The CEO of Armah Sports speaks to Kate Cracknell about creating defensible USPs and doing two fitness IPOs in five years

Back in November 2020, HCM spoke to Fahad Alhagbani – CEO of Armah Sports – about the founding of this new company and his previous time establishing and building Saudi operator, Fitness Time.

At that point, Armah Sports was on the verge of opening its first B_Fit and Optimo clubs, which Alhagbani described as “business class” and “first class” respectively. The vision: to launch the world’s first fully-fledged smart clubs.

Fast-forward to 2024 and Armah Sports has opened 12 clubs – three Optimo and nine B_Fit – with further locations secured for two Optimo and seven B_Fit openings in 2025–26.

Perhaps most notably, the young business has already completed a successful IPO – Alhagbani’s second in five years, having successfully floated Fitness Time in 2018.

With Alhagbani due to speak at the inaugural HCM Summit on 24 October (www.HCMsummit.live), we felt the time was right for an update on all things Armah Sports.

How’s the business performing?
Optimo and B_Fit are both doing very well. Our three Optimo clubs reached capacity in late July and now have waiting lists of hundreds of people. It’s crucial we don’t overwhelm the clubs, so we monitor access on a daily basis, capping the number of active members.

In doing so, we could theoretically fall short of our short-term sales targets, but we ensure our member experience and high service standards are upheld. Members appreciate this and it builds our brand equity.

Our B_Fit clubs are also reaching capacity, but here we’ve taken a different approach to exert control, removing our one- and three-month membership options so only six- and 12-month memberships are now available to new joiners.

We’re still maturing as a business – our first club opened just two-and-a-half years ago – but we ended 2023 above break even with six clubs open and operating. Profits in H1 2024 then exceeded expectations, reaching almost £2m with 12 clubs open compared to a loss of £1.5m in H1 2023.

We see these clear profits of H1 2024 as the first big step in establishing stability for future growth. The outlook for 2024 and beyond is positive and aligned with the business plan we promised our investors.

Tell us about the Armah Sports IPO
Two-and-a-half years ago, the Saudi stock market was very healthy and we wanted to take advantage of that, raising capital to grow and achieving that growth within the market rather than outside it.

The Capital Market Authority in Saudi Arabia recognises that family businesses are an important part of the economy and encourages them to IPO. However, we didn’t know if it would be possible for such young business.

The other reason for wanting to IPO was a desire to grow within a powerful governance framework. We’re 11 brothers and sisters, all shareholders in the business – mostly as silent partners – and we’re the first generation. There are now second and third generations to pass the business onto and working under the umbrella of governance helps ensure continuity and sustainability.

How did you go about it?
We sought advice from the CEO of Saudi Fransi Capital, which did the 2018 IPO of Fitness Time with us, and he said yes, provided we had proof of concept and a clear business plan for the next five years. What we already had in our favour were a story, a history and a track record – all crucial in building trust among investors.

Even though we’d already done an IPO, it wasn’t any easier the second time around and was still a process that took 22 months, but the discussions that took place were invaluable in further enhancing our strategy and business performance. We secured strong, long-term investors – including a sovereign wealth fund – and listed on the parallel market in November 2023.

Initially listing at £5.80 a share, we currently fluctuate around £19.00 – £20.00 a share, with a market cap of approximately £563m – which is similar to the valuation of Fitness Time when we listed it after 13 years of trading.

This is what all the knowledge and learnings we’ve brought with us are worth. We’ve achieved the same market cap at Armah Sports in less than half the time it took at Fitness Time.

We also won the Best IPO of the Year 2023 – Nomu – Parallel Market at the 2023 Saudi Capital Market Awards, beating 34 other IPOs.

Credit has to go to the whole team for this, from our consultants and advisors to the Armah team that supported the IPO while also building and opening clubs.

As a team, we complete each other. As far as I’m aware, nobody else in the fitness industry has created two companies from scratch and taken them to IPO in the space of five years.

Our next goal is to upgrade Armah Sports to the primary stock market. We’ll aim to do that in the next two years.

What’s your growth strategy now?
We’ll continue with our existing strategy and business plan, leveraging our knowledge and confidence in what we’re doing to grow our network.

We’ll open two new clubs in 2025, both B_Fit, followed by seven in 2026: two Optimo and five B_Fit. We’ve focused on Riyadh and Jeddah so far, but are currently negotiating locations in the eastern province – Mecca and Medina – for 2026–27.

We continue to focus on prime locations in the five major cities of Saudi Arabia. We get so many offers for second- and third-tier cities, but we don’t want to go down this road. The plan is to create an intimate network this time. We’re focused on experience, on service standards, on quality over quantity, keeping a close eye on all clubs from HQ. We’ll get to 30 clubs and then grow only slowly.

Our first 12 clubs and our head office were built on land we acquired with the proceeds of our 2018 IPO – an investment for the future of the business. This also meant we had no landlords to pay during COVID, so it also put us on a strong footing with the banks.

Banks will normally loan 60 per cent of a facility’s value, but in one case our land ownership meant we were offered 100 per cent.

Moving forward, unless there’s a piece of land we particularly want to buy, we’ll follow an asset-light model, as our pre-IPO process found investors prefer this.

You’re using the op co/prop co model
We’ve just signed a deal with the publicly-listed Banan real estate company, whereby the real estate company will purchase land and build and fit out clubs to our specifications. Armah will then install the equipment and operate the clubs and we’ll share the profits. It represents another great way to grow, with six clubs already agreed. They will likely open in 2027 and are in addition to the pipeline I’ve already outlined.

Saudi is an interesting and growing market, as evidenced by the many international companies wanting to enter it. We have no reason to look overseas for growth at this stage.

The market has already doubled in size over five years and will double again in the next five to near maturity. We’ll need to look at diversification at that point – something we’re already planning for.

What about the facilities in your clubs?
I don’t usually just talk about facilities when describing our brands, because facilities aren’t a defensible USP. Anybody can create beautiful facilities.

What matters is how you put everything together and translate this for your members through your branding, brand personality, language and communication. This is an important part of building a bridge between your clubs and your members and I don’t think the fitness industry focuses on it nearly enough to optimise the opportunity.

We’ve invested heavily in all these areas and it has translated well into the way the brands are expressed. Optimo has the feel of a hotel – it’s very classy –and the B_Fit concept is more progressive and avant garde. These different personalities come across strongly in everything from the club environment to the way the brands and staff speak to members, both face to face and through our marketing channels.

You’ve embedded mental health support into your clubs
Awareness of mental health remains very low here in Saudi, so we’re taking it slowly, but we’ve signed an exclusive agreement with UK-based wellness culture platform Minderful (www.minderful.com) and we run sessions for members and staff in English and Arabic.

We’re not a medical institution, so our role is to educate and raise awareness rather than to treat people. So far, we’ve run sessions for members on sleep, body image and controlling stress and they’ve all been very positively received.

Will you launch more brands?
We have two more brands already cooking. One we’re calling BYLD, the other is yet to be named.

We’re still focused on Optimo and B_Fit for now, but we’re continuing to develop our other two concepts so they’re ready to go when the time is right. Timing will be determined by two factors. The first is our agreeing the exact market positioning for the two brands, which remains a moving target and we’ll continue to tweak their positioning until the final minute.

The second factor is the market being ready for them. We were originally looking at the low-cost segment – I mentioned that in my interview in HCM in 2020 – but we didn’t want to be the first mover. There are now two brands in that space and we’re continuing to observe their progress. We’ll decide how to position our two new brands over time.

We’re in a great position to do this, because our family has created the fitness market in Saudi Arabia. My eldest brother Abdulmohsen founded Bodymasters in 1994, which I then joined. Together we created Fitness Time and now Armah Sports. It’s one of our competitive advantages: we have the knowledge of the market because we created it, pivoting and improving with each new business.

Do you worry about growing competition?
I used to worry, but now we simply focus on what we do. We play in a different league.

Of course we keep an eye on the market to understand competitors’ strategies, but we’re confident we’ll always find ways to differentiate and strengthen our position and competitive advantage.

It’s also true that the Saudi fitness market is large enough for lots of players to succeed. We, therefore, see competition as a positive force that keeps the engine running well and drives the success of the overall market.

Tell us about your smart club model.
Abdulmohsen and I had already opened more than 100 Fitness Time locations when we created Armah Sports, so we didn’t want to repeat ourselves, but to create something new to differentiate ourselves in the market.

We had a vision of creating the world’s first smart clubs, inspired initially by discussions among my hugely supportive REX Roundtable community.

In the past, we prioritised growth and the fitness element of clubs over technology, which was arguably our weakest link. This time, we developed the tech infrastructure and then built our clubs on top of it – we built the backbone and then integrated everything else into that ecosystem.

We have an excellent building management system, for example, which is essentially about energy optimisation. It monitors our air conditioning, water consumption, pool temperatures and so on to enable our buildings to be greener. It’s why we were awarded LEED certificates for both Optimo and B_Fit.

We’re also entirely paperless across the entire Armah Sports business and all our systems can talk to each other. Club access is via facial recognition and members will soon be able to use Amazon Alexa voice technology to book classes, request information about our trainers and book personal training.

We have Innovation Labs at Optimo and B_Fit where we pilot tech – VR and AR, for example – that members can try. and we can assess – we also anticipated EVs before they were on Saudi streets, installing charging stations at our clubs.

Our ecosystem also includes smartwatch connections to apps and equipment, but of course that isn’t new for fitness.

This is a non-stop journey, constantly pushing the envelope to make our clubs as smart as we can. We view ourselves as a tech company, not just a fitness company, and we’re open to adopting any tech that will optimise operations and enhance the member experience.

It has to make sense, however – if you adopt too much technology, you can make it very complicated for yourself and your members. You have to be careful where you draw the line.

Are you using AI?
Fitness as a sector is slow to adopt technology, which means we can take our time to observe and see what else is coming. This is our approach when it comes to AI.

Nevertheless, machine learning is already part of the software in our clubs and is producing a lot of data. We want to be able to use this to inform our decisions as a business and to precisely target our marketing, so building our data analytics structure is one of the main things we’re working on at the moment.

What’s your vision as a company?
Now, as for the past 30 years, our vision and driving force is to have a positive impact on the community and on the Saudi lifestyle. This is important to the whole family and is the emotional purpose that keeps us going.

In Saudi Arabia, 65 per cent of the population is aged under 35 years. We want to unlock the human potential of our country by using fitness to help them lead a healthier life.