Appt of CEO, Offer Approaches
Esporta PLC
11 January 2002
11 January 2002
APPOINTMENT OF CHIEF EXECUTIVE, TRADING UPDATE, OUTLOOK AND
NOTICE OF APPROACHES
Appointment of Chief Executive
The Board of Esporta plc ('Esporta') is delighted to announce the appointment
of Maurice Kelly as the Company's new Chief Executive. Mr Kelly, who joins
with immediate effect, will build on the remedial measures taken by the Board
since the departure of the former chief executive in October and will
immediately commence a thorough review of the business and its prospects.
Commenting on his appointment, Esporta's chairman, John Grieves, said: 'We
are delighted that Maurice Kelly will be joining us. He brings over 20 years
of experience of the service industry to the Company. With Maurice Kelly on
board, we believe we have a skilled, determined and enthusiastic team to take
Esporta forward.'
Michael Cairns, who has been acting as Chief Executive since 22 October 2001
will resume his role as a non-executive director. The Board would like to
thank him for his valuable contribution during this period.
Trading Update
Total membership of clubs as at 31 December 2001 increased to 182,000 (of
which 139,000 were adults) 28% above last year (excluding the Espree clubs
sold in August). In the established clubs, those opened in 1998 and earlier,
total membership was 2% ahead. Revenue in the fourth quarter was 28% above
last year (excluding the Espree clubs), and in established clubs was just
over 3% ahead. Retention of members has remained satisfactory (over 67% of
those who were members of Esporta twelve months ago have been retained as
members of Esporta today), but the level of new joiners has continued to be
disappointing, not only at new and immature clubs, but also across the mature
estate. The recently opened clubs in Leeds and Wandsworth had initial
membership numbers below expectations.
Esporta now has three clubs open in Iberia. Two of these clubs, Las Rozas in
Madrid and Valles near Barcelona, have a high proportion of members at lower
membership rates sold by Healthland. The renewal of memberships at higher
Esporta determined prices has led to greater than expected attrition in these
clubs. These renewal prices, whilst generally ahead of the local market, are
at a lower level than the UK, although we expect to increase prices once the
Esporta offering is established. Initial membership fees in clubs to be
opened in Iberia in 2002 will continue to be at a lower level than in the UK
and in the short term this approach will lead to higher initial trading
losses for new openings.
In addition, at the end of December, the club at Kungens Kurva, Stockholm,
continued to trade below expectations. This club is expected to make an
operating loss in 2002.
As a result, revenue for the fourth quarter is just over 4% below
expectations. Due to the operational gearing within our business, this
shortfall will directly affect profits before exceptional charges.
Profits will be further reduced by exceptional charges in the second half of
the year; firstly, in respect of the severance and recruitment of certain
directors and senior management, amounting to approximately £1 million;
secondly, in respect of the recognition of liabilities arising from the
redemption of resaleable memberships at the Esporta Riverside club in
Chiswick, amounting to approximately £4 million; and finally, in the light of
the trading performance of the clubs in Finnieston, Milton Keynes, Stoke on
Trent and Kungens Kurva, the Board has reviewed the carrying value of these
clubs on the balance sheet and will be recognising an exceptional impairment
charge of approximately £6 million in the year.
Outlook
Although some of the trading issues referred to above will impact 2002, the
Board remains confident about the fundamentals of the business - the quality
and location of the clubs, the motivation and skills of the staff and the
strength of the Esporta brand. Furthermore, on the basis of actions taken
since October, the review of the business by interim management and the
appointment of Mr Kelly, the Board continues to be optimistic about the
future of Esporta. In 2002, Esporta plans to open a further 3 clubs in the
UK and 4 in Spain.
Notice of Approaches
Meanwhile, the Board has received approaches which may, or may not, lead to
an offer, or offers, being made for Esporta. Should any of these approaches
result in a firm proposal being made in an acceptable form, the Board will
evaluate it in the light of the review of the business to be carried out by
Mr Kelly and will then determine the course of action that it believes will
provide the best value for shareholders.
Enquiries:
John Grieves - Chairman Esporta 0118 912 3503
Michael Cairns - Director Esporta 0118 912 3503
Michael Ball - Finance Director Esporta 0118 912 3506
Nicholas Shott / Jean-Eudes Renier Lazard 020 7588 2721
Fiona Antcliffe / William Cullum Brunswick 020 7404 5959
Notes for Editors
Appointment of Maurice Kelly
Maurice Kelly has a background in the service sector encompassing senior
management positions with AB Foods (Primark) and Arcadia (formerly the Burton
group). In 1993, he joined Granada plc, becoming Managing Director of Granada
Entertainments, running all the company's location based entertainment
businesses. This included theme parks, nightclubs, bowling centres,
restaurants and 80 health and fitness clubs which traded under the name of
Spirit. In 1997, he became Managing Director of Granada Road Services
running the largest motorway services company in the UK, and operating the
Travelodge hotel chain and the Burger King and Little Chef fast food outlets
on the motorway. In January 2000, he joined easyEverything to develop the
innovative concept of internet cafes from the original outlet in Central
London. easyEverything now operates in 22 locations in 8 countries.
The following information is provided in relation to Maurice Kelly in respect
of his appointment as an Executive Director, in accordance with the UKLA
Rules chapters 16.4 and 6F2(b) to (g). In relation to 16.4(a), Maurice Kelly
has not held at any time in the previous five years and does not hold any
directorships in any other publicly quoted company. In relation to Chapter 6F2
(b) to (g), there are no details to disclose in respect of Maurice Kelly.
Resaleable Memberships
During 2001, the Company took the decision to offer to redeem rights to
membership ('rights') sold under the resaleable membership category at the
Esporta Riverside club in Chiswick as the after-sales market for those rights
had diminished. Members wishing to leave the club were therefore unable to
recover the costs of their rights to membership on a timely basis.
Historically, the Company had not recognised any liability in respect of
these rights, as there was a ready market for transfers of those rights to
replacement members. Having considered this matter, the Directors are of the
opinion that the offer by the Company to redeem these rights constitutes a
liability for the Company. Accordingly, a provision of some £4 million
(before discounting) will be recognised in the 2001 accounts as an
exceptional charge.
Background on Esporta
Esporta is one of the leading health club operators in the UK with a total
of 41 clubs in the UK and Europe and over 182,000 members. This total
includes 3 clubs in Spain and 1 in Sweden.
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