(EPIC: SRC / Market: AIM / Sector: Construction Materials)

 

9 September 2024

 

SIGMAROC PLC

 ('SigmaRoc', the 'Group' or the 'Company')

 

Interim results 2024

Analyst Briefing & Investor Presentation

 

Strong first half performance underpins confidence in our full year expectations

 

SigmaRoc, the European lime and minerals group, announces unaudited results for the six months ended 30 June 2024 ('H1 2024').

 

	Statutory results				Underlying results1
	30 June 2024	30 June 2023	YoY change		30 June 2024	30 June 2023	YoY change
Revenue	£468.8m	£290.0m	+60%		£468.8m	£290.0m	+60%
EBITDA	£82.0m	£52.3m	+57%		£100.0m	£54.9m	+82%
EBITDA margin	17.5%	18.0%	-50bps		21.3%	18.9%	+240bps
Profit before tax	£17.2m	£24.3m	-29%		£49.1m	£33.0m	+50%
EPS	0.29p	2.78p	-89%		3.18p	4.01p	-20%
Net debt2					£532.6m	£183.3m	+190%
Covenant Leverage					2.57x	1.69x	+50%
ROIC					6.2%	5.2%	+100bps
FCF3					£43.4m	-£0.6m
FCF Conversion4					43.4%	0.0%

 

 

	Proforma statutory results5			Proforma underlying results5
	30 June 2024	30 June 2023	YoY change	30 June 2024	30 June 2023	YoY change
Revenue	£531.6m	£578.9m	-8%	£531.6m	£578.9m	-8%
EBITDA	£99.8m	£117.4m	-15%	£117.8m	£121.9m	-3%
EBITDA margin	17.5%	20.3%	-280bps	22.2%	21.1%	+110bps
EPS	1.39p	n/a	n/a	4.27p	n/a	n/a
Covenant Leverage				2.3x	n/a	n/a

 

FINANCIAL HIGHLIGHTS

 

Resilient trading following CRH lime acquisitions (references below based on a proforma underlying basis⁵)

·      Underlying revenue down 8%, of which approximately half is due to lower input cost pass through and half due to softer volumes

·      Underlying EBITDA down 3%, comprising 1% impact from softer volumes and 2% timing difference on H1 2023 due to dynamic pricing effects carried over from 2022

·      Full year underlying EBITDA expected to be in-line with consensus⁶

·      Underlying EBITDA margin up 110bps due to effective pricing and cost management

·      Underlying EPS of 4.27p, up over 6% demonstrating earnings accretion from CRH acquisitions before any substantial synergistic benefits

 

Strong financial position and improved returns

·      Strong cash generation in the period bolstered by ETS (European Union Emissions Trading Scheme) returns shifting to H2

·      Covenant Leverage at 2.57x with pro-forma⁵ leverage 2.29x, on target to close the year below 2.3x

·      ROIC improved YoY due to CRH acquisitions, with clear path to medium term target of 15%

 

OPERATING HIGHLIGHTS       

·      Continued benefit from the broad diversification across end markets and regions

·      Robust infrastructure demand, a strong performance in agriculture and food and a recovery in paper and pulp offsetting softer residential construction and environmental sectors

·      Despite challenging market conditions, improved operational margins through effective cost control and operational efficiency programs

·      Volumes down 4% LFL due to residential construction and environment sectors

·      Established ventures arm which made two strategic investments to support further development of ultra-low carbon concrete products

 

STRATEGIC HIGHLIGHTS

 

Update on European lime businesses acquired from CRH

·      Acquisition of German, Czech and Irish businesses completed on 4 January 2024 and are now fully integrated ('Deal 1')

·      UK lime acquisition completed in March 2024 with integration progressing ahead of schedule ('Deal 2')

·      Polish anti-trust clearance received post period end with acquisition completed on 1 September 2024 ('Deal 3')

·      CRH lime businesses performing in line with expectations and confirmed via proforma trading results

·      Guidance on minimum synergies to be delivered by 2027 increased from €30m to €35m, with €15m and €25m expected in 2025 and 2026 respectively. Our revised targeted synergy range is now €35m to €60m, with further progress to be made following the completion of Deal 3

 

CURRENT TRADING AND OUTLOOK

 

·      Positive start to the second half with food, agriculture, mining and infrastructure segments robust

·      Some end markets continue to show mixed demand with areas of weakness remaining in certain areas, such as German power and auto sectors

·      Expected reductions in interest rates will aid a recovery in residential construction

·      The Board's expectations for the year remain unchanged and in line with consensus⁶

 

Max Vermorken, CEO, commented:

"I am delighted to be sharing these results for the first half of 2024 which have come in ahead of our expectations despite continued mixed markets. The results show the resilience of SigmaRoc's diversified business and operations and are testament to the hard work of all our staff.

 

"The integration of the core of the CRH acquisitions has gone well, with Poland completing post period end. We expect to report good progress on the integration of this last piece of the CRH acquisitions later in the year.

 

"The second half has started well, with many areas of the business showing good demand, despite some areas of weakness. The progress on the synergy program continues with guidance on the minimum target level increased to €35m by 2027, even before allowing for synergies that will arise post completion of the Polish acquisition.

 

"With the recent acquisitions now completed, SigmaRoc has transformed into a business with several lifetimes supply of a key natural resource that is essential to all the processes around modern life. This resource base provides SigmaRoc with a unique position in the European lime market."

 

The full text of the interim statement is set out below, together with detailed financial results, and will be available on the Company's website at www.sigmaroc.com

 

Notes:

1.     Underlying results are stated before acquisition related expenses, certain finance costs, redundancy and reorganisation costs, impairments, amortisation of acquisition intangibles and share option expense. References to an Underlying profit measure throughout this Annual Report are defined on this basis. Non-underlying items are described further in the Chief Financial Officer's report. These measures are not defined by UK IAS and therefore may not be directly comparable to similar measures adopted by other companies.

2.     Net debt including IFRS 16 lease liabilities.

3.     Free Cash Flow takes net cash flows from operating activities and adjusts for CapEx, net interest paid, and for the underlying result further adjusts for net non-underlying expenses paid and working capital payments relating to pre-acquisition accruals or purchase price adjustments.

4.     Free Cash Flow Conversion is FCF relative to underlying EBITDA.

5.     Proforma calculation includes Deal 2 and Deal 3, plus all acquisitions made by SigmaRoc in 2023, for entire period on an underlying basis.

6.     Consensus expectations for SigmaRoc, being the average of forecasts for the year ending 31 December 2024 provided by Analysts covering the Company, are revenue of £1,060.0m and underlying EBITDA of £219.3m.

 

 

ANALYST BRIEFING

 

SigmaRoc will host an online briefing for analysts on Monday, 9 September 2024 at 08:30 GMT. For more details and to register to attend please email SigmaRoc@walbrookpr.com

 

PRIVATE INVESTOR PRESENTATION

 

SigmaRoc's Executive team will provide a live presentation to private investors reviewing the 2024 interim results and prospects via Investor Meet Company on Monday, 9 September at 14.00 GMT.

 

The presentation is open to all existing and potential shareholders. Questions can be submitted before the event via your Investor Meet Company dashboard up until 9.00am the day before the meeting or at any time during the live presentation. Investors can sign up to Investor Meet Company for free and add to meet SigmaRoc via:

 

https://www.investormeetcompany.com/sigmaroc-plc/register-investor

 

Investors who already follow SigmaRoc on the Investor Meet Company platform will automatically be invited.

 

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014 AS IT FORMS PART OF UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018, AS AMENDED.

 

Information on the Company is available on its website, www.sigmaroc.com.

 

For further information, please contact:

 

SigmaRoc plc Max Vermorken (Chief Executive Officer) Garth Palmer (Chief Financial Officer) Tom Jenkins (Head of Investor Relations)	Tel: +44 (0) 207 002 1080   ir@sigmaroc.com
Panmure Liberum (Nomad and Co-Broker) Scott Mathieson / John More / Dru Danford   Deutsche Numis (Co-Broker) Richard Thomas / Hannah Boros	Tel: +44 (0) 203 100 2000     Tel: +44 (0) 20 7260 1000
Walbrook PR Ltd (Public Relations) Tom Cooper / Nick Rome	Tel: +44 20 7933 8780 sigmaroc@walbrookpr.com Mob: +44 7971 221972

 

About SigmaRoc

 

SigmaRoc is a quoted European lime and minerals Group.

 

Lime and limestone are key resources in the transition to a more sustainable economy. New applications for lime and limestone products as part of a drive for sustainability include the production and recycling of lithium batteries, the decarbonisation of construction including through substitution of cementitious material and new building materials, and environmental applications including lake liming, air pollution and direct air capture.

 

SigmaRoc seeks to create value by purchasing assets in fragmented markets and extracting efficiencies through active management and by forming the assets into larger groups. It seeks to de- risk its investments through the selection of projects with strong asset backing.

 

SIGMAROC PLC

Interim results (unaudited) for the six months ended 30 June 2024

 

 

EXECUTIVE STATEMENT

 

We are pleased to extend a warm welcome to the nearly 1,000 colleagues who have joined our Group since the start of 2024. They join an ambitious mission to build Europe's leading minerals platform focused on lime and limestone. We also extend our gratitude to the CRH Group for their support in the completion process.

 

Our intense focus on completing the CRH lime acquisitions, did not detract from posting excellent results in challenging market conditions. We report a strong first half of 2024 achieving an underlying EBITDA of £100m. Underlying EBITDA margins improved by 240bps to 21.3%, reflecting operational improvements. This positions us well to deliver market expectations for the full year.

 

The integration programme progressed ahead of plan. The integration of those businesses acquired in January is now complete having exited all Transitional Service Agreements ('TSA's). Integration of Buxton Lime in the UK, acquired in March 2024, is progressing smoothly and has traded well since acquisition. All acquired businesses are now under the same financial and safety reporting structures as the rest of the Group. The Polish lime operations successfully cleared antitrust filings and joined the Group on 1^st September 2024.

 

The synergies programme also progressed ahead of plan. We were able to map sufficient synergies to increase the €30m to €60m target to be delivered by 2027 to €35m to €60m. This was achieved while only having access to a part of the footprint for most of H1 2024. Further progress will now be made as we include the Polish lime assets fully within the scope. Updates will follow when we have completed the final part of the identification programme.

 

We continue to look at rationalising our portfolio through the disposal of non-core assets and will update on this when appropriate.

 

We can therefore now look to the future and consider the Group we are building as a whole. On a proforma basis, which includes all newly acquired entities for the entire first half, the results are very encouraging. Underlying EPS increased by 6.5% YoY demonstrating early value creation from the CRH acquisition. Leverage came in at under 2.3x. Turnover did reduce by 8%, however, lower pass-through of costs was the primary driver, as well as some softness in some end markets. EBITDA margin increased 110bps to 22.2% due to good pricing and disciplined cost control.

 

The Group's progress, in a busy half, was impressive. Certain achievements merit particular attention, such as safety, progress on ESG initiatives and innovation. Trading and market conditions are captured separately at the end of this statement.

 

Overall segment review

 

In 2023, several trends emerged across our markets, and many of these trends persist. These include a noticeable slowdown in European residential construction, disruptions in the paper and pulp markets, localised robustness in industrial markets, and a mixed environmental segment. The Group's diversified market exposure has allowed it to capitalise on certain tailwinds and mitigate headwinds as follows:

 

·      Industrial minerals markets (42.2% of H1 2024 Group revenues: H1 2023 30.3%) - Demand remained in line with budgeted volumes, consistent with H2 2023 trends. Steel volumes were supported by restocking after maintenance shutdowns and healthy orderbooks in key northern European markets. Paper and pulp traded well in spite of disruptions in Finland due to strike actions. Mining and chemical markets evolved on a more localised basis.

 

Outlook: Mixed demand trends emerged in 2023 as energy costs reduced and inflation stabilised. Automotive demand appears to have slowed, potentially impacting steel demand. Paper and pulp continues to face localised disruptions and consolidation. Mining and chemicals are likely to show both solid volume demand and mixed localised demand.

 

·      Environmental and agriculture markets (17.5% of H1 2024 Group revenues: H1 2023 12.5%) - Volume development in food, agriculture, and water purification was generally in line with expectations and at healthy levels. Agricultural demand improved compared to 2023, and the food segment benefited from a longer-than-usual beet season. However, flue gas treatment experienced a slower half-year due to reduced industrial output in Europe and a windier winter and spring, leading to lower coal and gas-fired power generation.

 

Outlook: These trends are expected to continue over the next 6 to 12 months. Sugar production is likely to support demand further, with sugar finding applications beyond food. Agricultural volumes are anticipated to remain robust in the second half of the year. Power generation demand will depend on European weather patterns.

 

·      Construction markets (40.3% of H1 2024 Group revenues: H1 2023 57.2%) - Infrastructure applications, which account for around 65% of our construction market revenues, saw robust demand in both the UK and Continental Europe. However, residential construction remained sluggish over the past six months, with permitting slowing in several European countries. Higher interest rates have significantly impacted both supply and demand for new residential construction.

 

Outlook: Infrastructure demand is expected to continue dominating this segment. Political stability or clarity will support demand as governments receive renewed mandates to invest in infrastructure projects following elections. A reduction in interest rates is anticipated to revive residential construction, given the structural demand for housing.

 

The Group is well-positioned to capitalise on the mixed demand landscape. Several markets show sustained demand or signs of growth, while others exhibit pent-up demand that will materialise as favourable macroeconomic factors align.

 

 

Regional breakdown

 

The above segmental analysis translates into the following regional performance for H1 2024, with further commentary provided by region:

 

Underlying £'M	Revenue		EBITDA		EBITDA margin
	H1 2024	H1 2023	H1 2024	H1 2023	H1 2024	H1 2023
North West	104.5	73.8	23.8	14.7	22.8%	19.9%
West	54.2	56.0	10.2	13.7	18.8%	24.5%
Central	143.8	-	32.6	-	22.7%	-
North East	166.3	160.2	38.5	32.0	23.2%	20.0%
Corporate	-	-	(5.1)	(5.5)	-	-
Group	468.8	290.0	100.0	54.9	21.3%	18.9%

 

 

North West: Primary drivers of the improved YoY performance were the additions of Clogrennane in January 2024 and Buxton Lime in March 2024. The UK and Irish markets continued to demonstrate strong performance, driven by robust infrastructure demand for both lime and limestone. However, UK residential construction faced challenges similar to those in other parts of Europe, including higher interest rates, political uncertainty, and pent-up demand.

 

Operationally, the key constituents of the North-West region delivered solid results. Despite the tougher months due to the slower residential construction market, our aggregates quarries, concrete, and precast businesses remained resilient, successfully defending their market positions, maintaining pricing, and controlling costs.

 

 

West: The West region, which uniquely focuses on the construction sector, experienced a reduction in demand for dimensional stone, aggregates and ready-mix concrete either due to economic context and/or weather conditions. Despite this decline, our entities maintained robust operational margins through effective cost control programs. While current trends are expected to persist, we anticipate a rebound in demand once residential construction recovers. Additionally, infrastructure demand may increase as new governments in Belgium and the Netherlands begin implementing their programs.

 

Central: This newly established Central region within the Group comprises Germany and the Czech Republic. Both countries performed in line with budget and post-acquisition expectations, although residential construction demand showed several weak spots. In the Czech Republic, the administration of a major steel producer led to a reduction in demand from the steel segment.

 

The Central region's performance was bolstered by a continued focus on efficiency and operational excellence. This drive led to the identification of several potential synergies, which will be discussed later. Demand was also affected by reduced power generation due to increased wind energy. However, agricultural, food, and related markets performed well, with quarries demonstrating flexibility in producing the right products.

 

North East: Nordkalk had a solid first half of the year with good pricing and cost control leading to overall margin improvement. This was driven by a recovery in paper and pulp demand, strong infrastructure construction demand in Poland and the Baltic States, and contributions from acquisitions made in early and mid-2023.

 

While construction demand in Scandinavia remained weak compared to historical trends, the bulk of these volumes carried limited margins due to legacy contract arrangements. As construction output in Finland and Sweden recovers, we anticipate an improved volume outlook.

 

Integration and synergies

 

The integration programs for the recently acquired CRH lime acquisitions have progressed smoothly, thanks to the dedication of our internal team and support from CRH. We are pleased to report that we have successfully exited TSAs for the German, Czech, and Irish businesses, and the integration of the UK carved-out business is ahead of schedule, with Poland having just commenced following acquisition on 1 September 2024.

 

A critical aspect of integration involves IT and systems-related handovers or transfers. Significant effort has been invested in preparing effective transfer strategies and implementing new or existing systems. As the UK and Polish entities transition into the Group and move away from their TSAs, these integration efforts will accelerate. The ultimate goal is to establish a fully revised and optimised IT structure across the Group, positioning us for the next phase of development.

 

Our synergy program, initially targeting €30m-€60m by 2027, has been increased to €35m to €60m, even before allowing for potential benefits from the Polish lime business. We are now targeting €15m and €25m to be delivered in 2025 and 2026 respectively, rising to €35m in 2027. We expect to report further progress following the integration of the Polish assets.

 

 

Safety

 

In June, the Group conducted a company-wide standstill to emphasise the inherent dangers of our sector and activities, reinforcing the necessity of taking every safety measure seriously. This initiative sparked extensive internal discussions and led to a review of certain processes to ensure continuous safety improvements. As part of this follow-up, we conducted a thorough assessment of supervisor training and job suitability to ensure proper supervision across the Group.

 

To bolster our safety efforts, we expanded our safety team with additional staff members dedicated to conducting safety audits across the Group. These audits are crucial for identifying and rectifying any shortcomings in both paperwork and practices. While the journey towards achieving a zero-harm environment is ongoing and challenging, our unwavering commitment to safety remains non-negotiable.

 

Environmental, Social and Governance (ESG)

 

In April, the Group published its latest ESG report as part of the annual report, showcasing significant progress across all aspects of ESG. We welcomed two new board members, Francesca Medda and Peter Johnson, whom each bring valuable experience and expertise. Francesca Medda, in particular, offers a strong focus on environmental and social reporting and analysis, while Peter Johnson contributes decades of public company experience together with a strong governance background.

 

Our commitment to becoming a more environmentally and socially responsible business continues to advance. We are managing CO₂ emissions by switching to more sustainable fuels in our kiln network and leveraging machine learning software to further reduce kiln emissions. Additionally, we are paying close attention to quarry operations, constantly improving dust, noise, and water management to benefit our neighbours and enhance biodiversity.

 

To enhance our environmental reporting and scoring, the Group has appointed a new head of ESG to monitor and improve our ratings with ESG rating agencies. We recognise that the performance of the Group and the clarity with which rating agencies understand the information in our ESG report are both critical. Therefore, we expect to make further strides in gaining recognition for our ESG efforts.

 

Innovation and research

 

The Group has established a ventures arm with a mandate to identify and support start-up companies relevant to our sector. To date, it has made two strategic investments and analysed several technology firms. These two investments are particularly exciting as they align with our goal of becoming the UK's leading producer of ultra-low carbon concrete products.

 

Additionally, the Group is developing an integrated R&D strategy to assist key customers with their technical challenges. This strategy focuses on our two primary product lines, limestone and lime, and aims to provide innovative solutions as well as client-specific analysis and assistance. Although these efforts are in the early stages, they now encompass the newly acquired businesses.

 

Finance review

 

For the six months ending 30 June 2024, the Group generated revenue of £468.8m (H1 2023: £290.0m) and underlying EBITDA of £100.0m (H1 2023: £54.9m). Underlying profit before taxation for the Group was £49.1m (H1 2023: £33.0m). Growth was generated from the CRH lime acquisitions during the period, with Germany, Czech and Ireland in January 2024 and then UK in March 2024.

 

Non-underlying items

 

The Group recorded £32.0m (H1 2023: £8.7m) of non-underlying items during the period, of which £17.4m are cash outflows. These items relate to six categories:

 

1.   £14.5m in exclusivity, introducer, advisor, consulting, legal fees, accounting fees, insurance and other direct costs relating to acquisitions which primarily pertain to the CRH lime acquisitions.

 

2.   £4.4m on amortisation of finance costs, of which £2.9m arising from terminating the previous debt facility from 2021 and £1.5m from the new syndicated 5-year debt facilities established in November 2023.

 

3.   £3.8m in share-based payments relating to grants of options.

 

4.   £5.4m amortisation of acquired assets and adjustments to acquired assets.

 

5.   £3.0m legal and restructuring expenses relating to the reorganisation and integration of recently acquired subsidiaries, including costs associated with discontinuing sites and operations, transitional salary costs, redundancies, severance and recruitment fees, and costs associated with financial reporting and system migrations.

 

6.   £0.9m on unwinding of discounts on deferred consideration payments for Harries and other non-cash balance sheet adjustments.

 

Interest and tax

 

Net finance costs in the period totalled £26.5m (H1 2023: £7.4m) including associated interest on bank finance facilities, as well as interest on finance leases (including IFRS 16 adjustments) and hire purchase agreements, plus £4.6m of non-underlying finance costs.

 

A tax charge of £9.7m (H1 2023: £4.7m) was recognised in the period, resulting in a tax charge on profitability generated from mineral extraction in the Channel Islands and profits generated through the Group's UK, Ireland, Belgium, Germany, Czech and Nordic based operations.

 

Earnings per share

 

Statutory basic EPS for the period was 0.30p (H1 2023: 2.81p and underlying basic EPS (adjusted for the non-underlying items mentioned above) for the period totalled 3.18p (H1 2023: 4.01p)). Statutory EPS declined due to substantial non-underlying expenditure incurred in relation to the CRH lime acquisitions and underlying EPS reduced due to the structure and phasing of the CRH lime acquisitions, with Deal 1 being funded primarily from equity and debt, whereas Deal 2 is entirely debt and Deal 3 will be from deferred consideration. On a proforma basis underlying basic EPS was 4.27p, representing a 6.5% improvement and demonstrating the earnings accretion of the combined CRH lime acquisitions.

 

Statement of financial position

 

Net assets at 30 June 2024 were £730.0m (2023: £497.0m). Net assets are underpinned by mineral resources, land and buildings and plant and machinery assets of the Group.

 

Cash flow

 

Cash generated by operations was £78.3m (2023: £17.1m). The Group spent £550.8m on acquisitions net of cash acquired, £27.3m on capital projects, including acquisition of intangibles, net of disposals, raised £195.7m net of fees from the issue of equity, and drew net proceeds from borrowings of £428.9m. The net result was a cash inflow for the period of £99.2m.

 

Net debt

 

Net debt at 30 June 2024 was £532.6m (2023: £183.3m) including IFRS 16 lease liabilities.

 

Bank facilities

 

On 22 November 2023 the Company entered a new syndicated senior credit facility of up to €750 million (the 'New Debt Facilities') led by Santander UK and BNPP, with the syndicate including several major UK and European banks and a further €125 million bridge loan ('Bridge Loan'). The New Debt Facilities were partially drawn on 4 January 2024 in connection with the CRH Lime Acquisitions, specifically CRH Deal 1, and the legacy debt facility was repaid as part of this process.

 

The New Debt Facilities comprise a €600 million committed term facility, €150 million revolving credit facility and a further €100 million uncommitted accordion.

 

The Group's New Debt Facilities have a maturity date of 21 November 2028 and are subject to a variable interest rate based on EURIBOR plus a margin depending on underlying EBITDA.

 

The Group's New Debt Facilities are subject to covenants which are tested monthly and certified quarterly. These covenants are:

·      Group interest cover ratio set at a minimum of 3.5 times EBITDA while the Bridge Loan remains outstanding and then 4.0 times thereafter; and

·      A maximum adjusted leverage ratio, which is the ratio of total net debt, including further borrowings such as deferred consideration, to adjusted EBITDA, of 3.95x in 2024.

 

The Bridge Loan has a maturity date of 21 November 2024, with options for two 6-month extensions which if exercised would push maturity to 21 November 2025. The Bridge Loan is subject to a variable interest rate based on EURIBOR plus a margin as follows:

-       2% for months 0 - 6

-       3% for months 7 - 12

-       4% for months 13 - 18 (assuming exercise of the first extension option)

-       5% for months 19 - 24 (assuming exercise of the second extension option)

 

As at 30 June 2024, the Group comfortably complied with its bank facility covenants under the terms of the New Debt Facilities and total undrawn facilities available to the Group under the New Debt Facilities amounted to approximately £100m.

 

Capital allocation

 

We prioritise the maintenance of a strong balance sheet and deploy our capital responsibly, allowing us to commit significant organic investment to our business whilst continuing to pursue acquisitions to accelerate our strategic development. This conservative approach to financial management will enable us to continue pursuing capital growth for our shareholders. 

 

Dividends

 

Subject to availability of distributable reserves, dividends will be paid to shareholders when the Directors believe it is appropriate and prudent to do so. The Group has achieved significant capital growth since its inception and the Directors expect to commence dividend payments once the Group's Covenant Leverage is below 1.5 times. The Directors therefore do not recommend the payment of an interim dividend (30 June 2023: nil).

 

Corporate

 

Our 2023 annual results were released on 18 March 2024 and on 12 April 2024 we held our AGM with all resolutions being passed.

 

CFO succession

 

As previously announced, after nearly eight years with the Group, Garth Palmer has notified the Board of his intention to pursue other interests starting in 2025. Garth will gradually hand over his tasks to Jan Van Beek, Deputy CFO and CFO designate, who will join the Board when Garth steps down. The appropriate AIM disclosures will be provided in due course once all regulatory processes have been completed and, in any event, before Jan is appointed to the Board.

 

Jan qualified as an accountant with Deloitte and led their international practice in the Netherlands. He subsequently built a distinguished career in senior finance roles within the minerals and chemicals industry based in Europe and the USA. During his time at Shell plc spin-out Hexion Jan was Global Finance Director and subsequently CFO of several divisions, comprising turnover of over USD 4bn and sales in 4 continents.

 

At Hexion Jan was jointly responsible for investor relations work in relation to USD 3bn NYSE listed bonds, the refinancing of multi-layered debt facilities as well as reporting work up to ultimate owner Apollo Global Management. At the end of his tenure with Hexion, Jan became CFO designate of a USD 2bn spin-out. 

 

Most recently Jan was Head of Finance at ASML, the world leading producer of machines for the semiconductor industry with a market capitalisation of EUR 335bn.

 

Outlook

 

Trading conditions in Europe present both head and tailwinds which the Board is actively managing. Industrial minerals will see areas of outperformance and possible challenges in relation to expected softness in automotive demand. Environmental markets have been consistently strong in the food and agricultural segments, with weather-related pockets of lower demand in power generation. A rebound in residential construction has not yet materialised given prevailing high interest rates and relatively low new planning applications although we are well placed for market recovery.

 

The Board remains confident in the Group's ability to deliver on the integration of the Polish assets, and to continue to build on SigmaRoc's position as a European leader in lime and limestone. 

 

The Board's current outlook for FY24 remains unchanged with EBITDA in line with consensus¹.

 

 

David Barrett	Max Vermorken	Garth Palmer
Executive Chairman	Chief Executive Officer	Chief Financial Officer

 

9 September 2024

 

 

Notes:

1.     Consensus expectations for SigmaRoc, being the average of forecasts for the year ending 31 December 2024 provided by Analysts covering the Company, are revenue of £1,060.0m and underlying EBITDA of £219.3m.

 

 

 

SigmaRoc today

 

The Group has established itself as a leader in European natural commodities. Through strategic acquisitions, including the recent acquisition of CRH's lime businesses, SigmaRoc has strengthened its market position and operational capabilities. The Group has 2.7bn tonnes of essential limestone resource in strategically important positions within in many of the key markets in Europe

 

Diverse portfolio of products

 

Recent strategic acquisitions have broadened SigmaRoc's offerings beyond traditional construction products. These include both specialised lime-related solutions and innovative offerings for a number of industrial applications that are key components in the manufacture of essential industrial products such as steel, pulp & paper, various chemicals and a number of environmental uses. This diversification allows the Group to cater to sectors outside of construction such as agriculture and the environment. This diversity of end markets, as a chemicals provider to key industrial processes, ensures resilience against market fluctuations given the broad focus on a variety of different end markets with different cycles.

 

Historic stability of lime and limestone markets

 

SigmaRoc sources its lime and limestone materials from historically stable markets, enhancing its operational advantages. By focusing on regions with established and predictable demand for lime and limestone products, SigmaRoc minimises volatility throughout its supply chain. The nature of lime and limestone products, critical in construction and industrial processes, ensures consistent demand even during economic fluctuations. The location of SigmaRoc's production facilities, strategically close to important industrial hubs, ensures it can respond promptly to customer orders in these markets while maintaining logistics efficiency. This foresight in targeting areas characterised by stable consumption patterns allows the Group to mitigate risks associated with economic downturns, providing a solid foundation for sustainable growth in the long term.

 

Strong assets

 

The company owns circa 70 high-efficiency kilns, which are capable of producing high-quality hydrated lime and quicklime, ensuring consistent and reliable output. Coupled with strategically located quarries, the Group achieves control over the entire production process, from raw material extraction to the final product. This allows the Group to manage production costs and maintain product quality.

 

2.7 billion tonnes of mineral reserves

 

At the core of the Group's sustainability and potential for long-term growth are its 2.7 billion tonnes limestone and lime mineral reserves. Its access to high quality deposits enables the Group to ensure a secure supply of materials, reducing the risk of disruptions and allowing for careful long-term planning. Additionally, holding substantial reserves in key geographical areas enhances SigmaRoc's negotiating power in the marketplace, supporting competitive pricing strategies and solidifying relationships with clients across various sectors that require lime and limestone products.

 

Disciplined cost management

 

Cost management is integral to the Group's strategy and underpins its profitable growth and success. SigmaRoc employs rigorous cost control measures aimed at improving operational efficiencies throughout its production process. By investing in technology and innovative practices, the company optimises resource allocation. This focus not only enables the Group to maintain competitive pricing but also strengthens its long-term viability within the sector. Strategic partnerships for supply chain management further stabilise costs for raw materials like limestone, allowing SigmaRoc to absorb fluctuations in material pricing while capitalising on local macro drivers and mega trends.

 

As SigmaRoc continues to navigate the challenges and opportunities in the natural commodity sector, we believe these competitive strengths will play a vital role in securing its position as a market leader, equipped to meet evolving demands and sustainable long-term growth.

 

CONDENSED CONSOLIDATED INCOME STATEMENT

 

				6 months to 30 June 2024 Unaudited							6 months to 30 June 2023 Unaudited
				Underlying		Non-underlying* (Note 8)			Total		Underlying	Non-underlying* (Note 8)			Total
Continued operations	Note		£'000		£'000				£'000		£'000	£'000			£'000
Revenue	6	468,783			-			468,783			290,018		-		290,018
Cost of sales	7	(357,921)			-			(357,921)			(223,320)		-		(223,320)
Gross profit		110,862			-			110,862			66,698		-		66,698
Administrative expenses	7	(40,994)			(28,911)			(69,905)			(28,013)		(7,960)		(35,973)
Profit from operations		69,868			(28,911)			40,957			38,685		(7,960)		30,725
Net finance (expense)/income		(21,860)			(4,601)			(26,461)			(6,381)		(764)		(7,145)
Other net (losses)/gains		1,126			(43)			1,083			738		634		1,372
Profit/(loss) before tax		49,134			(33,555)			15,579			33,042		(8,090)		24,952
Tax expense	9	(11,347)			1,598			(9,749)			(4,660)		-		(4,660)
Profit/(loss)		37,787			(31,957)			5,830			28,382		(8,090)		20,292
Profit/(loss) attributable to:
Owners of the parent		35,211			(31,957)			3,254			27,101		(8,090)		19,011
Non-controlling interests		2,576			-			2,576			1,281		-		1,281
		37,787			(31,957)			5,830			28,382		(8,090)		20,292
Basic earnings per share attributable to owners of the parent (expressed in pence per share)	16	3.18			(2.88)			0.30			4.01		(1.20)		2.81
Diluted earnings per share attributable to owners of the parent (expressed in pence per share)		2.95			(2.68)			0.27			3.84		(1.15)		2.70

* Non-underlying items represent acquisition related expenses, restructuring costs, certain finance costs, share option expense and amortisation of acquired intangibles. See Note 8 for more information.