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Gym Group to exploit 'once in a generation opportunity' to accelerate growth

The Gym Group said it will utilise the most favourable property market in its history to rapidly grow its estate
The budget operator plans to open 40 new sites by the end of 2022
The company has opened seven new sites during 2021
Number of memberships had bounced back to 730,000 in June, from 547,000 in February
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The Gym Group says it intends to exploit "the most favourable property market in its history" and "weakened competition in the sector" to ramp up the growth of its estate in the UK.

Reporting its results for the first half of 2021, the company reported that it's recovering rapidly from the COVID-19 lockdowns, driven by a strong return of members to its clubs.

The Gym Group had 730,000 members at the end of June – a quicker recovery than expected, bouncing back from 547,000 in February 2021.

Group-wide revenues for the six months to 30 June were £29.3m, down from £37.3m the year before. The period to 30 June was depressed by the company only trading for two and a half of the six months.

Despite the accelerating recovery in membership numbers during the period, the company reported pre-tax losses of £28.5m – compared to the £28.6m loss it posted in the first half of 2020.

In its last set of financials unaffected by the pandemic (full-year report for 2019) revealed on 19 March 2020 – just days before the COVID-19 forced clubs to close – the group reported revenues of £153.1m, up from £123.8m in 2018. Adjusted profit before tax for the 12 months to 31 December 2019 was £14.0m, up 36.0 per cent from the 2018 figure of £10.3m.

Presenting the 2021 results, CEO Richard Darwin said the business – which now has 187 clubs – had become cashflow-positive as soon as it was allowed to reopen in April.

This was partly thanks to its efforts to optimise yield, with slight price increases for new joiners across 60 sites, targeted increases for existing members on legacy rates and efforts to increase its Live It premium membership.

Nearly a quarter (24.7 per cent) of members now have a Live It membership – up from 22.5 per cent on 31 December 2020.

Darwin added that the primary focus has been – and will continue to be – on capitalising on the "unique opportunities for growth" created by the pandemic.

He renewed a target of opening 40 new sites by the end of 2022 and listed four factors that are creating these opportunities – a higher than ever demand for health and fitness, weakened competition in the sector, The Gym Group's financial strength and a property market that is "as good as the company had seen in its 12-year history".

Darwin said: "As a business, we feel we have a once in a generation opportunity to expand our estate and drive market share as a result of the change we've seen in the property market and the impact on the rest of the health and fitness sector.

"And we've already made good progress on that – having opened seven new sites in the year to date we're well on course for the 40 that we set out to open by the end of 2022.

"Thanks to our shareholders and banks, we've emerged as the best-capitalised business in the sector with the funding to be able to expand our estate very rapidly."

To see the full results reported by The Gym Group, ​​click here.

FOOTNOTE

Operational and Financial Update for H1 2021 – official statement from The Gym Group

• Strong recovery in membership numbers following re-opening, with total members at 30 June 2021 of 730,000, up from 547,000 at the end of February 2021

• Average headline price of a standard DO IT membership increased to £19.11 in June 2021 (vs £18.81 in December 2020 and £18.55 in June 2020)

• LIVE IT penetration at 30 June 2021 was 24.7% of total members, up from 22.5 per cent at 31 December 2020

• Number of trading days lost in H1 2021 was similar to H1 2020, however, a lower membership base in H1 2021 (due to extended closure periods during 2020 and 2021) resulted in a 21.4% reduction in revenue vs H1 2020

• Strong cost control and Government support during closures, together with strong recovery on re-opening, limited Group Adjusted EBITDA less Normalised Rent loss to £8.1m, in line with H1 2020

• EBITDA and cash flow positive in the months when gyms were fully open (May and June)

Current Trading Update and Outlook

• Equity placing completed 2 July 2021 providing £30.3m (net) of financing for accelerated rollout programme

• In addition to four sites opened in H1, we plan to open 40 new sites in the 18 months to December 2022, of which three have opened so far in July and August

• Total membership at 31 August 2021 was 721,000, a small decline from 30 June 2021 in line with expectations

• Gym visits remain strong at 1.4 visits per member per week since re-opening

• Non-Property Net Debt (including finance leases) at 31 August 2021 was £28.3m with headroom of £73.3m against £100m RCF

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The Gym Group says it intends to exploit "the most favourable property market in its history" and "weakened competition in the sector" to ramp up the growth of its estate in the UK.
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