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Virgin Active seeking cash injection to ride out the pandemic
31 Dec 2020 . BY Tom Walker
Virgin Active had 243 health clubs globally at the end of 2019, with 42 in the UK / Virgin Active
Virgin Active has become the latest big-box operator to signal its intention to raise cash to buffer it from the impact of the pandemic.

The operator, which has 42 clubs in the UK, is 80 per cent owned by Brait – the investment group of former billionaire, Christo Wiese.

Brait bought its stake from Richard Branson's Virgin Group and investor CVC in April 2015, leaving Branson with 20 per cent and valuing the business at £1.3bn.

Virgin Active filed its 2019 accounts on 24 December 2020, revealing how it has been coping with the pandemic so far.

In spite of mitigating actions taken to reduce the impact of the pandemic on the business – which included senior staff taking a 20 per cent pay cut during closures – the company was forced to take an additional loan of £25m in June 2020, which was matched by a £20m capital contribution from shareholders and a £5m deferral of licence fees.

The directors reported that all interest covenants up to 2021 were waived by lenders and that the company arranged a new liquidity covenant for the period from June 2020 to December 2021.

The accounts show the Virgin Active’s balance sheet is under pressure. Borrowings leapt between 2018 and 2019, increasing interest payments from £1.18m in 2018 to £13.61m in 2019 and driving the business from a £4.67m profit in 2018 to a loss of £1.18m in 2019.

The company is now understood to be looking to raise around £50m in cash, according to industry insiders, but it’s thought this will be done through the sale of equity, rather than from loan notes, to avoid gearing the business any further.

In the financial statement accompanying its 2019 accounts, Virgin Active said it aims to be able to continue to trade with the support of its ultimate backer – Virgin Active Investment Holdings – which has indicated it will stand behind the business, however, the directors say they accept that although this is the current position, this reliance on the financial support of the holding company must be seen as representing a “material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern.”

In spite of this warning note, it’s thought unlikely Wiese, Branson or the company’s banks would see any harm come to the business and that the current owners are likely to hold their nerve unless challenges escalate and lead to a fire sale.

If Brait ultimately has to sell its stake, then Virgin Active could be snapped up by one of the many private equity houses eyeing the sector for a deal.

Brait was thought to have been considering selling a slice of Virgin Active in 2019, with Morgan Stanley rumoured to be casting around for buyers, however, the pandemic has put a halt to these plans.

Virgin Active had 243 health clubs globally at the end of 2019, with more than half in southern Africa and others in Italy, Australia, UK, Singapore and Thailand.

The company has one of the most colourful backgrounds of any fitness operator, having – over the years – bought Holmes Place (2006) and Esporta (2011) as well as the bankrupt Health and Racquet Club chain (2003) and also having sold clubs to both Nuffield Health (2016) and David Lloyd Leisure (2017).
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Jobs   News   Products   Magazine
PRODUCT NEWS
Virgin Active seeking cash injection to ride out the pandemic
31 Dec 2020 . BY Tom Walker
Virgin Active had 243 health clubs globally at the end of 2019, with 42 in the UK / Virgin Active
Virgin Active has become the latest big-box operator to signal its intention to raise cash to buffer it from the impact of the pandemic.

The operator, which has 42 clubs in the UK, is 80 per cent owned by Brait – the investment group of former billionaire, Christo Wiese.

Brait bought its stake from Richard Branson's Virgin Group and investor CVC in April 2015, leaving Branson with 20 per cent and valuing the business at £1.3bn.

Virgin Active filed its 2019 accounts on 24 December 2020, revealing how it has been coping with the pandemic so far.

In spite of mitigating actions taken to reduce the impact of the pandemic on the business – which included senior staff taking a 20 per cent pay cut during closures – the company was forced to take an additional loan of £25m in June 2020, which was matched by a £20m capital contribution from shareholders and a £5m deferral of licence fees.

The directors reported that all interest covenants up to 2021 were waived by lenders and that the company arranged a new liquidity covenant for the period from June 2020 to December 2021.

The accounts show the Virgin Active’s balance sheet is under pressure. Borrowings leapt between 2018 and 2019, increasing interest payments from £1.18m in 2018 to £13.61m in 2019 and driving the business from a £4.67m profit in 2018 to a loss of £1.18m in 2019.

The company is now understood to be looking to raise around £50m in cash, according to industry insiders, but it’s thought this will be done through the sale of equity, rather than from loan notes, to avoid gearing the business any further.

In the financial statement accompanying its 2019 accounts, Virgin Active said it aims to be able to continue to trade with the support of its ultimate backer – Virgin Active Investment Holdings – which has indicated it will stand behind the business, however, the directors say they accept that although this is the current position, this reliance on the financial support of the holding company must be seen as representing a “material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern.”

In spite of this warning note, it’s thought unlikely Wiese, Branson or the company’s banks would see any harm come to the business and that the current owners are likely to hold their nerve unless challenges escalate and lead to a fire sale.

If Brait ultimately has to sell its stake, then Virgin Active could be snapped up by one of the many private equity houses eyeing the sector for a deal.

Brait was thought to have been considering selling a slice of Virgin Active in 2019, with Morgan Stanley rumoured to be casting around for buyers, however, the pandemic has put a halt to these plans.

Virgin Active had 243 health clubs globally at the end of 2019, with more than half in southern Africa and others in Italy, Australia, UK, Singapore and Thailand.

The company has one of the most colourful backgrounds of any fitness operator, having – over the years – bought Holmes Place (2006) and Esporta (2011) as well as the bankrupt Health and Racquet Club chain (2003) and also having sold clubs to both Nuffield Health (2016) and David Lloyd Leisure (2017).
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The Retention People unveil 2020 Member Experience Awards winners
Member engagement software provider The Retention People (TRP) has unveiled the winners of its annual 2020 Member Experience Awards (MEA).
Forget the ‘Netflix effect’ – it’s all about the ‘iFit effect’ to boost member retention
Addiction – a word laden with negativity. But isn’t that exactly what the fitness industry wants? For members to be addicted (in a healthy way) to exercise – not just to increase profits but, most importantly, so they can live happier, healthier and longer lives.
Pulse Fitness updates iGym London with state-of-the-art technology
Pulse Fitness has recently completed a refurbishment of the fitness facilities at iGym London.
Storytelling - the future of fitness content
Heading into 2021, storytelling will be a key trend among fitness content creators and connected fitness providers, as the industry recognises its potential to unlock ultra- engaging experiences that boost retention.
What does a socially distanced leisure centre and health club look like?
The world has had to get used to social distancing in 2020 and any business operating in the leisure and hospitality sectors has had to face this challenge more than most.
AskNicely helps empower businesses to improve customer experience and boost NPS
Maintaining a consistent member experience across a growing health and fitness brand can prove challenging.
Ariston’s range of water heaters can reduce running costs for gyms
Ariston’s electric water heaters create hot water cost-effectively, ensuring gym-goers can enjoy a post-workout shower, due to fast reheat times and large storage capacities.
A runner’s life, by Dame Kelly Holmes
I started running when I was 12 years old, a skinny girl with an afro. I knew I loved running, I felt free and seemed to glide easily rather than pound the pavements.
Uscreen announces first to market Apple Watch Fitness Tracker
At Uscreen, we pride ourselves on being proactive innovators in the industry. We're continually doing our research and predicting where the industry is going so we can ensure the state-of-the-art technology to back you up in your video business.
Xn Leisure’s five-step process to increasing member retention
While leisure operators can generate interest and build an audience fairly easily, the challenge is converting an audience into a paying, engaged community – and keeping them there.
Copper clothing can keep staff and members safe
Snap Fitness franchisee, Kunal Patel, is kitting out all staff – from personal trainers to cleaners – with copper-infused masks and gloves from medtech company, Copper Clothing.
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FunXtion International BV

[more...]
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CPASE creates unforgettable luxury member experience at new boutique club with Technogym
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DIARY

 

22 Jan 2021

Spa Leadership Symposium

Online (Zoom),
02-04 Feb 2021

Beauty West Africa

Landmark Centre, Lagos, Nigeria
+ More diary  
 


ADVERTISE . CONTACT US

Leisure Media, Portmill House, Portmill Lane,
Hitchin, Hertfordshire SG5 1DJ Tel: +44 (0)1462 431385

©Cybertrek 2021

ABOUT LEISURE MEDIA
LEISURE MEDIA MAGAZINES
LEISURE MEDIA HANDBOOKS
LEISURE MEDIA WEBSITES
LEISURE MEDIA PRODUCT SEARCH
PRINT SUBSCRIPTIONS
FREE DIGITAL SUBSCRIPTIONS