Gym Group (GYM) is in the process of converting the 13 locations bought from easyGym in June into its own branded sites, just as it completes the rebranding of the gyms acquired from Lifestyle. These conversions have constricted profitability in the period under review, with branding expenses and closure periods combining to reduce the cash profits margin by 190 basis points to 30.1 per cent. However, chief executive John Treharne expects the transitional effects won't be as pronounced in the second half as easyGym locations should be cheaper and faster to convert.
Strip out the cost of acquisition, conversions, and exceptionals, and pre-tax profits improved 8.4 per cent to £7m. Indeed, analysts at Peel Hunt envisage a 77 per cent increase in adjusted pre-tax profits from the full-year mark through to 2020.
The company now has 720,000 members using its gyms, an increase of 42 per cent on the 2017 half-year. Of this, 55,000 have opted for the LIVE IT premium membership, representing 7.6 per cent of the total membership. This contributed to a 1.6 per cent increase in average monthly revenue per member to £14.65, easily beating analysts' forecasts.
Analysts at Peel Hunt expect adjusted pre-tax profit of £16m for 2018, giving EPS of 9.2p, compared with £12m and 7.4p in 2017.
| GYM GROUP (GYM) | ||||
| ORD PRICE: | 323p | MARKET VALUE: | £445m | |
| TOUCH: | 321-323p | 12-MONTH HIGH: | 334p | LOW: 200p |
| DIVIDEND YIELD: | 0.4% | PE RATIO: | 65 | |
| NET ASSET VALUE: | 106p* | NET DEBT: | 15% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 42.8 | 5.94 | 3.5 | 0.30 |
| 2018 | 58.3 | 5.09 | 2.9 | 0.35 |
| % change | +36 | -14 | -17 | +17 |
| Ex-div: | 6 Sep | |||
| Payment: | 12 Oct | |||
| *Includes £63.4m of intangible assets, or 46p a share | ||||
