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SIG’s profits collapse

The building products supplier is proposing a £150m equity raise to strengthen its balance sheet
May 29, 2020

Building products supplier SIG (SHI) swung to a statutory pre-tax loss in the year to 31 December thanks to a £91m impairment of goodwill and other intangible assets and £27m in restructuring costs. Things were not an awful lot better on an underlying basis. As the group lost market share in the UK and Germany, like-for-like underlying pre-tax profit shrank to £21m, versus £52m a year earlier.

IC TIP: Sell at 28.1p

Covid-19 disruption saw revenue plunge by more than a third in March and April. When the pandemic is combined with already falling sales outside of this crisis and the disposal of the air handling business, SIG is guiding that revenue will drop by £500m this year. It is aiming for sales to recover to 2019 levels in 2022.

Excluding £276m in lease liabilities, the group finished last year with £163m of net debt, which had fallen to £114m by the end of April. But with lower earnings anticipated from 2020, leverage is likely to increase. SIG is therefore proposing a £150m equity raise via a placing and open offer. Funds managed by Clayton Dubilier & Rice (CD&R) are set to invest up to £85m, which will give it around a 25 per cent stake. The additional liquidity is also to ensure the group can deliver a new growth strategy, repositioning itself as a “service-focused local sales business”.

SIG (SHI)    
ORD PRICE:28.1pMARKET VALUE:£ 166m
TOUCH:28.1-28.2p12-MONTH HIGH:140pLOW: 15p
DIVIDEND YIELD:4.4%PE RATIO:NA
NET ASSET VALUE:50p*NET DEBT:£455m**
Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20152.5751.36.14.60
20162.85-110-20.63.66
20172.88-54.7-10.23.75
2018 (Restated)2.4310.30.63.75
20192.16-113-21.01.25
% change-11---67
Ex-div:na   
Payment:na   
*Includes intangible assets of £201m, or 34p a share, **Includes £276m in lease liabilities