LONDON (ShareCast) - (ShareCast News) - Shares in SIG plummeted nearly 20% on Friday, as the building products distributor issued a profit warning and announced that its chief executive has stepped down, as its like-for-like, third quarter sales fell.
Pre-tax profit for the year ending 31 December is now expected to be between £75m and £80m, compared to £87.4m last year, and below the forecast consensus of £90m.

It also expects to make savings in excess of £13m by the end of 2016.

The FTSE 250 company's chief executive Stuart Mitchell resigned by mutual agreement, and Mel Ewell, a non-executive director, was appointed on an interim basis.

A further review of its UK branch network and cost structure which will provide net savings of about £10m, with an exceptional charge of about £10m, along with other measures the company is targeting savings of at least £20m in 2017.

For the quarter ended 31 October, overall like-for-like sales declined by 0.8% as the company was affected by slowing activity around the EU referendum.

In the UK and Ireland LFL revenues were down by 1.1%, with distribution and exteriors businesses reporting that LFL sales decreased by 1.2% and 1.7% respectively.

However, revenues increased 10.6% compared to last year, as the company said it benefited 8.9% from foreign exchange rates and 3.9% from acquisitions, which offset a fall of 1.4% due to fewer working days.

The company said following a slowing of activity around the time of the EU referendum in June, trading conditions in the UK have since softened, while competition in the market has intensified.

In particular, there were delays to some projects in the commercial sector and "subdued demand for technical insulation in the petrochemical and manufacturing sectors", while the repairs, maintenance and improvement market also remained challenging.

The company is confident in the medium-term prospects for its offsite construction business, but it was affected by the commissioning of new plant and machinery, which had taken longer than anticipated and led to some projects being temporarily deferred to 2017, while the order book is growing.

In Europe, LFL sales slipped by 0.5%, but France recorded an improved second half, as LFL sales were down by 1% compared to a 3.6% decrease last year. In Germany, LFL sales fell 0.9%.

The company is reducing procurement costs, but due to the "challenging market environment", its margin has contracted by 30 basis points for the year to date.

Shares in SIG fell 19.55% to 93.16p at 1012 GMT.

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