SHEFFIELD: Insulation and roofing group SIG said its first-half pre-tax profit slipped 16% and despite sales picking up in the second quarter warned of the adverse effect of government austerity measures.

Les Tench, chairman said today: "SIG's management remains cautious on how its markets will develop over the next few months...based on the continuing macroeconomic uncertainty and concerns about the potential impact of government austerity measures and credit availability."

The company reported an underlying pre-tax profit of £18.5m for the six months to end-June, compared with £21.9m in the same period last year.

Sales across the group recovered in May and June after cold weather affected the start of the year, but a competitive pricing environment and decline in activity in non-residential construction squeezed margins. Shares in SIG closed at 90.7 pence on Tuesday, valuing the company at £556.7m.

SIG's warning follows that by CRH yesterday that its profits would fall 10% this year because of the weak US economy which hit the whole sector and saw its shares drop yesterday 6% to €11.71.

Wolseley, which has around 40% of its business in the US, fell 67p to £12.39. The company also announced the sale of its tool hire division Brandon Hire to Rutland Partners for £43m. Oriel Securities analyst Paul Checketts said Brandon Hire had become superfluous to chief executive Ian Meakins. It is rumoured other sections of Wolseley's UK business are up for sale, including Build Center and Encon.

"We don't believe Wolseley is rushing to exit these quite so soon. There remains plenty Wolseley can do on its own to improve its fortunes but we have concerns on the outlook for some of its largest end markets," Mr Checketts said.