Building materials group SIG impacted by ‘challenging’ construction market

Building materials group SIG’s shares dropped seven per cent this morning as warned a “challenging” construction market had chipped away at its performance.

The FTSE 250 company, which provides roofing, cladding and insulation materials for construction projects across Europe, reported a drop in revenues of 4.7 per cent for the second half of 2018.

The drop represents an acceleration from the 3.6 per cent drop between July and October, as construction demand “remained dampened by macroeconomic uncertainty”.

“House price inflation slowed and secondary housing market transactions continued to fall”, it added in a trading update.

SIG’s update follows last week’s news that growth in the UK construction sector eased to its slowest rate in three months in December.

Like-for-like revenues were down 8.8 per cent in the UK and Ireland, while the group’s business across the channel dropped 1.4 per cent.

The board said it believes the company will report profit before tax of around £75m in its March full-year results statement.

Trading conditions in construction markets across mainland Europe also “slowed materially” in the second half of the year, it said, particularly in France and Germany, where like-for-like revenues were down 3.2 per cent and 4.6 per cent respectively.

It also said it was making progress on a transformation strategy which saw it focus on “better pricing management”, and that the “planned withdrawal from unprofitable business” had contributed to the drop in revenue.

But increased gross margins were “above our expectations,” it added, with falling headcount helping the company reduce operating costs.

Analysts at Shore Capital Markets said the the increase in margins “lends credibility to the strategy of re-shaping SIG into a smaller but more profitable group”.