Snow hits SIG but forecast looks promising
SIG, the Europe-wide supplier of insulation, interiors, exteriors and construction products, has said that underlying pre-tax profits for the full year would not be less than expectations despite another challenging year.
The Sheffield-based group said notwithstanding exceptionally challenging conditions and disruption to trading caused by extreme weather conditions in the final weeks of the year proft before tax would not dip under £60m.
SIG’s total sales for the year were £2.7bn – a decrease of around £310m compared with £3m in 2008.
It said exceptionally challenging market conditions persisted throughout 2009 with the economic downturn significantly reducing construction activity and hence demand for the products and services supplied.
The scale of the decline varied by geography and market sector with a number of SIG’s mainland European countries of operation less heavily affected than the UK and Ireland.
In the UK and Ireland, which account for nearly 50% of the group’s sales, total sales fell by 20.4% with like-for-like sales 22% lower than the previous year.
The group said that UK non-residential construction levels continued to fall during the second half of 2009 while residential new build activity levels showed a slight improvement from the summer onwards.
Accordingly, the UK Exteriors division, which has the greatest exposure to the house building sector, saw a modest increase in demand in the final months of the year, while other parts of the group’s UK operations more oriented towards the non-residential sector faced increasingly challenging conditions throughout the second half of the year.
The UK government’s proposed changes to the Carbon Emissions Reduction Target (CERT), which favours insultation over other qualifying measures proved a further boost although funding has been slowing due to subdued demand.
Total sales in mainland Europe increased by 2.2% in sterling down by 6.2% in constant currency with like-for-like sales up by 0.3% in sterling and down by 7.9% in constant currency.
Intense focus on cash management continued throughout the year resulting in strong cash generation of c.£119m. This has been achieved through trading cash flows, tight working capital management and a much reduced capital expenditure programme.
The continuing review of resource levels across the group’s businesses generated additional annualised hard net cost savings of around £24m in the second half of 2009 bringing the total to £98m since the inception of the programme in 2008.
In a statement SIG said: “Macroeconomic conditions remain uncertain and with the prospects for recovery in construction markets accordingly unclear in respect of both timing and degree the outlook for 2010 remains challenging.
“As a result of the group’s restructuring measures undertaken to improve long-term operational efficiency together with the reduction in its fixed cost base and its significantly strengthened balance sheet, SIG is in good shape to deal both with the likelihood of a number of its end markets continuing to weaken in the coming months and to take advantage of their subsequent later recovery and of any growth opportunities which may emerge.”
