Sig Share Discussion Threads

[lucky_lady] 03/2/2009 09:10

I think this share has been way oversold.

[volsung] 02/2/2009 11:53

Maybe someone should change this thread's title?

[s34icknote] 15/1/2009 18:39

I,m out old at 166p!. Theres better interests elsewhere for my money.
May look to buy back in later at lower price.Plenty of other more attracted buys out there.

[quisquose] 14/1/2009 11:52

From today's Times:



SIG

It can be uncomfortable when a sharp currency move coincides with the end of a financial year. Ask SIG, the Sheffield-based distributor of insulation materials, which has about 45 per cent of its sales and a matching proportion of its debt in euros. Falling construction spending has prompted the company to cut working capital and enhance cash-generation, such that net debt has fallen by more than £40 million since the summer in constant currency terms.

Yet those measures have been more than offset by the year-end slide in sterling against the euro, which has sent SIG's reported net debt up to an unwieldy £710 million, about £100 million more than forecast and nearly three times yesterday's stock market value. With the City worried that currency moves could force SIG to breach its banking covenants, the shares tumbled by nearly 17 per cent, the worst fall in the FTSE 250. Although the euro has since given back some of its gains, those fears are not without foundation. SIG is charged with keeping its ratio of net debt to operating profits at less than 3½ times and it would not take too much of a deterioration in trading or a rebound in the euro to test that threshold.

Yesterday's update showed that like-for-like sales in the UK and Ireland continue to fall (down 4 per cent), albeit that public sector work is mitigating some of the decline in nonresidential private sector activity. In continental Europe, like-for-like sales rose 4 per cent and were ahead in all territories. SIG's advantage is that its three big overseas markets – France, Germany and Poland – did not suffer the same property price inflation as its home turf and have less far to fall.

At 182½p, or three times the best guess of next year's earnings, the shares are susceptible to short-term volatility. But, with SIG's dividend under threat and construction activity still on the wane, they are best avoided for now.

[quisquose] 14/1/2009 11:22

I used to know Bill Forrester, the CE of SIG up until 2001. He always used to say that his ambition was to grow this business to £1bn of sales. I used to think that growth for growth sake was a mistake, but he used to complain that his FD would veto most of his acquisitions, which ensured that growth was quite slow.
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Just looking back at the history I see that he did just achieve his ambition when he left with sales just over £1bn in 2001. The debt was a manageable £109m (interest cover 11 times) and the share price was £2.80.
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I never met David Williams, but it seems that his ambition must have been to grow the company's debt to £1bn!!
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If the strategy was to simply ramp the share price up as high a possible in the short term at the cost of increased risk in the long term then it certainly worked, but the brokers and analysts must be partly responsible for this.
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So where do we stand today? Okay sales of £3bn, but a company that has become so diversified that it has lost its identity. The debt of £710m, and falling interest cover, is frightening. The share price is £1 lower than when Bill Forrester left.
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I have to ask where was the financial prudence when all this money was being spent?

[s34icknote] 13/1/2009 20:24

downturn only just starting in commercial. I dumped at 204p on Friday. Just holding 2000 for long term. TRavis performing far better IMO.
There turnover will start to fall sharply now.

[tanners] 13/1/2009 10:20

Nothing too hideous; but with some reading between the lines I still think this is well overvalued.

The debt is over £700M, giving an enterprise value for the business of around £1bn, which imo is expensive in todays markets as it implies a P/E in excess of 10.

Interesting to note that in November's trading update they were happy to state the level of cash conversion as being 100%, but in today's statement they don't mention the actual rate but merely state it in excess of internal targets.........my take would be that it has fallen otherwise surely they would be quick to publish it.

They've obviously decided to try and cling onto the dividend, which could be disastrous imo, how they can meet interest payments, debt repayment and maintain the divi from their post tax profits which I'm guessing will be around £60M is anyone's guess.

I spoke to Warmfront again yesterday and the fella there confirmed that all Government funding had been withdrawn in the last week for free cavity wall insulation for the over 70s, whether the individual is on benfit or not.

If Sig PLC are a Warmfront contractor, then this could have quite an impact, imo.

[thamestrader] 13/1/2009 08:29

Nothing too hideous in the trading update. Thought it might rise more on the back of that, but as you said tanners, it's had a good run lately so it's probably already in the price.

[tanners] 12/1/2009 10:20

It is also interesting that Warm Front, who are a Governemnet funded organisation providing heating grants and insulation for the elderly have in the last week stopped providing free insulation for those not on state benefits.

Now I don't know whether SIG work for Warmfront, but given Sig's market size I would have thought there's a more than reasonable chance, and it just goes to show that whilst Brown and his cohorts are trumpeting how they are going spend their way out of recession, they are engineering other cuts by the backdoor.

I'm surpised by just how much SIG has risen in the last month, and tomorrow will tell whether or not it was just a sucker's rally.

I'm still short!

[jimmycarter] 08/1/2009 18:20

Much is about future outlook so if globally we do not go into a really deep recession lasting for some time then I expect this to climb steadily. Anyones guess though.

Alot taken from last management statement. Much will depend on how next trading statement compares and whether there is any vision of this mess we are in dessipitating?

[s34icknote] 08/1/2009 14:09

I feel Div is going going gone.
Commercial side has only half its lorrys out and they are finished by 11PM !
A tough year i feel.
Question is will this dive on the profit warning ?

[tanners] 18/12/2008 13:48

There will be a post close announcement. Have SHI issued one in previous years?

romi2nikki1 - don't understand this bit........are you referring to today or the date of trading update posted on 16.12.08?

Sig PLC have historically (for the last 3 years anyway), issued a trading update aorund the 10th January.

As for the forecast EPS - well I'll be taking any such predictions with a healthy dose of salt!

[tanners] 28/11/2008 19:29

LOL....early days yet s34icknote, next year will be interesting!

I closed my first short a bit early at 1.50, and given the suddeness of the drop it's no surprise to see a bounce; just a case of when to open the next one!

[s34icknote] 28/11/2008 18:44

questor looks wrong footed here!

[bobsha] 24/11/2008 16:20

Might be a good time to buy a few of these, with darling increasing govt spend on insulation and some tax breaks for sme,s like this one.

[richaims] 22/11/2008 00:33

Telegraph 19/11/08

SIG is not insulated from collapse of the housing sector

SIG 158p -23p

Questor says Sell

[tanners] 21/11/2008 11:17

KingL......I read the whole of this thread a few days ago, and indeed hat off, you've called this astutely, right from the dizzy heights when everyone was bullish, I'm a bit of a johnny come lately on the scene!

Dilraj.....indeed cash can be manipulated but only for so long, and it's fairly easy to spot; that's why I always like what I call free cashflow, where profits are translated into cash, without manipulating working capital.

rosco3009 - sorry to hear that you've taken a hit here......but I reckon even if they spike a bit there's further to fall.

[daihardtoo] 20/11/2008 16:49

"By the way, I'm guessing the reason why they can claim 100% cashflow whilst the debt remains the same is that those debts are in Euros, so the sterling value of those debts is increasing."


If the Sterling debt has remained the same whist sterling has depreciated against the euro, then that means that they have paid down some of their euro debt - to me that's a good thing.

I don't hold any of these at the moment, so will sit on the sidelines until the selling stops - can't wait to buy at 50p!

[rosco3009] 20/11/2008 16:47

Thanks guys for your reasoned postings above. I read what you said which helped me make a decision and I ditched most of my SHI holding (at a big loss) mainly held via CFD at £1-40. I wish I had sold the rest of my holding at £14 in July last year!

[dilraj] 20/11/2008 14:42

Tanners - I agree with your postings and this company has expanded at an alarming rate.They have been masters at spinning news but the recession will reveal all.Now that the acquisitions have stopped we will be able to get an understanding of the underlying business performance and just what the cash generation will be.Don't forget that companies can manipulate the cash situation,all you have do is not pay your supplier's at the year end for a few days and roll the payments into the following year - easy if you know !

Kingl where is the architect of this mess? got out at the right time I would say.

Next phase to come will be the selling of companies to generate cash and a further downgrade of profit forecasts.Watch this space

[kingl] 20/11/2008 14:22

Tanners, finally somebody that understands this company.

I have been negative about this company's strategy ever since it changed from being a supplier of insulation materials to becoming an acquisition conglomerate prepared to buy anything with borrowed money as long as the PER is greater than the interest rate.

Sure, this will always look good when the economy is booming, but ultimately this strategy has been shown to fail not just some or most of the time, but every single time.

There is no hindsight required to understand this, which is precisely why I have been saying it for some time. What makes me angry is that there are non-exec directors on the board of this and similar companies that are supposed to be wiser than I am, and are paid very good money, and yet they fail to understand this and allow the exec directors to play this risky game time after time.

You are right to compare SIG with Erinaceous Group, as I have compared them to Rentokil in my earlier posts. At least Rentokil survived, and I hope SIG do, but if they do the share prices will be languishing at or below the price before the spending spree started, only with a much weaker balance sheet and much less resilience to market conditions.

It's no coincidence that companies that last more than a generation or two always have the same prudent attitude to debt and growth. SIG has survived many recessions in its time, but has probably never looked more vulnerable.

And where is the chief architect of this mess now?

(By the way, I'm guessing the reason why they can claim 100% cashflow whilst the debt remains the same is that those debts are in Euros, so the sterling value of those debts is increasing.)

[richaims] 20/11/2008 12:42

Telegraph 19/11/08

SIG cuts 900 staff and warns on profits

Insulation and roofing materials group SIG is axing 900 jobs, the majority of them in the UK and Ireland, as it becomes the latest victim of the slowdown in the construction sector.