Sheffield-based SIG sells two of its businesses for more than £135m as it warns on profits

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Sheffield-based SIG has agreed to sell both its building solutions wing and its air handling division in two separate deals worth more than £135m after it warned its profits will tumble.

The firm is selling its Building Solutions (National) business to Kingspan Group for a consideration of £37.5m.

In a different transaction it will sell Air Handling Division to France Air Management SA for an enterprise value of £198.3m.

The deals were announced after shares in the building supplies firm plummeted after the business warned that a deepening downturn in the UK and German construction markets would hit profits.

The business shed more than a fifth of its share value in early trading after it told investors that annual profits in its core business will be "significantly lower" than previously predicted.

SIG, which supplies specialist building materials to trade customers across Europe, said it has been impacted by a "deterioration in the level of construction activity in key markets" due to the turbulent economic backdrop, particularly in the UK and Germany.

It said trading conditions have particularly worsened over "recent weeks" as economic uncertainty has continued to ratchet higher.

Management at the company is "taking ongoing actions" to address market weakness, it said.

It added that new initiatives and seasonal trading patterns mean it still expects to deliver a stronger second half of 2019.

However, SIG said that it is now expecting annual profits in its specialist distribution and roofing businesses to be "significantly lower" than previously forecast.

Shares in the company fell 21% to 93p in early trading on Monday.

Read more: The firm has faced a tough market of late.

Building Solutions is a leading UK manufacturer and distributor of building envelope solutions operating through its well-known brands, Steadmans, United Roofing Products, Trimform Products, and Advanced Cladding & Insulation.

In the year ended 31 December 2018, the Business reported revenue of circa £60.0m, operating profit of c.£3.3m and operating cash flow of c.£5.0m, with gross assets of c.£28.8m. This disposal represents an attractive valuation of approximately 11.4 2018 operating profit.

Commenting on the disposal of the building solutions wing, Meinie Oldersma, Chief Executive Officer of SIG Plc, said: "This disposal, on attractive terms, is in line with SIG's medium-term strategy and completes the exit of peripheral, non-core businesses identified in our 2017 strategic review."

The sale of the air business is contingent on shareholder approval and is expected to complete at the start of next year.

Ms Oldersma said: "We believe that the proposed sale of our Air Handling Division represents an attractive value for SIG's shareholders. The Disposal 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."