Gym Group low-cost offering means "more upside potential"

Alliance News

(Alliance News) - Gym Group PLC on Wednesday said it will post a first-half revenue rise, with its membership numbers and estate on the up.

In the six months ended June 30, revenue jumped 12% to GBP112.1 million from GBP99.8 million a year earlier. Its membership numbers stood at 905,000 as at June 30, rising from 867,000 a year prior and 850,000 on December 31.

It noted that in the first half of the year, it opened four new gyms, taking the total to 237. Gym Group added that it remains on track to open 10 to 12 new gyms by the year-end.

Average revenue per member per month in the first half rose to GBP20.44 from GBP18.81 a year prior.

Peel Hunt analysts believe there is scope for further growth in that measure.

"We believe there is more upside potential, with the average headline price more than GBP1.50/month below PureGym's and almost GBP28/month below the private traditional sector average," Peel analysts added.

"We still assume that 11 gyms open in 2024 versus four in 1H. The core estate is rebuilding profitability, new openings are continuing to perform strongly and net debt falling."

Peel Hunt rates Gym Group at 'buy' with a 225.0 pence price target. Peel believes the firm's valuation is "too low given the company's growth prospects".

Gym Group shares rose 5.8% to 129.75p each in London on Wednesday morning.

Gym Group Chief Executive Will Orr said: "We are making encouraging progress with our strategic priorities under our Next Chapter growth plan, delivering good growth in membership and yield. We have further strengthened our financial position, whilst stepping up our opening programme in line with our target to open 50 high quality sites over the next three years, funded from free cashflow. After a strong first half, we expect to deliver full year results at the higher end of market expectations."

By Eric Cunha, Alliance News news editor

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