Fitness First to pump £64m into Asia expansion

Fitness First, the UK-based chain of gym clubs, plans to pump £64m into an ambitious expansion in Asia, where increasing urbanisation and concern among some governments over rising obesity rates are encouraging more people to take up exercise.

The company, in the second year of a restructuring after being bought by private equity groups Oaktree Capital and Marathon, estimates that it will generate 35 per cent of sales from Asia in five years, up from 25 per cent currently.

Much of that will come from the opening of 50 new clubs, on top of an existing 88 in Asia. Most will be in air-conditioned shopping malls - the favoured location for gym-goers in Asia's rapidly expanding cities and so-called "second cities".

"We think the growth rates in Asia will be at least double what they are in Europe," said Andy Cosslett, chief executive, in an interview in Singapore.

The investment of £64m is part of £350m that Fitness First plans to spend over the next five years, which it disclosed in January. But this is the first time the company has said how much of the sum will go towards Asian expansion.

Mr Cosslett's comments came as Standard & Poor's, the rating agency, on Monday said this year would be "a good rather than great year" for the Asia-Pacific region, with growth forecast at 5.4 per cent on average, and continuing at the same rate into next year.

Unlike in Britain, where Fitness First has multiple landlords in various locations, the company in Asia typically works with big developers to become an "anchor" tenant in new malls.

With urbanisation an established trend in Asia, developers in Singapore such as CapitaLand and Central Group of Thailand are expanding across the region.

"We've got relations that go back years with owners of malls who are expanding - and we're expanding with them," Mr Cosslett said. "These people tend to be the biggest [developers] and they tend to have the best locations."

A handful of such developers are in early discussions with Fitness First about entering China, where the company has no presence. "We have conversations going on but it's probably two-to-three years down the line. We'll tiptoe in," Mr Cosslett said.

Fitness First opened its first gym in Asia in 2001, in Hong Kong. It has the most members in Thailand, followed by Singapore and the Philippines.

While memberships were growing partly with the emergence of a "middle class" with disposable income, the business was also helped by a greater enthusiasm than in the west for group activities in gyms.

Sixty per cent of people who join a Fitness First gym in the region engage in group gym exercise, compared with about 40 per cent in Britain. Asia also boasts a higher membership retention rate of 55 per cent, against 47 per cent in Britain.

The disclosures came as Fitness First broke out its performance in Asia business for the first time, reporting a 14.5 per cent rise in adjusted full-year operating profit for the division to £30.4m, on an almost 10 per cent rise on revenues of £136m.

The company will report its group numbers in about two weeks.

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