- Shares fall on news of disposal and write-off
- Sale could generate £1 million future payment
- Core business traded well in second half
Building products group Alumasc (ALU:AIM) has torn off the plaster and disposed of its struggling solar shading division Levolux for a nominal amount as it seeks to streamline the business.
News that the divestment would incur a non-cash impairment charge of £14.9 million before tax against the results for the year to the end of June didn’t go down well with investors, who marked the shares lower by 3.7% to 131p.
END OF THE ROAD
Having acquired Levolux in 2007 for £13.5 million, Alumasc is selling the division to a private investor for £1 plus £1 million repayable from any sale proceeds the new owner may make above that amount.
In other words, if the private firm sells Levolux on at some point for say £2 million then Alumasc is guaranteed to get £1 million.
The firm explained it was offloading the business as ‘demand for new build architectural solutions has taken longer to recover from the Covid-19 slowdown in Levolux's core UK and US markets’, pushing it into losses of £2 million for the year to June.
The £14.9 million impairment is made up of £11.1 million of goodwill on the initial acquisition and £3.8 million of tangible assets, while Levolux also holds £1.4 million in cash which will go to the new owner.
‘This disposal completes Alumasc's transition to a supply-only business focused on premium sustainable building products, systems and solutions, and will allow our management team to focus on the organic and inorganic growth opportunities within our core business’ said chief executive Paul Hooper.
POSITIVE TRADING
On a brighter note, the firm said trading in its core businesses was strong in the second half of the year and it expected to post results in line with its expectations.
David Buxton, head of research at FinnCap, observed that ‘while the disposal proceeds are low, the sale helps cleanse the business, improves the group’s quality of earnings and its focus on more profitable businesses and opportunities’.
He added: ‘While the shares are unlikely to immediately take this as a positive, we see significant medium-term upside to the valuation, with an attractive dividend yield of 7.3% and P/E of 5.8x offering attractions.’
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