Fit for pur­pose

With gyms re­open­ing af­ter the en­forced limbo, can the sec­tor shape up for the new nor­mal? Ben Gart­side

The Daily Telegraph - Business - - Front Page -

Boris John­son is en­cour­ag­ing Bri­tons to shed a few pounds in the on­go­ing bat­tle against obe­sity – a war that puts the health and fit­ness in­dus­try on the front line. De­spite their im­por­tant role in help­ing Bri­tain shake off the du­bi­ous hon­our of be­ing one of the least healthy coun­tries in Europe, many fit­ness firms feel they have not been given enough sup­port to help sur­vive one of the tough­est eco­nomic episodes in liv­ing mem­ory.

Richard Dar­win, chief ex­ec­u­tive of the Gym Group, says many cus­tomers car­ried on work­ing out un­til the last mo­ment be­fore gyms were forced to close. “Events hap­pened very quickly – there was no im­me­di­ate im­pact with us­age or mem­ber­ship lev­els be­fore the end of Fe­bru­ary, then there was lim­ited im­pact in city cen­tre sites, and only a week be­fore lock­down was there a no­table im­pact.”

Chris­tian Rose, the boss of Pow­er­league, high­lights the dif­fer­ence in de­mand be­tween cor­po­rate and in­di­vid­ual clients: “We saw slightly dif­fer­ent cus­tomer be­hav­iours – cor­po­rates dropped off, while so­cial foot­balling and our leagues con­tin­ued as nor­mal right up un­til the lock­down. Our cus­tomers are quite male bi­ased, aged 18 to 40, and they were ea­ger to play foot­ball and didn’t want any­thing to get in the way of that.”

It’s a sim­i­lar story from So­phie Lawler, head of To­tal Fit­ness, who says cus­tomer vis­its held up be­fore dip­ping by 10pc to 20pc in the fort­night be­fore lock­down, and then halv­ing in the last few days. The com­pany had started the year by “trad­ing ex­cep­tion­ally” but “we were stopped in our tracks” by the pan­demic. In early Fe­bru­ary, To­tal Fit­ness started daily cri­sis meet­ings with Lawler, the chief fi­nan­cial of­fi­cer, op­er­a­tions di­rec­tor and head of fi­nance – they only five staff who worked through­out the past four

months. “We fur­loughed 99pc of staff on day one, no ques­tions asked. You go into a cash preser­va­tion mode – that was the fo­cus.” Nei­ther To­tal Fit­ness nor Pow­er­league were able to ob­tain gov­ern­ment-backed loans as banks re­jected their re­quests.

“Prop­erty and peo­ple are our two cost driv­ers”, says Lawler. “We had four months of no rev­enue, and we ex­pect six to 12 more months of sig­nif­i­cantly eroded rev­enue – we need gov­ern­ment sup­port.”

Pow­er­league, mean­while, turned to in­vestors. “As we are in a Com­pany Vol­un­tary Agree­ment, the banks were ex­tremely un­help­ful,” Rose says.

“De­spite mak­ing £2.8m last year, and be­ing on track to make £3.6m with­out the pan­demic, we had to make money from in­vestors.

“We even­tu­ally made £4m from dif­fer­ent places and in­vest­ing in our sites and our peo­ple.” Al­though 12 staff are in the process of be­ing made re­dun­dant, Rose hopes they can be found new roles.

“We’re look­ing to ex­pand with our in­vest­ment raised, and

I’m op­ti­mistic un­less there is another catas­tro­phe. This busi­ness has an ex­tremely pos­i­tive fu­ture, with new sites in Lon­don and the Nether­lands be­ing set up.

“We have to mon­i­tor risk man­age­ment, but I’m op­ti­mistic.” Mean­while, the Gym Group found it­self in a cu­ri­ous po­si­tion. De­spite be­ing one of the more ex­posed com­pa­nies given their flex­i­ble mem­ber­ship op­tion, an­a­lysts be­lieved it could weather the pan­demic well. Citi an­a­lysts said in April that it was one of “the strong­est play­ers in the longer term”, while their Liberum coun­ter­parts con­cluded said that the com­pany was “fight­ing fit, but not im­mune” and rated their shares a buy. Dar­win says the Gym Group’s mas­ter­stroke was im­me­di­ately freez­ing all charges as lock­down loomed. “We thought [con­tin­ued mem­ber­ship pay­ments] would lead to an in­crease in mem­bers leav­ing. “Ours is a flex­i­ble style of mem­ber­ship and peo­ple can leave at any time, and that’s one of the rea­sons we’ve grown so rapidly,” he says.

“Just be­fore clo­sure we had 870,000 mem­bers, and by July 8 we were down to 692,000. We would have seen that ex­ac­er­bated and more sig­nif­i­cant losses if we hadn’t opted to freeze.”

The Gym Group moved to se­cure a £30m debt fa­cil­ity with its three banks and raised a fur­ther £40m in equity, with Dar­win de­scrib­ing the move as want­ing to be sure it could sur­vive “any sce­nario”.

While all three firms are cau­tiously op­ti­mistic, there is wide­spread con­cern at the Gov­ern­ment’s com­mu­ni­ca­tion strat­egy dur­ing the pan­demic. Rose raises con­cerns about the im­pact of shut­ting down small-sided foot­ball with other lead­ers in the sec­tor. Stud­ies in France have shown that close con­tact pe­ri­ods dur­ing a game are far be­low the amount re­quired to spread the virus be­tween play­ers. He and the other sig­na­to­ries did not hear back from the Depart­ment for Dig­i­tal, Cul­ture, Me­dia and Sport for another four weeks, at which point they were sent a copy and paste let­ter with links to the DCMS web­site.

To­tal Fit­ness’s Lawler, mean­while, says the gym sec­tor was only in­formed that it would not be re­open­ing with the July 4 first wave hours be­fore the ini­tial an­nounce­ment, which made meet­ings with stake­hold­ers and cred­i­tor ne­go­ti­a­tions “ex­cep­tion­ally dif­fi­cult”. Al­though she says gov­ern­ment fi­nan­cial sup­port has been very help­ful, un­clear com­mu­ni­ca­tion about the con­tin­u­a­tion of poli­cies such as rent sup­port has not been use­ful when many land­lords have been tak­ing a “dif­fi­cult” line in dis­cus­sions. Re­gard­less of the ob­sta­cles, all three firms are ea­ger to wel­come cus­tomers back. Dar­win says half of Gym Group cus­tomers felt their fit­ness lev­els have de­te­ri­o­rated and want to get back to work­ing out, while Rose high­lights the “egal­i­tar­ian” role of foot­ball as ex­er­cise and how it cre­ates a “sense of be­long­ing”.

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.