Gym Group scraps expansion as coronavirus hits membership

The Gym Group said it would halt expansion plans to conserve cash after losing 21,000 members in March because of the coronavirus outbreak.

The budget gym chain said it traded well in the first two months of 2020 and members hit a record 891,000 by the end of February. But the COVID-19 outbreak reduced gym use and triggered membership cancellations and freezes in the first two weeks of March, sending member numbers down to 870,000.

Gyms were already in the spotlight as potential places for the coronavirus to spread before the government urged people to minimise interaction in public venues. With further restrictions on citizens' movement in the pipeline gyms are likely to be hit by further falls in use over the coming months.

Reporting results for the year to the end of December the company said adjusted pretax profit rose 36% to £13.97m on revenue up 23.6% to £153.1m. Statutory pretax profit, which includes exceptional items and amortisation of intangible assets, fell 10.6% to £6.2m.

The company said it had a strong balance sheet with non-property net debt little changed at £47.4m. It has put new gyms on hold after those under construction are finished and reduced maintenance and capital expenditure to essentials only.

Operating and marketing costs will be cut and £1.6m of cash will be saved by not paying the final dividend. Gym Group has drawn down £20m remaining in its revolving credit facility, leaving it with £28.9m of cash.

The company's shares, which had lost almost three-quarters of their value over the previous month, rose 5.1% to 86.20p at 09:51 GMT.

Richard Darwin, Gym Group's chief executive, said: "Whilst 2019 was another successful year in which The Gym Group delivered substantial growth in members, revenue and profits, we are now focused on planning for the potential impact on our business of COVID-19.

"To date, we have seen a small impact on trading and all 179 of our gyms remain open. We go into a period of anticipated disruption with an established membership base, a cash generative business model and a strong balance sheet. As the scale of the outbreak escalates we have contingency plans in place."