South Africa’s largest health club chain Virgin Active says that although it has shown resilience through the coronavirus crisis, membership has decreased over the past year.
The group’s holding company, Brait, said in a financial statement for the year ended March 2021 that total group members are down 25% since December 2019, and active members are down 30%.
It is likely to take at least 18-24 months to revert to 2019 levels, it said.
Brait has an effective economic interest of 79.4% in Virgin Active. The reporting period for the health club chain extends to the year ended December 2020.
Virgin has 236 clubs in eight countries including Italy, the UK, Australia, Singapore and Thailand. It boasts approximately 931,000 adult members, with 66% of those based in South Africa. It has approximately 138 gyms across the country.
Brait said that while trading in Virgin Active improved significantly after the easing of the first wave of lockdown restrictions, the second wave that surfaced at the end of October 2020 in Europe and the UK resulted in these governments re-imposing national lockdown restrictions.
By the end of April 2021, Virgin Active’s clubs in the UK had been closed or partially closed for 10 of the previous 14 months, reopening on 12 April 2021; with Virgin Active’s Italian clubs
closed or partially closed for 10 of the previous 14 months, reopening on 24 May 2021.
Virgin Active’s clubs in Singapore and Thailand have also recently been closed and are expected to remain closed at least until the end of June 2021 and July 2021 respectively, it said.
Virgin Active South Africa reported a total membership base of 557,000 by the end of December, down significantly from 685,000 members in September 2020, and 740,000 members in February 2020.
Active membership declined to 515,000, from 734,000 recorded in February 2020.
“Terminations are in line with expectations, with new sales recovering from the impact of the Level 3 restrictions. Recent performance has been positive since Level 1 restrictions have been applied.
“However, effective 16 June 2021 South Africa reverted to Level 3 restrictions, which are likely to have an impact on operational performance,” Brait said.
The Virgin Active South Africa business (VASA), which is separately financed, meanwhile agreed to terms with its lenders during June 2021 to restructure and extend the term of its existing debt facilities and is in the process of concluding the requisite legal agreements.
For Virgin Active Group, revenue of £310.9 million (R6.2 billion), was down 48.3% year on year at budget rates, Brait said.
South Africa revenue of £121.7 million (R2.4 billion), was down 46% on the prior year – all clubs closed for five months of the year. Full-year EBITDA of £13.1 million in constant currency is £155.5 million behind the prior year due to the impact of the coronavirus lockdown on revenue, Brait said.
During closure periods, it pointed out that no revenue was generated as memberships were put on “freeze” and no membership subscriptions were collected.
Brait said that Virgin Active’s valuation decreased by 54% between the end of December 2019 and the end of March 2021.
Looking ahead, Brait said that, with the restructuring of the VA Europe business complete, it provides a solid recovery and growth platform for the business. It added that stronger than expected re-opening in the UK, and to a lesser extent Italy, provides grounds for optimism.
However, current lockdown restrictions and the prevailing third-wave is likely to impact the South African business, it said. “Getting back to 2019 levels will provide very significant value uplift for Brait.”