UK: Lamont Restructure Plan Progresses
The company has agreed the terms for the disposal of its Moygashel business to Ulster Weavers Apparel Limited, for an estimated consideration of £3.3m. The disposal is conditional upon the approval of the ordinary shareholders of Lamont.
A Circular setting out details of the proposed disposal and incorporating a notice convening an extraordinary general meeting is being prepared and will be posted to shareholders.
Moygashel is a manufacturer of Irish linen, principally for the apparel market, and is also a supplier of furnishing fabrics. In late 1998, delivery delays to Moygashel's customers were the direct result of commissioning difficulties with the then new dyeing and finishing facility at Moygashel's Ballievey site. As a result, in a marketplace where there was already overcapacity, the Moygashel business was unable to regain customer confidence in a realistic timescale and therefore did not generate sufficient sales volume in either 1999 or 2000, thereby incurring significant trading losses.
For the year ended December 31 1999 the turnover of the Moygashel business was £10.1m. However, it suffered an aggregate loss of £6.5m comprising an operating loss of £3.1m and exceptional costs and provisions of £3.4m in 1999 in addition to losses of £2.7m in the previous year. The net assets of the Moygashel business as at December 31 1999 were £11.1m. Sales of the Moygashel business throughout 2000 continued to be disappointing, resulting in further operating losses to June 30 2000 of £1.6m.
The net assets of the Moygashel business on disposal are estimated to be £8.2m. Estimated proceeds from the Moygashel disposal of £3.0m (after costs estimated at £0.3m) will be used to repay £1.1m due to CMI, as outlined below, and the balance will be applied to reduce Group borrowings.
On completion, £3.0m of the consideration will be received in cash with the balance payable upon agreement of completion accounts. As a result, the loss on disposal of the Moygashel business is expected to be approximately £5.2m. A provision for this loss will be made in the Group financial statements for the year ended December 31 2000.
The Group has also disposed of CMI (1993) Limited.
On July 24 2000 Lamont announced that it had refinanced certain property assets. As part of this refinancing, the property assets were transferred into a Group subsidiary, CMI, and new finance raised, which was without recourse to the balance of the Lamont Group.
Lamont has now sold CMI to Mr P J Magee for a nominal consideration. However, CMI has current bank debt of £6.2m which will be removed from the Group balance sheet. This sum will be reduced by the £1.1m anticipated receipt referred to above.
Frank Cushnahan, chairman of Lamont, said: "These disposals represent another important step in the restructuring programme at Lamont and will result in significant reductions in the Group's bank indebtedness. Discussions are continuing on steps to secure further reductions in indebtedness. Having successfully achieved a satisfactory outcome of the restructuring programme, with ongoing support from our bankers, the board will then attempt to enhance shareholder value by maximising the value of the remaining Group and pursuing other opportunities."
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