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SIG Earnings Advance 21% as U.K. Construction Strengthens

Aug. 12 (Bloomberg) -- SIG Plc earnings surged 21 percent in the first half as the distributor of building products benefited from a strengthening recovery in the U.K. housing market as well as procurement savings.

Underlying operating profit rose to 47.8 million pounds ($80 million) from 39.6 million pounds a year earlier, the Sheffield, England-based company said in a statement today. Sales in the U.K. and Ireland from continuing operations climbed 14 percent to 650 million pounds, offsetting flat revenue in continental Europe.

“Trading conditions in the U.K. have continued to gather momentum, led by the revival in the housing market,” Chief Executive Officer Stuart Mitchell said in the statement. “The group’s first-half performance and progress on its strategic initiatives provide a strong base on which to achieve its full-year expectations.”

U.K. homebuilding expanded at the fastest pace in more than a decade in July as record-low interest rates and government stimulus measures helped construction grow for a 15th month. Taylor Wimpey Plc, the U.K.’s second-largest publicly traded homebuilder, reported a 45 percent increase in operating profit in the first half.

SIG shares fell 0.7 percent to 170.8 pence at 10:10 a.m. in London trading, taking the decline to 19 percent this year.

Improved Margin

Procurement savings helped deliver a 0.4 percentage point improvement in gross margin and SIG forecast a full-year net benefit of about 7 million pounds, exceeding a previous target of as much as 5 million pounds. First-half revenue climbed 6.5 percent to 1.3 billion pounds, the first increase since 2011.

While first-half sales in mainland Europe declined 0.1 percent to 636.5 million pounds, the gross margin on that revenue rose by 0.5 percentage point on procurement savings. European conditions are still “variable,” and the French construction market is expected to weaken further in the second half, Mitchell said in the statement.

“Debt levels are still high, countries are still reining in government deficit, and unemployment levels are still high in some countries,” said Robert Eason, an analyst at Goodbody Stockbrokers in Dublin, before the statement was released. “Interest rates can be as low as you like; if employment is low people won’t be buying houses or renovating homes.”

Last month, the insulation, roofing and ceiling supplier acquired Sodimat SAS, a French distributor of flat roofing products, for 4.4 million euros ($5.8 million). It also bought Dutch ventilation company Inatherm BV for 5.4 million euros plus additional payments of as much as 2 million euros.

To contact the reporter on this story: Benjamin Katz in London at bkatz38@bloomberg.net

To contact the editors responsible for this story: David Risser at drisser@bloomberg.net Robert Valpuesta

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