South West Leisure Ltd

South West Leisure Limited

07 Nov 2017 / Tax enhanced research

Summary: South West Leisure (“SWL”) is raising money to finance the acquisition and redevelopment of a bar/restaurant in Chiswick, West London.

Why Invest

Positives

Strategy: Asset backed prime leisure location in West London with opportunity to add value through development of private rooms.

Issues

Competition: There is huge competition in the London eating out market; it is a question of getting the concept and execution right.

 

The Management

Positives

Team: Experienced team behind the redevelopment of the Harcourt in Marylebone and four other London sites.

Issues

Track record: There are no issues about the management team that cause us any concern.

 

Nuts & Bolts

  • Share Issue: Open offer issue for 5.0 million shares at £1 per share i.e. raising £5m gross.
  • Offer: The offer has been launched and will close on 21/11/17.
  • Exit Strategy: Expected exit is most likely through a trade sale.

 

Specific Issues

  • Current trading environment: After years of growth the London eating out market has recently seen a modest downtick in comparable sales, possibly reflecting the build up of consumer debt and economic uncertainty. The Chiswick property is not expected to reopen until next July by which time things might have improved. Importantly though, with the ownership of the freehold, it has the advantage over most of its competition of not paying rent.

 

Risks

  • Generic: SWL is a relatively small unquoted company. There will be no formal market in the shares. It is not intended that there will be any capital returns or dividends paid in at least the first three years. There can be no guarantee that the investment will be successful, that an exit will be achieved or there will be any value to be distributed.
  • Specific: Getting eating out concepts right is not easy. SWL have secured a prime site and has a team that has demonstrated its ability with the redevelopment of the Harcourt, nevertheless there is no guarantee that the success can be repeated. Should it re-open against a backdrop of a serious economic downturn it would make achieving the financial projections very difficult in the short term.