The Brighton Pier Group looks like the perfect reopening play

At The Brighton Pier Group, an eclectic leisure time mix offers excellent upside for this coming year, argues Mark Watson-Mitchell.

Before you start reading this profile just imagine what it will be like in less than one month’s time after all the lockdowns are ended – Javid permitting.

People will be able to go freely around enjoying themselves and their leisure time, which has been not easy over the last fifteen months.

Restaurants, bars, entertainment and other recreational facilities will be open and able to do business again – restriction free.

Let us just hope that the recent temperamental weather turns to sunny, warm and welcoming.

Today’s company selection will certainly be a grateful recipient of increased spending and, despite the fact that its shares have already doubled this year, I now rate them as a very appealing investment.

I refer to The Brighton Pier Group (LON:PIER). 

Not only does the company own the Brighton Palace Pier, but it also operates nine premium bars nationwide, eight indoor mini golf sites and the recently acquired Lightwater Valley theme park in North Yorkshire. 

Upon its admission to AIM in November 2013, the company was called the Eclectic Bar Group, but after it acquired Brighton Pier it changed its name and was readmitted to AIM in late April 2016.

It now operates as four separate divisions – Brighton Marine Palace and Pier Company, Eclectic Bars,Paradise Island Adventure Golf, and finally Lightwater Valley Attractions.

Brighton Marine Palace and Pier Company 

This side operates the family-friendly Brighton Palace Pier, one of the leading tourist destinations in the UK.

It has a wide range of attractions including two arcades with over 300 machines and eighteen funfair rides, together with a variety of on-site hospitality and catering facilities. 

The pier is free to enter, with revenue generated from the pay-as-you-go purchase of products from the fairground rides, arcades, hospitality facilities and retail catering kiosks. 

Eclectic Bars

This division owns and operates nine bars which trade under a variety of concepts including Embargo Republica, Lola Lo, Le Fez, Lowlander and Coalition. 

The bars estate is based in key university cities and towns that provide a vibrant night-time economy and the demographics to support premium bars. 

They target sophisticated students midweek and stylish over-21s and professionals at the weekend, by delivering premium product ranges, high quality music and entertainment. 

Paradise Island Adventure Golf 

The golf division operates eight indoor mini-golf sites at high footfall retail and leisure centres. Looking to capitalise on the convergence between retail and leisure, offering an accessible and traditional activity for the whole family.

There are sites in Glasgow, Manchester, Sheffield, Livingston, Cheshire Oaks, Derby, Rushden Lakes, and in Plymouth, with each site offering two unique 18-hole mini-golf courses. 

Lightwater Valley Attractions 

Only acquired two weeks ago for up to £5m cash, this part of the group owns and operates the Lightwater Valley Theme Park, which is a leading North Yorkshire attraction, set in 175 acres of landscaped parkland.

Focused on family days out, it offers a variety of attractions with rides, amusements, crazy golf, children’s outdoor and indoor play, entertainment shows, together with numerous food, drink and retail outlets. 

It also provides popular seasonal events including Halloween and Christmas.

Buying to build from its organic base

It is the group’s intention to position itself as a consolidator in this sector.

To capitalise upon the skills of the four existing divisions, the strategy is to create a growth company with a diverse portfolio of leisure and entertainment assets in the UK. 

It will look to realise synergies by leveraging scale. The group will seek organic revenue growth throughout its whole estate, while also actively pursuing future potential strategic acquisitions of entertainment destinations.

Quite a capable management team

The very able former stockbroking analyst Luke Johnson is a major shareholder and the group’s Chairman. His experience is legend, from reversing Pizza Express into Star Computers in the early 1990s, he co-founded the Strada restaurant chain and was Chairman of Giraffe for nine years until it was sold to Tesco for £50m in 2013.

Luke, who joined the company in June 2015, was also on the Board of My Kinda Town and currently chairs Bread Limited, the owner of the artisan bakery chain, Gail’s. 

The group’s CEO is Anne Ackord, who was previously Director of holiday park operator Bourne Leisure, and motorway service areas group Welcome Break. 

The CFO is accountant John Smith, formerly with Touche Ross, International Currency Exchange, Vision Express, then First Leisure Corporation, before becoming Finance Director of Eclectic Bars in June 2006.

A fairly tight equity

The group has some 37.29m shares in issue. 

Significant shareholders include the HPB Pension Trust (29.1%), Luke Johnson (27.0%), SFM UK Management (14.9%) and John Smith (3.4%).

Broker estimates

The company’s broker is Cenkos Securities, who currently have a ‘buy’ note out on the group.

Their analyst, Peter Renton, is anticipating the current year to the end of this month to show a fall in revenues, understandably, from £22.6m to just £16.0m, while adjusted pre-tax losses will have reduced substantially from £2.1m to only £0.5m.

However, going forward into the year to end-June 2022, he sees a big lift in revenues to £30.7m, with a profit of £3.0m, worth 6.4p per share in earnings.

My View

So just forget about the last fifteen months and look to the next twelve months – with sales and profits on the recovery tack.

The group’s shares were up to 188p or so way back in 2014 but had fallen to a low of 25p in March last year. 

They were 29.5p at the start of this year, since when they have risen steadily to the current 61p.

At that level they are trading on just 9.5 times price earnings for the coming year – that is too low and why I consider that they will trade significantly higher over the next year.

Although they could aim to break through the 100p barrier again, I now set a modest target price of just 75p.