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Report reveals JUMP! swim school’s entity had ‘poor budgeting control’ and owes millions
A failed arm of the JUMP! Swim Schools group may have been trading while insolvent for close to three years, according to an administrators report.
In a report to creditors released last week and seen by media outlets, it was estimated that Swim Loops Pty Ltd owed unsecured creditors $15.2 million. Of that, some $13.3 million was owed to six companies also related to Jump.
Glenn O'Kearney of GT Advisory was appointed as administrator to the business on 21st May, sparking concerns from Jump Swim franchisees that the administration may affect funds they were chasing for swim school franchises they had purchased but had not been built.
Jump Loops Pty Ltd, the company which holds newly-made franchise agreements, is owed $10 million. The administrators' report says between March 2016 and May 2019, it appears Jump Loops had "funded a significant proportion of (Swim Loops) loss-making operations".
The report advised that it appeared the company's financial position "can be largely attributed to a lack of working capital and poor budgeting control in relation to both revenue and expenses.”
From the 2013 financial year onwards, Swim Loops had accumulated losses of more than $10 million.
O'Kearney's report says while pinpointing insolvency would require further investigation, Swim Loops could have become insolvent as early as 30th June 2016.
Several transactions made by Swim Loops were also flagged as potentially uncommercial, making them subject to further review by a liquidator.
In or around March 2016, Swim Loops sold JUMP! Swim Schools intellectual property to a related entity for $1. Additionally, the company also transferred six corporate-operated swim schools to a related entity for an amount equal to the fit-out cost.
With Ian Campbell the sole director of Swim Loops, the administrator's report says it is possible the director would be liable for an insolvent trading claim but notes his financial position may affect any further investigations into whether this is the case.
No charges have been laid against Campbell, and the administrator's report notes that it would ultimately be for liquidators to decide whether to pursue any such allegation in court if they felt it was warranted.
A Jump Swim spokesman said the company had been audited every year and received a "statement of solvency" which would provide a defence for directors.
The administrator has only formed a preliminary view on potential insolvent trading and has clearly disclosed this would require further investigation.
The spokesperson said the company had approximately $2 million in debts to third-party creditors outside of those owed to related Jump entities.
The Jump spokesman said the company would also be defending recent action brought against it this week by the Australian Competition and Consumer Commission alleging it misled franchisees in its advertising.
Investigation revealed that since the administrator’s appointment, several steps have been implemented to cut down on expenses.
Specifically, JUMP!’s staff numbers have reduced drastically from 25 to 12, with the group leaving head office premises and cutting monthly overheads by more than half.
When confronted by a television crew from Nine Network’s A Current Affar last week, Campbell ran away.
Images: Jump founder Ian Campbell after being named Australian Emerging Franchisor of the Year in 2016 (top) and running from Nine Network’s A Current Affair last week (below).
9th January 2019 - Jump! Swim School responds to media reports of dissatisfied franchisees
8th January 2019 - Media slam Jump! Swim Schools over dissatisfied franchisees
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