SIG warns over pressures in Europe market

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​Insulation giant SIG said it is making progress and it is confident it can achieve its targets following an increase in sales in the first four months of 2016.

But the Sheffield-based group warned that construction markets in mainland Europe remain uncertain and competitive pressures continue.​

​The group’s revenue rose 9 per cent in the first four months of 2016​, boosted by acquisitions which contributed 5 per cent to growth and currency fluctuations which contributed 3 per cent.

Group like-for-like sales rose 1.1 per cent. ​The performance was better in the UK and Ireland with a 2.8 per cent increase in like-for-like sales.

The group’s insulation and interiors business reported a 3.1 per cent increase in like-for-like sales following better customer focus and a resilient new build residential market in the UK.

The exteriors business saw a 1.0 per cent fall in like-for-like sales, an improvement over recent quarters, suggesting there are signs that the UK repairs, maintenance and improvement market is stabilising.

​Revenues in mainland Europe rose 9.6 per cent, but like-for-like sales fell 1.0 per cent, hit by a 3.1 per cent decline in France as the French construction market recovery faltered.

But SIG’s chief executive Stuart Mitchell said leading housing indicators remain positive, with new residential starts up 3.1 per cent.

​Like-for-like sale​s in the German business were down 1.0 per cent although the group delivered positive like-for-like sales growth in Ireland, Benelux and Poland.

The ​g​roup has spent £14.6m on five in​-​fill acquisitions so far this year.

​“​While the ​g​roup has made a reasonable start to the year, with the key summer and autumn trading periods yet to come, construction markets in ​m​ainland Europe remain uncertain and competitive pressures persist​,” said Mr Mitchell.​

​“​However, SIG continues to make progress on its initiatives to improve business performance and has a high degree of confidence in achieving its 2016 targets of a net incremental benefit of £3m in supply chain and at least £10m in procurement.​“

​He added that the group expects​ to make progress in 2016 in line with its previous expectations.

The market was cheered by the news and SIG’s shares rose 0.5 ​​per cent to close at 125.4p.

Analyst Adrian Kearsey at Panmure said: “After experiencing a surprise dip in like-for-like sales during the third quarter, like-for-like sales stabilised during the fourth quarter and expanded 1.1 per cent during the four months to April 30.

“Acquisitions completed during 2015 are contributing more than expected to sales and we are raising our 2016 sales estimate by 2.4 per cent. Whilst it is possibly too early to move earnings estimates higher, SIG is once again on a positive footing.

“However, this is not reflected in the forward P/E (28.7 per cent discount to its peers), providing an attractive valuation for investors.”

Analyst Clyde Lewis at Peel Hunt said: “Group revenues increased by 9.3 per cent in the first four months of the year but underlying trading was unexciting, with group like-for-like sales ahead by just 1.1 per cent against flat comparatives.

“It was a mixed bag regionally, with trading in the UK generally better than mainland Europe.”