Avesco Group PLC Sale of freehold property (5245L)

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RNS Number : 5245L

Avesco Group PLC

12 January 2016

Avesco Group plc

("Avesco" or the "Group")

Sale of Freehold and Possible Closure of Fountain Studios

Avesco Group plc announces that its subsidiary, Fountain Television Limited ("Fountain") has exchanged contracts for the sale of the freehold land and buildings at its television studios in Wembley (the "Studios") to Quintain Wembley Fulton Road Limited, for a consideration of GBP16 million, payable in cash. At the same time, Fountain has agreed with effect from completion of the sale to enter into a lease back of the premises from the buyer at a nominal rent for a term of up to five years, however the lease will be capable of termination by either party on not less than six months' notice, expiring no earlier than 31 December 2016.

On exchange of contacts, Fountain received a deposit of GBP1.6m and the balance of the price will be received on completion, which is expected to take place on 5 February 2016. After payment of the costs of disposal, the net proceeds of the sale will be used to reduce debt.

In the year ended 30 September 2014, Fountain had sales of GBP5.3 million, representing 4 per cent of Group turnover, and made a pre tax loss of GBP0.3 million, a result which the Board considered to be an unacceptable return on the capital employed in the business compared to the market value of Fountain's premises. As at 31 March 2015, the land and buildings had a net book value of GBP5.3 million. After tax and other costs the sale is expected to result in a net profit of approximately GBP6m and net cash generation of some GBP13m.

The sale of the premises is likely to lead to the closure of the Fountain Studios business in Wembley and Fountain is therefore beginning a consultation process with its staff.

The main component of the Group's borrowing facilities is a GBP20m multi currency revolving loan from HSBC, which will as from completion of the sale of the Fountain premises be reduced to GBP10m. The remaining GBP10m line with HSBC will be in place until June 2018, leaving the Group with increased headroom to be used for its on-going development.

The Group will release its results for the year ended 30 September 2015 later today.

Richard Murray, Chairman of Avesco, commented:

"Fountain Studios and its outstanding team of people have a long and proud history of television programme making in Wembley and the Studios have over the years been home to many very successful television shows. However, the physical constraints of the Wembley site have limited Fountain's ability to grow while at the same time property values in Wembley have increased substantially. The disposal of the Fountain site will enable the Group to reduce its net debt to very modest levels and, as a Board, we believe that a far better return on capital is now available from investment in other parts of the Group where there are greater opportunities."

For further information please contact:

 
 Avesco Group plc 
 Richard Murray        Chairman                  01293 583400 
 John Christmas        Group Finance Director 
 
 finnCap Ltd 
 Julian Blunt/Scott 
  Mathieson            Corporate Finance         020 7220 0500 
 Malar Velaigam        Corporate Broking

This information is provided by RNS

The company news service from the London Stock Exchange

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January 12, 2016 02:00 ET (07:00 GMT)

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