The operator of Thanet’s council owned gyms and swimming pools, and the manager of its seafront beach huts, Your Leisure Kent Limited (YL), is facing bankruptcy.
Published last week, YL’s 2021/22 accounts include a stark warning from its independent auditor, McCabe Ford Williams, that “a material uncertainty exists which may cast significant doubt on the society's ability to continue as a going concern”. In other words the accountants believe that YL might be unable to pay its debts and fund its day to day running costs, which in plain English means that YL is likely to go bust.
But this shouldn’t be a surprise. I, and others, have raised this possibility before when writing about YL’s declining financial performance.
According to its accounts for the financial years 2018/19 to 2021/22 YL has made operating losses totalling a staggering £1.3million. At the same time YL has also exhausted its rainy-day cash reserves which, the 2021/22 accounts say, are now in “a deficit of £943,398”.
If that wasn’t bad enough the company has a huge debt mountain of at least £10 million. £8million of this is to cover the construction of the Ramsgate Leisure Centre and the refurbishment of Hartsdown Leisure Centre.
There is also a Lloyds Bank loan which is reported to be about £1million and a staff pension fund deficit also said to be close to £1million. I believe that it costs YL somewhere in region of £700,000 a year to service these debts.
To be fair to YL its financial troubles have been made worse by the Covid19 Pandemic but significant losses were already being reported before the pandemic and those losses continue with the company making operational losses of £336,021 in the 2021-22 financial year.
This is despite additional Government and TDC financial support of several hundred thousand pounds received by YL during the pandemic.
TDC’s Rescue Package
Thanet Council has already stepped in to assist the struggling YL. In August 2021 it removed the management of the Winter Gardens and the Theatre Royal from YL in order to reduce the company’s operating costs. But that intervention fades into insignificance when compared with TDCs latest scheme.
Although not yet made public, council reports state that TDC has decided to take on the responsibility of paying off YL’s £10 million debt mountain. But why would an already cash strapped council take on additional debt repayments said to be at least £700,000 a year. Surely this doesn’t make financial sense, or does it?
Takeover, Fire Sales & Beach Charging?
YL’s 2021-22 accounts say that the company is “exploring the potential for collaboration with a lager leisure Trust” and that it hopes to “finalise collaboration opportunity with a potential partner, with similar values, objectives and status and implement new arrangements” .
Although the words collaboration and partnership are used make no mistake YL is on its knees and is in no position to call the shots. The truth is that whoever YL might be negotiating with, that organisation will be taking over YL.
Presumably TDCs taking on of YL’s £10million debt aims to ease the path to its takeover by another organisation. After all what business could resist the temptation of a debt free acquisition and expansion opportunity?
At the same time, TDC is also in the process of negotiating a new modern, fit-for-purpose, long term contractual arrangement with YL which includes the payment of significantly improved management fees to the operator .
It’s almost certain that the modern, fit-for-purpose, long term will include options to purchase, at knock-down fire sale prices, the freeholds of the Theatre Royal and Winter Gardens, or perhaps the opportunity to become involved in lucrative schemes to develop these now boarded up properties. Thrown into this mix will of course be access to tens of £millions of levelling up cash. An irresistible offer for YL’s new owner.
To add icing on the cake it would appear that whoever takes over YL will benefit from a new service concession agreement (which) will allow for the expansion of Foreshore related services, this will include but is not be limited to a review of the coastal toilet provision.
Apart from the beach huts, and now the public toilets, what else might these new concessions be? Maybe the disposal, once again, of the Margate Harbour Arm for a pound a year to YLs new owner. Perhaps a chance to takeover Ramsgate’s Royal Harbour, or the power to set and take rents from beach cafes and amusements concessions or seafront carparking.
It’s not beyond the realms of possibility that the expansion of foreshore related services might even allow YLs new owner to privatise our beaches, with a French style pay as you use policy?
Clearly the council’s aim is to turn YL’s troubles to its own financial advantage. By allowing YLs new owner to dominate Thanet’s leisure industry, have first pickings of cheap council owned assets such as the Winter Gardens and Theatre Royal, coupled with huge, debt free, income generation opportunities and access to levelling up cash, the council will ensure that it will be handsomely rewarded for taking on YLs £10 million debt.
Why does this remind me so much of Dreamland's filching of valuable public assets, but on a much bigger scale?