An advertisement stands outside an entrance to a Pure Gym Ltd., a unit of CCMP Capital Advisors LLC in London, U.K., on Tuesday, Jan. 26, 2016. Pure Gym Ltd. hired Rothschild & Co as its considers 400m initial public offering, the Sunday Times reported, citing unidentified sources. Photographer: Simon Dawson/Bloomberg
© Bloomberg

Some people file going to the gym under “leisure”. Not the folk who use Pure Gym, the fast-growing budget operator planning to float £190m of shares. Pure Gym strips out the nice-sounding fripperies — pools, saunas, spas and cafés — leaving the punter to the business of heaving metal around an air-conditioned room. Less frippery allows a drastically lower membership fee, opening the experience to a broader swath of the sweaty masses.

Growth reflects this. Sales almost tripled from 2013 to 2015 and are up 50 per cent year on year since. A third comes from those new to the idea of gym membership, slightly more from those switching from rivals. Pure Gym’s low-cost model is clearly attractive. It needs to be, given the basic product is in permanent competition with a free alternative such as just running up a hill.

Pure Gym is not the first; the smaller Gym Group launched in 2007, two years before Pure Gym, and also beat it to the public market last November. Its shares are up a tenth, on a ratio of enterprise value to earnings before interest, tax, depreciation and amortisation of 14.

Pure Gym will hope for a similarly bouncy multiple. Its operating numbers are impressive, helped by that grim focus on actual exercise and lean payroll. The typical, 5,000-member gym (each paying about £20 a month) needs just two or three staff, resulting in an ebitda margin of 47 per cent. This is down to technical wizardry — keypads for entry, everything booked online — and an innovative approach to people. Personal trainers offer classes free in exchange for access to new clients. Cleaners learn first aid, enabling the gym to stay safely open 24/7.

This sector has gone through spells of adrenalin rush and fatigue before. The last recession saw indebted chains such as Fitness First fall into difficulties. Pure Gym’s stripped-down model provides some insulation against a recession. Luxuries are cut first when times are tough, so make sure your product does not feel luxurious.

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