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Tue 5th Dec 2017 - Update: Brighton Pier Group acquisition, Vianet results, Marston’s etal
Brighton Pier Group buys Paradise Island Adventure Golf operator for £10.5m: Brighton Pier Group, which has sector investor Luke Johnson as chairman, has entered into a conditional agreement to acquire Lethington Leisure, which owns and operates six Paradise Island Adventure Golf sites, for a total consideration of £10.5m on a cash-free, debt-free basis. Brighton Pier Group proposes to part-fund the acquisition through a placing of new ordinary shares to raise gross proceeds of up to £3.0m with the balance to be funded through an extension to the group’s existing banking facilities with Barclays Bank, the issue of £0.6m of consideration shares in the company to certain management selling shareholders of Lethington Leisure, and a payment of £1.0m in cash, deferred by one year by way of loan notes, to the remaining selling shareholders of Lethington Leisure. There is additional deferred consideration of up to £0.1m payable dependent on trading of Lethington Leisure in the period up to 30 June 2018. Brighton Pier Group stated: “The board believes the acquisition has a compelling strategic and financial rationale. Paradise Island Adventure Golf represents a profitable and high quality acquisition in-line with the group’s stated strategy of selectively acquiring leisure and entertainment assets in the UK. Lethington Leisure has a strong track record as a profitable and growing leisure operator. In the financial year ended March 2017, Paradise Island Adventure Golf had revenues of £3.49m, with a three-year compound annual growth rate from 2014-17 of 14.7%, and adjusted Ebitda of £1.21m. Trading in the first half of Lethington Leisure’s current financial year has shown high year-on-year growth, with current trading since September 2017 showing sales and Ebitda run-rate above forecast levels. The total consideration represents a multiple of approximately 6.25 times Lethington Leisure’s pro forma Ebitda for the 12-month period ended 31 March 2018 (representing six months of actual Ebitda plus six month pro forma budgeted Ebitda based on the prior year performance), which the directors believe is an attractive price for a high quality asset. The acquisition represents a growth opportunity to broaden the group’s business base. Paradise Island Adventure Golf operates six sites across the UK, with two additional sites already contracted, with a broader pipeline of new site opportunities and potential site acquisitions. Mini golf is an accessible activity for the whole family, which is less seasonal than Brighton Pier, further improving the distribution of earnings throughout the financial year, and fits into the growing demand for experiential leisure and ‘competitive socialising’. The group can utilise its management team’s experience of operating leisure assets to add complimentary income streams to Lethington Leisure’s operations and further develop the Paradise Island Adventure Golf offer, and signals the group’s confidence in its ability to be a longer-term consolidator within the sector. The acquisition is expected to enhance the group’s free cash flow and is expected to be significantly earnings enhancing in the first full financial year. Further details on Lethington Leisure and the acquisition are as follows. Conditional placing of new ordinary shares of 25p each in the company aims to raise gross proceeds of up to £3.0m for the company. The net proceeds of the placing receivable by the company are intended to be used to part finance the cash consideration payable under the acquisition. Luke Johnson, the company’s executive chairman, is intending to subscribe for approximately £0.85m of placing shares pursuant to the placing. The placing will be conducted through an accelerated bookbuilding process, which will be launched immediately. Application will be made for the placing shares to be admitted to trading on AIM. It is expected that admission and dealings in the placing shares will commence at 8.00am on Friday (8 December) and the acquisition will complete at the same time. The placing is not conditional on the acquisition completing. Panmure Gordon (UK) is acting as financial adviser, nominated adviser, joint broker and joint bookrunner and Arden Partners is acting as joint broker and joint bookrunner to the company. To minimise the time and transaction costs of the placing, the placing shares are being placed by the joint bookrunners with only a limited number of existing shareholders. The placing shares are not being made available to the public. The group’s existing activities continue to trade in line with management’s expectations.” Johnson added: “It is part of The Brighton Pier Group’s strategy to acquire growing experiential leisure and entertainment destinations. Paradise Island Adventure Golf operates in the growing social competition leisure sector in UK. Such facilities are known drivers of footfall as retail and leisure centres look to provide affordable entertainment for families and friends, which complement their retail and food offerings. We are excited by the opportunity to bring Paradise Island Adventure Golf into the group and will now turn our attention to expanding its footprint across the UK, having already identified a number of potential additional locations.”
 
Vianet reports fall in revenue and profit: Vianet Group, the international provider of actionable data and business insight through devices connected to its Internet of Things platform, has reported revenue fell to £6.71m for the six months ended 30 September 2017 compared with £7.06m the previous year. Recurring revenues were at 90% of turnover compared with 86% the year before. Profit before tax was down to £0.90m compared with £1.13m the year before after expensing £0.19m of corporate acquisition costs. Adjusted operating profit was up 3.97% to £1.70m compared with £1.64m the previous year. The company saw net cash increase to £2.72m compared with £1.98m the year before. Chairman James Dickson said: “I am pleased to report the group’s continued focus on growth areas has resulted in a moderate increase in adjusted operating profits for the six months to 30 September 2017, with our recurring revenue streams being strengthened by growth in the Smart Machines division further enhancing the quality of the group’s earnings. I was particularly pleased to report the acquisition of Vendman and a material contract win with a global coffee company post the year end as endorsement of the exciting growth prospects for our Smart Machines division. The revenue stream transition towards an annuity base will provide greater visibility and quality of future earnings for this division. As we expand the iDraught footprint, develop new revenues from further pub company data analytics and deliver efficiencies from increased automation in our Smart Zone division, the group believes that the division’s contribution can be sustained notwithstanding the challenges of the end customers’ market. Further we were pleased the company’s focus on Internet of Things and data analytics has been recognised by way of the reclassification of Vianet to the technology supersector as part of the FTSE ICB quarterly classification changes, which becomes effective as from 18 December 2017.  We believe this should also bring Vianet to the attention of a wider audience. Underpinned by high levels of recurring revenue, group cash flow is strong and there is a solid financial platform to facilitate further expansion and development. The board remains confident Vianet’s long term strategy is appropriate and that the group is capable of delivering consistent and sustained growth.”
 
Douglas Jack – Marston’s is building confidence: Peel Hunt leisure analyst Douglas Jack has said Marston’s is building confidence. Issuing a ‘Buy’ note on the shares with a target price of 140p, Jack said: “Marston’s has a wide range of profit streams, most of which are stable and cash generative. It is also managing is costs well, and, after an acquisition and a 36% increase in capex in 2017, has a sound foundation to generate circa 10% profit before tax growth in 2018E. Net debt/Ebitda remained at 6.0 times in 2017 on a pro forma basis (adjusting for acquisition timing). The £60m increase in net debt (despite a positive working capital movement) is not going to convince non-holders that the dividend is not being paid through higher debt. However, we do forecast net debt/Ebitda to fall to 5.7 times in 2018E, and believe expansion should continue provided that the return on investment on freeholds remains at 13% to 15%. Christmas bookings are in line, but we believe the outcome is likely to be better than that due to Christmas/New Year’s Day moving from a Sunday (last year) to a Monday, bringing the equivalent of an extra Saturday. The timing of the England matches at the World Cup could also not be much better, particularly the 7pm kick-offs on the Monday and Thursday nights, and the draw could lead to a long run in the tournament. This should be most beneficial to wet-led and town-centre pubs/bars.”
 
Corporate code set to get tougher on executive pay: Companies will have to consult their workforces and impose tougher standards over executive pay under proposals to change corporate governance rules. The Financial Reporting Council is planning a formal requirement for companies to take soundings from their employees and to have a greater regard for a wider range of stakeholders than in the past. The “comprehensive review” of the accounting watchdog’s code also includes proposals to extend the amount of time that executives have to wait to receive share awards from three to five years and to make companies say what they would do if they encountered significant shareholder opposition to executive pay policies and awards. Chairmen of remuneration committees should have at least 12 months’ previous experience and companies will have to make a bigger effort to have more boardroom diversity, including more women, people from ethnic minorities and social backgrounds. Britain’s corporate governance code has been in place since 1992. Its core principles of “comply or explain” will remain. The reforms will be subject to consultation until 28 February. Sir Win Bischoff, the council’s chairman, told The Times a revised code would be essential for restoring trust in business.
 
Fever-Tree appoints North American chief executive: Fever-Tree, the world’s leading supplier of premium carbonated mixers, has established a North American office and appointed Charles Gibb as the group’s North American chief executive. The company stated: “Since Fever-Tree first entered the North American market ten years ago, its pioneering approach to taste and quality of ingredients has seen the group become the number one premium mixer brand in the US. This announcement is the next step forward, signalling Fever-Tree’s commitment to and focus on the North American market. The US premium mixer sector continues to represent a significant opportunity for the group given the existence of the same trends of premiumisation, authenticity and mixability that have been driving the success of Fever-Tree globally. As part of this transition and reflecting the group’s increased ambition in the US, Fever-Tree has given notice to Brands of Britain, its US agent. The group will continue to work closely with Brands of Britain over the next six months with formal handover to be completed during the second quarter of 2018 after which time Fever-Tree will directly manage the current distribution network. Charles Gibb joined Fever-Tree as global strategy director in August and in his newly created role, will lead the group’s operations across North America. Charles is a highly-experienced, international executive with an exceptional track record gained over 25 years of operating at senior executive levels at Moët Hennessy, Diageo and Bacardi across a broad range of global markets. For the past nine years, Charles served as president and chief executive of Belvedere Vodka, a division of the LVMH Group where he was responsible for the Brand’s substantial global expansion.” Fever-Tree chief executive Tim Warrillow added: “Firstly I would very much like to thank Brands of Britain for its hard work and contribution to Fever-Tree’s success in the US. We have enjoyed working with their team over this period and wish them well for the future. The North American premium mixer market is still at a relatively early stage but the trend towards spirits premiumisation and the increasing focus on simple long drink mixability is accelerating and represents a significant opportunity for Fever-Tree, as the pioneer of the premium mixers segment. I am delighted that Charles Gibb has agreed to lead our operations in the region. He brings substantial international experience, a broad range of strategic and commercial skills as well as a proven track record of growing brands to significant scale. I look forward to working closely with him as we build the team and infrastructure in North America.”
 
London tops tourism charts as number of European visitors rises 24%: The weakness of the pound has helped London attract more visitors than any other European destination this year, despite a spate of terror attacks in the capital. The number of European visitors to London rose by 24% this year, according to data from online travel agent eDreams, helping the city become the most visited destination in Europe. The weakness of sterling against the euro is thought to have been a significant driver in the spike in overseas visitors. The pound remains 13% weaker against the euro than the day before the EU referendum in June last year and has failed to gain ground in the past 12 months, currently sitting at €1.13. Domestic holidaymakers are also increasingly visiting the capital rather than going overseas to places where their spending money doesn’t go as far as it did last year. The eDreams report said London had become the most popular destination for UK-based travellers, up from fourth in 2016. Chief executive Dana Dunne told The Telegraph: “The fall in the value of the pound since the Brexit referendum in 2016 appears to have been a key driver of growth, as visitors to the UK can now get more for their money. This should have a positive economic benefit in the UK as the World Travel and Tourism Council predicts that money spent by foreign visitors in the UK will increase by 6.2% for 2017.” The weak pound’s attraction for foreign and domestic travellers appears to have overcome fears about terrorism, which struck the capital at Westminster Bridge, London Bridge/Borough Market and Finsbury Park. A total of 14 people were killed and more than 100 injured in the three attacks in March and June this year. eDreams said London’s 24% rise in bookings from Europe was helped by the rising number of low-cost flights to the city.

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