SIG shares up 12% amid strong trading

Shares of Sheffield-based international building materials supplier SIG plc rose about 12% on Friday after it published a trading update saying it expects to deliver full year performance “significantly ahead of previous expectations.”

SIG said group sales were 25% up on 2021 for the quarter to March 31 on a like for like basis.

“Reported group sales were 27% up on 2021 for the quarter, with acquisitions adding 4% to the LFL result referenced above, offset partially by movements on working days and exchange rates,” said SIG.

“Including the acquisitions, the reported UK Interiors growth rate was 45%.

“The overall impact of inflation is estimated to have added c19% to group growth over the period, albeit the levels have varied across the different operating companies.

“This reflects the annualisation of input cost inflation experienced in the second half of 2021, as well as further increases in early 2022 as our suppliers have passed on steeply increasing energy costs in manufacturing.

“There remain some constraints in supply across the business, but these are continuing to abate, as previously reported.”

In its outlook, SIG said: “Given the strong momentum seen through the early part of 2022, together with increasing visibility on the near-term trading outlook, the board now expects the group to deliver a full year performance significantly ahead of previous expectations.”

Input cost inflation is currently higher than previously anticipated, as noted above, and expected to remain elevated in the near term.

“We expect that the resulting increase in revenue will more than offset any localised market softening.

In addition, we are confident that we will be able to maintain and build on the strong margin discipline that has been an important part of the recent progress made by the group, with underlying operating margin for 2022 now expected to reach 3%. 

“Furthermore, we now expect the group to be cash generative in 2022.”

SIG CEO Steve Francis said: “The first four months have seen markedly stronger growth than anticipated, driving positive margin momentum across all our countries of operation.

“Our decentralised model, with 433 branches in seven countries providing strong local specialist expertise and superior stock availability, continues to gain ground and to show resilience in market conditions that remain challenging.

“Demand for our sustainable construction offerings remain strong. The three acquisitions made during the last 18 months are performing well and this is an area of increasing strategic focus for us.

“Although it is relatively early in the year, and notwithstanding the current macro-economic and geo-political environment, the strength of our recent trading gives us the confidence that we will now reach our initial margin target of 3% and return to cash generation this year, ahead of schedule.”