Coronavirus » Gym Group CFO putting leisure firm back on track

Gym Group CFO putting leisure firm back on track

Mark George, finance chief of the listed discount club chain, reveals in an interview how a broad set of experiences prepared him well for the coronavirus challenge

When the coronavirus lockdown was announced, the gym sector was immediately affected. On 20 March the sector was forced to stop operating clubs in the UK because of the danger to customers and employees alike.

Many running businesses in the space might have panicked. But Gym Group CFO Mark George set to work with colleagues organising funding to finance the 183 club operator through the lockdown period.

Since George’s late 2018 arrival at the sector disruptor, which offers monthly renewable memberships instead of the traditional 12 month subscription model, it had been performing well.

Annual results to 31 December 2019 reveal adjusted pre-tax profit up 36 percent from the previous year to £14m on revenue that increased 24 percent to £153m over the same period.

But with the pandemic, George immediately recognised the enormity of the challenge. “We just didn’t know how many months the closure would last,” he says. But he also knew that it was vital to cut the group’s cost base as quickly as possible, furloughing 95 percent of the firm’s 2,000 workers including most of the 130 head office staff.

“We wanted to provide as much liquidity in a business as possible, so that we could see through any period of uncertainty,” says George. That meant raising £40m of additional equity from shareholders and negotiating a £30m extension to a £70m banking facility, he says.

George believes that both the equity and debt financings were well supported because of an expectation that the market would pick up, especially with the low-cost end of the gym market. “There was a belief that the coronavirus crisis is going to increase people’s interest in health and fitness, rather than decrease it,” he suggests.

There are also the changed economic circumstances to consider, says George. “As we come out of this, we’re going to be in an economically challenged environment, so then people are going to look to low cost options, rather than the premium gyms,” he adds.

But being able to make the right decisions under fire, George says comes from having had a non-linear career background, that has seen him undertake key commercial and finance roles in some of the UK’s most dynamic companies.

“It just makes it a little bit easier to cope with unusual and stressful situations, than perhaps it would be for someone who’s grown up in their career in a very orthodox way,” he says.

“You’ve got to be agile and you’ve got to be good at adapting to the situation in front of you and I think the more variation of roles and experiences you’ve had in your career, the better able you are to deal with that kind of challenge,” adds George.

“The world was already becoming a more ambiguous, and uncertain world. And that’s only been accelerated by this crisis. I think CFOs have to have the ability to adapt to different situations,” he says.

Brands value

George’s corporate experience started in a corporate development role at fibre optic cable network FLAG Telecom following a degree in PPE (Politics, Philosophy, Economics) at the University of Oxford and then a stint at management consultancy McKinsey & Co.

At FLAG his role mainly focused on “thinking about how we grow our network into new markets.” Crucially to developing personal resilience, George says he experienced the highs and lows of an IPO, and then a collapse in demand leading to Chapter 11 before being acquired by India’s Reliance Industries. He stayed there seven years. “There was just an awful lot going on and I learnt a huge amount,” he says.

But it was at Tesco that George took huge leaps forward as the grocery giant rapidly expanded, both domestically and internationally under CEO Sir Terry Leahy. George took on a number of positions, stepping stones to finance, in positions including corporate development, which included the acquisition of Royal Bank of Scotland’s half of Tesco Bank, head of Investor Relations, “which really opened my eyes to part of the role of a CFO,” he says, and then digital director.

But as a future in finance beckoned, George realised that he needed to build out the core skills required for a CFO position, areas such as accounting, treasury, tax, business partnering and planning roles at Tesco. From there he completed almost a decade at Tesco with the role of UK retail finance director, managing the finances and cost base of an operation with 300,000 staff.

By 2015, Tesco’s dramatic growth spurt to become the world’s second biggest grocer had run out of steam, and as a result George was made redundant. But an interim commercial finance director role at online clothes giant ASOS, saw him installed in an equally dynamic business, this time growing in a few years to become a £4bn brand.

“That’s where my natural strengths and background enabled me to be analytical and commercial, everything from understanding where we were trading each week and to leading the five-year plan process” he says.

Although the role was only a stop gap it helped forge a broad skill set, as did a year at online car retailer AutoTrader Group, where George spent a year as deputy CFO. “This was part of my journey to becoming someone very familiar with and experienced in digital businesses,” he reveals.

But an ultimate plan to succeed the CFO was derailed when the group changed tack, but nonetheless George says he was able to profit from the experience-gaining valuable financial control know-how.

Fit for purpose

With a breadth of finance experience- in both multisite and digital- George says he was well placed to become the CFO of the Gym Group- a business that listed in 2015, eight years after it was founded by former England squash player John Treharne.

He says the digital angle is important because a lot of marketing is undertaken through digital channels, rather than through a traditional subscription model. “All of our members sign up digitally, as you can’t join at a gym site. We’re extremely digital as a business; we talk about web traffic and conversion rates like any other ecommerce business” he says.

Key to the model is offering flexibility, for customers such as students or people changing jobs frequently. “Because we don’t tie people in it makes it very attractive for people to join us temporarily, to leave and come back.

“The average member stays about 10 or 11 months, which means every year we’ve effectively got to replenish the member base. That  sounds alarming on the one hand, but it’s just part of the model. It’s really important that we engage with people and find ways to sign them up, and most of that is done digitally,” says George.

In this respect, key to the Gym Group’s model is the interface between finance, data scientists and the marketing team, says George, in using data to understand the effectiveness of promotions or price changes.

“We use data to understand where we would want to locate gyms; what makes a successful gym location or a less successful one – to help us identify new properties to expand our network.

“But then also, we’ll be very data centric in understanding our customer base, so that we can make really good forecasts for our financial planning,” says George.

“Something that I have supported and encouraged is increased investment in our data science team, as the decisions that we make about pricing and promotions, and our commercial strategies are driven by data and analytics, more than instinct,” he adds.

The Gym Group has developed its own modelling approach, underpinned by the Anaplan tool “that utilises forecasts of web traffic conversion rates and churn from our data team and combines it with pricing data to forecast revenue by site by month” says George.

He says that alongside the importance of managing the core finance function, alongside supporting commercial decision-making through providing data insights, can be added the third leg of his role, financing and investor relations. “This was especially key during the coronavirus crisis when we had to raise equity, and debt, despite being a low leverage business with a very strong profitable business model,” explains George.

All those facets of George’s role will be brought to the fore as Gym Group seeks to rebound, having lost 20 percent of its membership over the lockdown to 692,000 by July 9 – and a halving of its share price- giving a market cap of around £250m by late August. On July 25 gyms were allowed to reopen in the UK, with lots of coronavirus safety features in place.

“Our focus is about rebuilding the confidence of our members to come back to the gym,” informs George, who says limiting entry numbers, adding distancing between equipment, and improved cleaning and sanitization have all been put in place,

“We’ve also introduced innovation such as a gym busyness tracker on our app so members can look at live and recent historical data to see when the gym is busier and when they might want to visit at a different time when it’s less busy. That helps to flatten out the peaks,” he says.

Having a resilient mindset has certainly helped in being able to instigate a response to the pandemic, the effectiveness of which will be revealed in new membership data next month.


“Being able to deal with uncertainty and ambiguity has become a more and more important trait, not just in the CFO but in any business leader,” says George.

But he says in a sector continually being disrupted that is even more the case. “It’s not like being in a mature industry where having a 30 year veteran experience is really useful, because our model of low cost gyms didn’t exist 10 years ago.

“Everything is changing so fast that as a business we have to not only operate in the current but also imagine what the future is going to look like,” he adds.

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