Man of Leisure: Sean Collidge
Sean Collidge has a lot to answer for. His Freeport Leisure brought discount retail parks to Britain and turned shopping into a family activity. Now he has designs on shoppers in Castleford. And their reluctant menfolk...
Wednesday 25 August 1999
He calls it the Freeport Oasis. Satellite TV, a mini-cinema, music videos, golf simulators, the Internet and even a business centre packed with PCs, mobile phone re-chargers, and Reuters' screens are all part of the package. Not that women are excluded; they too can take a break from endless grappling with the clothes racks to enjoy a massage, sip a glass of Chardonnay or surf the Net.
Mr Collidge, a mid-fifties veteran of many a high street battle, cut his retailing teeth down Carnaby Street in the Sixties. More recently, he has created a UK stock market phenomenon. Freeport Leisure shares, floated at 65p in 1994, today change hands at 550p. They have been easily the best-performing property share for the past couple of years.
Five years ago Mr Collidge launched the first factory outlet shopping centre in Britain. This retailing niche, an idea imported from the US, offers heavily discounted end-of-range famous brands including Calvin Klein, Cotton Traders and Nike, and is showing a rudely healthy growth pattern. Last year, like-for-like sales from its outlets stormed ahead 9 per cent while UK retail sales hardly grew at all.
Sean Collidge had originally planned to retire before he was 50. The whizz kid who in the Sixties owned a chain called Guys and Dolls, later spent 12 years in Hong Kong building an export business then returned to Britain to help run the Milletts stores chain. When that was sold to Sears, he launched a sweater shop called Jumpers before selling it to management and retiring to Cumbria's Vale of Lune. But he did not put his feet up for long. On business trips to America he had seen the success of its 300 factory outlets and often wondered aloud to business colleagues whether it could be replicated in Britain.
"I had been retired about six months when my accountant discovered what he thought might be the ideal property for launching the concept here," he says. It was a retailing adjunct to the Hornsea pottery near Hull developed by Peter Black, a Marks & Spencer supplier. They wanted pounds 4.6m for it and he began to look around for ways to finance its development as Britain's first factory outlet site.
"I knew it needed astronomical amounts of money to deliver the projects I had in mind," he says. "And at my time of life I did not want to go the venture capital route. The venture capitalists load you with debt and slow the rate of growth." He somehow persuaded the financial institutions, the stock exchange and his brokers Beeson Gregory to raise the funds in the form of equity through a full listing. A series of rights issues funded further developments, so the group remains fairly free of debt.
"The stock exchange were not very happy about my idea, " he says. "They wanted a five-year track record, so I told them I had been thinking about it for four and a half years." Chris Turner, the property guru at fund managers Henderson Touche which holds about 3 per cent of the equity, said he was relieved when he discovered what Mr Collidge planned.
Mr Turner says: "We had seen the success of factory outlets in the US and we had been considering a joint development ourselves. Then Sean came along and seemed to know what he was doing. He was seeing the project from the retailer's viewpoint. We decided to drop our scheme and bought shares in Freeport. We were in at the beginning and bought some at 60p."
Mr Collidge has adapted the factory outlet model for the bargain-hunting Brits, and insists on discounts of at least 30 per cent. He thinks there is room for 30 sites here. Freeport has six and plans four more, while fondly eyeing the possibilities for empire-building across Europe. From a standing start in 1994, Freeport has emerged as the leading operator against competition from such corporate heavyweights as the airports operator BAA, who partnered American operators McArthur Glen, and property giant MEPC.
The rents Mr Collidge charges are related to turnover and can work out at more than pounds 30 a square foot. Freeport has one outlet in his Stoke site with turnover running at pounds 1,400 per square foot per year.
Mr Collidge wants people to stay on his sites all day. "So we have got to deal with the non-shopper," he says. "They may be children, grandads, husbands or whoever, but they are the biggest barrier to consumers spending money with us. We have to provide a leisure alternative for them at minimal cost." Hence the Freeport Oasis. Mr Collidge went to Disneyland and Universal Studios for new ideas on how to suffuse his shopping centres with a leisure theme.
He claims the Castleford venture - a 30 acre site he bought for pounds 11m last September - will be the most advanced factory outlet scheme in the world when it opens on 22 September. He expects the project -130 shops in 250,000 square feet of selling space - to attract 12 to 15 million visitors a year. So he has a serious crowd control problem which he felt only big theme park operators such as Disney could resolve.
"For three months we studied how they handled the crowds, how they attracted people to go in one direction rather than another, how they moved them from one attraction to the next," he says. "We think we have answers."
When Castleford shopping village opens, the walkways will be lined with pulses of light which can speed, change direction and change colour, as aids to manipulate the perambulating shopper. Giant screens will act as signposts carrying advertising, videos and information to make them pause. "People follow the light subconsciously," says Mr Collidge. "If we speed it you will speed, if we slow it, you will slow. We believe we can move people where we want them to go as they do in Disneyland."
His credo is that retail without leisure simply does not work. In all his sites, large areas are given over to cafes, bars, cinemas, indoor and outdoor adventure playgrounds, encouraging the consumer to think of a trip to a Freeport shopping village as a family day out. At Braintree in Essex, to open before Christmas, there are plans for a multiplex cinema and bowling complex. At his Scottish site there are proposals for indoor skiing and a golf range.
If Mr Collidge relies on Disney for ideas, Freeport shareholders think he has managed to create his own moneymaking kingdom out of Cinderella property sites. Castleford is a classic. A site costing pounds 11m to buy and pounds 30m to develop is, if all goes to plan, predicted by property analysts in the City to be valued at pounds 70m by the middle of next year and pounds 100m the year after if the cash registers ring according to plan. Ten million people are within 90 minutes' drive of the Castleford site.
The value of the group's property assets has risen from pounds 8.36m in its first trading year to June 1995 to pounds 67m by mid-1998. Three sites opening this year - Castleford, Braintree and Stoke-on- Trent - dramatically raise the scale of the business. The selling space will jump from 290,000 square feet to nearly a million.
Adrian Elwood at stockbrokers Sutherlands believes by next year the balance sheet of the business will be worth around pounds 300m. The net asset value of the shares has risen from 41.5p in mid-95 and is projected by Mr Elwood to go as high as 685p a share by mid-2000. The share price is inevitably following in this slipstream. "In five years the company will probably worth pounds 1bn," says Mr Collidge.
Freeport is expected to deliver 1,200 permanent jobs to a place which a year ago was just another Northern industrial wasteland. The coal mine threatens to turn into a retailer's gold mine. "If I was a high technology Japanese company offering to create that many jobs, the Government would be falling over itself to give me a grant," the Freeport chief executive points out. "Because I am an English property developer I get nothing."
These days, with the shares at rarified levels, some followers of Freeport's fortunes are beginning to feel twitchy. "A company like this depends for its growth on a steady chain of new developments," says Alan Patterson at brokers WestLB Panmure. "It has gone well so far but I have a feeling it may not go so smoothly. I think Sean is struggling to find new sites. He wants four more in the UK but Governments now do not like out-of-town schemes."
Trouble finding new sites can only make the existing operations that much more valuable. And if any new site has to be in a remote area that also may be no bad thing. "The original site at Hornsea is just about a day's journey from anywhere," says Henderson's Chris Turner. "But that is an advantage for a factory outlet. You cannot expect the manufacturer to want those outlets to be round the corner from the high street shop selling his goods at twice the price."
Market Capitalisation: pounds 224m
Turnover for year to 27 June 1998: pounds 6.9m
Pre-tax profits: pounds 2.8m
Business: The group is the leading operator of factory outlet shopping centres, a retailing concept it introduced here in 1994 after it had been successfully developed in the US. Manufacturers of designer label brands in fashion and sportswear use the outlets to sell surplus end-of- range lines, overruns or cancelled orders at discount prices. Major retailers include GUS, Littlewoods and Next. Freeport insists on price discounts of at least 30 per cent. The group has six sites: Hornsea on Yorkshire's coast; Fleetwood in Lancashire; Westwood near Edinburgh; and Talke near Stoke-on-Trent, which is jointly owned with the Co-operative Society. Two sites open this autumn, Castleford in Yorkshire and Braintree in Essex. There are plans for four more outlets in the UK and for further expansion in Europe
Key executives: Sean Collidge, chief executive and founder, Peter Woolley, finance director, Gary Russell, commercial director
On A Roll Of Retail Expansion
July 1994: Freeport Leisure obtained a full listing on the Stock Exchange, raising pounds 6m to acquire and develop Hornsea near Hull as Britain's first factory outlet shopping centre
June 1995: With borrowings, financed the opening of the Fleetwood outlet on a leased site next to the marina owned by AB Ports
October 1995: One-for-one rights issue at 100p to raise pounds 10m to develop Scottish site near Edinburgh, which opened 11 months later.
April 1998: Raised pounds 63.3m via a one-for-one rights issue at 325p to finance developments at Castleford and Braintree
March 1999: Opened Talke, near Stoke-on-Trent, a joint venture outlet with the United Norwest Co-operative Society with some 154,000 square feet of selling space, including a large Co-op supermarket
September 1999: Castleford, largest site to date, to open with 250,000 square feet of selling space
November 1999: Braintree to open with 180,000 square feet of selling space, and plans for a cinema and bowling leisure complex
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