SIG shares leap after good news on profits

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SHARES in insulation and roofing giant SIG jumped six per cent yesterday after the group said annual profits will be better than expected despite tough trading conditions.

The Sheffield-based company said pre-tax profits for the year to December 31 will be no less than £82m, beating forecasts of £78.5m and last year’s £81.7m.

Total revenues in 2012 were £2.6bn, flat on a constant currency basis, although down by four per cent in sterling due to exchange rate movements.

SIG’s chief executive Chris Davies, who has announced plans to leave in March to take up a number of non-executive roles, said: “Trading in the second half held up pretty well. We’ve had a very strong performance in France, which has reassured people.”

The group lost around £3.5m on foreign exchange movements, but it has seen some benefit from foreign exchange on debts.

SIG derives 40 per cent of its business from the UK and another 45 per cent from Germany and France, the two strongest eurozone countries.

“We’re not exposed to the very weak Iberian and Balkan fringe,” said Mr Davies. “We’re not in Spain, Portugal, Italy or Greece. We’re in the powerhouse economies in Western Europe.”

The group announced the sale of its Czech and Slovak businesses to the Woodcote Group, a recent management buyout from Wolseley.

The two businesses account for just one per cent of group revenues.

The sale of the Slovak business is subject to regulatory approval, which is expected to be granted soon.

SIG has decided to concentrate its management and resources in the region on strengthening its position in Poland.

“Poland is the only country in Europe where GDP has remained in positive territory,” said Mr Davies.

“Our countries are the best of the bunch.”

Trading in the UK has benefited from a strong performance from SIG Energy Management as energy suppliers increased volumes to meet their CERT targets.

“The energy companies have not wanted to spend any more money than they needed to. They were hoping the Government would allow them to roll over any unfulfilled obligations into the next scheme,” said Mr Davies.

“In fact, Ofgem has held them to fulfil their obligations and said if they don’t fulfil them they will be punished. When they realised that would be the case they tried to minimise the shortfall and so have placed more than the average amount of work. We’ve done well out of that and have not chased volume.”

In the absence of any signs of economic improvement in SIG’s key countries, the group expects construction markets to remain challenging this year and likely to decline at a similar rate to 2012.

At its interim results in August the group said it was targeting a further £7m of cost savings.

Yesterday it said it has subsequently identified another £3m of savings from its branch network, increasing the target to around £10m. The associated net exceptional charge is now expected to be around £18m in 2012.

“There will be some jobs going,” said Mr Davies. “We’ll be scaling back our installation teams. There will be much less work following the demise of CERT.

“There will also be a small number of branch closures, mainly in mainland Europe. SIG will announce its 2012 results on March 7. The group’s shares closed up 8p at 135.5p yesterday.

Mr Davies is stepping down after 19 years with SIG.

He will be replaced by Stuart Mitchell, who joins from Wilkinson Hardware Stores where he was chief executive.