Sheffield’s SIG falls 22% as construction slumps

Shares of Sheffield-based European building materials supplier SIG fell about 22% on Thursday after it said in a full year trading update that its “deterioration in sales” accelerated in December and it warned underlying profit before tax for the year will be lower.

SIG saw a 6.1% decline in its like-for-like revenues over the year and group revenues from continuing operations were 7.4% lower.

In the update, SIG said: “The group has been reporting an ongoing deterioration during the year in the level of construction activity in key markets and key indicators continue to point to further weakening, principally in the UK.

“The group has also experienced some challenges in sustaining sales rates during a period of considerable and rapid organisational change.

“This deterioration in sales accelerated during December, with sales per working day in the month around a quarter lower than November.

“Management initiated several profit protection measures through the autumn to help offset the impact of the challenging market conditions with most of these delivering financial benefit in 2020, not in 2019 as previously expected.

“As a result, the board now anticipates underlying profit before tax for the year ended 31 December 2019 of c.£42m …”

SIG shares fell 22% to around 94p.

Analysts at Peel Hunt wrote: “The group has reported a much worse-than-expected UK December sales performance, resulting in CY19 forecasts dropping to £42m from £68m.

“CY20 forecasts get rebased lower, while the disposal of Air Handling is also materially dilutive, but this puts the group in a net cash position.

“Until the sales picture becomes clearer we move our recommendation to Hold and set our new target price at 115p.”