The Gym Group has tackled investor chatter about stagnation in market penetration by collaborating with PricewaterhouseCoopers (PWC) to release an independent report showing the number of low-cost gyms could double by 2026 to between 1200 and 1400 locations.

The report, 'UK Low Cost Gyms – Market headroom forecasts increased', which was released yesterday in advance of The Gym Group’s full-year results today, dispels concerns that penetration rates are stuck at 14 per cent.

Speaking to HCM, Gym Group CEO, Richard Darwin said: “Independent research confirms that the low-cost market can at least double its number of sites, supporting our ambition for future organic growth, alongside the maturing of our current estate.”

In reporting its annual results, The Gym Group – which bought portfolios of clubs from both Lifestyle and EasyGym in 2017/18 – said it achieved revenues of £123.9m on the combined estate for 2018, a 35.6 per cent increase on the £91.4m recorded in 2017.

Statutory profit before tax was £10m against £9.2m in 2017, giving dividends of £1.30 per share, against £1.20 per share in 2017.

Darwin said the company will continue to upgrade its acquired sites through 2019 and told HCM that once converted to the Gym Group model, the locations are yielding 20 per cent more revenue.

He attributed this significant improvement to 24/7 opening, ‘extra stimulus’ in the form of reduced prices and more powerful marketing – The Gym Group embarked on its first consumer TV advertising campaign earlier this year and is pursuing a ‘balanced media plan’ using social media, digital and TV.

While growth continues in the newer locations, return on capital invested (ROCE) on mature sites remained steady at 31 per cent in 2018, against 32 per cent in 2017.

The company signalled its intention to open a test site for a new small box concept in 2019 and although a location has not yet been revealed, Darwin said the format would be designed to fit a 5,000-8,000sq ft footprint.

He told HCM the new concept will enable The Gym Group to trade in smaller market towns and locations with reduced catchment areas. A rollout will follow once the concept has been proven.

The announcement reflects the direction being taken by Gym Group rival Pure Gym, which announced a small box concept recently, as industry operators continue to pivot their business models in the battle for locations and market share.

Darwin told HCM 2019 has started well for The Gym Group, saying: “We’ve had a successful start to the year and our brand now serves over 800,000 members, with 10 million visits already recorded this year. We plan to open 15-20 gyms in 2019 as we extend access to affordable fitness nationwide.”

On the employee front, he reported that the company’s new-style PT contracts were trialled in 2018 at 24 sites and will be rolled out through 2019 now back-office systems and processes have been fine-tuned to support them, saying: “We aim to be market-leading in terms of our employment proposition, and we expect the new contracts to be rolled out to the entire estate by the end of the year.”

FOOTNOTES

For more details on the Gym Group employment options and vacancies, click here.

Download the PwC report here.