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View the article online at http://citywire.co.uk/wealth-manager/article/a245672

Topnotch heads to the bottom of the fitness class

by Richard Lander on Jan 31, 2003 at 14:19

Topnotch Health Clubs has puffed and wheezed its way through a very unhealthy first half which leaves the group looking like a very sick athlete indeed.

Operating losses ballooned to £3.7 million from £429,000 in the six months to 31 October with reorganisation costs bringing the total pre-tax deficit to £4.9 million.

It is basically the same story that has afflicted the whole health club industry – over expansion which has led to a collision between oversupply and an economic downturn.

Business hasn’t got any better in the second half but the sale of the club in Derby and the closure of a club in Docklands is at least eating slowly into Topnotch’s massive debts, which stood at £9.3 million at the end of the period.

Citywire Verdict:

Having breached banking covenants and issued two profit warnings last year, Topnotch does at least have the backing of bankers for the next 12 months.

However while its clubs in middle England might be doing not too badly, outlets in the City and central London will continue to feel the pinch from the rapidly slowing service economy.

A £3.5 million tangible asset writedown has reduced shareholders funds to just £2 million. Who knows what will happen if the auditors feel the need for another writedown? The shares (THC), down 0.75p at 4.50p value the company at just £733,000 but are still to be avoided.

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