July 5, 2019 / 6:40 AM / 5 months ago

Building supplier SIG hit by weak UK construction market

(Reuters) - Building materials supplier SIG Plc (SHI.L) on Friday sounded another warning for Britain’s construction industry as it blamed a marked deterioration in activity for lower first half like-for-like sales, sending its shares down as much as 12%.The construction industry in Britain had its worst month in June since the 2009 recession according to the latest PMI data, hit by uncertainties over Britain’s exit from the European Union.

UK construction firms have almost a third less work in the pipeline than a year ago, according to an annual survey of subcontractors in June.

“Trading conditions remain challenging in many of the Group’s end markets and there has been a marked deterioration in the level of construction activity in the UK as the year has progressed,” the company said in a trading update.

Shares in the Sheffield-based company were down 6.3% at 124 pence at 0845 GMT, having recouped some earlier losses.

In the half year to end June, SIG’s group like-for-like sales fell 3.8%, with UK and Ireland down 12.7%. Overall group revenue from continuing operations fell 5.7% in the half-year period.

The company stuck to its full-year profit forecast, expecting a stronger second half as it pushes ahead with its restructuring and sale of non-profitable businesses.

SIG said it would sell its German flooring unit, WeGo FloorTec GmbH, to Kingspan Group (KSP.I). After the sale, the company has just one non-core business under review.

“Given SIG has now completed its strategy of walking away from unprofitable customers in distribution, the sequential (like-for-like) deterioration appears to solely reflect underlying market conditions,” Jefferies analysts said in a note.

The company is also looking to sell its air purification business, which had revenue of more than 300 million pounds in 2018 on a proforma basis. It reported a 7.7% rise in like-for-like sales in the first half of the year.

Reporting by Shariq Khan in Bengaluru. Editing by Jane Merriman

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