Virgin Active to flex muscles on JSE
VIRGIN Active, South Africa’s largest gym group, is believed to be preparing for what appears to be one of the largest listings on the JSE for some time, possibly by end-June.
The gym group started out nearly 15 years ago when it took over the ailing Health & Racquet, a one-time darling of the bourse.
The group today is in better shape, and one of the biggest gym chains in the world.
Virgin Active emerged after British entrepreneur Sir Richard Branson bought Health & Racquet for nearly R320-million from Leisurenet, when that company was placed in voluntary liquidation in 2000 after taking on too much debt in an unsuccessful international expansion.
Branson famously got involved after Nelson Mandela phoned him — a call Branson took while in the bath — to ask him to help salvage the chain to protect a national business and save jobs.
Health & Racquet expanded unsuccessfully in Australia, the UK and Germany, and was drowning under debt of R900-million.
The company went down locally as one of the largest corporate frauds in South African history after founders and executives Peter Gardener and Rodney Mitchell defrauded it of millions.
Today, Branson’s Virgin Group holds 42.5% of Virgin Active, CVC Capital Partners have 45.8% and management owns 11.92%.
The group has reportedly hired Standard Bank Group, Bank of America Merrill Lynch, Goldman Sachs Group, Morgan Stanley and UBS to work on the initial public offering on the JSE.
The chain may be valued at about £1.5-billion (more than R25-billion), according to the UK press.
Virgin Active has 267 clubs in nine countries and more than 1.4 million members.
It has 113 outlets in South Africa, more than in any other country.
In 2013, Virgin Active opened five new clubs in South Africa, two in Italy and its first club in Singapore.
Last year, it opened its first club in Bangkok, Thailand, four clubs in South Africa and two in Italy.
In the latest available full-year results, for the 12 months to December 2013, total revenue rose 5% year on year on a constant currency basis to £653.1-million.
Like-for-like sales rose 3%. The UK market grew 1% and Europe and Asia Pacific 6%.
South Africa jumped 14%, and was the main driver of growth, no doubt aided by discounted incentive packages offered by some of the larger medical-scheme administrators to join the gym.
Membership in the group grew 3% to 1.3 million for the period, while ebitda (earnings before interest, tax, depreciation and amortisation) rose 10% to £125.4-million
But once tax and interest charges of £93-million were taken into account, the company reported a loss for the period of £101.1-million from a previous loss of £80.4-million.
Virgin Active has been investing in upgrading facilities both locally and globally.
Branson appears to be cashing in several of his assets.
Last year, airline Virgin America and Virgin Money listed on the Nasdaq and London Stock Exchange, respectively.
The low-cost airline was valued at $1.35-billion (almost R17-billion), and the British bank “netted £140-million for its co-owners Branson and Wilbur Ross, a US financier”.
This week, Branson’s Virgin Atlantic Airways posted its first annual profit since 2011 after implementing a two-year turnaround plan based on a collaboration with US shareholder Delta Air Lines.
Virgin Active has been putting some corporate heavyweights in place in preparation for the listing.
Simon Susman, nonexecutive chairman of Woolworths since 2010, took over as nonexecutive chairman of the gym group at the end of last year.
Reports suggest that the South African gym group started meeting bankers in January, but Virgin Active declined to comment.
Meanwhile, the founders of Health & Racquet, Gardener and Mitchell, were released from prison at the end of 2012 after serving about 19 months each.
Life got tough for Wendy Addison, the whistleblower in the case who left South Africa after exposing the two.
She continued “receiving anonymous death threats post blowing the whistle”, according to an article in the Cape Times.
At one point, Addison was living on welfare in the UK. This came after she worked for a brief period for Virgin in the UK but was abruptly dismissed.
She has since become a member of the Corruption Research Group and established an organisation, SpeakOut SpeakUp, that educates on whistleblowing, corruption and antibribery.
Addison told a commission that Gardener and Mitchell had used the company as a personal bank.
They were eventually convicted of fraud, and, in March 2011, after appealing their original sentences, were sentenced to seven years’ imprisonment each.
The two were imprisoned at the Malmesbury Medium A Correctional Centre, where they set up a gym for inmates and officials.