Metalrax Group has completed a sale and leaseback deal on the headquarters of bakeware manufacturer George Wilkinson, which is a subsidiary of the engineering company.
The transaction relates to Progress Works in Burnley, Lancashire, where George Wilkinson is based, and is worth £1.6m in cash to the group. Metalrax has now taken on a 15-year lease, with annual rent reviews. The starting rent is £200,000 a year.
Metalrax says the proceeds from the transaction will be used to reduce its bank borrowings. The net cash impact to the group of the deal will initially be in the region of £100,000 a year.
Metalrax completed similar sale and leaseback transactions on three of its properties in December 2010 and January 2011, but this is expected to be the last.
The group returned to the black in 2010 after several years of losses. Announcing its results in January this year it said that cashflow was positive and that management had made “excellent progress in reducing net debt”, and it was upbeat about 2011.
Commenting on the latest deal, chief executive Andrew Richardson 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. ”
The group has also sold a property in Hockley, Birmingham, which has been vacant for over two years following the relocation of Samuel Groves, another bakeware subsidiary.
The £755,000 proceeds from the sale will be also used to reduce the group’s debt.