SIG slumps on profit warning as UK construction weakens

London

BUILDING materials supplier SIG Plc warned on Monday about significantly lower profits due to a weakening economic outlook in Britain and Germany, driving its shares down as much as 26 per cent and rattling nerves across the construction industry.

British construction has slumped, weighed down by uncertainty over Britain's departure from the European Union, while the German economy has been slipping towards recession even as construction remains buoyant.

SIG's warning sent ripples through the FTSE 350 Construction and Materials sector, with shares of bigger rivals Travis Perkins Plc, Howden Joinery Group Plc and B&Q-Owner Kingfisher Plc all lower.

SIG said in its trading update that it had highlighted "a number of key indicators pointing to further weakening of the macroeconomic backdrop, notably in the UK and in Germany".

"This deterioration in trading conditions has accelerated over recent weeks, and political and macroeconomic uncertainty has continued to increase," the company said.

Shares of SIG were down 22 per cent at 92.95 pence as at 0718 GMT after earlier flirting with a three-year low.

The Sheffield-based company expects much lower underlying profitability in both its specialist distribution and roofing merchant businesses compared to previous expectations. It said it was taking actions to address the continuing market weakness, but did not divulge specific details.

SIG reported underlying profit before tax of £75.3 million (S$127.8 million) for the year ended Dec 31, 2018.

Shore Capital analyst Graeme Kyle said the warning reflected "political turmoil impacting construction project decisions in the UK".

The company, which had repeatedly sounded warnings of a hit from Britain's construction industry woes, also separately announced the disposal of its air-handling division and building solutions business. REUTERS