Management at SIG (SHI) has been telling a turnaround story in recent years, but it wasn’t always clear people were listening. The UK is the building product distributor’s biggest single market by sales, and difficult trading conditions here distracted investors from the ongoing work of retooling the business. With the latest results, however, it appears people are finally listening.
The shares rose by around a tenth following the 2018 results announcement. Sales declined due to continued difficult trading, but also due to wide-ranging disposals. The group has been dropping non-core businesses, divesting or closing the equivalent of 11 per cent of its 2016 statutory revenues. The effect has been stark. The underlying gross margin widened by 50 basis points to 26.7 per cent, while adjusted pre-tax profits were up by a quarter – even after stripping out £35.8m of proceeds from business sales. Consequently, net debt has plummeted, reaching 1.7 times cash profits, from 2.3 times last year.
That said, the difficult end markets should not be ignored. The UK became increasingly troubled in the second half of the year, while France and Germany – SIG’s second and third largest markets, respectively – also saw trading conditions slow.
House broker Peel Hunt kept its forecasts steady, expecting £88m in adjusted pre-tax profits and EPS of 11.1p, up from £75.3m and 10.9p in 2018.
| SIG (SHI) | ||||
| ORD PRICE: | 133.5p | MARKET VALUE: | £790m | |
| TOUCH: | 133.3-133.6p | 12-MONTH HIGH: | 161p | LOW: 101p |
| DIVIDEND YIELD: | 2.8% | PE RATIO: | 45 | |
| NET ASSET VALUE: | 78p* | NET DEBT: | 41% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 2.63 | 39.0 | 5.60 | 4.40 |
| 2015 | 2.57 | 51.3 | 6.10 | 4.60 |
| 2016 | 2.85 | -110 | -20.6 | 3.66 |
| 2017 (restated) | 2.88 | -54.7 | -10.2 | 3.75 |
| 2018 | 2.74 | 28.5 | 3.00 | 3.75 |
| % change | -5 | - | - | |
| Ex-div: | 06 Jun | |||
| Payment: | 05 Jul | |||
| *Includes intangible assets of £340m, or 57p a share | ||||
