Brexit Hitting U.K. Construction as Building Merchant SIG Slumpsby
SIG’s 2016 profit view below analyst estimates, CEO steps down
Peers Travis Perkins, Wolseley also decline in London trading
U.K. building material suppliers dropped on Friday after SIG Plc warned of a continuing decline in business activity stemming from the country’s vote to leave the European Union. Shares in the Sheffield-based company plunged as much as 24 percent in London trading.
"Following a slowing of activity around the time of the EU referendum, trading conditions in the U.K. have continued to soften," the company said in a statement. Divisions from commercial sector to home remodeling have been impacted.
The group now sees full-year underlying profit before tax to be in the range of 75 million to 80 million pounds ($95 million to $101 million), while analysts had expected the company to make 88.8 million pounds, according to data compiled by Bloomberg. Last year, underlying pretax profit totaled 87.4 million pounds.
SIG’s Chief Executive Stuart Mitchell, who took up the role in March 2013, has agreed to step down and will be replaced on an interim basis by former Amey Plc CEO Mel Ewell, the company announced separately. Ewell is currently a non-executive director on the company’s board.
Jefferies analysts Sam Cullen and Anthony Codling said in a note they no longer recommend buying SIG shares, cutting their price target to 90 pence from 140 pence. Panmure Gordon analyst Adrian Kearsey warned that the "increasingly sporadic" U.K. construction market has created a difficult environment for all listed building merchants.
SIG shares fell 20 percent to 93 pence at 10:12 a.m. in London trading. Industry peers Travis Perkins Plc and Wolseley Plc were also impacted, declining as much as 2.8 percent and 1.1 percent respectively.