The Investment Column: SIG
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Your support makes all the difference.SHOULD INVESTORS be afraid of Germany? Only yesterday, Delta a British engineering company, cited a weakness in te German plumbing market as the reason for axing 400 jobs. Last week, RMC the concrete group, warned about the German recession's impact on its business and last month, BPB, the plasterboard maker, warned of weakness in the region.
But SIG, the insulation company which sources 30 per cent of sales in Germany, says things are fine. Its shares jumped 10 per cent yesterday on the back of a positive trading statement. Will any schadenfreude on the part of SIG chief executive Bill Forrester be premature? SIG expanded its German operations just before recession hit in the second half of 1997. Its shares crashed from 343.5p to a low of 91p last year as investors ran for cover. SIG responded by cutting back around 15 per cent of the German business.
The investment case for the company depends on the prospects for German recovery, from which SIG says it is well placed to benefit. Analysts expect pre-tax profits of pounds 38m and earnings of 21.9p per share this year, putting the shares, up at 208.5p on a forward p/e of 10.
The group will not be reporting more news before September, when it posts interims. But there is more likely to be good economic news from Germany than bad in the coming months. The economic shock has meanwhile made SIG more competitive. Buy.
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