SIG shares rise as sales increase after tough year

The Sheffield-based firm has cut its dividend by 20 per cent and named a new chief executive as it battles to turn around and expand its businesses across Europe.

The group said Meinie Oldersma, currently head of industrial products distributor Brammer, will join as chief executive in April.

​​Interim CEO Mel Ewell​ said: “​Our major markets face increased political uncertainty, with Article 50 expected to be triggered in the UK this week and forthcoming elections in France and Germany.

​“​Notwithstanding this uncertainty, the ​b​oard sees significant opportunity within the business to drive improved operational performance.​“​

​The group said that​ trading in the first two months of 2017 has been in line with the ​board’s expectations, although markets remain competitive and ​it is seeing some supplier price inflation.

​“​The longer term outlook in our core markets continues to offer considerable opportunity and SIG remains a good business with strong market positions which is capable of delivering much more​,” said Mr Ewell.​

SIG ​plans to sell assets and review costs as it battles to recover from weak trading in its UK insulation, interiors and offsite construction businesses.

​The group’s shares ​closed up 7 per​ ​cent ​at 114p ​as it reported some signs of improvement, with like-for-like sales ​increasing​ in November and December and trading in line ​in 2017.

​​The company said ​incoming CEO Mr Oldersma​ will​ bring experience in ​European expansion.

SIG’s former ​CEO​, Stuart Mitchell​,​ stepped down after a profit warning in November​.​

Analysts say the company’s long-running drive to find more efficiencies and expand in ecommerce had distracted it from day-to-day operations, resulting in below par sales growth and weaker margins.

“Since November we have slowed or stopped a number of internal initiatives, which will allow our team to refocus on customers and sales growth in order to generate cash​,” said Mr Ewell.

“This will ensure that we build on SIG’s significant potential in 2017​.”

U​nderlying pre​-​tax profit ​fell ​12.5 per​ ​cent​ ​​to ​£​77.5​m ​in the year to December 31​, in line with its forecast after the November warning.

SIG said it ​i​s reviewing its cost base to eliminate duplication and reduce discretionary spending​ and it will sell some assets to reduce debt, which forced it to cut the 2016 dividend​.

Analyst Adrian Kearsey ​at Panmure Gordon said: “2016 was another difficult year for SIG. Too much resource was invested in transformation change management and too little time spent servicing/selling to clients.

​“​This position was exacerbated by the sporadic construction market​, ​both in the UK and Europe.

​“​The new management line-up is taking decisive action and the early signs are encouraging​, but the turnaround will take time. The share price ​- up ​23​ per cent​ since November​ -​ shows investors are beginning to assume SIG can recover, but the valuation provides considerable upside​.”​

A​nalyst Charlie Campbell at Liberum said: “We continue to see SIG as structurally challenged, the outlook is cautious and outgoing interim CEO has put a few initiatives on hold to focus on core activities, which may mean that cost savings forecast in more optimistic forecasts need to be unwound.​“​

​​Jefferies analysts welcomed the refocused strategy and​ the ​ new CEO, nudging up their 2017 pretax profit forecast by ​£1m to ​£​76.6​m. They have a “hold” rating on the stock.​