiors and Larivière (France Exteriors)
were respectively awarded “Distributor of the
year” in the supplier category (BMJ) and “2021
Best Specialist Distributor of the Year” (Geste
D’Or), alongside several SIG appointments
to high-profile leadership roles in industry
associations. Our level of strategic
engagement with major suppliers and
customers has stepped up, opening up
new opportunities, leveraging SIG’s scale
and footprint.
Net zero commitments set
SIG has played a leading role in helping to
make the build environment more sustainable
since our foundation in 1957. In each era of
renewed focus on energy conservation, we
have worked closely with suppliers and
governments to promote better practices
and materials. SIG began measuring its
carbon footprint in 2007, issuing its first
Environmental Management Report that year.
In 2021, we refreshed our sustainability
commitments, including: net zero carbon by
2035 at the latest, by migrating our fleet to
electric and low-carbon fuels and shifting to
green energy suppliers; and zero SIG waste
to landfill by 2025, through reuse, recycling
and reduction.
Financial results ahead
of expectations
LFL revenue growth of 24% vs 2020 (and
8% up vs 2019), plus 120bps gross margin
improvement, enabled 340bps improvement
in operating costs as a percentage of sales,
driving our recovery to £41.4m underlying
operating profit (vs a loss of £53.1m in 2020).
Momentum accelerated during the year: H2
LFL sales were 15% above 2019 levels and
operating margin increased steadily through
2021, adding up to a 4-5% positive swing since
the launch of our strategy in 2020. Successful
pass through of product price inflation added
approximately 8% to revenue across the Group
for the year as a whole, with this increasing in
H2; importantly this was accompanied by
disciplined margin management and
underlying share gains.
2021 momentum underpins confidence to accelerate
2020 – 2021: Driving turnaround 2022 – 2025: Driving sustainable growth
Cash conservation Return to YOY growth Return to profit
Trending towards 5%
margin. Outpacing
construction growth
3% operating profit
margin by 2023.
Return to cash generation
New SIG era begins Performance
stabilisation
Maiden
bond issue
Net zero
carbon
commitment
Cash positive
Demonstrating industry leadership
Focusing on safety, sustainability,
specialisation and speed
UK and other
operating company
M&A add-ons
Profit and cash
position boosts
M&A capacity
Re-establishing tried and tested model
UK M&A add-ons
Completed Ongoing To come
Dividend
Export winning model
to new geographies
and categories
19SIG Annual Report and Accounts 2021
Strategic report Governance Financials
Reconnecting
Rebuilding trust and
rewarding performance
Driving operational excellence
New leadership,
refinancing and Return to
Growth strategy launch
Built Executive Leadership Team,
secured bond issue,
executed strategy
Growing management bench strength, building capability
2X_SRXpart2X_CEOXrevXandXKPIs_v78.indd 192X_SRXpart2X_CEOXrevXandXKPIs_v78.indd 19 10/03/2022 16:5110/03/2022 16:51
2022 priorities – Accelerating our
Return to Growth strategy
Successful strategic execution in 2021,
momentum into 2022 and structural demand
trends that support robust market growth give
us confidence in our path towards 5% Group
operating margin in the medium-term and 3%
for 2023. SIG achieved this level of performance
in the past by staying true to simple principles
of “specialist to specialist” customer focus,
deep supplier partnerships, empowered local
teams, effective stock management, contained
overheads and value-adding acquisitions.
Each of our businesses are at a different stage
on their journey towards a 5% margin, but the
ethos is the same.
In 2022 this requires a relentless focus on
operational excellence – continuing the
implementation of our seven pillars and
remaining flexible to respond to the after-
effects of the Covid-19 pandemic, supply chain
disruption and energy cost-driven inflation.
We are adapting our tried and tested model to
reflect the evolving needs of our markets,
focusing on four themes:
Safety
A strong safety culture is the foundation stone
of any good business, and our promise to our
people is that they, at all times, feel safe, proud
and valued. We deliver on this through training,
investment in our sites, honest reporting,
proactive interventions, and most importantly
making it everyone’s priority, from drivers
and warehouse colleagues to members of
the Board.
Sustainability
The significant carbon footprint of the
construction industry will drive strong demand
for a more sustainable built environment in the
coming years and SIG’s “Born Green” heritage
means we are well positioned to lead this
industry shift to sustainable construction. We
will pursue growth opportunities by focusing
on categories aligned to green growth drivers,
deepening our insight into the sustainability of
the products we offer, enabling customers to
consider trade-offs between embodied carbon
and in-life energy efficiency, and making lower
carbon materials and systems accessible.
This means partnering closely with existing
suppliers as well as early stage innovators.
We will embed SIG’s drive towards net zero
carbon by 2035 and zero SIG waste to landfill
by 2025, developing detailed country-level
plans and interim targets, and ensuring
sustainability is central to our focus,
behaviours and performance measures.
Migration of our fleet (c85% of SIG emissions)
to electric and lower-carbon fuels will continue,
along with shifting to greener energy suppliers.
Just as for our customers, pursuing net zero
carbon requires focus, investment and
creativity to tackle implementation trade-offs,
such as slower technology development in
HGV (vs cars or forklifts), variation in site
readiness for charging and fuel access points,
and country-specific regulations (e.g.
distributor responsibility for removal of
construction-site materials in France).
Specialisation
SIG is a specialist distribution business with
top three market share positions across our
operating companies – we want to be the
clear #1 in our target specialisms. Category
leadership is about not just scale, but more
importantly expertise, trust, thought leadership
and positive industry influence. Our business
development and talent development
efforts are focused on categories where
the importance of technical knowledge
and complex logistics will differentiate SIG,
such as roofing systems, technical insulation,
construction accessories and specialist timber.
Strengthening specialist expertise is our route
to winning share, upweighting higher margin
categories and increasing exposure to
sustainability growth drivers.
Speed
We must be easier, faster and more flexible
to work for, sell to and buy from. SIG handles
thousands of products from a broad supplier
ecosystem, provides bespoke fabrication, and
serves complex time-critical logistics needs
– our job is to make this as simple as possible.
In 2022, we will further reduce barriers to
front-line decision-making and increase
digitalisation in key processes (modernisation
enabled by technology). We are tackling
identified pain points in the “order to cash”
and “procure to pay” processes, and will adopt
systematic KPIs to track simplification progress
and productivity benefits. Multi-channel
engagement will increase, by making it easier
for customers to research, plan, order and
manage their accounts online.
Structural drivers support long-term market
growth. SIG is a resilient, diversified and high
potential franchise in sustainable construction,
with a proven business model and a
new leadership team delivering ahead of
expectations. We are on a path towards
5% operating margin and a return to cash
generation, with an increasing number
of investment opportunities to further
accelerate growth.
We look forward with confidence and
excitement.
UK turnaround delivered
UK Exteriors gained share and returned to
>5% operating margin in 2021. UK Interiors
(which previously saw the greatest deterioration
in performance in 2019/20) achieved an
impressive 38% LFL growth and 270bps
gross margin improvement, enabling
a return to profitability in H2. This is to the
credit of a rebuilt but highly experienced UK
leadership team (five of seven market-facing
directors joined in 2020 with an average of
27 years experience – all but one are ex-SIG)
and the recruitment of >100 senior sales and
branch managers who hit the ground running.
Healthy EU growth
Performance in our European businesses
was also very encouraging with our French
Exteriors and Polish businesses performing
strongly against 2020 and 2019. Germany and
Benelux are at an earlier stage of turnaround
than UK Interiors, but the profit levers will be
similar and actions are underway under new
and experienced leadership teams. Ireland
was uniquely impacted by local Covid-19
related restrictions in H1, but rebounded in H2.
M&A add-ons and refinancing
In 2021, we acquired Penlaw, one of the UK’s
foremost suppliers of building materials, and
F30 Building Products, a national supplier of
specialist construction accessories. These
acquisitions are performing well and bring
additional specialist expertise to the Group.
Focused M&A will continue to play a role in
accelerating execution of our strategy.
SIG’s maiden bond issue of €300m in
November was completed comfortably ahead
of the maturity dates of, and on more attractive
terms than, existing facilities, increasing our
financial flexibility and capacity for growth.
20 SIG Annual Report and Accounts 2021
Chief Executive Officer’s review
2X_SRXpart2X_CEOXrevXandXKPIs_v78.indd 202X_SRXpart2X_CEOXrevXandXKPIs_v78.indd 20 10/03/2022 16:5110/03/2022 16:51
Seven pillar strategic handbook
Responsible
actions
• Our people feel safe,
proud and valued
• A greener fleet and estate
• Positive community
impact
Specialist
expertise
• Known for specialist focus
and technical knowledge
• Advice to optimise cost,
performance and carbon
Focused
growth
• Growing energy efficient
and low-carbon solutions
• Expanding branch network
• Acquisitions
Winning
branches
• Local teams trusted and
empowered to succeed
• Differentiated through
expertise, proximity
and service
Valuable
partnerships
• Win-win strategies
with suppliers
• Supporting suppliers’
and customers’
sustainability goals
Superior
service
• Agile and entrepreneurial
sales teams
• Multi-channel, data-rich
customer journey
Highest
productivity
• Digitalising operational
processes
• Lean and effective
governance
Sustainable construction
Enable modern, sustainable and safe living and working
environments inthecommunities in which we operate
Sustainable market leadership
• Grow our leadership positions and market share
• Operating margin of 3%, trending towards 5% in the medium-term
• Cash generation to reinvest in growth and support progressive dividend policy
The seven pillars of our strategy served us well during 2021, are aligned with SIG’s proud
history, andare key to constructing our future.
Our strategy
21SIG Annual Report and Accounts 2021
Strategic report Governance Financials
2X_SRXpart2X_CEOXrevXandXKPIs_v78.indd 212X_SRXpart2X_CEOXrevXandXKPIs_v78.indd 21 10/03/2022 16:5110/03/2022 16:51
We have made significant progress on the
seven strategic pillars that underpin our Return
to Growth strategy, helping to accelerate our
delivery of the strategy and bringing the Group
back to growth sooner than expected.
• Our people feel safe, proud and valued
• A greener fleet and estate
• Positive community impact
2021 progress
− Five sustainability commitments established and
announced including net zero carbon commitment
of 2035 at the latest.
− 71% of people say they feel good about working for
SIG and our eNPS rating improved by 8 points.
Our people feel safe, committed and valued by SIG
with 91% of employees saying they feel safe at work.
− Strengthened the Environmental, social and
governance (“ESG”) capability within the Group with
the appointments of sustainability directors in the UK
and France and Health & Safety directors in Germany,
France and the UK.
− Ireland achieved a zero LTIFR in 2021 following
a renewed focus on safety culture.
− Scope 1 and 2 GHG emissions reduced 16.8%
against 2019.
− Investment in a greener fleet with ongoing move
to electric cars and forklifts in most operations.
− SIG Poland was awarded the title of “Reliable Employer
of the Year 2021” in recognition of its excellent working
conditions and safety record, as well as its commitment
to corporate social responsibility and personal
development.
Link to KPIs
− Lost time injury frequency rate (“LTIFR”)
− Greenhouse gas emissions (“GHG” emissions)
− Employee engagement result (“eNPS”)
Link to principal risks
− Health & Safety
− Macro-economic uncertainty
− Environmental, social and governance
− Legal or regulatory compliance
− Change management
2021 strategic pillar review
Reduction in Scope 1 and
2 GHG emissions
16.8%
vs 2019
Employees who feel good
about working for SIG
71%
Responsible actions
22 SIG Annual Report and Accounts 2021
Chief Executive Officer’s review
2X_SRXpart2X_CEOXrevXandXKPIs_v78.indd 222X_SRXpart2X_CEOXrevXandXKPIs_v78.indd 22 10/03/2022 16:5110/03/2022 16:51
Underlying
operating margin
1.8%
2020: (2.8%)
• Local teams trusted and empowered
to succeed
• Differentiated through expertise, proximity
and service
2021 progress
− UK turnaround now consolidated with branches given
empowerment to make pricing decisions locally that are
appropriate for their market and shape their business at
a branch level.
− LFL sales have increased by 24% from 2020 with gross
margin improving from 25.1% to 26.3%.
− Challenging product availability issues ongoing through H2,
particularly in UK, France and Germany.
Link to KPIs
− Net Promoter Score (“NPS”)
− Like-for-like sales (%)
− Gross margin (%)
− Operating margin (%)
Link to principal risks
− Health & Safety
− Attract, recruit and retain our people
− Digitalisation
− Change management
Winning branches
Empowered local teams
Investing in their sites, giving them the tools to
operate, simplifying targets, and upgrading
incentives has generated huge energy and
increased employee engagement.
23SIG Annual Report and Accounts 2021
Strategic report Governance Financials
2X_SRXpart2X_CEOXrevXandXKPIs_v78.indd 232X_SRXpart2X_CEOXrevXandXKPIs_v78.indd 23 10/03/2022 16:5110/03/2022 16:51
Driving growth
A focus on driving operational performance
at branch level alongside superior product
range and availability, leveraging our supplier
partnerships to secure scarce stock and
supporting our customers in one of the most
challenging supply years has driven our
growth in 2021.
• Agile and entrepreneurial sales teams
• Multi-channel, data-rich customer journey
2021 progress
− Customer NPS of 40 with favourable customer
recommendations.
− UK Interiors awarded “Distributor of the year” in the supplier
category at the BMJ awards.
− Strong development of omnichannel sales approach in Poland
with new functionalities on their ecommerce platform and
improved product availability. Ecommerce also launched
in Ireland.
− Reorganisation and reset of our German operations with a new
“Empowering the Touchpoints” strategy focusing on the market,
our customers and superior branch management.
Link to KPIs
− Net Promoter Score (“NPS”)
− Like-for-like sales (%)
Link to principal risks
− Macro-economic uncertainty
− Attract, recruit and retain our people
− Digitalisation
− Change management
Superior service
Specialist expertise
• Known for specialist focus and technical
knowledge
• Advice to optimise cost, performance
and carbon
2021 progress
− Larivière’s technical expertise was recognised by Le Geste D’Or
(an independent trade association) as it was awarded “2021 Best
Specialist Distributor of the Year”. Larivière also celebrated its 75th
anniversary in operation, highlighting its heritage in the market and
the depth of knowledge and expertise of its products.
− Market-experienced Managing Directors (“MDs”) are now in
place in all countries following recent appointments in Germany
and Benelux.
− An industry leading category organisation has been rebuilt in the
UK with the UK senior management team having, on average,
27 years of industry experience and an average of 13 years of
experience in other senior roles.
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
24 SIG Annual Report and Accounts 2021
Chief Executive Officer’s review
2X_SRXpart2X_CEOXrevXandXKPIs_v78.indd 242X_SRXpart2X_CEOXrevXandXKPIs_v78.indd 24 10/03/2022 16:5110/03/2022 16:51
• Win-win strategies with suppliers
• Supporting suppliers’ and customers’
sustainability goals
2021 progress
− Increasing collaboration with suppliers to improve sustainability of
the supply chain and ensure responsible sourcing. In the current
year, these strengthened supplier relationships have been
fundamental in managing the supply challenges noted.
− Our UK Commercial Director now chairs the newly-created
Builders Merchants Federation’s product forum, bringing together
merchants and suppliers to discuss industry challenges, trends
and opportunities including changes in legislation.
Link to KPIs
− Gross margin (%)
− Operating margin (%)
Link to principal risks
− Data quality and governance
− Environmental, social and governance
Valuable partnerships
25SIG Annual Report and Accounts 2021
Strategic report Governance Financials
2X_SRXpart2X_CEOXrevXandXKPIs_v78.indd 252X_SRXpart2X_CEOXrevXandXKPIs_v78.indd 25 10/03/2022 16:5210/03/2022 16:52
• Digitalising operational processes
• Lean and effective governance
2021 progress
− Improved technology processes to make the business easier
to work for, buy from and sell to.
− Roll out of Workplace from Facebook throughout the Group to
facilitate better communication and collaboration across teams
and enhance employee engagement.
− Appointment of an Interim Group Digitalisation Director to drive
the Group’s digital agenda.
− Some operational challenges in Germany and Benelux which are
the main focus of the new leadership teams in these businesses.
Link to KPIs
− Lost time injury frequency rate (“LTIFR”)
− Greenhouse gas emissions (“GHG emissions”)
− Employee engagement result (eNPS)
− Operating margin (%)
− Average trade working capital to sales ratio (%)
Link to principal risks
− Digitalisation
Highest productivity
Number of branches
432
2020: 421
Number of employees
>6,800
2020: >6,500
Branch openings
We opened branches in all countries,
with a multi-year programme of branch
openings now underway to in-fill
geographic gaps or upgrade our
presence in major urban markets.
26 SIG Annual Report and Accounts 2021
Chief Executive Officer’s review
2X_SRXpart2X_CEOXrevXandXKPIs_v78.indd 262X_SRXpart2X_CEOXrevXandXKPIs_v78.indd 26 10/03/2022 16:5210/03/2022 16:52
Steve Francis
Chief Executive Officer
10 March 2022
• Growing energy efficient and low-carbon
solutions
• Expanding branch network
• Acquisitions
2021 progress
− Focus on energy efficient solutions with new products such as
easy-kit solar panels and bio-friendly insulation coming onto
the market.
− Branch network expanded with new branches opened in Poland,
France and the UK.
− Strategic acquisitions of Penlaw and F30 have accelerated growth
in the UK with a strong ongoing M&A pipeline.
Link to KPIs
− Like-for-like sales (%)
− Gross margin (%)
− Operating margin (%)
− Average trade working capital to sales ratio (%)
Link to principal risks
− Cyber security
− Macro-economic uncertainty
− Data quality and governance
− Mergers and acquisitions
− Change management
Focused growth
27SIG Annual Report and Accounts 2021
Strategic report Governance Financials
2X_SRXpart2X_CEOXrevXandXKPIs_v78.indd 272X_SRXpart2X_CEOXrevXandXKPIs_v78.indd 27 10/03/2022 16:5210/03/2022 16:52
Non-financial KPIs
How we performed
Lost time injury frequency rate Net Promoter Score (NPS)
Employee engagement result (eNPS)GHG emissions per £m of revenue (metric tonnes)
2021
11. 8
2020
12.7
2019
12.1
11.8
Definition
The ratio of any injury resulting in
any lost time per 1,000,000 hours
worked
– on a 12m rolling basis.
2021 performance
An encouraging reduction in the
year with good safety performances
in France, Ireland and Poland.
Link to strategy
Link to risks
2
4
6
Link to remuneration
Health & Safety measures in annual
bonus scheme
2021
+40
2020
+43
+40
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.
2021 performance
Despite a small reduction in NPS in
2021, customer satisfaction remains
high driven by good product
availability in a difficult supply year
and superior customer service.
Link to strategy
Link to risks
1
3
10
Link to remuneration
To be considered in 2022
2021
-5
2020
+3
+3
Definition
eNPS is an employee experience
metric based on their likelihood to
recommend SIG as an employer.
2021 performance
An encouraging result which
is trending the right way. Our
company culture scores highly and
in general people enjoy their job and
the people they are working with.
People are proud to work for SIG
and are highly committed to
their work, the organisation
and their teams.
Link to strategy
Link to risks
2
4
6
Link to remuneration
To be considered in 2022
2021
23.0
2020
25.4
2019
26.9
23.0
Definition
Metric tonnes of GHG emissions
per £m of revenue.
2021 performance
A significant reduction from 2020
and 2019 driven by initiatives to
reduce carbon emissions across
the Group. These include the
ongoing migration of our vehicles
to electric and low-carbon fuels
alongside a shift towards greener
energy suppliers.
Link to strategy
Link to risks
6
8
Link to remuneration
To be considered in 2022
28 SIG Annual Report and Accounts 2021
Key performance indicators
2X_SRXpart2X_CEOXrevXandXKPIs_v78.indd 282X_SRXpart2X_CEOXrevXandXKPIs_v78.indd 28 10/03/2022 16:5210/03/2022 16:52
Financial KPIs
Like-for-like sales (%) Gross margin (%)
Operating margin (%) Average trade working capital to sales ratio (%)
2021
24%
2020
(13%)
2019
(7%)
24%
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 200
for the calculation.
2021 performance
A significant improvement on 2020
and 2019 reflecting the recovery
from the Covid-19 pandemic as well
as the pass through of inflationary
increases in input costs.
Link to strategy
Link to risks
3
4
10
Link to remuneration
Profit measures in annual
bonus scheme
2021
26.3%
2020
25.1%
2019
25.9%
26.3%
Definition
The calculation of underlying gross
profit, divided by the 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.
2021 performance
A 120bps improvement on 2020
driven by increased rebate receipts
following higher sales volumes.
Link to strategy
Link to risks
3
4
9
10
Link to remuneration
Profit measures in annual
bonus scheme
2021
1.8%
2020
(2.8%)
2019
2.0%
1.8%
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 201 for
the calculation.
2021 performance
Underlying operating margin has
increased by 460bps from 2020
driven by increased sales volumes
and strong margin discipline in
turbulent supply markets.
Link to strategy
Link to risks
3
4
9
10
Link to remuneration
Profit measures in annual
bonus scheme
2021
13.8%
2020 14.3%
13.8%
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.
2021 performance
A stable performance which
highlights continuing balance sheet
discipline against a backdrop of
a difficult supply year.
Link to strategy
Link to risks
3
4
10
Link to remuneration
Included in operating company
annual bonus schemes
Our strategic initiatives
Responsible
actions
Specialist
expertise
Focused
growth
Winning
branches
Valuable
partnerships
Superior
service
Highest
productivity
Risks
1
Cyber security
2
Health & Safety
3
Macro-economic
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
29SIG Annual Report and Accounts 2021
Strategic report Governance Financials
2X_SRXpart2X_CEOXrevXandXKPIs_v78.indd 292X_SRXpart2X_CEOXrevXandXKPIs_v78.indd 29 10/03/2022 16:5210/03/2022 16:52
Our ESG approach
2021 highlights
• Announcement of five sustainability
commitments to drive our ESG
agenda
• Carbon emissions 35% lower than
ten years ago and in comparison to
2019 (the last year unaffected by
Covid-19), a reduction in Scope 1
and 2 emissions of 16.8%
• Positive feedback from our 2021
employee engagement survey with
strong support for our aim to be an
employer of choice. 71% of our
people feel good about working
forSIG
• 91% of our people feel safe working
for SIG, an improvement from 89%
in 2020
• Refreshed Health & Safety culture
with senior hires made to enhance
capability and know-how
throughout the organisation
• Expansion of the senior team
dedicated to sustainability in the
UK and France
• Improvement in the robustness
ofthe governance supporting our
ESG agenda with the establishment
of a CEO-led ESG steering group
Our approach also considers the impact
of the United Nations Sustainable
Development Goals (“SDGs”) and the
underlying ESG risks we consider to
be important to the Group. These are
detailed further on pages 48 to 51.
We also further consider the governance
of our ESG obligations on page 48.
Our sustainability commitments
Commitment Measure
Health & Safety leader in
building materials
distribution
• “Our people feel safe” (from the
employee engagement survey)
• LTIFR
Net zero carbon by 2035
at the latest
• Emissions by Scope 1, 2 and travel
• Current fleet mix by fuel type
Zero SIG waste to
landfill by 2025
• % waste diverted from landfill
• Details of types of waste i.e.
hazardous and non-hazardous
Partner with
manufacturers and
customers to reduce
carbon and waste
across the supply chain
• Case studies and examples in the
long term will inform scope 3
emissions
Employer of choice in
building materials
distribution
• Employee engagement (eNPS)
• Diversity statistics
30 SIG Annual Report and Accounts 2021
Environmental, social and governance
3X_XSRXpart3X_XESG_v79.indd 303X_XSRXpart3X_XESG_v79.indd 30 10/03/2022 16:5710/03/2022 16:57
Environment Social Governance
We support sustainable construction
through our long-established focus on
energy efficient solutions, by promoting
use of lower carbon materials, by helping
customers make trade-offs between
insulation performance and embodied
carbon, and by reducing emissions
from our own operations.
Our sustainability credentialsare
fundamental to our history and to ourfuture
success. Practical innovation in energy
conservation is in the DNA of SIG, from
taking fibreglass into domestic housing
insulation in the 1950s, 60s and 70s through
to providing product kits and training to
empower small roofing contractors to install
residential photovoltaic panels. As customer
needs and technologies have evolved, so
hasourproduct range and our expertise.
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. Vehicle fuel
represents c85% of total emissions so our
biggest lever is transitioning to electric
vehicles (“EVs”) for cars and forklifts, and to
lower carbon technologies in commercial
vehicles, including hydrogenated vegetable
oil while electric vehicle and/or hydrogen
HGV solutions are still evolving.
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.
SIG is a “people topeople” business,
founded on high trust relationships
with suppliers and customers. Our
commercial success depends on
responsible entrepreneurship – local
operations empowered to succeed, where
our people feel safe, proud, and valued,
and where local communities recognise
SIG’s positive social impact.
Our social commitments are to our
employees, our partners and customers,
andthe communities in which we operate.
We have committed to being both a Health
& 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 first priority, and
we also do all we can to protect the mental
wellbeing ofeveryone who works with us.
We want people to be proud to work for SIG:
proud ofwho 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.
As a people business, it is vital that we
recruit and retain the best employees and
we can do this because we take good care
of our employees. 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.
Our annual employee engagement survey
reinforces the progress we are making with
91% of people stating that they feel safe at
work (a 2% increase from 2020) and 71% of
employees feeling positive about working
for SIG.
Our devolved operating model goes hand
inhand with robust standards, controls,
andtransparency – a strong governance
framework that fosters accountability
forsustainable performance and enables
sharing of best practices within and
across our operating companies. We
are proud to be a strongly governed,
transparent and fair business. Our
Governance section, set out on pages
68 to 128, provides full details of the
governance frameworks in place within
the Group.
In 2021, we took a fresh look at the
governance of issues relating to ESG.
Itwasa year in which we built the
foundations that will help us to achieve
the commitments we have set ourselves.
Weestablished an ESG steering group,
led by the CEO and comprising the CFO,
senior representatives from the operating
companies and functional experts from the
Group. A key output from the steering group
has been the articulation of our five
sustainability commitments, set out
on the previous page.
ESG priorities
In 2021, the Group undertook a process to determine those ESG
areas that are of primary significance and relative importance to
the Group and its internal stakeholders. Through this process,
we sought and considered the views and concerns of a range of
employees throughout the Group and have built a clear picture
of where our collective priorities lie.
The most important priorities identified were:
• Carbon reduction – reflecting the climate emergency that has come
sharply into focus in the last year;
• Health & Safety – everyone in our organisation should feel 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.
The ESG section of this report addresses each of these material issues
and sets out our commitments for how we are tackling them.
Environmental impact 32
Products and supply chain 39
Health & Safety 40
People 44
Governance of ESG and
climate-related matters 48
Climate-related impact
on strategy 48
ESG and climate-related risks 49
Climate-related Financial
Disclosures 50
United Nations Sustainable
Development Goals 51
ESG Principles 52
31SIG Annual Report and Accounts 2021
Strategic report Governance Financials
3X_XSRXpart3X_XESG_v79.indd 313X_XSRXpart3X_XESG_v79.indd 31 10/03/2022 16:5710/03/2022 16:57
Environment
Environmental impact
SIG was “Born Green” and our core products
– insulation androofing – 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.
We recognise and balance this opportunity
with our obligation to respond responsibly
to it. Weare committed to reducing carbon
emissions in our own business as well as
developing strong partnerships and working
relationships with our customers and suppliers
to contribute tothe protection of the
environment.
The environmentally related sustainability
commitments we have developed have been
made to minimise the impact ofour operations
on the environment, including our climate
change impact, as well as influencing the
broader carbon emissions associated with
our products.
Net zero carbon
by 2035 at the latest
We have committed to net zero carbon in SIG’s
operations by 2035 at the latest. That means
eliminating (or as a last resort offsetting) 52,771
metric tonnes of GHG emissions (2021), of
which vehicle fuel is the largest component.
We measure and report on our carbon
footprint in accordance with the Streamlined
Energy and Carbon Reporting Regulations
(“SECR”), and the accounting process has
been externally assessed to the ISO14064-3
standard.
We aim to achieve net zero carbon by meeting
the following secondary goals:
• 80% reduction against total Scope 1 and 2
(and business travel) emissions by 2035
(using 2021 emissions as a base year) and
offsetting any residual emissions;
• cars and forklifts to be 100% electric by
2030; and
• commercial vehicles to be 100% electric,
hydrogen, or low-carbon biofuel by 2035
(although this is dependent on the pace of
progress in the development of external
technology, especially for HGVs)
In 2022, we will also set intermediate targets
for the reduction of Scope 1 and 2 emissions
between now and 2035 and will define our
framework for Scope 3 emissions.
SIG’s carbon emissions are now 35% lower
than they were ten years ago and 16.8% lower
than 2019. 2020 was an anomalous year
because of Covid-19 impact on activity
and travel.
We will track the implied cost of carbon
emissions across SIG’s operations to inform
internal decision-making, by applying an
indicative price per metric tonne of €50 – this is
broadly in line with levels used by large listed
peers for internal carbon pricing. We do not
intend to operate an “internal market” for
carbon credits, since we want the primary
focus of the organisation to be on reducing
emissions, not carbon trading or accounting.
However, converting our carbon footprint (and
reduction) into the indicative equivalent cost of
offsetting today enables us to look holistically
at sustainable business performance. Just as
we are driving growth and operating
productivity to raise SIG’s underlying operating
profit, we will also drive carbon efficiency in our
operations to reduce emissions and minimise
any residual cost of offsetting to meet our net
zero carbon by 2035 commitment.
ESG key milestones: Born Green
1957 1981 1987 1990s1973-79
Sheffield Insulations Limited is
founded by Ernest Adsetts
with the principal activity of
“Wholesale and retail
Distribution of Insulating
Materials”.
SIG led the UK construction
industry’s response to the
energy crisis, entering the
new arena of energy
conservation. The Group
seized the opportunity
presented by this and by
the Government’s “Save it”
campaign.
Sir Norman Adsetts joins,
and subsequently become
Chairman of, the Association
for the Conservation of
Energy which proves to have
great success in increasing
the awareness of the need
to save energy.
In the year coined the “Energy
efficiency year” by the
Secretary of State for Energy,
Sir Norman was made an
OBE for his services to energy
conservation.
Continual focus on energy
conservation driving higher
insulation standards and
robust demand. The Group
benefits from the UK
Government’s allocation of
finance for the Home Energy
Efficiency Scheme.
32 SIG Annual Report and Accounts 2021
Environmental, social and governance
3X_XSRXpart3X_XESG_v79.indd 323X_XSRXpart3X_XESG_v79.indd 32 10/03/2022 16:5710/03/2022 16:57
Partner with
manufacturers and
customers to reduce
carbon and waste across
the supply chain
Our most direct environmental responsibility is
to reduce the carbon footprint and waste of
our own operations, most materially the
emissions from our fleet, estate, and business
travel. However, our role as a specialist
distributor connecting customers and
manufacturers means we can influence the
broader carbon emissions associated with
the products we distribute. This is key to
increasing our contribution to sustainable
construction, as well as being a commercial
opportunity for SIG.
There are several “win-win” levers, which
include climate-related opportunities that the
organisation has identified. These include:
• continue to expand our presence in
energy-conserving solutions with green
growth drivers, such as insulation, roofing
and solar panels;
• partner with suppliers to encourage
uptake of lower carbon products, such
as bio-sourced insulation solutions;
• work with large customers, such as
housebuilders, to support them in their
sustainability ambitions e.g. reducing
customers’ Scope 3 emissions;
• facilitate growth in the circular economy to
reduce waste, for example back-hauling
waste from customers’ sites; and
• provide value-added specialist services,
such as advice to architects and contractors
to optimise longevity, energy efficiency and
carbon footprint, as offered by SIG Technical
Services in the UK, for example.
The opportunities the organisation has
identified in relation to climate-related issues
are discussed in more detail on pages 12 to 17
and page 50 of the Strategic report. As can be
seen from these sections, sustainable
construction is key to our strategy and is
embedded within the DNA of our Group.
Zero SIG waste
to landfill by 2025
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.
2007 2010 2012 20212015–19
SIG began collecting and
reporting on carbon
consumption and disclosed
environmental stewardship as
one of its core principles. In
the 2007 annual report, our
first environmental report
included environmental
objectives established at
relevant levels within the
organisation along with a
detailed policy statement.
Introduction of the UK Carbon
Reduction Commitment
Energy Efficiency Scheme
(“CRC”).
SIG finished in the top 2% of
published CRC league tables
for reducing its carbon
emissions in 2011/2012.
Divergence from our
traditional models
in certain markets and
subsequent restructures
distracts from our
sustainability focus.
Sustainability commitments
launched:
– Net zero carbon by 2035 at
the latest
– Zero SIG waste to landfill
by 2025
– Partner with manufacturers
and customers to reduce
carbon
– Health & Safety leader
– Employer of choice
33SIG Annual Report and Accounts 2021
Strategic report Governance Financials
3X_XSRXpart3X_XESG_v79.indd 333X_XSRXpart3X_XESG_v79.indd 33 10/03/2022 16:5710/03/2022 16:57
Our carbon footprint
In comparison to 2019 (the last year unaffected
by Covid-19), we have achieved a reduction in
both Scope 1 emissions, which include vehicle
and heating fuel, of 15.6%, and Scope 2
emissions, which include electricity, of 25.3%.
Overall Scope 1 and 2 emissions combined
have reduced by 16.8%.
Lower emissions have been achieved through
effective projects designed to maximise the
efficient use of delivery vehicles, consolidating
our vehicle fleet and, through better use of
communication technology, reducing the miles
travelled by colleagues. We are also investing
across the business in energy-efficient
vehicles, including cars and forklift trucks, as
well as in facilities for powering them. In this
way, along with analysis of driving practices,
driver assessment and training, and efficient
vehicle routing, we continue to achieve annual
reductions in emissions.
Local initiatives to meet our carbon-related
sustainability commitments
Each of our businesses are committed to reducing
carbon emissions and meeting our carbon-related
sustainability commitments
One of our electric trucks on site in France
Rep of Ireland & NI
Ireland is working towards ensuring there
are solar panels on all of its business
premises. It has partnered with an
organisation who will help to implement this
plan in return for a commitment from SIG
Ireland to buy electricity from them for five
years at a price that is around 60% of the
current contract price. This will not only help
to manage the volatility of future energy
prices but will also make a significant impact
on the carbon footprint of the Irish business.
SIG Ireland is also in the process of
converting all its forklift trucks to electric
power and expects to complete this
programme by 2023 at the latest.
In addition, it is on target to have a fully
electric car fleet by 2025.
Germany
During 2021, the team at WeGo Systembaustoffe
has focused on developing new solutions
in sustainable e-mobility. Following the
successful test phase for electric forklifts, the
transition to environmentally friendly vehicles
is underway, with the necessary charging
infrastructure already included in the planning
and conversion of new sites.
“Since our foundation in 1957,
we have always played a
leading role in helping to
make the built environment
sustainable”
34 SIG Annual Report and Accounts 2021
Environmental, social and governance
Environment | Environmental impact
3X_XSRXpart3X_XESG_v79.indd 343X_XSRXpart3X_XESG_v79.indd 34 10/03/2022 16:5710/03/2022 16:57
Our solar panels solutions in France
A tree being planted in Poland to offset each
company car that is allocated
France
Environmental responsibility, including the
reduction of carbon emissions, is deeply
embedded in the French business and in 2021
the team took steps to ensure that this culture
became more visible throughout the business.
With the goal of building a leadership position
on environmental sustainability, the team
invited everyone in the business to a series of
workshops to feed directly into their 5 year
ESG strategy. These workshops explored not
only the challenges faced in the industry and
the business in relation to ESG but also sought
to build engagement and commitment from
employees to the strategy. Alongside these
workshops, the team also published its first
Annual Sustainability Report, detailing their
sustainability objectives and activities.
Our branches also play a crucial role in how we
are educating our customers about the more
sustainable options that are available for them.
New products such as easy-kit solar panels
and bio-friendly insulation (as detailed on page
17) are just two examples of how our team in
France is influencing the market to become
more environmentally responsible and reduce
carbon emissions.
Poland
The team in Poland has an established
eco-driving training programme along with
software that tracks how its cars and trucks
are being driven. This encourages greener,
as well as safer, driving. Its Master Driver
competition also recognises and rewards
the safest, most fuel-efficient drivers in the
business. In 2022, Poland will begin to provide
electric cars for its sales force and will
introduce electric forklift trucks at its
new warehouse.
For the last ten years, Poland has also
committed to a programme whereby for every
new company car that is allocated, a tree
is planted.
United Kingdom
In 2020 and 2021, the UK has replaced 125
cars within its fleet with electric vehicles
(replacing previous petrol/diesel models).
Future orders for cars being delivered in
2022 are also predominantly electric. It
is also currently working on installing EV
charging capacity at a number of its
branches to allow staff to charge whilst at
work – these have started to be installed
and will extend out to the wider branch
network during 2022/23.
As of 2021, 39% of the UKs forklift trucks
are electric, and of those purchased this
year, 56% were electric. The UK also moved
onto a green energy contract in January
2022, and is forecast to realise an annual
carbon saving from the electric forklift trucks
of approximately 269 tonnes. The aim is to
move all of its fleet to electric in the next
seven years on the replacement cycle.
Benelux
One third of the Benelux car fleet is now
electric, with EV-charging capacity being
rolled out across the branches and head
office sites to encourage the use of
electric cars.
Our recently opened branch in Nieuwegein
along with our head office site in Waalwijk
both have solar panels on their roof and
we anticipate this will be rolled out to other
branches in the future.
35SIG Annual Report and Accounts 2021
Strategic report Governance Financials
3X_XSRXpart3X_XESG_v79.indd 353X_XSRXpart3X_XESG_v79.indd 35 10/03/2022 16:5710/03/2022 16:57
CO
2
emissions – Scope 1 – Direct
Metric tonnes
2021
Group
Metric tonnes
2020
Group
Metric tonnes
2019
Group
Metric tonnes
2021
UK
Metric tonnes
2021
Europe
Road vehicle fuel emissions
1
35,002 36,818 43,160 16,010 18,992
Plant vehicle fuel emissions
2
4,759 4,206 4,858 2,183 2,576
Natural gas
3
2,642 1,488 2,024 1,580 1,062
Coal/coke for heating
4
79 40 37 0 79
Heating fuels (kerosene and LPG)
5
479 490 849 73 406
Total 42,961 43,042 50,928 19,846 23,115
Data source and collection methods
Vehicle fuel is c85% of total current emissions
(incl. third party) Equivalent to >120m miles in an
average passenger vehicle
1. Fuel cards and direct purchase records in litres converted according to 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
2021
Group
Metric tonnes
2020
Group
Metric tonnes
2019
Group
Metric tonnes
2021
UK
Metric tonnes
2021
Europe
Electricity
6
4,944 4,280 6,622 2,678 2,266
kWh
2021
Group
kWh
2020
Group
kWh
2021
UK
kWh
2021
Europe
Electricity 22,795,687 17,5 0 3 ,8 8 0 12,546,670 10,249,017
Data source and collection methods
6. Consumption in kWh converted according to BEIS guidelines.
Purchased electricity is c10% of total current
emissions (incl. third party) Equivalent to the
annual electricity useof900,000 averagehomes
CO
2
emissions – Scope 3 – Other indirect
Metric tonnes
2021
Group
Metric tonnes
2020
Group
Metric tonnes
2019
Group
Metric tonnes
2021
UK
Metric tonnes
2021
Europe
Third party provided transport (air and rail)
7
4,866 249 541 399 4,467
Data source and collection methods
7. Distance travelled converted according to BEIS guidelines.
2021
Group
2020
Group
2019
Group
2021
UK
2021
Europe
Total Scope 1, 2 and 3 emissions (metric tonnes) 52,771 47,3 4 6 58,091 22,923 29,848
Total energy (MWh)
8
215,481 92,462 123,019
Conversion factor
8. UK Government GHG Conversion Factors for Company Reporting 2021 provided by Defra.
This is equivalent to
− 870,000 tree seedlings grown for 10years
− >6bn smart phone charges
Emissions per £m of revenue
Metric tonnes
2021
Group
Metric tonnes
2020
Group
Metric tonnes
2019
Group
Metric tonnes
2021
UK
Metric tonnes
2021
Europe
Scope 1 18.7 23.0 23.5 21.2 17.0
Scope 2 2.2 2.3 3.1 2.9 1.7
Scopes 1 and 2 as required by GHG Protocol 20.9 25.3 26.6 24.1 18.7
Scope 3 2.1 0.1 0.3 0.4 3.3
Scopes 1, 2 and 3 23.0 25.4 26.9 24.5 22.0
All 2020 and 2019 CO
2
data is with the Air Handling business removed following its disposal in January 2020.
36 SIG Annual Report and Accounts 2021
Environmental, social and governance
Environment | Environmental impact
3X_XSRXpart3X_XESG_v79.indd 363X_XSRXpart3X_XESG_v79.indd 36 10/03/2022 16:5710/03/2022 16:57
GHG emissions
We are committed to providing full and
accurate data for our carbon footprint, with
minimal reliance on estimates. In 2021, 100%
of information is based on actual data (2020:
93.2%). 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 2021. We continue to
improve our data collection and accounting
processes, and the GHG information for the
period October 2020 to September 2021 has
been verified by Carbon Intelligence to
ISO14064-3 to a limited level of assurance.
Our carbon footprint includes emissions for
which we are directly responsible, such
as vehicle and heating fuel (Scope 1) and
emissions by third parties from the generation
of electricity (Scope 2). We have also disclosed
Scope 3 emissions over which the business
has limited control, including third-party air and
rail transportation and, in 2021, broadened
these emissions to include third-party
deliveries as well as third-party transportation.
We reported a 1.2% increase in Scope 1 and 2
emissions combined, mainly as a result of our
facilities opening after the Covid-19 lockdown.
Emissions from road vehicles have decreased
4.9% despite a higher volume of miles
undertaken, alongside this, emissions per
£m of revenue have decreased by 2.4 metric
tonnes. Both of these improvements are driven
by the ongoing carbon reduction initiatives in
the businesses (refer to pages 34 to 35 for
more details).
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 2021, along with factors
from the International Energy Agency (IEA) list
for 2021 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.
Waste
At SIG we are committed to eliminating waste
wherever possible. As a distributor in the
middle of the supply chain, we have the
opportunity to influence and support both our
suppliers and our customers in encouraging
reuse, recycling and reducing waste. We
aim to be sending zero SIG waste to landfill
by 2025.
As it is difficult to measure and quantify the
amount of waste disposed of in a year, the
KPI for waste management remains the
percentage of waste diverted from landfill.
We are a member of the Valpak compliance
scheme and we comply with our commitments
under the Producer Responsibility Obligations
(Packaging Waste) Regulations 2007.
“Emissions per £m of revenue
decreased by 2.4 metric
tonnes, driven by the ongoing
carbon reduction initiatives
in the businesses”
Hazardous waste diverted
from landfill
47%
2020: 0%
Non-hazardous waste diverted
from landfill
87%
2020: 78%
37SIG Annual Report and Accounts 2021
Strategic report Governance Financials
3X_XSRXpart3X_XESG_v79.indd 373X_XSRXpart3X_XESG_v79.indd 37 10/03/2022 16:5710/03/2022 16:57
Marly-La-Ville logistics
building, fostering
biodiversity and
sustainability
During 2021, our Interiors business in France
opened a new logistics building in Marly-La-
Ville, Bordeaux. This site is the first of its
nature to have received a BiodiverCity
“Excellent” AAAB label. The site was
constructed with environmental
sustainability at the core.
By investing in the wellbeing of our people
and ensuring our sites and logistics are kind
to theenvironment and foster biodiversity,
we can contribute to meeting our
sustainability commitments and our
purpose of sustainable construction.
18,000 m²
of mesohydrophilic meadows
9,000 m²
of preserved woodlands
100 m²
forest pond
2,000 m²
of orchards
a health trail
and picnic spaces for breaks
38 SIG Annual Report and Accounts 2021
Environmental, social and governance
Environment | Environmental impact
3X_XSRXpart3X_XESG_v79.indd 383X_XSRXpart3X_XESG_v79.indd 38 10/03/2022 16:5710/03/2022 16:57
Products and
supplychain
One of our sustainability commitments is to
“Partner with manufacturers and customers to
reduce carbon and waste across the supply
chain”. As a distributor of materials to the
building industry, SIG is in the middle of the
supply chain and we aim to use that position to
influence both our suppliers and our customers
to ensure that the materials we supply are as
sustainable and environmentally friendly as
they can be.
We see our role as presenting as much choice
aswe can to our customers, providing access to
the most environmentally friendly materials in the
market. We are also working with our suppliers to
promote their climate-friendly products and share
information about them with our customers.
Weplan to offer as wide a range of products as
we can, with full environmental and sustainability
data attached. Our salespeople will be trained
sothey have a robust understanding of the
environmental credentials of all the options, as
well as other product information. We are also
strengthening our procurement policies in favour
of more ethical and sustainable procurement
across the Group, and pursuing specifically
“green” purchasing, in line with customer
demandand industry standard.
Our category mix is well positioned with both
insulation and roofing critical to building energy
performance. Over 50% of our sales have
exposure to the tightening energy efficiency
regulations and subsidies, with the European
insulation market estimated to grow above
overall construction output.
Flex-R sustainability award
The Flex-R team in the UK celebrated after
its project Cwm Mawr came top in the “Best
Sustainability” category at the 2021 SPRA
Awards, which recognise the outstanding
workmanship and excellence of single ply
roofing projects. It received the award for its
collaboration with contractor Randell and
Janes Roofing on a distinctive project which
sits in an area designed as a “Site of Special
Scientific Interest”.
Cwm Mawr, in the heart of the Welsh
National Park, has been designed by
architects Kinver Kreations as a low impact
dwelling that blends seamlessly with its
surroundings. The roof features a large, curved
form to echo the surrounding hillside which
has been completed with a green roof.
Requiring a membrane which would be buried
beneath a green roof, the architects needed
professional, accurate and warranty
guaranteed installation.
Due to the sensitivity of the site, which
contains rare plants and flowers of scientific
interest, Flex-R worked with the roofing
contractors to carefully plan the installation
and overcome any challenges, including the
avoidance of use of heavy machinery that
may have damaged the landscape.
SIG Assured
SIG Assured is SIG 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)/(e-SDS)
− 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
39SIG Annual Report and Accounts 2021
Strategic report Governance Financials
3X_XSRXpart3X_XESG_v79.indd 393X_XSRXpart3X_XESG_v79.indd 39 10/03/2022 16:5710/03/2022 16:57
Social
Health & Safety
Our ambition
Our commitment is to be a “Health & Safety
leader in building materials distribution”.
Everyone in our organisation should feel safe;
physical safety and mental wellbeing is
paramount for all our employees.
Our ESG priorities on page 31 support this,
with Health & Safety ranking as one of the top
ESG priorities for our internal stakeholders.
2021 has been an encouraging year for
Health & Safety in the organisation and we
have achieved much.
• Health & Safety is now the first topic at every
Board and operating company review
meeting – accident statistics and key
initiatives are being discussed and socialised
at every level of the organisation.
• The engagement survey shows an
encouraging increase in the number of
people who feel safe at work (91% v 89%
in 2020) and 88% of people feel that safety
is being taken seriously.
• There has been significant investment in
Health & Safety capability and corresponding
expertise throughout the organisation.
• The Health & Safety agenda has been
enhanced and reframed with two additional
programmes – “Leadership leading by
example” and “Estate review – is the fabric
safe to work in?”.
• The Health & Safety metrics indicate an
increasing awareness of the Group’s safety
culture along with an understanding of the
correct behaviours, processes and protocols
in the Group.
Further details on the new Health & Safety
programmes along with regional Health &
Safety highlights can be seen on pages 42 to
43. The regional highlights and initiatives noted
are linked to where each operating company is
in its overall operational excellence journey.
Some businesses are now refining their Health
& Safety approach whereby others are
investing significantly in capability and capital
investments to materially drive forward
their journey.
Governance and structure
The CEO is ultimately responsible for Health &
Safety within the organisation. Each country
has its own Health & Safety team who are
supported by a central team, including the
Group Health, Safety and Environment
Director. In the spirit of our business model,
each devolved team directs their own Health &
Safety objectives under a central Health &
Safety policy and set of guidelines. We are
currently in the process of updating our central
policies and standards and are also in the
midst of upgrading our Group Health & Safety
reporting tool.
There is considerable Board and management
oversight into this area. A comprehensive
report is presented at each Board meeting by
the Group Health, Safety and Environment
Director, detailing accident statistics, progress
on key initiatives, details of significant incidents
and changes in the Health & Safety organisation.
This is presented at a country level which
allows the Board to understand the key issues
on the ground at each site.
The Group Health, Safety and Environment
Director is also a member of our Executive
Leadership Team and updates this forum on
a regular basis with the same information as
the Board.
The underlying country teams have been
strengthened in the year with the addition of a
new Health & Safety Director in Germany and
the remainder of the country teams expanded
to ensure they are adequately resourced.
A new Health & Safety Director will also join
the UK in the first quarter of 2022.
Health & Safety performance
in the year
In 2021, we continued to use the Total
Recordable Incident rate (“TRIR”) and Lost
Time Injury Frequency Rate (“LTIFR”) as our
reporting metrics. This allows us to better
compare against similar industries and our
competitors and allows for more transparency
within the reporting system.
The TRIR, which is calculated as an incident
resulting in injury or medical treatment being
required, environmental detriment or property
damage per 200,000 hours worked has
increased 21% from 8.8 in 2020 to 10.6 in
2021. Whilst this indicates performance has
worsened over the year, this increase is
believed to be due to more robust reporting
across the businesses alongside enhanced
awareness and education of correct
behaviours, processes and procedures
embedded into the organisation; it now
represents a good baseline for future reporting
and we would expect to see this improve in
2022 as the restructuring of the organisation is
completed and operational activity stabilises.
The LTIFR, which is calculated as any injury
resulting in any lost time per 1,000,000 hours
worked (on a rolling 12 month basis), has
decreased to 11.8 from 12.7 in 2020 driven by
strong performances in Ireland and Poland
and an improved performance in France.
Covid-19
In our 2020 report, we outlined a detailed
response to the pandemic including specific
risk assessments, investment in testing
equipment and signage and implementation
of hygiene stations alongside wellbeing
measures. We have continued these measures
into 2021 where relevant and have followed
country government guidelines throughout the
period with respect to working from home,
social distancing and use of PPE.
Occupational road risk
We strive for continuous improvement in the
standard of our vehicle fleet. By acquiring
vehicles to the latest standards, working in
partnership with our vehicle designers
and with effective management of routine
maintenance and inspections we maintain a
high level of efficiency and safety for our fleet.
Our drivers are assessed for competence and
selected through an authorisation and licence
check procedure. We promote a culture of safe
and courteous driving through our driver
assessment and training programmes to
provide for safe and efficient driving and
enable drivers to be exemplary representatives
of the business. Driver alcohol and substance
testing is conducted within the Group.
Information obtained from the Group’s vehicle
management systems is used to educate and
support drivers to improve their standard of
driving and fuel efficiency. Formal audits are
conducted of our drivers, vehicles, and fleet
management to ensure business compliance
with legal and company procedures. Any
significant issues are communicated to the
Board and our insurers.
40 SIG Annual Report and Accounts 2021
Environmental, social and governance
3X_XSRXpart3X_XESG_v79.indd 403X_XSRXpart3X_XESG_v79.indd 40 10/03/2022 16:5710/03/2022 16:57
Embedding safety
culture
Ireland has had zero lost time incidents in
the last twelve months. This compares to an
incident rate of over 20 less than two years
ago. As noted on the previous page, each
operational team is empowered to direct
their own Health & Safety objectives under
central policies and guidelines. Ireland has
used this flexibility to implement a new
behaviour-based safety culture which has
brought safety back to its basics under
the mantra:
Ireland has defined safety culture to be the
core values and behaviours resulting from
a collective commitment by leaders and
individuals to emphasise safety over competing
goals and to ensure the protection of people,
the environment, premises, equipment
and stock.
This has been delivered through 12 key
principles.
• Leadership safety values and actions–
Senior leaders demonstrate a commitment
to safety in their decisions and their
behaviours.
• Problem identification and resolution–
Issues potentially impacting safety are
promptly identified, fully evaluated, and fully
addressed and corrected, commensurate
with their significance.
• Personal accountability – All individuals
take personal responsibility for the safety
of themselves and for others.
• Work processes – A process of planning
and controlling work activities is
implemented so that safety is maintained.
• Continuous learning – Opportunities to
learn about ways to ensure safe systems
of work are sought out and implemented.
• Environment for raising concerns –
A safety-conscious work environment is
maintained where individuals feel free
to raise safety concerns without fear
of retaliation, intimidation, harassment,
or discrimination.
• Effective safety communication – Open
communication is key to maintaining a
focus on safety.
• Respectful work environment – Trust
and respect permeate the organisation.
A commitment to improving the profile
of, and attitude to, Health & Safety
and increased employee engagement
in safety.
• Questioning attitude – Individuals avoid
complacency and continuously challenge
existing conditions and activities to identify
discrepancies that might result in error or
inappropriate action.
• Value safety – Individuals hold safety as
a “value” and not just a priority.
• What is “safe”? – An emphasis on safe
and unsafe behaviour; not a sole
dependence on lagging indicators such
as safety statistics.
• Awareness – Awareness amongst all
staff of different ways to consider or query
human factors – how we do what we do,
and why.
“ Doing
what we
do better,
smarter,
safer”
41SIG Annual Report and Accounts 2021
Strategic report Governance Financials
3X_XSRXpart3X_XESG_v79.indd 413X_XSRXpart3X_XESG_v79.indd 41 10/03/2022 16:5710/03/2022 16:57
Enhancing the Health & Safety agenda
Our aim is to eliminate accidents fromour four critical hazards: pedestrian
and forklift truck interaction, roadtravel, work at height, and contact
with machinery.
Our focus to achieve this has previously been on front-line execution
with goodhousekeeping and Health & Safety routines on all sites, visible
andadequately resourced teams, delivery of training and communication
programmes managed locally in each country, frequent accident reporting
and investigations and regular Health & Safety audits.
In 2021, the Health & Safety agenda has
been supplemented and reframed with two
additional programmes:
The progress on these programmes is being reported to the Board and
the Executive Leadership Team on a monthly and country basis to ensure
transparency. We are already seeing these programmes deliver results
and we expect to see further progress in 2022.
1. Leadership leading
by example
We are demanding that our leadership, at all levels of the
organisation, are actively and visibly leading by example when
it comes to Health & Safety. Regular site visits should always
incorporate a Health & Safety review alongside briefings to
continually reinforce the Health & Safety agenda. Our leaders
should always be challenging the status quo when it comes to
Health & Safety and ensuring any Health & Safety concerns are
thoroughly and effectively investigated.
2. Estate review –
is the fabric safe to work in?
A review of our estate has begun to assess the safety of our
sites. This includes ensuring that all yards are suitably set up to
manage traffic and pedestrian flow; the welfare facilities on site
are appropriate; and sufficient investment has been identified
for areas that need rectification.
42 SIG Annual Report and Accounts 2021
Environmental, social and governance
Social | Health & Safety
3X_XSRXpart3X_XESG_v79.indd 423X_XSRXpart3X_XESG_v79.indd 42 10/03/2022 16:5710/03/2022 16:57
2021 regional highlights
Priorities for 2022
The focus for 2022 will be delivery in 6 areas:
1. Discipline – embed Health & Safety
disciplines across the businesses such that
all employees in the working environment are
aware of, and following, safety standards,
protocols and processes.
2. Communication – develop and deliver a
communications strategy that reflects the
differences between the businesses, yet is
coordinated under a Group communications
framework.
3. Metrics – refine and improve existing
output metrics and develop and integrate
input and activity metrics. Ensure they are
embedded within the businesses.
4. Training – design and deliver robust
training and awareness programmes and
ensure that Health & Safety capability across
the Group is enhanced.
5. Benchmarking – continue internal and
external verification of Health & Safety
benchmarks.
6. Culture – continue the transition from the
Zero Harm culture to one where our working
environment benefits the health, safety and
wellbeing of our colleagues, contractors, and
stakeholders.
“Everyone in our organisation
should feel safe; physical
safety and mental wellbeing
is paramount for all our
employees”
Poland
Poland has established an eco-driving training
programme along with software that tracks
how its cars and trucks are being driven. This
encourages greener, as well as safer, driving.
Rep of Ireland & NI
Ireland has focused on reporting near misses;
these are events in which no harm is done, but
had luck or other circumstances not prevailed,
could have caused an accident. Far from a
near miss being perceived as a failure, Ireland
has created a working atmosphere in which
people are encouraged to identify potentially
dangerous situations and flag them. Thatway,
they can scrutinise the full circumstances.
Germany
Germany has appointed a new Health & Safety
Director to drive positive change throughout
the organisation with further Health & Safety
hires expected in 2022 to strengthen the
capability of the team.
Health & Safety is at the top of all leadership
meeting agendas with additional monthly
safety talks being received from logistics
specialists.
France
France has invested in the fabric of its
premises. It has improved infrastructure,
for example the quality of storage facilities
such as racking in warehouses, as well as
improving the overall environment for
employees and customers. It has introduced
new signage in warehouses designed to
reduce accidents, particularly those
involving forklift trucks, and has also made
extensive improvements to the facilities for
employees, introducing more comfortable
amenities and relaxation areas at its
branches.
United Kingdom
The UK has invested heavily in its estate in
2021 with c£2m being spent on renovating
sites, improving welfare facilities and
significantly improving traffic management
at all its branches. A behavioural safety
programme called “Positive interventions”
has also been launched to understand
the trends and root causes of Health
& Safety infringements.
Benelux
One of the first actions of the new
management team in Benelux, including a
new Operations director who is overseeing
Health & Safety improvements, has been to
produce a Health & Safety handbook. This,
along with a clear roadmap and plan for
2022, has allowed Benelux to set Health &
Safety benchmarks and targets for future
improvements.
43SIG Annual Report and Accounts 2021
Strategic report Governance Financials
3X_XSRXpart3X_XESG_v79.indd 433X_XSRXpart3X_XESG_v79.indd 43 10/03/2022 16:5710/03/2022 16:57
Reliable Employer
of the Year
SIG in Poland has been recognised as a
“Reliable Employer of the Year” in 2021 in
recognition of its safe working conditions,
strong organisational culture and excellent
employee development opportunities –
including conferences, workshops, training
and e-learning systems.
This award recognises the very best
employers in Poland, who promote the most
effective solutions in people management
and HR innovation in addition to having high
standards of safety and working conditions.
People
Our approach to our people is aligned to
our purpose and is integral to meeting our
commitment to be an employer of choice in
building materials distribution. Having a culture
of being practical, helpful and humble is key
to facilitating our success. SIG is a family of
c6,800 colleagues and growing, with 432
multi-disciplinary branch teams across
8 countries. We operate a decentralised
business model enabling empowered local
teams, assisted by regional and national
support teams and management. Our people
make SIG the success it is; their efforts and
commitment over the last year demonstrate
they continue to be our greatest strength and
have enabled our return to growth.
Whilst Covid-19 continued to cause disruption
to the delivery of some people programmes,
we focused on ensuring that our people
continued to feel safe, engaged, connected
and valued, paying particular attention to their
health and wellbeing and facilitating our people
to work flexibly where this was possible. We
support our employees so they can continue
to deliver success today, tomorrow and into
the future.
Employee engagement
We strive to create a sense of belonging
among everyone who works at SIG and
appropriate two-way communication is key
to this. Our employees’ opinions and views
are genuinely important to us and key to
our success.
We had a very encouraging response to
our annual employee engagement survey
in October 2021, with 75% of employees
responding to the questionnaire. This is well
above both the SIG response rates last year
(61%) and the industry average (63%).
We achieved a positive eNPS score, which
was up by 8 points from last year and
demonstrates that our employees are more
likely than not to recommend working at
SIG. In addition to eNPS, we achieved an
engagement score of 71%, which was a new
measure for 2021. There has been significant
progress in several focus areas, particularly in
vision and leadership, culture, communication
and learning and development. The highest
scoring areas were Health & Safety, job
satisfaction and culture with scores well
above the industry average.
Similarly, as part of our obligation under the UK
Corporate Governance Code, and to ensure
we provide a direct communication channel
between the Board and our people, we ran a
Board Workforce Engagement programme
again this year, delivered by Simon King, a
Non-Executive Director. Several sessions
were held across the business with over 100
employees volunteering to attend the sessions
and providing feedback on how they felt about
working for the organisation. The feedback
was consistent across the business, with
employees feeling that the strategic direction
of the Group was right, that we were
reconnecting with what we have historically
done well and were renewing the focus on our
people and our customers. You can read more
about this engagement programme in the
Governance section on pages 76 to 77.
Great communication is a core part of our
engagement focus and in 2021 we introduced
a new internal communications platform,
Workplace by Facebook. All employees across
the Group have access to it, along with video
broadcasts, to receive business updates and
successes, share ideas and experiences, ask
questions, and give feedback.
Additionally, ensuring we facilitate robust
engagement with our leaders in the vision,
strategy and direction of the business is key.
As such, we have established our European
Leadership Group, which comprises 129
leaders across the organisation.
44 SIG Annual Report and Accounts 2021
Environmental, social and governance
Social
3X_XSRXpart3X_XESG_v79.indd 443X_XSRXpart3X_XESG_v79.indd 44 10/03/2022 16:5710/03/2022 16:57
Duo Day
In November 2021, France welcomed a number of people with
disabilities into their offices at Malakoff and Angers to support
European Week for the Employment of Persons with Disabilities.
The individuals spent time with SIG employees and were provided
with an opportunity to understand our business and participate in
our day-to-day life with the aim of building their confidence and
helping them tounderstand how they can bring value to an
organisation like SIG.
Our participation in Duo Day, which has c17,000 people with
disabilities registered for the scheme, forms a crucial part of the
development of a more diverse recruitment strategy, with the
overarching purpose of increasing disability representation in
the workforce.
Employee wellbeing
In January, we launched a Group-wide
Employee Health and Wellbeing Policy and
provided compulsory training for all employees
to ensure both an awareness and an
understanding of the policy and their
responsibilities in keeping themselves and their
colleagues safe and well. This policy included
promoting and supporting mental and
social wellbeing in the workplace, reducing
organisational risk factors such as stress
and excessive working hours and providing
support for individuals who are experiencing
health and wellbeing issues.
As a result, training sessions have been
developed for our management population to
enable them to regularly communicate and
engage with their teams in this area. To further
support individuals who are experiencing
issues, we have also trained a number of
nominated individuals in mental health first aid
training and we have relaunched an Employee
Assistance Programme service that is available
to all employees. We have also used our
employee communications platform,
Workplace, to push out notices about
wellbeing and to encourage people to take
steps to help them deal with the pressures of
both work and home life, particularly around
learning to live with Covid-19.
In our employee survey, we received a 73%
positive response when our employees were
asked about how the Group supports their
health and wellbeing. We recognise there is
always more we can do, and this will, therefore,
continue to be a focus in 2022.
“Our people are our greatest asset; it is
important that we support them and
the communities in which they live”
45SIG Annual Report and Accounts 2021
Strategic report Governance Financials
3X_XSRXpart3X_XESG_v79.indd 453X_XSRXpart3X_XESG_v79.indd 45 10/03/2022 16:5710/03/2022 16:57
22%
20%
15%
13%
78%
80%
85%
87%
Total employees
1
6,848
Board members
10
Executive Leadership Team
²
13
European Leadership Group
³
129
1. Headcount at 31 December 2021.
2. Data is per s.414c(8) of the Companies Act and includes subsidiary directors.
3. Data is per provision 23 of the UK Corporate Governance Code.
Diversity and inclusion
SIG operates in a traditionally male-orientated
industry. Women account for approximately
20% of our workforce and within that 20%
there is a greater proportion of women working
in sales and central functions (28% and 35%
respectively), with just 8% in operations.
We are working to address this balance.
As well as the gender balance of our
employees, we also monitor other subsets
of the population such as: age, ethnicity,
disability, and tenure with the Group. While
there are restrictions in collating certain
information in some of our businesses, we
report and monitor it where it is available.
We are committed to supporting and
promoting better diversity and inclusion across
all areas of the business, from Board level all
the way through the business and have further
developed a dashboard of statistics which
allows us to understand the roles, functions,
and geographical areas where particular
groups are under-represented. This data is
currently available on a monthly basis for all the
countries for which we are legally permitted
to collate the data.
We have an updated diversity and inclusion
policy and training, which is mandatory for all
employees to complete, outlining both
management and employee responsibilities.
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 best enables them to fulfil
their potential.
We have also carried out diversity and
unconscious bias awareness training for our
senior leader population alongside a number
of local activities across the business, such
as implementing changes to the recruitment
process in Ireland, bringing individuals with
disabilities into our business in France,
promoting Women in Construction in the
UK and working with schools in Poland to
promote joining the construction industry
to young adults.
We are pleased that 81% of the respondents
to our recent employee survey answered
positively when asked if they feel that
employees are treated with respect regardless
of their age, gender, and cultural background
which is a result of the focus that has been
put into this area to date.
To build on this focus, we are working to
establish a strategic framework and a plan for
2022 and beyond. The first phase of this is a
full audit of SIG’s representation, disclosure
and initiatives today at both a Group and local
level to identify areas where we can improve
on current performance. We will then develop
a medium and long-term plan with continued
and wider leadership education, awareness
and commitment.
46 SIG Annual Report and Accounts 2021
Environmental, social and governance
Social | People
3X_XSRXpart3X_XESG_v79.indd 463X_XSRXpart3X_XESG_v79.indd 46 10/03/2022 16:5710/03/2022 16:57
Talent and succession
In 2021, we launched “Performance Manager”,
an online platform for personal development
reviews. The platform can be used for all
employees and both simplifies and automates
the task of setting objectives, reviewing
performance throughout the year, measuring
the behaviours displayed by employees and
planning personal development activity. The
feedback on the platform has been positive
in terms of ease of use, transparency,
consistency, and reporting.
We also undertook a full talent and succession
review of our leadership group, which allowed
us to identify the level of capability in key roles
throughout the organisation, high potential,
successors to critical roles, candidates for
potential development moves and key
business risks and development opportunities
with supportive action planning.
This review of talent, performance and
succession and follow up activity continues
to demonstrate our commitment to identifying,
developing, and investing in the right balance
of “home grown” talent across SIG with
external hires.
Local initiatives have also been launched
in this area. In France, we have developed a
leadership training programme for 200
managers, focusing on key leadership
skills, whilst in the UK, a sales competency
framework and development programme
has been developed and launched across
its sales population.
Community and charity
We actively encourage, support and provide
resources for our people to take part
in community projects. Our internal
communications platform, Workplace, enables
our colleagues to raise awareness of good
causes, fundraise for charities and organise
events. Our workplace charity committees
have organised events and developed projects
in all areas across the Group with nominated
charities, who were selected through a
workplace ballot. As a result, our colleagues
have embraced this area with both personal
and team fundraising efforts supported by our
social media platforms to raise awareness and
gain support.
Over the past year we have continued to
develop local and national community support
projects such as;
• our Polish business dedicated over 110
hours of colleagues’ time to provide activity
sessions for local children aimed at supporting
learning techniques for success;
• in Ireland we have made donations to local
charities including the provision of meals and
presents to families in need over the festive
period. We have also installed defibrillators
within the branches and provided training
on their use;
• in the UK we have continued our support
for Cancer Research UK and the Rainy Day
Trust which is a charity that supports people
in the construction industry when they are
in particular need of assistance; and
• in addition to this, in early 2022 we are
working on ways on how best we can
provide financial and practical support to
those affected in the Ukraine. Each of our
operating companies has donated funds
directly to front-line agencies and we have
set up SIG funds to be deployed directly
to locally assist refugees and affected
employees and their families. We are
increasingly receiving donations from
employees to the same schemes. Where we
can, we are planning more direct practical
support, for example in housing of refugees.
We continue to play a significant role in
attracting people to the industry in all
our business areas through providing
apprenticeships, Kickstart (UK) and work
experience opportunities. Our online, virtual
and in person training platforms have proven
popular once again, providing learning
activities for our colleagues to improve their
work opportunities and to develop skills that
are transferable into their family lives.
Priorities for 2022
We will continue to value and nurture our
employees as the momentum of our recovery
continues. In 2022, we will bring an even
sharper focus to the talent, development, and
succession of our people, particularly those in
leadership positions. We will be placing greater
emphasis on our approach to diversity and
inclusion, to make sure we continue to be
inclusive at all levels and are attracting,
recruiting, and developing the best people
from diverse groups. We will look more closely
at both our sales and operations teams to
develop their skills and provide them with
improved tools and processes to outperform
and we will continue to communicate, engage,
connect, and celebrate our people.
“We have exceptional talent
who are driving our business
forward. We are building
robust succession plans to
ensure a sustainable future.”
47SIG Annual Report and Accounts 2021
Strategic report Governance Financials
3X_XSRXpart3X_XESG_v79.indd 473X_XSRXpart3X_XESG_v79.indd 47 10/03/2022 16:5710/03/2022 16:57
Governance of ESG and
climate-related matters
Board oversight – The governance
supporting ESG within the Group, including
our understanding of climate-related impacts,
has evolved over the year and we have
made great strides in ensuring that the risks,
opportunities and commitments included in
our approach are balanced, measured, and
appropriate for our business. Climate-related
risks and opportunities fall within the Group’s
ESG framework and form a fundamental
part of our overall ESG strategy, driving
our environmentally-related sustainability
commitments. Throughout 2021, the Board
has been provided with regular and pertinent
oversight of the Group’s ESG risks and
opportunities, including climate-related matters
from members of the Executive Leadership
Team, as well as a focused review on the new
sustainability commitments and our approach
to achieving them.
The result of these reviews is that the Board
considers the sustainability commitments and
overall ESG approach to be balanced and
measured, with an appropriate focus on
reducing vehicle emissions and waste, which
will help to mitigate the climate change risks
noted on the next page. The Board, however,
also recognises that there are significant
opportunities for the Group from climate-
related matters and the drive for sustainable
construction. These are explored further on
pages 12 to 17. Based on these reviews,
and as disclosed on page 66 in our viability
statement, the Board does not consider there
to be a significant risk of climate change
causing a significant downturn in the financial
health of the Group in the short-term.
Management oversight – During 2021, we
have set up an ESG steering group which is
run by the Group CEO and includes the CFO,
senior representatives from the operating
companies, and functional subject matter
experts. This group, whilst not a Board
Committee, has been instrumental in
developing the sustainability commitments and
understanding the climate change risks and
opportunities in the Group. In 2022, we will use
this working group to develop a wider ESG
community who will drive through the changes
needed at an operational level to ensure that
the commitments and strategy are delivered,
including developing a framework for our
Scope 3 emissions and interim targets for
our sustainability commitments.
Management’s role in assessing and managing
our ESG and climate-related risks and
opportunities is starting to be embedded
throughout the Group. The newly formed
European Leadership Group and the Executive
Leadership Team discuss ESG and climate-
related topics regularly and each operating
company is expanding their senior team to
include sustainability specialists. Management
are also responsible for harnessing the
opportunities that climate-related matters
bring. Page 14 sets out our role in driving
sustainable construction, and each team is
responsible for ensuring that we continue our
tradition of bringing energy efficient solutions
to the market.
Climate-related impact
on strategy
.
The Group considers short, medium and
long-term horizons in the context of climate-
related risks and opportunities 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 on page 49 sets out the main
climate-related transition risks the Group faces
alongside proposed mitigating strategies and
the time horizons which are relevant.
The Group does not consider physical risks
such as extreme heat, drought, rising sea
levels, 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, Poland
and Spain. Flood risk could be a consideration
but based on an external review of our branch
network, only c1% of our branches have any
flood risk attached to them, leading to minimal
risk for the Group’s strategy.
The impact on our strategy from the transition
risks identified are as follows:
• We are already in the process of migrating
our car and forklift fleet towards electric and
other low-carbon fuels (see pages 34 to 35).
Costs for these migrations have already been
factored into our short-terms forecasts.
• The biggest unknown in the short to
medium-term are detailed cost implications
for the replacement of our commercial truck
fleet. This is dependent on the pace of the
development of external technology and
infrastructure, especially for HGVs.
• Increasing need for better product carbon
data and a Scope 3 emissions framework
will mean an investment in climate change
specialism in the Group. This has already
begun with senior hires in the UK and France
and we expect to see additional recruitment
in 2022 onwards.
• No legislation has yet been passed which
would negatively impact the Group’s key
revenue streams or products and therefore
our strategy in the short, medium or
long-term.
Climate change also presents a number of
opportunities for the Group which are already
built into our strategy. Through our position in
the middle of the supply chain we are able to
influence both suppliers and customers to help
ensure that the materials we supply are as
sustainable and environmentally friendly as
they can be, and we have identified a number
of “win-win” opportunities. These include:
continuing to expand our presence in
energy-conserving solutions with green growth
drivers such as insulation, roofing and solar
panels; partnering with suppliers to encourage
uptake of lower-carbon products, such as
bio-sourced insulation solutions; working with
large customers such as housebuilders to
support their sustainability ambitions; and
providing value-added specialist services,
such as advice to architects and contracts to
optimise longevity, energy efficiency and
carbon footprint. Our category mix is well
positioned with both insulation and roofing
critical to building energy performance and
over 50% of our sales have exposure to
tightening energy efficiency regulations.
The financial impact of climate-related matters
is further discussed on page 66 as part of
our viability and going concern statements as
well as in Note 13 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 cashflows across
the Group.
Governance
48 SIG Annual Report and Accounts 2021
Environmental, social and governance
3X_XSRXpart3X_XESG_v79.indd 483X_XSRXpart3X_XESG_v79.indd 48 10/03/2022 16:5710/03/2022 16:57
ESG and climate-
related risks
.
During the year, the Group hasrefreshed its
approach toidentifying, monitoring and
reporting its key ESG risks, including climate-
related risks. The process of identifying and
assessing these risks follows our overall
approach to risk management set out on
pages 54 to 55 in that we focus on our
strategic objectives and combine a top-down
strategic Group-level view and a bottom-up
operational view of the risks at operating
company level. In addition, a more granular
and specific risk review has been performed
and reviewed with members of the ESG
steering group and other stakeholders. The
outputs from these risk review exercises have
been combined to consolidate our view of our
principal ESG and climate-related risks and
will be reviewed by the Board, Executive
Leadership Team and ESG steering group
regularly during the year.
Risk Description Mitigation Impact
1
Carbon targets
2
(S/M/L)
The carbon commitments stated on page 30 use an
offset strategy to fill any shortfalls in achieving net
zero carbon. There is a risk, however, that the use of
offsets is very limited (restricted to c<10% of targets)
and if we are unable to achieve the required carbon
targets, enough offsets may not be available or
allowable to fill any gaps in achieving our targets.
We are committed to achieving our challenging carbon targets
and, as part of our Scope 3 scenario assessments and planning,
we will identify and prioritise the key enablers to reducing our
carbon emissions and ensure that offsets are utilised only as
a last resort.
High
Removal of fossil
fuels from fleet
2
(S/M/L)
There is a significant degree of uncertainty regarding
the optimum future technology for our fleet and there
is therefore risk regarding what and when any
investment in new technologies should be made.
Pages 34 to 35 set out the progress we have made and future
plans we have for decarbonising our car and forklift truck fleets
across the Group.
The most cost-effective route for decarbonising heavy-duty
vehicles remains less clear. We are, however, working with our
fleet partners and manufacturers to assess the most viable
alternatives todiesel, including electric, hydrogen and bio-fuel.
High
Waste
management
2
(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.
We are a member of the Valpak compliance scheme and we
comply with our commitments under the Producer Responsibility
Obligations (Packaging Waste) Regulations 2007.
Medium
Product carbon
data
2
(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
Health & Safety
compliance
There is a risk that poor organisational arrangements
or behavioural culture with regards to Health & Safety
compliance directly contributes to a significant Health
& 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 & Safety. He is
supported by local Health & 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.
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.
We have an updated diversity and inclusion policy, which is
mandatory for all employees to review and understand, outlining
both management and employee responsibilities. 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.
Medium
Scope 3
emissions
2
(S)
Until the necessary Scope 3 analysis is performed,
there is a degree of uncertainty regarding SIG’s ability
to deliver on its Scope 3 commitments. The risk may
also be exacerbated by the complexity and resources
required to perform a reasonable level of scenario
analysis.
We currently provide limited data with regards to Scope 3
emissions. This is an area of focus for 2022 and a strategy will be
developed to ensure we have considered the emissions relating
to our broader supply chain.
Medium
1. The risks noted above that have a “High” impact have been referenced as part of the wider ESG risk disclosed in the Group’s principal risks and uncertainties on page 57.
Risk classification has been determined based on complexity or cost of risk reduction.
2. Indicates climate-related transition risks. 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
49SIG Annual Report and Accounts 2021
Strategic report Governance Financials
3X_XSRXpart3X_XESG_v79.indd 493X_XSRXpart3X_XESG_v79.indd 49 10/03/2022 16:5710/03/2022 16:57
Climate-related Financial Disclosures
The Financial Conduct Authority have
introduced the mandatory Taskforce on
Climate-related Financial Disclosures (“TCFDs”)
for all premium-listed companies. This is
effective for accounting periods beginning on
or after 1 January 2021.
The TCFD recommendations are supported by
11 recommended disclosures that aim to give
detailed information to allow stakeholders to
understand how organisations assess
climate-related risks and opportunities.
Climate-related risks can include physical risks,
such as extreme weather events, or risks
because of a transition to a low-carbon
economy, for example.
We have addressed how we have complied
with these recommendations elsewhere in the
report and, where we have not complied, we
have also explained why this is the case below.
The relevant disclosures can be seen on the
following pages:
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
Page 48
Describe management’s role in assessing and managing
climate-related risks and opportunities
Page 48
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
longterm.
Risks – Page 48 to 49
Opportunities – Pages 12 to 17, 48
Describe the impact of climate-related risks and
opportunities on the organisation’s businesses, strategy,
and financial planning.
Risks – Page 48 to 49
Opportunities – Pages 12 to 17, 48
Describe the resilience of the organisation’s strategy, taking
into consideration different climate-related scenarios,
including a 2°C or lower scenario.
We have not yet completed an exercise to
testthe resilience of the Group’s strategy to
different climate-related scenarios. This will
becompleted in 2022. The focus on 2021
hasbeen the execution of the Return to
Growth strategy. We do not, however, expect
this exercise to have a significant impact on the
Group’s strategy and financial planning given
our minimal exposure to physical climate-
related risks and the significant climate-related
opportunities identified (detailed on page 48).
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 49
Describe the organisation’s processes for managing
climate-related risks.
Page 49
Describe how processes for identifying, assessing, and
managing climate-related risks are integrated into the
organisation’s overall risk management.
Page 49
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 30
GHG emissions on page 36-37
Disclose Scope 1, Scope 2, and if appropriate, Scope 3
GHG emissions, and the related risks.
Disclosed on pages 36-37. Our Scope 3
emissions framework will be further developed
in 2022.
Describe the targets used by the organisation to manage
climate-related risks and opportunities and performance
against targets.
The high-level commitments made by the
Group to manage climate risks and
opportunities have been set out on page 30.
However, interim targets to ensure these
commitments are met have not yet been
set and will be completed in 2022.
50 SIG Annual Report and Accounts 2021
Environmental, social and governance
Governance
3X_XSRXpart3X_XESG_v79.indd 503X_XSRXpart3X_XESG_v79.indd 50 10/03/2022 16:5710/03/2022 16:57
United Nations Sustainable Development Goals
We are committed to creating long-term
sustainable value for our stakeholders.
To achieve this goal, we have aligned our
operations with the United Nations Sustainable
Development Goals (“SDGs”), providing us
with a framework against which to map our
ESG and business activities.
The SDGs are the blueprint to achieve a better
and more sustainable future for all. They
address the global challenges we face,
including those related to inequality, climate
change and responsible consumption and
production.
We welcome the framework as it is committed
to solving global issues, and these universal
principles support our commitment to
responsible business operations. Our ESG
report details the work undertaken by the
Group and highlights our commitment to
the SDGs.
SIG UK announced as a Zero Carbon
Business Champion
SIG in the UK has been announced as a Zero Carbon Business
Champion by the CO
2
nstruct Zero programme team. CO
2
nstruct
Zero is the Construction Leadership Council’s response to the
Government’s Ten Point Plan for a Green Industrial Revolution
and is backed by the Builders Merchants Federation.
The aim of the CO
2
nstruct Zero programme is to drive carbon out of
all parts of the construction supply chain by 2050 and to set out how
the construction industry as a whole can meet the net zero carbon
challenges set by the Government. SIG UK’s proposals for our
net zero carbon journey were assessed by the CO
2
nstruct Zero
programme team and ultimately approved with the announcement of
our Zero Carbon Business Champion status made in January 2022.
SDGs include:
Good health and wellbeing
Ensure healthy lives and promote
wellbeing for all, at all ages.
Quality education
Ensure inclusive and equitable quality
education and promote lifelong
learning opportunities for all.
Gender equality
Achieve gender equality and
empower all women and girls.
Decent work and economic
growth
Promote sustained, inclusive and
sustainable economic growth, full
and productive employment and
decent work for all.
Industry, innovation and
infrastructure
Build resilient infrastructure, promote
inclusive and sustainable
industrialisation and foster
innovation.
Reduced inequalities
Reduce inequality within and
among countries.
Responsible consumption and
production
Ensure sustainable consumption and
production patterns.
Climate action
Take urgent action to combat climate
change and its impacts.
Peace, justice and strong
institutions
Promote peaceful and inclusive
societies for sustainable
development, provide access to
justice for all and build effective,
accountable and inclusive institutions
at all levels.
51SIG Annual Report and Accounts 2021
Strategic report Governance Financials
3X_XSRXpart3X_XESG_v79.indd 513X_XSRXpart3X_XESG_v79.indd 51 10/03/2022 16:5710/03/2022 16:57
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 and equal opportunities
The Group has policies that promote equality
and diversity in the workforce as well as
prohibiting discrimination in any form. SIG
encourages and considers all applications
from individuals with recognised disabilities
to ensure they have equal opportunity for
employment and development within the
business. If an employee becomes disabled
during employment, every effort is made to
ensure they can continue in employment,
by making reasonable adjustments in the
workplace or by providing retraining for
alternative work where necessary.
Ethical Trading and
Human Rights policy
The Ethical Trading and Human Rights
policy covers the main issues that may be
encountered in relation to product sourcing
and sets out the standards of professionalism
and integrity that should be maintained by
employees in all Group operations worldwide.
The policy sets out standards concerning:
• safe and fair working conditions for
employees;
• responsible management of social and
environmental issues within the Group; and
• standards in the international supply chain.
SIG promotes human rights through its
employment policies and practices, supply
chain, and the responsible use of its products
and services.
Anti-bribery and
Corruption policy
SIG has a number of fundamental principles
that it believes are the foundation of sound and
fair business practice, one of which is a
zero-tolerance position on bribery and
corruption. The Group’s Anti-bribery and
Corruption policy clearly sets out the ethical
standards required to ensure compliance with
legal obligations within the countries in which
SIG and its subsidiary companies operate.
Anti-bribery and Corruption training is provided
to all employees across the Group. This online
training includes modules on competition law.
SIG values its reputation for ethical behaviour,
financial probity and reliability. It recognises
that over and above the commission of any
crime, any involvement in bribery will also
reflect adversely on its image and reputation.
Its aim, therefore, is to limit its exposure to
bribery and corruption by:
• setting out a clear policy on anti-bribery
and corruption;
• training all employees so that they can
recognise and avoid the use of bribery
by themselves and others;
• encouraging employees to be vigilant and to
report any suspicion of bribery, providing
them with suitable channels of
communication and ensuring sensitive
information is treated appropriately;
• rigorously investigating instances of alleged
bribery and assisting the police and other
appropriate authorities in any resulting
prosecution; 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 2020 on our website
(www.sigplc.com) in line with Home Office
guidance. The Group continues to work with
its supply chain to ensure there is a zero-
tolerance policy to slavery. The 2021 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 2022
for the six months to 31 December 2021.
52 SIG Annual Report and Accounts 2021
Environmental, social and governance
Governance
3X_XSRXpart3X_XESG_v79.indd 523X_XSRXpart3X_XESG_v79.indd 52 10/03/2022 16:5710/03/2022 16:57
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 59)
Environmental matters
Read more on pages 30 to 39
• 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
• Maintain ISO accreditation
• Sustainability commitments
(page 30)
• Waste management (page 37)
• Health, Safety and Environment
policy (pages 40 to 43)
• Health & Safety
• Environment, social and
governance
People and social
Read more on pages 40 to 47
• Annual employee engagement
survey
• Health & Safety leader in
building materials distribution
• Employer of choice in building
materials distribution
• Launch of employee wellbeing
training
• Sustainability commitments
(page 30)
• Diversity and equal
opportunities (page 46)
• SIG Code of Conduct (page 52)
• Employee engagement
(page 44)
• Talent and succession (page 47)
• Attract, recruit and retain
our people
• Environmental, social and
governance
Human rights and anti-bribery
Read more on page 52
• Raise awareness of policies
• Included in mandatory training
• Ethical Trading and Human
Rights policy (page 52)
• Anti-bribery and Corruption
policy (page 52)
• 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 16 to 17
Principal risks and uncertainties are managed
through the risk management framework.
Read more on pages 54 to 59
Our KPIs enable us to measure the success of
our strategic objectives and performance.
Read more on pages 28 to 29
The Section 172 Statement is set out on pages
78 to 83 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.
53SIG Annual Report and Accounts 2021
Strategic report Governance Financials
Non-financial information statement
3X_XSRXpart3X_XESG_v79.indd 533X_XSRXpart3X_XESG_v79.indd 53 10/03/2022 16:5710/03/2022 16:57
Risk management plays an
integral part in SIG’s planning,
decision-making and
management processes.
Allemployees 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 arerobust.
The Board, supported by the Audit Committee,
sets the strategy for the Group and ensures
the associated risks are effectively identified
and managed through the implementation of
the risk management and control frameworks.
The Group employs a three lines model to
provide a simple and effective way to enhance
risk 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,
theprincipal risks are reviewed by the Board,
the Audit 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.
Principal risks and uncertainties
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
andare operating efficiently and effectively across
theorganisation.
2
3
1
First line
Second line
Third line
54 SIG Annual Report and Accounts 2021
Risk
4X_XSRXpart4X_RiskXandXFinXrev_v76.indd 544X_XSRXpart4X_RiskXandXFinXrev_v76.indd 54 10/03/2022 17:0010/03/2022 17:00
Risk management principles
Our approach to risk management is supported
by the following key risk management principles:
1
25
34
Our 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 Committee has responsibility
forreviewing 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
oradditional 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 appetite
or tolerance for risks that have significant
negative consequences, particularly when they
could adversely impact Health & 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 below and
details of the risks and current mitigations are
included in the table on the following pages.
Principal risks
1
Cyber security
2
Health & Safety
3
Macro-economic 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
10
9
1
3
6
2
4
7
5
8
55SIG Annual Report and Accounts 2021
Strategic report Governance Financials
4X_XSRXpart4X_RiskXandXFinXrev_v76.indd 554X_XSRXpart4X_RiskXandXFinXrev_v76.indd 55 10/03/2022 17:0010/03/2022 17:00
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:
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 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 & 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 & 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. He
is supported by local Health & 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 & Safety standards and
arrangements, with assurance provided through a
programme of compliance audits performed by suitably
trained and experienced Health & Safety professionals.
3. Macro-economic uncertainty
Macro-economic volatility
impacts the Group’s ability
to accurately forecast and to
meet internal and external
expectations
Risk movement:
Link to Strategic pillars:
Supply and demand distortions (such as goods
and materials shortages throughout the global
supply chains and increased inflationary
pressures) and the reimposition of public health
restrictions in response to future waves and
variants of Covid-19 may continue to impact
European economies throughout 2022. 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. Very recently the conflict in
Ukraine has contributed to heightened
uncertainty. Changes in macro-economic
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.
56 SIG Annual Report and Accounts 2021
Risk
4X_XSRXpart4X_RiskXandXFinXrev_v76.indd 564X_XSRXpart4X_RiskXandXFinXrev_v76.indd 56 10/03/2022 17:0010/03/2022 17:00
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 reduced short-term intra-EU and
UK-EU mobility resulting from both Covid-19
restrictions and Brexit, 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.
Ongoing enhancements to pay and conditions, including
benchmarking remuneration packages to ensure market
competitiveness, 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.
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 30, we have set ambitious ESG
commitments and will focus on demonstrating leadership in
building materials distribution, Health & Safety, 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 the
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.
Our strategic initiatives
Responsible
actions
Specialist
expertise
Valuable
partnerships
Superior
service
Highest
productivity
Risk movement
Risk increased
Risk unchanged
Risk decreased
Winning
branches
Focused
growth
57SIG Annual Report and Accounts 2021
Strategic report Governance Financials
4X_XSRXpart4X_RiskXandXFinXrev_v76.indd 574X_XSRXpart4X_RiskXandXFinXrev_v76.indd 57 10/03/2022 17:0010/03/2022 17:00
Risk Description: Mitigation:
7. Mergers and acquisitions
We lack the capabilities to
effectively identify, acquire
and integrate significant
mergers and acquisition
opportunities and ensure
deals deliver desired
scalability and value
creation
Risk movement:
New principal risk
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 future 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.
8. Legal or regulatory compliance
We fail to comply with, or
are found to be in breach of,
legal or regulatory
requirements
Risk movement:
New principal risk
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 &
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.
58 SIG Annual Report and Accounts 2021
Risk
4X_XSRXpart4X_RiskXandXFinXrev_v76.indd 584X_XSRXpart4X_RiskXandXFinXrev_v76.indd 58 10/03/2022 17:0010/03/2022 17:00
Risk Description: Mitigation:
9. Digitalisation
SIG fails to maintain or offer
the digital capabilities
necessary to maintain
market competitiveness
Risk movement:
New principal risk
Link to Strategic pillars:
Increased technological innovation and change,
some of which has been driven by the societal
and working environment challenges presented
by the Covid-19 pandemic, has accelerated the
increasing role digitalisation will have in the
construction materials supply chain. Both
suppliers and customers are increasingly
seeking digital solutions to enable a more
integrated and frictionless experience.
This risk may be exacerbated by legacy systems
and technologies whichare heavily customised,
require significant system maintenance
toprevent outages and lack the functionality
to allow their integration into amore 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 2021, we benchmarked our digital capabilities
across the Group and have identified opportunities for
further progress in digital, particularly with regards to how
we can increase our own internal efficiencies and enhance
the customer experience. This will form the basis of
the focus on developing our digital capabilities
throughout 2022.
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 part of the Return to Growth strategy we have
made significant changes to our operating
model, infrastructure, and leadership. As we
enter the next phase of executing our strategy,
allied to ongoing economic and pandemic-driven
shifts in everything from demand patterns to
delivery models and working arrangements,
there is a risk that the business is challenged
by “change fatigue” and that future changes
are not implemented as planned, or benefits
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 staff engagement surveys continue to facilitate
the early identification of change impact in terms of our
employees, and action plans are implemented and
monitored accordingly.
Risk movement
Risk increased
Risk unchanged
Risk decreased
Our strategic initiatives
Responsible
actions
Specialist
expertise
Valuable
partnerships
Superior
service
Highest
productivity
Winning
branches
Focused
growth
59SIG Annual Report and Accounts 2021
Strategic report Governance Financials
4X_XSRXpart4X_RiskXandXFinXrev_v76.indd 594X_XSRXpart4X_RiskXandXFinXrev_v76.indd 59 10/03/2022 17:0010/03/2022 17:00
Financial review
Improving financial performance
The financial performance in
2021 included a more rapid
return to profitability than
anticipated, driven by the
Return to Growth strategy, and
helped by market demand.
The macro-economic environment, and
specifically the global supply chain impact of the
initial responses to Covid-19, affected material
availability during H2, creating a shortfall in the
supply of key materials to the industry. This led
to significant input cost inflation along with a
shortage of supply across our key product
categories. These supply constraints were
managed proactively to minimise the
commercial impact, although they did inevitably
impact our ability to meet customer demand
at times. Inflation on input costs was largely
passed on to customers, increasing the
reported revenue.
We increased our inventory holding levels in
certain segments during H2 to maintain and
enhance customer service, and this increased
the inventory held at 31 December 2021.
Combined with the impact of inflation on
working capital as a whole, this has created
a headwind on cash flow for the year, which
we expect to abate and then start to unwind
during 2022.
Revenue and gross margin
The Group saw a 24% increase in its LFL
revenue over the year, with Group revenue up
to £2,291.4m (2020: £1,874.5m), reflecting a
strong recovery from the Covid-19 impact
in 2020, driven by the effective implementation
of the Return to Growth strategy as well as the
inflationary tailwind. Pass through of product
price inflation added to the top line in all
geographies, to an increasing degree in H2.
We estimate the impact on revenue for the full
year to be approximately 8%.
Gross profit increased 28% to £602.1m (2020:
£470.5m) with a gross profit margin of 26.3%
(2020: 25.1%). This primarily reflects increased
rebate receipts due to increased sales.
“The Group is back to underlying profit,
driven by market share gains and
margin discipline in challenging
supply markets”
Revenue
£2,291.4m
2020: £1,874.5m
Underlying operating profit/(loss)
£41.4m
2020 (restated): (£53.1m)
Gross margin
26.3%
2020: 25.1%
Net debt
£365.0m
2020: £238.2m
60 SIG Annual Report and Accounts 2021
4X_XSRXpart4X_RiskXandXFinXrev_v76.indd 604X_XSRXpart4X_RiskXandXFinXrev_v76.indd 60 10/03/2022 17:0010/03/2022 17:00
Operating costs and profit
The Group’s underlying operating costs were £560.7m (2020 (restated): £523.1m). Underlying results exclude businesses that are classified as
non-core and Other items, in order to provide a better understanding of the performance of the Group. The increase in costs was primarily due to
increased trading volumes, inflation, increased variable compensation and the non-recurring government support schemes in the prior year, such
as furlough and other wage initiatives. The Group’s underlying operating profit was £41.4m (2020 (restated): £53.1m loss) and at a statutory level, the
Group’s operating profit was £14.0m (2020 (restated): loss of £160.0m) after Other items of £27.4m (2020 (restated): £107.4m). The latter included
£9.9m impairment of goodwill, £4.7m amortisation of intangible assets, £2.0m of onerous contract costs, £2.4m costs associated with refinancing,
£3.7m costs relating to restructuring activities and £3.3m related to cloud computing costs following IFRS Interpretation Committee guidance on this
topic issued during the year. Prior year operating profit has also been restated as a result of the cloud computing guidance issued – please refer to
the Statement of significant accounting policies on page 135 for more details.
Profitability continued to improve in H2 compared to the first half, with underlying operating profit approximately doubling in H2 vs H1.
Segmental analysis
UK
Underlying
revenue
2021
£m
Underlying
revenue
2020
£m
LFL sales
Underlying
operating
(loss)/profit
2021
£m
Underlying
operating
loss
(restated)
2020
£mvs2020 vs2019
UK Interiors 507.4 3 5 7.4 38% (8%) (2.5) (45.3)
UK Exteriors 422.2 310.1 36% 21% 25.0 (7.3 )
UK 929.6 6 6 7. 5 37% 4% 22.5 (52.6)
Underlying revenue in UK Interiors, a specialist insulation and interiors distribution business, was up 42% to £507.4m (2020: £357.4m). This included
a 5% impact from acquisitions in the year, LFL growth was 38%. The LFL decline against 2019 (pre Covid-19) included a decline in H1 and then good
growth in H2, reflecting the strong progress being made. Despite supply chain shortages and consequent adoption of “allocations” by suppliers,
especially around dry lining, daily sales showed strong growth throughout the year. The improved trading volume drove a substantially lower loss, with
the business driving the additional volumes through the existing capacity in the network. This resulted in an underlying operating loss of £2.5m (2020
(restated): £45.3m loss).
UK Exteriors, a specialist roofing merchant, which also includes our Building Solutions business, traded extremely well, benefitting from both the
strong demand environment and strategic stock management, with underlying revenues of £422.2m (2020: £310.1m), a LFL increase of 36%.
The increase in revenue, further benefit from an increased margin due to rebates, and favourable product mix resulted in an underlying
operating profit of £25.0m (2020 (restated): £7.3m loss).
France
Underlying
revenue
2021
£m
Underlying
revenue
2020
£m
LFL sales
Underlying
operating
profit
2021
£m
Underlying
operating
profit/(loss)
2020
£mvs2020 vs2019
France Interiors 195.3 16 8 .1 20% 7% 11.2 7.1
France Exteriors 406.0 344.8 22% 22% 17.4 8.3
France before non-core 601.3 512.9 21% 17% 28.6 15.4
Non-core businesses – 1.8 – – – (0.3)
France 601.3 514.7 21% 17% 28.6 15.1
France Interiors, trading as LiTT, a structural insulation and interiors business, saw underlying revenue increase by 16% to £195.3m (2020: £168.1m),
and by 20% on a LFL basis. 2021 continued the revenue growth experienced in the second half of 2020. The increase in revenue, coupled with an
improved margin as a result of supplier rebates, partially offset by higher operating costs due to trading levels and inflation, resulted in a £4.1m
increase in underlying operating profit to £11.2m (2020: £7.1m).
Underlying revenue in France Exteriors, trading as Larivière, a specialist roofing business, increased by 18% to £406.0m (2020: £344.8m), and by
22% on a LFL basis. The strong demand in the RMI market witnessed in late 2020 continued throughout 2021. 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 an underlying
operating profit increase of £9.1m to £17.4m (2020: £8.3m).
61SIG Annual Report and Accounts 2021
Strategic report Governance Financials
4X_XSRXpart4X_RiskXandXFinXrev_v76.indd 614X_XSRXpart4X_RiskXandXFinXrev_v76.indd 61 10/03/2022 17:0010/03/2022 17:00
Segmental analysis continued
Germany
Underlying
revenue
2021
£m
Underlying
revenue
2020
£m
LFL sales Underlying
operating
profit
2021
£m
Underlying
operating
profit
2020
£mvs2020 vs2019
Germany 393.2 370.7 10% 4% 3.6 0.4
Underlying revenue in WeGo/VTi, our specialist insulation and interiors distribution business in Germany, increased by 6% to £393.2m (2020:
£370.7m) and by 10% on a LFL basis. The improvement in Germany was aided by proactive stock management, allowing the business to meet
customer demand despite supply shortages, and input price inflation that was largely passed on to customers. The increased trading levels
resulted in an underlying operating profit of £3.6m (2020: £0.4m). We have new management in place in our German business and are encouraged
by early progress.
Benelux
Underlying
revenue
2021
£m
Underlying
revenue
2020
£m
LFL sales Underlying
operating
loss
2021
£m
Underlying
operating
profit
2020
£mvs2020 vs2019
Benelux 92.4 91.6 5% (8%) (4.9) 2.5
Underlying revenue from the Group’s business in Benelux increased slightly by £0.8m to £92.4m (2020: £91.6m), with increased volumes following
recovery from Covid-19 in the prior year largely offset by the impact of strong competitive pressure in the Netherlands, combined with certain
regulatory changes. This, along with a temporary increase in the cost base necessary to improve operational effectiveness, has resulted in an
operating loss of £4.9m compared to an operating profit of £2.5m in 2020. The new management appointed in mid-2021 have made good initial
progress in addressing both the operational issues and the cost base.
Ireland
Underlying
revenue
2021
£m
Underlying
revenue
2020
£m
LFL sales Underlying
operating
profit
2021
£m
Underlying
operating
profit
2020
£mvs2020 vs2019
Ireland 88.2 80.5 14% (5%) 2.8 0.8
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. The business was affected by further Covid-19 related government restrictions in the Republic of Ireland from January
until early May 2021, but saw a strong rebound in the second half, with underlying revenue increasing by 10% to £88.2m (2020: £80.5m), and by 14%
on a LFL basis. Underlying operating profit improved by £2.0m, finishing at £2.8m (2020: £0.8m) as the business saw a shift in sales mix towards its
higher margin offerings.
Poland
Underlying
revenue
2021
£m
Underlying
revenue
2020
£m
LFL sales Underlying
operating
profit
2021
£m
Underlying
operating
profit
2020
£mvs2020 vs2019
Poland 186.7 149.5 33% 29% 6.3 2.0
In our Polish business, a market leading distributor of insulation and interiors, underlying revenue increased to £186.7m (2020: £149.5m), with LFL
sales up 33% due to an increase in customer numbers, branch openings and significant price inflation. The business had a record year with an
underlying profit of £6.3m (2020: £2.0m), driven by the sales growth and partially offset by volume-related increases in operating costs.
Financial review
62 SIG Annual Report and Accounts 2021
4X_XSRXpart4X_RiskXandXFinXrev_v76.indd 624X_XSRXpart4X_RiskXandXFinXrev_v76.indd 62 10/03/2022 17:0010/03/2022 17:00
Reconciliation of underlying to statutory result
Other items, being items excluded from underlying results, during the year amounted to £35.2m (2020 (restated): £118.5m) on a pre-tax basis and are
summarised in the table below:
2021
£m
Restated
2020
£m
Underlying profit/(loss) before tax 19.3 (76 .1)
Other items – impacting profit/(loss) before tax:
Amortisation of acquired intangibles (4.7) (5.6)
Impairment charges (10.2) (61.5)
Net restructuring costs (3.7) (6.7)
Onerous contract costs (2.0) (13.2)
Cloud computing configuration and customisation costs (3.3) ( 7.1)
Costs associated with acquisitions (1.5) (0.2)
Costs associated with refinancing (2.4) ( 7.4)
Non-underlying finance costs (7. 8) (11.6)
Profit on agreed sale or closure of non-core businesses and associated impairment charges – 0.6
Net operating losses attributable to businesses identified as non-core – (0.3)
Investment in omnichannel retailing – (4.2)
Other specific items 0.4 (1.3)
Total Other items (35.2) (118.5)
Statutory loss before tax (15.9) (194.6)
Further details of Other items are as follows:
• Impairment charge of £10.2m (2020: £61.5m)
includes £9.9m relating to the impairment of
goodwill in Benelux.
• Net restructuring costs of £3.7m (2020:
£6.7m) 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
andBenelux.
• Onerous contract costs of £2.0m (2020:
£13.2m) related to provisions recognised for
licence fee commitments where no future
economic benefit is expected, principally in
relation to the SAP 1HANA implementation.
• Cloud computing costs relate to project
configuration and customisation costs
associated with cloud computing
arrangements which are expensed rather
than being capitalised as intangible assets
following IFRS Interpretation Committee
guidance on this topic issued during
the year.
• Costs associated with refinancing of £2.4m
(2020: £7.4m) includes adviser, legal and
other professional fees of £4.9m offset by a
£2.5m gain in relation to the recycling of the
cash flow hedging reserve following the
termination of hedging arrangements in
connection with the refinancing.
• Non-underlying finance costs of £7.8m
(2020: £11.6m) comprise a £12.9m make-
whole payment on settlement of the previous
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 previously
recognised in relation to the amendment
of the private placement notes in 2020,
together with £0.1m unwinding of the
discount on the onerous contract provision
Taxation
The effective tax rate for the Group on the total
loss before tax of £15.9m (2020 (restated):
£122.6m) is negative 78.0% (2020 (restated):
negative 7.3%). 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, 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 (2020: 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
£6.9m (2020: £6.9m), of which a charge of
£0.6m (2020: £0.7m) related to defined benefit
pension schemes and £6.3m (2020: £6.2m)
related to defined contribution schemes.
The total net liability in relation to defined
benefit pension schemes at 31 December
2021 was £10.7m (2020: £25.1m). The last
triennial actuarial valuation of the UK scheme
as at 31 December 2019 was concluded at
theend of 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 inJuly 2021 to accelerate plans to
achieve a secondary funding target.
Financial position
Overall, the net assets of the Group have
decreased by £37.2m to £264.7m (2020
(restated): £301.9m), with a cash position at
year-end of £145.1m (2020: £235.3m) and
net debt of £365.0m (2020: £238.2m).
63SIG Annual Report and Accounts 2021
Strategic report Governance Financials
4X_XSRXpart4X_RiskXandXFinXrev_v76.indd 634X_XSRXpart4X_RiskXandXFinXrev_v76.indd 63 10/03/2022 17:0010/03/2022 17:00
Cash flow
2021
£m
Restated
2020
£m
Underlying operating profit/(loss) 41.4 (5 3 .1)
Depreciation 68.3 68.4
Amortisation 3.4 4.8
Underlying EBITDA 113.1 20.1
Cash exceptional items (10.9) (19.7)
Increase in working capital (85.4) (42.1)
Repayment of lease liabilities (57.3) (54.8)
Capital expenditure (18.6) (13.3)
Other (15.0) 5 .1
Operating cash flow (74.1) (104.7)
Interest and financing (22.7) (22.6)
Refinancing cash costs (16.9) (8.3)
Tax (10.4) (9.7)
Free cash flow (124.1) (145.3)
(Acquisitions)/disposals (10.6) 147. 0
Drawdown/(repayment) of debt 52.0 (85.2)
Net proceeds from capital raise – 151.9
Total cash flow (82.7) 68.4
Cash and cash equivalents at beginning of the year
1
235.3 14 5 .1
Effect of foreign exchange rate changes (7. 5) 21.8
Cash and cash equivalents at end of the year
1
14 5.1 235.3
1. Cash and cash equivalents at 31 December 2021 comprise cash at bank and on hand of £145.1m (2020: £235.3m) less bank overdrafts of £nil (2020: £nil). Cash and cash
equivalents at 1 January 2020 include £110.0m from continuing operations and £35.1m from businesses held for sale.
Free cash flow represents the cash available after supporting operations, including capex and the repayment of lease liabilities, and before
acquisitions and any movements in funding.
During the year, the Group reported a free cash outflow of £124.1m (2020 (restated): £145.3m outflow) as a result of the increased underlying
operating profit in the year being offset by an increase in working capital, together with payments in relation to interest, tax and capital expenditure,
and exceptional and other cash flows. The costs associated with the refinancing exercise totalled £16.9m. “Other” includes payments to the
Employee Benefit Trust to fund share plans, and payments of £5m to the UK pension scheme, including the additional £2.5m referenced on the
previous page.
The increase in working capital was £85m of which £76m related to inventory movements. There were three key factors driving the increase, being
sales volume growth, year-over-year inflation, and the increases in holding levels referenced above.
Other movements in cash below free cash flow include £10.6m cash outflow in relation to the purchase of businesses (2020: £147.0m inflow from the
sale of businesses) and £52.0m net cash inflow from the restructuring of the debt facilities, consisting of £200.3m repayments of previous facilities
offset by £251.5m net proceeds from the new senior secured notes and £0.8m receipt on settlement of derivatives (2020: £85.2m repayments).
Financing and funding
On 18 November 2021, the Group completed the restructuring of its debt arrangements, comprising the issue of €300m senior secured notes and
the establishment of a new RCF of £50m. The existing private placement notes of £129.8m and a £70m term loan were repaid, together with a
£12.9m make-whole payment on early settlement of the private placement notes. The Group now has committed facilities in place to November 2026
(senior secured notes) and May 2026 for the RCF. The senior secured notes are subject to incurrence based covenants, 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 2021.
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 2023.
Financial review
64 SIG Annual Report and Accounts 2021
4X_XSRXpart4X_RiskXandXFinXrev_v76.indd 644X_XSRXpart4X_RiskXandXFinXrev_v76.indd 64 10/03/2022 17:0010/03/2022 17:00
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 54 to 59. 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 2024 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 2021 following the robust trading performance during the year and the refinancing
completed in November 2021. On 18 November 2021, the Group completed the restructure of its debt arrangements with the issue of €300m senior
secured notes and a £50m RCF (undrawn at 31 December 2021) and repayment of existing private placement notes and term loan. The Group has
committed facilities in place until 2026, with significantly less restrictive covenants than the previous debt arrangements (as detailed in the Financing
and funding section previously). On 24 June 2021, the Group also completed the cancellation of its share premium account resulting in the transfer of
£447.7m from the share premium account to retained earnings and creating distributable reserves.
As part of the Group’s financial and strategic planning process, the Group has prepared financial forecasts for the three years to 31December 2024.
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
Following the significant changes to the Group’s operating model, infrastructure and leadership as part
of the Return to Growth strategy, sensitivity analysis has been modelled on the basis that the next
phase of execution of the strategy does not deliver the level of expected continued growth, with
downside scenarios modelled on the medium-term plan for 2022, 2023 and 2024.
• Change management
The implications of a challenging economic environment, in particular the potential impacts which may
result from further waves of the ongoing Covid-19 pandemic, have been assessed. The impact of
resulting goods and material shortages throughout global supply chains and increased inflationary
pressures have been modelled by assuming a severe but plausible reduction in revenue and gross
margins in each of the three years.
• Macro-economic uncertainty
• Change management
The impact of the competitive environment 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.
• Macro-economic 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
• Macro-economic uncertainty
65SIG Annual Report and Accounts 2021
Strategic report Governance Financials
4X_XSRXpart4X_RiskXandXFinXrev_v76.indd 654X_XSRXpart4X_RiskXandXFinXrev_v76.indd 65 10/03/2022 17:0010/03/2022 17:00
Viability statement continued
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. In a situation including a
combination of the scenarios, resulting in a
52% reduction in underlying operating profit
from base forecasts in 2022 and even greater
reductions in 2023 and 2024, the analysis
shows that sufficient cash would be available
without the need to draw on the RCF and
therefore no covenant tests would apply. This
is before consideration of various mitigating
actions which would be available to the Group
in the case of these scenarios arising, including
reduction in discretionary spend, further cost
reduction programmes and a reduction in
non-essential capital expenditure. Reverse
stress testing has also been performed to
analyse the level of revenue, operating profit
and cash reductions over and above the
scenario considered on the previous page
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. There is not considered to be a
significant risk of climate change causing a
significant downturn in cashflows across the
Group over the viability assessment period and
therefore no specific sensitivities relating to
climate change are considered necessary over
and above the scenarios considered on the
previous page.
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 2024.
Going concern
The Group closely monitors its funding position
throughout the year, including monitoring
compliance with covenants and available
facilities to ensure it has sufficient headroom
to fund operations.
On 18 November 2021, the Group completed
the restructuring of its debt arrangements,
comprising the issue of €300m senior secured
notes and a new RCF of £50m. The existing
private placement notes of £129.8m and a
£70m term loan were repaid, together with
a £12.9m make-whole payment on early
settlement of the private placement notes.
The Group now has committed facilities in
place to November 2026 (senior secured
notes) and May 2026 for the RCF. The senior
secured notes are subject to incurrence based
covenants only, and the RCF has a leverage
maintenance covenant set at 4.75x which is
only effective if the facility is over 40% drawn
at a quarter end reporting date. The RCF
was undrawn at 31 December 2021.
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 2023.
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:
• a decline in market conditions resulting in
lower than forecast sales;
• continued implementation of the Return
to Growth strategy taking longer than
anticipated to deliver forecast increases
in revenue and profit;
• potential impact of material shortages
on forecast sales; and
• further waves of the Covid-19 pandemic
having an impact on trading.
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 on pages 65 to 66.
The Directors have considered the impact of
climate-related matters on the going concern
assessment and it is not expected to have a
significant impact on the Group’s going
concern assessment to 31 March 2023.
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 2023 and the
Directors therefore consider it appropriate to
adopt the going concern basis in preparing
the 2021 financial statements.
Financial review
66 SIG Annual Report and Accounts 2021
4X_XSRXpart4X_RiskXandXFinXrev_v76.indd 664X_XSRXpart4X_RiskXandXFinXrev_v76.indd 66 10/03/2022 17:0010/03/2022 17:00
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 54 to 59 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 10 March 2022 and signed on
the Board’s behalf by:
Steve Francis
Chief Executive Officer
Ian Ashton
Chief Financial Officer
10 March 2022
67SIG Annual Report and Accounts 2021
Strategic report Governance Financials
4X_XSRXpart4X_RiskXandXFinXrev_v76.indd 674X_XSRXpart4X_RiskXandXFinXrev_v76.indd 67 10/03/2022 17:0010/03/2022 17:00
Chairman’s introduction
Developing our business
“As a Board we seek to achieve
long-term sustainable success
for the Group”
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 2021. During 2021 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 is a member of the
Remuneration Committee but, as a nominated Director of CD&R,
he is not considered to be independent under Provision 10.
Notwithstanding this, the Board considers Bruno to be a
valuable member of the Committee and further details of why
this is the Committee’s view are contained on page 113.
1. The UK Corporate Governance Code 2018 (the “Code”) can be accessed
at www.frc.org.uk
Nominations Committee report 92
69
84
88
96
112
112
106Audit Committee report
Directors’ remuneration report
1. Board Leadership and Company Purpose
1. Board Leadership and Company Purpose
2. Division of Responsibilities
3. Composition, Succession and Evaluation
4. Audit, Risk and Internal Control
5. Remuneration
2 3 4 5
68 SIG Annual Report and Accounts 2021
5X_Governance_v73.indd 685X_Governance_v73.indd 68 11/03/2022 10:2811/03/2022 10:28
Dear Shareholder
On behalf of the Board, I am pleased to introduce the Group’s Corporate
Governance report on pages 70 to 128.
With the Group’s Return to Growth strategy accelerating, I would firstly
like to thank all of the Group’s employees for their hard work and
achievements during 2021, and for the enthusiasm and energy with
which they have embraced the strategy.
To ensure that the Board provides the required support and leadership,
this year we undertook an external evaluation exercise with the
assistance of Manchester Square Partners. The last three years, since
the most recent external evaluation, have been a period of enormous
challenge and change for the Board and for the Group, with significant
changes at both Board and senior management levels during 2020 in
particular. I am pleased that these have re-energised the Board and
have contributed to driving the business to recovery. It continues to be
a demanding time with a full, complex and challenging agenda. There
is now a renewed focus on operational execution and encouraging
progress is being made.
Key themes raised during the evaluation process were:
• ensuring the business is well set-up to deliver on its targets;
• increasing emphasis on long term strategy, including M&A, using the
current business as a platform, with the Board playing a key role in
guiding, shaping, debating and testing the strategic direction and
vision alongside the Executive Leadership Team;
• developing our sustainability strategy, and ensuring it is integrated into,
and enhances, the business strategy so that it becomes a competitive
advantage;
• progression of the digitalisation strategy; and
• increasing focus on people, succession, talent and diversity across
all levels of the Group.
Further details of the Board evaluation process can be found on
page90.
As well as the formal evaluation process, the independent Non-
Executive Directors (“Non-Executive Directors” or “NEDs”) also
embarked on a programme with YSC Consulting during 2021. Half of
the six independent Non-Executive Directors joined the Board during
the Covid-19 affected period which has impacted the amount of time
they have been able to spend together. The programme therefore gave
opportunity for a number of in-person meetings for the independent
group which has greatly helped in developing strong relationships
between the independent Directors.
Following the changes made at Executive Leadership Team level during
2020, the Company made further appointments during 2021 to
complete the restructure of the team. During 2022, our focus will move
to planning the medium-term succession for both senior management
and the Board. SIG is aware that gender diversity within the Board is
below the recommended levels made by the Hampton Alexander review
that were to be in place by the end of 2020 for FTSE350 companies.
We currently have a board of ten with two Directors being women, which
puts us below the recommendation of one-third. Ofthe six independent
Non-Executive Directors, 33% are women. CD&R has the right to
appoint two directors under the Relationship Agreement entered as part
of the financing arrangements in July 2020 (see page 86 for details).
CD&R’s two appointees to the Board are both male. On a statistical
level, this makes meeting the threshold of one-third of the Board being
women more challenging. However, it remains the Board’s aspiration to
meet the 33% target over the course of the next few years and this will
be addressed in the Board’s succession planning during 2022.
The Board strongly believes that diversity and inclusion is central to a
stronger, more cohesive and productive workforce and acknowledges
that there is still work to be done. The Board is already compliant with
the Parker review recommendations for FTSE250 companies as it
includes one director of colour. We are also working with an external
provider to establish a strategic framework and a plan for 2022
and beyond.
Finally, as well as ensuring the requirements for TCFDs were properly
implemented, the Board approved a set of focused sustainability
commitments. Our principles are clear; we need to do the right thing for
all our stakeholders and focus on the areas where SIG can make a
positive difference within our communities and the industry. We fully
support the commitment to significantly improve on our current position
over the coming year and beyond, focusing on Health & Safety, carbon
and waste reduction and becoming an employer of choice within
the building materials distribution industry. Further details on our
sustainability commitments are contained on pages 30 to 52.
2022 Annual General Meeting
After two years of Covid-19 restrictions we are very much looking forward
to meeting our shareholders at the Annual General Meeting (“AGM”) on
12 May 2022. The meeting will be held 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 cosec@sigplc.com in advance
of the meeting. We will ensure the answers to your questions are provided
at the meeting. Further details for the arrangements of the AGM will be
sent to shareholders shortly.
Any changes to the 2022 AGM arrangements will be published on
our website.
Andrew Allner
Chairman
10 March 2022
69SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 695X_Governance_v73.indd 69 11/03/2022 10:2811/03/2022 10:28
Board of directors
An
experienced
leadership
team
Andrew Allner BA, FCA
Non-Executive Chairman
1
Appointed as Non-Executive Chairman on
1November 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 current 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. Significant
experience of change and challenging situations.
Key strengths
Substantial board, leadership, strategy, international
and general management, corporate transaction,
governance and accounting expertise.
1. Independent on appointment
Steve Francis MA
Chief Executive Officer
Appointed as an Executive Director and
Chief Executive Officer on 25 February 2020.
External roles
Steve is a Non-Executive Director of Structured
Software Limited and Fellow of The Institute of
Turnaround.
Experience and past roles
Steve has previously been Chief Executive Officer of
Patisserie Holdings PLC, Tulip Ltd and Danwood
Group Holdings Limited. He was the Chief Financial
Officer and subsequently Managing Director of the
largest division of Vion (formerly Grampian) Food
Group Ltd and Chief Financial Officer and member
ofthe management buy-in team of British Vita plc.
Hehas worked with McKinsey, was a partner at
PwCand a banker at Barclays Capital and NatWest
Investment/County Bank.
Key strengths
Significant turnaround and leadership experience
across a range of multi-site international businesses,
considerable executive management experience
including strategic consultancy, mergers and
acquisitions, corporate finance and banking.
Kath Durrant BA
Non-Executive Director
Appointed as an Independent Non-Executive
Director and Chair of the Remuneration Committee
on 1January 2021.
External roles
Kath is Non-Executive Director and Remuneration
Chair at Vesuvius 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 ofCalisen 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, NAHL
Group plc and Marlowe plc, Non-Executive Director
roles at Ascential plc and two private companies,
Theo Topco Ltd and Howsy Limited. (Gillian is also a
director of Portswigger Limited, until 31 March 2022).
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
15years with Microsoft including three years as
Managing Director of MSN UK. Gillian was previously
a Non-Executive Director of 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.
Committee key
A
Audit committee
R
Remuneration committee
N
Nominations committee
Chair of committee
I
Independent
R N
RAA N NI IR
70 SIG Annual Report and Accounts 2021
1. Board Leadership and Company Purpose 2 3 4 5
5X_Governance_v73.indd 705X_Governance_v73.indd 70 11/03/2022 10:2811/03/2022 10:28
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.
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
Headlam Group plc, Donaldson Timber Engineering
Ltd and is Chairman at Smoking Lobster Restaurants
(Isle of Wight).
Experience and past roles
Simon most recently 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. Simon is also an advisor
at Gardenonaroll.com.
Key strengths
Over 35 years’ experience leading international
teams, building products distribution experience,
change management, retail, distribution, marketing,
technology/digital and stakeholder engagement
experience particularly the workforce.
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 Interserve Group Limited and
Non-Executive Chairman of Safestyle UK plc and
Progressive Energy Limited.
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
and Chair of 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
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 Committee on
1 February 2021.
External roles
Shatish is currently a Non-Executive Director and
Chair of the Audit & Risk Committee of Renew
Holdings plc and Speedy Hire Plc, Director of Unicef
UK Enterprises, and 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, 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, Westbury Street
Holdings Ltd, Socotec 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) and is currently Chairman and
CEO of Entrepreneurs Partners LLP. He has been
Managing Partner of the 3i Plc Group, an Operating
Partner of CD&R and Chairman and CEO of Brakes,
President and COO of Ecolab Inc (USA), President
and CEO of Henkel Ecolab, Teroson Gmbh, President
of Henkel Adhesives, based in Germany, and
Chairman and CEO of SAIM based in France.
Brunois a Knight of the Legion d’Honneur (France).
Key strengths
Deep industrial knowledge, corporate transactions,
extensive experience in driving and overseeing
improved company performance.
R R
N
N IA
R RAA N NI I
71SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 715X_Governance_v73.indd 71 11/03/2022 10:2911/03/2022 10:29
Strategy and
financing
Corporate reporting and
performance monitoring
Corporate governance report
Board activities
Key
Strategic priorities
Responsible
actions
Specialist
expertise
Superior
service
Valuable
partnerships
Highest
productivity
Focused
growth
Winning
branches
• Regular updates and reviews throughout
the year to monitor the Group’s financing
position, medium-term plan and
business plan.
• Consideration of M&A opportunities to
ensure they enhance Group structure
and strategy.
• Continued focus on progress and
challenges of the Return to Growth
strategy.
• Share capital reduction through
cancellation of share premium account,
creating distributable reserves and
enabling resumption of dividend payments
when appropriate, which was approved by
shareholders at the AGM in May and
confirmed by the High Court in June.
• Approval of the debt refinancing and the
successful offering of the Company’s debut
bond, listed on The International Stock
Exchange, which completed in November.
• Held a Board strategy day with all
members of the Executive Leadership
Team (“ELT”) also present, and including
presentations from ELT members.
• Consideration of the applications for
digitalisation across the Group, including
presentations from ELT members.
• Supporting the ELT in executing the Return
to Growth strategy and making senior
management appointments.
• Regularly reviewed the Group’s trading
performance against targets and updated
forecasts.
• Approved the 2022 budget and the
three-year financial projections.
• Periodic review of the Group’s ability to trade
as a going concern and viability.
• Approved the 2020 full-year and 2021 interim
results, and ensured work was on schedule
for the production of the 2021 full-year
Annual Report and Accounts.
• Approved the release of various trading
updates in line with the Disclosure &
Transparency Rules, UK Market Abuse
Regulation and other requirements.
• Ensured the Group was able to report
against the TCFD requirements.
• Reviewed the introduction of a new Group
consolidation and reporting system with
effect from January 2021.
• Received regular investor relations reports.
• Reviewed regular updates from brokers on
market conditions and equity investor
sentiment.
• Received specific feedback from advisers
during the refinancing process on debt
investor sentiment.
72 SIG Annual Report and Accounts 2021
1. Board Leadership and Company Purpose 2 3 4 5
5X_Governance_v73.indd 725X_Governance_v73.indd 72 11/03/2022 10:2911/03/2022 10:29
Stakeholder
engagement
Governance Risk management and
internal control
• New whistleblowing platform launched in
January and new policy communicated to
all employees.
• Presentations from senior management and
external advisers on Health & Safety matters.
• 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.
• Received regular updates from the Audit
Committee Chair on the key risk areas
discussed at those meetings.
• Received regular reports on risk
management and internal controls from
the Chief Financial Officer.
• Approved the year-end risk register, risk
appetite and principal risks.
• Approved the five sustainability
commitments set out on page 30 for
implementation in 2022 and beyond.
• Monitored the effects arising from Brexit and
in particular the UK Withdrawal Act to ensure
the appropriate measures were in place.
• Second annual Group-wide customer survey
undertaken, and preliminary results reported.
• Reviewed and approved amendments to the
SIG Wellbeing and Mental Health policy to
emphasise general health and wellbeing and
to reduce any stigma associated with mental
health. Monitored the continuing action
being taken to support employees during
the pandemic and remote working.
• Consulted with shareholders following the
vote on the Directors’ Remuneration Report
at the Annual General Meeting in May.
• Engagement with suppliers, including a
presentation to the Board from a key supplier
across Europe.
• Engagement with workforce on Executive
remuneration.
• Second annual employee engagement
survey undertaken, with feedback reviewed
to ensure any material concerns were
identified and suitably addressed.
• Reviewed feedback from the Board
Workforce Engagement sessions held by
Simon King and other Board members at
site visits during the year.
• Approved a revised schedule of Matters
Reserved for the Board.
• Approved updated Terms of Reference for
Committees.
• External Board evaluation process and
setting of objectives for 2022.
• Independent Non-Executive Directors
working sessions with YSC Consulting to
foster relationships and define roles and
priorities as independent directors.
• Further increased the priority of Health &
Safety matters at Board level, including
receiving reports and presentations from
businesses during the year.
• Reviewed and approved the publication of a
Provision 4 statement in line with the Code.
• Approval of the appointment of new
Managing Directors in Benelux and
Germany.
• Received regular updates from the Chairs of
the Audit, Nominations and Remuneration
Committees.
• Received regular updates on regulatory
matters at Board meetings.
• Annual review and approval of certain
Group-wide policies.
73SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 735X_Governance_v73.indd 73 11/03/2022 10:2911/03/2022 10:29
Corporate governance report | Board activities
Board attendance at meetings
The following table shows the attendance of Directors at meetings of the Board, Audit, Remuneration and Nominations Committees during the year
ended 31 December 2021:
Scheduled Board
(7 meetings)
1
Additional Board
(2 meetings)
1
Audit
(5 meetings)
Remuneration
(5 meetings)
Additional
Remuneration
(1 meeting)
2
Nominations
(3 meetings)
Andrew Allner
3
7 2 N/A 5 1 3
Ian Ashton
4
7 2 N/A N/A N/A N/A
Shatish Dasani
5
6 2 5 4 1 3
Bruno Deschamps 7 2 N/A 5 1 N/A
Kath Durrant 7 2 5 5 1 3
Ian Duncan
6
1 N/A N/A 1 N/A N/A
Steve Francis
7
7 2 N/A N/A N/A N/A
Gillian Kent 7 2 5 5 1 3
Simon King 7 2 5 5 1 3
Alan Lovell
8
7 2 5 4 1 2
Christian Rochat 7 2 N/A N/A N/A 3
1. This year there were seven scheduled Board meetings and two additional Board meetings. The additional Board meetings were required in connection with the refinancing
process which completed in November 2021.
2. There was one additional Remuneration Committee meeting held as part of the tender process for the new Remuneration Committee advisers. This post was filled in June 2021
by Korn Ferry.
3. The Chairman attended all five Audit Committee meetings.
4 Ian Ashton attended all five Audit Committee meetings as well as those sections of the Remuneration Committee meetings to which he was invited by the Chair of the Committee.
5. Shatish Dasani attended all the meetings he was entitled to attend following his appointment on 1 February 2021.
6. Ian Duncan attended all the meetings he was entitled to attend before his resignation on 31 January 2021.
7. Steve Francis attended all five Audit Committee meetings as well as those sections of the Remuneration Committee meetings to which he was invited by the Chair of the Committee.
8. Alan Lovell was unable to attend one Remuneration Committee meeting and one Nominations Committee meeting due to a prior engagement which he was unable to reschedule.
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 listed 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 2021, 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 2021 AGM. In light of the pandemic, the
meeting was a hybrid meeting with the Chairman, CEO, CFO and
Company Secretary present in person, with the rest of the Board joining
via an online platform. The meeting was open to shareholders to also
join via the online platform.
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.
As part of the review of conflicts this year, Directors confirmed they have
no connection with the external search firm Ridgeway Partners, whose
services were used in connection with the appointment of Shatish
Dasani and Kath Durrant. The Savannah Group and Odgers Berndtson
were used during the year for other senior appointments.
All Directors were required to complete a gifts and hospitality form
confirming receipt of gifts or hospitality provided as a result of their
directorship of the Company.
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, 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.
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 our Health & Safety procedures;
whistleblowing; anti-bribery and corruption; IT acceptable use; alcohol
and substance misuse; and gifts and hospitality. All employees,
74 SIG Annual Report and Accounts 2021
1. Board Leadership and Company Purpose 2 3 4 5
5X_Governance_v73.indd 745X_Governance_v73.indd 74 11/03/2022 10:2911/03/2022 10:29
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.
Site visits by Board members recommenced in the UK during 2021,
when Covid-19 restrictions were eased. Later in the year, when
restrictions were reimposed or tightened across Europe, it was no
longer possible for certain Board site visits to go ahead. These are being
resumed as soon as safe and appropriate in 2022. The Board plans
to rotate its meetings during 2022 and has scheduled a number of
meetings across the Group’s businesses, including outside of the UK.
The Group is committed to investing in, and rewarding, its workforce.
Local recognition programmes have been developed to align with
Group behaviours and our teams use these programmes to recognise
outstanding work, efforts or achievements that are aligned to these
behaviours. During 2021 the Group also launched the Kudos
programme which allows colleagues to recognise efforts made by fellow
team-members which are then shared on the Workplace platform, which
is one of SIG’s internal communication channels. The Group provides
regular training opportunities for its employees and it operates a share
incentive plan for its UK employees.
The culture has evolved considerably and for the better under the new
ELT. The culture varies between countries but consistent descriptions
of our culture from the recent employee engagement survey included:
committed, proud, agile, accountable, empowered, hardworking, open
and passionate. The goal is to create a winning, vibrant and modern
culture which combines discipline, clear expectations and effective
processes with entrepreneurial spirit. The Board agrees that the right
culture is key to future success and intends to give the topic more
attention in the coming year to ensure momentum is maintained.
Board engagement with employees
Workforce engagement with designated Non-Executive Director
(Simon King)
• Site visits took place during 2021 to engage with colleagues around
the Group. Where site visits were not possible due to Covid-19 travel
restrictions the meetings were held via Zoom. During the Zoom
meetings with overseas branches in France, Germany and Poland,
translators were present to enable a good dialogue flow, which worked
well. Further details can be found on page 76.
Workforce engagement on executive remuneration with
Chair of the Remuneration Committee (Kath Durrant)
• Engagement with colleagues was undertaken during October/
November 2021 to explain to colleagues the governance surrounding
the setting of executive remuneration and how target setting decisions
are made, with the success of the Group as a whole being the main
driver behind those decisions. Each session was followed by a Q&A
session. Further details can be found on page 113.
Workforce Engagement during Board visits
• The Board visited colleagues at the Larivière site at Genas, Lyon in
November. The Directors were given a tour of the branch following
which they joined branch colleagues for a presentation on sales
performance. This was followed by a lunch which gave the Board the
opportunity to speak with team members in an informal atmosphere.
• Board members visited a number of the Group’s operating sites to
review progress made locally, carry out site visits and meet
colleagues.
Annual employee survey
The second employee engagement survey was launched in October
and the results were reported to the Board at its December meeting.
Consistent with the first survey, the NPS methodology was used for the
2021 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 very encouraging. The response rate was 75%, being above the
benchmark average, which is a strong indicator of a workforce’s
engagement levels.
Focus following the survey
During December 2021 the results of the survey were reported to the
ELT and cascaded to local business management teams. During
January and February 2022, focus groups were established with groups
of employees to discuss in detail the results and to draw up action plans
at branch or department level (as appropriate) with action plans for all
branches and departments to be in place by the end of March. Progress
against these actions will be measured, reported and communicated
internally on a monthly basis.
Focus on data
The Board received and reviewed reports on the data sets recommended
in the guidelines produced by the Financial Reporting Council to monitor
culture and engagement within the business. These regular reports
included the following information:
• training data;
• recruitment;
• reward;
• promotion decisions;
• whistleblowing data;
• employee surveys;
• Board interaction with senior management and workforce;
• Health & Safety data, including near misses; and
• attitudes to regulators, internal audit and employees.
The Board receives these reports as a matter of its regular routine
business at each meeting. It also received reports on an ad hoc basis
from individual Board members, and from operating company Managing
Directors, on these matters.
75SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 755X_Governance_v73.indd 75 11/03/2022 10:2911/03/2022 10:29
Corporate governance report
Workforce engagement
with Simon King
Designated Non-Executive Director
The Workforce Engagement programme for 2021 was carried out
through a mixture of site visits in the UK and Zoom calls for other
operating companies because of the travel restrictions in place at that
time. During these meetings I met with more than 150 colleagues from
across the Group. It was good to see that some of the colleagues who
attended this year’s meetings had also joined the virtual meetings with
me during 2020.
For consistency, I asked the same three questions this year as I had
asked the previous year. 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.
As a result of this approach, and with the support of the Company
Secretariat team, I collected more than 1,000 comments made over
the engagement sessions during the year.
The three questions 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?; and
• if you were in charge, and budget was not a constraint, what would
be the one thing you would make happen at SIG?
What has gone
well in SIG?
Looking across the meetings as a whole, there were three clear
insights into how our colleagues felt: the teams were extremely
supportive of SIG, want the Group to succeed and are confident in
the new locally led strategy; colleagues felt supported and well
informed during the Covid-19 pandemic, both during lockdown and
in returning to the workplace; and everyone was very keen on
training and development so that they could further improve
services to customers.
A selection of some positive comments:
Branch visits
It was a privilege to visit A. Steadman & Son, one of SIG’s
manufacturing businesses, on a great British sunny day in Carlisle,
England. The sun and warmth meant that after our tour of the
fabrication sites, we were able to go outside for sessions with
several groups of cross functional colleagues who were happy to
share their thoughts. A lasting impression was the pride that the
team have in their business. They were doing well, in challenging
times, and the investments made in the insulating panel section of
the plant are delivering returns. The yard and interior production
lines projected care, safety and quality.
Since SIG’s acquisition of A. Steadman & Son, the company has
developed an excellent leadership team. One manager, having
started as a 17-year-old apprentice, is now, 20 years later, Factory
Manager of the original secondary steelwork production part of the
site. The teams are very experienced and skilled in what they do,
and customers benefit from the knowledge, expertise and technical
acumen within Steadman’s steel engineering facility.
I left upbeat and confident that the business is in the safe hands
of a great workforce.
“ I was allowed to work
from home from the
very start of the
pandemic and was well
supported through
Covid-19 (I was
pregnant at the time). I
felt safe and valued.”
“ Teamwork is valued
andwas strong during
the pandemic, in my
role being in touch
withcolleagues all
overGermany that
feeling was echoed
throughout my
country.”
“ There is a vision for the whole Group, the local strategy
confirms alignment with SIG and it’s very ambitious. SIG
France fits in well to the overall strategy, which shows
strong support from the Board and is forward looking.”
“ Last year regular ‘Town
Hall’ style meetings in
Poland were organised
for employees and 700
staff took part.”
“ Trusting me in Cork to
look after customers
has motivated me to
getmore orders.”
76 SIG Annual Report and Accounts 2021
1. Board Leadership and Company Purpose 2 3 4 5
5X_Governance_v73.indd 765X_Governance_v73.indd 76 11/03/2022 10:2911/03/2022 10:29
What has not gone
so well?
Inevitably not all the feedback was positive. Indeed, receiving the
feedback which was not necessarily positive was an important
purpose of undertaking the engagement activity and colleagues
were encouraged to discuss what could be done better and to
speak honestly about their constructive feedback. This was
especially helpful and several of the issues raised, having been
discussed at Board meetings, are now being addressed by
management. For example, communication between different
teams within the Group has been improved and the corporate
website is currently being refreshed. It was very encouraging that
many of the issues raised with me concerned issues that, if fixed,
would provide a better customer experience, or benefit the Group
in some way; none of the issues raised were personal.
A selection of some things that could be better:
What would be the change
you would make?
It was incredible to hear the passion in the voices of colleagues
when they were asked if they had ideas on how to improve SIG.
Notwithstanding that they were asked to assume no limitation on
budget and with the freedom to do anything, they always 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. Other insights mentioned included ESG,
youth development and in-house talent. I am delighted that they felt
confident enough to share these with me.
A selection of ideas to improve SIG:
I shared these insights with my colleagues during the December
Board meeting and we celebrated the significant progress that was
being made within the Group and the exceptional teams that we are
fortunate to have working with us. We reviewed this feedback in
conjunction with the employee engagement survey to explore any
common themes.
During a round of engagement visits in the Autumn I was joined by
my Board colleague Kath Durrant, the Chair of the Remuneration
Committee, as she was meeting with colleagues across the
workforce to discuss the governance and rationale involved in
setting executive remuneration. Further details of this can be
foundon page 113.
“It was incredible to hear the passion
in the voices of colleagues when they
were asked if they had ideas on how
to improve SIG”
“ Corporate culture and values programme: the impact of
this was lost as the launch was at the start of lockdown,
we were excited and would like to see it relaunched.”
“ SIG’s green credentials – want to improve ‘green’ issues
and to help customers do this too.”
“ Would like to get more
‘physical’ hands-on
training for products
tobetter understand
how products work
andalso go together–
Ifeel online learning
alone is not enough
forme.”
“ Would like to work on
ways to improve waste
recycling; stocking
greener products; and
getting involved in the
strategy in green issues
locally.”
“ Colleagues should
communicate more
between departments.
We have one goal, and
should all work towards
it rather than each
department doing their
own thing.”
“We are proud of the
digital progress in
Poland, I would invest
allin digital teams and
anew forklift to pick
theorders quicker.”
“ More hands-on training for Health & Safety to encourage
site-wide buy-in.”
77SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 775X_Governance_v73.indd 77 11/03/2022 10:2911/03/2022 10:29
Section 172 statement
“Companies do not exist in isolation. Successful and sustainable
businesses underpin our economy and society by providing
employment and creating prosperity. To succeed in the long-
term, directors and the companies they lead need to build
and maintain successful relationships with a wide range
of stakeholders. These relationships will be successful
andenduring if they are based on respect, trust and mutual
benefit. Accordingly, a company’s culture shouldpromote
integrity and openness, value diversity and be responsive
to the views of shareholders and wider stakeholders.”
The Corporate Governance Code 2018
Section 172 and stakeholder
engagement
SIG has an open and transparent approach to
stakeholder engagement, building respectful
and constructive relationships with its key
stakeholder groups. SIG recognises that the
validity and sustainability of its business
strategy is enhanced when it receives and acts
on stakeholder views and feedback. Across
SIG’s businesses, there are many examples
of stakeholder engagement influencing both
day-to-day and strategic decisions.
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 Group.
This Section 172 Statement, contained on
pages 78 to 83, illustrates in greater detail
some of the significant stakeholder
considerations taken into account by the
Board in its decision-making during 2021.
How the Directors have applied
their Section 172 duties
The Board has considered its key stakeholders
and the methods of engagement with each of
those stakeholders, both at Board level and
across the business. It receives regular reports
from management to enable it to monitor the
quality and effectiveness of the arrangements
for stakeholder engagement. Specific
examples of the way in which the Directors
have performed their fiduciary duty under
Section 172 are provided in relation to the
preparations for the debt refinancing and the
external Board evaluation.
The Board has approved a training programme
to ensure that, in preparing proposals for
Board consideration, managers are aware
of the Section 172 requirements in Director
decision-making, ensuring that Directors will
have the assurance that relevant stakeholder
interests are being set out for their
consideration.
In addition, as part of its decision-making
process, the Board also carefully considers
the principal risks of the Group as set out on
pages 54 and 59.
Corporate governance report
1. Board Leadership and Company Purpose 2 3 4 5
Shareholders
Why we engage
The Directors’ principal duty under Section 172 is
to act in good faith to promote the success of the
Group for the benefit of its members as a whole.
It therefore follows that the Directors consider
that shareholders’ views are important as part
of their decision-making process and welcomes
discussions with them, particularly in relation
to strategy, performance, remuneration and
governance.
Engagement activities
CD&R has the right to appoint two Non-Executive
Directors under the terms of the Relationship
Agreement between SIG and CD&R (see page 86
for further information regarding the relationship
with CD&R). Accordingly, engagement with CD&R
is more frequent than with other shareholders, as
CD&R is represented at Board meetings and in the
regular operational review meetings. SIG works
hard to ensure that there is active engagement
with other shareholders, which is achieved
through the publication of the annual and interim
reports, Stock Exchange announcements, the
AGM and other general meetings, investor
roadshows, analyst presentations, as well as
meetings between shareholders and Directors
such as the Chairman, the Chief Executive Officer
(“CEO”), the Chief Financial Officer (“CFO”), and
Chairs of Board committees.
Issues raised
• Inability to pay a dividend due to negative
distributable reserves.
• Requests for greater information regarding SIG’s
ESG agenda.
• Moderate opposition to certain aspects of the
remuneration of the Executive Directors.
Actions taken
• Successful capital reduction by way of
cancellation of share premium account to create
distributable reserves, enabling the payment
of dividends when determined appropriate by
the Board.
• Development of SIG’s sustainability
commitments, set out on pages 30 to 52.
• Slightly in excess of 20% of votes at the AGM in
May 2021 were exercised against the Directors’
Remuneration Report (“DRR”). In accordance
with the Code, the Company consulted with
shareholders regarding their reasons for voting
against the DRR. The principal result of this
consultation was that the Board was confident
the reasons for shareholders voting against the
DRR were specific to circumstances prevailing
in 2020 and were unlikely to be continuing or
repeated. The Company’s Provision 4
Statement was published in November 2021.
78 SIG Annual Report and Accounts 2021
5X_Governance_v73.indd 785X_Governance_v73.indd 78 11/03/2022 10:2911/03/2022 10:29
Colleagues
Why we engage
The Directors believe that SIG is, at heart, a people business. Engagement by the Group with
its other stakeholders is through its employees. Accordingly, engagement by the Group with
its workforce is fundamental to SIG’s success. Having the right company culture, underpinned
by suitable behaviours and a clear purpose, is imperative for SIG’s growth and ongoing
sustainability.
Engagement activities
The Board Workforce Engagement programme recommenced in October 2020 following its
suspension earlier in that year as a result of Covid-19 restrictions. The pace of the programme
was naturally limited during the first months of 2021 as Covid-19 restrictions were reimposed in
all countries where the Company operates.
From the early summer onwards, the programme was reignited with a mixture of face-to-face
and virtual meetings held across the Group. Typically, face-to-face meetings were conducted
with colleagues in the UK and meetings with colleagues based in other territories were
conducted online. A cross section of employees across the Group were invited to participate
in the programme, representing all levels, regions and functions. The Board-designated
Non-Executive Director, Simon King, led the programme and participated in every meeting.
The sessions were an 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. During the Autumn, the Chair of the Remuneration Committee, Kath Durrant, led
the exercise of engagement with the workforce to explain how executive remuneration aligns
with wider company pay policy. More detail of this exercise can be found in the Directors’
Remuneration Report on page 113.
During the year, we launched Workplace, the internal online business communication tool from
Facebook. Workplace enables colleagues across the Group to share information and interact on
a less formal communications platform. This has proved highly popular and has quickly become
a principal platform for internal employee communications. The Group also continued its
established communication cascades via email, Group-wide broadcasts by the CEO, European
Leadership Group meetings and internal newsletters. Lastly, in 2021 SIG ran its second
all-employee survey, to enable it to build on the results of the debut survey conducted in 2020.
The results of the survey were reported to the Board together with an analysis of the results.
Further, the Board reviewed management’s proposed actions to be taken in response to the
findings from the survey.
Issues raised
• The results of the employee survey were that the great majority of employees feel safe at their
place of work. However, there was a small minority of respondents who said that they felt
additional actions could be taken to make them feel safe.
• A number of employees across the Group reported that they experienced a heavy workload
during 2021.
• The Board Workforce Engagement programme in the UK suggested that some employees
desired greater training on the products sold by SIG and in particular new and more specialist
products.
Actions taken
• The Group continued to improve its resources to ensure Health & Safety remains the
business’s primary priority. Additional recruitment was undertaken in 2021 so that there is now
a dedicated Health & Safety expert on the senior management team of each of the operating
companies as well as at Group level.
• The Board is mindful that 2021 saw, at times, unprecedented levels of activity in SIG’s
businesses. This is a positive development for SIG, but the Board is aware of the potential
impact that such work pressures can have on employees. SIG has responded in the
short-term by ensuring that employees have knowledge of, and access to, the current support
available to them, for example under the Group’s Wellbeing and Mental Health services.
Looking to the longer-term, it is important to ensure that resourcing levels and operating
processes are optimised and that where possible digital tools are utilised to reduce demands
on employees
• Within the UK, the in-house training programme was significantly revised and revamped
to deliver more focused sessions and across a wider range of subjects.
Customers
Why we engage
Customers are of fundamental, and obvious, importance to any
business. For SIG, understanding the needs and requirements of
our customers is hugely important and the Group seeks to use this
understanding 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 in order to improve our service.
Engagement activities
SIG’s ability to conduct engagement activities with customers
during 2021 was impacted through the first half of the year, in
particular as a result of the various Covid-19 restrictions which were
in place. However, branches in the majority of countries of operation
remained open throughout most, if not all, of the year, meaning that
local and individual engagement with customers continued despite
the restrictions. Additionally, as the year progressed and restrictions
were eased (at least until the final weeks of the year), so it became
practicable to expand the range of engagement with customers.
In 2020 the Group conducted a survey of key customers across all
of the operating companies. This survey was repeated in 2021.
The results of the survey, together with management’s proposed
responses to the findings of the survey, will be reviewed by the
Board in 2022.
Issues raised
• Concerns over stock availability and rising product prices.
• Responding to customer requests regarding the sustainability
of the products sold by SIG and SIG’s carbon emissions as
these related to customers’ own supply chains.
• Reduced visibility in recent years, especially in the UK, on
industry wide associations and bodies.
Actions taken
• As Covid-19 restrictions were eased in Europe from March
onwards, it quickly became apparent that there was significant
pent-up demand for building materials. However, the regular
supply of those materials could be unreliable as it took
manufacturers and producers longer to bring supplies back
on-stream. SIG responded by increasing the authority for branch
directors to maintain stock levels appropriate to support their
customers locally. This did not necessarily address rising prices,
which were a result of increased demand and lower supply, but
did mean that SIG was able to fulfil its orders from customers
against a general background of product shortages.
• Some stakeholders, including customers, contacted SIG during
the year to understand more about the Group’s ESG agenda and
specifically concerning the sustainability of the products sold by
the Group and the steps to be taken by the Group to reduce its
carbon footprint. Accordingly, SIG has developed its sustainability
commitments which are set out at pages 30 to 52.
• SIG UK has actively re-engaged with industry representative
bodies and its colleagues now hold roles and posts with
organisations such as the National Federation of Roofing
Contractors, the Builders Merchants Federation and the
Construction Leadership Council.
79SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 795X_Governance_v73.indd 79 11/03/2022 10:2911/03/2022 10:29
Corporate governance report | Section 172 statement
1. Board Leadership and Company Purpose 2 3 4 5
Suppliers
Why we engage
SIG enjoys a critical place in industry supply chains. We generally sit between
manufacturers and producers on the one hand, who tend to be relatively small
in number but very large in size, and on the other hand customers who are
generally relatively smaller in size but very numerous in number. We connect
those two communities in ways in which they would be unlikely to be able 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 to create win-win outcomes.
Engagement activities
As with customers, engagement activities were impacted during 2021 as a
result of the Covid-19 restrictions in place at times during the year. However,
even during these periods, contact was maintained with suppliers through
means such as online meetings and telephone calls. Engagement opportunities
increased throughout the year as Covid-19 restrictions were generally eased.
Senior members of management from SIG met with suppliers at their
manufacturing and production facilities to discuss growth strategies for
the future.
Issues raised
• Shortages or difficulties in producing and distributing products led to some
products being placed on allocation during the year.
• Seeking greater understanding of the intentions of suppliers regarding the
sustainability and carbon footprint of their products.
• Reduced capacity in recent years, notably in SIG UK, to provide ancillary
specialist services, such as advice and design.
Actions taken
• The efforts made by SIG since Spring 2020 onwards to reconnect with its
suppliers were of great value during 2021 in ensuring that SIG retained a
place as a principal supply chain partner for many of its suppliers during a
period of supply shortages. SIG was also able to work with its suppliers, for
example during the driver shortages in the UK, when SIG arranged to collect
some products from its suppliers rather than the supplier delivering its
products to SIG’s branches, thus ensuring continuity of supply.
• A senior executive from one of SIG’s principal suppliers across Europe
attended the Board’s strategy day in November and made a presentation to
the Board and the ELT on a number of areas relevant to SIG, including the
supplier’s sustainability and carbon reduction plans.
• In the UK, SIG invested to increase its offering in specialist advisory areas,
such as thermal, acoustic and sustainable measurement.
Lenders
Why we engage
As with many businesses, 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.
Engagement activities
During the year SIG refinanced its debt. At the start of 2021, SIG’s Group debt
comprised term loans provided by a syndicate of banks, together with a series
of private placement loan notes held by a number of financial institutions. These
facilities were repaid in full, including make-whole payments on the private
placement notes, using the proceeds of €300m of 5.25% fixed rate senior secured
notes (“Notes”) due 2026 that were issued in November 2021. In addition, a new
£50m RCF was entered into with a syndicate of banks that included a majority
of the providers of the previous term loans. The refinancing exercise involved
considerable engagement with existing and new lenders, and credit rating
agencies, notably during the pre-marketing and marketing exercises relating to
the Notes. Outside of the refinancing exercise, there were regular meetings with
lenders involving the CFO and the Group Head of Tax & Treasury, and on
occasions the CEO, typically around the publication of preliminary and interim
results.
Issues raised
• The appetite for existing lenders to be refinanced, including whether they would
wish to participate in SIG’s new funding arrangements.
• Seeking buyers for the Notes and setting the pricing of the Notes.
• Ongoing dialogue with lenders following the refinancing.
Actions taken
• Various aspects of the former debt arrangements were amended in a technical
manner in order to better facilitate the simultaneous repayment of all of the
Group’s former facilities. The majority of banks in the syndicate, which provided
the Group’s previous term loans, also participated in the new RCF made
available to the Group as part of the refinancing.
• The CEO, CFO and Group Head of Tax & Treasury had a number of meetings
with potential buyers of the Notes during the pre-marketing and marketing
phases of the refinancing and separately with credit rating agencies. These
meetings were to determine demand and credit ratings for the Notes, to support
the offering, and to establish the price (coupon) of the Notes. These meetings
were successful as the Group was able to price and issue the Notes in
November 2021.
• The Notes are listed on The International Stock Exchange and SIG made
arrangements such that the regulatory news announcements it makes via the
London Stock Exchange are also made available to holders of the Notes
through The International Stock Exchange. Engagement with the banks that
provide the RCF will be periodic and will focus on full-year and half-year results
announcements together with other occasions when there are material
developments to discuss.
80 SIG Annual Report and Accounts 2021
5X_Governance_v73.indd 805X_Governance_v73.indd 80 11/03/2022 10:2911/03/2022 10:29
Local community
Why we engage
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,
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.
Engagement activities
There were a great number of collaborations across
the Group, which are too numerous to list individually.
A small number of examples are given below.
Issues raised
• Engagement was impacted during the year as a
result of Covid-19 restrictions.
• Collaboration is at the local level, meaning that
awareness of initiatives may not be known outside
of that locality.
• Notwithstanding the desire for activity to be
initiated and driven at the local level, some
colleagues raised whether there should be a broad
framework for activities set at the operating
company level.
Actions taken
• SIG UK established a Charity Committee and the
inaugural SIG UK Annual Charity Ball was
successfully held, raising funds for Cancer
Research UK and The Rainy Day Fund.
• SIG France is sponsoring a wheelchair tennis
player who is seeking to compete at the 2024
Paralympic Games and also partnered with the
Simon de Cyrene association which supports
assisted living for disabled people in local
communities.
• SIG Ireland is an official charity partner of Aware
(Mental Health) and makes annual donations
to Aware.
• SIG Poland provided learning materials to assist
home schooling during lockdown and designed
workshops to encourage and prepare final year
secondary school pupils for further education
and careers.
• SIG Germany contributed a significant proportion
of the cost of a motorised wheelchair for use by a
child with special needs at a school local to one of
its branches. The child was having access issues
with his school and without the specialised
wheelchair would have had to move to a
different school.
• SIG Benelux made contributions to a number
of local charities during the year.
Environment
Why we engage
SIG has a long-standing environmental heritage.
The Directors appreciate that environmental matters
are increasingly 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 and undertakes to operate
sustainably to benefit communities and the
environment.
Engagement activities
ESG matters have been reported at Board meetings
as a specific topic since January 2021, as this
marked the start of a review of the environmental
impact of the Group’s operations as part of a wider
ESG initiative. An ESG steering group was
established, led by the CEO and comprising the CFO
as well as senior representatives from all operating
companies along with functional experts from across
the Group. The steering group’s actions laid the
groundwork for governance of ESG throughout the
Group. A key output from the steering group has
been the formulation of the five sustainability
commitments, see pages 30 to 52 in the Strategic
report for more details.
Issues raised
• Establishing SIG’s carbon and waste targets.
• Reducing vehicle carbon emissions.
• Sourcing greener energy supplies for non-vehicle
energy requirements.
Actions taken
• SIG’s five sustainability commitments have been
published, see page 30 for further details.
• Steps were taken to reduce fossil fuel usage in the
fleet. Fleet cars are being replaced with electric
vehicles as they are due for renewal and the
infrastructure is in place to support them locally.
Discussions are taking place with manufacturers
regarding replacement options for larger vehicles.
In the meantime, initiatives have been introduced
to improve driver safety and reduce vehicle
emissions.
• SIG Ireland is developing clean energy supply
methods with the installation of solar panels across
sites to reduce carbon emissions.
• Working with our suppliers in developing a green
supply chain methodology.
Pension scheme
members and trustees
Why we engage
For many years SIG had a number of defined benefit
pension schemes open to new members. Pension
scheme members therefore comprise either former
or current employees of SIG and as such
areimportant stakeholders in their own right.
Engagement activities
There is regular dialogue between the Company
andthe Chair of the UK Pension Trustees (the
“Pension Chair”). Furthermore, SIG is in contact with
scheme members through the publication of regular
newsletters. During 2021 there was specific
communication with the Pension Chair concerning
the latest triennial scheme valuation and regarding
the refinancing of the Group’s debt arrangements.
Issues raised
• Triennial valuation of the UK defined benefit
pension scheme.
• Impact of debt refinancing on the UK defined
benefit pension scheme.
Actions taken
• Dialogue between the Company and the Pension
Chair, together with their respective advisers,
resulted in the agreement of the triennial valuation
in March 2021. Additionally, there were valuable
discussions regarding the long-term funding and
investment strategy of the pension scheme.
• SIG’s previous debt arrangements were
guaranteed by key entities within the Group on an
unsecured basis. The new debt facilities are also
guaranteed by key entities and in addition certain
security has been granted to support those
guarantees. The Pension Chair required
satisfaction that this security would not prejudice
the position of the scheme and its members in
certain default circumstances. SIG worked with the
Pension Chair to provide this satisfaction. As part
of those discussions, the Company agreed to
slightly increase the value of receivables pledged
to the pension scheme under the asset-backed
arrangements already in place with the scheme.
81SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 815X_Governance_v73.indd 81 11/03/2022 10:2911/03/2022 10:29
Corporate governance report | Section 172 statement
1. Board Leadership and Company Purpose 2 3 4 5
Examples of how the Directors applied their
Section 172 obligations
Debt refinancing
In considering a proposed debt refinancing, the Directors had regard
to their obligations under Section 172 of the Act. They considered the
interests of several stakeholders, in particular, and assessed relevant
risks, maintaining the Group’s reputation for high standards whilst
delivering the Group’s objectives. The principal Group objectives in
the opinion of the Directors were to; (a) provide ongoing support to
customers and suppliers and to preserve employment in a viable
business; (b) have the financial resources required to deliver its Return
to Growth strategy, recapture market share and strengthen the Group’s
position as a market leader across its operating businesses; (c) ensure
medium and long term access to capital that will provide the Group with
greater certainty, flexibility and balance sheet strength to pursue future
growth opportunities; and (d) seek to ensure an unqualified going
concern statement in the Group’s annual financial statements.
The Directors considered the interests of the following stakeholders in
these manners:
Shareholders
The refinancing of the debt facilities established a firm and stable
foundation for the delivery of the Group’s strategy on a longer-term basis
than the existing facilities provided.
Lenders
The Board worked closely with the Group’s financial advisors and banks
to ensure that the refinancing was carried out in a manner that resulted
in the optimal result for the Group. The Board oversaw production of the
Offering Memorandum for the Notes and were advised by the Group’s
legal advisors as to their obligations and the Group’s responsibilities in
publishing the Offering Memorandum.
Colleagues
The success of the refinancing was communicated to colleagues.
Colleagues will benefit from the long-term funding platform that the
refinancing provides which will allow the Group to implement its growth
strategy to deliver long-term benefits for the success of the Group,
including further investment in colleagues.
Customers
The refinancing will allow the Group to continue to implement its strategy
which has a focus on strengthening customer relationships. The
refinancing should enable the Group to maintain and improve its
geographical coverage for customers whilst developing its product
ranges and technical expertise that can be leveraged to deliver
innovative solutions for customers.
Suppliers
Placing the Group’s debt arrangements on a long-term basis should
provide greater reassurance for suppliers of the Group’s long-term
viability. This in turn should provide the time and space for the Group
to further strengthen its strategic partnerships with suppliers.
Pension scheme members and trustees
It is in the interests of the members of the pension schemes that the
Group’s financial covenant remains strong and it is able to continue to
contribute to the pension schemes. The refinancing is for the long-term
benefit of the Group which will assist the Group to maintain its financial
robustness to the benefit of pension scheme members.
Risks and mitigation
There was a risk that there would be insufficient market appetite to
purchase the Notes or that the Notes would be priced too high to be
acceptable to the Group, such that the refinancing would not go ahead.
Market assessments were undertaken by the Group’s banks, and a
pre-marketing exercise was carried out with potential investors, to
ensure that there was a high probability of success of the refinancing
before it was publicly launched. The Board was also mindful to
undertake the refinancing exercise well in advance of the maturity date
of the existing facilities, being May 2023 in the case of the majority of the
debt, meaning that the existing facilities would not fall due for repayment
during the going concern review period relevant for the audit of the 2021
financial statements.
External Board evaluation
The Board recognises with regard to its obligations under Section 172
of the Act that a regular board evaluation can help it to improve both
its own performance as well as the performance of the Group. In
compliance with the Code, SIG undertakes an annual Board evaluation
exercise. As the Company was not a member of the FTSE350 during
2021, the Company was not obliged under the Code to engage an
independent reviewer for its evaluation in 2021. However, the Board
considered that an independent review could bring greater objectivity
and fresh insights to the process and would help it to identify any issues
that required addressing. An independent review would also provide
assurance to stakeholders that the Board takes its responsibilities
seriously. Therefore, following a selection process, the Board appointed
Manchester Square Partners to undertake the Board evaluation exercise
which took place in Autumn 2021. Further details of the evaluation
process and conclusions can be found at pages 90 to 91.
The Directors considered the interests of the following stakeholders in
these manners:
Shareholders
Ensuring that the Board is functioning effectively and has strong
leadership provides assurance to shareholders that the business is
being properly managed and that their interests are being protected.
An external evaluation exercise provided greater rigour and therefore
additional assurance for all shareholders, and especially those
shareholders not represented on the Board.
82 SIG Annual Report and Accounts 2021
5X_Governance_v73.indd 825X_Governance_v73.indd 82 11/03/2022 10:2911/03/2022 10:29
Colleagues
The Board strive to lead by example and by undertaking this rigorous
process the Directors sought to demonstrate their commitment to the
business. The Board were further able to demonstrate their attention
to important matters such the continued implementation of the Return
to Growth strategy to ensure the long-term success of the business.
Customers
The evaluation process explicitly required the Directors to consider the
Group’s governance procedures to determine whether they were robust
and whether the Group is well managed. The conclusions from the
exercise should provide reassurance to customers that SIG’s business
is reputable and is one they can confidently engage with.
Suppliers
The process highlighted the value that direct engagement between
a supplier and the Board can bring to the Board’s discussions and
deliberations. The Board ensured that a representative from a key
supplier attended the Board’s strategy day so that the Board could
hear directly from a supplier.
Environment
The evaluation clarified the Board’s desire to develop SIG’s sustainability
strategy and to ensure that it is integrated into, and enhances, the
broader business strategy so that it becomes a significant benefit to
the environment and the Group by encouraging the use of sustainable
products in the building industry while enhancing SIG’s competitive
advantage.
Risks and mitigation
Recent history has been a challenging period for SIG to navigate.
This has been both caused by, and reflected in, considerable change in
the composition of the Board: the Board now comprises ten Directors
of whom only three were appointed prior to 2020. The majority of the
Board were therefore appointed during the Covid-19 affected period
and opportunities for the Board to meet in person have been limited.
In conducting an external Board evaluation in 2021, there was a risk that
the evaluation would conclude that the Board was underperforming, for
example because of the recent appointment of a majority of the Board
and the difficulty for the Board in developing strong relationships through
the Covid-19 affected period. However, the Board believed that it was
important for there to be a robust, external evaluation exercise to be
conducted. The Board concluded that a report which was critical of the
Board would at least provide a framework for future improvement, for
the benefit of all stakeholders.
Shareholder Communication
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. 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 interimresults.
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. His meetings with shareholders relayed
the strategy and direction of the business, while enabling him to
understand their views on matters such as governance and
performance. Contact is also maintained, where appropriate, with
shareholders to discuss overall remuneration plans and policies.
TheChairman and the Senior Independent Director are available
todiscuss 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 Committee and the Chair of the
Remuneration Committee are also available for contact with
shareholders should there be any matters raised which are relevant
totheir 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 in connection with their
exercise of votes on the Directors’ Remuneration Report at the AGM.
Some of these meetings took place prior to the AGM to ascertain
shareholders’ voting intentions and some meetings took place
subsequent to the AGM as part of the consultation exercise following
the vote against the Directors’ Remuneration Report in excess of 20%
of votesexercised.
Throughout the year, the Board responded to correspondence
received from shareholders on a range of issues and also participated
in a number of surveys and questionnaires submitted by a variety of
investor research bodies. There was an increase during the year of
questionnaires received from shareholders, lenders and customers
seeking information on ESG matters relating to SIG. The Board also
reviews the presentations of the annual and interim results.
The Chairman ensures that the Board as a whole has a clear
understanding of the views of shareholders and a regular report
is provided by the CFO on investor relations at Board meetings.
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, 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 2022, shareholders will be asked to vote on a poll, rather
than a show of hands, following best practice. The 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.
83SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 835X_Governance_v73.indd 83 11/03/2022 10:2911/03/2022 10:29
Member Role
Andrew Allner Non-Executive Chairman
Steve Francis Chief Executive Officer
Ian Ashton Chief Financial Officer
Shatish Dasani Independent Non-Executive Director (appointed 1 February 2021)
Bruno Deschamps Non-Executive Director appointed by CD&R
Ian Duncan Independent Non-Executive Director (resigned 31 January 2021)
Kath Durrant Independent Non-Executive Director (appointed 1 January 2021)
Gillian Kent Independent Non-Executive Director
Simon King Independent Non-Executive Director
Alan Lovell Senior Independent Non-Executive Director
Christian Rochat Non-Executive Director appointed by CD&R
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.
These are areas material to the Group’s direction, people and resilience,
and include:
• changes relating to the Group’s capital structure such as any reduction
of capital and share issues;
• approval of any significant changes in accounting policies or practices;
• ensuring maintenance of a sound system of internal control and risk
management; and
• annual approval of policies, including Health & Safety, Code of
Conduct, Gifts & Hospitality and Whistleblowing.
The Board mandate and the schedule of matters reserved for its decision
can both be found on the Group’s website at www.sigplc.com.
Evaluation
The Board undertakes an annual assessment of its performance, in line
with the Code. The most recent external evaluation had been conducted
in 2018. The Code requires companies within the FTSE350 to undertake
an external evaluation at least every three years. Notwithstanding that
SIG is not currently a member of the FTSE350, the Board felt that it was
important to undertake a rigorous assessment of its performance and
accordingly Manchester Square Partners were engaged to conduct this
review. Further details can be found on page 90.
Maintaining high standards of corporate governance was particularly
important during 2021. It was another unprecedented year, as the Group
continued to navigate its way through the Covid-19 pandemic, and
through its own recovery from what had been a very challenging position
in early 2020. Notwithstanding these challenges, the Group continued
to successfully implement its Return to Growth strategy, which included
making further appointments to the ELT. The Group also successfully
refinanced its debt through the Company’s debut public bond offering.
It was very encouraging that the Group returned to underlying
profitability during 2021.
Corporate governance report
Board Membership 2021
84 SIG Annual Report and Accounts 2021
2. Division of Responsibilities 1 3 4 5
5X_Governance_v73.indd 845X_Governance_v73.indd 84 11/03/2022 10:2911/03/2022 10:29
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 by the Board
during the year and can be found on the Group’s website (www.sigplc.com). The Board also appoints Committees to approve specific matters
as deemed necessary. For example, during the year, Board Committees were established to approve the preliminary and interim results
announcements, the closing of the debt refinancing and the closing of acquisitions.
The Board
• Establishes the Group’s purpose and strategy and satisfies itself
that these and its culture are aligned.
• Assesses and monitors culture and behaviours.
• Ensures that the matters set out in Section 172 of the Companies
Act 2006 are considered in Board discussions and decision
making.
• Ensures that all Directors act with integrity, lead by example and
promote the desired culture.
• Ensures that the necessary resources are in place for the Group
to meet its objectives and assesses the basis on which the Group
generates and preserves value over the long term.
• Reviews whistleblowing arrangements, ensuring that
arrangements are in place for proportionate and independent
investigation and follow-up action (a new policy, associated
training and a new platform were launched in January 2021).
• Sets the remuneration of the Non-Executive Directors.
Audit 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.
The Committee comprises solely
independent Non-Executive Directors.
CD&R has appointed an observer to the
Committee as it is entitled to under the
terms of its Relationship Agreement with
SIG (see page 86 for further details).
The Chair of the Committee attends
the AGM to respond to any shareholder
questions that might be raised on the
Committee’s activities. The Committee’s
Report is set out on pages 104 to 111.
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 meeting diversity objectives and
strategies for the Group as a whole.
The Committee comprises the
Chairman, the independent Non-
Executive Directors and one non-
independent Non-Executive Director.
The meetings of the Committee are
chaired by the Chairman. The Chairman
attends the AGM and can therefore
respond to any shareholder questions
that might be raised on the Committee’s
activities. The Committee’s Report is set
out on pages 92 to 95.
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 weekly and has more in-depth monthly meetings. Members are those individuals listed on page 87.
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 comprises the
independent Non-Executive Directors,
one non-independent Non-Executive
Director and the Chairman, who was
independent on appointment. The Chair
of the Committee attends the AGM to
respond to any shareholder questions
that might be raised on the Committee’s
activities. The Committee’s Report is set
out on pages 112 to 127.
Board and Committees
85SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 855X_Governance_v73.indd 85 11/03/2022 10:2911/03/2022 10:29
Corporate governance report | Board membership 2021
Board roles Investment by CD&R
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.
• Led the programme with YSC Consulting to foster relationships
and priorities with the independent Non-Executive Directors.
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 seem 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, with CD&R 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 NEDs 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 113 for further
information regarding Bruno’s role as a member of the Remuneration
Committee. An observer from CD&R attends Audit Committee
meetings.
The Relationship Agreement also provides for the NEDs 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 NEDs, the Audit Committee
observer, the Chairman, the CEO and the CFO together with the
Company Secretary. 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
representatives of CD&R at the subsequent Board meeting.
During 2021, the operating review meetings focused principally on
the UK, Germany and Benelux operating companies. This focus was
due to these being the operating companies which were in greatest
need of support to ensure their successful turnaround. Bruno and
Christian’s deep industry experience and knowledge, as
communicated through the operating review meetings, was of
significant value to all operating companies through the year.
Under the Relationship Agreement, any actual or potential conflict
between the interests of CD&R and/or either of the NEDs and SIG
must be declared and the relevant NED(s) 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 2021
by Bruno and Christian, and CD&R more generally, and believe
it significantly benefits SIG shareholders and stakeholders.
See page 100 for further information on the Relationship Agreement.
86 SIG Annual Report and Accounts 2021
2. Division of Responsibilities 1 3 4 5
5X_Governance_v73.indd 865X_Governance_v73.indd 86 11/03/2022 10:2911/03/2022 10:29
Executive Leadership Team as at 10 March 2022
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
Julien Monteiro
Managing Director France
Over 13 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
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
Kate Taylor
Group HR and
Communications
Director
Over 20 years’ of both
generalist and specialist HR
experience.
Key career highlights
• Move to Group HR function
in September 2019 to work
on the culture and
engagement strategy for
the Group
• Head of HR and HR
Director roles at 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
David Clegg
Group Health, Safety
and Environment
Director
An accomplished HSE and
Operations executive with
40 years' international
experience.
Key career highlights
• Director HSSE, Logistics
and Risk, MOL Pakistan
• Director HSSE and Risk,
Daewoo E&P Myanmar
• Director HSSE and Risk
Sub-Saharan Africa,
Worley Parsons
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
Ian Ashton
Chief Financial Officer
Senior executive with 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
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 Wyjck
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
Marcin Szczygiel
Managing Director Poland
Over 22 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
Steve Francis
Chief Executive Officer
Seasoned CEO in turbulent times.
Key career highlights
• CEO, Patisserie Holdings PLC
• CEO, Tulip Ltd
• CEO, Danwood Group Holdings Ltd
87SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 875X_Governance_v73.indd 87 11/03/2022 10:2911/03/2022 10:29
Corporate governance report
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 considers that each of the Non-Executive
Directors brings their own senior level of experience and expertise, and
that the balance between non-executive and executive representation
encourages healthy independent challenge. Prior to their appointment,
Directors are required to disclose their significant other appointments
and the Board is satisfied that each of the Non-Executive Directors can
dedicate sufficient time to their role and responsibilities. Directors are
aware that they must not take on additional external appointments
without the prior approval of the Board. During 2021, approval was given
to Simon King prior to him taking up the role of Non-Executive Director
of Headlam Group plc on 14 May 2021. Following the year end, approval
was given to Gillian Kent to accept a non-executive directorship of
AIM-listed Marlowe plc and to Simon King to accept a non-executive
appointment to the Board of privately owned Donaldson Timber
Engineering Limited.
The Nominations Committee reviews the other commitments of
Directors on appointment, on any proposal for reappointment and
following any change in roles, to ensure that the Directors have sufficient
time to undertake their role and responsibilities towards the Group.
Information and support
To enable the Board to perform its duties efficiently and effectively, all
Directors have full access to all relevant information and to the services
of the Company Secretary, whose responsibility it is to ensure that
Board policies and procedures are followed, including any 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. In 2021 the
independent Non-Executive Directors undertook a number of working
sessions with YSC Consulting, under the guidance of the Chairman, to
further relationships and priorities for the independent group.
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. 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.
The 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
During January and February 2021 two new Directors joined the Board:
• Kath Durrant was appointed as an independent Non-Executive
Director and Chair of the Remuneration Committee; and
• Shatish Dasani was appointed as an independent Non-Executive
Director and Chair of the Audit Committee.
During 2020 and 2021 there were a considerable number of
appointments made to the Board and to the ELT which were considered
by the Nominations Committee and the Board. Throughout 2021, two
new independent Non-Executive Directors took office, as noted above,
and there were appointments to the ELT of new Managing Directors of
Germany and Benelux together with ELT appointments of a new Chief
People Officer and to the new roles of Group Strategy Director and
Group HR and Communications Director. Additionally, a highly
experienced Interim Group Digitalisation Director joined on a contract
basis. During 2022, the Board and the Nominations Committee will give
greater focus to structured succession planning and talent development
to both the Board and the ELT. For further details see page 94.
Election and re-election of Directors
Under the Articles of Association, all Directors are subject to election
at the AGM immediately following their appointment and to re-election
every three years. However, in accordance with the Code, all Directors
will seek election or re-election at the Company’s AGM each year.
In accordance with Provision 18, the Board sets out the skills and
experience that each Director has, and why their contribution is and
continues to be important to the Group’s long-term sustainable success.
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.
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. Since his appointment in
November 2017, he has led the process for the appointment of a number
of new Non-Executive Directors and two new Executive Directors. He
managed the CEO and CFO succession in 2020, and worked closely
with the new CEO in the initial development of the strategy, people and
organisational changes and a successful capital raise in 2020 including
the CD&R investment.
Steve Francis brings significant turnaround and leadership experience
across a range of multi-site international businesses together with
considerable executive management experience including strategic
consultancy, mergers and acquisitions, corporate finance and banking.
He has expertise in driving rapid operational and performance
improvements and restoring profitable growth.
3. Composition, Succession and Evaluation 221 4 5
Board activities
88 SIG Annual Report and Accounts 2021
5X_Governance_v73.indd 885X_Governance_v73.indd 88 11/03/2022 10:2911/03/2022 10:29
Ian Ashton is a highly skilled senior executive with broad global
experience in financial leadership roles. He has a strong track record
of driving change which is of great value as SIG pursues its strategy
for growth.
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. He is
also a turnaround expert, which is pertinent to the Group as SIG builds
on its strategy to improve performance in several of its operating
companies.
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 ecommerce and software
businesses and expertise in building product markets and brands, which
is valuable in driving innovation and digitising our business.
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. Simon’s skills and
experience are valuable in our efforts to build on SIG’s leading market
positions.
Bruno Deschamps’ skills and experience include deep industrial
knowledge, corporate transactions, extensive experience in driving and
overseeing improved company performance, which is important as SIG
improves performance in a number of markets.
Christian Rochat’s skills and experience include deep industrial
knowledge, transformation, change management, strategy, stakeholder
engagement, corporate transactions and extensive experience in driving
and overseeing improved company performance. His experience and
knowledge is of value as SIG seeks to improve its trading 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, which is valuable as we continue
to develop our organisational structures.
Shatish Dasani is an experienced public company CFO and Chair
of Audit Committee as well as having strong international experience
across several sectors relevant to SIG’s business. He has a proven track
record of driving shareholder value, which will be important as we return
the Group to profitable growth and continue to enhance both the
financial performance and internal controls within the Group.
Therefore, to enable shareholders to make an informed decision,
the 2022 notice of AGM includes biographical details and a detailed
statement as to why the Group believes that the Directors should
be elected/re-elected.
It is the view of the Board that each of the Non-Executive Directors
standing for election or re-election brings considerable management
experience and an independent perspective to the Board’s discussions
and each of the Non-Executive Directors is considered independent of
management and each of the independent Non-Executive Directors 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 demonstrated by
the 2021 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 125. Full details of Directors’
remuneration, interests in the share capital of the Company and of share
options held are set out on pages 121 to 124 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 2022 AGM.
Skills and experience
The Board evaluation review process, detailed on pages 90 to 91,
identified that the Board encompasses a wide range and combination
of different skills, experience and knowledge, ranging from accounting
to sales and marketing to digital.
Training and induction
The Chairman reviews with the Board its training and development
needs. During the year, a number of Directors attended training courses
and seminars on various subjects and the Board as a whole received
Health & Safety training from Herbert Smith Freehills LLP. All Directors
receive induction training on their Directors’ duties, the responsibilities
of a premium listed issuer as well as the continuing obligations of a
company admitted to the premium listing segment of the Official List of
the FCA. As part of the exercise prior to publication of the Company’s
offering memorandum in connection with its debut bond offering, the
Board received a briefing from Allen & Overy LLP on the responsibilities
of the Company and the Board in preparing the offering memorandum.
The Board also receives regular presentations from advisers and senior
management on a range of topical issues, such as from the Group’s
financial advisors in relation to the macro-economic and industry
backdrop and sector dynamics that SIG faces.
On appointment, Directors receive an induction to the Group. This
involves meetings with each of the Board members, members of the
ELT, external advisers (such as brokers, Auditors and financial advisors),
visits to a number of branch locations (lockdown restrictions impacted
these during 2021) and receipt of a pack of corporate materials including
corporate policies and procedures, details of insurance, financial
framework and details of 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 are hugely important
to the success of the organisation, and acknowledges that there is
further work to be done in this area at SIG. These areas will be matters
of key focus for the Nominations Committee, together with the HR team,
as they develop diversity within the organisation during 2022 and
beyond. In relation to Board succession planning, the Board recently
reviewed and updated its Board Diversity policy and reviewed the Board
succession plan. The Board Diversity policy is available on the Group’s
website (www.sigplc.com). Further details can be found on page 94.
89SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 895X_Governance_v73.indd 89 11/03/2022 10:2911/03/2022 10:29
The effectiveness of the Board and its
Committees and the skills, experience and
diversity of our Directors, are vital to the long-
term sustainable success of the Group.
The Board undertakes a rigorous and transparent process of the annual
assessment of its performance, in line with the Code. The most recent
external evaluation was conducted in 2018. The Code requires
companies within the FTSE350 to undertake an external evaluation at
least every three years. Notwithstanding that SIG is not a member of the
FTSE350, the Board felt that it was important to undertake a rigorous
assessment of its performance together with the performance of its
principal Committees (Audit, Nominations and Remuneration).
Process
Following a competitive selection process, Manchester Square Partners
were appointed in September 2021 to undertake an external
effectiveness review for SIG. They were given access to Board and
Committee papers for the previous 12 months and observed the
December Board and Committee meetings. Individual interviews were
conducted with each Board member and the General Counsel &
Company Secretary. The report was sent to the Board prior to its
meeting in February 2022 and was discussed by the Board at that
meeting.
The period since the Board’s most recent external evaluation, in 2018,
was very challenging for SIG. The former CEO and CFO resigned in
February 2020, following two profit warnings in the previous six months.
Seven of the ten Directors on the Board today were appointed since
February 2020, including both Executive Directors. The Company was
recapitalised in July 2020 following the placing and open offer as part
of which CD&R became a c28% shareholder in SIG with two
representatives on the Board.
During the review process, the Chairman received praise from other
Directors for the strong leadership he showed through this difficult
period. He guided the Board very well through the troubles of 2020,
initiating many of the Director changes and encouraging new ways of
working. He has developed strong, constructive relationships with the
new CEO and the new Non-Executive Directors, including the two
CD&R representatives. The CEO received praise from the other Board
members for his strong and effective leadership, his quick learning of a
new sector, and the impact that he has achieved since his arrival. The
Board has a high degree of confidence in the CFO and have noted the
improvements made to the Finance function under his leadership.
The review found that the Board is energised and focused on putting the
business on a clear path to deliver sustainable growth. The Board has
emerged stronger from the difficulties of the last two years, although it
continues to have a full, complex and challenging agenda. Many of the
recent Board appointments took effect during Covid-19 restrictions,
which itself created challenges in building a strong dynamic among
Board members. However, relationship building was assisted during
2021 when it became possible for face-to-face meetings to resume,
including the Board strategy sessions in November 2021 which also
included theELT.
The report from Manchester Square Partners found that the Board is
acting in an effective manner and included specific examples of this,
such as:
• there being clarity and alignment on the role of the Board over the
coming years. The Board will spend time on the future growth strategy,
including M&A, digitalisation, succession, diversity and culture;
• there is clarity and alignment around strategic priorities. These include
delivery of positive cash flow at Group level, developing evolving
strategies for M&A, ESG, digitalisation and differentiated customer
service, together with talent development and succession planning
at all levels of the Group; and
• there is considerable assurance taken from the interaction between
the finance function, the Audit Committee and the operating review
meetings with CD&R. Risk management processes have developed
further following new hires into key roles in the Finance function. There
has been good progress on internal controls and the Board will ensure
that this progress continues, and new processes and procedures
become embedded.
All Directors are ambitious for the business and keen to realise its full
potential. They recognise the challenges and opportunities to be faced
by SIG strategically and operationally through the next stage of its
evolution. There is alignment in their views on what the Board needs
to do to be even more effective going forward.
Board evaluation
Corporate governance report
3. Composition, Succession and Evaluation 221 4 5
90 SIG Annual Report and Accounts 2021
5X_Governance_v73.indd 905X_Governance_v73.indd 90 11/03/2022 10:2911/03/2022 10:29
Board Committees
The majority of Directors are members of all of the principal Committees
or, in the case of the Executive Directors, attend the majority of meetings
of the Committees by invitation. As there is such significant overlap
between attendance at Board and Committee meetings, the evaluation
process focused principally on the Board itself. Where appropriate,
Manchester Square Partners commented on the Committees as follows.
Audit Committee
The Chair of the Committee has developed good relationships with the
external Auditors and works closely and effectively with the CFO and his
team. Risk management and mitigation are covered substantially in this
Committee, with the Board engaged as appropriate on important risks.
The Committee will consider ways in which the risk management
process can be further refined, and risk reviews made even more
wide-ranging.
Nominations Committee
It was acknowledged that, due to the Board’s focus in 2021 being on
embedding the Return to Growth strategy and making a number of
senior appointments to the ELT to deliver operational success, this
Committee had not focused on succession and diversity planning to the
extent that it had intended to at the outset of the year. One of the new,
recent appointments made to the ELT is the new Chief People Officer.
The Chairman, the Chief People Officer and the Company Secretary
have developed a plan for the Committee for 2022 which has
succession planning for the Board and ELT, and the improvement
of diversity throughout the Group, as a central pillar.
Remuneration Committee
The Chair of this Committee was appointed on 1 January 2021. She has
developed an effective relationship with the executive management,
listens carefully to the views of institutional shareholders, and is mindful
of good governance practices. The Committee undertook a competitive
selection process for the appointment of new advisors during this year,
following which Korn Ferry were engaged. Korn Ferry’s appointment has
provided a new perspective, and improved the support available, to the
Committee. Also, during 2021, the Chair led the engagement with the
Group’s workforce on executive remuneration. See page 113 for further
details. The Committee will continue to engage with the wider workforce
and other stakeholders.
Progress with 2021 priorities
The internal Board evaluation process carried out in 2020 established a
number of priorities for 2021:
• Focus on delivering the turnaround plan
The Board supported the Executive management in stabilising the
business, focusing on the Return to Growth strategy and ensuring that
the changes made to senior management were effective. It was very
satisfying that the Group returned to underlying profit before tax
in 2021.
• Develop best-in-class leadership and management capability
Two new independent Non-Executive Directors were appointed in
2021, and they chair the Audit and Remuneration Committees
respectively. The external review conducted by Manchester Square
Partners in 2021 concluded that these Committees are operating in an
effective manner. There were also a number of new appointments
made to the ELT, including new Managing Directors for each of
Germany and Benelux and a new Chief People Officer, with
appointments also to the newly created roles of Group Strategy
Director and Group HR and Communications Director. Additionally,
ahighly experienced Interim Group Digitalisation Director joined on a
contractbasis.
• Improve employee engagement and promote new winning
entrepreneurial culture
The results of the second employee survey undertaken in Autumn
2021 demonstrate the significant improvements made in employee
engagement since the first survey the year before. Participation
rates across the Group and the findings of positive emotions from
employees both exceeded benchmark averages. Further information
on the employee survey is set out at page 44. Additionally, the
designated Workforce Engagement Non-Executive Director, Simon
King, undertook many meetings with employees across the Group
during 2021. He found a workforce which has embraced the new
locally-focused strategy (see page 76 for further details).
• Regularly review strategic challenges and opportunities and
build a business for the future
The Return to Growth strategy developed by the Group in mid 2020
remains at the core of the Group’s strategy. Considerable progress
was made during the year as the Group returned to underlying profit
before tax in 2021. The Board is now able to look further ahead and
consider the strategic topics which are most important for the Group
in the medium and longer-term. This work led to the adoption of the
Group’s five sustainability commitments set out in the Strategic Report
on page30.
2022 priorities
Following the review conducted by Manchester Square Partners, the
Board identified the following priorities for 2022:
• succession plans for Non-Executive Directors to be reviewed and
revised;
• ensure sufficient meeting time during the year for (1) the full Board; (2)
the Non-Executive Directors; and (3) the independent Non-Executive
Directors;
• extend the invitation to an independent Non-Executive Director to
attend the operating review meetings (by rotation amongst
independent Non-Executives);
• Board and Committee papers to be published one week in advance of
meetings with guidance/ training to be delivered on best-practice for
Board/ Committee reporting;
• organise a deep dive session, with external input, to explore the
competitive landscape and potential disruptors;
• the Audit Committee to undertake regular deep-dive risk reviews;
• reinvigorate the Nominations Committee, including succession plans
for the Executive Directors and holding sessions on talent
development, culture, diversity and inclusion and organisational
effectiveness;
• develop a proposal for more formal Board oversight of ESG matters
in light of the five sustainability commitments; and
• develop a balanced scorecard of key metrics (financial and non-
financial) regarding the performance of operating companies.
91SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 915X_Governance_v73.indd 91 11/03/2022 10:2911/03/2022 10:29
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 and amended its terms of reference.
These can be found on the Group’s website at www.sigplc.com.
Evaluation
An external evaluation was conducted for the Committee in line with the
Code. More details can be found on page 91.
“The Nominations Committee is
responsible for Board recruitment and
will continue to conduct its proactive
process of planning and assessment”
3. Composition, Succession and Evaluation
Nominations Committee membership
Member Joined
Number of
meetings
attended
Andrew Allner
1
Chairman
1 November
2017 3/3
Shatish Dasani
Independent Non-Executive Director
1 February
2021 3/3
Kath Durrant
Independent Non-Executive Director
1 January
2021 3/3
Gillian Kent
Independent Non-Executive Director 1 July 2019 3/3
Simon King
Independent Non-Executive Director 1 July 2020 3/3
Alan Lovell
Senior Independent Non-Executive Director
1 August
2018 2/3
Christian Rochat
Non-Executive Director 10 July 2020 3/3
1. Independent on appointment.
221 4 5
Corporate governance report
92 SIG Annual Report and Accounts 2021
5X_Governance_v73.indd 925X_Governance_v73.indd 92 11/03/2022 10:2911/03/2022 10:29
Dear Shareholder,
I am pleased to present the Nominations Committee Report for the
financial year ended 31 December 2021 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.
2020 was a year of considerable activity for the Committee, with five
new appointments to the Board being made. 2021 was also a very busy
year for the Committee, with two further Board appointments taking
effect. Kath Durrant joined as an independent Non-Executive Director
and Chair of Remuneration Committee and Shatish Dasani joined as
an independent Non-Executive Director and Chair of Audit Committee.
Additionally, a number of appointments were made at an ELT level.
Taken together, these strengthened the Group’s senior management and
have set the Group up well for continued progress in implementing its
Return to Growth strategy.
I am pleased that during the year the Committee commenced the
exercise to more formally review talent and capability within the Group,
as it had stated last year that it would do, and I am encouraged by the
progress that has been made. I look forward to the conclusions from this
work and to reporting on those conclusions in the Committee’s report
next year.
Recent years have, rightly, seen an increased focus by companies and
their stakeholders on diversity and inclusion. The Board is aware that the
Group remains a work in progress in this area and the Committee will
be devoting attention to this important subject during 2022. We are
currently conducting a review of the Group’s workforce to provide a base
from which we can measure progress and to enable us to benchmark
ourselves against the Group’s peers.
The Committee’s work for 2022, over and above its normal duties,
willinclude completing its review of talent management, performance
and capability together with taking forward its review of diversity and
inclusion, plus the additional matters set out in the Committee’s
report below.
Andrew Allner
Chair of the Nominations Committee
10 March 2022
Directors’ tenure
as at 31 December 2021
Steve Francis 1 year 10 months
Ian Ashton 1 year 6 months
Andrew Allner 4 years 1 month
Shatish Dasani 11 months
Bruno Deschamps 1 year 6 months
Kath Durrant 1 year
Gillian Kent 2 years 6 months
Simon King 1 year 6 months
Alan Lovell 3 years 5 months
Christian Rochat 1 year 6 months
Independence of Directors
as at 31 December 2021
50%50%
Independent Not independent
Board gender diversity
as at 31 December 2021
80% 20%
Male Female
Age of Directors
as at 31 December 2021
70%30%
50 – 60 60+
93SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 935X_Governance_v73.indd 93 11/03/2022 10:2911/03/2022 10:29
Meetings and membership
During the year, the Committee met on three occasions. The quorum
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, two Non-Executive Directors and five independent
Non-Executive Directors.
During the year, and in accordance with its usual practice, the Committee
reviewed the 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 to be independent as at the date of this
report. On appointment to the Board, the Chairman was considered to
be 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 also 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 2022 AGM.
Executive Leadership Team appointments
During the year, new Managing Directors were recruited for two of
the Group’s operating companies, Germany and Benelux. The new
Managing Directors each have significant years of experience within the
building materials industry and, in the case of the MD for Germany, is an
SIG alumnus. The Group functions were also strengthened with new
appointments during 2021. A new Chief People Officer was recruited
externally during the year and an internal promotion was made to the
new role of Group HR & Communications Director. A further new role
of Group Strategy Director was created. Additionally, the Group’s
digitalisation skills and knowledge were increased through the external
hire of an experienced consultant as Interim Group Digitalisation
Director. The Committee considers that these appointments strengthen
the ELT as a whole and put the Company’s executive leadership in a
position to make further progress in 2022 in executing the Return to
Growth strategy.
Board succession planning
Succession planning for Directors, both Non-Executive and Executive,
and for other senior management of the Group, is a central pillar in the
Committee’s purpose and annual work. The external evaluation of the
Committee, undertaken during the year, demonstrated how important
Board succession is likely to be for the Group in the next few years.
During 2021, the Committee commenced the exercise of a more
structured and formal review of talent, management, performance and
capability, within the context of succession planning for the Board,
Executives and ELT, and against the backdrop of the Group’s strategic
goals. That work has continued since the year end and the Committee
will report on the output of that exercise in its report for2022.
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 by the Board during the year
and is available on the Group’s website (www.sigplc.com).
Corporate governance report | Nominations committee report
3. Composition, Succession and Evaluation 221 4 5
94 SIG Annual Report and Accounts 2021
5X_Governance_v73.indd 945X_Governance_v73.indd 94 11/03/2022 10:2911/03/2022 10:29
Gender diversity is a significant aspect of diversity and the Board
acknowledges the Hampton-Alexander Review recommendations,
which aim to increase the number of women in leadership positions in
FTSE350 companies, including a target of 33% representation of women
on FTSE350 company boards by 2020. The Committee is aware that
gender diversity on the Board is currently below this level. The Board
comprises ten Directors of whom two are women. Of the six
independent Non-Executive Directors, 33% 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 the threshold of one-third of the Board being
women more challenging. However, it remains the Board’s aspiration to
meet the 33% target over the course of the next few years. The Board is
already compliant with the Parker Review recommendations for
FTSE250 companies as it includes one director of colour.
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 Diversity and Inclusion policy,
defining the Group’s standards and expectations, can be found at
www.sigplc.com. The Company 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 page46.
During 2021, reporting protocols were put in place to increase the
transparency of the Group’s internal reporting of diversity and inclusion.
In addition, during the year the ELT attended a workshop led by an
external facilitator on diversity and unconscious bias. Since the year-end,
an external consultancy has been engaged to analyse diversity and
inclusion across the Group to provide an audit review and give a
benchmarking against the Group’s peers. This will be used to assist
management to improve diversity and inclusion representation
going forwards.
Committee performance
As part of corporate governance, the Committee reviews its own
performance annually and considers what improvements can be made.
The Committee’s performance and effectiveness were reviewed as part
of the external evaluation of the Board and Committee’s effectiveness,
of which further details can be found on page 91. It was noted as part
of the review that during 2020 and 2021 the Committee had devoted
considerable time to approving a significant number of appointments at
Board and ELT level, and ensuing that those new appointments were
successfully inducted into the Group. This was made more complicated
due to the restrictions on face-to-face meetings during much of this two
year period. The review of the Committee’s performance also noted that
much of the Board’s focus during 2021 had, rightly, been on relatively
immediate-term matters, such as implementing the Return to Growth
strategy and responding to trading issues such as product shortages
and price inflation following the lifting of Covid-19 restrictions. The
Committee is confident that 2022 will provide the opportunity to give
greater prominence and focus to more medium and longer-term
priorities, such as succession planning.
Areas of focus for 2022
In 2022, the Committee has the following as its areas of focus:
• review of talent and capabilities, especially at the ELT level and for
those colleagues who report to a member of the ELT;
• succession planning for the Board and ELT;
• ways to improve diversity and inclusion across the Group; and
• consider a recommendation to the Board for the adoption of a policy
on external commitments held by Directors. The Code does not
recommend any specific limits on external appointments, beyond the
requirement that Directors have sufficient time to meet their
responsibilities. However, this area has been an increasing focus for
proxy advisers and large institutional shareholders who have issued
their own voting guidelines regarding this topic.
Summary of Directors’ skills
as at 31 December 2021
Strategy
Transformation / Turnaround
Change management
Stakeholder Engagement
Workforce Engagement
Cultural Engagement
Retail
Distribution
Technology / Digital
27
26
28
26
23
26
16
22
20
Board’s rating out of 30 for each skill
Transportation / Fleet management
Health & Safety
Sustainability
Accounting / Auditing
Treasury Management
Marketing
Corporate Transactions
Property Management
International
19
22
19
24
22
21
26
20
26
95SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 955X_Governance_v73.indd 95 11/03/2022 10:2911/03/2022 10:29
The Board has ultimate responsibility for the Group’s risk management
and system of internal control and for reviewing its effectiveness. It
establishes the structure for risk management, sets strategic objectives,
sets the risk appetite and ensures that risk management and internal
control structure and frameworks are robust. The Board delegates
responsibility to the Audit Committee to consider the adequacy of the
risk management and internal control framework and to agree the
risk-based internal audit programme.
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 Committee that controls in place
are designed appropriately and operating effectively.
The Group internal audit function comprises an in-house team
supported by a co-source arrangement with KPMG LLP who provide
input 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 Committee Report on
pages 104 to 111.
Key elements of ongoing process for risk
management and internal control
In August 2021 a new Group Director of Audit and Risk was appointed.
He has reviewed the practices and methodologies employed by the
Group internal audit and risk functions. The Group internal audit and risk
functions are relatively mature and benefit from an experienced resource
base and robust methodology. However, there are a number of respects
in which the new Group Director of Audit and Risk will be able to
enhance those existing practices.
Group internal audit and risk periodically review local risk management
arrangements in order to provide reasonable assurance to the Audit
Committee 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 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. Essentially, it is a toolkit to help manage strategic, financial,
operational, people and compliance risk. The Group internal audit and
risk function supports with practical assistance where required.
• In accordance with the Group risk management framework, operating
companies and central function leadership teams maintain their own
local risk registers.
• The Board maintains an overall Group risk register, the content of
which is determined and assessed through regular input from the
Audit Committee. A review of the Group’s principal risks and how it
manages or mitigates them is presented in the Strategic report on
pages 54 to 59.
• 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
Committee and Board for their relevance and significance.
The Board regularly assesses the Group’s emerging and principal risks
and considers that its assessment is robust.
Internal control
An assurance framework was approved by the Audit Committee in
March 2021 and then communicated to Group and operating company
stakeholders. It will continue to be communicated as required and will be
part of any controls-based training material delivered by the Group
controls team. The Framework will continue to be the basis on which the
Group controls team annual plan is based.
The Group Controls Team supports 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. The controls plan for 2021
was defined, communicated and agreed with operating companies, and
the teams made progress on the delivery of the plan. They have
formalised previous control requirements, such as controls reviews,
quarterly Key Control Framework (“KCF”) submissions and reviews, and
policy refreshes. They have also defined new workstreams to further
enhance SIG’s control framework, including the creation of a controls
training programme, and a controls manual and methodology.
Risk Management
and Internal Control
4. Audit, Risk and Internal Control221 3 5
Corporate governance report
96 SIG Annual Report and Accounts 2021
5X_Governance_v73.indd 965X_Governance_v73.indd 96 11/03/2022 10:2911/03/2022 10:29
Key control activities include:
• operating company controls reviews: in order to build up
documentation over controls across core financial processes with the
operating companies, the 2021 plan contained a number of controls
reviews. The plan was developed with reference to the proposed
timing and coverage of internal audit work. The objective of controls
reviews is to support the operating companies in enhancing their
control environments;
• Group function controls reviews: Control reviews were performed over
the Group Tax and Treasury processes. Key controls in these functions
were documented and agreed with the functional heads. No significant
gaps in expected controls were identified;
• balance sheet reconciliation policy refresh: the Group balance sheet
reconciliation policy was most recently reviewed in 2019. A review
of the policy was performed in May 2021 with a view to making
the document clearer, more concise, and streamlining roles and
responsibilities. The policy now outlines the minimum requirements
for the completion and review of reconciliations and has been
communicated to operating companies and Group functions;
• 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 IT general controls using
an agreed red/amber/green criteria. The Group controls team
performed a high-level assessment of the operating company ratings
provided in Q1 and Q2 2021 and benchmarked these to determine
whether submissions were being assessed in a consistent manner
across the Group. Any significant issues or control weaknesses
identified are reported to the ELT, Audit Committee and the Board;
• UK SOX update: following the release of the Department of Business,
Energy and Industrial Strategy (“BEIS”) consultation paper this major
proposed corporate reform will impact SIG significantly if the legislation
is consistent with the consultation paper, requiring the formalisation of
our controls environment and the annual testing of its effectiveness.
SIG submitted a response to the consultation in July 2021. We await
the final details of the legislation and timelines involved. The Group
controls team have begun to consider likely impacts, gaps and
roadmaps for implementation;
• ensuring the levels of approval governed by the Group Delegation
of Authority policy are adhered to. This involves ensuring that all
operating companies hold appropriate Delegation of Authority
documents in place and that they are up to date. The policy is
refreshed annually and requires Board approval;
• continued monitoring of the impact of Covid-19 and any appropriate
changes to business practices; and
• monthly provision to the Board of relevant, accurate and timely
information including relevant key performance indicators.
A structured and approved programme of audits undertaken by Group
internal audit would ordinarily include regular site visits to, and interaction
with, the operating companies across the Group. However, due to
lockdown restrictions, this has been done by video call when necessary.
The implementation of recommended actions is monitored as part of a
continuous programme of improvement.
Covid-19 controls
Due to the impact of Covid-19, the Board and ELT took swift action
during 2020 to put in place a number of new controls to comply with
governmental advice, protect the business and its people and mitigate
against the risks arising from remote working. These controls remained
in place for some or all of 2021 and were in places further developed
during 2021. The measures implemented in consequence of Covid-19
included:
• strengthening of cyber security controls through acceleration of plans
to defend against the increased risk of phishing attacks;
• measures in place in branches to protect employees, customers and
suppliers from risk of infection. Head office locations were closed for
certain periods, with employees working remotely. Reporting of
confirmed Covid-19 cases and those employees who were self-
isolating;
• introduction of a Homeworking policy to ensure the safety and
wellbeing of employees working remotely. All operating companies put
in place detailed communication plans and established clear lines of
communication with regular Group and individual contact points. Most
operating companies put a support hotline in place for employees who
had queries or required support; and
• Group-wide Covid-19 response checklist was developed and
deployed to address key risks presented by the pandemic in the short,
medium and long term, giving the Audit Committee visibility into
measures implemented. The areas covered were supply chain failure,
people, liquidity and finance, legal and regulatory, Health & Safety,
customer service, change management and governance and business
continuity risk and IT (including fraud).
In addition to these measures, the Board and ELT continued to monitor
government advice on Covid-19 safety during the year across all SIG’s
countries of operation. The safety of our employees, suppliers and
customers remains of the utmost importance and SIG will continue to
ensure that all advice and safety measures are implemented.
97SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 975X_Governance_v73.indd 97 11/03/2022 10:2911/03/2022 10:29
4. Audit, Risk and Internal Control221 3 5
Corporate governance report | Risk management and Internal Control
Financial reporting
• In addition to the general internal controls and risk management
processes described on pages 109 to 110, 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.
• The policies and procedures are comprehensively detailed in the
Group Finance manual, which is used by all businesses in the
preparation of their results.
• Financial reporting control requirements are also set out in the Group
Finance manual, which is regularly updated to include changes to
accounting and reporting policies.
Annual assessment of the effectiveness of systems
of risk management and internal control systems
During 2021, 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 2021
and up to and including the date of this report.
98 SIG Annual Report and Accounts 2021
5X_Governance_v73.indd 985X_Governance_v73.indd 98 11/03/2022 10:2911/03/2022 10:29
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 2021 and 10 March 2022. 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
2021 %
Nature of holding as per
disclosure
Interests
disclosed to
the Company
as at 10 March
2022 %
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 174,743 ,8 03 14.79% Direct Interest
(including an Indirect
Interest of 1.0816%)
174,743 ,8 03 14.79% Direct Interest
(including an Indirect
Interest of 1.0816%)
Aberforth Partners LLP 119,525,533 10.12% Indirect Interest 118,322,520 10.01% Indirect Interest
UBS Asset Management 45,818,778 3.88% Indirect Interest 45,315,011 3.84% Indirect Interest
Massachusetts Financial Services Company 38,052,800 3.22% Indirect Interest 38,052,800 3.22% 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 2021, 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 Group General Counsel & Company Secretary’s
report. The Group General Counsel & Company Secretary also reports
to the Board concerning ongoing investigations and conclusions
reached. During 2021, Group employees used this system to raise
concerns about a number of separate issues, all of which were
appropriately responded to. A revised Whistleblowing policy was
launched in January 2021 together with migration to a new external
whistleblowing platform with enhanced features. A plan was put
in place to further increase awareness and effectiveness of the new
whistleblowing arrangements. The ELT and finance functions across the
Group were given specific awareness training before the new policy and
platform were launched. Training for the new Whistleblowing policy has
been rolled out Group-wide through SIG’s online compliance platform.
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 themself 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
Strategicreport.
Viability statement
The viability statement can be found on pages 65 to 66 of the
Strategicreport.
Independent Auditor
On the recommendation of the Audit Committee (see page 111), 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 Committee to agree its
remuneration. The remuneration of the Auditor for the year ended
31 December 2021 is fully disclosed in note 3 to the Consolidated
financial statements on page 156.
Directors’ report
99SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 995X_Governance_v73.indd 99 11/03/2022 10:2911/03/2022 10:29
Publication of Annual Report and notice of AGM
Shareholders are to note that the SIG plc Annual Report 2021 together
with the notice convening the 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 Chairman’s statement and Strategic report on pages 5 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 (2020: £nil). Details of the Group’s
policies in relation to Corporate Governance are disclosed on page 52.
Group results and dividends
The Consolidated income statement for the year ended 31 December
2021 is shown on page 129. The movement in Group reserves during
the year is shown on page 132 in the Consolidated statement of
changes in equity. Segmental information is set out in Note 1 to the
Consolidated financial statements on pages 149 to 154.
The Board has taken the decision not to declare a final dividend for the
year (2020: nil), recognising that the Company is still on a path to positive
cash generation and remains focused on sustaining and building on the
recovery of the last 12-18 months. No interim dividend was paid in 2021
(2020: nil). Therefore, the total dividend paid in 2021 was nil (2020: nil).
GHG emissions
Details of the Group’s GHG emissions, energy and carbon reduction
plans are detailed in the Strategic report on page 32 to 39.
Employees
Details of the Group’s policies in relation to employees (including
disabled employees) are disclosed in the Strategic report on page 52.
Further information on employee engagement and consultation can be
found in the Strategic report on page 44 and the Corporate Governance
report on pages 75 to 77.
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 78 to 83.
Post balance sheet events
Details of post balance sheet events are included in Note 35 on page
199 of the Consolidated financial statements.
Related party transactions
Except as disclosed in Note 33 to the Consolidated financial statements
on page 199, 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 86.
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 20 to the Consolidated financial
statements on pages 176 to 183.
Future developments
Possible future developments are disclosed in the Strategic report
on pages 18 to 20.
4. Audit, Risk and Internal Control221 3 5
Corporate governance report | Directors’ report
100 SIG Annual Report and Accounts 2021
5X_Governance_v73.indd 1005X_Governance_v73.indd 100 11/03/2022 10:2911/03/2022 10:29
Acquisitions and disposals
Details of acquisitions made, and businesses identified for sale or
closure are covered in Note 11 on page 164 and Note 15
on page 171 to 172 of the Consolidated financial statements.
Group companies
A full list of Group companies (and their registered office addresses) is
disclosed on pages 227 to 229.
Share capital
The Company has a single class of share capital, which is divided into
ordinary shares of 10p each. At 31 December 2021, the Company had a
called-up share capital of £118,155,697.70 divided into ordinary shares of
10p each (2020: £118,155,697.70).
During the year ended 31 December 2021, no options were exercised
pursuant to the Company’s share option schemes. 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
meeting 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.
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 Share Incentive Plan (the “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 on behalf of employee participants, 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 10 March 2022 was
24,814,955. The EBT trustee also waives any dividends on shares held
in theEBT.
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.
101SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 1015X_Governance_v73.indd 101 11/03/2022 10:2911/03/2022 10:29
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 is
removed pursuant to the Company’s Articles of Association or he/she
becomes prohibited by law from being a Director;
ii. they become bankrupt or compounds 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.
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.
4. Audit, Risk and Internal Control221 3 5
Corporate governance report | Directors’ report
102 SIG Annual Report and Accounts 2021
5X_Governance_v73.indd 1025X_Governance_v73.indd 102 11/03/2022 10:2911/03/2022 10:29
CREST
The Company’s ordinary shares are in CREST, the settlement system for
stocks and shares.
2022 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 9.8.4R 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 114
(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 70 to 103, the Audit Committee Report on pages
104 to 111, the Nominations Committee Report on pages 92 to 95, and
the Directors’ Responsibility Statement on page 128 are incorporated by
reference and form part of this Directors’ report. The Directors’ report,
together with the Directors’ Remuneration Report on pages 112 to 127,
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
2021 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 4.1.8R, the required content of
the management report can be found in the Strategic report and this
Directors’ report, including the sections of the Annual Report and
Accounts incorporated by reference. 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 99 to 103 was approved by the
Board of Directors on 10 March 2022 and signed on its behalf by:
Andrew Watkins
General Counsel & Company Secretary
10 March 2022
103SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 1035X_Governance_v73.indd 103 11/03/2022 10:2911/03/2022 10:29
Audit Committee report
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 Group’s risk management systems, processes and performance.
• 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. These can be found on the Group’s
website www.sigplc.com.
Evaluation
An external evaluation was conducted for the Committee in line with the
Code. More details can be found on page 91.
“The Group has made further good
progress on strengthening its internal
control environment and developing a
robust control framework”
Corporate governance report
Audit Committee membership
Member Joined
Number of
meetings
attended
Shatish Dasani
Chair & Independent Non-Executive Director
1 February
2021 5/5
Kath Durrant
Independent Non-Executive Director
1 January
2021 5/5
Alan Lovell
Senior Independent Non-Executive Director
1 August
2018 5/5
Gillian Kent
Independent Non-Executive Director 1 July 2019 5/5
Simon King
Independent Non-Executive Director 1 July 2020 5/5
Ian Duncan
Chair & Independent Non-Executive Director
(resigned 31 January 2021) 0/0
Purpose and aims
To provide effective oversight and governance over the financial integrity
of the Group’s financial reporting 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 business to an acceptable level.
4. Audit, Risk and Internal Control221 3 5
104 SIG Annual Report and Accounts 2021
5X_Governance_v73.indd 1045X_Governance_v73.indd 104 11/03/2022 10:2911/03/2022 10:29
Dear Shareholder,
On behalf of the Board, I am pleased to present the Audit Committee
Report for the financial year ended 31 December 2021. 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 2021 Annual Report and Accounts.
The Group has made further good 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 use them to adopt a risk-based approach to continuous monitoring
of control effectiveness.
The Committee considered measures undertaken to transform the
culture of the business in 2021. During 2021, the resource in the finance
team and UK shared service centre was increased to enable focus on
the control environment. The Committee endorsed the strengthening of
both teams and the importance of building a strong and sustainable
senior leadership team. Since the introduction of the new executive
management team during 2020, the quality and expertise of the finance
function has improved, and I am confident this progress will continue
during 2022.
The Committee held five meetings in 2021, including an additional
meeting to finalise the review of the 2020 year-end results. I also had
regular meetings with the CFO, Group General Counsel & Company
Secretary, Group Director of Audit and Risk and the external Auditor to
discuss key financial, control and risk issues and 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 2021 included:
− the enhancement and documentation of Risk and Controls Matrices
(“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). This activity
will continue into 2022;
− the management of the quarterly KCF self-certification process.
This included a refresh of the quarterly KCF process to drive best
practice within the Group and subsequent action monitoring;
− further development and formalisation of the IT general controls
framework and entity level controls covering key areas; and
− the introduction of a training programme for staff involved in control
activities to raise controls awareness and knowledge across
the Group.
• Consideration of the adequacy and robustness of the risk
management framework to ensure that the organisation’s principal
risks and uncertainties were identified and assessed, and actions
implemented to mitigate either the likelihood of risks arising or the
potential impact of risks materialising.
• The effectiveness of the internal audit function in ensuring that a
risk-based audit plan was delivered and agreed management action
plans were satisfactorily completed. The Committee oversaw the
recruitment process of a new Group Director of Audit and Risk,
culminating in an appointment in August 2021.
• The Taskforce on Climate-Related Financial Disclosures developed in
2015 and launched in 2017, became the standard of reporting for
premium listed companies with accounting periods beginning on or
after 1 January 2021. The Audit Committee has been presented with
papers during the year on the topic and has carefully examined the 11
reporting pillars to determine the Group’s ability to report against each
of them. I am pleased to report that SIG can comply with the vast
majority of these 11 recommendations, and for those that it currently
cannot we are able to explain why and the steps we propose to take
during 2022 to ensure full compliance going forward. The Committee
will continue to review this progress during 2022.
• The Group successfully completed a refinancing in November 2021,
well in advance of the maturity date of the previous facilities of May
2023, which involved the issue of a €300m bond (senior secured
notes), due in 2026, and a new RCF. The existing private placement
notes and term loans were repaid in full. The Committee reviewed the
accounting for the extinguishment of the previous facilities, recognition
of the new facilities and treatment of fees associated with the
transaction.
• The Committee has monitored the increased risk to cyber security as
a result of the Covid-19 pandemic and the higher number of staff
working remotely and the security risks this would attract. Areas under
review included business continuity, cyber and data security and IT
general controls. The Committee has monitored the progress made
and requested further deep-dive projects on items such as cyber
insurance, to ensure that best practices are in place across the Group.
The role of the Audit Committee will remain in sharp focus during the
year ahead and we continue to be committed to be active in anticipating
challenges and ensuring that they are addressed. In addition to its
ongoing programme, the Committee for the year ahead will have
focus on:
• development of the future controls operating model for the Group and
the role of the operating companies, Group controls team, and Group
internal audit in providing integrated and effective assurance across
SIG’s financial controls framework;
• Branch Auditing: as the Return to Growth strategy continues to
emphasise the pivotal nature of branches in delivering the customer
proposition, the internal audit function plans to introduce a branch
audit methodology during 2022 to provide assurance regarding the
completeness and effectiveness of our branch policies, procedures
and controls;
• continued development and embedding of risk management
processes across the Group and conducting deep-dive reviews into
specific risks; and
• ensuring the internal audit function, given the devolved nature of the
Group, has sufficient resources (including appropriate language
capability) to ensure it can effectively engage with each local operating
company. This process has started with the successful recruitment of
the Group risk manager from our Polish business.
I hope that you find this report informative and take assurance from the
work carried out by the Committee during the year.
Shatish Dasani
Chair of the Audit Committee
10 March 2022
105SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 1055X_Governance_v73.indd 105 11/03/2022 10:2911/03/2022 10:29
4. Audit, Risk and Internal Control221 3 5
Key Activities
March
Two meetings during March
• Reviewed progress of annual year end audit and
considered significant financial judgements
• Update on capital reduction proposal
• Annual assessment of internal controls and risk
management systems
• Internal audit effectiveness report
• Report from external Auditor – on full year Audit and
Accounts
• Report of Audit Committee in Annual Report approved
• Review of Annual Report and Accounts 2020 – reviewed
and recommended to Board for approval
• Full-year results: Draft preliminary announcement of results
– reviewed and recommended to Board for approval
• Private meeting with external Auditors for Committee
members
September
• Half-year results announcement
• External Auditor report on half year
• Internal controls update
• TCFD reporting update
• Group internal audit & risk strategy
• Annual review of Directors’ expenses
• Review of non-audit services from external Auditors
August
• Review of half year results
• Annual auditor evaluation
• Group risk register – status update
• Report of Group Tax and Treasury Director
• External Auditor – Half-year status report
• Senior Accounting Officer Review 2020
• Review and update of Audit Committee Terms
ofReference
December
• Cyber security update
• Annual Report and Accounts 2021 progress update
• TCFD report update
• Risk update and Annual Report disclosure
• Risk appetite update
• Update on audit and risk management team and
resourceallocation
Corporate governance report | Audit committee report
At every main meeting the Audit Committee also considers:
• Report of the CFO
• Report of the external Auditor
• Report of the Group Director of Audit and Risk, updatingonrisk,
internal audit and controls
• Minutes and actions from previous meetings
106 SIG Annual Report and Accounts 2021
5X_Governance_v73.indd 1065X_Governance_v73.indd 106 11/03/2022 10:2911/03/2022 10:29
Audit 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 Company 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 Steve Francis,
attended all of the meetings in 2021. The external Auditor, the Group
Director of Audit and Risk, and the Group Financial Controller also
attended all meetings of the Committee in 2021 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
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 four out of the five Audit Committee
meetings held this year. As an observer, the representative is entitled to
attend meetings but cannot influence the decision making of the
Committee.
Audit 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 terms of reference are reviewed at least annually and
are updated as necessary.
The Committee has in its terms of reference the power to engage
outside advisers and to obtain its own independent external advice at
the Group’s expense, should it be deemed necessary. The Chair of the
Committee reports to the subsequent meeting of the Board on the key
issues covered by the Committee, identifying any matters on which it
considers that action or improvement is needed, and makes
recommendations on the steps to be taken.
Audit Committee evaluation
As part of corporate governance, the Committee reviews its own
performance annually and considers what improvements can be made.
The Committee’s performance and effectiveness were reviewed as part
of the external evaluation of the Board and Committee effectiveness, of
which further details can be found on page 91.
Meetings
The Committee meets regularly throughout the year, with five meetings
being held during 2021. Key matters considered at meetings of the Audit
Committee during the year are listed on page 106.
107SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 1075X_Governance_v73.indd 107 11/03/2022 10:2911/03/2022 10:29
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 based on forecast revenues, operating
margins and discount rate risk adjusted
where appropriate.
The results of the 2021 impairment review have been reviewed.
The Committee noted the 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 the operational issues faced and
losses incurred during the year. The Committee considered
the appropriateness of the assumptions and the sensitivity
analysis performed.
Capitalisation of costs
related to cloud
computing arrangements
An IFRS Interpretations Committee Agenda
Decision released during the year clarified
certain guidance in relation to the accounting
for configuration and customisation costs in
cloud computing arrangements. This has
resulted in the Group reviewing and changing
its accounting policy relating to the
capitalisation of implementation costs
related to cloud computing arrangements.
The Committee noted that software costs incurred in 2021
and costs capitalised in previous years had been assessed to
identify costs relating to certain Software as a Service (“SaaS”)
arrangements which should now be expensed through the income
statement rather than being capitalised in light of the updated
guidance. The change in policy is applied retrospectively and the
prior year comparatives restated.
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 continue to strengthen the way in which the
recoverability of supplier rebates is controlled, including the
internal review processes and the technology in place to assist
in the calculation of supplier rebate income.
SAP onerous
contract provision
At 31 December 2020 an onerous contract
provision of £9.6m was recognised in relation
to future contracted licence fees relating to
the SAP 1Hana implementation following the
change in scope of the project in 2020.
Following further changes in the use of the
software during 2021 the provision has
been reassessed and a £2.2m increase
to the provision has been recognised at
31 December 2021.
The Committee considered the judgements made in relation to
the level of future economic benefit to be derived by the Group
from the future licence cost commitment and considered the
reassessment of the provision to be appropriate.
Disclosure of Other items The Group presents income statement items in
the middle column of the Consolidated income
statement entitled Other items where they are
significant in size and nature, and either do not
form part of the trading activities of the Group
or their separate presentation enhances
understanding 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. Following the refinancing
completed in November 2021 the Group now has committed
facilities in place beyond the three year viability assessment
period, with significantly less restrictive financial covenants in
place compared to the previous debt. On the basis of the new
debt facilities in place, the strong trading performance in 2021 and
current forecasts over the relevant future periods, the Committee
is satisfied with the conclusions over going concern and longer
term viability.
4. Audit, Risk and Internal Control221 3 5
Corporate governance report | Audit committee report
108 SIG Annual Report and Accounts 2021
5X_Governance_v73.indd 1085X_Governance_v73.indd 108 11/03/2022 10:2911/03/2022 10:29
Oversight of risk management and internal controls
The Terms of Reference of the Committee require that 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 Board, supported by the Committee, carries out
a review of the Group’s key strategic risks and uncertainties. In
performing this review the Board seeks the opinions of, 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
Board will consider 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 strategic risk deep dive 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:
Audit Committee
• Responsible, on behalf of the Board, for reviewing, and examining the
effectiveness of the risk management systems, processes and internal
controls implemented by management.
Executive Leadership Team
• Reviews and recommends the Group annual strategic risk report 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.
• Each ELT member is also responsible for, at least bi-annually, reviewing
the status of strategic risks and uncertainties relevant to their area of
responsibility.
Operating company Managing Directors
• 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 Board, 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
The SIG Assurance Framework (“Framework”) was presented to the
Committee in March 2021. It provides a structured means to support the
on-going process of identification, evaluation and management of
significant risk 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 was communicated to Group and operating company
stakeholders, including to all operating company FDs. The Framework
continues to be the basis on which the Group controls team’s annual
plan is based.
A new Head of Group Controls joined SIG in March 2021. The team’s
aim is to support the creation and maintenance of a robust financial
control environment and raise awareness across SIG by providing the
Group with practical and hands-on support and advice. The controls
plan for 2021 was defined, communicated and agreed with the operating
companies' FDs and the team continued to progress the delivery of the
plan throughout the year. The Group controls team have formalised
existing control activities across the Group allowing for requirements and
expectations to be set upfront for all involved (e.g. RACM template
development and documentation; action tracking and remediation; KCF
submission and reviews; and policy refreshes and implementation) as
well as defining new workstreams to further enhance SIG’s control
framework.
109SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 1095X_Governance_v73.indd 109 11/03/2022 10:2911/03/2022 10:29
Some major activities performed as part of the annual controls plan for
2021 were:
• Controls reviews and RACM enhancement across:
− all operating companies over 9 key financial processes. This activity
will continue into 2022;
− Group activities such as tax, treasury, external reporting,
consolidation;
− entity level controls such as Group finance, IT, Company Secretarial,
Delegation of Authority, HR, and risk and internal audit; and
− IT General Controls. This activity will continue into 2022.
• Management and analysis of the quarterly KCF self-certification
process including the Q1 deep-dive exercise and subsequent KCF
refresh that sets the minimum control requirements across key
processes.
• Monitoring of actions and supporting owners with remediation
activities with regular reporting to the Committee.
• Management of the bi-annual operating companies' management
representation letter process.
• Control framework assessment and gap analysis in readiness for UK
SOX introduction.
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 with
completing the plan and any issues arising.
Covid-19
In response to the Covid-19 pandemic, the Group designed and rolled
out a crisis response checklist to each operating company. The checklist
comprised a set of short, medium and long-term risks with activities for
consideration by management. Each operating company has continued
to use the schedule during 2021 to ensure it has coverage of the fuller
spectrum of risks and to prompt consideration of additional activity,
especially in relation to changes by governments. The focus of the
checklist has included key areas such as Health & Safety, cyber risk,
supply chain, liquidity and finance. The checklist has been updated
regularly in line with local government updates.
The Group internal audit plan has been kept under review and adjusted
as required whilst travel restrictions have largely remained in place.
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.
While the function is predominantly resourced with permanent
employees, it continues to use external subject matter expertise where
necessary and, in 2021, commissioned external support to perform
reviews of progress in enhancing the Group’s cyber security capabilities,
the completion of a review of IT general computer controls, the
completion of reviews of specific business critical applications and a
review of payroll processes across our French business.
The results of all audit assignments were presented to the Committee
during the year. Areas of weakness identified during the year resulted in
detailed action plans and follow-up checks to establish that actions had
been completed appropriately.
The Committee reviewed the remit, organisation, and resources of the
function, together with the internal audit plan. The internal audit plan is
regularly reviewed during the year to ensure the function remains aligned
to the key risks of the business and is appropriately resourced. The
Committee also oversaw the recruitment of a new Group Director of
Audit and Risk during the year.
Areas of focus for 2022 have been agreed by the Committee and
include:
• the implementation of a more formal approach to audit planning based
on a risk universe process; and
• ensuring the internal audit function, given the devolved nature of the
Group, has sufficient resources (including appropriate language
capability), to ensure it can effectively engage with each local
operating company. This process has started with the successful
recruitment of the Group Risk Manager role from our Polish business.
Oversight of external Auditor
Ernst & Young LLP were appointed as the Group’s Auditor in July 2018
following a tender. Shareholders formally approved their re-appointment
at the May 2021 Annual General Meeting. 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.
External Auditor performance evaluation
For the year ended 31 December 2020, 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 EY audit quality.
4. Audit, Risk and Internal Control221 3 5
Corporate governance report | Audit committee report
110 SIG Annual Report and Accounts 2021
5X_Governance_v73.indd 1105X_Governance_v73.indd 110 11/03/2022 10:2911/03/2022 10:29
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 auditors, 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 EY on a scale of 1 to 5 and to provide any additional
comments alongside their ratings.
Overall, the external Auditor’s performance and effectiveness was rated
well, with a higher score than the previous year across all areas, with the
most notable increase seen in the area of communication. Audit fees
continue to be the lowest rated area. 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, were 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 is aware of the need for the Group’s 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.
Policy on non-audit services
The Group has an agreed policy with regard to the provision of audit and
non-audit services by the external Auditor, which operated throughout
2021. The policy is based on the principle that they should undertake
non-audit services only where they are the most appropriate and
cost-effective provider of the service, and where the provision of
non-audit services does not impair, 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 2021 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
Audit Committee Chair before the external Auditors are 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 2021 were £0.4m, primarily the interim review (2020: £0.2m)
and assurance services in connection with the refinancing completed in
the year (2020: £nil). The total fees payable to the external Auditor for
audit services in respect of the same period were £2.6m (2020: £3.3m).
Current year costs include £0.3m in relation to the 2020 audit (2020:
£0.7m in relation to the 2019 audit).
The ratio of audit to non-audit fee was 5.75:1 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 156.
A full breakdown of external Auditor fees are disclosed in Note 3 to the
Consolidated financial statements on page 156.
Resolution to re-appoint external Auditor
The Committee recommends, and the Board agrees, that a resolution
for the re-appointment of Ernst & Young LLP as Auditor of the Company
for a further year will be proposed at the 2022 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 Company.
In reaching this conclusion the Committee has considered the following:
• the preparation of the Annual Report is a collaborative process
between the Finance, 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 advisers; and
• a final draft is reviewed by the Audit Committee members prior to
consideration by the Board.
Shatish Dasani
Chair of the Audit Committee
10 March 2022
111SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 1115X_Governance_v73.indd 111 11/03/2022 10:2911/03/2022 10:29
“The Committee’s policies and practices
are designed to support the strategy
and long-term sustainable success of
the Group”
Directors’ remuneration report
5. Remuneration221 43
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.
Terms of reference
Revised terms of reference were adopted in December 2020. During
2021 the Committee has reviewed the appropriateness of these terms
and considers them to remain appropriate. 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,
using the services of Manchester Square Partners. Feedback on the
planning, organisation, information, and decision quality were all viewed
positively. More details can be found on page 91.
The Committee is committed to supporting the business return to
profitable growth through the effective deployment of the remuneration
policy and its incentive structures. It remains mindful of the challenges
that Covid-19, inflation and supply chain issues have created for
colleagues, customers, suppliers and shareholders.
Remuneration Committee Membership
Member Joined
Number of
meetings
attended
Kath Durrant
Chair & Independent Non-Executive Director
1 January
2021 6/6
Andrew Allner
Chairman
1 November
2017 6/6
Shatish Dasani
Independent Non-Executive Director
1 February
2021 5/5
Bruno Deschamps
Non-Executive Director 10 July 2020 6/6
Alan Lovell
Senior Independent Non-Executive Director
1 August
2018 5/6
Gillian Kent
Independent Non-Executive Director 1 July 2019 6/6
Simon King
Independent Non-Executive Director 1 July 2020 6/6
Ian Duncan
Independent Non-Executive Director
(resigned 31 January 2021) 1/1
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
thebusiness.
112 SIG Annual Report and Accounts 2021
Directors’ remuneration report
5X_Governance_v73.indd 1125X_Governance_v73.indd 112 11/03/2022 10:2911/03/2022 10:29
Contents
In this report we set out:
1. The Annual Statement from the Chair of the Remuneration
Committee.
2. 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
2022 AGM.
Dear Shareholder,
On behalf of the Remuneration Committee, I am pleased to present the
Directors’ Remuneration Report for 2021.
Background
Following a challenging year in 2020 the traction behind the Return to
Growth strategy has accelerated. The new leadership team has been
further strengthened and has injected additional energy into a systematic
turnaround. The market challenges, particularly regarding supply
shortages and escalating price inflation have been managed well. As
indicated last year the team have remained focused on executing our
strategy of excellence in core operational disciplines, customer proximity
and employee engagement, strengthening supplier relationships and
commercial excellence in returning key businesses to growth.
Our Covid-19 protocols enabled us to continue to prioritise the Health &
Safety of our employees and customers, and our business stayed open
wherever this was possible during the various Covid-19 pandemic
national lockdowns. We did not receive any furlough or other support
from the UK Government in 2021.
Company Performance
Metric 2021 2020
Revenue £2,291.4m £1,874.5m
Like-for-like sales 24% (13%)
Gross margin 26.3% 25.1%
Underlying operating profit/(loss) £41.4m (£5 3 .1m)
Av. trade working capital to sales ratio 13.8% 14.3%
Operating margin 1.8% (2.8%)
Performance in 2021
At the start of the year the Committee set stretching targets for each
business. By the end of the year, we were delighted to see that
underlying operating profit targets in most countries had been
exceeded, with the UK returning to underlying profitability, and with
France and Poland delivering best-ever results. The market provided a
positive tailwind, but cost inflation and supply constraints have proved
challenging. The Committee noted the commercial discipline in each
business that has enabled gross margin to be maintained and
progression made in most categories in spite of the difficult environment.
Satisfied with the disciplined management of the business, the Board
supported management in its additional investment in inventory levels to
ensure severe supply chain issues could be managed. It is gratifying that
as a result, customer satisfaction levels have remained high and
opportunities to recoup market share have been realised.
Overall, Group performance for the year has exceeded expectations,
and set against the very challenging circumstances the Group faced in
2019 and 2020, the new leadership team has done a great job in the first
stages of moving from turnaround to growth.
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 to 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 the views of those
who had voted against the resolution to approve the Directors’
Remuneration Report at the 2021 AGM. The responses received
confirmed our understanding that the main reason shareholders
representing 23% of our share capital were not supportive was the
decision to pay a bonus in a year when UK Government support had
been received. Shareholders’ views are clearly understood on this
matter by the Committee, and it is grateful for the responses that were
received;
• re-tendered for remuneration advisory services. As a result, Korn Ferry
were selected to support 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 team;
• actively engaged with employees on executive remuneration. Working
with the Non-Executive Director for Workforce Engagement, Simon
King, and the new Chief People Officer, Julie Armstrong, the
Committee Chair attended meetings with groups of employees in
Manchester, Sheffield, Bristol; and in virtual sessions with employees
in Ireland, as with MDs and managers across Europe. Feedback from
these meetings was positive, it reinforced in particular the improved
levels of engagement and support for the Return to Growth strategy. It
also enabled both the Committee and the leadership team to consider
issues raised by staff regarding improved incentive structures and
workforce terms and conditions. As a result, a number of actions have
been taken and further reviews are work in progress for 2022;
• agreed a strategy and policy to fund the Employee Benefit Trust
(“EBT”) on an on-going basis, and approved funding for the
independently managed EBT to buy shares in the market;
• 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;
113SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 1135X_Governance_v73.indd 113 11/03/2022 10:2911/03/2022 10:29
• formally reviewed an analysis of the underpin and windfall tests that
apply to the Restricted Share Plan awards; and
• conducted a review of Committee performance, using the services of
Manchester Square Partners. Feedback on the planning, organisation,
information, and decision quality were all viewed positively.
Remuneration decisions
Other than bonus scheme adjustments for inventory and impact on net
debt as described below, there were no matters that the Committee felt
warranted the exercise of its discretion during the year.
Salary increases
Throughout our businesses we have implemented an annual salary
review and the Committee determined that there would be salary
increases for the Executive Directors for 2022 in line with the average for
the UK workforce of 3.0%. The Committee also determined that the
Chairman’s fee would rise by 3.0%.
Annual bonus outcomes for 2021
In determining the bonus pay-out for Executive Directors and the ELT,
we assessed the outcome of performance achieved against the targets
we set. The Committee noted the outperformance in most businesses
and the high levels of pay-out in incentive plans below the ELT. The
bonus measures for the Executive Directors cover the profitability of the
business, our debt position and key strategic priorities. The bolt-on
acquisitions of Penlaw and F30, both specialist distributors, took place in
the UK during the year, and to be consistent with the targets set at the
beginning of the year, adjustments were made to remove their impact
from both underlying operating profit and net debt performance. Also, to
be consistent with the basis on which the targets were originally set,
adjustment was made for the impact of the increased stock levels
specifically acquired to take advantage of the supply chain difficulties in
the market. This impacted all employees receiving a bonus based on net
debt and working capital targets. However, the Committee took a
decision to apply downwards discretion to limit the impact of this
adjustment to a maximum of half of the opportunity based on this
measure.
During the year there has been significant focus on leading improvement
in Health & Safety by the Executive Directors and other leaders in each
operating company. Additionally Health & Safety resources have been
appointed, and the Board review improvement at each Board meeting.
We then considered whether overall remuneration outcomes 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 87.0 percent and 86.7 percent of maximum
respectively.
Annual bonus design for 2022
Financial measures will continue to represent 80% of the opportunity
with the remainder reflecting strategic objectives. There will be a change
to one of the financial measures for 2022. Whilst the profitability measure
will remain unchanged, the net debt measure will change slightly and be
in the form of leverage (net debt/ EBITDA) as a more rounded measure
to reflect progress of our strategy alongside profitability.
Restricted Share Plan awards
Before Restricted Share Plan (“RSP”) awards made in 2020 and 2021
can vest in 2023 and 2024 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 either award.
The Committee intends to make awards in 2022 at the same level as in
2021 of 100% of salary to each Executive Director (which is lower than
the level provided for in the policy agreed with shareholders in 2020).
However, we will continue to review whether these levels of grant are
appropriate in the future.
Focus for the year ahead
Looking ahead, the Committee will:
• monitor the impact of the turnaround plan, execution of the strategy,
operational performance, and achievement of bonus targets and the
impact of the Covid-19 pandemic on the Group and its impact on the
outcomes of executive remuneration;
• continue to ensure consistency of approach and fair pay conditions
across the Group, the receipt of high-quality remuneration advice and
information to inform decisions, appropriate reflection of Group
performance in any performance-related pay element of remuneration,
and compliance with the Code;
• operate the annual bonus plans and RSP, assessing performance
against the corresponding targets/underpins. A regular formal review
of underpin and windfall tests will take place;
• continue to review how measures of sustainability can be incorporated
into the annual bonus plans;
• review updates received from the Group Head of Reward and Chief
People Officer in relation to developments in employee reward,
incentive, and benefit structures; and
• assess the underpin requirements of the future vesting of RSP awards.
Conclusion
In 2022 we expect the leadership team to sustain momentum from
successful implementation of our Return to Growth strategy with a
continued focus on operational excellence and delivery, while remaining
flexible at local level to respond to the after-effects of the pandemic,
supply chain disruption and inflation. The Committee will assess whether
any acquisition by the Group requires an adjustment to the targets set at
the beginning of the year.
Looking forward, the Committee remains focused on supporting the
business to achieve a significant improvement in performance and on
continuing to operate with rigour 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
10 March 2022
114 SIG Annual Report and Accounts 2021
5. Remuneration221 43
Directors’ Remuneration Report
5X_Governance_v73.indd 1145X_Governance_v73.indd 114 11/03/2022 10:2911/03/2022 10:29
How do our incentive performance measures align to our strategy?
In executing our strategy, we aim to focus onrecovering and enhancing value for shareholders and all other stakeholders. Asset out in our
Remuneration policy, the Restricted Share Plandoes not have a primary set of performance targets but operates a general underpin on
vesting allowing the Committee toreview holistically the overall performance ofthe Group, individual performance, and wider Group
considerations. In addition, wecontinually consider the performance measures we use for the annual bonus incentives to ensure they support
the deliveryof our strategy.
Our strategic pillars
To re-ignite growth, through our expertise, service and proximity
Responsible
actions
Winning
branches
Superior
service
Specialist
expertise
Valuable
partnerships
Highest
productivity
Focused
growth
• People feel safe,
proud and valued
• A greener fleet
and estate
• Positive
community
impact
• Local teams
trusted and
empowered to
succeed
• Agile and
entrepreneurial
sales teams
• Multi-channel,
data-rich
customer
journey
• Known for
specialist focus
and technical
knowledge
• Advice to
optimise cost,
performance
and carbon
• Win-win
strategies with
suppliers
• Supporting
suppliers’ and
customers’
sustainability
goals
• Digitalising
operational
processes
• Lean and
effective
governance
• 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 eNPS NPS GHG Emissions
per £m of revenue
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 • Focus on operational efficiency
• Focus on sustainable investment
• Linked to shareholder value
Strategic objectives • Strategic objectives 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 & Safety culture including visible leadership, sufficient resources,
effective reporting and follow-up, employee feedback, and improvements in metrics
Restricted Share Plan
Measures Link to strategy Link to KPls
General underpin
• Focus on long-term sustainable performance
• Allows overall performance of the Group, individual performance and wider
Groupconsiderations such as the level of employee and customer engagement
tobetakeninto account
Shareholding guidelines
• Linked to shareholder value
115SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 1155X_Governance_v73.indd 115 11/03/2022 10:2911/03/2022 10:29
5. Remuneration221 43
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.
This alignment of reward with the delivery of key markers of the success of the implementation
of the strategy ensures simplicity.
• 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;
• the use of an RSP supports a focus on the sustainability of the performance over the
longerterm;
• 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 Company.
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
sufficient to attract, incentivise and retain.
• The primary value of an RSP discounted vs a traditional LTIP is in share price appreciation
overtime, and is therefore aligned with the development of a sustainable business and
shareholder value.
Alignment to culture – incentive schemes
should drive behaviours consistent with
company 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.
116 SIG Annual Report and Accounts 2021
Directors’ Remuneration Report | Annual statement
5X_Governance_v73.indd 1165X_Governance_v73.indd 116 11/03/2022 10:2911/03/2022 10:29
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. During 2021, we held various workforce
engagement sessions with groups of employees across the organisation
to discuss executive remuneration. We have found these sessions useful
and intend to hold these sessions going forward. Analysis of workforce
terms and conditions took place during the year and was presented to the
Committee; where the Committee had suggestions for improvement,
further action has been requested of the management team. The
Committee will receive a report on progress during 2022.
Engagement with shareholders
We appreciated the support for granting restricted share awards during
this period of turnaround and recovery for the business. It enabled us
to navigate a period of uncertainty, and provide some surety when
recruiting the new leadership team, at Executive Director, ELT and
senior management levels.
We have engaged with shareholders on key matters throughout the
year, including in response to the 2021 AGM vote on the Directors’
Remuneration Report. Prior to the AGM, the Company received
feedback from a number of shareholders regarding their voting
intentions at the AGM. Those who expressed a likelihood that they would
vote against the report referred principally to the executive bonuses paid
for 2020, and in particular to the payment to the Group CEO in July
2020, as well as to the wider circumstances surrounding the payment of
those bonuses, such as the impact of Covid-19 on SIG’s business. SIG’s
engagement with shareholders has been ongoing since the AGM which
has confirmed the Group’s initial understanding of shareholders’
concerns in this regard. The Group believes that these circumstances
have now passed and does not see a likelihood of them being repeated.
We will continue to discuss any remuneration matters as they arise with
shareholders, and at an appropriate time, review the Remuneration
Policy, as the Group continues to pursue its strategic goals.
Remuneration principles
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;
and
• 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; and
• Health & 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; and
• 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
thewider workforce.
117SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 1175X_Governance_v73.indd 117 11/03/2022 10:2911/03/2022 10:29
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.
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 Company Remuneration Principles (see page 117);
• if there are differences, they are objectively justifiable; and
• if the approach seems fair and equitable in the context of other employees.
A summary of the remuneration structure andhow it compares to 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 2021 was 1.5%.
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
2021 of 1.5%.
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 aligned with those provided to UK
employees.
Benefits are aligned to the senior leadership team in the
country of operation.
Bonus plan Just over three quarters of our workforce participate in a cash
bonus scheme, up from just over half in 2020. 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.
2/3rds payable in cash and 1/3rd payable in shares up to
100% of salary; any excess of 100% of salary payable in
shares.
Restricted
Share Plan
55 senior leaders were invited to participate in the RSP in 2021,
with a range of annual awards between 20% to 80%. A holding
period does not apply below the level of Executive Directors.
Maximum annual award of 125% of salary; three-year
vesting period; two-year holding period with underpin on
vesting.
Awards of 100% of salary were made in 2021.
Share
Incentive Plan
All UK employees are invited to participate in the SIP. Executive Directors are invited to participate in the SIP.
118 SIG Annual Report and Accounts 2021
5. Remuneration221 43
Directors’ Remuneration Report | Annual statement
5X_Governance_v73.indd 1185X_Governance_v73.indd 118 11/03/2022 10:2911/03/2022 10:29
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 that 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 was operated in 2021 and how it is intended to be operated in 2022. You can find the full current
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.
The Company’s policy is to provide remuneration packages that fairly reward the Executive Directors for the contribution they make to the business
and that are appropriately competitive to attract, retain and motivate Executive Directors and senior managers of the right calibre. 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 advisers and evaluates the support provided by these advisers annually to ensure that advice is independent, appropriate and cost-effective.
Element and link to strategy How we implemented the policy in 2021 How we will implement the policy in 2022
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
2021 were as follows:
• CEO – £548,100
• CFO – £380,625
The general employee base salary
increase in the UK was 1.5%
Executive Director salaries for 2022 are
increased by 3% as follows:
• CEO – £564,543
• CFO – £392,044
The general UK employee base salary increase
was 3%.
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.
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 Company’s strategy
and the creation of value for shareholders.
Bonus operation for 2021 and 2022:
• 1/3rd 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 3 years and subject to continued
employment;
• 2 year holding period following vesting for deferred shares.
Maximum opportunity in 2021
was as follows:
• CEO – 150% of base salary
• CFO – 125% of base salary
Any bonus is subject to a Health
& Safety override, where the
Committee will review the Health
& Safety performance of the
business for the year in question.
See page 114 for bonus
outcomes for 2021.
No change to opportunity levels or deferrals.
The Health & Safety override will continue to
operate in 2022.
The performance measures for 2022 are
underlying operating profit (60%), leverage
(20%) 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.
119SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 1195X_Governance_v73.indd 119 11/03/2022 10:2911/03/2022 10:29
Element and link to strategy How we implemented the policy in 2021 How we will implement the policy in 2022
Restricted share plan
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; and
− the satisfaction of an underpin (whereby the Committee
can adjust vesting for business, individual and wider
company performance).
• a two-year holding period will apply following the
three-year vesting period.
RSP awards granted in 2021
were as follows:
• CEO – 100% of base salary
• CFO – 100% of base salary
No changes in RSP awards are expected for
2022, reflecting the present share price.
We will review increasing award levels to the
maximum as the share price increases.
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 approval of the
new Policy. Adherence to these guidelines is a condition of
continued participation in the equity 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 NED 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.
There were no increases in fees
in 2021. Fees for 2021 were
as follows:
• Chairman – £218,225
• NED fee – £60,900
• Senior Independent Director
– £10,000
• Remuneration Committee
Chair – £12,000
• Audit Committee Chair
– £12,000
Fees were reviewed in January 2022 and it
was agreed that the fees be increased by 3%
to align to the general workforce increase for
the UK.
• Chairman – £224,772
• NED fee – £62,727
• Senior Independent Director and designated
Workforce Engagement Director – £10,000
• Remuneration Committee Chair – £12,000
• Audit Committee Chair – £12,000
120 SIG Annual Report and Accounts 2021
5. Remuneration221 43
Directors’ Remuneration Report | Annual statement
5X_Governance_v73.indd 1205X_Governance_v73.indd 120 11/03/2022 10:2911/03/2022 10:29
The following section provides details of how SIG’s Remuneration Policy was implemented during
the financial year ended 31 December 2021.
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 2022 AGM. The information
on pages 112 to 127 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 2021 and the
prior year.
Executive Director Base salary
1
Taxable
benefits
2
£’000
Annual
bonus
3
£’000
LTIP
£’000
Pension
4
£’000
Other
5
£’000
Total
remuneration
£’000
Total fixed
remuneration
£’000
Total variable
remuneration
£’000
Steve Francis
6
2021 548 25 715 0 27 0 1,315 600 715
2020 436 17 0 0 22 375 850 475 375
Ian Ashton
7
2021 381 22 412 0 19 0 834 422 412
2020 188 11 94 0 9 0 302 208 94
The figures in the table above have been calculated as follows:
1. Base salary: amount earned for the year as Directors, 2020 figure taking account of any waiver between 1 April 2020 and 30 June 2020.
2. 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.
5. Other: For Steve Francis, for 2020 ‘Other’ includes the one-off cash payment received for his support in developing a new strategy for the Group and leading the Group through
the Capital Raising from 25 February 2020 to 23 April 2020 and subsequently as CEO of the Group.
6. Steve Francis became interim CEO on 25 February 2020 with a salary of £568,400 and ongoing CEO on 24 April 2020 with a salary of £540,000 and his remuneration for 2020
reflects payments earned from 25 February 2020.
7. Ian Ashton became CFO on 1 July 2020 and his remuneration in 2020 reflects payments earned from that date.
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 NEDs (Audited)
The table below sets out the single total figure of remuneration received by each NED for services rendered to the Group as a NED for the year ended
31 December 2021 and the prior year.
Base fee
Committee Chair/Senior
Independent Director fees
Additional Advisory Board fees Total fees
2021
£’000
2020
£’000
2021
£’000
2020
£’000
2021
£’000
2020
£’000
2021
£’000
2020
£’000
Andrew Allner (Chairman)
1
218 191 – – – 109 218 300
Ian Duncan
2
5 53 1 9 – – 6 62
Alan Lovell 61 53 10 8 – – 71 61
Gillian Kent 61 53 – – – – 61 53
Bruno Deschamps
3
61 29 – – – – 61 29
Simon King
4
61 30 – – – – 61 30
Christian Rochat
3
61 29 – – – – 61 29
Kath Durrant
5
61 – 12 – – – 73 –
Shatish Dasani
6
56 – 11 – – – 67 –
1. The Chairman took a 50% reduction along with the other Non-Executive Directors from April to June 2020 which partially offset the amount of additional fee awarded due to his
exceptional time commitment.
2. Ian Duncan retired as a NED on 31 January 2021.
3. Bruno Deschamps and Christian Rochat were appointed as NEDs on 10 July 2020. The fees paid to Bruno and Christian are not retained by them individually but paid to CD&R.
4. Simon King was appointed as a NED on 1 July 2020.
5. Kath Durrant was appointed as a NED on 1 January 2021.
6. Shatish Dasani was appointed as a NED on 1 February 2021 and his fees reflect remuneration earned from that date.
Annual report on remuneration
121SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 1215X_Governance_v73.indd 121 11/03/2022 10:2911/03/2022 10:29
2021 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 2021, which were based on underlying operating profit and net debt.
Performance condition (weighting) Actual Threshold Interim Maximum Outcome
CEO Actual
£’000
CFO Actual
£’000
Underlying operating profit (60%) £40.3m 25% 75% 100% 100%
£6 .18 m £16.36m £19.30m
Average net debt (20%) £35.0m 25% 50% 100% 50%
£52.0m £44.0m £36.0m
Strategic objectives (20%)
pay-out level 85% – 83%
Tot al
1
715 412
1. The Committee reviewed Health & Safety leadership and performance, and determined that there was no requirement to exercise its override discretions.
To be consistent with the basis that the targets were originally set, the estimated impact of the increased stock levels specifically acquired to address
the supply chain difficulties in the market was adjusted for. This impacted all employees receiving a bonus based on net debt and working capital
targets (net debt pre-adjusted of £51.85m). The Committee took a decision to apply downwards discretion to limit the impact of this adjustment to a
maximum of half of the opportunity based on this measure. One third of the bonus earned up to 100% of salary, and all of the bonus above this level
is being deferred into shares for three years, with an additional two year holding period applying.
Chief Executive Officer
CEO Bonusable Objectives Outcome
Organisational
leadership
A key part of the Return to Growth strategy has been the visible and energetic leadership of the CEO; creating belief and
momentum in what had become a quite demoralised business has been evidenced by significant shifts in employee
engagement survey responses where “Vision and leadership” improved by 22% vs 2020. In addition, more employees
wanted to participate in the employee engagement survey with a 75% participation rate in 2021. In an increasingly
decentralised business, the engagement of the next 120 leaders in the business has been key to creating momentum
and effective communication with colleagues at all levels. The recruitment of a high calibre Chief People Officer in Q4
2020 was also welcomed by the Committee.
Structure Germany and Benelux are operating companies with opportunities for improvement, and new MDs were recruited for
each business in H2 2020. The performance of these businesses has however been reflected in the CEO’s personal
assessment.
Health & Safety Health & Safety leadership has and remains a significant focus of the CEO, with new expectations set and significant new
resources put in place in each operating company. Progress has been made, yet there is further to go, again reflected in
the CEO’s personal assessment.
Customers The Group NPS scoring has maintained a rating of ‘favourable’, which in a year with intense supply challenges is positive.
Executive re-connections with suppliers have also progressed well.
Growth The CEO has worked hand in hand with each operating company MD to develop the next stage strategies, both organic
and inorganic, with renewed focus on sustainability and digital opportunities. The Board’s discussions on strategic
choices have been significantly elevated as a result.
Corporate development
and financing
The Committee noted the strong working relationship between CEO and CFO and the successful refinancing of the
business, with the cost of debt reduced and greater flexibility enabled – alongside an elevation in credit-rating.
The Committee evaluated the performance of the CEO against the above outcomes and awarded a bonus of 17.0% out of the 20% available for these
strategic objectives.
122 SIG Annual Report and Accounts 2021
5. Remuneration221 43
Directors’ Remuneration Report | Annual statement
5X_Governance_v73.indd 1225X_Governance_v73.indd 122 11/03/2022 10:2911/03/2022 10:29
Chief Financial Officer
CFO Bonusable Objectives Outcome
Leadership and
motivation
Significant improvement in employee engagement in the central Finance organisation. Strong relationship development
with operating company FDs and MDs.
Refinancing Successful and complex refinancing achieved with the issue of the Group’s first public bond. A very positive outcome,
increasing the financial stability and long-term flexibility of the Group. This included the further development, or
establishment, of relationships with various institutions, including rating agencies.
Capability and controls Significant focus on upgrading both the central finance team and working practices with operating companies. Control
procedures throughout the business have improved, and the external audit process continues to improve in both
effectiveness and efficiency.
Reporting Both operational and Board financial reporting have improved, and the roll-out of a new Group consolidation and
reporting system was a significant step forward.
Cost leadership Central cost saving programme executed with financial savings met.
The Committee evaluated the performance of the CFO against the above outcomes and awarded a bonus of 16.66% 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.
Restricted Share Plan awards vesting during 2021
No RSP awards have vested in the year. The Executive Directors have been granted RSP awards in 2020 and 2021. 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 and 2021 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 and 2021 RSP awards, the Committee’s views on the reasons for the movement, and wider business and individual
performance.
2021 Restricted Share Plan Awards (Audited)
Steve Francis and Ian Ashton were granted RSP awards of 100% of salary on 29 March 2021. 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 pence per share based on the closing share price of the previous trading day.
The normal vesting date of the awards will be 29 March 2024, 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.
Executive Director Date of grant
% of award for
minimum
performance
Shares
subject
to award
Face value at
date of award
Steve Francis 29 March 2021 100 1,405,384 548,100
Ian Ashton 29 March 2021 100 975,961 380,625
123SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 1235X_Governance_v73.indd 123 11/03/2022 10:2911/03/2022 10:29
Directors’ interests in SIG shares (Audited)
The interests of the Directors in office during the year ended 31 December 2021, and their families, in the ordinary shares of the Company at the dates
below were as follows:
Shares held Nil-cost options held
Unvested and
subject to
deferral
Shareholding
required
(% basic salary)
1
Current
shareholding
as a % of
basic salary
2
Requirement
met
2
Owned outright
or vested
Vested but
subject to
holding period
Vested
but not
exercised
Unvested
subject to
Vesting and
holding period
Steve Francis
3
815,769 – – 3,295,384 – 300 222 No
Ian Ashton
4
166,666 – – 2,306,089 – 300 147 No
Andrew Allner 238,800 – – – – – – –
Kath Durrant
5
10 0,774 – – – – – – –
Ian Duncan
6
Nil – – – – – – –
Gillian Kent Nil – – – – – – –
Alan Lovell 330,000 – – – – – – –
Bruno Deschamps Nil – – – – – – –
Simon King 166,666 – – – – – – –
Christian Rochat Nil – – – – – – –
Shatish Dasani
7
100,000 – – – – – – –
1. Executive Directors are expected to achieve target shareholdings within five years of appointment.
2. Based on SIG share price of 47.56p as at 31 December 2021. The post-tax value of the RSP awards granted in December 2020 and March 2021 has been included in the current
shareholding figure.
3. Steve Francis was appointed as CEO on 25 February 2020.
4. Ian Ashton was appointed as CFO on 1 July 2020.
5. Kath Durrant was appointed as NED on 1 January 2021.
6. Ian Duncan resigned as a NED on 31 January 2021.
7. Shatish Dasani was appointed as NED on 1 February 2021.
There have been no changes to shareholdings between 1 January 2022 and the date of this report.
No Directors exercised any share options during the year such that the aggregate gain on exercise was nil (2020: nil).
Total Shareholder Return (TSR)
The graph below shows the Company’s (TSR) performance (share price plus dividends paid) compared with the performance of the FTSE All Share
Support Services Index over the ten-year period to 31 December 2021. This index has been selected because the Company believes that the
constituent companies comprising the FTSE All Share Support Services Index are the most appropriate for this comparison as they are affected by
similar commercial and economic factors to SIG.
10 Year Company TSR Performance v FTSE All Share Industrial Support Services
Rebased TSR from 31 December 2011
SIG FTSE All Share Industrial Support Services
400
350
300
250
200
150
100
50
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
2021
369.6
72.0
124 SIG Annual Report and Accounts 2021
5. Remuneration221 43
Directors’ Remuneration Report | Annual statement
5X_Governance_v73.indd 1245X_Governance_v73.indd 124 11/03/2022 10:2911/03/2022 10:29
CEO pay in the last 10 years
The table below shows how pay for the CEO role has changed in the last 10 years.
Year
2012
£’000
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
Incumbent
Chris
Davies
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
Single figure of
Remuneration 1,024 1,031 987 968 765 581 100 150 794 669 688 258 850 1,315
% of max annual
bonus earned 54 50 60.5 57 0
3
n/a n/a n/a 70 0 0 0 57 87
% of max LTIP
awards vesting 0 0 n/a n/a 19.5 n/a n/a n/a n/a n/a 0 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
31December2013.
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.
Executive Director service contracts
Executive Directors have service agreements with an indefinite term, and which are terminable by either the Group or the Executive Director on six
months’ notice. The service agreements are available for inspection at the Company’s registered office.
Executive Director
Date of service
contract
Steve Francis 24 April 2020
Ian Ashton 1 July 2020
Non-Executive Directors
The Non-Executive Directors including the Chairman, do not have service contracts. The Company’s policy is that Non-Executive Directors are
appointed for specific terms of three years unless otherwise terminated earlier in accordance with the Articles of Association or by, and at the
discretion of, either party upon three months’ written notice. Non-Executive Director appointments are reviewed at the end of each three-year term.
Non-Executive Directors will normally be expected to serve two three-year terms, although the Board may invite them to serve for an additional
period. Non-Executive Directors’ letters of appointment are available to view at the Company’s registered office. Summary details of terms for
Non-Executive Directors are included below:
Non-Executive Director
Date of current letter of
appointment
Effective date of
appointment Expiry of current term
Andrew Allner 7 April 2020 1 November 2020 31 October 2023
Ian Duncan
1
7 April 2020 29 June 2020 N/A
Alan Lovell 7 March 2022 13 May 2021 12 May 2024
Gillian Kent 5 June 2019 1 July 2019 30 June 2022
Bruno Deschamps 10 July 2020 10 July 2020 9 July 2023
Simon King 22 May 2020 1 July 2020 30 June 2023
Christian Rochat 10 July 2020 10 July 2020 9 July 2023
Kath Durrant 12 December 2020 1 January 2021 31 December 2023
Shatish Dasani 27 January 2021 1 February 2021 31 January 2024
1. Ian Duncan resigned on 31 January 2021.
125SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 1255X_Governance_v73.indd 125 11/03/2022 10:2911/03/2022 10:29
Percentage change in Directors’ remuneration
The Directors are the only employees of SIG plc. The Committee monitors the year-on-year changes between the remuneration of each Director and
the average remuneration of the UK workforce. The year on year analysis for 2021 vs 2020 is not presented as the comparatives are not meaningful:
the Executive Directors joined the company during 2020 and did not serve a whole year in office during 2020.
CEO pay ratio
Financial Year Method Used
25th percentile
pay ratio
50th percentile
pay ratio
75th percentile
pay ratio
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
In determining the quartile figures, the hourly rates were annualised using the same number of contractual hours as the CEO. One UK employee with
the relevant annual salary was then chosen for each quartile and the single total remuneration figure was calculated for them to compare to the CEO.
For 2021, 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 2021 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
is published on our website (www.sigplc.com).
The Company 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.
2021 2020
CEO 25th 50th 75th CEO 25th 50th 75th
Basic salary 54 8,10 0 22,665 27,6 0 0 35,018 522,853 20,250 23,063 28,730
Benefits 24,455 126 153 194 20,419 111 63 157
Pension 27,405 1,700 1,656 2,626 34,801 1,215 619 1,724
Bonus Plan 715,271 200 100 5,253 375,000 0 143 1,15 3
Total Pay 1,315,231 24,691 29,509 43,091 953,073 21,576 24,898 30,994
CEO Pay for 2020 has been calculated for the period 1 January to 31 December based on the single total figure of remuneration table.
For the purpose of the calculations the following elements of pay were included in the single total figure of remuneration for the employee at each
quartile in the year to 31 December 2021:
• Annual basic salary
• Bonus earned in the year in question
• Employer Pension contribution
• Car/Car Allowance
• Private Medical Insurance value
• Group Life Assurance value
• Group Income Protection value
• Employer Share Incentive Plan contribution
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. In 2018 and 2019 the ratios were relatively
stable as a result of nil incentive outcomes. For 2020, the CEO was paid a bonus as it was part of the initial interim agreement on which the CEO was
appointed. In 2021 the CEO was paid a bonus in line with the scheme and treatment for all participants.
In future years we expect there to be significant volatility in this ratio over time and we believe that this will be caused by the following:
• Our CEO’s pay is made up of a higher proportion of incentive pay than that of our employees, in line with the expectations of our shareholders.
Success in executing the Return to Growth strategy will result in an increased level of bonus payments. Both the structure of remuneration and the
intention to reward success introduces a higher degree of variability in pay each year which affects the ratio.
126 SIG Annual Report and Accounts 2021
5. Remuneration221 43
Directors’ Remuneration Report | Annual statement
5X_Governance_v73.indd 1265X_Governance_v73.indd 126 11/03/2022 10:2911/03/2022 10:29
• We recognise that the ratio is driven by the different structure of the pay of our CEO versus that of our employees, as well as the make-up of our
workforce. This ratio varies between businesses even in the same sector. 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.
• Where the structure of remuneration is similar, for example for the ELT and the CEO, the ratio is much more stable over time.
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 2020 to the financial year ended 31 December 2021.
2021
£m
2020
£m % change
Distribution to shareholders – – –
Employee remuneration
1
303.2 267.4 13.4
1. Continuing operations employee remuneration.
The Company has declared that no final dividend would be paid for 2021 and no interim dividend was paid in 2021 (2020: nil).
Advisers 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
advisers, Korn Ferry, through a competitive tender process in 2021, replacing PricewaterhouseCoopers LLP (“PwC”). Korn Ferry attends meetings
ofthe Committee by invitation.
During the year, the Committee sought advice from PwC and later, Korn Ferry in relation to emerging market practices, especially in relation to the
impact of Covid-19 on executive remuneration, general matters related to remuneration and in relation to 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 adviser at a private meeting each year. It is satisfied that the
advice received during 2021 was independent, robust and professional advice.
The fees for the advice provided by PwC in 2021 were £7,850 (2020: £58,250). The fees were fixed on the basis of agreed projects. Other services
provided by PwC in the year included unrelated pensions, tax and mobility advice.
The fees for the advice provided by Korn Ferry in 2021 were £52,705 and were based on the time spent during the year. No other services were
provided by Korn Ferry during the year.
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 2020 Directors’ Remuneration Report at the AGM held on 13 May 2021 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 7 2 6 , 2 9 7,79 0 76.55 222,519,260 23.45 17, 9 3 9,7 5 0
To approve the New Remuneration Policy (as voted in 2020) 831,756,099 92.63 6 6,16 5,425 7. 37 23,295,204
Kath Durrant
Chair of the Remuneration Committee
10 March 2022
127SIG Annual Report and Accounts 2021
Governance Financials
Strategic report
5X_Governance_v73.indd 1275X_Governance_v73.indd 127 11/03/2022 10:2911/03/2022 10:29
The Directors are responsible for preparing the Annual Report and the
Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for
each financial year. Under that law the Directors are required to prepare
the Group Financial Statements in accordance with international
accounting standards, 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 10 March 2022 and is signed on its behalf by:
Steve Francis
Chief Executive Officer
10 March 2022
Ian Ashton
Chief Financial Officer
10 March 2022
Directors’ Responsibilities Statement
128 SIG Annual Report and Accounts 2021
Corporate Governance Report
5X_Governance_v73.indd 1285X_Governance_v73.indd 128 11/03/2022 10:2911/03/2022 10:29
Note
Underlying*
2021
£m
Other items**
2021
£m
Total
2021
£m
Underlying*
Restated
2020
£m
Other items**
Restated
2020
£m
Total
Restated
2020
£m
Continuing operations
Revenue 1 2,291.4 – 2,291.4 1,872.7 1.8 1,874.5
Cost of sales (1,689.3 ) – (1,689.3 ) (1,402.7 ) (1.3 ) (1,404.0 )
Gross profit 602.1 – 602.1 470.0 0.5 470.5
Other operating expenses 2 (560.7 ) (27.4 ) (588.1 ) (523.1 ) (107.4 ) (630.5 )
Operating profit/(loss) 3 41.4 (27.4 ) 14.0 (53.1 ) (106.9 ) (160.0 )
Finance income 5 0.7 – 0.7 0.7 – 0.7
Finance costs 5 (22.8 ) (7.8 ) (30.6 ) (23.7 ) (11.6 ) (35.3 )
Profit/(loss) before tax from continuing
operations 19.3 (35.2 ) (15.9 ) (76.1 ) (118.5 ) (194.6 )
Income tax (expense)/credit 6 (15. 6 ) 3.2 (12 .4 ) (10.7 ) 4.1 (6.6 )
Profit/(loss) after tax from
continuing operations 3 .7 (32 .0 ) (28 .3 ) (86.8 ) (114.4 ) (201.2 )
Discontinued operations
Profit after tax from discontinued operations 12 – – – – 69.7 69.7
Profit/(loss) after tax for the year 3 .7 (32 .0 ) (28 .3 ) (86.8 ) (44.7 ) (131.5 )
Attributable to:
Equity holders of the Company 3 .7 (32 .0 ) (28 .3 ) (86.8 ) (44.7 ) (131.5 )
Loss per share
From continuing operations:
Basic 8 (2.4 )p (23.1 )p
Diluted 8 (2.4 )p (23.1 )p
Total:
Basic 8 (2.4 )p (15.1 )p
Diluted 8 (2.4 )p (15.1 )p
* Underlying represents the results before Other items. See the Statement of significant accounting policies for further details.
** Other items have been disclosed separately in order to give an indication of the underlying earnings of the Group. Other items are defined in the Statement of significant
accounting policies on page 137 and further details are disclosed in Note 2.
The 2020 results have been restated as set out in the Statement of significant accounting policies.
The accompanying Statement of significant accounting policies and Notes to the consolidated financial statements are an integral part of this
Consolidated income statement.
129SIG Annual Report and Accounts 2021
Strategic report Governance Financials
Consolidated income statement
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1296X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 129 11/03/2022 16:50:4211/03/2022 16:50:42
Note
2021
£m
Restated
2020
£m
Loss after tax for the year (28 .3 ) (131.5 )
Items that will not subsequently be reclassified to the Consolidated income statement:
Remeasurement of defined benefit pension liability 31 9.1 (1.7 )
Deferred tax movement associated with remeasurement of defined benefit pension liability 24 0.1 0.3
Current tax movement associated with remeasurement of defined benefit pension liability 6 – 0.4
Items that may subsequently be reclassified to the Consolidated income statement:
Exchange difference on retranslation of foreign currency goodwill and intangibles (3.7 ) 5.1
Exchange difference on retranslation of foreign currency net investments (excluding goodwill
and intangibles) (10.7 ) 13.2
Exchange and fair value movements associated with borrowings and derivative financial instruments 8.6 (11.0 )
Tax credit on fair value movements arising on borrowings and derivative financial instruments – –
Exchange differences reclassified to the Consolidated income statement in respect of the disposal of
foreign operations – (5.9 )
Gains and losses on cash flow hedges 0.7 (0.5 )
Transfer to profit and loss on cash flow hedges (3.1 ) (0.7 )
(8 .2 ) 0.2
Other comprehensive income/(expense) 1.0 (0.8 )
Total comprehensive expense (27.3 ) (132.3 )
Attributable to:
Equity holders of the Company (27.3 ) (132.3 )
(27.3 ) (132.3 )
The 2020 results have been restated as set out in the Statement of significant accounting policies.
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.
130 SIG Annual Report and Accounts 2021
Financial statements
Consolidated statement of comprehensive income
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1306X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 130 11/03/2022 16:50:4211/03/2022 16:50:42
Note
2021
£m
Restated
2020
£m
Restated
1 January
2020
£m
Non-current assets
Property, plant and equipment 10 66.9 63.2 58.6
Right-of-use assets 25 230.9 229.6 255.2
Goodwill 13 120.1 128.8 159.0
Intangible assets 14 16.7 18.5 30.2
Lease receivables 25 2.9 3.6 4.4
Deferred tax assets 24 4.8 5.7 4.4
Derivative financial instruments 20 – 0.1 1.7
Current assets
Inventories 16 242.0 170.3 156.5
Lease receivables 25 0.8 0.7 0.8
Trade and other receivables 17 371.3 294.4 294.7
Current tax assets 17 – – 0.9
Derivative financial instruments 20 0.2 – 0.9
Cash at bank and on hand 20 145.1 235.3 110.0
Assets classified as held for sale – – 258.4
Total assets 1,201.7 1,150.2 1,335.7
Current liabilities
Trade and other payables 18 369.7 301.4 327.4
Lease liabilities 18 50.7 50.6 51.5
Interest-bearing loans and borrowings – – 275.1
Deferred consideration 18 1.1 0.5 –
Other financial liabilities 18 0.4 0.5 1.5
Derivative financial instruments 18 0.5 0.5 0.2
Current tax liabilities 18 4. 6 4.2 3.7
Provisions 23 12.9 10.5 6.7
Liabilities directly associated with assets classified as held for sale – – 115.7
Non-current liabilities
Lease liabilities 25 210.4 211.6 224.1
Interest-bearing loans and borrowings 19 249.6 212.2 –
Deferred consideration 20 0.7 0.4 –
Derivative financial instruments 20 – 0.4 1.9
Other financial liabilities 20 0.6 1.2 1.4
Other payables 3.8 3.5 1.0
Retirement benefit obligations 31 10.7 25.1 24.8
Provisions 23 21.3 25.7 18.6
Total liabilities 937.0 848.3 1,053.6
Net assets 264.7 301.9 282.1
Capital and reserves
Called up share capital 27 118.2 118.2 59.2
Share premium account 27 – 447.7 447.3
Treasury shares reserve (12.5 ) (0.2 ) –
Capital redemption reserve 0.3 0.3 0.3
Share option reserve 4.4 2.0 1.8
Hedging and translation reserves 2 .4 10.5 10.2
Cost of hedging reserve 0.1 0.2 0.3
Merger reserve 92.5 92.5 –
Retained profits/(losses) 59. 3 (369.3 ) (237.0 )
Attributable to equity holders of the Company 264.7 301.9 282.1
Total equity 264.7 301.9 282.1
The Consolidated balance sheets at 31 December 2020 and 1 January
2020 have been restated as set out in the Statement of significant
accounting policies.
The accompanying Statement of significant accounting policies
andNotes to the consolidated financial statements are an integral
part of this Consolidated balance sheet.
The Financial Statements were approved by the Board of Directors on
10 March 2022 and signed on its behalf by:
Steve Francis Ian Ashton
Director Director
Registered in England : 00998314
131SIG Annual Report and Accounts 2021
Strategic report Governance Financials
Consolidated balance sheet
as at 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1316X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 131 11/03/2022 16:50:4311/03/2022 16:50:43
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
profits/
(losses)
£m
Total
£m
At 1 January 2020 (restated) 59.2 447.3 – 0.3 1.8 10.2 0.3 – (237.0 ) 282.1
Loss after tax (restated) – – – – – – – – (131.5 ) (131.5 )
Other comprehensive income/
(expense) – – – – – 0.3 (0.1 ) – (1.0 ) (0.8 )
Total comprehensive income/
(expense) – – – – – 0.3 (0.1 ) – (132.5 ) (132.3 )
Issue of share capital 59.0 0.4 – – – – – 92.5 – 151.9
Transfer of unallocated treasury
shares – – (0.2 ) – – – – – 0.2 –
Credit to share option reserve – – – – 0.2 – – – – 0.2
At 31 December 2020 (restated) 118.2 447.7 (0.2 ) 0.3 2.0 10.5 0.2 92.5 (369.3 ) 301.9
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 ) – (19 .1 ) (27.3 )
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 – (447.7 ) – – – – – – 447.7 –
At 31 December 2021 118.2 – (12.5 ) 0.3 4.4 2 .4 0.1 92.5 59.3 264.7
Total equity at 1 January 2020 and 31 December 2020 has been restated as set out in the Statement of significant accounting policies.
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 Employee Benefit Trust (“the EBT”) to satisfy awards made under the Group’s share plans which
are not vested and beneficially owned by employees. Shares became unallocated during the prior year and were transferred to the treasury shares
reserve.
The share premium account was cancelled during the year through a capital reduction. See Note 27 for further details.
The merger reserve represents the premium on ordinary shares issued during the prior year through the use of a cash box structure. See Note 27 for
further details.
The accompanying Statement of significant accounting policies and Notes to the consolidated financial statements are an integral part of this
Consolidated statement of changes in equity.
132 SIG Annual Report and Accounts 2021
Financial statements
Consolidated statement of changes in equity
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1326X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 132 11/03/2022 16:50:4311/03/2022 16:50:43
Note
2021
£m
Restated
2020
£m
Net cash flow from operating activities
Cash generated from/(used in) operating activities 28 7.4 (50.5 )
Income tax paid (10.4 ) (9.7 )
Net cash used in operating activities (3.0 ) (60.2 )
Cash flows from investing activities
Finance income received 0.7 0.7
Purchase of property, plant and equipment and computer software (18.6 ) (13.3 )
Proceeds from sale of property, plant and equipment 2.7 5.6
Net cash flow on the purchase of businesses 15 (10.1 ) (0.8 )
Settlement of amounts payable for previous purchases of businesses 15 (0.5 ) –
Net cash flow arising on the sale of businesses 11 – 147.8
Net cash flow from investing activities (25.8 ) 140.0
Cash flows from financing activities
Finance costs paid
1
(36.3 ) (23.3 )
Repayment of lease liabilities (57.3 ) (54.8 )
Repayment of borrowings (200.3 ) (55.1 )
Proceeds from borrowings 251.5 –
Repayment of revolving credit facility (“RCF”)
2
Settlement of derivative financial instruments 0.8 (0.1 )
Acquisition of treasury shares (12.3 ) –
Net proceeds from equity raise 27 – 151.9
Net cash flow from financing activities (53.9 ) (11.4 )
(Decrease)/increase in cash and cash equivalents in the year 29 (82.7 ) 68.4
Cash and cash equivalents at beginning of the year
3
30 235.3 145.1
Effect of foreign exchange rate changes 30 (7.5 ) 21.8
Cash and cash equivalents at end of the year
3
30 145.1 235.3
1. Finance costs paid in the current year include a £12.9m make-whole payment in connection with the refinancing during the year (see Note 5).
2. As part of the changes to the debt facility agreements on 18 June 2020 (see Note 19), £70.0m drawn under the existing RCF was converted into a £70.0m term facility, with no
additional repayment or drawdown made.
3. Cash and cash equivalents comprise cash at bank and on hand of £145.1m (2020: £235.3m) less bank overdrafts of £nil (2020: £nil). Cash and cash equivalents at 1 January 2020
include £110.0m from continuing operations and £35.1m from businesses held for sale.
The 2020 results have been restated as set out in the Statement of significant accounting policies.
The accompanying Statement of significant accounting policies and Notes to the consolidated financial statements are an integral part of this
Consolidated cash flow statement.
133SIG Annual Report and Accounts 2021
Strategic report Governance Financials
Consolidated cash flow statement
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1336X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 133 11/03/2022 16:50:4311/03/2022 16:50:43
The significant accounting policies adopted in this Annual Report and Accounts for the year ended 31 December 2021 are set out below.
Basis of preparation
The Financial statements have been prepared under the historical cost convention except for derivative financial instruments which are stated at their
fair value. The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
The qualifying partnership, The SIG 2018 Scottish Limited Partnership, which is included in these consolidated financial statements, is entitled to
exemption from the requirements of Regulations 4 to 6 of Part 2 of The Partnerships (Accounts) Regulations 2008 in relation to preparation and audit
of annual financial statements of the partnership.
The 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.
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 2023 nor
the viability of the Group over the next three years.
The Financial statements have been prepared on a going concern basis as set out below.
Going concern
The Group closely monitors its funding position throughout the year, including monitoring compliance with covenants and available facilities to ensure
it has sufficient headroom to fund operations.
On 18 November 2021 the Group completed the restructuring of its debt arrangements, comprising the issue of €300m senior secured notes and a
new RCF of £50m. The existing private placement notes of £129.8m and £70m term loan were repaid, together with a £12.9m make-whole payment
on early settlement of the private placement notes. The Group now has committed facilities in place to November 2026 (senior secured notes) and
May 2026 for the RCF. The senior 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 2021.
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 2023.
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:
• a decline in market conditions resulting in lower than forecast sales;
• continued implementation of the Return to Growth strategy taking longer than anticipated to deliver forecast increases in revenue and profit;
• potential impact of material shortages on forecast sales; and
• further waves of the Covid-19 pandemic having an impact on trading.
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
page 65.
The Directors have considered the impact of climate-related matters on the going concern assessment and it is not expected to have a significant
impact on the Group’s going concern assessment to 31 March 2023.
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 2023 and the Directors therefore consider it appropriate to adopt the going concern basis in preparing the 2021 financial
statements.
134 SIG Annual Report and Accounts 2021
Financial statements
Statement of significant accounting policies
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1346X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 134 11/03/2022 16:50:4311/03/2022 16:50:43
New standards, interpretations and amendments adopted
The following amendments and interpretations apply for the first time in 2021, but have not had a material impact on the Financial Statements of
theGroup:
• Amendments to IFRS 4, IFRS 7, IFRS 9, IFRS 16 and IAS 39 Interest Rate Benchmark Reform – Phase 2
• Amendments to IFRS 16 Covid-19 Related Rent Concessions beyond 30 June 2021
New standards, amendments and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2021 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.
Change in accounting policy – Software as a Service (“SaaS”) arrangements
Following the IFRS Interpretations Committee (IFRIC) agenda decision published in April 2021, the Group has reviewed its accounting policy regarding
the configuration and customisation costs incurred in implementing SaaS arrangements.
SaaS arrangements are arrangements in which the Group does not currently control the underlying software used in the arrangement.
The Group’s revised policy 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.
Previously some configuration and customisation costs relating to SaaS arrangements which did not result in a separately identifiable software
intangible assets had been capitalised.
The change in accounting policy has been retrospectively applied, resulting in a restatement to previously reported numbers. The impact on the
Consolidated balance sheet and equity is a reduction in intangible assets and retained profits/(losses) of £12.1m at 1 January 2020 and £4.4m at
31December 2020. The impact on the Consolidated income statement is as follows:
Increase/(decrease) in profit/(loss)
31 December
2020
£m
Other underlying operating expenses (0.4)
Amortisation of computer software 0.6
Underlying operating loss 0.2
Impairment charges 14.6
Cloud computing configuration and customisation costs ( 7.1)
Other items 7.5
Operating loss 7.7
Loss before and after tax from continuing operations 7.7
A £14.6m impairment was previously recognised in 2020 and included within Other items in relation to the SAP 1HANA and related project
implementation costs. The impact of the restatement is that £9.7m of this is now included in costs expensed in the previous year (so is reflected
within the £12.1m reduction in intangibles at 1 January 2020) and £4.9m is included within cloud computing configuration and customisation costs
within Other items in 2020. A further £2.2m other costs relating to significant strategic projects are also now included within Other items in 2020,
amounting to the total £7.1m shown above.
The impact on basic and diluted loss per share is an increase in basic and diluted loss per share from continuing operations of 0.9p per share and an
increase in basic and diluted total loss per share of 0.9p per share.
The impact on the Consolidated cash flow statement is an increase in the net cash inflow from investing activities of £7.5m (due to a reduction in the
purchase of property, plant and equipment and computer software) and a decrease in the net cash used in operating activities of £7.5m, with no
change in the overall increase in cash and cash equivalents in the year.
135SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1356X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 135 11/03/2022 16:50:4311/03/2022 16:50:43
Disclosure restatements
Disaggregation of revenue:
Heating, ventilation and air conditioning is no longer considered to be a distinct product type requiring separate disclosure in Note 1(a) to the prior
year Consolidated Financial Statements. The prior year comparatives have been restated to present revenue by product type on a consistent basis
with the current year, with £6.9m of revenue previously shown as heating, ventilation and air conditioning combined within the Interiors product type.
This does not impact any of the primary statements or other notes to the financial statements.
Cost of inventories recognised as an expense:
During the preparation of the 2021 Annual Report and Accounts, an error was identified in the comparative amount disclosed for the cost of
inventories recognised as an expense in Note 3 to the consolidated financial statements as supplier rebates, discounts received and intercompany
amounts were not correctly reflected in the calculation. This is corrected as a restatement of the previously reported disclosure, with cost of
inventories recognised as an expense reduced from £1,888.2m in 2020 to £1,395.2m. This 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 is not reversed in a subsequent period.
On disposal of a subsidiary, the attributable amount of remaining goodwill relating to the entity disposed of is included in the determination of any
profit or loss on disposal.
Goodwill recorded in foreign currencies is retranslated at each period end. Any movements in the carrying value of goodwill as a result of foreign
exchange rate movements are recognised in the Consolidated statement of comprehensive income.
Any excess of the fair value of net assets over consideration arising on an acquisition is recognised immediately in the Consolidated
incomestatement.
136 SIG Annual Report and Accounts 2021
Financial statements
Financial statements
Statement of significant accounting policies
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1366X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 136 11/03/2022 16:50:4311/03/2022 16:50:43
Non-current assets (or disposal groups) held for sale and discontinued operations
Non-current assets (or disposal groups) classified as held for sale are measured at the lower of carrying amount and fair values less costs to sell.
Assets and liabilities classified as held for sale are presented separately as current items in the Consolidated balance sheet.
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered through a sale transaction rather
thanthrough continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available
forimmediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as
acompleted sale within one year from the date of classification.
A disposal group qualifies as a discontinued operation if it is a component of an entity that has either been disposed of, or is classified as held for
sale, and:
• represents a separate major line of business or geographical area of operations;
• is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations; or
• is a subsidiary acquired exclusively with a view to resale.
Discontinued operations are excluded from the results of continuing operations and are presented as a single amount of profit or loss after tax from
discontinued operations in the income statement. All other notes to the financial statements include amounts for continuing operations, unless
indicated otherwise. The Air Handling business, which was sold in January 2020, met the criteria above as it was a separate major line of business
of the Group and was therefore classified as a discontinued operation in the prior year. Additional disclosures are provided in Note 12.
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
thatdate.
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 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.
137SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1376X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 137 11/03/2022 16:50:4311/03/2022 16:50:43
Consolidated income statement disclosure continued
• 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, 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 31 December 2021 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 costsare therefore recorded as
Other items in order to provide a better understanding of the ongoing financial performance of the Group. Carefulconsideration is applied by
management in assessing whether these costs relate to fundamental restructuring and changing the structureand operating model of the business
as opposed to costs incurred in the normal course of business.
• Investment in omnichannel retailing
Costs incurred in the prior year in relation to the Group’s investment in developing an omnichannel retailing platform were included within Other
items as they were significant in size and do not relate to the ongoing trading activities of the Group.
• Costs associated with refinancing
Costs associated with the refinancing and changes to debt facility agreements during the 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. This includes the
make-whole payment in 2021, the loss on modification of the private placement notes in 2020 and subsequent release in 2021 and the write-off of
arrangement fees in relation to the previous arrangements which have been extinguished, which are included within non-underlying finance costs.
• Cloud computing customisation and configuration costs
Costs incurred in relation to the implementation of 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.
• 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.
138 SIG Annual Report and Accounts 2021
Financial statements
Statement of significant accounting policies
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1386X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 138 11/03/2022 16:50:4311/03/2022 16:50:43
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
varyacross the different businesses but generally range from 8 to 60 days from end of month. The amount of revenue recognised is impacted
bythefollowing:
Volume rebates
The Group provides retrospective volume rebates to certain customers, which give rise to variable consideration.
The Group estimates the expected volume rebates using an expected value approach based on expected volumes and thresholds in the contracts.
The Group then applies the constraint regarding variable consideration and revenue is only recognised to the extent that it is highly probable that a
significant reversal will not occur. Expected volume rebates due to customers are recognised as a reduction to trade receivables.
Early settlement discounts
Early settlement discounts are estimated using the expected value approach based on past experience and are recognised at the time of recognising
the revenue, subject to the constraint regarding variable consideration that it is highly probable that a change in estimate would not result in a
significant reversal of the cumulative revenue recognised.
b) Construction contracts
The Group has the following revenue streams which fall under the category of “construction contracts”:
i) Contracts for provision of industrial services
The Group’s business in Ireland provides industrial painting, coating and repair services. Revenue from these contracts is recognised over time, as
the entity’s performance enhances a customer-controlled asset, using an output method to measure progress towards completion, based on agreed
rates and/or valuation schedules agreed with the customer which confirm the amounts invoiced each month, depending on individual contract terms.
Any earned consideration that is conditional is recorded as a contract asset. A contract asset becomes a receivable when receipt is conditional only
on the passage of time. Therefore, revenue recognised from construction contracts described above which has not yet been invoiced is recognised
as a contract asset, which is shown as a separate line item on the Consolidated balance sheet rather than as part of trade and other receivables (£nil
in 2021 and £nil in 2020). Invoices are raised as the contract progresses based on agreed milestones, rates or valuation schedules depending on the
terms of individual contracts, with subsequent payment in accordance with agreed payment terms.
c) Presentation and disclosure requirements
The Group has disaggregated revenue recognised from contracts with customers into categories that depict how the nature, amount, timing and
uncertainty of revenue and cash flows are affected by economic factors. The Group has also disclosed information about the relationship between
the disclosure of disaggregated revenue and the revenue information disclosed for each reportable segment. Refer to Note 1 for the disclosure on
disaggregated revenue.
Supplier rebates
Supplier rebate income is significant to the Group’s results, with a substantial proportion of purchases covered by rebate agreements.
Some supplier rebate agreements are non-coterminous with the Group’s financial year, and firm confirmation of amounts due may not be received
until after the balance sheet date.
Where the Group relies on estimates, these are made with reference to contracts or other agreements, management forecasts and detailed
operational workbooks. Supplier rebate income estimates are regularly reviewed by senior management.
Outstanding amounts at the balance sheet date are included in trade payables when the Group has the right to offset against amounts owing to the
supplier and therefore settles on a net basis, in line with IAS 32 criteria. Where the supplier rebates are not netted off the amounts owing to that
supplier, the outstanding amount is included within prepayments and accrued income. The carrying value of inventory is reduced by the associated
amount where the inventory has yet to be sold at the balance sheet date.
Operating profit
Operating profit is stated after charging distribution costs, selling and marketing costs and administrative expenses, but before finance income and
finance costs.
139SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1396X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 139 11/03/2022 16:50:4311/03/2022 16:50:43
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
aresult 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
ofthe 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. TheEBT 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.
140 SIG Annual Report and Accounts 2021
Financial statements
Statement of significant accounting policies
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1406X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 140 11/03/2022 16:50:4311/03/2022 16:50:43
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 years
Non-compete contracts Life of the contract 3 years
Computer software Useful life of the software 3-10 years
Assets in the course of construction are carried at cost, with amortisation commencing once the assets are ready for their intended use.
Property, plant and equipment
Property, plant and equipment is shown at original cost to the Group less accumulated depreciation and any provision for impairment.
Depreciation is provided at rates calculated to write off the cost less the estimated residual value of property, plant and equipment on a straight-line
basis over their estimated useful lives as follows:
Current estimate of useful life
Freehold buildings 50 years
Leasehold properties and improvements Period of lease (3 to 25 years)
Plant and machinery (includingmotor vehicles) 3-8 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.
141SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1416X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 141 11/03/2022 16:50:4311/03/2022 16:50:43
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
recognised and depreciated over the lease term. The lease payments are discounted using the lessee’s incremental borrowing rate.
Where a lease liability relates to an onerous lease contract the right-of-use asset is assessed for impairment. Payments due under the lease continue
to be included in the lease liability, therefore a separate provision is no longer required. The lease liability is also remeasured upon the occurrence of
certain events, which is generally also recognised as an adjustment to the right-of-use asset. Provisions for short-term onerous lease contracts
continue to be recognised.
i) Definition of a lease
A lease is a contract (i.e. an agreement between two or more parties that creates enforceable rights and obligations), or part of a contract, that
conveys the right to control the use of an identified asset for a period of time in exchange for consideration. It is determined whether a contract is a
lease or contains a lease at the inception of the contract.
Under IFRS 16, an identified asset can be either implicitly or explicitly specified in a contract.
ii) Lease term
In accordance with IFRS 16, the lease term is defined as the non-cancellable period of the lease, together with:
• 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 added to the right-of-use asset on inception of the lease. The liability
continues to be recorded as a separate provision on the balance sheet (i.e. it is not included in the IFRS 16 lease liability).
v) Exemptions
The Group has certain assets with lease terms of 12 months or less and leases of equipment with low value. The Group applies the “short-term lease”
and “lease of low-value assets” recognition exemptions for these leases.
The Group has considered the amendments within the Covid-19-Related Rent Concessions (Amendment to IFRS 16) Standard allowing companies
with rent concessions meeting the criteria in the amendment to choose to take advantage of the practical expedient not to assess whether a rent
concession is a lease modification as all of the following conditions were met:
• the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the
lease immediately preceding the change;
• any reduction in lease payments affects only payments due on or before 30 June 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 income statement from Covid-19 related rent concessions during the year.
142 SIG Annual Report and Accounts 2021
Financial statements
Statement of significant accounting policies
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1426X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 142 11/03/2022 16:50:4311/03/2022 16:50:43
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.
Cash held but not available for use by the Group is disclosed as restricted cash within Note 29.
Lease payments are presented as follows in the Consolidated cash flow statement:
• short term lease payments and payments for leases of low-value assets that are not included in the measurement of the lease liabilities are
presented within cash flows from operating activities;
• payments for the interest element of recognised lease liabilities are included in “Finance costs paid” within cash flows from financing activities; and
• payments for the principal element of recognised lease liabilities are presented within cash flows from financing activities.
Cash flows in relation to the settlement of amounts payable for previous purchases of businesses related to consideration dependent on vendors
remaining within the business are classified as an operating cash flow. Cash flows in relation to contingent or deferred consideration not dependent
on vendors remaining within the business are classified as a cash flow from investing activities.
Financial assets
Financial assets are classified as either financial assets subsequently measured at amortised cost, fair value through profit and loss (“FVPL”) or fair
value through other comprehensive income (“FVOCI”).
The classification at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for
managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the
practical expedient, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or
loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical
expedient are measured at the transaction price determined under IFRS 15.
The Group measures financial assets at amortised cost if both the following conditions are met:
• the financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and
• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the
principal amount outstanding.
The Group’s financial assets are all measured at amortised cost, except for derivative financial instruments.
Financial assets at amortised cost are subsequently measured using the effective interest method and are subject to impairment. Gains and losses
are recognised in profit or loss when the asset is derecognised, modified or impaired. The Group’s financial assets include trade receivables, deferred
consideration and cash and cash equivalents.
Impairment of financial assets
The Group recognises an allowance for expected credit losses (“ECLs”) for all debt instruments held at amortised cost. ECLs are based on the
difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive,
discounted at an approximation of the original effective interest rate. For trade receivables and contract assets, the Group applies the standard’s
simplified approach and calculates ECLs based on lifetime expected credit losses. The Group has established a provision matrix that is based on the
Group’s historical credit loss experience, adjusted for forward looking factors specific to the debtors and economic environment.
143SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1436X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 143 11/03/2022 16:50:4311/03/2022 16:50:43
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed
from the Group’s consolidated statement of financial position) when:
• the rights to receive cash flows from the asset have expired; or
• the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without
material delay to a third party under a “pass-through” arrangement; and either (a) the Group has transferred substantially all the risks and rewards
ofthe asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset but has transferred control
ofthe 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
12months. 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.
144 SIG Annual Report and Accounts 2021
Financial statements
Statement of significant accounting policies
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1446X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 144 11/03/2022 16:50:4311/03/2022 16:50:43
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 incomeand 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
isrecognised 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.
145SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1456X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 145 11/03/2022 16:50:4311/03/2022 16:50:43
Provisions continued
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 Financial statements until they
have been approved by the Shareholders at the Annual General Meeting.
Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied
with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it
is intended to compensate, are expensed. The Group considered that the Coronavirus Job Retention Scheme in the UK and similar schemes in
Ireland, France and Benelux in relation to Covid-19 during 2020 met the definition of government grants in accordance with IAS 20 “Accounting for
government grants and disclosure of government assistance”. Income received is netted off the related staff costs in the relevant period.
Segmental reporting
In accordance with IFRS 8 “Operating Segments”, the Group identifies its reportable segments based on the components of the business on which
financial information is regularly reviewed by the Group’s Chief Operating Decision Maker (“CODM”) to assess performance and make decisions
about how resources are allocated. For SIG, the CODM is considered to be the Executive Leadership Team.
There are no changes to the reported operating segments from those reported in the 2020 Annual Report and Accounts, but the Germany and
Benelux segments are no longer grouped together, reflecting the current leadership structure and the way in which information is reported and
reviewed by the CODM. The “Distribution” business area is now also referred to as “Interiors”, hence UK Distribution and France Distribution are now
referred to as UK Interiors and France Interiors.
146 SIG Annual Report and Accounts 2021
Financial statements
Statement of significant accounting policies
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1466X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 146 11/03/2022 16:50:4311/03/2022 16:50:43
In the application of the Group’s accounting policies, which are described on pages 134 to 146, 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
asignificant effect on the amounts recognised in the Financial statements. The judgements involving estimations are dealt with separately below.
Classification of Other items in the Consolidated income statement
As described in the Statement of significant accounting policies, certain items are presented in the separate column of the Consolidated income
statement entitled Other items where they are significant in size or nature, and either they do not form part of the trading activities of the Group or
their separate presentation enhances understanding of the financial performance of the Group. Operating results from businesses identified as
non-core (see Note 11 of the Financial Statements) do not form part of the ongoing trading activities of the Group and are therefore also recorded
separately in Other items in order to enhance the understanding of the ongoing financial performance of the Group. The nature and amounts of the
items included in Other items, together with the overall impact on the results for the year, is disclosed in Note 2 of the Financial Statements.
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 losses can be utilised after consideration of available taxable temporary differences. The Group has £77.9m (2020: £57.0m) of potential
deferred tax assets relating mainly to cumulative UK tax losses and other deductible temporary differences which are currently unrecognised as there is
not considered to be sufficient convincing evidence at 31 December 2021 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 2021 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 £77.9m. Further details are disclosed in Note 24.
Key sources of estimation uncertainty
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 £261.4m from continuing operations for the year ended 31 December 2021 (2020: £198.5m). At 31 December 2021
trade payables is presented net of £29.8m (2020: £29.9m) 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 £58.2m (2020: £36.7m) due in relation to supplier rebates where there is no right
to offset against trade payable balances. The majority of these balances relate to agreements which are coterminous with the financial year end and
therefore this reduces the level of estimation involved. Based on experience in the current year, the amount received is not expected to vary from the
amount recorded by more than £1.0m (2020: £1.0m)
Post-employment benefits
The Group operates four defined benefit pension schemes. All post-employment benefits associated with these schemes have been accounted for
inaccordance with IAS 19 “Employee Benefits” (“IAS 19”). 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
wereto be increased/decreased by 0.1%, this would decrease/increase the Group’s gross pension scheme deficit by £2.6m as disclosed in Note 31.
At31December 2021 the Group’s retirement benefit obligations were £10.7m (2020: £25.1m).
147SIG Annual Report and Accounts 2021
Strategic report Governance Financials
Financial statements
Critical accounting judgements and
key sources of estimation uncertainty
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1476X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 147 11/03/2022 16:50:4411/03/2022 16:50:44
Key sources of estimation uncertainty continued
Impairment of goodwill
The Group tests goodwill annually for impairment, or more frequently if there are indications that an impairment may be required. Impairments of
goodwill and other non-current assets were recognised in the UK business in 2020 and in Benelux in 2021.
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 (1.5%-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 13.
Impairments are allocated initially against the value of any goodwill and intangible assets held within a CGU, with any remaining impairment applied to
property, plant and equipment on a pro rata basis.
The carrying amount of relevant non-current assets at 31 December 2021 is £434.6m (2020 restated: £440.1m) including right-of-use assets
recognised in accordance with IFRS 16. The most recent results of the impairment review process are disclosed in Note 13. An impairment charge of
£9.9m has been recognised in relation to the Benelux CGU. The carrying value of non-current assets associated with all the other Group’s CGU’s is
considered supportable at 31 December 2021. 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 £120.1m. Sensitivities are disclosed in Note 13. These indicate reasonably possible scenarios
which could lead to further impairment.
Provisions against receivables
At 31 December 2021 the Group has recognised trade receivables with a carrying value of £287.7m (2020: £232.7m). The Group recognises an
allowance for 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
2021. The total allowance for ECLs recorded at 31 December 2021 is £16.1m (2020: £15.3m). The bad debt to sales ratio of the Group has varied by
up to 0.1% over recent periods, therefore this gives an indication that the bad debt experience could vary by c£2m. Further detail on trade receivables
and the allowance for expected credit losses recognised is disclosed in Note 17.
Dilapidations provisions
The Group has a significant number of leasehold properties with contractual obligations to reinstate the properties to their original state of repair at
the end of the lease contract. The Group has recognised a provision of £22.0m at 31 December 2021 (2020: £22.1m) in relation to this obligation (see
Note 23). The total provision includes both the estimated cost of rectifying or reinstating leasehold modifications and improvements carried out, which
is recognised at the inception of the lease with a corresponding asset recognised in fixed assets and depreciated over the term of the lease, together
with the estimated cost of rectifying general wear and tear which is recognised as incurred over the life of the lease. Estimates are based on a
combination of a sample of assessments by third party independent property surveyors, internal assessments by the Group’s property experts and
previous settlement history. Whilst the Directors consider the estimates to be reasonable based on latest available information, actual amounts
payable could be different to the amount provided depending on specific circumstances of individual properties and counterparties at the expiry of
each lease contract. The amount payable is not expected to be materially different to the amount provided in the following year but there could be a
material adjustment over a longer timescale. The provision is reassessed each year on the basis of latest information, which could also result in a
change in the value of the provision year on year of up to c.10% based on past experience.
Leases – estimating the incremental borrowing rate
The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (“IBR”) to measure lease
liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term and with a similar security, the funds necessary to
obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore requires estimation when no observable
rates are available, such as for subsidiaries that do not enter into financing transactions. The Group estimates the IBR using observable inputs, such as
market interest rates, when available and is required to make certain entity-specific estimates, such as the subsidiary’s stand-alone credit rating.
148 SIG Annual Report and Accounts 2021
Financial statements
Critical accounting judgements and
key sources of estimation uncertainty
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1486X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 148 11/03/2022 16:50:4411/03/2022 16:50:44
1. Revenue and segmental information
Revenue
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 – 507.4 195.3 – 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^ 3.4 0.6 4.0 0.1 11.6 11.7 – – 0.1 – (15.8) –
Total underlying 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
Revenue attributable to
businesses identified as
non-core – – – – – – – – – – – –
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
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
^ Inter-segment revenue is charged at the prevailing market rates.
2020 (Restated)
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 3 57.4 – 357.4 168.1 – 168.1 370.7 91.6 46.3 149.5 – 1,18 3.6
Exteriors – 310.1 310.1 – 344.8 344.8 – – 34.2 – – 6 89.1
Inter-segment revenue^ 1.5 0.5 2.0 0.9 7.6 8.5 0.1 0.1 0.1 – (10.8) –
Total underlying revenue 358.9 310.6 669.5 169.0 352.4 521.4 370.8 91.7 80.6 149.5 (10.8) 1,872.7
Revenue attributable to
businesses identified as
non-core – – – – 1.8 1.8 – – – – – 1.8
Total 358.9 310.6 669.5 169.0 354.2 523.2 370.8 91.7 80.6 149.5 (10.8) 1,874.5
Nature and timing of
revenue
Goods for resale (recognised
at point in time) 358.9 310.6 669.5 169.0 354.2 523.2 370.8 91.7 75.2 149.5 (10.8) 1,869.1
Construction contracts
(recognised over time) – – – – – – – – 5.4 – – 5.4
Total 358.9 310.6 669.5 169.0 354.2 523.2 370.8 91.7 80.6 149.5 (10.8) 1,874.5
^ Inter-segment revenue is charged at the prevailing market rates.
The 2020 results have been restated to the include heating, ventilation and air conditioning product type within Interiors. See the Statement of
significant accounting policies.
149SIG Annual Report and Accounts 2021
Strategic report Governance Financials
Notes to the consolidated financial statements
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1496X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 149 11/03/2022 16:50:4411/03/2022 16:50:44
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
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 revenue 507.4 422.2 929.6 195.3 406.0 601.3 393.2 92.4 88.2 186.7 – 2,291.4
Revenue attributable to
businesses identified as
non-core – – – – – – – – – – – –
Inter-segment revenue^ 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* (5.4)
Operating profit 14.0
Net finance costs before
Otheritems (22.1)
Non-underlying finance costs (7.8)
Loss before tax (15.9)
Income tax expense (12.4)
Loss for the year (28.3)
^ Inter-segment revenue is charged at the prevailing market rates.
* 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.
150 SIG Annual Report and Accounts 2021
Financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1506X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 150 11/03/2022 16:50:4411/03/2022 16:50:44
2020 (Restated)
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 revenue 3 57.4 310.1 6 67. 5 16 8 .1 344.8 512.9 370.7 91.6 80.5 149.5 – 1,872.7
Revenue attributable to
businesses identified as
non-core – – – – 1.8 1.8 – – – – – 1.8
Inter-segment revenue^ 1.5 0.5 2.0 0.9 7.6 8.5 0.1 0.1 0.1 – (10.8) –
Total revenue 358.9 310.6 669.5 169.0 354.2 523.2 370.8 91.7 80.6 149.5 (10.8) 1,874.5
Segment result before
Other items (45.3) ( 7. 3 ) (52.6) 7.1 8.3 15.4 0.4 2.5 0.8 2.0 – (31.5)
Amortisation of acquired
intangibles (0.9) (4.3) (5.2) – (0.4) (0.4) – – – – – (5.6)
Impairment charges (49.7) (11.8) (61.5) – – – – – – – – (61.5)
Acquisition costs – (0.2) (0.2) – – – – – – – – (0.2)
Profits and losses on agreed
sale or closure of non-core
businesses (Note 11) (0.3) – (0.3) – (0.9) (0.9) – – – – – (1.2)
Net operating losses
attributable to businesses
identified as non-core
(Note 11) – – – – (0.3) (0.3) – – – – – (0.3)
Onerous contract costs (1.0) (1.0) – – – – – – – – (1.0)
Net restructuring costs (4.0) (1.7) (5.7) – (0.1) (0.1) (0.5) (0.4) – – – (6.7)
Cloud computing
customisation and
configuration costs (1.5) (0.9) (2.4) – – – – – – – – (2.4)
Other specific items (0.1) – (0.1) – 0.1 0.1 0.2 – – – – 0.2
Segment operating
(loss)/profit (102.8) (26.2) (129.0) 7.1 6.7 13.8 0.1 2.1 0.8 2.0 – (110.2)
Parent Company costs (21.6)
Parent Company Other items* (28.2)
Operating loss (160.0)
Net finance costs before
Other items (23.0)
Non-underlying finance costs (11.6)
Loss before tax and
discontinued operations (194.6)
Income tax expense (6.6)
Profit from discontinued
operations 69.7
Loss for the year (131.5)
^ Inter-segment revenue is charged at the prevailing market rates.
* Parent company Other items include investment in omnichannel retailing £4.2m, costs associated with refinancing £7.4m, onerous contract costs £12.2m, cloud computing
customisation and configuration costs £4.7m and other specific items £1.6m, offset by profit on agreed sale or closure of non-core businesses of £1.9m. See Note 2 for further
details.
The 2020 results have been restated as a result of the change in accounting policy relating to configuration and customisation costs in cloud
computing arrangements. See the Statement of significant accounting policies.
151SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1516X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 151 11/03/2022 16:50:4411/03/2022 16:50:44
1. Revenue and segmental information continued
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 69.5 208.0 277.5 136.1 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 937.0
2020 (restated)
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 150.6 241.0 391.6 67.6 210.6 278.2 138.1 48.7 52.6 59.5 968.7
Unallocated assets:
Right-of-use assets 1.4
Property, plant and equipment 0.3
Derivative financial instruments 0.1
Cash and cash equivalents 174.9
Other assets 4.8
Consolidated total assets 1,150.2
Liabilities
Segment liabilities 188.3 112.1 300.4 48.8 104.9 153.7 79.5 9.6 31.9 28.3 603.4
Unallocated liabilities:
Interest-bearing loans and borrowings 212.2
Derivative financial instruments 0.9
Other liabilities 31.8
Consolidated total liabilities 848.3
The 2020 balance sheet has been restated as set out in the Statement of significant accounting policies.
152 SIG Annual Report and Accounts 2021
Financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1526X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 152 11/03/2022 16:50:4411/03/2022 16:50:44
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
2020 (restated)
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 4.4 3.9 8.3 0.3 2.4 2.7 0.9 0.7 0.4 0.2 0.1 13.3
Computer software 0.2 0.1 0.3 – – – 0.2 – 0.3 – 0.4 1.2
Goodwill and intangible assets
acquired – 1.8 1.8 – – – – – – – – 1.8
Non-cash expenditure:
Depreciation of fixed assets 3.3 2.5 5.8 0.6 1.5 2.1 1.7 0.6 0.5 0.4 0.1 11.2
Depreciation of right-of-use
assets 15.2 8.0 23.2 5.1 8.6 13.7 12.9 1.6 1.7 3.2 0.3 56.6
Impairment of right-of-use assets 10.2 – 10.2 – – – – – – – – 10.2
Impairment of property, plant
and equipment and computer
software^ 4.0 – 4.0 – – – – – – – – 4.0
Amortisation of acquired
intangibles and computer
software^ 4.1 4.7 8.8 – 0.4 0.4 – – 0.2 0.1 0.9 10.4
Impairment of goodwill and
intangibles (excluding computer
software) 35.5 11.8 47. 3 – – – – – – – – 47.3
^ Restated due to the change in accounting policy in relation to customisation and configuration costs in cloud computing arrangements. See the Statement of significant
accounting policies for further details.
153SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1536X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 153 11/03/2022 16:50:4411/03/2022 16:50:44
1. Revenue and segmental information continued
b) Geographic information
The Group’s non-current operating assets (including property, plant and equipment, right-of-use assets, goodwill and intangible assets but excluding
lease receivables, deferred tax and derivative financial instruments) by geographical location are as follows:
Country
2021
£m
Restated
2020
£m
United Kingdom 228.7 217.6
Ireland 13.1 14.6
France 108.3 113.4
Germany 49.8 59.5
Poland 12.0 13.4
Benelux 22.7 21.6
Total 434.6 440.1
2. Other operating expenses
a) Analysis of other operating expenses
2021 2020 (restated)
Before Other
items
£m
Other items
£m
Total
£m
Before Other
items
£m
Other items
£m
Total
£m
Other operating expenses:
Distribution costs 282.2 3.7 285.9 261.2 8.0 269.2
Selling and marketing costs 158.0 1.0 159.0 138.8 1.4 140.2
Management, administrative and central costs 120.5 22.7 143.2 123.3 98.2 221.5
Property profits – – – (0.2) (0.2) (0.4)
Total 560.7 27.4 58 8.1 523.1 107.4 630.5
154 SIG Annual Report and Accounts 2021
Financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1546X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 154 11/03/2022 16:50:4411/03/2022 16:50:44
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):
2021 2020 (restated)
Other items
£m
Tax impact
£m
Tax impact
%
Other items
£m
Tax impact
£m
Tax impact
%
Amortisation of acquired intangibles (Note 14) (4.7) 0.2 4.3% (5.6) 1.1 19.6%
Impairment charges
1
(10.2) – – (61.5) – –
Profits and losses on agreed sale or closure of non-core
businesses (Note 11) – – – 0.6 – –
Net operating losses attributable to businesses identified as
non-core (Note 11) – – – (0.3) – –
Net restructuring costs
2
(3.7) 0.5 13.5% (6.7) 1.0 14.9%
Costs related to acquisitions (Note 15) (1.5) – – (0.2) – –
Investment in omnichannel retailing – – – (4.2) – –
Costs associated with refinancing
3
(2.4) 0.5 20.8% ( 7.4) 1.4 18.9%
Onerous contract costs
4
(2.0) – – (13.2) 0.3 2.3%
Cloud computing configuration and customisation costs
5
(3.3) 0.5 15.2% ( 7.1) – –
Other specific items
6
0.4 – – (1.3) 0.2 15.4%
Impact on operating profit/(loss) (27.4) 1.7 6.2% (106.9) 4.0 3.7%
Non-underlying finance costs
7
(7.8) 1.5 19.2% (11.6) 0.1 0.9%
Impact on profit/(loss) before tax (35.2) 3.2 9.1% (118.5) 4.1 3.5%
1. Impairment charges comprises £9.9m relating to goodwill (see Note 13) and £0.3m relating to additional impairment of an investment property (Note 10). Impairment charges in
the prior year comprised £45.4m related to goodwill (Note 13), £1.9m customer relationships in intangibles (Note 14), £0.5m other software costs (Note 14), £3.5m tangible fixed
assets (Note 10) and £10.2m right-of-use assets (Note 25). The prior year numbers have been restated to remove £14.6m impairment of software due to the change in accounting
policy relating to configuration and customisation costs in cloud computing arrangements. See the Statement of significant accounting policies for further details.
2. Net restructuring costs include property closure costs of £1.2m (2020: £0.8m), redundancy and related staff costs of £2.4m (2020: £2.8m), restructuring consultancy costs of
£0.1m (2020: £2.9m) and other costs of £nil (2020: £0.2m). These costs have been 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.
3. Costs associated with refinancing includes legal and professional fees of £4.9m (2020: £8.3m) offset by a £2.5m (2020: £0.9m) gain in relation to the termination of the cash flow
hedging arrangements as a result of the refinancing.
4. Onerous contract costs includes £2.0m (2020: £11.4m) relating to provisions recognised for licence fee commitments where no future economic benefit is expected to be
obtained, principally in relation to the SAP 1HANA implementation (see Note 23) together with £nil (2020: £1.8m) licence fees recognised in the Consolidated income statement
during the year whilst the project was on hold.
5. 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. Prior year amounts have been restated to include these costs as a result of the change in accounting policy during the year. See the
Statement of significant accounting policies for further details.
6. Other specific items of £0.4m credit in 2021 relates 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. The prior year amount included PwC investigation costs £1.8m and GMP equalisation costs £0.4m (see Note
31), offset by £0.6m gain on fair value of a forward currency option not hedged, £0.1m costs in relation to the cyber attack in France and £0.2m Other specific items.
7. Non-underlying finance costs comprise 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. Costs in 2020 comprised £11.3m loss on modification recognised in relation to the private placement notes and £0.3m write-off
of arrangement fees in relation to the previous RCF which was extinguished during 2020.
The total impact of the above amounts on the Consolidated cash flow statement is a cash outflow of £27.8m, including £12.9m within finance
costs paid.
155SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1556X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 155 11/03/2022 16:50:4411/03/2022 16:50:44
3. Operating profit/(loss)
2021
£m
Restated
2020
£m
Operating profit/(loss) is stated after charging/(crediting):
Cost of inventories recognised as an expense 1,680.0 1,395.2
Net decrease in provision for inventories 0.5 2.7
Depreciation of property, plant and equipment 11.4 11.2
Depreciation of right-of-use assets 56.9 56.6
Amortisation of acquired intangibles 4.7 5.6
Amortisation of computer software 3.4 4.8
(Gain)/loss on disposal of property, plant and equipment (0.9) 0.9
Impairment charges (Note 2 and Note 25) 10.7 62.4
Expense relating to short term leases (Note 25) 0.8 0.8
Net increase in provision for receivables (Note 17) 4.8 8.2
Foreign exchange rate losses 0.3 0.2
The prior year comparative for cost of inventories recognised as an expense has been restated to correct an error identified in the calculation.
Amortisation of computer software and impairment charges have been restated as a result of the change in accounting policy in relation to
customisation and configuration costs in cloud computing arrangements. Further details are provided in the Statement of significant accounting
policies.
Auditor’s remuneration:
During the year the Group incurred the following costs for services provided by the Company’s auditor:
2021
£m
2020
£m
Audit of the Company and Group financial statements 0.9 1.3
Audit of the Company’s subsidiaries 1.7 2.0
Total audit fees* 2.6 3.3
Audit-related assurance services^ 0.4 0.2
Total non-audit fees 0.4 0.2
Total fees 3.0 3.5
* The current year costs include £0.3m costs in relation to the 2020 audit (2020: £0.7m in relation to 2019).
^ The audit-related assurance services comprise £0.2m relating to the interim review and £0.2m relating to assurance services in connection with the refinancing completed during
the year. It is usual practice for a company’s Auditor to perform this work.
The Audit Committee Report on page 111 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:
2021
£m
2020
£m
Employee costs during the year amounted to:
Wages and salaries 247.6 218.3
Social security costs 44.8 41.5
IFRS 2 share option charge 2.6 0.2
Pension costs (Note 31) 6.7 6.2
Redundancy costs 1.5 1.2
Total staff costs 303.2 267.4
Amounts received from furlough schemes in relation to Covid-19 of £nil (2020: £8.1m) have been deducted from staff costs reported above (see Note
26). In addition to the above, redundancy and related staff costs of £2.4m (2020: £2.8m) have been included within Other items (Note 2).
Of the pension costs noted above, a charge of £0.4m (2020: £nil) relates to defined benefit schemes and a charge of £6.3m (2020: £6.2m) relates to
defined contribution schemes. See Note 31 for more details.
156 SIG Annual Report and Accounts 2021
Financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1566X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 156 11/03/2022 16:50:4411/03/2022 16:50:44
The average monthly number of persons employed by the Group during the year was as follows:
2021
Number
2020
Number
Production 229 242
Distribution 2,408 2,314
Sales 2,828 2,791
Administration 1,15 5 1,101
Total 6,620 6,448
The average numbers above include no staff that were employed in businesses classified as non-core (2020: 18).
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:
2021
£m
2020
£m
Directors’ remuneration (excluding IFRS 2 share option charge but including social security costs) 3.1 2.2
Total 3.1 2.2
5. Finance income and finance costs
2021 2020
Underlying
£m
Other items
£m
Total
£m
Underlying
£m
Other items
£m
Total
£m
Finance income
Interest on bank deposits 0.7 – 0.7 0.7 – 0.7
Total finance income 0.7 – 0.7 0.7 – 0.7
Finance costs
On bank loans, overdrafts and other associated items
1
4.6 – 4.6 4.3 – 4.3
On private placement notes
2
4.7 – 4.7 6.8 – 6.8
On senior secured notes
3
1.7 – 1.7 – – –
On obligations under lease contracts 11.6 – 11.6 12.3 – 12.3
Total interest expense 22.6 – 22.6 23.4 – 23.4
Make-whole payment on settlement of private placement
notes – 12.9 12.9 – – –
Write off of arrangement fees on extinguished debt
4
– 2.8 2.8 – 0.3 0.3
Loss on modification of private placement notes
5
– (8.0) (8.0) – 11.3 11.3
Unwinding of provision discounting
6
– 0.1 0.1 – – –
Net finance charge on defined benefit pension schemes 0.2 – 0.2 0.3 – 0.3
Total finance costs 22.8 7. 8 30.6 23.7 11.6 35.3
Net finance costs 22 .1 7.8 29.9 23.0 11.6 34.6
1. Other associated items includes the amortisation of arrangement fees of £0.9m (2020: £0.7m).
2. Included within finance costs on private placement notes is the amortisation of arrangement fees of £0.6m (2020: £0.4m) and the amortisation of the loss on modification of £2.1m
(2020: £1.2m).
3. Included within finance costs on the senior secured notes is the amortisation of arrangement fees of £0.1m (2020: £nil).
4. As part of the restructuring of the debt agreements in November 2021 the previous debt (private placement notes and term loan) has been extinguished and arrangement fees
which were being amortised over the term of the previous facilities have been written off. As part of the changes to debt facility agreements on 18 June 2020, £70.0m drawn under
the previous RCF was converted into a £70.0m term facility, which was accounted for as an extinguishment of the previous facility and new arrangement, and therefore
arrangement fees which were being amortised over the term of the previous facility were written off.
5. The amendments to the private placement loan notes on 18 June 2020 met the criteria for a modification of the existing arrangements rather than an extinguishment and
refinancing, resulting in the recognition of a loss on modification of £11.3m 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 is included within underlying finance costs on private placement notes over the remaining term of the
notes, resulting in a reduction in finance costs compared to the amount paid. On 18 November 2021 the private placement notes were fully repaid and the remaining balance of
the loss on modification has been released.
6. Relates to the onerous contract provision included within Other items. See Note 2 for further details.
157SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1576X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 157 11/03/2022 16:50:4411/03/2022 16:50:44
6. Income tax
The income tax expense comprises:
2021
£m
2020
£m
Current tax
UK & Ireland corporation tax: – charge for the year 0.3 0.5
– adjustments in respect of previous years – –
0.3 0.5
Mainland Europe corporation tax: – charge for the year 10.6 5.6
– adjustments in respect of previous years 2.0 (0.1)
12.6 5.5
Total current tax 12.9 6.0
Deferred tax
Current year credit (1.1) (2.2)
Adjustments in respect of previous years 0.6 2.6
Deferred tax credit in respect of pension schemes (0.1) –
Effect of change in rate 0.1 0.2
Total deferred tax (0.5) 0.6
Total income tax expense 12.4 6.6
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:
2021
Restated
2020
£m % £m %
Loss before tax from continuing operations (15.9) (194.6)
Profit before tax from discontinued operations (Note 12) – 72.0
Loss before tax (15.9) (122.6)
Expected tax credit (1.5) 9.4% (13.4) 10.9%
Factors affecting the income tax expense for the year:
Expenses not deductible for tax purposes^ 4.5 (28.3)% 19.6 (16.0)%
Non–taxable income* (0.1) 0.6% (33.2) 27.1%
Impairment and disposal charges not deductible for tax purposes** 1.4 (8.8)% 15.1 (12.3)%
Deductible temporary differences not recognised for deferred tax purposes 5.4 (34.0)% 18.1 (14.8)%
Other adjustments in respect of previous years 2.6 (16.4)% 2.5 (2.0)%
Effect of change in rate on deferred tax 0.1 (0.6)% 0.2 (0.2)%
Total income tax expense 12.4 (78.0)% 8.9 ( 7.3)%
Income tax expense reported in the consolidated income statement 12.4 6.6
Income tax attributable to a discontinued operation (Note 12)
– 2.3
12.4 8.9
^ The majority of the Group’s expenses that are not deductible for tax purposes are in relation to internal restructuring and impairments of property in 2021 and 2020, and the
divestments of businesses in 2020.
* The majority of the Group’s non-taxable income in 2020 related to the divestments of businesses.
** During the year the Group incurred impairment charges of £9.9m (2020: £45.4m) in relation to goodwill (as set out in Note 13) which are not deductible for tax purposes.
158 SIG Annual Report and Accounts 2021
Financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1586X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 158 11/03/2022 16:50:4511/03/2022 16:50:45
The effective tax rate for the Group on the total loss before tax of £15.9m (2020 (restated): £122.6m) is negative 78.0% (2020 (restated): negative
7.3%). 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 24) which has the effect of reducing 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 24).
The Group has previously disclosed the EU’s investigation into the UK controlled foreign company (CFC) rules which gave rise to potential additional
tax payable of up to £5m (before interest and penalties), which was not provided for. HMRC has now completed its review of the Group’s tax
arrangements for the periods in question and confirmed that they complied with the requirements of the UK CFC legislation and that it considers that
the Group’s arrangements did not result in unlawful State Aid. Accordingly, HMRC has accepted the Group’s tax returns as submitted and there is no
longer a potential exposure or payment to be made.
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:
2021
£m
2020
£m
Deferred tax movement associated with re-measurement of defined benefit pension liabilities* (0.1) 0.3
Tax credit associated with re-measurement of defined benefit pension liabilities* – 0.4
Total (0.1) 0.7
* These items will not subsequently be reclassified to the Consolidated income statement.
7. Dividends
No interim dividend was paid for the year ended 31 December 2021 and no final dividend is proposed. No interim or final dividend was proposed or
paid for the year ended 31 December 2020. No dividends have been paid between 31 December 2020 and the date of signing the financial
statements.
At 31 December 2021 the Company has distributable reserves of £190.2m (2020: negative £217.1m) as set out in Note 14 of the Company financial
statements. 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 27 for further details.
159SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1596X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 159 11/03/2022 16:50:4511/03/2022 16:50:45
8. (Loss)/earnings per share
The calculations of (loss)/earnings per share are based on the following (losses)/profits and numbers of shares:
Basic and diluted
2021
£m
Restated
2020
£m
Loss attributable to ordinary equity holders of the parent for basic and diluted earnings per share from
continuingoperations (28.3) (201.2)
Profit attributable to ordinary equity holders of the parent from discontinued operations – 69.7
Loss attributable to ordinary equity holders of the parent for basic and diluted earnings per share (28.3) (131.5)
Basic and diluted before
Otheritems
2021
£m
Restated
2020
£m
Loss attributable to ordinary equity holders of the parent for basic and diluted earnings per share from continuing
operations (28.3) (201.2)
Add back:
Other items (Note 2) 32.0 114.4
Profit/(loss) attributable to ordinary equity holders of the parent for basic and diluted earnings per share from
continuing operations before other items 3.7 (86.8)
Weighted average number of shares
2021
Number
Restated
2020
Number
For basic and diluted (loss)/earnings per share 1,177,972,694 871,941,603
Effect of dilution from share options – –
Adjusted for the effect of dilution 1,177,972,694 871,941,603
Due to incurring a loss per share, share options are considered antidilutive in the current and 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 at 31 December 2020 has
been restated to reflect the antidilutive nature of the share options.
The weighted average number of shares excludes those held by the EBT which are not vested and beneficially owned by employees. The weighted
number of shares has increased due to the equity raise which completed on 10 July 2020 with 589,999,995 new ordinary shares issued for gross
proceeds of £165m.
2021
Restated
2020
Loss per share
From continuing operations:
Basic loss per share (2.4)p (23.1)p
Diluted loss per share (2.4)p (23.1)p
Total:
Basic loss per share (2.4)p (15.1)p
Diluted loss per share (2.4)p (15.1)p
Earnings/(loss) per share before Other items^
Basic earnings/(loss) per share from continuing operations before Other items 0.3p (10.0)p
^ Earnings/(loss) per share before Other items (also referred to as underlying earnings/(loss) per share) has been disclosed in order to present the underlying performance of
theGroup.
Loss per share for the year ended 31 December 2020 has been restated to reflect the restatement of the 2020 results as explained in the Statement
of significant accounting policies. The diluted loss per share for the year ended 31 December 2020 has also been restated to reflect the antidilutive
nature of the share options.
160 SIG Annual Report and Accounts 2021
Financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1606X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 160 11/03/2022 16:50:4511/03/2022 16:50:45
9. Share-based payments
The Group had four share-based payment schemes in existence during the year ended 31 December 2021 (2020: five). The Group recognised a total
charge of £2.6m (2020: £0.2m) 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 42p (2020: 34p). Details of each of the schemes are provided below.
a) Management Incentive Plan (“MIP”)
On 16 May 2018 the Management Incentive Plan (“MIP”) was approved. Under this Plan, senior leadership and wider leadership team members can
be awarded an annual grant of restricted and deferred share options up to a certain percentage of base salary. Restricted share options have no
performance conditions other than the employee remaining in employment for the three year vesting period. The deferred share options are formally
granted 12 months after the granting of the restricted share options, with the number of options granted based on the achievement of certain
performance criteria for the relevant financial year. The deferred share options vest after a further two years provided the employee remains in
employment. The vesting period for both options is considered to be the three years from the granting of the restricted share options as this is the
date on which both parties have a shared understanding of the terms and conditions of the arrangement. There were no new awards of restricted and
deferred shares in 2021 or 2020, except for an uplift to previously issued awards in 2020 to reflect the increased number of shares following the
equity raise, resulting in a further 30,020 awards being issued.
MIP options
2021
Options
2020
Options
At 1 January 924,506 1,800,019
Granted during the year – 30,020
Exercised during the year (346,684) –
Lapsed during the year (234,777) (905,533)
At 31 December 343,045 924,506
Of the above share options outstanding at the end of the year, 8,838 (2020: nil) were exercisable at 31 December 2021. The options outstanding at
31December 2021 and 2020 had no exercise price, and therefore a weighted average exercise price of nil p (2020: nil p), and a weighted average
remaining contractual life of 0.3 years (2020: 0.8 years). In the year 346,684 options were exercised, of which 328,096 were settled in cash.
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
2021
Options
2020
Options
At 1 January 16,548,665 –
Granted during the year 11,16 8,431 16,548,665
Lapsed (3,042,174) –
At 31 December 24,674,922 16,548,665
Of the above share options outstanding at the end of the year, nil were exercisable at 31 December 2021. All options granted during the current and
prior year have no exercise price. The options outstanding at 31 December 2021 therefore have a weighted average exercise price of nil p (2020: nil p)
and the options outstanding have a weighted average remaining contractual life of 2.1 years (2020: 2.9 years). In the year, no options were exercised.
161SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1616X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 161 11/03/2022 16:50:4511/03/2022 16:50:45
9. Share-based payments continued
b) Restricted Share Plan (“RSP”) (continued)
The assumptions used in the Black-Scholes model in relation to the restricted share awards are as follows:
2020 RSP Awards
31 October
2021
26 March
2021
1December
2020
Share price (on date of official grant) 52p 39p 33p
Exercise price 0.0p 0.0p 0.0p
Expected volatility 53.1% 53.9% 5 4.1%
Actual life 3 years 3 years 3 years
Risk free rate 0.74% 0.15% (0.01)%
Dividend 3.2% 3.2% 3.3%
Expected percentage options to be exercised at date of grant 90% 92% 92%
Revised expectation of percentage of options to be exercised as at 31 December 2021 90% 81% 90%
The weighted average fair value of RSP awards granted during 2021 was 41p (2020: 34p). The expected volatility was determined by calculating the
historical volatility of the Group’s share price over the previous two years. The expected percentage of total options exercised is based on the
Directors’ best estimate for the effects of behavioural considerations.
c) Directors’ deferred shares
80,128 awards were also issued during the year in relation to the directors’ 2020 annual bonus plan which was settled two-thirds in cash and
one-third in deferred shares. The shares are deferred for 3 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 2021 RSP awards above.
1,236,494 deferred shares have also been accrued in relation to the directors’ 2021 annual bonus plan, which will be settled two-thirds in cash and
one-third in deferred shares. The shares are deferred for 3 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%.
Of the above awards outstanding at the end of the year, nil were exercisable at 31 December 2021. The awards have a weighted average exercise
price of nil p and the options outstanding have a weighted average remaining contractual life of 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. In 2021, 232,081 (2020: 296,162) matching shares
were granted during the year. Given the nature of the scheme, the fair value of the matching shares equates to the cost of the Company acquiring
theseshares.
162 SIG Annual Report and Accounts 2021
Financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1626X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 162 11/03/2022 16:50:4511/03/2022 16:50:45
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 2020 41.8 57. 3 148.6 247.7
Exchange differences 1.8 1.1 4.2 7.1
Additions 0.2 6.3 6.8 13.3
Transferred from held for sale 0.2 0.6 15.1 15.9
Reclassifications (3.3) 6.1 (1.4) 1.4
Disposals (0.9) (5.7) (8.7) (15.3)
At 31 December 2020 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
Accumulated depreciation and impairment
At 1 January 2020 21.8 40.4 126.9 189.1
Charge for the year 0.4 2.4 8.4 11.2
Impairment charges – 2.8 0.7 3.5
Exchange differences 0.9 1.0 2.8 4.7
Reclassifications (1.1) 2.1 (1.2) (0.2)
Transferred from held for sale – 0.4 9.2 9.6
Disposals (1.0) (2.5) (7.5) (11.0)
At 31 December 2020 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
Net book value
At 31 December 2021 20.2 18.5 28.2 66.9
At 31 December 2020 18.8 19.1 25.3 63.2
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 (2020:
£nil) has been recognised in rental income and £0.3m (2020: £0.6m) incurred in Other items during the year due to 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 depreciation 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 2021 is estimated to be £0.5m (2020: £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 £2.3m (2020: £nil).
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.
£2.4m of the impairment charge in 2020 was attributable to the impairment in relation to the UK Distribution CGU (see Note 13). Indicators of a
reversal of impairment are not considered sufficiently satisfied at 31 December 2021 and therefore no reversal of impairment is recognised in the
current year. £1.1m was related to the impairment of the investment property referred to above and other assets.
163SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1636X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 163 11/03/2022 16:50:4511/03/2022 16:50:45
10. Property, plant and equipment continued
Amounts included in software costs at 31 December 2019 with cost and net book value of £1.4m were reclassified to tangible fixed assets during the
prior year (see Note 14).
11. Divestments and exit of non-core businesses
There have been no business divestments or closures during the current year and no amounts recognised in respect of profits and losses on agreed
sale or closure of non-core businesses (2020: net gain of £0.6m). The prior year gain consisted of a £2.0m gain in relation to the disposal of the
Middle East business, offset by costs of £0.2m in relation to the proposed disposal of Building Solutions which was due to complete in the first half of
2020 but was terminated in May 2020, a loss on the sale of the Maury business of £0.9m and other costs in relation to previous disposals of £0.3m.
These are explained further below.
The sale of the Air Handling business also completed in the prior year and the gain on sale was included with the results from discontinued operations
(Note 12).
Prior year divestments
The Middle East business, which was in the process of being closed, was sold on 22 January 2020 for AED1. A gain on sale of £2.0m was
recognised in 2020, in relation to the reclassification to the Consolidated income statement of the cumulative exchange differences on the
retranslation of the net assets of the business previously recognised in other comprehensive income in accordance with IAS 21 “The effects of foreign
exchange rates” (“IAS 21”).
On 10 September 2020 the Group completed the sale of Maury NZ SAS (“Maury”), the Group’s high-end fabrication business in France and part of
the France Exteriors (Larivière) segment, for proceeds of €25,000. An overall loss on sale of £0.9m was recognised within Other items, including the
reclassification of the cumulative exchange differences on the retranslation of the net assets from equity to the Consolidated income statement, in
accordance with IAS 21. Net assets at the date of disposal were £0.9m and costs of less than £0.1m were incurred, resulting in the overall loss on
sale of £0.9m.
Costs of £0.2m were recognised during 2020 in relation to the proposed disposal of the Building Solutions business, which was previously classified
as held for sale at 31 December 2019 as a sale had been agreed and was due to complete in the first half of 2020, which was subsequently
terminated in May 2020 (and the business is now included within underlying operations). £0.3m costs were also incurred and recognised within Other
items in relation to the Commercial Drainage business which was closed in 2019.
Contribution to revenue and operating loss
The only business classified as non-core in the prior year was Maury, which contributed £1.8m to revenue for the year ended 31 December 2020 and
£0.3m operating loss for the year.
Cash flows associated with divestments and exit of non-core businesses
There is no net cash inflow in the year ended 31 December 2021 in respect of divestments and the exit of non-core businesses. Amounts for the prior
year were as follows:
2020
Air Handling
£m
Other
non-core
businesses
£m
Total
£m
Cash consideration received for divestments 189.7 0.7 190.4
Cash at date of disposal (29.2) (0.2) (29.4)
Disposal costs paid (12.9) (0.3) (13.2)
Net cash inflow 147.6 0.2 147. 8
Included within “Other non-core businesses” was £0.7m received during the year in relation to contingent consideration on the sale of the Building
Plastics division in 2017.
The losses arising on the agreed sale or closure of non-core businesses and associated impairment charges, along with their results for the prior
year, were disclosed within Other items in the Consolidated income statement in order to present the underlying earnings of the Group.
164 SIG Annual Report and Accounts 2021
Financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1646X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 164 11/03/2022 16:50:4511/03/2022 16:50:45
12. Discontinued operations
On 7 October 2019, the Group announced that it had agreed a sale of the Air Handling business for consideration of €222.7m on a cash free,
debtfree basis. The sale was approved by shareholders at a general meeting on 23 December 2019 and completed on 31 January 2020. At
31December 2019, Air Handling was classified as a disposal group held for sale and as a discontinued operation as it represented a major line
ofbusiness of the Group.
The results of the Air Handling business for the prior year are presented below. There are no amounts relating to discontinued operations in the
current year.
2020
£m
Revenue 25.4
Cost of sales (15.0)
Gross profit 10.4
Other operating expenses (9.3)
Operating profit 1.1
Finance costs (0.1)
Profit before tax from discontinued operations before group other items 1.0
Income tax expense (0.3)
Profit/(loss) after tax from discontinued operations 0.7
Gain on sale of subsidiary after income tax (see next page) 69.0
Profit/(loss) from discontinued operations 69.7
There were no amounts included in the Statement of other comprehensive income.
The net cash flows incurred by Air Handling are as follows:
2020
£m
Operating 1.1
Investing 147.6
Financing –
Net cash inflow 148.7
Earnings per share
2020
Basic earnings per share from discontinued operations 8.0p
Diluted earnings per share from discontinued operations 8.0p
165SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1656X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 165 11/03/2022 16:50:4511/03/2022 16:50:45
12. Discontinued operations continued
Gain on sale
2020
£m
Consideration received
1
:
Cash 191.9
Adjustment to consideration (2.2)
Final consideration 189.7
Carrying amount of net assets sold
2
(118.1)
Gain on sale before costs, income tax and reclassification of foreign currency translation reserve 71.6
Costs incurred in connection with the agreed disposal of the Air Handling business
3
(4.3)
Reclassification of foreign currency translation reserve 3.7
Income tax expense on gain (2.0)
Gain on sale after income tax 69.0
1. Consideration received was based on an enterprise value of €222.7m on a cash free, debt free basis, adjusted for actual levels of cash, debt and working capital in the Air
Handling division at completion to give proceeds received of €228.6m (£191.9m). Net proceeds received exclusive of amounts repaid in relation to debt owed to the Group by the
Air Handling division were €187.4m (£157.3m). As part of the completion process, further adjustments to the consideration were agreed and repaid by the Group, together with
settlement of tax payments, reducing total consideration by £2.2m.
2. The carrying amount of net assets sold was the net assets held for sale at 31 December 2019 plus £0.4m relating to the net profit for the month of January 2020 less tax payments
and working capital movements.
3. £12.2m of costs were also incurred and recognised in 2019 in connection with the sale. Including these in the overall calculation of the gain on sale above would give a gain on
sale after income tax of £57.0m.
13. Goodwill
£m
Cost
At 1 January 2020 413.6
Business disposed (0.7)
Acquisitions (Note 15) 1.0
Reclassified from held for sale 11.0
Exchange differences 10.7
At 31 December 2020 435.6
Acquisitions (Note 15) 4.8
Exchange differences (12.0)
At 31 December 2021 428.4
Accumulated impairment losses
At 1 January 2020 254.6
Impairment charges 45.4
Business disposed (0.7)
Exchange differences 7.5
At 31 December 2020 306.8
Impairment charges 9.9
Exchange differences (8.4)
At 31 December 2021 308.3
Net book value
At 31 December 2021 120.1
At 31 December 2020 128.8
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 11 CGUs (2020: 9) following the acquisition of the Penlaw Group of companies and F30 Building Products
Limited during the year. The addition of goodwill in the year of £4.8m relates to the acquisition of these two businesses (see Note 15), which are
considered as separate CGUs for the current year. Ireland is a CGU of the Group but does not have any associated goodwill, and UK Interiors has
no remaining goodwill balance following the impairment recognised during the prior year.
166 SIG Annual Report and Accounts 2021
Financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1666X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 166 11/03/2022 16:50:4511/03/2022 16:50:45
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.
2021
£m
2020
£m
UK Exteriors 57.4 57.4
Penlaw Group 2.7 –
F30 Building Products 2 .1 –
Building Solutions 11.0 11.0
France Exteriors (Larivière) 34.8 37.1
France Interiors (LiTT) 5.2 5.5
Germany 2.4 2.5
Poland 1.2 1.2
Benelux 3.3 14.1
Total goodwill 120.1 128.8
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 IFRS16, with adjustments made to factor in the
amount and timing of future tax flows in order to reflect a pre-tax discount rate. Discount rates 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
(1.2%-2.5%) applied thereafter and into perpetuity.
The key assumptions used for each CGU are shown in the table below 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, but there are no overriding changes to key assumptions relating to climate change 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.
2021 impairment review results
In the prior year, an impairment review was carried out at 30 June 2020, taking into account the impact of Covid-19 on the Group’s forecasts, and an
impairment charge of £42.8m was recognised, comprising £31.0m in relation to the UK Interiors CGU and £11.8m in relation to the UK Exteriors CGU.
At 31 December 2020 the impairment review was updated to reflect management’s latest forecasts and economic conditions and the results of this
review indicated that the UK Interiors CGU was further impaired by £17.5m. This impairment was allocated against goodwill (£2.6m), customer
relationships intangible assets (£1.9m), taking both of these to a carrying value of £nil, right-of-use assets (£10.1m), tangible fixed assets (£2.4m)
and software (£0.5m).
167SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1676X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 167 11/03/2022 16:50:4511/03/2022 16:50:45
13. Goodwill continued
An impairment review has been carried out at 31 December 2021 to reflect management’s latest forecasts and current economic conditions.
The results of this review indicated that the carrying value of goodwill and other assets associated with the Benelux CGU was no longer supportable.
A challenging year and a temporary increase in the cost base necessary to improve operational effectiveness has led to a reduction in forecast future
cashflows over the next three years for this CGU, and as a result an impairment charge of £9.9m has been recognised at 31 December 2021.
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 £37.3m, based on the value in use calculation. The carrying value of all other CGUs remains
supportable.
Sensitivity analysis
A number of sensitivities have been performed on the Group’s CGUs to highlight the changes in market conditions that would lead to the value in use
equalling the carrying value. The table below sets out the amount that each assumption would have to change by, all other assumptions remaining
the same, for the carrying value of goodwill, intangible assets and property, plant and equipment to equal recoverable amount for each CGU. The
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. UK Interiors and
Ireland do not have any goodwill at 31 December 2021 and are therefore not included in the analysis below.
2021 Headroom*
Average revenue growth (%) Pre-tax discount rate (%) Gross margin (%)
Long-term operating profit
growth rate (average % per
annum)
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
Assumption
used in value
in use
calculation
Change
required for
carrying value
to equal
recoverable
amount
Penlaw £22.6m 5.0% (16.3)% 9.3% 10.7% 21.1% (3.4)% 2.0% (27.7)%
F30 £11.5m 5.9% (39.6)% 9.3% 33.4% 29.0% (11.4)% 2.0% n/a^
UK Exteriors £82.3m 5.1% (8.9)% 9.3% 4.7% 29.6% (2 .1)% 2.0% (6.6)%
Building Solutions £42.0m 1.7% (24.7)% 9.3% 12.8% 26.7% (5.4)% 2.0% (20.8)%
France Interiors (LiTT) £100.9m 3.8% (20.0)% 8.9% 36.6% 29.3% (5.0)% 1.2% n/a^
France Exteriors (Larivière) £88.3m 3.6% (10.1)% 8.9% 7.0% 25.3% (2.1)% 1.2% (11.2)%
Germany (WeGo/VTi) £21.5m 6.8% (2 .1)% 8.5% 2.1% 27.9% (0.5)% 1.9% (3.0)%
Poland £61.2m 2.2% (21.6)% 10.4% 18.7% 21.2% (3.3)% 2.5% (51.6)%
* compared to carrying value of goodwill, intangible assets, property, plant and equipment and right-of-use assets
** average growth over the three years
^ not applicable as there is still headroom if no growth rate applied.
The changes required represent the absolute change required to the assumption % used in the value in use calculation.
Of the above sensitivities for 2021, management considers the % changes in revenue growth and gross margin to be reasonably possible scenarios
for Germany CGU, although this is not expected based on current trading performance and outlook. The other % changes in assumptions shown
above are not considered to be reasonably possible scenarios, but this additional voluntary information over and above that required by IAS36 has
been included in order to provide a full picture of the level of headroom and sensitivity to changes in assumptions for each CGU. For the Benelux
CGU, recoverable amount is 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 lead to further impairment of £4.0m.
168 SIG Annual Report and Accounts 2021
Financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1686X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 168 11/03/2022 16:50:4511/03/2022 16:50:45
2020 Headroom*
Average revenue growth (%) Pre tax discount rate (%) Gross margin (%)
Long-term operating profit
growth rate (average % per
annum)
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
Assumption
used in value
in use
calculation
Change
required for
carrying value
to equal
recoverable
amount
UK Exteriors £6.6m 4.1% (1.0)% 12.5% 0.5% 29.4% (0.3)% 2.0% (1.3)%
Building Solutions £26.1m 9.0% (20.2)% 12.5% 9.5% 24.8% (4.1)% 2.0% (16.7)%
Ireland £49.8m 7.9% (21.7)% 10.4% 17.5% 24.5% (4.3)% 2.0% (70.3)%
France Interiors (LiTT) £80.2m 0.8% (20.0)% 11.9% 37.8% 28.1% (4.7)% 1.6% (115.1)%
France Exteriors (Larivière) £6.7m 1.0% (1.1)% 11.9% 0.5% 23.5% (0.2)% 1.6% (2.6)%
Germany (WeGo/VTi) £64.4m 5.7% ( 7. 3 )% 11.7% 6.0% 28.1% (1.7)% 1.9% (16.0)%
Poland £8.2m 3.2% (4.0)% 12.7% 3.1% 19.9% (0.6)% 2.3% (12.4)%
Benelux £ 27.5 m 10.7% (12.2)% 12.3% 9.4% 24.3% (2.4)% 1.6% (33.5)%
* compared to carrying value of goodwill, intangible assets, property, plant and equipment and right-of-use assets.
** average growth in years 2 and 3 of the 3 year plan. Growth from 2020 to 2021 was not considered meaningful given the impact of Covid-19 on 2020.
The changes required represent the absolute change required to the assumption % used in the value in use calculation.
Of the above sensitivities for 2020, management considered the % changes in revenue growth and gross margin to be reasonably possible for the
UKExteriors and France Exteriors (Lariviere) CGUs, which would have led to an impairment of goodwill of £6.6m for UK Exteriors and £6.7m for
France Exteriors (Lariviere). The other % changes in assumptions were not considered to be reasonably possible scenarios, but were included as
additional voluntary information over and above that required by IAS36 in order to provide a full picture of the level of headroom and sensitivity to
changes in assumptions for each CGU.
The UK Interiors CGU was impaired to recoverable amount in 2020 and was therefore not included in the 2020 table above. The table below sets out
the key assumptions used in the value in use calculation for UK Interiors in the prior year and the additional impairment that would have arisen from a
reasonably possible change in each of the key assumptions:
2020
UK Interiors
Assumption
used in value
in use
calculation (%)
Reasonably
possible
change in
assumption
(%)
Additional
impairment
caused by
reasonably
possible
change
Revenue growth (average of year 2 and 3 growth) 11.5% (1.0)% £15.1m
Pre tax discount rate 12.6% (0.5)% £4.3m
Gross margin 23.3% (0.3)% £11.3m
Long-term operating profit growth rate (average % per annum) 2.0% (0.2)% £1.2m
The forecasts used in the 2021 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.
The Group continues to monitor the situation regarding Covid-19 and the potential impact of further waves which could adversely impact the Group’s
markets and trading performance and lead to further impairment of non-current assets in future periods if the severe lockdowns experienced in some
countries in 2020 were to take place again.
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 2021.
169SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1696X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 169 11/03/2022 16:50:4511/03/2022 16:50:45
14. Intangible assets
The intangible assets presented below relate to acquired intangibles that arise as a result of applying IFRS 3 “Business Combinations” (which requires
the separate recognition of acquired intangibles from goodwill) and computer software which is recognised separately from associated hardware.
Customer
relationships
£m
Non-compete
clauses
£m
Computer
software
£m
Total
£m
Cost
At 1 January 2020 (restated) 189.1 11.7 54.3 255.1
Additions 0.8 – 1.2 2.0
Disposals – – (3.1) (3.1)
Reclassifications – – (1.4) (1.4)
Exchange differences – – 0.8 0.8
Assets transferred from held for sale (Note 11) 16.6 – 0.6 17.2
At 31 December 2020 (restated) 206.5 11.7 52.4 270.6
Additions (Note 15) 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
Amortisation
At 1 January 2020 (restated) 175.2 11.7 38.0 224.9
Charge for the year 5.6 – 4.8 10.4
Impairment charges 1.9 – 0.5 2.4
Disposals – – (2.0) (2.0)
Exchange differences – – 0.7 0.7
Assets transferred from held for sale (Note 11) 15.3 – 0.4 15.7
At 31 December 2020 (restated) 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 42.9 257.3
Net book value
At 31 December 2021 8.8 – 7.9 16.7
At 31 December 2020 (restated) 8.5 – 10.0 18.5
The 2020 software balances have been restated as a result of the IFRS Interpretations Committee (IFRIC) agenda decision on configuration and
customisation costs in cloud computing arrangements. See the Statement of significant accounting policies for further details.
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 0.4m (2020: £0.4m). £1.4m was reclassified to tangible fixed
assets during the prior year (see Note 10).
The impairment charge in relation to customer relationships in 2020 related to the impairment recognised in relation to the overall impairment review
of non-current assets of UK Interiors CGU (see Note 13). The impairment charge in relation to software related to the overall impairment of UK Interiors
non-current assets (see Note 13). These charges were included within “Impairment charges” within Other items in the Consolidated income statement
(see Note 2).
170 SIG Annual Report and Accounts 2021
Financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1706X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 170 11/03/2022 16:50:4511/03/2022 16:50:45
15. Acquisitions
The Group acquired the following businesses during the year:
% ordinary
share capital
acquired Acquisition date Country of incorporation Principal activity
F30 Building Products Limited 100% 10 March 2021 United Kingdom Distributor of construction accessories
Penlaw and Company Limited 100% 26 October 2021 United Kingdom Distributor of interiors and insulation products
Penlaw Northwest Limited 100% 26 October 2021 United Kingdom Distributor of interiors and insulation products
Penlaw Norfolk Limited 100% 26 October 2021 United Kingdom Distributor of interiors and insulation products
Penlaw Fixings Limited 100% 26 October 2021 United Kingdom Distributor of interiors and insulation products
The Group acquired the above businesses to enlarge the UK Interiors business in terms of product range and geographic location, and the
acquisitions are allocated to the UK Interiors segment. The four Penlaw companies were acquired as one transaction and are therefore considered as
one business combination below and referred to as the Penlaw Group.
The provisional fair values of the identifiable assets and liabilities of the Penlaw acquisition and the final fair values of the F30 acquisition at the date of
acquisition are as follows:
2021 2020
Penlaw Group
£m
F30 Building
Products
£m
Total
£m
Total
£m
Assets
Intangible assets (customer relationships) 3.2 1.8 5.0 0.8
Property, plant and equipment 1.4 0.1 1.5 0.1
Right-of-use asset 7.2 0.3 7. 5 0.2
Cash and cash equivalents 2.0 0.2 2.2 3.2
Trade and other receivables 20.6 1.1 21.7 0.7
Inventories 3.1 0.2 3.3 0.4
37.5 3.7 41.2 5.4
Liabilities
Trade and other payables (20.8) (1.3) (22.1) (0.8)
Provisions (0.6) (0.1) (0.7) (0.2)
Current tax liability (0.1) (0.1) (0.2) (0.2)
Deferred tax liability (0.9) (0.4) (1.3) (0.1)
Lease liability (7. 2) (0.3) (7.5) (0.2)
(29.6) (2.2) (31.8) (1.5)
Total identifiable net assets at fair value 7.9 1.5 9.4 3.9
Goodwill arising on acquisition (Note 13) 2.7 2 .1 4.8 1.0
Purchase consideration transferred 10.6 3.6 14.2 4.9
The fair value of trade receivables amounts to £13.8m for the Penlaw Group and £1.2m for F30 Building Products. The gross amount of trade
receivables is £15.1m for the Penlaw Group and £1.2m for F30 Building Products.
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 £2.1m relating to F30 Building Products comprises 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 goodwill of £2.7m relating to the Penlaw Group comprises the value of expected synergies arising from the acquisition, strategic fit with the UK
Interiors business.
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, 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 the
year, revenue for the Group would have been £2,349.6m and loss before tax for the Group would have been £13.9m.
171SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1716X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 171 11/03/2022 16:50:4611/03/2022 16:50:46
15. Acquisitions continued
Purchase consideration
2021 2020
Penlaw Group
£m
F30 Building
Products
£m
Total
£m
Total
£m
Cash paid on completion 9.8 2.5 12.3 4.0
Deferred consideration due within one year 0.2 0.5 0.7 0.5
Deferred consideration due after more than one year 0.1 0.6 0.7 0.4
Contingent consideration due within one year 0.1 – 0.1 –
Contingent consideration due after more than one year 0.4 – 0.4 –
Total consideration 10.6 3.6 14.2 4.9
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. The range of
contingent consideration payable is therefore £nil to £1.2m. £0.5m has been recognised at the date of acquisition on the basis of current forecasts.
This is included within other payables on the Consolidated balance sheet. The provision 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.
In relation to F30 Building Products, a further amount of up to £0.8m is also payable over the twelve months from completion dependent on the future
performance of the business and dependent on the vendor remaining within the business. This is therefore treated as remuneration and is being
charged to the Consolidated income statement as earned. £0.6m has been recognised and included within accruals in relation to this at
31December 2021.
Analysis of cash flows on acquisition
2021 2020
Penlaw Group
£m
F30 Building
Products
£m
Total
£m
Total
£m
Consideration paid (included in cash flows from investing activities) (9.8) (2.5) (12.3) (4.0)
Net cash acquired with the subsidiary (included in cash flows from investing activities) 2.0 0.2 2.2 3.2
Total net cash flow included in cash flows from investing activities (7.8) (2.3) (10.1) (0.8)
Transaction costs (included in cash flows from operating activities) (0.3) (0.1) (0.4) (0.2)
Net cash flow on acquisition (8.1) (2.4) (10.5) (1.0)
2020
The 2020 amounts above relate to the acquisition of S M Roofing Supplies Limited. On 17 October 2020 the Group acquired 100% of the share
capital of S M Roofing Supplies Limited, a non-listed company based in the UK, for an enterprise value of £1.9m on a debt free cash free basis. Total
consideration was £4.9m, including £3.2m for cash within the business on completion. £4.0m was paid in cash on completion and two further
amounts totalling £0.9m are payable in one and two years’ time (not subject to performance criteria and not conditional upon vendors remaining
within the business).
The goodwill of £1.0m comprises the value of expected synergies arising from the acquisition (e.g. overhead costs in relation to finance, administration
and management), strategic fit with the UK Exteriors business and geographic location. The 2020 provisional fair values of the identifiable assets and
liabilities have been finalised during the current year with no further adjustments recognised.
From the date of acquisition, S M Roofing Supplies Limited contributed £1.0m of revenue and £nil to underlying profit before tax from continuing
operations of the Group for the year ended 31 December 2020. If the combination had taken place at the beginning of the year, revenue from
continuing operations for the Group would have been £1,877.8m and loss before tax from continuing operations for the Group would have been
£70.1m (restated).
172 SIG Annual Report and Accounts 2021
Financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1726X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 172 11/03/2022 16:50:4611/03/2022 16:50:46
16. Inventories
2021
£m
2020
£m
Raw materials and consumables 7.0 3.1
Work in progress 2.0 1.2
Finished goods and goods for resale 233.0 166.0
Total 242.0 170.3
The estimated replacement cost of inventories is not materially different from the balance sheet value stated above.
17. Trade and other receivables
2021
£m
2020
£m
Trade receivables 287.7 232.7
VAT 6.2 3.8
Other receivables 5.3 7. 5
Prepayments and accrued income 72.1 50.4
Trade and other receivables 371.3 294.4
Lease receivables (Note 25) 0.8 0.7
Current tax assets – –
Total receivables 372 .1 295.1
Included within prepayments and accrued income is £58.2m (2020: £36.7m) 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. The average credit period
on sale of goods and services for underlying operations on a constant currency basis is 46 days (2020: 45 days).
Trade receivables are stated net of allowance for estimated credit losses and provisions for sales credit notes and customer rebates. An allowance
has been made for estimated credit losses from trade receivables of £16.1m at 31 December 2021 (2020: £15.3m).
Movement in the allowance for expected credit losses
2021
£m
2020
£m
At 1 January (15.3) (19.5)
Utilised 3.3 8.8
Unused amounts released to the Consolidated income statement 2.3 1.3
Transferred from held for sale – (0.2)
Disposal of non-core businesses – 4.5
Charged to the Consolidated income statement ( 7.1) (9.5)
Exchange differences 0.7 (0.7)
At 31 December (16.1) (15.3)
The group applies the IFRS 9 simplified approach to measuring ECLs which uses a lifetime expected loss allowance for all trade receivables and
contract assets.
The expected loss rates have been assessed by each operating segment and are based on the payment profiles of sales over a period prior to
31December 2021, 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, considering the impact of Covid-19 in particular.
The concentration of credit risk is limited due to the customer base being large and unrelated.
173SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1736X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 173 11/03/2022 16:50:4611/03/2022 16:50:46
17. Trade and other receivables continued
31 December 2021
Days past due
< 30 days
£m
30-60 days
£m
61-90 days
£m
> 91 days
£m
Total
£m
Expected credit loss rate 0.2% 1.3% 8.9% 78.2%
Total gross carrying amount 269.7 30.5 8.9 18.2 327.3
Expected credit loss 0.6 0.4 0.8 14.3 16.1
The 2020 expected credit loss was as follows:
31 December 2020
Days past due
< 30 days
£m
30-60 days
£m
61-90 days
£m
> 91 days
£m
Total
£m
Expected credit loss rate 0.8% 4.0% 17.0% 61.1%
Total gross carrying amount 219.7 22.7 4.7 19.3 266.4
Expected credit loss 1.8 0.9 0.8 11.8 15.3
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
Included within trade receivables is a managed pool of customer balances of £41.1m (2020: £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 31 for further details.
Transfer of trade receivables
Consistent with previous years, the Group sold without recourse certain trade receivables, almost all in France, to banks and other financial
institutions for cash proceeds. These trade receivables of £32.8m (2020: £25.2m) have been derecognised from the Consolidated balance sheet,
because the Group has transferred the risks and rewards.
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. Trade receivable credit
exposure is controlled by counterparty limits that are set, reviewed and approved by operational management on a regular basis.
Trade receivables consist of a large number of typically small to medium sized customers, spread across a number of different market sectors and
geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable and to determine whether the credit risk
has increased since initial recognition. Where appropriate, credit guarantee insurance cover is purchased. There has been no significant change to
credit risk management as a result of Covid-19.
The Group does not have any significant credit risk exposure to any single customer.
18. Current liabilities
2021
£m
2020
£m
Trade payables 229.4 187.1
VAT 15.8 13.6
Social security and payroll taxes 12.9 12.2
Accruals and other payables 111.6 88.5
Trade and other payables 369.7 301.4
Lease liabilities (Note 25) 50.7 50.6
Deferred consideration 1.1 0.5
Other financial liabilities 0.4 0.5
Derivative financial instruments 0.5 0.5
Current tax liabilities 4.6 4.2
Provisions (Note 23) 12.9 10.5
Current liabilities 439.9 368.2
Trade payables is presented net of £29.8m (2020: £29.9m) 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.
174 SIG Annual Report and Accounts 2021
Financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1746X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 174 11/03/2022 16:50:4611/03/2022 16:50:46
Trade payables, accruals and deferred income principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit
period taken for trade purchases for underlying operations on a constant currency basis is 45 days (2020: 48 days).
The Directors consider that the carrying amount of current liabilities approximates to their fair value.
19. Interest-bearing loans and borrowings
2021
£m
2020
£m
Current interest-bearing loans and borrowings
Lease liabilities (Note 25) 50.7 50.6
Other financial liabilities 0.4 0.5
Total current interest-bearing loans and borrowings 51.1 51.1
Non-current interest-bearing loans and borrowings
Lease liabilities (Note 25) 210.4 211.6
Senior secured notes 249.6 –
Bank loan – 67.7
Private placement notes – 144.5
Other financial liabilities 0.6 1.2
Total non-current interest-bearing loans and borrowings 460.6 425.0
Total interest-bearing loans and borrowings 511.7 476.1
On 18 November 2021 the Group completed a restructuring of its debt arrangements. This comprised the issuance of €300m senior secured notes at
a coupon of 5.25% and a new RCF of £50m. The proceeds from the senior secured notes were used to repay the existing private placement notes
and £70m term loan, and the previous RCF of £25m was cancelled. This has been accounted for as an extinguishment of the previous arrangements,
and arrangement fees and the loss on modification which were being amortised over the term of the previous facilities have been written off (see
Note 5).
Senior secured notes
The €300m senior 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 £2.5m is unamortised at 31 December 2021.
The contractual repayment profile of the current senior secured notes and the previous private placement notes is shown below:
2021 2020
£m
Fixed interest
rate % £m
Fixed interest
rate %
Repayable in 2023 – – 66.2 6.0%
Repayable in 2026* 252.1 5.25% 70.0 5.3%
Total gross amount payable 252.1 – 136.2 –
Unamortised fees (2.5) – (1.8) –
Loss on modification – – 10.1 –
Total 249.6 5.25% 144.5 5.6%
* The previous private placement notes were subject to a put option which if exercised by the lenders would have meant that the notes due in 2026 would have become due and
payable in 2023
Committed facilities
The Group also has undrawn committed borrowing facilities at 31 December 2021 as follows:
2021
£m
2020
£m
RCF expiring May 2023 – 25.0
RCF expiring May 2026 50.0 –
Total 50.0 25.0
No amounts were drawn on the previous or new RCF during the year to 31 December 2021, and no amounts have been drawn subsequent to 31
December 2021.
175SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1756X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 175 11/03/2022 16:50:4611/03/2022 16:50:46
19. Interest-bearing loans and borrowings continued
Previous arrangements
Bank loan
As part of the amendments to the financing arrangements on 18 June 2020, the amount drawn on the RCF at that date of £70.0m was converted into
a term facility due for repayment on 31 May 2023 and a RCF of £25.0m. The £70.0m term facility was included within non-current borrowings per the
above, net of arrangement fees paid (of which £2.3m remained unamortised at 31 December 2020). This was accounted for as an extinguishment of
the previous facility and new arrangement, therefore arrangement fees which were being amortised over the term of the previous facility were written
off (see Note 5).
Private Placement Notes
On 18 June 2020 the Group concluded changes to its agreements with existing private placement notes holders with the following key changes:
• repayment of €30m of notes previously due on 31 October 2020 and €20m of notes previously due on 31 October 2021 deferred to 31 May 2023;
• £48.9m repaid on completion of the Group’s equity raise in July 2020, split across each of the individual notes on a pro-rata basis;
• holders of the existing 2023 notes (due 31 October 2023) and 2026 notes (due 12 August 2026) granted a put option for those notes to be
redeemed on 31 May 2023 at a price equal to 100% of the aggregate outstanding principal together with a make-whole amount calculated as
specified in the agreement;
• additional fee of 2% per annum to be paid on the outstanding principal; and
• financial covenants were reset.
The loan notes were considered separately to determine whether the changes should be accounted for as a modification of the existing arrangement
or as an extinguishment and refinancing. The Group concluded that each loan note met the criteria to be accounted for as a modification. Previous
arrangement fees therefore continued to be amortised over the remaining term (£0.3m at the date of modification) together with arrangement fees
incurred in relation to the new agreement (£1.9m). A loss on modification of £11.3m was also recognised, reflecting the difference in the present value
of the future cash flows discounted at each loan note’s original effective interest rate. This was recognised within finance costs within Other items (see
Note 5). This was unwinding over the remaining term of the loan notes, resulting in the finance cost recognised being lower than the actual amounts
paid.
£16.3m of private placement debt repayable in 2026 at 31 December 2020 that was denominated in US Dollar was swapped into Sterling through the
use of cross-currency swaps. The remainder of the private placement debt at 31 December 2020 was denominated in Euros. The private placement
debt in the table above was valued before application of the cross-currency swaps associated with the US Dollar denominated debt.
The fair value of borrowings is disclosed in Note 20.
20. Financial assets, liabilities, financial risk management and derivatives
The Group’s principal financial liabilities, other than derivatives, comprise loans and borrowings and trade and other payables. The main purpose of
these financial liabilities is to finance the Group’s operations. The Group’s principal financial assets include trade receivables and cash and cash
equivalents that derive directly from its operations.
a) Financial assets
The Group holds the following financial assets:
Note
2021
£m
2020
£m
Financial assets at amortised cost
Trade receivables 17 287.7 232.7
Cash at bank and on hand 145.1 235.3
Derivative financial instruments designated as hedging instruments 20d 0.2 0.1
Total 433.0 468.1
The interest received on cash deposits is at variable rates of interest of up to 0.17% (2020: 0.2%).
The Directors consider that the fair values of cash at bank and on hand, 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.
176 SIG Annual Report and Accounts 2021
Financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1766X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 176 11/03/2022 16:50:4611/03/2022 16:50:46
The Group’s credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit
ratingsassigned by international credit rating agencies. Information about the Group’s exposure to credit risk in relation to trade receivables is given
inNote 17.
Of the above cash at bank on hand, £56.3m (2020: £137.6m) is denominated in Sterling, £79.4m (2020: £83.1m) in Euros, £8.7m (2020: £12.7m) in
Polish Zloty, and £0.7m (2020: £1.9m) in other currencies.
b) Financial liabilities
The Group holds the following financial liabilities:
Note
2021
£m
2020
£m
Financial liabilities at amortised cost
Trade and other payables* 18 341.0 275.6
Borrowings 19 249.6 212.2
Deferred consideration 1.8 0.5
Lease liabilities 25 261.1 262.2
Derivative financial instruments designated as hedging instruments 20d 0.4 0.9
Derivative financial instruments not designated as hedging instruments 0.1 –
Other financial liabilities 1.0 1.7
Total 855.0 75 3.1
* 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.
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 – 136.7 1.7%–5.3% 9.8 134.4 –
Senior 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 –
Total 514.5 2.4 514.4 514.2 0.3
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 senior secured notes at 31 December 2021 is estimated to be £256.1m (2020: £164.7m) and is classified as a
Level 2 fair value measurement for disclosure purposes. The remaining fixed rate debt amounts to £524.1m (2020: £260.3m) and relates to lease
contracts, fixed rate loans and deferred consideration. The Directors consider the fair value of these remaining fixed rate debts to materially
approximate to the book values shown above.
177SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1776X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 177 11/03/2022 16:50:4611/03/2022 16:50:46
20. Financial assets, liabilities, financial risk management and derivatives continued
2020 interest rate and currency profile
The interest rate and currency profile of the Group’s financial liabilities at 31 December 2020, after taking account of interest rate and currency
derivative financial instruments (including derivative assets of £0.1m as noted above) but excluding prepayment of arrangement fees of £1.8m
wasasfollows:
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
Private placement notes Sterling 16.6 – 16.6 6.2% 5.6 – 16.6
Other borrowings Sterling 69.6 70.0 (0.4) 0.0% 0.6 – 69.6
Lease contracts Sterling 131.9 – 131.9 0.0% –7.7% 8.7–22.3 131.9 –
Private placement notes Euro 120.0 – 120.0 5.5% 4.0 – 120.0
Other borrowings Euro 1.5 – 1.5 2.8% 2.0 1.5 –
Lease contracts Euro 120.5 – 120.5 0.1%– 5.7% 1.1–120.1 120.5 –
Other borrowings Polish Zloty 0.1 0.1 – n/a n/a 0.1 –
Lease contracts Polish Zloty 9.8 3.0 6.8 1.9%–8.3% 1.0 –7. 2 9.8 –
Lease contracts Other – – – n/a n/a – –
Total 470.0 73.1 396.9 263.8 206.2
In addition to the currency exposures above, the Group held two cross-currency derivative financial instruments for 2020 which altered the currency
profile of the Group’s financial liabilities. These amounted to an asset of £16.6m and a liability of €18.3m. These derivatives also further reduced the
fixed interest payable of the Sterling private placement notes from 6.2% to 5.5 – 5.7%. The fair value of these derivatives was a net liability of £0.4m
which is included in the Sterling value of other borrowings in the table above. The Group’s net debt at 31 December 2020 was £238.2m and, after
taking account of these cross-currency derivatives, the Group had net Euro financial liabilities of £54.6m.
In both 2021 and 2020, 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 Group Board on a regular basis. It is Group policy that no trading in financial instruments or speculative transactions be undertaken.
Liquidity risk
Liquidity risk is the risk that SIG is unable to meet its financial obligations as they fall due. In order to minimise this risk, SIG seeks to balance certainty
of funding and a flexible, cost-effective borrowing structure. The key sources of finance are note holders, being professional institutional investors,
and an RCF with a principal bank. The Group also maintains significant cash balances which are more than sufficient to meet the requirements of the
working capital cycle taking into account the seasonality of the business.
To manage liquidity risk the Group prepares and reviews rolling weekly cash flow forecasts, actual cash and debt positions along with available
facilities and headroom which are reported weekly and monitored by Group management. In addition, full annual three-year forecasts are prepared
including cash flow and headroom forecasts. The Group is in a strong liquidity position and at 31 December 2021 held cash of £145.1m
(2020:£235.3m), and had £50.0m (2020: £25.0m) additional headroom from the new £50.0m RCF that matures in May 2026 (2020:£25.0m).
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. 59% of the Group’s 2021 continuing revenues (2020: 65%) 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.
178 SIG Annual Report and Accounts 2021
Financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1786X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 178 11/03/2022 16:50:4611/03/2022 16:50:46
The Group uses foreign exchange forward contracts to manage the exposures arising from cross currency transactions (Note 20d ii).
Overseas earnings streams are translated at the average rate of exchange for the year whilst balance sheets are translated using closing rates. The
table below sets out the principal exchange rates used:
Average rate Closing rate
2021 2020
Movement
(%) 2021 2020
Movement
(%)
Euro 1.17 1.13 3.4% 1.19 1.12 6.5%
Polish Zloty 5.32 5.04 5.7% 5.46 5.10 7.1%
Commodity risk
The nature of the Group’s operations creates an ongoing demand for fuel and therefore the Group is exposed to movements in market fuel prices.
The Group 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 17.
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 2021 is 99.5% (2020: 84%). The percentage of available gross debt at fixed rates of interest (including the undrawn RCF) is 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 2021 the Group held €300m (2020: €134m) of direct Euro-
denominated debt through its senior 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.
179SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1796X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 179 11/03/2022 16:50:4611/03/2022 16:50:46
20. Financial assets, liabilities, financial risk management and derivatives continued
As at 31 December 2020 the Group held two cross-currency derivative financial instruments which received fixed £16.6m and paid fixed €18.3m.
These derivative financial instruments were designated as hedging instruments as part of the net investment hedge of the Group’s Euro-denominated
net assets. Fair value changes on these derivatives were recognised in other comprehensive income (in the hedging and translation reserve) to offset
any gains or losses on translation of the net investments in the subsidiaries. These arrangements were terminated as part of the refinancing in
November 2021.
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.
The impact of the hedging instruments on the statement of financial position is as follows:
Notional
amount
€m
Carrying
amount
(Liability)
£m
Line item in the statement
of financial position
Change in fair value used
for measuring
ineffectiveness for the
period
£m
At 31 December 2021
Cross-currency swap – – Derivative financial instruments 0.5
Foreign currency denominated borrowing 300.0 2 52 .1 Senior secured notes 1.3
Foreign currency denominated borrowing – – Private placement notes 6.8
At 31 December 2020
Cross-currency swap 18.3 ( 0.1) Derivative financial instruments (1.4)
Foreign currency denominated borrowing 134.0 120.0 Private placement notes (9.5)
The impact of the hedged item on the statement of financial position is as follows:
31 December 2021 31 December 2020
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
Hedging and
translation
reserve
£m
Cost of
hedging
reserve
£m
Net investment in foreign subsidiaries 8.6 8.6 – (10.9) (10.7) (0.2)
The hedging gain recognised in Other comprehensive income before tax is equal to the change in fair value used for measuring effectiveness. There
is no ineffectiveness recognised in profit or loss.
Hedge of the Group’s Euro denominated assets
2021
£m
202
£m 0
Asset/(liability) at 1 January 0.1 (1.9)
Fair value gains/(losses) recognised in equity 0.5 (1.4)
Cash settlement on derecognition (0.6) –
Cash settlement on partial derecognition – 3.4
Liability at 31 December – 0.1
ii) Cash flow hedges
With regard to cash flow hedges, the effective portion of the gain or loss on the hedging instrument is recognised in equity and is subsequently
removed and included in the Consolidated income statement within finance costs in the same period that the hedged item affects the Consolidated
income statement. The cash flow hedges described below are expected to impact upon both profit and loss and cash flow annually over the life of
the hedging instrument and the related debt as interest falls due, and upon maturity of the debt and related hedging instrument.
180 SIG Annual Report and Accounts 2021
Financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1806X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 180 11/03/2022 16:50:4611/03/2022 16:50:46
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. As at 31 December 2020, the Group 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. These derivative financial instruments formed a cash flow
hedge as they fixed the functional currency cash flows of the Group. These derivative financial instruments were designated and effective as cash
flow hedges and the fair value movement was therefore deferred in equity via the Consolidated statement of comprehensive income. At 31 December
2020, the weighted average maturity date of these swaps was 5.6 years. 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
2021
£m
2020
£m
Asset/(liability) at 1 January (0.4) 1.7
Fair value gains/(losses) recognised in equity 0.5 (0.1)
Cash settlement on derecognition of cash flow hedges (0.1) –
Cash settlement on partial derecognition of cash flow hedges – (2.0)
Liability at 31 December – (0.4)
The Group also uses foreign exchange forward contracts to manage the exposures arising from cross currency transactions. At 31 December 2021
the Group held a number of short term forward contracts designated as hedging instruments in cash flow hedges of forecast purchases in US
Dollars. The forecast transactions are highly probable. Foreign exchange forward contract balances vary with the level of expected foreign currency
transactions and changes in foreign exchange forward rates.
Included within derivative financial instruments is £0.2m (2020: £0.1m) relating to forward foreign exchange contracts.
Interest rate risk
The Group previously held one interest rate derivative financial instrument which swapped variable rate debt into fixed rate debt thereby fixing the
functional currency cash flows of the Group. This interest rate derivative financial instrument was designated and effective as a cash flow hedge
andthe fair value movement was therefore deferred in equity via the Consolidated statement of comprehensive income. This swap expired in
August2020.
Hedge of the Group’s interest cash flows
2021
£m
2020
£m
Liability at 1 January – (0.2)
Fair value gains recognised in equity – 0.2
Liability at 31 December – –
For the cash flow hedges, there is an economic relationship between the hedged items and hedging instruments as the terms of the cross-currency
and interest rate swaps match the terms of the debt (i.e. notional amount, maturity and payment dates). The Group has established a hedge ratio of
1:1 for the hedging relationships as the underlying risk of the cross-currency swaps, interest rate swap and foreign exchange forward contracts are
identical to the hedged risk components. To test the hedge effectiveness, the Group uses the hypothetical derivative method and compares the
changes in fair value of the hedging instruments against the changes in fair value of the hedged items.
Hedge ineffectiveness can arise from differences in the timing of the cash flows of the hedged items and the hedging instruments; the counterparties’
credit risk differently impacting the fair value movements of the hedging instruments and hedge items; and changes to the forecasted amount of cash
flows of hedged items and hedging instruments.
The Group is holding the following cross-currency swaps, interest rate swaps and foreign exchange forward contracts:
Notional
amount
$m
Notional
amount
€m
Notional
Amount
£m Maturity
Average
hedged rate
Average
forward rate
At 31 December 2021
Foreign exchange forward contracts 11.5 27.8 32.2 2022 n/a 1.27
At 31 December 2020
Cross-currency swaps 22.2 n/a 16.5 2026 6.25% 1.34
Foreign exchange forward contracts 6.0 20.0 22.8 2021 n/a 1.34
181SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1816X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 181 11/03/2022 16:50:4611/03/2022 16:50:46
20. Financial assets, liabilities, financial risk management and derivatives continued
The impact of the hedging instruments on the statement of financial position is as follows:
Carrying
amount
£m
Line item in the statement of financial
position
Change in fair value used for
measuring ineffectiveness for
the period
£m
At 31 December 2021
Cross-currency swaps – Derivative financial instruments 0.5
Foreign exchange forward contracts (0.2) Derivative financial instruments 0.2
At 31 December 2020
Cross-currency swaps (0.4) Derivative financial instruments (0.1)
Interest rate swap – Derivative financial instruments 0.2
Foreign exchange forward contracts (0.4) Derivative financial instruments (0.6)
The impact of the hedged item on the statement of financial position is as follows:
31 December 2021 31 December 2020
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
Hedging and
translation
reserve
£m
Cost of
hedging
reserve
£m
Cross-currency swaps 0.5 0.5 – (0.1) (0.2) 0.1
Interest rate swap – – – 0.2 0.2 –
Foreign exchange forward contracts 0.2 0.2 – (0.6) (0.6) –
The effect of the cash flow hedges in the statement of profit or loss and other 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
€m
At 31 December 2021
Cross-currency swaps 0.5 – Finance costs – Operating expenses
Foreign exchange forward contracts 0.2 – Finance costs – Operating expenses
At 31 December 2020
Cross-currency swap (0.1) – Finance costs – Operating expenses
Interest rate swap 0.2 – Finance costs – Finance costs
Foreign exchange forward contracts (0.6) – 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.
Asatthe year end there was one (2020: no) such item with a total carrying amount of £0.1m (2020: £nil).
182 SIG Annual Report and Accounts 2021
Financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1826X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 182 11/03/2022 16:50:4611/03/2022 16:50:46
iii) Impact of hedging on equity
Set below is the reconciliation of each component of equity and the analysis of other comprehensive income (“OCI”):
Retained
(losses)/profits
Cash flow
hedging reserve
Foreign currency
translation reserve
Cost of hedging
reserve
2021
£m
Restated
2020
£m
2021
£m
2020
£m
2021
£m
2020
£m
2021
£m
2020
£m
At 1 January (369.3) ( 2 37.0) 2.2 3.5 8.4 6.7 0.2 0.3
Effective portion of changes in fair value arising
from:
Net Investment Swaps – – – – 0.5 (1.2) – (0.2)
Cross-currency swaps – – 0.5 (0.2) – – – 0.1
Interest rate swaps – – – 0.2 – – – –
Foreign exchange forward contracts – – 0.2 (0.6) – – – –
Amount reclassified to profit or loss – – (3.1) (0.7) – – (0.1) –
Foreign currency revaluation of foreign currency
denominated borrowing – – – – 8.1 (9.5) – –
Foreign currency revaluation of net foreign
operations – – – – (14.4) 18.3 – –
Tax ef fect – – – – – – – –
Exchange differences reclassified to the
Consolidated Income Statement in respect of the
disposal of foreign operations – – – – – (5.9) – –
Other movements not associated with hedging 428.6 (132.3) – – – – – –
At 31 December 59.3 (369.3) (0.2) 2.2 2.6 8.4 0.1 0.2
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.
2021
£m
2020
£m
Gains on derivative financial instruments recognised directly in the Consolidated income statement – 0.7
Amounts reclassified from OCI to profit and loss on cash flow hedges (3.1) 0.8
Total net losses on derivative financial instruments included in the Consolidated income statement (3.1) 1.5
21. Maturity of financial assets and liabilities
Maturity of financial liabilities
The maturity profile of the Group’s financial liabilities (inclusive of derivative financial assets) at 31 December 2021 was as follows:
2021
£m
2020
£m
In one year or less 51.7 51.3
In more than one year but not more than two years 44.0 43.4
In more than two years but not more than five years 336.4 294.5
In more than five years 81.7 88.3
Total 513.8 477.5
The table excludes trade payables of £341.0m (2020: £275.6m).
183SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1836X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 183 11/03/2022 16:50:4611/03/2022 16:50:46
21. Maturity of financial assets and liabilities continued
Contractual maturity analysis of the Group’s financial liabilities, derivative financial instruments, other financial assets,
deferredconsideration and cash and cash equivalents
IFRS 7 requires disclosure of the maturity of the Group’s remaining contractual financial liabilities. The tables below have been drawn up based on
theundiscounted 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.
2021 Analysis
Balance sheet
value
£m
Maturity analysis
< 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
Senior 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 62.6 387.0 126.2 589.6
Total liabilities 855.0 416.0 62.6 387.0 126.2 991.8
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) – – – (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)
184 SIG Annual Report and Accounts 2021
Financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1846X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 184 11/03/2022 16:50:4711/03/2022 16:50:47
2020 Analysis
Balance sheet
value
£m
Maturity analysis
< 1 year
£m
1-2 years
£m
2-5 years
£m
> 5 year
£m
Total
£m
Current liabilities
Trade and other payables 275.6 275.6 – – – 275.6
Lease liabilities 50.6 61.5 – – – 61.5
Deferred consideration 0.5 0.5 – – – 0.5
Derivative financial instruments 0.5 0.5 – – – 0.5
Other financial liabilities 0.5 0.5 – – – 0.5
Total 327.7 338.6 – – – 338.6
Non-current liabilities
Lease liabilities 211.6 – 51.8 101.5 144.0 297.3
Bank loans 67.7 2.7 2.7 71.6 – 7 7. 0
Private placement notes 144.5 7. 6 7.6 89.3 77.6 182.1
Deferred consideration 0.4 – 0.4 – – 0.4
Derivative financial instruments 0.4 (0.1) (0.1) (0.3) 1.2 0.7
Other financial liabilities 1.2 – 1.2 – – 1.2
Total 425.8 10.2 63.6 262.1 222.8 558.7
Total liabilities 753.5 348.8 63.6 262.1 222.8 8 97.3
Other
Derivative financial instrument assets (0.1) – – – (0.1) (0.1)
Cash and cash equivalents (235.3) (235.3) – – – (235.3)
Trade and other receivables (294.4) (294.4) – – – (294.4)
Total (529.8) (529.7) – – (0.1) (529.8)
Grand total 223.7 (180.9) 63.6 262.1 222.7 3 67.5
The table above includes: cross-currency interest rate swaps in relation to derivative financial assets with a fair value at 31 December 2020 of £0.1m
and derivative financial liabilities of £0.3m that will be settled gross, the final exchange on these derivatives will be a payment of €18.3m and receipt of
$22.2m in August 2026; and other derivative financial assets with a fair value at 31 December 2020 of £nil and derivative financial liabilities of £0.5m
that will be settled gross, the final exchange on these derivatives will be total receipts of €20m, PLN 32m, $3.0m and £nil and corresponding
payments of £29.2m and €nil.
The following financial assets and liabilities are subject to offsetting, enforceable master netting arrangements:
As at 31 December 2020
Gross amounts
of recognised
financial assets/
(liabilities)
£m
Amounts
available to offset
through netting
agreements
£m
Net amount
£m
Derivative financial assets 0.1 (0.1) –
Derivative financial liabilities (0.9) 0.1 (0.8)
Total (0.8) – (0.8)
185SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1856X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 185 11/03/2022 16:50:4711/03/2022 16:50:47
22. Sensitivity Analysis
IFRS 7 requires the disclosure of a sensitivity analysis that details the effects on the Group’s profit or loss and other equity of reasonably possible
fluctuations in market rates.
This sensitivity analysis has been prepared to illustrate the effect of the following hypothetical variations in market rates on the fair value of the Group’s
financial assets and liabilities:
(i) a 1% (100 basis points) increase or decrease in market interest rates; and
(ii) a 10% strengthening or weakening of Sterling against all other currencies to which the Group is exposed.
a) Interest rate sensitivity
The Group is currently exposed to Sterling and Euro interest rates. Following the refinancing in November 2021 the Group is no longer exposed to a
USD interest rate, and the exposure to variable Euro interest rates has reduced. 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.
2021 analysis
GBP EUR USD Total
+100bp
£m
-100bp
£m
+100bp
£m
-100bp
£m
+100bp
£m
-100bp
£m
+100bp
£m
-100bp
£m
Profit or loss – – (i) – – (iii) – – – –
Total Shareholders’ equity – – – – – – – –
2020 analysis
GBP EUR USD Total
+100bp
£m
-100bp
£m
+100bp
£m
-100bp
£m
+100bp
£m
-100bp
£m
+100bp
£m
-100bp
£m
Profit or loss 0.4 (0.4) (i) – – (iii) – – 0.4 (0.4)
Other equity – – (ii) 1.1 (1.2) (iv) (1.1) 1.1 (ii) – (0.1)
Total Shareholders’ equity 0.4 (0.4) 1.1 (1.2) (1.1) 1.1 0.4 (0.5)
The movements noted above are mainly attributable to:
(i) floating rate Sterling debt and cash deposits
(ii) mark-to-market valuation changes in the fair value of effective cash flow hedges
(iii) floating rate Euro debt and Euro cash deposits
(iv) changes in the value of the Group’s Euro-denominated assets and liabilities
b) Foreign currency sensitivity
The Group is exposed to currency rate changes between Sterling and Euros, US Dollars and Polish Zloty.
The following table details the Group’s sensitivity to a 10% change in Sterling against each respective foreign currency to which the Group is exposed,
indicating the likely impact of changes in foreign exchange rates on the Group’s financial position. The sensitivity analysis of the Group’s exposure to
foreign currency risk at the reporting date has been determined based on the change taking place at the beginning of the financial year and held
constant throughout the reporting period. A positive number indicates an increase in profit or loss and other equity.
186 SIG Annual Report and Accounts 2021
Financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1866X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 186 11/03/2022 16:50:4711/03/2022 16:50:47
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*
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
2020 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) – – (0.1) 0.1 ( 0.1) 0.1
Other equity 0.8 (1.0) (ii) (0.4) 0.5 (ii) 0.3 (0.4) (ii) 0.7 (0.9)
Total Shareholders’ equity 0.8 (1.0) (0.4) 0.5 0.2 (0.3) 0.6 (0.8)
Total assets and liabilities*
Profit or loss – – (iii) – – (v) (0.1) 0.1 (vi) (0.1) 0.1
Other equity (4.7) 5.8 (iv) (0.4) 0.5 (iv) (0.1) 0.1 (iv) (5.2) 6.4
Total Shareholders’ equity (4.7) 5.8 (0.4) 0.5 (0.2) 0.2 (5.3) 6.5
* Certain assets and liabilities such as inventories, non-current assets and provisions do not come under the scope of IFRS 7. Therefore, in order to present a complete analysis of
the Group’s exposure to movements in foreign currency exchange rates, the exposure on the Group’s total assets and liabilities has been disclosed.
The movements noted above are mainly attributable to:
(i) retranslation of Euro interest flows
(ii) mark-to-market valuation changes in the fair value of effective cash flow and net investment hedges and retranslation of assets and liabilities
under the scope of IFRS 7
(iii) retranslation of Euro profit streams and transaction exposure relating to purchases in Euros
(iv) retranslation of foreign currency denominated assets and liabilities outside the scope of IFRS 7 and mark-to-market valuation changes in the fair
value of effective cash flow and net investment hedges
(v) transaction exposure relating to purchases in US Dollars
(vi) retranslation of Polish Zloty profit streams
187SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1876X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 187 11/03/2022 16:50:4711/03/2022 16:50:47
23. Provisions
Onerous
leases
£m
Leasehold
dilapidations
£m
Onerous
contracts
£m
Other
amounts
£m
Total
£m
At 1 January 2021 0.6 22.1 11.4 2.1 36.2
Unused amounts reversed in the period (0.3) (0.5) – (0.2) (1.0)
Utilised 0.5 (1.4) (4.9) (2.2) (8.0)
New provisions 0.5 1.3 2.2 2.5 6.5
Added on acquisition – 0.6 – – 0.6
Unwinding of discount – – 0.1 – 0.1
Exchange differences – (0.1) – (0.1) (0.2)
At 31 December 2021 1.3 22.0 8.8 2.1 34.2
2021
£m
2020
£m
Included in current liabilities 12.9 10.5
Included in non-current liabilities 21.3 25.7
Total 34.2 36.2
Onerous leases
Since adoption of IFRS 16 on 1 January 2019, the future rental payments due over the remaining term of existing lease contracts is included in the
lease liability, with the right-of-use asset impaired to reflect the future cost not covered through sublease income. The remaining onerous lease
provision relates to other non-rental costs due over the remaining lease term based on expected value of costs to be incurred and assumptions
regarding subletting. The balance at 31 December 2021 is payable over the relevant lease terms, the longest unexpired term being 20 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 liability to rectify or reinstate leasehold improvements and modifications carried out on the inception of the lease (recognised on inception
with corresponding fixed asset) and the liability to rectify general wear and tear which is recognised as incurred over the life of the lease. The costs will
be incurred both at the end of the leases as set out in Note 25 (reinstatement) and during the lease term (wear and tear).
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 1HANA implementation following the change in scope of the project in 2020 and subsequent changes in 2021. The costs will be incurred
equally over the next two years.
Other amounts
Other amounts relate principally to claims and warranty provisions. The transfer of economic benefit is expected to be made between one and four
years’ time.
24. Deferred tax
The net deferred tax asset at the end of the year is analysed as follows:
2021
£m
2020
£m
Deferred tax assets:
Continuing operations 4.8 5.7
Net deferred tax asset 4.8 5.7
188 SIG Annual Report and Accounts 2021
Financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1886X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 188 11/03/2022 16:50:4711/03/2022 16:50:47
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
Other
temporary
differences
£m
Retirement
benefit
obligations
£m
Losses
£m
Other
£m
Total
£m
At 1 January 2020 (restated) (4.1) 5.0 2.3 2.7 3.2 (2.7) 6.4
Credit/(charge) to income 1.1 (1.0) – – (2.0) 1.3 (0.6)
Credit/(charge) to equity – – – 0.3 – – 0.3
Exchange differences ( 0.1) – – – – – (0.1)
Change of rate charged to equity – – 0.1 0.2 0.1 (0.5) (0.1)
Attributable to discontinued operations 1.4 0.7 (1.6) – (0.7) – (0.2)
At 31 December 2020 (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
The deferred tax charge within the Consolidated Income Statement for 2021 includes a charge of £0.1m (2020: £0.2m) arising from the change in
domestic tax rates in the countries in which the Group operates.
Given current and forecast trading the Directors consider that recognition of the deferred tax assets above is appropriate.
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 £77.9m (2020: £57.0m) of potential deferred tax assets relating mainly to cumulative UK tax losses and other deductible temporary
differences which are currently unrecognised as there is not considered to be sufficient convincing evidence at 31 December 2021 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.
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 £143m (2020: £280m). 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 are now substantively enacted at the balance sheet date and have been reflected in the measurement of deferred tax balances at the
period end. This has not had a significant impact as deferred tax 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.
Atpresent, 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.
189SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1896X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 189 11/03/2022 16:50:4711/03/2022 16:50:47
25. Leases
The Group as a lessee
The Group has lease contracts for various properties, vehicles and other equipment used in its operations. Information on the nature and accounting
for lease contracts is provided in the Statement of 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 2021 202.2 27.4 229.6
Foreign currency movement (6.6) (1.3) (7.9)
Additions 25.3 23.6 48.9
Added on acquisition 7.4 0.1 7.5
Disposals – (0.4) (0.4)
Modifications 11.2 (0.6) 10.6
Impairments (0.5) – (0.5)
Depreciation expense (42.7) (14.2) (56.9)
At 31 December 2021 196.3 34.6 230.9
Set out below are the carrying amounts of lease liabilities and the movements during the year:
2021
£m
At 1 January 2021 262.2
Foreign currency movement (8.1)
Additions 48.9
Added on acquisition 7. 5
Disposals (0.1)
Modifications 8.0
Accretion of interest 11.6
Payments (68.9)
At 31 December 2021 261.1
Current 50.7
Non-current 210.4
261.1
The following are the amounts recognised in profit or loss (from continuing operations):
2021
£m
2020
£m
Depreciation expense of right-of-use assets 56.9 56.6
Interest expense on lease liabilities 11.6 12.5
Expense relating to short-term leases (included in operating expenses) 0.8 0.8
Impairment of right-of-use assets (included in Other items)* 0.5 10.2
Total amount recognised in profit or loss 69.8 8 0.1
* £0.5m impairment is included within net restructuring costs within Other items. In the prior year £10.1m was included within “Impairment charges” within Other items in 2020
relating to the impairment of the right-of-use asset within UK Interiors and £0.1m was included within net restructuring costs within Other items.
The Group had total cash outflows for leases of £68.9m in 2021 (2020: £66.5m). The Group also had non-cash additions to right-of-use assets and
lease liabilities of £48.9m in 2021 (2020: £38.5m). The future cash outflows relating to leases that have not yet commenced are disclosed in Note
32(b).
The Group has several lease contracts that include extension and termination options. These options are negotiated by management to provide
flexibility in managing the lease-asset portfolio and align with the Group’s business needs.
Set out below are the undiscounted potential future rental payments relating to periods following the expiry date of extension and termination options
that are not included in the lease term.
190 SIG Annual Report and Accounts 2021
Financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1906X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 190 11/03/2022 16:50:4711/03/2022 16:50:47
Within five
years
£m
More than five
years
£m
Total
£m
Extension options expected not to be exercised 31.7 52.2 83.9
Termination options expected to be exercised 2.2 0.9 3.1
33.9 53.1 87.0
The Group has considered the impact of any rent concessions as a result of Covid-19. The only changes as a result of Covid-19 were changes in the
timing of payments (for example from quarterly to monthly) in the prior year and there were therefore no significant amounts recognised in the income
statement from Covid-19 related rent concessions during the year or prior year.
The Group as a lessor
The Group is an intermediate lessor of a number of property leases which are subleased to a third party and are classified as finance leases in
accordance with IFRS16. The Group has lease assets receivable of £3.7m at 31 December 2021 (2020: £4.3m). These leases have terms of between
3 and 13 years. Rental income recognised by the Group during the year is £1.0m (2020: £1.0m).
Future lease payments receivable from sub-leases classified as finance leases at 31 December 2021 are as follows:
2021
£m
2020
£m
Within one year 1.1 0.9
After one year but not more than five years 2.5 3.0
More than five years 1.0 1.2
4.6 5.1
Less: future finance charges (0.9) (0.8)
Lease assets receivable 3.7 4.3
Of the total lease assets receivable, £0.8m (2020: £0.7m) is due within one year and £2.9m (2020: £3.6m) is due after more than one year.
Future minimum rentals receivable under non-cancellable operating leases at 31 December 2021 are as follows:
2021
£m
2020
£m
Within one year 0.4 0.3
After one year but not more than five years 0.9 1.0
More than five years 0.2 –
1.5 1.3
26. Government grants
The Group benefited from a number of government support packages during 2020 in relation to the Covid-19 pandemic. Income received under
furlough support schemes (Coronavirus Job Retention Scheme in the UK and similar in Ireland, France and Benelux), amounting to £8.1m, met the
definition of government grants and was netted off the related staff costs, and other business grants of £0.7m were also received and deducted from
related costs. Amounts received in the year are shown below:
2021
£m
2020
£m
At 1 January – –
Received during the year – 8.8
Released to the profit and loss account – (8.8)
At 31 December – –
In 2020 the Group also benefitted from business rate savings in the UK and social tax savings in France, amounting to £2.1m, which represented a form
of government assistance, but not a grant as there was no transfer of resources. Payment deferrals in relation to VAT, employment taxes and corporate
tax did not have an impact on the profit and loss account. The majority of these had been repaid by 31 December 2020, with any outstanding amounts
included in the relevant liability on the Consolidated balance sheet. All outstanding balances have been repaid at 31 December 2021.
191SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1916X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 191 11/03/2022 16:50:4711/03/2022 16:50:47
27. Called up share capital
2021
£m
2020
£m
Authorised:
1,390,000,000 ordinary shares of 10p each (2020: 1,390,000,000) 139.0 139.0
Allotted, called up and fully paid:
1,181,556,977 ordinary shares of 10p each (2020: 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.
Equity raise in 2020
On 10 July 2020 the Group completed an equity raise, with 589,999,995 new ordinary shares issued for gross proceeds of £165m. 587,901,900 of the
shares were issued using a cash box structure, such that merger relief was available under the Companies Act 2006, section 612. In this circumstance,
no share premium is recorded and the £105.6m excess of the net proceeds over the nominal value of the share capital issue has been recorded as a
merger reserve. The proceeds of this issue were used to partially prepay private placement notes (see Note 19), to pay professional and lender fees
relating to the equity raise and debt restructuring and to provide working capital flexibility. Consequently, the merger reserve will qualify as distributable.
The other 2,098,095 of shares were issued directly to senior management, not within the cash box structure, and the excess of the proceeds over the
nominal value of the share capital of £0.4m was credited to the share premium account.
Professional fees of £13.1m incurred and directly related to the equity raise were deducted from the merger reserve (as no share premium recorded
due to the use of the cash box structure as noted above), resulting in a net increase to the merger reserve of £92.5m.
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. Shares became unallocated during the prior year and were transferred to the treasury share reserve. 24,708,134 shares were
purchased during the current year at a weighted average cost of 50.5p per share. A total of 24,814,955 own shares are outstanding at 31 December
2021 (2020: 125,429).
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 results in the transfer of
£447.7m from share premium account to retained profits/(losses) and creates distributable reserves.
192 SIG Annual Report and Accounts 2021
Financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1926X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 192 11/03/2022 16:50:4711/03/2022 16:50:47
28. Reconciliation of loss before tax to cash generated from operating activities
2021
£m
Restated
2020
£m
Loss before tax from continuing operations (15.9) (194.6)
Profit before tax from discontinued operations – 72.0
Loss before tax (15.9) (122.6)
Net finance costs (Note 5) 29.9 34.6
Depreciation of property, plant and equipment (Note 10) 11.4 11.2
Depreciation of right-of-use assets (Note 25) 56.9 57. 2
Amortisation of computer software (Note 14) 3.4 4.8
Amortisation of acquired intangibles (Note 14) 4.7 5.6
Impairment of computer software (Note 14) – 0.5
Impairment of property, plant and equipment (Note 10) 0.3 3.5
Impairment of goodwill (Note 13) 9.9 45.4
Impairment of acquired intangibles (Note 14) – 1.9
Impairment of right-of-use asset (Note 25) 0.5 10.2
Profit on agreed sale or closure of non-core businesses (Note 11) – (71.6)
(Profit)/loss on sale of property, plant and equipment (0.9) 0.7
Share-based payments 2.4 0.2
Gains on derivative financial instruments (2.8) (1.5)
Net foreign exchange differences 0.3 0.2
(Decrease)/increase in provisions (7.3) 11. 3
Working capital movements:
Increase in inventories (75.7) (5.4)
(Increase)/decrease in receivables (68.1) 19.7
Increase/(decrease) in payables 58.4 (56.4)
Cash generating from/(used in) operating activities 7.4 (50.5)
Included within the cash generated from/(used in) operating activities is a defined benefit pension scheme employer’s contribution of £5.0m (2020: £2.5m).
Of the total loss on sale of property, plant and equipment, £nil profit (2020: £0.2m) has been included within Other items of the Consolidated income
statement (see Note 2).
29. Reconciliation of net cash flow to movements in net debt
2021
£m
2020
£m
(Decrease)/increase in cash and cash equivalents in the year (82.7) 68.4
Cash flow from decrease in debt 15.8 183.0
(Increase)/decrease in net debt resulting from cash flows (66.9) 251.4
Movement in deferred consideration (0.9) (0.9)
Debt added on acquisitions (7.5) –
Non-cash items^ (60.0) (39.3)
Exchange differences 8.5 6.0
(Increase)/decrease in net debt in the year (126.8) 217.2
Net debt at 1 January (238.2) (455.4)
Net debt at 31 December (365.0) (238.2)
^ Non-cash items include the fair value movement of debt recognised in the year which does not give rise to a cash inflow or outflow, the movement in cash restricted for use in
relation to the asset backed funding arrangement implemented in relation to the UK defined benefit pension plan and non-cash movements in relation to lease liabilities.
193SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1936X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 193 11/03/2022 16:50:4711/03/2022 16:50:47
29. Reconciliation of net cash flow to movements in net debt continued
Net debt is defined as follows:
2021
£m
2020
£m
Non-current assets:
Derivative financial instruments – 0.1
Lease receivables 2.9 3.6
Current assets:
Derivative financial instruments 0.2 –
Lease receivables 0.8 0.7
Cash at bank and on hand 145.1 235.3
Current liabilities:
Lease liabilities (50.7) (50.6)
Deferred consideration (1.1) (0.5)
Other financial liabilities (0.4) (0.5)
Derivative financial instruments (0.5) (0.5)
Non-current liabilities:
Lease liabilities (210.4) (211.6)
Interest-bearing loans and borrowings (249.6) (212.2)
Deferred consideration (0.7) (0.4)
Derivative financial instruments – (0.4)
Other financial liabilities (0.6) (1.2)
Net debt (365.0) (238.2)
30. Analysis of net debt
At
31December
2020
£m
Cash flows
£m
Acquisitions
£m
Non-cash
items*
£m
Exchange
differences
£m
At
31December
2021
£m
Cash at bank and on hand 235.3 (72.6) (10.1) – (7.5) 14 5.1
Lease receivables 4.3 (1.0) – 0.4 – 3.7
239.6 (73.6) (10.1) 0.4 (7.5) 148.8
Liabilities arising from financing activities
Financial assets – derivative financial instruments 0.1 (0.8) – 0.9 – 0.2
Debts due within one year (1.5) 0.5 (0.2) (0.8) – (2.0)
Debts due after one year (214.2) (51.8) (0.7) 7.9 7.9 (250.9)
Lease liabilities (262.2) 68.9 (7.5) (68.4) 8.1 (261.1)
(477.8) 16.8 (8.4) (60.4) 16.0 (513.8)
Net debt (238.2) (56.8) (18.5) (60.0) 8.5 (365.0)
* 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.
194 SIG Annual Report and Accounts 2021
Financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1946X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 194 11/03/2022 16:50:4711/03/2022 16:50:47
31. Retirement benefit obligations
The Group operates a number of pension schemes, four (2020: four) of which provide defined benefits based on final pensionable salary. Of these
schemes, one (2020: one) has assets held in a separate trustee administered fund and three (2020: three) are overseas book reserve schemes. The
Group also operates a number of defined contribution schemes, all of which are independently managed.
In The Netherlands, the Company participates in the industry-wide pension plan for the construction materials industry (“BPF HiBiN”). The pension
plan is classified as a multi-employer defined benefit scheme under IAS 19, but is recognised in the financial statements as a defined contribution
scheme since the pension fund is not able to provide sufficient information to allow SIG’s share of the assets and liabilities to be separately identified.
Therefore, the Group’s annual pension expense for this scheme is equal to the required contribution each year. The coverage ratio of the multi-
employer union plan increased to 102.5% as at 31 December 2021 (2020: 94.8%). No change was made to the pension premium percentage of
22.2% (2020: 22.2%). The coverage ratio is calculated by dividing the fund’s assets by the total sum of pension liabilities and is based upon market
interest rates. The Company’s participation in this scheme represents c.0.1% of the total members. The Company is not liable for other participants’
obligations, and there is no agreed allocation of surplus or deficit on withdrawal from the scheme or on winding up of the scheme. The Company is
not aware of any planned changes to contributions or benefits at the current time.
The Group’s total pension charge for the year, including amounts charged to interest and Other items, was £6.9m (2020: £6.9m), of which a charge of
£0.6m (2020: £0.7m) related to defined benefit pension schemes and £6.3m (2020: £6.2m) related to defined contribution schemes.
Defined benefit pension scheme valuations
In accordance with IAS 19, the Group recognises all actuarial gains and losses in full in the period in which they arise in the Consolidated statement of
comprehensive income.
The actuarial valuations of the defined benefit pension schemes are assessed by an independent actuary every three years who recommends the
rate of contribution payable each year. The last formal actuarial valuation of the SIG plc Retirement Benefits Plan, the UK scheme which is the largest
scheme of the Group, was at 31 December 2019 was concluded during the year. It 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.
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 partnership is controlled by the Group and is therefore included within the consolidated financial statements. The
receivables continue to be recognised on the consolidated balance sheet, and the Plan’s interest in the partnership is a non-transferable financial
asset issued by the Group, and therefore does not constitute a plan asset for the Group. Distribution of income to the partners of the partnership,
which forms the contribution to the Plan, is at the discretion of the General Partner, a subsidiary of the Group. There is however a guarantee in place
which ensures that the Group’s subsidiary, SIG Trading Limited, will make an equivalent contribution to the Plan if the partnership does not effect the
discretionary distribution. The Group is therefore committed to making a contribution of £2.5m per annum until the structure terminates at the end of
20 years or earlier if the funding level of the Plan increases to greater than 115% of Technical Provisions before the end of the term.
The 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.
195SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1956X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 195 11/03/2022 16:50:4711/03/2022 16:50:47
31. Retirement benefit obligations continued
Investment risk The present value of the defined benefit plan liability is calculated using a discount rate determined by reference to high quality
corporate bond yields; if the return on plan assets falls below this rate, it will create a plan deficit. Currently the plan has relatively
balanced investments in line with the Trustees’ Statement of Investment Principles between equity securities and debt
instruments. Due to the long-term nature of the plan liabilities, the Trustees of the pension fund consider it appropriate that a
reasonable portion of the plan assets should be invested in growth assets to leverage the return generated by the fund.
Interest rate risk A decrease in the bond interest rate will increase the plan liability but this will be partially offset by an increase in the return on the
plan’s bond holdings.
Longevity risk The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan
participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the
plan’s liability.
Salary risk The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such,
an increase in the salary of the plan participants will increase the plan’s liability. However, a pensionable salary cap was
introduced from 1 July 2012 of 2.5% per annum.
Consolidated income statement charges
The pension charge for the year, including amounts charged to interest of £0.2m (2020: £0.3m) relating to the defined benefit pension schemes, was
£0.6m (2020: £0.7m). The charge for the prior year included £0.4m in relation to the estimated liability impact of equalising Guaranteed Minimum
Pensions (GMP) in relation to past transfer values, following the High Court ruling in November 2020. This estimated increase in the liability was
charged to Other items within the Consolidated income statement, consistent with the original GMP liability estimate of £1.0m in 2018.
In accordance with IAS 19, the charge for the defined benefit schemes has been calculated as the sum of the cost of benefits accruing in the year, the
increase in the value of benefits already accrued and the expected return on assets. The actuarial valuations described previously have been updated
at 31 December 2021 by a qualified actuary using revised assumptions that are consistent with the requirements of IAS 19. Investments have been
valued, for this purpose, at fair value.
The UK defined benefit scheme is closed to new members and has an age profile that is rising. The three overseas book reserve schemes remain
open to new members.
Consolidated balance sheet liability
The balance sheet position in respect of the four defined benefit schemes can be summarised as follows:
2021
£m
2020
£m
Pension liability before taxation (10.7) (25.1)
Related deferred tax asset 2.1 3.2
Pension liability after taxation (8.6) (21.9)
The actuarial gain of £9.1m (2020: £1.7m loss) for the year, together with the associated deferred tax credit of £0.1m (2020: £0.4m credit) has been
recognised in the Consolidated statement of comprehensive income. In addition a deferred tax credit of £0.4m (2020: £nil credit) has been recognised
in the Consolidated income statement.
Of the above pension liability before taxation, £2.2m (2020: £15.6m) relates to wholly or partly funded schemes and £8.5m (2020: £9.5m) relates to
the overseas unfunded schemes.
196 SIG Annual Report and Accounts 2021
Financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1966X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 196 11/03/2022 16:50:4711/03/2022 16:50:47
The movement in the pension liability before taxation in the year can be summarised as follows:
2021
£m
2020
£m
Pension liability at 1 January (25.1) (24.8)
Current service cost (0.4) –
Payment of unfunded benefits 0.3 –
Contributions 5.0 2.5
Net finance cost (0.2) (0.3)
GMP equalisation ruling – (0.4)
Actuarial gain/(loss) 9.1 (1.7)
Business disposals – 0.1
Effect of changes in exchange rates 0.6 (0.5)
Pension liability at 31 December (10.7) (25.1)
The principal assumptions used for the IAS 19 actuarial valuation of the UK scheme (the largest scheme of the Group) were:
2021
%
2020
%
Rate of increase in salaries* n/a n/a
Rate of fixed increase of pensions in payment 2.0% 1.8%
Rate of increase of LPI pensions in payment 3.2% 2.8%
Discount rate 1.8% 1.4%
Inflation assumption 3.4% 2.9%
* Upon closure of the UK defined benefit scheme to future benefit accrual the accrued benefits of active members ceased to be linked to their final salary and will instead revalue in
deferment broadly in line with movements in the Consumer Price Index.
Deferred pensions are revalued to retirement in line with the schemes’ rules and statutory requirements, with the inflation assumption used for LPI
revaluation in deferment.
Within the principal plan the life expectancy for a male employee beyond the normal retirement age of 65 is 22.6 years (2020: 22.6 years). The life
expectancy on retirement at age 65 of a male employee currently aged 45 years is 23.1 years (2020: 23.1 years). The life expectancy for a female
employee beyond the normal retirement age of 65 is 24.0 years (2020: 24.0 years). The life expectancy on retirement at age 65 of a female employee
currently aged 45 years is 25.6 years (2020: 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£2.6m. If the rate of inflation increased/decreased by 0.1% this would increase/decrease the
Group’s gross pension scheme deficit by c£0.8m. If the life expectancy for employees increased by one year the Group’s gross pension scheme
deficit would increase by c£9.1m. 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 2021 is 17 years (2020: 18 years).
The fair value of assets held at the balance sheet date were:
2021
£m
2020
£m
Equities 43.0 40.9
Corporate and government bonds 89.5 93.2
Investment funds 15.3 14.8
Property 8.1 7.4
Cash and net current assets 16.4 17.2
Total fair value of assets 172.3 173.5
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.
197SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1976X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 197 11/03/2022 16:50:4711/03/2022 16:50:47
31. Retirement benefit obligations continued
The amount included in the Consolidated balance sheet arising from the Group’s obligation in respect of its defined benefit schemes is as follows:
2021
£m
2020
£m
Fair value of assets 172.3 173.5
Present value of scheme liabilities (183.0) (198.6)
Net liability recognised in the Consolidated balance sheet (10.7) (25.1)
The overall expected rate of return is based upon market conditions at the balance sheet date.
Amounts recognised in the Consolidated income statement (from continuing operations) in respect of these defined benefit schemes are as follows:
2021
£m
2020
£m
Current service cost 0.4 –
GMP equalisation ruling – 0.4
Net finance cost 0.2 0.3
Amounts recognised in the Consolidated income statement 0.6 0.7
Analysis of the actuarial loss recognised in the Consolidated statement of comprehensive income in respect of the schemes:
2021
£m
2020
£m
Actual return less expected return on assets 0.8 12.9
Effect of changes in demographic assumptions 0.7 4.0
Effect of changes in financial assumptions 8.8 (24.2)
Impact of liability experience (1.2) 5.6
Remeasurement of the defined benefit liability 9.1 (1.7)
The remeasurement of the net defined benefit liability is included within the Consolidated statement of comprehensive income.
Movements in the present value of the schemes’ liabilities were as follows:
2021
£m
2020
£m
Present value of schemes’ liabilities at 1 January (198.6) (188.3)
Current service cost (0.4) –
Interest on pension schemes’ liabilities (2.5) (3.7)
Benefits paid 9.3 8.8
Payment of unfunded benefits 0.3 –
Effect of changes in exchange rates 0.6 (0.5)
GMP equalisation ruling – (0.4)
Remeasurement gains/(losses):
Actuarial gain arising from changes in demographic assumptions 0.7 4.0
Actuarial loss arising from changes in financial assumptions 8.8 (24.2)
Actuarial loss due to liability experience (1.2) 5.6
Business disposals – 0.1
Present value of schemes’ liabilities at 31 December (183.0) (198.6)
Movements in the fair value of the schemes’ assets were as follows:
2021
£m
2020
£m
Fair value of schemes’ assets at 1 January 173.5 163.5
Finance income 2.3 3.4
Actual return less expected return on assets 0.8 12.9
Contributions from sponsoring companies 5.0 2.5
Benefits paid (9.3) (8.8)
Fair value of schemes’ assets at 31 December 172.3 173.5
198 SIG Annual Report and Accounts 2021
Financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2021
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1986X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 198 11/03/2022 16:50:4811/03/2022 16:50:48
32. Commitments and contingencies
a) Capital commitments
2021
£m
2020
£m
The purchase of property, plant and equipment contracted but not provided for 0.1 0.3
At 31 December 2021 the Group is also committed to further licence costs of £10.1m (2020: £14.8m) in relation to the SAP implementation project
and other licence fees. £8.8m of this commitment has been already recognised as an onerous contract provision at 31 December, with £1.3m
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 2021. The future lease payments for these non-cancellable
lease contracts are £0.9m within one year (2020: £1.0m), £3.4m within five years (2020: £3.8m) and £1.8m thereafter (2020: £4.7m).
Information on the Group’s leasing arrangements is included in Note 25.
c) Contingent liabilities
As at the balance sheet date, the Group had outstanding obligations under customer guarantees, claims, standby letters of credit and discounted
bills of up to £9.9m (2020: £14.1m). Of this amount, £4.7m (2020: £5.0m) 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 £1.1m (2020: £1.5m) based on the remaining future rent
commitment at 31 December 2021. No provision has been made in these financial statements as it is not considered likely that any loss will be
incurred in connection with this.
33. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and have therefore not
been disclosed.
In 2021, SIG incurred expenses of £0.6m (2020: £0.5m) on behalf of the SIG plc Retirement Benefits Plan, the UK defined benefit pension scheme.
Remuneration of key management personnel
The total remuneration of key management personnel of the Group, being the Executive Leadership Team members and the Non-Executive Directors
(see page 121), is set out below in aggregate for each of the categories specified in IAS 24 “Related Party Disclosures”.
2021
£m
2020
£m
Short term employee benefits 6.7 5.8
Termination and post-employment benefits – 0.1
IFRS 2 share option charge 1.5 –
8.2 5.9
34. Subsidiaries
Details of the Group’s subsidiaries, all of which have been included in the financial statements, are shown on pages 227 to 230.
35. Post balance sheet events
There are no post balance sheet events requiring adjustment or disclosure in the Consolidated financial statements.
199SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 1996X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 199 11/03/2022 16:50:4811/03/2022 16:50:48
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 31 December 2021. Measures presented are aligned with the key performance measures used in the business and as included in the
Strategic report. Operating costs as a percentage of sales is not included as a KPI in the current year and is therefore not presented below, whilst free
cash flow is included for the first time in the current year.
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. Net debt on frozen GAAP basis
and covenant net debt which were presented last year are no longer relevant following the change in debt arrangements during the year and are
therefore no longer presented.
Note
2021
£m
2020
£m
Reported net debt 29 365.0 238.2
Lease liabilities recognised in accordance with IFRS 16 (239.1) (237.0 )
Lease receivables recognised in accordance with IFRS 16 3.7 4.3
Other financial liabilities recognised in accordance with IFRS 16 (1.0) (1.4)
Net debt excluding the impact of IFRS 16 128.6 4.1
b) Like-for-like sales
Like-for-like sales is calculated on a constant currency basis, and represents the growth in the Group’s sales per day excluding any acquisitions or
disposals completed or agreed in the current and prior year. Revenue is not adjusted for branch openings and closures. This measure shows how the
Group has developed its revenue for comparable business relative to the prior period. As such it is a key measure of the growth of the Group during
the year. Underlying revenue is revenue from continuing operations excluding non-core businesses.
UK
Interiors
£m
UK
Exteriors
£m
Total UK
£m
France
Interiors
(LiTT)
£m
France
Exteriors
(Larivière)
£m
Total
France
£m
Germany
£m
Benelux
£m
Ireland
£m
Poland
£m
Total
Group
£m
Statutory 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
Non-core businesses – – – – – – – – – – –
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
Statutory revenue 2020 3 5 7.4 310.1 6 67. 5 168 .1 346.6 514.7 370.7 91.6 80.5 149.5 1,874.5
Non-core businesses – – – – (1.8) (1.8) – – – – (1.8)
Underlying revenue 2020 3 57.4 310.1 667.5 168.1 344.8 512.9 370.7 91.6 80.5 149.5 1,872.7
% change year on year:
Underlying revenue 42.0% 36.1% 39.3% 16.2% 17.7% 17. 2% 6.1% 0.9% 9.6% 24.9% 22.4%
Impact of currency – – – 3.9% 4.0% 4.0% 3.5% 3.4% 3.6% 7.0% 2.6%
Impact of acquisitions (4.6)% (1.2)% (3.0)% – – – – – – – (0.3)%
Impact of working days 0.6% 0.6% 0.6% – – – – 0.8% 0.5% 1.6% (0.4)%
Like-for-like sales 38.0% 35.5% 36.9% 20.1% 21.7% 21.2% 9.6% 5.1% 13.7% 33.5% 24.3%
Non-statutory information
200 SIG Annual Report and Accounts 2021
Financial statements
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 2006X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 200 11/03/2022 16:50:4811/03/2022 16:50:48
c) Operating margin
This is used to enhance understanding and comparability of the underlying financial performance of the Group by period and segment.
2021
£m
Restated
2020
£m
Underlying revenue 2,291.4 1,872.7
Underlying operating profit/(loss) 41.4 (53.1)
Total 1.8% (2.8)%
d) 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.
2021
£m
2020
£m
(Decrease)/increase in cash and cash equivalents for the year (82.7) 68.4
Add back:
Net cash flow on the purchase of businesses 10.1 0.8
Settlement of amounts payable for previous purchases of businesses 0.5 –
Net cash flow arising on the sale of businesses – (147.8 )
Repayment of borrowings 200.3 55.1
Proceeds from borrowings (251.5) –
Repayment of RCF – 30.0
Settlement of derivative financial instruments (0.8) 0.1
Net proceeds from equity raise – (151.9)
Free cash flow (124.1) (145.3)
e) 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 revenue.
201SIG Annual Report and Accounts 2021
Strategic report Governance Financials
6X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 2016X_XFSXpart1X_XGroupXstatementsXandXNotes_v94.indd 201 11/03/2022 16:50:4811/03/2022 16:50:48
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 2021 and of the group’s loss 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 2021
which comprise:
Group Parent company
Consolidated income statement for the year ended 31 December 2021 Company balance sheet as at 31 December 2021
Consolidated statement of comprehensive income for the year ended
31 December 2021
Company statement of changes in equity for the year ended
31 December 2021
Consolidated balance sheet as at 31 December 2021 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 2021
Consolidated cash flow statement for the year ended 31 December 2021
Related notes 1 to 35 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.
Independent auditor’s report
To the members of SIG plc
202 SIG Annual Report and Accounts 2021
Financial statements
7X_XFSXpart2X_XAuditorsXreport_v24.indd 2027X_XFSXpart2X_XAuditorsXreport_v24.indd 202 10/03/2022 17:0910/03/2022 17:09
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:
• In conjunction with our walkthrough of the group’s financial statement close process, we confirmed 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 2023. We also engaged with management early to ensure all key risk factors were considered in their assessment;
• We obtained management’s going concern assessment, including the cash forecast for the going concern period through to 31 March 2023 and
tested 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;
• We obtained agreements for the Senior Secured Notes and Revolving Credit Facility (RCF) to verify the nature of facilities, repayment terms,
covenants, and other conditions. We assessed their continued availability to the group through the going concern period and ensured
completeness of covenants identified by management;
• We challenged the appropriateness of the key assumptions in management’s forecasts including revenue growth and gross margin percentage,
bycomparing these to year-to-date performance and industry benchmarks;
• We challenged management’s consideration of a reasonable worst-case scenario, evaluating whether or not expected labour and supply
shortages, the potential impact of COVID-19, or climate risk may materially impact the going concern assessment;
• We performed 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;
• We considered the amount and timing of mitigating factors under the Group’s control that could preserve cash if required;
• We assessed the plausibility of management’s downside scenarios 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; and
• We reviewed 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 2021, following the restructuring of its debt arrangements in November 2021, the Group has committed facilities of €300m Senior
Secured Notes and an RCF of £50m to November 2026 and May 2026 respectively. The RCF was undrawn at 31 December 2021. The Group also
had a cash balance of £145.1m at 31 December 2021.
• 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 growth assumptions in management’s forecasts.
Additionally, we did not identify events or conditions in the period to 31 March 2023, 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 a period to 31 March 2023.
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.
203SIG Annual Report and Accounts 2021
Strategic report Governance Financials
7X_XFSXpart2X_XAuditorsXreport_v24.indd 2037X_XFSXpart2X_XAuditorsXreport_v24.indd 203 10/03/2022 17:0910/03/2022 17:09
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 Gross Margin, 92% of
Revenue, 94% of Underlying Loss Before Tax and 88% 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 associated receivable
• Classification of Other Items in the Income Statement
Materiality • Overall Group materiality of £3.0m which represents 0.5% of gross margin
An overview of the scope of the parent company and group audits
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each company
within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We consider size, risk profile, the
organisation of the group and effectiveness of group-wide controls, changes in the business environment and other factors such as recent Internal
audit results when assessing the level of work to be performed at each company.
In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative coverage of significant
accounts in the financial statements, we selected 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% (2020: 89%) of the Group’s gross margin, being the measure
used to calculate materiality, 92% (2020: 89%) of the Group’s revenue, 94% (2020: 97% of the Group’s loss underlying loss before tax) of the Group’s
underlying profit before tax, and 88% (2020: 80%) of the Group’s total assets. For the current year, the full scope components contributed 72% (2020:
85%) of the Group’s gross margin, 72% (2020: 85%) of the Group’s revenue, 47% (96% of the Group’s underlying loss before tax) of the Group’s
underlying profit before tax, and 77% (2020: 79%) of the Group’s total assets. The specific scope components contributed 20% (2020: 4%) of the
Group’s gross margin, 20% (2020: 4%) of the Group’s revenue, 47% (1% of the Group’s underlying loss before tax)of the Group’s underlying profit
before tax, and 11% (2020: 1%) 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 40 components that together represent 8% of the Group’s gross margin, none are individually greater than 2% of the Group’s gross
margin. 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.
204 SIG Annual Report and Accounts 2021
Financial statements
Independent auditor’s report
To the members of SIG plc
7X_XFSXpart2X_XAuditorsXreport_v24.indd 2047X_XFSXpart2X_XAuditorsXreport_v24.indd 204 10/03/2022 17:0910/03/2022 17:09
Changes from the prior year
For our 2021 audit, two components were brought into scope for specified audit procedures due to risk and to further increase testing coverage over
the revenue to cash process. Additionally, two components were reduced from full to specific scope due to the reduction in risk profile of these
components relative to 2020.
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 one of these directly by the primary audit team and four by component audit teams.
Forthe three specific scope components, 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.
Although initial plans were made to travel to component locations during the audit cycle, these were disrupted by COVID-19 travel restrictions which
meant the planned visits were unable to take place. The primary team interacted regularly with the component teams where appropriate during
various stages of the audit and followed a programme of oversight remotely. These included frequent interaction with each component team to clarify
and discuss audit approach and any issues arising from the testing performed, together with:
• Briefing video calls were held with each full and specific scope component team during the planning phase of the audit;
• Detailed audit instructions were issued to the component locations;
• At the interim testing phase of the audit we held further briefing video calls with the component teams and attended an interim status meeting with
local component management; and
• At the year-end we attended all component team close meetings with local management via video call, reviewed key interoffice deliverables
reported to the primary audit team, and performed a remote file review of key audit workpapers.
The primary audit team were responsible for the scope and direction of the audit process. This, together with the additional procedures performed at
Group level, gave us appropriate evidence for our opinion on the Group financial statements.
Climate change
There has been increasing interest from stakeholders as to how climate change will impact companies. The Group has determined that the effects of
climate change are not expected to have a significant impact on the Group’s operations nor the viability of the Group over the next three years.
These effects are referenced on page 50 in the required Task Force for Climate related Financial Disclosures and on pages 54 to 59 in the principal
risks and uncertainties, which form part of the “Other information,” rather than the audited financial statements. Our procedures on these 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.
Our audit effort in considering climate change was focused on the Group’s disclosures in the financial statements and conclusion that no issues were
identified that would impact the carrying values of assets with indefinite and long lives or have any other impact on the Group financial statements.
Wealso challenged the Directors’ considerations of climate change in their assessment of going concern and viability and associated disclosures.
205SIG Annual Report and Accounts 2021
Strategic report Governance Financials
7X_XFSXpart2X_XAuditorsXreport_v24.indd 2057X_XFSXpart2X_XAuditorsXreport_v24.indd 205 10/03/2022 17:0910/03/2022 17:09
Whilst the Group have stated their commitment to achieve net zero carbon emissions by 2035, the Group is currently unable to determine the full
future economic impact on their business model, operational plans and customers to achieve this and therefore as set out above the potential
impacts are not fully incorporated in these financial statements.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters
included those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in our opinion thereon, and
we do not provide a separate opinion on these matters.
Risk Our response to the risk
Key observations communicated
to the Audit Committee
Impairment of goodwill, intangible
assets, property, plant and
equipment (“PPE”), and right-of-
use assets (“ROUA”)
Refer to Accounting policies (pages 136
and 148); and Notes 13 and 14 of the
Consolidated Financial Statements (pages
166 to 170)
The Group Balance Sheet includes
goodwill, intangible assets, property, plant
and equipment, and right-of-use assets
totalling £434.6m (2020: £440.1m).
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.
Particularly sensitive is the Benelux
cash-generating unit (“CGU”). Additionally,
indicators may exist to that reversal of
previously recorded impairment is
appropriate. This is relevant to the UK
Distribution CGU.
There is also an associated risk in the
company only balance sheet over the
potential impairment of investments in
subsidiary undertakings and the
recoverability of receivables due from
subsidiary undertakings. Additionally, there
is a risk that a reversal of previous
impairments are not appropriately recorded.
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.
We evaluated the identification of CGUs against the requirements of IAS 36.
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 ‘reverse indicators’ of impairment 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 COVID-19 and climate risk on the assumptions.
We challenged the underlying forecast in management’s 2022 budget and
2023-2024 medium-term plan. Our challenge focused on the inflationary
and product availability pressures while maintaining margin and seeking to
outperform the market.
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 CGUs with the lowest headroom levels we calculated the degree to
which the key inputs and assumptions would need to fluctuate before an
impairment was triggered and considered the likelihood of this occurring.
We performed our own sensitivities on the forecasts for each CGU based
on independent industry forecasts and determined whether adequate
headroom remained.
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.
Impairment of goodwill, intangible
assets, property, plant and
equipment (“PPE”), and right-of-use
assets (“ROUA”)
An impairment charge of £9.9m against
Benelux goodwill has been appropriately
recorded.
We agree that it is too early to reverse any of
the UK Distribution impairment as there was
insufficient evidence the turnaround plan is
complete.
We reviewed the disclosures included within
the financial statements and consider them
appropriate.
Impairment of investments and
recoverability of intercompany
balances in the parent company
accounts
We agree with the Directors assessment that
no impairment should be recorded at
31December 2021. Additionally,
management’s assessment not to reverse
previously recorded impairment is
reasonable.
206 SIG Annual Report and Accounts 2021
Financial statements
Independent auditor’s report
To the members of SIG plc
7X_XFSXpart2X_XAuditorsXreport_v24.indd 2067X_XFSXpart2X_XAuditorsXreport_v24.indd 206 10/03/2022 17:0910/03/2022 17:09
Risk Our response to the risk
Key observations communicated
to the Audit Committee
Continued overleaf
Impairment of investments and recoverability of
intercompany balances in the parent company accounts
We compared the forecasts and discount rates to our goodwill testing to
confirm these had been consistently applied.
We compared the balance sheet positions of the intercompany counterparty
to our testing on the consolidation to confirm the accuracy of the balances.
We compared the investment carrying value and the intercompany
receivable to the net assets of the investee and the discounted future
cashflow forecasts. Where a shortfall was noted we confirmed that the
impairment charge or expected credit loss provision was recorded correctly.
We compared the parent company net assets to the Group’s net assets and
to the Group’s market capitalisation. Neither test indicated an impairment in
the parent company investments were required.
We assessed whether any indicators existed to support the reversal of
previous investment impairment charges.
The primary audit team performed audit procedures over this risk area
covering 100% of the risk amount.
Misstatement of supplier rebate
income and associated receivable
Refer to Accounting policies (page 139);
and Notes 17 and 18 of the Consolidated
Financial Statements (page 173 to 175)
In 2021, income from Supplier Rebates
totalled £261.4m (2020: £198.5m) with a
receivable balance as at 31 December 2021
of £88.0m (2020: £66.6m).
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 estimate, where the processing is either manual or more
complex, and where the value is high. For example, agreements with
non-coterminous year ends are a particular focus due to the judgement in
predicting the rebate tier that will be achieved.
We performed walkthroughs to understand the key processes used to
record supplier rebate transactions and identified key controls.
We performed analytical reviews to understand unusual movements in
income statement and balance sheet accounts period on period, including
ageing analysis.
We selected a sample of suppliers, in order to obtain independent
confirmations to confirm key terms, income and year end receivable.
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.
For new agreements signed in the year, we obtained copies of the
agreements and reviewed management’s delegation of authority to confirm
that these were approved in line with Group’s policy.
We challenged the level of settlement provision held against supplier
rebates receivable in the UK.
Using data extracted from the accounting system, we tested the
appropriateness of a sample of journal entries and other adjustments to
supplier rebate accounts in the balance sheet and income statement.
We reviewed the appropriateness of the critical accounting judgements and
key sources of estimation uncertainty disclosure in respect of supplier
rebate amounts recorded in the income statement and balance sheet.
We performed the above audit procedures over this risk area at eight full
and specific scope locations, which covered 98% of the risk amount
associated to supplier rebate income and 96% 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.
207SIG Annual Report and Accounts 2021
Strategic report Governance Financials
7X_XFSXpart2X_XAuditorsXreport_v24.indd 2077X_XFSXpart2X_XAuditorsXreport_v24.indd 207 10/03/2022 17:0910/03/2022 17:09
Risk Our response to the risk
Key observations communicated
to the Audit Committee
Classification of Other Items
in the Income Statement
Refer to Accounting policies (page 137-138);
and Note 2b of the Consolidated Financial
Statements (page 155)
Other items recorded in 2021 is an expense
of £35.2m (2020 restated: expense of
£118.5 m).
Other items are not defined by IFRS and
therefore judgement is required in
determining the appropriateness of such
classification guided by IAS 1.
Consistency in items treated as separately
disclosed is important to maintain
comparability of reporting year-on-year.
Underlying profit is a key performance
measure of the Group. There exists a risk,
through management override of controls
or bias of judgement, of inappropriate
classification of these items separately to
overstate underlying profit.
We performed walkthroughs to understand the key processes used to
record Other items and identify key controls.
We reviewed management’s accounting policy in respect of Other items
classification in the income statement and challenged the appropriateness
of separately presenting these items within Other items.
We obtained evidence for a sample of transactions categorised as Other
Items to understand the nature of these costs and challenged the
appropriateness of separately presenting these items in-line with the
Group’s accounting policy.
We considered the consistency of approach with reference to Other items in
previous years.
Where an item related to impairment charges, testing was performed in line
with our response to the risk set out in the Key Audit Matter relating to the
impairment of goodwill, intangible assets, PPE and ROUA on page 206.
Where an item related to a restructuring project, we inspected the build-up
to ensure that the costs were attributable to the project and had been
correctly categorised as an underlying cost or as an Other Item in line with
the accounting policy.
We assessed the appropriateness of recognising cloud computing,
configuration, and customisation costs as Other Items following the change
in accounting policy.
We recalculated the amortisation charge in the year and confirmed this is
consistent with the Group accounting policy.
Where refinancing costs were classified within Other items, we obtained a
listing of transaction costs associated with the debt refinancing, challenged
management’s cost allocation and performed a sample test to confirm the
appropriate classification of the costs. We also assessed treatment of costs
associated with the previous debt arrangements.
The primary audit team, in conjunction with all full and specific scope
components, performed audit procedures over this risk area covering 100%
of the risk amount.
We agree that Other Items are recorded
in-line with the Group’s policy and the
guidance in IAS 1.
There are no changes in our key audit matters from the prior year.
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 £3.0m (2020: £1.8m), which is 0.5% (2020: 0.5%) of Gross Margin which provides a materiality value
reflective of the performance of the Group. We believe that this basis provides one of the most relevant performance measures to the stakeholders of
the group and is therefore an appropriate basis for materiality. The increase in materiality year on year is reflective of the improved financial
performance of the Group.
We determined materiality for the Parent Company to be £3.0m (2020: £1.8m), which is 1.0% (2020: 1.0%) of Equity being £3.8m, however we have capped
this at the materiality of Group.
During the course of our audit, we reassessed initial materiality and increased the final materiality from original assessment at planning of £2.8 million.
No additional testing was required due to an amendment in final materiality. This increase reflects our assessment based on the actual results for the
current year.
208 SIG Annual Report and Accounts 2021
Financial statements
Independent auditor’s report
To the members of SIG plc
7X_XFSXpart2X_XAuditorsXreport_v24.indd 2087X_XFSXpart2X_XAuditorsXreport_v24.indd 208 10/03/2022 17:0910/03/2022 17:09
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% (2020: 50%) of our planning materiality, namely £1.5m (2020: £0.9m). 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 £0.3m to £0.6m (2020: £0.2m to £0.4m).
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £0.15m (2020: £0.09m), 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 128, including the Strategic Report and the
Governance reports (Corporate Governance Report, Nominations Committee Report, Audit 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.
209SIG Annual Report and Accounts 2021
Strategic report Governance Financials
7X_XFSXpart2X_XAuditorsXreport_v24.indd 2097X_XFSXpart2X_XAuditorsXreport_v24.indd 209 10/03/2022 17:0910/03/2022 17:09
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we
have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches
not visited by us; or
• the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the
accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit
Corporate Governance Statement
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 page 65;
• Director’s 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 111;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 96;
• The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on page 96;
and;
• The section describing the work of the audit committee set out on pages 104 to 111.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 128, 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.
210 SIG Annual Report and Accounts 2021
Financial statements
Independent auditor’s report
To the members of SIG plc
7X_XFSXpart2X_XAuditorsXreport_v24.indd 2107X_XFSXpart2X_XAuditorsXreport_v24.indd 210 10/03/2022 17:0910/03/2022 17:09
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 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.
• Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures
involved journal entry testing, with a focus on manual consolidation journals, and journals indicating large or unusual transactions based on our
understanding of the business; enquiries of legal counsel, group management, internal audit, subsidiary management at all full and specific scope
components; and focused testing, including the procedures referred to in the key audit matters section above. In addition, we completed
procedures to conclude on the compliance of the disclosures in the Annual Report and Accounts with the requirements of the relevant accounting
standards, UK legislation and the UK Corporate Governance Code.
• Specific inquiries were made with the component teams to confirm the details of any instances of non-compliance with laws and regulations.
Thiswas 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.
211SIG Annual Report and Accounts 2021
Strategic report Governance Financials
7X_XFSXpart2X_XAuditorsXreport_v24.indd 2117X_XFSXpart2X_XAuditorsXreport_v24.indd 211 10/03/2022 17:0910/03/2022 17:09
Other matters we are required to address
• Following the recommendation from the audit committee we were appointed by the company on 4 July 2018 to audit the financial statements for
the year ending 31 December 2018 and subsequent financial periods.
• The period of total uninterrupted engagement including previous renewals and reappointments is four years, covering the years ending
31December 2018 to 31 December 2021.
• The audit opinion is consistent with the additional report to the audit committee.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the
company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Colin Brown
(Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
10 March 2022
212 SIG Annual Report and Accounts 2021
Financial statements
Independent auditor’s report
To the members of SIG plc
7X_XFSXpart2X_XAuditorsXreport_v24.indd 2127X_XFSXpart2X_XAuditorsXreport_v24.indd 212 10/03/2022 17:0910/03/2022 17:09
Statutory basis
Total
2017
£m
Total
2018
£m
Total
2019
£m
Total
Restated^
2020
£m
Total
2021
£m
Revenue 2,878.4 2,431.8 2,16 0.6 1,874.5 2,291.4
Operating (loss)/profit (36.3) 26.2 (87.9 ) (160.0) 14.0
Finance income 0.6 0.5 0.5 0.7 0.7
Finance costs (19.0) (16.4) (25.3) (35.3) (30.6)
(Loss)/profit before tax (54.7) 10.3 (112.7) (194.6) (15.9)
(Loss)/profit after tax (59.2) 4.1 (124.1) (201.2) (28.3)
(Loss)/earnings per share (p) (10.2) 3.0 (21.0) (2 3.1) (2.4)
Total dividend per share (p) 3.75 3.75 1.25 0.0 0.0
Underlying basis*
Underlying
2017
£m
Underlying
2018
£m
Underlying
2019
£m
Underlying
Restated^
2020
£m
Underlying
2021
£m
Revenue 2,714.3 2, 3 47. 2 2,143.0 1,872.7 2,291.4
Operating profit/(loss) 85.3 70.4 42.5 (5 3.1) 41.4
Finance income 0.5 0.5 0.5 0.7 0.7
Finance costs (16.6) (15.9) (25.3) (23.7) (22.8)
Profit/(loss) before tax 69.2 55.0 17.7 (76.1) 19.3
Profit/(loss) after tax 51.5 40.1 1.4 (86.8) 3.7
Earnings/(loss) per share (p) 8.7 6.8 0.2 (10.0) 0.3
^ Results for 2020 have been restated for the change in accounting policy in relation to cloud computing arrangements as set out in the Statement of significant accounting policies.
2019 and previous years are not restated.
* 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.
Five-year summary
213SIG Annual Report and Accounts 2021
Strategic report Governance Financials
8X_XFSXpart3X_X5YSXandXCompanyXstatementsXandXNotes_v43.indd 2138X_XFSXpart3X_X5YSXandXCompanyXstatementsXandXNotes_v43.indd 213 10/03/2022 17:0810/03/2022 17:08
Note
2021
£m
2020
£m
Fixed assets
Investments 5 267.6 267.6
Tangible fixed assets 6 0.3 0.3
Right-of-use assets 11 – 1.4
Intangible assets 7 0.6 1.0
268.5 270.3
Current assets
Debtors – due within one year 8 496.7 405.7
Debtors – due after more than one year 8 – –
Deferred tax assets 13 – –
Cash at bank and in hand 119.9 174.0
616.6 579.7
Current liabilities
Creditors: amounts falling due within one year 9 248.3 235.6
Provisions: amounts falling due within one year 12 4.5 4.3
252.8 239.9
Net current assets 363.8 339.8
Total assets less current liabilities 632.3 610.1
Creditors: amounts falling due after one year 10 249.6 213.9
Provisions: amounts falling due after one year 12 4.0 6.2
Net assets 378.7 390.0
Capital and reserves
Called up share capital 14 118. 2 118 . 2
Share premium account 14 – 4 47.7
Treasury shares reserve 14 (12.5) (0.2)
Merger reserve 14 104.0 104.0
Capital redemption reserve 14 0.3 0.3
Share option reserve 14 4.4 2.0
Exchange reserve 14 (0.2) (0.2)
Cash flow hedging reserve 14 (0.3) 2.1
Cost of hedging reserve 14 0.1 0.1
Retained profits 14 164.7 (284.0)
Shareholders’ funds 378.7 390.0
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 2021 of £1.0m (2020: £155.6m loss – restated).
The financial statements were approved by the Board of Directors on 10 March 2022 and signed on its behalf by:
Steve Francis Ian Ashton
Director Director
Registered in England: 00998314
Company balance sheet
as at 31 December 2021
214 SIG Annual Report and Accounts 2021
Financial statements
8X_XFSXpart3X_X5YSXandXCompanyXstatementsXandXNotes_v43.indd 2148X_XFSXpart3X_X5YSXandXCompanyXstatementsXandXNotes_v43.indd 214 10/03/2022 17:0810/03/2022 17:08
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
profits/
(losses)
£m
Total
Equity
£m
At 1 January 2020
(restated) 59.2 4 47.3 – 11.5 0.3 1.8 (0.2) 3.5 ( 0.1) (128.6) 394.7
Loss after tax (restated) – – – – – – – – – (155.6) (155.6)
Other comprehensive
(expense)/income – – – – – – – (1.4) 0.2 – (1.2)
Total comprehensive
(expense)/income – – – – – – – (1.4) 0.2 (155.6) (156.8)
Transfer of unallocated
treasury shares – – (0.2) – – – – – – 0.2 –
Credit to share option
reserve – – – – – 0.2 – – – – 0.2
Share capital issued in
the year 59.0 0.4 – 92.5 – – – – – – 151.9
At 31 December 2020 118.2 4 47.7 (0.2) 104.0 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 – (447.7) – – – – – – – 447.7 –
At 31 December 2021 118.2 – (12.5) 104.0 0.3 4.4 (0.2) (0.3) 0.1 164.7 378.7
Total equity at 1 January 2020 and the loss for the year ended 31 December 2020 has been restated as set out in the Company statement of
significant accounting policies.
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.
215SIG Annual Report and Accounts 2021
Strategic report Governance Financials
Company statement of changes in equity
for the year ended 31 December 2021
8X_XFSXpart3X_X5YSXandXCompanyXstatementsXandXNotes_v43.indd 2158X_XFSXpart3X_X5YSXandXCompanyXstatementsXandXNotes_v43.indd 215 10/03/2022 17:0810/03/2022 17:08
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 page 144.
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.
On 18 November 2021 the Company completed the restructuring of its debt arrangements, comprising the issue of €300m senior secured notes and
a new RCF of £50m. The existing private placement notes of £129.8m and £70m term loan were repaid, together with £12.9m make whole payment
on early settlement of the private placement notes. The Company now has committed facilities in place to November 2026 (senior secured notes) and
May 2026 for the RCF. The senior 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 2021.
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 2023.
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:
• a decline in market conditions resulting in lower than forecast sales;
• continued implementation of the new strategy taking longer than anticipated to deliver forecast increases in revenue and profit;
• potential impact of material shortages on forecast sales; and
• further waves of the Covid-19 pandemic having an impact on trading.
The forecasts on which the going concern assessment is based have been subject to sensitivity analysis and stress testing to assess the impact
ofthe above risks and the Directors have also reviewed mitigating actions that could be taken. Details are set out in the Viability statement review on
page 65.
The Directors have considered the impact of climate-related matters on the going concern assessment, but the impact on the Company
isnotconsidered to create any material uncertainties related to events or conditions that could cast significant doubt upon the Company’s ability
tocontinue 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 2023 and the Directors therefore consider it appropriate to adopt the going concern basis in preparing the 2021 financial
statements.
New standards, interpretations and amendments adopted
A number of amendments and interpretations apply for the first time in 2021, 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.
216 SIG Annual Report and Accounts 2021
Financial statements
Company statement of
significantaccountingpolicies
8X_XFSXpart3X_X5YSXandXCompanyXstatementsXandXNotes_v43.indd 2168X_XFSXpart3X_X5YSXandXCompanyXstatementsXandXNotes_v43.indd 216 10/03/2022 17:0810/03/2022 17:08
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
withFRS101:
− 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”
− 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”.
Change in accounting policy – software as a service (“SaaS”) arrangements
Following the IFRS Interpretations Committee (IFRIC) agenda decision published in April 2021, the Company has reviewed its accounting policy regarding
the configuration and customisation costs incurred in implementing SaaS arrangements. The Company’s revised policy is consistent with the Group as
detailed on page 135. The change in accounting policy has been retrospectively applied, resulting in a restatement to previously reported numbers.
The impact on the Company’s balance sheet and equity is a reduction in intangible assets and retained profits/(losses) of £9.0m at 1 January 2020
and a reduction in the loss before tax for the year ended 31 December 2020 of £9.0m. There is no impact on retained profits/(losses) or net assets
at 31 December 2020 as the previously capitalised costs were fully impaired during 2020 with no remaining net book value at 31 December 2020.
Share-based payments
The accounting policy for share-based payments (IFRS 2) is consistent with that of the Group as detailed on page 140.
Derivative financial instruments
The accounting policy for derivative financial instruments is consistent with that of the Group as detailed on page 144.
Financial assets and liabilities
The accounting policy for financial assets and liabilities is consistent with that of the Group as detailed on pages 143 to 144. The Company has
assessed on a forward looking basis the expected credit losses associated with amounts owed by subsidiary undertakings. The impairment
methodology applied depends on the ability to repay amounts repayable on demand and whether there has been any significant change in credit risk.
Investments
Fixed asset investments in subsidiaries are shown at cost less provision for impairment.
Tangible fixed assets
The accounting policy for tangible fixed assets is consistent with that of the Group as detailed on page 141.
Intangible assets
The accounting policy for tangible fixed assets is consistent with that of the Group as detailed on page 141.
Leases
The accounting policy for leases is consistent with that of the Group as detailed on page 142.
Foreign currency
The accounting policy for foreign currency is consistent with that of the Group as detailed on page 137.
Taxation
The accounting policy for taxation is consistent with that of the Group as detailed on page 140.
Dividends
Dividends proposed by the Board of Directors that have not been paid by the end of the year are not recognised in the Accounts until they have been
approved by the Shareholders at the Annual General Meeting.
217SIG Annual Report and Accounts 2021
Strategic report Governance Financials
8X_XFSXpart3X_X5YSXandXCompanyXstatementsXandXNotes_v43.indd 2178X_XFSXpart3X_X5YSXandXCompanyXstatementsXandXNotes_v43.indd 217 10/03/2022 17:0810/03/2022 17:08
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 £10.7m (2020: £2.7m) of
potential deferred tax assets relating to cumulative UK tax losses and other deductible temporary differences which are currently unrecognised as
there is not considered to be sufficient convincing evidence at 31 December 2021 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 2021 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 £10.7m. 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.
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
thevalue 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
moneyfor 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 (2020: £267.6m)
after an impairment loss recognised in 2020 of £109.3m. Of the £267.6m net book value at 31 December 2021, £263.7m relates to the Company’s
investment in SIG Trading Limited, the largest UK trading subsidiary, and therefore assumptions regarding sales, gross margin and operating profit
growth of this subsidiary are considered to be the key areas of estimation in the impairment review process. At 31 December 2020, a review of the
future operating cashflows of SIG Trading Limited using the following year’s budget as a base indicated that the carrying value of the investment
was not recoverable, resulting in the impairment charge recognised. At 31 December 2021 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 2021.
Whilst the Directors consider the assumptions used in the impairment review to be realistic, if actual results are different from expectations then it
is possible that the value of the investment included in the balance sheet could become impaired further. Further details on the assumptions and
sensitivities in relation to the forecast future cash flows of this subsidiary are provided in Note 13 of the Consolidated financial statements.
Impairment of amounts owed by subsidiary undertakings
At 31 December 2021 the Company has recognised amounts owed by subsidiary undertakings of £492.3m (2020: £402.5m). 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 £169.9m has been recognised
at 31 December 2021 (2020: £193.9m) 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 2021 and level of ECL provision required in the future.
Deferred tax assets
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be
utilised. Therefore, estimates are made to establish whether deferred tax balances should be recognised, in particular in respect of non-trading losses.
Deferred tax assets have not been recognised at 31 December 2021 on the basis that the realisation of their future economic benefit is uncertain.
218 SIG Annual Report and Accounts 2021
Financial statements
8X_XFSXpart3X_X5YSXandXCompanyXstatementsXandXNotes_v43.indd 2188X_XFSXpart3X_X5YSXandXCompanyXstatementsXandXNotes_v43.indd 218 10/03/2022 17:0810/03/2022 17:08
1. Loss for the year
As permitted by Section 408 of the Companies Act 2006 the Company has elected not to present its own Company income statement for the year.
SIG plc reported a profit after tax for the financial year ended 31 December 2021 of £1.0m (2020: £155.6m loss – restated).
The Auditor’s remuneration for audit services to the Company was £0.6m (2020: £0.6m).
2. Share-based payments
The Company had three share-based payment schemes in existence during the year ended 31 December 2021. The Company recognised a total
credit to equity of £0.7m (2020: credit of £0.2m) in the year relating to share-based payment transactions. Details of each of the share-based payment
schemes can be found in Note 9 to the Consolidated financial statements.
3. Dividends
No interim dividend was paid during 2021 (2020: nil) and the Directors are not proposing a final dividend for the year ended 31 December 2021 (2020:
no dividend). Total dividends paid during the year was £nil (2020: £nil). No dividends have been paid between 31 December 2021 and the date of
signing the financial statements.
See Note 14 for further details on distributable reserves.
4. Staff costs
Particulars of employees (including Directors) are shown below:
2021
£m
2020
£m
Employee costs during the year amounted to:
Wages and salaries 8.2 11.2
Social security costs 1.0 1.1
IFRS 2 share option charge 0.7 –
Pension costs 0.3 0.3
Total 10.2 12.6
The average monthly number of persons employed by the Company during the year was as follows:
2021
Number
2020
Number
Administration 58 69
219SIG Annual Report and Accounts 2021
Strategic report Governance Financials
Notes to the Company financial statements
8X_XFSXpart3X_X5YSXandXCompanyXstatementsXandXNotes_v43.indd 2198X_XFSXpart3X_X5YSXandXCompanyXstatementsXandXNotes_v43.indd 219 10/03/2022 17:0810/03/2022 17:08
5. Fixed asset investments
Fixed asset investments comprise investments in subsidiary undertakings, as follows:
2021
£m
2020
£m
Cost
At 1 January 650.9 650.8
Additions – 0.1
At 31 December 650.9 650.9
Accumulated impairment charges
At 1 January 383.3 274.0
Impairment charge – 109.3
At 31 December 383.3 383.3
Net book value
At 31 December 267.6 2 6 7. 6
At 1 January 267.6 376.8
Details of the Company’s subsidiaries are shown on pages 227 to 230.
The £0.1m addition of investments in the prior year related to the share based payment charge settled by SIG plc but relating to other subsidiary
companies.
Of the £267.6m (2020: £267.6m) investment net book value, £263.7m (2020: £263.7m) relates to SIG Trading Limited, the largest UK trading
subsidiary. At 31 December 2020, a review of the future operating cashflows of SIG Trading Limited using the following year’s budget as a base,
taking into account current economic conditions, indicated that the carrying value of the investment was not recoverable and an impairment charge
of £106.3m was recognised. At 31 December 2021 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 2021. £3.0m impairment was
also recognised in 2020 in relation to the Company’s investment in Freeman Group Limited following the settlement of intercompany balances and
distribution of remaining reserves during the year.
A more detailed sensitivity analysis of the Group’s significant CGUs is given in Note 13 of the Consolidated financial statements.
6. Tangible fixed assets
The movement in the year was as follows:
Land and buildings
Plant and
machinery
£m
Total
£m
Freehold land
and buildings
£m
Leasehold
improvements
£m
Cost
At 1 January and 31 December 2020 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
Depreciation
At 1 January 2020 0.1 0.1 0.6 0.8
Charge for the year – 0.1 – 0.1
At 31 December 2020 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
Net book value
At 31 December 2021 – 0.3 – 0.3
At 31 December 2020 – 0.3 – 0.3
220 SIG Annual Report and Accounts 2021
Financial statements
Notes to the Company financial statements
8X_XFSXpart3X_X5YSXandXCompanyXstatementsXandXNotes_v43.indd 2208X_XFSXpart3X_X5YSXandXCompanyXstatementsXandXNotes_v43.indd 220 10/03/2022 17:0810/03/2022 17:08
7. Intangible fixed asset
The movement in the year was as follows:
Computer
software
£m
Total
£m
Cost
At 1 January 2020 (restated) 3.5 3.5
Additions 0.4 0.4
Disposals (2.3) (2.3)
At 31 December 2020 (restated) 1.6 1.6
Additions – –
Disposals (0.1) (0.1)
At 31 December 2021 1.5 1.5
Depreciation
At 1 January 2020 (restated) 0.9 0.9
Charge for the year 0.9 0.9
Disposals (1.3) (1.3)
Impairment 0.1 0.1
At 31 December 2020 (restated) 0.6 0.6
Charge for the year 0.3 0.3
At 31 December 2021 0.9 0.9
Net book value
At 31 December 2021 0.6 0.6
At 31 December 2020 1.0 1.0
The 2020 software balances have been restated as a result of the IFRS Interpretations Committee (IFRIC) agenda decision on configuration and
customisation costs in cloud computing arrangements. See the Company statement of significant accounting policies for further details.
Included within computer software additions are assets in the course of construction of £nil (2020: £nil).
The impairment charge in the prior year related to IT projects no longer considered to have any future value to the Company.
8. Debtors
2021
£m
2020
£m
Amounts owed by subsidiary undertakings 492.3 402.5
Derivative financial instruments 0.2 –
Prepayments 4.2 3.2
Total 496.7 405.7
The Group recognises an allowance for expected credit losses (ECLs) in relation to amounts owed by subsidiary undertakings based on the ability to
repay amounts repayable on demand and whether there has been any significant change in credit risk. An ECL provision of £169.9m (2020: £193.9m)
has been recognised at 31 December 2021 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%.
221SIG Annual Report and Accounts 2021
Strategic report Governance Financials
8X_XFSXpart3X_X5YSXandXCompanyXstatementsXandXNotes_v43.indd 2218X_XFSXpart3X_X5YSXandXCompanyXstatementsXandXNotes_v43.indd 221 10/03/2022 17:0810/03/2022 17:08
9. Creditors: amounts falling due within one year
2021
£m
2020
£m
Lease liabilities 0.3 0.2
Amounts owed to subsidiary undertakings 234.7 219.3
Derivative financial instruments 0.5 0.5
Accruals and deferred income 12.8 15.6
Total 248.3 235.6
Amounts owed to subsidiary undertakings are measured at amortised cost, are unsecured and bear interest at rates between 0.0% and 3.5%.
10. Creditors: amounts falling due after one year
2021
£m
2020
£m
Lease liabilities – 1.4
Senior secured notes 249.6 –
Private placement notes – 144.5
Bank loans – 6 7.7
Derivative financial instruments – 0.3
Total 249.6 213.9
On 18 November 2021 the Company completed a restructuring of its debt arrangements. This comprised the issuance of €300m senior secured
notes at a coupon of 5.25% and the establishment of a new RCF of £50m. The proceeds from the senior secured notes were used to repay the
existing private placement notes and £70m term loan, and the previous RCF of £25m was cancelled. This has been accounted for as an
extinguishment of the previous arrangements, and arrangement fees and the loss on modification which were being amortised over the term of the
previous facilities have been written off.
Senior secured notes
The €300m senior 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 £2.5m is unamortised at 31 December 2021.
The contractual repayment profile of the current senior secured notes and the previous private placement notes is shown below:
2021 2020
£m
Fixed interest
rate
% £m
Fixed interest
rate
%
Repayable in 2023 – – 66.2 6.2%
Repayable in 2026* 252.1 5.25% 70.0 5.3%
Total gross amount payable 252.1 5.25% 136.2 5.6%
Unamortised fees (2.5) (1.8)
Loss on modification – 10.1
249.6 144.5
* The previous private placement notes were subject to a put option which if exercised by the lenders would have meant that the notes due in 2026 would have become due and
payable in 2023
222 SIG Annual Report and Accounts 2021
Financial statements
Notes to the Company financial statements
8X_XFSXpart3X_X5YSXandXCompanyXstatementsXandXNotes_v43.indd 2228X_XFSXpart3X_X5YSXandXCompanyXstatementsXandXNotes_v43.indd 222 10/03/2022 17:0810/03/2022 17:08
Previous arrangements
Bank loan
As part of the amendments to the financing arrangements on 18 June 2020, the amount drawn on the RCF at that date of £70.0m was converted into
a term facility due for repayment on 31 May 2023 and a RCF of £25.0m. The £70.0m term facility is included within non-current liabilities above, net
of arrangement fees paid (of which £2.3m remains unamortised at 31 December 2020). This has been accounted for as an extinguishment of the
previous facility and new arrangement, and therefore arrangement fees which were being amortised over the term of the previous facility have been
written off.
Private Placement Notes
On 18 June 2020 the Group concluded changes to its agreements with existing private placement notes holders with the following key changes:
• Repayment of €30m of notes previously due on 31 October 2020 and €20m of notes previously due on 31 October 2021 deferred to 31 May 2023;
• £48.9m repaid on completion of the Group’s equity raise in July 2020, split across each of the individual notes on a pro-rata basis;
• holders of the existing 2023 notes (due 31 October 2023) and 2026 notes (due 12 August 2026) granted a put option for those notes to be
redeemed on 31 May 2023 at a price equal to 100% of the aggregate outstanding principal together with a make-whole amount calculated as
specified in the agreement;
• additional fee of 2% per annum to be paid on the outstanding principal; and
• financial covenants were reset.
The loan notes were considered separately to determine whether the changes should be accounted for as a modification of the existing arrangement
or as an extinguishment and refinancing. The Company concluded that each loan note met the criteria to be accounted for as a modification.
Previous arrangement fees therefore continued to be amortised over the remaining term (£0.3m at the date of modification) together with arrangement
fees incurred in relation to the new agreement (£1.9m). A loss on modification of £11.3m was also recognised, reflecting the difference in the present
value of the future cash flows discounted at each loan note’s original effective interest rate. This was recognised within finance costs. This was
unwinding over the remaining term of the loan notes, resulting in the finance cost recognised being lower than the actual amounts paid.
223SIG Annual Report and Accounts 2021
Strategic report Governance Financials
8X_XFSXpart3X_X5YSXandXCompanyXstatementsXandXNotes_v43.indd 2238X_XFSXpart3X_X5YSXandXCompanyXstatementsXandXNotes_v43.indd 223 10/03/2022 17:0810/03/2022 17:08
11. Leases
The Company as a lessee
The Company has a lease contract for a property. Information on the nature and accounting for lease contracts is provided in the Statement of
significant accounting policies.
Set out below is the carrying amount of the right-of-use asset recognised and the movement during the period:
Buildings
£m
Total
£m
At 1 January 2020 1.6 1.6
Depreciation expense (0.2) (0.2)
At 31 December 2020 1.4 1.4
Depreciation expense (0.1) (0.1)
Modification (0.9) (0.9)
Impairment (0.4) (0.4)
At 31 December 2021 – –
Set out below is the carrying amount of the lease liability and the movement during the year:
Total
£m
At 1 January 2020 1.8
Accretion of interest 0.1
Payments (0.3)
At 31 December 2020 1.6
Accretion of interest –
Payments (0.2)
Modification (1.1)
At 31 December 2021 0.3
2021
£m
2020
£m
Current 0.3 0.2
Non-current – 1.4
0.3 1.6
The following are the amounts recognised in profit or loss:
2021
£m
2020
£m
Depreciation expense of right-of-use asset 0.1 0.2
Interest expense on lease liability – 0.1
Impairment of right-of-use asset 0.4 –
Total amount recognised in profit or loss 0.5 0.3
The Company had total cash outflows for leases of £0.2m in 2021 (2020: £0.3m). The Company had no non-cash additions to right-of-use assets and
lease liabilities in 2021 (2020: none). There are no future cash outflows relating to leases that have not yet commenced in 2021 (2020: none).
224 SIG Annual Report and Accounts 2021
Financial statements
Notes to the Company financial statements
8X_XFSXpart3X_X5YSXandXCompanyXstatementsXandXNotes_v43.indd 2248X_XFSXpart3X_X5YSXandXCompanyXstatementsXandXNotes_v43.indd 224 10/03/2022 17:0810/03/2022 17:08
12. Provisions
Onerous lease
£m
Dilapidations
£m
Onerous
contracts
£m
Total
£m
At 1 January 2021 – 0.2 10.3 10.5
Utilised – – (4.5) (4.5)
New provisions 0.2 – 2.2 2.4
Unwinding of discount – – 0.1 0.1
At 31 December 2021 0.2 0.2 8.1 8.5
2021
£m
2020
£m
Amounts falling due within one year 4.5 4.3
Amounts falling due after one year 4.0 6.2
Total 8.5 10.5
The dilapidations provision relates to the contractual obligation to reinstate leasehold property to its original state of repair. The transfer of economic
benefit in respect of the dilapidations provision is expected to be made on expiry of the lease in one years time.
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. 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. The transfer of economic benefit will be made within one year.
The onerous contract provisions relate to licence fee commitments where no future economic benefit is expected to be obtained, principally in
relation to the SAP 1 HANA implementation following the change in scope of the project in 2020 and subsequent changes in 2021. The costs will be
incurred equally over the next two years.
13. Deferred tax
2021
£m
2020
£m
Deferred tax assets – –
The different components of deferred tax assets and liabilities recognised by the Company and movements thereon during the current and prior
reporting period are analysed below:
Losses
£m
Other
£m
Total
£m
At 1 January 2020 and 2021 – – –
Charge/credit to income – – –
At 31 December 2021 – – –
Deferred tax has not been recognised on tax losses carried forward and other deductible temporary differences on the basis that the realisation of
their future economic benefit is uncertain. The unrecognised potential deferred tax asset in relation to this is £10.7m (2020: £2.7m). This is on the
basis that the realisation of their future economic benefit is uncertain. At the balance sheet date, no deferred tax liability is recognised on temporary
differences relating to undistributed profits of the overseas subsidiaries. The Group is in a position to control the timing of the reversal of these
temporary differences and it is probable that they will not reverse in the foreseeable future. The value of the losses has increased in the year due
to the main rate of UK corporation tax increasing from 19% to 25%.
225SIG Annual Report and Accounts 2021
Strategic report Governance Financials
8X_XFSXpart3X_X5YSXandXCompanyXstatementsXandXNotes_v43.indd 2258X_XFSXpart3X_X5YSXandXCompanyXstatementsXandXNotes_v43.indd 225 10/03/2022 17:0810/03/2022 17:08
14. Capital and Reserves
a) Called up share capital
2021
£m
2020
£m
Authorised:
1,390,000,000 ordinary shares of 10p each (2020: 1,390,000,000) 139.0 139.0
Allotted, called up and fully paid:
1,181,556,977 ordinary shares of 10p each (2020: 1,181,556,977) 118. 2 118.2
The Company did not allot any shares during the year. The Company completed an equity raise during the prior year. Details of the equity raise,
including movements in the share premium account and merger reserve, can be found in Note 27 to the Consolidated financial statements. During
2021 the Company allotted no shares (2020: 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. Shares became unallocated during the prior year and were transferred to the treasury share reserve. 24,708,134 shares were
purchased during the current year at a weighted average cost of 50.5p per share. A total of 24,814,955 own shares are outstanding at 31 December
2021 (2020: 125,429).
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 during the prior year through the use of a cash box structure.
See Note 27 to the Consolidated financial statements for further details.
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 results in the transfer of
£447.7m from share premium account to retained profits/(losses) and creates distributable reserves.
At 31 December 2021 the Company has distributable reserves of £190.2m (2020: negative £217.1m).
15. Guarantees and other financial commitments
a) Guarantees
At 31 December 2021 the Company had provided guarantees of £nil (2020: £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 £4.7m (2020: £8.0m). 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 Group considered to be its key management personnel, is provided in the
audited part of the Directors’ Remuneration Report on page 121. In addition, the Company recognised a share-based payment charge under IFRS 2
of £0.7m (2020: £nil) with a credit to the share option reserve of £0.7m (2020: £nil).
226 SIG Annual Report and Accounts 2021
Financial statements
Notes to the Company financial statements
8X_XFSXpart3X_X5YSXandXCompanyXstatementsXandXNotes_v43.indd 2268X_XFSXpart3X_X5YSXandXCompanyXstatementsXandXNotes_v43.indd 226 10/03/2022 17:0810/03/2022 17:08
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 2021 is disclosed below. Unless otherwise stated, the share capital disclosed
comprises ordinary or common shares which are held by subsidiaries of SIG plc .
Fully owned subsidiaries (United Kingdom)
A. M. Proos & Sons Limited (England) (ii)
A. Steadman & Son (Holdings) Limited (England) (ii)
A. Steadman & Son Limited (England) (ii)
Aaron Roofing Supplies Limited (England) (ii)
Acoustic and Insulation Manufacturing Limited (England) (ii)
Acoustic and Insulation Materials Limited (England) (ii)
Advanced Cladding & Insulation Group Limited (England) (ii)
Ainsworth Insulation Limited (England) (ii) (xi)
Ainsworth Insulation Supplies Limited (England) (ii) (xiii)
Air Trade Centre UK Limited (England) (ii)
AIS Insulation Supplies Limited (England) (ii)
Alltrim Plastics Limited (England) (ii)
Asphaltic Roofing Supplies Limited (England) (ii)
Auron Limited (England) (ii) (xix)
BBM (Materials) Limited (England) (ii)
Blueprint Construction Supplies Limited (England) (ii)
Bowller Group Limited (England) (ii)
Building Solutions (National) Limited (England)
Buildspan Holdings Limited (England) (ii) (vii)
C. P. Supplies Limited (England) (ii)
Cairns Roofing and Building Merchants Limited (England) (ii)
Capco Interior Supplies Limited (England) (ii) (xv)
Ceilings Distribution Limited (England) (i) (ii)
Cheshire Roofing Supplies Limited (England) (ii)
+Clyde Insulation Supplies Limited (Scotland) (ii)
Clydesdale Roofing Supplies (Leyland) Limited (England) (ii)
C.M.S. Acoustic Solutions Limited (England) (ii) (x)
CMS Danskin Acoustics Limited (England) (ii)
C.M.S. Vibration Solutions Limited (England) (ii) (xv)
Coleman Roofing Supplies Limited (England) (ii)
Construction Material Specialists Limited (England) (ii) (xvi)
CPD Distribution Plc (England) (ii)
Dane Weller Holdings Limited (England) (ii)
+Danskin Flooring Systems Limited (Scotland) (ii)
Davies & Tate plc (England) (ii)
Drainex Limited (England) (ii) (viii)
Euroform Products Limited (England) (ii)
+Fastplas Limited (Scotland) (ii)
F30 Building Products Limited (England)
Fibreglass Insulations Limited (England) (ii)
Fireseal (North West) Limited (England) (ii)
Firth Powerfix Limited (England) (ii) (vii)
Flex-R Limited (England) (xv)
Formerton Limited (England) (ii)
Formerton Sheet Sales Limited (England) (ii)
Franklin (Sussex) Limited (England) (ii)
Freeman Group Limited (England) (i) (ii)
General Fixings Limited (England) (ii)
G.S. Insulation Supplies Limited (England) (ii)
Gutters & Ladders (1968) Limited (England) (ii)
>HHI Building Products Limited (Northern Ireland) (ii)
Hillsborough Investments Limited (England) (i) (ii) (iii)
Impex Avon Limited (England) (ii) (xv)
Insulation & Machining Services Limited (England) (ii)
Insulslab Limited (England) (ii)
+J. Danskin & Company Limited (Scotland) (ii)
John Hughes (Roofing Merchant) Limited (England) (ii)
John Hughes (Wigan) Limited (England) (ii)
Jordan Wedge Limited (England) (ii)
K.D. Insulation Supplies Limited (England) (ii)
Kem Edwards Limited (England) (ii)
Kent Flooring Supplies Limited (England) (ii)
Kesteven Roofing Centre Limited (England) (ii)
Kitson’s Thermal Supplies Limited (England) (ii) (v)
Landsdon Holdings Limited (England) (ii) (xv)
Landsdon Limited (England) (ii) (x)
Leaderflush + Shapland Holdings Limited (England)
Lee and Son Limited (England) (ii)
Lifestyle Partitions and Furniture Limited (England) (ii) (vi)
London Insulation Supplies Limited (England) (ii)
+MacGregor & Moir Limited (Scotland) (ii)
Group companies 2021
227SIG Annual Report and Accounts 2021
Group companies 2021
9X_XGroupXCompaniesXandXCompanyXinfo_v20.indd 2279X_XGroupXCompaniesXandXCompanyXinfo_v20.indd 227 09/03/2022 17:3009/03/2022 17:30
Marvellous Fixings Limited (England) (ii)
Mayplas Limited (England) (ii) (ix)
Metechno Limited (England)
Ockwells Limited (England) (ii) (vii)
Omnico (Developments) Limited (England) (ii)
Omnico Plastics Limited (England) (ii)
One Stop Roofing Centre Limited (England) (ii)
Orion Trent Holdings Limited (England) (ii) (xvii)
Orion Trent Limited (England) (ii) (xvii)
Penkridge Holdings Limited (England) (ii)
Penlaw & Company Limited (England)
Penlaw Fixings Limited (England)
Penlaw Norfolk Limited (England)
Penlaw Northwest Limited (England)
Plastic Pipe Supplies Limited (England) (ii)
Polytech Systems Limited (England) (ii) (xvii)
Pre-Pour Services Limited (England) (ii) (xv)
Roberts & Burling Roofing Supplies Limited (England) (ii)
Roof Care (Northern) Limited (England) (ii)
Roof Shop Limited (England) (ii)
Roofing Centre Group Limited (England) (ii)
Roofing Material Supplies Limited (England) (ii)
Roplas (Humberside) Limited (England) (ii)
Roplas (Lincs) Limited (England) (ii)
Ryan Roofing Supplies Limited (England) (ii) (viii)
SAS Direct and Partitioning Limited (England) (ii)
Scotplas Limited (England) (ii)
Sheffield Insulations Limited (England) (i) (ii) (iii)
Shropshire Roofing Supplies Limited (England) (ii)
SIG Building Solutions Limited (England) (ii)
SIG Building Systems Limited (England)
SIG Digital Limited (England) (proposal to strike off – 29/10/2021)
SIG Dormant Company Number Eight Limited (England) (ii) (iv)
SIG Dormant Company Number Eleven Limited (England) (ii)
SIG Dormant Company Number Fourteen Limited (ii)
SIG Dormant Company Number Nine Limited (England) (i) (ii)
SIG Dormant Company Number Seven Limited (England) (i) (ii)
SIG Dormant Company Number Six Limited (England) (ii)
SIG Dormant Company Number Sixteen Limited (England) (ii)
SIG Dormant Company Number Ten Limited (England) (i) (ii) (xvii)
SIG Dormant Company Number Three Limited (England) (i) (ii)
SIG Dormant Company Number Two Limited (England) (i) (ii) (iv)
SIG Energy Management Limited (England) (i) (ii)
SIG EST Trustees Limited (England) (i) (ii)
SIG European Holdings Limited (England) (i)
SIG European Investments Limited (England)
SIG Green Deal Provider Company Limited (England) (i) (ii)
SIG Group Life Assurance Scheme Trustees Limited (England) (ii)
SIG Hillsborough Limited (England)
SIG (IFC) Limited (England)
SIG International Trading Limited (England) (i)
SIG Logistics Limited (England) (ii)
SIG Manufacturing Limited (England)
SIG Offsite Limited (England) (ii)
SIG Retirement Benefits Plan Trustee Limited (England) (i) (ii)
SIG Roofing Supplies Limited (England) (i) (ii)
SIG Scots Co Limited (Scotland) (i)
SIG Specialist Construction Products Limited (England) (ii)
SIG Trading Limited (England) (i)
S M Roofing Supplies Limited (England)
Solent Insulation Supplies Limited (England) (ii)
South Coast Roofing Supplies Limited (England) (ii)
Southwest Roofing Supplies Limited (England) (ii) (viii)
Specialised Fixings Limited (England) (ii)
Specialist Fixings and Construction Products Limited (ii)
Summers PVC (Essex) Limited (England) (ii)
Summers PVC Limited (England) (ii)
Support Site Limited (England) (i) (ii)
T.A.Stephens (Roofing) Limited (England) (ii)
Tenon Partition Systems Limited (England) (ii)
The Coleman Group Limited (England) (ii) (xviii)
The Greenjackets Roofing Services Limited (England) (ii) (xv)
Thomas Smith (Roofing Centres) Limited (England) (ii)
Tolway East Limited (England) (ii)
Tolway Fixings Limited (England) (ii)
Tolway Holdings Limited (England) (ii)
Trent Insulations Limited (England) (ii)
Trimform Products Limited (England) (ii)
TSS Plastics Centre Limited (England) (ii)
Undercover Holdings Limited (England) (ii)
Undercover Roofing Supplies Limited (England) (ii)
United Roofing Products Limited (England) (ii)
228 SIG Annual Report and Accounts 2021
Group companies 2021
9X_XGroupXCompaniesXandXCompanyXinfo_v20.indd 2289X_XGroupXCompaniesXandXCompanyXinfo_v20.indd 228 09/03/2022 17:3009/03/2022 17:30
Fully owned subsidiaries (United Kingdom) continued
United Trading Company (UK) Limited (England) (ii) (vii)
W.W. Fixings Limited (England) (ii) (xvi)
Warm A Home Limited (England) (ii) (xx)
Wedge Roofing Centres Holdings Limited (England) (ii)
Wedge Roofing Centres Limited (England) (ii)
Westway Insulation Supplies Limited (England) (ii)
Weymead Holdings Limited (England) (ii) (xv)
William Smith & Son (Roofing) Limited (England) (ii)
Window Fitters Mate Limited (England) (ii)
Wood Floor Sales Limited (England) (ii)
Woods Insulation Limited (England) (ii)
Workspace London Limited (England) (ii)
Zip Screens Limited (England) (i) (ii)
Fully owned limited partnership
+ The 2018 SIG Scottish Limited Partnership (Scotland) (xxi)
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
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 Services Limited (Jersey) – 44 Esplanade, St Helier, JE4 9WG,
Jersey
SIG Stukadoorsspecialist B.V. (The Netherlands) – Hoogeveenenweg
160, Nieuwerkerk a.d. Ussel, 2913 LV, The Netherlands
SIG Trading (Ireland) Limited (Ireland) (viii) – Ballymount Retail Centre,
Ballymount Road Lower, Dublin 24, Ireland
SIG Sp. z.o.o. (Poland) – ul. Kamienskiego 51, 30-644 Krakow, Poland
Sitaco Sp. z.o.o. (Poland) – ul. Kamienskiego 51, 30-644 Krakow, Poland
Sitaco Sp. z.o.o. Spolka Komandytowa (Poland) – ul. Kamienskiego 51,
30-644 Krakow, Poland
WeGo Systembaustoffe GmbH (Germany) – Maybachstrasse 14, 63456
Hanau-Steinheim, Germany
229SIG Annual Report and Accounts 2021
Strategic report Governance Financials
9X_XGroupXCompaniesXandXCompanyXinfo_v20.indd 2299X_XGroupXCompaniesXandXCompanyXinfo_v20.indd 229 09/03/2022 17:3009/03/2022 17:30
Notes
(i) Directly owned by SIG plc
(ii) Dormant company
(iii) Ownership held in cumulative preference shares
(iv) Ownership held in ordinary shares and 12% cumulative redeemable preference shares
(v) Ownership held in ordinary shares and preference shares
(vi) Ownership held in ordinary shares and deferred ordinary shares
(vii) Ownership held in ordinary shares and class A ordinary shares
(viii) Ownership held in ordinary shares and class B ordinary shares
(ix) Ownership held in ordinary shares, class A ordinary shares and class B ordinary shares
(x) Ownership held in ordinary shares, class B ordinary shares and class C ordinary shares
(xi) Ownership held in ordinary shares, class A ordinary shares, class B ordinary shares and class C ordinary shares
(xii) Ownership held in ordinary shares and class E ordinary shares
(xiii) Ownership held in ordinary shares, class A ordinary shares, class B ordinary shares, class C ordinary shares, class E ordinary shares, class F ordinary shares and class G
ordinary shares
(xiv) Ownership held in class A ordinary shares
(xv) Ownership held in class A ordinary shares and class B ordinary shares
(xvi) Ownership held in class A ordinary shares, class B ordinary shares and class C ordinary shares
(xvii) Ownership held in class A ordinary shares, class B ordinary shares and preference shares
(xviii) Ownership held in class A ordinary shares, class B ordinary shares and cumulative redeemable preference shares
(xix) Ownership held in class B ordinary shares and preference shares
(xx) Ownership held in class AA ordinary shares, class AB ordinary shares, class AC ordinary shares, class AD ordinary shares, class AE ordinary shares, class AF ordinary shares,
class AG ordinary shares, class B ordinary shares and class C ordinary shares
(xxi) Limited partner SIG Retirement Benefit Plan Trustee Limited
230 SIG Annual Report and Accounts 2021
Group companies 2021
9X_XGroupXCompaniesXandXCompanyXinfo_v20.indd 2309X_XGroupXCompaniesXandXCompanyXinfo_v20.indd 230 09/03/2022 17:3009/03/2022 17:30
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
S9 1XH
Tel: +44 (0) 114 285 6300
Fax: +44 (0) 114 285 6349
Email: info@sigplc.com
www.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
Company information
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
Jefferies International Limited
100 Bishopsgate
London
EC2N 4JL
Peel Hunt LLP
100 Liverpool Street
London
EC2M 2AT
Financial public relations
FTI Consulting LLP
200 Aldersgate
Aldersgate Street
London
EC1A 4HD
Financial advisers
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.
231SIG Annual Report and Accounts 2021
Strategic report Governance Financials
9X_XGroupXCompaniesXandXCompanyXinfo_v20.indd 2319X_XGroupXCompaniesXandXCompanyXinfo_v20.indd 231 09/03/2022 17:3009/03/2022 17:30
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 12 May 2022
Interim Results 2022 August 2022
Full Year Results 2022 March 2023
Annual Report and
Financial Statements 2022
posted to shareholders March/April 2023
Shareholder analysis at 31 December 2021
Size of Shareholding
Number of
Shareholders %
Number of Ordinary
Shares %
0 – 999 580 32.28% 234,450 0.02%
1,000 – 4,999 617 34.34% 1,408,200 0.12%
5,000 – 9,999 165 9.18% 1,10 5,926 0.09%
10,000 – 99,999 229 12.74% 7,6 0 4 , 215 0.64%
100,000 – 249,999 59 3.28% 9,407,729 0.80%
250,000 – 499,999 36 2.00% 12,405,756 1.05%
500,000 – 999,999 38 2.11% 27,296,960 2.31%
1,000,000 + 73 4.06% 1,122,0 9 3,741 94.97%
Total 1,797 100.00% 1,181,556,977 100.00%
232 SIG Annual Report and Accounts 2021
Company information
9X_XGroupXCompaniesXandXCompanyXinfo_v20.indd 2329X_XGroupXCompaniesXandXCompanyXinfo_v20.indd 232 09/03/2022 17:3009/03/2022 17:30
9X_XGroupXCompaniesXandXCompanyXinfo_v20.indd 2339X_XGroupXCompaniesXandXCompanyXinfo_v20.indd 233 09/03/2022 17:3009/03/2022 17:30
Registered office
T: +44 (0) 114 285 6300
F: +44 (0) 114 285 6349
E: info@sigplc.com
www.sigplc.com
Registered number: 00998314
Registered in England
9X_XGroupXCompaniesXandXCompanyXinfo_v20.indd 2349X_XGroupXCompaniesXandXCompanyXinfo_v20.indd 234 09/03/2022 17:3009/03/2022 17:30