MARKET REPORT: Profit scare deals blow to building supplier SIG

The second profit warning in three months walloped shares in building materials supplier SIG and wiped around £150million off the company’s value.

The Sheffield-based roofing and insulation seller has been hit hard by a drop-off in new construction projects in Europe, particularly in the UK and Germany.

It now expects profit for 2019 to come in at £42million – far short of the £68million analysts had forecast and some 40 per cent lower than what it raked in the year before.

Peel Hunt analysts said trading had been ‘much worse’ than expected in December, when sales were a quarter lower than the month before.

Shares slump: Building materials supplier SIG has been hit hard by a drop-off in new construction projects in Europe, particularly in the UK and Germany

Wet weather added an extra dash of misery on top of the industry slowdown. UK sales fell by about 16 per cent over the course of the year, dragging group sales down by 6 per cent.

Many in the industry hope Boris Johnson’s election win and the greater certainty around Brexit that it brings will breathe new life into the construction sector. FTSE 250-listed SIG took steps to simplify the business in 2019, selling its air purifying arm and another up for sale.

It hopes these moves will pay off in 2020.

Stock Watch – Providence Resources

Irish oil and gas group Providence Resources has hired industry veteran Alan Linn as its chief executive.

Linn, 62, has joined from UK shale group Third Energy and has previously had senior roles at Cairn Energy, Tullow Oil and Afren. 

AIM-listed Providence is developing the first commercial oil project off the coast of Ireland, but still needs to do more test drilling to secure new cash.

Investors welcomed the move, with shares rising 4.8 per cent, or 0.15p, to 3.25p.

But pessimistic investors sent the shares 20.9 per cent lower, down 24.95p, to 94.25p and trimmed its market value from more than £705million to about £557million.

SIG’s misfortune was contagious, sparking fears among traders that its peers including B&Q-owner Kingfisher (down 2.9 per cent, or 6.5p, to 217.5p), Travis Perkins (also 2.9 per cent lower, or 47p, to 1584p) and Grafton Group (down 4 per cent, or 35p, to 845p) might be similarly under the cosh. 

Bucking the construction gloom, however, builder Galliford Try rose 5.2 per cent, or 7.42p, to 151.5p after it said it has more than £3billion in contracts lined up after it offloaded its housing division to Vistry Group in late 2019.

SIG’s tumble tipped the mid-cap FTSE 250 index into the red, sending it down 0.04 per cent, or 8.85 points, to 21643.07.

The blue-chip FTSE 100 index, however, rose 0.3 per cent, or 23.19 points, to 7598.12.

Across the pond, Wall Street indexes the S&P 500, Dow Jones and Nasdaq all reached record highs as tensions eased in the Middle East.

In his latest display of Twitter bombast, President Trump said in block capitals: ‘Stock market at all-time high!’

Back in London, gold miner Centamin rose after it announced one of the best ever quarters for production at its Sukari gold mine in Egypt.

It dug up 148,000 ounces of gold between October and December, up 51 per cent on the previous quarter and 8 per cent on the same period of last year. 

Shares in Centamin, which is currently the target of a takeover approach from Canada’s Endeavour mining, added 3.4 per cent, or 4.1p, to 125.65p.

Footsie-listed Bunzl, which supplies companies with consumables such as carrier bags and napkins, edged up 0.6 per cent, or 12p, to 2042p, after it bought US packaging group Joshen Paper & Packaging for an undisclosed sum.

Dunelm lost 3.2 per cent, or 36p, to 1107p, as the High Street downturn dragged on its shares despite the company reporting that like-for-like sales rose 5 per cent to £313million in the three months to December 28.

This was driven by rapid online growth, with revenues from its site rocketing 32 per cent to £48million in the Christmas quarter.

BP investors were unfussed about a £2.8million investment in a Chinese artificial intelligence group, R&B, which creates energy management systems that control and improve a building’s energy use.

Its shares sagged 0.5 per cent, or 2.25p, to finish at 492.05p.

 

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