TIDMGYM
RNS Number : 7340X
Gym Group PLC (The)
02 September 2020
2 September 2020
The Gym Group plc
('the Company' or 'The Gym')
2020 Interim Results
Responding to the impact of COVID-19
The Gym Group plc, the nationwide operator of 183 low cost, no
contract gyms, announces its interim results for the six month
period ended 30 June 2020. The results reflect a period of
significant disruption in which the Company's gyms were required by
the UK Government to close on 20 March 2020 due to the COVID-19
outbreak. The gyms remained closed for the remainder of the
reporting period before gyms in England re-opened on 25 July
2020.
Finance Summary
Six months ended 30 June 2020 Six months ended 30 June 2019
GBP'000 GBP'000
------------------------------------------------- ------------------------------ ------------------------------
Revenue 37,274 73,988
Group Adjusted EBITDA 1,719 24,023
Group Adjusted EBITDA with Normalised Cash Rent (7,710) 24,023
Adjusted (loss) / profit before tax (26,328) 7,113
Statutory (loss) / profit before tax (26,983) 5,580
Adjusted Earnings per share (p) (14.9) 4.0
Statutory Earnings per share (p) (15.3) 3.0
Six months ended 30 June 2020 Year ended 31 December 2019
------------------------------ ------------------------------
Non-property net debt 29,163 47,395
-------------------------------------------------- ------------------------------ ------------------------------
*Definitions of KPIs can be found below the Directors
responsibility statement
Financial and Operational Update for H1 2020
-- Strong January/February campaign, increasing membership
levels to 891,000 as at 29 February 2020
-- 4 new gyms opened in H1 2020 bringing total estate to 179 as at 30 June 2020
-- Rapid lockdown of gym estate, following UK Government
announcement; closed gyms on 20 March 2020, with cost reduction
plans implemented to minimise cash outflows during closure
-- Equity Placing completed with net proceeds of GBP39.9 million
-- GBP30.0 million extension to existing GBP70.0 million
Revolving Credit Facility agreed with lending banks
-- Membership numbers decreased to 698,000 by 30 June 2020 (H1 2019: 796,000)
-- Development of COVID-secure operating protocols in
preparation for re-opening of gyms on 25 July 2020
Current Trading
-- Estate now reopened nationwide; gyms in England re-opened on
25 July with gyms in Wales opening on 10 August 2020 and gyms in
Scotland opening on 31 August 2020
-- As at 25 July, prior to the first gyms re-opening, total membership was 658,000 members
-- 4 new sites, which had been under construction prior to
lockdown, opened during August, taking total number of sites opened
in 2020 to 8 and total number of gyms in estate to 183
-- As at 31 August 2020, total membership was 676,000 members;
639,000 paying members and a further 37,000 members on 'free
freeze'; average age of members is 32
-- In the first five weeks of trading, the number of joiners was
up 30% year-on-year and cancellations were up 6% year-on-year
-- LIVE IT penetration at 22.3% at 31 August 2020 (Dec 2019: 18.9%)
-- Gym visits growing week on week as member confidence increases;
-- Non-Property Net Debt at 30 June of GBP29.2 million;
liquidity headroom of GBP70.8 million within GBP100.0 million
RCF
-- Cash flow positive in August 2020 after re-opening on 25 July 2020
Richard Darwin, CEO of The Gym Group, commented:
" Following our decisive actions during lockdown to minimise
costs and secure additional liquidity, we have reopened as the
strongest capitalised company in the sector. Exacting new safety
measures and innovative uses of technology have resulted in member
numbers and gym usage growing since reopening as member confidence
increases.
We anticipate the long-term structural growth of low-cost gyms
will continue to be driven by the underlying interest in health and
fitness, which is accelerating as a result of COVID 19 and the
Government's initiative to reduce obesity. With the likelihood of a
challenging economic environment in the coming months, gym-goers
will increasingly look for great value and as the lowest-priced
high quality gym operator we are well placed to meet this
demand."
A conference call will be held for analysts and investors at
8.30am today. Please email leisure@instinctif.com for dial-in
details or alternatively call Jack Devoy at Instinctif on 0207 427
1445 .
An accompanying slide presentation to the conference call will
be available from 9.30am at:
https://www.tggplc.com/investors/results,-reports-presentations
For further information, please contact
The Gym Group via Instinctif Partners
Richard Darwin, CEO
Mark George, CFO
Instinctif Partners
Matthew Smallwood
Justine Warren 020 7457 2020
Numis
Luke Bordewich
George Price 020 7260 1000
Peel Hunt
Dan Webster
George Sellar 020 7418 8900
1 179 as of 30 June 2020 (vs 175 at 31 December 2019) with four
new sites opened in H1 2020
Forward-looking statements
This announcement includes statements that are, or may be deemed
to be, "forward-looking statements". By their nature, such
statements involve risk and uncertainty since they relate to future
events and circumstances. Actual results may, and often do, differ
materially from any forward-looking statements. Any forward-looking
statements in this announcement reflect management's view with
respect to future events as at the date of this announcement. Save
as required by law or by the Listing Rules of the UK Listing
Authority, the Company undertakes no obligation to publicly revise
any forward-looking statements in this announcement following any
change in its expectations or to reflect subsequent events or
circumstances following the date of this announcement.
Chief Executive's Review
The impact of the COVID 19 pandemic forced the closure of the
entire estate of The Gym Group on 20 March 2020. With the majority
of our sites in England reopening on 25(th) July 2020, this meant
that during the first half of 2020 our sites were closed for over 3
months. Our business entered the crisis in a strong position
following a successful trading period in January and February with
membership at the end of February of 891,000. Financially, the
Board's prudent approach to financing meant that we had a low
leverage balance sheet with Net Debt of GBP47.4 million and Net
Debt: EBITDA of 0.98x at 31 December 2019. However, the prolonged
period of closure meant virtually no revenue as a result of our
commitment not to charge members whilst their gyms were closed,
which meant a challenging time even for a healthy business such as
ours.
Operating a business with no revenue and ongoing uncertainty
over the future reopening date required decisive action to create
financial resilience. This meant making operating cost reductions
and central cost savings, commencing landlord rent negotiations as
well as securing increased liquidity from the debt and equity
raise. Focus then turned to the marketing, technology and operating
protocols that were necessary to support the reopening and bring
colleagues back from furlough and welcome members back with
confidence. The Board has maintained a regular weekly virtual
meeting to support this decision-making process. Together with the
executive leadership it has sought external expert input to our new
protocols and is now visiting many sites to ensure these necessary
standards are being upheld. This routine supports our confidence in
the success of the reopening and the flexibility required to manage
in the current environment.
Responding to the crisis
Our response to the crisis came in three phases. First, shutdown
of the sites and measures taken to protect our people and minimise
cash burn; second, steps to boost liquidity; and third, putting in
place COVID-secure reopening procedures.
Across the business we implemented a hard lockdown after
closure, minimising operating costs and cash outflows. We were
assisted in this and are grateful for the response of key suppliers
including our cleaning firms, contact centre operator and vending
suppliers who all furloughed staff to ensure that contractual costs
were minimised. In addition, we are appreciative for the pragmatic
approach taken by our landlords. Upon closure we entered into
constructive dialogue with landlords to reach agreement to defer
payments during the period of closure. In around ten percent of the
estate we have also been able to establish deals to extend the
leases or remove a lease break and in doing so agree additional
rent-free periods. The cash flow benefit of these rent-frees will
be realised over both 2020 and 2021 with total benefit around
GBP2.5 million over the next 12 months, of which GBP1.1 million was
a realised benefit in H1 2020. In addition to this GBP1.1 million
H1 saving, a further GBP9.4 million of rent due in H1 has been
deferred and will be repaid over the next 12 months. In total
therefore cash rent paid in H1 was reduced by GBP10.5 million
compared to what would otherwise have been due in the period. We
are also grateful for decisive
actions taken by the government to support our sector. At the
peak of the closure we have had over 95% of our workforce in the
gyms and our central support teams on furlough. This financial
support has been significant to the business along with the
business rates relief and the scheme to defer VAT.
Notwithstanding the decisive actions that we took to reduce cost
and cash outflows, it was important that the business also boosted
its liquidity. In April an equity placing of 19.9% of our share
capital raised net proceeds of GBP39.9 million - we are grateful
for the support of our shareholders in this capital raise. At the
same time our syndicate of three leading banks agreed an additional
GBP30 million of debt facility for an initial 18 month term. This
increased our total available facilities to GBP100 million and
meant that at the end of June there remained untapped liquidity of
GBP70.8 million compared to our non property net debt position of
GBP29.2 million. Again, we are thankful for the strong support of
our lenders at this difficult time and it demonstrates the faith
that stakeholders have in the business and how they share our view
about the opportunities for recovery and growth. As part of our
measures to preserve cash, we are not declaring an interim dividend
in 2020 (2019: 0.45 pence per share).
In the last two months of the period the business developed the
operating procedures and strategy to be able to welcome members
back to the gym safely. Our gyms already have excellent ventilation
systems; substantial amounts of fresh air are pumped in every
second with the entire volume of one of our gyms typically replaced
in under an hour. This means when members are working out, any
aerosols can be dispersed rapidly. To ensure our members are
confident in the steps we have taken to make our gyms a safe place
to work out we have implemented measures above and beyond the
guidelines including the purchase of screens to place in front of
banks of cardio equipment to further reduce the spread of aerosols.
The government guidelines limit capacity to 100 sq. ft. per member
and we are able to accommodate this through limiting entry where
necessary using the technology embedded in the entrance portals.
The guidelines also require social distancing and enhanced cleaning
and sanitation measures. Our large facilities with an average size
of 16,500 square feet mean that we have been able to keep to the
original 2 metre social distancing. We have purchased specialised
cleaning equipment to make the cleaning of equipment more efficient
and effective. We have also added in additional levels of
governance to monitor the effective implementation of COVID-19
procedures including a Health and Safety sub-committee of the
Board.
Our re-opening protocols were reviewed by academics from the
Advanced Wellbeing Research Centre at Sheffield Hallam University
to ensure our plans were consistent with leading scientific
understanding of transmission risks and mitigation. Our work
supported the industry body, UKActive, in establishing industry
standards that became part of the Government's guidelines for
operating gyms in a COVID-secure way.
Operational and strategic progress
The results in H1 were substantially impacted by the 3 months of
closure. Revenues were GBP37.3 million, down 49.6% and Group
Adjusted EBITDA with Normalised Cash Rent was a loss of GBP7.7
million, versus a profit of GBP24.0 million at 30 June 2019. Prior
to the start of the pandemic we opened four sites in 2020 at
Cheltenham, Catford, Lowestoft and Isle of Wight. Four other sites
almost completed were paused as part of our initial response to
reduce cash outflow during the pandemic. All were completed by the
end of July and opened in early August adding sites in Stourbridge,
Plymouth Laira Bridge, South Ruislip and Birmingham Stechford,
bringing our portfolio up to 183 sites. In addition, I am pleased
that we were also able to continue with significant refurbishments
of two former easyGym sites in London at Fulham and Oxford Street.
Having brought them up to the standard we expect, these will be
good long-term investments for the group. We plan to assess the
right time to recommence our new site rollout after the initial
results of our reopening are clear.
Despite the enforced closure of our estate, we have continued
with work on one of our key strategic priorities to enhance our
technology capability and improve our central infrastructure
enabling us to operate a strong low cost business at scale. A
number of improvements have been made to support the post-COVID
operations for members. We have introduced contactless entry
through the use of QR codes on our app and member adoption of this
in the weeks after opening has been very strong. Also, our app has
been enhanced to include a busyness tracker that enables members to
see how busy the gyms are at any point in time. There was also a
relaunch of our website to improve the join journey and make it
more mobile friendly. Further functionality launched included the
ability of members to free freeze for an additional month along
with the relaunch of member direct debits following closure. I am
very confident that the strength of our tech team will continue to
drive competitive advantage in this area over the coming years.
The other significant launch during the year was the launch of
discounted membership of Fiit online classes for our members,
providing them with an alternative to working out at the gyms
whilst our gyms were closed. The Fiit partnership, which we signed
in January 2020, includes the ability for the Group to take virtual
content from Fiit and for members to do home workouts in Fiit pods
and studios in our gyms. As a result of lockdown there has been
some delay to this rollout, however we remain confident about the
quality of product and have recently launched the first enhanced
studio concept at our site in Tottenham White Hart Lane.
Whilst we took the decision to pause our new site rollout as a
result of the crisis, we remain confident about our long- term
positioning in the market. We are the only listed health and
fitness operator and with a low leverage balance sheet and strong
covenant we believe that there will be substantial pipeline
opportunities in the coming months. Our priority will be to take
advantage of an altered retail property landscape to be able to
pick up high quality site opportunities at reasonable rents. This
will show itself in two ways: i) the availability of strong new
site opportunities at lower rents and whilst early days since the
reopening of our sector there are initial signs that these pipeline
sites are beginning to become available and ii) the availability of
more premium sites at rents that will make these types of locations
more affordable for our business model. In addition, we will aim to
take advantage of any quality distressed operators. In many
instances this will be attracting displaced members from other
gyms; as the lowest price high quality operator, we will ensure
that our marketing makes these prospective members aware of the
opportunity in their locality.
People
The importance of the New Gym Team model that we implemented in
2018 and 2019 meant that we were able to furlough our Fitness
Trainers (who are part-time employees for us). This proved to be an
important source of financial support for them at a time when it
was not possible for them to train their clients in the gyms. The
support of all our people has been fantastic during this time and
demonstrated the strength of the culture within the Group. This is
a team with real strength in depth and I am confident that a
business based around a strong team and exceptional member service
will continue to be very successful. I would like to thank the
entire team for helping us navigate through a difficult few
months.
We also want to have an even more diverse team. At the beginning
of the year we launched a Diversity and Inclusion working group to
ensure that these principles are embedded in all our people
development and recruitment processes. We have also signed up to
the race charter. Ours is a diverse workforce with 31% from BAME
background and 26% female. However, higher in the organisation we
can and should be more diverse and I strongly believe that doing
this will further improve the performance of our leadership
team.
Sustainability
The pause in our rollout does not mean that our commitment to
grow this business in a sustainable way is at all diminished.
Sustainability is a focus for our company and we will continue to
work to the UN sustainability goals across the 4 key areas we have
identified as being most important to our stakeholders: (1) Good
health and promoting wellbeing; (2) Good jobs, quality education
and lifelong learning; (3) Diversity and equal opportunity; and (4)
Responsibility to the environment. Never has good health been more
important to our society and we will continue to deliver affordable
exercise, and the health benefits it brings, to our members. As a
fast growing market leader, offering exciting career and
development opportunities to our employees is a priority and being
an inclusive and diverse employer supports our culture of
innovation. We continue to take a proactive, strategic approach to
environmental management, constructing our new facilities with
energy efficiency as a priority and where possible re-fitting
existing gyms with updated energy-efficient technology, such as the
recent installation of LED lighting across our estate.
Looking Forward
Now that we have reopened it is important to continue to rebuild
the confidence of our members and be able to grow our membership
levels and yields. Our total membership has increased from 658,000
at the point of re-opening our gyms on 25 July 2020, to 676,000 as
at 31 August 2020 (771,000 as at 31 August 2019), during a summer
holiday period when in a normal year membership would be expected
to decline. Of these members, 37,000 have opted to 'freeze' their
membership temporarily without charge. Since re-opening, member
visits have been steadily increasing week by week. Whilst the total
number of visits remains lower than the same period last year, due
to the lower membership levels, the number of visits per member is
now at the level of last year, demonstrating a growing confidence
in our member base about working out in our gyms. A change in usage
patterns by members since re-opening, with a significant reduction
in evening peaks, is enabling us to operate within the new
government guidelines with only minimal waiting times for members
even in our busiest gyms.
Our infrastructure, scale, strong culture and the quality of our
people mean that I have absolute confidence that The Gym Group will
continue to be a leading player in an increasingly important
sector. The benefits to the whole nation of increased health and
fitness both in terms of physical and mental wellbeing have been
made all too obvious by COVID-19.
Richard Darwin
Chief Executive Officer
2 September 2020
Financial Review
We use financial and non-financial key performance indicators
('KPIs') to measure our performance over time. We select KPIs that
demonstrate the financial and operational performance underpinning
our strategic drivers:
Six months ended 30 June 2020 Six months ended 30 June 2019 Movement
GBP'000 GBP'000
------------------------------------ ------------------------------ ------------------------------ ---------
Revenue 37,274 73,988 -49.6%
Group Adjusted EBITDA 1,719 24,023 -92.8%
Group Adjusted EBITDA with
Normalised Cash Rent (7,710) 24,023 -132.1%
Group Adjusted EBITDA before
Pre-Opening Costs 1,955 24,585 -92.0%
Adjusted Earnings (22,119) 5,484 -503.3%
Statutory (Loss) / Profit Before Tax (26,983) 5,580 -583.6%
Group Operating Cash Flow (4,016) 18,692 -121.5%
Adjusted (Loss) / Profit Before Tax (26,328) 7,113 -470.1%
Total number of gyms(1) 179 165 8.5%
Members ('000) 698 796 -12.3%
Average number of members(2) ('000) 777 797 -2.5%
------------------------------------- ------------------------------ ------------------------------ ---------
(1) 179 as of 30 June 2020 (vs 175 at 31 December 2019) with
four new sites opened in 2020
(2) The sum of the closing membership in each month (excluding
sites not open at the end of the month) divided by the number of
months in the period
The following summary income statement compares the performance
in the Period with the same period in 2019
Six months ended 30 June 2020 Six months ended 30 June 2019
GBP'000 GBP'000
------------------------------------------------- ------------------------------ ------------------------------
Revenue 37,274 73,988
Cost of sales (769) (700)
-------------------------------------------------- ------------------------------ ------------------------------
Gross profit 36,505 73,288
-------------------------------------------------- ------------------------------ ------------------------------
Site costs incl. cash rent (excl. exceptional
costs) (27,964) (42,805)
Central Costs (excl. exceptional costs) (6,822) (6,460)
-------------------------------------------------- ------------------------------ ------------------------------
Group Adjusted EBITDA 1,719 24,023
-------------------------------------------------- ------------------------------ ------------------------------
Cash rent deferred to subsequent period (9,429) -
------------------------------------------------- ------------------------------ ------------------------------
Group Adjusted EBITDA with Normalised Cash Rent (7,710) 24,023
-------------------------------------------------- ------------------------------ ------------------------------
Add back cash rent deferred to subsequent 9,429 -
periods
Add back cash rent paid in periods 3,267 12,087
-------------------------------------------------- ------------------------------ ------------------------------
Group Adjusted EBITDAR 4,986 36,110
-------------------------------------------------- ------------------------------ ------------------------------
Depreciation of right of use asset (10,838) (9,417)
Other depreciation (12,017) (10,861)
Amortisation of IT intangible assets (1,370) (777)
Finance costs - leases (6,788) (6,095)
Finance costs - borrowing (1,333) (1,052)
Finance income 6 18
Long term employee incentive costs 1,027 (813)
Adjusted tax 4,209 (1,629)
-------------------------------------------------- ------------------------------ ------------------------------
Adjusted Earnings (22,119) 5,484
-------------------------------------------------- ------------------------------ ------------------------------
- Basic adjusted earnings per share (14.9) 4.0
- Diluted adjusted earnings per share (14.7) 3.9
-------------------------------------------------- ------------------------------ ------------------------------
Six months ended 30 June 2020 Six months ended 30 June 2019
GBP'000 GBP'000
------------------------------------------ ------------------------------ ------------------------------
Adjusted (Loss) / Profit Before Tax (26,328) 7,113
Exceptional expenses (357) (920)
Amortisation of non-IT intangible assets (298) (613)
------------------------------------------- ------------------------------ ------------------------------
(Loss) / Profit Before Tax (26,983) 5,580
------------------------------------------- ------------------------------ ------------------------------
Tax credit / (charge) 4,307 (1,497)
------------------------------------------- ------------------------------ ------------------------------
Earnings (22,676) 4,083
------------------------------------------- ------------------------------ ------------------------------
- Basic earnings per share (15.3) 3.0
- Diluted earnings per share (15.1) 2.9
------------------------------------------- ------------------------------ ------------------------------
Revenue
During the half year we opened a further four gyms, increasing
the size of the estate to 179(1) .
In the first two months of the year, a successful marketing
campaign resulted in membership numbers increasing from 794,000 at
the start of the year to 891,000 by the end of February. Membership
levels started to fall during March as the impact of COVID-19
started to become widespread and we continued to see additional
cancellations after the gyms were closed on 20 March 2020, with
membership levels decreasing to 698,000 at 30 June 2020.
From 20 March 2020 onwards, remaining members were put on 'free
freeze' and therefore not charged a monthly subscription and as a
result regular subscription revenue was not earned after this
date.
The total revenue for H1 2020 was GBP37.3 million (H1 2019:
GBP74.0 million).
Operating Costs including the benefits of UK Government COVID-19
initiatives
Site costs, including cash rent and excluding exceptional
expenses, decreased to GBP28.0 million (H1 2019: GBP42.8 million)
as a result of the gyms being closed for more than half of the
Period. Central support office costs increased slightly to GBP6.8
million (H1 2019: GBP6.5 million) but this increase was smaller
than originally planned for the year; an investment in people and
technology that would otherwise have increased costs year-on-year,
was offset by savings from furloughed staff during the period of
gym closure.
Immediately after the closing of our gyms on 20 March 2020 we
implemented a prepared plan to put our gyms into a 'hard lockdown'
to ensure operating costs were reduced as far as possible while our
gyms were closed. From that date until the end of the Period we
operated at a significantly lower cost level from a combination of
our own actions and support from UK Government initiatives.
Mitigating actions to reduce costs
Upon closure of our gyms we were able to reduce the estate
running costs significantly: maintenance was reduced to a bare
minimum for health and safety requirements and to prepare the sites
for re-opening; utilities were reduced substantially although not
down to zero as standing charges were still incurred; cleaning
costs were reduced to zero; and insurance costs were reduced,
reflecting the lower risk of sites not being in operation. In
addition we reduced marketing spend very significantly with a
minimal spend focused on maintinaining engagement with existing
members.
In June we implemented a restructuring programme that resulted
in a 20% reduction in headcount across our central support office
and regional operations management structure. The associated cost
savings will materialise in H2.
Support from UK Government initiatives :
In addition to the mitigating actions above, a number of
government initiatives enabled us to reduce or defer costs:
-- Business Rates Relief - relief available from April 2020 to
March 2021 saved us GBP3.2 million in the Period and will provide
further benefit of GBP1.1 million per month until March 2021
-- Coronavirus Job Retention Scheme (CJRS) - across our gyms and central support we furloughed approximately 95% of our staff from 21 March to shortly before the gyms re-opened in July. The total support claimed from the CJRS in the Period was GBP4.3 million with a further GBP0.5 million received for July
-- Rent - following the introduction of the government
protections against eviction of tenants in March 2020, later
formalised in the Corporate Insolvency and Governance Bill, we have
deferred GBP9.4 million in cash rent payments that would otherwise
have been paid during H1 2020. Immediately after the gyms were
closed we engaged proactively with our 171 landlords and with the
vast majority were able to agree a process for deferring rent
payments while the gyms were closed and to repay such deferred
payments over the subsequent 12 months. These deferments did not
impact the IFRS16 income statement charge for the Period but did
reduce the cash rent outflow, thereby supporting Operating Cash
Flow and Group Adjusted EBITDA. The GBP9.4 million rent deferred
from H1 2020 will be repaid across H2 2020 and H1 2021 resulting in
higher cash rent outflows in those periods than would otherwise
have arisen (see below). In addition, for a number of sites we have
also been able to establish deals with landlords to extend the
leases or take out a lease break and in doing so earn additional
rent-free periods; the benefit of these rent-free periods will
total approximately GBP2.5 million across 2020 and 2021 of which
GBP1.1 million was a benefit in the Period
Ongoing impact on costs of COVID-19 measures and Government
support
A number of the benefits of the Government initiatives described
above will continue into H2 2020 and H1 2021. Offsetting these
benefits will be the repayment of the rent deferred from H1 2020
along with incremental costs from the enhanced cleaning regime for
our COVID-secure protocols. The table below summarises the key
changes to our 'business as usual' operating cost base over the
next 12 months as a result of these COVID-related factors:
Increase / (decrease) in key costs versus 'business as usual' as a result of COVID-19 Estimate Estimate
(GBP million) H2 2020 H1 2021
---------------------------------------------------------------------------------------- --------- ---------
Cash rent deferrals from H1 2020 to be repaid over next 12 months 4.7 4.7
Rent free deals negotiated with landlords for lease extensions or sale of breaks (0.9) (0.5)
Business rates relief (6.4) (3.2)
Increase in cleaning costs 0.9 0.9
Furlough of site staff (0.4) 0.0
Furlough of central staff (0.1) 0.0
---------------------------------------------------------------------------------------- --------- ---------
Group Adjusted EBITDA
As a result of the extended period of closure and the factors
outlined above, Group Adjusted EBITDA decreased from GBP24.0
million in H1 2019 to GBP 1.7 million for H1 2020.
As described above, the deferment of some of our cash rent
benefited Group Adjusted EBITDA by GBP9.4 million in the Period and
will consequently reduce Group Adjusted EBITDA in subsequent
periods. To enable investors and analysts to understand this effect
as clearly as possible we will for the time being also report Group
Adjusted EBITDA with Normalised Cash Rent , which is calculated
using the cash rent that would have been paid in normal
circumstances without the agreed deferments, rather than the cash
rent that was actually paid. For H1 2020 the Group Adjusted EBITDA
with Normalised Cash Rent was a loss of GBP7.7 million.
Exceptional expenses
Exceptional expenses for the Period were GBP0.4 million (H1
2019: GBP0.9 million) arising from one-off restructuring costs
relating to the programme of redundancies in the central support
office implemented in June.
Result for the period
Depreciation increased to GBP22.9 million in the six months to
30 June 2020 (H1 2019: GBP20.3 million). Of this, GBP10.9 million
was depreciation of the right of use assets (H1 2019: GBP9.4
million) and GBP12.0 million other depreciation (H1 2019: GBP10.9
million).
Amortisation charges were GBP1.7 million (H1 2019: GBP1.4
million); within this GBP0.3 million related to amortisation of
acquired assets (H1 2019: GBP0.6 million) and GBP1.4 million from
IT/software amortisation (H1 2019: GBP0.8 million).
Finance costs have increased to GBP8.1 million (H1 2019: GBP7.1
million) comprising the implied interest relating to the finance
lease liability under IFRS 16 of GBP6.8 million (H1 2019: GBP6.1
million) plus the interest costs associated with our borrowing
facilities GBP1.3 million (H1 2019: GBP1.0 million).
As a result of these factors, statutory loss before tax was GBP
27.0 million (H1 2019: GBP5.6 million profit).
Adjusted Earnings
Six months ended 30 June 2020 Six months ended 30 June 2019
GBP'000 GBP'000
------------------------------------------- ------------------------------ ------------------------------
(Loss) / Profit before tax (26,983) 5,580
Amortisation of acquired assets 298 613
Exceptional administration expenses 357 920
-------------------------------------------- ------------------------------ ------------------------------
Adjusted (loss) / profit before tax (26,328) 7,113
-------------------------------------------- ------------------------------ ------------------------------
Tax credit / (charge) 4,307 (1,497)
Tax effect of above items (98) (132)
-------------------------------------------- ------------------------------ ------------------------------
Adjusted Earnings (22,119) 5,484
-------------------------------------------- ------------------------------ ------------------------------
Basic Adjusted earnings per share (pence) (14.9) 4.0
-------------------------------------------- ------------------------------ ------------------------------
Adjusted profit before tax is calculated from statutory profit
before tax and adding back the amortisation associated with non-IT
related intangibles and any exceptional items.
The tax credit was recognised based on management's best
estimate of the annual income tax rate expected for the full
financial year, applied to the profit before tax for the six-month
period. On this basis, the Group's tax credit was GBP4.3 million
(H1 2019: tax charge of GBP1.5 million). The Group had an income
tax payable of GBP0.4 million as at 30 June 2020.
Excluding the tax effect of the amortisation of non-IT
intangible assets and exceptional items (GBP98,000), the effective
tax rate on adjusted profit before tax for the half year ended 30
June 2019 was 16.0% (H1 2019: 22.9%).
Adjusted loss for the period of GBP 22.1 million (H1 2019:
GBP5.5 million profit) as a result of the factors discussed
above.
Financing
On 20 March 2020 we were required by the UK Government to close
our gyms. We faced an extended period of closure with no revenue
and with no visibility of when gyms would be allowed to re-open. At
the end of March 2020 the Company had drawn its GBP70 million
Revolving Credit Facility in full and held GBP22.4 million of cash.
With approximately GBP12 million of expected unwind of working
capital and committed capital expendtiure and a monthly cash burn
of approximately GBP5 million after cost mitigating actions had
been taken, the Company sought additional sources of liquidity to
ensure viability could be ensured in the event of a sustained
period of closure.
On 17 April 2020, the Company issued a total of 27,396,606 new
ordinary shares (representing 19.9% of the issued share capital) of
0.01p each in the capital of the Company at a price of 150 pence
per share, via a placing (the Placing), raising gross proceeds of
approximately GBP41.3 million (net proceeds of GBP39.9 million
after related costs).
On 5 June 2020 the Company agreed with its lending banks to
extend its existing GBP70 million Revolving Credit Facility (the
RCF) with an additional GBP30 million facility for a term of 18
months (the New Bank Facility). From September 2020 until June 2021
the covenant tests of the RCF will be replaced by new covenant
tests primarily relating to the performance of the Company against
agreed targets for Group Adjusted EBITDA with Normalised Cash Rent.
Upon termination or early cancellation of the New Bank Facility the
covenants and all other terms of the original RCF will apply until
the maturity of the RCF in October 2023.
As a result of the Placing and the New Bank Facility the Company
secured sufficient liquidity to finance the business through a
period of gym closure extending into 2021, well beyond any
reasonable scenario envisaged.
Dividends
A condition of the New Bank Facility is that the Company shall
not declare or pay a dividend during the term of the facility and
as such the Directors are not proposing an interim dividend
relating to H1 2020 and do not expect to pay a final dividend at
the end of the financial year 2020.
Cash Flow and Net Debt
Six months ended 30 June 2020 Six months ended 30 June 2019
GBP'000 GBP'000
------------------------------------------ ------------------------------ ------------------------------
Group Adjusted EBITDA(1) 1,719 24,023
Movement in working capital (106) (1,452)
Maintenance capital expenditure (5,629) (3,879)
------------------------------------------- ------------------------------ ------------------------------
Group Operating Cash Flow (4,016) 18,692
------------------------------------------- ------------------------------ ------------------------------
Exceptional items (361) (274)
Finance costs (580) (845)
Taxation - (1,523)
------------------------------------------- ------------------------------ ------------------------------
Free cash flow (4,957) 16,050
------------------------------------------- ------------------------------ ------------------------------
Expansionary capital expenditure (15,403) (15,899)
Investment in third party (1,009) -
Dividends paid - (1,312)
Net proceeds of issue of Ordinary shares 39,915 -
Repayment of borrowings (320) (40)
Bank interest received 6 10
------------------------------------------- ------------------------------ ------------------------------
Movement in non-property net debt(2) 18,232 (1,191)
------------------------------------------- ------------------------------ ------------------------------
(Decrease) / increase in debt (14,000) 1,985
------------------------------------------- ------------------------------ ------------------------------
Net cash flow 4,232 794
------------------------------------------- ------------------------------ ------------------------------
30 June 2020 30 June 2019
GBP'000 GBP'000
------------------------------------------ ------------------------------ ------------------------------
Non-property net debt 29,163 47,180
------------------------------------------- ------------------------------ ------------------------------
(1) See page 15 for a reconciliation of operating profit to
Group Adjusted EBITDA
(2) Movement in non-property net debt represents the movement
from the year end
As a result of the closure period and consequent drop in
profitability, Group Operating Cash Flow was an outflow of GBP 4.0
million, in contrast to the cash inflow of GBP18.7 million
delivered in H1 2019.
Following the closure of our gyms on 20 March 2020, a number of
actions were taken to preserve cash in case the closure period
became protracted. In addition to the operating cost mitigating
actions described in the "Operating Costs" section above, the
Company introduced a number of additional measures to conserve
cash:
-- Maintenance Capital Expenditure includes the replacement and
refurbishment of fixtures and fittings in the existing gyms as well
as investment in new gym equipment in existing gyms and in the
Period totalled GBP4.1 million (H1 2019: GBP3.3 million). Adjusting
for the movement in capex creditors, the cash flow in the Period
from maintenance capital expenditure was GBP5.6 million. Following
the closure of gyms on 20 March 2020, maintenance capex was
minimised by focusing only on repairs required for health and
safety reasons. To preserve cash, no major refurbishments beyond
those already underway were started in the Period and none are
planned in the remainder of 2020.
-- Expansionary Capital Expenditure arises primarily as a result
of the fit-out of new and acquired gyms and in H1 2020 totalled
GBP13.3 million (H1 2019: GBP13.6 million). Adjusting for the
movement in capex creditors, the cash flow in the Period from
expansionary capital expenditure was GBP13.2 million. Prior to the
closure of gyms on 20 March 2020, four new gyms had been opened in
the year (of which one was a 'small box' gym) and four additional
gyms were under construction. Work continued to complete the four
sites under construction, which were opened in August 2020, but to
conserve cash the Company took the decision not to start any new
development of pipeline sites during the closure period. In
addition to new sites, major refurbishment work was undertaken in
two former easyGym sites: London Fulham (completed) and London
Oxford Street (partially completed).
-- VAT - following the introduction of Government measures to
offer relief on VAT payments, we retained GBP1.5 million of VAT
payments relating to Q1 2020 due in March 2020, which will now be
paid in March 2021. In Q2 the Company operated with losses and as
at 30 June 2020 had a VAT receivable of GBP1.6 million.
As at 30 June 2020, the Group had drawn GBP36.0 million of its
GBP70.0 million RCF facility and none of its GBP30.0 million New
Bank Facility . Non-Property Net Debt was GBP29.2 million (GBP47.6
million at December 2019).
Outlook
We have emerged after re-opening as a profitable business in the
first month of trading. The level of membership needed for cash
flow break-even is approximately 520k paying members (depending on
average revenue per member) and we are already above that level and
expect to grow from this point. As there is no expansionary capex
currently, the business operated with a positive cash flow in the
first full month after re-opening, which means we are not eating
into our liquidity headroom as the business recovers.
Capex in the second half will be focused on essential
maintenance and targeted technology spend where we can see
immediate impact to support trading, plus the major refurbishment
of our London Oxford Street gym which is expected to complete in
October. We currently have no new sites under development but do
have a number of new leases agreed. We will re-start our build
programme when we have sufficient confidence in the broader
economic outlook. If we do incur any further capex spend on new
sites in 2020 it will be modest and towards the end of the year,
most likely for sites that will open in early 2021.
Principal Risks and Uncertainties
The principal risks and uncertainties set out in the 2019 Annual
Report and Accounts published 31 March 2020, remain valid at the
date of this report and have been reviewed and updated in light of
the COVID-19 pandemic. In summary, these include:
-- economic conditions, including the impact of COVID-19 (see below)
-- the competitive position of the Group;
-- the delivery of the organic rollout plan;
-- providing members with a high quality product and service;
-- retention of key staff;
-- dependency on the performance of IT systems;
-- data security and protection;
-- satisfactory delivery from outsourced services providers;
-- high operational gearing from the fixed cost base; and
-- adherence with regulatory requirements.
Update on COVID-19 related risks:
On 25 July 2020 gyms in England were permitted to re-open,
followed by our gyms in Wales on 10 August 2020 and Scotland on 31
August 2020. With the gyms now open, the principal COVID-19 risks
relating to business performance and a summary of our mitigating
actions are as follows:
COVID-19 risk Mitigating Actions
Our membership levels Ensuring our members can be confident
(and therefore revenue about coming to the gym
and profitability) reduce We have developed a comprehensive framework
significantly as a result of protocols for operating our gyms in
of (a) reduced confidence a COVID-secure way. This framework was
in the safety of gyms developed in line with Government guidance
during the pandemic and/or and following academic review by the Advanced
(b) an economic recession Wellbeing Research Centre at Sheffield
arising from the pandemic Hallam University. Our spacious, well-ventilated
gyms have been enhanced with additional
cleaning protocols and equipment, a contactless
entry system, limits on the number of
members in the gym at any one time and
the spacing of equipment to ensure social
distancing. We have also developed a 'gym
busyness' tracker to enable members to
see when their gym is less busy to reduce
peak usage. To provide confidence to our
members, in addition to these measures
they will see in the gyms, we have implemented
a comprehensive communications plan providing
them with information, videos and FAQs,
via email and on our website. For further
information on our #safewithus commitment
please go to: https://www.thegymgroup.com/coronavirus-information/
Trading in a recession
The Gym was founded and grew rapidly in
the global financial crisis of 2008-2012.
During that period the number of people
overall in the UK with a gym membership
remained flat, before returning to growth
again in the years since, demonstrating
that the health & fitness sector is very
resilient to economic downturns. We are
very well-placed to operate successfully
in a challenging economic environment;
we are the lowest price gym operator in
the UK market with an average monthly
subscription of GBP18.55 which is GBP2-5
per month lower than competitors in the
low-cost gym sector and significantly
lower than rates charged by mid-market
and premium operators. Although some of
our members may choose to cancel their
subscription due to financial hardship
we would also expect to benefit from others
'trading down' from the mid-market or
premium gyms.
Trading profitably with a reduced level
of membership
With all or most of our gyms trading,
but with a reduced level of membership,
we anticipate operating with monthly cash
outflows of around GBP9 million. This
GBP9 million includes operating costs
(inclusive of COVID-related factors such
as rent deferral repayment and business
rates relief), capital expenditure on
maintenance and IT, and debt interest
payments, but excludes the cost of capital
projects underway that are due to be completed
by September and any new expansionary
capital projects that may be started in
the future. The lower operating cost level
assumes significantly lower spend on marketing
and other discretionary costs and reduced
capital expenditure, focused on IT and
essential maintenance only. With this
level of cash outgoings, we expect to
be cash flow positive on a monthly basis
with membership levels above 520,000 paying
members (vs membership of 639,000 paying
members at 31 August 2020 and 891,000
paying members as at 29 February 2020).
--------------------------------------------------------------------
A series of regional lockdowns We have detailed operational plans for
or a second nation-wide how to respond to individual gym or estate-wide
lockdown requires us to closure based on the experience of the
close some or all of our original lockdown. A small number of temporary
gyms and as a result our individual site closures would not have
revenue is reduced or a material impact on our overall financial
eliminated for a period performance. In the event of an estate-wide
of time closure, revenue would once again be reduced
to zero and our cash burn each month would
be in the range of GBP2.5-7.5 million,
depending on (i) the extent of any Government
support schemes made available such as
the CJRS and (ii) our ability to defer
rent as we did successfully in the original
lockdown period, with agreements from
landlords. With Non-Property Net Debt
of GBP29.2 million as at 30 June 2020
and debt facilities in place of up to
GBP100.0 million, the business has sufficient
liquidity to sustain itself through a
prolonged period of closure should a second
national lockdown occur.
--------------------------------------------------------------------
Government guidelines The Government guidelines have been developed
with respect to the COVID-secure with the participation of sector operators
operation of gyms change (including The Gym Group), Public Health
to an extent that it impacts England (PHE) and medical experts from
our operating costs or the Government's Scientific Advisory Group
limits the number of members for Emergencies (SAGE). Although the guidelines
attending the gym at any are therefore based on significant operational
one time, and therefore and scientific input it cannot be certain
impacts the profitability that such guidelines won't change in the
of our economic model future if the severity of the pandemic
and the understanding of its causes and
effects change over time. It is difficult
to estimate the impact on profitability
of any such changes but the most detrimental
impact on our economic model would be
a reduction in the number of people allowed
to train in a gym at any one time (currently
1 member per 100 sq ft). A reduced capacity
may mean we are unable to support the
current level of membership in some of
our busiest gyms and although it may be
possible to mitigate some of the revenue
impact through increased pricing it could
adversely impact overall revenue. (See
"Trading profitably with a reduced level
of membership" above).
--------------------------------------------------------------------
A combination of the risks The Directors consider that the combination
listed above results in of events required to lower the profitability
a reduction in profitability of the Group to the point of breaching
such that the Group breaches bank covenants is unlikely but not implausible.
one or more of it bank In the event that the Group fails to meet
debt covenants. If unable one or more of its debt covenants, the
to reach agreement with Directors believe it likely that an agreement
the banks to waive covenants could be reached with the lending banks
or restructure debt, the to waive or amend covenants as part of
Group may be required a revised business plan, on the basis
to source additional forms that if such a breach were to occur, the
of financing in order Group would not at the time of breach
to continue to operate have drawn down on the incremental GBP30
as a going concern. million of the New Bank Facility agreed
in June 2020. However, no such commitment
for further covenant waivers is currently
in place with the lending banks. For more
detail on the Directors opinion with regards
to Going Concern and the risks considered
in forming this opinion please refer to
Note 2.2
An increase in the COVID-19 We have taken a number of precautions
infection rate results to reduce the chances of our staff becoming
in a significant number infected. In addition to the social distancing
of our gym staff becoming and cleaning measures outlined above,
ill and unable to work members and staff are asked not to visit
temporarily the gym if they are feeling ill or displaying
COVID symptoms and staff members have
their temperature measured at the start
of each shift.
Our flexible employment model - see below
- and large estate means we will be able
to cover staff shortages through a combination
of flexing up the hours worked by other
staff in the same gym or by utilising
staff from other nearby gyms.
-----------------------------------------------------------------
A reduction in demand In addition to having a full-time Gym
for personal training Manager and Assistant Gym Manager, each
causes a reduction in gym has a number of Fitness Trainers (FTs)
the number of Fitness who are employed on a part-time basis
Trainers in our business (typically 12 hours per week) to provide
a range of member service duties. Outside
of these employed hours the FTs operate
a self-employed personal training business
in our gyms with our members as clients
and for the right to do this the FTs pay
us rent each month. In the event that
there is a significant reduction in the
demand for personal training from our
members, the FTs' self-employed income
would decrease and they may choose to
look for employment or self-employment
opportunities elsewhere. If this happened,
certain gyms may face a shortage of staff
cover.
To reduce this risk occurring we are:
* offering significant discounts on the monthly rent
charged to FTs in the first few months after
re-opening ;
* ensuring our FT employment model remains
industry-leading in terms of reward and flexibility;
and
* remaining focused on FT recruitment and retention
with FT resourcing being a primary focus and KPI for
Gym Managers and the business as a whole;
As a result of these actions, FT vacancy
rates are currently at an all-time low.
If FT shortages do occur in certain gyms
in the future we expect to be able to
cover the shortage by moving FTs from
other gyms (without a cost to the business)
or by flexing up the hours of other FTs
in the same gym or cleaning contractors,
which would incur an incremental cost.
-----------------------------------------------------------------
Going Concern
The outbreak of COVID-19 and its continuing impact on the
economy casts a degree of uncertainty as to the future financial
performance and cash flows of the Group. When assessing the ability
of the Group to continue as a going concern the Directors have
considered the Group's financing arrangements, the pattern of
trading since gyms in England re-opened on 25 July 2020 and future
trading risks including further regional or nationwide
lockdowns.
Note 2.2 detaiIs the various risks and scenarios considered by
Directors in forming their opinion. In summary, whilst the Group
has secured sufficient liquidity, via the raising of equity and
additional debt facilities, to finance operations for at least the
next twelve months through any reasonable scenario, there are
plausible scenarios in which the Group may breach its bank debt
covenants. In the event that the Group fails to meet one or more of
its debt covenant s , the Directors believe it likely that an
agreement could be reached with the lending banks to waive or amend
covenants as part of a revised business plan, on the basis that if
such a breach were to occur, the Group would not at the time of
breach have drawn down on the incremental GBP30 million of the New
Bank Facility agreed in June 2020. However, no such commitment for
further covenant waivers is currently in place with the lending
banks.
Accepting that the risks as described in Note 2.2 - all of which
relate to COVID-19 impacts - represent a material uncertainty that
may cast significant doubt about the Group's ability to continue as
a going concern, the Board has a reasonable expectation that the
Group has adequate resources to continue in operational existence
for the next twelve months and therefore the Directors continue to
adopt the going concern basis in preparing these interim accounts.
For more detail please refer to Note 2.2.
Cautionary Statement
This report has been prepared solely to provide additional
information to shareholders to assess the Group's strategies and
the potential for those strategies to succeed. The Interim
Management Report should not be relied on by any other party or for
any other purpose.
In making this report, the Company is not seeking to encourage
any investor to either buy or sell shares in the Company. Any
investor in any doubt about what action to take is recommended to
seek financial advice from an independent financial advisor
authorised by the Financial Services and Markets Act 2000.
Directors' Responsibility Statement
The Directors of the Company are listed on pages 50-52 of the
2019 Annual Report.
The Directors confirm that, to the best of their knowledge:
-- the Interim Financial Statements have been prepared in
accordance with IAS 34 Interim Financial Reporting;
-- the Interim Management Report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
-- the Interim Management Report includes a fair review of the
information required by DTR 4.2.8R (disclosure of relates parties'
transactions and changes therein).
Richard Darwin Mark George
Chief Executive Officer Chief Financial Officer
2 September 2020 2 September 2020
Key Performance Indicators
Definitions
- Group Adjusted EBITDA - is calculated as operating profit
before depreciation, amortisation, long term employee incentive
costs and exceptional items, and after cash rent costs.
- Group Adjusted EBITDA with Normalised Cash Rent - is
calculated as operating profit before depreciation, amortisation,
long term employee incentive costs and exceptional items, and after
the cash rent costs that would ordinarily be payable in the period
(which may not have actually been paid due to rent deferments
agreed with landlords relating to site closures)
- Adjusted Profit before Tax - is calculated as profit before
tax before non-IT amortisation and exceptional items.
- Adjusted Earnings - is calculated as the Group's profit for
the year before non-IT amortisation, exceptional items, and the
related tax effect.
- Adjusted EPS - is calculated as the Group's profit for the
year before non-IT amortisation, exceptional items, and the related
tax effect, divided by the basic weighted average number of
shares.
- Group Operating Cash Flow - is calculated as Group Adjusted
EBITDA plus movement in working capital less maintenance capital
expenditure.
- Free Cash Flow - is calculated as Group Operating Cash Flow
less tax and interest paid and exceptional items.
- Non-property net debt - is calculated as borrowings less
property finance leases and cash and cash equivalents.
- Normalised cash rent - calculated using the cash rent that
would have been paid in normal circumstances without any agreed
deferments, rather than the cash rent that was actually paid
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2020
Note Six months ended 30 June Six months ended 30 June Year ended 31 December
2020 2019 2019
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
-------------------------- ----- ------------------------- ------------------------- -------------------------
Revenue 3 37,274 73,988 153,134
Cost of sales (769) (700) (1,437)
Gross profit 36,505 73,288 151,697
Administration expenses (55,373) (60,579) (130,122)
Operating (loss) / profit (18,868) 12,709 21,575
Finance income 6 18 32
Finance costs (8,121) (7,147) (15,388)
(Loss) / profit before
tax (26,983) 5,580 6,219
Tax credit / (charge) 6 4,307 (1,497) (2,624)
(Loss) / profit for the
year attributable to
equity shareholders (22,676) 4,083 3,595
-------------------------- ----- ------------------------- ------------------------- -------------------------
Other comprehensive
income for the year
Items that may be
reclassified to profit or
loss
Changes in the fair value
of derivative financial
instruments (3) - (155)
Items that will not be
reclassified to profit or
loss
Changes in the fair value
of financial assets at
fair value through other
comprehensive income - (133) (277)
Total comprehensive
(loss) / income
attributable to equity
shareholders (22,679) 3,950 3,163
-------------------------- ----- ------------------------- ------------------------- -------------------------
Earnings per share pence pence pence
-------------------------- ----- ------------------------- ------------------------- -------------------------
Basic 5 (15) 3.0 2.6
Diluted (15) 2.9 2.6
Reconciliation of GBP'000 GBP'000 GBP'000
operating profit to Group
Adjusted EBITDA:
-------------------------- ----- ------------------------- ------------------------- -------------------------
- Operating profit /
(loss) (18,868) 12,709 21,575
- Depreciation and
impairment of property,
plant and equipment 7 22,856 20,253 41,778
- Amortisation and
impairment of
intangibles 1,668 1,390 3,114
- Impairment - 25 -
- Exceptional items 4 357 920 6,086
- Long term employee
incentive costs (1,027) 813 1,900
- Cash rent payments(2) (3,267) (12,087) (25,913)
-------------------------- ----- ------------------------- ------------------------- -------------------------
- Group Adjusted
EBITDA(1) 1,719 24,023 48,540
-------------------------- ----- ------------------------- ------------------------- -------------------------
(1) Group Adjusted EBITDA is a non-GAAP metric used internally
by management and externally by advisors, and is not an IFRS
disclosure
(2) Cash rent payments are the actual cash payments which are
paid for the property leases during the year.
Condensed Consolidated Statement of Financial Position
As at 30 June 2020
Note 30 June 2020 30 June 2019 31 December 2019
Unaudited *Restated Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------------------------------------------- ----- ------------- -------------------- -----------------
Non-current assets
Property, plant and equipment (excluding
right-of-use asset) 7 179,399 167,625 176,001
Right-of-use asset 239,860 223,969 238,702
Intangible assets 86,771 85,927 86,379
Trade and other receivables 103 - -
Financial assets at fair value through other
comprehensive income 1,000 277 -
Derivative financial instruments 4 36 13
Deferred tax assets 3,810 - -
Total non-current assets 510,947 477,834 501,095
Current assets
Inventories 663 276 654
Trade and other receivables 4,605 10,321 8,769
Cash and cash equivalents 6,837 3,820 2,605
Total current assets 12,105 14,417 12,028
Total assets 523,052 492,251 513,123
--------------------------------------------------- ----- ------------- -------------------- -----------------
Current liabilities
Trade and other payables 21,539 26,001 29,389
Lease liabilities 16,296 14,385 15,637
Other financial liabilities 3,875 888 3,875
Borrowings 8 - 1,000 -
Provisions 9 572 518 352
Income taxes payable 6 360 1,443 374
Total current liabilities 42,642 44,235 49,627
Non-current liabilities
Borrowings 8 35,263 49,369 49,116
Lease liabilities 277,301 247,383 262,706
Other financial liabilities - - -
Provisions 9 1,361 1,201 1,303
Deferred tax liabilities 6 - (364) 208
--------------------------------------------------- ----- ------------- -------------------- -----------------
Total non-current liabilities 313,925 297,589 313,333
Total liabilities 356,567 341,824 362,960
--------------------------------------------------- ----- ------------- -------------------- -----------------
Net assets 166,485 150,427 150,163
--------------------------------------------------- ----- ------------- -------------------- -----------------
Capital and reserves
Issued capital 17 14 14
Own shares held 48 48 48
Capital redemption reserve 4 4 4
Share premium 159,474 159,474 159,474
Hedging reserve (169) (11) (166)
Merger reserve 39,912 - -
Retained deficit (32,800) (9,102) (9,211)
--------------------------------------------------- ----- ------------- -------------------- -----------------
Total equity shareholders' funds 166,485 150,427 150,163
--------------------------------------------------- ----- ------------- -------------------- -----------------
* See note 2.3 for details
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 June 2020
Issued Own shares Capital Share Hedging Merger Retained Total
capital held redemption premium reserve reserve deficit
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ----------- ----------- ----------- ------------ ----------- ----------- ----------- ---------
At 1 January
2019 14 48 4 159,474 (11) - (12,290) 147,239
Profit for the
period and
total
comprehensive
income - - - - - - 4,083 4,083
Share based
payments - - - - - - 728 728
Deferred tax
on share
based
payments - - - - - - (178) (178)
Dividends paid - - - - - - (1,312) (1,312)
Changes in the
fair value of
financial
assets at
fair value
through other
comprehensive
income - - - - - - (133) (133)
--------------- ----------- ----------- ----------- ------------ ----------- ----------- ----------- ---------
At 30 June
2019 14 48 4 159,474 (11) - (9,102) 150,427
Loss for the
period and
total
comprehensive
income - - - - - - (488) (488)
Share based
payments - - - - - - 942 942
Deferred tax
on share
based
payments - - - - - - 202 202
Dividends paid - - - - - - (621) (621)
Changes in the
fair value of
financial
assets at
fair value
through other
comprehensive
income - - - - - - (144) (144)
Changes in the
fair value of
derivative
financial
instruments - - - - (155) - - (155)
--------------- ----------- ----------- ----------- ------------ ----------- ----------- ----------- ---------
At 31 December
2019 14 48 4 159,474 (166) - (9,211) 150,163
Loss for the
period and
total
comprehensive
income - - - - - - (22,676) (22,676)
Issue of
Ordinary
share capital 3 - - - - 39,912 - 39,915
Share based
payments - - - - - - (638) (638)
Changes in the
fair value of
derivative
financial
instruments - - - - (3) - - (3)
Deferred tax
on share
based
payments - - - - - - (275) (275)
At 30 June
2020 17 48 4 159,474 (169) 39,912 (32,800) 166,485
--------------- ----------- ----------- ----------- ------------ ----------- ----------- ----------- ---------
Consolidated Cash Flow Statement
For the six months ended 30 June 2020
Note Six months ended 30 June Six months ended 30 June Year ended 31 December
2020 2019 2019
Unaudited Unaudited Restated*
Audited
GBP'000 GBP'000 GBP'000
-------------------------- ----- ------------------------- ------------------------- -------------------------
Cash flows from operating
activities
Operating (loss) / profit (18,868) 12,709 6,219
Adjustments for:
Net finance costs - - 15,356
Exceptional items 4 357 920 6,086
Depreciation of property,
plant and equipment 7 22,856 20,253 41,778
Amortisation of
intangible assets 1,668 1,390 3,114
Long term employee
incentive costs 11 (1,027) 813 1,900
Loss / (profit) on
disposal of property,
plant and equipment 1 (1) (112)
(Increase) / decrease in
inventories (9) 103 (275)
Decrease / (increase) in
trade and other
receivables 2,904 (3,308) (1,073)
(Decrease) / increase in
trade and other payables (3,002) 1,753 2,015
-------------------------- ----- ------------------------- ------------------------- -------------------------
Cash generated from
operations 4,880 34,633 75,008
Tax paid - (1,523) (3,579)
-------------------------- ----- ------------------------- ------------------------- -------------------------
Net cash flows from
operating activities
before exceptional items 4,880 33,110 71,429
Exceptional items (361) (274) (1,120)
-------------------------- ----- ------------------------- ------------------------- -------------------------
Net cash flow from
operating activities 4,519 32,836 70,309
-------------------------- ----- ------------------------- ------------------------- -------------------------
Cash flows from investing
activities
Payment for financial (1,009) - -
assets at fair value
through other
comprehensive income
Business combinations - (2,114) (2,114)
Purchase of property,
plant and equipment (18,972) (16,966) (36,652)
Purchase of intangible
assets (2,060) (699) (2,461)
Disposal of tangible
assets - - 391
Interest received 6 10 32
-------------------------- ----- ------------------------- ------------------------- -------------------------
Net cash flows used in
investing activities (22,035) (19,768) (40,804)
-------------------------- ----- ------------------------- ------------------------- -------------------------
Cash flows from financing
activities
Dividends paid - (1,312) (1,933)
Lease liabilities paid(1) (753) (6,000) (13,093)
Lease interest paid(1) (2,514) (6,087) (12,820)
Bank interest paid (580) (845) (2,197)
Payment of financing fees (320) (15) (884)
Drawdown of bank loans 20,000 3,985 53,500
Repayments of bank loans (34,000) (2,000) (52,500)
Proceeds of issue of 41,268 - -
Ordinary shares
Costs associated with (1,353) - -
share issue
-------------------------- ----- ------------------------- ------------------------- -------------------------
Net cash flows from /
(used in) financing
activities 21,748 (12,274) (29,927)
-------------------------- ----- ------------------------- ------------------------- -------------------------
Net increase in cash and
cash equivalents 4,232 793 (422)
Cash and cash equivalents
start of period 2,605 3,027 3,027
-------------------------- ----- ------------------------- ------------------------- -------------------------
Cash and cash equivalents
at end of period 6,837 3,820 2,605
-------------------------- ----- ------------------------- ------------------------- -------------------------
(1) These two items totalling GBP3,267,000 represent cash rent
as used in the KPI definition
* See note 2.3 for details
Notes to the Interim Financial Statements
1. General information
The Directors of The Gym Group plc (the 'Company') and its
subsidiaries (the 'Group') present their interim report and the
unaudited condensed consolidated financial statements for the six
months ended 30 June 2020 ('Interim Financial Statements').
The Company is a public limited company, incorporated and
domiciled in the UK. Its registered address is 5(th) Floor, One
Croydon, 12-16 Addiscombe Road, Croydon, CR0 0XT.
The Interim Financial Statements were approved by the Board of
Directors on 2 September 2020.
The Interim Financial Statements have not been audited or
formally reviewed by the auditors. The financial information shown
for the half year period ended 30 June 2020 does not constitute
statutory financial statements within the meaning of section 434 of
the Companies Act 2006.
The information shown for the year ended 31 December 2019 does
not constitute statutory accounts within the meaning of section 434
of the Companies Act 2006 and has been extracted from the Group's
Annual Report and Financial Statements for the year ended 31
December 2019.
The Interim Financial Statements should be read in conjunction
with the Annual Report and Financial Statements for the year ended
31 December 2019, which were prepared in accordance with European
Union endorsed International Financial Reporting Standards ('IFRS')
and those parts of the Companies Act 2006 applicable to companies
reporting under IFRS. The Annual Report and Financial Statements
for 2018 have been filed with the Registrar of Companies. The
Independent Auditors' Report on the Annual Report and Financial
Statements for 2019 was unqualified and did not contain a statement
under 498(2) or 498(3) of the Companies Act 2006, but did include a
reference drawing attention to a material uncertainty related to
going concern arising from the current uncertainty of the impact of
the COVID-19 pandemic on the Group's business.
Further copies of the Interim Financial Statements and Annual
Report and Financial Statements may be obtained from the address
above.
2. Basis of preparation and changes to the Group's accounting
policies
2.1 Basis of preparation
The Interim Financial Statements have been prepared in
accordance with IAS 34, 'Interim Financial Reporting' as endorsed
by the European Union and the comments Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
The Interim Financial Statements are presented in Pounds
Sterling, rounded to the nearest thousand Pounds, except where
otherwise indicated; and under the historical cost convention as
modified through the recognition of financial liabilities at fair
value through the profit and loss.
The accounting policies adopted in the preparation of the
Interim Financial Statements are consistent with those applied in
the preparation of the Group's consolidated financial statements
for the year ended 31 December 2019. The Group has not early
adopted any other standard, interpretation or amendment that has
been issued but is not yet effective.
2.2 Going Concern
The outbreak of Covid-19 and its continuing impact on the
economy casts a degree of uncertainty as to the future financial
performance and cash flows of the Group. When assessing the ability
of the Group to continue as a going concern the Directors have
considered the Group's financing arrangements, the pattern of
trading since gyms in England re-opened on 25 July 2020 and future
trading risks including further regional or nationwide lockdowns on
the cashflows, liquidity and bank facility covenants of the Group
over the next 12 month period.
In the first half of 2020 the Group raised additional financing
in the form of:
-- an equity placing, which raised net proceeds of GBP39.9 million; plus
-- a GBP30.0 million debt facility extension (the New Bank
Facility), which provided incremental liquidity beyond the existing
GBP70.0 million Revolving Credit Facility (RCF)
As a result of these actions, the Company secured sufficient
liquidity to finance the business through a period of gym closure
extending into 2021, well beyond any reasonable closure scenario
envisaged. The number of months of closure in 2021 for which we
would have sufficient liquidity would depend on, among other
factors, the extent to which UK Government support schemes such as
CJRS and Business Rates relief were extended, if at all, beyond
their current expected termination dates.
As at 31 July, one week after gyms in England re-opened, the
Group had Non-Property Net Debt of GBP35.7 million versus GBP100.0
million of total borrowing capacity and has since been trading with
positive cash flow.
During the 18-month term of the New Bank Facility, the covenants
of the RCF have been replaced with new covenants based on the
EBITDA performance of the Group after re-opening, based on a
revised business plan presented to the lending banks. The covenant
tests will be performed quarterly as follows:
-- Q3 2020: Cumulative EBITDA in August and September 2020 vs agreed targets
-- Between Q4 2020 and Q3 2021: Cumulative EBITDA from October
2020 through to the end of the relevant quarterly reporting period
vs agreed targets
Based on the trading performance since re-opening up until the
end of August, the Directors are confident of meeting the Q3 2020
EBITDA covenant test. In order to meet the targets between Q4 2020
and Q3 2021, the Group will be required to deliver a steady growth
in revenue each quarter; with an overall increase of approximately
10% between September 2020 and September 2021. The Directors expect
the Group to deliver on this target, barring any further extended
national lockdown periods.
With operating costs largely within the Group's control, the
risks of the EBITDA targets being missed relate primarily to
revenue, with the most likely causes being as follows:
-- A period of further nationwide lockdown of a month or more
would cause a period of loss that would very likely reduce the
cumulative EBITDA achieved from October 2020 to such an extent as
to cause the covenants to be breached;
-- The number of paying members may fall below the level needed
to deliver the required EBITDA covenant targets in a given quarter,
caused by a general lack of confidence in members returning to the
gym and/or a series of regional lockdowns
Although these outcomes are not considered probable, the
Directors deem these downside scenarios to be plausible and
therefore the risk of a breach in debt covenants is possible. In
the event that the Group fails to meet one or more of its debt
covenant EBITDA targets, the Directors believe it likely that an
agreement could be reached with the lending banks to waive or amend
covenants as part of a revised business plan, on the basis that if
such a breach were to occur, the Group would not at the time of
breach have drawn down on the incremental GBP30 million of the New
Bank Facility agreed in June 2020. However, no such commitment for
further covenant waivers is currently in place with the lending
banks.
The Directors have concluded that the potential impact of
COVID-19 described above and uncertainty over possible mitigating
actions, including covenant waivers represents a material
uncertainty that may cast significant doubt about the Group's
ability to continue as a going concern. However, having assessed
the financial forecasts, sensitivities and possible mitigating
actions, the Board has a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
next twelve months and therefore the Directors continue to adopt
the going concern basis in preparing these interim accounts.
Accordingly, these interim accounts do not include any adjustments
to the carrying amount or classification of assets and liabilities
that would result if the Group were unable to continue as a going
concern.
2.3 Adjustments to prior year
Adjustments in relation to IFRS 16
Following the adoption of IFRS 16, the Group presented its first
audited financial statements under the new standard for the year
ended 31 December 2019. In preparing those financial statements, it
was identified that certain leases were not reflected correctly in
the half year results. The effect of these corrections are shown in
the table below. There is no impact on the interim income statement
or cash flow statement for 30 June 2019.
Note that this has no impact on the audited financial statements
for the year ended 31 December 2019.
Consolidated statement of financial position (unaudited) as at
30 June 2019 (extract):
Six months ended 30 June 2019 Adjustments Six months ended 30 June 2019
Unaudited Unaudited *Restated Unaudited
Impact on the consolidated statement GBP'000 GBP'000 GBP'000
of financial position (extract):
------------------------------------- ------------------------------ ------------ ------------------------------
Non-current assets
Right-of-use asset 202,812 21,157 223,969
Non-current liabilities
Lease liabilities 231,857 15,526 247,383
Net assets 144,796 5,631 150,427
-------------------------------------- ------------------------------ ------------ ------------------------------
Capital and reserves
Retained deficit (14,733) 5,631 (9,102)
-------------------------------------- ------------------------------ ------------ ------------------------------
Total equity shareholders' funds 144,796 5,631 150,427
-------------------------------------- ------------------------------ ------------ ------------------------------
Classification of cash flows in respect of capital
expenditure
In the Consolidated cash flow statement for the year ended 31
December 2019, cash outflows of GBP1,585,000 in relation to the
purchase of plant, property and equipment were incorrectly
classified within movements in trade and other payables. This
classification has therefore been amended as shown in the table
below. There is no impact on the income statement or net cash.
Consolidated cash flow statement for the year ended 31 December
2019 (extract):
As reported Reclassification of capex creditor Restated
GBP000 GBP000 GBP000
Increase in inventories (275) - (275)
Increase in trade and other receivables (1,073) - (1,073)
Increase in trade and other payables 3,967 (1,585) 2,382
Other operational cash flows 69,642 - 69,642
--------------------------------------------- ------------ ----------------------------------- ---------
Net cash flow from operating activities 72,261 (1,585) 70,676
--------------------------------------------- ------------ ----------------------------------- ---------
Cash flows from investing activities
Purchase of property, plant and equipment (38,604) 1,585 (37,019)
Other investing cash flows (4,152) - (4,152)
--------------------------------------------- ------------ ----------------------------------- ---------
Net cash flows used in investing activities (42,756) 1,585 (41,171)
--------------------------------------------- ------------ ----------------------------------- ---------
Net cash flows used in financing activities (29,927) - (29,927)
--------------------------------------------- ------------ ----------------------------------- ---------
Net increase in cash and cash equivalents (422) - (422)
Cash and cash equivalents start of period 3,027 - 3,027
--------------------------------------------- ------------ ----------------------------------- ---------
Cash and cash equivalents at end of period 2,605 - 2,605
--------------------------------------------- ------------ ----------------------------------- ---------
3. Revenue
The main revenue streams are those described in the last annual
financial statements; membership income and other income. The
majority of revenue is derived from contracts with customers.
3.1 Disaggregation of revenue
In the following table, revenue is disaggregated by major
products and service lines and timing of revenue recognition. All
revenue arises in the United Kingdom.
Six months ended 30 June Six months ended 30 June Year ended 31 December
2020 2019 2019
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------------------- -------------------------- -------------------------- --------------------------
Major products/service
lines
Membership income 34,968 71,994 146,782
Rental income 1,769 1,135 4,572
Other income 537 859 1,780
---------------------------- -------------------------- -------------------------- --------------------------
37,274 73,988 153,134
Timing of revenue
recognition
Products transferred at a
point in time 600 1,204 2,550
Products and services
transferred over time 36,674 72,784 150,584
---------------------------- -------------------------- -------------------------- --------------------------
37,274 73,988 153,134
--------------------------- -------------------------- -------------------------- --------------------------
4. Exceptional items
Six months ended 30 June Six months ended 30 June Year ended 31 December
2020 2019 2019
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------------------- -------------------------- -------------------------- --------------------------
Remeasurement of contingent
consideration - - 2988
Impairment and other costs
arising as a result of
site closures (214) 920 2688
Restructuring costs 571 - 410
---------------------------- -------------------------- -------------------------- --------------------------
Total exceptional items in
operating expenses 357 920 6,086
---------------------------- -------------------------- -------------------------- --------------------------
Refinancing costs - - 486
---------------------------- -------------------------- -------------------------- --------------------------
Total exceptional items in
financing expenses - - 486
---------------------------- -------------------------- -------------------------- --------------------------
357 920 6,572
--------------------------- -------------------------- -------------------------- --------------------------
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, excluding
unvested shares held pursuant to The Gym Group plc Share Incentive
Plan, The Gym Group plc Performance Share Plan, The Gym Group plc
Restricted Stock Plan and The Gym Group plc Long Service Award
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
half year period ended 30 June 2020, 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, The Gym
Group plc Performance Share Plan, The Gym Group plc Restricted
Stock Plan and The Gym Group plc Long Service Award Plan.
Six months ended 30 June Six months ended 30 June Year ended 31 December
2020 2019 2019
Unaudited Unaudited Audited
--------------------------- -------------------------- -------------------------- --------------------------
Basic weighted average
number of shares 148,617,471 137,782,695 137,870,237
Adjustment for share awards 1,361,025 3,332,264 2,561,055
Diluted weighted average
number of shares 149,978,496 141,114,959 140,431,292
Basic earnings per share
(p) (15.3 ) 3.0 2.6
Diluted earnings per share
(p) (15.1) 2.9 2.6
---------------------------- -------------------------- -------------------------- --------------------------
Adjusted earnings per share is based on profit for the year
before exceptional items, non-IT amortisation and the associated
tax effect.
Six months ended 30 June Six months ended 30 June Year ended 31 December
2020 2019 2019
Unaudited Unaudited Audited
Restated* Restated*
GBP'000 GBP'000 GBP'000
--------------------------- -------------------------- -------------------------- --------------------------
Profit for the year (22,676) 4,083 3,595
Amortisation of non-IT
intangible assets 298 613 1,178
Exceptional administration
expenses 357 920 6,572
Tax effect of above items (98) (132) (771)
---------------------------- -------------------------- -------------------------- --------------------------
Adjusted earnings (22,119) 5,484 10,574
---------------------------- -------------------------- -------------------------- --------------------------
Basic adjusted earnings per
share (p) (14.9) 4.0 7.7
Diluted adjusted earnings
per share (p) (14.7) 3.9 7.5
---------------------------- -------------------------- -------------------------- --------------------------
6. Taxation
The major components of taxation are:
Six months ended 30 June Six months ended 30 June Year ended 31 December
2020 2019 2019
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------------------- -------------------------- -------------------------- --------------------------
Current income tax
Current tax on profits for
the period - 1,808 2,681
Adjustments in respect of
prior years (14) - (153)
---------------------------- -------------------------- -------------------------- --------------------------
Total current income tax (14) 1,808 2,528
Deferred tax
Origination and reversal of
temporary differences (4,501) (311) 91
Change in tax rates 71 - -
Adjustments in respect of
prior years 137 - 5
---------------------------- -------------------------- -------------------------- --------------------------
Total deferred tax (4,293) (311) 96
Tax (credit) / charge in
the Consolidated Statement
of Comprehensive Income (4,307) 1,497 2,624
---------------------------- -------------------------- -------------------------- --------------------------
The income tax expense was recognised based on management's best
estimate of the annual income tax rate expected for the full
financial year, applied to the profit before tax for the half year
ended 30 June 2020.
Excluding the tax effect of the amortisation of non-IT
intangible assets and exceptional items (GBP98,000), the effective
tax rate on Adjusted Profit Before Tax for the half year ended 30
June 2020 was 16.0%.
The net deferred tax assets recognised at 30 June 2020 was
GBP3,810,000 (30 June 2019: GBP364,000; 31 December 2019:
(GBP208,000)). This comprised deferred tax assets relating to tax
losses, provisions and equity settled share-based incentives
totalling GBP6,325,000 (30 June 2019: GBP4,001,000; 31 December
2019: GBP3,604,000) and deferred tax liabilities in relation to
accelerated capital allowances and acquired intangible assets
totalling GBP2,515,000 (30 June 2019: GBP3,637,000; 31 December
2019: GBP3,882,000). All deferred tax assets and liabilities have
been recognised.
7. Property, plant and equipment
Assets under Leasehold Fixtures, Gym and Computer Total Right of Total
Construction improvements fittings other equipment before use asset
and equipment Right of
equipment use asset
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- ------------- ------------- ---------- ----------- ----------- ----------- ----------- --------
Cost
At 1 January
2019 2,365 153,855 10,709 68,861 2,766 238,556 267,629 506,185
Additions 24,672 7,462 519 3,968 251 36,872 40,372 77,244
Disposals - (157) - (580) - (737) - (737)
Transfers (23,338) 15,566 655 6,903 214 - - -
At 31
December
2019 3,699 176,726 11,883 79,152 3,231 274,691 308,001 582,692
Transfers (7,607) 4,101 90 3,416 - - - -
Additions 8,614 5,636 51 995 123 15,418 11,998 27,415
Disposals - - - (1) - (1) - (1)
At 30 June
2020 4,706 186,463 12,023 83,562 3,354 290,108 319,999 610,106
-------------- ------------- ------------- ---------- ----------- ----------- ----------- ----------- --------
Accumulated
depreciation
At 1 January
2019 - 35,673 5,473 32,110 1,625 74,881 48,998 123,879
Charge for
the year - 12,238 1,308 8,406 618 22,570 19,112 41,682
Disposals - (110) - (347) - (457) - (457)
Impairment - 1,165 24 498 9 1,696 1,189 2,885
At 31
December
2019 - 48,966 6,805 40,667 2,252 98,690 69,299 167,989
Charge for
the year - 6,820 632 4,250 316 12,017 10,838 22,856
Disposals - - - - - - - -
Impairment - - - - - - - -
At 30 June
2020 0 55,786 7,437 44,917 2,568 110,707 80,137 190,845
-------------- ------------- ------------- ---------- ----------- ----------- ----------- ----------- --------
Net book
value
At 31
December
2019 3,699 127,760 5,078 38,485 979 176,001 238,702 414,703
-------------- ------------- ------------- ---------- ----------- ----------- ----------- ----------- --------
At 30 June
2020 4,706 130,677 4,587 38,645 785 179,399 239,860 419,259
-------------- ------------- ------------- ---------- ----------- ----------- ----------- ----------- --------
Outstanding capital commitments totalled GBP2,562,000 (30 June
2019: GBP2,645,000; 31 December 2019: GBP3,461,000).
8. Borrowings
Six months ended 30 June Six months ended 30 June Year ended 31 December
2020 2019 2019
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------------------- -------------------------- -------------------------- --------------------------
Current
Revolving credit facility - 1,000 -
--------------------------- -------------------------- -------------------------- --------------------------
Non-current
Facility A - 10,000 -
Facility B - 40,000 -
Revolving credit facility 36,000 - 50,000
Loan arrangement fees (737) (631) (884)
---------------------------- -------------------------- -------------------------- --------------------------
35,263 49,369 49,116
Total borrowings 35,263 50,369 49,116
---------------------------- -------------------------- -------------------------- --------------------------
In October 2019, the Group successfully refinanced its
borrowings, moving from a mix of term loans and RCF to a single
committed RCF (the "RCF") of GBP70 million. The facility is
syndicated to a three lender panel of HSBC, Barclays and Sabadell
and matures in 2023. In June 2020 the Group agreed an additional
GBP30 million commitment from its existing panel of lenders (the
"New Bank Facility"), bringing the entire committed funds to GBP100
million. The GBP30 million New Bank Facility has an 18 month term
and funds borrowed bear interest at 3.10% over the appropriate
sterling LIBOR. Whilst the New Bank Facility is in place, funds
borrowed under the RCF will bear interest at 2.6% over the
appropriate sterling LIBOR.
At 30 June 2020, the Group had drawn down GBP36 million (2018:
GBP51 million) on the RCF. The New Bank Facility was undrawn.
The agreement of the New Bank Facility resulted in fees of
GBP360,000 which will be amortised over the 18-month term. The New
Bank Facility is recognised at its amortised cost.
Covenants
The RCF is subject to financial covenants relating to leverage
and interest cover. The Group has been in compliance with all of
the covenants during the periods under review. Breach of the
covenants following a cure period would render any outstanding
borrowings subject to immediate settlement.
From the period ended 30 June 2020 to the period ended 30
September 2021 (or earlier if the New Bank Facility is cancelled),
the Group is no longer subject to covenants in respect of interest
cover and leverage but will instead be subject to covenants related
to agreed target levels of EBITDA.
Valuation
There have been no changes to the valuation techniques used for
financial assets or liabilities held at fair value and no transfers
in the hierarchy of financial assets or liabilities. The carrying
values of all financial assets and liabilities are considered to
represent their fair values.
Other than the fair value of contingent consideration
(classified as other financial liabilities) and the fair value of
an unlisted equity investment (classified as financial assets at
fair value through other comprehensive income) that are categorised
as Level 3, the fair value of all other financial assets and
liabilities are categorised as Level 2.
9. Provisions
Dilapidations Other Total
GBP'000 GBP'000 GBP'000
--------------------------- -------------- -------- --------
At 1 January 2019 1,145 679 1,824
New provisions 134 161 295
Utilisation of provisions - ( 412) ( 412)
Unwinding of discount 24 - 24
Release of provision - (76) (76)
At 31 December 2019 1,303 352 1,655
New provisions 45 262 307
Unwinding of discount 13 - 13
Release of provision - (42) (42)
---------------------------- -------------- -------- --------
At 30 June 2020 1,361 572 1,933
Due in less than one year - 352 352
Due in more than one year 1,303 - 1,303
---------------------------- -------------- -------- --------
At 31 December 2019 1,303 352 1,655
Due in less than one year - 572 572
Due in more than one year 1,361 - 1,361
---------------------------- -------------- -------- --------
At 30 June 2020 1,361 572 1,933
---------------------------- -------------- -------- --------
Other provisions are primarily in relation to costs arising from
the restructuring activities associated with redundancy, changing
the personal trainers operating model within the business, and for
remedial works at acquired sites.
10. Issued capital
On 17 April 2020, the Company issued a total of 27,396,606 new
ordinary shares (representing approximately 19.9% of the existing
issued share capital) of 0.01p each in the capital of the Company
at a price of 150 pence per share, via a placing (the Placing),
raising gross proceeds of approximately GBP41.3 million (net
proceeds of GBP39.9 million after related costs).
During the six months ended 30 June 2020, the Company issued
270,816 Ordinary shares of 0.01 pence each in relation to exercise
of options issued under the Gym Group Plc Performance Share Plan
and Long Service Award Plan
The total number of issued share capital as at 30 June 2020 is
165,878,544.
11. Long term employee incentive costs
The Group had the following share based payment arrangements in
operation during the year:
a) The Gym Group plc Performance Share Plan
b) The Gym Group plc Share Incentive Plan - Free shares
c) The Gym Group plc Share Incentive Plan - Matching shares
d) The Gym Group plc Restricted Stock Plan
e) The Gym Group plc Long Service Award Plan
f) The Gym Group plc Savings-Related Share Plan
No new awards was granted during the six months ended 30 June
2020.
In the six months ended 30 June 2020, the Group recognised a
reduction in the provision for future long term incentives
GBP(1,027,000) (six months ended 30 June 2019: total charge of
GBP813,000, year ended 31 December 2019: total charge of
GBP1,670,000) in respect of the Group's share based payment
arrangements and related employer's national insurance (GBP638,000
and GBP389,000 respectively), reflecting the significantly reduced
expected payout in the 2018 and 2019 Performance Share Plans.
12. Related party transactions
Identification of related parties
The Group has related party relationships with major
shareholders, key management personnel and family members of the
Directors.
Closewall Limited is a company under the control of a family
member of a Director, J Treharne.
Transactions with related parties
The following table provides the total amounts owed to related
parties for the relevant financial period:
Six months ended 30 June Six months ended 30 June Year ended 31 December 2019
2020 2019
Unaudited *Restated Unaudited Audited
GBP'000 GBP'000 GBP'000
-------------------------- --------------------------- --------------------------- ----------------------------
Closewall Limited - 178 186
-------------------------- --------------------------- --------------------------- ----------------------------
- 178 186
-------------------------- --------------------------- --------------------------- ----------------------------
Opening balance 186 98 98
Purchases 607 1,361 2,120
Repayments (793) (1,281) (2,032)
-------------------------- --------------------------- --------------------------- ----------------------------
- 178 186
-------------------------- --------------------------- --------------------------- ----------------------------
Representing:
-------------------------- --------------------------- --------------------------- ----------------------------
Trade and other payables - 178 186
-------------------------- --------------------------- --------------------------- ----------------------------
13. Subsequent events
At the end of the reporting period (30 June 2020) the Group's
entire estate was closed due to the COVID-19 pandemic and as a
result it was not earning subscription revenue from its members.
Following the lifting of restrictions across the UK, gyms in
England were permitted to open on 25 July 2020, gyms in Wales on 10
August and gyms in Scotland on 31 August. As such the Group has
been earning revenue from 25 July 2020; for more details regarding
the performance of trading since re-opening refer to the Current
Trading section on the opening page of this statement plus the
Chief Executive's Review section.
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