Virgin Active, the leading international health club company, today announces summary results for the 12 months ended 31 December 2014.

This announcement follows the agreement reached by CVC and Virgin Group in April this year to sell a controlling stake in Virgin Active to Brait. Brait’s experience in long term investments globally, particularly in Virgin Active’s biggest market, South Africa, fits with the company’s aspirations for international growth in both emerging and developed markets, and will enable it to accelerate its proven strategy. The transaction is expected to complete this summer, subject to approval by the South African and Namibian competition authorities.

2014 Financial Highlights

Unless specifically stated otherwise, all numbers are presented on a constant currency basis.

• Revenue was up 4% to £638.6m.  Excluding the impact of divested clubs, revenue growth was 6%
• Underlying EBITDA grew by 13% to £124.0m, with balanced growth across all territories

Business Highlights

• Excluding the impact of divested clubs, total membership grew by 2% to 1.31million
• Europe: revenue remained at the same level as 2013 even after divesting 12 non-core sites; underlying EBITDA grew by 17% 
• Africa: revenue and underlying EBITDA grew by 12% 
• Continued international expansion, with 11 new clubs including first club in Thailand
• £82.2m invested in new and existing clubs across the group, including £20.7m on premiumisation projects in the UK with expected returns in excess of 20%
•  Significant product innovation including redesigning the functional floor through the introduction of The Grid and Fitness Five, and the launch of exclusive programmes such as ZUU primal movement and Active Crew, a bespoke programme for children 
  aged 8-16 

Outlook

• Continued investment in technology:
  • Imminent launch of UK’s first fully tech-enabled club in Canon Street, London, as part of the £100m 3 year investment programme 
  • Multi-million pound overhaul of digital channels to enable members to access club services, fitness support and track progress both inside and outside the club
• Further geographical expansion in Africa and Asia.  New territory openings planned over the next 24 months in Kenya and Botswana, with a second club opening in Namibia in the second half of this year. Further clubs to open in Bangkok and Singapore in the next 12 months

Paul Woolf, Chief Executive Officer of Virgin Active, added

“2014 saw a continuation of the growth that we have enjoyed since we opened our first club in 1999. All established territories contributed to this profit growth in a period where we have continued to invest in both clubs and product innovation.

“As consumers the world over seek out ways to improve and maintain their health and wellness levels, I am confident that 2015 will be another year of growth for Virgin Active. With the backing of two long-term supportive shareholders, Brait and Virgin Group, continued investment in our brand, a solid pipeline of new clubs, and a talented team, we are well placed to achieve our ambitious goals for the future.”

Introduction

Virgin Active is the leading international health club company, with approximately 1.3 million adult members and 267 clubs spanning nine countries and four continents as at 31 December 2014. We benefit from strong brand awareness in our markets, which attracts members and high quality employees who each value an association with our aspirational global lifestyle brand. The number of clubs open by territory as at 31 December was as follows:

Chief Executive's review: 

2014 saw a continuation of the growth that we have enjoyed each year since we opened our first club in 1999.

On a constant exchange rate basis, underlying EBITDA grew in all regions in 2014 with the exception of APAC where we invested into the expansion of our business in Asia including the opening of our first club in Thailand. Looking forwards, the Group will continue to expand in a financially disciplined manner, whilst adhering to its values and enriching the lives of its members and people.

Confidence in our model and its prospects was further demonstrated through the proposed acquisition of a controlling stake in the business by long term investor, Brait.

Group performance

During the year the Group opened eleven new clubs and divested fourteen previously acquired non-core clubs. Excluding the impact of club closures, the membership base increased by 2% resulting in a closing adult membership base of 1.3 million. Revenue generated by the Group was £638.6m (2013: £616.1m) representing a 4% increase from prior year on a constant exchange rate basis.

On a constant exchange rate basis, underlying EBITDA grew by 13% to £124.0m (2013: £109.3m). On a reported exchange rate basis, the underlying EBITDA growth was 1% reflecting the 4% depreciation in Rand exchange rate against Sterling over 2014.

The Group continues to invest in both new clubs and its existing estate to ensure that it provides the best possible experience for its members. During 2014 we spent £82.2m (2013: £67.7m) on capital expenditure to fund new clubs across APAC, Africa and Europe, and to fully upgrade our offering in an additional six clubs in the UK.

European performance

The European business had another successful year. Despite the closure of twelve non-core clubs, total revenue remained at the same level as 2013 and underlying EBITDA grew by 17% on a constant exchange rate basis.

Six UK clubs were given a complete makeover during 2014. Member feedback and club performance following the changes continues to be very positive. The next phase of the UK upgrade investment programme, under which another twelve clubs will be upgraded, will be largely complete by summer 2015. During the year, we sold 12 clubs which were not core to the Group.

Continental Europe opened 3 new clubs during 2014 and ended the year with 45 clubs in operation. A further 2 new clubs are planned to open in 2015. Revenue grew by 5% and underlying EBITDA grew by 9% during the year at constant exchange rates.

African performance

We finished the year with 114 clubs having opened 7 clubs during the year, and grew our local membership base by 1%. 2014 saw a depreciation of the Rand against the Sterling of 4%, however, on a constant exchange rate basis, revenue grew by 12%.

Underlying EBITDA grew by 12% on a constant exchange rate basis with growth coming through a combination of like-for-like and new club performance.

Asia Pacific performance

In Asia Pacific we grew our membership and revenue on a constant exchange rate basis by 22% and 21% respectively. Our Australian business now operates out of five sites and we have signed a lease on one further site which will open in 2015. We also opened our first club in Thailand, in the Empire Tower Bangkok.

Product

Virgin Active has always been known for delivering innovative products to its members and in 2014 we accelerated this by focusing on the creation of a global product pipeline. This global approach has allowed us to leverage our international scale to create and invest in products which lead our industry.

The most notable of these was The Grid. The Grid is a new and exclusive approach to functional training which is designed to get people moving better, faster and more effectively. The Grid delivers an intense workout experience which is highly social and team based. By anchoring the activity around a grid floor of 2m2 blocks the smart design allows the group to work together, ensuring that participants are spurred on to achieve their goal. A selection of programs including Grid Lean, Grid Strong, Grid Active and Grid Fit allow members to choose their workout focus. The Grid is now available in all Virgin Active markets and has proved a big hit with members.

The Group has also continued to invest in gym floor equipment. 2014 saw the role out of the Fitness 5 package including battle ropes, Bulgarian bags, Tiyr, Plyo boxes and TRX Rip trainers, all accompanied by member-friendly materials to help incorporate this new kit into everyday workouts.

Other launches in 2014 include programs as diverse as Zumba Step, the primal pattern movement class Zuu, and Active Crew, our bespoke programme for children aged 8-16 years. This exciting roster of product innovation has enabled the brand to carve out a strong and differentiated market position in each of our territories.

Alongside this focus on innovation, the product provision in many clubs has been significantly upgraded as part of an extensive program of refurbishment which has introduced state-of-the-art equipment, upgraded studios and redesigned spaces which are ideally suited to reflect modern workout habits.

Market Trends

The global health club industry has continued to grow in recent years despite economic recessions in many of the major markets. All markets in which we operate remain competitive with new entrants and public facility provision. Virgin Active benefits from positive health and wellness trends, particularly in emerging markets. Population growth, increasing urbanisation and a growing middle class with higher levels of discretionary income have all contributed to the growth of the health club industry’s potential customer base. There is also an increasing global focus on physical activity and a greater interest in health and fitness and the benefits of leading a healthy and active lifestyle, with governments addressing a significant obesity issue in many markets. We therefore believe that health and fitness will remain a growth area across the globe over the coming years.

For further information please contact:

Pendomer, Ben Foster, ben.foster@pendomer.com, +44 (0) 20 3603 52211