Esporta, the fitness club operator that shocked the market with a surprise profits warning last week, saw its chief executive, Graham Coles, fall on his sword yesterday.
Mr Coles, who left by mutual consent, had struggled to gain credibility for his management team ever since Esporta was spun from Michael Grade's First Leisure group last year.
Meanwhile, speculation mounted that the premium health and fitness chain, whose market capitalisation tumbled from £216m last year to £90m, was a prime takeover target. Its shares edged up 3p to 54p, recovering from last week's record low of 48.5p.
Analysts pointed to Whitbread and Royal Bank Private Equity, which bought the rival operator, Cannons, earlier this year, as possible buyers of Esporta's 34 clubs. Whitbread, which in August announced plans to double its premium David Lloyd Leisure racket clubs to 100 by 2006, declined to comment. A spokesman said the group planned to grow the clubs organically.
Michael Cairns, a non-executive director will temporarily succeed Mr Coles – best known for his six-year stint as First Leisure's finance director. The company said the severance was still being negotiated. He was on a one-year £220,000 contracted salary.
Esporta said last week that full-year sales would miss expectations by 3 to 4 per cent, blaming it on a lack of new memberships. Analysts expect this to hit profits by about 40 per cent because of the business's high operational gearing.
James Ainly, at Dresdner Kleinwort Wasserstein, expressed surprise at Esporta's commitment to completing its 18-month new opening's pipeline, when rival operators kept their horizons to a maximum of 12 months. "It shows a little lack of control in terms of the risks they have taken on board," he said.
As the economic downturn worsens, quoted health and fitness club operators will come under increasing pressure to meet expectations. Analysts are divided as to the sector's resilience if consumer confidence is tested.Reuse content