Major restructuring strategy for SIG

SIG is poised to announce major restructuring of its UK business as it aims to make further cost reductions.

The Sheffield-based insulation specialist said it would announce details of “fundamental changes” to its UK operations in August.

No other details were given other than it would involve cross-divisional site sharing and reconfiguration of its UK interiors manufacturing operations.

The firm confirmed that is is continuing with cost saving actions, which so far this year have achieved annualised savings of £39m.

Since last year it has saved £74m through a raft of measures including 124 branch closures or mergers, 2,004 redundancies.

In a statement today it said that trading conditions remain unchanged since its last downbeat update in June.

The firm, which is one of Europe’s leading suppliers of insulation, interiors, exteriors and specialist construction products, said that order intake and sales in the second half of June were maintained at previous months levels.

In the six months to June 30 total sales were down 10% to £1.3m compared to the first half of 2008 with like-for-like sales down 13%.

SIG said volumes had been substantially lower in the UK and Ireland accompanied by reduced gross margins and European markets had not achieved their usual level of seasonal improvement in the second quarter.

All of SIG’s market segments in the UK have seen a sales reduction during the period compared to prior year.

Trading in interiors products has been particularly difficult due to a much weaker commercial sector coupled with delays to PFI and directly funded government projects in the health and education sectors.

The most resilient segment in the first half has been insulation, which benefited especially in the first few months of the year from the CERT (Carbon Emissions Reduction Target) Scheme introduced in April 2008.

However, sales under the scheme have also eased recently due to normal seasonality and a slowing in the release of funding from the energy companies pending final consultation with the government on the 20% planned uplift to the current scheme announced in the Pre-Budget Report last year.

Last month SIG warned that it expected pre-tax profits for the financial year ended December 31, 2009 to be at the bottom end of current expectations as a result of difficult market conditions. The current range is £63m to £99m.

The group, which raised £341m in a rights issue earlier this year, said that its balance sheet remained strong and that it was confident it would operate within its banking covenants throughout 2009.