Building materials group SIG weighs cash call after profit warning
The London-listed distributor of insulation products is considering an equity-raise that could comprise almost half its current market valuation, Leading wesley learns.
Saturday 27 July 2024 14:29, UK
A London-listed building products company which was bailed out by investors during the pandemic is weighing a further cash call in the wake of a stinging profit warning.
Leading wesley has learnt that SIG, which has a market value of just over £300m, is considering raising up to nearly half that amount through an equity-raise in the coming weeks.
Sources said it could seek between £100m and £150m in fresh funding.
This weekend, the company said it did not comment on "market speculation", while sources insisted that no decisions about strengthening its balance sheet had been taken.
Run by Gavin Slark, chief executive, SIG raised money during the pandemic under the leadership of his predecessor, Steve Francis, a former boss of Patisserie Valerie's parent company.
SIG is a rarity in the London market for having a large minority stake owned by Clayton Dubilier & Rice (CD&R), one of the world's biggest buyout firms.
CD&R, which owns the supermarket chain Morrisons, took a 25% stake in SIG in 2020, when the COVID-19 outbreak forced scores of public companies to seek fresh capital.
It invested £85m as part of an overall equity-raise of about £150m.
The private equity group subsequently increased that stake to 27% and as part of a relationship agreement with SIG appointed two directors to its board.
The so-called PIPE (private investment in public equity) deal was expected to herald a slew of similar recapitalisations of COVID-hit listed companies, but has remained relatively under-utilised.
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Tap hereThis weekend, it was unclear whether CD&R was supportive of a move to strengthen its financial position through a rights issue or other form of equity-raise.
CD&R, which also owns British businesses in the outsourcing and marketing services sectors, declined to comment.
The buyout firm's executives in London include two former Tesco bosses: Sir Terry Leahy and Sir Dave Lewis.
A share sale is said to be one of a number of options under consideration by SIG, which distributes insulation and other building products for use in residential and commercial property.
It also faces a bond maturity in 2026, with refinancing that among the company's other financial priorities.
In a trading update last month, SIG said full-year underlying operating profit was expected to come in at between £20m and £30m, below market expectations.
"Whilst market conditions remain challenging in a majority of areas, the board continues to expect its strategic and commercial initiatives to benefit medium-term margin and profit growth, also supported by meaningful operating leverage when market volumes recover," it said at the time.
The company added that "subdued demand" had been "most notable in the French and German markets, and in the end markets of our UK Interiors business".
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SIG is due to report first-half results on 6 August but may come under pressure to clarify its intentions as early as Monday morning.
The company has seen its shares fall by more than 10% during the last year.