TIDMGYM
RNS Number : 3181Z
The Gym Group plc
14 March 2017
The Gym Group plc
('the Company' or 'The Gym')
Full Year Results
A year of profitable growth and significant pipeline
progress
The Gym Group plc, the fast growing, nationwide operator of 89
low cost gyms branded 'The Gym', announces its full year results
for the year ended 31 December 2016.
Financial Highlights
-- Revenue of GBP73.5 million, an increase of 22.6% (2015: GBP60.0 million)
-- Group Adjusted EBITDA(1) of GBP22.7 million, an increase of 33.4% (2015: GBP17.0 million)
-- Adjusted earnings per share(2) increased to 5.6p (2015: Adjusted loss per share of 1.8p)
-- Adjusted profit before tax(3) increased by GBP10.7 million to
GBP8.7 million (2015: Adjusted loss before tax of GBP2.0
million)
-- Statutory profit before tax of GBP6.9 million (2015: loss before tax of GBP12.4 million)
-- Proposed final dividend of 0.75p per share, giving a proposed
full year dividend of 1.0p per share
Operational Progress
-- Average Mature Site EBITDA(4) increased to GBP476,000 (2015: GBP472,000)
-- 15 new gyms opened in 2016, increasing the total estate to 89
-- Total year end members at 448,000(5) , an increase of 19.1%
versus prior year (2015: 376,000)
Outlook
-- Early 2017 performance in line with the Board's expectations;
495,000 members at the end of February, an increase of 10.5% since
the year end
-- Expect to achieve towards the top end of the guidance range
of 15 to 20 sites openings for 2017, with 17 sites exchanged at the
start of the year, compared to 12 sites in early 2016
John Treharne, CEO of The Gym Group, commented:
"2016 has been a good year with strong financial and operational
progress. Our existing estate continues to deliver excellent
returns and our low cost, 24/7, no contract model is disrupting the
market and attracting new members. We will continue to expand
rapidly in 2017 through a well developed site pipeline.
We have had an encouraging start to 2017 with January and
February, key months for any gym business, showing record
membership levels with an increase in members to 495,000."
An audio webcast of the analyst presentation will be available
from 13:00 today via our website www.tggplc.com
A copy of the Annual Report and Accounts is available via our
website.
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, long term employee incentive
costs, exceptional items and other
income.
(2) Adjusted earnings per share is calculated as the Group's
profit for the year before amortisation, exceptional items, other
income and the related tax effect, divided
by the basic weighted average number of shares.
(3) Adjusted profit before tax is calculated as profit before
tax before amortisation, exceptional items and other income
(4) Average Mature Site EBITDA is calculated as Group Adjusted
EBITDA contributed by the mature gym portfolio, divided by the
number of mature sites. Mature
sites are defined as gyms that have been open for 24 months or
more measured at the end of the year.
(5) Average member numbers grew by 20.8% to 429,000 (2015:
355,000).
Chairwoman's Statement
2016 has been a good year for The Gym. Revenue increased by
22.6% to GBP73.5 million, Group Adjusted EBITDA increased by 33.4%
to GBP22.7 million and Adjusted Earnings per share increased from a
loss of 1.8p to a profit of 5.6p. We are pleased to recommend a
final dividend per share of 0.75p, bringing the full year dividend
to 1.0p per share. 15 new sites were opened taking the total number
of gyms to 89. Following the Company's IPO in November 2015, the
free float has increased from 50% to 64% and we continue to welcome
new shareholders to this exciting growth business.
I have enjoyed seeing this business develop and grow over the
year, consistently delivering increasing revenue and profit by
growing the estate efficiently and meeting the needs of all our
members, current and new. With a strong balance sheet we are well
positioned to drive future growth and realise the substantial
market opportunity. Our vision remains to provide affordable
exercise facilities to every person who wants to improve their
wellbeing; a very positive purpose for a company.
A strong feature of 2016 has been building out the team to
realise our growth potential. I was delighted to welcome David
Kelly and Emma Woods as Non-Executive Directors to our Board
alongside Paul Gilbert, the Senior Independent Director. David
brings a wealth of experience in digitally enabled businesses and
Emma is a very accomplished and experienced marketeer across
several multi-site leisure businesses. David and Emma have
undertaken a thorough induction and are now providing challenge and
support to the business in equal measure. The Board is now
compliant with corporate governance requirements, and our reporting
and operating rhythm is well established.
I was also delighted that John Treharne, as founder CEO, has
strengthened the Executive Committee. Nick Henwood and Barney
Harrison bring new energy, discipline and rigour to operations and
marketing in partnership with the experienced leaders Jonathan
Spaven and Jasper McIntosh in property and technology respectively.
Our CFO, Richard Darwin, has also strengthened his finance team and
they have risen to the challenge I set to deliver this report to
you, our shareholders, alongside year end results, in record time.
This leadership team has the ability and capacity to deliver on our
growth ambitions.
A standout feature of The Gym Group is its culture, the way work
gets done. Everyone is focused on delivering a great gym experience
for our members - it doesn't come much healthier than that. I have
now visited over 30 sites and seen first-hand the commitment of our
gym managers. To grow, a business needs to nurture talent and the
Gold award for Investors in People is external recognition for the
high standards we achieve. My visits have included, by example,
Hounslow, Liverpool, Vauxhall as early sites; Kingston and Ealing
having been recently refreshed; Sheffield, Tottenham, Gloucester,
Bracknell and Angel as they reach maturity; and Southfields,
Southall, Tooting, Sunbury and Peckham Rye as new sites. Whilst
every gym has its own character, every gym also has consistently
excellent equipment, is well maintained, has the highest standards
of safety and cleanliness and many smiling faces be it in gym
classes or after a workout. Our Net Promoter Score has increased
again this year, testament to the business delivering member
delight.
I also visited Bristol Longwell Green. This is one of four sites
purchased from Fitness First, with the next three to open as The
Gym in 2017. With fit-out works limited to under three weeks to
ensure we were open for members during the peak New Year period,
it's very satisfying to see a site that looks like The Gym and is
now welcoming nearly two times prior membership numbers shortly
after reopening. We maintained strict capital discipline in these
purchases but it demonstrates our willingness to be opportunistic
in accelerating our rollout in target areas.
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 and health
conscious society. We have developed a bolder, more confident
design that helps our members to Lift, Tone, Burn and Move their
way through their workout or to join our expanding class programme.
More than a third of our joiners continue to be new to gym
membership. We have become a favourite amongst students and see the
largest number of new joiners coming from traditional higher cost
gyms. We look forward to reaching more communities as we open more
gyms to provide them with the same encouragement to enhance their
wellbeing.
This is a simple, profitable business model with much room for
growth. We look forward to delivering on that.
Finally, let me extend thanks to three Directors who left the
business having been connected to its prior private equity
ownership: Philip Newborough, David Burns and Jim Graham. Philip
committed Bridges Ventures as a founder investor alongside John
Treharne; David committed Phoenix Equity Partners as secondary
investor and lead investor through the IPO; and Jim Graham worked
first at Phoenix and then directly at The Gym as Chief Operating
Officer. Their contribution was fundamental to the early stage
success of the Company and I give my personal thanks for their
support to me as your incoming Chairwoman. It continues to be a
high performing growth company; as shareholders we all look forward
to sharing in its success.
Penny Hughes
Chairwoman
14 March 2017
Chief Executive's Review
Introduction
I am pleased to present my second Chief Executive's Review
following our Initial Public Offering on the Full List of the
London Stock Exchange in November 2015. The Gym Group has been able
to deliver further strong growth and progress in a year when there
have been significant changes in the economic and political
landscape.
During the year we increased our estate to 89 sites, up from 74
in the prior year. The 15 new sites were in line with our guidance
and in the last two years we have delivered 34 new sites overall.
The financial and operational results continue to be strong: total
year end members increased by 19.1% to 448,000 (2015: 376,000);
revenue increased by 22.6% to GBP73.5 million (2015: GBP60.0
million). Group Adjusted EBITDA increased by 33.4% to GBP22.7
million (2015: GBP17.0 million). Adjusted profit before tax
increased by GBP10.7 million to GBP8.7 million (2015: Adjusted loss
before tax of GBP2.0 million) and Adjusted earnings per share
increased to 5.6p (2015: Adjusted loss per share of 1.8p). Our
statutory profit before tax increased significantly to GBP6.9
million (2015: loss of GBP12.4 million).
As well as delivering strong results, we have laid down the
foundations for the sustained growth of the business. This involved
strengthening the new site pipeline for 2017 and increasing the
levels of functional expertise at both Board and Executive
Committee level. These steps will help us to cement our market
leadership in the rapidly growing low cost gym sector, as well
enabling us to use our increased scale to investigate ways to grow
further. The scale of the opportunity and our ability to deliver is
as strong now as it ever has been.
Low cost gyms are a fast growing and developing market, and we
continue to drive the expansion of the sector by attracting members
that are new to the gym market, whilst also attracting members from
more traditional gym operators. More than a third of our joiners
have never been a member of a gym before. The market opportunity is
constantly evolving. Low cost gym operators have an important role
in providing affordable gym provision, particularly as some local
authorities such as Manchester are seeking to find significant
savings from their leisure budgets.
Strategic progress
Delivering performance from gyms
The way our new sites mature over time remains predictable. At
the year end we had 55 sites that had been open for more than two
years. Progress has been made in driving profitability from the
mature estate, evidenced by an increase in the mature EBITDA per
site of 0.8% to GBP476,000 (2015: GBP472,000). This profitability
per site has been achieved both from sites opened in the early
years of the Group's history, as well as from the newer cohorts
that have recently reached maturity: sites opened between 2008 and
2012 have an average EBITDA per site of GBP483,000, and sites
opened between 2013 and 2014 have an average EBITDA of
GBP465,000.
As we continue to build at a lower cost than the historic sites,
our return on capital on the mature estate has risen to 32% (2015:
31%). The return on capital for mature sites opened between 2008
and 2012 and for sites opened in 2013 and 2014 is consistent at
32%.
We still have a relatively immature estate with 34 sites having
been open for less than two years. Our results benefit from profits
earned from these sites even whilst they are maturing. Our new
sites opened in 2015 and 2016 earned GBP3.8 million of site EBITDA
during the year (2015: GBP4.5 million from new sites). The site
opening programme was concentrated in the last quarter of 2016 and
this had some impact on new site margin compared to 2015. We can
expect to benefit from the growth of these sites as they mature
during 2017 and beyond.
Improving operating efficiencies
We experienced an increase in the mature EBITDA margin in 2016
to 47.5% (2015: 46.3%). This has been achieved by our ability to
deliver a low cost, technology led business model. We operate with
disciplined cost control, which begins with selecting the right
sites and negotiating acceptable levels of rent and other fixed
costs (rates and service charges). This is assisted by a stronger
covenant with landlords (through being a listed company with
minimal debt). The fixed cost percentage was maintained for the
mature category at 26% of revenue in 2016 (2015: 26%). Unlike other
leisure businesses we have a known and predictable cost base. We
negotiate fixed rental uplifts at years five and ten on the
majority of our 15 year leases. The recent rateable value changes
have enhanced our visibility on future payment levels. We have
contracted on electricity and gas for the majority of our sites
until 2019. Equally, our business model means that we are not
exposed to significant cost pressures from the National Living Wage
or from exchange rates.
This disciplined approach to delivering our cost base enables us
to give our members the benefit of low cost gym membership at an
average membership fee of GBP17 (2015: GBP16). Our offering
continues to be consistently and genuinely low cost, with
membership fees ranging from GBP10.99 to GBP28.99. Our strategy is
to be the lowest cost quality operator in any given market and the
success of this approach is shown by our rising membership numbers
and the strength of our brand.
Achieving our rollout strategy
The low cost model continues to attract different types of
operator. Increasingly, The Gym is sought by landlords for the best
sites, assisted by the stronger financial covenant following the
IPO. Our disciplined approach to site rollout is key in delivering
the high returns and sustained performance that we have seen from
our mature sites.
We opened 15 sites in 2016. Our programme had a strong London
bias with eight of the sites being within the M25. Some of the 2016
openings have been as strong in terms of the number of members at
opening as the sites we opened in the earliest years of the
business. There remains a substantial growth opportunity to expand
our footprint across the UK. The type of space that we can use is
highly flexible and varied - a real strength of our business model.
In 2016, gyms opened in the lower floors of residential
developments (Tooting, Southfields), an old car park (Blackpool)
and vacant retail space (Oldham). We also refurbished one of the
Fitness First sites that we acquired - this was reopened after a
three week turnaround (Bristol Longwell Green). Small scale
acquisitions, such as the four sites we have acquired from Fitness
First, are a useful tool in delivering our rollout strategy. Other
site opportunities are emerging as retailers look to reduce their
amount of available space. In the first half of 2017, we will be
opening a new gym at the Sainsbury's site in Murrayfield using some
vacant first floor space.
Our new sites continue to trade well, in line with our
expectations. Our pipeline is expanding rapidly and we entered the
year with our strongest pipeline ever, with 17 sites exchanged.
Consequently, we are well positioned to achieve towards the top end
of our guidance range of between 15 and 20 openings in 2017. Over
the medium term we continue to believe that 15 to 20 openings per
year will secure the appropriate level of scale and quality to grow
our estate.
The strong returns on capital demonstrated from the mature
estate are not yet fully benefiting from the reduction in costs
that we have achieved in fitting out the new sites. Savings have
been achieved on multiple stages of the fit-out process, including
build costs, gym equipment and fixtures and fittings. During 2016
our average fit cost was GBP1.33 million compared to a historical
average on mature sites of GBP1.49 million. The variety of sites
that we open does result in this cost varying according to the type
of building we select and also depends on the scale of landlord
works required. In certain instances, in retail warehouse sheds
predominantly in the North, we have achieved fit-out costs as low
as GBP1.11 million.
Developing the customer proposition
The Gym benefited from new branding developed in 2015 and we
have upgraded the sites with this new branding when their planned
refurbishments became due. Eight sites, including our first ever
site in Hounslow, have been refurbished across the estate,
including a members' zone, new cardio equipment and rebranding.
Refurbishments will continue to be important in sustaining the
returns from our business model, with several sites due to be
refurbished in 2017 that were opened in 2012.
Further developments have been made to our class offering as we
continue to extend our range and number of classes. Origin, a
bespoke high intensity workout for members, is being trialled
across The Gym this year. We continue to believe that in a no
contract environment high levels of customer satisfaction are
fundamental to customer retention and rejoiner levels. Our Net
Promoter Score, which measures customer feedback, increased to
62.2% (2015: 60.2%) during the year. Our Feefo score (our online
measure of customer satisfaction) was 91.6%. We intend to introduce
member satisfaction as a metric within the incentive programme at
site level during the coming year, further reinforcing its
importance to the running of a successful gym.
Focusing on our people
During the year the business has recruited new talent to ensure
that we have the appropriate expertise at Board and Executive
Committee level to support continued growth in the medium term.
David Kelly and Emma Woods joined the board as Non-Executives,
enhancing our expertise in key areas. David brings a wealth of
relevant IT experience from companies such as Amazon UK, eBay and
Rackspace. Emma is currently Group Marketing and Digital Director
of Merlin Entertainments plc and has previously worked at Pizza
Express. IT and commercial marketing are both areas where
successful low cost companies will differentiate themselves. The
insight that they are already bringing is very welcome. Nick
Henwood joined as our first ever Operations Director with previous
experience in David Lloyd Leisure, Autoglass and Mothercare. In a
business fast approaching 100 sites he is bringing important levels
of structure and review to operations. Barney Harrison is our new
Commercial and Marketing Director and has joined us from Sky, with
experience at SkyBet and Sky Ireland. This is an important role as
we seek out ways to
improve customer acquisition and retention and to drive
ancillary revenue.
The support of our people continues to be key to our success. A
free share distribution to staff was made in April 2016 to reward
and encourage ownership. The share matching scheme allows staff to
buy shares each month in a tax efficient way with the investment
being matched by the Company. To date 79 (31.5%) of our colleagues
have joined the scheme. Our people are highly engaged, passionate
and committed to the significant business that we are creating. I
have seen this first hand in witnessing their dedication in
ensuring the new sites are launched successfully. Recognition of
our people's hard work and high standards continues with the Group
recently being awarded the Investors in People Gold award, the only
gym business to have this accolade.
Our use of technology
Technology and systems are at the heart of our business and
facilitate the low cost environment that we operate in. We intend
to upgrade our capability in this area with the development of a
new member management system in the coming year. In addition, we
are working closely with our call centre provider to further
improve performance in this critical area for member satisfaction.
We have also refreshed and modernised our website to enhance
customer conversion levels.
A new email sales platform was adopted in 2016 to improve the
way we communicate with new and lapsed members. More of our
marketing is now digital as the amount we dedicate to pay per click
and search engine optimisation is expanded. We constantly seek ways
of improving the efficiency of our marketing communications through
text, email and local activity - all keys tools in attracting new
members in a local area. Increasingly we are focused on retaining
those members that join us through induction and other retention
tools. However, we recognise that member attrition is a natural
by-product of a no contract, flexible business model and that each
member may have several membership events with us during their
lifetime. We are also utilising technology in trials to grow
ancillary revenue streams.
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 495,000,
a record level, with a 10.5% increase since December 2016. This
level of member growth will help to underpin our performance for
the rest of the year. In 2017 we anticipate opening towards the top
end of the guidance range of 15 to 20 sites. As in 2016, these site
openings will be weighted to the second half of the year, with six
sites expected to be open in the first half of the year.
After a year of rapid growth we will continue to focus on
delivering on our strategic priorities and once again making
significant financial progress. We are embarked on a path that I am
convinced will deliver further value for our members and our
shareholders.
John Treharne
Chief Executive Officer
14 March 2017
Financial Review
Summary
We are pleased to have delivered another strong set of financial
results in the first full year following our IPO, with revenue
growth of 22.6% and Group Adjusted EBITDA growth of 33.4%.
This growth has contributed to our first positive Adjusted
Earnings result of GBP7.2 million, compared to a GBP1.1 million
loss in 2015.
Group Operating Cash Flow increased by 34.0% as a result of the
increase in Group Adjusted EBITDA, offset by a 6.7% increase in
maintenance capital expenditure due to the higher number of gyms in
operation.
2016 2015
GBP'000 GBP'000
Total Number of Gyms 89 74
Total Number of Members ('000) 448 376
Revenue 73,539 59,979
Group Adjusted EBITDA(1) 22,691 17,016
Group Adjusted EBITDA before Pre-Opening Costs(2) 24,888 19,681
Adjusted Earnings(3) 7,153 (1,107)
Statutory profit before tax 6,940 (12,382)
Group Operating Cash Flow(4) 24,944 18,616
-------------------------------------------------- ------- --------
(1) Group Adjusted EBITDA is calculated as operating profit
before depreciation, amortisation, long term employee incentive
costs, 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 profit 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.
Result for the year
2016 2015
GBP'000 GBP'000
Revenue 73,539 59,979
Cost of sales (830) (1,073)
-------- --------
Gross profit 72,709 58,906
Administration expenses (64,153) (55,105)
Long term employee incentive costs (519) -
Exceptional costs (321) (7,607)
Other income - 1,105
-------- --------
Operating profit / (loss) 7,716 (2,701)
Finance income 19 265
Finance costs (795) (9,946)
-------- --------
Profit / (loss) before tax 6,940 (12,382)
Tax (charge) / credit (1,237) 909
-------- --------
Profit / (loss) for the year 5,703 (11,473)
-------- --------
Tax charge / (credit) 1,237 (909)
Amortisation of intangible assets 1,442 2,308
Other income - (1,105)
Exceptional administration expenses 321 7,607
Exceptional finance costs - 1,623
-------- --------
Adjusted profit / (loss) before tax 8,703 (1,949)
Tax (charge) / credit (1,237) 909
Tax effect of above items (313) (67)
-------- --------
Adjusted Earnings 7,153 (1,107)
-------- --------
Revenue
The 22.6% increase in revenue for 2016 has been driven by both
increases in membership numbers and Average Revenue per Member per
Month.
Our commitment to member satisfaction, one of our key strategic
drivers, is reflected in our membership numbers. Member numbers at
the year end grew significantly, from 376,000 at 31 December 2015
to 448,000 at 31 December 2016.
Our average member numbers grew by 20.8% to 429,000 (2015:
355,000), largely due to the opening of 15 sites during the year.
Average Revenue per Member per Month increased by 1.5%, from
GBP14.08 to GBP14.29 in 2016 as our pricing continues to
mature.
As a result, revenue for the year ended 31 December 2016
increased to GBP73.5 million (2015: GBP60.0 million).
Administration expenses
Administration expenses increased by 16.4%, primarily due to the
number of gyms increasing from 74 at 31 December 2015 to 89 at 31
December 2016.
The largest cost within administration expenses is property
lease rentals. These increased from GBP11.2 million in 2015 to
GBP13.5 million in 2016 due to the increase in the number of gyms.
Staff costs also form a significant part of administration expenses
and increased from GBP8.4 million to GBP9.9 million, excluding a
charge of GBP0.5 million from long term employee incentives. The
increase was driven by both gym openings and head office support
costs.
Head office costs increased from GBP6.3 million in 2015 to
GBP7.3 million in 2016. This was largely due to the full year
effect of headcount increases from 2015, administrative costs
associated with being a fully listed company and costs associated
with the new head office location.
Depreciation charges increased from GBP10.9 million in 2015 to
GBP12.7 million in 2016, largely as a result of the increased
number of sites. Depreciation as a percentage of revenue decreased
from 18.2% to 17.3%, reflecting the growing maturity of our
estate.
Amortisation charges decreased from GBP2.3 million to GBP1.4
million due to certain intangible assets recognised on the
acquisition of The Gym Limited becoming fully amortised during the
year.
Group Adjusted EBITDA
2016 2015
GBP'000 GBP'000
Operating profit / (loss) 7,716 (2,701)
Depreciation of property, plant and equipment 12,693 10,907
Amortisation of intangible assets 1,442 2,308
Exceptional items 321 7,607
Other income - (1,105)
Long term employee incentive costs 519 -
Group Adjusted EBITDA 22,691 17,016
-------- --------
Group Adjusted EBITDA increased by 33.4% to GBP22.7 million
(2015: GBP17.0 million), due to the ongoing rollout of new sites
and existing sites reaching mature profit levels.
Group Adjusted EBITDA is adversely affected by pre-opening costs
incurred in the process of opening new sites. Group Adjusted EBITDA
before Pre-Opening Costs increased by 26.5% to GBP24.9 million.
Pre-opening costs decreased from GBP2.7 million to GBP2.2 million,
reflecting 15 site openings in 2016 compared to 19 in 2015.
Growth in EBITDA from our mature sites has contributed
significantly towards the growth in Group Adjusted EBITDA. Mature
Site EBITDA(5) contributed by the 55 mature sites increased by
38.9% to GBP26.2 million (2015: GBP18.8 million from 40 sites).
EBITDA from new sites decreased from GBP4.5 million in 2015,
representing 34 sites, to GBP3.8 million in 2016, also with 34
sites. This is largely as a result of the timing of gym openings in
2016 compared to 2015. The new gyms opened in 2016 are performing
well.
(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.
Exceptional items
Exceptional costs have decreased significantly year on year as
2015 included GBP7.6 million of costs associated with the Group's
IPO and the exploration of strategic options in the lead-up to
this.
In 2016 exceptional costs relate to GBP0.1 million of
reorganisation activities during the Group's post-IPO period, and
GBP0.2 million of costs associated with the relocation of the
Group's head office.
Long term employee incentives
During the year the Group introduced a Performance Share Plan
('PSP') and Share Incentive Plan ('SIP'). PSP shares were granted
to certain members of senior management. In April 2016 each of our
employees was awarded GBP1,000 of free shares under the SIP, which
vest in three years subject to continued employment.
We also operate a matching shares scheme under the SIP, where
for every share purchased by an employee the Company will award one
matching share, up to a maximum value, which vest in three years
subject to continued employment.
The Group recognised a charge of GBP0.5 million in relation to
these share based payment arrangements.
Finance costs
Finance costs decreased from GBP9.9 million in 2015 to GBP0.8
million in 2016 as a result of the Group's post-IPO financing
structure. The Group currently has drawn GBP10.0 million of its
five year bullet repayment facility.
Taxation
The Group has incurred a tax charge of GBP1.2 million for the
year ended 31 December 2016, which represents an effective tax rate
on statutory profit before tax of 17.8%. This includes the benefit
of GBP0.3 million of prior year adjustments in relation to interest
charges on shareholder loan notes held prior to the IPO.
The underlying effective tax rate, after adjusting for
amortisation and exceptional items, is 17.8%.
Earnings
Statutory profit before tax increased to GBP6.9 million (2015:
loss of GBP12.4 million), largely as a result of the increase in
Group Adjusted EBITDA and decrease in exceptional costs and finance
costs. The Group delivered a profit for the year of GBP5.7 million,
compared to a loss of GBP11.5 million in 2015, as a result of the
factors discussed above.
Basic earnings per share ('EPS') was 4.5p (2015: loss of 19.0p).
Adjusted EPS was 5.6p (2015: loss of 1.8p). Adjusted EPS is
calculated by excluding amortisation, exceptional items, other
income and the resultant tax effect from basic earnings.
Dividend
The Group declared an interim dividend of 0.25p per share. The
Board is recommending a final dividend of 0.75p per share,
resulting in a full year dividend of 1.0p per share.
In the future, the Board intends to adopt a progressive dividend
policy. When making proposals for the payment of dividends, the
Board considers the resources available to the Group, including
liquidity and the Company's distributable profits.
Cash Flow
2016 2015
GBP'000 GBP'000
Group Adjusted EBITDA 22,691 17,016
Movement in working capital 5,186 4,348
Maintenance capital expenditure(1) (2,933) (2,748)
-------- --------
Group Operating Cash Flow 24,944 18,616
Expansionary capital expenditure(2) (20,922) (28,230)
Other income - 1,105
Exceptional items (944) (7,001)
Taxation (243) (73)
Finance costs (552) (4,108)
Dividends paid (321) -
IPO proceeds - 89,931
Repayment of debt - (89,842)
Other net cash flows from financing activity - 16,886
-------- --------
Net cash flow 1,962 (2,716)
-------- --------
(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 product enhancements,
acquisitions and IT projects. It is stated gross of amounts funded
by finance leasing (2016: GBPnil; 2015: GBP3.1 million) and net of
contributions towards landlord building costs.
The Group's increasing Group Adjusted EBITDA and efficient use
of working capital continues to deliver strong cash flows. Group
Operating Cash Flow increased by 34.0% to GBP24.9 million (2015:
GBP18.6 million). This is largely as a result of the 33.4% increase
in Group Adjusted EBITDA, offset by a GBP0.2m increase in
maintenance capital expenditure due to the increased number of gyms
in operation.
Our negative working capital profile continues to give Group
Operating Cash Flow Conversion of more than 100%, at 109.9% for the
year (2015: 109.4%).
The reduction in expansionary capital expenditure of GBP20.9
million (2015: GBP28.2 million) arises as a result of the fit-out
of new gyms.
The net cash inflow, as well as the self-financing of the
rollout programme during the year, resulted in a reduction in Net
Debt : Group Adjusted EBITDA to 0.23x (2015: 0.42x).
Balance sheet
2016 2015
GBP'000 GBP'000
Non-current assets 148,157 134,551
Current assets 10,795 8,636
Current liabilities (34,257) (25,546)
Non-current liabilities (10,405) (9,198)
-------- --------
Net assets 114,290 108,443
-------- --------
Our business model and strong conversion from revenue to cash
results in an uncomplicated balance sheet.
Non-current assets have increased by GBP13.6 million to GBP148.2
million (2015: GBP134.6 million). This is as a result of capital
expenditure in property, plant and equipment and computer software
totalling GBP27.6 million, offset by depreciation and amortisation
of GBP14.1 million.
Current assets have increased due to higher cash balances, as
discussed above. Current liabilities have increased by GBP8.7
million as a result of lease incentives associated with new gyms
opening in the year, and increases in trade and other payables as
the size of our operations increases.
The Group has drawn GBP10.0 million of its five year bullet
repayment facility. GBP30.0 million of the facility was undrawn at
31 December 2016 and will be utilised to fund new sites, working
capital and capital expenditure.
Guidance
We reiterate the guidance that we have made previously:
-- we expect to open towards the top end of the guidance level of 15 to 20 openings for 2017;
-- the charge for long term employee incentives is anticipated
as GBP0.9m in 2017, rising to GBP1.5m in 2018; and
-- pre-opening costs are expected to remain stable at GBP140,000 per site in 2017.
In addition, in 2017:
-- we expect the new site fit-out costs to continue to be
between GBP1.3 million and GBP1.4 million per site, with a further
GBP2.0 million to GBP2.5 million of capital spend on IT, prior year
acquisitions and other expansionary projects;
-- maintenance capital expenditure is expected to equate to 7% of revenue;
-- depreciation is expected to be 16% of revenue in 2017;
-- to support the growth of the business we expect head office
costs to be 9.0% to 9.5% of revenues (2016: 10%); and
-- the effective tax rate, after adjusting for amortisation and
exceptional items, is expected to be 23%.
Richard Darwin
Chief Financial Officer
14 March 2017
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2016
Note 31 December 2016 31 December 2015
GBP'000 GBP'000
Revenue 73,539 59,979
Cost of sales (830) (1,073)
Gross profit 72,709 58,906
Administration expenses (64,993) (62,712)
Other income - 1,105
Operating profit / (loss) 7,716 (2,701)
Finance income 19 265
Finance costs (795) (9,946)
Profit / (loss) before tax 6,940 (12,382)
Tax (charge) / credit 6 (1,237) 909
Profit / (loss) for the year attributable to equity shareholders 5,703 (11,473)
----------------- -----------------
Other comprehensive income for the year - -
Total comprehensive income / (loss) attributable to equity
shareholders 5,703 (11,473)
----------------- -----------------
Earnings per share 4 pence pence
Basic 4.5 (19.0)
Diluted 4.4 (19.0)
Adjusted earnings per share 4
Basic 5.6 (1.8)
Diluted 5.6 (1.8)
----------------- -----------------
Reconciliation of operating profit to Group Adjusted EBITDA
Operating profit / (loss) 7,716 (2,701)
Depreciation of property, plant and equipment 7 12,693 10,907
Amortisation of intangible assets 1,442 2,308
Exceptional items 3 321 7,607
Other income - (1,105)
Long term employee incentive costs 5 519 -
----------------- -----------------
Group Adjusted EBITDA 22,691 17,016
----------------- -----------------
Group Adjusted EBITDA is a non-GAAP metric used by management
and is not an IFRS disclosure
Consolidated Statement of Financial Position
As at 31 December 2016
Note 31 December 2016 31 December 2015
GBP'000 GBP'000
Non-current assets
Property, plant and equipment 7 99,037 85,237
Intangible assets 48,717 49,137
Trade and other receivables 403 -
Deferred tax asset 6 - 177
Total non-current assets 148,157 134,551
Current assets
Inventories 159 122
Trade and other receivables 5,814 5,654
Cash and cash equivalents 4,822 2,860
Total current assets 10,795 8,636
Total assets 158,952 143,187
----------------- -----------------
Current liabilities
Trade and other payables 34,123 25,546
Income taxes payable 134 -
Total current liabilities 34,257 25,546
Non-current liabilities
Borrowings 8 9,178 8,966
Provisions 544 232
Deferred tax liabilities 6 683 -
----------------- -----------------
Total non-current liabilities 10,405 9,198
Total liabilities 44,662 34,744
----------------- -----------------
Net assets 114,290 108,443
----------------- -----------------
Capital and reserves
Issued capital 12 12
Own shares held 48 48
Capital redemption reserve 4 4
Share premium 136,280 136,280
Retained deficit (22,054) (27,901)
----------------- -----------------
Total equity shareholders' funds 114,290 108,443
----------------- -----------------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2016
Issued capital Own shares held Capital Share premium Retained Total
redemption deficit
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2015 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
Ordinary 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
Profit for the
year and total
comprehensive
income - - - - 5,703 5,703
Share based
payments - - - - 465 465
Dividends paid - - - - (321) (321)
At 31 December
2016 12 48 4 136,280 (22,054) 114,290
-------------- --------------- -------------- ------------- -------------- --------
Consolidated Cash Flow Statement
For the year ended 31 December 2016
Note 31 December 2016 31 December 2015
GBP'000 GBP'000
Cash flows from operating activities
Operating profit / (loss) 7,716 (2,701)
Adjustments for:
Other income - (1,105)
Exceptional items 3 321 7,607
Depreciation of property, plant and equipment 7 12,693 10,907
Amortisation of intangible assets 1,442 2,308
Long term employee incentive costs 519 -
Loss on disposal of property, plant and equipment 30 98
Increase in inventories (37) (47)
Increase in trade and other receivables (451) (1,372)
Increase in trade and other payables 5,622 5,669
----------------- -----------------
Cash generated from operations 27,855 21,364
Tax paid (243) (73)
Interest paid (571) (4,124)
----------------- -----------------
Net cash flow from operating activities before exceptional items
and other income 27,041 17,167
Other income - 1,105
Exceptional costs (944) (7,001)
----------------- -----------------
Net cash flow from operating activities 26,097 11,271
----------------- -----------------
Cash flows from investing activities
Proceeds from disposals of property, plant and equipment 22 -
Purchase of property, plant and equipment (22,833) (27,330)
Purchase of intangible assets (1,022) (575)
Interest received 19 16
----------------- -----------------
Net cash flows used in investing activities (23,814) (27,889)
----------------- -----------------
Cash flows from financing activities
Dividends paid (321) -
Proceeds of issue of Ordinary shares - 89,931
Drawdown of bank loans - 17,500
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)
----------------- -----------------
Net cash flows (used in) / from financing activities (321) 13,902
----------------- -----------------
Net increase / (decrease) in cash and cash equivalents 1,962 (2,716)
Cash and cash equivalents at 1 January 2,860 5,576
----------------- -----------------
Cash and cash equivalents at 31 December 4,822 2,860
----------------- -----------------
Notes
1. General information
The financial information, comprising the Consolidated Statement
of Comprehensive Income, Consolidated Statement 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 2016, which were approved
by the Board of Directors on 14 March 2017.
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 2016 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 2016 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 6 June 2017.
2. Basis of preparation
The Consolidated Financial Statements for the year ended 31
December 2016, from which the financial information in this
announcement is derived, have been prepared in accordance with
International Financial Reporting Standards ('IFRS') as adopted for
use in the EU, International Financial Reporting Interpretations
Committee ('IFRIC') interpretations and with those parts of the
Companies Act 2006 applicable to companies reporting under
IFRS.
The Consolidated Financial Statements have been prepared on a
going concern basis under the historical cost convention as
modified by the recognition of derivative financial instruments at
fair value through the profit and loss.
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. Exceptional items
2016 2015
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
Costs related to post IPO 149 -
reorganisation
Costs associated with head 172 -
office relocation
-------- --------
321 7,607
-------- --------
An additional GBP2,620,000 of exceptional costs associated with
the issue of share capital as part of the IPO was recognised
directly in reserves in the prior year.
4. 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, excluding
unvested shares held pursuant to The Gym Group plc Share Incentive
Plan and The Gym Group plc Performance Share Plan.
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
year ended 31 December 2016, the Group had potentially dilutive
shares in the form of share options and unvested shares issued
pursuant to The Gym Group plc Share Incentive Plan and The Gym
Group plc Performance Share Plan.
2016 2015
Basic weighted average number
of shares 128,105,275 60,485,605
Adjustment for share awards 347,617 -
------------ -----------
Diluted weighted average
number of shares 128,452,892 60,485,605
------------ -----------
Basic earnings per share
(p) 4.5 (19.0)
Diluted earnings per share
(p) 4.4 (19.0)
------------ -----------
Adjusted earnings per share is based on profit for the year
before exceptional items, amortisation and their associated tax
effect.
2016 2015
GBP'000 GBP'000
Profit / (loss) for the year 5,703 (11,473)
Amortisation of intangible
assets 1,442 2,308
Other income - (1,105)
Exceptional administration
expenses 321 7,607
Exceptional finance costs - 1,623
Tax effect of above items (313) (67)
-------- ---------
Adjusted earnings 7,153 (1,107)
-------- ---------
Basic adjusted earnings per
share (p) 5.6 (1.8)
Diluted adjusted earnings
per share (p) 5.6 (1.8)
-------- ---------
5. Long term employee incentive costs
The Group had the following share based payment arrangements in
operation during the year:
-- The Gym Group plc Performance Share Plan
-- The Gym Group plc Share Incentive Plan - Free shares
-- The Gym Group plc Share Incentive Plan - Matching shares
The Group recognised a total charge of GBP465,000 (2015:
GBP1,018,000) in respect of the Group's share based payment
arrangements and related employer's national insurance of GBP54,000
(2015: GBP51,000). During the prior year the Group operated The Gym
Group Senior Management Share Option Plan.
6. Taxation
The major components of taxation are:
(a) Tax on profit
2016 2015
GBP'000 GBP'000
Current income tax
Current tax on profits for 426 -
the year
Adjustments in respect of
prior years (49) (173)
--------
Total current income tax 377 (173)
Deferred tax
Origination and reversal of
temporary differences 1,118 (700)
Change in tax rates 18 (91)
Adjustments in respect of
prior years (276) 55
--------
Total deferred tax 860 (736)
Tax charge / (credit) in the
Income Statement 1,237 (909)
-------- --------
b) Reconciliation of tax charge / credit
The tax on the Group's profit / loss before tax differs from the
theoretical amount that would arise using the weighted average rate
applicable to profits / losses of the Group as follows:
2016 2015
GBP'000 GBP'000
Profit / (loss) before tax 6,940 (12,382)
Tax calculation at standard
rate of corporation tax of
20.00% (2015: 20.25%) 1,388 (2,507)
Expenses not deductible for
tax purposes 156 786
Exceptional IPO costs not
deductible - 1,023
Change in tax rates 18 (93)
Adjustments in respect of
prior years (325) (118)
--------
1,237 (909)
-------- ---------
(c) Deferred tax
During the year the Group recognised the following deferred tax
assets and liabilities:
Accelerated capital Losses Intangible assets Share schemes Total
allowances
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2015 (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
Prior year adjustment 276 - - - 276
Recognised in income
statement (564) (796) 217 25 (1,118)
Change in deferred tax
rate - (50) 32 - (18)
At 31 December 2016 (475) 160 (393) 25 (683)
------------------------ -------- ------------------ -------------- --------
7. Property, plant and equipment
Leasehold Fixtures, Gym Computer Total
improvements fittings and equipment
and other
equipment equipment
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January
2015 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
Additions 16,729 1,178 8,257 381 26,545
Disposals (100) - (244) - (344)
At 31 December
2016 90,656 6,747 42,800 1,305 141,508
-------------- ----------- ----------- ----------- --------
Accumulated
depreciation
At 1 January
2015 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
Charge for
the year 6,422 812 5,205 254 12,693
Disposals (48) - (244) - (292)
At 31 December
2016 18,683 3,133 19,909 746 42,471
-------------- ----------- ----------- ----------- --------
Net book value
At 31 December
2015 61,718 3,248 19,839 432 85,237
At 31 December
2016 71,973 3,614 22,891 559 99,037
-------------- ----------- ----------- ----------- --------
8. Borrowings
2016 2015
GBP'000 GBP'000
Non-current
Bank facility A 10,000 10,000
Loan arrangement fees (822) (1,034)
-------- --------
9,178 8,966
-------- --------
The Group's bank borrowings are secured by way of fixed and
floating charges over the Group's assets.
HSBC and Barclays bank facility
On 12 November 2015 the Group entered into a five 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 previous 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 2016, facility A was fully drawn and facility B
and the revolving credit facility were undrawn.
Five year record
2016 2015 2014 2013(1) 2012(1)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 73,539 59,979 45,480 35,734 22,264
Group Adjusted EBITDA 22,691 17,016 14,688 11,752 6,000
Group Adjusted EBITDA before Pre-Opening Costs 24,888 19,681 16,668 12,886 7,615
Group Operating Cash Flow 24,944 18,616 16,514 14,751 9,624
Group Operating Cash Flow Conversion 109.9% 109.4% 112.4% 125.5% 160.4%
Expansionary Capital Expenditure 20,922 28,230 20,335 14,058 21,645
Net Debt 5,178 7,140 49,205 36,743 18,979
Net Debt to Group Adjusted EBITDA 0.23x 0.42x 3.35x 3.11x 3.16x
Adjusted Earnings 7,153 (1,107) (4,452) (3,551) (958)
Adjusted Earnings per share (p) 5.6 (1.8) (9.1) (13.3) (3.6)
Total Number of Gyms (number) 89 74 55 40 32
Total Number of Members ('000) 448 376 293 225 166
Average Revenue per Member per Month (GBP) 14.29 14.08 13.98 14.06 13.78
Number of Mature Gyms in Operation (number) 55 40 32 16 10
Mature Gym Site EBITDA 26,161 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 2016 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 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR LLFVRVFIVLID
(END) Dow Jones Newswires
March 14, 2017 03:00 ET (07:00 GMT)
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