MIDAS UPDATE: Budget gym chain is in fantastic shape as membership rises 41% 


MIDAS UPDATE: Budget gym chain is in fantastic shape as membership rises 41% 

Joanne Hart, Financial Mail on Sunday

The summer holidays are over, the children go back to school this week and it is time to face reality. 

For many people, that means cutting back on the barbecues, beer and rosé, and focusing, once again, on the waistline.

Gym Group is ideally placed to benefit from these aspirations. Recommended by Midas at 202½p in November 2015, the shares have soared by 65 per cent to 334p and most City brokers predict further growth.

The company released half-year figures last week, with turnover up 36 per cent to £58million

The company released half-year figures last week, with turnover up 36 per cent to £58million

The company released half-year figures last week, with turnover up 36 per cent to £58million

The company released half-year figures last week, with turnover up 36 per cent to £58 million, underlying profit up 8 per cent to £7 million and the dividend 17 per cent ahead at 0.35p. 

Importantly too, membership rose 41 per cent to 720,000, as would-be fitness fans responded to Gym Group’s low costs – typically £17 a month. Even its more expensive premium offer is only £5 a month more.

The company runs 147 gyms and is expected to add between 15 and 20 new sites annually for the next several years. Brokers at Peel Hunt predict full-year sales of £124 million, rising to £150 million in 2019.

Strong profit growth is expected too, with £16 million pencilled in for this year and £23 million next, accompanied by rising dividend payments.

Midas verdict: Doctors and Ministers alike wax lyrical on the importance of keeping fit, but many private gyms are expensive and exclusive. 

The Gym Group aims to be different and the approach is working. Investors who bought in 2015 have done well and may be tempted to sell a few shares. But they should keep most of their stock as this firm has plenty of growth potential.

 

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