The Rise of the Activity Sector

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An analysis of the growth in the physical activity sector and its future potential A Priority Sector for UK Plc The Rise of the Activity Sector About ukactive

Contents About ukactive

ukactive is the UK’s leading not-for-profit fitness providers. We facilitate big impact For more information visit About ukactive 3 body for physical activity with a mission to partnerships across the public and private www.ukactive.com or contact us on: improve the health of the nation through sector, supporting partners in delivering T: 020 7400 8600 4 getting more people, more active, more their goals around physical activity. Foreword – a perspective on growth and a bright future E: [email protected] often. We exist to serve anyone with a role The ukactive Research Institute is a to play in achieving that goal. Executive summary 6 supplier of research and insight services We collaborate with over 4,000 members for the physical activity sector. These Introduction 8 and stakeholders across the UK, including services include evidencing the impact operators of fitness facilities of all sizes of products, programmes or services, as well as local authority leisure centres, generating insights into consumer Global fitness markets 12 leisure trusts, equipment suppliers, behaviour and understanding the charities, vocational trainers, sports commercial performance of physical UK market activity timeline 14 providers, lifestyle companies and outdoor activity-related businesses.

Valuation of the UK private and public health and fitness sector 16

What is driving the growth in value? 18

Defining the physical activity sector: opportunities beyond health and fitness 20

Case studies 21

Fostering innovation: ActiveLab by ukactive 37

Looking forward 38

Glossary 39

Methodology 40

End notes 42

Acknowledgement We would like to thank the ukactive Nuffield Health, Oxygen Freejumping, members, stakeholders and partners Places for People Leisure, Precor, who have contributed to this report, PureGym, Sport England, Technogym, in part by providing highly The Gym Group, Water Babies and commercially sensitive financial and Xercise4Less. brand sponsorship information. This report has been researched in We would also like to thank Nick Bishop partnership with leading international (Managing Director, Morgan Stanley, advisory and accountancy firm Mazars, Head of Leisure, EMEA), Alliance Leisure, and Nielsen Sports (formerly Repucom), Anytime Fitness, David Lloyd Leisure, an expert provider of analytics and énergie Group, Greenwich Leisure Limited, insights within the sports industry.

2 3 e Rise of the Activity Sector Foreword

New proﬁtable business models are emerging to drive Foreword active lifestyles

A perspective on growth and a bright future.

rom our highly differing vantage driving force within the sector. points, we have both seen the Its health-based proposition opens doors Fphysical activity landscape change for continued acquisition into new areas, significantly over the past decade. with the capital to support it. Alongside the rise in the number of gym Advances in technology provide the operators, we have witnessed an increase sector with further growth potential, in market diversity, with the introduction from facilitating the development of of low-cost gym operators and boutique increasingly sophisticated and easy-to- fitness studios providing consumers with use equipment, programmes, merchandise greater choice than ever before. and services, to mobile applications, e most significant development wearable trackers and online booking remains the expansion and increasing systems. New profitable business models competitiveness of the low-cost gym are emerging to drive active lifestyles sector, clearly evidenced by e Gym with little connection to facility operators, Nick Bishop Group’s strong IPO in November 2015, creating a driving dynamic for innovation. Managing Director, Morgan Stanley, valued at over £250 million. It has been Businesses today must respond to Head of Leisure, EMEA announced that PureGym, the UK’s changing consumer habits. Flexible, biggest gym operator, plans to do the low-cost gym memberships serviced same. Sustained growth of the low-cost almost entirely online give consumers sector, with challenger brands such as the freedom to exercise and have time Xercise4Less, seems to indicate that and disposable income to spend on a further mergers and acquisitions could be variety of additional leisure pursuits or on the horizon as companies continue to secondary spend opportunities such as compete for site space while trying to gain personal training or boutique classes. the benefits of scale. For some operators, Conversely, the more expensive, high-end taking over established clubs is a route to experience satisfies consumers’ demand expansion, especially given concerns over for a more all-encompassing health high street planning regulations and the and wellbeing service. Meanwhile, the difficulties of obtaining planning consent increasing popularity of outdoor exercise for new-build sites. e campaigning work sees initiatives such as Parkrun and British of ukactive to reclaim and repurpose sites Military Fitness provide consumers with a on the high street may open new locations wide choice of ways to get fit and active. for new concepts and formats, providing an Steven Ward exciting opportunity for growth. e sustained rise in the number of gym memberships year on year1 indicates Executive Director, ukactive ere are still opportunities at the premium that consumer interest in the sector end of the spectrum to provide a high-end, remains strong. e sector has grown its family, full-scale service such as penetration of the UK adult population David Lloyd Leisure and Nuffield Health. holding a fitness membership every Virgin Active, by announcing the sale of 35 year since 2008, despite predictions of of its UK fitness clubs to Nuffield Health in difficulties resulting from the recession. June 2016, indicates its intention to do just is proves the sector is resilient and that, focusing on its premium ‘Collection’ increasingly ingrained as a positive habit and family clubs. Under their current in the lives of UK consumers. We believe owners, both Virgin Active and David that this, together with the numerous Lloyd Leisure have benefited from major investments made in the sector both investment programmes into their estates, globally and nationally, alongside the with a commensurate growth in earnings. growing evidence of the benefit activity Backed by its ability to continually reinvest has to health, should give confidence to its earnings, Nuffield Health remains a those investing in the sector.

4 5 e Rise of the Activity Sector Executive summary

Executive £6.6bn summary estimated 2015 ﬁtness sector valuation

is report identifies the financial contribution of the physical activity £7.7bn sector to the UK’s economy. estimated 2016 fitness sector forecast

he health and fitness sector is part a more diverse range of organisations that General Practitioners has made physical legacy operators and arrangements have of the wider physical activity sector. count getting the nation moving as one of “Greater flexibility in activity one of its top priorities as an finally been dealt with, creating a bright Tis report identifies and examines their core objectives. institution. Fitness is no longer a matter of future in which investment opportunities the financial contribution of both to the leisure; it is central to health, stimulating abound. is is particularly evident in However, with their hundreds of millions of payment options, such UK’s economy. its value to society as a result. the supporting infrastructure base of customer visits per year, the bedrock of the as short-term and suppliers driving much of the innovation in Supported by Mazars, a leading success of the physical activity movement Societal trends have brought active the sector. We feature in this report newly international advisory and accountancy remains the health club and leisure centre lifestyles more prominence, with social no-contract models, has emerging models commercialising the fun organisation specialising in valuations, operators. e valuation cited in this report media platforms such as Instagram, of fitness and companies blazing a trail of and sponsorship experts Nielsen Sports, is based solely on private and public health widened the appeal of gym Facebook and Twitter bringing greater international expansion from the UK. we have valued the UK’s private and public and fitness operators. A private operator is connection between those passionate memberships by reducing e case studies represent the tip of the health and fitness sector higher than a commercially owned health and fitness about fitness and the wider general public. iceberg of opportunity that can be found previous valuations* at an estimated £6.6 site that is available to the public on an the cost barrier and is has influenced a younger generation within the ukactive network. billion in 2015, and we have forecast annual, monthly or “pay-as-you-go” meeting the needs of time- of consumers to emerge more health- a valuation of £7.7 billion for 2016**. membership. Public sector-led facilities conscious than their predecessors, ukactive’s mission is to improve the health is is the result of continued membership are delivered either by local authorities pressured consumers.” creating ample room for growth in the of the nation by getting more people, more growth, especially in the low-cost or are outsourced by local authorities to sector. Social media trends promoting active, more often. A strong, vibrant and sector, and increasing investment trusts, social enterprises, not-for-profits, “strong not skinny” and the evolution successful sector, with the backing of the enabling expansion. e number of major commercial entities and charities, which of workout clothing from functional to investment community, is essential to transactions in the physical activity redistribute their profits for the benefit of e sector’s growth in value and volume fashionable have also contributed to the achieving this aim. sector in the past year indicates that the community. ough the estimated £6.6 has been supported by the elevated growth of the fitness sector consumer base We hope you find this report informative investors believe the sector has strong billion valuation in 2015 and £7.7 billion 2016 importance of physical activity and health and the desirability of the category. and we are here if you wish to join us in growth prospects, which is reinforced by valuation forecast of the fitness sector is in society. Strong media coverage and is report highlights 15 case studies from our mission of creating the best possible PureGym’s recently, announced plans to greater than previous calculations to date, public sector campaigns, such as Public organisations which have contributed conditions for growth. float on the London Stock Exchange2. we believe the total value of the entire Health England’s “Change4Life” and greatly to the revived growth of the sector is significantly greater and therefore Sport England’s “is Girl Can”, have made e physical activity sector is vast. It spans physical activity sector. ey represent a its potential substantially underestimated. consumers more aware than ever of the a broad range of diverse organisations coming of age of the sector as it emerges negative health and wellbeing impacts with a role to play in achieving ukactive’s Growth in the sector has been driven by from its initial entrepreneurial roots into of an inactive lifestyle and the benefits of mission of improving the health of the a variety of factors. Greater flexibility a well-structured, professional sector moving more. ey have also shown the nation by getting more people, more active, in payment options, such as short-term ready to ride the waves of major societal steps one can take to get more active, be it more often. is breadth and diversity and no-contract models, has widened trends towards further growth. e case by joining the local gym, entering a national means that it is not currently possible to the appeal of gym memberships by studies include private gym operators, mass participation running event, cycling provide an accurate financial valuation of reducing the cost barrier and meeting franchisors, the actions of public bodies, to work or taking the dog for a walk in the * is does not refer to previous calculations the entire physical activity sector, which the needs of time-pressured consumers. and public providers of leisure and fitness park. is drive has been supported by the made by ukactive but to those done by other spans from companies such as Apple, Product innovation and technology activities. ese examples illustrate the organisations such as e Leisure Database Academy of Medical Royal Colleges, which which now plays a major role through the development across the sector, such as the investment and growth opportunities for Company, who produce a yearly report on the hailed the benefits of physical activity as state of the UK fitness industry. provision of wearable technology, through development of fitness apps and trackers, the sector and mark a new era of sustained a “miracle cure” for the lifestyle-related to national charities such as Macmillan, have enhanced the consumer fitness value for investors. e successful * is * estimated 2016 forecast is based on an uplift diseases which threaten the sustainability which provides physical activity services experience, potentially leading to return of the sector to public markets in the valuation multiple that takes into account of the NHS. As a result, the Royal College of improved investor sentiment towards the sector for cancer patients. Never has there been a reduction in churn. and market activity in 2016 means that and its prospects.

6 7 e Rise of the Activity Sector Introduction

Introduction

e physical activity sector is open for business – and more of it.

he physical activity sector is open for However, the 6,435 gyms (which span the industry will continue to grow substantially. e rising prevalence of inactivity-related services. Over the next five years, £1 billion business – and more of it. Anyone with private, public and third sectors of the We hope that organisations in the broader health problems is associated with both of funding is allocated to support this and an interest in the health of the nation industry) providing services to 9.2 million physical activity sector see the increasing direct and indirect costs to the economy11. create a more active climate in which this T 6 stands to benefit as a result. For that reason, members are only part of the landscape. benefit in providing in-depth access to their In 2012 Sport England estimated the direct sector can thrive. e government has the physical activity sector is a priority Equipment suppliers, outdoor activity performance and growth projections in the cost of physical inactivity to the NHS committed with this strategy to supporting sector for the wider health of UK Plc. providers, mass participation events, future so as to showcase the true value of across the UK to be £1.06 billion12. As people the development of this market for many children’s activity providers, vocational this broadening sector. continue to live longer and retire later, and years to come by stimulating demand from e physical activity sector looks very training providers, health and fitness as the cost of health care increases, people current non-category users. OPEN different from how it did 10 years ago. Over Servicing a health need technology and activity merchandise will not only have a clear incentive to look the past decade the number of both public e prominence of workplace health and suppliers, activity holiday providers, e physical activity sector is responding after themselves in the future, they will and private gyms in the UK has risen along wellbeing programmes and their increasing sporting delivery providers (including to and servicing a major national health find they have little choice but to do so. with the number of members to reach 14.3% priority on the corporate agenda further volunteer-led community activity), need. e success of this sector is a national Health insurers, as well as the NHS, will penetration3 – indicating plenty of room highlight the desire for UK organisations Corporate Social Responsibility (CSR) priority due to the impact that it can have increasingly rely on the physical activity for further growth. Last year six of the 19 to improve the health and wellbeing of the programmes and sponsorship, workplace on broader society. e total cost to the UK sector to make their client claim books mergers and acquisitions taking place in nation. e Office for National Statistics health solutions, and activity and lifestyle economy of physical inactivity is predicted affordable in the long term. the health and fitness market across Europe reported that in 2013, 30.6 million days providers all contribute significantly to to be around £20 billion annually, with involved a British business, reflecting the Government strategy is aligned to the were lost to the UK labour market due the impact the sector is having on the 37,000 deaths occurring as a result of UK’s position as the largest fitness market strategic direction of the sector and to musculoskeletal problems alone14. health of the nation. e boom in boutique people being inactive8. With the benefits of in Europe4. the mass needs of the UK public. Employers are becoming more aware that fitness studios has also been an exciting regular physical activity being heralded by e UK Government’s new sport strategy, physical activity improves the productivity Lowering average membership fees has development for the sector over the past members of the NHS and the Academy of Sporting Future: Towards an Active Nation, and health of their workforce, and facilitated growth in the low-cost market, few years, with examples like Boom Cycle, Medical Royal Colleges as a “miracle cure”9, moves away from a narrow focus of solely employees are becoming more concerned attracting new customers to the fitness Heartcore Fitness and Barry’s Bootcamp activity is now firmly recognised as key to encouraging people to participate in sport about their health. e Global Benefit market while squeezing mid-market generating a loyal following7. e appeal establishing and maintaining good physical and towards encouraging inactive people to Attitudes Survey 2015/16 reported health operators for their existing members. of boutique studios is their intimate, and mental health and wellbeing. become more active and healthy in a variety as a top priority for employees. ere is also “Pay-as-gym” and rolling contracts provide customer-focused service, which has Moreover, it is predicted that one in four of ways compatible with the demands a growing body of evidence indicating the customers with a flexible offering and value ignited a resurgence of customer passion people (25%) will be aged 65+ by 205010. on their time. Moreover, the government health risks faced by an inactive employee. for money – fuelling the growth of leading across the entire sector. is means the already substantial burden is keen to get active those groups it has Findings from e Lancet’s second Series budget operators such as e Gym Group, As mentioned earlier in this report, though on health services is likely to grow. identified as under-represented and harder on physical activity show that increased PureGym, Xercise4Less and énergie’s the estimated 2015 valuation of £6.6 billion Mass inactivity and the rise of lifestyle- to reach, such as women and girls, the sitting time, common in societies where Fit4Less brand. It is clear that customers and the £7.7 billion 2016 valuation forecast related disease will increase the burden disabled, the elderly and those from a people are predominately sitting at work remain confident in the products and of the private and public health and fitness further. Physical activity is a mandatory lower socio-economic group13. or when travelling, is linked to an increase services provided, as the number of gym sector is greater than previous calculations inclusion in any strategy to manage the is strategy highlights the considerable in all-cause mortality, and that businesses members continues to climb year by year. to date, we believe the total financial value risk of falls and fractures in older adults scope for growth in the sector and ties the should try and find more ways to get their Deloitte’s recent report, Passion for leisure, of the entire physical activity sector is and for the maintenance of an independent, government into a series of KPIs which employees more active. notes how consumers are now spending significantly greater, and therefore it is happy later life. With links emerging to resonate with the sector’s core objectives. more of their disposable income on “non- A growing campaign by ukactive is potentially substantially underestimated. dementia and already established to a is includes reducing the number of essential” items such as going to the gym5, highlighting and comparing past and e sector has continued to grow every year, range of conditions such as arthritis, an facilities with underutilised spare capacity, with low-cost memberships being an present behaviour; once it would not have and despite Brexit creating uncertainty ageing society amplifies the fundamental growing the economic value of the sector attractive option to new entrants into the been uncommon to see packets of cigarettes for all markets, we are optimistic that the need for a thriving physical activity sector. and reaching a broader audience with its health and fitness market. shared in team meetings or smoking at

8 9 e Rise of the Activity Sector Introduction

e health and ﬁtness sector is at the heart of the

desks. Yet inactive, sedentary offices and e health and fitness sector is at the heart exercise classes to hundreds of thousands their associated environments now create of the digital revolution sweeping the of overweight people as a preventative digital revolution the same level of risk to our health and globe. Wearable tech and applications have and combative solution to diabetes17 wellbeing. Future generations will note provided customers with the opportunity indicates openness to cross-sector sweeping the globe significant differences in their workplaces to monitor their fitness over time, partnerships. Public and private sector to those we inhabit today. Some businesses providing insight and inspiring them to partnerships enable organisations to do offer incentives, such as subsidised or challenge themselves and others. deliver successfully on local, national and corporate gym memberships or “walking e rise of the “quantified self”15 who plays international needs of consumers in terms meetings”, to encourage employees to move an active role in managing their lifestyle of health, physical activity and sport. daily. However, companies are increasingly has made it difficult to find a technology As brands continue to think about the looking to get creative with their health and brand that has not launched a wearable future landscape in which they will be wellbeing initiatives, thereby presenting device – Apple, Samsung, Sony, Philips operating, there are plenty of opportunities operators, suppliers and new market and Microsoft all supply activity trackers. for organisations in the sector to develop entrants with an opportunity to capitalise Google have made physical activity a partnerships that engage consumers, on the growing interest in workplace health central tenet of its brand-led marketing. employees and communities. We have seen and wellbeing. ere will be a time when an New technology-led innovations are this in the rise and popularity of Corporate inactive office is seen in the same context creating the chance for members to Social Responsibility programmes. as smoking at desks. is change in culture understand their current ability, DNA will serve as a further stimulus for the composition, current bio markers and risk Partnerships between mass participant growth of the sector. profile, and tailor exercise programmes event companies and operators and to manage them. Online streaming, suppliers are becoming more common. Innovation and technology augmented reality (AR) and virtual reality Examples include PureGym partnering More than ever, organisations are using (VR) will bring an acceleration of enhanced with e Great Run Company, Nuffield data-driven solutions and discovery- consumer experience across the market. Health with Human Race, and Technogym driven research to stay competitive and e next generation health club that is able becoming the official partner of the 10th become more ingrained in the daily lives to harness the above into a personalised, Bloomberg Square Mile Relay in London of their customers. Digital technology technology-led and evidence-based in July 2016. In each instance, these enables businesses to access data from service is just around the corner. partnerships provide both companies with activity programmes and service users, a means to expand their reach to e provision of VR and “immersive providing clear consumer segmentation new demographics. fitness” experiences holds much and an indication of their health and fitness promise and can be especially important Vertical integration has also begun needs. Big data and advanced analytics for boutique studios whose success in the sector as businesses seek to enable companies to make informed depends in part on providing a unique expand their capabilities and consumer and quick decisions in their day-to- and exciting fitness experience to attract offerings. Life Fitness, owned by US day business. With the introduction of and retain customers. listed giant Brunswick, have continued advanced machine learning techniques, their march towards being a $2 billion this information can be used to stimulate Disruption is also likely to come from company through aggressive growth and innovative products and services. Health outside the sector. e embryonic acquisitions across the active lifestyle and fitness operators sit on goldmines emergence of AR saw the physical activity sector, bringing more diversity to their of data highlighting trends in human sector expand to e Pokémon Company product range. Technogym’s acquisition behaviour, some of which stretches back through the craze that swept the globe in of a majority stake in the global, digital decades. Historically this insight has been summer 2016. is technology-led game membership engagement software an underutilised asset within the sector, attracted a new consumer segment to business Exerp in April 2016 is a clear but it is now being mined successfully building activity into their lives, arguably example of this, as is Les Mills’s investment by the most enlightened operators. temporarily but certainly profitably. It in online, at-home exercise class platform With investment and the introduction delivered healthy returns for its investors, LES MILLS On Demand. LES MILLS On of new skill sets to the sector, this data having reportedly generated $250 million Demand takes the brand into the homes is being unlocked to drive innovation. in revenues in the first five weeks after of its loyal customers, allowing them to Technological developments have its launch in July 2016, according to an access their workouts anywhere, anytime, transformed the customer experience international survey carried out by on almost any device and delivered by the through easy-to to-use online booking and YouGov16. Whilst longevity may remain a best instructors in the world. registration platforms and free mobile web problem, it has created a new category of apps. By utilising the ubiquity of mobile service which may see further variations By continuing to invest in improving the phones and the internet, organisations on the theme in the future (rumours customer experience through technology have the opportunity to interact with abound of a Harry Potter-themed version) and research, listening to customers’ consumers throughout the day like and a programmatic cycle akin to the health and fitness wants and needs, and by never before, creating a physical and release cycle of blockbuster films. building successful partnerships across mental health and wellbeing service that and outside the sector, the physical activity Partnerships extends beyond gym walls. Some expert sector will maintain its growth momentum. commentators predict that, much like with A vast multitude of partners hold a the taxi market, it is only a matter of time symbiotic self-interest in getting before an Uber comes and shakes things the nation moving and, as a result, a up for the existing players in the market, commitment to collaboration. e NHS’s stimulating demand in the process. decision to provide personal trainers and

10 11 e Rise of the Activity Sector Global ﬁtness markets

e surge in activity in the health and ﬁtness Global ﬁtness market over the past few years has markets been global

ough the focus of this report is on the evidence the sustained investor interest in investment opportunities and market the low-cost gym sector. Moreover, it is not activity in the UK, the surge in activity just gym operators successfully floating; in the health and fitness market over Fitbit, the renowned activity tracker the past few years has been global, with producer, took the plunge on 18 June 2015. many businesses directing their attention At the time of the IPO Fitbit was reportedly towards expanding their reach both at worth $4.1 billion. Following the IPO its home and internationally. value doubled, with shares of the wearable provider up 20% just four days after e European health and fitness sector going public20. continues to remain strong, with 19 mergers and acquisitions (M&A) taking place in 2015, Companies in the sector are also looking matching the previous year’s performance to penetrate underdeveloped markets, and up from nine in 2013, according to capitalising on the long-term growth Europe Active & Deloitte’s European Health opportunities in areas where penetration and Fitness Market Report 2016. is is rates are currently low. Virgin Active is a clear sign that the sector remains an currently focusing its attention on growing attractive environment to investors. its portfolio in South East Asia, with the company reportedly investing up to £115 Alongside M&A, businesses are also million in ailand alone21. With average considering other options for expansion, penetration rates in the Asia-Pacific region such as crowdfunding, capital investment, being reported at just 3.8%22 in 2015, there is private equity and IPOs. Dutch fitness certainly plenty of opportunity, and room, operator Basic-Fit, which owns 368 clubs for business to flourish. In a similar vein, servicing over 1 million members in five the penetration rates across the European countries across Europe, took a significant market, though often greater than those in step forward in the company’s plans for the Far East, are still relatively low, ranging expansion when it floated on the Euronext from 1.9% in Russia to 19.4% in Norway23, Amsterdam on 10 June 2016 by raising gross showing there is also further room for proceeds of €400 million to pay off debt expansion across the European market. and fund potential future acquisitions18. In the US, Planet Fitness, one of the largest e international context is useful for US franchisors and health and fitness predicting further growth in the UK. When centre operators, has continued to thrive analysing the penetration rates of fitness following its flotation on 11 August 2015 memberships in international markets, at $16 per share. At the time of its IPO the there is a clear correlation between how business had 7.1 million members; a year on active a society is generally and the and Planet Fitness is serving an impressive penetration rates in fitness. Achieving the 8.6 million members, with total revenue broader mission of more people, more active, for the second quarter 2016 reaching $91.5 more often is good for society and good million, a 15.9% increase on the previous for business. year’s performance19. ese stories further

12 13 e Rise of the Activity Sector UK market activity timeline

3 December PureGym announces 3,000 partnership with 22 February Anytime e Great Run Oxygen Freejumping Fitness open Company, a leading secures £8 million 3,000th site 1 August UK market provider of mass alongside a Nuffield Health participation £2 million equity acquires 35 Virgin Active Clubs for 24 running events in investment from 13 April an estimated £80 the UK. Beechbrook Capital, Bannantyne is activity timeline million, expanding a specialist provider rumoured to be its portfolio of fitness 3 December of debt and equity planning an expected and wellbeing gyms PureGym ranks capital to small £300million IPO 6 May from 77 to 112. 9th on Sunday and medium-sized on London’s GLL makes £1.2 Times Virgin Fast business in Northern Alternative million funding 1 July Track 100, while and Western Europe. Investment available for Olympic Anytime Fitness Market (AIM). ranks number one Xercise4Less athletes through its 5 August on Entrepreneur places 17th. 24 February Sport Foundation. GLL finalises merger 2015 magazine’s annual Xercise4Less with North Country secures £70 million Top Global 12 January 4 November 14 June Leisure (NCL), 2016 funding from Franchise list. Xercise4Less DW Sport purchases PureGym increasing the Business Growth 14 September secures a total of seven LA Fitness announces number of sites GLL 11 January Fund (BGF). PureGym announces £31 million in sites from PureGym. partnership with 6 July operates to over 250. David Lloyd Leisure Group training plans to float on funding as the Dutch Telematics is believed to have exercise programme the London Stock operator aims to 5 November business TomTom. agreed the sale and provider Les Exchange in October reach 100 sites by 29 May PureGym is reported leaseback of 44 of Mills announces 2016, raising an the end of 2016. PureGym acquires to be spending its clubs to M&G partnership with estimated 43 LA Fitness clubs £20 million on Investments for global technology £190 million. for an estimated renovating the 43 £350 million. company Polar. £80 million. LA Fitness sites it purchased earlier in 3 June the year. GLL secures the management contract for six leisure sites on behalf of Bath & North East 9 July Somerset Council. Water Babies Directors Steve 30 September 31 August Franks and Paul UK operator DW 15 March 15 April e Gym Group e Gym Group PureGym reports a ompson sign a Sports completes releases its pre-tax publishes its revenue increase £2 million contract its acquisition of 62 profit and a maiden Annual Report of 82%, reaching with Shenzhen L.M. Fitness First clubs. dividend, reporting 2015, showing £125 million as a Global Education revenues rising revenues up by 32% result of strong growth & Technology to 16 June 25.1% to £36.1 million to £60 million and and in anticipation of expand the brands 26 June énergie closes in the first six membership figures the company’s reach east into the Nuffield Health crowdfunding months of the year. publishes Annual 21 January rising to 376,000 expected IPO. campaign, having Chinese Market. PureGym launches 16 April Report and members. raised £629,300 an indoor cycling Virgin Active Accounts 2014, 22 April from 283 investors. 14 July studio ‘Pure Ride’ in is sold to South reporting earnings 9 November Snap Fitness David Lloyd e Gym Group collaboration with African investment reaching £81 million confirms it has 21 June Leisure announces completed its IPO on Olympic cyclist firm Brait for (EBITDA excluding signed a deal with Silverfleet partnership with the London Stock Chris Hoy. £682 million. exceptional items). MSG Life to develop Capital backs the Reebok Spartan Exchange with a 30 UK clubs. Lifetime Training’s Race UK, offering a valuation of around 3 August management free 14-day trial for £250 million. Spartan Race UK Phoenix Equity 4 May takeover of the contestants at their Partners announces Bannatyne Group company. 24 November local club. intention to float announces its profits PureGym report Anytime Fitness e Gym Group on have doubled and 22 June opens 3,000th site revenues of the London Stock that it is planning UK-based business in the UK town Exchange. to open 16 new Virgin Active of Stroud. Bannatyne Spas. announces plans to £125m invest £150 million Virgin in expanding its Active launch portfolio across Discovery Lab South East Asia.

14 15 e Rise of the Activity Sector Valuation of the UK private and public health and ﬁtness sector

Valuation of the UK private and 3 FINANCE VALUATION public health and ﬁtness sector

Total revenue based 2016 forecast: ukactive partnered with Mazars, a leading international advisory and accountancy organisation specialising in valuation 2015: valuations, and sponsorship experts Nielsen Sports in 2015 to calculate a 2015 valuation of the health and fitness sector. £7.5bn In 2016, Mazars suggested a set of valuation parameters, which were used by ukactive to estimate a 2016 total financial £6.4bn valuation forecast. Following the results of the EU referendum on 23 June 2016 there has been considerable economic and market uncertainty. It remains unclear what the impact the Brexit result will have on valuation parameters of businesses in general and in the sector in particular. erefore, no specific adjustments were made to Mazars’ valuation £3.7bn private parameters as a result of the vote. (£2.2bn multi-site clubs £4.4bn private and £1.5bn single site) Nielsen Sports supported ukactive in creating an estimated 2016 forecast for sponsorship value using increased annual growth rates for the private and public sector to project the 2015 valuation to an estimated 2016 figure. £2.7bn public ese processes are described in further detail in the methodology section of this report. (£1.4bn from Trusts, £323m £3.1bn public from Councils and £988m from Management Contractors)

TOTAL ESTIMATED e project produced a total estimated valuation figure of £6.6bn for 2015 and PRIVATE: e private sector provides millions of consumers PUBLIC: Local authorities provide communities with access to 1 VALUATION FIGURE an estimated forecast of £7.7bn for 2016. with the opportunity to participate in physical activity and sport sport and physical activity programmes, in part through funding programmes with little or no public funding. the provision of leisure centres, pools and gyms in their area 25. Much of this provision is increasingly run without subsidy from the state, although significant proportions of the sector are still operated with public support to underwrite provision to certain priority, under-represented groups or to support centres deemed 7.7bn to require subsidy to operate effectively. 6.6bn 6.5

5.5 5.5 Total brand sponsorship-based BRAND SPONSORSHIP valuation 2015 4.5 4.5 4 VALUATION 3.5 3.5 £152.6m 2.5 2.5 Brand sponsorship value is the sponsorship value that can be derived from available 1.5 1.5 assets that have the potential to be £100.3m private branded. At the most granular level it is (independents and multi-site clubs) 2015 2016 how much value a company could generate by selling tangible assets, such as branding £52.3m public their facilities, membership, classes etc. to (from Trusts, Councils and a sponsor. Management Contractors) SPORT ENGLAND’S It is not to be confused with brand value (equity) that recognises brand reputation 2 ECONOMIC VALUE OF SPORT: and association as an intangible asset. 2016 forecast: HEALTH CONTRIBUTION £11.2bn e sector has yet to realise its true value and potential by way of its sponsorship value. It entertains millions of customer £ 1 57. 5m In 2013, Sport England examined the economic value of the sport and visits per week, with immense consumer physical activity sector in England. It valued the health contribution at reach. is underutilised asset is reflected £103.4m private £11.2bn per annum. To generate this figure research was undertaken to in the contained valuation provided to it 26 value the healthcare costs saved and the total economic value . but is expected to grow significantly with £54.1m public greater commercial exploitation in the years ahead.

16 17 e Rise of the Activity Sector What is driving the growth in value?

What is driving the growth in value?

Economic value and growth is being driven by more than rising revenues. Growth in value is e digital also being driven by: New acquisition ways of customers providing an inexpensive and more eﬀective model to drive membership. to monetise the base beyond subscriptions, such as new product and concept development, personal training, branded clothing, 65+ and digital services. New pricing models including rolling contracts, product New consumers bundling and elastic pricing. such as older females and over 65s, entering the market.

Better industry approach to Further segmentation and segmentation customer insight in the market with clear consumer Value utilising Customer Relationship propositions, ranging from extreme engineering Management (CRM) systems and data low-cost, to budget, through to leading to better to increase motivation and create active mid-market and premium, club facilities for habits, thereby extending tenure and spread across the public, private less capital. and third sector. customer lifetime value. Social media and platform innovation bringing new consumers into the market.

18 19 e Rise of the Activity Sector Case studies

Deﬁning the physical Case studies

activity sector e following case studies show the variety of growth and investment opportunities available for the physical activity sector. ey include success stories from public and private Opportunities beyond health and ﬁtness. gym operators, ﬁtness equipment suppliers and franchisors.

Private and public health and ﬁtness operators form part of the wider physical activity sector, which is comprised of a variety of diﬀerent organisations, all contributing to the health and wellbeing of the nation.

PRIVATE SECTOR FACILITY OPERATORS (gyms and leisure facilities)

PUBLIC SECTOR FACILITY OPERATORS (gyms and leisure facilities)

VOCATIONAL TRAINERS (skills and qualiﬁcations)

SPORTING DELIVERY (including volunteer-led community sport provision)

EXERCISE EQUIPMENT SUPPLIERS

ACTIVE HOLIDAYS

ACTIVE TECHNOLOGY (such as wearable ﬁtness trackers and ﬁtness apps)

LIFESTYLE PROVIDERS

WORKPLACE HEALTH AND WELLBEING

ACTIVITY MERCHANDISE (such as branded clothing, water bottles and towels)

CHILDREN’S ACTIVITY PROVIDERS (in and outside of schools)

FITNESS STUDIOS

MASS PARTICIPATION EVENTS

OUTDOOR ACTIVITY PROVIDERS

CORPORATE SOCIAL RESPONSIBILITY-FUNDED PROGRAMMES

20 21 e Rise of the Activity Sector Case studies

Alliance Anytime Leisure Fitness

Case study £100m Case study 3,200 invested into over clubs open in 100 leisure facility 23 countries developments

lliance Leisure’s services are has to provide for, Alliance’s recent the leisure facilities, growing the nytime Fitness was founded in entrepreneurial opportunity as have been created, in addition to hundreds specifically designed to meet the developments have focused on providing market as a result. 2002 in Minneapolis, USA, and is well as the chance to support local of member interactions, including changing needs of the public sector, leisure operators with a wider range of now the world’s largest health club communities in “Getting to a Healthier comments and social shares. A Alliance is also supporting leisure A education and Leisure Trust market via leisure activities that are attractive to network with over 3,200 clubs open in 23 Place”. ese external investors bring operators with sales, marketing and Future ambitions two key divisions: Facility Development their local community and still provide countries and growing. Over 2.5 million with them a vast array of beneficial customer retention interventions and and Client Support. e company’s Facility a commercial return. members choose Anytime Fitness with a experiences from outside the sector, e company has plans for another training. e main delivery mechanism Development division helps design, new member joining every three minutes. and this experience, coupled with the 400 locations in the next five years, e indoor skate parks Alliance has for this support is through zero-risk, build and fund innovative, relevant and e convenience and affordability of its business’s franchise model, makes for a requiring £160 million of investment funds. developed attract 5–20-year-olds that income-share partnerships which only sustainable facilities that drive community product, for both franchise owners and hugely successful partnership. Its franchisees will provide approximately previously would have been restricted trigger payment to Alliance when pre- engagement, increase participation in a members, is just one of the many features 30% of this capital and 20% will be sourced to outdoor skate parks and the barriers agreed targets are surpassed. e success Anytime Fitness’s finance partners, changing physical activity environment which allow its business to thrive. through asset finance, leaving the balance of the British weather. Howe Bridge of this support mechanism is illustrated NatWest and HSBC, have significantly and drive income to create sustainable e company offers a business model of £80 million for the banks or other Leisure Centre generated over 2,000 visits by a new contract with Leeds City Council influenced and supported its UK outcomes. Meanwhile, its Client Support for franchise investors that allows for a investors to finance. From these numbers, (including over 800 skate park users) to its where a 20%+ increase in year-on-year growth and have developed a thorough division offers the complete sales, great work/life balance while providing it is key for the business to have this new family adventure zone in under membership sales has been achieved understanding of the business model marketing and retention solution to their communities with a convenient and continued investor support. four weeks. through staff training and effective and the needs of individual franchisees. empower Local Authority and Leisure affordable, 24-hour health club. marketing campaigns. NatWest has been working with the Anytime Fitness’s global success rate Trust staff to increase levels of income and e Summit at Selby, a £5.3 million leisure Since its first opening in the UK, in October business since 2010 and is providing over is over 96% and it is this statistic which improve customer service to their development that boasts first-class Future ambitions 2010, Anytime Fitness has seen its club £2 million of finance to franchisees. Its attracts so many new franchise investors. end consumers. facilities, including an aerial trek, indoor With a strong focus on physical activity network steadily increase, and it now has second finance partner, HSBC, has also With over 340 territories already sold, the skiing, adventure climbing wall, indoor Since it was started in 1998 the company and the direct health benefits this brings, 100 clubs trading across the UK and Ireland. been working with Anytime Fitness company is well on its way to its target of skate park, huge soft play area, new café has developed over 100 projects and Alliance Leisure will be working with In the past 12 months the company has from inception and has already lent 550 clubs open by 2020. Anytime Fitness is and an eight-lane bowling alley, has been invested over £100 million into leisure numerous local authorities to enable the opened 50 new clubs, with its franchisees over £10 million to around 60 franchisees, the fastest-growing franchise globally, and developed to increase participation while facility development. e Alliance mission costs of providing leisure and physical investing £0.5 million of total capital per with a similar value forecast in the very in the UK the business is playing a vital part bringing health benefits to community is to continually challenge the sector activity to be reduced as the protection club, for a total of £25 million investment near future. in the worldwide success. groups who previously would not have into looking at its facilities differently, of their non-statutory service is put at into the franchise system in this period. considered using their local municipal From a member engagement perspective, unlocking space that can be developed greater risk. Introducing new activity Its clubs employ around four members of leisure centre. Similarly, VerTigo indoor Anytime Fitness has been running its into new, innovative, activity areas that and play concepts will remain one of staff per club, creating over 200 new jobs, family climbing centres attract families #MyAnytimeStoryUK project. deliver on community engagement, and the company’s objectives, with plenty and over 400 since launch*. that may not otherwise be engaged in the is campaign is designed to capture increasing income. of innovative developments to come. traditional swimming, badminton and e rapid growth of Anytime Fitness member testimonials and build on is is supported through Alliance’s Alliance has recognised for a number of squash offering. Harlow Leisurezone’s has attracted over 170 UK franchisees to Anytime’s community ethos. Members income-share partnerships in which their years that developing fitness facilities that VertiGO climbing facility now attracts invest in its business model. e company can post their transformational stories client support team ensures business cater for just 14.3% of the UK population over 500 visitors per week during school attracts investors and owner–managers and directly engage with one another plan targets are met; income, health is not enough, particularly with the holidays. Meanwhile, a new toning suite at who have a passion for fitness and who on its microsite, supporting and praising and participation levels increase in the emergence of the low-cost gym facilities. Burnley Leisure gained 160 new members, generally come from outside the fitness each other’s achievements. Since launch local community; and employees see an With the growing health, wellbeing and with 65% of customers over 56 years old industry, bringing new talents into the in summer 2016, over 24,000 users have investment in their development through * ese figures do not include the jobs created in social objectives that the public sector and who previously would not have used sector as a result. Its franchisees see the visited the site and 50 individual stories training and coaching. the Anytime Fitness supplier/partner network.

22 23 e Rise of the Activity Sector Case studies

David Lloyd énergie Leisure Group

Case study 475,000 Case study £629,300 members across investment secured the UK and Europe from 283 investors

avid Lloyd Leisure (DLL) was founded managers and leading international nergie is the leading UK fitness low-cost market through Fit4Less, the company’s biggest investor, contributing in 1981 by former professional tennis asset advisers M&G Investments for the franchise business. Since its mid-market sector through énergie fitness, £100,000 towards the crowdfunding Dplayer David Lloyd. In 2007 the leaseback and sale of 44 of its UK racquet, éconception in 2003 énerige has grown and women-focused fitness through its initiative. company was sold by Whitbread Plc, which health and fitness clubs in January 2016. to operate trading fitness clubs in 93 fitness for women brand, the Group is Future ambitions acquired the business in 1996, to UK-based e majority of the funding was provided locations across five countries. Its ambition able to tap into three different market property company London & Regional by M&G Secured Income Property Fund, is to open around 30 new clubs a year. segments, building a family of brands that By 2023 énergie aims to have 582 clubs, Properties and Caird Capital LLP for an advised by M&G Real Estate31. e business At the core of the company is the notion appeals to a wide consumer base. e Group over 1 million members and a £172 million estimated £925 million27. has now invested over £80 million in that local ownership will ensure its gyms has also found innovative ways to engage network turnover38. is may seem an renovating and improving its 77 UK clubs, are tailored to the needs of the community new customers, such as partnering with ambitious target but the organisation’s In 2013 London & Regional Properties sold and it has opened three new clubs this and local customers. e physical activity Paramount Pictures to promote their films franchisee model has already led to rapid the business to leading private equity year in Antwerp (Belgium), Newbury sector offers an appealing alternative to Terminator Genisys and Hercules, and growth and proven its scalability, with a firm TDR Capital for an estimated £750 and Glasgow, with a fourth opening in fast-food franchise investment following more recently with Warner Bros. Pictures’ further 31 franchisees set to open in 2016 on million28. at was the largest transaction Colchester in October32. the government’s call to action on obesity Creed, starring Sylvester Stallone. top of its current 93 clubs. e company’s in the health and fitness sector in that year. in the UK. rough providing an attractive partnership with Hedgehog Business Following the acquisition, the company In August 2016 the business announced is year énergie listed itself on franchise investment opportunity, énergie Solution shows its willingness to innovate reported an annual turnover of £253 million the launch of a new £4 million marketing Crowdcube, a leading investment and its master licensees secured 36 new and embrace technology to improve the for the year ending December 201429. campaign “COME TO LIFE” to relaunch crowdfunding platform, with the aim of franchise contracts in the financial year customer experience, a strategy which will the brand, which included David Lloyd raising £500,000 investment to further Today it is Europe’s largest operator of ending September 201535. be essential for the growth of companies Leisure’s first ever TV ad. Filmed at its club fuel the company’s growth. Alongside premium racquet, health and fitness clubs, across the sector. e company is also in Chigwell, Essex, the campaign illustrates e Group’s three brands – énergie expanding énergie’s franchisee network, operating 83 sites across the UK and 11 looking at potentially expanding its reach both the breadth of facilities on offer at the fitness, fitness for women and Fit4less the funding will also enable énergie to in Europe, with over 6,000 employees to the Middle East and the Far East. clubs and the brand’s investment in making by énergie – have won multiple awards invest in technological innovation and the servicing around 475,000 members30. its clubs the go-to place for members to across the fitness and franchising development of a new training academy. énergie has suggested that its plans for e business delivers a high-end, family, come together to keep fit, have fun and sector, including ukactive Flame Awards It closed its crowdfunding round in June growth could include an IPO, with the inclusive service to its members, providing relax with family and friends. Health Club Operator of the Year 2016, a 2016, exceeding its target of £500,000 by company having completed much of the over 10,000 fitness classes each week number of regional awards at the Health securing a reported £629,300 from 283 due diligence in 2012 when it considered e company has also entered into a in around 90 studios and teaching more Club Management Member’s Choice investors36. Investors received 4.03% floating on the stock exchange. Alternative number of high-profile partnerships, than 12,500 children tennis as part of its Awards 2014 and shortlisted in the “Best equity in the company, which is currently options could be private equity funding or including Jaguar, Zoggs, Ricoh, Universal Tennis All Stars coaching programme. Website” category at the British Franchise valued at around £15 million37. British through trade sales39. Music UK and, more recently, Reebok e company also operates a number of Association Awards 2016. By serving the entrepreneur Lara Morgan was the Spartan Race UK in July 2016 and British sub-brands including DL Kids, DL Studios skin care and spa brand Elemis33 in and the DLicious Cafebar. It now has five August 201634. David Lloyd Studios in the UK, providing members with a “pay-as-you-go” service Future ambitions entitling them to high-intensity studio David Lloyd Leisure is expected to maintain workouts, personal training sessions and its impressive growth, reaching 94 clubs Orangetheory fitness training. by the end of 2016 with ambitious plans for David Lloyd Leisure secured a £350 million growth over the next two years. contract with expert UK investment

24 25 e Rise of the Activity Sector Case studies

Greenwich Nuﬃeld Leisure Limited Health

Case study £225m Case study £100m turnover in 2015 investment into its facilities in 2015

rom humble beginnings in 1993, e company has sustained rapid growth Olympic Park in east London. is was uffield Health is one of the leading while revenue increased to £768 million), More recently the company partnered Greenwich Leisure Limited (GLL) over the past few years, culminating developed to support talented athletes not-for-profit UK healthcare it does not rest on its laurels – Nuffield with the University College London Fhas successfully grown its portfolio in its decision in 2013 to raise capital by reach their athletic potential through skills Norganisations, delivering connected Health’s recent acquisition of 35 Virgin (UCL) Faculty of Engineering to explore from a single site in Greenwich, south- issuing a social impact bond, promoted development and training. Since 2008 the health and wellbeing services. Established Active clubs on 1 August 2016 expands its and understand economic benefits of east London, to more than 230 leisure, by banking partners Triodos Bank NV, GLL Sport Foundation has awarded over in 1957, it has a long-standing reputation as portfolio of fitness and wellbeing gyms connected healthcare. is information sports and cultural facilities. As a social offering investors a fixed gross return £6.1 million in athlete award bursaries, a leader in the health and wellbeing market from 77 to 11246, which suggests it has no will ultimately be used to inform the enterprise the company “trades with a of 5% per annum and the chance to help supporting emerging talent and preparing and, unlike other companies, Nuffield intention of doing so. In 2015 Nuffield Health delivery and development of integrated social purpose”, employing a workforce contribute to the company’s charitable young athletes to compete on national and Health does not have shareholders so it invested almost £100 million in its facilities, healthcare programmes and services. of over 10,000 people and generating a mission. e company’s innovative choice international stages. In 2016 seven athletes can reinvest profits back into front-line including a new Cambridge Hospital e company has an existing partnership turnover of around £225 million40 in 201541. to raise investment through a social impact supported by the GLL Sport Foundation member and patient services. and Manchester Diagnostic Suite, and it with Manchester Metropolitan University, e company has successfully created a bond aligned with its status as a social programme came home with a medal from acquired two central London gyms. with which it plans to conduct research into Nuffield Health aims to “advance, promote strong, federated regional network enterprise and its mantra of existing to the Rio 2016 Olympics43. the prevention of lifestyle disease and the and maintain health and healthcare of all Nuffield Health has also undergone an while keeping the local community at the benefit the community through providing management of chronic diseases as well as Future ambitions descriptions, and to prevent, relieve and internal restructure to bring together heart of its service delivery and staffing. quality leisure and fitness opportunities emotional health and wellbeing. cure sickness and ill health of any kind, its hospital and wellbeing functions In 2015 GLL received over 40 million visits for all. It has also helped restore one of In late 2016 GLL will merge its operations all for the public benefit”45. e company under a single Operating Board to further Future ambitions to its facilities. London’s historic lidos, Charlton Lido in the with 16 North Country Leisure (NCL) provides access to thousands of health streamline its processes and create a Royal Borough of Greenwich. venues, bringing NCL facilities entirely Nuffield Health aims to be the UK’s leading Operating under the brand name “Better”, experts through 31 hospitals, 112 fitness greater sense of unity47. is restructuring under the “Better” brand44 and increasing health and wellbeing provider48 by 2020. it is the UK’s largest provider of public By December 2013 the company reached and wellbeing gyms, 212 corporate fitness has enabled the organisation to reduce the number of sites operated by GLL to over e not-for-profit’s acquisition of the 35 leisure, working with 40 local authorities its social investment bond target of £5 and wellbeing centres and four stand- company overheads by £2 million 250. e merger will enable future growth Virgin Active clubs has already taken it and public organisations. e Better million, receiving support from over 300 alone medical centres. In addition to gyms per annum. and presence of the company across the closer to this ambition. In 2016 Nuffield Swim School is also the largest provider individual investors and a number of and hospitals, Nuffield Health’s broad North as well as improve facility services Nuffield Health’s growth momentum Health received planning permission to of swimming lessons in the UK, with 116 established institutional investors such health and wellbeing services also include and programmes. GLL also has plans to could also be attributed to its numerous build a new hospital next to Manchester pools serving 100,000 members across 100 as the Rathbone Ethical Bond Fund, City health assessments, nutritional therapy, fully merge with its other subsidiaries, technology, innovation and research Royal Infirmary, which is due to open locations. Despite Sport England reporting of London Corporation Social Investment occupational health, diagnostics and Tone Leisure Group Limited and Carlisle partnerships. In 2015 Microsoft announced in 2018. Nuffield Health has also been a general decline in the number of people Fund and the Bank Workers Charity. physiotherapy – and Nuffield Health has Leisure Limited, in 2016. Nuffield Health as its health and wellbeing announced as the preferred bidder to swimming once a week42, GLL’s Better e minimum investment was £2,000 or the largest network of physiotherapists partner for the launch of the company’s design, build, fund and operate a private Swim Schools have seen a rise of 28% in £200 for GLL employees. is enabled GLL GLL aims to continue to grow its portfolio outside of the NHS. latest fitness tracker, Microsoft Band. patients unit at St Bartholomew’s Hospital. swimming participation since 2012. to continue its development of the London through developing and running “stand- Nuffield Health prides itself on offering Nuffield Health collaborated with Microsoft is, alongside the company’s structural 2012 Olympic legacy venues e Copper alone” facilities as well as leveraging Following its merger with Nexus a holistic and connected health and to offer customers goal-based workouts and reporting modifications, will allow Box Arena and e London Aquatics Centre, its expertise in securing new council Community in 2011, with whom the wellbeing service to customers. Its vision tailored for the Microsoft Band. Later that Nuffield Health to successfully compete in a and deliver on its mission to encourage the partnerships, such as its recent Lincoln company had been working in of a “One Nuffield Health” complete health year Nuffield Health partnered with one of changing health landscape, characterised surrounding communities to take part in Libraries Contract. partnership since 1996, the company’s approach drives company innovation, the UK’s biggest mass participation events by an ageing population that is putting physical activity and sport. geographic reach now extends far ensuring that despite its great financial companies, Human Race, for a two-year huge resourcing pressure on the NHS. beyond the south-east to include Belfast, GLL’s Sport Foundation is now housed in successes (EBITDA rose to an impressive partnership offering health and wellbeing Manchester, Carlisle, York and Cardiff. e Copper Box Arena at Queen Elizabeth £86 million in 2015, a 17% increase on 2013, support to race participants.

26 27 e Rise of the Activity Sector Case studies

Oxygen Places for People Freejumping Leisure

Case study £8m Case study 64,000 investment from swimming lessons Beechbrook Capital for children each week £2m equity investment

xygen Freejumping was established launch across two parks, West Acton and e most recent expansion has been ounded in 1991, Places for People As a social enterprise, Places for People Places for People Leisure spent £7.7 million in 2015 by former ukactive CEO Southampton. Oxygen’s model is distinct supported by Beechbrook Capital, a Leisure (formerly known as DC Leisure reinvests its surpluses back on improving facilities and equipment in ODavid Stalker and former LA Fitness from its competitors. It combines high specialist provider of debt and equity FLeisure) is a leading management into the organisation to further its social the last year, providing new innovative Founder and CEO, and ukactive Chair Fred quality fit-out, including professional- capital to small- and medium-sized contractor that operates 115 leisure facilities purpose of “creating active places and and sophisticated centres to increase Turok. It provides an innovative way to get level trampolining equipment (with each business in Northern and Western Europe, in 35 local authorities throughout England. healthy people”54. e business delivers participation in physical activity. fit while having fun through trampoline- site’s fit-out and build costing around £1.5 which contributed £8 million alongside a It is the leisure management arm of Places a wide range of programmes to improve In particular, Places for People Leisure based exercise classes. million), with a diverse range of classes for £2 million equity investment. Managing for People Group – which also provides the health and wellbeing of a significant has invested £2.7 million in works to date all ages and demographics. e company’s Director of Beechbrook’s UK SME Fund, property management, development and number of local residents around the within its leisure management contract Indoor trampolining and “jumping gyms” wide range of products, partnerships and John Herbert, referred to Oxygen as “a regeneration – offering local authorities country. Recently the business entered the with Mid Sussex District Council. Since have been a fast-growing attraction in programming provide a balanced revenue fantastic example of the type of business the chance to help improve the health and low-cost gym sector through launching the works were completed in October 2014 the USA over the past few years, with the model, profitable in both peak and off-peak we are looking to support thanks to the wellbeing of the local population while community gym brand “Places Gym”, there has been a 43% increase in members, International Trampolining Association times. Activities stretch from birthday strength of the management team, the reducing revenue costs. With 30 million expanding its potential market reach and and from 2014–15 admissions have identifying almost 500 parks – or those parties and boutique fitness classes to quality of the Oxygen offering and the visits annually and 200,000 members, furthering its social purpose of getting increased by 23%. A further £1.9 million close to opening – across the USA, Parkour and professional gymnastics. performance of the business to date”51. the business employs nearly 9,000 people more people to be more active. will be invested by Places for People with a further 80 in Australia49. and provides swimming lessons to 64,000 Leisure in 2016, along with £1.2 million Additionally, there are now 119 parks either Just over a year after opening its first site in Future ambitions Over the past decade Places for People children each week52. from Mid Sussex District Council to open or under construction in the UK, West Acton, the business is set to become Leisure has continued to grow, building e company aims to lead the sector and enhance the current facilities and which marks a rapid growth since the first the UK’s largest trampoline park operator. Places for People Leisure reported strong 12 new leisure centres, with two more due grow to 30 sites by the later stages of increase participation even further. park launched in May 2014. Bryony Page’s e company has signed eight sites, five of performance in 2015–16, with income to open in 2016 and 2017, equating to over 2018. Despite being a fledgling market, historic silver medal win for Great Britain at which are open and trading. In January the increasing across existing contracts by £140 million of investment by its local Future ambitions competition for sites is stiff; but having the Rio 2016 Olympics will no doubt provide company announced a landmark multi-site 3.1% over the year and Earnings Before authority partners and £10 million by signed eight sites, Oxygen shows no Places for People Leisure’s ongoing a further “shot in the arm” for the sector agreement with Lucozade Powerleague50, Interest and Tax (EBIT) increasing in the Places for People Leisure. In February 2014 signs of slowing down, with both portfolio objectives are to increase participation and have a positive effect on the number of swiftly followed by the acquisition of sites same contracts by 5.2%. e business Places for People Leisure was awarded a expansion and new products soon to come at its facilities while continuing to pursue people participating in the sport in the UK. at the Leeds Cardigan Fields Leisure Park also managed to secure two new 10-year 20-year contract to design, build, operate to market that fundamentally change the its health and wellbeing strategy and and Croydon Colonnades, and finally an contracts for Dartford and Sheffield City and maintain the new Hinckley Leisure From the beginning the company’s vision existing trampoline park model. improve products and services. It aims to agreement with Virgin Active to transform Council and four contract extensions Centre on behalf of Hinckley and Bosworth was popular with investors. In its initial continue its steady growth, recognising the former Sheffield Millhouse. ¬– an impressive achievement in such Borough Council. As part of the contract, fundraising stage, the company raised the recent government sports strategy a highly competitive market. In 2016 Places for People Leisure managed the old over £2.5 million to support Oxygen’s Sporting Future, which launched in the organisation was the only operator Hinckley Leisure Centre from September December 2015 and aims to work with its nationally to receive a Quest Stretch 2014 until the new £15 million Hinckley network of strategic partners to obtain “outstanding” for Sports Development Leisure Centre opened in June 2016, during further funding and enhance sporting by the UK Quality Scheme for Sport and which time participation significantly opportunities for all members of the Leisure (Quest) and was ukactive’s increased from 650,000 to 880,000 – an communities it serves. Leisure Centre Operator of the Year increase of 35%. from 2013–201553.

28 29 e Rise of the Activity Sector Case studies

Precor PureGym

Case study Part of the Case study 800,000 €2.5bn members Amer Sports Corporation 9th fastest growing business

recor is a global provider of fitness e company has been involved in various the latest Elliptical Crosstrainer from the ureGym is the UK’s largest gym affordable fitness centres to people across PureGym was also rated as one of the equipment, guided for over 35 years projects and joined into new partnerships company that first introduced the category operator providing low-cost and Britain, particularly in London Sunday Times’ 100 Best Companies to Pby the simple and enduring principle with customers and franchisees across to the world in 1995. Networked fitness will Phigh-quality fitness facilities for and the south-east. work for in 2016 and was named as the of enhancing the member experience. the UK. is includes working with continue to be a growing part of the Precor around 800,000 members across more ninth fastest-growing business by the As part of its stated ongoing growth Precor has a strong reputation for providing renowned private operator Virgin Active, business and will be further developed with than 160 sites. A focus on member needs Sunday Times’ Virgin Fast Track 100 in strategy, in 2015 PureGym also class-leading, premium fitness solutions which currently owns 273 health clubs the imminent release of the P62 console and a technology-enabled operating model December 201559. e company was also rebranded all clubs, launched its first and is part of the €2.5 billion Amer Sports in 10 countries. e group prides itself on across Precor’s CV range. Precor’s Preva underpin the company’s differentiated listed in the London Stock Exchange’s Top TV advertising campaign and agreed to Corporation – the world-leading sports its innovation and, as such, kits its gym operating system has the capabilities to customer offer. Members sign up online 100 Companies to Inspire Europe 2016, a a three-year partnership with e Great equipment company. floors with the newest and best products offer a customisable user interface called and pay on average under £20 a month celebration of some of the fastest-growing Run Company, a leading provider of mass available. is includes Queenax, which MyUI™. In the future, operators will be able with no contract commitment, and the and most dynamic small- and medium- Founded in 1980 in Seattle, Washington, participation running events in the UK, now features in more than 100 Virgin Active to benefit from this feature by integrating majority of gyms are open 24 hours a day, sized enterprises in the UK and Europe. Precor has developed a reputation for becoming an official sponsor of events clubs worldwide. Virgin Active recently their own brand messaging throughout the seven days a week, 365 days a year. e premium quality, excellence and innovation. that have over 250,000 participants Future ambitions refurbished its Wandsworth Southside user interface. company has invested to deliver a better Among many other achievements, in 1995 annually56. e same year, Sir Chris Hoy, club in London and opened the brand user experience, offering 50–80 free PureGym operates in a growing Precor changed the face of aerobic exercise six-time Olympic champion, invested in new Collection Club Merchant Square personal trainer-led classes every week, market, with low-cost being the fastest- by introducing the world to the first Elliptical PureGym and became a Special Adviser in Paddington, both featuring Queenax high-quality equipment and extensive free growing segment in the gym sector. Fitness Crosstrainer. In 2007 Precor and Brand Ambassador. rigs, bringing the total of UK Virgin Active weights areas. PureGym has stated it will continue to replicated this landmark achievement by installations to 28 clubs. In 2016 PureGym launched Pure Ride, execute on its growth strategy while launching the world’s first Adaptive Motion Originally founded in Leeds in 2009 by a boutique indoor cycling studio in adhering to its founding vision: to combine Trainer (AMT), and in 2011 the company In addition to Virgin Active, Precor works Peter Roberts, PureGym pioneered the Moorgate57, and announced partnerships great value and high-quality sites to launched the next generation of CV with the world’s largest 24-hour fitness model for affordable, flexible, high-quality with AXA PPP Healthcare, O2, TomTom, further open up access to fitness and equipment – the Experience Series – before club chain, Anytime Fitness, which recently fitness clubs in the UK. e company triSUP and UK Running Events. activity to the British public. releasing Preva networked fitness and the opened a new club in Knutsford. e club is received initial capital in a funding round new AMT with Open Stride. the first Anytime Fitness in the UK to install led by Magenta Partners in 2010 before In financial results for the 12 months to In September 2016 PureGym announced a Queenax functional training system. being acquired by private equity firm 31 December 2015, PureGym reported its intention to float on the London Stock Precor has continued to grow further is site showcases a corner Queenax unit CCMP Capital in 2013, which remains the good revenue growth and a 63% increase in Exchange with admission expected in with the acquisition in 2015 of Queenax, and Precor cardio stations, including an majority shareholder55. membership numbers, strengthening its October 2016. e share offer is expected the world’s most unique, modular, AMT with Open Stride, all connected with position as market leader. at strong set of to raise gross primary proceeds of £190 functional training system. As a pioneer In early 2015 the company appointed Preva networked fitness, along with Precor results led to the company being awarded million60. Funds raised are expected to in the functional strength training space, Humphrey Cobbold as CEO to further boost Vitality series strength equipment and an Operator of the Year at the 2015 ukactive repay existing bank debt in full, with Queenax has earned a reputation as the its growth trajectory. He was formerly Icarian machine. Flame Awards. e company’s performance the remainder being used to reduce most flexible, functional training space CEO of online cycling retailer Wiggle, in H1 2016 was also impressive, generating net leverage and for further growth. sets and systems available in the market. Future ambitions following a 15-year career at management revenue of £76.6 million (+ 51% increase, Rothschild is acting as advisers to the e demand for versatile training options consultancy firm McKinsey & Company. Precor will continue to invest in research year on year) and a Group Adjusted company on the IPO. has increased over the past few years and Later in the year, PureGym acquired 43 LA and development of new products. 2017 EBITDA of £16.5 million (+23% increase, Queenax holds a global leadership position Fitness sites, extending the availability of will see the UK launch of the new EFX, year on year)58. for functional training.

30 31 e Rise of the Activity Sector Case studies

Sport England Technogym

Case study £258m Case study 2000 invested in employees in 2,867 projects 14 branches globally

port England, formerly known as the inward investment into local and regional outcomes, with 20% channelled into testing ounded in 1983, Technogym is a 40% stake in the company. e company’s English Sports Council, is a non- infrastructure. From 2012–16 Sport England and developing new concepts64. world-leading international supplier founder Nerio Alessandri holds the departmental government body invested £258 million in 2,867 projects, of technology and design-driven remaining 60%. S Future ambitions F providing funding and services to sport with multiple local authority facilities products and services in the wellness and More recently, in June 2016, the company in England. Following the government achieving a 30% reduction in capital build Sport England plans to continue to fitness industry. Technogym provides a announced a partnership with the National publishing a new sport strategy, Sporting cost and a 40% improvement in efficiency collaborate with the industry to provide complete range of cardio, strength and Strength and Conditioning Association Future, in 2016, Sport England released its averaging around £750,000. e combined high-quality sports facilities across functional equipment alongside a digital, (NSCA). e NSCA, an international body new strategy, Towards an Active Nation, throughput in the first full year of operation England and to develop a Community Asset cloud-based platform allowing consumers for strength and conditioning research and which focuses on how best to direct for completed capital projects was Fund providing facilities the chance to to connect with their personal wellness education based in Colorado, will be working taxpayer funding into sport across the 19.5 million visits. apply for up to £150,000 of funding. experience anywhere, both on the with Technogym to create educational country. As part of this strategy, Sport equipment and via mobile when outdoors. In 2013, Sport England set aside content for professionals and Technogym’s England committed funding for seven Over the next four years, Sport England With over 2,000 employees and 14 branches £30 million of Lottery Funding for its customers65. is type of partnership is a investment programmes, including capital also plans to invest £18 million annually globally, Technogym is present in over Strategic Facilities Fund (2013–17) which first for the fitness industry. investment in facilities61. in football facilities as part of the Parklife 100 countries. More than 65,000 wellness supports collaborative and cross-sector project, which aims to develop football centres and 200,000 private homes in Future ambitions Sport England recognises that facilities are projects that aim to grow and maintain hubs in over 20 cities across the nation. the world are equipped with Technogym. a fundamental part of community sport community sport participation. To ensure Technogym was the official supplier for Technogym aims to be the world’s leading infrastructure and that local authorities are sustainability beyond the fund closing six editions of the Olympic Games: Sydney wellness solution provider and wellness currently facing a great amount of financial in 2017, they encourage candidates and 2000, Athens 2004, Turin 2006, Beijing 2008, partner, providing “wellness on the go” to pressure to reduce costs while providing associates to inject further capital63. London 2012 and Rio 2016. consumers worldwide. a range of good quality public services. Alongside its investment, Sport England Since 2011, Sport England has invested in In May 2016 the company floated on the e company’s new partnership in offers support services, such as strategic refurbishing facilities using local consumer Italian Stock Exchange at €3.25 per share, April 2016 with Exerp, a Denmark-based, analysis, capital build and cost-effective insight in order to increase participation in giving the company a value of €650 global, digital expert in fitness club solutions, procurement, benchmarking, activity programmes in the places where million. Goldman Sachs, JP Morgan, and member management software, shows its community asset transfer, frameworks the majority of activity occurs. In addition, Mediobanca were all appointed as advisers commitment to using (digital) innovation and catalogues, and contract guidance as part of its legacy programme for London on the offering. e decision supports to strengthen its increasing profitability on delivering increased participation 66 2012, the company spent over £112 million the company’s strategy to continue its and market presence . Previous examples and impacting on wider local outcomes. in over 2,000 facilities through its Inspired international growth, taking advantage of include Technogym’s creative concept is ensures facilities meet the needs of Facilities programme62. the rise of consumer interest in health and MyRun, a running solution that provides consumers and that communities have wellbeing. As of September 2016, shares personalised programmes and feedback Sport England capital investment strategy access to high-quality sports facilities were being offered at €4.30 per share, a 32% on running technique, and Group Cycle, a focuses on four key investment areas: while providing steady revenue. increase. e 57.5 million shares offered to training programme that enables users improving and protecting playing fields, to record and compare their performance Sport England also fosters innovation by investors account for 28.75% of the total sustaining the core market, rejuvenating against other users67. managing its portfolio on the principle capital of the company. e shares were facilities where high impact on activity that 80% of investments should deliver all sold by Arle Capital Partners, who owned a levels is projected, and encouraging

32 33 e Rise of the Activity Sector Case studies

e Gym Group Water Babies

Case study 424,000 Case study 47,000 gym members customers of swimming lessons a week

ince establishing its first site in 2008, hour concept and acquired four additional 424,000, up 19.4% on the previous pportunities for investment in “HSBC Franchisor of the Year” 2016 award (IoS), which since 2011 have collaborated e Gym Group’s (e Gym) portfolio sites. All gyms were located in densely year’s half-year update73. the physical activity sector are – defeating global leading fast-food chain with Water Babies to promote the safe has grown to 80 gyms (as of 24 August populated areas with strong transportation not simply limited to the major McDonald’s. Research conducted in 2014 delivery of infant and toddler swim lessons. S 68 e company has benefitted from a number O 2016) with over 424,000 members (as of links. ese clubs were financially operators of facilities or the global suppliers found that franchising contributes an In October 2015 the ASA, Water Babies and of high-profile partnerships, including 30 June 2016). In November 2015, e Gym successful, providing the confidence of fitness equipment. Exciting opportunities estimated £15.1 billion to the UK economy, Splash About International Ltd launched collaborating with Sport England on became the first gym in over a decade to needed to push forward with the opening exist in companies that literally work from a 10% increase on the previous year’s new national guidelines, published by the their successful “is Girl Can” campaign float on the London Stock Exchange (LSE). of a further 30 gyms across the UK over the cradle to the prevention of early entrance estimate, evidencing the franchise British Standards Institution, to keep babies by offering free access to 42 sites for a e Group Gym successfully completed its next four years70. to the grave. industry’s continued strong growth and safe in swimming pools78. is represented weekend in early October 201574. initial public offering (IPO) with a valuation wealth generation77. a significant milestone in ensuring best Phoenix Equity Partners, a mid-market e campaign was repeated in 2016, with One such example is Water Babies, a leading of around £250 million (a 17x multiple practice across the sector. Water Babies private equity firm, acquired a majority all gym’s participating and offering free UK franchisor providing high-quality infant In July 2016 the company’s Directors on the 2014 EBITDA), and the company has also partnered with the University of share of e Gym in June 2013 and has access to more than 10,000 women and toddler swimming lessons since 2002. Steve Franks and Paul ompson signed received £90 million of gross proceeds from Manchester to conduct research examining guided the business’s substantial growth across the UK. Since then the company has become the a £2 million contact with Shenzhen L.M. the offer69. e IPO opens access to equity the physical and psychological impact of ever since. By the end of 2015, e Gym world’s largest infant swimming business, Global Education & Technology to expand capital, enabling the company to continue Future ambitions swimming lessons on families, infants had increased its revenue by 31.9% to £60 operating franchises providing swimming the brand’s reach east into the Chinese its growth strategy. e Gym is currently and parents. million (up from £45.5 million in 2014) and lessons in the UK, Ireland, New Zealand, Market. Shenzhen, the Master Franchisors the only listed gym company on the LSE. e Gym is still a relatively young had opened 19 more gyms71. Today e company, just under 10 years old, and will Canada and the Netherlands to over 47,000 for China, opened its first franchise to Future ambitions e Gym offers affordable, 24-hour access Gym operates 80 gyms across the UK in have many opportunities to continue its customers a week through around 350 the public in Xi’an, the capital of Shaanxi Shenzhen plans to open more centres to high-quality fitness facilities without a variety of settings from retail parks to growth in the coming years, enhancing teachers76. It is part of e Bubble Group, Province in central China. China’s recent in Xi’an, while other groups have been tying members into a long-term contract. residential developments, and, moving customer’s wellbeing whilst generating comprising of Water Babies UK, Water relaxation of the one-child policy and registering their interest in expanding the e Gym is part of a growing budget gym forward into the mid-term, ambitions are value for shareholders. Babies International, WaterBumps and the cultural importance it places on child brand’s reach across China. e company sector which, over the past decade, has to open 15–20 new gyms per year. the Doodle Training Academy. e Doodle development in the country have provided also has plans to expand in Europe, looking challenged mid-market operators, forcing e Gym released its full, first-half results Training Academy, the group’s training arm, Water Babies with a fantastic opportunity Since its IPO in November 2015 e Gym’s to build Water Babies-owned premises and established brands to re-evaluate their at the end of August 2016, reporting a rise in provides high-quality training for swim to help shape the health and fitness sector value has increased to more than £260 providing ownership of the design, build and offering in order to survive in a highly revenue to £36.1 million in the six months teachers and awards them with a nationally in the world’s most populated country, million, sustaining its strong trading fit-out of sites. competitive market. to the end of June 2016. is represents a recognised diploma; WaterBumps provides while showing the UK is a global leader in a momentum and outperforming the FTSE 25.1% increase from the same period last in swimming lessons tailored for the pre- and growing and crucial market. One year after opening its first gym in All-Share Index with shares increasing 75 the previous year (H1 2015: £8.5 million) . post-natal market. Hounslow in 2008, Founder John Treharne, more than 20%72. e company’s trading Water Babies’ partnerships include the with the backing of Bridges Ventures LLP, update released for the half year, ending 30 e company has won multiple awards, ASA, the National Governing Body for tested the scalability of the low-cost, 24- June 2016, reported a membership base of including the British Franchise Association Swimming and the Institute of Swimming

34 35 e Rise of the Activity Sector Fostering innovation

Xercise4Less Fostering innovation: ActiveLab by ukactive

Case study

£21.9m ukactive wants to improve the health of the generated in nation by fostering an innovation climate in the health and physical activity sector. sales in 2015

K businesses are creating new e first cohort of ActiveLab entrants will products and services to help more enlist in October 2016 and will work with Upeople be more active, more often ukactive, a range of mentors and leading and to improve customer experience in companies from across the sector to the physical activity sector. ukactive is develop products or services that support in the privileged position of gaining early the national effort to improve the health sight of many of them. It is able to match of the nation. ey will also have access to these opportunities with rapid distribution, a wide range of successful entrepreneurs enabling concepts to scale at pace. who helped build the health and fitness ukactive is also able to draw on 26 years sector to where it is today. e first wave of history, including access to many of the of companies selected will seek to solve ounded in 2006 by former rugby player the year leading up to July 2015, up from £12 Future ambitions entrepreneurs and drivers of the sector’s “Generation Inactive” by helping children Jon Wright, Xercise4Less is one of the million the previous year and representing growth to date. ese entrepreneurs and families become more active. ey will Xercise4Less believes that profitable, UK’s leading low-cost gym operators. a three-year annual sales growth of 99%. remain committed to supporting the seek to “turn the tide of physical inactivity” F sustainable, organic growth occurs most Headquartered in Leeds, the business is It also featured at number 17 in the Sunday ukactive mission, developing innovation by motivating the least active in society often when customers and employees enjoy now expanding its reach across the UK, Times’ Fast Track 100, a league table that in the sector and driving future to get moving; help realise the “latent their business relationship with a company operating 55 gyms79 across the north of ranks private British businesses based on commercial opportunities. value of leisure” by creating solutions and willingly sing its praises to friends, England, the Midlands, Scotland, Wales and sales over the previous three years80. that help to reimagine existing assets neighbours and colleagues. As a result, the As a result, ukactive brings these assets the South West. In 2015 the business opened and facilities in a way that helps them to e company’s growth strategy has been company has invested a great amount of together from October 2016 through its first gym inside the M25 in Hounslow, be more operationally efficient or reach supported by the Business Growth Fund time, energy and money into reminding its ActiveLab Service, an innovation with additional sites planned in London and new audiences; or they will support the (BGF), an independent company supporting themselves and employees of the values programme to support the next wave of the South East. Xerise4Less is expected to “digital transformation” of the sector by the growth of British businesses through that brought it success at the start of 2016 exciting products, technology and continue its momentous growth by opening bringing forward businesses that enhance providing long-term growth capital. In and into maintaining the standards that services to develop, grow and reach an additional 15 to 20 gyms in the UK in the customer experience in the physical August 2013 BGF invested an initial £5 have bought it success so far. their intended audiences. 2016 and 2017. activity sector. million in Xercise4Less, alongside a further Xercise4Less plans to operate 100 sites by ActiveLab, powered by ukactive, is the Alongside access to a gym from as little as £2 million capital investment in May 2014 e programme will culminate in the first 2017, creating an expected 4,000 new jobs83. global launch pad of innovation in the £9.99 a month, the business offers members and a further £7.6 million to date – taking ActiveLab innovation event in March 2017 81 is will strengthen the business’s position business of physical activity. over 200 free classes each month, including BGF’s total investment to £19.7 million . which will bring together our members with as a major player in the low-cost gym sector Les Mills Body Pump, spinning, yoga, Zumba Such a sizeable investment reflects the high-profile speakers and influencers from and enable it to continue to successfully ActiveLab will raise the profile of innovation and circuit training, and a separate women- increasing investor interest in the budget the physical activity and innovation sectors disrupt the market. in the sector by connecting the best of new only area. To promote physical activity from gym sector as the UK private fitness market products, technology and services with our and partners. ActiveLab companies will 82 a young age and develop physical literacy continues to grow year on year . members, partners and stakeholders. also have the opportunity to showcase their in children, Xercise4kids, a sub-brand of BGF holds a minority stake in the It will provide an ecosystem of expertise products and services at the event and Xercise4Less, provides free membership company, with investor Richard Taylor and bespoke support, with ukactive take part in a series of live pitches. for 3–5-year-olds when accompanied by a sitting on Xercise4Less’s Board. members and private and public sector ActiveLab will create a permanent net parent or guardian. Funding from the BGF is expected to partners coming together to deliver an work of high-potential ventures, industry enable the business to push forward with advisers and interested investors and e business has continued to grow from acceleration programme for ActiveLab its ambitious five-year expansion plan to foster a global hotbed of innovation in strength to strength over the past few companies and ongoing support for open around 50 new gyms across the UK. the physical sector. years, generating sales of £21.9 million in ActiveLab alumni.

36 37 e Rise of the Activity Sector Glossary

Looking Glossary forward

Boutique fitness studios Merger ese are small, independent fitness An agreement to unify two studios that specialise in offering a existing organisations into a single particular fitness experience such as new company. Mergers and acquisitions spinning, yoga, Pilates or dance. are frequently done to increase a company’s market share or reach or Chief Medical Officer’s physical to allow the business to successfully activity guidelines develop into new areas of the market. e Chief Medical Officer recommends his year has been incredibly positive equipment, fitness apps allow users to track 75 minutes of vigorous physical activity, Private operator for the physical activity sector. their steps and monitor their heart rate at 150 minutes of moderate activity or a A commercially owned health and TNow firmly established as a priority little or no cost, and virtual reality enables combination of both per week. All children fitness site that is available to the sector for UK Plc, it is being positively individuals to fully and imaginatively and young people aged 5–18 should engage public on an annual, monthly or impacted by consumer trends which immerse themselves in their training. in moderate to vigorous physical activity “pay-as-you-go” membership basis. indicate a growing desire for leisure Despite these positive changes, the future of for at least 60 minutes and up to several activities such as visiting the gym and 86 Social enterprise the sector is not assured. e UK’s decision hours every day . participating in sporting activities. to leave the European Union in June 2016 A social enterprise is an organisation Sporting participation has risen since 2014, Council operator has created uncertainty. e impact of that delivers services and products with Sport England’s Active People Survey this momentous decision on the sector A leisure facility operated directly by the or both to the market while having 10 revealing that in the last year 15.83 will become clearer as the government local authority. particular social objectives that serve million people over the age of 16 played specifies what it hopes to achieve in its as its primary purpose. sport, with 1.75 million people more active Franchise trade and commercial relationships with than when London secured the right to host A licence granted by the government Social Impact Bond (SIB) the EU and countries beyond our continent. the 2012 Olympic Games84. Great Britain’s or a business that allows the licensee A SIB is a contract made with the public In the short term, ambitious projects Olympic and Paralympic successes at the to have access to the business’s sector or a governing authority to deliver may be put on hold as businesses learn 2016 Rio Games are also likely to have a commercial knowledge, processes, services which produce positive social to navigate the new economic landscape. positive effect on the role that sport and branding and trademarks to enable the outcomes in specified areas. Where savings Economic downturn resulting from market physical activity play in the culture of the party to provide services or products are achieved in line with the specified social uncertainty has the potential to have a UK. Our collective job is to translate this under the business’s name. outcomes, part of these will be passed on negative impact on the sector’s growth and fantastic operating environment into a to investors. Investors in SIBs are typically funding opportunities, but for little concrete Initial Public Offering (IPO) significant growth in the number of people interested in the social impact of their reason. e fundamentals of the UK health participating in sport and physical activity. An IPO is the first sale of stocks or shares investment rather than simply focusing on and fitness sector remain strong – there has ere has never been such clear evidence (privately owned equity) in a company to the financial return on their investment. never been a greater need for its services of the impact of physical activity on health. the public and other investing institutions. and we have never enjoyed such a fertile ere has never been such harmony It is often referred to as “going public” or Trust operator consumer landscape. e UK government between the cheerleaders spreading that “taking a company public”. A health and fitness facility that is adamant that the UK is still very much message far and wide. is managed and operated by an 85 Low-cost or budget operator “open for business” . It remains committed external organisation on behalf of Developments in technology, social media to helping the sector expand overseas and A low-cost operator is characterised by the local authority. platforms such as Facebook, Twitter and take its place at the vanguard of the march flexible or cheap membership prices or a Instagram, virtual reality programmes of great British businesses into emerging combination of the two. is is usually a and wearable fitness trackers have markets. Only time will reveal Brexit’s result of a lower operating cost structure. revolutionised how physical activity is true impact, but rising share prices and presented, planned, delivered and reviewed. the possibility of further IPOs and mergers Leisure management contractor Similarly, gym users now have access to and acquisitions indicate that the physical A leisure management contractor manages personalised programmes and specialised activity sector is far from dormant. and runs sites on behalf of a local authority.

38 39 e Rise of the Activity Sector Case studies

Methodology

Financial valuation Mazars then used publically available As previously discussed, the results of fitness organisations, however Mazars Audience Reach refers to the number of information – including information the EU referendum on 23 June 2016 have has also applied a valuation multiple to people that were exposed to the asset (e.g. In 2015 Mazars LLP (Mazars), in partnership from databases Mazars has access to – to caused significant economic and market this estimated revenue in order to more number of facilities, footfall, emails sent, with ukactive, set out to produce a financial obtain a revenue multiple derived from uncertainty. No specific adjustments were accurately reflect the market’s view on the Facebook likes) and generally constitutes valuation of the UK health and fitness recent acquisitions and listed companies made to Mazars’ valuation parameters value of this revenue. the key driver. e second element is the sector (the sector). in the sector. From this analysis, Mazars following the Brexit vote, as it is still number of opportunities to see each asset Sponsorship valuation Mazars, in conjunction with ukactive, concluded that a revenue valuation unclear what impact the vote will have on (per 30 minutes) during a visit to the facility, completed extensive market research into multiple of 1.3x was applicable to value the valuation parameters of companies is was conducted by sponsorship website, etc. Visibility Weighting of the asset the sector to determine an appropriate the sector. Using this revenue valuation generally and in the sector. e market valuation experts Nielsen Sports with is a percentage based on its prominence and valuation methodology. A number of multiple and the revenue metrics, Mazars multiples used in this valuation parameters analysis that concentrates on the size. is calculation of the asset’s value accepted valuation approaches were was able to give an estimate of the analysis are current as at the date of this sponsorship value that can be derived from is completed by applying industry-wide considered, and due to likely data constraints aggregated enterprise value of the sector. report (i.e. post the referendum vote). ukactive members’ available assets that accepted advertising costs (CPT) that are it was determined that a market-based have the potential to be branded. specific to the type of asset being valued. e total valuation figure calculated by e sector valuation performed by methodology was most appropriate. Mazars for the sector in 2015 was £6.4 billion. e Leisure Database Company has Data received from the questionnaire was e valuation also identifies sponsorship A questionnaire was created based been considered. Its valuation is based inputted into Nielsen Sports’ proprietary and marketing expenditures in 2015. is Estimated 2016 financial value forecast on the conclusions of the research. on the estimated annual revenue of the valuation model, which incorporates the includes advertising in media such as TV, is questionnaire was tailored to the In 2016, Mazars provided a set of valuation constituents of the sector. Mazars has used assets’ exposure and visibility. is formed print, online and PR activities. Together with sector and specifically structured to parameters which could be used by a similar approach to estimating revenue the basis of the calculation of each asset’s all asset values, the total value per ukactive enable data extraction appropriate for and ukactive to estimate a 2016 valuation figure from a sample of private and public sector value, combined with additional metrics: member was calculated. Subsequently, relevant to the valuation calculation. on a comparable basis to 2015. the sample data was used to estimate the is survey was then distributed by value of each sub-sector, extrapolating the To derive an estimate for the valuation ukactive and completed by members of market using i) the number of consumers of the sector, a 2016 revenue valuation the sector. and ii) facilities data provided by ukactive. multiple was applied to the previously e results from this questionnaire calculated 2015 financial metric. As in e value of the brand sponsorship were analysed alongside publically 2015, the 2016 revenue valuation multiple ONSITE VALUE OF ASSET BRANDING potential calculated by Nielsen Sports available data from listed companies was derived from recent acquisitions and in 2015 was £152.6 million. operating in the sector and validated for listed companies in the sector. e revenue Estimated 2016 sponsorship value forecast accuracy. e revenue data provided was valuation multiple increased from 1.3x then extrapolated across the industry, to 1.5x from 2015 to 2016, suggesting an Nielsen Sports supported ukactive in incorporating ukactive’s knowledge of the increase in optimism by investors in the creating an estimated 2016 forecast sector and the input of a broad range of sector. It should be noted that this increase for sponsorship value using increased AUDIENCE OPPORTUNITIES VISIBILITY industry specialists. From the calculations, was partially caused by the inclusion of CPT annual growth rates for the private and Mazars was able to formulate a total newly listed companies within the dataset, REACH TO SEE WEIGHTING public sector from e Leisure Database revenue metric of £4.96 billion applicable such as e Gym Group. Under these Company’s 2016 State of the UK Fitness to the sector, with revenue being the only assumptions, an estimated value of the Industry Report. ese annual changes financial metric consistently provided from sector could be calculated at £7.5 billion. were used to project the 2015 valuation to each source. an estimated 2016 figure of £157.5 million.

40 41 e Rise of the Activity Sector End notes

End notes

Á e Leisure Database Company, State of the UK 15 e “quantified self” refers to individuals utilising 31 Europe Real Estate, “M&G Investments acquires 46 Health Club Management, “Exclusive: Nuffield 62 Sport England, Towards An Active Nation, 75 e Financial Times, “e Gym Group Fitness Industry Report 2016, 26 May 2016 technology to measure and track their everyday £350m David Lloyd portfolio (UK)”, 8 January Health acquires 35 Virgin Active sites”, 14 June Strategy 2016-2021, 19 May 2016, declares first profit and divi”, 31 August 2016, activities to improve their quality of life 2016, http://europe-re.com/mg-investments- 2016, http://www.healthclubmanagement.co.uk/ https://www.sportengland.org/media/10629/ https://www.ft.com/content/9f5354a7-6701-

2 e Financial Times, “PureGym aims to raise acquires-350m-david-lloyd-portfolio-uk/61633 detail.cfm?pagetype=detail& sport-england-towards-an-active-nation.pdf 3ab4-bdcd-5067c4f3bd99

£190m in London Stock Exchange float”, 14 16 e Financial Times, “Pokémon Go crosses subject=news&codeID=324798 September 2016, https://www.ft.com/content/ $250m in revenues since launch”, 12 August 2016, 32 Health Club Management, 63 Sport England, Sport England’s Strategic Facilities 76 Water Babies website, “About us, f8a4caf0-7a44-11e6-ae24-f193b105145e https://www.ft.com/content/2dd63522-5fdf- “David Lloyd Leisure relaunches brand with 47 Nuffield Health, Nuffield Health Annual Report Fund prospectus 2013-2017, [n.d], e extraordinary story of an extraordinary 11e6-ae3f-77baadeb1c93 national campaign”, 22 August 2016, 2015, https://www.nuffieldhealth.com/about-us/ https://www.sportengland.org/media/3686/ business”, [n.d], https://www.waterbabies.co.uk/

3 e Leisure Database Company, State of the http://www.healthclubmanagement.co.uk/ reports/annual-2015/reports strategic-facilities-prospectus.pdf about-us, [accessed on 23 August 2016]

UK Fitness Industry Report 2016, 26 May 2016 17 e Telegraph, “Personal trainers detail.cfm?pagetype=detail& on the NHS in war on diabetes”, 22 March 2016, 48 Health Club Management August 2016. Issue No. 64 Sport England, Towards An Active Nation, 77 British Franchise Association, subject=news&codeID=326381 4 Europe Active & Deloitte, European Health http://www.telegraph.co.uk/news/ 238, http://www.healthclubmanagement.co.uk/ Strategy 2016-2021, 19 May 2016, “Franchise Industry Research: bfa/ and Fitness Market Report 2016, April 2016 health/12200443/Personal-trainers-on-the- 33 Health Club Management, “David Lloyd Clubs pdf/HCM_Aug_2016.pdf https://www.sportengland.org/media/10629/ NatWest Franchise Survey”, [n.d],

NHS-in-war-on-diabetes.html and Elemis strike beauty deal”, 19 August 2016, sport-england-towards-an-active-nation.pdf http://www.thebfa.org/about-franchising/ 5 Deloitte, Passion for Leisure, A view of the UK http://www.healthclubmanagement.co.uk/ 49 International Association of franchising-industry-research, leisure consumer, July 2016, http://www2. 18 Euronext Website, https://www.euronext.com/ detail.cfm?pagetype=detail& Trampoline Parks Website, 65 Spa Business Digital Magazine, [accessed on 23 August 2016] deloitte.com/uk/en/pages/consumer- en/ipo-detail/661910/NL0011872650-XAMS/ subject=news&codeID=326359 http://www.indoortrampolineparks.org/ “Technogym joins forces with National Strength industrial-products/articles/passion-for- Basic-Fit, [accessed on 22 September 2016] and Conditioning Association”, 16 June 2016, 78 British Swimming and e ASA, “New baby

leisure.html 34 Health Club Management, “David Lloyd 50 Health Club Management, “Five-site expansion http://www.spabusiness.com/detail. swimming guidelines launched”, 13 October 2015,

19 Planet Fitness, Inc., Planet Fitness Announces lands exclusive partnership with Spartan Race”, for Oxygen”, Issue No. 232, February 2016, cfm?pagetype=detail& http://www.swimming.org/asa/news/general- 6 e Leisure Database Company, State of the Second Quarter 2016 Results, 11 August 2016, 14 July 2016, http://www.healthclubmanagement. http://www.healthclubmanagement.co.uk/pdf/ subject=news&codeID=324877 news/new-baby-swimming-guidelines- UK Fitness Industry Report 2016, 26 May 2016 http://s2.q4cdn.com/945805771/ﬁles/doc_news/ co.uk/detail.cfm?pagetype=detail& HCM_Feb_2016.pdf launched/25257, [accessed on 23 August 2016]

PLNT-2Q16-Earnings-Release.pdf 66 Health Club Management, “Technogym acquires 7 Ray Algar, 2015 UK Boutique Fitness Studio subject=news&codeID=325520 51 Beechbrook Capital, “Beechbrook Capital majority stake in software specialist Exerp”, 79 Xercise4Less website, “Find a gym”, Report, May 2015 20 CNBC Website, “Fitbit soars 20% on second 35 énergie Group, Corporation Limited Report Provides Growth Capital to Oxygen Freejumping”, 6 April 2016, http://www.healthclubmanagement. https://www.xercise4less.co.uk/find-a-gym/, trading day”, 22 June 2015, http://www.cnbc. 15 February 2016, http://www.beechbrookcapital. 8 All-Party Commission on Physical Activity, and Financial Statement for the year ended co.uk/detail.cfm?pagetype=detail& [accessed on 31 August 2016] com/2015/06/22/fitbit-stock-opens-up-more- com/news/title/provides-growth-capital-to- Tackling Physical Inactivity – A Coordination September 2015, 2015 subject=news&codeID=323110 than-10.html oxygen, [accessed on 24 August 2016] 80 e Sunday Times Fast Track 100, Fast Track 100 Approach, 2014, http://www.cedar.iph.cam.ac.uk/ 36 Crowdfund Insider, “énergie Closes Crowdcube 67 Technogym, Technogym Annual Report 2015, league table 2015, http://www.fasttrack.co.uk/ wp-content/uploads/2014/04/PA_commission_ 21 Health Club Management, “Virgin opens Siam Initiative; Captures Nearly £630,000 in Total”, 52 Places for People, Places for People Annual http://corporate.technogym.com/sites/ league-tables/fast-track-100/league-table/, report.pdf Discovery club in ailand”, 22 August 2016, 15 June 2016, http://www.crowdfundinsider. 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42 43 The Rise of the Activity Sector

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