PureGym boss: Believe in the business model

Like any modern gym-goer, PureGym CEO Humphrey Cobbold keeps a close eye on the numbers.

When gyms closed at the start of the UK’s first lockdown in March 2020, they were perceived by many as virus-friendly places. But the boss of the UK’s largest gym chain decided to take the lead in developing industry protocols for the safe opening of gyms.

Cobbold says business leaders should speak out on issues in which they have expertise. He began campaigning to support the sector and appeared regularly in the media. “I think there’s a certain tendency for business to take a backseat,” he says. “There are concerns about how business supportive the government is. . . but in this case I felt like we needed to stand up and be visible.”

He had his work cut out. Cobbold presented the sector logs to Deputy Chief Medical Officer Sir Jonathan Van-Tam and other SAGE scientists during a visit to the Park Royal PureGym in west London. When Van-Tam saw the swanky gym, he suspected a smoke screen by being shown PureGym’s smartest website. But Cobbold, 57, told him: “That’s £23 a month. . . This is what a modern gym looks like.”

Fearing a government blind spot in the UK gyms sector, which consultants Deloitte estimated in 2019 at around £5.5 billion, he wanted to build an evidence base of the industry’s risk of contagion from Covid-19. “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 in management consulting.

PureGym led the development of contagion risk data in gyms with industry association ukactive. A first study found a total of 78 coronavirus cases in 22 million gym visits. Repeated lobbying, supported by this data and other studies, helped convince policymakers that gyms were relatively safe. They would open in the UK before pubs post-lockdown 2021 indoors.

While Cobbold had his eye on reopening, he also had to lead through the “imminent crises” of the pandemic. These included discussing rent deferrals with the company’s 250 landlords and deciding to cover the vacation pay of PureGym’s 2,000 personal trainers who have been missing out on government payments. Earlier in 2020, the company had also bought Danish operator Fitness World for £350m. The company lost nearly £200m, down from £39.6m in 2019, a hit Cobbold described as “frankly, awful” at the time.

And the heavy losses continued into last year. PureGym had net debt of more than $800 million for the nine months ended September 2021. Cobbold and Chief Financial Officer Alex Wood “didn’t really have a day off between May and December,” he says, as they prepared for a list — something that Cobbold had already tried out in the company in 2016.

But PureGym had to “raise quite a bit of capital to pay off debt and raise enough cash.” As public offerings slowed towards the end of 2021, Investor confidence dwindled and PureGym withdrew. Cobbold says he was “more frustrated than disappointed” that “markets weren’t as responsive as we needed them to be.”

Despite the high level of debt, Cobbold’s confidence rests on the company’s balance sheet. In 2016, PureGym was worth around £550m – now it’s valued at more than £1.5bn, he says. “It frustrates me that public market investors have not been able to see through some of the near-term fluctuations in the market.”

Indeed, surviving the pandemic required faith in the model, as well as an “act of faith” that attendance would recover, he says. Now, PureGym expects to benefit from gym-goers wanting to trade their memberships to manage that Cost of Living Crisis.

And its offering remains decidedly straightforward: the Oval venue in south London, where we meet, is not glamorous. But, like its 300 UK locations, the space is airy and perfectly functional for the 20-year-old who spends their Wednesday mornings there for around £25 a month.

Cobbold prides itself on PureGym’s “budget status” and accessibility. “I think this is the standard gym product that people are looking for. Of course there are people who are happy to pay £100 or £150 to have a little more granite, a little more glass and a little more chrome,” says Cobbold, but it’s not PureGym’s model.

The company offers a no-contract membership and variable pricing model, with costs ranging from £46.99 per month for a standard membership in Clapham, South London, to £17.99 per month for the same package in Grimsby, North East England. It’s a sign of how to run a simple business in a “challenging way,” he says.

Three questions for Humphrey Cobbold

Who is your leadership hero?

The late Andrew Grove, former CEO of Intel. He wasn’t a big, flashy leader or anything, but he did have a few key principles. He said the problem with most companies 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 have to have that ethos of sane paranoia.

What was the first leadership lesson you learned?

The importance of authenticity. When you lead, people look at you and you can only reasonably expect them to follow you if they believe the person you are presenting is genuine.

What would you do if you weren’t CEO?

A scientist. I studied science at Cambridge, I wanted to be a nuclear physicist. I did a few research internships but it wasn’t quite as exciting as reading about Einstein made everything ring and I was seduced by an interest in economics.

Undeterred by the failed IPO, Cobbold has continued funding elsewhere and is undertaking a small expansion in the US. “We halted the IPO process after a week and entered talks with private investors over the next week.” KKR would eventually invest £300m to fund PureGym’s international expansion plans. It’s a well-known 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 he has no control over PureGym’s direction due to private equity ownership. Decisions such as expanding into the US or introducing a Peloton-style bike will be made in consultation with PureGym’s private equity owners.

“As CEO, you have to be clear and precise,” he says, “but it’s not just my path or the highway.” His collaborative approach leads to “robust debates,” he says, but also promotes trust in his leadership. “Leonard Green is 11,000 miles and eight time zones away,” he says. “They know they depend on us and my feel for the market.”

We’ll talk the week after John Foley resigned as CEO of Peloton. Cobbold, a “nerdy” cyclist and former CEO of online sports retailer Wiggle, says he uses cycling platform Zwift instead of Peloton. And while admiring the deal, he says it “probably took a bit of a beating.” PureGym’s US investment will be small, opening three locations risking about $20 million, he says. “If we build even one modest-sized company in America, it could be 100 or 200 locations that could be worth $300 million to $500 million.”

The cautious optimism that the company isn’t “betting” on expansion is reminiscent of Van-Tam’s warnings to avoid “ripping your pants out of pandemic restrictions.” Looking at the data, Cobbold says, “If it works, great, if it doesn’t, we’ve learned why it’s not working.” PureGym boss: Believe in the business model

Adam Bradshaw

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