The Gym Group PLC (LSE:GYM) said it does not expect a recovery to pre-pandemic levels until the last quarter of this year and cautioned inflation could add up to 6% to its cost base.
But despite Coronavirus (COVID-19) restrictions, the low-cost gym clocked a 32% rise in sales for the year ended December 31, 2021, as losses narrowed.
"We expect that, on a like-for-like basis, mature sites will be at pre-Covid levels of revenue per month by fourth quarter 2022 and higher in 2023," the company said in a statement.
"In the current inflationary environment, we are seeing inflation in our operating cost base which is expected to be 4-6% overall, driven notably by around £2mln increase in utility costs in the second half."
Sales for the period were £106.0mln, as the statutory loss came in at £35.4mln, down almost 3%.
The company said it saw a significant increase in members following re-opening in April, with total members at the end of 2021 of 718,000, up from 547,000 at the end of February 2021.
Despite the impact of Omicron on January trading, the gym train operator reported 14.9% growth in membership in the first two months of 2022, marking 50% growth in memberships since February last year.
The company has also increased the rollout target to 25-30 openings for 2023 and 2024.
"Our rollout programme is accelerating with a further 28 openings planned in 2022, increasing the number of communities that can access our high quality, great value gyms," said Richard Darwin, chief executive of The Gym Group.
A brand transformation and the launch of a new technology platform in 2022 will accelerate the pace of change to return maintenance capital expenditure to a normal level of 6-7% of revenue at around £12mln, the company said.
A £7mln one-time investment is required to complete the brand transformation project in 2022, said the company. £5mln of which will be capital expenditure.
Over the past year, the gym group's net debt decreased from £47.3mln to £44.1mln, excluding its property network.
Shares in The Gym Group fell 6% to 192p in late morning deals, the lowest since November 2020.