Bullish Bannatyne ready to flex financial muscles

Jul 9 2008 by Karen Dent, The Journal

ENTREPRENEUR Duncan Bannatyne is shrugging off fears of a recession and pushing ahead with the expansion of his fitness empire after newly published accounts show a 40% surge in annual turnover.

Bannatyne Fitness, which owns 53 clubs and manages eight others, more than doubled its pre-tax profits last year to £5.9m from £2.5m on a turnover that rose from £54.3m to £77m.

The business spent almost £90m acquiring 24 LivingWell health clubs from Hilton Hotels in 2006 and the Dragons’ Den star says he is continuing to look at growing the number of gyms in the group.

The entrepreneur, who is worth an estimated £310m, says he is not concerned that the credit crunch and fears of a recession will lead to health club members tightening their purse strings.

He believes going to the gym is now essential to thousands of people’s lifestyles.

“People desire a healthy lifestyle. We’ve been operating for 10 years now. A lot more people go to the gym, a lot fewer people are smoking – 400,000 have stopped since the ban.

“People use health clubs to keep fit. It’s a necessity to most people.”

He added: “I’d compare it with going to a restaurant and having a meal. Many people go out and spend money on a meal than being a health club member.”

And he believes spas will soon be the big thing in the health club industry: “We see spas as a fantastic way forward. We have just completed the development of one in Darlington.”

In addition to the £800,000 Sensory spa and beauty complex at Darlington, where Mr Bannatyne’s group of businesses is based, he is seeking planning permission to build new spas in Durham and Hastings.

David Pope, an analyst with Brewin Dolphin in Newcastle, said the health club sector remains very healthy despite the economic downturn.

He said: “The industry is trading comfortably but where there are a lot of gyms, there is price competition. As a group, you are better placed to deal with that.

“There is a general trend towards gym membership at the moment. The only time it has struggled in the last few years has been when there were more gyms than clients, it has taken time to build.”

However, he pointed out that the Esporta health club group – struggling because of high levels of debt – may start discounting a way out of its problems. This could interfere with gym customer loyalty if a recession was to hit.

The Bannatyne Group’s interests also include a number of hotels, and Newcastle’s Bar Bannatyne.

At the start of the year, Mr Bannatyne revealed £16m investment plans, including two new health clubs, hotel extensions and the two additional spas. The developments are expected to create more than 100 jobs.

The newly published accounts are for the 2007 calendar year.

A dragon who has real teeth

DUNCAN Bannatyne is best known as a tough-talking panellist on TV’s Dragons’ Den.

The serial entrepreneur, whose business interests now include health clubs, hotels and a bar, was brought up in the tough tenements of Clydebank and joined the Royal Navy, where he spent a stint in military jail.

His business empire was started with a single ice cream van which he bought for £450. It grew to become the Stockton-based Duncan’s Super Ices fleet. His enterprises have expanded to include nursing homes, children’s nurseries and radio stations.

Bannatyne Fitness, which was established in 1997, has grown to become the UK’s largest independent health club operator.

According to The Sunday Times Rich List, Darlington-based Mr Bannatyne’s estimated £310m fortune makes him the second wealthiest person in the North East after Mark Fenwick of the department store family, and one place above the Duke of Northumberland.

Mr Bannatyne, who recently appeared in the BBC documentary Bannatyne Takes On Tobacco, was awarded an OBE in 2004 for his services to charity.

He has pledged to donate his fortune to good causes before he dies and has set up the Bannatyne Foundation to benefit charities in the UK and overseas. Accounts show Bannatyne Fitness donated over £72,000 to charity last year.