Metalrax completes £1.6m sale and leaseback agreement

BIRMINGHAM based engineering group Metalrax has completed a further sale and leaseback agreement on one of its subsidiaries.

The company, which supplies specialist engineering and consumer durable products, has struck a £1.6m deal on a sale and leaseback agreement with Johnson & Starley Property Ltd.

The deal, set to complete on May 17, is the fourth to be completed by the firm in the last six months and Metalrax said it was likely to be the last for the foreseeable future.

The latest transaction relates to the group’s property at Progress Works, Elm Street in Burnley, where George Wilkinson, a group subsidiary which manufactures consumer bakeware and other household products, is based.  

The £1.6m is payable on completion of the deal and the group has entered into a 15 year lease, with annual rent reviews.  The commencing rent will be £200,000 per annum.
 
The proceeds from the sale and leaseback agreement will be used to reduce the group’s bank borrowings. The reduction in interest costs associated with this debt repayment will be around £100,000, meaning the net cash impact to the group will initially be in the region of £100,000 per annum.  

The property being disposed of has a net book value of £1,775,000 and therefore a loss on disposal of £175,000 will arise on completion of this transaction.

Andrew Richardson, chief executive of Metalrax, said: “We remain focused on reducing our gearing by cash generation from both operations and asset sales.  Lower bank borrowings gives the group more freedom to pursue its goals of superior return on investment and sustainable growth. This transaction is an essential part of this de-gearing strategy. “

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