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SIG hit by weaker UK construction market

Construction materials giant SIG was hit by a slowdown in the construction market in the first half of 2019, the company revealed in its half-year results this morning.

Revenue from its UK and Ireland operation stood at £514.6m in the six months to the end of June, almost £80m down on the £593.8m it reported for the same period last year.

The decline was due in part to “challenging trading conditions”, chief executive Meinie Oldersma said.

Underlying operating profit in the region rose, however, from £14.2m to £14.9m as a result of cost-cutting in its distribution business.

Mr Oldersma said: “There has been a marked deterioration in the level of construction activity in the UK as the year has progressed and a number of key indicators are pointing to further weakening of the macro-economic backdrop, notably in the UK and in Germany.”

He added that increasing political and economic uncertainty meant worse trading conditions would continue.

PMI numbers for August released earlier this week showed new orders in the sector had plunged to the lowest level for a decade.

The downbeat outlook for the rest of the year saw analysts at Peel Hunt cut their full year pre-tax profit expectation for SIG by £4m to £80m.

Revenue for the overall group fell from £1.33bn to £1.26bn.

Pre-tax profit technically fell from £19.6m to £5.2m. However, this was due to the introduction of new accountancy rules under IFRS 16, which changed how leases are reported in accounts.

On a like-for-like basis, the company said its underlying pre-tax profit was up from £27.3m to £30m.

SIG’s share price was down 5.1 per cent by last morning.

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