REG - Gym Group PLC (The) - 2024 Interim results
11/09/2024 07:00
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RNS Number : 6450D Gym Group PLC (The) 11 September 2024
11 September 2024
The Gym Group plc
('The Gym Group', 'the Group' or 'the Company')
2024 Interim Results
Strong first half performance; well set for the full year
Leading low cost gym operator, The Gym Group, announces its interim results
for the six month period ended 30 June 2024.
Key financial metrics(1)
Six months ended 30 June 2024 Six months ended 30 June 2023 Movement
Revenue (£m) 112.1 99.8 +12%
Group Adjusted EBITDA (£m) 41.7 35.1 +19%
Group Adjusted EBITDA Less Normalised Rent (£m) 22.1 17.2 +28%
Adjusted profit/(loss) before tax (£m) 0.5 (5.2) +£5.7m
Statutory profit/(loss) before tax (£m) 0.2 (6.1) +£6.3m
Statutory profit/(loss) after tax (£m) 0.2 (6.1) +£6.3m
Adjusted Basic and Diluted profit/(loss) per share (p) 0.3 (2.9) +3.2p
Statutory Basic and Diluted profit/(loss) per share (p) 0.1 (3.4) +3.5p
Free cash flow (£m) 24.5 14.2 +73%
Non-Property Net Debt (£m) (as at period end) (54.6) (69.7) Down by 22%
(1) For a summary of KPI definitions used in the table see the 'Definition of
non-statutory measures' section.
Financial highlights
• Revenue for the period increased by 12%, with average members up 3% and
average revenue per member per month ('ARPMM') up 9%; like-for-like(2) revenue
grew 9%
• Group Adjusted EBITDA Less Normalised Rent at £22.1m was 28% ahead of the
prior year period driven by strong revenue growth, outpacing cost inflation
• Strong free cash flow generated in H1, up 73% to £24.5m, funding four new
sites opened in the period, enhancements to existing sites and continued
technology investment; Non-Property Net Debt was down by £11.8m in the period
(Dec 2023: £66.4m), resulting in reduced leverage(3) of 1.26x
• New £90m three-year combined bank facility signed in June 2024, made up of a
£45m Term Loan and £45m Revolving Credit Facility, with improved terms
2 Like-for-like revenue vs 2023 includes all sites open as at 31 December
2021.
3 Leverage calculated as Non-Property Net Debt divided by Group Adjusted
EBITDA Less Normalised Rent.
Business and operational highlights
• Next Chapter growth plan, announced in March 2024, starting to deliver
progress in driving up returns in mature gym estate, through higher yield,
reduced promotion and better targeted customer acquisition
• The Gym Group app refreshed with additional features, as part of a detailed
programme to improve member retention
• High levels of member engagement and satisfaction levels sustained throughout
the period
• Seven new sites opened year to date (four in H1); enhancements made in around
150 sites; on track to open 10-12 new sites in 2024 as guided
• Strong pipeline of high quality sites to accelerate new openings in 2025, in
line with our plan to open circa 50 sites over three years, funded from free
cashflow
Current trading and outlook
• Trading momentum continued in July and August; we now expect to deliver 5-6%
like-for-like revenue growth in 2024
• After a strong first half performance, and continued encouraging trading
throughout the summer, we now expect to deliver full year results at the top
end of recently revised market expectations(4).
4 Current Company-compiled analyst forecast range for EBITDA Less Normalised
Rent is £42.4m-£44m.
Will Orr, CEO of The Gym Group, commented:
"Further positive trading momentum during the first half reflects the
continued early benefit of executing on our Next Chapter strategy, set out in
March. We have increased membership, revenue and profit and our
market-leading proposition is more resonant than ever, in a growing
market. We are also well on track to deliver our target of opening circa 50
new high quality gyms over the next three years, funded from free cash flow.
We have detailed plans in place for the key autumn trading period and are well
set to deliver full year results at the top end of recently revised market
expectations(5)."
5 Current Company-compiled analyst forecast range for EBITDA Less Normalised
Rent is £42.4m-£44m.
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_3bshTPicTRyLtUvfT6z2mA
(https://storm-virtual-uk.zoom.us/webinar/register/WN_3bshTPicTRyLtUvfT6z2mA)
.
A copy of the presentation and recording of the webcast will be published on
the Company's website.
For further information, please contact:
The Gym Group via Instinctif Partners
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 240
high quality sites across the UK. These gyms offer 24/7 opening and flexible,
no contract membership. As at 30 June 2024, there were 905,000 members
nationwide. Our gyms have over 60 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 (SBTi).
Sites opened in 2024 to date are: Orpington, London Euston Road, Manchester
Oxford Road, Welwyn Garden City, London Plaistow, Dudley and London East Ham.
CEO Review
At our preliminary results presentation in March 2024, I outlined our Next
Chapter growth plan. Our investment case is to deliver sustained growth from
free cash flow and the Next Chapter growth plan is focused on how we will
deliver this, within the highly resilient and growing market that is health
and fitness.
This strategic plan aims firstly to "Strengthen the core" of our existing
business, increasing returns from the existing estate. The primary elements of
this are pricing and revenue management; member acquisition and conversion;
and improving member retention. This activity will support like-for-like sales
growth which in turn will generate increasing cash flows to invest in the
second part of the plan - 'Accelerate rollout of quality sites'. To deliver
this, we will open around 50 high quality, high returning sites over the next
three years. In turn, successful execution of these two priorities will
provide the cashflow to develop further options to 'Broaden our growth' over
the longer term.
A winning proposition
Underpinning our growth is our focused, scalable proposition which continues
to deliver for our members. We now have over 900,000 members, up 6% since last
year end, and 4% year on year. Average members, at 914,000 are 3% up on the
comparative period of 2023. Visits have grown by 5% compared with the prior
year and the proportion of members visiting 4x per month has increased by
1.3ppts; this remains a key target as more members visiting more frequently
stay with us for longer, which drives revenue growth and the Social Value we
create.
We have invested £2.2m in our mature gyms in the first half, upgrading
facilities and equipment in around 150 sites with more comprehensive
enhancement projects in five of those sites. We have also rolled out the
popular HYROX training concept to more locations, and this programme will be
available in at least 50 of our gyms by the year end.
Customer satisfaction metrics show continuing strength, with OSAT scores
improving by 2.4ppts in H1 compared with the same period last year. According
to Google reviews, we have a significantly higher percentage of 4/5 and 5/5
satisfaction scores compared with our closest low cost competitors. We are
also proud to have been named as one of the Best Places to Work in the UK in
this year's Sunday Times survey. Our employee engagement score in the latest
survey carried out in June increased to 8.7/10 (8.5/10 last time). Our highly
engaged and high performing teams are critical to delivering a positive member
experience, driving frequency of visit and supporting our growth plan.
Strengthen the core
The focus in the first six months of this financial year has been on
strengthening the core in mature sites, with active yield and revenue
management delivering a strong improvement in like-for-like revenue and good
growth in site EBITDA, marking progress in our target to improve mature site
ROIC to 25%.
Yield improvement from reducing the gap with competitors
We have targeted reducing the pricing gap with our key low cost competitors
and have made good progress in the period. Our average headline rate in June
2024 was £23.94, up 9% year on year. Like-for-like revenue growth of 9%
reflects a combination of higher headline rates for new members; selective
re-pricing of the existing member base; and reduced promotional activity -
particularly in the key January/February recruitment period.
Encouragingly we have achieved this whilst maintaining our strong customer
satisfaction scores and without seeing an increase in the rate of churn in the
membership base. The like-for-like volume of members has remained broadly
flat. Our strategy has been to optimise the pricing opportunity, whilst using
our data management tools to minimise volume attrition. The introduction of
off-peak pricing to offer a more accessible product and provide members with
three membership options has, as hoped, attracted new types of members;
strengthened our marketing proposition; and provided a "safety net" to hold on
to existing members who otherwise might have churned out. We have further
refined off-peak pricing at site level to minimise cannibalisation and drive
incremental volume. The proportion of members opting for our Ultimate
membership remains extremely robust, standing at 31.3% (30.7% at 30 June 2023
and 31.7% at 31 December 2023).
We have shifted the mix towards less costly promotions and improved the
effectiveness of promotions when deployed. For example, new customers acquired
via a "50% off" promotion have a higher propensity to churn when the promotion
ends than those acquired via "no joining fee", as a result of "bill shock"
when the next payment is made at the full rate. We aim to minimise "bill
shock", and early signs from the measures we are taking to support this are
encouraging.
Using data and technology to support customer acquisition and retention
Shifting our brand focus from national to local as part of our digital
marketing strategy is starting to deliver positive brand metric results around
our gyms. For example, we have seen an 8% improvement in the perception of Gym
Group value for money - notwithstanding headline rate increases - and a 5%
improvement in intention to join one of our gyms. Real time ad-tech is
allowing us to tailor advertising to relevant geography and demographics,
helping to support our trading performance.
For members joining via the website, our new A/B testing programme is
delivering a steady stream of incremental improvements to conversion rates. We
have increased testing to improve our understanding of customer acquisition
costs vs member lifetime value. This will ensure that any increase in
marketing investment will deliver the right returns.
As we stated in March, increasing member retention has the potential to drive
significant upside, and a core part of our focus on retention is centred
around 'early life' engagement with our members. The highest rate of churn is
in the first 45 days of membership, before a habit has formed. We are already
seeing positive results from our 'early life' programme, for example applying
behavioural science to increase initial email engagement with a new member and
achieving a higher uptake of inductions.
As part of the retention programme, in July, we relaunched our app. This is
already highly rated and well-used by our members, with average active users
increasing by 11% year on year in the period. New developments include an
onboarding questionnaire, allowing members to set their goals and preferences;
tailored workout programmes and "how-to" guides; and fitness tracking. Further
features and enhancements will be introduced in H2.
Accelerate rollout of quality sites
Our Next Chapter growth plan targets an accelerating rollout of high quality
sites delivering 30% ROIC and funded from free cashflow.
We opened four new gyms in the period: London Euston; Welwyn Garden City;
Orpington; and Manchester Oxford Road. Three further sites have opened since
the half year end, and we have secured the locations to deliver 10-12 new
sites in 2024 as planned. There is a strong pipeline building - helped by our
new national partnership with leading property agents, Savills - that is
expected to deliver 15-20 new gyms in 2025, in line with our three year target
of c.50 gyms, delivering an average ROIC of 30%. We remain committed to our
ROIC target, which will continue to take precedence over delivering a specific
number of site openings in any given year.
We have also refined our approach to launching our new gyms, which has
resulted in a more rapid ramping up of member volumes. Enhanced tailoring to
local markets has seen the four sites opened in H1 (two in Greater London and
two in Urban Residential locations) open very strongly compared to previous
cohorts.
We continue to drive cost efficiency projects that will enhance new site
returns as well as improve mature site performance, including refining the
operating model, optimising energy usage and innovating in-build cost
management.
Preliminary work on the steps we might take to broaden our growth into new
channels, adjacencies and/or markets continues, and we will provide an update
on our plans in due course.
Management changes
Alison Sagar, Chief Commercial Officer, stepped down from the Executive
Committee and left the business in July. Tina Koehler joins on 30
September in the same role. Tina joins from Deliveroo, where she was Chief
Marketing Officer, having previously served in senior commercial and marketing
roles at Procter & Gamble, Amazon and Audi.
Summary and Outlook
Our near-term priority remains reducing the pricing gap with key competitors
while this opportunity sustains, whilst aiming to maintain volume. The first
half benefited from both the repricing action taken in the second half of last
year and higher headline rates applied in the key January/February recruitment
period, as well as more efficient promotions. As we anniversary these actions
the benefit to yield in the second half of the current year is likely to be at
a lower rate than in the first half. We have raised our full year
like-for-like revenue guidance from 4-5% growth to 5-6%. Further details of
full year guidance can be found in the Financial Review on page 10.
Trading momentum has continued strongly ahead of the key student recruitment
period, and we are well prepared for autumn trading. We continue to execute
our strategy across yield and revenue management, member acquisition and
retention, with encouraging early results. The second half of the year will
see us step up our openings and also deliver a further raft of improvements in
over 100 sites.
We are well-set for the balance of the year and expect to deliver full year
results at the top end of recently revised market expectations(6).
6 Current Company-compiled analyst forecast range for EBITDA Less Normalised
Rent is £42.4m-£44m.
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 consolidated financial statements, we have also
adopted a three-column format for 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 are not considered to be incurred in the normal course of
business. They are classified as non-underlying items on the face of the Group
income statement within their relevant category. Non-underlying items include
costs of major strategic projects and investments, restructuring and
reorganisation costs (including site closure costs), 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.
Summary
Six months ended 30 June 2024 Six months ended 30 June 2023 Movement
Total number of gyms at period end 237 230 +3%
Total number of members at period end ('000) 905 867 +4%
Revenue (£m) 112.1 99.8 +12%
Group Adjusted EBITDA (£m) 41.7 35.1 +19%
Group Adjusted EBITDA Less Normalised Rent (£m) 22.1 17.2 +28%
Adjusted profit/(loss) before tax (£m) 0.5 (5.2) +£5.7m
Statutory profit/(loss) before tax (£m) 0.2 (6.1) +£6.3m
Statutory profit/(loss) after tax (£m) 0.2 (6.1) +£6.3m
Net cash inflow from operating activities (£m) 52.0 42.0 +24%
Free cash flow (£m) 24.5 14.2 +73%
Non-Property Net Debt (£m) (as at period end) (54.6) (69.7) Down by 22%
Results for the period
Six months ended 30 June 2024 Six months ended 30 June 2023
Underlying result Non-underlying items Total Underlying result Non-underlying items Total
£m £m £m £m £m £m
Revenue 112.1 - 112.1 99.8 - 99.8
Cost of sales (1.5) - (1.5) (1.4) - (1.4)
Gross profit 110.6 - 110.6 98.4 - 98.4
Operating expenses (before depreciation, amortisation and impairment) (69.9) - (69.9) (64.7) (0.5) (65.2)
Depreciation, amortisation and impairment (29.7) (0.1) (29.8) (28.5) (0.1) (28.6)
Operating profit 11.0 (0.1) 10.9 5.2 (0.6) 4.6
Finance costs (10.7) (0.2) (10.9) (10.4) (0.3) (10.7)
Finance income 0.2 - 0.2 - - -
Profit/(loss) before tax 0.5 (0.3) 0.2 (5.2) (0.9) (6.1)
Tax (charge)/credit - - - - - -
Profit/(loss) for the period attributable to shareholders 0.5 (0.3) 0.2 (5.2) (0.9) (6.1)
Earnings/(loss) per share
Basic and diluted (p) 0.3 0.1 (2.9) (3.4)
Revenue
Trading in the first half of 2024 has been strong, with good growth in both
membership and yield. Revenue increased by 12% to £112.1m (H1 23: £99.8m),
reflecting 3% higher average membership numbers throughout the period and a 9%
increase in yield.
The average membership number in the period was 914,000 compared with 884,000
in the six months ended 30 June 2023; we closed the period with 905,000
members which was up 6% on 31 December 2023.
The average headline price of a Standard membership increased to £23.94 in
June 2024 compared with £22.02 in June 2023 and £23.16 in December 2023,
largely as a result of higher joining fees and price increases for new
members, as well as some selective repricing of the base membership. The
proportion of members taking our premium membership was 31.3% in June 2024
compared with 30.7% and 31.7% in June 2023 and December 2023 respectively. As
a result, Average Revenue Per Member Per Month ('ARPMM') in the first half of
2024 was up 9% to £20.44 compared with £18.81 in the first half of 2023.
Like-for-like revenue (based on all sites open as at 31 December 2021)
increased by 9% year on year.
Cost of sales
Cost of sales, which includes the costs associated with the generation of
ancillary income as well as call centre costs and payment processing costs,
were £1.5m (H1 23: £1.4m) with the increase year on year mirroring the
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 2024 Six months ended 30 June 2023
£m £m
Site costs 56.4 53.3
Site Normalised Rent 19.4 17.7
Site costs including Normalised Rent 75.8 71.0
Central Support Office costs 12.5 10.0
Central Support Office Normalised Rent 0.2 0.2
Central Support Office costs including Normalised Rent 12.7 10.2
Share based payments 1.0 1.4
89.5 82.6
Less: Normalised Rent (19.6) (17.9)
Underlying operating expenses (before depreciation, amortisation and 69.9 64.7
impairment)
Site costs
In the first half of 2024, site costs increased by 6% to £56.4m (H1 23:
£53.3m). Excluding the impact of new sites opened in FY23 and FY24, site
costs increased by 3%.
The fixed costs associated with running the sites (predominantly building
rates and service charges) were broadly flat year on year as the impact of the
increased estate size and inflationary increases in building rates costs (new
three year assessment period starting April 2023) were offset by rebates
received as a result of successful rateable value appeals.
Controllable site costs increased by £3.2m, reflecting the increased estate
size and inflationary pay and cost increases. Utilities rates moderated
slightly in the period as expected.
Site Normalised Rent, which is defined as the contractual rent payable,
recognised in the monthly period to which it relates, increased by £1.7m in
the period, again reflecting the larger estate size, with rent free periods on
sites opened in the second half of FY22 and FY23 coming to an end.
Central Support Office costs
Central Support Office costs in the period increased to £12.5m (H1 23:
£10.0m), reflecting the investment made to date to deliver the Next Chapter
strategy, as well as inflationary pay increases and increased accruals for
discretionary pay awards linked to financial performance. Normalised Rent in
relation to the Group's head office remained flat at £0.2m.
Share based payments
Share based payments in the period amounted to £1.0m (H1 23: £1.4m). The
lower first half charge largely reflects delays in granting awards under the
2024 schemes until changes to the Group's remuneration policy were approved by
shareholders at the AGM in May.
In January 2024, the Group established an Employee Benefit Trust ('EBT') which
is being used to purchase shares in order to minimise dilution associated with
the share based payments. During the period, the EBT purchased 1,399,973
shares, which have been classified as Treasury shares in the Consolidated
Statement of Financial Position. Subsequent to 30 June 2024, the EBT purchased
a further 1,434,955 shares.
Underlying depreciation and amortisation
Underlying depreciation and amortisation charges in the period amounted to
£29.7m (H1 23: £28.5m). The increase year on year reflects the increased
estate size and continuing investment in technology.
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 Operating profit/(loss) as follows:
Six months ended Six months ended
30 June 2024 30 June 2023
£m £m
Operating profit 10.9 4.6
Non-underlying operating items (see below) 0.1 0.6
Share based payments 1.0 1.4
Underlying depreciation and amortisation 29.7 28.5
Group Adjusted EBITDA 41.7 35.1
Normalised Rent(7) (19.6) (17.9)
Group Adjusted EBITDA Less Normalised Rent 22.1 17.2
( )
(7) Normalised Rent is the contractual rent payable, recognised in the monthly
period to which it relates. Property lease payments differ to Normalised Rent
by £0.1m (H1 23: £0.1m) due to timing differences.
Group Adjusted EBITDA Less Normalised Rent at £22.1m was 28% ahead of the
prior year period (H1 23: £17.2m), as the increased revenue was only
partially offset by increased site operating costs and the growth in support
office costs.
Underlying finance costs
Underlying finance costs increased in the period by £0.3m to £10.7m (H1 23:
£10.4m). The finance costs associated with our bank borrowings (comprising
interest payable and fee amortisation less capitalised interest) increased by
£0.4m to £3.0m (H1 23: £2.6m) as the benefit from reduced borrowings was
more than offset by the increases in SONIA rates throughout 2023. The average
interest rate paid in the period on drawn funds was 8.5% (H1 23: 7.6%).
The implied interest relating to the lease liabilities was £7.7m (H1 23:
£7.8m).
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 2024 Six months ended 30 June 2023
£m £m
Affecting operating expenses (before depreciation, amortisation and
impairment)
Costs of major strategic projects and investments - 0.1
Restructuring and reorganisation costs (including site closures) - 0.4
- 0.5
Affecting depreciation, amortisation and impairment
Amortisation of business combination intangible assets 0.1 0.1
0.1 0.1
Affecting finance costs
Remeasurement of borrowings - 0.1
Refinancing costs 0.2 0.2
0.2 0.3
Total all non-underlying items before tax 0.3 0.9
Tax on non-underlying items - -
Total non-underlying charge in income statement 0.3 0.9
Non-underlying costs affecting depreciation, amortisation and impairment in
the period relates 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 £0.2m (H1 23:
£0.3m) and relates to advisory and legal costs incurred in agreeing the
Group's new banking facilities.
Taxation
The tax charge for the period was £nil (H1 23: £nil) and the effective tax
rate on the statutory profit before tax for the period ended 30 June 2024 was
therefore 0% (H1 23: 0%).
The net deferred tax asset recognised at 30 June 2024 was £16.3m (31 December
2023: £16.3m; 30 June 2023 £16.3m). 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 2024, and the Directors
believe that this forecast provides convincing evidence to support the
continued recognition of the deferred tax assets that were recognised at 31
December 2023. However, given the ongoing macroeconomic and geopolitical
uncertainty, the Directors do not believe it is appropriate to recognise
additional deferred tax assets at 30 June 2024.
Earnings
As a result of the factors discussed above, the statutory profit before tax in
the period was £0.2m (H1 23: loss of £6.1m) and the statutory profit after
tax was £0.2m (H1 23: loss of £6.1m).
Adjusted profit before tax is calculated by taking the statutory profit before
tax and adding back the non-underlying items. Adjusted profit before tax was
£0.5m (H1 23: loss of £5.2m). Adjusted profit after tax was £0.5m (H1 23:
loss of £5.2m).
The basic and diluted earnings per share was 0.1p (H1 23: loss of 3.4p), and
the basic and diluted adjusted profit per share was 0.3p (H1 23: loss of
2.9p).
Dividend
We are a growth company, in a growth market, with a clear capital allocation
policy. Whilst dividends and other returns of capital to shareholders will be
considered by the Directors in the future, we are not proposing an interim
dividend for the current year as we continue to see significant opportunities,
with attractive returns, to invest our free cash flow in growing the business.
Cash flow
Six months ended Six months ended
30 June 2024 30 June 2023
£m £m
Group Adjusted EBITDA Less Normalised Rent 22.1 17.2
Movement in working capital 10.7 7.5
Maintenance capital expenditure (4.3) (7.0)
Free cash flow before non-underlying items, interest and tax 28.5 17.7
Non-underlying items (0.5) (0.6)
Net interest paid (3.5) (2.9)
Free cash flow(8) 24.5 14.2
Expansionary capital expenditure (11.2) (7.6)
Purchase of own shares (1.5) -
Refinancing fees - (0.2)
Cash flow before movement in debt 11.8 6.4
Net (decrease)/increase in non-property lease indebtedness (2.9) 0.3
Net repayment of borrowings (3.0) (7.0)
Net cash flow 5.9 (0.3)
8 A reconciliation of Net cash inflow from operating activities to Free cash
flow has been included in Note 11 to the Interim Financial Statements.
Free cash flow generated in the period was £24.5m (H1 23: £14.2m). The
increase year on year reflects the improved trading profits as well as higher
working capital inflows, driven partly by short-term timing differences on
payments and receipts. The cash outflow in respect of maintenance capital
expenditure in the period of £4.3m was lower year on year (H1 23: £7.0m) as
a result of settling a higher than normal level of creditors brought forward
from 2022 in HY23.
Expansionary capital expenditure in the period amounted to £11.2m (H1 23:
£7.6m) and relates predominantly to the fit-out of the four new gyms we
opened in the period and spend on technology projects.
As noted earlier, in January 2024, the Group established an Employee Benefit
Trust ('EBT') which is being used to purchase shares in order to minimise
dilution associated with the share based payments and during the period, the
EBT purchased 1,399,973 shares at a cost of £1.5m.
Balance sheet and net debt
At 30 June 2024 At 30 June 2023 At 31 December 2023
£m £m £m
Non-current assets 555.5 567.2 558.5
Current assets 15.4 10.8 13.0
Current liabilities (77.4) (63.2) (72.3)
Non-current liabilities (365.9) (385.6) (371.2)
Net assets 127.6 129.2 128.0
Net debt (54.6) (69.7) (66.4)
Non-current assets decreased in the period by £3.0m to £555.5m as right of
use assets acquired (in relation to new leases) was more than offset by the
depreciation and amortisation charged in the period.
Net current liabilities increased by £2.7m, largely as a result of short term
timing differences in working capital balances.
Non-current liabilities decreased by £5.3m as a £3m reduction in drawings
under the Group's RCF and payments made in relation to existing leases more
than offset the recognition of lease liabilities on new sites.
As at 30 June 2024, the Group had Non-Property Net Debt of £54.6m (31
December 2023: £66.4m; 30 June 2023: £69.7m) comprising drawn facilities of
£56.0m and non-property leases of £6.0m, less cash of £7.4m. The Directors
believe that this measure of net debt best reflects the financial health of
the business. In addition, it is a key constituent of the Adjusted Leverage
covenant included in the Group's banking agreement. At 30 June 2024, Adjusted
Leverage was 1.26 times (December 2023: 1.72 times), significantly below the
banking covenant threshold of 3.0 times; and Fixed Charge Cover was 1.81 times
(December 2023: 1.73 times).
New banking facilities agreement
On 28 June 2024, the Group agreed a new facilities agreement with the same
banking syndicate, which came into effect on 1 July 2024. Under the new
agreement, the Group has in place a combined £90m facility, consisting of
£45m of Term Loan and £45m of RCF. The new facility is due to mature in June
2027.
Funds borrowed under the new facility agreement will bear interest at a
minimum annual rate of 2.75% (was 2.85%) above the Sterling Overnight Index
Average ('SONIA'); and undrawn funds under the RCF will bear interest at a
minimum annual rate of 1.1% (was 1.14%).
The new facilities agreement will continue to be subject to quarterly
financial covenant tests on Adjusted Leverage and Fixed Charge Cover (both
terms defined on page 12). Adjusted Leverage must not exceed 3.0 times and the
Fixed Charge Cover must be greater than 1.5 times.
Terms permit the distribution of surplus cashflow to shareholders in line with
our capital allocation policy, which prioritises organic growth.
Going concern
The Board has reviewed the financial forecast 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 31 December 2025. 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 current and future expected trading performance; the Group's
current and forecast liquidity position; and the mitigating actions that can
be deployed in the event of reasonable downside scenarios. Further detail is
provided in Note 2 to the Interim Financial Statements.
Current trading and outlook
Trading in July and August shows continued positive momentum. So, after a
strong first half, and continued encouraging trading throughout the summer, we
expect to deliver full year results at the top end of recently revised market
expectations(9), with like-for-like revenue in 2024 now expected to increase
by 5-6% overall.
We continue to expect like-for-like site cost growth of 2-3%, with utility
rates continuing to moderate further in the second half. We expect Central
Support Office costs in the second half to be at a similar level to what we
have seen in the first half as we invest to deliver the Next Chapter growth
plan.
We reiterate our plan to open 10-12 sites in 2024, with all new sites
continuing to be financed from free cash flow and we expect Adjusted Leverage
to be at the lower end of the range of 1.5 to 2.0 times. The Next Chapter
growth plan aims to deliver c.50 site openings over three years with an
average ROIC of 30%, funded from free cashflow.
9 Current Company-compiled analyst forecast range for EBITDA Less Normalised
Rent is £42.4m-£44m.
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 environment 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 2023 (pages 54-61), a summary of which is provided below.
• Operational gearing
• Member experience
• Trading environment
• Our people
• IT dependency
• Cyber and data security
• Reputation, brand and trust
• Reliance on key suppliers
Climate change and Artificial intelligence continue to be considered as
emerging risks for the Group.
Update on 2024 Annual General Meeting voting
An update as regards the voting outcome for resolutions 3, 4 and 11 at the
Company's 2024 AGM has been published in the corporate governance section,
within investors, of the Company's website -
https://www.tggplc.com/investors/corporate-governance/statements
(https://www.tggplc.com/investors/corporate-governance/statements) .
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 2024 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 2023. 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
11 September 2024
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 payable, recognised in the monthly
period to which it relates. Property lease payments differ to Normalised Rent
by £0.1m (H1 23: £0.1m) due to timing differences.
• Group Adjusted EBITDA Less Normalised Rent - Group Adjusted EBITDA after
deducting Normalised Rent. A reconciliation of Operating profit/(loss) to
Group Adjusted EBITDA Less Normalised Rent is included below the Consolidated
statement of comprehensive income in the Interim Financial Statements.
• Adjusted Profit/Loss before tax - profit/loss before tax before non-underlying
items.
• Adjusted Earnings - profit/loss for the period before non-underlying items and
the related tax.
• Basic Adjusted EPS - Adjusted Earnings divided by the basic weighted average
number of shares.
• Free cash flow - Group Adjusted EBITDA Less Normalised Rent and movement in
working capital, less maintenance capital expenditure, cash non-underlying
items, bank and non-property lease interest and tax. A reconciliation of Net
cash inflow from operating activities to Free cash flow is included in Note 11
to the Interim Financial Statements.
• Non-Property Net Debt - bank and non-property lease debt less cash and cash
equivalents. See Note 9 to the Interim Financial Statements for the breakdown.
• 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 from landlords.
• Adjusted Leverage - Non-Property Net Debt divided by Group Adjusted EBITDA
Less Normalised Rent.
• Fixed Charge Cover - Group Adjusted EBITDA divided by Finance costs (excluding
interest costs on property leases) less Finance income plus Normalised Rent.
Consolidated Statement of Comprehensive Income
For the period ended 30 June 2024
6 months ended 30 June 2024 6 months ended 30 June 2023
Unaudited Unaudited
Underlying Non-underlying (Note 4) Total Underlying Non-underlying (Note 4) Total
Note £m £m £m £m £m £m
Revenue 3 112.1 - 112.1 99.8 - 99.8
Cost of sales (1.5) - (1.5) (1.4) - (1.4)
Gross profit 110.6 - 110.6 98.4 - 98.4
Operating expenses (before depreciation, amortisation and impairment) (69.9) - (69.9) (64.7) (0.5) (65.2)
Depreciation, amortisation and impairment (29.7) (0.1) (29.8) (28.5) (0.1) (28.6)
Operating profit 11.0 (0.1) 10.9 5.2 (0.6) 4.6
Finance costs (10.7) (0.2) (10.9) (10.4) (0.3) (10.7)
Finance income 0.2 - 0.2 - - -
Profit/(loss) before tax 0.5 (0.3) 0.2 (5.2) (0.9) (6.1)
Tax (charge)/credit 5 - - - - - -
Profit/(loss) for the period attributable to equity shareholders 0.5 (0.3) 0.2 (5.2) (0.9) (6.1)
Other comprehensive income for the period
Items that may be reclassified to profit or loss
Changes in the fair value of derivative financial instruments - - - - - -
Total comprehensive income/(expense) attributable to equity shareholders 0.5 (0.3) 0.2 (5.2) (0.9) (6.1)
Earnings/(loss) per share (p) 6
Basic and diluted 0.3 0.1 (2.9) (3.4)
Reconciliation of Operating profit to Group Adjusted EBITDA Less Normalised
Rent(1)
6 months ended 6 months ended
30 June 2024 30 June 2023
Unaudited Unaudited
Note £m £m
Operating profit 10.9 4.6
Add back: Non-underlying operating items 4 0.1 0.6
Share based payments (included in Operating expenses) 13 1.0 1.4
Underlying depreciation and amortisation 29.7 28.5
Group Adjusted EBITDA 41.7 35.1
Less: Normalised Rent(2) (19.6) (17.9)
Group Adjusted EBITDA Less Normalised Rent(1) 22.1 17.2
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, share based
payments and non-underlying items, and after deducting Normalised Rent.
2 Normalised Rent is the contractual rent payable, recognised in
the monthly period to which it relates. Property lease payments differ to
Normalised Rent by £0.1m (H1 23: £0.1m) due to timing differences.
Consolidated Statement of Financial Position
As at 30 June 2024
30 June 2024 30 June 2023 31 December 2023
Unaudited Unaudited Audited
Note £m £m £m
Non-current assets
Intangible assets 91.7 91.5 91.4
Property, plant and equipment 7 171.1 171.8 171.7
Right-of-use assets 8 275.4 286.6 278.1
Investments in financial assets 1.0 1.0 1.0
Deferred tax assets 5 16.3 16.3 16.3
Total non-current assets 555.5 567.2 558.5
Current assets
Inventories 0.6 0.8 0.7
Trade and other receivables 7.4 4.9 10.8
Cash and cash equivalents 7.4 5.1 1.5
Total current assets 15.4 10.8 13.0
Total assets 570.9 578.0 571.5
Current liabilities
Trade and other payables 49.0 35.3 43.6
Lease liabilities 8 28.4 27.6 28.6
Provisions - 0.3 0.1
Total current liabilities 77.4 63.2 72.3
Non-current liabilities
Borrowings 9 56.8 63.3 58.9
Lease liabilities 8 307.4 320.8 310.6
Provisions 1.7 1.5 1.7
Total non-current liabilities 365.9 385.6 371.2
Total liabilities 443.3 448.8 443.5
Net assets 127.6 129.2 128.0
Capital and reserves
Own shares held 0.1 0.1 0.1
Share premium 189.8 189.8 189.8
Treasury shares 15 (1.4) - -
Merger reserve 39.9 39.9 39.9
Retained deficit (100.8) (100.6) (101.8)
Total equity shareholders' funds 127.6 129.2 128.0
Consolidated Statement of Changes in Equity
For the period ended 30 June 2024
Own shares held Share premium Treasury shares Merger reserve Retained deficit Total
Note £m £m £m £m £m £m
At 1 January 2024 0.1 189.8 - 39.9 (101.8) 128.0
Profit for the period - - - - 0.2 0.2
Other comprehensive income for the period - - - - - -
Profit for the period and total comprehensive income - - - - 0.2 0.2
Purchase of own shares 15 - - (1.5) - - (1.5)
Exercise of share options - - 0.1 - (0.1) -
Share based payments 13 - - - - 0.9 0.9
Deferred tax on share based payments - - - - - -
At 30 June 2024 (Unaudited) 0.1 189.8 (1.4) 39.9 (100.8) 127.6
Consolidated Statement of Changes in Equity
For the period ended 30 June 2023
Own shares held Share premium Treasury shares 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 for the period - - - - - -
Loss for the period and 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 Cash Flow Statement
For the period ended 30 June 2024
6 months ended 6 months ended
30 June 2024 30 June 2023
Note £m £m
Cash flows from operating activities
Profit/(loss) before tax 0.2 (6.1)
Adjustments for:
Finance costs 10.9 10.7
Finance income (0.2) -
Non-underlying operating items 0.1 0.6
Underlying depreciation of property, plant and equipment 7 12.2 12.0
Underlying depreciation of right-of-use assets 8 14.6 14.0
Underlying amortisation of intangible assets 2.9 2.5
Share based payments 13 1.0 1.4
Loss on disposal of property, plant and equipment 0.1 -
Decrease in inventories 0.1 0.1
Decrease in trade and other receivables 3.5 3.9
Increase in trade and other payables 7.2 3.8
Decrease in provisions (0.1) (0.3)
Net cash inflow from operating activities before non-underlying items 52.5 42.6
Non-underlying items (0.5) (0.6)
Net cash inflow from operating activities 11 52.0 42.0
Cash flows from investing activities
Purchase of property, plant and equipment (12.2) (7.7)
Purchase of intangible assets (3.3) (3.9)
Bank interest received 0.2 0.1
Purchase of own shares (1.5) -
Net cash outflow used in investing activities (16.8) (11.5)
Cash flows from financing activities
Repayment of lease liability principal (15.2) (13.4)
Lease interest paid (7.7) (7.8)
Bank interest paid (3.4) (2.4)
Payment of financing fees - (0.2)
Repayment of bank loans (3.0) (7.0)
Net cash outflow from financing activities (29.3) (30.8)
Net increase/(decrease) in cash and cash equivalents 5.9 (0.3)
Cash and cash equivalents at the start of the period 1.5 5.4
Cash and cash equivalents at the end of the period 7.4 5.1
Notes to the Interim Financial Statements
1. General information
The Directors of The Gym Group plc ('the Company') and its subsidiaries ('the
Group') present their interim report and unaudited condensed consolidated
financial statements ('Interim Financial Statements') for the six months ended
30 June 2024. 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 11
September 2024. 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 2024 and 30 June 2023 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 2023 has been extracted from
the Group's Annual Report and Accounts 2023 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 2023. The consolidated financial statements
for the year ended 31 December 2023 have been filed with the Registrar of
Companies. The independent auditors' report on the Group's Annual Report and
Accounts for 2023 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 pound sterling. The
Interim Financial Statements are presented in pound 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 2023, except for new standards effective as of 1 January 2024.
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
Amendments to IAS 1 - Classification of Liabilities as Current or Non-current 1 January 2024
Liabilities with Covenants
Amendments to IFRS 16 - Lease Liability in a Sale and Leaseback 1 January 2024
Amendments to IAS 7 and IFRS 7 - Disclosures: Supplier Finance 1 January 2024
Amendments to IAS 21 - Lack of Exchangeability 1 January 2024
2. Basis of preparation (continued)
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 2024, the Directors have considered the following:
· the Group's trading performance in the first half of 2024 and throughout July
and August;
· future expected trading performance to December 2025 (the going concern
period), including membership levels and behaviours in light of the
continued difficult macroeconomic environment; and
· the Group's financing arrangements and relationship with its lenders and
shareholders.
In the first half of 2024, we have seen strong trading, with membership at 30
June 2024 reaching 905,000. Average revenue per member per month ('ARPMM') for
the period was up 9% to £20.44, and Ultimate, the premium price product,
ended the period at 31.3% of total membership. As a result, revenue for
the period was £112.1m, up 12% on the prior year; and Group Adjusted EBITDA
Less Normalised Rent at £22.1m was 28% higher than in the first half of
2023, as the growth in revenue outpaced cost inflation.
The Group also reported strong cash generation in the period, with free cash
flow of £24.5m (see Note 11 to the Consolidated financial information for a
reconciliation to Net cash inflow from operating activities) being generated
and used to fund four new site openings, as well as significant investment
in technology.
On 28 June 2024, the Group agreed a new facilities agreement with its existing
banking syndicate, which came into effect on 1 July 2024. Under the new
agreement, the Group has in place a combined £90m facility, consisting of
£45m of Term Loan and £45m of RCF. The new facility is due to mature in June
2027.
The new facilities agreement will continue to be subject to quarterly
financial covenant tests on Adjusted Leverage and Fixed Charge Cover (both
terms defined on page 12). Adjusted Leverage must not exceed 3.0 times and the
Fixed Charge Cover must be greater than 1.5 times.
As at 30 June 2024, the Group had Non-Property Net Debt of £54.6m (31
December 2023: £66.4m; 30 June 2023: £69.7m) comprising drawn facilities of
£56.0m and non-property leases of £6.0m, less cash of £7.4m. The Directors
believe that this measure of net debt best reflects the financial health of
the business. In addition, it is a key constituent of the Adjusted Leverage
covenant included in the Group's banking agreement. At 30 June 2024, Adjusted
Leverage was 1.26 times (December 2023: 1.72 times), significantly below the
banking covenant threshold of 3.0 times; and Fixed Charge Cover was 1.81 times
(December 2023: 1.73 times).
Despite the encouraging trading year to date, the Directors have continued to
take a cautious approach to modelling the future expected performance for the
period to 31 December 2025. The base case forecast anticipates continued
growth in yields across the whole estate as a result of pricing
optimisation actions that have already been taken. Modest increases in
membership levels are driven largely by the sites opened in 2023 and 2024,
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, the financial covenants are passed with
headroom and the Group can operate comfortably within its financing
facilities.
The Directors have also considered a severe downside scenario in which
membership numbers in the mature estate decline by approximately 5% during the
latter part of 2024 and throughout 2025. Yields continue to increase in 2024
as a result of pricing optimisation actions already taken, but no further
growth is assumed in 2025. In addition, the number of new site openings is
reduced to conserve cash, and discretionary performance-related bonuses and
share based payment funding are removed. Under this scenario, the financial
covenants continue to be passed and the Group continues to operate within its
financing facilities.
Conclusion
The Board has reviewed the financial forecast 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 31 December 2025. 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 current and future expected trading performance; the
Group's current and forecast liquidity position and 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. 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 members 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 2024 30 June 2023
Unaudited Unaudited
£m £m
Major products/service lines
Membership income 106.4 94.3
Rental income from personal trainers 4.1 3.9
Ancillary income 1.6 1.6
112.1 99.8
Timing of revenue recognition
Products transferred at a point in time 2.0 1.8
Products and services transferred over time 110.1 98.0
112.1 99.8
Contract liabilities at 30 June 2024 amounted to £13.4m (H1 23: £11.6m).
Contract liabilities relate to membership fees received at the start of a
contract, where the Group has the obligation to provide a gym membership over
a period of time and are included within trade and other payables. The
contract liability balance increases as the Group's membership numbers
increase.
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.
4. Non-underlying items
6 months ended 6 months ended
30 June 2024 30 June 2023
Unaudited Unaudited
£m £m
Affecting operating expenses (before depreciation, amortisation and
impairment)
Costs of major strategic projects and investments - 0.1
Restructuring and reorganisation costs/(income) (including site closures) - 0.4
Total affecting operating expenses (before depreciation, amortisation and - 0.5
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 0.1 0.6
Affecting finance costs
Remeasurement of borrowings - 0.1
Refinancing costs 0.2 0.2
Total affecting finance costs 0.2 0.3
Total all non-underlying items before tax 0.3 0.9
Tax on non-underlying items - -
Total non-underlying charge in income statement 0.3 0.9
The cash flow on non-underlying operating items was £0.5m (H1 2023: £0.6m).
The £0.5m paid in the current period related to accruals on the Group balance
sheet at 31 December 2023. Depreciation, amortisation and impairment and
remeasurement of borrowings are non-cash items.
Non-underlying costs affecting depreciation, amortisation and impairment in
the period relates 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 £0.2m (H1 23:
£0.3m) and relates to advisory and legal costs incurred in agreeing the
Group's new banking facilities.
5. Taxation
The tax charge in the Consolidated Statement of Comprehensive Income of £nil
(H1 23: £nil) has been calculated based on management's best estimate of the
annual income tax rate expected for the full financial year, applied to the
profit before tax for the half year ended 30 June 2024. The effective tax rate
on the statutory profit before tax for the period ended 30 June 2024 was
therefore 0% (H1 23: 0%).
The net deferred tax asset recognised at 30 June 2024 was £16.3m (31 December
2023: £16.3m; 30 June 2023: £16.3m). 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 2024, and the Directors
believe that this forecast provides convincing evidence to support the
continued recognition of the deferred tax assets that were recognised at 31
December 2023. However, given the ongoing macroeconomic and geopolitical
uncertainty, the Directors do not believe it is appropriate to recognise
additional deferred tax assets at 30 June 2024.
6. Earnings/(loss) per share
Basic earnings/(loss) per share is calculated by dividing the profit/(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 earnings/(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 2024, 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.
6 months ended 6 months ended
30 June 2024 30 June 2023
Unaudited Unaudited
Profit/(loss) (£m)
Profit/(loss) for the period attributable to equity shareholders 0.2 (6.1)
Adjustment for non-underlying items 0.3 0.9
Adjusted profit/(loss) for the period attributable to equity shareholders 0.5 (5.2)
Weighted average number of ordinary shares for basic EPS 179,090,919 178,373,139
Effect of dilution from share options 6,040,073 -
Weighted average number of ordinary shares adjusted for the effect of dilution 185,130,992 178,373,139
Earnings/(loss) per share (p)
Basic earnings/(loss) per share 0.1 (3.4)
Diluted earnings/(loss) per share 0.1 (3.4)
Adjusted basic earnings/(loss) per share 0.3 (2.9)
Adjusted diluted earnings/(loss) per share 0.3 (2.9)
At 30 June 2023, 9,575,032 share awards were excluded from the diluted
weighted average number of Ordinary shares calculation because their effect
would be anti-dilutive.
7. Property, plant and equipment
For the period ended 30 June 2024
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 2024 1.8 251.2 11.9 94.3 6.3 365.5
Additions 3.1 6.2 0.1 1.9 0.5 11.8
Disposals (0.1) - - - - (0.1)
Transfers (1.9) 1.6 - 0.2 - (0.1)
At 30 June 2024 2.9 259.0 12.0 96.4 6.8 377.1
Accumulated depreciation
At 1 January 2024 - (111.4) (10.1) (67.5) (4.8) (193.8)
Charge for the period - (8.0) (0.3) (3.5) (0.4) (12.2)
At 30 June 2024 - (119.4) (10.4) (71.0) (5.2) (206.0)
Net book value
At 30 June 2024 2.9 139.6 1.6 25.4 1.6 171.1
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
Included within additions for the period is £3.3m of accrued capital
expenditure (H1 23: £2.9m).
The Group had £6.5m of commitments that were contracted but not provided as
at 30 June 2024 relating to contracts for the fit-out of new gyms where works
have not yet commenced (H1 23: £5.8m).
8. 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 2024
Property leases Non-property leases Total
£m £m £m
Cost
At 1 January 2024 434.3 18.3 452.6
Additions 12.0 - 12.0
Disposals (1.9) - (1.9)
At 30 June 2024 444.4 18.3 462.7
Accumulated depreciation
At 1 January 2024 (170.4) (4.1) (174.5)
Charge for the period (13.3) (1.3) (14.6)
Disposals 1.8 - 1.8
At 30 June 2024 (181.9) (5.4) (187.3)
Net book value
At 30 June 2024 262.5 12.9 275.4
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
The split of lease liabilities between current and non-current is as follows:
30 June 2024 30 June 2023 31 December 2023
Unaudited Unaudited Audited
£m £m £m
Current 28.4 27.6 28.6
Non-current 307.4 320.8 310.6
Total Lease liabilities 335.8 348.4 339.2
At 30 June 2024, the Group had in place total facilities of £11.5m in respect
of non-property lease arrangements (30 June 2023: £12.8m) which it utilises
to finance the fit-out of new gyms. As at 30 June 2024, the amount outstanding
on these facilities was £6.0m (H1 23: £11.8m).
9. Borrowings and Non-Property Net Debt
The carrying value of the Group's bank borrowings at 30 June 2024 was £56.8m
(31 December 2023: £58.9m; 30 June 2023: £63.3m).
During the period, the Group had in place a combined £80m Revolving Credit
Facility ('RCF') (H1 23: £80m) which was syndicated to a three-lender panel
of NatWest, HSBC and Barclays. The facility was due to mature in October 2025
and funds borrowed under the facility agreement bore interest at a minimum
annual rate of 2.85% (H1 23: 2.85%) above the Sterling Overnight Index Average
('SONIA'). The average interest rate paid in the period on drawn funds was
8.5% (H1 23: 7.6%). Undrawn funds bore interest at a minimum annual rate of
1.14% (H1 23: 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 (other than as a
result of changes in floating interest rates), the borrowings are remeasured
using the original effective interest rate. Any remeasurement of borrowings is
treated as non-underlying and excluded from Adjusted earnings.
At 30 June 2024, the Group had drawn down £56.0m under the facility agreement
(30 June 2023: £63.0m). Adjusted Leverage was 1.26 times (H1 23: 1.82 times)
and Fixed Charge Cover was 1.81 times (H1 23: 1.83 times). Both terms are
defined on page 12.
Non-Property Net Debt at the period end was made up as follows:
30 June 2024 30 June 2023 31 December 2023
Unaudited Unaudited Audited
£m £m £m
Bank borrowings 56.0 63.0 59.0
Less: Cash and cash equivalents (7.4) (5.1) (1.5)
Non-Property Net Debt excluding non-property leases 48.6 57.9 57.5
Non-property leases (Note 10) 6.0 11.8 8.9
Non-Property Net Debt 54.6 69.7 66.4
On 28 June 2024, the Group agreed a new facilities agreement with the same
banking syndicate which came into effect on 1 July 2024. Under the new
agreement, the Group has in place a combined £90m facility, consisting of
£45m of Term Loan and £45m of RCF. The new facility is due to mature in June
2027.
Funds borrowed under the new facility agreement will bear interest at a
minimum annual rate of 2.75% above the Sterling Overnight Index Average
('SONIA'); and undrawn funds under the RCF will bear interest at a minimum
annual rate of 1.1%. The new facilities agreement will continue to be subject
to quarterly financial covenant tests on Adjusted Leverage and Fixed Charge
Cover (both terms defined on page 12). Adjusted Leverage must not exceed 3.0
times and the Fixed Charge Cover must be greater than 1.5 times.
10. Financial liabilities
The table below sets out the changes in liabilities arising from financing
activities.
For the period ended 30 June 2024
Borrowings Non-property lease liabilities Property lease liabilities Total lease liabilities
£m £m £m £m
At 1 January 2024 58.9 8.9 330.3 339.2
Repayments of interest and principal (6.4) (3.2) (19.7) (22.9)
Interest expense 2.9 0.3 7.4 7.7
New leases and modifications - - 12.0 12.0
Lease disposals - - (0.2) (0.2)
Other 1.4 - - -
At 30 June 2024 56.8 6.0 329.8 335.8
For the period ended 30 June 2023
Borrowings Non-property lease liabilities Property lease liabilities Total lease liabilities
£m £m £m £m
At 1 January 2023 70.0 11.4 339.0 350.4
Repayments of interest and principal (9.4) (3.2) (18.0) (21.2)
Interest expense 2.7 0.5 7.3 7.8
New leases and modifications - 3.1 8.3 11.4
At 30 June 2023 63.3 11.8 336.6 348.4
Included in 'Other' is the effect of changes to amortised cost on borrowings
using the effective interest rate method and £1.2m of accrued interest
reversal from December 2023.
11. Net cash inflow from operating activities
The Directors believe that Free cash flow is the measure that best reflects
the amount of cash available to the Group for investing in new sites and
technology, and for enhancing existing sites. A reconciliation of Net cash
inflow from operating activities to Free cash flow is included below.
Reconciliation of Net cash inflow from operating activities to Free cash flow
30 June 2024 30 June 2023
Unaudited Unaudited
£m £m
Net cash inflow from operating activities 52.0 42.0
Less: Property lease payments made (Note 10) (12.3) (10.7)
Less: Maintenance capital expenditure (including funded by lease) (4.3) (7.0)
Less: Bank and non-property lease interest paid (11.1) (10.2)
Add: Bank interest received 0.2 0.1
Free cash flow 24.5 14.2
12. Issued capital
The total number of shares in issue as at 30 June 2024 was 179,258,422 (30
June 2023: 178,401,999).
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 64,502 (H1 23: 3,324,866) shares were granted
under the Group's share schemes.
Subsequent to 30 June 2024, the Group issued new PSP and RSP awards, which
vest over three years and are subject to continued employment. A total of
1,722,051 RSP options were issued. The PSP options are also subject to
achievement of certain performance targets. A total of 2,804,981 PSP options
were issued.
For the period ended 30 June 2024, the Group recognised a total charge of
£1.0m (H1 23: £1.4m) 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
157 of the Group's Annual Report and Accounts 2023. There have been no
significant changes to the nature of the Group's related parties during the
period.
15. Employee Benefit Trust
In January 2024, the Group established an Employee Benefit Trust ('EBT'). The
EBT will be used to purchase shares in order to minimise dilution associated
with the share based payments. In the period ended 30 June 2024, the EBT
purchased 1,399,973 shares at a cost of £1.5m. These shares have been
classified as Treasury shares in the Consolidated Statement of Financial
Position.
Subsequent to 30 June 2024, the EBT purchased a further 1,434,955 shares at a
cost of £2.0m.
16. Subsequent events
On 1 July 2024, the Group repaid the £56.0m of drawn RCF debt and associated
accrued interest of £0.8m and drew down £45.0m of term loan and £11.0m of
RCF under the new financing facility (details of which are set out in note 9).
The £56.0m liability under the existing facility was classified as
non-current in the Group's balance sheet at 30 June 2024.
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