Pure Gym: Can Sir Chris Hoy help it work out a successful float?

The fitness club business once looked like a licence to print money. Sign ’em up for a year’s minimum membership, make sure they have a direct debit in place, and then sit back and watch the cash pour in regardless of whether or not they ever darken your doors.

Despite that, the adjective “troubled” often seems to find itself attached to the names of those once considered among the sector’s leading lights. Holmes Place, LA Fitness, Fitness First, they’ve all been through the ringer at some point in their respective histories.

Investors therefore have every right to feel “troubled” when a gym operator announces its intention to raise a bunch of money by listing its shares on the London Stock Exchange, like the Pure Gym Group just has.

However, there are reasons for optimism, and not just because Olympian superman Sir Chris Hoy is a shareholder and brand ambassador.

Pure Gym has enjoyed a relentless rise, having gone from two outlets eight years ago to today’s 167. With nearly 800,000 members, it is one of the reasons behind some of its rivals’ troubles.

A disruptive entrant, Pure Gym’s USP is a low cost, low (not quite no) frills model that utilises technology to keep staff costs down. You may or may not pay a joining fee of between £5 and £20, but after that you’ll only be charged between £15 and £35 a month. There’s no yearly lock in, and you can sign up and pay online.

There are also no Turkish baths or other fancy ephemera, and you’ll have to remember to take a towel if you want a shower after your work out. But you get 24-hour access to the usual array of cardio machines and weights and you can go to classes too if that’s your thing. There’s the option of buying a temporary pass if you want to give it a test run.

The model was imported from the US, where it was a stunning success, by entrepreneur Peter Roberts, and it has helped to put a real squeeze on mid-market health clubs.

Those at the top that charge fancy prices for fancy add ons to those that can afford not to use them are doing just fine, and there’s now not much in the space between them and those in the cheap and cheerful space, including Pure’s rival Gym Group, which is also thriving. So what could go wrong?

Plenty. It isn’t just a fraying business model that has caused problems for health clubs in the past. Some have over extended themselves, expanding too fast, borrowing excessively, paying too much for executives who haven’t always proved up to snuff.

Times change and tastes change, and the bigger companies get, the harder it is to adapt. This float is far from risk free.

Investors, are being tapped for £190m of new money. Some shares from existing owners, the chain’s current and former management, private equity firm CCMP and Sir Chris, will also be sold into the float.

The selling point is that there is still plenty to shoot for. Pure Gym is tempting investors with the prospect of 37 new outlets this year, up to 30 more in 2017 and between 20 and 25 a year thereafter. The company will need to tempt new and existing gym members into them to pull it off. But there are a lot of the latter. Some 9.2m people in this country are members of a health club.

More probably ought to be given the toll obesity takes on the NHS. For that reason alone, Pure Gym’s float, and the greater brand recognition that should accompany it, is probably a welcome development.