Gym Group Plc · LSE:GYM
Gym — The Gym Group — H1 2016 Earnings Presentation
29 slides from Gym's earnings presentation, August 2016
Slide 1: Interim Results
The Gym Group plc INTERIM RESULTS August 2016
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: Summary performance
Summary performance Estate Revenue Group Adjusted EBITDA 80 £36.1m Av. member growth of sites + 25.1% vs PY + 22.8% Av. revenue £11.5m (H1 2015: 63 sites) per member + £3.0m (35.2%) growth + 1.6% vs PY (H1 2015 : £8.5m) Adjusted PBT Adjusted EPS Strong cash Maiden interim generation dividend £
Slide 4: Strategic and Operational Update
Strategic and Financial Operational Update Outlook Update 3
Slide 5: A disruptive concept and compelling proposition
A disruptive concept and compelling proposition Significant market opportunity Market leader Compelling consumer proposition Low-cost, technology-led disruptive business model High quality and well invested gym estate Experienced management team led by Founder / CEO Attractive financial model Value
Slide 6: Keys to success in low cost gym market
Keys to success in low cost gym market Key success factors for The Gym Group Know how & • 8 years refinement of the model: expertise – Large format, high utilisation gyms – Efficiently marketing a low-cost proposition online – Integration of multiple components of technology Ability to • Dedicated
Slide 7: Market opportunity
Market opportunity A large, fragmented Low cost gyms are The model is Significant health & fitness the fastest growing growing the market opportunity for market in the UK sub-segment further growth in low cost space • UK market £4.4bn(1) ~55%(2) >30% underpenetrated vs. international precedent of jo
Slide 8: Market opportunity
Market opportunity A fragmented market… …with low-cost driving market growth Total UK health and fitness market (£bn)(2) 2012-16 CAGR 4.3 4.4 UK health and fitness market by 3.9 3.9 4.1 0.2 0.3 0.4 +3.5% 4 0.1 0.1 number of private and public clubs(1) +54.6% 3 3.8 3.8 3.9 4.0 4.0 2 450 Low cost +1.5
Slide 9: Operational KPIs
Operational KPIs Strong performance of existing Gyms (#) 80 Revenue £m gyms 74 60.0 • Revenue £36.1m +25.1% 6 55 45.5 (H1 2015: £28.9m) sites 40 35.7 36.1 open in 32 28.9 22.3 • Average members 420,000 H1 2016 16 +22.8% (H1 2015: 342,000) 5 10 1 • Average revenue per member £14.31, +1.6% (H1 2015: 2
Slide 10: Further operational progress
Further operational progress Strengthen the customer Focus on team and people proposition • Awarded Gold Investors in • Net Promoter Score of 62.0% People in May 2016 up 1.8% compared to year • All Staff Share Scheme, each end employee granted £1,000 free • Feefo score of 93.5% for 6 shares and the
Slide 11: Property rollout
Property rollout Target of 2016 Progress • 6 gyms opened in H1 2016 15-20 new sites p.a. • Openings weighted towards over medium Q4 2016 term Glasgow Bothwell Street 24/03/16 • Strong line up of London 20,200 sq. ft. Converted retail property centric openings for 2016 (e.g. Lewisham, Sunbury, Norwic
Slide 12: Financial Update
Strategic and Financial Operational Update Outlook Update 11
Slide 13: Summary financials
Summary financials H1 H1 % • Average membership growth +22.8% and average revenue per member +1.6% driving £'m 2016 2015 Change overall revenue growth of 25.1% Revenue 36.1 28.9 + 25.1% • Group Adjusted EBITDA grew by £3.0m to £11.5m driven by increased size of the estate Group Adjusted and improved
Slide 14: Group income statement
Group income statement H1 H1 % • Site EBITDA margin reflects immaturity of £'m 2016 2015 Change estate. At H1 2016 25 sites open since Dec Revenue 36.1 28.9 25.1% 2014 (H1 2015: 23 sites open since Dec Site EBITDA 15.0 11.4 30.8% 2013) Central costs (3.5) (2.9) 18.0% • Central cost investment suppor
Slide 15: EBITDA increased 35.2%
EBITDA increased 35.2% 2.5 0.1 ( 0.6 ) 11.5 1.0 8.5 £ millions H1 2015 Group Sites open up to 2015 and 2016 Pre opening costs Central costs H1 2016 Group Adjusted EBITDA December 2014 openings Adjusted EBITDA Average Site EBITDA(1) up 2.7% to £187,000 (H1 2015: £182,000) 1. Average Site EBITDA is ca
Slide 16: Ancillary income
Ancillary income H1 H1 % • 90% of income is recurring £’m 2016 2015 Change monthly fees; remainder is joining fees and ancillary Revenue 36.1 28.9 25.1% income • Ancillary income defined as Cost of sales (0.4) (0.6) revenue from vending, day membership passes and other Gross Profit 35.7 28.3 25.9% s
Slide 17: Operational costs
Operational costs • Average number sites: 76 H1 H1 % in H1 2016 (59 in H1 2015) £'m 2016 2015 Change • Average site operating costs 3.4% lower than prior year as Operating costs (1) 10.0 8.0 25.1% efficiencies are gained from Property costs (1) 9.6 7.7 24.3% a larger estate • Impact of strong cost c
Slide 18: Group cash flow
Group cash flow • Strongly cash generative model with Group Operating 2.8 (0.8) Cash Flow Conversion(2) of 13.5 (8.5) 116.9% 11.5 • Positive cash flow from negative net working capital of £2.8m (IFRS accounting for leases, lease incentives and strong revenue growth) • Expansionary capex reflecting (
Slide 19: Capital expenditure
Capital expenditure Expansionary H1 H1 % • Initial site investment, central IT projects and £'m 2016 2015 Change product enhancement Expansionary • New gym fit-out costs remain at £1.35m per 8.5 12.6 -32.7% Capex site • Product enhancement (£0.3m) and IT spend Maintenance 0.8 0.7 15.7% (£0.3m) Capex
Slide 20: KPIs
KPIs £'m H1 H1 H1 15-16 % FY Financial 2016 2015 2014 change 2015 Revenue 36.1 28.9 22.0 25.1% 60.0 Group Adjusted EBITDA 11.5 8.5 7.9 35.2% 17.0 Group Adjusted EBITDA before POC 12.6 9.7 8.4 30.2% 19.7 Group Operating Cash Flow 13.5 11.8 8.0 13.6% 18.6 Group Operating Cash Flow Conversion 116.9% 13
Slide 21: Outlook
Strategic and Financial Operational Update Outlook Update 20
Slide 22: Outlook
Outlook • Strong membership growth in H1 to 424,000 +19% vs H1 2015 in line with the Board’s expectations • Opening programme on track; 6 open at end of H1 2016; targeting 15-20 sites in full year with strong London bias; openings back ended Q4 • Pipeline strong for 2017 • On track to meet market ex
Slide 23: Appendix
Appendix 22
Slide 24: The Gym is a market leader
The Gym is a Leading market leader player with significant market opportunity UK low-cost gym market landscape as at 31 March 2016(1) # of clubs (ranked by # of members) No fixed contract 24/7 Pure Gym 147 TheTheGym Gym 75 Xercise4Less 35 Fit4Less 48 Sports Direct Fitness 30 Easy Gym 15 Fitness4Less
Slide 25: Business model: financial dynamics
Business model: financial dynamics Property rent costs Depreciation Pre-opening costs • Leasehold with fixed • Depreciation P&L charge • Indicative pre-opening step-up every 5 years(1) relatively high given upfront cost c.£140k(2) per site cost of investment in sites • Costs incurred before • Under
Slide 26: Yield management
Yield management Two stage process: Illustrative Site Yield Maturation 1. Drive membership up to maturity 8000 • Price range £10.99-£24.99 per month(1) 7000 • Typically £20.00 joining fee charged 6000 • Price point regularly reviewed 5000 • Price decision data inputs: 4000 – Gross demand and net mem
Slide 27: Financial model
Financial model Technology led operating model Maturity: Members Maturity: Site EBITDA with high margins and returns • Average 6,000 members • Site EBITDA lags • Low operating costs after 2 years(2) number growth • Leases(1) typically fixed • Strong pre-opening process: • Initial losses from rental
Slide 28: Shareholders
Shareholders 28.1% Phoenix Advised Funds 13.9% Bridges Community Ventures 6.1% Management 32.9% Institutions holding >3%(1) 19.0% Others holding <3% 1. Includes Standard Life Investments, Hargreave Hale, Soros Fund Management, Fidelity International and Columbia Threadneedle. 27
Slide 29: 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 2013 November 2007 • Previously CFO of Essenden PLC and • Previously Director of Property a