‘Challenges’ for building materials supplier as construction work slows
A specialist building materials supplier based in Sheffield said trading conditions remained tough due to a “marked deterioration” in construction activity in the UK.
In its half year trading update for the six months ending 30 June 2019, SIG said it had seen a 3.8% decline in its like-for-like (LFL) revenues over this period.
Group revenues from continuing operations were 5.7% lower, including an adverse 1.3% currency movement and a 0.6% impact from fewer working days.
The overall drop in like-for-like revenues includes a 12.7% decline for the UK and Ireland. This features a 17% fall for SIG Distribution. Responding to these figures, SIG said: “The LFL sales declines in the UK & Ireland reflect a falling level of construction activity as the second quarter progressed.
“Revenues at SIG Distribution have also been affected, as anticipated, by the radical actions taken to focus on better pricing management and a planned withdrawal from unprofitable business, as previously reported.
“The business has now completed its transition to a smaller and more focused base, with resulting higher gross margins and lower costs.
“The Group’s businesses in Mainland Europe reported a positive performance in the period, with LFL revenues up +3.3%.”
SIG’s management said it was continuing to review “remaining peripheral businesses” within the Group’s portfolio, and today announced the sale to Kingspan Group of WeGo FloorTec GmbH, a German manufacturer of raised access flooring.
This business contributed about £2m worth operating profit in Germany in 2018, and the transaction is expected to complete shortly, generating proceeds of approximately £12m.
The Group also stated: “The continuing transformation of the Group’s businesses, coupled with normal seasonality, should enable delivery of a stronger second half to the year.
“As such, the Board continues to believe underlying profitability for the full year will be delivered in line with its expectations, but will continue to monitor how trading conditions develop.
“The Group has made further progress during the period in transforming the business.
“Previously reported actions in our UK businesses around pricing, costs and the transition to a more integrated functional operating model are delivering a sustained improvement in margins, and we continue to pursue similar initiatives in our operations across Mainland Europe.”
