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SIG weathers the storm

SIG's self-help measures continue to offset tough trading conditions, yet unconvinced investors sent the shares tumbling 3 per cent
August 11, 2015

"We're swimming against the tide but making good progress," says SIG (SHI) boss Stuart Mitchell, who has been countering pricing pressures and tricky markets with self-help. Pricing discipline and procurement gains generated £7m for the insulation and roofing materials specialist, helping the gross margin inch up 20 basis points.

IC TIP: Buy at 194p

Against a backdrop of competitive pressures in insulation and interiors and waning demand in the private repair, maintenance and improvement market, strategic initiatives helped widen the gross margin by 40 basis points in the UK business. They also helped counter weakness in non-residential and industrial sectors in Germany. Factors like the closure of power stations brought like-for-like sales down 2.5 per cent in Germany and Austria, yet self-help measures kept the gross margin unchanged. Elsewhere, unfavourable sales mixes in the tepid French and Polish markets had a more overwhelming effect.

However, management report that like-for-like sales started to improve in the second quarter as the economic recovery gathered steam on the continent. They also expect UK non-residential markets to improve and plan to spend £200m on acquisitions by 2017.

Broker Stifel expects adjusted pre-tax profit of £107m for the year to December 2015, giving adjusted EPS of 13p, rising to 14.7p in 2016.

SIG (SHI)
ORD PRICE:194pMARKET VALUE:£1.1bn
TOUCH:193.6-194p12-MONTH HIGH:212pLOW: 143p 
DIVIDEND YIELD:2.4%PE RATIO:35
NET ASSET VALUE:106p*NET DEBT:31%

Half-year to 30 JunTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20141.2811.83.11.42
20151.2426.83.11.69
% change-5+127 -+19

Ex-div:08 Oct

Payment:06 Nov

*Includes intangible assets of £480m, or 81p a share