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Pandemic cuts The Gym Group's revenues by half, but company eyes return to growth

Revenues fell 47.4 per cent, as the group lost 45 per cent of its trading days
CEO, Richard Darwin says the company will reopen in a cashflow positive position
The Gym Group has retained three-quarters of its members
The operator opened eight new sites during 2020, taking the total number of clubs in its estate to 183
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During 2020 we demonstrated the resilience of our business and its culture, even in the most challenging of times
– Richard Darwin, CEO The Gym Group
Credit: The Gym Group

The Gym Group saw its revenues cut by nearly half during the pandemic, a direct result of the group losing 45 per cent of its trading days during 2020.

Announcing its full-year results (the year ending 30 December 2020), the budget chain reported revenues of £80.47m – down 47.4 per cent from the £153.13m recorded in 2019.

The bottom line was hit harder, as the company announced pre-tax losses of £46.5m – signalling a 433 per cent fall from the £14m profit reported for 2019.

The Gym Group lost more than a quarter (27.2 per cent) of its members during the pandemic, with the number of memberships across its sites falling from 794,000 in December 2019 to 578,000 in December 2020.

In the two months since December 2020, the group has lost a further 31,000 members – as of 28 February, it had a total of 547,000 members.

Despite the disruption, the operator opened eight new sites during 2020, taking the total number of clubs in its estate to 183.

The pandemic has also resulted in the penetration of its premium LIVE IT offer increasing. A total of 22.5 per cent of its members are now on the LIVE IT membership, compared with a penetration rate of 18.9 per cent in 2019.

As health clubs in England are preparing for reopening on 12 April – with Scottish gyms to follow on 26 April – Gym Group CEO Richard Darwin said the company was now "ready to rebuild membership and return to growth", and that it would reopen in a cashflow positive position – likely to be the only health and fitness operator to do so, due it its low gearing.

“During 2020 we demonstrated the resilience of our business and its culture, even in the most challenging of times," Darwin said.

"By freezing subscriptions when closed and by providing an excellent COVID-secure environment in our gyms when open, we have retained most of our members.

"By supporting colleagues with topped-up furlough pay, honest communications and a comprehensive wellbeing plan we have high levels of staff retention and engagement.

"What more, by managing cash carefully we will emerge from the crisis with manageable levels of debt (£58m of non-property debt).

"We are ready to start rebuilding our memberships levels and growing our estate from 12 April, extending affordable fitness at a time when health and fitness has never been more important.”

Analysts at investment bank Liberum expect Gym Group to seek another loan deal later this year, in order to fuel its growth.

"While £42m of liquidity remains, we expect that another covenant reset in June will be required to unlock funding and to take full advantage of the plentiful new site opportunities – and bring openings back up to the 15-20 per year levels," Liberum said in its analysis.

Darwin added that although the company – along with the entire health club sector – was disappointed in the level of financial support offered by the government during the pandemic, especially around VAT – the group remains positive about growing its operations once facilities are reopened.

"We were disappointed that some of the arguments we made, as an industry, fell on deaf ears," Darwin said.

"The benefits of health and fitness clearly weren't deemed as substantial enough for us to be put on a level playing field with hospitality.

"But it's not all about support. We – and a couple of other companies in the sector – have demonstrated that even without a great deal of assistance we can drive stronger levels of expansion and create high-quality products for our members.

"So, as we restart our expansion drive, that's what we intend to do. We are pretty focused on not waiting for more government support but actually getting on and growing our membership and our estate."

Darwin said any COVID-19 recovery programmes on offer would be delivered through its network of personal trainers.

"We will certainly be encouraging our PTs to offer recovery programmes and I believe there will be a good level of demand from people looking for such schemes," Darwin said, adding that the group has retained around 1,400 of its 1,500 PTs during the pandemic.

The Gym Group's share price has rallied since reopening was announced and currently stands at £2.44 per share (18 March 2020) against a low of £0.75 on 20 March 2020.

The company published social impact data earlier this week which showed that it generated £1.8bn in social value since 2016. Find out more here.

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The Gym Group saw its revenues cut by nearly half during the pandemic, a direct result of the group losing 45 per cent of its trading days during 2020.

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