Registered users can save articles to their personal articles list. Login here or sign up here

Virgin listing speculation grows

JSE might be more likely than LSE. Balance sheet not in great shape.

Market speculation is once again swirling that Virgin Active, the operator of a global chain of health and leisure centres is planning a listing.

A report published on Sky News said that the UK-based group had appointed Bank of America Merrill Lynch, Goldman Sachs, Morgan Stanley, Standard Bank and UBS to work on a proposed listing.

The appointment of Standard Bank as one of the lead banks suggests that the listing would be on the JSE, rather than the London Stock Exchange, Sky says.

Virgin Active is part-owned by CVC Capital Partners, with a 45.58% stake; Richard Branson’s Virgin Group with a 42.50% stake; and management, with an 11.92% stake.

The company was founded in the UK 14 years ago and has grown – organically and by acquisition – to become one of the largest global health club companies with 1.3 million members in 270 clubs in eight different countries. The focus is on Africa and Asia for future growth with plans for a new gym in Thailand well advanced.

 

2013

2012

Territory

Number of clubs

Number of clubs

UK

113

120

South Africa & Namibia

109

104

Italy

28

26

Spain

11

11

Portugal

4

4

Australia

4

4

Singapore

1

Total

270

269

Source: Virgin Active 2013 Report

While CVC, Virgin Active and their media partners were not prepared to comment on the ‘speculation’, a closer look at the company’s latest financials – for the year to December 2013 – suggests that a listing may be more necessary than opportunistic.

The company grew turnover by 5% to £653.1 million and ebitda by 10% to £125.4 million. However once tax and hefty interest charges of £93 million are accounted for the company reported a loss for the period of £101.1 million, up from the previous period when losses of £80.4 million were reported.

Virgin has been investing heavily in upgrading its facilities, both locally and abroad. In this 2012 article, Ross Faragher-Thomas, CEO of Virgin Active SA, told Moneyweb the company would invest up to R350 million/year for the next three years upgrading its gyms. The same would apply in the UK and other territories.

As a result the group has accumulated substantial debt. Total long- and short-term liabilities amount to £1176.9 million, more than total assets of £1019.8 million.

Of this, bank debt of £337 million comes due between December 2017 and June 2018. Shareholder loans of £572.9 million are due in five years or more, and could probably be rolled over if necessary.

At a glance the cash-flow statement looks healthy with a net cash inflow from operating activities of £126.5 million and net cash for the period of £22 million after expenses. However a closer look shows that the group owed creditors £26.5 million, up from virtually zero the previous year.

These figures suggest that unless the situation changes, the company may struggle to repay the capital portion of its debt.

The auditors, KPMG, have not issued a going concern statement. According to the financial report (which can be found here) “the Group has ongoing communication with its bankers about its future borrowing needs and no matters have been drawn to its attention to suggest that renewal of facilities will not be possible on acceptable terms when they fall due.”

Results for the year to December 2014 will be released in May and the situation may be different. For one, the rand will not have depreciated against sterling by 27% as it did in 2013. South Africa, whose gyms are teeming with health-nuts, and which exibited the strongest growth of the regions, contributed £185 million of the group’s £653.1 million. Ebitda for the individual regions is not disclosed.

Early last year the company also reorganised its management team to accelerate future growth plans. Matthew Bucknall, who co-founded Virgin Active, and was its CEO took up a full-time position of Group President to focus on accelerating the group’s international expansion.

Paul Woolf, previously the group’s FD, succeeded Bucknall as CEO.

In December Virgin Active announced that it had appointed Simon Susman, former CEO of Woolworths, as its non-executive director.

Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.

COMMENTS   0

Comments on this article are closed.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR

Podcasts

SHOP NEWSLETTERS TRENDING CPD HUB

Follow us:

Search Articles:Advanced Search
Click a Company:
server: 172.17.0.2