PureGym Struggles with Nearly £90 million Losses during Ambitious Expansion Phase
PureGym's Widened Losses Revealed, Amid Job Creation and Expansion
The financial year 2024 saw a significant increase in losses for low-cost gym chain PureGym, with pre-tax loss soaring to £88.5 million, according to latest filings with Companies House. This figure marks a rise from the £77.6 million loss recorded in the previous year.
The Leeds-based company, which expanded its workforce and opened new locations in 2024, saw its headcount rise from 6,785 to 7,579, and unveiled 102 new gyms across the UK. These expansions came amidst the acquisition of Blink Fitness, an endeavor that saw the firm's debt grow from £665.8 million in 2023 to £784.7 million in 2024, consequently escalating its finance costs to £183.7 million in 2024, from £173.2 million in 2023. Despite this, PureGym's net leverage fell from 4.4x to 4.3x.
In April 2024, PureGym announced an almost £605 million turnover for the year, along with a reported EBITDA (earnings before interest, taxes, depreciation, and amortisation) growth of 10.5 percent to £256 million. The company attributed the increased losses to the increased debt accrued during the Blink Fitness acquisition. To offset these losses, PureGym emphasized that its adjusted EBITDA and run rate adjusted EBITDA had grown throughout the year.
PureGym, founded in 2009 by Peter Roberts, is backed by investors Leonard Green & Partners and KKR. The brand operates gymnasiums not only in the UK, but also in the USA, Denmark, and Switzerland.
A statement jointly signed by PureGym's board indicated that, despite inflationary pressures and economic uncertainty, the company's business model is structurally "low-cost," and management is actively working to mitigate inflationary impacts. Gym costs are carefully controlled across key areas such as rent, labor, cleaning, and maintenance. The company's energy costs remain relatively stable, with future contracts locked in to ensure known and acceptable levels through 2025.
In May 2024, PureGym confirmed its revenue growth by 23 percent in the first quarter of its new financial year, compared to the same period in 2024. Clive Chesser, the former CEO of Punch Pubs & Co, took over as PureGym's new chief executive in August 2024, succeeding Humphrey Cobbold, who became PureGym's chairman.
Looking forward, PureGym's CEO acknowledged that various challenges remain in the macroeconomic environment, including cost inflation, uncertain consumer confidence, and government policy impact. Nevertheless, the company remains resilient, with management successfully addressing cost pressures and a relatively low staffing model lessening the effects of payroll tax increases relative to other operators. The company's robust unit economics, both in the mature estate and new sites, continue to be promising. Innovations in gym offerings are also enabling PureGym to target a larger market share in key geographies.
The increased debt accrued during the Blink Fitness acquisition, which escalated PureGym's finance costs, might impact the company's overall financial structure within the business and industry sector. Despite this, PureGym's strategic moves, such as controlling gym costs in key areas and locking in energy contracts, indicate a resilience that could help navigate through macroeconomic challenges.
