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(Alliance News) - SIG PLC on Monday warned on annual profit amid deteriorating trading conditions and said that it has sold Air Handling and Building Solutions units for around GBP236 million in total as part of a programme of selling non-core businesses.
SIG shares were 23% lower at 92.00 pence each early in London, the worst performers in the FTSE 250 index.
The building materials company said the weakening of trading has accelerated over recent weeks and political and economic uncertainty has continued to increase. As a result, SIG said it is now anticipating significantly lower underlying profitability than previous expectations for 2019 in both the specialist distribution and roofing merchanting businesses.
In 2018, SIG reported group underlying pretax profit of GBP72.7 million and revenue of GBP2.68 billion.
Management is taking action to address the continuing market weakness, the company said, and further benefits from business transformation initiatives and normal trading seasonality are still expected to deliver a stronger second half.
SIG said the sale of Air Handling Division and Building Solutions businesses will significantly strengthen the group's balance sheet.
It sold its Air Handling unit to to France Air Management SA for an enterprise value of EUR222.7 million, around GBP198.3 million, on a cash-free, debt-free basis. Proceeds of at least GBP130 million from the sale will be used to reduce debt, and any residual proceeds will be returned to shareholders, SIG said.
The Air Handling business undertakes heating, ventilation and air conditioning related projects.
"The disposal [of the Air Handling business] is a result of continuing management actions in line with stated priorities to reduce financial leverage, to simplify the group's operations by exiting from non-core businesses and to deliver significantly improved operational and financial performance. The disposal enables SIG to become a more focused business, with leading positions and attractive medium-term growth prospects in its core markets, a strengthened balance sheet and the flexibility to pursue further value creating investment opportunities," said Chief Executive Officer Meinie Oldersma.
SIG separately has sold its roofing, cladding and insulation business, Building Solutions (National) Ltd, to Irish company Kingspan Holdings (Panels) Ltd for GBP37.5 million, also on a cash-free, debt-free basis.
The sale of Building Solutions completes the company's medium-term strategy of disposing of non-core businesses to refocus the business portfolio and strengthen its balance sheet, SIG said. Proceeds from sale of the Building Solutions business also will go towards lowering SIG's debt.
By Tapan Panchal; tapanpanchal@alliancenews.com
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