Travis Perkins is not the only building products business to unnerve investors.
Insulation specialist SIG has slumped nearly 22% - down 38.6p to 139.9p - after it cut its full year profit forecasts after market conditions deteriorated in the second half of its financial year. It pointed to poor trading in France in particular, notably in September although October has also proved difficult.
It also suffered - as did Travis Perkins - from lower than expected demand in the UK repair, maintenance and improvement market.
In all it now expected full year profits to be between £85m and £90m, compared to consensus estimates of around £100m.
It has been cutting costs, especially in its supply chain, and has accelerated this programme in the light of the poor market conditions. It expects at least £20m of savings from this.
Analysts at Jefferies said:
SIG have today reduced guidance for 2015 pretax profit, setting a range of £85-90m. This represents an 18% downgrade to our current forecast at the low end of guidance and a 13% downgrade at the high end. On the plus side, an additional £20m of savings have been announced as part of the group’s supply chain review. Our 2016 numbers remained unchanged currently, though we will review this following the group’s Capital Markets Day on16 November.
Clearly today’s news will impact the share negatively. Despite this, we continue to believe that there is much good work going on at SIG and further potential to improve the underlying operational efficiency of the business. We note that management have over delivered on the cost savings outlined as part of the group’s strategic initiatives and we would not be surprised to see further outperformance as part of the supply chain review. However, we also recognize that there is only so much management can do to offset deteriorating markets.
