Financial
Matters
2005 Company
Accounts of LC,
Danoptra (the
company that owns LC), & Gamestec
(another company owned by
Danoptra). The accounts are in pdf format. I hope to add more recent accounts in
the near future. PB
£50 million
asked for LC Mail On Sunday 15.7.07 via http://www.theretailbulletin.com/?tag=a97f6e2fedcabc887911dc9b5fd3ccc3
"Leisure Connection,
Britain's biggest sports centre operator, is for sale at up to £50 million. The
company operates more than 80 sports and leisure centres on behalf of local
authorities as well as facilities where British athletes train before Olympic
Games. It also runs swimming pools, private health clubs, corporate fitness
centres and Wellness gyms. Owner Danoptra Holdings has appointed
PricewaterhouseCoopers to handle the sale."
Why is LC for sale?
The hole in Danoptra's profits described below might
have something to do with it. I predict the price of £50 million will be
significantly reduced before and if anyone takes over. Let's face it, the
majority of LC's assets are contracts, they don't own that many buildings and
what price LC's goodwill?. With £50m one could start a new leisure company, bid
for contracts and not have to worry about repairing the image inherited from
LC. I will donate £1 to charity for every million over £20 million that Danoptra
is paid for LC. Anyone like to nominate a appropriate charity to receive the
largesse?
The
report is wrong to state that LC include Wellness gyms. That brand belongs to
Greenwich Leisure. PB
Danoptra
Posts Financial Year Results From
Intergame 30.1.07 http://www.intergame.ltd.uk/News001.aspx?Action=-617781463&ID=52aaa266-f672-4e87-8958-68111ddeafeb&SiteID=1
Bell
Fruit and Mazooma are “not for sale,” was the message which came across
clearly from the managing director of the machine makers’ parent company,
Danoptra, speaking with InterGame during the London ATEI.
Derek Lloyd, recently installed by the company’s venture capital owners,
was able to release figures for the group’s performance during the 2005
financial year and talk a little about his immediate objectives.
There
had been some speculation in the UK financial press about the plans to sell off
one of the divisions of Danoptra, Leisure Connection, which specialises in
health clubs. Coupled with the opening of negotiations on the further financing
of the group with the banks, it led to talk of problems and sell-offs.
Lloyd,
however, quickly quashed these rumours, pointing out that it was normal practice
for venture capital companies to both renegotiate their financing and also to
sell off parts of the business after a three-to-five-year span. “We have no
intention of selling Bell Fruit and the other machine-making businesses for the
moment,” he said. “Obviously anything is for sale if the price is right, but
we are not actively seeking a buyer.”
Lloyd
said that also applied to the operating division, where Gamestec is currently
the second largest machine company in the country.
It is normal practice for venture capital companies
to make profits by selling on acquisitions or parts of them. What is less
common, at least among more successful investors, is selling at a loss. See "lousy"
investment.
Derek Lloyd now seems to be
ruling out the sale of Leisure Connection and describing such speculation as
rumours. However, two weeks ago the Chief Executive of Leisure Connection emailed
staff saying, "It is true that
we are currently re-financing the company and Cognetas will be looking to sell
their share in Leisure Connection sometime during this year."
Finally, describing Leisure
Connection as specialising in health clubs could mislead some readers. The
company's main work is running local authority leisure facilities under
contracts, which are increasingly less lucrative and now in the face of much
stronger competition. PB
Danoptra posts financial results
From Intergame Newsletter 25.1.07 http://intergame.creativemessage.com/
Reproduced in Full (Danoptra
owns LC)
Britain's second largest machine group, Danoptra, has filed figures for the financial year ended September 30, 2005.
They show good performances by manufacturers Bell Fruit Group and Mazooma against a weaker performance by the big machine operating sector at Gamestec which is, in terms of number of units in operation, second in the country.
Danoptra earnings before interest and tax was £10.7m (2004: £11.8m) on sales up to £201.9m from £191.5m in 2004. A large non-cash charge of £61.4m for goodwill impairment plus other non-cash and exceptional items produced a loss after tax of £82m.
The company said that the trading environment remained difficult in 2006 and the group is in talks with its finance providers. "These discussions are on-going and positive and Danoptra's shareholder remains very supportive."
New CEO Derek Lloyd said that the current financial year had started well and the group was ahead in all divisions.
From Hempstead & Co Incorporated http://www.hempsteadco.com/faqs.shtml
Question - What is goodwill impairment?
Answer - Goodwill impairment occurs when the
value of the goodwill of a business unit declines to an amount less than the
carrying value of the goodwill on the company's books.
Goodwill Impairment doesn't sound like
good news to me, especially when it is almost £65.5 million and loss after tax
is £82 million. It would not surprise me to see senior players departing the
company following such results. PB
Why Are So Many Company Accounts Listed as
Overdue?
It appears that on 8 January
Graham Farrant emailed LC staff about the reports of the company being for sale
but he didn't really touch on the financial issues . Graham refers to
refinancing the company and "hitting our budget targets for the first quarter of this year".
If he means the first week of 2007, of course the sales are up due to New Year
fitness resolutions but it is hard to extrapolate anything meaning full from
this in terms of the future.
I also note that he puts delivering
the budgets before customers. Graham Farrant's
Email
If
Graham or his masters at Danoptra and Cognetas wanted to resolve the speculation
about finances they have only to make available audited accounts to a few
respected financial journalists or at the least issue a meaningful press
statement about them. As of noon on 13.1.07 no press statements relating to the
viability of Danoptra have been posted on either the Cognetas,
Danoptra, Gamestec
or
LC websites.
There
is a legal requirement for companies to file accounts at Companies House.
Companies House allows any person with Internet access to search for free
certain records. Under "Danoptra Limited" as of noon on 13.1.07 the
record shows "Next Accounts Due: 30/10/2006 OVERDUE.
Last Return Made Up To: 15/03/2006. Next
Return Due: 12/04/2007"
For
Danoptra Holdings the record is "Last Accounts Made Up To:
30/09/2004 (GROUP). Next
Accounts Due: 30/10/2006 OVERDUE.
Last Return Made Up To: 10/01/2006."
The
accounts of a third company, Danoptra Nominees, is not overdue.
For
Leisure Connection Limited: "Next Accounts Due:
30/07/2006 OVERDUE. Last
Return Made Up To: 03/12/2006."
For
Leisure Connection (Holdings) Limited;
"Next Accounts Due: 30/07/2006 OVERDUE.
Last Return Made Up To: 26/10/2006."
Both The
Leisure Connection Foundation Limited and Leisure Connection (CG) Limited
accounts were up to date.
It
may be that some accounts have been sent to Companies House but are not yet
entered on the system. It is also possible that one or more of the companies has
been granted an extension for filing their accounts. However, the lack of hard
information and number of overdue accounts does nothing to reassure employees or
others concerned about the solvency of LC and Danoptra. PB
Lloyd denies Danoptra troubles
from Intergame Online 9.1.07 Reproduced in full
http://www.intergame.ltd.uk/News001.aspx?Action=-617781463&ID=301f9af1-bd8b-4b42-b046-f695ccb9fde6&SiteID=1
Britain's second largest machine operating company, Danoptra, is renegotiating its banking facilities, triggering speculation in the national press at the weekend that it is in some trouble. However, according to the company's new managing director, Derek Lloyd, this is far from the truth.
The leisure conglomerate has reportedly applied to its three banks - RBS, HBOS and HSBC - for a revision of its loan facilities prior to Christmas. Danoptra is the parent of operator Gamestec and manufacturers Bell-Fruit and Mazooma, while it also has Leisure Connection, a health club business.
Danoptra is itself owned by Cognetas, a private equity house which had a three-to-five-year plan for the group in the first place.
First for disposal was due to be Leisure Connection, but over the weekend this was interpreted as the first of a succession of panic measures.
Lloyd, however, has been at pains to assure the group's staff that the exit strategy being sought for Leisure Connection is no more than was originally planned. The company has accepted that the performance of the group in 2006 was significantly less than hoped for, but that is an industry-wide issue.
The gaming divisions had made a promising start to the New Year, due to improvements in business practices and stronger management controls. Lloyd quoted positive trends within the industry as indicative of a brighter future for the company's gaming businesses, especially the incoming changes in the law which will permit sharing the cashbox and the opportunity to “communicate with potential players.”
The
plans to sell off LC might explain the bizarre efforts in the last eight months
to reduce costs by cutting back in ways that have annoyed councils and
customers. A company that is disposing of its contracts does not have to worry
so much about the long term impact of slashed
budgets.
Cognetas is
a new name for Electra Partners Europe. My
guess is they Cognetas have realised that leisure Private Finance Initiative
contracts are not going to happen as often as they has expected and not be the
same royal roads to riches that PFIs have been in other sectors. The poor
results may well explain Colin Daniels' early
retirement from Danoptra. PB
The Sunday Times
7.1.07 http://www.timesonline.co.uk/article/0,,2095-2534370_1,00.html
Credit squeeze hits buyout firms
Jenny Davey, Matthew Goodman and Louise Armitstead
New evidence of the financial squeeze facing private-equity buyouts emerged this weekend with news that three high-profile deals have run into trouble.
The latest revelations will add to growing concern that the huge wave of buyout activity seen since the late 1990s has spurred companies to take on unsupportable levels of debt.
The Sunday Times can today disclose that:
Stead & Simpson, one of Britain’s oldest shoe-shop chains, has bust its borrowing limits just one year after agreeing a £51.4m buyout backed by Bank of Scotland Corporate;
The leisure conglomerate Danoptra, which was taken private in a £118m deal in 2002, has been forced to ask its lenders for new banking facilities after a downturn in trading at one of its two divisions;
Private-equity groups Duke Street and Apax are battling to save their investment in Focus, one of Britain’s biggest DIY chains. They are locked in restructuring talks with Focus’s creditors to try to avoid insolvency.
These latest signs of the acute financial stress facing private-investment groups have emerged just days after the Little Chef roadside restaurant group narrowly averted bankruptcy by clinching a rescue deal.
Stead & Simpson...
Separately, the Danoptra leisure conglomerate has opened talks to renegotiate its banking facilities. The firm, which changed its name from Kunick after the buyout, submitted proposals just before Christmas to its three banks, Royal Bank of Scotland, HBOS and
HSBC. The leisure group has two divisions. One runs health clubs on behalf of local authorities. It is the second division — manufacturing and distributing amusement machines to pubs and other venues — where trading has been hit.
The division appointed Derek Lloyd as its managing director last August and he is thought to be working to try to reverse the decline, but needs the support of his banks to do so.
Talks with Danoptra’s three banks are said to be amicable. But one source close to the company admitted that the leisure group had been a
“lousy” investment for Cognetas, the private-equity house formerly known as Electra, which backed the buyout. Cognetas is expected to split up Danoptra this year by putting Leisure Connection, the health-club arm, up for sale....
Meanwhile, private-equity groups Duke Street and Apax are battling to save their investment in
Focus...
Graham
Farrant's "Don't Panic Mr Mannering " Email
This
was posted to me anonymously but two former LC staff members have confirmed they
have been told by current employees of such an email. PB
08/01/2007
To:
LC
Leisure Centre Staff
Subject:
Urgent
You
may have seen some press speculation over the weekend, or you might be contacted
by your clients who may have seen it, regarding the Danoptra
group,
Leisure Connection and its ownership by our venture capital backers Cognetas
(formerly called Electra).
The
purpose of this note is to put your minds at rest and to prevent any damaging
speculation within the company about what is happening.
When
Cognetas bought LC 4 years ago as part of the Danoptra/Kunick Group, they always
intended to onward-sell the company in due course, and probably
within
3 - 5 years as that is what VC companies do with their acquisitions. It is
no
surprise to any of us that as that timescale has elapsed, there is discussion
about the future ownership of LC and the Directors have been discussing the
timing of any sale with Cognetas. It is true that we are currently
re-financing the company and Cognetas will be looking to sell their share in LC
sometime during this year. It is important that you know that we are in control of the
process.*
We
have also been hitting our budget targets for the first quarter of this year and
are making great progress with improving the financial position of the company,
increasing sales and controlling costs in a way that has not really been evident
before. On the back of this great progress we believe that Leisure
Connection is in a very good position to come out of this process stronger and
more able to respond to the changing patterns of consumer demand in the fitness
industry, and better able to respond to the changing demands of our public
sector
clients too.
If
you want to know anything more, or if you hear any other rumours, please do not
hesitate to contact one of the Directors and we will let you know what the
current position is. Unfortunately there are always people who want to
speculate and start rumours within a company at this time - please don't let
yourself be drawn into this as it is critical that we remain focussed on our key
objectives of delivering the budget and providing an
excellent
service to our clients and customers.
Graham
Graham
Farrant
Chief
Executive Officer Leisure
Connection
Mobile
Number Provided
*Compare the above to rationale
given in July 2002