RICH PICKINGS: Branson's brave face

It's been hard to miss Sir Richard Branson in the last few weeks.

There he was in Melbourne, leaping from a red tram to promote his new Virgin Active chain of gyms. Then it was off to Sydney, where he stepped out of a helicopter at the launch of V-Australia, Virgin Blue's new offshoot. A few days later he was at a swimming pool hamming it up with the Australian swimming team. After that, it was off to Los Angles, where he stood on the wing of jumbo jet.

"Recession?" Branson asked the press on the tarmac at LA International airport. "What recession?”

"The way to get out of recessions is try to expand out of recessions and create more jobs, bring airfares down and try to offer better quality of products.”

It's a terrific entrepreneurial attitude and typical Branson. But are his claims of expanding in the downturn just typical Branson bluster?

Figuring out exactly how much Richard Branson is worth or how his business empire is performing is not easy.

Branson's sprawling Virgin Group is said to include hundreds of separate companies, covering everything from airlines, trains and telecommunications to retail, entertainment, media, financial services and health.

But Branson's personal empire seems much bigger than it actually is. A large number of the companies are run as joint ventures with local players (such as Australian airline Virgin Blue, in which Branson's Virgin Group retains a 25.5 per cent stake while others simply operate under the Virgin brand.

A good example of this is the US chain of Virgin Megastores, which recently announced it was closing down due to soaring rents and falling sales. Branson actually sold this business in 2007, but it still trades under the Virgin moniker – for a royalty fee, of course.

The vast majority of Virgin companies are also private, which makes it hard to estimate movements in Branson's fortune. Last year, Forbes magazine valued Branson at around $6.8 billion, although this is likely to have fallen sharply, particularly as he heavily exposed to the ailing British economy.

"You feel like it could be a Japanese-style recession [in Britain] that goes on for 20 years – it feels that bad," he said during his recent trip to Australia.

Branson owns a 10.4 per cent stake in Virgin Media, a conglomerate that provides broadband, pay TV, phone and mobile services to around seven million British customers. The company is listed on the Nasdaq and was the subject of takeover speculation in 2006 and 2007, with private equity groups apparently set to offer $US30 a share. That never happened, and in the last 12 months Virgin Media shares have fallen by 70 per cent to just over $US4. The value of Branson's stake has tumbled from $795 million to $233 million.

His 25.5 per cent stake in Virgin Blue has taken a similar hammering, falling in value from $350 million to just $53 million. Like most airlines around the world, Virgin Blue is struggling badly and recently announced plans to sack around 400 people.

Yet for all his substantial losses, Branson does seem to be actively trying to expand and take advantage of subdued asset prices.

His biggest push is in the airline business. In the United States, his US airline Virgin America recently launched an attempt to muscle in further on the trans-American route by starting flights from Boston to San Francisco and Los Angeles. The decision to proceed with the launch of V-Australia despite Virgin Blue's clear problems is more proof that Branson is trying to take advantage of the difficult conditions in the airline industry to grab market share.

"It's a great time to be expanding. The cost of buying new planes is very cheap. The cost of fuel is very cheap,” he told the Boston Globe last month.

Branson is making small expansionary moves in other parts of the empire too.

Bringing the Virgin Active gym chain to Australia is a relatively minor play, given the chain will start with only sites in Sydney and Melbourne, but there is scope to grow.

Late last year, Virgin Media launched Britain's fastest broadband package (offering 50MB per second) and is also pushing heavily into video on demand.

Branson is even believed to be considering the acquisition of the Honda formula one team, although he says he won't go near the sport until the business model is improved and teams stop losing hundreds of millions of dollars each year.

But despite these positive moves, you get the feeling this downturn is likely to shake the foundations of the Virgin empire.

So many of his companies operate in sectors reliant on discretionary spending, particularly travel and tourism, entertainment, retail and media. Even the Virgin Active gym chain is likely to suffer as consumers trim their budgets.

The airlines could be real millstone around Branson's neck. The industry is in a truly terrible state and it looks a near certainty that operators around the world will collapse or be forced to merge.

The Virgin airlines do not look to be in good shape. The fall in Virgin Blue's share price indicates investors have all but given up on the company and even smaller rivals such as regional airline Rex say the airline is vulnerable to a takeover. There have also been questions raised Virgin America's financial position and last week the company was forced to refute speculation in the US press that it was racking up unsustainable losses.

One thing that is certain is that the ever-upbeat Branson will never talk down his empire. You certainly can't fault his attitude.

"Great fortunes can be made in times of recession,” he said last month.

"It's not easy, but everything is half the price it was a few months ago. So if you can, if you've got a bit of money, there's a fortune to be made."