Johannesburg - Plans to list the Virgin Active health clubs have been put aside for now, Ross Faragher-Thomas, managing director of Virgin Active in South Africa, told Sake24.
Two weeks ago rumours appeared in the European press that Sir Richard Branson's Virgin Group wanted to list the health clubs separately to unlock value.
Under the Virgin Active brand Virgin operates 187 health clubs in Italy, Spain, Portugal, Britain and South Africa.
A value of up to R12.5bn has been attached to the clubs. Faragher-Thomas, who recently returned from Britain, said, however, that all discussions around Virgin selling the clubs were off the table for now. while the business is still being evaluated in the search for options.
Faragher-Thomas said Virgin Active in South Africa was busy expanding its activities. He said the clubs had done particularly well through the 2008 and 2009 economic downturn.
The group had been pleasantly surprised by the impact of the financial strictures on its business. Far fewer people had left the club than in previous years and bad debts had also reduced.
He said it appeared that people regarded their health as more important during tough times and they became more serious about exercise. Of course, exercise helps to lift depression and tension, which also means that more people want to stay with the clubs.
There are currently 92 clubs in South Africa, with plans to expand the number to 120 countrywide in the next five years.
The demand for new clubs is increasing for several reasons. One is the growing black middle class, which is also health-conscious. Virgin Active is opening its first flagship gymnasium in Soweto next year.
A second reason for the demand for new clubs is urbanisation, and how cities have changed. A couple of years ago, for instance, in areas like Rosebank in Johannesburg there were just a few houses with a handful of people living there, but now there are high-rise blocks of flats in which thousands are living and the expansion is continuing. As a result there is an ever-growing demand for health clubs in certain areas.
No cross-subsidisation
Faragher-Thomas said the clubs were continually working on greater efficiency in containing overheads. Water and electricity, he said, are a major expense for health clubs and electricity price hikes cannot be passed on to members. Clubs therefore have to devise plans to operate more efficiently.
He said that Virgin Active spends up to R280m reinvesting in established clubs every year.
Faragher-Thomas said with the takeover of Health & Racquet clubs Virgin Active had shut down nine clubs and had since not closed any others.
He said a new club costs between R40m and R70m. Each club works independently. There is no cross-subsidisation. Every club has to fend for itself. This is part of the recipe for success.
Before the end of the year Virgin Active will open two new clubs in South Africa, one each in Montana and Glenvista.
- Sake24.com
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