Weak UK construction activity impacts SIG

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Supplier of specialist building materials, SIG plc, has revealed that the deterioration in the level of UK construction activity has had a knock-on effect on its sales

SIG’s previously reported actions in its UK businesses around pricing, costs and the transition to a more integrated functional operating model are delivering a sustained improvement in margins, and it continues to pursue similar initiatives in our operations across Mainland Europe.

Trading conditions remain challenging in many of SIG’s end markets and there has been a marked deterioration in the level of construction activity in the UK as the year has progressed.  However, the continuing transformation of the group’s businesses, coupled with the group’s normal seasonality, should enable the delivery of a stronger second half to the year.

As such, the board has said it continues to believe that underlying profitability for the full year will be delivered in line with its expectations, but will continue to monitor how trading conditions develop.

SIG saw a 3.8% decline in its like-for-like (LFL) revenues over the period. Group revenues from continuing operations were 5.7% lower in the period, including an adverse 1.3% currency movement and a 0.6% impact from fewer working days.

The LFL sales declines in the UK & Ireland reflect a falling level of construction activity as the second quarter progressed. Revenues at SIG Distribution have also been affected, as anticipated, by the radical actions taken to focus on better pricing management and a planned withdrawal from unprofitable businesses. The business has now completed its transition to a smaller and more focused base, with resulting higher gross margins and lower costs.

The group’s businesses in Mainland Europe reported a positive performance in the period, with LFL revenues up +3.3%. The French business has recovered strongly to +3.3% following the previously reported ransomware attack. Core systems are now fully operational, with no ongoing impact anticipated.

Net debt has fallen further in the period and SIG expects this to result in further progress in headline financial leverage on 30 June 2019.

Management continues its review of remaining peripheral businesses and has announced the sale to Kingspan Group of WeGo FloorTec, a German manufacturer of raised access flooring. The business contributed £2m operating profit in Germany in 2018. The transaction is expected to complete shortly and the resulting proceeds of £12m should reduce headline financial leverage.

SIG will announce its interim results for the half year ended 30 June 2019 on 6 September 2019.

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