SIG restructuring not 'radical' enough for Canaccord, downgrades and cuts target

Insulation specialist SIG is attempting a ‘back to basics’ approach but is not going far enough for Canaccord Genuity, which downgraded its recommendation on the stock on Thursday.

Canaccord cut SIG shares to ‘hold’ from ‘buy’ and reduced its 12-month target price to 180p from 190p.

The Canadian broker asserted that while management’s decision to adopt a ‘back to basics’ approach to the business, the measures have not gone far enough and only a significant restructuring of the company would suffice to represent value.

Analysts added that increased competition in recent years is likely to be maintained in coming quarters, and may even become more intense.

“While we believe that management is getting a grip of the issues and will deliver improved financial performance and value over the medium term, in the absence of any radical restructuring of the group and in view of the execution risk, we believe the share price looks close to being priced for delivery,” the analysts said.

SIG recently said its efforts to streamline the business would centre around cutting administration costs and improving customer service and value.

The analysts felt there were “structural obstacles” in place in the company which could prevent these measures from being effective.

“With a long history of poor management and investment in the wrong areas it seems, it may take longer and require more investment to deliver an improved performance.”