Thanet councillors are likely to agree plans to give financial help to Your Leisure as it struggles amid covid restrictions.
Your Leisure operates Margate Winter Gardens, Theatre Royal, Margate and Ramsgate leisure centres, Northdown House and manages beach huts along the Thanet coastline.
But income began to fall in February last year as the pandemic started to unfold and since the national lockdown in March both theatres have remained closed and leisure centres had limited operations in the periods when the toughest restrictions had been lifted.
The leisure trust now faces serious financial struggle with trading income down by £1.28million in 2020 compared to 2019 and outstanding liabilities in the region of £8m in terms of loans for Hartsdown and Ramsgate leisure centres.
Thanet council is to discuss options to help keep the company afloat including approving a loan to Your Leisure of between £700k-£1.5m; providing additional funding of £230k plus VAT to the Winter Gardens to ensure that it can reopen and operate from October 2021 by being able to replace and relocate the boilers; and explore with Your Leisure the potential to refinance, through council prudential borrowing, the existing loans in respect of the leisure centres.
The council is also expected to agree to extend the current agreement for the leisure trust to manage the Theatre Royal until April 28, 2022. Funding for both the Winter Gardens and Theatre Royal has also been applied for under the Margate Town Deal.
A report to Cabinet members, who will discuss the issue on Thursday, says: “The financial impact of Covid on YL is evident. The facilities and services they provide have been forced to close for ten months now, and despite the partial reopening of the leisure centres there is substantially reduced income through meeting social distancing guidelines.
“Whilst substantial effort and actions were and continue to be taken to mitigate the impact, YL faces an uncertain future and the possibility of insolvency and liquidation. In turn the council faces the prospect of facilities and services not reopening in the future and having to seek alternative arrangements to provide the services currently delivered by YL. The current climate will create challenges in finding a replacement operator particularly with the existing loan and pension liabilities.”
The council, as guarantor for the leisure centre loans, could also face extra penalties if the loans are redeemed early. Your Leisure currently repays around £600,000 per annum.
The report adds: “Over and above these loans there is also a liability attached to pensions of between £2m and £5m as well as various other liabilities should Your Leisure cease trading.”
Efforts to survive
Your Leisure has worked to contain the financial impact with use of the Coronavirus Job Retention Scheme (CJRS). It also gained £200,000 in grants from the Coronavirus Retail, Hospitality and Leisure Grant Fund and secured short-term financial support from its bankers with an £800,000 loan via the Coronavirus Business Interruption Loan Scheme (CBILS).
The leisure trust has taken advantage of the deferral of the March 2020 VAT liability which is now due to be paid in March 2021 and negotiated an instalment arrangement with HM Revenue & Customs for the payment of PAYE liabilities.
The trust has also negotiated payment holidays on rent, loan and utility liabilities and secured additional and advanced funding from local authority partners.
An application for £930,000 grant funding through the Cultural Recovery Fund was submitted although the amount granted was £332,000 and a crowd-funding page for Margate Winter Gardens and the Theatre Royal was also launched.
Several of Your Leisure’s hospitality staff were also made redundant last year.
The leisure trust had a cash balance of £806,529 as of January 12.
Leader of Thanet District Council, Cllr Rick Everitt, said: “As the report rightly states, the financial impact of Covid-19 on the leisure and entertainment industry has been profound. If the council doesn’t act now we could be faced with the prospect of many local services having to cease operation. This could have far reaching long-term effects given the health inequalities we see within our district.
“There would be significant financial implications for the council, whether we took services in-house, were able to identify an alternative provider or allowed them to cease altogether. There is no risk-free option here.
“Whilst we welcome the recent Government financial support to the leisure sector it doesn’t go nearly far enough and only applies from 2 December 2020. This doesn’t address many months of financial loss before that, given the first national restrictions were imposed in March 2020.
“At this point all of Your Leisure’s facilities and services were required to close and consequently their customer income ceased. Whilst some services have reopened, customer confidence remains low and there is significant uncertainty around when the latest national restrictions will lift.
“The council has worked closely with Your Leisure throughout the pandemic to understand the challenges they have been facing and has confidence in the management’s approach.
“Supporting a Thanet business, which employs many local people and in turn protects the health and wellbeing of so many of our residents, who really value the services provided, has to be a priority and this will be considered when the Cabinet meets on Thursday.”
The Cabinet meeting takes place online on Thursday (January 28) at 5.30pm.