Monday 7 October 2019 10:38 am

Like a brick: SIG shares drop as profit warning sends ripples through construction industry

Building materials firm SIG shares tumbled 15 per cent this morning as it warned profits would be “significantly lower” than last year, amid languishing construction markets in the UK and Germany.

SIG’s warning set alarm bells ringing across the industry as it said a “deterioration in trading conditions” had worsened in recent weeks. 

Read more: Construction industry output ‘drops like a brick’ to a decade low

Shares of bigger rivals Travis Perkins, Howden Joinery Group and B&Q-Owner Kingfisher were all lower this morning.

Order books across the industry have declined in recent months, as Brexit-related uncertainty has ground industry decision-making to a halt.

Sheffield-based SIG provides specialist building products including thermal insulation, dry linings, flooring and ceiling products, across Europe.

It said management is “taking ongoing actions” to address the weak market, but still expects “significantly lower underlying profitability for the full year than its previous expectations”.

Separately, the company said it was looking to sell its air handling division to France Air for €222.7m (£199m). 

From the proceeds of that, £130m will be used to reduce the level of its total debt, which has more than doubled in the last 12 months.

It also announced it will sell its building solutions division to Kingspan for £37.5m.

Construction hit by ‘political turmoil

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

Last week, a closely-followed survey of the industry showed UK construction activity fell at the second-fastest rate since the financial crisis in September.

Read more: UK construction sector suffers ‘disastrous’ blow as downturn deepens

IHS Markit’s construction purchasing managers’ index registered a score of 43.3 in September, meaning the sector shrank more severely than in August, when the score was 45. A reading below 50 indicates contraction.

“The construction sector offered another devastating result in September with the second fastest fall in new orders since March 2009 and the financial crisis,” said Duncan Brock, group director at Cips.