SIG warns on profts as it sells two businesses
Building materials supplier SIG issued a profits warning on Monday, citing deteriorating markets caused by Brexit worries and a weaker German economy.
The company said it now anticipated “significantly lower” full year underlying profits in both its specialist distribution and roofing merchanting businesses.
In separate announcements, SIG said it had sold its air handling division and building solutions business for a combined £235.8m, which would “significantly strengthen” its balance sheet.
The air handling division has been sold to France Air Management for €222.7m (£198.3m), including debt, while Irish building materials supplier Kingspan bought SIG's building solutions unit for £37.5m.
"The group has been reporting during the year a deterioration in the level of construction activity in key markets and highlighting a number of key indicators pointing to further weakening of the macro-economic backdrop, notably in the UK and in Germany," SIG said.
"This deterioration in trading conditions has accelerated over recent weeks, and political and macro-economic uncertainty has continued to increase."
SIG said most of the net cash proceeds would be used to cut debt and reduce leverage with any residual net cash proceeds returned to shareholders.
Analysts at AJ Bell said SIG was the latest company to sell non-core assets as Brexit continued to dampen consumer sentiment and businesses stalled on big investment decisions.
“The key challenge is not to sell anything that could be a good earnings driver in more buoyant market conditions," they said.
“SIG has issued numerous profit warnings in the past few years as the UK construction market goes through a very difficult patch. Right-sizing its business now could be a sensible thing to do, particularly as it is managing to sell assets on decent valuation multiples.
“Builders’ merchant Grafton recently offloaded its Plumbase UK plumbing and heating products arm and Belgian operations. Property group Unite has sold nearly £200m in the past few weeks, saying the disposals support a strategy of recycling assets to improve portfolio quality and maintain financial discipline."