Gym boss sweats to build empire

Phillip Mills is excited about plans for the new Les Mills at 88 Quay St in Britomart, which he says is becoming a hip spot in Auckland. Photo / Steven McNicholl

On Sundays, Phillip Mills takes a mountain bike to the Woodhill State Forest. On Mondays he lifts weights with a personal trainer.

On Friday he does a lunch-time RPM class at Les Mills Victoria St and he does a Bodybalance class twice a week.

The chief executive of the Les Mills gym empire is perched on a hollow retro-style yellow cube chair in the new $10 million Les Mills Britomart - the most advanced gym of its type in New Zealand, which opened this month.

After telling how 90,000 people are teaching Les Mills classes in 75 countries, a somewhat worn out-looking Mills says, with a slight American inflection: "We have a long way to go, a lot of growth in all sorts of ways.

"Last year we launched our clothing and merchandise range. This year we have our first home DVD going out in the United States ... we think we'll wind up having tens of millions of US dollars spent on informercials.

"Once we become a consumer brand in America, everything changes," says Mills, who is son of the late Colleen Mills and New Zealand sports champion and former Auckland mayor Les.

"They've made some pretty significant guarantees that they will spend several million dollars promoting our product. We film that DVD in Auckland at Les Mills Victoria St in June. It goes to air in December/January next year.

"The biggest country for us is the US where we don't own gyms but we licence our classes to 3000 gyms, we train their teachers, etc.

The New Zealand business is about as big as our international business is now. But ... in America, we think we can be in 10,000-plus gyms by 2020."

These are the ambitious global expansion plans of Les Mills NZ and Les Mills International - privately owned companies headquartered in Auckland which are valued at a collective $130 million.

Phillip Mills spurned a $100 million offer for the New Zealand business three years ago but could not say precisely what Les Mills International's valuation was.

The relatively simple company structure traces back to either Phillip or his family, and he admits to owning 85 per cent of Les Mills NZ and 62-63 per cent of Les Mills International, giving him a personal net worth of about $70 million. However, in the last decade he has appeared only once on the NBR Rich List.

"I've avoided the Rich List, really. [The New Zealand business is] not something I ever intend to sell and it's really about the mission - it's about building a better holistic health system in this country and the world."

Expansion has not gone off without hitches in a business that can be copied easily. Two years ago, Les Mills International worked with US federal authorities to break a North Carolina-based group selling counterfeit versions of Les Mills fitness trademarks and resources.

Erick Heck, a former employee of a US fitness club chain where he was a Les Mills instructor, his wife Margie Heck and an associate, David Grant, admitted to illegally copying, selling and distributing counterfeit Les Mills instructor resources, including music CDs, DVDs and other items, the company said.

They also admitted doing this outside the US and names from Britain and the Netherlands were given up.

Search warrants and cease-and-desist threats flew around and an out-of-court settlement was reached.

The Christchurch earthquake has been a disaster for the business, shutting gyms in the CBD and Ferrymead and forcing members at Hagley Park, Lincoln University, Sumner, Fendalton/Papanui, Mt Pleasant and elsewhere to use other gyms.

"Christchurch was, aside from that horrible disaster, a disaster for us. We had just invested $16-$17 million," Mills said of the company property at 203 Cashel St.

"We had knocked down our old building, bought three adjacent properties and built a brand new beautiful green building ... but we won't be able to open it until Christmas because it's in the cordon area. Financially, it's a rotten one."

Les Mills also faces increasing competition from cheap Australian gyms that are arriving here.

In the new Britomart gym, Mills is surrounded by dozens of $8000 cross-training machines. These stand in rows facing the waterfront on Auckland's Quay St, amid Warren & Mahoney's funky 1960s-style interior fitout with bold primary colours, polished concrete, giant screens and floor-to-ceiling glass windows.

On the staircase are the words "Since 1968", showing the longevity of the business established by Mills' parents.

"This Britomart development is going to become the area of Auckland," Mills said. "There's this big Nike concept store going in across the road, Lululemon's (Athletica) first outlet store, a trendy cycle store going in right next to us, all of these beautiful cafes here."

The gym at 88 Quay St is about 200m from Britomart, 200m from the ferry terminal and directly across the road from hundreds of relocated staff from Westpac and Ernst & Young. Gaining 5500 new members, without gouging its Victoria St site, is the Britomart gym's aim.

Leasing the premises is an unusual step because the business owns most of its properties.

Two in Auckland illustrate that: 186 Victoria St West is a $7.6 million property, according to QV records, and 269 Khyber Pass Rd in Newmarket, where a new gym is planned, is worth $5.4 million. Both are owned by Les Mills Property.

Blair Wolfgram is national manager of property and facilities for Les Mills NZ and has been involved closely in the Britomart project.

More than $1 million has been spent on lighting, sound systems and multi-screens at Britomart.

"There is more than $8 million of fitout and equipment in this one. By the time you get through your full start-up costs, this will be a $10 million investment.

"When we do lease, we try to lease for 50 years. Les Mills Victoria St has been there for 43 years."

New gyms at Riccarton and Newmarket will come next, then a swimming pool at Victoria St.

When asked about ownership, Mills is candid: "I own about 85 per cent of Les Mills NZ and maybe 62-63 per cent of Les Mills International, but both have staff and former staff [shareholders] as well.

"We think we can probably open 10 more gyms over the next 10 years, mainly in Auckland."

Both Les Mills companies hold monthly board meetings. Directors include South Island businessman Brian Kreft and Auckland lawyer and Mills' neighbour Gerard Curry.

Mills saves his property investments for the business. He admits to owning no houses overseas, where he spends much of his time, and he and wife Jackie stash cheap mountain bikes to get from hotels to work.

"I don't believe in collecting material acquisitions. If we are going to survive as a [human] race, with a tremendous explosion of affluence, we are going to need to find ways to consuming less materially."

The Les Mills empire has been under his control for more than three decades but succession plans are in place. Daughter Diana is a creative director at Les Mills International's head office in Auckland's Centre St.

Son Les, 22, has finished university at Santa Monica and will work in the gym industry in the US for a year.

Mills' parting shot is a plea not to put him on anybody's rich list. He prefers to stay well below the corporate radar, thank you.

Phillip Mills on his parents, Colleen and Les Mills

"Dad is 76, staying fit and still living in Pt Chevalier. After the Auckland mayoralty (1990-98) he spent a couple of years as chief executive of Les Mills International, then company chairman for a few years before handing that role to Brian Kreft.

He stayed on as a director for several more years after that and overall played a key role in the success of that company. He still helps my sister and I with our businesses.

"He also maintains his interest in athletics. Many people are aware of his background in sport as a competitor, in business and politics, but few are aware he was New Zealand's national athletics coach in the '70s, and won the Halberg Award for Coach of the Year in 1997. He has only recently given up coaching athletics. He guided Valerie Vili [Adams] and her coach Kirsten Hellier. Beatrice Faumuina and a number of other top athletes have been part of his squads.

"Mum died tragically of melanoma five years ago. She was an incredibly energetic woman - played sport all her life and was still winning World Masters Athletics titles in her 60s. We all thought she would live to be 120, but she had fair Irish skin and all of that athletics training in our ozone-depleted atmosphere had been quietly killing her."

Phillip David Mills
* Son of former Auckland mayor Les and the late Colleen Mills, NZ sports champions.
* Father of Diana, 24 of Auckland and Les, 22, of California
* Married to Jackie Mills.
* Commonwealth Games 400m hurdles finalist 1974 and 1978.
* Won track scholarship to the University of California, Los Angeles.
* Graduated in philosophy from UCLA, 1978.
* Returned here to work for Les Mills gyms, founded 1968.
* With Jackie Mills, bought Les Mills after the 1987 sharemarket crash.
* Ernst & Young Entrepreneur of the Year 2004.
* Author of Fighting Globesity with Jackie Mills.
* Lives in Herne Bay, keen cyclist and sportsman.