Richard Darwin is to step down from his role as CEO of The Gym Group (TGG).

He has spent the past seven years leading the low-cost gym chain – a period during which the UK business has grown significantly, from 63 to 229 gyms nationwide.

He will remain available to support the company until July 2023.

John Treharne, TGG founder, will take up the reigns as executive chair while the company searches for a new CEO.

"It's been an honour to help The Gym Group grow into a nationally recognised presence in affordable fitness over the last seven years, first as CFO and then as CEO," Darwin said.

"I'm extremely proud to have navigated the business through the pandemic, developed the brand and put in place a first-class management team which is capable of taking on this next phase of growth.

"For me, this is the right time to step down; TGG is a great business with enormous potential. I wish John and everyone at TGG ongoing success."

The company has not released any details of the financial arrangements associated with his departure, but The Times is reporting that Darwin had a salary of £337,000 in 2022 and total remuneration of £486,000 in 2021.

The Gym Group's trading has been on par with or ahead of other gym operators, but the company has been slightly off-track against its stated trading aims over the last year or so.

Darwin's departure was announced as the group provided a trading update for the year ending 31 December 2022.

During the year, the company achieved a record number of new openings for a single year (28), increasing the total number of sites to 229, with performance of the new site openings 'in line with expectations'.

Revenues for the 12 months to 31 December 2022 were £172.9m – up 12.9 per cent from the £153.1m achieved in the last full pre-pandemic year of 2019.

TGG ended the year with a total of 821,000 members across its estate – an increase of 14.3 per cent from the pandemic-affected 2021, while average revenue per member per month for the year (ARPMM) was £17.82.

Uptake of TGG's premium price product, Live It, increased slightly. At the end of 2022, 29.6 per cent of total membership were on a Live It price plan, compared to 27.1 per cent at the end of 2021.

The company said total like-for-like revenue for 2022 in the pre-COVID estate (sites open up to end of 2018), remained at 90 per cent of pre-pandemic numbers, indicating that trading remained stable in Q4 2022, but did not grow.

Year-end non-property net debt was £76.1m (Dec 2021: £44.1m) including £11.5m of finance leases. The company said it intends to remain within its stated guidance of 1.5-2.0x for non-property net debt.

Looking ahead to 2023, the group said visit frequency and satisfaction scores remain materially higher than pre-COVID scores and January trading has kicked off in line with expectations with a "similar profile of demand to previous early January trading periods".

The Gym Group's energy costs are 96 per cent hedged until the end of 2023, with other hedging in place beyond that. The company said its expectation is that utility costs will increase by around £10m in 2023 compared to 2022.

TGG expects the current difficult economic environment and consumer behaviour to continue and as a result intends to "take a more measured approach" to new site openings in 2023 – particularly in the first six months – with financing being done in-house.

"The pipeline of new site opportunities remains promising, but we are planning for all new site growth to be self-financed in 2023," TGG said.

"We currently expect up to 20 new openings in the year with a strong second half weighting."

John Treharne, said: “We're in one of the busiest times of the year for our sector.

"It's clear that even with cost-of-living pressures, many consumers regard gym membership as essential, and they are ever more focussed on receiving value for money.

"This plays to our strengths. We will continue to grow carefully and fulfil the company’s significant potential to the benefit of all of our stakeholders."

TGG is the only traded health club operator in the UK, but analysts' response to its successes indicate that they remain inexplicably wary of the sector.

With profits of around £40m a year, even on a 10x multiple, taking into account debt, the company should be valued at around £324m, however the current share prices place it at only £237m with share prices lower than at IPO.

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