Quadrant faces more heavy lifting on loss making Fitness and Lifestyle Group

Fitness and Lifestyle Group owns gym chains such as Fitness First and is owned by Quadrant Private Equity. Picture: iStock.

Quadrant Private Equity’s Fitness and Lifestyle Group is banking on a hard-won debt refinancing to keep it afloat, even as it continues to book hefty losses more than four years after Covid-19 shutdowns hammered the fitness sector.

The business that owns gym chains including Fitness First and Goodlife Health Clubs posted a $161.2m bottom-line loss for the year to June, narrowing from the $215.1m it plunged into the red the previous year, according to accounts recently lodged with the corporate regulator.

But despite the improvement, the company is buckling under almost $2.2bn worth of loans – a crushing debt load inherited from being forced to shut its doors in 2020 during Covid-19 lockdowns, when revenue dried up but rent and debt obligations continued.

The company, which is also backed by US investment giant Oaktree Capital Management and counts HPS Investment Partners as its lender, pulled off a critical debt restructure last month that extends its repayment timeline from the 2026 financial year to 2028.

The deal lowers average borrowing costs and expands liquidity, buying crucial breathing room as the business attempts its recovery.

Auditors have gained comfort that the company can continue as a going concern for the next 12 months following the refinancing.

The debt pile consists of almost $705m in bank debt, $831.1m in mezzanine debt, and non-current borrowings including $361.4m of senior loan notes, $61.5m of redeemable preference shares and $207m of priority preference shares.

The numbers underscore a paradox gripping the post-pandemic fitness industry. While memberships are surging and Australians are returning to gyms in droves, embracing the broader wellness boom and craving the social connection lost during lockdowns, operators that took on heavy debt loads before Covid-19 are still struggling to dig themselves out.

Fitness and Lifestyle Group said the year to June 30 had been a period of “strong growth and performance” for what is the largest corporately owned fitness platform in the Asia-Pacific region.

The company achieved record membership numbers, revenue and operating cashflow for fiscal 2025, and made significant progress on its technology transformation, new club rollout and wellness innovation.

The fitness group has been riding a wave of industry trends, introducing premium wellness experiences across its facilities as consumers increasingly prioritise holistic health, mindfulness, and longevity over traditional gym workouts.

The shift reflects broader changes in the fitness landscape, where hybrid models combining in-person and digital offerings have become standard, and members are willing to pay more for specialised training, recovery services and community-driven experiences.

However, the results weren’t without setbacks.

The group’s Emily Skye fitness business posted a one-off impairment of $7.1m, and the company sold its Vietnam operations during the financial year.

Fitness and Lifestyle Group comprises Fitness First Australia, Goodlife Health Clubs, Jetts Fitness in New Zealand and Thailand, Zap Fitness, Barry’s and Emily Skye FIT.

It was created by Quadrant following a series of acquisitions and now operates in four countries with over 330 locations, more than 600,000 members and 6,000 employees.

The business’s struggles mirror broader challenges facing private equity firms like Quadrant that bought businesses when interest rates were low and are now less profitable with higher debt servicing costs.

Run by Chris Hadley, the firm has made major profits on various investments.

But last year, Quadrant handed the keys of its restaurant chain business that owns Rockpool Bar and Grill to lender Metrics Credit Partners.

It also recently sold Grays Online to Slattery Auctions, which placed the cash-strapped business into administration.

Rivals have also faced challenges - Pacific Equity Partners has called in restructuring advisers for Cranky Health and BGH Capital recapitalised IVF provider Virtus, which is now performing to plan.

For Fitness and Lifestyle Group, the path forward depends on whether the operational improvements can eventually outpace the weight of its pandemic-era debt burden.

The extended debt timeline provides runway, but the company will need sustained growth to finally work out from under its financial load.