Gym Group Plc · LSE:GYM
Gym — The Gym Group — Investor Day (May 2022)
93 slides from Gym's investor day presentation, May 19, 2022
Slide 1: Capital Markets Day
Capital Markets Day 19 May 2022
Slide 2: Forward-looking statement disclaimer
Forward-looking statement disclaimer This presentation should be read in conjunction with the announcement published by The Gym Group plc on 19 May 2022. This presentation and information communicated verbally to you contains certain projections and other forward-looking statements with respect to t
Slide 3: Welcome & introduction
Welcome & introduction Richard Darwin, Chief Executive Officer
Slide 4: Who you will meet today
Who you will meet today Richard Darwin Mark George Ann-marie Murphy Chief Executive Officer Chief Financial Officer Chief Operating Officer • CEO since September 2018 • Joined TGG as CFO in • COO since February 2022 (CFO 2015 - 2018) October 2018 (previously Chief People Officer • Formerly CFO of Es
Slide 5: The story so far…
The story so far… Rapid growth and Continued growth and Managing through COVID Strategic expansion proof of business model investment in scale and recovery 2008 2015 2019 2020 2021 2025 First gym opened Successful IPO on Gyms and members Business significantly Revenue recovery starts 300+ sites in H
Slide 6: Business transformed since the IPO
Business transformed since the IPO 01 02 Significant investment made in core Rapid growth in estate infrastructure to run business of 200+ gyms • 104 organic new sites • New Tech platforms to support enhanced • 36 sites acquired through Member Experience (via Website and App) four separate acquisiti
Slide 7: Strong proposition appealing to a wide demographic with multiple growth drivers
Strong proposition appealing to a wide demographic with multiple growth drivers Member demographic High quality, low cost gym proposition Affluent Urban achievers Rated “Excellent” on Trustpilot (UK: 23%) adversity Consistently strong member satisfaction scores (UK: 16%) 14% c. 50 million gym visits
Slide 8: Business model enables self financing growth
Business model enables self Strong financing growth demand for health and fitness Reinvestment High quality, in estate great value and growth gyms of new sites Self-financing growth delivering financial returns (30% ROIC) Strong Growing financial membership returns and base social value Scale benefi
Slide 9: Our plan to 2025
Our plan to 2025 Financial drivers 2025 targets Revenue Recovery 300+ of existing estate sites 25-30 £95-105m new sites per year EBITDA £40-50m PBT Capital Markets Day 2022 9
Slide 10: Areas of focus today
Areas of focus today Low cost gym market Key strategic initiatives Financial potential Financial outlook Market opportunity Enabling faster growth and capital allocation Next generation technology Revenue optimisation Brand Capital Markets Day 2022 10
Slide 11: Market opportunity
Market opportunity Richard Darwin, Chief Executive Officer
Slide 12: Unique market opportunity to accelerate expansion
Unique market opportunity to accelerate expansion • Strong and resilient demand for health and fitness • Low cost fastest growing segment Large & • Additional opportunity in small towns growing market • Distress in retail / leisure; greater availability of sites at affordable rents • Growth in low c
Slide 13: Long-term growth and resilience in the UK gym market
Large & growing Long-term growth and resilience in the UK market Unique market gym market Attractive Accelerated property opportunity move to market for The Gym low cost Group Scale advantage % of UK population that are members of a health & fitness club 15.6 16% 14.0 • Memberships of health & fitne
Slide 14: Rapid growth across various categories with further opportunity in small towns
Large & growing Rapid growth across various categories with further market Unique market opportunity in small towns Attractive Accelerated property opportunity move to market for The Gym low cost Group Scale advantage Number of sites by category 2016-211 • Substantial growth in high performing City
Slide 15: An increased interest in health & fitness post-COVID
Large & growing An increased interest in health & fitness post-COVID market Unique Attractive market Accelerated property opportunity market for The Gym move to Group low cost Scale advantage Fitness frequency now above pre-COVID levels Sustained opportunity to target people interested in and expect
Slide 16: Post COVID structural trends accelerating move to low cost
Large & growing Post COVID structural trends accelerating move market Unique market Accelerated to low cost Attractive property opportunity market for The Gym move to Group low cost Scale advantage 01 02 03 Growth in low cost an existing Parts of Health & Cost of living crisis will increase theme pr
Slide 17: Scale advantages enhance strong market position
Large & growing Scale advantages enhance strong market position market Unique Attractive market Accelerated property opportunity move to market for The Gym low cost Group Scale advantage • Economies of scale result in a UK number of low cost gyms, 2016-20212 market with two clear leaders 78% 26.7% (
Slide 18: Attractive property market creates opportunities to expand estate
Large & growing Attractive property market creates opportunities market Unique Attractive market to expand estate and achieve historic returns Accelerated opportunity move to property for The Gym low cost market Group Scale advantage • Distress in retail / leisure - greater availability of target si
Slide 19: Significant headroom in low cost gym market
Significant headroom in low cost gym market Low cost gym members penetration UK potential for low cost gyms % of total population Number of low cost gyms 7.0 – 8.9% 1700 - 1900 5.0 – 6.9% 1200 - 1400 4.2% 3.4% 3.7% 756 2.9% 2.0% 1.5% Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 2026F 2030F 2022 2026F 2
Slide 20: Enabling faster growth
Enabling faster growth Ann-marie Murphy, Chief Operating Officer
Slide 21: We will enable faster growth through...
We will enable faster growth through... 01 02 03 Outstanding Highly Flexible model product & satisfied & product operational members formats delivery Capital Markets Day 2022 21
Slide 22: We have a high quality, great value product
We have a high quality, great value product 01 Outstanding product & operational delivery Low cost Free Access to Friendly, helpful no contract group exercise 200 top quality staff & access to membership classes digital classes personal trainers Convenient High quality Multi-gym Bring a gym equipmen
Slide 23: The most successful operating model in the market
The most successful operating model 01 Outstanding product & in the market operational delivery Market leading flexible Recognised as a great place operating model to work Fitness trainer Model • #25 in Glassdoor’s top 50 places to work in the UK Employed contract – 12 hours a week • Won Employee Ex
Slide 24: Operational performance pillars
01 Outstanding product & operational delivery 4 operational performance pillars People / member service / safe, clean and legal / profit Safe, clean and legal We are consistently delivering high levels of quality audits, 96.8% on average Constantly looking for areas to improve. We never stop our foc
Slide 25: Our members ‘love us’
Our members ‘love us’ 02 Highly satisfied members “ Immediately I noticed the abundance of diversity in the gym.. I did the burn 400 class and loved it. All very Engaged colleagues delivering tidy, clean and perfectly functional.” great member service satisfaction London Walthamstow Increased our me
Slide 26: We provide affordable fitness for all
We provide affordable fitness for all 02 Highly satisfied members Age Affluence Location Affluent Under 18 4% achievers Urban (UK: 23%) adversity 18 - 21 20% (UK: 16%) 22% 14% 22 - 25 19% Rising 18% prosperity (UK: 10%) 26 - 35 29% 24% 36 - 45 15% Financially 22% stretched Comfortable 46 - 55 8% (UK
Slide 27: Our formats reflect member requirements
Our formats reflect member requirements 03 Flexible model & product formats 01 Live classes Solutions from full studio to open 05 Product solutions Range of kit tailored to membership profile plan flexible spaces and usage 02 Digital classes App integration of exercise plans 06 Flexible space Design
Slide 28: We optimise space and product…
We optimise space and product… 03 Flexible model & product formats Small Medium Large Individual, unisex Reduced size male and Standard configuration shower/WC cubicles female changing, WC of changing, WC & wash rooms & wash rooms Inclusion of admin & Majority of lockers Majority of lockers BOH area
Slide 29: …delivering growth across a range of sizes
…delivering growth across a range of sizes 03 Flexible model & product formats York Sydenham Paignton City Residential Greater London Town Retail Park High Street Retail Park Opened April 2021 Opened May 2021 Opened September 2021 Size: 15,250 sq.ft Size: 12,750 sq.ft Size: 10,250 sq.ft Capital Mark
Slide 30: Our formats give us headroom for growth…
Our formats give us headroom for growth… 03 Flexible model & product formats TGG growth by segment 2022 2021 Year-end Accelerating growth Growth 2022 28 new sites to be opened in 2022, including City Residential 106 16 three gyms purchased from Fitness First Greater London 64 7 10-20,000ft2 Low cost
Slide 31: …and deliver proven returns
…and deliver proven returns 03 Flexible model & product formats Smaller sites still delivering high returns • The average size of a new gym through organic growth • Proven format and operating model across all sizes to has been gradually reducing over several years as we deliver consistent ROIC have
Slide 32: Continued innovation enabling faster growth…
Continued innovation enabling faster growth… Remote Small Town Digital Diet and operation. format. fitness. nutrition. Capital Markets Day 2022 32
Slide 33: Next generation technology
Next generation technology Jasper McIntosh, Chief Information Officer
Slide 34: Technology is a critical enabler and key differentiator
Technology is a critical enabler and key differentiator Activity in Q1 2022 Ecommerce >14m >19m >6.5m gym visits app sessions web sessions Data App Technology @ Technology drives every area: The Gym Group • Online joining • Gym entry • Operational efficiency Internal systems In gym • Digital content
Slide 35: Scale enables us to invest in initiatives beyond the reach of almost all other UK operators
Scale enables us to invest in initiatives beyond the reach of almost all other UK operators £14m capex Delivered Opportunity invested evenly across 2019 - 2021 2019 - 2021 2022+ Gym visits Lower CPA c.104m 10% reduction = c.£1m saving Website and App Proprietary App sessions upgrades software c.59m
Slide 36: Our strategy uses technology to drive KPI across acquisition, experience and efficiency
Our strategy uses technology to drive KPI across acquisition, experience and efficiency Acquisition Experience Efficiency Ecommerce App Productivity Pricing In-gym Automation KPI impact KPI impact KPI impact Web traffic, Visits, member satisfaction, Rejoin, conversion & yield churn cost Data & insig
Slide 37: We are active right across the user journey
We are active right across the user journey and see further opportunity in many areas Acquisition In gym Leave & win-back * Online content Activity tracking Churn prediction * Optimised joining Free wifi Re-join marketing * Advanced pricing * Workout programmes * Targeted eCRM * Remote site manageme
Slide 38: A new ecommerce platform build for acquisition and growth
A new ecommerce platform build for acquisition and growth A platform for acquisition • Mobile first • Search optimised • “Welcome” experience • Digital content A platform for growth • Latest technology • New content tools • Data & analytics • Security Capital Markets Day 2022 38
Slide 39: The platform launched in April drives marketing, engagement & product
The platform launched in April drives marketing, engagement & product Driving marketing • Increased search visibility • Improved speed and stability • Stronger merchandising • Quicker online joining Driving engagement • Improved mobile experience • More engaging content • Improved testing tools Impr
Slide 40: Our app experience has been significantly improved
Our app experience has been significantly improved Contactless Live gym entry busyness Classes & Digital activities classes Capital Markets Day 2022 40
Slide 41: Our app is market leading and delivers very high user engagement
Our app is market leading and delivers very high user engagement App usage has increased significantly: Our app ratings are now the best in the industry: Monthly Active App Users as % of Apple App Store Google Play Store Operator Rating * Rating * Closing Membership 2022 vs 2019 The Gym Group 4.7 4.
Slide 42: New data capabilities enable us to optimise price, churn and operational efficiency
New data capabilities enable us to optimise price, churn and operational efficiency Pricing Churn Operations Subscription, Churn propensity, Location, promotion, demand analysis, feedback performance KPI impact KPI impact KPI impact Increase Increase member satisfaction, Reduce costs, conversion & y
Slide 43: We’re investing into new technology in several other areas
We’re investing into new technology in several other areas New Increasing Digital Technology Automation Product Access control Digitisation Out-of-gym exercise Image recognition Reporting Connected fitness Video help stations Data Performance measurement KPI impact KPI impact KPI impact Grow estate
Slide 44: We are set up for ongoing success
We are set up for ongoing success We have a strong team and a best in class platform. We will continue to invest to realise the opportunity. An experienced senior management team: 01 – Key differentiator CIO in role since 2014. Rated in the Our scale advantage is a key point of differentiation top 2
Slide 45: Revenue optimisation
Revenue optimisation Nick Shelmerdine, Director of Strategy & Corporate Development
Slide 46: Our price product architecture today
Introduction Our price product architecture today Core memberships: Add-ons and additional memberships: LIVE IT Multi-Gym Access, Bring a Friend, Fitness & Body Tracking, (27% of members)1 Discounts & Offers Student Yanga Sports Membership Water +£5-7 On-Demand 1, 3, 5 Day Unlimited 24/7 Gym Time, F
Slide 47: Three significant opportunities to drive this forward
The next stage Three significant opportunities to drive this forward Price point optimisation 01 Selectively increasing prices to maximise revenue Three tier architecture 02 Introducing a third core membership and new features to help us drive volume and yield Commercial sophistication 03 Leveraging
Slide 48: In Dec 2021, our competitors were materially more expensive…
Price point optimisation In Dec 2021, our competitors were materially more expensive… Price Position vs Competitors, Dec 20211 £ per month Average across all locations Average difference to The Gym Group in competing locations £19.27 Average £19.96 +£4.12 Average £22.69 £23.21 18-26% higher than +£4
Slide 49: …and research showed an opportunity to narrow the gap
Price point optimisation …and research showed an opportunity to narrow the gap In members’ views, the value we deliver outweighs …and they see little difference between The Gym Group the price we charge… and Pure Gym on the top 10 most important criteria Value Map – The Gym Group Price vs Value Perf
Slide 50: We are now accelerating price increases to optimise revenue
Price point optimisation We are now accelerating price increases to optimise revenue Average headline rate, Jan 2019 to Apr 20221 • Headline price increased across 178 sites in April • But The Gym Group remains best value in competing New £21.00 £20.85 locations… members • …and well placed to benefi
Slide 51: LIVE IT’s success has generated £24m in profit
Membership architecture LIVE IT’s success has generated £24m in profit LIVE IT penetration How LIVE IT has added value % of total memberships (Illustrative) 30% 25% 20% Volume Adding the ‘LIVE IT’ 15% Total DO IT premium membership has enabled us to capture value £24.2m LIVE IT from members willing
Slide 52: Now we can make another step-change
Membership architecture Now we can make another step-change Current structure (Illustrative) The opportunity Customers not yet reached Volume (priced out) A lower priced membership package can attract incremental volume (net of cannibalisation) from Volume non-gym goers unwilling to pay for DO IT to
Slide 53: Adding a third core membership brings transformative benefits
Membership architecture Adding a third core membership brings transformative benefits New structure (Illustrative - relative price points not exact) Key benefits • Potential to drive both incremental volume and yield • Enables us to close the headline rate gap to competitors with fewer downsides Inc
Slide 54: And we will unlock new levels of sophistication
Commercial Sophistication And we will unlock new levels of sophistication Investments in technology, data & analytics and brand enable us to unlock new ways to optimise our commercial strategy More sophisticated Site-level tailoring strategies for Stronger ‘test & across more new site pricing, membe
Slide 55: Q&A
Q&A
Slide 56: Break
Break
Slide 57: Brand
Brand Emily Kortlang, Group Brand & Marketing Director
Slide 58: Why is brand & branding important to The Gym Group?
Why is brand & branding important to The Gym Group?
Slide 59: Strong brands deliver a competitive advantage
Strong brands deliver a competitive advantage 01 02 03 Brands are People pay more Reduce remembered for brands the cost to acquire Increase consideration Reduced price sensitivity Increase conversion, lowering CPA Increased Increased Higher Improved awareness traffic conversion acquisition Capital M
Slide 60: To stay strong, brands need to evolve…So do we!
To stay strong, brands need to evolve…So do we! 2014 2015 2022 Brands need to update their identity and meaning to… 1971 1987 1992 Current Attract new Develop Remain audiences & retain new revenue competitive 1951 1954 1967 2019 core customers streams 1987 - 1998 1998 - 2003 2003 - 2004 Therefore: …
Slide 61: What is our challenge in this area?
What is our challenge in this area?
Slide 62: We’re a great business but the brand isn’t strong enough
We’re a great business but the brand isn’t strong enough product. price. place. people. purpose. planet. Capital Markets Day 2022 62
Slide 63: ‘The Gym’ is generic…
‘The Gym’ is generic… • When we spend to advertise ‘The Gym’, we advertise the gym and grow the category and our competitors • When consumers search for ‘The Gym’ there is considerable leakage to our competitors (who use the term within their website to improve their SEO ranking) • ‘The Gym’ lacks d
Slide 64: Capital Markets Day 2022
Capital Markets Day 2022 o © the gym group
Slide 65: ‘The Gym’ costs us money
‘The Gym’ costs us money The Gym Best in Category • Brand awareness of ‘The Gym’, is low Top of Mind Q: What gyms are you aware of? 7% 28% for a business of our size and scale • Awareness is the first phase in the marketing funnel, and without this, consumers are unable to consider Awareness and the
Slide 66: How can we address this challenge?
How can we address this challenge?
Slide 67: A strong brand needs a strong identity & an emotional connection
A strong brand needs a strong identity & an emotional connection Name Identity Essence Memorable, with significant Distinctive & Meaning & an SEO benefits memorable brand assets emotional connection Capital Markets Day 2022 67
Slide 68: We’re changing our name, logo and our visual identity
We’re changing our name, Name logo and our visual identity Capital Markets Day 2022 68
Slide 69: Moving to The Gym Group has significant commercial upsides
Moving to The Gym Group has significant Name commercial upsides Generic high competition, The Gym The Gym X Gym THE CATEGORY GYM high cost & weak Group defensibility Domain Equity BROAD CATEGORY THE GYM CPA BLENDED UNIQUE / CATEGORY THE THEGYM GYMGROUP GROUP Marketing Investment BROAD UNIQUE NAME FI
Slide 70: We’re creating a new digital first, visual identity system
We’re creating a new digital first, visual identity system Identity • Created for the digital consumer journey with AA accessibility rating • Delivery of a digital first toolkit for digital-centric experiences • Future proof for expansion of digital experiences & touchpoints needed for a Gen-Z audie
Slide 71: ‘The Gym Group’ enables us to create powerful connections with key audiences
‘The Gym Group’ enables us to create powerful Essence connections with key audiences Groups bring psychological safety and create a 01 sense of community & belonging The gym-intimidated are looking for gyms 02 to be friendly, approachable and inclusive Groups are powerful motivators, groups get behi
Slide 72: Our new brand and branding
Our new brand and branding Name Identity Essence Capital Markets Day 2022 73
Slide 73: The new brand and branding will launch this year
The new brand and branding will launch this year July August September Signage Web & App Marketing Campaign Signage across our 204 sites The website and app updated With bought and updated to The Gym Group to new visual identity and earned media switched over in August Capital Markets Day 2022 74
Slide 74: We have a new team that can deliver and realise the value
We have a new team that can deliver and realise the value Marketing Team Emily Kortlang Seanpaul Walsh Matt Puddephatt Cassie Melrose Amy Binns Greg Mills Capital Markets Day 2022 75
Slide 75: ‘The Gym Group’ will create new value for the business
‘The Gym Group’ will create new value for the business High brand Our new brand delivers: health metrics 01 More awareness Brand High investment Awareness 02 More consideration Reduced Reduced 03 More members need for price Performance sensitivity media 04 Outstanding financial Decreased CPA perform
Slide 76: Financial outlook and capital allocation
Financial outlook and capital allocation Mark George, Chief Financial Officer
Slide 77: Financial outlook and capital allocation
Financial outlook and capital allocation 01 Medium term outlook 02 Capital allocation principles 1) “EBITDA” here refers to EBITDA less Normalised Rent
Slide 78: Proven financial model: strong returns and self-funding growth
Proven financial model: strong returns and self-funding growth High-growth business that delivers consistently Economic model driven by gyms delivering strong financial returns 30% ROIC2 at maturity (from year 3 onwards) 2019 P&L £million Target mature site economics by gym size £000 Revenue 153.1 1
Slide 79: 2025 targets: 300+ sites and c.£100m EBITDA
2025 targets: 300+ sites and c.£100m EBITDA1 Building blocks to target EBITDA1 • Recover to pre-Covid levels of profitability per site: • Delivers £40-50m PBT2 • 28 new sites in 2022 and 25-30 sites per year 2023, 2024 & 2025 • Latent profitability from 2024 and 2025 sites still to mature • Average
Slide 80: Our plan to 2025
Our plan to 2025 2025 targets Financial drivers 300+ Revenue Recovery sites of existing estate £95-105m 25-30 EBITDA new sites per year £40-50m PBT Capital Markets Day 2022 81
Slide 81: Recovery well underway with more to come
Recovery well underway with more to come Outperformed Top 10 European Revenue recovery above industry LFL revenue expected to be at operators in membership recovery average across UK and rest of Europe pre-COVID levels by end of 2022 Membership change 2021 Industry Revenue LFL Revenue by Month 2020-
Slide 82: Factors influencing the shape of recovery
Factors influencing the shape of recovery Infection Shift in working Alternative Cost of living concerns? patterns? fitness options? squeeze? Short Fear from catching Work-from-home Expansion of digital and Consumers thinking term covid still a factor but affecting gyms, outdoor fitness options care
Slide 83: Speed of recovery varies across estate
Speed of recovery varies across estate Disruption of normal routines, particularly working from home, is affecting the speed of return to gyms Regions with highest prevalence of WFH Office-focused city centre gyms slowest Gyms with parking recovering faster clearly more impacted to recover so far th
Slide 84: Tactical and strategic actions to support recovery and growth
Tactical and strategic actions to support recovery and growth Marketing & promotions Improving the Strategic initiatives Measured and targeted marketing and member experience Major projects going live in 2022 that will promotions to attract re-joiners and new In the gym and in the app – taking a gre
Slide 85: New sites performing well
New sites performing well Membership vs mature target by month of opening Sites opened since 110% the end of lockdowns 100% performing in line 90% with historical norms, 80% indicating they 70% 60% will deliver 50% 30% ROIC 40% 30% once mature 20% 10% 0% (4) (3) (2) (1) 0 1 2 3 4 5 6 7 8 9 10 11 12
Slide 86: Financial outlook and capital allocation
Financial outlook and capital allocation 01 Medium term outlook 02 Capital allocation principles 1) “EBITDA” here refers to EBITDA less Normalised Rent
Slide 87: Capital allocation principles
Capital allocation principles Re-investment Growth capex Leverage and cash Ongoing investment in physical Investing in high-returning Sensible leverage with excess and digital product to maintain growth opportunities cash returned to shareholders outstanding member experience Maintenance capex @ Inv
Slide 88: Delivering strong growth and free cash flow
Delivering strong growth and free cash flow Net Debt2 £ In 2022, Net debt2 level to with EBITDA1 per site maintain leverage at 1.5x EBITDA recovering to pre-covid levels and with significant growth capex, net cash flow will be negative Excess cash In 2023, the business starts to generate Net debt2 l
Slide 89: Closing remarks
Closing remarks Richard Darwin, Chief Executive Officer
Slide 90: A clear plan to achieve c. £100m EBITDA in 2025
A clear plan to achieve c. £100m EBITDA1 in 2025 Complete Underway Planned Membership recovery Site pipeline 25-30 p.a. Flexible formats Technology platform Pricing changes Three price product architecture Brand transformation 1) “EBITDA” here refers to EBITDA less Normalised Rent. “c.£100m” target
Slide 91: Summary
Summary 01 02 03 Resilient business Maximise site growth Immediate well-positioned in low potential from market opportunity cost gym market and opportunity around yield recovering well 04 05 06 Brand and tech Route to Capital allocation are key enablers to £40-50m PBT principles clearly running a su
Slide 92: Q&A
Q&A
Slide 93: Capital Markets Day
Capital Markets Day Thank you