PIER Brighton Pier Group Plc (the)

8 May 2024

The Brighton Pier Group PLC

(the "Company" or the "Group")

Final results

 (for the 12 months to 24 December 2023)

The Brighton Pier Group PLC (the 'Group') owns and trades Brighton Palace Pier, as well as five premium bars nationwide, eight indoor mini-golf sites and Lightwater Valley Family Adventure Park.

On 20 June 2022, the Group changed its accounting reference date (and financial year end) from 30 June to 31 December. As a result, the prior period financial results are presented on an 18 month basis to 25 December 2022, and will not be directly comparable to current year financial information, which is presented on a 12 month basis to 24 December 2023. Going forwards, the change of year end date will enable more meaningful comparison of the Group's financial performance, as it ensures that the typically busy summer trading months are aggregated within a single reporting period.

Overall, trading conditions were challenging for the business, with cost of living pressures softening consumer demand, most notably in the Bars division, as well as poor weather, train strikes and a fire at the Royal Albion Hotel impacting footfall to the Pier during key trading periods.

The Group recorded £8.2 million of non-cash highlighted items during the year, of which £8.3 million related to impairment charges to its goodwill, property, plant and equipment and right-of-use assets. Of these impairment charges, £4.9 million related to the disposal of three sites in the Bars division in Manchester, Cambridge and Brighton. The decision to dispose of these sites was taken at the end of 2023 and as of 7 May 2024, Cambridge and Brighton have been sold. The disposal of Manchester is also expected to complete in 2024. This will result in a £4.6 million non-cash gain from the release of the lease liabilities associated with these sites, broadly offsetting the impairment charges recognised during 2023. This will positively impact 2024 reported earnings.

Trading in 2024 is anticipated to be in line with market expectations and we have taken a number of positive steps across the four divisions to enhance the Group's proposition going forwards.

Commenting on the results, Anne Ackord, Chief Executive Officer, said:

"In spite of a number of operational challenges experienced during 2023, the Group delivered a resilient underlying trading performance.

While the outlook must continue to be one of caution until economic conditions improve, the plan to trial charging for admissions to the Pier during peak trading periods, the rationalisation of the loss-making sites in the Bars division and the ongoing lodges project at Lightwater Valley are all important developments that should enhance the Group's ability to successfully navigate the challenges faced."

Enquiries:

This announcement contains inside information

Chairman's statement

This report covers the 12 months ended 24 December 2023, with comparisons to 2022 financial performance being for the 18 months ended 25 December 2022, following the change to the Company's accounting reference date on 20 June 2022. Throughout this document, references to like-for-like trading compare the 12 months ended 24 December 2023 with the 12 months ended 25 December 2022. In future periods, comparison of the Group's performance will be on a 12 month basis.

Group revenue for the 12 month period was at £34.8 million (2022: 18 month period at £58.9 million), EBITDA for the 12 month period was £4.2 million (2022: 18 month period at £13.9 million) and losses per share, excluding highlighted items for the 12 months were (1.7) pence (2022: 18 month period earnings per share of 16.4 pence).

Inflationary pressures persisted throughout the trading period, restricting the disposable incomes of the Group's target markets and affecting footfall and revenue across the majority of the estate. These pressures have also led to significant cost increases, which, despite best efforts, could not be fully recovered from our customers. The most significant cost increases were related to food & beverage, wages and insurance. Despite these challenges, all four divisions have remained resilient and continue to generate positive EBITDA.

The general fragility in the consumer discretionary market was exacerbated further by exceptionally poor weather across the key summer trading months, and the disruption caused by unpredictable weather patterns continues to be a challenge for us all.

In addition, rolling train strikes and a fire at the Royal Albion Hotel (which restricted access to the Pier during peak season) combined to reduce footfall onto the Pier by 18% during the key summer months. In spite of this, the Pier held like-for-like sales to just 3% lower versus 2022, a positive reflection of the enduring appeal of this historic attraction. As these strikes continue into 2024, I am surely not alone in urging a swift resolution to the disputes between union members and the respective rail operators.

Despite the shift in customer preferences away from larger shopping centres, trading in the Golf has remained robust. Like-for-like sales are broadly in line with 2022 (1% down), and the combination of competitive pricing and wide demographic appeal should ensure that this division continues to hold up well in the future.

I was also pleased to see like-for-like sales at Lightwater Valley up by 7% on comparable months in 2022, as the Group experimented with a more dynamic pricing structure to target its customer base more effectively. Overall trading remained challenging during 2023, and the impairment charges recognised during the period reflect a more cautious outlook going forward. A number of operational efficiencies were implemented during the Park's closure in the winter months of 2023 and early trading during 2024 has been promising.

The Bars division has been the most significantly disrupted by economic and social pressures experienced during 2023, with weak trading across the majority of the eight sites. In late 2023, the Group took the decision to dispose of three sites, all of which were loss-making. The disposal of these three sites is expected to deliver a more consistent trading result for the remainder of the division. The impairment charges recognised during the period reflect the write-down of property, plant and equipment and right-of-use assets associated with these three sites. It should be noted that in the next reporting period, these charges will be broadly offset by a corresponding non-cash gain from the reversal of the lease liabilities for these sites, improving earnings in 2024. The disposal of the three sites is expected to deliver a more consistent trading result for the remainder of the division, although the outlook remains one of caution in the late-night sector.

On 20 December 2023, the Group completed the second stage refinancing of its borrowing facilities, replacing its £10.9 million term loan and £1.0 million revolving credit facility with a larger £5.0 million revolving credit facility and a reduced term loan of £6.9 million. These new facilities provide the Group with additional operational flexibility and will provide the opportunity to reduce its interest costs going forward. The new facilities expire on 31 December 2027. The Group also made a final repayment on its Coronavirus Business Interruption Loans during 2023, with £5.0 million of loans received having now been repaid in full. As at 24 December 2023, the Group had total cash and cash equivalents of £4.0 million (2022: £4.2 million).

Trading has been subdued for the first 18 weeks of 2024 at 5% below the comparable period in 2023, as household disposable incomes remain under pressure. Unhelpful weather conditions have also persisted in the early months of the year. However, there is scope over the summer to recover this position, especially when coupled with the savings from the disposed bars, the proposed introduction of a £1 admission charge for the Pier for all non-residents of Brighton and the encouraging early trading from Lightwater Valley in 2024. We therefore believe that we will be able to manage the challenges of this current market, with the Group in a stronger position than at the start of 2022. However, we need the economic headwinds from high inflation and interest rates to abate, in order to move from a conservative to a more positive outlook for the Group.

The Board does not propose to pay any dividend in respect of the 2023 reporting period (2022: nil).

Luke Johnson

Non-Executive Chairman

7 May 2024

Chief Executive Officer's report

This business review covers the trading results for the 12 months ended 24 December 2023 (2022: 18 months ended 25 December 2022), following the change to the Company's accounting reference date on 20 June 2022.

Full-year results for the 12 months to 24 December 2023

Unless otherwise stated, comparisons to 2022 financial performance below are for the 18 months ended 25 December 2022.

Revenue for the period was £34.8 million (2022: £58.9 million). This primarily reflects the shorter period of account. On a like-for-like basis (comparing with the 12 months ending 25 December 2022), Group revenue was down 4%, primarily due to softer trading in the Bars division, but also as a result of weekend train strikes, poor weather and the hotel fire impacting footfall to the Pier over the key summer months. 

Revenue split by division:

·              Pier division                           £15.6 million            (2022: £25.3 million)

·              Golf division                            £6.2 million            (2022: £10.0 million)

·              Bars division                           £8.4 million            (2022: £15.5 million)

·              Lightwater Valley                   £4.6 million               (2022: £8.1 million)

On a divisional basis and comparing with the like-for-like period in 2022:

·             Brighton Palace Pier like-for-like sales were down 3% on 2022;

·             Golf division like-for-like sales were down 1% on 2022;

·             Lightwater Valley like-for-like sales were up 7% on 2022; and

·             Bars division like-for-like sales were down 12% on 2022.

Group gross margin for the period was 86 % (2022: 87%), with inflationary pressures primarily in relation to food & beverage continuing to affect the Group.

Group adjusted EBITDA (see Notes 2 and 6) for the period was £4.3 million (2022: £13.8 million).

Adjusted EBITDA split by division:

·              Pier division                             £1.7 million               (2022: £4.7 million)

·              Golf division                            £2.8 million               (2022: £5.5 million)

·              Bars division                           £0.7 million               (2022: £3.5 million)

·              Lightwater Valley                   £0.4 million               (2022: £1.9 million)

·              Group overhead                   £(1.3) million            (2022: £(1.8) million)

Group EBITDA (see Notes 2 and 6) for the period was £4.2 million (2022: £13.9 million).

Highlighted items consist of non-cash charges of £8.2 million (2022: £0.5 million of net gains) which were recognised during the period - see Note 3 for further details. These arose from:

·             £(3.0) million - impairment charges to right-of-use assets;

·             £(3.0) million - impairment charges to assets held for sale;

·             £(1.3) million - impairment charges to goodwill;

·             £(1.0) million - impairment charges to property, plant and equipment; and

·             £0.1 million - release of provision in relation to an ongoing legal claim.

Net finance costs of £1.7 million (2022: £1.8 million), made up of:

·              Interest on borrowings           £0.8 million               (2022: £0.7 million)

·              Interest on leases                    £0.7 million               (2022: £1.1 million)

·              Loan fee amortisation          £0.2 million                             (2022: £nil)

Operating loss was £(7.1) million (2022: £9.4 million profit).

Loss before tax (excluding highlighted items) was £(0.6) million (2022: £7.2 million profit).

Loss before tax was £(8.8) million (2022: £7.6 million profit), primarily due to £(8.3) million of impairment charges recognised within highlighted items in the current period.

Taxation on ordinary activities totalling credits of £(1.3) million (2022: tax charges of £1.3 million).

Loss after tax was £(7.5) million (2022: £6.4 million profit).

Basic losses per share (excluding highlighted items) were (1.7) pence (2022: 16.4 pence earnings per share) - see Note 4 for further details.

Basic losses per share were (20.2) pence (2022: 17.1 pence earnings per share) - see Note 4 for further details.

Divisional Review

Pier division

·              Revenue - for the 12 month period was £15.6 million (2022: 18 month period at £25.3 million)

·              Like-for-like sales - down 3% on the 12 month period ending 25 December 2022

·              Gross margin - down 2% at 83% (2022: 85%), from a combination of sales mix (with lower footfall impacting the high margin rides business) and significant inflationary pressures (in particular in relation to food & beverage operations).

·              EBITDA - for the 12 month period was £1.7 million (2022: 18 month period at £4.7 million)

The trading performance of the Pier was negatively impacted by exceptionally poor weather during the key summer months, with periods of high winds and sustained heavy rain. This was further worsened by significant disruption caused by both ongoing train strikes and a major fire at the hotel opposite the Pier's entrance in July 2023. These factors combined negatively impacted the number of visitors to the Pier, with summer footfall down 18% on the equivalent like-for-like period in 2022, although like-for-like sales were down only 3% for the full year.

Despite disappointing weather over the summer months the Pier continues to diversify its offering. The Easter promotional activity and themed events for the King Charles III Coronation weekend brought high footfall to the Pier. The fifth annual 'PierFest' - a music, theatre and film festival hosted entirely on the Pier - was the best attended yet, assisted by an unusually warm September 2023. We have made significant inroads in building our local residents database and, mainly through word-of-mouth recommendations, have increased our events and functions business which we believe will continue to grow. We are actively focusing on additional opportunities in this field over the coming months.

The Pier added a 'Rockin' Tug' children's ride to the fairground to complement its existing offering. The Rides continue to provide a unique offering to visitors and, when weather conditions permit, they significantly bolster the trading performance for the division as a whole.

Shareholders will be aware that each year we undertake a substructure survey which forms the basis for the annual maintenance plan by grading all the steelwork supporting the deck. This is also complemented every five to six years by a dive survey, which inspects the structure of the Pier below the water line. The dive survey was last completed during 2023 and we can report that no additional maintenance requirements in excess of those normally budgeted have arisen from either survey. The next dive survey is scheduled to take place in 2028.

Golf division

·              Revenue - for the 12 month period at £6.2 million (2022: 18 month period at £10.0 million)

·              Like-for-like sales - down 1% on the 12 month period ending 25 December 2022

·              Gross margin - down 1% at 98% (2022: 99%)

·              EBITDA - for the 12 month period at £2.8 million (2022: 18 month period at £5.5 million)

The Golf division delivered another robust performance during 2023, with sales broadly in line with 2022 on a like-for-like basis. As in all of the Group's divisions, inflationary increases have applied pressure to operating margins, with increased food offerings in the Plymouth site being the main driver behind the 1% reduction in gross margin to 98% (2022: 99%).

Bars division

·              Revenue - for the 12 month period at £8.4 million (2022: 18 month period at £15.5 million)

·              Like-for-like sales - down 12% on the 12 month period ending 25 December 2022

·              Gross margin - in line with last year at 82% (2022: 82%)

·              EBITDA - for the 12 month period at £0.6 million (2022: 18 month period at £3.5 million)

Trading conditions in the Bars division continue to be challenging, with the contraction in disposable consumer income having a severe impact on the younger target demographic, particularly in the late-night-focused sites. The 12% decline versus 2022 on a like-for-like basis was driven in part by a challenging comparative, with early 2022 still experiencing exceptional post-pandemic demand.

Lowlander Grand Café experienced stronger trading, particularly in the second half of the year, with the venue's unique offering of Belgian craft beers and a regularly evolving brasserie menu driving a 9% like-for-like sales increase. Trading is continuing well in the early months of 2024.

In December 2023, the Group took the decision to dispose of three loss-making sites: Manchester, Cambridge and Brighton , with a view to delivering a more consistent and profitable trading result for the remainder of the division.

Lightwater Valley

·              Revenue - for the 12 month period at £4.6 million (2022: 18 month period at £8.1 million)

·              Like-for-like sales - up 7% on the 12 month period ending 25 December 2022

·              Gross margin - down 1% at 86% (2022: 87%)

·              EBITDA - for the 12 month period at £0.4 million (2022: 18 month period at £1.9 million)

Whilst trading was impacted by wet weather during July and August 2023, the Park's peak trading period, it was nevertheless encouraging to see sales, EBITDA and visitor numbers ahead of 2022 on a like-for-like basis. We have introduced a number of improvements to the catering operation during the Park's winter closure, with the intention of driving additional spend per head in the summer of 2024. This has been coupled with a comprehensive review of staff allocations during peak times, which is expected to lead to more efficient rota planning.

The Park continued to host themed calendar events, with special seasonal offerings at Easter and Halloween being well-received by customers. This year saw the introduction of a number of dinosaur-themed attractions, with Rex the Valleysaurus joining Ebor the Dragon as the second Park mascot. Lightwater Valley also broke a record for weekend visitors during the Coronation of King Charles III in May 2023 with over 6,000 visitors on one day.

The development of 20 pod-type units for rental has continued during the year, with planning variations approved in the second half of the year.

Financial review

Unless otherwise stated, comparisons to 2022 financial performance are for the 18 months ended 25 December 2022.

Cash flow

Cash flow generated from operations (after interest and tax payments) available for investment was £1.8 million (2022: £10.7 million). This decrease was principally driven by the lower profit before tax in the current period.

Property, plant and equipment and software

The Group invested £0.8 million in capital expenditure during the period (2022: £1.3 million):

·      £0.4 million was spent on the Pier division, £0.3 million of which related to various IT infrastructure upgrades, with the balance relating to minor expenditure;

·      £0.2 million was spent in the Bars division on ERP software upgrades alongside other minor refurbishments across the trading sites;

·      £0.1 million was spent at Lightwater Valley in relation to ride upgrades and the lodges development plan;

·      £0.03 million was spent in the Golf division on minor course improvements across the estate; and

·      £0.1 million was spent on Group IT infrastructure.

Current bank debt and cash

On 20 December 2023, the Group completed the second stage refinancing of its borrowing facilities, replacing its £10.9 million term loan and £1.0 million revolving credit facility with a larger £5.0 million revolving credit facility and a reduced term loan of £6.9 million. These new facilities will provide the Group with additional operational flexibility and reduce its interest costs going forwards. The new facilities expire on 31 December 2027.

At the period end the Group had total bank debt of £11.4 million (2022: £11.3 million net of loan amortisation fees), and net debt (total bank debt less cash and cash equivalents) of £7.4 million (2022: £7.1 million), broken down as follows:

·      An outstanding principal term facility of £6.9 million (2022: £10.9 million):

o  £3.9 million debt repayment was made in the period (2022: £0.9 million), using the new £5.0 million RCF facility available to the Group (see below)

o  £0.7 million is due within the next twelve months to the end of December 2024

·      RCF facility drawdowns of £4.5 million (2022: £nil):

o  Current facility is £5.0 million (2022: £1.0 million)

o  Facility was initially drawn down at £4.5 million to facilitate repayment of the term loan.

·      CBILS 2 facility of £nil (2022: £0.5 million):

o  Final repayment of £0.5 million made at the end of March 2023.

·      Cash balances of £4.0 million (2022: £4.2 million).

During the 12 month period, the Group made net drawdowns of £0.1 million (2022: net repayments of £9.1 million), made up of:

·      £4.5 million drawdown of the RCF (2022: £3.6 million repayment);

·      £(3.9) million repayment of the principal term facility (2022: £0.9 million repayment);

·      £(0.5) million repayment of the CBILS 2 facility (2022: £2.7 million repayment); and

·      £nil repayment of the CBILS 1 facility (2022: £1.8 million repayment).

Key performance indicators ('KPI's)

The Group's KPIs remain focused on the continued growth of the Group to drive revenues, EBITDA (see Notes 2 and 6) and earnings growth.

The like-for-like period is defined as the 12 month period ending 25 December 2022. Total Group revenue for the period was £34.8 million (2022: £58.9 million), down 4% on the like-for-like period in 2022 (2022: £36.1 million).

Revenue split by division:

·             Pier division                                                                                £15.6 million              (2022: £25.3 million)

·             Golf division                                                                               £6.2 million                (2022: £10.0 million)

·             Bars division                                                                               £8.4 million                (2022: £15.5 million)

·             Lightwater Valley                                                                      £4.6 million                (2022: £8.1 million)

On a divisional basis and comparing with the like-for-like period in 2022:

·             Brighton Palace Pier like-for-like sales were down 3% on 2022;

·             Golf division like-for-like sales were down 1% on 2022;

·             Lightwater Valley like-for-like sales were up 7% on 2022; and

·             Bars division like-for-like sales were down 12% on 2022.

EBITDA split by division:

·             Pier division                                                                                £1.7 million                (2022: £4.7 million)

·             Golf division                                                                               £2.8 million                (2022: £5.5 million)

·             Bars division                                                                               £0.6 million                (2022: £3.5 million)

·             Lightwater Valley                                                                      £0.4 million                (2022: £1.9 million)

·             Group overhead                                                                         £(1.3) million              (2022: £(1.7) million)

Group loss on ordinary activities before taxation, excluding highlighted items, was at £(0.6) million (2022: £7.2 million profit).

Group loss on ordinary activities after taxation was at £(7.5) million (2022: £6.4 million profit).

Significant events that have taken place since the year end

In December 2023, the Group took the decision to dispose of three loss-making sites in the Bars division: Manchester, Cambridge and Brighton. The assets relating to these sites were fully impaired during the 12 month period ended 24 December 2023, resulting in total charges recognised within highlighted items of £4.9 million. The associated lease liabilities, which will be derecognised upon the completion of the disposal of the sites, were recognised as held for sale as at 24 December 2023. The resulting gains are expected to be approximately £4.6 million, broadly offsetting the impairment charges recognised during the 12 months ending 24 December 2023 and improving expected earnings for 2024. As of the date of this report, the disposal of Cambridge and Brighton has been completed.

On 22 April 2024, the Group signed an amendment to its loan facility. This amendment altered the quarterly covenants that the Group tests on a quarterly basis. The other principal terms of the loan facility were unchanged from that agreed on 20 December 2023.

Strategy of the Group, current trading and outlook for the coming period

Short-to-medium term strategy and outlook

Whilst the rate of inflation has eased over the previous year, high interest rates and living costs continue to weigh on consumer discretionary spend. Coupled with disappointing weather in the early months of 2024, footfall was affected across the Group's trading estate.

Despite these challenges, all four divisions have remained resilient and continue to generate positive EBITDA.

Furthermore, the Group continues to execute a number of actions that will impact positively on earnings for the current year.

In the Bars, the disposal of three loss-making sites at the beginning of the year (namely Brighton, Cambridge and Manchester), together with savings in overhead, will improve the profitability of the division going forward.

On the Pier, the Group intends to charge for admission during peak trading periods in the summer. This fee, which will not apply to local residents, will allow us to continue to invest in the structure of the Pier and additionally to contribute to its ever-increasing operating costs. Brighton Palace Pier is an iconic landmark in Brighton which attracts tourists from all over the world and these visitors also contribute significant revenue to the city as a whole.

Lightwater Valley has undergone a number of improvements over the closed winter period, and early trading in 2024 has been promising. Planning variations have recently been approved for a mixed-use development for lodges, pods and camping areas in the grounds of the Park. The Group looks forward to realising this exciting additional revenue stream in the years ahead.

Finally, the Golf division continues to trade well and we believe there is further potential to expand this division with new sites when suitable opportunities arise.

Current trading

Current Group like-for-like sales for the first 18 weeks of 2024 were down £(0.5) million or 5% below the equivalent period in 2023.

The notable highlight so far has been Lightwater Valley, which at total sales of £0.8 million is £0.3m ahead of last year. The division benefited from the sunny weather across the Easter holiday period.

The Bars division continues to experience challenging trading conditions, with total sales of £1.8m, down £(0.2) million against 2023.

The Golf division has benefited from the poor weather with sales for the 18 week period in line with last year at £2.4 million.

By contrast, the Pier was hampered by poor weather in the early months of 2024, with Brighton experiencing record levels of rainfall in February. Total sales of £3.4m were £(0.6) million lower than the equivalent weeks in 2023.

Whilst trading was slightly below the prior year equivalent in the first 18 weeks of 2024, there remain opportunities from the busy summer trading period ahead. Furthermore, when coupled with savings from the disposed bars, admission charging on the Pier and encouraging early sales in Lightwater Valley, we believe the shortfall from the first 18 weeks can be recovered.

Longer term developments

The Group will continue exploring further opportunities for organic revenue growth that, combined with ongoing optimisation of operations across all four divisions, will yield a resilient trading performance. There are early signs that macroeconomic headwinds are easing and, while the Group remains cautious in the immediate term, it is also keen to identify further growth opportunities as conditions improve.