New SIG chief to build on ‘self-help’ measures

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INSULATION and roofing group SIG said it will beat weak construction markets again this year, as its new chief executive begins a strategic review.

Stuart Mitchell, who joined from hardware retailer Wilkinson and replaced former CEO Chris Davies a week ago, said he will build on “self-help” measures by previous management.

SIG is up against stagnant or sliding construction markets across the UK and Europe, which have forced it to cut costs including jobs.

“There are a number of self-help things which Chris and the previous team have put in place but I will be building on that,” said Mr Mitchell.

“There is further potential in the group, with opportunities to improve performance in areas such as procurement, e-commerce, supply chain, logistics and rebranding.”

Sheffield-based SIG yesterday posted growing profits and margins but flat underlying revenues in 2012.

Measured at a constant currency basis, its sales edged up just 0.1 per cent in 2012. But set against a market which declined 2.4 per cent, SIG said it beat the market by 2.5 per cent.

It expects the market to remain tough this year, with a similar rate of decline.

“Having said that, over the last three years SIG has outperformed the market between two and three per cent and we would expect that to continue,” said Mr Mitchell.

Finance director Doug Robertson said it was a “decent achievement” to keep sales level in a sliding market.

Underlying pre-tax profits increased four per cent on a constant currency basis, but dipped 0.5 per cent to £84.1m once the weak euro was factored in. The weak euro also meant revenues fell 3.9 per cent to £2.6bn.

Gross margin rose to 26.1 per cent from 25.7 per cent. Underlying operating margin edged up to 3.7 per cent from 3.6 per cent.

SIG hiked its final dividend by a third to 3p per share.

As well as weak construction markets, the company said its performance in 2012 was hit by the second wettest year on record in the UK

Sales in the UK fell 1.4 per cent to £1.1bn, and including Ireland were down 2.4 per cent. Mainland Europe sales were up 1.8 per cent at £1.44bn at constant currency.

Mr Robertson said conditions across Europe ranged from down 14 per cent in Ireland, to Germany, the strongest market, which was flat year on year. SIG declined to say if the worst is behind it.

Sales so far this year are slightly down on a year ago, hurt by snow and a strong comparator in January 2012. A purchasing managers’ survey this week showed construction output fell in February at the fastest pace in more than three years despite a rare pick-up in house building.

“I’m finding it hard to call at the moment,” said Mr Robertson. “I do hear in some quarters that perhaps the second half of this year may be better than the second half of 2012, against slightly weaker comparison. But I’ve not heard a good answer (why).

“There are potentially more bumps along the way. We do tailor the footprint of our business according to the market we are in. We continue to look for opportunities to make ourselves more efficient.”

Its average headcount was 10,228 during the year, but staff numbers dipped below 10,000 at the year end.

SIG again cut costs in January, after identifying another £3m of savings from its branch network.

Net debt came in slightly better than analysts expected at £105m.

After making five small acquisitions for a total £7.3m, it plans more deals this year. It has set aside about £20m-£30m for these, and last month bought a roofing business with £2m of assets.

Andy Brown, analyst at Panmure Gordon stockbrokers, said: “The combination of a clear strategy with its five pillars of profit recovery and strong market positions should help sentiment towards the shares continue to improve.

“It retains structural growth drivers, principally through insulation and energy management, and with the strengthened balance sheet we retain our positive stance.”

Jon Bell, analyst at Shore Capital, said: “In the context of an anticipated further decline in construction markets in the current year, SIG’s market outperformance seems likely to continue, and needs to if revenue declines are to be avoided.”