Building materials group Sig plc (LON:SHI) has appointed a new chief executive as it looks to bounce back from a ‘disappointing’ 2016.
Meinie Oldersma will take over the reins from current interim group chief executive Mel Ewell who has been filling in since SIG’s former boss, Stuart Mitchell, walked the plank following a profit warning back in November.
Oldersma, currently the boss at engineering parts distributor Brammer, will take up his new position at some point next month.
His appointment came as SIG saw profits fall by almost 20% (on a constant currency basis) in 2016 despite posting a rise in revenues.
As the company had guided at the end of last year, underlying profit before tax for the 12 months to 31 December 2016 came in at £77.5mln (2015: £88.6mln) on revenues of £2.74bn (2015: £2.46bn).
While UK like-for-like sales were robust and up 1.2% year-on-year, issues in its French and German divisions in particular meant like-for-likes in mainland Europe were down 0.4% across the year.
“We have delivered underlying profit before tax in line with our previously stated range, but we are disappointed with the overall financial performance of the Group in 2016,” said interim chief executive Mel Ewell.
“Although the Board believes that the Group's strategic direction is correct, implementation has proved challenging.”
Given the weaker performance in 2016, SIG said it would rebase its final dividend to make sure it falls within the firm’s dividend policy of 2-3x earnings cover.
As a result, the final divi of 1.83p takes the total pay-out for the year to 3.66p, less than the 4.6p SIG paid out last year.
Last year’s trading also had an effect on the group’s year-end leverage, with its net debt-to-EBITDA ratio increasing to 2.1x with net debt up to £260mln as of 31 December.
SIG has already “identified a number of actions” to strengthen the balance sheet which is a “key short-term priority”.
The company said trading so far in 2017 has been in line with expectations, although markets “remain competitive”.
Bearish brokers
“We continue to see SIG as structurally challenged,” said Liberum analyst Charlie Campbell.
“The outlook is cautious and the outgoing interim CEO has put a few initiatives on hold to focus on core activities, which may mean that cost savings forecast in more optimistic forecasts need to be unwound.”
The analyst also noted that net debt was higher than had been expected at £263mln (versus forecasts of £253mln).
--Updates for broker comment--