Virgin Active struggling to keep members in South Africa

Virgin Active has shown strong membership growth over the past few years but is still 10% below 2019 membership levels, as the company’s South African business suffers from high membership terminations.

This was revealed in Brait’s interim results presentation for the six months to the end of September 2023. Brait owns 79% of Virgin Active, which operates in six countries. 

Virgin Active performed well relative to the prior period in 2022, with revenue growing 20%, active members up 11%, and earnings up 205%. 

However, compared to 2019, the company’s earnings are down 86%, membership is down 10%, and revenue has declined by 6%. 

Much of this poor performance relative to 2019 can be attributed to its largest market, South Africa, which makes up over a third of the company’s operations. 

Virgin Active’s South African operations have experienced very high termination rates from customers and a high turnover of memberships. 

In the first nine months of 2023, the company sold 170,000 memberships but only registered membership growth of 31,000 at the end of the period. Active members rose to 606,000.

This indicates a high turnover rate of memberships, with new customers signing up but then a large proportion of them terminate the membership or existing members fail to renew.

The company said this was primarily driven by the poor quality of sales in the earlier part of the year due to a challenging economic environment. 

Compared to 2019, active memberships in South Africa are down 15% – the highest of all Virgin Active’s markets. Italy is the only market where memberships are higher than pre-COVID. 

Source: Brait Interim Results Presentation

Virgin Active’s slow recovery following the disruption of the pandemic means that the company is unlikely to reach its stated earnings targets for the end of September 2025. 

Again, this is mainly due to the poor performance of its South African operations. 

In 2023, Virgin Active has added 2,400 members a month, and the average yield per member has also risen. 

However, this is far below the expected growth rate of 3,700 new members a month needed to meet its targets. 

Internationally, the company is firing on all cylinders, having added 6,000 new members per month so far in 2023. 

To improve its performance in South Africa, Virgin Active has changed its sales commission structure and improved its customer engagement. 

The company is also refurbishing several key clubs, with these sites showing strong performance post-reopening. 

Source: Brait Interim Results Presentation