Sheffield’s SIG swings to £125m first-half loss

Shares of Sheffield-based building materials supplier SIG plc fell about 10% on Thursday after it published results for the six months ended June 30, 2020, showing a pre-tax loss of £125.4 million compared to a £2.2 million profit a year earlier.

SIG said the loss reflected “£71.7m of other items, including £42.8m of impairment of goodwill in the UK businesses, mainly reflecting the impact of Covid-19.”

Revenue fell 24% to £840.1 million. No interim dividend for the current year will be paid, nor will a final dividend be declared.

SIG said the second half of 2020 is expected to remain loss making for the firm, but at a lower rate than the first, and it expects full year sales to be moderately higher than it previously guided.

SIG’s shares have fallen about 80% over the past 12 months.

SIG recently carried out a restructuring of its financing facilities via a capital raise of £165 million including an £83 million equity investment by US buyout firm Clayton, Dubilier & Rice LLC.

On current trading and outlook, SIG said: “Market fundamentals remain sound and near-term order books give an element of encouragement, but there remains significant economic uncertainty …

“Trading following initial estimates of immediate H1 Covid-19 impact was better than anticipated, and the board now expects full year sales to be moderately higher than guided in May …

“H2 expected to remain loss-making, but at a lower rate than H1 …”

SIG CEO Steve Francis, Chief Executive Officer, said: “In mid-summer, we concluded the successful restructure of our financing facilities and a £165m capital raise.

“These, along with our careful management of working capital and cash in recent months, have created a sound financial base on which we can rebuild the business.

“The new management team has started to execute its strategy and implement its organisational model, which focuses on our local branch teams, enabling growth and returning to active industry leadership.

“As previously stated, 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 firmly believe that our new strategy for growth will provide the basis, not only for the restoration of profit and strong cash conversion, but also serve as a foundation to play a leading role in our industry in the years to come. 

“Long term fundamentals remain sound in the group’s markets across Europe. 

“In the short term, significant economic uncertainty remains in all of our markets, although government stimulus for the construction sector, notably in the UK, is welcome.

“Trading was better than anticipated during the peak lockdown months of March to May, compared to our initial estimates of the possible Covid-19 impact, and the board now expects full year sales to be moderately higher than guided in May.

“Group sales in July and August were encouraging although down year on year, and market share losses during 2019, particularly in the UK distribution business, will take time to recover.

“The second half of 2020 is expected to remain loss making, but at a lower rate than the first despite some increased pressure on gross margin in the UK.  

“I am extremely encouraged by the energy and excitement with which our people have embraced the new strategy and by the initial progress made in a short space of time.  

“The group demonstrated agility and resilience in the first half of the year, dealing with an unprecedented external challenge, and significant internal change and activity.

“Coupled with a strengthened balance sheet, the foundations are now in place for the business to grow.”