Virgin Active runs through £100m mark as gyms fight off recession

Published on Monday 10 May 2010 20:40

HEALTH club chain Virgin Active has broken the £100 million profits barrier for the first time in its decade-long history, partly spurred by South Africa's growing "aspirational middle-class population".

• Despite the recession, consumers appear reluctant to stop going to the gym. Picture: PA

The group – which has more than 70 clubs in the UK, 91 in South Africa and 187 sites overall – yesterday posted revenues up 15 per cent to 391m in 2009.

Membership lifted 4 per cent to 919,000 last year.

On South Africa, Virgin Active said: "The demographics of the country continue to change rapidly, driven by improved wealth distribution and an expanding, aspirational middle-class population, a trend that is underpinning demand for our product."

The company also has 17 sites in Italy and eight in Spain and Portugal.

Underlying earnings, excluding interest payments, tax, depreciation and amortisation, lifted 18 per cent to 101.1m.

Margins edged up 1 per cent to 26 per cent

Virgin Active chief executive Matthew Bucknall said the overall result showed that the fitness club industry had shown its defensive characteristics "despite some of the worst economic conditions of recent times".

Some industry analysts had felt the niche leisure sector, one that is not seen as particularly cheap, would suffer as consumers reined in their spending amid surging unemployment. But Bucknall said: "The trend that we have seen throughout the recession confirms our opinion that health and fitness has become a core aspect to people's lives."

It was the tenth consecutive year of revenue and profits growth for Virgin Active, which is majority owned by Sir Richard Branson's Virgin Group, and which acquired rival Holmes Place in 2006.

Bucknall said: "These results underline the fundamental strength of our offer and the quality and scale of our international presence.

"In particular, we have benefited from the strong attraction and distinctive nature of our product, as well as the importance our members continue to place on health and fitness."

Virgin Active said part of its success was due to its strategy of situating clubs in sizeable catchment areas and using facilities large enough to drive economies of scale.

During the year it also increased the number of staff on the gym floor and improved the range of equipment and classes on offer. Capital expenditure last year was 21m, bringing total investment over the past two years to 50m. Eight clubs were opened in 2009 – all of them overseas – while agreements have been secured for a further 17 clubs in the international expansion.

Virgin Active said it was now making daily calls to 1,000 members who have used its facilities in the previous 24 hours to get feedback on its services.