SIG, the supplier of specialist building materials, said it expects to deliver a stronger second half performance, although political and economic uncertainty continue to increase.
Publishing its results for the six months ended June 30 2019, SIG said its transformation continues to deliver increased profit and reduced debt.
The company said it secured further operational and financial progress in the first half, despite falling construction activity, particularly in the UK.
Underlying revenue in the UK & Ireland business fell by 13.3 per cent in the first half of 2019 to £514.6m, equivalent to a decline in like-for-like sales of 12.5 per cent, principally reflecting weaker market conditions and a falling level of construction activity as the second quarter progressed, SIG said. Underlying PBT, (profit before tax) pre IFRS 16, was up 20 per cent to £30.0m.
Meinie Oldersma, the chief executive, said: "We made further progress in H1 2019, demonstrating our ability to deliver a sustained improvement in the operational and financial performance of SIG. Underlying profit, return on sales and return on capital employed all improved, and we further reduced net debt and headline financial leverage.
"We continue to deliver increases in gross and operating margins in our UK businesses and have largely completed the transition to a smaller, more focused base of business in SIG distribution. We continue to roll out transformational initiatives across our businesses in Mainland Europe, which we expect to result in further upside over the next twelve months. We remain on track to deliver our medium term targets.
"In addition, we continue to strengthen our balance sheet. We have almost halved net debt since the start of 2017, with further improvement anticipated in the second half from continuing reductions in levels of working capital and the receipt of proceeds from the previously announced disposal of WeGo FloorTec. There remains one further business, previously identified as peripheral, under review. Accordingly, we believe our medium term target of headline financial leverage below 1.0x is within reach.
"Our previously announced review of strategic options for the Air Handling division is well advanced. A further update will be provided when appropriate. The significant improvements in the business during the first half of 2019 have been made against a backdrop of challenging trading conditions in many of the group's end markets. There has been a marked deterioration in the level of construction activity in the UK as the year has progressed and a number of key indicators are pointing to further weakening of the macro-economic backdrop, notably in the UK and in Germany.
"We continue to see benefits from transformational initiatives across the group's businesses.
"Coupled with the group's normal seasonality, these are expected to deliver further upside in the second half of the year. However, political and macro-economic uncertainty continues to increase as we enter the traditionally strongest trading months of the year. We continue to monitor trading conditions closely and we are taking actions in anticipation of further market weakness."