SIG reviews cheque issuance; revenue hits £2.8bn

UPDATE 1 — Sheffield-based European building products distributor SIG plc said its 2017 revenue from continuing operations increased 7.5% to about £2.8 billion.

SIG also said it has initiated a “rigorous review” of controls around cheque issuance after it discovered a “historical overstatement of cash and trade payables.”

In a trading update for the year ended December 31, SIG said trading in recent months has been in line with its expectations.

“Group revenue from continuing operations for the year increased by 7.5% to c. £2.8bn, with currency contributing 3.8% to this growth and acquisitions 0.2%, offset by the effect of fewer working days (0.5)%,” said SIG.

“As a result, group like-for-like (LFL) revenues for the year were ahead by 4.0%, in line with our expectations.”

SIG added: “Leverage reduction remains a key medium term priority and the group continues to focus on structural reductions in levels of working capital and sustained profit improvement to drive leverage lower.

“During initial year end close processes, the group has identified a historical overstatement of cash and trade payables related to cash cut-off procedures associated with the issue of cheques around previous period ends. 

“There was no impact from this on the group’s income statement, but it resulted in an overstatement of cash of c.£20m at 31 December 2016 and c.£27m at 30 June 2017. 

“If adjusted, this would have resulted in headline financial leverage of 2.3x at 31 December 2016 (reported 2.1x) and 1.9x at 30 June 2017 (reported 1.6x).  

“The group has initiated a rigorous review of controls around cheque issuance and will provide a further update at the time of its full year results.

“After adjusting for the overstatement, SIG is anticipating headline financial leverage of c.1.9x at 31 December 2017. 

“The group continues to target a 1.0-1.5x leverage range during 2018 and is aiming to maintain leverage below 1.0x over the medium term.”

In its outlook, SIG said: “The improvement in confidence in Mainland European markets continues to mitigate a weaker second half margin performance in the UK. 

“As a result, returns on sales have remained stable and our overall expectations for underlying profitability for the full year remain unchanged. “