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UK's SIG to review cheque issuance controls due to accounting errors

Reuters

(Reuters) - SIG Plc (SHI.L), a distributor of specialist building products in Europe, said on Tuesday it would review the controls around cheque issuance after a historical overstatement of cash and trade payables resulted in higher closing net debt for 2017.

Shares in SIG were down 2.5 percent at 169.4 pence at 0813 GMT, after falling as much as 6.4 percent.

SIG, which supplies insulation, energy management and roofing products, said group revenue from continuing operations rose 7.5 percent to 2.8 billion pounds in 2017, with like-for-like sales growing 4 percent.

The company said the overstatement of cash amounted to about 20 million pounds as of December 2016 and about 27 million pounds at the end of June 2017.

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"(The) new management has reported errors in previous accounting processes which resulted in year-end cash being overstated ... which means that new guidance for closing net debt is higher," Liberum analyst Charlie Campbell said.

SIG expects to be about 1.9 times leveraged at the end of 2017, after adjusting for the overstatement, versus Liberum's estimate of 1.7 times.

"The only slight disappointment is that the debt position is £20m-£30m worse than expected as the group has chosen to stop the historic deferral of trade payables," said Peel Hunt analysts in a note.

The company, which has been battling to recover from weak trading in its UK insulation, interiors and offsite construction businesses, said improvement in confidence in Mainland European markets continued to mitigate a weaker second-half margin performance in Britain.

SIG's UK and Ireland like-for-like sales rose 2.1 percent, higher than the 1.1 percent rise it reported a year earlier.

The company in March hired Meinie Oldersma as CEO to help turn around the businesses across Europe. Its former boss left following a profit warning due to weak demand, tougher competition and project delays.

The company, which has been pursuing a number of actions to strengthen its balance sheet including selling assets and reviewing costs, recently conducted a comprehensive review of its strategy.

(Reporting by Noor Zainab Hussain in Bengaluru; Editing by Amrutha Gayathri and Gopakumar Warrier)