The Gym Group sees its share price sink 16%

The Gym Group shares are down today after the company said some of its “staff-dependent” sites were struggling amid the shift to hybrid or work from home.

Shares of the group fell 15.67 percent or 19.37p to 104.23p this afternoon, after falling more than 60 percent in the past year.

The company’s energy costs are expected to rise by £8 million to £10 million next year, it told investors.

But in its latest trading update, The Gym Group said its membership stood at 838,000 as of October 31, representing a 16.7 percent increase from December 31, 2021.

Revenue for the 10 months at the end of October was £143.2 million, up 78 percent from a year ago.

In October, the group’s comparable sales were 93 percent compared to the same period in October.

But the group said performance at 16 “personnel-dependent” sites was “significantly below these levels.”

The group said it was on track to reach its goal of 28 new openings this year and 25 to 30 new locations next year.

It said it will continue to control its costs, with energy volumes hedged 100 percent through the end of the first quarter of next year and 63 percent for the full year 2023.

Amid the implementation of strict cost containment, net debt excluding property was £68.5 million at the end of the period.

Richard Darwin, chief executive of The Gym Group, said: “Against an uncertain background, we are pleased to see that memberships have continued to grow over the past four months, demonstrating that people are prioritizing their physical and mental health – and that gyms are a important part of the local community.

“Working patterns have continued to evolve after the pandemic and while the performance of our 16 workforce-dependent sites has been disappointing, the rest of the estate continues to recover well and demonstrate the resilience of our business model.

“Having completed the most ambitious rollout program in our history to date, we are encouraged by the momentum in the pipeline for new gyms next year and believe there is a lot of room for further growth.”

He added: “We are aware of the macro environment and continue to monitor developments very closely. However, the board remains very confident in the long-term opportunities for The Gym Group; our value proposition has always been a competitive advantage and we believe that in today’s consumer environment, our high-quality, affordable offerings will be even more compelling and attractive.”

Lara Martinez, an analyst at Third Bridge, said: “Despite surpassing pre-Covid membership levels, The Gym Group still struggles with venues that rely on traditional work patterns. Our specialists suggest that this trend is indispensable, and that the redesign of the estate is something to keep an eye on”

“The Gym Group should benefit from the trade-in of people from premium gym locations, although some will trade out of the industry altogether.”