After announcing a pre-tax loss from continuing operations of £112.7m for 2019 (2018: profit before tax of £10.3m), SIG revealed plans for a rights issue to raise £150m.
Funds managed by Clayton, Dubilier & Rice (CD&R) will invest up to £85m in the building products distribution multi-national as part of the equity raise. Other building sector firms in CD&R’s portfolio include Spie, Socotec and Roofing Supply Group.
CD&R, which prefers to describe itself as an investment manager, is set to take a 25% stake in SIG, becoming its biggest shareholder, and get two seats on the board.
IKO, the roofing products manufacturer that is currently SIG’s biggest shareholder with 15% of the issued ordinary share capital, has indicated that it supports the new strategy and equity raise.
Steve Francis was brought in by SIG as interim chief executive in February on a turnaround basis but was given the job permanently in April. He had previously led the management buyout of the failed Patisserie Valerie cake shop chain last year only to be rapidly ousted by the venture capitalists who had provided some of the money. His LinkedIn profile reveals that he was the youngest ever participant in Varsity boat race in his first year up at Oxford in 1980.
At SIG he intends to refocus and expand the company, “playing a leading, active and forward-thinking role in the construction industries in which we operate”, he said.
He said: "Since my appointment as CEO on 25th February, we have been developing a new strategy and organisational model which focuses on people, growth and active industry leadership. The essence of our new strategy is re-connection with our people – employees, customers, suppliers and the communities in which we do business – we are a local, sales and service-driven business. We have also been navigating the effects of Covid-19. I am encouraged by how robustly we have operated in the most testing of circumstances and would like to thank all our people for their resilience and fortitude in the face of this pandemic.
"After nearly a decade of contraction, which has included disposals, rationalisation, debt and cost reduction, it is now time to focus on how to grow SIG and rebuild our core USPs of customer proximity, service and expertise. We play an important role in the construction industry, providing a channel through which suppliers can bring their products to a fragmented customer base conveniently and efficiently. I firmly believe that our new strategy for growth will provide the basis, not only for the restoration of profit and cash conversion, but also serve as a foundation to play a leading role in our industry in the years to come.
"The new management team will empower our customer-facing people and promote an entrepreneurial spirit throughout the group, thereby re-connecting with our customers and suppliers, re-energising our highly talented employees, and re-setting the growth ambition of SIG.”
In 2019 SIG saw its total revenue fall 9% to £2,085m and underlying operating profit halved to £33.5m. Statutory loss before tax from continuing operations was £112.7m (2018: profit before tax of £10.3m), reflecting £128.3m of ‘other items’, including £90.9m of impairment of goodwill and other intangibles, clearing the decks in the traditional way for the new chief executive to start afresh.