Weakened construction environment leads to 3.6% drop in revenues at SIG
Listed firm SIG has seen a 3.6% drop in like-for-like revenues in recent trading period and 1.4% decline across the year-to-date, with a weakened construction sector through Autumn.
The Sheffield-headquartered specialist building products firm this morning issued a trading update for the July to October period. Group revenues from continuing operations decreased by 2.3% in the period, with group like-for-like revenues 3.6% lower.
SIG said: “While market conditions are challenging, the transformation of SIG’s business progresses as planned. As such, management remains confident that the Group will see significant profit improvement in the second half of the year and deliver a result in line with its expectations.”
The firm’s distribution division has been hit the hardest, with a 10.3% drop in revenue growth during the period.
SIG added: “The UK construction environment has weakened during the autumn. Commercial construction demand remains dampened by macro-economic uncertainty, house price inflation is slowing and secondary housing market transactions have continued to fall. This weaker trading environment impacts demand for SIG’s products and is a key factor behind the lower LFL revenues in the UK and Ireland, down 8.7% in the Period. Revenues at SIG Distribution have also fallen due to the focus on improving profitability across the customer portfolio, which continues to deliver increasing gross margins at the expense of lower revenue.”
The firm said that trading conditions in construction markets across Mainland Europe had also softened since June, notably in France as anticipated, where LFL revenues were down by 1.6% during the Period. LFL revenues were also lower in Germany, down 2.1%, as the business has sought to reduce its exposure to loss-making customers and improve gross margins. “In contrast, the Group continues to see robust demand and good top-line growth in Poland, Benelux and its Air Handling business,” added SIG.
A year ago, the Group set out the conclusions of its strategic review, which identified the considerable opportunity for significant improvement in the operational and financial performance of each major operating company and across the Group as a whole.
The strategic review identified that improvement would come from focused delivery of three strategic levers around customer service, customer value and operational efficiency. SIG said: “The Group is now seeing evidence of tangible progress. Whilst the planned withdrawal from unprofitable business has reduced revenue, improved management of pricing and customer profitability is increasing gross margins ahead of expectations. In addition operating costs are falling, with reductions in headcount delivered in the Period as anticipated and further planned reductions on track for completion by 31 December 2018.”
SIG’s management remains confident that the Group will see significant profit improvement in the second half of the year and deliver a result in line with its expectations, driven by higher gross margins and lower operating costs.
