TIDMGYM
RNS Number : 6896S
Gym Group PLC (The)
18 March 2021
18 March 2021
The Gym Group plc
('the Company' or 'The Gym')
Full Year Results
Ready to rebuild membership and return to growth
The Gym Group plc, the fast growing, nationwide operator of
186(1) low-cost, no-contract gyms, announces its full year results
for the year ended 31 December 2020. The results reflect a year of
significant disruption in which the Company's gyms were required by
the UK Government to close for 45% of the trading days in the year
due to COVID-19.
2021 Update and Outlook
-- Gyms in England are expected to re-open on 12 April 2021 with
gyms in Scotland re-opening 26 April 2021
-- Higher levels of membership retention during this current
lockdown versus previous closure periods; as at 28 February 2021
our membership level was 547,000 (31 December 2020: 578,000)
-- 97% of current members say they expect to return to the gym
as soon as possible, with 75% stating that fitness will be more
important to them than it was pre-COVID
-- Focus on cash management to enable us to re-open in a
position of financial strength; as at 28 February 2021,
Non-Property Net Debt was GBP58.2 million versus total bank
facilities of GBP100.0 million
-- Three new sites opening in April and one in May, with an
additional four starting on-site imminently. In addition, our
growing pipeline has a further six leases exchanged with several
more in advanced negotiations
2020 Financial highlights
Year ended 30 December 2020 Year ended 30 December 2019 Movement
Revenue (GBP'000) 80,470 153,134 (47.4)%
Group Adjusted EBITDA (GBP'000) 16,810 74,453 (77.4)%
Group Adjusted EBITDA less Normalised
Rent (GBP'000) (10,169) 48,540 (120.9)%
Adjusted (Loss) / Profit before Tax
(GBP'000) (46,525) 13,969 (433.1)%
Statutory (Loss) / Profit before Tax
(GBP'000) (47,192) 6,219 (858.8)%
Adjusted Earnings (GBP'000) (35,999) 10,574 (440.4)%
Statutory Earnings (GBP'000) (36,368) 3,595 (1,111.6)%
Basic Adjusted Earnings per Share (p) (22.9) 7.7 (397.4)%
Basic Statutory Earnings per share (p) (23.1) 2.6 (988.5)%
Free Cash Flow (GBP'000) (16,544) 32,282 (151.2)%
As at 31 December 2020 As at 31 December 2019 Movement
---------------------------------------- ---------------------------- ---------------------------- -----------
Non-Property Net Debt (GBP'000) 47,264 47,395 (0.3)%
----------------------------------------- ---------------------------- ---------------------------- -----------
Note: for a summary of KPI definitions used in the table see
page 15 .
-- 45% of trading days lost due to closure plus reduced
membership levels resulting in 47.4% reduction in revenue
-- Strong cost control and Government support limited EBITDA
less Normalised Rent loss to GBP10.2 million
-- Low levels of debt and low-cost base enabled trading to be
cash flow positive when gyms were open even with reduced membership
levels
-- No final dividend recommended
2020 Strategic and Operational Progress
-- 8 new gyms opened increasing the total estate to 183(1) at December 2020
-- Total year end members at 578,000, a decrease of 27.2% versus
prior year (2019: 794,000) due to prolonged periods of closure;
average member numbers fell by 11.1% to 708,000 (2019: 796,000)
-- LIVE IT penetration as at December 2020 was 22.5% of total members (2019: 18.9%)
-- Strong retention of gym staff and high engagement levels
resulting from the support provided to colleagues during lockdowns;
our people-first approach included topping-up furlough pay, the
introduction of a new communications platform and extensive
wellbeing support
-- GBP1.8 billion of Social Value(2) created by the Gym Group
since 2016 with each gym generating GBP3 million of Social Value
per year prior to the COVID-19 pandemic
Richard Darwin, CEO of The Gym Group, commented:
"During 2020 we demonstrated the resilience of our business and
its culture even in the most challenging of times. By freezing
subscriptions when closed and by providing an excellent
COVID-secure environment in our gyms when open, we have retained
most of our members; by supporting colleagues with topped-up
furlough pay, honest communications and a comprehensive wellbeing
plan we have high levels of staff retention and engagement; and by
managing cash carefully we will emerge from the crisis with
manageable levels of debt. We are ready to start rebuilding our
memberships levels and growing our estate from 12 April, extending
affordable fitness at a time when health and fitness has never been
more important."
A live audio webcast of the analyst presentation will be
available at 08.30am today via the following link:
https://us02web.zoom.us/webinar/register/WN_e7iM4PsOQVeGQZqE64GKKQ
Two additional statements from the Company have been released
(available at www.tggplc.com ) relating to:
-- Changes to Non-Executive Director Roles and Responsibilities
-- The Social Value created by The Gym Group since 2016
For further information, please contact
The Gym Group via Instinctif Partners
Richard Darwin, CEO
Mark George, CFO
Numis
Luke Bordewich
George Price 020 7260 1000
Peel Hunt
Dan Webster
George Sellar 020 7418 8900
Instinctif Partners
Matthew Smallwood
Justine Warren 020 7457 2020
(1) 183 as of 31 December 2020 (vs 175 at 31 December 2019) with
eight new sites opened in 2020. 186 sites as at 18 March 2021
(2) Social Value analysis completed by 4Global and Sheffield
Hallam University's Advanced Wellbeing Research Centre. Further
details available in the Sustainability Report within the Company's
2020 Annual Report & Accounts available at www.tggplc.com
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 its expectations or to reflect subsequent events or
circumstances following the date of this announcement.
Chairwoman's Statement
A challenging year
For the first two months of 2020 the business traded well,
achieving strong membership gains. But as is well documented, on 20
March all gyms were closed in the first lockdown period of the
coronavirus pandemic.
Since then, our gyms have periodically been open and closed
again according to the government rules of each of England,
Scotland and Wales.
Across the estate, we have been open for members for only 55% of
the trading days of the year. To manage through this crisis, fast
and appropriate actions were taken to protect colleagues and
members, strengthen our balance sheet, reduce our costs and other
commitments and utilise government support schemes. Our primary aim
has been to put our business in the best possible position to
recover, be able to restart growth and be the best gym operator for
accessing affordable fitness. This has been shown to be more
relevant than ever within this health crisis. Whilst our gyms
remain closed and with the vaccine programme providing confidence
that the end of the crisis is in sight, we are prepared and ready
for the recovery journey with appropriate financial and colleague
resources and a determination to thrive.
Our 2020 results
Our financial results for the year have been severely impacted
by the 45% loss in trading days from regional and national
lockdowns, with revenue down 47.4% from GBP153.1m to GBP80.5m.
As a result of significant cost saving measures, plus valuable
Government support in the form of business rates relief and
furlough grants, the impact on profits was mitigated as far as
possible but nonetheless Group Adjusted EBITDA Less Normalised Rent
fell to a loss of GBP10.2m in 2020 from a profit of GBP48.5m in
2019. The management team has focused on preserving cash and
liquidity to maintain balance sheet strength through the crisis;
tight cash management, a well-supported equity raise and an
increase in our debt facilities enabled us to end the year with net
debt of GBP47.3m vs total borrowing facilities of GBP100.0m.
Managing through the pandemic for our stakeholders
In this report we provide more detail of the progress we made in
2020 in terms of sustainability, which has always been at the root
of our business. Our purpose is well aligned with Promoting Health
and Wellbeing, one of the 17 UN Sustainability Goals, and our
values and strong focus on business ethics are part of our DNA.
This was evident in our work to engage with and support all
stakeholders throughout the pandemic crisis, in the ultimate belief
that this is central to the sustainable success of our business. We
are excited to publish in this report the social value our business
creates every year, a measure that is perfectly aligned with our
business purpose and highlights the significant positive impact we
have on the communities we serve.
We have sought to manage through the pandemic for our
stakeholders, providing a safer environment for our members to work
out, clear communication for our people, working with our suppliers
and landlords and engaging with our shareholders and lending
banks.
We have had first class communication with members and froze
membership so they need never worry that we would charge them when
our gyms were closed and supported them during lockdown with free
online classes. When we re-opened our member satisfaction reached
new highs as members appreciated the physical and mental well-being
benefits of being back in the gym with high confidence in the
safety procedures we put in place. We have developed our COVID
secure operating protocols to give our members confidence to return
to gym settings, and have been pleased to see very low incidence of
COVID-19 cases attributed to the UK fitness and leisure sector
since first reopening in July, as reported by ukactive in December
2020.
We have kept colleagues engaged, even when so many have been
furloughed for large periods of the year, and been open in our
communication through some difficult but necessary restructuring.
With our 'People First' mindset we rolled out training programs for
all employees focusing on their health & wellbeing. We also
have maintained our important work on Diversity & Inclusion,
signed up to Business in the Community's (BITC) Race at Work
Charter and launched our Diversity & Inclusion Manifesto. We
have worked with suppliers and landlords to negotiate agreed
outcomes through these extraordinary and changing events. Our
lending banks have shown support and flexibility in providing
financial capacity and our shareholders readily supported an equity
raise.
We are looking forward to continuing our engagement with our
stakeholders in 2021 to further inform them of our sustainability
strategy and to build together on the foundations laid.
Our shareholders
Like most businesses severely affected by the pandemic, given
macro uncertainty we did not pay a final dividend in relation to
2020. We have made strong efforts to be transparent and timely in
our reporting to keep our stakeholders informed of our robust
position and actions in the face of the pandemic. Our Executive
Directors lead shareholder dialogue, but given all circumstances, I
proactively communicated with our top shareholders towards year end
to check in for feedback. They were unanimous in their satisfaction
with the way decisions had been taken and events managed and I held
a number of follow-up conversations which were supportive and
focused on the fundamentals of our business to recover and indeed
to be even more competitive in tougher economic times.
Whilst our share price, along with most hospitality, leisure
& travel companies, was impacted by wider pandemic related
concerns through the year, some recovery is evident as newsflow has
improved with the progress on vaccinations. We remain focused on
delivering for shareholders and pleased that more colleagues
participated in the Savings-Related Share Option Scheme
('Sharesave') than in 2019, aligning colleagues and shareholder
interests even more closely.
Our work as a Board
Katy Tucker joined our business as Company Secretary in January
and has served a more than busy period as the Board in the initial
crisis period met weekly and has maintained more frequent
communication and decision making as required throughout the year.
I am grateful to Board colleagues who also readily gave up their
directors' fees in Q2 to show leadership and support in a
financially stressed year. For much of the year, in addition to
achieving financial resilience, our work focused on taking the
right actions to re-open gyms safely and welcome back members and
colleagues. Our work later in the year has focused on the
judgements to restart growth and prepare for regaining members in
large numbers.
We have also worked on Board composition. The report of the
Nomination Committee provides a fuller description of our
decisions. The business has benefitted from continuity at Board
level since IPO five years ago but we agreed it was time to start
rotation and to attract new skills and experiences to our team. I
am delighted that Rio Ferdinand and Wais Shaifta have joined the
Board and I am excited by the different perspectives they bring as
we rethink how we can be more relevant in our pursuit of affordable
fitness for all. At the same time I am enormously grateful for the
support Paul Gilbert has shown to me and to the business in the
nine years he has served, first as Chair during private equity
ownership and then as the Senior Independent Director since IPO. He
has done more than most in shaping this business from near start up
to the enterprise it is today. He retires at our AGM in May with
our best wishes and thanks. I am pleased that Emma Woods and David
Kelly have readily taken on significant responsibilities to Chair
the Remuneration and Audit committees respectively and Emma as
Senior Independent Director.
Strategic confidence
Whilst our financial condition has been impacted by the pandemic
- with higher levels of debt and lower membership than planned - we
remain as confident as ever in our proposition. Providing
affordable fitness for all through gym membership is even more
relevant as society is encouraged to improve health through
physical and wellbeing activity and looks for great value for money
in harder economic times. We are sufficiently confident that we
have prudently maintained our pipeline growth and have the
experience and plans to address the challenge of recovering
membership levels. Whilst it will take time to recover from the
impact of COVID related closures, our longer term strategic outlook
and opportunity is as strong as ever.
We recognise that the COVID-19 pandemic has caused considerable
hardship and strain for many people, and it has affected our
stakeholders in different and often difficult ways. On behalf of
the Board and everyone at The Gym I would like to extend our
sympathies to all of our people, stakeholders and supporters who
have been impacted by this crisis.
Finally, congratulations and thanks to our leadership team, led
by CEO Richard Darwin, who managed calmly through unprecedented
circumstances. On behalf of the Board our thanks to them and to all
colleagues, members, suppliers and landlords, banks and
shareholders for your support, flexibility and encouragement
through 2020 and the year ahead.
Penny Hughes
Chairwoman
18 March 2021
Chief Executive's Review
Review of 2020
2020 was the most challenging year for our business in its 12
year history.
We entered the year in a strong position with 794,000 members
and low gearing of less than 1.0x EBITDA. Our approach throughout
the year has been to ensure that our business exits the crisis in a
strong position, well-placed to welcome our members back to their
gyms and to take advantage of an altered competitive landscape.
Decisions taken have been for the long-term benefit of the
business.
Our February 2021 membership is 547,000 and with a re-opening
date of 12 April announced, we are confident that these actions
have given us as strong a base as possible from which to rebuild
our membership. Our gearing remains manageable and having
successfully refinanced during the year we have the flexibility to
deliver on our plans. This health crisis has demonstrated the
importance of physical activity for all of the UK population. As a
result, we are confident about future demand for our low-cost
product as part of the ongoing trend for people to lead healthier
lifestyles.
The COVID 19 pandemic meant 45% of our trading days in 2020 were
lost to closures from government restrictions; 2021 has started
with a further national lockdown once again closing the entire
estate.
For a low cost gym business such as ours, periods of closure
mean virtually no membership acquisition and increased attrition
immediately after the closure announcement (although this has
lessened with the later lockdowns as we reach a core level of loyal
members). As we have seen from previous re-openings, the benefit of
a subscription business such as ours is the ability to restart
member payments from the day of opening.
There are three groups of stakeholders that deserve particular
thanks for helping us to manage through this crisis. First, our
team responded with speed and agility to adapt to the initial
crisis and to get us ready for the post COVID operating
environment. This included locking down the estate to reduce cash
burn when it first closed in March and then, prior to reopening,
adapting our model to make the estate COVID secure for our members.
Second, our thanks also go to our major suppliers, including our
cleaning firms, equipment suppliers, contact centre operators and
vending suppliers who all furloughed staff to ensure that
contractual costs were minimised. Third, and by no means least, we
are grateful for the decisive actions taken by the UK Government to
support our sector through 2020 and into the new year - without the
immediate relief from furlough, rates relief and VAT deferral,
businesses such as ourselves would have been in a very different
financial situation. At the peak of the closure we have had over
95% of our workforce in the gyms and central support on furlough.
Along with
rates relief government support in 2020 has been worth
GBP16.0m.
Our financing partners have also been supportive through the
crisis. In April we boosted our liquidity with an equity placing
supported by our shareholders raising net proceeds of GBP39.9m -
this was an important part of our COVID recovery plan. At the same
time our syndicate of three leading banks agreed an additional
GBP30m of debt facility which has now been extended to a two year
term. This increased total available bank facilities to GBP100m and
along with the equity raise gave us good levels of liquidity to see
us through the crisis and for us to be able to continue with a
limited amount of expansionary capital spend. At the end of 2020
our Net Debt was GBP47.3m - the same level as the beginning of 2020
- enabling us to enter this latest national lockdown in 2021 with a
good level of liquidity. Again, we are thankful for the support of
our investors and banks. As part of our measures to preserve cash,
we have halted dividend payments.
Through the crisis, the business has demonstrated its agility in
being able to adapt its ways of working to deal with the COVID
restrictions placed on our business. We were assisted in this by
working with the Advanced Wellbeing Research Centre at Sheffield
Hallam University who performed a review of our COVID procedures.
These measures included the purchase of screens placed in front of
banks of cardio equipment to reduce the spread of aerosols and
specialised cleaning equipment to make the cleaning of equipment
more efficient. 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 existing technology embedded in the
gyms' entrance portals. The guidelines have also required social
distancing which has been possible through markings on the floor
and the goodwill of our members. Our large well-ventilated
facilities with an average size of 16,500 sq. ft, mean that we have
been able to keep to original 2m social distancing guidelines. Our
procedures have demonstrated to our members the important steps we
have taken to make our gyms a safe place to work out and are an
important way of giving them confidence to continue with their
routine of coming to the gym.
The measures we have put in place have been welcomed by our
members and in the period of opening we have seen member
satisfaction scores around 10% higher than pre-COVID. As a sign
that member confidence is growing, visits per member also increased
during August and September to a point where members were using the
gym on average 1.2 times per week, a level higher than the previous
year. Independent surveys also recognise that there is a group of
ex-members who intend to return but will only do so once the risk
from COVID-19 is reduced and the vaccine is rolled out. Given the
progress the UK government is making on the vaccine rollout, this
gives us confidence about our ability to recover previous levels of
membership once we are open.
The financial results in 2020 were substantially impacted by the
periods of closures, which reduced trading days by 45%. Revenue was
GBP80.5m (2019: GBP153.1m) down 47% vs 2019 and our Group Adjusted
EBITDA Less Normalised Rent was GBP(10.2)m down from GBP48.5m in
2019. There was a statutory loss of GBP36.4m (2019: profit of
GBP3.6m). These results show the significant operational gearing
within our business mitigated in the year only by the government
assistance and the substantial cost saving measures implemented. We
have slowed down our rollout as a result of the pandemic,
preserving liquidity to cope with a rapidly changing crisis. During
the year we opened eight sites, with four opened prior to start of
the pandemic and four in August once contractors were able to
resume on sites. This brought our portfolio up to 183 sites at year
end. In addition, we completed significant refurbishments of two of
the former easyGym sites in London at Fulham and Oxford Street.
Oxford Street in particular will be a real flagship for our
business; it includes all the latest equipment and showcases our
new virtual group exercise concept. In 2021 we will have three new
gyms opening in April and one further gym in May, with four
additional locations going on site shortly.
We remain very confident about our long term positioning in the
market. We are the only listed health and fitness operator and with
low levels of gearing we present a strong covenant for landlords.
Our immediate priority is to secure high quality opportunities in
locations that have traditionally been difficult for us to find
affordable sites and we are increasingly being offered these
excellent sites by landlords on attractive terms. In addition, we
expect to attract displaced members from other gyms that have
closed as a result of the pandemic. The landscape has changed
significantly with around 20% of local authority sites not
reopening and further difficulties for mid-market and premium
operators. The size of the low cost sector has been stable in 2020
with 735 sites in total (2019: 728 sites) but as the impact of the
pandemic recedes, we believe that the high quality low cost
operators have strong opportunities for growth and the market will
return to expansion once again.
Strategic priorities
As we enter a recovery period, our strategic priorities are
based around two key initiatives: i) Rebuilding our membership; and
ii) Securing a high quality new site pipeline.
i) Rebuilding our membership
Key to our recovery will be a strong uplift in membership
numbers, recovering the many thousands who have left over the past
year. We are very experienced in executing plans to grow membership
numbers both in our normal seasonal trading and when opening new
sites, and we will use this experience over the months to come. The
pandemic has reduced our site membership on average to the levels
that sites would have reached a few months after opening. Sites
typically have a 2-year maturation profile so we now expect that as
part of the recovery, sites will need to go through a maturation
phase once more and our success recovering from the pandemic will
be reflected in how far we can shorten this maturation profile. Our
average price point is now GBP18.81 which makes us very competitive
within the low cost market and we anticipate that this attractive
price point will underpin the recovery in membership levels in a
difficult economic environment. All sites that were open at the
start of 2020 have lower membership levels today than before the
pandemic although not all sites have been impacted equally; some of
the city centre sites have experienced higher levels of membership
loss and the start of their sustained recovery period will depend
on the return to offices in the city centres.
As part of our preparations for rebuilding our membership, we
have continued throughout this period to invest in and enhance our
technology capability and improve our central infrastructure - this
is a fundamental requirement for operating a strong low cost
business at scale. The key development for 2021 is to build a new
website which we plan to launch in the autumn. A new website will
give us a number of advantages enabling improved web merchandising,
the ability to create new products as well as improved upsell and
SEO capability. In 2020 we concentrated the technology advances
around supporting the COVID operating experience for members.
Contactless entry through the use of QR codes on our app was
introduced upon reopening - member acceptance of this development
has been very strong. Our app has also been enhanced to include a
busyness tracker that enables members to see how busy the gyms are
at any point in time.
I am very confident that the strength of our technology team and
their innovation will continue to drive competitive advantage in
this area over the coming years.
We have also taken the opportunity to review our member value
proposition to ensure that our future product is even more relevant
to our members in the post COVID world. As we approach 200 sites we
will maximise the benefits of product consistency across the whole
estate. Part of the work includes the relaunch of our group
exercise offer, where a common range of classes will enable
consistent quality of delivery across the business. We have also
launched a new virtual group exercise product in two sites, Oxford
Street and Tottenham White Hart Lane, using online classes provided
by our partner, Fiit. The virtual content supplied by Fiit is part
of a wide ranging partnership that also includes discounted Fiit
membership to our members available through our website. We intend
to offer a combination of virtual and in-person content in more
sites as we extend this trial further across the estate.
ii) Securing a high quality new site pipeline
We believe there is a compelling opportunity for our business as
the nation emerges from the pandemic and as a result, we have been
building our pipeline even during the periods of closure. As a
result of retail closures, we are seeing the availability of more
high quality sites at good levels of rent. Some of the planned
sites in 2021 are locations where we have traditionally struggled
to find sites but in the current situation are now available to us
on attractive terms, including Oxford, Cambridge and York. Small
box sites - sites of c.8,000 sq. ft - are also a good opportunity
to accelerate our growth; we currently have three small box sites
open with further sites planned this year. In the future our plan
is to have formats that cover a range of sizes from large box at
16,000 sq. ft and above to small box of 7,000-8,000 sq. ft. This
flexible approach combined with the improving property market will
enable us to cover large parts of the country and extend our offer
of affordable fitness to as much of the UK population as
possible.
As the pandemic struck, we were beginning to realise some of the
benefits of the New Gym Team model that was rolled out in 2019,
where Fitness Trainers work for us in a part-time capacity 12 hours
per week. The model showed its worth in an additional way during
the crisis enabling us to place all these part-time employees on
furlough. This proved to be an important source of financial
support for our team - which would not have been available to them
under the old model - at a time when it was not possible for them
to train their clients in the gyms. As a result, we are likely to
have better retention of these key team members as we re-open the
estate. As we move out of the crisis, we are confident that the New
Gym Team model will continue to give us benefits in improved member
service, staff training, engagement and levels of compliance.
The support of our teams across our estate and in our central
support has been the highlight for me of a difficult year and
demonstrates the strength of the culture throughout the business.
It is the main reason, along with the scale of the market
opportunity, that I am so upbeat about our future potential. At an
early stage in the crisis, we decided that we would put support of
our teams at the centre of the actions to ensure we emerge from the
pandemic in a strong position. We gave financial assistance where
necessary for those on furlough but also gave clear and honest
communication about the strength of our business and its future
prospects. We have been rewarded by good levels of retention in the
reopening period after the first lockdown, across gym managers,
Fitness Trainers and central staff. And when difficult decisions
were necessary, such as aligning our levels of central support to
lower levels of revenue, we have been open in explaining our
decision-making.
Many of our team signalled their own belief in the prospects of
the business by investing into the employee sharesave scheme. I am
confident that the strength of the team and the culture of the
business will help to facilitate a strong level of membership
recovery once we get the green light to reopen.
I am delighted that we have recently welcomed to the Board Wais
Shaifta and Rio Ferdinand as Non-Executive Directors, increasing
our range of skills and experience and bringing different
perspectives. Their appointments are indicative of our desire to
think beyond the pandemic to create a relevant and fast growing
health & fitness brand. Their appointment will of course also
give a real boost to the work that we are doing in technology,
engagement and diversity both within the business and for our
members across the UK.
ESG principles have always been at the very heart of our
strategy and development since we started. The first site in
Hounslow was located in an area with a low income demographic and a
number of the subsequent sites showed the same characteristics,
bringing affordable fitness to these areas for the first time.
During the last year we have pulled together all the work we are
already doing across the business on ESG and formulated even
stronger plans for the future. Part of this has been calculating
the social value of our business - we worked with 4Global and
Sheffield Hallam University to assess the social value in our last
uninterrupted year of 2019. This work shows we were creating social
value of over GBP0.5bn per year from improved health and wellbeing
and fewer demands on the NHS as a result of the workouts in our
gyms. This reinforces the importance of gyms within the fabric of
our society - particularly in the current situation - and the need
for government to promote an active lifestyle. We also continue to
make good progress in our 4 priority United Nations Sustainability
Development Goals:
i) Promoting good health and wellbeing - we intend to publicise
the social value that our gyms bring on a regular basis to inform
the debate on the benefits of gyms (as set out above);
ii) Good jobs, quality education and lifelong learning - this
was enhanced by the launch of a new communication and learning
platform for our employees in the year (CORE);
iii) Diversity and Inclusion - in 2020 we publicised our first
ever D&I manifesto setting our goals in this area; and
iv) Responsibility to the environment - we completed our
roll-out of LED lighting and our governance arrangements were
tightened with the launch of the Health and Safety and Wellbeing
Committee which I chair.
This is considerable progress given the year of disruption we
have experienced and in the coming months we will invest further in
this area as well as continue to articulate the benefits we
continue to bring to members, colleagues and the wider
community.
Our business has demonstrated its strength and resilience
through the past year and continues to do so. The vaccine rollout
is well under way and we now expect gyms to re-open in mid-April.
By concentrating through this current lockdown on the two strategic
priorities we enter this new year more confident and forward-
looking in our approach as opposed to just managing the crisis. The
Gym Group has a high quality offer in great locations at an
affordable price and is well positioned to prosper in the coming
years. 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 and our business is ready to play
a central role in helping the UK deliver on providing that at
scale.
Richard Darwin
Chief Executive Officer
18 March 2021
Financial Review
Summary
2020 has been a challenging year for everyone, including The Gym
Group, but we ended the year as a strong, well-capitalised business
in a sector that will be at the heart of the nation's recovery from
the pandemic.
The Group lost 45% of the trading days in the year due to
closures as a result of government restrictions relating to
COVID-19, with revenue declining by 47.4% to GBP80.5 million (2019:
GBP153.1 million). During the year, and especially in the periods
of closure, we have taken a number of actions to reduce costs to
mitigate the impact of the lost revenue. We received GBP16.0
million of support from the UK Government in the form of business
rates relief and furlough payments. Despite these measures, Group
Adjusted EBITDA less Normalised Rent declined to GBP-10.2 million
(2019: GBP48.5 million).
Our focus during the year has been to manage cash, ensuring we
entered 2021 with a good level of liquidity. Capital expenditure
was reduced from Q1 onwards as the first lockdown arrived; however
we continued to invest in technology throughout the year, which
will be central to our recovery and future growth, and we opened
eight new sites, taking our total estate to 183 gyms. In a further
measure to protect cash during the first lockdown, we entered into
rent deferral agreements with landlords, deferring a total of
GBP9.4 million of rent payments in the first half, of which GBP5.6
million was repaid by the end of the year, with the remaining
GBP3.8 million expected to be repaid in 2021.
Our liquidity was strengthened by the raising of GBP39.9 million
of net proceeds via an equity placing in April and the extension of
our banking facilities from GBP70.0 million to GBP100.0 million in
June, alongside improved flexibility in our bank covenants. As a
result of the new funding and the careful management of cash we
ended 2020 with a similar level of net debt as we started the year,
with Non-Property Net Debt of GBP47.3 million (Dec 2019: GBP47.4
million).
This financial review uses a combination of statutory and
non-statutory measures to summarise 2020 performance. See page 15
for the definitions of the non-statutory Key Performance
Indicators.
Year ended 31 December 2019
Year ended 31 December 2020 Restated*
----------------------------------------------------- ---------------------------- ----------------------------
Total number of gyms(1) 183 175
Total number of members at end of period ('000) 578 794
Revenue (GBP'000) 80,470 153,134
Group Adjusted EBITDA (GBP'000) 16,810 74,453
Group Adjusted EBITDA less Normalised Rent (GBP'000) (10,169) 48,540
Group Adjusted EBITDA less Normalised Rent and before
preopening costs (GBP'000) (9,850) 49,715
Adjusted (Loss) / Profit before Tax (GBP'000) (46,525) 13,969
Adjusted Earnings (GBP'000) (35,999) 10,574
Group Operating Cash Flow (GBP'000) (16,282) 39,178
Free Cash Flow (GBP'000) (16,544) 32,282
Statutory (Loss) / Profit before Tax (GBP'000) (47,192) 6,219
Statutory Earnings (GBP'000) (36,368) 3,595
------------------------------------------------------ ---------------------------- ----------------------------
(1) Excludes three gyms announced as closing in 2019; two sites
acquired from the Lifestyle Fitness and easyGym acquisitions plus
one site opened in 2015 for which a five-year break clause was
exercised by the Group.
* Refer to note 4 for details of the restatement of maintenance
capex.
Result for the year
31 December 31 December
2020 2019
GBP'000 GBP'000
----------------------------------------------- ------------ ------------
Revenue 80,470 153,134
Cost of sales (2,116) (1,437)
------------------------------------------------ ------------ ------------
Gross profit 78,354 151,697
Other income 427 -
Administration expenses excluding exceptional
items (111,574) (124,036)
Exceptional administration items (1,122) (6,086)
------------------------------------------------ ------------ ------------
Operating (loss) / profit (33,915) 21,575
Finance income 6 32
Finance costs (13,283) (14,902)
Exceptional finance costs - (486)
------------------------------------------------ ------------ ------------
(Loss) / profit before tax (47,192) 6,219
Tax credit / (charge) 10,824 (2,624)
------------------------------------------------ ------------ ------------
Loss/Profit for the year (36,368) 3,595
(Loss) / profit before tax (47,192) 6,219
Amortisation of non-IT intangible assets 860 1,178
Exceptional administration and finance
expenses 1,122 6,572
Remeasurement of RCF (1,315) -
----------------------------------------------- ------------ ------------
Adjusted (loss)/profit before tax (46,525) 13,969
Tax credit / (charge) 10,824 (2,624)
Tax effect of above items (298) (771)
------------------------------------------------ ------------ ------------
Adjusted Earnings (35,999) 10,574
------------------------------------------------ ------------ ------------
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------------------------------- ----------------- ------------
Operating (loss) / profit (33,915) 21,575
- Depreciation of property, plant and
equipment 45,169 41,778
- Amortisation 3,765 3,114
- Exceptional impairment of property,
plant and equipment 1,606 -
- Exceptional impairment of intangible
assets 1 -
- Exceptional items (excluding impairment
of property, plant and equipment and
intangible assets) (485) 6,086
- Long term employee incentive costs 669 1,900
- Normalised rent (26,979) (25,913)
------------------------------------------------- ------------ --------------
Group Adjusted EBITDA less Normalised
Rent (10,169) 48,540
------------------------------------------------- ------------ --------------
Revenue
For much of the year, with gyms closed, we had significant
periods with no new member acquisition but we continued to see
cancellations. As a result, we ended the year with 578,000 members,
a decrease of 27.2% compared with the closing membership level in
December 2019. The average membership level across the 12-month
period fell by 11.1% to 708,000 (2019: 796,000). In addition to the
reduction in subscription income, we also lost ancillary income
(e.g. vending) during the closures plus revenue from the rent paid
to us by our Fitness Trainers.
In the periods of government-enforced closure - comprising 45%
of trading days in the year - we earned close to zero revenue as we
immediately 'froze' members' accounts so they did not pay their
subscription while gyms were closed. In the periods when gyms were
open, lower levels of overall membership meant that monthly
revenues were significantly lower than normal.
In the periods when we were trading with gyms open, we were able
to maintain a good yield per member; average headline prices
increased by GBP0.36 to GBP18.81 (2019: GBP18.45) and the take-up
of LIVE IT continued to increase with 22.5% of the membership
having this premium product at the end of the year vs 18.9% at the
end of 2019.
As a result of these factors, revenue for the year decreased
47.4% to GBP80.5 million (2019: GBP153.1 million).
Operating costs including the benefits of government COVID-19
initiatives
Site costs, including Normalised Rent and excluding exceptional
expenses, decreased to GBP77.7 million (2019: GBP90.3 million) as a
result of the gyms being closed for significant periods in the
year. Central support office costs remained flat at GBP13.0 million
(2019: GBP12.7 million) but this 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 closures and
from an internal restructuring programme in June which resulted in
a 22% reduction in central headcount.
Immediately after the closing of our gyms on 20 March 2020, and
in the subsequent periods of lockdown in the second half of the
year, we implemented a number of cost reduction initiatives to
ensure operating costs were reduced as far as possible while the
gyms were closed.
Mitigating actions to reduce costs
During periods of gym closure we were able to reduce the
estate's running costs significantly: maintenance was reduced to
cover health and safety requirements and to prepare the sites for
reopening; utilities were reduced substantially; 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 only spend on
maintaining engagement with existing members.
When gyms re-opened after the first lockdown the additional
cleaning procedures and materials for our COVID-secure protocols
resulted in a significant increase in cleaning costs. We expect
this incremental cost to be GBP2.0-2.5 million per year for the
foreseeable future.
Support from 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 GBP9.6 million in the year and will provide
further benefit of GBP1.1 million per month until August 2021
-- Coronavirus Job Retention Scheme ('CJRS') - across our gyms
and central support we furloughed approximately 95% of our staff
during closure periods. The total support claimed from the CJRS in
the year was GBP6.1 million, with further support available in Q1
2021 whilst gyms are closed
-- VAT payment deferral - GBP1.9 million of VAT due to HMRC
during the year has been deferred to 2021
Group Adjusted EBITDA less Normalised Rent
Our key profit metric takes EBITDA (which under IFRS 16 excludes
any lease rental costs) and subtracts 'Normalised Rent' which is
the cost of the rental payments applicable to the period in
question, regardless of when the rent is paid in cash. This measure
shows the underlying profitability of the business and then
elsewhere we disclose the cash flow effects of rent payment
deferrals.
Group Adjusted EBITDA less Normalised Rent decreased to
GBP(10.2) million in the year (2019: GBP48.5 million). The drop in
profitability was as a result of the significant reduction in
revenue, partially offset by the various cost saving measures and
government support described above.
Further information on the impact of our adoption of IFRS 16 in
2019 can be found on our corporate website: TGGPLC.com
Exceptional items
Exceptional administrative costs decreased to GBP1.1 million,
from GBP6.1 million in 2019, and comprised:
-- GBP0.9 million writedown of assets of one of our sites
whereby the discounted present value of future cash flows for the
site do not support the full value of the assets and GBP0.7 million
writedown of assets for one site announced as closing in 2019
following a delay in the surrender of the lease to 2021 (see
below).
-- GBP0.4 million gain recognised in 2020 arising on the closure
of three sites announced during 2019, which arose as a result of
estate management. Stoke and Birmingham Corporation Street were
acquisitions from Lifestyle and easyGym respectively, whilst we
exercised a lease break option in Newport, a site we opened in
2015.
-- GBP0.7 million of restructuring costs, related to the
restructuring of the central support team in June 2020 in which
headcount was reduced by 22%.
-- A one-off gain of GBP0.6m on the renegotiation of a lease reducing the lease term.
-- A reduction of GBP0.2 million in the provisions established
upon the acquisition of sites from easyGym.
Exceptional finance costs decreased to GBPnil.
Long term employee incentives
During the year the Group granted further shares under the
Performance Share Plan ('PSP') and Share Incentive Plan ('SIP') and
also Restricted Stock Options to certain members of senior
management. The awards vest in three years provided continuous
employment during this period and, in the case of the PSP, certain
performance conditions are attained relating to total shareholder
returns.
The Group continues to operate a matching shares scheme under
the SIP, where for every share purchased by an employee the Group
will award one matching share, up to a maximum value, which vest in
three years subject to continuous employment.
Towards the end of the year, the Group has also granted shares
under a share saving scheme ('SAYE'), where all employees were
invited to save regularly, up to a maximum value, to buy the
Group's shares at a discounted price, which vest in three years
subject to continuous employment.
The Group recognised a charge of GBP0.7 million (2019: GBP1.9
million) in relation to these share based payment arrangements. The
year-on-year reduction is due to the expectation that the financial
targets in prior year PSP awards will not be met and therefore the
proportion of awards associated with financial targets will not
vest.
Finance costs
Finance costs excluding exceptionals decreased to GBP13.3
million in 2020 (2019: GBP14.9 million). The implied interest
relating to the lease liability under IFRS 16 increased to GBP12.7
million (2019: GBP12.9 million). Finance costs associated with our
bank borrowing facilities were GBP0.6 million (2019: GBP2.0
million) comprising interest costs and fee amortisation of GBP1.9
million offset by the remeasurement of the amortised cost of our
borrowings of GBP-1.3 million.
On 5 June 2020 the Company agreed with its banks to extend its
existing GBP70 million RCF with an additional GBP30 million
facility for a term of 18 months (the New Bank Facility). Following
the national lockdown in November, the Company agreed a revision to
the New Bank Facility in which the term was extended to 24 months
and covenants were revised to reflect updated Company forecasts.
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.
At 31 December 2020 the Group had drawn GBP51.0 million of the
facilities and with cash of GBP3.7 million ended the year with
non-property net debt of GBP47.3 million.
Taxation
The Group has incurred a tax credit of GBP10.8 million for the
year ended 31 December 2020, which represents an effective tax rate
('ETR') on statutory profit before tax of 22.9% (2019: 42.2%). The
decrease in ETR is due to a decreased level of exceptional items
which are not deductible for tax purposes and decreased charges
relating to share based payments.
The underlying effective tax rate on adjusted loss before tax,
after adjusting for amortisation and exceptional items, is 22.6%
(2019: 24.3%).
Earnings
Statutory loss before tax was GBP47.2 million (2019: profit of
GBP6.2 million), with a decrease in Group Adjusted EBITDA less
Normalised Rent, increased depreciation due to increased number of
sites, increased amortisation of intangible assets from IT
investment and lower exceptional costs. The Group delivered a loss
for the year of GBP36.4 million (2019: profit of GBP3.6 million) as
a result of the factors discussed above.
Adjusted loss before tax is calculated from statutory loss
before tax and adding back the amortisation associated with non-IT
related intangibles, any exceptional items and the remeasurement of
borrowings. Adjusted loss before tax in the year was GBP46.5
million (2019: profit of GBP14.0 million).
Basic earnings per share ('EPS') was a loss of 23.1p (2019:
earnings of 2.6p). Basic Adjusted EPS was a loss of 22.9p (2019:
earnings of 7.7p).
Dividend
The Directors are not proposing a final dividend for 2020,
taking into account the ongoing impacts of the pandemic and the
material Government support received. It is a condition of the
GBP30m New Bank Facility that the Company shall not declare or pay
a dividend and whilst this facility remains undrawn the Directors
would like to continue to have access to it as necessary.
Cash flow
31 December 31 December
2020 2019**
GBP'000 GBP'000
-------------------------------------------- ------------ ------------
Group Adjusted EBITDA less Normalised
Rent* (10,169) 48,540
Rent working capital 4,370 -
Movement in working capital (3,096) 922
Maintenance capital expenditure cash
flow (7,387) (10,284)
--------------------------------------------- ------------ ------------
Group operating cash flow (16,282) 39,178
Exceptional items (906) (1,120)
Bank interest paid (1,798) (2,197)
Taxation 2,442 (3,579)
--------------------------------------------- ------------ ------------
Free cash flow (16,544) 32,282
Expansionary capital expenditure cash
flow (21,828) (30,919)
Dividends paid - (1,933)
Refinancing fees (418) (884)
Net proceeds from issue of Ordinary Shares 39,915 -
Other financial assets purchased (1,000) -
Bank interest received 6 32
--------------------------------------------- ------------ ------------
Movement in non-property net debt 131 (1,422)
Net drawdown of borrowings 1,000 1,000
--------------------------------------------- ------------ ------------
Net cash flow 1,131 (422)
--------------------------------------------- ------------ ------------
* See page 16 for a reconciliation of operating profit to Group
Adjusted EBITDA less Normalised Rent.
** Refer to note 4 for details of the restatement
Group Operating Cash Flow decreased from an inflow of GBP39.2
million in 2019 to an outflow of GBP16.3 million in 2020 as a
result of lower profitability.
Following closure of our gyms on 20 March 2020, and in
subsequent closure periods, a number of actions were taken to
preserve cash, in addition to the operating cost mitigation
described in the 'Mitigating actions to reduce costs' section
above:
-- Maintenance Capital Expenditure includes the replacement and
refurbishment of fixtures and fittings plus new gym equipment in
existing gyms and in the year totalled GBP6.1 million (2019:
GBP10.2 million). Adjusting for the movement in capex creditors,
the cash flow from maintenance capex was GBP7.4 million (2019:
GBP10.3 million). Following the closure of gyms on 20 March 2020,
maintenance capex for the rest of the year was minimised by
focusing only on repairs required for health and safety
reasons.
-- Expansionary Capital Expenditure arises primarily as a result
of the fit-out of new and acquired gyms and in 2020 totalled
GBP18.5 million (2019: GBP30.6 million). Adjusting for the movement
in capex creditors, the cash flow from expansionary capex was
GBP21.8 million (2019: GBP30.9 million). Prior to the closure of
gyms on 20 March 2020, four new sites had been opened in the year
(of which one was a small box gym) and then a further four were
opened in August. In addition to new sites, major refurbishment
work was undertaken in two former easyGym sites - London Fulham and
London Oxford Street - which were completed and reopened in H2
2020.
-- Rent - following the introduction of the government
protections against eviction of tenants in March 2020, we deferred
GBP9.4 million in rent payments that would otherwise have been paid
during H1 2020. Immediately after the gyms were closed we engaged
proactively with landlords and with the vast majority were able to
agree deferred rent payments while the gyms were closed and to
repay over the subsequent 12 months. These deferments did not
impact the IFRS 16 income statement charge for the period but did
reduce the cash rent outflow, thereby supporting Operating Cash
Flow. The GBP9.4 million rent deferred from H1 started to be repaid
in H2 and by the end of the year GBP5.6 million had been repaid
leaving GBP3.8 million outstanding. This will result in higher cash
rent outflows in 2021 than would otherwise have arisen. 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
in exchange for rent-free periods; the benefit of these rent-free
periods will total approximately GBP2.1 million across 2020 and
2021 of which GBP1.4 million was a benefit in 2020.
-- VAT - following the introduction of government relief
measures on VAT, we retained GBP1.9 million of VAT payments
relating to Q1 2020 due in March 2020, which will now be paid in
2021.
Balance sheet
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------------- ------------ ------------
Non-current assets 521,945 501,095
Current assets 10,543 12,028
Current liabilities (43,095) (49,627)
Non-current liabilities (334,949) (313,333)
-------------------------- ------------ ------------
Net assets 154,444 150,163
-------------------------- ------------ ------------
Non-current assets have increased by GBP20.8 million to GBP521.9
million (2019: GBP501.1 million), largely due to an increase in
right- of-use assets totalling GBP17.0 million following new sites
added to the estate plus the extension of a number of existing
leases and the recognition of a deferred tax asset of GBP7.6
million.
Current assets have decreased GBP1.5 million mainly due to
reduced inventory and receivables balances offset by an increase in
cash balances. Current liabilities have decreased by GBP6.5 million
mainly due to lower trade payables.
As of 31 December 2020 the Group had drawn GBP51.0 million of
its GBP100.0 million revolving credit facility.
Outlook and Guidance for 2021
At the end of February 2021 we had 547,000 members and
Non-Property Net Debt of GBP58.2 million, with GBP7.7 million of
deferred rent, VAT payable and furlough receivable outstanding.
Whilst closed we have a monthly cash burn of c.GBP5.0 million of
which c.GBP2.5 million is rent.
We anticipate that when we re-open gyms in April 2021 we will be
close to cash flow break-even and we will then grow membership,
revenues and profitability from this point.
We will open three new sites in April and one in May and expect
to start on-site with an additional four gyms by June. We have six
further leases exchanged and several more in advanced
negotiations.
Mark George
Chief Financial Officer
18 March 2021
Key Performance Indicators
Definitions of non-GAAP measures
* Group Adjusted EBITDA - is operating profit before
depreciation, amortisation, long term employee
incentive costs and exceptional items.
* Normalised Rent(1) - Normalised Rent is the
contractual rent that would have been paid in normal
circumstances without any agreed deferments,
recognised in the monthly period to which it relates.
* Adjusted Profit before Tax - is calculated as profit
before tax before non-IT amortisation, exceptional
items and modification of bank borrowings.
* Adjusted Earnings - is calculated as the Group's
profit for the year before non-IT amortisation,
exceptional items, modification of bank borrowings
and the related tax effect.
* Basic Adjusted EPS - is calculated as the Group's
profit for the year before non-IT amortisation,
exceptional items, modification of bank borrowings
and the related tax effect, divided by the basic
weighted average number of shares.
* Group Operating Cash Flow - is calculated as Group
Adjusted EBITDA less Normalised Rent plus movement in
working capital less maintenance capital expenditure.
* Free Cash Flow - is calculated as Group Operating
Cash Flow less tax, interest and other financing
costs and exceptional items.
* Non-Property Net Debt - is calculated as borrowings
less property finance leases and cash and cash
equivalents.
* Return On Invested Capital - is calculated as Group
Adjusted EBITDA less Normalised Rent of the Group's
mature sites, divided by total capital invested in
the sites.
* Maintenance capital expenditure - relates to the
replacement of gym equipment and premises
refurbishment.
* Expansionary capital expenditure - relates to the
Group's investment in the fit-out of new gyms, the
acquisition of the Lifestyle and easyGym portfolios
and technology projects. It is stated net of
contributions towards landlord building costs.
(1) On adoption of IFRS 16, we revised our adjusted profit measures
to deduct cash rent, in lieu of the rent cost that was previously
charged under IAS 17. However, we have agreed significant changes
in the timing of our rent payments with landlords as a consequence
of COVID-19. We have therefore revised our adjusted profit measures
to instead deduct normalised rent, to ensure a smoothed notional
rent charge in the income statement.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020
31 December 31 December
Note 2020 2019
GBP'000 GBP'000
------------------------------------------------------------- ----- ------------ ------------
Revenue 5 80,470 153,134
Cost of sales (2,116) (1,437)
------------------------------------------------------------- ----- ------------ ------------
Gross profit 78,354 151,697
Other income 427 -
Administration expenses (112,696) (130,122)
------------------------------------------------------------- ----- ------------ ------------
Operating (loss) / profit (33,915) 21,575
Finance income 6 32
Finance costs (13,283) (15,388)
------------------------------------------------------------- ----- ------------ ------------
(Loss) / profit before tax (47,192) 6,219
Tax credit / (charge) 10,824 (2,624)
------------------------------------------------------------- ----- ------------ ------------
(Loss) / profit for the year attributable
to equity shareholders (36,368) 3,595
------------------------------------------------------------- ----- ------------ ------------
Other comprehensive income/(expense) for
the year
Items that may be reclassified to profit
or loss
Changes in the fair value of derivative financial
instruments 11 (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 - (277)
Total comprehensive (loss) / income attributable
to equity shareholders (36,357) 3,163
------------------------------------------------------------- ----- ------------ ------------
(Loss)/earnings per share pence pence
Basic 7 (23.1) 2.6
Diluted 7 (23.1) 2.6
GBP'000 GBP'000
Reconciliation of operating (loss)/profit to Group
Adjusted EBITDA less Normalised Rent:
- Operating (loss) / profit (33,915) 21,575
- Depreciation of property, plant and equipment
and right-of-use assets 45,169 41,778
- Amortisation 3,765 3,114
- Exceptional impairment of property, plant
and equipment and right-of-use assets 6 1,606 -
- Exceptional impairment of intangible assets 6 1 -
* Exceptional items (excluding impairment of property,
plant and equipment and intangible assets) 6 (485) 6,086
- Long term employee incentive costs 11 669 1,900
- Normalised rent (26,979) (25,913)
Group Adjusted EBITDA less Normalised Rent (10,169) 48,540
------------------------------------------------------------- ----- ------------ ------------
Consolidated Statement of Financial Position
As at 31 December 2020
31 December 31 December
2020 2019
Note GBP'000 GBP'000
---------------------------------------------- ----- ------------ ------------
Non-current assets
---------------------------------------------- ----- ------------ ------------
Property, plant and equipment (excluding
right of use asset) 8 171,386 176,001
Right of use asset 8 255,558 238,702
Intangible assets 86,386 86,379
Trade and other receivables - -
Financial assets at fair value through other
comprehensive income 1,000 -
Derivative financial instruments 1 13
Deferred tax assets 7,614
---------------------------------------------- ----- ------------ ------------
Total non-current assets 521,945 501,095
Current assets
---------------------------------------------- ----- ------------ ------------
Inventories 290 654
Trade and other receivables 6,355 8,769
Income taxes receivable 162 -
Cash and cash equivalents 3,736 2,605
---------------------------------------------- ----- ------------ ------------
Total current assets 10,543 12,028
Total assets 532,488 513,123
---------------------------------------------- ----- ------------ ------------
Current liabilities
---------------------------------------------- ----- ------------ ------------
Trade and other payables 18,598 29,389
Lease liabilities 21,842 15,637
Other financial liabilities 2,609 3,875
Borrowings - -
Provisions 46 352
Income taxes payable - 374
---------------------------------------------- ----- ------------ ------------
Total current liabilities 43,095 49,627
Non-current liabilities
---------------------------------------------- ----- ------------ ------------
Borrowings 9 49,180 49,116
Lease liabilities 284,473 262,706
Other financial liabilities - -
Provisions 1,241 1,303
Deferred tax liabilities 55 208
---------------------------------------------- ----- ------------ ------------
Total non-current liabilities 334,949 313,333
Total liabilities 378,044 362,960
---------------------------------------------- ----- ------------ ------------
Net assets 154,444 150,163
---------------------------------------------- ----- ------------ ------------
Capital and reserves
---------------------------------------------- ----- ------------ ------------
Issued capital 10 17 14
Own shares held 48 48
Capital redemption reserve 4 4
Share premium 159,474 159,474
Hedging reserve (155) (166)
Merger reserve 39,912 -
Retained deficit (44,856) (9,211)
---------------------------------------------- ----- ------------ ------------
Total equity shareholders' funds 154,444 150,163
---------------------------------------------- ----- ------------ ------------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2020
Capital
Issued Own shares redemption Share Hedging Merger Retained
capital held reserve premium reserve reserve deficit Total
Note 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 - - - - - - 3,595 3,595
Other
comprehensive
expense
for the
year - - - - (155) - (277) (432)
------------------ ----- --------- ----------- ------------ --------- --------- --------- --------- ---------
Total
comprehensive
income - - - - (155) - 3,318 3,163
Share based
payments 11 - - - - - - 1,670 1,670
Deferred
tax on share
based payments - - - - - - 24 24
Dividends
paid - - - - - - (1,933) (1,933)
------------------ ----- --------- ----------- ------------ --------- --------- --------- --------- ---------
At 31 December
2019 14 48 4 159,474 (166) - (9,211) 150,163
Loss for
the period - - - - - - (36,368) (36,368)
Other
comprehensive
income for
the year - - - - 11 - - 11
------------------ ----- --------- ----------- ------------ --------- --------- --------- --------- ---------
Total
comprehensive
expense - - - - 11 - (36,368) (36,357)
Issue of
Ordinary
share capital 10 3 - - - - 39,912 - 39,915
Share based
payments 11 - - - - - - 801 801
Deferred
tax on share
based payments - - - - - - (78) (78)
------------------ ----- --------- ----------- ------------ --------- --------- --------- --------- ---------
At 31 December
2020 17 48 4 159,474 (155) 39,912 (44,856) 154,444
------------------ ----- --------- ----------- ------------ --------- --------- --------- --------- ---------
Consolidated Cash Flow Statement
For the year ended 31 December 2020
31 December
31 December 2019
2020 Restated*
Note GBP'000 GBP'000
----------------------------------------------------- ------ ------------ ------------
Loss Before Tax (47,192) 6,219
Adjustments for:
Net Finance Costs 13,277 15,356
Exceptional administration items (excluding
impairment) (485) 6,086
Exceptional income - -
Depreciation and impairment of PPE 46,775 41,778
Amortisation and impairment of intangible
assets 3,766 3,114
Long Term employee incentive costs 669 1,900
Loss/(profit) on disposal of PPE 676 (112)
Decrease/(increase) in inventories 364 (275)
Decrease/(increase) in trade and other receivables 2,719 (1,073)
(Decrease)/increase in trade and other payables (5,589) 2,382
Payment of deferred consideration (1,266) -
----------------------------------------------------- ------ ------------ ------------
Cash generated from operations 13,714 75,375
Tax rebate/(payments) 2,442 (3,579)
------------------------------------------------------------- ------------ ------------
Net cash flows from operating activities
before exceptional items 16,156 71,796
Exceptional items (906) (1,120)
------------------------------------------------------------- ------------ ------------
Net cash flows from operating activities 15,250 70,676
------------------------------------------------------------- ------------ ------------
Cash flows from investing activities
Payment for financial assets at fair value
through profit and loss (1,000) -
Business combinations - (2,114)
Purchase of property, plant and equipment (25,469) (37,019)
Purchase of intangible assets (3,774) (2,461)
Proceeds from the disposal of PPE 28 391
Interest received 6 32
------------------------------------------------------------- ------------ ------------
Net cash flows used in investing activities (30,209) (41,171)
------------------------------------------------------------- ------------ ------------
Cash flows from financing activities
Dividends paid - (1,933)
Repayment of lease liability principal (9,948) (13,093)
Lease interest paid (12,661) (12,820)
Bank interest paid (1,798) (2,197)
Payment of financing fees (418) (884)
Drawdown of bank loans 41,000 53,500
Repayment of bank loans (40,000) (52,500)
Proceeds of issue of Ordinary shares 41,268 -
Costs associated with share issue (1,353) -
Derivative financial instruments paid - -
----------------------------------------------------- ------ ------------ ------------
Net cash flows from/(used in) financing activities 16,090 (29,927)
------------------------------------------------------------- ------------ ------------
Net increase/(decrease) in cash and cash
equivalents 1,131 (422)
Cash and cash equivalents at start of period 2,605 3,027
------------------------------------------------------------- ------------ ------------
Cash and cash equivalents at end of period 3,736 2,605
------------------------------------------------------------- ------------ ------------
* See note 4 for details regarding the prior year
restatement
Notes
For the year ended 31 December 2020
1. General information
The Gym Group plc ('the Company') and its subsidiaries ('the
Group') provide low cost, high quality health and fitness
facilities.
The Company is a public limited company whose shares are
publicly traded on the London Stock Exchange and is incorporated
and domiciled in the United Kingdom.
The registered address of the Company is 5th Floor, OneCroydon,
12-16 Addiscombe Road, Croydon, United Kingdom, CR0 0XT.
The financial information set out above does not constitute
statutory accounts for the years ended 31 December 2020 or 2019
within the meaning of sections 435(1) and (2) of the Companies Act
2006 nor does it contain sufficient information to comply with the
disclosure requirements of International Financial Reporting
Standards.
An unqualified report on the Consolidated Financial Statements
for each of the years ended 31 December 2020 and 2019 has been
given by the Company's auditors, Ernst & Young LLP. Each year's
report did not include a modified opinion and did not contain any
statement under section 498(2) or (3) of the Companies Act 2006.
However, Ernst & Young LLP did include a reference within each
of their reports drawing attention to material uncertainty related
to going concern arising from the current uncertainty of the impact
of the COVID-19 pandemic on the Group's business.
The Consolidated Financial Statements for the year ended 31
December 2019 have been filed with the Registrar of Companies, and
those for 2020 will be delivered in due course subject to their
approval by the Company's shareholders at the Company's Annual
General Meeting on 11 May 2021.
2. Basis of preparation
The Consolidated Financial Statements have been prepared on a
going concern basis under the historical cost convention as
modified by the recognition of derivative financial instruments,
financial assets and other financial liabilities at fair value
through the profit and loss and the recognition of financial assets
at fair value through other comprehensive income.
The Consolidated Financial Statements provide comparative
information in respect of the previous period. In addition, the
Group presents an additional statement of financial position at the
beginning of the preceding period when there is a retrospective
application of an accounting policy, a retrospective restatement,
or a reclassification of items in Financial Statements.
Going concern
In assessing the going concern position of the Group for the
year ended 31 December 2020, the Directors have considered the
Group's cash flows, liquidity and business activities in the light
of the COVID-19 pandemic.
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 during 2020 when gyms were open between lockdowns; and
-- future trading risks including continued regional or
nationwide lockdowns and reduced membership levels on the
cashflows, liquidity and bank facility covenants of the Group over
the period to 30 June 2022.
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'). The RCF
and the New Bank Facility are both provided by a consortium of
HSBC, NatWest and Banco de Sabadell.
During the periods of trading between lockdowns in the second
half of 2020 the Group traded profitably and reduced capital
expenditure and other cash outflows. As at 31 December 2020, the
Group had Non-Property Net Debt of GBP47.3 million versus GBP100.0
million of total borrowing capacity.
Following the phased introduction of Tier 4 restrictions in a
number of regions in December 2020, the Group was required to close
162 of its 183 gyms. On 4 January 2021 all remaining gyms were
required to close as the UK Government announced a nationwide
lockdown. The UK Government has announced that gyms will re-open on
12 April 2021 if there is continued progress with the Government's
four criteria for monitoring the pandemic.
As at 28 February 2021, the Group had Non-Property Net Debt of
GBP58.2 million and therefore liquidity of GBP41.8 million versus a
total borrowing capacity GBP100.0 million. In the next 12 months
the Group's liquidity will be influenced by (i) the number of
months of closure of its gyms and (ii) the trading performance of
the business when gyms are permitted to open. Below we set out the
financial implications of periods of closure and trading
respectively:
Cash burn when gyms are closed
During the current period of closure, the Group has no revenue
and is operating with a monthly cash burn (excluding new site
capital expenditure) of around GBP5 million. This cash burn rate
has been minimised as a result of significant reductions in
operating costs and the following UK Government support:
-- GBP1.1 million per month of Business Rates relief, currently
due to end August 2021 due to there being a cap on relief of GBP2.0
million in H2 2021;
-- GBP1.1 million per month of furlough income support from the
Coronavirus Job Retention Scheme (CJRS), currently due to end when
we re-open in April 2021; and
-- GBP0.5 million per month from Local Restrictions Support
Grants (LRSG) ongoing until we re-open in April 2021.
In addition to the ongoing support the Group has also benefitted
from a one-off Government grant of GBP27,000 per site; these grants
have a total one-off benefit of GBP4.5 million to the Group, of
which GBP2.2 million had been received from the relevant local
authorities before 28 February 2021.
While gyms are required to remain closed and with current levels
of Government support and the business is operating with monthly
cash burn of c. GBP5.0 million. This cash burn assumes c.GBP2.5
million of rent being paid each month, which is the 'normalised'
level of rent per month excluding the impact of rent deferrals. A
total of GBP3.6 million of rent deferred from 2020 is due to be
repaid over the course of 2021, in addition to the 'normalised'
level of GBP2.5 million per month. Any further deferrals agreed
will improve cash flow in the closure period and extend the period
of closure for which the Group would be able to operate.
Trading when gyms are open
As at 28 February 2021 the Group had 547,000 members, all on
'free freeze', down from 578,000 on 31 December 2020. During the
ongoing period of closure we expect membership to reduce further at
a similar rate to recent weeks; this rate of membership loss is
lower than in the first national lockdown from March to July 2020
and the second national lockdown in November 2020.
When gyms re-open our subscription revenue starts immediately
and in the periods of trading between national lockdowns in 2020
the business operated profitably. The profitability of the Group
after the gyms re-open from the current lockdown will depend on the
membership level and level of UK Government financial support.
Whilst we continue to receive the benefit of Business Rates relief,
which is anticipated to be until the end of August 2021, the
business would require approximately 540,000 members to be break
even at the cash flow level. When the benefit of Business Rates
relief ends, the cost base of the business would increase by
c.GBP1.1 million per month, increasing the cash flow break-even
point to around 610,000 members.
Although there is uncertainty over the level of continued
Government support and the speed of recovery in membership once
gyms have re-opened, it is the Directors expectation that the
business will be close to break-even at a cash flow level when gyms
re-open and from that point the recovery in membership will improve
profitability and cash flow, therefore reducing net debt and
increasing liquidity headroom.
In December 2020, the Group amended the New Bank Facility to
extend it from 18 months to 24 months (now due to end June 2022 at
which point the terms of the original GBP70 million RCF will apply)
and to set new covenants based on a revised business plan. The
Group met the covenant test for December 2020. As a result of the
national lockdown in early 2021 the Group agreed with its lending
banks a waiver of the March 2021 covenant test. The June 2021
covenant test is based on a cumulative EBITDA for H1 2021 and was
set at a level that allowed for up to one month of closure in that
six month period; with the current lockdown being at least three
months we will not be able to meet the June 2021 covenant test. As
our plan anticipates meeting all subsequent covenant tests, we
anticipate that our lending banks will provide flexibility on the
June 2021 test although no such agreement has been reached. We have
agreed with the banks that discussions regarding future covenant
tests will take place during April/May 2021 once there is further
visibility on the external environment, levels of government
support and whether gyms have re-opened.
The Directors have considered a reverse stress test scenario in
which it is assumed the current lockdown ends at the end of April
2021 (vs Government target date of re-opening gyms of 12 April
2021) and a new lockdown starts in November 2021 (matching the
timing of the winter lockdown in November 2020) and continues
indefinitely, with the business trading in the months between
lockdowns on an approximately cash flow neutral basis. In such a
scenario the Group would be able to continue operating until March
2022 before reaching the GBP100 million borrowing capacity. In such
circumstances additional options may be available to mitigate the
impact on the Group's liquidity and cash flow including: (i)
further reductions in operating and capital expenditure; (ii)
additional support from the UK Government; (iii) extension of debt
facilities; (iv) continued deferral of, or reductions in, rent
payments to landlords; (v) the potential to raise additional funds
from third parties. In the reverse stress test scenario, the
closures from November 2021 onwards would result in EBITDA losses
in Q4 2021 and as a result the Q4 2021 covenant test would not be
met.
Whilst the Group has secured sufficient liquidity, via the
raising of equity and additional debt facilities, to finance
operations through most reasonable scenario, it may be necessary in
certain downside scenarios to extend the term of GBP30.0 million
New Bank Facility beyond June 2022. The Directors also consider it
to be a plausible risk that current covenant targets after June
2021 will not be met due to the impact of further closure or slower
recovery in membership numbers due to changes in members'
behaviour. In the event that the Group fails to meet one or more of
its 2021 debt covenants, the Directors believe it likely that
further agreement could be reached with the lending banks to waive
or amend covenants as part of a revised business plan. However, no
such commitment for further covenant waivers (beyond the March 2021
waiver already agreed) 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 or extending the New Bank
Facility, 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 financial statements. Accordingly, these
financial statements do not include any adjustments to the carrying
amount or classification of assets and liabilities that would
result if the Company were unable to continue as a going
concern.
3. New and amended IFRS standards that are effective for the current year
Impact of the initial application of interest rate benchmark
reform amendments to IFRS 9 and IFRS 7
In September 2019, the IASB issued interest rate benchmark
reforms (Amendments to IFRS 9, IAS 39 and IFRS 7). These amendments
modify specific hedge accounting requirements to allow hedge
accounting to continue for affected hedges during the period of
uncertainty before the hedged items or hedging instruments affected
by the current interest rate benchmarks are amended as a result of
the ongoing interest rate benchmark reforms.
The amendments are relevant to the Group given that it applies
hedge accounting to its benchmark interest rate exposures. The
application of the amendments impacts the Group's accounting in the
following ways:
-- The Group has floating rate debt, linked to GBP LIBOR, which
it cash flow hedges using interest rate swaps. The amendments
permit continuation of hedge accounting even though there is
uncertainty about the timing and amount of the hedged cash flows
due to the interest rate benchmark reforms.
-- The Group will retain the cumulative gain or loss in the cash
flow hedge reserve for designated cash flow hedges that are subject
to interest rate benchmark reforms even though there is uncertainty
arising from the interest rate benchmark reform with respect to the
timing and amount of the cash flows of the hedged items. Should the
Group consider the hedged future cash flows are no longer expected
to occur due to reasons other than interest rate benchmark reform,
the cumulative gain or loss will be immediately reclassified to
profit or loss.
The amendments also introduce new disclosure requirements to
IFRS 7 for hedging relationships that are subject to the exceptions
introduced by the amendments to IFRS 9.
Impact of the initial application of 'COVID-19-Related Rent
Concessions' Amendment to IFRS 16
In May 2020, the IASB issued COVID-19-Related Rent Concessions
(Amendment to IFRS 16) that provides practical relief to lessees in
accounting for rent concessions occurring as a direct consequence
of COVID-19, by introducing a practical expedient to IFRS 16. The
practical expedient permits a lessee to elect not to assess whether
a COVID19-related rent concession is a lease modification. A lessee
that makes this election shall account for any change in lease
payments resulting from the COVID-19-related rent concession the
same way it would account for the change applying IFRS 16 if the
change were not a lease modification.
The practical expedient applies only to rent concessions
occurring as a direct consequence of COVID-19 and only if all of
the following conditions are met:
a) The change in lease payments results in revised consideration
for the lease that is substantially the same as, or less than, the
consideration for the lease immediately preceding the change;
b) Any reduction in lease payments affects only payments
originally due on or before 30 June 2021 (a rent concession meets
this condition if it results in reduced lease payments on or before
30 June 2021 and increased lease payments that extend beyond 30
June 2021); and
c) There is no substantive change to other terms and conditions of the lease.
In the current financial year, the Group has applied the
amendment to IFRS 16 (as issued by the IASB in May 2020) in advance
of its effective date.
Impact on accounting for changes in lease payments applying the
exemption
The Group has applied the practical expedient retrospectively to
all rent concessions that meet the conditions in IFRS 16:46B and
has not restated prior period figures.
The Group has benefitted from a one-month waiver of lease
payments on five sites and additional rent free periods on a
further six sites in exchange for the removal of break clauses in
the leases. The waiver of lease payments of GBP682,000 has been
accounted for as a negative variable lease payment in profit or
loss. The Group has derecognised the part of the lease liability
that has been extinguished by the forgiveness of lease payments,
consistent with the requirements of IFRS 9:3.3.1.
Impact of the initial application of other new and amended IFRS
Standards that are effective for the current year
In the current year, the Group has applied the below amendments
to IFRS Standards and Interpretations issued by the Board that are
effective for an annual period that begins on or after 1 January
2020. Their adoption has not had any material impact on the
disclosures or on the amounts reported in these Financial
Statements.
-- Amendments to References to the Conceptual Framework in IFRS Standards
-- Amendments to IAS 1 and IAS 8 Definition of material
4. Adjustments to prior year
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
--------------------------------------------- ------------ ----------------------------------- ---------
5. Revenue
The main revenue streams are those described in the last annual
Financial Statements; membership income, rental income and other
income. The majority of revenue is derived from contracts with
customers.
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.
31 December 31 December
2020 2019
GBP'000 GBP'000
---------------------------------------------- ------------ ------------
Major products/service lines
Membership income 77,041 146,782
Rental income from personal trainers 2,454 4,572
Other income 975 1,780
----------------------------------------------- ------------ ------------
80,470 153,134
---------------------------------------------- ------------ ------------
Timing of revenue recognition
Products transferred at a point in time 1,162 2,550
Products and services transferred over
time 79,308 150,584
----------------------------------------------- ------------ ------------
80,470 153,134
---------------------------------------------- ------------ ------------
Assets and liabilities relating to contracts
with customers
---------------------------------------------- ------------ ------------
Contract liabilities (6,442) (7,961)
----------------------------------------------- ------------ ------------
Revenue recognised that was included
in contract liabilities in the prior
year
Membership income 7,952 7,051
Other income 9 61
----------------------------------------------- ------------ ------------
Contract liabilities relate to membership fees received at the
start of a contract, where the Group has the obligation to provide
a gym membership over a period of time and are included within
trade and other payables. During periods of gym closure, no revenue
is recognised for membership fees thereby increasing contract
liabilities. The contract liability balance increases as the
Group's membership numbers increase, and therefore has decreased
between 2019 and 2020 following a fall in membership numbers. The
Group does not receive any consideration in advance from customers
greater than 12 months hence the total contract liability at 31
December 2019 of GBP7,961,000 has been recognised as revenue during
the year ended 31 December 2020.
6. Exceptional items
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------------------------------- ------------ ------------
Impairment of tangible and intangible
assets 1,607 1,448
Restructuring costs 657 410
Adjustments to net asset acquired in
business combinations (171) -
Other site closure costs (403) 1,240
Gain on reduction of lease term (568) -
Remeasurement of contingent consideration - 2,988
-------------------------------------------- ------------ ------------
Total exceptional items in operating
expenses 1,122 6,086
-------------------------------------------- ------------ ------------
Refinancing costs - 486
-------------------------------------------- ------------ ------------
Total exceptional items in financing
expenses - 486
-------------------------------------------- ------------ ------------
Total exceptional items 1,122 6,572
-------------------------------------------- ------------ ------------
Impairment and tangible and intangible assets
Impairment costs in 2020 relate to the writedown of assets of
GBP881,000 for one site whereby the discounted present value of
future cash flows using a pre-tax discount rate of 11.1% do not
support the full value of the assets and an additional GBP726,000
for one site which was announced as closing in 2019 where the lease
surrender has been delayed to 2021. The GBP1,448,000 recognised in
2019 relates to the impairment of assets for the closure of three
sites announced in 2019 (see Finalisation of site closures
below).
Restructuring costs
Restructuring costs in the current year relate primarily to the
costs associated with restructuring the central support team in
June 2020 in which headcount was reduced by 22%. The costs in 2019
relate primarily to changing the operating model for the use of
Personal Trainers within the business that was completed in
2019.
Adjustment to net assets acquired in business combinations
Certain provisions that were recognised as part of acquisition
of gyms from easyGym have been released as the costs are unlikely
to be incurred.
Finalisation of site closures
Finalisation of site closures relate to the closure of the three
sites announced in 2019, which arose as part of our estate
management in order to optimise Group performance; the closures
comprised two sites acquired from the Lifestyle and easyGym
acquisitions plus one site opened in 2015 for which a five-year
break clause was exercised by the Group in 2019. The gain in the
current year primarily arises due to certain costs provided for in
2019 not being incurred, or no longer being expected to be
incurred, in closing these sites.
Gain on reduction of lease term
The landlord on one of our sites has reduced the lease term and
in exchange for doing so the lease has been renegotiated in 2020.
As a consequence of the renegotiation, the Group has recognised a
one-off gain of GBP568,000 this year related to the remeasurement
of the lease liability and associated right-of-use asset.
Remeasurement of contingent consideration
Remeasurement of contingent consideration relates to a change in
the probability-based estimate of contingent consideration that
will be payable for the acquisition of two easyGym sites in the
event the Group is successful in acquiring new leases for these
sites. This remeasurement of the acquisition consideration has been
recognised in the income statement but has no cash impact in 2020
and 2019.
Refinancing costs
Refinancing costs relate to unamortised costs incurred in
relation to the previous bank facility that was refinanced in
October 2019.
7. Loss 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
year ended 31 December 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. As the Group is in a
loss making position in the current year, all potential dilutive
share options will not be dilutive.
31 December 31 December
2020 2019
------------------------------------------- ------------ ------------
Basic weighted average number of shares 157,292,003 137,870,237
Adjustment for share awards - 2,561,055
-------------------------------------------- ------------ ------------
Diluted weighted average number of shares 157,292,003 140,431,292
-------------------------------------------- ------------ ------------
Basic earnings per share (p) (23.1) 2.6
Diluted earnings per share (p) (23.1) 2.6
-------------------------------------------- ------------ ------------
At 31 December 2020, 4,125,842 share awards (2019: nil) were
excluded from the diluted weighted average number of Ordinary
shares calculation because their effect would be anti-dilutive.
Adjusted earnings per share is based on (loss)/profit for the
year before exceptional items, amortisation of non-IT intangible
assets, revaluation of borrowings and their associated tax
effect.
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------------------------------ ------------ ------------
(Loss) / profit for the year (36,368) 3,595
Amortisation of non-IT intangible assets 860 1,178
Exceptional expenses 1,122 6,572
Revaluation of RCF (1,315) -
Tax effect of above items (298) (771)
------------------------------------------- ------------ ------------
Adjusted earnings (35,999) 10,574
------------------------------------------- ------------ ------------
Basic adjusted earnings per share (p) (22.9) 7.7
Diluted adjusted earnings per share (p) (22.9) 7.5
------------------------------------------- ------------ ------------
8. Property, plant and equipment
Total
Before
Assets Gym & Right Right
Under Leasehold Fixtures Other Computer of Use of Use
Construction improvements & Fittings Equipment Equipment Assets Asset Total
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)
WIP transfer (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
Additions 19,661 1,536 39 80 385 21,701 38,069 59,770
Disposal (563) (435) (43) (860) (16) (1,917) (1,764) (3,681)
WIP Transfer (20,461) 13,954 (614) 6,073 40 (1,008) 1,008 -
Transfer
between
asset
classes (94) - - - - (94) - (94)
-------------- -------------- -------------- ------------ ----------- ----------- -------- -------- --------
At 31
December
2020 2,242 191,781 11,265 84,445 3,640 293,373 345,314 638,687
-------------- -------------- -------------- ------------ ----------- ----------- -------- -------- --------
Accumulated Depreciation
--------------------------------------------------------------------------------------------------------------------
At 1 January
2019 - 35,673 5,473 32,110 1,625 74,881 48,998 123,879
Charge - 12,238 1,308 8,406 618 22,570 19,112 41,682
Impairment - 1,165 24 498 9 1,696 1,189 2,885
Disposals - (110) - (347) - (457) - (457)
-------------- -------------- -------------- ------------ ----------- ----------- -------- -------- --------
At 31
December
2019 - 48,966 6,805 40,667 2,252 98,690 69,299 167,989
Charge - 13,525 1,240 8,145 620 23,530 21,639 45,169
Impairment - 809 9 241 - 1,059 547 1,606
Disposals - (439) (58) (769) (26) (1,292) (1,729) (3,021)
-------------- -------------- -------------- ------------ ----------- ----------- -------- -------- --------
At 31
December
2020 - 62,861 7,996 48,284 2,846 121,987 89,756 211,743
Net book value
At 31
December
2019 3,699 127,760 5,078 38,485 979 176,001 238,702 414,703
At 31
December
2020 2,242 128,920 3,269 36,161 794 171,386 255,558 426,944
-------------- -------------- -------------- ------------ ----------- ----------- -------- -------- --------
The impairment charge of GBP1,606,000 for 2020 includes
GBP726,000 in relation to the closure of one site announced in 2019
following a delay in the surrender of the lease to 2021 (2019:
GBP2,885,000 includes GBP2,688,000 in relation to the closure of
three sites announced). The impairment loss for the open site was
calculated based on the value in use of the assets for the site
being lower than the carrying value of the assets making the
recoverable amount nil. The discount rate used in measuring value
in use was 11.1%. Under reasonably possible downside scenarios
arising in relation to a potential 5% shortfall in long-term
membership, further impairment of up to GBP470,000 would arise in
relation to two sites.
Right-of-use assets relate to property leases.
Included within additions for the year are GBP72,000 of
capitalised interest (2019: GBP176,000), GBP168,000 of capital
contributions from landlords not yet received (2019: GBPnil),
GBP820,000 of accrued capital expenditure for invoices not received
(2019: GBP2,278,000) and GBP116,000 of invoices received but not
paid at 31 December 2020 (2019: GBP3,382,000).
9. Borrowings
31 December 31 December
2020 2019
GBP'000 GBP'000
--------------------------- ------------ ------------
Revolving credit facility 49,798 50,000
Loan arrangement fees (618) (884)
---------------------------- ------------ ------------
49,180 49,116
--------------------------- ------------ ------------
The Group's bank borrowings are secured by way of fixed and
floating charges over the Group's assets.
In October 2019, the Group successfully refinanced its
borrowings, moving from a mix of term loans and Revolving Credit
Facility ('RCF') to a single committed RCF of GBP70 million. The
facility is syndicated to a three lender panel of HSBC, Barclays
and Banco de Sabadell and matures in 2023. On 5 June 2020 the
Company agreed with its lending banks to extend its existing GBP70
million RCF with an additional GBP30 million facility for a term of
18 months, which was subsequently further extended on 17 December
2020 to June 2022 (the New Bank Facility).
The funds borrowed under the New Bank Facility bear interest at
a minimum annual rate of 2.60% (2019: 1.75%) above the appropriate
Sterling LIBOR. The average interest rate paid in the year on drawn
funds under the new facility is 2.28% (2019: 2.71%). Undrawn funds
bear interest at a minimum annual rate of 0.910% (2019: 0.613%). At
the year end, the Group had drawn down GBP51 million (2019: GBP50
million) on the facility.
The 2019 facility resulted in fees incurred of GBP873,000 and
these costs will be spread over the term of the loan using the
effective interest method. The facility is recognised at its
amortised cost. The June 2020 refinancing resulted in fees incurred
of GBP366,000 and the costs will be spread over the remaining term
of the loan on a straight-line basis.
The Group's borrowings are held at amortised cost using the
effective interest method. Each reporting period, the Group reviews
its cash flow forecasts and if these have changed since the
previous reporting period, the borrowings are remeasured using the
original effective interest rate. Any remeasurement of borrowings
is treated as being non-underlying and is excluded from adjusted
earnings.
Covenants
The RCF is subject to financial covenants relating to leverage
and fixed charge cover, which did not change significantly from
those under the previous facility.
From September 2020 until June 2022 the covenant tests of the
RCF have been replaced in the New Bank Facility by new covenant
tests primarily relating to the performance of the Group against
agreed targets for Group Adjusted EBITDA less Normalised 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.
10. Issued capital
The total number of issued share capital as at 31 December 2020
is 165,751,888 (2019: 137,917,377).
11. Long term employee incentive costs
The Group operates share based compensation arrangements under
The Gym Group plc Performance Share Plan and The Gym Group plc
Share Incentive Plan. The awards granted during the year are
similar in nature to those awarded during 2019.
For the year ended 31 December 2020, the Group recognised a
total charge of GBP669,000 (31 December 2019: GBP1,900,000) in
respect of the Group's share based long term incentive plans and
related employer's national insurance.
Five year record
For definitions of these key performance indicators refer to
page 15. The following table sets out a summary of selected key
financial information and key performance indicators for the
business.
2020 2019 2018 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- --------- -------- -------- -------- --------
Revenue 80,470 153,134 123,884 91,377 73,539
Group Adjusted EBITDA less
Normalised Rent (10,169) 48,540 39,131 30,558 25,377
Group Operating Cash Flow (16,282) 39,178 33,972 24,677 24,944
Expansionary Capital Expenditure 21,828 30,919 57,551 52,453 20,922
Non-property Net Debt 47,264 47,395 45,973 37,543 5,178
Non-property Net Debt to
Group Adjusted EBITDA (4.64) 0.98 1.17 1.23 0.20
Total number of Gyms (number) 183 175 159 128 89
Total number of members
('000) 578 794 724 607 448
Average Revenue Per Member
per Month 17.20 16.02 14.89 14.41 14.31
Number of Mature Gyms in
operation (number) 155 109 89 74 55
Mature Gym Site EBITDA 3,865 48,113 38,967 32,376 26,589
Return on Invested Capital
for Mature Sites 2% 31% 30% 30% 32%
----------------------------------- --------- -------- -------- -------- --------
Responsibilities statement
The following statement will be contained in the 2020 Annual
Report and Accounts:
The Directors confirm, to the best of their knowledge:
-- that the consolidated Financial Statements, prepared in
accordance with IFRSs in conformity with the Companies Act 2006
(and IFRSs pursuant to Regulation (EC) 1606/2002 as it applies in
the European Union), give a true and fair view of the assets,
liabilities, financial position and results of the Parent Company
and undertakings included in the consolidation taken as a
whole;
-- that the annual report, including the Strategic Report,
includes a fair review of the development and performance of the
business and the position of the Company and undertakings included
in the consolidation taken as a whole, together with a description
of the principal risks and uncertainties that they face; and
-- that they consider the Annual Report, taken as a whole, is
fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company's position,
performance, business model and strategy.
On behalf of the Board
Mark George
Chief Financial Officer
18 March 2021
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END
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March 18, 2021 03:00 ET (07:00 GMT)
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