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http://www.thenorthernecho.co.uk/business/8373480.Arcade_fire_over_new_rules_delay/ THE Government has been urged to save the region’s ailing amusement arcade industry which has been hit by a number of closures in recent months. At least five amusement arcades have closed in the past two months – including outlets in Middlesbrough, Hartlepool and York – with the loss of about 35 jobs. Trade association Bacta, which represents amusement arcade owners, claims businesses are being strangled by red tape and what it describes as unfair gambling legislation hitting trade. It said the Government should reverse legislation which reduced the amount that could be spent on a single stake or “spin” on amusement machines from £2 to £1 and placed limits on the number of machines allowed in premises, regardless of their size. In addition, business owners were having to swallow a VAT rise in January, which unlike other retailers, cannot be passed on to customers. Craig Truelove, of Brigg Amusements, in Filey, North Yorkshire, said: “The industry is on its knees. Everybody is struggling and in the same boat. “We have had a really tough two years and I don’t know how we have survived.” Mr Truelove, who said his family-run business had recently closed two gaming outlets on the North Yorkshire coast, said licensing costs had gone up by 363 per cent over the past five years, while businesses also faced increased competition from bookmakers. Bacta said 1,350 jobs had been lost in the British amusement arcade industry in the past 18 months. This was also having a knock-on effect on firms that manufactured amusement and arcade machines. Its chief executive Leslie MacLeod Miller, said: “Every week of delay means further closures. “Burdensome legislation has wrapped the amusement industry in red tape and is forcing the closure of hundreds of businesses. “Both the Conservatives and Liberal Democrats promised to take action while in opposition. They cannot now be allowed to forget about the thousands of British jobs that are at risk.” A spokesman for the Department of Culture Media and Sport said: “We are keen to ensure these businesses can remain competitive in these tough economic times. “We are looking at industry requests to increase the maximum stake from £1 to £2 and permitting a modest increase in the number of such machines in adult-only arcades and bingo clubs, and we hope to make an announcement shortly.” Now I read into this that BACTA already knows what the announcement is going to be - or have I read between the lines too much?

according to RNS today

from praesepeplc.com With the season now in full swing I am very pleased with our four FECs (at Weston, Burnham on Sea and Ilfracombe). All four venues have been reequipped with particular emphasis on children’s ‘ticket redemption’ prize machines and these are proving a big hit with the holiday makers. At our inland AGC venues Steve Lawrence and his new Operations team are now getting up into top gear on all fronts and again this is having a very positive effect on the business. Similarly Kevin Hamilton and his Beacon Bingo team are producing some great results, not only at the Club venues but also in terms of our on-line ‘BeaconBingo on-line’ web site. When we bought Beacon we were confident that we would be able to identify considerable synergies between the two businesses and this has been the case. Les Brydon, one of my former Regional Directors from Talarius has been working with us on a consultancy basis, spearheading the integration of the two businesses and this initiative is going well. When we purchased Beacon there was a live deal to sell the Streatham Bingo club to a private operator. Having reviewed the club and its potential we decided to abort this deal and we are now working hard to breathe new life into the business in Streatham and to allow the Club to reach its potential earnings targets. This is starting to come through now and the venue will now make a serious contribution to group EBITDA. Nick Harding August 2010

in fact, given the background of the majority of the top team (GW, WT), might it be less surprising to some if FIF went private (via Bridgepoint) than anything else?

nicely muted TS, an air of quiet optimism I thought more focus on free from and speciality breads is a good thing imo and FIF needs to be in a position to participate in the leadership of these markets - maybe more acquisitions in these areas? interesting that Thorntons cakes did so well - that's a super premium brand that consumers like / associate with indulgence and, with good distribution, might do even better vs private label in future agree that some more debt reduction would be nice but, all in all, I think the new CEO (still less than a year in of course), has a good grip on what needs to be done and is getting on with doing it IMO Park is maybe just too big an acquisition to pull off now. You can be sure that Duffy et al know enough about Park to judge a good price, but why would they not leave it bumbling along where it is - surely its of very little interest to anyone else just now and I doubt Vision has been investing too heavily in it recently - and mobilise the firepower towards acquisitions in speciality breads and free from, they are the growth markets aren't they? I know they supply into France already so maybe that will feature in something sometime in the future too - Lightbody Europe SARL is in Rennes. It would be a bit of a departure from the previous activities of the board but hey, who knows?

OK, as I was concerned about the share price, I did some research. I went back over recent announcements and I visited two venues again: the crystal rooms and a bingo club. Two things give me cause for optimism and, whilst they don't totally eliminate every last bit of any concern I have had about the falling share price, I am more than satisfied to stick with my investment. i) Bingo! The electronic bingo is a superb product and this statement from the annual report 'We continue to apply to vary venue licences from AGC to Bingo Club and are working on a way to link all these small ‘Micro Clubs’ together in a way which will allow the bingo player who is out doing her shopping to drop in and play for exciting prizes that compete with other types of gaming on the High street.' gives a hint to the direction this is going. If PRA can indeed network its bingo machines across its venues (just as conventional bingo already does), then the jackpot size (and likely payout frequency) will be very attractive. I saw jackpots on the machines in situ already (not linked across sites) at £2k and £7.2k! As implied in the annual report, this will help to win a share of business from other venues - where else could you go now to have the potential to win £7.2k from a low stake machine (casino machines tend to only be up to £4k) If you haven't played these machines (or watched someone play them), its hard to understand just how good they are at extracting money from players. From an operator perspective they are smashing. 2. B3 stakes review. Appreciating that PRA's venues are, essentially, fixed cost from the perspective of machines, then any increase in revenue makes a very big impact on profitability. The DCMS is reviewing stakes and there is talk of an increase in B3 stakes from £1 to £2. Again from the PRA report 'we do believe that this would be further underpinned by an increase in stakes on Category B3 machines later in 2010, which we expect to come as a result of the current review being undertaken by the Gambling Commission and the Department of Culture Media and Sport. Any changes in stake levels on B3 equipment will affect both our AGC business and our Bingo Club business.' Once the DCMS review is completed it will, at the very least, take away an element of uncertainty and, if the outcome does allow a stake increase / improved ratio of B3 to C machines, the benefit to PRA will surely be significant. As an aside, if the review negatively impacts FOBTs in bookies, there is even more potential for the bingo offer to appear as an attractive alternative to more people.

SAurely what Harding and his increasingly large cadre of expensive boardroom colleagues need to do now is to fund some acquisitions with shares imagine this hypothetical scenario So Mr AGC Chain owner, your business is worth, we both agree, £10m. Now, how about we give you £3m of PRA shares (at 7p) for it. As you know, the shares are likely to go up some time and, let's say they get to 49p, that's £21m for you already.... Deferred tax bills, control over realising the capital gain, a stake in the business to keep you interested blah blah blah So, how about it?

Now that we know that John Penrose has been appointed as Minister for Gambling most larger companies are springing into action and trying to arrange meetings with the Minister. I have an advantage here in that Mr Penrose is also MP for Weston Super Mare where we now operate a large FEC business called the Golden Gate. On this basis I wrote to Mr Penrose about two weeks ago but as yet haven’t received a reply! Our political agenda at present hinges entirely around the increase in stake on B3 gaming machines. Just this small adjustment would not only improve revenues overall but would cause us to start to take on new products (new B3 games) on a revenue share basis would also make the lower priced Category C gaming machines more attractive to players. We had strong support from both the Conservatives and the Liberal Democrats prior to the election and clearly now we are expecting them to deliver. Having commissioned some brand research into the Cashino and Showboat trading names for AGCs we found an overwhelming case for retaining Cashino and rebranding Showboat. Showboat will be mothballed and used at seaside locations where the research indicated that it was strongest. So our two brands will be Beacon (bingo) and Cashino (AGCs). In addition we also have ‘BeaconBingo on-line’ which although only being a fledgling business is a strong site, ably managed by Chris Drake. Chris’s experience is all off-line and this therefore tends to shape the way that he presents the on-line offer. He has some interesting innovations, including a video of himself walking around the home page, which is interesting! Last Thursday and Friday I was finally given a pass out of the office and was up the M6 to meet some of our AGC managers in the northwest. We now have strong representation up there and I was able to visit venues at Farnworth, Lancaster, Birkenhead, Liverpool, Runcorn, Chester and Stockport. To a man (or woman actually) they were very positive and enthusiastic about the changes to the business and I am certain that this enthusiasm will permeate across to our player base and from there on to revenues. All the venues were busy promoting World Cup fun games for the players and were also preparing for a fund raising day in aid of the CHIPS charity. I am confident that we will do well for CHIPS on the day and will be able to provide more funds for wheelchairs for disabled youngsters. Progress continues to be made in the integration of the Beacon and Praesepe business and we are well on track to achieve all the targets that we set for ourselves in this process. The offices in Milton Keynes have been extended to provide accommodation for the new operations team and the IT systems will be merged in the next few weeks. Integration is always a painful process for the staff who are being ‘rationalised’ but we are mindful of this and try to make things as simple as we can, always bearing in mind that the purpose of any merger is to c

Look up there, see the recent director trades... Harding, Proctor, Evans... all putting there money where there mouth is

PRA has a market cap (based on yesterday's close and 300,113,638 shares in issue) of £25.15m and, after the acquistion of Beacon it also has - 80 sites - extended bingo offer - a £45m debt facility - a new Board member And still has a decent pipeline of deals that just need the finance to conclude - including those mentioned in Spain, Germany and Netherlands. I really, really want to see a European deal done next. Transformational is an oft used word in takeovers, but I think this really has transformed the prospects for PRA from a contender to a very serious player in its industry. I remain optimistic that the top team can make exciting things happen.

a little update on the www.prasepeplc.com website - microbingo - B3 stakes - EGM - an invitation worth a read

seems very complicated way of achieving the stated objective, no shortage of fees to be paid there! http://www.londonstockexchange.com/exchange/prices-and-news/news/market-news/market-news-detail.html?announcementId=10375061 but the intent is good and the result should be OK I read that there is more to come too - enough being raised for one deal here, but 5 are mentioned in some detail.

A nice little e-zine has appeared on the www.praesepeplc.com home page 'How do you grow a pan-European gaming business in the midst of a recession' Worth a look imo

http://business.timesonline.co.uk/tol/business/movers_and_shakers/article6981553.ece

Nice two page article / interview with Nick Harding the CEO. A prelude to some sort of corporate activity in the near future?

I'd really like to see Praesepe do a deal in Europe (maybe Netherlands, Spain or Germany I suppose) next. It would be a good thing for Praesepe and its shareholders, imo, for a number of reasons (including but not limited to) 1. No one else seems to be trying to consolidate outside the UK to any extent 2. It could put PRA on the radar of a much broader investment community across the continent. A few continental fund managers showing some interest would do no harm. 3. I suspect the UK AGC market is a little ahead of the European market and that some catch up changes could really add to the earnings of the acquired sites quickly and easily 4. Euro income could, imo, be worth more pounds in future than it is now as currency movements continue 5. The first few European acquisitions might just open the floodgates to many more opportunities. 6. It helps with the exit: Surely a pan European business would be a tastier morsel for (for example) one of the big US operators than just another collection of sites in the (more competitive, less fragmented) UK?

The CEO, Nick Harding, started this journey once before as CEO of Talarius plc. From June 05 to Jan 07 he grew Talarius to become the largest UK AGC operator (200 sites), taking the share price from 80p to 280p in the process. His plans for Talarius were cut short – in a nice way – by an earlier than expected, acceptable offer to sell to an Australian based trade buyer on a 9x multiple. The expectation was that Talarius, under its new ownership, would continue with its acquisition plans but, due to problems in its home market, it hasn’t. Nick’s no compete clause expired and he began the same journey again with Praesepe. This time he and his main backers are more determined to reach the £100m EBITDA target and an early buy out offer is, therefore, less likely to be accepted. Praesepe is at the early stage of its journey. At the time of writing it has 54 sites across the UK, EBITDA for the 6 months to July 09 of £1.14m, a strong deal pipeline and a market capitalisation of £17.8m. The main shareholder (38.5%) is Marwyn – a big backer (and beneficiary) of Talarius previously. It is committed to the plan and is unlikely to sell out before the target exit. Depending on the size of the business being bought, Praesepe has acquired sites / groups of sites on EBITDA multiples up to 7x, with the average around 5.2x. Nick Harding is President of BACTA (the AGC trade body) and is well thought of in the industry across Europe – this makes doing deals that bit easier. On acquisition, sites are usually rebranded (Cashino), refitted with new machines on a revenue share model with leading manufacturers (uniquely for the industry – lower capex requirements / no ‘failed’ machines) and the operations are sharpened across the board. Based on The Crystal Room (so far the flagship Praesepe site in Leicester Square, London), such actions have a dramatic impact on revenue and earnings: The Crystal Room weekly revenue is considerably up versus the weeks before the acquisition was completed. Acquisitions will be funded by a mix of new equity and debt. Currently there are 220m shares in issue, with 400m authorised. Have in mind that there is the potential for dilution unless further investments are made as new shares are issued. If the business sells for £800m with 400m shares issued, that is £2 a share. Compare that to the 8.5p market price today and, if you believe that the AGC market will follow the rule of consolidation and that Nick Harding can repeat and build on his previous success at Talarius, then it is worth a look.