SIG earnings fall as it pays down debt

Specialist building products distributor SIG reported an 8.6% rise in revenue to £1.38bn in the first half on Tuesday, or an improvement of 3.2% at constant currencies.

The FTSE 250 company said its underlying operating profit was down 16.1%, or 20.4% at constant exchange rates, to £45.7m in the six months to 30 June, while underlying profit before tax was off 20%, or 24.3% at constant currencies, to £38.3m.

Its underlying profit before tax, excluding property profits, fell 33.7% or 38.1% at constant exchange rates to £30.1m.

SIG’s board said underlying basic earnings per share were off 23% year-on-year at 4.7[, while its cash inflow from trading was 31.1% lower to £41.3m.

The company’s return on capital employed was 8.4% post-tax, down 450 basis points from the 12.9% reported a year ago, while the board confirmed a dividend per share down 31.7% to 1.25p.

As at 30 June, SIG’s net debt was £166.5m, down 35.9% from the £259.9m reported on 31 December, making for a net debt-to-EBITDA leverage of 1.6x, compared to 2.1x at the beginning of the period.

“In the first half of 2017 the business delivered underlying PBT in line with guidance,” said chief executive Meinie Oldersma.

“Although lower than the first half of last year, as previously indicated, it represents an increase on H2 2016, providing some evidence that business performance has stabilised.

“However, there remains considerable work to be done to improve returns over the medium term.”

Oldersma said that, following management actions taken in the first half to strengthen the group's balance sheet, SIG made “good initial progress” on its key short-term priority to reduce leverage.

The company would continue to focus on leverage reduction in order to deliver its targeted range of between 1.0 and 1.5x during 2018.

“Following my appointment as CEO, I commissioned a comprehensive review of the group's strategy, use of capital and cost base,” Meinie Oldersma added.

“The initial phase confirms that the business has real opportunity to improve profits and returns over the medium term, but also highlights the execution challenges in delivering these upsides.

“We intend to report progress from this review in Q4 2017.”

In terms of outlook, Oldersma said the key risk was the “challenging environment” created by macro uncertainty in the UK, although that may partly be mitigated by continuing improvement in confidence in mainland European markets.

“However, we continue to expect the business to show a stronger second half - excluding H1 property profits - and our expectations for the full year are unchanged.”