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SIG prepares for spending cuts impact


Published on Friday 9 July 2010 20:09

INSULATION and roofing giant SIG said first-half profits will beat forecasts thanks to a rebound in sales following the severe weather at the start of the year, but the company sounded a note of caution over the rest of the year.

The Sheffield-based group said sales will stay flat in 2010 as public spending cuts are expected to hit the struggling construction sector.

Chief executive Chris Davies said: "I think the second half will be pretty flat, but that will be a result after the two years we've seen. Things are very slowly starting to stabilise, as markets gradually recover over the year." The impact of public spending cuts, in addition to austerity measures across Europe and a gloomier UK macroeconomic picture, are all expected to take their toll.

"There are notes of caution to be sounded – clearly the effects of the Budget and the upcoming comprehensive spending review, and implications for employment in the public sector," said Mr Davies. "It may well have an effect on consumer confidence and impact the housing market."

The group, which sells insulation and other construction materials, said its underlying pre-tax profits will be "above market expectations" despite a four per cent fall in sales to 1.29bn. The group warned recovery prospects remain uncertain.

Combined sales rates for May and June were level, or slightly ahead, of 2009 figures although volumes in June were a little weaker than May. SIG said that non-residential construction is still in decline and looks unlikely to return to growth before the end of the year.

The company, which has shed around 2,800 jobs over the past two years, said that it would make further cost savings "where appropriate".

"We are looking closely at trading levels in operations which are presently running behind planned volumes to seek further efficiencies should this continue," said Mr Davies.

Floods in November and this winter's extreme weather conditions disrupted trading at SIG and led to the closure of a number of sites.

SIG's key markets have since stabilised with the UK distribution and merchanting businesses reporting sales growth of two per cent.

The biggest improvement came in the group's roofing operation, which has the greatest exposure to the recovering residential construction sector.

But sales in UK interiors manufacturing and insulation installation were down by 20 per cent in the first half, with no imminent signs of improvement.

SIG said its UK insulation and interior business will continue to face challenges in the short term. But in the medium term, the group said it is well positioned to benefit from increasing demand for insulation, driven by higher regulatory standards.

It should also see a boost to sales from various schemes offering incentives and subsidies for energy conservation, renewable energy and sustainable construction.

Company in 1bn revenue club

SIG is one of a small band of Yorkshire companies making revenues of over 1bn.

Other members of the elite club include Saltaire-based Pace, Leeds-based Asda, Bradford-based Morrisons, Drax in North Yorkshire and York-based Persimmon.

SIG was founded in 1957 in Sheffield. Over the past 50 years it has grown from a small insulation distribution business into a multi-national company operating in four different market sectors.

The company floated on the London Stock Exchange in1989 and is listed in the FTSE 250 within support services sector.


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