SIG sells roofing division for £9m following review

The Sheffield-based firm sold the business to The Gores Group, a US private equity firm.

Following the strategic review, SIG concluded that the business was unlikely to achieve its medium-term return on capital employed targets, having consistently underperformed the group’s weighted average cost of capital.

Last year the German roofing business made sales of £137m and a net result around break-even.

SIG expects to incur an associated non-cash exceptional charge in 2013 of £43m relating to the divestment.

Analysts described the deal as a sensible move given the business lacks scale relative to its other divisions and its returns have been lower than expected.

Analyst Mike Allen, at Panmure Gordon, said the deal should free up management time to focus on divisions that are generating superior returns and ultimately help improve the quality of earnings going forward.

“We are not changing our headline forecasts on the back of this transaction as it was operating on a break-even basis, although there will be a non-cash exceptional charge of around £43m in 2013 as flagged,” said Mr Allen.

“We re-iterate our positive stance on the shares following a period of share price weakness ahead of its results on March 13.”

Last month, SIG said revenues rose four per cent to £2.7m in 2013 after benefiting from favourable exchange rates.

As a result, the group said annual pre-tax profits will be no less than market consensus of £85.8m.

The group said trading improved as the year progressed, with like-for-like sales up 2.5 per cent in the second half compared with a 3.5 per cent decline in the first half, which was hit by bad weather.

SIG said last year’s long, cold winter knocked £5m off its half-year profits.

A very long winter in Europe led to exceptionally cold weather and frosts up to Easter in early April in the UK and Ireland.

The group said that trading improved as the weather returned to seasonal norms.

Chief executive Stuart Mitchell said the company saw early signs of recovery in July in the UK.

For the full year, like-for-like sales fell by 0.5 per cent, with Mainland Europe down 1.5 per cent and the UK and Ireland up by one per cent.

Excluding SIG Energy Management, like-for-like sales in the UK increased by four per cent.

SIG’s net debt was expected to be £120m at the end of 2013, which includes £17m of expenditure on acquisitions during the year.

There are signs that market conditions are starting to improve in the UK, although construction activity in mainland Europe remains weak.