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Kath Hudson • Journalist • Health Club Management EVERYONE’S TALKING ABOUT . . .

Attracting investors T

The health and fitness industry has weathered a run of recessions. Now the economic climate is looking brighter, what should operators be doing to catch the attention of investors?

wo years ago, when we ran a feature about investor relations, the overall picture wasn’t very uplifting (see HCM

June 12, p30). The UK was in the midst of a recession, the fi tness sector was receiving negative press about contracts, Fitness First had run into fi nancial diffi culties and local authorities were implementing budget cuts. But as the recession bit, there

wasn’t in fact the mass cancellation of memberships that had been predicted, which earned the sector some credibility. In addition, as predicted in 2012, the

low-cost chains emerged strongly. While mid-market clubs ran into well-reported problems, the budget chains worked hard

to create a niche for themselves, based not least on listening to consumers’ desire for value and distaste for contracts. And now, after a long and miserable

recession, the outlook is more positive. The economy is doing better, with house prices rising again, along with consumer confi dence. There’s a buzz in the fi tness sector too: Fitness First has come through its restructuring, new clubs are being built, and while the low-cost sector has driven the growth of the industry, premium microgyms are also popping up all over London. Added to this, we’re seeing some old

faces – such as Allan Fisher, David Turner and Mike Balfour, who all founded chains in the past – back in the industry.

Against this backdrop, a number of

operators have attracted new investors, among them David Lloyd Leisure, The Gym Group and Xercise4Less. Meanwhile payasugym has also received an initial £250,000 funding from Albion Ventures. So what does this mean? Are the bad

times behind us? Is the current buzz sustainable? And are investors starting to take another look at the health and fitness sector? In fact Nicholas Batram, travel and

leisure analyst at Peel Hunt, says the sector is not particularly on the City’s radar at the moment, because there aren’t any listed companies. So how do we gain the attention of potential investors? We ask the experts....


NIGEL BLAND Partner • Deloitte Corporate Finance


rowth is cyclical, so now should be a good time to invest in the

health and fitness sector, with the next three to four years looking promising. Budget gyms are still flavour of the

month, offering substantial market growth and attracting new members to the sector. The mid and upper markets are more difficult and operators need to convince investors they have a case for growth: not just rolling out, but looking for ways to segment, differentiate and originate new products. Despite predictions, the sector has held up well in terms

of membership during the recession. Now the economy is growing, I don’t think memberships will necessarily grow much faster, but I do think people will be prepared to pay more if the service is good enough, so this should be a focus. The balance sheet for the sector is generally looking

healthier now. Some businesses ran into difficulties, but after restructuring most are now out the other side – but they will need to prove strong management to attract backing. The general direction of travel should be easier now, with

people better off. The demand for health and fitness will not go away, especially with the obesity issue, so the industry could do well if it can offer a solution to this problem.

CHRISTOPH RUEDIG Investment director • Albion Ventures

look at three areas: the management, the product and the market. We only back first rate management; the product has to be clearly differentiated, offering clear benefits to customers and stakeholders, and the market has to be stable, with a growing customer base and predictable revenues. In the fitness sector, the old model of just opening a gym


and hoping people will join is no longer working. The market is saturated and there has been a lot of erosion by budget gyms. Companies that want to grow have to innovate – for

example, with new fitness concepts and class franchising with well-known brands. However, innovation also brings about creative destruction, by threatening established players and creating more pressure to keep changing. The UK fitness sector doesn’t offer a lot of growth, which

will be driven mainly by new product offerings and business models: lots of chains are looking outside the UK for growth. Albion Ventures invested in payasugym as it’s an innovative

company. Its online gym directory and pay-as-you-go business model target less frequent gym users and ensure they receive good value for money.

” 38 Read Health Club Management online at July 2014 © Cybertrek 2014

hen we assess whether or not a company is investable, we

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