August 23, 2012 / 8:31 AM / 5 years ago

CORRECTED-UPDATE 2-SIG sees muted UK construction growth in 2013

(Corrects paragraph 8 phrase from 'logistical and management changes' to 'changes in the logistics management')

* Targeting further 7 mln stg of cost savings

* H1 profit 34.7 mln stg vs 35.4 mln stg yoy

* H1 sales flat, hit by poor weather and economy

* Outlook unchanged, sees uneven demand continuing

By Brenda Goh

LONDON, Aug 23 (Reuters) - British building materials group SIG Plc announced more cost cuts to compensate for falling volumes across its European markets and said it was looking to a muted recovery in the UK's construction sector next year.

The company, which supplies insulation, roofing and specialist construction materials, posted a slight fall in first-half profit and flat sales on Thursday, which it said were hit by the weakening economy and adverse weather conditions.

The global construction sector has struggled to recover from the financial crisis, weighed down by government spending cuts and recession. Activity has particularly slowed in countries such as the UK and Ireland.

"There are some grounds for hoping that we'll see the present double dip recession in the UK easing out as we get towards the end of this year," Chief Executive Chris Davies told Reuters.

"Hopefully we'll start to see a little bit of growth in the positive direction in the UK and in some of our major countries in 2013. But it won't be spectacular," he said.

In continental Europe, which accounts for 55 percent of SIG's sales, he said business in Germany and France was resilient, while the Benelux region remained "very challenging." The UK, where its sales fell by 1 percent to 547.9 million pounds, was "somewhere in between" he said.

At 0807 GMT, shares in SIG were up 2.5 percent at 96.5 pence.

COST CUTTING

SIG said it is targeting a further 7 million pounds in annual cost cuts after having announced 5 million pounds of savings at the start of this year, which it expects to make from changes in the logistics management of its branch network.

"It is clear that the macro picture is very uncertain and as a result of that we're undertaking some self help measures to underpin our profitability for the year," Davies said.

The company said its like-for-like sales so far in the second half of 2012 had been in line with the prior year, following a slight decline in May and June, and that it had seen little impact from the London Olympics.

It was keeping its outlook unchanged from July, when it said it expected uneven demand to continue during the second half.

SIG's underlying profit before tax for the six months to end-June fell 1.9 percent to 34.7 million pounds, versus 35.4 million pounds in the same period last year. It also raised its interim dividend by 33.3 percent to 1 pence per share.

Goodbody analyst Robert Eason, who has a 'buy' rating on the stock, told Reuters that the results were in line with his expectations and that it was encouraging that the company forecasted flat second-half sales, rather than falling sales, given the poor macro environment.

"We'll be definitely buyers after this set of results," he said.

$1 = 0.6328 British pounds Reporting by Brenda Goh; editing by Rhys Jones; Editing by David Cowell

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