SIG selling VJ Technology to pay down debt

Supplier of specialist building products SIG has agreed to sell VJ Technology (VJT) to UK private equity investment firm Primary Capital, it announced on Tuesday, following a competitive disposal process.

The FTSE 250 firm said VJT is a UK distributor of technical fixings, fasteners and consumables to the infrastructure, commercial and wider construction industry, and was part of SIG Distribution.

It said the divestment was in line with its medium-term strategy of disposing of smaller, non-core businesses in order to refocus its portfolio and strengthen its balance sheet.

“The strategy review undertaken last year identified VJT's niche product offering and operating model as being very different to that of the main SIG businesses,” the board said in its statement.

In the year ended 31 December, VJT reported sales of £31.0m, profit before tax of £5.0m and operating cash flow of £4.1m.

The gross assets of VJT as at 31 December were £16.4m.

SIG said consideration from the sale was expected to be around £29.7m, resulting in a gain on sale of £7.4m, with the proceeds set to reduce net debt.

Completion was expected on or before 30 June, reducing leverage at the half-year.

“The group remains confident of meeting its headline financial leverage target of 1.0 - 1.5x for the current financial year and, as a result of this disposal and other ongoing actions, is increasingly confident of its ability to achieve its medium term target of headline financial leverage below 1x,” the board explained.

The profits of VJT were excluded from underlying operations for planning purposes, and therefore there would be no impact on the group's expectations for current year underlying profit.