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Gym Group hammered by closures

The fitness group has had to contend with a massive loss of trading days through 2020
March 18, 2021
  • Potential opportunities through pressure on UK commercial property market
  • Members signal that they have become more focused on fitness

Negligible debt, but around £306m in lease liabilities. For Gym Group (GYM), the main problem centred on how to meet liabilities of any description when its sites were open for only 55 per cent of the year’s trading days.

The company plans to open three new gyms in April and one in May, and management believes that the stress placed upon the commercial property market by the pandemic presents an opportunity. Is this apparent optimism justified? Well, the company said that 97 per cent of current members have indicated that have become more determined to get back to the gym because of the lockdown restrictions.

Consensus forecasts are for an earnings loss of 21p a share in 2021, before recovering to positive EPS of 3.15p in the following year. After the balance sheet cut-off, the company drew down £51m from its revised rolling credit facility. With a current monthly cash-burn of £5m, that provides sufficient headroom as the group anticipates being close to cashflow break-even when its gyms re-open. Yet with so many lingering clinical uncertainties, we move back to hold. 

Last IC view: Buy, 245p, 29 Aug 2019

GYM GROUP (GYM)   
ORD PRICE:248pMARKET VALUE:£ 411m
TOUCH:246-248p12-MONTH HIGH:275pLOW: 75p
DIVIDEND YIELD:NILPE RATIO:NA
NET ASSET VALUE:93p*NET DEBT:£352m
Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201674.06.904.501.00
201791.09.205.601.20
201812410.05.401.30
20191536.222.600.45
202080.5-47.2-23.1nil
% change-47---
Ex-div:-   
Payment:-   
*Includes intangible assets of £86.4m, or 52p a share