- Strong growth in revenue and earnings
- Acquisition of Esporta’s UK Business for up to £77.6 million
Milton Keynes, 26 April 2011:
Leading international health club operator, Virgin Active, today announces summary results for the 12 months ended 31 December 2010.
12 months ended 31 Dec 2010 Revenue £445.2m
12 months ended 31 Dec 2009 Revenue £391.0m
12 months ended 31 Dec 2010 EBITDA £114.6m
12 months ended 31 Dec 2009 EBITDA £101.1m
12 months ended 31 Dec 2010 EBITDA margin 26%
12 months ended 31 Dec 2009 EBITDAmargin 26%
12 months ended 31 Dec 2010 No. of members 975,000
12 months ended 31 Dec 2009 No. of members 919,000
12 months ended 31 Dec 2010 No. of clubs 194
12 months ended 31 Dec 2009 No. of clubs 187
2010 Financial Highlights (Audited)
Positive contribution from all four territories to Group revenue growth of 14%; like-for-like revenue growth of 9%
EBITDA increased by 13% from £101.1m to £114.6m, and by 9% on a like-for-like basis from £103.6m to £113m
The business invested £34.3m (2009: £29.3m) in capital expenditure to further improve our club offering, guided by our members feedback gained from c.25,000 calls to members every month
Membership grew by 6% to 975,000 members
The Group opened seven new clubs in 2010 in South Africa, Italy and Iberia (2009: 10 club openings). Lease agreements have been secured for a further 17 clubs to open in 2011
The business has had an encouraging start to the current year, with first quarter trading positive on a like-for-like basis and total membership passing the 1 million mark
The Group announced today that it has signed an agreement to acquire Esporta's UK business of 55 health clubs and 159,000 members for a total consideration of up to £77.6 million.
Commenting, Richard Baker, Chairman of Virgin Active said:
“The company is pleased to report another strong set of results, in the face of tough economic conditions. Our strategy of engaging great people to deliver a high quality experience to our members has once again delivered for our shareholders. The exciting acquisition of the Esporta clubs will enable us to accelerate our growth plans in the UK.”
Commenting, Matthew Bucknall, Chief Executive of Virgin Active said:
“I am pleased to announce our 11th consecutive year of revenue and profit growth. This performance demonstrates the resilience of health club demand and the importance our members continue to place on health and fitness. We have been able to sustain this growth over the last 3 years when economic conditions have been difficult and we continue to see excellent prospects for future growth in all our territories. This is testament to the quality of our people, the strength of our offer and the diversity of our international presence. I would like to extend my thanks and appreciation to our people for their commitment in delivering our vision and values as well as to our members for their ongoing support.
The acquisition of Esporta follows our takeover of Holmes Place almost 5 years ago, which was a transformational and highly successful deal that allowed Virgin Active to establish a strong footprint in London. The location of Esporta’s clubs is an excellent fit with this estate and significantly strengthens our business. The acquisition broadens our product offering and demonstrates our willingness and ability to lead consolidation in the market.
Virgin Active's strong organic growth story, evidenced by the new clubs we are opening in Italy, Iberia and South Africa, combined with the benefits the Esporta acquisition will bring, means that we are well positioned to make significant progress in the years ahead."
For further information please contact: Financial Dynamics: Ben Foster + 44 7776 240 806 Charlie Armitstead + 44 7703 330 269
2010 saw Virgin Active deliver 14% revenue and 13% EBITDA growth and 9% revenue and EBITDA growth on a like-for-like basis. This result has been achieved against the backdrop of a challenging economic environment in all of our territories. This performance underscores the strength of our business model and strategy.
Virgin Active’s success has been built on a strategy that focuses on four key success factors:
People – Our people are core to our business. We value and invest in our people to ensure that we attract and retain the most talented people who are passionate about what they do.
Service – We place great emphasis on understanding our members. Our ability to build our product around our members’ needs supported by passionate employees and one of the world’s most recognisable global brands enables us to differentiate our proposition from our competitors.
Value – We offer outstanding value for money to our members by providing comprehensive multi-use facilities at competitive prices.
Location – Our clubs are situated in large catchments where we know the demand will support building large facilities.
We opened a further 7 clubs in 2010, closing the year with 194 clubs across Europe and South Africa as follows: Country
No. of clubs at end 2010 South
United Kingdom 71
2010 revenues increased to £445.2m, a 14% improvement on the prior year (2009: £391.0m). Like-for-like revenue, which compares the results from health clubs in operation for a full 12 months in the prior year, increased by 9% to £416.8m (2009: £383.3m).
In addition to an increase in membership subscriptions we have seen good growth in our ancillary revenues in every territory.
EBITDA increased by 13% to £114.6m (2009: £101.1m). Like-for-like EBITDA improved by 9% in the year to £113.0m in 2009 (2009: £103.6m). The EBITDA improvement resulted from underlying revenue growth, ongoing cost management, growth in the contribution from new clubs and favourable movements in exchange rates. At constant currency rates revenue growth was 9% and EBITDA growth was 6%.
Virgin Active remains a well financed company with bank debt leverage immediately after the Esporta acquisition expected to be at a conservative 2.5 times EBITDA.
South Africa is our largest territory and Virgin Active now operates 94 clubs, 3 of which were added to the portfolio during 2010. We continue to see strong growth in the country, particularly from a growing aspirational middle class. A new club concept aimed at catering for this segment of the market was successfully launched during the year and 2011 will see Virgin Active open a landmark club in the township of Soweto at Maponya Mall. A total of 8 new clubs are scheduled to open in South Africa in the next 12 months.
We have close and successful working relationships with health insurance providers in South Africa who have pioneered the offer of valuable rewards to their members, including discounted gym membership, to encourage healthier lifestyles. This is a powerful value proposition in the local market which underpins our market positioning.
The UK business has maintained earnings growth in each of the past 3 years, demonstrating the resilience of our proposition in a tough economic environment.
Our clubs are well positioned and well invested and our members continue to be attracted by our focus on value for money, innovation, and customer service. The business is well positioned to take advantage of improved economic conditions over the medium term.
Our Italian business continues to deliver strong growth, with 2 new clubs opened in 2010 and a further 7 scheduled to open in 2011 and early 2012. Our growth has focused on increasing our representation and coverage in the key metropolitan centres of Northern Italy and Rome. Our focus is now being expanded to include major cities in the South. There remain good opportunities to grow our footprint and we expect to open between 15 and 20 new clubs within the next 3 years.
Our Iberian business has delivered strong like-for-like revenue and earnings growth despite the economic challenges facing Spain and Portugal. Our ability to offer large facilities with a broad range of services at an affordable price has allowed the business to draw new members from both the premium and value ends of the market in one of the world’s largest health club markets.
We believe the market provides attractive opportunities for growth in a market with high health club demand. A further 2 clubs are scheduled to open Iberia in 2011 and we expect to open up to 10 clubs within the next 3 years.
Acquisition of Esporta
Virgin Active also announces today that it has signed an agreement to acquire Esporta’s UK business, which currently operates 35 health and fitness clubs and 20 racquet clubs with a total membership of 159,000, for a total consideration of up to £77.6 million. The transaction does not include the acquisition of the freehold ownership of 17 racquet properties, which will be leased from a Propco entity, which will remain under the control of the vendor.
The transaction remains subject to Office of Fair Trading (OFT) approval. During the OFT review period, Virgin Active will engage with the landlords of the non-Propco leases to determine which leases will be transferred – these will be rebranded as Virgin Active within a 12 month period.
For the year ended 31st December 2009, Esporta's UK business had revenues of £140m. Following the transaction Virgin Active UK will have combined revenues of over £325m and a total portfolio of up to 125 clubs in the UK with over 430,000 members.
Although it remains very fragmented, the acquisition of Esporta significantly strengthens Virgin Active's position in the UK market. The Group will be even better placed to capitilise on the increasing importance that consumers continue to place on health and fitness in improving economic conditions.
Virgin Active believes that the Esporta estate is highly complementary to Virgin Active’s existing business. The acquisition will enable Virgin Active to maintain its strategy of driving economies of scale to offer members outstanding value for money. Furthermore, Esporta's racquets clubs provide additional diversity and enhance Virgin Active's offer to members, the majority of whom will enjoy reciprocal rights between clubs in the Virgin Active estate.
The transaction follows Virgin Active's successful acquisition of six clubs from Esporta in Spain in 2005 and a further ten clubs in the UK in 2004/5. In 2006 Virgin Active acquired 46 clubs from Holmes Place in the UK. Consistent with its approach when it acquired Holmes Place, Virgin Active intends to invest significantly in the Esporta clubs to improve the facilities, service levels and range of equipment for members. Current trading and outlook
Our performance in 2010 continued to demonstrate that our business is resilient in a tough economic environment that has had an impact on consumer spending. The trend that we have seen throughout the recession confirms our opinion that health and fitness is no longer a discretionary spend but instead one that is core to people’s lifestyles, particularly in large urban centres. We have successfully capitalised on this sentiment by offering market leading facilities and excellent value for money. There are exciting opportunities to open new clubs in South Africa, Italy and Iberia and, overall, the business is well placed to further benefit from an improvement in the economic environment.
We have had a strong start to 2011 with positive like-for-like performance. We expect to further strengthen this performance with the opening of 17 new clubs in 2011 and early 2012.