SIG (SHI) chief executive Stuart Mitchell was disappointed with the group's performance in 2015, and so was the market. Despite a reported uptick in trading so far this year, shares in the building products distributor shed 6 per cent after full-year results showed a drop in revenue, underlying profits and post-tax return on capital.
The source of the disappointment was not entirely within SIG's control. A weak euro led to an 8.9 per cent decline in European revenues, while an unexpected softening of the repair, maintenance and improvement (RMI) market weighed on like-for-like UK sales. Management hopes rising mortgage approvals will improve RMI sales this year, and support a restructuring programme which last year contributed £12.6m to underlying profits, and should result in an eventual £50m net benefit by 2018.
Corporate broker Jefferies believes the "beauty is that none of this is rocket science", perhaps easy for an analyst to say, but reflected in recent cost improvement quick wins. For example, each of the 200 branches in the exteriors business was previously charged with managing its own stock and fleet. This has now been modified to a "hub and spoke" structure, at significant savings.
Jefferies expects full-year adjusted pre-tax profits of £97.8m, giving EPS of 12.1p, up from £87.4m and 11.2p in 2015.
SIG (SHI) | ||||
|---|---|---|---|---|
| ORD PRICE: | 136.5p | MARKET VALUE: | £807m | |
| TOUCH: | 136-137p | 12-MONTH HIGH: | 212p | LOW: 117p |
| DIVIDEND YIELD: | 3.4% | PE RATIO: | 22 | |
| NET ASSET VALUE: | 110p* | NET DEBT: | 36% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 2.81 | 7.5 | nil | 2.25 |
| 2012 | 2.64 | 43.7 | 4.5 | 3.00 |
| 2013 | 2.71 | 2.1 | -2.5 | 3.55 |
| 2014 | 2.63 | 39.0 | 5.6 | 4.40 |
| 2015 | 2.57 | 51.3 | 6.1 | 4.60 |
| % change | -3 | +32 | +9 | +5 |
Ex-div:28 Apr Payment:27 May *Includes intangible assets of £526m, or 89p a share. | ||||
