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Highlights
- UK’s largest gym chain PureGym is all set to explore fundraising options amid resurgence after Covid lockdowns.
- All its 506 gyms are now open for its customers in the UK, Denmark, and Switzerland, due to a post-pandemic fitness boom.
- After a challenging start to 2021, the company has returned to profitability.
UK’s Largest Gym Operator PureGym is planning a potential stock market debut to as demand for fitness booms after the easing of coronavirus restrictions. The post-pandemic fitness boom has rebounded the demand, and thus, advisers have been appointed by PureGym to work on a potential IPO and capitalise on the opportunity to enhance its global expansion.
The revenues of the company have jumped back to nearly the pre-pandemic levels, as the restrictions have eased, and all of its 506 gyms have opened in the UK, Denmark and Switzerland in April and early May. Along with the revenue boost, the growth plans of the company have also shifted back to the pre-pandemic targets, which are aiming to open over 50 sites a year and expanding into areas like the Middle East, Asia, and the US. At the end of the quarter, the net debt of the company was £810 million, therefore, it is trying to capitalise on the growth opportunities and minimise its borrowing. The potential IPO is a fundraising option for the company to improve its debt-laden balance sheet.
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The potential IPO
The IPO is being planned later in 2021. The company has already engaged Morgan Stanley and Barclays as its lead advisers, while RBC, Jefferies and Berenberg have been hired as bookrunners, as reported by The Financial Times. Around 15 new gyms have been opened by the company across the UK in the first half of 2021, with plans to potentially open more sites in the second half of the year, including 3 new gyms in the US, along with the first of 40 franchised sites in the Middle East.
As the covid lockdown led to shutting down of gyms for almost 18 months in the UK, the company faced a loss of around £500,000 a day. After suffering from heavy losses last year, reported as £214.6 million, the company has rebounded back to making profits. The company lost £92 million in the first six months of 2021, but the earnings before interest, taxes, depreciation and amortisation, adjusted to include rents, have jumped up to £16 million for the second quarter, and £8 million just in the month of June. As of August 15, the total gym membership was recorded at 1.6 million, which accounts for 94% of the December 2019 levels before Covid-19 hit the fitness business, as compared with 81% of that level as recently as March this year.
ALSO READ: How covid is changing our fitness habits
According to Humphrey Cobbold, Chief Executive Officer of PureGym, the company earned around £132 million in 2019, and in turn made losses of in the range of £100-£150 million during the pandemic, which means that there was no profitability and all the cash was wiped out for the whole year. The company is in talks with landlords about returning the deferred rents worth £30 million over time. The majority owner of the fitness chain, Leonard Green, which is a US private equity group, supported the company with an equity injection worth £100 million. Leonard Green bought the company in 2017 in a deal that valued it at £600 million. This purchase was made after the cancellation of the earlier plans of PureGym to get listed on the London Stock Exchange following the Brexit Vote in 2016 as the investor demand was weak at the time. The Government Covid support schemes and deferred rents at many sites also helped the company to get some support during the pandemic.
Summing up
The pandemic has led to health and wellness become an even bigger priority for people. PureGym is on the path of recovery as the fitness industry is coming back on track. The company is particularly planning to focus on the UK and Switzerland, due to the fallout in the retail sector creating conducive opportunities for commercial property tenants like PureGym.
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