August 2022
The Gym Group forecasts EBITDA of up to £105m by 2025

25 May 2022

The Gym Group’s (TGG) plans and profit forecasts were presented to analysts and investors during the company’s recent Capital Markets Day.

The event was led by CEO Richard Darwin who said EBITDA is projected to get to £95-105m by 2025, up from £74m in 2019.

Darwin also confirmed that TGG's ambitions to build a 300-strong network are realisable by 2025.

This keeps sight of the company’s previous forecast, where Darwin envisioned a “clear path to 300 sites over the next two to three years”.

The bullish presentation went down well with investors, with brokers tipping the company positively for its 'undervalued structural growth'.

In terms of expansion, 28 further sites will open in 2022, with 61 per cent on retail parks. The next most popular sites are on the high street and adjacent to supermarkets.

Between 25 and 30 clubs are set to launch in 2023 and 2024, with most of these sites already secured.

Darwin said the market currently offers a unique opportunity to accelerate expansion, describing the favourable conditions as 'distress in retail and leisure' – specifically in premium and mid-market sectors, which are providing greater availability of sites at affordable rents – as well as strong and resilient demand for health and fitness from consumers who need low-cost options because of the cost of living squeeze.

He confirmed that in order to optimise revenue going forward, headline prices increased by 8 per cent across 178 sites throughout April as part of a yield management review, with TGG still remaining best value in competing locations when compared with rival clubs.

Existing member renewal prices are being kept below the headline price to reward loyalty and discourage churn.

Membership costs are fluctuating depending on geographical location and whether the club is rural or urban. For example, in South Sunderland, members can sign up for as little as £9.99 per month, but in some areas, such as Oxford and Brighton, the cost can be around £25 per month, with several clubs in London upwards of £35.

Growth in low-cost segments generally is a prevailing trend that shows no sign of abating and is happening in other industries as well as health and fitness. Darwin said a +21 per cent CAGR is typical, compared with only +1 per cent for mid-market and premium businesses. He also noted that budget operators typically outperform the market during downturns.

The company confirmed that its business had transformed since completing an IPO on the London Stock Exchange in November 2015. Highlights include: opening 200 clubs by the end of 2021; launching 104 new sites, with 36 being fast transactions from just four acquisitions; new web and app platforms that enhance members’ experience; and being ranked number 25 in Glassdoor’s top 50 places to work.

It also addressed the new branding and name change from The Gym to The Gym Group which is being rolled out throughout 2022.

New signage will be released in July, the web and app will be rebranded in August and a marketing campaign will launch in September. Darwin expects the new name and look to deliver more awareness for the company and to increase member numbers. The strategy is partly driven by the theory that people are looking for gyms to be friendly, approachable and inclusive.

BACKGROUND
TGG's growth strategy is pitched around the success of three pillars: product and operational delivery, satisfied members and flexible product formats.

The product delivery includes low-cost, no contract membership, free group exercise classes, access to 200 digital classes, gyms with 24/7 access and personal trainer support for members. Satisfaction is based around providing affordable fitness, with 32 per cent of the operator’s offering in the 20 most deprived local authorities, and operational values comprise creating formats that reflect members’ needs, such as app-based workouts and flexible live classes spaces.

According to Darwin, the app improvements, which now include 200 workouts from partner Fiit, a real-time busyness feature to help in-club member flow and contactless entry has won high engagement. Usage and ratings have also increased as it now scores 4.7 on the Apple App Store.

Overall, during Q1 of 2022, there were over 14m gym visits, 19m app sessions and 6.5m web sessions.

Data shows that there continues to be an elevated interest in health and fitness. Referring to Deloitte’s European Health & Fitness Market report – which was analysed in the April 2022 issue of HCM – it showed that fitness frequency is now shown at above pre-COVID levels and expected to increase further. It also observed that the greatest barrier to against people joining a gym is cost.


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