Picture supply: Britvic (copyright Evan Doherty)
One inventory from the FTSE small-cap index that has been steadily recovering over the previous couple of years is The Gymnasium Group (LSE:GYM). Now at 136p, shares of the funds fitness center chain are up 63% since a post-pandemic low of 83p in April 2023.
Zooming out a bit additional although, the inventory remains to be down 55% from a excessive of 307p in June 2021. If it had been to succeed in that worth once more, an investor might greater than double their cash by investing immediately.
Is that this a inventory that may pump up my portfolio? Let’s take a more in-depth look.
Stable set of outcomes
For these unfamiliar, the corporate was a pioneer of the low-cost fitness center mannequin, providing 24/7 entry and versatile, no-contract membership. I was a member a couple of years again and my fitness center was spacious with ample gear for the equal of lower than £5 every week. Cut price stuff.
As we speak (12 March), we bought the group’s full-year report for 2024, and there was so much to love. Income grew 11% yr on yr to £226.3m, pushed by a rise in each membership numbers and pricing.
Members rose 5% to succeed in 891,000 by the top of the yr. And 12 new websites (half in London) had been opened, on the prime finish of steerage, bringing the entire variety of gyms to 245.
In the meantime, profitability improved considerably, with the agency swinging to a pre-tax revenue of £2.5m in comparison with a lack of £8.3m in 2023.
We’ve simply been by means of the height recruitment months of January and February, when the motivation to sweat off these additional Christmas kilos remains to be excessive. So it’s encouraging that administration says income for the primary two months of 2025 grew by 8%. Like-for-like income was up 3%, whereas the membership on the finish of February was 951,000.
Wanting forward, the corporate plans to open 50 new websites over the subsequent three years, together with as much as 16 gyms this yr. This growth might be funded solely by means of free money move.
With cost-of-living pressures nonetheless ongoing, I wouldn’t wager in opposition to 1m+ members in future.
Ought to I purchase Gymnasium Group inventory?
The inventory’s price-to-sales ratio is simply 1.1, which isn’t significantly costly. On this foundation, the valuation appears first rate, although the web revenue margin is sill razor-thin. It wouldn’t take a lot — rising prices or one other pandemic-style occasion — to place the group again into loss-making territory.
Final yr, internet debt was diminished by £5.1m to £61.3m. However that’s nonetheless increased than earlier than Covid, when it stood at £47.4m.
The corporate has been elevating costs to enhance income per member. Final yr, the typical worth of its normal membership rose 6% to £24.53. My fear with this although is that there is perhaps restricted pricing energy any longer because of relentless competitors.
Talking personally, I’ve a number of totally different fitness center choices inside a five-mile radius, and almost all supply contract-free memberships and half are open 24/7. The month-to-month worth of my native leisure centre, with its two swimming swimming pools, isn’t way more than the closest Gymnasium Group location.
This well-run firm is performing properly and the inventory might have additional to run. However weighing issues up, I’m not going to take a position. I choose companies with distinctive and sturdy aggressive benefits, and sadly I don’t discover that right here.
