The Gym Group’s Next Chapter strategy is delivering results and the and the UK-based operator expects full-year results at the top-end of recently revised market expectations.

The low-cost operator today announced a 12 per cent increase in revenue, to £112.1 million, for the first half of 2024, and a pre-tax profit of £0.2 million, compared to a £6.1 million loss during the same period last year. EBITDA was up 19 per cent to £41.7 million.

The guidance for like-for-like revenue growth in 2024 has now been raised to between 5 and 6 per cent, from a 4 – 5 per cent set out in March, following encouraging trading conditions through the summer.

CEO, Will Orr, said: “Further positive trading momentum during the first half reflects the continued early benefit of executing on our Next Chapter strategy set out in March. We've increased membership, revenue and profit and our proposition is more resonant than ever in a growing market.

“We're also well on track to deliver against our target of opening circa 50 new high-quality gyms over the next three years, funded from free cashflow. We have detailed plans in place for the key autumn trading period and are well set to deliver full year results at the top end of recently revised market expectations.”

Seven new sites have opened in 2024 – in Orpington, London Euston Road, Manchester Oxford Road, Welwyn Garden City, London Plaistow, Dudley and London East Ham – four in the first half and three since the end of June. The company is on track to open 10 to 12 new sites this year – in line with previous announcements – and there's a pipeline of 15 to 20 sites for 2025.

A £90 million three-year combined bank facility was signed in June, made up of £45 million term loan and £45 million revolving credit facility with improved terms. Free cashflow generated in the first half year was up 73 per cent on the same period last year to £24.5 million. Orr says the plan is to deliver sustained growth from free cashflow, with an ROIC target of 30 per cent on new sites and an average of 25 per cent across the 240-gym estate.

Orr told HCM that good progress is being made towards this goal through a combination of increasing revenues and reducing costs. “One of our non-executive directors is Simon Jones, formerly of Premier Inn, who is experienced in reducing build costs while still improving the product," he said. "We'll avoid tired and under-invested gyms at all costs and are replacing equipment regularly and investing in the estate.”

Already this year, £2.2 million has been invested in mature gyms, upgrading facilities and equipment at 150 sites and rolling out the Hyrox programme to more locations, which will be in 50 sites by the end of the year.

Another recent change is a spotlight on retention, including a refreshment of the app with this in mind. “The low-cost sector has been all about acquisition," said Orr, "but we think the industry will start moving more towards retention as well.

“We're using behavioural science to engage with members during the first 45 days – when there is the most chance of them leaving – and helping them to form habits. Our communications today are less about our proposition and more about what they gain from their membership to nudge behaviour change, help habit formation and reward them when they make progress.”

Membership is up 6 per cent since the year-end to 905,000 and visits are up by 5 per cent on the first half of 2023. A 9 per cent increase in average revenue per member per month has been achieved, thanks to price increases – the average headline rate was £23.94 in June, an increase of 9 per cent on the previous year.

The introduction of three membership options, including off-peak, has helped to retain members while pushing prices up. Customer satisfaction scores are also rising.

Data analysis is playing a key role in Orr’s tightening of the business. “Everything we do is tested," he said, "from site selection to digital marketing to make sure we’re getting it right”.

"One area this is impacting is marketing, where the approach is shifting from national to local, both in terms of messaging and deployment," he continued. "We know most of our members live within a couple of miles, or a short drive-time, so we’re focusing our digital marketing and our billboard campaigns on those localities, which does allow for some tailoring to the location.”

Going forward, Orr plans to keep a close eye on cost efficiency that will enhance new site returns, improve mature site performance by refining the operating model, optimising energy usage and innovating in cost management of new clubs.

“It’s an exciting company to be part of,” says Orr. “It had all the right ingredients when I joined – capable people, a great product and strong customer scores. There's the opportunity to apply ever more precision in day to day strategy and deploy data to inform decision-making in order to go to the next level.

“It’s great to know that 905,000 people are benefiting from the product and doing something positive for themselves, which also helps the country," said Orr. "We get some great feedback about life-changing transformations going on in our gyms. What we’re doing is a good thing and the clear journey is to keep growing.”

Will Orr will be speaking at the HCM Summit in London on 24 October. Click here to book your tickets.