Building materials group SIG weighs cash call after profit warning | Business News

A London-listed building products company that was rescued by investors during the pandemic is mulling another cash call following a sharp profit warning.

Sky News understands that SIG, which has a market value of just over £300m, is considering raising up to almost half that amount through a capital raise in the coming weeks.

Sources said it could seek between £100m and £150m in new funding.

This weekend, the company said it did not comment on “market speculation”, while sources insisted that no decisions had been made on strengthening its balance sheet.

Run by chief executive Gavin Slark, SIG raised money during the pandemic under the leadership of his predecessor, Steve Francis, the former boss of Patisserie Valerie’s parent company.

SIG is a rarity in the London market in that it has a large minority stake held by Clayton Dubilier & Rice (CD&R), one of the largest buyout firms in the world.

CD&R, owner of the Morrisons supermarket chain, acquired a 25% stake in SIG in 2020 as the COVID-19 outbreak forced numerous public companies to seek new capital.

It invested £85m as part of a global capital raise of around £150m.

The private equity group later increased this 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 series of similar recapitalizations of COVID-hit listed companies, but it remained relatively underutilized.

This weekend, it was unclear whether CD&R supported a move to strengthen its financial position through a rights issue or other form of capital increase.

CD&R, which also owns British companies in the outsourcing and marketing services sectors, declined to comment.

The buyout firm’s London executives include two former Tesco bosses: Sir Terry Leahy and Sir Dave Lewis.

The share sale is considered one of several options being considered by SIG, which distributes insulation and other construction products for use in residential and commercial properties.

It also faces a bond maturity in 2026, with refinancing among the company’s other financial priorities.

In a trading update last month, SIG said underlying operating profit for the full year was expected to be between £20 million and £30 million, below market expectations.

“While market conditions remain challenging in most areas, the board continues to expect its strategic and commercial initiatives to benefit margin and profit growth over the medium term, also supported by significant operating leverage when market volumes recover “, he stated at the time.

The company added that “moderate demand” was “most notable in the French and German markets, and in the end markets of our UK Interiors business”.

SIG is due to release first-half results on August 6, but could come under pressure to clarify its intentions as early as Monday morning.

The company has seen its shares fall more than 10% in the last year.