TIDMGYM
RNS Number : 9482E
Gym Group PLC (The)
16 March 2022
16 March 2022
The Gym Group plc
('The Gym Group', 'the Group' or 'the Company')
2021 Full Year Results
Recovering strongly - accelerating the pace of change
The Gym Group, the nationwide operator of 203(1) low cost, high
quality, 24/7 no contract gyms, announces its full year results for
the year ended 31 December 2021.
Financial highlights
Year ended 31 December 2021 Year ended 31 December 2020 Movement
Revenue (GBPm) 106.0 80.5 31.7%
Group Adjusted EBITDA (GBPm) 35.4 16.8 110.7%
Group Adjusted EBITDA Less Normalised Rent
(GBPm) 5.7 (10.2) n/a
Adjusted Loss for the year (GBPm) (28.5) (35.4) 19.5%
Basic and Diluted Adjusted Loss per share
(p) (16.7) (22.5) 25.8%
Statutory Loss for the year (GBPm) (35.4) (36.4) 2.7%
Basic and Diluted Statutory Loss per share
(p) (20.7) (23.1) 10.4%
Year ended 31 December 2021 Year ended 31 December 2020 Movement
------------------------------------------ ---------------------------- ---------------------------- ---------
Non-Property Net Debt (GBPm) (44.1) (47.3) 6.8%
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(1) As at 16 March 2022; 202 sites as at 31 December 2021 (31
December 2020: 183); one additional site opened in January
2022.
For a summary of KPI definitions used in the table see the
'Definition of Non-Statutory Measures' section .
Strong recovery in 2021
-- Significant increase in membership numbers following re-opening
in April, with total members at 31 December 2021 of 718,000,
up from 547,000 at the end of February 2021 (Dec 2020:
578,000)
-- Strong operational performance with record member satisfaction
scores and high staff engagement; ranked in top 25 Glassdoor
Best Places to Work in the UK
-- Yield strengthened with average price of a standard DO
IT membership at GBP19.27 in December 2021 (Dec 2020: GBP18.81)
and penetration of premium LIVE IT membership at 27.1%
(Dec 2020: from 22.5%)
-- Cash flow positive in all months when gyms were open;
Group Adjusted EBITDA Less Normalised Rent of GBP5.7m for
FY 2021 (FY 2020: loss of GBP10.2m); GBP13.8m in H2 when
gyms fully open
-- Low leverage positions business for accelerated growth;
Non-Property Net Debt (including finance leases) at 31
December 2021 of GBP44.1m (Dec 2020: GBP47.3m)
-- Accelerated rollout underway; 19 sites opened in the year
(of which 15 in H2); new sites trading well
Accelerating into 2022 and beyond
-- Encouraging start to 2022 with membership growing 14.9%
in the first two months despite impact of Omicron on early
January trading; 825,000 members at 28 February 2022 (50%
growth since Feb 2021)
-- Plan to open 28 sites in 2022 with 20 leases already exchanged;
rollout target increased to 25-30 openings for 2023 and
2024
-- New technology platform launching in April 2022 to drive
website traffic, engagement and conversion
-- Strengthened digital fitness offer - 200 classes online
for all members at no additional charge
-- Brand transformation commencing Spring 2022 to support
membership recovery and future growth
Richard Darwin, CEO of The Gym Group, commented:
" The Gym Group has had an encouraging start to the year,
building on the momentum of our excellent recovery in 2021. We have
now grown our membership by 50% in the 12 months to February 2022.
Our rollout programme is accelerating with a further 28 openings
planned in 2022, increasing the number of communities that can
access our high quality, great value gyms. We are confident that
our high margin, low-cost business model and our yield optimisation
strategy will help to mitigate the impacts of the current
inflationary environment. Our pace of change is accelerating
through the launch of a new technology platform and a brand
transformation in 2022 as we position our business to take
advantage of the many growth opportunities within the low cost gym
market. "
A live audio webcast of the analyst presentation will be
available at 10:00 a.m. today via the following link:
https://webcasting.brrmedia.co.uk/broadcast/6225e0c2969a0548ac0c33b0
The company announces it will host a capital markets day on 19
May 2022 in London.
For further information, please contact:
The Gym Group via Tulchan
Richard Darwin, CEO
Mark George, CFO
Numis
Luke Bordewich
George Price 0207 260 1366
Peel Hunt
Dan Webster
George Sellar 0207 418 8900
Tulchan
James Macey-White
Elizabeth Snow 0207 353 4200
Forward-looking statements
This announcement includes statements that are, or may be deemed
to be, 'forward-looking statements'. By their nature, such
statements involve risk and uncertainty since they relate to future
events and circumstances. Actual results may, and often do, differ
materially from any forward-looking statements. Any forward-looking
statements in this announcement reflect management's view with
respect to future events as at the date of this announcement. Save
as required by law or by the Listing Rules of the UK Listing
Authority, the Company undertakes no obligation to publicly revise
any forward-looking statements in this announcement following any
change in its expectations or to reflect subsequent events or
circumstances following the date of this announcement.
Chair of the Board's Statement
2021 was the second year that the business was severely impacted
by the COVID-19 pandemic, with our gyms shut for over 100 days, or
28% of the year. However, the steps we took in 2021 benefited from
our experience of managing the crisis in 2020 and, as a result, we
were well-placed to capitalise as restrictions eased and people
returned to gyms. We fully expect that 2022 will represent a return
to a near normal environment.
Those confident steps have been rewarded with a significant
recovery in membership, strong member satisfaction, excellent
employee engagement and good engagement with a wide set of
stakeholders - from shareholders, banks, suppliers and landlords
who have all played an active role in supporting our strong
recovery.
Financial results
Whilst full-year results were impacted by the pandemic,
significant progress has been made when compared with 2020.
Revenues were up 31.7% and Group Adjusted EBITDA Less Normalised
Rent was GBP5.7m, up from a loss of GBP10.2m in 2020; and the
statutory loss for the year was GBP35.4m, down from GBP36.4m in
2020. This is a business that has quickly returned to generating
free cash flow when open; and with a well-supported GBP30m equity
raise to strengthen the balance sheet, we are now accelerating our
growth ambitions with fast organic site rollout, targeting 28
openings in 2022.
Strategic clarity
We have taken the opportunity of recovery to review and refresh
our strategy. Providing affordable fitness for all through gym
usage is even more important post COVID-19, with an increased
desire to improve both physical and mental health through physical
activity. Equally, in tougher economic times and periods of
inflation, our low cost offering provides great value for
money.
We remain ambitious to maximise our UK expansion through
accelerated openings, taking advantage of a favourable property
market, our strong covenant relative to peers and good reputation
with landlords. We are investing to drive membership through
greater brand awareness and by improving our offer, notably in
group exercise classes which are particularly attractive to female
gym users.
We are increasing our commercial sophistication supported by
expert resources to make better pricing decisions and focus on
driving sales. We have strengthened our digital fitness offer in
partnership with Fiit, now offering 200 classes online to all our
members for no additional charge. We have also appointed our first
Strategy Director to help us explore longer-term opportunities for
growth. All these initiatives were developed in 2021 and set the
business up well, not just for good recovery, but for realising
significant profitable growth in the years ahead.
Our work as a Board
Our Company Secretary, Katy Tucker, went on a period of
maternity leave in July 2021, handing over to Nadira Hussein as
Interim Company Secretary - and credit to them both, we have not
missed a beat! The year has included extensive induction programmes
for newly appointed Non-Executive Directors, Wais Shaifta and Rio
Ferdinand, and the first year of David Kelly as Chair of the Audit
and Risk Committee and Emma Woods as Chair of the Remuneration
Committee and Senior Independent Director. We have also introduced
a Sustainability Committee with oversight responsibility for
matters relating to ESG, health, safety and wellbeing and equality,
diversity and inclusion.
Our Board deliberations are engaged, ambitious and supportive.
Our Board effectiveness review was undertaken with the help of
external specialist resources for the first time this year and,
whilst confirming the Board and its Committees work to a high
level, gave us valuable insights to make us fitter for the future.
Finding more space for free-flow thinking, utilising in the best
way the different perspectives brought by new Directors Rio and
Wais, and overtly aligning Directors to aspects of strategic growth
are being adopted within our ways of working. We will maintain an
active dialogue on succession too.
Early in 2022, we announced that our Chief Financial Officer
('CFO'), Mark George, will leave The Gym Group for a new role with
Wickes plc. Mark has played a full role as CFO and Executive
Director since joining us in 2018 and he leaves with our thanks and
good wishes for the future. Our search for his successor is well
underway and Mark's replacement will be announced in due
course.
Awards and recognition
I was delighted to be shortlisted for the Non-Executive Director
Awards (FTSE All Share). For me, it is the story of The Gym Group
that is being recognised. Two years of pandemic in which our normal
24/7 business had to close its doors for repeated long periods has
been an unprecedented shock. However, the actions we have taken
together have ensured a good recovery and a positive outlook ahead.
We are a strong and relevant leisure business and the opportunity
for growth looks as significant now as at any time.
We continue to generate significant social value and have
focused the business on helping members to work out at least four
times a month, the critical level of exercise that research
supports makes a positive health contribution. We have committed to
achieving net-zero by 2035 in line with the Science Based Targets
initiative ('SBTi'). We were also very pleased indeed to be
included at number 25 in Glassdoor's prestigious list of the top 50
Best Places to Work in the UK. Our colleagues care passionately
about our members and worked tirelessly to ensure our gyms were
clean, safe and welcoming places for members to return to, enjoy
and improve their wellbeing. Our focus on all stakeholders sets The
Gym Group in position to deliver attractive sustainable growth.
As this document was being finalised, we have all witnessed the
Russian invasion of Ukraine. This is a shocking event at every
level and our thoughts are with the Ukrainian people. There have
been many global impacts as a result of this but there is no direct
impact to our business model, and escalating energy costs are a
small proportion of costs in our high margin business. We cannot
know how events will unfold but remain confident in our
business.
Chief Executive's Review
2021 has been a significant year of recovery for The Gym Group
as we have rebuilt membership following the three lockdowns imposed
during the pandemic. Membership grew from 578,000 in December 2020
to 718,000 at year end. We believe, as a business, that we are
better placed to prosper in the years ahead than at any time in our
history, and look forward with confidence to further recovery as
the operating environment normalises. We are exiting the pandemic
with a highly engaged team and member satisfaction scores as high
as we have seen. We believe that this is a great launchpad from
which to accelerate our expansion.
The market dynamics for our business are very strong. The demand
for health and fitness will continue to increase because of the
health shock that the pandemic has given to so many people. Within
health and fitness, low cost gyms are the part of the market that
are growing most rapidly and in the type of sites that are most
suitable for us, there is a once in a generation opportunity to
expand; and we do so with a relatively unleveraged balance sheet at
a time when many of our competitors are more constrained
financially.
Throughout the pandemic, we have made the bold decisions to
reinforce our market position. At the beginning of the year, we
decided to keep our central teams working so that we could make
progress on initiatives such as improvements to our technology
platform, website and class offering. We also invested in our teams
through support via online training to ensure that they were
engaged and ready for the re-opening. In July, we were delighted to
receive the support of our shareholders to raise GBP30m to
accelerate our rollout with 40 sites to be opened within the
18-month period up to the end of 2022.
By February 2021, our membership number had reduced to 547,000
as we experienced typical levels of attrition without significant
acquisition during lockdown. Immediately after re-opening in April,
we saw a period of exceptional membership acquisition - the
opportunity to go to the gym became an attractive option at a time
when there were limited other leisure venues open. As expected,
through the second half of the year, the more normal seasonal
patterns re-established themselves such that we finished the year
with 718,000 members; this is 90% of the pre-COVID-19 December 2019
number. Like-for-like membership numbers are around 82% of these
levels given the increase in the size of our estate in the last two
years. In the autumn, we saw a pleasing number of students
re-joining as university attendance began to normalise.
The recovery has not been uniform across the country or by type
of site location. Sites in the North have recovered membership
fastest and are now operating at pre-COVID levels of revenue per
site. Recovery has been slower in London and the South where
people's day-to-day routines have been slower to return to normal.
In the small number of city centre workforce-dependent gyms, the
recovery has also been patchy because of the work from home
guidance in December 2021 and January 2022 under Plan B
restrictions. In contrast, we have seen good levels of recovery in
our sites located in suburban locations. In light of these factors,
we have been encouraged by the overall growth in member numbers to
825,000 by the end of February 2022 - an increase of 50% versus
February 2021.
One of our key strengths is a relatively unleveraged balance
sheet with low levels of debt and strong liquidity. At the end of
2021, our Non-Property Net Debt was GBP44.1m - below the level of
December 2020 - reflecting cash outflow from the 19 sites that we
have opened in the year but benefitting from the GBP30m proceeds
from the equity raise. This result is also indicative of how
quickly post re-opening we reverted to generating free cash flow.
Our aim is to return as quickly as possible to a position where our
free cash flow generation enables us to self-finance our expansion
plans.
One of the most pleasing aspects since re-opening has been how
our members have responded to the operating changes we have made,
both in terms of cleanliness of the gym as well as developments we
have made in group exercise classes ('Group X'). This is reflected
in member satisfaction scores higher than pre-COVID-19 levels.
Member visits are a key metric for our business, not just in terms
of member engagement with the gym but also how it delivers social
value to our members and communities. The work that we have done
during the year on social value with 4Global demonstrates that we
delivered over GBP4m social value per gym in 2019. This study
showed that social value is driven most significantly when members
work out more than four times per month. Throughout 2022 and
beyond, a key initiative will be to encourage our members to
increase their frequency of workouts. We plan to put in place
incentive schemes for our frontline staff to drive this metric.
The financial results in 2021 were, once again, substantially
impacted by the periods of closures from January to mid-April 2021
(end of April in Wales and Scotland) although ahead of 2020 when
there were more closure days. Revenue was GBP106.0m (2020:
GBP80.5m) up 31.7%, and Group Adjusted EBITDA Less Normalised Rent
was GBP5.7m compared with a loss of GBP10.2m in 2020. These results
show how the business has bounced back from the periods of closure
in 2021 to be able to immediately generate positive EBITDA after
rent. The Adjusted Loss for the year was GBP28.5m and the Statutory
Loss was GBP35.4m.
The distress in the commercial property market caused by the
pandemic and shifts in retailing to online, is presenting a
once-in-a-generation opportunity for us to accelerate our rollout.
When we came into 2021, we were beginning to build the pipeline so
that we could recommence our rollout programme once gyms re-opened.
In total, 19 sites were opened in the year, including one small box
site. This brought our portfolio up to 202 sites at year end and
included four sites opened on a single day in December 2021 - a
record for the business. Since year end, we have opened a further
site in Glasgow, Scotland, bringing the total estate to 203. This
size of estate and pace of rollout positions us as the second
largest operator within the UK health and fitness market by number
of sites and we continue to see substantial growth to come as we
plan to open 28 sites in 2022. The sites that we have opened have
been performing well and in line with pre-COVID-19 patterns of
maturity for our estate.
Strategic priorities
As we emerged from the pandemic in the past year, we took the
opportunity to review and refresh our strategy to ensure it
remained relevant for the post COVID operating environment. Our
strategic priorities can be summarised around three key initiatives
- (i) rebuilding and extending our membership; (ii) accelerating
our UK rollout; and (iii) growing sustainably - and I am pleased
with the progress made on each in the past year.
(i) Rebuilding and extending our membership
Key to our recovery is the ability to attract both previous
members and new members to our gyms. Where we have seen the most
rapid recovery is in sites which are located within the residential
areas of large towns and cities, where most of our gyms are
located. The slowest recovery has been in the small number of city
centre sites that are wholly dependent on workforce. Our property
acquisition strategy has been concentrated in residential areas for
a number of years and, as a result, we have a limited number of
workforce-dependent sites. Our low price point makes us a very
attractive proposition to prospective members and continues to
underpin the recovery in membership levels that we have seen.
The big seasonal period of demand for our business continues to
be January/February; and, as a result of the pandemic, 2022 is the
first normal January/February period of acquisition since 2020.
Whilst the first two weeks were impacted by the Omicron variant, we
have been encouraged by how we have traded in January and February.
With membership at the end of February of 825,000 and 28 sites
planned to be opened in 2022, we are well set for a strong recovery
in our financial performance in the year to come.
Our focus is also on attracting new members with different
characteristics from those in our current membership base. We
believe there is an opportunity to increase the number of females
who join our gyms, particularly by focusing on group exercise
classes. In addition, by reiterating the significant value
proposition, there is an opportunity to attract those prospective
members who still believe that gyms are expensive. Finally, we plan
to increase the communication around sustainability to members as
this is an area of strength for The Gym Group and of member
interest.
Brand transformation
2022 will also be the year when we complete a brand
transformation project and relaunch our brand. Over the past few
months, we have been working on a new visual identity for our brand
under the brand name 'The Gym Group', where previously we traded as
'The Gym'. This will drive consistency across the estate and bring
the brand name in line with our website URL - historically we have
always driven member and non-member traffic to thegymgroup.com. By
the end of September, all sites will have new signage reflecting
the new visual identity, and the website and other digital
collateral will be implemented from the end of September. By the
September/October campaign, all marketing will also be using the
updated brand. I am excited by this brand transformation - it is a
natural next step for us as a business and we believe it will
cement our position as a modern consumer brand in the health and
fitness market.
Improving commercial sophistication
Now that we have expanded above 200 sites, our ability to
operate effectively at scale becomes even more important. As we
develop a truly nationwide business, we see a particular
opportunity to drive pricing and yield from a starting position as
the lowest priced gym operator, typically c.GBP4 cheaper than local
competitors. The most important part of this yield growth in recent
years has been the growth of our premium multi-site membership,
LIVE IT. This has now reached 27% of our membership, particularly
helped by the network effect of having more locations where
multi-site access is a good option for members. As we continue our
growth path, we see the opportunity to offer additional packages
with more content in them and to further increase yield through
price increases that we expect will more than offset cost
inflation. Our Average Revenue per Member per Month ('ARPMM') in
the second half of the year was GBP17.60, up 5.9% vs two years ago
(H2 2019: GBP16.62), demonstrating the progress we have already
made in this area.
We also see further opportunity in retention. We know that
tenure increases when members use the gym more often and will
therefore be focusing on initiatives to ensure that members use the
gym frequently and at least four times per month in line with our
social value goals.
Developing our product offering
As we emerge from the pandemic, we see opportunity to drive
performance by restarting our refurbishment programme with projects
planned to upgrade equipment and improve product layout. A
significant focus is on group exercise classes - currently, take-up
of our class offering is under 5% of our membership base and, as we
have added consistency to the classes we offer, we believe we have
the opportunity to increase this.
We have also been seeking to enhance the digital offering to our
members. For the last two years, we have had a partnership with
Fiit to offer their premium digital classes to members at a
discount and for us to trial (in three gyms) in-gym virtual classes
using their content. We have now extended the arrangement with Fiit
to give members access to 200 high quality classes in The Gym Group
app. This arrangement will enable us to offer high quality digital
content to our members for no additional charge, further
demonstrating the strong value and flexibility we offer to our
members.
(ii) Accelerating our UK rollout
With the funds secured in July 2021 to recommence our rollout,
we have been able to return to our historical levels of site
openings with 19 new sites opened in the year, and we are
encouraged by their early membership growth. This included several
sites that are in target locations where we have been looking for a
while such as Cambridge, York and Oxford. There are further new
locations for us in our pipeline for 2022. This opportunity has
arisen because we are seeing the availability of high quality sites
at good levels of rent across the country. We now have several
different formats that we can deploy ranging from 7,000 sq. ft to
21,000 sq. ft and our openings have reflected this range of format
during the year. We believe that this flexibility will enable us to
maximise our rollout opportunity within the UK market and our
vision is to double the number of sites over the next few
years.
In March 2022, we also agreed to acquire three sites from
Fitness First which will enhance our presence in long-standing
target locations in London residential areas, where we have traded
well historically.
(iii) Focus on sustainability
We believe that we are leading the UK health and fitness sector
with our focus on sustainability and have been accelerating the
work we have been doing in this area. We undertook an extensive
materiality assessment with all our stakeholders and from that
feedback we identified the topics that are of high importance to
our stakeholders and also had a high impact on our business. These
are the areas we are going to focus our sustainability strategy on
in 2022 and beyond.
Our work on increasing the social value we are generating has
continued and we have created a new KPI linked to driving social
value. Our Diversity and Inclusion working group has made great
strides towards breaking down more barriers to fitness for all. We
are also proud to announce that we are the UK's first carbon
neutral gym chain and that we have committed to reducing our 2019
carbon emissions by 50% by 2030 and to being carbon net-zero by
2035, in line with the SBTi.
People
One of our key strengths is our unique team and culture, and we
were delighted to see a 10% increase in the overall engagement
score, to 61%, in our annual employee engagement survey and to be
recognised by Glassdoor as number 25 in their list of the Best
Places to Work in the UK (the only leisure business placed in the
top 50).
Last year I wrote that the support of our teams across our
estate and in our central support had been the highlight for me in
a difficult year during the pandemic. This year, I believe that we
have seen the benefits of the support we gave our people and of a
highly engaged team. An example of that was around the time of the
'pingdemic' during the summer when our team went to extraordinary
efforts to keep our sites open. The commitment of our teams to
ensuring great member service is also enabling us to achieve record
Overall Satisfaction ('OSAT') scores.
In January 2022, Mark George, who has been with us since 2018 as
Chief Financial Officer ('CFO'), informed the Board of his
intention to resign as CFO and Executive Director to take up the
position of CFO at Wickes Group plc. Since joining in 2018, Mark
has evolved and strengthened the Group's finance function and
successfully secured new bank and equity financing to get us
through the pandemic, ensuring that the business is well placed to
deliver its accelerated growth strategy. I would like to thank Mark
for his significant contribution to The Gym Group and wish him well
in his future career.
We have started a search to identify and appoint a successor to
Mark, who is expected to remain with the Group until July 2022.
Technology
Another key enabler to building a successful business that can
operate effectively at scale, is in our technology development. In
the second quarter of 2022, we will be relaunching our technology
platform with a new website and content management system. It is
this development that will enable value-driving improvements such
as new product offerings and flexibility in pricing, as well as
enhancing our Search Engine Optimisation ('SEO') and performance
marketing. This project will also drive new resilience in our core
systems, enabling us to take advantage of peaks in demand.
Our business is as well-positioned as any in our sector to
flourish as the economy emerges from the pandemic. We have a clear
set of strategic priorities that will deliver significant
shareholder value and we do so after a good start to 2022 with
strong membership growth in January and February despite some
initial disruption from Omicron. At the current time there is
considerable global uncertainty as a result of the tragic events in
Ukraine. However, we are confident that our high margin, low cost
model will enable us to withstand the impact of an inflationary
environment.
Our purpose is to break down barriers to fitness for all and we
are delivering on that goal as we spread into more communities
across the country. I am encouraged by the start to the year that
we have had and look forward to making further strong progress in
the year ahead as we put the challenges of the pandemic behind
us.
Financial Review
Presentation of results
This financial review uses a combination of statutory and
non-statutory measures to discuss performance in the year. The
definitions of the non-statutory Key Performance Indicators can be
found in the 'Definition of Non-Statutory Measures' section. To
assist stakeholders in understanding the financial performance of
the Group, aid comparability between periods and provide a clearer
link between the Financial Review and the Consolidated Financial
Statements, we have also adopted a three-column format to
presenting the Group Income Statement in which we separately
disclose underlying trading and non-underlying items.
Non-underlying items are income or expenses that are material by
their size and/or nature and that are not considered to be incurred
in the normal course of business. These are classified as
non-underlying items on the face of the Group Income Statement
within their relevant category. Non-underlying items include
restructuring and reorganisation costs (including site closure
costs), costs of major strategic projects and investments,
impairment of assets, amortisation and impairment of business
combination intangibles, profit/loss on disposal of assets and
businesses, revaluation gains or losses on borrowings, and
refinancing costs. Further details on non-underlying items are
provided later in this report.
Summary
2021 has again been challenging overall for The Gym Group as a
result of the COVID-19 pandemic, with Government-enforced gym
closures in the first three and a half months resulting in the loss
of almost 30% of trading days. Whilst this has had an inevitable
detrimental impact on our overall financial performance in the
year, we have navigated the challenges well and taken a number of
actions to mitigate the impact of the lost revenue, including
reducing costs and capital expenditure to conserve cash. In
addition, we continued to receive UK Government support in the form
of business rates relief, furlough payments and local authority
grants.
Gyms re-opened in England on 12 April, followed by gyms in
Scotland on 26 April and in Wales on 3 May. Following an initial
period of above-expected demand immediately after re-opening, where
we saw strong membership recovery and an increased average number
of visits per member, trading returned to a more normal seasonal
pattern in the second half of the year. Despite the challenges of
the pandemic, we opened 19 new gyms in the year, taking our total
estate to 202 gyms as at 31 December 2021. The new site openings in
the second half of the year were funded by the GBP30m equity raise
we completed in July 2021. The gyms that opened in the year are
performing well.
Year ended 31 December 2021 Year ended 31 December 2020 Movement
------------------------------------------ ---------------------------- ---------------------------- ---------
Total number of gyms at year end 202 183 10.4%
Total number of members at end of period
('000) 718 578 24.2%
Revenue (GBPm) 106.0 80.5 31.7%
Group Adjusted EBITDA (GBPm) 35.4 16.8 110.7%
Group Adjusted EBITDA Less Normalised Rent
(GBPm) 5.7 (10.2) n/a
Adjusted Loss before Tax (GBPm) (36.8) (46.5) 20.9%
Adjusted Loss for the year (GBPm) (28.5) (35.4) 19.5%
Statutory Loss before Tax (GBPm) (44.2) (47.2) 6.4%
Statutory Loss for the year (GBPm) (35.4) (36.4) 2.7%
Group Operating Cash Flow (GBPm) 6.3 (16.3) n/a
Free Cash Flow (GBPm) 2.0 (16.6) n/a
Non-Property Net Debt (GBPm) (44.1) (47.3) 6.8%
------------------------------------------- ---------------------------- ---------------------------- ---------
Results for the year
Year ended 31 December Year ended 31 December
2021 2020
Underlying Non-underlying Total Underlying Non-underlying Total
result items result items
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 106.0 - 106.0 80.5 - 80.5
Cost of sales (1.7) - (1.7) (2.1) - (2.1)
-------------------------------- ----------- --------------- ------- ----------- --------------- -------
Gross profit 104.3 - 104.3 78.4 - 78.4
Other income 7.3 - 7.3 0.4 - 0.4
Operating expenses
before depreciation,
amortisation and impairment (79.1) (2.3) (81.4) (62.7) 0.5 (62.2)
Depreciation, amortisation
and impairment (52.7) (4.2) (56.9) (48.0) (2.5) (50.5)
-------------------------------- ----------- --------------- ------- ----------- --------------- -------
Operating loss (20.2) (6.5) (26.7) (31.9) (2.0) (33.9)
Finance costs (16.6) (0.9) (17.5) (14.6) 1.3 (13.3)
Loss before tax (36.8) (7.4) (44.2) (46.5) (0.7) (47.2)
Tax credit/(charge) 8.3 0.5 8.8 11.1 (0.3) 10.8
-------------------------------- ----------- --------------- ------- ----------- --------------- -------
Loss for the year attributable
to shareholders (28.5) (6.9) (35.4) (35.4) (1.0) (36.4)
Loss per share
Basic and diluted (p) (16.7) (20.7) (22.5) (23.1)
-------------------------------- ----------- --------------- ------- ----------- --------------- -------
Revenue
Revenue in the year increased by 31.7% to GBP106.0m (2020:
GBP80.5m), reflecting the increased number of open trading days
compared to the prior year (72% vs 55%).
In the periods of Government-enforced closure, we earned close
to zero revenue as we 'froze' members' accounts so they did not pay
their subscription whilst gyms were closed. Ancillary income (e.g.
vending) and rental income from our Fitness Trainers were also lost
during these closure periods.
Whilst the number of trading days was higher year on year,
average membership numbers in 2021 were lower than in 2020 due to
the extended periods of closure during 2020 and early 2021. From a
peak in February 2020 of 891,000, membership decreased to 547,000
by the end of February 2021. When gyms re-opened in April 2021, we
saw stronger demand than expected, with member numbers increasing
to 730,000 by the end of June 2021, before falling back in line
with seasonal norms to end the year at 718,000. The 'free freeze'
option for members was removed on re-opening which ensured that
revenue recovered strongly from the re-opening date.
Since re-opening, we have been able to maintain a good yield per
member. The average headline price of a standard DO IT membership
increased to GBP19.27 in December 2021 compared with GBP18.81 in
December 2020 and the proportion of members taking our premium LIVE
IT membership increased to 27.1% in December 2021 compared with
22.5% in December 2020. As a result of the increased headline
prices and LIVE IT penetration, Average Revenue Per Member Per
Month ('ARPMM') in the second half of the year was GBP17.60, up
5.9% on H2 2019.
Cost of sales
Cost of sales at GBP1.7m (2020: GBP2.1m) was GBP0.4m lower than
the prior year despite the increase in revenue and reflects
improved stock management.
Other income
Other income in the year amounted to GBP7.3m (2020: GBP0.4m) and
predominantly reflects income received under the various
COVID-related Government grant schemes.
Underlying operating expenses before depreciation, amortisation
and impairment
Underlying operating expenses before depreciation, amortisation
and impairment are made up as follows:
Year ended Year ended
31 December 31 December
2021 2020
GBPm GBPm
---------------------------------------------------- ------------- -------------
Site costs before Normalised Rent 60.2 49.2
Add: Normalised Rent 29.7 27.0
---------------------------------------------------- ------------- -------------
Site costs including Normalised Rent 89.9 76.2
Central support office costs 16.0 12.8
Long-term employee incentive costs 2.9 0.7
---------------------------------------------------- ------------- -------------
108.8 89.7
Less: Normalised Rent (29.7) (27.0)
---------------------------------------------------- ------------- -------------
Underlying operating expenses before depreciation,
amortisation and impairment 79.1 62.7
---------------------------------------------------- ------------- -------------
Site costs including Normalised Rent
Site costs including Normalised Rent increased to GBP89.9m
(2020: GBP76.2m), reflecting the higher level of variable operating
costs and lower levels of Government support as gyms were open for
more trading days of the year. We also invested more in marketing
year on year to stimulate demand following re-opening. In addition,
the increase in the gym portfolio also contributed to the site
costs increase year on year.
During periods of closure, management continued to control
operating costs and take advantage of Government support in the
form of the Coronavirus Job Retention Scheme ('CJRS') and business
rates relief. We also continued to negotiate COVID-related rent
concessions with landlords. Across our gyms and central support, we
furloughed approximately 95% of our staff during closure periods.
The total support claimed from the CJRS during the year was GBP3.4m
(2020: GBP6.1m) and has been netted off against staff costs within
Underlying operating expenses in the Group's income statement. When
gyms re-opened, furlough support ended and staff costs returned to
more normal levels.
Business rates relief amounted to GBP8.2m in the year (2020:
GBP9.6m). In addition to significant rent deferrals, we also agreed
a further GBP1.6m of rent concessions in the year (2020: GBP0.7m)
which have been included as a credit within Underlying operating
expenses and a reduction in the lease liability, in line with the
IASB practical expedient for COVID-19-related rent concessions in
relation to IFRS 16 Leases.
Cleaning and maintenance costs also increased in the run-up to
and following re-opening as we worked to ensure a safe and
welcoming gym environment for both members and staff. Despite many
of the COVID-secure regulations falling away following re-opening,
we made the decision to continue with many of our enhanced cleaning
protocols to keep members safe. This has contributed to a
significant increase in membership satisfaction scores compared to
pre-COVID levels.
Normalised Rent costs, which are defined as the contractual
rents that would have been paid in normal circumstances without any
agreed deferments, recognised in the monthly period to which they
relate, amounted to GBP29.7m in the year (2020: GBP27.0m). The
increase year on year reflects the growing gym portfolio.
Central support office costs
Central support office costs increased in the year to 31
December 2021 to GBP16.0m (2020: GBP12.8m) as we continued our
investment in people and technology to ensure we emerge strongly
from the pandemic and well-equipped for growth.
Long-term employee incentive costs
Long-term employee incentive costs in the year amounted to
GBP2.9m (2020: GBP0.7m). The increase year on year reflects the
fact that there was an adjustment in the prior year to reverse
certain historical charges following an assessment that financial
targets in relation to the 2018 and 2019 schemes would not be
met.
During the year, the Group granted further shares under the
Performance Share Plan ('PSP'), the Share Incentive Plan ('SIP')
and the Restricted Stock Option Plan 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 met 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. The shares
vest after three years subject to continuous employment.
Underlying depreciation and amortisation
Underlying depreciation and amortisation charges in the year
amounted to GBP52.7m (2020: GBP48.0m). The increase year on year
reflects the increased gym portfolio as well as accelerated
depreciation and amortisation on some technology and signage assets
that will be replaced when the new consumer website and brand are
launched later this year.
Group Adjusted EBITDA Less Normalised Rent
The Group's key profit metric is Group Adjusted EBITDA Less
Normalised Rent as the Directors believe that this measure best
reflects the underlying profitability of the business. Group
Adjusted EBITDA Less Normalised Rent is reconciled to the statutory
operating loss as follows:
Year ended 31 Year ended 31
December 2021 December 2020
GBPm GBPm
Operating loss (26.7) (33.9)
Non-underlying operating items 6.5 2.0
Long-term employee incentive costs 2.9 0.7
Underlying depreciation and amortisation 52.7 48.0
Group Adjusted EBITDA 35.4 16.8
Normalised Rent (29.7) (27.0)
------------------------------------------ --------------- ---------------
Group Adjusted EBITDA Less Normalised
Rent 5.7 (10.2)
------------------------------------------ --------------- ---------------
Group Adjusted EBITDA Less Normalised Rent was GBP5.7m in the
year (2020: loss of GBP10.2m) and reflects the increased site
profitability as a result of the higher proportion of open trading
days and grant income received, partially offset by the investment
in support function costs.
Underlying finance costs
Underlying finance costs in the year amounted to GBP16.6m (2020:
GBP14.6m). The implied interest relating to the lease liability
under IFRS 16 was GBP14.0m (2020: GBP12.7m). Finance costs
associated with our bank borrowing facilities were GBP2.6m (2020:
GBP2.0m) comprising interest costs and fee amortisation.
Non-underlying items
Non-underlying items are costs or income which the Directors
believe , due to their size or nature, are not the result of normal
operating performance. They are therefore separately disclosed on
the face of the income statement to allow a more comparable view of
underlying trading performance.
Year ended Year ended
31 December 31 December
2021 2020
GBPm GBPm
Affecting operating expenses before depreciation,
amortisation and impairment
Costs of major strategic projects and investments 1.8 -
Restructuring and reorganisation costs (including
site closures) 0.5 0.3
Adjustment to net assets acquired in business
combinations - (0.2)
Gain on reduction of lease term - (0.6)
2.3 (0.5)
Affecting depreciation, amortisation and
impairment
Impairment of property, plant and equipment,
right-of-use assets and intangible assets 4.0 1.6
Amortisation of business combination intangible
assets 0.2 0.9
4.2 2.5
Affecting finance costs
Remeasurement of borrowings 0.8 (1.3)
Refinancing costs 0.1 -
--------------------------------------------------- ------------- -------------
0.9 (1.3)
Total all non-underlying items before tax 7.4 0.7
Tax on non-underlying items (0.5) 0.3
--------------------------------------------------- ------------- -------------
Total all non-underlying items 6.9 1.0
--------------------------------------------------- ------------- -------------
Non-underlying costs affecting operating expenses before
depreciation, amortisation and impairment amounted to GBP2.3m in
the year (2020: credit of GBP0.5m).
Costs of major strategic projects and investments in the year of
GBP1.8m includes the costs incurred to date in respect of the brand
transformation project. Also included here are the costs incurred
in relation to the exploration of a potential strategic investment
and the costs associated with the acquisition of the trade and
assets of a portfolio of three sites trading under the Fitness
First brand name, details of which are included in note 13 of the
Consolidated Financial Statements.
Restructuring and reorganisation costs in the year include the
costs of restructuring the Group's marketing department, together
with the costs associated with the previously announced closure of
one of the Group's gyms.
Non-underlying costs affecting depreciation, amortisation and
impairment in the year amounted to GBP4.2m (2020: GBP2.5m) and
comprised GBP4.0m of site impairment in relation to four city
centre workforce-reliant gyms that have struggled to recover
post-COVID as a result of the shift to working from home. Also
included is GBP0.2m of amortisation of business combination
intangibles.
Non-underlying items affecting finance costs amounted to GBP0.9m
in the year (2020: credit of GBP1.3m) and largely reflect the
remeasurement of the Group's Revolving Credit Facility ('RCF')
.
Taxation
The underlying tax credit in the year was GBP8.3m (2020: credit
of GBP11.1m), representing an effective tax rate on underlying loss
before tax of 22.6% (2020: 23.9%).
The effective tax rate on the statutory loss before tax was
19.9% (2020: 22.9%).
Earnings
As a result of the factors discussed above, the statutory loss
before tax for the year was GBP44.2m (2020: loss of GBP47.2m) and
the loss after tax for the year was GBP35.4m (2020: loss of
GBP36.4m).
Adjusted loss before tax is calculated by taking the statutory
loss before tax and adding back the non-underlying items. Adjusted
loss before tax in the period was GBP36.8m (2020: loss of
GBP46.5m). Adjusted loss after tax was GBP28.5m (2020: loss of
GBP35.4m).
The basic and diluted loss per share was 20.7p (2020: loss of
23.1p), and the basic and diluted adjusted loss per share was 16.7p
(2020: loss of 22.5p).
Dividend
As set out in the Group's Annual Report and Accounts 2020, it is
a condition of the GBP30m New Bank Facility that the Company shall
not declare or pay a dividend. Although this facility currently
remains undrawn, the Directors would like to continue to have
access to it as necessary and, as a result, the Directors are not
proposing a final dividend in respect of 2021.
Cash flow
Our focus during the extended lockdown period was to manage
cash, ensuring we exited lockdown with a good level of liquidity,
ready to grow the business and take advantage of the opportunities
in the property market. During lockdown periods, the typical net
cash outflow for the Group was c.GBP5m per month. In open months,
the Group was cashflow positive before expansionary capital
expenditure.
Year ended Year ended
31 December 31 December
2021 2020
GBPm GBPm
-------------------------------------------- ------------- -------------
Group Adjusted EBITDA Less Normalised
Rent 5.7 (10.2)
Rent working capital (2.9) 3.7
Movement in other working capital 7.4 (2.4)
Maintenance capital expenditure (3.9) (7.4)
-------------------------------------------- ------------- -------------
Group operating cash flow 6.3 (16.3)
Non-underlying items (2.2) (0.9)
Bank interest paid (2.0) (1.8)
Taxation (0.1) 2.4
Free cash flow 2.0 (16.6)
Expansionary capital expenditure funded
by leases (7.2) -
Expansionary capital expenditure funded
by other sources (21.8) (21.8)
Refinancing fees (0.1) (0.4)
Net proceeds from issue of ordinary shares 30.3 39.9
Other financial assets purchased - (1.0)
Cash flow before movement in debt 3.2 0.1
Net increase in finance lease indebtedness 6.4 -
Net (repayment)/drawdown of borrowings (6.0) 1.0
Net cash flow 3.6 1.1
-------------------------------------------- ------------- -------------
The Group operating cash inflow in the year was GBP6.3m (2020:
outflow of GBP16.3m), reflecting the Group's return to
profitability at the EBITDA level.
Following the introduction of Government relief measures on VAT,
we deferred a GBP1.9m VAT payment relating to Q1 2020 that was due
to be paid in March 2020. This deferred VAT has been repaid equally
over an eight-month period, with the first instalment being made in
June 2021. As at 31 December 2021, GBP0.2m of deferred VAT remained
outstanding which was paid in January 2022. Despite this, there was
a net inflow on working capital (excluding rent) in the year of
GBP7.4m (2020: outflow of GBP2.4m) which reflects the business
returning to more normal creditor levels following the re-opening
of gyms in April.
The above inflows were partially offset by a net outflow on rent
working capital of GBP2.9m (2020: inflow of GBP3.7m), reflecting
the unwind of deferred rents from 2020 and a general return to more
normal rental payment patterns. As at 31 December 2021, GBP2.1m of
rent deferrals remained outstanding (31 December 2020: GBP3.8m). In
addition, for a number of sites, we were able to establish deals
with landlords to extend the leases or take out a lease break in
exchange for rent-free periods; the cash flow benefit of these
rent-free periods in 2021 was GBP2.6m (2020: GBP1.4m).
Fixed asset additions in respect of maintenance capital
expenditure remained relatively low in the year at GBP4.7m (2020:
GBP6.1m) as we focused only on repairs required for health and
safety reasons to conserve cash where possible in the first half of
the year. Adjusting for the movement in capital creditors, the cash
flow from maintenance capex was GBP3.9m (2020: GBP7.4m). We expect
expenditure on maintenance to return to more normal levels in
2022.
Fixed asset additions in respect of expansionary capital
expenditure in the period amounted to GBP29.4m (2020: GBP18.5m) and
relate to the Group's investment in the fit-out of new and acquired
gyms and technology projects . The fit-out costs are stated net of
contributions towards landlord building costs. During the year, we
opened 19 new sites and completed work on a further site which was
opened in January 2022, spending a total of GBP24.2m. The
investment in technology in the year of GBP5.2m relates largely to
enhancements made to the member experience, including improvements
to the Group's website and new functionality in the app. Adjusting
for the movement in capital creditors, the cash flow from
expansionary capital expenditure was GBP29.0m (2020: GBP21.8m),
including GBP7.2m funded by finance leases (2020: GBPnil).
On 2 July 2021, the Group's balance sheet and liquidity was
further strengthened by an equity placing. The Gym Group plc issued
11,350,000 new ordinary shares and raised gross proceeds of
GBP31.2m. The costs directly related to the transaction amounted to
GBP0.9m. At the same time as the equity placing, certain
restrictions in the Group's banking facilities around capital
expenditure and finance lease debt were relaxed.
Following the share issue, the total number of shares in issue
was 177,560,022. The proceeds of the share issue are being used to
accelerate the Group's site rollout programme.
Balance sheet
Year ended Year ended
31 December 31 December
2021 2020
GBPm GBPm
------------------------- ------------- -------------
Non-current assets 549.9 521.9
Current assets 14.8 10.5
Current liabilities (57.4) (43.1)
Non-current liabilities (355.2) (334.9)
------------------------- ------------- -------------
Net assets 152.1 154.4
------------------------- ------------- -------------
Non-current assets increased in the year by GBP28.0m to
GBP549.9m due to the opening of 19 additional sites in the year
which resulted in an increase in the right-of-use assets. The
deferred tax asset also increased as a result of the increased
losses in the year and the impact of the change in UK corporation
tax from 19% to 25%, following substantive enactment of the Finance
Act 2021.
Current assets increased in the year by GBP4.3m, reflecting a
higher cash balance at year end.
Current liabilities increased in the year by GBP14.3m as we saw
a return to more normal trade payables as sites were fully open
this year end. Lease liabilities were also higher, reflecting the
new site openings.
Non-current liabilities largely comprise the long-term element
of the Group's lease liabilities and drawn bank debt. The increase
in the year of GBP20.3m reflects the inception of new leases on the
new sites, partly offset by GBP5.0m lower bank borrowings.
At 31 December 2021, the Group had Non-Property Net Debt of
GBP44.1m (31 December 2020: GBP47.3m) comprising drawn facilities
of GBP45.0m and finance leases of GBP6.4m, less cash of GBP7.3m.
Deferred rent and VAT at the balance sheet date amounted to GBP2.1m
and GBP0.2m respectively. During the year, the Group agreed with
its lenders a waiver for both the March and June 2021 covenants as
a result of the extended lockdown period.
In March 2022, the Group obtained credit committee approval from
its banks for certain changes to its RCF facility. These included a
one-year extension of Facility A (GBP70m) to October 2024; the
cancellation in full of the temporary Facility B (GBP30m) and
replacement with a new GBP10m facility to October 2024; and further
relaxation of finance lease restrictions.
Going concern
The Board has reviewed the financial forecasts and downside
scenarios of the Group and has a reasonable expectation that the
Group has adequate resources to continue in operational existence
for the period to 30 June 2023. As a result, the Directors continue
to adopt the going concern basis in preparing the Consolidated
Financial Statements. In making this assessment, consideration has
been given to the current and future expected trading performance;
the Group's current and forecast liquidity position; the continued
positive momentum with regards the COVID-19 situation and success
of the UK booster vaccination programme; the support received to
date from our lenders and shareholders; and the mitigating actions
that can be deployed in the event of reasonable downside scenarios.
Further detail is provided in note 2 of the Consolidated Financial
Statements.
Trading update and outlook
In the first two months of the year, membership levels increased
by 14.9% to 825,000 at 28 February 2022, despite the Omicron
variant temporarily interrupting the improving consumer confidence.
Sites in the North and in suburban locations are recovering more
quickly than locations in the South and in city centres, reflecting
both the Omicron-related work from home guidance and more disrupted
working routines in those areas. This pattern gives us confidence
that, as the normalisation of routines occurs across the country,
we will see stronger recovery in the rest of our estate.
Taking this uneven pattern into account, we expect that, on a
like-for-like basis, mature sites will be at pre-COVID levels of
revenue per month by Q4 2022 and higher in 2023. This will be
driven by a combination of the momentum in membership numbers and
price increases in 2022 as we seek to optimise revenue through
yield management, whilst retaining price leadership in the market.
In the current inflationary environment, we are seeing inflation in
our operating cost base which is expected to be 4-6% overall
(driven notably by a c.GBP2m increase in utility costs in the
second half). Whilst these increases will not be fully offset
through price rises and operational efficiency in 2022, we expect
that by 2023 they will be offset as the full benefit of the price
rises starts to come through.
We plan to open 28 new sites in 2022, of which 20 leases have
already been exchanged. Maintenance capital expenditure is expected
to return to more normal levels of 6-7% of revenue (c.GBP12m) in
2022 in order to maintain our high quality gym experience; and
expenditure on technology capital expenditure is expected to be
c.3% of revenue. The new technology platform that will be launched
in Q2 is expected to drive online conversion and member experience.
The brand transformation project, the rollout of which is expected
to commence in spring 2022, will increase brand awareness and
marketing effectiveness and will require a GBP7m one-off investment
in 2022 (of which GBP5m will be capital expenditure).
Key Performance Indicators
Definition of Non-statutory Measures
- Group Adjusted EBITDA - operating profit before depreciation,
amortisation, long-term employee incentive costs and non-underlying
items.
- Normalised Rent - 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 Loss/Profit before Tax - loss/profit before tax
before non-underlying items.
- Adjusted Earnings - loss/profit for the year before non-underlying
items and the related tax effect.
- Basic Adjusted EPS - loss/profit for the year before non-underlying
items and the related tax effect, divided by the basic weighted
average number of shares.
- Group Operating Cash Flow - Group Adjusted EBITDA Less Normalised
Rent, movement in working capital and maintenance capital
expenditure.
- Free Cash Flow - Group Operating Cash Flow less cash non-underlying
items, bank and non-property lease interest and tax.
- Non-Property Net Debt - bank and non-property lease debt
less cash and cash equivalents.
- Mature Gym Site EBITDA - Group Adjusted EBITDA Less Normalised
Rent contributed by mature sites.
- Return On Invested Capital of Mature Sites - Mature Gym
Site EBITDA divided by total capital initially invested in
the mature sites.
- Maintenance capital expenditure - costs of replacement gym
equipment and premises refurbishment.
- Expansionary capital expenditure - costs of fit-out of new
gyms (both organic and acquired), technology projects and
other strategic projects. It is stated net of contributions
towards landlord building costs.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2021
Year ended 31 December Year ended 31 December
2021 2020
(Re-presented*)
Underlying Non-underlying Total Underlying Non-underlying Total
(note (note
5) 5)
Note GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 4 106.0 - 106.0 80.5 - 80.5
Cost of sales (1.7) - (1.7) (2.1) - (2.1)
-------------------------------- ----- ----------- --------------- ------- ----------- --------------- -------
Gross profit 104.3 - 104.3 78.4 - 78.4
Other income 7.3 - 7.3 0.4 - 0.4
Operating expenses
before depreciation,
amortisation & impairment (79.1) (2.3) (81.4) (62.7) 0.5 (62.2)
Depreciation, amortisation
& impairment 8,9 (52.7) (4.2) (56.9) (48.0) (2.5) (50.5)
-------------------------------- ----- ----------- --------------- ------- ----------- --------------- -------
Operating loss (20.2) (6.5) (26.7) (31.9) (2.0) (33.9)
Finance costs (16.6) (0.9) (17.5) (14.6) 1.3 (13.3)
Loss before tax (36.8) (7.4) (44.2) (46.5) (0.7) (47.2)
Tax credit/(charge) 6 8.3 0.5 8.8 11.1 (0.3) 10.8
-------------------------------- ----- ----------- --------------- ------- ----------- --------------- -------
Loss for the year attributable
to equity shareholders (28.5) (6.9) (35.4) (35.4) (1.0) (36.4)
-------------------------------- ----- ----------- --------------- ------- ----------- --------------- -------
Other comprehensive
income for the year
Items that may be reclassified
to profit or loss
-------------------------------- ----- ----------- --------------- ------- ----------- --------------- -------
Changes in the fair
value of derivative
financial instruments 0.1 - 0.1 - - -
-------------------------------- ----- ----------- --------------- ------- ----------- --------------- -------
Total comprehensive
expense attributable
to equity shareholders (28.4) (6.9) (35.3) (35.4) (1.0) (36.4)
-------------------------------- ----- ----------- --------------- ------- ----------- --------------- -------
Loss per share (p) 7
Basic and diluted (16.7) (20.7) (22.5) (23.1)
-------------------------------- ----- ----------- --------------- ------- ----------- --------------- -------
* During the year, the Directors agreed to change the way they
present the consolidated income statement and adopt a columnar
format because they believe this provides the reader with
supplemental data relating to the financial condition and results
of operations. See Note 2 for further details.
Reconciliation of Operating Loss to Group Adjusted EBITDA Less
Normalised Rent(1)
Year ended Year ended
31 December 2021 31 December 2020
Note GBPm GBPm
Operating loss (26.7) (33.9)
Add: Non-underlying operating items 5 6.5 2.0
Long-term employee incentive costs
(included in Operating expenses) 2.9 0.7
Underlying depreciation & amortisation 8,9 52.7 48.0
Group Adjusted EBITDA 35.4 16.8
Normalised Rent(2) (29.7) (27.0)
------------------------------------------------ ----- ------------------ ------------------
Group Adjusted EBITDA less Normalised
Rent(1) 5.7 (10.2)
------------------------------------------------ ----- ------------------ ------------------
1 Group Adjusted EBITDA less Normalised Rent is a non-statutory
metric used internally by management and externally by investors.
It is calculated as operating profit before depreciation,
amortisation, long term employee incentive costs and non-underlying
items, and after deducting Normalised Rent.
2 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.
Consolidated Statement of Financial Position
As at 31 December 2021
31 December 31 December
2021 2020
Note GBPm GBPm
---------------------------------- ----- ------------ ------------
Non-current assets
---------------------------------- ----- ------------ ------------
Property, plant and equipment 8 165.6 171.3
Right-of-use assets 9 281.2 255.6
Intangible assets 86.0 86.4
Investments in financial assets 1.0 1.0
Deferred tax assets 16.1 7.6
---------------------------------- ----- ------------ ------------
Total non-current assets 549.9 521.9
Current assets
---------------------------------- ----- ------------ ------------
Inventories 0.3 0.3
Trade and other receivables 6.3 6.3
Income taxes receivable 0.9 0.2
Cash and cash equivalents 7.3 3.7
---------------------------------- ----- ------------ ------------
Total current assets 14.8 10.5
Total assets 564.7 532.4
---------------------------------- ----- ------------ ------------
Current liabilities
---------------------------------- ----- ------------ ------------
Trade and other payables 30.4 18.7
Lease liabilities 27.0 21.8
Other financial liabilities - 2.6
Total current liabilities 57.4 43.1
Non-current liabilities
---------------------------------- ----- ------------ ------------
Borrowings 10 44.3 49.2
Lease liabilities 309.3 284.5
Provisions 1.6 1.2
Total non-current liabilities 355.2 334.9
Total liabilities 412.6 378.0
---------------------------------- ----- ------------ ------------
Net assets 152.1 154.4
---------------------------------- ----- ------------ ------------
Capital and reserves
---------------------------------- ----- ------------ ------------
Own shares held 0.1 0.1
Share premium 189.7 159.5
Hedging reserve (0.1) (0.2)
Merger reserve 39.9 39.9
Retained deficit (77.5) (44.9)
---------------------------------- ----- ------------ ------------
Total equity shareholders' funds 152.1 154.4
---------------------------------- ----- ------------ ------------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
Own shares Share Hedging Merger Retained
held premium reserve reserve deficit Total
Note GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ----- ----------- --------- --------- --------- --------- -------
At 1 January 2020 0.1 159.5 (0.2) - (9.2) 150.2
Loss for the year
and total comprehensive
expense - - - - (36.4) (36.4)
Issue of ordinary
share capital 11 - - - 39.9 - 39.9
Share-based payments 12 - - - - 0.8 0.8
Deferred tax on
share-based payments - - - - (0.1) (0.1)
-------------------------- ----- ----------- --------- --------- --------- --------- -------
At 31 December 2020 0.1 159.5 (0.2) 39.9 (44.9) 154.4
Loss for the year - - - - (35.3) (35.3)
Other comprehensive
income for the year - - 0.1 - - 0.1
-------------------------- ----- ----------- --------- --------- --------- --------- -------
Total comprehensive
expense - - 0.1 - (35.3) (35.2)
Issue of ordinary
share capital 11 - 30.2 - - - 30.2
Share-based payments 12 - - - - 2.4 2.4
Deferred tax on
share-based payments - - - - 0.3 0.3
-------------------------- ----- ----------- --------- --------- --------- --------- -------
At 31 December 2021 0.1 189.7 (0.1) 39.9 (77.5) 152.1
-------------------------- ----- ----------- --------- --------- --------- --------- -------
Consolidated Cash Flow Statement
For the year ended 31 December 2021
Year ended Year ended
31 December 31 December
2021 2020
Note GBPm GBPm
----------------------------------------------------- ----- ------------- -------------
Cash flows from operating activities
Loss before tax (44.2) (47.2)
Adjustments for:
Finance costs 17.5 13.3
Non-underlying operating items 6.5 2.0
Underlying depreciation of property, plant
& equipment 8 23.6 23.9
Underlying depreciation of right-of-use
assets 9 23.5 21.3
Underlying amortisation of intangible assets 5.4 2.9
Long-term employee incentive costs 12 2.9 0.7
Rent concessions (1.6) (0.7)
Loss on disposal of property, plant & equipment
and right-of-use assets 0.4 0.7
Decrease in inventories - 0.4
(Increase)/decrease in trade and other receivables (0.3) 3.4
Increase/(decrease) in trade and other payables 10.1 (5.6)
Payment of deferred consideration (2.6) (1.3)
----------------------------------------------------- ----- ------------- -------------
Cash generated from operations 41.2 13.8
----------------------------------------------------- ----- ------------- -------------
Tax (paid)/received (0.1) 2.4
Net cash inflow from operating activities
before non-underlying items 41.1 16.2
Non-underlying items (2.2) (0.9)
----------------------------------------------------- ----- ------------- -------------
Net cash inflow from operating activities 38.9 15.3
----------------------------------------------------- ----- ------------- -------------
Cash flows from investing activities
Payment for financial assets at fair value
through profit and loss - (1.0)
Purchase of property, plant & equipment 8 (20.5) (25.5)
Purchase of intangible assets (5.2) (3.8)
Net cash outflow used in investing activities (25.7) (30.3)
----------------------------------------------------- ----- ------------- -------------
Cash flows from financing activities
Repayment of lease liability principal (17.7) (9.9)
Lease interest paid (14.2) (12.7)
Bank interest paid (1.8) (1.8)
Payment of financing fees (0.2) (0.4)
Drawdown of bank loans 30.0 41.0
Repayment of bank loans (36.0) (40.0)
Proceeds of issue of ordinary shares 31.2 41.3
Costs associated with share issue (0.9) (1.4)
Net cash flow (used in)/from financing activities (9.6) 16.1
----------------------------------------------------- ----- ------------- -------------
Net increase in cash and cash equivalents 3.6 1.1
Cash and cash equivalents at the start of
the year 3.7 2.6
----------------------------------------------------- ----- ------------- -------------
Cash and cash equivalents at the end of
the year 7.3 3.7
----------------------------------------------------- ----- ------------- -------------
Notes to the Consolidated Financial Information
1. General information
The Gym Group plc ('the Company') and its subsidiaries ('the
Group') operate low cost, high quality, 24/7, no contract gyms .
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,
CR0 0XT, United Kingdom.
The financial information set out above does not constitute
statutory accounts for the years ended 31 December 2021 or 2020
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 2021 and 2020 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, in 2020 Ernst & Young LLP did include a reference
within their report drawing attention to material uncertainty
related to going concern arising from the uncertainty at that time
of the impact of the COVID-19 pandemic on the Group's business.
The Consolidated Financial Statements for the year ended 31
December 2020 have been filed with the Registrar of Companies, and
those for 2021 will be delivered in due course subject to their
approval by the Company's shareholders at the Company's Annual
General Meeting on 12 May 2022.
2. Basis of preparation
The financial statements have been prepared in accordance with
the Listing Rules and the Disclosure Guidance and Transparency
Rules of the United Kingdom Financial Conduct Authority (where
applicable), international accounting standards in conformity with
the requirements of the Companies Act 2006, and United Kingdom
adopted international accounting standards. The accounting policies
applied are consistent with those described in the Annual Report
and Accounts for the year ended 31 December 2020 of the Group,
except in relation to the presentation of the Group Income
Statement where the Directors have adopted a columnar format (see
below for further details). The functional currency of each entity
in the Group is pounds sterling. The Consolidated Financial
Statements are presented in pounds sterling and all values are
rounded to the nearest one hundred thousand pounds, except where
otherwise indicated.
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.
During the year, the Directors decided to change the way they
present the consolidated income statement to provide the reader
with supplemental data relating to the financial condition and
results of operations. The principal changes that have been adopted
are:
-- Presentation of the profits in a three-column format showing
'Underlying', 'Non-underlying' and 'Total' numbers. Items of income
and expense that are material by their size and/or nature and are
not considered to be incurred in the normal course of business, are
classified as non-underlying items on the face of the income
statement within their relevant category.
-- Presentation of 'Operating expenses before depreciation,
amortisation and impairment' and 'Depreciation, amortisation and
impairment' separately on the face of the consolidated income
statement; previously both were summed together and shown as
'Administration expenses'. As a result of this change, expenses are
now presented on the face of the income statement as a mixture of
by nature and by function with a note to the financial statements
showing the analysis by nature.
The Group presents profit for the year before non-underlying
items as the Directors believe that this shows more clearly the
trends in the Group's business and gives an indication of the
Group's ongoing sustainable performance. The Directors believe the
changes above also provide the reader with additional and relevant
information as well as providing better linkage with the numbers
discussed in the Financial Review by simplifying the reconciliation
to Group Adjusted EBITDA Less Normalised Rent.
Items of income and expense that are material by their size
and/or nature and are not considered to be incurred in the normal
course of business, are classified as non-underlying items on the
face of the income statement within their relevant category.
Further details are provided in note 5.
Going concern
In assessing the going concern position of the Group for the
year ended 31 December 2021, the Directors have considered the
following:
-- the Group's trading performance in the second half of 2021
and throughout the traditional January and February peak
period;
-- future expected trading performance to June 2023 (the going
concern period), including membership levels and behaviours;
-- the Group's site rollout programme;
-- the latest situation and UK Government guidance with respect to the COVID-19 pandemic; and
-- the Group's financing arrangements and relationship with its lenders and shareholders.
Following the re-opening of gyms in April 2021, trading in the
second half of 2021 was solid with total membership increasing from
547,000 at the end of February 2021 to 718,000 at the end of
December 2021. Trading in the first two months of 2022 which is
traditionally the peak period for gym memberships, has been strong,
with membership numbers at the end of February 2022 reaching
825,000.
The Directors believe that the current trading performance,
together with the COVID-impacted commercial property market,
provide the Group with a unique opportunity to accelerate growth
and gain market share. The Directors are now focused on delivering
that opportunity. We opened 19 new gyms in 2021 which are
performing in line with our expectations, and have plans to open a
further 28 in 2022.
To facilitate this accelerated growth, on 2 July 2021, the Group
raised additional financing in the form of an equity placing, which
raised net proceeds of GBP30.3m. In addition, certain restrictions
in the Group's banking facilities around capital expenditure and
finance lease debt were relaxed.
As at 31 December 2021, the Group had Non-Property Net Debt
(including finance leases) of GBP44.1m and GBP62.3m of headroom
(calculated off bank debt less cash) under the GBP100m Revolving
Credit Facility ('RCF') (reducing to GBP75m in March 2022 before
increasing to GBP80m in May 2022 and maturing in October 2024).
Until June 2022, the RCF is subject to quarterly financial
covenant tests primarily relating to the performance of the Group
against agreed targets for Group Adjusted EBITDA Less Normalised
Rent. From June 2022, the covenants consist of quarterly tests on
leverage (net debt to Group Adjusted EBITDA Less Normalised Rent),
fixed charge cover (Adjusted EBITDAR to Net Finance Charges and
Normalised Rent) and minimum liquidity.
The Group's base case forecast for the period to 30 June 2023
anticipates continued recovery of membership and robust yields,
together with the successful execution of the accelerated rollout
plan. Under this scenario, all financial covenants are passed with
a significant level of headroom and the Group can operate
comfortably within its financing facilities.
The Directors have considered a downside scenario which
anticipates a slower recovery in which membership numbers only
return to 88% of pre-pandemic levels (December 2019) by the end of
the going concern period. Under this scenario, all financial
covenants continue to be passed and the Group continues to operate
within its financing facilities.
The Directors have also considered a reverse stress test
scenario that modelled the impact of a significant downturn in
trading and resulting drop in membership numbers. Mitigating
actions were also modelled including moving to a minimum level of
maintenance capital expenditure, reducing discretionary expenditure
in order to preserve cash and a deliberate slowing down or
temporary cessation of the rollout programme. In this scenario, the
number of new members each month would have to decline by 26%
compared to the base case (the equivalent of membership reducing to
82% of the February 2022 closing membership number) before the
fixed charges cover covenant would be breached in December 2022.
However, the Group would remain within its liquidity limits.
In the event of a reverse stress test scenario, the Directors
would introduce additional measures to mitigate the impact on the
Group's liquidity, covenants and cash flow including: (i) further
reductions in controllable operating costs, marketing and capital
expenditure; (ii) discussions with lenders to secure additional
debt facilities and/or covenant waivers; (iii) deferral of, or
reductions in, rent payments to landlords; and (iv) the potential
to raise additional funds from third parties.
The Directors believe that the success of the UK's booster
vaccination programme and the fact that all sectors of the economy
remained open for business during winter 2021/22, despite the
recent Omicron outbreak, are strong indicators that further
prolonged periods of enforced closure are highly unlikely. In
addition, the Group has a very good relationship with its lenders
who have been supportive throughout the pandemic. The lenders
understand the Group's business model, our significant profit and
cash generation in months when gyms are fully open, and our
relatively low gearing. As a result, in the unlikely event there
was another national lockdown, the Directors believe that the banks
would continue to support the Group with covenant flexibility in
the form of waivers or amendments, as they have done on a number of
occasions during previous lockdown periods. The Directors therefore
consider that the combination of a lockdown and a subsequent lack
of flexibility from the banks is remote.
Conclusion
The Board has reviewed the financial forecasts and downside
scenarios of the Group and has a reasonable expectation that the
Group has adequate resources to continue in operational existence
for the period to 30 June 2023. As a result, the Directors continue
to adopt the going concern basis in preparing these consolidated
financial statements. In making this assessment, consideration has
been given to the current and future expected trading performance;
the Group's current and forecast liquidity position; the continued
positive momentum with regards the COVID-19 situation and success
of the UK booster vaccination programme; the support received to
date from our lenders and shareholders; and the mitigating actions
that can be deployed in the event of reasonable downside
scenarios.
3. New and amended IFRS standards that are effective for the current year
Interest Rate Benchmark Reform - Phase 2: Amendments to IFRS 9,
IAS 39, IFRS 7, IFRS 4 and IFRS 16
The amendments provide temporary reliefs which address the
financial reporting effects when an interbank offered rate (IBOR)
is replaced with an alternative nearly risk-free interest rate
(RFR).
The amendments include the following practical expedients:
-- To permit contractual changes, or changes to cash flows
that are directly required by the reform, to be treated
as changes to a floating interest rate, equivalent to a
movement in a market rate of interest;
-- To permit changes required by IBOR reform to be made to
hedge designations and hedge documentation without the hedging
relationship being discontinued;
-- To provide temporary relief to entities from having to meet
the separately identifiable requirement when an RFR instrument
is designated as a hedge of a risk component.
The practical expedient has been applied to the Group's hedging
arrangements in the current financial year and has had no impact on
the consolidated financial statements. The Group intends to use the
practical expedients in future periods for changes in the interest
rates on the Group's borrowings.
COVID-19-Related Concessions beyond 30 June 2021 Amendments to
IFRS 16
On 28 May 2020, the IASB issued COVID-19-Related Rent
Concessions - amendment to IFRS 16 Leases
The amendments provide relief to lessees from applying IFRS 16
guidance on lease modification accounting for rent concessions
arising as a direct consequence of the COVID-19 pandemic. As a
practical expedient, a lessee may elect not to assess whether a
COVID-19 related rent concession from a lessor is a lease
modification. A lessee that makes this election accounts for any
change in lease payments resulting from the COVID-19-related rent
concession the same way it would account for the change under IFRS
16 if the change were not a lease modification.
The amendment was intended to apply until 30 June 2021, but as
the impact of the COVID-19 pandemic is continuing, on 31 March
2021, the IASB extended the period of application of the practical
expedient to 30 June 2022. The amendment applies to annual
reporting periods beginning on or after 1 April 2021.
In the current and prior financial year, the Group has applied
the amendment to IFRS 16 (as issued by the IASB in March 2021 and
May 2020) in advance of their effective dates. As permitted by this
concession, the Group has derecognised GBP1.6 million (2020: GBP0.7
million) of the lease liability that has been extinguished by the
forgiveness of lease payments on buildings.
4. Revenue
The principal revenue streams for the Group are membership
income, rental income from personal trainers and ancillary income.
The majority of revenue is derived from contracts with customers
and all revenue arises in the United Kingdom.
Disaggregation of revenue
In the following table, revenue is disaggregated by major
products and service lines and timing of revenue recognition.
Year ended Year ended
31 December 31 December
2021 2020
GBPm GBPm
----------------------------------------- ------------- -------------
Major products/service lines
Membership income 100.8 77.0
Rental income from personal trainers 4.0 2.5
Ancillary income 1.2 1.0
----------------------------------------- ------------- -------------
106.0 80.5
----------------------------------------- ------------- -------------
Timing of revenue recognition
Products transferred at a point in time 1.8 1.2
Products and services transferred over
time 104.2 79.3
----------------------------------------- ------------- -------------
106.0 80.5
----------------------------------------- ------------- -------------
Contract liabilities at 31 December 2021 amounted to GBP8.4m
(2020: GBP6.4m).
5. Non-underlying items
Year ended Year ended
31 December 31 December
2021 2020
GBPm GBPm
------------------------------------------- ------------ ------------
Affecting operating expenses before
depreciation, amortisation and impairment
Costs of major strategic projects and
investments 1.8 -
Restructuring and reorganisation costs
(including site closures) 0.5 0.3
Adjustment to net assets acquired in
business combinations - (0.2)
Gain on reduction of lease term - (0.6)
------------------------------------------- ------------ ------------
Total affecting operating expenses before
depreciation, amortisation and impairment 2.3 (0.5)
Affecting depreciation, amortisation
and impairment
Impairment of property, plant & equipment,
right-of-use assets and intangibles 4.0 1.6
Amortisation of business combination
intangible assets 0.2 0.9
------------------------------------------- ------------ ------------
Total affecting depreciation, amortisation
and impairment 4.2 2.5
------------------------------------------- ------------ ------------
Total affecting operating expenses [1] 6.5 2.0
Affecting finance costs
Remeasurement of borrowings 0.8 (1.3)
Refinancing costs 0.1 -
------------------------------------------- ------------ ------------
Total affecting finance costs 0.9 (1.3)
Total all non-underlying items before
tax 7.4 0.7
Tax on non-underlying items (0.5) 0.3
------------------------------------------- ------------ ------------
Total non-underlying charge in income
statement 6.9 1.0
------------------------------------------- ------------ ------------
2 Depreciation, amortisation and impairment are non-cash items.
Of the other items affecting operating expenses, GBP2.2m are cash
outflows (2020: cash outflow of GBP0.9m).
Costs of major strategic projects and investments
Costs of major strategic projects and investments in the year
include costs incurred to date in respect of the brand
transformation project. Also included here are the costs incurred
in relation to the exploration of a potential strategic investment
and the costs associated with the acquisition of the trade and
assets of a portfolio of three sites trading under the Fitness
First brand name, details of which are included in note 13.
The brand transformation project which commenced in the second
half of 2021 and is expected to complete in 2022, involves creating
a new visual identity for our brand and a change of our external
brand from 'The Gym' to 'The Gym Group'. This will drive
consistency across the estate and bring the brand name into line
with our website URL. The new visual identity will be employed in
all new sites from Q2 onwards, and a full rebranding of the
existing sites, the website and other digital collateral will be
implemented from the end of September. By the September/October
marketing campaign, all marketing will also be using the updated
brand.
Restructuring and reorganisation costs (including site closure
costs)
Restructuring costs in the year relate to the cost of
restructuring the senior leadership team within central support as
well as additional costs associated with the closure of three sites
previously announced where the lease surrender to the landlord has
been delayed to 2022. Prior year costs relate primarily to the
restructuring of the central support team in June 2020 in which
headcount was reduced by 22%, offset by a release of provision in
relation to the three sites earmarked for closure.
Adjustment to net assets acquired in business combinations
Certain provisions that were recognised as part of the
acquisition of gyms from easyGym were released in the prior year as
the costs are unlikely to be incurred.
Gain on reduction of lease term
The landlord on one of our sites reduced the lease term and in
exchange for doing so the lease was renegotiated in 2020. As a
consequence of the renegotiation, the Group recognised a one-off
gain of GBP0.6 million in the prior year related to the
remeasurement of the lease liability and associated right-of-use
asset.
Impairment of property, plant and equipment, right of use assets
and intangibles
Impairment costs in the year relate to the write down of assets
in four city centre sites which have been particularly hard hit by
the COVID-19 pandemic and where recovery is slower than in the rest
of estate. For these sites, the discounted present value of future
cash flows using a pre-tax discount rate of 11.9% does not support
the full value of the assets. The prior year impairment costs
include the write down of assets in one site where the discounted
present value of future cash flows using a pre-tax discount rate of
11.1% does not support the full value of the assets. The prior year
also included an additional GBP0.8 million impairment for one site
which was announced as closing in 2019 where the lease surrender
was delayed.
Amortisation of business combination intangible assets
This includes the amortisation cost of intangible assets
acquired as part of the Lifestyle and easyGym acquisitions.
Remeasurement of borrowings
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.
Refinancing costs
Refinancing costs relate to non-capitalisable costs incurred in
relation to the renegotiation of the Group's banking facility.
Tax on non-underlying items
This represents the tax charge or credit arising on the Group's
non-underlying items, calculated at the current tax rate.
6. Taxation
The tax credit in the Consolidated Statement of Comprehensive
Income is broken down as follows:
Year ended Year ended
31 December 31 December
2021 2020
GBPm GBPm
--------------------------------------- ------------- -------------
Current income tax
Current tax on profits for the period (0.3) (2.5)
Adjustments in respect of prior years (0.3) (0.5)
--------------------------------------- ------------- -------------
Total current income tax (0.6) (3.0)
Deferred tax
Origination and reversal of temporary
differences (7.7) (6.4)
Change in tax rates (3.0) -
Adjustments in respect of prior years 2.5 (1.4)
--------------------------------------- ------------- -------------
Total deferred tax (8.2) (7.8)
Tax credit (8.8) (10.8)
--------------------------------------- ------------- -------------
The effective tax rate on the statutory loss before tax for the
year ended 31 December 2021 was 19.9% (2020: 22.9%). Excluding the
tax effect of non-underlying items, the effective tax rate on the
underlying loss before tax for the year ended 31 December 2021 was
22.6% (2020: 23.9%). The net deferred tax asset recognised at 31
December 2021 was GBP16.1m (31 December 2020: GBP7.6m). This
comprised deferred tax assets in respect of all tax losses and
other timing differences where the Directors believe it is probable
that these will be recovered within reasonable future periods.
7. Loss per share
Basic loss per share is calculated by dividing the loss
attributable to equity shareholders by the weighted average number
of ordinary shares outstanding during the period, 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 loss 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 2021, 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, all potential dilutive share options will not be
dilutive.
Year ended Year ended
31 December 31 December
2021 2020
Loss (GBPm)
Loss for the year attributable to equity
shareholders (35.4) (36.4)
Adjustment for non-underlying items 6.9 1.0
------------------------------------------ ------------- -------------
Adjusted loss for the year attributable
to equity shareholders (28.5) (35.4)
Weighted average number of shares
Basic and diluted weighted average
number of shares 171,060,028 157,292,003
Earnings per share (p)
Basic and diluted loss per share (20.7) (23.1)
Adjusted basic and diluted loss per
share (16.7) (22.5)
------------------------------------------ ------------- -------------
At 31 December 2021, 5,260,315 share awards (2020: 4,125,842)
were excluded from the diluted weighted average number of ordinary
shares calculation because their effect would be anti-dilutive.
8. Property, plant and equipment
Fixtures,
Assets Leasehold fittings Gym and Computer
under construction improvements and equipment other equipment equipment Total
GBPm GBPm GBPm GBPm GBPm GBPm
---------------- -------------------- -------------- --------------- ----------------- ----------- --------
Cost
-----------------------------------------------------------------------------------------------------------------
At 1 January
2020 3.7 176.7 11.9 79.2 3.2 274.7
Additions(1) 2.3 13.4 0.2 5.1 0.4 21.4
Disposals (0.2) (0.4) - (0.8) - (1.4)
Transfers(1) (3.5) 3.3 (0.8) 1.0 - -
Transfers to
right-of-use
assets - (1.1) - - - (1.1)
-------------------- -------------- --------------- ----------------- ----------- --------
At 31 December
2020 2.3 191.9 11.3 84.5 3.6 293.6
Additions 1.9 16.4 0.2 2.5 0.7 21.7
Disposals (0.1) (1.5) - (0.5) - (2.1)
Transfers (2.0) 1.9 - 0.1 - -
At 31 December
2021 2.1 208.7 11.5 86.6 4.3 313.2
---------------- -------------------- -------------- --------------- ----------------- ----------- --------
Accumulated depreciation
-----------------------------------------------------------------------------------------------------------------
At 1 January
2020 - (48.9) (6.8) (40.7) (2.3) (98.7)
Charge for
the year - (13.9) (1.2) (8.2) (0.6) (23.9)
Impairment - (0.8) - (0.2) - (1.0)
Disposals - 0.3 - 0.7 - 1.0
Transfers to
right-of-use
assets - 0.3 - - - 0.3
---------------- -------------------- -------------- --------------- ----------------- ----------- --------
At 31 December
2020 - (63.0) (8.0) (48.4) (2.9) (122.3)
Charge for
the year - (14.6) (1.1) (7.4) (0.5) (23.6)
Impairment - (2.8) - (0.4) - (3.2)
Disposals - 1.2 - 0.3 - 1.5
At 31 December
2021 - (79.2) (9.1) (55.9) (3.4) (147.6)
At 31 December
2020 2.3 128.9 3.3 36.1 0.7 171.3
At 31 December
2021 2.1 129.5 2.4 30.7 0.9 165.6
---------------- -------------------- -------------- --------------- ----------------- ----------- --------
(1) Additions and transfers have been restated for 2020 due to
the incorrect classification of assets acquired during the year
between Assets under construction and the various other fixed asset
categories .
Included within additions for the year are GBPnil of capitalised
interest (2020: GBP0.1 million), GBP0.1 million of capital
contributions from landlords not yet received (2020: GBP0.2
million) and GBP2.2 million of accrued capital expenditure (2020:
GBP0.9 million).
Outstanding capital commitments at 31 December 2021 totalled
GBP2.9m (31 December 2020: GBP2.2m).
9. Right-of-Use Assets and Leases
Non-property
Property leases leases Total
GBPm GBPm GBPm
-------------------------- ---------------- ------------- --------
Cost
-------------------------- ---------------- ------------- --------
At 1 January 2020 307.9 - 307.9
Additions 38.0 - 38.0
Disposals (1.6) - (1.6)
Transfers from leasehold
improvements 1.1 - 1.1
-------------------------- ---------------- ------------- --------
At 31 December 2020 345.4 - 345.4
Additions 42.8 7.2 50.0
At 31 December 2021 388.2 7.2 395.4
-------------------------- ---------------- ------------- --------
Accumulated depreciation
-------------------------- ---------------- ------------- --------
At 1 January 2020 (69.1) - (69.1)
Charge for the year (21.3) - (21.3)
Impairment (0.6) - (0.6)
Disposals 1.6 - 1.6
Transfers from leasehold
improvements (0.4) - (0.4)
At 31 December 2020 (89.8) - (89.8)
Charge for the year (23.3) (0.2) (23.5)
Impairment (0.9) - (0.9)
At 31 December 2021 (114.0) (0.2) (114.2)
-------------------------- ---------------- ------------- --------
Net book value
-------------------------- ---------------- ------------- --------
At 31 December 2020 255.6 - 255.6
At 31 December 2021 274.2 7.0 281.2
-------------------------- ---------------- ------------- --------
The split of lease liabilities between current and non-current
is as follows:
31 December 31 December
2021 2020
GBPm GBPm
------------------------- ------------ ------------
Current 27.0 21.8
Non-current 309.3 284.5
------------------------- ------------ ------------
Total Lease liabilities 336.3 306.3
------------------------- ------------ ------------
The maturity analysis of lease liabilities is as follows:
31 December 31 December
2021 2020
GBPm GBPm
----------------------------------------- ------------ ------------
Within one year 39.1 34.6
Greater than one year but less than two
years 37.8 32.4
Greater than two years but less than
three years 37.8 32.4
Greater than three years but less than
four years 35.4 32.7
Greater than four years but less than
five years 35.5 32.2
Five years or more 242.7 232.3
428.3 396.6
Less: unearned interest (92.0) (90.3)
----------------------------------------- ------------ ------------
Total Lease liabilities 336.3 306.3
----------------------------------------- ------------ ------------
During the year, the Group entered into a leasing arrangement
with a total available facility of GBP9.5m to finance the fit-out
of new gyms. As at 31 December 2021, the amount outstanding on this
facility was GBP6.4m.
The Group has benefited from unconditional waivers of lease
payments and additional rent-free benefits on six properties in
exchange for the removal of break clauses without modification to
the original lease contract. The waiver of lease payments of
GBP1.6m (2020: GBP0.7m) has been included as a credit within
underlying operating expenses and a reduction in the lease
liability, in line with the IASB practical expedient for
COVID-19-related rent concessions in relation to IFRS 16
Leases.
10. Borrowings
31 December 31 December
2021 2020
GBPm GBPm
------------------------------------------ ------------ ------------
Revolving credit facility 45.0 51.0
Remeasurement adjustment (0.3) (1.2)
------------------------------------------ ------------ ------------
Revolving credit facility carrying value 44.7 49.8
Loan arrangement fees (0.4) (0.6)
------------------------------------------ ------------ ------------
44.3 49.2
------------------------------------------ ------------ ------------
The Group has GBP100 million of available facilities under a
Revolving Credit Facility ('RCF'). The facility is syndicated to a
three-lender panel of HSBC, NatWest 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'). In July 2021, at the same time as the
equity placing, certain restrictions in the Group's banking
facilities around capital expenditure and non-property lease debt
were relaxed.
The funds borrowed under the New Bank Facility bear interest at
a minimum annual rate of 2.60% (2020: 2.60%) above the appropriate
sterling LIBOR. Following the abolition of sterling LIBOR rates on
1 January 2022, the underlying interest rate for the debt will
transition to Sterling Overnight Index Average (SONIA) plus a
credit adjustment spread.
The average interest rate paid in the year on drawn funds under
the new facility is 2.67% (2020: 2.28%). Undrawn funds bear
interest at a minimum annual rate of 0.91% (2020: 0.91%).
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.
The Group's bank borrowings are secured by way of fixed and
floating charges over the Group's assets.
In March 2022, the Group obtained credit committee approval from
its banks for certain changes to its RCF facility. These included a
one-year extension of Facility A (GBP70m) to October 2024; the
cancellation in full of the temporary Facility B (GBP30m) and
replacement with a new GBP10m Facility to October 2024; and further
relaxation of finance lease restrictions. Funds borrowed under the
RCF will bear interest at a minimum rate of 2.85%. Prior to formal
documentation of these agreed changes, Facility A and Facility B
remain in place.
The proportion of the revolving credit facility that was undrawn
and available at 31 December 2021 was GBP55.0m (31 December 2020:
GBP49.0m).
Non-Property Net Debt
31 December 31 December
2021 2020
GBPm GBPm
---------------------------------------------- ------------ ------------
Borrowings 45.0 51.0
Less: Cash and cash equivalents (7.3) (3.7)
---------------------------------------------- ------------ ------------
Non-Property Net Debt excluding non-property
leases 37.7 47.3
Non-Property leases (note 9) 6.4 -
---------------------------------------------- ------------ ------------
Non-Property Net Debt 44.1 47.3
---------------------------------------------- ------------ ------------
Covenants
The RCF is subject to financial covenants relating to leverage
and fixed charge cover.
From September 2020 until June 2022 the covenant tests of the
RCF have been replaced in the New Bank Facility by 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. Waivers were received in
respect of the March 2021 and June 2021 reporting periods due to
the extended lockdown.
11. Issued capital
The total number of shares in issue as at 31 December 2021 is
177,519,174 (31 December 2020: 165,751,888).
12. Long-term employee incentive costs
The Group operates share-based compensation arrangements under
The Gym Group plc Performance Share Plan (PSP) and The Gym Group
plc Share Incentive Plan (SIP). During the year, 984,231 shares
were granted under the PSP and 45,626 under the SIP. These grants
and their vesting criteria are similar in nature to those awarded
during 2020.
For the year ended 31 December 2021, the Group recognised a
total charge of GBP2.9m (2020: GBP0.7m) in respect of the Group's
share based long-term incentive plans and related employer's
national insurance.
13. Subsequent events
In March 2022, the Group agreed to acquire the trade and assets
of a portfolio of three sites trading under the Fitness First brand
for total cash consideration of GBP5.5 million. The consideration
will be paid on the date
of completion, which is expected to be before the end of March 2022 .
The sites to be acquired are in key residential areas within the
M25 where the Group has consistently traded well. The acquisition
complements the Group's existing growth strategy.
The acquired sites will be converted to The Gym Group brand in
2022, with total capital expenditure expected to be c.GBP2.5
million. Following conversion, the sites are expected to generate
strong returns on capital at maturity.
Given the timing of the acquisition, we are yet to complete the
assessment of the fair value of the assets to be acquired,
including goodwill.
In March 2022, the Group also obtained credit committee approval
from its banks for certain changes to its RCF facility. These
include a one-year extension of Facility A (GBP70m) to October
2024; the cancellation in full of the temporary Facility B (GBP30m)
and replacement with a new GBP10m Facility to October 2024; and
further relaxation of finance lease restrictions. Funds borrowed
under the RCF will bear interest at a minimum rate of 2.85%.
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END
FR GLGDXCUBDGDL
(END) Dow Jones Newswires
March 16, 2022 03:03 ET (07:03 GMT)
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