SIG reports solid first half despite Brexit jitters

SIGs chief executive Stuart Mitchell reported a "solid first half"

Insulation giant SIG '‹said the uncertainty resulting from Britain's vote to leave the European Union makes its outlook more difficult to assess, adding that construction activity in the UK'‹ slowed before and after the vote.'‹ '‹

As a result the Sheffield-based group said like-for-like UK sales were flat in June and July, although there was some improvement in trading as July progressed. Brexit has hit the British construction industry hard, with a business survey showing the sector suffered its sharpest downturn in seven years last month.

SIG’s chief executive Stuart Mitchell said: “It’s very difficult to read too much into week by week trends.

“It was a bit of a shock immediately after the referendum, but we saw a steady and modest improvement in July.

“There is uncertainty and it’s very difficult to call at this stage.”

He added that August is traditionally the group’s quietest month, whilst September and October are its busiest months so it will have a clearer idea about post Brexit trends later in the year.

He said that the products the group sells are relatively low value and it is not materially exposed to cross-border transactional risk as it buys and sells the vast majority of its products within each country it operates in.

SIG said its underlying pre-tax profit for the six months to June 30 rose 20 per cent to £47.7m. Revenue rose 11 per cent to £1.38bn.

"The markets we operate in have been pretty tough," said Mr Mitchell.

"Bearing that in mind, we've had a very solid first half."

Analyst Adrian Kearsey at Panmure Gordon said: “SIG has delivered a creditable first half performance, with 1.4 per cent like-for-like outperformance.

“Given the uncertainty, we expect the UK construction market to trade sideways for a short while. Therefore, whilst the first half performance was ahead of our estimates, we are leaving our full year estimates unchanged.

“The rating has reached 2008 banking crisis levels. We believe this is massively overdone, especially since half of earnings are derived in Continental Europe (better macro environment and foreign exchange translation benefit from weaker sterling).

“Therefore, we see scope for material upside in the share price and reiterate our ‘buy’ recommendation.”

SIG said it continues to make good progress on its strategic initiatives to improve business performance.