Builders’ woes dent profits at major supplier

SIG sank nearly 16pc after it warned a downturn in the UK and German construction industries will dent its full-year profits.

The building materials supplier said trading had deteriorated rapidly since it released half-year results a month ago.

The FTSE 250- listed firm provides thermal insulation and other specialist building products such as ceiling tiles, dry lining and flooring – meaning its business is tied to construction activity.

The Sheffield-based group, which was originally known as Sheffield Insulations, has 585 branches in the UK, Ireland and mainland Europe.

SIG blamed political and economic uncertainty for the drop-off in sales during what is usually its busiest time of year.

Shore Capital Markets analysts Graeme Kyle said that, in the UK, it was a reflection of Brexit-induced turmoil

slowing down decisions being made on building projects. In Germany, concerns are mounting that the economy is on the brink of a recession as factory orders fall and the manufacturing sector, according to the finance ministry, is ‘subdued’.

SIG shares plummeted 15.9pc, or 19p, to 100.5p.

The slump set off alarm bells elsewhere in the sector, dragging down shares in rival builders’ merchants.

B&Q- owner Kingfisher fell 0.5pc, or 1p, to 191.3p, Howden Joinery slid 3pc, or 17p, to 538p, and Travis Perkins lost 2.1pc, or 26.5p, closing at 1224.5p.

Housebuilders Berkeley Group and Persimmon were also fallers – the former by 1pc, or 37p, to 4007p and the latter by 1.3pc, or 27p, to 2069p.

After SIG’s warning that profits will be ‘significantly lower’ in its main specialist distribution and roofing merchants businesses, analysts at its joint broker Peel Hunt cut their annual profit-before-tax estimates by £12m, from £80m to £68m, for 2019.

SIG also said it will sell its air handling division to France Air Management for £198m and use at least £130m of this to pay off debt. This could leave it debt-free in 2020, while the rest of the cash will be passed on to shareholders.

Russ Mould, investment director at AJ Bell, said: ‘SIG has issued numerous profit warnings in the past few years as the UK construction market goes through a very difficult patch. Right- sizing its business now could be a sensible thing to do.’