Gym Group sees healthy jump in memberships and revenue – trials new pricing structure
The Gym Group saw its membership grow by nearly 10 per cent in the first half of 2023, resulting in a major boost to revenues, with the million member milestone now in sight.
Reporting its results for the first six months of the year, the low-cost operator said it had 867,000 members on 30 June 2023, an increase of 9.7 per cent on the June 2022 figure of 790,000. The total is also up 5.6 per cent since the end of 2022, when it had 821,000 members.
The company went into the pandemic with 891,000 members, but this fell to around 500,000 after the lockdowns.
Revenue grew 18.5 per cent year on year, reflecting a healthy increase in yield (average revenue per member per month) of 8.4 per cent. Like-for-like revenue grew 6.9 per cent year on year. Chair, John Treharne said: "This is an encouraging and solid performance which builds confidence that the journey to long-term recovery is well underway."
The Gym Group attributes the improvements in revenue to both the average price of a standard 'Do It' membership, which increased by 5.4 per cent to £22.02 and the penetration of its premium 'Live It' membership, which grew to 30.7 per cent of total membership (up from 28.7 per cent in 2022).
Working with pricing experts at Simon Kucher and Partners, the company reviewed its pricing last year, identifying a £4 gap against other low-cost operators and has been working to close this to drive profitability.
Treharne said The Gym Group is also trialling a three-part pricing architecture at some of its clubs and expects this to contribute to the drive for profitability once rolled out. The company, which is still in growth mode, registered a statutory loss after taxation of £6.1 million in H1 2023, versus a loss of £3.4 million in H1 2022.
Increases in energy prices and other inflationary pressures meant operating costs (excluding depreciation, amortisation and impairment) increased 25 per cent to £65.2 million from £52 million in the same period in 2022, but Gym Group chair, John Treharne said the positive trading results offset the impact of this inflation, maintaining EBITDA.
EBITDA – less normalised rent – was broadly flat in line with expectations, while net debt has fallen by £6.4m since September 2022.
Treharne said the company has extended its bank facility to 2025, with Barclays new to the syndicate, joining HSBC and Natwest and replacing Sabadell. The focus continues to be on reducing net debt and keeping borrowings within two times net debt as the company drives growth.
The Gym Group slowed its rollout in 2023 against 2022 – when it opened 28 new locations – following a more prudent opening strategy this year in order to be self-funded. The mature estate has also had £7m of investment this year.
Two new locations have opened so far during 2023 – in Edinburgh and Accrington – and the company plans to open a further four to five by the end of the year (the fifth may fall into early 2024) before accelerating the roll-out to 10 to 12 sites in 2024.
New clubs which are being built in residential areas are proving successful, with Treharne saying the company is seeing good performances from its 2021 and 2022 openings. The occasional disposal will take place where sites are not performing or leases are under review.
New CEO, Will Orr, took up his post on 1 September, with Treharne saying: "The actions we've taken to strengthen the management team,including the appointment of Will Orr as CEO, coupled with our financial position and the group’s customer proposition is enabling us to continue to take advantage of the many growth opportunities in our market.”
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