PureGym chief: keeping faith in the business model

Like any modern gym goer, Humphrey Cobbold, chief executive of PureGym, keeps a close eye on the numbers.

When gyms were shuttered at the beginning of the UK’s first lockdown in March 2020, many perceived them as virus-friendly places. But the boss of the UK’s largest gym chain decided to take the lead on developing industry protocols for gyms to open safely.

Cobbold says business leaders should speak out on issues where they have expertise. He began to lobby for support for the sector, appearing regularly in the media. “I think there’s a bit of a tendency for business to shrink into the background,” he says. “There are concerns as to how supportive of business the government is . . . but in this case, I felt we had to stand up and be visible.”

He had his work cut out. Cobbold presented the sector protocols to deputy chief medical officer Sir Jonathan Van-Tam and other SAGE scientists on a visit to Park Royal PureGym in west London. When Van-Tam saw the slick fitness studio, he suspected a smokescreen by being shown PureGym’s smartest site. But 57-year-old Cobbold told him: “This is £23 a month . . . This is what a modern gym looks like.”

Fearing a government blind spot over the UK gym sector, which the consultants Deloitte valued at about £5.5bn in 2019, he wanted to build an evidence base about the industry’s Covid-19 infectiousness. “You can take the man out of McKinsey, but you can’t take McKinsey out of the man,” he quips, having spent his early career with the management consultancy.

PureGym led on developing data on infectiousness at gyms with industry association ukactive. An initial study found a total of 78 coronavirus cases in 22mn gym visits. Repeated lobbying, backed up by this data and other studies, helped to convince policymakers that gyms were relatively safe. They would open indoors in the UK before pubs after the 2021 lockdown.

While Cobbold had one eye on reopening, he also needed to lead through the pandemic’s “immediate crises”. This included discussing rent deferrals with the company’s 250 landlords and taking the decision to cover the furlough wages of PureGym’s 2,000 personal trainers who missed out on government payments. In early 2020, the company had also bought Danish operator Fitness World for £350mn. The company lost almost £200mn, up from £39.6mn in 2019, a hit Cobbold described at the time as “frankly, awful”.

And the heavy losses continued into last year. PureGym had net debt of more than £800mn, compared with just £70.9mn in earnings, over the nine months to September 2021. On top of this, an attempt to go public failed. Cobbold and chief financial officer Alex Wood “didn’t really have a day off between May and December”, he says, as they prepared to list — something Cobbold had tried previously at the company in 2016.

But PureGym had to “raise quite a lot of capital to pay down debt and raise sufficient cash”. As public offerings slowed towards the end of 2021, investor confidence waned and PureGym pulled back. Cobbold says he was “frustrated rather than disappointed” that “the markets weren’t as responsive as we needed them to be”.

Despite the high debt levels, Cobbold’s confidence comes from the business’s record. In 2016, PureGym was worth about £550mn — it is now valued at more than £1.5bn, he says. “It frustrates me that the public market investors weren’t able to see through some of the short-term wobbles in the market.”

Indeed, getting through the pandemic has required confidence in the model, as well as an “act of faith” that attendance would bounce back, he says. Now, PureGym expects to benefit from gym goers who want to trade down their memberships to manage the cost of living crisis.

And its offer remains decidedly no-frills: the Oval venue in south London where we meet is not glamorous. But, like its 300 sites in the UK, the space is airy and perfectly functional for the 20-somethings who are spending their Wednesday morning there at a cost of about £25 a month.

Cobbold is proud of PureGym’s “budget status” and accessibility. “I think this is the standard gym product that people look for. Of course, there are people who are happy paying £100 or £150 to go somewhere with a bit more granite and a bit more glass and a bit more chrome,” Cobbold says, but it is not PureGym’s model.

The company offers contract-free membership and there is a variable pricing model, with costs ranging from £46.99 a month for a standard membership in Clapham, south London, to £17.99 a month for the same package in Grimsby, north-east England. It is a sign, he says, of how to run a simple business in a “sophisticated way”.

Three questions for Humphrey Cobbold

Who is your leadership hero?

The late Andrew Grove, former chief executive of Intel. He wasn’t a big, showy leader or anything but he had a couple of key principles. He said the problem with most businesses that become successful is that they become proud of that success. That success leads to complacency and complacency is almost always a prelude to failure. You’ve got to have this ethos of healthy paranoia.

What was the first leadership lesson you learnt?

The importance of authenticity. If you’re leading, people are looking to you and you can only reasonably expect them to follow if they believe that the individual you’re presenting is for real.

What would you do if you weren’t a chief executive?

A scientist. I read sciences at Cambridge, I wanted to be a nuclear physicist. I did a couple of research science internships but it was not quite as exciting as reading about Einstein made it all sound and I got seduced by an interest in business.

Undeterred by the failed initial public offering, Cobbold has pursued funding elsewhere and is undertaking a small-scale expansion in the US. “We stopped the IPO process at the end of one week and moved into discussions with private capital providers the next.” KKR would eventually invest £300mn to fund PureGym’s international expansion plans. It is a familiar path: in 2017, US private equity group Leonard Green & Partners bought a majority stake in PureGym from CCMP Capital Advisors.

Cobbold rejects any notion that, under private equity ownership, he lacks control of PureGym’s direction. Decisions such as expanding into the US or launching a Peloton-style bike are taken in consultation with PureGym’s private equity owners.

“As a chief executive, you have to be clear and forthright,” he says, “but it’s not just my way or the highway.” His collaborative approach leads to “robust debates”, he says, but also fosters trust in his leadership. “Leonard Green are 11,000 miles and eight time zones away,” he says. “They know they’re reliant on us and my feel for the market.”

We speak in the week after John Foley stepped back as chief executive of Peloton. A “nerdy” cyclist and former chief executive of online sports retailer Wiggle, Cobbold says he uses the Zwift bike platform, rather than Peloton. And while he admires the business, he says it “probably got a bit carried away with things”. PureGym’s US investment will be small, opening three sites will risk about $20mn, he says. “If we build even a modestly sized business in America, it might be 100 or 200 sites that might be worth $300mn to $500mn.”

The cautious optimism of not “betting the company” on expansion recalls Van-Tam’s warnings to avoid “tearing the pants out of” pandemic restrictions. With an eye trained on the data, Cobbold says: “If it works, great, if it doesn’t, we’ll have learned why it doesn’t work.”