Jobs cut at Fitness First Australia as UK parent completes restructuring

Fitness First Australia is set to shed 120 of its staff across Australia, following its UK parent company reporting a pre-tax loss of just over $1 billion in the year to 31st October.

The job losses were announced on Thursday and make up almost 3% of the group's 4,357 staffing complement. They include 81 staff at 77 clubs while 39 posts will go at the business' head office in Sydney's Bondi Junction.

The cuts mean that almost one-quarter of Fitness First's Australian head office staff have been let go in the past year, driven by the shedding of 24 of the Group's Australian clubs.

In June, Fitness First announced that it was selling the clubs as a result of structural changes undertaken by its UK-based parent company. Subsequently, it has renegotiated the leases at six sites while two clubs in Melbourne will close by the end of the year.

This week also saw UK-based parent company Fitness First Group announcing the completion of its restructuring, following a turbulent two-year period during which the privately-owned group has struggled under a burden of debt.

The Group, which runs more than 400 clubs centres across the UK, Germany, Australia and Asia serving 1.1 million members, reported on Thursday that it posted a 3.4% increase in revenue to £608.3 million ($934 million) last year. However, club closures and one-off accounting charges saw it slump to a pre-tax loss of £671.5 million, compared to a loss of £82.9 million for the year before.

Announcing the company's full year results for 2011, Group Chief Executive Andy Cosslett explained "it's no secret that 2011 was a difficult year for us."

Coslett emphasised that the Group is in better shape now after its £550 million ($850 million) of debt was wiped out after a debt-for-equity swap this year that saw private equity firms Oaktree Capital and Marathon Capital become its new majority owners.

Cosslett explained that the privately owned Group is now "effectively debt free", adding "we have rationalised our portfolio of clubs so that we have fewer, more profitable sites across the world.

"In this context, I am delighted that during this most difficult time the business still managed to grow the top-line."

By contrast, Fitness First Australia Managing Director Peter Manuel advised that there had been a 5% decline in revenue and an 8% decline in membership in Australia in the past two years, with Manuel blaming consumer spending and the rise of budget 24/7 gyms,

Manuel said Oaktree Capital and Marathon Capital had put aside approximately $160 million to invest in Fitness First and the restructure was part of an effort to "get Fitness First back into great shape".

Manuel advised that the staff cuts would see one part-time fitness staff in every Australian club converted to full-time, while administrative services would be moved online.

Manuel added "we are absolutely putting ourselves in a different part of the category (from budget gyms). We are saying we care about the fitness journey that our members will be on and the role of my staff is to motivate, educate and celebrate and support everybody.

"The choice that we're making is really a choice in investing in fitness services."

In February 2012, following a difficult global period trading, Fitness First parted company with then Chief Executive Colin Waggett, Chief Financial Officer Duncan Tatton-Brown and UK Managing Director John Gamble.

They were replaced by turnaround specialist Chris Stone as Chief Executive and Jan Kengelbach of BC Partners - the private equity company that acquired the business in 2009 - as interim Chief Financial Officer.

After setting the restructuring in motion, Stone handed over to current Chief Executive Andrew Cosslett - a former head of Intercontinental Hotels Group.

Cosslett said that during the 12 months to 31st October, Fitness First achieved more than £100m of pre-tax earnings (EBITDA) and that the company's "troubles are behind it".

He added "we have new owners who have completed a financial restructuring of the business (and) in addition to our strong cash generation, we have capital available from our new owners which will allow us to invest in our remaining clubs and radically improve the experience of our customers.

"Fitness First is a great brand that is going to get even better and I look forward to its future with real excitement."

10th May 2012 - FORMER INTERCONTINENTAL HOTELS GROUP CHIEF EXECUTIVE TO LEAD FITNESS FIRST

14th February 2012 - MANAGEMENT CHANGES AT FITNESS FIRST’S UK BASE 

14th September 2011 - MEMBERSHIP, PROFITS FALL AT FITNESS FIRST

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

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