European Metals Holdings Regulatory News (EMH)

17 Jan 2006 07:00

European Motor Hldgs PLC17 January 2006 EUROPEAN MOTOR HOLDINGS plc ("EMH") DISPOSAL At the time of the acquisition of Smith Knight Fay (Holdings) Limited ("SKF") on1 July 2005, we announced that EMH was the subject of a review by Toyota andLexus to assess the enlarged group's candidacy for those franchises and thatapproval had been given for SKF to continue to operate the franchises in theintervening period. The assessment procedures were successful and EMH wasapproved as a partner for both franchises and looks forward to having theopportunity to work with them in the future. However, following discussionswith the manufacturers, it has been agreed to dispose of the existing Toyota andLexus franchises in line with those manufacturers' market area arrangements.SKF's Mazda business shares a property with the Lexus business and EMH hastherefore decided to dispose of the Mazda business at the same time. Accordingly, on 16 January 2006 the group disposed of the business and certainassets of SKF's three Toyota businesses, one Lexus business and one Mazdabusiness to RRG Group Limited ("RRG"). The businesses disposed of operate inthe South Manchester area (Stockport, Denton and Macclesfield). RRG alreadyoperates other Toyota and Lexus franchises in the North Manchester area. Thetotal consideration for this transaction was £13.2 million, which has beensettled in cash, and the gross assets disposed of amounted to £12.5 million.The assets disposed of include three freehold properties from which the Toyotabusinesses operate. The Lexus and Mazda businesses operate from a site whichforms part of a larger freehold property which is also used by other SKFbusinesses. SKF has therefore leased the Lexus/Mazda site to RRG for a minimumof seven years and a maximum of twenty years at an initial annual rent of£330,000. SKF accounts for borrowings and interest centrally and historically onlyproduced accounts for individual businesses to operating profit level. In theyear ended 31 May 2004 (the latest period for which audited accounts areavailable) the businesses disposed of made a contribution to SKF's operatingprofits of £1.4 million. Management accounts for the thirteen months ended 30June 2005 indicate that the businesses made a contribution to SKF operatingprofits in that period of £1.3 million. Interest on the disposal considerationand the rental income from the Lexus/Mazda site are estimated to amount toapproximately £1.1 million in a full year. The proceeds of the disposal will be used to reduce the group's borrowings whichwere increased significantly on the acquisition of SKF. The disposal will allowEMH to continue to concentrate on its chosen manufacturer partners of BMW group,Premier Automotive Group and Volkswagen group, with the potential of beingawarded Toyota and/or Lexus franchises in the future. EMH will be making a trading update announcement in February, but the Board doesnot expect the disposal to have an impact on the group's forecast preexceptional results for either the year ending 28 February 2006 or thesubsequent financial year. This information is provided by RNS The company news service from the London Stock Exchange