Building on our potential Building on our potential Str Strate tegy upda y update te 21 November 2017
Disclaimer: Forward-looking statements This presentation may include certain forward-looking statements, beliefs or opinions, including statements with respect to SIG plc’s business, financial condition and results of operations. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believes”, “estimates”, “plans”, “anticipates”, “targets”, “aims”, “continues”, “expects”, “intends”, “hopes”, “may”, “will”, “would”, “could” or “should” or, in each case, their negative or other various or comparable terminology. These statements are made by SIG plc Directors in good faith based on the information available to them at the date of this presentation and reflect the SIG plc Directors’ beliefs and expectations. By their nature, these statements involve risk and uncertainty because they relate to events and depends on circumstances that may or may not occur in the future. A number of factors could cause actual results and developments to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, developments in the global economy, changes in the UK and European governments’ policies, spending and procurement methodologies, and failure in SIG’s health, safety or environmental policies. No presentation or warranty is made that any of these statements or forecasts will come to pass or that any forecast results will be achieved. Forward-looking statements speak only as at the date of this presentation and SIG plc and its advisers expressly disclaim any obligations or undertaking to release any update of, or revisions to, any forward-looking statement in this presentation. No statement in the presentation is intended to be, or intended to be construed as a profit forecast or profit estimate and no statement in the presentation should be interpreted to mean that earnings per SIG plc share for the current or future financial years will necessarily match or exceed the historical earnings per SIG plc share. As a result, you are cautioned not to place any undue reliance on such forward-looking statements. This presentation does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any securities. The making of this presentation does not constitute a recommendation regarding any securities . This presentation and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other person. 2
Today’s agenda • Context for strategic review • Strategy update • Executing our strategy • Case studies o Customer service: Serving our Roofing customers o Customer value: Delivering customer value in Air Handling o Operational efficiency: Driving operational efficiency in France • Financial guidance • Conclusions and questions 3
Andrew Allner Chairman 4
Meinie Oldersma Chief Executive Officer 5
Today’s agenda • Context for strategic review • Strategy update • Executing our strategy • Case studies o Customer service: Serving our Roofing customers o Customer value: Delivering customer value in Air Handling o Operational efficiency: Driving operational efficiency in France • Financial guidance • Conclusions and questions 6
Our leading market positions Estimated market shares 2016 Revenue: £2.6bn Total UK & Ireland £1.3bn Mainland Europe £1.3bn Air Handling, £131m Other, £25m Benelux, £100m 32% 30% Distribution, 29% 29% Germany, £770m £386m Exteriors, France, £415m £589m 18% 17% Ireland, £86m 12% 12% 11% 10% 9% 9% 6% 6% 2% 1% Distribution Exteriors Ireland France Germany Poland Benelux Air Handling #1 interiors #1 specialist roofing #1 technical insulation Market leader #1 technical insulation Specialist market leader Market leader Market leader #1 insulation #1 technical insulation #3 structural insulation #1 interiors #3 roofing #3 structural insulation #3 interiors #3 construction #3 interiors accessories Note: ONS, Euroconstruct, GFK, BMI, Eurostat, INSEE, FBF, OC&C analysis, company estimates 7 2016 revenue reflects continuing operations as at 30 June 2017
Our experienced people 40% 35% 33% 30% 25% Staff tenure 19% 19% 20% 15% 14% 15% 10% 5% 0% <1 year 1-2 years 3-5 years 6-10 years >10 years Length of tenure provides bedrock of experience NOTE: SIG staff tenure at October 2017 8
Lack of meaningful profit growth since 2010 2010-12 2013-16 2017 - Investment in capability adds cost but does not Profit Profit deliver growth Warning #1 Warning #2 Underlying Pre-Tax Profit, £m 200 210 Margin recovery but below pre-crisis levels 180 150 Share Price, p 150 120 100 90 50 60 98 88 87 84 82 78 63 30 0 0 2010 2011 2012 2013 2014 2015 2016 2017 • Loose central organisation with • Investment in central capability adds £45m • New leadership individual Opco focus administration costs (Chairman, CEO, CFO) • Headcount reduced by c.3,000 • Many initiatives pursued, though few deliver • Comprehensive review and 180 branches closed of strategy • Weak incentive structures and performance • Group fragmented with many management mechanisms disparate brands and businesses • Poor allocation of capital 9
Poor operational and financial control over 2013-16 Headline financial leverage Gross margin Administration costs Net Debt / EBITDA % £m 28% 200 2.2 2.1x 183 £45m increase 2.0 1.8x 180 1.8 26.9% 27% 26.8% 26.7% 1.6 160 26.4% 152 150 1.4 1.2 138 26% 140 1.0x 1.0x 1.0 0.8 120 0.6 25% 0.4 100 0.2 80 0.0 24% 2013 2014 2015 2016 2013 2014 2015 2016 2013 2014 2015 2016 10
Considerable scope to improve margin SIG Return on Sales % Peer ROS % • SIG has historically delivered a 6.3% through cycle average ROS of 4.5 - 5.5% 5.5% • Every 100bps improvement in Through cycle average 4.5 – 5.5% SIG’s ROS% adds c.£27m 4.2% 3.9% 3.8% additional profit 3.3% 2013 2014 2015 2016 Travis Perkins Grafton Group 2016 2016 NOTE: Travis Perkins’ ROS% consists of 1.6% statutory and 4.7% adjustment for one - offs; Grafton Group’s ROS% consists of 4.8% st atutory and 0.7% adjustment for one-offs. 11
Today’s agenda • Context for strategic review • Strategy update • Executing our strategy • Case studies o Customer service: Serving our Roofing customers o Customer value: Delivering customer value in Air Handling o Operational efficiency: Driving operational efficiency in France • Financial guidance • Conclusions and questions 12
Review of strategy • Initiated April 2017 • Thorough and robust review o Preliminary view from granular external benchmarking o Detailed bottom-up analysis by Opco o Supported by external consultants o Importantly, aspirations set by local management teams and only then aggregated at Group level o Output in form of medium term plan, focusing on a small number of strategic levers and key strategic enablers that will deliver materially improved performance • Review has confirmed that there is considerable opportunity to deliver significantly improved operational and financial performance in each major Opco, and across the Group as a whole • Improvement will come from focused delivery of three strategic levers around customer service, customer value and operational efficiency • Highly disciplined execution will be required to deliver this opportunity o SIG’s track record highlights the considerable challenge in delivering lasting change 13
Our specialist business model Specialist Specialist General Retail / DIY merchants distribution merchants Advanta Advantages of ges of specialis specialist t focus ocus Insulation & Interiors • Defined product focus Roofing & Exteriors • Key supply niche • Partnership with both suppliers and customers Air Handling • Market leadership • Less asset intensive than traditional merchants End customers Developers Contractors Specialist installers Independent merchants SIG is focused on specialist distribution and merchanting of specialist products for our business customers 14
Value-add through our specialist business model Our suppliers OUR BRANCHES VALUE-ADD • Depth and availability of stock • Credit provision • Break bulk • Specialist and technical advice • Delivery and logistics • Product enhancement OUR PEOPLE Our customers We bring value to our customers as a specialist ‘middle man’ in our core markets 15
Strong positions in our core markets Insula Insulation and tion and Inte Interior riors Market leader • Specialist distribution of both value-add Market participant and commodity products • Broad product range across technical and structural insulation and interiors • Consolidated markets • Few key suppliers, many large and small customers 16
Strong positions in our core markets Roofing and Exterior oofing and Exteriors Market leader • Specialist merchanting business Market participant • Broad product range across pitched and flat roofs, facades and accessories • Markets more regional and fragmented • Few key suppliers, many small customers 17
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