Sale & Leaseback of Further Tuffnells Properties

RNS Number : 7026S

Connect Group PLC

07 November 2019

 

THE INFORMATION CONTAINED IN THIS ANNOUNCEMENT IS CONSIDERED TO HAVE BEEN INSIDE INFORMATION PRIOR TO ITS RELEASE, AS DEFINED IN ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) 596/2014. UPON PUBLICATION OF THIS ANNOUNCEMENT THE INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN FOR THE PURPOSES OF THAT REGULATION.

7 November 2019

Connect Group PLC

("Connect Group" or "the Company")

The Proposed Sale and Leaseback of a Second Tranche of Tuffnells Properties

Further to Connect Group's announcement on 23 September 2019 that its subsidiary, Tuffnells Parcels Express Limited ("Tuffnells"), had successfully exchanged contracts for the sale of six Tuffnells distribution depots as part of a proposed sale and leaseback transaction of selected Tuffnells freehold and long leasehold properties, Connect Group is pleased to announce that Tuffnells has now exchanged contracts for the disposal of a further two Tuffnells distribution depots to separate and independent purchasers as noted below (together, the "Tuffnells Sale Portfolio No. 2") for an aggregate sale consideration of £5,170,000 (plus VAT).

Transaction details

The Group has agreed to sell each property within the Tuffnells Sale Portfolio No. 2 on the following key terms:

Tuffnells Distribution Depot	Purchaser	Sale Consideration (plus VAT)	Lease Terms
			Annual Rental (plus VAT)	Term (from date of Completion)
Belvedere	Campus Overseas Corp (registered in British Virgin Islands)	£4,800,000	£245,083	10 years
Carnforth	Real Estate Investments Group Limited	£370,000	£40,817	20 years
TOTAL		£5,170,000	£285,900

Tuffnells will receive consideration for each property within the Tuffnells Sale Portfolio No. 2 in cash, payable on completion.  Each purchaser will, as part of an associated leaseback transaction for each property, let each of the respective properties back to Tuffnells on a full repairing and insuring lease for the term noted in the table above, in each case with effect from the date of completion of the sale of the respective property, with the leases to be guaranteed by Connect Group. The rents, which will be at market standard rates, payable under each of the leases is set out above and will, together, represent an aggregate rental value of £285,900 (plus VAT) per annum.

Completion of the sale of each property is expected to take place during November 2019.

Background and rationale to the transaction

As reported in the Group's announcement on 23 September 2019, Connect Group is a UK based specialist distributor and a leading provider of distribution solutions in complex and fragmented markets. Through its core businesses, Smiths News and Tuffnells Parcels Express, the Group's networks are focused on serving high drop density early morning deliveries from its 78 distribution depots and the demands of mixed and irregular sized freight. 

Tuffnells operates its business from a network of 37 local collection and delivery distribution depots.  Each of the Belvedere and Carnforth properties comprise part of the assets that were acquired as part of the acquisition of the Tuffnells business in December 2014 and, together, the gross value of the two properties being disposed of as part of the Tuffnells Sale Portfolio No. 2 is £1.9million as at 31 August 2019.  

The sale and leaseback of each of the two properties comprising the Tuffnells Sale Portfolio No. 2 will seek to further align the Tuffnells real estate portfolio with the Group's other real estate interests (which are predominantly leasehold) and will ensure consistency in approach, oversight and flexibility of the Group's real estate network.  Furthermore, the transaction represents another important step in the Group's strategy of promoting a disciplined capital allocation programme and the introduction of lean process management and continuous improvement principles, each of which are expected to drive efficiency savings and improved customer experience across the Group. 

Use of proceeds

The Board intends to use the cash proceeds arising from the sale and leaseback of the Tuffnells Sale Portfolio No. 2 to reduce the Group's net debt by the repayment of part of the Group's revolving loan facility under its current debt facility agreement and to achieve a more efficient balance sheet, providing sufficient ongoing headroom for further future investment in the Group, with any such investment to be funded from ongoing operating cashflow.

Tony Grace, Chief Financial Officer of Connect Group, commented on the transaction:

"The sale and leaseback of this second tranche of properties is another step in our strategic plan and ambition to reduce the Group's net debt position to a targeted net debt/EBITDA ratio of 1x by FY2021 as announced on 22 January 2019.  We are pleased to be able to report that we have now exchanged contracts on a further two Tuffnells properties. We look forward to formally completing on each of these properties in due course and, furthermore, exploring other possible sale and leaseback opportunities for the remaining Tuffnells freehold real estate portfolio, where those opportunities meet the Board's expectations in respect of value, economic return and timings."

Enquiries:

Connect Group PLC

Tony Grace, Chief Financial Officer

01793 563641

www.connectgroupplc.com 

Buchanan (Financial PR)

Richard Oldworth / Jamie Hooper

[e-mail] 

www.buchanan.uk.com

Person responsible for arranging release of this announcement:

Stuart Marriner, General Counsel & Company Secretary

Connect Group PLC

Rowan House

Cherry Orchard North

Kembrey Park

Swindon

SN2 8UH

email: [e-mail]

LEI: 2138004O33ONVOOQXB02

About Connect Group

Connect Group PLC is a UK based specialist distributor and a leading provider of distribution solutions in complex and fragmented markets. The Group's networks are focused on serving high drop density early morning deliveries, and the demands of mixed and irregular sized freight.

The Group's core businesses are:

Smiths News is the UK's largest newspaper and magazine wholesaling business with an approximate 55 per cent market share. It distributes newspapers and magazines on behalf of the major national and regional publishers, delivering to approximately 25,500 customers across England and Wales on a daily basis. The speed of turnaround and density of Smiths News' coverage is critical to one of the UK's fastest physical supply chains.

Tuffnells is a leading distributor of mixed and irregular freight, serving small and medium sized enterprises across the UK. Its national network of depots collects and delivers mixed parcel freight consignments, specialising in items of irregular dimension and weight ("IDW"), examples of which include bulky furnishings, building materials and automotive parts. With a mix of local and national clients, Tuffnells offers a range of timed services that are responsive to customer demand.

 

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