For the second time in 12-month, a no-frills gym is to make the leap and raise money through an IPO to float on the London Stock Exchange. Pure Gym, following in the example of The Gym Group, intend to raise about £190million to help accelerate expansion plans and pay down debts accrued from their rapid growth and purchase of LA Fitness group last year. While many were critical of the ‘budget’ gym approach when it first hit the scenes and are focussing on the many negatives of an IPO post-Brexit, investors and spread betting sites certainly haven’t shared in the concerns, citing that competitor ‘The Gym Group’ is currently up over £25 per share from its’ initial listing and, in the wake of the Brexit pandemonium, will likely gain further footing from consumers wanting the benefit of a gym without the historical norm of high-costs.
Having reported revenues last year of £125.2million before expenses, 2016 has seen additional growth and profits and an IPO would allow them to pay off bank debts and continue their plans to build 38 new gyms this year, 25-30 more in 2017 and a minimum of 20 additional locations each year after – but is the model solid enough to withstand such speedy growth – Their chairman, Tony Ball, seems to believe so. He said “When the company was founded the traditional gym market was moribund. It did not cater for modern gym users who are tech-savvy, want to be able to exercise at any time of day or night and want gyms they actually use, all without being locked into an expensive 12-month contract.” The truth is that while companies like Virgin Gym, bought by Brait in 2015, have reduced their footing in the UK, there is plenty of room to step into and companies like Pure Gym and The Gym Group can provide a 24-hour service to consumers that can’t afford and don’t want to pay £100+ per month for a membership. The benefits of a sauna, steam room and even a pool pale in comparison to a cost saving of nearly £1000 per year, and with technology so advanced now – the need to woo members with Sky-enabled TV’s and treadmills that track calories has become almost obsolete as fitness bands or Apple Watches have been developed to do the same thing.
While the success of any IPO will definitely be decided by the public and their engagement with it, the potential for huge rewards and additional post-Brexit gains will likely see investors jumping on board in addition to trading and spread betting companies happy to push them.
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