SIG plc’s (SHI) Troubles Aggravate As It Reports A Loss, Cuts Dividend

European building products specialist SIG plc (LON:SHI) continues to experience shrinking margins as it reported a loss for the first-half of 2017. While pre-tax profit, excluding one-offs and property sales, of £30 million met expectations, the interim dividend was cut by a third on account of a £49 million one-off non-operating loss, including more than £15 million in non-cash charges.

LSE:SHI SIG Future Revenue and Net Income by Simply Wall St

Revenue jumped 8.3% to £1.38 billion, exceeding analysts’ projections, driven by an impressive like-for-like sales growth of 4.3% in Mainland Europe along with UK and Ireland delivering a 1.3% growth. Despite rebound in end markets, the company ended up with a loss and clearly needs to figure out how it can create value for shareholders out of its “strong positions in core markets of insulation & energy management, interior fit out and roofing”.

“In the first half of 2017 the business delivered underlying PBT in line with guidance. 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”, said CEO Meinie Oldersma, who took the reins in the wake of former CEO Stuart Mitchell’s departure, when SIG’s market value hit new lows late last year.

SIG is going through a strategic review to revive the company and deliver sustained profitability. While the company is expected to come out with its findings later this year, it has, in the meanwhile, reduced net debt from £259.9 million to £166.5 million, which indicates a significant reduction in insolvency risk.

“In terms of outlook the key risk is the challenging environment created by macro uncertainty in the UK, although this 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”, added Meinie.