Construction supplier launches ‘rigorous review’ after overstatement of cash

Construction supplier SIG has “initiated a rigorous review” after it revealed historical cash overstatements in its previous accounts.

Figures released for the periods ending December 2016 and June 2017 inadvertently inflated its cash position by up to £27m.

This meant its headline financial leverage figures were lower than they should have been – for example in June 2017 it reported 1.6x when it should have been 1.9x.

The Sheffield company is targeting a leverage range of 1.0x-1.5x this year and has a medium-term target of 1.0x.

SIG reassured the stock market “there was no impact from this on the group’s income statement”.

The problem related to cash cut-off procedures associated with the issue of cheques around previous period ends and the group has now “initiated a rigorous review of controls around cheque issuance”.

Trading in recent months has been in line with SIG’s expectations. Group revenue from continuing operations for 2017 increased by 7.5% to £2.8bn, although currency movements were responsible for around half of this growth.

Like-for-like group revenues were ahead by 4%, with its operations in mainland Europe growing at a faster rate. This mitigated a weaker second half margin performance in the UK.

SIG said: “As a result, returns on sales have remained stable and our overall expectations for underlying profitability for the full year remain unchanged.

“Management continues to focus on the execution of key strategic levers to deliver a step change in the operational and financial performance of the group.”