Proposed disposal of European Roads Businesses

• Jarvis has entered into a conditional agreement to sell European Roads businesses to Somaro for e35.3m (£24.5m);


• Somaro will assume net indebtedness in European Roads businesses at completion, which currently amounts to approximately e7.1m (£4.9m);


• In November 2004 the European Roads businesses paid a dividend to Jarvis of e10.5m (£7.3m);


• Transaction is conditional upon appropriate French competition clearance and Jarvis shareholder approval - completion expected on or after 1 April 2005; and


• Proceeds are anticipated to be used, in part, to reduce group indebtedness with the balance available for working capital purposes.

Alan Lovell, Chief Executive commented:

"This disposal and the funds generated by it represent further significant progress regarding the implementation of the strategy to reduce debt and focus on three core business areas in future, being the UK rail, road and plant hire activities. Two of the key disposals the Group needed to make have now been achieved with negotiations about the remaining realisation, the sale of the Tube Lines interest, now at an advanced stage. Refinancing discussions with the Group's lenders are progressing constructively and, whilst a great deal remains to be achieved, I am confident that our objectives will be met."

Introduction

Jarvis plc ("Jarvis") is pleased to announce that it has today signed a conditional agreement with Somaro S.A. ("Somaro"), a subsidiary of Bouygues S.A., to sell its European Roads businesses (which comprises Prosign S.A. and its subsidiaries ("Prosign") and Veluvine B.V. and its subsidiary ("Veluvine")) for a cash consideration is e35.3 million (£24.5 million). In addition, Somaro will assume the net indebtedness of the European Roads businesses on completion, which currently amounts to approximately e7.1 million (£4.9 million). In November 2004, Veluvine declared and paid a e10.5 million (£7.3 million) dividend to the Jarvis group.

The agreement is conditional, inter alia, on Jarvis shareholder approval and French regulatory approval.

Background to and reasons for the disposal

As outlined in Jarvis's 2004 Annual Report, the Directors are implementing a business plan that is designed to develop a simpler, leaner and more cash generative group that is sustainable in the long term.

The strategy underlying the business plan is for the Jarvis group to focus primarily on UK rail, road and plant hire activities. The Directors believe this will enable Jarvis to maintain a competitive advantage and grow its market share by capitalising on its investment in technology, new products and equipment.

As part of its restructuring initiatives, the European Roads businesses were identified as non-core and, in conjunction with Dresdner Kleinwort Wasserstein, a process was initiated to implement the sale. After extensive discussions and careful consideration of the proposals received, the Board has decided to sell the European Roads businesses to Somaro.

Information on Prosign and Veluvine

The European Roads businesses are active in the manufacture of road marking products, the contract application and sales of those products in the road safety industry in France and the road marking industry in The Netherlands.

Prosign

Prosign commenced business in 1952. The head office is in La Garenne-Colombes, near Paris, and it currently employs approximately 435 people across France.

Prosign offers a comprehensive range of integrated products and contracting services in the road marking, safety products and equipment, road signs, and road/bridge repair markets in France. Prosign focuses on developing and offering high quality, added value products and services for the markets in which it operates, with particular emphasis on seeking environmentally friendly solutions. It manufactures its road marking products and equipment from two manufacturing plants in the Paris region at Noyon and at Bretigny-sur-Orge.

Prosign's revenues are primarily derived from its road marking activities. It is one of the leaders in both road markings manufacturing and contracting in France. Prosign's customers are primarily from the public sector, including municipalities, regional councils and Direct Labour Organisations. Approximately 7 per cent. of its turnover is generated outside France.

Veluvine

Veluvine commenced business in 1895. The headquarters and manufacturing facilities are in Breda, The Netherlands, employing approximately 20 full time employees.

Veluvine is a market leader in road markings in the Netherlands. It focuses on the manufacture of paint and related products such as thermoplastics and two-components the majority of which are sold to private contractors.

The Veluvine Group is geographically well diversified with exports accounting for approximately 60 per cent. of its revenues. Key markets include France, Germany and Belgium as well as Eastern Europe. Veluvine offers an environmentally friendly product range that is tailored specifically to meet the various certification requirements of its countries of export.

Financial information on Prosign and Veluvine

The following financial information has been extracted without material adjustment from the consolidation returns used for producing the audited financial statements of Jarvis. For the year ended 31 March 2004, Prosign and Veluvine had turnover of £45.3 million (2003: £41.8 million) and £11.4 million (2003: £8.4 million) respectively, an operating profit of £1.7 million (2003: £1.6 million) and £2.2 million (2003: £1.4 million) respectively, and profit before tax of £1.5 million (2003: £1.5 million) and £2.4 million (2003: £1.6 million) respectively.

Somaro will assume the net indebtedness of the European Roads businesses on Completion, which currently amounts to approximately e7.1 million (£4.9 million).

As at 31 March 2004, Prosign and Veluvine had net assets of £8.8 million and £9.4 million respectively. In November 2004, Veluvine paid a dividend of e10.5 million (£7.3 million) to the Jarvis group.

Principal terms and conditions of the disposal

This disposal is to be effected through the inter-conditional sale by Streamline International Limited ("Streamline") (a wholly owned subsidiary of Jarvis) to Somaro of the entire issued share capital of Veluvine and 99.999 per cent. of the issued share capital of Prosign (the minority shareholding will remain owned by certain minority shareholders). The consideration payable for the European Roads businesses is e35.3 million (£24.5 million). 90 per cent. of the consideration will be satisfied in cash on completion and the remaining 10 per cent. will be held in an escrow account or used to support the provision of a standby letter of credit to Somaro. The escrow account would be used to pay for, or the standby letter of credit would support, any warranty or indemnity claims made by Somaro. Either arrangement would terminate by 31 December 2006 except to the extent of the amount of any unsettled warranty claims. Somaro will assume the net indebtedness of the European Roads businesses on completion. The consideration will be subject to an adjustment, after completion, to the extent combined Prosign and Veluvine shareholders' funds at 31 March 2005 are lower than approximately e20.5 million.

Completion of the disposal of the European Roads businesses is conditional, inter alia, upon approval by Jarvis shareholders and the to receipt of appropriate French competition clearance, which is not expected to be forthcoming before the end of February 2005. Completion is also subject to there being no material adverse change to the combined Prosign and Veluvine shareholders' funds having occurred since signing. If Jarvis shareholder approval is obtained and all other conditions are met, completion will take place on or after 1 April 2005.

Financial effects of the disposal and application of disposal proceeds

After taking account of the goodwill relating to Prosign and Veluvine, the disposal of the European Roads businesses will give rise to a loss on disposal of approximately £3.0 million (after costs).

It is intended that a proportion of the net cash proceeds will be used for the repayment of Jarvis Group indebtedness with the balance available for working capital purposes.

Extraordinary General Meeting

A circular containing a notice of Extraordinary General Meeting will be despatched to shareholders in due course.

small e before a number denotes euros

Enquiries:

Jarvis plc	Tel: 020 7017 8147
Jonathan Haslam
Merlin	Tel: 020 7653 6620
Paul Downes/ Bridget Fury/ Lachlan Johnston
Dresdner Kleinwort Wasserstein	Tel: 020 7623 8000
Chris Treneman/ Simon Gregory

Back to top