ANNuAl
reporT AND
AccouNTS
2021
The Gym Group plc
The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
In 2021, we again demonstrated
the resilience of our business model
and culture. We have emerged
strongly from the pandemic and
are growing again. At a time
when exercise and good health
have never been more important,
we remain committed to breaking
down barriers to fitness for all.
B
The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
oVerVIeW
2021 hIGhlIGhTS
Financial
revenue
£106.0m
2020: £80.5m
Group Adjusted eBITDA
less Normalised rent
£5.7m
2020: loss of £(10.2)m
Statutory loss for the year
£(35.4)m
2020: loss of £(36.4)m
Non-property net debt
£44.1m
2020: £47.3m
Strategic and operational
• Significant increase in membership
numbers; total members at
31 December 2021 of 718,000
(Dec 2020: 578,000)
• Average headline price of a standard
DO IT membership increased to £19.27
in December 2021 (Dec 2020: £18.81)
• LIVE IT penetration at 31 December
2021 of 27.1% (Dec 2020: 22.5%)
• Cash flow positive in all months when
gyms were open
• 19 sites opened in the year; new sites
trading well
• Strong operational performance with
record member satisfaction scores
• High staff engagement; rated number
25 in Glassdoor Best Places to Work in
the UK
contents
oVerVIeW
01 2021 Highlights
02
Introduction to our business
02 Our Purpose
02 Our Business Model
02 Our Strategy
02 What We Deliver
03 Our Key Stakeholders
04 At a Glance
STrATeGIc reporT
06 Chair of the Board’s Statement
08 Chief Executive’s Review
14 Market Review
16 Strategic Framework
18 Strategy in Action
26 Key Performance Indicators (‘KPIs’)
28 Sustainability Report
50 Stakeholder Information
56
Financial Review
62
Principal Risks and Uncertainties
Executive Committee
Introduction from the Chair of the Board
GoVerNANce
70
72 Board of Directors
74
75 Corporate Governance Report
79 Report of the Nomination Committee
82 Report of the Audit and Risk Committee
85 Report of the Sustainability Committee
86 Report of the Remuneration Committee
109 Directors’ Report
112 Directors’ Responsibility Statement
SEE FINANCIAL REVIEW
pAGeS 56-61
SEE STRATEGY IN ACTION
pAGeS 18-25
FINANcIAl STATemeNTS
113 Independent Auditor’s Report
121 Consolidated Statement
of Comprehensive Income
122 Consolidated Statement
of Financial Position
123 Consolidated Statement of Changes in Equity
124 Consolidated Cash Flow Statement
125 Notes to the Consolidated Financial
Statements
158 Company Statement of Financial Position
159 Company Statement of Changes in Equity
160 Notes to the Company Financial Statements
166 Five-Year Record
166 Definition of Non-Statutory Measures
167 Corporate Information
01
01
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE
The Gym Group plc
The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
ANNUAL REPORT AND ACCOUNTS 2021
oVerVIeW
INTroDucTIoN To our BuSINeSS
our purpose
our Strategy
BreAKING
DoWN
BArrIerS
To FITNeSS
For All
hIGh QuAlITy
eSTATe
SEE STRATEGY IN ACTION
pAGeS 18-19
compellING
memBer eXperIeNce
SEE STRATEGY IN ACTION
pAGeS 20-21
INNoVATIVe
TechNoloGy
AND mArKeTING
SEE STRATEGY IN ACTION
pAGeS 22-23
uNIQue TeAm
AND culTure
SEE STRATEGY IN ACTION
pAGeS 24-25
GroWING
SuSTAINABly
SEE SUSTAINABILITY REPORT
pAGeS 28-49
our Business model
reinvestment
in customers
and sites
eIN
r
-
F
l
e
S
Strong
financial
returns and
social value
02
02
Strong
demand for
health and
fitness
F o rcIN
G
G
high quality,
low cost,
gyms
r
o
W
Th
Growing
membership
base
Increased
economies
of scale
What We Deliver
• Accessible fitness for all
32%
of gyms located in 20% most deprived
areas of the UK
• Social value for communities
£2.5bn
of social value created through member
exercise over the last 5 years
• Sustainable long-term growth
22%
membership growth per year for the
last 10 years with an average of 18 new
sites opened per year
• Strong return on capital
30%
or above return on capital consistently
delivered
Note: Return on capital based on mature site performance
pre-COVID, which we expect to return to as the pandemic passes
oVerVIeW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
our Key Stakeholders
Stakeholders
Why they matter
We have worked closely
with our stakeholders
throughout the coVID-19
pandemic.
ShAreholDerS
Our investors provide capital for growth, whilst providing
challenge and feedback on our business model and plans
for the future.
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.
SEE STAKEHOLDER INFORMATION
pAGeS 52-55
memBerS
SupplIerS
commuNITIeS
eNVIroNmeNT
Satisfied members are what make our gyms successful and
they inspire us every day with their achievements. They are
the best indicator that we are delivering on our purpose of
breaking down barriers to fitness for all.
Our partnerships with our suppliers 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 business.
Being a valuable part of the communities in which we
operate is hugely important to us. Providing safe and
affordable facilities to exercise creates social value for the
communities we operate in.
We continually seek out opportunities to improve our
environmental performance, including reducing our carbon
emissions. Sustainability is at the core of our business.
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.
03
03
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
ANNUAL REPORT AND ACCOUNTS 2021
oVerVIeW
AT A GlANce
compellING
oFFer
We operate high quality,
low cost gyms that have
wide appeal and strong
levels of membership,
attracting new gym users
to the market and winning
market share through
affordability, 24/7
opening hours and
our no contract model.
04
04
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
with on-demand
fitness classes
multi-gym access, fitness
tracking and bring a friend
all available with
lIVe IT
oVerVIeW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Strong gym network
As at 31 December 2021, we operated 202 sites across
all regions of the UK and we are one of the largest gym
operators in Europe in terms of members. There remains
significant headroom for future growth and we plan to
open 28 new sites in 2022, taking advantage of strong
latent demand for affordable fitness and our position
as the best capitalised gym business in the UK.
202
Number of gyms
718,000
Number of members
£19.27
Average monthly membership cost
Note: All figures stated as at 31 December 2021.
Average monthly membership cost relates to ‘DO IT’ rate
Existing gym
2021 opening
05
05
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
chAIr oF The BoArD’S STATemeNT
GooD To Be
recoVerING
2021 was the second year that the
business was severely impacted by the
coVID-19 pandemic, with our gyms shut
for over 100 days, or 28% of the year.
however, the steps we took in 2021
benefitted from our experience of
managing the crisis in 2020 and, as a
result, we were well-placed to capitalise
as restrictions eased and people returned
to gyms. We fully expect that 2022 will
represent a return to a near normal
environment.
Those confident steps have been rewarded
with a significant recovery in membership,
strong member satisfaction, excellent
employee engagement and good
engagement with a wide set of
stakeholders - from shareholders, banks,
suppliers and landlords who have all
played an active role in supporting our
strong recovery.
Financial results
Whilst full-year results were impacted by
the pandemic, significant progress has
been made when compared with 2020.
Revenues were up 31.7% and Group
Adjusted EBITDA Less Normalised Rent was
£5.7m, up from a loss of £10.2m in 2020;
and the statutory loss for the year was
£35.4m, down from £36.4m in 2020. This
is a business that has quickly returned to
generating free cash flow when open; and
with a well-supported £30m equity raise to
strengthen the balance sheet, we are now
accelerating our growth ambitions with fast
organic site rollout, targeting 28 openings
in 2022.
Strategic clarity
We have taken the opportunity of recovery
to review and refresh our strategy.
Providing affordable fitness for all through
gym usage is even more important post
COVID-19, with an increased desire to
The pandemic has tested
us all. We are particularly
grateful to our colleagues
who have made our gyms
such clean, safe and
welcoming places for
members to return to and
enjoy to improve their
wellbeing. No one ever
regrets a workout!
penny hughes cBe
Chair of the Board
06
improve both physical and mental health
through physical activity. Equally, in
tougher economic times and periods of
inflation, our low cost offering provides
great value for money.
We remain ambitious to maximise our UK
expansion through accelerated openings,
taking advantage of a favourable property
market, our strong covenant relative to
peers and good reputation with landlords.
We are investing to drive membership
through greater brand awareness and by
improving our offer, notably in group
exercise classes which are particularly
attractive to female gym users.
We are increasing our commercial
sophistication supported by expert
resources to make better pricing decisions
and focus on driving sales. We have
strengthened our digital fitness offer in
partnership with Fiit, now offering 200
classes online to all our members for no
additional charge. We have also
appointed our first Strategy Director to help
us explore longer-term opportunities for
growth. All these initiatives were developed
in 2021 and set the business up well, not
just for good recovery, but for realising
significant profitable growth in the years
ahead.
our work as a Board
Our Company Secretary, Katy Tucker,
went on a period of maternity leave in
July 2021, handing over to Nadira Hussein
as Interim Company Secretary - and credit
to them both, we have not missed a beat!
The year has included extensive induction
programmes for newly appointed Non-
Executive Directors, Wais Shaifta and Rio
Ferdinand, and the first year of David Kelly
as Chair of the Audit and Risk Committee
and Emma Woods as Chair of the
Remuneration Committee and Senior
Independent Director. We have also
introduced a Sustainability Committee with
oversight responsibility for matters relating
to ESG, health, safety and wellbeing and
equality, diversity and inclusion.
long periods has been an unprecedented
shock. However, the actions we have taken
together have ensured a good recovery
and a positive outlook ahead. We are a
strong and relevant leisure business and the
opportunity for growth looks as significant
now as at any time.
Our Board deliberations are engaged,
ambitious and supportive. Our Board
effectiveness review was undertaken with
the help of external specialist resources for
the first time this year and, whilst confirming
the Board and its Committees work to a
high level, gave us valuable insights to
make us fitter for the future. Finding more
space for free-flow thinking, utilising in the
best way the different perspectives brought
by new Directors Rio and Wais, and
overtly aligning Directors to aspects of
strategic growth are being adopted within
our ways of working. We will maintain an
active dialogue on succession too. More
details on the process of the effectiveness
review can be found on page 81.
Early in 2022, we announced that our
Chief Financial Officer (‘CFO’), Mark
George, will leave The Gym Group for a
new role with Wickes plc. Mark has
played a full role as CFO and Executive
Director since joining us in 2018 and he
leaves with our thanks and good wishes for
the future. Our search for his successor is
well underway and Mark’s replacement
will be announced in due course.
Awards and recognition
I was delighted to be shortlisted for the
Non-Executive Director Awards (FTSE All
Share). For me, it is the story of The Gym
Group that is being recognised. Two years
of pandemic in which our normal 24/7
business had to close its doors for repeated
We continue to generate significant social
value and have focused the business on
helping members to work out at least four
times a month, the critical level of exercise
that research supports makes a positive
health contribution. We have committed to
achieving net-zero by 2035 in line with the
Science Based Targets initiative (‘SBTi’).
We were also very pleased indeed to be
included at number 25 in Glassdoor’s
prestigious list of the top 50 Best Places to
Work in the UK. Our colleagues care
passionately about our members and
worked tirelessly to ensure our gyms were
clean, safe and welcoming places for
members to return to, enjoy and improve
their wellbeing. Our focus on all
stakeholders sets The Gym Group in
position to deliver attractive sustainable
growth.
As this Annual Report was being finalised,
we have all witnessed the Russian invasion
of Ukraine. This is a shocking event at
every level and our thoughts are with the
Ukrainian people. There have been many
global impacts as a result of this but there
is no direct impact to our business model,
and escalating energy costs are a small
proportion of costs in our high margin
business. We cannot know how events will
unfold but remain confident in our business.
penny hughes cBe
Chair of the Board
16 March 2022
07
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
chIeF eXecuTIVe’S reVIeW
moVING
From
recoVery
To GroWTh
2021 has been a significant year
of recovery for The Gym Group
as we have rebuilt membership
following the three lockdowns
imposed during the pandemic.
Membership grew from 578,000 in
December 2020 to 718,000 at year end.
We believe, as a business, that we are
better placed to prosper in the years ahead
than at any time in our history, and look
forward with confidence to further recovery
as the operating environment normalises.
We are exiting the pandemic with a highly
engaged team and member satisfaction
scores as high as we have seen. We believe
that this is a great launchpad from which to
accelerate our expansion.
The market dynamics for our business are very
strong. The demand for health and fitness will
continue to increase because of the health
shock that the pandemic has given to so many
people. Within health and fitness, low cost
gyms are the part of the market that are
growing most rapidly and in the type of sites
that are most suitable for us, there is a once in
a generation opportunity to expand; and we
do so with a relatively unleveraged balance
sheet at a time when many of our competitors
are more constrained financially.
I am encouraged by
the start to the year that
we have had and look
forward to making further
strong progress in the
year ahead as we put
the challenges of the
pandemic behind us.
richard Darwin
Chief Executive Officer
08
08
718,000
Number of members
at 31 December 2021
202
Number of gyms
at 31 December 2021
Throughout the pandemic, we have made the
bold decisions to reinforce our market position.
At the beginning of the year, we decided to
keep our central teams working so that we
could make progress on initiatives such as
improvements to our technology platform,
website and class offering. We also invested
in our teams through support via online
training to ensure that they were engaged and
ready for the re-opening. In July, we were
delighted to receive the support of our
shareholders to raise £30m to accelerate our
rollout with 40 sites to be opened within the
18-month period up to the end of 2022.
By February 2021, our membership number
had reduced to 547,000 as we experienced
typical levels of attrition without significant
acquisition during lockdown. Immediately
after re-opening in April, we saw a period of
exceptional membership acquisition – the
opportunity to go to the gym became an
attractive option at a time when there were
limited other leisure venues open. As
expected, through the second half of the
year, the more normal seasonal patterns
re-established themselves such that we
finished the year with 718,000 members; this
is 90% of the pre-COVID-19 December 2019
number. Like-for-like membership numbers are
around 82% of these levels given the
increase in the size of our estate in the last
two years. In the autumn, we saw a pleasing
number of students re-joining as university
attendance began to normalise.
The recovery has not been uniform across the
country or by type of site location. Sites in the
North have recovered membership fastest
and are now operating at pre-COVID levels
of revenue per site. Recovery has been
slower in London and the South where
people’s day-to-day routines have been
slower to return to normal. In the small
number of city centre workforce-dependent
gyms, the recovery has also been patchy
because of the work from home guidance in
December 2021 and January 2022 under
Plan B restrictions. In contrast, we have seen
good levels of recovery in our sites located in
suburban locations. In light of these factors,
we have been encouraged by the overall
growth in member numbers to 825,000 by
the end of February 2022 – an increase of
50% versus February 2021.
One of our key strengths is a relatively
unleveraged balance sheet with low levels of
debt and strong liquidity. At the end of 2021,
our Non-Property Net Debt was £44.1m –
below the level of December 2020 – reflecting
cash outflow from the 19 sites that we have
opened in the year but benefitting from the
£30m proceeds from the equity raise. This
result is also indicative of how quickly post
re-opening we reverted to generating free
cash flow. Our aim is to return as quickly as
possible to a position where our free cash flow
generation enables us to self-finance our
expansion plans.
One of the most pleasing aspects since
re-opening has been how our members
have responded to the operating changes
we have made, both in terms of cleanliness
of the gym as well as developments we
have made in group exercise classes
(‘Group X’). This is reflected in member
satisfaction scores higher than pre-
COVID-19 levels. Member visits are a key
metric for our business, not just in terms of
member engagement with the gym but also
how it delivers social value to our members
and communities. The work that we have
done during the year on social value with
4Global demonstrates that we delivered
over £4m social value per gym in 2019.
This study showed that social value is driven
most significantly when members work out
more than four times per month. Throughout
2022 and beyond, a key initiative will be to
encourage our members to increase their
frequency of workouts. We plan to put in
place incentive schemes for our frontline
staff to drive this metric.
The financial results in 2021 were, once
again, substantially impacted by the periods
of closures from January to mid-April 2021
(end of April in Wales and Scotland) although
ahead of 2020 when there were more
closure days. Revenue was £106.0m
(2020: £80.5m) up 31.7%, and Group
Adjusted EBITDA Less Normalised Rent was
£5.7m compared with a loss of £10.2m in
2020. These results show how the business
has bounced back from the periods of closure
in 2021 to be able to immediately generate
positive EBITDA after rent. The Adjusted Loss
for the year was £28.5m and the Statutory
Loss was £35.4m.
The distress in the commercial property
market caused by the pandemic and shifts
in retailing to online, is presenting a
once-in-a -generation opportunity for us to
accelerate our rollout. When we came into
2021, we were beginning to build the
pipeline so that we could recommence our
rollout programme once gyms re-opened.
In total, 19 sites were opened in the year,
including one small box site. This brought our
portfolio up to 202 sites at year end and
included four sites opened on a single day in
December 2021 – a record for the business.
Since year end, we have opened a further
site in Glasgow, Scotland, bringing the total
estate to 203. This size of estate and pace of
rollout positions us as the second largest
09
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
chIeF eXecuTIVe’S reVIeW CONTINUED
one of our key strengths is our
unique team and culture, and
we were delighted to see a
10% increase in our employee
engagement score, to 61%, in our
annual engagement survey, and
to be recognised by Glassdoor as
number 25 in their list of the
Best places to Work in the uK.
10
£106.0m
revenue in 2021
2020: £80.5m
£5.7m
Group Adjusted eBITDA less
Normalised rent in 2021
2020: loss of £(10.2)m
operator within the UK health and fitness
market by number of sites and we continue to
see substantial growth to come as we plan to
open 28 sites in 2022. The sites that we have
opened have been performing well and in
line with pre-COVID-19 patterns of maturity
for our estate.
Strategic priorities
As we emerged from the pandemic in the
past year, we took the opportunity to review
and refresh our strategy to ensure it remained
relevant for the post COVID operating
environment. Our strategic priorities can
be summarised around three key initiatives –
(i) rebuilding and extending our membership;
(ii) accelerating our UK rollout; and (iii)
growing sustainably – and I am pleased with
the progress made on each in the past year.
(i) Rebuilding and extending
our membership
Key to our recovery is the ability to attract
both previous members and new members to
our gyms. Where we have seen the most
rapid recovery is in sites which are located
within the residential areas of large towns
and cities, where most of our gyms are
located. The slowest recovery has been in the
small number of city centre sites that are
wholly dependent on workforce. Our
property acquisition strategy has been
concentrated in residential areas for a
number of years and, as a result, we have a
limited number of workforce-dependent sites.
Our low price point makes us a very
attractive proposition to prospective members
and continues to underpin the recovery in
membership levels that we have seen.
The big seasonal period of demand for our
business continues to be January/February;
and, as a result of the pandemic, 2022 is the
DEVELOPING OUR PRODUCT OFFERING
As we emerge from the pandemic, we
see opportunity to drive performance by
restarting our refurbishment programme
with projects planned to upgrade
equipment and improve product layout.
A significant focus is on group exercise
classes - currently, take-up of our class
offering is under 5% of our membership
base and, as we have added consistency
to the classes we offer, we believe we
have the opportunity to increase this.
We have also been seeking to enhance the
digital offering to our members. For the last
two years, we have had a partnership with
Fiit to offer their premium digital classes to
members at a discount and for us to trial (in
three gyms) in-gym virtual classes using their
content. We have now extended the
arrangement with Fiit to give members access
to 200 high quality classes in The Gym
Group app. This arrangement will enable us
to offer high quality digital content to our
members for no additional charge, further
demonstrating the strong value and flexibility
we offer to our members.
first normal January/February period of
acquisition since 2020. Whilst the first two
weeks were impacted by the Omicron
variant, we have been encouraged by how
we have traded in January and February.
With membership at the end of February of
825,000 and 28 sites planned to be opened
in 2022, we are well set for a strong
recovery in our financial performance in the
year to come.
Our focus is also on attracting new
members with different characteristics from
those in our current membership base. We
believe there is an opportunity to increase
the number of females who join our gyms,
particularly by focusing on group exercise
classes. In addition, by reiterating the
significant value proposition, there is an
opportunity to attract those prospective
members who still believe that gyms are
expensive. Finally, we plan to increase the
communication around sustainability to
members as this is an area of strength for
The Gym Group and of member interest.
BRAND TRANSFORMATION
2022 will also be the year when we
complete a brand transformation project
and relaunch our brand. Over the past few
months, we have been working on a new
visual identity for our brand under the
brand name ‘The Gym Group’, where
previously we traded as ‘The Gym’. This
will drive consistency across the estate and
bring the brand name in line with our
website URL - historically we have always
driven member and non-member traffic to
thegymgroup.com. By the end of
September, all sites will have new signage
reflecting the new visual identity, and the
website and other digital collateral will be
implemented from the end of September.
By the September/October campaign, all
marketing will also be using the updated
brand. I am excited by this brand
transformation – it is a natural next step for
us as a business and we believe it will
cement our position as a modern consumer
brand in the health and fitness market.
IMPROVING COMMERCIAL
SOPHISTICATION
Now that we have expanded above 200
sites, our ability to operate effectively at scale
becomes even more important. As we
develop a truly nationwide business, we see
a particular opportunity to drive pricing and
yield from a starting position as the lowest
priced gym operator, typically c.£4 cheaper
than local competitors. The most important
part of this yield growth in recent years has
been the growth of our premium multi-site
membership, LIVE IT. This has now reached
27% of our membership, particularly helped
by the network effect of having more
locations where multi-site access is a good
option for members. As we continue our
growth path, we see the opportunity to offer
additional packages with more content in
them and to further increase yield through
price increases that we expect will more than
offset cost inflation. Our Average Revenue
per Member per Month (‘ARPMM’) in the
second half of the year was £17.60 up 5.9%
vs two years ago (H2 2019: £16.62),
demonstrating the progress we have already
made in this area.
We also see further opportunity in retention.
We know that tenure increases when
members use the gym more often and will
therefore be focusing on initiatives to ensure
that members use the gym frequently and at
least four times per month in line with our
social value goals.
11
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
chIeF eXecuTIVe’S reVIeW CONTINUED
our business is as well-positioned
as any in our sector to flourish
as the economy emerges from
the pandemic.
12
(ii) Accelerating our UK rollout
With the funds secured in July 2021 to
recommence our rollout, we have been able
to return to our historical levels of site
openings with 19 new sites opened in the
year, and we are encouraged by their early
membership growth. This included several
sites that are in target locations where we
have been looking for a while such as
Cambridge, York and Oxford. There are
further new locations for us in our pipeline for
2022. This opportunity has arisen because
we are seeing the availability of high quality
sites at good levels of rent across the country.
We now have several different formats that
we can deploy ranging from 7,000 sq. ft to
21,000 sq. ft and our openings have
reflected this range of format during the year.
We believe that this flexibility will enable us
to maximise our rollout opportunity within the
UK market and our vision is to double the
number of sites over the next few years.
In March 2022, we also agreed to acquire
three sites from Fitness First which will
enhance our presence in long-standing target
locations in London residential areas, where
we have traded well historically.
(iii) Focus on sustainability
We believe that we are leading the UK
health and fitness sector with our focus on
sustainability and have been accelerating
the work we have been doing in this area.
We undertook an extensive materiality
assessment with all our stakeholders
and from that feedback we identified the
topics that are of high importance to our
stakeholders and also had a high impact
on our business. These are the areas we
are going to focus our sustainability strategy
on in 2022 and beyond.
Our work on increasing the social value we
are generating has continued and we have
created a new KPI linked to driving social
value. Our Diversity and Inclusion working
group has made great strides towards
breaking down more barriers to fitness for
all. We are also proud to announce that we
are the UK’s first carbon neutral gym chain
and that we have committed to reducing our
2019 carbon emissions by 50% by 2030
and to being carbon net-zero by 2035, in
line with the SBTi. Our full Sustainability
Report can be found on pages 28 to 49.
people
One of our key strengths is our unique team
and culture, and we were delighted to see
a 10% increase in the overall engagement
score, to 61%, in our annual employee
engagement survey and to be recognised
by Glassdoor as number 25 in their list of
the Best Places to Work in the UK (the only
leisure business placed in the top 50).
Last year I wrote that the support of our teams
across our estate and in our central support
had been the highlight for me in a difficult
year during the pandemic. This year, I believe
that we have seen the benefits of the support
we gave our people and of a highly engaged
team. An example of that was around the time
of the ‘pingdemic’ during the summer when
our team went to extraordinary efforts to keep
our sites open. The commitment of our teams
to ensuring great member service is also
enabling us to achieve record Overall
Satisfaction (‘OSAT’) scores.
In January 2022, Mark George, who has
been with us since 2018 as Chief Financial
Officer (‘CFO’), informed the Board of his
intention to resign as CFO and Executive
Director to take up the position of CFO at
Wickes Group plc. Since joining in 2018,
Mark has evolved and strengthened the
Group’s finance function and successfully
secured new bank and equity financing to
get us through the pandemic, ensuring that
the business is well placed to deliver its
accelerated growth strategy. I would like to
thank Mark for his significant contribution to
The Gym Group and wish him well in his
future career.
We have started a search to identify and
appoint a successor to Mark, who is
expected to remain with the Group until
July 2022.
Technology
Another key enabler to building a successful
business that can operate effectively at scale,
is in our technology development. In the
second quarter of 2022, we will be
relaunching our technology platform with a
new website and content management
system. It is this development that will enable
value-driving improvements such as new
product offerings and flexibility in pricing, as
well as enhancing our Search Engine
Optimation (‘SEO’) and performance
marketing. This project will also drive new
resilience in our core systems, enabling us to
take advantage of peaks in demand.
Our business is as well-positioned as any in
our sector to flourish as the economy
emerges from the pandemic. We have a
clear set of strategic priorities that will deliver
significant shareholder value and we do so
after a good start to 2022 with strong
membership growth in January and February
despite some initial disruption from Omicron.
At the current time there is considerable
global uncertainty as a result of the tragic
events in Ukraine. However, we are confident
that our high margin, low cost model will
enable us to withstand the impact of an
inflationary environment.
Our purpose is to break down barriers to
fitness for all and we are delivering on that
goal as we spread into more communities
across the country. I am encouraged by the
start to the year that we have had and look
forward to making further strong progress in
the year ahead as we put the challenges of
the pandemic behind us.
richard Darwin
Chief Executive Officer
16 March 2022
13
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
mArKeT reVIeW
SIGNIFIcANT
opporTuNITy
IN The loW coST
Gym mArKeT
The uK health and fitness
industry has made great
strides in its recovery post-
lockdown and as the best
capitalised operator in the
most resilient segment of
the market – low cost –
The Gym Group is well-
positioned to take
advantage of growth
opportunities.
young consumers show the
highest interest levels in
returning to or joining
gyms
consumer demand
The Gym Group was founded during the
2008 financial crisis 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.
COVID-19 has made people even more
aware of the positive impact exercise has
on the immune system and general
wellbeing. Demand for gyms is highest
amongst the 16-24 and 25-34 year-olds
and, according to a recent study
by Mintel, these age groups have
become a lot more financially aware as a
result of the pandemic and are therefore
more likely to favour cost-effective gym
membership options.
The average headline rate for a monthly
membership at The Gym Group is lower
than at all of our national competitors
with the average price difference in
directly competing locations being
around £4. This demonstrates our
commitment to offering best value for
money to ever more price-conscious
consumers.
With working two to three days a week
from home expected to become the norm,
it is likely that consumers will increasingly
look for gyms that can offer facilities close
to both home and the office. With our
expansion strategy of developing clusters
in metropolitan cities across the UK over
the past ten years, we are well-placed to
satisfy the demand for multi-site access,
with our premium LIVE IT membership,
which in 2021 grew to 27.1% of our
overall membership.
39% 16–24
36% 25–34
27% 35–44
18% 45–54
11% 55–64
4% 65+
Base: 1,700 internet users aged 16+ who do not currently have a
health & fitness club membership or have frozen their membership
Source: Lightspeed/Mintel, June 2021
14
Average headline rate for a monthly
membership (December 2021)
Average headline rate (December 2021)
£19.27
2020: £18.81
The Gym Group
JD Gyms
PureGym
Average price
difference vs
Gym Group in
competing sites
£19.27
£19.96
+£4.12
£22.69
+£4.48
Everlast/Sports Direct
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.
£23.21
+£4.06
22.88
Industry supply
Following the acquisition of DW Fitness
sites out of administration, Everlast
Fitness/Sports Direct increased their
membership pricing and no longer meet
the criteria for low-cost gyms. JD Gyms
have concluded the majority of the
conversions of acquired Xercise4Less
sites with 11 sites still trading under the
original brand following the closure of
nine sites. Publicly-funded leisure centres
are under threat without further financial
support by the Government and a
number of sites have remained closed
post pandemic.
The consumer demand for high quality,
affordable and accessible gyms has been
the principal driver of the growth of the
industry since we opened the first low
cost gym in the UK in 2008. Despite the
challenges relating to the pandemic, the
UK’s low cost segment has continued to
expand in 2021 with The Gym Group
contributing 40% of new site openings in
2021, driving the wider market forward
and increasing market share to 26.7%.
Growth potential
The research consultancy Mintel expects
that private health and fitness club
revenues will recover rapidly in 2022
after enduring financial pressures as a
result of closures and restrictions in
2020 and 2021. Providing no further
lockdowns causing gym closures, Mintel
believes that the market will be one of the
fastest to fully recover within the leisure
and hospitality industry as consumers
prioritise their health and fitness following
the pandemic.
A PwC study published in February 2019
into the total market potential for low cost
gyms assesses the overall opportunity for
low cost gyms to be between 1,200 and
1,400 gyms by 2026. As at December
2021, we estimate the total number of
low cost gyms to be 756, resulting in
additional growth potential in the market
of 450–650 gyms.
market share
26.7%
2020: 24.9%
Number of low cost gyms (December 2021
PureGym
The Gym Group
énergie Fitness
JD Gyms/Xercise4Less
Trugym
24/7 Fitness
Simply Gym
Fitness4Less
Others
77
81
72
74
67
65
12
12
9
10
99
88
274
295
183
202
Growth potential
in the market
450-
650
New low cost gyms
in the UK market
by 2026
Number of sites for each company at 31 December 2020
Number of sites at 31 December 2021, shaded area shows the net growth
providing there are
no further lockdowns
causing gym closures,
it is expected that the
market will be one of
the fastest to fully recover
within the leisure and
hospitality industry
as consumers prioritise
their health and fitness
following the pandemic.
mINTel
UK HEALTH & FITNESS INDUSTRY 2021
15
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
STrATeGIc FrAmeWorK
FIT For
The FuTure
Innovative technology
and great people
enable us to operate
a high quality estate,
providing a compelling
member proposition
and sustainable and
impactful growth.
16
hIGh
QuAlITy
eSTATe
SEE STRATEGY IN ACTION
pAGeS 18-19
compellING
memBer
eXperIeNce
SEE STRATEGY IN ACTION
pAGeS 20-21
progress in 2021
progress in 2021
• We have continued to grow our gym
network with the opening of 19 new
sites in 2021 whilst continuing to invest
in our existing estate to deliver a great
member experience.
• Our adaptable model allowed us to
open sites ranging from 7,000 up to
21,000 sq.ft, enabling us to access
more locations and therefore expand
our addressable market.
• Our strong covenant has helped us
capitalise on the current distress in the
property market, enabling us to secure
a strong pipeline of high-quality assets
from which we plan to open 28 new
sites in 2022.
• Now more than ever members want
flexibility in where, how and when they
work out; with no-contract membership,
24/7 access to our gyms and online
classes available to follow at home, we
have all bases covered.
• Increasingly, members are also seeing
the benefits of our LIVE IT premium
membership, which offers access to all
of our 200+ sites, with 27.1% of our
members now signed up to LIVE IT.
• Despite having to navigate additional
restrictions in our gyms post-reopening,
by focusing on service levels our teams
delivered the highest ever member
service score.
risks
• Scale of change
• Operational gearing
risks
• Member experience
• Reputation, brand and trust
performance measure
performance measure
202
Total number of gyms
at 31 December 2021
64%
of members rated
us outstanding
(vs 183 in 2020)
(5 out of 5) for staff friendliness
INNoVATIVe
TechNoloGy
AND mArKeTING
SEE STRATEGY IN ACTION
pAGeS 22-23
uNIQue
TeAm AND
culTure
SEE STRATEGY IN ACTION
pAGeS 24-25
GroWING
SuSTAINABly
SEE SUSTAINABILITY REPORT
pAGeS 28-49
progress in 2021
progress in 2021
progress in 2021
• We demonstrated the power of our
marketing and electronic customer
relationship management (‘eCRM’)
capability in 2021 with record numbers
of new joiners after being locked down
for more than three months at the
beginning of the year.
• Our Reset and Recharge programme
focused on re-energising our teams
ahead of re-opening our gyms; and our
LeadWELL programme trained
employees on topics such as resilience,
psychological safety and financial
planning.
• We also invested in new digital
• This year we also launched our
marketing platforms to improve the
quality of our online advertising,
resulting in reduced cost per acquisition
(‘CPA’) and increased sign-ups.
• During the year we also laid the
foundations for the launch of a new
brand and a new website in 2022.
Equality, Diversity and Inclusion Pledge,
which provides clear targets and actions
for achieving greater gender and
cultural diversity representation across
our business.
• We were thrilled to be recognised by
Glassdoor as one of the top 50 Best
Places to Work in the UK and that our
colleague support programme was
awarded the ‘Most Innovative Response
to COVID-19’ at the annual
Engagement Excellence Awards.
• This year we completed a materiality
assessment with key stakeholders –
including members, employees and
shareholders – to understand which
sustainability issues were most
important to them and we’re now using
this feedback to help set priorities for
2022 and beyond.
• In 2021, we delivered £485 million of
social value in communities across the
UK with work-outs in our low cost,
accessible facilities contributing to the
improved health, wellbeing and
educational development of our
members.
• We have set ambitious targets for
reducing the carbon impact of our
business: reducing by 50% by 2030
and to net-zero by 2035.
risks
• Reputation, brand and trust
• IT dependency
• Data protection
risks
• Reputation, brand and trust
• Our people
risks
• Reputation, brand and trust
performance measure
performance measure
performance measure
55%
more re-joiners
in April–Dec 2021
versus the same period in 2019
#25
ranked company in
Glassdoor’s 50 Best places
to Work
in the UK and the only leisure
business to be listed
£485m
of social value
created in 2021
17
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
STrATeGy IN AcTIoN
hIGh
QuAlITy
eSTATe
We have continued to grow our gym
network with the opening of 19 new sites
in 2021 whilst continuing to invest in the
existing estate to deliver a great member
experience. our adaptable model
allowed us to open sites ranging from
7,000 up to 21,000 sq.ft in 2021 whilst
our rigorous standards and maintenance
regimes continue to provide a safe
environment and deliver the high
standards our members have come
to expect.
Great locations
Good relationships with landlords and our strong financial covenant
continue to enable us to secure prime locations. Be it retail parks,
office conversions or high streets, in the residential areas of cities or
in smaller towns, our adaptable format and flexibility enables us to
operate in a wide variety of locations.
The repurposing of buildings also brings a new lease
of life to sites that may have been empty for some time, providing
facilities for local communities and regenerating the area.
Leeds Headingley
Dorchester
18
SEE STRATEGIC FRAMEWORK
pAGeS 16-17
Top class facilities
Our facilities are high quality and all available at low
cost. We continue to evolve and adapt our gym
formats with design and data-driven insight to exceed
member expectations. 2021 saw us trial three new
hybrid studios combining both virtual and live classes,
making top-quality and visually immersive group
exercise accessible to all.
low carbon
sustainable development
We continue to drive forward on our sustainability
agenda, expanding the use of heat pump technology
and the development of control systems to improve
efficiency. Our new gym in Cambridge incorporates
PV solar panels and rainwater recovery for flushing of
WCs. Our gyms deliver measurable social value into
the communities they serve and we typically occupy
existing buildings, often repurposed for gym use.
Oxford Street London
Leeds Headingley
Cambridge
19
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
STrATeGy IN AcTIoN CONTINUED
compellING
memBer
eXperIeNce
As gym-goers continued to face
the challenges and uncertainty
of coVID-19 in 2021, our 24/7,
no-contract, low cost gyms offered
flexibility, value for money and a
safe and friendly environment in
which to train.
Group exercise
member satisfaction
We offer free unlimited classes to all our members and
ensure that inclusivity, motivation, hard work and lots of
fun are at the heart of every class. We have delivered
over 110,000 classes since May 2021 and continuously
train our team to ensure that the best member experience
is delivered at all times. We continue to innovate with the
launch in selected sites of our new ‘Class Collective’ range
of seven signature pre-choreographed classes delivered
by our team following specialist training – guaranteed to
take the member experience to the next level.
We measure how satisfied our members are by
gaining regular online feedback and measuring
against an Operations Satisfaction score (‘OSAT’).
Despite having to navigate additional restrictions in our
gyms post-reopening, by focusing on service levels,
our teams delivered the highest ever OSAT score with
57% of members surveyed telling us that they are
highly satisfied (5 out of 5) with our service. Our teams
are central to this and with a friendliness score of 64%
we are always aiming to deliver a friendly, welcoming
and social environment.
brilliant, lovely environment PERTH 64%
Great instructor, classes are
friendliness score
Member satisfaction survey January 2022 – Perth
20
ultimate flexibility
member app
Now more than ever members want flexibility in
where, how and when they work out. With no-contract
membership, 24/7 access to our gyms and online
classes available to follow at home, we have all bases
covered. Increasingly, members are also seeing the
benefits of our LIVE IT premium membership – which
offers access to all of our 200+ sites – with 27.1% of
our members now signed up to LIVE IT.
Improvements made to the app this year include a
complete visual redesign, upgrades to popular
features, including Gym Busyness, and the restructuring
of functionality to make it easier to find and use. These
member-facing changes have been coupled with
several performance improvements and, as a result,
the app experience has improved significantly,
resulting in higher member engagement and a record
4.7 out of 5 rating on the Apple App Store.
27.1%
members signed
up to lIVe IT
at 31 December 2021
4.7
out of 5 rating
on Apple App
Store
SEE STRATEGIC FRAMEWORK
pAGeS 16-17
21
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
STrATeGy IN AcTIoN CONTINUED
INNoVATIVe
TechNoloGy
AND
mArKeTING
We demonstrated the power of
our marketing capability in 2021
with record numbers of new
joiners as we recovered our
membership after being locked
down for more than three
months. During the year, we
also laid the foundations for
the launch of a new brand
and a new website in 2022.
Digital experience
Driving membership recovery
A primary focus in 2021 has been the redevelopment
of our online digital platform and website. The new
website, launching in Spring 2022, will enable us to
improve online merchandising, be more agile in
proposition delivery, optimise key member journeys,
deliver more content to members and scale easily to
support rapid member growth. These changes will
increase our presence in digital channels, provide an
improved joiner experience and deliver higher rates
of sales conversion.
We used our digital Customer Relationship
Management (‘CRM’) platform to capitalise on
significant appetite to return to the gym to deliver
record re-joiner numbers in 2021. By effectively
targeting our millions of former members across
multiple channels, we delivered 55% more re-joiners in
April–Dec 2021 versus the same period in 2019. We
also invested in new digital marketing platforms to
improve the quality of our online advertising and our
audience targeting, resulting in reduced cost per
acquisition (‘CPA’) and increased sign-ups.
55%
more re-joiners in April–
December 2021 compared
with the same period in 2019
22
Data-driven insight
We continued to build a powerful analytics and insight
capability in 2021. Sophisticated models and insight
are used increasingly to assess new property locations,
build membership profiles and forecasts, target
marketing spend to key audiences, make pricing
changes to maximise yield, operate our gyms more
effectively and identify trends in member behaviour,
allowing us to target communications, improve
acquisition efficiency and improve retention.
A new brand and visual identity
Having identified that brand awareness in the market
for our trading brand ‘The Gym’ was low, our task was
clear: create a new identity system to express our
brand which creates meaning and stands out. In 2022,
we will be launching a new brand identity that
represents the purpose of our business: to break down
barriers to fitness for all. At the core of our design
system, a new wordmark will bring to life our new
name – ‘The Gym Group’. To drive brand distinction
and bolster awareness, a suite of corresponding assets
will be established: a brand icon, a primary colour
palette, a custom brand typeface, iconography and a
photographic style.
SEE STRATEGIC FRAMEWORK
pAGeS 16-17
23
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
STrATeGy IN AcTIoN CONTINUED
uNIQue TeAm
AND culTure
creating new opportunities
We have continued to enjoy huge success with our
involvement in the UK Government Kickstart Scheme
which provides opportunities for 16-24-year-olds on
Universal Credit to gain employment and training. Since
inception of the Scheme, we have onboarded 182
Kickstart trainees, of which 84 completed the programme
in 2021 with 64 moving into permanent Fitness Trainer
roles. A further 58 trainees are yet to complete their
training. In November 2021, we extended our
commitment, providing a further 20 placements within
our gym support function. We are also proud to have
partnered with the Rio Ferdinand Foundation supporting
community programmes that provide young people with
valuable employability skills, training and the opportunity
to pursue a career in fitness.
84
Kickstart trainees
supported to complete
the programme in 2021
Diversity and inclusion
This year we strengthened our Diversity and Inclusion
(‘D&I’) commitments through the launch of our Equality,
Diversity and Inclusion Pledge, which provides clear
targets and actions for achieving greater gender and
cultural diversity across our business. We also
launched our Breaking Down Barriers project focused
on identifying the barriers that exist at The Gym Group
across five areas: Age, Gender, Cultural diversity,
LGBTQI+ and Disability.
our friendly, inclusive and
people-centred culture continues
to be a key part of our success.
Throughout 2021, we continued
to put our unique set of values
at the centre of decision-making,
ensuring our colleagues were
re-energised, re-connected
and re-focused post lockdown.
prioritising a holistic approach
to wellbeing and personal
development contributed to
our high engagement scores
and being externally recognised
for our innovative response
to coVID-19.
response to coVID-19 during 2021
Our colleague response focused on staying connected,
supporting mental health and encouraging learning and
development. Our Reset and Recharge programme
focused on re-energising our teams through a schedule
of weekly activities as well as training to support social,
physical and mental wellbeing ahead of re-opening our
gyms. We also launched our LeadWELL programme in
partnership with Outliers, providing employees with
bespoke training covering topics on resilience,
psychological safety and financial planning. Our overall
colleague programme was awarded the ‘Most Innovative
Response to COVID-19’ at the annual Engagement
Excellence Awards.
24
employee engagement and wellbeing
Having successfully embedded our employee
engagement surveys in 2020, we are proud to have
received an incredible 85% response rate to our 2021
survey and have seen a 10% increase in our overall
engagement score of 61%. We attribute this to
initiatives such as our Inclusive Workspace which has
reshaped our approach to work/life balance; the
introduction of our Coaching for Performance
programme facilitating effective conversations and
performance discussions; and the success of our
employee reward and recognition programme.
Glassdoor award
We are proud of our people-first approach and unique
culture and were thrilled for this to be recognised by
Glassdoor who rated The Gym Group as number 25
in their ranking of the Best Places to Work in the UK.
We were the only leisure business to be listed.
SEE STRATEGIC FRAMEWORK
pAGeS 16-17
25
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
Key perFormANce INDIcATorS (‘KpIs’)
moVING ForWArD
We use a number of financial and non-financial KPIs to measure
our performance over time. We select KPIs that demonstrate the
financial and operational performance underpinning our strategic
drivers. During the year, we added two new non-financial KPIs
(Members that visit 4+Times in a Month and Employee Engagement
Score) as these closely align with our strategic goals in respect of
our members and our people. At the same time, we removed
the Financial KPI relating to Expansionary Capital Expenditure as
we believe Group Operating Cash Flow and Return on Invested
Capital of Mature Sites are appropriate measures of investment
performance. Details on Expansionary Capital Expenditure can
be found in the Financial Review on pages 56 to 61.
Non-financial
Total Number of Gyms
+10.4%
2021
2020
2019
2018
2017
link to strategic goals
High quality estate
202
183
175
158
128
2021 performance
The total number of sites grew by 10.4%
during 2021 with 19 organic site
openings, one of which was a small
box gym.
Number of mature Gyms
+12.9%
2021
2020
2019
2018
2017
109
89
74
175
155
Definition
Mature gyms are defined as gyms that
have been open for 24 months or more
measured at the end of the year.
link to strategic goals
High quality estate
2021 performance
The number of mature gyms increased to
175 in 2021. However, due to the various
COVID-19 lockdowns, many of the gyms
that were opened in 2019 and 2020 have
yet to reach maturity in terms of financial
performance and membership levels.
Total Number of members ’000
+24.2%
members that visit 4+ Times in a month %
+8.7ppts
2021
2020
2019
2018
2017
Definition
Total number of members reflects gym
memberships at the year end.
link to strategic goals
Compelling member experience
Growing sustainably
718
794
724
578
607
2021
2020
2019
2018
2017
32.6
23.9
44.0
41.7
40.7
2021 performance
The total number of members has
increased year on year partly reflecting
the additional sites opened in the year.
Our membership number reduced to
547,000 during the lockdown. We then
saw a period of exceptional membership
acquisition immediately after opening
before returning to more normal seasonal
patterns in the second half of the year.
Definition
This is a new KPI for the Group in 2021
and is defined as the percentage of
total members that have visited the gym
4+ times in a month, calculated as a
rolling 12 month average.
link to strategic goals
Compelling member experience
Growing sustainably
2021 performance
The number of members visiting the gym
4+ times per month has increased in
2021 but remains below target due to
the COVID-19 disruption. Research
shows that people who visit the gyms
4+ times per month are more likely to
continue their membership and gain
significant health benefits from it.
Average revenue per member per month £
+2.3%
employee engagement Score
+10ppts
2021
2020
2019
2018
2017
17.60
17.20
16.02
14.89
14.41
2021
2020
2019
2018
2017
N/A
N/A
N/A
61
51
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.
link to strategic goals
Innovative technology and marketing
2021 performance
Average revenue per member per
month has increased by 2.3%, driven
by a £0.46 increase in the average
headline price and an increase in the
take-up of our premium product, LIVE IT
(from 22.5% of total members in 2020
to 27.1% in 2021).
Definition
This is a new KPI for the Group in 2021
and is calculated as the proportion of
those employees that responded
‘Strongly Agree’ to the engagement
survey questions.
link to strategic goals
Unique team and culture
* Note that in order to provide better year-on-year comparability for yield, the figures presented for 2021 and 2020 have
been adjusted to exclude the impact of UK Government-enforced closure periods as a result of the COVID-19 pandemic.
The 2021 figure is calculated for the period from July 2021 to December 2021 when all gyms were fully open and
trading had returned to normal. The 2020 figure is calculated on a site-by-site basis and excludes days where the sites
were required to be closed due to Government restrictions.
* Data prior to 2020 not available.
2021 performance
The employee engagement score in
2021 increased by 10 ppts vs 2020
with the completion rate also increasing.
This reflects the progress made in the
year in building an inclusive work
environment that has strong
relationships within teams who
recognise each other for their
commitment to The Gym Group.
26
Financial
revenue £m
+31.7%
2021
2020
2019
2018
2017
106.0
80.5
123.9
91.4
2020
153.1
5.7
2021
-10.2
2019
2018
2017
Definition
Revenue is generated from membership
fees and ancillary services such as
rental and vending income.
link to strategic goals
High quality estate
Compelling member experience
Innovative technology and marketing
2021 performance
Revenue in the year increased by 31.7%
reflecting the increased number of open
trading days compared to the prior year
(72% vs 55%). New gyms opened in
the year also contributed to the increase
in the Group revenue figure.
Group operating cash Flow £m
+£22.6m
2020
-16.3
2021
6.3
2019
2018
2017
Definition
Group operating cash flow is calculated
as Group Adjusted EBITDA Less
Normalised Rent plus movement in
working capital and maintenance
capital expenditure.
Maintenance capital expenditure
comprises the costs of replacement gym
equipment and premises refurbishment.
39.2
34.0
24.7
link to strategic goals
High quality estate
Compelling member experience
Innovative technology and marketing
2021 performance
Group operating cash flow has
increased by £22.6m as a result of the
improved profitability and working
capital benefits from resumed trading
and growth.
Group Adjusted eBITDA less Normalised rent £m
+£15.9m
Definition
Group Adjusted EBITDA Less Normalised
Rent is calculated as operating profit
before depreciation, amortisation,
long-term employee incentive costs and
non-underlying 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
link to strategic goals
High quality estate
Compelling member experience
Innovative technology and marketing
2021 performance
Group Adjusted EBITDA Less Normalised
Rent increased by £15.9m in the year
reflecting the increased site profitability
as a result of the higher proportion of
open trading days, and grant income
received, partially offset by the
investment in support functions.
Non-property Net Debt £m
-£3.2m
2021
2020
2019
2018
2017
Definition
Non-property net debt is calculated
as bank and non-property lease debt
less cash and cash equivalents.
link to strategic goals
High quality estate
Compelling member experience
Innovative technology and marketing
44.1
47.3
47.4
46.0
37.5
2021 performance
Non-property net debt has reduced
slightly as capital expenditure was more
than offset by the net proceeds of
£30.3m from the equity placing and
cash inflows from operations.
mature Gym Site eBITDA £m
+£18.6m
22.5
3.9
2021
2020
2019
2018
2017
Non-property Net Debt to Group
Adjusted eBITDA
7.74x
48.1
39.0
32.4
2020
Definition
Mature gym site EBITDA is calculated
as Group Adjusted EBITDA Less
Normalised Rent contributed by mature
sites.
link to strategic goals
High quality estate
Compelling member experience
Innovative technology and marketing
2021 performance
Mature gym site EBITDA increased
significantly in 2021 as a result of the
higher proportion of open trading days.
However, it is still below pre-COVID
levels as trading has yet to recover fully.
We expect to see the figures trending
back towards pre-COVID levels in 2022.
2021
-4.64x
2019
2018
2017
0.98x
1.17x
1.23x
7.74x
Definition
Non-property net debt to Group
Adjusted EBITDA is defined as
Non-property net debt as a proportion
of Group Adjusted EBITDA Less
Normalised Rent.
2021 performance
Non-property net debt to Group
Adjusted EBITDA has improved in
the year as a result of the return to
profitability and the improved net
debt position.
return on Invested capital of mature Sites* (%)
18%
link to strategic goals
High quality estate
Compelling member experience
Innovative technology and marketing
2021
2020
2019
2018
2018
18
18
Definition
Return on invested capital of mature sites
is calculated as Mature Gym Site EBITDA
divided by total capital initially invested in
the mature sites.
link to strategic goals
High quality estate
Compelling member experience
Innovative technology and marketing
31
30
30
2021 performance
Return on invested capital of mature sites
was 18% in 2021 as trading has yet to
recover fully from COVID-19. We expect
to see the figure trending back towards
pre-COVID levels in 2022.
* Note that in order to provide better year-on-year comparability for ROIC, the figures presented for 2021 and 2020 have
been adjusted to exclude the impact of UK Government-enforced closure periods as a result of the COVID-19 pandemic.
The 2021 figure is calculated for the period from July 2021 to December 2021 when all gyms were fully open and
trading had returned to normal. The 2020 figure is calculated to exclude those months when sites were required to be
closed due to Government restrictions.
27
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
SuSTAINABIlITy reporT
SuSTAINABIlITy AT
The Gym Group
At The Gym Group, our purpose
is to break down barriers to
fitness for all and our ambition
is to deliver this in an entirely
sustainable way, enabling people
to live healthier, more rewarding
lives within the natural balance
of the planet. We actively place
sustainability at the core of our
business and in 2021 we
advanced on this agenda by
forming a dedicated Sustainability
committee with the objective of
continuously improving our
sustainability performance.
G e N e r AT ING SocIAl VAlue
A N D m e m B erS
l B e I N G
S
e
D W e
SAFeG
DATA A
u
A
l
r
DI
N
N
G
o
p l
y
e
N
G o
u r e m
heAlTh, S A Fe T y A
oTecTIN
r
p
Good health
and wellbeing
D
c
p
u
r
I
V
S
T
o
A
c
m
y
e
r
Safeguarding
customer data
and privacy
BreAKING
DoWN
BArrIerS
To FITNeSS
For All
r
e
D
u
c
N
G
I
o
u
r
c
A
r
B
o
N
responsibility
to the
environment
e
m
I
S
S
I
o
N
S
Diversity
and equal
opportunity
Good jobs,
quality
education
and lifelong
learning
S
N
o
I
T
I
r
e
e
r
A
c
D
N
A
S
B
o
J
D
o
o
G G
D
N
o
c
&
y
A
p
r
AI
h F
p p o rTu NITIeS WIT
p r o VIDIN
o
BuIlDING A DIVerSe, I N c l u S I V e
AND eQuAl WorK p l A c e
GeNerATING SocIA l V A l u e
28
28
Even though we continued to be impacted
by the pandemic, we still enabled over
33 million visits to the gym in 2021. We
made further progress on measurement of
the social value generated by our members
exercising in our gyms, achieving
£485 million in the year. A metric designed
to drive this value has been introduced as a
key performance measure and incentive for
executive performance.
COP26 concluded in November with nearly
200 countries agreeing to the Glasgow
Climate Pact to keep 1.5°C alive. The latest
report from the Intergovernmental Panel for
Climate Change (‘IPCC’) indicates urgent
action is required if this is to be achieved.
During the year we undertook an extensive
carbon audit of our operations and supply
chain to establish a 2019 baseline carbon
footprint leading to the launch of our
Net-Zero commitment, with a target 50%
carbon reduction before 20301 and
achieving net-zero by 2035. We have also
chosen to off-set emissions on our journey to
net-zero and become the UK’s first carbon
neutral gym chain in alignment with The
CarbonNeutral Protocol.
Our internal and external stakeholders are
key to the success of our business and
following best practice set out in the Global
Reporting Initiative (‘GRI’), we conducted an
extensive materiality assessment with all
stakeholders to identify significant issues
and impacts that matter most to them,
including members, investors, suppliers
and our people.
The materiality matrix demonstrates the
findings of the assessment, identifying the
sustainability topics that are key priorities
for The Gym Group. In the diagram
opposite, we have aligned our material
topics to our priority areas. Note that
‘Safeguarding customer data and privacy’
is specifically addressed in the GRI Index.
Further information on our approach and
performance on each of these topics is
provided within this report.
1 Compared to 2019 on a like-for-like basis of operating estate.
Identifying our material topics
r
e
h
g
H
i
r
e
w
o
L
l
s
r
e
d
o
h
e
k
a
t
s
o
t
e
c
n
a
t
r
o
p
m
I
Breaking down barriers
to fitness for all
Safeguarding
customer data and
privacy
Engaging positively
with our employees
Running
our business
ethically
Upholding human
rights and
eliminating modern
slavery
Protecting our employees’
and members’ health,
safety and wellbeing
Providing good
jobs and career
opportunities
Building a diverse,
inclusive and equal
workplace
Working with
our suppliers
Investing in local
communities
Minimising our
impacts on water
resources
Running a
profitable business
Minimising the
impacts of resource
use and waste
Addressing key
climate change risks
to our business
Generating
social value
Reducing our
carbon emissions
Lower
Higher
Business impact
Very High
Need active
management
High
Actively
monitoring
Moderate
Tracking
Sustainability governance
Robust governance practices are a
fundamental foundation for a sustainable
business.
Our Sustainability Committee reports to
The Gym Group plc Board to ensure
sustainability is at the core of our business
and shares oversight of corporate
responsibility for sustainability, reviews
sustainability targets and commitments and
oversees the assessment of climate-related
risks and opportunities, including the
requirements of the Task Force on Climate-
Related Financial Disclosures (‘TCFD’).
The Committee receives reports from three
key workstreams:
• Equality, Diversity & Inclusion (‘EDI’)
• Environmental, Social & Governance
(‘ESG’)
• Health, Safety & Wellbeing
Our Board shares The Gym Group’s passion
for a sustainable business and the delivery
of affordable fitness for all. The participation
of Executive members in the Sustainability
Committee demonstrates our commitment to
integrating sustainability into the heart of our
business decisions.
The Gym Group Board
Group Sustainability committee
Sustainability Working Group
Equality, Diversity and
Inclusion Workstream
Health, Safety and
Wellbeing Workstream
Environment, Social and Governance Workstream
reporting for the 2021
financial year
We continually review and improve our
reporting processes. In 2019, we began to
align to the GRI standards for our
sustainability reporting and we have
continued to report in accordance with
these standards (Core Option). In addition,
for 2021 we have further developed our
reporting to align with the Sustainability
Accounting Standards Board (‘SASB’)
standards.
We were delighted to be a founding
member of the All-party Parliamentary
Group for ESG and look forward to
contributing to further development of the
UK’s ESG strategy.
In aligning with 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.
We have also made a submission to the
Workforce Disclosure Initiative (‘WDi’) and
the Science Based Targets Initiative (‘SBTi’).
David melhuish
Chief Development and
Sustainability Officer
29
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE
The Gym Group plc
The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
SuSTAINABIlITy reporT CONTINUED
GooD JoBS
AND QuAlITy
eDucATIoN
engagement survey
85%
participation rate
(increase of 20% from 2020)
overall level of engagement
across the business
61%
(increase of 10% from 2020)
hydrate & chat catch-ups
are fantastic to build trust
and develop the team
2021 engagement survey feedback
30
30
employment
Through our participation in the UK
Government Kickstart Scheme, we
continued to provide job placement
opportunities for 16 to 24-year-olds on
Universal Credit who are at risk of
long-term unemployment. Our first cohort
of 30 Kickstart Fitness Trainees started in
December 2020 and during 2021 we
welcomed a further 147 trainees. So far
84 have qualified as personal trainers after
completing our Kickstart programme and
we welcomed 64 as new employees.
During 2021, we further expanded the
Kickstart Scheme, introducing five new
trainees into our gym support functions with
a further 13 placements approved in
partnership with The Princes Trust. We plan
to fully participate in the government
scheme until this ceases in March 2022.
We continue to review our employee
reward and wellbeing offering. This year
we introduced a new Salary Sacrifice
Pension Scheme, a Life Assurance
Programme, an Electric Car Salary
Sacrifice Scheme, and enhanced our
Company Maternity Pay for employees.
During 2021, we further developed our
communication and engagement platform
– CORE – extending the Mental Wellbeing
Hub to include content focused on women’s
health, men’s health, and family wellbeing.
We continue to engage and discuss with
our employee forums to enable feedback
on key business decisions.
It’s fantastic to see the
Gym Group brilliantly
backing the Kickstart
Scheme – helping our next
generation of workers
really get on track and
enable them to excel in
the fitness industry.
mims Davies
Minister for Employment
Training and development
This year we launched our LeadWELL
programme in partnership with Outliers
Wellbeing. The six-week programme
included training on financial wellbeing
and psychological safety, focusing on
empowering our leadership teams and
supporting mental resilience. In addition,
we relaunched our Coaching for
Performance programme, providing a
framework for managers to assess the
performance and potential of their
teams, and facilitate effective
development and progression
discussions. We have also continued
our six-monthly talent map reviews to
establish what career development
plans are required for 2022.
182
Kickstart Trainees onboarded
since 2020
84
qualified as personal
trainers in 2021
64
as new employees
58
further trainees due to
complete programme
our approach
Our people-first culture plays a key part in
our success and over the past year, despite
the challenges, we have continued to
ensure that nurturing our people and our
culture remains a key business focus.
The materiality assessment we carried out
during 2021 highlighted that ‘providing
good jobs and career opportunities with
fair pay and conditions’ was a topic of
high importance to our stakeholders.
Throughout the challenges posed by
government restrictions over the past two
years, our priority has been to provide a
workplace where our people can thrive
personally and grow professionally. The
strength of our values and culture has
enabled us to support our people
effectively throughout this time.
One of our key focuses in 2021 has been
to safely reopen our gyms for our
members, whilst ensuring that our
employees are fully supported as we do
so. Our focus on people aligns with, and
contributes to, the United Nations
Sustainable Development Goals (‘SDGs’),
as we strive for Quality Education (SDG 4)
and Good Jobs and Economic Growth
(SDG 8).
At The Gym Group we believe it is vital to
provide regular opportunities for our people
to share their experiences, ideas and
feedback. We continued with our
engagement surveys to gain thoughts on
energy levels, recognition, and our response
to the challenges of the COVID-19 pandemic.
We achieved an 85% participation rate (an
increase of 20% from 2020) and our overall
level of engagement across the business
increased by 10% to 61%. Feedback
highlighted particular satisfaction with the
support provided for balancing life and
work, and the focus on wellbeing that is
offered by The Gym Group.
one of our key focuses
in 2021 has been to safely
reopen our gyms for our
members, whilst ensuring
that our employees are
fully supported as we
do so.
31
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
SuSTAINABIlITy reporT CONTINUED
We are delighted to
have partnered with the
rio Ferdinand Foundation
in 2021 to launch the
new Find your Future
programme.
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/modern-slavery.
We also have a detailed Anti-Bribery and
Corruption Policy, which is available to all
employees via our intranet.
In our communities
We are delighted to have partnered with
the Rio Ferdinand Foundation in 2021 to
launch the new Find Your Future
programme. This new community-focused
12-month programme commenced in
November 2021 and will create
opportunities for up to 150 young people
in South London via an employment skills
programme and the Community Sports
Leadership Award. The activities will be
delivered in youth centres across South
London and will utilise The Gym Group’s
local gym facilities for a realistic on-the-job
experience. Our teams will deliver both
practical and theory-based knowledge on
fitness, helping participants develop their
employability skills for meaningful careers
in the sports and fitness sector and the
wider world of work.
In 2022, we will formally launch Grow
Your Own, The Gym Group’s own talent
development scheme. This scheme will
provide an opportunity for those who have
completed the Find Your Future programme
and wish to start their career in the fitness
industry. The scheme will deliver further
training, education, experience and the
certifications necessary for becoming a
qualified Personal Trainer.
As our business expands, it is vital that we
prioritise providing good jobs and career
opportunities, whilst protecting our
employees’ and members’ health, safety,
and wellbeing. As our numbers increase
and teams expand, we will concentrate on
growing our own talent from within our
communities. Our Emerging Talent scheme
will be relaunched and we will continue to
gather employee feedback and adjust our
work practices accordingly, to ensure we
always put our people first.
32
OVERVIEW
STrATeGIc reporT
GOVERNANCE
FINANCIAL STATEMENTS
cASe STuDy
BuIlDING A
reWArDING cAreer
Isla mcIntosh, construction
manager, tells us about her career
journey at The Gym Group and the
incredible support she received.
I started working for The Gym Group in
Edinburgh City Centre back in 2013 as a
Personal Trainer. I love working in the
fitness industry and with my passion and
drive to develop, I naturally moved on to
an Assistant General Manager role in the
same gym. I love the company, the ethos,
and the wider team at The Gym Group.
With training and support from my
manager and regional manager, I was
promoted to General Manager at the new
Edinburgh Murrayfield Gym. During the
fit-out, I had an opportunity to be involved
with the contractors on-site, and found
managing these partnerships and the
construction aspect of the job really
interesting. Expressing my interest, I was
able to shadow project managers in their
daily job and learned more about
development practices. This led to me
successfully moving into a role within the
Property team.
Construction Manager for a little over six
months and I’m loving it! My next
educational journey is already lined up as I
am working towards becoming a chartered
member of RICS over the next few years.
To support my role, I studied a Master’s
Degree in Project Management in
Construction at Edinburgh Napier
University, which The Gym Group
supported financially. In July 2021, an
opportunity came up within the Property
team and I’ve now been in my role as
my career achievements
were only possible
with the support of
my employer.
ISlA mcINToSh
33
33
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
STrATeGIc reporT
SuSTAINABIlITy reporT CONTINUED
GooD heAlTh
AND WellBeING
Social value
+31%
in 2021 compared with
2020
70%
of social value generated in
our gyms by our members
through exercise comes
from direct NhS cost savings
and mental wellbeing
benefits to our members
Social value is a reflection
of the positive contribution
our business is making to
the communities we
operate in. It is aligned
with our purpose and with
our commercial success.
34
34
our approach
Regular physical activity benefits both the
body and mind. It can reduce symptoms of
depression and anxiety as well as
contribute to preventing and managing a
host of health conditions, including
cardiovascular diseases, cancer and
diabetes. Throughout 2021, the persistence
of the COVID-19 pandemic and the
continuation of government restrictions, has
highlighted the crucial importance of
exercise for both mental and physical
health.
Our purpose at The Gym Group is to
break down barriers to fitness for all.
Through the provision of affordable,
high-quality, safe, 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
UK Government’s vision to get the nation
active and directly contribute to target 3.4
of Sustainable Development Goal 3 –
Good Health and Wellbeing: to reduce
premature mortality and promote mental
health and wellbeing.
Staying true to our purpose, we launched a
Group-wide initiative to identify the
physical and perceived barriers that may
prevent people from either becoming
members of, or working at, The Gym
Group. This insight will inform how we
work to become ever more accessible and
is discussed on page 39, within the
Diversity and Equal Opportunity section.
The social impact of The Gym
Group
Building on our work in 2020, we once
again commissioned 4Global, a UK-based
data, services and software company, to
determine the social impact of our business
over the previous five years. This involved
using a model created by Sheffield Hallam
University that determines the social value
to communities created through regular
exercise. The methodology (see diagram
opposite) was updated in 2021 to reflect
the latest scientific research and is used
extensively by Sport England, local
authorities and the UK Government.
As a result of national restrictions, our gyms
were closed for extended periods in both
2020 and 2021, causing a significant
reduction of social value in both years.
Despite this, we were able to grow social
value by 31% in 2021 and are aiming in
2022 to exceed the £700 million
generated in 2019.
Social value generated
by The Gym Group in
the past five years (£m)
£2.5bn
700
540
410
485
370
2017
2018
2019
2020
2021
Social value generated
in 2021 (£m)
£485m
70% of the social value generated in our
gyms by our members through exercise
comes from direct NHS cost savings and
mental wellbeing benefits to our members.
As a business, we are dedicated to
generating social value and therefore have
introduced a new KPI for the Executive
Committee, with the core purpose of
driving social value. The performance
measure is linked to executive pay and is
based on the percentage of members who
visit our gyms at least four times a month
and thereby contribute to the social value
generated in our gyms. This KPI is aligned
with our members’ motivation for joining
our gyms and will be a Group-wide
initiative. Our target for 2022 is to return to
pre-COVID levels.
One of the major factors in social value
generation is the socio-economic status of
our members. Individuals from more
deprived communities are more likely to
suffer from chronic conditions and therefore
the social benefit to keeping these
members active will be more significant.
With 19 new gyms opening during 2021,
32% of The Gym Group’s estate continues
to be located in the 20% most deprived
areas in the UK – reinforcing our
commitment to tackling inactivity in
disadvantaged communities.
The Social Value calculator model
Volume of participants, frequency and duration of activity,
demographics and socio-economic profile
health
Reduction in
likelihood of
developing:
Heart disease
Breast cancer
Colon cancer
Type 2 diabetes
Dementia
Depression
Hip fractures
Back pain
mental
wellbeing
Improved life
satisfaction
Individual
development
Increased
educational
attainment
Improved starting
salaries
Social and
community
development
Reduced criminal
incidences in young
males
Improved social
capital to
communities
Social value generated
35
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
SuSTAINABIlITy reporT CONTINUED
Access to our gyms
Making gyms accessible is central to our
purpose at The Gym Group. Our network
of over 200 operating sites in the UK
affords access to 49.5% of the UK
population. Our 24/7 operation allows
members to use the gym when it suits their
lifestyle. The average monthly headline
rate of £19.27 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.
Our 2021 programme on identifying and
removing further barriers that may prevent
individuals from accessing our gyms is
described on page 39.
Safety at our gyms
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, whilst remaining functional and easy
to use. Our external health and safety
auditors deliver a consistent and
transparent review of performance at site
level, including the physical safety of
equipment and facilities, as well as audits
of our wider safety and building
maintenance systems.
Our main objective in 2021 was to
improve central visibility of health, safety
and compliance across the Group, and
produce improved data and reporting to
support ongoing, focused risk reviews. We
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 health and safety
trends. With this new set of data we can
initiate detailed risk reviews and set clear
actions which will have a positive impact
on overall accident frequencies. We aim to
reduce accident frequencies in 2022 by
focusing on areas where we see
opportunity to improve risk mitigation.
During the year we also appointed
Wakefield Council as our Primary Authority
partner to provide regulatory advice on
our health and safety management system
and liaise with other enforcing and
regulatory bodies across the UK. The
Council benefits from extensive experience
in dealing with other multi-site leisure
companies and large national
supermarkets.
In 2022, we will continue to develop our
health and safety management system with
an aim to conform to ISO 45001, the
international health and safety standard.
Certifying our management system to ISO
45001 will provide the business with
another layer of reassurance that our
health and safety processes, procedures
and culture are effective and, where they
are not, ensure they are challenged and
reviewed.
our network affords access to
49.5%
of the uK population
32%
of our estate in the 20% most
deprived areas of the uK
our average health
and safety audit
result for 2021 was
97%
our main health and
safety objective in
2021 was to improve
central visibility and
compliance across the
Group and produce
improved data and
reporting to support
ongoing, focused risk
reviews.
36
OVERVIEW
STrATeGIc reporT
GOVERNANCE
FINANCIAL STATEMENTS
3737
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
SuSTAINABIlITy reporT CONTINUED
DIVerSITy
AND eQuAl
opporTuNITy
reduced Gender pay Gap to
1.62%
Aiming for
gender balance by
50/50
2030
(2021: 29.2% FemAle)
We want our staff and
members to be reflective
of the diversity of the
local communities in
which we operate.
38
38
our approach
Equality, diversity and inclusion remain
fundamental to our culture, values and
decision-making. We are committed to
achieving our purpose of breaking down
barriers to fitness for all and ensuring that
The Gym Group is a place where everyone
is welcomed, accepted for who they are,
and has equal opportunities to succeed. To
truly achieve this, it is vital for us to
understand the barriers that exist within our
business.
Our Diversity & Inclusion strategy focuses
our actions on three core pillars: Insights,
Talents and Culture. By delivering our
strategy, we are contributing to SDG 5 -
Gender Equality, and SDG 10 - Reduced
Inequalities.
Collaboration is an important part of our
culture and we remain active members of
Women in Hospitality, Travel and Leisure
(‘WiHTL’), regularly contributing to
cross-industry discussions and initiatives.
In addition, as signatories of the Business
in the Community Race at Work Charter,
we continue with our commitment to its five
‘calls-to-action’ for businesses to prioritise
activity on race and improve equality of
opportunity in the workplace. Our Chief
Sustainability and Development Officer,
David Melhuish, was recognised as an
Inclusive Leader within the 2021 Role
Models for Inclusion Index from WiHTL
and The MBS Group, demonstrating our
leadership commitment. Colleagues from
The Gym Group were also featured within
their Women to Watch Index.
In relation to wellbeing and flexible
working, we were shortlisted for two Top
Employer Awards through WM People,
one for Best in Flexible Working and the
other for Best in Mental Health,
demonstrating external recognition of our
progress in these areas.
our five areas of diversity
Inclusion at The Gym Group
At the end of 2020, we launched our
Diversity and Inclusion Manifesto,
providing transparency on our
commitments to improving diversity,
inclusion and equality within the business.
Our Executive Committee pledged their
personal commitment and accountability
to this agenda by signing The Gym Group
Equality, Diversity and Inclusion Pledge,
which sets out the principles, ambitions,
and targets for 2021. We have made great
strides towards the actions in our 2021
pledge and have stretched our 2022
targets to highlight our longer-term goals
for improved inclusion and diversity at
The Gym Group.
On page 41 we set out where we are
currently in relation to the targets set in
2021 and our targets for 2022 to 2030.
Despite the challenges of the pandemic
and the temporary closure of our gyms, we
remained committed to staying connected,
driving inclusion and wellbeing, and
improving flexibility. We are proud to have
launched our ‘Inclusive Workspace’ for our
gym support colleagues, which has
cemented our new flexible approach to
working – creating an environment of trust,
work/life balance and a culture where
people can perform at their best.
In January and March 2021, we launched
our lockdown-focused Reset & Recharge
(‘R&R’) programme, providing employees
with weekly social and wellbeing activities
to energise and connect teams ready for
returning to the office and gyms.
In addition, we were proud to provide
colleagues with diversity and inclusion and
unconscious bias training. As we build an
inclusive and diverse workforce, we
continue to deliver communications
supporting national awareness events to
raise the profile and discussions around
inclusion and share examples of how our
teams are driving diversity and inclusion
within their gyms.
Identifying barriers
In 2021, our Chief Development and
Sustainability Officer, David Melhuish, was
appointed our Executive sponsor for the
Diversity & Inclusion Group, and has
played a crucial role in raising the agenda
for discussions and positive action on
diversity. In 2021, the group launched a
project focused on identifying the barriers
that exist for both employees and members
at The Gym Group.
Workstreams formed of colleagues from
across the business focused on identifying
the barriers that exist across five areas of
diversity: age, cultural diversity, disability,
gender and LGBTQI+. The research
identified a number of barriers and
potential solutions to support us in
achieving our purpose of breaking down
barriers to fitness for all. Key themes
identified were around Perception of the
Gym Sector, Accessibility, Gymtimidation,
Visibility & Representation, and Education
& Understanding. Moving forward, our
workstreams will continue to raise
awareness and work as ambassadors for
diversity and inclusion.
In response to some of the key barriers
highlighted, we introduced several new
policies during 2021: our Dignity at The
Gym Policy, Transgender Inclusion Policy
and Transition Action Plan, and
Menopause Policy. In addition, we have
begun delivering informal training sessions
with our gym managers to encourage
discussions on how to facilitate inclusive
environments in the gym.
For 2022, we will review the information
and recommendations collected from this
research and the insights provided will
inform our diversity and inclusion plans
going forward.
Age
cultural
diversity
Disability
Gender
lGBTQI+
39
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
SuSTAINABIlITy reporT CONTINUED
cASe STuDy
SupporT AT The
Gym Group
caroline and Natacha, and their
care worker rachel, tell us about the
support they have received since
joining The Gym Group in 2021.
‘Lockdown was an extremely tough time for
us mentally due to being stuck indoors at
home. We wanted to find fun activities in
an environment that felt safe. Since joining
The Gym Group, Paul (Assistant Manager
at Exeter Marsh Barton) has taught us how
to adapt and push through any barriers,
teaching us to try new things and
educating us and our carers on safe and
effective use of the equipment. We get fitter
and stronger week by week; we have fun
every time we visit and get the support to
push ourselves safely. The staff at The Gym
Group have been incredibly supportive
since day one, finding ways to enable us to
40
40
do things we wouldn’t normally try.
Paul’s willingness to learn and communicate
with us through sign and the level of
interaction we receive, you just wouldn’t get
anywhere else!’
– caroline and Natacha.
Rachel adds: “The care agency researched
and visited every gym in the area to assess
which gym would offer the best personal
service. After speaking to various managers
and visiting every gym in the area, Paul was
highly recommended by our staff. The
personalised attention at The Gym Group is
just one of a kind. Natacha and Caroline
get full attention every time they visit and we
have never received this level of attention
anywhere else.”
I feel stronger, fitter
and happier. The Gym
Group has given us
a place to feel safe.
NATAchA
The Gym Group gives
us something to focus
on and look forward
to each week.
cArolINe
equality, Diversity & Inclusion
pledge 2022 – 2023
We would like our staff and members to
be reflective of the diversity of the local
communities in which we operate. And
we aspire to achieve a gender, balanced
workforce by 2030 and for our senior
leaders to be 40% female by 2025. Below
we state our performance against this target
over the past three years. We will continue
to take positive action to address gender
balance and report monthly to the Board of
Directors on our progress.
We promoted the importance of capturing
ethnicity data during the course of the year
and significantly increased the employee
population identifying their ethnicity. Our
population identifying as ethnically white
has increased by 2.7% but remains below
the UK average in both gym support and
operational groups.
Gender pay gap
The fitness sector has historically struggled
to attract women which we have
addressed through our Diversity & Inclusion
Manifesto and Pledge, brand awareness,
improved standardised recruitment
practices, unconscious bias training and
targeted recruitment strategies.
We are pleased to have achieved a
reduction in our mean gender pay gap
from 5.48% in 2020 to 1.62% in 2021.
Our median gender pay gap has also
reduced since last year. The majority of our
employees undertake the same role,
and are therefore on the same pay rate,
regardless of whether they are male
or female.
ethnicity pay gap
Throughout 2021, we continued to collect
and record ethnicity data for our workforce,
and we are pleased to see that our
colleagues feel increasingly comfortable
with sharing this information with us.
For the first time, we have chosen to report
on our ethnicity pay gap. Our mean
ethnicity pay gap as of April 2021 is 16%
and our median ethnicity pay gap is 0%.
We recognise we have to make progress
in addressing this gap and during 2022
we will focus on actions to reduce this.
Our full ethnicity and gender pay gap
reports provide further detail on our figures
and the actions we are taking to address
this and are available on our website
www.tggplc.com.
performance against our 2021 eDI pledge
2021 target %
2021 actual %
15
25
30
30
16.1
27.4
29
28.4
Senior leaders
who are female
All staff who
are female
Senior leaders from uK ethnic minority groups
Senior leaders who are female
members from our operations team who
are from uK ethnic minority groups
members from our operations team who
are female
Addressing gender balance
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
2019 2020 2021
capturing ethnicity data
Gym
Support %
Gym
operations %
uK 2011
census %
1.4
72.2
0.5
6.0
10.7
9.2
8.6
69.5
1.5
5.1
9.6
5.7
5.7
65.0
3.5
67.7
86.0
3.2
7.5
6.3
12.2
3.1
7.4
6.5
11.9
1.0
2.2
7.5
3.3
41
2020
2021
2020
2021
Black, African, Caribbean Asian Mixed Other White Not disclosed
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
SuSTAINABIlITy reporT CONTINUED
reSpoNSIBIlITy
To The
eNVIroNmeNT
purchasing
100%
renewable energy
95%
of waste diverted
from landfill
carbon neutral since
2021
our responsibility to
the environment is a
significant way in which
we align and contribute
to the sustainable
development goals.
42
42
committed to achieving
NeT-Zero
carbon by 2035
50%
reduction in emissions
by 20301
climate and carbon
The world is facing a critical moment in
tackling climate change. As a multi-site
operator with over 200 gyms across the
UK, we have an obligation to our
stakeholders to minimise the impact of our
operations. Our most significant carbon
impact comes from the energy we use in
our gyms.
We are proud to have procured 100%
renewable energy since October 2019 for
all of our sites where we directly 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’)1. In 2021, the renewable fuel mix of
our power supplier is certified by EcoAct.
We acknowledge that we are on a journey
towards net-zero and are committed to
taking action to reduce our emissions whilst
understanding and managing the risks
posed by climate change.
Our carbon emissions through electrical
power consumption will reduce with the
decarbonisation of the National Grid and
natural gas will eventually become our
principal source of direct carbon emission.
We now have 13 sites operating
successfully without gas for water heating
and are continuing to roll out electric heat
pumps to obviate the requirement for gas.
We understand that as our business grows
in terms of the number of sites and
members, our emissions will also grow. This
will require a comprehensive approach
towards maintaining progress to meet our
net-zero target.
our approach
Climate change is the most pressing
challenge of our time, and beyond the
potential financial impact this could have
on our business in the longer-term, it
threatens our ability to provide accessible
fitness for all. 2021 saw COP26 conclude
with nearly 200 countries signing the
Glasgow Climate Pact, which renews their
commitment to meet the Paris Agreement
and limit global warming to 1.5°C through
collective action. We recognise the
importance of this commitment and the
individual responsibility of each and every
one of us to achieve this goal. The Gym
Group is committed to championing
environmental action and welcomes the
UK’s net zero Strategy and Ten Point Plan
for a Green Industrial Revolution.
We will take a proactive, strategic
approach to reducing our environmental
impacts by leading the way within the
health and fitness sector. We continue to
reduce our carbon emissions and
environmental impact and are investing in
the energy-efficient design of our new sites,
as well as investing in our existing estate
with schemes such as extending the use of
air source heat pumps for hot water
generation. We are also working to reduce
waste from our operations and improve the
operational efficiencies of our gyms,
however, we continue to face the challenge
of increased cleaning regimes due to
COVID-19.
Our responsibility to the environment is a
significant way in which we align and
contribute to the Sustainable Development
Goals. 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 address our carbon risk aligns
with SDG 13 – Taking Urgent Action to
Combat Climate Change.
1
Compared to 2019 on a like-for-like basis of
operating estate.
43
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
SuSTAINABIlITy reporT CONTINUED
offsetting project
location
certification
Ghana
Verified Carbon
Standard
community
reforestation,
Ghana:
The project is restoring degraded forest reserves
in Ghana with teak, indigenous trees and natural
forest in riparian buffer zones, following the principles
and criteria of the Forest Stewardship Council (‘FSC’).
The areas have been degraded due to
overexploitation, bush fires and conversion to
agriculture. The project works closely with local
farmers, some of whom are employed by the project
and others are able to grow crops, via intercropping,
within the reforested area, benefitting from the
improved soil conditions.
Ghana
Gold Standard
efficient cookstoves;
creating jobs and
transforming lives
In Ghana, more than 80% of the population use
solid fuels for cooking. The project introduces a
more efficient cookstove which cooks food more
quickly and requires 46% less fuel and is less smoky
- cutting carbon emissions and reducing exposure to
toxic fumes. Cutting fuel requirements saves families
as much as $100 annually, at the same time
protecting Ghana’s forests.
We commissioned site-level energy audits
at five sample sites in 2021 to identify
potential energy reduction initiatives that
might be applied across the estate. The
uniformity of our estate enables
opportunities to be realised in multiple
locations when identified in a typical
sample. There were no new issues
identified and we continue with our
programme of upgrading and networking
building control systems as the main driver
for energy reduction. Our strategy of
delivering energy efficiency by exemplary
design and high-quality maintenance of
services remains in place. 95% of our gyms
now have full LED lighting with the
remaining ten sites programmed for
conversion in 2022.
We have now submitted our net-zero
commitment to the Science Based Target
initiative (‘SBTi’), joined the Business Ambition
for 1.5°C and the UN Race to Zero. In line
with SBTi requirements we are developing
our pathway with a near-term target of 50%
reduction in baseline emissions before 20301,
and a long-term target of net-zero by 2035.
We have also chosen to offset emissions on
our journey to net-zero and have become the
UK’s first carbon neutral gym chain. Our
carbon offset projects are carefully chosen
and certified by internationally recognised
bodies:
The uK’s first carbon
neutral gym chain
1
Compared to 2019 on a like-for-like basis of
operating estate.
44
carbon emissions
Carbon emissions for the year ending on
31 December 2021 have been measured
as required under the Large and Medium-
sized Companies and Groups (Account and
Reports) Regulations 2008 as amended in
2013. In 2021, we further developed our
carbon auditing process to understand our
Scope 1, 2 and 3 emissions and set our
ambitious target to achieve net zero carbon
emissions by 2035. The main activity which
creates carbon emissions for The Gym
Group is the purchase and use of gas and
electricity to power our gyms. We have also
re-stated our Scope 3 emissions for 2019
and 2020 to increase the boundary in line
with 2021 data to include emissions from
water use, business travel, waste and
upstream transportation. We have used
the Greenhouse Gas (‘GHG’) Protocol
Corporate Accounting and Reporting
Standards (revised edition 2015) and
data gathered to fulfil the requirements
under the Carbon Reduction Commitment
Energy Efficiency scheme to calculate
the disclosures.
Due to the closure periods as a result of the
restrictions from the COVID-19 pandemic,
our overall energy consumption and
subsequent emissions appear lower than
previous years. However, to ensure fair
and balanced reporting we have included
comparative carbon intensity metrics of
tCO2e per trading gym and, tCO2e per
million-member visits.
Total emissions and Intensity
metrics
14,000
12,000
10,000
8,000
6,000
4,000
2,000
2017
2018
2019
2020
2019
2020
2021
400
350
300
250
200
150
100
50
Total emissions
Intensity metric tCO2e per million member visit
Intensity metric1 tCO2e per gym
Total emissions (tco2e)
Direct Emissions from Operation (Scope 1)
Purchased Electricity and Heat (Scope 2)
Indirect Emissions in Value Chain (Scope 3)
Total emissions (tco2e)
2019
2020
2021
2,035
9,544
1,629
1,602 1,282
5,895 6,420
978
1,088
13,208 8,585 8,680
% Change from base year
-35% -34%
Intensity Metric1 (tCO2e per gym)
% Change from base year
74
47
43
-37% -42%
Intensity Metric (tCO2e per million member visit)
283
349
259
% Change from base year
23%
-9%
Total consumption (kwh)
2019
2020
2021
Scope 1 (Gas)
Scope 2 (Electricity)
Scope 2 (Heat)
Total (kWh)
11,071,196
34,409,373
10,907
8,710,907
6,999,558
25,272,315 30,216,391
22,450
18,405
45,491,477
34,001,627
37,238,399
45
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
SuSTAINABIlITy reporT CONTINUED
landfill diversion 2020
landfill diversion 2021
No. of Gyms serviced
128
percentage increase
N/A
percentage of estate
70%
Total tonnage collected
443
No. of Gyms serviced
157
percentage increase
(vs 2020)
23%
percentage of estate
77%
Total tonnage collected
942
Waste
In 2021, we reduced our waste to landfill
from 10% in 2020 to 5% in 2021.
Due to a mixture of increased trading days
in 2021 compared to 2020 and new gym
openings, waste collection increased by
105%. This presents an area for
environmental performance improvement
and we will continue to drive down waste
consumption.
‘Blue roll’ is still the major contributor to the
increased volumes as we continue to
ensure the highest cleaning and hygiene
standards are maintained in our gyms at all
times. We are exploring how we can
reduce the use of blue roll through new
dispensers and the quantity of dispensers
in each gym, but only as and when it is
safe to do so. Blue roll is considered a
recyclable product but is not recyclable
when sprays are added to it. This has
resulted in a larger volume of waste
categorised as general waste with the
subsequent material being diverted to
waste-to-energy.
Landfill 10%
Recycled 54%
Waste-to-energy 34%
Anaerobic digestion 2%
Landfill 5%
Recycled 42%
Waste-to-energy 53%
Anaerobic digestion 0%
Average Tonnes per gym
Average Tonnes per gym
3.5
6.0
Water
The use of water at our sites is typically
confined to 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 acquired gyms. The facilities
were closed due to COVID-19 pandemic
restrictions and have been fully
decommissioned except at one location.
We do not operate swimming pools or
other similar ‘wet’ facilities.
During 2021, we carried out site water
auditing across all gyms to provide insight
into how water is used across the estate, to
identify wastage, and to initiate a
monitoring and targeting programme.
Whilst our data of historical water
consumption does not present a holistic
yearly picture for reporting, we now have
systems in place to collect water data and
we will report on water consumption
moving forward. This will allow us to better
monitor and manage our water
consumption and therefore reduce the
environmental impact from our resources.
46
OVERVIEW
STrATeGIc reporT
GOVERNANCE
FINANCIAL STATEMENTS
cASe STuDy
loW cArBoN
Gym eXpANSIoN
Newton Abbot Gym
Newton Abbott is a small market town
located between the edge of Dartmoor and
Torquay, with a population of just 27,000
people. Previously, this would not be a typical
location for a low cost gym operation;
however, development in our smaller format
model and improvements in operational
efficiency enabled us to open a new
8,500sq.ft gym in the town in 2021.
The property identified had been unoccupied
for several years, was in poor condition and
had a varied history, being used for car sales
and more recently by a carpet and flooring
distributor.
When we took on the building it was in a
poor state of repair, with roof leaks, damp
and some structural issues. We were able to
significantly invest into the building fabric to
bring it up to modern standards, transforming
a long-unloved dilapidated building. The
works included the removal of asbestos,
overhauling and insulating roofs, repairing a
failed wall bounding a river and resurfacing
the car park, to name a few of the enabling
works.
Once the building fabric was brought up to
standard, we then applied our ‘best-in-class’
mechanical and electrical systems, including
high efficiency air-conditioning and
ventilation systems, with smart control systems
to best manage the flow of fresh air and the
internal temperature.
Being able to reuse, reduce and recycle is key
to our approach:
• We reuse the condensate water from our
A/C systems to flush toilets;
• We reduce our energy consumption by
using high efficiency LEDs for lighting;
• We use heat created from cooling and
recycle it to heat water for showers
In addition to the repurposing and
regeneration of the building, this site has
created a facility that the community did not
previously have access to. An affordable,
accessible and high quality gym environment
that didn’t exist in the locality before,
breaking down barriers to fitness for many in
the town.
It is estimated that member participation at
the gym will create between £1.5 million and
£2.0 million of social value directly into the
community each year.
47
47
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
SuSTAINABIlITy reporT CONTINUED
TASK Force oN clImATe-relATeD FINANcIAl DIScloSureS
At The Gym Group, we are
committed to tackling both
the immediate and long-
term impacts of climate
change on our business
and the people we serve.
We are responding by embracing the
Task Force on Climate-Related Financial
Disclosures (‘TCFD’) and developing our
disclosures in line with the Task Force’s
recommendations across four thematic
areas: governance, strategy, risk
management, and metrics and targets.
The recommendations support the
identification and assessment of our
climate-related risks and opportunities;
informing how we respond to the physical
risks of climate change and the transition
risks associated with the UK progressing to
a low-carbon economy. These
recommendations will also aid our strategy
to achieve our target of net-zero carbon by
2035 with an aim of a 50% reduction in
emissions by 20301, from a 2019 baseline.
This is our first year reporting against the
TCFD disclosures and recommendations,
and we will continue to refine and develop
our approach as we progress our
understanding of our climate-related
financial risks and opportunities to meet the
recommendations in full.
We are proud to have
procured 100% renewable
energy since october 2019
for all of our sites where
we directly control the
purchase of energy.
In doing so, we are
directly contributing to
SDG target 7.2.
1
Compared to 2019 on a like-for-like basis of
operating estate.
48
TcFD governance
The Gym Group Board and Executive
Committee are fully committed to
identifying and addressing the immediate
and longer-term risks that climate change
poses to our business. In 2021, we
strengthened our approach to the
governance of climate-related risks and
opportunities through the establishment of
a new Sustainability Committee
(‘Committee’), chaired by Non-Executive
Director Wais Shaifta, reporting directly to
the Board. Climate-related risks and
opportunities will be a standing agenda
item for the Committee, and through the
Committee, regular Board level governance
of climate-related issues is provided. To
further bolster our climate change
governance, our Chief Development and
Sustainability Officer, David Melhuish, has
taken on responsibility for sustainability
and now leads the management and
oversight of the Group’s response to
carbon.
Through the Committee and our focused
ESG workstream we will incorporate
financial impact assessments of the risks
and opportunities identified.
TcFD strategy
We position the environment as a key
stakeholder alongside shareholders,
employees, members, suppliers,
communities, and lending banks. As a
business, we have pledged to become
net-zero by 2035 and submitted our
net-zero strategy to SBTi. Responding to the
risks and opportunities from climate change
and the transition to a low carbon
economy is therefore a clear priority. Our
process to managing climate risks is
embedded within ‘Responsibility to the
Environment’, a core pillar of our strategic
approach to sustainability. We are working
collaboratively with our key stakeholders to
both enhance the resilience of our business
against climate-related risks and maximise
the opportunities that arise with a transition
to net-zero.
TcFD risk management
Our risk management process has been
developed in line with our TCFD Scenario
Analysis Report, ensuring our processes are
informed by robust climate science. This
allows us to credibly identify, evaluate and
mitigate risks to the business. In line with
TCFD disclosure recommendations, we
have identified and assessed our climate-
related financial risks against two
recognised climate scenarios, known as
representative concentration pathways
(‘RCP’s’), RCP 4.5 and RCP 8.5: a 2°C
scenario and a 4°C scenario. We have
selected two scenarios, as defined by
the Intergovernmental Panel on Climate
Change (‘IPCC’), to present a sharp
contrast between potential futures and
allow for a comprehensive assessment
of risks and opportunities.
climate
scenario
rcp 4.5
rcp 8.5
Definition
The 2°C climate
scenario, represented
by RCP 4.5, describes
a pathway of moderate
to high emission
mitigation, reflecting
a transition to a lower
carbon economy.
The 4°C climate
scenario, represented
by RCP 8.5, describes
a pathway where
greenhouse gas
emissions continue
to grow unmitigated.
We assess climate-related risks through our
TCFD Risk Register, and communicate the
findings to our Management team,
Executive Committee, and the Board. The
Risk Register facilitates a robust assessment
of the current and future business impact of
climate-related physical and transition risks
and opportunities, identified through our
climate scenario analysis, over short
(2030), medium (2050), and long-term
(2080) timeframes. This allows the business
to identify and prioritise the most significant
risks and inform our planning for current
and future risk mitigation. Risks and
opportunities are reviewed regularly in line
with evolving policy, forthcoming
legislation, and the latest climate science.
metrics and targets
As a business, we are committed to
significantly reducing our carbon
emissions. We measure, monitor and
disclose the annual greenhouse gas
emissions intensity metrics per gym and
per million member visits to measure and
accelerate our progress on our target to be
net-zero by 2035. Refer to the ‘climate and
carbon’ sub-section of the ‘Responsibility to
the Environment’ section on pages 42 to
47 for further information on our disclosure
of climate-related metrics and targets.
The table below provides references to the
Annual Report and Accounts 2021 sections
containing the relevant information on the
internal processes in place to address each
of the 11 TCFD recommended disclosures.
Disclosure recommendation
Section reference
Governance
a) Describe the Board’s oversight of
climate-related risks and opportunities
Sustainability Report – Responsibility to the Environment – Taskforce on Climate-related
financial disclosures (‘TCFD governance’)
Strategic Report – Sustainability Governance
Governance – Report of the Sustainability Committee
b) Describe management’s role in assessing
and managing climate-related risks
and opportunities
Sustainability Report – Responsibility to the Environment – Taskforce on Climate-related
financial disclosures
Governance – Report of the Sustainability Committee
page
Page 48
Page 29
Page 85
Page 48
Page 85
Strategy
a) Describe the climate-related risks and
opportunities the organisation has identified
over the short, medium and long-term
b) Describe the impact of climate-related risks
and opportunities on the organisation’s
businesses, strategy and financial planning
c) Describe the resilience of the organisation’s
strategy, taking into consideration different
future climate scenarios, including a 2°C or
lower scenario
risk
a) Describe the organisation’s processes
for identifying and assessing
climate-related risks
Sustainability Report – Responsibility to the Environment – Taskforce on Climate-related
financial disclosures
Page 48
Sustainability Report – Responsibility to the Environment – Taskforce on Climate-related
financial disclosures
Page 48
Strategic Report – Strategy in Action
Sustainability Report – Responsibility to the Environment – Taskforce on Climate-related
financial disclosures
Page 19
Page 48
Sustainability Report – Responsibility to the Environment – Taskforce on Climate-related
financial disclosures
Page 48
Strategic Report - Principal Risks and Uncertainties
b) Describe the organisation’s processes
for managing climate-related risks
Sustainability Report – Responsibility to the Environment – Taskforce on Climate-related
financial disclosures
Strategic Report – Principal Risks and Uncertainties
c) Describe how processes for identifying,
assessing and managing climate-related risks
are integrated into the organisation’s overall
risk management
Sustainability Report – Responsibility to the Environment – Taskforce on Climate-related
financial disclosures
Strategic Report – Principal Risks and Uncertainties
Pages 62-68
Page 48
Pages 62-68
Page 48
Pages 62-68
metrics
a) Disclose the metrics used by the
Sustainability Report – Responsibility to the Environment – Climate and carbon
Pages 43-45
organisation to assess climate-related
risks and opportunities
b) Disclose Scope 1, Scope 2 and, if
appropriate, Scope 3 greenhouse
gas emissions and the related risks
Sustainability Report – Responsibility to the Environment – Climate and carbon: Carbon
emissions
Page 45
c) Describe the targets used by the organisation
Sustainability Report – Responsibility to the Environment – Climate and carbon
Pages 43-45
to manage climate-related risks and
opportunities and performance
against targets
49
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
STAKeholDer INFormATIoN
NoN-
FINANcIAl
INFormATIoN
The table opposite 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.
50
50
reporting requirement
Where to find further information
page
Summary of relevant policies if applicable
environmental matters
Sustainability Report
28-49
Our environmental strategy is set out on page 43.
employees
Sustainability Report
Chief Executive’s Statement
Principal Risks and Uncertainties –
Our people
28-49
08-13
65
The Group 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 on the intranet.
human rights
Sustainability Report
28-49
Modern Slavery Statement
Social matters
Sustainability Report
28-49
It is prohibited for any employee or person working
on our behalf to offer, give, request or accept any
bribe. The Group has an Anti-Bribery and
Corruption Policy which sets out the relevant
procedures, as described on page 32.
The Company also has a Whistleblowing Policy.
Our approach to diversity and equal opportunity
and promoting wellbeing are set out
on pages 38 to 41.
Our Diversity and Inclusion Manifesto can be found
on our website at www.tggplc.com
Business model
Business Model
02
An explanation of the Group’s business model
can be found on page 02.
principal risks
Principal Risks and Uncertainties
62-69
The Board has a process for considering the
principal risks as set out on page 62.
Non-Financial KpIs
Key Performance Indicators
26
The Board approves relevant KPIs for use
in the Strategic Report, as on page 26.
relationships with
suppliers, members
and others
Stakeholder Information
52-55
The Company has a number of policies and
procedures underpinning its commitment to
high standards of business conduct, which
are available to all staff on the intranet.
1 The Company’s Modern Slavery Act Statement is available on our website at www.tggplc.com.
51
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
STAKeholDer INFormATIoN CONTINUED
STAyING
eNGAGeD
52
52
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, balancing the interests
of our stakeholders. 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 COVID-19
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, some key engagement areas
in 2021, 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 and
Accounts 2021.
The Board has reserved certain matters for
its own decision and these can be found
on our website. For more information on
Board decision making, see pages 75 to 78.
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. We have
also 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 2021 and the
outcomes of engagement in the table
opposite, including where the action taken
was related to disruption from the
COVID-19 pandemic.
Who they are and
why they matter
What matters
to them
how we engaged
during 2021
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
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
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 2021, the Chair of the
Remuneration Committee
met with many of our top
shareholders to discuss their views
on the proposals contained
in the Company’s new
Remuneration Policy.
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 July
2021 in which we issued a further
11,350,000 shares to accelerate
the roll-out of new sites.
The Board did not recommend
any dividends in respect of the
financial year 2020 and does not
recommend any in respect of
financial year 2021 either.
We have made further progress
in ESG reporting by establishing
a Sustainability Committee to
further strengthen our governance
around our sustainability
commitment.
We continued to utilise our
Communications and
Engagement platform CORE
during furlough to support
effective communication and
engagement with our colleagues.
We also launched our LeadWELL
programme focused on personal
wellbeing, resilience and
empowerment.
In addition to communications
tools, our Executive Committee
regularly visited our sites (when
open) to update our employees
on key changes and to support
re-opening plans and see the
COVID-19 secure protocols in
action.
We continued to deliver regular
employee engagement and pulse
surveys, the results of which were
fed back to the Board and action
plans instigated.
Throughout 2021, we expanded
our Kickstart programme and
welcomed 147 trainees; a scheme
supported by the UK Government
to encourage 16-24 year-olds
into new employment
opportunities and training.
Our market-leading operating
model for personal trainers,
enabled us to furlough our Fitness
Trainers when the Coronavirus
Job Retention Scheme (‘CJRS’)
was in place, providing stability
for our teams.
CORE has enabled us to launch
wellbeing initiatives to support
our teams affected by lockdowns
and host a bespoke Wellbeing
Hub for our colleagues.
The outputs of the employee
engagement surveys were
considered by the Board and
Executive Committee and actions
identified.
We launched a further invitation
to join our Sharesave in 2021,
enabling employees to share
in the success of the Group.
We developed our Kickstart
programme to welcome
more colleagues, extending
opportunities for development
within our Gym Support
functions.
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 2021 dividend
position can be found on
page 60.
The Board welcomes questions
from our shareholders at our
Annual General Meeting (‘AGM’).
The arrangements for our 2022
AGM will be confirmed in the
2022 Notice of Meeting. In
addition, Penny Hughes, the
Chair of the Board, is also
available to shareholders and has
met several of the Company’s
shareholders during the year.
The Board has committed to
ongoing improvements in
sustainability reporting and
our Sustainability Report can
be found on pages 28 to 49 and
on our website, www.tggplc.com.
The Board has met regularly to
consider, oversee and review
progress on people-related
actions.
All Directors visit several of our
sites each year and did so once
sites were permitted to reopen
within COVID-19 secure protocols
to support our teams.
In November 2021, we held our
annual employee conference,
bringing together circa 500
colleagues from across the
business and enabling our
Directors to engage and energise
our teams.
The Board has appointed one of
its members as the Non-Executive
Director who is responsible for
understanding the views of the
workforce and ensuring that
these are fed into the Board’s
decision making process.
53
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
STAKeholDer INFormATIoN CONTINUED
Who they are and
why they matter
What matters
to them
how we engaged
during 2021
outcomes of
that engagement
how the Board
considers the interests
of our stakeholders
All our members have access to
free unlimited classes. In 2021, we
launched three new studios which
combine virtual and live classes.
We regularly review our member
satisfaction scores at Board
meetings.
Despite social distancing
restrictions following the
re-opening, we achieved our
highest ever member satisfaction
OSAT score of 57%.
Our COVID-19 secure protocols
were developed in consultation
with the Advanced Wellbeing
Research Centre at Sheffield
Hallam University and rolled
out to all our sites.
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. It considers
technology a strategic priority
alongside driving membership
recovery, developing our member
value proposition and securing a
high quality pipeline of great sites
for our members.
We have received positive
feedback for our practices in
engagement with our landlords
during the COVID-19 disruption
– we conducted clear and timely
discussions and demonstrated
flexibility in our approach.
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 worked with
key suppliers to develop plans in
accordance with business needs.
The Board takes a zero-tolerance
approach to bribery and
corruption. It also reviews the
Group’s Modern Slavery Act
Statement annually.
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
acting as responsible tenants.
When gyms were closed we kept
our members updated through
clear communications and we
offered ‘free freeze’ on
memberships so they didn’t
pay whilst gyms were closed.
A key part of our strategy and
business model is to ensure we
achieve high levels of member
satisfaction in our gyms. We
measure this through Operations
Satisfaction scores (‘OSAT’).
A primary focus in 2021 has
been the redevelopment of our
online digital platform and
website with the latter launching
in spring 2022. More detail on
our digital offering can be found
on pages 22 to 23.
We continue to clearly
communicate our COVID-19
secure protocols on our website
and in the gyms.
Promoting wellbeing is also a key
part of our Sustainability strategy
as set out on pages 34 to 36.
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 and it is
available to download from
Companies House.
• Value for money:
flexible, 24/7, no
contract and low cost
• Excellent service
and equipment
• Accessibility and
inclusivity
• Safe and friendly
environment in which
to work out
members
Satisfied
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
our purpose of
breaking down
barriers to fitness
for all.
• 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
our partnerships
with our suppliers
ensures 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.
54
Who they are and
why they matter
What matters
to them
how we engaged
during 2021
outcomes of
that engagement
• Being a responsible
corporate citizen
• Contributing positively
to the local community
• Being inclusive and
accessible
• Supporting local and
national charities
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 launched the Gym
Group community project aimed
at fundraising in the gym’s local
community.
We have worked closely with
local authorities to support the
safe inspection of our gyms.
In 2021, we launched our
Equality, Diversity and Inclusion
Pledge, which further enhances
our diversity and inclusion
commitments with targets focused
on improving our gender and
cultural diversity across the
business and within our senior
leadership teams.
During the year, we undertook an
extensive programme with
all key stakeholder groups to
identify and prioritise ESG
material issues.
We have aligned the outcome of
the materiality assessment to our
priority areas and published our
approach and performance on
each of these topics in this report.
• Reducing our carbon
emissions
• Protecting health
and wellbeing
• Running our business
ethically
• Minimising the impact
of resource use
and waste
• Addressing climate
change risks
how the Board
considers the interests
of our stakeholders
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 position on diversity
is set out on page 80. The Board
considers diversity to be a focus
for succession planning.
The interests and priorities of our
stakeholders on environmental
matters has been considered in
our approach to sustainability.
We have established a
Sustainability Committee of
the Board to provide strategic
direction and monitor progress
on performance against the
stakeholder priorities.
communities
Being a valuable
part of the
communities
in which we
operate is hugely
important to us.
providing safe
and affordable
facilities for
exercise creates
social value for
the communities in
which we operate
environment
We continually
seek out
opportunities
to improve our
environmental
performance,
including reducing
our carbon
emissions.
Sustainability is
at the core of
our business.
We also expanded the remit
of our Sustainability Working
Group and continued to enhance
reporting. We have also
established a Sustainability
Committee to further strengthen
governance in this area.
Our Sustainability Report details
our environmental strategy,
activity and initiatives. This can
be found on pages 28 to 49.
During the year, we provided
regular updates on the Group’s
financial performance against
Plan and also performance
against agreed debt covenants.
At the time of the equity placing
in July 2021, we discussed the
accelerated rollout plan with
our lenders and sought their
agreement to a number of
changes to the capital
expenditure and finance
lease restrictions.
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 Group
performance is
meeting agreed
covenant targets
• Regular engagement
with management to
understand business
strategy and risks
By maintaining open
communication throughout the
year, and in particular throughout
the closure period at the start of
the year, we were able to keep
the banks updated on our
expected debt and covenants
position. As a result, and in light
of the national lockdown in the
early part of the year, the
banks agreed a waiver of the
March 2021 and June 2021
covenant tests.
In July 2021, at the same time as
the equity placing, we agreed
an amendment to the Group’s
existing Revolving Credit Facility
(‘RCF’) such that certain
restrictions around capital
expenditure and finance lease
debt were relaxed to facilitate the
Group’s accelerated rollout plan.
Management holds regular
meetings/calls with lending banks
during the year to enable them to
be updated on the progress and
performance of 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.
55
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
FINANcIAl reVIeW
INVeSTmeNT
IN FuTure
GroWTh
presentation of results
This financial review uses a combination of
statutory and non-statutory measures to
discuss performance in the year. The
definitions of the non-statutory Key
Performance Indicators can be found in the
‘Definition of Non-Statutory Measures’
section on page 166. To assist stakeholders
in understanding the financial performance
of the Group, aid comparability between
periods and provide a clearer link between
the Financial Review and the Consolidated
Financial Statements, we have also adopted
a three-column format to presenting the
Group Income Statement in which we
separately disclose underlying trading and
non-underlying items. Non-underlying items
are income or expenses that are material by
their size and/or nature and that are not
considered to be incurred in the normal
course of business. These are classified as
non-underlying items on the face of the
Group Income Statement within their relevant
category. Non-underlying items include
restructuring and reorganisation costs
(including site closure costs), costs of major
strategic projects and investments,
impairment of assets, amortisation and
impairment of business combination
intangibles, profit/loss on disposal of assets
and businesses, revaluation gains or losses
on borrowings, and refinancing costs. Further
details on non-underlying items are provided
later in this report.
2021 has again been
challenging overall for
The Gym Group as a
result of the coVID-19
pandemic, but we have
navigated the challenges
well and taken a number
of actions to mitigate
the impact on our results.
mark George
Chief Financial Officer
56
5656
Summary
2021 has again been challenging overall
for The Gym Group as a result of the
COVID-19 pandemic, with Government-
enforced gym closures in the first three and
a half months resulting in the loss of almost
30% of trading days. Whilst this has had
an inevitable detrimental impact on our
overall financial performance in the year,
we have navigated the challenges well
and taken a number of actions to mitigate
the impact of the lost revenue, including
reducing costs and capital expenditure to
conserve cash. In addition, we continued to
receive UK Government support in the form
of business rates relief, furlough payments
and local authority grants.
Gyms re-opened in England on 12 April,
followed by gyms in Scotland on 26 April
and in Wales on 3 May. Following an
initial period of above-expected demand
immediately after re-opening, where we
saw strong membership recovery and an
increased average number of visits per
member, trading returned to a more normal
seasonal pattern in the second half of the
year. Despite the challenges of the
pandemic, we opened 19 new gyms in the
year, taking our total estate to 202 gyms as
at 31 December 2021. The new site
openings in the second half of the year
were funded by the £30m equity raise we
completed in July 2021. The gyms that
opened in the year are performing well.
Total number of gyms at year end
Total number of members at end of period ('000)
Revenue (£m)
Group Adjusted EBITDA (£m)
Group Adjusted EBITDA Less Normalised Rent (£m)
Adjusted Loss before Tax (£m)
Adjusted Loss for the year (£m)
Statutory Loss before Tax (£m)
Statutory Loss for the year (£m)
Group Operating Cash Flow (£m)
Free Cash Flow (£m)
Non-Property Net Debt (£m)
results for the year
Revenue
Cost of sales
Gross profit
Other income
Operating expenses before depreciation,
amortisation and impairment
Depreciation, amortisation and impairment
operating loss
Finance costs
loss before tax
Tax credit/(charge)
loss for the year attributable to shareholders
loss per share
Basic and diluted (p)
year ended 31
December 2021
Year ended 31
December 2020
202
718
106.0
35.4
5.7
(36.8)
(28.5)
(44.2)
(35.4)
6.3
2.0
(44.1)
183
578
80.5
16.8
(10.2)
(46.5)
(35.4)
(47.2)
(36.4)
(16.3)
(16.6)
(47.3)
Movement
10.4%
24.2%
31.7%
110.7%
n/a
20.9%
19.5%
6.4%
2.7%
n/a
n/a
6.8%
year ended 31 December 2021
Year ended 31 December 2020
underlying
result
£m
Non-
underlying
items
£m
–
–
–
–
(2.3)
(4.2)
(6.5)
(0.9)
(7.4)
0.5
(6.9)
106.0
(1.7)
104.3
7.3
(79.1)
(52.7)
(20.2)
(16.6)
(36.8)
8.3
(28.5)
(16.7)
Total
£m
106.0
(1.7)
104.3
7.3
(81.4)
(56.9)
(26.7)
(17.5)
(44.2)
8.8
(35.4)
Underlying
result
£m
Non-
underlying
items
£m
80.5
(2.1)
78.4
0.4
(62.7)
(48.0)
(31.9)
(14.6)
(46.5)
11.1
(35.4)
–
–
–
–
0.5
(2.5)
(2.0)
1.3
(0.7)
(0.3)
(1.0)
(20.7)
(22.5)
Total
£m
80.5
(2.1)
78.4
0.4
(62.2)
(50.5)
(33.9)
(13.3)
(47.2)
10.8
(36.4)
(23.1)
57
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
FINANcIAl reVIeW CONTINUED
underlying operating expenses before depreciation,
amortisation and impairment
Underlying operating expenses before depreciation, amortisation and impairment
are made up as follows:
Site costs before Normalised Rent
Add: Normalised Rent
Site costs including Normalised rent
Central support office costs
Long-term employee incentive costs
Less: Normalised Rent
year ended 31
December 2021
£m
Year ended 31
December 2020
£m
60.2
29.7
89.9
16.0
2.9
108.8
(29.7)
49.2
27.0
76.2
12.8
0.7
89.7
(27.0)
underlying operating expenses before
depreciation, amortisation and impairment
79.1
62.7
Site costs including Normalised Rent
Site costs including Normalised Rent increased
to £89.9m (2020: £76.2m), reflecting the
higher level of variable operating costs and
lower levels of Government support as gyms
were open for more trading days of the year.
We also invested more in marketing year on
year to stimulate demand following re-
opening. In addition, the increase in the gym
portfolio also contributed to the site costs
increase year on year.
During periods of closure, management
continued to control operating costs and take
advantage of Government support in the
form of the Coronavirus Job Retention
Scheme (‘CJRS’) and business rates relief. We
also continued to negotiate COVID-related
rent concessions with landlords. Across our
gyms and central support, we furloughed
approximately 95% of our staff during
closure periods. The total support claimed
from the CJRS during the year was £3.4m
(2020: £6.1m) and has been netted off
against staff costs within Underlying
operating expenses in the Group’s income
statement. When gyms re-opened, furlough
support ended and staff costs returned to
more normal levels.
Business rates relief amounted to £8.2m in
the year (2020: £9.6m). In addition to
significant rent deferrals, we also agreed a
further £1.6m of rent concessions in the year
(2020: £0.7m) which have been included as
a credit within Underlying operating
expenses and a reduction in the lease
liability, in line with the IASB practical
expedient for COVID-19-related rent
concessions in relation to IFRS 16 Leases.
Cleaning and maintenance costs also
increased in the run-up to and following
re-opening as we worked to ensure a safe
and welcoming gym environment for both
members and staff. Despite many of the
COVID-secure regulations falling away
following re-opening, we made the decision
to continue with many of our enhanced
cleaning protocols to keep members safe.
This has contributed to a significant increase
in membership satisfaction scores compared
to pre-COVID levels.
Normalised Rent costs, which are defined as
the contractual rents that would have been
paid in normal circumstances without any
agreed deferments, recognised in the
monthly period to which they relate,
amounted to £29.7m in the year (2020:
£27.0m). The increase year on year reflects
the growing gym portfolio.
revenue
Revenue in the year increased by 31.7% to
£106.0m (2020: £80.5m), reflecting the
increased number of open trading days
compared to the prior year (72% vs 55%).
In the periods of Government-enforced
closure, we earned close to zero revenue as
we ‘froze’ members’ accounts so they did
not pay their subscription whilst gyms were
closed. Ancillary income (e.g. vending) and
rental income from our Fitness Trainers were
also lost during these closure periods.
Whilst the number of trading days was
higher year on year, average membership
numbers in 2021 were lower than in 2020
due to the extended periods of closure during
2020 and early 2021. From a peak in
February 2020 of 891,000, membership
decreased to 547,000 by the end of
February 2021. When gyms re-opened in
April 2021, we saw stronger demand than
expected, with member numbers increasing
to 730,000 by the end of June 2021, before
falling back in line with seasonal norms to
end the year at 718,000. The ‘free freeze’
option for members was removed on
re-opening which ensured that revenue
recovered strongly from the re-opening date.
Since re-opening, we have been able to
maintain a good yield per member. The
average headline price of a standard DO IT
membership increased to £19.27 in
December 2021 compared with £18.81 in
December 2020 and the proportion of
members taking our premium LIVE IT
membership increased to 27.1% in
December 2021 compared with 22.5% in
December 2020. As a result of the
increased headline prices and LIVE IT
penetration, Average Revenue Per Member
Per Month (‘ARPMM’) in the second half of
the year was £17.60, up 5.9% on H2 2019.
cost of sales
Cost of sales at £1.7m (2020: £2.1m) was
£0.4m lower than the prior year despite the
increase in revenue and reflects improved
stock management.
other income
Other income in the year amounted to
£7.3m (2020: £0.4m) and predominantly
reflects income received under the various
COVID-related Government grant schemes.
58
Central support office costs
Central support office costs increased in
the year to 31 December 2021 to £16.0m
(2020: £12.8m) as we continued our
investment in people and technology to
ensure we emerge strongly from the
pandemic and well-equipped for growth.
Long-term employee incentive costs
Long-term employee incentive costs in the
year amounted to £2.9m (2020: £0.7m). The
increase year on year reflects the fact that
there was an adjustment in the prior year to
reverse certain historical charges following
an assessment that financial targets in
relation to the 2018 and 2019 schemes
would not be met.
During the year, the Group granted further
shares under the Performance Share Plan
(‘PSP’), the Share Incentive Plan (‘SIP’) and
the Restricted Stock Option Plan 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 met 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. The shares vest after three
years subject to continuous employment.
Underlying depreciation and amortisation
Underlying depreciation and amortisation
charges in the year amounted to £52.7m
(2020: £48.0m). The increase year on
year reflects the increased gym portfolio
as well as accelerated depreciation and
amortisation on some technology and
signage assets that will be replaced when
the new consumer website and brand are
launched later this year.
Group Adjusted EBITDA Less Normalised Rent
The Group’s key profit metric is Group Adjusted EBITDA Less Normalised Rent as the Directors
believe that this measure best reflects the underlying profitability of the business. Group
Adjusted EBITDA Less Normalised Rent is reconciled to the statutory operating loss as follows:
operating loss
Non-underlying operating items
Long-term employee incentive costs
Underlying depreciation and amortisation
Group Adjusted eBITDA
Normalised Rent
Group Adjusted eBITDA less Normalised rent
year ended 31
December 2021
£m
Year ended 31
December 2020
£m
(26.7)
6.5
2.9
52.7
35.4
(29.7)
5.7
(33.9)
2.0
0.7
48.0
16.8
(27.0)
(10.2)
Group Adjusted EBITDA Less Normalised Rent was £5.7m in the year (2020: loss of £10.2m)
and reflects the increased site profitability as a result of the higher proportion of open trading
days and grant income received, partially offset by the investment in support function costs.
underlying finance costs
Underlying finance costs in the year amounted to £16.6m (2020: £14.6m). The implied
interest relating to the lease liability under IFRS 16 was £14.0m (2020: £12.7m). Finance
costs associated with our bank borrowing facilities were £2.6m (2020: £2.0m)
comprising interest costs and fee amortisation.
Non-underlying items
Non-underlying items are costs or income which the Directors believe, due to their size or
nature, are not the result of normal operating performance. They are therefore separately
disclosed on the face of the income statement to allow a more comparable view of
underlying trading performance.
year ended 31
December 2021
£m
Year ended 31
December 2020
£m
Affecting operating expenses before depreciation,
amortisation and impairment
Costs of major strategic projects and investments
Restructuring and reorganisation costs
(including site closures)
Adjustment to net assets acquired in business
combinations
Gain on reduction of lease term
Affecting depreciation, amortisation and
impairment
Impairment of property, plant and equipment,
right-of-use assets and intangible assets
Amortisation of business combination intangible assets
Affecting finance costs
Remeasurement of borrowings
Refinancing costs
Total all non-underlying items before tax
Tax on non-underlying items
Total all non-underlying items
1.8
0.5
–
–
2.3
4.0
0.2
4.2
0.8
0.1
0.9
7.4
(0.5)
6.9
–
0.3
(0.2)
(0.6)
(0.5)
1.6
0.9
2.5
(1.3)
–
(1.3)
0.7
0.3
1.0
59
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
FINANcIAl reVIeW CONTINUED
Non-underlying costs affecting operating
expenses before depreciation, amortisation
and impairment amounted to £2.3m in the
year (2020: credit of £0.5m).
Costs of major strategic projects and
investments in the year of £1.8m includes the
costs incurred to date in respect of the brand
transformation project. Also included here are
the costs incurred in relation to the exploration
of a potential strategic investment and the costs
associated with the acquisition of the trade
and assets of a portfolio of three sites trading
under the Fitness First brand name, details of
which are included in note 30 of the
Consolidated Financial Statements.
Restructuring and reorganisation costs in the
year include the costs of restructuring the
Group’s marketing department, together with
the costs associated with the previously
announced closure of one of the Group’s gyms.
Non-underlying costs affecting depreciation,
amortisation and impairment in the year
amounted to £4.2m (2020: £2.5m) and
comprised £4.0m of site impairment in
relation to four city centre workforce-reliant
gyms that have struggled to recover post-
COVID as a result of the shift to working from
home. Also included is £0.2m of amortisation
of business combination intangibles.
Non-underlying items affecting finance costs
amounted to £0.9m in the year (2020: credit
of £1.3m) and largely reflect the
remeasurement of the Group’s Revolving
Credit Facility (‘RCF’).
Taxation
The underlying tax credit in the year was
£8.3m (2020: credit of £11.1m), representing
an effective tax rate on underlying loss
before tax of 22.6% (2020: 23.9%).
The effective tax rate on the statutory loss
before tax was 19.9% (2020: 22.9%).
earnings
As a result of the factors discussed above, the
statutory loss before tax for the year was
£44.2m (2020: loss of £47.2m) and the loss
after tax for the year was £35.4m (2020:
loss of £36.4m).
Adjusted loss before tax is calculated by
taking the statutory loss before tax and adding
back the non-underlying items. Adjusted loss
before tax in the period was £36.8m (2020:
loss of £46.5m). Adjusted loss after tax was
£28.5m (2020: loss of £35.4m).
The basic and diluted loss per share was
20.7p (2020: loss of 23.1p), and the basic
and diluted adjusted loss per share was
16.7p (2020: loss of 22.5p).
60
Dividend
As set out in the Group’s Annual Report and Accounts 2020, it is a condition of the £30m New
Bank Facility that the Company shall not declare or pay a dividend. Although this facility
currently remains undrawn, the Directors would like to continue to have access to it as necessary
and, as a result, the Directors are not proposing a final dividend in respect of 2021.
cash flow
Our focus during the extended lockdown period was to manage cash, ensuring we exited
lockdown with a good level of liquidity, ready to grow the business and take advantage of the
opportunities in the property market. During lockdown periods, the typical net cash outflow for
the Group was c.£5m per month. In open months, the Group was cashflow positive before
expansionary capital expenditure.
Group Adjusted eBITDA less Normalised rent
Rent working capital
Movement in other working capital
Maintenance capital expenditure
Group operating cash flow
Non-underlying items
Bank interest paid
Taxation
Free cash flow
Expansionary capital expenditure funded by leases
Expansionary capital expenditure funded by
other sources
Refinancing fees
Net proceeds from issue of ordinary shares
Other financial assets purchased
cash flow before movement in debt
Net increase in finance lease indebtedness
Net (repayment)/drawdown of borrowings
Net cash flow
year ended 31
December 2021
£m
Year ended 31
December 2020
£m
5.7
(2.9)
7.4
(3.9)
6.3
(2.2)
(2.0)
(0.1)
2.0
(7.2)
(21.8)
(0.1)
30.3
–
3.2
6.4
(6.0)
3.6
(10.2)
3.7
(2.4)
(7.4)
(16.3)
(0.9)
(1.8)
2.4
(16.6)
–
(21.8)
(0.4)
39.9
(1.0)
0.1
–
1.0
1.1
The Group operating cash inflow in the year was £6.3m (2020: outflow of £16.3m), reflecting
the Group’s return to profitability at the EBITDA level.
Following the introduction of Government relief measures on VAT, we deferred a £1.9m VAT
payment relating to Q1 2020 that was due to be paid in March 2020. This deferred VAT has
been repaid equally over an eight-month period, with the first instalment being made in June
2021. As at 31 December 2021, £0.2m of deferred VAT remained outstanding which was
paid in January 2022. Despite this, there was a net inflow on working capital (excluding rent)
in the year of £7.4m (2020: outflow of £2.4m) which reflects the business returning to more
normal creditor levels following the re-opening of gyms in April.
The above inflows were partially offset by a net outflow on rent working capital of £2.9m
(2020: inflow of £3.7m), reflecting the unwind of deferred rents from 2020 and a general
return to more normal rental payment patterns. As at 31 December 2021, £2.1m of rent
deferrals remained outstanding (31 December 2020: £3.8m). In addition, for a number of
sites, we were able to establish deals with landlords to extend the leases or take out a lease
break in exchange for rent-free periods; the cash flow benefit of these rent-free periods in
2021 was £2.6m (2020: £1.4m).
Fixed asset additions in respect of maintenance capital expenditure remained relatively low in
the year at £4.7m (2020: £6.1m) as we focused only on repairs required for health and safety
reasons to conserve cash where possible in the first half of the year. Adjusting for the
movement in capital creditors, the cash flow from maintenance capex was £3.9m (2020:
£7.4m). We expect expenditure on maintenance to return to more normal levels in 2022.
Fixed asset additions in respect of expansionary capital expenditure in the period amounted
to £29.4m (2020: £18.5m) and relate to the Group’s investment in the fit-out of new and
acquired gyms and technology projects. The fit-out costs are stated net of contributions
towards landlord building costs. During the year, we opened 19 new sites and completed
work on a further site which was opened in January 2022, spending a total of £24.2m. The
investment in technology in the year of £5.2m relates largely to enhancements made to the
member experience, including improvements to the Group’s website and new functionality in
the app. Adjusting for the movement in capital creditors, the cash flow from expansionary
capital expenditure was £29.0m (2020: £21.8m), including £7.2m funded by finance leases
(2020: £nil).
On 2 July 2021, the Group’s balance sheet and liquidity was further strengthened by an
equity placing. The Gym Group plc issued 11,350,000 new ordinary shares and raised gross
proceeds of £31.2m. The costs directly related to the transaction amounted to £0.9m. At the
same time as the equity placing, certain restrictions in the Group’s banking facilities around
capital expenditure and finance lease debt were relaxed.
Following the share issue, the total number of shares in issue was 177,560,022. The proceeds
of the share issue are being used to accelerate the Group’s site rollout programme.
Balance sheet
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets
year ended 31
December 2021
£m
Year ended 31
December 2020
£m
549.9
14.8
(57.4)
(355.2)
152.1
521.9
10.5
(43.1)
(334.9)
154.4
Non-current assets increased in the year by £28.0m to £549.9m due to the opening of
19 additional sites in the year which resulted in an increase in the right-of-use assets. The
deferred tax asset also increased as a result of the increased losses in the year and the impact
of the change in UK corporation tax from 19% to 25%, following substantive enactment of the
Finance Act 2021.
Current assets increased in the year by £4.3m, reflecting a higher cash balance at year end.
Current liabilities increased in the year by £14.3m as we saw a return to more normal trade
payables as sites were fully open this year end. Lease liabilities were also higher, reflecting the
new site openings.
Non-current liabilities largely comprise the long-term element of the Group’s lease liabilities
and drawn bank debt. The increase in the year of £20.3m reflects the inception of new leases
on the new sites, partly offset by £5.0m lower bank borrowings.
At 31 December 2021, the Group had Non-Property Net Debt of £44.1m (31 December
2020: £47.3m) comprising drawn facilities of £45.0m and finance leases of £6.4m, less cash
of £7.3m. Deferred rent and VAT at the balance sheet date amounted to £2.1m and £0.2m
respectively. During the year, the Group agreed with its lenders a waiver for both the March
and June 2021 covenants as a result of the extended lockdown period.
In March 2022, the Group obtained credit committee approval from its banks for certain
changes to its RCF facility. These included a one-year extension of Facility A (£70m) to
October 2024; the cancellation in full of the temporary Facility B (£30m) and replacement
with a new £10m facility to October 2024; and further relaxation of finance lease restrictions.
Going concern
The Board has reviewed the financial forecasts and downside scenarios of the Group and has
a reasonable expectation that the Group has adequate resources to continue in operational
existence for the period to 30 June 2023. As a result, the Directors continue to adopt the going
concern basis in preparing the Consolidated Financial Statements. In making this assessment,
consideration has been given to the current and future expected trading performance; the
Group’s current and forecast liquidity position; the continued positive momentum with regards
the COVID-19 situation and success of the UK booster vaccination programme; the support
received to date from our lenders and
shareholders; and the mitigating actions that
can be deployed in the event of reasonable
downside scenarios. Further detail is
provided in note 2 of the Consolidated
Financial Statements.
Trading update and outlook
In the first two months of the year,
membership levels increased by 14.9% to
825,000 at 28 February 2022, despite the
Omicron variant temporarily interrupting the
improving consumer confidence. Sites in the
North and in suburban locations are
recovering more quickly than locations in the
South and in city centres, reflecting both the
Omicron-related work from home guidance
and more disrupted working routines in those
areas. This pattern gives us confidence that,
as the normalisation of routines occurs across
the country, we will see stronger recovery in
the rest of our estate.
Taking this uneven pattern into account, we
expect that, on a like-for-like basis, mature
sites will be at pre-COVID levels of revenue
per month by Q4 2022 and higher in 2023.
This will be driven by a combination of the
momentum in membership numbers and
price increases in 2022 as we seek to
optimise revenue through yield management,
whilst retaining price leadership in the
market. In the current inflationary
environment, we are seeing inflation in our
operating cost base which is expected to be
4-6% overall (driven notably by a c. £2m
increase in utility costs in the second half).
Whilst these increases will not be fully offset
through price rises and operational efficiency
in 2022, we expect that by 2023 they will be
offset as the full benefit of the price rises starts
to come through.
We plan to open 28 new sites in 2022, of
which 20 leases have already been
exchanged. Maintenance capital expenditure
is expected to return to more normal levels of
6-7% of revenue (c.£12m) in 2022 in order
to maintain our high quality gym experience;
and expenditure on technology capital
expenditure is expected to be c.3% of
revenue. The new technology platform that
will be launched in Q2 is expected to drive
online conversion and member experience.
The brand transformation project, the rollout
of which is expected to commence in spring
2022, will increase brand awareness and
marketing effectiveness and will require a
£7m one-off investment in 2022 (of which
£5m will be capital expenditure).
mark George
Chief Financial Officer
16 March 2022
61
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
prINcIpAl rISKS AND uNcerTAINTIeS
mANAGING
our rISK
our robust risk
management process is
integral to delivering the
Group’s strategic and
operational objectives.
Approach to risk management
The Board and senior management take
very seriously their responsibility for risk
management and internal controls, and for
reviewing their effectiveness at least
annually. An effective risk management
process balances risk and reward and is
dependent on the judgement of the
likelihood and impact of the risk involved.
The Board has overall responsibility for
ensuring there is an effective risk
management process in place which is
designed to identify the principal risks that
the business faces and to provide
reasonable assurance that they are fully
understood and managed.
risk appetite
The Gym Group seeks to optimise a high
level of return whilst achieving appropriate
risk versus reward performance in line with
our growth strategy. Our commitment to
delivering a compelling member
experience means that we have no
appetite to lose our price competitiveness
or our commitment to operational
excellence. We are willing to accept the
risk of partnering with third parties to
deliver our core business activities.
However, contracts and relationships with
critical suppliers must be well monitored,
value for money and regularly reviewed. In
addition, third parties must comply with
appropriate regulatory and ethical
standards.
We seek to provide a great place to work
and balance costs and risks to ensure our
colleagues are engaged and have the
capability to deliver our strategy. We have
no tolerance for harm (physical or mental)
to individuals and actively promote
diversity and inclusion. We also have no
appetite for the loss of, or otherwise
unauthorised or accidental disclosure of,
member or other sensitive data and no
appetite to knowingly breach the spirit or
letter of the laws that apply to us. In areas
of uncertainty, we will have a robust
justification and clear rationale for the
choices we make. Where possible, high
priority projects must be delivered on time,
to budget, to expected quality and in a
way that safeguards the wellbeing of our
colleagues working on the project.
However, cost overruns and delays will
sometimes be tolerated to achieve the
desired outcome.
risk management process
The Group’s risk management process is
designed to measure, evaluate, document
and monitor risks within all areas of the
business.
Each functional area of the business
maintains an operational risk register in
which senior management identifies and
documents the risks that their business
area faces. A review of the functional risk
registers is performed at least annually
by the Senior Management Team (‘SMT’)
– made up of the Executive Committee
and other senior management - and by
the Audit and Risk Committee (on behalf
of the Board).
62
In addition, the Board and SMT also
consider and identify strategic risks at least
annually – i.e. those risks that they believe
would have a significant impact on our
ability to achieve our strategic goals.
The Group principal risk register is made
up of those strategic risks (top down) and
functional risks that are believed would
have the greatest impact on our operations
(bottom up).
Each risk is evaluated against three criteria
with equal weighting to arrive at an overall
score:
• likelihood –
the likelihood of occurrence.
• Financial impact –
the financial implications.
• control environment –
the strength of controls mitigating
the risk.
In assessing the risks, consideration is given
to ‘what can go wrong’, i.e. what could
make the risk become realised. For each
risk identified, current and future mitigations
are developed and documented.
Key roles and responsibilities
The roles and responsibilities for designing, monitoring and operating the system of risk management are set out below.
Board
Audit and risk
committee
Senior management
Team (‘SmT’)
Functions and
employees
Third line
of defence
Second line
of defence
First line
of defence
• Has overall responsibility
for strategy, governance,
performance, internal
control and risk
management
• Monitors and reviews
the overall effectiveness
of the Group’s system
of internal control and
risk management
• Sets the “tone” and
• Makes recommendations
culture for managing
risk and embedding risk
management controls,
providing strategic
direction on the
appropriate balance
between risk and reward
to the Board for
improvements or
developments
• Defines and reviews the
Group’s risk appetite
• Promotes and supports
the embedding of risk
management throughout
the business
• Ensures there is active
management of identified
and emerging risks
• Formally reviews the
functional and strategic
risk registers on a regular
basis
• Manage day-to-day risk
in their own areas guided
by Group policies,
procedures and control
frameworks
• Identify and report on
functional risks to the SMT
and ensure mitigations
are in place
• Deliver the actions
associated with
managing risk
• Monitors compliance
with internal control
systems and oversees
the external audit
• Reports to the Audit
and Risk Committee
on the internal control
environment
• Ensures the most
significant risks facing
the Group are properly
managed
• Evaluates the risk
implications of
planned investments
principal risks
The Board and Senior Management Team
have identified nine principal risks which
are set out below and on the next pages.
These are the risks 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 our 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.
For each of the principal risks set out
below, we have included a link to the
Group’s strategic priorities, movement in
risk trend and examples of relevant controls
or mitigating factors. Those principal risks
which have been included in the
assessment of the Group’s long-term
viability have also been highlighted.
risk heat map
h
g
H
i
y
t
i
l
i
b
a
b
o
r
p
m
u
i
d
e
M
w
o
L
Key
7
4
3
6
5
8
Low
Medium
Impact
1 Significant business interruption
2 Operational gearing
3 Member experience
4 Trading environment
5 Our people
6 Information technology dependency
7 Scale of change
8 Data protection
9 Reputation, brand and trust
2
1
9
High
63
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
prINcIpAl rISKS AND uNcerTAINTIeS CONTINUED
Key
Risk movement in 2021:
Risk increase
No change
Risk decrease
V
Included in Viability
assessment, see page 69
principal
risk
Description
and impact
mitigations
and controls
This risk remains highly relevant today
despite the significantly reduced likely
impact on operations of the coVID-19
pandemic.
Other causes of significant disruption or
widespread closure of our estate include, for
example:
• A major health scare in relation to gym usage.
• The failure of a key supplier, impacting
our ability to operate our gyms.
• Climate change resulting in an increase in the
likelihood and severity of environmental disasters
such as storms or droughts.
Given the relatively fixed cost base of the Group,
any prolonged period of closure would lead to a
decrease in membership and substantial loss of
revenue and profitability which could in turn lead
to a material uncertainty in the Group’s ability to
continue as a going concern.
The high operational gearing of the
business, as a result of the largely fixed
cost base, limits the number of corrective
actions that could be made to mitigate
any underperformance in membership
numbers, which could adversely impact
profitability.
This was evidenced during the COVID-19 lockdowns
which caused a significant drop in revenue which
was only partially mitigated by cost management
measures.
Failure to provide members with a
high quality product and service could
result in a loss of membership and
reputational damage.
In addition, the confidence of prospective members
being in a gym environment has been impacted
by concerns over COVID-19 and other anxieties.
Whilst confidence is increasing, the return to pre-
COVID levels of membership may not take place
immediately.
A decrease in membership numbers as a result
of a fall in actual or perceived customer service
or confidence would adversely impact revenue
and profitability.
1
Significant
business
interruption
V
2
operational
gearing
V
3
member
experience
64
Strategic
link
High quality
estate
Compelling
member
experience
Growing
sustainably
• Business continuity procedures and risks are
monitored and refreshed regularly.
• Management has identified proven measures
to preserve cash and reduce discretionary spend
during periods where all, or a large proportion
of, the Group’s sites are closed, and is able to
re-open quickly to minimise revenue loss as
demonstrated during the COVID-19 lockdowns.
• A review of all key suppliers has been undertaken
and plans are being put in place to mitigate critical
supplier failure.
• As part of our response to the TCFD
recommendations, we have reviewed the risks
of climate change on our business and identified
adaptation action required. Further information
can be found in the Sustainability Report on
pages 28 to 49.
• Monthly monitoring and reforecasting of business
performance at site level.
High quality
estate
• Active yield management on a gym-by-gym basis.
• Regular financial management by the Executive
Committee and the Board.
• Management has identified proven measures to
reduce operating costs, preserve cash and reduce
discretionary spend where necessary.
• Option to slow down expansion to preserve cash.
• During COVID-19 lockdowns, government support was
taken in the form of business rates relief and wages
support for furloughed staff.
• Continue to monitor gym utilisation and member
satisfaction scores through enhanced monitoring
and feedback processes.
Compelling
member
experience
• Ongoing review of equipment usage and appropriate
investment in repairs and maintenance to ensure
we meet member requirements.
• Continue to explore further innovations to improve
the member experience.
• Enhanced cleaning and sanitation protocols remain
in place to reduce the risk of COVID-19 transmission
and increase member confidence.
• Gym ‘busyness’ tracker helps nervous members
to visit at quieter times.
• Strong member communication plan in place which
focuses on our commitment to COVID-19 cleanliness
protocols (#safewithus), the community, overcoming
anxiety to exercise, and tackling the reasons for
increased ‘Gym-timidation’.
principal
risk
Description
and impact
mitigations
and controls
4
Trading
environment
V
5
our people
V
Strategic
link
High quality
estate
Compelling
member
experience
We operate in a competitive market
during a time of economic uncertainty,
primarily driven by the coVID-19
pandemic. The speed and scale of
recovery post-coVID is uncertain, so
we need to respond appropriately
to external market conditions whilst
maintaining focus on delivering our
strategic objectives.
During these uncertain times, members may
choose to cancel their membership due to financial
hardship, impacting revenue and profitability.
• We are very well placed to operate successfully in
a challenging economic environment as we are one
of the lowest priced gym operators in the UK market
with an average monthly subscription 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.
• We continue to combine our low cost operating model
with innovative technology and scalable infrastructure,
to ensure we can retain price leadership.
• We continue to focus on choosing the best sites in a
geographical area.
• We continue to invest in the member proposition.
The success of the business is dependent
on talent attraction, development and
retention, as well as a healthy culture
and focus on wellbeing.
A lack of experienced and motivated staff will have
a detrimental impact in all areas of the business,
from operations to central functions.
Increased demand and competition for employed
gym staff could impact on our ability to support the
gyms and deliver a good member experience.
Lack of adequate succession planning and
dependency on a small number of key staff could
result in loss of knowledge and weakening of
supplier relationships, which in turn could impact
operational performance.
• The Group uses a variety of tools to attract, retain and
motivate staff at all levels of the business, including:
Unique team
and culture
– Competitive remuneration and benefits packages
– Opportunity to own shares in the Company
– Opportunities for training and progression
– Short, clear reporting lines
– Succession planning
– Engagement surveys providing staff with the
opportunity to provide feedback and ideas
– Launched e-learning platform and internal
communication and recognition platform, CORE
– Kickstart and ‘Grow your own’ PT programmes
– Employee forums.
• Wellbeing Programme and Wellbeing Hub in place.
• Employee Assistance Programme providing 24/7
telephone counselling service.
• Employee Diversity and Inclusion Group.
• Growth of the central functions and changes to the
way we run the business are reducing dependencies
on key individuals by spreading knowledge more
widely.
65
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE
The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
prINcIpAl rISKS AND uNcerTAINTIeS CONTINUED
Key
Risk movement in 2021:
Risk increase
No change
Risk decrease
V
Included in Viability
assessment, see page 69
principal
risk
Description
and impact
mitigations
and controls
• Our primary data systems are hosted by specialist
hosting providers 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 backed
up regularly 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.
• Regular programme of load testing on critical
member-facing platforms.
• Appropriate project governance in place for all
significant projects.
• Project timelines reflect complexity and include
contingency and staged deliveries to reduce risk.
• Third party consultancies are engaged to support
and advise our internal resources with these
projects where appropriate.
• Internal resources are regularly reviewed and
increases implemented where appropriate (e.g.
additional and/or dedicated team members in
Property Acquisition, Estates, Technology and
Marketing added this year).
• All potential new site openings and related
financial assumptions are reviewed by the Executive
Committee prior to sign-off.
• Our highly experienced Property team is focused
on site selection and sourcing the best deals to
deliver a strong pipeline.
• The diversity of our operating model helps to
penetrate town and small town market locations.
• The business continues to adhere to a strict site
selection process to ensure all sites selected have
met current criteria and all site appraisals are
thoroughly reviewed by the Executive Committee
prior to instructing solicitors.
• We continue to monitor and investigate all M&A
opportunities to supplement organic site rollout.
• Should an acquisition take place, due diligence
is performed proportionately based on the scale,
price and perceived risk of the acquiree.
6
IT 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.
In addition, innovation introduced as part of our
re-opening plan post-COVID (including the gym
‘busyness’ tracker and contactless entry), has
fundamentally changed the digital relationship with
members and the volume of digital interaction.
Whilst this is a long-term opportunity, it has
introduced additional load and complexity to our
member-facing technology platforms.
Disruption to our critical IT systems could negatively
impact member experience and/or our ability to
collect revenue.
The business is working on a number
of significant projects in relation to
technology and branding, as well as the
accelerated site rollout plan.
In addition, we may consider inorganic expansion
as opportunities arise.
All of these could see resources stretched and
distracted from performing their core roles. There is
also the risk that projects are not delivered on time
or on budget or that they do not deliver what they
set out to, resulting in business interruption and/or
financial loss.
In addition, a change in market conditions and/
or increased competition for sites could lead to
site scarcity or sub-optimal site selection. A lack
of, or significant increase in the cost of, available
resources (manpower and materials) could also
delay the execution of the rollout plan and/or
lead to sub-optimal financial returns and under-
performance against our growth plans.
7
Scale of
change
V
66
Strategic
link
Innovative
technology
and marketing
Compelling
member
experience
High quality
estate
Compelling
member
experience
Innovative
technology
and marketing
Unique team
and culture
principal
risk
Description
and impact
mitigations
and controls
Strategic
link
8
Data
protection
9
reputation,
brand
and trust
The Group holds business critical and
confidential information electronically.
A breach of security or data protection
regulations as a result of unauthorised
access, loss or disclosure of this
information could lead to legal claims,
regulatory penalties, disruption
of operations and/or reputational
damage.
Data protection legislation brings potentially wide-
reaching effects and consequences for all business,
with penalties for breaches attracting fines of up to
4% of annual turnover, or €20million – whichever
is the higher.
The Gym Group brand is built on trust,
inclusion and strong sustainability
credentials.
A health and safety or other serious incident in
any of our gyms or an inappropriate social media
post by a member of staff which is interpreted as a
Gym Group view, could have a widespread impact
on our brand and reputation, leading to loss of
membership.
In addition, in a year when we are transforming
and relaunching our brand, there is a risk that the
new brand is not adopted successfully or that the
project does not deliver what it set out to do.
• The Group’s networks and systems are protected by
firewalls, security software and secure passwords.
• All sensitive data is captured and presented using
Innovative
technology
and marketing
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.
• Data Protection Manager in place to oversee and
optimise our control environment in this area.
• Our Group policies and procedures set out
the expectations and behaviours that enable
all colleagues to make the right decisions and
communicate appropriately.
• We listen to our members and stakeholders as
part of our communication and engagement
programmes. We reflect their needs in our plans,
which include health, community, climate and
sustainability initiatives.
• We have a robust business response plan in
place to deal with brand and reputational issues,
including the retention of a specialist PR agency
and media training for key Executives.
• We have appropriate project governance and
timelines in place and the use of both dedicated
internal resources and specialist third party
consultancies to support.
Innovative
technology
and marketing
Compelling
member
experience
67
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
STrATeGIc reporT
prINcIpAl rISKS AND uNcerTAINTIeS CONTINUED
changes in principal risks in 2021
In 2020, ‘Regulatory’ risk was included as
a Principal risk. However, the Board
believes that improvements in internal
processes and controls, as well as stability
in the external regulatory and legal
landscape, has resulted in this risk no
longer being considered a Group principal
risk by the Board.
In addition, ‘Competition’ risk in relation to
competitor pricing was also separately
included in 2020. However, the Board
now believes that the likelihood of irrational
competitor pricing decisions has reduced
such that this no longer meets the definition
of a Principal risk.
In both cases, whilst these are no longer
included in the Group’s Principal risks, we
do continue to monitor them and ensure
appropriate mitigations are in place as
part of our ongoing risk management
process.
Other changes from 2020 include the
replacement of ‘Organic rollout’ with the
broader risk around ‘Scale of change’ and
the inclusion of ‘Reputation, brand and
trust’ reflecting the increasing use of social
media in all aspects of society.
risks and uncertainties relating to
coVID-19
The impact of COVID-19 and resulting risks
continued to be a significant feature in
2021 with gyms closed for the first three
and a half months of the year. Whilst the
business has been able to trade largely as
normal for the last few months and the
likelihood of further lockdowns becomes
ever more remote, we do continue to
monitor developments and guidance
around the pandemic and our priority
remains the safety of our staff and
members. In addition to the direct impact
of COVID-19 and specifically periods of
closure, there remains some uncertainty
about the longer-term economic impact of
the pandemic and resulting government
actions which we have sought to capture in
the ‘Trading environment’ risk above.
emerging risks
In addition to the principal risks set out in
the previous pages, the Senior
Management Team and Board also
considered emerging risks. These are risks
that, whilst not currently believed to be
principal risks to the Group, are clearly
important to us and could have a
significant impact on the ability of the
business to fulfil its strategic objectives in
the future.
Emerging risks identified include climate
change and sustainability, and
relationships with key suppliers and
partners. The potential impact of these risks
cannot yet be quantified but mitigations
have been identified and actions are in
progress to address these risks. More
information on climate and sustainability
are included in the Sustainability Report on
pages 28 to 49.
Going concern
In assessing the going concern position
of the Group for the year ended
31 December 2021, the Directors
have considered the following:
• the Group’s trading performance in the
second half of 2021 and throughout the
traditional January and February 2022
peak period;
• future expected trading performance to
June 2023 (the going concern period),
including membership levels and
behaviours;
• the Group’s site rollout programme;
• the latest situation and UK Government
guidance with respect to the COVID-19
pandemic; and
• the Group’s financing arrangements and
relationship with its lenders and
shareholders.
Following the re-opening of gyms in April
2021, trading in the second half of 2021
showed total membership increasing by 31%,
from 547,000 at the end of February 2021 to
718,000 at the end of December 2021.
Trading in the first two months of 2022 which
is traditionally the peak period for gym
memberships, has been strong, with
membership numbers at the end of February
2022 reaching 825,000.
The Directors believe that the current trading
performance, together with the COVID-
impacted commercial property market,
provide the Group with a unique opportunity
to accelerate growth and gain market share.
The Directors are now focused on delivering
that opportunity. We opened 19 new gyms
in 2021 which are performing in line with our
expectations, and have plans to open a
further 28 in 2022.
To facilitate this accelerated growth, on 2 July
2021, the Group raised additional financing
in the form of an equity placing, which raised
net proceeds of £30.3m. In addition, certain
restrictions in the Group’s banking facilities
around capital expenditure and finance lease
debt were relaxed.
As at 31 December 2021, the Group had
Non-Property Net Debt (including finance
leases) of £44.1m and £62.3m of
headroom (calculated off bank debt less
cash) under the £100m Revolving Credit
Facility (‘RCF’) (reducing to £75m in March
2022 before increasing to £80m in May
2022 and maturing in October 2024).
Until June 2022, the RCF is subject to
quarterly financial covenant tests primarily
relating to the performance of the Group
against agreed targets for Group Adjusted
EBITDA Less Normalised Rent. From June
2022, the covenants consist of quarterly
tests on leverage (net debt to Group
Adjusted EBITDA Less Normalised Rent),
fixed charge cover (Adjusted EBITDAR to
Net Finance Charges and Normalised Rent)
and minimum liquidity.
The Group’s base case forecast for the
period to 30 June 2023 anticipates
continued recovery of membership and
robust yields, together with the successful
execution of the accelerated rollout plan.
Under this scenario, all financial covenants
are passed with a significant level of
headroom and the Group can operate
comfortably within its financing facilities.
68
Whilst the viability review has considered
all the principal risks identified by the
Group, the Directors have concluded that
the risks that would most materially threaten
the Group’s growth drivers, future
performance, solvency or liquidity were
significant business interruption,
operational gearing, our people and scale
of change. Severe but plausible downside
scenarios based on these risks were
therefore created against which liquidity
and debt covenant headroom analysis was
performed. The Directors considered the
fact that the Group’s RCF facility is currently
expected to expire in October 2024 and
concluded that there is a realistic prospect
that this will be extended to cover the
whole of the viability assessment period.
The downside scenarios included
modelling a severe but plausible decline in
membership numbers vs the base case
plan; a significant increase in employee
and utilities costs over and above that
included in the base case plan; and a
severe slowdown in the site rollout plan.
Management also performed a reverse
stress test in which a further, more severe
and prolonged decline in member intake
was modelled. In both the downside
scenarios and the reverse stress test
scenario, mitigating actions were modelled,
including moving to a minimum level of
maintenance capital expenditure, reducing
discretionary expenditure in order to
preserve cash and a deliberate slowing
down or temporary cessation of the rollout
programme.
Having concluded the above viability
assessment, the Directors have a
reasonable expectation that the Group will
be able to continue in operation and meet
its liabilities as they fall due over the period
to 31 December 2024.
The Directors have considered a downside
scenario which anticipates a slower recovery
in which membership numbers only return to
88% of pre-pandemic levels (December 2019)
by the end of the going concern period.
Under this scenario, all financial covenants
continue to be passed and the Group
continues to operate within its financing
facilities.
The Directors have also considered a reverse
stress test scenario that modelled the impact of
a significant downturn in trading and resulting
drop in membership numbers. Mitigating
actions were also modelled including moving
to a minimum level of maintenance capital
expenditure, reducing discretionary
expenditure in order to preserve cash and a
deliberate slowing down or temporary
cessation of the rollout programme. In this
scenario, the number of new members each
month would have to decline by 26%
compared to the base case (the equivalent of
membership reducing to 82% of the February
2022 closing membership number) before the
fixed charges cover covenant would be
breached in December 2022. However, the
Group would remain within its liquidity limits.
In the event of a reverse stress test scenario, the
Directors would introduce additional measures
to mitigate the impact on the Group’s liquidity,
covenants and cash flow, including: (i) further
reductions in controllable operating costs,
marketing and capital expenditure;
(ii) discussions with lenders to secure additional
debt facilities and/or covenant waivers;
(iii) deferral of, or reductions in, rent payments
to landlords; and (iv) the potential to raise
additional funds from third parties.
The Directors believe that the success of the
UK’s booster vaccination programme and
the fact that all sectors of the economy
remained open for business during winter
2021/22, despite the recent Omicron
outbreak, are strong indicators that further
prolonged periods of enforced closure are
highly unlikely. In addition, the Group has a
very good relationship with its lenders who
have been supportive throughout the
pandemic. The lenders understand the
Group’s business model, our significant
profit and cash generation in months when
gyms are fully open, and our relatively low
gearing. As a result, in the unlikely event
there was another national lockdown, the
Directors believe that the banks would
continue to support the Group with covenant
flexibility in the form of waivers or
amendments, as they have done on a
number of occasions during previous
lockdown periods. The Directors therefore
consider that the combination of a lockdown
and a subsequent lack of flexibility from the
banks is remote.
Conclusion
The Board has reviewed the financial
forecasts and downside scenarios of the
Group and has a reasonable expectation
that the Group has adequate resources to
continue in operational existence for the
period to 30 June 2023. As a result, the
Directors continue to adopt the going
concern basis in preparing these
consolidated financial statements. In
making this assessment, consideration has
been given to the current and future
expected trading performance; the Group’s
current and forecast liquidity position; the
continued positive momentum with regards
the COVID-19 situation and success of the
UK booster vaccination programme; the
support received to date from our lenders
and shareholders; and the mitigating
actions that can be deployed in the event
of reasonable downside scenarios.
Viability
As stated above in the going concern
assessment, the Directors have a
reasonable expectation that the Group has
adequate resources to continue in
operational existence for the period to
30 June 2023. However, in accordance
with provision 31 of the UK Corporate
Governance Code 2018, the Directors
have also assessed the longer-term viability
of the Group, taking into account the
Group’s current position and the potential
impact of the principal and emerging risks
documented earlier in this report (including
climate change risk) that would threaten its
business model, future performance,
solvency or liquidity.
The Directors have determined that the
three-year period to 31 December 2024 is
an appropriate period over which to assess
the Group’s viability 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 plan; and
• the period is sufficient to reflect the return
to stable mature membership numbers
and see the maturation of new sites
opened in 2020 and 2021.
69
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
GoVerNANce
INTroDucTIoN From The chAIr oF The BoArD
Areas of board focus in 2021
our areas of focus Board activities
Strategy
Stakeholders
Financial
• Continued the engagement with industry
peers and government in relation to
COVID-19
• Re-opening plans
• Site approvals and pipeline reviews
• Consideration of sustainability matters
• Performance management and talent
review of executive management
• Strategy refresh and site visits
• Updates on rebranding
• COVID-19 Operating Protocol
• Furlough and CJRS-related actions
• Updates on engagement with
our stakeholders in relation to
COVID-19 disruption
• Impact of COVID-19 on workforce
• Equity placing
• Engagement with the Company’s banks
on amendments to the revolving credit
facility
• Business performance, including trading
updates and the market’s response to
announcements
• Impact of COVID-19 on financial
position of the Company
• Approval of 2022 Budget
Technology
• Improved app and mobile web
experience
• Development of new website for
2022 launch
Governance
• Approval of the 2020 Annual Report
and Accounts
• AGM
• Succession planning and leadership
• Diversity and inclusion matters
• Formation of the Sustainability Committee
• Externally facilitated effectiveness
review of the Board and its Committees
• Continued onboarding and
development of our two new
Non-Executive Directors
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. In the second year
dominated by the COVID-19 pandemic, the Board and
management have focused on ensuring that the Company emerges
from COVID-19 as a stronger business, forged by overcoming
adversity, not least having our gyms closed for a third of the year.
I want to record my sincere appreciation to all those at The Gym
Group who have lived our values even in these more difficult times.
Dear Shareholder
I am pleased to introduce the 2021
corporate Governance report on
behalf of the Board. The corporate
Governance report forms part of
the Directors’ report.
The continued uncertainty
caused by the coVID-19 crisis
has demonstrated the strength
of our values, our culture and
our leadership, together with
our determination to deliver
for all our stakeholders. This
is reflected by the Board’s
engagement and commitment
to supporting management
over the last 12 months.
penny hughes cBe
Chair of the Board
70
coVID-19
The impact of COVID-19 was a fundamental area of focus during
the year, with the Board undertaking regular and detailed reviews
of our response to the pandemic throughout the business and our
governance in scheduled and additional Board meetings. The
Board received updates from the Executive Committee and
management colleagues to better understand the day-to-day
approach. In order to keep our people safe, Board meetings were
held virtually to adhere to governmental restrictions; however,
when lockdowns were lifted, the Board met in person, with the
offer to join meetings virtually always available.
Board member update
I was delighted to welcome Rio Ferdinand and Wais Shaifta to the
Board in February 2021, and I am pleased to report that they are
both making a valuable contribution to our strategy discussions and
overall Board deliberations. As part of their induction programme
both Rio and Wais met individually with each Board member, the
Executive Committee and members of the senior management team
from key areas of the business to gain an insight into their
respective areas of responsibility. The pandemic placed restrictions
on the usual induction format as certain briefings were conducted
by video conference with some face-to-face engagements and site
visits. However, when the restrictions were lifted and it was safe to
do so, Rio and Wais visited our gyms and other business locations
and met key advisers. Director inductions are ongoing processes
and kept under review by the Board.
As reported last year, Paul Gilbert retired from the Board as Chair
of the Audit and Risk Committee and Senior Independent Director
in May 2021. David Kelly replaced Paul as Chair of the Audit and
Risk Committee and Emma Woods was appointed as the Senior
Independent Director and Chair of the Remuneration Committee.
Since the year-end we announced the resignation of Mark George
as Chief Financial Officer and Executive Director of the Company.
The Nomination Committee has begun a formal process to identify
and appoint a successor to Mark.
Talent, diversity and succession
One of the significant commitments stemming from our externally
facilitated Board effectiveness review is for the Board to increase
its focus on succession and talent management, both to the Board
and Executive Committee and throughout the business. This has
initially been conducted through the work of the Nomination
Committee and has now become a prime focus of the Board and
increasingly of our senior management. We are deeply conscious
of the importance of developing the next generation of leadership
with the enhanced capability to lead the next stage of our strategy.
Sustainability
In 2020, we commissioned 4Global, a UK-based data analysis
company, to determine the social impact of our business over the last
five years. Using the Social Value Model created by Sheffield Hallam
University, 4Global developed a Social Value Calculator which
determined the social value of regular exercise on communities, through
reduced risk of non-communicable diseases; increased wellbeing;
increased educational attainment; and reduced crime. In 2021 we
made further progress on measuring the social value generated by our
members exercising in our gyms, achieving £485 million in the year.
To demonstrate our commitment to generating social value in the
communities we serve, we have introduced a Company wide initiative
with the core purpose of driving social value across the business. This is
a new KPI, linked to executive pay and based on the percentage of
members who visit our gyms at least four times a month.
Our Sustainability Report on pages 28 to 49 sets out in detail the
social impact of The Gym Group, and our approach to the
environment.
penny hughes cBe
Chair of the Board
16 March 2022
uK corporate Governance
code compliance statement
The UK Corporate Governance Code 2018 (the ‘Code’) is the
key governance measure to which we referred during the
financial year to 31 December 2021. The Code can be found
at www.frc.org.uk.
We always intend to comply with the prevailing principles of
good governance and code of best practice honestly, simply,
transparently, and with clarity and integrity.
provision 24
Following the retirement of Paul Gilbert from the Board at the
Company’s AGM in May 2021, David Kelly was appointed
as the Chair of the Audit and Risk Committee. 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 in the
Annual Report and Accounts 2020.
provision 36
In respect of Provision 36, the Company has now introduced
formal post-termination of employment share ownership
guidelines to further align the interest of the Executive
Directors with those of shareholders. Further detail is outlined
in the Directors’ Remuneration Report on page 90.
2021 Governance report
Our governance reporting follows the order set out in the Code:
compliance with the code
Board leadership and company purpose
More information can be found on page 75.
Division of responsibilities
More information can be found on page 76.
composition, succession and evaluation
More information can be found on pages 79 to 81.
Audit, risk and internal control
More information can be found on pages 82 to 84.
remuneration
More information can be found on pages 86 to 108.
71
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
ANNUAL REPORT AND ACCOUNTS 2021
GoVerNANce
BoArD oF DIrecTorS
penny hughes
richard Darwin
mark George
John Treharne
emma Woods
David Kelly
rio Ferdinand
Wais Shaifta
committees
career
Board skills
and experience
Independent
Non-Executive Chair of the
Board
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.
Penny has taken a
hands-on role in leading
the business throughout her
time as Chair of the Board.
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.
Chief Executive Officer
Chief Financial Officer
Founder Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Senior Independent
Non-Executive Director
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 was The Gym
Group’s Chief Financial
Officer from 2015 to 2018.
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.
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.
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.
Mark brings his quality
experience in consumer
plcs to the Board and
Executive team. Mark is
diligent and sets high
standards. He has evolved
and strengthened the
Company’s finance
function and successfully
secured new bank and
equity financing, ensuring
that the business is well
placed to deliver its
accelerated growth
strategy.
Emma has wide-ranging
David is an experienced
Following his football
Wais has gathered
digital operating executive.
career, Rio has pursued a
substantial e-commerce
marketing experience
within the FMCG and
leisure sector.
David was previously the
Operations Director at
Emma was the former CEO
Amazon in the UK from
of Wagamama and
1998 to 2000, the Chief
previously held Marketing
Operating Officer at
Director roles at Merlin
Entertainments plc, Pizza
Express and Unilever.
Emma is a customer and
marketing champion.
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.
number of interests in
expertise from a number of
business, broadcasting and
leading online businesses.
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.
As the former CEO at Push
Doctor, one of the leading
digital healthcare
companies in Europe, Wais
worked in partnership with
the NHS to connect
thousands of patients each
week with clinicians. Before
joining Push Doctor, Wais
was 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
David draws on his
extensive plc experience
from a wide range of
multi-site leisure businesses,
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 all
which is key to the Board’s
development of the
Company’s strategy. As a
former executive leader,
she offers perspectives 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’ 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.
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
purpose and our strategic
priorities as we recover to
grow again.
his committee memberships
demographics will support
and Board responsibilities.
our continued pursuit of our
other
appointments
iQ Student
Accommodation – Adviser
None
Riverstone Living – Chair
Form3 – Non-Executive
Director and Chair of
Strategic Advisory Board
Motherclub Ltd – Director
None
ukactive – Board member
Tortilla Mexican Grill plc
Independent Non-Executive
FE Luxury Travel, Football
Revaia Capital –
Frame – Chairman
Jigsaw South East –
Chair of Trustees
– Chair of Board of
Director, Reach plc;
Non-Executive Director and
Chair of Remuneration
Committee of On the Beach
– Director
Escapes, Legacy Sports
and Education Foundation,
Rio Ferdinand Foundation
Directors
Great Portland Estates plc
– Non-Executive Director
Non-Executive Director
Planity – member of Board
of Directors
Pacaso Global –
General Manager and
Vice President of Sales
plc; Non-Executive Chair
and Chair of Audit,
Remuneration, and Social
Impact committees of Simply
Business (Xbridge Limited).
72
72
OVERVIEW
STRATEGIC REPORT
GoVerNANce
FINANCIAL STATEMENTS
penny hughes
richard Darwin
mark George
John Treharne
emma Woods
David Kelly
rio Ferdinand
Wais Shaifta
Independent
Chief Executive Officer
Chief Financial Officer
Founder Director
Senior Independent
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Emma has wide-ranging
marketing experience
within the FMCG and
leisure sector.
Emma was the former CEO
of Wagamama and
previously held Marketing
Director roles at Merlin
Entertainments plc, Pizza
Express and Unilever.
Emma is a customer and
marketing champion.
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.
As the former CEO at Push
Doctor, one of the leading
digital healthcare
companies in Europe, Wais
worked in partnership with
the NHS to connect
thousands of patients each
week with clinicians. Before
joining Push Doctor, Wais
was 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
former executive leader,
she offers perspectives 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.
Tortilla Mexican Grill plc
– Chair of Board of
Directors
Great Portland Estates plc
– Non-Executive 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 all
his committee memberships
and Board responsibilities.
Independent Non-Executive
Director, Reach plc;
Non-Executive Director and
Chair of Remuneration
Committee of On the Beach
plc; Non-Executive Chair
and Chair of Audit,
Remuneration, and Social
Impact committees of Simply
Business (Xbridge Limited).
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
Wais’ 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.
Revaia Capital –
Non-Executive Director
Planity – member of Board
of Directors
Pacaso Global –
General Manager and
Vice President of Sales
commITTeeS
Nomination
Committee
Audit and Risk
Committee
Remuneration
Committee
Sustainability
Committee
73
73
committees
career
Penny has served on the
Richard possesses extensive
Mark has held senior roles
John founded The Gym in
boards of directors of firms
experience working for
Non-Executive Chair of the
Board
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.
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.
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
with McKinsey & Co.
Officer of Essenden plc (now
management consultant
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
Ten Entertainment Group
plc) from 2009 to 2015 and
Chief Financial Officer of
Paramount Restaurants from
2003 to 2008.
Richard was 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 Chair of the Board.
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
Mark brings his quality
experience in consumer
plcs to the Board and
Executive team. Mark is
diligent and sets high
talented and stable team of
standards. He has evolved
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.
and strengthened the
Company’s finance
function and successfully
secured new bank and
that the business is well
placed to deliver its
accelerated growth
strategy.
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
equity financing, ensuring
to support our business.
other
appointments
iQ Student
Accommodation – Adviser
None
None
ukactive – Board member
Frame – Chairman
Jigsaw South East –
Chair of Trustees
Riverstone Living – Chair
Form3 – Non-Executive
Director and Chair of
Strategic Advisory Board
Motherclub Ltd – Director
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE
The Gym Group plc
The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
ANNUAL REPORT AND ACCOUNTS 2021
GoVerNANce
eXecuTIVe commITTee
Ann-marie murphy
Chief Operating Officer
David melhuish
Chief Development and Sustainability 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.
Ann-marie was promoted to the position of Chief Operating
Officer in February 2022. Over the last 12 months, Ann-marie
has been instrumental in leading the Operations and People
functions, enabling the business to respond effectively to a new
operating environment created by the closures of gyms as a
result of government restrictions. Her proactive and positive
response to keeping our People connected to the business
during the various COVID-19 lockdowns has been recognised
with external awards and strong levels of engagement.
David joined The Gym Group in April 2013 and is critical to
the accelerated rollout and growing the estate. David was
previously the Head of Development at Central England
Co-operative.
In 2021 David was promoted to Chief Development and
Sustainability Officer and is responsible for designing,
implementing and leading our sustainability strategy. David
acts as an ambassador for all sustainability related matters at
The Gym Group, both internally and externally. He ensures
the business is well-positioned to meet its designated
sustainability reporting and disclosure obligations as well as
wider corporate targets.
Jasper mcIntosh
Chief Information Officer
Jasper has headed The Gym Group’s technology operation
since 2011. An experienced technology director, Jasper has
previously delivered high profile projects for GlaxoSmithKline,
Global Fund, the NHS and the French Presidential Palace.
Whilst at The Gym Group, Jasper has overseen a major
programme of digital transformation, introducing significant
new digital experiences and data and analytics capabilities
to drive change across the business. In 2021, Jasper was
awarded a top 20 place in the CIO 100 list that recognises
the most transformational and disruptive CIOs in the UK.
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 worked closely
on managing matters relating to the disruptions caused by
the COVID-19 pandemic and to ensure that we continue to be
driven by our purpose to break down barriers to fitness for all.
Richard Darwin, CEO, and Mark George, CFO, were also members of our Executive Committee
(‘ExCo’), and their biographies are on page 72.
74
74
corporATe GoVerNANce reporT
Board leadership and company purpose
Governance and Key responsibilities
Role of the Board
The Board is the principal decision-making body in the Company.
It is collectively responsible for promoting the long-term success of
the business for the benefit of its members, achieving this through
the creation and delivery of sustainable shareholder value. The
Board also carefully considers its wider stakeholders, including
colleagues, customers and suppliers, when making decisions and
more information can be found on pages 52 to 55.
In addition to setting the strategy of the business and overseeing its
implementation by management, the Board provides leadership to
the business on purpose, culture, values and ethics, sustainability,
monitoring overall financial performance of the business, and
ensuring effective corporate governance, succession planning and
stakeholder engagement. The Board is also responsible for
ensuring that effective internal control and risk management
systems are in place. The Matters Reserved for the Board can be
found on our website.
Board Committees
The Board has formally delegated certain governance
responsibilities to its Board committees to assist with fulfilling
its responsibilities, as outlined in the table below.
Governance structures as at 31 December 2021
The Board
SEE BIOGRAPHIES ON
pAGeS 72-73
The schedule of matters reserved for the Board includes the consideration and approval of:
• the Group’s strategic aims, objectives and commercial strategy;
• review of performance relative to the Group’s business plans and budgets;
• 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.
The Board formally delegates certain matters to one of the Committees set out below.
Audit and risk
committee
Sustainability
committee
remuneration
committee
SEE REPORT ON
pAGeS 82-84
SEE REPORT ON
pAGe 85
SEE REPORT ON
pAGeS 86-108
Board
committees
Nomination
committee
SEE REPORT ON
pAGeS 79-81
clear and formal Board responsibilities
The Board and its Committees have a scheduled forward
programme of meetings, aligned to the updated strategy, to ensure
that sufficient time is allocated to each key area and the Board’s
time is used effectively. Our Board comprises four Independent
Non-Executive Directors, of which one acts as Senior Independent
Director, two Executive Directors and the Founder Director. Each of
their responsibilities is listed on page 76 and more information on
their specific contributions to the business can be found in their
biographies on pages 72 to 73.
There is sufficient flexibility for items to be added to the agenda,
which enables the Board to focus on key matters relating to the
business at the right time.
The Chair of the Board and Non-Executive Directors also met without
the Executive Directors being present, and the Senior Independent
Director held discussions with the Non-Executive Directors without the
Executive Directors or the Chair of the Board being present.
Directors were made aware of the key discussions and decisions
made at each of the four principal Committees. The Chair of each
Committee provided a detailed summary at the Board meeting
following the relevant Committee meeting.
On the occasion that a Director is unavoidably unable to attend a
meeting, they receive a briefing from the Chair of the Board
before the meeting, so that their comments and input can be taken
into account at the meeting, and the Chair of the Board provides
an update to them after the meeting.
75
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
ANNUAL REPORT AND ACCOUNTS 2021
GoVerNANce
corporATe GoVerNANce reporT CONTINUED
roles and responsibilities
Key responsibility
chair of the
Board
Penny Hughes has been the Chair of the Board since the IPO in 2015 and has provided continuity during her
tenure. Penny’s responsibilities include:
• The leadership, effectiveness and governance of the Board.
• Setting the agenda, style and tone of Board discussions with a particular focus on strategic matters.
• Ensuring each Non-Executive Director makes an effective contribution to the Board.
• Ensuring that the Directors receive accurate, timely and clear information.
• Chairing the Nominations Committee.
• Promoting a culture of openness and debate.
• Facilitating constructive Board relations.
ceo
Richard Darwin’s responsibilities as Chief Executive Officer include:
• Proposing the strategic objectives of the Group for approval by the Board and delivering the strategic and
financial objectives in line with the agreed purpose and strategy.
• Leading the Executive Committee and senior management team in managing the operational requirements
of the business.
• Providing clear and visible leadership of our shared values.
• Responsible for the effective and ongoing communication with colleagues and shareholders.
Mark George’s responsibilities as Chief Financial Officer include:
• Working with the CEO to develop and implement the Group’s purpose and strategic objectives.
• The financial delivery and performance of the Group.
• Ensuring that the Group remains appropriately funded to pursue the strategic objectives.
• Investor relations activities, and communications with shareholders.
Emma Woods has been the SID since the retirement of Paul Gilbert in May 2021. Emma’s responsibilities include:
• Acting as a sounding board for the Chair of the Board and serving as an intermediary for the other
Directors as necessary.
• Acting as lead independent Non-Executive Director.
• Leading the Non-Executive Directors in the performance evaluation of the Chair of the Board, with input
from the Executive Directors.
• Being available to meet with shareholders in the event that the Chair of the Board or the Executive
Directors are unavailable.
Responsibilities of the Non-Executive Directors include:
• Constructively challenging management proposals and providing advice in line with their respective
skills and experience.
• Helping develop proposals on strategy.
• Having a prime role in appointing and, where necessary, removing Executive Directors.
• Having an integral role in succession planning.
The Company Secretariat function was first formed in 2020 and carries out the following responsibilities:
• Supporting the Chair of the Board and the Independent Non-Executive Directors with their responsibilities.
• Advising on regulatory compliance and corporate governance matters.
• Facilitating individual induction programmes for Directors and assisting with their development as required.
• Communications with shareholders and organisation of the AGM.
chief Financial
officer
Senior
Independent
Director ‘SID’
Independent
Non-executive
Directors
company
Secretary
76
7658
Board meetings
The Board’s programme of meetings allows key areas of focus to
be established and reviewed on a regular basis. In line with
COVID-19 safety guidance, the Board held all meetings remotely
during periods of Government-mandated lockdowns, with
management teams and colleagues attending by video conference
to assess performance, discuss progress and agree key priorities
for the short and medium term. As soon as lockdown restrictions
were lifted and it was safe to do so, the Board held its scheduled
meetings in person, always offering Board members the option to
join meetings by video conference as well.
The below table shows the attendance of Directors at scheduled
Board meetings. When unable to attend a meeting, a Director
receives papers and has the opportunity to feedback comments in
advance to Penny Hughes, the Chair of the Board.
Penny Hughes
Richard Darwin
Rio Ferdinand1
Mark George
Paul Gilbert2
David Kelly
Wais Shaifta3
John Treharne
Emma Woods
Nomination
Committee
Audit and Risk
Committee
Remuneration
Committee
Sustainability
Committee
(formerly Health
and Safety and
Wellbeing
Committee)
2/2
2/2
1/1
–
1/1
2/2
0/1
2/2
2/2
–
–
–
–
2/2
7/7
3/4
–
7/7
7/7
–
3/5
–
2/2
7/7
–
–
7/7
3/3
3/3
0/2
–
1/3
–
2/2
3/3
–
Board
10/10
10/10
6/10
10/10
4/4
10/10
9/10
10/10
10/10
1 Rio Ferdinand joined the Board on 1 February 2021. Rio attended the majority of Board and Committee meetings following his appointment. Where he was unable to attend a meeting, this was
due to a pre-existing commitment. Rio was a member of the Health & Safety and Wellbeing Committee, but is not a member of the Sustainability Committee.
2 Paul Gilbert stepped down from the Board on 11 May 2021.
3 Wais Shaifta joined the Board on 1 February 2021. He attended all but one Board meeting and one Audit and Risk Committee meeting following his appointment, which he was unable to attend
due to being on paternity leave.
Director independence
The Chair of the Board has satisfied the independence criteria of
the Code on her appointment to the Board and all the Non-
Executive Directors are considered to be independent. The new
Non-Executive Directors were determined to be independent
before their appointment through the recruitment process.
The independence of the Non-Executive Directors is closely
monitored by the Board.
how the Board spent its time
The Board measures the time spent on strategy, governance and
operational performance at each meeting. The biggest part of
the Board’s time was spent on strategy, followed by governance
and operational performance, which the Board considers to
be appropriate.
Minutes of all Board and Committee meetings are taken by the
Company Secretary and circulated for comments and approval.
Any unresolved concerns raised by a Director are recorded in
the minutes.
77
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
GoVerNANce
corporATe GoVerNANce reporT CONTINUED
The following sets out the key areas of focus for the Board
during the year:
purpose and strategy:
• Purpose, ambitions and strategy culture and values
• Budget and future financial plan
• Competitor reviews
• Climate change and sustainability
• Capital structure and dividend policy
Governance and risk:
• Board succession
• Board independence, composition and diversity
• Board training and development
• Investor feedback via advisers
• AGM voting and feedback
• Stakeholder engagement
• Engagement Survey
• Gender pay gap statement
• Modern slavery statement
• Diversity and inclusion
operational
• Technology roadmap
• Plan to grow and deepen membership base
• Plan to accelerate growth
• Product strategy
• Talent, succession and capability
• Rebranding
Board skills and composition
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 includes visiting
several operational locations. The Board and Committees 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
78
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.
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, Rio Ferdinand,
Penny Hughes, Richard Darwin, Mark George, David Kelly,
John Treharne, Wais Shaifta and Emma Woods will be
offering themselves for re-election at the Company’s AGM
on 12 May 2022.
Although Mark George has notified the Company of his
resignation as Chief Financial Officer and Executive Director in
January 2022, he will remain in his post until July 2022, a date
after 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.
Directors’ conflicts of interest
No Directors took on additional significant commitments during
the year.
No 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.
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 Chair of the Board 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.
Shareholders can also keep up to date with Company matters in
the media. The Company also maintains a holistic timetable of
press engagement on commercial and corporate matters which
is managed by Tulchan Communications.
reporT oF The NomINATIoN commITTee
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
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 2021
• Oversaw the search for and appointment of two new Non-
Executive Directors during the year, and oversaw their full,
formal and tailored induction programme.
• Reviewed the composition of the Board and its Committees and
continued with the ongoing review process of Board rotation
and succession.
• Oversaw progress on diversity and inclusion initiatives. The
Committee receives regular updates on the progress of diversity
and inclusion workstreams.
• Approved the appointment of a new designated Non-Executive
Director for workforce engagement to ensure the views and
concerns of the wider workforce are brought to the Board and
taken into account.
2
• Oversaw the externally facilitated Board evaluation process,
the results of which can be found on page 81.
• Reviewed and considered the future model, 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.
Succession planning: Board level
Following a period of continuity, we commenced a recruitment
process to strengthen our Board; primarily to support our ambitious
growth plans and mindful of best governance practices. In
February 2021 Rio Ferdinand and Wais Shaifta joined the Board
as Non-Executive Directors. Wais and Rio bring a wealth of
complementary business and life experiences that will enhance the
breadth of knowledge, customer insight and quality of work of the
Board and the wider ExCo team.
79
committee members
chair of the
committee
committee
members
Number of meetings
held in 2021
Penny Hughes
Richard Darwin, David Kelly,
John Treharne, Emma Woods,
Wais Shaifta, Rio Ferdinand
The quality of our leadership
team has never been more
important to the Board.
We continue to strengthen
required skills and experience,
build individual calibre, and
demonstrate our support
for diversity and inclusion
in all its dimensions.
penny hughes cBe
Chair of the Board
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
GoVerNANce
reporT oF The NomINATIoN commITTee CONTINUED
The Committee has put in place an orderly succession plan for the
Independent Non-Executive Directors, taking into account governance
requirements and the balance of Directors’ skills and experience. The
Committee will keep this process under regular review.
Succession planning: beyond the Board
The Committee regularly reviews the composition and succession plans
in place for members of the Executive Committee and their direct
reports. The Committee received a report on the future model, capability
and succession planning for key roles within the wider business.
In addition, the CEO regularly briefs the Board about the
performance of individual Executive team members and any
changes that he proposes to make to this team. Whilst this activity
does not take place formally within the meetings of the Nominations
Committee, it does form part of its work in overseeing Executive
team development and succession process, and the pipeline of
talent available for succession to the Board. The Board members
have regular contact with members of the Executive team and the
wider Senior Management Team, through formal Board
presentations, attendance at annual Strategy Days, and in regular
visits to the head office and other Company sites, when Non-
Executive Directors meet members of the Executive Senior
Management teams on a less formal basis. Each Non-Executive
Director also mentors and provides guidance to the Executive team
as well as members of the Senior Management Team, subject to the
specific requirements of the mentee.
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.
As at 31 December 2021 the Board comprised 25% (two) female
and 75% (six) male Board members. The gender balance within our
Executive Committee as at 31 December 2021 was 20% (one)
female and 80% (four) male members. The Senior Management
Team, comprised mainly of Executive Committees’ direct reports,
have 44.4% (four) female and 55.6% (five) male members. Although
the proportion of female Board members has remained the same
this past year, we firmly believe we are making progress towards a
more diverse leadership in all areas, including gender and cultural
diversity, and are working towards a more representative, diverse
Board to reflect our diverse workforce. In 2021 we strengthened our
commitment to Diversity and Inclusion through the launch of our
Equality, Diversity and Inclusion Pledge and projects focused on our
purpose of breaking down barriers. Details of relevant initiatives can
be found on page 38 to 41.
We have published our annual Gender Pay Gap report. As disclosed,
our mean gap has decreased from 5.48% in 2020 to 1.62% in 2021.
We attribute this to an increase in women being appointed into senior
roles which has helped support in closing the pay gap. We will
continue to address closing the gender pay gap further through the
actions set out in our report and through further stretched targets within
our Equality, Diversity and Inclusion pledge for 2022 to ensure this has
a focus from all levels.
Search for a new cFo
In January 2022, Mark George notified the Board of his intention to
resign as CFO and Executive Director. The Board, supported by the
Committee, has commenced a recruitment process to identify Mark’s
successor. We will announce further details in due course.
Governance processes
The Committee meets at least twice a year and at such other times as
the Chair of the Committee or any member of the Committee may
request. In 2021, the Committee met twice and attendance at the
meetings is shown in the table on page 77.
The Committee has formal terms of reference which can be viewed on
the Company’s website www.tggplc.com.
As described in our report last year, in 2021 Wais and Rio
commenced their full, formal and tailored induction programme. Due to
the impact of COVID-19 restrictions we had to be flexible with aspects
of the programme such as site visits and in-person meetings with various
groups and stakeholders. In this programme and their first year as
Directors, Wais and Rio have demonstrated great engagement and
willingness to learn and develop, and I am delighted to continue to
support their progress.
Gender breakdown at 31 December 2021
Board
EXCO
Board
6
eXco
4
2
1. Male: 6
75%
2. Female: 2
25%
1
1. Male: 4
80.0%
2. Female: 1
20.0%
Senior Leadership Team
Senior
management
Team
5
1. Male: 5
55.6%
2. Female: 4
44.4%
4
80
Actions to improve effectiveness were agreed as follows:
• The post COVID-19 landscape presents an opportunity to have
a reset and recontract. The Board will consider a plan for
greater business engagement, location of Board meetings and
cement its use of hybrid working for Committees.
• Set aside more time to discuss our approach to important
conversations such as succession planning and develop long-
term objectives on priority topics.
• Schedule Non-Executive Director only time, to identify key
issues and process impact and effectiveness of the Board
session.
• Align Non-Executive Directors to key strategic themes.
• Undertake a Board Diversity and Inclusion session.
I look forward to meeting shareholders at the AGM on 12 May 2022.
penny hughes
Chair of the Nomination Committee
16 March 2022
Board effectiveness review
We held an external Board effectiveness review in January 2022,
focused on ensuring that the Board is fit for the future, as we accelerate
our growth strategy and develop our stakeholder relationships. The
review concluded that we have a unified and strong Board with
independent Non-Executive Directors and Executives Directors sharing
a passion and commitment for the business, with a conviction to do the
right thing for our members and colleagues. The themes identified in the
review were mostly about amplifying what is already working.
However, as always, we challenge ourselves to continue to improve,
and the findings of this review and the actions which we have agreed
are set out below.
The effectiveness review was led by Pavita Cooper, an independent
board evaluation specialist. Pavita had no other connection with the
Group or any of the Directors. The process involved interviews focused
on a number of specific topics with the Executive Directors, Non-
Executive Directors, Company Secretary, Director of Strategy and
Business Development as well as the Chief Operating Officer (to discuss
Diversity and Inclusion initiatives). Pavita also had access to strategy
plans and met with a number of the Group’s external advisors such as
the auditor and brokers.
All Board members actively engaged in the process and provided
open and constructive comments. Pavita then presented the results to
the Board, which were discussed, and a number of actions were
agreed. On her feedback, there was universal acknowledgement that
the Chair of the Board provides exceptional leadership.
The overall conclusion of the review is set out below:
• The Board is functioning well, and the Board dynamics are
excellent.
• There is a breadth and depth of complementary skills and
experience around the Board table.
• Board members have good external reputation, held in high
regard and respected by our partners.
• The response to COVID-19 swift adaptation to the new ways of
working was a success for the Board and the wider business.
• There is broad consensus that The Gym Group has a unique
culture; the Board embodies the Group’s values and this is
reflected in their stewardship of the organisation.
• There is alignment around strategy and the areas that need
more focus.
81
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
reporT oF The AuDIT AND rISK commITTee
Dear Shareholder
The membership of the Audit and Risk Committee (the ‘Committee’)
has this year seen a mix of change and continuity. Paul Gilbert
retired as Committee chair and from the Board last year and I took
over. I am grateful for the commitment Paul has shown to the
Committee and to the business in the nine years he served on the
Board. We also welcomed Wais Shaifta who is bringing a fresh
perspective to our discussions.
This year has continued to be impacted by the COVID-19
pandemic, which resulted in significant challenges for our
members, colleagues and overall operations. The Group has
maintained a robust financial position and improved its internal
controls and risk management, despite being significantly
impacted by ongoing challenges due to government restrictions
resulting in closures and revised ways of working. The full-year
audit process, though more complex due to the pandemic, was
completed effectively within the planned timetable. I would like to
thank the Finance team and EY for the additional planning and
commitment that contributed to this.
Since I was appointed as Chair of the Committee last year, I have
been able to broaden and deepen my understanding of the
business and each of its functions, enabling the Committee to
move forward with a clear vision – namely, to ensure the
soundness and effectiveness of the Group’s systems and controls,
which has been even more important amid a global pandemic.
role of the committee
The 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 auditor, advising
on the appointment of external auditor and reviewing the
effectiveness of the internal audit, internal controls, risk management,
whistleblowing and fraud systems in place within the Group.
Further details on the responsibilities of the Committee are as follows:
• 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 2021,
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 oversee internal audit.
• To review and monitor the external auditor’s effectiveness,
independence and the provision of additional services.
• To review the Group’s risk appetite.
committee members
chair of the
committee
committee
members
David Kelly
Emma Woods, Wais Shaifta
Number of meetings
held in 2021
7
The Group has maintained a
robust financial position and
continued to improve its internal
controls and risk management,
despite being significantly
impacted by challenges caused
by government restrictions. I am
grateful to all involved for the
quality of work, debate and
challenge exhibited, which has
continued with no less vigour
than in previous years.
David Kelly
Chair of the Audit and Risk Committee
82
Summary of principal activities and focus in 2021
The principal activities since the last report were as follows:
In March 2021 the Committee held a private session with the
external auditor without members of management being present.
• Reviewed and recommended for approval to the Board the
2021 half-year results issued in September 2021.
• Reviewed and recommended for approval to the Board the
Group Whistleblowing and Bribery Act policies.
• Oversaw the ongoing optimisation of the Company’s financial
processes and control environment.
• Oversaw the planning and execution of the equity placing.
• Recommended for approval to the Board the execution of
amendments to the revolving credit facility.
• Verified the independence of the external auditor and
approved the scope of the audit plan and the audit fees.
• Development of a formal Risk Appetite Statement and
consideration of how this is embedded into core risk
management processes.
• Assessment of the principal risks and the effectiveness of risk
management and internal control systems.
• Considered our approach to proposed audit and corporate
governance reforms as set out in the BEIS consultation issued in
March 2021.
risk management
Our risk management process and the risks which are considered to
be the principal risks of the Group are detailed on pages 62 to 69.
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.
• 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
At the time of Paul Gilbert retiring, and prior to appointing me as
Chair of the Committee, the Board considered Provision 24 in
relation to the future composition of the Committee to ensure that
the Committee members retained recent and relevant financial
experience. Taking into account my 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 Board concluded that the Committee
would continue to discharge its obligations.
In 2021, the Committee met seven times. Attendance at the meetings is
shown in the table on page 77.
During the year, the Committee has also adopted a formal ‘Risk
Appetite Statement’, linked to our corporate purpose and strategic
ambitions, and this is embedded into the Group’s risk management
process. Further details can be found in the Principal Risks and
Uncertainties section on pages 62 to 69.
The Committee is made up solely of Independent Non-Executive
Directors who have experience relevant to our market.
The Committee has formal terms of reference which can be viewed
on the Company’s website: www.tggplc.com.
resignation of cFo
As announced in January 2022 our current CFO, Mark George,
will be leaving the Company in July 2022. The process to identify
and appoint Mark’s successor is underway and we will announce
further details in due course.
Significant issues and judgements relating to the
financial statements
The Committee has the responsibility to monitor the integrity of the
annual and interim reports, including a review of the significant
financial reporting matters and judgements contained in them.
At its meetings in July and August 2021 and February 2022, the
Committee reviewed a comprehensive paper prepared by the
Finance Director which analysed the Group’s results for the half year
and full financial year, highlighted significant issue and judgements
arising in the preparation of the Group’s financial statements, and
provided information to support the Directors’ viability and going
concern statements. The Committee also considered a paper
prepared by the external auditor which included their findings in
respect of the audit of the financial statements and significant
reporting and accounting matters therein.
The most significant issues and judgements considered by the
Committee were as follows:
Presentation of the consolidated statement
of comprehensive income
The Audit and Risk Committee considered the changes proposed by
management with regards the presentation of the Group
Consolidated Statement of Comprehensive Income and the separate
disclosure of underlying results and non-underlying items. The
Committee agreed with management that the additional disclosure
will provide more clarity over the Group’s profits and losses and
provide a more comparable view of underlying trading performance.
Non-underlying items
The Committee reviewed and considered the non-underlying items
identified by management and is satisfied that they are
appropriately classified as such.
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 3 Year Plan approved by the
Board together with assumed growth rates thereafter.
83
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
GoVerNANce
reporT oF The AuDIT AND rISK commITTee CONTINUED
The methodology, along with key assumptions around future
growth rates 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 13, 14 and 15 to the financial
statements for further information.
Going concern and viability
The Committee reviewed and considered the paper prepared by
management to support the going concern assumption and longer-
term viability statement in the financial statements. Consideration was
given to the assumptions made in both the base case and reasonable
downside case, as well as additional risk-based scenarios and reverse
stress tests. The adequacy and timing of renewal of the Group’s bank
facilities, as well as access to alternative forms of financing, were also
considered. Following a detailed review and discussion, the
Committee concluded that the Group should be considered a going
concern and that its longer-term viability is secure.
hand and inventory, an internal audit function is not necessary at
this time, but that this 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 Committee reviews and considers responses to
any whistleblowing reports received. The Committee reviewed the
effectiveness of the Group’s whistleblowing procedures at the
November 2021 meeting, and approved an updated policy.
There were no material matters requiring the Committee to make
amendments to the reports.
external auditor
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, the
Committee reviewed the effectiveness of the auditor through:
• Reviewing the 2021 audit plan.
• Discussing the results of the audit, including their views on
material accounting issues and key judgements and estimates.
• Meeting the auditor without management present and
understanding the extent to which the auditor challenged
management.
• Considering the robustness of the audit process.
• 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 Committee is satisfied with the performance and
independence of Ernst & Young LLP and therefore recommend their
reappointment at the May 2022 AGM.
Auditor rotation
The external auditor, Ernst & Young LLP, were appointed on 28 July
2015. In line with the EU Audit Directive, 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.
I can confirm that the Company has complied with The Statutory
Audit Services for Large Companies Market Investigation
(Mandatory Use of Competitive Tender Processes and Audit
Committee Responsibilities) Order 2014 during the financial year.
The Committee reviewed 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
Non-audit services
In 2021, EY 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 auditor. The
Committee has a formal policy on the supply of non-audit services
by the Company’s auditor, 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 auditor are
preapproved by the Committee.
Fair, balanced and understandable
The Board recognises its duty to ensure that the Annual Report and
Accounts 2021, 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 2021
were prepared, including detailed project planning and a
comprehensive review process.
• The review of the Annual Report and Accounts 2021 by the
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 auditor.
• Ongoing financial information, including KPIs, received on a
monthly basis.
As detailed in the Directors’ Responsibility Statement on page 112
each of the Directors has confirmed that, to the best of each
person’s knowledge and belief, the Annual Report and Accounts
2021, 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.
David Kelly
Chair of the Audit and Risk Committee
16 March 2022
84
reporT oF The SuSTAINABIlITy commITTee
committee members
chair of the
committee
committee
members
Number of health &
Safety and Wellbeing
committee meetings
held in 2021
Wais Shaifta
Penny Hughes John Treharne,
David Kelly, Richard Darwin,
David Melhuish
3
Key responsibilities
• Understanding the sustainability and climate risks and
opportunities for the Group
• Assisting the Board in its oversight of corporate responsibility,
climate, sustainability and reputational matters taking into
account the Group’s purpose, strategy and culture
• Assessing the Group’s current sustainability footprint, reviewing
sustainability targets and commitments and materiality.
Dear Shareholder
I am pleased to present the first report of the Sustainability
Committee (‘Committee’). The challenges created by the COVID-19
pandemic, racial unrest, political division, and climate-related
disasters around the globe have accelerated focus on
Environmental, Social and Governance (‘ESG’) matters, with
significant risks and opportunities for our business and our
members.
Sustainability has always been at the core of The Gym Group’s
business. The creation of the Committee in December 2021, to
build on the work started by the Health & Safety and Wellbeing
Committee, demonstrates the Company’s commitment to
continually improving its sustainability performance and reporting.
ESG related matters are regularly discussed and reviewed at the
Board and its Committees, with the Company always striving to
meet and exceed the expectations of our stakeholders as well as
ensuring we are managing our risks and taking advantage of the
opportunities. More information on our approach to sustainability
can be found in our Sustainability Report on pages 28 to 49.
Our approach to sustainability recognises both the immediate and
long-term impacts of climate change on our business and the
people we serve. Within the Sustainability Report on page 48, we
have responded to evolving climate risks through our support for
the Taskforce on Climate-Related Financial Disclosures (‘TCFD’).
This year marks our first reporting against the TCFD recommended
disclosures and we are committed to continuing on this journey to
implement the full suite of recommendations.
In its inaugural year, the Committee intends to assess what is
material in forming The Gym Group’s sustainability strategy, with
an in-depth review of sustainability workstreams at its first meeting
in February 2022. The Committee will also review the Group’s
sustainability assessment and will monitor sustainability KPIs to
measure delivery against the Company’s strategy and targets, and
support management’s engagement strategy on sustainability.
Wais Shaifta
Chair of the Sustainability Committee
16 March 2022
85
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
reporT oF The remuNerATIoN commITTee
Dear Shareholder
Following my appointment as Chair of the Remuneration
Committee in May 2021, I am pleased to present the Directors’
Remuneration Report for The Gym Group.
I would like to thank my colleague Non-Executive Director David
Kelly for his work as the previous Chair and I am grateful that
David continues to serve on the Remuneration Committee.
This Chair’s statement summarises the main areas of activity for the
Remuneration Committee in the year and introduces the other
sections of the Directors’ Remuneration Report, which this year
comprises:
• The Directors’ Remuneration Policy (‘Policy Report’), which
we are seeking to amend and update at our 2022 AGM
on 12 May 2022.
• The Annual Report on Remuneration (‘Implementation Report’),
which sets out the remuneration arrangements and incentive
outcomes for the year under review and how the Remuneration
Committee intends to implement our Policy in 2022.
There are three main themes which I would like to highlight to
shareholders in this statement:
• The Gym Group (‘TGG’) performance in 2021, and what this
has meant for the pay and welfare of all staff and for Executive
Directors’ pay.
• The changes to our Policy which we are proposing at our 2022
AGM, and on which we consulted extensively with our leading
institutional shareholders in Autumn 2021.
• The arrangements for the departure of our CFO, Mark George,
which was announced in January 2022.
The Gym Group’s performance in 2021
As detailed more fully in the Chair’s Statement and the Chief
Executive’s Review, 2021 was another year affected by COVID-19
restrictions, with gyms fully closed during the lockdown from
6 January to 12 April 2021.
We explained in last year’s Director’s Remuneration Report that
given this closure period, a bonus opportunity to be paid in 2022
would be limited to a maximum target of 50% of annual awards
for all colleagues.
Given the restrictions and ongoing consumer anxiety around
COVID-19, we are pleased that the team achieved:
• A full year performance of our key profit measure of Group
Adjusted EBITDA Less Normalised Rent of £5.7 million which
was in line with market expectations.
• Continued progress in our roll-out strategy – on 20 December
2021 we went above 200 gyms for the first time. We opened
19 sites in the year of which 15 were opened in H2, taking us
over the 200 gyms milestone.
• Total membership numbers grew from 547,000 in February
2021 and ended the year at 718,000, with 734,000 being the
average for membership numbers in November 2021 and
December 2021.
• We were recognised by Glassdoor as one of the top 50
companies to work for (Glassdoor rankings of 4.5).
committee members
chair of the
committee
committee
members
Number of meetings
held in 2021
Emma Woods
Penny Hughes, David Kelly,
Rio Ferdinand
7
The remuneration committee is
excited to move beyond coVID-19
and ensure The Gym Group team
is incentivised to deliver both
growth in our traditional business
and financial KpIs, and also a
‘Social Value’ measurement.
emma Woods
Chair of the Remuneration Committee
86
For the H2 2021 bonus for our Executive Directors we looked at three
metrics with equal weightings: Group Adjusted EBITDA less
normalised rent, site opening numbers and membership numbers, all
of which were judged to appropriately support the best long-term
interests of our shareholders in the challenging trading conditions that
we faced. Against the performance measures which were set for H2,
a prospective bonus outcome of 89% of six month max was attained,
resulting in a potential bonus of 44.7% of salary for our CEO.
Before confirming this outcome, the Remuneration Committee
considered the wider experience of our shareholders and other
stakeholders and noted the following:
• The Company ceased taking furlough payments after March
2021.
• The targets which were set for H2 reflected the increased
capacity to deliver on our strategic plans (particularly site
openings) from the funds which were raised by a successful
£31m equity raise on 1 July 2021.
• Employees within the Group Bonus Scheme received H2 2021
bonuses at 50% of full-year maximum and, accordingly, the
outcome for the CEO’s bonus for H2 broadly aligns to the
experience of our staff in the Group Bonus Scheme.
• The March 2019 PSP awards are no longer expected to vest on
27 March 2022 due to the downward pressure on our share
price caused by the emergence of the Omnicron variant in
December 2021 and January 2022 and the ongoing market
anxiety around leisure stocks.
Against the background set out above, the proposed bonus
outcomes for 2021 were considered appropriate. It is important
for the business as a whole to have confidence in the integrity of
incentive plans and paying modest bonuses (justified by H2 2021
performance and after an exceptionally challenging two years)
will, we believe, position us well for 2022 and so support
shareholders’ best interests in the longer-term.
Bigger company/best practice changes.
Certain changes are matters which we have previously flagged
our intent to introduce as part of our 2022 policy, and which we
acknowledge to be appropriate given the Company’s more
established position as a publicly listed company.
• We will align the pension contribution for all Executive
Directors and Executive Committee members from 10% of
salary to that of all employees at 4% of salary from the start of
January 2023. As a business which values the contribution of
‘all voices’ this is entirely appropriate.
• We will introduce a two year post-employment shareholding
guideline of 200% of salary (or actual shareholding at leaving,
if lower) to apply to all Executive Directors for a two year
period from leaving from the 2022 AGM.
Introduction of ESG/Social Value measures to our annual bonus
As is detailed in our Sustainability Report, we have recognised the
importance to our business and its wider stakeholders that we
have effective tools to measure and target the health and wider
social benefit of our gyms. As such, the leadership team at TGG
have been working closely with Sheffield Hallam and 4Global
who have created a ‘social value’ scoring system which is now
widely recognised by the UK Government.
We intend to bring measures based on this work into our annual
bonus scorecard for 2022 and during the life of this policy, either
as key inputs (such as the number of member visits per month) or
as outputs under our developed Social Value Calculator. When
we consulted with our shareholders they expressed strong
feedback in favour of the use of Social Value as a metric for
incentive pay at TGG. It is very affirming that our leading
shareholders backed this initiative and saw its potential to
represent a win for our gym members, a win for the business, and
a win for our shareholders who we know care about supporting
businesses that do good.
renewal of our remuneration policy at our 2022 AGm
(and implementation of our policy in 2022)
At our 2022 AGM we will be bringing forward a revised and
updated Directors’ Remuneration Policy as our current Directors’
Remuneration Policy, which was approved by our shareholders
at our 2019 AGM, will reach its normal course three year
renewal date.
CFO and Chief Executive Officer’s salary adjustment
In September last year, I wrote to our leading shareholders to
explain why we would now be implementing moving the CFO’s
salary up from the entry level we had set for Mark George as a
newly appointed first time CFO in 2018 of £225,000 to
£275,000, which step followed careful benchmarking of
comparable roles.
In late 2021 we consulted with our leading institutional
shareholders (as well as the major proxy advisors) regarding
changes to our policy and its implementation which we wished to
bring forward in 2022, and these proposed changes are in three
main areas as summarised below. As a whole, we feel these
changes reflect the Company’s growing maturity as a listed
business and the development in the scale and extent of its
operations since our IPO, and the wider contribution which we
can now see our business making to UK society. We are grateful
to those shareholders with whom we consulted for their support
and guidance on these matters. To give some idea regarding this
development journey, in 2015 we were a business of 60 gyms,
and we are now operating over 200 gyms.
This salary readjustment had been linked to Mark showing his
capability in the CFO role, which he did in the first 18 months since
his appointment and then further throughout 2021, but (and as
disclosed in our 2020 Directors’ Remuneration Report) we consciously
delayed from making any change to Mark’s salary in early 2021
(which had been considered) due to the pandemic. Mark himself had
not regarded any such salary adjustment at that time as appropriate.
(Mark has subsequently resigned to take up the opportunity of the
CFO of Wickes plc and will be leaving in July 2022).
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Format of the report and matters to be approved at
our AGm
At the 2022 AGM, shareholders will be asked to approve two
resolutions related to Directors’ remuneration matters. These
resolutions are:
• To approve the Directors’ Remuneration Report.
• To approve the updated Directors’ Remuneration Policy.
The vote to approve the Directors’ Remuneration Report is the
normal annual advisory vote on such matters. If approved by our
shareholders, the Directors’ Remuneration Policy will apply for a
maximum of three years from the 2022 AGM and will replace
the Directors’ Remuneration Policy previously approved at the
2019 AGM.
We are happy to receive feedback from shareholders at any time
in relation to our remuneration policies and hope to receive your
support for the resolutions referred to above at our forthcoming
AGM.
I will be available at the AGM to answer any questions you may
have.
emma Woods
Chair of the Remuneration Committee
16 March 2022
As part of the benchmarking we carried out last year on the level
for the CFO salary, we also looked carefully at what level the
CEO salary should be at, now the Company is considerably
larger than when it was set three years ago. I have therefore
discussed with shareholders that we intend to move our CEO’s
salary from its 2021 level of £306,000 per annum to a new level
of £400,000 on a phased basis, with the likelihood being that we
will move to this new level in three stages over the period of the
next two years, in line with business recovery.
This proposal seeks to place our CEO’s salary at a level which we
regard as appropriate for TGG given the scale to which its
business has grown, but with a positioning that still respects our
long-established outlook of weighting total packages towards
incentives which align to the delivery of long-term value for our
shareholders. Within a package balanced in this way, having
appropriate levels of fixed pay is important. Accordingly, this
re-positioning is necessary to maintain the integrity of our overall
pay outlook (modest to market level salaries; good incentive
opportunities) which, we believe, will serve shareholders well as
the business continues on its development journey.
Given the strong re-opening performance of H2 2021, for 2022
the CEO’s salary will move to the first stage of this readjustment
and be £337,000.
As we have demonstrated in the past, our preference as a Board
is for Executive Directors’ salaries to move only in line with salary
inflation rates for all staff when we can do so, and we would
intend to return to that position after the proposed repositioning of
the CEO’s salary as described above is completed.
resignation of our chief Financial officer
We announced in January 2022 that our Chief Financial Officer,
Mark George, has resigned from his position.
The remuneration-related arrangements for Mark’s leaving TGG
are set out in the Implementation Report, and the Committee is
satisfied that these are fully in line with our Directors’ Remuneration
Policy whereby:
• Fixed pay reflects contractual entitlements for the notice period
only.
• Mark will receive no annual bonus for 2021 and all of Mark’s
unvested share awards will lapse when he leaves the business.
The Remuneration Committee would like to formally thank Mark
for his hard work on remuneration issues during a tricky couple of
years and wish him all the best for the future.
88
At a glance
Remuneration policy and implementation
Base salary
Reviewed annually.
Richard Darwin: £306,000
Richard Darwin: £337,000
Overview of policy
Remuneration in 2021
Implementation for 2022
pension and benefits
Mark Gorge: £241,267
In line with policy. Richard
Darwin and Mark George
pension contributions at 10%
of salary.
With effect from 1 January
2023, Executive Director
pension levels will be aligned to
the majority of the workforce.
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.
Pension – maximum contribution
of 10% of salary.
Benefits consist of car
allowance, life insurance,
private medical cover, a car
parking space and additional
mobile telephone contracts
(in the case of the Founder
Director).
Annual bonus
Maximum of 100% of salary.
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.
Outcome for Richard Darwin
with regards to H2 2021 bonus
was 89% of maximum, resulting
in a bonus payout of 44.7% of
salary. No bonus is payable to
Mark George due to his
decision to resign as Group
CFO in January 2022.
No changes in maximum.
See the Committee Chair’s
letter regarding the proposed
introduction of ESG/
Social Value measures as
part of the annual bonus
for 2022.
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long-term incentives
Share ownership
guidelines
2021 single total figure
Richard Darwin
Mark George
Overview of policy
Remuneration in 2021
Implementation for 2022
PSP awards granted in March
2019 held by Richard Darwin
and Mark George are no
longer expected to vest due to
not achieving the performance
metrics assessed to 27 March
2022 (that date being after this
report was published).
Awards granted in 2021:
Richard Darwin: 175% of salary
Mark George: 175% of salary
Performance conditions for
2021 awards:
66.7% relative TSR target; and
33.3% absolute TSR target.
At the year end, Richard Darwin
met the requirements.
Performance share award,
subject to service and
performance over a three-year
period, as well as two year post-
vesting holding period.
Maximum award of 200% of
salary (300% in exceptional
circumstances).
Subject to malus and clawback
provisions.
300% for Executive Directors.
(200% for new Executive
Directors).
With effect from the 2022
AGM, introduction of a two
year post-employment
shareholding guideline of 200%
of salary (or actual shareholding
at leaving, if lower) to apply for
a two year period from leaving.
Awards for 2022:
Quantum: 175% of salary
Performance conditions: relative
TSR (50%); Adjusted Group
Operating Cash Flow (25%);
ROIC in the mature estate
(25%).
Introduction of post-employment
shareholding guideline with
effect from 2022 AGM.
Salary
Taxable
benefits
Bonus
Long-term
incentives
Pension
Total
remuneration
306,000
12,772
136,782
241,267
10,738
–
–
–
30,600
486,154
24,127
276,132
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 represents the proposed policy which will take effect, subject to the approval of the shareholders, immediately after the 2022 AGM
(the ‘Directors’ Remuneration Policy’).
Part B 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.
90
pArT A: 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
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.
Policy and operation
Maximum
Performance measures
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 or travel
allowance, a car parking
space and additional mobile
telephone contracts (in the
case of the Founder 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.
n/a
It is anticipated that salary
increases will generally be in
line with percentage increases
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 and
Accounts 2021.
n/a
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.
Changes from
previous policy
Maximum
amount of
salary
re-expressed
to link to
percentage
increases for
salaried staff
in most
years.
No material
changes.
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Changes from
previous policy
Confirmed
that from
1 January
2023
Executive
Directors’
pension
contribution
levels will be
aligned to
the majority
of the
workforce.
No material
changes.
Policy and operation
Maximum
Performance measures
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
The maximum employer’s
contribution is limited to up to
10% of base salary for current
Executive Directors. With effect
from 1 January 2023 all
Executive Directors will have
employer’s contribution levels
aligned to the contribution
levels for the majority of the
workforce (currently 4% of
base salary).
The maximum level of annual
bonus plan outcomes is 100%
of base salary for the duration
of this policy.
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 payout of
more than 20% of the
maximum portion of overall
annual bonus attributable to
that measure, with a sliding
scale to full payout 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.
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. In calculating the
numbers of shares for deferral,
the Company will use the
average share price for the
three months preceding the
award date.
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 share
awards.
Element and
purpose
pension
To provide
retirement
benefits.
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.
92
Changes from
previous policy
No material
changes.
Element and
purpose
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
Performance
Share Plan
(‘PSP’).
Policy and operation
Maximum
Performance measures
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.
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.
In calculating the numbers of
shares in awards, the
Company uses the three month
average share price preceding
the award date.
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
PSP 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.
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Maximum
n/a
Performance measures
n/a
Changes from
previous policy
Introduction
of post-
cessation
share
ownership
guidelines.
Element and
purpose
Policy and operation
Share
ownership
guidelines
To further
align the
interests of
Executive
Directors with
those of
shareholders.
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 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).
In addition to the
in-employment shareholding
guideline, Executive Directors
will be expected to retain the
lower of actual shares held at
cessation and shares equal to
200% of salary for two years
post-cessation.
This guideline will apply in
respect of any vested shares
which vest from PSP and DSBP
awards granted after the
2022 AGM.
94
Element and
purpose
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
shareholders.
Policy and operation
Maximum
Performance measures
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 will
not be subject to
performance conditions.
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 operates 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 are able to
participate in each of the
all-employee share plans on
the same terms as other Group
staff.
chair of the Board and Non-executive Directors
Element and
purpose
chair of the
Board
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.
Policy and operation
Maximum
Performance measures
Fees are paid monthly in cash.
n/a
The aggregate fees and any
benefits of the Chair of the
Board 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.
The fees paid to the Chair of
the Board and Non-Executive
Directors aim to be competitive
with other fully listed
companies of equivalent size
and complexity. The fees for
the Non-Executive Directors
may include a basic fee and
additional fees for further
responsibilities (for example,
when chairing Board
Committees or holding the
office of Senior Independent
Director).
The fees payable to the
Non-Executive Directors are
determined by the Board, with
the Chair of the Board’s fees
determined by the Committee.
Directors do not participate
in decisions regarding their
own fees.
No benefits are envisaged for
the Chair of the Board and
Non-Executive Directors but
the Company reserves the right
to provide benefits including
travel and office support.
Changes from
previous policy
No material
changes.
Changes from
previous policy
No material
changes.
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Notes to the policy table
Founder Director
As announced in May 2018, from 17 September 2018 John
Treharne stood down as CEO and took on the role of Founder
Director. This enabled John to continue to provide the benefit of his
immense network and experience across the sector with a focus
on nurturing culture and entrepreneurial activity, whilst also
leaving more time for his family and personal interests.
John’s package was redesigned as follows:
• the only elements of fixed pay which John should receive as
Founder Director are base salary and benefits (his base salary
was reduced from £195,000 p.a to £100,000 p.a. with effect
from 1 January 2022);
• John no longer receives any pension contribution from the
Company;
• John no longer participates in the annual bonus and does not
receive any new grants of PSP awards (previous PSP awards
have either vested or lapsed);
• John remains subject to shareholding guideline requirements
(300% of salary), and whilst acting as Founder Director he has
committed to retain a minimum shareholding of at least 0.5% of
total issued share capital.
Malus and clawback
The Remuneration Committee may apply malus and clawback to
a PSP award, to deferred shares under the 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 corporate failure of a Group Company) 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 encourage
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.
96
Travel and hospitality
Whilst 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 (including any related tax liabilities
settled by the Company), 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
Whilst 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.
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 limits set out in the policy table;
• the determination of performance against targets and resultant
vesting/bonus payouts;
• various discretions required when dealing with a change of
control or restructuring of the Group (e.g. the timing and
determination of performance conditions);
• 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.
Whilst performance measures and targets for annual bonus and
PSP awards 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 as applied to the forfeited awards.
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.
A new Chair or Non-Executive Director would be recruited on
the terms explained above in respect of the main policy for
such Directors.
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, DSBP 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.
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.
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
David Kelly
Emma Woods
Rio Ferdinand
Wais Shaifta
25 July 2016
11 November 2016
1 February 2021
1 February 2021
Initial period of three years, subject to re-election at each Annual General
Meeting of the Company and are terminable on one month’s notice given
by either party.
97
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
GoVerNANce
reporT oF The remuNerATIoN commITTee CONTINUED
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, 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 good leaver reason
determined by the Committee, such bonus will be payable as the
Committee in its absolute discretion determines. Such payments will
normally be on a pro-rata basis for the part of the year worked. 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; or
• ceases to be employed due to death, 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 good leaver 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
(acceleration will be automatic in cases of death). Awards will
be prorated by reference to the proportion of the vesting
period for which the participant remained employed. The
Committee has a standard ability to vary time prorating.
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). The Committee will normally align continuing
holding periods after termination with the two year period after
termination for share ownership guidelines. However, if the
participant ceases employment during the holding period 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 prorating. The
Committee has a standard ability to vary time pro-rating.
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.
98
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 Annual General Meeting, 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 Chair of the Board.
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 a
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.
Illustrations of application of remuneration policy
The following chart shows how the remuneration policy for the Chief Executive Officer will be applied in 2022 using the following
assumptions:
Minimum
Target
– Consists of base salary, benefits and pension.
– Base salary is the salary to be paid in 2022.
– Benefits measured as benefits paid to the Director in the year ended 31 December 2021.
– Pension measured as the defined contribution or cash allowance in lieu of Company contributions of 10%
of salary.
Richard Darwin
£337,000
£12,772
£33,700
Base salary
Benefits
Pension
Total fixed
£383,472
Based on what the Director would receive if performance was on-target (excluding share price appreciation
and dividends):
– Annual bonus: consists of a mid-level bonus.
– LTI: consists of the threshold level of vesting (20% vesting) of PSP awards (at 175% of salary).
Maximum and growth
Based on the maximum remuneration receivable (excluding dividends but assuming 50% share price
appreciation):
– Annual bonus: consists of maximum bonus of 100% of base salary.
– LTI: consists of full vesting of PSP awards (at 175% of salary).
– Maximum with growth simply assumes 50% share price growth for PSP awards.
richard Darwin (chief executive officer)
£’000
£1,700
£1,600
£1,500
£1,400
£1,300
£1,200
£1,100
£1,000
£900
£800
£700
£600
£500
£400
£300
£200
£100
£0
£670
18%
25%
57%
£383
100%
£1,605
18%
£1,310
45%
37%
26%
29%
21%
24%
Minimum
On-target
Maximum
Max with growth
Share price growth
Long-term incentive
Annual bonus
Fixed
99
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
GoVerNANce
reporT oF The remuNerATIoN commITTee CONTINUED
pArT B: ImplemeNTATIoN reporT
Implementation of Policy for 2022 (unaudited information)
Base salary
The Chief Executive Officer’s base salary for 2022 will be £337,000.
The base salary for John Treharne (our Founder Director) will be £100,000 (2021: £195,000).
Pension
Contributions rates for Executive Directors will be 10% of salary. Contributions may be made as cash supplements in full or in part. We
will align the pension contribution rate for all Executive Directors to that of all employees at 4% of salary from the start of January 2023.
Benefits
Details of the benefits received by Executive Directors are set out in note 1 to the single figure table on page 101.
Annual bonus
The overall bonus plan maximum for Richard Darwin will be 100% of base salary for 2022. Mark George will not be eligible to
participate in the bonus plan for 2022 following the announcement that he will be leaving the Company in July 2022.
The 2022 bonus will be based on financial targets (namely Group Adjusted EBITDA Less Normalised Rent), number of new sites opened,
average Q4 membership numbers and percentage of members visiting our gyms four times a month. As noted in the Committee Chair’s
letter, we also intend to introduce an ESG/Social Value measure as a new strategic target for the purpose of the 2022 annual bonus.
All of these targets are either specific KPIs (Group Adjusted EBITDA) or are lead indicators (site openings; membership metrics) towards a
number of our non-financial KPIs (total number of gyms; total number of members). Due to issues of commercial sensitivity, we do not
believe it is in shareholders’ interests to disclose any further details of these targets 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 2022 bonus (and performance against these targets) in
next year’s Directors’ Remuneration Report.
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
An award will be made in 2022 under the PSP to Richard Darwin over shares worth 175% of salary. Mark George will not receive a
PSP award in 2022 following the announcement of his resignation in January 2022.
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. PSP 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 return to the previous mix of relative TSR and financial performance metrics that were in use prior to the
onset of the pandemic. The mix of targets will be relative TSR (50% weighting), Adjusted Group Operating Cash Flow (25% weighting)
and ROIC in the mature estate (25% weighting). These are measures which encourage the generation of sustainable long-term returns to
shareholders. It is currently intended that the measures will be as described below, although for relative TSR the Committee is considering
the introduction of a sector specific comparator group to operate for part of the award; if this change is made it will be confirmed in the
RNS announcement for the grant of 2022 PSP awards.
Relative TSR vs FTSE Small Cap (excluding investment trusts) (50% of total award)
% of that part of the award that vests
0%
20%
100%
Pro rata straight-line between 20% and 100%
The Gym Group ranking
Below median
Median
Upper quintile or above
Median to upper quintile
100
Adjusted Group Operating Cash Flow (25% of total award)
Adjusted Group Operating Cash Flow for financial year 2024
% of that part of the award that vests
Below £135m
£135m
£150m or above
0%
20%
100%
Between £135m and £150m
Pro rata straight-line between 20% and 100%
ROIC in the mature estate (25% of total award)
ROIC in the mature estate for financial year 2024
% of that part of the award that vests
Below 25%
25%
30% or above
0%
20%
100%
Between 25% and 30%
Pro rata straight-line between 20% and 100%
Founder Director
With effect from 1 January 2022, John Treharne will be paid a base salary of £100,000. As Founder Director he will continue to receive
benefits in accordance with the Policy. John will not receive any pension contributions, nor will he participate in the annual bonus plan or
receive any PSP awards in 2022.
Non-Executive Directors’ fees
Penny Hughes will receive an annual fee of £138,000 as Chair of the Board. David Kelly, Emma Woods, Rio Ferdinand and Wais
Shaifta will each receive a 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 2021:
£
executive Directors
Richard Darwin
Mark George
Founder Director
John Treharne
Non-executive Directors
Paul Gilbert6
Penny Hughes
David Kelly
Emma Woods
Wais Shafta7
Rio Ferdinand7
Salary/fees
Taxable
benefits1
Bonus2
Long-term
incentives3
Pension4
Total
remuneration
Total fixed
remuneration5
Total variable
remuneration5
306,000
12,772
136,782
241,267
10,738
195,000
8,036
19,960
1,524
138,000
55,000
55,000
50,417
50,417
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
30,600
486,154
349,372
136,782
24,127
276,132
276,132
–
–
–
–
–
–
–
203,036
203,036
21,484
21,484
138,000
138,000
55,000
55,000
55,000
55,000
50,417
50,417
50,417
50,417
–
–
–
–
–
–
–
–
1
Taxable benefits comprise car allowance (£8,000 for Richard Darwin and Mark George), private medical cover, a car parking space and additional mobile telephone contracts
(in the case of the Founder Director). The benefits for Paul Gilbert is the taxable annual value of family gym membership for 10 years which was provided to Paul as a retirement gift.
2 Further details of the bonus outturn for 2021 can be found on page 102. The bonus total for Richard Darwin represents 44.7% of base salary.
3 The 2019 PSP awards are not expected to vest as the EPS and ROIC measures for the three year financial performance period to 31 December 2021 have not been met. The performance of the
TSR element of the awards will have its final measurement on 27 March 2022 but is not expected to be attained.
4 Pensions are provided via a defined contribution and/or cash supplement.
5 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.
6 Paul Gilbert stepped down from the Board on 11 May 2021.
7 Wais Shaifta and Rio Ferdinand joined the Board on 1 February 2021.
101
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
GoVerNANce
reporT oF The remuNerATIoN commITTee CONTINUED
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/fees
Taxable
benefits
Bonus
Long-term
incentives
Pension
Total
remuneration1
Total fixed
remuneration
Total variable
remuneration
283,050
11,786
213,180
2,209
143,000
5,671
40,333
3,931
101,200
40,333
40,333
–
–
–
–
–
–
–
–
–
–
12,483
28,305
335,624
323,141
12,483
12,483
21,318
249,190
236,707
12,483
–
–
–
–
–
–
–
–
–
–
148,671
148,671
44,264
44,264
101,200
101,200
40,333
40,333
40,333
40,333
–
–
–
–
–
1
The aggregate emoluments (being salary/fees, bonuses, benefits and pension allowances) of all Directors for 2021 was £1,335,640 (2020: £959,615).
Further information on the 2021 annual bonus (audited)
As explained in the Committee Chair’s letter, an annual bonus plan was only operated for the second half of 2021 subject to a
maximum of 50% of base salary (half of the normal maximum). The H2 2021 bonus for the Executive Directors was based on three
metrics with equal weightings (Group Adjusted EBITDA Less Normalised Rent, site openings and membership numbers). Outcome
against the targets was as follows:
Measure (weighting)
EBITDA targets (33%)
Site openings (33%)
Threshold
£5.0m
10
Maximum
£5.5m
18
£5.7m
19
Actual
Vesting outcome
Membership numbers (33%)1
730,000
750,000
734,119
Overall
1 Membership numbers averaged over last two months in 2021.
100%
100%
68.2%
89.4%
Having considered the wider experience of our shareholders and other stakeholders the Committee determined that it was appropriate
to allow payment of the H2 2021 bonus in line with the achievement of the targets as described above, giving a total bonus of 44.7% of
annual salary for the CEO. Mark George will not receive a bonus for H2 2021 following the announcement of his resignation as CFO in
January 2022.
performance Share plan awards
Vesting outcomes for 2019 PSP awards
Performance measure and weighting
Target range
Earnings per share growth
(25%)
Target range between 14.2p (20% vests) and 19.6p
(100% vests) for financial year 2021.
Performance
achieved
(20.7)p
Vesting
outcome
% of total
award vesting
0%
0%
TSR (50%)
Target range between median performance (20% vests)
and upper quintile performance (100% vests) against the
constituents of the FTSE SmallCap (excluding investment
trusts) measured over three year period to 27 March 2022.
estimated to
be below
median1
estimated to
be nil
estimated to
be 0%
ROIC (25%)
Target range between 29.7% and 31.7%.
18%
0%
0%
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.
Total
0%
1
The final TSR outcome will be measured after the latest possible date for inclusion in the Annual Report and Accounts 2021. An estimated value has been included and the final outcome will be confirmed
in the Annual Report and Accounts 2022.
102
Details of outstanding pSp awards
Executive
Richard Darwin
Mark George
John Treharne
Awards held at
1 Jan 2021
Awards granted
during the year1, 2
Awards exercised
during the year
Awards lapsed
during the year3
Interests held at
31 Dec 20214
834,737
429,733
355,967
230,421
168,975
–
109,641
139,096
–
–
–
185,414
816,421
598,708
170,553
1
The above PSP awards were granted at the three-month average market price of 232.4p to the last trading day prior to grant on 25 March 2021. On the basis of this approach 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 2018 PSP awards (representing 139,096 shares for Richard Darwin and 185,414 shares for John Treharne) lapsed as the performance conditions for these awards were not achieved.
4 The minimum share price in 2021 was 210.0p and the maximum share price was 313.0p. The closing share price on 31 December 2021 was 254.5p.
These awards vest based on performance against the following targets:
Performance measure
2019 award (50% TSR, 25%
growth in adjusted EPS and 25%
ROIC in mature estate)
2020 award (66.7% relative
TSR and 33.3% absolute TSR)
2021 award (66.7% relative TSR
and 33.3% absolute TSR)
Adjusted epS growth
20% of this part vests at threshold performance
rising on a pro rata basis until 100% vests.
Target range between
14.2p and 19.6p for
FY2021.
Not applicable.
Not applicable.
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:
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.
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.
Target range as for
2019 award.
Target range as for
2019 award.
Not applicable.
Not applicable.
Target range between
210p (threshold) and
300p (maximum).
Target range between
285p (threshold) and
335p (maximum).
• 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. 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. 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.
103
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
GoVerNANce
reporT oF The remuNerATIoN commITTee CONTINUED
• 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.
participation in the Share Incentive plan (‘SIp’)
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
at 1 Jan 2021
Partnership shares
purchased in 2021
Matching shares
awarded in 2021
Free shares
awarded in 2021
Total SIP shares at
31 Dec 2021
8,725
4,860
722
994
722
994
–
–
10,169
6,848
participation in the Sharesave plan
The Executive Directors participate in the Sharesave Plan on the same terms as all other employees. Details of the Executive Directors’
participation in the Sharesave Plan are as follows:
Exercise
Total
Sharesave
awards at
1 Jan 2021
Richard Darwin
16,666
Mark George
16,666
Awards
granted
–
–
Exercise
price of
awards
granted
(pence)
108.0
108.0
Awards
vested
(number)
Awards
exercised
(number)
Awards
lapsed
(number)
–
–
–
–
–
–
Total
Sharesave
awards at
31 Dec 2021
16,666
16,666
Earliest
exercise
date
1 December
2023
1 December
2023
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 2021:
Director1
Penny
Hughes2
John
Treharne3
Richard
Darwin4
Mark
George
Paul
Gilbert5
David
Kelly
Emma
Woods6
Wais
Shafta
Rio
Ferdinand
Ordinary shares
65,201 1,591,908 721,760
13,642
Shares awarded under SIP
–
3,909
10,169
6,848
Maximum shares receivable
under PSP awards
Maximum shares receivable
under Sharesave awards
Total shareholding and share
interests
– 170,553
816,421 598,708
–
–
16,666
16,666
65,201 1,766,370 1,565,016 635,864
–
–
–
–
–
10,000
13,930
–
–
–
–
–
–
10,000
13,930
–
–
–
–
–
–
–
–
–
–
The shareholdings and awards set out above include those held by Directors and their respective connected persons.
1
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 Ordinary 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 in includes 100,000 Ordinary shares owned by Charlotte Darwin.
5 Paul Gilbert stepped down from the Board on 11 May 2021.
6 The total number of Ordinary shares in which Emma Woods or persons connected with her is interested in includes 8,930 Ordinary shares owned by Lorcan Woods.
104
Statement of Directors’ shareholding and share interests (audited) continued
Progress towards share ownership guidelines
3x salary
guidelines
Richard Darwin
Mark George
16%
605%
0x
1x
2x
3x
4x
5x
6x
7x
Multiple of salary as at 31 December 2021 and calculated using the share price on that day (255p).
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.
Under share ownership guidelines implemented by the Remuneration Committee, any Executive Director at Admission is required to build
and then maintain a shareholding equivalent to 300% of base salary, and any Executive Director appointed after Admission has a share
ownership guideline of 200% 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 2021 year-end, Richard Darwin and John Treharne complied with this
requirement as shown above.
payments to past Directors (audited)
No payments were made to past Directors during the year.
As was announced in January 2022, our Chief Financial Officer, Mark George, has resigned his position. He is currently working his
notice period and it is anticipated that he will leave the business in July 2022. During this period, he will continue to receive his normal
fixed pay in accordance with his contractual entitlements for the notice period. Mark will receive no annual bonus for 2021 or 2022
and all of his unvested PSP share awards will lapse when he leaves the business. Any awards he holds under the all-employee SAYE and
SIP schemes will be treated in accordance with the rules of the relevant scheme.
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
200
180
160
140
120
100
80
105.9
100.8
31 Dec
2015
136.1
115.2
113.3
150.7
146.3
141.6
123.2
156.8
113.2
192.9
132.7
87.3
31 Dec
2016
31 Dec
2017
31 Dec
2018
31 Dec
2019
31 Dec
2020
31 Dec
2021
The Gym Group plc
FTSE Small Cap Index
Source: Datastream
(a Refinitiv Product)
105
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
GoVerNANce
reporT oF The remuNerATIoN commITTee CONTINUED
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
2021
CEO
Single figure of total
remuneration
Annual bonus pay-out
against maximum %
Long-term incentive vesting
rates against maximum
opportunity %
John Treharne
John Treharne
John Treharne
John Treharne
Richard Darwin
Richard Darwin
Richard Darwin
Richard Darwin
£287,793
£313,628
£431,302
£272,721
£97,326
£536,613
£335,624
£486,154
£60,0002
27.2%3
74.3%3
16.0%
16.0%
35.1%
0%
44.7%
n/a
n/a
n/a
41.7%
41.7%
72.5%
0%
0%4
1
2
3
4
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.
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.
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.
The 2019 PSP awards are expected not to vest due to failure to meet the performance metrics. As the final outcomes will be determined after the latest possible date for inclusion in this report, the
final outcomes will be confirmed in the 2022 report.
Annual percentage change in remuneration of Directors and employees
In 2020, in response to the impact of COVID-19, the Board took swift action to ensure that remuneration at The Gym Group aligned with
the broader experience of our stakeholders. As a result, each of the Executive Directors took material reductions in their salary for the
second quarter of 2020 (this was 30% in respect of Richard Darwin and 20% in respect of Mark George). In addition, the Chair of the
Board, Non-Executive Directors and Founding Director each waived their fees or salary on a voluntary basis entirely in the second
quarter. The percentage increases between 2020 and 2021 shown in the table below therefore reflect a return to pre pandemic levels
of fees and salary for the Directors.
The percentage change in remuneration of the Directors and employees of the business between the 2019, 2020 and 2021 financial
years were as follows:
Employees1,2
executive Directors:
Richard Darwin
Mark George
Founder Director:
John Treharne
Non-executive Directors:
Paul Gilbert3
Penny Hughes
David Kelly
Emma Woods
Wais Shafta4
Rio Ferdinand4
% change from 2019 to 2020
% change from 2020 to 2021
Salary or fees
5%
(6)%
(3)%
Benefits
(11)%
3%
20%
Bonus
Salary or fees
(100)%
6%
(100)%
(100)%
8%
13%
Benefits
29%
8%
100%
Bonus
100%
100%
0%
(27)%
(48)%
N/A
36%
42%
N/A
(27)%
(27)%
(27)%
(27)%
N/A
N/A
31%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
36%
36%
36%
36%
N/A
N/A
9%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1
2
3
4
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.
The average percentage change in employee remuneration was calculated using the movement in mean values (in respect of each element of remuneration) between the relevant years. 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.
Paul Gilbert retired from the Board on 11 May 2021.
Wais Shaifta and Rio Ferdinand, joined the Board on 1 February 2021.
106
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 101)
compares to equivalent single figure remuneration for full-time equivalent UK employees, ranked at the 25th, 50th and 75th percentile.
Year
2018
2019
2020
2021
Method
25th percentile pay ratio
Median pay ratio
75th percentile pay ratio
Option B
Option B
Option B
Option B
19.2 : 1
30.4 : 1
19.0 : 1
26.3 : 1
12.8 : 1
26.6 : 1
18.8 : 1
25.0 : 1
10.4 : 1
13.5 : 1
13.2 : 1
23.8 : 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.
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.
FTE equivalent pay has been calculated using the gender pay gap reporting methodology.
The Committee believes the median pay ratios for 2018, 2019, 2020 and 2021 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.
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).
3
4
5
6
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
£18,505.60
£19,441.77 £19,630.00
£18,505.60
£19,441.77
£20,424.09
The change in each of the pay ratios for 2021 (relative to prior years) reflects both: (1) return to normal fixed pay for the Chief Executive
Officer (after the temporary reductions made in 2021 in response to COVID-19); and (2) the payment of a bonus in respect of H2 2021.
As the CEO pay ratio will involve the inclusion of variable pay outcomes for any year, it is reasonable to expect the ratio to vary from
year to year.
relative importance of spend on pay (unaudited)
The table below details the change in total staff pay between 2020 and 2021 compared with distributions to shareholders by way of
dividend, share buy backs or any other significant distributions or payments:
Total gross staff pay1
Dividends/share buy backs
2021
£’000
2020
£’000
29,738
26,585
–
–
% change
11.86%
0%
1 The increase in gross staff pay from 2020 reflects the increase in our number of employees due to new gym openings and additional gym support staff.
Summary of shareholder voting
The following table shows the results of the advisory vote on the 2020 Directors’ Remuneration Report (at the 2021 AGM) and the
binding vote on the Directors’ Remuneration Policy at the 2019 AGM:
For (including discretionary)
Against
Votes withheld
Approval of the 2020 Directors’
Remuneration Report (2021 AGM)
Approval of the Directors’
Remuneration Policy (2019 AGM)
Total number of votes
% of votes cast
Total number of votes
% of votes cast
114,021,914
3,893,530
7,229,647
96.7%
3.3%
–
84,131,086
4,759,041
–
94.7%
5.3%
–
107
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
GoVerNANce
reporT oF The remuNerATIoN commITTee CONTINUED
remuneration committee in 2021 (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 Chair of the Board 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 77 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. The whole Board, specially the Chair of the Board and the Chair of the Remuneration Committee,
regularly visit our gyms, which facilitates engagement and keeps the Board up to date with gym operations. It is our intention to continue
this dialogue in 2022 and to explain to the wider workforce how the pay of Executive Directors and employees is aligned.
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 2021 were £72,715 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
emma Woods
Chair of the Remuneration Committee
16 March 2022
108
DIrecTorS’ reporT
The Directors present their report together with the audited
financial statements for the period ended 31 December 2021.
Where reference is made to other sections of the Annual Report
and Accounts 2021, these sections are incorporated into this
report by reference.
A summary statement of non-financial information and where this
can be found in the report is on page 51.
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.
The Board
The Directors who served during the year were:
Penny Hughes
John Treharne
Richard Darwin
Paul Gilbert (resigned with effect from 11 May 2021)
David Kelly
Emma Woods
Mark George
Wais Shaifta (appointed with effect from 1 February 2021)
Rio Ferdinand (appointed with effect from 1 February 2021)
Following year end, Mark George notified the Board of his
resignation as Chief Financial Officer and Executive Director.
Mark will be stepping down from his post in July 2022.
The roles and biographies of the Directors as at the date of this
report are on pages 72 to 73. 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.
• 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.
Directors’ indemnity insurance
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.
Dividend
As noted on page 60, the Directors are not proposing a final
dividend for the year 2021, taking into account the impacts of the
pandemic upon the Group when gyms were closed and the
business support measures received from the Government. It is a
condition of the £30m 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.
events after the balance sheet date
In March 2022, the Group agreed to acquire the trade and assets
of a portfolio of three sites trading under the Fitness First brand for
total cash consideration of £5.5 million. At the same time, the
Group also obtained credit committee approval from its banks for
certain changes to its RCF facility.
Further detail is included in note 30 to the Consolidated Financial
Statements.
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 69
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 70 to 78, 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 36 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 45 and forms part of this report
by reference.
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 32 and forms part of
this report by reference.
political donations
The Company made no political donations in 2021 (2020: £nil).
109
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
GoVerNANce
DIrecTorS’ reporT CONTINUED
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.
Directors’ interests
The beneficial interests of the Directors of the Company at
31 December 2021, and their connected persons, in the issued
Ordinary shares are provided on page 104 within the Directors’
Remuneration Report.
major interests in shares
As at 31 December 2021, 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
18,910,857
Liontrust Sustainable Investments
Blantyre Capital
17,807,214
Legal & General Investment Management 11,024,995
10,504,766
Fidelity International
8,839,116
Janus Henderson Investors
8,408,677
Invesco
7,666,665
Columbia Threadneedle Investments
6,991,669
BMO Global Asset Management (UK)
6,842,801
AXA Framlington Investment Managers
5,359,760
Premier Miton Investors
10.64
10.02
6.20
5.91
4.97
4.73
4.31
3.93
3.85
3.02
Share capital
As at 31 December 2021, the Company’s issued share capital
comprised 177,751,218 Ordinary shares with a nominal value of
£0.01 each with one vote per share.
ordinary shares
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.
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 2021 AGM, shareholders approved an authority for the
Company to make market purchases of its own shares up to a
maximum of 16,610,444 shares (being approximately 10% of the
issued share capital at that time) at prices not less than the nominal
value of each share (being £0.01 each). No use was made of this
authority during the period. The Company intends to renew this
authority at its 2022 AGM.
110
Authority to allot shares
At the 2021 AGM, authority was given to the Directors to allot
new Ordinary shares up to a nominal value of £5,536.26,
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 £11,074.18, equivalent
to 66.67% of the authorised share capital of the Group. The
Company intends to renew this authority at its 2022 AGM.
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 2 to the
Consolidated Financial Statements.
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 and Accounts 2021. If a requirement is not shown, it is not
applicable to the Company.
Section
Listing Rule requirement
Location
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 52 to 55.
Auditors
Each of the persons who is a Director at the date of approval of
the Annual Report and Accounts 2021 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 2022 AGM will be circulated to
shareholders separately. We will ensure that shareholders are kept
informed using the Notice of Meeting, our website, and relevant
regulatory announcements in due course.
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
Note 10 Finance
Costs (page 140)
On behalf of the Board
Nadira hussein
Company Secretary
16 March 2022
Report of the
Remuneration
Committee (pages 86
to 108)
Note 25 Issued Share
Capital and Reserves
(page 153)
Corporate
Governance Report
(page 78 Directors’
conflicts of interest)
111
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
DIrecTorS’ reSpoNSIBIlITy STATemeNT
The Directors are responsible for preparing the Annual Report and
Accounts 2021 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 and Accounts 2021, 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 and Account 2021, 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
16 March 2022
112
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 2021 and of the Group’s
loss for the year then ended;
• the Group financial statements have been properly prepared in
accordance with UK adopted international accounting
standards;
• 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 2021 which comprise:
Group
parent company
Consolidated Statement
of Financial Position as at
31 December 2021
Company Statement of
Financial Position as at
31 December 2021
Company Statement of Changes
in Equity for the year then ended
Independence
We are independent of the Group and Parent 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.
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.
conclusions relating to going concern
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 obtained management’s forecast cash flows and covenant
calculations covering the period from the date of signing to
30 June 2023 and we agreed these to the Board-approved
budgets and forecasts.
• We challenged the appropriateness of the going concern
assessment period, taking into consideration events after the
going concern period which may have an impact.
• We tested the mathematical accuracy of the cash flows, as well
as the calculation of the forecast covenants.
Related notes 1 to 9 to the
financial statements including
a summary of significant
accounting policies
• We challenged management in respect of the assumptions
used in the going concern assessment, in particular new
membership numbers, churn rate, operating costs and timing/
number of new gym openings
Consolidated Statement of
Comprehensive Income for
the year then ended
Consolidated Statement of
Changes in Equity for the year
then ended
Consolidated Cash Flow
Statement for the year then
ended
Related notes 1 to 30 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 UK adopted international accounting standards. 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 believe that the audit
evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
• We assessed, against historic and current membership levels
and independent sector forecasts, the plausibility of the
reduction in membership numbers that would lead to a
covenant breach under the reverse stress test scenario and the
impact this would have on liquidity.
• We understood and challenged the Board’s controllable
mitigation plans, including reduced gym openings, lower
marketing spend, deferral of projects and the forecast impact
on the ability of the business to operate within its financial
covenants.
• We obtained supporting documentation to evaluate the
plausibility of management’s mitigation plans considering
actions delivered to date.
• We compared forecast future cash flows to historical data,
ensuring variations are in line with our expectations and
understanding of the business to consider the reliability of past
forecasts.
• We 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 management’s
forecast cash flows with additional downside on revenue.
• We obtained evidence of the banks’ agreement to the
extension of the Group’s RCF to October 2024.
113
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
INDepeNDeNT AuDITor’S reporT
To The memBerS oF The Gym Group plc CONTINUED
• We agreed available facilities to underlying agreements and
the extent of drawings thereunder to external confirmations at
31 December 2021.
• We assessed the adequacy of disclosures within the Annual
Report and Accounts 2021.
Our key observations
We observed that since gyms re-opened in April 2021,
membership numbers have increased from 536,000 to 718,000
in December 2021 and 825,000 in February 2022.
Under the reverse stress test, it required a 26% reduction in the
assumed membership number in each month under the base case
to create a breach of financial covenants (breach occurring in
December 2022; membership reduced to 82% of February 2022
levels at that time) with no liquidity issues under this scenario
during the going concern period.
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Group’s and Parent Company’s ability to continue as a going
concern for a period to 30 June 2023.
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 Loss before tax,
100% of Revenue and 100% of Total Assets.
Key audit matters • Deferral of membership income
• Annual goodwill impairment testing including cash flow and discount rate assumptions
• Property, plant and equipment and Right of Use assets impairment testing including cash flow and discount rate
assumptions
Materiality
• Overall Group materiality of £689,000 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, 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 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% (2020: 100%) of the Group’s Revenue, Group’s
Loss before tax, and Group’s Total Assets.
2021
2020
Full scope
Specific scope
remaining
components
Full scope
Specific scope
Remaining
components
Number of components
Revenue
Loss before tax
Total assets
2
100%
100%
99.9%
1
0%
0%
0.1%
4
–
–
–
2
100%
97.8%
99.9%
1
0%
2.2%
0.1%
4
–
–
–
Changes from the prior year
There are no changes from the prior year.
114
FINANCIAL STATEMENTS Involvement with component teams
All audit work performed for the purposes of the audit was undertaken by the Group audit team.
Key audit matters
Key audit matters are those matters that, in our professional judgement, 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
Deferral of membership income
– total revenue for the year ended
31 December 2021: £106.0m
(31 December 2020: £80.5m), of
which £8.5m was deferred at
31 December 2021 (31 December
2020: £6.4m) and presented in the
balance sheet as contract liabilities.
We obtained an understanding of the Group’s
revenue recognition process, in particular in respect
of the membership subscription income recognition
process. This included making enquiries of the
outsourced membership management service
provider to obtain an understanding of the
outsourced elements of the membership income
process.
Key observations communicated
to the Audit and Risk Committee
Based on our procedures,
deferral of membership
income in the year ended
31 December 2021 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.
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 management’s deferred membership
fee income calculation for all material balances in
order to ensure the accuracy of the calculation of
income deferred.
We performed full scope audit procedures over this
risk area in all locations, which covered 100% of
the risk amount.
Refer to the Report of the Audit and Risk
Committee (pages 82 to 84); Accounting
policies (page 128); and Note 5 of the
Consolidated Financial Statements
(page 137)
In preparing the consolidated financial
statements, management needs 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’).
Although the calculation of deferred
membership fees does not involve
significant judgement or estimation, it is
non-routine in its performance, with large
numbers of members, varying
subscription rates and the reliance on
outsourced processes which could be
open to manipulation.
The risk has decreased in the current
year in comparison to the prior year.
This is due to measures with respect to
COVID-19 in the prior year requiring
manual calculations due to the lockdown
over year end and, as a result,
increasing the risk of material error and
management override. The deferred
membership fee income is a system-
generated calculation in the current year.
115
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE Key observations communicated
to the Audit and Risk 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.
The financial statements
disclosures, particularly
those in note 15, materially
comply with the applicable
requirements of IAS 36
and IAS1.
The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
INDepeNDeNT AuDITor’S reporT
To The memBerS oF The Gym Group plc CONTINUED
Risk
Our response to the risk
Annual goodwill impairment
testing including cash flow and
discount rate assumptions –
31 December 2021: £77.7m
(31 December 2020: £77.7m).
Refer to the Report of the Audit and Risk
Committee (pages 82 to 84); Accounting
policies (page 132); and Note 15 of the
Consolidated Financial Statements
(page 147)
As disclosed in note 15 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 Group
chain of health and fitness facilities.
Management has 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 2021.
We focused on this area due to both the
significance of the carrying value of
goodwill 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 to the consolidated financial
statements.
There is a continuing risk and uncertainty
in the current year due to COVID-19 and
the impacts of the related Government-
enforced closures during the year and
member behaviour.
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 Group’ brand. This group of CGUs represent
the lowest level of independent cash inflows 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. We tested the input data to
source information, we evaluated the calculation
methodology and tested the integrity of the model.
For this test, we assessed whether the assumptions
disclosed in note 15 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 applied in management’s
impairment models and to assist in our assessment
of the discount rate and long-term growth rate
assumptions used in the impairment models.
We assessed the financial statements disclosures,
particularly those in note 15 for Goodwill to the
consolidated financial statements, against 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.
116
FINANCIAL STATEMENTS Key observations communicated
to the Audit and Risk Committee
Based on our procedures,
we consider management’s
assessment and the
impairment charges which
have been recorded in the
current year are reasonable.
The financial statements
disclosures, particularly
those in note 13 and 14 to
the Consolidated Financial
Statements, materially
comply with the applicable
requirements of IAS 36 and
IAS1.
Risk
Our response to the risk
property, plant and equipment
impairment testing - 31 December
2021: £165.6m (31 December 2020:
£171.3m); rou asset
31 December 2021: £281.2m
(31 December 2020: £255.6m)
Refer to the Report of the Audit and Risk
Committee (pages 82 to 84); Accounting
policies (pages 129 and 130); and Notes
13 and 14 of the Consolidated Financial
Statements (pages 143 and 144)
As disclosed in notes 13 and 14 to the
Consolidated Financial Statements,
property, plant and equipment is
recognised of £446.8m relating to the
assets held, including the Right of Use
assets for The Gym Group chain.
Management has undertaken an annual
impairment review in respect of property
plant and equipment (‘PPE’) and Right of
Use (‘ROU’) assets and has recognised an
impairment of £4.0m in the current year.
We focused on this area due to both the
significance of the carrying value of PPE
and ROU assets, 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 13 for PPE and note 14 for ROU
assets.
There is a continuing risk and uncertainty
in the current year due to COVID-19 and
the impacts of the related Government-
enforced closures during the year and
member behaviour.
We performed a walkthrough of the process and
controls to gain an understanding of the Group’s
impairment process.
Given the impairment indicators in the year due to
COVID-19, we obtained management’s impairment
testing model for PPE and ROU assets. We tested
the input data to source information, we evaluated
the calculation methodology and tested the integrity
of the model.
For the impairment test, we assessed whether the
assumptions disclosed in note 13 and 14 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 3 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 applied in management’s
impairment models and to assist in our assessment
of the discount rate and long-term growth rate
assumptions used in the impairment models.
Additionally, we engaged with EY specialists in
respect of the valuation of property as part of our
fair value assessment of the ROU assets.
We assessed the financial statements disclosures,
particularly those in note 13 for PPE and 14 for
ROU assets to the Consolidated Financial
Statements, against 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.
117
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
INDepeNDeNT AuDITor’S reporT
To The memBerS oF The Gym Group plc CONTINUED
In the prior year, our auditor’s report included a key audit matter
in relation to Annual Goodwill and Property, Plant and Equipment
(‘PPE’) and Right of Use (‘ROU’) asset testing as one key audit
matter. In the current year, these have been split into two separate
key audit matters as we consider the PPE and ROU asset testing
to be a key audit matter in the current year due to the increased
impairment in the year.
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 £689,000 (2020:
£523,000), which is 0.65% (2020: 0.65%) of revenue. We
believe that revenue is the key variable which will drive
performance of the Group in 2022, and it is therefore expected
that the users of the financial statements will focus on membership
levels and revenue.
We determined materiality for the Parent Company to be
£2,923,000 (2020: £1,942,700), which is 1% (2020: 1%) of
assets.
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.
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% (2020: 75%) of our planning
materiality, namely £517,000 (2020: £392,000). 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 £180,950 to £517,000
(2020: £176,400 to £392,000).
Reporting threshold
An amount below which identified misstatements are considered
as being clearly trivial.
We agreed with the Audit and Risk Committee that we would
report to them all uncorrected audit differences in excess of
£34,000 (2020: £26,000), 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 and Accounts 2021 set out on pages 1 to 108,
other than the financial statements and our auditor’s report
thereon. The Directors are responsible for the other information
contained within the Annual Report and Accounts 2021.
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 this
gives rise to 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.
opinions on other matters prescribed by the
companies Act 2006
In our opinion, the part of the Report of the Remuneration
Committee to be audited has been properly prepared in
accordance with the Companies Act 2006.
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.
118
FINANCIAL STATEMENTS 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 section of the Annual Report and Accounts 2021 that
describes the review of effectiveness of risk management and
internal control systems set out on pages 62 to 63; and
• The section describing the work of the Audit and Risk
Committee set out on pages 82 to 84.
• 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
Report of the Remuneration Committee 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; or
• a Corporate Governance Statement has not been prepared by
the Company.
corporate Governance Statement
We have reviewed 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 by the Listing Rules.
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 68 to 69;
• 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 68 to 69;
• Director’s statement on whether it has a reasonable expectation
that the Group will be able to continue in operation and meets
its liabilities set out on pages 68 and 69;
• Directors’ statement on fair, balanced and understandable set
out on page 112;
• Board’s confirmation that it has carried out a robust assessment
of the emerging and principal risks set out on pages 62 to 67;
responsibilities of Directors
As explained more fully in the Directors’ Responsibility Statement
set out on page 112, 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 Group’s
(Accounts and Reports (Amendment)) Regulations 2013 in
particular in respect of the Report of the Remuneration
Committee; UK Tax Legislation; and UK Corporate
Governance Code 2018.
119
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
INDepeNDeNT AuDITor’S reporT
To The memBerS oF The Gym Group plc CONTINUED
other matters we are required to address
• Following the recommendation from the Audit and Risk
Committee, we were appointed by the Company on 29 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 seven years, covering
the years ending 31 December 2015 to 31 December 2021.
• The audit opinion is consistent with the additional report to the
Audit and Risk 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
16 March 2022
• 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 and
Risk 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 programmes and controls established to address
risks identified, or otherwise prevent, deter and detect fraud, as
well as reviewing the risk register’ and how senior management
monitors those programmes 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
continuance procedures; reviewing interim financial
information; identifying related parties; and considering the
nature of the account and our assessment of inherent risk for
relevant assertions of significant accounts.
• Based on this understanding we designed our audit procedures
to identify non-compliance with such laws and regulations. Our
procedures involved testing of journal entries, with focus on
manual journals, large or unusual transactions, or journals
meeting our defined risk criteria based on our understanding of
the business; 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 formalized 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 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.
120
FINANCIAL STATEMENTS coNSolIDATeD STATemeNT oF compreheNSIVe INcome
FOR THE YEAR ENDED 31 DECEMBER 2021
Revenue
Cost of sales
Gross profit
Other income
Operating expenses before depreciation,
amortisation and impairment
Depreciation, amortisation and impairment
operating loss
Finance costs
loss before tax
Tax credit/(charge)
loss for the year attributable
to equity shareholders
other comprehensive income for the year
Items that may be reclassified to profit or loss
Changes in the fair value of derivative financial
instruments
Total comprehensive expense attributable
to equity shareholders
loss per share (p)
Basic and diluted
31 December 2021
£m
31 December 2020
£m
(Re-presented)*
Note
underlying
Non-
underlying
(note 9)
Total
Underlying
Non-
Underlying
(note 9)
5
6
7
13,14,15
10
11
106.0
(1.7)
104.3
7.3
(79.1)
(52.7)
(20.2)
(16.6)
(36.8)
8.3
–
–
–
–
(2.3)
(4.2)
(6.5)
(0.9)
(7.4)
0.5
106.0
(1.7)
104.3
7.3
(81.4)
(56.9)
(26.7)
(17.5)
(44.2)
8.8
80.5
(2.1)
78.4
0.4
(62.7)
(48.0)
(31.9)
(14.6)
(46.5)
11.1
–
–
–
–
0.5
(2.5)
(2.0)
1.3
(0.7)
(0.3)
Total
80.5
(2.1)
78.4
0.4
(62.2)
(50.5)
(33.9)
(13.3)
(47.2)
10.8
(28.5)
(6.9)
(35.4)
(35.4)
(1.0)
(36.4)
0.1
–
0.1
–
–
–
(28.4)
(6.9)
(35.3)
(35.4)
(1.0)
(36.4)
12
(16.7)
(20.7)
(22.5)
(23.1)
* During the year, the Directors agreed to change the way they present the consolidated income statement and adopt a columnar format because they believe this provides the reader with
supplemental data relating to the financial condition and results of operations. See note 2 for further details. An analysis of Operating expenses before depreciation, amortisation and impairment by
their nature is given in note 7.
reconciliation of operating loss to Group Adjusted eBITDA less Normalised rent1
31 December 2021
£m
Note
31 December 2020
£m
operating loss
Add back: Non-underlying operating items
Long-term employee incentive costs (included in Operating expenses)
Underlying depreciation and amortisation
9
8,26
13,14,15
Group Adjusted eBITDA
Less:
Normalised Rent2
Group Adjusted eBITDA less Normalised rent1
(26.7)
6.5
2.9
52.7
35.4
(29.7)
5.7
(33.9)
2.0
0.7
48.0
16.8
(27.0)
(10.2)
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 non-underlying items, and after deducting Normalised Rent. Refer to the KPIs on pages 26 and 27 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 125 to 157 form an integral part of the Financial Statements.
121
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE THE GyM GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2021
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
31 December 2021
£m
Note
31 December 2020
£m
13
14
15
16
11
17
18
19
14
20
21
14
23
25
25
25
25
25
165.6
281.2
86.0
1.0
16.1
549.9
0.3
6.3
0.9
7.3
14.8
564.7
30.4
27.0
–
57.4
44.3
309.3
1.6
355.2
412.6
152.1
0.1
189.7
(0.1)
39.9
(77.5)
152.1
171.3
255.6
86.4
1.0
7.6
521.9
0.3
6.3
0.2
3.7
10.5
532.4
18.7
21.8
2.6
43.1
49.2
284.5
1.2
334.9
378.0
154.4
0.1
159.5
(0.2)
39.9
(44.9)
154.4
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Investments in financial assets
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
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Capital and reserves
Own shares held
Share premium
Hedging reserve
Merger reserve
Retained deficit
Total equity shareholders’ funds
The notes on pages 125 to 157 form an integral part of the Financial Statements.
These Financial Statements were approved by the Board of Directors on 16 March 2022.
Signed on behalf of the Board of Directors
Richard Darwin
Chief Executive Officer
Mark George
Chief Financial Officer
Company Registration Number 08528493
122
FINANCIAL STATEMENTS
coNSolIDATeD STATemeNT oF chANGeS IN eQuITy
FOR THE YEAR ENDED 31 DECEMBER 2021
Share
premium
£m
Hedging
reserve
£m
Merger
reserve
£m
Retained
deficit
£m
At 1 January 2020
Loss for the year and total comprehensive expense
Issue of ordinary share capital
Share-based payments
Deferred tax on share-based payments
At 31 December 2020
Loss for the year
Other comprehensive income for the year
Loss for the year and total comprehensive expense
Issue of ordinary share capital
Share-based payments
Deferred tax on share-based payments
Own shares
held
£m
0.1
–
–
–
–
0.1
–
–
–
–
–
–
Note
25
26
11
25
26
11
159.5
–
–
–
–
159.5
–
–
–
30.2
–
–
(0.2)
–
–
–
–
(0.2)
–
0.1
0.1
–
–
–
–
–
39.9
–
–
39.9
–
–
–
–
–
–
Total
£m
150.2
(36.4)
39.9
0.8
(0.1)
(9.2)
(36.4)
–
0.8
(0.1)
(44.9)
154.4
(35.3)
–
(35.3)
–
2.4
0.3
(35.3)
0.1
(35.2)
30.2
2.4
0.3
At 31 December 2021
0.1
189.7
(0.1)
39.9
(77.5)
152.1
The notes on pages 125 to 157 form an integral part of the Financial Statements.
123
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
coNSolIDATeD cASh FloW STATemeNT
FOR THE YEAR ENDED 31 DECEMBER 2021
cash flows from operating activities
Loss before tax
Adjustments for:
Finance costs
Non-underlying operating items
Underlying depreciation of property, plant and equipment
Underlying depreciation of right-of-use assets
Underlying amortisation of intangible assets
Long-term employee incentive costs
Rent concessions
Loss on disposal of property, plant and equipment and right-of-use assets
Decrease in inventories
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Payment of deferred consideration
cash generated from operations
Tax (paid)/received
Net cash inflow from operating activities before non-underlying items
Non-underlying items
Net cash inflow from operating activities
cash flows from investing activities
Payment for financial assets at fair value through profit and loss
Purchase of property, plant and equipment
Purchase of intangible assets
Net cash outflow used in investing activities
cash flows from financing activities
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 flow (used in)/from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the start of the year
cash and cash equivalents at the end of the year
The notes on pages 125 to 157 form an integral part of the Financial Statements.
31 December 2021
£m
Note
31 December 2020
£m
(44.2)
(47.2)
10
9
13
14
15
26
14
7
20
9
22
22
22
22
25
25
17.5
6.5
23.6
23.5
5.4
2.9
(1.6)
0.4
–
(0.3)
10.1
(2.6)
41.2
(0.1)
41.1
(2.2)
38.9
–
(20.5)
(5.2)
(25.7)
(17.7)
(14.2)
(1.8)
(0.2)
30.0
(36.0)
31.2
(0.9)
(9.6)
3.6
3.7
7.3
13.3
2.0
23.9
21.3
2.9
0.7
(0.7)
0.7
0.4
3.4
(5.6)
(1.3)
13.8
2.4
16.2
(0.9)
15.3
(1.0)
(25.5)
(3.8)
(30.3)
(9.9)
(12.7)
(1.8)
(0.4)
41.0
(40.0)
41.3
(1.4)
16.1
1.1
2.6
3.7
124
FINANCIAL STATEMENTS NoTeS To The coNSolIDATeD FINANcIAl STATemeNTS
FOR THE YEAR ENDED 31 DECEMBER 2021
1. GeNerAl INFormATIoN
The Gym Group plc (‘the Company’) and its subsidiaries (‘the Group’) operate low cost, high quality, 24/7, no contract gyms.
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, CR0 0XT, United Kingdom.
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) and United Kingdom adopted international accounting standards. The
accounting policies applied are consistent with those described in the Annual Report and Accounts for the year ended 31 December 2020
of the Group, except in relation to the presentation of the Group Income Statement where the Directors have adopted a columnar format
(see below for further details). 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 one hundred 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 the financial statements.
Changes to the presentation of the consolidated statement of comprehensive income
During the year, the Directors decided to change the way they present the consolidated income statement to provide the reader with
supplemental data relating to the financial condition and results of operations. The principal changes that have been adopted are:
• Presentation of the profits/losses in a three-column format showing ‘Underlying’, ‘Non-underlying’ and ‘Total’ numbers. Items of
income and expense that are material by their size and/or nature and are not considered to be incurred in the normal course of
business, are classified as non-underlying items on the face of the income statement within their relevant category. Further details are
provided later in this note and in note 9.
• Presentation of ‘Operating expenses before depreciation, amortisation and impairment’ and ‘Depreciation, amortisation and
impairment’ separately on the face of the consolidated income statement; previously both were summed together and shown as
‘Administration expenses’. As a result of this change, expenses are now presented on the face of the income statement as a mixture of
by nature and by function with a note to the financial statements showing the analysis by nature (see note 7).
The Group presents profit/loss for the year before non-underlying items as the Directors believe that this shows more clearly the trends in
the Group’s business and gives an indication of the Group’s ongoing sustainable performance. The Directors believe the changes above
provide the reader with more reliable and relevant information and greater clarity over the Group’s financial performance and results of
operations, giving a more comparable view of underlying trading performance. This presentation also provides better linkage with the
numbers discussed in the Financial Review and helps to simplify the reconciliation to Group Adjusted EBITDA Less Normalised Rent.
Items of income and expense that are material by their size and/or nature and are not considered to be incurred in the normal course of
business, are classified as non-underlying items on the face of the income statement within their relevant category. Further details are
provided in note 9.
125
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
NoTeS To The coNSolIDATeD FINANcIAl STATemeNTS CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2021
2. SummAry oF SIGNIFIcANT AccouNTING polIcIeS CONTINUED
The table below shows the impact of the changes on each income statement line in the current and prior year.
Revenue
Cost of sales
Gross profit
Other income
Administration expenses
Operating expenses before depreciation, amortisation
and impairment
Depreciation, amortisation and impairment
operating loss
Finance costs
loss before tax
Tax credit
loss for the year attributable to equity shareholders
2021 as reported
£m
2021
£m
2020 as reported
£m
2020 as previously
reported
£m
106.0
(1.7)
104.3
7.3
–
(81.4)
(56.9)
(26.7)
(17.5)
(44.2)
8.8
(35.4)
106.0
(1.7)
104.3
7.3
(138.3)
–
–
(26.7)
(17.5)
(44.2)
8.8
(35.4)
80.5
(2.1)
78.4
0.4
–
(62.4)
(50.3)
(33.9)
(13.3)
(47.2)
10.8
(36.4)
80.5
(2.1)
78.4
0.4
(112.7)
–
–
(33.9)
(13.3)
(47.2)
10.8
(36.4)
Going concern
In assessing the going concern position of the Group for the year ended 31 December 2021, the Directors have considered the
following:
• the Group’s trading performance in the second half of 2021 and throughout the traditional January and February 2022 peak period;
• future expected trading performance to June 2023 (the going concern period), including membership levels and behaviours;
• the Group’s site rollout programme;
• the latest situation and UK Government guidance with respect to the COVID-19 pandemic; and
• the Group’s financing arrangements and relationship with its lenders and shareholders.
Following the re-opening of gyms in April 2021, trading in the second half of 2021 showed total membership increasing by 31%, from
547,000 at the end of February 2021 to 718,000 at the end of December 2021. Trading in the first two months of 2022 which is
traditionally the peak period for gym memberships, has been strong, with membership numbers at the end of February 2022 reaching
825,000.
The Directors believe that the current trading performance, together with the COVID-impacted commercial property market, provide the
Group with a unique opportunity to accelerate growth and gain market share. The Directors are now focused on delivering that
opportunity. We opened 19 new gyms in 2021 which are performing in line with our expectations, and have plans to open a further 28
in 2022.
To facilitate this accelerated growth, on 2 July 2021, the Group raised additional financing in the form of an equity placing, which
raised net proceeds of £30.3m. In addition, certain restrictions in the Group’s banking facilities around capital expenditure and finance
lease debt were relaxed.
As at 31 December 2021, the Group had Non-Property Net Debt (including finance leases) of £44.1m and £62.3m of headroom
(calculated off bank debt less cash) under the £100m Revolving Credit Facility (‘RCF’) (reducing to £75m in March 2022 before
increasing to £80m in May 2022 and maturing in October 2024).
Until June 2022, the RCF is subject to quarterly financial covenant tests primarily relating to the performance of the Group against
agreed targets for Group Adjusted EBITDA Less Normalised Rent. From June 2022, the covenants consist of quarterly tests on leverage
(net debt to Group Adjusted EBITDA Less Normalised Rent), fixed charge cover (Adjusted EBITDAR to Net Finance Charges and
Normalised Rent) and minimum liquidity.
The Group’s base case forecast for the period to 30 June 2023 anticipates continued recovery of membership and robust yields,
together with the successful execution of the accelerated rollout plan. Under this scenario, all financial covenants are passed with a
significant level of headroom and the Group can operate comfortably within its financing facilities.
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FINANCIAL STATEMENTS 2. SummAry oF SIGNIFIcANT AccouNTING polIcIeS CONTINUED
The Directors have considered a downside scenario which anticipates a slower recovery in which membership numbers only return to
88% of pre-pandemic levels (December 2019) by the end of the going concern period. Under this scenario, all financial covenants
continue to be passed and the Group continues to operate within its financing facilities.
The Directors have also considered a reverse stress test scenario that modelled the impact of a significant downturn in trading and
resulting drop in membership numbers. Mitigating actions were also modelled including moving to a minimum level of maintenance
capital expenditure, reducing discretionary expenditure in order to preserve cash and a deliberate slowing down or temporary cessation
of the rollout programme. In this scenario, the number of new members each month would have to decline by 26% compared to the
base case (the equivalent of membership reducing to 82% of the February 2022 closing membership number) before the fixed charges
cover covenant would be breached in December 2022. However, the Group would remain within its liquidity limits.
In the event of a reverse stress test scenario, the Directors would introduce additional measures to mitigate the impact on the Group’s
liquidity, covenants and cash flow, including: (i) further reductions in controllable operating costs, marketing and capital expenditure; (ii)
discussions with lenders to secure additional debt facilities and/or covenant waivers; (iii) deferral of, or reductions in, rent payments to
landlords; and (iv) the potential to raise additional funds from third parties.
The Directors believe that the success of the UK’s booster vaccination programme and the fact that all sectors of the economy remained
open for business during winter 2021/22, despite the recent Omicron outbreak, are strong indicators that further prolonged periods of
enforced closure are highly unlikely. In addition, the Group has a very good relationship with its lenders who have been supportive
throughout the pandemic. The lenders understand the Group’s business model, our significant profit and cash generation in months when
gyms are fully open, and our relatively low gearing. As a result, in the unlikely event there was another national lockdown, the Directors
believe that the banks would continue to support the Group with covenant flexibility in the form of waivers or amendments, as they have
done on a number of occasions during previous lockdown periods. The Directors therefore consider that the combination of a lockdown
and a subsequent lack of flexibility from the banks is remote.
Conclusion
The Board has reviewed the financial forecasts and downside scenarios of the Group and has a reasonable expectation that the Group
has adequate resources to continue in operational existence for the period to 30 June 2023. As a result, the Directors continue to adopt
the going concern basis in preparing these consolidated financial statements. In making this assessment, consideration has been given to
the current and future expected trading performance; the Group’s current and forecast liquidity position; the continued positive
momentum with regards the COVID-19 situation and success of the UK booster vaccination programme; the support received to date
from our lenders and shareholders; and the mitigating actions that can be deployed in the event of reasonable downside scenarios.
climate change
In preparing the Consolidated Financial Statements, management has considered the impact of climate change, particularly in the
context of the disclosures included in the Strategic Report and the stated net-zero targets. These considerations did not have a material
impact on the financial reporting judgements and estimates, consistent with the assessment that climate change is not expected to have a
significant impact on the Group’s going concern assessment to 30 June 2023 nor the viability of the Group over the next three years.
The following specific points were considered:
• We procure 100% renewable energy for all of our sites where we directly control the purchase of energy.
• The Group continues to reduce its carbon emissions and environmental impact by investing in the energy-efficient design of our new
sites, as well as in our existing estate.
• 95% of our gyms now have full LED lighting with the remaining ten sites programmed for conversion in 2022.
• Our carbon emissions through electrical power consumption will reduce with the decarbonisation of the National Grid and natural
gas will eventually become our principal source of direct carbon emission. We now have 13 sites operating successfully without gas
for water heating and are continuing to roll out electric heat pumps to obviate the requirement for gas.
• In all cases, the expected costs and investment required during the Group’s strategic planning horizon have been considered within
the future cash flows included within the Group’s three-year Plan which forms the basis of our Going Concern and Viability
assessment, the goodwill and site impairment testing, and the assessment of the recoverability of deferred tax assets.
127
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
2. SummAry oF SIGNIFIcANT AccouNTING polIcIeS CONTINUED
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.
Segmental 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 low cost, high quality, 24/7, no contract
gyms within the United Kingdom, presently traded through 202 sites. It is managed as one entity and management has consequently
determined that there is only one operating segment.
Segmental results are measured using earnings before interest, tax, depreciation, amortisation, long-term employee incentive costs and
non-underlying items. Segmental 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 segmental 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 memberships 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 with a new member joining.
Rental income from personal trainers is recognised on a straight-line basis over the term of the rental agreement.
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Other income, mainly vending income, is recognised at a point in time, which is at 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.
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 comprises costs arising in connection with the generation of ancillary revenue, primarily call centre costs and payment
processing costs.
other income and government grants
Other income predominantly compromises government grants receivable.
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 the related
costs 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. For example, 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.
Non-underlying items
Non-underlying items are income or expenses that are material by their size and/or nature and are not considered to be incurred in the
normal course of business. The Directors consider that these items should be disclosed separately on the face of the income statement
(but within their relevant category) to allow a more comparable view of underlying trading performance.
Non-underlying items include restructuring and reorganisation costs (including site closure costs), costs of major strategic projects and
investments, impairment of assets, amortisation and impairment of business combination intangibles, profit/loss on disposal of assets and
businesses, revaluation gains or losses on borrowings, and refinancing costs.
Profit before non-underlying items is used to calculate adjusted earnings per share and is reconciled to profit before taxation on the face
of the income statement. Non-underlying items are disclosed in note 9.
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.
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FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
2. SummAry oF SIGNIFIcANT AccouNTING polIcIeS CONTINUED
leases and right-of-use assets
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.
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 2021.
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.
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FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 DECEMBER 2021 2. SummAry oF SIGNIFIcANT AccouNTING polIcIeS CONTINUED
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 customer lists
Brands and customer lists acquired as part of a business combination are initially recorded at fair value. They 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. The
carrying values of brands and customer lists is reviewed for impairment if events or changes in circumstances indicate the carrying value
may not be recoverable.
Technology-related intangible assets
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. The carrying value of technology-related intangible assets are reviewed for impairment if events or changes in circumstances
indicate the carrying value may not be recoverable.
Contract-related intangible assets
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. The carrying value of contract-
related intangible assets are reviewed for impairment if events or changes in circumstances indicate the carrying value may not
be recoverable.
Computer software
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring into 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:
• 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;
• It can be demonstrated that the software product will generate probable future economic benefits;
• 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.
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 as appropriate. The carrying value of computer
software is reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable.
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FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
2. SummAry oF SIGNIFIcANT AccouNTING polIcIeS CONTINUED
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 gym.
Any impairment charge is recognised in non-underlying items 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 non-underlying items in the income statement unless the asset is carried at a revalued amount, in which case, the reversal
is treated as a revaluation increase and recognised as a separate reserve within equity.
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 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 net finance costs 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’).
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.
The Group initially recognises its financial liabilities at fair value net of transaction costs where applicable and, other than derivatives
and contingent consideration, they 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 non-underlying items in the
income statement.
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FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 DECEMBER 2021 2. SummAry oF SIGNIFIcANT AccouNTING polIcIeS CONTINUED
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 eligible for capitalisation.
All other borrowing costs are recognised in net finance costs 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. 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
other comprehensive income and accumulated under the heading of hedge reserve within equity. The amount is limited to the cumulative
change in fair value of the hedged item from inception of the hedge. The gain or loss relating to the ineffective portion is recognised
immediately in net finance costs in the income statement.
Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss 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 within net finance cost in the income statement at the same time as the interest expense on the hedged borrowings. However,
when the hedged forecast transaction results in the recognition of a non-financial asset or a non-financial liability, the gains and losses
previously recognised in other comprehensive income and accumulated in equity are removed from equity and included in the initial
measurement of the cost of the non-financial asset or non-financial liability. This transfer does not affect other comprehensive income.
Furthermore, if the Group expects that some, or all, of the loss accumulated in the cash flow hedging reserve will not be recovered in the
future, that amount is immediately reclassified to profit or loss.
pensions
The Group operates defined contribution pension schemes 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.
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FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
2. SummAry oF SIGNIFIcANT AccouNTING polIcIeS CONTINUED
Trade and other payables
Trade and other 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. If not, they are presented as
non-current liabilities. Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using
the effective interest method.
Taxation
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 at
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 between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes at the balance sheet date, 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 reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered.
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 in 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 expenditure 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 a 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.
3. SIGNIFIcANT AccouNTING JuDGemeNTS, eSTImATeS AND ASSumpTIoNS
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.
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. Judgement 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 2.1% and 8.7%. See note 14
for further detail on the methodology used.
134
FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 DECEMBER 2021 3. SIGNIFIcANT AccouNTING JuDGemeNTS, eSTImATeS AND ASSumpTIoNS CONTINUED
Sources 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 are included in note 2. The carrying values of such assets are included in notes 13, 14 and 15.
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 reviews property, plant and equipment for indicators of impairment and, where such indicators exist,
estimates the recoverable amount of the CGU. For each CGU, the recoverable amount of property, plant and equipment assets and
intangible assets is determined based on value-in-use calculations; and for right-of-use assets, it is the fair value less costs of disposal. 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 13, 14 and 15.
Whilst 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
property, plant and equipment is sensitive to reasonably possible changes in key assumptions – see note 13 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 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 171 of the Group’s 202 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 2021 would increase by £0.1 million. If a provision was required for a site where the Group does benefit
from security of tenure, the provision at 31 December 2021 would increase by £0.1 million. A ten basis points change in the discount
rate would not have a material impact on the provision recognised at 31 December 2021.
Details of dilapidation provisions recognised are set out in note 23.
135
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
4. NeW AND AmeNDeD IFrS STANDArDS ThAT Are eFFecTIVe For The curreNT yeAr
The Group applied for the first time certain standards and amendments, which are effective for annual periods beginning on or after
1 January 2021 (unless otherwise stated). The Group has not early adopted any other standard, interpretation or amendment that has
been issued but is not yet effective.
Interest rate Benchmark reform – phase 2: Amendments to IFrS 9, IAS 39, IFrS 7, IFrS 4 and IFrS 16
The amendments provide temporary reliefs which address the financial reporting effects when an interbank offered rate (‘IBOR’) is
replaced with an alternative nearly risk-free interest rate (‘RFR’). The amendments include the following practical expedients:
• To permit contractual changes, or changes to cash flows that are directly required by the reform, to be treated as changes to a
floating interest rate, equivalent to a movement in a market rate of interest.
• To permit changes required by IBOR reform to be made to hedge designations and hedge documentation without the hedging
relationship being discontinued.
• To provide temporary relief to entities from having to meet the separately identifiable requirement when an RFR instrument is
designated as a hedge of a risk component.
The practical expedient has been applied to the Group’s hedging arrangements in the current financial year and has had no impact on
the consolidated financial statements. The Group intends to use the practical expedients in future periods for changes in the interest rates
on the Group’s borrowings.
coVID-19-related rent concessions beyond 30 June 2021 Amendments to IFrS 16
On 28 May 2020, the IASB issued COVID-19-Related Rent Concessions – amendment to IFRS 16 Leases
The amendments 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. 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 amendment was intended to apply until 30 June 2021, but as the impact of the COVID-19 pandemic is continuing, on 31 March
2021, the IASB extended the period of application of the practical expedient to 30 June 2022. The amendment applies to annual
reporting periods beginning on or after 1 April 2021.
In the current and prior financial year, the Group has applied the amendment to IFRS 16 (as issued by the IASB in March 2021 and May
2020) in advance of their effective dates. As permitted by this concession, the Group has derecognised £1.6 million (2020: £0.7 million)
of the lease liability that has been extinguished by the forgiveness of lease payments on buildings (see note 14).
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 (including the June 2020
amendments to IFRS 17)
Insurance Contracts
Amendments to IFRS 10 and IAS 28
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
Amendments to IAS 1
Amendments to IFRS 3
Classification of Liabilities as Current or Non-current
Reference to the Conceptual Framework
Amendments to IAS 16
Property, Plant and Equipment – Proceeds before Intended Use
Amendments to IAS 37
Onerous Contracts – Cost of Fulfilling a Contract
Annual Improvements to IFRS
Standards 2018-2020 Cycle
Amendments to IAS 1 and
IFRS Practice Statement 2
Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards,
IFRS 9 Financial Instruments, IFRS 16 Leases, and IAS 41 Agriculture
Disclosure of Accounting Policies
Amendments to IAS 8
Definition of Accounting Estimates
Amendments to IAS 12
Deferred Tax related to Assets and Liabilities arising from a Single Transaction
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.
136
FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 DECEMBER 2021 5. reVeNue
The principal revenue streams for the Group are membership income, rental income from personal trainers and ancillary income.
The majority of revenue is derived from contracts with customers and all revenue arises in the United Kingdom.
Disaggregation of revenue
In the following table, revenue is disaggregated by major products and service lines and timing of revenue recognition.
major products/service lines
Membership income
Rental income from personal trainers
Ancillary 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
31 December 2021
£m
31 December 2020
£m
100.8
4.0
1.2
106.0
1.8
104.2
106.0
(8.4)
6.4
77.0
2.5
1.0
80.5
1.2
79.3
80.5
(6.4)
8.0
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 19). The contract liability balance
increases as the Group’s membership numbers increase. The Group does not receive any consideration in advance from customers
greater than 12 months. Hence the total contract liability as at 31 December 2020 of £6.4 million has been recognised as revenue
during the year ended 31 December 2021.
6. oTher INcome
Government grants receivable for the purpose of immediate financial support
Government grants receivable towards work placements (note 8)
Compensation for disruption caused by building works
31 December 2021
£m
31 December 2020
£m
7.1
0.2
–
7.3
0.2
–
0.2
0.4
During the year, the Group received £10.5m (2020: £6.3 million) of direct grant support from the UK Government as a result of the
COVID-19 pandemic, comprising:
• £7.1 million (2020: £0.2 million) of local government grants (see above). These were received under the Local Restrictions Support
Grant for Closed Businesses scheme (‘LRSG Closed’), the Local Restrictions Support Grant for Open Businesses scheme (‘LRSG
Open’), the Closed Business Lockdown Payment scheme (‘CBLP’) and the Restart Grant scheme (‘Restart’) 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 at the same time as the related costs were recognised. The grants were received solely as
compensation for costs incurred in the year and as such there are no future related costs in respect of them. There was no outstanding
balance of deferred income or receivable related to this grant as at 31 December 2021 (2020: £nil); and
• £3.4 million (2020: £6.1 million) 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, in November and December 2020 and from January to April 2021. The amounts
received in relation to the CJRS have been netted off employee costs in the income statement (note 8). There was no outstanding balance
of deferred income or receivable related to this grant as at 31 December 2021 (2020: receivable of £0.2 million).
137
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
6. oTher INcome CONTINUED
In addition to the grants noted above, the Group also received government assistance in the form of a business rates holiday for the period
1 April 2020 to 31 March 2022. During the period 1 April 2020 to 30 June 2021, businesses in the retail, hospitality and leisure sectors in
England did not have to pay business rates for the 2020 to 2021 and 2021 to 2022 tax years. From 1 July 2021, businesses in those
sectors received a 66% discount on business rates for the remainder of the 2021 to 2022 tax year subject to a maximum discount of £2
million per business. The value of business rates saved during the year ended 31 December 2021 was £8.2 million (2020: £9.6 million).
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 in the form of a one-off grant per person employed to cover setup costs. Government support income is recognised evenly over
each six-month placement term. During the year, the Group has recognised £0.2 million (2020: £nil) in Other income and £0.6 million
(2020: £nil) received towards salary costs has been netted off against employee costs in the income statement (note 8). A balance of
£0.1 million (2020: £nil) within deferred income will be recognised in future periods. There is no outstanding balance receivable related
to this grant as of 31 December 2021 (2020: £nil).
7. operATING eXpeNSeS
Operating expenses comprise the following:
Underlying employee costs (note 8)
Site costs (excluding employee costs)1
Central support office costs (excluding employee costs)2
Loss on disposal of property plant and equipment
Auditors’ remuneration costs:
Fees payable for the audit of the Group’s annual accounts
Audit of the Group’s subsidiaries pursuant to legislation
underlying operating expenses before depreciation, amortisation and impairment
Non-underlying operating expenses before depreciation, amortisation and impairment (note 9)
operating expenses before depreciation, amortisation and impairment
31 December 2021
£m
31 December 2020
£m
31.6
41.0
5.9
0.4
0.1
0.1
79.1
2.3
81.4
22.8
33.9
5.1
0.7
0.1
0.1
62.7
(0.5)
62.2
1 Site costs include the fixed and variable costs of running the Group’s gyms and include rates and services charges, cleaning costs, utilities, repairs and maintenance, site technology costs,
marketing costs and insurance.
2 Central support office costs largely comprise central technology costs and professional fees.
8. employee INFormATIoN
Wages and salaries
Social security costs
Employers’ pension costs
Long-term employee incentive costs (note 26)
Government grants (note 6)
underlying employee costs
Non-underlying employee costs
employee costs
31 December 2021
£m
31 December 2020
£m
30.4
2.1
0.5
2.9
(4.0)
31.9
0.3
32.2
25.8
2.1
0.4
0.7
(6.1)
22.9
0.7
23.6
Included within employee costs in 2021 is £0.3 million (2020: £0.1 million) which has been included within cost of sales in the
consolidated income statement.
The average number of employees, including Directors, during the year was:
Operational
Administrative
138
31 December 2021
Number
31 December 2020
Number
1,873
132
2,005
1,965
106
2,071
FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 DECEMBER 2021 9. NoN-uNDerlyING ITemS
Affecting operating expenses before depreciation, amortisation and impairment
Costs of major strategic projects and investments
Restructuring and reorganisation costs (including site closures)
Adjustment to net assets acquired in business combinations
Gain on reduction of lease term
Total affecting operating expenses before depreciation, amortisation and impairment
Affecting depreciation, amortisation and impairment
Impairment of property, plant and equipment, right-of-use assets and intangible assets
Amortisation of business combination intangible assets
Total affecting depreciation, amortisation and impairment
Total affecting operating expenses1
Affecting finance costs
Remeasurement of borrowings
Refinancing costs
Total affecting finance costs
Total all non-underlying items before tax
Tax on non-underlying items
Total non-underlying charge in income statement
31 December 2021
£m
31 December 2020
£m
1.8
0.5
–
–
2.3
4.0
0.2
4.2
6.5
0.8
0.1
0.9
7.4
(0.5)
6.9
–
0.3
(0.2)
(0.6)
(0.5)
1.6
0.9
2.5
2.0
(1.3)
–
(1.3)
0.7
0.3
1.0
1 Depreciation, amortisation and impairment are non-cash items. Of the other items affecting operating expenses, £2.2 million are cash outflows (2020: cash outflow of £0.9 million).
costs of major strategic projects and investments
Costs of major strategic projects and investments in the year include costs incurred to date in respect of the brand transformation project.
Also included here are the costs incurred in relation to the exploration of a potential strategic investment and the costs associated with
the acquisition of the trade and assets of a portfolio of three sites trading under the Fitness First brand name, details of which are
included in note 30.
The brand transformation project, which commenced in the second half of 2021 and is expected to complete in 2022, involves creating
a new visual identity for our brand and a change of our external brand from ‘The Gym’ to ‘The Gym Group’. This will drive consistency
across the estate and bring the brand name into line with our website URL. The new visual identity will be employed in all new sites from
Q2 onwards, and a full rebranding of the existing sites, the website and other digital collateral will be implemented from the end of
September. By the September/October marketing campaign, all marketing will also be using the updated brand.
restructuring and reorganisation costs (including site closure costs)
Restructuring costs in the year relate to the cost of restructuring the senior leadership team within central support as well as additional
costs associated with the closure of three sites previously announced where the lease surrender to the landlord has been delayed to
2022. Prior year costs relate primarily to the restructuring of the central support team in June 2020 in which headcount was reduced by
22%, offset by a release of provision in relation to the three sites earmarked for closure.
Adjustment to net assets acquired in business combinations
Certain provisions that were recognised as part of the acquisition of gyms from easyGym were released in the prior year as the costs are
unlikely to be incurred.
Gain on reduction of lease term
The landlord on one of our sites reduced the lease term and in exchange for doing so the lease was renegotiated in 2020. As a
consequence of the renegotiation, the Group recognised a one-off gain of £0.6 million in the prior year related to the remeasurement of
the lease liability and associated right-of-use asset.
Impairment of property, plant and equipment, right of use assets and intangibles
Impairment costs in the year relate to the write-down of assets in four city centre sites which have been particularly hard hit by the
COVID-19 pandemic and where recovery is slower than in the rest of estate. For these sites, the discounted present value of future cash
flows using a pre-tax discount rate of 11.9% does not support the full value of the assets. The prior year impairment costs include the
write-down of assets in one site where the discounted present value of future cash flows using a pre-tax discount rate of 11.1% does not
support the full value of the assets. The prior year also included an additional £0.8 million impairment for one site which was announced
as closing in 2019 where the lease surrender was delayed.
139
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
NoTeS To The coNSolIDATeD FINANcIAl STATemeNTS CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2021
9. NoN-uNDerlyING ITemS CONTINUED
Amortisation of business combination intangible assets
This includes the amortisation cost of intangible assets acquired as part of the Lifestyle and easyGym acquisitions.
remeasurement of borrowings
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.
refinancing costs
Refinancing costs relate to non-capitalisable costs incurred in relation to the renegotiation of the Group’s banking facility.
Tax on non-underlying items
This represents the tax charge or credit arising on the Group’s non-underlying items, calculated at the current tax rate.
10. FINANce coSTS
Bank loans and overdrafts interest
Lease interest
Amortisation of financing fees
Capitalised interest
underlying finance costs
Non-underlying finance costs
Finance costs
31 December 2021
£m
31 December 2020
£m
2.0
14.0
0.6
16.6
–
16.6
0.9
17.5
1.6
12.7
0.4
14.7
(0.1)
14.6
(1.3)
13.3
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 Group’s general borrowings during 2020 of 1.9%.
11. TAXATIoN
Tax on loss
current income tax
Current tax on losses in the year
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
Tax credit
The standard rate of corporation tax applied to reported losses is 19% (2020: 19%).
31 December 2021
£m
31 December 2020
£m
(0.3)
(0.3)
(0.6)
(7.7)
(3.0)
2.5
(8.2)
(8.8)
(2.5)
(0.5)
(3.0)
(6.4)
–
(1.4)
(7.8)
(10.8)
140
FINANCIAL STATEMENTS 11. TAXATIoN CONTINUED
reconciliation of tax credit
Loss before tax
Tax calculation at standard rate of corporation tax of 19.0%
Expenses not deductible for tax purposes
Change in tax rates
Adjustments in respect of prior years
Tax credit
Deferred tax
31 December 2021
£m
31 December 2020
£m
(44.2)
(8.4)
0.7
(3.3)
2.2
(8.8)
(47.2)
(9.0)
0.2
(0.1)
(1.9)
(10.8)
Total
£m
(0.1)
1.4
6.4
(0.1)
7.6
(2.5)
7.7
3.0
0.3
16.1
At 1 January 2020
Adjustments in respect of prior years
Recognised in income statement
Recognised in equity
At 31 December 2020
Adjustments in respect of prior years
Recognised in income statement
(Charge)/Credit to income statement due to changes
in tax rates
Recognised in equity
At 31 December 2021
Accelerated
capital
allowances
£m
(3.5)
1.2
3.9
–
1.6
(2.1)
0.5
(0.2)
–
(0.2)
Losses
£m
0.2
–
1.8
–
2.0
(0.4)
7.2
2.5
–
11.3
Intangible
assets
£m
(0.3)
0.2
–
–
(0.1)
–
0.1
–
–
–
Share
Schemes
£m
0.7
–
0.6
(0.1)
1.2
–
(0.1)
–
0.3
1.4
Other
£m
2.8
–
0.1
–
2.9
–
–
0.7
–
3.6
Deferred tax assets have been recognised in respect of all tax losses and other temporary timing differences where the Directors believe
it is probable that these will be recovered within the next four years. In assessing the probability of recovery, the Directors have reviewed
the Group’s three-year Plan that has been used for both the Going concern and Viability assessment and the goodwill and fixed asset
impairment testing. This plan anticipates continued recovery of membership and robust yields, the successful execution of the accelerated
rollout plan and a return to profitability.
A deferred tax liability has arisen on accelerated capital allowances, whereby the tax written-down value is lower than the net book
value.
The Finance Act 2021 has increased the corporation tax rate from 19% to 25% with effect from 1 April 2023. The deferred tax assets
and liabilities have been measured using the rates expected to apply in the reporting periods when the timing differences reverse.
There are no material uncertain tax provisions at 31 December 2021 (2020: £nil). However, judgement has necessarily been applied in
estimating the impact and timing of utilisation of capital allowances and tax losses which could give rise to prior period adjustments in
future years.
141
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
NoTeS To The coNSolIDATeD FINANcIAl STATemeNTS CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2021
12. 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, The Gym Group plc Long Service Award Plan
and Save As You Earn Scheme (‘SAYE’) (see note 26).
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 2021, 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, The Gym Group plc Long Service Award Plan and SAYE
(see note 26).
loss (£m)
Loss for the year attributable to equity shareholders
Adjustment for non-underlying items
Adjusted loss for the year attributable to equity shareholders
Weighted average number of shares
Basic and diluted weighted average number of shares
loss per share (p)
Basic and diluted loss per share
Adjusted basic and diluted loss per share
31 December
2021
31 December
20201
(35.4)
6.9
(28.5)
(36.4)
1.0
(35.4)
171,060,028
157,292,003
(20.7)
(16.7)
(23.1)
(22.5)
1
The adjusted loss for the year attributable to equity shareholders and the adjusted basic and diluted loss per share for 2020 has been restated to reflect a correction to the allocation of the Group
tax credit between underlying and non-underlying.
At 31 December 2021, 5,260,315 share awards (2020: 4,125,842) were excluded from the diluted weighted average number of
ordinary shares calculation because their effect would be anti-dilutive.
142
FINANCIAL STATEMENTS 13. properTy, plANT AND eQuIpmeNT
Assets under
construction
£m
Leasehold
improvements
£m
Fixtures,
fittings and
equipment
£m
Gym
and other
equipment
£m
Computer
equipment
£m
cost
At 1 January 2020
Additions1
Disposals
Transfers1
Transfer to right-of-use assets
At 31 December 2020
Additions
Disposals
Transfers
At 31 December 2021
Accumulated depreciation
At 1 January 2020
Charge for the year
Impairment
Disposals
Transfer to right-of-use assets
At 31 December 2020
Charge for the year
Impairment
Disposals
At 31 December 2021
Net book value
At 31 December 2020
At 31 December 2021
Total
£m
274.7
21.4
(1.4)
–
(1.1)
293.6
21.7
(2.1)
–
176.7
13.4
(0.4)
3.3
(1.1)
191.9
16.4
(1.5)
1.9
11.9
0.2
–
(0.8)
–
11.3
0.2
–
–
79.2
5.1
(0.8)
1.0
–
84.5
2.5
(0.5)
0.1
3.2
0.4
–
–
–
3.6
0.7
–
–
208.7
11.5
86.6
4.3
313.2
(48.9)
(13.9)
(0.8)
0.3
0.3
(63.0)
(14.6)
(2.8)
1.2
(6.8)
(1.2)
–
–
–
(8.0)
(1.1)
–
–
(40.7)
(8.2)
(0.2)
0.7
–
(48.4)
(7.4)
(0.4)
0.3
(2.3)
(0.6)
–
–
–
(2.9)
(0.5)
–
–
(98.7)
(23.9)
(1.0)
1.0
0.3
(122.3)
(23.6)
(3.2)
1.5
(79.2)
(9.1)
(55.9)
(3.4)
(147.6)
3.7
2.3
(0.2)
(3.5)
–
2.3
1.9
(0.1)
(2.0)
2.1
–
–
–
–
–
–
–
–
–
–
2.3
2.1
128.9
129.5
3.3
2.4
36.1
30.7
0.7
0.9
171.3
165.6
1 Additions and transfers in 2020 have been restated to more accurately reflect the classification of assets acquired during the year between assets under construction and the various other fixed
asset categories.
The Group reviews the carrying value of property, plant and equipment, right-of-use assets and intangible assets for indicators of
impairment at least annually. This annual impairment review initially considers each gym to be a separate cash generating unit (‘CGU’).
However, for gym sites that have a higher penetration of LIVE IT membership and hence the cash inflows of such gym sites are not
generated largely independent of other gym sites within the surrounding geographical area, these gym sites are considered as a group
of CGUs for impairment review purposes. The recoverable amount of property, plant and equipment assets and intangible assets is the
value in use and for right-of-use assets is the fair value less costs of disposal; with an impairment loss recognised where the recoverable
amount is below the carrying value of the assets. The value in use was calculated using the discounted present value of each site’s future
cash flows in the Group’s three-year plan using a pre-tax discount rate of 11.9% (2020: 11.1%). The fair value less costs of disposal of
right-of-use assets was calculated on the basis of the cash flows that could be realised by the Group through the sublet of the site
discounted using a post tax discount rate of 9.8%.
The impairment charge of £3.2 million relates to a write-down of assets in four city centre sites which have been particularly hard hit by
the COVID-19 pandemic and where recovery is slower than in the rest of estate. For these sites, the recoverable amount of £4.3 million
does not support the full value of the assets. The prior year impairment charge includes £0.8 million for the write-down of assets in one
site where the value in use of £1.4 million does not support the full value of the assets. The prior year also included an additional £0.2
million impairment for one site which was announced as closing in 2019 where the lease surrender was delayed.
Under the downside scenario used for going concern in relation to a softness in membership numbers, a further impairment of up to
£2.3 million would arise in relation to five sites.
Included within additions for the year are £nil of capitalised interest (2020: £0.1 million), £0.1 million of capital contributions from
landlords not yet received (2020: £0.2 million) and £2.2 million of accrued capital expenditure (2020: £0.9 million).
143
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE
The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
NoTeS To The coNSolIDATeD FINANcIAl STATemeNTS CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2021
14. rIGhT-oF-uSe ASSeTS AND leASeS
(i) Amounts recognised in the consolidated statement of financial position
Property
leases
£m
Non-property
leases
£m
cost
At 1 January 2020
Additions
Disposals
Transfers from leasehold improvements
At 31 December 2020
Additions
At 31 December 2021
Accumulated depreciation
At 1 January 2020
Charge for the year
Impairment
Disposals
Transfers from leasehold improvements
At 31 December 2020
Charge for the year
Impairment
At 31 December 2021
Net book value
At 31 December 2020
At 31 December 2021
307.9
38.0
(1.6)
1.1
345.4
42.8
388.2
(69.1)
(21.3)
(0.6)
1.6
(0.4)
(89.8)
(23.3)
(0.9)
(114.0)
255.6
274.2
–
–
–
–
–
7.2
7.2
–
–
–
–
–
–
(0.2)
–
(0.2)
–
7.0
Total
£m
307.9
38.0
(1.6)
1.1
345.4
50.0
395.4
(69.1)
(21.3)
(0.6)
1.6
(0.4)
(89.8)
(23.5)
(0.9)
(114.2)
255.6
281.2
The impairment charge of £0.9 million relates to a write-down of assets in four city centre sites which have been particularly hard hit by
the COVID-19 pandemic and where recovery is slower than in the rest of estate. For these sites, recoverable amount of £4.6 million does
not support the full value of the assets. The prior year impairment charge of £0.6 million relates to one site which was announced as
closing in 2019 where the lease surrender was delayed. Please refer to note 13 for further details on the methodology used for
calculating the impairment.
The split of lease liabilities between current and non-current is as follows:
Current
Non-current
Total lease liabilities
31 December 2021
£m
31 December 2020
£m
27.0
309.3
336.3
21.8
284.5
306.3
144
FINANCIAL STATEMENTS 14. rIGhT-oF-uSe ASSeTS AND leASeS CONTINUED
The maturity analysis of lease liabilities is as follows:
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
Total lease liabilities
31 December 2021
£m
31 December 2020
£m
39.1
37.8
37.8
35.4
35.5
242.7
428.3
(92.0)
336.3
34.6
32.4
32.4
32.7
32.2
232.3
396.6
(90.3)
306.3
During the year, the Group entered into a leasing arrangement with a total available facility of £9.5 million to finance the fit-out of new
gyms. As at 31 December 2021, the amount outstanding on this facility was £6.4 million.
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, whilst still providing useful information about
leases to users of the financial statements.
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 £1.6 million (2020: £0.7 million) of the lease liability that has been
extinguished by the forgiveness of lease payments on buildings. This has been netted off against operating expenses in the consolidated
income statement.
Where landlords have agreed to permanently change the frequency of rental payments, the change in the value of the lease liability of
£0.8 million (2020: £0.8 million) has been recognised within finance costs in the consolidated income statement as all changes impact
solely on the interest charge related to the lease liability.
(ii) Amounts recognised in the consolidated income statement
The statement of profit or loss shows the following amounts relating to leases:
Lease liability derecognised under COVID-19 Rent Concession
Depreciation charge of right-of-use assets
Impairment of right-of-use assets
Interest expense (included in finance cost)
31 December 2021
£m
31 December 2020
£m
(1.6)
23.5
0.9
14.0
(0.7)
21.3
0.6
12.7
The total cash outflow for leases in the year was £31.9 million (2020: £22.6 million). A maturity analysis of future lease payments is set
out above.
145
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
14. rIGhT-oF-uSe ASSeTS AND leASeS CONTINUED
Additionally, in 2020 the Group 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 £0.7 million and the decrease in the lease liability of £0.7 million 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 as well as hire purchases agreements for gym equipment. Property rental contracts are
typically made for fixed periods of ten to 20 years but may have extension options as well. Hire purchase agreements are made for
fixed periods of three years, 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.
Right-of-use assets are measured at cost comprising the following:
• the amount of the initial measurement of lease liability;
• 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.
(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. Where it is reasonable probable that the Group will exercise
the termination or extension option, this has been included within the calculation of the lease liability. There are no unrecognised lease
extension options.
During the period, the Group has renegotiated 12 leases (2020: 12) which resulted in additional lease liabilities of £6.9 million being
recognised (2020: £16.7 million). In 2020, the Group agreed to a reduction in the lease term of one site proposed by the lessor
resulting in £0.6 million being recognised in profit and loss (see note 9).
146
FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 DECEMBER 2021 15. INTANGIBle ASSeTS
cost
At 1 January 2020
Additions
At 31 December 2020
Additions
At 31 December 2021
Accumulated amortisation
At 1 January 2020
Charge for the year
At 31 December 2020
Charge for the year
At 31 December 2021
Net book value
At 31 December 2020
At 31 December 2021
Goodwill
£m
Customer
list
£m
Contract
£m
Computer
software
£m
77.7
–
77.7
–
77.7
–
–
–
–
–
2.7
–
2.7
–
2.7
(1.8)
(0.6)
(2.4)
(0.2)
1.2
–
1.2
–
1.2
(0.3)
(0.2)
(0.5)
–
Total
£m
92.9
3.8
96.7
5.2
11.3
3.8
15.1
5.2
20.3
101.9
(4.5)
(2.9)
(7.4)
(5.4)
(6.6)
(3.7)
(10.3)
(5.6)
(2.6)
(0.5)
(12.8)
(15.9)
77.7
77.7
0.3
0.1
0.7
0.7
7.7
7.5
86.4
86.0
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 Group’ brand and the Group now operates only as one chain of gym.
All of the goodwill acquired through business combinations has therefore been allocated for impairment testing purposes to ‘The Gym
Group’ chain of gyms. 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 a financial plan 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 Group
2021
2020
Discount
rate
Growth
rate
Discount
rate
11.9%
3.0
11.1%
Growth
rate
3.0%
Discount rates reflect the estimated 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 5% to 78% for revenue and 5% to 48%
for costs. The impact of any new openings is not included in the assessment as they do not form part of the existing assets. 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.
147
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
16. INVeSTmeNTS IN FINANcIAl ASSeTS
On 3 February 2020, the Group purchased convertible loan notes in Fiit Limited for cash consideration of £1.0 million. Conversion
was originally expected to take place within two years of issue giving the Group a small minority stake at a maximum valuation of
£1.25 million. These notes are measured at fair value through profit or loss and the carrying value at the end of the year is £1.0 million
(2020: £1.0 million).
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 the investment. The business continues to build strategic partnerships with a number of
parties and is expected to continue to have adequate funding in place. As such, the carrying amount is believed to appropriately reflect
the fair value. The range of sensitivity in the valuation at 31 December 2021 to reasonably possible changes in the assumptions used is
not considered to be material.
Post year end, a number of changes to the terms of the convertible loan notes have been agreed, including the extension of the date of
conversion to 15 July 2023 and changes to the circumstances in which the loan notes may be redeemed or converted.
17. 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
18. cASh AND cASh eQuIVAleNTS
Cash at bank
Short term deposits
Bank overdrafts
cash and cash equivalents
31 December 2021
£m
31 December 2020
£m
0.8
–
0.8
0.6
4.9
6.3
6.3
–
6.3
0.9
(0.2)
0.7
0.7
4.9
6.3
6.2
0.1
6.3
31 December 2021
£m
31 December 2020
£m
3.3
4.0
7.3
–
7.3
0.2
3.6
3.8
(0.1)
3.7
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.
19. TrADe AND oTher pAyABleS
Trade payables
Social security and other taxes
Accruals
Other payables
Contract liabilities (note 5)
Deferred income
148
31 December 2021
£m
31 December 2020
£m
2.3
2.5
17.0
0.1
8.4
0.1
30.4
2.9
0.2
9.2
–
6.4
–
18.7
FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 DECEMBER 2021 20. oTher FINANcIAl lIABIlITIeS
At 1 January 2020
Transfer from contingent consideration to deferred consideration
Cash paid in year
At 31 December 2020
Cash paid in year
At 31 December 2021
Deferred
consideration
£m
Contingent
consideration
£m
–
3.9
(1.3)
2.6
(2.6)
–
3.9
(3.9)
–
–
–
–
Total £m
3.9
–
(1.3)
2.6
(2.6)
–
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. The £3.9 million balance of contingent
consideration at 1 January 2020 represented the fair value payable for the two lease extensions which were obtained during 2020
crystallising the liability. As a result, the contingent consideration was reclassified as deferred consideration, with £1.3 million being paid
during 2020 and the remaining £2.6 million paid during the year.
21. BorroWINGS
Non-current
Revolving credit facility
Loan arrangement fees
31 December 2021
£m
31 December 2020
£m
44.7
(0.4)
44.3
49.8
(0.6)
49.2
The Group has £100m of available facilities under a Revolving Credit Facility (‘RCF’).
The facility is syndicated to a three-lender panel of HSBC, NatWest 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’). In July 2021, at the
same time as the equity placing, certain restrictions in the Group’s banking facilities around capital expenditure and finance lease debt
were relaxed.
The funds borrowed under the New Bank Facility bear interest at a minimum annual rate of 2.60% (2020: 2.60%) above the
appropriate sterling LIBOR. Following the abolition of sterling LIBOR rates on 1 January 2022, the underlying interest rate for the debt
will transition to Sterling Overnight Index Average (‘SONIA’) plus a credit adjustment spread.
The average interest rate paid in the year on drawn funds under the new facility is 2.67% (2020: 2.28%). Undrawn funds bear interest
at a minimum annual rate of 0.91% (2020: 0.91%).
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.
The Group’s bank borrowings are secured by way of fixed and floating charges over the Group’s assets.
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. Waivers were received in respect of the March 2021 and June 2021 reporting periods due to the
extended lockdown.
149
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
21. BorroWINGS CONTINUED
Available facilities
At 31 December 2021, the Group had drawn down £45.0 million under the RCF (2020: £51.0 million), leaving £55.0 million (2020:
£49.0 million) undrawn and available. The £45.0 million is repayable in October 2023.
Subsequent events
In March 2022, the Group obtained credit committee approval from its banks for certain changes to its RCF facility. These included a
one-year extension of Facility A (£70 million) to October 2024; the cancellation in full of the temporary Facility B (£30 million) and
replacement with a new £10 million Facility to October 2024; and further relaxation of finance lease restrictions. Funds borrowed under
the RCF will bear interest at a minimum rate of 2.85%. Prior to formal documentation of these agreed changes, Facility A and Facility B
remain in place.
22. FINANcING lIABIlITIeS
At 1 January 2020
Cash flows
Other non-cash movements
At 31 December 2020
Cash flows
Other non-cash movements
At 31 December 2021
23. proVISIoNS
At 1 January 2020
New provisions
Release of provision
At 31 December 2020
New provisions
Utilisation of provisions
At 31 December 2021
Due in less than one year
Due in more than one year
At 31 December 2020
Due in less than one year
Due in more than one year
At 31 December 2021
Cash and cash
equivalents
£m
Borrowings
£m
Lease Liabilities
£m
2.6
1.1
–
3.7
3.6
–
7.3
(49.1)
(278.3)
(1.0)
0.9
22.6
(50.6)
(49.2)
(306.3)
6.0
(1.1)
31.9
(61.9)
(44.3)
(336.3)
Dilapidations
£m
1.3
0.1
(0.2)
1.2
0.4
–
1.6
–
1.2
1.2
–
1.6
1.6
Other
£m
0.4
–
(0.3)
0.1
–
(0.1)
–
0.1
–
0.1
–
–
–
Total
£m
1.7
0.1
(0.5)
1.3
0.4
(0.1)
1.6
0.1
1.2
1.3
–
1.6
1.6
A dilapidations provision is recognised when there is a 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. Subject to
a new lease not being negotiated to extend the current lease term, dilapidations would become payable between 2025 and 2040.
150
FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 DECEMBER 2021 24. 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: inputs are quoted prices in active markets
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
There were no transfers between levels throughout the periods under review.
Fair values
With the exception of the Group’s borrowings, the carrying value of financial assets and liabilities equal their fair value. The carrying
value of borrowings of £44.3 million (2020: £49.2 million) have a fair value of £45.0 million (2020: £50.0 million). The fair values of
financial derivatives and borrowings have been calculated by discounting the future cash flows at prevailing market interest rates. Other
than the fair value of financial assets at fair value through profit and loss that are categorised as Level 3, the fair value of all other
financial assets and liabilities are categorised as Level 2.
capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, 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 property 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
Non-property leases
Less: cash and cash equivalents
Non-property net debt
Total equity
Total capital
Gearing ratio
31 December 2021
£m
31 December 2020
£m
45.0
6.4
(7.3)
44.1
229.6
273.7
16%
51.0
–
(3.7)
47.3
199.4
246.7
19%
Financial risk management
The Group has exposure to the following risks from its use of financial instruments:
• Market risk
• Liquidity risk
• Credit risk
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.
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.
The principal market risk affecting the Group is 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 2021 and 2020. 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.
151
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
24. FINANcIAl INSTrumeNTS CONTINUED
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 through 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 GBP LIBOR. The exposure arises on derivatives and the Group’s bank borrowings. As listed in note 4, the
Group has cash flow hedge relationships affected by the interest rate benchmark reform. The debt that was originally issued as GBP
LIBOR floating rate debt was transitioned to SONIA (see note 21). Hedging instruments include LIBOR-based interest rate swaps that
have also been transitioned to SONIA.
Below are details of the hedging instruments and hedged items, 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 daily compounded GBP SONIA,
pay GBP fixed interest rate swap
September 2022 GBP 27.2 million GBP LIBOR RCF of £70.0 million
maturing in October 2023
The Group is not expecting any reduction in interest rates over the next 12 months.
The increase in the loss before tax of a reasonably possible increase in interest rates is as follows:
Change in interest rates of 0.5%
31 December 2021
£m
31 December 2020
£m
0.2
0.3
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
Lease liabilities
Trade and other payables
Borrowings
Other financial liabilities
Lease liabilities
Within 1
year
£m
19.4
1.2
39.1
59.7
Within 1
year
£m
12.1
1.8
2.6
34.6
51.1
31 December 2021
1 to 2
years
£m
–
46.0
37.8
2 to 5
years
£m
more than
5 years
£m
–
–
108.7
–
–
242.7
Total
£m
19.4
47.2
428.3
83.8
108.7
242.7
494.9
31 December 2020
1 to 2
years
£m
–
1.7
–
32.4
34.1
2 to 5
years
£m
–
52.1
–
97.3
More than
5 years
£m
–
–
–
232.3
Total
£m
12.1
55.6
2.6
396.6
149.4
232.3
466.9
credit risk
The Group’s principal financial assets are bank balances and cash, trade and other receivables, unlisted securities and derivative
financial instruments. 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.
152
FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 DECEMBER 2021
25. 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 2021
£m
31 December 2020
£m
–
0.1
–
0.1
31 December 2021
31 December 2020
177,519,174
48,050
165,751,888
48,050
In addition, 232,044 Ordinary shares of £0.0001 each are held by an employee benefit trust (2020: 217,777).
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
£41.3 million. 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 £39.9 million 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.
In July 2021, 11,350,000 Ordinary shares of £0.0001 each were issued at a price of £2.75 per share and raised gross proceeds of
£31.2 million. The costs directly related to the transaction amounted to £0.9 million. The proceeds of the share issue are being used to
accelerate the Group’s site rollout programme.
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 a 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.
Issued Share Capital and Capital Redemption Reserve are not included in the Consolidated Statement of Changes in Equity because
the balances in these reserves are less than £0.1 million.
153
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
26. 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 Payment, 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 £2.4 million (2020: £0.8 million) in respect of the Group’s share based payment
arrangements and a charge related to employer’s national insurance of £0.5 million (2020: credit of £0.1 million).
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
2021
3,780,043
23,622
144,191
1,609,138
3,917
791,060
Granted
during
the year
Lapsed/cancelled
during
the year
Exercised
during
the year
outstanding at
31 December
2021
exercisable at
31 December
2021
984,231
–
45,626
372,323
2,750
166,171
(959,152)
–
(19,043)
(154,782)
–
(73,549)
(191,802)
(4,191)
(12,078)
3,613,320
19,431
158,696
(222,051) 1,604,628
4,358
882,569
(2,309)
(1,113)
380,021
19,431
–
89,014
–
–
6,351,971
1,571,101
(1,206,526)
(433,544) 6,283,002
488,466
The exercise price of all options under the schemes held during the year is £0.01, with the exception of the SAYE scheme where
the exercise price ranges between 108.0p and 236.0p. 488,466 options were exercisable under the PSP and SIP schemes as at
31 December 2021 (2020: 655,397). No other options were exercisable as at 31 December 2021.
(a) performance Share plan
The outstanding awards as at 31 December 2021 will all vest within three years, subject to continued employment and the achievement
of certain performance targets. For awards made in 2021 and 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.
154
FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 DECEMBER 2021 26. ShAre-BASeD pAymeNTS CONTINUED
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
Without Holding Period
With holding period
2021
2020
2021
2020
£2.32
£0.0001
60.2%
3 years
–
0.13%
£1.45
£0.0001
49.5%
3 years
–
(0.10)%
£2.63
£0.0001
68.83%
5 years
–
0.42%
£1.45
£0.0001
49.5%
3 years
–
(0.10)%
The weighted average fair value of each award issued under this scheme during the year was £1.67 (2020: £0.84). The weighted
average remaining contractual life was 8.0 years (2020: 1.7 years) at 31 December 2021.
(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 4.3 years (2019: 5.3 years) at 31 December 2021.
(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 £2.64 (2020: £1.76) and was determined using the share price at the date of grant. The weighted average
remaining contractual life was 1.3 years (2020: 1.8 years) at 31 December 2021.
(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 £2.66 (2020: £1.45) and was determined using the share price at the date of grant. The weighted average
remaining contractual life was 8.4 years (2020: 9.0 years) at 31 December 2021.
(e) long Service Awards
The awards are subject to continued employment requirements over a one-year period for awards issued in 2021 and a three-year
period for awards issued prior to 2021 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 vesting period. The weighted average fair value of each award issued under this scheme during
the year was £2.61 (2020: £nil) and was determined using the share price at the date of grant. The weighted average remaining
contractual life was 0.6 years (2020: 7.8 years) at 31 December 2021.
(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 £1.17 (2020: £0.53) and was determined using the share price at the date of grant. The weighted average
remaining contractual life was 2.5 years (2020: 3.3 years) at 31 December 2021.
155
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
27. commITmeNTS AND coNTINGeNcIeS
Contracted for but not provided
31 December 2021
£m
31 December 2020
£m
2.9
2.2
The commitments above relate to contracts for the fit-out of new sites where works have not yet commenced.
28. 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. During the period, Closewall Limited provided services to the Group to the value of
£11,000 (2020: £1,700,000). There was no balance outstanding at 31 December 2021 (2020: £nil).
The subsidiaries of the Group are as follows:
Company
Principal activity
Country of incorporation
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
Holding
100%
100%
100%
100%
100%
100%
The registered office of the subsidiaries is 5th Floor, OneCroydon, 12-16 Addiscombe Road, Croydon, CR0 0XT.
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 charge
31 December 2021
£m
31 December 2020
£m
2.6
0.2
0.1
1.2
4.1
2.1
0.3
0.1
0.2
2.7
At the current and prior year end, there were no outstanding loan balances owed by key management personnel. At the year end,
£0.6 million (2020: £nil) 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.
156
FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 DECEMBER 2021 29. DIVIDeNDS mADe AND propoSeD
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 2021 (2020: £nil).
30. eVeNTS AFTer The reporTING perIoD
In March 2022, the Group agreed to acquire the trade and assets of a portfolio of three sites trading under the Fitness First brand for
total cash consideration of £5.5 million. The consideration will be paid on the date of completion, which is expected to be before the
end of March 2022.
The sites to be acquired are in key residential areas within the M25 where the Group has consistently traded well. The acquisition
complements the Group’s existing growth strategy.
The acquired sites will be converted to The Gym Group brand in 2022, with total capital expenditure expected to be c.£2.5 million.
Following conversion, the sites are expected to generate strong returns on capital at maturity.
Given the timing of the acquisition, we are yet to complete the assessment of the fair value of the assets to be acquired, including
goodwill.
In March 2022, the Group also obtained credit committee approval from its banks for certain changes to its RCF facility. These include a
one-year extension of Facility A (£70 million) to October 2024; the cancellation in full of the temporary Facility B (£30 million) and
replacement with a new £10 million Facility to October 2024; and further relaxation of finance lease restrictions. Funds borrowed under
the RCF will bear interest at a minimum rate of 2.85%.
157
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
FINANcIAl STATemeNTS
compANy STATemeNT oF FINANcIAl poSITIoN
AS AT 31 DECEMBER 2021
Non-current assets
Investments in subsidiaries
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
Non-current liabilities
Borrowings
Total liabilities
Net assets
capital and reserves
Own shares held
Share premium
Hedging reserve
Merger reserve
Retained earnings
Total equity shareholders’ funds
31 December 2021
£m
Note
31 December 2020
£m
4
5
5
6
7
8
8
8
8
8
225.9
–
225.9
65.5
0.1
65.6
291.5
7.1
44.3
51.4
240.1
0.1
189.7
(0.1)
39.9
10.5
240.1
193.6
17.0
210.6
53.1
0.1
53.2
263.8
5.6
49.2
54.8
209.0
0.1
159.5
(0.2)
39.9
9.7
209.0
The notes on pages 160 to 165 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 loss for the year amounted to £1.5 million (2020: £nil).
These Financial Statements were approved by the Board of Directors on 16 March 2022.
Signed on behalf of the Board of Directors
richard Darwin
Chief Executive Officer
mark George
Chief Financial Officer
Company Registration Number 08528493
158
FINANCIAL STATEMENTS
compANy STATemeNT oF chANGeS IN eQuITy
FOR THE YEAR ENDED 31 DECEMBER 2021
At 1 January 2020
Capital contributions to subsidiaries
Issue of Ordinary share capital
At 31 December 2020
Loss for the year
Other comprehensive income
Total comprehensive loss for the year
Capital contributions to subsidiaries
Issue of Ordinary share capital
Own
shares held
£m
Share
premium
£m
Hedging
reserve
£m
Merger
reserve
£m
Retained
earnings
£m
0.1
–
–
0.1
–
–
–
–
–
159.5
–
–
159.5
–
–
–
–
30.2
(0.2)
–
–
(0.2)
–
0.1
0.1
–
–
–
–
39.9
39.9
–
–
–
–
–
8.9
0.8
–
9.7
(1.5)
–
(1.5)
2.3
–
Total
£m
168.3
0.8
39.9
209.0
(1.5)
0.1
(1.4)
2.3
30.2
At 31 December 2021
0.1
189.7
(0.1)
39.9
10.5
240.1
The notes on pages 160 to 165 form an integral part of the Financial Statements.
Retained earnings include distributable reserves of £4.9 million (2020: £4.4 million).
159
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
NoTeS To The compANy FINANcIAl STATemeNTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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 2021, the Directors have considered the
following:
• the Group’s trading performance in the second half of 2021 and throughout the traditional January and February 2022 peak period,
in particular in respect of its trading subsidiary The Gym Limited (‘TGL’) on which the Company is interdependent;
• future expected trading performance of the Company and TGL to June 2023 (the going concern period), including membership levels
and behaviours;
• the Group’s site rollout programme;
• the latest situation and UK Government guidance with respect to the COVID-19 pandemic; and
• the Company and Group’s financing arrangements and relationship with its lenders and shareholders.
Following the re-opening of gyms in April 2021, trading in the second half of 2021 showed total membership increasing by 31%, from
547,000 at the end of February 2021 to 718,000 at the end of December 2021. Trading in the first two months of 2022 which is
traditionally the peak period for gym memberships, has been strong, with membership numbers at the end of February 2022 reaching
825,000.
The Directors believe that the current trading performance, together with the COVID-impacted commercial property market, provide the
Group with a unique opportunity to accelerate growth and gain market share. The Directors are now focused on delivering that
opportunity. We opened 19 new gyms in 2021 which are performing in line with our expectations, and have plans to open a further 28
in 2022.
160
FINANCIAL STATEMENTS 2. SummAry oF SIGNIFIcANT AccouNTING polIcIeS CONTINUED
To facilitate this accelerated growth, on 2 July 2021, the Group raised additional financing in the form of an equity placing, which
raised net proceeds of £30.3m. In addition, certain restrictions in the Group’s banking facilities around capital expenditure and finance
lease debt were relaxed.
As at 31 December 2021, the Group had Non-Property Net Debt (including finance leases) of £44.1m and £62.3m of headroom
(calculated off bank debt less cash) under the £100m Revolving Credit Facility (‘RCF’) (reducing to £75m in March 2022 before
increasing to £80m in May 2022 and maturing in October 2024).
Until June 2022, the RCF is subject to quarterly financial covenant tests primarily relating to the performance of the Group against
agreed targets for Group Adjusted EBITDA Less Normalised Rent. From June 2022, the covenants consist of quarterly tests on leverage
(net debt to Group Adjusted EBITDA Less Normalised Rent), fixed charge cover (Adjusted EBITDAR to Net Finance Charges and
Normalised Rent) and minimum liquidity.
The Group’s base case forecast for the period to 30 June 2023 anticipates continued recovery of membership and robust yields,
together with the successful execution of the accelerated rollout plan. Under this scenario, all financial covenants are passed with a
significant level of headroom and the Company and Group can operate comfortably within its financing facilities.
The Directors have considered a downside scenario which anticipates a slower recovery in which membership numbers only return to
88% of pre-pandemic levels (December 2019) by the end of the going concern period. Under this scenario, all financial covenants
continue to be passed and the Group continues to operate within its financing facilities.
The Directors have also considered a reverse stress test scenario that modelled the impact of a significant downturn in trading and
resulting drop in membership numbers. Mitigating actions were also modelled including moving to a minimum level of maintenance
capital expenditure, reducing discretionary expenditure in order to preserve cash and a deliberate slowing down or temporary cessation
of the rollout programme. In this scenario, the number of new members each month would have to decline by 26% compared to the
base case (the equivalent of membership reducing to 82% of the February 2022 closing membership number) before the fixed charges
cover covenant would be breached in December 2022. However, the Group would remain within its liquidity limits.
In the event of a reverse stress test scenario, the Directors would introduce additional measures to mitigate the impact on the Company
and Group’s liquidity, covenants and cash flow, including: (i) further reductions in controllable operating costs, marketing and capital
expenditure; (ii) discussions with lenders to secure additional debt facilities and/or covenant waivers; (iii) deferral of, or reductions in, rent
payments to landlords; and (iv) the potential to raise additional funds from third parties.
The Directors believe that the success of the UK’s booster vaccination programme and the fact that all sectors of the economy remained
open for business during winter 2021/22, despite the recent Omicron outbreak, are strong indicators that further prolonged periods of
enforced closure are highly unlikely. In addition, the Company and Group have a very good relationship with their lenders who have
been supportive throughout the pandemic. The lenders understand the Group’s business model, our significant profit and cash
generation in months when gyms are fully open, and our relatively low gearing. As a result, in the unlikely event there was another
national lockdown, the Directors believe that the banks would continue to support the Group with covenant flexibility in the form of
waivers or amendments, as they have done on a number of occasions during previous lockdown periods. The Directors therefore
consider that the combination of a lockdown and a subsequent lack of flexibility from the banks is remote.
Conclusion
The Board has reviewed the financial forecasts and downside scenarios of the Group and has a reasonable expectation that the Group
has adequate resources to continue in operational existence for the period to 30 June 2023. As a result, the Directors continue to adopt
the going concern basis in preparing these financial statements. In making this assessment, consideration has been given to the current
and future expected trading performance; the Company and Group’s current and forecast liquidity position; the continued positive
momentum with regards the COVID-19 situation and success of the UK booster vaccination programme; the support received to date
from our lenders and shareholders; and the mitigating actions that can be deployed in the event of reasonable downside scenarios.
161
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
NoTeS To The compANy FINANcIAl STATemeNTS CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2021
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 Company 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 Company’s activities expose it to financial risks associated with movements in interest rates. The Company 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 Company 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 Company has designated its
derivative financial instrument as a cash flow hedge.
At inception of the hedge relationship, the Company 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.
162
FINANCIAL STATEMENTS 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.
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 2020
Capital contribution to subsidiaries
At 31 December 2020
Additions
At 31 December 2021
£m
192.8
0.8
193.6
32.3
225.9
In December 2021, the Company invested £30.0 million into its directly held subsidiary, The Gym Group Midco1 Limited. 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. A corresponding capital contribution of £2.3 million has been recognised within investments in subsidiaries (2020:
£0.8 million). Details of the Company’s share-based payment arrangements are shown in note 26 to the Consolidated Financial
Statements.
The Company’s subsidiary undertakings are shown in note 28 to the Consolidated Financial Statements.
163
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
NoTeS To The compANy FINANcIAl STATemeNTS CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2021
31 December 2021
£m
31 December 2020
£m
0.2
65.3
65.5
65.5
–
65.5
0.5
69.6
70.1
53.1
17.0
70.1
31 December 2021
£m
31 December 2020
£m
0.1
5.3
1.7
7.1
–
5.0
0.6
5.6
31 December 2021
£m
31 December 2020
£m
44.7
(0.4)
44.3
49.8
(0.6)
49.2
5. TrADe AND oTher receIVABleS
Prepayments and accrued income
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
164
FINANCIAL STATEMENTS 8. 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 2021
£m
31 December 2020
£m
–
0.1
–
0.1
31 December 2021
31 December 2020
177,519,174
165,751,888
48,050
48,050
Refer to note 25 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 a 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.
Issued Share Capital and Capital Redemption Reserve are not included in the Consolidated Statement of Changes in Equity because the
balances in these reserves are less than £0.1 million.
9. eVeNTS AFTer The reporTING perIoD
In March 2022, and in connection with the acquisition of the trade and assets of three sites by the Group, as disclosed in note 30 to the
Group’s financial statements, the Company obtained credit committee approval from its banks for certain changes to its RCF facility.
These include a one-year extension of Facility A (£70 million) to October 2024; the cancellation in full of the temporary Facility B (£30
million) and replacement with a new £10 million Facility to October 2024; and further relaxation of finance lease restrictions. Funds
borrowed under the RCF will bear interest at a minimum rate of 2.85%.
165
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
ANNUAL REPORT AND ACCOUNTS 2021
FIVe-yeAr recorD
FOR THE YEAR ENDED 31 DECEMBER 2021
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
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 (£)1
Members that visit 4+ Times in a Month2
Number of Mature Gyms in operation (number)
Mature Gym Site EBITDA
Return on Invested Capital of Mature Sites3
Employee Engagement Score
2021
£m
106.0
5.7
6.3
44.1
7.74
202
718
17.60
32.6%
175
22.5
18%
61%
2020
£m
80.5
(10.2)
(16.3)
47.3
(4.64)
183
578
17.20
23.9%
155
3.9
18%
51%
2019
£m
153.1
48.5
39.2
47.4
0.98
175
794
16.02
44.0%
109
48.1
31%
n/a
2018
£m
123.9
39.1
34.0
46.0
1.17
159
724
14.89
41.7%
89
39.0
30%
n/a
2017
£m
91.4
30.6
24.7
37.5
1.23
128
607
14.41
40.7%
74
32.4
30%
n/a
1
2
3
In order to provide better year-on-year comparability for yield, the figures presented for 2021 and 2020 have been adjusted to exclude the impact of UK Government-enforced closure periods as
a result of the COVID-19 pandemic. The 2021 figure is calculated for the period from July 2021 to December 2021 when all gyms were fully open and trading had returned to normal. The 2020
figure is calculated on a site-by-site basis and excluded days where the sites were required to be closed due to Government restrictions.
The 2021 and 2020 figures are impacted by closure days.
In order to provide better year-on-year comparability for ROIC, the figures presented for 2021 and 2020 have been adjusted to exclude the impact of UK Government-enforced closure periods as
a result of the COVID-19 pandemic. The 2021 figure is calculated for the period from July 2021 to December 2021 when all gyms were fully open and trading had returned to normal. The 2020
figure is calculated to exclude those months when sites were required to be closed due to Government restrictions.
DeFINITIoN oF NoN-STATuTory meASureS
Group Adjusted eBITDA – operating profit before depreciation, amortisation, long-term employee incentive costs and non-underlying
items.
Normalised rent – 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 loss/profit before Tax – loss/profit before tax before non-underlying items.
Adjusted earnings – loss/profit for the year before non-underlying items and the related tax effect.
Basic Adjusted epS – loss/profit for the year before non-underlying items and the related tax effect, divided by the basic weighted
average number of shares.
Group operating cash Flow – Group Adjusted EBITDA Less Normalised Rent, movement in working capital and maintenance
capital expenditure.
Free cash Flow – Group Operating Cash Flow less cash non-underlying items, bank and non-property lease interest and tax.
Non-property Net Debt – bank and non-property lease debt less cash and cash equivalents.
mature Gym Site eBITDA – Group Adjusted EBITDA Less Normalised Rent contributed by mature sites.
return on Invested capital of mature Sites – Mature Gym Site EBITDA divided by total capital initially invested in the mature
sites.
maintenance capital expenditure – costs of replacement gym equipment and premises refurbishment.
expansionary capital expenditure – costs of fit-out of new gyms (both organic and acquired), technology projects and other
strategic projects. It is stated net of contributions towards landlord building costs.
166
FINANCIAL STATEMENTS corporATe INFormATIoN
FOR THE YEAR ENDED 31 DECEMBER 2021
Company Secretary
Nadira Hussein
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
This publication has been manufactured using 100%
offshore wind electricity sourced from UK wind.
100% of the inks used are vegetable oil based, 95%
of press chemicals are recycled for further use and,
on average 99% of any waste associated with this
production will be recycled and the remaining
1% used to generate energy. This document is
printed on Evolution 100, a material produced from
100% recovered fibre certified to FSC® standards.
FINANCIAL STATEMENTSSTRATEGIC REPORTOVERVIEWGOVERNANCE The Gym Group plc
5th Floor
OneCroydon
12-16 Addiscombe Road
Croydon
CR0 0XT
www.tggplc.com
www.thegymgroup.com