THE GYM GROUP PLC
ANNUAL REPORT AND
ACCOUNTS 2020
S TAY I N G
S T RO N G
OVERVIEW
2020 HIGHLIGHTS
REVENUE
£80.5m
2019: £153.1m
GROUP ADJUSTED EBITDA LESS
NORMALISED RENT
£(10.2)m
2019: £48.5m
STRATEGIC
• 45% of trading days lost due to COVID-19
• 8 new sites opened in the year
• Ended 2020 with £52.7m of liquidity
OPERATIONAL
• COVID protocols introduced in gyms
• Strong staff retention and engagement
STATUTORY (LOSS)/PROFIT BEFORE TAX
£(47.2)m
2019: PROFIT OF £6.2m
NON-PROPERTY NET DEBT
£(47.3)m
2019: £(47.4)m
M A I N TA I N I N G
FO C US
NUMBER OF GYMS
TOTAL NUMBER OF MEMBERS
183
578,000
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
01
IN 2020 WE DEMONSTRATED
THE RESILIENCE OF OUR BUSINESS
AND CULTURE IN THE MOST
CHALLENGING OF TIMES.
WE ARE READY TO RECOVER
AND GROW AGAIN, BREAKING
DOWN BARRIERS TO FITNESS,
WHEN EXERCISE AND GOOD
HEALTH HAVE NEVER BEEN
MORE IMPORTANT.
CONTENTS
Overview
02 Company Overview
03 Our Key Stakeholders
04 At a Glance
05
Investment Case
Strategic Report
06 Chairwoman’s Statement
08 Chief Executive’s Review
12 Key Performance Indicators
14 Market Opportunity
16 Business Model and Strategy
18 Strategy in Action
26 Section 172 Statement
30 Sustainability at The Gym
42 Financial Review
46 Principal Risks and Uncertainties
53 Non-Financial Information Statement
Governance
54 Chairwoman’s Introduction
56 Board of Directors
58 Executive Committee
59 Corporate Governance Report
65 Report of the Nomination Committee
68 Report of the Audit and Risk Committee
71 Report of the Remuneration Committee
90 Directors’ Report
94 Directors’ Responsibility Statement
Financial Statements
95
102 Consolidated Statement
Independent Auditor’s Report
of Comprehensive Income
103 Consolidated Statement
of Financial Position
104 Consolidated Statement of Changes
in Equity
105 Consolidated Cash Flow Statement
106 Notes to the Consolidated Financial
Statements
137 Company Statement of Financial
Position
138 Company Statement of Changes
in Equity
139 Notes to the Company Financial
Statements
144 Five-Year Record
144 Key Performance Indicators:
Definition of Non-statutory Measures
145 Corporate Information
02
OVERVIEW
COMPANY OVERVIEW
O U R
M OT I VAT I O N
OUR PURPOSE
THE GYM BREAKS
DOWN BARRIERS
TO FITNESS FOR ALL. THE FIRST STEP
OUR CULTURE AND VALUES
The unique principles and behaviours that help
us achieve our purpose.
We rally around each other
and our members – always
ready to help someone take
the first step.
REALNESS
We are fair and honest in
everything we do. Quality over
numbers. Integrity over image.
What is right over what is easy.
FRIENDLINESS
We believe the gym should feel
welcoming and inclusive, never
intimidating. We don’t take
ourselves too seriously and are
always up for a bit of fun.
CHALLENGING
YOUR LIMITS
We are passionate self-starters.
We are proud of our high
standards. We are constantly
developing our knowledge and
expertise – individually and as a
company.
OUR BUSINESS MODEL
FIT FOR THE FUTURE
Our unique proposition and proven business model utilises
technology and economies of scale to provide a great value
member experience, whilst also delivering strong financial returns.
See pages 16 and 17
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 OVERVIEW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
03
OUR KEY STAKEHOLDERS
The COVID-19 pandemic has required us to work more
closely than ever with our stakeholders. Our detailed
report on Working with our Stakeholders is on pages 26
to 29.
EMPLOYEES
WHY THEY MATTER
HOW WE ENGAGE
Our employees are the
driving force behind our
purpose and growth.
• Employee engagement surveys
• Intranet and communications platform CORE with rich content for employees,
and a training platform to support e-learning and knowledge sharing
• Employee Assistance Programme
• Launching and regularly updating employee wellbeing resources
• Taking actions in the pandemic to support our people including topping
up furlough payments
• Regular gym visits by ExCo and Board members
MEMBERS
Happy members are what
makes our gyms successful,
and they inspire us every day
with their achievements.
They are the best indicator
that we are delivering fitness
for all.
• Satisfaction surveys
• COVID-secure operating protocols
• Health and wellness online resources
• Free fitness classes in lockdown and access to online classes
through our digital fitness partner Fiit
COMMUNITIES
Being a valuable part of the
communities in which we
operate is hugely important to
us; a strong relationship
between our gyms and our
communities is mutually
beneficial.
• Working with 4Global to calculate the social value of The Gym
• Developing COVID-secure operating protocols and working with
local authorities for inspections
• Charity partnerships, e.g. the Movember Foundation
• Diversity & Inclusion Manifesto
• Signatories of the Race at Work Charter
Our investors provide capital
for growth, whilst providing
challenge and feedback on
our business model and plans
for the future.
• Programme of investor relations including trading updates and
results announcements twice each year, as well as additional
progress updates throughout the COVID-19 pandemic
• Investor engagement through one-to-one meetings and
investor conferences throughout the year
SHAREHOLDERS
Our partnerships with suppliers
ensure we source the best
value goods and services for
the benefit of our members.
• Engaging proactively and responsibly with landlords
• Being responsible tenants
• Key supplier relationship management
SUPPLIERS
Our lending banks provide
funds for growth and day-to-
day working capital to enable
us to operate and grow our
business to its full potential.
• Regular updates on Company performance
• Reporting on performance versus agreed debt covenants
• Completed refinancing exercises in April and December 2020
• Proactive engagement through lockdowns
LENDING
BANKS
ENVIRONMENT
We continually seek out
opportunities to improve our
environmental performance
including reducing our carbon
emissions; sustainability is at
the core of our business.
• Alignment of our activities with UN Sustainable Development
Goals (‘UN SDGs’)
• Further developed our sustainability reporting in 2020; report
available on page 30
• Implemented requirements of the Streamlined Energy and
Carbon Reporting scheme
04
OVERVIEW
AT A GLANCE
C O M P E L L I N G
O FFE R
We focus on operating high quality, low cost
gyms that have widespread appeal and
achieve strong levels of membership. The
economies of scale in our business model
enable us to offer a great service at a low cost
for our members whilst also delivering a strong
return on capital for our shareholders.
STRONG GYM NETWORK
We now operate 183 sites
across all regions of the UK.
There remains a significant
opportunity for future growth
and in 2021 we plan to
expand this network further,
taking advantage of the
fallout from COVID-19 and
our position as the best
capitalised gym business
in the UK.
Existing gym
2020 opening
NUMBER OF GYMS
183
NUMBER OF MEMBERS
578,000
We are the 5th largest gym operator in Europe
in terms of number of members.
MEMBER PROPOSITION
• Market leading low-price
membership
• High quality gym equipment
and exercise facilities
• Convenient locations
• 24/7 access and unlimited
training
• No contract
• Friendly, helpful staff and
access to personal trainers
• Free group exercise classes
• Free app
• Multi-gym access, fitness
tracking, on-demand fitness
classes and refillable Yanga
sports water all available for
an added charge
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 OVERVIEW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
05
INVESTMENT CASE
A GROWING MARKET
FOR LOW COST GYMS
The UK health and fitness market
grew significantly with 15.6% of the UK
population having been a member
of a gym prior to COVID. This growth
was led by the low cost gym sector
which was introducing new people
to gym memberships for the first
time every year. Whilst having a
short term impact on the health and
fitness sector, COVID-19 is likely to
increase gym usage and headroom
for significant growth remains with the
number of low cost gyms in the UK
forecast to almost double by 2026.
PROVEN BUSINESS
MODEL ENABLED
BY TECHNOLOGY
AND ECONOMIES
OF SCALE
Our technology-led business model
has re-engineered the traditional
gym operating model, removed
costly underused facilities and
enabled us to offer a high quality
gym experience at a very low price.
STRONG RETURN
ON CAPITAL
We continue to use the increasing
scale of our Company to drive cost
efficiencies across the entire business,
enabling us to deliver great value
to our members as well as a strong
financial return to shareholders.
Prior to COVID we consistently
delivered a return on capital in our
mature estate of more than 30%.
06
STRATEGIC REPORT
CHAIRWOMAN’S STATEMENT
P R E SS I N G
A H E A D
A CHALLENGING
YEAR
For the first two months of
2020 the business traded
well, achieving strong
membership gains. But as
is well documented, on
20 March all gyms were
closed in the first lockdown
period of the coronavirus
pandemic.
Since then, our gyms have periodically been
open and closed again according to the
government rules of each of England,
Scotland and Wales.
Across the estate, we have been open for
members for only 55% of the trading days
of the year. To manage through this crisis,
fast and appropriate actions were taken
to protect colleagues and members,
strengthen our balance sheet, reduce our
costs and other commitments and utilise
government support schemes. Our primary
aim has been to put our business in the best
possible position to recover, be able to
restart growth and be the best gym operator
for accessing affordable fitness. This has
been shown to be more relevant than ever
within this health crisis. Whilst our gyms
remain closed and with the vaccine
programme providing confidence that the
end of the crisis is in sight, we are prepared
and ready for the recovery journey with
appropriate financial and colleague
resources and a determination to thrive.
Our 2020 results
Our financial results for the year have been
severely impacted by the 45% loss in trading
days from regional and national lockdowns,
with revenue down 47.4% from £153.1 million to
£80.5 million.
“ O U R P R I M A R Y A I M H A S
B E E N T O P U T O U R B U S I N E S S
I N T H E B E S T P O S S I B L E P O S I T I O N
T O R E C O V E R .”
P E N N Y H U G H E S C B E , C H A I R W O M A N
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020
07
As a result of significant cost saving measures,
plus valuable Government support in the form
of business rates relief and furlough grants,
the impact on profits was mitigated as far as
possible but nonetheless Group Adjusted
EBITDA Less Normalised Rent fell to a loss
of £10.2 million in 2020 from a profit of
£48.5 million in 2019. The management team
has focused on preserving cash and liquidity
to maintain balance sheet strength through
the crisis; tight cash management, a well-
supported equity raise and an increase in
our debt facilities enabled us to end the year
with net debt of £47.3 million vs total borrowing
facilities of £100.0 million.
Managing through the pandemic for
our stakeholders
In this report we provide more detail of the
progress we made in 2020 in terms of
sustainability, which has always been at the
root of our business. Our purpose is well
aligned with Promoting Health and
Wellbeing, one of the 17 UN Sustainability
Goals, and our values and strong focus on
business ethics are part of our DNA. This
was evident in our work to engage with and
support all stakeholders throughout the
pandemic crisis, in the ultimate belief that
this is central to the sustainable success of
our business. We are excited to publish in
this report the social value our business
creates every year, a measure that is
perfectly aligned with our business purpose
and highlights the significant positive impact
we have on the communities we serve.
We have sought to manage through the
pandemic for our stakeholders, providing a
safer environment for our members to work
out, clear communication for our people,
working with our suppliers and landlords
and engaging with our shareholders and
lending banks.
We have had first class communication with
members and froze membership so they
need never worry that we would charge them
when our gyms were closed and supported
them during lockdown with free online
classes. When we reopened our member
satisfaction reached new highs as members
appreciated the physical and mental
wellbeing benefits of being back in the gym
with high confidence in the safety procedures
we put in place. We have developed our
COVID-secure operating protocols to give
our members confidence to return to gym
settings, and have been pleased to see very
low incidence of COVID-19 cases attributed to
the UK fitness and leisure sector since first
reopening in July, as reported by ukactive in
December 2020.
We have kept colleagues engaged, even
when so many have been furloughed for
large periods of the year, and been open in
our communication through some difficult
but necessary restructuring. With our
‘People First’ mindset we rolled out training
programmes for all employees focusing on
their health and wellbeing. We also have
maintained our important work on Diversity
& Inclusion, signed up to Business in the
Community’s (‘BITC’) Race at Work Charter
and launched our Diversity & Inclusion
Manifesto. We have worked with suppliers
and landlords to negotiate agreed outcomes
through these extraordinary and changing
events. Our lending banks have shown
support and flexibility in providing financial
capacity and our shareholders readily
supported an equity raise.
We are looking forward to continuing our
engagement with our stakeholders in 2021
to further inform them of our sustainability
strategy and to build together on the
foundations laid.
Our shareholders
Like most businesses severely affected by
the pandemic, given macro uncertainty we
did not pay a final dividend in relation to
2020. We have made strong efforts to be
transparent and timely in our reporting to
keep our stakeholders informed of our
robust position and actions in the face of the
pandemic. Our Executive Directors lead
shareholder dialogue, but given all
circumstances, I proactively communicated
with our top shareholders towards year end
to check in for feedback. They were
unanimous in their satisfaction with the way
decisions had been taken and events
managed and I held a number of follow-up
conversations which were supportive and
focused on the fundamentals of our business
to recover and indeed to be even more
competitive in tougher economic times.
Whilst our share price, along with most
hospitality, leisure and travel companies, was
impacted by wider pandemic related
concerns through the year, some recovery is
evident as newsflow has improved with the
progress on vaccinations. We remain
focused on delivering for shareholders and
pleased that more colleagues participated in
the Savings-Related Share Option Scheme
(‘Sharesave’) than in 2019, aligning colleagues
and shareholder interests even more closely.
Our work as a Board
Katy Tucker joined our business as Company
Secretary in January and has served a more
than busy period as the Board in the initial
crisis period met weekly and has maintained
more frequent communication and decision
making as required throughout the year. I am
grateful to Board colleagues who also readily
gave up their Directors’ fees in Q2 to show
leadership and support in a financially
stressed year. For much of the year, in
addition to achieving financial resilience, our
work focused on taking the right actions to
reopen gyms safely and welcome back
members and colleagues. Our work later in
the year has focused on the judgements to
restart growth and prepare for regaining
members in large numbers.
We have also worked on Board composition.
The report of the Nomination Committee
provides a fuller description of our decisions.
The business has benefited from continuity at
Board level since IPO five years ago but we
agreed it was time to start rotation and to
attract new skills and experiences to our team.
I am delighted that Rio Ferdinand and Wais
Shaifta have joined the Board and I am excited
by the different perspectives they bring as we
rethink how we can be more relevant in our
pursuit of affordable fitness for all. At the same
time I am enormously grateful for the support
Paul Gilbert has shown to me and to the
business in the nine years he has served, first
as Chair during private equity ownership and
then as the Senior Independent Director since
IPO. He has done more than most in shaping
this business from near start up to the
enterprise it is today. He retires at our AGM in
May with our best wishes and thanks. I am
pleased that Emma Woods & David Kelly have
readily taken on significant responsibilities to
Chair the Remuneration & Audit committees
respectively and Emma as Senior
Independent Director.
Strategic confidence
Whilst our financial condition has been
impacted by the pandemic – with higher
levels of debt and lower membership than
planned – we remain as confident as ever in
our proposition. Providing affordable fitness
for all through gym membership is even
more relevant as society is encouraged to
improve health through physical and
wellbeing activity and looks for great value
for money in harder economic times. We are
sufficiently confident that we have prudently
maintained our pipeline growth and have the
experience and plans to address the
challenge of recovering membership levels.
Whilst it will take time to recover from the
impact of COVID-related closures, our
longer term strategic outlook and
opportunity is as strong as ever.
We recognise that the COVID-19 pandemic
has caused considerable hardship and
strain for many people, and it has affected
our stakeholders in different and often
difficult ways. On behalf of the Board and
everyone at The Gym I would like to extend
our sympathies to all of our people,
stakeholders and supporters who have been
impacted by this crisis.
Finally, congratulations and thanks to our
leadership team, led by CEO Richard
Darwin, who managed calmly through
unprecedented circumstances. On behalf of
the Board our thanks to them and to all
colleagues, members, suppliers and
landlords, banks and shareholders for your
support, flexibility and encouragement
through 2020 and the year ahead.
Penny Hughes
Chairwoman
18 March 2021
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 08
STRATEGIC REPORT
CHIEF EXECUTIVE’S REVIEW
L O O K I N G
FO RWA R D
2020 was the most
challenging year for
our business in its
12-year history.
We entered the year in a strong position
with 794,000 members and low gearing of
less than 1.0x EBITDA. Our approach
throughout the year has been to ensure that
our business exits the crisis in a strong
position, well-placed to welcome our
members back to their gyms and to take
advantage of an altered competitive
landscape. Decisions taken have been for
the long-term benefit of the business.
Our February 2021 membership is 547,000
and with a reopening date of 12 April
announced, we are confident that these
actions have given us as strong a base as
possible from which to rebuild our
membership. Our gearing remains
manageable and having successfully
refinanced during the year we have the
flexibility to deliver on our plans. This health
crisis has demonstrated the importance of
physical activity for all of the UK population.
As a result, we are confident about future
demand for our low-cost product as part
of the ongoing trend for people to lead
healthier lifestyles.
The COVID-19 pandemic meant 45% of our
trading days in 2020 were lost to closures
from government restrictions; 2021 has
started with a further national lockdown
once again closing the entire estate.
“ O U R A P P R O A C H H A S B E E N T O
E N S U R E T H AT O U R B U S I N E S S
E X I T S T H E C R I S I S I N A S S T R O N G
A P O S I T I O N A S P O S S I B L E .”
R I C H A R D D A R W I N , C E O
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020
09
For a low cost gym business such as ours,
periods of closure mean virtually no
membership acquisition and increased
attrition immediately after the closure
announcement (although this has lessened
with the later lockdowns as we reach a core
level of loyal members). As we have seen
from previous reopenings, the benefit of a
subscription business such as ours is the
ability to restart member payments from the
day of opening.
There are three groups of stakeholders that
deserve particular thanks for helping us to
manage through this crisis. First, our team
responded with speed and agility to adapt to
the initial crisis and to get us ready for the
post-COVID operating environment. This
included locking down the estate to reduce
cash burn when it first closed in March and
then, prior to reopening, adapting our model
to make the estate COVID-secure for our
members. Second, our thanks also go to our
major suppliers, including our cleaning firms,
equipment suppliers, contact centre
operators and vending suppliers who all
furloughed staff to ensure that contractual
costs were minimised. Third, and by no means
least, we are grateful for the decisive actions
taken by the UK Government to support our
sector through 2020 and into the new year –
without the immediate relief from furlough,
rates relief and VAT deferral, businesses such
as ourselves would have been in a very
different financial situation. At the peak of the
closure we have had over 95% of our
workforce in the gyms and central support on
furlough. Along with rates relief government
support in 2020 has been worth £16.0 million.
Our financing partners have also been
supportive through the crisis. In April we
boosted our liquidity with an equity placing
supported by our shareholders raising net
proceeds of £39.9 million – this was an
important part of our COVID recovery plan.
At the same time our syndicate of three
leading banks agreed an additional
£30 million of debt facility which has now
been extended to a two-year term. This
increased total available bank facilities to
£100 million and along with the equity raise
gave us good levels of liquidity to see us
through the crisis and for us to be able to
continue with a limited amount of
expansionary capital spend. At the end of
2020 our Net Debt was £47.3 million – the
same level as the beginning of 2020 –
enabling us to enter this latest national
lockdown in 2021 with a good level of
liquidity. Again, we are thankful for the
support of our investors and banks. As part
of our measures to preserve cash, we have
halted dividend payments.
Through the crisis, the business has
demonstrated its agility in being able to
adapt its ways of working to deal with the
COVID restrictions placed on our business.
We were assisted in this by working with the
Advanced Wellbeing Research Centre at
Sheffield Hallam University who performed
a review of our COVID procedures. These
measures included the purchase of screens
placed in front of banks of cardio equipment
to reduce the spread of aerosols and
specialised cleaning equipment to make
the cleaning of equipment more efficient.
The government guidelines limit capacity
to 100 sq. ft. per member and we are able
to accommodate this through limiting entry
where necessary using the existing
technology embedded in the gyms’
entrance portals. The guidelines have also
required social distancing which has been
possible through markings on the floor and
the goodwill of our members. Our large
well-ventilated facilities with an average size
of 16,500 sq. ft. mean that we have been
able to keep to original 2 m social distancing
guidelines. Our procedures have
demonstrated to our members the important
steps we have taken to make our gyms a
safe place to work out and are an important
way of giving them confidence to continue
with their routine of coming to the gym.
The measures we have put in place have
been welcomed by our members and in the
period of opening we have seen member
satisfaction scores around 10% higher than
pre-COVID. As a sign that member
confidence is growing, visits per member
also increased during August and
September to a point where members were
using the gym on average 1.2 times per
week, a level higher than the previous year.
Independent surveys also recognise that
there is a group of ex-members who intend
to return but will only do so once the risk
NUMBER OF GYMS
183
NUMBER OF MEMBERS
578,000
from COVID-19 is reduced and the vaccine
is rolled out. Given the progress the UK
government is making on the vaccine rollout,
this gives us confidence about our ability to
recover previous levels of membership once
we are open.
The financial results in 2020 were
substantially impacted by the periods of
closures, which reduced trading days by
45%. Revenue was £80.5 million (2019:
£153.1 million) down 47% vs 2019 and our
Group Adjusted EBITDA Less Normalised
Rent was £(10.2) million down from £48.5
million in 2019. There was a statutory loss of
£36.4 million (2019: profit of £3.6 million).
These results show the significant
operational gearing within our business
mitigated in the year only by the government
assistance and the substantial cost saving
measures implemented. We have slowed
down our rollout as a result of the pandemic,
preserving liquidity to cope with a rapidly
changing crisis. During the year we opened
eight sites, with four opened prior to start of
the pandemic and four in August once
contractors were able to resume on sites.
This brought our portfolio up to 183 sites at
year end. In addition, we completed
significant refurbishments of two of the
former easyGym sites in London at Fulham
and Oxford Street. Oxford Street in particular
will be a real flagship for our business; it
includes all the latest equipment and
showcases our new virtual group exercise
concept. In 2021 we will have three new
gyms opening in April and one further gym
in May, with four additional locations going
on-site shortly.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE
10
STRATEGIC REPORT
CHIEF EXECUTIVE’S REVIEW
CONTINUED
“ AT A N E A R LY S TA G E I N T H E C R I S I S ,
W E D E C I D E D W E W O U L D P U T S U P P O R T
O F O U R T E A M S AT T H E C E N T R E O F O U R
A C T I O N S , T O E N S U R E W E E M E R G E F R O M
T H E PA N D E M I C I N A S T R O N G P O S I T I O N ”
R I C H A R D D A R W I N , C E O
REVENUE
£80.5m
GROUP ADJUSTED EBITDA
LESS NORMALISED RENT
£(10.2)m
We remain very confident about our long
term positioning in the market. We are the
only listed health and fitness operator and
with low levels of gearing we present a
strong covenant for landlords. Our
immediate priority is to secure high quality
opportunities in locations that have
traditionally been difficult for us to find
affordable sites and we are increasingly
being offered these excellent sites by
landlords on attractive terms. In addition, we
expect to attract displaced members from
other gyms that have closed as a result of
the pandemic. The landscape has changed
significantly with around 20% of local
authority sites not reopening and further
difficulties for mid-market and premium
operators. The size of the low cost sector
has been stable in 2020 with 735 sites in
total (2019: 728 sites) but as the impact of the
pandemic recedes, we believe that the high
quality low cost operators have strong
opportunities for growth and the market will
return to expansion once again.
Strategic priorities
As we enter a recovery period, our strategic
priorities are based around two key
initiatives:
i) Rebuilding our membership
ii) Securing a high quality new site pipeline
i) Rebuilding our membership
Key to our recovery will be a strong uplift in
membership numbers, recovering the many
thousands who have left over the past year.
We are very experienced in executing plans
to grow membership numbers both in our
normal seasonal trading and when opening
new sites, and we will use this experience
over the months to come. The pandemic has
reduced our site membership on average to
the levels that sites would have reached a few
months after opening. Sites typically have a
two-year maturation profile so we now expect
that as part of the recovery, sites will need to
go through a maturation phase once more
and our success recovering from the
pandemic will be reflected in how far we can
shorten this maturation profile. Our average
price point is now £18.81 which makes us very
competitive within the low cost market and
we anticipate that this attractive price point
will underpin the recovery in membership
levels in a difficult economic environment. All
sites that were open at the start of 2020 have
lower membership levels today than before
the pandemic although not all sites have
been impacted equally; some of the city
centre sites have experienced higher levels
of membership loss and the start of their
sustained recovery period will depend on the
return to offices in the city centres.
As part of our preparations for rebuilding our
membership, we have continued throughout
this period to invest in and enhance our
technology capability and improve our
central infrastructure – this is a fundamental
requirement for operating a strong low cost
business at scale. The key development for
2021 is to build a new website which we plan
to launch in the autumn. A new website will
give us a number of advantages enabling
improved web merchandising, the ability to
create new products as well as improved
upsell and SEO capability. In 2020 we
concentrated the technology advances
around supporting the COVID operating
experience for members. Contactless entry
through the use of QR codes on our app
was introduced upon reopening – member
acceptance of this development has been
very strong. Our app has also been
enhanced to include a busyness tracker that
enables members to see how busy the
gyms are at any point in time.
I am very confident that the strength of our
technology team and their innovation will
continue to drive competitive advantage in
this area over the coming years.
We have also taken the opportunity to review
our member value proposition to ensure that
our future product is even more relevant to
our members in the post-COVID world. As
we approach 200 sites we will maximise the
benefits of product consistency across the
whole estate. Part of the work includes the
relaunch of our group exercise offer, where
a common range of classes will enable
consistent quality of delivery across the
business. We have also launched a new
virtual group exercise product in two sites,
Oxford Street and Tottenham White Hart
Lane, using online classes provided by our
partner, Fiit. The virtual content supplied by
Fiit is part of a wide ranging partnership that
also includes discounted Fiit membership to
our members available through our website.
We intend to offer a combination of virtual
and in-person content in more sites as we
extend this trial further across the estate.
ii) Securing a high quality
new site pipeline
We believe there is a compelling opportunity
for our business as the nation emerges from
the pandemic and as a result, we have been
building our pipeline even during the
periods of closure. As a result of retail
closures, we are seeing the availability of
more high quality sites at good levels of rent.
Some of the planned sites in 2021 are
locations where we have traditionally
struggled to find sites but in the current
situation are now available to us on attractive
terms, including Oxford, Cambridge and
York. Small box sites – sites of c.8,000 sq. ft.
– are also a good opportunity to accelerate
our growth; we currently have three small
box sites open with further sites planned this
year. In the future our plan is to have formats
that cover a range of sizes from large box at
16,000 sq. ft. and above to small box of
7,000-8,000 sq. ft. This flexible approach
combined with the improving property
market will enable us to cover large parts of
the country and extend our offer of
affordable fitness to as much of the UK
population as possible.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 11
“ W E ’ R E D E L I G H T E D T H E G Y M H AV E A D O P T E D
T H E S O C I A L VA L U E C A L C U L AT O R , W H I C H
U S E S 5 Y E A R S O F R E S E A R C H F R O M S H E F F I E L D
H A L L A M U N I V E R S I T Y T O M E A S U R E T H E
I N D I V I D U A L A N D S O C I E TA L B E N E F I T S
R E S U LT I N G F R O M P H Y S I C A L A C T I V I T Y.”
D R C A R O L I N E D A L T O N , T H E M E L E A D F O R L I V I N G W E L L
W I T H C H R O N I C D I S E A S E , S H E F F I E L D H A L L A M U N I V E R S I T Y
Many of our team signalled their own belief in
the prospects of the business by investing into
the employee sharesave scheme. I am
confident that the strength of the team and the
culture of the business will help to facilitate a
strong level of membership recovery once we
get the green light to reopen.
I am delighted that we have recently
welcomed to the Board Wais Shaifta and
Rio Ferdinand as Non-Executive Directors,
increasing our range of skills and experience
and bringing different perspectives. Their
appointments are indicative of our desire
to think beyond the pandemic to create a
relevant and fast growing health and fitness
brand. Their appointment will, of course,
also give a real boost to the work that we
are doing in technology, engagement and
diversity both within the business and for
our members across the UK.
ESG principles have always been at the very
heart of our strategy and development since
we started. The first site in Hounslow was
located in an area with a low income
demographic and a number of the
subsequent sites showed the same
characteristics, bringing affordable fitness to
these areas for the first time. During the last
year we have pulled together all the work we
are already doing across the business on
ESG and formulated even stronger plans for
the future. Part of this has been calculating
the social value of our business – we worked
with 4Global and Sheffield Hallam University
to assess the social value in our last
uninterrupted year of 2019. This work
shows we were creating social value of over
£0.5 billion per year from improved health
and wellbeing and fewer demands on the
NHS as a result of the workouts in our gyms.
This reinforces the importance of gyms
within the fabric of our society – particularly
in the current situation – and the need for
government to promote an active lifestyle.
We also continue to make good progress in
our four priority United Nations Sustainability
Development Goals:
i) Promoting good health and wellbeing
– we intend to publicise the social value
that our gyms bring on a regular basis
to inform the debate on the benefits of
gyms (as set out above);
ii) Good jobs, quality education and
life-long learning – this was enhanced by
the launch of a new communication and
learning platform for our employees in
the year (CORE);
iii) Diversity and Inclusion – in 2020 we
publicised our first ever D&I manifesto
setting our goals in this area; and
iv) Responsibility to the environment – we
completed our roll-out of LED lighting
and our governance arrangements were
tightened with the launch of the Health
and Safety and Wellbeing Committee
which I chair.
This is considerable progress given the year
of disruption we have experienced and in
the coming months we will invest further in
this area as well as continue to articulate the
benefits we continue to bring to members,
colleagues and the wider community.
Our business has demonstrated its strength
and resilience through the past year and
continues to do so. The vaccine rollout is
well under way and we now expect gyms
to reopen in mid-April. By concentrating
through this current lockdown on the two
strategic priorities we enter this new year
more confident and forward-looking in our
approach as opposed to just managing the
crisis. The Gym Group has a high quality
offer in great locations at an affordable price
and is well positioned to prosper in the
coming years. The benefits to the whole
nation of increased health and fitness both
in terms of physical and mental wellbeing
have been made all too obvious by
COVID-19 and our business is ready to play
a central role in helping the UK deliver on
providing that at scale.
Richard Darwin
Chief Executive Officer
18 March 2021
As the pandemic struck, we were beginning
to realise some of the benefits of the New
Gym Team model that was rolled out in 2019,
where Fitness Trainers work for us in a
part-time capacity 12 hours per week. The
model showed its worth in an additional way
during the crisis enabling us to place all
these part-time employees on furlough. This
proved to be an important source of financial
support for our team – which would not have
been available to them under the old model
– at a time when it was not possible for them
to train their clients in the gyms. As a result,
we are likely to have better retention of these
key team members as we reopen the estate.
As we move out of the crisis, we are
confident that the New Gym Team model will
continue to give us benefits in improved
member service, staff training, engagement
and levels of compliance.
The support of our teams across our estate
and in our central support has been the
highlight for me of a difficult year and
demonstrates the strength of the culture
throughout the business. It is the main
reason, along with the scale of the market
opportunity, that I am so upbeat about our
future potential. At an early stage in the
crisis, we decided that we would put support
of our teams at the centre of the actions to
ensure we emerge from the pandemic in a
strong position. We gave financial assistance
where necessary for those on furlough but
also gave clear and honest communication
about the strength of our business and its
future prospects. We have been rewarded
by good levels of retention in the reopening
period after the first lockdown, across gym
managers, Fitness Trainers and central staff.
And when difficult decisions were necessary,
such as aligning our levels of central support
to lower levels of revenue, we have been
open in explaining our decision-making.
“ W E P U B L I S H E D O U R
F I R S T E V E R D I V E R S I T Y &
I N C L U S I O N M A N I F E S T O
S E T T I N G O U R G O A L S I N
T H I S A R E A .”
R I C H A R D D A R W I N , C E O
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 12
STRATEGIC REPORT
KEY PERFORMANCE INDICATORS
R E M A I N I N G
R ES O LU T E
We use a number of 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.
NON-FINANCIAL
TOTAL NUMBER OF GYMS
+4.6%
2020
2019
2018
2017
2020 performance
The total number of sites grew by
4.6% during 2020 with eight organic
site openings, one of which was a
small box gym.
NUMBER OF MATURE GYMS
+42.2%
158
128
183
175
2020
2019
2018
2017
109
89
74
155
Definition
Mature gyms are defined as gyms
that have been open for 24 months or
more measured at the end of the year.
2020 performance
The Group’s progressive rollout
strategy means that gyms opened in
2018, along with gyms acquired from
Lifestyle in 2017 and easyGym in 2018,
are considered to be mature in 2020.
TOTAL NUMBER OF MEMBERS ’000
-27.2%
AVERAGE REVENUE PER MEMBER PER MONTH £
7.4%
2020
2019
2018
2017
Definition
Total Number of Members reflects
gym memberships at the year end.
578
607
794
724
2020
2019
2018
2017
17.20*
16.02
14.89
14.41
2020 performance
Total Number of Members has
decreased from 794,000 at
31 December 2019 to 578,000 in 2020,
despite the opening of eight sites, as
a consequence of the closures and
restrictions arising due to COVID-19.
Definition
Average Revenue per Member per
Month is calculated as revenue
divided by the average number of
members divided by the number of
months in the period.
2020 performance
Average Revenue per Member per
Month has increased by 7.4%, driven
by a £0.36 increase in average
headline price and the take-up of our
premium product, LIVE IT, increasing
to 22.5% (2019: 18.9%).
* Note that in order to provide better year-on-year comparability for yield, the
value presented for 2020 is calculated on a site-by-site basis and excludes
days where the site was required to be closed due to government restrictions.
If closed days were not excluded, the Average Revenue per Member per
Month presented would be £9.46.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 13
FINANCIAL
REVENUE £m
-47.4%
2020
2019
2018
2017
EXPANSIONARY CAPITAL EXPENDITURE £m
-29.4%
80.5
91.4
153.1
123.9
2020
2019
2018
2017
21.8
30.9
57.6
52.5
Definition
Revenue is generated from
membership fees and ancillary
services such as rental and vending
income.
2020 performance
Revenue for the year decreased by
47.4% due to lower member numbers
and periods of enforced closure as a
consequence of the COVID-19
pandemic.
Definition
Expansionary Capital Expenditure is
expenditure in relation to the fit-out of
new gyms, acquisition of gyms and
technology projects.
2020 performance
Expansionary Capital Expenditure
was 29.4% lower, mainly due to fewer
new site openings, partially offset by
the timing of supplier payments.
GROUP ADJUSTED EBITDA LESS
NORMALISED RENT £m
-121.0%
2020
-10.2
2019
2018
2017
Definition
Group Adjusted EBITDA less
Normalised Rent is calculated as
operating profit before depreciation,
amortisation, long term employee
incentive costs and exceptional items,
and after deducting normalised rent.
Normalised Rent is the contractual rent
that would have been paid in normal
circumstances without any agreed
deferments, recognised in the monthly
period to which it relates.
48.5
39.1
30.6
This is an important measure used to
assess performance of sites which is a
proxy for cash profit and is a measure
used internally and externally by
investors.
Note that this measure has been
revised since 2019. See footnote 1 on
page 144 for further details.
2020 performance
Group Adjusted EBITDA less
Normalised Rent has fallen 121.0% as a
result of the significant reduction in
revenue, partially offset by cost saving
measures and government support.
MATURE GYM SITE
EBITDA £m
-91.9%
3.9
2020
2019
2018
2017
48.1
39.0
32.4
Definition
Mature Gym Site EBITDA is calculated
as Group Adjusted EBITDA
contributed by the mature gym
portfolio.
2020 performance
Mature Gym Site EBITDA has
decreased by 91.9% as a result of the
significant reduction in revenue,
partially offset by cost saving measures
and government support.
GROUP OPERATING
CASH FLOW £m
-141.6%
2020
-16.3
2019
2018
2017
Definition
Group Operating Cash Flow is
calculated as Group Adjusted EBITDA
plus the movement in working capital
less maintenance capital expenditure.
NON-PROPERTY
NET DEBT £m
-0.2%
2020
2019
2018
2017
Definition
Non-Property Net Debt is defined as
borrowings from bank facilities less
cash and cash equivalents.
RETURN ON INVESTED CAPITAL
OF MATURE SITES %
2%
39.2
34.0
24.7
2
2020
2019
2018
2017
31
30
30
Maintenance capital expenditure
comprises the replacement of gym
equipment and premises refurbishment.
2020 performance
Group Operating Cash Flow has
decreased by 141.6% as a result of the
decrease in profitability.
Definition
Return on Invested Capital is calculated
as Group Adjusted EBITDA of the
Group’s mature organic sites, divided by
total capital initially invested in the
mature sites. This has been added as a
financial KPI as it is a useful measure to
assess the performance of the mature
sites and is a measure used internally
and externally by investors.
2020 performance
Return on Invested Capital has fallen to
2% as a result of the decrease in
profitability.
NON-PROPERTY NET DEBT TO GROUP
ADJUSTED EBITDA
-4.64x
2020
-4.64x
2019
2018
2017
0.98x
1.17x
1.23x
Definition
Non-Property Net Debt to Group
Adjusted EBITDA is defined as
Non-Property Net Debt as a
proportion of Group Adjusted EBITDA.
2020 performance
Non-Property Net Debt to Group
Adjusted EBITDA has fallen despite a
stable Non-Property Net Debt as a
result of the decrease in profitability.
47.3
47.4
46.0
37.5
2020 performance
Non-Property Net Debt was broadly
unchanged, the cash outflows from
operations and capital expenditure
being offset by net proceeds of
£39.9m from an equity placing.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 14
STRATEGIC REPORT
MARKET OPPORTUNITY
S E I Z I N G T H E
O PP O R T U N I T Y
I N T H E L OW C O S T GYM M A R K E T
The UK health and fitness
industry is subject to rapid
transformation accelerated
by the COVID-19 pandemic.
As the best capitalised
national operator in the most
resilient segment of the
market – low cost – The Gym
Group is well positioned to
take advantage of growth
opportunities that lie ahead.
In November 2020, the Chief Medical Officer,
Professor Chris Whitty, outlined the lead role
the physical activity sector will play in
supporting the nation’s recovery from
COVID-19 at the ukactive National Summit.
The Government has recognised that as a
result of the impact of COVID-19 it will have
to intensify its efforts in getting the nation
active and launched the ‘Better Health
Campaign’ in July 2020 when gyms were
first allowed to reopen in England, focusing
initially on weight loss, nutrition and activity
with a view to widening the scope in future.
Consumer demand
The Gym Group was founded amidst the
2008 financial crisis when our low cost gyms
started to offer consumers a value-for-
money alternative to traditional fitness and
leisure centres without having to commit to
long term contracts during a time of financial
uncertainty. Since then the low cost segment
of the market has been driving the growth of
the industry, making safe, well equipped and
maintained fitness clubs available to all.
It is anticipated that whilst having a short
term impact on the health and fitness sector,
COVID-19 will increase gym usage in the
medium and longer term as awareness of
Anticipated change in level of exercise after COVID-19 outbreak (% of respondents)
208
7%
14%
28%
50%
2,017
14%
6%
50%
29%
306
7%
8%
44%
BY AGE
345
9%
8%
47%
352
15%
5%
55%
347
19%
3%
53%
42%
36%
25%
25%
Exercise
+23%
Net:
18-24
+36%
25-34
+34%
35-44
+27%
45-54
+20%
55-64
+21%
459
19%
4%
61%
15%
>65
+10%
I will not do this
Less than before
Same as before
More than before
Outlook for fitness
market Strategy&
Notes: Nationally representative panel was asked Compared to BEFORE COVID-19
restrictions, how do you anticipate your participation in the following activities will change
once things return to normal? Net calculated as proportion of respondents who selected
more minus proportion who selected less. Some numbers may not sum due to rounding.
Source: Strategy & Consumer Survey
the positive impact exercise has on the
immune system and general wellbeing
increases. In an October 2020 PwC survey, it
was found that 29% of all UK consumers
said they would exercise more in the future
than pre COVID-19 compared to only 6%
saying they would exercise less. This number
was significantly higher in the 18–24 and
25–34 age groups with 50% and 42%
respectively. These age groups combined
represent 65% of our membership.
As a national market leader offering a
high-quality gym experience in well-invested
facilities at a low price we are well placed
to capture a substantial share of the
demand in the UK market, supporting our
recovery in 2021.
Industry supply
The extended periods of closure in 2020
took their toll on businesses that were
struggling prior to the pandemic and it is
evident from high-profile administrations and
closures in the sector that the number of
gyms in the UK, especially in the mid-market
and public sector, is declining. DW Fitness
sold assets of 46 sites out of administration
to Everlast Fitness/Sports Direct and closed
27 facilities in the summer. Everlast
continues to operate these gyms at
mid-market headline rates. Xercise4Less,
with 50 sites, fell into administration and was
sold to JD Gyms which closed eight sites.
The threat that publicly funded leisure
centres are facing has been widely reported
in the press with one in three at risk of
closing without further financial support by
the Government. Against this backdrop we
have continued to expand with a further
eight sites opened in 2020.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 OVERVIEW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
15
Number of low cost gyms (December 2020)
Number of UK gym members
PureGym
The Gym
263
274
175
183
énergie Fitness
JD Gyms/Xercise4Less
75
77
80
72
Sports Direct/Everlast
34
32
Trugym
Simply Gym
24/7 Fitness
easyGym
12
12
11
9
912
95
Others below
60
62
Average headline rate (December 2020)
The Gym
Xercise4Less
JD Gyms
Everlast/Sports Direct
PureGym
énergie Fitness
December 2019
Net growth in 2020
18.81
14.99
19.90
21.41
22.71
22.88
8.7
1.3
4.1
9.3
1.9
4.0
9.8
2.2
4.2
9.9
2.5
4.1
10.4
2.8
4.2
3.3
3.4
3.4
3.3
3.4
2015
2016
2017
2018
2019
Members (millions)
Public
Authority
Traditional
private
Low
Cost
24.9%
MARKET SHARE
Note: Xercise4Less and JD Gyms are predominantly located in the north of the UK; in these regions The Gym Group’s
gyms are priced substantially lower than its £18.81 national average, ensuring we are highly competitive in every local
market.
Growth potential
The stores-based retail sector had been
under pressure for some time with the
growth in online shopping, but the pandemic
has accelerated the downturn and many
once-thriving retailers have started to close
stores and have been placed in
administration. This often leaves landlords of
retail parks and shopping centres with voids
to fill and has given us access to premium
sites that are now affordable within our
business model. Our strong covenant and
12-year track record make us a preferred
choice of tenant to many landlords.
A PwC study published in February 2019 into
the total market potential for low cost gyms
estimates the overall opportunity for low cost
gyms to be between 1,200 and 1,400 gyms
by 2026. As of December 2020 we estimate
the total number of low cost gyms to be 735,
resulting in additional growth potential in the
market of 460–660 gyms.
Approximately 50% of the growth potential
identified by PwC is in markets with a
population size of 25,000–60,000 within a
10 to 15 minute drivetime which we started
to target in late 2019 and early 2020 with our
openings in Newark, Beverley and Lowestoft.
We are planning to continue to add to these
small catchment gyms in selected markets
as part of our 2021 opening programme.
“ D E S P I T E T H E D I S R U P T I O N S
C A U S E D BY T H E M U LT I P L E
G O V E R N M E N T C L O S U R E S ,
W E A D D E D E I G H T N E W S I T E S
I N 2 0 2 0 , G R O W I N G O U R
M A R K E T S H A R E I N T H E L O W
C O S T S E C T O R T O 2 4 .9 % A N D
W E A R E C O N T I N U I N G T O
B U I L D O U R D E V E L O P M E N T
P I P E L I N E F O R 2 0 21 – 2 2 .”
16
STRATEGIC REPORT
BUSINESS MODEL
AND STRATEGY
F I T FO R T H E
FU T U R E
Our unique proposition and
proven business model utilise
technology and economies of
scale to provide a great value
member experience, whilst also
delivering strong financial returns.
WHAT WE DO
MARKET-LEADING
LOW COST GYM
EXPERIENCE DRIVES
GROWTH IN
MEMBERSHIP BASE
SIGNIFICANT
ADVANTAGES FROM
SCALE-EFFICIENT
MODEL: OPERATIONS,
TECHNOLOGY,
BRAND AND
MARKETING
WITH SCALE WE
ACHIEVE STRONG
FINANCIAL RETURNS
WHICH ENABLE
REINVESTMENT TO
DRIVE FURTHER
GROWTH
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 OVERVIEW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
17
HOW WE DO IT
HIGH
QUALITY
ESTATE
COMPELLING
MEMBER
EXPERIENCE
INNOVATIVE
TECHNOLOGY
AND MARKETING
UNIQUE
TEAM AND
CULTURE
Despite the challenges of the
COVID-19 pandemic we have
continued to deliver growth
in our gym estate, adding
eight new sites, including one
small box gym.
In addition, we have
responded to the pandemic
quickly and effectively,
upgrading our entire estate
to be safe, compliant and
able to deliver a fantastic
gym experience.
Our strong covenant has
helped us further capitalise
on the current distress in the
property market, enabling
us to secure a good pipeline
of high quality sites to open
in 2021.
In a year defined by
COVID-19, our key
achievement has been
successfully innovating our
member experience to
deliver improved levels of
member satisfaction despite
the need to enforce new
restrictions.
LIVE IT penetration has
continued to rise, with 22.5%
of members subscribing to
the premium product at the
end of 2020.
We also launched a strategic
partnership with the #1 rated
fitness app, Fiit, providing
on-demand workouts to our
members at a 60% discount.
• Organic rollout
• Operational gearing
• Regulatory
• Member experience
TOTAL NUMBER OF GYMS
+4.6%
2020
2019
183
175
88%
satisfaction with measures
we have put in place to deal
with COVID-19
Continued investment into
our digital experience has
resulted in member app
adoption and usage growing
significantly. Key new
features in our app include
contactless entry to our gyms
as well as the ability to check
how busy the gym is before
attending.
Timely, open and honest
communication has been
incredibly important
throughout 2020, and our
efforts have been embraced
by members. Our innovative
‘So I can’ campaign has
continued to flourish,
adapting to changing
circumstances and delivering
topical messaging that
achieves cut-through.
• IT dependency
• Data protection
• Brand reputation
400K+
active app users across
Q3 and Q4
2020 has presented a great
opportunity for us to
re-enforce the unique values
of our business, supporting
our employees through a
difficult year and multiple
periods of gym closure.
We have invested in two new
systems; a colleague
engagement platform, CORE,
and a learning management
tool to support our
employees in developing
themselves further.
Our progress is
demonstrated through our
reassuringly strong employee
engagement measures and
our Investors in People (‘IIP’)
Gold Award.
• Attraction and retention
of talent
87%
employees agree that they
would recommend us as a
great place to work
S
E
V
I
T
A
I
T
I
N
I
0
2
0
2
N
I
S
S
E
R
G
O
R
P
K
S
I
R
S
E
R
U
S
A
E
M
E
C
N
A
M
R
O
F
R
E
P
See pages 18 and 19
for Strategy in Action
See pages 20 and 21
for Strategy in Action
See pages 22 and 23
for Strategy in Action
See pages 24 and 25
for Strategy in Action
18
THE GYM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2020
STRATEGIC REPORT
STRATEGY IN ACTION
HIGH
QUALITY
ESTATE
We have continued to grow our gym network
in a disciplined fashion, whilst investing in our
existing estate to deliver the highest standards
of COVID safety and ensure a fantastic gym
experience for our members.
COVID-SECURE GYM
ENVIRONMENT
Our response to COVID-19 has been
highly regarded by our members,
rolling out changes to our facilities
that ensure a safe and secure training
environment for all. This has been vital
in successfully reassuring members to
return to the gym whilst ensuring we
remain compliant and open.
New COVID signage
New floor markings for socially
distanced equipment
New cleaning stations
S TAY I N G
SA FE
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
19
TOP-NOTCH
FACILITIES
AND EQUIPMENT
We pride ourselves on always
delivering the highest standards of
gyms, offering a wide range of top-
quality equipment. We are constantly
looking to enhance our blueprint,
reviewing member feedback and the
latest trends to ensure we deliver the
best offering for our members. Our
rigorous maintenance regime keeps
our high quality kit in top shape for
our members whilst maximising its life.
GREAT LOCATIONS
Our strong covenant continues to be
highly attractive to landlords, giving
us access to the best sites available
in the market when very few other
companies are looking to acquire new
sites. Our disciplined approach to new
site selection ensures we always pick
prime locations, whilst remaining
flexible on the space. With the distress
in the commercial property market as
a result of COVID-19 we have been able
to build a good pipeline of high quality
sites to open in 2021.
LONDON OXFORD STREET GYM:
new functional training area
LONDON OXFORD STREET GYM:
new studio including Fiit
virtual content
CATFORD:
former Carpetright – retail park
NUMBER
OF GYMS
183
“ O U T S TA N D I N G GYM , A M A Z I N G
E Q U I P M E N T, C L E A N , M O D E R N ,
E V E R Y T H I N G YO U N E E D .”
M E M B E R , N O V E M B E R 2 0 2 0
S O U R C E : T R U S T P I L O T
20
STRATEGIC REPORT
STRATEGY IN ACTION
CONTINUED
COMPELLING
MEMBER
EXPERIENCE
Despite a turbulent year, our low cost,
24/7, no contract proposition delivered
within our friendly and inclusive gyms,
continues to break down barriers to
fitness for our members, whatever
their age, income or goal.
MEMBER SAFETY
& SATISFACTION
We track member satisfaction across each of our sites to
ensure we consistently exceed expectations. The additional
COVID measures we have introduced, along with our
relentless focus on cleaning and safety, has seen member
satisfaction increase since reopening after lockdown.
9/10 members are satisfied with the measures we have
put in place to prevent the spread of COVID-19.
COVID-safe training
S TAY I N G
A H E A D
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 INNOVATING THE
MEMBER EXPERIENCE
In addition to our compelling proposition of low cost, 24/7,
no contract gyms, we are constantly looking to evolve our
member experience. In March we launched a strategic
partnership with digital fitness brand, Fiit, providing our
members with discounted access to their #1 rated fitness
app and access to over 600 high quality, interactive
workouts on-demand.
21
INCREASED LIVE IT
PENETRATION
LIVE IT continues to grow in popularity with members,
particularly as many people start to work more flexibly
and require a gym near both home and work. In 2020
the percentage of members subscribing to LIVE IT
increased to 22.5%
MEMBERS SUBSCRIBING
TO LIVE IT INCREASED TO
22.5%
IMPACT OF COVID ON THE
HEALTH OF THE NATION
2020 has been a tough year for everyone, and to help
people to take the first step and kick-start their journey to
feeling better both physically and mentally, we offered a free
two-week, off-peak gym pass to everyone in the UK with the
Me-Set Campaign in December. The campaign was aligned
with the UK Government’s goal to make the nation more
active and has been well received by the communities
around our gyms.
“ T H E WAY I N W H I C H T H E GYM
H A S A D A P T E D A N D R E A C T E D
T O G O V E R N M E N T R E S T R I C T I O N S ,
D O I N G R I G H T BY T H E I R
C U S T O M E R S A N D M A K I N G
T H E I R GYM S C O V I D - S A F E I S
I N C R E D I B L E .”
M E M B E R , N O V E M B E R 2 0 2 0
S O U R C E : T R U S T P I L O T
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE
22
STRATEGIC REPORT
STRATEGY IN ACTION
CONTINUED
INNOVATIVE
TECHNOLOGY
AND
MARKETING
Enhancements to our digital
experience have resulted in a
significant rise in adoption of our
digital services. Our innovative and
values-driven approach to marketing
has been integral in supporting our
members throughout a difficult year
and continues to underpin rebuilding
our membership numbers.
STAND-OUT, HIGH
PERFORMANCE MARKETING
Our SO I CAN campaign continues to generate cut-through
in the market while demonstrating our values, purpose and
diversity. The agile nature of our marketing allows us to
constantly adapt our messaging to be topical and relevant.
In a year where communication with our members has never
been more important, our in-house CRM team has played
a vital role in managing the closure and reopening of gyms;
mitigating churn to maintain high membership numbers.
Their laser focus on data gives us significant opportunity
to win back lapsed members.
S TAY I N G
CO N N E C T E D
ACTIVE APP USERS
IN BOTH Q3 AND Q4.
400K+
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 ENHANCED DIGITAL EXPERIENCE:
‘How busy is my gym?’ feature
23
ENHANCED DIGITAL
EXPERIENCE
2020 has seen an increased focus and investment into
our digital capability, introducing some key new roles in our
team. New app features launched as part of our response
to COVID-19, such as contactless gym entry and a ‘gym
busyness’ tracker, have resulted in over 400,000 active
app users in both Q3 and Q4.
TECHNOLOGY AT SCALE
We continue to operate a highly scalable technology
platform, which helps us to evolve and deliver our
proposition efficiently. In 2020, we were able to automate
capacity management across all our gyms to meet the
government guidelines, guaranteeing compliance and
keeping things simple for both members and colleagues.
DATA-DRIVEN FOCUS
Data-driven insight continues to power decision making;
from pricing and promotion to retention and site location.
By using self-service reports in Workday and PowerBI, we
are able to share insightful membership and financial data
on a daily basis. Further to this, we use advanced models
and predictive analytics to model member behaviour and
financial scenarios, enabling us to take proactive decisions
to maximise performance.
S TAY I N G
CO N N E C T E D
“ O N E O F T H E F E W L A R G E
C O R P O R AT I O N S W H O C A M E
O U T O F T H E C O V I D L O C K D O W N S
L O O K I N G B E T T E R – T H E Y
D E M O N S T R AT E D E M PAT H Y A N D
U N D E R S TA N D I N G T O A L L O F T H E I R
C L I E N T S BY D O I N G T H E R I G H T
T H I N G E V E R Y S T E P O F T H E WAY.
T H A N K YO U GYM G R O U P.”
M E M B E R , N O V E M B E R 2 0 2 0
S O U R C E : T R U S T P I L O T
ACTIVE APP USERS
IN BOTH Q3 AND Q4.
400K+
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE
24
STRATEGIC REPORT
STRATEGY IN ACTION
CONTINUED
UNIQUE
TEAM AND
CULTURE
Our friendly, inclusive and ‘people centred’
culture continues to be a key part of our
success and across 2020 it has been
particularly important to put our unique set
of values at the centre of decision making.
The way in which we have supported our
colleagues through lockdown, embraced
new flexible ways of working and improved
our focus on D&I, all demonstrates why
we have retained our IIP Gold award.
‘PEOPLE FIRST’ RESPONSE
TO COVID-19
Our colleague response to lockdown focused around three key pillars;
staying connected, supporting mental health and encouraging
learning and development. We accelerated the launch of a new
colleague engagement platform, CORE, which was critical in
maintaining great communication throughout the period. We also
launched a new learning management tool, helping colleagues
develop themselves further during lockdown and subsequently
training all employees on our new COVID-safe policies and
procedures. Our value-based decision making was further
demonstrated by paying 100% of salary to all furloughed fitness
trainers. All these measures were only possible due to the rollout
of our market leading New Gym Team operating model.
S TAY I N G
T RU E
TO OUR VALUES
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 25
KICKSTART
In December 2020 we launched our involvement in the
government Kickstart scheme, providing opportunities for
16-24-year olds on Universal Credit to gain employment and
train as qualified personal trainers. We have 30 placements
under way and are looking to grow this significantly in 2021.
Not only does our scheme support young people in ‘taking
their first step’ into a fitness career, it also provides a great
opportunity to sustainably source new talent into the
business.
DIVERSITY & INCLUSION
Diversity & Inclusion are central to our brand purpose
of breaking down barriers to fitness for all. This year we
proudly launched our D&I manifesto, formalising and
bringing to life our commitment as a business. The D&I
manifesto was developed by a steering group of colleagues
across all functions and levels of the business and has
Board-level sponsorship from our Chairwoman, Penny
Hughes, to ensure it continues to be a central focus in
decision making.
EMPLOYEE ENGAGEMENT
In our quest to remain a people centred organisation, it is
paramount that we continually ask for feedback from our
employees. We have now formalised this feedback-loop,
launching our employee engagement survey in September.
The engagement score combines five critical measures
including job satisfaction, likelihood to remain at TGG
and likelihood to recommend us as a place to work.
While the focus will be on continually improving these
scores over time, our first result has set a fantastic
baseline, outperforming the benchmark set by similar
companies in our sector.
RETAINED IIP GOLD AWARD
We are proud to be a people centred organisation, putting
members and colleagues at the heart of what we do and
why we do it. The strategic initiatives detailed in this section,
along with our unique culture, have helped us to retain our
Investors In People Gold Award in 2020.
“ G AV E M E A N O P P O R T U N I T Y
T O G R O W A N D P R O G R E S S
M Y C A R E E R . G R E AT P E O P L E
A N D G R E AT C U LT U R E . O N E
O F T H E B E S T C O M PA N Y
E N V I R O N M E N T S W H E R E
T H E Y A C T U A L LY K N O W
W H AT F L E X I B L E W O R K I N G
I S A N D T R U S T E D E M P L OY E E S
T O N O T A B U S E I T.”
E X- C O L L E A G U E , N O V E M B E R 2 0 2 0
S O U R C E : G L A S S D O O R
S TAY I N G
T RU E
TO OUR VALUES
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE
26
STRATEGIC REPORT
SECTION 172 STATEMENT
S TAY I N G
E N GAG E D
some key engagement areas in 2020,
the outcomes of that engagement, and
examples of how our stakeholders’ interests
influence the way we do business. In
addition to our engagement processes,
we also receive and respond to feedback
on an ongoing basis regarding issues
relevant to stakeholders, and consider
how we can ensure they are kept updated
on issues that are relevant to them. Where
appropriate, we use this feedback to
inform content of the annual report.
The Board has reserved certain matters
for its own decision and these can be found
on page 60. For more information on Board
decision making, see page 61.
How we consider our stakeholders
Since the outbreak of COVID-19 in the
UK in March 2020, we have kept our
key stakeholder groups updated with
information regarding the actions we
are taking and how it affects them and
we have considered the interests of
stakeholder groups in our decision making
and actions throughout the pandemic.
We have included details of our stakeholder
groups, the Board’s activities in 2020 and
the outcomes of engagement in the table
opposite, including where the action
taken was related to disruption from
the COVID-19 pandemic.
WORKING
WITH OUR
STAKEHOLDERS
Board decision making
Section 172 of the Companies Act 2006
(‘s.172’) imposes a general duty on directors
to act in the way they consider, in good faith,
would be most likely to promote the success
of the company for the benefit of its
stakeholders. Our goal is to drive value for
members, colleagues and shareholders
alike. The Board believes that balancing the
interests of stakeholders with our corporate
purpose and the desire to maintain high
standards of ethical conduct is embedded
in the way we do business.
The ongoing disruption of the coronavirus
pandemic has required us to work more
closely with our stakeholders than ever, and
we have set out in the table opposite who
we consider to be our key stakeholders,
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 27
HOW THE BOARD
CONSIDERS THE INTERESTS
OF OUR STAKEHOLDERS
The Board is kept informed of
all responses received as part
of shareholder consultations by
management and the brokers.
The Board’s dividend policy can
be found on page 45.
The Board welcomes questions
from our shareholders at our
AGM. The arrangements for our
2021 AGM will be confirmed in
the 2021 Notice of Meeting.
As it relates to Remuneration,
we will continue to consult
shareholders on any future
major changes to Policy. The
Remuneration Report is on
pages 71-89.
The Board has committed to
ongoing improvements in
sustainability reporting and our
Sustainability Report can be
found on pages 30-41 and on
our website, www.tggplc.com
WHO THEY ARE AND
WHY THEY MATTER
WHAT MATTERS
TO THEM
HOW WE ENGAGED
DURING 2020
OUTCOMES OF
THAT ENGAGEMENT
SHAREHOLDERS
Our investors provide
capital for growth,
whilst providing
challenge and
feedback on our
business model and
plans for the future.
• Timely and relevant
information on
performance, and
measures taken to
mitigate the financial
impact of COVID-19
• Opportunities for
engagement with
management
• Remuneration Policy
• Information on ESG
performance
Our Executive Directors
maintain an investor relations
annual plan, consisting of:
• Meetings with our current
and prospective
shareholders;
• Presentations given to
shareholders upon the
release of annual or interim
results;
• Feedback from our joint
brokers following investor
engagement, and reports
from brokers on market
trends;
• Reporting to the Board as a
whole on investor matters;
• Preparation of investor
materials.
In 2020, the Chairwoman met
with many of our top investors
to discuss their views.
In addition, the Company’s
brokers held meetings with
investors and provided
feedback to the Board.
We provided information and
regular updates on our response
to COVID-19 to our shareholders
throughout the year, issuing
market updates and press
releases in addition to the normal
results cycle updates.
Our shareholders supported us
in the equity placing in April 2020
in which we issued a further
28 million shares. Our Board
members, including Executive
Directors, also participated in
the placing.
The Board did not recommend a
dividend for financial year 2019
and does not recommend a final
dividend for financial year 2020
as a cash preservation measure
during COVID-19.
We took swift action on
remuneration, including salary
and fee reductions, delaying
2020 long term incentive grants
(with no change to in-flight PSP
awards) and bonus deferral.
We have made further progress
in ESG reporting by producing a
Sustainability Report to GRI
Standards, which is available on
page 30.
EMPLOYEES
Our employees are
the driving force
behind our purpose
and growth. We run a
People First business
and consider our
unique team and
culture to be a vital
part of our strategy.
• Regular, relevant,
clear information
• Opportunities to
provide feedback
• Opportunities to
develop careers and
skills
• Engagement with
management
• Attractive salary and
benefits, including
participation in share
schemes
As many of our colleagues were
furloughed or changed their
ways of working, we brought
forward the launch of our
communications platform
CORE, which enabled us to
share regular information and
gather feedback.
We launched Workday Learning
to promote continued training
and provide resources for our
colleagues.
In addition to communications
tools, our Executive Committee
regularly visited our sites (when
open) to update our employees
on key changes, and to support
reopening plans and see the
COVID-secure protocols in
action.
We have implemented
employee engagement and
pulse surveys, results of which
were fed back to the Board and
action plans instigated.
In December 2020 we
welcomed the first 30 recruits
onto our Kickstart programme;
a scheme supported by the UK
Government to encourage 16-24
year-olds into new employment
opportunities and training.
Our market leading NGT model
enabled us to furlough our
Fitness Trainers when the CJRS
was in place, providing stability
for our teams.
The Board has met regularly to
consider, oversee and review
progress of People related
actions, which are set out on
pages 34-35.
All Directors visit several of our
sites each year and did so once
sites were permitted to reopen
within COVID-secure protocols
to support our teams.
We were unable to hold our
annual employee conference,
but Directors have remained in
contact virtually using our
communications platforms.
The Board appoints one of its
members as the Non-Executive
Director who is responsible for
people engagement. David
Kelly carried out this role in
2020 and Emma Woods takes
over this responsibility in 2021,
and you can find out more
about our activities in the
Directors’ Report on page 91.
Core has enabled us to launch
wellbeing initiatives to support
our teams affected by
lockdowns. We have also
trained 30 employees to
become Wellbeing champions
to provide additional support to
colleagues.
Workday Learning enables us to
provide e-learning content and
important messages to all
employees whether furloughed
or working.
The outputs of the employee
engagement surveys were
considered by the Board and
ExCo and actions identified.
We launched a further invitation
to join our Sharesave in 2020.
We were delighted that more
employees took part in the
2020 Sharesave, showing
support for the Company.
We intend to develop our
Kickstart programme to
welcome more colleagues
and offer young people
opportunities for development.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE
28
STRATEGIC REPORT
SECTION 172 STATEMENT
CONTINUED
WHO THEY ARE AND
WHY THEY MATTER
WHAT MATTERS
TO THEM
HOW WE ENGAGED
DURING 2020
OUTCOMES OF
THAT ENGAGEMENT
MEMBERS
Happy members
are what makes our
gyms successful,
and they inspire us
every day with their
achievements. They
are the best indicator
that we are delivering
fitness for all.
• A great value
experience
• Excellent service
and equipment
• Accessibility and
inclusivity
• Demonstration of
our values
• A COVID-safe
environment in
which to work out
• High levels of
business conduct and
integrity in dealing
with suppliers and
carrying out our
property
management
commitments
• Strong listed
company covenant
• Responsible tenants
• Open and clear
communication
SUPPLIERS
We believe our
partnerships ensure
we source the best
value goods and
services for the
benefit of our
members.
High standards of
ethics and business
conduct is an
important part of
being a responsible
part of the
communities in which
we operate.
COMMUNITIES
Being a valuable part
of the communities in
which we operate is
hugely important to
us; a strong
relationship between
our gyms and our
communities is
mutually beneficial.
• Be a responsible
corporate citizen
• Contribute positively
to the local
community
• Be inclusive and
accessible
• Support local and
national charities
We saw improved member
satisfaction scores when we
were open after national
lockdowns.
We provided free online classes
to members and discounted
access to FiiT during lockdown.
Our COVID-secure protocols
were developed in consultation
with the Advanced Wellbeing
Research Centre at Sheffield
Hallam University and rolled out
to all our sites.
We kept our members updated
through clear communications
in closure periods and we
offered ‘free freeze’ on
memberships so they didn’t pay
while gyms were closed.
It is a key part of our strategy
and business model to use
technology to improve the
member experience, with 2020
updates highlighted on page
20.
In 2020 we launched new
functionality in our app,
including contactless entry to
all sites, to continue to deliver a
high quality and great value
member experience.
We clearly communicate our
COVID-secure protocols on our
website and in the gyms.
Promoting wellbeing is also a
key part of our sustainability
strategy as on page 32.
We commenced close
engagement with landlords to
discuss revisions to terms and
payment schedules at the time
of national lockdowns.
Our strong, listed company
covenant continues to be highly
attractive to landlords.
We actively manage our
supplier relationships and have
worked with our major suppliers
through the pandemic to
minimise costs and disruption.
The Company has in place
whistleblowing arrangements
which enable employees to
raise concerns should they
suspect wrongdoing or
unethical conduct.
We publish our Payment
Practices Report twice a year
at Companies House.
We have received positive
feedback for our practices in
engagement with our landlords
in COVID-19 disruption – we
conducted clear and timely
discussions and demonstrated
flexibility in our approach.
We maintained helpful and
positive relationships with major
suppliers, including our
cleaning firms, equipment
suppliers, contact centre
operators and vending
suppliers who all furloughed
staff to ensure that contractual
costs were minimised.
We maintain our properties
to a high standard, maintaining
good relationships with
property management
companies and act as
responsible tenants.
Our low price model enables
fitness to be affordable for all,
and supports those accessing
a gym for the first time.
Our COVID-secure protocols
were developed in consultation
with Sheffield Hallam University
Advanced Wellbeing Centre.
We have strengthened our
diversity and inclusion actions
at all levels.
In 2020 we raised over £32,000
for Movember and over £23,000
through the online membership
join journey.
We have worked closely with
local authorities to support the
safe inspection of our gyms.
Widened our gym network to
afford access to 49.6% of the
UK population (up from 46%
in 2019).
Published our Diversity &
Inclusion Manifesto and made
progress with diversity
initiatives such as improving
data collection to support
equalities monitoring, and
actions in recruitment and
training practices.
HOW THE BOARD
CONSIDERS THE INTERESTS
OF OUR STAKEHOLDERS
We regularly review our
member satisfaction scores at
Board meetings.
Member satisfaction forms part
of our bonus targets for
Executive Directors.
Directors use member
feedback to identify ways in
which our member journey can
be improved or enhanced.
The Board has overseen the
technology developments,
receiving reports on progress of
initiatives, and considers
technology a strategic priority
for 2021 alongside rebuilding
membership, developing our
member value proposition, and
securing a high quality pipeline
of great sites for members.
The Board is committed to high
standards of ethical business
conduct.
The policies and procedures
relevant to business conduct
are available to all employees.
Executive Directors, on behalf
of the Board, have also held
discussions directly with our
lender banks and have worked
with key suppliers to develop
joint plans for the crisis.
The Board takes a zero-
tolerance approach to bribery
and corruption. It also reviews
the Company’s Modern Slavery
Act Statement annually.
The Board recognises the
importance of contributing to
wider society and considers it
a vital part of achieving
our purpose.
The Board considers the
long-term impact of its
operations as part of its
Sustainability strategy.
The Board’s policy on diversity
is set out on page 67. The Board
considers diversity to be a
focus for succession planning.
In 2020, we commissioned
4Global to calculate the Social
Value created by The Gym
Group, results of which can be
seen on page 32.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 WHO THEY ARE AND
WHY THEY MATTER
WHAT MATTERS
TO THEM
HOW WE ENGAGED
DURING 2020
OUTCOMES OF
THAT ENGAGEMENT
• Minimise the impact
of the Company’s
operations on the
environment
• Energy efficiency and
sustainable working
practices
ENVIRONMENT
We continually seek
out opportunities to
improve our
environmental
performance and to
contribute to the
wellbeing and
sustainability of the
communities in which
we operate.
During the year we have
expanded the remit of our
Sustainability Working Group
and continued to enhance
reporting.
We continue to make energy
saving improvements in our
sites, such as further rollout of
LED lighting.
Our Sustainability Report details
our environmental strategy,
activity and initiatives. This can
be found on pages 30-41.
We implemented requirements
of the Streamlined Energy and
Carbon Reporting scheme.
We launched electronic solution
to replace paper-based
process in gyms.
We purchased 100% of energy
in 2020 from renewable
sources.
Completed work on a further
23 sites to upgrade lighting
systems. 93% of our estate now
operates with full LED lighting.
LENDING BANKS
Our lending banks
provide funds for
growth and day-to-day
working capital
to enable us to
operate and grow
our business to its
full potential.
• Regular and clear
reporting that
demonstrates
company
performance is
meeting agreed
covenant targets
• Regular engagement
with management to
understand business
strategy and risks
During the year we provided
regular updates on company
performance and reported on
performance versus agreed
debt covenants.
In June 2020, as the COVID-19
pandemic developed, we
agreed an amendment to the
Group’s existing £70 million
Revolving Credit Facility (‘RCF’)
with our three lending banks:
NatWest, HSBC and Banco
de Sabadell, which extended
the RCF by incremental
commitments totalling
£30 million.
During the year we worked with
the Company’s banks on debt
refinancing and maintained
open communication
throughout the crisis and
provided information on
performance and debt
covenants.
In December 2020, to adapt to
site closures related to further
COVID-19 restrictions, we
agreed an amendment to the
terms of the RCF, extending
terms and allowing flexibility in
covenant tests.
In February 2021, the Banks
agreed a waiver of the March
2021 covenant test in light of the
ongoing national lockdown.
29
HOW THE BOARD
CONSIDERS THE INTERESTS
OF OUR STAKEHOLDERS
The Board is conscious of the
Company’s impact on the
environment and aims to take
progressive steps to continually
improve the energy efficiency
of our gyms. For more on
our responsibility for the
environment, please see
pages 30-41.
Management holds regular
meetings/calls with lending
banks during the year to enable
them to be updated on the
progress and performance in
the business.
Representatives from the
lending banks are invited to our
half-year and full-year results
presentations.
In financial plans discussed at
the Board, analysis is presented
on how plans would impact
debt covenants to ensure the
interests of the lending banks
are protected.
The Board’s annual going
concern and viability
assessment is performed with
specific reference to the level of
borrowings required under
different scenarios and the
impact of such scenarios on
debt covenants.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 30
STRATEGIC REPORT
SUSTAINABILITY
AT THE GYM
S U S TA I N A B I L I T Y
R E P O R T
I am pleased to present our
Sustainability Report for
2020. While this has been a
year of significant disruption
for our business, our purpose
and our passion have not
changed. Sustainability has
always been at the core of
The Gym Group, and these
pages set out our approach
to and actions on
sustainability through 2020
and as we move into 2021.
Our strategy and activities
are aligned with the United
Nations SDGs in several
areas, as set out in the table
opposite and described
through this report.
Our purpose is to ‘Break Down Barriers to
Fitness for All’, and fitness has a vital role to
play in the UK’s recovery from COVID-19. The
social value generated through exercise now
sits at the heart of the Government’s
investments into sport and physical activity.
Improving people’s physical and mental
health are the most established reasons for
this focus, but engaging in regular exercise
can also help individuals steer clear from
crime and improve educational attainment.
Our purpose naturally aligns us with SDG 3
– ensuring healthy lives and promoting
wellbeing for all. For the first time, the social
value generated by The Gym Group over the
past five years has been analysed; this is
explored further on page 32.
Good jobs, quality education and life-long
learning for the benefit and development of
our people remain central to The Gym
Group and, throughout the pandemic, we
have maintained our commitment to
supporting our people. For example, we
launched our communications platform,
CORE, to ensure our employees – whether
working or furloughed – remained
connected, and that they understood what
and how the business was doing. We are
glad to report on our efforts in this area on
page 34.
Although our Gender Pay Gap has increased
slightly, our gap is still low in comparison to
the national average of 15.5% in 2020 (from
Office of National Statistics), which is
detailed on page 37 and in our Gender Pay
Gap Report, available on our website: www.
tggplc.com. We continue to take action
through improvements in recruitment and
training, and through our focus on diversity
and inclusion. We have made progress in
this area by launching The Gym’s Diversity
and Inclusion Manifesto, which sets out our
commitment to celebrating diversity and
making our gyms more inclusive, accessible
places to be. Our members, as well as our
people, are key to ensuring this, and our
manifesto has been shared on our website.
You can read more about our work on
diversity and equal opportunity on
page 36.
We also acknowledge and commit to
understanding and addressing the
immediate and longer term challenges to
our business and public health posed by
climate change. We are committed to further
improving our environmental performance
and promoting the good health of our
communities through sustainable practices,
and we discuss this in detail on page 38.
In the area of charitable contributions, we
continued to partner with Movember, this
year supported by our digital fitness partner,
Fiit. Despite the restrictions of national
lockdown in Q4 2020, we raised £32,500.
Separately, over £23,000 was also donated
by members to various causes during the
joining process.
As CEO of The Gym Group, I have ultimate
responsibility for sustainability performance,
and we have strengthened our governance
arrangements with the introduction of the
new Health & Safety and Wellbeing Board
Committee, which I chair. ESG matters are
regularly discussed by the Board and its
Committees (for example, diversity matters
are considered at the Nomination
Committee). More information on our
sustainability governance is on page 36
and in our Corporate Governance Report
on page 59. This is our first full sustainability
report to be prepared to the GRI Standards
– the global standards for sustainability
reporting. Last year, we reported our
commitment to continually improve our
sustainability reporting, and we are pleased
to build on that with this significant step
to ensure our reporting is clear, accessible
to our stakeholders, and reflects our
commitment to sustainable business.
As we continue to develop our reporting,
we welcome feedback on this report and our
sustainability performance, and are happy
to continue to engage with our stakeholders
and interested parties.
Richard Darwin
Chief Executive Officer
18 March 2021
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 31
OUR PURPOSE: TO BREAK DOWN
BARRIERS TO FITNESS FOR ALL.
GOOD JOBS,
QUALITY
EDUCATION
AND LIFELONG
LEARNING
DIVERSITY
AND EQUAL
OPPORTUNITY
RESPONSIBILITY
TO THE
ENVIRONMENT
OUR FOCUS
AREAS
GOOD HEALTH
AND WELLBEING
THE SDGS WE
ADDRESS
WHO THIS
IMPACTS
MEMBERS AND
EMPLOYEES
EMPLOYEES
WHY IS IT
IMPORTANT?
We break down barriers to
fitness, which contributes to
promotion of good physical
and mental health
and wellbeing.
The safety of our members
is of paramount importance.
We operate according to
our COVID-secure operating
protocols in all our sites.
The wellbeing of our people is
vital for success and is at the
heart of our decisions.
We invest in our people, with
increased employee
engagement through new
forums and an online
communication platform for
both furloughed and working
teams, and schemes such as
Kickstart to support young
people in their fitness
careers.
COMMUNITY,
MEMBERS
AND EMPLOYEES
SHAREHOLDERS,
ENVIRONMENT
AND COMMUNITY
We make a positive
contribution to our community
by being a fair and
inclusive space.
Our Diversity & Inclusion
Manifesto sets out our
commitments to listen,
commit and act.
We continually seek out
opportunities to improve our
environmental performance
and to contribute to the
wellbeing and sustainability
of the communities in which
we operate.
To expand our reporting for 2020, we have
detailed our key focus areas in the table
above. This explains why we consider
these goals to be of material importance
to The Gym Group and how we work
to promote them within the business.
We have also included the stakeholder
groups most significantly impacted –
though naturally many of the issues are
key to several stakeholder groups.
The table also shows how our goals align
with the UN Sustainable Development
Goals (‘SDGs’). These 17 goals and
related targets to achieve by 2030 aim
to address the challenges we face as
a global society – related to health,
education, climate, environmental
degradation, poverty, and peace and
justice. Throughout this report, we show the
actions we are taking to advance societal
goals, with key SDGs and underlying
targets highlighted where relevant.
Engaging with our stakeholders
Our stakeholders are key to the success
of our business, and we engage with both
internal and external stakeholders, around
our goals, progress and performance, to
improve our reporting. We use a range
of methods to gather information about
stakeholder expectations and feedback.
See page 3 for a summary of our key
stakeholder groups and engagement
methods, and the ‘Working with our
Stakeholders’ spread on pages 26-29.
We also explore how the Board considers
the interests of stakeholder groups in
decision making and promotes the success
of the Company, with particular regard to
the COVID-19 pandemic, on pages 26-29.
Sustainability governance
We continued to hold our Sustainability
Working Group (‘SWG’) during 2020, adding
new members and expanding its remit
to include employee volunteering. The
Committee is chaired by Cornelia Woschek,
our Head of Sustainability and Business
Development, and includes representation
from the Executive Committee, through
David Melhuish, our Development Director.
The SWG draws its members from a
number of business functions to lead the
management of sustainability within the
business and with our stakeholders. The
SWG reports to the Executive Committee
which is chaired by the CEO, ensuring
that it has a Board-level reporting line.
The PLC Board shares The Gym Group’s
passion for a sustainable business and
the delivery of affordable fitness for
all. It regularly and formally discusses
sustainability and ESG matters – as
our product evolves, as the rollout of
sites progresses and as our employee
numbers expand. In 2020, the Board
established a Health, Safety and Wellbeing
(‘HSW’) Committee with direct oversight
of relevant policies and procedures.
The HSW Committee is chaired by the
CEO, and its activities, including frequency
of meetings, are set out in the Corporate
Governance Report on page 64.
Specific sustainability issues such as health,
safety and employee engagement are also
managed and overseen by issue-specific
Committees reporting into the Board or
Executive Committee as appropriate.
Reporting for the 2020 financial year
As part of our work to continually improve
our reporting, in 2019 we began the process
of adopting the Global Reporting Initiative
(‘GRI’) Standards on sustainability reporting.
This report has been prepared in
accordance with the GRI Standards:
Core option. In aligning with these global
standards, we ensure that we continue to
provide our varied stakeholders with clear,
concise information that demonstrates
how we are progressing with our material
topics. The GRI content index can be
found on our website, www.tggplc.com.
All data included in this section was subject
to internal validation and was prepared with
support from specialist consultancy Simply
Sustainable. All references to ‘this year’
in this chapter refer to The Gym Group’s
2020 financial year from 1 January to
31 December 2020, unless otherwise stated.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 32
STRATEGIC REPORT
SUSTAINABILITY
AT THE GYM
CONTINUED
G O O D H E A LT H &
W E L L B E I N G
Our strategic approach
Regular physical activity benefits both the
body and mind. According to the World
Health Organization, it can reduce high
blood pressure, help manage weight and
reduce the risk of heart disease, stroke,
type 2 diabetes and various cancers,
and increase mental wellbeing.
Our purpose at The Gym Group is to
‘Break Down Barriers to Fitness for All’.
Through the provision of affordable, high
quality, well-equipped 24/7 facilities and a
wide-ranging and growing gym network,
we are breaking down those barriers to
fitness. In doing so, we are supporting
the Government’s vision to get the nation
active. We are also directly contributing
to target 3.4 of SDG 3 – Good Health and
Wellbeing: to reduce premature mortality
and promote mental health and wellbeing.
The outbreak of COVID-19, the link
between obesity and severity of the
effects of the virus, and the importance
of mental wellbeing throughout lockdown
have further highlighted the crucial
importance of physical exercise.
Inactivity is a threat to the UK’s health with
63% of adults overweight or living with
obesity¹.
PERCENTAGE OF CASES PREVENTED
The social impact of The Gym
In 2020, we commissioned 4Global,
a UK-based data analysis company,
to determine the social impact of our
business over the last five years²,³.
Using the Social Value Model created
by Sheffield Hallam University, 4Global
developed a Social Value Calculator
including demographic data from
Experian. The model determines the
social value of regular exercise on
communities, through reduced risk of
non-communicable diseases; increased
wellbeing; increased educational attainment;
and reduced crime. This methodology
is used extensively by Sport England,
local authorities and Government.
The analysis shows that the social value
we delivered increased from £246 million
in 2016 to £553 million in 2019. Our number
of gyms almost doubled during this period,
but this was not the only driver for the
increased value; over the same period,
the average value returned by each gym
increased from £2.8 million to £3.1 million
as participation levels grew. By 2019, over
1 million individuals were completing
enough activity to elicit health and wellbeing
improvements in our gyms, generating
an average value of £490 per person.
One of the major factors in social value
generation is the socio-economic status of
our members. Those from more deprived
communities are more likely to suffer from
chronic conditions, and therefore the social
benefit to keeping these members active
will be higher than one from a less deprived
community. 32% of The Gym Group’s estate
is located in the 20% most deprived areas
in the UK – reinforcing our commitment
to tackling inactivity in underrepresented
and disadvantaged communities.
Prevention of non-communicable diseases
through exercise is one of the contributors
to social value as it significantly reduces
treatment cost and GP visits. The positive,
immediate impact exercise has on
mental health is well documented and
the fact that almost 45% of the cases we
help to prevent every year are linked to
depression confirms the importance of
making gyms accessible and affordable.
The COVID-19 pandemic has unfortunately
greatly impacted participation levels
across the physical sector and fitness
industry. Government-enforced closures
and restrictions on capacities and
activities have affected opportunities for
members to access facilities and as a
result, the social value we generated in
2020 dropped by 48%, to £287 million.
DEPRESSION 44.8%
CORONARY HEART DISEASE
& STROKE 35.7%
TYPE 2 DIABETES 13.5%
DEMENTIA 5.5%
COLON CANCER 0.3%
BREAST CANCER – FEMALES 0.2%
49%Our network of 183 operating
sites in the UK affords access
to over 49% of the population
£3.1mAverage social value
per gym pre-COVID
SOCIAL VALUE GENERATED
BY THE GYM GROUP IN THE
PAST FIVE YEARS (£M)
£1.8bn
553
416
306
246
287
2016
2017
2018
2019
2020
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 33
THE SOCIAL VALUE CALCULATOR MODEL
Volume of Participants, Frequency of Activity,
Demographics and Socio-economic Profile
SUBJECTIVE
WELLBEING
Increased Life
Satisfaction and
Happiness
EDUCATION
CRIME
Increased
educational
attainment and
Improved
starting salaries
Crime reduction
for young men
HEALTH
Reduction in
likelihood of
developing:
Heart Disease
Breast Cancer
Colon Cancer
Type 2 Diabetes
Dementia
Depression
Social Value Generated
Factors driving social value aligned with commercial value:
expansion, membership levels, visit frequency and tenure
INTERVIEW WITH RACHEL,
MEMBER OF THE GYM STOURBRIDGE
How did you cope without The Gym
during the closure periods in 2020?
When it was announced that gyms were
closing again, I actually had a little cry. We
all need our routine and I thrive on
certainty and just as I found happiness
and confidence again, it seemed like it
was going to be taken away.
However, whilst it is harder not to have the
safe environment of The Gym in the Winter
when it’s cold and dark outside, I have
been coping a bit better this time as I
turned to your free online workouts. I
usually arrange with some other members
that I met at The Gym to join the same
classes and we have a bit of a banter
afterwards online. I even got my parents
who are in their 70s to join in sometimes
and they love it – it makes us all happy!
What role does The Gym play in your
general wellbeing?
Going to The Gym is not just about having
access to great equipment for my fitness
routine, it is about having a safe and
friendly place that I go to where I am with
like-minded people. Becoming part of that
community and doing online workouts
with live instructors when gyms were
closed is essential to my health and
mental wellbeing and saved me from
having to seek professional help to get
me through these incredibly tough times.
This is a stock image as we were unable to photograph
the member due to COVID-19 restrictions
How have the pandemic and lockdowns
affected you over the past year?
From being an incredibly active person
with a demanding job and a great social
life, I went to being stuck on my own in the
house. Being at home all day, working
long hours and not seeing people really
got me down, impacted my confidence
and my mental wellbeing.
What motivated you to join The Gym
Stourbridge?
When The Gym opened in August 2020
after the first lockdown, I was so excited to
join. I found a new and exciting community
led by incredibly friendly and caring staff.
Knowing I can go to The Gym makes me
excited in anticipation. It lifts my mood
when I go and the feeling of happiness is
on an upward trajectory throughout my
workout. When I leave The Gym I feel
relaxed and nothing seems as big a
problem for me any more.
Access to the gym
Making gyms accessible is central to our
purpose at The Gym Group. Our network
of 183 operating sites in the UK affords
access to over 49% of the population4
(up from 46% in 2019). These sites have
been specifically selected to be easily
accessible, close to public transport,
with free car parking where necessary.
Our 24/7 operation allows members to
use the gym when it suits their lifestyle.
The average monthly headline rate of £18.81
makes The Gym Group the best value, high
quality proposition in the market, and with
our ‘no contract’ model, members need
only pay for the months they intend to use
the gym, further increasing accessibility.
During national and local lockdowns in
2020, we automatically froze membership
payments. Also, to ensure our members
could continue to do regular physical
activity, we provided a large number
of free online exercise classes as
well as discounted memberships to
Fiit, our digital fitness partner.
Safety at the gym
The safety of our members and staff is
at the heart of our operation and as the
business has grown, we have continued to
evolve our health and safety management
system. A clear understanding and
continuous review of our risk profile
ensures our processes are compliant and
mitigate risk, while remaining functional
and fit for purpose. Our external health
and safety auditors deliver a consistent
and transparent review of performance
at site level, including the physical safety
of equipment and the building facilities
together with audits of our wider safety and
building maintenance systems. We have
recently launched our digital health, safety
and compliance portal, which provides
central visibility of compliance as well as
advanced reporting and management data
to support us in quickly identifying and
responding to key health and safety trends.
This year, the pandemic has brought
additional safety challenges. In response,
we have implemented COVID-secure
protocols to enable our gyms to operate
safely throughout the pandemic. We
have consulted scientists from the
Advanced Wellbeing Research Centre
at Sheffield Hallam University to support
our in-depth work on preparing these
protocols to keep our members and
communities safer in our gyms.
1 Public Health England, Better Health Campaign 2020.
2 The Gym Group – Social Value 2016–2020 by 4Global.
3 Datahubclub – Physical Activity A Social Solution 2017.
4 % of adult population living within 15 minutes drive time
of a The Gym Group site.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 34
STRATEGIC REPORT
SUSTAINABILITY
AT THE GYM
CONTINUED
G O O D J O BS, Q UA L I T Y
E D U C AT I O N
Our strategic approach
Our people are our biggest asset, and we
are committed to providing a workplace
where they can thrive personally and
grow professionally. Throughout 2019,
we successfully launched and rolled
out the New Gym Team employment
model, embedded our values across the
business, and established our employer
brand. As part of this programme, several
initiatives were planned for 2020 but early
on it became clear that the year would
take us on a very different course.
“ I T ’ S T H E M O S T C O M P L E T E
B U S I N E S S T R A I N I N G F O R
P E R S O N A L T R A I N E R S I
H AV E S E E N I N T H E L A S T 12
Y E A R S … T H A N K YO U F O R
P U T T I N G T H I S T O G E T H E R ,
I T H A S T H E P O T E N T I A L
T O H E L P E V E RY P E R S O N A L
T R A I N E R T O S U C C E E D ! ”
F I T N E S S T R A I N E R
From late March, approximately 95% of our
colleagues were furloughed as gyms were
required to close in line with government
policy. Throughout this challenging period,
our priority has been supporting the
wellbeing of our people, and our People
First campaign was launched to ensure our
employees had support where and when
they needed it. The strength of our values
and culture has enabled us to support our
people effectively throughout this time.
We believe it is vital to provide regular
opportunities for our people to share
their experiences, ideas and feedback.
In September 2020, we ran our first ever
engagement survey to gain thoughts on
energy levels, recognition and our COVID-19
response. The overall engagement across
the business was 51% (SMG benchmark
across health and fitness industries across
Europe, America and Australia is 44%), and a
major positive takeaway from the survey was
the trust in the leadership and management
in dealing with COVID-19 and ensuring
people felt safe to return to work. The main
area of focus following the survey is the
motivation levels of our teams that have
been affected by furlough and the general
COVID-19 environment. A positive work-life
balance and emphasis on recognition are
key areas being implemented to support
this. Keeping Connected guidelines were
introduced in June 2020 for head office
employees to ensure that our teams could
keep connected whilst working from home.
Guidelines were introduced to support
the health, safety and wellbeing of our
teams working from home and allowances
for required furniture and technology
to ensure our teams could work from
home comfortably were provided.
Our focus on people aligns with and
contributes to the SDGs as we strive for
Quality Education (SDG 4) and Good
Jobs and Economic Growth (SDG 8),
directly in our organisation and, more
widely, through our members.
Employment
To support our employees who were
furloughed, as well as those working from
home, in March 2020 we launched a new
communications and engagement platform
– CORE – two months earlier than initially
planned. This formed part of our People First
plan, as we sought to support the mental
health and wellbeing of our teams through
increased communication. New employee
forums have also been established to
ensure employees have a vehicle to express
their thoughts, ideas and opinions about the
current situation, and all business decisions
have been made with the aim of keeping
as many people employed as possible.
During our closure period, and due to a
lack of new gym openings and a need to
consider the sustainability of our operations,
there were a small number of redundancies
in The Gym Group’s head office, in roles
related to business growth. Through the
employee assistance programme and by
assessing what roles were needed for the
future, half of the roles at risk were able to
be fully mitigated by moving the employees
to other vacant roles. Sadly, 15 people in
full-time roles were made redundant. For the
impacted group of employees, an employee
assistance programme was established to
provide people with support for their health
and wellbeing during this time, and also to
assist with practical skills such as CV writing,
interview workshops and job search support.
Training and development
To support our employees while gyms
were closed, we launched an e-learning
platform. The platform was integrated into
our core HR system, Workday, and meant
that all our employees could undertake
online learning from wherever they were
and via any device. Through this, we
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020
35
were able to train all our employees on
the new COVID-secure measures to
ensure we could keep our teams and
our members safe when we reopened.
Case study
KICKSTART SCHEME
As well as mandatory compliance and safety
e-learning modules, we also launched
a new ‘Set for Success’ Personal Trainer
programme. This is designed to support our
Fitness Trainers so they can build effective
businesses and increase their client base.
So far, 34% of our Fitness Trainers have
completed the programme and feedback
has been very positive. We are continuing
to expand this and are collecting thoughts
on further areas of improvement.
Reward and recognition
As part of CORE, a reward and recognition
scheme (‘Your Personal Bests’) was
launched in July 2020. This allows for
peer-to-peer e-card recognition. Since
the launch in July, 1,600 peer-to-peer
e-cards have been sent, with 80% of all
employees receiving a recognition moment
from their peers. We also introduced
Spotlight awards, given by the Executive
Committee team to reward exceptional
performance, which have a monetary
value attached. Both initiatives have been
extremely popular with our employees.
Throughout 2021, we will refocus on our
Coaching for Performance programme,
which supports transparency in progression
paths, promotions and pay reviews.
Human rights, anti-bribery and
anti-corruption
We conduct our business honestly and
ethically wherever we operate. We recognise
the risks of modern slavery and take active
steps to assess and manage them. We
comply with the Modern Slavery Act and
our statement, including further information
on our activity to mitigate risks related
to modern slavery, can be found on our
website: www.tggplc.com/modernslavery.
We take a zero-tolerance approach to
bribery and corruption and are committed
to implementing and enforcing effective
systems to prevent and detect bribery
and corruption. We have an Anti-Bribery
Policy, which is available to all employees
via our intranet. We do not consider bribery
and corruption to be a principal risk to our
Company because we only operate within
the UK and have a low level of discretionary
spend due to our fixed cost base.
We are not aware of any business
relationships in place which are likely to
have an adverse impact on human rights,
anti-bribery or anti-corruption matters.
No such matters have been identified
under the Anti-Bribery Policy to date.
For the initial cohort of 30, we received
around 900 referrals, and following a video
screening and interview stage, we offered 30
roles to begin in December 2020, with a
further 11 on hold until more roles are
approved by the Government. We have
recently had our application approved for a
further 120 Kickstart Fitness Trainees for
2021, which we will introduce in a further
three cohorts.
We are also taking our commitment one step
further than required by the scheme, and
reinvesting the government grant into each
individual to ensure they are all Level 2 and
Level 3 Personal Trainer qualified, First Aid
trained, and have full Personal Trainer
insurance – so that they are set up to
succeed in their own business on completion
of the scheme. At the end of the six-month
placement, we envisage these young people
will transition into an employed Fitness Trainer
role with The Gym Group.
As soon as gyms reopened, we applied to
the Government’s Kickstart scheme to
recruit 30 new Kickstart Fitness Trainee
roles. The scheme provides funding to
employers to create job placements for
16–24-year-olds on Universal Credit who are
at risk of long term unemployment.
JOANNA GOODHEAD, KICKSTART FITNESS
TRAINEE, TELLS US WHY SHE APPLIED FOR
THE SCHEME AND WHAT ADVICE SHE HAS
FOR OTHER KICKSTART COHORTS
experience better but you will be a more
attractive employee. Even if Personal
Training isn’t your chosen career, the six
months will provide you with invaluable skills
and experiences that are transferrable to
your dream career.
“ T O A N YO N E T H I N K I N G O F
J O I N I N G F U T U R E C O H O R T S
– I W O U L D S AY J U S T G O
F O R I T ! ”
J O A N N A G O O D H E A D
Having completed my coaching
qualification and a coaching placement at
University I always knew that some form of
coaching was what I wanted to do in the
future, and I love the satisfaction you get
when others achieve their goals. Fitness has
always played a big role in my life and I
have always taken a lot of time in my
activities.
So I started to look into getting my Personal
Trainer qualification. I found lots of
companies that offered it but due to the
pandemic, it was all online with very few
practical elements. So when my work coach
from Universal Credit suggested I look at
The Gym Group Kickstart Fitness Trainee
role and what The Gym were offering, it
seemed very attractive as it included both
the theory and practical elements of being
a Personal Trainer. As soon as I had finished
reading the job description, I knew that it
was a role I wanted to apply for and had
everything crossed I would be successful!
To anyone thinking of joining Future Cohorts
– I would say JUST GO FOR IT! However, be
prepared to work hard – ‘you get out what
you put in’. If you throw yourself into the
working environment and ask lots of
questions, not only will you enjoy your
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE
36
STRATEGIC REPORT
SUSTAINABILITY
AT THE GYM
CONTINUED
D I V E R S I T Y & E Q UA L
O PP O R T U N I T Y
Our strategic approach
Diversity and inclusion are crucial to our
culture, our values and our behaviours.
As our business continues to grow, we
are committed to nurturing a diverse
and inclusive culture, both for our
members and our employees. This
commitment is fundamental to achieving
our purpose of ‘Breaking Down Barriers
to Fitness for All’ and ensuring that The
Gym Group is a place for everyone.
Throughout 2020, and led by our Diversity
& Inclusion Strategy, we have focused
our actions on three core pillars:
Through this strategy, we seek to align
and contribute to the SDGs, particularly
by promoting SDG 5 – Gender Equality,
and SDG 10 – Reduced Inequalities.
We recognise the importance of
collaboration and we remain active
members of Women in Hospitality, Travel
and Leisure, regularly contributing to cross-
industry discussions and initiatives. In July
2020, we also became proud signatories
of the Business in the Community Race
at Work Charter, committing to its five
calls-to-action for businesses to prioritise
action on race and improve equality
of opportunity in the workplace.
Inclusion at The Gym Group
A key focus in 2020 has been improving
the quality of our data insights to better
understand our workforce demographic,
in line with the first pillar of our Diversity
and Inclusion Strategy. Through a data
collection drive, we have successfully
enhanced the accuracy of our equal
opportunities monitoring. We have also
developed a diversity and inclusion
dashboard, which enables us to assess
and regularly review our progress in the
attraction, progression and retention of
diverse talent at The Gym Group. Through
this work, we have been able to identify
key areas in need of improvement.
INSIGHTS
– to understand
our workforce
demographic.
TALENT
– to ensure we attract,
develop and retain
a diverse workforce.
CULTURE
– to embed our
diversity, equality and
inclusion initiatives.
This year, our Chairwoman Penny Hughes was identified
as an Advocate for Change within Women in Hospitality,
Travel and Leisure, as an acknowledgment of her
commitment to driving change and promoting equality,
inclusion and diversity.
Our recently formed Employee Diversity
and Inclusion Group, led by our Chief
Commercial Officer and Executive sponsor,
Barney Harrison, has played a crucial role
in raising the agenda for discussions and
positive action on diversity. Throughout the
year, the Group ran an ongoing series of
internal podcasts focusing on topics such as
International Women’s Day and Black History
Month. This has evolved into a valuable
platform to celebrate the achievements and
experiences of our diverse workforce, and
to encourage conversations about diversity.
At the end of 2020 we launched our
Diversity & Inclusion Manifesto, outlining
The Gym Group’s stance on inclusion
and building upon the culture we have
and continue to nurture. The manifesto
provides transparency for our employees,
members and all those who interact with
The Gym Group on our commitments
DIVERSITY
BOARD1
BOARD
1
1. MALE: 5
71.4%
2
2. FEMALE: 2
28.6%
1 Includes two Executive Committee Directors.
EXCOEXCO
1
SENIOR LEADERSHIP TEAM
SENIOR LEADERSHIP TEAM
1
ALL EMPLOYEES
ALL STAFF
1
2
1. MALE: 5
83.3%
2. FEMALE: 1
16.7%
2
1. MALE: 32
76.2%
2. FEMALE: 10
23.8%
2
1. MALE: 1,406
72.6%
2. FEMALE: 530
27.4%
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 37
Gender pay gap
The fitness industry has historically
struggled to attract women. Through our
Diversity & Inclusion Manifesto and Pledge,
brand awareness, improved standardised
recruitment practices, unconscious bias
training and targeted recruitment strategies,
we will strive to break down this barrier.
Our mean gender pay gap has increased
this year, as we have seen more men than
women in senior roles, which attract a higher
salary. Our median gender pay gap has
reduced as we now employ over 1,200 more
Fitness Trainers, who are all paid the same
hourly rate.
April 2019 April 2020
Mean gender pay gap
2.0%
5.48%
Median gender
pay gap
Mean bonus gender
pay gap
Median bonus gender
pay gap
11.7%
0.00%
37.4% 46.93%
37.1%
27.25%
Although our Gender Pay Gap has increased
slightly, our gap is still extremely low in
comparison to the National average of 15.5%
in 2020 (from Office of National Statistics).
Wellbeing
As a ‘people-first’ business, the health and
wellbeing of our employees remain a key
priority. This year we focused on raising
awareness of mental and physical wellbeing
and providing the required support to those
who need it. Our Wellbeing Strategy, led by
our Chief People Officer, Ann-marie Murphy,
focuses on four key areas:
• Prevention
• Development of Health and Wellbeing
Champions
• Leadership
• Expanding our vocational health offering.
In addition to our Employee Assistance
Programme, which provides a 24/7
telephone counselling service, we have
already taken the first step towards
enhancing our Wellbeing Programme by
investing in increasing our number of
qualified Mental Health First Aiders. In the
last quarter of 2020, we have increased the
number from three to 30. These Wellbeing
Champions provide additional support and
signposting, should employees have
concerns over their mental wellbeing. We
also have a new Wellbeing Hub, which
provides employees and managers with
additional support through access to online
mental wellbeing toolkits, robust Wellness
Action Plans, training resources and further
guidance.
OUR NEW D&I MANIFESTO
to improving diversity, inclusion and
equality within the business, how we
aim to achieve this, and the individual
responsibilities in championing this.
Our Executive Committee have pledged
their personal commitment and
accountability to this agenda by signing
The Gym Group Equality, Diversity &
Inclusion Pledge, which sets out the
principles, ambitions and targets for 2021.
We state our ambition to meet the following
targets which will be reported monthly
to the Board of Directors for review, and
as an Executive Committee team we will
constantly review the data and work to
understand the insights behind it. We will
review current employee and hiring targets
for all populations. If in 2021 we are unable
to achieve any of the targets below, we will
explain why as part of our Equality, Diversity
& Inclusion Plan and the 2021 Annual Report.
These are short term goals and by the
end of 2021 we aim to have a minimum:
SENIOR LEADERSHIP
TEAM DIVERSITY
20%
of the population will be from
a culturally diverse heritage
25%
of the population will be female
GYM OPERATIONS
DIVERSITY
30%
of the population will be from
a culturally diverse heritage
30%
of the population will be female
RECRUITMENT
We will aim for female and
culturally diverse new hires to
represent the diversity targets.
Where possible, diverse shortlists will
be provided for all interview panels.
The D&I Manifesto clearly sets out our commitments to creating a more diverse and
inclusive workspace here at The Gym Group and the actions we are taking to achieve
this. We want to ensure that The Gym Group is a place where everyone is welcome,
accepted for who they are and has equal opportunities to succeed.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 38
STRATEGIC REPORT
SUSTAINABILITY
AT THE GYM
CONTINUED
R ES P O N S I B I L IT Y TO TH E
ENV I RONM ENT
Our strategic approach
We recognise that climate change is
an important global challenge, and we
support the commitments made by the UK
Government to keep global temperature
rise well below 2OC and achieve net zero
carbon emissions by 2050. Clearly, meeting
this commitment will require all sections
of the economy to work together, and we
support the UK’s Net Zero Strategy and Ten
Point Plan for a Green Industrial Revolution.
We believe in taking a proactive, strategic
approach to environmental management,
and we strive to be at the forefront of best
practice within the health and fitness sector.
As well as reducing our carbon emissions,
we are also fully committed to reducing
waste from our operations and increasing
the efficiencies of our gyms. As our growth
continues and we open more gyms, we aim
to continue to reduce our carbon emissions
and environmental impact through the
energy-efficient design of new sites as well
as investment into the existing estate.
Our commitment to the environment is
a significant way in which we align and
contribute to the SDGs. In particular,
our efforts to procure renewable energy
and increase the energy efficiency of
our gyms align with SDG 7 – Affordable
and Clean Energy; our efforts to reduce
waste align with SDG 12 – Responsible
Production and Consumption; and
our approach to reducing our carbon
emissions aligns with SDG 13 – Taking
Urgent Action to Combat Climate Change.
The pandemic has significantly impacted
our business, with gym closures in line
with government policy and fewer new site
openings than planned. Throughout this
period, we have continued our commitment
to the environment, and from March to
July when gyms were closed, we ensured
energy and water consumption was at a
minimum across our sites. As our gyms
reopen, and as a result of the additional
safety measures we have introduced to
protect our people and members, we are
facing new challenges. Specifically, we
have seen an increase in site-level energy
consumption due to increased ventilation
requirements, and an increase in waste from
cleaning materials. We are actively exploring
how to reduce this impact while continuing
to keep our people and members safe.
Climate and carbon
The world is facing a critical moment in
tackling climate change. As a multi-site
operator with 183 gyms across the UK, we
have a responsibility to minimise the impact
of our operations. Our most significant
environmental impact comes from energy
use in our gyms. As such, the single biggest
improvement we can make is through
the procurement of renewable energy.
We are proud to have purchased 100%
renewable power since October 2019*
for all of our sites where we control the
purchase of energy. In doing so, we are
directly contributing to SDG target 7.2
(‘By 2030, increase substantially the
share of renewable energy in the global
energy mix’). The 2020 renewable fuel
mix of our power supplier, as certified
by EcoAct, is illustrated opposite.
1 We operate 21 sites (11% of the estate) where electricity is
provided centrally by the respective landlord and we do
not have purchasing control over the energy supplier
and contract type.
2 Fuel mix disclosure statement by Haven Power (our
supplier) for 12 months ending 31.3.20, verified by EcoAct.
Our REGOcertificate can be found at tggplc.com
100% OF
ELECTRICITY
SUPPLIED BY
RENEWABLE
SOURCES1,2
BIOENERGY
47.8%
WIND
32.7%
PHOTOVOLTAIC
11.7%
HYDROPOWER
7.8%
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020
39
Our renewable energy certificates are
available on our website: www.tggplc.com
As part of our environmental strategy, we
monitor energy consumption at each of our
sites and minimise it to make our buildings
as efficient as possible. In 2020, we
implemented the requirements of the
Streamlined Energy and Carbon Reporting
(‘SECR’) scheme. As part of this process, we
have undertaken quarterly progress reviews,
allowing us to identify and act on
opportunities for increased efficiencies.
We also continued with our programme of
upgrading our lighting systems to high-
efficiency LEDs, completing work on 23 sites
during the year. 93% of our estate now
operates with full LED lighting. (COVID-19
lockdowns prevented us from completing
the whole estate in 2020; we plan to
upgrade the remaining sites in 2021.)
We recognise that we have more to do to
reduce our emissions, and in 2021 we will set
long term, ambitious targets to reduce
carbon emissions in line with global climate
science and the UK Government’s Net Zero
Strategy. We also acknowledge the
immediate and longer-term challenges to
our business posed by climate change, and
we are committed to understanding and
managing these risks. In 2021, we will
conduct a climate change materiality and
risk assessment in line with the Task Force
on Climate-related Financial Disclosures
(‘TCFD’) requirements, to identify key
physical and transition risks and
opportunities to our business operations,
and to consider appropriate mitigation
measures.
We will also commence site-level
energy audits in 2021 to provide insight
into consumption variations across the
estate and identify opportunities for
energy-reduction programmes.
Greenhouse gas emissions
Greenhouse gas (‘GHG’) emissions for
the year ended 31 December 2020 have
been measured as required under the
Large and Medium-sized Companies
and Groups (Account and Reports)
Regulations 2008 as amended in 2013. The
main activity which releases GHG is the
purchase and use of gas and electricity
to power our gyms. We have used the
GHG Protocol Corporate Accounting and
Reporting Standards (revised edition) and
data gathered to fulfil the requirements
under the CRC Energy Efficiency
scheme, to calculate the disclosures.
In previous years we have published an
intensity metric of tCO2e per trading gym,
due to the continued growth of the business.
However, 2020 emissions have been
significantly impacted by COVID and
extended closure periods have reduced
our overall energy consumption. For
consistency we have presented 2020 data
with the same intensity metric but, for fair
and balanced reporting, we have included
a second metric, tCO2e per million member
visits, to account for the time the business
was closed and the occupancy restrictions
that have been imposed. Member visits
and building occupancy are key drivers of
energy consumption and representative
of the intensity and use of our facilities.
Emissions per gym have decreased
due to the extended closure period
whilst emissions per member visit have
increased from the previous year due to
the occupancy restrictions in place.
TOTAL EMISSIONS & INTENSITY METRICS
14,000
12,000
10,000
8,000
6,000
4,000
2,000
400
350
300
250
200
150
100
50
2017
2017
2018
2018
2019
2019
2020
2020
Total emissions
Intensity metric tCO2e per million member visit
Intensity metric1 tCO2e per gym
We have also presented data of total
consumption in kWh and transportation
which is generated by business journeys
undertaken in personal vehicles.
Year ending 31 December
TOTAL EMISSIONS (tCO2e)
BASE YEAR
2017
2018
2019
2020
TOTAL
CONSUMPTION (KWh)
2018
2019
2020
Scope 1 (Gas)
Scope 2 (Electricity)
Scope 2 (Heat)
Scope 3 (Transport)
8,710,907
10,602,020
11,071,196
28,777,288 34,409,373 25,272,315
18,405
263,430
10,907
Total (kWh)
39,379,308
45,491,476 34,265,057
Direct Emissions
from Operation (Scope 1)
Indirect Emissions
from Energy Usage (Scope 2)
Indirect Emissions
from Heat Purchased (Scope 2)
Transportation (Scope 3)
1,267
1,950
2,035
1,602
8,023
8,841
9,542
5,892
–
–
–
–
2
–
3
62
Total Emissions
9,290
10,791
11,579
7,559
Intensity Metric1 (tCO2e per gym)
% Change from base year
Intensity Metric (tCO2e per
million member visit)
80
–
70
-13%
65
-19%
41
-49%
348
304
248
307
% Change from base year
–
-13%
-29%
-12%
1 Includes any gym open at any point during the year.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 40
STRATEGIC REPORT
SUSTAINABILITY
AT THE GYM
CONTINUED
Waste
Eliminating waste and improving our
recycling rates is an important area of
focus and we encourage our members
and colleagues to take an active role in
this. Our waste generation is limited to
that brought onto the premises by our
members and cleaning materials, as
we do not directly operate any food or
beverage facilities* and only have a limited
offer for consumption through vending
machines. In 2020, we introduced an
electronic solution to replace all paper-
based processes for staff in our gyms and
we will see a benefit in waste reduction
and the use of printer cartridges in 2021.
As a result of the additional safety
measures we have introduced to protect
our people and members from COVID-19,
we have unfortunately seen an increase
in general waste generated at our
sites, mainly relating to the introduction
of intensive cleaning regimes.
Throughout this period, we continue
to actively explore how to reduce our
impact while keeping our people and
members safe. For example, we have
provided our members with paper towels
‘Blue Roll’ and sanitiser spray rather than
antibacterial wipes, as this is more easily
recyclable or sent for energy generation.
Water
The use of water at our sites is confined
to typical shower, toilet, washbasin and
cleaning requirements. All taps and showers
are either non-concussive or electronic for
timed operation, reducing misuse and waste.
Prior to the pandemic, we operated
a small number of saunas and steam
rooms, located in gyms we had recently
acquired. These were closed due to
COVID restrictions and are being fully
decommissioned. One remaining installation
will be evaluated during the course of
2021 to determine if it should reopen.
We have never operated any swimming
pools or other similar ‘wet’ facilities.
During 2020, we trialled a revolutionary
toilet cistern at our new gym in Beverley,
which uses condensate from the air
conditioning units for flushing. This award-
winning product is continually topped up
with water produced by the air conditioning
system which would normally have gone
443
tonnes
of total waste removed
from our sites during 2020
90%Proportion of waste
diverted from landfill
We also found that single-ply sheet was
suitable and reduced the volume of
paper used, and sourced coreless rolls,
which do not require cardboard inserts.
While we have seen a 13% decrease in the
total weight of waste for the year, and a
reduction from 4.3 to 3.5 tonnes per site, we
were only open for approximately 55% of
our expected trading time. For the three full
operating months after reopening (August,
September and October) we saw the total
waste collected increase by over 90% due
to the additional cleaning materials required
to keep our gyms COVID-secure. The total
waste removed from our sites during 2020
was 443 tonnes and the proportion of waste
diverted from landfill was 90% for the year.
LANDFILL DIVERSION 2020
Landfill 10%
Recycled 54%
Energy from waste
incineration 34%
Anaerobic
digestion 2%
* There are small cafes run by private third parties
operating from two of our gyms.
* The Gym Group had direct responsibility for waste
removal at 128 operating sites in 2020 (70% of our
estate). Data is provided from this cohort. At our
remaining sites, waste collection is the responsibility of
the respective landlord or local authority and we are not
provided with waste data. Landfill diversion is based on
overall waste depot performance.
directly to the drain, reducing the amount
of mains water required for each flush. We
are now installing this unit in all new sites.
We will commence site water auditing
during 2021 to provide insight into
consumption variations across the estate,
to identify wastage, and to initiate a
monitoring and targeting programme.
Historical water consumption data is
not sufficiently accurate for reporting;
however, we now have systems in place
to collate water data and plan to report
on water consumption moving forward.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 Case study
LOW CARBON GYM
Beverley is the location
of one of our first ‘small box
gyms’, which enable us to
open in towns that would
previously have been
considered too small
for our operation. As well as
developing a model to meet
the needs of the members
and delivering affordable
fitness, we took the
opportunity to incorporate
energy and water-saving
measures to make this
gym one of the most
environmentally friendly we
have opened. Some of these
initiatives are outlined here.
We now have three small
catchment gyms – Newark,
Beverley and Lowestoft –
and we will be rolling out
more sites in 2021.
41
Ventilation
Gyms require plenty of clean fresh air for the
exercise that’s going on inside, as well as
removing the stale air that’s generated by it.
To keep it fresh, we don’t recirculate any of
the air from the gym, but instead of throwing
away the energy we’ve used to heat or cool
the air from outside, we run it through a
‘plate heat recuperator’, to bring the outside
air in line with the temperature inside, with
up to 85% temperature efficiency. The
fans are direct drive using high-efficiency
permanent magnet EC motors, which are
in a class of their own and allow stepless
control of the airflow and therefore power
during periods of low occupancy.
Air conditioning
Our gyms are always fully air conditioned
and we use the latest advanced, high-
efficiency air conditioning systems. As we’re
open 24/7, we need to keep close control
of our operations to make sure we’re not
wasting our energy. The system at Beverley
has a sensor on every unit, which scans
the room to detect exactly how many
people are in the space and switches off
the air conditioning when it’s not needed,
while ensuring the empty room isn’t too
hot or cold for the next occupant. The air
conditioning control system also offers full
online reporting of both live and trending
power consumption and provides us with
full maintenance reports and alerts.
Hot water
The hot water provided to the showers and
basins is generated by an air sourced heat
pump connected to the air conditioning. By
absorbing the heat created from cooling the
gym and converting it into hot water for the
showers, the heat pump removes the need
for a gas supply, further lowering the carbon
footprint of the site. The high-efficiency
showers also result in lower hot water
consumption and therefore energy demand.
Water
The showers have automatic flow rate
regulation at the showerhead, and
timed operation, providing an 80% water
saving in comparison to conventional
lever control, without compromising
the shower experience. Taps are ‘non-
concussive’ (self-closing) and require
no external power source, delivering a
timed flow of water and avoiding waste.
We have also installed a revolutionary toilet
cistern that uses condensate from the air
conditioning units for flushing. This award-
winning product is continually topped up
with water produced by the air conditioning
system that would normally have gone
direct to the drain, reducing the amount
of mains water required for each flush.
Lighting
All of the light fittings in Beverley are high-
efficiency LEDs, including the external
signage. They are also installed to allow
50% of the lights to be switched off
automatically during overnight periods, even
when operating 24/7. All individual rooms
also have infra-red detectors to switch
lighting off when rooms are not occupied.
50%
of the lights are switched off automatically
during overnight periods, even when
operating 24/7
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 42
STRATEGIC REPORT
FINANCIAL REVIEW
S T RO N G TO
TH E CO R E
Summary
2020 has been a challenging year for
everyone, including The Gym Group, but we
ended the year as a strong, well-capitalised
business in a sector that will be at the heart
of the nation’s recovery from the pandemic.
The Group lost 45% of the trading days in the
year due to closures as a result of
government restrictions relating to COVID-19,
with revenue declining by 47.4% to £80.5
million (2019: £153.1 million). During the year,
and especially in the periods of closure, we
have taken a number of actions to reduce
costs to mitigate the impact of the lost
revenue. We received £16.0 million of support
from the UK Government in the form of
business rates relief and furlough payments.
Despite these measures, Group Adjusted
EBITDA less Normalised Rent declined to
£(10.2) million (2019: £48.5 million).
Our focus during the year has been to
manage cash, ensuring we entered 2021
with a good level of liquidity. Capital
expenditure was reduced from Q1 onwards
as the first lockdown arrived; however we
continued to invest in technology throughout
the year, which will be central to our recovery
and future growth, and we opened eight new
sites, taking our total estate to 183 gyms. In a
further measure to protect cash during the
first lockdown, we entered into rent deferral
agreements with landlords, deferring a total
of £9.4 million of rent payments in the first
half, of which £5.7 million was repaid by the
end of the year, with the remaining £3.7
million expected to be repaid in 2021.
Our liquidity was strengthened by the raising
of £39.9 million of net proceeds via an equity
placing in April and the extension of our
banking facilities from £70.0 million to £100.0
million in June, alongside improved flexibility
in our bank covenants. As a result of the new
funding and the careful management of
cash we ended 2020 with a similar level of
net debt as we started the year, with
Non-Property Net Debt of £47.3 million
(December 2019: £47.4 million).
This Financial Review uses a combination
of statutory and non-statutory measures
to summarise 2020 performance. See
page 12 for the definitions of the Key
Performance Indicators.
“ 2 0 2 0 H A S B E E N A C H A L L E N G I N G
Y E A R F O R T H E G R O U P B U T
W E E M E R G E A S A S T R O N G,
W E L L - C A P I TA L I S E D B U S I N E S S .”
M A R K G E O R G E , C F O
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 43
Total number of gyms at end of period
Total number of members at end of period (‘000)
Revenue
Group Adjusted EBITDA*
Group Adjusted EBITDA less Normalised Rent*
Group Adjusted EBITDA less Normalised Rent and before
Pre-Opening Costs*
Adjusted (Loss)/Profit Before Tax*
Adjusted Earnings*
Group Operating Cash Flow*
Free cash flow
Statutory (loss)/profit before tax
2020
£’000
183
578
80,470
16,810
(10,169)
(9,850)
(46,525)
(35,999)
(16,282)
(16,544)
(47,192)
2019
£’000
1751
794
153,134
74,453
48,540
49,715
13,969
10,574
39,178**
32,282**
6,219
Revenue
For much of the year, with gyms closed, we
had significant periods with no new member
acquisition but we continued to see
cancellations. As a result, we ended the year
with 578,000 members, a decrease of 27.2%
compared with the closing membership
level in December 2019. The average
membership level across the 12-month
period fell by 11.1% to 708,000 (2019:
796,000). In addition to the reduction in
subscription income, we also lost ancillary
income (e.g. vending) during the closures
plus revenue from the rent paid to us by our
Fitness Trainers.
1 Excludes three gyms closed in 2019 as previously announced; two sites acquired from the Lifestyle Fitness and
easyGym acquisitions plus one site opened in 2015 for which a five-year break clause was exercised by the Group.
* Refer to page 144 for the definitions of the non-Statutory Key Performance Indicators.
** Refer to note 5 of the Consolidated Financial Statements for details of the restatement of maintenance capex.
Result for the year
Revenue
Cost of sales
Gross profit
Other income
Administration expenses excluding exceptional items
Exceptional administration items
Operating (loss)/profit
Finance income
Finance costs
Exceptional finance costs
(Loss)/Profit before tax
Tax credit/(charge)
(Loss)/Profit for the year
(Loss)/Profit before tax
Amortisation of non-IT intangible assets
Exceptional administration and finance expenses
Remeasurement of borrowings
Adjusted (loss)/profit before tax
Tax credit/(charge)
Tax effect of above items
Adjusted Earnings
Operating (loss)/profit
Depreciation of property, plant and equipment and impairment
Amortisation of intangible assets
Exceptional impairment of property, plant and equipment
Exceptional impairment of intangible assets
Exceptional administrative costs
Long term employee incentive costs
Normalised Rent
2020
£’000
80,470
(2,116)
78,354
427
(111,574)
(1,122)
(33,915)
6
(13,283)
–
(47,192)
10,824
2019
£’000
153,134
(1,437)
151,697
–
(124,036)
(6,086)
21,575
32
(14,902)
(486)
6,219
(2,624)
(36,368)
3,595
(47,192)
860
1,122
(1,315)
(46,525)
10,824
(298)
6,219
1,178
6,572
–
13,969
(2,624)
(771)
(35,999)
10,574
2020
£’000
(33,915)
45,169
3,765
1,606
1
(485)
669
(26,979)
2019
£’000
21,575
41,778
3,114
–
–
6,086
1,900
(25,913)
Group Adjusted EBITDA less Normalised Rent
(10,169)
48,540
In the periods of government-enforced
closure – comprising 45% of trading days in
the year – we earned close to zero revenue
as we immediately ‘froze’ members’
accounts so they did not pay their
subscription while gyms were closed. In the
periods when gyms were open, lower levels
of overall membership meant that monthly
revenues were significantly lower than
normal.
In the periods when we were trading with
gyms open, we were able to maintain a good
yield per member; average headline prices
increased by £0.36 to £18.81 (2019: £18.45)
and the take-up of LIVE IT continued to
increase with 22.5% of the membership
having this premium product at the end of
the year vs 18.9% at the end of 2019.
As a result of these factors, revenue for the
year decreased 47.4% to £80.5 million (2019:
£153.1 million).
Operating costs including the benefits
of government COVID-19 initiatives
Site costs, including Normalised Rent and
excluding exceptional expenses, decreased
to £77.7 million (2019: £90.3 million) as a
result of the gyms being closed for
significant periods in the year. Central
support office costs remained flat at
£13.0 million (2019: £12.7 million) but this was
smaller than originally planned for the year;
an investment in people and technology that
would otherwise have increased costs
year-on-year, was offset by savings from
furloughed staff during the period of gym
closures and from an internal restructuring
programme in June which resulted in a 22%
reduction in central headcount.
Immediately after the closing of our gyms on
20 March 2020, and in the subsequent
periods of lockdown in the second half of
the year, we implemented a number of cost
reduction initiatives to ensure operating
costs were reduced as far as possible while
the gyms were closed.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 44
STRATEGIC REPORT
FINANCIAL REVIEW
CONTINUED
Mitigating actions to reduce costs
During periods of gym closure we were able to
reduce the estate’s running costs significantly:
maintenance was reduced to cover health and
safety requirements and to prepare the sites for
reopening; utilities were reduced substantially;
cleaning costs were reduced to zero; and
insurance costs were reduced, reflecting the
lower risk of sites not being in operation. In
addition we reduced marketing spend very
significantly with only spend on maintaining
engagement with existing members.
When gyms reopened after the first
lockdown the additional cleaning procedures
and materials for our COVID-secure
protocols resulted in a significant increase in
cleaning costs. We expect this incremental
cost to be £2.0 million to £2.5 million per year
for the foreseeable future.
Support from government initiatives
In addition to the mitigating actions above, a
number of government initiatives enabled us
to reduce or defer costs:
• Business rates relief – relief available
See page 102 for a reconciliation of
operating profit to Group Adjusted
EBITDA. ** Refer to note 5 of the
consolidated accounts for details of the
restatement from April 2020 to March
2021 saved us £9.6 million in the year and
will provide further benefit of £1.1 million
per month until August 2021.
Cash flow
Group Adjusted EBITDA less Normalised Rent
Rent working capital
Movement in working capital
Maintenance capital expenditure cash flow
Group Operating Cash Flow
Exceptional items
Bank interest
Taxation
Free cash flow
Expansionary capital expenditure cash flow
Dividends paid
Refinancing fees
Net proceeds from issue of Ordinary shares
Other financial assets purchased
Bank interest received
Movement in non-property net debt
Net drawdown of borrowings
Net cash flow
* See page 102 for a reconciliation of operating profit to Group Adjusted EBITDA.
** Refer to note 5 of the Consolidated Financial Statements for details of the restatement.
Balance sheet
Non-current assets
Current assets
Current liabilities
Non-current liabilities
• Coronavirus Job Retention Scheme
Net assets
2020
£’000
(10,169)
4,370
(3,096)
(7,387)
(16,282)
(906)
(1,798)
2,442
2019
Restated**
£’000
48,540
–
922
(10,284)
39,178
(1,120)
(2,197)
(3,579)
(16,544)
32,282
(21,828)
–
(418)
39,915
(1,000)
6
131
1,000
1,131
(30,919)
(1,933)
(884)
–
–
32
(1,422)
1,000
(422)
2020
£’000
2019
£’000
521,945
10,543
(43,095)
(334,949)
501,095
12,028
(49,627)
(313,333)
154,444
150,163
(‘CJRS’) – across our gyms and central
support we furloughed approximately
95% of our staff during closure periods.
The total support claimed from the CJRS
in the year was £6.1 million, with further
support available in Q1 2021 whilst gyms
are closed.
• VAT payment deferral – £1.9 million of
VAT due to HMRC during the year has
been deferred to 2021.
Group Adjusted EBITDA less
Normalised Rent1
Our key profit metric takes EBITDA (which
under IFRS 16 excludes any lease rental
costs) and subtracts ‘Normalised Rent’ which
is the cost of the rental payments applicable
to the period in question, regardless of when
the rent is paid in cash. This measure shows
the underlying profitability of the business
and then elsewhere we disclose the cash
flow effects of rent payment deferrals.
Group Adjusted EBITDA less Normalised
Rent decreased to £(10.2) million in the year
(2019: £48.5 million). The drop in profitability
was as a result of the significant reduction in
revenue, partially offset by the various cost
saving measures and government support
described above.
Further information on the impact of our
adoption of IFRS 16 in 2019 can be found on
our corporate website: TGGPLC.com
Exceptional items
Exceptional administrative costs decreased
to £1.1 million, from £6.1 million in 2019, and
comprised:
• £0.9 million writedown of assets of one of
our sites whereby the discounted present
value of future cash flows for the site do
not support the full value of the assets
and £0.7 million writedown of assets for
one site announced as closing in 2019
following a delay in the surrender of the
lease to 2021 (see below);
• £0.4 million gain recognised in 2020
arising on the closure of three sites
announced during 2019, which arose as a
result of estate management. Stoke and
Birmingham Corporation Street were
acquisitions from Lifestyle and easyGym
respectively, whilst we exercised a lease
break option in Newport, a site we
opened in 2015;
• £0.7 million of restructuring costs, related
to the restructuring of the central support
team in June 2020 in which headcount
was reduced by 22%;
• a one off gain of £0.6 million on the
renegotiation of a lease reducing the
lease term; and
• a reduction of £0.2 million in the
provisions established upon the
acquisition of sites from easyGym.
Exceptional finance costs decreased to £nil.
Long term employee incentives
During the year the Group granted further
shares under the Performance Share Plan
(‘PSP’) and Share Incentive Plan (‘SIP’) and also
Restricted Stock Options to certain members of
senior management. The awards vest in three
years provided continuous employment during
this period and, in the case of the PSP, certain
performance conditions are attained relating to
total shareholder returns.
The Group continues to operate a matching
shares scheme under the SIP, where for every
share purchased by an employee the Group
will award one matching share, up to a
maximum value, which vest in three years
subject to continuous employment.
Towards the end of the year, the Group has
also granted shares under a share saving
scheme (‘SAYE’), where all employees were
invited to save regularly, up to a maximum
value, to buy the Group’s shares at a
discounted price, which vest in three years
subject to continuous employment.
The Group recognised a charge of £0.7
million (2019: £1.9 million) in relation to these
share based payment arrangements. The
year-on-year reduction is due to the
expectation that the financial targets in prior
year PSP awards will not be met and
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 45
therefore the proportion of awards associated
with financial targets will not vest.
Finance costs
Finance costs excluding exceptionals
decreased to £13.3 million in 2020 (2019: £14.9
million). The implied interest relating to the lease
liability under IFRS 16 increased to £12.7 million
(2019: £12.9 million). Finance costs associated
with our bank borrowing facilities were £0.6
million (2019: £2.0 million) comprising interest
costs and fee amortisation of £1.9 million offset
by the remeasurement of the amortised cost of
our borrowings of £(1.3) million.
Basic earnings per share (‘EPS’) was a loss of
23.1p (2019: earnings of 2.6p). Basic Adjusted
EPS was a loss of 22.9p (2019: earnings of 7.7p).
Dividend
The Directors are not proposing a final dividend
for 2020, taking into account the ongoing
impacts of the pandemic and the material
Government support received. It is a condition
of the £30.0 million New Bank Facility that the
Company shall not declare or pay a dividend
and whilst this facility remains undrawn the
Directors would like to continue to have access
to it as necessary.
On 5 June 2020 the Company agreed with its
banks to extend its existing £70 million RCF
with an additional £30 million facility for a
term of 18 months (the New Bank Facility).
Following the national lockdown in November,
the Company agreed a revision to the New
Bank Facility in which the term was extended
to 24 months and covenants were revised to
reflect updated Company forecasts. Upon
termination or early cancellation of the New
Bank Facility the covenants and all other
terms of the original RCF will apply until the
maturity of the RCF in October 2023.
At 31 December 2020 the Group had drawn
£51.0 million of the facilities and with cash of
£3.7 million ended the year with Non-Property
Net Debt of £47.3 million.
Taxation
The Group has incurred a tax credit of £10.8
million for the year ended 31 December 2020,
which represents an effective tax rate (‘ETR’) on
statutory profit before tax of 22.9% (2019: 42.2%).
The decrease in ETR is due to a decreased
level of exceptional items which are not
deductible for tax purposes and decreased
charges relating to share based payments.
The underlying effective tax rate on adjusted
loss before tax, after adjusting for amortisation
and exceptional items, is 22.6% (2019: 24.3%).
Earnings
Statutory loss before tax was £47.2 million
(2019: profit of £6.2 million), with a decrease in
Group Adjusted EBITDA less Normalised Rent,
increased depreciation due to the increased
number of sites, increased amortisation of
intangible assets from IT investments and
lower exceptional costs. The Group delivered
a loss for the year of £36.4 million (2019: profit
of £3.6 million) as a result of the factors
discussed above.
Adjusted loss before tax is calculated from
statutory loss before tax and adding back the
amortisation associated with non-IT related
intangibles, any exceptional items and the
remeasurement of borrowings. Adjusted loss
before tax in the year was £46.5 million (2019:
profit of £14.0 million).
Group Operating Cash Flow decreased from
an inflow of £38.8 million to an outflow of
£16.3 million as a result of lower profitability.
Following closure of our gyms on 20 March
2020, and in subsequent closure periods, a
number of actions were taken to preserve cash,
in addition to the operating cost mitigation
described in the ‘Mitigating actions to reduce
costs’ section above:
• Maintenance Capital Expenditure
includes the replacement and
refurbishment of fixtures and fittings
plus new gym equipment in existing gyms
and in the year totalled £6.1 million.
Adjusting for the movement in capex
creditors, the cash flow from maintenance
capex was £7.4 million (2019: £10.2 million).
Following the closure of gyms on
20 March 2020, maintenance capex for
the rest of the year was minimised by
focusing only on repairs required for
health and safety reasons.
• Expansionary Capital Expenditure arises
primarily as a result of the fit-out of new
and acquired gyms and in 2020 totalled
£18.5 million. Adjusting for the movement
in capex creditors, the cash flow from
expansionary capex was £21.8 million
(2019: £30.6 million). Prior to the closure of
gyms on 20 March 2020, four new sites
had been opened in the year (of which
one was a small box gym) and then a
further four were opened in August. In
addition to new sites, major refurbishment
work was undertaken in two former
easyGym sites – London Fulham and
London Oxford Street – which were
completed and reopened in H2 2020.
• Rent – following the introduction of the
government protections against eviction
of tenants in March 2020, we deferred £9.4
million in rent payments that would
otherwise have been paid during H1 2020.
Immediately after the gyms were closed
we engaged proactively with landlords
and with the vast majority were able to
agree deferred rent payments while the
gyms were closed and to repay over the
subsequent 12 months. These deferments
did not impact the IFRS 16 income
statement charge for the period but did
reduce the cash rent outflow, thereby
supporting Operating Cash Flow.
The £9.4 million rent deferred from H1
started to be repaid in H2 and by the end
of the year £5.6 million had been repaid
leaving £3.8 million outstanding. This will
result in higher cash rent outflows in 2021
than would otherwise have arisen. In
addition, for a number of sites we have
also been able to establish deals with
landlords to extend the leases or take out
a lease break in exchange for rent-free
periods; the benefit of these rent-free
periods will total approximately £2.1 million
across 2020 and 2021 of which £1.4 million
was a benefit in 2020.
• VAT – following the introduction of
government relief measures on VAT, we
retained £1.9 million of VAT payments
relating to Q1 2020 due in March 2020,
which will now be paid in 2021.
Non-current assets have increased by
£20.8 million to £521.9 million (2019: £501.1
million), largely due to an increase in right- of-
use assets totalling £17.0 million following new
sites added to the estate plus the extension of
a number of existing leases and the recognition
of a deferred tax asset of £7.6 million.
Current assets have decreased £1.5 million
mainly due to reduced inventory and
receivables balances offset by an increase in
cash balances. Current liabilities have
decreased by £6.5 million mainly due to lower
trade payables.
As of 31 December 2020 the Group had
drawn £51.0 million of its £100.0 million
revolving credit facility.
Outlook and guidance for 2021
At the end of February 2021 we had 547,000
members and Non-Property Net Debt of
£58.2 million, with £8.7 million of deferred rent
and VAT outstanding, partially offset by
£1.1 million of furlough income still to be
received. Whilst closed we have a monthly
cash burn of c.£5.0 million of which
c.£2.5 million is rent.
We anticipate that when we reopen gyms
in April 2021 we will be close to cash flow
break-even and we will then grow
membership, revenues and profitability
from this point.
We will open three new sites in April and one
in May and expect to start on-site with an
additional four gyms by June. We have six
further leases exchanged and several more
in advanced negotiations.
Mark George
Chief Financial Officer
18 March 2021
* For definitions of non-statutory measures
please see ‘Key Performance Indicators:
Definitions of non-statutory measures’ on
page 144.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 46
STRATEGIC REPORT
PRINCIPAL RISKS
AND UNCERTAINTIES
M A N AG I N G
O U R R I S K
Our robust risk management
process ensures risks
are identified, evaluated,
monitored and controlled
by our management team
with oversight by the Board.
Risk management
In order to gain an understanding of the
risk exposure of the Group, we review
each area of our business annually
and use a methodology that will assist
the Group in measuring, evaluating,
documenting and monitoring its risks
within all areas of its operations.
We use our risk management process as
described to identify, monitor, evaluate and
escalate risks as they emerge, enabling
management to take appropriate action
wherever possible in order to control
them and also enabling the Board to
keep risk management under review.
This is an area that the Board has always
taken seriously. However, it has never been
more important than now, as the past
year has shown us through the impact of
an uncontrollable event in COVID-19.
THE
BOARD
• Provides strategic direction on the appropriate balance
between risk and reward.
• Sets the ‘tone’ and culture for managing risk and
embedding risk management.
• Ensures the most significant risks facing the organisation
are properly managed.
• Evaluates the risk implications of planned investments.
• Plans for how the business would manage a crisis.
AUDIT AND
RISK
COMMITTEE
• Monitors and reviews the Group’s system
of internal control and risk management.
• Makes recommendations to the Board for
improvements or developments.
• Reviews the Group’s risk appetite.
• Reviews the Group’s risk management
framework.
EXECUTIVE
COMMITTEE
• Promotes and supports the embedding
of risk management throughout the
business.
• Ensures there is active management
of identified and emerging risks.
• Formally reviews the risk register on
a regular basis.
• Reports to the Audit and Risk
Committee on the internal control
environment.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 47
The table below sets out the principal risks
of the business and for each risk identifies
whether and how COVID-19 has affected that
particular risk.
Responsibility for risk
The relevant roles and responsibilities
in monitoring and operating the system
of risk management are illustrated
in the diagram on page 46.
We are following our robust risk
management framework and ensuring that
an active risk assessment and business
continuity plan is in place, overseen by
our Health and Safety Manager, reporting
to the Executive Committee. The Group
will follow Public Health England and
Health Protection Scotland guidance, and
medical and local authority advice where
relevant, to ensure that we respond to any
developments quickly, safely and in the
best interests of our people. In addition,
management has taken a number of actions
to increase available liquidity, reduce
costs to mitigate the disruption caused
by the outbreak, and it will also continue
to seek to access the various government
schemes to support businesses. As set
out on page 51, appropriate financial
modelling has been undertaken to support
the assessment of the business as a going
concern with the material uncertainty from
COVID-19 and in support of viability.
Principal risks
The risk factors addressed below are
those which we believe to be the most
material to our business model, which
could adversely affect the operations,
revenue, profit, cash flow or assets of the
Group and which may prevent us from
achieving the Group’s strategic objectives.
Additional risks and uncertainties currently
unknown to us, or which we currently
believe are immaterial, may also have
an adverse effect on the Group.
Risks and uncertainties
in 2020 relating to COVID-19
The impact of COVID-19 and resulting risks
have been a significant feature of the past
12 months. We are continually monitoring
the impact of the pandemic and our
priority is to ensure the safety of our staff
and members. Whilst there are signs of
optimism that we will soon be through the
cycle of lockdowns and that our business
may soon be able to return to trade as
normal, there remains uncertainty on the
continuing impact of COVID-19 on the wider
environment and the Group’s operations.
PRINCIPAL RISKS HEAT MAP
t
c
a
p
m
I
e
r
e
v
e
S
j
r
o
a
M
e
t
a
r
e
d
o
M
r
o
n
M
i
7
5
4
3
8
1
2
6
9
10
Unlikely
Probable
Likely
Highly likely
Likelihood
Key
1 Business interruption
2 Operational gearing
3 Member experience
4 Economic conditions
5 Competition
6 Staff retention
7 Information technology dependency
8 Organic rollout
9 Data protection
10 Regulatory
Impact of COVID-19 on the
risk likelihood and impact
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 48
STRATEGIC REPORT
PRINCIPAL RISKS
AND UNCERTAINTIES
CONTINUED
PRINCIPAL RISK
DEFINITION
IMPACT
MITIGATION
Whilst this risk is highly
relevant today as a result of
COVID-19, this risk is wider
than pandemics and there
could be other causes of
significant disruption or
widespread closure of our
estate, including for example:
(a) Climate change resulting in
an increase in the
likelihood and severity of
environmental disasters
such as storms or
droughts, which could
result in major
infrastructure damage and
outages of electricity and
water supplies.
(b) Major health scare in
relation to gym usage.
(c) Failure of a key supplier
impacting our ability to
operate our gyms.
(d) Significant reputational
damage.
High operational gearing from
the fixed cost base.
1
BUSINESS
INTERRUPTION
2
OPERATIONAL
GEARING
3
MEMBER
EXPERIENCE
Failure to provide members
with a high quality product
and service would damage
the Group’s reputation.
Extended periods of closure
would result in a loss of
revenue and could also
cause a decrease in
membership numbers.
This is specifically the case
during the current COVID-19
pandemic, with reduced
member numbers and
enforced temporary gym
closures.
Over an extended period, a
loss of revenue coupled with
the inability of the Group to
remove certain of its cost
base in a closure scenario
means this could lead to a
material uncertainty in the
Group’s ability to continue as
a going concern.
• A detailed exercise is being undertaken to
assess each of the sources of business
interruption risk and determine where
appropriate action can be taken to mitigate it,
based on whether the cost of the action is
proportionate to the risk it is mitigating.
• This will be turned into a clear action plan with
•
•
agreed owners and timeframes.
In addition, business continuity procedures and
risks are monitored and refreshed regularly.
In relation to COVID-19, management has
identified and implemented proven measures
to preserve cash and reduce discretionary
expenditure during a period when all of the
Group’s sites are closed, and to be able to
reopen quickly to minimise revenue loss.
Appropriate financial modelling has been
undertaken to support the assessment of the
business as a going concern with the material
uncertainty from COVID-19 and in support
of viability.
• As part of our response to the TCFD
recommendations, we will review the risks of
future climate change on our business and
identify adaptation action required.
A limited number of
corrective options in
the cost base could
be made to correct
any underperformance
in membership numbers,
which could have an
adverse impact on
profitability.
COVID-19 lockdowns have
caused a significant drop
in revenue, which has been
only partially mitigated by
cost management measures.
• Monthly monitoring and reforecasting of
business performance at site level.
• Active yield management on a gym-by-gym
basis.
• Regular financial management by the
Executive Committee and Board.
• Option to slow down expansion in order to
preserve cash.
• During COVID-19 lockdowns, operating costs
have been reduced significantly to minimise
the impact of lost revenue and we have taken
government support in the form of business
rates relief and wages support for furloughed
staff. Capex has also been reduced
significantly to preserve cash.
Reductions in actual or
perceived customer service
could result in a decrease in
membership numbers and
revenue generation.
COVID-19 has had an
adverse impact on this risk.
Whilst member feedback is
at an all-time high in
response to the COVID-
secure steps implemented
in the gyms, there are
significant numbers of
former members who
continue to be
uncomfortable returning to
their normal day-to-day
activities – including due to
COVID-19.
• Monitor gym utilisation and member
satisfaction scores.
• Enhance monitoring and feedback processes.
• Ongoing review of equipment usage to ensure
we meet member requirements.
• Explore further innovations to improve the
member experience.
• Enhanced cleaning protocols to reduce risk of
COVID-19 transmission and increase member
confidence.
• Maintain appropriate levels of expenditure on
repairs and maintenance.
• Significant work completed on preparing gyms
to be COVID-secure.
• Gym busyness tracker helps nervous members
to visit at quieter times.
• Strong communications plan in place to
communicate the #safewithus commitment to
members and to reinforce key guidelines
regarding sanitisation, face coverings and
social distancing.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 49
PRINCIPAL RISK
DEFINITION
IMPACT
MITIGATION
4
ECONOMIC
CONDITIONS
A prolonged uncertainty
following wider economic
shock such as the impact of
COVID-19 could cause
significant disruption to
business conditions.
5
COMPETITION
The Group may face
increased competition and
pressure from competitor
pricing decisions.
• We are very well placed to operate
successfully in a challenging economic
environment; we are one of the lowest price
gym operators in the UK market with an
average monthly subscription of £18.81 which is
£1-4 per month lower than most competitors in
the low cost gym sector and significantly lower
than rates charged by mid-market and
premium operators. Although some of our
members may choose to cancel their
subscription due to financial hardship we
would also expect to benefit from others
‘trading down’ from the mid-market or premium
gyms.
• Continue to operate a low cost operating
model to ensure we can retain price
leadership.
• Maintain focus on choosing the best sites in a
geographical area.
• Continue to invest in the member proposition.
A period of disruption
caused by continued
national lockdowns may
result in continuing
challenges for the economy,
resulting in a loss of
membership and hence
revenue.
Over an extended period, a
loss of revenue coupled with
the inability of the Group to
remove certain of its cost
base in a closure scenario
means this could lead to a
material uncertainty in the
Group’s ability to continue as
a going concern.
The ability of the Group to
hold or increase prices and
therefore achieve
performance targets could
be affected.
However, COVID-19 has led
to the closure of competitors
and so at this stage has
reduced this risk.
6
STAFF
RETENTION
Loss of key staff through
retention policy and failure to
manage succession.
A lack of experienced and
motivated staff will have a
detrimental impact on all
areas of the business, from
operations to central
functions.
• The Group uses a variety of techniques to
attract, retain and motivate staff at all levels
across the business. These techniques
include:
– competitive remuneration packages;
– opportunities to own shares in the
COVID-19 has resulted in a
small reduction in staff
churn, as the economic
uncertainty is encouraging
people to remain in role.
Company;
– opportunities for training and progression;
– short, clear reporting lines;
– succession planning; and
– utilising staff engagement surveys so our
staff have an opportunity to provide
feedback and ideas.
•
In addition, the growth of central functions and
way we run the business is reducing
dependencies on key individuals by spreading
knowledge more widely.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE
50
STRATEGIC REPORT
PRINCIPAL RISKS
AND UNCERTAINTIES
CONTINUED
PRINCIPAL RISK
DEFINITION
IMPACT
MITIGATION
7
INFORMATION
TECHNOLOGY
DEPENDENCY
Our ability to enrol members,
carry out online marketing
activity, process payments
and control gym access is
dependent on the
performance of our IT
systems.
Disruption in critical IT
systems could have a
negative impact on our
reputation and our ability to
collect revenue.
• Our primary data systems are hosted by fully
qualified organisations in suitable data centres.
• Our primary IT infrastructure is fully managed
by specialist IT companies which provide
best-practice architecture and support.
• All membership and business information is
There is a slight increase in
this risk due to COVID-19, as
we experience significant
spikes in usage around the
point of reopening post-
lockdown.
backed up using third party locations.
• Robust disaster recovery and business
continuity plans are in place.
• Additional capacity has been added to our
infrastructure to cope with large spikes in
usage.
8
ORGANIC
ROLLOUT
Site scarcity may affect the
delivery of our rollout plan.
Delays to our rollout plan
may have an adverse impact
on growth targets and
operational returns.
• Our highly experienced property team is
focused on site selection and sourcing the
best deals to deliver a strong pipeline.
• Our expansion into small box gyms increases
the range of suitable sites.
9
DATA
PROTECTION
The Group holds business
critical and confidential
information electronically. A
breach of security or data
protection rules is a key risk.
However, COVID-19 has
resulted in increased
availability of high quality
sites, thereby resulting in a
reduced risk.
Unauthorised access, loss or
disclosure of this information
may lead to legal claims,
regulatory penalties,
disruption of operations and
reputational damage.
We do not consider this risk
to be affected by COVID-19.
• The Group’s networks and systems are
protected by firewalls, security software and
secure passwords.
• All sensitive data is captured and presented
using SSL encryption. Our transactional
website is scanned quarterly to ensure PCI
compliance.
• Access to central member data systems
requires 2-Factor authentication.
• All customer payment data is stored externally
on systems that are PCI-DSS and/ or BACS
certified.
• We have implemented industry-leading
authentication management software.
• We are recruiting a Data Protection Manager to
oversee and optimise our control environment
in this area.
10
REGULATORY
Failure to adhere to
regulatory requirements such
as the Listing Rules, taxation,
the Data Protection Act,
employment law, health and
safety requirements, planning
regulations, noise abatement
and advertising and
marketing regulations.
Potential reputational
damage and penalties.
• The Board has oversight of the management of
regulatory risk and compliance, and delegates
specific responsibilities to senior management.
We do not consider this risk
to be affected by COVID-19.
• Expert opinion sought where relevant.
• Legal advice taken to ensure systems,
processes and documentation conform with
the Data Protection Act.
• Third party health and safety risks
assessments and audits carried out. Staff
conduct periodic health and safety
assessments.
• Employment and continuous training and
development of appropriately qualified staff.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020
51
GOING CONCERN
In assessing the going concern position of
the Group for the year ended 31 December
2020, the Directors have considered the
Group’s cash flows, liquidity and business
activities in the light of the COVID-19
pandemic.
The outbreak of COVID-19 and its continuing
impact on the economy casts a degree of
uncertainty as to the future financial
performance and cash flows of the Group.
When assessing the ability of the Group to
continue as a going concern the Directors
have considered:
•
•
•
the Group’s financing arrangements;
the pattern of trading during 2020
when gyms were open between
lockdowns; and
future trading risks including continued
regional or nationwide lockdowns and
reduced membership levels.
on the cash flows, liquidity and bank facility
covenants of the Group over the period to
30 June 2022.
In the first half of 2020 the Group raised
additional financing in the form of:
• an equity placing, which raised net
proceeds of £39.9 million; plus
• a £30.0 million debt facility extension
(the ‘New Bank Facility’), which provided
incremental liquidity beyond the existing
£70.0 million Revolving Credit Facility
(‘RCF’). The RCF and the New Bank
Facility are both provided by a
consortium of HSBC, NatWest and
Banco de Sabadell.
During the periods of trading between
lockdowns in the second half of 2020 the
Group traded profitably and reduced capital
expenditure and other cash outflows. As at
31 December 2020, the Group had Non-
Property Net Debt of £47.3 million versus
£100.0 million of total borrowing capacity.
Following the phased introduction of Tier 4
restrictions in a number of regions in
December 2020, the Group was required to
close 162 of its 183 gyms. On 4 January 2021
all remaining gyms were required to close as
the UK Government announced a
nationwide lockdown and the gyms remain
closed as at 18 March 2020. The UK
Government has announced that gyms will
reopen on 12 April if there is continued
progress with the Government’s four criteria
for monitoring the pandemic.
As at 28 February 2021, the Group had
Non-Property Net Debt of £58.2 million and
therefore liquidity of £41.8 million versus a
total borrowing capacity £100.0 million. In the
next 12 months the Group’s liquidity will be
influenced by (i) the number of months of
closure of its gyms and (ii) the trading
performance of the business when gyms are
permitted to open. Below we set out the
financial implications of periods of closure
and trading respectively:
Cash burn when gyms are closed
During the current period of closure, the
Group has no revenue and is operating with
a monthly cash burn (excluding new site
capital expenditure) of around £5 million.
This cash burn rate has been minimised as a
result of significant reductions in operating
costs and the following UK Government
support:
• £1.1 million per month of Business Rates
relief, currently due to end August 2021;
due to there being a cap on the relief of
£2.0 million in H2 2021;
• £1.1 million per month of furlough
income support from the Coronavirus
Job Retention Scheme (‘CJRS’), currently
due to end when we reopen in April
2021; and
• £0.5 million per month from Local
Restrictions Support Grants (LRSG)
ongoing until we re-open in April 2021.
In addition to the ongoing support the Group
will also benefit from one-off Government
grant of £27,000 per site; these grants have
a total one-off benefit of c.£4.5 million to the
Group, of which £2.2 million had been
received from the relevant local authorities
before 28 February 2021.
While gyms remain closed and with current
levels of Government support, the business
is operating with monthly cash burn of
c.£5.0 million. This cash burn assumes
c.£2.5 million of rent being paid each month,
which is the ‘normalised’ level of rent per
month excluding the impact of rent deferrals.
A total of £3.6 million of rent deferred from
2020 is due to be repaid over the course of
2021, in addition to the ‘normalised’ level of
£2.5 million per month. Any further deferrals
agreed will improve cash flow in the closure
period and extend the period of closure for
which the Group would be able to operate.
Trading when gyms are open
As at 28 February 2021 the Group had
547,000 members, all on ‘free freeze’, down
from 578,000 on 31 December 2020. During
the ongoing period of closure we expect
membership to reduce further at a similar
rate to recent weeks; this rate of
membership loss is lower than in the first
national lockdown from March to July 2020
and the second national lockdown in
November 2020.
When gyms reopen our subscription
revenue starts immediately and in the
periods of trading between national
lockdowns in 2020 the business operated
profitably. The profitability of the Group after
the gyms reopen from the current lockdown
will depend on the membership level and
the level of UK Government financial
support. Whilst we continue to receive the
benefit of Business Rates relief, which is
anticipated until the end of August 2021, the
business would require approximately
540,000 members to be break even at the
cash flow level. When the benefit of Business
Rates relief ends, the cost base of the
business increases by c.£1.1 million per
month, increasing the cash flow break-even
point to around 610,000 members.
Although there is uncertainty over the level
of continued Government support and the
speed of recovery in membership once
gyms have reopened, it is the Directors
expectation that the business will be close
to break even at a cash flow level when
gyms reopen and from that point the
recovery in membership will improve
profitability and cash flow, therefore
reducing net debt and increasing liquidity
headroom.
In December 2020, the Group amended the
New Bank Facility to extend it from 18
months to 24 months (now due to end June
2022 at which point the terms of the original
£70 million RCF will apply) and to set new
covenants based on a revised business
plan. The Group met the covenant test for
December 2020. As a result of the national
lockdown in early 2021 the Group agreed
with its lending banks a waiver of the March
2021 covenant test. The June 2021 covenant
test is based on a cumulative EBITDA for H1
2021 and was set at a level that allowed for
up to one month of closure in that six month
period; with the current lockdown being at
least three months we will not be able to
meet the June 2021 covenant test. As our
plan anticipates meeting all subsequent
covenant tests, we anticipate that our
lending banks will provide flexibility on the
June 2021 test although no such agreement
has been reached. We have agreed with the
banks that discussions regarding future
covenant tests will take place during April/
May 2021 once there is further visibility on
the external environment, levels of
government support and whether gyms
have reopened.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE While the review has considered all the
principal risks identified by the Group,
severe but plausible events were focused on
for enhanced stress testing. These included
a slower recovery in membership numbers
vs the base case plan and also a reverse
stress test in which a further national
lockdown occurs in the Autumn/Winter of
2021/22. In both the downside scenarios and
the reverse stress test scenario mitigating
actions were then modelled. Key mitigating
actions included slowing the rollout
programme, agreeing covenant waivers,
moving to a minimum level of maintenance
capital expenditure and IT capital
expenditure and reductions in discretionary
expenditure in order to preserve cash.
The principal risks detailed above which
have the greatest effect on financial results
are considered to be business interruption,
operational gearing, member experience,
support of lenders and economic
conditions, with each of these risks being
significantly increased as a consequence of
COVID-19 as shown in the risk heatmap on
page 47. Although the Group’s response to
the COVID-19 crisis is management’s primary
focus at this time, the Directors consider the
longer term opportunity in the UK health and
fitness market to remain substantial, with
further opportunity created by the reduction
in certain risks as a consequence of
COVID-19, in particular ease of acquiring
sites for organic rollout and weaker
competition. The Directors consider that the
Group will be very well placed to take
advantage of these opportunities once it has
come through the COVID-19 crisis.
52
STRATEGIC REPORT
PRINCIPAL RISKS
AND UNCERTAINTIES
CONTINUED
The Directors have considered a reverse
stress test scenario in which it is assumed
the current lockdown ends at the end of
April 2021 (vs Government target date for
reopening gyms of 12 April 2021) and a new
lockdown starts in November 2021 (matching
the timing of the winter lockdown in
November 2020) and continues indefinitely,
with the business trading in the months
between lockdowns on an approximately
cash flow neutral basis. In such a scenario
the Group would be able to continue
operating until March 2022 before reaching
the £100 million borrowing capacity. In such
circumstances additional options may be
available to mitigate the impact on the
Group’s liquidity and cash flow including:
(i) further reductions in operating and capital
expenditure; (ii) additional support from the
UK Government; (iii) extension of debt
facilities; (iv) continued deferral of, or
reductions in, rent payments to landlords;
(v) the potential to raise additional funds
from third parties. In the reverse stress test
scenario, the closures from November 2021
onwards would result in EBITDA losses in
Q4 2021 and as a result the Q4 2021
covenant test would not be met.
Whilst the Group has secured sufficient
liquidity, via the raising of equity and
additional debt facilities, to finance
operations through most reasonable
scenarios, it may be necessary in certain
downside scenarios to extend the term of the
£30.0 million New Bank Facility beyond June
2022. The Directors also consider it to be a
plausible risk that current covenant targets
after June 2021 will not be met due to the
impact of further closure or a slower recovery
in membership numbers due to changes in
members’ behaviour. In the event that the
Group fails to meet one or more of its 2021
debt covenants, the Directors believe it likely
that further agreement could be reached with
the lending banks to waive or amend
covenants as part of a revised business plan.
However, no such commitment for further
covenant waivers (beyond the March 2021
waiver already agreed) is currently in place
with the lending banks.
The Directors have concluded that the
potential impact of COVID-19 described
above and uncertainty over possible
mitigating actions, including covenant
waivers or extending the New Bank Facility,
represents a material uncertainty that may
cast significant doubt about the Group’s
ability to continue as a going concern.
However, having assessed the financial
forecasts, sensitivities and possible
mitigating actions, the Board has a
reasonable expectation that the Group
has adequate resources to continue in
operational existence for the next 12 months
and therefore the Directors continue to
adopt the going concern basis in preparing
these financial statements.
Accordingly, these financial statements do
not include any adjustments to the carrying
amount or classification of assets and
liabilities that would result if the Group were
unable to continue as a going concern.
VIABILITY
In accordance with provision 31 of the UK
Corporate Governance Code 2018, the
Directors have assessed the viability of the
Group taking into account the Group’s
current position and the potential impact of
the principal and emerging risks
documented above that would threaten its
business model, future performance,
solvency or liquidity.
As indicated under the Going Concern
assessment above, the Directors have
concluded that the potential impact of the
COVID-19 pandemic described above and
uncertainty over possible mitigating actions
represents a material uncertainty that may
cast significant doubt on the Group’s ability
to continue as a going concern.
Nevertheless, as stated above the Directors
have a reasonable expectation that the
Group has adequate resources to continue
in operational existence for the next 12
months and that the Company will be able to
continue in operation and meet its liabilities
as they fall due over the period to
31 December 2023.
The Directors have determined that the
33 month period to 31 December 2023 is
an appropriate period over which to assess
its viability statement as:
•
•
•
the Directors review a three-year financial
plan each year as part of an annual
strategy review with management and
the viability analysis is based primarily
from this forecast;
the period is sufficient to reflect the
impact that COVID-19 and related
mitigation plans are likely to have
on the Group’s performance and
cash flows; and
it is also sufficient to reflect the return to
stable (pre-COVID) mature membership
numbers and see the maturation of new
sites opened in 2019 and 2020.
The Board also carried out a robust
assessment of the principal risks facing the
Group, including those that would threaten
its growth drivers, future performance,
solvency or liquidity. As noted above the
Board has also performed specific stress
testing on the impact of the COVID-19
pandemic. The outputs from these reviews
were then used to perform liquidity and debt
covenant headroom analysis on the strategic
plan and the COVID-19 scenarios, including
the downside sensitivity reviews that were
based on principal risks.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 53
NON-FINANCIAL
INFORMATION STATEMENT
The table below sets out where stakeholders can find information in our Strategic Report that relates to non-financial matters detailed under
section 414CB of the Companies Act 2006.
REPORTING REQUIREMENT
WHERE TO FIND
FURTHER INFORMATION
ENVIRONMENTAL
MATTERS
Sustainability Report – environmental
responsibility and greenhouse gas information
EMPLOYEES
Sustainability Report
Chief Executive’s Statement
Principal Risks – staff retention
PAGE
38-39
30-41
8-11
49
HUMAN RIGHTS
Modern Slavery Act Statement1
Human rights, anti-bribery and anti-corruption
35
SOCIAL MATTERS
Sustainability Report
30-41
SUMMARY OF RELEVANT POLICIES
IF APPLICABLE
Our environmental strategy is set out on
page 38.
The Company has relevant training for all
employees which is served via a training
portal. Our employee-related policies and
procedures which include our privacy
notice, family-friendly and inclusivity
policies, and all work-related policies are
available to all employees online.
It is prohibited for any employee or person
working on our behalf to offer, give, request or
accept any bribe. the Company has an
Anti-Bribery Policy which sets out the relevant
procedures, as described on page 35. The
Company also has a Whistleblowing Policy.
Our strategic approaches to diversity and
equal opportunity and promoting wellbeing
are set out on pages 36 and 37.
Our Diversity & Inclusion Manifesto can be
found on our website www.tggplc.com.
BUSINESS
MODEL
Business Model
16-17
An explanation of the business model can
be found on page 16.
PRINCIPAL
RISKS
Principal Risks and Uncertainties
46-52
The Board has a process for considering
the principal risks (page 46) as set out in
the Audit and Risk Committee Report on
page 68.
NON-FINANCIAL KPIs
Key Performance Indicators
12-13
The Board approves relevant KPIs for use
in the Strategic Report, as on page 12.
RELATIONSHIPS WITH
SUPPLIERS, MEMBERS
AND OTHERS
S172 statement within the Strategic Report
26-29
The Company has a number of policies
and procedures underpinning its
commitment to high standards of business
conduct, which are available to all staff
online.
1 The Company’s Modern Slavery Act Statement is available on our website at http://www.tggplc.com.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 54
GOVERNANCE
CHAIRWOMAN’S INTRODUCTION
DEAR
SHAREHOLDERS,
I am pleased to introduce the 2020
Corporate Governance Report on
behalf of the Board. The Corporate
Governance Report forms part of
the Directors’ Report.
“ T H E B O A R D F U L LY S U P P O R T S
A N D P R O M O T E S T H E C O M PA N Y ’ S
P U R P O S E BY C O N D U C T I N G I T S
B U S I N E S S A C C O R D I N G T O T H E
VA L U E S – TA K I N G T H E F I R S T S T E P,
R E A L N E S S , F R I E N D L I N E S S A N D
C H A L L E N G I N G YO U R L I M I T S .”
P E N N Y H U G H E S C B E , C H A I R W O M A N
AREAS OF BOARD FOCUS
IN 2020
Our areas of focus
Board activities
STRATEGY
STAKEHOLDERS
FINANCIAL
• Engagement with industry peers and
government in relation to COVID-19
• Site approvals and pipeline reviews
• Consideration of sustainability
matters
• Restructuring
• Performance management and talent
review of executive management
• Approval of 2021 Plan
• COVID-19 Operating Protocol
• Furlough and CJRS-related actions
• Updates on engagement with our
stakeholders in relation to COVID-19
disruption
• Landlord negotiations
• Equity placing
• Engagement with the Company’s
banks regarding COVID-19
• Consideration of revised budgets
and trading plans
• Approval of 2021 Budget
TECHNOLOGY
• Launch of busyness tracker
• Website upgrades
• Contactless entry to the gyms
GOVERNANCE
• Approval of the Annual Report
• AGM under Stay at Home Measures
• Board succession planning
• Diversity and inclusion matters
• Launch of the Health & Safety and
Wellbeing Committee
• Effectiveness reviews of the Board
and Committees
AREAS OF BOARD FOCUS
IN 2021
To date in 2021 the Board has focused on:
• preparation of the Company’s year end reports;
• reviewing outcomes and agreeing actions relating to
Board evaluation;
• succession planning and rotation of Board and Committee
roles and responsibilities;
the appointment and induction of new Directors;
•
• receiving reports from ExCo on reopening plans for sites,
operational matters relating to the closure period and
updates on progress of projects; and
• sustainability reporting.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020
55
GOVERNANCE AND
COMPLIANCE STATEMENT
Through the year and as at the date of this report, except where
noted below, the Company has complied with the Code by
applying the principles and reporting against the provisions in
the Annual Report as a whole.
In respect of Provision 36, the Company does not currently have
formal post-termination of employment share ownership
guidelines in place. Share ownership guidelines are in place for
Executive Directors and the Founder Director. The Remuneration
Committee has stated its intention to review this during the term
of the current Remuneration Policy, which was approved by
shareholders in 2019. More information is on page 85.
Following the retirement of Paul Gilbert from the Board at the
Company’s AGM, David Kelly will be appointed as Audit and Risk
Committee Chair. The Company has considered the
requirements of Provision 24 in relation to the future composition
of the Audit and Risk Committee and has set out its satisfactory
conclusions on page 59.
Where to find information against each
of the Code principles:
Board leadership and purpose
• Board of Directors, page 56
• Sustainability Report, page 30
• Working with our stakeholders, pages 26-29
• Company overview, pages 2-3
Division of responsibilities
• Corporate Governance Report, page 59
• Board Evaluation Report, page 64
Composition, succession and evaluation
• Board Evaluation Report. page 64
• Corporate Governance Report, page 59
• Nomination Committee Report, page 65
Audit, risk and internal control
• Audit and Risk Committee Report, page 68
• Directors’ Responsibility Statement, page 94
• Principal Risks and Uncertainties, page 46
Remuneration
• Remuneration Report, pages 71-89
A
B
C
D
E
Purpose and culture
The Gym Group’s purpose is to break down barriers to fitness for all,
and the Board fully supports and promotes this by conducting its
business according to the values – taking the first step, realness,
friendliness and challenging your limits – and considering the
interests of stakeholders in our decision making. The Board
continues to be committed to ensuring that the Group operates with
high standards of corporate governance. We believe it is important
that the governance structure supports the success of the
Company’s strategy and ensures the creation and preservation of
shareholder value, as well as benefiting other stakeholders.
Ways of working
The Board’s normal ways of working were also disrupted by the
outbreak of COVID-19 in the UK, and the Board has demonstrated
adaptability in moving to virtual working, changing our pattern of
meetings and being flexible in our annual agenda to ensure
meetings remained effective and key matters related to COVID-19
were given ample Board attention. We also held our 2020 AGM under
stringent Stay at Home measures, ensuring that we preserved
people’s safety while facilitating shareholder participation by proxy
voting, inviting questions in advance, and keeping shareholders up
to date on arrangements with update announcements.
Stakeholders
During the year, we have ensured that the interests of stakeholders
are a key part of Board decision making. Our report on how we
manage the business in the interests of our stakeholders is set out
on pages 26-29, including examples of activities the Board has
carried out in the year. The Board’s decision making has been
focused on balancing the interests of our stakeholder groups
through the COVID-19 crisis. The Board also considered the need to
have regard to the interests of our stakeholders as part of its
succession planning and composition review carried out in the year,
which is detailed on page 66.
Board evaluation
In this report we have also described our Board evaluation process
in respect of the year, set out on page 64. As part of this process, in
accordance with the Corporate Governance Code, we reviewed our
composition and concluded that there was an effective balance of
skills, experience and knowledge. The Nomination Committee is
responsible for keeping composition, tenure and succession
planning under review and making recommendations as appropriate,
and will continue to do so in 2021. The dates of Directors’ service
contracts are on page 88.
The remainder of this report explains in more detail the corporate
governance structure in place, including our Board and Committee
structure, described on page 60, our policies, including our Diversity
and Inclusion Policy which is described in the report of the
Nomination Committee on page 65, and protocols on internal
controls, which is discussed in more detail in the Report of the Audit
and Risk Committee on pages 68 to 70. I hope that you find these
pages useful.
Penny Hughes
Chairwoman
18 March 2021
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 56
56
THE GYM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2020
GOVERNANCE
BOARD OF DIRECTORS
Committees
Career
PENNY HUGHES
Independent
Non-Executive
Chairwoman
Penny has served on the
boards of directors of
firms across the
consumer, media,
technology and finance
sectors.
The majority of Penny’s
executive career was
spent at Coca-Cola,
where she was
appointed President of
Coca-Cola Great Britain
& Ireland in 1992.
RICHARD DARWIN
Chief Executive Officer
MARK GEORGE
Chief Financial Officer
JOHN TREHARNE
Founder Director
EMMA WOODS
DAVID KELLY
RIO FERDINAND
WAIS SHAIFTA
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
None
John founded The Gym
in 2007 and has over 20
years’ experience in the
health and fitness
industry.
John launched Dragons
Health Club plc in 1991,
before its flotation on
AIM in 1997 and sale to
Crown Sports plc in
2000.
Mark has held senior
roles in finance, strategy
and general
management in a
number of leading
consumer businesses
including Tesco, Asos
and most recently Auto
Trader PLC, where he
was Deputy CFO and a
member of the
Operational Leadership
Team.
He started his career as
a management
consultant with
McKinsey & Co.
Richard possesses
extensive experience
working for leisure and
FMCG companies in the
UK and internationally,
including The Rank
Group, Hard Rock Café
International and Diageo.
He qualified as a
chartered accountant
with Coopers & Lybrand.
He has previously held
the positions of Chief
Financial Officer of
Essenden plc (now Ten
Entertainment Group
plc) from 2009 to 2015
and Chief Financial
Officer of Paramount
Restaurants from 2003
to 2008.
Richard served as The
Gym Group’s Chief
Financial Officer from
2015 to 2018.
Board skills and
experience
Penny has taken a
hands-on role in leading
the business
throughout her time as
Chairwoman. Penny
leads the Board in
strategic matters,
engages closely with the
Executive Directors,
visits operations
extensively, and takes an
active role in furthering
initiatives across the
business such as
sustainability and
diversity and inclusion.
Richard has led the
business strongly
through the disruption of
the pandemic, including
continuing to develop a
talented and stable team
of executives.
Richard’s detailed
knowledge of The Gym
Group and background
in leisure businesses
supports his
development of the
business’s strategy
and financial delivery.
Mark brings his quality
experience in consumer
plcs to the Board and
executive team. Mark is
diligent, sets high
standards and has
demonstrated flexibility
and leadership in
managing the financial
operations of the
business well through
COVID-19 disruption,
including working closely
with our lenders and
continuing to develop
the finance function.
John’s wealth of
operational and
leadership experience
and knowledge of
industry trends offers the
Board valuable context
to develop its strategy
and inform its decisions.
As founder, John has an
unmatched network of
industry connections
used to support our
business.
Other appointments
iQ Student
Accommodation
– Adviser
Riverstone Living – Chair
Form3 – Non-executive
Director
None
None
ukactive – Board
member
Frame – Chairman
Jigsaw South East –
Chair of Trustees
Committees
Nomination Committee
Audit and Risk Committee
Remuneration Committee
marketing experience
within the FMCG and
leisure sector.
Emma is currently the
Chief Executive Officer
at Wagamama and
previously has held
Marketing Director roles
at Merlin Entertainments
Non-Executive Chairman
plc, Pizza Express and
of Betterbathrooms (UK),
Unilever.
PAUL GILBERT
Senior Independent
Non-Executive Director
Paul is an economics
graduate from the
University of Cambridge
and a Chartered
Accountant.
He has previously held
the positions of Chief
Financial Officer of TJ
Hughes, National Car
Parks and Matalan, and
Clothingsites.co.uk,
Hiring Hub, and Sykes
Cottages. Paul was also
previously Non-
Executive Director of
New Look Retailers.
Paul was the Non-
Executive Chairman of
The Gym from February
2012 until September
2015.
Emma has wide-ranging
David is an experienced
Following his football
Wais has gathered
including #5Magazine,
currently CEO at Push
digital operating
executive.
career, Rio has pursued
a number of interests in
business, broadcasting
David was previously the
and charity work,
Operations Director at
Amazon in the UK from
1998 to 2000, the Chief
Operating Officer at
Lastminute.com from
2000 to 2003, the Vice
President, Operations/
Chief Operating Officer
at eBay from 2003 to
2007 and Senior Vice
at Rackspace from 2010
to 2012.
a lifestyle brand that
spans online content
and fashion. Rio is a
television pundit for
BT Sport as well as an
author and filmmaker
and works collaboratively
with young people
through the Rio
Rio is a passionate
advocate for fitness,
mental health and
wellbeing and diversity.
President of International
Ferdinand Foundation.
substantial e-commerce
expertise from a number
of leading online
businesses. He is
Doctor, one of the
leading digital
healthcare companies
in Europe, working in
partnership with the NHS
to connect thousands of
patients each week with
clinicians. Before joining
Push Doctor, Wais was
previously Director of
Global Operations at
Treatwell, and prior to
that was International
Operations Director at
Just Eat.
Paul is a Chartered
Accountant with a strong
finance background and
experience of multi-site
retail businesses. As our
Audit and Risk
Committee Chair, Paul
brings recent, relevant
and robust financial
experience to the
Committee and the
Emma brings the Board
David draws on his
Rio’s advocacy for
valuable commercial
extensive plc experience
fitness, mental health
and operational insights
from a wide range of
and wellbeing and
into multi-site leisure
businesses, which is key
to the Board’s
development of the
technology and product
diversity means that
he brings a unique
businesses. His
understanding of
technology development
on our colleague and
Company’s strategy. As a
is particularly valuable to
membership profile,
current executive leader,
our development. David
she offers perspective
brings his thorough
which will form a key part
of the Board’s strategy in
on the challenges facing
understanding of listed
recovery. Rio’s insight
Board as a whole. Paul is
hospitality and leisure
available to all
stakeholders in his
capacity as SID.
brings relevant challenge
Committee Chair, his
businesses. Emma
and support to the
executive team with
particular focus on
meeting customer
expectations.
plc matters to the
Remuneration
Committee
responsibilities.
memberships and Board
and our strategic
Wais’s background in
leading technology
businesses gives him a
strong understanding of
the vital role technology
ever more relevant to
members. Wais is an
executive leader in a
healthcare business and
is well aligned with our
purpose to provide
access to affordable
fitness for all.
perspective to the Board
plays in our drive to be
Grip-UK Limited –
Wagamama –
Chair and Audit Chair
Non-Executive Chairman
Chief Executive Officer
of Simply Business; Chair
Push Doctor – CEO
into our key market
demographics will
support our continued
pursuit of our purpose
priorities as we recover
to grow again.
FE Luxury Travel,
Football Escapes,
Legacy Sports and
Education Foundation,
Rio Ferdinand
Foundation – Director
of Pure360 and Camelot
Global Lottery Solutions
Ltd; Senior Independent
Director and Chair of the
Remuneration Committee
of On the Beach Group
plc; Chair of the
Remuneration Committee
of Reach plc; Audit Chair
of Forest Holidays;
Non-Executive Director
of Holiday Extras.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020
PENNY HUGHES
Independent
Non-Executive
Chairwoman
RICHARD DARWIN
Chief Executive Officer
MARK GEORGE
Chief Financial Officer
JOHN TREHARNE
Founder Director
PAUL GILBERT
Senior Independent
Non-Executive Director
EMMA WOODS
Non-Executive Director
DAVID KELLY
Non-Executive Director
RIO FERDINAND
Non-Executive Director
WAIS SHAIFTA
Non-Executive Director
57
Committees
Career
None
Penny has served on the
Richard possesses
boards of directors of
firms across the
consumer, media,
extensive experience
working for leisure and
FMCG companies in the
technology and finance
UK and internationally,
Mark has held senior
roles in finance, strategy
and general
management in a
number of leading
John founded The Gym
in 2007 and has over 20
years’ experience in the
health and fitness
industry.
sectors.
including The Rank
Group, Hard Rock Café
consumer businesses
including Tesco, Asos
The majority of Penny’s
International and Diageo.
and most recently Auto
He qualified as a
chartered accountant
Trader PLC, where he
was Deputy CFO and a
with Coopers & Lybrand.
member of the
John launched Dragons
Health Club plc in 1991,
before its flotation on
AIM in 1997 and sale to
Crown Sports plc in
executive career was
spent at Coca-Cola,
where she was
appointed President of
Coca-Cola Great Britain
& Ireland in 1992.
Operational Leadership
2000.
Team.
He started his career as
a management
consultant with
McKinsey & Co.
He has previously held
the positions of Chief
Financial Officer of
Essenden plc (now Ten
Entertainment Group
plc) from 2009 to 2015
and Chief Financial
Officer of Paramount
Restaurants from 2003
to 2008.
Richard served as The
Gym Group’s Chief
Financial Officer from
2015 to 2018.
Board skills and
experience
Penny has taken a
Richard has led the
hands-on role in leading
business strongly
talented and stable team
standards and has
the business
throughout her time as
Chairwoman. Penny
leads the Board in
strategic matters,
engages closely with the
Executive Directors,
visits operations
extensively, and takes an
active role in furthering
initiatives across the
business such as
sustainability and
diversity and inclusion.
through the disruption of
the pandemic, including
continuing to develop a
of executives.
Richard’s detailed
knowledge of The Gym
Group and background
in leisure businesses
supports his
development of the
business’s strategy
and financial delivery.
Mark brings his quality
experience in consumer
plcs to the Board and
executive team. Mark is
diligent, sets high
demonstrated flexibility
and leadership in
managing the financial
operations of the
business well through
COVID-19 disruption,
with our lenders and
continuing to develop
the finance function.
John’s wealth of
operational and
leadership experience
and knowledge of
industry trends offers the
Board valuable context
to develop its strategy
and inform its decisions.
As founder, John has an
unmatched network of
industry connections
used to support our
including working closely
business.
Paul is an economics
graduate from the
University of Cambridge
and a Chartered
Accountant.
He has previously held
the positions of Chief
Financial Officer of TJ
Hughes, National Car
Parks and Matalan, and
Non-Executive Chairman
of Betterbathrooms (UK),
Clothingsites.co.uk,
Hiring Hub, and Sykes
Cottages. Paul was also
previously Non-
Executive Director of
New Look Retailers.
Paul was the Non-
Executive Chairman of
The Gym from February
2012 until September
2015.
Paul is a Chartered
Accountant with a strong
finance background and
experience of multi-site
retail businesses. As our
Audit and Risk
Committee Chair, Paul
brings recent, relevant
and robust financial
experience to the
Committee and the
Board as a whole. Paul is
available to all
stakeholders in his
capacity as SID.
Other appointments
None
None
Grip-UK Limited –
Non-Executive Chairman
Wagamama –
Chief Executive Officer
iQ Student
Accommodation
– Adviser
Riverstone Living – Chair
Form3 – Non-executive
Director
ukactive – Board
member
Frame – Chairman
Jigsaw South East –
Chair of Trustees
Emma has wide-ranging
marketing experience
within the FMCG and
leisure sector.
Emma is currently the
Chief Executive Officer
at Wagamama and
previously has held
Marketing Director roles
at Merlin Entertainments
plc, Pizza Express and
Unilever.
David is an experienced
digital operating
executive.
David was previously the
Operations Director at
Amazon in the UK from
1998 to 2000, the Chief
Operating Officer at
Lastminute.com from
2000 to 2003, the Vice
President, Operations/
Chief Operating Officer
at eBay from 2003 to
2007 and Senior Vice
President of International
at Rackspace from 2010
to 2012.
Following his football
career, Rio has pursued
a number of interests in
business, broadcasting
and charity work,
including #5Magazine,
a lifestyle brand that
spans online content
and fashion. Rio is a
television pundit for
BT Sport as well as an
author and filmmaker
and works collaboratively
with young people
through the Rio
Ferdinand Foundation.
Rio is a passionate
advocate for fitness,
mental health and
wellbeing and diversity.
Wais has gathered
substantial e-commerce
expertise from a number
of leading online
businesses. He is
currently CEO at Push
Doctor, one of the
leading digital
healthcare companies
in Europe, working in
partnership with the NHS
to connect thousands of
patients each week with
clinicians. Before joining
Push Doctor, Wais was
previously Director of
Global Operations at
Treatwell, and prior to
that was International
Operations Director at
Just Eat.
Emma brings the Board
valuable commercial
and operational insights
into multi-site leisure
businesses, which is key
to the Board’s
development of the
Company’s strategy. As a
current executive leader,
she offers perspective
on the challenges facing
hospitality and leisure
businesses. Emma
brings relevant challenge
and support to the
executive team with
particular focus on
meeting customer
expectations.
Wais’s background in
leading technology
businesses gives him a
strong understanding of
the vital role technology
plays in our drive to be
ever more relevant to
members. Wais is an
executive leader in a
healthcare business and
is well aligned with our
purpose to provide
access to affordable
fitness for all.
Push Doctor – CEO
Rio’s advocacy for
fitness, mental health
and wellbeing and
diversity means that
he brings a unique
perspective to the Board
on our colleague and
membership profile,
which will form a key part
of the Board’s strategy in
recovery. Rio’s insight
into our key market
demographics will
support our continued
pursuit of our purpose
and our strategic
priorities as we recover
to grow again.
FE Luxury Travel,
Football Escapes,
Legacy Sports and
Education Foundation,
Rio Ferdinand
Foundation – Director
David draws on his
extensive plc experience
from a wide range of
technology and product
businesses. His
understanding of
technology development
is particularly valuable to
our development. David
brings his thorough
understanding of listed
plc matters to the
Remuneration
Committee Chair, his
Committee
memberships and Board
responsibilities.
Chair and Audit Chair
of Simply Business; Chair
of Pure360 and Camelot
Global Lottery Solutions
Ltd; Senior Independent
Director and Chair of the
Remuneration Committee
of On the Beach Group
plc; Chair of the
Remuneration Committee
of Reach plc; Audit Chair
of Forest Holidays;
Non-Executive Director
of Holiday Extras.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE
58
GOVERNANCE
EXECUTIVE COMMITTEE
BARNEY HARRISON
Chief Commercial Officer
Barney is an experienced marketing and
eCommerce professional. He has held a
number of senior marketing positions at
Sky, including the Head of Multi-
Channel Acquisition, Head of Direct
Marketing and eCommerce (ROI) and
Head of Media and Acquisition (Sky
Betting and Gaming).
Barney joined The Gym in 2016, and
in 2019 was promoted to Chief
Commercial Officer. Since 2020,
Barney has also led our central
operations function.
ANN-MARIE MURPHY
Chief People Officer
Ann-marie joined The Gym Group in
April 2018. She has over 15 years’
experience across a variety of senior
Human Resources roles, particularly in
the travel and retail industries. Before
joining The Gym Group, Ann-marie was
Group Human Resources Director at
New Look Retailers.
At the start of 2021, Ann-marie took on
the additional responsibility for our
Gym operations across the UK,
in addition to running the
People function.
JASPER MCINTOSH
Chief Information Officer
Jasper has headed The Gym Group’s
technology operation since 2011, joining
the Executive Committee in 2014. An
experienced technology director,
Jasper has previously delivered high
profile projects for GlaxoSmithKline,
Global Fund, the NHS and the French
Presidential Palace. While at The Gym
Group, he has overseen a major
programme of digital transformation,
introducing significant new digital
experiences and data & analytics
capabilities.
DAVID MELHUISH
Development Director
David joined The Gym Group in April
2013 and has successfully opened over
140 gyms to date. He was previously
Head of Development & Facilities at
Central England Co-operative managing
a diverse trading estate of over 300
properties.
Richard Darwin, CEO, and Mark George, CFO, are also members of our Executive Committee, and their biographies are on page 56.
HOW THE BOARD AND EXECUTIVE COMMITTEE
WORK TOGETHER
The Board and ExCo work closely together to ensure the robust governance of the business and successful execution of our strategy.
Over the year, the Board and ExCo have worked closely on managing matters related to COVID-19 remediation actions and developing
the strategy for 2021. The ExCo team’s biographies can be seen set out above.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 59
CORPORATE GOVERNANCE REPORT
BOARD GOVERNANCE
The Board and Committees
As at the date of this report, the Board comprises nine members:
• Non-Executive Chairwoman
• Five Independent Non-Executive Directors, of which one acts as
Senior Independent Director
• Two Executive Directors
• Founder Director
Two Independent Non-Executive Directors, Wais Shaifta and Rio
Ferdinand, joined the business on 1 February 2021, and Senior
Independent Director Paul Gilbert will retire from the Board at the
time of the Company’s AGM.
The Chairwoman, Penny Hughes, was deemed independent
on appointment.
The Board feels there is an appropriate succession plan for Board
representation to ensure a continued appropriate combination of
Executive and Non-Executive Directors. A full list of Directors and
biographies is set out on pages 56-57, which include summaries
of the skills and experiences each Director brings to the Board.
Board and Committee composition and orderly succession will be a
focus for Directors in the coming year. Our Remuneration Committee
continues to be made up of Independent Non-Executive Directors.
Our Nomination Committee is made up of a majority of Independent
NEDs, with the Founder Director and CEO also being members.
The Board is satisfied that there is a sufficient balance between
Executive and Non-Executive Directors on the Board to ensure that
no one individual has unfettered decision-making powers, and that
the Board has the appropriate balance of skills, experience,
independence and knowledge of the Company to enable it to
discharge its duties and responsibilities effectively.
The primary responsibility of the Board is to promote the long term
success of the Company and to grow shareholder value sustainably.
The Board has responsibility for the management, direction and
performance of the Group and for ensuring that appropriate resources
are in place to achieve its strategy. The Board directs and reviews the
Group’s operations within an agreed framework of controls, allowing
risk to be assessed and managed within permitted parameters.
The Board has established a formal schedule of matters reserved for
its approval and has delegated other specific responsibilities to its
principal Committees: the Audit and Risk Committee, Remuneration
Committee and Nomination Committee. Each of the Committee’s
roles and responsibilities are set out in formal terms of reference,
which are determined by the Board and available on the Company’s
website. Reports from each of these Committees are provided on
pages 65 to 89. In addition, in 2020 the Board formed the Health &
Safety and Wellbeing Committee, with formal responsibility for
oversight of COVID-secure operating protocols and material
updates, and reviewing the effectiveness of, the Group’s health and
safety risk and control processes. A report on the business of the
HSW Committee is on page 64.
Compliance with the Code
Our compliance and governance statement is on page 55.
In respect of Provision 36, the Company does not currently have
formal post-termination of employment share ownership guidelines
in place. The applicable share ownership guidelines under the
Remuneration Policy are set out on page 85. In accordance with the
Remuneration Policy, Executive Directors’ PSP awards have had a
two-year holding period applied since 2018. The Remuneration
Committee has stated its intention to consider the appropriateness
of extending the application of the share ownership guidelines for a
period post termination of employment during the anticipated
three-year term of the current Remuneration Policy, which was
approved by shareholders in 2019. More information is on page 85.
Once Paul Gilbert retires from the Board at the Company’s AGM,
David Kelly will be appointed as Audit and Risk Committee Chair
and Wais Shaifta will join the Committee. The Committee has
considered Provision 24 in relation to the future composition of the
Audit and Risk Committee when Paul Gilbert retires from the Board.
When considering appointments to the Committee to replace Paul
Gilbert, the Board has considered the rotation of Directors to ensure
that the Committee retains recent and relevant financial experience.
In addition to the commercial skills, length of service and experience
of the Committee members, the Committee is well supported by the
Chairwoman and Executive Directors and the Company’s advisers.
Taking into account David’s experience of audit committees, the
Committee’s industry-relevant experience as a whole, the relevant
financial experience of other Board members who do not sit on the
Committee, and the support of the Company’s advisers, the
Committee can continue to discharge its obligations as set out
in the Audit and Risk Committee Report on pages 68-70. The
Committee will keep the composition of its Committees under
regular review to ensure that composition remains appropriate.
More information on the Board’s succession planning is in the
Nomination Committee Report.
BOARD LEADERSHIP
Governance structure and key responsibilities
The Board has established a formal schedule of matters reserved for
its approval and has delegated other specific responsibilities to its
principal Sub-Committees: the Audit and Risk Committee,
Remuneration Committee and Nomination Committee. The Board
has further established a Health & Safety and Wellbeing Committee.
Each of the Committee’s roles and responsibilities are set out in
formal terms of reference, which are determined by the Board. These
are available for review on the Company’s website.
All formal Board and Committee meetings are minuted and these
minutes are formally approved at the following meeting. Board
minutes contain details of the Directors’ decision-making processes
and any concerns raised by the Directors. The Board keeps the
matters reserved for the Board under review, and has agreed the
current schedule of matters reserved remains effective. The Board
has agreed to review the matters reserved later in the year, once the
Group’s operations have fully resumed.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 60
GOVERNANCE
CORPORATE GOVERNANCE REPORT
CONTINUED
Governance structure and key responsibilities
THE
BOARD
the Group’s strategic aims, objectives and commercial strategy;
review of performance relative to the Group’s business plans and budgets;
The schedule of matters reserved for the Board includes the consideration and approval of:
•
•
• major changes to the Group’s corporate structure, including acquisitions and disposals;
• material capital expenditure;
• Financial Statements and Group dividend policy, including recommendation of the interim and final
dividends;
• major changes to the capital structure including tax and treasury management;
• major changes to accounting policies or practices;
•
•
•
the system of internal control and risk management policy;
the Group’s risk appetite statements; and
the Group’s corporate governance and compliance arrangements.
BOARD
COMMITTEES
The Board formally delegates certain matters to one of the Committees set out below.
AUDIT AND RISK
See report on page 68
REMUNERATION
See report on page 71
NOMINATION
See report on page 65
HEALTH & SAFETY
AND WELLBEING
New for 2020
See report on page 64
Roles and responsibilities
Key responsibility
CHAIRWOMAN
There is a clear separation of responsibilities between the Chairwoman and the Chief Executive Officer. Penny
Hughes, as Non-Executive Chairwoman, sets the Board agenda and leads discussion and decision making.
She uses her experience of chairing to promote effective debate and contribution from Executive and
Non-Executive Board members.
CEO
Richard Darwin, as Chief Executive Officer, leads the Executive Committee, which support him in the operational
and day-to-day management of the Company. The Non-Executive Directors meet at least once annually without
Executive Directors present.
SENIOR
INDEPENDENT
DIRECTOR ‘SID’
Paul Gilbert fulfils the role of SID on the Board. Paul is available to shareholders if they have concerns that the
normal channels of Chairwoman, Chief Executive Officer or Chief Financial Officer have failed to resolve, or for
which such channels of communication are inappropriate. This mode of communication was not used in the year.
He also acts as intermediary for the other Directors and the Chairwoman, as necessary, and conducts the annual
appraisal of the Chairwoman. From the Company’s next AGM, when Paul retires from the Board, Emma Woods will
take on the role of SID.
EXCO
COMPANY
SECRETARY
The Executive Committee is responsible for executing the strategy determined by the Board and members
regularly attend Board meetings to update Directors on progress made against the Company’s agreed
strategic objectives.
In January 2020, the Company appointed an in-house Company Secretary, with responsibility for ensuring
effective communication flows between the Board, its Committees, and the Executive Committee.
The Company Secretary also advises the Board on corporate governance matters and ensures that Board
procedures are followed. The Company Secretary attends all Board and Committee meetings by invitation
of the respective Chairs.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 BOARD SKILLS AND COMPOSITION
Overview
Pursuant to the delegated authority of the Nomination Committee,
during the year and in early 2021 the Nomination Committee
reviewed the structure, size and composition of the Board to ensure
it has an appropriate balance of skills, diversity, experience,
knowledge and independence, and made recommendations
regarding appointments to the Board, succession planning and
Committee composition.
In 2021, it is the Board’s intention that the Nomination Committee will
carry on this continual review of composition by looking at the skills
matrix of the Board, considering skills, knowledge and experience
that are necessary and desirable for the successful execution of the
Company’s strategy.
RELATIONSHIP WITH SHAREHOLDERS
Ensuring a satisfactory dialogue with shareholders and receiving
reports on the views of shareholders is a matter reserved for the
Board.
The Board is committed to maintaining good communications with
existing and potential shareholders based on the mutual
understanding of objectives. The Group has regular dialogue with
institutional shareholders in order to develop an understanding of
their views which is communicated back to, and discussed with, the
Board. Management also conducts meetings with institutions that
focus on private clients as a way of extending the Company
shareholder base. The Chairwoman is also available to shareholders
and has met several of the Company’s larger shareholders during
the year.
The Board receives regular investor feedback through our joint
brokers, Numis and Peel Hunt, both at Board meetings and through
written updates, as well as via our remuneration consultants who
provide updates to the Board on institutional shareholder views.
Presentations given to analysts and investors covering the annual
and interim results, along with results and further information for
investors, are included in the investors section of the Company’s
website at www.tggplc.com. The CEO and CFO hold presentations at
the time of the half year and full year results, with such presentations
being made available as audio recordings on the investor website. All
Board members usually attend the AGM, subject to prevailing
COVID-19 restrictions. In 2020, the AGM was held in accordance with
the Stay at Home measures, as a closed meeting with shareholders
given the opportunity to vote by proxy and submit questions in
advance.
Board decision making
The Board considers the interests of the Company’s stakeholders in
all of its decision making, as described in detail on pages 26-29.
61
BOARD DECISION MAKING
2020 was a severely disrupted year in which several well-
established ways of working had to be reconsidered and
carried out differently.
As part of its decision making, the Board has regard to a variety
of matters including the interests of various stakeholders, the
consequences of its decisions in the long term and its long
term reputation in the marketplace. Usually, the Board holds two
strategy sessions which consider future plans and initiatives for
beyond the next 12 months. In 2020, owing to closure periods
and disruption, the Board held one strategy session in
November to look ahead to 2021 business plan and to recovery.
The Directors also review the Budget for the forthcoming year in
detail. The Executive Committee attend these sessions and
present to the Board on each of their respective areas of
responsibility to ensure the Board has all relevant information on
behalf of stakeholder groups, such as environmental impact,
community assessment via site appraisals, employee and
member feedback, and any necessary communications, and to
ensure that the Board’s strategy is clearly communicated.
To help reduce risk as part of decision making, the Audit and
Risk Committee review all key risks that the Company faces,
which are not limited to those disclosed as principal risks in this
report. Risks are also considered in detail as part of any
acquisition made by the Company. The Board draws on all of
the above resources and processes when considering a major
strategic decision.
See pages 26 to 29 for Stakeholder engagement
The Board has met virtually through the COVID-19 pandemic, and
continued to do so in early 2021.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 62
GOVERNANCE
CORPORATE GOVERNANCE REPORT
CONTINUED
BOARD MEETINGS
Overview
There were nine scheduled Board meetings held in 2020 and there
are nine Board meetings scheduled for 2021, one of which is a
shorter update meeting to review progress of preparation of interim
financial statements. There are also four scheduled sub-Committee
meetings of the Board to approve financial and trading statements.
In addition to our scheduled meetings, following the outbreak of
COVID-19 in the UK, the Board adapted its ways of working by
moving to virtual working and meeting online. As part of this, the
Board agreed to hold more regular informal ad hoc meetings, which
are considered unscheduled and usually less than an hour in
duration, to ensure that the team remained connected and provide
support to and access for the executive team if required. In March
2020, the Board held two additional ad hoc sub-Committee
meetings to review and approve matters relating to the Company’s
Annual Report and Accounts, and thereafter chose to meet on an
ad hoc basis at weekly intervals through the first national lockdown
until the Company’s sites reopened in July 2020.
Eight Audit and Risk Committee meetings were held. This was an
increased number from 2019, owing to additional considerations
around preparation of financial reporting and monitoring of the
changing macroeconomic environment.
Seven Remuneration Committee meetings were held. The additional
meetings were held to consider remuneration actions taken in
response to the COVID-19 pandemic, as described in the
Remuneration Report.
Four Nomination Committee meetings were held to consider the
appointments of new Non-Executive Directors and Board succession
planning matters.
The Health & Safety and Wellbeing Committee was first constituted
in July 2020 and met three times to consider matters relating to the
Company’s COVID-secure operating protocols.
Since the end of 2020, the Board has moved to fortnightly informal
virtual meetings in the third national lockdown commencing January
2021 in addition to its formal, scheduled meetings. This enables the
Board to maintain regular contact with the executive team and
facilitates effective decision making when in-person meetings are
not possible.
The scheduled Board and Committee meetings have standing
agenda items, which ensure that all aspects of the business are
given due consideration. The Board regularly reviews strategic
matters as part of the standing agenda items. In addition, the Board
held a strategy meeting in November 2020 with the Executive
Committee, to review, consider and discuss the strategic plans of the
Group for 2021 and recovery from COVID-19 disruption. The Board
intends to keep the number of strategic meetings under review for
2021.
Board and Committee attendance
Our Directors’ attendance and engagement has continued to be
excellent. Directors’ attendance at the scheduled Board and
Committee meetings during the year was as follows:
Penny Hughes
Richard Darwin
Mark George
Paul Gilbert
David Kelly
John Treharne
Emma Woods
Board
Nomination
Committee
Audit and Risk
Committee
Remuneration
Committee
Health & Safety
and Wellbeing
Committee
9/9
9/9
9/9
9/9
9/9
9/9
9/9
4/4
4/4
–
4/4
4/4
4/4
4/4
–
–
–
8/8
8/8
–
8/8
7/7
–
–
7/7
7/7
–
7/7
3/3
3/3
–
3/3
–
3/3
–
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 63
BOARD EFFECTIVENESS
Information and support
An agenda and accompanying pack of detailed papers are
circulated to the Board a week in advance of each Board meeting via
a secure digital app. Given the fast-paced nature of the business,
certain relevant information, such as latest trading data up to the
prior day is shared with Directors at Board meetings. These include
reports from Executive Directors, other members of senior
management and external advisers. Members of senior
management are often invited to present relevant matters to the
Board. All Directors have direct access to senior management should
they require additional information on any of the items to be
discussed, and the Company Secretary if they should wish to
discuss procedural or administrative matters. The Board and the
Audit and Risk Committee also receive further regular and specific
reports to allow the monitoring of the adequacy of the Company’s
systems of internal controls.
The information supplied to the Board and its Committees is kept
under review and is formally assessed on an annual basis as part of
the Board evaluation exercise to ensure it is fit and proper for
purpose and that it enables sound decision making.
Training and development
The Company has developed an induction programme to provide
new Directors with a formal, tailored induction that will include visiting
several operational locations when possible. The Board and
Committee standing agenda items include the briefing of Directors
on a wide range of topics, which include corporate governance and
regulatory requirements. Additionally, Directors have access to the
advice and services of the Company Secretary and independent
and professional advice at the Company’s expense should they
determine that this is necessary to discharge their duties.
As part of the Board evaluation and induction processes, the
Chairwoman has reviewed training and development needs with
each Director. Overall, the Board feel well trained, and recognise the
importance of formal training for new Directors or to support role and
responsibility changes. There was a request for some refresher
training on Board Committee responsibilities which will be facilitated
during 2021.
Findings from previous review and progress on actions
Appointment and induction of new Directors
No new Directors were appointed during the year. Wais Shaifta and
Rio Ferdinand joined the Board on 1 February 2021 and information
relating to their appointment and induction programme is in the
Nomination Committee Report on page 65.
Re-election of Directors
The Board considers all Directors to be effective, committed to their
roles and to have sufficient time to perform their duties. In
accordance with the Articles of Association, Penny Hughes, Richard
Darwin, Mark George, David Kelly, John Treharne and Emma Woods
will be offering themselves for re-election at the Company’s AGM.
Wais Shaifta and Rio Ferdinand will be offering themselves for
election at the Company’s AGM, having joined on 1 February 2021.
Paul Gilbert, after nine years with the Group of which five were as
Senior Independent Director, will be retiring from the Board and will
not seek re-election at the AGM.
All of the Directors have service agreements or letters of
appointment and the details of their terms are set out in the Report
of the Remuneration Committee. The service agreements and letters
of appointment are available for inspection at the Company’s
registered office during normal business hours.
BOARD EVALUATION AND EFFECTIVENESS
Overview
The Directors are aware of the need to continually monitor and
improve performance and recognise this can be achieved through
regular Board evaluations, which provide a valuable feedback
mechanism for improving Board effectiveness. In addition to regular
discussions during Board meetings, the Board considers each year
whether to conduct a formal external performance evaluation of the
Board, its Committees and the Chairwoman and it was agreed to
undertake the review internally this year, as in previous years. As the
Company is outside of the FTSE 350, it is not required to hold an
external evaluation every three years. However, evaluation plans are
kept under review on an annual basis.
Key findings for 2019
Actions undertaken
CONTINUED FOCUS ON ALL ASPECTS
OF DIVERSITY WITHIN THE COMPANY.
MORE OPPORTUNITIES FOR DIRECTORS
TO REFRESH AND DEVELOP THEIR
UNDERSTANDING OF SPECIFIC TOPICS.
CONSIDER WAYS OF ENSURING ROBUST
AND EFFICIENT GOVERNANCE OVER SITE
APPROVALS WAS MAINTAINED, SUCH AS
DEVELOPING A DEDICATED BOARD
COMMITTEE.
The Nomination Committee reviewed the skills, experience, diversity
and knowledge of the Board and made two new appointments as well
as other developments as detailed in the Nomination Committee
report on page 65. Progress has been made on diversity and inclusion
initiatives as detailed in the Sustainability Report on page 36 – 37.
Proposals for refreshing governance training have been carried
forward into 2021 as new Directors join the Board.
The frequency of site appraisals decreased pursuant to COVID-19
disruption. Instead, the Board constituted a new Committee dedicated
to the oversight of health and safety and wellbeing matters.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 64
GOVERNANCE
CORPORATE GOVERNANCE REPORT
CONTINUED
BOARD EFFECTIVENESS
2020 internal evaluation
As part of the 2020 evaluation, a tailored questionnaire specifically
designed to assess the performance of the Board, each of its
Committees and the Chairwoman, was circulated and completed by
all Directors. The questionnaire covered the Board’s performance in
relation to the coronavirus disruption and the Board’s leadership in
this period as well as key initiatives which took place during the year,
including the process of appointment of our new Non-Executive
Directors. The questionnaire was supplemented by a review of the
Chairwoman’s performance. The results were collated, and a
summary paper was prepared, which was discussed in detail by the
Board and a list of action points was compiled which will be
monitored by the Nomination Committee to ensure all outcomes are
monitored and achieved in a timely manner.
The review showed a consensus view that 2020 had been an
exceptional year of disruption, and the Board had showed flexibility
and agility in leadership, adapting ways of working and maintaining a
positive, supportive working relationship with the executive team,
who had shown resilience and pace in a difficult period. In 2021, it
would be important that the Board focus on the strategic outlook of
the business during and after recovery from COVID-19 disruption. It
was agreed to review agendas to focus on key essential priorities
and value drivers, and ensure sufficient time for the Board to focus
on future strategy. In addition, the Board will support the executive
team as appropriate to achieve the strategic plan and return to
growth.
The feedback relating to the appointments of the two new Non-
Executive Directors was unanimously positive and all Directors
agreed that a full, formal and tailored induction programme would be
very important to support the new Directors in learning about the
business, its culture, purpose, history and strategy, its commercial
proposition, and the governance roles and responsibilities relevant to
their duties. It was agreed that orderly succession and rotation of
Board roles and responsibilities would continue and be reviewed
regularly by the Nomination Committee. This review includes the role
of the Designated NED for People Engagement, which would rotate
to enable other Directors to take on the responsibilities including
working with the Chief People Officer ensuring People matters were
reflected at Board level. In addition, Directors commented that
general refresher training on Committee responsibilities would be
useful, in light of changes to Committee composition.
The performance of each Director was also assessed through a
self-appraisal section of the questionnaire and discussed by the
Board and, accordingly, the Board believes that each Director should
be re-elected at the AGM, as they have the requisite skills and
experience, and demonstrate the necessary commitment to
contribute effectively to the deliberations of the Board. Additionally,
the Chairwoman has confirmed that the performance of each
Director continues to be effective and that they each demonstrate
commitment to the role.
The questionnaire was supplemented by a review of the
Chairwoman’s performance which was carried out by the SID, who
discussed feedback with the Chairwoman and identified no matters
of concern. It was concluded that the Chairwoman’s leadership
remains effective.
The results of the evaluation exercise demonstrated that the Board,
its Committees and the Chairwoman continue to operate effectively.
Directors’ conflicts of interest
Closewall Limited (‘Closewall’) is a building firm owned by the brother
and sister-in-law of John Treharne. Closewall is one of several
contractors that tender for contracts for the design and construction
of the Group’s gyms with which the Group has long term
relationships. The Group paid £1.8 million (2019: £2.0 million) to
Closewall in connection with the fit-out of new gyms during the year
ended 31 December 2020. John Treharne has never been involved in
decision making in relation to the fit-out contractors that the Group
engages and the Group operates a robust purchasing process
overseen by a number of senior employees. In the opinion of the
Directors, such decision making has followed appropriate
governance procedures with regard to conflicts of interest.
No Directors took on additional significant commitments during
the year.
No other contract with the Company or any subsidiary undertaking
of the Company in which any Director was materially interested
existed at the end of the financial year.
In accordance with the Board’s Conflicts Policy, Rio and Wais
declared their external commitments to the Board in advance of
appointment and these were approved.
HEALTH & SAFETY AND
WELLBEING COMMITTEE
Members
Richard Darwin (Chair), Penny Hughes,
John Treharne, Paul Gilbert, David Melhuish
Meetings
3
The HSW Committee first met on 30 July 2020 and met three
times in the year, primarily to consider matters relating to the
Company’s COVID-secure operating protocols and applicable
policies and procedures. In 2020, the Committee also received
updates and reviewed progress on the Company’s COVID-
secure and health and safety site audits. The Committee also
considered and, where appropriate, approved Health & Safety
policies and procedures.
In 2021, the HSW Committee has met once to consider
matters connected to reopening protocols, health and safety
updates and employee wellbeing matters.
Richard Darwin is the Chair of the HSW Committee and its
membership is comprised of Board Directors and the
Development Director, David Melhuish, who is a member of the
Executive Committee. In accordance with the Committee’s
terms of reference, the Chair invites other persons to attend the
Committee depending on the business of the agenda.
As with Board Committees, the Company Secretary attends
the meeting at the invitation of the Chair and keeps a formal
record of minutes.
The Committee has formal terms of reference setting out its
duties, which include, in addition to the matters detailed above,
health and safety and wellbeing matters escalated by the
Executive Committee and the H&S Steerco, or from other
persons as appropriate. The Committee receives reports and
recommendations from the H&S Steerco relating to operational
health and safety matters.
An overview of the Company’s health and safety is included in
the Sustainability Report on pages 32 and 33.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020
REPORT OF THE NOMINATION COMMITTEE
65
COMMITTEE
MEMBERS
Chairwoman
Committee members
Richard Darwin, Paul Gilbert,
David Kelly, John Treharne,
Emma Woods
Number of meetings held in 2020
4
“ T H E B U S I N E S S H A S B E N E F I T E D
F R O M C O N T I N U I T Y AT B O A R D L E V E L
S I N C E I P O, A N D W E A G R E E D I T WA S
T I M E T O S TA R T R O TAT I O N A N D T O
AT T R A C T N E W S K I L L S A N D
E X P E R I E N C E S T O O U R T E A M .”
P E N N Y H U G H E S C B E , C H A I R W O M A N
OBJECTIVES
• To ensure the Board has an appropriate balance of skills,
diversity, experience, knowledge and independence.
• To ensure that the most suitable candidates for Executive and
Non-Executive positions are identified and nominated to fill
vacancies as and when they arise.
• To ensure that appropriate succession plans are in place for
Penny Hughes
Directors and senior executives of the Company.
• To undertake a Board evaluation process to identify
developmental processes that can enhance Board practices and
Director performance.
KEY ACHIEVEMENTS IN 2020
• Led the recruitment process using external search agency MBS
Group for the appointment of two new Non-Executive Directors,
Wais Shaifta and Rio Ferdinand, recommended their
appointments to the Board and approved their induction
programme.
• Reviewed the composition of the Board and its Committees and
commenced an ongoing review process of Board rotation and
succession planning to continue into 2021, with a remit to make
recommendations for the composition of the Board’s Committees
and Board responsibilities on an ongoing basis.
• Oversaw progress on diversity and inclusion initiatives, including:
– the publication of the Diversity and Inclusion Manifesto;
– the Company’s signature of the Race at Work Charter;
– the appointment of Penny as the Board’s Race Sponsor; and
– receiving regular updates on the progress of diversity and
inclusion workstreams.
• Supported the Board evaluation process for 2020-21, the results
of which can be found in the Corporate Governance report on
page 64.
• With support from the Remuneration Committee, held a review
and planning session considering talent and succession planning
for key roles within the wider business.
Roles and responsibilities
The role of the Committee is to develop and maintain a formal,
rigorous and transparent procedure for making recommendations
on appointments and reappointments to the Board. In addition, it is
responsible for reviewing the succession plans for Executive
Directors and Non-Executive Directors.
This involves:
• keeping under review the leadership needs of the Group, both
Executive and Non-Executive, with a view to ensuring the
continued ability of the Group to compete effectively in the
marketplace;
regularly reviewing the structure, size and composition of the
Board to ensure it has an appropriate balance of skills, diversity,
experience, knowledge and independence, and reporting and
making recommendations to the Board with regard to any
changes; and
regularly assessing the knowledge, skills and experience of
individual members of the Board and reporting the results
to the Board.
•
•
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE
66
GOVERNANCE
REPORT OF THE NOMINATION COMMITTEE
CONTINUED
MAIN ACTIVITIES
Appointment of new Directors
In 2020, as recommended by the previous Board evaluation, the
Nomination Committee undertook to review the skills, diversity,
experience and knowledge of the Board, to ensure the Board had
the necessary resources to continue to provide strong and effective
leadership to the Company. The Committee agreed that the
Company had been well served by the stability and experience of
the Board since IPO, and that the Company was well supported with
a mix of skills. All Directors continued to perform their duties well and
had shown flexibility and adaptability through the disruption caused
by the COVID-19 outbreak in the UK.
The Nomination Committee recognised an opportunity to introduce
further diversity and entrepreneurial, digital and engagement skills,
aligned with the Company’s future strategic ambitions. The
Committee authorised the Chairwoman to lead a formal recruitment
process, supported by external search agency MBS Group. MBS
Group performed no other services for the Company in the year. The
process included development of a brief setting out the Committee’s
specification for the role, preparation of a shortlist, and interviews
with several Board members and members of senior management of
the Company to assess the shortlisted candidates’ skills, knowledge,
experience and alignment with the Company’s culture and strategy.
Furthermore, the Committee determined that the existing Board of
Directors was sufficiently well experienced to support an appropriate
induction for Directors who had not held a post on a listed company
Board before, which enabled the Company to consider a broader
range of candidates at different stages and places in their respective
careers.
Following a formal, robust and transparent process, including receipt
of satisfactory references, the Committee recommended the
appointments of Wais Shaifta and Rio Ferdinand to the Board. Their
biographies can be found on page 57 and both Directors joined the
Board on 1 February 2021.
The Committee further approved a full, formal and tailored induction
programme designed to support the new Directors in learning
about the business, its culture, purpose, history and strategy, its
commercial proposition, and the governance roles and
responsibilities relevant to their duties. Wais and Rio have begun
this programme.
Gender breakdown at 31 December 2020
Succession planning: Board level
The Committee considered succession and Committee roles and
responsibilities for the Independent Directors, taking into account
governance requirements and the balance of Directors’ skills and
experience on an ongoing basis.
As announced by the Company on 15 January 2021, Paul Gilbert will
retire from the Board of Directors at the Company’s AGM. Paul has
served nine years in total on the Board of The Gym Group; five since
IPO as Senior Independent Director and prior to IPO as Non-
Executive Chairman. The Board is enormously grateful to Paul for his
support and contribution he has made to the Company. Following
Paul’s retirement, David Kelly will undertake the role of Chair of the
Audit and Risk Committee.
The Board formally considered the composition of the Audit and Risk
Committee following these changes. The Board recognises the
requirement of Provision 24 of the Corporate Governance Code, that
at least one member of the Committee has recent and relevant
financial experience, and the rationale for its satisfactory conclusions
is set out on page 59.
Following the Company’s AGM and Paul’s retirement from the Board,
the role of Senior Independent Director will be taken over by Emma
Woods. In addition, the Nomination Committee recommended to the
Board that further changes to the Committee memberships of the
Non-Executive Directors be made, taking into account the Directors’
skills, knowledge and experience. It was recommended that, with
effect from the Company’s AGM, Emma Woods be appointed Chair
of the Remuneration Committee, Wais Shaifta join the Audit & Risk,
Nomination and Health & Safety and Wellbeing Committees, and Rio
Ferdinand join the Remuneration, Nomination and Health & Safety
and Wellbeing Committees. The Committee will keep the
composition of its Committees under regular review to ensure that
composition remains appropriate.
In the coming years, the Board intends that an orderly rotation of
Independent Non-Executive Directors will take place, taking into
account governance requirements and the balance of Directors’
skills and experience, and the Committee will keep this matter under
regular review.
BOARD
1
EXCO
1
SENIOR LEADERSHIP TEAM
1
1. MALE: 5
71.4%
2
2. FEMALE: 2
28.6%
2
1. MALE: 5
83.3%
2. FEMALE: 1
16.7%
2
1. MALE: 32
76.2%
2. FEMALE: 10
23.8%
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 67
We have published our most recent Gender Pay Gap Report. Our
mean gender pay gap has increased this year, as we have seen
more men than women in senior roles, which attract a higher salary.
Our median gender pay gap has reduced as we now employ over
1,200 more Fitness Trainers, who are all paid the same hourly rate.
While our gender pay gap compares favourably with the UK
economy more widely, we are committed to reporting on an annual
basis the actions we are taking to further reduce the gap and on our
progress made against these actions. As we highlight in our report,
the pay gap is formed largely because our most senior roles are
mainly filled by men and we continue to focus on a diverse
succession pipeline.
We will continue to monitor and report our progress on diversity
during 2021.
Governance processes
The Committee meets at least twice a year and at such other times
as the Committee Chair or any member of the Committee may
request. In 2020, the Committee met four times and attendance at
the meetings is shown in the table on page 62.
The external search agency engaged to work on the appointment of
the new Independent Non-Executive Directors, MBS Group,
performed no other services for the Company in the year.
The Committee has formal terms of reference which can be viewed
on the Company’s website www.tggplc.com.
Annual evaluation of the Nomination Committee’s
performance
As part of the evaluation process, the performance and effectiveness
of the Nomination Committee was considered and it was agreed that
the Committee continued to work effectively. Feedback from
Directors was unanimously positive regarding the high calibre of the
appointments made to the Board, though it was acknowledged that
as the interview process had been conducted amid COVID-19
protocols, it would be important for the new Directors to make site
and business visits when possible. All Directors commented on the
importance of a full, formal and tailored induction plan to introduce
the new Board colleagues to the business and support their
understanding of roles and responsibilities. Both factors were taken
as actions and Wais and Rio have embarked on full, formal and
tailored induction plans which will develop over time and include site
visits at the appropriate stage.
The report on the full Board evaluation process can be found within
the Corporate Governance Report on page 64.
Penny Hughes
Chairwoman of the Nomination Committee
18 March 2021
Succession planning: beyond the Board
In 2019, the Committee recommended the appointment of an
in-house Company Secretary to the Board, which was an action from
our Board evaluation the previous year. The Company Secretary’s
main duties are ensuring Board procedures are followed, advising
the Board on corporate governance matters, and ensuring effective
communication flows between the Board, its Committees, and the
Executive Committee. Katy Tucker was appointed to the role of
Company Secretary on 2 January 2020 and Mark George, Chief
Financial Officer, stepped down as Company Secretary on the same
date, retaining his executive responsibilities as CFO. As part of the
Board evaluation process, details of which are on page 64, the Board
agreed that the move to appoint a standalone Company Secretary
had been well received and had a positive effect on Board
procedures, communication flows and Board advice and support,
particularly in light of the COVID-19 changes to ways of working.
Senior management succession planning continues to be a focus for
the Committee. During the year, the Committee undertook to review
certain senior management roles, both from a capabilities
perspective and in terms of succession planning. The Committee
met without the Executive Directors to review progress against the
CEO and CFO’s respective development plans as noted in 2019’s
report, and consider ongoing performance and development. With
support from the Remuneration Committee, the Nomination
Committee considered the findings of the talent review carried out
by the Executive Committee in relation to the senior management
team (‘SLT’).
Diversity and inclusion
Our Diversity and Inclusion Policy is that no individual should be
discriminated against on the grounds of age, disability, gender
reassignment, marriage and civil partnership, pregnancy and
maternity, race (which includes colour, nationality and ethnic or
national origins), religion or belief, sex or sexual orientation. Our
policy is reflected in our approach to recruitment at all levels,
including Board level, and is stated in our employee handbook which
forms part of our employees’ service contracts.
During the year, our Chairwoman Penny Hughes was identified as an
Advocate for Change within Women in Hospitality, Travel and Leisure,
as an acknowledgment of her commitment to driving change and
promoting equality, inclusion and diversity at The Gym Group.
Our strategic approach to diversity and equal opportunity, including
the progress made in 2020, is set out within our Sustainability Report
on diversity and inclusion on page 36. We have published our D&I
Manifesto on the Company’s website, www.tggplc.com.
As at 31 December 2020 the Board comprised 28.6% (two) female
and 71.4% (five) male Board members. The gender balance within our
Executive Committee as at 31 December 2020 was 16.7% (one)
female and 83.3% (five) male members. The senior leadership team,
comprised mainly of executive committees’ direct reports, have
23.8% (ten) female and 76.2% (32) male members.
Since December, the Board composition has changed with the
appointment of Wais and Rio. Following the Company’s AGM, the
Board will have two female (25%) and six male Board members
(75%). We firmly believe in making progress towards more diverse
leadership in all areas, including gender and cultural diversity. Whilst
the proportion of female representation on the Board has fallen,
we feel strongly that we are making strides towards a more
representative, diverse Board and will continue this progress
over time.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 68
GOVERNANCE
REPORT OF THE AUDIT AND RISK COMMITTEE
COMMITTEE
MEMBERS
Chairman
Paul Gilbert
Committee members
David Kelly, Emma Woods
Number of meetings held in 2020
8
“ T H E B U S I N E S S H A S F O C U S E D
O N M A N A G I N G C A S H A N D
R I S K T H R O U G H T H I S P E R I O D
O F S I G N I F I C A N T U N C E R TA I N T Y
A N D A S A R E S U LT I S P R E PA R E D
T O E M E R G E F R O M T H E C R I S I S
I N A R O B U S T P O S I T I O N .”
PA U L G I L B E R T, C H A I R O F T H E A U D I T A N D
R I S K C O M M I T T E E
OBJECTIVES
• To monitor the integrity of the Financial Statements and related
announcements, including any significant financial reporting
judgements contained therein of the Company and its
subsidiaries.
• To advise on whether the Annual Report and Accounts, taken as a
whole, is fair, balanced and understandable and to provide the
information necessary for shareholders to assess the Company’s
position and performance, business model and strategy.
• To review and, where appropriate, make recommendations to the
Board on the adequacy and effectiveness of the Group’s financial
controls and internal control and risk management systems.
• To review the Group’s risk management framework, including
principles, policies, methodologies, systems, processes,
procedures and people.
• To monitor the effectiveness and objectivity of the Company’s
internal audit function (if applicable).
• To monitor the effectiveness, independence and objectivity of the
Company’s external auditors, as well as setting the auditors’
remuneration and terms of engagement, and conducting a tender
process (if applicable).
• To develop, implement and monitor the non-audit services policy.
• To monitor the effectiveness of the Group’s whistleblowing
procedures.
• To review the Group’s risk appetite.
KEY ACHIEVEMENTS IN 2020
• Considered the plans and outcome of the Group’s half year and
full year results announcements and Annual Report.
• Oversaw the Group’s external reporting response to COVID-19,
including review of the accounting and reporting impacts of
COVID-19.
• Reviewed the Corporate Risk Assessment and the impact
COVID-19 has on it.
• Oversaw the ongoing optimisation of the Company’s financial
process and control environment.
• Oversaw the planning and execution of the equity placing.
• Oversaw the planning and execution of amendments to the
revolving credit facility.
Roles and responsibilities
The Audit and Risk Committee’s role is to assist the Board with the
discharge of its responsibilities in relation to financial reporting,
including reviewing the Group’s annual and half year Financial
Statements and accounting policies, internal and external audits and
controls, reviewing and monitoring the scope of the annual audit and
the extent of the non-audit work undertaken by external auditors,
advising on the appointment of external auditors and reviewing the
effectiveness of the internal audit, internal controls, risk management,
whistleblowing and fraud systems in place within the Group.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020
69
Exceptional items
Exceptional items as identified by management has been reviewed
and considered, and the Committee is satisfied that they are
appropriately classified as such.
External auditors
The appointment of Ernst & Young LLP was made having considered
their capabilities and experience in comparison to the previous audit
firm. As part of the annual reporting process, we reviewed the
effectiveness of the auditors through:
reviewing the 2020 audit plan;
•
• discussing the results of the audit including their views on
material accounting issues and key judgements and estimates;
• meeting the auditors without management present and
understanding the extent to which the auditors challenged
management;
• considering the robustness of the audit process; and
• confirming their independence and objectivity through a review of
any non-audit service work undertaken during the year and
whether any other conflicts of interest exist which might impact
independence.
The Audit and Risk Committee is satisfied with the performance and
independence of Ernst & Young LLP and therefore recommend their
reappointment at the AGM.
Audit rotation
The external auditors, Ernst & Young LLP, were appointed on 28 July
2015. In line with EU requirements, it is intended that the external
audit will be put to tender every ten years and therefore the
Company will conduct a tender process no later than 2025. In
addition, as required by the UK Financial Reporting Council’s Ethical
Standards (2016 and 2019), Ernst & Young LLP’s policy is to rotate key
audit partners every five years, with the next rotation to take place
ahead of our year ending 31 December 2022.
Risk management
Our risk management process and the risks which are considered to
be the principal risks of the Group are detailed on pages 46 to 50.
During the year the Committee has reviewed the Group’s risk
assessment and methodology, including the mitigating actions put in
place to reduce each risk.
Internal control
The Group operates its system of internal control by using the
following key elements:
• Regular review meetings of various groups, including business
functions, senior management, sub-Committees and the Board to
discuss key issues;
• A detailed business planning process, combining top-down and
bottom-up approaches, with outputs reviewed by the Board;
• A robust system of financial controls, including preventative
controls and detective controls including a thorough review
process; and
• Circulation of monthly reports to the Board containing detailed
information regarding financial performance, rolling forecasts,
actual and forecast covenant compliance, and financial and
non-financial KPIs.
Governance processes
The Audit and Risk Committee meets at least four times a year and
as requested by the external auditors. The Committee met eight
times in 2020 to consider additional matters relevant to the COVID-19
pandemic. During 2020 the Committee held a private session with
the external auditors without members of management being
present.
The Committee is made up solely of the Independent Non-Executive
Directors who have experience relevant to our market. The Chairman
of the Committee is a chartered accountant and brings recent and
relevant financial experience and expertise. The Committee has
formal terms of reference which can be viewed on the Company’s
website: www.tggplc.com.
The Chairman of the Committee will be retiring from this role and
from the Board of Directors at the Company’s next AGM. See the
Corporate Governance Report page 59 for further details on his
replacement as Audit and Risk Committee Chair.
Significant issues
Prior to each meeting of the Committee at which they are to be
considered, the management team produces a paper providing
details of any significant accounting, tax, compliance and legal
issues. Management are also invited to attend these meetings where
further guidance is required.
The significant issues considered by the Committee in respect of the
2020 Annual Report are as follows:
COVID-19
The Committee considered the potential impact of the COVID-19
pandemic on the cash flows and liquidity of the Group, particularly in
relation to the preparation of the Company’s Financial Statements on
a going concern basis and the assessment of the Group’s viability.
Appropriate financial modelling has been undertaken to support the
assessment of the business as a going concern with the material
uncertainty from COVID-19 and in support of viability. The Company’s
going concern and viability statements are set out on page 51, and
these set out the approach taken and the conclusions made.
The Committee also considered the presentation of COVID-19
impacts in the Annual Report, including financial impact and the
effect COVID-19 has had on the risks the Group is exposed to.
Deferral of membership fee income
The Audit and Risk Committee places reliance on management
controls over revenue recognition. In a normal trading period, the
deferral of membership fee income is derived by a procedural
calculation which has been automated to the greatest extent
possible to lower the risk of human error. However, the government
restrictions in response to COVID-19 have meant that significant
manual intervention has been required in determining the deferral of
revenue. The approach to the deferral at year end and outcome has
been reviewed by senior finance team members.
Annual impairment testing
Impairment reviews have been performed by management on the
Group’s cash-generating units to which tangible assets, goodwill and
other intangible assets have been allocated. The cash flow forecasts
used were based on the budgets approved by the Board together
with assumed growth rates thereafter. The methodology, along with
key assumptions around future growth rates (in particular, in relation
to the recovery from the impact of COVID-19) and discount rates,
were reviewed and considered by the Audit and Risk Committee.
The Committee is satisfied that appropriate impairment of tangible
and intangible assets has been recognised. Please refer to notes 15
and 16 to the Financial Statements for further information.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 70
GOVERNANCE
REPORT OF THE AUDIT AND RISK COMMITTEE
CONTINUED
Annual evaluation of the Audit and Risk Committee’s
performance
As part of the evaluation process, the performance and effectiveness
of the Audit and Risk Committee were considered and it was agreed
that the Committee continued to work effectively, and following the
outcome of the last evaluation it was noted that more time had been
dedicated to Committee meetings during the year under review.
Fair, balanced and understandable
The Board recognises its duty to ensure that the Annual Report and
Accounts, taken as a whole, are fair, balanced and understandable
and provide the information necessary for shareholders to assess
the performance, strategy and business model of the Company.
The Board has placed reliance on the following to form this opinion:
• The process by which the Annual Report and Accounts were
prepared, including detailed project planning and a
comprehensive review process;
• The review of the Annual Report and Accounts by the Audit and
Risk Committee, placing reliance on the experience of the
Committee members;
• Reports prepared by senior management regarding critical
accounting judgements and key financial areas;
• Discussions with and reports prepared by the external auditors;
and
• Ongoing financial information, including KPIs, received on a
monthly basis.
As detailed in the Directors’ Responsibility Statement on page 94,
each of the Directors has confirmed that, to the best of each
person’s knowledge and belief, the Annual Report and Accounts,
taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Company’s
position, performance, business model and strategy.
Paul Gilbert
Chairman of the Audit and Risk Committee
18 March 2021
The above risk management and internal control systems have been
in place during 2020 and up to at least 18 March 2021. The Audit and
Risk Committee, on behalf of the Board, has reviewed the
effectiveness of the internal control systems and risk management
processes in place during the year, taking account of any material
developments since the year end. As part of its review, the Audit
and Risk Committee has considered the FRC’s 2014 ‘Guidance on
Risk Management, Internal Control and Related Financial and
Business Reporting’. The Committee has not identified, nor been
advised of, any failings or weaknesses that it has determined to be
significant although a number of minor improvements have been
made throughout the year.
The Group did not have an internal audit function during the year.
The Committee discussed the requirement for an internal audit
function during the year, as it does annually, and has concluded that,
given the relatively straightforward nature of the Group’s operations
and the low levels of portable assets such as cash in hand and
inventory, an internal audit function is not necessary at this time. The
necessity of an internal audit function will be kept under review as
the Company continues to grow.
Whistleblowing
The Group encourages staff to report any concerns which they
believe need to be brought to management’s attention concerning
any financial or other impropriety. All employees receive a copy of
the employee handbook, which includes whistleblowing
arrangements and sets out the procedures which apply for a
member of staff to raise concerns in complete confidence in respect
of suspicions of wrongdoing or unethical conduct. The policy
confirms that bullying, harassment or other detrimental treatment
afforded to a colleague who has made a qualifying disclosure is
unacceptable. The Audit and Risk Committee reviews and considers
responses to any whistleblowing reports received. The Committee
reviewed the effectiveness of the Group’s whistleblowing procedures
at the March 2020 meeting.
Non-audit services
In 2020, the auditors did not provide any non-audit services to the
Company or its subsidiaries.
In line with UK Independence Rules, the Committee is responsible
for approving all non-audit services provided by the auditors. The
Committee has a formal policy on the supply of non-audit services
by the Company’s auditors, which is aligned with the requirements of
the UK Financial Reporting Council’s Ethical Standards (2016 and
2019). This policy is available on the Group’s website. All non-audit
services carried out by the Company’s auditors are pre-approved by
the Committee.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 REPORT OF THE REMUNERATION COMMITTEE
71
COMMITTEE
MEMBERS
Chairman
Committee members
David Kelly
Penny Hughes, Paul Gilbert,
Emma Woods
Number of meetings held in 2020
7
“ T H E H E A LT H A N D W E L L B E I N G
O F T H E GYM G R O U P T E A M S H AV E
B E E N T H E P R E D O M I N A N T F O C U S
D U R I N G T H E M A N A G E M E N T O F
T H E PA N D E M I C .”
D AV I D K E L LY, C H A I R O F T H E
R E M U N E R A T I O N C O M M I T T E E
DEAR SHAREHOLDER
I am pleased to welcome you to the Report of the Remuneration
Committee.
As set out earlier in this report, 2020 was a year of extraordinary
challenge for The Gym Group. Throughout the year, the
Remuneration Committee sought to best support our executive team
in taking the steps which they considered most appropriate for our
business and to protect and promote the best long term interests of
all our stakeholders, including our shareholders, customers and
employees. These steps included the successful reopening of our
gyms in line with rigorous safety protocols when we had the
opportunity to do so, and the closure of gyms as government
guidance changed. We also supported the business’ emphasis on
employee welfare in what has been a very challenging period for our
employees. The health and wellbeing of The Gym Group teams have
been a predominant focus during our response to the pandemic.
A ‘People First’ support programme was launched during the first
lockdown which has then been expanded into the creation of a
‘Reset & Recharge’ Programme to support the current lockdown. This
focused on employee wellbeing and ensured support networks were
known and communications were shared. Learning opportunities
were provided and some great free external courses were sourced
to ensure that when employees return they are in fact recharged and
ready to restart. The programme aims to keep colleagues connected
and gives ideas and mechanisms to teams who are both furloughed
or still working.
We have updated our teams as far in advance as possible of any
changes that we may need to make to pay while our gyms have
been closed. We have been committed to uphold our people
principles throughout – fairness and transparency being at the core.
We have been able to top up the pay of our member-facing
employees (Fitness Trainers, General Managers and Assistant
General Managers) to full pay for the majority of the first lockdown
and we have committed to pay in full until the end of March 2021,
at which point we should have a clearer picture of when we are likely
to be able to reopen.
The Gym Group’s performance in 2020
During 2020, the Remuneration Committee took a number of steps
to ensure that remuneration at TGG aligned to the broader
experience of our stakeholders:
• We supported the actions taken by our Board whereby voluntary
reductions were made to Executive Directors’ salaries during
the second quarter (the reductions were 30% for Richard Darwin
and 20% for Mark George). In addition our Chair, Non-Executive
Directors and Founding Director each waived their fees on a
voluntary basis entirely in the second quarter.
• Although we released our annual bonuses for 2019, our Executive
Directors reinvested 50% of the 2019 annual bonus amounts (net of
income tax) in the shareholder placing in April 2020. The balance
of 2019 bonuses were released only in August 2020.
• We supported the annual launch of our Sharesave Plan for all
employees in October 2020.
• We initially delayed the grant of our 2020 Performance Share Plan
(‘PSP’) awards until early September and when these awards
were made we applied revised performance conditions which
are focused on both relative out-performance of the market and
on recovery of absolute value for shareholders over a period of
three years:
– 66.7% of awards were subject to a relative TSR condition,
comparing our TSR performance to that of the constituents
of the FTSE SmallCap (ex. Investment Trusts)
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 72
GOVERNANCE
REPORT OF THE REMUNERATION COMMITTEE
CONTINUED
At the current time, we believe that these performance measures
continue to be appropriate for PSP awards at The Gym Group. Many
of the same considerations as applied when setting the performance
measures for the PSP awards made in September 2020 continue to
be relevant for new PSP awards to be made in 2021.
CFO’s base salary
In a normal operating environment, the Remuneration Committee
strongly believes that 2021 would have been an appropriate time to
propose an increase in the base salary for our CFO. Mark joined the
Company in October 2018, with this being his first main board CFO
role at a listed PLC. Since that time Mark has grown and developed
in the role of CFO and he has demonstrated strong performance,
leadership and contribution to developing the strategic direction of
the business. Accordingly, the Committee has given strong
consideration to rewarding this important contribution, although we
remain guided by our philosophy of being relatively modest on fixed
pay positionings, where base salaries are consciously positioned at
or below ‘market-median’ levels.
However, Mark has asked for his base salary to remain frozen at this
time. Mark’s strong view is that accepting an increase in base salary
would not be appropriate at a time when the Group is dealing with
the challenges of the pandemic, is not paying salary increases to
other colleagues and has been required to make tough decisions
on costs right across the business.
As a Committee we accept and support this decision, and we fully
respect the leadership and clear perspective which has guided Mark
on this point. We do, however, want our shareholders to be aware
that we are likely to bring forward a new proposal on this matter in
the near future when it becomes appropriate to do so.
Format of the report and matters to be approved at our AGM
At the AGM, to be held on 11 May 2021, shareholders will be asked to
approve the Directors’ Remuneration Report (excluding the Directors’
remuneration policy). The Directors’ Remuneration Report comprises
this introductory statement and the ‘Implementation Report’ which
follows on pages 75 to 82. We also provide for information the main
sections of our Directors’ remuneration policy (approved by
shareholders at our 2019 AGM) from page 83.
The vote on the Directors’ Remuneration Report at our 2021 AGM is
our normal annual advisory vote on such matters. At the Company’s
2020 AGM our Directors’ Remuneration Report was approved by
99.99% of our shareholders, and our whole Board is grateful to its
shareholders for the support received.
I hope that our shareholders will remain supportive of our approach
to executive pay at The Gym Group and that you will vote in favour of
the resolution to approve the Directors’ Remuneration Report at the
2021 AGM.
David Kelly
Chairman of the Remuneration Committee
18 March 2021
– 33.3% of awards are subject to a condition based on absolute
TSR, with the targets requiring recovery to levels in 2023 of
between 210p (threshold) and 300p (maximum). These values
are challenging given that the three-month average share
price prior to the award date on 8 September was £1.534
• The performance conditions applied to our 2020 PSP were only
settled after detailed consideration as to which metrics would
best support the business and align our executives to the
experience of shareholders at a time when having appropriate
pay arrangements for our senior leaders is crucial for the long
term development of The Gym Group. We believe that a heavier
weighting to TSR relative out-performance than for past awards
was appropriate and links our PSP to the experience of
shareholders directly. We also were keen to retain an element of
absolute growth within the performance measures; ideally this
would have been on a profits-based metric as in past years, but
with the impact of COVID-19 making the setting of relevant and
valid three-year financial targets very challenging, we moved to
absolute TSR as our growth metric. This will be kept under review
for future awards.
• Annual bonuses for 2020 were nil. 2018 PSP awards (for which
performance is measured to 31 December 2020) will not vest.
Implementation of our remuneration policy in 2021
Looking forward into 2021, we have given consideration to three
actions on pay matters which we regard as appropriate and
designed to support shareholders’ interests over the long term.
Annual bonus for 2021
Due to the significant uncertainty in the external environment and the
difficulty in forecasting financial performance, it is proposed that the
2021 bonus will be assessed in two equal tranches in respect of the
first and second half of the financial year.
Our initial proposal was that targets would be set separately for each
half-year. However, setting H1 targets is exceptionally challenging
due to the uncertainty of continuing lockdowns and forced closures
of gyms. Any bonus which may become payable for H1 will
accordingly be made on the basis of a holistic assessment of
performance in H1, based on the Remuneration Committee’s
judgement and affordability. Our proposal is that H2 targets will be
confirmed later in the year when the likely pattern of trading has, it is
hoped, become more fully established. This ‘split-year’ approach
allows the Committee to apply the 2021 bonus appropriately and in a
way most likely to support the efforts of the management team to
operate the business in shareholders’ best interests in 2021, given
that the operating environment for gyms is likely to change during
the course of the year. With the current rapid pace of developments
in the environment for gym operations in the UK, setting full year
targets at the commencement of 2021 risks rewarding for the
accuracy of predicting the frequency and length of lockdowns,
rather than incentivising strong operational performance by our
management team in 2021.
2021 PSPs
Our 2021 PSP awards will have the same performance condition
mix as applied for our September 2020 PSP awards.
• 66.7% will be subject to a relative TSR performance condition
(again comparing against the constituents of the FTSE SmallCap
(ex. IT))
• 33.3% will be subject to an absolute TSR growth condition, with
the target range as set out later in this report. These absolute
growth targets have been set at levels that would have been
challenging for the company to attain in the context of its
pre-COVID performance, and they are considered appropriate
notwithstanding the challenges that the company has faced
in the last year.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 73
At a glance
Remuneration policy and implementation
Overview of policy
Remuneration in 2020
Implementation for 2021
Base salary
Reviewed annually.
Consideration given to performance
of the Company and the individual,
responsibilities or scope of the role,
as well as pay practices in relevant
comparator companies.
See page 83.
Pension and benefits
Pension – maximum contribution of
15% of salary.
Benefits consist of car allowance, life
insurance, private medical cover, a
car parking space (in the case of the
CEO) and additional mobile
telephone contracts (in the case of
the Founder Director).
See page 83.
Richard Darwin: £283,050
(normally £306,000*)
Mark George: £213,180
(normally £224,400*)
* During the year, each of the
Executive Directors took material
reductions in their salary for the
second quarter of 2020 in
response to the pandemic (this
was 30% in respect of Richard
Darwin and 20% in respect of
Mark George).
See page 74.
In line with policy. Richard Darwin
and Mark George pension
contributions at 10% of salary.
See page 76.
Richard Darwin: £306,000
Mark George: £224,400*
The car allowance for the CEO will
be extended to the CFO for 2021.
Annual bonus
Maximum of 100% of salary.
Nil.
No changes in maximum.
See page 76.
Paid in cash up to 75% of base
salary and outcomes above this level
deferred into shares for two years.
Subject to achievement of relevant
performance conditions.
Subject to malus and clawback
provisions.
See page 84.
Long term incentives
Performance share award, subject to
service and performance over a
three-year period, as well as two
year post-vesting holding period.
PSP awards granted in 2018 held by
Richard Darwin and John Treharne
lapsed in full (as performance
conditions not met).
Maximum award of 200% of salary
(300% in exceptional circumstances).
Subject to malus and clawback
provisions.
See page 85.
Share ownership
guidelines
300% for Executive Directors.
(200% for new Executive Directors).
See page 85.
Awards granted in 2020:
• Richard Darwin: 175% of salary
• Mark George: 175% of salary
Performance conditions:
66.7% relative TSR target, 33.3%
absolute TSR target.
Both Executive Directors also
participated in the Sharesave Plan
for 2020.
See page 77 to 79.
At the year end, Richard Darwin met
the requirements. Mark George will
build a shareholding to the required
levels.
See page 79.
See the Committee Chairman’s
letter regarding the proposed
approach regarding annual bonus
for 2021.
See page 72.
Awards for 2021:
• Richard Darwin: 175% of salary
• Mark George: 175% of salary
• Performance conditions: relative
TSR (66.7%); absolute TSR
(33.3%)
No change.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 74
GOVERNANCE
REPORT OF THE REMUNERATION COMMITTEE
CONTINUED
2020 single total figure
Richard Darwin
Mark George
Salary
283,050
213,180
Taxable
benefits
11,786
2,209
Bonus
–
–
Long term
incentives1
Pension
Total
remuneration
12,483
12,483
28,305
335,624
21,318
249,190
1 The values shown in respect of long term incentives relate to the intrinsic value of options granted under the Sharesave Plan during 2020.
See page 76.
Introduction
This report contains the material required to be set out as the Directors’ Remuneration Report for the purposes of Part 4 of The Large and
Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013, which amended The Large and Medium-
sized Companies and Groups (Accounts and Reports) Regulations 2008 (‘the DRR Regulations’).
Part A constitutes the implementation sections of the Directors’ Remuneration Report (‘the Implementation Report’). The auditors have
reported on certain parts of the Implementation Report and stated whether, in their opinion, those parts have been properly prepared in
accordance with the Companies Act 2006. Those parts of the Implementation Report which have been subject to audit are clearly indicated.
Part B represents shows the main sections of our Directors’ remuneration policy which was approved by shareholders at the 2019 AGM (‘the
Directors’ Remuneration Policy’). The material in Part B is not subject to the advisory vote on the Directors’ Remuneration Report at the 2021
AGM. The policy as approved by our shareholders can be found within our 2018 Annual Report and Accounts which are available on our
website at: www.tggplc.com/investors.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 75
PART A: IMPLEMENTATION REPORT
Implementation of Policy for 2021 (unaudited information)
Base salary
The Executive Directors’ base salaries for 2021 will be as follows:
• Richard Darwin: £306,000
• Mark George: £224,400
Pension
Contributions rates for Richard Darwin and Mark George will be 10% of salary. Contributions may be made as cash supplements in full or in part.
Benefits
Details of the benefits received by Executive Directors are set out in note 2 to the single figure table on page 76. The car allowance for the
CEO will be extended to the CFO for 2021.
Annual bonus
As set out in the Committee Chairman’s letter, the Committee has decided to adjust the principles of the annual bonus plan to reflect the
impact of COVID-19 on the business.
The overall bonus plan maximum for 2021 will be 100% of base salary for 2021.
However, due to the significant uncertainty in the external environment and the difficulty in forecasting financial performance, it is proposed
that the 2021 bonus will be assessed in two equal tranches in respect of the first and second half of the financial year.
Setting H1 targets is exceptionally challenging due to the uncertainty of continuing lockdowns and forced closures of gyms. Any bonus which
may become payable for H1 will accordingly be made on the basis of a holistic assessment of performance in H1, based on the Committee’s
judgement and affordability. H2 targets will be confirmed later in the year when the likely pattern of trading has, it is hoped, become more fully
established. This approach allows the Committee to apply the 2021 bonus appropriately and in a way most likely to support the efforts of the
management team to operate the business in shareholders’ best interests in 2021, given that the operating environment for gyms is likely to
change during the course of the year.
For the reasons outlined above, the Committee is not yet in a position to disclose details of targets for the annual bonus on a prospective
basis. However, the Committee is committed to adhering to principles of transparency in terms of retrospective annual bonus target
disclosure and will, therefore, provide appropriate and relevant levels of disclosure for the bonus targets applied to the 2021 bonus (including
a holistic assessment of performance for H1 and performance against these targets) in next year’s Directors’ Remuneration Report.
Any bonuses will be determined separately in respect of the first and second half of the financial year, but will only be paid following the end of
the financial year (in early 2022). Bonuses are payable in cash for outcomes up to 75% of base salary, with any outcomes above this level made
as awards of deferred shares under the Deferred Share Bonus Plan. Deferred shares are capable of vesting two years after these are awarded.
Long term incentives
Awards will be made in 2021 under the PSP to Richard Darwin and Mark George over shares worth 175% of salary. As in past years, the proposed award
levels will be confirmed by the Committee only at the time of award having considered overall performance, including shareholder experience.
These awards will vest three years after grant, and performance vested shares will also be subject to a further two-year holding period after
the initial three-year period to vesting.
The performance conditions will be a mix of relative TSR (66.7% weighting) and absolute TSR (33.3% weighting) targets as described below.
These are measures which encourage the generation of sustainable long term returns to shareholders. The conditions are measured from a
3-month average at the time of award.
Relative TSR vs FTSE Small Cap (excluding investment trusts) (66.7% of total award)
The Gym Group ranking
Below median
Median
Upper quintile or above
Median to upper quintile
Absolute TSR (33.3% of total award)
The Gym Group adjusted share price
Below 285p
285p
335p or above
285p to 335p
% of that part of the award that vests
0%
20%
100%
Pro rata straight-line between 20% and 100%
% of that part of the award that vests
0%
20%
100%
Pro rata straight-line between 20% and 100%
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 76
GOVERNANCE
REPORT OF THE REMUNERATION COMMITTEE
CONTINUED
Founder Director
John Treharne will continue to be paid a base salary of £195,000 as Founder Director and to receive benefits in accordance with the Policy.
He will not receive any pension contributions, nor will he participate in the annual bonus plan or receive any PSP awards in 2021.
Non-Executive Directors’ fees
Penny Hughes will receive an annual fee of £138,000 as Chairwoman. Paul Gilbert, David Kelly and Emma Woods will each receive a fee of
£55,000. Rio Ferdinand and Wais Shaifta joined the Board as non-executive Directors of the Company with effect from 1 February 2021 and
will each receive an annual fee of £55,000.
Single total figure table (audited)
The remuneration for the Executive Directors, Non-Executive Directors and Founder Director of the Company who performed qualifying
services during the year is detailed below.
For the year ended 31 December 2020:
£
Executive Directors
Richard Darwin
Mark George
Founder Director
John Treharne
Non-Executive Directors
Paul Gilbert
Penny Hughes
David Kelly
Emma Woods
Salary/fees1
Taxable
benefits2
Bonus3
Long term
incentives4,5
Pension6
Total
remuneration
Total fixed
remuneration7
Total variable
remuneration7
283,050
213,180
11,786
2,209
143,000
5,671
40,333
101,200
40,333
40,333
3,931
–
–
–
–
–
–
–
–
–
–
12,483
28,305
335,624
323,141
12,483
21,318
249,190
236,707
12,483
12,483
–
–
–
–
–
–
–
–
–
–
148,671
148,671
44,264
101,200
40,333
40,333
44,264
101,200
40,333
40,333
–
–
–
–
–
1 As disclosed in the 2020 Annual Report, all of the Directors (including the Founder Director and Non-Executive Directors) agreed to material reductions in their normal salary or fees in
respect of the second quarter of 2020 as part of the Company’s mitigation against the COVID-19 crisis.
2 Taxable benefits comprise car allowance (£8,000 for Richard Darwin), private medical cover, a car parking space (in the case of the CEO) and additional mobile telephone contracts (in
the case of the Founder Director).
3 No bonus was paid for 2020 as explained further on page 77.
4 Following year end it was confirmed that 2018 PSP awards (representing 139,096 shares for Richard Darwin and 185,414 shares for John Treharne) will lapse as the performance
conditions (for both EPS growth and TSR performance to 31 December 2020) for these awards were not achieved (see page 77).
5 The value of long term incentives for Richard Darwin and Mark George are the intrinsic values of the options granted to them under the Sharesave Plan on 21 October 2020, being the
difference between the option price (108.0p) and the average market value of the Company’s shares over the final quarter of the 2020 financial year (182.9p), multiplied by the number of
option shares (16,666 shares). Further details of the Sharesave Plan options are disclosed on page 79.
6 Pensions are provided via a defined contribution and/or cash supplement.
7 Total fixed remuneration is the aggregate of the base salary, pensions and benefits elements, and total variable remuneration is the aggregate of the bonus and long term incentive
elements.
Comparative figures for the year ended 31 December 2019:
£
Richard Darwin
Mark George
John Treharne
Paul Gilbert
Penny Hughes
David Kelly
Emma Woods
Salary/fees
Taxable
benefits
Bonus
Long term
incentive
Pension
Total
remuneration1
Total fixed
remuneration
Total variable
remuneration
300,000
11,395
105,300
89,918
30,000
536,613
341,395
220,000
1,840
77,220
5,613
22,000
326,673
243,840
195,218
82,833
195,000
55,000
138,000
55,000
55,000
10,999
2,995
–
–
–
–
–
–
–
–
139,873
–
–
–
–
–
–
–
–
–
345,872
205,999
139,873
57,995
57,995
138,000
138,000
55,000
55,000
55,000
55,000
–
–
–
–
1 The aggregate emoluments (being salary/fees, bonuses, benefits and pension allowances) of all Directors for 2020 was £959,615 (2019: £1,515,153).
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 77
Further information on the 2020 annual bonus (audited)
Although 2020 bonus outcome was nil, for information we have set out below the intended 2020 adjusted EBITDA targets for annual bonus:
EBITDA targets
Performance Share Plan awards
Vesting outcomes for 2018 PSP awards
Threshold
£55.0m
Target
£57.0m
Maximum
£60.0m
Actual
N/A
Performance measure and weighting
Target range (each measured to 31 December 2020)
Earnings per share growth
(50%)
Target range between 11.7p (20% vests) and 17.6p
(100% vests) for financial year 2020.
TSR (50%)
Total
Target range between median performance (20% vests) and upper
quintile performance (100% vests) against the constituents of the
FTSE SmallCap (excluding investment trusts).
Performance
achieved
Vesting
outcome
% of total award
vesting
(23.1)p
Below
median
0%1
0%
0%
0%
0%
1 The calculation of Adjusted EPS for these purposes applied the assumptions regarding amortisation of IT capital expenditure which applied when the original target range of 11.7p to
17.6p was determined, to ensure a consistent basis of measurement across financial years 2018 to 2020.
Details of outstanding PSP awards
Executive
Richard Darwin
Mark George
John Treharne
Awards
held at
1 Jan 2020
Awards
granted during
the year1, 2
524,873
349,087
173,736
416,981
255,997
–
Awards
exercised
during
the year
Awards
lapsed during
the year3
Interests
held at
31 Dec 20204
–
–
–
(39,223)
834,737
–
429,733
(61,014)
355,967
1 The above PSP awards were granted at the three-month average market price of 153.4p to the last trading day prior to grant on 9 September 2020 (the closing market price on the date
of grant was 145p). The awards thus represented awards to Richard Darwin and Mark George over shares worth 175% of basic salary.
2 The exercise price of awards granted during the year is 0.01p.
3 PSP awards granted in 2017 to Richard Darwin and John Treharne vested over 109,641 shares and 170,553 shares respectively (including dividend equivalents).
4 Following year end it was confirmed that 2018 PSP awards (representing 139,096 shares for Richard Darwin and 185,414 shares for John Treharne) will lapse as the performance
conditions for these awards were not achieved.
5 The minimum share price in 2020 was 76.9p and the maximum share price was 316.0p. The closing share price on 31 December 2020 was 217.0p.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 78
GOVERNANCE
REPORT OF THE REMUNERATION COMMITTEE
CONTINUED
These awards vest based on performance against the following targets:
2018 award (50% growth in adjusted EPS
and 50% TSR)
2019 award (50% TSR, 25% growth in
adjusted EPS and 25% ROIC in
mature estate)
2020 award (66.6% relative TSR and
33.3% absolute TSR)
Target range between 11.7p and
17.6p for FY2020.
Target range between 14.2p and
19.6p for FY2021.
Not applicable.
Target range between median
performance against the
constituents of the FTSE
SmallCap (excluding Investment
Trusts) rising on a pro rata basis
until full vesting for upper quintile
performance.
Not applicable.
Target range as for 2018 award.
Target range as for 2018 award.
Not applicable.
Target range between 29.7% and
31.7%. Vesting above 60% for this
part of the award subject to an
additional underpin of average
ROIC of 20% for legacy Lifestyle
and easyGym sites across 2020
and 2021.
Not applicable.
Not applicable.
Target range between 210p
(threshold) and 300p (maximum).
Performance measure
Adjusted EPS growth
20% of this part vests at
threshold performance rising on
a pro rata basis until 100% vests.
Measured over three financial
years commencing with the year
of award.
Relative TSR
ROIC
20% of this part vests at
threshold performance rising on
a pro rata basis until 100% vests.
Measured over three financial
years commencing with the year
of award (average across three
years).
Absolute TSR
20% of this part vests at
threshold performance rising on
a pro rata basis until 100% vests
at maximum performance.
Detail:
• The EPS condition applies to the EPS achieved in the final year only of the three financial years’ performance period, based on the
Adjusted EPS. In all years, Adjusted EPS is to be calculated using the Company’s definition of Group Adjusted EBITDA less Normalised
Rent (which will reflect normalised rent rather than IFRS 16 depreciation and interest charges); and
the EPS metrics will continue to apply the amortisation assumptions for IT capital expenditure which applied when the original PSP target
ranges were set.
•
The TSR conditions will (other than in exceptional circumstances) use a three-month averaging period at the start and end of each
performance period to calculate the TSR of the Company and the TSR of the constituents of the comparator group. For 2018 PSP awards,
relative TSR was measured on the basis of performance over three financial years (beginning with the financial year of grant) and from 2019
onwards TSR is measured on the basis of performance over three calendar years beginning with the grant date. The absolute TSR measure
will also credit any dividends paid in the performance period.
ROIC in the mature estate reflects ROIC in those sites which have been developed organically by the Group and have been open more than
two years.
The Committee also has a standard power to apply its judgement to adjust the formulaic outcome of all performance measures to take account
of any circumstances (including the performance of the Company, any individual or business) should it consider that to be appropriate.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 79
Participation in the Share Incentive Plan
The Executive Directors participate in the SIP on the same terms as all other employees. Details of the Executive Directors’ participation in the
SIP are as follows:
Executive
Richard Darwin
Mark George
Total SIP
shares 1 at
Jan 2020
Partnership
shares
purchased in
2020
Matching
shares
awarded in
2020
Free shares
awarded in
2020
Total SIP
shares at 31
Dec 2020
6,809
2,868
958
996
958
996
–
–
8,725
4,860
Participation in the Sharesave Plan
The Executive Directors participate in the Sharesave on the same terms as all other employees. Details of the Executive Directors’
participation in the Sharesave as follows:
Executive
Richard Darwin
Mark George
Total
Sharesave
awards at
1 Jan 2020
–
8,910
Awards
granted1
16,666
16,666
Exercise
price of
awards
granted
(pence)
108.0
108.0
Awards
vested
(number)
Awards
exercised
(number)
Awards
lapsed
(number)2
Total
Sharesave
awards at
31 Dec 2020
–
–
–
–
–
8,910
16,666
16,666
Earliest exercise date
1 December 2023
1 December 2023
1 The Sharesave awards granted to Richard Darwin and Mark George over 16,666 shares each relate to a three-year savings contract that is due to vest in December 2023. The exercise
price was set in line with the HMRC rules.
2 Mark George elected to cancel his participation in the 2019 Sharesave in order to participate in the 2020 Sharesave scheme in full. This resulted in the lapse of the option originally
granted to him over 8,910 shares at an exercise price of 202.0p per share.
Statement of Directors’ shareholding and share interests (audited)
The table below details, for each Director, the total number of Directors’ interests in shares at 31 December 2020:
Director1
Ordinary Shares
Shares awarded under SIP
Maximum shares receivable under PSP awards
Maximum shares receivable under
Sharesave awards
Penny
Hughes2
John
Treharne3
Richard
Darwin4
Mark
George
Paul
Gilbert
David
Kelly
Emma
Woods5
65,201
2,591,908
1,013,834
13,642
204,442
10,000
13,930
–
–
–
3,909
8,725
4,860
355,967
834,737
429,733
–
16,666
16,666
–
–
–
–
–
–
–
–
–
Total shareholding and share interests
65,201
2,951,784
1,873,962
464,901
204,442
10,000
13,930
1 The shareholdings and awards set out above include those held by Directors and their respective connected persons.
2 The total number of Ordinary shares in which Penny Hughes or persons connected with her or are interested in includes 5,201 Ordinary shares owned by Robbie Hughes.
3 There is a charge over 1,150,000 shares held in John Treharne’s name in an account with Investec Wealth & Investment Limited.
4 The total number of Ordinary shares in which Richard Darwin or persons connected with him is or are interested includes 35,758 Ordinary shares owned by Charlotte Darwin.
5 The total number of Ordinary shares in which Emma Woods or persons connected with her or are interested in includes 8,930 Ordinary shares owned by Lorcan Woods.
Progress towards share ownership guidelines
3x salary
guidelines
Richard Darwin
Mark George
16%
747%
0x
1x
2x
3x
4x
5x
6x
7x
8x
Beneficial holding up to guideline
Beneficial holding in excess of guideline
Percentages at the end of the bars show the total beneficial shareholding as a percentage of salary.
Multiple of salary as at 31 December 2019
Under share ownership guidelines implemented by the Remuneration Committee, the existing Executive Directors are required to build and
then maintain a shareholding equivalent to at least 300% of base salary. Additionally, John Treharne has committed to maintaining a holding
of at least 0.5% of issued share capital whilst in the role of Founder Director. At the 2020 year-end, Richard Darwin and John Treharne
complied with this requirement as shown above. Mark George joined the business on 31 October 2018 and will be required to build and then
maintain a shareholding equivalent to at least 200% of base salary.
Payments to past Directors (audited)
No payments were made to past Directors during the year.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE
80
GOVERNANCE
REPORT OF THE REMUNERATION COMMITTEE
CONTINUED
Performance graph and CEO remuneration table (unaudited)
The graph below shows the total shareholder return (‘TSR’) performance of an investment of £100 in The Gym Group plc’s shares from its
listing in November 2015 to the end of the period, compared with a £100 investment in the FTSE SmallCap Index over the same period. The
FTSE SmallCap Index was chosen as a comparator because it represents a broad equity market index of which the Company is a constituent.
The TSR was calculated in accordance with the DRR Regulations.
Total Shareholder Return index
160
150
140
130
120
110
105.9
100
100.8
90
80
6
Nov
2015
31
Dec
2015
136.1
113.3
31
Dec
2017
115.2
87.3
31
Dec
2016
141.6
123.2
31
Dec
2018
150.7
146.3
31
Dec
2019
156.8
113.2
31
Dec
2020
FTSE SmallCap Index
The Gym Group plc
Source: Thomson Reuters
The table below details certain elements of the CEO’s remuneration over the same period as presented in the TSR graph:
2015
2016
2017
20181
20181
2019
2020
Single figure of
total remuneration
CEO
Annual bonus
pay-out against
maximum %
John Treharne
£287,793
£60,0002
John Treharne
£313,628
John Treharne
£431,302
John Treharne
£272,721
Richard Darwin
£97,326
Richard Darwin
£536,613
Richard Darwin
£335,624
27.2%3
74.3%3
16.0%
16.0%
35.1%
0%
Long term
incentive vesting
rates against
maximum
opportunity %
n/a
n/a
n/a
41.7%
41.7%
72.5%
0%
1 The 2018 figures represent the single figure of total remuneration for John Treharne for the period to 17 September 2018, and for Richard Darwin from that date.
2 The actual bonus paid has been inserted for 2015 as this related to the year of Admission when an uncapped discretionary bonus plan was in operation. No long term incentive awards
vested in 2015, 2016 or 2017.
3 The maximum bonus for 2016 was 47.5% of base salary and so the outcome of 27.2% of maximum bonus was 12.9% of base salary. The maximum bonus for 2017 was 75% of base salary
and so the outcome of 74.3% of maximum bonus was 55.7% of base salary.
Annual percentage change in remuneration of Directors and employees
The table below shows the percentage change in remuneration of the Directors and employees of the business between the 2019 and 2020
financial years.
Employees1,2
Executive Directors:
Richard Darwin
Mark George
Non-Executive Directors:
Paul Gilbert
Penny Hughes
David Kelly
Emma Woods
% change from 2019 to 2020
Salary or fees
Benefits
Bonus
5.18%3
(10.56)%
(99.84)%
(5.65)%
(3.10)%
(26.67)%
(26.67)%
(26.67)%
(26.67)%
3.43%
20.07%
31.25%
N/A
N/A
N/A
(100)%
(100)%
N/A
N/A
N/A
N/A
1 The strict legal requirement is to only provide details of employees of The Gym Group plc. As the listed entity does not have any employees, we have decided to voluntarily disclose in
respect of all The Gym Group employees.
2 The average percentage change in employee remuneration was calculated using the movement in mean values (in respect of each element of remuneration) between 2019 and 2020.
The relevant mean values were calculated by dividing the aggregate total of each element of remuneration for all Group employees during the year (calculated on an FTE basis) by the
total number of Group employees.
3 Average employee salaries increased by 5.18%, reflecting that a number of new senior roles were created in 2020. Director salaries or fees fell in 2020, reflecting the voluntary
reductions/ waivers taken by our leadership team.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 81
CEO to employee pay ratio (unaudited)
The table below shows how the CEO’s single figure remuneration (as taken from the single figure remuneration table on page 76) compares to
equivalent single figure remuneration for full-time equivalent UK employees, ranked at the 25th, 50th and 75th percentile.
Year
2018
2019
2020
Method
Option B
Option B
Option B
25th percentile
pay ratio
Median pay ratio
75th percentile
pay ratio
19.2 : 1
30.4 : 1
19.0 : 1
12.8 : 1
26.6 : 1
18.8 : 1
10.4 : 1
13.5 : 1
13.2 : 1
Notes to the CEO to employee pay ratio:
1 Option B (based on the gender pay gap reporting disclosures) was preferred as this data was already prepared on a Group basis.
2 In line with the gender pay gap reporting regulations, pay for the 25th percentile, median and 75th percentile employees was calculated with reference to 5 April for each financial year.
As the employees at the 25th, 50th and 75th percentile all have the same hourly rate (for gender pay gap reporting purposes), the relevant individuals were identified using the full pay
and benefits of employees for the financial year.
3 The ratios shown are representative of the FTE 25th percentile, median and 75th percentile pay for employees within the Group at the gender pay gap reference date.
4 FTE equivalent pay has been calculated using the gender pay gap reporting methodology.
5 The Committee believes the median pay ratios for 2018, 2019 and 2020 to be consistent with the pay, reward and progression policies for the Company’s UK employees taken as a whole
as at the reference date.
6 The Company was not required to publish the CEO to employee pay ratio for 2018 but chose to on a voluntary basis (and this has been included for additional context).
The total pay and benefits and the salary component of total pay and benefits for the employee at each of the 25th percentile, the median
and the 75th percentile are shown below:
Salary
Total pay and benefits
25th percentile
Median
75th percentile
25th percentile
Median
75th percentile
£17,633.73
£17,867.17
£25,404.57
£17,633.73
£17,867.17
£25,459.18
The change in each of the pay ratios for 2020 (relative to prior years) reflects both: (1) significantly lower remuneration for the CEO in 2020
(relative to previous years), as detailed earlier in this report; and (2) changes in the employment model of the Group where the number of UK
staff increased in 2020 under the New Gym Team initiative which offers part-time employment to our Personal Trainers.
Relative importance of spend on pay (unaudited)
The table below details the change in total staff pay between 2019 and 2020 as detailed in note 11 to the Consolidated Financial Statements,
compared with distributions to shareholders by way of dividend, share buy backs or any other significant distributions or payments. These
figures have been calculated in line with those in the audited Financial Statements:
Total gross staff pay1
Dividends/share buy backs
2020
£’000
26,585
–
2019
£’000
22,966
1,933
% change
15.8%
(100)%
1 The increase in gross staff pay from 2019 reflects the effect of the change in the employment model of the Group under the New Gym Team initiative (which offers part-time employment
to our Personal Trainers). The new model was implemented during 2019 and 2020 is the first full year of operation.
Summary of shareholder voting
The following table shows the results of the advisory vote on the 2019 Directors’ Remuneration Report (at the 2020 AGM) and the binding vote
on the Directors’ Remuneration Policy at the 2019 AGM:
For (including discretionary)
Against
Votes withheld
Approval of the 2019 Directors’
Remuneration Report (2020 AGM)
Approval of the Directors’ Remuneration
Policy (2019 AGM)
Total number
Total number
of votes
% of votes cast
of votes
% of votes cast
122,619,935
99.99%
84,131,086
2,122
0.01%
4,759,041
3,190,654
–
–
94.7%
5.3%
–
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 82
GOVERNANCE
REPORT OF THE REMUNERATION COMMITTEE
CONTINUED
Remuneration Committee in 2020 (unaudited)
The Committee’s principal responsibilities are to recommend the Group’s policy on executive remuneration, determine the levels of
remuneration for Executive Directors and the Chairman and prepare an annual remuneration report for approval by the shareholders at the
AGM.
The Chief Executive Officer and other Executive Directors as necessary are invited to attend meetings of the Committee, except when their
own remuneration is being directly discussed. Penny Hughes takes no part in any discussions relating to her own remuneration. The
Committee met seven times during the year and the table on page 62 details attendance of members at these meetings.
The Committee has formal terms of reference which can be viewed on the Company’s website.
The Committee does not currently consult with employees specifically on the effectiveness and appropriateness of the executive
Remuneration Policy and framework. However, the Company seeks to promote and maintain good relationships with employees as part of its
employee engagement strategy.
During the year, the Committee considered its obligations under the UK Corporate Governance Code and concluded that:
•
•
the Directors’ Remuneration Policy supports the Company’s strategy (including in the performance measures chosen); and
remuneration for our Directors remains appropriate.
In addition, the Committee has ensured that the Directors’ Remuneration Policy and practices are consistent with the six factors set out in
Provision 40 of the Corporate Governance Code:
Clarity – Our Directors’ Remuneration Policy is well understood by our senior executive team and has been clearly articulated to our
shareholders and representative bodies (both on an ongoing basis and during consultation when changes are being made).
Simplicity – The Committee is mindful of the need to avoid overly complex remuneration structures which can be misunderstood and
deliver unintended outcomes. Therefore, a key objective of the Committee is to ensure that our Directors’ Remuneration Policy and
practices are straightforward to communicate and operate.
Risk – Our Directors’ Remuneration Policy has been designed to ensure that inappropriate risk-taking is discouraged and will not be
rewarded via (i) the balanced use of both annual incentives and long term incentives which employ a blend of financial, non-financial
and shareholder return targets, (ii) the significant role played by shares in our incentive plans (together with bonus deferral and in
employment shareholding guidelines) and (iii) malus/clawback provisions within all our incentive plans.
Predictability – Our incentive plans are subject to individual caps, with our share plans also subject to market standard dilution limits.
The weighting towards use of shares within our incentive plans means that actual pay outcomes are highly aligned to the experience of
our shareholders.
Proportionality – There is a clear link between individual awards, delivery of strategy and our long term performance. In addition, the
significant role played by incentive/‘at-risk’ pay, together with the structure of the Executive Directors’ service contracts, ensures that poor
performance is not rewarded.
Alignment to culture – Our executive pay policies are fully aligned to The Gym Group’s culture through the use of metrics in both
the annual bonus and PSP that measure how we perform against key aspects of our strategy, which has the objective of delivering
sustainable growth.
FIT Remuneration Consultants LLP (‘FIT’), signatories to the Remuneration Consultants Group’s Code of Conduct, were appointed by the
Committee and provide advice to the Committee on all matters relating to remuneration, including best practice. FIT provided no other
services to the Group and, accordingly, the Committee was satisfied that the advice provided by FIT was objective and independent. FIT’s
fees in respect of 2020 were £97,718 plus VAT. FIT’s fees were charged on the basis of the firm’s standard terms of business for advice
provided.
On behalf of the Board
David Kelly
Chairman of the Remuneration Committee
18 March 2021
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 83
PART B: DIRECTORS’ REMUNERATION POLICY
The following table summarises The Gym Group’s policies in respect of the key elements of our Directors’ remuneration:
Element and purpose
Policy and operation
Maximum
Performance measures
Changes from previous policy
Base salary
This is the core
element of pay and
reflects the
individual’s role and
position within the
Group with some
adjustment to reflect
their capability and
contribution.
Benefits
To provide benefits
valued by recipients.
Pension
To provide retirement
benefits.
Base salaries will typically
be reviewed annually, with
consideration given to the
performance of the
Company and the
individual, any changes in
responsibilities or scope of
the role, as well as pay
practices in relevant
comparator companies of
a broadly similar size and
complexity with due
account taken of both
market capitalisation and
turnover.
The Committee does not
strictly follow benchmark
pay data but instead uses
it as one of a number of
reference points when
considering, in its
judgement, the appropriate
level of salary. Base salary
is paid monthly in cash.
The Executive Directors
currently receive private
medical cover, a car
allowance, a car parking
space (in the case of the
CEO) and additional mobile
telephone contracts (in the
case of the Founding
Director).
The Committee reserves
the discretion to introduce
new benefits where it
concludes that it is
appropriate to do so,
having regard to the
particular circumstances
and to market practice.
Where appropriate, the
Company will meet certain
costs relating to Executive
Director relocations.
Executive Directors can
receive pension
contributions to personal
pension arrangements or, if
a Director is impacted by
annual or lifetime limits on
contribution levels to
qualifying pension plans,
the balance (or all) can be
paid as a cash
supplement.
n/a
Clarified the maximum
amount of salary for the
duration of the policy as a
fixed amount.
n/a
No material changes.
It is anticipated that salary
increases will generally be
in line with those awarded
to salaried staff. That said,
in certain circumstances
(including, but not limited
to, changes in role and
responsibilities, market
levels, individual and
Company performance),
the Committee may make
larger salary increases to
ensure they are market
competitive. The rationale
for any such increase will
be disclosed in the relevant
Annual Report. However an
overriding cap applies, the
effect of which is that no
increase will be made if it
would take an Executive
Director’s base salary
above £383,000 per
annum (being the median
level of salaries for CEOs in
the bottom half of the FTSE
SmallCap).
It is not possible to
prescribe the likely change
in the cost of insured
benefits or the cost of
some of the other reported
benefits year-to-year.
Relocation expenses are
subject to a maximum limit
of 100% of base salary,
provided that such
expenses may be paid only
in the year of appointment
and for a further two
financial years.
The Committee will monitor
the costs of benefits in
practice and will ensure
that the overall costs do
not increase by more than
the Committee considers
appropriate in all the
circumstances.
The maximum employer’s
contribution is limited to up
to 10% of base salary.
n/a
Newly appointed Executive
Directors will have
employers’ contribution
levels aligned to the
contribution levels for the
majority of the workforce.
Reduced to 10% for all
Executive Directors.
This aligns Executive
Directors’ pension
contribution levels with
those for senior managers
in the business. Newly
appointed Directors will be
aligned to the majority of
the workforce.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 84
GOVERNANCE
REPORT OF THE REMUNERATION COMMITTEE
CONTINUED
Element and purpose
Policy and operation
Maximum
Performance measures
Changes from previous policy
Annual bonus plan
To motivate
executives and
incentivise delivery
of performance over
a one-year operating
cycle, focusing on
the short- to
medium-term
elements of our
strategic aims.
Annual bonus plan levels
and the appropriateness of
measures are reviewed
annually at the
commencement of each
financial year to ensure
they continue to support
our strategy.
Once set, performance
measures and targets will
generally remain
unchanged for the year,
except to reflect events
such as corporate
acquisitions or other major
transactions where the
Committee considers it to
be necessary in its opinion
to make appropriate
adjustments.
Annual bonus plan
outcomes will be paid in
cash up to 75% of base
salary. Outcomes above
this level will be deferred in
shares for two years.
During the deferral period
the value of any dividends
will be credited as
reinvested in further
deferred shares.
Clawback provisions apply
to the annual bonus plan
and malus and clawback
will apply to deferred
shares.
The maximum level of
annual bonus plan
outcomes is 100% of base
salary for the duration of
this policy.
Introduction of deferral
feature for bonus outcomes
in respect of financial year
2019 and later years.
Deferral will be made under
the new Deferred Share
Bonus Plan (‘DSBP’)
proposed for approval by
shareholders at the 2019
AGM.
The performance
measures applied may be
financial or non-financial
and corporate, divisional or
individual and in such
proportions as the
Committee considers
appropriate.
Where a sliding scale of
targets is used, attaining
the threshold level of
performance for any
measure will not typically
produce a pay-out of more
than 20% of the maximum
portion of overall annual
bonus attributable to that
measure, with a sliding
scale to full pay-out for
maximum performance.
However, the annual bonus
plan remains a
discretionary arrangement
and the Committee retains
a standard power to apply
its judgement to adjust the
outcome of the annual
bonus plan for any
performance measure
(from zero to any cap)
should it consider that to
be appropriate.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 85
Element and purpose
Policy and operation
Maximum
Performance measures
Changes from previous policy
A two-year holding period
was introduced in 2018 and
applied to PSP awards
made to Executive Directors
in 2018. This is now included
in the formal policy for
completeness.
Clarified the ability of the
Committee to adjust the
formulaic outcomes from
performance conditions
where appropriate.
The PSP allows for awards
over shares with a
maximum value of 200% of
base salary per financial
year (300% for recruitment
related awards or in special
circumstances).
Actual participation levels
will be kept under regular
review, and the Committee
expressly reserves
discretion to make such
awards as it considers
appropriate within the plan
limits.
The Committee may set
such performance
conditions on PSP awards
as it considers appropriate,
whether financial or
non-financial and whether
corporate, divisional or
individual.
Performance periods may
be over such periods as
the Committee selects at
grant, which will not be less
than, but may be longer
than, three years.
No more than 20% of
awards vest for attaining
the threshold level of
performance conditions.
The Committee also has a
standard power to apply its
judgement to adjust the
formulaic outcome of all
LTIP performance
measures to take account
of any circumstances
(including the performance
of the Company, any
individual or business)
should it consider that to
be appropriate.
n/a
n/a
No material changes.
The Committee will further
consider the
appropriateness of
extending the application of
the share ownership
guidelines for a period post
termination of employment
during the anticipated
three-year period of this
policy.
Long term
incentives
To motivate and
incentivise delivery
of sustained
performance over
the long term, and to
promote alignment
with shareholders’
interests, the
Company operates
the PSP.
Share ownership
guidelines
To further align the
interests of Executive
Directors with those
of shareholders.
Awards under the PSP may
be granted as nil/nominal
cost options or conditional
awards which vest to the
extent performance
conditions are satisfied
over a period of at least
three years. Vested awards
may also be settled in cash
(in exceptional cases only).
Vested awards for
Executive Directors will be
subject to a further
two-year holding period
during which time awards
may not normally be
exercised or released but
are no longer contingent
on performance conditions
or future employment.
During the vesting period
(and the additional holding
period) the value of any
dividends on performance
vested shares will be
credited as reinvested in
further PSP award shares.
Clawback and malus
provisions apply to PSP
awards.
Executive Directors are
expected to build up a
prescribed level of
shareholding.
Minimum shareholding of
300% of base salary for
any Executive Director at
Admission, 200% of salary
for any future Executive
Director appointed after
Admission. The Committee
reserves the power to
amend, but not reduce,
these levels in future years.
To the extent that the
prescribed level has not
been reached, Executive
Directors will be expected
to retain a proportion of the
shares vesting under the
Company’s share plans
until the guideline is met.
Any PSP performance-
vested shares subject to a
holding period and any
shares awarded in
connection with annual
bonus deferral will be
credited for the purpose of
the guidelines (discounted
for anticipated tax
liabilities).
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 86
GOVERNANCE
REPORT OF THE REMUNERATION COMMITTEE
CONTINUED
Element and purpose
Policy and operation
Maximum
Performance measures
Changes from previous policy
The maximum participation
levels for all-staff share
plans will be the limits for
such plans set by HMRC
from time to time.
Consistent with normal
practice, such awards
would not be subject to
performance conditions.
No material changes.
All-staff share plans
To encourage share
ownership by staff,
thereby allowing
them to share in the
long term success of
the Group and align
their interests with
those of the
shareholders.
The Company operates an
all-staff Share Incentive
Plan (under which an award
of ‘free shares’ can be
made, as well as
‘partnership shares’ and
‘matching shares’). The
Company also intends to
operate a Sharesave
scheme.
These all-staff share plans
are established under
HMRC tax-advantaged
regimes and follow the
usual form for such plans.
Executive Directors would
be able to participate in
all-employee share plans
on the same terms as other
Group staff.
Chairwoman and Non-Executive Directors
Element and purpose
Policy and operation
Chairwoman and Non-Executive
Director fees
To enable the Company to
recruit and retain Company
Chairs and Non-Executive
Directors of the highest calibre,
at the appropriate cost.
The fees paid to the
Chairwoman and Non-Executive
Directors aim to be competitive
with other fully listed companies
of equivalent size and
complexity.
The fees payable to the
Non-Executive Directors are
determined by the Board, with
the Chairwoman’s fees
determined by the Committee.
Directors do not participate in
decisions regarding their own
fees.
No benefits are envisaged for
the Chairwoman and Non-
Executive Directors but the
Company reserves the right to
provide benefits including travel
and office support.
Maximum
Performance measures
Fees are paid monthly in cash.
n/a
The aggregate fees and any
benefits of the Chairwoman and
Non-Executive Directors will not
exceed the limit from time to
time prescribed within the
Company’s Articles of
Association for such fees
(currently £1,000,000 p.a. in
aggregate).
Any increases actually made will
be appropriately disclosed.
Notes to the policy table
Malus and clawback
The Remuneration Committee may apply malus and clawback to a
PSP award, to deferred shares under the new Deferred Share Bonus
Plan and to cash amounts under the annual bonus plan (clawback
only). The relevant circumstances where these powers of recovery
may operate are where:
•
the Company materially misstated its financial results for any
reason and that misstatement would result or resulted either
directly or indirectly in an award being granted or vesting to a
greater extent than would have been the case had that
misstatement not been made;
the extent to which any performance target and/or any other
condition was satisfied was based on an error, or on inaccurate or
misleading information or assumptions which resulted either
directly or indirectly in an award being granted or vesting to a
greater extent than would have been the case had that error not
been made;
•
• circumstances arose (or continued to arise) during the vesting
period (including any holding period) of an award which would
have warranted the summary dismissal of the participant; or
(for awards made from 2019 onwards) there is a sufficiently
significant impact on the reputation of the Company (including a
Company failure) to justify the operation of malus or clawback.
•
Normally, clawback can operate for up to three years following the
vesting of an award.
Stating maximum amounts for the Remuneration Policy
The DRR Regulations and related investor guidance encourages
companies to disclose a cap within which each element of the
Directors’ Remuneration Policy will operate. Where maximum
amounts for elements of remuneration have been set within the
Directors’ Remuneration Policy, these will operate simply as caps
and are not indicative of any aspiration.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 87
Travel and hospitality
While the Committee does not consider it to form part of benefits in
the normal usage of that term, it has been advised that corporate
hospitality, whether paid for by the Company or another, and
business travel for Directors and in exceptional circumstances their
families may technically come within the applicable rules and so the
Committee expressly reserves the right for the Committee to
authorise such activities within its agreed policies.
Differences between the policy on remuneration for
Directors from the policy on remuneration of other staff
While the appropriate benchmarks vary by role, the Company seeks
to apply the philosophy behind this policy across the Company as a
whole. Where the Group’s pay policy for Directors differs from its pay
policies for groups of staff, this reflects the appropriate market rate
position and/or typical practice for the relevant roles. The Company
takes into account pay levels, bonus opportunity and share awards
applied across the Group as a whole when setting the Executive
Directors’ Remuneration Policy.
Committee discretions
The Committee will operate the annual bonus plan, the DSBP and
PSP according to their respective rules and the above policy table.
The Committee retains discretion, consistent with market practice, in
a number of respects, in relation to the operation and administration
of these plans.
Recruitment remuneration policy
The Company’s recruitment remuneration policy aims to give the
Committee sufficient flexibility to secure the appointment and
promotion of high-calibre executives to strengthen the management
team and secure the skill sets to deliver our strategic aims.
In terms of the principles for setting a package for a new Executive
Director, the starting point for the Committee will be to apply the
general policy for Executive Directors as applicable from time to time
and structure a package in accordance with that policy. Consistent
with the DRR Regulations, any caps contained within the policy for
fixed pay do not apply to new recruits, although the Committee
would not envisage exceeding these caps in practice.
The annual bonus plan and PSP, including the maximum award
levels, will operate as detailed in the general policy in relation to any
newly appointed Executive Director. For an internal appointment, any
variable pay element awarded in respect of the prior role may either
continue on its original terms or be adjusted to reflect the new
appointment as appropriate. For external and internal appointments,
the Committee may agree that the Company will meet certain
relocation expenses in the year of appointment and for a further two
financial years, as it considers appropriate. For external candidates,
it may be necessary to make additional awards in connection with
the recruitment to buy out awards forfeited by the individual on
leaving a previous employer.
These discretions include, but are not limited to, the following:
• The selection of participants;
• The timing of grant of an award/bonus opportunity;
• The size of an award/bonus opportunity subject to the maximum
For the avoidance of doubt, buy-out awards are not subject to a
formal cap. Any awards to a newly recruited Executive Director which
are not buy-outs will be subject to the limits for the annual bonus
plan and PSP as stated in the general policy.
limits set out in the policy table;
• The determination of performance against targets and resultant
vesting/bonus pay-outs;
• Discretion required when dealing with a change of control or
restructuring of the Group;
• Determination of the treatment of leavers based on the rules of
the plan and the appropriate treatment chosen;
• Adjustments required in certain circumstances (e.g. rights issues,
corporate restructuring events and special dividends); and
• The annual review of performance measures, weightings and
targets from year to year.
While performance measures and targets for annual bonus and PSP
will generally remain unchanged once set, the Committee has the
usual discretions to amend the measures, weightings and targets in
exceptional circumstances (such as a major transaction) where the
original conditions would cease to operate as intended. Any such
changes would be explained in the subsequent Directors’
Remuneration Report and, if appropriate, be the subject of
consultation with the Company’s major shareholders.
Any use of these discretions would, where relevant, be explained in
the Directors’ Remuneration Report.
Outstanding obligations
For the avoidance of doubt, in approving this policy, authority is given
to the Company to honour any commitments entered into with
current or former Directors prior to the adoption of this policy
(including under a prior policy).
For any buy-outs the Company will not pay more than is necessary in
the view of the Committee, and will in all cases seek, in the first
instance, to deliver any such awards under the terms of the existing
annual bonus plan and PSP. It may, however, be necessary in some
cases to make buy-out awards on terms that are more bespoke than
the existing annual bonus plan and PSP (for example, specific
arrangements under Listing Rule 9.4.2).
All buy-outs, whether under the annual bonus plan, PSP or otherwise,
will take due account of the service obligations and performance
requirements for any remuneration relinquished by the individual
when leaving a previous employer. The Committee will seek, where it
is practicable to do so, to make buy-outs subject to what are, in its
opinion, comparable requirements in respect of service and
performance.
However, the Committee may choose to relax this requirement in
certain cases, such as where the service and/or performance
requirements are materially completed, or where such factors are, in
the view of the Committee, reflected in some other way, such as a
significant discount to the face value of the awards forfeited, and
where the Committee considers it to be in the interests of
shareholders. Exceptionally, where necessary, such buy-outs may
include a guaranteed or non-prorated annual bonus in the year of
joining.
A new Non-Executive Director would be recruited on the terms
explained above in respect of the main policy for such Directors.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 88
GOVERNANCE
REPORT OF THE REMUNERATION COMMITTEE
CONTINUED
Service contracts
The date of each Executive Director’s contract is:
Name
Date of service contract
Duration
John Treharne
6 November 2015
Richard Darwin
6 November 2015
Mark George
31 October 2018
Each Executive Director’s service agreement should be of indefinite duration, subject to
termination by the Company or the individual on six months’ notice. The service
agreements of all current Executive Directors comply with that policy.
The contracts of all current Executive Directors, which are available for inspection at the Company’s registered office, contain a payment in
lieu of notice clause which is limited to base salary only.
For each Non-Executive Director, the effective date of their latest letter of appointment is:
Name
Date of appointment
Term
Penny Hughes
6 November 2015
Paul Gilbert
David Kelly
6 November 2015
25 July 2016
Emma Woods
11 November 2016
Initial period of three years, subject to re-election at each AGM of the Company and are
terminable on one month’s notice given by either party.
Termination policy summary
The Remuneration Committee will consider treatments on a
termination having regard to all of the relevant facts and
circumstances available at that time. This policy applies both to any
negotiations linked to notice periods on a termination and any
treatments that the Committee may choose to apply under the
discretions available to it under the terms of the annual bonus plan,
the DSBP and PSP. The potential treatments on termination under
these plans are as follows:
Annual bonus plan
If an Executive Director resigns or is dismissed for cause before the
bonus payment date, the right to receive any bonus normally lapses.
If an Executive Director ceases employment before such date by
reason of death, injury, ill health, disability or any other reason
determined by the Committee, such bonus will be payable as the
Committee in its absolute discretion determines. Similar treatment
will apply in the event of a change in control of the Company.
Deferred Share Bonus Plan
Awards are normally preserved in all leaver cases (other than
termination for cause) but release will not typically be accelerated,
except in the case of death in service. The Committee has the ability
to release a good leaver’s awards early in suitable cases.
Performance Share Plan
If, during the performance or vesting period, a participant:
•
resigns or is dismissed for cause, awards lapse in full;
• dies, awards vest in full; or
• ceases to be employed due to injury, ill health, disability,
redundancy, the participant’s employing company or employing
part of a business being sold out of the Group or for any other
reason the Committee determines, awards are retained and vest
in the normal course subject to the performance conditions, or, if
the Committee so decides, immediately on the participant
ceasing to be in employment. Awards will be pro-rated by
reference to the proportion of the performance period for which
the participant remained employed. The Committee has a
standard ability to vary time pro-rating.
If a participant ceases employment during the holding period,
performance-vested awards will normally be retained and vest as
normal at the end of the holding period (unless the Committee
exercises its discretion to allow awards to vest early on cessation in
suitable cases). However, if the participant ceases employment due
to dishonesty, fraud, misconduct or any other circumstances
justifying summary dismissal, awards lapse in full.
If there is a change of control or winding up of the Company awards
typically vest to the extent that the relevant performance conditions
have been satisfied at that time and subject also to pro-rating, unless
the Committee determines a different basis of vesting.
The all-staff Share Incentive Plan and Sharesave scheme provide
treatments for leavers in line with HMRC rules for such plans.
The Company has the power to enter into settlement agreements
with Directors and to pay compensation to settle potential legal
claims. In addition, and consistent with market practice, in the event
of the termination of an Executive Director, the Company may make
a contribution towards that individual’s legal fees and fees for
outplacement services as part of a negotiated settlement. Any such
fees will be disclosed as part of the detail of termination
arrangements. For the avoidance of doubt, the policy does not
include an explicit cap on the cost of termination payments.
Consideration of shareholder views
The Committee considers shareholder views received during the
year and at each AGM, as well as guidance from shareholder
representative bodies more broadly, when determining the
Remuneration Policy and its implementation. The Committee seeks
to build an active and productive dialogue with investors on
developments on the remuneration aspects of corporate governance
generally and it will consult with major shareholders in advance of
any material change to the structure and/or operation of the policy
and will seek formal shareholder approval for any such change if
required.
External appointments
The Company’s policy is to permit an Executive Director to serve as a
non-executive director elsewhere when this does not conflict with the
individual’s duties to the Company, and where an Executive Director
takes such a role they may be entitled to retain any fees which they
earn from that appointment. Such appointments are subject to
approval by the Chairwoman.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 89
Consideration of employment conditions elsewhere in the Group (unaudited information)
Pay and employment conditions generally in the Group will be taken into account when setting Executive Directors’ remuneration.
The same reward principles guide reward decisions for all Group employees, including Executive Directors, although remuneration packages
differ to take into account appropriate factors in different areas of the business:
Base salary/benefits/pension
The Committee receives and considers an annual report summarising the base salaries, benefits and
pension arrangements received by each category of Group staff.
Annual bonus
Long term incentives
The majority of Group employees participate in an annual bonus plan, although the quantum and balance
of Group, business unit and individual objectives varies by level and nature of role. The Committee
receives an annual report summarising the bonus potential and performance metrics used in each of the
annual bonus schemes in operation across the Group.
Key Group employees participate in the PSP and may receive awards based on the same performance
conditions as those for Executive Directors (although the Committee reserves the discretion to vary the
performance conditions for awards made to employees below Board level). The Committee is responsible
for operation of the PSP and approves all PSP awards made to Group staff.
All-employee share plans
The Committee considers it is important for all employees to have the opportunity to become
shareholders in the Company. The Company currently offers a Share Incentive Plan and Sharesave
scheme. The Committee regularly monitors participation in the Group all-employee share plans.
Reflecting standard practice, the Company does not consult with staff in drawing up the Company’s annual Remuneration Report or when
determining the underlying policy.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 90
GOVERNANCE
DIRECTORS’ REPORT
As permitted by legislation, some of the matters normally included in
the Directors’ Report, including disclosures regarding greenhouse
gas emissions, have instead been included in the Strategic Report
(pages 6 to 53) as the Board considers them to be of strategic
importance.
A summary statement of non-financial information and where this
can be found in the report is on page 53.
Corporate structure
The Gym Group plc is a public company limited by shares,
incorporated in England and Wales, and its shares are traded on the
Main Market of the London Stock Exchange. The Company number
is 08528493.
Directors’ indemnity
The Company has granted an indemnity by way of deed poll to its
Directors against any liability which attaches to them in defending
proceedings brought against them, to the extent permitted by
English law. In addition, Directors and Officers of the Company and
its subsidiaries are covered by Directors’ and Officers’ liability
insurance.
Compensation for loss of office
The Company does not have arrangements with any Director which
would provide compensation for loss of office or employment
resulting from a takeover, except that provisions of the Company’s
share plans may cause options and awards granted under such
plans to vest on a takeover.
The Board
The Directors who served during the year were:
Penny Hughes
John Treharne
Richard Darwin
Paul Gilbert
David Kelly
Emma Woods
Mark George
Wais Shaifta and Rio Ferdinand joined the Board on 1 February 2021,
and Paul Gilbert will retire from the Board at the Company’s AGM on
11 May 2021.
The roles and biographies of the Directors as at the date of this
report are on pages 56 and 57. The general powers of the Directors
are set out in Articles 64 to 68 of the Company’s Articles of
Association (‘the Articles’). These provide that the Board may
exercise all the powers of the Company, subject to applicable
legislation, the Articles and any special resolution of the Company,
applicable on the date that any power is exercised.
Appointment and replacement of Directors
The appointment and replacement of Directors is governed by the
Company’s Articles. These state that the number of Directors shall
not be less than two nor exceed 12 and that:
•
the shareholders may by ordinary resolution elect any person
willing to act as a Director;
the Board may by ordinary resolution elect any person willing to
be a Director;
•
• Every Director shall retire at each AGM and be eligible for
•
•
re-election;
the Company may, by special resolution, or ordinary resolution of
which special notice has been given according to applicable
legislation, remove any Director before the expiration of his or her
period of office; and
there are a number of other grounds on which a Director’s office
may cease, namely: voluntary resignation, if they are absent
without special leave of absence for a period of more than six
months, they are physically or mentally incapable of acting as a
Director, they become bankrupt or prohibited by law from being a
Director.
Dividend
As noted on page 45, the Directors are not proposing a final dividend
for the year 2020, taking into account the ongoing impacts of the
pandemic upon the Group and the material support received by the
Group from HM Government. It is a condition of the £30m New Bank
Facility is that the Company shall not declare or pay a dividend and
whilst this facility remains undrawn, the Directors would like to
continue to have access to it as necessary.
Post Balance Sheet events
Following the phased introduction of Tier 4 restrictions in a number
of regions in December 2020, the Group was required to close 162 of
its 183 gyms. On 4 January 2021 all remaining gyms were required to
close as the UK Government announced a nationwide lockdown. The
UK Government has announced that gyms in England will re-open
on 12 April 2021 if there is continued progress with the Government’s
four criteria for monitoring the pandemic. The Scottish Government
has announced that gyms in Scotland will be able to re-open on
26 April 2021. The Welsh Government has not yet announced a date
for gyms in Wales to re-open.
In the Government’s Budget statement of 3 March 2021, it was
announced that Business Rates relief would be extended and further
grants for closed businesses would be made available. The Group
will benefit from both of these measures to an estimated combined
value of approximately £8 million between April and August 2021.
Future developments in the business of the Company
The likely future developments in respect of the business of the
Company can be found in the Strategic Report on pages 6 to 53 and
forms part of this report by reference.
Corporate governance
A report on corporate governance and compliance with the UK
Corporate Governance Code is set out on pages 54 to 64, and forms
part of this report by reference.
Health and safety
An overview of health and safety is provided in the Sustainability
Report on page 34 and forms part of this report by reference.
Greenhouse gas emissions
Information on the Group’s greenhouse gas emissions is set out in
the Sustainability Report on page 39 and forms part of this report by
reference.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 91
Human rights, anti-bribery and anti-corruption
Information on the Group’s human rights and anti-bribery policies is
set out in the Sustainability Report on page 35 and forms part of this
report by reference.
Political donations
The Company made no political donations in 2020 (2019: £nil).
Employee involvement and policy regarding
disabled persons
The Company operates an equal opportunities policy which aims to
treat individuals fairly and not to discriminate on the basis of sex,
race, ethnic origin, disability or on any other basis. The Company’s
policy and procedures are designed to provide for full and fair
consideration and selection of disabled applicants, to ensure they
are properly trained to perform safely and effectively and to provide
career opportunities which allow them to fulfil their potential. Where
an employee becomes disabled in the course of their employment,
the Company will actively seek to retain them wherever possible by
making adjustments to their work content and environment or by
retraining them to undertake new roles.
Workforce engagement
The Group updates staff with information on the Group’s
performance and on matters concerning them on a regular basis,
most frequently through our communications platform CORE, which
was launched in 2020 and features videos, articles, podcasts,
interactive forums and access to corporate tools and Company
benefit information, as well as information on wellbeing. CORE also
facilitates engagement with our staff members who have been
furloughed at times, ensuring that they retain access to information.
In addition we share information in email communications, staff
meetings and forums, and the annual company conference, though
an annual conference was not held in 2020 owing to coronavirus
restrictions in the UK. Our People system, Workday, also alerts
employees to Group related and role related communications.
Through CORE and other communications we include any relevant
updates on financial and economic factors which might be affecting
the Company, particularly following results presentations to ensure
that staff have an up to date understanding of the Company’s
performance. Our Board and Executive Committee regularly visit our
gyms, which facilitates engagement and keeps the Board up to date
with gym operations, and both teams have carried out visits when
permitted by, and in accordance with, COVID-19 restrictions. The
Board believes that our commitment to developing and supporting
our people forms part of the Company’s strategy, as set out in our
Sustainability Report on page 34, where further employee
engagement initiatives are detailed.
When making Board decisions which are relevant to our people,
considerable value is placed on: the involvement of staff, regular, open,
fair and respectful communication, zero tolerance for human rights
violations, fair remuneration, and, above all, a safe working environment.
The Company encourages the involvement of employees in the
Company’s performance through our employee share schemes. In
addition to the SIP, in October 2020 we launched a further invitation
to join our Sharesave plan to allow all eligible employees including
our new Personal Trainer population the opportunity to participate in
the Company’s success.
The Board has appointed one of its members as the Designated
Non-Executive Director for People Engagement, and undertakes to
review the specification and duties of this role annually. During the
year and to date, David Kelly has held this role, with responsibility for
acting as the employees’ ambassador at the Board table. It is
intended that the role will move to Emma Woods following the
Company’s AGM. In 2021, the views of our employees and feedback
from our teams were gathered via an externally facilitated
engagement survey, the results of which are discussed in more
detail in our Sustainability Report on page 34. David worked with
Ann-marie Murphy, Chief People Officer, to review the feedback in
detail by region and function and analyse outcomes to be presented
to the Board. One of the outcomes of the engagement survey was for
the People team to provide regular pulse surveys to follow up and
monitor progress on key people-related issues, such as maintaining
engagement with and support for furloughed and working staff.
David’s responsibilities included working with the Chief People
Officer in the review and analysis of the feedback from the survey,
and presentation of feedback and engagement initiatives the
Non-Executive Directors to the Board. David also plays a role in the
Group-wide recognition programme via the Remuneration
Committee.
Gender pay gap
As mentioned in the Report of the Nomination Committee, we
have published our 2020 Gender Pay Gap Report on both the
Government’s and Company’s websites. Our reports for previous
years remain available on the same websites. Whilst our gender pay
gap compares favourably with other organisations across both the
UK economy and the low cost retail and fitness sector, we are
committed to reporting on an annual basis the actions we are taking
to reduce the gap and on our progress made against these actions.
As we highlight in our report, the pay gap is formed largely because
our most senior roles are mainly filled by men. We continue to focus
on a diverse succession pipeline and our actions are set out on
pages 36-37.
Directors’ interests
The beneficial interests of the Directors of the Company at
31 December 2020, and their connected persons, in the issued
Ordinary shares are provided on page 79 within the Directors’
Remuneration Report.
Major interests in shares
As at 31 December 2020, the Company was aware of the following
interests representing 3% or more of the issued share capital of the
Company correct as at the date of notification. It should be noted
that these holdings may have changed since notified to the
Company; however, notification of any change is not required until
the next applicable threshold is crossed.
Institution
Number of
shares
Percentage
Liontrust Sustainable Investments
16,361,046
Legal & General Investment Management
11,476,428
Janus Henderson Investors
10,655,376
Columbia Threadneedle Investments
8,685,833
Fidelity International
Invesco
8,349,068
6,966,598
AXA Framlington Investment Managers
6,722,477
Aberdeen Standard Investments
Premier Miton Investors
6,303,228
5,274,340
9.86%
6.91%
6.42%
5.23%
5.03%
4.20%
4.08%
3.80%
3.18%
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 92
GOVERNANCE
DIRECTORS’ REPORT
CONTINUED
Share capital
The details of the issued share capital can be found in note 28 to
the Consolidated Financial Statements. The rights attached to the
Company’s Ordinary shares, being the only share class of the
Company with voting rights, are set out in the Articles of Association.
The Ordinary shares rank pari passu in all respects with the other
Ordinary shares in issue, including for voting purposes, and will rank
in full for all dividends and other distributions thereafter declared,
made or paid on the Ordinary share capital of the Company. Each
Ordinary share ranks equally in the right to receive a relative
proportion of shares in case of a capitalisation of reserves.
Subject to the provisions of the Act, any equity securities issued by
the Company for cash must first be offered to shareholders in
proportion to their holdings of Ordinary shares. The Act and Listing
Rules allow for the disapplication of pre-emption rights which may
be carried out by a special resolution of the shareholders, whether
generally or specifically, for a maximum period not exceeding five
years.
Except in relation to dividends which have been declared and rights
on a liquidation of the Company, the shareholders have no rights to
share in the profits of the Company.
The Ordinary shares are not redeemable. However, the Company
may purchase or contract to purchase any of the Ordinary shares on
or off market, subject to the Act and the requirements of the Listing
Rules.
There are no restrictions on transfers of Ordinary shares other than:
• certain restrictions which may from time to time be imposed by
laws or regulations such as those relating to insider dealing;
• some of the Company’s employee share plans include restrictions
on transfer of shares while the shares are held within the plan;
• pursuant to the Company’s Share Dealing Code whereby the
Directors and designated employees require approval to deal in
the Company’s shares; and
• where a person with an interest in the Company’s shares has
been served with a disclosure notice and has failed to provide the
Company with information concerning interests in those shares.
The Company is not aware of any arrangements between
shareholders which may result in restrictions on the transfer of
securities or voting rights.
Amendment to the Company’s Articles of Association
The Company may alter its Articles of Association by special
resolution passed at a general meeting of shareholders.
Authority for the Company to purchase its own shares
At the 2020 AGM the Company was generally and unconditionally
authorised by its shareholders to make market purchases (within the
meaning of section 693 of the Act) of its Ordinary shares on such
terms and in such manner as the Directors of the Company may
determine subject to the following conditions:
• The maximum number of Ordinary shares authorised to be
•
•
purchased is 16,583,992, representing 10% of the Company’s
existing share capital;
the minimum price (exclusive of expenses) which may be paid for
an Ordinary share is 0.01p (being the nominal value of the
Ordinary shares);
the maximum price (exclusive of expenses) which may be paid for
each Ordinary share purchased under this authority is the higher
of:
– an amount equal to 105% of the average of the middle market
price shown in the quotations for an Ordinary share as derived
from the London Stock Exchange Daily Official list for the five
trading days immediately preceding the date on which the
Ordinary share is contracted to be purchased; and
– an amount equal to the higher of the price of the last
independent trade of an Ordinary share and the highest
current independent bid for an Ordinary share as derived from
the London Stock Exchange trading system;
•
the authority shall expire at the close of the next AGM of the
Company after the passing of this resolution or, if earlier, on
30 June 2021.
The Company did not buy back any shares during the year. A
resolution will be proposed at the 2021 AGM to renew this authority.
Authority to allot shares
At the 2020 AGM, authority was given to the Directors to allot new
Ordinary shares up to a nominal value of £5,527.44, equivalent to
33.33% of the issued share capital of the Company. In addition,
authority was given to the Directors to allot further new Ordinary
shares up to a nominal value of £11,056.55, equivalent to 66.67% of
the authorised share capital of the Group. The authority shall expire
at the close of the next AGM of the Company after the passing of this
resolution or, if earlier, on 30 June 2021.
A resolution will be proposed at the 2021 AGM to renew this authority.
Significant agreements
The Company is not a party to any significant agreements which
would take effect, alter or terminate upon a change of control of the
Company.
Financial risk management
The Group’s financial risk management objectives and policies,
including its use of financial instruments, are set out in note 26 to
the Consolidated Financial Statements.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020
93
Information presented in other sections
Certain information is required to be included in the Annual Financial
Report by Listing Rule 9.8.4. The following table provides references
to where this information can be found in this Annual Report. If a
requirement is not shown, it is not applicable to the Company.
Section
Listing Rule requirement
Location
Note 13 Finance Costs
(Amount Capitalised)
(page 120)
Report of the
Remuneration Committee
(pages 71-89)
Note 28 Issued Share
Capital and Reserves
(page 132)
1
4
7
A statement of the amount of
interest capitalised by the
Group during the period
under review with an
indication of the amount and
treatment of any related tax
relief
Details of long term incentive
schemes
Details of any allotment for
cash of equity securities
made during the period
under review otherwise than
to the holders of the
Company’s equity shares in
proportion to their holdings of
such equity shares and which
has not been specifically
authorised by the Company’s
shareholders
10
Details of contracts of
significance
Corporate Governance
Report (page 64 Directors’
conflicts of interest)
Section 172 and engagement with suppliers, customers
and others
In its decision making, the Board has regard to each Director’s duty
to promote the success of the Company on behalf of the Company’s
stakeholders, to foster the Company’s relationships with employees,
suppliers, members, and others, and considers the effect of the
principal decisions taken by the Company during the financial year
on the Company’s stakeholders. This is set out in our s172 statement
on pages 26 to 29.
Auditors
Each of the persons who is a Director at the date of approval of this
Annual Report confirms that: a) so far as the Director is aware, there
is no relevant audit information of which the Company’s auditors are
unaware; and b) the Director has taken all the steps which he/she
ought to have taken as a Director in order to make himself/herself
aware of any relevant audit information and to establish that the
Company’s auditors are aware of that information. Ernst & Young LLP
have expressed their willingness to continue in office as auditors and a
resolution to reappoint them will be proposed at the forthcoming AGM.
AGM
The Notice convening the 2021 AGM will be circulated to
shareholders separately. Owing to ongoing COVID-19 restrictions, the
Board anticipates that there will again be some necessary changes
to our usual arrangements on attendance and participation for the
2021 AGM, and will ensure shareholders are kept informed using the
Notice, our website, and relevant announcements in due course.
On behalf of the Board
Katy Tucker
Company Secretary
18 March 2021
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 94
GOVERNANCE
DIRECTORS’ RESPONSIBILITY STATEMENT
The Directors are responsible for preparing the annual report and
the Group Financial Statements in accordance with applicable
United Kingdom law and regulations.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors have elected to
prepare the Group financial statements in accordance with
International Financial Reporting Standards (‘IFRSs’) in conformity
with the Companies Act 2006, and the parent company financial
statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and
applicable law), including Financial Reporting Standard 101 Reduced
Disclosure Framework (‘FRS 101’). Under company law the Directors
must not approve the Group financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of
the Group and the Company and of the profit or loss of the Group
and the Company for that period.
Under the Financial Conduct Authority’s Disclosure Guidance and
Transparency Rules, group financial statements are required to be
prepared in accordance with IFRSs adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union.
In preparing the Financial Statements, the Directors are required to:
• select suitable accounting policies in accordance with IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors
and then apply them consistently;
• make judgements and estimates that are reasonable and
prudent;
• present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable
information;
• provide additional disclosures when compliance with the specific
requirements in IFRSs (or in respect of the Parent Company
Financial Statements, FRS 101) is insufficient to enable users to
understand the impact of particular transactions, other events
and conditions on the Group’s financial position and
performance;
in respect of the Group Financial Statements, state whether IFRSs
in confirmity with the Companies Act 2006 and IFRSs adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union have been followed, subject to any material
departures disclosed and explained in the Financial Statements;
in respect of the Parent Company Financial Statements, state
whether applicable UK accounting standards including FRS 101
have been followed, subject to any material departures disclosed
and explained in the Financial Statements; and
•
•
• prepare the Financial Statements on a going concern basis,
unless it is appropriate to presume that the Company and/or
Group will not continue in business.
The Directors confirm that the Financial Statements comply with the
above requirements.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s and
Group’s transactions and disclose with reasonable accuracy at any
time the financial position of the Company and the Group and
enable them to ensure that the Company and Group Financial
Statements comply with the Companies Act 2006 and, as regards
the Group Financial Statements, Article 4 of the IAS Regulation. They
are also responsible for safeguarding the assets of the Group and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors’ Report,
Directors’ Remuneration Report and Corporate Governance
Statement that comply with that law and those regulations. The
Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company’s
website. Legislation in the UK governing the preparation and
dissemination of accounts may differ from legislation in other
jurisdictions.
Responsibility statement
The Directors confirm, to the best of their knowledge:
•
that the consolidated Financial Statements, prepared in
accordance with IFRSs in conformity with the Companies Act
2006 (and IFRSs pursuant to Regulation (EC) 1606/2002 as it
applies in the European Union), give a true and fair view of the
assets, liabilities, financial position and results of the Parent
Company and undertakings included in the consolidation taken
as a whole;
that the annual report, including the Strategic Report, includes a
fair review of the development and performance of the business
and the position of the Company and undertakings included in
the consolidation taken as a whole, together with a description of
the principal risks and uncertainties that they face; and
that they consider the Annual Report, taken as a whole, is fair,
balanced and understandable and provides the information
necessary for shareholders to assess the Company’s position,
performance, business model and strategy.
•
•
On behalf of the Board
Richard Darwin
Chief Executive Officer
18 March 2021
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 95
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF THE GYM GROUP PLC
Opinion
In our opinion:
• The Gym Group plc’s Group Financial Statements and Parent
Company Financial Statements (the “Financial Statements”) give a
true and fair view of the state of the Group’s and of the Parent
Company’s affairs as at 31 December 2020 and of the Group’s
loss for the year then ended;
the Group Financial Statements have been properly prepared in
accordance with International Accounting Standards in conformity
with the requirements of the Companies Act 2006 and International
Financial Reporting Standards adopted pursuant to Regulation
(EC) No. 1606/2002 as it applies in the European Union;
the Parent Company Financial Statements have been properly
prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006.
•
•
•
We have audited the financial statements of The Gym Group plc
(the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year
ended 31 December 2020 which comprise:
Group
Parent Company
Consolidated balance sheet
as at 31 December 2020
Balance sheet as at
31 December 2020
Consolidated income statement
for the year then ended
Statement of changes in equity
for the year then ended
Consolidated statement of
comprehensive income for the
year then ended
Related notes 1 to 9 to the
financial statements including
a summary of significant
accounting policies
Consolidated statement of
changes in equity for the year
then ended
Consolidated statement of cash
flows for the year then ended
Related notes 1 to 34 to the
financial statements, including
a summary of significant
accounting policies
The financial reporting framework that has been applied in the
preparation of the Group Financial Statements is applicable law and
International Accounting Standards in conformity with the
requirements of the Companies Act 2006 and International Financial
Reporting Standards adopted pursuant to Regulation (EC) No.
1606/2002 as it applies in the European Union. The financial reporting
framework that has been applied in the preparation of the Parent
Company financial statements is applicable law and United Kingdom
Accounting Standards, including FRS 101 “Reduced Disclosure
Framework” (United Kingdom Generally Accepted Accounting
Practice).
Basis for opinion
We conducted our audit in accordance with International Standards
on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our
report. We are independent of the group in accordance with the
ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as
applied to listed public interest entities, and we have fulfilled our
other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We draw attention to note 2 in the financial statements, which indicates
that the Directors have concluded that the potential impact of COVID-19
described in note 2 and uncertainty over possible mitigating actions,
including covenant waivers or extending the New Bank Facility,
represents a material uncertainty that may cast significant doubt about
the Group’s ability to continue as a going concern. However, having
assessed the financial forecasts, sensitivities and possible mitigating
actions, the Board has a reasonable expectation that the Group has
adequate resources to continue in operational existence for the next
12 months and therefore the Directors continue to adopt the going
concern basis in preparing these financial statements. Our opinion is
not modified in respect of this matter.
In auditing the financial statements, we have concluded that the directors’
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the directors’
assessment of the group and parent company’s ability to continue to
adopt the going concern basis of accounting included:
• We gained an understanding of the process undertaken by
management to perform the going concern assessment, including the
evaluation of the ongoing impact of COVID-19 on the Group and the
Group’s access to available sources of liquidity;
• We obtained management’s forecast cash flows and covenant
calculations covering the period from the date of signing to 30 June
2022 and we agreed these to the Board approved budgets and
forecasts.
• We tested the mathematical accuracy of the cash flows, as well as the
calculation of the forecast covenants;
• We obtained a copy of the waiver from the Bank for the anticipated
covenant breach in March 2021;
• We challenged management in respect of the assumptions used in
the going concern assessment and reverse stress test reflecting the
risk of further lockdown later in FY21 and the impact this would have
on liquidity and breaching of financial covenants.
• We understood and challenged the Board’s controllable
mitigation plans and the forecast impact on the ability of the
business to operate within its financial covenants. We obtained
supporting documentation to evaluate the plausibility and
achievability of management’s mitigation plans considering
actions delivered to date.
• We compared forecast future cashflows to historical data, ensuring
variations are in line with our expectations and understanding of the
business and considered the reliability of past forecasts.
• Considered the results of other audit procedures and other
knowledge obtained in the audit and whether it was consistent with
or contradicted management’s assumptions.
• We performed our own sensitivity analysis on managements
forecast cashflows and considered the reverse stress tested
management model.
• We agreed available facilities to underlying agreements and the extent
of drawings thereunder to external confirmations.
• We assessed the adequacy of disclosures within the Annual Report
and Accounts.
Our key observations
• We have observed that the group is experiencing a high level of
•
disruption from the impact of the pandemic from both a revenue and
profitability perspective. There is uncertainty about the impacts of
COVID-19 on management’s forecasts in the going concern
assessment period, with membership levels and further enforced gym
closures being key assumptions.
In December 2020, the Group amended the New Bank Facility to
extend it from 18 months to 24 months (now due to end June 2022 at
which point the terms of the original £70 million RCF will apply) and to
set new covenants based on a revised business plan. Based on
management’s forecasts, it is expected that the Group will breach its
current banking covenant in June 2021 requiring a waiver and it may
be necessary in certain downside scenarios to extend the term of the
New Bank Facility beyond June 2022.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 96
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF THE GYM GROUP PLC
CONTINUED
We draw attention to the Viability Statement in the Annual Report at page 51 that comments on the impact of the current outbreak of COVID-19
in the UK and the impact on the Viability Statement. The Directors consider that the material uncertainty referred to in respect of going
concern may cast significant doubt over the future viability of the Group and Company. Our opinion is not modified in respect of this matter.
In relation to the Group and Parent Company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the Directors’ statement in the Financial Statements about whether the directors considered
it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. However,
because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s ability to continue as a going concern.
Overview of our audit approach
Audit scope
• We performed an audit of the complete financial information of two components and audit procedures on specific
balances for a further one component.
• The components where we performed full or specific audit procedures accounted for 100% of Profit before tax and
exceptionals, 100% of Revenue and 100% of Total assets.
Key audit matters
• Deferral of membership income
• Annual goodwill and property, plant and equipment impairment testing including cash flow and discount rate
assumptions
Materiality
• Overall group materiality of £523,000 which represents 0.65% of revenue.
An overview of the scope of the Parent Company and
Group audits
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our
allocation of performance materiality determine our audit scope for
each company within the Group. Taken together, this enables us to
form an opinion on the Consolidated Financial Statements. We take
into account size, risk profile, the organisation of the Group and
effectiveness of Group-wide controls, changes in the business
environment and other factors when assessing the level of work
to be performed at each company.
In assessing the risk of material misstatement to the Group financial
statements, and to ensure we had adequate quantitative coverage of
significant accounts in the financial statements, of the seven
reporting components of the Group, we selected three components
covering entities, which represent the principal business units within
the Group.
Of the three components selected, we performed an audit of the
complete financial information of two components (“full scope
components”) which were selected based on their size or risk
characteristics. For the remaining one component (“specific scope
components”), we performed audit procedures on specific accounts
within that component that we considered had the potential for the
greatest impact on the significant accounts in the financial
statements either because of the size of these accounts or their risk
profile.
The reporting components where we performed audit procedures
accounted for 100% (2019: 100%) of the Group’s Revenue, Group’s
Profit before tax and exceptional items, Group’s Profit before tax and
the Group’s Total assets.
2020
2019
Full
scope
Specific
scope
Remaining
components
Full
scope
Specific
scope
Remaining
components
Number of
components
2
Revenue
100%
1
0%
4
2
3
– 97.1%
2.9%
(Loss)/profit
before tax
and
exceptional
items
(Loss)/profit
before tax
(94.7%)
(5.3%)
– 130.5% (30.5%)
(97.8%)
(2.2%)
–
175% (75%)
Total assets
99.9%
0.1%
– 99.9%
0.1%
Changes from the prior year
In the current year two of the components were descoped. This is
due to a reorganisation during the prior year and these entities are
no longer trading.
Involvement with component teams
All audit work performed for the purposes of the audit was
undertaken by the Group audit team.
2
–
–
–
–
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 97
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These
matters included those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit; and directing the
efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in our
opinion thereon, and we do not provide a separate opinion on these matters.
Risk
Our response to the risk
Key observations communicated
to the Audit Committee
We obtained an understanding of the Group’s revenue
recognition process, in particular in respect of the
membership subscription process. This included visiting
the outsourced membership management service
provider to obtain an understanding of the outsourced
elements of the membership income process.
Based on our procedures,
deferral of membership income
in the year ended 31 December
2020 is appropriately recognised
and presented as contract
liabilities as at that date.
We also obtained an understanding of the deferred
membership fee income calculation process and
related controls, taking into consideration the additional
processes in place for the updated calculation reflecting
the impact of COVID-19.
We obtained the full revenue listing directly from the
management service provider and tested a sample to
ensure validity of the information. We re-performed a full
recalculation on management’s deferred membership
fee income calculation for all material balances in order
to ensure the accuracy of the calculation of income
deferred.
Deferral of membership income – total
revenue for the year ended 31 December
2020: £80.5m (31 December 2019: £153m), of
which £6.4m was deferred at 31 December
2020 (31 December 2019: £8.0m) and
presented in the balance sheet as contract
liabilities.
Refer to the Report of the Audit and Risk
Committee (page 68); accounting policies
(page 108); and notes 6 and 21 of the
Consolidated Financial Statements
(pages 116 and 125).
In preparing the annual accounts,
management need to calculate the amount
of joining and subscription payments
collected, which relate to membership after
the year end date and for which the related
revenue should be deferred and presented
as a contract liability under IFRS 15 “Revenue
from Contracts with Customers” (“IFRS 15”).
The calculation of deferred membership fees
does not involve significant judgement or
estimation but is a non routine process
whose calculation requires considerable
manual input. That calculation is more
complex this year due to the need to reflect
impacts of COVID-related closure periods.
There is an increased risk of material error
and management override in the inputs to
this calculation, with an increased risk in the
current year due to these manual calculations
due to COVID-19.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE Key observations communicated
to the Audit Committee
Based on our procedures, we
consider management’s
assessment of the CGUs to be
appropriate. We believe that the
combined effect of the cash flow
and discount rate assumptions
used by management in the
CGU impairment model are
within acceptable ranges and
reasonably possible changes in
the key assumptions would not
cause an impairment to arise in
respect of the goodwill.
Additionally, in respect of
property plant and equipment
impairment, we consider the
cash flow and discount rate
assumptions, and impairment
charges which have been
recorded in the current year in
reasonable.
We consider that management’s
impairment model methodology
is acceptable.
The Financial Statement
disclosures, particularly those in
note 15 and 16 to the
Consolidated Financial
Statements, materially comply
with the applicable requirements
of IAS 36 and IAS1.
98
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF THE GYM GROUP PLC
CONTINUED
Risk
Our response to the risk
We performed a walkthrough of the process and
controls to gain an understanding of the Group’s
impairment process.
We obtained and challenged management’s CGU
assessment which treats each gym as a CGU, but
allocates the Group’s goodwill to the chain of health and
fitness facilities operating under “The Gym” brand. This
group of CGUs represent the lowest level within the
Group at which the goodwill will be monitored for
internal management purposes and is consistent with
the Operating Segments identified under IFRS 8
“Operating Segments”.
We obtained management’s impairment testing models
for goodwill and property plant and equipment. We
checked the input data to source information, we
evaluated the calculation methodology and tested the
integrity of the model.
We assessed whether the assumptions disclosed in
note 15 and 16 to the Consolidated Financial Statements
were the appropriate key assumptions to be used in the
impairment model, being the discount rate, revenue
growth and cost inflation over the next three years and
the long term growth from 2023 onwards.
We then challenged the reasonableness of these
assumptions by reference to historical data, external
benchmarks and the risk of management bias.
We assessed the historical accuracy of management’s
forecasting by comparing actual financial performance
to management’s previous forecasts / budgets.
We considered management’s sensitivity analysis
showing the impact of a reasonably possible change in
key impairment assumptions to determine whether an
impairment charge would be required. This
consideration included performing our own sensitivity
analysis by reference to the results of our assessment of
assumptions referred to above.
As part of our work we utilised EY valuations specialists
to assist in assessing the appropriateness of the
methodology used by the models and to assist in our
assessment of the discount rate and long term growth
rate assumptions used in the impairment models.
We ensured that the Financial Statement disclosures,
particularly those in note 15 for PPE and 16 for Goodwill
to the Consolidated Financial Statements, met the
requirements of IAS 36 and IAS1 “Presentation of
Financial Statements” (“IAS 1”), particularly those related
to judgements, estimation uncertainty and sensitivities.
The Group audit team performed the full scope audit
procedures on the impairment models prepared for The
Gym Group plc
Annual goodwill impairment testing
including cash flow and discount rate
assumptions – 31 December 2020: £77.7m
(31 December 2019: £77.7m); and property,
plant and equipment impairment testing –
31 December 2020: £171.4m (31 December
2019: £176.0m)
Refer to the Report of the Audit and Risk
Committee (page 68); accounting policies
(page 109 and 114); and note 16 of the
Consolidated Financial Statements (page 122).
As disclosed in note 16 to the Consolidated
Financial Statements, goodwill recognised in
the Group Statement of Financial Position of
£77.7m (arising on the acquisition of The Gym
Limited, the acquisition of the trade and
assets of 18 gyms from Lifestyle Fitness, the
acquisition of the trade and assets of one
gym in Aylesbury and the acquisition of the
trade and assets of 13 gyms from easyGym)
has been allocated to one group of cash
generating units (“CGUs”) comprising The
Gym chain of health and fitness facilities.
As disclosed in note 15 to the Consolidated
Financial Statements, property, plant and
equipment is recognised of £426.9m relating
to the assets held, including the Right-of-Use
assets for The Gym chain.
Management have undertaken an annual
impairment review in respect of the goodwill
allocated to the group of CGUs in
accordance with the requirements of IAS 36
“Impairment of Assets” (“IAS 36”) and
concluded that no impairment arises at
31 December 2020. They have also
undertaken an annual impairment review in
respect of property plant and equipment
(PPE) and have recognised an impairment of
£1.61m in the current year.
We focused on this area due to both the
significance of the carrying value of goodwill
and PPE and the inherent uncertainty
involved in an impairment review, which
requires management to make significant
judgements and estimations as to future
outcomes and assumptions of cash flows (for
example customer acquisition and retention,
changes in subscription rates, operating
costs etc), along with the discount rate to be
applied to those cash flows. In addition, such
judgements and estimates could be
influenced by management bias.
The significant assumptions are disclosed in
note 15 for PPE and note 16 for goodwill to the
Consolidated Financial Statements. There is
an increased risk and uncertainty in the
current year due to the impacts of the
Government-enforced closures in respect of
COVID-19.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 99
In the prior year, our auditor’s report included a key audit matter in
relation to Adoption of IFRS 16, since it was the first year of
implementation. Given that this is no longer the first year, this has not
been included as a key audit matter in the current year. In the current
year. PPE impairment has been considered additionally to Goodwill
impairment, due to the impacts of Government-enforced closure due
to COVID-19.
Our application of materiality
We apply the concept of materiality in planning and performing the
audit, in evaluating the effect of identified misstatements on the audit
and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in
the aggregate, could reasonably be expected to influence the
economic decisions of the users of the financial statements.
Materiality provides a basis for determining the nature and extent of
our audit procedures.
We determined materiality for the Group to be £523,000 (2019:
£639,000), which is 0.65% of revenue (2019: 5% of profit before tax
and exceptional items). Due to the loss before tax in the current year,
profit before tax and exceptional items is no longer an appropriate
materiality measure. We consider that revenue is the key variable
which will drive performance of the group in 2021, and it is therefore
expected that the users of the financial statements focus will turn to
growth of membership levels and revenue.
We determined materiality for the Parent Company to be £2,638,630
(2019: £1,913,500), which is 1% (2019: 1%) of total assets. Given the
nature of the Parent Company’s activities we believe total assets is a
key metric of the shareholders. While materiality for the Parent
Company exceeds that of the Group, as noted below our
performance materiality for the Parent Company’s audit was based
upon an allocation of the performance materiality used in the audit
of the Group’s financial statements.
Reporting threshold
An amount below which identified misstatements are considered as
being clearly trivial.
We agreed with the Audit Committee that we would report to them all
uncorrected audit differences in excess of £26,000 (2019: £35,000),
which is set at 5% of planning materiality, as well as differences
below that threshold that, in our view, warranted reporting on
qualitative grounds.
We evaluate any uncorrected misstatements against both the
quantitative measures of materiality discussed above and in light of
other relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual
report set out on pages 1 to 89, other than the financial statements and
our auditor’s report thereon. The Directors are responsible for the other
information contained within the annual report.
Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in
this report, we do not express any form of assurance conclusion
thereon.
Our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the course of
the audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements themselves. If,
based on the work we have performed, we conclude that there is a
material misstatement of the other information, we are required to
report that fact.
We have nothing to report in this regard.
Performance materiality
The application of materiality at the individual account or balance
level. It is set at an amount to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality.
Opinions on other matters prescribed by the
Companies Act 2006
In our opinion, the part of the directors’ remuneration report to be
audited has been properly prepared in accordance with the
Companies Act 2006.
On the basis of our risk assessments, together with our assessment
of the Group’s overall control environment, our judgement was that
performance materiality was 75% (2019: 75%) of our planning
materiality, namely £392,000 (2019: £486,000). We have set
performance materiality at this percentage due to experience with
the Group demonstrating an effective control environment and low
incidence of misstatements.
Audit work at component locations for the purpose of obtaining audit
coverage over significant financial statement accounts is undertaken
based on a percentage of total performance materiality. The
performance materiality set for each component is based on the
relative scale and risk of the component to the Group as a whole and
our assessment of the risk of misstatement at that component. In the
current year, the range of performance materiality allocated to
components was £176,400 to £392,000 (2019: £92,400 to £462,000).
•
•
In our opinion, based on the work undertaken in the course of
the audit:
•
the information given in the Strategic Report and the Directors’
Report for the financial year for which the financial statements are
prepared is consistent with the financial statements and those
reports have been prepared in accordance with applicable legal
requirements;
the information about internal control and risk management
systems in relation to financial reporting processes and about
share capital structures, given in compliance with rules 7.2.5 and
7.2.6 in the Disclosure Rules and Transparency Rules sourcebook
made by the Financial Conduct Authority (the FCA Rules), is
consistent with the financial statements and has been prepared
in accordance with applicable legal requirements; and
information about the Company’s corporate governance
statement and practices and about its administrative,
management and supervisory bodies and their committees
complies with rules 7.2.2, 7.2.3 and 7.2.7 of the FCA Rules.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 100
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF THE GYM GROUP PLC
CONTINUED
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and
the Parent Company and its environment obtained in the course
of the audit, we have not identified material misstatements in:
•
•
the Strategic Report or the Directors’ Report; or
the information about internal control and risk management
systems in relation to financial reporting processes and about
share capital structures, given in compliance with rules 7.2.5 and
7.2.6 of the FCA Rules
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
• adequate accounting records have not been kept by the Parent
•
Company, or returns adequate for our audit have not been
received from branches not visited by us; or
the Parent Company Financial Statements and the part of the
Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law
are not made; or
• we have not received all the information and explanations we
require for our audit
• a Corporate Governance Statement has not been prepared by
the Company
Corporate Governance Statement
The Listing Rules require us to review the Directors’ statement in
relation to going concern, longer-term viability and that part of
the Corporate Governance Statement relating to the group and
company’s compliance with the provisions of the UK Corporate
Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial
statements or our knowledge obtained during the audit:
• Directors’ statement with regards to the appropriateness of
adopting the going concern basis of accounting and any material
uncertainties identified set out on pages 51 to 52;
• Directors’ explanation as to its assessment of the Company’s
prospects, the period this assessment covers and why the period
is appropriate set out on pages 51 to 52;
• Directors’ statement on fair, balanced and understandable set out
on page 94;
• Board’s confirmation that it has carried out a robust assessment
of the emerging and principal risks set out on pages 48 to 50;
• The section of the annual report that describes the review of
effectiveness of risk management and internal control systems
set out on pages 46 and 47; and;
• The section describing the work of the Audit Committee set out
on pages 68 to 70.
Responsibilities of directors
As explained more fully in the Directors’ Responsibilities Statement
set out on page 94, the Directors are responsible for the preparation
of the financial statements and for being satisfied that they give a
true and fair view, and for such internal control as the Directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due
to fraud or error.
In preparing the financial statements, the Directors are responsible
for assessing the Group and Parent Company’s ability to continue as
a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or the Parent Company
or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of
users taken on the basis of these financial statements.
Explanation as to what extent the audit was considered
capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with
laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect irregularities, including
fraud. The risk of not detecting a material misstatement due to fraud
is higher than the risk of not detecting one resulting from error, as
fraud may involve deliberate concealment by, for example, forgery or
intentional misrepresentations, or through collusion. The extent to
which our procedures are capable of detecting irregularities,
including fraud is detailed below.
However, the primary responsibility for the prevention and detection
of fraud rests with both those charged with governance of the
company and management.
• We obtained an understanding of the legal and regulatory
frameworks that are applicable to the group and determined that
the most significant are Companies Act 2006; UK Listing Rules;
UK Listing Authority – Disclosure and Transparency Rules; The
Companies (Miscellaneous Reporting Regulation) 2018; The Large
and Medium-sized Companies and Groups (Accounts and
Reports (Amendment)) Regulations 2013 in particular in respect of
the Directors’ Remuneration Report; UK Tax Legislation; Financial
Services Act 2012 and UK Corporate Governance Code 2018.
• We understood how The Gym Group plc is complying with those
frameworks by making enquiries of senior management and
those charged with governance; attendance at audit committees;
obtaining an understanding of entity-level controls and
considering the influence of the control environment; obtaining an
understanding of policies and procedures in place regarding
compliance with laws and regulations, including how compliance
with such policies is monitored and enforced; obtaining an
understanding of management’s process for identifying and
responding to fraud risks, including programs and controls
established to address risks identified, or otherwise prevent,
deter and detect fraud, and how senior management monitors
those programs and controls; and reviewing correspondence with
relevant regulatory authorities.
• We assessed the susceptibility of the Group’s Financial
Statements to material misstatement, including how fraud might
occur by: discussing within the audit team; performing client
acceptance/continuance procedures; reviewing interim financial
information; identifying related parties, including circumstances
related to the existence of a related party with dominant
influence; obtaining an understanding of entity-level controls
and considering the influence of the control environment; and
considering the nature of the account and our assessment of
inherent risk for relevant assertions of significant accounts.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020
101
• Based on this understanding we designed our audit procedures
to identify non-compliance with such laws and regulations. Our
procedures involved enquiring of members of senior
management and those charged with governance regarding their
knowledge of any non-compliance or potential non-compliance
with laws and regulations that could affect the financial
statements; enquiring about the policies that have been
established to prevent non-compliance with laws and regulations
by officers and employees, and whether such policies are
formalised in a code of conduct, conflict-of-interests statement
or similar standard; enquiring about the entity’s methods of
enforcing and monitoring compliance with such policies, if any;
and inspecting correspondence, if any, with the relevant licensing
or regulatory authorities.
A further description of our responsibilities for the audit of the
financial statements is located on the Financial Reporting Council’s
website at https://www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.
Other matters we are required to address
Following the recommendation from the audit committee we were
appointed by the company on 28 July 2015 to audit the financial
statements for the year ending 31 December 2015 and subsequent
financial periods.
• The period of total uninterrupted engagement including previous
renewals and reappointments is 6 years, covering the years
ending 31 December 2015 to 31 December 2020.
• The non-audit services prohibited by the FRC’s Ethical Standard
were not provided to the Group or the Parent Company and we
remain independent of the Group and the Parent Company in
conducting the audit.
• The audit opinion is consistent with the additional report to the
Audit Committee.
Use of our report
This report is made solely to the Company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members as a body, for
our audit work, for this report, or for the opinions we have formed.
Michael Kidd (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Belfast
18 March 2021
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE
102
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2020
Revenue
Cost of sales
Gross profit
Other income
Administration expenses
Operating (loss)/profit
Finance income
Finance costs
(Loss)/profit before tax
Tax credit/(charge)
(Loss)/profit for the year attributable to equity shareholders
Other comprehensive income/(expense) for the year
Items that may be reclassified to profit or loss
Changes in the fair value of derivative financial instruments
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
Total comprehensive (expense)/income attributable to equity shareholders
(Loss)/earnings per share
Basic
Diluted
Reconciliation of operating (loss)/profit to Group Adjusted EBITDA less Normalised Rent:
– Operating (loss)/profit
– Depreciation of property, plant and equipment and right-of-use assets
– Amortisation of intangible assets
– Exceptional impairment of property, plant and equipment and right-of-use assets
– Exceptional impairment of intangible assets
– Exceptional items (excluding impairment of property, plant and equipment, right-of-use assets
and intangible assets)
– Long term employee incentive costs
– Normalised Rent2
Note
6
7
8
12
13
14
27
10
15
16
9, 15
9, 16
9
29
31 December
2020
£’000
31 December
2019
£’000
80,470
(2,116)
153,134
(1,437)
78,354
151,697
427
(112,696)
–
(130,122)
(33,915)
21,575
6
(13,283)
32
(15,388)
(47,192)
6,219
10,824
(2,624)
(36,368)
3,595
11
–
(36,357)
pence
(23.1)
(23.1)
£’000
(33,915)
45,169
3,765
1,606
1
(485)
669
(26,979)
(155)
(277)
3,163
pence
2.6
2.6
£’000
21,575
41,778
3,114
–
–
6,086
1,900
(25,913)
– Group Adjusted EBITDA less Normalised Rent1
(10,169)
48,540
1 Group Adjusted EBITDA less Normalised Rent is a non-statutory metric used internally by management and externally by investors. It is calculated as operating profit before
depreciation, amortisation, long term employee incentive costs and exceptional items, and after deducting Normalised Rent. Refer to the KPIs on page 144 for further information.
2 Normalised Rent is the contractual rent that would have been paid in normal circumstances without any agreed deferments, recognised in the monthly period to which it relates.
The notes on pages 106 to 136 form an integral part of the Financial Statements.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 103
31 December
2020
£’000
31 December
2019
£’000
Note
15
15
16
17
27
14
18
19
20
21
22
23
25
14
24
22
25
14
28
28
28
28
28
28
28
171,386
255,558
86,386
1,000
1
7,614
176,001
238,702
86,379
–
13
–
521,945
501,095
290
6,355
162
3,736
654
8,769
–
2,605
10,543
12,028
532,488
513,123
18,598
21,842
2,609
46
–
29,389
15,637
3,875
352
374
43,095
49,627
49,180
284,473
1,241
55
49,116
262,706
1,303
208
334,949
313,333
378,044
362,960
154,444
150,163
17
48
4
159,474
(155)
39,912
(44,856)
14
48
4
159,474
(166)
–
(9,211)
154,444
150,163
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2020
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Investments in financial assets
Derivative financial instruments
Deferred tax assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Income taxes receivable
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Lease liabilities
Other financial liabilities
Provisions
Income taxes payable
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Capital and reserves
Issued capital
Own shares held
Capital redemption reserve
Share premium
Hedging reserve
Merger reserve
Retained deficit
Total equity shareholders’ funds
The notes on pages 106 to 136 form an integral part of the Financial Statements.
These Financial Statements were approved by the Board of Directors on 18 March 2021.
Signed on behalf of the Board of Directors
Richard Darwin
Chief Executive Officer
Mark George
Chief Financial Officer
Company Registration Number 0852849
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE
104
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
Issued
capital
£’000
Own shares
held
£’000
Note
Capital
redemption
reserve
£’000
At 1 January 2019
Profit for the year
Other comprehensive expense
Total comprehensive income
Share based payments
Deferred tax on share based
payments
Dividends paid
At 31 December 2019
Loss for the year
Other comprehensive income
Total comprehensive expense
Issue of Ordinary share capital
Share based payments
Deferred tax on share based
payments
14
–
–
–
–
–
–
48
–
–
–
–
–
–
14
48
–
–
–
3
–
–
–
–
–
–
–
–
29
14
32
28
29
14
At 31 December 2020
17
48
4
–
–
–
–
–
–
4
–
–
–
–
–
–
4
The notes on pages 106 to 136 form an integral part of the Financial Statements.
Hedging
reserve
£’000
Merger
reserve
£’000
Share
premium
£’000
159,474
–
–
–
–
–
–
(11)
-
(155)
(155)
–
–
–
159,474
(166)
–
–
–
–
–
–
–
11
11
–
–
–
Retained
deficit
£’000
(12,290)
3,595
(277)
3,318
1,670
24
(1,933)
Total
£’000
147,239
3,595
(432)
3,163
1,670
24
(1,933)
(9,211)
150,163
(36,368)
–
(36,368)
–
801
(36,368)
11
(36,357)
39,915
801
–
–
–
–
–
–
–
–
–
–
–
39,912
–
159,474
(155)
39,912
44,856
154,444
–
(78)
(78)
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2020
Cash flows from operating activities
(Loss)/profit before tax
Adjustments for:
Net finance costs
Exceptional administration items
Depreciation and Impairment of property, plant and equipment and right-of-use assets
Amortisation of intangible assets
Long term employee incentive costs
Loss/(profit) on disposal of property, plant and equipment and right-of-use assets
Decrease/(increase) in inventories
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Payment of deferred consideration
Cash generated from operations
Tax rebate/(paid)
Net cash flows from operating activities before exceptional items
Exceptional items
Net cash flow from operating activities
Cash flows from investing activities
Payment for financial assets at fair value through profit and loss
Business combinations
Purchase of property, plant and equipment
Purchase of intangible assets
Disposal of tangible assets
Interest received
Net cash flows used in investing activities
Cash flows from financing activities
Dividends paid
Repayment of lease liability principal
Lease interest paid
Bank interest paid
Payment of financing fees
Drawdown of bank loans
Repayments of bank loans
Proceeds of issue of Ordinary shares
Costs associated with share issue
Net cash flows from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents start of period
Cash and cash equivalents at end of period
* See note 5 for details.
The notes on pages 106 to 136 form an integral part of the Financial Statements.
105
31 December
2020
£’000
Note
31 December
2019
Restated*
£’000
(47,192)
6,219
9
15
16
29
23
28
13,277
(485)
46,775
3,766
669
676
364
2,719
(5,589)
(1,266)
13,714
2,442
16,156
(906)
15,356
6,086
41,778
3,114
1,900
(112)
(275)
(1,073)
2,382
–
75,375
(3,579)
71,796
(1,120)
15,250
70,676
(1,000)
–
(25,469)
(3,774)
28
6
–
(2,114)
(37,019)
(2,461)
391
32
(30,209)
(41,171)
–
(9,948)
(12,661)
(1,798)
(418)
41,000
(40,000)
41,268
(1,353)
(1,933)
(13,093)
(12,820)
(2,197)
(884)
53,500
(52,500)
–
–
16,090
(29,927)
1,131
2,605
3,736
(422)
3,027
2,605
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 106
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. GENERAL INFORMATION
The Gym Group plc (‘the Company’) and its subsidiaries (‘the Group’) provide low cost, high quality health and fitness facilities.
The Company is a public limited company whose shares are publicly traded on the London Stock Exchange and is incorporated and
domiciled in the United Kingdom.
The registered address of the Company is 5th Floor, OneCroydon, 12-16 Addiscombe Road, Croydon, United Kingdom, CR0 0XT.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies is set out below. These have been applied consistently in the Financial Statements.
Statement of compliance
The financial statements have been prepared in accordance with the Listing Rules and the Disclosure Guidance and Transparency Rules of
the United Kingdom Financial Conduct Authority (where applicable), international accounting standards in conformity with the requirements of
the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union. The accounting policies applied are consistent with those described in the Annual Report and Accounts for the year
ended 31 December 2019 of the Group. The functional currency of each entity in the Group is Pounds Sterling. The Consolidated Financial
Statements are presented in Pounds Sterling and all values are rounded to the nearest thousand Pounds, except where otherwise indicated.
Basis of preparation
The Consolidated Financial Statements have been prepared on a going concern basis under the historical cost convention as modified by
the recognition of derivative financial instruments, financial assets and other financial liabilities at fair value through the profit and loss and the
recognition of financial assets at fair value through other comprehensive income.
The Consolidated Financial Statements provide comparative information in respect of the previous period. In addition, the Group presents an
additional statement of financial position at the beginning of the preceding period when there is a retrospective application of an accounting
policy, a retrospective restatement, or a reclassification of items in Financial Statements.
Going concern
In assessing the going concern position of the Group for the year ended 31 December 2020, the Directors have considered the Group’s cash
flows, liquidity and business activities in the light of the COVID-19 pandemic.
The outbreak of COVID-19 and its continuing impact on the economy casts a degree of uncertainty as to the future financial performance and
cash flows of the Group. When assessing the ability of the Group to continue as a going concern the Directors have considered:
•
•
•
the Group’s financing arrangements;
the pattern of trading during 2020 when gyms were open between lockdowns; and
future trading risks including continued regional or nationwide lockdowns and reduced membership levels
on the cashflows, liquidity and bank facility covenants of the Group over the period to 30 June 2022.
In the first half of 2020 the Group raised additional financing in the form of:
an equity placing, which raised net proceeds of £39.9 million; plus
•
a £30.0 million debt facility extension (the ‘New Bank Facility’), which provided incremental liquidity beyond the existing £70.0 million
•
Revolving Credit Facility (‘RCF’). The RCF and the New Bank Facility are both provided by a consortium of HSBC, NatWest and Banco
de Sabadell.
During the periods of trading between lockdowns in the second half of 2020 the Group traded profitably and reduced capital expenditure
and other cash outflows. As at 31 December 2020, the Group had Non-Property Net Debt of £47.3 million versus £100.0 million of total
borrowing capacity.
Following the phased introduction of Tier 4 restrictions in a number of regions in December 2020, the Group was required to close 162 of its
183 gyms. On 4 January 2021 all remaining gyms were required to close as the UK Government announced a nationwide lockdown. The UK
Government has announced that gyms will re-open on 12 April 2021 if there is continued progress with the Government’s four criteria for
monitoring the pandemic.
As at 28 February 2021, the Group had Non-Property Net Debt of £58.2 million and therefore liquidity of £41.8 million versus a total borrowing
capacity £100.0 million. In the next 12 months the Group’s liquidity will be influenced by (i) the number of months of closure of its gyms and (ii)
the trading performance of the business when gyms are permitted to open. Below we set out the financial implications of periods of closure
and trading respectively:
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 107
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Cash burn when gyms are closed
During the current period of closure, the Group has no revenue and is operating with a monthly cash burn (excluding new site capital
expenditure) of around £5 million. This cash burn rate has been minimised as a result of significant reductions in operating costs and the
following UK Government support:
•
£1.1 million per month of Business Rates relief, currently due to end August 2021 due to there being a cap on relief of £2.0 million in
H2 2021;
£1.1 million per month of furlough income support from the Coronavirus Job Retention Scheme (‘CJRS’), currently due to end when
we reopen in April 2021; and
£0.5 million per month from Local Restrictions Support Grants (‘LRSG’) ongoing until we reopen in April 2021.
•
•
In addition to the ongoing support the Group has also benefited from a one-off Government grant of £27,000 per site; these grants have a
total one-off benefit of £4.5 million to the Group, of which £2.2 million had been received from the relevant local authorities before 28 February
2021.
While gyms are required to remain closed and with current levels of Government support and the business is operating with monthly cash
burn of c. £5.0 million. This cash burn assumes c.£2.5 million of rent being paid each month, which is the ‘normalised’ level of rent per month
excluding the impact of rent deferrals. A total of £3.6 million of rent deferred from 2020 is due to be repaid over the course of 2021, in addition
to the ‘normalised’ level of £2.5 million per month. Any further deferrals agreed will improve cash flow in the closure period and extend the
period of closure for which the Group would be able to operate.
Trading when gyms are open
As at 28 February 2021 the Group had 547,000 members, all on ‘free freeze’, down from 578,000 on 31 December 2020. During the ongoing
period of closure we expect membership to reduce further at a similar rate to recent weeks; this rate of membership loss is lower than in the
first national lockdown from March to July 2020 and the second national lockdown in November 2020.
When gyms re-open our subscription revenue starts immediately and in the periods of trading between national lockdowns in 2020 the
business operated profitably. The profitability of the Group after the gyms re-open from the current lockdown will depend on the membership
level and level of UK Government financial support. Whilst we continue to receive the benefit of Business Rates relief, which is anticipated to
be until the end of August 2021, the business would require approximately 540,000 members to be break even at the cash flow level. When
the benefit of Business Rates relief ends, the cost base of the business would increase by c.£1.1 million per month, increasing the cash flow
break-even point to around 610,000 members.
Although there is uncertainty over the level of continued Government support and the speed of recovery in membership once gyms have
reopened, it is the Directors expectation that the business will be close to break even at a cash flow level when gyms re-open and from that
point the recovery in membership will improve profitability and cash flow, therefore reducing net debt and increasing liquidity headroom.
In December 2020, the Group amended the New Bank Facility to extend it from 18 months to 24 months (now due to end June 2022 at which
point the terms of the original £70 million RCF will apply) and to set new covenants based on a revised business plan. The Group met the
covenant test for December 2020. As a result of the national lockdown in early 2021 the Group agreed with its lending banks a waiver of the
March 2021 covenant test. The June 2021 covenant test is based on a cumulative EBITDA for H1 2021 and was set at a level that allowed for up
to one month of closure in that six month period; with the current lockdown being at least three months we will not be able to meet the June
2021 covenant test. As our plan anticipates meeting all subsequent covenant tests, we anticipate that our lending banks will provide flexibility
on the June 2021 test although no such agreement has been reached. We have agreed with the banks that discussions regarding future
covenant tests will take place during April/May 2021 once there is further visibility on the external environment, levels of government support
and whether gyms have reopened.
The Directors have considered a reverse stress test scenario in which it is assumed the current lockdown ends at the end of April 2021 (vs
Government target date of reopening gyms of 12 April 2021) and a new lockdown starts in November 2021 (matching the timing of the winter
lockdown in November 2020) and continues indefinitely, with the business trading in the months between lockdowns on an approximately
cash flow neutral basis. In such a scenario the Group would be able to continue operating until March 2022 before reaching the £100 million
borrowing capacity. In such circumstances additional options may be available to mitigate the impact on the Group’s liquidity and cash flow
including: (i) further reductions in operating and capital expenditure; (ii) additional support from the UK Government; (iii) extension of debt
facilities; (iv) continued deferral of, or reductions in, rent payments to landlords; (v) the potential to raise additional funds from third parties. In
the reverse stress test scenario, the closures from November 2021 onwards would result in EBITDA losses in Q4 2021 and as a result the Q4
2021 covenant test would not be met.
Whilst the Group has secured sufficient liquidity, via the raising of equity and additional debt facilities, to finance operations through most
reasonable scenario, it may be necessary in certain downside scenarios to extend the term of £30.0 million New Bank Facility beyond June
2022. The Directors also consider it to be a plausible risk that current covenant targets after June 2021 will not be met due to the impact of
further closure or slower recovery in membership numbers due to changes in members’ behaviour. In the event that the Group fails to meet
one or more of its 2021 debt covenants, the Directors believe it likely that further agreement could be reached with the lending banks to waive
or amend covenants as part of a revised business plan. However, no such commitment for further covenant waivers (beyond the March 2021
waiver already agreed) is currently in place with the lending banks.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 108
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
CONTINUED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
The Directors have concluded that the potential impact of COVID-19 described above and uncertainty over possible mitigating actions,
including covenant waivers or extending the New Bank Facility, represents a material uncertainty that may cast significant doubt about the
Group’s ability to continue as a going concern. However, having assessed the financial forecasts, sensitivities and possible mitigating actions,
the Board has a reasonable expectation that the Group has adequate resources to continue in operational existence for the next twelve
months and therefore the Directors continue to adopt the going concern basis in preparing these financial statements. Accordingly, these
financial statements do not include any adjustments to the carrying amount or classification of assets and liabilities that would result if the
Company were unable to continue as a going concern.
Consolidation
Subsidiaries
A subsidiary is an entity controlled, either directly or indirectly, by the Company. Control is achieved when the Group is exposed, or has rights,
to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
Specifically, the Group controls an investee if and only if the Group has:
• power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);
• exposure, or rights, to variable returns from its involvement with the investee; and
•
the ability to use its power over the investee to affect its returns.
When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee, including:
the contractual arrangement with the other vote holders of the investee;
•
rights arising from other contractual arrangements; and
•
the Group’s voting rights and potential voting rights.
•
The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the
three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the
Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are
included in the income statement from the date the Group gains control and until the date the Group ceases to control the subsidiary.
When necessary, adjustments are made to the Financial Statements of subsidiaries to bring their accounting policies into line with the Group’s
accounting policies. All intra-Group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members
of the Group are eliminated in full on consolidation.
The acquisition method of accounting is used to account for the acquisition of subsidiaries or business combinations where trade and assets are
acquired by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities
incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the
cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition
is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement. Subsequent
changes to the fair value during the measurement period are treated as fair value adjustments against the acquired net assets.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief
operating decision maker, who is responsible for allocating resources and assessing performance of the operating segment, has been
identified as the Board of Directors. The Group’s activities consist solely of the provision of high quality health and fitness facilities within the
United Kingdom, presently traded through 183 sites. It is managed as one entity and management has consequently determined that there is
only one operating segment.
Segment results are measured using earnings before interest, tax, depreciation, amortisation, long term employee incentive costs,
exceptional items and other income. Segment assets are measured at cost less any recognised impairment. All revenue arises in and all
non-current assets are located in the United Kingdom. The accounting policies used for segment reporting reflect those used for the Group.
Revenue
Revenue, which is stated excluding value added tax and other sales-related taxes, is measured at the fair value of the consideration
receivable for goods and services supplied.
Revenue from membership income comprises monthly membership fees, non-refundable joining fees and longer term membership fees.
Longer term membership fees comprises student membership fees which typically cover a nine month period and corporate annual
membership fees. All membership income is recognised and spread over the period the membership relates to, being the period of the Group’s
performance obligations, with any subscriptions in advance of the period in which the service is provided being recorded as a contract liability
on the statement of financial position. Joining fee income is recognised over the period in which the membership commences since the
performance obligation attached to that income is satisfied in that period and to match against the costs associated of a new member joining.
Rental income from Personal Trainers is recognised on a straight-line basis over the term of the rental agreement.
Other income, mainly vending income, is recognised at a point in time, which is the point of sale as this reflects the fulfilment of all
performance obligations.
Contracts with customers are non-complex and do not require any significant accounting judgements or estimates.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 109
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Contract liabilities relate to membership fees received at the start of a contract, where the Group has the obligation to provide a gym
membership over a period of time.
Cost of sales
Cost of sales comprise costs arising in connection with the generation of ancillary revenue, primarily call centre costs and payment
processing costs.
Other income
Other income compromises amounts receivable not in the ordinary course of business and government grants. Where the income relates to
an identifiable expense, the income is offset against the relevant expense. Where an expense is not easily identifiable, the income is
recognised within Other income.
Government grants
Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them
and that the grants will be received.
Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the
related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group
should purchase, construct or otherwise acquire non-current assets (including property, plant and equipment) are recognised as deferred
income in the Consolidated Statement of Financial Position and transferred to profit or loss on a systematic and rational basis over the useful
lives of the related assets.
Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate
financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable.
Where the income relates to a distinct identifiable expense, the income is offset against the relevant expense e.g. income received under the
Coronavirus Job Retention Scheme has been offset against staff costs. Where an expense is not distinctly identifiable or the income relates to
multiple expenses, the income is recognised within Other income.
Exceptional items
Items that are material in size, unusual or infrequent in nature are included within profit or loss and disclosed separately as exceptional items
in the income statement and the notes to the Financial Statements.
The separate reporting of exceptional items, which are presented as exceptional within the relevant category in the income statement, helps
provide an indication of the Group’s underlying business performance.
Property, plant and equipment
Property, plant and equipment are included at cost less accumulated depreciation and any recognised impairment loss.
Depreciation is calculated to write down the cost of the assets on a straight-line over the estimated useful lives on the following bases:
• Leasehold improvements over the shorter of the useful life and the term of lease;
• Fixtures, fittings and equipment between three and ten years;
• Gym and other equipment between five and ten years; and
• Computer equipment three years.
The estimated useful lives are reviewed at the end of each reporting period and adjusted if appropriate. The carrying values of property, plant
and equipment are reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable.
Assets under construction represents the construction of gyms and are included in Property, plant and equipment. No depreciation is
provided on assets under construction until the asset is available for use.
Leases
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a
corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases
with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture
and telephones). For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term
of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are
consumed.
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e. the date the underlying asset is available for use).
Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses and adjusted for any remeasurement of
lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease
payments made at or before the commencement date less any lease incentives received. Right-of-use assets are related to the property
leases and are depreciated on a straight-line basis over the lease term.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 110
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
CONTINUED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
The carrying values of right-of-use assets are reviewed for impairment if events or changes in circumstances indicate the carrying value may
not be recoverable.
Lease liabilities
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by
using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
•
•
•
Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable;
Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date; and
Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.
The lease liability is presented as a separate line in the consolidated statement of financial position.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective
interest method) and by reducing the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
•
The lease payments change due to changes in an index or rate, in which cases the lease liability is remeasured by discounting the
revised lease payments using an unchanged discount rate (unless the lease payments change is due to a change in a floating interest
rate, in which case a revised discount rate is used).
A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is
remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at
the effective date of the modification.
•
The Group did remeasure lease liabilities during the year ended 31 December 2020.
Although the Group enjoys security of tenure as tenant in respect of certain of its lease arrangements, there are conditions associated with
these rights such that no unconditional right to extend the lease term exists.
Intangible assets
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the
acquired subsidiary or the Group’s share of trade and assets acquired in a business combination at the date of acquisition. Goodwill on
acquisitions is included in intangible assets. Goodwill is tested annually for impairment and carried at cost less accumulated impairment
losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill
relating to the entity sold.
Goodwill is allocated to cash generating units (‘CGUs’) for the purpose of impairment testing. The allocation is made to those CGUs or groups of
CGUs that are expected to benefit from the business combination in which the goodwill arose identified according to operating segment. As the
Group has just one operating segment and no monitoring on a lower level of goodwill occurs, goodwill is tested over the one operating segment.
Brands and customers lists
Brands and customers lists were acquired as part of a business combination and were initially recorded at fair value. Brands and customers
lists have finite useful lives and are carried at cost less accumulated amortisation and any recognised impairment. Amortisation is calculated
using the straight-line method to allocate the cost of brands and customers lists over their estimated useful lives of five and three years
respectively.
Technology related
Technology-related intangible assets are the intellectual property rights represented by the development costs associated with the
development of the bespoke membership and customer-related management systems that provide highly tailored functionality and integrate
closely with website and online payment systems. This asset is amortised on a straight-line basis over its useful economic life of three years.
Contract related
Contract-related intangibles relate to the premium paid to acquire certain concession arrangements. These assets have been amortised on a
straight-line basis over the useful lives of the individual contracts, ranging from three to 22 years.
Computer software
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software.
Certain costs incurred in connection with the development of software to be used internally or for providing services to customers are
capitalised once a project has progressed beyond a conceptual, preliminary stage to that of application development. Development costs
that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as
intangible assets when the following criteria are met:
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 111
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
•
It is technically feasible to complete the software product so that it will be available for use;
• Management intends to complete the software product and use or sell it;
• There is an ability to use or sell the software product;
•
• Adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and
• The expenditure attributable to the software product during its development can be reliably measured.
It can be demonstrated how the software product will generate probable future economic benefits;
Costs that qualify for capitalisation include both internal and external costs but are limited to those that are directly related to the specific
project. Computer software costs are included at capitalised cost less accumulated amortisation and any recognised impairment loss.
Amortisation is calculated to write down the cost of the assets on a straight-line basis over their estimated useful lives, over three to five years.
Useful lives are reviewed at the end of each reporting period and adjusted if appropriate.
Impairment of non-financial assets
Goodwill is tested for impairment annually and when circumstances indicate that the carrying value may be impaired. Assets that are subject
to depreciation or amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s fair value less costs to sell and value in use. Where the asset does not generate cash flows that are
independent from other assets, the Group estimates the recoverable amount of the CGUs to which the asset belongs. For property, plant
and equipment and intangible assets the allocation is made to those CGUs that are expected to benefit from the asset, that being each
trading health and fitness facility.
Any impairment charge is recognised in the income statement in the period in which it occurs. Impairment losses relating to goodwill cannot
be reversed in future periods. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used
to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying
amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the
asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase.
Financial instruments
Financial assets (excluding derivative financial instruments)
The Group classifies its financial assets as those to be measured at amortised cost, those recognised at fair value through profit and loss and
those recognised at fair value through other comprehensive income.
The Group’s measures its trade and other receivables and cash and cash equivalents at amortised cost. Subsequent to initial recognition
these assets are carried at amortised cost using the effective interest method. Income from these financial assets is calculated on an
effective yield basis and is recognised in the income statement.
Due to the Group’s upfront payment model, it has limited exposure to credit losses.
Investments in unquoted equity securities are designated as fair value through other comprehensive income if they are held as long term
strategic investments that are not expected to be sold in the short to medium term. All fair value movements in value in respect of those
assets are recognised in other comprehensive income and are not recycled to profit or loss.
Debt instruments that meet the following conditions are measured subsequently at amortised cost:
• The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows;
and
• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on
the principal amount outstanding.
Debt instruments that meet the following conditions are measured subsequently at fair value through other comprehensive income (‘FVTOCI’):
• The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the
financial assets; and
• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on
the principal amount outstanding.
By default, all other financial assets are measured subsequently at fair value through profit or loss (‘FVTPL’).
The financial assets are presented as current assets, except for those with maturities greater than 12 months after the reporting date. These
are classified as non-current assets.
Financial liabilities (excluding derivative financial instruments)
The Group’s financial liabilities comprise trade and other payables, other financial liabilities (including contingent consideration)
and borrowings.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 112
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
CONTINUED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
The Group initially recognises its financial liabilities at fair value net of transaction costs where applicable and, other than derivatives and
contingent consideration, are subsequently measured at amortised cost using the effective interest method. Transaction costs are amortised
using the effective interest method over the maturity of the loan. Contingent consideration is subsequently measured at its fair value, which is
reassessed at each reporting period, and any fair value movement is recognised in the income statement.
Borrowing costs
General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets
that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such
time as the assets are substantially ready for their intended use or sale.
Investment income earned on temporary investments of specific borrowings pending their expenditure on qualifying assets is deducted from
the borrowing costs of eligible for capitalisation.
All other borrowing costs are recognised in the income statement in the period in which they are incurred.
Derivative financial instruments and hedging activities
The Group’s activities expose it to financial risks associated with movements in interest rates. The Group uses interest rate hedging contracts
to hedge its interest rate exposure. The use of financial derivatives is approved by the Board.
The Group does not use derivative financial instruments for speculative purposes.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair
value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is
designated as a hedging instrument, and if so, the nature of the item being hedged. During the year the Group has designated its derivative
financial instrument as a cash flow hedge.
At the inception of the hedge relationship, the Group documents the economic relationship between hedging instruments and hedged items
including whether changes in the cash flows of the hedging instruments are expected to offset changes in the cash flows of hedged items.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in the
hedge reserve within equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss, within
financing costs.
Amounts accumulated in equity are reclassified in the periods when the hedged item affects profit or loss i.e. the gain or loss relating to the
effective portion of the interest rate hedging contracts is recognised in profit or loss within finance cost at the same time as the interest
expense on the hedged borrowings.
Pensions
The Group operates a defined contribution pension scheme and pays contributions to publicly or privately administered pension plans. The
Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit
expense when they are due.
Share based payments
Equity-settled share based payments are measured at the fair value of the equity instruments at the grant date, which excludes the effect of
non-market-based vesting conditions. The fair value at the grant date is recognised as an expense on a straight-line basis over the vesting
period, based on the Group’s estimate of the number of equity instruments that will eventually vest. The estimate of the number of awards
likely to vest is reviewed at each balance sheet date up to the vesting date at which point the estimate is adjusted to reflect the actual
outcome of awards which have vested. No adjustment is made to the fair value after the vesting date even if the awards are forfeited or
not exercised.
Inventories
Inventories are carried at the lower of cost and net realisable value.
Trade and other receivables
Trade and other receivables consist mainly of prepayments, accrued income and receivables relating to property leases.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank, short term deposits held on call with banks and other short term highly liquid investments
with original maturities of three months or less.
Trade and other payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade
and other payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the
business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 113
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Current taxation
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the
taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the
balance sheet date. Income tax relating to items recognised in comprehensive income or directly in equity is recognised in comprehensive
income or equity and not in the income statement.
Deferred taxation
Deferred income tax is provided using the liability method on all temporary differences at the balance sheet date between the tax bases of
assets and liabilities and their carrying amounts for financial reporting purposes, with the following exceptions:
• where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business
•
combination that at the time of the transaction affects neither accounting nor taxable profit or loss;
in respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and
• deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which
deductible temporary differences, carried forward tax credits or tax losses can be utilised.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and amended to the extent that it is probable that
sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and
liabilities. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is
realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date.
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event; it is probable that an
outflow of resources will be required to settle the obligation; and a reliable estimate can be made of the amount of the obligation. Provisions
are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects
current market assessments of the time value of money and risks specific to the obligation. The increase in the provision due to the passage
of time is recognised as a finance cost.
A dilapidations provision is recognised when there is future obligation relating to the maintenance of leasehold properties. The provision is
based on management’s best estimate of the cost of meeting this obligation.
Dividends
Dividends payable by the Company are recognised on declaration.
The preparation of the Financial Statements in accordance with IFRS requires estimates and assumptions to be made that affect the value at
which certain assets and liabilities are held at the balance sheet date and also the amounts of revenue and expenditure recorded in the
period. The Directors believe the accounting policies chosen are appropriate to the circumstances and that the estimates, judgements and
assumptions involved in its financial reporting are reasonable.
Accounting estimates made by the Group’s management are based on information available to management at the time each estimate is
made. Accordingly, actual outcomes may differ materially from current expectations under different assumptions and conditions. The
significant judgements that management has made in applying its accounting policies and the estimates and assumptions for which there is
a significant risk of a material adjustment to the Financial Statements within the next financial year are set out below.
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
Critical judgements apart from those involving estimates in applying the Group’s accounting policies
Incremental borrowing rate
The calculation of lease liabilities requires the Group to determine an incremental borrowing rate (‘IBR’) to discount future minimum lease
payments. Judgment is applied in determining the components of the IBR used for each lease including risk-free rates, the Group’s borrowing
margin and any lease specific adjustments. The applicable IBR for each lease varies between 3.5% and 8.7%. See note 21 for further detail on
the methodology used.
Source of estimation uncertainty
Depreciation and amortisation
The Group reviews the estimated useful lives and residual values of property, plant and equipment and intangible assets annually. The assets
are depreciated or amortised over their estimated useful lives to their residual values. Given the significance of the carrying values of
property, plant and equipment to the Group’s financial position, relatively small changes in estimated useful lives could have a material effect
on the Consolidated Financial Statements. Details of the useful lives assigned to the Group’s property, plant and equipment and intangible
assets is included in note 2. The carrying values of such assets are included in notes 15 and 16.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 114
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
CONTINUED
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS CONTINUED
impairment
The Group is required to test, on an annual basis, whether goodwill has suffered any impairment based on the recoverable amount of its
CGUs. In addition, the Group has reviewed plant, property and equipment for indicators of impairment and where such indicators exist, has
estimated the recoverable amount of the CGUs. For each of these, recoverable amount is determined based on value in use calculations.
The use of this method requires the estimation of future cash flows and the determination of a pre-tax discount rate in order to calculate the
present value of the cash flows. More information, including key assumptions and carrying values, is included in notes 15 and 16.
While the Directors have currently assessed that reasonably possible changes in key assumptions are unlikely to cause an impairment in the
carrying value of goodwill, estimates of future cash flows and the determination of discount rates applied to those cash flows could change in
the longer term such that an impairment arises. Further, the Directors have currently assessed that the carrying value of plant, property and
equipment is sensitive to reasonably possible changes in key assumptions – see note 15 for further details. In addition, estimates of future
cash flows and the determination of discount rates applied to those cash flows could change in the longer term such that an impairment
arises in relation to other CGUs.
Provisions
Provisions are made for dilapidations in respect of leased premises. The recognition and measurement of these provisions require estimates
to be made in respect of uncertain events and amounts, with the key sources of estimation uncertainty relating to whether a restoration
obligation will arise, the amount and timing of future cash flows required to settle any restoration obligation assessed as arising, and to a
lesser extent the discount rate of 2% applied to those estimated cash flows. Any difference between expectations and the actual future
liability will be accounted for in the period when such determination is made. Management has determined that the likelihood of a liability
arising is not probable in relation to 159 of the Group’s 184 gym sites as the Group enjoys security of tenure as tenant and therefore is unlikely
to give up a site where it is trading profitably. If circumstances indicate otherwise the Group will recognise an appropriate provision.
If the future cost of restoration for those sites where a provision is currently recognised was to increase by 10% across these sites, the
provision at 31 December 2020 would increase by £124,000. If a provision was required for a site where the Group does benefit from security
of tenure, the provision at 31 December 2020 would increase by £50,000. A ten basis points change in the discount rate would increase/
decrease the provision recognised at 31 December 2020 by £13,000.
Details of dilapidation provisions recognised are set out in note 25.
4. NEW AND AMENDED IFRS STANDARDS THAT ARE EFFECTIVE FOR THE CURRENT YEAR
Impact of the initial application of interest rate benchmark reform amendments to IFRS 9 and IFRS 7
In September 2019, the IASB issued interest rate benchmark reforms (Amendments to IFRS 9, IAS 39 and IFRS 7). These amendments modify
specific hedge accounting requirements to allow hedge accounting to continue for affected hedges during the period of uncertainty before
the hedged items or hedging instruments affected by the current interest rate benchmarks are amended as a result of the ongoing interest
rate benchmark reforms.
The amendments are relevant to the Group given that it applies hedge accounting to its benchmark interest rate exposures. The application
of the amendments impacts the Group’s accounting in the following ways:
• The Group has floating rate debt, linked to GBP LIBOR, which it cash flow hedges using interest rate swaps. The amendments permit
continuation of hedge accounting even though there is uncertainty about the timing and amount of the hedged cash flows due to the
interest rate benchmark reforms.
• The Group will retain the cumulative gain or loss in the cash flow hedge reserve for designated cash flow hedges that are subject to
interest rate benchmark reforms even though there is uncertainty arising from the interest rate benchmark reform with respect to the
timing and amount of the cash flows of the hedged items. Should the Group consider the hedged future cash flows are no longer
expected to occur due to reasons other than interest rate benchmark reform, the cumulative gain or loss will be immediately reclassified to
profit or loss.
The amendments also introduce new disclosure requirements to IFRS 7 for hedging relationships that are subject to the exceptions
introduced by the amendments to IFRS 9. The new disclosure requirements are presented in note 26.
Impact of the initial application of ‘COVID-Related Rent Concessions’ Amendment to IFRS 16
In May 2020, the IASB issued COVID-Related Rent Concessions (Amendment to IFRS 16) that provides practical relief to lessees in accounting
for rent concessions occurring as a direct consequence of COVID-19, by introducing a practical expedient to IFRS 16. The practical expedient
permits a lessee to elect not to assess whether a COVID-related rent concession is a lease modification. A lessee that makes this election
shall account for any change in lease payments resulting from the COVID-related rent concession the same way it would account for the
change applying IFRS 16 if the change were not a lease modification.
The practical expedient applies only to rent concessions occurring as a direct consequence of COVID-19 and only if all of the following
conditions are met:
a) The change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the
consideration for the lease immediately preceding the change;
b) Any reduction in lease payments affects only payments originally due on or before 30 June 2021 (a rent concession meets this condition if
it results in reduced lease payments on or before 30 June 2021 and increased lease payments that extend beyond 30 June 2021); and
c) There is no substantive change to other terms and conditions of the lease.
In the current financial year, the Group has applied the amendment to IFRS 16 (as issued by the IASB in May 2020) in advance of its
effective date.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 115
4. NEW AND AMENDED IFRS STANDARDS THAT ARE EFFECTIVE FOR THE CURRENT YEAR CONTINUED
Impact on accounting for changes in lease payments applying the exemption
The Group has applied the practical expedient retrospectively to all rent concessions that meet the conditions in IFRS 16:46B, and has not
restated prior period figures.
The Group has benefited from a one-month waiver of lease payments on five sites and additional rent free periods on a further six sites in
exchange for the removal of break clauses in the leases. The waiver of lease payments of £682,000 has been accounted for as a negative
variable lease payment in profit or loss. The Group has derecognised the part of the lease liability that has been extinguished by the
forgiveness of lease payments, consistent with the requirements of IFRS 9:3.3.1.
Impact of the initial application of other new and amended IFRS Standards that are effective for the current year
In the current year, the Group has applied the below amendments to IFRS Standards and Interpretations issued by the Board that are
effective for an annual period that begins on or after 1 January 2020. Their adoption has not had any material impact on the disclosures or on
the amounts reported in these Financial Statements.
Amendments to References to the Conceptual
Framework in IFRS Standards
Amendments to IAS 1 and IAS 8 Definition of material
The Group has adopted the amendments included in Amendments to
References to the Conceptual Framework in IFRS Standards for the first
time in the current year. The amendments include consequential
amendments to affected Standards so that they refer to the new
Framework. Not all amendments, however, update those pronouncements
with regard to references to and quotes from the Framework so that they
refer to the revised Conceptual Framework. Some pronouncements are
only updated to indicate which version of the Framework they are
referencing to (the IASC Framework adopted by the IASB in 2001, the IASB
Framework of 2010, or the new revised Framework of 2018) or to indicate
that definitions in the Standard have not been updated with the new
definitions developed in the revised Conceptual Framework.
The Standards which are amended are IFRS 2, IFRS 3, IFRS 6, IFRS 14, IAS 1,
IAS 8, IAS 34, IAS 37, IAS 38, IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22, and
SIC-32.
The Group has adopted the amendments to IAS 1 and IAS 8 for the first
time in the current year. The amendments make the definition of material in
IAS 1 easier to understand and are not intended to alter the underlying
concept of materiality in IFRS Standards. The concept of ‘obscuring’
material information with immaterial information has been included as part
of the new definition.
The threshold for materiality influencing users has been changed from
‘could influence’ to ‘could reasonably be expected to influence’. The
definition of material in IAS 8 has been replaced by a reference to the
definition of material in IAS 1. In addition, the IASB amended other
Standards and the Conceptual Framework that contain a definition of
‘material’ or refer to the term ‘material’ to ensure consistency.
New and revised IFRS Standards that are in issue but not yet effective
At the date of authorisation of these financial statements, the Group has not applied the following new and revised IFRS Standards that have
been issued but are not yet effective:
IFRS 17
Insurance Contracts
IFRS 10 and IAS 28 (amendments)
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
Amendments to IAS 1
Classification of Liabilities as Current or Non-current
Amendments to IFRS 3
Reference to the Conceptual Framework
Amendments to IAS 16
Amendments to IAS 37
Property, Plant and Equipment – Proceeds before Intended Use
Onerous Contracts – Cost of Fulfilling a Contract
Annual Improvements to IFRS
Standards 2018-2020 Cycle
Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards,
IFRS 9 Financial Instruments, IFRS 16 Leases, and IAS 41 Agriculture
The Directors do not expect that the adoption of the Standards listed above will have a material impact on the Financial Statements of the
Group in future periods.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 116
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
CONTINUED
5. ADJUSTMENTS TO PRIOR YEAR
Classification of cash flows in respect of capital expenditure
In the Consolidated Cash Flow Statement for the year ended 31 December 2019, cash outflows of £1,585,000 in relation to the purchase of
plant, property and equipment were incorrectly classified within movements in trade and other payables. This classification has therefore
been amended as shown in the table below. There is no impact on the income statement or net cash.
Consolidated Cash Flow Statement for the year ended 31 December 2019 (extract):
Increase in inventories
Increase in trade and other receivables
Increase in trade and other payables
Other operational cash flows
Net cash flow from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Other investing cash flows
Net cash flows used in investing activities
Net cash flows used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents start of period
Cash and cash equivalents at end of period
As reported
£’000
Reclassification
of capex
creditor
£’000
(275)
(1,073)
3,967
69,642
72,261
(38,604)
(4,152)
(42,756)
(29,927)
(422)
3,027
2,605
–
–
(1,585)
–
(1,585)
1,585
–
1,585
–
–
–
–
Restated
£’000
(275)
(1,073)
2,382
69,642
70,676
(37,019)
(4,152)
(41,171)
(29,927)
(422)
3,027
2,605
6. REVENUE
The main revenue streams are those described in the last annual Financial Statements; membership income, rental income and other income.
The majority of revenue is derived from contracts with customers.
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.
Major products/service lines
Membership income
Rental income from personal trainers
Other income
Timing of revenue recognition
Products transferred at a point in time
Products and services transferred over time
Liabilities relating to contracts with customers
Contract liabilities
Revenue recognised that was included in contract liabilities in the prior year
Membership income
Other income
31 December
2020
£’000
31 December
2019
£’000
77,041
2,454
975
146,782
4,572
1,780
80,470
153,134
1,162
79,308
2,550
150,584
80,470
153,134
(6,442)
(7,961)
7,952
9
7,051
61
Contract liabilities relate to membership fees received at the start of a contract, where the Group has the obligation to provide a gym
membership over a period of time and are included within trade and other payables (see note 21). During periods of gym closure, no revenue
is recognised for membership fees thereby increasing contract liabilities. The contract liability balance increases as the Group’s membership
numbers increase, and therefore has decreased between 2019 and 2020 following a fall in membership numbers. The Group does not receive
any consideration in advance from customers greater than 12 months hence the total contract liability at 31 December 2019 of £7,961,000 has
been recognised as revenue during the year ended 31 December 2020.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 7. OTHER INCOME
Government grant for the purpose of immediate financial support
Government grant towards work placements (note 8)
Compensation for disruption caused by building works
8. OPERATING PROFIT
Operating profit is stated after charging/(crediting):
Depreciation of property, plant and equipment (excluding right-of-use asset)
Depreciation of right-of-use asset
Amortisation of IT intangible assets
Amortisation of non-IT intangible assets
Impairment of property, plant and equipment (excluding right-of-use asset)
Impairment of right-of-use asset
Impairment of intangible assets
Loss/(gain) on disposal of property plant and equipment
Cost of inventory recognised as an expense
Employee benefit expense (note 11)
Auditors’ remuneration
Fees payable for the audit of the Company’s annual accounts
Audit of the Company’s subsidiaries pursuant to legislation
Total
117
31 December
2020
£’000
31 December
2019
£’000
251
26
150
427
–
–
–
–
31 December
2020
£’000
31 December
2019
£’000
23,530
21,639
2,905
860
1,059
547
1
676
1,722
22,921
100
70
170
22,571
19,112
1,936
1,141
1,696
1,189
37
(112)
260
26,742
96
61
157
In 2020, as a result of the COVID-19 pandemic, the Group received £6,357,000 of direct grant support from the UK Government:
• Grants of £6,106,000 were received as part of a government initiative to provide immediate financial support in the form of the Coronavirus
Job Retention Scheme (‘CJRS’). The Group was entitled to the CJRS payments because it had to shut down its operations and furlough its
employees from March to July 2020 and in November and December 2020. There is no outstanding balance of deferred income and a
receivable related to this grant of £244,000 in the Statement of Financial Position as at 31 December 2020;
• Local government grants totalling £251,000 (see note 7) were received under the Local Restrictions Support Grant (Closed) scheme
(‘LRSG’) to provide immediate financial support for businesses that were forced to cease operations or close as a result of local
restrictions. These grants were recognised in profit or loss in Other income as the related costs were recognised. There are no future
related costs in respect of these grants which were received solely as compensation for costs incurred in the year. There is no outstanding
balance of deferred income or receivable related to this grant as at 31 December 2020.
In addition to the grants received under CJRS and LRSG, the Group also received government assistance in the form of a business rates
holiday for the period 1 April 2020 to 31 March 2021. During this period, business in the retail, hospitality and leisure sectors in England will not
have to pay business rates for the 2020 to 2021 tax year. The value of business rates saved during the year ended 31 December 2020 is
£9,600,000.
The Group has enrolled in the Kickstart scheme offered by the Government to combat youth unemployment. Under this scheme, the Group
receives financial support in order to offer six-month work placements for young people aged 16-24 who are claiming Universal Credit. Grant
income is recognised evenly over each six-month placement term, and during the period, the Group has recognised £26,000 in other income
(see note 7). A further balance of £38,000 within deferred income will be recognised in future periods. There is no outstanding balance
receivable related to this grant as at 31 December 2020.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 118
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
CONTINUED
9. EXCEPTIONAL ITEMS
Impairment of tangible and intangible assets
Restructuring costs
Adjustment to net assets acquired in business combinations
Finalisation of site closures
Gain on reduction of lease term
Remeasurement of contingent consideration (see note 23)
Total exceptional items in operating expenses
Refinancing costs
Total exceptional items in financing expenses
Total exceptional items
31 December
2020
£’000
31 December
2019
£’000
1,607
657
(171)
(403)
(568)
–
1,122
–
–
1,448
410
–
1,240
–
2,988
6,086
486
486
1,122
6,572
Impairment and tangible and intangible assets
Impairment costs in 2020 relate to the writedown of assets of £881,000 for one site whereby the discounted present value of future cash flows
using a pre-tax discount rate of 11.1% do not support the full value of the assets and an additional £726,000 for one site which was announced
as closing in 2019 where the lease surrender has been delayed to 2021. The £1,448,000 recognised in 2019 relates to the impairment of assets
for the closure of three sites announced in 2019 (see Finalisation of site closures below).
Restructuring costs
Restructuring costs in the current year relate primarily to the costs associated with restructuring the central support team in June 2020 in
which headcount was reduced by 22%. The costs in 2019 relate primarily to changing the operating model for the use of Personal Trainers
within the business that was completed in 2019.
Adjustment to net assets acquired in business combinations
Certain provisions that were recognised as part of acquisition of gyms from easyGym have been released as the costs are unlikely to
be incurred.
Finalisation of site closures
Finalisation of site closures relate to the closure of the three sites announced in 2019, which arose as part of our estate management in order
to optimise Group performance; the closures comprised two sites acquired from the Lifestyle and easyGym acquisitions plus one site
opened in 2015 for which a five-year break clause was exercised by the Group in 2019. The gain in the current year primarily arises due to
certain costs provided for in 2019 not being incurred, or no longer being expected to be incurred, in closing these sites.
Gain on reduction of lease term
The landlord on one of our sites has reduced the lease term and in exchange for doing so the lease has been renegotiated in 2020. As a
consequence of the renegotiation, the Group has recognised a one-off gain of £568,000 this year related to the remeasurement of the lease
liability and associated right-of-use asset.
Remeasurement of contingent consideration
Remeasurement of contingent consideration relates to a change in the probability-based estimate of contingent consideration that will be
payable for the acquisition of two easyGym sites in the event the Group is successful in acquiring new leases for these sites. This
remeasurement of the acquisition consideration has been recognised in the income statement but has no cash impact in 2020 and 2019.
Refinancing costs
Refinancing costs relate to unamortised costs incurred in relation to the previous bank facility that was refinanced in October 2019.
10. LOSS 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 (see note 29).
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 119
10. LOSS PER SHARE CONTINUED
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 year ended 31 December 2020, 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 (see note 29). As the Group is in a loss making
position in the current year, all potential dilutive share options will not be dilutive.
Basic weighted average number of shares
Adjustment for share awards
Diluted weighted average number of shares
Basic (loss)/earnings per share (p)
Diluted (loss)/earnings per share (p)
31 December
2020
31 December
2019
157,292,003
–
137,870,237
2,561,055
157,292,003
140,431,292
(23.1)
(23.1)
2.6
2.6
At 31 December 2020, 4,125,842 share awards (2019: nil) were excluded from the diluted weighted average number of Ordinary shares
calculation because their effect would be anti-dilutive.
Adjusted earnings per share is based on (loss)/profit for the year before exceptional items, amortisation of non-IT intangible assets,
revaluation of borrowings and their associated tax effect.
(Loss)/Profit for the year
Amortisation of non-IT intangible assets
Exceptional administration expenses
Revaluation of borrowings
Tax effect of above items
Adjusted (loss)/earnings
Basic adjusted (loss)/earnings per share (p)
Diluted adjusted (loss)/earnings per share (p)
11. EMPLOYEE INFORMATION
Wages and salaries
Social security costs
Employers’ pension costs
Long term employee incentive costs (note 29)
Coronavirus Job Retention Scheme (‘CJRS’) Income
The average number of employees, including Directors, during the year was:
Operational
Administration
12. FINANCE INCOME
Bank interest receivable
31 December
2020
£’000
31 December
2019
£’000
(36,368)
860
1,122
(1,315)
(298)
3,595
1,178
6,572
–
(771)
(35,999)
10,574
(22.9)
(22.9)
7.7
7.5
31 December
2020
£’000
31 December
2019
£’000
25,763
2,143
452
669
(6,106)
22,458
1,876
508
1,900
–
22,921
26,742
31 December
2020
Number
31 December
2019
Number
1,965
106
2,071
1,314
109
1,423
31 December
2020
£’000
31 December
2019
£’000
6
6
32
32
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 120
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
CONTINUED
13. FINANCE COSTS
Bank loans and overdrafts interest
Gain arising on changes in actual and estimated cash flows of bank borrowings (see note 24)
Lease interest
Unwinding of discount
Movement in fair value of derivative financial instruments
Amortisation of financing fees
Refinancing costs (see note 9)
Capitalised interest
31 December
2020
£’000
31 December
2019
£’000
1,562
(1,315)
12,661
29
23
360
35
13,355
1,848
–
12,852
24
1
353
486
15,564
(72)
(176)
13,283
15,388
Capitalised interest is recognised within leasehold improvements. The capitalisation rate used to determine the amount of borrowing costs to
be capitalised is the weighted average interest rate applicable to the entity’s general borrowings during the year of 1.9% (2019: 3.2%).
14. TAXATION
Tax on (loss)/profit
Current income tax
Current tax on (losses)/profits for the period
Adjustments in respect of prior years
Total current income tax
Deferred tax
Origination and reversal of temporary differences
Change in tax rates
Adjustments in respect of prior years
Total deferred tax
31 December
2020
£’000
31 December
2019
£’000
(2,488)
(491)
(2,979)
(6,280)
(143)
(1,422)
(7,845)
2,681
(153)
2,528
91
–
5
96
Tax (credit)/charge in the Consolidated Statement of Comprehensive (Losses)/Income
(10,824)
2,624
The standard rate of corporation tax applied to reported (losses)/profits is 19% (2019: 19%).
Reconciliation of tax charge
(Loss)/profit before tax
Tax calculation at standard rate of corporation tax of 19.0%
Expenses not deductible for tax purposes
Exceptional costs not deductible
Change in tax rates
Adjustments in respect of prior years
31 December
2020
£’000
31 December
2019
£’000
(47,192)
(8,966)
177
21
(143)
(1,913)
6,219
1,182
924
666
–
(148)
(10,824)
2,624
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 14. TAXATION CONTINUED
Deferred tax
At 1 January 2019
Adjustments in respect of prior years
Recognised in income statement
Recognised in equity
At 31 December 2019
Adjustments in respect of prior years
Recognised in income statement
Recognised in equity
At 31 December 2020
Accelerated
capital
allowances
£’000
Losses
£’000
Intangible
assets
£’000
Share
Schemes
£’000
(3,369)
(104)
26
–
(3,447)
1,212
3,833
–
1,598
107
1
(18)
–
90
–
1,849
–
1,939
(500)
(33)
168
–
(365)
205
105
–
514
10
155
24
703
(26)
589
(78)
Other
£’000
3,110
121
(420)
–
2,811
31
47
–
(55)
1,188
2,889
121
Total
£’000
(138)
(5)
(89)
24
(208)
1,422
6,423
(78)
7,559
Unrecognised tax losses
The Group has tax losses of £nil (2019: £nil) that are available indefinitely for offset against future taxable profits of the companies in which the
losses arose.
Change in tax rate
The 2020 Finance Bill announced that the planned reduction in the main rate of corporation tax from 19% to 17% from 1 April 2020 would not
occur and that the corporation tax rate would remain at 19% from 1 April 2020 and that this rate will be maintained from 1 April 2021. Deferred
tax assets and liabilities that had previously been measured at 17% have been remeasured at 19% as that is the rate expected to be in effect
when the asset or liability reverses.
The Finance Bill 2018-2019 introduced a number of changes to the capital allowances regime. These included the following:
• a temporary increase in the maximum annual investment allowance from £200,000 to £1 million per annum from 1 January
•
2019-31 December 2020;
the introduction of a new Structures and Buildings Allowance of 2% per annum on certain structural construction, improvements and
repairs; and
• a reduction in the rate of relief applying to Special Rate plant and machinery from 8% to 6% from 1 April 2019.
Each of these changes has been considered within the calculation of the tax charge for the year.
Uncertain tax positions
The Group had no material uncertain tax provisions as at 31 December 2020 (2019: £nil).
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 122
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
CONTINUED
15. PROPERTY, PLANT AND EQUIPMENT
Assets under
construction
£’000
Leasehold
improvements
£’000
Fixtures,
fittings and
equipment
£’000
Gym and
other
equipment
£’000
Computer
equipment
£’000
Total before
Right-of-use
assets
£’000
Right-of-use
asset
£’000
Cost
At 1 January 2019
Additions
Disposals
Transfers
At 31 December 2019
Additions
Disposals
Transfers
Transfers to intangible assets
At 31 December 2020
Accumulated depreciation
At 1 January 2019
Charge for the year
Disposals
Impairment
At 31 December 2019
Charge for the year
Impairment
Disposals
At 31 December 2020
Net book value
At 31 December 2019
At 31 December 2020
Total
£’000
506,185
77,244
(737)
–
582,692
59,790
(3,681)
–
(94)
153,855
7,462
(157)
15,566
176,726
1,536
(435)
13,954
–
10,709
519
–
655
11,883
39
(43)
(614)
–
68,861
3,968
(580)
6,903
79,152
80
(860)
6,073
–
2,766
251
–
214
3,231
385
(16)
40
–
238,556
36,872
(737)
–
274,691
21,701
(1,917)
(1,008)
(94)
267,629
40,372
–
–
308,001
38,069
(1,764)
1,008
–
191,781
11,265
84,445
3,640
293,373
345,314
638,687
35,673
12,238
(110)
1,165
48,966
13,525
809
(439)
5,473
1,308
–
24
6,805
1,240
9
(58)
32,110
8,406
(347)
498
40,667
8,145
241
(769)
1,625
618
–
9
2,252
620
–
(26)
74,881
22,570
(457)
1,696
98,690
23,530
1,059
(1,292)
48,998
19,112
–
1,189
69,299
21,639
547
(1,729)
123,879
41,682
(457)
2,885
167,989
45,169
1,606
(3,021)
62,861
7,996
48,284
2,846
121,987
89,756
211,743
2,365
24,672
–
(23,338)
3,699
19,661
(563)
(20,461)
(94)
2,242
–
–
–
–
–
–
–
–
–
3,699
2,242
127,760
128,920
5,078
3,269
38,485
36,161
979
794
176,001
238,702
414,703
171,386
255,558
426,944
The impairment charge of £1,606,000 for 2020 includes £726,000 in relation to the closure of one site announced in 2019 following a delay in
the surrender of the lease to 2021 (2019: £2,885,000 includes £2,688,000 in relation to the closure of three sites announced). See note 9 for
further details. The impairment loss for the open site was calculated based on the value in use of the assets for the site being lower than the
carrying value of the assets making the recoverable amount £nil. The discount rate used in measuring value in use was 11.1%.
Under reasonably possible downside scenarios arising in relation to a potential 5% shortfall in long-term membership, further impairment of
up to £470,000 would arise in relation to two sites.
Right-of-use assets relate to property leases – see note 22.
Included within additions for the year are £72,000 of capitalised interest (2019: £176,000), £168,000 of capital contributions from landlords not
yet received (2019: £nil), £820,000 of accrued capital expenditure for invoices not received (2019: £2,278,000) and £116,000 of invoices
received but not paid at 31 December 2020 (2019: £3,382,000).
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020
123
Computer
software
£’000
7,915
3,333
–
11,248
3,679
(2)
94
Total
£’000
96,167
3,333
(6,545)
92,955
3,679
(42)
94
1,249
–
–
1,249
–
(40)
–
1,209
15,019
96,686
78
225
37
–
340
214
–
(40)
514
909
695
2,515
1,936
–
–
4,451
2,905
1
(2)
10,007
3,077
37
(6,545)
6,576
3,765
1
(42)
7,355
10,300
6,797
7,664
86,379
86,386
Goodwill
£’000
Brand
£’000
Customer list
£’000
Technology
£’000
Contract
£’000
77,738
–
–
77,738
–
–
–
77,738
–
–
–
–
–
–
–
–
–
77,738
77,738
2,219
–
(2,219)
–
–
–
–
–
2,217
2
–
(2,219)
–
–
–
–
–
–
–
6,270
–
(3,550)
2,720
–
–
–
2,720
4,421
914
–
(3,550)
1,785
646
–
–
2,431
935
289
776
–
(776)
–
–
–
–
–
776
–
–
(776)
–
–
–
–
–
–
–
16. INTANGIBLE ASSETS
Cost
At 1 January 2019
Additions
Disposals1
At 31 December 2019
Additions
Disposals
Transfer from tangible assets
At 31 December 2020
Accumulated amortisation
At 1 January 2019
Charge for the year
Impairment
Disposal
At 31 December 2019
Charge for the year
Impairment
Disposals
At 31 December 2020
Net book value
At 31 December 2019
At 31 December 2020
1 Relates to intangible assets that had been fully amortised and are no longer in use.
Impairment test for goodwill
Each of the Group’s individual gyms has been identified as a CGU. However, for the purposes of impairment testing goodwill has been
allocated to the chain of gyms or group of CGUs expected to benefit from the business combination in which the goodwill arose. Since 2018,
all the gyms operated under The Gym brand and the Group now operates only as one chain of gym.
Goodwill acquired through business combinations has therefore been allocated for impairment testing purposes accordingly as follows:
The Gym chain of gyms
2020
£’000
2019
£’000
77,738
77,738
77,738
77,738
This represents the lowest level within the Group at which goodwill is monitored for internal management purposes. The recoverable amount
of the CGU has been determined based on a value in use calculation using cash flow projections based on financial budgets approved by
the Board covering a three-year period. Cash flows beyond this period are extrapolated using the estimated growth rates stated in the key
assumptions. The key assumptions used in the value in use calculations are as follows:
The Gym
2020
2019
Discount rate
Growth rate Discount rate
Growth rate
11.1%
3.0%
9.4%
3.0%
Discount rates reflect estimate of return on capital employed required in each business by an investor. This is also the benchmark used by
management to assess operating performance and to evaluate future capital investment proposals. The above pre-tax discount rates are
derived from the Group’s post tax weighted average cost of capital. Changes in the discount rates over the years are calculated with
reference to latest market assumptions for the risk-free rate, equity market risk premium and the cost of debt.
Membership growth, growth rates in subscription rates and increases applied to costs have been modelled on a site-by-site basis based
upon a mixture of historical experience and expected recovery post COVID-19 and range from 7% to 67% for revenue and 2% to 50% for costs.
The impact of any new openings are not included in the assessment as they do not form part of the existing asset. The performance of any
gyms expected to close are included within the calculation up to the point of closure.
Goodwill is tested for impairment on at least an annual basis, or more frequently if events or changes in circumstance indicate that the
carrying value may be impaired. In the years under review, management’s value in use calculations have indicated no requirement to impair.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 124
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
CONTINUED
17. INVESTMENTS IN FINANCIAL ASSETS
Investments in equity instruments designated as at FVTOCI
Equity instruments
Financial assets mandatorily measured at FVTPL
Convertible debt instruments
Total investments
31 December
2020
£’000
31 December
2019
£’000
–
1,000
1,000
–
–
–
Investments in equity instruments designated as at FVTOCI
The Group invested £316,000 in 2017 and a further £432,000 in 2018 in the unlisted equity of an operating company. Later in 2018, the fair value
was subsequently reduced by £463,000 to £285,000 and in 2019, the fair value was further reduced by £285,000 to £nil.
This is a level 3 valuation under the fair value hierarchy and was determined based on the ongoing uncertainty surrounding the Company’s
ability to raise sufficient funds to continue trading until it is generating positive net cash flows. The range of sensitivity in the valuation at
31 December 2020 to reasonably possible changes in the assumptions used is not considered to be material. The Directors have determined
that the Group’s unlisted equity investment should not be accounted for as an associate. Although the Group holds a 17.2% shareholding in
the investee, financial and operating policy decisions are governed by a shareholder agreement that provides voting rights based on the
number of shareholders rather than the number of shares held. On the basis the Group is one of over 30 shareholders, the Directors consider
that the Group does not have significant influence over the investee.
Financial assets mandatorily measured at FVTPL
On 3 February 2020, the Group purchased convertible loan notes in Fiit Limited for cash consideration of £1,000,000. Conversion will take
place within two years of issue and would give the Group a small minority stake. The loan notes bear an implied compound interest rate of
25% upon conversion.
This is a level 3 valuation under the fair value hierarchy and was determined based on the performance of the business post acquisition
against the business plan produced at the time of investment. As the business is performing well and is expected to continue to have
adequate funding in place, no revaluation is required as the carrying amount appropriately reflects fair value. The range of sensitivity in the
valuation at 31 December 2020 to reasonably possible changes in the assumptions used is not considered to be material.
18. INVENTORIES
Goods for resale
The cost of inventories recognised as an expense during the year was £1,722,000 (2019: £260,000).
19. TRADE AND OTHER RECEIVABLES
Trade receivables
Loss allowance
Other receivables
Prepayments and accrued income
Due in less than one year
Due in more than one year
31 December
2020
£’000
31 December
2019
£’000
290
290
654
654
31 December
2020
£’000
31 December
2019
£’000
990
(240)
750
663
4,942
6,355
6,355
–
6,355
2,129
(88)
2,041
406
6,322
8,769
8,769
–
8,769
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 20. CASH AND CASH EQUIVALENTS
Cash at bank
Short term deposits
Bank overdrafts
Cash and cash equivalents
125
31 December
2020
£’000
31 December
2019
£’000
229
3,557
3,786
(50)
3,736
17
2,597
2,614
(9)
2,605
Cash and cash equivalents earn interest at floating rates based on daily bank deposit rates. Short term deposits are made for varying periods
of between one day and one month depending on the immediate cash requirements of the Group and earn interest at the respective short
term deposit rates.
21. TRADE AND OTHER PAYABLES
Trade payables
Social security and other taxes
Accruals
Contract liabilities (note 6)
Deferred income
22. LEASES
This note provides information for leases where the Group is a lessee.
(i) Amounts recognised in the balance sheet
The balance sheet shows the following amounts relating to leases:
Right-of-use asset
Property leases
Lease liabilities
Current
Non-current
Maturity analysis of lease liabilities:
Within one year
Greater than one year but less than two years
Greater than two years but less than three years
Greater than three years but less than four years
Greater than four years but less than five years
Five years or more
Less: unearned interest
31 December
2020
£’000
31 December
2019
£’000
2,850
620
8,648
6,442
38
10,603
724
10,101
7,961
–
18,598
29,389
31 December
2020
£’000
31 December
2019
£’000
255,674
238,702
21,842
284,473
15,637
262,706
31 December
2020
£’000
31 December
2019
£’000
34,550
32,370
32,491
32,714
32,241
232,296
28,410
29,691
29,911
29,634
29,862
227,136
396,662
(90,347)
374,644
(96,301)
306,315
278,343
As described in Note 4 the IASB issued COVID-19-Related Rent Concessions – amendment to IFRS 16 Leases to provide relief to lessees from
applying IFRS 16 guidance on lease modification accounting for rent concessions arising as a direct consequence of the COVID-19 pandemic.
Many lessors have provided rent concessions to lessees as a result of the COVID-19 pandemic. Rent concessions can include rent holidays or
rent reductions for a period of time, possibly followed by increased rent payments in future periods. Applying the requirements in IFRS 16 for
changes to lease payments, particularly assessing whether the rent concessions are lease modifications and applying the required
accounting, could be practically difficult in the current environment. The objective of the amendment is to provide lessees that have been
granted COVID-19 related rent concessions with practical relief, while still providing useful information about leases to users of the financial
statements.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 126
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
CONTINUED
22. LEASES CONTINUED
As a practical expedient, a lessee may elect not to assess whether a COVID-19 related rent concession from a lessor is a lease modification.
A lessee that makes this election accounts for any change in lease payments resulting from the COVID-19 related rent concession the same
way it would account for the change under IFRS 16, if the change were not a lease modification. The practical expedient applies only to rent
concessions occurring as a direct consequence of the COVID-19 pandemic.
As permitted by this concession, the Group has derecognised £682,000 of the lease liability that has been extinguished by the forgiveness
of lease payments on buildings.
Where landlords have agreed to permanently change the frequency of rental payments, the change in the value of the lease liability of
£843,000 has been recognised within finance costs in the Income Statement as all changes impact solely on the interest charge related
to the lease liability.
(ii) Amounts recognised in the statement of profit or loss
The statement of profit or loss shows the following amounts relating to leases:
Depreciation charge of right-of-use assets
Impairment of right-of-use assets
Interest expense (included in finance cost)
31 December
2020
£’000
31 December
2019
£’000
21,523
547
12,661
19,112
–
12,852
The total cash outflow for leases in 2020 was £22,609,000 (2019: £25,913,000). A maturity analysis of future lease payments is set out above.
Additionally, the Group has benefited from a one-month unconditional waiver of lease payments on six properties in England and additional
rent free benefits on six properties in exchange for removal of break clauses without modification to the original lease contract. The waiver of
lease payments of £682,000 and the decrease in the lease liability of £682,000 has been accounted for as a negative variable lease payment
in profit or loss.
The Group does not have any low value or short term leases.
(iii) The Group’s leasing activities and how these are accounted for
The Group leases gym sites and its head office. Rental contracts are typically made for fixed periods of ten to 20 years, but may have
extension options as well. Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is
available for use by the Group.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the
following lease payments:
• Fixed payments (including in-substance fixed payments), less any lease incentives receivable;
• Amounts expected to be payable by the Group under residual value guarantees; and
• Payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. There are no
variable lease payments nor residual value guarantees.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally
the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay
to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar
terms, security and conditions.
To determine the incremental borrowing rate, the Group:
• where possible, uses recent third party financing received by the individual lessee as a starting point, adjusted to reflect changes in
financing conditions since third party financing was received;
• uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by The Gym Group, which does not
have recent third party financing; and
• makes adjustments specific to the lease, e.g. term and security.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to
produce a constant periodic rate of interest on the remaining balance of the liability for each period.
the amount of the initial measurement of lease liability;
Right-of-use assets are measured at cost comprising the following:
•
• any lease payments made at or before the commencement date less any lease incentives received;
• any initial direct costs; and
•
restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 127
22. LEASES CONTINUED
(iv) Extension and termination options
Extension and termination options are included in a number of property leases across the Group. These are used to maximise operational
flexibility in terms of managing the assets used in the Group’s operations. The majority of extension and termination options held are
exercisable only by the Group and not by the respective lessor.
During the period, the Group has extended 12 leases (2019: nil) which resulted in additional lease liabilities of £16,654,000 being recognised (2019:
£nil). In addition, one lease term has been reduced by the landlord resulting in £568,000 being recognised in profit and loss (see note 9).
23. OTHER FINANCIAL LIABILITIES
At 1 January 2019
Cash paid in year
Recognised in relation to prior acquisition
At 31 December 2019
Transfer from contingent consideration to deferred consideration
Cash paid in year
At 31 December 2020
Deferred
Consideration
£’000
Contingent
Consideration
£’000
2,115
(2,115)
–
–
3,875
(1,266)
2,609
887
–
2,988
3,875
(3,875)
–
–
Total
£’000
3,002
(2,115)
2,988
3,875
–
(1,266)
2,609
On 4 July 2018 the Group acquired the trade and assets of a portfolio of 13 gyms trading under the easyGym brand for an initial cash consideration
of £14.5 million, with an additional £6.1 million deferred consideration payable on completion of lease assignment on three sites and further
contingent consideration if lease extensions are agreed on two sites. £4.0 million of deferred consideration was paid shortly after acquisition.
At 31 December 2018, deferred and contingent consideration with fair value of £3.0 million was outstanding and recognised within other financial
liabilities. During the year ended 31 December 2019 the remaining deferred consideration of £2.1 million was paid. During 2019 the Directors
reassessed the probabilities of the lease extensions occurring in respect of the two sites concerned and considered these to be virtually certain.
As a consequence, the estimated fair value of contingent consideration payable in respect of these lease extensions at 31 December 2019
increased by £3.0 million to £3.9 million. During 2020, the two lease extensions were obtained which crystallises the remaining consideration. As a
result, the contingent consideration has been reclassified as deferred consideration, with £1.3 million being paid during the year.
24. BORROWINGS
Non-current
Revolving credit facility
Loan arrangement fees
31 December
2020
£’000
31 December
2019
£’000
49,798
(618)
50,000
(884)
49,180
49,116
The Group’s bank borrowings are secured by way of fixed and floating charges over the Group’s assets.
In October 2019, the Group successfully refinanced its borrowings, moving from a mix of term loans and Revolving Credit Facility (‘RCF’) to a
single committed RCF of £70 million. The facility is syndicated to a three lender panel of HSBC, Barclays and Banco de Sabadell and matures
in 2023. On 5 June 2020 the Company agreed with its lending banks to extend its existing £70 million RCF with an additional £30 million
facility for a term of 18 months, which was subsequently further extended on 17 December 2020 to June 2022 (‘the New Bank Facility’).
The funds borrowed under the New Bank Facility bear interest at a minimum annual rate of 2.60% (2019: 1.75%) above the appropriate Sterling
LIBOR. The average interest rate paid in the year on drawn funds under the new facility is 2.28% (2019: 2.71%). Undrawn funds bear interest at a
minimum annual rate of 0.910% (2019: 0.613%). At the year end, the Group had drawn down £51 million (2019: £50 million) on the facility.
The 2019 facility resulted in fees incurred of £873,000 and these costs will be spread over the term of the loan using the effective interest
method. The facility is recognised at its amortised cost. The June 2020 refinancing resulted in fees incurred of £366,000 and the costs will be
spread over the remaining term of the loan on a straight-line basis.
The Group’s borrowings are held at amortised cost using the effective interest method. Each reporting period, the Group reviews its cash flow
forecasts and if these have changed since the previous reporting period, the borrowings are remeasured using the original effective interest
rate. Any remeasurement of borrowings is treated as being non-underlying and is excluded from adjusted earnings.
Covenants
The RCF is subject to financial covenants relating to leverage and fixed charge cover, which did not change significantly from those under the
previous facility.
From September 2020 until June 2022 the covenant tests of the RCF have been replaced in the New Bank Facility by new covenant tests primarily
relating to the performance of the Group against agreed targets for Group Adjusted EBITDA less Normalised Rent. Upon termination or early
cancellation of the New Bank Facility the covenants and all other terms of the original RCF will apply until the maturity of the RCF in October 2023.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 128
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
CONTINUED
24. BORROWINGS CONTINUED
Available facilities
The total borrowing facilities available to the Group are:
Total facilities available to the Group
Revolving credit facility
Facilities undrawn and available are:
Revolving credit facility
The loan maturity is as follows:
Within one year
Between two and five years
25. PROVISIONS
At 1 January 2019
New provisions
Utilisation of provisions
Unwinding of discount
Release of provision
At 31 December 2019
New provisions
Utilisation of provisions
Unwinding of discount
Release of provision
At 31 December 2020
Due in less than one year
Due in more than one year
At 31 December 2019
Due in less than one year
Due in more than one year
At 31 December 2020
31 December
2020
£’000
31 December
2019
£’000
100,000
70,000
100,000
70,000
31 December
2020
£’000
31 December
2019
£’000
49,000
20,000
49,000
20,000
31 December
2020
£’000
31 December
2019
£’000
–
51,000
–
50,000
51,000
50,000
Dilapidations
£’000
1,145
134
–
24
–
1,303
58
–
29
(149)
1,241
–
1,303
1,303
–
1,241
1,241
Other
£’000
679
161
(412)
–
(76)
352
46
(60)
–
(292)
46
352
–
352
46
–
46
Total
£’000
1,824
295
(412)
24
(76)
1,655
104
(60)
29
(441)
1,287
352
1,303
1,655
46
1,241
1,287
A dilapidations provision is recognised when there is future obligation relating to the maintenance of leasehold properties. The provision is
based on management’s best estimate of meeting this obligation, but the amount and timing of this are uncertain.
Other provisions comprise estimated costs arising from the restructuring activities associated with changing the Personal Trainer operating
model within the business and for remedial works associated with the acquired sites.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 129
26. FINANCIAL INSTRUMENTS
Fair value hierarchy
IFRS 7 requires fair value measurements to be recognised using a fair value hierarchy that reflects the significance of the inputs used in the
value measurements:
Level 1:
Level 2: a valuation that uses observable inputs for the asset or liability other than quoted prices in active markets
Level 3: a valuation using unobservable inputs i.e. a valuation technique
inputs are quoted prices in active markets
There were no transfers between levels throughout the periods under review.
Fair values
Set out below is a comparison of carrying amounts and fair values of the Group’s financial instruments. The fair values of financial derivatives
and borrowings have been calculated by discounting the future cash flows at prevailing market interest rates. The fair values of the other
financial instruments closely approximate their carrying values. Other than the fair value of financial assets at fair value through profit and loss
or other comprehensive income that are categorised as Level 3, the fair value of all other financial assets and liabilities are categorised as
Level 2.
Held at amortised cost
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Borrowings
Held at fair value
Financial assets at fair value through profit and loss
Financial assets at fair value through other comprehensive income
Derivative financial instruments
Other financial liabilities
31 December 2020
31 December 2019
Carrying
value
£’000
Fair value
£’000
Carrying
value
£’000
Fair value
£’000
1,413
3,736
(11,498)
(49,180)
1,000
–
1
(2,609)
1,413
3,736
(11,498)
(51,000)
1,000
–
1
(2,609)
2,447
2,605
(20,704)
(49,116)
2,447
2,605
(20,704)
(50,000)
–
–
13
(3,875)
–
–
13
(3,875)
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns
for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to
maintain or adjust capital, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new
shares or sell assets to reduce debt.
Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided
by total capital. Net debt is calculated as total borrowings less cash and cash equivalents and excludes lease liabilities. Total capital is
calculated as equity as shown in the Consolidated Statement of Financial Position plus net debt. The gearing ratios for the periods under
review are as follows:
Total borrowings
Less: cash and cash equivalents
Non-property net debt
Total equity
Total capital
Gearing ratio
Financial risk management
The Group has exposure to the following risks from its use of financial instruments:
• Market risk
• Liquidity risk
• Credit risk
31 December
2020
£’000
31 December
2019
£’000
51,000
(3,736)
47,264
199,403
50,000
(2,605)
47,395
159,488
246,667
206,883
19%
23%
This note presents information about the Group’s exposure to each of the above risks, and the Group’s objectives, policies and procedures for
measuring and managing risk. The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk
management framework.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE
130
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
CONTINUED
26. FINANCIAL INSTRUMENTS CONTINUED
Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Key
market risks affecting the Group include interest rate risk. Financial instruments affected by market risk include borrowings, deposits and
derivative financial instruments.
The sensitivity analysis in the following sections relates to the position as at 31 December 2020 and 2019. The analysis has been prepared on
the basis that the amount of net debt and the ratio of fixed to floating interest rates of the debt and derivatives are all constant.
Interest rate risk
The Group is exposed to interest rate risk because the Group’s long term debt obligations are at floating interest rates. The risk is managed
by the Group by the use of interest rate swap contracts. Hedging activities are evaluated regularly to align with interest rate views and defined
risk appetite, ensuring the most cost-effective hedging strategies are applied.
The Group’s exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section of
this note.
The Group is exposed to the following interest rate benchmarks within its hedge accounting relationships, which are subject to interest rate
benchmark reform: GBP LIBOR (‘LIBOR’). At 31 December 2020 and 2019 all of the Group’s borrowings were at floating rates of interest.
The Group’s current GBP LIBOR contracts include adequate and robust fallback provisions for a cessation of the referenced benchmark
interest rate.
For the Group’s derivatives, the International Swaps and Derivatives Association’s (‘ISDA’) fallback clauses were made available at the end of
2019 and during 2020 the Group started discussions with its banks with the aim to implement this language into its ISDA agreements.
Below are details of the hedging instruments and hedged items in scope of the IFRS 9 amendments due to interest rate benchmark reform,
by hedge type. The terms of the hedged items listed match those of the corresponding hedging instruments.
Hedge type
Instrument type
Maturing in
Nominal
Hedged Item
Cash flow hedges
Receive three-month GBP LIBOR,
pay GBP fixed interest rate swap
September 2022 GBP 27,200,000
GBP LIBOR RCF of £70,000,000
maturing in October 2023
The Group will continue to apply the amendments to IFRS 9 until the uncertainty arising from the interest rate benchmark reforms with respect
to the timing and the amount of the underlying cash flows that the Group is exposed to ends. The Group has assumed that this uncertainty
will not end until the Group’s contracts that reference LIBOR are amended to specify the date on which the interest rate benchmark will be
replaced, the cash flows of the alternative benchmark rate and the relevant spread adjustment. This will, in part, be dependent on the
introduction of fallback clauses which have yet to be added to the Group’s contracts and the negotiation with lenders.
The Group is not expecting any reduction in interest rates over the next 12 months.
The reduction in profit before tax of a reasonably possible increase in LIBOR is as follows:
Change in interest rates of 0.5%
31 December
2020
£’000
31 December
2019
£’000
255
246
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 131
26. FINANCIAL INSTRUMENTS CONTINUED
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. Ultimate responsibility for liquidity risk
management rests with the Board of Directors. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows,
matching the maturity profiles of financial assets and operational liabilities and by maintaining adequate cash reserves.
The table below summarises the maturity profile of the Group’s financial liabilities:
Trade and other payables
Borrowings
Other financial liabilities
Lease liabilities
Trade and other payables
Borrowings
Other financial liabilities
Lease liabilities
31 December 2020
Within 1
year
£’000
11,498
1,811
2,609
34,550
1 to 2
years
£’000
–
1,658
–
32,370
2 to 5
years
£’000
More than
5 years
£’000
–
52,157
–
97,446
–
–
–
232,296
Total
£’000
11,498
55,626
2,609
396,662
50,468
34,028
149,603
232,296
466,395
Within 1
year
£’000
20,704
1,660
3,875
28,410
31 December 2019
1 to 2
years
£’000
–
6,353
–
29,691
2 to 5
years
£’000
More than
5 years
£’000
–
47,151
–
89,407
–
–
–
227,136
Total
£’000
20,704
55,164
3,875
374,644
54,649
36,044
136,558
227,136
454,387
Credit risk
The Group’s principal financial assets are bank balances and cash, trade and other receivables, unlisted securities and derivative financial
instruments. The Group’s other receivables largely comprise security deposit payments, on which the credit risk is not concentrated as it is
spread over a number of counterparties. The credit risk on liquid funds and derivative financial instruments is limited because the
counterparties are banks with high credit ratings assigned by international credit-rating agencies. The Group has no significant concentration
of credit risk, with exposure spread over a large number of counterparties and customers.
27. DERIVATIVES AND HEDGE ACCOUNTING
On 9 November 2018 the Group entered into an interest rate cap with a notional amount of £27.2 million with a term of four years and a strike
rate of 1.75% with reference to three-month GBP LIBOR.
Derivatives are only used for economic hedging purposes and not as speculative investments.
For information about the methods and assumptions used in determining the fair value of derivatives refer to note 26.
The fair value loss during the year was £12,000 (2019: £156,000). £23,000 (2019: £1,000) has been recognised within Financing Costs and a gain
of £11,000 (2019: loss of £155,000) has been recognised directly in equity in the Hedging Reserve.
Hedge ineffectiveness
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to
ensure that an economic relationship exists between the hedged item and hedging instrument.
The Group’s interest rate cap has similar critical terms as the hedged item, such as reference rate, reset dates, payment dates, maturities and
notional amount. The Group does not hedge 100% of its loans; therefore the hedged item is identified as a proportion of the outstanding loans
up to the notional amount of the cap.
Hedge ineffectiveness will arise from changes in probability of the hedged transactions occurring, or if there are changes in the credit risk of
the derivative counterparty.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE
132
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
CONTINUED
28. ISSUED SHARE CAPITAL AND RESERVES
Allotted, called up and fully paid
Ordinary shares of £0.0001 each
Own shares held
Deferred Ordinary shares of £1 each
The number of Ordinary shares in issue is as follows:
Ordinary shares of £0.0001 each
Deferred Ordinary shares of £1 each
31 December
2020
£’000
31 December
2019
£’000
17
48
14
48
31 December
2020
31 December
2019
165,751,888
48,050
137,917,377
48,050
In addition, 217,777 Ordinary shares of £0.0001 each are held by an employee benefit trust (2019: 178,170).
In April 2020, 27,512,181 Ordinary shares of £0.0001 each were issued at a price of £1.50 per share raising gross proceeds of approximately
£41,300,000. A cash box structure was used in such a way that merger relief was available under the Companies Act 2006, section 612. In this
circumstance no share premium is recorded and the £39,900,000 excess of the net proceeds over the nominal value of the share capital
issue has been recorded as a Merger reserve. The proceeds of this issue were used to reduce net indebtedness, provide working capital
flexibility and to fund incremental capital expenditure across the wider Group. For amounts passed to entities in the Group by way of
inter-company loans, this Merger reserve is not immediately distributable. This reserve will qualify as distributable on settlement of these
inter-company funding arrangements in the future.
The following describes the nature and purpose of each reserve in equity:
Own shares held and capital redemption reserve
These reserves represent 48,050 Deferred Ordinary shares of £1 each repurchased by the Company on 12 November 2015 and Ordinary
shares held in an employee benefit trust. The Deferred Ordinary shares constitute separate, non-voting class of shares which is held in
treasury and not admitted to trading. The rights attached to the Deferred Shares are set out in the Company’s Articles.
Share premium
The amount subscribed for share capital in excess of nominal value.
Hedging reserve
The fair value movements on the effective portion of hedging instruments.
Merger reserve
The amount subscribed for share capital in excess of nominal value attracting merger relief under the Companies Act 2006.
Retained earnings/deficit
The accumulated net gains and losses of the Group since inception.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 133
29. SHARE BASED PAYMENTS
The Group had the following share based payment arrangements in operation during the year:
a) The Gym Group plc Performance Share Plan
b) The Gym Group plc Share Incentive Plan – Free shares
c) The Gym Group plc Share Incentive Plan – Matching shares
d) The Gym Group plc Restricted Stock Plan
e) The Gym Group plc Long Service Award Plan
f) The Gym Group plc Savings Related Share Option Scheme (‘SAYE’)
In accordance with IFRS 2 Share Based Payments, the value of the awards is measured at fair value at the date of the grant. The fair value is
expensed on a straight-line basis over the vesting period, based on management’s estimate of the number of shares that will eventually vest.
The Group recognised a total charge of £801,000 (2019: £1,670,000) in respect of the Group’s share based payment arrangements and a
credit related to employer’s national insurance of £132,000 (2019: charge of £230,000).
A summary of the movements in each scheme is outlined below:
Scheme name
Performance Share Plan
Share Incentive Plan – Free shares
Share Incentive Plan – Matching shares
Restricted stock
Long Service Awards
Save as You Earn
Outstanding
at
1 January 2020
Granted
during the
year
2,852,355
33,528
106,377
728,404
6,930
227,029
1,447,479
–
65,265
1,064,218
–
694,940
Lapsed/
cancelled
during the
year
(326,157)
(3,429)
(5,657)
(57,568)
(233)
(130,909)
Exercised
during the
year
Outstanding at
31 December
2020
Exercisable
at
31 December
2020
(193,634)
(6,477)
(21,794)
(125,916)
(2,780)
–
3,780,043
23,622
144,191
1,609,138
3,917
791,060
570,690
23,622
–
48,861
–
–
3,954,623
3,271,902
(523,953)
(350,601)
6,351,971
643,173
The outstanding share options balances at 1 January 2020 for the Performance Share Plan and Restricted Stock have been restated by
103,584 and 9,206 shares respectively to correctly reflect the opening balances. The exercise price of all options under the schemes held
during the year is £0.01. 655,397 options were exercisable under the PSP and SIP schemes as at 31 December 2020 (2019: 220,757). No other
options were exercisable as at 31 December 2020.
(a) Performance Share Plan
During the year, the Group has modified its reporting of profit KPIs for 2018 and 2019 awards to reflect the impact of the introduction of IFRS 16
(leases) and also changes in accounting assumptions regarding the amortisation of IT investments. The related vesting targets of the financial
measures (Adjusted EPS and ROIC) have also been subsequently modified to ensure that there is no impact on the vesting outcome of the
awards from the adoption of IFRS 16.
The outstanding awards as at 31 December 2020 will all vest within three years, subject to continued employment and the achievement of
certain performance targets. For awards made in 2020, the performance targets are solely based on TSR, with 33.3% based on absolute
shareholder return and 66.7% based on relative TSR. For awards made prior to 2020, the targets are based on TSR and financial performance
measures with each target contributing to 50% of the vesting conditions. Prior to the 2019 awards all of the financial performance measures
were based on adjusted EPS targets, with the 2019 awards split equally between EPS and ROIC. The vesting conditions of the Performance
Share Plan awards are set out in part B of the Report to the Remuneration Committee. The maximum term of these awards is three years and
settlement is in the form of shares. The fair value of the EPS element was determined using the share price at the date of grant. The fair value
of the TSR element of the award was estimated at the grant date using a Monte Carlo simulation model, taking into account the terms and
conditions upon which the awards were granted. This model simulates the TSR and compares it against the group of comparator companies.
It takes into account historic dividends and share price fluctuations to predict the distribution of relative share price performance.
The shares are potentially dilutive for the purposes of calculating diluted earnings per share.
The following assumptions were used for options granted during the year:
Weighted average share price at date of grant
Exercise price
Expected volatility
Expected term until exercised
Expected dividend yield
Risk-free interest rate
2020
2019
£1.45
£0.0001
49.5%
3 years
0
(0.10)%
£2.17
£0.0001
37.7%
3 years
0
0.67%
The weighted average fair value of each award issued under this scheme during the year was £0.84 (2019: £1.77). The weighted average
remaining contractual life was 1.7 years (2019: 1.3 years) at 31 December 2020.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 134
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
CONTINUED
29. SHARE BASED PAYMENTS CONTINUED
(b) Share Incentive Plan – Free shares
The awards are subject to continued employment requirements over a three-year period and have no performance conditions. The shares are
held by an employee benefit trust and are dilutive for the purposes of earnings per share.
The options vest in full at the end of the three-year period. No awards were issued in the current or prior year. The weighted average
remaining contractual life was 5.3 years (2019: 6.3 years) at 31 December 2020.
(c) Share Incentive Plan – Matching shares
Under the Matching shares award, for every share purchased by an employee the Company will award one matching share, up to a maximum
value. The awards are subject to continued employment requirements over a three-year period and have no performance conditions. The
shares are held by an employee benefit trust and are dilutive for the purposes of earnings per share.
The options vest in full at the end of the three-year period. The weighted average fair value of each award issued under this scheme during
the year was £1.76 (2019: £2.17) and was determined using the share price at the date of grant. The weighted average remaining contractual life
was 1.8 years (2019: 1.4 years) at 31 December 2020.
(d) Restricted stock
The awards are subject to continued employment requirements over a three-year period and have no performance conditions. The shares are
held by an employee benefit trust and are dilutive for the purposes of earnings per share.
The options vest in full at the end of the three-year period. The weighted average fair value of each award issued under this scheme during
the year was £1.45 (2019: £2.37) and was determined using the share price at the date of grant. The weighted average remaining contractual
life was 9.0 years (2019: 8.5 years) at 31 December 2020.
(e) Long Service Awards
The awards are subject to continued employment requirements over a three-year period and have no performance conditions. The shares are
held by an employee benefit trust and are dilutive for the purposes of earnings per share.
The options vest in full at the end of the three-year period. The weighted average fair value of each award issued under this scheme during
the year was £nil (2019: £2.37) and was determined using the share price at the date of grant. The weighted average remaining contractual life
was 7.8 years (2019: 8.3 years) at 31 December 2020.
(f) Save as You Earn (SAYE) Scheme
Under the SAYE scheme, employees are allowed to acquire options over the Company’s shares at a discount of up to 20% of their market
value at the date of grant. The awards are subject to continued employment requirements over a three-year period and have no performance
conditions. The shares are held by an employee benefit trust and are dilutive for the purposes of earnings per share.
The options vest in full at the end of the three-year period. The weighted average fair value of each award issued under this scheme during
the year was £0.52 (2019: £1.00) and was determined using the share price at the date of grant. The weighted average remaining contractual
life was 3.3 years (2019: 3.4 years) at 31 December 2020.
30. COMMITMENTS AND CONTINGENCIES
Contracted for but not provided
31 December
2020
£’000
31 December
2019
£’000
2,247
3,461
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 135
31. RELATED PARTY TRANSACTIONS
Identification of related parties
The ultimate holding company of the Group is The Gym Group plc, a company incorporated in The United Kingdom.
Closewall Limited is a company under the control of a family member of a Director, J Treharne, and provides services to the Group as
disclosed in the Corporate Governance Report.
The subsidiaries of the Group are as follows:
Company
Principal activity
Country of incorporation
Holding
The Gym Group Midco1 Limited
The Gym Group Midco2 Limited
The Gym Group Operations Limited
The Gym Limited
Derwent Fitness NW Limited
Derwent Fitness GS Limited
Holding company
Holding company
Holding company
Fitness operator
Dormant
Dormant
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
100%
100%
100%
100%
100%
100%
The registered office of the subsidiaries is 5th Floor, OneCroydon, 12-16 Addiscombe Road, Croydon, CR0 0XT.
The following table provides the total amounts owed to related parties for the relevant financial period:
Closewall Limited
Opening balance
Purchases
Repayments
Representing:
Trade and other payables
31 December
2020
£’000
31 December
2019
£’000
–
–
186
1,651
(1,837)
–
–
186
186
98
2,120
(2,032)
186
186
All purchases in the period are in relation to Closewall Limited.
Terms and conditions of transactions with related parties
The purchases from related parties are made at normal market prices. Outstanding balances at the year end are unsecured, interest free and
settlement occurs in cash. There have been no guarantees provided for any related party payables. Payments to Closewall Limited are in
respect of the provision of services.
Compensation of key management personnel
Key management includes the Directors as identified in the Directors’ Report and members of the Group’s Executive Committee. The
compensation paid or payable to key management for employee services is shown below:
Remuneration
Termination benefits
Company contributions to defined contribution pension scheme
Share based payment (credit)/charge
31 December
2020
£’000
31 December
2019
£’000
2,068
313
108
209
2,698
2,612
–
161
1,186
3,959
At the year end, £nil (2019: £nil) was owed by key management personnel in respect of season ticket loans. At the year end, £nil (2019:
£533,000) was owed to key management personnel in respect of year-end bonus.
Information regarding the highest paid Director is shown in the Report of the Remuneration Committee.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 136
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
CONTINUED
32. DIVIDENDS MADE AND PROPOSED
Interim dividend of nil per Ordinary share paid and declared (2019: 0.45p)
Final dividend of nil per Ordinary share proposed (2019*: 1.15p)
31 December
2020
£’000
31 December
2019
£’000
–
–
–
621
–
621
* The Board had recommended a final dividend of 1.15p per share for 2019. However, the Board decided to suspend the payment of that dividend after careful consideration of
distributable reserves, the capital base of the Group and earnings fluctuations arising from the COVID-19 pandemic and no resolution was proposed for this at the Group’s AGM.
A condition of the New Bank Facility is that the Company shall not declare or pay a dividend during the term of the facility and as such the
Directors are not proposing a final dividend for the financial year 2020.
33. FINANCING LIABILITIES
At 1 January 2019
Cash flows
Other non-cash movements
Changes in fair values
At 31 December 2019
Cash flows
Other non-cash movements
Changes in fair values
At 31 December 2020
3,027
(422)
–
–
2,605
1,131
–
–
3,736
Cash and cash
equivalents
£’000
Borrowings
£’000
Lease
Liabilities
£’000
(251,857)
(25,913)
(573)
–
(278,343)
22,609
(50,581)
–
(48,165)
(116)
(840)
–
(49,121)
(1,000)
941
–
(49,180)
(306,315)
Derivative
financial
instruments
£’000
169
–
–
(156)
13
–
–
(12)
1
34. EVENTS AFTER THE REPORTING PERIOD
Following the phased introduction of Tier 4 restrictions in a number of regions in December 2020, the Group was required to close 162 of its
183 gyms. On 4 January 2021 all remaining gyms were required to close as the UK Government announced a nationwide lockdown. The UK
Government has announced that gyms in England will re-open on 12 April 2021 if there is continued progress with the Government’s four
criteria for monitoring the pandemic. The Scottish Government has announced that gyms in Scotland will be able to re-open on 26 April 2021.
The Welsh Government has not yet announced a date for gyms in Wales to re-open.
In the Government’s Budget statement of 3 March 2021, it was announced that Business Rates relief would be extended and further grants for
closed businesses would be made available. The Group will benefit from both of these measures to an estimated combined value of
approximately £8 million between April and August 2021.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2020
Non-current assets
Investments in subsidiaries
Derivative financial instruments
Trade and other receivables
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Corporation tax payable
Total current liabilities
Non-current liabilities
Borrowings
Total liabilities
Net assets
Capital and reserves
Issued capital
Own shares held
Capital redemption reserve
Share premium
Hedging reserve
Merger reserve
Retained earnings
Total equity shareholders’ funds
137
31 December
2020
£’000
31 December
2019
£’000
Note
4
8
5
5
193,608
1
17,000
192,807
13
17,000
210,609
209,820
53,164
90
53,254
16,358
13
16,371
263,863
226,191
6
5,603
8,760
13
–
5,616
8,760
7
9
9
9
9
9
9
9
49,180
54,796
49,116
57,876
209,067
168,315
17
48
4
159,474
(155)
39,912
9,767
14
48
4
159,474
(166)
–
8,941
209,067
168,315
The notes on pages 139 to 143 form an integral part of the Financial Statements.
As permitted by s408 of the Companies Act 2006, the Company’s profit and loss account is not presented as part of these accounts.
The Company’s profit for the year amounted to £25,000 (2019: £1,585,000).
These Financial Statements were approved by the Board of Directors on 18 March 2021.
Signed on behalf of the Board of Directors
Richard Darwin
Chief Executive Officer
Mark George
Chief Financial Officer
Company Registration Number 08528493
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE
138
FINANCIAL STATEMENTS
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
Issued
capital
£’000
Own shares
held
£’000
Capital
redemption
reserve
£’000
At 1 January 2019
Profit for the year
Other comprehensive expense
Total comprehensive income for the
year
Capital contributions to subsidiaries
Dividends paid
At 31 December 2019
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Capital contributions to subsidiaries
Issue of Ordinary share capital
14
–
–
–
–
–
14
–
–
–
–
3
48
–
–
–
–
–
48
–
–
–
–
–
4
–
–
–
–
–
4
–
–
–
–
–
Share
premium
£’000
159,474
–
–
–
–
–
159,474
–
–
–
–
–
Hedging
reserve
£’000
Merger
reserve
£’000
Retained
earnings
£’000
(11)
–
(155)
(155)
–
–
(166)
–
11
11
–
–
–
–
–
–
–
–
–
–
–
–
–
39,912
Total
£’000
167,148
1,585
(155)
2,004
1,670
(1,933)
7,619
1,585
–
1,585
1,670
(1,933)
8,941
168,889
25
–
25
801
–
25
11
36
801
39,915
At 31 December 2020
17
48
4
159,474
(155)
39,912
9,767
209,067
The notes on pages 139 to 143 form an integral part of the Financial Statements.
Retained earnings include distributable reserves of £4,361,000 (2019: £4,117,000).
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 139
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. GENERAL INFORMATION
The Gym Group plc (‘the Company’) is incorporated and domiciled in the United Kingdom with company number 08528493. The registered
address of the Company is 5th floor, OneCroydon, 12-16 Addiscombe Road, Croydon, United Kingdom, CR0 0XT.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies is set out below. These have been applied consistently in the Financial Statements.
Statement of compliance and basis of preparation
The Financial Statements of the Company have been prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure
Framework (‘FRS 101’) and with those parts of the Companies Act 2006 applicable to companies reporting under FRS 101. The Financial
Statements of the Company are included in the Company’s Consolidated Financial Statements which can be obtained from the Company’s
registered office.
The Company meets the definition of a qualifying entity under FRS 101 and has therefore taken advantage of the following disclosure
exemptions available to it under FRS 101:
(a) the requirements of IFRS 7 Financial Instruments;
(b) the requirements of paragraph 97 of IFRS 13 Fair Value Measurement;
(c) the requirements of IAS 7 Statement of Cash Flows;
(d) the requirements of paragraphs 10(d), 111 and 134 to 136 of IAS 1 Presentation of Financial Statements;
(e) the requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors;
(f) the requirements of paragraph 17 of IAS 24 Related Party Disclosures; and
(g) the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members of
a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member.
The preparation of financial statements in conformity with FRS 101 requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of
judgement or complexity or areas where assumptions and estimates are significant to the Financial Statements are disclosed in note 3.
Going concern
In assessing the going concern position of the Company for the year ended 31 December 2020, the Directors have considered the
Company’s cash flows, liquidity and business activities in the light of the COVID-19 pandemic.
The outbreak of COVID-19 and its continuing impact on the economy casts a degree of uncertainty as to the future financial performance and
cash flows of the Company and those of the Group, in particular its trading subsidiary The Gym Limited (‘TGL’) on which the Company is
interdependent. When assessing the ability of the Group to continue as a going concern the Directors have considered:
•
•
•
the Group’s financing arrangements;
the pattern of trading during 2020 when gyms were open between lockdowns; and
future trading risks including continued regional or nationwide lockdowns and reduced membership levels
on the cashflows, liquidity and bank facility covenants of the Company and TGL over the period to 30 June 2022.
In the first half of 2020 the Company raised additional financing in the form of:
• an equity placing, which raised net proceeds of £39.9 million; plus
• a £30.0 million debt facility extension (the ‘New Bank Facility’), which provided incremental liquidity beyond the existing £70.0 million
Revolving Credit Facility (‘RCF’). The RCF and New Bank Facility are both provided by a consortium of HSBC, NatWest and Banco
de Sabadell.
During the periods of trading between lockdowns in the second half of 2020 the Group traded profitably and reduced capital expenditure
and other cash outflows. As at 31 December 2020, the Group had Non-Property Net Debt of £47.3 million versus £100.0 million of total
borrowing capacity.
Following the phased introduction of Tier 4 restrictions in a number of regions in December 2020, TGL was required to close 162 of its 183
gyms. On 4 January 2021 all remaining gyms were required to close as the UK Government announced a nationwide lockdown and the gyms
remain closed as at 18 March 2020. The UK Government has announced that gyms will re-open on 12 April if there is continued progress with
the Government’s four criteria for monitoring the pandemic.
As at 28 February 2021, the Group had Non-Property Net Debt of £58.2 million and therefore liquidity of £41.8 million versus a total borrowing
capacity £100.0 million. In the next 12 months the Company and Group’s liquidity will be influenced by (i) the number of months of closure of
TGL’s gyms and (ii) the trading performance of the business when gyms are permitted to open. Below we set out the financial implications of
periods of closure and trading respectively:
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 140
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
CONTINUED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Cash burn when gyms are closed
During the current period of closure, the Company and TGL have no revenue and TGL is operating with a monthly cash burn (excluding new
site capital expenditure) of around £5 million. This cash burn rate has been minimised as a result of significant reductions in TGL’s operating
costs and the following UK Government support:
• £1.1 million per month of Business Rates relief, currently due to end August 2021 due to there being a cap on relief of £2.0 million in H2 2021;
• £1.1 million per month of furlough income support from the Coronavirus Job Retention Scheme (‘CJRS’), currently due to end when TGL’s
gyms reopen in April 2021; and
• £0.5 million per month from Local Restrictions Support Grants (‘LRSG’) ongoing until TGL’s gyms re-open in April 2021.
In addition to the ongoing support, TGL will also benefit from a one-off Government grant of £27,000 per site; these grants have a total one-off
benefit of £4.5 million to TGL, of which £2.2 million had been received from the relevant local authorities before 28 February 2021.
While gyms remain closed and with current levels of Government support the business is operating with monthly cash burn of c.£5.0 million.
This cash burn assumes c.£2.5 million of rent being paid each month, which is the ‘normalised’ level of rent per month excluding the impact of
rent deferrals. A total of £3.6 million of rent deferred from 2020 is due to be repaid over the course of 2021, in addition to the ‘normalised’ level
of £2.5 million per month. Any further deferrals agreed will improve cash flow in the closure period and extend the period of closure that the
Company and TGL would be able to operate.
Trading when gyms are open
As at 28 February 2021 TGL had 547,000 members, all on ‘free freeze’, down from 578,000 on 31 December 2020. During the ongoing period of
closure we expect membership to reduce further at a similar rate to recent weeks; this rate of membership loss is lower than in the first
national lockdown from March to July 2020 and the second national lockdown in November 2020.
When gyms open, TGL’s subscription revenue starts immediately and in the periods of trading between national lockdowns in 2020 the
business operated profitably. The profitability of the Company and TGL after the gyms re-open from the current lockdown will depend on the
membership level and level of UK Government financial support. Whilst we continue to receive Business Rates relief, which is anticipated to
be until the end of August 2021, the business would require approximately 540,000 members to be break even at the cash flow level. When
the benefit of Business Rates relief ends, the cost base of the business would increase by c.£1.1 million per month, increasing the cash flow
break-even point to around 610,000 members.
Although there is uncertainty over the level of continued Government support and the speed of recovery in membership once gyms have
re-opened, it is the Directors expectation that the business will be close to break even at a cash flow level when gyms re-open and from that
point the recovery in membership will improve profitability and cash flow, therefore reducing net debt and increasing liquidity headroom.
In December 2020, the Group amended the New Bank Facility to extend it from 18 months to 24 months (now due to end June 2022 at which
point the terms of the original £70 million RCF will apply) and to set new covenants based on a revised business plan. The Group met the
covenant test for December 2020. As a result of the extended national lockdown in early 2021 the Group agreed with its lending banks a
waiver of the March 2021 covenant test. The June 2021 covenant test is based on cumulative EBITDA for H1 2021 and was set at a level that
allowed for up to one month of closure in that six month period; with the current lockdown being at least three months we will not be able to
meet the June 2021 covenant test. We have agreed with the banks that discussions regarding future covenant tests will take place during
April/May 2021 once there is further visibility on the external environment, levels of government support and whether gyms have reopened.
The Directors have considered a reverse stress test scenario in which it is assumed the current lockdown ends at the end of April 2021 (vs
Government target date for re-opening gyms of 12 April 2021) and a new lockdown starts in November 2021 (matching the timing of the winter
lockdown in November 2020) and continues indefinitely, with TGL trading in the months between lockdowns on an approximately cash flow
neutral basis. In such a scenario the Company and TGL would be able to continue operating until March 2022 before reaching the £100 million
borrowing capacity. In such circumstances additional options may be available to mitigate the impact on the Company and TGL’s liquidity and
cash flow including: (i) further reductions in TGL operating and capital expenditure; (ii) additional support from the UK Government; (iii)
extension of debt facilities; (iv) continued deferral of, or reductions in, rent payments to landlords; (v) the potential to raise additional funds
from third parties. In the reverse stress test scenario, the closures from November 2021 onwards would result in EBITDA losses in Q4 2021 and
as a result the Q4 2021 covenant test would not be met.
Whilst the Company and Group has secured sufficient liquidity, via the raising of equity and additional debt facilities, to finance operations for
at least the next twelve months through most reasonable scenarios, it may be necessary in certain downside scenarios to extend the term of
the £30.0 million New Bank Facility beyond June 2022. The Directors also consider it to be a plausible risk that current covenant targets in
2021 will not be met due to the impact of further closure or a slower recovery in membership numbers due to changes in members’ behaviour.
In the event that the Group fails to meet one or more of its 2021 debt covenants, the Directors believe it likely that further agreement could be
reached with the lending banks to waive or amend covenants as part of a revised business plan. However, no such commitment for further
covenant waivers (beyond the March 2021 waiver already agreed) is currently in place with the lending banks.
The Directors have concluded that the potential impact of COVID-19 described above and uncertainty over possible mitigating actions,
including covenant waivers or extending the New Bank Facility, represents a material uncertainty that may cast significant doubt about the
Company and TGL’s ability to continue as a going concern. However, having assessed the financial forecasts, sensitivities and possible
mitigating actions for both the Company and TGL, the Board has a reasonable expectation that the Company has adequate resources to
continue in operational existence for the next twelve months and therefore the Directors continue to adopt the going concern basis in
preparing these financial statements. Accordingly, these financial statements do not include any adjustments to the carrying amount or
classification of assets and liabilities that would result if the Company were unable to continue as a going concern.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020 141
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Investments
On initial recognition, investments in subsidiaries are recorded at cost, which is the fair value of the consideration paid. Where consideration is
paid by way of shares, the excess of fair value of the shares over nominal value of those shares is recorded in share premium. Investments in
subsidiaries are reviewed for impairment at each balance sheet date with any impairment charged to the income statement.
Financial instruments
Financial assets (excluding derivative financial instruments)
The Group measures its trade and other receivables and cash and cash equivalents at amortised cost. Subsequent to initial recognition these
assets are carried at amortised cost using the effective interest method. Income from these financial assets is calculated on an effective yield
basis and is recognised in the income statement.
Financial liabilities (excluding derivative financial instruments)
The Company initially recognises its financial liabilities at fair value and subsequently they are measured at amortised cost using the effective
interest method.
Derivative financial instruments and hedging activities
The Group’s activities expose it to financial risks associated with movements in interest rates. The Group uses interest rate hedging contracts
to hedge its interest rate exposure. The use of financial derivatives is governed by the Group’s treasury policies, as approved by the Board.
The Group does not use derivative financial instruments for speculative purposes.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair
value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is
designated as a hedging instrument, and if so, the nature of the item being hedged. During the year the Group has designated its derivative
financial instrument as a cash flow hedge.
At inception of the hedge relationship, the Group documents the economic relationship between hedging instruments and hedged items
including whether changes in the cash flows of the hedging instruments are expected to offset changes in the cash flows of hedged items.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in the cash
flow hedge reserve within equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss, within other
gains/(losses).
Amounts accumulated in equity are reclassified in the periods when the hedged item affects profit or loss i.e. the gain or loss relating to the
effective portion of the interest rate hedging contracts is recognised in profit or loss within finance cost at the same time as the interest
expense on the hedged borrowings.
Current taxation
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the
taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the
balance sheet date.
Income tax relating to items recognised in comprehensive income or directly in equity is recognised in comprehensive income or equity and
not in the income statement.
Deferred taxation
Deferred income tax is provided using the liability method on all temporary differences at the balance sheet date between the tax bases of
assets and liabilities and their carrying amounts for financial reporting purposes, with the following exceptions:
• Where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business
•
combination that at the time of the transaction affects neither accounting nor taxable profit or loss;
In respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and
• Deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which
deductible temporary differences, carried forward tax credits or tax losses can be utilised.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and amended to the extent that it is probable that
sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and
liabilities. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is
realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE 142
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
CONTINUED
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the Financial Statements in accordance with FRS 101 requires estimates and assumptions to be made that affect the value
at which certain assets and liabilities are held at the balance sheet date and also the amounts of revenue and expenditure recorded in the
period. The Directors believe the accounting policies chosen are appropriate to the circumstances and that the estimates, judgements and
assumptions involved in its financial reporting are reasonable.
There are no critical accounting judgements or estimates within these Financial Statements.
4. INVESTMENTS IN SUBSIDIARIES
At 1 January 2019
Capital contribution to subsidiaries
At 31 December 2019
Capital contribution to subsidiaries
At 31 December 2020
£’000
191,137
1,670
192,807
801
193,608
During the current and prior year, share options in the Company’s shares were granted to employees of The Gym Group Operations Limited
and The Gym Limited. Corresponding capital contributions have been recognised within investments in subsidiaries. Details of the Company’s
share based payment arrangements are shown in note 29 to the Consolidated Financial Statements.
The Company’s subsidiary undertakings are shown in note 31 to the Consolidated Financial Statements.
5. TRADE AND OTHER RECEIVABLES
Prepayments and accrued income
Social security and other taxes
Amounts owed by Group undertakings
Due in less than one year
Due in more than one year
6. TRADE AND OTHER PAYABLES
Trade payables
Amounts owed to Group undertakings
Accruals
7. BORROWINGS
Non-current
Revolving credit facility
Loan arrangement fees
31 December
2020
£’000
31 December
2019
£’000
502
17
69,645
70,164
53,164
17,000
70,164
19
157
33,182
33,182
16,358
17,000
33,358
31 December
2020
£’000
31 December
2019
£’000
33
5,035
535
5,603
250
7,903
607
8,760
31 December
2020
£’000
31 December
2019
£’000
49,798
(618)
50,000
(884)
49,180
49,116
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020
143
8. DERIVATIVES AND HEDGE ACCOUNTING
On 9 November 2018 the Company entered into an interest rate cap with a notional amount of £27.2 million and a strike rate of 1.75% with
reference to three-month GBP LIBOR.
Derivatives are only used for economic hedging purposes and not as speculative investments.
For information about the methods and assumptions used in determining the fair value of derivatives refer to note 26 to the Consolidated
Financial Statements.
The fair value loss during the year was £12,000 (2019: £156,000). £23,000 (2019: £1,000) has been recognised within Financing Costs and a gain
of £11,000 (2019: loss of £155,000) has been recognised directly in equity in the Hedging Reserve.
9. ISSUED CAPITAL AND RESERVES
Allotted, called up and fully paid
Ordinary shares of £0.0001 each
Own shares held
Deferred Ordinary shares of £1 each
The number of Ordinary shares in issue is as follows:
Ordinary shares of £0.0001 each
Deferred Ordinary shares of £1 each
31 December
2020
£’000
31 December
2019
£’000
17
48
14
48
31 December
2020
31 December
2019
165,751,888
137,934,293
48,050
48,050
Refer to note 28 of the Consolidated Financial Statements for details of movements in share capital.
The following describes the nature and purpose of each reserve in equity:
Own shares held and capital redemption reserve
These reserves represent 48,050 Deferred Ordinary shares of £1 each repurchased by the Company on 12 November 2015 and Ordinary
shares held in an employee benefit trust. The Deferred Ordinary shares constitute separate, non-voting class of shares which is held in
treasury and not admitted to trading. The rights attached to the Deferred Shares are set out in the Company’s Articles.
Share premium
The amount subscribed for share capital in excess of nominal value.
Hedging reserve
The fair value movements on the effective portion of hedging instruments.
Merger reserve
The amount subscribed for share capital in excess of nominal value attracting merger relief under the Companies Act 2006.
Retained earnings
The accumulated net gains and losses of the Company since inception.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE
144
FINANCIAL STATEMENTS
FIVE-YEAR RECORD
FOR THE YEAR ENDED 31 DECEMBER 2020
See below for a definition of these non-statutory Key Performance Indicators. The following table sets out a summary of selected key financial
information and Key Performance Indicators for the business.
Revenue
Group Adjusted EBITDA less Normalised Rent
Group Operating Cash Flow
Expansionary Capital Expenditure
Non-Property Net Debt
Non-Property Net Debt to Group Adjusted EBITDA
Total number of Gyms (number)
Total number of Members (‘000)
Average Revenue per Member per Month (£)
Number of Mature gyms in operation (number)
Mature Gym Site EBITDA
Return on Invested Capital for Mature Sites
2020
£’000
80,470
(10,169)
(16,282)
21,828
47,264
(4.64)x
183
578
17.20
155
3,865
2%
2019
£’000
153,134
48,540
39,178
30,919
47,395
0.98x
175
794
16.02
109
48,113
31%
2018
£’000
123,884
39,131
33,972
57,551
45,973
1.17x
159
724
14.89
89
38,967
30%
2017
£’000
91,377
30,558
24,677
52,453
37,543
1.23x
128
607
14.41
74
32,376
30%
2016
£’000
73,539
25,377
24,944
20,922
5,178
0.20x
89
448
14.31
55
26,589
32%
KEY PERFORMANCE INDICATORS
DEFINITION OF NON-STATUTORY MEASURES
Group Adjusted EBITDA – is operating profit before depreciation, amortisation, long term employee incentive costs and exceptional items.
Normalised Rent1 – Normalised Rent is the contractual rent that would have been paid in normal circumstances without any agreed
deferments, recognised in the monthly period to which it relates.
Adjusted Profit before Tax – is calculated as profit before tax before non-IT amortisation, exceptional items and modification of bank
borrowings.
Adjusted Earnings – is calculated as the Group’s profit for the year before non-IT amortisation, exceptional items, modification of bank
borrowings and the related tax effect.
Basic Adjusted EPS – is calculated as the Group’s profit for the year before non-IT amortisation, exceptional items, modification of bank
borrowings 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, interest and other financing costs and exceptional items.
Non-Property Net Debt – is calculated as borrowings less property finance leases and cash and cash equivalents.
Return On Invested Capital – is calculated as Group Adjusted EBITDA of the Group’s mature sites, divided by total capital invested in the sites.
Maintenance capital expenditure – relates to the replacement of gym equipment and premises refurbishment.
Expansionary capital expenditure – relates to the Group’s investment in the fit-out of new gyms, the acquisition of the Lifestyle and easyGym
portfolios and technology projects. It is stated net of contributions towards landlord building costs.
1 On adoption of IFRS 16, we revised our adjusted profit measures to deduct cash rent, in lieu of the rent cost that was previously charged under IAS 17. However, we have agreed
significant changes in the timing of our rent payments with landlords as a consequence of COVID-19. We have therefore revised our adjusted profit measures to instead deduct
normalised rent, to ensure a smoothed notional rent charge in the income statement.
THE GYM GROUP PLCANNUAL REPORT AND ACCOUNTS 2020
OVERVIEW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
145
CORPORATE INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2020
Company Secretary
Katy Tucker
Company number
08528493
Registered office
5th Floor
OneCroydon
12-16 Addiscombe Road
Croydon
CR0 0XT
Website
www.tggplc.com
Corporate Advisers
Bankers
HSBC Bank plc
Solicitors
Allen & Overy LLP
Auditors
Ernst & Young LLP
Joint Brokers
Numis Securities Limited
Peel Hunt LLP
Registrar
Link Group
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THE GYM GROUP PLC
5th Floor
OneCroydon
12-16 Addiscombe Road
Croydon
CR0 0XT
www.tggplc.com
www.thegymgroup.com