The Group is set to acquire 18 gyms from rival Lifestyle Fitness.
Companies: Gym Group Plc
Gym Group (LON: GYM) has today announced the acquisition of 18 new gym sites from Lifestyle Fitness in a deal worth £20.5m.
The low-cost gym operator will add the 18 new sites its portfolio of 98 existing sites, with the deal expected to be finalised in the coming weeks.
The strategic acquisitions will help the Company expand its operations from the South to the Midlands and North East.
Shares in GYM jumped 6% off the back of the announcement.
John Treharne, CEO of The Gym Group, commented:
"Lifestyle is an excellent and complementary fit with our existing estate. These are well invested gyms in strong locations with an established membership. The acquisition strengthens The Gym Group's position in the Midlands and North in areas where we are currently underrepresented and accelerates our expansion plan. The addition of these gyms is anticipated to be significantly earnings enhancing by 2019."
Singers released a note regading the acquisition, saying:
"The acquisition multiple of c6x historical EBITDA (ex central costs) is a low and attractive, albeit this rises to c.7.5x when the requisite catch-up investment in the sites is factored in."
The also noted that they are "cautious on th stock on sector capacity issues and lack of LFL growth."
Gym Group's market cap of c. £260m means the Group trades at a PE ratio of 24x versus the industry median of 16x. Share prices have fluctuated significantly over the past few years despite revenue growth averaging c. 34% year-on-year.
The Group swung to net profit in 2016, with profit margins forecast to grow im FY 17 and beyond.
