UK Stock Story - The Gym Group

By David Gorman

In this UK stock story, David Gorman introduces The Gym Group. A Castlefield positive investment theme just now is Health & Wellbeing, two causes that investee company The Gym Group is committed to promoting.

It’s probably difficult to tell, but I’ve been a reasonably regular gym-goer for 25 years. I’m in my mid-fifties, so these days I go to the gym for some damage limitation; keep generally fit, lose a bit of weight, decompress, that kind of thing. I enjoy going and I’m not alone; in 2021, a pandemic year remember, 10.3 million people held a gym membership[1] spread across over 7,000 clubs[2] and club membership spans the age ranges[3]. The UK health and fitness market has grown significantly of late and, just prior to the pandemic, 15.6% of the population was a member of a gym. This growth in attendance was led by the low-cost gym sector, which introduced new people to the benefits of health club memberships every year[4].

Most people would acknowledge the importance of exercise to national wellbeing, not just to our physical fitness but also to our mental health. As part of its Live Well initiative, the NHS website is clear on this point;

It's the miracle cure we've all been waiting for. It can reduce your risk of major illnesses, such as coronary heart disease, stroke, type 2 diabetes and cancer and lower your risk of early death by up to 30%... Exercise is the miracle cure we've always had, but for too long we've neglected to take our recommended dose. Our health is now suffering as a consequence[5].

The pandemic was a major test for us all and the gym sector was not immune. Not only did fitness club owners have to survive being closed for months on end, but re-openings were fraught with new cleaning routines, restrictions on numbers and the cancellation of group exercise classes (an important reason why many people join a gym in the first place). Post-Covid, gyms have had to adjust to changes in their customers’ working patterns, now that working from home has become common. For gyms, location is vital. In my experience, a gym must be either near a person’s workplace or near their home; if it’s not convenient, people won’t go. When attendance at a workplace became optional, members probably switched to a gym near home or cancelled their subscription altogether.

If there were any positive consequences of the pandemic, one was that it increased the public’s interest in health and wellbeing. When we couldn’t go anywhere, we really valued our “one hour of exercise” – remember those days? Even though it has had a short-term negative impact on the health and fitness sector, COVID-19 is likely to increase gym usage and scope for significant growth remains, with the number of low-cost gyms in the UK forecast to almost double by 2026[6].

We followed this whole story closely because we are investors in The Gym Group PLC (TGG). The company opened its first premises in Hounslow only in 2008 but it is now the fifth largest gym operator in Europe, with more than 700,000 members and over 200 gyms in its estate[7]. The directors hope to have more than 300 sites by 2025[8].

Pandemic restrictions meant that TGG lost around 200,000 members, or around 27% of its total membership, between 2019 and 2020[9], although the company maintained its programme of opening new facilities, going from 175 gyms in 2019 to 202 in 2021[10] and membership numbers have recovered very well too[11].

When applied to The Gym Group’s facilities, “low-cost” emphatically does not mean “grotty;” the gyms are large, airy, clean, with well laid-out changing rooms and, importantly, lots of the latest gym equipment. Average monthly membership fees in December 2021, without any onerous contract commitments, were around £19 a month at The Gym Group, a little less than at other low-cost providers and much better value than the £35 to £55 charged by many mid-range providers and the £55 plus charged by the premium providers[12]. The Gym Group can keep membership fees low through economies of scale, good value locations, and more automation plus not including expensive-to-maintain facilities, such as swimming pools and saunas. Also, customers can easily join, leave, or freeze their memberships, meaning members aren’t trapped in a contract if they find the service isn’t suitable.  With the gyms being open all day, every day, it also makes it easier to use the facilities anytime, very handy if members do shift work – as is common among NHS workers, for example. This serves to emphasise the importance of the service that TGG offers to those who would usually not be able to fit exercise in the gym around their work commitments and/or afford a membership

As well as the health benefits detailed above, gyms in general and The Gym Group in particular can have an important social purpose. These days, good corporate citizenship is not just about offering affordable fitness for all, this company has sustainability at its heart and, to drive this agenda, established a Group Sustainability Committee last year[13]. The company has set out to be an industry leader in generating and evidencing social value.

Improved physical fitness and related mental help to reduce the strain on the nation’s health and social care resources. As well as supporting a diverse workplace, The Gym Group management aim to provide good jobs for employees in an industry with a reputation for a transitory, often low-paid workforce. The directors have also set firm targets for reducing carbon emissions, in alignment with the Carbon Neutral Protocol[14], as well as for health & safety - injuries can occur during exercise and with equipment, so the company is committed to reducing these as much as possible. In this data driven age, where each member probably has The Gym Group App on their phone to manage everything from door entry to individual training programmes, protecting customer data and privacy is also essential.

We have been shareholders in The Gym Group for several years now and the shares fit into our positive investment theme of Health and Wellbeing. The company makes a positive contribution to client portfolios and to national wellbeing. I’m not making much progress though!

 Written by David Gorman









[8] Slide 5



[11] Slide 5

[12] Slide 48




Information is accurate as at 20.06.2022. Opinions constitute the fund manager’s judgement as of this date and are subject to change without warning. The officers, employees and agents of CIP may have positions in any securities mentioned herein. This material may not be distributed, published or reproduced in whole or in part. With investment, capital is at risk.