Additional Walker disclosure
In November 2007, David Walker published “Guidelines for disclosure and transparency in Private Equity” (the Walker report) which recommended that portfolio companies of private equity firms make certain additional disclosure in their financial statements.
Fitness First Group is a portfolio company as defined in the Walker report, and subsequently amended by the Guidelines Monitoring Group, and the Board of Directors has agreed to adopt all of the recommendations in the Walker report.
Ownership & Management of Fitness First Group
The parent company of the group is Fitness First Group Limited. The Company’s equity is owned as follows:
||Ordinary shares %
|Funds advised by BC Partners *
|Management and other shareholders
* of which CIE Management II Ltd 79%, other funds 1%
BC Partners acquired its shareholding in Fitness First through a £835 million secondary buy-out in November 2005. BC Partners is a leading private equity firm that has played an active role in the development of the large buy-out market for 20 years. The firm operates as an integrated team through its offices in Europe and America
The Group is managed by the Board of Directors which comprises representatives of BC Partners and the senior management of Fitness First. The Board is the Group’s decision making body.
Day to day operational management of the Group is the responsibility of the Group Executive.
Board of Directors
The Members of the Board are as follows:
Andrew Newington, Chairman and BC Partners representative. Andrew joined BC Partners in 2000 from DB Capital Partners Europe where he spent two years and completed a number of equity and structured investments. For four years prior to this he worked as a solicitor specialising in mergers and acquisitions for Ashurst Morris Crisp. He has an MBA from Columbia Business School and a degree in law from Exeter University. He speaks English, French and German and conversational Japanese.
Jonathan Hosgood, Non Executive Director and BC Partners representative. Jonathan joined BC Partners in 2009 from Barclays Capital, where he worked for 12 years in leverage finance department, most recently as co-head. He holds a degree in politics, philosophy and economics from Oxford University.
David Giampaolo, Non Executive Director. David joined the Board of Fitness First in 2005. David is Chief Executive of Pi Capital. He previously founded, built up and sold several businesses and health club chains in the US and UK. In 2002 David led a management buy-in of Pi Capital and became the CEO and a major shareholder. He remains on the Board of Directors of numerous other UK and US companies and is an active member of the YPO and CEO global business organizations.
Jan Kengelbach, Chief Financial Officer, Managing Director United Kingdom and BC Partners representative. Jan joined BC Partners in London in 2010 from AlixPartners, where he spent three and a half years working as a financial restructuring and operational turnaround advisor. Previously, Jan worked as the Managing Director of the Byrd Hoffman Water Mill Foundation in New York, as a strategy consultant with McKinsey & Co. in Munich, and as an intern with Goldman Sachs’ M&A division in London. Jan holds an MBA from Kellogg School of Management, an engineering science degree from the Ecole Centrale Paris, and a mechanical engineering degree from the Technical University Munich. He is a Certified Restructuring and Insolvency Advisor (CIRA) and speaks English, German, French and Spanish.
Chris Stone, Chief Executive Officer. Chris is a business leader who has spent the previous 12 years leading the turnaround and growth of Northgate IS, taking it from a loss making, £82M revenue business, to a global market leader with revenues of £850M and profits of £150M. This turnaround was achieved with the same senior management team in place throughout, and included periods as a public company, as well as a spell as a privately owned, PE backed company. Prior to Northgate, Chris worked at Accenture, DEC, EDS and Bain. He is married with 3 children, and lives in Sussex.
Principal Risks & Uncertainties
Please read the principal risks & uncertainties in conjunction with the Risks & Uncertainties section of the financial statements.
As with any business, various risks may affect the Company, its results and management’s ability to execute the Company’s strategy. The Board has implemented systems to identify risks, to assess them and to ensure that reasonable mitigation and action plans are in place. The Board is paying particular attention to the operational risks and uncertainties surrounding the dynamic economic conditions in many of the Company’s markets. The following general risks have been identified by the Company:
We may be unable to attract and retain members, which could have a negative effect on our business, particularly given the current economic conditions and competitive market in which we operate. As well as ensuring our clubs offer a differential experience to our members, we have developed a multi channel approach to generating leads to attract new members. We have also invested in systems to predict potential leavers as well as loyalty and reward programmes to ensure our members feel welcome, valued and inspired to lead a healthy lifestyle.
We may be unable to attract and retain sufficient key personnel (Fitness Firsters). It is no coincidence that our strategy map has Fitness Firsters at its foundation. We are committed to attracting the right people and to provide opportunities for learning and development, and a career in the fitness industry.
Clubs may not execute the Top 10 member experience essentials to an acceptable standard. Our Top 10 essentials is a list of the most important aspects to our service offering that have been identified by our members through extensive market research and outlines the basic aspects of our member experience that we would like to be in place in every club across the world.. We are committed that where the top 10 essentials are not in place we are working to implement them, and we track feedback from a sample of our members on a monthly basis to measure how well we are doing.
We may experience a lack of sufficient funding to maintain our existing clubs or to continue our investment in expanding our portfolio of new clubs, or a breach of financial reporting covenants on our bank facilities. Our funding is primarily provided by a syndicate of banks and shareholder loans. We hold regular dialogue with our banks and shareholders and we closely monitor and manage our cash flows, funding position and our financial covenants to ensure that the covenants are met. This could include seeking additional funding from our banks or shareholders and negotiating changes to the covenant conditions if necessary.
We may breach existing laws and regulations, or changes in laws or regulations may lead to a breach, or we may suffer major health and safety incidents. We actively monitor our compliance with all relevant laws and regulations and take immediate steps to prevent or correct any such breach.
Our IT systems may fail for a sustained period of time or we may suffer a significant loss of data. We have developed a number of industry leading applications and we maintain a significant level of security and resilience to ensure our IT systems are robust.
While the Company seeks to minimise the risk of being adversely affected by the failure of a supplier, or a customer, the volatility of trading and its impact on our trading partners represents a potential risk to the business. Whilst the Company has a number of long term, mutually beneficial and entrenched supplier relationships, the Company believes that it is not exposed to individual contracts or other arrangements that are essential to the business that could not be sourced from alternative suppliers.
Outlook - trends and factors affecting future development performance
In all the countries within which the Group operates the percentage of the population using health clubs continues to grow and there is a strong consensus from all commentators that the underlying health club market will continue to rise at a rate above GDP, driven by health and obesity concerns.
The Group operates in Europe, Australia and Asia and as a result is not dependant on a single market. In particular the Group has a strong market position in Australia and Asia, which markets are forecast to have a greater level of economic growth and development. Management is committed to expanding the portfolio of Fitness First clubs by investment in new sites across all regions, but with focus on the regions with the best opportunities for growth and return on investment.