Specialist
Former divisional leader at Pure Gym Ltd
Agenda
- Coronavirus – membership churn and expected recovery, focusing on PureGym and The Gym Group (LON: GYM), including EBITDA break-even levels
- Pricing outlook – acquiring new members
- Budget gyms’ virtual offerings and margin implications
- UK gym expansion opportunities and saturation points, highlighting opportunities in big and box formats
- Rental outlook, government support and CAPEX requirements
Questions
1.
What is the expected membership churn in the budget sector due to coronavirus amid the third national lockdown in the UK?
2.
What is the typical split between active and casual members within a budget gym?
3.
How likely is it that inactive gym members will return to the budget sector post-coronavirus? Has coronavirus made it more likely that these members will just choose to work out at home or in a park?
4.
What are the primary drivers of the 35-50% churn rate?
5.
Do you expect any differences in membership between PureGym and The Gym Group?
6.
Could competition intensify between PureGym and The Gym Group, given the potential drop-off in smaller competitors?
7.
How much of a competitive threat are Anytime Fitness and Snap?
8.
If we assume a 50-65% drop in membership levels by 12 April 2021 vs 2019, can we assume a similar drop in revenue by 12 April 2021 vs 2019?
9.
What are break-even levels like in this industry? What membership levels are required to break even at EBITDA for 2021?
10.
What are your pricing expectations for 2021 in the budget sector?
11.
What is the expected trajectory in membership recovery from April to December 2021?
12.
Can budget operators return to 100% of pre-coronavirus revenues, even with a 90-95% membership, by the end of 2022? What could revenue be like at the end of 2021 vs 2019 levels?
13.
Is the roll-out of the virtual offering accretive to margins?
14.
Is the mid-market more at risk than the budget market from the substitution effect from virtual classes and home workouts? Do virtual classes and home workouts impact different segments differently?
15.
What sort of opportunity is there for the budget sector to pick up mid-market members if there is an economic downturn?
16.
What do we know about the reopening plans across the market, considering leisure centres, mid-market chains and independent chains?
17.
A lot of leisure centres may not be open post-coronavirus. What opportunity does that present to the budget sector?
18.
You mentioned a potential 10-15% drop in the number of leisure centres. How much capacity is exiting the market in the budget sector?
19.
What could be the saturation for the budget sector in the UK? Have we reached that point? Are we close to reaching it? How many sites would lead to a saturation point?
20.
How many new potential large-box sites have opened due to distress in the retail sector?
21.
Do you think that 500 sites by 2025 is still viable, given the growth in virtual and the assumption that membership will not return to 2019 levels?
22.
What government support do you expect for the sector post-coronavirus?
23.
There are a number of sites located in city centres. Are you expecting some closures in the budget sector, given the trends towards working at home?
24.
There is a push towards small-box sites across budget operators. How much more competitive is the small box sector compared to the large-box sector? It seems franchisees dabble more in small-box sites.
25.
What are your expectations for rental rates in the budget sector for 2021 vs 2019?
26.
Are you hearing anything around how rents differ and whether they’re lower due to reduced demand from alternatives such as hospitality and retail?
27.
How easy is it to renegotiate a lease to compensate for the volume loss and ensure revenues remain the same?
28.
Do you expect any differences in the CAPEX requirements for existing or new sites post-coronavirus?
29.
There is GBP 18,000 available in government grants for gyms. Is it likely that budget operators will be able to access the full GBP 18,000 for each gym they have?
30.
How material are restart costs on a per-gym basis?
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