Brighton Pier Group — Sweating the assets

Research: Consumer

Brighton Pier Group — Sweating the assets

The popularity of Brighton Pier Group’s (BPG’s) diversified low-ticket leisure offer underpins confidence in a significant bounce back from its FY23 ‘annus horribilis’ as well as in potential benefits from new initiatives, notably a £1 admission fee to the Palace Pier (annually over four million visitors as a free attraction) during key summer trading for non-residents of Brighton. The coincidence in FY23 of harsh weather, train strikes and protracted disruption from a fire near the company’s most important site, the Pier, is surely exceptional and it is testimony to BPG’s resilience that H223 adjusted EBITDA almost held year-on-year. As conditions normalise, despite no consensus forecasts for FY25, we see continued progress under entrepreneurial management with strong cash generation funding lucrative marginal revenue and further expansion as a consolidator.

Richard Finch

Written by

Richard Finch

Analyst, Consumer

Consumer

Brighton Pier Group

Sweating the assets

Travel and leisure

QuickView

21 May 2024

Price

44p

Market cap

£16m

Share price graph

Share details

Code

PIER

Listing

AIM

Shares in issue

37.3m

Business description

Brighton Pier Group is a diversified UK leisure business. It owns and operates Brighton Palace Pier (the UK’s most visited free attraction outside London), eight indoor mini golf sites, the Lightwater Valley Family Adventure Park in Yorkshire and five premium bars.

Bull

Diverse and well-invested portfolio of mass-market low-ticket attractions in prime locations.

Cash-generative, asset-backed model (61p NAV per share adjusted for £4.6m gain expected by company on bar disposals).

Entrepreneurial management keen to take advantage of opportunities on pandemic fallout.

Bear

Macro uncertainty of economy and weather.

Structural integrity of key Pier asset, mitigated by significant investment in protective measures boosted by income from new admission fee.

Execution risk in terms of expansion, if not an immediate priority.

Analysts

Richard Finch

+44 (0)20 3077 5700

Russell Pointon

+44 (0)20 3077 5700

The popularity of Brighton Pier Group’s (BPG’s) diversified low-ticket leisure offer underpins confidence in a significant bounce back from its FY23 ‘annus horribilis’ as well as in potential benefits from new initiatives, notably a £1 admission fee to the Palace Pier (annually over four million visitors as a free attraction) during key summer trading for non-residents of Brighton. The coincidence in FY23 of harsh weather, train strikes and protracted disruption from a fire near the company’s most important site, the Pier, is surely exceptional and it is testimony to BPG’s resilience that H223 adjusted EBITDA almost held year-on-year. As conditions normalise, despite no consensus forecasts for FY25, we see continued progress under entrepreneurial management with strong cash generation funding lucrative marginal revenue and further expansion as a consolidator.

Resisting Pier pressure

The introduction of an admission charge to the Pier is a reminder that UK piers in the guise of Blackpool’s similarly iconic trio helped fuel the advance in the 1980s of First Leisure into a successful leisure conglomerate. For its part, the Pier saw revenue rise by 30% over the six years before COVID-19, at a consistent EBITDA margin of 20–25%. The fee will apply at weekends from 25 May to July, then daily to end-August. Given historical annual footfall of over four million visitors and even allowing for free access by locals holding a BPG resident’s card, management’s estimate of 400,000+ receipts pa may be cautious, not least as the sum is nominal (£1.65 at Bournemouth Pier and £3 walk-only at Southend) and justified as helping meet the rising costs of a structure that is 125 years old. There should also be material incremental revenue from a longer dwell-time by those who have cared to pay and from improving the reach with Brighton residents with discounts and promotions.

Improving the mix

Further initiatives set to benefit this year include the disposal of the three loss-making bars and a more dynamic pricing structure, enhanced catering and an extended season at Lightwater Valley, a long-term growth opportunity owing to its extensive space, with planning approval for a mixed-use lodging development.

Valuation: Lacking visibility

With recovery in key summer trading expected clearly to trump a 5% fall in like-for-like sales in the quieter first 18 weeks, the company is on target to meet market forecasts. The share price is at a steep discount to NAV (61p adjusted for £4.6m gain on bar disposals).

Consensus estimates

Year
end

Revenue
(£m)

EBITDA*
(£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

EV/EBITDA*
(x)

12/22**

36.1

6.0

1.3

N/A

0.0

8.5

12/23

34.8

4.3

(0.6)

(1.7)

0.0

10.7

12/24e

35.1

5.5

1.1

1.9

0.0

8.0

12/25e

N/A

N/A

N/A

N/A

N/A

N/A

Source: Company-compiled. Note. *Excluding exceptionals. **Pro forma for the sake of consistency following change of year end to December.

EDISON QUICKVIEWS ARE NORMALLY ONE-OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.

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General disclaimer and copyright

This report has been prepared and issued by Edison. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. Where Edison has used consensus estimates within this publication, we do not guarantee their accuracy or completeness.

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No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

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The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

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This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

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Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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