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Membership, profits fall at Fitness First

Membership, profits fall at Fitness First
September 14, 2011

Just months before an expected sharemarket float of its international parent company, Fitness First Australia has been losing members and sales.

While budget and 24 hour fitness operations have been growing, Fitness First's Australian membership fell by 16,000 people, or almost 5%, to 332,000 members in the year to October 2010, according to a Sydney Morning Herald report on the fitness group's latest accounts filed with the corporate regulator.

The Sydney Morning Herald reports that net profit fell by a third to $28.5 million, dragged down by asset write-downs for "non-performing clubs" and depreciation expenses to reflect a change in the estimated useful life of its club fit-outs.

The earnings drop came as revenue slipped 1% to $339.6 million, halting almost a decade of remarkable growth since the company entered the Australia market in 2000. The chain reportedly opened just one new club over the year, taking its total number to 93.

Fitness First's new Managing Director, former Procter & Gamble Australia executive Peter Manuel, is now charged with turning around the trend, looking to attract new members with new products such as dance workouts such as Zumba and an overhaul of its fitness offering.

Fitness First's lacklustre results coincided with a management reshuffle. Fitness First Australia's previous Managing Director, Peter Stirling Benson, leaving in February, followed by the Finance Director, Mark Forrest, in June.

Manuel, who took the helm in early May, told the Sydney Morning Herald that the global financial crisis "had an impact" on gym operators, forcing the company to put off opening new clubs.

He added that the global financial crisis "also had an impact on how consumers chose to spend their income and now there's also increased competition," citing the expansion of budget and 24-hour operators, as well as specialist studios and personal trainers.

A similar rate of decline in members and revenue has continued in the current financial year, Manuel admited, but pointed out that "we're working on plans which will see us return to the positive growth levels of previous years."

Manuel said the company was looking at the types of classes it was offering and other changes, declining to give details before the planned overhaul.

Fitness First is majority-owned by the London private equity firm BC Partners. BC is reportedly seeking to list the international fitness group, which also runs gyms in Britain, Germany and some Asian countries, on the Singapore Stock Exchange in an initial public offering valued at up to S$700 million ($550 million).

The gym operator is targeting the Asia-Pacific region as its main growth market with Fitness First Australia having been one of the strongest performers in its network - with a 21% share of Australia's $1.8 billion fitness industry.

However, a recent report from IBISWorld suggests that with consumer confidence on the wane, many former fitness club members are switching from gym contracts to less expensive options such as jogging or cycling.

As a result, IBISWorld report that fitness industry revenue fell 1.4% in Australia during 2009/10.

However, IBISWorld tipped demand would rebound in the next five years, boosted by new products and older customers.

16th April 2011 - PETE MANUEL TO HEAD FITNESS FIRST AUSTRALIA

4th November 2010 - FITNESS INDUSTRY PUTS CUSTOMER SAFETY FIRST 

5th October 2010 - ASSOCIATIONS JOINTLY ENDORSE NEW GUIDELINES FOR EXERCISE INTENSITY

5th January 2010 - FITNESS TO BENEFIT AS AUSTRALIA TURNS TO SELF-IMPROVEMENT 


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