TIDMGYM
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 GBP60.0 million, an increase of 31.9% (2014: GBP45.5 million)
-- Group Adjusted EBITDA(1) of GBP17.0 million, an increase of 15.9% (2014: GBP14.7 million)
-- Group Operating Cash Flow(2) of GBP18.6 million, an increase
of 12.7% (2014: GBP16.5 million)
-- Loss before tax of GBP12.4 million (2014: GBP9.4 million) as
a result of pre IPO finance costs and exceptional costs
-- Proforma adjusted profit before tax(3) of GBP5.3 million with
proforma Adjusted EPS(4) 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 via Instinctif Partners
John Treharne, CEO
Richard Darwin, CFO
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 GBP60.0 million, Group Adjusted EBITDA increased by 15.9%
to GBP17.0 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
GBP60.0 million (2014: GBP45.5 million), an increase of 31.9%, and
Group Adjusted EBITDA of GBP17.0 million, an increase of 15.9%
(2014: GBP14.7 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 GBP16 per
month.
An exercise to renegotiate operating cost contracts has
identified GBP1 million of annualised savings on an ongoing basis
and was implemented during the year.
Achieving our rollout strategy
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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 GBP1.5 million for
the 2008 to 2014 portfolio to an average cost of approximately
GBP1.35 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 GBP1,000 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
GBP'000 GBP'000
Total number of gyms 74 55
Number of year end members ('000) 376 293
Revenue 59,979 45,480
Group Adjusted EBITDA(1) 17,016 14,688
Group Adjusted EBITDA before Pre-Opening
Costs(2) 19,681 16,668
Adjusted Earnings(3) (1,107) (4,452)
Group Operating Cash Flow(4) 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 GBP2.7 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
GBP'000 GBP'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 121,000(5) . Average revenue per member
per month increased from GBP13.98 in 2014 to GBP14.08.
As a result Group revenue increased by 31.9% to GBP60.0 million
in the year ended 31 December 2015, from GBP45.5 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.
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(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 GBP2.0 million to GBP2.7 million.
Property lease rentals and staff costs form a significant part
of our administration expenses. Property lease rentals increased
from GBP7.8 million in 2014 to GBP11.2 million in 2015 due to a
larger portfolio of gyms. Staff costs increased from GBP5.5 million
to GBP8.4 million. This was driven by both gym openings and head
office support staff costs.
Depreciation charges increased from GBP7.6 million in 2014 to
GBP10.9 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 GBP4.0 million to GBP6.3
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 GBP1.1 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
GBP'000 GBP'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 GBP19.7 million (2014: GBP16.6 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 GBP18.8 million (2014: GBP16.2 million from
32 sites).
EBITDA from the 34 new sites performed strongly and increased by
81.2% to GBP4.5 million (2014: GBP2.5 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 GBP7.6
million were incurred (2014: GBP2.7 million).
This includes GBP5.7 million of costs in relation to the Group's
IPO. An additional GBP2.6 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 GBP1.0m (2014:
GBPnil) 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 GBP0.9 million was incurred in relation to the
exploration of strategic options prior to the IPO.
Finance costs
Finance costs decreased by 15.7% to GBP9.9 million in the year
ended 31 December 2015, from GBP11.8 million in the year ended 31
December 2014.
This included GBP1.6 million (2014: GBPnil) 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 GBP2.5
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 GBP0.8
million.
Taxation
The Group has incurred an income tax credit for the year ended
2015 of GBP0.2 million (2014: GBPnil) 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 GBP0.7 million (2014: GBP0.7
million) has arisen in relation to the reversal of temporary
differences.
Earnings
The loss for the year increased from GBP8.8 million for the year
ended 31 December 2014 to GBP11.5 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 GBP0.19 (2014:
loss of GBP0.18).
Adjusted EPS was a loss of GBP0.02 (2014: loss of GBP0.09).
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
GBP'000 GBP'000
Group Adjusted EBITDA 17,016 14,688
Movement in working capital 4,348 3,407
Maintenance capital expenditure(1) (2,748) (1,581)
--------- ---------
Group Operating Cash Flow 18,616 16,514
Expansionary capital expenditure(2) (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 GBP18.6 million (2014: GBP16.5
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 Conversion(3) to 109.4% (2014: 112.4%).
Expansionary capital expenditure of GBP28.2 million arises as a
result of the fit-out of new gyms.
(1) Maintenance capital expenditure comprises the replacement of
gym equipment and premises refurbishment.
(2) Expansionary capital expenditure relates to the Group's
investment in the fit-out of new gyms and central IT projects. It
is stated gross of amounts funded by finance leasing (GBP3.1
million, 2014: GBP4.7 million) and net of contributions towards
landlord building costs.
(3) Group Operating Cash Flow Conversion is calculated as Group
Operating Cash Flow as a percentage of Group Adjusted EBITDA
2015 2014
GBP'000 GBP'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
--------- ---------
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Proceeds from the Group's IPO of GBP89.9 million and a new term
loan of GBP10.0 million were used to repay GBP53.9 million of
borrowings under the Group's previous bank loan facilities
(including accrued interest), GBP22.7 million of outstanding
shareholder loans, GBP10.0 million of outstanding finance leases
and GBP8.8 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
GBP'000 GBP'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 GBP16.0
million to GBP134.4 million. This is as a result of capital
expenditure in property, plant and equipment and computer software
totaling GBP29.2 million, offset by depreciation and amortisation
of GBP13.2 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 GBP4.7 million largely as a result of lease
incentives associated with new gyms opening during the year.
The Group has drawn GBP10.0 million of its 5 year bullet
repayment facility. GBP25.0 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
GBP'000 GBP'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 EBITDA(1) 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 GBP GBP
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
GBP'000 GBP'000 GBP'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 - -
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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
Capital
Own shares redemption Retained
Issued Capital held reserve Share Premium deficit Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
GBP'000 GBP'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
The consolidated financial statements have been prepared on a
going concern basis under the historical cost convention as
modified by the recognition of financial liabilities (including
derivative instruments) at fair value through the profit and
loss.
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This is the Group's first set of financial statements prepared
in accordance with IFRS. The Group previously prepared its
financial statements under UK Generally Accepted Accounting
Practice. The Group's deemed transition date to IFRS is 1 January
2014, the beginning of the first period presented, and the
requirements of IFRS 1 First-time Adoption of International
Financial Reporting Standards ('IFRS 1') have been applied as of
that date.
The Directors have made appropriate enquiries and formed a
judgement at the time of approving the financial statements that
there is a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable
future. For this reason the Directors continue to adopt the going
concern basis in preparing the financial statements.
3. Operating loss / profit
Operating loss / profit is stated after charging / (crediting): 2015 2014
GBP'000 GBP'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 GBP1,105,000 (2014: GBPnil)
relates to a payment received on the surrender of a lease.
4. Exceptional items
2015 2014
GBP'000 GBP'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 GBP2,620,000 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 2014
Loss for the year GBP'000 (11,473) (8,783)
Basic and diluted weighted average number of shares 60,485,605 48,802,414
Basic and diluted earnings per share GBP (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
GBP'000 GBP'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 GBP (0.02) (0.09)
----------- -----------
6. Finance income
2015 2014
GBP'000 GBP'000
Bank interest receivable 16 20
Fair value gains on derivative financial instruments 249 -
-------- --------
265 20
-------- --------
7. Finance costs
2015 2014
GBP'000 GBP'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 GBP1,290,000
of outstanding capitalised financing fees and interest incurred on
the repayment of finance lease creditors of GBP333,000.
8. Taxation
The major components of taxation are:
(a) Tax on profit
2015 2014
GBP'000 GBP'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
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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
GBP'000 GBP'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
GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
Fixtures,
Leasehold fittings and Gym and other Computer
improvements equipment equipment equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
GBP'000 GBP'000 GBP'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
GBP10.0 million term loan ('facility A') for the purposes of
refinancing the Group's finance leases, a GBP25.0 million term loan
('facility B') to fund acquisitions and capital expenditure, and a
GBP5.0 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 2013(1) 2012(1)
GBP'000 GBP'000 GBP'000 GBP'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 GBP (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
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