Strong revenue and earnings growth
Acquisition of Esporta completed and integration well underway
Acquisition of Virgin Active Australia creates platform for expansion into Asia Pacific
Milton Keynes, May 2012:
Virgin Active, the leading international health club operator, today announces summary results for the 12 months ended 31 December 2011.
12 months ended 31 Dec 2011 Revenue £536.2m
12 months ended 31 Dec 2010 Revenue £445.2m
LFL Change +4%
12 months ended 31 Dec 2011 EBITDA £126.8m
12 months ended 31 Dec 2010 EBITDA £114.6m
LFL Change +9%
12 months ended 31 Dec 2011 EBITDA margin 24%
12 months ended 31 Dec 2010 EBITDA margin 26%
LFL Change +1%pts
12 months ended 31 Dec 2011 No. of members 1,214,000
12 months ended 31 Dec 2010 No. of members 975,000
LFL Change +4%
12 months ended 31 Dec 2011 No. of clubs 259
12 months ended 31 Dec 2010 No. of clubs 194
LFL Change n/a
- Strong financial performance with Group revenue up 20% and EBITDA up 11% versus prior year
- Like-for-like group revenue increased 4% and EBITDA 9% versus prior year
- Acquisition of Esporta’s UK business completed in July 2011 and integration progressing well:
- Adds 53 clubs with complementary footprint, including 20 racquet clubs
- All clubs rebranded Virgin Active and £25m capital investment programme now underway
- Virgin Active’s culture and operating practices successfully introduced
- Continued expansion in existing and new territories:
- 10 new clubs opened in 2011 in Italy (5), South Africa (4) and Iberia (1)
- Entered the Australian market with the acquisition of 4 clubs, providing Virgin Active with a platform for further expansion in the Asia Pacific Region
- Underlying like-for-like EBITDA margin was 1 percentage point ahead of 2010, however total reported margin was down 2 percentage points due to the introduction of the lower margin Esporta estate. Improving the margins in the Esporta estate is a core part of Virgin Active’s acquisition rationale
- In October 2011, Funds advised by CVC Capital Partners acquired a majority stake in Virgin Active, investing to support further growth and development of the business. Virgin Group remains a significant investor and, as part of the transaction, Virgin Active agreed a new 30 year global brand agreement for use of the Virgin Active brand.
- Net bank debt at year end reduced to 2.4 times EBITDA even after completing the Esporta and Australian acquisitions. Subsequent to the year end, the Group extended its banking facilities (comprising of separate European and South African banking facilities) until June 2018, thereby providing a secure long term capital structure to support further expansion of the Group.
Commenting, Richard Baker, Chairman of Virgin Active said:
"2011 was another busy and successful year for Virgin Active with the acquisition of Esporta’s UK operations and CVC’s investment in a majority stake in our business. Since the year end, we have successfully extended our bank facilities in Europe and South Africa which, together with the support of CVC as a new majority shareholder, provides us with a strong financial platform from which to continue our growth into the future."
Matthew Bucknall, Chief Executive of Virgin Active, added:
"We have delivered another year of double-digit revenue and profit growth, the twelfth consecutive time we have achieved this, driven by a strong organic performance and investment in new clubs. Virgin Active’s clubs offer outstanding value for money, with large, well-invested facilities providing a broad range of activities. This has allowed the business to grow through a challenging consumer spending environment.
The expansion in our club membership to over 1 million members and the growing club usage by our existing members has demonstrated the increasingly important role health and fitness plays in people’s lives.
In the coming year we will be completing the integration of the Esporta sites, and making significant capital investment in the acquired clubs to improve all areas of the member experience. Overall, we see exciting opportunities to continue to grow the business internationally in both existing and new territories, underpinned by a great product, a powerful brand, a strong balance sheet and two supportive shareholders."
Virgin Active delivered a 20% increase in revenue and an 11% increase in EBITDA in 2011, the twelfth year of double digit earnings growth.
This result has been achieved against the backdrop of a challenging economic environment, which underscores the strength of our business model and strategy, focused on four key success factors:
- People - we aim to attract the most talented people into Virgin Active and then invest in their development to ensure that they are the best in our industry.
- Service - we place significant emphasis on understanding what our members want from health and fitness and then ensure that our offer is built around these needs.
- Value - we offer outstanding value for money to our members - providing comprehensive multi-use facilities at competitive prices.
- Location - we situate our clubs in large catchment areas where we know the demand will support large facilities that offer a broad range of activities, and which will facilitate reciprocal club usage at facilities close to home and work.
This model is flexible and scalable as we seek leading positions in new markets where we can match the right consumer positioning with strict financial disciplines.
Organic growth of the business has been supplemented with a number of targeted strategic acquisitions that have been effectively integrated to improve the overall quality of our business. These include our successful acquisition of 46 clubs from Holmes Place in the UK in 2006, six clubs from Esporta in Spain in 2005 and a further ten clubs in the UK in 2004/5.
In July 2011, we completed the acquisition of Esporta’s UK business for a total consideration of £77.6 million, adding a highly complementary estate and greatly enhancing our position in the UK market. The acquisition has broadened the offering available to members, with reciprocal rights across an enlarged UK estate and access to 20 racquets clubs.
In October 2011, we acquired four clubs in Australia previously operated by Virgin Group under the Virgin Active brand. This acquisition provides a platform in an important health club market from which to further grow our club footprint, both in Australia and more broadly in the Asia Pacific region.
In 2011 we acquired 57 clubs, sold 2 and opened a further 10 clubs, closing the year with 259 clubs across Europe, South Africa and Australia as follows:
South Africa: 98 (+4)
UK: 122 (+51)
Italy: 24 (+5)
Iberia: 11 (+1)
Australia: 4 (+4)
Total: 259 (+65)
2011 revenues increased by 20% to £536.2 million compared to £445.2 million in 2010. Like-for-like revenue, which compares the results from health clubs in operation for a full 12 months in the prior year, increased by 4%.
The increase in total revenues was driven by growth in membership subscriptions from both existing and new clubs and a part year contribution from the acquired Esporta estate.
EBITDA increased by 11% to £126.8 million (2010: £114.6 million). Like-for-like EBITDA improved by 9% in the year. Underlying like-for-like margins were 1 percentage point ahead of 2010, however total reported margins were down two percentage points as a result of the acquisition of the Esporta estate, currently operating at a lower margin to the group.
2011 was a landmark year for our UK operations with the acquisition of Esporta’s UK business increasing our UK portfolio by 33 health and fitness clubs and 20 racquet clubs, with a total membership of 154,000. We completed the acquisition in July 2011 and integration into Virgin Active is progressing well. All of the Esporta clubs have now been rebranded Virgin Active and the group’s culture and operating practices have been successfully introduced. A significant capital investment program is underway to improve all areas of the customer experience.
Our strategy in the UK is focused on operating multi-use facilities in the mid to upper market segment. We continue to see high levels of club usage in the UK which demonstrates the importance our customers put on health and fitness, and underpins our resilient performance against a challenging economic backdrop.
The South African economy has continued to expand despite the slowdown elsewhere in the world, and our business there has delivered another year of excellent growth. Our market positioning allows us to capitalize on the positive dynamics of an active culture and a growing middle class. We also continue to benefit from the close relationships we have with the leading health insurance providers in the region, who offer discounted gym subscriptions to their customers.
We opened four new clubs during the year, including our landmark club in Soweto at Maponya Mall, and we continue to see significant opportunities for further club openings in this market.
Italy and Iberia
Our Italian and Iberian businesses continue to grow. In Italy we opened five new clubs in the North and in Iberia we opened a new club in Lisbon. All of these clubs are trading well.
The challenging economic environment in Southern Europe has inevitably led to a slowdown in new developments where we generally site our clubs, and where we are frequently chosen to be anchor tenants. As a result, we have taken the decision to focus our new openings on high quality locations in major metropolitan centres.
We acquired the four Virgin Active clubs in Australia that were being operated by Virgin Group during the year. These clubs are performing well and represent a unique offer in the mid to premium segment of the Australian market. We see significant opportunities to expand our presence there and in the broader Asia Pacific region.
2012 will be a year of significant investment in the future growth of the business, including a £25m upgrade of the Esporta estate and major operational and capital investment in new customer insight systems. We see exciting opportunities to continue to grow the business organically in our existing territories and in Asia Pacific. We will also benefit from the full integration of Esporta and from the major investment that has now started in these clubs to improve all areas of the member experience.
Trading since the beginning of the year has been in line with expectations and we are confident of delivering further growth in the future.