Insulation products group SIG’s (SHI) fortunes may be turning after a dismal 2016 which saw a profit warning and cost the CEO his job.

The company’s half year trading update to 30 June has been warmly received by the stock market with its shares ticking up 4.8% to 152.9p.

The company’s revenues are up 8.1% to around £1.4bn, with currency movements contributing 5.3% to this growth and acquisitions 0.5%.

SIG attributes its improved UK performance to passing on supplier price inflation to its customers.

In Europe, the company’s revenue is up by 4.2% on a like-for-like basis as it enjoys a recovery in construction markets, especially in France.


Hope springs eternal

Since the departure of former chief executive Stuart Mitchell in late 2016, a lot of hope has been put into SIG’s new management team led by CEO Meinie Oldersma.

Adrian Kearsey, analyst at Panmure Gordon, says it’s ‘too early to herald a full turnaround of the business’ but adds that ‘we’re seeing a route to recovery’.

The optimism in the new management is reflected by the share price which is up over 30% in three months. This optimism is not fanciful; management has been working on reducing net debt and strengthening the balance sheet.

SIG says in its statement that net debt will be lower at 30 June than it was at 31 December 2016 when it stood at £259.9m.

It has been busy disposing of assets, putting in tighter controls over cash, working capital and capital expenditure.

The company expects a stronger second half of 2017, which it says is usual.

Panmure’s Kearsey says that SIG’s recovery is being driven by a ‘back to basics approach which should start to push earnings before interest and tax margins and return on invested capital materially higher’.

He adds that despite SIG’s strong share run, using an enterprise value (market cap plus debt) to sales metric, it still trades at a 41% discount to its peers. Kearsey gives SIG a ‘buy’ recommendation.

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Issue Date: 05 Jul 2017