Virgin Active investors are understood to be preparing a £60m+ funding injection into the fitness operator, in a bid to secure its future.
As
reported by HCM in December, Virgin Active has been actively looking to raise cash to buffer it from the impact of the latest lockdowns in Italy and the UK.
Investors are believed to be considering providing the business with new capital, while also negotiating a deal with lenders and landlords, asking them to make a "meaningful financial contribution" to enable the company to continue trading.
Lloyds Bank had been seeking to offload its exposure to Virgin, but it's understood that it has not found any takers.
Virgin Active is 80 per cent owned by Brait – the investment group of former billionaire, Christo Wiese – which bought its stake from Richard Branson's Virgin Group and investor CVC in April 2015, leaving Branson with 20 per cent and valuing the business at £1.3bn.
Filing its 2019 accounts on 24 December 2020, Virgin Active revealed how it has been coping with the pandemic so far.
In spite of mitigating actions taken to reduce the impact of the pandemic on the business – which included senior staff taking a 20 per cent pay cut during closures – the company was forced to take an additional loan of £25m in June 2020, which was matched by a £20m capital contribution from shareholders and a £5m deferral of licence fees.
The directors reported that all interest covenants up to 2021 were waived by lenders and that the company arranged a new liquidity covenant for the period from June 2020 to December 2021.
The accounts show the Virgin Active’s balance sheet is under pressure. Borrowings leapt between 2018 and 2019, increasing interest payments from £1.18m in 2018 to £13.61m in 2019 and driving the business from a £4.67m profit in 2018 to a loss of £1.18m in 2019.
In the financial statement accompanying its 2019 accounts, Virgin Active said it aims to be able to continue to trade with the support of its ultimate backer – Virgin Active Investment Holdings – which has indicated it will stand behind the business, however, the directors say they accept that although this is the current position, this reliance on the financial support of the holding company must be seen as representing a “material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern.”
Virgin Active had 243 health clubs globally at the end of 2019, with 42 in the UK.
Financial arrangements for the South African business are separate from those of the remainder of the portfolio.
