Profits jump at SIG, outlook uncertain

8th Jul 2011 07:45

Insulation, roofing and commercial interior products supplier SIG said that trading has continued to be in line with expectations since its last update on 11 May, and first-half profits are likely to be around 84% higher than the same period last year.However, the group warned that growth will moderate in the second half, "due to a combination of stronger comparators and macroeconomic factors."Underlying pre-tax profit for the six months ended 30 June is expected to be £34m, up from £18.5m in the first half of 2010, reflecting the "operational gearing benefit of strong sales growth at stable gross margins, delivered through a leaner cost base as a result of management initiatives in recent years," the firm said.Meanwhile, revenues grew by 9% from £1.28bn to £1.40bn, driven by a 15% increase in sales in Mainland Europe, which accounts for around 54% of group revenues. While good progress was made in France, Germany, Poland and Central Europe, trading conditions in Benelux have remained challenging. Nevertheless, sales in the region have improved "modestly" during the first half, following a decline in the second half of 2010.While "unhelpful", SIG said that the Eurozone crisis is not expected to have any immediate impact on trading.Total sales in UK and Ireland, which accounts for the remainder of group sales, grew by almost 3%."Growth in residential construction maintained the mildly positive trend experienced during 2010, although some weakness in the private repair, maintenance and improvement sector (RMI) and public sector housing was experienced towards the end of the period."Furthermore, the group said that a weaker economic backdrop in the UK is likely to affect consumer spending on home improvement projects. Public sector new building programmes (which account for 6% of group revenues) could be hit by government cuts.Shares rose 0.69% higher to 146.2p on Friday morning.BC