Deutsche Bank has downgraded building materials distributor SIG PLC (LSE:SHI) to 'sell', warning that the group is unlikely to generate free cash flow over the coming years, even in a more favourable trading environment.
Analyst Christen Hjorth reduced the target price from 13p to 5p following a sharp cut to earnings forecasts.
Despite SIG’s recent trading update guiding to full-year 2025 earnings before interest and tax (EBIT) of around £32 million, broadly in line with consensus, the broker said deteriorating conditions warrant a more cautious stance.
Deutsche now expects EBIT in 2026 and 2027 to fall 22% and 19% below previous forecasts, citing a weak exit rate and persistent macroeconomic uncertainty. On this basis, the group is projected to remain both loss-making and free cash flow negative throughout the forecast horizon.
The analysis suggests that even a return to average EBIT margins from the past five or ten years would be insufficient to restore free cash flow positivity. With the balance sheet now under greater scrutiny, the broker said financial risk has increased materially, justifying the downgrade.
Shares in SIG fell 3% to 9.74p.