The MD of
Parkwood Leisure talks about success in local
authority facility management and about the
challenges for private operations in a time of
widespread financial
uncertainty
Andrew Holt, the
softly-spoken managing director of Parkwood
Leisure, welcomes me into his surprisingly
functional office, located in a large house in a
Worcestershire village.
It is from this quiet
country outpost that Holt and his team
successfully run the UK’s number two operator of
public sector leisure facilities. Parkwood
Leisure will contribute around £50m turnover and
£2.5m pre-tax profit this year to its parent,
Parkwood Holdings, on whose board Holt also
sits.
Holt’s division of Parkwood was formed
from scratch in 1994 when the group’s owner,
Tony Hewitt, decided to start a leisure
operation. Holt was on-board from the
outset.
“We began with three staff and no
contracts,” he says. Now operating 74 centres,
geographically spread from Penrith to Penzance
to Portsmouth and employing 4,200 people, he’s
clearly had a busy 13 years.
Potted
history
Born in Swansea, Holt’s career
began in 1979 at the Britannia Leisure Centre in
Shoreditch, east London, as a recreational
assistant. Over the next 10 years he stuck with
local authorities in both London and Wales,
becoming head of sport and recreation for the
London Borough of Southwark in the late
80s.
Following a further 10 years in senior
leisure management roles, Holt formed his own
leisure management business, CLM, in 1990 and
quickly won five contracts from local
authorities. The business was later sold to
public service giant Serco.
Holt joined CCL
Leisure in 1992 to work for veteran industry
guru Roger Bottomley as operations director.
“You couldn’t wish to meet a nicer man,” he
says. “He was traditional and moralistic, but
also transparent and open and he kept ahead of
the market. I’ve tried to copy those
characteristics.”
In 2004, Parkwood – with
Holt at the helm – acquired CCL. “I felt
emotional about taking over the business, having
helped to build it,” he says, “but I had empathy
with the managers and that helped to smooth the
acquisition.” CCL remains the only acquisition
for Parkwood Leisure’s local authority
facilities division, with subsequent growth
strictly organic.
The Parkwood group has
three other divisions: Glendale, the UK’s
largest provider of grounds and countryside
management, which will turn over £63m this year;
the healthcare division, which will become
healthier once its loss-making NHS patient
transport business is sold; and the successful
Parkwood Project Management, which provides
services to the construction and asset
management markets.
Local authority
vs private
Happy to discuss his
division’s impeccable track record in council
facilities management, Holt is more guarded when
it comes to the company’s three private clubs,
which are run as a separate business unit. The
acquisition of two Sportz Academy clubs – in
Potters Bar and Hitchin, Hertfordshire, in late
2006 – has proved, says Holt, “very challenging.
We inherited a mish-mash of members who were
either not paying fees or paying very low ones,
and the buildings had not been maintained. We’ve
improved the yield per member and have a solid
membership database. We’re now breaking even –
but it took longer than anticipated, which has
been disappointing.”
The third club, in
Salisbury, Wiltshire, was technically a new
build, although the shell previously belonged to
Cannons who never developed it. “We spent £2.7m
on the fit-out,” says Holt, with a noticeable
catch in his voice. “The club’s in the right
location, has 2,000 members and only one
competitor [LA Fitness]. It’s profi table and a
great base to work from.” So are more private
clubs on the cards? “We’ll judge it at the end
of the year,” Holt says, cagily. “The credit
crunch may well affect that market.”
That
potential problem is not envisaged with the
local authority centres. With some 37,000 direct
debit members and the popularity of
pay-and-play, Parkwood’s managed facilities are
thriving – from the smaller clubs, with just 200
members, up to the London Borough of Bexley’s
Crook Log Centre with 5,000.
Of having
wrested a number of contracts from other
companies, including market-leader DC Leisure,
Holt says: “We have an excellent track record
and our prices are competitive. Councils respect
our leading position in the PPP and PFI market,
and the fact that we’re a quoted company lets
them know that we’re here for the long
term.
“It’s interesting,” he adds, wryly,
“that our main competitors are almost double our
size but making less than half our profit.
People who can no longer afford private club
rates will come to us and get a nice surprise,
as we now compete on quality with David Lloyd
and Esporta. The big private operators can,
however, still teach us a thing or two about
sales and marketing.”
That said, Parkwood
Leisure’s website, at the astute address of
www.leisure-centre.com, is proving a huge
marketing asset, boasting 87,000 page
impressions in March. “If you type ‘leisure
centre’ into Google, we come up first,” Holt
says with glee. I’ve since checked, and he’s
quite right.
Membership fees at Parkwood’s
managed facilities range from £25 to £36 a
month. Health and fitness accounts for just 26
per cent of their revenue, with swimming and
management fees providing 50 per cent and the
remainder coming from dryside and other
activities.
Holt is excited by the prospect
of his facilities helping to keep kids out of
trouble. “It’s been shown that, where a
successful leisure centre is operating, there
are far fewer problems. I can’t believe that
governments don’t realise that and incentivise
operators to get under-18s into the
centres.
“We’re packed on weekend evenings
with kids roller-skating and swimming. We’ve
just opened in Cardiff and the leisure pool is
full of kids aged 13-18 on Friday and Saturday
nights – kids who might otherwise be on the
streets.”
Fitness equipment supply, which is
put out to tender every two years, is currently
in the hands of Precor. “We’ve spent around
£1.5m with them in the past 18 months,” says
Holt. “It’s excellent equipment from a good
company and with good support.”
In
sickness and in health
The Code of
Practice on workforce matters is currently
clouding Holt’s blue-sky outlook. “Staff
transferring employment from local authority to
privately managed facilities have their terms
and conditions protected under TUPE [Transfer of
Undertakings (Protection of Employment)
Regulations] which is fine,” he says. “But now,
any new staff you employ must be on no less
favourable terms and conditions, which is
something we do not support. It’s not
legislative or statutory, but many local
authorities adhere to it. We think market
conditions should prevail and private companies
like ours should be free to employ staff under
their own terms.
“Sickness is a big issue –
public sector staff have the benefit of six
months’ full pay and six months’ half-pay. We
obviously adhere to that when it’s TUPE staff,
but with new staff? Sorry, but no. Meanwhile, we
have a sickness rate of just 2.7 per cent,
whereas the public sector average is about 13
per cent.”
Parkwood is refusing to pitch for
contracts where the council insists the code
should apply and, for this reason, Holt has
dropped out of the bidding for centres in
Crawley, West Sussex and Basildon,
Essex.
“Some of our competitors take a
different view,” he says, “but they may have a
different financial make-up, being in private
equity hands. We’re a Stock Exchange-listed
company and have our shareholders’ interests to
consider.”
Funding
matters
Parkwood’s funding techniques are
traditional. “For PPPs and PFIs we go to our
City partners, such as Bank of Ireland and
Barclays,” says Holt. The Sportz Academy
acquisition was backed by Parkwood’s bankers,
Barclays, but Holt went to HBOS for a loan to
fund the Salisbury club.
Consultancy firm
KPMG handles project modelling, and major law
firms put the legal structure together. “The
overheads are huge, with fees often reaching
around £1m,” says Holt. “For that reason,
bidding involves risk, but I can think of very
few where we lost or withdrew.
“Design,
build, operate and maintain is the model I now
support,” he continues. “We’ve just won
contracts previously operated by DC Leisure in
Cherwell [Oxfordshire] and Portsmouth on that
basis. In Cherwell, the council is paying £19m
to replace one leisure centre and £9m to
refurbish two others. We choose the architects
and contractors, use our designs and have an
operating contract for 25 years, but make no
contribution to capital cost. The council can
borrow money far more cheaply than we can, and
they get a guaranteed price, delivery to their
specification on time and on budget, and get a
profit share.” That said, Holt is critical of
the historical lack of investment in the public
sector, with most centres built in the 60s and
70s and now, he says, badly in need of
upgrading, particularly in areas such as plant
that the public doesn’t see.
Future
prospects
Holt cites the strength of his
management and staff as a major contributor to
the company’s own health and fitness. “We have a
great team, including five regional directors
working in the field, which is vital to good
client relationships. We have dedicated project
management people working on innovative designs
and business plans, and the profitable organic
growth of the company over a relatively short
period gives our staff security,” he
says.
So, overall, what are Holt’s key
objectives for Parkwood’s future? “We’re always
looking at our margins and returns to
shareholders. By the end of 2009, we want to
have a turnover of £70m and we’re on track to
achieve that.
“Longer term, we’ll continue
with more of the same. I’d like to increase the
number of private clubs and there may well be
other opportunities – we’re talking to a
developer about an ice rink and real-snow
facility, to another about a canoe slalom
centre, and to Orion Land and Leisure, who build
leisure facilities alongside residential
property, about a number of projects.
“But,
basically, I’m concentrating on what we do best.
I understand the councils and how they work.
We’ve grown by 25 per cent in the last six
months and I don’t want to grow any further
until we’ve got everything we currently do
exactly right.”
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 Andrew Holt began his career as a
recreational assistant at a leisure centre 29
years ago |
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