The Gym Group sets hearts racing as post-lockdown demand outstrips expectations


The Gym Group PLC (LON:GYM) set investor hearts racing on Wednesday as the chain said its branches have outperformed expectations since reopening after lockdown restrictions were eased in the UK.

In a trading update, the company said its gyms in England, Scotland and Wales had reopened on April 12, April 26 and May 3 respectively, and since then it had seen “strong demand” with total membership increasing to 729,000 by May 24 from 547,000 at the end of February.

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Meanwhile, the firm said member satisfaction levels were “significantly higher than pre-COVID levels” and the average number of visits per member per week since reopening has risen to 1.5 from 1.1 in the same period in 2019.

Looking ahead, the company said it expects the next three months to trade “more in line with seasonal norms”, with the summer period historically quitter for gyms. As a result, it said it tends to see “limited net gains in overall membership levels during this period”.

The group also said net debt at the end of April was £63.1mln with outstanding deferred rent and VAT of a further £9.4mln, versus a total bank facility of £100mln. At current membership levels, the company said it expects to be cash-flow positive before expansionary spending and to generate cash flow towards its new site rollout.

Looking at its expansion plans, the company said it has opened four new gyms since April 12, taking its total to 187 branches, adding that all four are “performing extremely well and have grown strong levels of membership despite a limited pre-sale marketing period”.

The group also said it is entering new leases to build its pipeline for 2021 and 2022, saying the changes in the commercial property market had presented “opportunities to acquire excellent sites at affordable rents”.

“Our members are delighted to be working out in the gym once more with visits per member and new joiner sign-up rates at record levels. With membership levels growing strongly, we are building our pipeline of new gyms to take advantage of what we see as a unique opportunity to extend affordable fitness to even more locations across the UK”, Gym Group chief executive Richard Darwin said in a statement.

In a note, analysts at house broker Peel Hunt upped their target price for the group to 325p from 300p and retained their ‘buy’ rating as they upgraded their forecasts for the company in 2021 and 2022.

Shares in the company jumped 4.2% to 269.8p in early trading.


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