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.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Content Writer - Global Financial Services

£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Web Developer - PHP

£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Loan Underwriter

£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

Orthorexia nervosa: How becoming obsessed with healthy eating can lead to malnutrition

Orthorexia nervosa

How becoming obsessed with healthy eating can lead to malnutrition
Lady Chatterley is not obscene, says TV director

Lady Chatterley’s Lover

Director Jed Mercurio on why DH Lawrence's novel 'is not an obscene story'
Farmers in tropical forests are training ants to kill off bigger pests

Set a pest to catch a pest

Farmers in tropical forests are training ants to kill off bigger pests
Mexico: A culture that celebrates darkness as an essential part of life

The dark side of Mexico

A culture that celebrates darkness as an essential part of life
Being sexually assaulted was not your fault, Chrissie Hynde. Don't tell other victims it was theirs

Being sexually assaulted was not your fault, Chrissie Hynde

Please don't tell other victims it was theirs
A nap a day could save your life - and here's why

A nap a day could save your life

A midday nap is 'associated with reduced blood pressure'
If men are so obsessed by sex, why do they clam up when confronted with the grisly realities?

If men are so obsessed by sex...

...why do they clam up when confronted with the grisly realities?
The comedy titans of Avalon on their attempt to save BBC3

Jon Thoday and Richard Allen-Turner

The comedy titans of Avalon on their attempt to save BBC3
The bathing machine is back... but with a difference

Rolling in the deep

The bathing machine is back but with a difference
Part-privatised tests, new age limits, driverless cars: Tories plot motoring revolution

Conservatives plot a motoring revolution

Draft report reveals biggest reform to regulations since driving test introduced in 1935
The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border