£4 MILLION CHISWICK RIVERSIDE WRITE-OFF STUNS ESPORTA
Health Club group's independence under threat due to massive provision and slow growth in new memberships
Esporta purchased the Riverside club in recent years but were receiving complaints from members who were unable to resell memberships on a timely basis. They therefore took the decision to offer to redeem rights to membership sold under the resaleable membership category. Competition from new clubs in the area such as the Park Club may have had an impact.
Historically, the company had not recognised any liability in respect of these rights, as there had previously been a ready market for transfers of those rights to replacement members. In a recent trading statement they revealed that the company had decided to take a £4 million charge (after discounting) for this liability in their 2001 accounts.
City analysts described the trading statement as "disastrous". Further charges are also expected for severance and recruitment payments to senior directors as well as a reduction in the value of the clubs. The company confirmed that it has received approaches that may lead to offers being made for the business. City analysts believe the business could interest other health club operators or a company looking to realise value from the freehold properties held by the company.
June 7th 2002