Low cost gym operator The Gym Group (GYM:AIM) has raised £31.2 million via an institutional placing of 11.35 million new shares at 275p per share, at a slight discount of 3.5% to yesterday’s closing price.
The new shares represent around 6.8% of the existing issued share capital prior to the placing. Demand for the placing was said to be strong and oversubscribed many times. The company’s shares traded down 1.8% to 280p on Friday.
FUNDRAISE RATIONALE
The placing proceeds will be used to accelerate expansion of the estate and Gym Group has targeted 40 new sites over the next 18 months. Historically, the company has added 15-20 new sites a year.
The board believes that the pandemic-impacted commercial property market provides a ‘unique opportunity’ to increase the pipeline of attractive sites on favourable terms.
Longer term, the company believes there is a significant organic growth opportunity with the potential to double its estate from the current 187 sites.
Chief executive Richard Darwin commented: ‘Gyms have an essential role to play in the nation’s physical and mental health and growing our portfolio will widen access to affordable fitness for more communities across the UK.’
REVISED FINANCING
To provide more flexibility the company has gained approval from the credit committee to revise terms of its existing £100 million banking facilities.
This allows increased capital expenditure limits, permission for £10 million of third-party finance leases and the waiving of the June 2021 bank covenant testing.
At the end of June, Gym Group said it had £62.6 million of net debt, and outstanding rent and VAT of £7.2 million, implying £30.2 million of headroom.
STRONG CURRENT TRADING
Trading since reopening has been better than management’s expectations with memberships increasing from 547,000 at the end of February to 734,000 at the end of June, compared with 794,000 before the pandemic.
Importantly, member satisfaction scores are higher than pre-Covid levels reflecting positive feedback on safety and cleanliness. The proportion of members taking premium membership has increased to 24.7% compared with 22.3% in December 2020.
Institutional support for the placing and the speed of execution demonstrates confidence in the company’s management and execution of the strategy.
