The Investment Column

07 February 2007 – The Independent

Edited by Michael Jivkov

Ultimate Leisure

Our view: Buy

Share price: 186p (unch)

The management of Ultimate Leisure, the late-night bars and clubs operator, has two options. Make acquisitions or sell the business. It has opted for the former and, subject to shareholder approval this week, will complete a £25m equity fundraising giving it the firepower to enact this strategy.

The unvestment firm Dawnay Day and the billionaire Reuben Brothers will put up the bulk of the money and end up with more than 60 per cent of the company. On top of that, Ultimate Leisure’s bankers have promised to lend it a further £50m for deals. This leaves the company with a substantial war chest. The management hope to use it to acquire up to 100 high-street, food-oriented venues.

Interim results from Ultimate Leisure yesterday showed a further deterioration in the group’s profitability. However, it looks to have turned the corner as far as its current estate goes. Like-for-like sales in the second half of its financial year registered growth of 2.3 per cent thanks to the positive effect of its refurbishment programme.

Ultimate Leisure’s extensive freehold property portfolio means the downside in its shares is very limited. Meanwhile, the group’s ongoing refit programme and expansion plans should return the company the growth path and get its shares moving higher.