Virgin Active is really struggling – just not in South Africa

Business Insider SA
Virgin Active
(Virgin Active)
  • The tougher lockdown imposed in December cut short a "steady" improvement Virgin Active had been seeing in use of its gyms until then, parent company Brait says.
  • Now sales are down, and terminations are up.
  • Yet, in South Africa, Virgin active is cashflow neutral, and looks like it has enough money.
  • In its other territories, such as the UK and Italy, it is looking for financing.
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South Africa's move back to Alert Level 3 restrictions in December did Virgin Active no favours – but unlike operations in the UK and beyond, it is still financially healthy.

After its clubs reopened, in late August, there had been a "steady improvement in member engagement" at Virgin Active, its parent company Brait told investors on Monday. In December, club utilisation stood at 70%.

Then came the return of Level 3, with "lower usage rates, an increase in terminations and lower sales".

That follows five months of closed gyms during 2020, which halved Virgin's revenues.

Yet, relatively speaking, things are looking good.

Virgin Active South Africa is cashflow neutral, Brait said, and by the end of 2020 had "sufficient liquidity to fund its business plan".

That is not true elsewhere, with “continuing” discussions about a “funding solution” for Virgin Active in the United Kingdom, Italy, and Asia Pacific, where extended lockdowns meant a hit to liquidity, Brait said.

The investment company shared no details of those discussions or more on what a restructure may look like, nor did it signal optimism or provide any timeline for announcements.

Gyms in Bangkok reopened in January, but though originally scheduled to do so, those in Italy (which have been closed since late October) did not. Brait now anticipates restrictions in Italy to last at least another month, while the United Kingdom's lockdown seems set to remain for at least two more months. 

Virgin is South Africa's biggest gym chain, and had more than 700,000 members before the pandemic. It had estimated that it would take up to two years to return to its pre-lockdown levels of revenue – before South Africa tightened restrictions again in December.

(Compiled by Phillip de Wet)

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