The report, ‘Business Outlook 2020: Focus on Business,
’ reflects on the themes, activity and challenges of the previous year and forecasts what 2020 might bring across the sectors in which Christie & Co operates, including leisure.
The health and fitness market was highlighted as one of the best performing markets across the leisure sector in 2019. Operators enjoyed a continued period of growth throughout the year, with the market exceeding a value of £5 billion for the first time. The report suggests investor interest remains strong for corporate quality deals, whether by M&A activity or new build organic growth.
The sale of Merlin Entertainments to Blackstone, Canadian pension firm, CPPIB and Kirkbi, a company operated by the Danish family who control Lego, is noted as a significant transaction in the wider market. Similar deals suggest a healthy level of investor interest for the alternatives market which looks set to continue in 2020, with a number of exciting deals due to complete in the first half of the year.
Despite many leisure operators trading comparatively well in 2019, Christie & Co observed an increase in operational costs which have impacted profitability for some operators. This may influence owner’s capital expenditure in 2020, however where possible we consider continued investment is essential to maintaining competitive advantage and value.
The report considers additional challenges faced by the sector in the past 12 months. Developers of leisure and hospitality real estate, battled with construction inflation, whilst uncertainty driven by ongoing Brexit negotiations continued to delay deals involving European investors. Albeit, the report suggests we may see an improvement in this regard in 2020, driven by the outcome of the General Election in December and more clarification of the Brexit plan.
Looking to the year ahead, the report also outlines Christie & Co’s market predictions which are:
- Uncertainty around Brexit may continue to influence a reduction in investor confidence until a decision has been finalised. As a result, we may see a decrease in European investment into the UK, however there is still significant interest from other regions including China and the US
- Increase in distress disposals and CVA’s (this will drive increasing uncertainties for landlords exposed to rental income) for under invested and/or poorly managed businesses
- Holiday parks will continue to be highly sought after, however a number of administrations in 2019, including the collapse of Dream Lodge Group in August, suggest their attractiveness as a second home could come under pressure as lenders tighten their borrowing criteria
Overall, the report emphasises well-invested and well-located businesses remain the most sought-after assets within the alternatives space.
Jon Patrick, Head of Leisure & Development at Christie & Co comments, “Following December’s decisive General Election result we have definitely witnessed an uptick in investor engagement, with both operational business opportunities and development situations remaining sought after. We expect this renewed confidence to continue in the year to come.”