Severe weather hampers trading at SIG

SIG said construction activity slowed in May and June and warned that uneven demand is likely to continue during the second half with disruption to construction schedules because of the London 2012 Olympics.

The Sheffield-based company said first half sales for the six months to June 30 fell four per cent in sterling terms due to the weakening euro.

The UK, which accounts for 40 per cent of SIG’s sales, saw record rainfall in April and June.

Shore Capital analyst Jon Bell said: “Consistent with patterns seen elsewhere, the company has encountered a slowdown in sales activity in its most recent trading period. These trends have been exacerbated by the effects of the weakening euro.

“On a brighter note, improving gross margin trends are continuing and net debt has fallen from the position a year ago by £33m to £130m.”

SIG said sales in the first half of the year were flat in constant currency terms against very strong prior year comparatives, despite the increasingly uncertain macroeconomic environment, exceptionally cold weather conditions in Europe in February, and the wettest second quarter on record in the UK.

In constant currency terms, the group expects profitability to be broadly flat compared to the first half of 2011.

Although the weather has made demand patterns difficult to discern, SIG said underlying construction activity slowed in May and June.

This was reflected by a deceleration in sales growth from one per cent in the first quarter to a decline of 0.5 per cent in the second quarter on a like-for-like constant currency basis.

Sales in local currency in mainland Europe were up around two per cent on last year, with France and the Benelux countries showing the strongest progression.

Sales in the UK fell one per cent.

In Ireland, which represents around two per cent of group turnover, local currency sales were “substantially down” on 2011.

The group’s shares closed down 4.5p at 91.5p.

SIG has opened 15 new branches so far this year, 11 in Mainland Europe and four in the UK. It has also acquired a small insulation distribution business in Holland.