Low cost, no-contract gym operator The Gym Group (GYM:AIM) released strong interim results for the six months ended 30 June 2019. Revenues grew 27% to £74m as previously reported and profit before tax grew 53% to £7.1m, lifting the shares 1% to 241p.
Commenting on the first two months of the second half, the company noted that it is on track to meet its opening schedule of 15-20 new gyms and hit its financial and operating targets for 2019.
Chief executive Richard Darwin said ‘Our rapid and profitable growth has been achieved through operating high quality, great value gyms that offer affordable fitness for all.
'Our growing membership visited a record 24 million times in the first half of the year demonstrating the wide and diverse appeal of The Gym’.
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The company continues to increase its appeal to customers with an additional 20% or 133,000 signing up in the first half, with the average spend per month rising 5.6% to £15.47 which indicates an element of pricing power.
The premium LIVE IT product contributed half of the growth in subscribers and now has 135,000 members.
The average profitability of each site improved by 25.7% to £30.5m as a growing number of sites reached optimum profit levels. By the end of 2019 the company expects 109 sites or roughly two thirds of its estate to reach this 'mature' level.
As more sites reach maturity they will drive increased profitability at the group level.
PROGRESSIVE DIVIDENDS
Gym group has now reached an inflection point where the cash generated from operations is enough to fund the investment of new sites, giving the board flexibility to continue their progressive dividend policy.
Therefore the company has proposed raising the interim dividend by 28.6% to 0.45p.
Since initiating a dividend in 2016, the company has grown it at an average rate of 20% per year. The dividend is covered seven times by earnings, giving the company plenty of room to increase it further in future.
The company said that it should have personal trainers at all of its gyms by the start of September, as planned, after trials at several sites showed a positive response by customers.
