European Leisure to sell Maygay

European Leisure has agreed to sell amusement machine manufacturer Maygay Machines Ltd for £16.5 million sterling to Pinco, a company formed by investment firm 3i Group and Maygay's existing management for the acquisition.

European Leisure's finance director Mr Patrick Hooper said the company had decided to sell Maygay because the business was "very volatile".

"Profits have been as low as £1 million and as high as £4 million over the last four years. We want a profit stream that will grow," he said.

Maygay, which had net assets of £2.5 million at end-June, reported its highest ever turnover and profits in the year to June 30th 1997. It recorded an operating profit of £4.1 million sterling and pre-tax profits of £3.0 million.

But European Leisure said it expected operating profits for the half year ending December 31st, 1997 to be "significantly less" than in the six-month period a year earlier, dragging down Maygay's figures for the current financial year.

The variable earnings profile results from changing trends in the market in which Maygay operates, European Leisure said.

It plans to invest the cash proceeds of the disposal in its core business, including its sports bars and leisure division which will give a more consistent return, Mr Hooper said. The company currently runs 70 American pool and snooker clubs across Britain and would like to see that rise to around 120.

It said it had acquired 13 new units over the last nine months and is looking at another six individual units. Pending identification of suitable opportunities for investment, European Leisure said it would use the proceeds of the sale to reduce group net borrowings which currently stand at £46 million sterling while the debt/equity ratio is around 50 per cent.