Virgin Active gets a pummelling

Fitness chain Virgin Active, with operations in southern Africa, the UK, Italy and Asia Pacific, has lost over 100 000 members globally this year.

So far, the Brait-owned business’ revenue is down 50% from last year and Ebitda ( earnings before interest, tax, depreciation and amortisation) for the first nine months is negative – standing at -£8.4 million (about -R173 million), versus £102.4 million for the prior period.

It will be lucky to break even (on an Ebitda basis) this year.

Given how lockdowns were implemented, there was a wave of reopenings, beginning in Italy in May, then Australia (and Thailand and Singapore) in June, the UK in July (“later than expected”) and finally SA in August.

The company says that as of 30 September (the current reporting period), all clubs had reopened, apart from seven in London and three in Australia.

The second round of lockdown measures implemented in Italy and the UK means gyms are currently closed there.

The signs had been looking positive, with Brait saying “usage levels gradually improved across all territories as member engagement increased pre the second European lockdown”.

In August, Moneyweb suggested that “it is not inconceivable for Virgin Active to end 2020 with under one million members globally”. For context, it had 1.2 million members at the end of February. By end-September this number had fallen to 1.026 million, 11% lower than last year.

But this tells only part of the membership story. No membership fees have been charged while clubs are closed, and many members remain on “freeze”, resulting in no revenue for most territories.

In South Africa, memberships could have been be frozen until the end of October, but customers had to opt in to this.

“A high percentage of members chose to remain on freeze”, while the UK, particularly in London, “experienced higher than anticipated terminations and members on contract freeze”.

At the end of September, a quarter of the group’s members worldwide were not currently “active” In SA, 30% of the base has been on freeze. This translates to no revenue from these members.

The most recent usage number (as measured by entry card swipes per day versus last year) disclosed by the group is 57% (up from 35% in September).

Virgin Active (and Brait) will be watching the number of terminations in SA closely this month.