By Aashika Jain
(Reuters) - Building materials supplier SIG Plc (L:SHI) reported a 23.5 percent rise in half-year underlying pretax profit, helped by a robust improvement in the UK residential construction market and a mild winter.
Shares in the Sheffield-based company rose more than 5 percent to 181.1 pence in early trade on Tuesday.
The company, which generates more than half of its revenue from mainland Europe, said conditions in mainland Europe remained variable with the French construction market expected to weaken further in the second half.
"We would be expecting the French construction market to be down 5 percent in the second half compared with last year," Chief Executive Stuart Mitchell told Reuters.
In mainland Europe, SIG's biggest market is France, followed by Germany, Benelux, Poland and Ireland.
Mitchell was, however, bullish on the company's performance in the UK, which accounted for 47 percent of SIG's total sales, and said he was expecting the benefits of the pick up in commercial markets in 2015.
The company supplies insulation, exterior roofing and interior products to the residential and commercial markets.
SIG is usually impacted by a decline in construction activity at the end of the cycle due to the nature of its products.
"Although markets remain variable, SIG should continue to outperform, in our view, and with further self-help benefits to come, profit momentum is positive," Panmure Gordon analysts said in a note and reiterated their "buy" rating on the stock.
Underlying gross margin in the first half rose 40 bps to 26.8 percent, helped by a cost-saving programme launched late last year.
"For the full year, we expect a benefit of 7 million pounds, ahead of our internal target of 1-5 million pounds of savings," Mitchell said.
The company is looking at expansion via acquisitions to the tune of 30-50 million pounds for the full year, Mitchell said.
SIG completed three acquisitions in the first half, and another three in July alone, bringing the total spend on acquisitions to 14.6 million pounds.
Underlying pretax profit from continuing operations rose to 41.5 million pounds for the six months ended June 30, from 33.6 million pounds a year earlier.
Revenue rose 6.5 percent to 1.3 billion pounds.
SIG said it would pay an interim dividend of 1.42 pence per share, up from 1.15 pence last year.
Shares in the company were up 2.3 percent at 175.805 pence at 0913 London time.
(Reporting by Aashika Jain in Bangalore; Editing by Gopakumar Warrier)