TIDMGYM
RNS Number : 4792K
The Gym Group plc
29 August 2019
The Gym Group plc
('the Company' or 'The Gym')
2019 Interim Results
Strong first half delivering continued profitable growth
The Gym Group plc, the fast growing, nationwide operator of
166(1) low cost 24/7 no contract gyms(2) , announces its interim
results for the six month period ended 30 June 2019.
Financial Highlights
Post IFRS 16 Pre IFRS 16
----------------------------------------------- -------------------------------------------------
Six months ended Six months ended Movement Six months ended Six months ended Movement
30 June 2019 30 June 2018 30 June 2019 30 June 2018
Revenue (GBP'000) 73,988 58,327 26.9% 73,988 58,327 26.9%
Group Adjusted
EBITDA (GBP'000) 24,023 18,775 28.0% 22,593 17,533 28.9%
Adjusted Profit
before Tax
(GBP'000) 7,113 4,641 53.3% 9,110 6,677 36.4%
Adjusted Earnings
(GBP'000) 5,484 3,545 54.7% 7,081 5,127 38.1%
Adjusted EPS (p) 4.0 2.8 42.9% 5.1 4.0 27.5%
Free cash flow
(GBP'000) 16,049 13,610 17.9% 16,049 13,610 17.9%
Group Operating
Cash Flow
(GBP'000) 18,692 16,421 13.8% 18,692 16,421 13.8%
------------------ ----------------- ----------------- --------- ------------------ ------------------ ---------
Note: for a summary of KPI definitions used in the table see
section provided below the financial review.
-- Revenue of GBP74.0 million, an increase of 26.9% (H1 2018: GBP58.3 million)
-- Group Adjusted EBITDA of GBP24.0 million, an increase of
28.0% (H1 2018: GBP18.8 million); EBITDA margin increases to 32.5%
(H1 2018: 32.2%)
-- Adjusted profit before tax of GBP7.1 million, up 53.3% (H1 2018: GBP4.6 million)
-- Statutory profit before tax increased by 80.5% to GBP5.6 million (H1 2018: GBP3.1 million)
-- Adjusted EPS of 4.0p, an increase of 42.9% (H1 2018: 2.8p)
-- Non-Property Net Debt broadly flat at GBP47.2 million (December 2018: GBP46.0 million)
-- Interim dividend of 0.45 pence per share declared, up 28.6% (H1 2018: 0.35 pence)
Strategic and Operational Progress
-- 8 new gyms opened in H1 2019 bringing total estate to 165(1)
-- Membership numbers increased by 10.6% to 796,000 (H1 2018: 720,000)(3)
-- New operating model (New Gym Team) transition to be completed by 1 September 2019
-- LIVE IT take-up grows to 135,000 (H1 2018: 55,000)
representing 16.9% of total members at 30 June 2019
-- Increase in the average revenue per member per month to
GBP15.47 (H1 2018: GBP14.65) of which GBP0.16 was from rental
income from personal trainers under the New Gym Team operating
model
Current Trading and H2
-- In the first two months of H2, the Company has continued to
trade well and in line with our expectations
-- On track to meet opening schedule of 15 -20 standard catchment gyms in 2019
-- First small box site to open in Newark, Nottinghamshire at
capital cost of GBP0.70-0.75 million
-- The Company is on track to achieve our financial and operational plans for the full year
Richard Darwin, CEO of The Gym Group, commented:
"Our rapid and profitable growth has been achieved through
operating high quality great value gyms that offer affordable
fitness for all. Our growing membership visited a record 24 million
times in the first half of the year demonstrating the wide and
diverse appeal of The Gym. Continued investment in systems,
infrastructure and people to scale the business is enabling us to
take advantage of the huge growth potential that exists in the low
cost gym market. We are on track to open between 15 and 20 standard
catchment gyms this year whilst our new "small box" format further
increases the number of towns that we can go to. We are confident
that we can deliver further profitable growth both this year and in
the years to come."
An audio webcast of the analyst presentation will be available
live on http://view-w.tv/795-1295-22261/en at 9.30 today.
For further information, please contact
The Gym Group via Instinctif Partners
Richard Darwin, CEO
Mark George, CFO
Instinctif Partners
Matthew Smallwood
Justine Warren 020 7457 2020
Numis
Luke Bordewich
George Price 020 7260 1000
Peel Hunt
Dan Webster
George Sellar 020 7418 8900
(1) 165 as of 30 June 2019 (vs 158 at 31 December 2018) with
eight new sites opened in H1 2019 and one site recently closed
(Birmingham Corporation Street). 166 sites as at 29 August 2019
(2) All gyms open 24/7 excluding nine gyms as at 30 June 2019
due to licensing restrictions.
(3) Average number of members grew 20.0% to 797,000 (H1 2018:
664,000). Average members excludes new sites not open at the period
end. Proforma members of 720,000 as at 30 June 2018 (including
easyGym members acquired on 4 July 2018)
Forward-looking statements
This announcement includes statements that are, or may be deemed
to be, "forward-looking statements". By their nature, such
statements involve risk and uncertainty since they relate to future
events and circumstances. Actual results may, and often do, differ
materially from any forward-looking statements. Any forward-looking
statements in this announcement reflect management's view with
respect to future events as at the date of this announcement. Save
as required by law or by the Listing Rules of the UK Listing
Authority, the Company undertakes no obligation to publicly revise
any forward-looking statements in this announcement following any
change in its expectations or to reflect subsequent events or
circumstances following the date of this announcement.
Chief Executive's Review
The Gym Group has traded well in the first half of 2019,
building on the investment in infrastructure and systems put in
place over the past two years. With 165 sites across the UK this is
now a business of considerable scale and over the coming years we
will continue to invest to ensure we maintain a rapid rate of
growth. The business aims to create sustainable competitive
advantage through the quality of the sites that we operate and the
platforms that support them. The first six months of 2019 have
delivered another period of substantial progress. Revenue of
GBP74.0 million increased by 26.9% (H1 2018: GBP58.3 million) with
20.0% growth in the H1 average number of members to 797,000 (H1
2018: 664,000). Average revenue per member per month also increased
compared to last year, up 5.6% to GBP15.47 (H1 2018: GBP14.65).
Approximately half of the growth in this spend per head has come as
expected from LIVE IT, our premium pricing proposition, which
reached 135,000 members by 30 June 2019.
At the period end, we had 165 sites open; this included eight
new openings in the first half of the year, more than we have
opened in H1 in recent years. In addition, we completed the
transition of the easyGym estate onto our brand and platform
converting sites at London Oxford Street and Birmingham Kings
Heath. Over the past two years we have acquired two portfolios of
sites - Lifestyle Fitness and easyGym - and have successfully
integrated them into our business. These acquisitions have
delivered rapid increase in scale through access to new catchments
and enabled us to accelerate our business plan.
Group Adjusted EBITDA increased by GBP5.2 million to GBP24.0
million, up 28.0% (H1 2018: GBP18.8 million). Site EBITDA(1)
increased by 25.7% to GBP30.5 million assisted by the ongoing
maturation of our estate. By the end of the year (2019) the
business will have 109 sites that are considered mature increasing
to 155 by the end of 2020, underpinning and driving growth in
profitability over the next two years.
The Gym Group is a very cash generative business with GBP16.0
million of free cash flow(2) generated in the half year (H1 2018:
GBP13.6 million). The scale of our mature estate is now such that
the cash generated from operations is sufficient to fund the
investment in new sites and the development of our platform. Net
Debt increased only marginally to GBP47.2 million (December 2018:
GBP46.0 million) at the half year demonstrating we are reaching the
inflexion point where growth and dividends can be self-funded. The
result of this is that we can continue our progressive dividend
policy with the Board declaring an interim dividend of 0.45 pence
per share, up 28.6% versus the first half of 2018 (H1 2018: 0.35
pence).
There are four areas that we believe are key to creating a
profitable business within the low cost gym market. These are: i)
Taking advantage of the market opportunity across different size
formats; ii) Efficiently executing the roll out of sites from a
strong pipeline; iii) Building an infrastructure and platform to
support our growing business; iv) Continuing to develop our
business model. Let me update on the progress we have made in each
of these areas in the last six months:
Market Opportunity: The UK low cost gym sector continues to grow
with the number of gyms increasing to 687 sites at June 2019(3) .
The Gym Group has a market share of 24% within this market. Over
the last 18 months, we have grown the number of sites in our estate
by 29% whilst the overall market for low cost gyms has grown by
20%. The average size of site that we have developed has been
16,700 sq ft within catchment sizes of greater than 60,000
population ("standard catchment"). In March we commissioned
analysis by PWC to assess the potential of the overall market and
this showed that the low cost market could grow to 1200-1400 sites
by 2026. Half of this growth is estimated to be delivered from
standard catchments and half from catchments between 25,000-60,000
population. We aim to take advantage of both areas of growth by
continuing to roll out standard catchment size gyms and also open
small box gyms of around 5,000-9,000 sq. ft. We expect the capital
cost of these smaller gyms to be GBP0.70-0.75 million and - as with
our larger gyms - will be targeting a ROCE of 30% at maturity. Our
first small box will open in Newark, Nottinghamshire later this
year.
Rolling out sites from a strong pipeline: We opened eight sites
in the first half of 2019. These openings are meeting our
expectations. Five of the openings are ex-retail sites as we
continue to take advantage of the opportunity created by recent
retail closures. This is giving us a ready supply of quality sites
on retail parks with parking and in the first half we have opened
such gyms in Carlisle, Kidderminster, Northampton, Ayr, and
Nottingham Radford. However, our model and property requirements
have always been very flexible and in the first half openings have
also taken place on a leisure park in Ipswich and through landlord
redevelopments of sites in Hove and Slough. The pipeline of
openings is encouraging for H2 and will include strong South East
locations including Basingstoke, Colliers Wood, Acton and Canning
Town. We expect to meet our guidance of 15 to 20 new sites for 2019
with our H2 openings expected to be weighted towards the end of the
year.
As part of our ongoing estate management we have taken the
decision to exit two sites that we do not believe will meet our
long-term requirements. We will close the former Lifestyle gym in
Stoke on 23 September 2019 and a further site (details not
disclosed for commercial reasons) will close before the end of 2019
when we have an opportunity to exercise a break clause; we do not
anticipate any further closures in the foreseeable future. In
addition, as announced previously, we have currently mothballed the
former easyGym site at Birmingham Corporation Street. We have a
large site within 300 metres in Birmingham City Centre which can
accommodate all the members for both sites and have decided to
concentrate our capital spend on an extensive refurbishment of the
City Centre site.
Infrastructure development: A significant part of the
development that has supported our rapid growth has been the
investment in infrastructure over the last two years. This included
our Member Management System and Workday ERP system - both projects
that are now embedded in our business processes and working well.
The digital platform in particular has enabled us to launch
additional products such as LIVE IT, Yanga and the member app.
Workday, which boosted our administrative systems, is a key enabler
of our Personal Trainer model (New Gym Team) transition. Moving
forward the pace of technology development is unlikely to relent
and we plan to invest in our capability in this area. Ongoing
development and investment in technology will enable us to optimise
online membership sign-ups; develop our e-commerce website and use
data to support our approach to pricing, churn and property
evaluation. From 2020 we expect to spend 3.0-3.5% of revenue on IT
capex annually (circa. 2.5% of revenue in 2019) and expect that the
projects in which we invest will improve the digital and gym
experience for members and will enhance efficiency and
profitability.
At the end of 2018, we continued the development of the member
app. We are pleased with the initial take up, the app has already
been downloaded by over 250,000 of our members and is used widely
to book classes, monitor fitness and set challenges. We will
continue to issue further updates of the app over the coming
months, and to use technology to put information in the hands of
our managers, improving analytical decision-making and driving our
focus on member satisfaction. Data is a key area to driving
competitive advantage.
Developing our business model: With the IT platforms now in
place we continue to seek ways to enhance our business model either
to improve member service or to expand relevant products. LIVE IT,
our premium pricing product, continues to be the most significant
advancement in driving additional revenue per member. With
penetration of 16.9% of membership at the half year, this has
increased Average Revenue Per Member per Month (ARPMM),
contributing approximately half of the 5.6% growth recorded at the
end of June 2019. Further pricing developments are currently in
trial - FLEX IT, a variation with no joining fee option, is set at
a higher monthly price than our base membership offer which
includes a joining fee. We are performing an extended trial across
32 sites to ensure that we can apply the learnings to optimise
revenues. Our approach to dynamic pricing enables us to adjust
volumes and yields according to local market conditions and
capability in the area has been significantly enhanced over the
past year.
Also of note are developments in our marketing capability with
innovative, relevant campaigns aimed at our target audience. The SO
I CAN campaign that we ran for Jan / Feb included TV for the first
time but also utilised a diverse range of media that included Out
Of Home, digital channels, social media, PPC and SEO. In June we
launched First Steps, a campaign aimed at introducing 16-18 years
olds to using The Gym by giving them free off-peak membership for
six weeks over the summer months. Take up has been good with many
tens of thousands of visits over the period of the campaign. The
campaign includes an offer to sign up for membership at the end of
the six weeks.
Perhaps the most significant recent change to our business model
has been the implementation of New Gym Team - the new operating
model for Personal Trainers. I am pleased to announce as of 1
September that all sites will be operating on the new model and the
transition has gone according to plan. This is a market-leading
proposition and allows us to attract and retain the best Personal
Trainers. We are now a business that has close to 2000 employees
(1500 are part-time Personal Trainers). The next stage of the
process is to ensure we can maximise the benefits of the model by
driving sustained improvement in member satisfaction. Our initial
experience is encouraging and justifies our work to move the
business across to the new model.
Progress over the past six months is demonstrated in the
financial and non-financial metrics that we have reported in the
first half of the year. Site EBITDA margin, as expected, was
broadly flat at 41.2% (H1 2018: 41.6%) reflecting a business that
is still relatively immature and the inclusion of the former
easyGym sites, which currently have a lower margin that our organic
sites. Overall Site EBITDA increased by 25.7% to GBP30.5 million as
our estate continued to expand. We continue to open sites in line
with historical levels at an overall cost of between GBP1.3 million
to GBP1.4 million per site.
Our people are critical to this business and the engagement and
development of a much larger workforce will be of paramount
importance as we expand. I am pleased that we recently retained our
Investors in People gold award. To ensure we maintain the strong
and positive culture of the business we have launched our values
across the wider business. These have landed well and realness,
friendliness, challenging our limits and taking the first step are
now at the heart of everything we do.
We continue to invest selectively in central areas that support
business development with a focus on expanding our commercial and
technology capability. I am pleased to have promoted Barney
Harrison our Commercial & Marketing Director to a new position
of Chief Commercial Officer to assist in this aim. This gives him a
wider remit to expand the commercial capability of the business,
building on the work he has done to date in expanding our product
and proposition and marketing capabilities.
Our financial success has been achieved by adopting a business
model that champions the strong social purpose of the business in
expanding affordable health and fitness. All the changes that we
make are to ensure our members receive a high-quality experience in
a low-cost environment. Our business had 24 million member visits
in the first half and as we move into more catchments through the
development of small box solutions, we look forward to expanding
access to affordable fitness still further. We are proud that this
expansion has been done in a way that minimises the impact on the
environment in which we operate. We are truly committed to putting
sustainability at the heart of the business and have recently
started work on a Corporate Sustainability framework to co-ordinate
and advance the work that we are doing across the business. We have
made a commitment to invest over GBP2 million over the coming years
to reduce our energy consumption in our older estate and we
continue to invest in the most efficient solutions in new Gyms.
I am pleased with the pace of change that is being driven
through the business to expand the business model, make
member-facing improvements and improve profitability. After a good
first half we look forward to further progress in the coming months
and remain on track to meet our operating and financial plans for
the full year. There remain significant opportunities for us go
after and with a strong team and the tailwinds of a growing low
cost gym market, I am confident about our growth prospects.
Richard Darwin
Chief Executive Officer
29 August 2019
(1) Site EBITDA is calculated as Group Adjusted EBITDA
contributed by the gym portfolio
(2) Free Cash Flow is calculated as Group Operating Cash Flow
less tax and interest paid and exceptional items
(3) Figures based on Leisure Database Company 2019 State of the
UK Fitness Industry Report up to March 2019 and Company analysis to
June 2019
Financial Review
IFRS 16 has been adopted for the first time in 2019 and the
figures below are presented on this basis unless stated otherwise.
The 2018 comparatives have been restated accordingly - see note 2.2
for more detail.
During the half year we have opened a further eight gyms,
increasing the size of the estate to 165(1) . Membership numbers
have increased from 720,000 to 796,000.
This growth has resulted in a 28.0% increase in Group Adjusted
EBITDA to GBP24.0 million (H1 2018: GBP18.8 million).
Adjusted profit before tax has grown from GBP4.6 million in H1
2018 to GBP7.1 million in H1 2019.
We use financial and non-financial key performance indicators
('KPIs') to measure our performance over time. We select KPIs that
demonstrate the financial and operational performance underpinning
our strategic drivers.
Six months ended 30 June 2019 Six months ended 30 June 2018 Movement
Restated
GBP'000 GBP'000
Revenue 73,988 58,327 26.9%
Group Adjusted EBITDA 24,023 18,775 28.0%
Group Adjusted EBITDA before
Pre-Opening Costs 24,585 19,285 27.5%
Adjusted Earnings 5,484 3,545 54.7%
Statutory Profit Before Tax 5,580 3,091 80.5%
Group Operating Cash Flow 18,692 16,421 13.8%
Adjusted Profit Before Tax 7,113 4,641 53.3%
Total number of gyms 165 134 23.1%
Members ('000) 796 720 10.6%
Average number of members(2) ('000) 797 664 20.0%
(1) 165 as of 30 June 2019 (vs 158 at 31 December 2018) with
eight new sites opened in 2019 and one site recently closed
(Birmingham Corporation Street)
(2) Average number of members is calculated as the total number
of members divided by the number of months in the period, excluding
sites not open at the end of the period.
Revenue
The average number of members for the half year increased by
20.0% to 797,000 (H1 2018: 664,000) driven by the increased size of
the estate including the easyGym acquisition from 2018. Average
revenue per member per month ("ARPMM") increased by 5.6% to
GBP15.47 (H1 2018: GBP14.65) due to the following factors:
-- An increase in the penetration of our premium pricing
product, LIVE IT from 8.4%* at H1 2018 to 16.9% at H1 2019;
-- The inclusion of rental income from personal trainers ("PTs")
as a result of the transition to our new PT model against which
there are salary and other costs;
-- The addition of easyGym sites in 2019 (not part of the
business in H1 2018) which have a higher ARPMM than the average in
the rest of the estate; and
-- Pricing maturation in the business as a whole.
As a result of the growth in member volumes and increase in
ARPMM, revenue for the half year increased by 26.9% to GBP74.0
million (H1 2018: GBP58.3 million).
*55,000 LIVE IT members out of 656,000 total non-proforma
members
Group Adjusted EBITDA
Group Adjusted EBITDA increased from GBP18.8 million in H1 2018
to GBP24.0 million for H1 2019. Growth was driven by the increased
size of the estate, a growing contribution from organic openings
and acquisitions in 2018 and the growth of LIVE IT. Group Adjusted
EBITDA margin increased to 32.5% (H1 2018: 32.2%) as a result of
the ongoing maturation of the estate and a reduction in central
costs as a percentage of revenue as we see the benefits of our
growing scale.
Result for the period
Depreciation, which under IFRS 16 includes the depreciation of
right-of-use property assets, has remained stable as a percentage
of revenue at 27.4% (H1 2019: GBP20.3 million) in the six months to
30 June 2019 (H1 2018: 27.3%, GBP16.0 million). Of this percentage
of revenue 12.7% was depreciation of the right of use assets and
14.7% other depreciation (which is lower than the 15.4% of revenue
in H1 2018 due to a change in the useful economic life of gym
equipment applied from 1 January 2019).
Amortisation charges increased from GBP0.9 million to GBP1.4
million in H1 2019 due to increased investment in software since H1
2018; within this GBP0.6 million related to amortisation of
acquired assets (H1 2018: GBP0.5 million) and GBP0.8 million from
IT/software amortisation (H1 2018: GBP0.3 million).
Finance costs have increased to GBP7.1 million (H1 2018: GBP6.2
million) comprising the implied interest relating to the finance
lease liability under IFRS 16 of GBP6.1 million (H1 2018: GBP5.4
million) plus the interest costs associated with our borrowing
facilities GBP1.0 million (H1 2018: GBP0.9 million), which have
increased to fund the ongoing growth in our estate.
As a result of these factors, statutory profit before tax
increased by 80.5%, to GBP5.6 million (H1 2018: GBP3.1
million).
Adjusted Earnings
Six months ended 30 June 2019 Six months ended 30 June 2018
Restated
GBP'000 GBP'000
Profit before tax 5,580 3,091
Amortisation of acquired assets 613 512
Exceptional administration expenses 920 1,038
------------------------------ ------------------------------
Adjusted profit before tax 7,113 4,641
Tax charge (1,497) (899)
Tax effect of above items (132) (197)
------------------------------ ------------------------------
Adjusted Earnings 5,484 3,545
------------------------------ ------------------------------
Basic Adjusted earnings per share (pence) 4.0 2.8
-------------------------------------------- ------------------------------ ------------------------------
Adjusted profit before tax is calculated from statutory profit
before tax and adding back the amortisation associated with non-IT
related intangibles and any exceptional items.
As part of our ongoing estate management, we exercised a break
clause in H1 2019 and the site will close before the end of 2019.
We do not believe the site will meet our long-term requirements and
we have taken advantage of our contractual right to exit. The Group
has incurred exceptional costs of GBP0.9 million in the period in
relation to the impairment of assets arising from this lease break
clause exercise (H1 2018: GBP1.0 million in relation to acquisition
and restructuring costs). The decision to close our Stoke site was
taken in H2 and therefore the impact of this closure is not shown
in the H1 financials.
The tax charge was recognised based on management's best
estimate of the annual income tax rate expected for the full
financial year, applied to the profit before tax for the six-month
period. On this basis, the Group's tax charge was GBP1.5 million
(H1 2018: GBP0.9 million). The Group had an income tax payable of
GBP1.4 million as at 30 June 2019.
Excluding the tax effect of the amortisation of non-IT
intangible assets and exceptional items (GBP132,000), the effective
tax rate on adjusted profit before tax for the half year ended 30
June 2019 was 22.9% (H1 2018: 23.6%).
Adjusted earnings for the period increased by 54.7% to GBP5.5
million (H1 2018: GBP3.5 million) as a result of the factors
discussed above.
Dividends
The Directors have declared an interim dividend of 0.45 pence
per share to shareholders on the register at the close of business
on 6 September 2019. The ex-dividend date is 5 September 2019, with
a payment date of 11 October 2019. The last date for Dividend
Reinvestment Plan (DRIP) elections is 20 September 2019.
Cash Flow and Net Debt
Six months ended 30 June 2019 Six months ended 30 June 2018
Restated
GBP'000 GBP'000
Group Adjusted EBITDA* 24,023 18,775
Movement in working capital (1,452) 1,124
Maintenance capital expenditure (3,879) (3,478)
------------------------------ ------------------------------
Group Operating Cash Flow 18,692 16,421
Exceptional items (274) (730)
Net finance costs (845) (672)
Taxation (1,523) (1,409)
------------------------------ ------------------------------
Free cash flow 16,049 13,610
Expansionary capital expenditure (15,899) (19,825)
Dividends paid (1,312) (1,154)
Other net cash flows from financing activity 1,955 28,842
------------------------------ ------------------------------
Net cash flow 793 21,473
----------------------------------------------- ------------------------------ ------------------------------
*See page 11 for a reconciliation of operating profit to Group
Adjusted EBITDA
The Group continues to deliver strong cash generation and during
the period has invested in opening new sites and refurbishing
existing sites as well as investing in software and other
technology. Group operating cash flow of GBP18.7 million in the six
months to 30 June 2019 increased from GBP16.4 million in the first
six months of 2018.
The reduction in working capital was due to two factors which
combined adversely affected working capital by GBP3.2m; (1) a new
PT rental receivable arising on the rollout of New Gym Team which
we will continue to have each month going forward; and (2) two
additional days of membership receivables accruing due to the last
day of June being a Sunday, an effect that will occur from time to
time depending on the day on which the end of the reporting period
falls.
As a result, Group operating cash flow conversion decreased from
87.5% in the six months ended 30 June 2018 to 77.8% in the six
months ended 30 June 2019.
Expansionary capital expenditure of GBP15.9 million arises
primarily as a result of the fit-out of new and acquired gyms. It
also includes GBP2.1 million of deferred consideration on the
initial purchase price of the easyGym acquisition. The decrease in
expansionary capex compared to 2018 is primarily due to the
considerable investment in the conversion of the acquired Lifestyle
sites during the same period in 2018.
Maintenance capital expenditure as a percentage of revenue was
lower in H1 2019 than H1 2018, reflecting the timing of spend
planned during the year; we expect total maintenance capital
expenditure in 2019 as a whole to be between 6-7% of revenue, as
previously guided, to ensure our gyms deliver the high-quality
experience our members are used to.
The Group has drawn a further GBP2.0 million of its five year
bullet repayment facility of GBP60.0 million. The net cash outflow
of GBP1.2 million prior to the drawing of the facility has resulted
in an increase in non-property net debt to GBP47.2 million (GBP46.0
million at December 2018).
Outlook
In the first two months of H2 2019, the Company has continued to
trade well and in line with our expectations. As such we re-iterate
the FY2019 guidance we gave at the beginning of the year:
-- 15 - 20 organic openings with H2 openings being weighted to the end of the year
-- New site fit-out costs expected to be between GBP1.3 million and GBP1.4 million per site
-- GBP3.5 - 4.0 million of capital spend on IT projects
-- Maintenance capital expenditure maintained between 6% and 7% of revenue
-- Depreciation (on a pre-IFRS 16 basis) expected to be c.15% of revenue(1)
-- Central costs to be 8.0% to 8.5% of revenue
-- Long-term employee incentive costs expected to be c.GBP1.8 million
-- Future tax effective rate, after adjusting for amortisation
and exceptional items, expected to be 23% in 2019
(1) Change versus previous guidance provided 19 March 2019 -
that depreciation would be c.16% of revenue - resulting from the
2019 change in accounting estimate, extending the Useful Economic
Life of gym equipment
Principal Risks and Uncertainties
The principal risks and uncertainties set out in the last annual
report remain valid at the date of this report and have been
updated. In summary, these include:
-- the competitive position of the Group;
-- the delivery of the organic rollout plan;
-- providing members with a high quality product and service;
-- retention of key staff;
-- implementation of wide-ranging and significant projects;
-- dependency on the performance of IT systems;
-- data security and protection;
-- satisfactory delivery from outsourced services providers;
-- high operational gearing from the fixed cost base; and
-- adherence with regulatory requirements.
Management makes critical judgements in applying the Group's
accounting policies in relation to depreciation and amortisation,
goodwill impairment and provisions. A more detailed description of
these estimations and uncertainties is included in pages 30-33 of
the 2018 Annual Report, which can be obtained from the Company's
registered office or from www.tggplc.com.
Going Concern
As stated in note 2 to the Interim Financial Statements, the
Directors are satisfied that the Group has sufficient resources to
continue in operation for the foreseeable future, a period of at
least 12 months from the date of this report. Accordingly, they
continue to adopt the going concern basis in preparing the Interim
Financial Statements.
Cautionary Statement
This report has been prepared solely to provide additional
information to shareholders to assess the Group's strategies and
the potential for those strategies to succeed. The Interim
Management Report should not be relied on by any other party or for
any other purpose.
In making this report, the Company is not seeking to encourage
any investor to either buy or sell shares in the Company. Any
investor in any doubt about what action to take is recommended to
seek financial advice from an independent financial advisor
authorised by the Financial Services and Markets Act 2000.
Directors' Responsibility Statement
The Directors of the Company are listed on pages 38-39 of the
2018 Annual Report.
The Directors confirm that, to the best of their knowledge:
-- the Interim Financial Statements have been prepared in
accordance with IAS 34 Interim Financial Reporting;
-- the Interim Management Report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
-- the Interim Management Report includes a fair review of the
information required by DTR 4.2.8R (disclosure of relates parties'
transactions and changes therein).
Richard Darwin Mark George
Chief Executive Officer Chief Financial Officer
29 August 2019 29 August 2019
Key Performance Indicators - pre- and post-IFRS 16
The adoption of IFRS 16 as of 1 January 2019 has had a
significant impact on the key performance indicators previously
adopted by the Group. As there is no impact on Group strategy or
cash, the Board has amended the definitions of KPIs, which are
non-IFRS GAAP measures, as per the presentation available on our
website https://www.tggplc.com with the aim to have cash-based
measures that best reflect the underlying performance of the
business and these new definitions are those used in this
document.
Definitions
For each of the KPIs below the definition remains unchanged with
the adoption of IFRS16 unless stated otherwise
- Group Adjusted EBITDA - Pre-IFRS 16 definition of Group
Adjusted EBITDA is operating profit (including IAS17 rent costs)
before depreciation, amortisation, long term employee incentive
costs and exceptional items, and is a non-IFRS GAAP measure. Post
IFRS 16 definition of Group Adjusted EBITDA is operating profit
before depreciation, amortisation, long term employee incentive
costs and exceptional items, and after cash rent costs.
- Adjusted Profit before Tax - is calculated as profit before
tax before non-IT amortisation and exceptional items.
- Adjusted Earnings - is calculated as the Group's profit for
the year before non-IT amortisation, exceptional items, and the
related tax effect.
- Adjusted EPS - is calculated as the Group's profit for the
year before non-IT amortisation, exceptional items, and the related
tax effect, divided by the basic weighted average number of
shares.
- Group Operating Cash Flow - is calculated as Group Adjusted
EBITDA plus movement in working capital less maintenance capital
expenditure.
- Free Cash Flow - is calculated as Group Operating Cash Flow
less tax and interest paid and exceptional items.
- Non-property net debt - is calculated as borrowings less
property finance leases and cash and cash equivalents.
** Note: the definitions of Adjusted PBT/Earnings/EPS have
changed between 2018 and 2019 with IT-related amortisation no
longer being excluded. Where shown, the 2018 Adjusted
PBT/Earnings/EPS figures have been restated based on this new
definition.
*** Note: In 2019 the Company changed its policy relating to the
Useful Economic Life of gym equipment (see Note 2.3 below). The H1
2019 numbers in the table above reflect this new policy and the H1
2018 numbers are based on the previous policy.
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2019
Note Six months ended 30 June Six months ended 30 June Year ended 31 December
2019 2018 2018
Unaudited Unaudited Audited
Restated* Restated*
GBP'000 GBP'000 GBP'000
Revenue 3 73,988 58,327 123,884
Cost of sales (700) (557) (1,007)
Gross profit 73,288 57,770 122,877
Administration expenses (60,579) (48,481) (104,218)
Operating profit 12,709 9,289 18,659
Finance income 18 6 22
Finance costs (7,147) (6,204) (12,681)
Profit before tax 5,580 3,091 6,000
Tax charge 6 (1,497) (899) (2,064)
Profit for the year
attributable to equity
shareholders 4,083 2,192 3,936
Other comprehensive
income for the year
Items that may be
reclassified to profit or
loss
Changes in the fair value
of derivative financial
instruments (133) - (11)
Items that will not be
reclassified to profit or
loss
Changes in the fair value
of financial assets at
fair value through other
comprehensive income - - (463)
Total comprehensive
income attributable to
equity shareholders 3,950 2,192 3,462
------------------------- ------------------------- -------------------------
Earnings per share pence pence pence
Basic 5 3.0 1.7 3.0
Diluted 2.9 1.7 2.9
Reconciliation of GBP'000 GBP'000 GBP'000
operating profit to Group
Adjusted EBITDA:
- Operating profit 12,709 9,289 18,659
- Depreciation 7 20,253 15,951 34,511
- Amortisation 1,390 861 1,973
- Impairment 25 - -
- Exceptional items 4 920 1,038 2,343
- Long term employee
incentive costs 813 695 1,012
- Cash rent payments (12,087) (9,059) (19,367)
------------------------- ------------------------- -------------------------
- Group Adjusted
EBITDA(1) 24,023 18,775 39,131
------------------------- ------------------------- -------------------------
(1) Group Adjusted EBITDA is a non-GAAP metric used internally
by management and externally by advisors, and is not an IFRS
disclosure
*See note 2.2 for details regarding the restatement as a result
of the adoption of IFRS 16 'Leases'.
Condensed Consolidated Statement of Financial Position
As at 30 June 2019
Note 30 June 2019 30 June 2018 31 December 2018
Unaudited Unaudited Audited
Restated* Restated*
GBP'000 GBP'000 GBP'000
Non-current assets
Property, plant and equipment 7 370,437 317,618 366,947
Intangible assets 85,927 73,852 86,618
Financial assets at fair value through other
comprehensive income 277 629 285
Derivative financial instruments 36 - 169
Deferred tax assets 364 1,402 366
------------- ------------- -----------------
Total non-current assets 457,041 393,501 454,385
Current assets
Inventories 276 199 379
Trade and other receivables 10,321 9,735 7,696
Cash and cash equivalents 3,820 21,929 3,027
Total current assets 14,417 31,863 11,102
Total assets 471,458 425,364 465,487
------------- ------------- -----------------
Current liabilities
Trade and other payables 26,001 25,625 26,376
Lease liabilities 14,385 12,776 9,652
Other financial liabilities 888 - 3,002
Borrowings 8 1,000 1,500 3,000
Provisions 9 518 110 679
Income taxes payable 6 1,443 887 1,293
Total current liabilities 44,235 40,898 44,002
Non-current liabilities
Borrowings 8 49,369 41,254 45,165
Lease liabilities 231,857 201,787 233,567
Other financial liabilities - 188 -
Provisions 9 1,201 807 1,145
------------- ------------- -----------------
Total non-current liabilities 282,427 244,036 279,877
Total liabilities 326,662 284,934 323,879
Net assets 144,796 140,430 141,608
------------- ------------- -----------------
Capital and reserves
Issued capital 14 14 14
Own shares held 48 48 48
Capital redemption reserve 4 4 4
Share premium 159,474 159,474 159,474
Hedging reserve (11) - (11)
Retained deficit (14,733) (19,110) (17,921)
------------- ------------- -----------------
Total equity shareholders' funds 144,796 140,430 141,608
------------- ------------- -----------------
*See note 2.2 for details regarding the restatement as a result
of the adoption of IFRS 16 'Leases'.
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 June 2019
Issued Own shares Capital Share premium Hedging Retained Total
capital held redemption reserve deficit
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2018 12 48 4 136,280 - (15,723) 120,621
Adjustment
from adoption
of IFRS 16 - - - - - (4,964) (4,964)
Profit for the
period and
total
comprehensive
income - - - - - 2,192 2,192
Share based
payments - - - - - 541 541
Issue of
Ordinary
share capital 2 - - 23,998 - - 24,000
Costs
associated
with the
issue of
share capital - - - (804) - - (804)
Dividends paid - - - - - (1,154) (1,154)
-------------- ------------- ------------- -------------- -------------- ------------- --------
At 30 June
2018
(Unaudited,
Restated) 14 48 4 159,474 - (19,108) 140,432
Profit for the
period and
total
comprehensive
income - - - - - 1,744 1,744
Share based
payments - - - - - 256 256
Deferred tax
on share
based
payments - - - - - 133 133
Changes in the
fair value of
derivative
financial
instruments - - - - (11) - (11)
Dividends paid - - - - - (483) (483)
Changes in the
fair value of
financial
assets at
fair value
through other
comprehensive
income - - - - - (463) (463)
-------------- ------------- ------------- -------------- -------------- ------------- --------
At 31 December
2018
(Audited,
Restated) 14 48 4 159,474 (11) (17,921) 141,608
Profit for the
year - - - - - 4,083 4,083
Share based
payments - - - - - 728 728
Deferred tax
on share
based
payments - - - - - (178) (178)
Dividends paid - - - - - (1,312) (1,312)
Changes in the
fair value of
financial
assets at
fair value
through other
comprehensive
income - - - - - (133) (133)
At 30 June
2019 14 48 4 159,474 (11) (14,733) 144,796
-------------- ------------- ------------- -------------- -------------- ------------- --------
*See note 2.2 for details regarding the restatement as a result
of the adoption of IFRS 16 'Leases'.
Consolidated Cash Flow Statement
For the six months ended 30 June 2019
Note Six months ended 30 June Six months ended 30 June Year ended 31 December
2019 2018 2018
Unaudited Unaudited Audited
Restated* Restated*
GBP'000 GBP'000 GBP'000
Cash flows from operating
activities
Operating profit 12,709 9,289 18,659
Adjustments for:
Exceptional items 4 920 1,038 2,343
Depreciation of property,
plant and equipment 7 20,253 15,951 34,511
Amortisation of
intangible assets 1,390 861 1,973
Long term employee
incentive costs 11 813 695 1,012
(Profit) / loss on
disposal of property,
plant and equipment (1) 61 72
Decrease / (increase) in
inventories 103 (2) (182)
Increase in trade and
other receivables (3,308) (2,743) (1,218)
Increase in trade and
other payables 1,753 3,808 4,487
------------------------- ------------------------- -------------------------
Cash generated from
operations 34,633 28,958 61,657
Tax paid (1,523) (1,409) (2,009)
------------------------- ------------------------- -------------------------
Net cash flows from
operating activities
before exceptional items 33,110 27,549 59,648
Exceptional items (274) (730) (2,105)
------------------------- ------------------------- -------------------------
Net cash flow from
operating activities 32,836 26,819 57,543
------------------------- ------------------------- -------------------------
Cash flows from investing
activities
Payment for financial
assets at fair value
through other
comprehensive income - (313) (432)
Business combinations (2,114) - (18,600)
Purchase of property,
plant and equipment (16,966) (21,666) (42,341)
Purchase of intangible
assets (699) (1,330) (4,928)
Interest received 10 6 22
------------------------- ------------------------- -------------------------
Net cash flows used in
investing activities (19,768) (23,303) (66,279)
------------------------- ------------------------- -------------------------
Cash flows from financing
activities
Dividends paid (1,312) (1,154) (1,637)
Finance lease liabilities
paid(1) (6,000) (3,681) (8,460)
Finance lease interest
paid(1) (6,087) (5,378) (10,907)
Bank interest paid (845) (672) (1,371)
Payment of financing fees (15) (14) (302)
Drawdown of bank loans 3,985 5,500 12,500
Repayments of bank loans (2,000) - (1,500)
Proceeds of issue of
Ordinary shares - 24,000 24,000
Costs associated with
share issue - (644) (804)
Derivative financial
instruments paid - - (213)
------------------------- ------------------------- -------------------------
Net cash flows (used in)
/ from financing
activities (12,274) 17,957 11,306
Net increase in cash and
cash equivalents 793 21,473 2,570
Cash and cash equivalents
start of period 3,027 457 457
------------------------- ------------------------- -------------------------
Cash and cash equivalents
at end of period 3,820 21,929 3,027
------------------------- ------------------------- -------------------------
*See note 2.2 for details regarding the restatement as a result
of the adoption of IFRS 16 'Leases'.
(1) These two items totalling GBP12,087,000 represent cash rent
as used in the KPI definitions
Notes to the Interim Financial Statements
1. General information
The Directors of The Gym Group plc (the 'Company') and its
subsidiaries (the 'Group') present their interim report and the
unaudited condensed consolidated financial statements for the six
months ended 30 June 2019 ('Interim Financial Statements').
The Company is a public limited company, incorporated and
domiciled in the UK. Its registered address is 5(th) Floor, One
Croydon, 12-16 Addiscombe Road, Croydon, CR0 0XT.
The Interim Financial Statements were approved by the Board of
Directors on 29 August 2019.
The Interim Financial Statements have not been audited or
formally reviewed by the auditors. The financial information shown
for the half year period ended 30 June 2019 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 2018 does
not constitute statutory accounts within the meaning of section 434
of the Companies Act 2006 and has been extracted from the Group's
Annual Report and Financial Statements for the year ended 31
December 2018, save for the restatement as a result of the adoption
of IFRS 16 'Leases' (see note 2.2).
The Interim Financial Statements should be read in conjunction
with the Annual Report and Financial Statements for the year ended
31 December 2018, which were prepared in accordance with European
Union endorsed International Financial Reporting Standards ('IFRS')
and those parts of the Companies Act 2006 applicable to companies
reporting under IFRS. The Annual Report and Financial Statements
for 2018 have been filed with the Registrar of Companies. The
Independent Auditors' Report on the Annual Report and Financial
Statements for 2018 was unqualified, did not draw attention to any
matters by way of emphasis, and did not contain a statement under
498(2) or 498(3) of the Companies Act 2006.
Further copies of the Interim Financial Statements and Annual
Report and Financial Statements may be obtained from the address
above.
2. Basis of preparation and changes to the Group's accounting
policies
2.1. Basis of preparation
The Interim Financial Statements have been prepared in
accordance with IAS 34, 'Interim Financial Reporting' as endorsed
by the European Union and the comments Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
The Interim Financial Statements are presented in Pounds
Sterling, rounded to the nearest thousand Pounds, except where
otherwise indicated; and under the historical cost convention as
modified through the recognition of financial liabilities at fair
value through the profit and loss.
2.2. New standards, interpretations and amendments adopted by
the Group
The accounting policies adopted in the preparation of the
Interim Financial Statements are consistent with those applied in
the preparation of the Group's consolidated financial statements
for the year ended 31 December 2018, except for the adoption of new
standards effective as of 1 January 2019. The Group has not early
adopted any other standard, interpretation or amendment that has
been issued but is not yet effective.
The Group has applied the same accounting policies and methods
of computation in its interim consolidated financial statements as
in its 2018 annual financial statements, except for those that
relate to new standards and interpretations effective for the first
time for periods beginning on 1 January 2019 and will be adopted in
the 2019 annual financial statements. However, a change in
accounting estimate (see note 2.3) and a change in presentation
(see note 2.4) have been applied in the period. New standards
impacting the Group that will be adopted in the annual financial
statements for the year ended 31 December 2019, and which have
given rise to changes in the Group's accounting policies are:
-- IFRS 16 Leases
Details of the impact the new standard has had are given
below:
IFRS 16 Leases
IFRS 16 specifies the recognition, measurement, presentation and
disclosure of leases and is being applied for the first time in the
Group's Consolidated Financial Statements for the year ended 31
December 2019. The standard provides a
2.2. New standards, interpretations and amendments adopted by
the Group (continued)
single lessee accounting model, requiring lessees to recognise
assets and liabilities for all leases unless the lease term is 12
months or less or the underlying asset has a low value.
Adjustments recognised on adoption of IFRS 16
The effect on the statement of financial position is as
follows:
30 June 2018 as reported Impact of IFRS16 Opening balance at 1 July 2018
GBP'000 GBP'000 GBP'000
Property, plant and equipment 141,325 176,293 317,618
Intangible assets 63,354 10,498 73,852
Current assets 35,159 (3,296) 31,863
Current liabilities 48,163 (7,265) 40,898
Finance lease liabilities - 214,563 214,563
Deferred tax liabilities (1,816) 3,218 1,402
------------------------------- ------------------------- ----------------- -------------------------------
30 June 2019 under IAS17 Impact of IFRS16 Opening balance at 1 July 2019
GBP'000 GBP'000 GBP'000
Property, plant and equipment 167,646 202,791 370,437
Intangible assets 77,503 8,424 85,927
Current assets 27,704 (13,287) 14,417
Current liabilities 64,257 (20,022) 44,235
Finance lease liabilities - 246,242 246,242
Deferred tax liabilities (3,176) 3,540 364
------------------------------- ------------------------- ----------------- -------------------------------
The effect on profit before tax and adjusted earnings is as
shown below. Note that the adoption of IFRS 16 as of 1 January 2019
has had a significant impact on the key performance indicators
previously adopted by the Group. As there is no impact on Group
strategy or cash, the Board has amended the definitions of KPIs,
which are non-IFRS GAAP measures, with the aim to have cash-based
measures that best reflect the underlying performance of the
business and these new definitions as defined below are those used
in this document.
- Group Adjusted EBITDA - Pre-IFRS 16 definition of Group
Adjusted EBITDA is operating profit (including IAS17 rent costs)
before depreciation, amortisation, long term employee incentive
costs and exceptional items, and is a non-IFRS GAAP measure. Post
IFRS 16 definition of Group Adjusted EBITDA is operating profit
before depreciation, amortisation, long term employee incentive
costs and exceptional items, and after cash rent costs.
- Adjusted Profit before Tax - is calculated as profit before
tax before non-IT amortisation and exceptional items.
- Adjusted Earnings - is calculated as the Group's profit for
the year before non-IT amortisation, exceptional items, and the
related tax effect.
2.2. New standards, interpretations and amendments adopted by
the Group (continued)
30 June Impact of 30 June Impact of 30 June
2018 as IFRS16 2018 under new KPI 2018
reported IFRS16 definitions Restated*
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 58,327 - 58,327 - 58,327
Cost of Sales and Admin expenses (40,794) 10,301 (30,493) (9,059) (39,552)
IAS 17
rent
costs
Cash rent payments
---------------------------------------------------- ----------- ----------- ----------- ------------ -----------
Group Adjusted EBITDA 17,533 10,301 27,834 (9,059) 18,775
---------------------------------------------------- ----------- ----------- ----------- ------------ -----------
Add back:
- Cash rent payments 9,059 9,059
- Amortisation on IT related assets (349) (349)
Depreciation of property, plant and equipment (9,000) (6,951) (15,951) - (15,951)
Depreciation of right of use
assets
Long term employee incentive costs (695) - (695) - (695)
Finance income 6 - 6 - 6
Finance costs (818) (5,386) (6,204) - (6,204)
Finance lease
interest
---------------------------------------------------- ----------- ----------- ----------- ------------ -----------
Adjusted profit before tax 7,026 (2,036) 4,990 (349) 4,641
---------------------------------------------------- ----------- ----------- ----------- ------------ -----------
Tax charge (1,353) 454 (899) - (899)
Tax effect of above items (263) - (263) 66 (197)
Adjusted Earnings 5,410 (1,582) 3,828 (283) 3,545
---------------------------------------------------- ----------- ----------- ----------- ------------ -----------
30 June Impact of 30 June Impact of 30 June
2019 under IFRS16 2019 under new KPI 2019 as
IAS17 IFRS16 definitions reported
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 73,988 - 73,988 - 73,988
Cost of Sales and Admin expenses (51,395) 13,517 (37,878) (12,087) (49,965)
IAS 17
rent
costs
Cash rent payments
------------------------------------------------ ------------ ------------ ------------ ------------ ------------
Group Adjusted EBITDA 22,593 13,517 36,110 (12,087) 24,023
------------------------------------------------ ------------ ------------ ------------ ------------ ------------
Add back:
- Cash rent payments 12,087 12,087
- Amortisation on IT related
assets (777) (777)
Depreciation of property, plant and equipment (10,834) (9,419) (20,253) - (20,253)
Depreciation of right of use
assets
Impairment (25) - (25) - (25)
Long term employee incentive costs (813) - (813) - (813)
Finance income 18 - 18 - 18
Finance costs (1,052) (6,095) (7,147) - (7,147)
Finance
lease
interest
------------------------------------------------ ------------ ------------ ------------ ------------ ------------
Adjusted profit before tax 9,887 (1,997) 7,890 (777) 7,113
------------------------------------------------ ------------ ------------ ------------ ------------ ------------
Tax charge (1,897) 399 (1,497) 148 (1,497)
Tax effect of above items (280) - (280) - (132)
Adjusted Earnings 7,710 (1,598) 6,113 (629) 5,484
------------------------------------------------ ------------ ------------ ------------ ------------ ------------
2.3. Change in accounting estimate
The Group has reviewed the estimated useful economic life
('UEL') of gym equipment and consequently, has increased their UEL.
The impact of this change is to decrease the H1 2019 depreciation
charge by GBP440,000, with an estimated full year reduction of
approximately GBP900,000.
2.4 Change in Presentation
Following the adoption of IFRS16 Leases the Group has changed
its policy on the presentation of interest paid in the cash flow
statement and has presented them as financing cashflows rather than
operating cash flows as previously.
30 June 2018 as Impact of IFRS16 30 June 2018 Change in 30 June 2018
reported under IFRS16 presentation Restated*
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash flows from
operating
activities
Cash generated
from operations 19,900 9,058 28,958 - 28,958
Tax
(Paid)/Refunded (1,409) - (1,409) - (1,409)
Interest paid (678) (5,378) (6,056) 6,056 -
------------------ ----------------- ------------------ ------------------ ------------------
Net cash flows
from operating
activities before
exceptional items 17,813 3,680 21,493 6,056 27,549
------------------ ----------------- ------------------ ------------------ ------------------
Exceptional items (730) - (730) - (730)
------------------ ----------------- ------------------ ------------------ ------------------
Net cash flow from
operating
activities 17,083 3,680 20,763 6,056 26,819
------------------ ----------------- ------------------ ------------------ ------------------
Cash flows from
financing
activities
Dividends paid (1,154) - (1,154) - (1,154)
Finance lease
liabilities paid - (3,681) (3,681) - (3,681)
Finance lease
interest paid - - - (5,378) (5,378)
Bank interest paid - - - (678) (678)
Payment of
financing fees (14) - (14) - (14)
Drawdown of bank
loans 5,500 - 5,500 - 5,500
Repayments of bank - - - - -
loans
Proceeds of issue
of Ordinary
shares 24,000 - 24,000 - 24,000
Costs associated
with share issue (644) - (644) - (644)
------------------ ----------------- ------------------ ------------------ ------------------
Net cash flows
(used in) / from
financing
activities 27,688 (3,681) 24,007 (6,056) 17,951
------------------- ------------------ ----------------- ------------------ ------------------ ------------------
2.5. Going Concern
The Directors have made appropriate enquiries and formed a
judgement at the time of approving the interim financial statements
that there is a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable
future. For this reason the Directors continue to adopt the going
concern basis in preparing the interim financial statements.
3. Revenue
The main revenue streams are those described in the last annual
financial statements; membership income and other income. The
majority of revenue is derived from contracts with customers.
3.1 Disaggregation of revenue
In the following table, revenue is disaggregated by major
products and service lines and timing of revenue recognition. All
revenue arises in the United Kingdom.
Six months ended 30 June Six months ended 30 June Year ended 31 December
2019 2018 2018
Unaudited Unaudited Audited
Restated* Restated*
GBP'000 GBP'000 GBP'000
Major products/service
lines
Membership income 71,994 57,392 121,515
Rental income 1,135 293 875
Other income 859 642 878
-------------------------- -------------------------- --------------------------
73,988 58,327 123,884
-------------------------- -------------------------- --------------------------
Timing of revenue
recognition
Products transferred at a
point in time 1,204 1,036 2,062
Products and services
transferred over time 72,784 57,291 121,822
-------------------------- -------------------------- --------------------------
73,988 58,327 123,884
-------------------------- -------------------------- --------------------------
4. Exceptional items
Six months ended 30 June Six months ended 30 June Year ended 31 December
2019 2018 2018
Unaudited Unaudited Audited
Restated* Restated*
GBP'000 GBP'000 GBP'000
Acquisition costs - 599 644
Acquisition integration
costs - 149 460
Restructuring costs - 290 1,239
Impairment arising on the 920 - -
exercise of a lease break
-------------------------- -------------------------- --------------------------
920 1,038 2,343
-------------------------- -------------------------- --------------------------
5. Earnings per share
Basic earnings per share is calculated by dividing the profit or
loss attributable to equity shareholders by the weighted average
number of Ordinary shares outstanding during the year, excluding
unvested shares held pursuant to The Gym Group plc Share Incentive
Plan, The Gym Group plc Performance Share Plan, The Gym Group plc
Restricted Stock Plan and The Gym Group plc Long Service Award
Plan.
Diluted earnings per share is calculated by adjusting the
weighted average number of Ordinary shares outstanding to assume
conversion of all dilutive potential Ordinary shares. During the
half year period ended 30 June 2019, the Group had potentially
dilutive shares in the form of share options and unvested shares
issued pursuant to The Gym Group plc Share Incentive Plan, The Gym
Group plc Performance Share Plan, The Gym Group plc Restricted
Stock Plan and The Gym Group plc Long Service Award Plan.
Six months ended 30 June Six months ended 30 June Year ended 31 December
2019 2018 2018
Unaudited Unaudited Audited
Restated* Restated*
2019 2018 2018
Basic weighted average
number of shares 137,782,695 128,746,872 133,301,917
Adjustment for share awards 3,332,264 1,443,530 1,569,233
-------------------------- -------------------------- --------------------------
Diluted weighted average
number of shares 141,114,959 130,190,402 134,871,150
Basic earnings per share
(p) 3.0 1.7 3.0
Diluted earnings per share
(p) 2.9 1.7 2.9
-------------------------- -------------------------- --------------------------
Adjusted earnings per share is based on profit for the year
before exceptional items, non-IT amortisation and the associated
tax effect.
Six months ended 30 June Six months ended 30 June Year ended 31 December
2019 2018 2018
Unaudited Unaudited Audited
Restated* Restated*
GBP'000 GBP'000 GBP'000
Profit for the year 4,083 2,192 3,936
Amortisation of non-IT
intangible assets 613 512 1,038
Exceptional administration
expenses 920 1,038 2,343
Tax effect of above items (132) (197) (185)
-------------------------- -------------------------- --------------------------
Adjusted earnings 5,484 3,545 7,132
-------------------------- -------------------------- --------------------------
Basic adjusted earnings per
share (p) 4.0 2.8 5.4
Diluted adjusted earnings
per share (p) 3.9 2.7 5.3
-------------------------- -------------------------- --------------------------
6. Taxation
The major components of taxation are:
Six months ended 30 June Six months ended 30 June Year ended 31 December
2019 2018 2018
Unaudited Unaudited Audited
Restated* Restated*
GBP'000 GBP'000 GBP'000
Current income tax
Current tax on profits for
the period 1,808 1,175 2,323
Adjustments in respect of
prior years - - 22
-------------------------- -------------------------- --------------------------
Total current income tax 1,808 1,175 2,345
Deferred tax
Origination and reversal of
temporary differences (311) (276) 69
Change in tax rates - - (28)
Adjustments in respect of
prior years - - 240
Total deferred tax (311) (276) 281
Tax charge in the
Consolidated Statement of
Comprehensive Income 1,497 899 2,064
-------------------------- -------------------------- --------------------------
The income tax expense was recognised based on management's best
estimate of the annual income tax rate expected for the full
financial year, applied to the profit before tax for the half year
ended 30 June 2019.
Excluding the tax effect of the amortisation of non-IT
intangible assets and exceptional items (GBP132,000), the effective
tax rate on Adjusted Profit Before Tax for the half year ended 30
June 2019 was 23%.
The net deferred tax assets recognised at 30 June 2019 was
GBP364,000 (30 June 2018: GBP1,402,000; 31 December 2018:
GBP366,000). This comprised deferred tax assets relating to tax
losses and equity settled share-based incentives totalling
GBP4,001,000 (30 June 2018: GBP3,218,000; 31 December 2018:
GBP4,239,000) and deferred tax liabilities in relation to
accelerated capital allowances and acquired intangible assets
totalling GBP3,637,000 (30 June 2018: GBP1,816,000; 31 December
2018: GBP3,873,000).
At 30 June 2019 there was a net unrecognised deferred tax asset
of GBPnil (30 June 2018: GBPnil; 31 December 2018: GBPnil) relating
to unrecognised tax losses.
7. Property, plant and equipment
Assets under Leasehold Fixtures, Gym and other Computer Right of use Total
Construction improvements fittings and equipment equipment asset
equipment
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January
2018 2,368 118,075 9,452 57,713 1,950 - 189,558
On adoption
of IFRS 16 202,574 202,574
Transfers (23,412) 16,403 247 6,465 297 - -
Additions 23,409 10,403 827 4,143 519 54,788 94,089
Business
combinations
(Restated) - 9,165 183 2,357 - - 11,705
Disposals - (191) - (987) - - (1,178)
At 31
December
2018
(Unaudited,
Restated) 2,365 153,855 10,709 69,691 2,766 257,362 496,748
Transfers (9,612) 6,778 86 2,660 69 20 0
Additions 12,847 1,223 202 504 130 9,768 24,673
Disposals - (150) - (88) - - (238)
At 30 June
2019 5,600 161,705 10,997 72,767 2,965 267,149 521,183
------------- -------------- ------------- -------------- -------------- -------------- --------
Accumulated
depreciation
At 1 January
2018 - 25,944 4,163 24,981 1,114 - 56,202
On adoption
of IFRS 16 40,119 40,119
Charge for
the year - 9,868 1,310 8,021 511 14,801 34,511
Disposals - (139) - (892) - - (1,031)
At 31
December
2018
(Unaudited,
Restated) - 35,673 5,473 32,110 1,625 54,920 129,801
Charge for
the year - 5,873 661 3,999 302 9,417 20,253
Disposals - (150) - (88) - - (238)
Impairment - 782 47 95 7 - 931
At 30 June
2019 - 42,178 6,181 36,116 1,933 64,338 150,746
------------- -------------- ------------- -------------- -------------- -------------- --------
Net book
value
At 31
December
2018
(Unaudited,
Restated) 2,365 118,182 5,236 37,581 1,141 202,442 366,947
At 30 June
2019 5,600 119,527 4,816 36,651 1,032 202,812 370,437
------------- -------------- ------------- -------------- -------------- -------------- --------
*See note 2.2 for details regarding the restatement as a result
of the adoption of IFRS 16 'Leases'.
Outstanding capital commitments totalled GBP2,645,000 (30 June
2018: GBP4,973,000; 31 December 2018: GBP1,041,000).
8. Borrowings
Six months ended 30 June Six months ended 30 June Year ended 31 December
2019 2018 2018
Unaudited Unaudited Audited
Restated* Restated*
GBP'000 GBP'000 GBP'000
Non-current
Facility A 10,000 10,000 10,000
Facility B 40,000 32,000 36,000
Loan arrangement fees (631) (746) (835)
49,369 41,254 45,165
-------------------------- -------------------------- --------------------------
Current
Revolving credit facility 1,000 1,500 3,000
-------------------------- -------------------------- --------------------------
The Group's bank borrowings are secured by way of fixed and
floating charges over the Group's assets.
On 12 November 2015, the Group entered into a five year bullet
repayment facility with HSBC and Barclays. The facility comprises a
GBP10.0 million term loan ('facility A') for the purposes of
refinancing the Group's previous finance leases, a GBP25.0 million
term loan ('facility B') to fund acquisitions and capital
expenditure, and a GBP5.0 million revolving credit facility. On 14
September 2017, the Group agreed a facility amendment increasing
the facility B commitment from GBP25.0 million to GBP35.0 million
to enable the acquisition of the Lifestyle Portfolio of Gyms. On 4
July 2018, the facility B commitment was extended by GBP5.0 million
to GBP40.0 million; and the revolving credit facility was extended
by GBP5.0 million to GBP10.0 million for financing the easyGym
acquisition. Interest is charged at LIBOR plus a 2.5% margin.
At 30 June 2019, facility A and B were fully drawn; and GBP1.0
million of the revolving credit facility was drawn.
There have been no changes to the valuation techniques used for
financial assets or liabilities held at fair value and no transfers
in the hierarchy of financial assets or liabilities. The carrying
values of all financial assets and liabilities are considered to
represent their fair values.
Other than the fair value of contingent consideration
(classified as other financial liabilities) and the fair value of
an unlisted equity investment (classified as financial assets at
fair value through other comprehensive income) that are categorised
as Level 3, the fair value of all other financial assets and
liabilities are categorised as Level 2.
9. Provisions
Dilapidations Other Total
GBP'000 GBP'000 GBP'000
At 1 January 2018 (restated) 740 917 1,657
Business combinations 143 217 360
New provisions 242 462 704
Utilisation of provisions - (917) (917)
Unwinding of discount 20 - 20
-------------- -------- --------
At 31 December 2018 1,145 679 1,824
New provisions 45 113 158
Utilisation of provisions - (274) (274)
Unwinding of discount 11 - 11
At 30 June 2019 1,201 518 1,719
-------------- -------- --------
Due in less than one year - 679 679
Due in more than one year 1,145 - 1,145
At 31 December 2018 1,145 679 1,824
-------------- -------- --------
Due in less than one year - 518 518
Due in more than one year 1,201 - 1,201
-------------- -------- --------
At 30 June 2019 1,201 518 1,719
-------------- -------- --------
Other provisions are primarily in relation to costs arising from
the restructuring activities associated with changing the personal
trainers operating model within the business, and for remedial
works at acquired sites.
10. Issued capital
During the six months ended 30 June 2019, the Company issued
22,924 Ordinary shares of 0.01 pence each in relation to matching
share awards under The Gym Group Plc Share Incentive Plan. The
shares were then allocated to award holders via an Employee Benefit
Trust, subject to satisfaction of continued employment conditions,
for nil consideration.
The total number of issued share capital as at 30 June 2019 is
137,782,695.
11. Long term employee incentive costs
The Group operates share based compensation arrangements under
The Gym Group plc Performance Share Plan and The Gym Group plc
Share Incentive Plan. The awards granted during the six months
ended 30 June 2019 are similar in nature to those awarded during
2018.
In the six months ended 30 June 2019, the Group recognised a
total charge of GBP813,000 (six months ended 30 June 2018:
GBP695,000, year ended 31 December 2018: GBP797,000) in respect of
the Group's share based long term incentive plans and related
employer's national insurance (GBP728,000 and GBP85,000
respectively).
12. Related party transactions
Identification of related parties
The Group has related party relationships with major
shareholders, key management personnel and family members of the
Directors.
Closewall Limited is a company under the control of a family
member of a Director, J Treharne.
Transactions with related parties
The following table provides the total amounts owed to related
parties for the relevant financial period:
Six months ended 30 June Six months ended 30 June Year ended 31 December 2018
2019 2018
Unaudited Unaudited Audited
Restated* Restated*
GBP'000 GBP'000 GBP'000
Closewall Limited 178 - 98
--------------------------- --------------------------- ----------------------------
178 - 98
--------------------------- --------------------------- ----------------------------
Opening balance 98 2 36
Purchases 1,361 3,748 2,405
Repayments (1,281) (3,714) (2,343)
--------------------------- --------------------------- ----------------------------
178 36 98
--------------------------- --------------------------- ----------------------------
Representing:
--------------------------- --------------------------- ----------------------------
Trade and other payables 178 - 98
--------------------------- --------------------------- ----------------------------
13. Subsequent events
On 22 August, we communicated to members that our gym in Stoke
will close on 23 September 2019. This decision was taken as part of
our ongoing estate management as we do not believe the site will
meet our long-term requirements. This closure is expected to give
rise to exceptional costs of approximately GBP0.5m in H2 2019.We do
not anticipate any further closures in the foreseeable future.
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 or visit www.rns.com.
END
IR DMGZRRRGGLZM
(END) Dow Jones Newswires
August 29, 2019 02:00 ET (06:00 GMT)
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