GRMP Grampian

RNS Number:4191X
Grampian Hldgs PLC
18 January 2001



Date:      18 January 2001



Contacts:

David McGibbon, Finance Director & Company Secretary

Grampian Holdings p.l.c.

0141 357 2000



David Bick

Holborn Public Relations

020 7929 5599

david.bick@holbornpr.co.uk



Tom Cassidy

Media House

0141 226 3700



                           Grampian Holdings p.l.c.

             Proposed Acquisition of the Malcolm Family Companies

                           and an update on trading



Proposed Acquisition of Malcolm Family Companies


  * Consideration #9.25m - #4.85m in Grampian shares, with the balance of #
    4.4m in Loan Notes

  * Price includes independent fleet valuation of #7.5m, plus Goodwill of #
    1.75m

  * Board believes Acquisition will be earnings enhancing.



Update on Trading

The Malcolm Group


  * Activity levels remain high

  * New rail freight facilities to be developed at Grangemouth with
    assistance of Government grant. Operations will commence in February.

EWM


  * Encouraging Christmas trading. Overall, second half performance is
    satisfactory

  * Good trading to date in January - stock levels reducing as expected.

Disposal of EWM


  * Process of disposal well under way.



PROPOSED ACQUISITION OF THE MALCOLM FAMILY COMPANIES

Grampian Holdings p.l.c. today announces the proposed Acquisition of a fleet
of vehicles, trailers and tippers to be effected through the acquisition of
three companies ("the Malcolm Family Companies") owned by the Malcolm family.

The other assets and liabilities in the Malcolm Family Companies are not
intended to be acquired and consequently those assets will be for the benefit
of the Vendors and those liabilities will be discharged by the Vendors.

The consideration for the Acquisition will be #9.25m payable at completion in
a combination of Grampian shares and Loan Notes.

As Donald Malcolm, Andrew Malcolm and Walter Malcolm are shareholders and
directors of the Malcolm Family Companies and are also directors of W H
Malcolm, a subsidiary of Grampian (and Andrew Malcolm is also a director of
Grampian) they are regarded as related parties under the Listing Rules. For
that reason the Acquisition requires the approval of Grampian shareholders.

Reasons for the Acquisition

Trading between W H Malcolm (a subsidiary of Grampian) and companies
controlled by the Malcolm family has taken place for many years through the
hire of vehicles and trailers and the sub-contracting of haulage by W H
Malcolm.

Details of these trading relationships have been disclosed each year in
Grampian's Annual Review and Accounts.

Demand for W H Malcolm's fleet varies depending on local market circumstances
and on such factors as seasonal peaks and troughs. It has been the policy of W
H Malcolm to meet additional short term demand by hiring from outside sources,
principally, but not exclusively, from companies controlled by the Malcolm
family.

Vehicle and trailer rentals and other operational arrangements have reflected
the long term relationship existing between the parties and sub-contract of
haulage has taken place at normal commercial rates.

W H Malcolm has recently been developing in its Construction Services Division
a 'one stop shop' service to its customers, providing the full range of
earthworks, road and drainage and construction vehicles for its major UK
construction clients. This strategy has resulted in greater utilisation of W H
Malcolm's tipper fleet. As a consequence increased reliance has had to be
placed on third party hire and sub-contracting. Grampian believes that this is
not ideal for building up the long term business relationships in today's
market. In addition, growth in general haulage tied into distribution
contracts and more predictable demand patterns has resulted in a need for a
larger fleet of vehicles and trailers and less sub-contracting.

The Grampian board now believes that it is logical to acquire the vehicles,
trailers and tippers owned by the Malcolm Family Companies through the
acquisition of these companies. They will be fully integrated within W H
Malcolm, which will benefit from resulting cost savings. Together the Malcolm
Family Companies operate a total of 63 articulated units, 33 tippers, 226
curtain-sided trailers and 24 other items of plant and trailers. W H Malcolm
has been the principal customer of the Malcolm Family Companies in recent
years.

Financial effects of the Acquisition

Based on the latest audited accounts, turnover attributable to the Malcolm
Family Companies amounted to approximately #4.9m (of which approximately #4.7m
was turnover attributable to W H Malcolm). Profits before tax and gains on
sale of assets amounted to approximately #2.0m. On the same basis the net
asset value of the Malcolm Family Companies was #3.58m.

Grampian has reviewed the accounts referred to above. Adjusting profits to
reflect Grampian's accounting policies (principally those relating to
depreciation) and making further adjustments for non-recurring items, the
directors of Grampian believe that this Acquisition will be earnings*
enhancing.

Consideration

The consideration of #9.25m is based on an independent valuation of #7.5m for
the vehicles, trailers and tippers owned by the Malcolm Family Companies,
together with a sum of #1.75m for goodwill. On completion Grampian will own
the fleet of vehicles, trailers and tippers currently operated in the Malcolm
Family Companies. Consequently Grampian will not incur the costs previously
incurred in hiring the vehicles in the Malcolm Family Companies and as a
result the future earnings from these assets will be attributable to Grampian.
The goodwill payment represents less than one year's earnings of these assets.

The total consideration will be satisfied by the allotment and issue by
Grampian to the Vendors of 6,780,576 new Grampian shares ("Consideration
Shares") (the share price of which was 711/2 pence as at the close of business
on 17 January 2001) and by the issue of approximately #4.4m in nominal value
of Loan Notes to be guaranteed by the Bank of Scotland.

The Loan Notes will be redeemable at par on 30 June 2002 or at any time
thereafter until 30 June 2006, when all outstanding Loan Notes will be
redeemed.

* As compared to the position in the absence of the Acquisition. This should
not be taken to constitute a profit forecast.



The consideration shares will represent 5.8% of Grampian's enlarged issued
share capital. Following completion, Andrew, Walter and Donald Malcolm and
persons connected with them will be interested in an aggregate of
approximately 6.5% of Grampian's enlarged issued share capital.

Subject to Grampian shareholder approval at an EGM to be held on Monday, 5
February 2001, completion in escrow of the Acquisition will take place on 5
February 2001, immediately following the EGM and full completion will, subject
to admission of the consideration shares to listing, take place on 6 February
2001.

UPDATE ON TRADING

Overall, trading for the group remains broadly in line with expectations.

The Malcolm Group

In The Malcolm Group, activity levels remained high through to the end of the
calendar year and these levels have continued into the new year.

The Construction Services division remained busy and fleet utilisation levels
were high for both tippers and plant. We enter the new year with a healthy
order book.

The Warehousing and Distribution division remained busy through to the end of
the year. The new warehouse development at Crick is now full and, as
anticipated, the rail link became operational and has been utilised on a daily
basis since the end of October.

In December, the Scottish Executive announced the approval of a grant to The
Malcolm Group of #878,000 to enable rail freight facilities to be developed at
our Grangemouth site. As a result, the group is now proceeding with this
development which will enable us to move products by rail from Grangemouth to
Crick. The plans are to introduce a regular train service between these two
strategically important sites before the end of February.

For The Malcolm Group as a whole the key focus remains that of containing
costs to offset, where possible, the adverse impact experienced in margins
through higher fuel costs. Whilst recent reductions in fuel costs are welcome,
operating profits will not reach last year's record levels.

Retail

For The Edinburgh Woollen Mill Ltd ("EWM"), trading in the second half year to
date shows an improvement and, over the Christmas period in particular,
trading was encouraging. Overall, it has been a satisfactory performance.

Trading for the 23 weeks to 5 January showed an improved pattern against the
first half year. Sales in total were down by 0.4% and on a like for like basis
were down by 2.0%. However, gross margins continued to strengthen and in value
terms showed an increase of 3.1% in total and 1.2% on a like for like basis
against the same period last year.

Trading over the Christmas and New Year period was encouraging. Sales in total
for the 6 weeks to 5 January were up by 2.7% and 1.1% on a like for like
basis. Significantly, continuing the pattern previously noted, gross margins
in value terms were up by 11.8% in total and 10.1% on a like for like basis.
This encouraging trading is continuing in January with stock levels reducing
in line with expectations.

DISPOSAL OF EWM

In the Interim Statement the board indicated its intention to work with our
advisers, Deutsche Bank, to determine the most appropriate method of disposal
of EWM.

The process of disposal is well under way, preliminary talks have been held
with interested parties and a further announcement will be made in due course.



                                   - ENDS -

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