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Virgin Active seeks £70m as premium gym memberships plummet
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Premium gym chain Virgin Active is seeking £70 million from shareholders to shore up its flailing balance sheet after posting a £36 million yearly operating loss on 7 October.
Shareholders will stump up £45 million in cash to support European and Asia-Pacifica operations, and a further £25 million for general liquidity and investment purposes, reported the Evening Standard.
Virgin Active’s substantial losses in 2022 stemmed from impairment charges relating to what Virgin called “movements in the medium-term business plan”.
The Virgin Group subsidiary – which charges as much as £300 for a standard rolling contract – suffered a significant decline in membership due to pandemic-era lockdowns, and has yet to stage a full recovery.
Membership numbers as of 31 Dember 2022 were 21% lower than at the end of December 2019, according to financial statements posted last week.
Though post-period figures were not disclosed, there is evidence of a mounting crisis in the premium fitness market, with the high-end gym club Equinox (which operates sites in the exclusive neighborhoods of Kensington and Bishopsgate – warned that its future hung in the balance.
On the flip side, budget chain The Gym Group increased its membership by 9.3% and saw revenues grow by 18.5% year on year, according to the London-listed company’s interim results published inAugust.
However, The Gym Group is also grappling with net debt, which measured £69.7 million as of 30 June 2023, a 21% year-on-year increase.
Both Virgin Active and The Gym Group have seen the cost of debt surge amid the Bank of England’s interest rate hikes, but a trade-down among the fitness community appears to be heaping pressure on the upper end of the market.