Trading Update

RNS Number : 3793Z

SIG PLC

13 January 2011

 



Trading Update

Thursday 13 January 2011

SIG plc ("SIG"), a leading European supplier of insulation, interiors, exteriors and specialist construction products, issues the following trading update for the year ended 31 December 2010 in advance of its Full Year results announcement on 17 March 2011.

SIG's total sales for the year are expected to be in the region of £2,690m, a decrease of c.2.0% compared with 2009 (£2,744m) in Sterling, or a decrease of c.0.3% in constant currency.  Sales at the end of November and throughout December were affected by the severe winter weather conditions in the UK and Northern & Central Europe causing heavy disruption to construction activity. Notwithstanding the resultant loss of sales, the Board remains confident that underlying* profit before tax, as detailed in the Interim Management Statement of 17 November 2010, will be not less than the analysts' consensus expectations at that time of £61.3m. 

Overall, the end markets in which SIG operates continued gradually to stabilise as the second half of the year progressed, although some individual segments and geographies have yet to fully level out. Although all countries are at different points in their individual cycles, in SIG's major countries of operation (UK, France and Germany), 2010 saw residential construction levels turn modestly positive from a low base. After a steep fall in 2009, private sector non-residential construction activity experienced a slowing in the rate of decline in H2 2010, while public sector construction work continued to benefit from significant government investment programmes throughout the year.

Against this backdrop, H2 sales in Sterling were c.0.1% lower and in constant currency grew by c.2.4% compared to prior year. Gross margins in H2 were consistent with those achieved in H1 2010, in markets which remained highly competitive.

UK and Ireland (c.48% of Group Sales)

Total sales decreased by c.2.8% in Sterling and by c.2.6% in constant currency compared to 2009. In H2, total sales decreased by c.0.6% in Sterling and by c.0.3% in constant currency.

In the UK, sales in the Group's distribution and merchanting businesses (c.87% of UK sales) continued to show improvement through November. Sales fell away in December due to the extreme weather conditions, but nevertheless remained higher for the full year than 2009. In the case of both the Interiors Manufacturing and Energy Management divisions, sales trends in the final two months of the year remained consistent with H2 as a whole, which represented a significantly lower rate than in 2009. Total sales in the UK for the year fell by c.2.2%, and by c.0.5% in H2.

Mainland Europe (c.52% of Group Sales)

Total sales in Mainland Europe for the year decreased by c.1.3% in Sterling and increased by c.1.9% in constant currency. In H2, total sales in Mainland Europe increased by c.0.4% in Sterling and by c.4.7% in constant currency.

As in the UK, November sales continued to develop positively compared to prior year before being affected in the final weeks of the year by the severe weather conditions, with roofing and other outside trades being hardest hit, after having performed strongly in H2 up until that point. Also in common with the UK, non-residential remains weaker than residential construction activity in all of SIG's Mainland European countries of operation.

In terms of SIG's individual countries of operation, France and Germany (c.79% of Mainland Europe sales) showed the best progress in 2010 versus prior year, performing strongly in H2 notwithstanding some weather-induced slippage in December. In the Poland and Central European region after a challenging H1, sales in H2 showed moderate growth compared to 2009.  In Benelux, where the economic recession impacted later than elsewhere in Europe, trading conditions remained particularly challenging and as a result sales continued to decline through H2.

Financial Position

Net debt has reduced by c.£65m from £255m at 31 December 2009 to c.£190m at 31 December 2010 (or c.£200m assuming constant currency and no fair value movements).

Intense focus on cash management continued throughout the year resulting in good cash generation. This has been achieved through trading cash flows, strong working capital management and a tight rein on capital expenditure.

Restructuring and Cost Saving Programme

During 2010 management identified and undertook a number of further initiatives for cost savings across the Group. In addition to actions previously announced, the latestprogramme of measures is intended to generate further annualised cost savings of c.£7m, of which c.£4m will fall in 2011 following c.£3m benefit in 2010.

The total one-off restructuring costs associated with the actions taken in 2010 are currently estimated to be c.£20m and will be treated as non-recurring items in the 2010 accounts.

Outlook

The Board expects to see 2010's modest growth trend in residential building continue in 2011 and the decline in commercial construction to level out in H1 2011. However, government expenditure cuts are expected to cause public sector new construction activity to decline as the year progresses, counteracting mild growth in the private sector.

While maintaining a firm control on operating costs and working capital, the Group will continue to make carefully selected organic investment in the area of renewables and carbon reduction in 2011, and in further controlled expansion of its branch network in both the UK and Mainland Europe.

Against this background, the Board believes that SIG is well positioned to make progress through 2011 as its markets continue to stabilise.

Definitions

*          Underlying profit before tax is before the amortisation of acquired intangibles, impairment charges, restructuring costs and gains and losses on derivative financial instruments.

There will be a conference call with management at 8.00am this morning to discuss the statement.  The dial in number is 020 3140 0668; Participants Pin: 692551#.

Enquiries

Chris Davies, Chief Executive Gareth Davies, Finance Director	SIG plc		0114 285 6300
Richard Mountain / Nick Hasell	Financial Dynamics		0207 269 7291

Cautionary Statement

This Trading Update is prepared for and addressed only to the Company's shareholders as a whole and to no other person.  The Company, its directors, employees, agents or advisors do not accept or assume responsibility to any other person to whom this Trading Update is shown or into whose hands it may come and any such responsibility or liability is expressly disclaimed.

Certain information included in this Trading Update is forward looking and involves risks and uncertainties that could cause the actual results to differ materially from those expressed or implied by forward looking statements.  It is believed that the expectations set out in these forward looking statements are reasonable but they may be affected by a wide range of variables which could cause future outcomes to differ from those foreseen in forward looking statements, including but not limited to, changes in risks associated with the level of market demand, product availability and pricing, competitor risk, credit risk, credit insurance, restructuring of SIG and exchange rates.  More information about the risks and uncertainties that may affect the Group's performance is contained in the Annual Report to Shareholders for the year ended 31 December 2009.  All statements in this release are based upon information known to the Company at the date of this Trading Update.  The Company undertakes no obligation to publicly update or revise any forward looking statement, whether as a result of new information, future events or otherwise.

 

END

 

 

TSTUUUBRAUAAAAR