2nd Mar 2006 07:03
AWG PLC02 March 2006 AWG Plc Proposed disposal of Morrison Construction Services and Morrison Project Investments businesses Highlights • Sale of Morrison Construction Services to Galliford Try Plc • Total consideration of approximately £42 million • AWG Plc retains six completed PFI investments • Completion conditions include Galliford Try Plc shareholder approval and clearance from the Pensions Regulator The board of AWG Plc ("AWG") announces today that it has agreed to sell MorrisonConstruction Services Ltd ("Construction Services"), its Project Investmentsbusiness ("Project Investments") and investments in two early stage PFI projects- Defence Housing Executive (DHE) Portsmouth and Highland Schools - to GallifordTry Plc ("Galliford Try"). The anticipated total consideration for thetransaction amounts to approximately £42 million. In addition, AWG has agreed with Galliford Try that, under its new ownership,Project Investments will provide assistance to AWG in the management and futuresale of its six remaining PFI investments, which have a current book value of£7.6 million. Morrison Utility Services and Morrison Facilities Services, which form themajority of the Morrison group, are not part of this transaction. Speaking today, Jonson Cox, Group Chief Executive of AWG Plc, commented: "Twoyears ago, faced with an unprofitable construction business, we set out tore-build the performance of Morrison Construction Services and to improvefinancial and commercial discipline. Today's announcement is a tribute to theefforts of the management teams and all 1,500 employees. I would like to thankthem all. The sale is a very good result for all parties. For shareholders, it deliversgood value and focuses AWG's business activities on water and support services.For employees, it secures a strong future as part of a group with which there isa good cultural and business fit. For customers, it will bring together theskills and scale of a larger construction group." Information on Construction Services and Project Investments AWG acquired Construction Services as part of its acquisition of the Morrisongroup in September 2000. Following the change of AWG management and a businessreview in the first half of 2004, Morrison was restructured and a moredisciplined, lower risk business model was adopted to improve commercial focusand build value. Construction Services has around 1,500 employees based in eight principaloffices throughout the UK and provides services in the areas of building andinfrastructure (including water frameworks and highways maintenance), to bothpublic and private sector clients. Based in Edinburgh, Project Investments is a niche support activity for theMorrison business with 15 employees, focusing on bidding for selective PFIprojects - mainly in Scotland. Its latest project, which reached financial close on 28 October 2005, was toprovide serviced accommodation for Defence Housing Executive (DHE) personnel inPortsmouth. The Highland Schools project incorporates the design, construction and financingof 11 schools for The Highland Council. The investment represents a 50 per centequity stake in the project company and is anticipated to reach financial closeshortly. Morrison has made a strong commitment to this PFI project, whichGalliford Try considers a key strategic contract. Both parties are committed tothe successful completion of this high profile project. Terms of disposal The total consideration receivable by AWG under the transaction is anticipatedto be approximately £42 million: £€38 million of this relates to Morrison Construction Services and £0.5 million for the goodwill of Project Investments. Approximately £4.5 million of this consideration will be deferred, principally in relation to certain work in progress balances, the major proportion of which will become payable upon financial close of the Highland Schools' PFI project. £€3.5 million will be paid on transfer of equity ownership of the DHE Portsmouth interest and Highland Schools PFI investment. The precise amount of the latter is subject to final valuation of the investment at financial close. In addition to the purchase consideration paid by Galliford Try, any cashremaining in the construction business at completion of the transaction (overand above the normalised level of working capital) will be cash settled to AWGon a pound for pound basis. The transaction is classified as Class 1 for Galliford Try (as defined under thelisting rules of the UKLA) and is to be funded through Galliford Try placing andopen offer of £50 million. The transaction is therefore subject to the approvalof Galliford Try shareholders. A circular including notice of the Galliford Try extraordinary general meetingwill be distributed shortly and completion of the transaction is expected on 31March 2006. Financial effects of the disposal Morrison Construction Services generated sales of £333 million and an operatingprofit of £0.4 million, on an IFRS basis, in the year ended 31 March 2005. Thenet book value of assets at the date of completion are anticipated to beapproximately £90 million, which predominantly comprises goodwill resulting fromthe acquisition in 2000, when the major proportion of purchase goodwill wasallocated to the construction division. AWG expects to realise an exceptionalaccounting loss on disposal, after associated costs, of approximately £55million on the transaction. AWG will retain responsibility for, and funding of, the historic pensionobligations of Morrison Construction Services in the Morrison Pension and LifeAssurance Plan. AWG and the trustees of the pension fund have agreed a fundingplan to eliminate the current FRS17 deficit over a four-year period fromcompletion. The transaction is conditional upon receiving clearance from thePension's Regulator in respect of the proposed pension arrangements agreed tofacilitate the transaction. Current employees of Morrison Construction Services will be offered membershipof a new pension scheme, operated by Galliford Try, on completion of thetransaction. AWG will be hosting a conference call for analysts at 10:30am on Thursday 2March 2006. The telephone number to dial for those wishing to participate is0208 609 0205, PIN code 125521 (and press hash key). Enquiries: Jonson Cox, Group Chief Executive, AWG Plc 01480 323257 Scott Longhurst, Group Finance Director, AWG Plc 01480 323526 Anthony Cardew, Cardew Group 0207 930 0777 Notes: Remaining Morrison business Following the sale of Construction Services and Project Investments, Morrisonwill become a focused support services company, capable and of sufficient scaleto operate as a standalone business. It will have two major divisions: Utility Services, an established networkservices provider to all four utility sectors. For the year ended 31 March 2005,Utility Services' turnover was £359 million, and its operating profit was £6.8million. Morrison's other support services division is Facilities Services, a leader inpublic sector repairs and maintenance outsourcing for local authorities andhousing associations. For the year ended 31 March 2005, Facility Services'turnover was £150 million, and its operating profit was £3.9 million. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Galliford Try