London-based building products company SIG is considering a significant cash call as it grapples with the aftermath of a severe profit warning. According to sources, the company is contemplating raising up to £150m in fresh funding in the following weeks.
However, SIG has declined to comment on this matter, stating that it does not engage in market speculation. The company also emphasized that no decisions regarding its financial position have been made at this time.
Under the leadership of Chief Executive Gavin Slark, SIG previously raised capital during the pandemic, under the direction of former CEO Steve Francis. Francis, who previously headed the parent company of Patisserie Valerie, helped the company secure funding during the height of the COVID-19 crisis.
SIG stands out in the London market due to its significant minority stake owned by Clayton Dubilier & Rice (CD&R), one of the world’s largest buyout firms. In 2020, CD&R, which also owns supermarket chain Morrisons, acquired a 25% stake in SIG for £85m as part of a larger equity-raise of £150m. The private equity group later increased its stake to 27% and appointed two directors to SIG’s board under a relationship agreement.
This private investment in public equity (PIPE) deal was expected to pave the way for similar recapitalizations of publicly-traded companies impacted by the pandemic. However, it has not been widely utilized.
It remains unclear whether CD&R is in favor of a potential rights issue or other form of equity-raise to strengthen SIG’s financial position. The buyout firm, which also owns businesses in the outsourcing and marketing services sectors, declined to comment. Notably, the London office of CD&R includes former Tesco executives Sir Terry Leahy and Sir Dave Lewis.
Sources suggest that SIG is considering various options, including a share sale, to address its current financial challenges. The company, which distributes insulation and other building products, is also facing a bond maturity in 2026, adding to its financial priorities.
In a recent trading update, SIG reported that its full-year underlying operating profit is expected to be between £20m and £30m, falling below market expectations. The company noted that while market conditions remain challenging, it is confident in its strategic and commercial initiatives to drive medium-term margin and profit growth, aided by operating leverage when market volumes recover.
SIG has observed a decline in demand, particularly in the French and German markets and its UK Interiors business. The company is expected to release its first-half results on 6 August, but may face pressure to clarify its plans as early as Monday morning. Over the past year, SIG’s shares have dropped by more than 10%.
