Focus on Europe pushes up profits at SIG

While the UK and Irish businesses scraped an operating profit of £1.1m in the year to December 31, a vast improvement on the previous year’s £68m loss, Mainland Europe reported a 62 per cent increase in operating profit to £32m.

Continental Europe is becoming increasingly important to the Sheffield-based group. The Continent now accounts for 56 per cent of group sales compared with 38 per cent in 2007.

SIG’s chief executive Chris Davies said: “In the countries we’re in in Mainland Europe – we’re not in Greece or Spain – we’ve seen a faster recovery from the recession than in the UK. Ireland is still struggling and in the UK we’ve had a technical recession much longer and deeper than in France and Germany.”

Talking about the outlook for 2012, Mr Davies said the group has some strong comparatives to live up to.

“Growth is running out of steam in France. Presidential elections create uncertainty. We see it cooling off and we also see it in other countries,” he said.

He expects mainland Europe to be down between nought and two per cent this year, the UK market to fall between three and five per cent and the Irish market to be down by as much as eight to ten per cent.

“That doesn’t mean our markets will be down by that much. We’ve got the momentum from new branch openings.”

SIG opened 14 new branches in mainland Europe last year and four in the UK. It plans to open between 15 and 20 new branches a year over the medium term and said it will continue to open branches in the UK despite the closure of 15 British branches.

“We are opening branches in the UK where we haven’t got coverage. We’re opening branches in London and the South East and there are other locations in the UK where we have gaps,” said Mr Davies.

SIG’s shares rose 3.8 per cent last night to close up 4.4p at 119.9p after the company said that full-year underlying pre-tax profits grew 27 per cent to £81.7m. Revenue increased eight per cent to £2.74bn.

The company, which supplies insulation, roofing and specialist construction materials, said sales per day so far this year are about one per cent ahead of 2011 despite harsh winter weather in February.

Mr Davies expects trading patterns in 2012 to be uneven as construction in individual sectors and countries respond to local factors.

The London Olympics may prove disruptive due to road closures, but the group is planning to overcome this with night deliveries.

The double bank holiday in early June to celebrate the Queen’s Diamond Jubilee could also cost the group business although this could be counteracted by the feel-good factor.

“The Olympics and the Jubilee are not going to affect demand for the year as a whole, but they could disturb normal trading patterns,” said Mr Davies.

The group has also benefited from the London Olympics as it has supplied a wide range of products to the games, including insulation, dry wall products and brickwork accessories.

SIG has supplied millions of pounds worth of material to the athletes’ village, the media centre and the velodrome and also to new shopping malls that have sprung up in the east end of London.

The group said it will look at bolt-on acquisitions this year in the region of £1m to £9m.

SIG is paying out a final dividend of 1.5p a share, bringing the total dividend for the year to 2.25p.

“This confirms the board’s confidence in our prospects going forward,” said Mr Davies. “We hope to see a gradual improvement in the dividend.”

Reaching across the continent

SIG operates from about 750 trading sites across Europe, employing about 12,000 staff. Its core business sectors are insulation and energy management, interior fit-out and roofing.

The company can trace its roots back to 1957 when its first insulation distribution branch opened in Sheffield as Sheffield Insulations Limited.

In 1989 it listed on the London Stock Exchange as Sheffield Insulations Group with 30 branches.

It operates in Germany, the Netherlands, Belgium, Austria, the Czech Republic, Slovakia, Poland, Hungary, Turkey, Romania and Bulgaria