SIG hard hit but looks for economic upturn

SPECIALIST insulation and construction products supplier SIG has said that the first half of its year had been “exceptionally challenging” but believes it is “well placed” to benefit from a future upturn in the economy.

The Sheffield-based group, which is to cut another 300 jobs, saw sales during the six months to June 30 down 10% to £1.345bn on a year earlier with like-for-like sales down 12.7% while its UK and Ireland sales, which make up half of its business, were down 21.5% to £667.1m.

Total sales in Europe increased by 5.2% to £677.6m.

SIG made a pre-tax loss of £9m but said that underlying operating profit – before restructuring costs are included – was £35m, down 58.3% from last year.

The group has been hit by the effects of the recession on the construction sector where it supplies insulation and other building products for new and refurbished building projects in the residential and commercial property markets. It said that publically funding construction projects have held steady but been hit by slipping timescales but it expects to see work from government economic stimulus packages in the UK, France and Germany.

Chairman Les Tench said that the group had continued to reduce its workforce as part of cost cutting measures to deal with the “increasingly challenging trading conditions” it continued to experienced.

It has made savings of £39m a year with a one-off cost of £18m and said that total savings over the last 12 months were around £74m. It has more than halved its workforce, bringing it down by 2,500 people to around 2,000 staff and closed 141 branches, leaving 124.

The group said it had “strong” cash generation of £79m reflecting the focus on working capital management and it has strengthened its financial position following the £325m equity raising in April.

Mr Tench said: “Trading conditions in the first half of 2009 have been exceptionally challenging in all of our end markets, which negatively impacted group trading. We expect trading in the near term to remain difficult and management therefore continues to run the business tightly, reducing costs and focusing on cash management while defending the group’s leading market positions and gross margins.

“Following the equity raise in April, SIG is well placed to trade through the challenging times ahead and benefit fully from the upturn when it arrives.”

It is not paying an interim dividend.