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News report: Set for growth
Will Orr has been talking to HCM about the company’s new strategy for 2024, as Kath Hudson reports
Will Orr, CEO of The Gym Group, revealed the company’s results for 2023 recently, along with a trading update and a new strategy, called Next Chapter, which will involve strengthening the core business to increase returns from the estate, accelerating rollouts and establishing new revenue streams.
1. Strengthening core business
“There’s a significant opportunity to improve member retention, which will drive yield and volume,” Orr told HCM. “The highest churn occurs in the first 45 days of a membership, before a habit has formed. We’ll be focusing on helping new members build lasting habits – whether that’s via our expert teams in the gyms, or through digital channels, such as our app.”
A number of growth-drivers have been identified to deliver increased returns: yield and revenue management; member acquisition and improving retention, with Orr’s experience with recurring subscription models at The Times a key reason for his recent appointment.
“Our analysis shows that within the catchment of our existing 233 sites, there are a further circa five million people, who are either members of another gym or considering joining a gym,” said Orr.
2. Accelerating rollout
The company opened six sites in 2023 and is planning 10-12 this year, 16-18 in 2025 and 20 in 2026 to make a total of 50 as growth ramps up.
Analysts have been excited by the company’s plans to open these with an ROI of 30 per cent, against the current 20 per cent. Orr did not divulge how this will be achieved, although Pure Gym and Basic-Fit have been reducing build-costs over the last year, so it’s likely The Gym Group will follow suit as one part of the strategy.
Low-cost gym market potential
As yet unpublished research into the low-cost health club market from PricewaterhouseCoopers (PwC), found the potential for a further 600 to 850 locations in the UK, with two-thirds at the current size and the other third delivered in smaller formats to fit less densely populated areas.
PwC says there’s 10-15 years’ growth potential in the UK market at the current rate of development.
3. Broadening growth – new revenue streams
Broadened growth options are being strategically assessed, but might include further developments to the existing proposition; format innovation; investigating new channels to market; and introducing adjacent revenue streams, such as corporate wellness programmes.
Given the commercially sensitivity of these moves, details were not given, although it’s noteworthy that operators such as Everyone Active are adding access to medical advice to their packages through partnerships with companies such as Health Hero.
More: www.hcmmag.com/TGG14/2/24
• NEWSFLASH:
Will Orr will be speaking at the HCM Summit on 24 October in London. Find out more at www.HCMmag.com/summit
Revenues across the business were up 18 per cent year-on-year from £172.9 million to £204.0 million.
2023 closed with membership at 850k, reaching 909k at March 2024. Membership increases were driven by new site openings, not by growth in existing clubs, which remained stable.
Average revenue per member per month was up 9 per cent. The ‘Ultimate’ membership was chosen by 31.7 per cent of members, while off-peak – launched in 2023 and starting at £13.99 – is drawing in new members who are older and have greater time flexibility.
Average visits-per-member were up 10 per cent and 92 per cent of members rated The Gym Group either 4/5 or 5/5 for overall satisfaction.
Group Adjusted EBITDA Less Normalised Rent was up 1 per cent from £38.0 million to £38.5 million and there was a bottom line improvement of 57 per cent on statutory loss after tax, from (-£19.3 million) to (-£8.4 million) through cost control.
Non-property net debt dropped 13 per cent from (-£76 million) to (-£66.4 million) and cashflow was up 62 per cent from £16.7 million to £27.0 million.
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