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SIG swings to loss but anticipates better full year than indicated

“The second half of 2020 is expected to remain loss making, but at a lower rate than the first despite some increased pressure on gross margin in the UK,” said CEO Steve Francis

SIG PLC -

SIG PLC (LON:SHI) swung to losses in the first half of the year but said trading amid the coronavirus pandemic has not been as bad as feared and it now expects full year sales to be slightly higher than previously guided. 

The insulation and roofing specialist said its financial restructuring and fundraising in the summer has provided confidence to invest in a new growth strategy under a new management team led by chief executive Steve Francis.

“The new management team has started to execute its strategy and implement its organisational model, which focuses on our local branch teams, enabling growth and returning to active industry leadership,” he said.

Trading was better than anticipated during the peak lockdown months of March to May, with revenue for continuing operations of £817.7mln for the first six months of 2020 down 23.7% on last year as the European business performed better than the UK, where roofing outperformed distribution.

A statutory pre-tax loss of £125.4mln was made for the period, compared to a £2.2mln profit before tax a year earlier, with an underlying operating loss of £43.2mln versus an operating profit of £29.1mln last time. 

“Group sales in July and August were encouraging although down year on year, and market share losses during 2019, particularly in the UK distribution business, will take time to recover,” said Francis. 

“The second half of 2020 is expected to remain loss making, but at a lower rate than the first despite some increased pressure on gross margin in the UK.”

The shares fell 11% to 23.9p in early trade on Thursday, down 80% since the start of the year.

Broker Peel Hunt said the results are “not a surprise given the start to the year and the COVID-19 impact”. 

“The new management team has been busy kick-starting the process of refocusing the group on sales growth. A bigger focus on service, getting much closer to customers with more operational freedom at branch level form part of these changes. The benefits will take time to come through but the journey has started.

“With the shares below 30p, medium-term investors should find this an attractive entry point.”

Quick facts: SIG PLC

Price: 25.48 GBX

LSE:SHI
Market: LSE
Market Cap: £301.06 m
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