What does lower end of expectation mean for this company with 330M debt

Report:
RNS Number : 1419S
SIG PLC
13 May 2009




SIG plc

AGM and Interim Management Statement


Wednesday 13 May 2009




SIG plc, a leading European supplier of insulation, interiors, exteriors and specialist construction
products is today issuing its Interim Management Statement covering the period from 1 January 2009 to the date of this announcement, ahead of its Annual General Meeting to be held at 12 noon today at Aston Hotel, Catcliffe, Rotherham, S60 5BD.


As highlighted in the annual results announcement on 18 March 2009, extremely cold weather conditions in the first quarter (Q1), in particular in Mainland Europe, allied to subdued or reduced demand in many of SIG's market segments and countries of operation, have resulted in an exceptionally challenging trading environment in the first part of 2009 with pricing pressures accompanying lower volumes. In total, sales are lower by 7.2%, or by 13.3% in constant currency terms compared to the period 1 January to 12 May in 2008. Like for like* sales reduced by 11.9% in Sterling and by 17.7% in constant currency.


Around one third of the Group's sales are made into the residential building sector, both new build and Repairs, Maintenance and Improvement (RMI). Demand from this sector fell steeply during the course of 2008 in the UK and Ireland, and to a lesser extent in a number of European countries. 2009 has seen some early signs of stabilisation in demand in the UK house building market, but volumes remain at a substantially lower level than in the same period in 2008.


Approximately two thirds of the Group's sales are made into the non-residential building and industrial non-construction sectors. Activity remained broadly solid in these sectors throughout 2008 in all of SIG's countries of operation, although as previously reported the private non-residential sector in the UK and Ireland tailed down markedly towards the end of 2008 and has continued to decline in 2009, most notably in the commercial office market segment. Demand for industrial process insulation has remained steady in all countries as has publicly funded non-residential construction, although in the UK funding-related issues have delayed project flow against anticipated levels so far.


Trading Summary

UK and Ireland (c.50% of Group Sales)

Overall construction and building activity has shown a sharp decline in 2009 over 2008 in both the UK and Ireland (Ireland accounts for c.4% of Group sales). Against this background, like for like* sales adjusted for constant currency have fallen by 23.5%, with the UK down 21.9% against strong prior year comparatives, and Ireland 41.6% lower.


After a sluggish start to the year in the UK, exacerbated by bad weather in February, activity levels in most segments picked up in March only for progress to become patchy in April. Ireland traded in line with expectations through to mid-March but has subsequently weakened further.


Sales of insulation and related products in the UK have shown the most resilience, continuing to benefit particularly from increased demand driven by the CERT (Carbon Emissions Reduction Target) Scheme introduced in April 2008. Other segments have been more depressed, with trading in Interiors products impacted by delays to PFI and directly funded government projects in the health and education sectors caused by funding issues and / or re-tendering requirements.


Mainland Europe (c.50% of Group Sales)

Trading in most countries in which the Group operates was adversely affected by the extremely cold weather which gripped the Continent throughout most of Q1 and inhibited building site activity for all outside building trades. European like for like* sales so far in 2009 are down 9.8% against the same period in the prior year on a constant currency basis, but 2.6% up in Sterling with the weakness of the UK currency against the Euro versus the same period in 2008 providing some translational benefit.


The severe cold conditions made underlying demand trends in Mainland Europe particularly hard to discern in Q1. Following the improved weather in April trading has yet to settle into a consistent pattern, and sales performance has been changeable in most countries. However, Poland and our other smaller markets in Central Europe (c.5% of Group Sales) did not achieve the usual level of seasonal improvement in April which suggests that demand in the region is stalling.



Cost Saving Measures


In 2008, SIG moved quickly to adjust its cost base to the more challenging trading conditions and at the time of the annual results SIG highlighted the additional contingency plans that were in place. In view of the ongoing uncertainty in the outlook across SIG's spread of market sectors and countries, and anticipating that trading in places may well become still more difficult as the year develops, the Company is pressing ahead with this comprehensive range of further restructuring and cost saving measures.


These include:


*

further branch closures and redundancies across the Group's distribution businesses in the UK and Ireland;
*

management restructuring and consequent merger of a number of UK business units;
*

rationalisation of the Group's UK Interiors manufacturing operations into a reduced number of sites;
*

further redundancy measures in Mainland Europe, principally an additional 100 job losses in Germany and 30 in France; and
*

rationalisation and integration of our Polish operations into a single entity, with an initial reduction of 40 staff


In aggregate, these steps which involve additional associated one off restructuring costs of c.15m, increase the previously announced level of annualised net hard cost savings implemented in 2009 from 15m to c.27m of which we expect to benefit c.22m in 2009. Since the commencement of the cost saving programme in 2008 this brings the annualised net hard cost savings achieved to 62m, and staff reductions to c.1,900.


In addition to these hard cost savings, the Group is continuing to identify and deliver day-to-day savings across all its businesses in areas such as fleet management, consumables and further cost avoidance programmes.


Acquisitions


No acquisitions were made in the period and none are planned for the remainder of 2009.


Financial Position


Following the passing of the special resolution at the EGM on 9 April 2009 in respect of the placing and open offer and firm placing, 325m (net of expenses) was raised by the issue of 455,047,973 ordinary shares of 10p each at a price of 75p per share.


The equity share issue has created a more appropriate capital structure for the Group and provides greater resilience and financial flexibility in the current environment.


Following receipt of the equity proceeds, the objective of the Board is to minimise the Group interest charge for the year whilst maintaining, where possible, existing debt facilities in order to maximise headroom and flexibility going forward. To date the majority of the proceeds have been used to pay down revolving credit facilities and termed out 2009 facility maturities and to cancel certain fixed interest rate derivatives.


The Group has continued its strong focus on cash conversion in the year to date resulting in a net debt reduction (in addition to the equity proceeds) of c.21m. The weakening of the Euro since the year end has reduced the debt position by a similar amount.


Net debt at 30 April 2009 amounted to c.330m (31 December 2008: 697.1m).


Board


As part of a planned process SIG plc is pleased to announce that it has appointed Chris Geoghegan, Vanda Murray OBE and Jonathan Nicholls to its Board as Non Executive Directors ('NEDs'). All have extensive international experience.


Mr Geoghegan and Mrs Murray will join from 1 July 2009 and Mr Nicholls from 6 November 2009. It is intended that Mr Nicholls will become Chairman of the Audit Committee.


Mr Geoghegan is currently a NED of Volex plc and Kier Group plc and Chairman of Hampson Industries plc. Prior to his retirement he was Chief Operating Officer of BAE Systems plc.


Mrs Murray is a NED of Carillion plc, Chair of Eazyfone Group Limited and Deputy Chair of the North West Regional Development agency. Previously Mrs Murray held executive positions as CEO of Blick Plc, President - Europe of Stanley Security Solutions and Managing Director of Ultraframe UK.


Mr Nicholls was most recently Finance Director of Old Mutual plc prior to which he was Group Finance Director of Hanson plc.


As part of the Board's long term planning, Peter Blackburn and Michael Borlenghi will be retiring from the Board on 30 September 2009.



Summary and Outlook


Macroeconomic forces continue to impact negatively on construction markets in SIG's countries of operation and are expected to do so throughout the remainder of 2009 and into 2010. The severity and duration of the downturn in the different sectors and geographies in which SIG operates is an unfolding picture, but it is clear that H1 will be exceptionally difficult and that trading conditions will remain challenging for the foreseeable future. In this context, having strengthened the balance sheet the Group will continue to run the business tightly through the remainder of 2009, focusing on maximising revenues and cash generation whilst continuing to realign the cost base to the changing market circumstances.


Whilst trading conditions are expected to remain challenging for the foreseeable future, the Group remains well placed to benefit from the longer term positive trend of demand for insulation in the construction and refurbishment of all types of buildings.



* Like for like sales excludes the impact of acquisitions completed after

1 January 2008.



Enquiries:

Chris Davies, Chief Executive

Gareth Davies, Finance Director

**Leslie Tench, Chairman




SIG plc





0114 285 6300

Faeth Birch/Gordon Simpson


Finsbury





020 7251 3801


** Enquiries in respect of Directorate changes only

TIME TO PRAY. FOR 70p.

love it

OVER 130p.

L&G reduced holdings,
No interim dividend, sales down 10%, operating profit down 58%.
I have sold @124 this morning at a small loss hoping to buy back lower.
Price now 135 can anyone explain ?

Chart looks Ok to me.

May have been just noise in the market steve.

Lovely uptrend channel developing and at these low SP levels and a nice gentle angle up not too steep. Getting in early on these uptrend channels can be very profitable..............



A bit of resistance to overcome at 170p but then we have clear sky to 220p......Nice...

Thanks GF, will start to look at charts more closely.
Have only 20% of portfolio left as i think there must be a correction soon.

Steve,

I bought these at a crazy price. I think by the nature of the beast over the next 12-18mts will do very well. But the market is very nervous and some retracements of 5% or are bound to occur/
============
Citi cuts SIG to hold from buy, TP raised to 135p from 120p
Business Financial Newswire
SIG is not out of the woods yet, says Citigroup, and the interim results were poor as expected. Continues to expect profit before tax of 64m for 2009E.

The share price is up by over 40% from its recent lows, says Citi, 'and while there is arguably medium-term value, we believe the shares are likely to pause in the near term'.


Story provided by Business Financial Newswire

over145p

Anyone have any views on this as a recovery play ?. Encouraging signs/noise coming from the housing market. The Euro has remained strong v Sterling which should improve profits expressed in GBP. Reduced interest paments and stronger balance sheet. May be a medium term hold at 113p...any views ?

The recovery starts now. Watch TW. BDEV RDW PSN , SPGH. TOO.

Family owned Canadian company, IKO Enterprises, sitting on 5.3% of SHI at the moment. Possible stake building. Trading update next Wednesday.

LOOKING GOOD

IN AGAIN TODAY.

Any reason for the 3.3% drop today?
(Also, any chance of adding the 200 dma to the chart in the header please?)

harry . 1 and 3 year graphs, 200dma.

Thanks. Just the one would have be enough! ;o)
Looks about fair value atm. Don't currently hold, but always on my watch list.

SHI SIG GROUP

Gone long here, this morning. Chart looking very sound fundys are solid and results 14th of march. Could have a good run up to them.

From IG INDEX

Client Sentiment used as a proxy for
short selling figure.

Client Sentiment

LONG 95% of IG clients with open positions in this market expect the price to rise

5% of IG clients with open positions in this market expect the price to fall

SIG (shi) moving up nicely. Wonder if their is any takeover interest here?.

Another view.

Bought on the drop.

May buy a few more if it retreats.

Certainly have a breakout here now.

Very nice.

Next resistance 136p/137p. Blue sky
to it now.

Prelims March 14th

Company will also benefit from government
pushed/led initiative of insulation for
private and landlord owned homes.

British Gas very active at the moment on this.

https://www.government-grants.co.uk/loft-insulation-grants.shtml

SIG (shi)

Tecnicaly the stock is very solid
in a uptrend channel with lower indicators
pointing to more upside.

concerning post 19 - could you give a bit more detail on which of the fundamentals are looking good please?

Yep no problem.......

SIG Forecasts

Year Ending Revenue (£m) Pre-tax (£m) EPS P/E PEG EPS Grth. Div Yield

31-Dec-11 2,740.00 80.51 9.47p 11.8 0.4 +32% 2.29p 2.0%

Not only that Brokers well behind it.........

What The Brokers Say

Strong Buy 6
Buy 1
Neutral 4
Sell 0
Strong Sell 1

Total 12

SIG Forecasts

Year Ending Revenue (£m) Pre-tax (£m) EPS P/E PEG EPS Grth. Div Yield

31-Dec-11 2,740.00 80.51 9.47p 11.8 0.4 +32% 2.29p 2.0%

a 32% increase in EPS, very nice.

Hoping this will be beat.

SIG (shi) from Ample site.

Midweek also sees results from SIG (SHI).

At its full-year update, the company indicated that underlying pre-tax profits would be marginally above analysts' expectations, with Bloomberg's upper end of range at £80.4 million.

Relatively benign weather boosted revenue up 8% to about £2.74 billion while gross margin was maintained. By region, mainland Europe revenue was up 11%. France remains the company's strongest market. UK increased 4%, while Ireland slipped 1%.

Following recent disposals the group now has three core markets - insulation and energy management, interior fit out and roofing.

Shares in the company are trading on a 2012 PE ratio of between 10 and 11 times.

Panmure Gordon has a 'buy' rating on the stock. Analyst Andy Brown states: "The recent stabilisation of trading should help sentiment towards the shares improve. It retains structural growth drivers, principally through insulation, and with the strengthened balance sheet we retain our positive stance."

Concensus forecasts easily beaten
today on the results.

The concensus was...........

Consensus 78.90 pre tax 9.25 eps 2.07 div Hemscott Premium

The actual figures were.........

Underlying profit before tax
£81.7m

Underlying basic earnings per share
9.4p

Dividends per share
2.25p

Well and trully beaten.

Details...........

14 March 2012

Preliminary results for the year ended 31 December 2011


SIG plc ("SIG") is a leading distributor of specialist building products in Europe, with strong positions in its core markets of insulation & energy management, interiors and exteriors.



Continuing operations*
2011
2010
Increase

Revenue
£2,744.8m
£2,545.4m
7.8%

Underlying** operating profit
£95.6m
£77.8m
22.9%

Underlying profit before tax
£81.7m
£64.2m
27.3%

Underlying basic earnings per share
9.4p
7.4p
27.0%

Dividends per share
2.25p
-
-




Financial highlights



· Sales from continuing operations up by 7.8% to £2,744.8m (7.1% in constant currency)

· Gross margin in continuing operations improved by 20bps to 25.6% (2010: 25.4%)

· Underlying operating margin in continuing operations up by 40bps to 3.5% (2010: 3.1%)

· Underlying profit before tax from continuing operations increased by 27.3% to £81.7m

· Statutory profit before tax increased to £7.5m (2010: loss of £80.8m)

· Net debt of £115.9m, reduced by £69.1m compared to 31 December 2010 - leverage now less than 1x (net debt/EBITDA)

· Return on capital employed (post-tax) increased by 230bps to 7.9% (2010: 5.6%)

· Proposed final dividend of 1.5p per share, bringing total dividend for the year to 2.25p

Operational highlights

· Continued market outperformance of c.3%

· Recently opened trading sites performing very strongly

· Invested further in organic growth - another 18 branches opened during 2011

· Divested non-core operations, increased focus on three core markets of insulation & energy management, interiors and exteriors

· £5m of annual cost savings identified from further rationalisation of branch network - total sites as at 31 December 2011: 715 (2010: 748)

* Continuing operations exclude the results of businesses (up to the date of the disposal) divested in 2011. The comparative results for these businesses for the year ended 31 December 2010 have also been excluded.

** Underlying is before the amortisation of acquired intangibles, impairment charges, restructuring costs, profit and loss arising on the sale of businesses, trading profits and losses associated with disposed businesses and gains and losses on derivative financial instruments. On a pre-tax basis these totalled £74.2m (2010: £145.0m).

http://www.moneyam.com/action/news/showArticle?id=4328288

Commenting on the results and outlook, Chris Davies, Chief Executive, said:

"We are pleased with these results and the progress we are making. I would highlight in particular the success of our organic growth strategy, with new branches moving into profitability more quickly than anticipated.



"During 2011 the Group delivered on a number of key objectives. Operationally, we continued to outperform the market while improving gross margins and securing additional efficiency savings. Strategically, we increased focus on our three core markets of insulation & energy management, interiors and exteriors by divesting non-core operations. Financially, we improved returns and further strengthened our balance sheet.



"We enter 2012 as a much leaner, stronger and more focused organisation. Sales per day in constant currency so far this year were around 1% ahead of strong prior year comparators, despite the impact of severe weather across Mainland Europe in February this year.



"Given the current uncertainties in the macroeconomic environment, we continue to expect market volumes to be slightly down overall in 2012. However, we have a solid platform on which to build and are targeting further market outperformance, with new branches expected to make a significant contribution to future growth

BRIEF-SIG plc full year underlying profit up 27 pct
14 Mar 2012 - 07:05

LONDON, March 14 (Reuters) - SIG PLC :

* Auto alert - SIG PLC FY underlying pretax profit from continuing

operations rose 27.3 percent to 81.7 million STG

* Auto alert - SIG PLC total dividend 2.25 pence per share

* Auto alert - SIG PLC FY sales from continuing operations rose 7.8

percent to 2.74 billion STG

* Auto alert - SIG PLC final dividend 1.5 pence per share

* Sales per day in constant currency so far in 2012 were up about 1 percent

...............................................................................

Broker upgrade just out......

SIG FTSE 250 Consumer, Cyclical Buy 153 121.3 26.1% Jefferies

153p SP target Upside 26.1%

BUY confirmed on the Candles........

http://www.britishbulls.com/StockPage.asp?CompanyTicker=SHI&MarketTicker=Industrials&Typ=S

Just bought in here.

Not in this one -
IC-
With recent full year update, profits before tax coming in slightly ahead of most brokers expectations. The company may be over the worst. Half of sales are in mainland europe . Also business from UK energy companies trying to insulate homes in order to hit energy-saving targets, set by the government. The outlook for 2013 is cautious,the company should benefit from cost savings and attemps to sell loss-making Czech and Slovak businesses. Long term there should be a cyclical upside,

Liking the look of the SHI chart. Already broken horizontal support and could go for a break through of the ceiling of the upward trend channel.

Roofing and insulation materials market recovering. Beneficiary of housing market boom.

Long on SHI from the open, Technicaly well sold off over the last few weeks. Solid trading from the company.

There is hope at the end of the channel for "Freda" on this one ( if he bought @ around 100p a few years back ) after a new CEO today ........

SIG shares offer 'considerable upside' - By Graeme Evans | Tue, 14th March 2017 - 12:30

SIG shares offer 'considerable upside' - SHI 114.90p +7.70p (7.18%)
"Never forget your customer" is the kind of business mantra that belongs on page one of the management handbook. And yet somehow SIG (SHI) failed to heed this message after it became too distracted by its own internal restructuring.

The resulting loss of customer focus and weaker trading performance ultimately cost the job of chief executive Stuart Mitchell, and today resulted in underlying profits dropping by 12.5% to £88.6 million in 2016.

The European building products firm has already acknowledged its mistakes and has slowed or stopped a number of internal initiatives so it can refocus on customers and achieve the sales growth needed to boost cash generation.

And with today's appointment of a new chief executive in Meinie Oldersma, who has 30 years of distribution experience, the company gave shareholders a further reason to believe that SIG remains a good business with strong market positions.

This was reflected in the share price, which jumped 11% today, further justifying our positive take on the shares in January, and putting it back where it was before a November profits warning highlighted problems.

Sentiment was helped by house broker Panmure Gordon's view that the current valuation for SIG, with a forward price/earnings (PE) ratio of 10.6, provides "considerable upside".

Panmure analyst Adrian Kearsey has a 'buy' rating on the stock and a price target of 135p. He said the reinvigorated sales push will take time to deliver, but that the early signs were encouraging after SIG said its UK insulation arm had been delivering positive like-for-like sales growth since November.



He said SIG's market leading positions meant the company was well placed, with the recent difficulties more likely to reflect problems with execution rather than strategy. Kearsey is also encouraged that SIG has recognised that its balance sheet was becoming too stretched.

With net debt of £260 million, SIG said a key short-term priority was to reduce leverage of 2.1 times underlying earnings. As a result, it will target further asset disposals and moderate capital expenditure.

It has also rebased the final dividend to 1.83p a share, in line with its dividend policy of 2–3 times earnings cover. Together with the interim dividend of 1.83p, this provides a total dividend of 3.66p, down from 4.60p a year earlier.

SIG's medium-term target is to return leverage to within the 1-1.5 times range, although it admits this may take until 2018 to achieve.

In doing this, it believes its balance sheet will be able to withstand any near-term fluctuations in market demand. At present, SIG said trading has been in line with expectations, although its markets remain competitive and it has been experiencing some supplier price inflation.

It added: "For 2017 SIG continues to expect the new build residential market to be the best performing sector in the UK construction market, with the commercial sector more uncertain.

"In mainland Europe economic indicators have strengthened and we have seen improving quarterly like-for-like sales performance."

In contrast to Panmure, UBS analyst Miguel Borrega believes the rebasing of the dividend and underlying weak trends will put pressure on the shares. He has a 'sell' rating and 90p price target.