SIG tumbles as it says full-year profit is set to fall

22nd Oct 2015 08:48

(ShareCast News) - Shares in SIG tumbled on Thursday after the building products company said it expects to report a fall in underlying pre-tax profit for the year as a result of challenging market conditions in mainland Europe.For the nine months to end September, group like-for-like sales were up 0.2%, with the UK and Ireland ahead by 2%, but mainland Europe down 1.7% compared to the same period last year.In the third quarter, group LFL sales dropped 0.9%, with the UK and Ireland up 0.4% and mainland Europe down 2.3%.At its half-year results on 11 August, SIG said it expected to make year-on-year progress assuming the improving sales trend in mainland Europe continued. However, this trend did not continue, with market conditions deteriorating in the second half, particularly in France.SIG said this was most notable in September, although October has remained difficult. In addition, the company has been hit by a lower-than-expected level of demand in the UK repair, maintenance and improvement market."The challenging market conditions have also impacted SIG's gross margin, which is now anticipated to be broadly flat year-on-year, with procurement savings being offset by competitive pressures and adverse volume effects," the company said.As a result, it now expects full-year underlying pre-tax profit to be within the range of £85m to £90m, lower than the £98.1m reported in 2014.SIG said that in response to the market downturn, it is accelerating its cost-cutting drive, with savings of at least £20m expected to be delivered. This is in addition to efficiencies being delivered from the group's procurement initiative.At 0905 BST, SIG shares were down 22% at 140p.