Ultimate Leisure Group PLC

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Ultimate Leisure Group PLC

26 Mosley Street
Newcastle upon Tyne NE1 1DF
United Kingdom
Telephone: 0191 261-8800
Fax: 0191 221-2282
Web site: http://www.ultimateleisure.com

Public Company
Incorporated: 1997
Employees: 1,000
Sales: £36.4 million (2005)
Stock Exchanges: London
Ticker Symbol: ULG
NAIC: 722410 Drinking Places (Alcoholic Beverages); 722211 Limited-Service Restaurants; 721110 Hotels (Except Casino Hotels) and Motels

Ultimate Leisure Group PLC operates more than 30 bars and nightclubs in northern England and Ireland, most of which it owns. The firm's sites are typically large, stylish venues located in established "drinking circuit" areas and geared toward a younger clientele. The company utilizes several different bar concepts, including lounge-styled Chase/Barbacca/Quilted Llama, Western-themed Coyote Wild, and tropical Beach/Blubambu. In 2005 founder and Chairman Allan Rankin, CEO Bob Senior, and several other top managers and directors left the firm under pressure from stockholders who wanted expansion to speed up.

Beginnings

Ultimate Leisure Group was founded in 1997 in Newcastle-upon-Tyne, England, with backing from local businessman Allan Rankin and his family, who operated metal galvanizing concern the Metnor Group and other companies. The firm was chartered to focus on developing large, stylish venues in drinking circuit areas that were already home to numerous bars, with particular emphasis placed on attracting women, which was a time-honored way to lure male customers. The new company would be headed by Bob Senior, who had more than two decades' experience in the pub business.

Newcastle, located on England's northeast coast, was renowned for its nightlife, with some 135 bars in the city's mile-square Bigg Market area. At this time more than half were owned by brewing company Scottish & Newcastle, and because of restrictive local laws new liquor licenses were essentially unavailable, with the only way to enter the market through acquisition.

Shortly after commencing operations, the firm purchased five bars and a hotel in the center of Newcastle along with an undeveloped property on that city's Quayside, where the 560-capacity Chase bar opened the following year. The firm had spent £3 million acquiring and renovating the lounge-style venue, which featured a beer garden nestled under the Tyne bridge. Revenues for 1998 were £5 million, with a profit of £680,000.

After acquiring three more bars and a hotel in nearby Whitley Bay, by early 1999 Ultimate Leisure was operating a total of nine pubs and two hotels. These included the Waterside Hotel and the Vault, Ram Jam, Love Shack, and Chase bars in Newcastle; and the Rex Hotel and Deep Club Cafe in Whitley Bay. The company had 300 employees.

Public Stock Offering in 1999

In late July 1999 the firm's stock began trading on the London Stock Exchange's Alternative Investment Market, after which its name became Ultimate Leisure Group PLC. The initial offering of a one-fourth ownership stake raised £6 million, which would soon be used for upgrading existing facilities and to make new acquisitions. Afterward, the family of cofounder and Commercial Director Allan Rankin continued to hold a controlling interest in the firm.

In November four more Newcastle bars were purchased from Allied Leisure PLC for £3.7 million, and a few weeks later two bars and a restaurant in Sunderland were acquired for £1.3 million from an independent operator. The company also had recently refurbished the Rex Hotel in Whitley Bay and the Yel Bar in Newcastle and begun work on several other new sites. The first of these to open, in early March 2000, was the Sports Bar Cafe in Newcastle, which had been developed at a cost of £1 million.

For the fiscal year ended June 30, 2000, Ultimate Leisure reported revenues of £12 million, up from £8.3 million in 1999, and a profit of £3.2 million. Later that summer the new 995-capacity Sea nightclub opened in Newcastle's popular Quayside area, which featured a dance floor and VIP lounge. Another club in Newcastle, Masters Bar, also had recently been refurbished with modern, stylish fixtures and renamed Bar M.

Expansion Beyond Newcastle Continuing in 2001

As competition in the area increased and national firms began to aggressively seek entrée into Newcastle's prime drinking circuit, Ultimate Leisure began looking at more opportunities for growth further afield. In early 2001 sites were acquired in Sunderland, Durham, and South Shields, and in June the firm reached an agreement to buy a hotel/restaurant called The Gresham in the Jesmond suburb of Newcastle for £570,000. Jesmond recently had become a hot destination for drinkers, and the company began converting the hotel into a large bar. Ultimate Leisure also unveiled the refurbished Chase Bar in Newcastle in June 2001, with capacity increased to 780.

In July the company paid £1.6 million to buy an established bar/nightclub in the college town of Durham called Klute, which could serve 400. At this time Allan Rankin was named to the newly created title of chief executive of the company, with Bob Senior serving as managing director and Jon Pither as board chair. For 2001 sales of £16.6 million were recorded. The firm now had 500 employees.

In October 2001 Ultimate Leisure opened a new 1,300-capacity bar in Sunderland called Beach, which featured a tropical theme that would later reappear elsewhere. Fall also saw more venues purchased outside the Newcastle area, including the Glasshouse bar in Nottingham and a 1,600-capacity venue in Rotherham that was closed for refurbishing.

In early 2002 £13 million of credit was secured through the Royal Bank of Scotland, at the same time that a new license in Newcastle's Bigg Market was acquired. It was the first in the area with a 2 a.m. closing time, later than the British pub's standard last call of 11 p.m. The license would be used for a new 1,300-capacity bar under development on a leased site. In May the company also bought the Venice Bar in South Shields, which was licensed to serve drinks until 2 a.m. as well.

The late summer of 2002 saw Beach Rotherham opened, along with a Sunderland pub that had been converted into a Chase bar. In September the firm's late-closing Bigg Market property was completed and opened as Blubambu, a variation on the Beach theme.

Debut of Coyote Wild in Autumn of 2002

The fall of 2002 also saw an 800-capacity venue opened in South Shields called Coyote Wild, inspired by the recent Hollywood film Coyote Ugly in which lightly clad female bartenders danced on top of a bar and sprayed water on patrons. It was decorated in a western theme and featured a mechanized "bucking bronco" that customers could ride to win drinks. Later in the year a lease also was signed on a property in Belfast, Northern Ireland, and a bar was purchased in Mansfield.

In early 2003 the firm linked up with a pair of British television stars known as Ant & Dec, who invested £175,000 to help convert the firm's Johnny Ringo's bar in Newcastle into The Lodge, which had a license to serve drinks until 1 a.m. April saw the opening of the Bambu Beach club at the recently leased site in Belfast's Odyssey Complex, and in May the firm's second Coyote Wild opened in Mansfield, while a Chase-style bar called The Quilted Llama opened in Nottingham.

Revenues for 2003 topped £26.5 million, with a net profit of £6.8 million before taxes. One-third of earnings had been generated outside of the company's Newcastle stronghold. Employment now stood at more than 1,000.

In August 2003 Ultimate Leisure paid £4.2 million for two neighboring bars and a nightclub with a combined capacity of 1,000 in Belfast. In October the firm raised an additional £20 million through a new issue of 6.9 million shares of stock.

The company was renovating a 140-year-old former post office in Derby that it had recently purchased, which was opened as a Coyote Wild bar in December. A total investment of £3 million had been made in the 900-capacity venue, which would serve alcohol until 1:30 a.m. Other properties also had been acquired recently in Leeds, Ireland, and Derby, and work on converting a former boathouse site in Durham into a new Chase was ongoing.

Company Perspectives:

Quite simply we are owners, designers and operators of atmospheric drinking venues in which enjoyment flourishes.

Ultimate Leisure, predominantly based in the North East of England, is one of the most exciting and innovative bar operators in the country.

The Company's philosophy is to identify under developed, prime sites; to design and develop these into unique, stylish and imaginative drinking venues; and to attract and empower and develop staff who commit to the Ultimate Leisure ethos.

With over 30 trading sites Ultimate Leisure is the predominant bar operator in the North East of England and is expanding its concepts further afield into other towns and cities.

Gresham Dispute Reaching the High Court in 2003

Although most of the company's acquisitions had been relatively straightforward, the conversion of the Gresham Hotel in Newcastle into a 450-capacity bar had faced particularly strong opposition from neighbors in the upscale Jesmond area. There were already other bars nearby, but protesters voiced fears that the new venue would bring an increase in noise and rowdy, drunken behavior like that associated with Bigg Market. It was in fact legal to transfer the license of a bar that had been demolished by order of the city, as the firm was seeking to do, but in January the transfer request was turned down by local magistrates because of inadequate soundproofing. The case was appealed to the High Court in London, and in the summer, after word surfaced that the anti-Gresham campaign was being funded by a rival firm, the High Court decided in favor of Ultimate Leisure. In December the license transfer was approved, and the venue was finally opened as Barbacca. Several months later, however, the ruling was again overturned, though the company was given permission to continue operating while an appeal was made.

In March 2004 a new Chase bar opened in Durham, which had taken five years to complete due to another lengthy public inquiry. In August the firm opened its refurbished City Vaults bar in Newcastle's Bigg Market area, with capacity for 1,200 and a late license, at a cost of £1.5 million. That same month a nightclub called Halo and a second Quilted Llama bar, with total capacity of 1,600, opened in Leeds in the former Trinity St. David's church building next to the University. September saw the firm buy a site in Cork, Southern Ireland, which it began refurbishing. Also in 2004, board Chairman Jon Pither retired, and Allan Rankin took his place and turned the chief executive duties over to Bob Senior.

Public drinking had been deregulated recently in England after many decades of an 11 p.m. pub closing time, and much media coverage was given to the feared increase in binge and round-the-clock drinking it might cause. Ultimate Leisure responded to such concerns by announcing that it would not offer all-inclusive drink pricing at its bars, and would not change any to 24-hour service.

In the latter half of 2004 and into early 2005 growth began to slow as the firm found suitable new properties harder to acquire, and business declined at some bars due to fierce competition and stepped-up policing in the wake of deregulation. The firm also was experiencing delays in finishing its Cork Blubambu bar, a Chase in South Shields, and Jimmy'z in Newcastle Quayside.

Management Shake-Up in 2005

Rumors about a possible sale of the company began surfacing in the summer of 2005, and after a dispute with shareholders who wanted expansion sped up, in August the firm's top management, including CEO Bob Senior, Chairman Allan Rankin, and several board members, resigned. Rankin sold his holdings in the firm, and Senior and another company executive founded Utopian Leisure Group to re-enter the bar/restaurant business with £50 million in new funding. Mark Jones was appointed executive chairman of Ultimate Leisure, and pledged to continue making acquisitions in accordance with shareholder wishes.

Less than a decade after its founding, Ultimate Leisure Group PLC had assembled a collection of more than two dozen bars and nightclubs in northern England and Ireland, many of which used the firm's beach, western, or lounge themes. Under new management, the company sought to maintain its pace of expansion in an increasingly challenging market.

Principal Competitors

Luminar PLC; Punch Taverns PLC; JD Wetherspoon PLC; Enterprise Inns PLC; Mitchells & Butler PLC; Spirit Group Ltd.; Rindberg Holding Company; Inventive Leisure PLC; Greene King PLC.

Key Dates:

1997:: Ultimate Leisure is founded in Newcastle, England; seven properties are acquired.
1998:: The firm's first lounge-themed Chase bar opens in Newcastle.
1999:: Stock begins trading on the London Stock Exchange; seven additional bars are acquired.
2001:: Expansion outside Newcastle is boosted; the first Beach-themed bar opens.
2002:: A late-closing license is won in Newcastle; Coyote Wild debuts; Belfast site is bought.
2003:: A new 6.9 million share offering is made; Gresham Hotel and Derby Post Office sites open.
2004:: A 1,600-capacity bar/nightclub opens next to Leeds University; Cork site is bought.
2005:: Expansion slows; shareholders force out the top managers and directors.