Esporta plc
Address:
Trinity Court
Molly Millars Lane
Wokingham
Berkshire, RG412PY
United Kingdom
Telephone: (+44) 118 912 3500
Fax: (+44) 118 912 3600
http://www.esporta.co.uk
Statistics:
Public Company
Incorporated: 1982 as First Leisure Corporation plc
Employees: 1,740
Sales: £64 million ($96 million) (1999)
Stock Exchanges: London
Ticker Symbol: ESP.L
NAIC:71394 Fitness and Recreational Sports Centers
Company Perspectives:
Esporta aims to be the leading operator of health clubs at the premium end of the market by offering superior levels of service and facilities which help people feel good about their lives.
Company History:
Berkshire, United Kingdom-based Esporta plc was formed from the breakup of First Leisure Corporation plc in 1999. Esporta now comprises that company's health and fitness club holdings (previously held under First Leisure's Health and Fitness Division). Esporta expects to increase its operations from 26 clubs in 2000 to 46 clubs or more by 2002, with much of this growth to be achieved organically. The company's clubs, typically oriented to the family and high-end brackets, operate under the Esporta brand name, but also under the Riverside, Racquets and Health, and Espree brands, with the latter targeted specifically at the corporate fitness segment. While Esporta itself was dormant in 1999, its pro forma revenues as First Leisure's Health and Fitness division totaled £64.0 million for the year, with net profits of £4.7 million. Esporta is led by chairman J.K. Grieves and CEO Graham Coles. The company is listed on the London Stock Exchange.
From Rags to Riches in Postwar London
Esporta was the offshoot of the activities of one of the United Kingdom's entertainment industry's most influential families. Olga and Isaac Winogradsky arrived in London's East End at the turn of the century, after fleeing the pogrom of Tsarist Russia. Settling in the Stepney neighborhood, the Winogradsky family became rag merchants. Growing up in poverty, the three Winogradsky children--Boris (later Bernard), Lew, and Leslie--slept on the floor and all left school before the age of 14 to pursue their careers. The Winogradsky boys all gravitated toward the entertainment business. Both Boris and Lew began their careers as Charleston dancers--with Lew changing his last name to Grade and Boris changing his name to Bernard Delfont. Leslie followed suit, taking the name of Grade.
All three went on to achieve great success in the United Kingdom's entertainment world. As Lew Grade, by then Lord Grade of Elstree, told the Independent on Sunday: 'None of us Grades knew how we came to do the things we did. Show business came to us naturally.' Leslie Grade turned to artist representation, making his early mark by bringing such stars as Bob Hope and Danny Kaye to the damaged theaters of London's West End, as England emerged from the Second World War. Leslie Grade's agency--the Grade Organization, set up with brothers Lew and Bernard--remained one of the country's most prominent until well through the 1960s. The Grade Organization also ran theaters, in addition to becoming one of Europe's largest theatrical agents. Leslie Grade was forced into early retirement after a number of strokes--his place in the agency was taken by son Michael in 1966.
If Leslie Grade had made his parents proud, his brothers made themselves rich. After ending his dancing career and a stint working with Leslie in his theatrical agency, Lew Grade went off on his own--into the newly developing television industry. In 1955, Grade founded the ITC television and film production company, which became one of the country's most important broadcasters through its Midlands-based ATV franchise, part of the ITV independent television network. Under Grade, ITC produced such world-renowned television series as 'The Saint,' 'The Persuaders,' and 'The Muppet Show,' as well as the highly popular mid-60s show, 'Sunday Night at the Palladium.'
Grade also produced a number of highly successful films and miniseries. His role in building Britain's postwar entertainment industry earned him a life peerage in 1976. The newly ennobled Lord Grade of Elstree then led ITC into a new venture that was to prove the company's undoing. In the mid-1970s, ITC sunk the then-unheard-of sum of US $30 million into the production of a film called Raise the Titanic. As Lew reportedly said afterward, 'It would have been cheaper to lower the Atlantic.' The film proved a worldwide disaster, toppling ITC's financial position and ultimately leading to the company's loss of its ITV television franchise and the company's sale to rising Australian magnate Robert Holmes.
By then, brother Bernard Delfont was just getting started on a new career. After his stint as a dancer, Delfont had entered the booking side of the entertainment business. Delfont hit the big time at the start of the 1950s when, spending some £40,000, he brought the famed showgirls of Paris's Folies Bergere for a theater run in London. The Folies Bergere show lasted for more than 2,000 performances, earning Delfont more than 600,000 pounds. Delfont used part of these proceeds to fund his brothers' new agency, the Grade Organization, which quickly built up a powerful position in London's theater world.
Leslie Grade's retirement in 1966 led to the sale of the Grade Organization--for £6 million to EMI in 1967. Delfont joined EMI as part of the deal, taking over as head of the company's film and cinema division and, for a time, served as chief executive officer for EMI itself. After EMI had been acquired by Thorn Industries in 1979, its leisure and gambling operations were sold off to Trusthouse Forte. Delfont took over as head of the Trusthouse Forte Leisure division. The following year, however, Delfont--known as 'Sir Delfont' since his ennoblement in 1976--was forced into retirement.
At the age of 70, however, Delfont was preparing to start a new career in the entertainment industry. By 1982, he had gathered the resources to perform a buyout of Trusthouse Forte's leisure division. Renaming his new company First Leisure, Delfont set out to build a new empire.
Shaping Up for the 21st Century
Among First Leisure's holdings was the Blackpool Tower, the landmark amusement center in the famed and long-time favorite resort destination for Britain's holiday-goers, bought by Delfont for £6 million. First Leisure's operations extended to encompass a wide variety of entertainment venues, including one of the United Kingdom's leading chains of bowling alleys, seaside amusement piers, squash clubs, bars, theaters, and nightclubs.
Through the 1980s, Delfont built First Leisure into a diversified entertainment conglomerate, boosting especially its numbers of bowling alleys and discotheques. The company also bought up holdings in such varied areas as marinas and caravan parks. By 1991, Delfont, at the age of 81, was beginning to feel ready for retirement--at least, partial retirement. In that year, Delfont stepped down from his chairman position. He retained his position as president of First Leisure, however, until his death in 1994.
After weathering the severe recession of the early 1990s, First Leisure set out to expand its holdings in new directions, adding the Riva chain of seven bingo parlors in 1993. Through the rest of the decade, the company invested strongly in its bingo wing, building up the Riva chain to 22 bingo parlors. By the end of the 1990s, with the introduction of the National Lottery, the bingo industry found itself under extreme pressures, with revenues dwindled throughout the market. By then, however, First Leisure already had begun building an interest in another area, one that promised explosive growth. In 1994, First Leisure bought up a 75 percent share of the Royal County of Berkshire Racquets and Health Club. More health and fitness-related acquisitions followed, including that of ISK Leisure, bringing the company's total holdings in that market to 26 by century's end.
Another area of focus for First Leisure was the bar and discotheque market. By the middle of the 1990s, First Leisure had become one of the United Kingdom's leading discotheque operators, with more than 20 large-capacity clubs and theme bars grouped under its Dancing division. This division had quickly become one of First Leisure's largest revenue producers, responsible for more than £57 million of the company's £158 million revenues in 1995. By then, however, First Leisure was facing widespread criticism for its diversified (some called them unrelated) interests.
This sentiment was shared by Michael Grade, son of Leslie Grade, who joined the company as chairman and chief executive in 1997. Michael Grade had long blazed his own path in the United Kingdom's entertainment industry. After starting a career as a reporter with the Daily Mirror at the age of 17, Grade moved to Hollywood in the 1970s, joining Embassy Television to produce the long-running hit 'Who's the Boss' and other hit series. Back in England, Grade joined BBC1 as director of programs in 1984, before taking over as head of Channel Four in 1988.
Grade's arrival at First Leisure was greeted enthusiastically by his uncle, the sole surviving Winogradsky brother, who told the Independent on Sunday: 'I'm very proud of Michael. He is the only person in the British entertainment business with creative ability and business ability. The two rarely go together.' By the middle of 1999, Grade received harsh criticism from Lady Delfont, widow of First Leisure's founder, who said, as reported by the Daily Telegraph: 'At no time did we understand that Michael Grade's job was to asset-strip a thriving company.'
Grade faced criticism from another front. Stockholders revolted over Grade's hefty pay package, while complaining about the company's slipping share price. In response, Grade stepped down as company chairman, while retaining the CEO spot. He also vowed to conduct a review of the company's operations.
Grade's review reached a conclusion that many analysts saw as inevitable: the breakup of the company. In early 1998, Grade sold off First Leisure's failing bingo division, vowing to refocus
1955:Grade Organization is established.
1967:Grade Organization is sold to EMI.
1979:EMI is acquired by Thorn Electrical Industries and its Leisure division is sold to Trusthouse Forte.
1982:Bernard Delfont leads buyout of Trusthouse Forte Leisure and founds First Leisure plc.
1993:Riva bingo parlors are acquired.
1994:Acquisition of Royal County of Berkshire Racquets and Health Club and ISK Leisure.
1997:Michael Grade is named chairman and CEO.
1998:Bingo division is sold.
1999:Bars and nightclubs division is sold.
2000:Health and fitness division reformed as Esporta PLC.
By early 1999, however, Grade seemed to have thrown in the towel in his effort to bring together the company's disparate holdings. In May 1999, First Leisure shocked the financial community when it announced that it had entered talks for the sale of the company to the Cannons Group fitness center and entertainment group. Despite the reported purchase price of £530 million, the two sides broke off negotiations less than a week later, claiming an inability to agree on a price for the two companies' merger.
Grade quickly quelled further rumors that First Leisure was looking to sell out to a single buyer. By August 1999, the company had agreed to sell its 31-strong Superbowl chain of bowling alleys to the Allied Leisure-backed acquisition vehicle Moatdale for £111.5 million. The acquisition gave Allied Leisure, itself only recently formed from a merger between Allied and European Leisure, control of 59 bowling alleys in the United Kingdom. After disposing of First Leisure's 50 percent share of the Delfont Mackintosh Theatres group, Grade turned his carving knife to First Leisure's prime asset, selling its nightclub and bars division to a buyout team led by former First Leisure deputy director of operations Paul Kinsey. The cash price for the sale reached £210 million and included the sale of the company's name and Soho Street headquarters.
Grade had successfully pared the now nameless company down to just its health and fitness assets--a division that had been undergoing strong growth in the late years of the 1990s. Instead of incorporating as a new company, Grade revived a shell company, Just So Fashions, renamed it Esporta Limited, then re-registered the company as Esporta plc. After transferring the former health and fitness holdings to Esporta plc in January 2000, Esporta formally began trading on the London Stock Exchange in February 2000. By then, Grade had stepped down as head of the company&mdashø return to the film and television production world--making way for new chairman JK Grieves and CEO Graham Coles.
The 'new' company had steadily expanded its fitness division, acquiring the Espree and Riverside branded clubs. The company also began building its own clubs--its new smaller-scale clubs were branded under the Esporta name--while larger country club-type facilities modeled after the company's original Berkshire acquisition were branded under the Racquets and Health brand name.
Esporta reported (pro forma) revenues of £64 million for the 1999 year, with net profits of nearly £5 million. The company also announced ambitious growth plans, expecting to bring its total number of fitness centers to 26 by the end of 2000 and to 46 by 2002. With the fitness boom only just beginning in the United Kingdom, Esporta's future looked healthy indeed.
Principal Operating Units: Cookridge Hall Golf & Country Club; Dorset Racquets and Health Club; Esporta Health and Fitness; Espree Leisure; Riverside Racquet Centre; Royal County of Berkshire Racquets and Health Club; Surrey Tennis & Country Club; Warwickshire Racquets and Health Club.
Principal Competitors: Cannons Group; Holmes Place; De Vere Group; Dragons Health Clubs; Whitbread.
Further Reading:
Baker, Lucy, 'First Leisure Strikes Pounds 111m Cash Deal Over Bowling Alleys,' Independent, August 17, 1999, p. 15.
Bennett, Neil, 'Grade's Hard Graft,' Daily Telegraph, May 2, 1999, p. 4.
Halstead, Richard, 'Making of the Grades: Profile: The Grade Dynasty,' Independent on Sunday, February 2, 1997, p. 4.
Osborne, Alistair, 'First Leisure To Sell Off Bars Division for Pounds 210m,' Daily Telegraph, October 30, 1999.
Reece, Damian, 'Pumping Profits,' Sunday Telegraph, January 9, 2000, p. 10.
Yates, Andrew, 'Bid War on the Cards as Sector Giants Stalk First Leisure,' Independent, August 18, 1997, p. 18.
------, "Bingo Is Out as Michael Grade's Shake-up of First Leisure Begins," Independent, January 23, 1998, p. 24.
Source: International Directory of Company Histories, Vol. 35. St. James Press, 2001.
