Gym Group PLC · LSE:GYM
Gym — The Gym Group — FY2016 Earnings Presentation
36 slides from Gym's earnings presentation, March 2017
Slide 1: Full Year Results
The Gym Group plc FULL YEAR RESULTS MARCH 2017
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 are
Slide 3: Overview
Overview • Delivering on our growth strategy Disruptive Market technology-led pioneer business • Strong financial and operational results Attractive Growing • Excellent returns from the financial the existing estate model market • Strong new site pipeline 02
Slide 4: Our Members
Our Members 34% 32 joiners never used a average age gym before I love The Gym’s 22 easy, online booking gyms in the system and great most inactive 49% regions of the UK range of classes. members The free weights previously at area is welcoming a traditional club and women-friendly, >100,000 unlike a
Slide 5: Summary Performance
Summary Performance Estate Revenue Group Adjusted EBITDA 89 sites £73.5m +20.3% vs PY +22.6% vs PY £22.7m (2015: 74 sites) +£5.7m; +33.4% vs PY Av. Member Av. Revenue growth per Member (2015: £17.0m) growth +20.8% +1.5% Adjusted Adjusted Strong cash Total dividend PBT EPS generation per share £8.7m
Slide 6: Operational KPIs
Operational KPIs Gyms (#) Revenue £’m 15 89 73.5 sites open 74 60.0 in 2016 55 45.5 35.7 40 32 22.3 1 5 10 16 2008 2009 2010 2011 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Members (‘000) Group Adjusted EBITDA £’m 448 22.7 376 17.0 293 14.7 225 11.8 166 7 26 96 6.0 58 2008 2009 2010 2011 2012
Slide 7: Financial Update
FINANCIAL UPDATE 06
Slide 8: Summary Financials
Summary Financials £’m 2016 2015 %Change • Average membership growth +20.8% and Total Number of Gyms 89 74 20.3% average revenue per member +1.5% driving overall revenue growth of 22.6% Revenue 73.5 60.0 22.6% • Group Adjusted EBITDA grew by £5.7m Group Adjusted EBITDA(1) 22.7 17.0 33.4% to £22.7m d
Slide 9: Group Income Statement
Group Income Statement £’m 2016 2015 % Change • Site EBITDA margin reflects reduction in Revenue 73.5 60.0 22.6% immaturity of estate. Site EBITDA 30.0 23.3 28.4% – 2016: 34 sites open < 2 years Central costs (7.3) (6.3) 15.2% (38% of estate) Group Adjusted EBITDA 22.7 17.0 33.4% – 2015: 34 sites op
Slide 10: Group Adjusted EBITDA Increased 33.4%
Group Adjusted EBITDA Increased 33.4% 0.5 1.0 4.7 1.5 22.7 17.0 2015 Group Sites open up to 2015 and 2016 Pre-opening costs Central costs 2016 Group Adjusted EBITDA December 2014 openings (before Adjusted EBITDA POC) Average Site EBITDA up 7.0% to £337,000 (2015: £315,000) 09
Slide 11: Operational Costs
Operational Costs Predictable cost base – focus on driving £’m 2016 2015 %Change efficiencies through scale Average number of sites 80 64 25.0% % of Revenue 2016 • Fixed rental uplifts at five and ten years Operating costs 20.3 16.9 20.1% 18% Rent on majority of leases Property costs 20.3 16.0 26.9%
Slide 12: Group Cash Flow
Group Cash Flow • Group Operating Cash Flow Conversion(2) of 109.9% £’m • Positive cash flow from negative net working capital 2.9 0.8 5.1 of £5.1m (IFRS accounting for 0.9 leases, lease incentives and strong revenue growth) • Expansionary capex reflecting 15 openings in 2016 Net Debt 24.9 20.9 22.7
Slide 13: Capital Expenditure
Capital Expenditure Expansionary Expansionary capital expenditure 2016 • Initial site investment, acquisitions, IT projects and product enhancement 3.3 Product enhancement, £20.9m acquisitions and IT projects • New gym fit-out costs £1.33m per site 1.8 Initial capex – 2015 and 2017 cohort Maintenanc
Slide 14: Tax
Tax 2016 Progress • Improvement in effective tax rate, reducing to 18% in 2016 (2015: 26% on proforma basis) • £0.2m of cash taxes paid in year Changes in year • ATCA – increase in tax deductibility of historic shareholder loans • R&D – additional tax relief on the development of new infrastructure
Slide 15: Guidance
Guidance Reconfirmed New • Number of openings expected to be • Expect new sites fit-out costs to continue towards top end of 15 to 20 guidance for to be between £1.3m and £1.4m with 2017 further £2.0m-£2.5m p.a. of capital spend • Long term employee incentive cost on IT, prior year acquisitions and
Slide 16: Strategic and Operational Update
STRATEGIC AND OPERATIONAL UPDATE 15
Slide 17: Strategic and Operational Progress
Strategic and Operational Progress Accessing Delivering Focusing Achieving Developing the significant performance on our our rollout the customer market from open people strategy proposition opportunity gyms 16
Slide 18: Market Opportunity
Market Opportunity A fragmented market… …with low cost driving market growth UK health and fitness market by number Total UK health and fitness market (£bn)(2) 2012-16 CAGR of private and public clubs(1) 4.4 +3.5% 4.3 Est. >510 as of 4.1 0.4 +54.6% 0.3 Jan ’17(4) 3.9 3.9 0.2 450 Low cost 0.1 0.1 3.9
Slide 19: The Low Cost Gym Market
The Low Cost Gym Market UK low cost gym market landscape as at 31 January 2017 Leading player with significant market opportunity Low Cost Development UK Mar ’16 – Jan’17 (1) Ownership # clubs 24/7 structure (2) Pure Gym 147 173 O The Gym 75 89 O Fit4Less 48 55 O/F Xercise4Less 35 47 O Sports Direct
Slide 20: Significant Headroom for Growth
Significant Headroom for Growth • The UK low cost segment accounts for only Leading European operators by number of gyms (2) 20% of the health and fitness market with overall penetration below Northern European 388 levels. 319 243 • Significant headroom for growth based on 188 173 other European com
Slide 21: People
People Strengthen Board Strengthen Executive Committee Non-Executive Directors appointed: • Nick Henwood appointed Operations • David Kelly – experienced digital operating Director (previous similar roles at David executive (Rackspace, eBay, Amazon, Lloyd, Mothercare and Autoglass) Lastminute.com) •
Slide 22: Improving Site Performance
Improving Site Performance 30.0 53% 5.7 70% 61.8% 43% 26.2 6.0 40% 58.2% 42% 52% 60% 54.1% 25.0 51% 35% 41% 5.0 4.5 50% 18.8 50% 3.8 30% 40.0% 40% 20.0 16.2 49% 4.0 39% 25% 40% 31.3% 38% 15.0 48% 3.0 2.5 20% 30% 37% 9.5 47% 1.9 10.0 2.0 15% 20% 36% 6.0 46% 45% 10% 35% 5.0 1.0 10% 44% 5% 34% 0% 33% 0
Slide 23: Improving Site Performance
Improving Site Performance Mature site metrics 2016 Revenue £1.00m Increase in ROCE for Gross profit 99% mature sites to 32% Fixed property costs 26% Other opex 26% Absolute mature EBITDA per site improvement EBITDA £0.48m EBITDA margin 47.5% Average capital cost up to 2014 £1.49m Actual capital cos
Slide 24: Pricing and Yield
Pricing and Yield 2016 progress Mature Average Revenue per Member per Month (£) • 1.9% increase in mature Average Revenue per Member per Month; 310,000 average mature 14.79 14.39 14.49 14.51 members 14.17 • Remain competitively priced versus other low cost operators 2012 2013 2014 2015 2016 • Target
Slide 25: Pipeline Rollout
Pipeline Rollout 2016 and 2017 progress Rolling average sq. ft. (1) • 15 openings - 8 South East and 7 rest Mature New of the UK, weighted towards Q4 18,984 18,736 at 2016 at 2016 • 16,600 average sq. ft. for 2016 openings • Strong line up of London openings for 17,187 2017 – Bloomsbury, Streatham,
Slide 26: New Site Strategies
New Site Strategies Various avenues to Case Study Exchanged (1) Open grow the estate Bristol Longwell Green 1. Standard strip out • Site in very good condition 14 80 and conversion • Fit-out works limited to under three 2. Refurbishment weeks 3 9 of existing club • Strong membership on opening 3. Ac
Slide 27: Customer Experience
Customer Experience Product Development Ancillary Income Improvements to offering Current revenue streams • Expanded class timetables with online bookings at all • Vending machines in all the estate gyms • Multi-site membership options • Origin (high intensity training programme) at selection of gym
Slide 28: Outlook
the e °ee find your fit OUTLOOK 27
Slide 29: Outlook
Outlook • 2016 experienced strong growth in members with an encouraging set of openings • 2016 earnings in line with expectations • Membership growth Jan / Feb to 495,000 +10.5%, in line with the Board’s expectations • Opening programme on track with 17 sites exchanged at the start of 2017 • Expect
Slide 30: Appendix
APPENDIX 29
Slide 31: KPIs
KPIs £’m 2016 2015 2014 2013 2012 15-16% change Financial Revenue 73.5 60.0 45.5 35.7 22.2 22.6% Group Adjusted EBITDA 22.7 17.0 14.7 11.8 6.0 33.4% Group Adjusted EBITDA before POC 24.9 19.7 16.7 12.9 7.6 26.5% Group Operating Cash Flow 24.9 18.6 16.5 14.8 9.6 34.4% Group Operating Cash Flow Conver
Slide 32: Keys to Success in the Low Cost Gym Market
Keys to Success in the Low Cost Gym Market Key success factors for The Gym Group Know how Ability to Scale Access to and expertise source sites advantages capital Technology • 9 years refinement • Dedicated • Increasing returns • High quality, • Technology key to of the model acquisitions team: to s
Slide 33: Price Development
Price Development Headline rate development 35 -15% 30 32.18 27.48 25 -7% 4% 0% 3% 2% 2% 5% 20 1% 22.18 3% 19.98 19.99 19.99 19.95 20.45 20.59 18.9 19.24 19.37 19.17 18.46 18.8 18.49 15 16.54 17.11 17.06 17.23 10 5 0 (3) The Gym Sports Direct Easy Gym Simply Gym Fitness4Less Pure Gym Xercise4Less 24
Slide 34: Financial Model
Financial Model Technology led operating model Maturity: Members Maturity: Site EBITDA with high margins and returns • Consistent maturity profile with • Site EBITDA lags • Low operating costs member outcome dependent on number growth • Leases(1) typically fixed sq footage per site • Initial losses
Slide 35: Business Model: Financial Dynamics
Business Model: Financial Dynamics Property rent costs Depreciation Pre-opening costs • Leasehold with fixed • Depreciation P&L charge relatively • Indicative pre-opening step-up every 5 years(1) high given upfront cost of cost c.£140,000(2) per site investment in sites • Under IFRS, the 5 year fixe
Slide 36: The Gym Group Team
The Gym Group Team John Treharne Richard Darwin Jonathan Spaven Chief Executive Officer Chief Financial Officer Property Director • Founder and CEO since • CFO since May 2015 • Property Director since October November 2007 2013 • Previously CFO of Essenden plc • Previously Managing Director at and P