A cruel winter as SIG loses £30m in sales

The Sheffield-based group said it had lost around 30m of sales after cold weather brought construction activity to a standstill.

Chief executive Chris Davies said: "We were hit by the snow in January and February, it has been real avalanche conditions in mainland Europe. It's very frustrating for the people on the ground. This has been the coldest winter in 30 years."

City analyst Robert Gardiner, of Davy Research, said: "We expected the weather to have a significant impact on the group's operations given that a large element of this business is roofing."

The group hopes to retrieve the lost sales over the coming months and said results are likely to be more weighted towards the second half of the year.

SIG announced a sharp drop in profits in 2009, following a year it described as "exceptionally challenging".

Sales in the UK slumped 20.6 per cent to 1.32bn offsetting a more resilient performance in mainland Europe after an increase of 2.4 per cent to 1.38bn.

The company, which cut 1,774 jobs and closed 72 branches during 2009 in order to save 65m, reported underlying pre-tax profits of 60.6m, a fall of 55.9 per cent.

Restructuring charges and other one-off items meant it posted bottom-line losses of 55.3m.

SIG said possible cuts to public spending following the General Election were not an immediate concern for the company.

"Certainly public sector spending on construction seems to be well in place running into 2011," said Mr Davies.

The company's operations in the UK and Ireland account for about 48 per cent of its total sales.

Around 25 per cent of its business is in UK non-residential and about a third of that is in public sector areas or PFI-funded areas.

The company, which reduced its net debt by 63 per cent to 254.5m at the end of last year, said it expects to cut debt further to 215m-220m by the end of 2010.

The company said it was not proposing a final dividend for 2009. SIG shares fell 11.3p to 116p last night.

Analyst Jon Bell, of Shore Capital, said he believes the company's shares are overvalued at current levels with downside risks persisting, and reiterated his "sell" rating on the stock.

SIG said the actions taken by management had boosted efficiency and meant the company was well positioned to deal with the likelihood that a number of its markets will continue to weaken in the coming months.

Chairman Les Tench said: "The extreme cold weather conditions and snow experienced across the UK and mainland Europe in January and February have resulted in a particularly slow start to trading in 2010.

"It is management's expectation that the shape of the year is now more likely to be significantly more weighted towards the second half and that the pre-tax profit for the first six months will be well below the result for the equivalent period last year."

Asked whether he thought the UK was through the worst of the recession, Mr Davies said: "We have to look at it country by country. I think it troughed in the middle of last year. We will level out on a like-for-like sales basis in the middle of this year."

He added that the group expects to see a pick-up in the summer.

The group is likely to be hit by uncertainty surrounding the UK General Election and any tax increases introduced by the Government.

From small beginnings...

Founded in 1957 in Sheffield, SIG 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 in May 1989 and is listed in the FTSE 250 within the support services sector.

The group operates in 11 countries in Europe and has small trading operations in a further five, serving a wide range of trades in the building and construction markets.

SIG organises its activities into four divisions: insulation & building environments, exteriors, interiors and specialist construction products.