Brighton Pier Regulatory News (PIER)

The Brighton Pier Group PLC

 (the "Group")

 Final results for the 52 weeks to 25 June 2017

29 September 2017

The Brighton Pier Group PLC consists of two divisions: The Brighton Marine Palace and Pier Company, which owns and operates Brighton Pier, an iconic landmark and leisure attraction in Brighton; and Eclectic Bars Limited, which is a leading operator of premium bars in the UK.

Pier division highlights

· First full year in the group delivered operating profit of £4.1m

· Opportunities for growth across all income streams

· Exciting plans to upgrade the bars and restaurant at a cost of £1.3m over the coming winter

· Recent dive and structural surveys do not indicate any requirement for exceptional repairs

Bars division highlights

· Operating profit of £2.0m (excluding loss of £0.2m from 6 disposed sites)

· Small minor upgrades to three bars completed during the year

· 'Smash' brand launched successfully in Reading

· Further roll-out of the 'Smash' brand to continue with the conversion of Wimbledon

Commenting on the results, Luke Johnson, Executive Chairman said

'The results for the year now include the first full year of trading since the acquisition of the Brighton Palace Pier. During the period the group doubled adjusted earnings per share. This financial progress demonstrates the success of our strategy.

Over the next few months, work will start on the exciting upgrades to the bars and restaurants across the pier. As well as a major upgrade to all our facilities, these changes will significantly increase capacity inside and out and provide new conference and events opportunities all the year around.

The Group continues to rationalise the bars division together with driving operational and financial improvements across the estate. During the period, we have successfully disposed of six marginal sites and in the last few days we have let the lower floors of our freehold site in Derby to a new restaurant owner on a 20 year lease.'

All Group announcements and news can be found on www.brightonpiergroup.com.

Chairman's Statement

This set of results includes the first full 12 months of trading by The Brighton Marine Palace and Pier Company, acquired by The Brighton Pier Group PLC ('Group') towards the end of April 2016.

Brighton Palace Pier is an iconic landmark and leisure attraction in Brighton, offering a wide variety of seaside entertainment including rides, amusement arcades, bars, a restaurant and other food and retail kiosks. Free of charge to enter, the pier provides a nostalgic, recreational environment, with spectacular views of Brighton and the English Channel. According to Visit Britain, it is the fifth most popular free visitor destination in the UK, drawing over 4.65 million visitors in 2016, and making it the UK's most visited attraction outside of London.

I believe this acquisition capitalised on a significant opportunity for the Group to acquire the freehold of a valuable asset, while at the same time broadening its business base. The enlarged Group has also benefited from the extensive experience of the pier's management team, led by Anne Martin. Revenue generated has transformed the existing business during the current financial year, providing substantial free cash flow for use within the enlarged Group and enabling the possibility of funding further acquisitions across the leisure and entertainment sector, as and when opportunities arise.

During the first financial year of ownership, the pier business has traded in line with our expectations. The pier continues to attract visitors to Brighton seafront in substantial numbers, many of whom come by rail. Reduced disruption to the services will benefit both the City of Brighton and the pier in the coming years if a final resolution to the dispute can be achieved.

The Group continues to make good progress rationalising the bars division together with driving operational and financial improvements across the estate. During the 52 week period, we have disposed of six marginal sites and since the year end we have let part of our freehold site in Derby to a new restaurant owner. Whilst these actions have resulted in reduced sales and closure costs, EBITDA losses from these venues during the period equated to £0.2 million, the elimination of which will benefit trading in the coming financial year.

At the end of this financial period, the combined Group improved profitability, doubling its basic adjusted earnings to 10.9 pence per share (4.2 pence per share for the same period last year). This financial success demonstrates what results the Group can continue to accomplish through effort and application.

I am equally delighted to report that the Board has decided to approve an ambitious plan to upgrade the catering and bars facilities on the pier. Over the coming winter season, Palm Court and Victoria's Bar will close to undergo a full refit. This upgrade will involve a substantial modernisation of the restaurant and bar, as well as creating flexibility to provide either one large or two smaller conference and events space(s) throughout the year. Combining the main restaurant and takeaway kitchens will enhance efficiency and increase internal and external seating capacity by 60%.

At the same time, but over a shorter period, similar work will take place on the refit of Horatio's. Opening up the walls to extend this bar to the outside will enable customers to benefit from its enviable position on the pier, with views over Brighton and the sea front. The upgrade to Horatio's and its outside terraces will increase overall capacity as well as enhancing the bar's ability to offer food, live music and other events throughout the year. There will inevitably be some sales and profit impact from these closures during the winter months; however, the upgrade to the facilities, giving flexibility to seat more visitors during peak summer trading season and offer improved conference and event spaces, should significantly benefit the pier over the longer term.

The financial highlights are included in the Business Review. 

Board

Finally, I am delighted to report the appointment of Anne Martin in a newly created role as Chief Executive Officer of the Brighton Pier Group, which took effect from the start of the new financial year on 26 June 2017. Anne has brought a wealth of experience to the Group since she joined following the acquisition of The Brighton Marine Palace and Pier Company. Under her leadership over the course of the last 11 years, The Brighton Palace Pier has continued to grow year-on-year. As the Group purchases more businesses, her unique knowledge and experience will be invaluable in helping to evaluate, acquire and manage these new assets.

Dividend

The Board does not propose to pay any dividend during the year.

Luke Johnson

Executive Chairman

29 September 2017

Business Review

The Group owns and trades Brighton Palace Pier as well as 14 (2016:18) premium bars in major towns and cities across the UK.

Brighton Palace Pier offers a wide range of attractions including 2 amusement arcades and 18 rides, together with a variety of on-site hospitality and catering facilities. The attractions, product offering and layout of the pier are focused on creating a family-friendly atmosphere that aims to draw a wide demographic of visitors. The pier is free to enter, with revenue generated from the pay-as-you-go purchase of products on the rides, in the arcades, in the hospitality facilities and at the retail kiosks.

The bars trade under a variety of concepts including Embargo Republica, Lola Lo, Po Na Na, Fez Club, Lowlander, Smash and Coalition. The Group predominantly targets a customer base of sophisticated students midweek and stylish over 21s and professionals at the weekend. The division focuses on delivering added value to its customers through premium product ranges, high quality music and entertainment, and a commitment to exceptional service standards. The Bars estate is nationwide, incorporating key university cities and towns that provide a vibrant night-time economy and the demographics to support premium bars.

Full year results

The trading results include the 52 week period for both the Pier division and the Bars division. While the Bars division has a full comparative in the same period last year, the acquisition of the Pier division completed on 27 April 2016 and as a result has only 9 week in its comparatives.

The Group is pleased to report continuing profitability with profit before tax and highlighted items of £3.5 million (2016: £0.9 million).

Adjusted earnings per share (basic) on all operations was 10.9 pence (2016: 4.2 pence).

Adjusted earnings per share (diluted) on all operations was 10.4 pence (2016: 4.1 pence).

Profit before tax and after highlighted items was £1.9 million (2016: £47,000).

Basic earnings per share was 5.9 pence (2016: loss per share of 0.5 pence).

Diluted earnings per share was 5.7 pence (2016: loss per share of 0.5 pence).

Review of the Group's activities for the year

Pier Division

The Pier division manages all the trading of The Brighton Marine Palace and Pier Company, owner of the iconic landmark and leisure attraction in Brighton.

The Pier has now completed its first financial year under new ownership. We are pleased to report that trading has been in line with expectations announced at the time of acquisition and that integration into the Group was completed considerably quicker than expected.

Since the end of the financial year, trading on the pier during August and September has been mixed and did not match the strong trading performance of financial year 2016, owing to rain and strong winds. The management team at the pier has shown itself adept at generating revenue when the sun shines and saving costs when possible.

In September 2016, we reported on the new soft play trial in the Glitter Bar, the new takeaway fish & chip shop on the pier head, and the launch of the new website. The success of the soft play trial gave us the confidence to launch the largest soft play area in Brighton, with the creation of 'Palace Play' in the Dome, totalling 231m2 with a capacity for 140 children. A new café has also opened in the Dome, providing an area for parents and friends to relax whilst their children play. Both facilities opened in March 2017, enabling us to increase the price of the children's wristband and thus, contributing positively to trading at the pier. Palace Play also has the advantage of offering a leisure space all year round and an activity for local Brighton families and guests to enjoy in the winter months.

The new takeaway fish & chip shop opened in June 2016 and has been a notable success, repaying its investment by the end of the first summer of trading.

The new website has been a strong tool in driving online sales of wristbands and has helped to offset some of the negative effects caused by the disruption of train services over much of the summer. The quick and easy train service into Brighton from London is a major benefit to all businesses in Brighton, as well as the wider local population, and whilst there have recently been some improvements in the service, a resolution to these disputes would be welcomed to allow it to return to full service.

In December, we launched our first Christmas market on the pier. Incorporating 20 stalls, it provided an incentive to visit the pier during its winter season. The additional footfall created by the market benefited the restaurants, arcades and rides during what would otherwise be a quiet period. The plan next year is to develop the market further and consider whether there may be similar events that could be added to the pier's calendar during the quieter off- peak season.

Review of the Group's activities during the year (continued)

As always, the months between September and March are an opportunity to catch up on general maintenance and embark on new projects ready for the busy period from Easter onwards. This year has been no exception; the dive survey and annual survey were both completed, resulting in no additional maintenance needs other than the budgeted requirements and, thereby allowing us to commence a number of new projects. The first of these involved the move and replacement of the 'Dolphin Derby, a game that is a big favourite on the pier but is now 25 years old. At the end of February, the brand new Dolphin Derby was installed in its new location next to the 'Wild River Ride'. This move made way for the new 'i-220' children's ride (opened in March) and for the improvements planned for Horatio's Bar this winter. The i-220 will elevate visitor's skywards, offering scenic views of the seafront - however, unlike its namesake (the 'i360'); the new i-220 ride will take visitors to a less-dizzying height of 8 metres.

Finally, on 1 July 2016 we reported the plan to reclaim the Brighton Pier name, restoring the Palace back to its original title of 'Brighton Palace Pier'. A competition was held to design the new sign for the pier, and our chosen winner was Lucy Williams, a local Brighton resident. Her design creates an archway of the word 'Brighton' representative of the pier's dome, with the remaining words 'Palace Pier' on the facade of the building. Work is underway to construct the first of these three new signs.

The Bars division

The division has continued to focus on reducing operating costs, maintaining gross margins, reviewing the potential disposal of marginal and unprofitable sites (where the opportunity arises), minor refurbishments to three venues, and the launch of 'Smash', a new venue within the Group's Reading Sakura site. Progress continued to be made in these areas during the period.

Gross margin has improved by 200 basis points against the same period last year, despite cost increases, which have been filtering through from the weak pound. Focus has been on regular reviews of competitor pricing, targeting customers into more profitable products, and supplier support. Labour and controllable costs continue to be tightly managed, with unprofitable nights being closed and underperforming or marginal venues being disposed of. Six sites have been disposed of since June 2016.

The street level bar of Reading Sakura was re-developed and reopened at the end of May 2016 as Smash. The bar trades during post-work hours and in the evening with a menu that includes fresh-dough pizza and craft beer. In addition, the venue provides activity areas for customers to enjoy games of ping pong with friends and to watch major events on large screens. Work is now underway to open our second Smash in Wimbledon with the conversion of the existing Po Na Na venue; this will open on 30 September 2017.

In December 2016, we started a programme to install new EPOS, and now all sites have been fully installed. This upgrade provides integrated chip and pin, which massively reduces the risk of defalcation, as well as improved end of day routines that allow the General Manager to spend less time on back office duties and more time driving sales and improving the customer experience. The new software and hardware simplify the connectivity of new apps, improve speed of service and reduce annual maintenance costs.

During the period, the Bars division undertook a rebuild of the Eclectic websites. These were all completed at the end of February, improving online bookings, mobile functionality and creating a single content management system for all the brands.

At the end of January 2017, Manchester Lola Lo underwent an upgrade to develop and modernise its offering, with the addition of media screens, a dedicated 'Master Class' bar and changed seating areas. The new media screens enable Lola Lo to display major sporting and other events throughout the venue. A similar upgrade was completed to Cambridge Lola Lo at the end of April 2017.

Since the year end, a further minor refit has taken place to convert the second floor of Reading Sakura to a Coalition, thus concluding a full upgrade to the whole site during the year.

Bars disposals

The Group has continued to rationalise its estate, disposing of some of the smaller marginal sites together with any underperforming sites.

Sheffield

The lease on this trading unit was assigned on 8 July 2016. All costs associated with this venue were provided for in prior periods.

Brighton Dirty Blonde

A surrender of the lease was agreed on 23 November 2016 at no cost to the Group. No residual risk remains on this site.

Lincoln Lola Lo

The lease for this business was held in a separate company. This company was sold on 23 November 2016 for a nominal sum. No residual risk remains to the Group from the disposal of this company.

Edinburgh Lola Lo

This venue was sub-let to an existing Scottish operator on 31 January 2017. This lease expires on 6 June 2021.

Brighton Lola Lo

The lease for this business was held in a separate company. This company was sold on 13 March 2017 for a nominal sum. No residual risk remains to the Group from the disposal of this company.

Oxford Lola Lo

This venue was assigned to another operator on 17 March 2017. This lease expires on 9 February 2021.

Manchester Sakura

This site remains closed. The landlord is in the process of making repairs to fix the water ingress from the railway track above the venue. No rent or rates are currently being paid on this closed site. We will seek to dispose of this site once the repairs are complete.

Derby Lola Lo

Since the end of the year, the Group has granted a twenty-year lease over the lower floors of our venue in Derby to a new tenant at an annual passing rent of £90,000.

These disposal sites (including Derby) together make up £1.9 million of the sales shortfall versus the same period last year. The trading loss from all of the above disposed sites in the period equated to a loss of £0.2 million. The write-offs associated with the disposals, including goodwill and fixed asset write-offs, legal and other costs, less any proceeds, totalled £0.5 million. These costs are included in highlighted items (see Note 3).

Outlook for the coming year and strategy of the combined Group

We are confident of another year of progress.

The pier continues to attract visitors to Brighton seafront in substantial numbers, despite the weather since the end of the financial year not matching that enjoyed in the previous year.

In the short to medium term, the Group sees development opportunities for the pier business, including the potential to improve its catering and hospitality offering. An ambitious investment plan will be underway shortly to create more capacity within the Palm Court restaurant and in Victoria's Bar, both inside and outside. These changes are intended to improve the surroundings and provide more flexible space for conferences, functions, and weddings on the pier, as well as extra seating during the busy summer months. At the same time, we are also developing plans for Horatio's Bar, utilising the broader Group's expertise of bar management. These exciting developments will start in October and November of this calendar year, and are anticipated to impact trading in the coming financial year, with an immediate benefit expected to be generated next summer.

In terms of the Bars division, the Group will continue to focus on providing quality service and delivery in respect of the Group's existing sites, whilst also continuing to undertake selective investment to improve the estate, dispose of the remaining two closed sites, and target developments and acquisitions when opportunities arise. The successful disposal of the six loss-making sites in this period, and the development to convert our Wimbledon site to a Smash will benefit trading in the coming financial year.

The long-term strategy of the enlarged Group is to capitalise on the skills of both the Bars and the Pier divisions to create a growth company operating across a diverse portfolio of leisure and entertainment assets in the UK. The Group will achieve this objective by way of organic revenue growth across the whole estate, together with the active pursuit of future potential strategic acquisitions of and entertainment destinations, thus enhancing the Group's portfolio to realise synergies by leveraging scale. It is the Board's longer-term strategy to position the Company as a consolidator within this sector.

Significant events that have taken place since the year end

There have been no significant events arising between the end of the financial year and the date of signing of the financial statements to report.

Cash Flow

Cash flow generated from operations (after interest and tax payments) available for investment was £3.7 million (2016: £1.9 million).

Balance Sheet

Fixed assets

The Group invested £1.7 million in capital expenditure during the period (2016: £1.2 million).

· £0.7 million was spent on the Pier division - which primarily included new arcade machines, the Palace soft play and café in the dome, new pizza and fish & chip takeaways, Dolphin Derby, i-220 and other minor capital maintenance.

· £0.9 million on the Bars division - which primarily included the upgrades of Manchester and Cambridge Lola Los, Reading Coalition, new EPOS installation and other minor capital maintenance.

During the period, the Group disposed of a number of sites resulting in fixed assets with a net book value of £0.3 million being written down. This cost appears in highlighted items (see Note 3).

Bank debt

At the period end, the Group had:

· an outstanding term facility of £11.3 million (2016: £12 million), with repayments of £1.2 million due to be repaid within the next 12 months (2016: £1.2 million);

· an RCF facility of £1.0 million with £nil million drawn at the year-end (2016: £0.5 million);

· cash balances of £4.1 million (2016: £3.1 million).

Key performance indicators

The Group's key performance indicators are focused on the continued expansion of the Group to drive revenues EBITDA and earnings growth.

New acquisitions and developments

The long-term strategy of the enlarged Group continues to capitalise on the skills of the Group to create a growth company operating across a diverse portfolio of leisure and entertainment assets in the UK. The Group will achieve this objective by way of organic revenue growth across the whole estate, together with the active pursuit of future potential strategic acquisitions of leisure and entertainment destinations that could enhance the Group's portfolio realising synergies by leveraging scale. It is the Board's longer-term strategy to position the Group as a consolidator within this sector.

· The successful acquisition of the Brighton Marine and Palace Pier Company in April 2016 is the first example of this strategy. The cash flow generated by the pier from its first full 12 months of trading has been transformative, bringing substantial additional revenues and free cash flow for potential utilisation by the enlarged Group. This could include the possible funding of further acquisitions across the leisure and entertainment sector.

· Significant developments are planned for the coming financial year in terms of refurbishing the restaurant and bars on the pier. In addition, we continue to invest in the bars estate with three small refits during the year and a major refit planned with the conversion of Wimbledon to Smash in the coming financial year.

· We continue to focus on the long-term quality of acquisitions.

Group performance versus the prior period

The Group will continue to drive sales through acquisitions and development, together with a strong focus over the coming year to increase revenues from a broader mix of activities. The Group continues to review its operations and, where appropriate, dispose of less profitable businesses. During the period, the Group has disposed of six sites. Although these disposals have impacted sales in the short term by £1.9 million in this financial year, it will improve profitability by £0.2 million in the coming year.

· Revenue was up 39% at £31.3 million (2016: £22.6 million)

· Group EBITDA before highlighted items was up 126% at £5.2 million (2016: £2.3 million).

· Group EBITDA after highlighted items was up 303% at £4.6 million (2016: £1.4 million).

· Group profit before tax and highlighted items was up 278% at £3.5 million (2016: £0.9 million)

· Group profit before tax and after highlighted items was £1.9 million (2016: £0.05 million)

Consolidated statement of comprehensive income

For the 52 week period ended 25 June 2017

* Adjusted basic and diluted earnings per share are calculated based on the profit for the period adjusted for highlighted items.

** 2017 basic weighted average number of shares in issue is 31.73 million (2016: 18.50 million).

No other comprehensive income was earned during the year (2016: NIL).

Consolidated balance sheet

As at 25 June 2017

Deferred tax balances as at 25 June 2017 have been presented on a net basis.

These consolidated financial statements have been approved by the Board of Directors and signed on its behalf by: J.A.Smith, Director

29 September 2017

Registered Company number: 08687172

Consolidated statement of cash flows

For the period ended 25 June 2017

Notes to the consolidated financial statements

For the period ended 25 June 2017

1. Accounting policies

The Brighton Pier Group PLC is a public limited company incorporated and domiciled in England and Wales. The Company's ordinary shares are traded on the Alternative Investment Market. Its registered address is 36 Drury Lane, London, WC2B 5RR. Both the immediate and ultimate Parent of the Group is The Brighton Pier Group PLC. The Brighton Pier Group PLC owns and operates Brighton Pier, one of the leading tourist attractions in the UK. The Group is also a leading operator of 14 premium bars trading in major towns and cities across the UK.

Announcement

This announcement was approved by the Board of Directors on 29 September 2017. The preliminary results for the year ended 25 June 2017 are based on the audited financial statements for the same period. The financial information set out in this announcement does not constitute the Company's statutory accounts for the years ended 25 June 2017 or 26 June 2016. The financial information set out in the announcement has been prepared on the basis of the accounting policies set out in the statutory accounts of Brighton Pier Group PLC for the year ended 25 June 2017. This condensed consolidated financial information does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The auditor's reports on the financial statements for the years ended 25 June 2017 and 26 June 2016 were unqualified and did not contain a statement under Section 498 of the Companies Act 2006. The financial statements for the year ended 26 June 2016 have been delivered to the Registrar of Companies.

Basis of preparation

The Group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union as they apply to financial statements of the Group for the period ended 25 June 2017 and in accordance with the Companies Act 2006. The accounting policies which follow set out those policies which apply in preparing the financial statements for the period ended 25 June 2017. These accounting policies were consistently applied for all the periods presented.

The Group financial statements are presented in sterling and all values are rounded to the nearest thousand pounds (£000) except when otherwise indicated.

The Group financial statements have been prepared under the historical cost convention.

The financial statements are prepared on a 52 or 53 week basis up to the last Sunday in June each year (2017: 52 week year ended 25 June 2017; 2016: 52 week year ended 26 June 2016). The notes to the consolidated financial statements are on this basis.

2. Segmental information

The following table presents revenue, profit and loss and certain asset and liability information regarding the Group's business segments for the period ended 25 June 2017.

All segment assets and liabilities are located within the United Kingdom and all revenues arose in the United Kingdom.

Segment revenues are generated from external customers. There were no inter-segment sales in the years presented. No single customer contributed more than 10% of the Group's revenues.

3. Highlighted items

The above items have been highlighted to give a better understanding of non-comparable costs included in the consolidated statement of comprehensive income for this period.

Site pre-opening costs of £48,000 relate to the one-off opening costs of redeveloped sites in Cambridge, Manchester and Reading.

Impairment of intangible non-current assets relates to additional goodwill impairments of £469,000 made on the core bars estate.

Other closure and legal costs relate to the one-off costs incurred as a result of the closure of five sites in Lincoln, Brighton, Edinburgh and Oxford. These include £273,000 of goodwill write offs and £270,000 of fixed asset disposals arising as a result of the closures. Closure costs also include £273,000 of onerous lease provisions booked in relation to sites in Manchester and Liverpool, as well as £55,000 of redundancy costs arising from the continued streamlining of the bars estate.

4. Earnings per share

Basic earnings per share amounts are calculated by dividing net income for the period attributable to ordinary shareholders of The Brighton Pier Group PLC by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the Parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

The following reflects the income and share data used in the basic and diluted earnings per share computations:

Diluted basic earnings per share

The impact of dilutive shares on the weighted average number of shares is summarised below:

5. Movement in cash and cash equivalents reconciled in debt

The movement in cash and cash equivalents is reconciled to movements in debt as follows:

6. Reconciliation to EBITDA

Group profit before tax can be reconciled to Group EBITDA as follows:

Group EBITDA after highlighted items was £4,636,000, which excludes those highlighted items that do not impact EBITDA, namely the goodwill write offs and impairment of £742,000 and the write-off of property, plant and equipment at closed sites of £270,000.