SIG braced for worse as sales slump 10%

By This Is Money
Updated: 06:31 EDT, 10 July 2009

Building materials supplier SIG today said sales were down 10% this year, as it continues to feel the heat from the housing market crash.

Slow start: SIG sales have fallen 10% this year

Sales have fallen to £1.35bn in the six months to June, compared with £1.49bn in the same period last year.

The company blamed a steep decline in construction work for the slump.

SIG said after a slow start to the year, UK trading picked up modestly in March and remained broadly stable until the end of June.

The company has performed better in continental Europe, where sales have benefited from an upswing in construction.

However Ireland remains a worsening trend and UK government-funded projects, such as supplying products for schools and hospitals, have been hit with delays.

Home insulation is proving the most resilient section of the business, due to a government drive to reduce carbon emissions.

Sheffield-based SIG has attempted to offset the sales decrease with a £325m cash call to investors and cost-saving measures – including the closure of 80 trading sites and a 7% cut in the workforce.

The company expects conditions to remain extremely challenging in the near future but following a rights issue, has managed to reduce debt from £697.1m in December of last year to £276m at the end of June.

Panmure Gordon stockbrokers analyst Andy Brown said it was encouraging that there had not been a material change in trading conditions.

He added: 'This is the first hurdle cleared to restoring confidence. Markets remain tough, but cash generation was stronger than expected.'

SIG added: 'The board believes that SIG remains well placed to benefit from the longer term positive trend of demand for housing and for insulation in the construction and refurbishment of all types of buildings.'

Shares rose 2% following the update but later fell 0.5% to stand at 87.50p.