TIDMELTA
RNS Number : 0120C
Electra Private Equity PLC
16 June 2021
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Electra Private Equity PLC
Hostmore PLC, announced as the name of the parent company for
Electra Private Equity PLC's hospitality brands, TGI Fridays and
63rd+1st, to be demerged in the third quarter of 2021
and
Listing Preparation and Trading Update
and
Capital Markets Day
Further to the announcement on 21(st) May 2021 of its intention
to demerge TGI Fridays ("Fridays"), Electra Private Equity PLC
("Electra") announces Hostmore PLC as the name of the new parent
company for Electra's hospitality brands which is intended to be
demerged by Electra and admitted to the Main Market of the London
Stock Exchange late in the third quarter of this year. These brands
comprise Fridays, the rejuvenated American themed casual dining
brand, and the start-up, 63rd+1st, which is a new city-based,
cocktail-led bar and restaurant brand.
Hostmore PLC
Hostmore has been created to provide a platform for the
development of hospitality brands to supplement the continued
growth of Fridays and 63rd+1st. Its management team, to be led by
Robert B. Cook as CEO and Alan Clark as CFO, has a successful track
record of building and leading businesses in the hospitality and
leisure sectors.
Hostmore businesses are, and will be, defined by iconic brand
experience, vibrant heritage and sector-leading technology. Its
strategic focus will be to optimise its brands, aligning them with
evolving consumer demands and delivering personalised customer
engagement, optimising experience and efficiency through digital
leadership. Its mission is to make every customer experience
relevant and engaging, to celebrate the unique heritage and
character of its brands, and create environments where people have
fun and feel welcomed.
Following the demerger, Hostmore will seek to add rapidly
growing, early-stage businesses to its portfolio of complementary
brands, exploring opportunities to extend its offering in
experience-led hospitality and leisure concepts.
Listing Preparation and Trading Update
As announced at Electra's half year results in May, the Board
has decided that the optimal outcome for Electra shareholders in
implementing the final stages of its strategy is likely to be
achieved through a capital markets solution for both Fridays /
Hostmore and Hotter Shoes ("Hotter"). The plans for, and progress
towards listing both businesses are in-line with the Board's
expectations. As part of the listing processes Electra remains
focused on ensuring that both Hostmore and Hotter have the
appropriate balance sheets to maximise their future potential and
value as standalone publicly listed companies. This includes
ensuring that Hostmore is well positioned to benefit from current
opportunities for growth. In light of this and of the announcement
of the delay to lock down easing to 19 July, Electra will continue
to assess the optimal capital structure for both businesses and the
potential sources of capital.
Fridays
In the 4 weeks since re-opening for dine-in customers on 17(th)
May 2021, Fridays stores have recorded like-for-like 'LFL' growth
vs the equivalent period in 2019 of 12.5%. This LFL growth excludes
the contribution from new stores including that of the first
63rd+1st store, which is trading in line with management
expectations following its opening on 24(th) May 2021.
Hotter
On a LFL basis, Hotter's direct channels continued to show
strong growth with sales up 15% in the month. Including the
contribution from retained retail stores Hotter continues to trade
strongly with overall sales in May up 38% on May 2020. The margin
impact of Hotter's new strategy and business model are also
reflected in a 7 percentage point improvement in year on year gross
margin for the first 4 months of Hotter's trading year from
February 2021.
Capital Markets Day
Electra announces that it will be holding a Capital Markets Day
focused on Hostmore/Fridays for investors and analysts on 29(th)
June 2021. The event, which will be virtual from 9:30am to 12:30pm,
will be focused on Hostmore's strategy, business model, performance
and outlook with presentations from Hostmore's Chief Executive
Officer, Robert B Cook, and Chief Financial Officer, Alan Clark.
Electra Chairman, Neil Johnson and Chief Financial and Operating
Officer, Gavin Manson will be available for questions in relation
to the implementation of Electra's strategy.
Investment Themes
The investment themes which will be highlighted at the Capital
Markets Day are:
-- The revitalisation of the iconic Fridays brand over the last
eighteen months, to provide a strong platform, under the new
Hostmore name, to benefit from current market dislocation
-- Strong supply/demand dynamic post Covid-19 with scope for selective consolidation
-- Refreshed strategy towards an integrated omni-channel offering and strong ESG credentials
-- Diversified and well-balanced Fridays estate portfolio across locations, types and regions
-- Successful cost management during the pandemic, geared to future growth
-- Attractive financial profile focused on cash generation and profitability
-- Highly experienced team, transforming the business and accelerating performance
Medium Term Guidance
The Capital Markets Day will provide further details of
initiatives that management have embedded over the past 18 months
and guidance on the prospects for the business, including
medium-term guidance on:
-- Estate portfolio
o 85 existing sites at the end of December 2020
o c 8 net new site openings per year on average
o Up to c.3 site closures in medium term as leases expire
-- Net Sales
o GBP235m run rate indoor gross sales from existing
portfolio
o Incremental sales from net new site openings
o Further changes in both average covers per site from market
share, and sales per head, will be incremental to this
-- Gross margin
o Medium-term gross margin broadly in line with pre-pandemic
level
-- EBITDA margin
o Mid-teens EBITDA margin over the medium term and improving
with volume growth
-- Other / exceptional
o Net non-cash items of c.GBP1m income per year from unwind of
onerous lease provisions and loan arrangement fees
-- Capex
o Maintenance capex of c.1.25%-1.75% of sales per year
o New site capex of c.GBP750k-GBP1,250k per store
-- Working capital
o Negative net working capital of 8-10% of net sales in the near
term due to pandemic unwind
Hostmore Capital Allocation Framework
Hostmore's underlying capital strategy will be to maintain a
strong balance sheet. This results in a target normalised Net Debt
/ EBITDA leverage range of 0.75x-1.5x. This strategy reflects a
balanced approach to the elements of capital allocation below:
Strategy Framework
Capex
* Reinvest in the business to drive long term organic * Maintenance capex of c.1.25%-1.75% of sales per year
growth
* New site capex of c.GBP750k-GBP1,250k per store
* Returns-based approach to investment in core business
----------------------------------------------------------------- ----------------------------------------------------------------
Dividends
* No initial dividends until leverage target achieved * It is expected that it will be the Board's intention
to commence payment of an ordinary dividend once
trading normalises to 2019 EBITDA levels
* Intention to pay an ordinary dividend in due course
----------------------------------------------------------------- ----------------------------------------------------------------
Inorganic
growth * Franchise expansions * Disciplined approach to inorganic opportunities
* New brands
* Investment in additional growth opportunities as they
arise
----------------------------------------------------------------- ----------------------------------------------------------------
Surplus
cash * Return surplus cash to shareholders * Consider other forms of return when appropriate:
special dividends, buybacks etc
----------------------------------------------------------------- ----------------------------------------------------------------
The Capital Markets Day materials will be available on the
Investor Relations section of Electra's website immediately before
the presentations. Joining details for the virtual event will be
announced on 28(th) June 2021.
A further Capital Markets Day, focused on Hotter, will be held
later in the year.
For Further Information
Gavin Manson, Chief Financial and Operating Officer, Electra
Private Equity PLC 020 3874 8300
John Sunnucks, Sofia Newitt, Vico Partners Limited 020 3957
5045
Notes to Editors
Electra Private Equity PLC:
Electra is a private equity investment trust which has been
listed on the London Stock Exchange since 1976. Electra's
investment objective is to follow a realisation strategy, which
aims to crystallise value for shareholders, through balancing the
timing of returning cash to shareholders with maximisation of
value.
The Board has decided that the optimal outcome for shareholders,
and for further significant longer term value creation, is likely
to be to list Electra's two largest remaining portfolio assets,
Fridays and Hotter Shoes ("Hotter") on the LSE's Main Market and
AIM, respectively (by way of a demerger of Hostmore and,in the case
of Hotter, through reclassification of Electra's listing subsequent
to the demerger of Hostmore).
Since 1(st) October 2016, Electra has distributed over GBP2
billion to shareholders through ordinary dividends, special
dividends and share buybacks.
Hostmore
Hostmore will be a hospitality group, with current operations
focused on casual dining brand, Fridays, and cocktail-led bar and
restaurant brand, 63rd+1st. To be established on its demerger from
Electra in the third quarter of 2021, Hostmore will provide a
platform on which to further expand both the Fridays, and the new
'63rd and 1(st) ' brand, in the U.K. and in other territories,
under the leadership of an experienced team which has a track
record of building businesses in the hospitality and leisure
sectors.
Hostmore will seek to add rapidly growing, early-stage
businesses to its portfolio of complementary brands, exploring
opportunities to extend its offering into other experience-led
hospitality and leisure concepts.
Fridays
Fridays is the UK franchise of the American themed restaurant
chain acquired by Electra Private Equity in 2014. Fridays trades
through 86 restaurants across the UK offering authentic American
food, an innovative cocktail list and a high level of service.
The experienced management team appointed in 2019/2020 have
transformed the business while navigating the Covid-19 crisis
through a range of strategic initiatives including a complete
overhaul of brand identity, the development of the 4D strategy to
provide customers with greater choice and flexibility, and the
identification of three core pillars from extensive customer
research - quality, relevance & simplification.
Fridays outperformed the market in 2020 during the period
dine-in was open and it is well-positioned to capture maximum
upside post-pandemic with a growing rollout of sites and strong
opportunities for site acquisition.
63rd+1st
Hostmore's second branded offering in the UK, the city-based,
cocktail-led bar and restaurant, 63rd+1st, was launched in Cobham
on reopening in May 2021.
Inspired by the site of the first Fridays in Manhattan where
63rd Street and 1st Avenue met, 63rd+1st delivers the personality
of Fridays, with greater emphasis on cocktails and upmarket food
ingredients. Offering a wide range of premium cocktails, spirits,
beers and wine, 63rd+1st provides customers with a sophisticated
tone that is still grounded in the same New York heritage and
energy.
This brand has been developed in response to growing consumer
demand for all-day venues and members clubs and boutique hotel
style environments where customers can work, rest and socialise.
63rd+1st is aiming to open seven additional sites in targeted city
centres and high streets across the UK by the end of 2022, with
scope for 20+ by 2024.
Hotter Shoes
Hotter Shoes is the UK's largest shoe manufacturer with a strong
focus on comfort and service. Coinciding with the implementation of
its new operating model, in October 2020 Hotter launched its
"freesole", "cushion +" and "stability +" product ranges which
incorporate differentiating technology to meet customers' needs
beyond the core brand promise of uncompromising comfort and
fit.
Hotter's product has continued to develop in 2021 with further
focus on differentiating technology in the spring/summer range
launched in late February, to be expanded further in future product
collections.
The optimisation of its operating model in 2020 improves
Hotter's situation and gives it the opportunity for growth as a
digital direct to consumer business serving its existing UK and US
markets, supported by a small, strategic UK retail estate. Whilst
Hotter is relatively early in the demonstration of sustained growth
and profitability in its new model, the resilience and performance
to date give Electra grounds for confidence in its development as
an increasingly profitable digital business serving its target
demographic of over-55-year-olds in the UK, the US and beyond.
-Ends-
Important Information
The contents of this announcement have been prepared by and are
the sole responsibility of Electra Private Equity PLC ("Electra")
.
This announcement is being made for information purposes only in
connection with the proposed demerger by Electra of Hostmore and
the admission of the entire issued and to be issued share capital
of Hostmore to the Official List of the Financial Conduct Authority
and to trading on the main market for listed securities of the
London Stock Exchange plc ("Admission") and does not purport to be
full or complete.
This announcement does not constitute an offer or invitation to
sell or issue, or a solicitation of an offer or invitation to
purchase or subscribe for any securities in any jurisdiction nor
shall it (or any part of it) or the fact of its distribution, form
the basis of, or be relied on in connection with any contract
therefor.
In particular, this announcement does not constitute an offer or
invitation to sell or issue, or a solicitation of an offer or
invitation to purchase or subscribe for, any securities in the
United States. The shares of Hostmore have not been, and will not
be, registered under the US Securities Act of 1933, as amended (the
"US Securities Act"), and may not be offered or sold in the United
States, except pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of the US Securities
Act, and in compliance with any applicable State or local
securities laws.
This announcement may not be relied upon for the purpose of
entering into any transaction and should not be construed as, nor
be relied on in connection with, any offer, invitation or
inducement to purchase or subscribe for, or otherwise acquire, hold
or dispose of any securities of Electra and/or Hostmore and shall
not be regarded as a recommendation in relation to any such
transaction whatsoever.
HSBC Bank plc ("HSBC"), which is authorised by the Prudential
Regulation Authority (the "PRA") and regulated in the UK by the
Financial Conduct Authority (the "FCA") and the PRA, and Numis
Securities Limited ("Numis"), which is authorised and regulated in
the UK by the FCA, are acting as financial advisers exclusively for
Electra and Numis is acting exclusively as sponsor for Hostmore and
in each case for no one else in connection with the demerger,
Admission or any other matters described in this announcement and
will not regard any other person as a client in connection with the
demerger, Admission or any other matters described in this
announcement or be responsible to anyone other than Electra and
Hostmore for providing the protections afforded to clients of HSBC
or Numis (as applicable) nor for providing advice in connection
with the demerger, Admission, or any other matters referred to in
this announcement. Apart from the responsibilities and liabilities,
if any, which may be imposed on HSBC or Numis by the Financial
Services and Markets Act 2000 or the regulatory regime established
thereunder, neither HSBC or Numis nor any of their respective
affiliates, directors, officers or employees owes or accepts any
duty, liability or responsibility whatsoever (whether direct or
indirect, consequential, whether in contract, in tort, in delict,
under statute or otherwise) to any person who is not a client of
HSBC or Numis (as applicable) for the contents of this announcement
or its accuracy, completeness or verification or for any other
statement made or purported to be made by it, or on its behalf, or
by any other person(s) in connection with the demerger, Admission,
this announcement, any statement contained herein, or
otherwise.
Certain statements made in this announcement are forward-looking
statements and by their nature, all such forward-looking statements
involve risk and uncertainty. Forward-looking statements include
all matters that are not historical facts and often use words such
as "expects", "may", "will", "could", "should", "intends", "plans",
"predicts", "envisages" or "anticipates" or other words of similar
meaning. These forward-looking statements are based on current
beliefs and expectations based on information that is known to
Electra at the date of this announcement. Actual results of the
Electra Group (being Electra and its subsidiary undertakings from
time to time), the Hostmore Group (being Hostmore and its
subsidiary undertakings from time to time) and/or their respective
industries may differ from those expressed or implied in the
forward-looking statements as a result of any number of known and
unknown risks, uncertainties and other factors, including, but not
limited to, the effects of the COVID-19 pandemic and uncertainties
about its impact and duration, many of which are difficult to
predict and are generally beyond the control of Electra and/or
Hostmore. Persons receiving this announcement should not place
undue reliance on any forward-looking statements. Unless otherwise
required by applicable law or regulation, each of Electra, Hostmore
and their advisers (including HSBC and Numis) disclaims any
obligation or undertaking to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise.
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