SIG confident after reporting first half of growth

The London-listed firm said its gross margin expanded by 30 basis points year-on-year for the six months ended 30 June to 26.2%, while its underlying operating profit jumped to £42.5m from £13.9m.

Its underlying operating margin was 180 basis points higher at 3.1%, while underlying profit before tax improved to £28.9m from £3.3m.

Underlying earnings per share came in at 1.6p, swinging from a loss of 0.3p per share in the first half of 2021.

Net debt expanded to £431.8m by the end of the period, from £289.4m a year ago, while on a pre-IFRS 16 basis, net debt widened to £164.4m from £57.5m.

Looking ahead, SIG said market conditions, demand patterns and inflation dynamics had been variable across its geographic and end market segments through the second quarter, with that backdrop expected to persist in the second half.

A return to positive free cash flow was expected in the second half, however, as seasonal working capital unwound, with the full year also expected to be positive, although the firm said it would “remain committed” to maintaining product availability and superior service.

The board said it remained confident in delivering its expectations for the full year.

“SIG is a structurally different business to two years ago - more specialist, more local, more productive, more flexible,” said chief executive officer Steve Francis.

“Over this time, we have delivered above market performance and enabled a rapid return to robust profitability, along with a rhythm of steady progress.

“The first half of 2022 in particular saw significantly stronger growth than originally planned, which resulted in margin improvement across our operations.”

Francis said SIG was now “resilient, flexible and sustainable”, noting that 80% of its products served the insulation and building energy efficiency markets.

“We are by far the largest independent supplier in Europe of these products, which are needed now more than ever.

“Our strong market position, growth strategy and decentralised model will continue to enable us to navigate the pricing environment well and drive market share gains.

“In addition, our scale, diversification and resilience in uncertain markets mean that we are confident both in delivering the board's expectations for the year and in our growth path to 5% operating margin in the medium term.”

At 1120 BST, shares in SIG were up 1.88% at 35.15p.

Reporting by Josh White at Sharecast.com.