SIG plc (LON:SHI) is a leading supplier of specialist building materials to trade customers across Europe, with strong positions in its core markets as a specialist distributor of insulation and interiors products, a merchant of roofing and exteriors products, and a provider of air handling solutions. The Group have today issued its results for the six months ended 30 June 2019.
Highlights
· Further operational and financial progress in the first half, despite falling construction activity, particularly in the UK
· Underlying PBT, pre IFRS 16, up 20% to £30.0m (H1 2018: £25.1m) and underlying earnings per share, pre IFRS 16, up 23% to 3.7p (H1 2018: 3.0p), both in line with the Board’s expectations
· As previously announced, like-for-like sales down 3.8% reflecting weaker market conditions and focus on profitability over volume
· Transition to smaller, more profitable base of business in SIG Distribution largely complete
· Gross margin up 70bps and operating costs lower. Group underlying operating profit, pre IFRS 16, up to £36.5m (H1 2018: £33.0m)
· Net debt, pre IFRS 16, down to £158.2m (H1 2018: £176.1m) and headline financial leverage, pre IFRS 16, down to 1.4x (H1 2018: 1.8x). Further improvement anticipated in H2 2019
· Previously announced review of strategic options for Air Handling division well advanced
· Interim dividend of 1.25p per share (H1 2018: 1.25p)
· Continuing transformation and the Group’s normal seasonality are expected to deliver a stronger second half, although political and macro-economic uncertainty continue to increase
Commenting, Meinie Oldersma, Chief Executive Officer, said:
“We made further progress in H1 2019, demonstrating our ability to deliver a sustained improvement in the operational and financial performance of SIG. Underlying profit, return on sales and return on capital employed all improved, and we further reduced net debt and headline financial leverage.
We continue to deliver increases in gross and operating margins in our UK businesses and have largely completed the transition to a smaller, more focused base of business in SIG Distribution. We continue to roll out transformational initiatives across our businesses in Mainland Europe, which we expect to result in further upside over the next twelve months. We remain on track to deliver our medium term targets.
In addition, we continue to strengthen our balance sheet. We have almost halved net debt since the start of 2017, with further improvement anticipated in the second half from continuing reductions in levels of working capital and the receipt of proceeds from the previously announced disposal of WeGo FloorTec. There remains one further business, previously identified as peripheral, under review. Accordingly, we believe our medium term target of headline financial leverage below 1.0x is within reach.
Our previously announced review of strategic options for the Air Handling division is well advanced. A further update will be provided when appropriate.
The significant improvements in the business during the first half of 2019 have been made against a backdrop of challenging trading conditions in many of the Group’s end markets. There has been a marked deterioration in the level of construction activity in the UK as the year has progressed and a number of key indicators are pointing to further weakening of the macro-economic backdrop, notably in the UK and in Germany.
We continue to see benefits from transformational initiatives across the Group’s businesses. Coupled with the Group’s normal seasonality, these are expected to deliver further upside in the second half of the year. However, political and macro-economic uncertainty continues to increase as we enter the traditionally strongest trading months of the year. We continue to monitor trading conditions closely and we are taking actions in anticipation of further market weakness.”
Analyst presentation (9am today)
A briefing to analysts will take place today at 9am at the offices of Peel Hunt LLP, Moor House, 120 London Wall, EC2Y 5ET. A live webcast of the presentation will be on www.sigplc.com, a recording of which will also be available later in the day.
