News - Midlands
Martin Dalby is well-known in industry circles for his infectious enthusiasm and general bonhomie. And why not. A holiday village is meant to be a fun place, a place for families to unwind, relax and forget about the world outside. Such a place needs such a captain of the troops. And who wouldn’t be walking with a spring in their step if they were Dalby. He oversees one of the most successful leisure operators in the UK, boasting occupancy rates (upwards of 90 per cent) and repeat business rates (60 per cent) that most in the tourism industry would die for.
But the day we meet at the company’s first UK village at Sherwood Forest, north of Nottingham, Dalby is in a rather more sombre mood. And it isn’t because the day we meet we have all just returned to work after the long Christmas break either. The cause for Dalby and everyone else’s gloom are events thousands of miles away in the Indian Ocean as the world tries to come to terms with the after-effects of the Boxing Day tsunami. For once, a visitor to Center Parcs really would find it hard to forget about the world outside their window today.
Indeed, midway through our interview in a restaurant overlooking the central lake at Sherwood there is simply no getting away from the subject as the nation prepares to mark the disaster with a three-minute silence.
As the clock ticks near midday an hour into our interview, an attendant press officer helpfully reminds us that the hour is fast approaching and we need to put pens down so to speak. So Dalby gets up from his chair for a little wander while I remain seated. We all do nothing but stare out over the lake for a few minutes.
The moment isn’t lost on anyone. It’s a calm winter’s day outside, the lake is perfectly still, a couple unaware of the silence walk past hand in hand with their children smiling happily behind. Right in front of our restaurant window they all stop for a family picture. The scene couldn’t have been more poignant.
Earlier in the interview I had already broached the subject of the tsunami. After all, for such a big leisure player as Center Parcs, the disaster is sure to have some kind of knock-on effect. For the short term at least the company, like so many others, is doing all it can to raise funds for the victims of the disaster. Dalby says the business has planned a series of fundraising events at its four UK villages and has pledged to match in monetary terms what guests and employees raise.
In the medium to long term what the disaster will do for tourism in the Far East is another matter. Dalby poses a simple but hard-hitting question. “You have to ask whether people will want to go back to areas that have been hit. I’m not so sure.”
Added to 9/11, the SARS outbreak and wider terrorist fears, it is clear that many UK consumers will be asking themselves the same – all factors that have somewhat reinvigorated the UK tourism market in recent years, a trend which will no doubt be further driven by the tsunami disaster.
Yet Dalby is quick to add that there are still plenty of forces pulling the other way too. “Yes, on the one hand the long-haul travel market may suffer some reaction to global events, but on the other you have scores of low cost airlines making for instance the European market very competitive, so it cuts both ways,” he says.
Talk of low cost airlines brings us to talk of the internet. Dalby freely admits that such travellers booking their flights over the internet are precisely the customers Center Parcs wants to target. “They’re our target audience,” he affirms.
Given which I’m rather surprised when Dalby reveals that only 15 per cent of Center Parcs bookings are presently made online – albeit that the percentage has doubled in the last two years. Dalby admits that the figure might appear low, but stresses that people booking a Center Parcs holiday also naturally like to speak to operators. “They often want to know whether a particular villa is available. They want to speak to someone direct. There is nothing wrong with that,” he says.
However, Dalby knows that in today’s world he has to get that internet booking rate higher. “It matters because the internet is becoming the option of choice. We want to be a leading edge leisure business, we have to find the right platforms.” But the internet isn’t the only thing weighing on Dalby’s mind. Despite the company’s outwardly impressive financial figures, the biggest challenge Center Parcs continues to face is a perception problem – both in the City following its flotation, and among the wider general population.
Let’s take the City first where Dalby is not a happy man. I plunge straight in and ask him what he thinks about the fact that the firm’s share price continues to languish well below its 100p flotation price in December 2003 (the day we meet the price has been stuck at 84p for several days). Dalby plunges straight in with a feisty response too as his hands raise to the heavens. “The vagaries of the City are something you only discover when you are in it. We did not realise just how illogical the City can be. It has been a frustrating time for the business.”
Frustrating because Dalby says he has delivered on everything he said he would. “We have delivered in terms of our operating financial performance, we have delivered in terms of announcing the site of our fifth village (see overleaf).”
And yet…and yet the shares refuse to budge. “The day we announced the site of the fifth site the shares didn’t move a penny! I can understand that it is very much a long term proposition but even so.
“I thought the City was supposed to factor in future potential for growth and I would have expected something. And then on other days the price fluctuates. You ask brokers why and often no-one can give you a straight answer.”
While positive news such as a fifth site refuses to move the share price, so negative news seems to happily send shares the other way. For instance, just before Christmas the City was spooked when Dalby warned that future performance would be hit by sharply rising energy costs – even though such rises are affecting every business in the land. Dalby said there had been significant increases in energy costs in the six months to October 2004, with like-for-like costs rising 9.1 per cent, while further increases were expected in the second half with energy costs expected to rise by 25 per cent by the end of spring 2006.
The rise was blamed on the fact that Center Parcs had previously been locked in to a far more favourable contract which was up for renewal.
Dalby is convinced it still comes down to a perception problem. “Quite simply we are not fully understood, either by the City or by consumers. The biggest issue with customers is that those who have not been to one of our sites simply don’t know what we are about. We are not Butlins. There is not a bell ringing at 8am every morning. We have the same problem with the City. The City does not quite know what we are.”
But, I ask, isn’t that what a flotation is all about? Spreading the word among analysts, funds and the like? Everyone getting to know the business inside out?
“Of course,” Dalby replies, but then he revealingly adds: “I think though there was a nervousness about the original flotation itself.” Dalby says that via the accelerated initial public offering (IPO) process the business got a good price, but with hindsight questions were raised over whether the accelerated process was in fact the right one for the business.
The process, popularised by investment bank Collins Stewart, involves brokers raising funds from a consortium of institutional investors who formally commit to buy shares at a set price in a shell company created to make the acquisition. The shell company bids in a public auction for the company for sale, which is subsequently floated in a limited timeframe – typically 10 days. The original motivation from Collins Stewart was that city institutions needed to fight back against VCs that had been acquiring public companies at a snip before bringing them back to the stock market at a later date at a significantly higher price.
Adds Dalby: “It is unlikely that we will see many more accelerated IPOs in the style and format that we used. There is a certain view that you do need to have a much more balanced share register. You need to have analysts all on board before you float. You need more time to sell the company to the investment community than you have in the accelerated process. We were so quick in coming to the market that we could not see all the potential investors.”
However Dalby doesn’t lay the blame at Collins Stewart whom he says did a “great job”. “They told us they would float us on 11 December and they did. They sold us a product.”
Dalby and his management team were keen to buy the product too, with the memory of the protracted sale of the business by Scottish & Newcastle (S&N) to a VC back in 2001 still fresh in their memories. “There was no way we were going through that again. It drained everyone and we didn’t want another 18 months of trying to sell the business,” recalls Dalby, although he freely admits that he did still look at the secondary buyout option as well as a float.
But whatever Dalby’s view of the City today, he has now learnt to largely ignore it and get on with the job in hand. “A year ago we thought the share price was important to track. We have since learnt that you don’t need to look at the share price all the time. If you react to the share price all the time you will damage your business.
“We have a clear strategy and set targets to deliver and are getting our heads down. If the strategy is right and we deliver on what we say we will, then logic says the share price will follow. If it doesn’t we will be disappointed and if it stays below 100p we will feel we have let people down who bought into us at that price.”
In the latter scenario would he consider a de-listing? “It is early days. We came to the City because we wanted a longer term ownership platform. We are in this for the long term.”
Meantime, what is the Center Parcs strategy now? Regards the core business the focus very much splits between work on its fifth site and continued upgrading of its existing sites in terms of both accommodation and other facilities. Outside its core the company is taking its first tentative steps outside of the parks, most notably in the spa market.
Regards the existing sites the funding for the upgrade is coming via its landlord Sun Capital, the investment vehicle of Hugh Osmond, who owns all four UK sites (Center Parcs leases them back).
In August last year Center Parcs negotiated a deal with Sun Capital for an investment of £28m over three years in return for a £3m increase in their annual rental bill to £43.6m. Dalby also has another £12m to spend thanks to the sale last year of children’s activity holiday business 3D Education and Adventure to PGL. The latest investment comes on top of the £30m that was released when Center Parcs originally struck the sale-and-leaseback deal with Sun Capital in 2002.
Dalby is using the new cash to upgrade many chalets to executive villas, which offers extras such as private saunas and hot tubs, while he also wants to revamp swimming pools and sports areas and put more money into the firm’s own Aqua Sana spa brand – all part of a definite move up the value curve as the business seeks to attract ever wealthier middle class families with money to spend, epitomised by the chosen location of its fifth village in Bedfordshire.
Dalby says the relationship with Sun Capital works perfectly for both sides. “When we struck the original deal with Sun we had been looking to refinance the business as we had taken on debt in order to acquire the Oasis holiday village. We looked at a number of options such as securitization and the sale-and-leaseback option. The latter works very well as Sun is happy that we’re upgrading the facilities and we’re happy because it means we get more customers.”
The latter figure currently stands at a cool 1.3 million guests a year, staying on average 3.5 days each visit, while occupancy at the four villages average 91.5 per cent. Dalby, an accountant by trade who spent most of his career with S&N before moving sideways to Center Parcs in 1994 when it was owned by S&N, is ambitious too. He sees no reason why the company cannot become the UK’s leading leisure business.
In terms of City and consumer sentiment it is clear that much will depend on Dalby’s strategy outside the leafy confines of the villages. For instance, the company has done some homework on potential takeover targets – the likes of Warner Holidays and Shearings have been banded about – while new initiatives such as ‘mini center parcs’ are being seriously looked at too.
Dalby doesn’t comment on acquisition targets, but says the ‘mini’ idea may have legs – effectively a smaller version of the existing villages which would cost less to build and may not face the same planning hurdles.
“Building a fifth site is very challenging and it is debatable whether UK demand would support a sixth. However, you could fit a smaller park somewhere. For instance Ireland wouldn’t be big enough to support a full village but could support something smaller,” he says.
Wherever the firm goes next, its roots will always remain in the Midlands. This year marks the 18th anniversary of the opening of Sherwood Village, and to toast the fact the company is building a brand new head office just outside the village at nearby Ollerton.
Dalby will certainly continue to keep his feet on the ground too, not least thanks to his three children who are his eyes and ears on the ground. “Every time we stay at a park I get them to write reports about what they enjoyed and didn’t enjoy. It can be very revealing and informative.” Perhaps the City should read them too.
The world outside his window
Martin Dalby is well-known in industry circles for his infectious enthusiasm and general bonhomie. And why not. A holiday village is meant to be a fun place, a place for families to unwind, relax and forget about the world outside. Such a place needs such a captain of the troops. And who wouldn’t be walking with a spring in their step if they were Dalby. He oversees one of the most successful leisure operators in the UK, boasting occupancy rates (upwards of 90 per cent) and repeat business rates (60 per cent) that most in the tourism industry would die for.But the day we meet at the company’s first UK village at Sherwood Forest, north of Nottingham, Dalby is in a rather more sombre mood. And it isn’t because the day we meet we have all just returned to work after the long Christmas break either. The cause for Dalby and everyone else’s gloom are events thousands of miles away in the Indian Ocean as the world tries to come to terms with the after-effects of the Boxing Day tsunami. For once, a visitor to Center Parcs really would find it hard to forget about the world outside their window today.
Indeed, midway through our interview in a restaurant overlooking the central lake at Sherwood there is simply no getting away from the subject as the nation prepares to mark the disaster with a three-minute silence.
As the clock ticks near midday an hour into our interview, an attendant press officer helpfully reminds us that the hour is fast approaching and we need to put pens down so to speak. So Dalby gets up from his chair for a little wander while I remain seated. We all do nothing but stare out over the lake for a few minutes.
The moment isn’t lost on anyone. It’s a calm winter’s day outside, the lake is perfectly still, a couple unaware of the silence walk past hand in hand with their children smiling happily behind. Right in front of our restaurant window they all stop for a family picture. The scene couldn’t have been more poignant.
Earlier in the interview I had already broached the subject of the tsunami. After all, for such a big leisure player as Center Parcs, the disaster is sure to have some kind of knock-on effect. For the short term at least the company, like so many others, is doing all it can to raise funds for the victims of the disaster. Dalby says the business has planned a series of fundraising events at its four UK villages and has pledged to match in monetary terms what guests and employees raise.
In the medium to long term what the disaster will do for tourism in the Far East is another matter. Dalby poses a simple but hard-hitting question. “You have to ask whether people will want to go back to areas that have been hit. I’m not so sure.”
Added to 9/11, the SARS outbreak and wider terrorist fears, it is clear that many UK consumers will be asking themselves the same – all factors that have somewhat reinvigorated the UK tourism market in recent years, a trend which will no doubt be further driven by the tsunami disaster.
Yet Dalby is quick to add that there are still plenty of forces pulling the other way too. “Yes, on the one hand the long-haul travel market may suffer some reaction to global events, but on the other you have scores of low cost airlines making for instance the European market very competitive, so it cuts both ways,” he says.
Talk of low cost airlines brings us to talk of the internet. Dalby freely admits that such travellers booking their flights over the internet are precisely the customers Center Parcs wants to target. “They’re our target audience,” he affirms.
Given which I’m rather surprised when Dalby reveals that only 15 per cent of Center Parcs bookings are presently made online – albeit that the percentage has doubled in the last two years. Dalby admits that the figure might appear low, but stresses that people booking a Center Parcs holiday also naturally like to speak to operators. “They often want to know whether a particular villa is available. They want to speak to someone direct. There is nothing wrong with that,” he says.
However, Dalby knows that in today’s world he has to get that internet booking rate higher. “It matters because the internet is becoming the option of choice. We want to be a leading edge leisure business, we have to find the right platforms.” But the internet isn’t the only thing weighing on Dalby’s mind. Despite the company’s outwardly impressive financial figures, the biggest challenge Center Parcs continues to face is a perception problem – both in the City following its flotation, and among the wider general population.
Let’s take the City first where Dalby is not a happy man. I plunge straight in and ask him what he thinks about the fact that the firm’s share price continues to languish well below its 100p flotation price in December 2003 (the day we meet the price has been stuck at 84p for several days). Dalby plunges straight in with a feisty response too as his hands raise to the heavens. “The vagaries of the City are something you only discover when you are in it. We did not realise just how illogical the City can be. It has been a frustrating time for the business.”
Frustrating because Dalby says he has delivered on everything he said he would. “We have delivered in terms of our operating financial performance, we have delivered in terms of announcing the site of our fifth village (see overleaf).”
And yet…and yet the shares refuse to budge. “The day we announced the site of the fifth site the shares didn’t move a penny! I can understand that it is very much a long term proposition but even so.
“I thought the City was supposed to factor in future potential for growth and I would have expected something. And then on other days the price fluctuates. You ask brokers why and often no-one can give you a straight answer.”
While positive news such as a fifth site refuses to move the share price, so negative news seems to happily send shares the other way. For instance, just before Christmas the City was spooked when Dalby warned that future performance would be hit by sharply rising energy costs – even though such rises are affecting every business in the land. Dalby said there had been significant increases in energy costs in the six months to October 2004, with like-for-like costs rising 9.1 per cent, while further increases were expected in the second half with energy costs expected to rise by 25 per cent by the end of spring 2006.
The rise was blamed on the fact that Center Parcs had previously been locked in to a far more favourable contract which was up for renewal.
Dalby is convinced it still comes down to a perception problem. “Quite simply we are not fully understood, either by the City or by consumers. The biggest issue with customers is that those who have not been to one of our sites simply don’t know what we are about. We are not Butlins. There is not a bell ringing at 8am every morning. We have the same problem with the City. The City does not quite know what we are.”
But, I ask, isn’t that what a flotation is all about? Spreading the word among analysts, funds and the like? Everyone getting to know the business inside out?
“Of course,” Dalby replies, but then he revealingly adds: “I think though there was a nervousness about the original flotation itself.” Dalby says that via the accelerated initial public offering (IPO) process the business got a good price, but with hindsight questions were raised over whether the accelerated process was in fact the right one for the business.
The process, popularised by investment bank Collins Stewart, involves brokers raising funds from a consortium of institutional investors who formally commit to buy shares at a set price in a shell company created to make the acquisition. The shell company bids in a public auction for the company for sale, which is subsequently floated in a limited timeframe – typically 10 days. The original motivation from Collins Stewart was that city institutions needed to fight back against VCs that had been acquiring public companies at a snip before bringing them back to the stock market at a later date at a significantly higher price.
Adds Dalby: “It is unlikely that we will see many more accelerated IPOs in the style and format that we used. There is a certain view that you do need to have a much more balanced share register. You need to have analysts all on board before you float. You need more time to sell the company to the investment community than you have in the accelerated process. We were so quick in coming to the market that we could not see all the potential investors.”
However Dalby doesn’t lay the blame at Collins Stewart whom he says did a “great job”. “They told us they would float us on 11 December and they did. They sold us a product.”
Dalby and his management team were keen to buy the product too, with the memory of the protracted sale of the business by Scottish & Newcastle (S&N) to a VC back in 2001 still fresh in their memories. “There was no way we were going through that again. It drained everyone and we didn’t want another 18 months of trying to sell the business,” recalls Dalby, although he freely admits that he did still look at the secondary buyout option as well as a float.
But whatever Dalby’s view of the City today, he has now learnt to largely ignore it and get on with the job in hand. “A year ago we thought the share price was important to track. We have since learnt that you don’t need to look at the share price all the time. If you react to the share price all the time you will damage your business.
“We have a clear strategy and set targets to deliver and are getting our heads down. If the strategy is right and we deliver on what we say we will, then logic says the share price will follow. If it doesn’t we will be disappointed and if it stays below 100p we will feel we have let people down who bought into us at that price.”
In the latter scenario would he consider a de-listing? “It is early days. We came to the City because we wanted a longer term ownership platform. We are in this for the long term.”
Meantime, what is the Center Parcs strategy now? Regards the core business the focus very much splits between work on its fifth site and continued upgrading of its existing sites in terms of both accommodation and other facilities. Outside its core the company is taking its first tentative steps outside of the parks, most notably in the spa market.
Regards the existing sites the funding for the upgrade is coming via its landlord Sun Capital, the investment vehicle of Hugh Osmond, who owns all four UK sites (Center Parcs leases them back).
In August last year Center Parcs negotiated a deal with Sun Capital for an investment of £28m over three years in return for a £3m increase in their annual rental bill to £43.6m. Dalby also has another £12m to spend thanks to the sale last year of children’s activity holiday business 3D Education and Adventure to PGL. The latest investment comes on top of the £30m that was released when Center Parcs originally struck the sale-and-leaseback deal with Sun Capital in 2002.
Dalby is using the new cash to upgrade many chalets to executive villas, which offers extras such as private saunas and hot tubs, while he also wants to revamp swimming pools and sports areas and put more money into the firm’s own Aqua Sana spa brand – all part of a definite move up the value curve as the business seeks to attract ever wealthier middle class families with money to spend, epitomised by the chosen location of its fifth village in Bedfordshire.
Dalby says the relationship with Sun Capital works perfectly for both sides. “When we struck the original deal with Sun we had been looking to refinance the business as we had taken on debt in order to acquire the Oasis holiday village. We looked at a number of options such as securitization and the sale-and-leaseback option. The latter works very well as Sun is happy that we’re upgrading the facilities and we’re happy because it means we get more customers.”
The latter figure currently stands at a cool 1.3 million guests a year, staying on average 3.5 days each visit, while occupancy at the four villages average 91.5 per cent. Dalby, an accountant by trade who spent most of his career with S&N before moving sideways to Center Parcs in 1994 when it was owned by S&N, is ambitious too. He sees no reason why the company cannot become the UK’s leading leisure business.
In terms of City and consumer sentiment it is clear that much will depend on Dalby’s strategy outside the leafy confines of the villages. For instance, the company has done some homework on potential takeover targets – the likes of Warner Holidays and Shearings have been banded about – while new initiatives such as ‘mini center parcs’ are being seriously looked at too.
Dalby doesn’t comment on acquisition targets, but says the ‘mini’ idea may have legs – effectively a smaller version of the existing villages which would cost less to build and may not face the same planning hurdles.
“Building a fifth site is very challenging and it is debatable whether UK demand would support a sixth. However, you could fit a smaller park somewhere. For instance Ireland wouldn’t be big enough to support a full village but could support something smaller,” he says.
Wherever the firm goes next, its roots will always remain in the Midlands. This year marks the 18th anniversary of the opening of Sherwood Village, and to toast the fact the company is building a brand new head office just outside the village at nearby Ollerton.
Dalby will certainly continue to keep his feet on the ground too, not least thanks to his three children who are his eyes and ears on the ground. “Every time we stay at a park I get them to write reports about what they enjoyed and didn’t enjoy. It can be very revealing and informative.” Perhaps the City should read them too.