12th Nov 2014 08:31
LONDON (Alliance News) - Building products distributor SIG PLC saw its shares fall early Wednesday after it said it had slightly lowered its expectations for the year due to weak economic conditions in Europe, although it also raised its cost benefit targets from the strategic initiatives it is taking.
In a statement, the specialist in insulation and energy management products said like-for-like sales, which exclude acquisitions and disposals and are at constant currency, were up 1.7% from July to October, as 7.2% growth in the UK and Ireland was partly offset by a 3.2% decline in mainland Europe. However, it said reported sales excluding disposals were down 1.4%.
For the year to October, like-for-like sales were up 4.8%, as 9.6% growth in the UK and Ireland was partly offset by growth of just 0.4% in mainland Europe. Reported sales excluding disposals grew 2.9% as 11.1% growth in UK and Ireland was dragged back by a 4.4% decline in mainland Europe.
"Trading conditions in mainland Europe, particularly Germany and Poland, weakened due to the deteriorating macroeconomic environment, not helped by political uncertainties in Ukraine," the company said.
It said like-for-like revenue was down 4.1% in Germany and 9.8% in Poland between July to October, and was down 2.9% in France. It said the performance in France was much stronger than the market, which is seeing double-digit declines in new housing starts.
SIG said it's making good progress on its strategic initiatives, and now expects to get an extra net benefit of at least GBP8 million out of them in 2014. It said the extra benefits are mainly coming from procurement improvements.
It said it is now targeting a cumulative net benefit from its strategic initiatives at the upper end of the previously announced GBP15 million to GBP20 million range in 2015, while the target for 2016 remains at about GBP30 million.
It said its gross margin is up by 50 basis points for the year to October thanks to the procurement savings it is making.
"The strong growth in the UK & Ireland, accelerated savings from the group's strategic initiatives and improving gross margin are expected to partially mitigate the effects of weaker macroeconomic conditions in Mainland Europe and foreign exchange translation in 2014," the company said.
"As a result, SIG continues to expect a year of good progress, albeit slightly lower than its previous expectations," it added.
SIG shares were down nearly 3.0% at 152.80 pence early Wednesday, one of the worst-performing stocks on the FTSE 250.
By Steve McGrath; [email protected]; @stevemcgrath1
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