REG - Gym Group PLC (The) - 2023 Interim Results
12/09/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230912:nRSL0793Ma&default-theme=true
RNS Number : 0793M Gym Group PLC (The) 12 September 2023
12 September 2023
The Gym Group plc
('The Gym Group', 'the Group' or 'the Company')
2023 Interim Results
Leading low cost gym operator, The Gym Group, announces its interim results
for the six month period ended 30 June 2023.
Key financial metrics 1 (#_ftn1)
Six months ended 30 June 2023 Six months ended Movement
30 June 2022
Restated*
Revenue (£m) 99.8 84.2 18.5%
Group Adjusted EBITDA (£m) 35.1 33.5 4.8%
Group Adjusted EBITDA Less Normalised Rent (£m) 17.2 17.0 1.2%
Adjusted Loss before tax (£m) (5.2) (4.7) (10.6)%
Statutory Loss before tax (£m) (6.1) (7.2) 15.3%
Statutory Loss after tax (£m) (6.1) (3.4) (79.4)%
Basic and Diluted Adjusted Loss per share (p) (2.9) (0.8) (262.5)%
Basic and Diluted Statutory Loss per share (p) (3.4) (2.0) (70.0)%
Free cash flow (£m) 14.2 7.5 89.3%
Non-Property Net Debt (£m) (as at period end) (69.7) (57.6) (21.0)%
* Refer to note 3 of the Unaudited Condensed Consolidated Financial
Information for details of the restatement of Finance costs (no impact at
Group Adjusted EBITDA level).
Financial highlights
• Revenue grew 18.5% year on year, reflecting growth in average membership of
9.3% and yield ('ARPMM') of 8.4%; like-for-like revenue grew 6.9% year on
year 2 (#_ftn2)
• Membership at 30 June 2023 was 867,000, up 9.7% year on year (Jun 2022:
790,000) and up 5.6% since the end of 2022 (Dec 2022: 821,000)
• Yield continued to strengthen due to both the average price of a standard DO
IT 3 (#_ftn3) membership increasing by 5.4% to £22.02 at 30 June 2023 and
LIVE IT 4 (#_ftn4) penetration growing to 30.7% of total membership (Jun
2022: 28.7%)
• EBITDA Less Normalised Rent broadly flat, in line with guidance, with revenue
growth offsetting inflationary cost increases
• Free cash flow generation of £14.2m resulted in £6.4m reduction in
Non-Property Net Debt to £69.7m at 30 June 2023 (Dec 2022: £76.1m); leverage
improved to 1.82x
Business and operational highlights
• Board and management team strengthened: Will Orr appointed as Group CEO and
joined the business on 1 September; Simon Jones, of Whitbread, appointed as
Non-Executive Director on 6 February 2023
• Two new gyms opened in the first half at Edinburgh and Accrington and
anticipate opening up to a further five sites in the second half; sites opened
in 2021 and 2022 maturing in line with expectations
• High levels of member engagement with increasing visit frequency (up 9.0% year
on year in H1) and continuing strong customer satisfaction scores; increased
maintenance capital expenditure to support member experience
• Trial of three-tier price product architecture in 64 sites showing early
encouraging results
• Bank facilities secured until October 2025 with supportive syndicate;
Covid-related covenants removed
Outlook and current trading
• Trading in July and August continued in line with expectations; on track to
deliver our plans for the year as a whole
• We are maintaining our guidance for FY 2023, provided in March, that revenue
growth will broadly be offset by cost inflation; leverage 5 (#_ftn5) expected
to remain within the range of 1.5 to 2.0x
John Treharne, Chair of The Gym Group, commented:
"The Gym Group has delivered a solid first half, driving growth in both
membership and yield, and remains on track for the full year. I am delighted
to welcome Will Orr on board. The actions we have taken to strengthen
management, our financial position and the Group's customer proposition will
enable us to continue to take advantage of the many growth opportunities in
our market under his leadership."
Will Orr, CEO of The Gym Group, commented:
"Our 'high value, low cost' proposition meets a clear customer need in a
growing market. I am excited to join a passionate, expert team who are
committed to lowering barriers to fitness across the UK. As well as getting to
understand all aspects of the business I'm already starting work with the team
to deliver the next phase of The Gym Group's development and capturing our
share of the undoubted market potential."
A live audio webcast of the analyst presentation will be available at 9:00
a.m. today via the following link:
https://storm-virtual-uk.zoom.us/webinar/register/WN_kJUuhA0xS0aqKbrRXVnkSQ
(https://storm-virtual-uk.zoom.us/webinar/register/WN_kJUuhA0xS0aqKbrRXVnkSQ)
For further information, please contact:
The Gym Group via Instinctif Partners
John Treharne, Chair of the Board
Will Orr, CEO
Luke Tait, CFO
Katharine Wynne, Investor Relations
Instinctif Partners (Financial PR) +44 (0)20 7457 2020
Justine Warren
Matthew Smallwood
Joe Quinlan
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.
Notes for editors
The Gym Group was a pioneer of the low cost gym model, and now operates 230
high quality sites across the UK. These gyms offer 24/7 opening and flexible,
no contract membership. As at 30 June 2023, there were 867,000 members
nationwide. Our gyms have over 53 million visits per annum, score highly on
member satisfaction, and are consistently rated "excellent" on Trustpilot. The
Gym Group is the UK's first carbon neutral chain of gyms.
Business and Operational Review
The Gym Group has delivered a solid first half against an economic backdrop
that has seen no let-up in inflation and pressures on discretionary consumer
spending. With this background, The Gym Group has focused on delivering great
value for our members and managing controllable costs tightly to underpin our
attractive low cost proposition. We have seen continuing good demand and
strengthened pricing, driving an 18.5% increase in first half revenue,
offsetting the step-up in inflationary costs, in particular utilities costs,
to deliver EBITDA similar to last year. This is consistent with our FY 2023
guidance, which remains unchanged. Details of the financial results will
follow in the Financial Review. The following section focuses on the
operational progress in the half.
Continuing progress in strategic priorities
The Gym Group's founding mission is to make health and fitness accessible and
affordable for everyone. Our highly efficient, low cost model ensures that we
can offer a high quality member experience at low prices with no contract
obligation. We now operate 230 well-equipped gyms across the UK, helping more
than 800,000 members keep mentally and physically active. In an environment
where consumers face significant pressures on their costs of living, demand
for health and fitness remains robust and we have focused on maintaining great
value, supported by our recent technology investment. As a result, we have
continued to grow our membership whilst further improving revenues per member.
New site openings moderated after record openings in 2022
After opening a record number of sites in 2022, we are on track with our plan
for new sites in 2023, with the intention to be fully self-financing. In the
first half, two new sites opened at Accrington and Edinburgh Corstorphine,
both of which are in retail park locations. We anticipate opening up to a
further five sites in the second half. One site was closed in Manchester due
to a lease expiry. The sites opened in 2021 and 2022 are maturing in line with
our expectations.
Strong membership and yield growth
Like-for-like revenue 6 (#_ftn6) grew 6.9% year on year. Total membership
stood at 867,000 as at 30 June 2023, 9.7% higher than at 30 June 2022, and
5.6% higher than at 31 December 2022. Average member numbers in H1 2023 of
885,000 are similarly 9.3% higher than the average of H1 2022. Revenue in
comparable sites is on an improving trend and is now at 97% of 2019 7
(#_ftn7) levels.
Average revenue per member per month ('ARPMM') increased by 8.4% in the first
half to £18.81, due to a combination of optimising headline subscription
rates and higher penetration of our premium LIVE IT subscription, supported by
a new pay up-front option. The average standard DO IT membership monthly cost
has increased by 5.4% to £22.02 as at 30 June 2023 (June 2022: £20.89; Dec
2022: £21.49). LIVE IT take-up has exceeded 30% for the first time in this
period, reflecting improvements in the product offer such as the integration
of the Fiit app - offering free digital workouts - enabled by our technology
platform investment in 2022.
Improving operational metrics
We have made further good progress in ensuring we serve the needs of today's
members effectively. Visits per member are up 9.0% year on year and up 21.4%
on 2019 levels. This means that the average member visited four times per
month in the first half of the year, in line with our social value target.
57% of our members rated The Gym Group 5 out of 5 in overall satisfaction
measures 8 (#_ftn8) , with 93% rating us at least 4 out of 5; and more than
two thirds rated us 5 out of 5 for friendliness. Our Trustpilot and Google
ratings are both industry-leading at 4.5.
Downloads of The Gym Group app rose 15.4% in H1 compared with the prior year.
We averaged 700,000 users in the first half, up 34% year on year, and
penetration levels have increased to 80% of our member base. Again,
satisfaction levels are high with Apple and Android ratings at 4.7 and 4.6 out
of 5 respectively.
Investing in the core gym product
During the period, we spent £7.0m on maintenance capex (H1 2022: £2.8m) as
part of our investment in format enhancements and major kit replacements at
key mature sites to maintain high standards and reinforce the attraction to
our members. We are also rolling out new equipment to sites across the
country, including extending the dumbbell range in 88 gyms, and adding lifting
rigs, SkiErgs and air bikes in a number of further sites, to ensure we are
continuing to offer relevant and high quality equipment and help increase
capacity in existing footprints.
Trialling three-tier membership structure
In May we began trialling a three-tier price architecture in 64 of our sites
aimed at attracting incremental membership volumes and providing a platform
for enhanced yield management. The three-tier price architecture includes a
lower entry price for off-peak membership which appeals to additional, more
price-sensitive members and emphasises our value credentials; as well as an
enhanced upper end premium product, building on our successful LIVE IT
product.
The initial results from the trial are encouraging and we are continuing to
evaluate and optimise and prepare a potential rollout plan.
Extending Corporate membership
A growing channel for new members is our offer to Corporates which gives us
substantial additional reach potential. We have grown our Corporate
memberships from small beginnings very rapidly over the past year, more than
doubling Corporate sales. As a result, this segment now accounts for more than
2% of our overall membership.
Sustainability at the core of our purpose
Our commitment to being a sustainable business, with the core purpose of
breaking down barriers to fitness for all, extends across all our activities.
We are proud to be AAA rated by MSCI.
In the first half of 2023, we have continued to grow our social value as
members made over 32 million visits to our gyms, up 20% on the prior half
year.
A core driver of ensuring we can continue to deliver value to our members at
the same time as reducing our carbon footprint is managing our site costs
through energy saving initiatives, including lighting and water usage. These
initiatives are continuing to underpin our status as the UK's first carbon
neutral chain of gyms.
We have continued to invest in our people, with enhanced early career
development and engagement initiatives. We have accelerated our personal
trainer programme in order to ensure we are offering an attractive career
path, to develop future leaders and to support staff retention.
Strengthening Board and management
On 3 May 2023, The Gym Group announced the appointment of Will Orr, formerly
of Times Media Group, as CEO. Will commenced his role on 1 September 2023,
joining the Board as an Executive Director on that date, and will also join
the Sustainability Committee from 12 September 2023. As announced on 12
January 2023, following Will's appointment, John Treharne has resumed his
former Non-Executive role and duties as Chair of the Board.
In addition, Simon Jones, Managing Director for Premier Inn and Restaurants,
UK and Global Commercial Director at Whitbread, joined the Board as a
Non-Executive Director on 6 February 2023. David Kelly stepped down as a
Non-Executive Director at the AGM on 11 May 2023 after seven years of service.
Finally, The Gym Group has appointed Krishan Pandit as Company Secretary with
effect from 13 November 2023, replacing Katy Tucker who will step down as
Company Secretary on 19 September 2023. Luke Tait will act as Company
Secretary in addition to his Executive responsibilities on an interim basis
until Krishan joins in November 2023.
Summary Guidance and Outlook
• Our guidance for FY 2023 is unchanged, that revenue growth is anticipated to
be broadly offset by cost inflation.
• We expect to open up to five sites in the balance of the year, financed from
free cash flow. Our current plans are to open 10-12 new gyms in 2024.
• Bank facilities secured to October 2025 with supportive syndicate and
Covid-related covenants removed; Leverage (calculated as Non-Property Net Debt
: Group Adjusted EBITDA Less Normalised Rent) is expected to remain within the
target range of 1.5 to 2.0x (covenant set at 3.0x).
Financial Review
Presentation of results
This Financial Review uses a combination of statutory and non-statutory
measures to discuss performance in the period. 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 condensed
consolidated financial statements ('Interim Financial Statements'), we have
adopted a three-column format to presenting the Consolidated Statement of
Comprehensive Income 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 Consolidated Statement of
Comprehensive Income 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, remeasurement
gains or losses on borrowings, and refinancing costs. Further details on
non-underlying items are provided later in this report.
Six months ended 30 June 2023 Six months ended 30 June 2022 Movement
Restated*
Total number of gyms at end of period 230 212 8.5%
Total number of members at end of period ('000) 867 790 9.7%
Revenue (£m) 99.8 84.2 18.5%
Group Adjusted EBITDA (£m) 35.1 33.5 4.8%
Group Adjusted EBITDA Less Normalised Rent (£m) 17.2 17.0 1.2%
Adjusted Loss before tax (£m) (5.2) (4.7) (10.6)%
Statutory Loss before tax (£m) (6.1) (7.2) 15.3%
Statutory Loss after tax (£m) (6.1) (3.4) (79.4)%
Net cash inflow from operating activities (£m) 42.0 29.6 41.9%
Free cash flow (£m) 14.2 7.5 89.3%
Non-Property Net Debt (£m) (as at period end) (69.7) (57.6) (21.0)%
* Refer to note 3 of the Unaudited Condensed Consolidated Financial
Information for details of the restatement of Finance costs (no impact at
Group Adjusted EBITDA level).
Results for the period
Six months ended 30 June 2023 Six months ended 30 June 2022
Restated*
Underlying result Non-underlying items Total Underlying result Non-underlying items Total
£m £m £m £m £m £m
Revenue 99.8 - 99.8 84.2 - 84.2
Cost of sales (1.4) - (1.4) (0.8) - (0.8)
Gross profit 98.4 - 98.4 83.4 - 83.4
Other income - - - 0.3 - 0.3
Operating expenses (before depreciation, amortisation & impairment) (64.7) (0.5) (65.2) (50.8) (1.2) (52.0)
Depreciation, amortisation & impairment (28.5) (0.1) (28.6) (29.4) (0.1) (29.5)
Operating profit 5.2 (0.6) 4.6 3.5 (1.3) 2.2
Finance costs (10.4) (0.3) (10.7) (8.2) (1.2) (9.4)
Loss before tax (5.2) (0.9) (6.1) (4.7) (2.5) (7.2)
Tax credit - - - 3.2 0.6 3.8
Loss for the period attributable to equity shareholders (5.2) (0.9) (6.1) (1.5) (1.9) (3.4)
Loss per share
Basic and diluted (p) (2.9) (3.4) (0.8) (2.0)
* Refer to note 3 of the Unaudited Condensed Consolidated Financial
Information for details of the restatement of Finance costs (no impact at
Group Adjusted EBITDA level).
Revenue
Trading in the first half of 2023 was positive despite the ongoing
cost-of-living pressures on consumers, demonstrating the resilience of the low
cost gym model. Revenue increased by 18.5% to £99.8m (H1 2022: £84.2m),
reflecting 9.3% higher average membership numbers throughout the period and an
8.4% increase in yields.
The average membership number in the six months to 30 June 2023 was 885,000
compared with 810,000 in the six months ended 30 June 2022; and we closed the
period with 867,000 members which was up 5.6% on 31 December 2022.
The average headline price of a standard DO IT membership increased to £22.02
in June 2023 compared with £20.89 in June 2022 and £21.49 in December 2022,
largely as a result of higher joining fees and price increases for new
members, as well as some repricing of the base membership. In addition, the
proportion of members taking our premium membership was 30.7% in June 2023
compared with 28.7% and 29.6% in June 2022 and December 2022 respectively. As
a result, Average Revenue Per Member Per Month ('ARPMM') in the first half of
2023 was up 8.4% to £18.81 compared with £17.36 in the first half of 2022.
Cost of sales
Cost of sales increased to £1.4m in the first half of 2023 (H1 2022: £0.8m),
reflecting revenue and membership growth.
Underlying operating expenses (before depreciation, amortisation and
impairment)
Underlying operating expenses (before depreciation, amortisation and
impairment) are made up as follows:
Six months ended 30 June 2023 Six months ended 30 June 2022
£m £m
Site costs before Normalised Rent 53.3 41.8
Site Normalised Rent 17.7 16.3
Site costs including Normalised Rent 71.0 58.1
Central Support Office costs 10.0 8.4
Central Support Office Normalised Rent 0.2 0.2
Central support office costs including Normalised Rent 10.2 8.6
Share based payments 1.4 0.6
82.6 67.3
Less: Normalised Rent (17.9) (16.5)
Underlying operating expenses (before depreciation, amortisation and 64.7 50.8
impairment)
Site costs including Normalised Rent
Site costs including Normalised Rent in the first half of 2023 increased to
£71.0m (H1 2022: £58.1m). The fixed costs associated with running the sites
(predominantly rates and service charges) increased by £4.2m year on year as
a result of the increased estate size and the end of the Covid-related rates
relief which reduced costs in the first quarter of 2022.
Controllable site costs increased by £7.3m with higher utilities costs
accounting for £5.1m of this increase, largely as a result of the increased
unit costs of energy. Marketing costs were also higher year on year,
reflecting increased advertising spend to drive membership numbers in the peak
January/February trading period. Higher staff costs reflected inflationary pay
increases and increased site bonus payments following a successful first
period of trading. Other increases in controllable costs broadly reflect the
larger estate size.
Site Normalised Rent, which is defined as the contractual rent that would have
been paid in normal circumstances without any agreed deferments, recognised in
the monthly period to which it relates, amounted to £17.7m in the period (H1
2022: £16.3m). The increase year on year reflects the larger estate size.
Central Support Office costs including Normalised Rent
Central Support Office costs in the six months to 30 June 2023 increased to
£10.2m (H1 2022: £8.6m), reflecting inflationary pressure on pay and rewards
as well as the annualisation of the investment in people and technology that
was made in the first half of 2022.
Share based payments
Share based payment costs in the period amounted to £1.4m (H1 2022: £0.6m),
reflecting a more regular run rate following a year in which the charge was
lower than expected due to share price volatility and a number of adjustments
for leavers.
Underlying depreciation and amortisation
Underlying depreciation and amortisation charges in the period amounted to
£28.5m (H1 2022: £29.4m). The reduction year on year reflects a return to
more normal levels as the prior year charge included accelerated depreciation
and amortisation on a number of assets that were replaced following the launch
of the new consumer website and brand.
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 statutory operating profit as follows:
Six months ended Six months ended
30 June 2023 30 June 2022
£m £m
Operating profit 4.6 2.2
Non-underlying operating items 0.6 1.3
Share based payments 1.4 0.6
Underlying depreciation and amortisation 28.5 29.4
Group Adjusted EBITDA 35.1 33.5
Normalised Rent (17.9) (16.5)
Group Adjusted EBITDA Less Normalised Rent 17.2 17.0
Group Adjusted EBITDA Less Normalised Rent in the period was broadly in line
with the prior year at £17.2m (H1 2022: £17.0m), as the increased revenue
was offset by increased operating costs.
Underlying finance costs
Underlying finance costs in the period amounted to £10.4m (H1 2022: £8.2m).
The implied interest relating to the lease liability was £7.8m (H1 2022:
£6.9m). Finance costs associated with our bank borrowing facilities were
£2.6m (H1 2022: £1.3m) comprising interest costs and fee amortisation. Funds
borrowed under the Revolving Credit Facility ('RCF') bear interest at a
minimum rate of 2.85%.
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.
Six months ended 30 June 2023 Six months ended 30 June 2022
Restated*
£m £m
Affecting operating expenses (before depreciation, amortisation and
impairment)
Costs of major strategic projects and investments 0.1 1.3
Restructuring and reorganisation costs (including site closures) 0.4 (0.1)
0.5 1.2
Affecting depreciation, amortisation and impairment
Amortisation of business combination intangible assets 0.1 0.1
0.1 0.1
Affecting finance costs
Refinancing and remeasurement of borrowings 0.3 1.2
0.3 1.2
Total all non-underlying items before tax 0.9 2.5
Tax credit on non-underlying items - (0.6)
Total all non-underlying items 0.9 1.9
* Refer to note 3 of the Unaudited Condensed Consolidated Financial
Information for details of the restatement of Finance costs.
Non-underlying items affecting operating expenses before depreciation,
amortisation and impairment amounted to £0.5m in the period (H1 2022:
£1.2m).
The costs of major strategic projects and investments in the period of £0.1m
relate predominantly to the Group's work in relation to introducing a
three-tier price product architecture. As noted earlier in this report, the
trial results have been encouraging and we are now evaluating and optimising
the results and preparing a potential rollout plan.
Restructuring and reorganisation costs in the period of £0.4m include the
costs associated with the change of Group CEO and other Board and Executive
Committee changes, as well as restructuring within the Central Support Office
team, partly offset by accrual true-ups and lease surrender income associated
with the closure of a small number of gyms in recent years.
Non-underlying costs affecting depreciation, amortisation and impairment in
the period amounted to £0.1m (H1 2022: £0.1m) and relate to the amortisation
of business combination intangibles acquired as part of the Lifestyle, easyGym
and Fitness First acquisitions.
Non-underlying items affecting finance costs amounted to £0.3m in the period
(H1 2022 restated: £1.2m) and reflect the costs associated with making
certain changes to the Group's RCF earlier in the year, as well as the
periodic remeasurement of the Group's RCF.
Taxation
The tax credit in the period was £nil (H1 2022 restated: credit of £3.8m)
and the effective tax rate on the statutory loss before tax for the period
ended 30 June 2023 was therefore 0% (H1 2022 restated: 52.8%).
The net deferred tax asset recognised at 30 June 2023 was £16.3m (31 December
2022: £16.3m; 30 June 2022 restated: £20.0m). This comprised deferred tax
assets in respect of tax losses and other temporary differences where the
Directors believe it is probable that these will be recovered within a
reasonable period. Short term timing differences are generally recognised
ahead of losses on the basis that they are likely to reverse more quickly.
The financial forecast used in the Going Concern assessment was also used to
assess the deferred tax recoverability at 30 June 2023, and the Directors
believe that this plan provides convincing evidence to support the continued
recognition of the deferred tax assets that were recognised at 31 December
2022. However, given the ongoing macro-economic and geopolitical uncertainty,
the Directors do not believe it is appropriate to recognise additional
deferred tax assets at 30 June 2023.
Earnings
As a result of the factors discussed above, the statutory loss before tax for
the period was £6.1m (H1 2022 restated: loss of £7.2m) and the statutory
loss after tax for the period was £6.1m (H1 2022 restated: loss of £3.4m).
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 £5.2m (H1 2022: loss of £4.7m). Adjusted loss after tax was also
£5.2m (H1 2022: loss of £1.5m).
The basic and diluted loss per share was 3.4p (H1 2022 restated: loss of
2.0p), and the basic and diluted adjusted loss per share was 2.9p (H1 2022:
loss of 0.8p).
Dividend
It is a condition of the £10m additional RCF 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 an interim dividend in respect of
2023 (H1 2022: £nil).
Cash flow
Six months ended Six months ended
30 June 2023 30 June 2022
£m £m
Group Adjusted EBITDA Less Normalised Rent 17.2 17.0
Movement in working capital 7.5 (4.8)
Maintenance capital expenditure funded by leases (1.5) -
Maintenance capital expenditure funded by other sources (5.5) (2.8)
Group operating cash flow 17.7 9.4
Non-underlying items (0.6) (1.1)
Net interest paid (2.9) (1.3)
Taxation - 0.5
Free cash flow 14.2 7.5
Expansionary capital expenditure funded by leases (1.5) (1.8)
Expansionary capital expenditure funded by other sources (6.1) (13.2)
Refinancing fees (0.2) (0.6)
Net consideration paid on acquisition - (5.4)
Cash flow before movement in debt 6.4 (13.5)
Net increase in finance lease indebtedness 0.3 0.6
Net (repayment)/drawdown of borrowings (7.0) 12.5
Net cash flow (0.3) (0.4)
The Group operating cash inflow in the period was £17.7m (H1 2022: inflow of
£9.4m) largely reflecting the Group's trading performance, with working
capital inflows broadly offsetting the maintenance capital expenditure. The
higher than expected working capital inflow of £7.5m (H1 2022: outflow of
£4.8m) reflects careful cash management throughout the period as well as some
short term timing differences around the period end which are expected to
reverse in the second half of the year. The prior year outflow included £1.6m
in relation to the unwind of deferred rents from 2020 and 2021.
Fixed asset additions in respect of maintenance capital expenditure in the
period amounted to £3.3m (H1 2022: £2.8m) continuing the higher run rate in
the second half of 2022 as we returned to more normal levels of operation and
investment. However, the timing of settlement of some maintenance capital
creditors brought forward from the prior year has meant that the cash flow
from maintenance capital expenditure in the period was £7.0m (H1 2022:
£2.8m), including £1.5m funded by finance leases (H1 2022: £nil).
Fixed asset additions in respect of expansionary capital expenditure in the
period amounted to £4.1m (H1 2022: £16.5m) and relate to the fit-out of new
gyms, enhancements to existing gyms and spend on technology projects. The
fit-out costs are stated net of landlord contributions. Adjusting for the
movement in capital creditors, the cash flow from expansionary capital
expenditure was £7.6m (H1 2022: £15.0m), including £1.5m funded by finance
leases (H1 2022: £1.8m).
Balance sheet
At 30 June 2023 At 30 June 2022 At 31 December 2022
Restated*
£m £m £m
Non-current assets 567.2 568.9 580.4
Current assets 10.8 16.1 15.2
Current liabilities (63.2) (56.8) (64.7)
Non-current liabilities (385.6) (379.1) (396.9)
Net assets 129.2 149.1 134.0
* Refer to note 3 of the Unaudited Condensed Consolidated Financial
Information for details of the restatement of Finance costs.
Non-current assets decreased in the period by £13.2m to £567.2m as the
investment in maintenance and expansionary assets was more than offset by the
depreciation and amortisation charged in the period.
Current assets decreased by £4.4m to £10.8m in the period, largely
reflecting the unwind of year end prepayments in relation to marketing and
rates. Current liabilities were broadly in line with the position at 31
December 2022 as the unwind of capital creditors brought forward from the
prior year end was largely offset by an increase in short term lease
liabilities (despite overall lease liabilities falling by £2.0m as a result
of the reduction in new site leases signed).
Drawings under the RCF decreased by £7.0m in the period reflecting careful
cash management and prudent investment in new site openings. At 30 June 2023,
the Group had Non-Property Net Debt of £69.7m (31 December 2022: £76.1m; 30
June 2022: £57.6m) comprising drawn facilities of £63.0m and finance leases
of £11.8m, less cash of £5.1m.
Banking facilities
On 5 September 2023, the Group agreed a number of amendments to its £80m RCF.
These included an extension of the facilities to October 2025 and the
inclusion of Barclays within the syndicate alongside HSBC and NatWest. In
addition, Covid-related covenants have been removed.
Going concern
The Board has reviewed the financial forecasts and downside scenario of the
Group and has a reasonable expectation that the Group has adequate resources
to continue in operational existence for the period to 31 December 2024. As a
result, the Directors continue to adopt the going concern basis in preparing
the Interim Financial Statements. In making this assessment, consideration has
been given to the macroeconomic and geopolitical environment; the Group's
current and future expected trading performance, including membership levels
and behaviours; the Group's financing arrangements and relationship with its
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 Interim Financial Statements.
Principal risks and uncertainties
The Directors take very seriously their responsibility for operating a robust
risk management and internal controls process, and for reviewing their
effectiveness at least annually. The risk management framework is designed to
effectively identify, assess and mitigate risks, whilst enabling the Group to
deliver its strategic and operational objectives.
During the period, there has been a continued focus on risk management. Key
risk indicators are monitored quarterly, and functional risk registers have
been updated during the period. We also continue to monitor the ongoing
macroeconomic and geopolitical uncertainty and assess the impact this could
have on the Group's principal risks.
The principal risks and uncertainties that the Group expects to be exposed to
in the second half of the year are the same as those described in the
'Principal risks and uncertainties' section of the Group's Annual Report and
Accounts 2022 (pages 54-62), a summary of which is provided below.
• Significant business interruption
• Operational gearing
• Member experience
• Trading environment
• Structural change in the industry
• Our people
• IT dependency
• Cyber and data security
• Reputation, brand and trust
• Relationships with key suppliers
However, the ongoing geopolitical tensions, inflationary cost pressures and
interest rate increases, continue to make the macroeconomic outlook uncertain.
The Directors believe that this is leading to upward pressure on the 'Trading
environment' risk, as the longer this uncertainty continues, the higher the
likelihood that members may choose to cancel their memberships due to
financial hardship.
The 'People' risk is also trending upwards as the cost-of-living crisis is
making it more difficult to attract people who want to start their own
personal training business; and the cost of retention is increasing as
employees look for higher salaries to combat high inflation and rising
interest rates.
The 'Relationships with key suppliers' and 'Operational gearing' risks are
also increasing as a result of the continued inflationary pressure on the
Group's cost base and site fit-out costs. In addition, the recent interest
rate rises have resulted in a substantial increase in the cost of servicing
the Group's debt.
To mitigate the upward trend on these risks, we continue to use a variety of
tools to attract, retain and motivate staff at all levels of the business and
are currently trialling new gym staffing models to assist in recruitment and
retention. Tight debt and cash management also remain in place and all new
site selection and capital spend is rigorously challenged to ensure that
available funds are invested in those projects expected to give the best
returns.
Climate change remains an emerging risk for the Group and work is currently
underway to update our climate scenario analysis and financial modelling.
Responsibility statement
The Directors confirm that, to the best of their knowledge:
• the condensed consolidated financial statements ('Interim Financial
Statements') have been prepared in accordance with IAS 34 Interim Financial
Reporting as adopted for use in the United Kingdom and give a true and fair
view of the assets, liabilities, financial position and profit or loss of the
Group for the period ended 30 June 2023 as required by the Disclosure Guidance
and Transparency Rules of the UK Financial Conduct Authority ('DTR') 4.2.4R.
• the half year results announcement includes a fair review of the significant
events during the first six months of the financial year and a description of
principal risks and uncertainties for the remaining six months of the
financial year as required by DTR 4.2.7R.
• the notes to the condensed consolidated financial statements include a fair
review of related party transactions and changes thereto as required by DTR
4.2.8R.
The Directors of the Company are listed on pages 72 and 73 of the Group's
Annual Report and Accounts 2022, subject to the changes set out below:
• On 24 March 2023, Richard Darwin resigned as Chief Executive Officer and
Executive Director.
• At the Group's AGM on 11 May 2023, David Kelly did not seek reappointment as
Non-Executive Director.
• On 1 September 2023, Will Orr joined the Group and assumed the role of Chief
Executive Officer and Executive Director.
A list of the current Directors is maintained on the Group's website at
www.tggplc.com (http://www.tggplc.com)
On behalf of the Board
Luke Tait
Chief Financial Officer
12 September 2023
Definition of non-statutory measures
• Group Adjusted EBITDA - operating profit before depreciation, amortisation,
share based payments 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 period before non-underlying items and
the related tax effect.
• Basic Adjusted EPS - Adjusted Earnings 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.
• 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 capital contributions from landlords.
Consolidated Statement of Comprehensive Income
For the period ended 30 June 2023
6 months ended 30 June 2023 6 months ended 30 June 2022
Restated*
Unaudited Unaudited
Underlying Non-underlying (note 5) Total Underlying Non-underlying (note 5) Total
Note £m £m £m £m £m £m
Revenue 4 99.8 - 99.8 84.2 - 84.2
Cost of sales (1.4) - (1.4) (0.8) - (0.8)
Gross profit 98.4 - 98.4 83.4 - 83.4
Other income - - - 0.3 - 0.3
Operating expenses (before depreciation, amortisation & impairment) (64.7) (0.5) (65.2) (50.8) (1.2) (52.0)
Depreciation, amortisation & impairment (28.5) (0.1) (28.6) (29.4) (0.1) (29.5)
Operating profit 5.2 (0.6) 4.6 3.5 (1.3) 2.2
Finance costs (10.4) (0.3) (10.7) (8.2) (1.2) (9.4)
Loss before tax (5.2) (0.9) (6.1) (4.7) (2.5) (7.2)
Tax credit 6 - - - 3.2 0.6 3.8
Loss for the period attributable to equity shareholders (5.2) (0.9) (6.1) (1.5) (1.9) (3.4)
Other comprehensive income
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 (5.2) (0.9) (6.1) (1.4) (1.9) (3.3)
Loss per share (p) 7
Basic and diluted (2.9) (3.4) (0.8) (2.0)
* Refer to note 3 of the Unaudited Condensed Consolidated Financial
Information for details of the restatement of Finance costs.
Reconciliation of Operating Profit to Group Adjusted EBITDA Less Normalised
Rent(1)
6 months ended 6 months ended
30 June 2023 30 June 2022
Unaudited Unaudited
Note £m £m
Operating profit 4.6 2.2
Add back: Non-underlying operating items 5 0.6 1.3
Share based payments (included in Operating expenses) 13 1.4 0.6
Underlying depreciation and amortisation 28.5 29.4
Group Adjusted EBITDA 35.1 33.5
Less: Normalised Rent(2) (17.9) (16.5)
Group Adjusted EBITDA Less Normalised Rent(1) 17.2 17.0
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, share based
payments 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 30 June 2023
At 30 June 2023 At 30 June 2022 At 31 December 2022
Restated
Unaudited Unaudited Audited
Note £m £m £m
Non-current assets
Intangible assets 91.5 91.8 92.7
Property, plant and equipment 8 171.8 166.8 181.0
Right-of-use assets 9 286.6 289.3 289.4
Investments in financial assets 1.0 1.0 1.0
Deferred tax assets 6 16.3 20.0 16.3
Total non-current assets 567.2 568.9 580.4
Current assets
Inventories 0.8 0.7 0.9
Trade and other receivables 4.9 8.1 8.9
Income taxes receivable - 0.4 -
Cash and cash equivalents 5.1 6.9 5.4
Total current assets 10.8 16.1 15.2
Total assets 578.0 585.0 595.6
Current liabilities
Trade and other payables 35.3 31.1 38.8
Lease liabilities 9 27.6 25.1 25.3
Provisions 0.3 0.6 0.6
Total current liabilities 63.2 56.8 64.7
Non-current liabilities
Borrowings 10 63.3 57.3 70.0
Lease liabilities 9 320.8 320.0 325.1
Provisions 1.5 1.8 1.8
Total non-current liabilities 385.6 379.1 396.9
Total liabilities 448.8 435.9 461.6
Net assets 129.2 149.1 134.0
Capital and reserves
Own shares held 0.1 0.1 0.1
Share premium 189.8 189.7 189.8
Merger reserve 39.9 39.9 39.9
Retained deficit (100.6) (80.6) (95.8)
Total equity shareholders' funds 129.2 149.1 134.0
* Refer to note 3 of the Unaudited Condensed Consolidated Financial
Information for details of the restatement of Finance costs.
Consolidated Statement of Changes in Equity
For the period ended 30 June 2023
Own shares held Share premium Hedging reserve Merger reserve Retained deficit Total
Note £m £m £m £m £m £m
At 1 January 2023 0.1 189.8 - 39.9 (95.8) 134.0
Loss for the period - - - - (6.1) (6.1)
Other comprehensive income - - - - - -
Total comprehensive expense - - - - (6.1) (6.1)
Share based payments 13 1.3 1.3
Deferred tax on share based payments - - - - - -
At 30 June 2023 (Unaudited) 0.1 189.8 - 39.9 (100.6) 129.2
Consolidated Statement of Changes in Equity (Restated)*
For the period ended 30 June 2022
Own shares held Share premium Hedging reserve Merger reserve Retained deficit Total
Note £m £m £m £m £m £m
At 1 January 2022 0.1 189.7 (0.1) 39.9 (77.5) 152.1
Loss for the period - - - - (3.4) (3.4)
Other comprehensive income - - 0.1 - - 0.1
Total comprehensive expense - - 0.1 - (3.4) (3.3)
Share based payments 13 - - - - 0.6 0.6
Deferred tax on share based payments - - - - (0.3) (0.3)
At 30 June 2022 (Unaudited) 0.1 189.7 - 39.9 (80.6) 149.1
* Refer to note 3 of the Unaudited Condensed Consolidated Financial
Information for details of the restatement of Finance costs.
Consolidated Cash Flow Statement
For the period ended 30 June 2023
6 months ended 6 months ended
30 June 2023 30 June 2022
Restated*
Unaudited Unaudited
Note £m £m
Cash flows from operating activities
Loss before tax (6.1) (7.2)
Adjustments for:
Finance costs 10.7 9.4
Non-underlying operating items 0.6 1.3
Underlying depreciation of property, plant and equipment 8 12.0 13.5
Underlying depreciation of right-of-use assets 9 14.0 13.4
Underlying amortisation of intangible assets 2.5 2.5
Share based payments 13 1.4 0.6
Rent concessions - (0.1)
Decrease/(increase) in inventories 0.1 (0.4)
Decrease/(Increase) in trade and other receivables 3.9 (1.4)
Increase/(decrease) in trade and other payables 3.8 (1.4)
Decrease in provisions (0.3) -
Cash generated from operations 42.6 30.2
Tax received - 0.5
Net cash inflow from operating activities before non-underlying items 42.6 30.7
Non-underlying items (0.6) (1.1)
Net cash inflow from operating activities 42.0 29.6
Cash flows from investing activities
Purchase of property, plant & equipment 8 (7.7) (13.1)
Purchase of intangible assets (3.9) (2.9)
Business combinations - (5.4)
Bank interest received 0.1 -
Net cash outflow used in investing activities (11.5) (21.4)
Cash flows from financing activities
Repayment of lease liability principal (13.4) (12.6)
Lease interest paid (7.8) (6.8)
Bank interest paid (2.4) (1.1)
Payment of financing fees (0.2) (0.6)
Drawdown of bank loans - 18.0
Repayment of bank loans (7.0) (5.5)
Net cash outflow used in financing activities (30.8) (8.6)
Net decrease in cash and cash equivalents (0.3) (0.4)
Cash and cash equivalents at the start of the period 5.4 7.3
Cash and cash equivalents at the end of the period 5.1 6.9
* Refer to note 3 of the Unaudited Condensed Consolidated Financial
Information for details of the restatement of Finance costs.
Notes to the Condensed Consolidated Financial Information
1. General information
The Directors of The Gym Group plc ('the Company') and its subsidiaries ('the
Group') present their interim report and unaudited condensed consolidated
financial statements ('Interim Financial Statements') for the six months ended
30 June 2023. The Group operates 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 Interim Financial Statements were approved by the Board of Directors on 12
September 2023. They have not been audited or formally reviewed by the
auditors.
2. Basis of preparation
The Interim Financial Statements have been prepared in accordance with IAS 34
Interim Financial Reporting as adopted for use in the UK, and the Listing
Rules and the Disclosure Guidance and Transparency Rules of the UK Financial
Conduct Authority (where applicable).
The Interim Financial Statements provide comparative information in respect of
the previous period. The financial information shown for the half year periods
ended 30 June 2023 and 30 June 2022 does not constitute statutory financial
statements within the meaning of section 434 of the Companies Act 2006. The
information shown for the year ended 31 December 2022 has been extracted from
the Group's Annual Report and Accounts 2022 and does not constitute statutory
accounts within the meaning of section 434 of the Companies Act 2006.
The Interim Financial Statements should be read in conjunction with the
Group's Annual Report and Accounts 2022. The Consolidated Financial Statements
for the year ended 31 December 2022 have been filed with the Registrar of
Companies. The Independent Auditors' Report on the Group's Annual Report and
Accounts for 2022 was unqualified and did not contain a statement under 498(2)
or (3) of the Companies Act 2006.
The functional currency of each entity in the Group is pounds sterling. The
Interim Financial Statements are presented in pounds sterling and all values
are rounded to the nearest one hundred thousand pounds, except where otherwise
indicated.
Accounting policies
The accounting policies adopted in the preparation of the Interim Financial
Statements are consistent with those described in the Group's Annual Report
and Accounts 2022, except for new standards effective as of 1 January 2023.
The Group has not early adopted any other standard, interpretation or
amendment that has been issued but is not yet effective.
The table below sets out those new and revised IFRS standards that have been
issued and are relevant to the Group and effective for the current reporting
period. Adoption of the below has not had a material impact on the Interim
Financial Statements.
New pronouncement Effective date
Definition of Accounting Estimates - Amendments to IAS 8 Accounting policies, 1 January 2023
Changes in Accounting Estimates and Errors
Disclosure of Accounting Policies - Amendments to IAS 1 Presentation of 1 January 2023
Financial Statements and IFRS Practice Statement 2
Deferred Tax related to Assets and Liabilities arising from a Single 1 January 2023
Transaction - Amendments to IAS 12 Income Taxes
Going concern
The Interim 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.
In assessing the going concern position of the Group for the period ended 30
June 2023, the Directors have considered the following:
• the Group's trading performance in the first half of 2023 and in July and
August;
• future expected trading performance to December 2024 (the going concern
period), including membership levels and behaviours;
• the macroeconomic and geopolitical environment; and
• the Group's financing arrangements and relationship with its lenders and
shareholders.
Trading in the first half of 2023 has been encouraging and the Group has
generated significant levels of free cash flow. Membership at 30 June 2023 was
867,000, up 9.7% year on year (Jun 2022: 790,000) and up 5.6% since the end of
2022 (Dec 2022: 821,000) and yields have continued to strengthen. As a result,
revenue increased by 18.5% year on year in the first half of 2023, offsetting
inflationary cost increases. Trading in July and August has continued to be
encouraging.
The Group continues to have access to a combined £80m revolving credit
facility ('RCF') as well as £13.65m of finance lease facilities (£15m
permitted under the RCF). As at 30 June 2023, the Group had Non-Property Net
Debt (including finance leases) of £69.7m, a reduction of £6.4m since 31
December 2022, resulting in £22.1m of headroom (calculated off bank debt
less cash) under the RCF.
On 5 September 2023, the Group agreed a number of amendments to its £80m RCF.
These included an extension of the facilities to October 2025 and the
inclusion of Barclays within the syndicate alongside HSBC and NatWest. In
addition, Covid-related covenants have been removed. The RCF is subject to
quarterly financial covenant tests on leverage (Net Debt to Group Adjusted
EBITDA Less Normalised Rent) and fixed charge cover (Adjusted EBITDAR to Net
Finance Charges and Normalised Rent).
Despite the positive trading to date in 2023, the Directors expect the
macroeconomic uncertainty to continue for some time which may impact consumer
behaviour. As a result, we have taken a cautious approach to preparing the
financial plan that underpins the going concern review.
The base case forecast for the period to 31 December 2024 anticipates
continued growth in yields across the whole estate as a result of pricing
actions that have already been taken. However, modest increases in membership
levels are driven largely by the sites opened in 2022 and not by growth in the
mature estate. In addition, the Directors have continued to take a measured
approach to new site openings throughout the plan period, with all new sites
assumed to be self-financed. Under this scenario, all financial covenants are
passed with good levels of headroom and the Group can operate within its
financing facilities.
The Directors have considered a downside scenario which anticipates a greater
impact of the macroeconomic uncertainty and resultant weaker trading
throughout the period under review. Under this scenario, membership numbers in
the mature estate start to deviate from the base case from September 2023 such
that they are approximately 14% lower by the end of 2024. Under this scenario,
the number of new site openings is reduced, and discretionary
performance-related bonuses removed to ensure that all financial covenants
continue to be passed with reasonable levels of headroom, and the Group
continues to operate within its financing facilities.
In the event of a more severe downside 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 consider such a scenario to
be highly unlikely.
Conclusion
The Board has reviewed the financial forecasts and downside scenario of the
Group and has a reasonable expectation that the Group has adequate resources
to continue in operational existence for the period to 31 December 2024. As a
result, the Directors continue to adopt the going concern basis in preparing
these Interim Financial Statements. In making this assessment, consideration
has been given to the current and future expected trading performance and
liquidity position; the macroeconomic and geopolitical environment; the
Group's financing arrangements and relationship with its lenders and
shareholders; and the mitigating actions that can be deployed in the event of
reasonable downside scenarios.
3. Adjustments to prior year
Remeasurement of borrowings
The Group has borrowings in the form of an RCF which should be measured at
amortised cost using the effective interest method. Following changes made to
the banking facilities in May 2022, the valuation of the borrowings at
amortised cost was not correctly reflected in the financial statements at 30
June 2022. Correction of this error results in finance costs decreasing by
£1.4m with a corresponding reduction in the carrying value of the borrowings
on the balance sheet. The tax effect of the adjustment is a decrease in the
tax credit in the income statement of £0.4m and a corresponding reduction in
the deferred tax asset on the balance sheet. There is no impact to Adjusted
earnings as the remeasurement of borrowings is excluded from this key
performance indicator.
Condensed consolidated income statement for the six months ended 30 June 2022
(extract):
As reported Remeasurement of borrowings Restated
£m £m £m
Operating profit 2.2 - 2.2
Finance costs (10.8) 1.4 (9.4)
Loss before tax (8.6) 1.4 (7.2)
Tax credit/(charge) 4.2 (0.4) 3.8
Changes in the fair value of derivative instruments 0.1 - 0.1
Loss for the period and total comprehensive loss attributable to equity (4.3) 1.0 (3.3)
shareholders
Loss per share pence pence pence
Basic and diluted (2.6) 0.6 (2.0)
Condensed consolidated statement of financial position as at 30 June 2022
(extract):
As reported Remeasurement of borrowings Restated
£m £m £m
Non-current assets
Deferred tax assets 20.4 (0.4) 20.0
Total non-current assets 569.3 (0.4) 568.9
Total assets 585.4 (0.4) 585.0
Non-current liabilities
Borrowings 58.7 (1.4) 57.3
Total non-current liabilities 380.5 (1.4) 379.1
Total liabilities 437.3 (1.4) 435.9
Net assets 148.1 1.0 149.1
Condensed consolidated cash flow statement for the six months ended 30 June
2022 (extract):
As reported Remeasurement of borrowings Restated
£m £m £m
Loss before tax (8.6) 1.4 (7.2)
Adjustments for:
Net finance costs 10.8 (1.4) 9.4
Cash generated from operations 30.2 - 30.2
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.
6 months ended 6 months ended
30 June 2023 30 June 2022
Unaudited Unaudited
£m £m
Major products/service lines
Membership income 94.3 79.1
Rental income from personal trainers 3.9 3.9
Ancillary income 1.6 1.2
99.8 84.2
Timing of revenue recognition
Products transferred at a point in time 1.8 1.6
Products and services transferred over time 98.0 82.6
99.8 84.2
Contract liabilities at 30 June 2023 amounted to £11.6m (H1 2022: £8.3m).
Contract liabilities relate to membership fees received at the start of a
contract, where the Group has an obligation to provide a gym membership over a
period of time and are included within trade and other payables in the
Statement of Financial Position.
The Group operates in a market that experiences a small degree of seasonality.
The majority of members join during the first quarter of the year as a result
of a post-Christmas drive to improve fitness levels and general health. A
second wave of new joiners is experienced in September and October as students
return to university, with quieter periods experienced during the school
holidays. Marketing expenditure is phased towards peak joining periods,
particularly the January/February campaign.
5. Non-underlying items
6 months ended 6 months ended
30 June 2023 30 June 2022
Restated
Unaudited Unaudited
£m £m
Affecting operating expenses before depreciation, amortisation and impairment
Costs of major strategic projects and investments 0.1 1.3
Restructuring and reorganisation (income)/costs (including site closures) 0.4 (0.1)
Total affecting operating expenses before depreciation, amortisation and 0.5 1.2
impairment
Affecting depreciation, amortisation and impairment
Amortisation of business combination intangible assets 0.1 0.1
Total affecting depreciation, amortisation and impairment 0.1 0.1
Total affecting operating expenses(1) 0.6 1.3
Affecting finance costs
Refinancing and remeasurement of borrowings 0.3 1.2
Total affecting finance costs 0.3 1.2
Total all non-underlying items before tax 0.9 2.5
Tax on non-underlying items - (0.6)
Total non-underlying charge in income statement 0.9 1.9
(1) The cash flow on non-underlying operating items was £0.6m (H1 2022:
£1.1m). Depreciation, amortisation and impairment and remeasurement of
borrowings are non-cash items.
The costs of major strategic projects and investments in the period of £0.1m
relate predominantly to the Group's work in relation to introducing a
three-tier price product architecture. As noted earlier in this report, the
trial results have been encouraging and we are now evaluating and optimising
the results and preparing a potential rollout plan.
Restructuring and reorganisation costs in the period of £0.4m include the
costs associated with the change of Group CEO and other Board and Executive
Committee changes, as well as restructuring within the Central Support Office
team, partly offset by accrual true-ups and lease surrender income associated
with the closure of a small number of gyms in recent years.
Non-underlying costs affecting depreciation, amortisation and impairment in
the period amounted to £0.1m (H1 2022: £0.1m) and relate to the amortisation
of business combination intangibles acquired as part of the Lifestyle, easyGym
and Fitness First acquisitions.
Non-underlying items affecting finance costs amounted to £0.3m in the period
(H1 2022 restated: £1.2m) and reflect the costs associated with making
certain changes to the Group's RCF earlier in the year, as well as the
periodic remeasurement of the Group's RCF.
6. Taxation
The tax credit in the Consolidated Statement of Comprehensive Income of £nil
(H1 2022 restated: credit of £3.8m) has been calculated based on management's
best estimate of the annual income tax rate expected for the full financial
year, applied to the loss before tax for the half year ended 30 June 2023. The
effective tax rate on the statutory loss before tax for the period ended 30
June 2023 was therefore 0% (H1 2022 restated: 52.8%).
The net deferred tax asset recognised at 30 June 2023 was £16.3m (31 December
2022: £16.3m; 30 June 2022 restated: £20.0m). This comprised deferred tax
assets in respect of tax losses and other temporary differences where the
Directors believe it is probable that these will be recovered within a
reasonable period. Short term timing differences are generally recognised
ahead of losses on the basis that they are likely to reverse more quickly.
The financial forecast used in the Going Concern assessment was also used to
assess the deferred tax recoverability at 30 June 2023, and the Directors
believe that this plan provides convincing evidence to support the continued
recognition of the deferred tax assets that were recognised at 31 December
2022. However, given the ongoing macro-economic and geopolitical uncertainty,
the Directors do not believe it is appropriate to recognise additional
deferred tax assets at 30 June 2023.
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's share based long term incentive schemes.
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 period ended 30 June 2023, the Group had
potentially dilutive shares in the form of share options and unvested shares
issued pursuant to The Gym Group plc's share based long term incentive
schemes. As the Group is in a loss-making position, all potential dilutive
share options will not be dilutive.
6 months ended 6 months ended
30 June 2023 30 June 2022
Restated
Unaudited Unaudited
Loss (£m)
Loss for the period attributable to equity shareholders (6.1) (3.4)
Adjustment for non-underlying items 0.9 1.9
Adjusted loss for the period attributable to equity shareholders (5.2) (1.5)
Weighted average number of shares
Basic and diluted weighted average number of shares 178,373,139 176,618,656
Earnings per share (p)
Basic and diluted loss per share (3.4) (2.0)
Adjusted basic and diluted loss per share (2.9) (0.8)
At 30 June 2023, 9,575,032 share awards (H1 2022: 7,443,898) were excluded
from the diluted weighted average number of Ordinary shares calculation
because their effect would be anti-dilutive.
8. Property, plant and equipment
Amounts recognised in the Consolidated Statement of Financial Position in
respect of property, plant and equipment are as follows:
For the period ended 30 June 2023
Assets under construction Leasehold improvements Fixtures, fittings and equipment Gym and other equipment Computer equipment Total
£m £m £m £m £m £m
Cost
At 1 January 2023 2.3 240.8 11.6 90.0 5.6 350.3
Additions 2.0 1.6 - 1.0 0.2 4.8
Disposals (0.1) - - - - (0.1)
Transfers (1.2) 0.8 - (1.5) - (1.9)
At 30 June 2023 3.0 243.2 11.6 89.5 5.8 353.1
Accumulated depreciation
At 1 January 2023 - (95.2) (9.6) (60.5) (4.0) (169.3)
Charge for the period - (7.9) (0.3) (3.4) (0.4) (12.0)
At 30 June 2023 - (103.1) (9.9) (63.9) (4.4) (181.3)
Net book value
At 30 June 2023 3.0 140.1 1.7 25.6 1.4 171.8
For the period ended 30 June 2022
Assets under construction Leasehold improvements Fixtures, fittings and equipment Gym and other equipment Computer equipment Total
£m £m £m £m £m £m
Cost
At 1 January 2022 2.1 208.7 11.5 86.6 4.3 313.2
Additions 5.1 7.1 0.1 0.8 0.4 13.5
Business combinations - 1.1 - 0.1 - 1.2
Transfers (1.2) 1.1 - 0.1 - -
At 30 June 2022 6.0 218.0 11.6 87.6 4.7 327.9
Accumulated depreciation
At 1 January 2022 - (79.2) (9.1) (55.9) (3.4) (147.6)
Charge for the period - (7.9) (0.4) (4.9) (0.3) (13.5)
At 30 June 2022 - (87.1) (9.5) (60.8) (3.7) (161.1)
Net book value
At 30 June 2022 6.0 130.9 2.1 26.8 1.0 166.8
Included within additions for the period is £2.9m of accrued capital
expenditure (31 December 2022: £6.2m).
Outstanding capital commitments at 30 June 2023 totalled £5.8m (31 December
2022: £0.8m).
9. Right-of-Use Assets and Leases
Amounts recognised in the Consolidated Statement of Financial Position in
respect of right-of-use assets are as follows:
For the period ended 30 June 2023
Property leases Non-property leases Total
£m £m £m
Cost
At 1 January 2023 420.5 15.3 435.8
Additions 8.2 1.1 9.3
Transfers - 1.9 1.9
At 30 June 2023 428.7 18.3 447.0
Accumulated depreciation
At 1 January 2023 (144.6) (1.8) (146.4)
Charge for the period (13.0) (1.0) (14.0)
At 30 June 2023 (157.6) (2.8) (160.4)
Net book value
At 30 June 2023 271.1 15.5 286.6
For the period ended 30 June 2022
Property leases Non-property leases Total
£m £m £m
Cost
At 1 January 2022 388.2 7.2 395.4
Additions 16.8 1.8 18.6
Business combinations 3.6 - 3.6
Disposals (0.8) - (0.8)
At 30 June 2022 407.8 9.0 416.8
Accumulated depreciation
At 1 January 2022 (114.0) (0.2) (114.2)
Charge for the period (12.6) (0.7) (13.3)
At 30 June 2022 (126.6) (0.9) (127.5)
Net book value
At 30 June 2022 281.2 8.1 289.3
The split of lease liabilities between current and non-current is as follows:
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£m £m £m
Current 27.6 25.1 25.3
Non-current 320.8 320.0 325.1
Total Lease liabilities 348.4 345.1 350.4
The maturity analysis of lease liabilities is as follows:
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£m £m £m
Within one year 43.2 41.1 40.4
Greater than one year but less than two years 43.9 40.4 43.4
Greater than two years but less than three years 41.1 38.8 40.5
Greater than three years but less than four years 39.6 37.3 38.6
Greater than four years but less than five years 38.9 37.4 38.7
Five years or more 237.5 245.3 246.0
444.2 440.3 447.6
Less: unearned interest (95.8) (95.2) (97.2)
Total Lease liabilities 348.4 345.1 350.4
During the period, the Group entered into additional leasing arrangements with
a total available facility of £1.0m to finance portals that are used in the
fit-out of new gyms, increasing the total available facilities to £13.65m (31
December 2022: £12.5m; 30 June 2022: £12.5m). As at 30 June 2023, the amount
outstanding on these facilities was £11.8m (31 December 2022: £11.5m; 30
June 2022: £7.0m).
10. Borrowings
The carrying value of the Group's bank borrowings at 30 June 2023 was £63.3m
(31 December 2022: £70.0m; 30 June 2022: £58.7m).
The Group has in place an RCF which is syndicated to a three-lender panel of
banks. Funds drawn under the RCF bear interest at a minimum annual rate of
2.85% above the Sterling Overnight Index Average (SONIA) plus a credit
adjustment spread. The average interest rate paid in the period on drawn funds
was 7.60% (H1 2022: 3.23%). Undrawn funds bear interest at a minimum annual
rate of 1.14%.
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 effective interest rate. Any remeasurement of borrowings
is treated as non-underlying and excluded from Adjusted earnings.
The RCF is subject to financial covenants relating to leverage and fixed
charge cover.
At 30 June 2023, the Group had drawn down £63.0m under the RCF, leaving
£17.0m undrawn and available.
Non-Property Net Debt at the period end was as follows:
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£m £m £m
Bank borrowings 63.0 57.5 70.0
Less: Cash and cash equivalents (5.1) (6.9) (5.4)
Non-Property Net Debt excluding non-property leases 57.9 50.6 64.6
Non-property leases (note 9) 11.8 7.0 11.5
Non-Property Net Debt 69.7 57.6 76.1
11. Financial instruments and investments in financial assets
IFRS 7 requires fair value measurements to be recognised using a fair value
hierarchy that reflects the significance of the inputs used in the value
measurements:
• Level 1: quoted prices in active markets for identical assets and liabilities
• Level 2: inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as process) or
indirectly (i.e. derived from prices)
• Level 3: inputs for the asset or liability that are not based on observable
market data (unobservable market data)
There were no transfers between levels throughout the periods under review.
With the exception of the Group's borrowings, the carrying value of financial
assets and liabilities equal their fair value. The carrying value of
borrowings of £63.3m (June 2022: £58.7m; December 2022: £70.0m) have a fair
value of £63.0m (June 2022: £57.5m; December 2022: £70.0m). The fair values
of financial derivatives and borrowings have been calculated by discounting
the future cash flows at prevailing market interest rates. Other than the fair
value of financial assets at fair value through profit and loss that are
categorised as Level 3, the fair value of all other financial assets and
liabilities are categorised as Level 2.
In February 2020, the Group purchased convertible loan notes in Fiit Limited
for cash consideration of £1.0m. These notes are measured at fair value
through profit and loss and the carrying value at 30 June 2023 was £1.0m (31
December 2022 and 30 June 2022: £1.0m). This is a level 3 valuation under the
fair value hierarchy and was determined based on the performance of the
business post-acquisition against the business plan produced at the time of
the investment. The range of sensitivity in the valuation of 30 June 2023 to
reasonably possible changes in the assumptions used is not considered to be
material.
12. Issued capital
The total number of shares in issue at 30 June 2023 was 178,401,999 (31
December 2022: 178,039,002).
13. Share based payments
The Group operates share based compensation arrangements under The Gym Group
plc Share Incentive Plan (SIP), The Gym Group plc Performance Share Plan
(PSP), The Gym Group plc Restricted Stock Plan (RSP), The Gym Group plc Long
Service Award Plan and The Gym Group plc Save as You Earn Plan (SAYE).
During the period, a total of 3,324,866 share awards were granted under the
Group's share based compensation schemes. These grants and their vesting
criteria are similar in nature to those awarded during 2022, except in the
case of the deferred shares granted as part of the Deferred Share Bonus Plan
for Executive Directors (details of which were set out on page 93 of the
Annual Report and Accounts 2022), and an equivalent grant for other members of
the senior management team, which are subject to continued employment over a
two year or 18-month period respectively and have no other performance
conditions.
For the period ended 30 June 2023, the Group recognised a total charge of
£1.4m (H1 2022: £0.6m) in respect of the Group's share based payment
arrangements and related employer's national insurance.
14. Related party transactions
The Group's significant related parties are as disclosed in Note 28 on page
158 of the Group's Annual Report and Accounts 2022. In March 2023, two dormant
entities, Derwent Fitness NW Limited and Derwent Fitness GS Limited, were
struck off. There have been no other significant changes to the nature of the
Group's related parties during the period.
15. Subsequent events
On 5 September 2023, the Group agreed a number of amendments to its £80m RCF.
These included an extension of the facilities to October 2025 and the
inclusion of Barclays within the syndicate alongside HSBC and NatWest. In
addition, Covid-related covenants have been removed.
1 (#_ftnref1) For a summary of KPI definitions used in the table see the
'Definition of non-statutory measures' section
2 (#_ftnref2) Like-for-like revenue vs 2022 includes all sites open as at 31
December 2020
3 (#_ftnref3) Includes Standard product in sites where three-tier price
product architecture is being trialled
4 (#_ftnref4) Includes Ultimate product in sites where three-tier price
product architecture is being trialled
5 (#_ftnref5) Calculated as Non-Property Net Debt : Group Adjusted EBITDA
Less Normalised Rent
6 (#_ftnref6) Like-for-like revenue vs 2022 includes all sites open as at 31
December 2020
7 (#_ftnref7) Like-for-like revenue vs 2019 includes all sites open as at 31
December 2018
8 (#_ftnref8) Overall Satisfaction score surveys undertaken by Service
Management Group
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR EAPNFFFNDEFARecent news on GYM
See all newsREG - Gym Group PLC (The) - Total Voting Rights
AnnouncementREG - Gym Group PLC (The) - Director/PDMR Shareholding
AnnouncementREG - Gym Group PLC (The) - Change of Registered Office
AnnouncementREG - Gym Group PLC (The) - Director/PDMR Shareholding
AnnouncementREG - Gym Group PLC (The) - Notice of AGM
Announcement