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Sept. 27, 2016 Issue N°15 You’re reading Fitness News Europe, the independent business news publication for executives in the international fitness industry. With an online portal and a bi-monthly newsletter, Fitness News Europe provides reliable business news and often exclusive analysis on the fast-moving fitness market. Check out our website for further information about the publication, to register for a free trial and obtain your subscription at a special launch rate. CONTENTS MAIN STORIES Pure Gym firms up IPO plans ............................................................................................................ L’Orange Bleue heads for Spain and Italy ........................................................................................ TRX Training builds up range ............................................................................................................ Sports Direct CEO quits ..................................................................................................................... Octane Fitness founder leaving ....................................................................................................... Prime purchases Health City Italia ................................................................................................... Prama upgrade hits European clubs ................................................................................................ FIBO targets trainers ......................................................................................................................... BRIEFS 1escape, Brait, CMG Sports Club, Nike ............................................................................................. Fitness News Europe is published by Zelus (France) Editor: Barbara Smit [email protected] [email protected] @ All rights reserved. The information published in this newsletter cannot be copied or distributed electronically without the publisher’s written permission. 1 FITNESS NEWS Europe FITNESS NEWS EUROPE - ISSUE 15 Pure Gym firms up IPO plans Analysts are upbeat about the prospects for Pure Gym, the leading gym operator in the United Kingdom in number of gyms and members, which intends to raise £190 Driven by its disruptive, low-cost and technology-enabled concept, the operator es- milliontablished (£223.7m) by Peter throughRoberts ain float 2008 on hadthe London163 gyms stock at theexchange, end of probably June, with in 785,770October. members paying an average monthly fee of £19.79. Pure Gym operates with much the same low-cost model as The Gym Group, which hitairline the business,stock market or Premier last November, Inn and Travelodgebut analysts in appear the hotel confident industry. that both of them may expand profitably in the years to come – not unlike Ryanair and Easyjet in the “There’s a big opportunity for both of them to expand provided they can remain focused on providing a quality product at attractive prices,” said Wyn Ellis, leisure analyst at Numis. Pure Gym reported sales of £125.2 million (€147.4m) and a gym site adjusted- EBITDAness gyms of acquired£41.0 million in 2015, (€48.3m) the group in 2015, posted which a sales saw increase the completion of 51% to of £76.6 a corporate million rebranding. With 27 gyms opened in the first half, including 16 conversions of LA Fit - (€88.9m). The group’s adjusted EBITDA reached £16.5 million, up 23% compared withThere the are same few six divergences months last between year. It thewould business have soared approaches by 44% of Thewithout Gym non-recurGroup and ring items related to the acquisition of LA Fitness. Pure£500 Gym,million suggesting (€580m). that their valuations may not be far apart. On this basis, Pure Gym’s projected initial public offering (IPO) could value the company at more than gym category, then again it may be argued that The Gym Group has more upside potentialPure Gym with may ancillary be at an revenues, advantage among due to other its market factors. leadership in the U.K. budget RETURN TO CONTENTS RETURN TO It was reported early this year that Pure Gym appointed Rothschild to study options for its ownership. Pure Gym was acquired in May 2013 by funds advised by CCMP - tor’s managers. Capital Advisors, a U.S. private equity fund, Hermes GPE and some of the gym opera The next year it attempted a tie-up with The Gym Group, which was thwarted by the competition authorities. In May 2015 the company bought the LA Fitness Group and its 43 gyms – retaining 31 of them. Humphrey Cobbold, the group’s chief executive, told FNE that the company’s shares couldend of be the listed September, on the mainleading board to the of thestart London of the roadstock show. exchange in October, assuming it decides to go ahead with the IPO. The price range is expected to be set around the Pure Gym said that the proceeds and loans under new banking facilities would be usedThe to operator repay existing estimates bank the debt potential in full, for to low-cost reduce net gyms leverage in the andU.K. supportat about profitable950 value expansion.gyms and 3.5 Apart million from to gym 4.5 openings,million members, this could compared involve new with formats 1.9 million and acquisitions. members at 2 FITNESS NEWS Europe FITNESS NEWS EUROPE - ISSUE 15 450 gyms in March 2016. Pure Gym intends to open about 38 gyms this year, including about 20 new gyms and 18 conversions of former LA Fitness clubs. The plan for next year includes about 25 to 30 openings (excluding potential conversions) and 20 to 25 per year over the medium term. It may also launch more fitness concepts such as Pure Ride, a cycling studioIrish market that was opened in London in January. customer proposition and operating model” and that “a number of other international The company added that the Irish market is “likely to be well suited to the Pure Gym - markets” could provide extra opportunities for the group in the longer term, “either through the acquisition of existing gym portfolios or through organic roll-out.” How ever,as yet. Cobbold emphasised that Pure Gym is “very focused on maximising the potential inThe the primaryU.K.,” and offering that there would aren’t consist any concreteof newly-issued plans for shares entry but into the any company other markets added include members of the management, other individual shareholders and funds ad- that the IPO may include a partial sale of shares held by current shareholders, which visedadmission, by CCMP the groupand Hermes added, (throughwith an over-allotment an entity called option Gym Bidco).of up to The 15%. company and selling shareholders expect to target a free float of at least 25% immediately upon today is a story of disruption and shows how entrepreneurial vision can build real “Pure Gym’s growth from a start-up company in 2008 to undisputed market leader - business success,” stated Tony Ball, chairman of Pure Gym. The rise of Pure Gym and other budget operators has transformed the British mar ket in the last years. As the group pointed out, an estimated 88% of the 1.9 million people who became gym members in the five years until March 2016 joined value gyms. The numbers are based on market analysis by the Leisure Database Company (LDC),Disruptive as reported model in FNE#7. However, the group has also attracted members from rival gyms with its relatively RETURN TO CONTENTS RETURN TO near-permanent opening hours. The company says that 45% of Pure Gym members cheap and flexible concept, which does not require annual commitment, and offers run by other U.K. operators. The average price of less than £20 at Pure Gym com- whopares joined with anin theaverage six months monthly until membership the end of fee June of were£41.13 formerly in private members sector gymsof clubs in Among the most important aspects of its business model, Pure Gym points to low thepersonnel country, costs, again owing based to on the LDC use research. of technology. That allows it to employ only two to three full-time staff per gym, while services such as cleaning, maintenance and - erates without high-cost amenities such as swimming pools. remote security monitoring are outsourced to specialists. Furthermore, Pure Gym op at least two years had 5,631 members in 2015. They generated sales of £1.1 million, The group thus prides itself on juicy returns. On average, gyms open as Pure Gym for a gym site adjusted EBITDA margin of 46% and gym site return on capital employed (ROCE) reaching 47%. Among its moves to raise extra sales and profits, the group is expanding gyms where 3 FITNESS NEWS Europe FITNESS NEWS EUROPE - ISSUE 15 feasible and trying out new membership options. Pure Gym is also developing new - sales channels and cross marketing. Cobbold added that the proceeds from the in tended IPO would help Pure Gym to continue investing in technology. The IPO plans come after the launch of The Gym Group as well as Basic-Fit’s float on the Euronext exchange in Amsterdam in June. L’Orange Bleue moving into southern Europe - TheSpain largest and Italy. fitness franchise in France with over 300 clubs, L’Orange Bleue is prepar ing to move into other south European countries, starting in the next few months in Jérôme Olivard, project manager at L’Orange Bleue, says that two clubs are to open in Barcelona between December and January, one of them owned by the group on Avenidayear. de Borbon and the other through a licensing agreement on Carrer Girona. The plan is to have nearly ten clubs up and running in Spain around the end of next Another project