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TALKBACK everyone’s talking about . . .

investor relations T

he health and fi tness industry has received some negative PR over the last few months. Combined with the

challenging economic climate, how might this impact the way in which the sector is viewed by the investment community? Consumer TV programme Watchdog

has investigated underhand sales practices yet again. The subject gets picked over by the consumer media with monotonous regularity, so is it time to dump the contract? Do they make the industry look shifty, or suggest a lack of confi dence in the product? Customers have voted with their feet in favour of fl exible contracts

at budget gyms, so is it time for everyone else to take the hint? Certainly Anne-Marie Harris of

Bridges Ventures LLP (see below), which invests in The Gym Group, believes fl exible contracts are one of the key reasons why the budget sector is so popular. And even at the premium end of the scale, BOOM! Cycle has opted for no contracts as it feels this drives them to keep offering exactly what consumers want (see HCM May 12, p28). But it’s not just the perennial question

of contracts at issue here. Fitness First has run into well documented fi nancial diffi culties this year. New management has been brought in, with investment

tony de leede fit ’n’ fast australia • ceo


enerally I think there is still a good appetite for the health and

fitness industry, especially the budget sector, because investors know the margins are good when you get it right. We’re currently looking at selling 25 per cent of our Fit ’n’ Fast business and initial interest has been strong. However, like everything else, the industry has been

affected by the recession and it’s not as easy to borrow money as it was 10 years ago, when the industry was flying high. In terms of keeping the faith of the investment community,

health clubs do receive a disproportionate amount of scrutiny regarding sales tactics, so transparency here is important. We’re very clear and upfront about our cancellation policy: you can cancel a contract, but there will be a cancellation fee. Innovations are also pleasing to the investment community:

anything which can alter the landscape and attract more people. I think we might start to see more 24-hour operators, as well as more smaller, specialist facilities. Going forward, I think the investment community will

continue to show an interest, but will drive a hard bargain – unless it’s in an area which is exploding, like Asia.

kath hudson • journalist • health club management

A double dip recession, a major operator in trouble and contracts under consumer media scrutiny. What can the industry do to ensure it keeps the faith of the investment community?

companies Oaktree and Marathon buying up 77 per cent of the company’s debt in April. But with one-third of Fitness First’s 142 UK gyms said to be unprofi table, job losses and closures could result from any restructuring. Will this have a wider impact on the industry? On the positive side, the fi tness

sector has held up fairly well throughout the recession, and none of our columnists – investors and operators alike – think there will be a mass exodus of investors from the industry. But when banks are being increasingly

discerning with their lending, what can operators do to make sure they tick all the boxes? We ask the experts....


mike saul barclays corporate • head of hospitality and leisure

operators to have completed their commercial, financial and legal due diligence, and to have considered all risk angles when presenting to us. We also want to understand growth potential and the local operating environment. Strong management is vital, and


when assessing a proposal the strength of the team is a key consideration. We want to see an indication that operators could react quickly to adapt their business strategy if necessary. Barclays wants to understand the five-year plan, where the business hopes to be, and what the management is doing to achieve this. We work to a ‘no surprise’ mentality, and want to be kept abreast of developments. In the current climate, with job uncertainty and confidence

low, some consumers are reluctant to be tied into contracts, so offering flexibility can be advantageous. As a bank, however, we will always view each business on a case-by-case basis and will want to understand how operators are keeping membership numbers steady, as well as appreciating the cost of acquisition and churn rate.

” 30 Read Health Club Management online at june 2012 © cybertrek 2012

s a lender to all sectors of this market, Barclays expects

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