Full Year Results

RNS Number : 0635S
The Gym Group plc
15 March 2016
 

15 March 2016

The Gym Group Plc

('the Company' or 'The Gym')

 

Full Year Results

Strong revenue and profit growth and record number of new site openings underpinning future growth

 

The Gym Group Plc, the fast growing, nationwide operator of 75 low cost gyms branded 'The Gym', announces its full year results for the year ended 31 December 2015.

 

Financial Highlights

·      Revenue of £60.0 million, an increase of 31.9% (2014: £45.5 million)

·      Group Adjusted EBITDA1 of £17.0 million, an increase of 15.9% (2014:  £14.7 million)

·      Group Operating Cash Flow2 of £18.6 million, an increase of 12.7% (2014: £16.5 million)

·      Loss before tax of £12.4 million (2014: £9.4 million) as a result of pre IPO finance costs and exceptional costs

·      Proforma adjusted profit before tax3 of £5.3 million with proforma Adjusted EPS4 of 3.07p

 

Operational Progress

·      Successful IPO on the London Stock Exchange and refinancing in November 2015

·      19 new gyms opened in 2015 increasing the total estate to 74, with a further site opening this week

·      Total year end members at 376,000, an increase of 28.3% versus prior year (2014: 293,000)

 

Outlook

·      A strong start to 2016 with performance in line with the Board's expectations

·      Strong pipeline with 6 new sites expected to be open by the end of H1 2016;  a further 4 locations where contractors are on site

 

 

John Treharne, CEO of The Gym Group, commented:

 

"2015 was a landmark year for The Gym Group with an acceleration in roll out and strong results, culminating in a successful IPO. Our low cost, affordable and disruptive model, which we relentlessly strive to improve, resonates with consumers as demonstrated by the near 30% increase in membership in 2015. In January 2016 we moved through the 400,000 member mark. A strong site pipeline for 2016 will see us continue to expand at a fast rate to take advantage of our considerable opportunity.  We have a proven model, strong market fundamentals and financial strength to continue to prosper and deliver value for shareholders both in 2016 and much further beyond." 

 

An audio webcast of the analyst presentation will be available from 13:00 today via our website www.tggplc.com

 

For further information, please contact

The Gym Group

John Treharne, CEO

Richard Darwin, CFO

 

via Instinctif Partners

Numis

Oliver Cardigan

Oliver Hardy

Toby Adcock

 

020 7260 1000

Instinctif Partners

Matthew Smallwood

Justine Warren

0207 457 2020

1 Group Adjusted EBITDA is calculated as operating profit before depreciation, amortisation, exceptional items and other income.

2 Group Operating Cash Flow is calculated as Group Adjusted EBITDA less working capital less maintenance capital expenditures.

3 Proforma adjusted profit before tax is calculated as Group Adjusted EBITDA less depreciation and proforma interest.

4 Proforma Adjusted EPS is calculated as proforma adjusted profit before tax less proforma tax divided by the number of shares at the year end.

 

Chairwoman's statement

2015 was an excellent year for The Gym. Revenue increased by 31.9% to £60.0 million, Group Adjusted EBITDA increased by 15.9% to £17.0 million and 19 new gyms were opened during the year. This demonstrates the ability of the business to drive top and bottom line growth by growing the estate efficiently and meeting the needs of our members. We are delighted to have listed on the Full List of the London Stock Exchange and welcome our new shareholders to this exciting business. The business has a well-defined operating and financial model and has further strengthened its balance sheet to support future growth.  We are well positioned to take advantage of the substantial opportunity in the market.

My first impressions

I joined The Gym shortly before the IPO of the Company. I am pleased to share with you my first impressions. This is a business which has pioneered the low cost gym model. It has a clear strategy and a passionate culture with the aim of providing every member the very best experience. Supported by a knowledgeable and experienced property team, it selects excellent sites that meet strict criteria and deliver high returns in a reassuringly predictable way. Operating a flexible, low cost, disruptive, technology led model, The Gym operates efficiently and is now driving further benefits from its increased scale.

The fact that The Gym has all these attributes as a relatively young business with much potential is testament to an experienced, talented and driven management team led by the Company's founder, John Treharne.

Future growth will enable the Company to further its vision to provide affordable exercise facilities to every person who wants to improve their wellbeing; a very positive purpose for a company.

Strong governance

Strong governance is about putting in place a system and an openness to challenge in order to make good decisions. At IPO we strengthened our Board processes and committee structures, and we expect to appoint an additional Non-Executive Director in the coming months to complete this process. There is a strong commitment to a well organised and efficient Board to support the Executive team, and to enable swift and confident decision making.

Looking ahead

The Gym has extensive opportunities to grow in the years ahead. Our low cost, no contract, high quality, 24 hour gym membership is highly attractive in today's fast moving, value conscious society. Our proposition is extremely competitive within the wider gym market and we are evidencing new members joining us from traditional higher cost gyms and other health and fitness operators. Importantly, more than a third of our new members are experiencing gym membership for the first time. We look forward to reaching more communities as we open more gyms to provide them with the same encouragement to enhance their wellbeing.

Our people are vital in delivering an outstanding service to our members.  I am pleased to announce that in the coming weeks we plan to introduce a scheme where all of our staff will have the opportunity to become shareholders in the business.

I am delighted to have been appointed Chairwoman.  I believe The Gym, with its attractive financial model and successful growth strategy, is well positioned to continue to enhance and create value for institutional and employee shareholders as we work every day to provide our members with an excellent experience.

 

Penny Hughes

Chairwoman

14 March 2016

 

Chief Executive's Review

Introduction

The Gym is the original pioneer of low cost gyms in the UK that are open 24/7.  Underlying our disruptive concept is that we offer the products that members want at market leading prices without compromising on quality or fundamentals.

I am pleased to present my first Chief Executive's Review following our listing on the Full List of the London Stock Exchange in November 2015.

This has been a landmark year for our business with a record number of new site openings, increasing our estate to 74 sites at 31 December 2015 from 55 in the prior year. Our financial metrics reflect the rapid growth that we have delivered: Total year end members increased by 28.3% to 376,000 (2014: 293,000); revenue of £60.0 million (2014: £45.5 million), an increase of 31.9%, and Group Adjusted EBITDA of £17.0 million, an increase of 15.9% (2014: £14.7 million).

We are a market leader in the low cost sector, enabling us to realise the benefits of increased scale to drive down operational and capital costs and deliver higher returns. Low cost gyms are a fast growing market, and we continue to drive the expansion of the sector by attracting members that are new to the gym market and also from more traditional gym operators.  We constantly seek out ways to improve our business model to capitalise on this market opportunity.  Equally, the strength of our financial covenant means that we are offered the best sites by landlords which underpins the growth of our estate and our pipeline.

Strategic progress

Delivering performance from gyms

Our business model is straightforward with new sites taking time to reach maturity. Once mature they generate excellent levels of cash and good returns. We have been accelerating our rollout programme and so at the end of 2015, 34 of our 74 sites had been open for less than two years. We can expect to benefit from the growth of these sites as they mature during the current year and beyond.

Improving operating efficiencies

Our business model strips out the elements of the more traditional proposition that add unnecessary cost and are barely used, enabling us to operate a low cost environment.  As we grow we will use the benefits of scale and operating expertise to continue to take costs out of the way that we deliver the business model. We deliver as low a cost base as possible. This enables us to pass on these benefits to the members through charging some of the lowest prices in the sector.  The Gym charges an average fee of £16 per month.

An exercise to renegotiate operating cost contracts has identified £1 million of annualised savings on an ongoing basis and was implemented during the year.

Achieving our rollout strategy

The Gym operates a flexible low cost model that can be used in many different types of location.  There remain substantial growth opportunities to expand our footprint across the UK.  In 2015, gyms opened in sites previously used as retail space (Bedford and Reading) and a gentlemen's club (Charing Cross). We also opened a gym as part of a leisure park regeneration scheme (Hemel Hempstead), as well as gym spaces vacated by other operators (Eastbourne, Croydon Purley Way and Derby). Our new sites continue to trade well, in line with our expectations.  Our pipeline is expanding rapidly.  We are well positioned to open between 15 and 20 gyms in total in 2016 and per year thereafter over the medium term.  The pipeline is stronger than at any point in our history; landlords are also recognising the strength of our covenant, assisted further by our newly acquired status as a publicly listed company.

We continue to refine and reduce the cost of building and fitting out a new site where we are provided with a clean shell by the landlord.  Savings have been achieved on multiple stages of the fit-out process, including build costs, gym equipment and fixtures and fittings.  This is demonstrated by the decrease in the initial cost to fit out a new gym, from an average of £1.5 million for the 2008 to 2014 portfolio to an average cost of approximately £1.35 million for the 2015 gyms.

Developing the customer proposition

The low cost sector is still at an early stage of development in the UK, particularly compared with older, low cost gym markets in mainland Europe and the United States.  We continue to evolve our concept to address the needs of our members.  This is achieved by monitoring customer feedback closely to ensure that we provide what members want at affordable prices.  During 2015 we expanded group exercise classes in response to feedback from members.  Similarly, scientific analysis of actual usage patterns indicated that members wanted additional space allocated for lighter free weights. The Gym also benefited from a brand relaunch to emphasise our brand personality at our sites.  We are applying this to the new sites as we develop them, ensuring there is consistency across the sites as well as in our marketing messaging.  This new branding will be rolled out into some of our earlier sites as they come up for refurbishment.

Monitoring member feedback about our offer and the service that we provide is a core component of the development of our business.  Examples of feedback include measuring the use of machines to enable us to understand when to change the equipment in our gyms, ensuring that what we provide is in line with what members want to use. Equally we analyse our site openings to understand the demographics of our membership base and aid our decision making for future site acquisition.  Member feedback about our operational performance is measured through Net Promoter Score with a score of 60.2% achieved in 2015. Our online measure of customer satisfaction, Feefo, score was 94% for the year.  The business is constantly evolving the way it collects this type of feedback.

Focussing on our people

Our people are instrumental to running a successful business.  The Gym is made up of 74 gyms that act as local businesses drawing on a network of central head office support to fulfill their operational goals.  As we grow we continue to enhance the quality of support to this network of sites.  A regional operations structure has been put in place, along with the expansion of our commercial team to explore further revenue opportunities and enhance our monitoring of suppliers. We operate an outsourced support model where services are provided through a number of key suppliers. 

Our people are highly engaged, passionate and committed. We have achieved a 2 star 'Outstanding' award in the Best Companies accreditation which measures workplace engagement.  The Company recently achieved the Investors in People Silver award and is currently applying for the Gold award. The business continues to be the only low cost fitness provider with such accreditation.  

We are pleased to give our people the opportunity to share in the success of the Group.  In the coming weeks we will introduce an all-staff share scheme where all of our people will be granted an award of £1,000 free shares and also have the opportunity to invest in additional shares.

Our use of technology

Technology and systems are at the heart of our business and facilitate the low cost environment that we operate.  A simple online joining process is critical to our model.  We are exploring ways to upgrade our capability in this area with the development of a new member management system. Our goal is for members to access their data in a more efficient way and for the business to communicate with members more effectively.

The business moved to a new email sales platform during the year that will enable us to reach new and lapsed members more effectively. More of our marketing is now online as we expand the scope of Pay per Click and Search Engine Optimisation.  At the heart of our marketing effort is our ability to drive potential members in a local catchment to our website to join up. This critical difference in operation to the traditional health club market helps us to attract over 35% first time gym users.  Our 24/7, CCTV controlled environment attracts a wider cross section of people who wish to exercise outside traditional gym opening hours when it suits them. As a result, over a third of the membership base are shift workers such as doctors, nurses, bus drivers, taxi drivers, hotel and restaurant workers, who find traditional opening hours too restrictive.   

Outlook

The new financial year has started well and in line with the Board's expectations.  January and February are the two most significant trading months of the year for any gym business.  Membership numbers at the end of February had increased to 418,000, a record level with an 11.2% increase since December 2015. This level of member growth will help to underpin our performance for the rest of the year.  The pipeline continues to be strong and we expect to open 15 to 20 sites in the current year. As in 2015 these site openings will be weighted to the second half of the year, with 6 sites expected to be open in the first half of the year and a further 4 locations where contractors are on site.

Five months into our life as a public company, our strategic priorities and financial results are progressing well.  Our focus is on creating value for both our members and our shareholders.

John Treharne

Chief Executive Officer

14 March 2016

 

Financial Review

Summary

 

2015

2014

 

£'000

£'000

Total number of gyms

74

55

Number of year end members ('000)

376

293

Revenue

59,979

45,480

Group Adjusted EBITDA1

17,016

14,688

Group Adjusted EBITDA before Pre-Opening Costs2

19,681

16,668

Adjusted Earnings3

(1,107)

(4,452)

Group Operating Cash Flow4

18,616

16,514

 

The Group delivered another excellent performance in 2015, with revenue growth of 31.9% and Group Adjusted EBITDA growth of 15.9%, with strong performances from both mature and new gyms.

Our Group Adjusted EBITDA growth has been achieved despite the substantial pre-opening costs of £2.7 million incurred with the opening of 19 new gyms, and additional investment in our key central functions. 

Group Operating Cash Flow increased by 12.7%, as a result of the conversion of Group Adjusted EBITDA offset by increases in maintenance capital expenditure as our estate increases in size.

Result for the year         

 

2015

2014

 

£'000

£'000

Revenue

59,979

45,480

Cost of sales

(1,073)

(1,040)

Gross profit

58,906

44,440

Administration expenses

(55,105)

(39,452)

Exceptional costs

(7,607)

(2,653)

Other income

1,105

-

Operating (loss) / profit

(2,701)

2,335

Finance income

265

20

Finance costs

(9,946)

(11,797)

Loss before tax

(12,382)

(9,442)

Tax credit

909

659

Loss for the year

(11,473)

(8,783)

 

Revenue

The strength of The Gym's member proposition has continued to be reflected in our membership performance. Year end membership numbers increased significantly in 2015, with 376,000 members at 31 December 2015 compared to 293,000 at 31 December 2014.

The average number of members increased by 31.0% during the year to 355,000 (2014: 271,000), primarily due to the opening of 19 new gyms. Average member numbers were split between mature sites of 234,000 and new sites of 121,0005.  Average revenue per member per month increased from £13.98 in 2014 to £14.08.

As a result Group revenue increased by 31.9% to £60.0 million in the year ended 31 December 2015, from £45.5 million in the year ended 31 December 2014.

1 Group Adjusted EBITDA is calculated as operating profit before depreciation, amortisation, exceptional items and other income.

2 Group Adjusted EBITDA before Pre-Opening Costs is defined as Group Adjusted EBITDA excluding the costs associated with new site openings.

3 Adjusted Earnings is calculated as the Group's loss for the year before amortisation, exceptional items, other income and the related tax effect.

4 Group Operating Cash Flow is calculated as Group Adjusted EBITDA less working capital less maintenance capital expenditures.

5 Mature sites are defined as gyms that have been open for 24 months or more measured at the end of the year.  New sites are

  defined as gyms that have been open for less than 24 months at the end of the year.

Administration expenses

Administration expenses increased by 39.7%, driven primarily by an increase in the total number of gyms from 55 as at 31 December 2014 to 74 as at 31 December 2015.  Due to the higher number of site openings in 2015, pre-opening costs associated with new site openings increased from £2.0 million to £2.7 million.

Property lease rentals and staff costs form a significant part of our administration expenses.  Property lease rentals increased from £7.8 million in 2014 to £11.2 million in 2015 due to a larger portfolio of gyms.  Staff costs increased from £5.5 million to £8.4 million.  This was driven by both gym openings and head office support staff costs.

Depreciation charges increased from £7.6 million in 2014 to £10.9 million in 2015, largely as a result of the increased number of sites.  The Group's depreciation charges appear high in relation to operating loss / profit as leasehold improvements and fit-out costs start to be depreciated as soon as a gym is opened, whereas it takes time for a gym to reach mature profit levels.

Head office costs increased from £4.0 million to £6.3 million.  This is due to investments in key business functions, including property, commercial and finance.  We believe that our core functions are now well-placed to support the growth of the business in the foreseeable future.

Other income

Other income of £1.1 million relates to proceeds received in relation to a lease surrender for one of the Group's sites that did not reach opening.

Group Adjusted EBITDA

 

2015

2014

 

£'000

£'000

Operating (loss) / profit

(2,701)

2,335

Exceptional items

7,607

2,653

Other income

(1,105)

-

Depreciation of property, plant and equipment

10,907

7,600

Amortisation of intangible assets

2,308

                     2,100

Group Adjusted EBITDA

17,016

14,688

Group Adjusted EBITDA increased during the year mainly due to the increase in the number of gyms in operation resulting from the Group's ongoing rollout strategy, and from gyms reaching maturity in member numbers and revenue.

Group Adjusted EBITDA was adversely affected by pre-opening costs, with gym openings being weighted towards the second half of the year.  Group Adjusted EBITDA before Pre-Opening Costs increased by 18.1% to £19.7 million (2014: £16.6 million).

As a result of the ongoing rollout strategy Site EBITDA contributed by the 40 mature sites demonstrated strong growth, increasing by 15.9% to £18.8 million (2014: £16.2 million from 32 sites). 

EBITDA from the 34 new sites performed strongly and increased by 81.2% to £4.5 million (2014: £2.5 million from 23 new sites). Growth was driven by an increased number of new gyms and the strength of gyms opened during 2014 and early 2015 as they mature.  This strong performance has offset losses associated with gyms opening later in 2015 which are in the process of growing their membership numbers.  The impact of gym openings was magnified as a result of 11 out of the 19 total openings occurring in the second half of 2015.

Exceptional items

In the year ended 31 December 2015 exceptional costs of £7.6 million were incurred (2014: £2.7 million).

This includes £5.7 million of costs in relation to the Group's IPO. An additional £2.6 million of costs associated with the issue of new shares have been recognised within share premium.

In accordance with IFRS 2, a non-cash charge of £1.0m (2014: £nil) has been recognised in respect of share options granted to staff and senior managers in connection with the capital restructuring on the date of the IPO. 

Additionally £0.9 million was incurred in relation to the exploration of strategic options prior to the IPO.

Finance costs

Finance costs decreased by 15.7% to £9.9 million in the year ended 31 December 2015, from £11.8 million in the year ended 31 December 2014.

This included £1.6 million (2014: £nil) of exceptional finance items relating to the write off of capitalised financing fees and interest on finance lease creditors, which occurred as part of the refinancing activity in November 2015. Excluding exceptional items, finance costs decreased by 30.0%, driven primarily by a decrease in preference share interest of £2.5 million following a change in the Company's Articles of Association in 2014, and fair value gains on interest rate derivatives.

Finance costs will decrease in 2016 due to the refinancing carried out in 2015.  Based on the December 2015 interest charge, the proforma annualised interest charge for 2015 was £0.8 million.

Taxation

The Group has incurred an income tax credit for the year ended 2015 of £0.2 million (2014: £nil) due to the trading loss position and adjustments in respect of prior years.  Trading losses were offset by disallowable exceptional costs and disallowable interest charges arising under the previous private equity funding structure.  A deferred tax credit of £0.7 million (2014: £0.7 million) has arisen in relation to the reversal of temporary differences.

Earnings

The loss for the year increased from £8.8 million for the year ended 31 December 2014 to £11.5 million for the year ended 31 December 2015 as a result of the factors discussed above.

Basic earnings per share ('EPS') was a loss of £0.19 (2014: loss of £0.18).

Adjusted EPS was a loss of £0.02 (2014: loss of £0.09).  Adjusted EPS is calculated by excluding amortisation, exceptional items, other income and the resultant tax effect from basic earnings.  The improvement in Adjusted EPS results from both an increase in Adjusted Earnings and the dilution arising on the issue of shares on IPO.

Dividend

Due to the short period of time between the IPO and the year end, the Board has not recommended a final dividend for 2015.

The Directors intend to declare an interim dividend in respect of the first half of 2016.  The total dividend for 2016 is expected to be 10% to 20% of Adjusted Earnings.

 

Cash Flow

 

2015

2014

 

£'000

£'000

Group Adjusted EBITDA

17,016

14,688

Movement in working capital

4,348

3,407

Maintenance capital expenditure1

(2,748)

(1,581)

Group Operating Cash Flow

18,616

16,514

Expansionary capital expenditure2

(28,230)

(20,335)

Other income

1,105

-

Exceptional items

(7,001)

(2,653)

Taxation

(73)

(244)

Finance costs

(4,108)

(5,726)

IPO proceeds

89,931

-

Repayment of debt

(89,842)

(2,617)

Other net cash flows from financing activity

16,886

16,546

Net cash flow

(2,716)

1,485

The Group continues to deliver strong cash generation with Group Operating Cash Flow 12.7% higher at £18.6 million  (2014:  £16.5 million) due to an increase in EBITDA resulting from a greater number of gyms and efficient use of working capital, offset by increased investment in maintenance capital expenditure as the estate grows. These factors result in a small decrease in Group Operating Cash Flow Conversion3 to 109.4% (2014: 112.4%).

Expansionary capital expenditure of £28.2 million arises as a result of the fit-out of new gyms. 

3 Group Operating Cash Flow Conversion is calculated as Group Operating Cash Flow as a percentage of Group Adjusted EBITDA

 

 

2015

2014

 

£'000

£'000

Net debt at 1 January

49,205

36,743

Group Operating Cash Flow

(18,616)

(16,514)

Expansionary capital expenditure

28,230

20,335

Other non-operating cash flow

(4,275)

8,641

IPO proceeds

(89,931)

-

Drawdown of new bank facility

10,000

-

Financing fees and costs of IPO

9,828

-

Repayment of shareholder loans

22,699

-

Net debt at 31 December

7,140

49,205

Proceeds from the Group's IPO of £89.9 million and a new term loan of £10.0 million were used to repay £53.9 million of borrowings under the Group's previous bank loan facilities (including accrued interest), £22.7 million of outstanding shareholder loans, £10.0 million of outstanding finance leases and £8.8 million of cash costs associated with the IPO.

As a result of the Group's IPO and refinancing, combined with the strong operating performance, Net Debt : Group Adjusted EBITDA decreased to 0.42x (2014: 3.35x).

Balance sheet

Our business model, strong conversion from revenue to cash and debt restructuring during the year results in an uncomplicated balance sheet.

 

2015

2014

 

£'000

£'000

Non-current assets

 

 

Property, plant and equipment

85,237

67,510

Intangible assets

49,137

50,870

Deferred tax asset

177

-

Total non-current assets

134,551

118,380

Current assets

 

 

Inventories

122

75

Trade and other receivables

5,654

4,282

Cash and cash equivalents

2,860

5,576

Total current assets

8,636

9,933

Total assets

143,187

128,313

Current liabilities

 

 

Trade and other payables

25,546

20,797

Income taxes payable

-

246

Borrowings

-

3,613

Total current liabilities

25,546

24,656

Non-current liabilities

 

 

Borrowings

8,966

70,253

Provisions

232

223

Financial instruments

-

1,037

Deferred tax liabilities

-

559

Total non-current liabilities

9,198

72,072

Total liabilities

34,744

96,728

Net assets

108,443

31,585

 

The non-current assets of the Group have increased by £16.0 million to £134.4 million. This is as a result of capital expenditure in property, plant and equipment and computer software totaling £29.2 million, offset by depreciation and amortisation of £13.2 million.

Cash balances have decreased as a result of the net funding of the capital expenditure program from operating cash flows.

Other current assets primarily relate to prepaid property costs and have remained consistent year on year.  Trade and other payables have increased by £4.7 million largely as a result of lease incentives associated with new gyms opening during the year.

The Group has drawn £10.0 million of its 5 year bullet repayment facility.  £25.0 million of the facility was undrawn at 31 December 2015 and will be utilised to fund new sites, working capital and capital expenditure.

Richard Darwin

Chief Financial Officer

14 March 2016

 

 

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2015

 

 

 

Note

31 December 2015

 

31 December 2014

 

 

 

£'000

 

£'000

 

 

 

 

 

 

Revenue

 

 

59,979

 

45,480

Cost of sales

 

 

(1,073)

 

(1,040)

 

 

 

 

 

 

Gross profit

 

 

58,906

 

44,440

 

 

 

 

 

 

Administration expenses

 

 

(62,712)

 

(42,105)

Other income

 

 

1,105

 

-

 

 

 

 

 

 

Operating (loss) / profit

 

3

(2,701)

 

2,335

Being:

 

 

 

 

 

  - Group Adjusted EBITDA1

 

 

17,016

 

14,688

  - Depreciation

 

9

(10,907)

 

(7,600)

  - Amortisation

 

 

(2,308)

 

(2,100)

  - Exceptional items and other income

 

3, 4

(6,502)

 

(2,653)

 

 

 

 

 

 

Finance income

 

6

265

 

20

Finance costs

 

7

(9,946)

 

(11,797)

 

 

 

 

 

 

Loss before tax

 

 

(12,382)

 

(9,442)

 

 

 

 

 

 

Tax credit

 

8

909

 

659

 

 

 

 

 

 

Loss for the year attributable to equity shareholders

 

 

(11,473)

 

(8,783)

 

 

 

 

 

 

Other comprehensive income for the year

 

 

-

 

-

 

 

 

 

 

 

Total comprehensive loss attributable to equity shareholders

 

 

(11,473)

 

(8,783)

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

 

£

 

£

Basic and Diluted

 

5

(0.19)

 

(0.18)

Adjusted

 

5

(0.02)

 

(0.09)

 

 

1 Group Adjusted EBITDA is a non-GAAP metric used by management and is not an IFRS disclosure

 

 

Consolidated Statements of Financial Position

As at 31 December 2015

 

 

 

Note

31 December 2015

 

31 December 2014

 

31 December 2013

 

 

 

£'000

 

£'000

 

£'000

Non-current assets

 

 

 

 

 

 

 

Property, plant and equipment

 

9

85,237

 

67,510

 

51,418

Intangible assets

 

 

49,137

 

50,870

 

52,738

Deferred tax asset

 

 

177

 

-

 

-

 

 

 

 

 

 

 

 

Total non-current assets

 

 

134,551

 

118,380

 

104,156

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Inventories

 

 

122

 

75

 

138

Trade and other receivables

 

 

5,654

 

4,282

 

3,060

Cash and cash equivalents

 

 

2,860

 

5,576

 

4,091

 

 

 

 

 

 

 

 

Total current assets

 

 

8,636

 

9,933

 

7,289

 

 

 

 

 

 

 

 

Total assets

 

 

143,187

 

128,313

 

111,445

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Trade and other payables

 

 

25,546

 

20,797

 

14,125

Income taxes payable

 

 

-

 

246

 

-

Borrowings

 

10

-

 

3,613

 

2,363

 

 

 

 

 

 

 

 

Total current liabilities

 

 

25,546

 

24,656

 

16,488

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

Borrowings

 

10

8,966

 

70,253

 

106,195

Provisions

 

 

232

 

223

 

131

Derivative financial instruments

 

 

-

 

1,037

 

177

Deferred tax liabilities

 

 

-

 

559

 

1,708

Total non-current liabilities

 

 

9,198

 

72,072

 

108,211

 

 

 

 

 

 

 

 

Total liabilities

 

 

34,744

 

96,728

 

124,699

 

 

 

 

 

 

 

 

Net assets / (liabilities)

 

 

108,443

 

31,585

 

(13,254)

 

 

 

 

 

 

 

 

Capital and reserves

 

 

 

 

 

 

 

Issued capital

 

 

12

 

9

 

8

Own shares held

 

 

48

 

-

 

-

Capital redemption reserve

 

 

4

 

-

 

-

Share premium

 

 

136,280

 

48,974

 

550

Retained deficit

 

 

(27,901)

 

(17,398)

 

(13,812)

Total equity shareholders' funds / (deficit)

 

 

108,443

 

31,585

 

(13,254)

 

 

Consolidated Statement of Changes in Equity

For the year ended 31 December 2015

 

 

 

Issued Capital

 

Own shares held

 

Capital redemption reserve

 

Share Premium

 

Retained deficit

 

Total

 

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2014

 

8

 

-

 

-

 

550

 

(13,812)

 

(13,254)

Loss for the year and total comprehensive loss

 

-

 

-

 

-

 

-

 

(8,783)

 

(8,783)

Waiver of preference share interest

 

-

 

-

 

-

 

-

 

5,197

 

5,197

Issue of Ordinary share capital

 

1

 

-

 

-

 

29

 

-

 

30

Reclassification of preference shares

 

-

 

-

 

-

 

48,395

 

-

 

48,395

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2014

 

9

 

-

 

-

 

48,974

 

(17,398)

 

31,585

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss for the year and total comprehensive loss

 

-

 

-

 

-

 

-

 

(11,473)

 

(11,473)

Share based payments

 

-

 

-

 

-

 

-

 

1,018

 

1,018

Conversion of Preference share capital into Ordinary share capital

 

2

 

-

 

-

 

-

 

-

 

2

Cancellation of share capital

 

(4)

 

-

 

4

 

-

 

-

 

-

Issue and repurchase of share capital

 

-

 

48

 

-

 

-

 

(48)

 

-

Costs associated with the issue of share capital

 

-

 

-

 

-

 

(2,620)

 

-

 

(2,620)

Issue of Ordinary share capital

 

5

 

-

 

-

 

89,926

 

-

 

89,931

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2015

 

12

 

48

 

4

 

136,280

 

(27,901)

 

108,443

 

 

Consolidated Cash Flow Statement

For the year ended 31 December 2015

 

 

 

Note

31 December 2015

 

31 December 2014

 

 

 

£'000

 

£'000

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

Operating (loss) / profit

 

 

(2,701)

 

2,335

Adjustments for:

 

 

 

 

 

Other income

 

 

(1,105)

 

-

Exceptional items

 

4

7,607

 

2,653

Depreciation of property, plant and equipment

 

9

10,907

 

7,600

Amortisation of intangible assets

 

 

2,308

 

2,100

Loss on disposal of property, plant and equipment

 

 

98

 

39

(Increase) / decrease in inventories

 

 

(47)

 

65

Increase in trade and other receivables

 

 

(1,372)

 

(1,223)

Increase in trade and other payables

 

 

5,669

 

4,526

Cash generated from operations

 

 

21,364

 

18,095

Tax paid

 

 

(73)

 

(244)

Interest paid

 

 

(4,124)

 

(5,726)

Net cash flows from operating activities before exceptional items and other income

 

 

17,167

 

12,125

Other income

 

 

1,105

 

-

Exceptional items

 

 

(7,001)

 

(2,653)

Net cash flow from operating activities

 

 

11,271

 

9,472

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Proceeds from disposals of property, plant and equipment

 

 

-

 

1,036

Purchase of property, plant and equipment

 

 

(27,330)

 

(17,785)

Purchase of intangible assets

 

 

(575)

 

(231)

Interest received

 

 

16

 

-

Net cash flows used in investing activities

 

 

(27,889)

 

(16,980)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Proceeds of issue of Ordinary shares

 

 

89,931

 

30

Drawdown of bank loans

 

 

17,500

 

11,580

Payment of financing fees

 

 

(1,067)

 

-

Costs associated with IPO

 

 

(2,620)

 

-

Repayment of bank loans

 

 

(53,902)

 

-

Repayment of shareholder loans

 

 

(22,699)

 

-

Repayment of finance leases

 

 

(13,241)

 

(2,617)

Net cash flows from financing activities

 

 

13,902

 

8,993

 

 

 

 

 

 

Net (decrease) / increase in cash and cash equivalents

 

 

(2,716)

 

1,485

Cash and cash equivalents at 1 January

 

 

5,576

 

4,091

Cash and cash equivalents at 31 December

 

 

2,860

 

5,576

Notes

 

1. General information     

The financial information, comprising of the consolidated statement of comprehensive income, consolidated statements of financial position, consolidated statement of changes in equity, consolidated cash flow statement and related notes, has been extracted from the consolidated financial statements of The Gym Group Plc ('the Company') for the year ended 31 December 2015, which were approved by the Board of Directors on 14 March 2016.

 

The financial information does not constitute statutory accounts within the meaning of sections 435(1) and (2) of the Companies Act 2006 or contain sufficient information to comply with the disclosure requirements of International Financial Reporting Standards ('IFRS'). An unqualified report on the consolidated financial statements for the year ended 31 December 2015 has been given by the auditors Ernst & Young LLP. It did not include reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain any statement under section 498 (2) or (3) of the Companies Act 2006.

 

The consolidated financial statements for the year ended 31 December 2015 will be filed with the Registrar of Companies, subject to their approval by the Company's shareholders at the Company's Annual General Meeting on 15 May 2016.

 

2. Basis of preparation

 

3. Operating loss / profit

 

Operating loss / profit is stated after charging / (crediting):

 

2015

 

2014

 

 

£'000

 

£'000

 

 

 

 

 

Other income

 

(1,105)

 

-

Depreciation of property, plant and equipment

 

10,907

 

7,600

Amortisation of intangible assets (included in administration expenses)

 

2,308

 

2,100

Operating lease rentals

 

11,186

 

7,781

Loss on disposal of property, plant and equipment

 

98

 

39

Cost of inventory recognised as an expense

 

197

 

225

 

 

 

 

 

Auditors' remuneration

 

 

 

 

Fees payable for the audit of the Company's annual accounts

 

40

 

6

Fees payable for other services

 

 

 

 

Audit of the Company's subsidiaries pursuant to legislation

 

50

 

37

Tax compliance services

 

-

 

25

Tax advisory services

 

3

 

-

Reporting accountant services in relation to IPO

 

883

 

-

Other non-audit services in relation to IPO

 

42

 

-

Corporate finance services

 

126

 

-

 

 

1,144

 

68

The amounts above for 2015 relate to Ernst & Young LLP, with the comparative figures in 2014 relating to Grant Thornton UK LLP.

Other income received in the year of £1,105,000 (2014: £nil) relates to a payment received on the surrender of a lease.

 

4. Exceptional items

 

 

2015

 

2014

 

 

£'000

 

£'000

 

 

 

 

 

Costs in relation to IPO

 

5,731

 

-

Share based payment costs associated with IPO

 

1,018

 

-

Exploration of strategic options

 

809

 

-

Costs in relation to aborted merger with Pure Gym

 

49

 

1,950

Gym relocation

 

-

 

703

 

 

7,607

 

2,653

An additional £2,620,000 of exceptional costs associated with the issue of share capital as part of the IPO have been recognised directly in reserves.

5. Earnings per share

 

Basic earnings per share is calculated by dividing the profit or loss attributable to equity shareholders by the weighted average number of Ordinary shares outstanding during the year. 

As the Company issued shares and changed its capital structure on IPO, the number of shares in the prior period has been adjusted to match the post restructuring position such that the figures remain comparable.

Diluted earnings per share is calculated by adjusting the weighted average number of Ordinary shares outstanding to assume conversion of all dilutive potential Ordinary shares. During the current and prior year the Group had no convertible financial instruments, options or other dilutive instruments.

The following reflects the income and share data used in the basic earnings per share calculation:

 

 

 

2015

 

 

 

 

 

Loss for the year £'000

 

(11,473)

 

Basic and diluted weighted average number of shares

 

60,485,605

 

 

 

 

 

Basic and diluted earnings per share £

 

(0.19)

 

(0.18)

 

Adjusted earnings per share is based on profit for the year before exceptional items, amortisation and their associated tax effect.

 

 

2015

 

2014

 

 

£'000

 

£'000

 

 

 

 

 

Loss for the year

 

(11,473)

 

(8,783)

Amortisation of intangible assets

 

2,308

 

2,100

Other income

 

(1,105)

 

-

Exceptional administration expenses

 

7,607

 

2,653

Exceptional finance costs

 

1,623

 

-

Tax effect of amortisation and exceptional items

 

(67)

 

(422)

Adjusted earnings

 

(1,107)

 

(4,452)

 

 

 

 

 

Basic weighted average number of shares

 

60,485,605

 

48,802,414

Adjusted earnings per share £

 

(0.02)

 

(0.09)

 

6.  Finance income

 

 

2015

 

2014

 

 

£'000

 

£'000

 

 

 

 

 

Bank interest receivable

 

16

 

20

Fair value gains on derivative financial instruments

 

249

 

-

 

 

265

 

20

7.  Finance costs

 

 

2015

 

2014

 

 

£'000

 

£'000

 

 

 

 

 

Bank loans and overdrafts

 

4,950

 

4,937

Shareholder loans

 

1,809

 

1,899

Preference share interest

 

-

 

2,533

Finance leases and hire purchase contracts

 

1,112

 

1,073

Unwinding of discount

 

9

 

3

Amortisation of financing fees

 

443

 

492

Exceptional finance costs

 

1,623

 

-

Fair value losses on derivative financial instruments

 

-

 

860

 

 

9,946

 

11,797

 

Exceptional finance costs comprise the write-off of £1,290,000 of outstanding capitalised financing fees and interest incurred on the repayment of finance lease creditors of £333,000.

 

8.  Taxation

The major components of taxation are:

(a)   Tax on profit 

 

 

2015

 

2014

 

 

£'000

 

£'000

Current income tax

 

 

 

 

Current tax on profits for the year

 

-

 

246

Adjustments in respect of prior years

 

(173)

 

244

Total current income tax

 

(173)

 

490

 

 

 

 

 

Deferred tax

 

 

 

 

Origination and reversal of temporary differences

 

(700)

 

(628)

Change in tax rates

 

(91)

 

44

Adjustments in respect of prior years

 

55

 

(565)

Total deferred tax

 

(736)

 

(1,149)

 

 

 

 

 

Tax credit in the Income Statement

 

(909)

 

(659)

 

(b)   Reconciliation of tax credit

The tax on the Group's loss before tax differs from the theoretical amount that would arise using the weighted average rate applicable to losses of the Group as follows:

 

 

2015

 

2014

 

 

£'000

 

£'000

 

 

 

 

 

Loss before tax

 

(12,382)

 

(9,442)

 

 

 

 

 

Tax calculation at standard rate of corporation tax of 20.25% (2014: 21.49%)

 

(2,507)

 

(2,029)

Expenses not deductible for tax purposes

 

786

 

1,647

Exceptional IPO costs not deductible

 

1,023

 

-

Change in tax rates

 

(93)

 

44

Adjustments in respect of prior years

 

(118)

 

(321)

 

 

(909)

 

(659)

 

 

 (c)        Deferred tax

During the year the Group recognised the following deferred tax assets and liabilities:

 

 

Accelerated capital allowances

 

Losses

 

Intangible assets

 

Other

 

Total

 

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2013

 

(1,386)

 

1,683

 

-

 

125

 

422

Prior year adjustment

 

(177)

 

213

 

-

 

(30)

 

6

Acquisitions

 

-

 

-

 

(1,898)

 

-

 

(1,898)

Recognised in income statement

 

(414)

 

(315)

 

248

 

(29)

 

(510)

Change in deferred tax rate

 

264

 

(198)

 

215

 

(9)

 

272

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2013

 

(1,713)

 

1,383

 

(1,435)

 

57

 

(1,708)

Prior year adjustment

 

526

 

39

 

-

 

-

 

565

Recognised in income statement

 

(581)

 

829

 

393

 

(57)

 

584

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2014

 

(1,768)

 

2,251

 

(1,042)

 

-

 

(559)

Prior year adjustment

 

(55)

 

-

 

-

 

-

 

(55)

Recognised in income statement

 

1,545

 

(1,245)

 

400

 

-

 

700

Change in deferred tax rate

 

91

 

-

 

-

 

-

 

91

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2015

 

(187)

 

1,006

 

(642)

 

-

 

177

 

 

9. Property, plant and equipment  

 

Leasehold improvements

 

Fixtures, fittings and equipment

 

Gym and other equipment

 

Computer equipment

 

Total

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

Cost

 

 

 

 

 

 

 

 

 

 

At 1 January 2013

32,780

 

2,265

 

15,276

 

272

 

50,593

Additions

9,080

 

818

 

4,264

 

95

 

14,257

Disposals

(19)

 

-

 

(280)

 

(2)

 

(301)

 

 

 

 

 

 

 

 

 

 

At 1 January 2014

 

41,841

 

3,083

 

19,260

 

365

 

64,549

Additions

15,978

 

1,054

 

7,526

 

178

 

24,736

Disposals

(1,067)

 

(104)

 

(1,129)

 

(10)

 

(2,310)

 

 

 

 

 

 

 

 

 

 

At 31 December 2014

 

56,752

 

4,033

 

25,657

 

533

 

86,975

Additions

17,364

 

1,549

 

9,428

 

391

 

28,732

Disposals

(89)

 

(13)

 

(298)

 

-

 

(400)

 

 

 

 

 

 

 

 

 

 

At 31 December 2015

 

74,027

 

5,569

 

34,787

 

924

 

115,307

 

 

 

 

 

 

 

 

 

 

Accumulated depreciation

 

 

 

 

 

 

 

 

 

 

At 1 January 2013

2,276

 

523

 

4,496

 

137

 

7,432

Charge for the year

1,961

 

524

 

3,411

 

83

 

5,979

Disposals

-

 

-

 

(280)

 

-

 

(280)

 

 

 

 

 

 

 

 

 

 

At 1 January 2014

 

4,237

 

1,047

 

7,627

 

220

 

13,131

Charge for the year

2,602

 

672

 

4,225

 

101

 

7,600

Disposals

(233)

 

(47)

 

(980)

 

(6)

 

(1,266)

 

 

 

 

 

 

 

 

 

 

At 31 December 2014

 

6,606

 

1,672

 

10,872

 

315

 

19,465

Charge for the year

5,745

 

656

 

4,329

 

177

 

10,907

Disposals

(42)

 

(7)

 

(253)

 

-

 

(302)

 

 

 

 

 

 

 

 

 

 

At 31 December 2015

 

12,309

 

2,321

 

14,948

 

492

 

30,070

 

 

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

 

 

 

At 31 December 2013

 

37,604

 

2,036

 

11,633

 

145

 

51,418

At 31 December 2014

 

50,146

 

2,361

 

14,785

 

218

 

67,510

At 31 December 2015

 

61,718

 

3,248

 

19,839

 

432

 

85,237

 

 

10. Borrowings

 

 

2015

 

2014

 

2013

 

 

£'000

 

£'000

 

£'000

Non-current

 

 

 

 

 

 

Bank facility A

 

10,000

 

-

 

-

Former bank facility A (principal and PIK interest)

 

-

 

34,813

 

31,786

Former bank facility B (principal and PIK interest)

 

-

 

9,800

 

1,010

Finance leases

 

-

 

6,555

 

5,675

Shareholder loans and accrued interest

 

-

 

20,785

 

18,992

Preference share capital and accrued interest

 

-

 

-

 

50,924

Loan arrangement fees

 

(1,034)

 

(1,700)

 

(2,192)

 

 

8,966

 

70,253

 

106,195

 

 

 

 

 

 

 

Current

 

 

 

 

 

 

Finance leases

 

-

 

3,613

 

2,363

 

The Group's bank borrowings are secured by way of fixed and floating charges over the Group's assets.

 

On 12 November 2015 the Group refinanced its former bank facilities and shareholder loans using the net proceeds of its IPO.

 

HSBC and Barclays bank facility

On 12 November 2015 the Group entered into a new 5 year bullet repayment facility with HSBC and Barclays.  The facility comprises a £10.0 million term loan ('facility A') for the purposes of refinancing the Group's finance leases, a £25.0 million term loan ('facility B') to fund acquisitions and capital expenditure, and a £5.0 million revolving credit facility. Interest is charged at LIBOR plus a 2.5% margin.

At 31 December 2015, facility A was fully drawn and facility B and the revolving credit facility were undrawn.

 

Four year record

 

2015

 

2014

 

20131

 

20121

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

Revenue

59,979

 

45,480

 

35,734

 

22,264

Group Adjusted EBITDA

17,016

 

14,688

 

11,752

 

6,000

Group Adjusted EBITDA before Pre-Opening Costs

19,681

 

16,668

 

12,886

 

7,615

Group Operating Cash Flow

18,616

 

16,514

 

14,751

 

9,624

Operating Cash Flow Conversion

109.4%

 

112.4%

 

125.5%

 

160.4%

Expansionary Capital Expenditure

28,230

 

20,335

 

14,058

 

21,645

Net Debt

7,140

 

49,205

 

36,743

 

18,979

Net Debt to Adjusted EBITDA

0.42x

 

3.35x

 

3.11x

 

3.16x

Group Adjusted earnings

(1,107)

 

(4,452)

 

(3,551)

 

(958)

Adjusted earnings per share £

(0.02)

 

(0.09)

 

(0.13)

 

(0.04)

 

 

 

 

 

 

 

 

Total number of gyms (number)

74

 

55

 

40

 

32

Number of members ('000)

376

 

293

 

225

 

166

Revenue per member per month (£)

14.08

 

13.98

 

14.06

 

13.78

Mature gyms in operation (number)

40

 

32

 

16

 

10

Mature Gym Site EBITDA

18,828

 

16,244

 

9,505

 

6,041

1 The Gym Group plc acquired control of The Gym Limited on 13 June 2013.  Before this date the Group did not constitute a single legal group.  Prior to the acquisition, combined financial information has been prepared on a basis that aggregates the results, cash flows, assets and liabilities of each the companies constituting the Group.

 

Responsibilities statement

The following statement will be contained in the 2015 Annual Report and Accounts:

We confirm that to the best of our knowledge:

·     the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and results of the Group; and

·     the Strategic Report contained in this annual report includes a fair review of the development and performance of the business and the position of the Company and the Group, together with a description of the principal risks and uncertainties that they face; and

·     the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.

On behalf of the Board

 

Richard Darwin

Chief Financial Officer and Company Secretary

14 March 2016

 


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