The Australian Fitness Industry Report 2012...The Australian Fitness Industry Report 2012 2. About...

The Australian Fitness Industry Report 2012

September 2012


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Contents

Foreword i

About Fitness Australia ii

Introduction 4 Trends & Key Findings 4

1 Industry composition and value 5 1.1 Number of businesses and market consolidation 6 1.2 Revenue 9 1.3 Capital expenditure 11 1.4 Innovation 12

2 Employment 13 2.1 Number of professionals employed 13 2.2 Recent trends in employment growth 15

3 Service subsectors 16

4 Client profiles 17 4.1 Age 17 4.2 Gender 18 4.3 Location 18 4.4 Socio-economic status 19

5 Comparisons and linkages 20 5.1 Comparisons with other industries 20

6 Industry outlook 22 6.1 Economic contribution 22 6.2 Industry innovation 23 6.3 Health benefits 23 6.4 Strategic directions 24

7 Financial Report 25

8 References 45

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Support of Life Fitness for the production of this Report is gratefully acknowledged by Fitness Australia.

Fitness Australia wishes to acknowledge the contribution of Deloitte Access Economics to this report

This report provides detailed and consolidated information illustrating the current state of the fitness industry. There is little regular data specifically about the fitness industry which this report seeks to address. By displaying the fitness industry in the appropriate context, not only can we better determine our own future, but we can seek the necessary support to ensure that our industry delivers the greatest contribution possible to enhancing the health and well-being of Australians.

In comparison to other sectors, the fitness industry on the whole, has fared better and continues to grow despite the backdrop of uncertainty that has affected the broader economy. This can be attributed to a myriad of factors including cultural and demographic changes associated with the increasing importance accorded to fitness, the recognition that it delivers personal health benefits and industry innovation in tailoring programs to meet the needs of consumers. However, the industry continues to face challenges, especially related to workforce retention and professionalism.

There are measures that can be taken to address these challenges to ensure continued strength and prosperity of the industry. A nationalised system whereby our workforce is better recognised and supported will ensure a greater recognition for the individuals who work in this industry but also increase the standard and consistency of service provided to consumers.

Fitness Australia believes that this report will provide a suitable backdrop for our continued advocacy efforts both now and in the future.

We welcome comments about how to make this report even more useful in the future.

Lauretta Stace

Chief Executive Officer Fitness Australia

Foreword

Welcome to the inaugural edition of the Australian Fitness Industry 2012 Report, which outlines the size, composition and issues affecting our $1.2 billion sector. It represents the first in a planned series of annual reports on the state of the industry.


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About Fitness Australia

Fitness Australia is the leading peak health and fitness industry association providing a range of business support services and solutions to almost 30,000 registered exercise professionals, fitness service providers and industry suppliers Australia-wide.

Our advocacy and research work also ensures that the diverse interests of the fitness industry ranging from business challenges to accessing the latest industry research information are well represented.

Over the last decade, there has been strong growth in the industry and it is expected that this growth will continue well into the next decade. Around 3.3 million Australians were estimated to use the services of a exercise professional in 2011.

As a peak industry association with a highly credible national profile, Fitness Australia recognises the growing importance of the fitness industry to the Australian economy and to maintaining the health and wellbeing of the community. Fitness Australia is committed to leading, supporting and growing an innovative fitness industry that embraces knowledge sharing, professionalism and high standards of care and customer service.

Strategic priorities which underpin this commitment are focused on enhancing industry standards, reputation and quality of the workforce. As a peak body, representation of the interests of the industry, through advocacy on issues of core interest and importance such as taxation reform, a uniform national system for registration/regulation of the profession, equitable access for personal trainers to public space and issues of copyright in fitness facilities continue to remain at the forefront. Fitness Australia is undertaking a series of actions to implement the identified priorities listed below:

1. The development of a quality framework to assist the fitness industry set and raise standards to achieve and maintain safety, quality and customer care;

2. Engaging in strategic workforce planning to enhance the exercise professional registration system to establish clarity in scope of practice;

3. Working collaboratively with education providers to facilitate access to high quality continuing education programs that will increase industry knowledge and expertise;

4. Working with all levels of government and the broader health sector to partner in meeting preventative health objectives; and

5. Engaging in advocacy programs that support the growth and development of the industry.

These actions place Fitness Australia in a strong position to continue to assist the industry focus on what is important for their customers and to deliver quality services in order to prosper.

For more information, visit the Fitness Australia website at fitness.org.au/fitnessindustryreport

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Introduction

Deloitte Access Economics was appointed by Fitness Australia to conduct a survey of businesses in the fitness industry in order to provide a detailed overview of the industry in 2012.

This report follows an earlier report, the Fitness Industry Workforce Report 2012 (Deloitte Access Economics 2012a) which documented the current supply and demand of exercise professionals in Australia, with projections for the future.

Providing a snapshot of the industry on an annual basis is important for identifying the trends within and their impact upon the fitness industry. Trend information in relation to how the industry is developing, what it will potentially look like in the future and its financial sustainability is vital for successful future planning for the industry.

This State of the Industry Report 2012 is an important companion document to the Fitness Industry Workforce Report 2010-2012. Key findings of this report will be communicated to government, industry and other key stakeholders. Fitness Australia will use these findings to underpin decision making and industry advocacy. Findings may also be useful in terms of assisting the industry to identify effective investment opportunities in the future.

In this report the fitness industry is defined as those businesses that provide physical fitness services in a ‘dry’ setting (i.e. not including pools, but including gyms at pools). It includes both guided outdoor training and indoor facilities. This definition was adopted to ensure members of Fitness Australia were adequately represented.

Trends & Key FindingsParticipation in physical activity

Among Australians, aerobics, fitness or gym workouts are now the second most popular physical recreational activity after walking. Over 4 million Australians participate in fitness industry activities. Users are typically female (42%) and younger (25-34 years). The biggest increase in users was from the 45-54 year age group. Looking forward, participation will continue to increase exponentially with total demand increasing to 7.15 million users by 2020

Industry composition

is characterised by a large number of private and small to medium sized businesses. There has also been and expansion of niche areas in the industry such as women’s circuit training.

Industry growth

there has been growth and climbing levels of participation in fitness activities within the community. However recently there has been a slight downward trend probably associated with the economy and consequently a reduction in the discretionary spend of consumers.

Revenue

the industry will have revenue of over $1.2 billion in 2012. Membership fees made up 83% of income followed by personal training fees. When the industry is segregated, the revenue of at least half of all businesses are under $100,000. Trends show changes in consumer preferences (due to more disposable income and other factors such as increased in health & wellbeing) has had an impact on revenue. Businesses reported a 4% average increase in revenue. 24/7 facilities and fitness studios have seen greater levels of growth, being 11% and 12% respectively.

Employment

30,000 exercise professionals are registered in Australia with Fitness Australia and Physical Activity Australia. Over half are women. Almost two thirds are aged between 22-39 years. Recent trends in employment growth indicate an increase of 7.2% (variable) in the number of exercise professionals. Of note 68% of the workforce remains casually employed. This factor has been identified as significantly contributing to the high level of turnover of staff within the fitness industry. Trends in relation to future workforce projections (entries and exits), skills training and remuneration have been highlighted in the Fitness Industry Workforce Report 2010-2012.

Industry subsectors & offerings

In recent years a change in consumer focus on improving health and quality of life has become increasingly apparent. This, together with the interest of government in preventative health, has meant that the fitness industry has had to evolve to meet a much greater array of fitness needs within the community. Business models range from small person training studios to large multi-national chains. Equally, service offerings range from the traditional fitness classes, to more niche orientated offerings to meet the needs of sub-groups such as older people, children and those with more complex health needs as well as those interested in general health and lifestyle improvements.

Predictions for the future of the fitness industry will continue to be informed by trends relating to factors such as what consumers want and expect, the impact of technology on customer service offerings, the capacity to tap into the retiring ‘baby boomer’ age group and other sub-groups within the population and, as good corporate citizens, the capacity of fitness businesses to respond to community needs, especially in areas of disadvantage where significant population health issues exist.


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1. Industry composition and value

In 2009-10 18% of the population participated in fitness activities.

The fitness industry is a dynamic and evolving industry. Fitness activities are defined by the Australian Bureau of Statistics (ABS) as participation in ‘aerobics/fitness/gym activities’, ‘Pilates’, ‘weight training’ and ‘yoga’ categories. The latest data available (ABS, 2010a) show that attendance at clubs is on the rise, with 18.3% of the Australian population participating in organised fitness activities in 2009-10, a 2.1% rise since 2005-06. The industry is characterised by a large number of private, small to medium sized businesses, due to the relatively low barriers to entry for small businesses. The recent expansion of small and bigger players into former niche areas – such as women’s circuit training, corporate training, and wellness programs – has helped fuel the growth within the fitness industry. The April 2012 survey of exercise professionals indicated that whilst the industry has had strong growth and increasing participation in the past decade, recent years have been tougher for the industry. It is likely that this is in part due to the economic downturn, but also due to a shift in consumer preferences, as evidenced by strong growth in some other segments of the industry.

There are over 2,550 businesses in the fitness industry

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Chart 1.1Survey response by type of fitness centre

Source: April 2012 survey results. Leisure centre responses included gyms.

1.1 Number of businesses and market consolidation

A wide range of businesses make up the fitness industry, from sole traders to large, multinational fitness centres. In 2012, 1,290 businesses were registered with Fitness Australia equating to just over 50% of the industry – an estimated 2,557 business sites.

Small businesses characterise the fitness industry. At last count, 76% of fitness businesses employed fewer than 20 people and only 2% of centres employed more than 100 people (ABS 2005). Barriers to entry for smaller businesses are low and there are very limited regulatory requirements. A new personal training business requires little equipment, few staff, no shop front, and qualifications that are relatively simple to attain.

The April 2012 survey captured responses from a large cross-section of the industry, albeit skewed towards larger businesses. Half of survey participants were from gyms, followed by 30% in outdoor services, 6% in studios and 6% self-employed or contracted independent trainers (Chart 1.1).

Gym47%

Independent Trainer6%

Other17%

Outdoor Services30%


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Location of fitness centres

Of the survey responses received, 84% reported that their business is located in a metropolitan region. When the overall client population was considered, 91% of clients were metropolitan based and 9% were rural, as regional gyms tend to have fewer clients. The largest number of businesses which responded to the April 2012 survey were from NSW (31% of total responses), the most populous state, followed by 22% in each of Victoria and Queensland (Chart 1.2)

Chart 1.2Survey response by location of fitness centre

Source: April 2012 survey results. Leisure centre responses included gyms.

QLD22%

NT1%

NSW31%

ACT4%

SA7%

TAS3%

VIC22%

WA10%

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Chart 1.3Survey response by organisational structure of fitness centre

Source: April 2012 survey results.

Organisational structures of fitness centres

Fitness Australia membership data (2011) showed that about 30% of businesses were privately owned, nearly 20% were public or not for profit, and 45% were either company owned or operated as a franchise. According to the April 2012 survey results (which included Fitness Australia members and non-members), nearly two thirds of businesses were part of a chain or had multiple sites. As with the Fitness Australia data, organisational structure was predominantly private ownership with a minority of businesses public/government owned or not for profit. Of the public or government owned businesses, all except two were also operated by government, rather than private management (Chart 1.3)

PrivateIndependant

PrivateFranchise

PublicGovernment Owned

Not for Profit

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Other


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1. Deloitte Access Economics calculations based on figures for gyms and fitness centres, personal training, and independent group training from ABS 2006, relative to historical trends for the Sport and Recreation industry as a whole for the past decade (various publications of ABS cat. 8155). This was also confirmed through the Household Expenditure Survey as reported in ABS 2011f.

1.2 Revenue

The global economic downturn led to Australians becoming more cautious with their spending, especially on items that may be considered as discretionary spending. While growth has slowed, the industry is expected to record revenue of approximately $1,200 million in 2010-111 with an average operating profit margin of 4.5%.

The April survey found that membership fees made up 83% of total income followed by personal training fees. This is similar to previous surveys including the ABS (2006) 2004-05 survey and Sweeney Research (2009 A breakdown of how revenue is generated is provided below.

When the industry is segregated by revenue it is clear that almost half of all businesses have revenue under $100,000, with the next major segment recording revenue greater than $1,000,000. Given larger businesses were over represented in the April 2012 survey it is likely that more than half of businesses would record revenue under $100,000.

Chart 1.4Sources of revenue, 2011


Membership82%

FitnessSubcontractorRental Income4%

Personal TrainingSessions5%

Other9%

The industry will have revenue of over $1.2 billion in 2012

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Chart 1.5Proportion of survey responses by revenue ($’000)


Excluding businesses that were starting up (and therefore have abnormally high capital expenditure within the first year or so of operation), businesses with revenue under $100,000 reported average annual revenue of $48,828. These comprised studios, independent trainers and outdoor services (with a few small gyms). Businesses with revenue greater than $1,000,000 averaged $2,486,213 in annual revenue and were largely franchised clubs, university or school based centres and leisure centres with some large independent gyms.

Trends

Consumer preferences over the decade have continued to change and this has had an impact on revenue. The factors that contribute to this include an increased awareness of, and interest in, healthy lifestyles, partly due to Government promotional campaigns, together with varying disposable incomes and the increasing tendency for families to outsource. Time poor people are increasingly contracting out household tasks such as cleaning, cooking, grocery shopping and dog walking, therefore other life tasks such as keeping fit are increasingly outsourced to specialists.

0% 5% 10% 15% 20% 25% 30% 35% 40%

3,000 -15,000

1,000 -3,000

100 -1,000

10 -100

0 -10

The April 2012 survey data show that recent years have been tougher for the industry than the previous decade. Last year saw an overall weakening in both memberships and revenue and both are expected to remain stable for the year ahead, with relatively little growth. The majority of businesses have observed a 4% increase in business size by revenue over the past 5 years (July 2006-June 2011), noting again this does not capture a significant number of 24/7 chains which have been a driver of growth in the past three years.

Interestingly, if the major fitness chains are excluded from survey results, it is evident that other segments of the fitness industry have shown membership and revenue growth above the industry trend. 24/7 gyms, studios and university/school based centres all reported stronger growth, averaging 6%, which is similar to the previous year. Over the past 5 years, 24/7 facilities have seen 11% average annual growth in revenue and a 13% annual increase in membership; fitness studios reported 12% annual growth in both revenue and membership.

4% annual average increase in revenue was reported by businesses


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1.3 Capital expenditure

In health and fitness centres and gymnasia, labour costs were the biggest component of expenses, followed by rent. Labour and rent together comprised more than half of total expenses (ABS 2011). As a large proportion of the fitness industry’s costs are fixed in nature, the profit margin is sensitive to movements in revenue, which comes largely from fitness centre memberships.

Capital expenditure is another important expense for fitness facilities, comprising spending to acquire or upgrade physical assets such as property and equipment. Capital outlays are made to maintain or to expand operations and can include expenditure such as adding a sauna, refurbishing a shower room, or building a new fitness facility. Compared to small personal training businesses, larger fitness centres have higher equipment costs including weights and resistance training machines, and aerobic equipment such as treadmills and exercise bikes. As well as the upfront finance requirement, such investments also incur high depreciation costs.

Businesses with revenue under $100,000 reported average annual capital expenditure of $12,875 and those with revenue greater than $1,000,000 reported an annual average of $78,681. In total, capital expenditure for the fitness industry in 2012 is estimated at $47 million, or 3.9% of revenue.

Chart 1.6Sources of expenses, 2011


Gym47%

Independent Trainer6%

Other17%

Outdoor Services30%

Capital expenditure is $47 million for the industry in 2012

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Chart 1.7Expenditure by type (%) ($’000)


1.4 InnovationInnovation trends

Remaining dynamic, competitive and responsive to new fitness trends both locally and abroad remains a challenge for the fitness industry. However the industry continues to rise to this challenge through the development of programs and business models to meet changing consumer preferences and the integration of new technologies (online services, apps, social media, radio frequency identification technology).2

Innovation as the primary driver in shaping the future of the fitness industry is explored in the report, The Future of Fitness: A White Paper commissioned in 2010 from the Nielsen Company for Les Mills International and Better by Design. This report brings together data, expert opinion and views about how the global fitness industry can remain fresh and relevant. The increasing need for permanent connection through advances in technology, greater personalisation of services and the blurring of lines between fitness services and other services are informative and discussed at length.

2. Interestingly, many businesses acknowledged that government awareness of the industry and the progression to a standardised/national system that was regulated and had codes of conduct was an innovation as well. Whilst it was not expanded upon in survey responses, and is not primarily an innovation that directly affects customers, it was seen as important for the industry.

Industry

Gym

24/7 Gym

Personal Trainers

Staff wages 36.2 35.7 17.9 33.0

Rent 27.1 28.2 19.5 12.1

Other 11.5 12.0 0.0 0.7

Marketing (including sponsorship)

4.5 4.4 8.6 13.4

Commissions / bonuses

4.4 4.5 6.2 0.0

Utilities 4.0 3.9 8.1 1.9

Cleaning 3.0 3.0 2.0 0.2

Building maintenance

1.6 1.5 4.5 0.3

Equipment repair and maintenance

1.3 1.0 4.8 4.3

Franchise fees 1.2 1.2 3.6 0.0

Travel / Accomodation / Entertainment

1.1 1.0 1.8 6.1

Licenses 1.0 0.9 2.1 3.3

Staff training 0.9 0.7 2.6 10.2

Rent 27.1 28.2 19.5 12.1

Finance /leasing (e.g. equipment)

0.6 0.3 11.5 3.1

Stationery 0.6 0.5 1.6 1.7

3rd party professional services (accounting, legal etc.)

0.5 0.5 2.1 6.1

Insurance 0.4 0.4 2.0 3.6

Recruitment 0.2 0.2 0.9 0.0


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2. Employment

2.1 Number of professionals employed

In 2011 29,875 exercise professionals were registered (24,875 registered with Fitness Australia and 5,000 registered with Physical Activity Australia).3,4 Registration is not compulsory and it is very difficult to measure the number of unregistered professionals. In our previous report for Fitness Australia, Fitness Industry Workforce Report 2010-2020, (Deloitte Access Economics 2012a) consultations with

3. Fitness Australia and Physical Activity Australia represent Australia’s peak fitness industry bodies (pers., comm. 9/12/2011, Service Skills Australia).

4. An estimate of 5,000 exercise professionals registered with Physical Activity Australia was obtained from Kinect Australia’s website – now updated as Physical Activity Australia (Physical Activity Australia, 2011)

The Fitness Australia data suggest that approximately 56% of exercise professionals are female (16,749) with 13,126 males. Almost two thirds (62%) of exercise professionals are aged between 22 to 39 years, with only 4% over the age of 55 years.

Chart 2.1Number of exercise professionals per 1,000 people, by jurisdiction, 2011


0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5

ACT

NT

TAS

QLD

VIC

NSW

WA

SA

key stakeholders estimated that potentially around 75% of fitness industry professionals are registered with either Fitness Australia or Physical Activity Australia. As a broad estimation, the April 2012 survey indicated that 92% of professionals were registered. Fitness Australia data show that the number of fitness industry professionals per 1,000 people by jurisdiction ranges between 0.8 in Tasmania to 3.0 in the Australian Capital Territory (ACT) (Chart 2.1).

30,000 exercise professionals are registered in Australia

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Chart 2.2Distribution of exercise professionals by age group, industry data


Labour Force Survey data (ABS 2006) suggest that, on a headcount basis, 68% of the exercise professional workforce were employed as casuals, 12% permanent part time, 18% permanent full time and 2% are working proprietors and partners (ABS 2006). For the purpose of this analysis the ABS figures are used.

68% of the workforce is casually employed

35-3914%

30-3417%

26-2915%

22-2516%

40-4412%

45-498%

50-545%

55-592%

18-219%

65-831%

60-641%


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Chart 2.4Number of exercise professionals, by type, in 2011

Source: Deloitte Access Economics calculations; Fitness Australia Industry data.

There is a significant crossover of qualifications/registrations evident in the fitness workforce (Chart 2.4). The data show that almost 90% of workforce participants are registered gym instructors and around 80% are registered personal trainers. Less prevalent are yoga instructors and aqua instructors, with only 0.3% and 1.5% of the workforce registered to supply these services, respectively (classified as ‘other trainers’).

2.2 Recent trends in employment growth

Since 1999, the number of exercise professional has been increasing, albeit with significant variation year on year. The average annual growth rate between 2005 and 2010 was around 7.2% (Job Outlook 2011).

Workforce projections

Fitness Australia commissioned a detailed analysis of the exercise professionals’ workforce in Australia (2012a). The Fitness Industry Workforce Report 2010-2012 provides an important insight into the current profile of the industry as well as identifying challenges and opportunities. Workforce supply and retention is affected by such factors as: available working hours, level of professional qualification, job roles and expectations, remuneration, supply of graduates and demand for services.

The full report can be found at: www.fitness.org.au/workforcereport.

Chart 2.3Number of FTE exercise professionals, 2011

Source: Source: Deloitte Access Economics calculations.

4,809

149

1,781 17,975

GroupInstructor

1,530

PersonalTrainer1,530

GymInstructor

1,530Other1,426

Job growth is at 7.2% but remains variable

Full time Part time Casual Total

Personal Trainer 64 15 42 121

Group Instructor 306 74 199 579

Gym Instructor 377 91 246 714

Personal Trainer AND Gym Instructor

3,595 872 2,341 6,808

Personal Trainer AND Group Instructor

30 7 19 56

Group Instructor AND Gym Instructor

356 86 232 675

Other (e.g. Yoga, Aqua Trainers)

285 69 186 540

Total 5,975 1,449 3,890 11,314

% of total 53% 13% 34% 100%

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Industry offerings are likewise diverse, from traditional exercise classes and gym type activities to newer niche areas such as boot camps, seniors classes, and access to allied health services. Fitness businesses, in response to the increasing interest by the community are embracing and promoting approaches which emphasise overall health and wellbeing.

A testament to this approach is evidenced by the increasing penetration of yoga, tai chi and meditation classes into the core business areas of the fitness industry. Options such as massage, acupuncture and allied health services have also been integrated into business models to further expand market reach. Those consumers who just want to work out and get physically fit remain a central part of service offerings. Circuit training specific gyms have also boomed in the past few years with the franchises Curves and Contours, among others, promoting a simple 30 minute work out three times a week to busy women. The fitness industry has also claimed a central role both in the national preventative health agenda as well as in combating the complications of chronic diseases. Specific programs to assist in managing these conditions have emerged recently including Lift for Life, BEAT IT, and Heartmoves.

The industry is also taking steps to build and strengthen the networks and referral pathways to and from allied health professionals. Currently, approximately, 8% of clients are being referred to medical or allied health services and slightly more (11%) are referrals from such services.

The ABS reported a breakdown of fitness activities by age and gender. Younger women were more likely to be involved in aerobics, general fitness activities, pilates and yoga, whereas men more commonly participated in weight training followed by aerobics and general fitness activities (Chart 3.1)

3. Service subsectors

Population growth, changes in population age structure and changes in consumer wealth and spending has led to the fitness industry being characterised by a range of different business models, from small personal training studios to large, multi-national chains.

Chart 3.1Participation in activities by age and gender (%), 2009-10

Source: Deloitte Access Economics calculations.

Activity 15-34 35-54 55+

M F M F M F

Aerobics 13.2 21.3 9.5 16.9 4.8 7.9

Pilates - 1.4 - 2.0 - 0.9

Weights 2.7 0.4 1.5 0.7 0.4 0.4

Yoga - 3.8 0.4 3.4 0.3 1.8


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Applying this proportion to the 2012 population, there are an estimated 4.14 million Australians involved in fitness activities this year (ABS 2008).

The majority of members or clients (90%) visited their fitness centre attended once or twice per week with 8% visiting three times per week. The top three factors said to consolidate the level of customer commitment to their centre were access to professional staff (74%), overall atmosphere of the facility (68%), and availability of machines in working order (67%). The main barriers to attracting new customers included an unstable economy, too much competition, and customers’ lack of awareness of service offerings (Sweeney Research, 2009).

4. Client profiles

Over 4 million Australians participate in fitness industry activities In 2009-10, ABS statistics show that over 14.0% of Australians were estimated to have participated in fitness activities such as aerobics, pilates, weight training and yoga activities. This rate is up from 12.6% for 2009-10.

18-24

25-34

35-44

45-54

55-64

65-74

0-18

0% 5% 10% 15% 20%

Proportion of Clients

25% 30% 35% 40% 45%

Chart 4.1Proportion of clients by age

Source: April 2012 survey.

5. The survey data shows a lower proportion of clients aged over 45 years compared to the Ezypay data (which records around 7,000 individual responses), where nearly 30% of respondents were aged over 45 years

4.1 Age

Users of fitness facilities are typically younger and female. Over 1 in 5 men and nearly 1 in 3 women aged between the ages of 18 and 34 make use of fitness industry services. The utilisation rate falls with age to 8.1% for men and 10.2% for women in the 65+ age group (Deloitte Access Economics 2012a). Consumers over the age of 45 years make up 27% of industry revenue, although an increase to 30% is expected over the next five years (IBISWorld 2011).

The survey found that more than half of clients are female, 42% are in the 25-34 year age group, and almost 9 out 10 clients are aged between 18 and 44.5

About two thirds of survey respondents said there had been no significant change in attendance across each age group. Of those who reported a change in utilisation over the past year, the majority reported increases rather than decreases. The biggest increase (27%) was observed for the 45-54 year age group, and the smallest increase was for gym goers aged 65 years and older (Chart 4.1).

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4.2 Gender

Men and women report similar participation rates in sport and recreation (65% and 63% respectively) when both organised (e.g. gyms, football clubs) and non-organised sport and recreation activities (e.g. walking, beach swimming) are considered (ABS 2010a). In 2009-10, around a quarter of the population (26%) reported participating in organised sport and physical recreation while double that percentage (52%) took part in non-organised activity. When focusing on the utilisation of organised fitness services such as those represented by Fitness Australia, 63% of users are female (Sweeney Research 2009). In fact, women aged 25-44 are the key client base for gyms whereas men 45 years and over are least likely to attend a fitness facility. Overall 14.9% of males and 21.7% of females participate in organised fitness activities (Chart 4.2).

4.3 Location

Participation in all sport and recreation is the same (64% of the population) among individuals living in capital cities and those residing in non-metropolitan areas (ABS 2010a), although most organised fitness services (e.g. gyms, studios) are metropolitan based, reflecting population dispersion. Premises are typically located in inner city areas close to workplaces, or where consumers live and shop, such as suburban shopping centres. Maximising convenience for current and future members is paramount.

Deloitte Access Economics (2012a) reported the participation rate in fitness activities in 2009-10 for males and females was highest in the ACT and lowest in Tasmania. Given the relative populations of NSW and Victoria, it is unsurprising that more than half of the demand for fitness services (in terms of the total number of participants) comes from these jurisdictions whereas ACT, Northern Territory (NT) and Tasmania account for less than 5% of total demand in combination (Charts 4.3 & 4.4).

Chart 4.2Participation in fitness activities by gender, 2009-10

Source: ABS 2010a.

15-17

5

10

15

20

25

30

35

18-24

% P

opul

atio

n Pa

rtic

ipat

ing

% Population Participating

Male

25-34 35-44 45-54 55-64 65+

Female


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4.4 Socio-economic status

IBISWorld (2011) found that areas of higher average income tend to have a greater concentration of fitness establishments. In 2009-10, individuals whose weekly household income was in the highest quintile reported a participation rate of 80%, whereas the participation rate for persons in the lowest quintile was 45% (ABS 2011). The link between income and participation in organised fitness activities is further evidenced by the decline in gym memberships during the economic downturn, when real household incomes fell. Levels of fitness activity are also positively correlated with levels of education, income and health status.

Chart 4.3Demand for fitness services by jurisdiction, 2011

Source: Deloitte Access Economics 2012a.

QLD21.6%

SA8%

WA9.8%

NT0.8%

ACT2.3%

TAS1.5%

VIC25.5%

NSW30.5%

Chart 4.4Demand for fitness services by jurisdiction, 2011

Source: Deloitte Access Economics 2012a.

ACT

MaleFemale

0 5 10 15 20 25 30

Proportion of Clients

NT

TAS

WA

SA

QLD

VIC

NSW

FemaleAverageMaleAverage

The majority of clubs are metropolitan, in line with population dispersion

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5.1 Comparisons with other industries

Comparisons show that the fitness industry, relative to the broader industry group of sport and recreation, has been growing at a faster rate in employment, wages, revenue and value added. These are all linked to the increase in participation in gyms and fitness classes relative to sport and recreation more broadly. Aerobics, fitness or gym activities are now the second most popular physical recreational activity, with only walking being more popular. The fitness industry has more

5. Comparisons and linkages

Participation in the fitness industry is second only to walking.

Chart 5.1Total change 2004-05 to 2009-10 (‘000 people)

Source: ABS 2011a. Only statistically significant changes shown.

Swimming/Diving

Bush Walking

Golf

Motor Sports

Cricket (Outdoor)

Tennis

Volleyball

Cross Country Running

Surfing

Ice/Snow Sports

Cricket (Indoor)

Roller Sports (e.g. Skateboarding)

Australian Rules Football

Rowing

Walking for Excercise

Canoeing/Kayaking

Badminton

Weight Training

Aerobics/Fitness/Gym

Jogging/Running

-200 -100 0 100 200 300 400 500

participants than swimming and cycling (the next biggest) combined. The fitness industry is continuing to grow, although as other sport participation has been declining, only 20% of sport and recreation categories recorded an increase in participation between 2004-05 and 2009-10.

These increases have been driven by changing demographic factors. Since 2005-06 the average wealth of an Australian household has increased 14%. Urbanisation and increasing time pressures are likely to continue to reinforce gym participation.


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Economic contribution

The fitness industry contributes to the economy both directly (employment, output and taxation revenue) and indirectly (demand drivers such as utilities, rent or advertising). The fitness industry also provides benefits to consumers through increased health, which may decrease demand for other health related services and free up Government revenue for other purposes (including other spending or reductions in taxation).

The direct contribution of the fitness industry in 2010-11 is outlined in Chart 5.2. The contribution to GDP (value added) is $627 million and direct labour income is $482 million. Using the ratios gathered from the ABS Input-Output tables for the Sport and Recreation industry, indirect value added is $757 million, labour income is $468 million and there is an additional 6,143 FTE of employment. In total, the direct and indirect fitness industry contribution is worth $1,384 million.

The fitness industry contributes nearly $1.4 billion to Australia’s GDP

Chart 5.2Total, direct and indirect economic contribution, 2010-11

Source: ABS 2011c and Deloitte Access Economics calculations.

Direct Indirect Total

Value added ($ million) 627 757 1,384

Labour income ($ million) 482 468 950

Employment (FTE) 11,314 6,143 17,457

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6.1 Economic outlook

Trends in relation to demand for fitness services in the future will be based on changes in population growth, demography, elasticity of income and the capacity of the industry to tailor services to meet specific needs. Demographic ageing suggests increased demand for fitness services in older age groups (45-64 and 65+), which have traditionally had lower participation rates than younger age groups, but which will now swell in terms of absolute numbers if current participation rates by age and gender are maintained. In addition, as the industry has matured, younger people who have developed an early lifetime habit of utilising services may well carry that practice into older age, whereas current 65+ Australians had much lower exposure to the fitness industry as young adults. The April 2012 survey found that 8% of clients were referred to medical or allied health services and 11% were referred from medical or allied health services.

Recent social trends, however, suggest that the fitness industry is also sensitive to factors other than income and demographics – such as innovation, advertising, changing lifestyle and generational factors, the increasing attention given by various forms of media, and public policy recognition of physical activity as a treatment and/or prevention against chronic health conditions. As governments and various health organisations continue to promote the need for physical activity, and as the fitness industry continues to innovate to meet the needs of clients, it is likely these factors will continue to drive industry growth.

6. Industry Outlook

In an effort to limit the rise in public health system costs, the Government has invested heavily in preventive health – as evidenced by the establishment of the National Preventative Health Taskforce in 2008 and the associated national strategy. The strategy focuses on increasing physical activity, particularly in obese and older populations, noting that physical activity is the ‘best preventative medicine for old age’ (National Preventative Health Taskforce 2009). Furthermore in 2010, the Commonwealth Government established the Australian National Preventative Health Agency, specifically to strengthen Australia’s investment and infrastructure in preventive health.

People participating in other, non-fitness industry forms of physical activity (such as organised sports) may continue to switch towards using fitness services (as illustrated in Chart 5.1). There are a number of factors behind this potential change. First, fitness is often more convenient, efficient and accessible for flexibility and time-constrained consumers and may continue to become even more so as the breadth of fitness services continues to increase with new programs, targeted products and delivery methods (e.g. 24/7 gyms). Furthermore, fitness may be preferred more by older cohorts, and those that are concerned about sport-related injuries.

Therefore despite the impacts of the global financial crisis and the relative downturn observed in the fitness industry in the last two years, it is expected that the industry will return to previous growth trends. As the fitness industry is a mature industry operating in a competitive market, growth in fee revenue represents a change in demand rather than an increase in profit at the margin.


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6.2 Industry innovation

Recent innovations in the fitness industry include the adaptation of existing programs to an exercise focus. Examples include adapting dance routines through Zumba, or Bodyjam or fighting programs such as Crossfit or kick boxing, or less intense programs such as yoga and pilates. Industry innovation is likely to continue to be catalysed by strong competition in the market and the diversity of market niche opportunities.

The market is also increasing the number of personalised services that is provides, as clients seek to maximise their return on time spent exercising, and exercise professionals seek to enhance fitness outcomes through increased motivation. The market’s strongest reported growth, albeit from a low base, is in the 24/7 business structure, where gyms focus on the provision of low cost, accessible gym facilities that maximise client convenience and flexibility.

As social values changes and trends in consumption change, the industry will continue to innovate to meet these needs. The 2010 industry survey (Kirby-Brown and Hall, 2010) released a trend report that highlighted ten ways the industry can innovate to meet changes in consumer demand. These included:

• Instant relevant information and its live consumption by consumers (e.g. self service programs, real time reviews of gym service – allowing instant adaptation).

• Application of video streaming (streaming of a class or example exercise).

• Personalisation (fitness programs, instant personalisation of machines on use).

• Use of social networks (to organise activities or build personal or brand awareness).

• Use of wireless devices (e.g. to record exercise programs or have admission organised through a mobile phone).

• Adaptation of programs for senior citizens.• Adaptation of programs for children.• Relaxation/’escape’ fitness programs.• Integration of services with charities and

community groups (e.g. ‘workout miles’ that become a charitable donation, integration of services with local initiatives).

• Increased focus on ‘green initiatives’ (e.g. use of green energy, use of recycled materials).

6.3 Health benefitsImpact of fitness services on physical activity of members

One of the biggest opportunities currently facing the fitness industry is the potential for it to link in with the general and allied health sector. Traditionally, fitness has been about servicing the ‘well’, while the ‘unwell’ have been left for health sector professionals such as general practitioners, physiotherapists and dieticians. As the health of Australians becomes more complex – particularly as the incidence of physical inactivity related and obesity related disease increases and the population ages – the need for the fitness workforce to be able to contribute to the management of health issues is growing.

Recent innovations in the fitness industry include the adaptation of existing programs to an exercise focus.

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6.4 Strategic directionsPolicy

Achieving a national system for professional registration and regulation remains a priority for the fitness industry. The industry dividends delivered by such a system include:

• Improved standards of service to customers;• Increased support for those working in the

industry (harmonisation of standards and expectations);

• Increased professionalism for the industry (unification of professional standards, establishing pathways to decrease the transient nature of the workforce); and

• Improved perceptions of the industry as it becomes more established within Australia.

Innovation

Future innovation remains a challenge for the industry requiring consideration of the main influences on consolidating long term commitment of clients – namely, location, professional staff, overall atmosphere, expanding services to target sub populations, capturing the niche markets, flexibility in price points and creative use of technology.

Members

Levels of membership satisfaction with the provision of fitness services varies suggesting that that there is room for improvement. Whilst 68% of all respondents to the latest industry survey were at least satisfied to some degree with the service provided (of whom 33% were very satisfied), 32% were not (of whom 24% were very unsatisfied).6 The survey also indicated that the fitness industry seeks to engage more and in different ways with existing members. Membership engagement activities include:

• Updating and tailoring facilities;• Increasing participation rates of current

members (i.e. incentives to encourage more frequent visits, longer and/or higher quality visits, with economies of scale in pricing);

• A focus on the health and fitness outcomes being achieved from their membership;

• Provision of a safe, supervised training environment to learn more about fitness; and

• Targeting particular niches of new consumers to meet the specific needs they have.

Initiatives to grow industry-wide membership were seen by respondents as being achieved by changing community perceptions about the fitness industry through focusing on

• Inclusiveness – ensuring that the community knows that the fitness industry caters to all individuals (e.g. not just healthy people); and

• Integration – being able to provide holistic services that link to other wellness offerings and initiatives.

Employment

Factors associated with the high level of turnover in staff and the level of professionalism within the fitness industry has been previously discussed in this report. In addition to these factors this survey indicated that businesses were becoming increasingly focused on measures to lift staff retention levels. These measures include:

• Increasing permanent staff (translations from casuals);

• identifying and promoting leaders;• increased support for staff training and

personal development;• improved management of staff; and• as needs diversify to specific customer groups,

recruiting and training multi-skilled staff with experience in particular niche areas (e.g. fitness for people with disabilities).

Competition

The fitness industry is a mature and highly competitive market, with low barriers to entry in some segments. Currently the four largest players have less than 40% of the market share (IBISWorld 2011), so it is likely that profit margins will stay relatively flat as major players seek consolidation through mergers and acquisitions to capture economies of scale. Additional revenue will also be sought through organic growth and efficiency gains – both strategies largely reliant on effective innovation.

6. As there were no reference units on the source document and the figures added to 107, percentage values were calculated from the number of responses presented.


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7. Financial Report

Annual Financial Report Discussion and Analysis

Discussion and analysis of the financial performance of Fitness Australia Limited for the twelve months ended 30 June 2012.

The year in review

In the 2012 financial year period, Fitness Australia generated total revenues of $3.835 million, which represents a reduction from the previous year of $69,134 or 1.8%. Revenue from professional registrations continued to perform strongly with an increase of $61,398 or 2.7%. At the same time, business membership revenue declined by $13,472 or 2.0% and affinity agreement revenue declined by $194,517 or 43.5%. The decline in affinity agreement revenue has come about as a direct result of the decision to enter into a partnership with a new insurance provider, Guild Insurance. The previous partnership with Marsh Insurance was terminated in November 2011. Despite the reduction in revenue associated with this decision, it is the view of the Board and the executive that this new partnership will provide significant value and benefits to fitness industry businesses and professionals over the longer term and affinity revenue will continue to grow over time.

Fitness Australia has continued to invest heavily in areas of strategic importance, including industry development, quality improvement, risk management, research and advocacy. At the same time, considerable investment has been made across key operational areas in order to provide services and support to the fitness industry. This includes investment in relationship management, industry support, marketing and communications initiatives and enhancements to information technology systems. As a result of this investment, the surplus of the company for the financial year after providing for income tax was $51,745, which has met budget expectations.

At the end of the financial year, Fitness Australia had 1,212 registered business members, including supplier members, and it had registered 13,585 professionals. The National Register of Exercise Professionals numbered 25,830 at the end of the year, which represents a 6.0% increase on the previous year.

The net asset position of $879,206 is $54,592 or 6.6% greater than the previous year. This indicates a strong balance sheet and good cash flows which will assist the association to continue to grow and invest in industry support and development and to realise its longer term strategic objectives.

Lauretta Stace

Chief Executive Officer Fitness Australia

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Fitness Australia Limited ABN: 51 131 422 403 Directors' Report for the Year Ended 30 June 2012 The Directors present this report on the company for the financial year ended 30th June 2012 Directors The names of the directors in office at any time during or since the end of the year are:

Paul William Kinghorn Robert John Parker Susan Jane Kingsmill Gregory Charles Oliver

Andrew Simon Nairn Melainie Cameron

Mark Gregory Forrest (resigned July 2011) Benjamin Jon Ritchie (resigned October 2011) Kerry Anne Chikarovski (resigned October 2011)

David Allan (appointed October 2011) Gregory James Will (appointed October 2011) Gregory David Brewer Hurst (appointed October 2011)

Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.

Company Secretary

The following person held the position of company secretary at the end of the financial year: Lauretta Stace who is also Chief Executive Officer, has held the position of Secretary since 3 June 2008.

Operating Results

The profit of the company for the financial year after providing for income tax was $51,745 (2011, profit of $263,592)

Review of Operations

A Review of the company operations during the financial year and the results of those operations are as follows; Revenue decreased $69,134 this year in comparison to last year. The main decreases in revenue were Affinity Agreements of $194,517 and Sponsorship of $33,060. Expenses and finance costs increased by $213,988. The main increases in expenditure were Registration expenses of $21,352, Human Resources of $115,097, Projects of $171,313 and Grant Revenue expenses $31,087.

Significant Changes in State of Affairs There have been no significant changes in the state of the company's affairs during the financial year. Principal Activities The principal activities of the company during the course of the year were:

To operate as a company representing, informing and supporting the fitness industry in Australia, administering the national registration scheme and setting and promoting high


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Fitness Australia Limited ABN: 51 131 422 403 Directors' Report for the Year Ended 30 June 2012

standards of training, education and continuing development for fitness professionals, stimulating informed debate on issues of interest in the industry, advocating policy positions, and promoting the role of the fitness industry to government, health agencies and the community.

There have been no significant changes in the nature of these activities during the year. After Balance Date Events

Fitness Australia Limited moved premises on 16th July 2012. The new premises is located at 90-96 Bourke Road, Alexandria, NSW 2015. Fitness Australia Limited has entered into a five year lease for the new premises. The lease includes a six month rent free period. The new location is not expected to materially affect the company's operations, the results of those operations or the state of affairs of the company in subsequent financial years.

Future Developments

The company expects to maintain the present status and level of operations and hence there are no likely known developments in future financial years.

Information on Directors

Paul William Kinghorn - Director Qualifications - General Manager/Owner - Equilibrium Health Clubs Robert John Parker - Director Qualifications - Head, Children's Hospital Institute of Sports Medicine - The Children's Hospital at Westmead Susan Jane Kingsmill - Director Qualifications - Owner - Hiscoes Fitness Centre Gregory Charles Oliver - Director Qualifications - Chief Executive Officer - Goodlife Health Clubs Andrew Simon Nairn - Director Qualifications - General Manager & Director- Flinders Campus Community Services Inc Melanie Cameron - Director Qualifications - Associate Professor - School of Exercise Science, Australian Catholic University David Allan - Director (appointed October 2011) Qualifications - Consultant to Genesis Fitness Clubs Gregory James Will - Director (appointed October 2011) Qualifications - Principal/Chartered Accountant - Armstrong Dawson Gregory David Brewer Hurst - Director (appointed October 2011) Qualifications - Owner/Director - Australian Institute of Fitness & Chairman of Australian Fitness Network.

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Fitness Australia Limited ABN: 51 131 422 403 Directors' Report for the Year Ended 30 June 2012 Meetings of Directors

Attendance at meetings:

Director Number Eligible to Attend Number Attended Paul Kinghorn 9 9 Robert John Parker 9 7 Susan Jane Kingsmill 9 9 Andrew Simon Nairn 9 9 Melanie Cameron 9 7 Gregory Charles Oliver 9 8 David Allan 8 8 Gregory James Will 6 6 Gregory David Brewer Hurst 6 5 Benjamin Jon Ritchie 3 3 Kerry Anne Chikarovski 3 1

Director Related Transaction

During the year the following transactions occurred between the company and the directors or related entities:

Gregory Hurst - Owner/Director of Australian Institute of Fitness paid membership of $1,650. Paul Kinghorn - General Manager/Owner of Equilibrium Health Clubs paid membership of $550. Andrew Nairn – Managing director of Flinders One Fitness paid membership of $825. Gregory Oliver - Chief Executive Officer of Goodlife Health Clubs of which 47 clubs paid memberships totalling $32,292.70.

All transactions occurred within a normal customer relationship on conditions no more favourable than those available to other customers.

Environmental Issues

The company's operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a State or Territory.

Dividends

The constitution of the company prohibits distribution of its income among its members and no dividends have been or will be paid.

Auditor's Independence Declaration

A copy of the auditors independence declaration as required under section307C of the Corporations Act 2001 follows this report.

Indemnities Granted

The company has paid premiums to insure each of the directors against liabilities for costs and expenses incurred by them in defending legal proceedings arising from their conduct while acting in the capacity of director of the company, other than conduct involving a wilful breach of duty in relation to the company.


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Fitness Australia Limited ABN: 51 131 422 403 Directors' Report for the Year Ended 30 June 2012

Paul William Kinghorn Director

Andrew Nairn Director

Dated this 14th day of September 2012

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Auditors Independence Declaration Under Section 307C of the Corporations Act 2001 To the Directors of Fitness Australia Limited

I declare that, to the best of my knowledge and belief, in relation to the audit of Fitness Australia Limited for the year ended 30 June 2012 there have been;

a) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and

b) no contraventions of any applicable code of professional conduct in relation to the audit.

Astims SWM Chartered Accountants

Bill Murphy Suite 6, Level 1, 55 Grosvenor Street, Neutral Bay NSW 2089 Dated this 4th day of September 2012


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Fitness Australia Limited ABN: 51 131 422 403 Statement of Comprehensive Income For the Year ended 30 June 2012 Note 2012 2011 $ $ Sales revenue 2 3,674,338 3,775,929 Other revenue 2 161,161 128,704 Marketing expenses (399,537) (575,804) Occupancy expenses (236,149) (220,627) Administration expenses (272,153) (272,252) Membership expenses (115,345) (122,209) Registration expenses (81,027) (59,675) Meeting expenses (88,937) (87,102) Human resources (1,931,918) (1,816,821) Projects (250,381) (79,068) Grant revenue expenses (37,624) (6,537) Other expenses (326,267) (281,986) Finance Costs 4 (12,284) (15,553) Profit before Income Tax 83,877 366,999 Income Tax Expense 5 (32,132) (103,407) Profit/(Loss) for the year 51,745 263,592 Other comprehensive income: - - Other comprehensive income for the year - - Total comprehensive income for the year 51,745 263,592 Profit/(Loss) attributable to members 51,745 263,592 Total comprehensive income attributable to members 51,745 263,592 The accompanying notes form part of these financial statements.

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Fitness Australia Limited ABN: 51 131 422 403 Statement of Financial Position As at 30 June 2012 Note 2012 2011 $ $ Current Assets Cash and Cash Equivalents 6 1,175,586 781,389 Trade and Other Receivables 8 72,082 60,878 Financial Assets 9 66,007 95,461 Current Tax Assets 10 12,793 - Other 11 250,219 514,193 Total Current Assets 1,576,687 1,451,921 Non-Current Assets Property, Plant and Equipment 12 363,409 261,977 Intangible Assets 13 153,417 186,736 Other 11 2,535 228,318 Total Non-Current Assets 519,361 677,031 Total Assets 2,096,048 2,128,952 Current Liabilities Trade and Other Payables 14 399,589 323,490 Current Tax Liabilities 10 - 50,356 Borrowings 15 98,680 69,325 Short Term Provisions 16 200,610 187,371 Other Liabilities 17 452,893 538,916 Total Current Liabilities 1,151,772 1,169,458 Non-Current Liabilities Borrowings 15 65,070 134,880 Total Non-Current Liabilities 65,070 134,880 Total Liabilities 1,216,842 1,304,338 Net Assets 879,206 824,614 Equity Reserves 18 630,660 632,874 Retained Profits 248,546 191,740 Total Equity 879,206 824,614

The accompanying notes form part of these financial statements.

Fitness Australia Limited ABN: 51 131 422 403 Statement of Financial Position As at 30 June 2012 Note 2012 2011 $ $ Current Assets Cash and Cash Equivalents 6 1,175,586 781,389 Trade and Other Receivables 8 72,082 60,878 Financial Assets 9 66,007 95,461 Current Tax Assets 10 12,793 - Other 11 250,219 514,193 Total Current Assets 1,576,687 1,451,921 Non-Current Assets Property, Plant and Equipment 12 363,409 261,977 Intangible Assets 13 153,417 186,736 Other 11 2,535 228,318 Total Non-Current Assets 519,361 677,031 Total Assets 2,096,048 2,128,952 Current Liabilities Trade and Other Payables 14 399,589 323,490 Current Tax Liabilities 10 - 50,356 Borrowings 15 98,680 69,325 Short Term Provisions 16 200,610 187,371 Other Liabilities 17 452,893 538,916 Total Current Liabilities 1,151,772 1,169,458 Non-Current Liabilities Borrowings 15 65,070 134,880 Total Non-Current Liabilities 65,070 134,880 Total Liabilities 1,216,842 1,304,338 Net Assets 879,206 824,614 Equity Reserves 18 630,660 632,874 Retained Profits 248,546 191,740 Total Equity 879,206 824,614



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Fitness Australia Limited ABN: 51 131 422 403 Statement of Changes in Equity For the Year ended 30 June 2012 Reserves Retained Total Pro�ts Equity As at 1 July 2010 632,874 (71,852) 561,022 Movements through State Entities - - - Pro�t/(Loss) for year - 263,592 263,592 At 30 June 2011 632,874 191,740 824,614 Movements through State Entities (2,214) - (2,214) Over provision for income tax 2011 - 5,061 5,061 Pro�t/(Loss) for year - 51,745 51,745 At 30 June 2012 630,660 248,546 879,206 The accompanying notes form part of these �nancial statements.

Fitness Australia Limited ABN: 51 131 422 403 Statement of Comprehensive Income For the Year ended 30 June 2012 Note 2012 2011 $ $ Sales revenue 2 3,674,338 3,775,929 Other revenue 2 161,161 128,704 Marketing expenses (399,537) (575,804) Occupancy expenses (236,149) (220,627) Administration expenses (272,153) (272,252) Membership expenses (115,345) (122,209) Registration expenses (81,027) (59,675) Meeting expenses (88,937) (87,102) Human resources (1,931,918) (1,816,821) Projects (250,381) (79,068) Grant revenue expenses (37,624) (6,537) Other expenses (326,267) (281,986) Finance Costs 4 (12,284) (15,553) Profit before Income Tax 83,877 366,999 Income Tax Expense 5 (32,132) (103,407) Profit/(Loss) for the year 51,745 263,592 Other comprehensive income: - - Other comprehensive income for the year - - Total comprehensive income for the year 51,745 263,592 Profit/(Loss) attributable to members 51,745 263,592 Total comprehensive income attributable to members 51,745 263,592 The accompanying notes form part of these financial statements.

Fitness Australia Limited ABN: 51 131 422 403 Statement of Cash Flows For the year ended 30 June 2012 Note 2012 2011 $ $ Cash Flows from Operating Activities Receipts from Members & Customers 3,562,923 4,209,333 Payments to Suppliers & Employees (2,937,676) (3,342,652) Interest Received 47,487 38,159 Income Tax (Paid)/Refunded (90,220) (85,091) Net Cash Inflow/(Outflow) from Operating Activities 7 582,514 819,748 Cash Flows from Investing Activities (Purchase)/Sale of Property, Plant & Equipment (175,101) (115,957) Net Cash Inflow/(Outflow) from Investing Activities (175,101) (115,957) Cash Flows from Financing Activities Proceeds/(Repayment) of Borrowings (65,607) (458,541) Inflow/(outflow) from discontinued operations (2,214) - (Increase)/Decrease in Value of Deposits 29,454 (4,770) Net Cash Inflow/(Outflow) from Financing Activities (38,367) (463,311) Net Increase/(Decrease) in Cash Held 369,046 240,481 Cash and Cash Equivalents as at 1 July 2011 781,390 540,909 Cash and Cash Equivalents as at 30 June 2012 1,150,436 781,390


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Fitness Australia Limited Notes to the Financial Statements For the Year ended 30 June 2012 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

The financial report is a general purpose financial report and it has been prepared in accordance with Accounting Standards, Urgent Issues Group Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. The financial report has been prepared on an accruals basis and is based on historical costs and does not take into account changing money values, or, except where stated, current valuations of non-current assets. Cost is based on the fair values of the consideration given in exchange for assets. Unless otherwise stated the accounting policies have been consistently applied. The following is a summary of the material accounting policies used by Fitness Australia Limited in the preparation of the financial report.

(a) Cash and Cash Equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less.

(b) Provisions

Provisions are recognised when the group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period.

(c) Employee Benefits

Provision is made for the company’s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled. Employee benefits payable later than one year have been measured at their nominal amount as it has been determined that they are not materially different from their present value.

(d) Property, Plant and Equipment

Each class of property, plant and equipment is carried at cost or fair value as indicated less, where applicable, any accumulated depreciation and impairment losses.

Plant and Equipment

Plant and equipment are measured on the cost basis less depreciation and impairment losses.

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets’ employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.

Depreciation

The depreciable amount of all fixed assets including buildings and capitalised lease assets, but excluding freehold land, is depreciated on a straight line or diminishing value basis over the asset’s useful life to the consolidated group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.


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Fitness Australia Limited Notes to the Financial Statements For the Year ended 30 June 2012 The depreciation rates used for each class of depreciable assets are: Low value pool 37.5 % DV Computer and office equipment 20.0 - 35.0 % Furniture and fittings 10.0 - 25.0 % Motor vehicles 12.5% PC

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains or losses are included in the income statement. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings.

(e) Impairment of Assets

At each reporting date, the company reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the income statement.

Impairment testing is performed annually for goodwill and intangible assets with indefinite lives. Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

(f) Income Tax

The income tax (revenue) for the year comprises current income tax expense (revenue) and deferred tax expense (revenue).

Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority.

Non-member income of the company is only assessable for tax, as member income is excluded under the principle of mutuality.

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Fitness Australia Limited Notes to the Financial Statements For the Year ended 30 June 2012 (g) Leases

Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership that are transferred to the company, are classified as finance leases. Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values.

Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term. Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses on a straight-line basis over the lease term.

(h) Revenue and Other Income

Revenue from membership fees is recognised upon receipt of monies for the period in which the payment relates. Revenue from registration fees received from fitness professionals on registration or renewal of registration is also now recognised upon receipt of monies. Revenue from insurance sponsorship under the fitness professionals insurance scheme is recognised in full when the company has a right to receive the revenue.

Interest revenue is recognised using the effective interest rate method, which, for floating rate financial assets is the rate inherent in the instrument.

All revenue is stated net of the amount of goods and services tax (GST). (i) Trade and Other Payables

Trade and other payables represent the liabilities at the end of the reporting period for goods and services received by the company that remain unpaid.

Trade payables are recognised at their transaction price. Trade payables are obligations on the basis of normal credit terms.

(j) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the ATO is included with other receivables or payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to, the ATO are presented as operating cash flows included in receipts from customers or payments to suppliers.


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Fitness Australia Limited Notes to the Financial Statements For the Year ended 30 June 2012 (k) Comparative Figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. Where the group has retrospectively applied an accounting policy, made a retrospective restatement of items in the financial statements or reclassified items in its financial statements, an additional statement of financial position as at the beginning of the earliest comparative period will be disclosed.

(l) Critical Accounting Estimates and Judgments

The directors evaluate estimates and judgments incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the group.

Key Estimates - Impairment

The group assesses impairment at the end of each reporting period by evaluation of conditions and events specific to the group that may be indicative of impairment triggers. Recoverable amounts of relevant assets are reassessed using value-in-use calculations which incorporate various key assumptions.

(m) New Accounting Standards for Application in Future Periods

The AASB has issued new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods. The company has decided not to early adopt any of new and amended pronouncements and that it would not have any material effect on the company’s financial statements.

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Fitness Australia Limited Notes to the Financial Statements For the Year ended 30 June 2012 2012 2011 $ $ 2. Revenue Sales Revenue Business membership 656,975 670,447 Associate membership 77,727 75,764 International (IHRSA) - 1,080 Marketing & business development 92,824 57,827 Advertising 121,794 110,056 Affinity agreements 252,761 447,278 Registrations 2,309,603 2,248,205 Accreditation 109,316 81,182 Sponsorship 3,000 36,060 Partnership income 50,338 48,030 3,674,338 3,775,929 Other Revenue Other revenue 9,674 4,912 Projects 90,000 60,000 Interest received 47,487 38,159 Recoveries 14,000 24,956 Profit on sale of non-current assets - 677 161,161 128,704 3,835,499 3,904,633 3. Expenses Loss on sale of non-current assets 20,173 - Auditor's remuneration 31,308 26,900 Marketing expenses 399,537 575,804 Occupancy expenses 236,149 220,627 Administration expenses 272,153 272,252 Membership expenses 115,345 122,209 Registration expenses 81,027 59,675 Meeting expenses 88,937 87,102 Human resources 1,931,918 1,816,821 Projects 250,381 79,068 Grant revenue expenses 37,624 6,537 Other expenses 259,912 241,919 Bad and doubtful debts 2,907 185 Motor vehicle expenses 11,967 12,982 3,739,338 3,522,081 4. Finance Costs Borrowing Costs 1,312 - Interest paid Computer finance 8,382 14,332 Toyota finance 2,590 1,221


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Fitness Australia Limited Notes to the Financial Statements For the Year ended 30 June 2012 2012 2011 $ $ 12,284 15,553 5. INCOME TAX Accounting Profit 83,877 366,999 Principle of mutuality adjustment 23,230 (43,632) Other adjustments - 21,321 Taxable Income 107,107 344,688 Income Tax Payable 32,132 103,406 6. Cash and Cash Equivalents Cash on hand 365 365 Term deposits (3 months or less) 89,165 113,578 CBA cheque account - 59,100 St George account - operation music 142 8,221 CBA online saver account 986,297 397,085 CBA business saver - DOHA 45,914 164,883 CBA premium 1 - DOHA 53,703 38,157 1,175,586 781,389 Reconciliation of Cash Cash and Cash Equivalents 1,175,586 781,389 Bank Overdrafts (25,151) - 1,150,435 781,389 7. Cash Flow Information Reconciliation of Cash Flow from Operations with Profit after Income Tax Profit after Income Tax 51,745 263,592 Adjustments for Non-Cash Components in Profit: Depreciation 86,816 73,683 (Profit)/Loss on Sale of Property, Plant & Equipment 20,173 (677) Changes in Assets and Liabilities (Increase)/Decrease in Trade and Other Receivables (11,204) 339,910 (Increase)/Decrease in other assets 489,757 46,373 Increase/(Decrease) in Trade and Other Payables 76,099 3,787 Increase/(Decrease) in Provisions & Tax Liabilities (44,849) 78,975 Increase/(Decrease) in Other Liabilities (86,022) 14,104 Net Cash Provided by Operating Activities 582,515 819,748

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Fitness Australia Limited Notes to the Financial Statements For the Year ended 30 June 2012 2012 2011 $ $ 8. Trade and Other Receivables Current Trade receivables 72,082 74,878 Less provision for doubtful debts - (14,000) 72,082 60,878 Total Trade and Other Receivables 72,082 60,878 9. Financial Assets Current Term deposits (> 3 months) 66,007 95,461 66,007 95,461 Total Financial Assets 66,007 95,461 10. Tax Assets and Liabilities Current Assets Provision for income tax 12,793 - 12,793 - Liabilities Provision for income tax - 50,356 - 50,356 Net Tax Assets 12,793 (50,356) 11. Other Assets Current Accrued income 2,111 45,947 Deposits paid 19,159 19,289 Operation music income & expenses - 126,946 Prepayments 101,997 24,211 Industry innovation fund (operation music) 126,952 297,800 250,219 514,193 Non-Current Industry innovation fund (operation music) - 224,471 Prepaid borrowing expenses 2,535 3,847 2,535 228,318


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Fitness Australia Limited Notes to the Financial Statements For the Year ended 30 June 2012 2012 2011 $ $ 12. Property, Plant and Equipment Plant and Equipment Motor vehicles at cost 89,938 89,938 Accumulated depreciation and impairment 23,905 7,031 66,033 82,907 Furniture & fittings at cost 297,259 155,919 Accumulated depreciation and impairment 50,932 40,074 246,327 115,845 Computer & office equipment at cost 82,263 76,935 Accumulated depreciation and impairment 52,367 37,172 29,896 39,763 Low value pool 21,153 23,462 21,153 23,462 Total Plant and Equipment 363,409 261,977 Total Property, Plant and Equipment 363,409 261,977 13. Intangible Assets Non-Current Software at cost 199,205 199,205 Accumulated amortisation 68,902 40,221 130,303 158,984 Website at cost 32,466 32,466 Accumulated amortisation 9,352 4,714 23,114 27,752 153,417 186,736 14. Trade and Other Payables Current Other creditors 3,168 - Trade creditors 277,925 189,965 PAYG withholding payable 32,921 28,831 Superannuation payable 47,966 34,040 Provision for GST 37,609 70,654 399,589 323,490 Total Trade and Other Payables 399,589 323,490

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Fitness Australia Limited Notes to the Financial Statements For the Year ended 30 June 2012 2012 2011 $ $ 15. Borrowings Current CBA cheque account 25,151 - Computer finance lease (APT) 55,824 48,287 Computer finance lease (Coresoft) - 3,823 Toyota finance 17,705 17,215 98,680 69,325 Non-Current Computer finance lease (APT) - 52,105 Toyota finance 65,070 82,775 65,070 134,880 Total Borrowings 163,750 204,205 16. Provisions Current Provision for fringe benefit tax 8,000 1,500 Provision for payroll tax 10,096 9,600 Provision for employee benefits 182,514 176,271 200,610 187,371 Total Provisions 200,610 187,371 17. Other Liabilities Current Accrued expenses 242,653 114,791 Unexpended grant funding (DOHA) 37,701 166,916

Unexpended grant funding (WA Dept of sports and recreation)

119,945

80,000

Unexpended funds (WA) - 159,376 Unexpended grant funding (SA) 12,894 17,833 Unexpended funding - NSW 39,700 - 452,893 538,916 452,893 538,916 18. Reserves Transferred equity 630,660 632,874 630,660 632,874


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Fitness Australia Limited Notes to the Financial Statements For the Year ended 30 June 2012 2012 2011 $ $ 19. Auditors Remuneration

Astims SWM Chartered Accountants were the auditors of Fitness Australia Limited

Auditor's remuneration 31,308 26,900 31,308 26,900 20. Business Details

The registered office of the company is: Fitness Australia Limited 90-96 Bourke Road Alexandria, NSW, 2015

The principal place of business is: Fitness Australia Limited 90-96 Bourke Road Alexandria, NSW, 2015

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Fitness Australia Limited ABN: 51 131 422 403 Directors Declaration for the Year Ended 30 June 2012 The directors of the company declare that:

1. The accompanying financial statements and notes of the company as at 30 June 2012 are in accordance with the Corporations Act 2001: a) give a true and fair view of the company's financial position as at 30 June 2012 and its performance for the year ended on that date; and b) comply with Australian Accounting Standards. 2. There are reasonable grounds to believe that the company will be able to pay its debts as and when they become payable.

This declaration is made in accordance with a resolution of the Board of Directors:

Paul William Kinghorn Director

Andrew Nairn Director

Dated the 14th day of September 2012


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ABS (Australian Bureau of Statistics) 2006, 8686.0 – Sports and Physical Recreation Services, Commonwealth of Australia, Canberra. ABS (Australian Bureau of Statistics) 2008, 3222.0 – Population Projections, Australia, 2006 to 2101 Australia, Sep 2008, Commonwealth of Australia, Canberra. ABS (Australian Bureau of Statistics) 2010a, 4177.0-Participation in Sport and Physical Recreation, 2009-10, Commonwealth of Australia, Canberra.

ABS (Australian Bureau of Statistics) 2011a, 4156.0.55.001 – Perspectives on Sport, Jan 2011, Commonwealth of Australia, Canberra.

ABS (Australian Bureau of Statistics) 2011c, – Australian National Accounts: Input-Output Tables – Electronic Publication, 2007-08 Final, Commonwealth of Australia, Canberra.

ABS (Australian Bureau of Statistics) 2011d, 6554.0 – Household Wealth and Wealth Distribution, Australia, 2009-10, Commonwealth of Australia, Canberra.

ABS (Australian Bureau of Statistics) 2011e, 6401.0 – Consumer Price Index, Australia, Dec 2011, Commonwealth of Australia, Canberra.

ABS (Australian Bureau of Statistics) 2011f, 4156.0 – Sports and Physical Recreation: A Statistical Overview, Australia 2011, Commonwealth of Australia, Canberra.

ABS (Australian Bureau of Statistics) 2010b, 4156.0 – Sports and Physical Recreation: A Statistical Overview, Australia, Oct 2010, Commonwealth of Australia, Canberra.

8. References

ABS (Australian Bureau of Statistics) 2009, 4156.0 – Sports and Physical Recreation: A Statistical Overview, Australia, 2009, Commonwealth of Australia, Canberra.

ABS (Australian Bureau of Statistics) 2008, 3222.0 – Population Projections, Australia, 2006 to 2101 Australia, Sep 2008, Commonwealth of Australia, Canberra.

ABS (Australian Bureau of Statistics) 2006, 8686.0 – Sports and Physical Recreation Services, Commonwealth of Australia, Canberra.

Deloitte Access Economics 2012a, Fitness Industry Workforce Report 2010 – 2020, Report for Fitness Australia, Canberra, Australia.

Ezypay 2010, Australian Fitness Industry Survey 2010, Ezypay, Australia.

IBISWorld 2011, IBISWorld Industry Report X0025 Fitness in Australia, IBISWorld, New South Wales.

Kirby-Brown, C, Hall, S 2010, The 10 top consumer trends impacting the fitness industry in 2010.

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Postal Address:

PO Box 6453 Alexandria New South Wales 2015

Phone 1300 211 311Fax 1300 734 613 Email [email protected]

www.fitness.org.au

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