Write-offs give nightspot group a 56m pounds hangover

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The Independent Online
EUROPEAN Leisure, part of the leisure industry's growing army of walking wounded, has limped in with a net pounds 56m loss for the year to 30 June. The result was struck after big write-offs, chiefly losses on planned and completed disposals.

In the previous year the company made pounds 5.2m before tax, before a tranche of write-offs left the company nursing a retained loss of pounds 4.3m.

While many leisure operators have failed during the recession, European - the owner of London's Camden Palace and Hippodrome nightspots - remains confident despite the jolt to its finances.

It is now a very different picture 'looking from the inside out rather than from the outside in', said Ian Rock, who took over as chief executive after the abrupt departure 14 months ago of Michael Ward.

'Despite the continuing recession,' Mr Rock said, 'I remain confident about the future of the consumer leisure industry. If and when the upturn comes, we'll be there.'

The shape that European Leisure will be in when that happens, however, will be markedly different from the company that was carved out of a block of expensive acquisitions in the late Eighties.

Additionally, the board was recently bolstered by the appointments of Clive Bastin, deputy chairman of Frogmore Estates, and Patrick Hooper from Pentos.

Expenditure has been cut to the bone. The days of spending large amounts on a new discotheque have gone, replaced by 'defensive spending' to maintain standards and ultimately to hold existing trade.

European, owner of 74 discos and venue bars and 67 snooker clubs and bars, has suffered with the rest of the industry from competitive price discounting, and a drop in spend per head.

The all-important flow of cash from 18 to 25-year-olds has been reduced to a trickle, particularly in the middle of the week. That environment has made it virtually impossible for many operators of leisure venues to spend on anything other than maintenance.

Well-known names that have succumbed to the pressure so far include Leading Leisure, Airbreak and Harry Goodman's International Leisure Group. Chunks of the industry, particularly hotels, are now being run by receivers.

Meanwhile, European is pushing ahead with a disposal programme, aiming to erase debts which, at pounds 76.6m at the year-end, were more than double shareholders' funds of pounds 33.8m.

The entertainments division, European hopes, will be 18 discos and venue bars lighter. Snooker operations, while holding steady, will lose 11 clubs.

'We said we would sell 30 units,' Mr Rock said. 'Five have been sold, which include two entertainment ships, and 16 are in the hands of solicitors.'

However, because it was 'difficult' to complete deals, he could not accurately predict the length of the disposal timetable.

Fresh banking facilities have been secured until next July. 'We do have a burden of debt, but we are not under pressure from our banks,' Mr Rock said.

Despite the heavy pounds 8.8m of extraordinary and pounds 47.5m of exceptional write-offs during 1991, European's pounds 7.7m of interest payments were covered 1.2 times by trading profits of pounds 9.6m.

Trading since the year-end has stayed flat, with nightclub owners still engaged in heavy discounting on admission prices.

Entertainment operations are 'a touch down on last year', but snooker clubs have shown some signs of returning to growth, he said.

The shares were unchanged yesterday at 3p.