Gym Group flexes on robust pre-tax profits for 2019

The fitness company have reported strong results whilst bracing itself for continuing impact of coronavirus

Article updated: 19 March 2020 11:00am Author: Joe Healey

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  • Group released as expected solid results for 2019 with adjusted pre-tax profits rising 36% to £14mn
  • Revenues jumped for the year by 24% to £153.1mn highlighting another robust year of growth for the flexible gym, a model which has proven to be a consumer favourite over the years
  • Investors will welcome the announcement of a final dividend of 1.15p a share, totalling a fully pay-out of 1.6p compared to 2018’s 1.3p
  • Despite showing good momentum heading into 2020, it’s inevitable coronavirus will take its toll as the group reports seeing lower attendance and increasing cancellations which has resulted in a 71% decrease in the share price YTD
  • Recommendation: Now trading on an attractive forward earnings multiple of roughly 8x, we view the shares as a ‘Buy’ for investors willing to accept a higher level of risk

Gym Group released solid results as expected for 2019, with adjusted pre-tax profits rising 36% to £14m. Revenues also jumped for the year by 24% to £153.1m, highlighting another robust year of growth for the flexible gym, a model which has proven to be a consumer favourite over the years. The board declared a final dividend of 1.15p a share, totalling a full pay-out of 1.6p compared to 2018’s 1.3p. Following a positive trading update back in January for the second half of 2019 the group seemed to be continuing this momentum heading into 2020, with a total of 891,000 members at the end of February. However, with the virus starting to heavily impact consumer lifestyles, they are starting to see lower attendance and increasing cancellations which has resulted in a 71% decrease in the share price YTD.

2019 was another successful year for the Group who saw continued momentum in member numbers and a strong progress in membership for their LIVE IT movement which now represents 18.9% of members. What was a rising proposition has, like many other businesses, unfortunately succumbed to coronavirus pressure with the company noting a drop in attendance and memberships on their sites. I think where investors are most concerned is the possibility of wide-spread gym closures which would significantly stunt growth in the group. The Group remained relatively highly-levered which has helped contribute to their impressive growth over the years, but should this start to dry up and gyms close, this could weigh on the company’s outlook.

Looking past this, their business model remains strong and should the virus impact fade away, demand will likely continue where it left off. In light of this, and management’s proven ability to be innovative there is still room for growth. Now trading on an attractive forward earnings multiple of roughly 8x, we view the shares as a ‘BUY’ for investors willing to accept a higher level of risk.


All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.

Joe Healey

Investment Research Analyst

Following his completion of the graduate scheme, Joe is an Investment Research Analyst covering equities. He holds a BA Hons Business Management degree and is currently studying towards CFA Level II after passing CFA Level I in June 2019.

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