Spire Healthcare

Private hospital operator Spire Healthcare (LSE: SPI) is a UK share I’ve already bought for my Stocks and Shares ISA. I’m considering upping my holdings too as waiting lists for free treatment keep growing.

The British Heart Foundation said on Thursday that wait times for cardiac care grew for a 22nd straight month in April to an all-time high of 319,366 people. Lists are climbing across the NHS and this is driving patient numbers at the likes of Spire through the roof. Private patient revenues at this particular provider rose at a record pace in 2021.

I think stocks like this could be better placed than many others to weather the economic downturn as well. This is because spending on healthcare tends to remain broadly unchanged, even during bad times. Good health is something we can’t afford to take for granted.

I’m considering buying more of Spire despite the threat that rising staff costs pose to profits.

The Gym Group

Investing in companies that offer cheaper goods and services could work for me as consumer spending power falls. One way I’m thinking of doing this is by buying The Gym Group (LSE: GYM) shares.

People don’t stop working out when times get tough. They might however choose to do it at lower cost by joining a gym with cheap membership costs like The Gym Group. In fact, this operator’s low-cost model has helped turbocharge member levels since re-opening last April. It had 718,000 on its books at the end of 2021, up from 547,000 10 months earlier.

I could be tempted to buy the share today and hold onto it for the long haul too. I like its plans to significantly expand its gym network from 206 sites to above 300 by 2025.

The fitness industry is competitive, and The Gym Group will have to paddle hard to keep growing membership numbers. Still, I find the rate at which it has added members over the past year highly encouraging.

Bloomsbury Publishing

Reading is a relatively cheap pastime. So it makes companies involved in the book trade like Bloomsbury Publishing (LSE: BMY) attractive investments for me during this cost of living crisis.

The company’s exceptional trading news this week has boosted my appetite. Sales and profits rocketed 24% and 40% respectively to new highs in the last fiscal year (to February) as the upswing in book demand seen during the pandemic carried on.

I like Bloomsbury for other reasons too. It’s the home of Harry Potter, a cash cow whose sales continue to grow decades after launching. I also like the company’s successful foray into the realm of academic literature.

I’d buy the business even as soaring paper prices put profit margins under strain.

Fitness on the up

Despite lockdown causing many gyms to close, a new emphasis was placed on health, healthy living, and working out due to the pandemic. Firms like Gym Group could benefit and recent results point towards increased demand in memberships at its gyms.

The Gym Group is the UK’s largest low-cost, value gym with over 200 locations currently open throughout the UK. Gym Group attracts its customers with no fixed contracts and a cheap monthly memberships starting from as little as £10.99. In addition to this, it offers its members flexibility to train around their lifestyles with lots of 24-hour locations.

As I write, Gym Group shares are trading for 257p per share. This time last year shares were trading for 217p, which is a 19% return. Is this new focus on health and gym-going a temporary fad or a new way of living?

For and against buying shares

FOR: Gym Group has reported that membership numbers are still on an upward trajectory. This is based on a latest trading report released in December last year. In February 2021, it had 547,000 members. By the end of November, this stood at 735,000. Gym Group reported its multi-site premium membership had increased by 27.1% at the end of November compared to increases of 24.1% in July and 22.5% in December 2020.

AGAINST: I believe the biggest threat to Gym Group is the continued pandemic. There is a real risk that a new variant, as strong or stronger than the original and one that could bypass vaccine, could arise. If this were to happen, restrictions could force gyms to close.

FOR: Gym Group has a good amount of liquidity which will support the growth stock to enhance its number of sites and its offering. It is aiming to open 22 new sites in the UK by the end of December 2022. In addition to this, it has a good track record of performance. I understand that past performance is not a guarantee of the future, however. I can see that revenue and operating profit increased for three years in a row before 2020 was impacted by Covid-19.

AGAINST: There is lots of competition in the gym market and some have a longer history, with larger brand recognition, and a more varied offering than Gym Group. Not everyone wants a cheaper, basic gym experience. Some want a state of the art experience with swimming pools and so on and are willing to pay a premium for it. The Gym Group’s business model is to cater for the basic gym goer, without these added extras.

Growth stock I’d buy

Right now I would add Gym Group shares to my portfolio at current levels. I believe the shares are cheap. Furthermore, these new gym goers and older members will continue to support its growth and profitability. Gym Group’s plans to expand seem to be on track and the next few years could be an exciting time. 

Rupert Hargreaves: Bloomsbury Publishing

Bloomsbury Publishing (LSE: BMY) is my top British growth stock for January. A rise in the demand for reading material through the coronavirus pandemic has generated windfall profits for the company over the past two years.

Bloomsbury aims to capitalise on this newfound love of reading in the years ahead. Analysts believe this will translate into earnings growth of 11% this year and 10% in 2023.

Of course, this growth is not guaranteed. Rising inflation could cause consumers to cut back on spending on non-essential items like books. Despite this headwind, I would buy the stock for my portfolio.

Rupert Hargreaves does not own shares in Bloomsbury Publishing.

Zaven Boyrazian: Frontier Developments

Frontier Developments (LSE:FDEV) is a game development studio and publishing house. It’s responsible for a popular collection of titles, including Elite Dangerous and Jurassic World Evolution.

The stock took a significant hit in 2021 after management lowered its revenue guidance due to underperforming sales. However, its first entry of the Formula 1 franchise is coming out later this year, along with multiple other projects through its publishing arm.

Personally, I think the lineup of new releases could drastically boost sales again. And with further franchise titles coming out in 2023, including Warhammer, the stock looks like it has excellent growth potential in my mind.

Zaven Boyrazian owns shares in Frontier Developments.

Royston Wild: B&M European Value Retail 

City analysts don’t expect B&M European Value Retail (LSE: BME) to record ripping earnings growth in the near term. In fact, they’re expecting profits to reverse over the next 12 months or so as supply chain costs balloon. It’s my opinion, however, that earnings could actually surprise positively as shoppers seek out bargains in this high-inflationary environment. Indeed, B&M’s trading statement in early January showed profits exceeding analyst estimates.

This FTSE 100 share is unlikely to be a flash in the pan. Discount grocers Aldi and Lidl have grown rapidly over the past decade as consumers prioritise value. Encouragingly, B&M is expanding rapidly to make the most of this opportunity, too.

Royston Wild does not own shares in B&M European Value Retail.

G A Chester: Gym Group 

Low-cost operator Gym Group (LSE: GYM) was expanding and delivering strong revenue and cash-flow growth before the pandemic. Inevitably, government-mandated shutdowns had a negative impact on the business. 

There remains some risk from coronavirus, but I think Gym is cheaply valued on its pre-pandemic cash flows. Furthermore, it’s well funded to exploit an unprecedented growth opportunity coming out of the pandemic. 

Due to large numbers of store closures in UK towns and cities, the company has been offered dozens of high-quality sites on attractive terms. Management has never seen the property market so favourable and is taking full advantage to accelerate expansion. 

G A Chester has no position in Gym Group.

Ed Sheldon: Sage

My top British growth stock for January is Sage (LSE: SGE). It’s a leading provider of cloud-based accounting and payroll solutions with a focus on small and medium-sized businesses.

I’m bullish on Sage for a couple of reasons. Firstly, I expect the company to benefit from the ongoing global economic recovery. Better economic conditions should lead to higher demand for the company’s accounting solutions.

Secondly, the valuation seems very reasonable. Currently, Sage sports a forward-looking P/E ratio of around 32. By contrast, US rival Intuit currently trades at around 50 times this year’s forecast earnings.

One risk to consider here is competition from Intuit and other players such as Xero. I think this risk is baked into the valuation, however.

Edward Sheldon owns shares in Sage and Xero.

Roland Head: Electrocomponents

Profits at industrial and electronic parts supplier Electrocomponents (LSE: ECM) have risen by an average of 40% per year since 2016.

According to CEO Lindsley Ruth, trading was strong during the third quarter. He now expects results for the year to 31 March to be ahead of broker forecasts. My sums suggest we could see earnings growth in excess of 40% in 2021/22.

The main risk I can see is that with the stock trading on 26 times forecast earnings, any disappointment could cause the shares to slide. However, I expect further growth.

Roland Head does not own shares of Electrocomponents.

Christopher Ruane:  S4 Capital

After strong growth for most of 2021, digital ad group S4 Capital (LSE: SFOR) fell in the final quarter. It had a weak start to 2022. Like S4 boss Sir Martin Sorrell, I have increased my holding this month.

One risk is the cost of integrating acquisitions eating into profits. But the company continues to grow aggressively, acquiring another US agency this month. For 2022 it is targeting 25% growth in both gross profit and net revenue. S4 is set to benefit from growing spend on digital advertising. 

Christopher Ruane owns shares in S4 Capital.

Paul Summers: Biotech Growth Trust

Last year was pretty awful for shareholders of minnow-focused Biotech Growth Trust (LSE: BIOG). As a patient, long-term investor, however, I’ve been taking this period of selling pressure as an opportunity to load up.

Whether 2021 will see a return to form is hard to say. On an optimistic note, directors believe the valuations given to small-cap stocks in the sector are now “very compelling”. A rise in merger and acquisition activity, the passing of price legislation in the US and increased regulatory approval of drugs (held up by the pandemic) could also spark a recovery.

Paul Summers owns shares in Biotech Growth Trust

Harshil Patel: Alpha FX 

My top British growth stock for January is financial solutions company Alpha FX (LSE:AFX). It’s a founder-led British business focused on two areas: foreign exchange risk management and alternative banking. 

Trading has been strong, and the company has proven sales and profit growth over several years. I like that it has a diversified client base and client numbers are also growing.  

I’d say not only is Alpha FX a growth stock, but it’s also a good quality business with a double-digit profit margin. 

With a market capitalisation of under £1bn, I reckon it has much room to grow further.  

Harshil Patel does not own shares in Alpha FX.

The Gym Group itself has slumped to its cheapest since early February, at around 235p per share. The company’s high valuation even in spite of recent drops leaves it in danger of additional weakness too. Today the UK share trades on a forward price-to-earnings (P/E) ratio of above 60 times.

In great shape to jump again?

The risks of gym shutterings are something investors need to consider seriously, even if studies into omicron are in their early days. But could The Gym Group be an attractive dip buy at current prices for my long-term portfolio? Attendance at gyms and fitness centres has been especially strong since Covid-19 lockdowns were first eased in the spring.

The Gym Group itself added 183,000 new members in the four months to 30 June, latest trading numbers showed. This took the total to 730,000. A quest for better personal health and an improved physique has driven gym attendance through the roof in recent years. It’s a long-term trend that I’d expect to resume in the event of fresh lockdowns.

The ongoing Covid-19 crisis poses a significant threat to profits in the immediate future. But the rate at which the gym industry is growing means The Gym Group could still prove to a brilliant buy for the years ahead. I’m encouraged by a recent £30m-plus share placing, too, that has bulked up its balance sheet and left it better prepared for fresh centre closures. I think recent heavy share price weakness could prove an attractive point for me to buy this cheap UK share at.

A fallen penny stock I’m considering buying

Recent share price falls leave Titon Holdings (LSE: TON) trading just inside penny stock territory at 99.5p per share. It has lost 20% of its value over the past three months as concerns over the economic recovery have grown. The departure of recently installed chief executive Mat Norris “to take up another role” earlier in November hasn’t helped investor confidence, either.

Could this provide me with a great dip opportunity, however? Titon manufactures ventilation systems as well as door and window fittings that it sells in Europe, North America, and South Korea. It is therefore well placed to ride the housebuilding boom to meet the needs of a growing global population.

It’s true that conditions are weak in its Asian marketplace. However, I think the strength of the UK, US, and European housing markets still make it an attractive stock for me to buy. Revenues at Triton rose 4.1% year-on-year during the six months to March 2021, latest financials showed, as housebuilding levels recovered. I’m expecting another sunny update when full-year trading numbers are released, one that could help Titon’s share price power back above £1.

In great shape

Intense competition in the fitness industry could pose a significant threat to The Gym Group (LSE: GYM). But I think the rate at which the entire sector is predicted to grow might offset this problem and still help this cheap UK share to deliver mighty profits growth. Analysts at Technavio think the global gym and health club market will grow by more than $100bn between now and 2025.

I’m particularly encouraged by The Gym Group’s focus on the cheaper end of the market. This is enabling it to exploit the rising importance of value in the mind of consumers. It might also serve the company well if the cost of living keeps on rising.

Membership numbers at The Gym Group have rocketed since Covid-19 restrictions were eased in the spring. It had 730,000 members on its books as of June, up from 547,000 four months earlier.

The company also has plans to open 40 new gyms between the middle of 2021 and the end of next year, to capitalise on its momentum. And it embarked on a £30.3m equity raise in July to help it execute its programme.

City brokers expect GYM to break back into profit in 2022 following two years of coronavirus-related turbulence. But be aware that, at its current price of 275p per share, current projections leave the company trading on an elevated P/E ratio of 69 times for next year.

This sort of pumped up valuation could prompt a share price crash if trading conditions suddenly worsen again. Say, for example, if the pandemic worsens considerably and gyms have to be closed down once more.

Another cheap UK share on my radar

As a long-term investor however, I’m prepared to look past these immediate threats and consider the returns The Gym Group could provide me over a number of years. It’s why I’m also thinking about buying Premier Foods (LSE: PFD) for my shares portfolio today.

I reckon this dirt-cheap UK share is an attractive buy for several reasons. Firstly, it operates in the highly-defensive food production market. Therefore it can expect sales to remain stable, even if broader economic conditions, and consequently broader consumer spending power, sink.

Secondly, it owns a broad array of beloved food brands, from Mr Kipling cakes and Paxo stuffing to Sharwood’s Indian cooking sauces. These labels have exceptional pricing power that allow Premier Foods to raise prices at all points in the economic cycle.

And finally, at 109p per share, the company trades on a bargain-basement forward P/E ratio of 9.5 times. I think this could be one of the best cheap UK shares to buy today, despite the danger posed by rising input costs in the short-to-medium term.

Royston Wild: Games Workshop Group 

The Games Workshop Group (LSE: GAW) share price has fallen off a cliff since it struck record closing highs in September. I think this provides an excellent dip-buying opportunity.  

Though the fantasy wargame maker still trades on an elevated valuation (it carries a forward P/E ratio above 25 times) I think its long record of earnings growth merits a premium. It’s one I was happy to pay when I bought the growth stock late last year. 

Games Workshop has an impressive history of upgrading earnings forecasts. So appetite for the firm has nosedived since it advised in mid-September that recent trading has ‘only’ been in line with forecasts. I think this is an overreaction by the market, and I fully expect rapid international expansion and moves into money-spinning media like video games to keep producing strong and sustained profits growth long into the future. 

Royston Wild owns shares in Games Workshop Group.

Rupert Hargreaves: Dunelm Group

The UK retail sector is incredibly competitive. This makes it hard for most companies to grow. However, some – like Dunelm Group (LSE: DNLM) – seem to have cracked the code.

Since 2018, the group’s earnings per share have risen by 75%, and it does not look as if the company will slow down any time soon. Dunelm has invested heavily in its e-commerce strategy, which has helped the group weather the pandemic.

As the company reinvests its pandemic windfall profits back into growth, I reckon Dunelm can continue to expand. That is why I would buy the growth stock for my portfolio.

Rupert Hargreaves does not own shares in the Dunelm Group.

Christopher Ruane:  S4 Capital

After a recent pullback in its share price, I think now could be a good time to add more S4 Capital (LSE: SFOR) to my portfolio. The digital advertising group has continued its aggressive growth strategy, announcing last month the acquisition of tech specialist Zemoga. With almost 400 staff, it is a sizeable addition to the S4 fold. The deal strengthens S4’s foothold in South America.

Fast growth brings risks, including integrating people. If S4 doesn’t do that well, it could stall profit growth.

Christopher Ruane owns shares in S4 Capital.

Andy Ross: Brooks Macdonald 

Brooks Macdonald (LSE: BRK), is a Jim Slater-style growth stock in my opinion. Its price to earnings growth (PEG) ratio is 0.5, which indicates the shares may be undervalued. A price to earnings ratio (P/E) of 13 adds further credence to that view. Top line growth has been good as well with revenue going from £81m in 2016 to £118m in 2021. Not super exciting, but consistent.  

Recent full year results were good. Group revenue of £118.2 million was up 8.8%. The underlying profit margin was up by 4.7 points to 25.9%.  

All in all, it strikes me as a top growth stock. Best of all, as a financial services firm, it’s not going to be impacted by gas prices, lorry driver shortages or many of the other problems companies are facing.  

Andy Ross does not own shares in Brooks Macdonald.

Zaven Boyrazian: Focusrite

Focusrite (LSE:TUNE) designs and develops a wide range of music production equipment and software for the audio industry. It undoubtedly caters to a niche market. But the demand for audio equipment throughout the pandemic increased as many individuals took up music production to pass the time during lockdown.

Now that lockdown is over, demand remains high as music festivals and other events make their return. Looking at the latest trading update, revenue for its 2021 fiscal year is estimated to be £173m. That’s up from £130m in 2020 and is significantly ahead of analyst expectations.

Management does employ a fairly aggressive acquisitive growth strategy that could create problems if a lousy deal is made. However, given the impressive growth, it’s a risk that I think is worth taking.

Zaven Boyrazian does not own shares in Focusrite.

Roland Head: Hikma Pharmaceuticals

FTSE 250 pharma group Hikma Pharmaceuticals (LSE: HIK) is high-quality business that’s unfairly overlooked by investors, in my view.

This £5.4bn company sells a mix of generic medicines and own-branded products. Profit margins are high.

Recent news includes the launch of a generic version of leading asthma drug Advair and the acquisition of injectables specialist Custopharm. Hikma generates margins of nearly 40% on injectables, so growth here could boost profits.

The main risk I can see is that management will overpay for acquisitions. But I don’t see any sign of this yet.

Analysts expect Hikma’s earnings to rise by 10%-15% per year between now and 2023. With the stock trading on 16 times 2021 forecast earnings, I view Hikma as a buy for growth.

Roland Head does not own shares in Hikma Pharmaceuticals.

G A Chester: The Gym Group 

With firepower of over £100m in cash and credit, The Gym Group (LSE: GYM) is uniquely positioned to take advantage of fallout from the pandemic. All its rivals are more financially constrained. 

Due to the blizzard of retail store closures, GYM is being offered dozens of high-quality sites at very attractive commercial rents. It currently expects to open 40 new gyms by the end of next year, taking its estate to around 230. 

There’s execution risk in the size and speed of the rollout, but this near-term opportunity and structural growth in the low-cost gym segment make GYM my top pick. 

G A Chester has no position in The Gym Group.

Kevin Godbold: Indivior

Pharmaceutical company Indivior (LSE: INDV) will release its third-quarter report on 28 October. Meanwhile, City analysts have pencilled in an uplift in earnings of around 60% for 2022.

Previously, July’s half-year report contained some impressive numbers for revenue and profits. The firm’s SUBLOCADE injection product drove much of the progress, and that’s used for treating opioid use disorder — Indivior specialises in treatments for addiction and serious mental illness.

There’s a positive outlook for the business and the company is engaged in a $100m share buyback programme, which the directors say “appropriately balances returning capital to shareholders with maintaining our ability to execute our patient-focused strategy.”

As the business makes further progress, I think there could be more to come for shareholders here.

Kevin Godbold owns Indivior shares.

Paul Summers: Boohoo Group

Utterly biased I may be but I really do think fast-fashion giant Boohoo (LSE: BOO) offers great value at its current price. At the time of writing, the shares have tumbled nearly 50% in twelve months. For a hugely ambitious company with multiple brands (now including Debenhams). a rapidly growing international presence and 500 million potential customers, that looks very overdone. 

Yes, supply chain problems, ongoing investment in the business and the lowering of guidance on sales growth may also be troubling some. However, I regard these as either temporary setbacks or prudent moves by management that shouldn’t trouble patient holders.

Having fallen so far, I submit the risk/reward trade-off with Boohoo has never been better.

Paul Summers owns shares in Boohoo Group

If anything, the coronavirus crisis has improved the outlook for companies specialising in fitness and wellbeing as the theme of looking after oneself has grown in popularity. What’s more, Britons are particularly enthusiastic when it comes to personal fitness. According to Statista, some 10m people here are members of a health and fitness club. This puts the UK second only to Germany.

The popularity of keeping fit was underlined in The Gym Group’s latest financials. In May, the UK leisure share said trading had beaten its own expectations and that 729,000 members were on its books as of 24 May. This was up from 547,000 less than three months earlier.

Expanding for growth

Encouragingly the business is taking steps to exploit this phenomenon to its fullest. The Gym Group opened four new gyms in April alone. It recently raised £31.2m by placing new shares to accelerate its site expansion programme too. It plans to open 40 new fitness centres over the next 18 months.

The experts at Researchandmarkets.com think the global gym market will grow at a compound annual growth rate of 7.7% through to 2024. It’ll be worth an estimated $96.6bn by the end of the period. And if previous years are anything to go by, operators at the low-cost end of the market like The Gym Group will be the main driver of this growth.

A UK turnaround share on my radar

There’s a risk the UK share might not have things all its own way though. Competition in the gym space is intense and The Gym Group isn’t the only operator to be rapidly expanding. Then there’s the emergence of Peloton, which allows people to work out at home in a novel way. It makes fitness equipment and offers subscriptions for people to take part in live instructor-led group classes.

Peloton had 5.4m signed-up members as of March, an astonishing figure when you consider it only sold its first bike in 2014. The business rolled out a line of cheaper line of treadmills from last September to keep membership growing as well.

??????????????All that being said, City analysts are confident The Gym Group will bounce back strongly from the washout of 2020. They think the UK share will narrow losses to around £31m in 2021, from £47m last year. And they think it’ll bounce back into the black with profits of approximately £10m in 2022.

The business isn’t without its challenges, but I still think the fitness firm could still make me handsome returns over the next decade.

Is this a ‘reopening’ stock I should consider for my portfolio? Let’s take a look at the investment case.

GYM shares: 3 reasons to be bullish

There are certainly things to like about the Gym Group shares right now. Firstly, a lot of the Covid-19 uncertainty has disappeared. When I last covered the stock, back in early November, I saw the shares as quite risky. At the time, we didn’t have a Covid-19 vaccine and the UK was on lockdown. The uncertainty here was very high.

It’s fair to say that the vaccine news has been a game-changer for the company. Not only have gyms across the UK been able to reopen, but people now feel much safer going to them.

Secondly, trading has been solid. In a trading update posted in late May, the company advised that total membership numbers had increased from 547,000 at the end of February to 729,000 at 24 May.

Third, the company is looking at accelerating its new site opening programme. In May, it said it’s having discussions with its banks about increasing financial flexibility.

Has The Gym Group share price climbed too high?

I still have some concerns about The Gym Group shares however. One is that, after the recent share price rise, the stock is now close to where it was pre-Covid-19. That doesn’t make a lot of sense, in my view.

For starters, the group has issued new shares since April 2020. This means its market-cap is now higher than it was pre-Covid-19.

Secondly, while membership numbers have jumped, they’re still about 8% below December 2019 numbers. And the company recently advised it expects to see limited gains in membership over the summer months.

Additionally, the company is expected to post a substantial loss this year. For FY2021, analysts expect the group to generate a net loss of £31m. In 2019, it generated a net profit of £3.6m.

Finally, the company has more debt than it did pre-Covid-19. At the end of 2019, net debt stood at £47.4m. At the end of April however, it had net debt of £63m.

Insiders are offloading GYM stock

Another concern is that recently, insiders at The Gym Group have been offloading quite a lot of stock. On 8 July, for example, CEO Richard Darwin sold 350,000 shares at a price of £2.78 per share. This represented about one third of his holding. Meanwhile, in late March, founder John Treharne sold 500,000 shares at a price of £2.52 per share. This represented about 20% of his holding.

In my view, these large sales suggest insiders see limited share price upside in the near future. It’s also worth noting that after the recent share price rise, the stock has a very high valuation. Currently, it’s trading at about 95 times next year’s earnings.

GYM: my move now

Putting this all together, I don’t see a lot of appeal in The Gym Group shares right now. I think a lot of reopening optimism is already priced into the stock. All things considered, I think there are better stocks I could buy today.

I’ve written recently about two FTSE 350 firms I’d be happy to buy ahead of 19 August’s ‘Freedom Day’. Here are three smaller companies I believe are similarly set to come out of the pandemic even stronger than when they went in.

Pre-pandemic momentum

Cinema chain Everyman Media Group (LSE: EMAN), fitness chain The Gym Group (LSE: GYM) and pubs and hotels chain Young & Co (LSE: YNGA) all had good business momentum before the pandemic. This is clear from their pre-pandemic trading updates.

EMAN reported record sales and a big uplift in its market share of the UK box-office. GYM announced another year of strong growth in members and revenue. YNGA delivered good growth against tough prior-period comparatives and increased its dividend for the 23rd consecutive year.

All three businesses were knocked for six when the UK went into lockdown. However, I was impressed by how their managements handled this period of unprecedented turmoil (“the most challenging in our 189-year history,” in YNGA’s case). Furthermore, I believe they’re now very well-positioned to regain the strong business momentum they had before the pandemic struck.

Pandemic management

EMAN, GYM and YNGA moved quickly to strengthen their balance sheets in the first months of the pandemic. All three were backed by shareholders willing to inject fresh capital into the businesses. Lenders were also very supportive.

The financial backing enabled EMAN, GYM and YNGA to continue a limited amount of expansionary capital spend. Since the first lockdown, the companies have opened a smattering of new sites, as well as invested in targeted refurbishments and staff retainment and training.

I suspect this has put them in a stronger position for coming out of the pandemic than some of their less financially-robust competitors.

Post-pandemic plans

EMAN is “looking forward to unveiling an enhanced venue experience in the coming months.” It’s going cautious on expansion of its 35 sites this year but has a pipeline of seven new venues for 2022/23.

GYM has recently done another equity fundraising to accelerate site rollout. It believes “the Covid-impacted commercial property market provides a unique opportunity to increase the company’s pipeline of attractive sites on favourable commercial terms.”

Meanwhile, YNGA has just announced it’s selling its tenanted estate. This will provide it with “additional firepower” to upgrade its managed freehold pubs and hotels. And also “capitalise on attractive acquisition opportunities that may come to the market.”

My UK stocks to buy come with risks too

There’s an obvious risk for me investing in EMAN, GYM and YNGA right now. Namely, a new virus variant that produces a return of restrictions or lockdowns. Or, in the absence of government diktats, a reluctance of consumers to visit leisure and hospitality venues. In either of these scenarios, my investment would surely suffer — certainly in the short term.

However, I’m prepared to accept this risk. I think the momentum in these businesses before the pandemic, the continuing support of their shareholders and lenders through it, and their current levels of liquidity mean they’ll ultimately emerge stronger than more financially-constrained competitors.

The fitness centre chain has shot 10% higher to 285p per share. The Gym Group’s share price is now up 75% from levels recorded a year ago. And the UK leisure share is now trading at its most expensive since the middle of February 2020.

The Gym Group thrives as facilities reopen

Investors piled out of The Gym Group last year as Covid-19 lockdowns forced its gyms to close. But the UK share has steadily risen in price thanks to the successful coronavirus vaccine programme and the subsequent reopening of the UK economy.

Financials released today show how strong trading at The Gym Group has been since it began reopening its gyms on 12 April. It said that business since re-opening has “outperformed the company’s expectations” thanks to “strong demand for the return to gyms”.

The Gym Group has seen membership numbers balloon from 547,000 in February to 729,000 by 24 May, it said. This is down from the 794,000 members the chain had on its books last December.

Meanwhile, the number of visits to its fitness facilities has been “strong”, The Gym Group said. The average number of visits per member per week has clocked in at 1.5 since re-opening, up from 1.1 in the comparative period in 2019. The company said that its whole estate is now up and running again, and that all of its members are paying following the removal of fee freezes upon re-opening.

Taking steps for future growth

Looking ahead, The Gym Group said that it expects to trade “more in line with seasonal norms” during the next three months. It noted that summer months are traditionally quieter for the industry. As a consequence limited net gains in overall membership levels tend to be small.

The Gym Group has also continued to expand and it opened four new gyms since 12 April. Its new centres in Chichester, York, Cambridge, and London Sydenham take the firm’s total estate to 187. The business said that it has begun talking with lenders with a view to accelerating its site expansion programme too.

Commenting on recent trading, chief executive Richard Darwin said “our members are delighted to be working out in the gym once more with visits per member and new joiner sign-up rates at record levels”.

He added that “with membership levels growing strongly, we are building our pipeline of new gyms to take advantage of what we see as a unique opportunity to extend affordable fitness to even more locations across the UK”.