Mowlem sighs with relief on pounds 15.5m disposal

End of a disastrous investment: Losing London City Airport finds buyer after months of negotiations
John Mowlem, the struggling construction group, sold London City Airport yesterday for pounds 14.5m, less than a third of the pounds 50m the company is estimated to have poured into the loss-making but increasingly popular airstrip in east London.

The sale draws a line under a disastrous investment and while there was some disappointment that Mowlem had failed to achieve the airport's book value, the City was relieved that the company had finally negotiated a sale and the shares closed 9p higher at 63p.

The buyer is Dermot Desmond, former chairman of Dublin airport operator Aer Rianta, who knocked the price of the airport down after several months of negotiations. The strike price is pounds 4.3m below the value of the airport in Mowlem's balance sheet and, together with costs associated with the sale, will result in a pounds 5.5m charge against profits in the company's second- half figures.

The book value had already been written down and compares with an initial development cost of about pounds 30m and losses of almost pounds 20m in the eight years since the airport opened.

Ken Minton, Mowlem's recently installed chairman, said yesterday he was "absolutely relaxed" about the price achieved: "We've spent a lot of time with many people who have never even got close to putting bucks on the table. Now we've made the sale and, thank God, we have."

Mowlem, which announced a pounds 31.8m loss in the six months to June, has been trying to sell City Airport for several years as it attempted to refocus on its core activities. Suggestions that, having carried the airport for so long, Mowlem has sold out just as it starts to take off carry little clout with with Mr Minton, who believes the operation will not offer a decent return for years to come.

London City Airport was developed in 1987 as part of the planned rejuvenation of London's former docks but, like the rest of the property developments in the area, suffered in its early years from poor transport infrastructure. Passenger numbers did not start taking off until the Limehouse link by- passed the congested A13 out of London, putting the aiport within a short drive of the City.

Other key developments included an extension to the runway which allowed the airport to accommodate aircraft such as the BAe 146 "whisper jet" with a vastly improved range than the smaller planes that had previously used the strip.

Last year, 480,000 passengers used the airport, a 96 per cent increase over 1993. Despite the rise in volumes, however, London City remains a quick and easy alternative to the capital's other busy airports. Last year it made a loss of pounds 2.9m after hefty interest costs, but broke even at the operating level.

Mr Desmond is chairman of Dublin-based International and Underwriting, and is also a director and large investor in Pembroke Capital, a company providing specialist financial services to the aviation industry.

He was formerly the non-executive chairman of the state-owned Irish airports authority, Aer Rianta.