Disposal/Change of Name
CARCLO ENGINEERING GROUP PLC
30 September 1999
Disposal of Lee Steel Strip for £20.6m and
proposal to change the name.
HIGHLIGHTS
* Major change in strategic emphasis at Carclo with the
sale of Lee Steel Strip to Avesta Sheffield AB for proceeds of
£20.6 m, in cash.
* Disposal is conditional upon clearance from the
competition authorities.
* Group now focused upon Technical Plastics and Specialist
Wire.
* Proposal to be put before shareholders to change the name
of the company from 'Carclo Engineering Group PLC' to 'Carclo
plc'.
Commenting on these developments, George Kennedy, Chairman,
said:-
'The disposal of Lee Steel Strip is a positive strategic step,
not only for Carclo, but also for Lee Steel Strip itself. Lee
Steel Strip, despite its unique position in the precision
steel strip industry, was no longer a strategic fit with
Carclo, the large part of which is now focused upon technical
plastics.
The proposal to change the name of the company to 'Carclo plc'
reflects the change in emphasis of the group away from
traditional engineering activities towards higher growth
applications in the automotive, optical-medical and
teletronics markets'.
Contact:
Ian Williamson, Group Chief Executive 0114 256 2162
Simon Gorringe, Robert Fleming & Co. Limited 0171 638 5858
Richard Hews, Ludgate Communications 0171 253 2252
CARCLO ENGINEERING GROUP PLC
('CARCLO')
1. Disposal of Lee Steel Strip
The Board of Carclo announces that it has reached agreement
with Avesta Sheffield Holdings Limited, a wholly owned
subsidiary of Avesta Sheffield AB, to sell the entire issued
share capital of Lee Steel Strip Limited ('LSS'). The
agreement is conditional upon the parties receiving clearance
from the competition authorities.
(a) Proceeds
The total proceeds before costs arising from this disposal are
expected to be approximately £20.6m. This comprises
consideration for the equity of £17.9m and an amount of £2.7m
for surplus land and buildings adjacent to LSS. The
consideration will be payable in cash at completion.
(b) The business of Lee Steel Strip
LSS joined the Carclo group in 1993 as part of the merger with
Arthur Lee & Sons plc, and since then it has comprised the
predominant part of Carclo's Precision Engineering division.
Its principal activity is the manufacture of precision cold
rolled steel strip. The business is located in Sheffield,
England.
In the year to 31 March 1999 the business had sales of £27.4m
and earned profit before taxation of £979,000. The operating
profit before interest and taxation in that year was
£1,285,000 and the net assets of LSS at that date were £11.2m.
In addition the book value of the surplus land at 31 March
1999 was £2.4m.
(c) Impact of the disposal on Carclo
The proceeds from the disposal of LSS and the associated
property are in excess of the tangible net assets being sold.
However, when Carclo merged with Arthur Lee & Sons plc in 1993
goodwill arising on acquisition, amounting to £9.6m, was
allocated to LSS. This goodwill which was previously written
off will, in accordance with FRS2, be realised through the
profit and loss account in the year ending 31 March 2000,
giving rise to an exceptional item in this regard of £9.6m.
This has no impact on the cash position of the group. The
exceptional profit on disposal, after costs but before
taxation, is forecast to be approximately £5.8m.
The overall impact on earnings per share before exceptional
items of this disposal is expected to be modest, although the
cyclical nature of earnings derived from this business means
that the underlying quality and sustainability of Carclo's
earnings in future years will be enhanced.
The proceeds arising from this transaction will amount to
approximately £19.6m after allowing for taxation and the
associated costs of disposal and will be used to reduce group
indebtedness. On a pro-forma basis therefore the group's net
debt at 31 March 1999, after allowing for the acquisition of
CTP Carrera, Inc., in April 1999 and adjusting for this
disposal, would have been £24.9m. The group's cash and unused
bank facilities following this transaction will be
approximately £70.0m.
2. Proposed change of name
Carclo is now principally focused upon Technical Plastics and
Specialist Wire. Technical plastics operations serving the
growing automotive, optical-medical and teletronics market now
comprise 70 per cent. of group turnover. To reinforce and
support the brand identity of these operations, the Board is
recommending that the group name be shortened to 'Carclo plc'.
A circular convening an Extraordinary General Meeting of
Carclo will be despatched to shareholders in the next few
days, setting out the details of and reasons for this proposal
and including a special resolution to be put before the
shareholders at the meeting.
Contact:
Ian Williamson, Group Chief Executive 0114 256 2162
Simon Gorringe, Robert Fleming & Co. Limited 0171 638 5858
Richard Hews, Ludgate Communications 0171 253 2252