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PureGym IPO: will the gym firm flex its muscles?

By Ryan Hogg

Edited by Jekaterina Drozdovica

11:47, 16 September 2021

PureGym IPO
Source: Shutterstock

PureGym is attempting to rebound from a year fraught with difficulty for the fitness industry with a fundraising round. One option, highlighted by CEO Humphrey Cobbold in an interview with the Financial Times, has caught the eye of investors: an initial public offering (IPO). 

PURE GYM IPO analysis

What is known about the IPO so far?

Although the PureGym IPO price or date are not known yet, investors are looking on as Cobbold consults on the route to a market debut. He’s hired Morgan Stanley and Barclays as the group’s lead advisors, with RBC, Jefferies and Berenburg as bookrunners. 

If carried forward, it will be PureGym’s second run at an IPO – an attempt in 2016, which had sought to raise £190m, was abandoned in the face of weak investor enthusiasm. Cobbold was also CEO during that previous IPO flirtation, emphasising his determination to bring in more liquidity to the group.

Who owns PureGym?

PureGym is owned by Leonard Green & Partners (LGP), a US-based Private Equity group, which acquired the company on 30 November 2017, at the time valuing it at £600m, and trades under the umbrella of Pinnacle Bidco PLC. 

According to the PureGym website, they aim to provide affordable and flexible memberships, rolling out new gyms with high returns on capital. PureGym operates 506 gyms across the UK, Denmark and Switzerland for its 1.6 million members.

Why is PureGym considering an IPO?

  • Financials in good shape, but a boost is needed

The latest company results for Q2 2021 paint a picture of recovery. While PureGym revenue for the first half of 2021 is down 24% on the same rate for 2020, it’s largely a result of factors isolated to the first quarter, where widespread lockdowns confined the group’s revenues to £0.5m. 

This indicated that more than 99% of the company’s revenues in 2021 were earned in the three months to June. At the same time, the group has seen its overheads drop sharply as it withheld new gym construction while saving on maintenance costs in its closed gyms. 

Earnings before interest, taxes, depreciation and amortization for (EBITDA) Q2 2021 was £16m, an improvement on a £20m loss in Q2 2020, although the company has availed itself of rent deferrals, which are yet to be repaid.


The group is also burdened by debt accumulated both over the crisis and in LGP’s leveraged takeover of the group in 2018. Senior Secured Net Debt (SSND) was £786m by Q2 2021, a slight rise on the £745m of debt held in December 2019. 

The company’s net debt to Run-rate EBITDA ratio accordingly rose slightly to 4.9x for Q2 2021, compared to 4.6x for December 2019. Liquidity, though, at £221m remains strong, and includes £145m of undrawn Revolving Credit Facility. All of PureGym’s borrowings are in fixed rate instruments, and anticipated inflationary pressures may help the group pay down their debt more quickly.

These results present a gym that has been disrupted, if not hobbled, by the COVID-19 pandemic, and indicates further funding is required to improve the group’s liquidity while it continues a deleveraging programme ongoing since 2017.

  • Expansion into new markets

An added kick to its finances is only part of the group’s motivation to explore an IPO. Plans are underway to expand into significantly larger markets.

In a June statement, Cobbold said: “Whilst Europe remains our core-market, we see opportunities to provide affordable fitness further afield. We expect that before the end of the year the first four PureGym locations will open in the Middle East in Saudi Arabia.

“This marks the start of our strategic franchise partnership with the Al Hokair Group and later this year or early next three trial sites are expected to open in the USA.”

  • Booming demand for wellness

Following the relaxation of COVID-19 restrictions, many industries have benefited from a wave of pent-up demand. The fitness industry has been no exception. PureGym membership is at 94% of pre-pandemic levels. The Gym Group, a UK competitor, is at 92% of its 730,000 members from 2019. 

Pre-Covid, membership was trending in the right direction. UK gym membership increased by 33% between 2011 and 2019. Low cost gyms like PureGym have seen their market share increase in that time from 4% to 40%, with 2.8m of the 6m gym members in the UK choosing the budget option by 2019. A growing number of affordable gyms are likely to view the remaining market share as a race, with extra capital providing key ammunition.



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  • The race for vacant retail space

The easing of restrictions has brought indirect impact, tempting Cobbold to act now. While the fitness industry appears to have rebounded from the pandemic, retail has struggled. A study by the Centre for Cities in the UK showed London’s ‘overall recovery index’ is at 43 (where 100 signifies pre-COVID rates), as consumers shun the high street and focus on online retail and more regional offerings.

Evictions and vacations are likely incoming, and with them vacant space. PureGym may be taking its lead from John Lewis - the company announced in July that it planned to build 10,000 homes over the next decade, an astute move that reflected unease over the retail sector as much as it did the security and recent growth of the housing market. 

Evidently, Cobbold senses a similar opportunity for exercise units that may not linger for long. He said: 

“Changing work and leisure patterns against the backdrop of fallout in the retail sector are presenting favourable opportunities for commercial property tenants like PureGym.This is especially true for businesses of scale and those operating in health and wellness, which has become an even bigger individual priority for consumers.”
  • Success of previous fitness IPOs rallying PureGym

PureGym is joining another race which appears to be taking hold in the US – the one of fitness IPOs. Mark Wahlberg’s F45 Training – with 1,750 studios - raised over $300m when it floated on the New York Stock Exchange on 15 July, on its way to a current market capitalization of $1.27bn. In the same month, Xponential Fitness, a North American fitness boutique, closed at $12.25 on its 23 July debut, with an intention to raise $120m in funding.  

The Gym Group offers a template closer to home. The group’s 2015 listing generated £90m for the company on its way to a valuation of £250m. The group has proven a reliable investment, with a current market cap of £488m, and a strong buy consensus, according to Marketbeat

PureGym IPO analysis: selling points 

News of a potential IPO was warmly received by Fitch Ratings, who last week upgraded the group from negative to ‘stable’ and gave it a ‘B-‘ Issuer Default Rating (IDR). In its explanation for the upgrade, the agency said: 

“The 'B-' IDR encapsulates Pure Gym's high leverage, weak fixed-charge cover ratios, and negative free cash flows (FCF; post capex), which are partly offset by satisfactory liquidity following a cash injection from shareholders, an enlarged revolving credit facility (RCF) and a tap issue during the pandemic. 
“These factors are complemented by its solid market position as the second-largest fitness and gym operator in Europe, and improved geographic diversification after its acquisition of Fitness World.”

In July, the ratings agency suggested an IPO could increase the company’s rating, capitalising on  increased credit with longer-term debt deleveraging. This could present the group as a safer investment option, if it decides to list publicly.

The gym’s unique selling point of cheap, contract-free attendance could also help it carve a path in the US. The gym generated £21.90 in revenue per member for FY 2020. When converted to USD, this is more than $7 cheaper than the average gym membership price in the United States, according to analysis by RunRepeat

Risks and competitors

While PureGym has rebounded, membership rates are still below pre-pandemic levels. It is not yet clear whether the pandemic has attracted a new demographic to the gym, while home-based competitors, like Peloton, accumulated market share as gyms were forced into lockdown. 

The Peloton stock price is currently trading at five times its pre-pandemic rate. The company announced to shareholders that membership was estimated at 2.3 million in Q4 2021, compared to 560,000 in Q1 2020. Sustained growth in home-based businesses like Peloton could spell trouble for Puregym’s prospects.

Likewise on the gym front, a wave of IPOs shows both appetite for gym investment and a warning of dilution in the market. While raising hefty levels of capital in their IPOs, public debutants have failed to set the market alight. Xponential fitness has fallen from the opening share price of $12.25 to $10.83, while F45 is sitting at $14.25, below the market debut price of 16.20 USD and a brief peak at $17.28 on 13 August. 


The Gym Group, meanwhile, poses risks to beat PureGym to the punch while the economy runs hot. The rival group plans to build 40 new sites by the end of 2022, and can take advantage of share price increases as PureGym continues to weigh up its options.  

Fitch Ratings view PureGym as currently lagging behind its competitors, though ambitious growth plans could give it the edge in the long run. 

“Pure Gym is rated one notch below its closest Fitch-rated peer, Deuce Midco Limited (David Lloyd Leisure, DLL; 'B'/Stable), the premium lifestyle club operator. Pure Gym has a more aggressive expansion strategy, resulting in expected weaker FCF generation and higher FFO-adjusted gross leverage,” Fitch Rating said in a note.

“We expect the latter to reduce to 7.7x in 2022 as coronavirus-related disruptions recede while we expect DLL's FFO-adjusted gross leverage to trend towards 7.0x under the company's new capital structure. This is partially offset by Pure Gym's stronger profitability of around 48%-50%, due to a low-cost business model, versus around 40% at DLL.”

Edited by Jekaterina Drozdovica


Is Pure Gym on the stock market?

PureGym is not yet on the stock market. An IPO would likely place it on the London Stock Exchange (LSE).

When will Pure Gym go public?

It is not yet known if or when PureGym will go public. The company has hired Morgan Stanley and Barclays as its lead advisors to explore a potential IPO, but it is currently one of a number of funding options.

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