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 neighbourhoods of Kensington and Bishopsgate – warned that its future hung in the balance.
On the flipside, 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 in August.
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.