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UK Leisure Sector - Q4 2015


Click here to download the UK Leisure Sector - Q4 2015 summary


With the festive period now a pleasant but quickly distant memory, we are able to review the UK leisure sector during 2015 as a whole. Whilst we are confident that 2015 will be seen as the point where the economic recovery reached the leisure and hospitality property market in all regions of the UK, it was a continuing trend that significant regional variations remain. Perhaps best evidenced by the differing LfL trading performance reported by two of the strongest managed pub operators, albeit with very different geographical concentration of assets. Mitchells & Butlers reported LfL growth of 0.8% for the 52 weeks to 26th September 2015. By comparison, Fuller Smith & Turner, with an enviable estate based almost exclusively within London and the South-East of England, achieved LfL sales growth of 5.6% for the 26 weeks to the same date. This is certainly not a new phenomena and despite the improving regional performance, it appears that strong sales growth in regional markets is an utopian dream for many.

2015 will again be remembered for strong merger and acquisition activity across all sectors of the leisure market. With an abundance of private equity funds and a healthy supply of suitable opportunities to satisfy appetites, Q4 2015 continued the trend from the first 9 months of the year. We saw Coral sell the retail arms of Gala Bingo to Caledonia in October for £241 million. Gala, with 1.1 million active members, is reported to represent approximately 38% of the UK retail bingo market. A month later Isfield Investments, in conjunction with a new management team, bought Kornicis Group comprising 17 sites in London. Luke Johnson continued to invest in this sector with the acquisition via Risk Capital Partners of the small Brighton based coffee shop chain, the Small Batch Coffee Company. To wrap up an active quarter, Singapore based Frasers Hospitality announced the acquisition of four further UK hotels from Swire Hotels adding to their earlier purchase of Malmaison Hotel du Vin in June.

Whilst concerns in relation to international security will undoubtedly continue to place a dark cloud across the wider UK economic and investment sentiment, we remain confident that 2016 will see further strengthening of the leisure sector market conditions and further improvement in trading performance, particularly among tenanted pub companies.

UK Leisure Sector Q4 2015 Highlights

October 2015 -

Leisure: Coral sells the 130 Bingo operator Gala to Caledonia Investment Trust for £241 million.

November 2015 -

Pubs: Kornicis Group, owner of Jamies and Smollensky's branded bars and restaurants with 17 sites has been sold by NBGI Private Equity to a new management team led by Richard Stringer and Ian Banks and backed by Isfield Investments.

Pubs: Punch Taverns has reported for the 52 weeks to 22 August 2015. EBITDA was £196m. Core LfL net income grew by 0.3%. Average EBITDA per pub is up 4% y-o-y reflecting disposals of non-core units.

Pubs: Enterprise full year results for the year to 30 September 2015. LfL income growth of 0.8% in the year as a whole. Revenue is £625m (2014: £632m) and the group has generated pre-exceptional EBITDA of £296m (2014: £302m). The group now has 35 managed units as at 30 September. Commercial property portfolio is now 213 sites.

Restaurants: Risk Capital Partners, Luke Johnson's private equity vehicle, has acquired a majority stake in the Brighton-based coffee shop chain and wholesaler, the Small Batch Coffee Company, for a reported £3 million.

Pubs: Mitchells & Butlers has reported for the 52 weeks to 26 September 2015. Total sales were up by 6.6% at £2.1bn. Adjusted operating profit was up by 4.8% at £328m. The group reports that LfL sales were +0.8% in the year.

Restaurants: Patisserie Holdings, the parent company of the Patisserie Valerie chain, has reported a 22.9% rise in adjusted EBITDA to £18.8m for the year to 30 September. During the year revenue grew 20% to £91.9m.

December 2015 -

Pubs: Cubitt House has secured investment from unnamed private investors who will acquire a majority stake in the business. Cubitt House operates The Thomas Cubitt, Elizabeth Street; The Alfred Tennyson, Motcomb Street; The Orange, Pimlico Road; and The Grazing Goat, New Quebec Street. All four are held on short leasehold interests. Cubitt House saw turnover of £11,088,702 in the year ended 31 December 2014.

Leisure: Indoor Bowling Equity has acquired 6 bowling venues from The Original Bowling Company taking it to 36 sites.

Hotels: Following its purchase of UK hotel group Malmaison Hotel du Vin earlier this year in June, Singapore-based Frasers Hospitality announced the acquisition of four boutique hotels in the UK from Swire Properties Hotels Holdings for €36.1 million (€136,000 per room). The portfolio of hotels, across southern England, includes the 75-room Avon Gorge Hotel in Bristol, the 60-room Montpellier Chapter in Cheltenham and the 71-room Hotel Seattle in Brighton.

Restaurants: Fulham Shore, the David Page-led operator of Franco Manca, The Real Greek and Bukowski Grill, has reported a rise in revenue from £5.5m to £13.9m in the six months ended 27 September 2015.

Leisure: AB InBev purchased Camden Town Brewery in a transaction which reportedly values the company at £85 million.