Gym Group Plc · LSE:GYM
Gym — The Gym Group — H1 2021 Earnings Presentation
33 slides from Gym's earnings presentation, Sep 2, 2021
Slide 1: The Gym Group Plc Half Year Results
THE GYM GROUP PLC HALF YEAR RESULTS 2 SEPTEMBER 2021
Slide 2: Forward-Looking Statement Disclaimer
FORWARD-LOOKING STATEMENT DISCLAIMER This presentation and information communicated verbally to you may contain certain projections and other forward- looking statements with respect to the financial condition, results of operations, businesses and prospects of The Gym Group plc. These statements ar
Slide 3: Well-Positioned for Accelerated Growth
WELL-POSITIONED FOR ACCELERATED GROWTH STRONG RECOVERY AFTER RE-OPENING • Emerged from the latest lockdown in a position of strength: • Careful cash management and shareholder support → significant liquidity; • Continued investment in tech and marketing → enhanced trading capability; • Support for c
Slide 4: Financial Update
FINANCIAL UPDATE MARK GEORGE - CFO
Slide 5: Financial Summary
FINANCIAL SUMMARY MEMBERS REVENUE GROUP ADJUSTED EBITDA ADJUSTED LOSS BEFORE LESS NORMALISED RENT3 TAX 730,000 £29.3M (£8.1M) (£27.4M) 32,000 VS PY £8.0M VS PY £0.1M VS PY £1.1M VS PY (Jun 2020: 698,000) (Jun 2020: £37.3m) (Jun 2020: (£8.2m)) (Jun 2020: (£26.3m)) NON-PROPERTY NET NON-PROPERT
Slide 6: Group Income Statement
GROUP INCOME STATEMENT GROUP ADJUSTED EBITDA LESS NORMALISED RENT – H1 2021 VS H1 2020 £'m H1 2021 H1 2020 % Change Revenue 29.3 37.3 (21.4%) Cost of sales (0.5) (0.8) 37.5% Gross profit 28.8 36.5 (21.1%) Site costs (excl. exceptional costs)* (15.0) (24.7) 39.3% Central costs (excl. exceptional cost
Slide 7: Enhanced Yield Management Sophistication
ENHANCED YIELD MANAGEMENT SOPHISTICATION AVERAGE MONTHLY HEADLINE PRICE FOR ‘DO IT’ SUBSCRIPTION £19.50 • Building on strong demand after re-opening, continue to optimise yield £19.11 £19.00 • A more sophisticated pricing model allowed the business to £18.81 identify and implement targeted price inc
Slide 8: Reduced Capex in H1 Due to Closures; Acceleration to Come in H2
REDUCED CAPEX IN H1 DUE TO CLOSURES; ACCELERATION TO COME IN H2 H1 2021 H1 2020 % Change EXPANSIONARY New site Capex 7.1 9.2 easyGym refit - 1.7 • New site capex in H1 2020 relates to 4 sites opened prior to lockdown Tech & Data 1.7 2.4 and completion of 3 more sites that opened in Jul / Aug 2020 wh
Slide 9: Careful Cash Management and Equity Raise Result in Low Level of Debt
CAREFUL CASH MANAGEMENT AND EQUITY RAISE RESULT IN LOW LEVEL OF DEBT Post balance sheet Non-Property CASH FLOW & NET DEBT net debt of £30.1m after £30.3m equity raise on 2 Jul NON-PROPERTY NET DEBT NON-PROPERTY NET DEBT (30 JUN 2021) AFTER 2 JUL 2021 PLACING £60.4M £30.1M (Dec 2020: £47.3m) OTHER DE
Slide 10: Balance Sheet Strengthened for Growth
BALANCE SHEET STRENGTHENED FOR GROWTH BANK FINANCING • £100m of facilities (to Jun 2022 then reverting to original £70m facility) with additional permission for £10m 3rd party finance lease • March and Jun 2021 covenant tests waived due to extended lockdown in early 2021 • Future covenants based on
Slide 11: Trading Update & Financial Outlook
TRADING UPDATE & FINANCIAL OUTLOOK CONTINUED RECOVERY OF MEMBERSHIP AND PROFITABILITY • Closing Members of 721k as at 31 Aug 2021 • Expected increase in members Sept/Oct with return to universities and then further growth in Jan/Feb 2022 • Profitable (on an EBITDA basis) and cashflow positive in tra
Slide 12: Strategic & Operational Review
STRATEGIC & OPERATIONAL REVIEW RICHARD DARWIN - CEO
Slide 13: Our Three Strategic Priorities
OUR THREE STRATEGIC PRIORITIES 1) RECOVER THE CORE BUSINESS 2) CAPITALISE ON THE MARKET OPPORTUNITY 3) GROW SUSTAINABLY
Slide 14: Strong Start with More to Come
STRONG START WITH MORE TO COME RECOVER THE CORE BUSINESS RECOVERY WELL ON THE WAY MORE GROWTH EXPECTED • Memberships up to 721,000 as at 31 Aug up from • Lifting of restrictions on 19 July has enabled: 547,000 at the end of Feb 2021 • site capacity limits to be lifted • Visits per member per week at
Slide 15: Technology Improving Member Experience
TECHNOLOGY IMPROVING MEMBER EXPERIENCE RECOVER THE CORE BUSINESS FACILITATING A STRONG RE-OPENING • Website enhancements including new online functionality, UX improvements, a more resilient web platform and database upgrades • Online optimisation continues to deliver benefit through better online s
Slide 16: Commercial Advances Delivering at Scale
COMMERCIAL ADVANCES DELIVERING AT SCALE RECOVER THE CORE BUSINESS OPTIMISING YIELD • Data-driven decisions has enabled continued yield optimisation • Price increases in c.60 sites for new joiners • Targeted increases for existing members on legacy rates • Testing & learning new pricing and promotion
Slide 17: Our People Are Key to Our Success
OUR PEOPLE ARE KEY TO OUR SUCCESS RECOVER THE CORE BUSINESS SUPPORTING STAFF DURING THE PANDEMIC WAS TOP PRIORITY • Topping-up furlough pay • New comms platform to keep colleagues informed and engaged • Wellbeing support and opportunities for training offered whilst in lockdown ONGOING INVESTMENT IN
Slide 18: Unique Strategic Opportunity for Growth
UNIQUE STRATEGIC OPPORTUNITY FOR GROWTH CAPITALISE ON THE MARKET OPPORTUNITY ATTRACTIVE FINANCIAL PROPERTY MARKET WEAKENED STRENGTH • Distress in retail/leisure INCREASING COMPETITORS • Companies with strong resulting in greater DEMAND • Distress in premium & mid balance sheet best able to availabil
Slide 19: Significant Growth Opportunity
SIGNIFICANT GROWTH OPPORTUNITY CAPITALISE ON THE MARKET OPPORTUNITY SUBSTANTIAL WHITE SPACE IN THE UK CASE STUDY 1: PERTH • Pre-Covid PwC research1 suggests potential for c.1,200-1,400 low cost • Busy retail park in central location gyms by 2026 (749 today) • Strong demographics & no low cost gym in
Slide 20: New Sites Performing Well
NEW SITES PERFORMING WELL CAPITALISE ON THE MARKET OPPORTUNITY 7 SITES OPENED IN 2021 TO DATE IN STRONG LOCATIONS EARLY PERFORMANCE ENCOURAGING • Chichester: former Lidl with car park in affluent town with no low cost gym • Despite little in the way of pre-opening marketing • York: former Office Out
Slide 21: Strongly Positioned to Accelerate Growth
STRONGLY POSITIONED TO ACCELERATE GROWTH CAPITALISE ON THE MARKET OPPORTUNITY TWO LARGEST OPERATORS CONTINUE TO GROW WE REMAIN COMPETITIVE IN WITH REST OF THE LOW COST MARKET STAGNANT EACH LOCAL MARKET NUMBER OF LOW COST GYMS (JUNE 2021)1,2 AVERAGE HEADLINE RATE PER MONTH (NO CONTRACT) JUNE 20214 Ju
Slide 22: The Gym Group: Sustainability in Our DNA
THE GYM GROUP: SUSTAINABILITY IN OUR DNA GROW SUSTAINABLY CONTINUE TO MAKE GOOD PROGRESS WITH OUR SUSTAINABILITY ROAD MAP Continuing to develop Social Value as an additional KPI of the business Expanded our participation in the Supporting TGG Community Projects Government’s Kickstart Scheme with und
Slide 23: Summary
SUMMARY STRONG START – MORE TO COME • Memberships recovered well upon re-opening; records set on joiners and visits in first few weeks • Further recovery expected in Sep/Oct and Jan/Feb as we continue recovering to pre-Covid membership levels • Investment in Marketing, Tech & Data capability to supp
Slide 24: Q&A
Q&A
Slide 25: Business KPIs
BUSINESS KPIS 20-21 % £'m H1 2016 H1 2017 H1 2018 H1 2019 H1 2020 H1 2021 change Financial Data Revenue 36.1 42.8 58.3 74.0 37.3 29.3 (21%) Group Adjusted EBITDA less Normlalised Rent 12.9 14.6 18.8 24.0 (8.2) (8.1) 1% Group Operating Cash Flow 13.5 13.0 16.4 18.7 (4.0) (3.4) 15% Group Operating Cas
Slide 26: Financial Model: Mature Sites (Pre-Covid)
FINANCIAL MODEL: MATURE SITES (PRE-COVID) MATURITY: MEMBERS MATURITY: SITE EBITDA¹ MATURE SITE ECONOMICS² Average Mature Average estate £m 2018 2019 Gym Site Members (#) LTM EBITDA 0.5 Revenue £0.97 £1.00 £ Millions 6,000 Gross Profit 99% 99% 0.4 5,000 Fixed Property costs ³ 27% 26% 4,000 0.3 Other
Slide 27: UK Market in Long-Term Growth
UK MARKET IN LONG-TERM GROWTH % OF UK POPULATION THAT ARE MEMBERS • Memberships of health and fitness 18 16 OF A HEALTH & FITNESS CLUB 15.6 clubs were in structural growth for 14 many years up until 2019 11.9 12 10.5 • During the Global Financial Crisis 10 growth rates flattened but didn’t % 7.3 8 d
Slide 28: £1.8bn of Social Value Created Since 2016
£1.8BN OF SOCIAL VALUE CREATED SINCE 2016 £m’s SOCIAL VALUE GENERATED BY GYM GROUP 600 • Social Value Calculator developed by 4Global in partnership with 500 Sheffield Hallam University and used by Sport England and 400 Government to determine the social value of regular exercise on 300 communities
Slide 29: Social Value Through Physical Activity
SOCIAL VALUE THROUGH PHYSICAL ACTIVITY EXTENSIVE RESEARCH BY LEADING ACADEMIC INSTITUTIONS HAS DEMONSTRATED THE LINK BETWEEN PHYSICAL EXERCISE AND: • Reduction in risk of developing non-communicable diseases • Subjective Wellbeing • Educational Attainment • Reduction in crime BUILDING ON THIS RESEAR
Slide 30: The Social Value Calculator Model
THE SOCIAL VALUE CALCULATOR MODEL VOLUME OF PARTICIPANTS, FREQUENCY • The key outputs of the model are a projection of the total social OF ACTIVITY, DEMOGRAPHICS AND value into these 4 core categories SOCIOECONOMIC PROFILE • A person has to use the gym at least 4 times per month to contribute to the
Slide 31: Property (as at June 2021)
PROPERTY (AS AT 30 JUNE 2021) MAP OF ALL 187 LOCATIONS ROLLING AVERAGE SQUARE FOOTAGE CURRENT LOCATIONS 20,000 Inside M25 62 19,000 Outside M25 – South East 30 18,000 Outside M25 – Other 95 17,000 16,000 Total 187 15,000 14,000 13,000 12,000 AVERAGE SQUARE 11,000 FOOTAGE IN 2021 10,000 16,400 2010 2
Slide 32: Investment Case
INVESTMENT CASE 1. GROWING 2. HIGH QUALITY 3. COMPELLING 4. INNOVATION IN 5. SUSTAINABILITY AT 6. ATTRACTIVE MARKET GYM ESTATE MEMBER PROPOSITION TECHNOLOGY & THE CORE OF OUR FINANCIAL MODEL OPPORTUNITY MARKETING BUSINESS Investment Low cost segment Disciplined site Attractive low cost Investment in
Slide 33: The Gym Group Team
THE GYM GROUP TEAM RICHARD DARWIN MARK GEORGE ANN-MARIE MURPHY Chief Executive Officer Chief Financial Officer Chief People Officer • CEO September 2018 (CFO since May 2015) • CFO since October 2018 • Joined The Gym Group in May 2018 • Formerly CFO of Essenden plc (now Ten • Previously Deputy CFO of