A budget gym business that started with a single site in west London seven years ago is to float on the stock market with a valuation of £250m.
The Gym Group’s initial public offering will make £3m for its founder, John Treharne, at the share price of 195p announced on Monday. He will also keep a 3.5% stake worth another £9m and stay on as chief executive.
The chain lets customers pay for gym time without tying them to the high upfront payments and fixed contracts that have become notorious in the sector.
Its 66 branches are open 24 hours a day and it keeps costs down by cutting out on-site sales and marketing teams in favour of online registration.
The company will sell half of its shares in the IPO, raising a gross sum of £90m for investment and expansion. The shares rose to 205p in conditional trading after the offer price was announced.
Its backers, Phoenix Equity Partners and Bridges Ventures, and directors and senior management will share another £35m between them. The two investment funds will keep stakes of 28.1% and 13.9% respectively and top management will hold a 6.9% stake.
Treharne, who opened his first branch in Hounslow in 2008, said he plans to open between 15 and 20 new gyms a year to tap demand for flexible use.
“The Gym gives members the freedom and flexibility to improve their health and fitness on their own terms, removing the old barriers of fixed, high-cost contracts which have served to reduce accessibility in the past,” he said.
“We operate a successful, innovative and technology-led disruptive business model. We believe that these factors give us a significant competitive advantage and we look forward to using our listing to realise our growth strategy.”
Confounding predictions that gyms would die out, UK spending on membership has increased by more than 40% in the last year as people have taken to budget gyms, which also include easyGym and Anytime Fitness.
The Gym said the number of low-cost gyms nationwide had increased to 319 this year from 58 in 2011. In the year to the end of June, about 35% of those joining The Gym had never been members of other fitness centres.
Reports had suggested The Gym was seeking a £300m valuation, but fund managers have been taking a harder line on flotation prices after some IPOs flopped in last year’s frenzy.
In the year to the end of December 2014, The Gym’s adjusted earnings before interest, tax and other items were £14.7m, up 56% in two years.
