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Soho House has reported another annual loss and rising debt as the members’ clubs group said an independent review of its accounting practices had “shown no material issues”, following a recent short-seller report.
The company said its audit committee had “engaged a large, globally recognised forensic accounting firm and a prominent independent global law firm” to review its accounting practices. This was to “counter any misleading statements that have been made about us”, according to chief executive Andrew Carnie during Friday’s earnings conference. The company declined to name the firms.
New York-based short seller GlassHouse last month published a report criticising Soho House’s accounting practices and expansion strategy, accusing the group of having “a broken business model and terrible accounting” and describing its listing as being “eerily similar” to that of bankrupt company WeWork.
Soho House, which floated on the New York Stock Exchange in 2021, fiercely rejected the report, saying it contained factual inaccuracies and that its biggest shareholders are considering taking the company private.
Its shares have plunged almost 60 per cent since its listing, including a fall of as much as 14 per cent on Friday as annual earnings were announced.
Soho House reported a net loss of almost $118mn, compared with a loss of $220mn a year earlier. This was worse than the $74mn loss analysts had expected.
Adjusted earnings before interest, taxes, depreciation and amortisation more than doubled to $128mn and the group expects this to rise to between $155mn and $165mn this year.
However, debt — a subject in GlassHouse’s crosshairs — rose, with net debt growing 20 per cent year on year to $638mn. Soho House said this was still an improvement as it ended the period as a multiple of only five times ebitda, compared with nine times a year earlier.
Soho House, which operates 42 members’ clubs worldwide, added that it now had almost 260,000 members, up 15 per cent year on year. It said it was confident about its expansion plans, with more than 20 new clubs in locations such as São Paulo expected to open this year. It has recently opened clubs in Mexico City and Portland.
The GlassHouse report said the group had never been profitable since its founding in 1995 and added it was “facing an existential crisis”.
In its 31-page report, it criticised what it called Soho House’s “questionable” accounting practices and what it described as a “mountain” of debt maturities. It also accused Soho House’s growth strategy, including plans to expand into “less affluent cities” to push for more revenues, saying it is working against the company as it “loses its exclusive appeal”.
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