Luke Johnson to take 18.5 per cent of Eclectic Bar

Serial entrepreneur becomes executive chairman of troubled bar operator

Luke Johnson to take 18.5 per cent of Eclectic Bar

Aim-listed Eclectic Bar (AIM: BAR) has announced that serial entrepreneur Luke Johnson is to take an 18.5% stake and has become executive chairman.

He is subscribing for 3m shares at a price of 50p each. In addition, Reuben Harley, Eclectic’s chief executive officer, and John Smith, Eclectic’s chief financial officer, each intend to subscribe for 150,000 new Ordinary Shares (300,000 new ordinary shares in total). The £1.65 million raised is needed to “provide additional working capital to fund the development of the group’s business”.

Eclectic, operates 19 up-market bars/nightclubs in the UK but has suffered from poor trading since floating at 160p back in November 2013. It issued a profits warning in November 2014 and announced it would be slowing its ambitious expansion plans.

Today, the company said that trading had continued to see “competitive pressures” over the past few months in a number of locations. It also confirmed: “Effects of current trading are likely to impact on the result for this financial year.”

As part of its strategy to concentrate on more profitable sites it has sold bar Lola Lo in Norwich and is “retaining flexibility” over the timing of the development and opening of its two new sites in Sheffield and Liverpool.

Luke Johnson won’t be drawing a salary but will be getting warrants that will represent 10% of the enlarged share capital at 60p each. They must be exercised in two tranches and must be exercised by June 2019, after which time they lapse. If exercised in full they will take his stake up to 25.9% of the company.

It is perhaps noteworthy that both Schroders (20.1%) and Helium (currently holding 17.1%) aren’t taking part in this subscription. Their stakes will be significantly diluted.

Still, Johnson has a good track record of making money for himself. Private investors nursing a loss in Eclectic must be hoping they will reap some benefit from his undoubted business acumen.

Certainly, in early morning trade today the price was up 28% to 62.5p.

Trade down, or Equity Release?

Homeowners should seriously consider all the other options, say financial advisers and actuaries. One idea, of course, is to trade down – sell your home, move to a cheaper place and use the proceeds of the sale to increase your income in retirement.

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