Harris: Budget operators with experienced management and compelling fi nancials should be attractive to investors
anne-marie harris bridges ventures llp • partner sustainable growth funds
“T
he majority of investors and banks now have a mixed view of
the fitness sector. There was significant investment made in the late 90s/early noughties which meant operators expanded quickly, resulting in over- capacity. The necessary consolidation hasn’t materialised, growth has stagnated and investment returns have been hit.
In addition, many businesses were over-leveraged, such that cashflow was increasingly used to service high debt levels, rather than on capex to ensure the customer proposition was kept fresh and relevant to today’s gym users. However, while the macro environment remains challenging
for consumer-facing businesses, trading overall has held up – fitting exercise into a healthy lifestyle is seen as important. But customers are demanding value for money and the OFT enquiry into unfair contracts has threatened the traditional model. The emergence of the low-cost sector is a natural consequence, as customers receive a high quality product without high membership fees and restrictive contracts. Companies in this sub-sector, with experienced management and compelling financials, should be attractive to investors.
june 2012 © cybertrek 2012
ross chester la fitness • cfo
areas: the quality of the existing business/brand, the strategy and the management. It cannot be overestimated how important it is to have a credible management who the funders believe can deliver the strategy. Banks fundamentally want a good
“A
asset – and one that is improving, not a business which is weighted down by a burden of legacy debt. Banks appear to have two polar extreme views: stay in the good and improving, at least for the short term, and exit the stagnating. As a consequence, accessing new finance or amending existing finance is challenging and typically comes with a punitive cost, whether through increased margin or fees, tighter covenants, equity dilution, or a combination of all these. The first part of securing investment is understanding the
”
key metrics of your own business which will meet any banks’ expectations. Make sure your funders understand the business, the opportunities and the challenges. Keep up the dialogue well in advance of any financing need: banks don’t like surprises, so try not to give them one.
” Read Health Club Management online at
healthclubmanagement.co.uk/digital 31
s ever, any investment decision is premised in three key
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