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The Gym Group plc
Annual Report
and Accounts 2022
The Gym Group plc | Annual Report and Accounts 2022
The Gym Group plc | Annual Report and Accounts 2022
Strategic report
Overview
2022 highlights
Financial
Revenue
£172.9m
2021: £106.0m
Group Adjusted EBITDA Less Normalised Rent
£38.0m
2021: £5.7m
Statutory loss for the year
£19.3m
2021: loss of £35.4m
Non-property net debt
£76.1m
2021: £44.1m
See Financial review | Pages 16-23
Strategic and operational
Membership ended the year at 821,000, an increase
of 14.3% from the end of the previous year
(Dec 2021: 718,000)
Yield continued to strengthen with average price of
a standard DO IT membership increasing to £21.49
at 31 December 2022 (Dec 2021: £19.27) and LIVE IT
penetration growing to 29.6% of total membership
(Dec 2021: 27.1%)
281 new site openings in 2022 – highest number in
a single year
Successful delivery of the new technology platform
and brand relaunch
Our high margin, low cost model has demonstrated
its ability to drive strong financial returns
Visit frequency and satisfaction scores remain
materially higher than pre Covid-19 scores
1
2
Focus on sustainability continues with £3.3m of social
value² per gym created in 2022; UK's first carbon
neutral gym chain
See Strategy in action | Pages 28-35
25 organic openings in the year plus three sites acquired from Fitness First
and one closure (31 Dec 2021: 202).
See page 3 for definition of social value. £756m total social value created in
2022 divided by 229 sites open at year end.
Founded in 2007,
The Gym Group is the
original provider of high
quality, low cost gym
facilities in the UK. We offer
24/7, no contract gym
memberships delivering
great value-for-money for
all our members.
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2022 highlights
Introduction to our business
Contents
Overview
01
02
02 Our purpose
02 Our business model
02 Our strategy
03 What we deliver
03 Our key stakeholders
04 At a glance
Strategic report
08 Chair of the Board’s statement
Chief Executive’s review
10
16
Financial review
24 Market review
26
28
36
38
54
64
Strategic framework
Strategy in action
Key performance indicators (‘KPIs’)
Sustainability report
Principal risks and uncertainties
Stakeholder information
Introduction from the Chair of the Board
Board of Directors
Executive Committee
Corporate Governance report
Report of the Nomination Committee
Report of the Audit and Risk Committee
Report of the Sustainability Committee
Report of the Remuneration Committee
Governance
70
72
75
76
81
84
90
92
108 Directors’ report
111
Directors’ responsibility statement
Independent auditor’s report
Financial statements
112
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
159 Company statement of financial position
160 Company statement of changes in equity
161 Notes to the Company financial statements
Other information
167 Five-year record
167 Definition of non-statutory measures
168 Corporate information
tggplc.com
| 01
The Gym Group plc | Annual Report and Accounts 2022
The Gym Group plc | Annual Report and Accounts 2022
Strategic report
Introduction to our business
Our purpose
Breaking down
barriers to
fitness for all
What we deliver
l Accessible fitness for all
32%
of gyms located in 20% most deprived areas
of the UK
l Social value for communities
£2.85bn
of social value1 created through member exercise
over the last five years
l Sustainable long term growth
22%
membership growth per year for the last ten years
with an average of 20 new sites opened per year
l Strong return on capital
20%
delivered in 2022, impacted by Covid-19
and macroeconomics
1 Social value is a measure of the value we are creating through regular
exercise in the communities in which we operate. It is derived using a
model created by Sheffield Hallam University and used extensively by
Sport England, local authorities and the UK Government.
Our business model
Reinvestment
in estate and
growth of
new sites
Strong
financial
returns and
social value
Strong
demand for
health and
fitness
Self-financing
growth delivering
financial returns
Scale benefits
from operating
200+ sites
High quality,
great value
gyms
Growing
membership
base
02 |
Our strategy
High quality estate
See Strategy in action
Pages 28-29
Compelling member
experience
See Strategy in action
Pages 30-31
Innovative technology
and marketing
See Strategy in action
Pages 32-33
Unique team
and culture
See Strategy in action
Pages 34-35
Growing
sustainably
See Sustainability report
Pages 38-53
Our key stakeholders
A successful working relationship with our stakeholders is key to our operating model.
See Stakeholder engagement | Pages 66-69
Stakeholders
Why they matter
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.
Members
Suppliers
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.
Communities
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.
Environment
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.
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The Gym Group plc | Annual Report and Accounts 2022
The Gym Group plc | Annual Report and Accounts 2022
Strategic report
At a glance
Strong
proposition
As at 31 December 2022 we operated 229 sites in the UK.
We are consistently rated 'excellent' on Trustpilot, score
highly on member satisfaction and have over 53 million
gym visits per annum.
Member proposition
Market-
leading
low price
membership
High
quality
gym equipment
and exercise
facilities
Friendly,
helpful staff
and access
to personal
trainers
24/7
access and
unlimited
training
Convenient
locations
52.5% of UK
population live
within 15 minutes
drive of at least
one of our gyms
LIVE IT1
multi-gym
access, fitness
tracking, bring
a friend and Fiit
premium
No
contract
Free
group exercise
classes
Free Fiit
on-demand
fitness classes
in our app
04 |
1 LIVE IT is our premium membership
plan which offers additional benefits.
Strong gym network
We focus on operating high quality, low cost gyms
that have widespread appeal, breaking down
barriers to fitness for all. In 2022, we delivered
record organic growth, opening a total of 28 new
gyms. We also exercised a landlord break on one
property and closed the site. The economies of scale
in our business model enable us to offer a great
service at a low cost for our members whilst also
delivering a strong financial performance.
Member demographic
Urban
adversity
(UK: 16%)
Affluent
achievers
(UK: 24%)
21%
15%
18%
Rising
prosperity
(UK: 10%)
23%
Comfortable
communities
(UK: 27%)
23%
Financially
stretched
(UK: 23%)
229
Number of gyms
821,000
Number of members
£21.49
Average monthly membership cost
Existing gyms
2022 acquired sites
2022 organic openings
Note: All figures stated as at 31 December 2022.
Average monthly membership cost relates to ‘DO IT’ rate.
DO IT membership is a membership for one specified gym.
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Strategic reportFinancial statementsGovernance report The Gym Group plc | Annual Report and Accounts 2022
The Gym Group plc | Annual Report and Accounts 2022
The Gym Group plc | Annual Report and Accounts 2022
The Gym Group plc | Annual Report and Accounts 2022
Strategic report
The story so far...
Rapid growth and
proof of business model
Continued growth and
investment in scale
Managing through Covid-19
and recovery
Strategic expansion
2008
2015
2019
2020
2021
2022
First gym opened
in Hounslow
Successful IPO on
London Stock Exchange
Gyms and members
more than doubled
in four years
Funded 20 new sites
from operating cash flow
Business significantly
impacted by Covid-19
Rollout slowed to reduce
capital spend
Revenue recovery starts
Accelerated growth plan
Return to a full year
of trading
Record organic expansion -
estate up to 229 sites
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Number of gyms
229
202
183
175
229
Total number
of sites
159
128
89
74
55
16
32
40
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1
2008 2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Number of members
448k
376k
293k
225k
166k
8k
26k
57k
96k
794k
724k
719k
607k
578k
821k 821k
Total number
of members
2008 2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
06 |
06 |
Adjusted EBITDA £38m1
£49m
£39m
£38m
£31m
£25m
£20m
£15m
£12m
£6m
£6m
2020
2012
2013
2014
2015
2016
2017
2018
2019
2021
2022
-£10m
£38m
Adjusted EBITDA Less Normalised Rent
1 Adjusted EBITDA refers to Group Adjusted EBITDA Less Normalised Rent -
a reconciliation to Operating profit is provided on page 121. For 2012 and
2013, the number is presented on an aggregated basis as the Group did not
constitute a single legal group until 13 June 2013. Group Adjusted EBITDA
Less Normalised Rent for 2012-2014 has not been restated for IFRS 16.
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The Gym Group plc | Annual Report and Accounts 2022
Strategic report
Chair of the Board’s statement
Well placed
for the future
2022 was the first year in three that we have been fully open,
as we moved into the post-pandemic trading environment,
and we are proud to have delivered on several major
projects, including opening our highest ever number of
sites in a year.
2022 brought its own challenges with the war in
Ukraine and macroeconomic pressures on consumers.
These pressures have encouraged us to focus on what
we do best and play to our strengths as we move
into 2023.
Despite cost-of-living pressures for UK consumers,
we see that many still regard their gym membership
as essential, whilst seeking value for money. We are
well placed to provide this low cost, high value gym
experience to customers, which is reflected in high
member satisfaction scores and in maintaining our
position as the lowest cost nationwide 24/7 gym.
As we saw in 2008-2009, we expect the low cost
gym sector to be more resilient to a challenging
macroeconomic environment as UK consumers
prioritise value and seek lower cost alternatives
for their gym memberships. At the end of 2022, we
achieved like-for-like revenue at 90% of pre Covid-19
levels, with 821,000 members and 229 open gyms.
28
new sites opened in 2022, bringing total
to 229 at 31 December 2022
“We are confident that we remain
well placed to face the current
macroeconomic challenges and take
advantage of significant long term
sector growth ahead.”
John Treharne | Chair of the Board
08 |
Industry and market trends
What seems evident from looking
at the sector, both in the UK and
across Europe, is that value remains
a key purchase decision driver.
The pandemic shone a light on the
importance of health and wellbeing
for people’s physical and mental
health, which is why fitness remains
a protected category of spend.
As energy costs put pressure on
operators’ facilities and opening
times, providing 24/7 access and
flexible, no contract, low cost
memberships will be most appealing
to consumers when considering
changing their gym provider.
Strategic progress
As we emerged from the Covid-19
pandemic in 2022, we saw an
opportunity to invest to support
our strategic ambitions. We opened
28 new gyms in the year and
implemented a number of yield
optimisation initiatives. Our brand
transformation launched in August
2022 and brand awareness metrics
are encouraging, positioning us well
across all channels. Our new consumer-
facing website launched in April
2022, which is a step change in our
technology investment, and ongoing
technology improvements, mean we
can support our inclusive product and
great member experience.
We will continue to be sector leaders
for sustainability, delivering on our
founding mission to break down
barriers to fitness with a welcoming,
accessible experience. We will also
continue to implement pioneering
environmental, social and governance
(‘ESG’) initiatives to support our
people, our members and the
environment. In 2022, we announced
that we were the UK’s first carbon
neutral gym chain. The pandemic
has heightened focus on the UK’s
health, and fitness facilities have an
increasingly important role to play
in the communities around them.
ESG metrics now form part of our
key performance indicators (‘KPIs’)
so that all areas of the business
are engaged in achieving our
sustainability objectives.
Our work as a Board
Over 2022 and to date, there have
been several changes to our Board.
I am pleased to say that the values
of the organisation continue to be
reflected by every Board Director
– realness, friendliness, taking the
first step and challenging our limits –
and I take this opportunity to thank
those Directors who left us in the
year, Mark George, Rio Ferdinand
and Penny Hughes, for their service
and contribution.
Executive changes
In April 2022, Ann-marie Murphy was
promoted to the plc Board as Chief
Operating Officer (‘COO’), and in her
first year as an Executive Director
has focused on driving operational
performance. Luke Tait joined us
as Chief Financial Officer (‘CFO’) in
October 2022, joining us from casual
dining brand Nandos. Even though
Luke has only been with us a short
time, he has shown commitment and
diligence through the budget and
financial year end process.
I wish to express my thanks to Richard
Darwin for more than seven years of
leadership of The Gym Group, both as
Chief Executive Officer (‘CEO’) since
2018 and formerly CFO since our IPO
in 2015. Richard has overseen our
growth from 63 to 230 sites today,
navigating the challenges of the
Covid-19 pandemic. He continues to
support the transition and will leave
The Gym Group in due course. We are
making good progress in the search
for our new CEO and we will update
the market at the appropriate time.
We have strengthened our Executive
Committee with two new members,
Emily Kortlang and Nick Shelmerdine,
adding marketing and strategy
leadership to the discussions. I have
taken the role of Executive Chair
to support with the transition to a
new CEO.
Board changes
In July 2022, Penny Hughes stepped
down after six years as The Gym
Group Chair, and I thank Penny for her
extraordinary leadership. Penny was
integral to helping The Gym Group
scale successfully and develop the
capabilities we rely on today; and I was
delighted to take the helm as Chair.
In August 2022, we welcomed two
new Non-Executive Directors (‘NEDs’),
Elaine O’Donnell and Richard Stables,
to our Board. Elaine is a chartered
accountant and an experienced
Audit Committee and Board Chair
who draws on her expertise at a
broad range of businesses, and
as a former partner at EY, to
strengthen our Committees’ and
Board’s debates. Richard is an expert
corporate financier with over 30 years’
experience in the City and brings
his market insight and knowledge
to our Board strategy and planning.
Rio Ferdinand stepped down in August
owing to his increasing external
commitments and I also want to thank
Rio for his significant contribution and
wish him well.
On 6 February 2023, we appointed
a new NED – Simon Jones,
Managing Director for Premier Inn
and Restaurants, UK and Global
Commercial Director at Whitbread –
who will be a valuable addition to our
first class Board team, bringing his
vast experience from such a leading
UK hospitality brand, which similarly
delivers great value with high quality
for their customers.
Looking forward
This time last year, we reflected
on emerging from the pandemic
and indicated that we hoped 2022
would see a return to a more normal
trading environment. As the trading
environment has normalised, it is now
clear that it will take longer to return
to pre Covid-19 levels as a result of
both the changes to consumers’
everyday lives and lifestyles and the
macroeconomic headwinds that we
are facing. As we look to the future, we
will continue to identify opportunities
to attract new members, optimise
yield and maximise operational
efficiency as has always been
fundamental to our low cost model,
to mitigate the economic pressures
going into 2023. We are confident
that we remain well placed to face
these challenges and take advantage
of the significant long term sector
growth ahead.
John Treharne
Chair of the Board
15 March 2023
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The Gym Group plc | Annual Report and Accounts 2022
Strategic report
Chief Executive's review
Strong and
strategic
expansion
“The Gym Group is in a strong
position going into 2023 despite
the difficult economic environment
which has caused challenges for all
consumer businesses.”
Richard Darwin | Chief Executive Officer
821,000
Number of members
at 31 December 2022
£172.9m
Revenue in 2022
2021: £106.0m
Looking back to the
start of 2021, we were
commencing the third of
the Covid-19 lockdowns
and our recovery
trajectory was uncertain.
However, by the end of
2022, we were operating
from 229 sites across the
UK and generated revenue
in the year that was 13%
higher than in 2019. Our
business also returned to
generating free cash flow
in the year.
Our operating environment has changed
post Covid-19, but through this period of
transition, The Gym Group is one of the
leading operators in our sector.
Membership grew during the year
from 718,000 at the end of December
2021 to 821,000 at the end of
December 2022, assisted by some
further post Covid-19 membership
recovery, yield optimisation and the
strongest site opening programme
in our history. Also in the year, we
delivered on two transformational
initiatives – the relaunch of the
brand and the new technology
infrastructure. Both initiatives will
enable the business to trade more
effectively over the coming years.
The relaunch of the brand under
The Gym Group name means we
have a distinctive and memorable
brand and visual identity that will
build brand awareness in a crowded
consumer market. The launch of our
new technology infrastructure means
that we have a modern, sophisticated
website and app that will enable us
to deliver highly effective levels of
member acquisition.
It is now apparent that some
members have not come back to in-
gym workouts post Covid-19; therefore
our work to recover pre Covid-19 levels
of profitability is continuing. For sites
open in 2018, the like-for-like revenue
recovery (vs 2019) is 90%, reflecting
membership volume recovery of c.81%
of 2019 levels, with yield at c.110%.
Some of the members have been
displaced because they have not
fully returned to office working - just
16 sites out of our 154 sites that were
open pre Covid-19 are significantly
workforce-dependent and the rest
are located in residential areas or
have a strong student membership.
We believe that there is further
membership recovery to come in the
medium term but this has been slowed
in the short term by the cost-of-living
pressures which are having an impact
on underlying demand.
Despite these trends, the market
dynamics for our business are very
strong and we are growing our share
within the market. The Gym Group’s
share of the low cost gym market by
number of sites is currently 29.3%,
up from 16.7% in 2016. The demand
for health and fitness is expected to
continue to increase because of the
health shock that the pandemic has
given so many people; and within
health and fitness, low cost gyms were
the part of the market that grew most
rapidly pre Covid-19. We also continue
to see a good supply of sites in the
locations that are most suitable for us.
As a result of our year of recovery,
the business has resumed generating
free cash flow to invest into our site
expansion. 2022 has been a year of
significant investment with 28 new
sites and the additional spend on the
technology infrastructure and brand
relaunch. At the end of 2022, our Non-
Property Net Debt was £76.1m including
£11.5m of finance leases. In 2022,
because of the timing of recovery,
part of this growth was funded from
our debt facilities. However, as we move
into 2023, we plan to revert to self-
financing our growth from free cash
flow generation.
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Strategic report
Chief Executive's review continued
“We have a clear set
of strategic priorities
and have made
significant progress
against them in 2022.”
Richard Darwin |
Chief Executive Officer
£38.0m
Group Adjusted EBITDA Less
Normalised Rent in 2022
2021: £5.7m
£19.3m
Statutory Loss in 2022
2021: loss of £35.4m
Our confidence about the future
growth potential of this business
comes from having a high quality offer
for members at an affordable price.
This means that, with high levels of
satisfaction, members will rejoin a
number of times throughout their
lifetime. Rejoiner rates are currently
around 42% of new member acquisition,
reflecting our success in driving
multiple join events. Our member
satisfaction (‘OSAT’) scores are at an
all-time high post Covid-19 and our
members are visiting the gyms on
average 12% more often than they
were in 2019. All this ensures we are in
a strong position to trade through the
current economic difficulties and
expand into the future. At this time,
our low price model is more relevant
than ever.
The financial results for 2022 reflect
the year of recovery. Revenue
was £172.9m (2021: £106.0m) up
63%, and Group Adjusted EBITDA
Less Normalised Rent was £38.0m
compared with £5.7m in 2021. The
Adjusted Loss for the year was
£6.9m (2021: loss of £28.5m) and the
Statutory Loss was £19.3m (2021: loss
of £35.4m).
Strategic priorities
Our business has a clear set of
strategic priorities that were
articulated at the Capital Markets
Day in May 2022. Significant
progress has been made against
these strategic priorities with
the successful delivery of two
transformational initiatives in the
year, yield optimisation and the scale
of the organic rollout. Whilst the short
term economic situation is expected
to remain challenging through 2023,
the longer term market opportunity
will only be enhanced by the current
economic conditions and its impact
on weaker competitors; we expect to
continue to grow market share
as a result.
i) Market opportunity and
organic rollout
Our positioning in the market as a
high quality, affordable gym priced at
an average headline price of £21.49
per month is compelling and puts us
in a strong position to continue to
grow rapidly over the coming years.
At the end of December 2022, our
market share was 29.3% of the low
cost market by number of sites (total
market estimated at 781 sites across
the UK). We believe that the UK low
cost gym market has the potential
to continue to grow strongly over the
coming years and, as one of the few
operators expanding, we expect our
market share to also grow.
Our ability to expand rapidly and
take advantage of the market
opportunity is partly driven by our
ability to identify the right locations
and build the appropriate format
for that location and open sites
ranging from 7,000 to 21,000 sq. ft.
This means that we can expand in
smaller locations, as we have done
in 2022 in towns such as Leyland,
Lancashire and Glenrothes, Scotland
(each around 8,000 sq. ft), as well as
in larger sites such as the conversion
of an existing gym in Paddington
(21,000 sq. ft). This flexibility of gym
format enables us to access more
catchments across the country and
increases our addressable market.
Given the economic environment, we
intend to be selective in terms of the
sites that we open in the next year
and continue to choose sites that
will trade well at affordable rents.
Our disciplined approach to rents
continues the approach we have
adopted successfully throughout our
history and is reflected in a favourable
rent profile in our estate.
We are pleased with the quality of
our site rollout in 2022, and the 28
sites that we have opened in the
year are performing according to
our expectations. Five of the 28 sites
are in residential areas of London
and include the three sites that
we acquired from Fitness First in
March 2022 – these sites in Romford,
Leyton and Harringay have already
doubled their number of members
compared to the member numbers
pre-acquisition and will be strong
sites over the coming years for our
business.
ii) Optimising yield and
profitability through a new
price product architecture
Having the formats, the brand and the
technology platform in place gives
us opportunity to concentrate our
next set of technology developments
on more member-facing initiatives
that will drive our yield and hence our
profitability. These developments are
being made on the back of extensive
research with members and non-
members, as well as detailed analysis
in partnership with a well known
industry consultant. The research we
undertook confirmed what we already
knew - that the value of the offering
that we deliver and the quality of
our proposition are very strong. As
a result, we are implementing a well
thought out strategy on yield to
improve our profitability.
The first step taken during 2022 was
to increase average headline price
by approximately £2 per month on
average for new members, and also
to implement some repricing of the
existing membership. Despite these
increases, we remain the lowest
priced 24/7 nationwide gym operator,
ensuring that we provide excellent
value for money at a time of squeezed
discretionary incomes. Secondly,
we recently introduced a new pay
up front product on the back of this
research – this is a very cost-effective
product that will demonstrate the
value of our offering versus the
higher price competitors, whilst also
giving us the benefit of increased
tenure from those that take it up.
Thirdly, in the Summer of 2023, we
are planning to introduce a three tier
price architecture that will give more
choice to members and will include a
lower entry price as well as an upper
end premium product. This premium
product will build on the already
successful LIVE IT product that is
currently taken up by around 30% of
our membership base but with more
product elements within it. This new
price product architecture will require
trialling and so is not expected to
have initial yield uplift, but we expect
it to increase the commercial flexibility
of our trading and further increase
our yields in the coming years.
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The Gym Group plc | Annual Report and Accounts 2022
Strategic report
Chief Executive's review continued
Summary
The tough trading environment
and economic circumstances over
the past few months have made
2022 a challenging year for all, and
I am grateful for the support of our
teams across our whole business.
The commitment of our teams to
ensuring great member service is also
enabling us to achieve record OSAT
scores and is another reason for our
confidence about how we expect to
trade well through the difficult economy.
Our business is as well positioned
as any in our sector to flourish as
the economy emerges from the dual
impact of the cost-of-living crisis
and the pandemic. We have a clear
set of strategic priorities to improve
this business and continue to add
greater capability to trade effectively.
This is my last report as CEO after
nearly eight years with the business,
but my confidence about the quality
of the estate we have built and the
foundations we have put in place is
stronger than ever. The January and
February 2023 trading period has
demonstrated our ability to drive
revenue growth to offset energy and
other cost pressures that we are
having to absorb. With increases in
both membership and yield despite
the economic headwinds, we are
taking advantage of the strong
market position that we have built
within the wider health and fitness
sector. I have confidence that the
business will continue to grow strongly
in future years.
Richard Darwin
Chief Executive Officer
15 March 2023
“Our business is as
well positioned as
any in our sector
to flourish as the
economy emerges
from the dual
impact of the
cost-of-living crisis
and the pandemic.”
Richard Darwin |
Chief Executive Officer
iii) Developing the technology
platform
The first of our transformational
initiatives in 2022 was the launch of
our new technology infrastructure.
This project delivered an enhanced
technology platform with mobile-
centric developments for the
website and the members area and
further enhancements to the app.
The rationale for this significant
piece of development was to ensure
improvements in site speed, gain
search engine optimisation (‘SEO’)
benefits and increase conversion
rates. This project was implemented
successfully and has already given
us the ability to identify and make
material improvements to our member
acquisition journey.
I am also pleased with the progress
that we have made with our app. Our
app score rating is 4.7 on Apple and
4.6 on Android, among the highest
in the industry and with well-used
features such as site capacity,
workout recording and class booking.
We have also incorporated over 200
new Fiit videos into the app for our
members to use and the technology
platform has also enabled the
integration of the Fiit offer into our
LIVE IT product.
iv) Rolling out the new brand
The brand transformation was the
second transformational project of
the year with a successful relaunch
in August 2022. The rationale for
this initiative was to enhance our
brand awareness and marketing
effectiveness which had been held
back by our previous generic brand.
A unique brand name also gives us
considerable SEO benefits by being
able to drive more organic traffic
to our site, particularly important
as the cost of buying search terms
through the big technology platforms
continues to increase ahead of
inflation. There were two significant
parts to the project – designing and
launching a new visual identity and
then developing the new creative
platform that was part of the first
marketing campaign. I am confident
that the new visual identity will serve
this business well over the coming
years – all sites have now been
externally rebranded and other
assets in use throughout the business
have been updated. The new ‘Gym
Face’ advertising campaign, was
rolled out in September and October.
The same creative campaign was
used for the important January and
February peak trading period in 2023.
Our latest brand awareness
metrics are encouraging with a
5.6 percentage points increase in
prompted awareness in the 12 months
since February 2022 - positioning us
to trade very well across all channels
and ultimately drive revenue growth.
Sustainability
We are very proud of our
sustainability work centred around
our purpose of breaking down
barriers to fitness for all. The Gym
Group is dedicated to increasing the
social value it generates, while helping
members to get great value from
their gym memberships. One aim is to
increase the percentage of members
visiting our gyms at least four times
per month and we are delighted that,
through our initiatives, we have seen a
12% increase in member usage of our
gyms in 2022.
We are proud to be the first
carbon neutral gym chain in the
UK and during the year, our work
on carbon reduction and the net
zero commitment to the Science
Based Target initiative (‘SBTi’) has
intensified. We are now working on
verification by SBTi, whilst at the same
time implementing energy saving
programmes like our recent ’20 is
Plenty’ campaign which has seen
us increasing the temperature in
our gyms during the summer months
from 19°C to 20°C. Our commitment
to net zero is now for us to reach
this target by 2045 but we plan to
have decarbonised our own business
by 2035.
One of the key strengths of The
Gym Group is our unique team and
culture, and we were delighted to have
retained high levels of engagement
in our annual employee survey and to
be recognised by Glassdoor in 2022
as number 25 in their list of the Best
Places to Work in the UK (the only
leisure business placed in the top
50). We also retained our Investors in
People Gold award during the year.
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The Gym Group plc | Annual Report and Accounts 2022
Strategic report
Financial review
A year of
significant
recovery and
investment
“£16.6m of free cash flow generated
in the year to partially fund
the site rollout programme and
the investment in technology
and brand.”
Luke Tait | Chief Financial Officer
£65.4m
Net cash inflow from operating activities
2021: £38.9m
£76.1m
Non-Property Net Debt
2021: £44.1m
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’ on page 167. To assist
stakeholders in understanding the
financial performance of the Group,
aid comparability between years 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,
remeasurement gains or losses on
borrowings, and refinancing costs.
Further details on non-underlying
items are provided later in this report.
Summary
Total number of gyms at year end
Total number of members at year end ('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)
Net cash inflow from operating activities (£m)
Free cash flow (£m)
Non-Property Net Debt (£m)
Results for the year
Year ended
31 December
2022
Year ended
31 December
2021
Movement
%/£m
229
821
172.9
71.3
38.0
(5.5)
(6.9)
(19.4)
(19.3)
65.4
16.6
(76.1)
202
718
106.0
35.4
5.7
(36.8)
(28.5)
(44.2)
(35.4)
38.9
2.0
(44.1)
+27
+14%
+63%
+101%
+32.3
+31.3
+21.6
+24.8
+16.1
+26.5
+14.6
-32.0
Revenue
Cost of sales
Gross profit
Other income
Operating expenses before depreciation,
amortisation and impairment
Depreciation, amortisation and impairment
Operating profit/(loss)
Finance costs
Loss before tax
Tax (charge)/credit
Loss for the year attributable to shareholders
Loss per share
Basic and diluted (p)
Year ended 31 December 2022
Year ended 31 December 2021
Underlying
result
£m
Non-
underlying
items
£m
–
–
–
–
(4.4)
(8.5)
(12.9)
(1.0)
(13.9)
1.5
(12.4)
172.9
(2.0)
170.9
0.8
(101.8)
(59.3)
10.6
(16.1)
(5.5)
(1.4)
(6.9)
(3.9)
Underlying
result
£m
Non-
underlying
items
£m
106.0
(1.7)
104.3
7.3
(79.1)
(52.7)
(20.2)
(16.6)
(36.8)
8.3
(28.5)
–
–
–
–
(2.3)
(4.2)
(6.5)
(0.9)
(7.4)
0.5
(6.9)
Total
£m
172.9
(2.0)
170.9
0.8
(106.2)
(67.8)
(2.3)
(17.1)
(19.4)
0.1
(19.3)
(10.9)
(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)
(20.7)
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The Gym Group plc | Annual Report and Accounts 2022
Strategic report
Financial review continued
Revenue
Revenue in the year increased to £172.9m (2021: £106.0m), reflecting a full year of open trading days compared with 72%
in the prior year and a return to more normal seasonal trading patterns. However, changes in customer behaviour as a
result of the structural shift in working patterns and the difficult macroeconomic environment, meant that like-for-like
revenue in the gyms that were open up to the end of 2018 only reached 90% of 2019 revenue.
Average membership numbers in the 12 months to 31 December 2022 were 808,000 compared with 681,000 in 2021; and
we closed the year with 821,000 members, up 14% on 31 December 2021.
The average headline price of a standard DO IT membership increased to £21.49 per month in December 2022 compared
with £19.27 in December 2021, reflecting the yield optimisation initiatives we put in place during the year to increase
the price for new members by approximately £2 per month across the majority of our sites and to reprice some of the
existing membership base. As a result of these increases, Average Revenue Per Member Per Month (‘ARPMM’) in the
second half of the year was £18.30 compared with £17.60 in the second half of 20211. Despite the increases implemented,
we remain the lowest priced low cost gym operator in the UK.
Demand for our premium membership product continued to grow during the year such that in December 2022,
the proportion of members taking our LIVE IT membership was 29.6% compared with 27.1% in December 2021.
Cost of sales
Cost of sales, which includes the costs associated with the generation of ancillary income as well as call centre costs and
payment processing costs, were £2.0m (2021: £1.7m) reflecting the revenue recovery and increased trading days. However,
the year on year increase was lower than expected as a result of improved stock management.
Other income
Other income in the year amounted to £0.8m (2021: £7.3m). The prior year income consisted largely of income received
under the various Covid-19 related Government grant schemes. As all gyms were open throughout the current year, no
grants have been received in 2022.
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
Site Normalised Rent
Site costs including Normalised Rent
Central support office costs
Central support office Normalised Rent
Central support office costs including Normalised Rent
Share based payments
Less: Normalised Rent
Underlying operating expenses before depreciation, amortisation and impairment
Year ended
31 December
2022
£m
Year ended
31 December
2021
£m
85.0
32.9
117.9
15.4
0.4
15.8
1.4
135.1
(33.3)
101.8
60.2
29.3
89.5
16.0
0.4
16.4
2.9
108.8
(29.7)
79.1
Site costs including Normalised Rent
Site costs including Normalised Rent in 2022 increased to £117.9m (2021: £89.5m) as we returned to more normal operating
conditions, with sites open for the whole year. Utilities costs were £2.8m higher year on year, reflecting not only the
increased number of trading days but also the significant increases in wholesale gas and electricity prices as a result
of geopolitical events. As a result of the Group’s utilities hedging, the impact of the price increases was contained to
Q4 2022. However, as previously indicated, we expect utility costs to increase by a further £10m in 2023. Business rates
also increased year on year as Covid-19 related Government support was removed. Staff and cleaning cost increases
reflected the rise in the National Living Wage as well as the return to normal trading and removal of the furlough scheme.
New openings in 2021 and 2022 also contributed to site cost increases year on year.
Site 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
£32.9m in the year (2021: £29.3m). The increase year on year largely reflects the growing gym portfolio.
Central support office costs including Normalised Rent
Central support office costs in the year were broadly in line with the prior year at £15.8m (2021: £16.4m).
Share based payments
Share based payment costs in the year amounted to £1.4m (2021: £2.9m). The reduction year on year reflects the impact
of leavers in the year as well as share price movements.
Underlying depreciation and amortisation
Underlying depreciation and amortisation charges in the year amounted to £59.3m (2021: £52.7m). The increase year on
year reflects the increased gym portfolio, as well as accelerated depreciation and amortisation on a number of assets
that have been replaced following the launch of the new consumer website and brand.
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
statutory operating loss as follows:
Operating loss
Non-underlying operating items
Share based payments
Underlying depreciation and amortisation
Group Adjusted EBITDA
Normalised Rent
Group Adjusted EBITDA Less Normalised Rent
Year ended
31 December
2022
£m
Year ended
31 December
2021
£m
(2.3)
12.9
1.4
59.3
71.3
(33.3)
38.0
(26.7)
6.5
2.9
52.7
35.4
(29.7)
5.7
Group Adjusted EBITDA Less Normalised Rent was £38.0m (2021: £5.7m) and reflects the increased site profitability as a
result of revenue recovery and the higher proportion of open trading days.
Underlying finance costs
Underlying finance costs amounted to £16.1m (2021: £16.6m). The implied interest relating to our property and capital
leases was £13.3m (2021: £14.0m). Finance costs associated with our bank borrowing facilities were £2.8m (2021: £2.6m)
comprising interest costs and fee amortisation.
In May 2022, the Group made certain changes to its revolving credit facility (‘RCF’). 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. Funds borrowed under the RCF
now bear interest at a minimum rate of 2.85% (previously 2.60% whilst Facility B was in place).
18 |
1
Due to the Government-enforced closures in the first 3.5 months of 2021, the full year ARPMM for 2021 is distorted and does not provide a meaningful year
on year comparator.
| 19
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The Gym Group plc | Annual Report and Accounts 2022
Strategic report
Financial review continued
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.
Affecting operating expenses before depreciation, amortisation and impairment
Costs of major strategic projects and investments
Restructuring and reorganisation (income)/costs (including site closures)
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 credit on non-underlying items
Total all non-underlying items
Year ended
31 December
2022
£m
Year ended
31 December
2021
£m
4.6
(0.2)
4.4
8.3
0.2
8.5
0.9
0.1
1.0
13.9
(1.5)
12.4
1.8
0.5
2.3
4.0
0.2
4.2
0.8
0.1
0.9
7.4
(0.5)
6.9
Non-underlying items affecting operating expenses before depreciation, amortisation and impairment in the year
amounted to £4.4m (2021: £2.3m).
The costs of major strategic projects and investments of £4.6m (2021: £1.8m) includes £4.0m (2021: £0.5m) in relation
to the Group’s brand transformation. The total costs incurred in the year in respect of this project were £6.5m of which
£4.0m is reflected in the income statement and relates to the relaunch of the brand and creation of the Group’s visual
identity and marketing assets, and £2.5m is included in property, plant and equipment and relates predominantly to new
site signage. The remainder of the costs included in other strategic initiatives in the year largely relate to the integration
of the three sites acquired from Fitness First in March 2022.
The credit in restructuring and reorganisation costs in the year reflects lease surrender income and costs associated
with the closure of a small number of gyms, together with the profit on remeasurement of one of the Group’s leases.
Also included here are the costs associated with the various Board changes that occurred during the year.
Non-underlying costs affecting depreciation, amortisation and impairment in the year amounted to £8.5m (2021: £4.2m),
of which £8.2m (2021: £4.0m) relates to the impairment of 13 sites where slower recovery from Covid-19 and changes in
hybrid working patterns have impacted on performance. Also included here is the amortisation of business combination
intangibles acquired as part of the Lifestyle, easyGym and Fitness First acquisitions.
Non-underlying items affecting finance costs amounted to £1.0m (2021: £0.9m) and largely reflect the remeasurement
of the Group’s RCF following the changes agreed with the lenders.
Taxation
The tax credit for the year was £0.1m (2021: credit of £8.8m), representing an effective tax rate of 0.5% (2021: 19.9%).
The trading losses incurred as a result of the Covid-19 pandemic, together with the introduction in March 2021 of the
temporary enhanced capital allowances regime (‘super-deduction tax break’), have resulted in significant tax losses to
carry forward which are not anticipated to be fully utilised during the three years covered by the Group’s financial plan.
Losses for which no deferred tax asset is recognised equate to £20.2m, resulting in an unrecognised deferred tax asset of
£5.1m using a 25% tax rate. There is no time limit for utilising trade losses in the UK.
Earnings
As a result of the factors discussed above, the statutory loss before tax was £19.4m (2021: loss of £44.2m) and the
statutory loss after tax was £19.3m (2021: loss of £35.4m).
Adjusted loss before tax is calculated by taking the statutory loss before tax and adding back the non-underlying items.
Adjusted loss before tax was £5.5m (2021: loss of £36.8m). Adjusted loss after tax was £6.9m (2021: loss of £28.5m).
The basic and diluted loss per share was 10.9p (2021: loss of 20.7p), and the basic and diluted adjusted loss per share was
3.9p (2021: loss of 16.7p).
Dividend
It is a condition of the new £10m additional facility under the RCF that the Company shall not declare or pay a dividend.
Although this facility is currently 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 2022.
Acquisition of sites operating under the Fitness First brand
On 22 March 2022, the Group acquired three sites operating under the Fitness First brand for cash consideration of
£5.4m. The sites are located in residential areas of East London where we have traditionally been very successful.
The gyms were converted to The Gym Group format in late 2022. A transitional service agreement (‘TSA’) was in place
during the period between acquisition and conversion.
A valuation has been performed on the tangible and intangible assets acquired in the transaction resulting in goodwill
of £4.1m. Further information is included in note 13 to the consolidated financial statements.
Cash flow
Group Adjusted EBITDA Less Normalised Rent
Rent working capital
Movement in other working capital
Maintenance capital expenditure
Group operating cash flow
Non-underlying items
Interest paid
Taxation
Free cash flow
Expansionary capital expenditure funded by leases
Expansionary capital expenditure funded by other sources
Refinancing fees
Proceeds from disposal of equipment
Net consideration paid on acquisition
Net proceeds from issue of Ordinary shares
Cash flow before movement in debt
Net increase in finance lease indebtedness
Net drawdown of borrowings
Net cash flow
Year ended
31 December
2022
£m
Year ended
31 December
2021
£m
38.0
(2.1)
(3.2)
(8.7)
24.0
(5.3)
(2.9)
0.8
16.6
(8.0)
(35.0)
(0.7)
0.4
(5.4)
0.1
(32.0)
5.1
25.0
(1.9)
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
The Group operating cash inflow in the year was £24.0m (2021: inflow of £6.3m) as the improved EBITDA Less Normalised
Rent was partially offset by working capital outflows and higher maintenance capital expenditure.
The outflow on rent working capital of £2.1m in the year (2021: outflow of £2.9m), reflects the continued unwind of deferred
rents from 2020 and 2021. As at 31 December 2022, only £0.1m of rent deferrals remained outstanding (31 December
2021: £2.1m). The net outflow on working capital (excluding rent) in the year was £3.2m (2021: inflow of £7.4m) and reflects a
return to more normal trading patterns.
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Strategic reportGovernance reportFinancial statements The Gym Group plc | Annual Report and Accounts 2022
The Gym Group plc | Annual Report and Accounts 2022
Trading update and outlook
The business has had an uneven start to the new financial year when compared with Board expectations, with
membership at the end of February 2023 of 890,000, up 8.4% versus the end of 2022 (2022: 14.9%). Revenue after two
months has grown 18.7% year on year, reflecting membership growth of 8% and yield growth (ARPMM) of 10%. Like-for-
like revenue for the two months reached 97% of the pre Covid-19 level, driven by increases in ARPMM whilst remaining the
lowest cost nationwide gym chain.
We continue to expect energy costs to be c.£10m higher in 2023 compared to 2022 and are now 96% hedged for FY23.
We also expect that the current difficult macroeconomic environment and its impact on consumer demand will continue
throughout the year. Therefore, we now anticipate the full year revenue increases from yield improvements and new site
openings to be broadly offset by cost increases.
We intend to take a more measured approach to our new site openings in 2023 and anticipate opening up to 12 new sites,
with all openings being self-financed. As a result, leverage (calculated as Non-Property Net Debt : Group Adjusted EBITDA
Less Normalised Rent) is expected to remain within the range of 1.5 to 2.0x.
Luke Tait
Chief Financial Officer
15 March 2023
Strategic report
Financial review continued
Fixed asset additions in respect of maintenance capital expenditure in the year amounted to £11.9m (2021: £4.7m) as we
returned to more typical levels of maintenance to mirror the return to regular operations. Adjusting for the movement in
capital creditors, the cash flow from maintenance capital expenditure was £8.7m (2021: £3.9m).
Fixed asset additions in respect of expansionary capital expenditure in the year amounted to £46.5m (2021: £29.4m) and
relate to the Group’s investment in the fit-out of new gyms and investment in our technology and brand transformation
projects. The fit-out costs are stated net of landlord contributions towards building costs. During the year, we opened
28 new gyms and substantially completed work on a further two sites which were opened in January 2023, spending a
total of £35.2m, of which £8.0m was funded by finance leases (2021: £7.2m). The investment in technology in the year of
£8.8m relates largely to enhancements made to the member experience, including improvements to the Group’s website
and new functionality in the app. £2.5m was spent on the brand transformation, largely in respect of new site signage.
Adjusting for the movement in capital creditors, the cash flow from expansionary capital expenditure was £43.0m (2021:
£29.0m), including the amount funded by finance leases.
The net consideration paid on acquisition of £5.4m relates to the acquisition of three sites from Fitness First in March
2022. Included within the expansionary capital expenditure above was £2.1m of conversion costs.
Balance sheet
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets
As at
31 December
2022
£m
As at
31 December
2021
£m
580.4
15.2
(64.7)
(396.9)
134.0
549.9
14.8
(57.4)
(355.2)
152.1
Non-current assets increased in the year by £30.5m to £580.4m. £9.5m of the increase relates to the fair value
accounting in relation to the acquisition of the three sites from Fitness First and a further £2.1m relates to the conversion
of those sites to The Gym Group format and brand. Full details of the fair values of all assets acquired as part of
the Fitness First transaction are set out in note 13 to the consolidated financial statements. Right-of-use assets and
Property, plant and equipment also increased as a result of opening 25 organic sites in the year, but this increase was
partially offset by the impairment charge discussed under Non-underlying items earlier in this report. As noted in the
Taxation section, the Group has an unrecognised deferred tax asset of £5.1m at 31 December 2022.
Non-current liabilities increased by £41.7m in the year, to £396.9m partly reflecting the increased lease liabilities from the
new and acquired sites. Drawings under the RCF also increased by £25.0m in the year to fund both the acquisition of the
sites from Fitness First and part of the organic site rollout.
As at 31 December 2022, the Group had Non-Property Net Debt of £76.1m (31 December 2021: £44.1m) comprising drawn
facilities of £70.0m and finance leases of £11.5m, less cash of £5.4m.
Going concern
The Board has reviewed the financial plan 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 2024. 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 and 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.
22 |
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Strategic report
Market review
Strengthen
our position
The low cost sector has proven to be the most resilient segment of the health and
fitness industry in the UK in 2022. In times of a difficult economic climate, our
significant experience, benefit of economies of scale and a highly cost efficient
operating model enable us to further strengthen our position as a market leader.
Consumer demand
Covid-19 has driven an increase in the
importance of health and wellbeing,
with a focus on exercise, resulting
in strong initial recovery in gym
demand in the first half of 2022, as
Covid-19 restrictions and concerns
eased. By March 2022, the total UK
gym membership was back to 2018
levels and the low cost sector close to
2019 membership numbers.
The remaining 7% of our estate
is highly workforce-dependent
and, whilst still important to our
nationwide network and LIVE IT
membership, slower in its recovery.
All our new openings since 2019
have been in predominantly
residential areas.
Whilst demand for gym memberships
remained positive, the recovery
stalled in the second half of the
year as cost-of-living concerns
and pressure on consumer
spending increased.
Within this macroeconomic
environment, Covid-19 has left a
lasting change on patterns of work
and exercise with more people
working from home more regularly.
Most of our estate is in residential
areas and well positioned to benefit
from this trend.
UK gym membership (m)1,2
Number of sites by category 2019–2022
9.3
1.9
8.7
1.3
9.8
2.2
9.9
2.5
10.4
2.8
8.3
4.1
4.0
4.2
4.1
4.2
3.3
3.4
3.4
3.3
3.4
9.9
2.7
3.9
3.2
Urban
Residential
Greater
London
Residential
City
Centre
Town
2015
2016
2017
2018
2019
2021
2022
15%
20%
22%
25%
27%
27%
101
130
+29
53
63
+10
-1
16
15
5
21
+16
2019
2022
Low cost
Share %
Total
Low cost
Mid-market & Premium
Public
24 |
2015-2019 CAGR
1
2
LDC State of the Industry Report 2022
(as at March 2022).
There is no data available for 2020 due
to Covid-19 disruption. Data for 2021
has been taken from the Deloitte Touche
European Health and Fitness Report.
+5%
+21%
+1%
+1%
Industry supply
The impact of two years of
disruption caused by the pandemic,
followed by rising costs and removal
of Government support, has put
pressure on many operators in the
sector. This resulted in over 600
closures of health and fitness clubs
to March 2022. A survey of public
sector operators conducted by
ukactive, showed that leisure services
are expected to be reduced or lost
entirely in 40% of council areas
before the end of 2023¹ due to the
increase in energy costs.
The low cost gym sector is once
again proving its resilience to
recession and whilst the total
number of fitness clubs in the UK
as of March 2022 decreased for
the first time in over ten years, net
supply of low cost gyms increased
by 33 sites in 2022, predominantly
driven by the two largest low
cost operators.
1 ukactive news 03/11/2022.
Growth potential
Whilst the current difficult
macroeconomic environment puts
pressure on consumers to prioritise
their spending, exercise proves to be
no longer a discretionary item for
many. A recent PwC consumer study
asked which categories people
would potentially cut back on. Only
36% of those surveyed said that
they would cut back on ‘paid health
and wellbeing’ in comparison to
70% planning to cut back on take-
aways and deliveries and 66% on
restaurant meals and pub visits.
As the lowest cost, nationwide, 24/7
gym operator in the UK, we are well
placed to attract the portion of the
market that is ready to switch from
premium and mid-market fitness
clubs in search for better value for
money and retain the members that
have already chosen us as their
preferred health and fitness provider.
A PwC market study published
in February 2019 into the total
market potential for low cost gyms
assesses the overall opportunity for
In this trading environment, the
benefit of economies of scale,
competitive pricing and a highly cost-
efficient operating model, enabled
us to open 28 new sites and further
strengthen our position as a market
leader with a low cost market share of
29.3% (up from 26.7% in Dec 2021).
UK low cost gyms
781
as at 31 December 2022
Market share
29.3%
up from 26.7% in December 2021
PureGym
The Gym Group
295
331
202
229
énergie Fitness
67
81
JD Gyms/Xercise4Less
74
79
Trugym
127
24/7 Fitness
10 10
Simply Gym
98
Others
50
8
65
Number of sites for each company at 31 December 2021
Number of sites at 31 December 2022, shaded area shows net growth
Number of sites at 31 December 2022, shaded area shows net loss
the sector to be between 1,200 and
1,400 gyms. As at December 2022, we
estimate the total number of low cost
gyms to be 781, resulting in additional
growth potential in the market of
400–600 gyms.
Our covenant and reputation,
alongside a highly experienced
property acquisition team and
sophisticated location appraisal
process, enabled our rapid growth
to date and are key to our successful
expansion programme.
The Gym Group average DO IT
headline rate per month
£21.49
Average competitor
headline rate variance
where we compete
Which of the following spending categories
will you cut back on in the next 3 months
PwC Consumer Research November 2022
+£2.35 +£2.33
£4
£3
£2
£1
£0
+£3.83
70%
70%
60%
50%
40%
30%
20%
10%
0%
66%
66%
62%
50%
42%
36%
PureGym
JD Gyms
énergie
Fitness
Take-away/
delivery
Restaurant
meals
Bars
& pubs
Leisure (e.g.
cinema, events)
Secondary
holiday
Main
holiday
Paid for
exercise
| 25
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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.
High
quality
estate
Compelling
member
experience
See Strategy in action |
Pages 28-29
See Strategy in action |
Pages 30-31
Progress in 2022
We delivered record site growth in
Progress in 2022
We further strengthened the
2022 with 25 organic openings and
the acquisition and conversion of
three sites from Fitness First, making
a total of 28 new gyms.
With sizes ranging from 7,000 to
21,000 square feet, our adaptable
model and flexible format has
allowed us to deliver exceptional gym
facilities in a wide range of locations
and building types.
flexibility for our members to workout
whenever and wherever suits them
by adding the highly rated Fiit on-
demand fitness app to our premium
LIVE IT membership for no extra cost.
LIVE IT, which provides access to all
our 229 sites, was chosen by 29.6% of
our members (compared to 27.1% as
at 31 December 2022). The 2022 take-
up is the highest proportion ever.
Our strong relationships with
A friendly, inclusive atmosphere
landlords and financial covenant
continue to enable us to secure
prime locations.
comes across positively in the scores,
with 66% of members surveyed rating
our service outstanding (5 out of 5).
Risks
Operational gearing
Member experience
Risks
Significant business interruption
Member experience
Structural change in the industry
Trading environment
Relationships with key suppliers
Structural change in the industry
Performance measure
229Total number of gyms as at
31 December 2022
(vs 202 at 31 Dec 2021)
IT dependency
Reputation, brand and trust
Performance measure
66%of members rated us outstanding
(5 out of 5) for staff friendliness
26 |
Unique
team and
culture
Growing
sustainably
See Strategy in action |
Pages 34-35
See Strategy in action |
Pages 38-53
Innovative
technology
and marketing
See Strategy in action |
Pages 32-33
Progress in 2022
A significant investment has been
made into digital this year. We
launched our new customer-facing
website designed to work brilliantly
on mobile devices, which is where we
see most of our web traffic.
We continued to invest in technology
infrastructure throughout 2022,
benefiting members and staff. A new
cloud hosted digital platform launched
in April uses the latest technologies to
maximise performance and deliver the
best online experience to members
across web and app.
We also rolled out our new brand
successfully, deploying a new visual
presence across 229 external signs,
and rebranding key digital touch points
across our website and member app.
Progress in 2022
We launched our ‘people promise’ to
focus on our commitment to provide
development opportunities and
career pathways, support employee
wellbeing and nurture a friendly and
inclusive culture.
We launched our Emerging Talent and
Apprenticeship programmes providing
development opportunities for our
operational and support teams.
We were awarded the ‘We Invest in
Wellbeing Silver’ accreditation in
recognition for our ongoing focus on
employee wellness and maintained our
‘Investors in People Gold’ accreditation.
Risks
Structural change in the industry
Risks
Our people
IT dependency
Reputation, brand and trust
Cyber and data security
Reputation, brand and trust
Relationships with key suppliers
Progress in 2022
In 2022, we delivered £756 million of
social value in communities across
the UK through workouts in our
gyms, contributing to the improved
health, wellbeing and educational
development of our members. We
also increased the percentage of
our members working out regularly in
our gyms (more than four times per
month) by 7%.
Our commitment to net zero has
taken a significant step forward
with a detailed preparation of a full
submission to SBTi.
We are working towards our targets
of 50/50 gender balance by 2030,
and 40% female leaders by 2025. In
2022, we increased the percentage
of female senior leaders by 6.3
percentage points to 35.1% (up from
28.8% in 2021).
Risks
Significant business interruption
Operational gearing
Reputation, brand and trust
Relationships with key suppliers
Performance measure
Performance measure
Performance measure
27%more digital users in July - Dec 2022
(versus the same period in 2021, across
website and app combined, compared
to 14% estate growth)
65%promotion rate of Fitness Trainer
Emerging Talent programme
£756m
of social value created in 2022
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Strategic reportGovernance reportFinancial statements
The Gym Group plc | Annual Report and Accounts 2022
The Gym Group plc | Annual Report and Accounts 2022
Strategic report
Strategy in action
High quality
estate
We delivered record site growth in 2022 with 25 organic openings and the acquisition and
conversion of three sites from Fitness First, making a total of 28 new gyms. With sizes ranging
from 7,000 to 21,000 square feet, our adaptable model and flexible format has allowed us to
deliver exceptional gym facilities in a wide range of locations and building types. Through
our rigorous standards and maintenance regimes, we provide a safe environment, deliver
an exceptional member experience, and ensure our gyms are highly energy efficient and
up to date.
See Strategic framework | Pages 26-27
Targeted locations
Retail parks have proved highly attractive and
successful locations and 57% of our 2022 cohort
has been located within existing parks, with
a further 21% in high footfall locations. Easily
accessible gyms in highly residential areas have
proven the quickest to recover since reopening and
with our sophisticated approach to site selection,
we have ensured that all sites opened since 2019
have been in predominantly residential areas.
Our strong relationships with landlords and
financial covenant continue to enable us
to secure prime locations.
28
new gyms in 2022
Member centric
Our flexible gym format and design continues
to evolve providing facilities closely matched to
the member usage patterns, demographics and
demands. We continue to work on eliminating
‘gymtimidation’ and providing comfortable, safe
and accessible facilities, delivering on our purpose
of breaking down barriers to fitness for all.
We constantly monitor the market trends and
member demand to ensure we reflect the latest
expectations of our members. We continue to
upgrade equipment and adapt our offer to remain
current and relevant to all audiences.
Birmingham
Selly Oak
City Residential
Opened August 2022
Size: 15,145 sq. ft
Romford
Greater London
Commuter town centre
Opened November 2022
Size: 20,839 sq. ft
Glenrothes
Town
Retail Park
Opened August 2022
Size: 9,074 sq. ft
Sustainable development
We remain focused on the cost of delivery of new
sites as well as the long term operating cost and
sustainability of our gyms. Our ongoing investment
in energy efficient design, something that has been
ongoing for many years, will deliver significant
benefits given the recent increases in utility costs.
We continue to evolve and improve the energy and
sustainability performance in our gyms, as detailed
in the Sustainability report on pages 38-53.
28 |
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Grimsby
Corstorphine
Strategic reportFinancial statementsGovernance report
The Gym Group plc | Annual Report and Accounts 2022
The Gym Group plc | Annual Report and Accounts 2022
Strategic report
Strategy in action continued
Compelling
member
experience
“In 2022, we continued to strengthen
our member proposition, investing
in our gyms and digital experience,
as well as creating an ever more
flexible, friendly and effective
training environment for our
members. Our commitment to
providing a friendly, positive and
inclusive environment comes
through strongly in our member
satisfaction scores.”
Ann-marie Murphy | Chief Operating Officer
See Strategic framework | Pages 26-27
30 |
High quality, low cost
Our high quality gym equipment is at the heart
of our value proposition for members. In 2022, we
invested £5.5m in new kit to ensure all our existing
gyms remain relevant and up to date, whilst
remaining the UK’s lowest cost 24/7 nationwide
gym operator. 22 sites received a major overhaul
and replacement of kit, including Guildford, which
was extended by 5,200 sq. ft. A further 45 sites
received significant investment, as part of our
plate loaded rollout and kit enhancements.
Member satisfaction
On the whole, member engagement remained strong
in 2022, supported by our four visits a month metric
which was above pre Covid-19 levels. We measure how
satisfied our members are by gaining regular online
feedback and measuring against OSAT scores. 57%
of members surveyed told us that they were highly
satisfied (5 out of 5) with our service. Our teams are
central to this and with a friendliness score of 66%, we
are always aiming to deliver a friendly, inclusive and
social environment.
£5.5m
invested in new kit
66%
friendliness score
Ultimate flexibility
24/7 opening hours, no contracts and online
classes are a key part of our flexible member
offer. With members settling into new working
and exercise patterns post Covid-19, we further
strengthened the flexibility for our members to
workout whenever and wherever suits them by
adding the highly rated Fiit on-demand fitness
app to our premium LIVE IT membership for no
extra cost. Those members automatically get Fiit
premium worth £20 per month which includes
access to over one thousand classes from expert
trainers that can be used on-demand in the gym,
at home or on the move. LIVE IT, which provides
access to all our 229 sites, was last year chosen
by a higher proportion of our members than ever.
29.6%
of members signed up to
LIVE IT at 31 December 2022
(vs 27.1% as at 31 December 2021)
One of UK’s top gym member app
We have continued to improve the digital experience
in our member app with many new features. Highlights
include the introduction of online workouts, refreshing
the user experience around our new brand identity and
providing a personal training booking service. As at
December 2022, we had over 650k monthly users and
one of the best rated apps in the sector.
4.7
out of 5 rating
on Apple App Store
4.6
out of 5 rating
on Android App Store
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Strategic report
Strategy in action continued
Innovative
technology
and marketing
New digital platform
A significant investment has been made into
digital this year. In April 2022, we launched our
new customer facing website. The site is where The
Gym Group experience begins for every member
and is key to every joining process. It is designed
to work brilliantly on mobile devices, which is where
we see most of our web traffic. The new platform is
also highly scalable and resilient, looks fantastic,
has state of the art analytics capabilities, and can
be easily optimised to maximise the number of
visitors that make a purchase.
Technology infrastructure
We continued to invest in our technology infrastructure
throughout 2022, benefiting members and staff. A new
cloud hosted digital platform, launched in the first half
of the year, uses the latest technologies to maximise
performance and deliver the best online experience
to members across web and app. New security tools
delivered to members in May 2022, gives them a
seamless experience however they choose to connect
with us, while new automation tools make life easier
and more secure for our staff, helping us to run the
business more efficiently, as we grow the estate.
“We made significant investments
in our technical capabilities and
have redeveloped our online digital
platforms. In addition, we launched
a new brand identity, which
represents our purpose of breaking
down barriers to fitness for all.”
Emily Kortlang | Chief Marketing Officer
See Strategic framework | Pages 26-27
Price optimisation
2022 also presented a significant opportunity to
optimise pricing across a range of products. New
price optimisation tools were developed to enable
price to be managed more dynamically than ever
before, and data science models now allow us to
predict price elasticity and likelihood to churn for
different cohorts of members. New products and
features were launched in the second half of the
year, and a new enterprise data warehousing and
analytics platform developed in 2022, will allow us
to deliver even more advanced data models and
insight in 2023.
Rolling out the new brand
Having identified that brand awareness for our
previous trading brand ‘The Gym’ was low, our task
was to create a new identity system to meaningfully
express our brand. In the Summer of 2022, we designed
and created our new visual identity. This involved
successfully deploying our new visual identify across
229 external signs, and rebranding key digital touch
points of our website and member app.
New creative platform
Alongside the brand transformation project, we also
launched a new advertising campaign called ‘Gym Face’
which targeted the gym intimidated audience. Our new
visual identity and Gym Face allowed us to begin to
drive brand distinction, bolster awareness and grow our
market share by attracting new audiences. The most
recent brand awareness metrics are encouraging, with
a 5.6 percentage point increase in prompted awareness
in the 12 months since February 2022.
32 |
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Strategic report
Strategy in action continued
Unique team
and culture
Our friendly, inclusive, and people centred culture, continues be a key part of our success.
Throughout 2022, we continued to put our unique set of values at the centre of decision making
and encapsulated this with the launch of our ‘people promise’ focused on our commitment to
providing development opportunities and career pathways, supporting employee wellbeing
and nurturing a friendly and inclusive culture. Our people first approach contributed to our
high engagement scores, successful retention of our Investors in People accreditation and
external recognition for our Equality, Diversity and Inclusion strategy and progress.
See Strategic framework | Pages 26-27
Investors in People
We are thrilled to have maintained our
Investors in People ‘We invest in people’ Gold
accreditation demonstrating our ongoing
commitment to our people. In addition, we
were awarded the ‘We invest in wellbeing’
Silver accreditation in recognition for our
ongoing focus on employee wellness.
Wellbeing in 2022
We have continued to embed our holistic
approach to wellbeing and the support available
to employees: relaunching our wellbeing
strategic pillars and principles to the business,
enhancing and promoting our employee wellbeing
resource hub, and launching our Mental Health
Ambassadors programme to improve awareness
of the support and resources available to
employees. Following the success of our 2021
LeadWell programme in partnership with Outliers
Wellbeing, we extended this into 2022, providing
employees with further training on psychological
safety, tackling burnout and leadership behaviour.
Diversity and inclusion
This year, we were pleased to make progress
towards our Equality, Diversity and Inclusion (‘EDI’)
pledge targets, through focusing on the attraction,
progression and retention of diverse talent. We have
continued to embed our EDI employee work groups
who have championed inclusion throughout the year
celebrating key events such as Pride and Black History
Month and implementing initiatives such as our
Inclusive Traineeship. Further details on all our
EDI initiatives can be found in the Sustainability
report on pages 44-45.
Employee engagement
We are proud to have achieved high employee
engagement scores throughout 2022, increasing our
level of employee engagement across the business by
6% to 67%. We attribute this to our focus on learning
and development, recognition and reward, while
creating a positive environment for people to work.
Career adventures
Our participation in the UK Government Kickstart
Scheme concluded and we were thrilled with the
overall success of the programme which gave
234 young people the opportunity to gain work
experience and a qualification in fitness, with 66%
of our Fitness Trainer Kickstarters, and 38% of
our Business Support Kickstarters converting to
permanent roles at The Gym Group.
We created further development opportunities with
the launch of our Emerging Talent Programmes
providing Assistant General Managers the
competencies and knowledge to develop into
General Managers and Fitness Trainers with
the skills required to transition into operational
management roles. In addition, we introduced
apprenticeship development opportunities across
our Gym Support teams enabling employees to
undertake a professional qualification relevant to
their role.
We have continued to embed Coaching for
Performance, providing a framework for managers
to assess the performance and potential of their
teams, facilitate effective development discussions
and ensure alignment to the Group’s objectives to
drive engagement and delivery.
13
employees enrolled in
Apprenticeships
42%
of Emerging Talent Assistant
General Managers promoted
to General Manager
65%
of Emerging Talent Fitness
Trainers promoted to
Assistant General Manager
34 |
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Strategic report
Key performance indicators (‘KPIs’)
Growing and recovering
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 streamlined our KPIs to ensure they remain closely
aligned with our strategic goals, and how the Directors
view and manage the business. As a result, the number
of mature gyms and the mature gym site EBITDA are no
longer shown as separate KPIs. Non-Property Net Debt
is also no longer shown as a separate KPI but remains
a key component of Non-Property Net Debt to Group
Adjusted EBITDA.
Non financial
Total number of gyms
+13.4%
2022
2021
2020
2019
2018
Total number of members ’000
+14.3%
229
202
183
175
159
2022
2021
2020
2019
2018
578
821
794
718
724
Definition
Number of gyms open at the
end of the year.
Link to strategic goals
High quality estate
2022 performance
The total number of gyms grew by
13.4% during 2022, as the Group
opened 25 new organic sites
and acquired three sites that
previously operated under the
Fitness First brand. One gym was
closed during 2022.
Definition
Total gym memberships
at the end of the year.
Link to strategic goals
Compelling member experience
Growing sustainably
2022 performance
The total number of members has
increased year on year reflecting
post Covid-19 recovery and
new site openings. City centre
workforce-dependent sites are
recovering at a slower pace than
the rest of the estate.
Average Revenue per Member per Month (‘ARPMM’) £1
+1.3%
Members that visit 4+ times in a month %
+14.6ppts
2022
2021
2020
2019
2018
17.82
17.60
17.20
16.02
14.89
2022
2021
2020
2019
2018
32.6
23.9
47.2
44.0
41.7
Definition
Revenue divided by the average
number of members divided
by the number of months in
the period.
Link to strategic goals
High quality estate
Compelling member experience
Innovative technology
and marketing
2022 performance
ARPMM increased by 1.3% in
2022, driven by an increase in the
average headline price of around
£2 and an increase in the take-up
of our premium product, LIVE IT
(from 27.1% of total members in
2021 to 29.6% in 2022). ARPMM for
the second half of the year was
£18.30, up 4.0% on 2021.
Definition
The percentage of total members
that have visited the gym four or
more times in a month, calculated
as a rolling 12 month average.
Link to strategic goals
Compelling member experience
Growing sustainably
2022 performance
The percentage of members
visiting the gym four or more
times per month has increased
significantly in 2022, and is now
exceeding levels achieved pre
Covid-19. Research shows that
people who visit the gym four
or more times per month are
more likely to continue their
membership and gain significant
health benefits from it, which
drives increased social value.
Employee engagement score %
+6ppts
2022
2021
2020
2019
2018
Definition
The proportion of employees that
responded ‘Strongly Agree’ to the
engagement survey questions.
Link to strategic goals
Unique team and culture
67
61
51
2022 performance
Our employee engagement
continues to strengthen,
increasing a further 6 ppts in
2022. This reflects our continued
focus on building an inclusive
work environment that has strong
relationships within teams who
recognise each other for their
commitment to The Gym Group.
36 |
1
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 when the sites
were required to be closed due to Government restrictions.
Financial
Revenue £m
+63.1%
2022
2021
2020
2019
2018
Definition
Revenue is generated from
membership fees and ancillary
services, such as rental income
from personal trainers and
vending income.
Link to strategic goals
High quality estate
Compelling member experience
Innovative technology
and marketing
106.0
80.5
172.9
153.1
123.9
2022 performance
Revenue in the year increased
by 63.1% reflecting a full year of
open trading days (compared with
72% in the prior year), as well as
increased prices and LIVE IT take-
up. See the Financial review on
pages 16-23 for further details.
Return on Invested Capital (‘ROIC’) %2
20%
2022
2021
2020
2019
2018
20.0
18.0
18.0
31.0
30.0
Definition
Group Adjusted EBITDA Less
Normalised Rent contributed
by mature sites divided by total
capital initially invested in the
mature sites.
Link to strategic goals
High quality estate
Compelling member experience
Innovative technology and marketing
2022 performance
ROIC increased to 20% in 2022,
reflecting the continued revenue
recovery. However, as like-for-
like revenue in the mature gyms
only reached 90% of 2019 levels
and the macroeconomic and
geopolitical environment led
to increases in the cost base
(especially in utilities and staff
costs), ROIC has not returned to
pre Covid-19 levels.
Group operating cash flow £m
+£17.7m
Group Adjusted EBITDA Less Normalised Rent £m
+£32.3m
2020
-16.3
24.0
6.3
2022
2021
2019
2018
39.2
34.0
2020
5.7
2022
2021
-10.2
2019
2018
38.0
48.5
39.1
Definition
Group Adjusted EBITDA Less
Normalised Rent plus the
movement in working capital less
maintenance capital expenditure.
Maintenance capital expenditure
comprises the replacement of
gym equipment and premises
refurbishment.
2022 performance
Group operating cash flow
increased by £17.7m as the
improved EBITDA Less Normalised
Rent was partially offset by
working capital outflows and
higher maintenance capex spend.
See the Financial review on pages
16-23 for further details.
Link to strategic goals
High quality estate
Compelling member experience
Innovative technology
and marketing
Definition
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.
Link to strategic goals
High quality estate
Compelling member experience
Innovative technology
and marketing
2022 performance
Group Adjusted EBITDA Less
Normalised Rent increased by
£32.3m in the year, reflecting
increased site profitability as a result
of revenue recovery and the higher
proportion of open trading days.
See the Financial review on pages
16-23 for further details.
Non-Property Net Debt to Group Adjusted EBITDA
2.0x
2020
-4.64
2022
2021
2.0
2019 0.98
1.17
2018
7.74
Definition
Non-Property Net
Debt as a proportion of Group
Adjusted EBITDA Less Normalised
Rent. Non-Property Net Debt
comprises bank and non-property
lease debt less cash and cash
equivalents.
2022 performance
Non-Property Net Debt to Group
Adjusted EBITDA has improved
significantly in the year as a
result of the improved trading
performance and now lies within
the Group’s target range for
leverage of 1.5x-2.0x.
Link to strategic goals
High quality estate
Compelling member experience
Innovative technology
and marketing
2
ROIC is calculated for mature sites only (open 24 months or more at the
period end) and excludes acquisition sites. 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.
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The Gym Group plc | Annual Report and Accounts 2022
The Gym Group plc | Annual Report and Accounts 2022
Strategic report
Sustainability report
Sustainability
at The Gym
Group
G e n e r a ting social value
r e m p l o y e e s
s h e a l t h ,
d w e l l b e i n g
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Breaking
down barriers
to fitness
for all
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Building a diverse , i n c l u s i v
and equal work p l a c e
Generating socia l v a l u e
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At The Gym Group, we remain committed
to breaking down barriers to fitness,
enabling everyone to live healthier
and more rewarding lives, within the
natural balance of the planet. The cost-
of- living crisis, driven by high inflation
and compounded by the soaring cost
of energy, has presented a range of
challenges for UK society, including
The Gym Group and our members.
Our low cost and accessible gym model,
which is delivered in a resilient and
sustainable way, is therefore more
compelling than ever.
Our sustainability strategy was created to help deliver
our purpose and consists of five key pillars, as defined by
our ‘sustainability wheel’. Our 2022 report highlights our
performance and activities during the year, in line with
our strategy.
We continue to report with reference to Global Reporting
Initiative 2021 Universal Standards and against
Sustainability Accounting Standards Board Leisure
Facilities Standards. Full reporting can be found on our
website along with our sustainability strategy, materiality
matrix, and sustainability governance structures.
We were the first carbon neutral gym chain in the UK and
have again offset our remaining carbon emissions for 2022
through investment in carefully chosen and Gold Standard
certified carbon offset projects in support of our journey
to net zero.
Social impact
Research into the benefits of exercise
clearly shows that when our members
visit our gyms at least four times
a month, improvements in their
physical health, mental wellbeing
and social development (social
value) are achieved. We therefore
introduced a new performance metric
in 2022, to help us track our positive
social impact. In 2022, the Covid-19
pandemic continued to impact our
ability to deliver this societal benefit,
with further disruption from the
pandemic in January and February.
This report sets out how we have
achieved our target and delivered
an increase of 8% in social value
compared to 2019 by enabling over
53 million gym visits.
The environment
The UK saw a record temperature of
40.3°C in July 2022, 1.6 °C higher than
the previous record. Across the globe,
2022 has been a year of extreme
climate events claiming hundreds
of thousands of lives and displacing
millions of people. We are in a period
of ‘climate changed’ as well as climate
change, and we are evaluating both
risks and opportunities to ensure our
business is resilient to this change.
We have expanded our assessment
of climate-related impacts within
our Task Force on Climate-Related
Financial Disclosures (‘TCFD’)
reporting and explored further water
management measures.
At COP27, UN Secretary General
António Guterres made some of his
strongest comments yet on global
warming, saying, “our planet is fast
approaching tipping points that will
make climate chaos irreversible”. The
UN’s environment agency (‘UNEP’)
reported that there is “no credible
pathway to 1.5°C in place”, and the
only way to limit the worst impacts
of the climate change crisis is a
“rapid transformation of societies”.
The report highlights that, if current
pledges of action were delivered in full
by 2030, then we would experience a
rise in global temperature of about
2.5°C, with catastrophic effects.
Our commitment to net zero has taken
a significant step forward this year,
with a full submission to the Science
Based Targets initiative (‘SBTi’); this
includes the recalculation of our 2019
carbon footprint – our baseline year.
Our Green House Gas (‘GHG’)
emissions are therefore restated
in this report and we have removed
data for 2020 and 2021; this is due
to the lack of comparability owing to
the significant impact of Covid-19 on
our operations. Our 2022 emissions
are stated in line with this revised
calculation for direct comparison.
Diversity and equal opportunity
The Gym Group is a place where we
want everyone to feel included and
accepted, with equal opportunities
to succeed, and we continue to make
progress towards our goals. We were
also delighted to be recognised by
Reward Gateway in their Engagement
Excellence Awards.
Good jobs and quality
education
This year was our first time
assessment for the We Invest In
Wellbeing accreditation where we
achieved silver. We also received
the Best Places To Work award by
Glassdoor and maintained our
Investors In People Gold accreditation.
Human rights, anti-bribery and
anti-corruption
We conduct our business honestly
and ethically wherever we operate.
Our Human Rights Policy Statement
and Anti-Bribery and Corruption
Policy Statement can be found on our
website. We also have a detailed Anti-
Bribery and Corruption policy, which
is available to all employees via our
intranet along with training.
David Melhuish
Chief Development and
Sustainability Officer
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Strategic report
Sustainability report continued
Good jobs
and quality
education
Engagement survey
83%
Participation rate
(decrease of 2 percentage
points from 2021)
Overall engagement
score
67%
(increase of 6 percentage
points from 2021)
Our people first culture
is vital to our success
and remains a business
focus at The Gym Group.
Through our ‘people
promise’ we are committed
to supporting our
employees in their career
adventures, providing
new opportunities and
a culture where people
can achieve their goals.
The impact of the increase in the cost-
of-living brought us new challenges in
2022 and looking after our people’s
wellbeing and talent development
has remained a business priority. To
deliver this, we have implemented
development programmes across
a variety of roles and continued to
provide wellbeing support through the
delivery of our LeadWell programme
in partnership with Outliers Wellbeing,
covering topics such as psychological
safety and tackling burnout.
Employee engagement
We have continued to utilise our
annual engagement surveys to listen
to our teams’ experiences, and we
have used the findings to shape our
people strategy. Feedback from
our 2021 engagement survey results
indicated that our people were
looking for additional opportunities
to learn and develop. In response
to initiatives launched in 2022, we
have seen key drivers of employee
engagement, such as job satisfaction
and opportunities to learn and
develop, increase by 8 and 10
percentage points respectively.
Employee learning and
development
We relaunched our ‘Emerging
Talent’ management development
programme in May 2022, providing
high potential Assistant General
Managers with development
pathways into General Manager
roles. This achieved huge success,
with a 95% retention rate and 42%
promotion rate in this first cohort.
In June we expanded the ‘Emerging
Talent’ framework by launching a
bespoke Fitness Trainer programme,
which serves to provide the skills
required to progress. This resulted in
an 83% retention rate, with 65% of
participants securing promotions to
Assistant General Manager positions.
By providing opportunities to develop
into management roles, we hope to
grow and retain our internal talent
pipelines and will continue to deliver
our Emerging Talent programmes
in 2023.
We also introduced new
apprenticeship development
opportunities across our Gym
Support function, which enables
existing employees to undertake a
professional qualification relevant
to their role, such as accountancy,
marketing and leadership. In 2023,
we will expand apprenticeship
opportunities to support our Gym
Operations teams.
13
employees enrolled
on apprenticeships
42%
promotion rate –
Emerging Talent
management
development
programme
65%
promotion rate –
Fitness Trainer Emerging
Talent programme
As we move into 2023, we will remain
focused on delivering internal
development programmes and aim
to introduce targets to measure the
effectiveness of these programmes.
Development in 2023 will be focusing
on female leadership, conscious
leadership and building a future
leader’s pipeline for gym operations.
In our communities
The UK Government’s Kickstart
Scheme — designed to provide
job placement opportunities for
young adults at risk of long term
unemployment — concluded this
year. Since joining the scheme in
December 2020, we have given
234 young people the opportunity
to gain work experience and a
qualification in fitness.
Fitness Trainee
Kickstart programme
66%
of participants
converted to a
Fitness Trainer role
at The Gym Group
Kickstart Business
Support programme
38%
of participants
converted to permanent
roles within our Gym
Support function
Due to the success of the Kickstart
programme, we have decided to
create a Grow Your Own talent
development scheme in 2023. Within
this scheme we will launch The
Gym Group Academy to provide a
framework for multiple pathways
into a career in fitness. The scheme
will deliver further education,
experience and the personal
training certifications required to
become a Fitness Trainer. The Gym
Group Academy will focus on those
currently on universal credit, hard
to reach demographics and women.
Programmes will run throughout
the year and range from five day
work experience placements to
16 week Grow Your Own Fitness
Trainer programmes.
Whilst our partnership with the Rio
Ferdinand Foundation pilot ‘Find Your
Future’ programme did not generate
the participant engagement
anticipated, we were active in
delivering engagement visits to
supported community projects.
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Miranda Jeffery,
General Manager at
our Northampton gym,
shares her career and
development adventure
at The Gym Group.
I joined The Gym Group in 2019
as a Fitness Instructor but was
always really interested in the
operational side of the business.
With the ongoing support and
encouragement of my manager, I
applied for the Assistant General
Manager role and in 2021, achieved
my first step into management. I
instantly knew this was the right
path for me and loved leading,
educating and motivating my own
team of Fitness Trainers, as part of
my new role.
In 2022, I was selected to take part
in the Emerging Talent leadership
development programme. This
programme was a huge support in
fast tracking my career at The Gym
Group, and I was soon promoted
to General Manager. The modules
within the programme helped build
my understanding of the role and
the skills and knowledge required to
deliver in this position.
“Completing the
Emerging Talent
programme has not
only fuelled my
knowledge but also
my passion for working
at The Gym Group.”
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Strategic report
Sustainability report continued
Good health
and wellbeing
Social value
generated in 2022
£756m
(vs £700m in 2019)
70%
Of social value comes
from direct NHS cost
savings and mental
wellbeing benefits
to our members
The World Health
Organisation (‘WHO’)
has long recognised that
regular physical activity
is proven to help prevent
and manage diseases,
such as heart disease,
stroke, diabetes and
several cancers. Exercise
can also improve mental
health, quality of life
and wellbeing.
2022 saw a dramatic increase in
the cost-of-living, with the crisis
disproportionately impacting lower
income demographics. Offering
affordable facilities to exercise is
therefore increasingly important.
With 28 new gym openings in 2022,
we continue to locate 32% of our
growing estate in the 20% most
deprived areas of the UK, reinforcing
our commitment to tackling inactivity
in disadvantaged communities.
At The Gym Group, we have made it
our purpose to break down barriers to
fitness, and not only provide access to
low cost, safe and high quality fitness
facilities to our members, but also
to motivate our members to use our
gyms regularly.
Our network of
229 gyms affords
access to
52.5%
of the UK population
The social impact of
The Gym Group
Growing the positive impact our
business has on our members and
the communities we serve is central
to our purpose. We are proud to have
increased the social value generated
in 2022, beyond our target by 8% to
£756 million.
Social value generated
+8%
vs target
756
540
700
2022 target
485
370
This incredible result was not only
driven by higher membership numbers
(up 14.3% on 2021) but was also the
result of our focus on motivating
our members to exercise in our
gyms regularly.
As a business dedicated to generating
social value, we created a new KPI
for the Executive Committee to drive
social value. Performance is measured
on the percentage of members who
visit our gyms at least four times a
month. Our target for 2022 was to
return to 2019 levels; we exceeded this
target and achieved a 7.1% increase
on 2019 to 47.2% by launching a range
of initiatives including celebrating
member visits, creating member
challenges and welcome videos
for new members to increase the
accessibility of our gyms.
Information on how the social value is
calculated and the Social Value Model
can be found on our website.
% of members visiting at least
4x per month1
41.7%
44.0%
47.2%
32.6%
23.9%
2018
2019
2020
2021
2022
1 Calculated as a rolling 12-month average.
Safety at our gyms
The safety and security of our people
remains a priority focus, and we
have improved processes for both
our members and employees. This is
supported by a more sophisticated
approach to reviewing risk, as well as
robust strategic crisis management
plans and emergency action plans.
Our main focus throughout 2022
was to conform our health and
safety management system to ISO
45001:2018. We are now working on
certification to the ISO standard
in 2023.
Our Primary Authority partner,
Wakefield Council, provides valuable
insight from a regulatory perspective
into our management system
and processes and supports us in
responding to regulatory queries
from other Local Authorities. We
have begun seeking a secondary
partnership with a Fire Authority.
2022 was the first year of delivering
an unannounced health and safety
audit schedule across the business;
as a result, we observed a marginal
reduction in our Group audit results,
in which we obtained an audit score
of 96%.
Our overall headline accident rate
hasn’t seen a material change. We
have developed additional rates for
more serious accident types which
demonstrate whilst our overall rate
remains static, we have seen positive
reductions in our more serious
accident and incident types.
Average
Audit Score
96%
(2021: 97%)
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Positive impact of
exercise on mental
wellbeing
Interview with Fraser, member
at The Gym Group Greenwich
Why did you join The Gym
Group Greenwich?
I joined The Gym Group because I
felt that I needed to do a bit more
for my fitness and find an outlet
from university stress.
What do you like about The
Gym Group?
The community that is led by Jason
at The Gym Group Greenwich is
incredible. When I go to the gym,
I know I am seeing people that
genuinely care about me. The
staff and members are incredibly
friendly. Importantly, I don’t feel
judged - it is a social space as well
as a place to exercise, and whilst I
go to the gym mostly on my own,
there are always people around for
me to talk to and workout with.
What role does The Gym
Group play in your general
wellbeing?
I was diagnosed with depression
and anxiety and was prescribed
anti-depressants to cope with
day-to-day living. I also had some
therapy sessions with the NHS and
my university. However, it felt like I
had to find my own path to improve
my mental wellbeing. When gyms
opened again post pandemic,
I went regularly. I always look
forward to going to the gym and
feel so much better afterwards.
That positive feeling doesn’t leave
me, it stays with me for the rest
of the day.
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Diversity
and equal
opportunity
Breaking down barriers
to fitness and ensuring
The Gym Group is a place
where everyone feels
included and accepted,
with equal opportunities
to succeed, remained a
core focus in 2022.
Last year, with the impact of the
cost-of-living crisis, we prioritised
reviewing our diverse and inclusive
recruitment practices and
representation. To support our
Equality, Diversity and Inclusion (‘EDI’)
pledges launched in March 2022, we
developed recruitment and retention
KPIs and targets and report progress
quarterly to the Sustainability
Committee. Our Chief Development
and Sustainability Officer, David
Melhuish, remains the sponsor of
the EDI group, playing a crucial role
in raising the agenda and positive
action on diversity. Overall, we are
pleased to have reported positive
progress against our EDI targets,
however, we recognise that more work
is required.
Inclusion at The Gym Group
Approach to recruitment
To reduce bias and ensure an inclusive
hiring approach, we introduced
standardised competency based
interviews for all operational
positions. We also revised job adverts
to reflect gender neutral language
and tone, and provided alternative
application routes for those who
require adjustments. Additionally, we
promote flexible working practices
within our recruitment adverts. To
further attract diverse talent, we
released our series of inclusive brand
videos to showcase the diversity of our
people and their experiences working
at The Gym Group.
We launched our Inclusive Traineeship
in October 2022, the first of which
was in partnership with the Down’s
Syndrome Association, and
welcomed five amazing trainees. The
programme has delivered valuable
work experience within our gyms,
whilst supporting our trainees with
their Active IQ Level 1 Award in Fitness
and Physical Activity. The Traineeship
has been a success and we intend
to continue the programme under
our Gym Academy framework, with
further cohorts planned for 2023.
Employee inclusion
and retention
We have continued to embed our
employee led EDI working groups
throughout 2022, which are focused
on age, cultural diversity, disability,
gender and LGBTQI+ to drive inclusion
in the business.
Target
2022 result
40% 35.1%
female senior leaders1 by 2025
Target
2022 result
50/50 30.7%
gender balance by 2030
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Gender pay gap
In January 2022, we introduced a
new director level to the business.
This resulted in an initial increase in
males at a senior level, creating a rise
in our mean gender pay gap to 3.3%
(versus 1.6% in 2021). Our median pay
gap remained consistent with 2021
reporting as most 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
We collected ethnicity data from 98%
of our employees enabling greater
accuracy in our pay gap reporting in
2022. We are pleased to report our
mean ethnicity pay gap as of April
2022 has improved, falling to 14.8%
(versus 16% in 2021). Our median
ethnicity pay gap remains at 0% as
most employees did not change roles
or pay during the year. We recognise
that more work is required to reduce
our mean ethnicity pay gap.
Our full ethnicity and gender pay
gap reports, which provide further
detail on our figures and the actions
we are taking to address these gaps,
will be available on our website by the
end of March 2023.
In May 2022, we relaunched our
wellbeing strategy to the business. In
response to the cost-of-living crisis,
we focused on providing financial
and emotional wellbeing support,
highlighting available resources
and bringing forward pay reviews.
We launched the first cohort of our
new Mental Health Ambassadors
programme in October, a six-month
programme providing refresher
training and upskilling to 24 (existing
and new) mental health champions to
further support our colleagues.
To improve the retention of female
talent, we investigated the key factors
impacting our female employees’
experiences and drivers to leave the
business. In 2023, we will use these
insights to inform our EDI strategy
and support our gender pledges.
This year, we also joined ukactive’s
Everyone Can disability taskforce,
contributing to thought leadership
and influencing change within
our sector.
EDI pledges 2022–2030
Gender
Throughout the year, we have taken
positive action to support movement
towards our gender pledges.
In 2022, female representation among
our senior leaders1 increased by
6.3 percentage points to 35.1% and
across the business by 1.5 percentage
points to 30.7%. Whilst some progress
has been made, a focus on female
retention and development will be key
to achieving our targets.
1 Senior leaders includes senior managers, heads
of department, directors and members of the
Executive Committee.
The Gym Group gender balance
Male
Female
27.4%
30.7%
29.2%
30.7%
72.6%
69.3%
70.8%
69.3%
2019
2020
2021
2022
Senior leaders gender balance
Male
Female
23.8%
24.5%
28.8%
35.1%
76.2%
75.5%
71.2%
64.9%
2019
2020
2021
2022
Ethnicity
We continued to collect and monitor
our employee ethnicity data in 2022.
Using ethnicity data collected from
communities within a five-minute
catchment area of our gyms, we
established how reflective our
workforce is of the communities
we serve. Within Gym Support,
those identifying as Black, African
and Caribbean increased by 2.3
percentage points compared with
2021. Across Gym Operations, whilst
those identifying as ethnically white
increased by 1.8% percentage points
from 2021, overall ethnic diversity
remains broadly above census data
and in line with catchment data.
However, we are aware that Asian
employees are currently under
represented; more work is required to
understand reasons for this trend.
Gym Support: Index vs communities we serve
Gym Operations: Index vs communities we serve
200
160
Black, African,
Caribbean
120
80
40
0
Over
represented
Mixed
White
Asian
Under
represented
2021
2022
200
160
120
80
40
0
Black, African,
Caribbean
Mixed
Over
represented
White
Asian
Under
represented
2021
2022
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Strategic report
Sustainability report continued
Responsibility
to the
environment
Purchasing
100%
Renewable energy1
Carbon neutral since
2021
Scope 1 and 2 emissions
-11%
compared to 2019
1 For all sites where The Gym Group controls
the purchase of energy.
46 |
46 |
We are committed to
reducing our carbon
emissions at The Gym
Group, and we recognise
the importance of the
Paris Agreement to limit
global warming to 1.5°C.
Our sustainability strategy
acknowledges this and sets
out our responsibility to
the environment.
Our road to net zero
Our stated commitment to net zero
was accepted by Science Based
Targets initiative (‘SBTi’) in March
2022, and we have now made our full
submission; this defines our pathway
to net zero in compliance with the
latest science based standards and
guidelines. As part of this process, we
have extended our Scope 3 emissions
boundary to include all materially
relevant activities, as well as restating
and aligning our baseline year of 2019.
Our level of ambition has not changed,
and we remain committed to
decarbonising our estate of Scope 1 and
2 emissions by 2035. However, alignment
with our Scope 3 emissions trajectory
determines a SBTi net zero target of
2045. We recognise emission reductions
are only a part of achieving net zero.
Our carbon
reduction
target1,2,3
We are committed to
achieving our near
term target of a 50%
reduction in Scope 1 and
2 emissions by
2030
And decarbonising these
emissions by
2035
We have committed to
a science based target
to achieve net zero by
2045
Our carbon reduction
commitments
Our wider climate-related targets are
outlined below and we will review these
over time as we continue to develop
our net zero plan.
Suppliers
We commit to engaging with
all our key suppliers to set their
own emission reduction targets,
aligned with climate science,
by 2028
Members
We commit to developing
a member engagement plan
by 2025 to drive forwards our
net zero ambition
Renewable
energy
We commit to increasing and
maintaining our annual sourcing
of renewable electricity to
100% by 2025
Abatement
We will develop our plan to
remove and store carbon from
the atmosphere. This will serve
to offset the impact of our
unabated emissions, which
remain once we have achieved
our 2045 net zero target
Our GHG emissions reporting in 2020
and 2021 was significantly impacted
by Covid-19 restrictions and was
therefore not representative of our
typical performance. As published in
our Annual Report 2021 on page 45,
our Scope 1 emissions in that year
were 1,282 tCO2e and Scope 2
6,420 tCO2e. Owing to materially
lower levels of activity than usual,
we have chosen not to restate these
years, and we will report against
our 2019 baseline going forward
to demonstrate progress towards
our net zero commitment. Our 2022
emissions are stated in line with this
revised operational boundary for
direct comparison.
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Energy management
and reduction
A volatile energy market has been
a feature of 2022, and there have
been significant increases in utility
costs that remain into 2023, and
beyond. The increasing cost of
energy, combined with the need for
net zero, makes energy reduction
and management more important
than ever.
Across the UK, we have a team
of specialist Facilities Managers
(‘FMs’) who maintain a consistently
high standard across our gyms.
In 2022, we undertook detailed
energy measurement, monitoring
and reporting at several sites. Our
energy reporting is now being built
into a centralised system to allow full
visibility, both centrally and locally,
of all sites. We also introduced a
standardised energy audit that FMs
now complete each year at every site.
The energy audit seeks to identify any
issues that may be driving excessive
energy consumption. Examples
of when we successfully reduced
our energy use are found in the
below table:
The issue
The solution
The outcome
Air handling
unit controls
An anomaly with
the control system
on our air handling
units resulted in the
unit running at high
speed overnight.
Lighting
upgrade
Prior to 2016, all our
sites were fitted with
T5 fluorescent lamps,
with LED lighting
introduced in May
2016.
Corrected so that the units
are run at approximately
50% capacity at periods of
low occupation.
We produced a training
video on the correct
configuration for all
engineers to prevent
any reoccurrence.
Completion of our lighting
replacement programme
in 2022, with all gyms now
operating LED lighting.
Reduction of power
consumption on a like-
for-like basis and fewer
lamps needed due to the
improved output.
Air conditioning
systems and
temperature
control
With record breaking
high temperatures
this summer, the
demand on our air
conditioning was
significant.
On World Environment
Day we launched our ‘20 is
Plenty’ campaign to ensure
gyms were operating at no
lower than 20oC .
We also continued to
rollout and develop our
remote monitoring and
control systems for air
conditioning.
Applied to 100 sites, this
initiative would deliver
a carbon reduction of
approximately 46 tCO2
per year.
Reduced energy and
power consumption on
a continuous basis.
Replacing 20,000 T5
lamps with LED will deliver
a carbon reduction of
approximately 2,000 tCO2
per year.
Published studies vary,
but it is generally reported
that increasing the air
conditioning temperature
by 1oC can save 5–10% of
running costs.
Data logging and remote
access enhance our
understanding and lead
to optimisation of energy
consuming systems.
1 From a 2019 baseline.
2 Aligned with the UK governments commitment for grid decarbonisation as published
in 2021.
3 Reduction in Scope 3 emissions by 54% per gym by 2030 and 97% per gym by 2045 to
achieve the absolute long term target of 90% reduction for Scope 1, 2, and 3.
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Strategic report
Sustainability report continued
Scope 3 emissions
Scope 3 Category
Emissions (tCO2e)
Capital goods
Business travel
Employee commuting and
homeworking
Fuel and energy related
Purchased goods and services
Upstream transport
Waste
2019
2022
Var
Contr.
17,544
272
21,856
205
25% 59.3%
-25% 0.6%
402
2,343
4,488
375
236
385
3,031
11,064
80
216
-4%
1.0%
29% 8.2%
147% 30.1%
-79% 0.2%
-15% 0.6%
Total
25,660
36,837
100%
30% of our gym’s power requirements
can be met by onsite solar panels, and
we are able to consume up to 100%
of the power generated, avoiding
emissions of over 35 tCO2e per year
for a typical gym. We have already
completed detailed site appraisals at
several sites and are in discussion with
landlords to agree the installation.
We will continue to make capital
investments to reduce energy
consumption in 2023. Due to the
increased energy costs, capital
investments will have a reduced
payback period and improved return
on investment. We will explore further
opportunities as they arise, including
investment in low carbon technologies
and energy-saving initiatives.
Low carbon technology
We have continued to rollout our
hot water systems using air source
heat pump (‘ASHP’) technology. Last
year, working in partnership with our
key suppliers, we developed a highly
efficient system that incorporates
carbon dioxide (‘CO2‘) as the
refrigerant with a global warming
potential of just 1.0. We are now able
to successfully generate hot water
using this method at all new sites
and currently operate 30 sites using
ASHP, removing the need for gas fired
boilers. We will actively replace old
gas fired systems with ASHP as they
reach their end of life, supporting our
pathway to net zero.
To further support our net zero
roadmap, we are installing
photovoltaic solar panels to generate
local onsite power. Typically, up to
Total emissions (tCO2e)
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
2019
Direct emissions from operation (Scope 1)
Purchased electricity and heat (Scope 2)
Indirect emissions in value chain (Scope 3)
48 |
2022
2022 carbon emissions
Our Scope 1 direct emissions for this
year are 2,138 tCO2e, resulting from the
direct combustion of 10,960,970 kWh of
natural gas. Both 2019 and 2022 now
include emissions resulting from loss of
refrigerants. This represents a carbon
decrease of 1% from 2019.
Scope 2 indirect emissions for this
year are 7,633 tCO2e, resulting from
the consumption of 39,435,614 kWh of
electricity and 38,880 kWh of direct
heat, purchased and consumed in
day-to-day business operations.
This represents a carbon decrease
of 13% from 2019.
Our operations have an intensity
metric of 203 tCO2e per gym and
871 tCO2e per million visits for this
reporting year. This represents a
reduction in operational carbon
intensity by 1.5% and an increase of
11% respectively from our base year.
Our emissions have been calculated
utilising location based emission
factors, as published by the
Department for Business, Energy
and Industrial Strategy. Due to the
renewable electricity procurement
contract that we have had in place
since 2019, should we utilise market-
based emissions factors to calculate
carbon emissions, our Scope 2 would
reduce by 6,002 tCO2e.
Emissions year ended 31 December
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)
%Change from base year Scope 1 and 2
% Change from base year Scope 1, 2 and 3
Intensity Metric (tCO2e per gym)
% Change from base year
Intensity Metric (tCO2e per million member visit)
% Change from base year
Total consumption (kwh)
Scope 1 (Gas)
Scope 2 (Electricity)
Scope 2 (Heat)
Total (kWh)
2019
2,157
8,797
25,660
36,614
206
785
2022
2,138
7,633
36,837
46,608
-11%
27%
203
-1.5%
871
11%
2019
2022
11,071,196
34,409,373
10,907
10,960,970
39,435,614
38,880
45,491,476
50,435,464
Waste management
2022 marked the start of our
initiative to extend the lifespan of
our gym equipment. We kicked off
a programme to remanufacture and
overhaul kit within our aged estate
to extend the lifespan of our core
product offering. Machines have
been taken from existing gyms
to create a baseline stock holding,
which can then be repurposed
elsewhere within the estate, shifting
the balance from ‘remove and
replace’ to ‘remanufacture and
recycle’. Any kit that cannot be
remanufactured is responsibly
recycled through our buy
back programme.
Throughout 2022, we gradually
reduced the volume of blue roll
cleaning tissue used by members
in our gyms as the intense Covid-19
cleaning regimes relaxed. By
modifying member communications
and reducing the number of cleaning
stations in each site, we observed a
lower volume of waste without any
negative response from members
or impact on the cleanliness
of equipment.
As well as reducing the amount of
waste generated, we have reduced
the number of waste collections,
which has subsequently eliminated
transport and handling emissions.
This has resulted in a reduction of 32%
in our overall waste (by weight) in the
second half of 2022. Landfill diversion
has remained consistent with 2021,
seeing 95% of our waste being recycled
or sent to waste to energy plants.
2022 has seen a full year of waste
generation compared with the nine
months of operation in 2021, with new
gyms also adding to the total amount
generated. Against this background,
the amount of waste generated
per gym has remained the same,
and after adjusting for the closure
period in 2021, we witnessed a gross
reduction in total waste by 19%.
Water management
We concluded our estate-wide water
audit in 2022. Only eight sites were
identified as having issues, all of
which were quickly remedied. We
have also installed data loggers with
remote monitoring to capture water
consumption data at several sites.
We will evaluate the findings in the first
half of 2023 to gain greater insight
into our water consumption and
establish an ongoing monitoring and
targeting system.
As we do not operate any pools,
sauna, steam rooms or similar wet
facilities, toilet and wash facilities
are the main water use. Most of our
gyms are equipped with low water
volume shower heads to reduce
consumption, and we have identified
up to 80 locations where replacing
the original showers can reduce water
consumption by over 30%. This work
is ongoing and will be completed in
2023, with the potential to save over
half a million litres of water a week.
Landfill diversion
Total weight (in tonnes)
Average tonnes/gym
Diverted from landfill
2019
750
4.3
90%
2020
443
3.5
90%
2021
942
6
95%
2022
1,066
6
95%
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Strategic report
Task Force on Climate-Related Financial Disclosures (‘TCFD’)
TCFD pillar
TCFD recommended
disclosures
Cross-reference and
compliance status
Next steps and further
comments
In meeting the requirements of Listing Rule 9.8.6 R, we have concluded that for FY22:
l we fully comply with recommended disclosures 2, 3, 6, 7, 8 and 10; and
l we partially comply with recommended disclosures 1, 4, 5, 9 and 11.
TCFD pillar
TCFD recommended
disclosures
Cross-reference and
compliance status
Next steps and further
comments
Governance
1) Describe the Board’s oversight
of climate-related risks and
opportunities.
2) 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, Risk
management) (pages 50-53).
Governance – Report of the Sustainability
Committee (pages 90-91).
Partially compliant – climate-related risks
and opportunities are discussed as part of the
Board Committees, however further work could
be done to delve deeper into the financial and
business strategy implications of such impacts.
Sustainability report – Responsibility to the
environment – Taskforce on Climate-Related
Financial Disclosures (pages 50-53).
Governance – Report of the Sustainability
Committee (pages 90-91).
Compliant
Strategy
3) Describe the climate-related
risks and opportunities the
organisation has identified
over the short, medium and
long term.
Sustainability report – Responsibility to the
environment – Taskforce on Climate-Related
Financial Disclosures (pages 50-53).
Compliant
4) Describe the impact of
Sustainability report – Responsibility to the
climate-related risks and
opportunities on the
organisation’s businesses,
strategy and financial
planning.
environment – Taskforce on Climate-Related
Financial Disclosures (pages 50-53).
Sustainability report – Responsibility to the
environment (pages 46-49).
Strategic report – Strategy in action
(pages 28-35).
Partially compliant – work has commenced
in this area, however further work is to be
conducted on how our commercial strategy will
be impacted by our identified climate-related
risks and opportunities, including the financial
impact.
We will conduct a training needs
analysis of key climate skills
required at the Board level and
review the provision of climate-
related remuneration.
We will continue to ensure our
senior management plays
a key role in climate-related
management and assessment,
including reviewing our
organisational strategy against
climate impacts.
We recognise that we need to
undertake further work to review
the relevance of our selected
time horizons for climate
scenario analysis.
Using both identified climate
scenarios (RCP 4.5 and RCP 8.5),
we plan to undertake a financial
quantification assessment of
climate-related impacts on our
business.
5) Describe the resilience of the
Sustainability report – Responsibility to the
organisation’s strategy, taking
into consideration different
future climate scenarios,
including a 2°C or lower
scenario.
environment – Taskforce on Climate-Related
Financial Disclosures (pages 50-53).
Partially compliant – we have begun climate
scenario modelling for two distinct futures,
however further work is to be conducted on the
resilience impacts for our business.
We will review and disclose the
resilience of our strategy against
identified climate scenarios,
focusing on mitigation measures
for those most significant.
Risk
management
6) Describe the organisation’s
Sustainability report – Responsibility to the
processes for identifying and
assessing climate-related
risks.
environment – Taskforce on Climate-Related
Financial Disclosures (pages 50-53).
Strategic report – Principal risks and
uncertainties (pages 54-63).
We will assess and disclose the
current and future regulatory
drivers of our approach to
climate change.
Compliant
7) Describe the organisation’s
processes for managing
climate-related risks.
Sustainability report – Responsibility to the
environment – Taskforce on Climate-Related
Financial Disclosures (pages 50-53).
Strategic report – Principal risks and
uncertainties (pages 54-63).
Compliant
We will continue to manage
and monitor climate-related
risks and opportunities for our
business.
8) 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 (pages 50-53).
Strategic report – Principal risks and
uncertainties (pages 54-63).
We will continue to review the
status of climate change as an
emerging risk and monitor any
changes in its immediacy of
impact.
Compliant
Metrics and
targets
9) Disclose the metrics used by
the organisation to assess
climate-related risks and
opportunities.
Sustainability report – Responsibility to the
environment - Climate and Carbon (pages
46-49).
Sustainability report – Responsibility to the
environment – Taskforce on Climate-Related
Financial Disclosures (pages 50-53).
We will explore additional
climate-related performance
metrics, such as climate-related
remuneration for our employees
and metrics to monitor physical
climate risks to our business and
on our organisational strategy.
Partially compliant – whilst we have
developed ESG remuneration for Executives,
we have not yet considered the integration of
climate into remuneration policies.
10) Disclose Scope 1, Scope 2
and, if appropriate, Scope
3 greenhouse gas emissions
and the related risks.
11) Describe the targets used
by the organisation to
manage climate-related
risks and opportunities and
performance against targets.
Sustainability report – Responsibility to the
environment - Climate and Carbon: Carbon
emissions (pages 46-49).
We are committed to continually
reducing our greenhouse gas
emissions in line with SBTi.
Compliant
Sustainability report – Responsibility to the
environment - Climate and Carbon
(pages 46-49).
Partially compliant – we have made great
progress in setting climate-related targets for
our business.
We will review relevant metrics
and targets, such as capital
deployment towards responding
to and preparing for climate-
related risks and opportunities,
as well as water and waste
metrics for our business.
Our progress on TCFD
At The Gym Group, we are committed
to tackling both the immediate and
long term impacts of climate change
on our business and the communities
we serve. This year marks our
second year of reporting against
TCFD. We are proud to have made
progress against the disclosures
over the past year: comprehensively
reviewing our climate-related risks
and opportunities; evaluating
qualitative financial impacts on the
business; and completing our first
submission to Carbon Disclosure
Project (‘CDP’). In 2023, we will
continue to work towards meeting
the recommendations in full in order
to meet the legal requirements of
The Companies (Strategic Report)
(Climate-related Financial Disclosure)
Regulations 2022.
Governance
Our Board and Executive Committee
remain fully committed to identifying
and addressing the immediate and
longer term climate-related impacts
on our business. Our Board has
overall accountability for managing
the business risks and opportunities
posed by climate change.
Our Sustainability Committee
(‘Committee’), chaired by Non-
Executive Director Wais Shaifta,
meets at least three times per year
and reports directly to the Board.
Members of the Committee further
report climate-related issues to the
Senior Management Team (‘SMT’), as
key topics arise.
50 |
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Task Force on Climate-Related Financial Disclosures (‘TCFD’)
continued
Our Chief Development and
Sustainability Officer, David Melhuish,
continues to lead the management
and oversight of The Gym Group’s
sustainability strategy and is
responsible for monitoring and
overseeing our climate-related
progress. As outlined within the
Committee’s terms of reference, this
includes, but is not limited to, reviewing
progress against our goals and
targets to achieve net zero (see pages
90-91) and managing physical and
transition risks through our identified
control measures (see Principal risks
and uncertainties, pages 54-63). Last
year, through the Committee and our
focused ESG workstream, we added
an ESG-related metric to the annual
Executive bonus.
Strategy
Our process for managing climate-
related impacts is embedded in the
responsibility to the environment pillar
of our sustainability strategy and we
strive to be at the forefront of
best practice within the health and
fitness industry. As a business, we have
pledged to decarbonise our Scope 1
and 2 emissions by 2035, and become
net zero by 2045, against a 2019 base
year. We have successfully submitted
our net zero trajectory to the SBTi.
Last year, we worked with an
independent sustainability
consultancy to assess the resilience of
our strategy against climate change.
We undertook climate scenario
modelling and identified two distinct
transition and physical scenarios to
assess our UK business operations.
The selected scenarios present a
sharp contrast between potential
futures, which allows us to plan for a
range of possible manifesting climate
impacts, such as the likelihood of flood
risk at future site selection.
To identify climate impacts, we
adopted three time horizons:
short term (2030), medium term
(2050) and long term (2080). The
time horizons use the Met Office’s
UKCP18 Projections as the basis for
the physical risk identification. To
ensure a consistent approach, the
same timeframes were selected for
the transition risk identification. In
the short term, alignment with the
current business strategy presents
the milestone for risk and opportunity
materialisation. The UK Government’s
net zero target date and the typical
lifespan of our assets (including our
buildings) presents the milestone for
the medium term; whilst the long term
time horizons directly mirrors the
physical scenario.
The two physical climate scenarios
chosen, as defined by the
Intergovernmental Panel on Climate
Change, are outlined below.
Physical
climate
scenarios
Representative
Concentration Pathway 4.5
A cautious scenario with a predicted global temperature increase between 1.7°C
and 3.2°C. This is in line with current trends, climate change policies, pledges
and commitments.
Representative
Concentration Pathway 8.5
A worst case scenario with a predicted global temperature increase between 3.2°C
and 5.4°C, where carbon emissions continue growing unmitigated.
Consistent with TCFD, climate-related physical risks were then categorised as follows:
l Acute physical risks: event-driven risks, including increased severity of extreme weather events, such as hurricanes,
floods and heat waves.
l Chronic physical risks: longer term shifts in climate patterns (e.g. sustained higher temperatures) that may cause sea
level rise or chronic heat waves.
The selected transition climate scenarios, as defined by The Energy Transition Risks & Opportunities (ET Risk) research
consortium, are outlined on page 53.
Transition
climate
scenarios
Ambitious climate
transition
An optimistic scenario in line with a 2°C temperature increase where technological
solutions drive the low carbon economy forwards.
Limited climate
transition
A conservative scenario in line with a 3–4°C temperature increase where policy
interventions continue as usual and global climate targets and commitments
are not reached.
Consistent with TCFD, climate-related transition risks were then categorised as Policy and legal, Market, Technology
and Reputation.
The most significant risks are summarised on page 53. Through the scenario analysis, RCP8.5 is recognised as the
scenario in which the identified physical risks are the most significant. By contrast, the identified transition risk and
climate opportunity are most significant under the RCP4.5 scenario.
TCFD risk
category
Identified
climate risks
Business
impact
Financial
impact
Control
measures
Time horizon for
materialisation
Physical:
acute
Heat wave
Potential reputational
Physical:
chronic
Changing
climatic
temperature
damage with employees,
members and the public
owing to heightened
health risks (such as
asthma, fatigue and
heat stroke).
Sustained temperature
rise leading to
overheating at indoor
facilities, resulting in
health risks to staff and
members.
We are reviewing our
business plan to select
new sites with passive
design elements, energy
efficient technology and
ventilation systems, and
temperature monitoring
systems.
Short term (2030)
Medium term (2050)
Revenues:
Decreased
revenues due to
reduced demand
for products and
services.
Expenditures:
Increased
operating costs
associated with
additional air
conditioning to
regulate indoor
temperature.
Transition:
reputation
A lack of
supplier
engagement in
the transition to
net zero
Inability to realise The
Gym Group’s net zero
commitments due to
a lack of value chain
engagement on Scope 3
emissions.
Expenditures:
Increased
operating costs
associated with
higher carbon
taxes.
Short term (2030)
We are currently
establishing supplier
engagement targets
in line with SBTi
requirements and,
in 2022, we began
calculating our material
Scope 3 emissions.
The most significant opportunities are summarised below:
TCFD opportunity
category
Identified climate
opportunity
Business
impact
Financial
impact
Control
measures
Time horizon for
materialisation
Markets
Setting a science
based target
to deliver a
decarbonisation
roadmap ahead of
current UK policy.
A reduced
dependency on fossil
fuels and a resultant
reduced sensitivity
to the changing cost
of carbon.
Expenditures:
Operational
savings as
a result of
reduced
greenhouse gas
emissions.
Short term (2030)
We are currently
modelling our net
zero pathway for
our Scope 1, 2 and
3 emissions in line
with SBTi, as well as
establishing wider
climate targets
(including renewable
energy procurement
and beyond value
chain mitigation).
Risk management
We assess climate impacts through
our TCFD risk and opportunity
register and communicate the
findings to our management team,
Executive Committee and the Board.
Our TCFD register assesses both the
impact and likelihood of each climate-
related financial impact, and outlines
current and future control measures.
We have identified a significance
threshold for escalating climate
risks and opportunities, and have
introduced this into our group-wide
risk register as an emerging risk.
As set out in the Principal risks and
uncertainties section on pages 54-63,
the Group’s principal risk register
is made up of those strategic risks
and functional risks that are believed
would have the greatest impact
on operations. The risk register is
reviewed twice yearly by the SMT and
discussed with the Audit and Risk
Committee. This process ensures that
actual and potential climate-related
impacts are controlled, mitigated
or transferred as appropriate,
and integrated into business
decision making.
Metrics and targets
As a business, we are committed to
significantly reducing our Scope 1, 2
and 3 greenhouse gas emissions in
accordance with the Greenhouse Gas
Protocol Standard. Our 2022 carbon
footprint and metrics relating to
energy, water and waste can be found
on pages 48-49.
We have now submitted our net zero
commitment for validation to SBTi. In
line with the SBTi requirements, we are
developing our pathway with a near
term target of 50% reduction by 2030,
and a long term target of net zero by
2045 against a base year of 2019.
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Principal risks and uncertainties
Managing
our risk
Our risk management framework is designed to effectively
identify, assess and mitigate risks whilst enabling us to
deliver the Group’s strategic and operational objectives.
Approach to risk management
The Board and Senior Management
Team (‘SMT’) take very seriously
their responsibility for operating a
robust risk management and internal
controls process, and for reviewing
their effectiveness at least annually.
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. The
Audit and Risk Committee provides
oversight and challenge on the
effectiveness of risk management
and mitigating controls.
Risk appetite
The UK Corporate Governance Code
requires companies to determine their
risk appetite. This is an expression
of the amount and types of risk that
the Group is willing to take in order to
achieve its strategic and operational
objectives. A risk that can seriously
affect the performance, prospects
or reputation of a company is
deemed to be a principal risk. The
Group’s risk management process
aims to strike a balance between
identifying, monitoring and mitigating
risks whilst maximising potential
opportunities and returns to ensure
we deliver against our 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 functional heads
and business area leaders identify
and document the risks that their
business area faces. A review of the
functional risk registers is performed
twice yearly by the SMT, made up of
the Executive Committee and other
senior management, and the output
of that review is discussed with the
Audit and Risk Committee (on behalf
of the Board).
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’s principal risk register is
made up of those strategic risks (top
down) and functional risks (bottom
up) that are believed would have the
greatest impact on our operations.
Each risk is evaluated against three
criteria with equal weighting to arrive
at an overall score:
l Likelihood – the likelihood of
occurrence.
l Financial impact – the financial
implications.
l 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.
54 |
Key roles and responsibilities
The roles and responsibilities for designing, monitoring and operating the system of risk management are set out below.
Board
Third line
of defence
Has overall responsibility
for strategy, governance,
performance,
internal control and
risk management.
Sets the tone and
culture for managing
risk and embedding
risk management
controls, providing
strategic direction on
the appropriate balance
between risk and reward.
Ensures the most
significant risks
facing the Group are
properly managed.
Evaluates the risk
implications of
planned investments.
Audit and Risk
Committee
Senior Management
Team (‘SMT’)
Functions and
employees
Second line
of defence
First line
of defence
Monitors and reviews
the overall effectiveness
of the Group’s system
of internal control and
risk management.
Makes recommendations
to the Board for
improvements
or developments.
Defines and reviews the
Group’s risk appetite.
Monitors compliance
with internal control
systems and oversees
the external audit.
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 risk registers
at least twice yearly and
the strategic risks at
least annually.
Reports to the Audit
and Risk Committee
on the internal control
environment and
principal and emerging
risks identified.
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.
Principal risks
The Board and SMT have identified
ten principal risks which are set out
on the following 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, 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
i
m
u
d
e
M
w
o
L
Key
Low
8
6
7
4
5
3
10
Medium
Impact
2
1
9
High
1 Significant business interruption
2 Operational gearing
3 Member experience
4 Trading environment
5 Structural change in the industry
(New for FY22)
6 Our people
7 IT dependency
8 Cyber and data security
9 Reputation, brand and trust
10 Relationships with key suppliers
(New for FY22)
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Principal risks and uncertainties continued
Key
Risk movement in 2022:
Risk increase
No change
Risk decrease
Included in Viability assessment, see page 63
Key
Risk movement in 2022:
Risk increase
No change
Risk decrease
Included in Viability assessment, see page 63
V
V
Principal risk
Description and impact
Mitigations and controls
Strategic link
Principal risk
Description and impact
Mitigations and controls
Strategic link
1
Significant
business
interruption
There are a number of factors that could
cause widespread disruption or the
closure of a significant proportion of our
estate, including:
a resurgence of Covid-19 or another
pandemic of similar scale and impact;
a major health scare in relation to
gym usage;
the failure of a key supplier or IT system,
impacting our ability to operate a
substantial proportion of our gyms; and
climate change resulting in an
increase in the likelihood and severity
of environmental disasters such as
storms or droughts.
This could lead to sub-optimal membership
levels, an increase in the number of under-
performing sites and substantially lower
revenue and profitability.
Compelling
member
experience
Growing
sustainably
Business continuity procedures and risks
are monitored and refreshed regularly
Measures identified to preserve cash
and reduce discretionary spend during
periods where all, or a large proportion of,
the Group’s sites are closed; ability to re-
open quickly to minimise revenue loss as
shown during the Covid-19 lockdowns
Critical suppliers identified and
contingency plans in place in the event of
supplier failure
Reviewed the risks of climate change on
our business and identified adaptation
action required as part of response to
the TCFD recommendations. Further
information can be found in the
Sustainability report on pages 50-53
2
Operational
gearing
V
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 under-performance
in membership numbers, which could
adversely impact profitability.
In addition, the current macroeconomic
and geopolitical environment has led to
significant increases in utilities costs and
wage inflation.
The Group may be unable to attract
sufficient members and/or increase prices
to sufficiently cover the cost increases,
leading to reduced margins.
Monthly monitoring of business
performance at site level
Active yield management on a gym-by-
gym basis
Regular financial management by the
Executive Committee and the Board
Measures identified to reduce operating
costs, preserve cash and reduce
discretionary spend where necessary
Option to slow down expansion to
preserve cash
Active retention management undertaken
and cancellations closely monitored
Energy-efficient investment into our sites
96% hedged on energy costs for FY23 and
partially hedged for FY24
High quality
estate
Growing
sustainably
3
Member
experience
Failure to provide members with a
high quality product and service could
result in a loss of membership and
reputational damage.
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.
High quality
estate
Compelling
member
experience
Tracking of gym utilisation and member
satisfaction scores through enhanced
monitoring and feedback processes
Ongoing review of equipment usage
and appropriate investment in repairs
and maintenance to ensure we meet
member requirements
Continuous review of further innovations
to improve the member experience
Gym ‘busyness’ tracker helps nervous
members to visit at quieter times
Strong member communication plan in
place which focuses on our commitment
to the community, overcoming anxiety
to exercise, and tackling the reasons for
increased gym intimidation
Free Fiit membership added to the LIVE
IT product in 2022, further enhancing the
offering and value
Compelling
member
experience
4
Trading
environment
V
The UK is currently experiencing
a cost-of-living crisis and there is
significant economic uncertainty.
We need to respond appropriately
to external market conditions while
maintaining focus on delivering on
our strategic objectives.
Members may choose to cancel their
membership due to financial hardship.
In addition, the continued economic
uncertainty could impact the Group’s ability
to access the level of funding it requires to
deliver on its strategic objectives.
There is also a risk that new competitors
enter the fitness market offering an
alternative to the low cost gym model.
This could lead to sub-optimal membership
levels, an increase in the number of under-
performing sites and substantially lower
revenue and profitability.
Well placed to operate successfully in a
challenging economic environment as we
are one of the lowest price gym operators
in the UK market with an average monthly
subscription which is about £2 per month
lower than most competitors in the low
cost gym sector, and significantly lower
than rates charged by mid-market and
premium operators
Benefit from others trading down from the
mid-market or premium gyms
Highly experienced management team
in place, with significant industry-wide
knowledge and intelligence
Specialist advisors retained to assist
the Group in ensuring it has access
to appropriate financing to deliver its
strategic objectives
Current bank facility agreement in place
until October 2024, and strong underlying
operating cash generation before
investment in growth
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Principal risks and uncertainties continued
Key
Risk movement in 2022:
Risk increase
No change
Risk decrease
Included in Viability assessment, see page 63
Key
Risk movement in 2022:
Risk increase
No change
Risk decrease
Included in Viability assessment, see page 63
V
V
Principal risk
Description and impact
Mitigations and controls
Strategic link
Principal risk
Description and impact
Mitigations and controls
Strategic link
5
Structural
change in the
industry
NEW
V
The normalisation of hybrid working
and the emergence of alternative out-
of-home and flexible fitness offerings,
means that there is a potential long term
shift in the behaviour of traditional and
prospective members and their appetite
for low cost gyms in the locations where
we have presence.
There is also a risk that new competitors
enter the fitness market offering an
alternative to the low cost gym model.
This could lead to sub-optimal membership
levels, an increase in the number of under-
performing sites and substantially lower
revenue and profitability.
Continue to combine our low cost
operating model with innovative
technology and scalable infrastructure, to
ensure we remain relevant and good value
for money
Highly experienced management team
in place, with significant industry-wide
knowledge and intelligence
Continue to invest in the member
proposition with customer insight
and segmentation analysis regularly
undertaken to understand emerging
trends and changes in member behaviour
Continue to focus on choosing the best
sites in a geographical area; increasingly
opening sites on retail parks rather than
in city centres
High quality
estate
Compelling
member
experience
Innovative
technology
and
marketing
6
Our people
V
The success of the business is dependent
on talent attraction, development
and retention, as well as culture
and wellbeing.
A lack of experienced and motivated staff
could have a detrimental impact in all
areas of the business, from Operations to
Gym Support.
Increased demand and competition
for staff could impact on our ability to
support the gyms, deliver a good member
experience and execute on our strategy.
Stretched resources could see staff
distracted from performing their core roles
or failing to deliver on key projects.
Lack of adequate succession planning
and dependency on a small number
of key staff could also result in loss of
knowledge and weakening of supplier
relationships, which in turn could impact
operational performance.
Use 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
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
6
Our people
continued
Economic pressures and the cost-of-
living crisis mean this risk is trending up,
as costs increase and personnel seek
higher salaries.
Employee Diversity and Inclusion Group
Growth of Gym Support and changes to
the way we run the business, reducing
dependencies on key individuals by
spreading knowledge more widely
Improved brand recognition will over time
make The Gym Group more attractive to
potential recruits
V
7
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 reopening plan post Covid-19
(including the gym ‘busyness’ tracker and
contactless entry), has fundamentally
changed the digital relationship
with members and the volume of
digital interactions.
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.
Primary data systems hosted by specialist
hosting providers in suitable data centres
Primary IT infrastructure fully managed
by specialist IT companies which provide
best-practice architecture and support
All membership and business information
backed up regularly using third
party locations
Innovative
technology
and
marketing
Compelling
member
experience
Robust disaster recovery and business
continuity plans in place
Additional capacity added to our
infrastructure to cope with large spikes
in usage
Regular programme of load testing on
critical member-facing platforms
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Principal risks and uncertainties continued
Key
Risk movement in 2022:
Risk increase
No change
Risk decrease
Included in Viability assessment, see page 63
Key
Risk movement in 2022:
Risk increase
No change
Risk decrease
Included in Viability assessment, see page 63
V
V
Principal risk
Description and impact
Mitigations and controls
Strategic link
Principal risk
Description and impact
Mitigations and controls
Strategic link
8
Cyber and
data security
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.
Cyber attacks are generally increasing due
to the current geopolitical instability; and
over time, we believe our increased brand
recognition will increase our vulnerability
to such attacks.
Data protection legislation brings
potentially wide-reaching effects and
consequences for all businesses, with
penalties for breaches attracting fines
of up to 4% of annual turnover, or €20m
– whichever is the higher.
Networks and systems protected by
firewalls, industry-leading authentication
management and security software and
secure passwords
Innovative
technology
and
marketing
All sensitive data is captured and
presented using SSL encryption
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
Quarterly penetration testing performed
on all key systems
Ongoing programme of assessments and
accreditations testing the information
security environment; transactional
website scanned quarterly to ensure
PCI compliance
Mandatory annual cyber security and
data protection training for all employees.
Employees with access to larger volumes
of personal data required to complete
a more advanced course for data
protection each year
Additional security measures being
implemented to further strengthen
PCI compliance
Data Protection Manager in place
to oversee and optimise our control
environment in this area
Senior leadership briefs the Board on
information security matters at least
annually when the CIO presents the
Group’s IT strategy
Cyber security insurance in place
9
Reputation,
brand and
trust
The Gym Group brand is built on trust,
inclusion and strong sustainability
credentials. The relaunch of the brand
in FY22 and its growth and promotion
in FY23 brings s increased attention from
media coverage of The Gym Group as
brand recognition increases.
A health and safety or other serious
incident in any of our gyms could result
in reputational damage, particularly if
misinformation is spread on social media.
There is also a risk that an inappropriate
social media post by a member of staff is
interpreted as the view of The Gym Group,
which could have a widespread impact
on our brand and reputation, leading to
loss of membership. This increases as the
estate and workforce grows and brand
recognition increases.
10
Relationships
with key
suppliers
NEW
The Gym Group maintains good
relationships with its key suppliers and
seeks to treat all suppliers ethically
and professionally.
Where possible, we employ a policy of
using multiple suppliers to minimise
business interruption should one supplier
fail. However, we have key dependencies in
areas such as equipment provision, gym
access and payment processing.
With the continuing macroeconomic
challenges in the UK economy and the wider
geopolitical conflicts, there is an increased
risk of critical supplier failure caused by
financial exposure and/or cyber attacks.
There is also a risk of supply chain
disruption due to lack of availability and
increased cost of labour and materials.
In addition, as our business grows, there
is a risk that key suppliers’ processes
and procedures do not keep pace with
our requirements.
Group policies and procedures set out the
expectations and behaviours that enable
all colleagues to make the right decisions
and communicate appropriately
Innovative
technology
and
marketing
Compelling
member
experience
Unique team
and culture
Growing
sustainably
Communication and engagement
programmes in place to listen to our
members and stakeholders and ensure
we reflect their needs in our plans, which
include health, community, climate and
sustainability initiatives
Promotion of our values and high
standards of doing business should
ensure we become a trusted brand which
boosts our reputation
Clear, documented procedures in place
for managing health and safety incidents;
staff regularly trained to ensure all
incidents are effectively managed
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
Central control of social media posts
Business continuity plans for critical
suppliers in place and reviewed regularly
High quality
estate
Innovative
technology
and
marketing
Growing
sustainably
Close relationships maintained with our
principal supply partners and contractors
to provide as much visibility of future
requirements as possible
Stock holding levels in place with main
suppliers and advance purchasing of
materials undertaken as appropriate
Constant focus on costs through regular
meetings of senior executives, providing
early sight of price increases, potential
shortages and delays
Competitive tendering undertaken where
appropriate to ensure price increases
are minimised
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Principal risks and uncertainties continued
Changes in principal risks
in 2022
In the 2021 Annual Report and
Accounts, ‘Scale of change’ was
included as a Group principal risk.
Given the successful delivery of a
number of significant projects in
FY22 in relation to technology and
brand, as well as the reduction in the
number of new sites expected to be
opened in FY23, the Board believes
that the execution risk in relation to
the delivery of major strategic projects
has significantly reduced and, as such,
that ‘Scale of change’ is no longer a
Group principal risk. We do, however,
continue to monitor the risk and ensure
appropriate mitigations are in place as
part of our ongoing risk management
process. In addition, there remains
significant demand on resources to
optimise the brand and technology.
The impact of this is captured in the
risk entitled ‘Our people’.
Emerging risks
In addition to the principal risks set
out on the previous pages, the SMT
and Board also consider emerging
risks as part of their review. 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.
Climate change continues to be
included in our emerging risks register.
The full potential impact of this risk
cannot yet be quantified with any
certainty; however, we have included
a range of scenarios, and mitigating
actions within the TCFD disclosures on
pages 50-53.
Going concern
In assessing the going concern position
of the Group for the year ended
31 December 2022, the Directors have
considered the following:
l the Group’s trading performance
in FY22 and throughout the
traditional January and February
2023 peak period;
l future expected trading
performance to June 2024 (the
going concern period), including
membership levels and behaviours
in light of the current difficult
macroeconomic environment; and
l the Group’s financing
arrangements and relationship
with its lenders and shareholders.
2022 was a year of significant
recovery and growth for The Gym
Group, with membership at the end
of December 2022 reaching 821,000,
an increase of 14.3% from the end
of December 2021. Average revenue
per member per month for the year
(‘ARPMM’) was £17.82 and for the
second half of the year was £18.30,
up 4.5% on the second half of the
prior year. LIVE IT, the premium price
product, ended the year at 29.6% of
total membership compared with 27.1%
in December 2021. As a result, revenue
and Group Adjusted EBITDA both
increased significantly. The Group
also reported strong cash generation,
with free cash flow of £16.6m being
generated and used to part-fund the
25 organic site openings as well as
our investment in the new technology
and brand. The remaining organic
site openings and the acquisition
of the three sites previously trading
under the Fitness First brand were
funded through an increase in the
Group’s borrowings. All sites opened
in the year are performing in line with
our expectations.
In May 2022, the Group agreed with
its lenders certain changes to the
Group’s Revolving Credit Facility
(‘RCF’). As a result, the Group now
has access to a combined £80m
facility which matures in October
2024. The Group also currently has
access to £13m of finance lease
facilities (£15m permitted under the
RCF). As at 31 December 2022, the
Group had Non-Property Net Debt
(including finance leases) of £76.1m,
with £15.4m of headroom (calculated
off bank debt less cash) under the
RCF. The RCF is subject to quarterly
financial covenant 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. Whilst
the going concern assessment covers
the period to the end of June 2024,
the Directors have 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 or refinanced before
that time.
Following the January and February
2023 peak trading period, closing
membership at 28 February 2023 was
890,000 members, an increase of
8.4% on the position at 31 December
2022. However, demand has been
impacted by the cost-of-living
pressures felt by many; and the
Directors expect the current difficult
macroeconomic environment and
consumer behaviour to continue. As
a result, we have taken a cautious
approach to preparing the three
year financial plan that underpins the
going concern review.
The base case forecast for the period
to 30 June 2024 anticipates continued
growth in yields across the whole estate
as a result of pricing actions that have
already been taken. However, modest
increases in membership levels are
driven largely by the sites opened in
2022 and not by growth in the mature
estate. In addition, the Directors have
taken a more measured approach to
new site openings throughout the plan
period, with all new sites assumed to be
self-financed. Under this scenario, all
financial covenants are passed with
a reasonable level of headroom and
the Group can operate within its
financing facilities.
62 |
The Directors have considered a
downside scenario which anticipates
a more significant cost-of-living
downturn throughout the period
under review. Under this scenario,
membership numbers in the mature
estate start to deviate from the
base case from March 2023 such
that they are approximately 10%
lower by the end of 2023. Yields do
continue to increase but at a much
lower level than under the base case.
Under this scenario, the number of
new site openings is reduced and
discretionary performance-related
bonuses removed to ensure that 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 to
ascertain the extent of the downturn
in trading that would be required
to breach the Group’s banking
covenants or liquidity requirements.
Mitigating actions assumed in this
scenario include moving to a minimum
level of maintenance and IT capital
expenditure; reducing controllable
operating costs and marketing
expenditure; and pausing the new
site opening programme in order
to preserve cash. In this scenario,
the number of new members each
month would have to decline by 16.5%
compared to the base case (the
equivalent of membership reducing
to 73% of the February 2023 closing
membership number) before the
leverage covenant would be breached
in June 2024. 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 consider the
reverse stress test scenario to be
highly unlikely.
Conclusion
The Board has reviewed the financial
plan 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 2024. 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 and
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 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 2024. 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 2025
is an appropriate period over which to
assess the Group’s viability as:
l the Directors review a three year
financial plan with management
each year as part of an annual
strategy review and the viability
analysis is based primarily on this
plan; and
l the period is sufficient to reflect
the return to stable mature
membership numbers and see the
maturation of new sites opened in
2021 and 2022.
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 operational gearing, the trading
environment, a structural change in
the industry and our people. 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
of £80m 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
compared with the base case plan
and a significant increase in costs
(in particular employee and utilities
costs) over and above that included
in the base case plan. The Directors
have also considered a reverse
stress test scenario to ascertain the
extent of the downturn in trading
that would be required to breach the
Group’s banking covenants or liquidity
requirements. In both the downside
scenarios and the reverse stress
test scenario, mitigating actions
assumed include moving to a minimum
level of maintenance and IT capital
expenditure; reducing controllable
operating costs and marketing
expenditure; and pausing the new
site opening programme in order to
preserve cash.
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 2025.
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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.
Reporting
requirement
Where to find further information
Page
Summary of relevant policies if applicable
Environmental
matters
Sustainability report
38-53
Our environmental strategy is set out on
page 50.
Employees
Sustainability report
Chief Executive’s review
Principal risks and uncertainties
– Our people
38-53
10-15
58-59
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
38-53
Modern Slavery statement
Social matters
Sustainability report
38-53
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 39.
The Company also has a Whistleblowing policy.
Our approach to diversity and equal
opportunity and promoting wellbeing are set
out on pages 40-45.
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 2.
Principal risks
Principal risks and uncertainties
54-63
The Board has a process for considering the
principal risks as set out on page 54.
Non-financial
KPIs
Relationships
with suppliers,
members
and others
Key performance indicators (‘KPIs’)
36-37
The Board approves relevant KPIs for use in
the Strategic report, as on page 36-37.
Stakeholder information
66-69
The Group 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.
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Stakeholder information
Engaging
with our
stakeholders
Section 172 (‘s172’) of the Companies Act 2006 imposes on
company directors a duty to act in the interests of a broad
range of stakeholders including shareholders, employees,
suppliers and local communities. A statement in respect of
compliance with s172 is on pages 108-111.
Who they are and why
they matter
How we engaged
during 2022
Outcomes of that engagement
How the Board considers the
interests of our stakeholders
Shareholders
Meetings with our
Our investors provide
capital for growth,
whilst providing
challenge and
feedback on our
business model and
plans for the future.
current and prospective
shareholders.
Held dialogue with
shareholder groups.
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 and
organising a Capital
Markets Day.
The Board did not recommend
any dividends in respect of the
financial year 2021 and does not
recommend any in respect of
financial year 2022 either.
The Chair of the Board held
a number of one-on-one
shareholder meetings to discuss
queries on governance or
strategic matters. This type of
engagement helps our investors
and shareholders to be better
informed about our business.
Shareholders were also keen to
understand our remuneration
decisions. The Board and
Remuneration Committee
Chair continued to consult with
shareholders, to understand their
views on key decisions, and we will
continue this dialogue in future
years. For more information, see
the Report of the Remuneration
Committee on pages 92-107.
The Board is kept informed of
all responses received as part
of shareholder consultations by
management and the brokers.
The Board’s 2022 dividend position
can be found on page 21.
The Board welcomes questions
from our shareholders at our
Annual General Meeting (‘AGM’).
The arrangements for our
2023 AGM will be confirmed in
the 2023 Notice of Meeting. In
addition, John Treharne, the Chair
of the Board, is also available
to shareholders.
The Board has committed to
ongoing improvements in
sustainability reporting and our
Sustainability report can be found
on pages 38-53 and on
our website.
Who they are and why
they matter
How we engaged
during 2022
Outcomes of that engagement
How the Board considers the
interests of our stakeholders
Employees
Our employees define
our culture and values.
Fostering an engaged
workforce is central to
our strategy, enabling
us to deliver the
exceptional service
that keeps us at the
forefront of our sector.
Our friendly, inclusive
and people-centred
culture continues
be a key part of
our success.
We launched our ‘people
promise’ focused on
our commitment to
providing development
opportunities and
career pathways,
supporting employees
and nurturing a friendly
and inclusive culture.
Since our participation
in the Kickstart Scheme
in December 2020, we
have welcomed 234
young people between
the ages of 16-24 to
gain work experience
and a qualification
in fitness.
The newly established
Emerging Talent
Programmes give
Assistant General
Managers and Fitness
Trainers the necessary
competencies to
progress within
operational
management roles.
Our people first approach
contributed to our high
engagement scores, successful
retention of our Investors in People
Gold accreditation and external
recognition for our Equality,
Diversity and Inclusion strategy
and progress.
The Board has met regularly
to consider, oversee and
review progress on people-
related actions.
All Directors visit several of
our sites each year to support
our teams.
In December 2022, we held two
‘We’re With You’ events, bringing
together colleagues from across
the business to celebrate the
launch of our new visual identity
and enable our leaders to engage,
energise and recognise our teams.
66% of our Fitness Trainer
Kickstarters and 38% of our
Business Support Kickstarters
converting to permanent roles at
The Gym Group.
We have seen great success with
the first cohorts of our Emerging
Talent programmes, with a
42% promotion rate within the
Emerging Talent management
development programme and
48% promotion rate within
the Fitness Trainer Emerging
Talent programme.
Members
A key part of our
Being high quality,
we represent for our
members the lowest
cost 24/7 nationwide
gym operator in the
market. We continue
to work on eliminating
gym intimidation and
providing comfortable,
safe and accessible
facilities, delivering
on our purpose of
breaking down barriers
to fitness for all.
strategy and business
model is to ensure we
achieve high levels of
member satisfaction in
our gyms. We measure
this through OSAT scores.
A primary focus in 2022
was the redevelopment
of our online digital
platform and website
which launched in
Spring 2022. More detail
on our digital offering
can be found on pages
32-33.
In the Summer of 2022,
we rolled out our new
brand identity across
all gyms and rebranded
key digital touch points
of our website and
member app.
We constantly monitor market
trends and member demand: our
flexible gym format and design
continues to evolve providing
facilities closely matched to
the member usage patterns,
demographics and demands.
The new website is very mobile
device friendly, which is where
we see most of our web traffic. In
addition, the new platform is highly
scalable and resilient, with state of
the art analytics capabilities.
A new cloud hosted digital
platform, launched in April 2022,
uses the latest technologies to
maximise performance and deliver
the best online experience to
members across web and app.
We regularly review our
member satisfaction scores
at Board meetings.
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
to be a strategic priority alongside
driving membership recovery,
developing our member value
proposition and securing a high
quality pipeline of great sites for
our members.
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Stakeholder information continued
Who they are and why
they matter
How we engaged
during 2022
Outcomes of
that engagement
How the Board considers the
interests of our stakeholders
Who they are and why
they matter
How we engaged
during 2022
Outcomes of
that engagement
How the Board considers the
interests of our stakeholders
We maintained helpful and positive
relationships with our suppliers.
We maintain our properties to
a high standard, maintaining
good relationships with property
management companies and
acting as responsible tenants.
Suppliers
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
member of the
communities in which
we operate.
Our strong, listed
company covenant
continues to be highly
attractive to landlords.
The Group has
whistleblowing
arrangements in
place, 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.
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.
Our low price model
enables fitness to
be affordable for all
and supports those
accessing a gym for the
first time.
We aspire to achieve a gender
balanced workforce by 2030 and
for our senior leaders to be 40%
female by 2025 driving greater
female representation across
our gyms.
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.
We tried to ensure
that our workforce
was reflective of the
communities in which
we operate.
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.
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 83. The Board
considers diversity to be a focus
for succession planning.
Environment
A good quality
environment is
essential to provide
basic human needs,
for society to develop
and for our business
to grow. The health
of the population is
adversely affected by
climate change and
the resilience of our
business is essential
to meet the challenges
it presents.
Our commitment to net
zero took a significant
step forward this year,
with detailed preparation
of a full submission to
SBTi which we have
submitted for validation.
Our Sustainability
report details our
environmental strategy,
activity and initiatives.
This can be found on
pages 38-53.
As part of our net zero
commitment to SBTi we have also
committed to:
engaging with all our key
suppliers to set their own
emissions reduction targets,
aligned with climate science,
by 2028; and
developing a member
engagement plan by 2025
to drive forwards our net
zero ambition.
For more information please refer
to the governance TCFD pillar on
pages 50-51.
Lending banks
During the year, we
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.
provided regular updates
on the Group’s financial
performance, including
performance against
agreed debt covenants.
In the first half of 2022,
management met with
the lending banks to
discuss the Group’s
strategic plan and the
acquisition of the three
sites from Fitness First.
Following discussions with
the lending banks on the
Group’s strategic plan and the
acquisition of the three sites
from Fitness First, we agreed,
in May 2022, certain changes
to our RCF facility, including 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.
Our Board and Executive
Committee remain fully committed
to identifying and addressing
the immediate and longer term
climate-related impacts on our
business. Our Board has overall
accountability for managing the
business risks and opportunities
posed by climate change.
The Sustainability Committee
meets at least three times per
year and reports directly to
the Board.
Responsibility for monitoring and
overseeing the Group’s climate-
related progress is delegated
to the Chief Development and
Sustainability Officer.
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 by
the Board, analysis is presented
on how these plans would impact
debt covenants in order to ensure
that 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.
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Introduction from the Chair of the Board
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 a year dominated by geopolitical
and macroeconomic disruptions,
the Board and management have
worked to ensure that the Group
remains focused on its strengths and
protects its people and stakeholders.
The Board’s activities during 2022 are
described on page 79.
Board composition
As Chair of the Board, it is my role to
ensure that we have the right balance
of skills, experience, knowledge and
perspectives around the table to
ensure robust debate, constructive
challenge and positive engagement
on strategy. It is also important that
all Board members receive a full,
formal and tailored induction and
receive the information and access
to resources they need to carry out
their responsibilities. During 2022 and
into 2023, our new Board members
completed, or are in the process of
completing, their inductions, details
of which are in the Report of the
Nomination Committee on
pages 81-83.
During 2022, Ann-marie Murphy,
Elaine O’Donnell, Richard Stables and
Luke Tait joined the Board, and Rio
Ferdinand, Penny Hughes and Mark
George left the Board. I took on the role
of Chair from July 2022.
In February 2023, we also welcomed
Simon Jones to the Board as a
Non-Executive Director (‘NED’) and
member of our four Committees. As we
announced in January 2023, Richard
Darwin will step down from the Board in
due course and, for an interim period,
I have taken on the role of Executive
Chair to assist in the transition.
Independence and
responsibilities
The independence status of the
Directors is set out on page 78. To
preserve Board balance, all of our
Non-Executive Directors have the
same responsibilities, which are
further explained in this report on
page 77, and include engaging in
Board discussions, making sufficient
time available to carry out their
roles and acting in accordance with
their duties.
Talent, diversity and succession
In 2022, we have increased our
focus on succession and talent
management for the Board and
Executive Committee and throughout
the business. This has been conducted
through the work of the Nomination
Committee and the Board as a whole.
In 2022 and 2023, we reviewed the
talent and succession pipeline for
senior management to ensure that
we have the right resources within
our business.
Sustainability
We continue to improve and enhance
our sustainability reporting, as is
set out in the Sustainability report
from pages 38-53. Our Sustainability
Committee supports and promotes
our sustainability strategy, ensuring
that sustainability matters are
supported by robust governance
streams and sustainability matters
remain central to Board discussions
and considerations. In 2022, we
continued to make further progress on
measuring the social value generated
by our members exercising in our gyms.
AGM
Our AGM is planned for 11 May
2023, and I look forward to meeting
shareholders there.
John Treharne
Chair of the Board
15 March 2023
Dear Shareholder
I am pleased to
introduce the 2022
Governance report on
behalf of the Board.
The Governance report
forms part of the
Directors’ report.
“As Chair of the
Board, it is my role to
ensure that we have
the right balance
of skills, experience,
knowledge and
perspectives
around the table
to ensure robust
debate, constructive
challenge and positive
engagement on
strategy.”
John Treharne | Chair of the Board
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 2022. The Code can be found at www.frc.org.uk.
We always intend to comply with the prevailing principles of
good governance and the code of best practice honestly, simply,
transparently, and with clarity and integrity.
Provision 5
Rio Ferdinand was the appointed NED for workforce engagement
until he stepped down from the Board in August 2022. Since that time
we have made use of alternative arrangements as permitted by the
Code and set out on page 83. The Committee intends to review the
effectiveness of this arrangement in 2023 as part of the Board’s annual
review of effectiveness.
Provision 9
John Treharne, Executive Chair of the Board since January 2023, was
not considered independent on appointment as Chair in July 2022.
John was the founder of The Gym Group and formerly held the positions
of CEO of the Group until September 2018, and Founder Director until
July 2022. The Board believes it is in the best interests of the Group for
John to hold the role of Executive Chair for a limited period of time to
support the transition to a new CEO. The Board believes this exceptional
arrangement is appropriate at this time, as John’s unrivalled knowledge
of The Gym Group and Board tenure will offer stability and consistency
for the Board and support for the Executive Directors in a period of
change. The Group will announce plans for John’s succession in due
course, once Richard Darwin’s successor is appointed.
2022 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 76.
Division of responsibilities
More information can be found
on page 77.
Composition, succession and
evaluation
More information can be found
on pages 81-83.
Audit, risk and internal control
More information can be found
on pages 84-89.
Remuneration
More information can be found
on pages 92-107.
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Board of Directors
Committees
Nomination Committee
Remuneration Committee
C
Chair
Audit and Risk Committee
Sustainability Committee
John Treharne
Chair of the Board
Emma Woods
Senior Independent
Non-Executive Director
Elaine O’Donnell
Non-Executive Director
Wais Shaifta
Non-Executive Director
David Kelly
Non-Executive Director
Richard Stables
Non-Executive Director
Simon Jones
Non-Executive Director
Committees
C
C
C
C
Career
John founded The Gym Group
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.
John was appointed Chair of
the Board and the Nomination
Committee in July 2022, and took
on the role of Executive Chair in
January 2023, with a focus on
supporting the transition to a
new CEO.
Emma has wide-ranging
marketing experience within
the FMCG and leisure sector,
and has built a diverse portfolio
as a Chair and Non-Executive
Director over recent years.
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.
Elaine is a highly experienced
financial professional and
Audit Chair. She is Senior
Independent Director and Chair
of the Audit Committee of On
the Beach Group plc, and Chair
of the Audit & Risk Committee
and Non-Executive Director of
SThree plc. She was formerly
Chair of Games Workshop plc
until 31 December 2022, having
served in various roles on that
Board since 2013. Elaine was
previously a Partner at EY and is
a chartered accountant.
Board skills
and experience
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 of The Gym Group, John
has an unmatched network
of industry connections and
corporate knowledge used to
support our business and the
Board’s evolution, and as Chair
John provides stability and
continuity in leadership.
Emma brings the Board valuable
commercial and operational
insights into multi-site leisure
businesses, which is key to the
Board’s development of the
Group’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.
Elaine brings to the Board
extensive experience as a
Non-Executive Director and plc
Chair and Committee member
of a diverse range of businesses.
Elaine’s financial knowledge
and expertise, in addition to her
online retail industry experience,
supports the Board in its
oversight of the Group’s financial
reporting and controls.
Other
appointments
ukactive
– Board member
Europe Active
– Board member
Tortilla Mexican Grill plc
– Chair of Board of Directors
Great Portland Estates plc
– Chair of the Remuneration
Committee
Huel Limited
– Non-Executive Director
On the Beach plc
– Senior Independent Director
and Chair of the Audit
Committee
SThree plc
– Chair of the Audit & Risk
Committee
72 |
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.
David is an experienced
digital operating executive
and Board Director.
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.
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’s experience
of healthcare businesses
means he is well aligned
with our purpose to provide
access to affordable fitness
for all.
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.
Reach plc
– Non-Executive Director
Voi Technology
– Regional General Manager
Samaipata
– Operating Partner
The Grange Academy
– Governor
On the Beach plc
– Chair of Remuneration
Committee
Simply Business
(Xbridge Limited)
– Non-Executive Chair
and Chair of Audit,
Remuneration, and Social
Impact Committees
Parcel2Go
– Non-Executive Chair
Irish Lottery
– Non-Executive Director
Richard is an experienced
corporate financier,
having spent 32 years at
Lazard. Currently, Richard
is a Partner at Fulcrum
Advisory Partners LLP,
an independent advisory
firm, and a Senior Advisor
to Blantyre Capital.
Richard is a qualified
chartered accountant.
Simon is Managing Director for
Premier Inn and Restaurants,
UK and Global Commercial
Director at Whitbread, and has
led the UK business for Premier
Inn and Whitbread’s portfolio of
restaurant brands since 2016.
Prior to his current role, Simon
was Marketing and Strategy
Director for Premier Inn.
Before joining Whitbread in
2012, Simon had over 15 years’
experience as a strategy
consultant, working with a
variety of clients across the
retail and hospitality industry,
latterly as a partner at
OC&C Strategy Consultants.
Richard brings his strong
experience of corporate
finance and understanding
of the UK financial markets
to support the Board in
its strategic direction and
decision making, deepening
the Board’s skillset for
the future.
Simon has extensive
commercial and operational
experience in building
UK-wide businesses whose
customer proposition is
based on value and quality,
which supports the Board’s
discussions and future growth.
Fulcrum Advisory
Partners LLP
– Partner
Blantyre Capital
– Senior Advisor
Premier Inn and
Restaurants UK
– Managing Director
Whitbread
– UK & Global Commercial
Director
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Board of Directors continued
Executive Committee
Richard Darwin
Chief Executive Officer
Luke Tait
Chief Financial Officer
Ann-marie Murphy
Chief Operating Officer
David Melhuish
Chief Development and
Sustainability Officer
Jasper McIntosh
Chief Information Officer
Emily Kortlang
Chief Marketing Officer
Nick Shelmerdine
Director of Strategy and
Corporate Development
Committees
Career
Board skills
and experience
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 and was The Gym
Group’s Chief Financial Officer
(‘CFO’) from 2015 to 2018.
He has previously held the
positions of CFO of Essenden plc
(now Ten Entertainment Group
plc) from 2009 to 2015, and CFO
of Paramount Restaurants from
2003 to 2008.
Richard agreed with the Board in
January 2023 that he would step
down from the business.
Richard 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.
Luke is the Chief Financial Officer
(‘CFO’) and joined us in October
2022. Luke was formerly Group
CFO of Nando’s Group Holdings
Limited, the global restaurant
business, which he joined in 2017.
Prior to this, he held various
finance roles at SSP plc, including
CFO of the UK and US businesses
and Group Corporate Finance
Director, culminating as Group
Financial Controller. Luke is a
qualified accountant.
Ann-marie joined the Group
in April 2018 as Director of
People and Development
and was appointed as Chief
People Officer in January 2021.
Ann-marie was subsequently
appointed as Chief Operating
Officer in February 2022, and
joined the Board in April 2022.
Ann-marie has over 15 years
experience across a variety of
senior Human Resources roles,
particularly in the travel and
retail industries. Prior to joining
The Gym Group, Ann-marie was
Group Human Resources Director
at New Look Retailers.
Luke joined the Board in October
2022, and has brought his broad
experience across global leisure
businesses to lead the finance
function. In his first year as
CFO, Luke is working with the
leadership and stakeholders to
ensure the Group is well placed
to capitalise on the significant
market opportunities ahead.
Ann-marie brings her strong
leadership and talent
management experience to the
Board and Executive Committee.
Ann-marie provides essential
insight to the operational
aspects of the business and
keeps people at the heart of the
Board’s strategy.
Other
appointments
None
None
None
74 |
David joined The Gym Group
in April 2013 and has been
critical to the rapid growth
of the estate and on-going
strategic expansion. In
2021, David was promoted
to Chief Development and
Sustainability Officer and is
responsible for delivery and
support of our high quality
gyms, as well as developing,
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.
David was previously the
Head of Development at
Central England Co-operative.
Jasper is The Gym Group’s
Chief Information Officer
(‘CIO’) and 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 2022, Jasper was awarded
a top three place in the CIO
100 list that recognises the
most transformational and
disruptive CIOs in the UK.
Emily is The Gym Group’s
Chief Marketing Officer
(‘CMO’). Emily joined The
Gym Group as Group Brand
and Marketing Director
in October 2021, and
was promoted to CMO in
November 2022. Emily was
formerly Brand Director
for Beats by Dr. Dre, at
Apple, and prior to that
held marketing roles at Red
Bull and Fallon, responsible
for brand, social media,
creative, campaign and retail
marketing.
Emily led The Gym Group’s
brand transformation
project in 2022, and was
fundamental in the launch
of the new brand identity, as
well as developing the new
creative ‘Gym Face’ multi-
channel campaign. Our new
visual identity and Gym Face
are significant steps forward
for the business to raise
brand awareness and drive
consistency in the Group’s
marketing strategy.
Nick is The Gym Group’s
Director of Strategy and
Corporate Development.
Nick joined The Gym Group
in November 2021 and
was formerly Associate
Partner at OC&C Strategy
Consultants and MD Delivery
at The Restaurant Group plc,
focused on building a food
delivery business and major
transformation projects.
Nick brings his expertise
in growth strategy, M&A,
business development and
change in the consumer and
leisure space to the Executive
Committee.
During his time at The Gym
Group, Nick has been crucial
in the development of the
strategic direction of the
business. Nick delivers a more
forward-looking approach to
decision-making to evaluate
and seize new growth
opportunities.
How the Board
and Executive
Committee
work together
The Board and Executive Committee work closely together
to ensure the robust governance of the business and
successful execution of our strategy. Over the year,
the Board and Executive Committee worked closely on
delivering transformational change projects in brand and
technology with a focus on ensuring that the Group is well
resourced, motivated and driven by our purpose to break
down barriers to fitness for all.
Richard Darwin, CEO, Luke Tait, CFO, and Ann-marie Murphy, COO are
also members of our Executive Committee, and their biographies are
on page 74.
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Corporate Governance report
Board leadership and
business purpose
Governance
Role of the Board
The Board is the principal decision-
making body in the Group. 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 66-69.
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 2022
The Board
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.
Board
Committees
The Board formally delegates certain matters to one of the Committees set out below.
Nomination
Committee
See report | Pages 81-83
Audit and Risk
Committee
See report | Pages 84-89
Sustainability
Committee
See report | Pages 90-91
Remuneration
Committee
See report | Pages 92-107
Division of 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.
As at 31 December 2022, our Board
comprised four Independent
Non-Executive Directors, of which
one acts as Senior Independent
Director, one non-independent Non-
Executive Director, three Executive
Directors and the Chair. Each of their
responsibilities is listed on page 77
and more information on their specific
contributions to the business can be
found in their biographies on pages
72-74.
The Chair of the Board and the
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 provides an update to them
after the meeting.
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.
76 |
Roles and key responsibilities
Chair of
the Board
John Treharne was appointed Chair of the Board in July 2022, and Executive Chair in January 2023, for a
limited period to support the transition to a new CEO. John’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 Nomination Committee.
Promoting a culture of openness and debate.
Facilitating constructive Board relations.
Chief
Executive
Officer
(‘CEO’)
Chief
Financial
Officer
(‘CFO’)
Chief
Operating
Officer
(‘COO’)
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 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.
Luke Tait’s responsibilities as Chief Financial Officer include:
Working with the Executive Directors and Executive Committee 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.
Financial reporting including the preparation of the Annual Report and Accounts.
Ann-marie Murphy was appointed to the Board in April 2022. Ann-marie’s responsibilities as Chief Operating
Officer include:
Working with the Executive Directors and Executive Committee to develop and implement the Group’s
purpose and strategic objectives and commercial and trading plans.
Leading the Operations function and senior management teams in driving operational excellence.
Ensuring that People and Operations remain central to Board discussions and deliberations, and
promoting the conscious culture of the business.
Reporting to the Board on workforce related matters including engagement, culture, talent and
succession planning.
Senior
Independent
Director
(‘SID’)
Emma Woods has been the SID since 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.
Non-
Executive
Directors
Company
Secretary
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 carries out the following responsibilities:
Supporting the Chair of the Board and the 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.
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Board meetings
The Board’s programme of meetings
allows key areas of focus to be
established and reviewed on a regular
basis. Scheduled Board meetings
are predominantly held in person,
with additional virtual and hybrid
meetings facilitated where required.
Management teams and colleagues
attend to support the Board’s
assessment of performance, discuss
progress and agree key priorities.
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 feed
back comments in advance to John
Treharne, the Chair of the Board, or
the respective Committee Chair.
Board
Nomination
Committee
Audit and Risk
Committee
Remuneration
Committee
Sustainability
Committee
John Treharne1
Richard Darwin
David Kelly
Wais Shaifta
Emma Woods
Ann-marie Murphy2
Elaine O’Donnell3
Richard Stables3
Luke Tait4
Penny Hughes1
Mark George5
Rio Ferdinand6
8/8
8/8
7/8
8/8
8/8
6/6
3/3
3/3
2/2
4/4
4/4
2/5
3/3
3/3
3/3
3/3
3/3
1/1
1/1
2/2
0/2
4/4
4/4
4/4
1/1
3/4
4/4
1/1
2/2
1/3
1 Penny Hughes stepped down as Chair of the Board on 25 July 2022, and John Treharne took over as Chair on the same date.
2 Ann-marie Murphy was appointed to the Board as Chief Operating Officer on 11 April 2022.
3 Elaine O’Donnell and Richard Stables were appointed to the Board on 30 August 2022.
4 Luke Tait joined the Board as Chief Financial Officer on 17 October 2022.
5 Mark George left the Board on 1 July 2022.
6 Rio Ferdinand stepped down from the Board on 30 August 2022.
3/3
3/3
3/3
3/3
2/2
Director independence
John Treharne, Chair of the Board,
is not deemed independent on
appointment. Non-Executive Directors
Penny Hughes, Wais Shaifta, Emma
Woods, David Kelly, Rio Ferdinand
and Elaine O’Donnell, who served
during the year, were determined
to be independent on and during
their appointments. Richard Stables
was not considered independent
on appointment to the Board.
Simon Jones, appointed February
2023, was deemed independent on
appointment. The independence
of the Non-Executive Directors is
closely monitored by the Board on
an ongoing basis. The Corporate
Governance Code statement which
includes information on the Board’s
decisions on independence is set out
on page 71.
Cross directorships
Elaine O’Donnell and David Kelly both
serve as Non-Executive Directors
on the Board of On The Beach plc.
During the year, David Kelly and
Wais Shaifta both served as Non-
Executive Directors on the Board of
Reach plc, until David Kelly stepped
down in December 2022. Taking
into account the size of The Gym
Group’s Board and the non-executive
nature of these roles and the
different sector of the companies,
and considering that all Directors
maintain independence of judgement
and follow Group policies on actual
or potential conflicts of interest,
Wais, Elaine and David continue to
be considered independent.
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.
The following sets out the key areas of focus for the
Board during the year:
Strategy
Financial
Technology
Strategy refresh and approval
Site approvals and pipeline reviews
Consideration of sustainability matters
Performance management and talent
review of executive management
Functional reports including People and
Operations
Trading environment reviews, consideration
of market conditions and investor feedback
Stakeholder engagement
Business performance, including trading
updates and the market’s response to
announcements
Preparation of the Annual Report and
Accounts, full and half year announcements
Engagement with the Group’s Banks
Capital Markets Day presentation
Budget and financial planning
Improved app and mobile web experience
New website launch
Technology investment and improvements
Brand
Brand transformation project
Governance
Approval of the Annual Report and Accounts
Annual AGM
Succession planning and Board composition,
independence, roles and responsibilities
Diversity and inclusion matters
Onboarding and development of new Directors
Board training and development
Approval of new Remuneration policy
Board skills and composition
Information and support
An agenda and accompanying pack
of detailed papers are circulated
to the Board prior to the meeting,
usually a week in advance, 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 regular and specific
reports to allow the monitoring of the
adequacy of the Group’s system 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 Group has developed an
induction programme to provide new
Directors with a formal and 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 and
services of the Company Secretary
and independent and professional
advice at the Group’s expense should
they determine that this is necessary
to discharge their duties.
During the year, the Board held a
Diversity and Inclusion workshop,
which was an action following from
the Board’s external evaluation in
early 2022.
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, all Directors
will offer themselves for election or
re-election at the Company’s AGM
each year.
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.
78 |
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Corporate Governance report continued
Governance report
Report of the Nomination Committee
The Board receives regular investor
feedback through our joint brokers,
Numis Securities Limited and Peel
Hunt LLP, 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 Group’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, and other members
of management such as the COO
attending where appropriate.
Shareholders can also keep up to
date with Group matters in the media.
The Group also maintains a holistic
timetable of press engagement
on commercial and corporate
matters, which is managed by
Tulchan Communications.
Directors’ conflicts of interest
No Directors took on additional
significant commitments during the
year which impacted on their ability to
carry out their duties. All Directors act
in line with the Group’s Conflicts Policy.
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 Chair of the
Remuneration Committee consulted
with shareholders during the year on
remuneration matters.
80 |
Objectives
l To ensure the Board has an
appropriate balance of skills,
diversity, experience, knowledge
and independence.
l 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.
l To ensure that appropriate
succession plans are in place for
Directors and senior executives
of the Group.
l To undertake a Board
evaluation process to identify
developmental processes that
can enhance Board practices
and Director performance.
Committee areas of focus
in 2022 and to date
l Oversaw the search for and
appointment of two new Non-
Executive Directors (‘NEDs’) during
the year, and oversaw their full,
formal and tailored induction
programme.
l Oversaw the search for and
appointment of a NED in 2023,
Simon Jones.
l Oversaw the search for a new
Chief Financial Officer (‘CFO’).
l Oversaw the appointment of the
Chief Operating Officer (‘COO’)
to the Board.
l Reviewed the composition of
the Board and its Committees
and continued with the ongoing
review process of Board rotation
and succession.
l Oversaw progress on diversity and
inclusion initiatives. The Committee
receives regular updates on
the progress of diversity and
inclusion workstreams and the
Board attended a Diversity and
Inclusion workshop.
l Ensured there was appropriate
representation for workforce
engagement to the Board, to
ensure the views and concerns of
the wider workforce are brought to
the Board and taken into account.
l Supported the expansion of
Executive Committee with two new
members, and the development of
the Senior Management Team.
l Prepared a plan for the Board’s
next evaluation.
l Reviewed and considered
the future model, talent, and
succession planning for key roles
within the wider business.
l Considered the change of
Chair and the Chair’s role and
responsibilities.
l Commenced the search for a new
CEO; and
l Considered relevant corporate
governance matters relating to
composition of the Board on an
ongoing basis.
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:
l 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;
l 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
l Regularly assessing the knowledge,
skills and experience of individual
members of the Board and
reporting the results to the Board.
“We have seen a
number of changes this
year and believe we
are building a strong,
diverse Board, well
placed to continue the
significant growth we
have made, focus on
our unique capabilities,
and strengthen us for
the future.”
John Treharne | Chair of the
Nomination Committee
Committee
members
Chair of the
Committee
Committee
members
during
the year
John Treharne
Richard Darwin
David Kelly
Emma Woods
Wais Shaifta
Elaine O’Donnell
Richard Stables
Penny Hughes*
Rio Ferdinand*
Simon Jones*
Number of
meetings
held in 2022
3
*
Until the Director left the Board. Simon joined
in February 2023.
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Governance report
Report of the Nomination Committee continued
Succession planning:
Board level
The Committee has put in place
an orderly succession plan for the
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.
In August 2022, Rio Ferdinand left
the Board and Elaine O’Donnell and
Richard Stables joined the Board as
Non-Executive Directors. Elaine and
Richard bring complementary skills
and experiences as senior financiers
in their respective careers, broadening
and deepening the Board’s skillset.
During the year, the Committee
supported the appointment of
Ann-marie Murphy, Chief Operating
Officer, to the Board, and the
recruitment and appointment of
Luke Tait as Chief Financial Officer.
Ann-marie was promoted from the
Executive Committee and Luke Tait
joined the Board and Executive
Committee with responsibility for all
aspects of the finance function.
In February 2023, Simon Jones was
appointed to the Board as a Non-
Executive Director and member of all
the Board’s Committees. Simon brings
extensive commercial and operational
experience as a current executive of a
leading UK consumer business.
Search for a new CEO
In January 2023, we announced that
Richard would step down as CEO
following more than seven years
leading the Company as CEO and
as CFO. The Board has initiated the
process to find a new CEO. Richard
will step down from the Board in due
course and he will remain available to
support the Group until July 2023.
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, focusing on
the Executive Committee and Senior
Management Team and ongoing
resource requirements.
During the year, the Committee
supported the strengthening of
the Executive Committee with two
new members, promoted from
internal positions: Emily Kortlang as
Chief Marketing Officer, and Nick
Shelmerdine as Director of Strategy
and Corporate Development.
In addition, the CEO regularly briefs
the Board about the performance
of individual Executive Committee
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 Committee 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 Committee
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 Group sites,
when Non-Executive Directors meet
members of the Executive Committee
and Senior Management Team on
a less formal basis. Non-Executive
Directors also mentor and provide
guidance to Executive Committee
members as well as members of the
Senior Management Team, subject
to the specific requirements of
the mentee.
Gender breakdown
at 31 December 2022
Board
33.3%
Male 6
Female 3
66.7%
Executive Committee
28.6%
Male 5
Female 2
71.4%
Executive Committee’s
Direct Reports (19 people)
52.6%
Male 9
Female 10
47.4%
Workforce representation
Rio Ferdinand, our NED for workforce
engagement, left the Board in August
2022. We have long standing and
effective structures for workforce
engagement developed over several
years. Ann-marie Murphy, COO,
ensures that the views of the wider
workforce are regularly represented
by reporting on People & Operations,
which is a standing agenda item at
each Board meeting, and that these
views are fed into the Board’s decision
making process. In addition, the
Sustainability Committee receives
reports and information on workforce
matters including equality, diversity
and inclusion and team development
initiatives. The Committee intends
to review the effectiveness of this
alternative arrangement in 2023 as
part of the Board’s annual review of
effectiveness, and will report updates
in 2023’s Annual Report and Accounts.
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 2022, the Board
comprised 33.3% (three) female and
66.7% (six) male Board members. The
gender balance within our Executive
Committee, as at 31 December
2022, was 28.6% (two) female and
71.4% (five) male members, including
the three Executive Directors. The
Executive Committee’s direct reports,
comprising our Senior Management
Team and certain heads of
departments, have 52.6% (ten) female
and 47.4% (nine) male members.
We 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 workforce.
We continue our commitment to
Diversity and Inclusion through
reviewing progress against our
Equality, Diversity and Inclusion
pledges and projects focused on our
purpose of breaking down barriers.
Details of relevant initiatives can be
found on pages 44-45.
We will be publishing our annual
Gender Pay Gap report on our
website. As described in the
Sustainability report on page 45, in
January 2022, we introduced a new
director level to the business. This
resulted in an initial increase in males
at a senior level, which created a rise
in our mean gender pay gap to 3.3%
(versus 1.6% in 2021). Our median pay
gap remains consistent with 2021
reporting as most of our employees
undertake the same role and are
therefore on the same pay rate,
regardless of whether they are male
or female. Our full published gender
pay gap report, together with our
ethnicity pay gap report, will provide
further details on our figures and
the actions we are taking to address
these gaps.
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 2022, the Committee met
three times and attendance at the
meetings is shown in the table on
page 78.
The Committee has formal terms of
reference which can be viewed on the
Group’s website www.tggplc.com.
In 2022, Elaine and Richard worked
through their full, formal and tailored
induction programme, which included
site visits and gym tours, in-person
and virtual Board meetings, a Board
offsite, and meetings with senior
management and Group advisers.
Luke Tait is working through his
induction while carrying out his
executive duties and Simon Jones
has begun his, which follows a similar
format to Elaine and Richard’s. In
their first year as Directors, all of our
new colleagues have demonstrated
great engagement and willingness to
learn and share the benefit of their
extensive combined experience.
Board effectiveness review
We held an external Board
effectiveness review in early 2022,
in which a series of actions were
identified and reported on in
our previous Committee report
(available on www.tggplc.com).
These actions were successfully
implemented in 2022, including
holding a diversity workshop.
With the agreement of the Committee,
I intend to hold an internal Board
effectiveness review during 2023,
later than the usual timing of Q1. The
Committee has taken the decision,
mindful of the requirement and
benefits of an annual evaluation,
to delay the evaluation from its
usual timing in Q1 to later in the
year. The Committee agreed that
as we have had several changes to
the composition of our Board and
the Committee is seeking a new
CEO, a short delay from the usual
cycle of evaluation will enable our
newer Board colleagues to complete
their inductions, deepen their
understanding and engage fully with
the process once it is launched.
I look forward to meeting shareholders
at the AGM on 11 May 2023.
John Treharne
Chair of the Nomination Committee
15 March 2023
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Report of the Audit and Risk Committee
Dear Shareholder
As Chair of the Audit and Risk
Committee (the ‘Committee’), I am
pleased to present this report for
the year ended 31 December 2022.
This report is intended to provide
shareholders with an insight into
how key topics were considered
during the year, the work of the
Committee and how it has discharged
its responsibilities.
The Committee fulfils a vital role in
the Group’s governance framework,
providing valuable independent
challenge and oversight across
the Group’s financial reporting,
risk management and internal
control procedures.
As our business continued to
recover from the impacts of the
Covid-19 pandemic, 2022 saw
further disruption from economic
and geopolitical instability. As with
many UK consumer businesses,
the Group faced a significantly
increased cost base from utilities,
supply chain and our workforce
at a time when our customers are
facing financial hardship due to
the cost-of-living crisis. Despite this
challenging economic backdrop,
the Group has shown good financial
recovery, successfully executed its
ambitious gym opening programme
and continued to improve its internal
controls and risk management
processes throughout the year. I
am also pleased to report that the
full year audit process has been
conducted according to plan and
on time, and I would like to thank the
Finance team and EY for the planning
and commitment that contributed to
this, particularly in a year with several
new individuals involved in the process.
We were delighted to welcome our
new Chief Financial Officer, Luke
Tait, to the business in October
2022. As Chief Financial Officer, Luke
has responsibility for all aspects
of financial reporting and control
as well as data protection and risk
management. Since joining the
business, Luke has attended all
Committee meetings and updated
the Committee on key matters
as appropriate. I look forward to
continuing to work with Luke on
ensuring we maintain and further
enhance our robust financial controls
and quality reporting environment.
The Committee is grateful for the
support of the Finance Director,
Michelle Valentine, in the period
between Mark George leaving and
Luke joining the business, and I would
also like to thank Michelle and the
Finance team for their diligence and
support for both Luke and I through
our induction into the business.
In this financial year, we have also
welcomed a new external lead Audit
Partner from EY, Ian Venner, who
offers a fresh perspective and further
enhances the independence of our
external auditors. I look forward to
building on our constructive early
interactions with Ian and the rest of
his team going forwards.
I am pleased to continue the
Committee’s work to ensure the
soundness and effectiveness of the
Group’s financial reporting systems
and internal controls, supporting the
Group in its next phase of strategic
ambition and growth.
Composition and Governance
of the Committee
I joined the Board and was appointed
Chair of the Committee in August
2022. I would like to thank David Kelly
for his contribution as Chair of the
Committee up until August 2022,
including the recommendation of the
2022 half year results and investor
presentation. I am grateful for David’s
ongoing Committee membership
and the role that he has played in
supporting me and in ensuring a
smooth handover and transition.
The Committee currently comprises
five independent Non-Executive
Directors, listed opposite with their
appointment dates, who bring a wide
range of financial and commercial
expertise relevant to our market
and necessary to fulfil our duties.
Summary biographies of each
Committee member are included on
pages 72-73.
“I am pleased
to continue the
Committee’s work to
ensure the soundness
and effectiveness
of the Group’s
systems and controls,
supporting the
Company in its next
phase of strategic
ambition and growth.”
Elaine O’Donnell | Chair of the Audit
and Risk Committee
Committee
members
Chair of the
Committee
Committee
members
Number of
meetings
held in 2022
Elaine O’Donnell
Emma Woods
Wais Shaifta
David Kelly
Simon Jones*
4
*
Simon Jones joined the Committee
in February 2023.
Committee Member
Appointment to the Committee
Elaine O’Donnell (Chair)
30 August 2022
Wais Shaifta
David Kelly
Emma Woods
Simon Jones
11 May 2021
5 July 2016
14 November 2016
6 February 2023
The Board is satisfied that as Chair,
I have extensive recent and relevant
financial experience and that the
Committee as a whole has a wide
range of experience and competence
relevant to the sector in which the
Group operates through current and
previous roles.
Whilst the management team and
Chair of the Board are not members
of the Committee, a positive
working relationship is critical to
the Committee’s proper function.
Only members of the Committee are
entitled to attend meetings, however
standing invitations are extended
to the Chief Financial Officer, Chief
Executive Officer, Chief Operating
Officer, Chair of the Board, the
external auditors and other Non-
Executive Directors. In addition, the
Committee also invites other senior
finance and business managers to
attend certain meetings,
The Company Secretary is secretary
to the Committee.
In 2022, the Committee met four times.
Attendance at the meetings is shown
in the table on page 78. In March
2023, the Committee held a private
session with the external auditor
without members of management
being present.
The Committee has formal terms of
reference which can be viewed on the
Company’s website: www.tggplc.com.
During the year the Committee
reviewed these terms of reference and
made updates in line with best
practice recommendations from the
Corporate Governance Institute (‘CGI’).
Role and responsibilities of the
Committee
The Committee’s role is to assist
the Board with the discharge of
its responsibilities in relation to
financial reporting, risk management
and control.
This includes:
l Reviewing the Group’s annual and
half year financial statements and
accounting policies.
l Monitoring the integrity of the
Group’s financial statements and
related announcements, including
reviewing and challenging any
significant financial reporting
judgements contained therein.
l As requested by the Board,
assessing whether the Annual
Report and Accounts, taken as
a whole, is fair, balanced and
understandable and provides
the information necessary for
shareholders to assess the Group’s
position and performance,
business model and strategy.
l Reviewing the Group’s risk
management framework, including
principles, policies, methodologies,
systems, processes, procedures
and people; and advising on the
Group’s risk appetite.
l Monitoring compliance with
internal control systems; reviewing
the overall effectiveness of the
Group’s system of internal control
and risk management and making
recommendations to the Board for
improvements or developments.
l Regularly reviewing the need for
an internal audit function to help
in evaluating the robustness of
current internal control systems.
l Agreeing the external auditor’s
engagement terms, scope and
fees; monitoring and reviewing the
effectiveness and independence
of the external auditors; and
ensuring appropriate policies are
in place to protect independence.
l Advising on the appointment
of the external auditor and the
extent and fees for any non-audit
services provided.
l Reviewing the effectiveness
of the Group’s whistleblowing,
anti-bribery and fraud
prevention processes.
Summary of principal activities
and focus in 2022
The principal activities since the last
report were as follows:
l Transition of the leadership of
the Committee to a new Chair in
August 2022.
l Review and recommendation for
approval to the Board the 2022 full
and half year results including the
investor presentation.
l Consideration of significant
accounting matters and
judgements in relation to the
financial statements. This included
consideration of management’s
approach and the related
comments of the external auditor.
l Consideration and recommendation
of the Group’s going concern and
viability statements.
l Evaluation of the reporting
requirements of the TCFD
framework and agreeing the
scope and review of the new
reporting for climate based
financial disclosures.
l Consideration of the Code
requirements concerning
fair balanced and
understandable reporting.
l Consideration of the Group’s
risk management annual review,
including risk appetite statement,
and approval of the Principal risks
and uncertainties report.
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Report of the Audit and Risk Committee continued
This is the case where gyms in a
geographic location have a higher
proportion of LIVE IT members who
frequently visit other gyms in the
same geographic location and there
is significant trading interdependency
such that the cash inflows from each
individual gym are not generated
largely independent of each other.
In these instances, management has
grouped together and considered
a number of gyms as a cluster for
impairment testing purposes.
The discount rate to apply to the
CGU cash flows was calculated
by management using internal
and external data points, and
assumptions. As part of their audit of
the impairment testing, the auditor
challenged management’s calculation
of the discount rate and, following
discussion, a revised discount rate
was calculated and used.
The impairment testing methodology
and key assumptions, including
CGU determination and discount
rates, were reviewed and considered
by the Audit and Risk Committee
and the Committee is satisfied
that the impairment loss of £8.3m
that has been recognised in the
Group’s financial statements for
2022 is appropriate. Please refer to
notes 3, 14, 15 and 16 to the financial
statements for further information.
l Assessment of the principal
risks and the effectiveness of
risk management and internal
control systems.
l Review of compliance with, and
continuing suitability of, the
Committee’s terms of reference,
approving minor updates.
l Oversight of the operation of the
Group’s Whistleblowing and Anti-
Bribery policies, including rollout
of training to all staff.
l Verification of the independence
of the external auditor and
approving the scope of the audit
plan and the audit fees.
l Monitoring the transition to a new
Audit Partner and reviewing the
performance, effectiveness and
independence of the external
auditor.
l Discussions with the external
auditors without management
present.
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 meeting in July 2022, the
Committee reviewed a comprehensive
paper prepared by the Finance
Director, which analysed the
Group’s results for the half year
and highlighted any significant
issues and judgements arising in the
preparation of the Group’s half year
financial statements. In early 2023,
an updated paper was prepared
and reviewed, which supported the
preparation of the Group’s Annual
Report and Accounts 2022. It also
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
full year financial statements and
significant reporting and accounting
matters therein.
The most significant issues and
judgements considered by the
Committee were as follows:
Annual impairment testing
Consistent with prior years, as
part of the year end procedures,
management has carried out
an assessment to determine
whether there are any indicators of
impairment in relation to goodwill,
tangible assets, right-of-use assets
and other intangible assets. The cash
flow forecasts used in the assessment
were based on the Group’s three year
financial plan, together with assumed
growth rates thereafter. A number
of significant judgements have been
made by management in relation
to the impairment review process,
the most judgemental of which are
considered to be the determination
of cash generating units (‘CGUs’) and
the determination of the discount
rates to apply to the future cash flows
generated by each CGU.
Under IAS 36, goodwill is allocated to
CGUs on the basis of which CGUs are
expected to benefit from the business
combination in which the goodwill
arose. Management has determined
that the Group’s goodwill cannot be
allocated to CGUs on a non-arbitrary
basis as adding to our network of
gyms is beneficial to all gyms in the
Group (both the newly acquired
ones and the existing network) via
economies of scale, geographic
coverage and brand penetration.
Management has also determined
that the Group has just one operating
segment and no monitoring on a lower
level of goodwill occurs. As a result,
goodwil impairment has been tested
at the operating segment level, being
the entire business.
With regards impairment testing for
tangible assets, right-of-use assets
and other intangible assets, in many
cases, individual gyms have been
identified as a CGU. However, there
are some instances in which a cluster
of gyms has been considered by
management to constitute a CGU.
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 assessment included a review of
the principal risks facing the Group,
their financial impact and how they
are managed. This included the
adequacy and timing of renewal of
the Group’s bank facilities, as well
as access to alternative forms of
financing, which 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.
As well as the key judgements noted
above, the Committee also reviewed
and considered other accounting
matters including the presentation
of the non-underlying items
identified by management and the
accounting for the acquisition of the
three sites from Fitness First. The
Committee is satisfied that the non-
underlying items and acquisition are
appropriately classified and disclosed
in the financial statements. Please
refer to notes 9 and 13 to the financial
statements for further information.
There were no material matters
requiring the Committee to make
amendments to the reports.
Fair, balanced and
understandable
The Board recognises its duty to
ensure that the Annual Report and
Accounts 2022, taken as a whole, is
fair, balanced, and understandable
and provides the information
necessary for shareholders to assess
the performance, strategy and
business model of the Group.
The Board has placed reliance on the
following to form this opinion:
l The process by which the
Annual Report and Accounts
2022 was prepared, including
detailed project planning and a
comprehensive review process.
l The review of the Annual Report
and Accounts 2022 by the
Committee, placing reliance
on the experience of the
Committee members.
l Reports prepared by senior
management regarding critical
accounting judgements and
significant accounting policies.
l Discussions with, and reports
prepared by, the external auditor.
l Regular financial information
received throughout the year,
including monthly KPIs reports.
As detailed in the Directors’
responsibility statement on page
111, each of the Directors has
confirmed that, to the best of each
person’s knowledge and belief, the
Annual Report and Accounts 2022,
taken as a whole, is fair, balanced
and understandable, and provides
the information necessary for
shareholders to assess the Group’s
position, performance, business
model and strategy.
External auditor effectiveness
The appointment of Ernst & Young
LLP in 2015 was made having
considered their capabilities and
experience. As part of the annual
reporting process, the Committee
reviewed the effectiveness of the
auditor through:
l Reviewing the 2022 audit plan.
l Discussing the results of the audit,
including their views on material
accounting issues and key
judgements and estimates.
l Meeting the auditor without
management present and
understanding the extent to
which the auditor challenged
management.
l Considering the robustness of the
audit process.
l Meeting without auditors present
to consider the performance of
the auditor.
l Confirming their independence
and objectivity through a review of
formal reports presented to the
Committee and considering any
other conflicts of interest exist
which might impact independence.
l Confirmation that no non-audit
work was undertaken.
The Committee is satisfied with the
performance and independence
of Ernst & Young LLP and therefore
recommends their reappointment at
the May 2023 AGM.
External auditor fees
During 2022, management agreed
an increase in the audit fees for the
Group and subsidiary companies
to £300,000 for the year ended
31 December 2022 (2021: £200,000).
The increase partly reflected the
additional audit work required
around the implementation of the
new lease management system
and the acquisition of the three
sites operating under the Fitness
First brand.
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Report of the Audit and Risk Committee continued
The Committee also discussed the
increasing propensity for cyber
attacks in light of recent geopolitical
events and the increased risk in
relation to our people given the
current economic conditions. The
Committee was satisfied with the
mitigations in place to manage
cyber risk, which include: the
Chief Information Officer (‘CIO’)
briefing the Board on information
security matters at least annually;
all employees being required to
complete online training courses for
data protection and cyber security
at least once a year; and an ongoing
programme of assessments and
accreditations testing the information
security environment. There have
been no material information security
breaches in the last three years. The
Committee was also satisfied that
the Group continues to have in place
a variety of tools to attract, retain,
motivate and support its employees.
In 2023, we expect to evolve and
develop further our risk management
framework and appetite statements
and expect to report progress in next
year’s Annual Report and Accounts.
Non-audit services
In 2022, 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 pre-approved
by the Committee.
External auditor rotation
The external auditor, Ernst & Young
LLP, was appointed on 28 July 2015.
lt is intended that the external audit
will be put to tender at least every
ten years. As a result, the Company
expects to 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. In line with this policy,
a rotation was required ahead of our
year ending 31 December 2022 and,
therefore, during the year, Ian Venner
took over as Audit Partner from
Michael Kidd.
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.
Engagement with regulators
During FY 2022, the FRC’s Audit
Quality Review (‘AQR’) team conducted
a review of the audit of the Annual
Report and Accounts 2021, as part of
their routine processes. The findings
and recommendations of this review
were reported and considered by the
Committee and were discussed with
the auditors as part of the 2022 audit
planning work and final audit meeting.
Risk management
Our risk management process and
the risks which are considered to
be the principal risks of the Group
are detailed in the Principal risks
and uncertainties section on
pages 54-63.
During the year, the Committee
reviewed the Group’s risk
management process and
methodology and considered the
principal and emerging risks identified
by management, together with the
adequacy of any mitigating actions
put in place to reduce each risk. In
addition, the Committee reviewed and
approved the risk appetite statement
included in the Annual Report and
Accounts 2022, which is linked to our
corporate purpose and strategic
ambitions and embedded into the
Group’s risk management process.
The Committee discussed the
inclusion of the two new risks that
have been identified by management:
‘Structural change in the industry’
and ‘Relationships with suppliers’
and agreed on balance with their
inclusion in the Group’s principal
risks in light of the current economic
climate and continuation of hybrid
working patterns.
Internal control
The Group’s system of internal control
is underpinned by the following:
l Regular review meetings of
various groups, including business
functions, senior management,
sub-committees and the Board to
discuss key issues.
l A detailed business planning
process, combining top down
and bottom up approaches, with
outputs reviewed by the Board.
l A robust system of financial
controls, including preventative
controls and detective
controls including a thorough
review process.
l 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. During the
year, the Committee discussed
developments in the Group’s
internal control environment with
management and the auditors,
including the implementation
of a lease and property project
management system which
has improved control in these
key areas.
Internal audit
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 hand and inventory,
an internal audit function is not
necessary at this time. This will be kept
under review as the Group 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 to follow
should a member of staff wish to raise
concerns in confidence in respect of
suspicions of wrongdoing or unethical
conduct, including anonymously
if preferred. The policy confirms
that bullying, harassment or other
detrimental treatment afforded to a
colleague who has made a qualifying
disclosure is unacceptable. The
Committee approved an updated
policy in November 2021, pursuant to
which a new whistleblowing reporting
function accessible to all staff was
launched in 2022 to supplement the
whistleblowing notification email
address which is available on the
corporate website. The Committee
receives regular reports relating to
any whistleblowing-related matters
raised under the relevant channels,
and can consider responses where
appropriate. No instances of
whistleblowing were reported in 2022.
Elaine O’Donnell
Chair of the Audit and
Risk Committee
15 March 2023
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Report of the Sustainability Committee
Strategy
Sustainability has always been
at the core of The Gym Group’s
business. One of the Committee’s
responsibilities is to assist the Board
in articulating and developing The
Gym Group’s sustainability strategy,
which you can find explained in
more detail on our website,
www.tggplc.com/sustainability.
In the Sustainability report on
pages 38-53, we explain our
progress and performance
against our sustainability strategy
in the areas identified in our
materiality assessment.
Risks and opportunities
The Committee supports the Board
in developing its understanding of
the climate and sustainability risks
and opportunities for the Group. You
can read more about our assessment
of these risks in the Principal risks
and Uncertainties section on pages
54-63. 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 pages 50-53, we have responded
to evolving climate risks through our
support for the Taskforce on Climate-
Related Financial Disclosures (‘TCFD’).
Sustainability governance
The Committee supports the
Group in continually improving its
sustainability performance and
reporting. ESG related matters are
regularly discussed and reviewed at
the Board and its Committees, with
the Group 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. The
Committee holds a dedicated meeting
at least three times a year, escalating
relevant matters to the Board directly
after each of these meetings, and in
between meetings of the Committee,
the Board receives reports on key ESG
related matters, such as health and
safety, directly.
Dear Shareholder
I am pleased to present the Report
of the Sustainability Committee (the
‘Committee’), and to report on the
developments since last year.
The challenges created by the cost-
of-living crisis in the UK, the impact
on public and economic health
of the Covid-19 pandemic, racial
unrest, geopolitical instability, 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. During the year,
Penny Hughes left the Board and
Committee and I thank her for her
engagement with and support for the
Committee. In February 2023, Simon
Jones joined the Committee.
Key responsibilities
l Assisting the Board in its oversight
of corporate responsibility,
climate, sustainability and
reputational matters taking into
account the Group’s purpose,
strategy and culture.
l Reviewing and monitoring
progress relating to objectives,
targets and metrics in
sustainability and ESG matters
including social value, health and
safety, equality, diversity and
inclusion objectives.
l Assessing the Group’s current
sustainability footprint, reviewing
sustainability targets and
commitments and materiality.
l Reviewing and recommending for
approval the external statements
and disclosures made by the
Group in relation to sustainability
and ESG matters.
l Developing, upholding and
promoting the Group’s
sustainability strategy, and
making recommendations to
the Board on sustainability and
ESG matters.
l Reviewing progress against aims
to continue to reduce carbon
emissions and the Group’s
environmental impact.
l Understanding the sustainability
and climate risks and
opportunities for the Group.
“The Committee
supports the Board
in developing
understanding of the
sustainability risks
and opportunities
for the Group.”
Wais Shaifta | Chair of the
Sustainability Committee
Committee
members
Chair of the
Committee
Committee
members
Number of
meetings
held in 2022
Wais Shaifta
John Treharne
David Kelly
Richard Darwin
David Melhuish
Penny Hughes*
Simon Jones*
3
* Penny left in July 2022 and Simon joined in
February 2023.
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The Gym Group Board
Group Sustainability Committee
Sustainability Working Group
Equality, Diversity and
Inclusion workstream
Environment, Social and
Governance workstream
Health, Safety and
Wellbeing workstream
Activities in the year
l Completing an in-depth review
of sustainability workstreams
and the Group’s sustainability
assessment.
l Implementing a governance
framework as set out in the
above table.
l Monitoring gender and cultural
diversity across the Group at
different levels of the workforce,
understanding how reflective
these populations are of our
member population.
l Considering reports from the
sustainability workstreams: Health
and Safety, Governance, Equality,
Diversity and Inclusion (‘EDI’),
Environment and climate action
and social Impact.
l Supporting management’s
engagement strategy on
sustainability, including reviewing
the Committee’s external
reporting as required.
l Monitoring sustainability KPIs
to measure delivery against the
Group’s strategy and targets.
Looking forward to 2023
The Committee will continue to
support the sustainability governance
streams to uphold the Group’s
sustainability strategy and ensure
that sustainability remains at the
heart of the Board’s agenda.
Wais Shaifta
Chair of the Sustainability Committee
15 March 2023
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The Gym Group plc | Annual Report and Accounts 2022
The Gym Group plc | Annual Report and Accounts 2022
Governance report
Report of the Remuneration Committee
Dear Shareholder
I am pleased to present the Report
of the Remuneration Committee (the
‘Committee’) for The Gym Group.
Much has changed both within The
Gym Group and across the wider
business environment since I wrote
my first Remuneration Committee
Chair statement for our shareholders
around a year ago.
After a number of years of very stable
leadership at Board and Executive
Committee level within The Gym
Group, 2022/23 has seen a degree
of leadership change in the business
and this has impacted the structure
and work of the Remuneration
Committee. First let me cover Board
changes: Penny Hughes, who chaired
the business so effectively from
IPO and contributed her extensive
experience in remuneration, retired
last summer and was replaced by
Founder Director, John Treharne. John
was not considered independent on
appointment as Chair, which means
that whilst he can support me and
attend meetings, he is not a formal
member of the Committee as the
Committee is composed entirely
of independent Non-Executive
Directors in accordance with the
Corporate Governance Code. Also,
Rio Ferdinand, who had contributed to
the Remuneration Committee through
the last 18 months with highly relevant
insights on team engagement and
team pay structures, stepped off
the Board due to other increasing
commitments. I am therefore
especially grateful that Elaine
O‘Donnell, a highly experienced Non
Executive who has sat on a number of
remuneration committees, joined the
Committee in August 2022, and the
Committee was further strengthened
with the appointment of Simon Jones
in February 2023.
As well as these Board changes, at
Executive Director level we have hired
a new CFO (Luke Tait) who was able to
join us in October 2022 (as disclosed
last year, our prior CFO Mark George
had resigned to join Wickes Group plc).
Our shareholders will also be aware
that our Board agreed with Richard
Darwin in January 2023 that after
seven years in the business (first as
CFO and then as CEO) it is the right
time for him to pass the baton on to
a new CEO, and we are in the process
of recruiting a new talented leader for
our business, using the experienced
headhunting firm of Odgers. Below
Board, we have strengthened
our Executive Committee with
the appointment of a new Chief
Marketing Officer and Director of
Strategy and Corporate Development.
Plus, after eleven years with the
business, our Chief Information
Officer has also decided it is time for
a new challenge, and a search is under
way for new technology leadership.
Within this high level of senior
leadership change throughout
the year, we were very pleased
that our Chief Operating Officer,
Ann-marie Murphy, agreed to accept
a promotion in April 2022, with
Ann-marie joining the Board from
that time.
This process of leadership change
has meant that we have done a lot
of thinking about our continuing
remuneration structures relative to
the market and their effectiveness
for The Gym Group. We have
particularly noted during this year
that with widespread depression
of share prices in the market (often
driven by macro events) there are
continuing challenges for growth-
based equity plans, where actual
vesting outcomes can often reflect
the challenge of predicting the
pace of recovery. We also note that
a growing number of leisure peers
have chosen to seek simpler and
straightforward (and potentially
fairer) alignment with shareholder
experiences by moving to Restricted
Share Plans with appropriate
underpins, particularly where three-
year share plan performance cycles
may be misaligned to a longer-term
development trajectory.
Throughout the year, I was
encouraged that a number of our
leading shareholders got in touch
directly with me, both in my role as
Remuneration Committee Chair,
and also as Senior Independent
“In 2022 and into
2023, we have done
a lot of thinking
about our continuing
remuneration
structures relative to
the market and their
effectiveness for
The Gym Group.”
Emma Woods | Chair of the
Remuneration Committee
Committee
members
Chair of the
Committee
Committee
members
Number of
meetings
held in 2022
Emma Woods
David Kelly
Elaine O’Donnell
Penny Hughes*
Rio Ferdinand*
Simon Jones*
4
*
Until the relevant Director stepped down from
the Board. Simon joined in February 2023.
92 |
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Director, to recognise this challenge
around current remuneration
incentives and provide helpful
suggestions on directions which
we may wish to explore in the
future to ensure management were
sufficiently incentivised to drive share
price recovery.
Whilst I want to reassure shareholders
that we are not proposing
any changes to our Directors’
Remuneration Policy at this year’s
AGM, I also want to flag that it is
likely that, given the importance
of having the right remuneration
structures in place for our new CEO
to support their vision for the next
phase of growth, I currently anticipate
re-engaging on the design of our
remuneration policy before the end of
the normal three-year policy-period.
Performance and remuneration
in 2022
Team engagement is something the
business worked very hard to protect
during Covid-19, and in 2022 the
management team were very vigilant
around the potential challenges to
this valuable asset to our business
from the negative impacts on our
staff from inflationary pressures and
the cost of living.
l As a business we took decisive
action and, reflecting the
feedback from our management
teams below the senior leadership
team and the Executive
Committee, we supported a 5%
pay award in September 2022,
bringing forward the 2023 pay
review and implementing this early.
This pay award to our colleagues
was higher than budgeted, as
like most businesses no one had
anticipated the inflationary spike
when setting 2022’s plan. To fund
this action, the senior team of
Executive Committee and Senior
Management Team all opted to
delay any pay award for them
during 2022, choosing to prioritise
lower earners.
l We continued to provide a
range of support and resources
available to all colleagues,
such as SAYE option scheme,
pension contributions, CORE
perks and financial wellbeing
hub, Royal London financial
wellbeing support, flexible
working, cycle to work schemes,
travel loans, gym membership
discount, eye care and flu jab
vouchers, and EAP (employee
assistance programme). We also
provided ‘Wellbeing Wednesday’
communications to our team,
focusing on financial wellbeing,
promoting the above benefits,
and signposting our team to the
resources and support available
to them.
l Additionally, we have partnered
with financial wellbeing partners
via Reward Gateway to run
bespoke cost of living support
webinars for individuals in our
team requiring more specific
assistance.
l We were delighted to be
recognised by Glassdoor in 2022
as number 25 in their list of the
Best Places to Work in the UK.
You will have seen in the Strategic
report that profitability has not
yet returned to pre Covid-19 levels.
Against this background, the financial
metrics (Group Adjusted EBITDA) for
our 2022 annual bonus plan (50%
weighting of the total) were not
achieved. However, as a Remuneration
Committee, we were impressed with
how the Executive Committee and the
Senior Management Team worked
to mitigate some of the cost and
business pressures in this period
to achieve the results that we did.
Critically, these pressures did not
prevent them from overachieving on
two of the non-financial annual bonus
metrics which were attained, both
site openings (20% weighting of total
bonus) where we managed to secure
and open the most sites we have ever
done in a year, and our social value
metric (10% weighting of total bonus)
of percentage of members visiting
4+ times per month.
As we explained in last year’s Report
of the Remuneration Committee,
the inclusion of a social value metric
within our bonus plan was seen as
very important to underpin the work
being done on the inclusivity of our
wider business proposition. When
we consulted with our shareholders
before the 2022 AGM, they expressed
strong feedback in favour of the
use of Social Value as a metric for
incentive pay at The Gym Group.
The non-financial objectives achieved
within 2022’s annual bonus are all
matters which are important to The
Gym Group’s long term development.
These non-financial objectives were
cascaded through the business.
Accordingly, paying some element of
annual bonus for attainment of these
is, in the Remuneration Committee’s
view, important to reinforce the
integrity of having such measures
within our annual bonus plan. Critically
we want to ensure we maintain the
commitment of the senior team
(including our CFO and COO as
continuing Executive Directors)
through this period of change, which,
we believe, is strongly in shareholders’
best interests. However, to ensure
affordability and to preserve cash, we
will be delivering 2022 annual bonuses
solely in the form of deferred shares
(equivalent to 30% of maximum
bonuses) under our Deferred Share
Bonus Plan which will vest after two
years, but given the importance of
retention will be subject to continuous
employment. In the case of Luke Tait,
who joined in October, these awards
will be prorated for the period worked
in 2022.
Application of discretion
for 2022
The Committee did not apply discretion
(positive or negative) during the year
ended 31 December 2022.
Implementation of our
Remuneration Policy in 2023
Our intention is to continue to operate
our Directors’ Remuneration Policy in
2023 in a way that is closely aligned
with how our Policy was applied in
2022, but with certain changes (all
of which are within the scope of our
Directors’ Remuneration Policy) which
we feel are appropriate and targeted
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Report of the Remuneration Committee continued
At a glance
Remuneration policy and implementation
to best address the challenges which
the business is likely to face in 2023 in
a period of leadership transition.
l Firstly, as is normal in cases
where other Executive Directors
assume the responsibilities of the
Group CEO on an interim basis,
our CFO and COO have been
offered additional responsibility
allowances which may be paid
from when Richard Darwin leaves
the business until a new CEO
comes into post, reflecting their
additional responsibilities for
business leadership in this period.
Details of these amounts are set
out in the Implementation report.
Our CFO has, however, waived the
responsibility allowance and will
not receive this.
l Having made no inflationary
award for our senior leaders
since September 2021, we have
implemented the delayed 5%
salary award described above
in January 2023. This effectively
covers 2022 and 2023.
l We are proposing a revised
balance within our annual bonus
metrics for 2023, with 60% on
financial performance (up from
50% in 2022) and 40% on non-
financial performance. Within
the non-financial performance
element, part will be on personal
performance, but the majority
will be on strategic deliverables.
Within the strategic deliverables,
we will focus on matters which
demonstrate effective leadership
of our business through the
leadership transition period and
which demonstrate continued
business momentum (including
social value contribution) and
team morale.
l Our 2023 PSP metrics are matters
which are important for the
business and for shareholders.
We are introducing a Social Value
metric for PSP (20% weighting)
based on our established
methodology (which is externally
verified by 4Global) and which
reflects the wider contribution made
by our gyms and which is important
to our members, the business and
ultimately to our shareholders.
We have retained TSR for the
remaining 80% of the award: 40%
of the award will measure relative
TSR performance, and 40% of the
award (reflecting comments from
some of our leading shareholders
last year) will again be on absolute
TSR growth. We believe that having
part of our PSP subject to a direct
growth measure (absolute TSR)
which should be driven by our all-
round performance (both financially
and strategically) remains
appropriate: in a macroeconomic
environment with continuing
challenges, we see this measure as
protecting shareholders’ interests
better than the use of financial
measures for growth which may not
remain relevant over a three-year
PSP period due to external factors
(such as assumptions for input
costs made when setting targets).
Closing remarks: Format of
the report and matters to be
approved at our AGM
Although in the introduction to this
report I mentioned briefly the changes
made at Executive Director level
within The Gym Group in 2022, full
details regarding Luke’s and Ann-
marie’s remuneration arrangements
as new Executive Directors (which are
fully consistent with our Directors’
Remuneration Policy) are set out in
the Implementation report.
The remuneration-related
arrangements for Richard Darwin’s
leaving The Gym Group are set
out in the Implementation report,
and these reflect our Directors’
Remuneration Policy and our
contractual commitments under
Richard’s service agreement. As
noted in the Strategic report, our
whole Board remains very grateful to
Richard for his work as an Executive
Director, and particularly the strong
leadership and commitment he
showed during the unprecedented
challenges of operating our business
during the Covid-19 period, where
businesses like ours were subject to
rapidly imposed and long-lasting
mandatory closures in line with UK
Government requirements. I can only
echo this thanks, and as Chair of the
Committee I would also like to thank
Richard for the contributions he has
made to the work of the Committee in
the past seven years since our IPO in
November 2015.
We are also grateful for the strong
shareholder support shown for
our forward-looking Directors’
Remuneration Policy (‘Policy’) which
was passed at the 2022 AGM with
support of 96.61%. A copy of the
Policy can be found within our
2021 Annual Report and Accounts
which are available on our website
at: www.tggplc.com/investors. For
completeness, I want to flag that the
resolution to approve the previous
(2021) Remuneration statement and
Implementation report was passed
by a majority (72.87%), but a number
of shareholders were unhappy
with certain aspects of our 2021
remuneration. We understand that
their dissatisfaction was uniquely
linked to furlough monies not being
repaid, and we very much expect
these extraordinary events never
to re-occur.
At this year’s 2023 AGM shareholders
will be asked to approve the Report
of the Remuneration Committee
(excluding the remuneration policy).
The Report of the Remuneration
Committee comprises this
introductory statement and the
Implementation report which
follows on pages 96-107. The vote
on the Report of the Remuneration
Committee at our 2023 AGM is our
normal annual advisory vote on such
matters. 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 resolution 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
15 March 2023
Overview of policy
Remuneration in 2022
Implementation for 2023
Base salary
Reviewed annually.
Richard Darwin: £337,000
Richard Darwin: £337,000
Luke Tait: £300,000 (from appointment)
Luke Tait: £300,000
Consideration given to performance
of the Group and the individual,
responsibilities or scope of the role,
as well as pay practices in relevant
comparator companies.
Ann-marie Murphy: £220,000
(from appointment)
Ann-marie Murphy:
£231,000
Ann-marie will be paid a
responsibility allowance
equivalent to £5,000 per
month for the period
from Richard leaving the
business until the new CEO
starts work.
With effect from 1 January
2023, Executive Director
pension levels will be aligned
to the majority of the
workforce (currently 4%).
No changes in maximum.
In 2023, metrics will be
balanced between 60%
on financial performance
and 40% on non-financial
performance. Within the
non-financial element, part
will be based on personal
measures and a majority on
strategic measures.
Awards for 2023:
Quantum: 175% of salary
Performance conditions:
Absolute TSR (40%);
Relative TSR (40%); Social
value (20%). Relative TSR
is measured against
constituents of the FTSE
SmallCap (ex IT and REITs).
Pension and
benefits
Pension – maximum contribution
of 10% of salary but aligned with
majority of the workforce from start
of 2023.
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.
In line with policy. Executive Directors received
pension contributions as follows:
Richard Darwin – 10% of salary
Luke Tait – 4% of salary
Ann-marie Murphy – 4% of salary
Full attainment of site openings and
members visiting 4+ times per month gives
30% attainment.
2022 outcomes awarded as shares (no cash):
Ann-marie Murphy’s award and Luke Tait’s
award (pro-rata for the part year) vest after
two years subject to continued employment.
Long term
incentives
Performance share award, subject
to service and performance over a
three-year period, as well as two year
post-vesting holding period.
The PSP awards granted in September 2020
are due to vest in September 2023. It is too
early to accurately assess whether the awards
are likely to vest.
Maximum award of 200% of salary
(300% in exceptional circumstances).
Subject to malus and clawback
provisions.
Awards granted in 2022:
Richard Darwin: 175% of salary
Luke Tait: 175% of salary
Performance conditions for 2022 awards:
Absolute TSR (50%); Cumulative Adjusted
Group Operating Cash Flow (25%); ROIC in the
mature estate (25%). The numbers of awards
made in April 2022 were calculated using a
three-month average share price (£2.22) as
against April 2022 prices of c. £1.90 resulting in
a 14% reduction in number of awards; this step
was made to reflect shareholder experience.
After joining, Luke Tait received a PSP award
of 175% of salary and also a buy-out award in
respect of awards from a previous employer
that were forfeited on his joining the Group.
Share
ownership
guidelines
300% for Richard Darwin.
200% for Luke Tait and Ann-marie
Murphy and any new Executive
Directors.
A two year post-employment
shareholding guideline of 200% of
salary (or actual shareholding at
leaving, if lower) applies from leaving.
Luke Tait and Ann-marie Murphy will build a
shareholding to the required levels.
No changes.
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Report of the Remuneration Committee continued
2022 single total figure
Richard Darwin
Luke Tait
Ann-marie Murphy
Salary
337,000
62,097
158,889
Taxable
benefits
13,680
1,656
8,529
Bonus1
–
18,629
47,737
Long term
incentives
–
–
–
Other
–
340,000
–
Pension
31,225
2,484
5,538
Total
remuneration
381,905
424,866
220,693
1 Bonuses will be delivered in deferred shares, vesting after two years, subject to continued employment.
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’).
Directors’ remuneration policy
The current Directors’ remuneration
policy for Executive and Non-
Executive Directors was approved
by shareholders at the 2022 AGM
(the ‘Directors’ Remuneration Policy’)
and can be found within our 2021
Annual Report and Accounts which
are available on our website at:
www.tggplc.com/investors.
Implementation report
The following pages set out the
implementation sections of the
Report of the Remuneration
Committee (‘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.
Implementation of policy for
2023 (unaudited information)
Base salary
The base salary of the Executive
Directors for 2023 will be as follows:
l Chief Executive Officer: £337,000
l Chief Financial Officer: £300,000
l Chief Operating Officer: £231,000
In addition, for the period from
Richard leaving the business until a
new CEO starts work, Ann-marie will
be paid a responsibility allowance of
£5,000 per month in respect of the
additional leadership obligations
taken on by the continuing Executive
Directors. Luke was offered the same
allowance but has chosen to waive the
responsibility allowance and will not
receive it.
Pension
With effect from 1 January 2023,
contributions rates for all Executive
Directors will be aligned to that
of all employees, at 4% of salary.
Contributions may be made as cash
supplements in full or in part.
Benefits
Details of the benefits received by
Executive Directors are set out in note
1 to the single figure table on page 98.
Annual bonus
The overall bonus plan maximum for
each of the Executive Directors will be
100% of base salary for 2023.
The 2023 bonus will be based 60% on
financial measures (Group Adjusted
EBITDA) and 40% on non-financial
measures. Within non-financial
measures, part will be based on
personal objectives and the majority
will be based on strategic deliverables
which will include objectives linked to
matters which demonstrate effective
leadership of the business until a
new CEO comes into post and other
matters demonstrating continued
business momentum, including social
value (to be measured using the
same 4+ visits per month by members
as applied for 2022 bonus) and
team morale.
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 2023 bonus
(and performance against these
targets) in next year’s Report of the
Remuneration Committee.
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 2023 under
the PSP to each of the Chief Financial
Officer and Chief Operating Officer
over shares worth 175% of salary.
As for 2022 awards, the number of
shares will be calculated using the
three month average share price.
The metrics are summarised below.
The comparator group for Relative
TSR is the constituents of the FTSE
SmallCap (ex IT and REITs).
Absolute TSR (40% of total award)
Compound annual growth in adjusted Gym Group share price
% of that part of the award that vests
Below 7.5%
7.5%
15% or above
7.5% to 15%
0%
20%
100%
Pro rata straight-line between 20% and 100%
Relative TSR (40% of total award)
Relative TSR ranking
% of that part of the award that vests
Below median
Median
Upper quintile
Between median and upper quintile
0%
20%
100%
Pro rata straight-line between 20% and 100%
Social value for 2025 (20% of total award)
Social value generated during financial year 2025
% of that part of the award that vests
Below £700m
£700m
£900m or above
Between £700m and £900m
0%
20%
100%
Pro rata straight-line between 20% and 100%
Chair of the Board and Founder Director
With effect from 25 July 2022, John Treharne is paid a base salary of £138,000 recognising his role as Chair. 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 2023.
Non-Executive Directors’ fees
David Kelly, Emma Woods, Wais Shaifta, Elaine O’Donnell, Richard Stables and Simon Jones will each receive a base fee of
£55,000 per annum. It was decided during 2022, given the significant increase in workload that Committee Chairs and the
SID role had experienced in recent years, that these roles would receive a market comparable additional fee for the roles
fulfilled. Accordingly, from 1 July 2022 Emma Woods received an additional fee of £13,000 per annum in respect of her
role as Senior Independent Director and Chair of the Remuneration Committee. From 30 August 2022, Elaine O’Donnell
received an additional fee of £8,000 per annum in respect of her role as Chair of the Audit and Risk Committee.
As disclosed in the Group’s announcement made on 30 August 2022, Richard Stables is currently a Partner at Fulcrum
Advisory Partners LLP (“Fulcrum Partners”), an independent advisory firm, and a Senior Advisor to Blantyre Capital
(“Blantyre”), a c. 11.8% shareholder in the Company. While Richard has not been appointed as a representative of Blantyre
or any other shareholder and Fulcrum Partners has ceased to provide advisory services to Blantyre in relation to the
Company, Fulcrum Partners is party to an incentive arrangement with Blantyre pursuant to which Fulcrum Partners is
entitled to certain cash payments contingent on the share price of the Company achieving various price levels up to
600p per share, with a maximum cash value at those price levels equivalent to 305,641 shares in the Company.
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Report of the Remuneration Committee continued
Single total figure table (audited)
The remuneration for the Executive Directors, Non-Executive Directors and Chair and Founder Director of the Company
who performed qualifying services during the year is detailed below.
For the year ended 31 December 2022:
£
Salary/fees
Executive Directors
Taxable
benefits1
Bonus2
Long term
incentives3
Pension4
Other5
Total
remuneration
Total fixed
remuneration6
Total variable
remuneration6
Richard Darwin
337,000
13,680
–
62,097
1,656
18,629
31,225
–
381,905
381,905
–
2,484 340,000 424,866
66,237
358,629
Luke Tait7
Ann-marie
Murphy7
158,889
8,529
6,644
Mark George8
148,589
Chair and Founder Director
John Treharne
116,548
9,875
Non-Executive Directors
Penny Hughes8
78,274
David Kelly
Emma Woods9
Wais Shaifta
Rio Ferdinand8
55,000
61,500
55,000
36,667
Elaine O’Donnell9 10
21,339
Richard Stables10
18,629
–
–
–
–
–
–
–
47,737
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5,538
12,981
–
–
–
–
–
–
–
–
220,693
172,956
47,737
–
–
–
168,214
168,214
126,424
126,424
1,679
79,953
79,953
–
–
–
–
–
–
55,000
55,000
61,500
61,500
55,000
55,000
36,667
36,667
21,339
21,339
18,629
18,629
–
–
-
–
–
–
–
–
–
1
2
Taxable benefits comprise car allowance (£8,000 for Richard Darwin, £4,323 for Mark George, £1,656 for Luke Tait and £5,778 for Ann-marie Murphy), private
medical cover, a car parking space and additional mobile telephone contracts (in the case of John Treharne).
Further details of the bonus outturn for 2022 can be found on page 99. The bonus total for Ann-marie Murphy and Luke Tait represents 30% of base salary (pro-
rata for the period from appointment to the Board). Bonuses will be delivered in deferred shares, vesting after two years subject to continued employment to
help support retention during the period of CEO transition.
3
The 2020 PSP awards are not due to vest until September 2023. It is too early to accurately assess whether the awards are likely to vest. Details of the final
vesting outcome for the 2020 PSP awards will be included in the 2023 DRR.
4 Pensions are provided via a defined contribution and/or cash supplement.
5
Luke Tait was granted a buy-out award over 228,050 shares in respect of awards from a previous employer that were forfeited on his joining the Group. The buy-
out award is in the form of a ‘restricted stock award’ and will vest after three years, subject to continued employment. The value in ‘other’ for Penny Hughes is the
annual value of family gym membership for ten years which was provided to Penny as a retirement gift.
6
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.
7 Ann-marie Murphy and Luke Tait joined the Board on 11 April 2022 and 17 October 2022 respectively.
For the year ended 31 December 2021:
£
Executive Directors
Salary/fees
Taxable
benefits
Bonus
Long term
incentives
Pension1
Other
Total
remuneration
Total fixed
remuneration
Total variable
remuneration
Richard Darwin
306,000
12,772
136,782
Mark George
241,267
10,738
Founder Director
John Treharne
195,000
8,036
Non-Executive
Directors
Paul Gilbert2
Penny Hughes
David Kelly
Emma Woods
Wais Shafta
Rio Ferdinand
19,960
1,524
138,000
55,000
55,000
50,417
50,417
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
28,279
21,201
–
–
–
–
–
–
–
483,833
347,051
136,782
–
–
–
273,206
273,206
203,036
203,036
1,128
22,612
22,612
–
–
–
–
–
138,000
138,000
55,000
55,000
55,000
55,000
50,417
50,417
50,417
50,417
–
–
–
–
–
–
–
–
1
The pension values for the Executive Directors have been restated to reflect that pension paid as a cash supplement are reduced for an amount equivalent to
the employer National Insurance contributions.
2 The value in ‘other’ for Paul Gilbert is the annual value of family gym membership for ten years which was provided to Paul as a retirement gift.
3 The aggregate emoluments (being salary/fees, bonuses, benefits and pension allowances) of all Directors for 2022 was £1,650,190 (2021: £1,331,521).
Further information on the 2022 annual bonus (audited)
For 2022, the overall bonus plan maximum for the Executive Directors was 100% of base salary. Performance was based
on four metrics with equal weightings 50% based on financial targets (Group Adjusted EBITDA Less Normalised Rent), and
the remaining 50% based on strategic targets (site openings and membership number), and number of member visits
per month).
Measure (weighting)
EBITDA targets (50%)
Site openings (20%)
Membership numbers (20%)1
% of members visiting 4+ times per month
(10%)
Overall
Threshold (20%)
Maximum (100%)
Actual
Vesting outcome
£42.4m
22
882,000
£47.4m
25 + strong
pipeline
922,000
£38.0m
28
831,000
43.0%
45.0%
47.2%
0%
100%
0%
100%
30%
8 Mark George, Penny Hughes and Rio Ferdinand stepped down from the Board on 1 July 2022, 25 July 2022, and 30 August 2022 respectively.
1 Membership numbers averaged over last three months in 2022.
9 From 1 July, Emma Woods received an additional fee of £13,000 per annum in respect of her role as Senior Independent Director and Chair of the Remuneration
Committee. From 30 August 2022, Elaine O’Donnell received an additional fee of £8,000 per annum in respect of her role as Chair of the Audit & Risk Committee.
10 Elaine O’Donnell and Richard Stables joined the Board on 30 August 2022.
As explained in the Committee Chair’s letter, the Remuneration Committee has decided that the 2022 annual bonus will be
delivered purely as awards of deferred shares under the Deferred Share Bonus Plan. Deferred shares awarded for 2022
bonuses will be subject to continued employment and will be capable of vesting two years after these are awarded.
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Report of the Remuneration Committee continued
Performance Share Plan awards
Vesting outcomes for 2019 PSP awards
The TSR element of 2019 PSP awards was not determined in time for inclusion in the Annual Report and Accounts 2021.
The final outcome was subsequently confirmed as resulting in nil vesting for that part of the award and the overall vesting
outcome for the 2019 awards was therefore nil, as confirmed in the table below.
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.
TSR (50%)
ROIC (25%)
Total
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.
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.
Performance
achieved
(20.7)p
Below
median
Vesting outcome
% of total award
vesting
0%
0%
0%
0%
18%
0%
0%
0%
Vesting outcomes for 2020 PSP awards
The PSP awards granted in September 2020 are due to vest in September 2023. It is too early to accurately assess whether
these awards are likely to vest. The final vesting outcome will be disclosed in the Annual Report and Accounts 2023.
Details of outstanding PSP awards
Executive
Richard Darwin4
Luke Tait5
Ann-marie Murphy6
Mark George7
John Treharne
Awards held at
1 Jan 2022
Awards granted
during the year1
Awards exercised
during the year
Awards lapsed
during the year2
Interests held at
31 Dec 20223
816,421
–
404,433
598,708
170,553
265,414
580,186
153,464
–
–
–
–
93,888
–
–
236,913
–
58,686
598,708
844,922
580,186
405,323
–
–
170,553
1 The exercise price of awards granted during the year is 0.01p.
2
2019 PSP awards (representing 236,913 shares for Richard Darwin and 58,686 shares for Ann-marie Murphy) lapsed as the performance conditions for these
awards were not achieved.
3 The minimum share price in 2022 was 94.0p and the maximum share price was 265.5p. The closing share price on 31 December 2022 was 109.0p.
4
5
PSP awards were granted to Richard Darwin at the three-month average market price of 222.2p to the last trading day prior to grant on 6 April 2022, thus
representing an award over shares worth 175% of basic salary.
Awards granted to Luke Tait during 2022 include: (i) an award over 352,136 shares, worth 175% of basic salary, and subject to the same performance conditions
as awards made to the other Executive Directors; (ii) a buy-out award over 228,050 shares in respect of awards from a previous employer that were forfeited
on his joining the Group. The awards granted to Luke Tait were each granted at the three-month average market price of 149.09p to the last trading day prior to
grant on 17 October 2022.
6 Awards were granted to Ann-marie Murphy prior to her promotion to the Board. The awards were calculated using the three-month average market price of
222.2p to the last trading day prior to grant on 6 April 2022 and thus represent shares worth 155% of basic salary, and reflect her previous role as Chief People
Officer (before she was promoted to the Board).
7 Mark George resigned during 2022 and all of his unvested PSP share awards lapsed when he left the business.
The PSP awards subject to performance conditions will normally vest based on performance against the
following targets:
2021 award
(66.7% relative TSR
and 33.3% absolute TSR)
Target range as
for 2020 award.
2022 award
(50% absolute TSR, 25%
ROIC in mature estate,
25% cumulative adjusted
cash flow)
Not applicable.
2020 award
(66.7% relative TSR and 33.3% absolute TSR)
Target range between median
performance against the
constituents of the FTSE SmallCap
(excluding Investment Trusts) rising
on a pro rata basis until full vesting
for upper quintile performance.
Not applicable.
Not applicable.
Target range
between 25% and
30%.
Target range between 210p
(threshold) and 300p (maximum).
Target range
between 285p
(threshold) and
335p (maximum).
Target range
between 300p
(threshold) and
375p (maximum).
Not applicable.
Not applicable.
Target range
between £135m
(threshold) and
£150m (maximum).
Performance measure
Relative TSR
20% of this part vests at threshold
performance rising on a pro rata
basis until 100% vests.
ROIC in mature estate
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.
Cumulative Adjusted Group
Operating Cash Flow
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.
Detail:
l 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, where relevant, the TSR of the
constituents of the comparator group. TSR is measured on the basis of performance over a three year period
beginning with the grant date (where awards are made later in the year, TSR may be measured from the main award
date for that year). The absolute TSR measure will also credit any dividends paid in the performance period.
l 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.
l The cash flow performance condition is measured by reference to cumulative adjusted operating cash flow generated
by the Group during the three year performance period. Please note that the Annual Report and Accounts 2021
incorrectly referred to performance measured over a single financial year. For the avoidance of doubt, the condition
is a cumulative measure of adjusted operating cash flow across a three year performance period.
l 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.
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Report of the Remuneration Committee continued
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
Ann-marie Murphy
Luke Tait
Mark George
Total SIP
shares at
1 Jan 2022
Partnership
shares
purchased
in 2022
Matching
shares
awarded
in 2022
Free shares
awarded
in 2022
Shares
forfeited or
withdrawn
in 20221
10,169
1,736
–
6,848
955
365
–
1
955
365
–
1
–
–
–
–
–
–
–
6,850
Total SIP
shares at
31 Dec 2022
12,079
2,466
–
–
1
2,287 matching shares were forfeited when Mark George left employment with the Group. The remaining partnership shares were transferred to Mr George, in
accordance with the rules of the SIP.
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:
Executive Director
Total
Sharesave
awards at
1 Jan 2022
Awards
granted
(number)
Exercise price
of awards
granted
(pence)
Awards
vested
(number)
Awards
exercised
(number)
Awards
lapsed
(number)
Total
Sharesave
awards at
31 Dec 2022
Earliest exercise date
Richard Darwin
16,666
Ann-marie
Murphy
1,000
–
–
108.0
108.0
–
–
–
–
–
–
16,666 1 December 2023
1,000 1 December 2023
Statement of Directors’ shareholding and share interests (audited)
The table below details, for each Director who served during the year, the total number of Directors’ interests in shares at
31 December 2022 or the date the departing Director left the Board:
Director1, 2
John
Treharne3
Richard
Darwin4
Luke
Tait
Ann-marie
Murphy
David
Kelly
Emma
Woods5
Wais
Shafta
Elaine
O’Donnell
Richard
Stables
Mark
George2
Penny
Hughes2
Rio
Ferdinand2
Ordinary shares
1,591,908
721,760
64,210
–
10,000
13,930
Shares awarded
under SIP
Maximum shares
receivable under
PSP awards
Maximum shares
receivable under
Sharesave awards
Total shareholding
and share
interests
3,909
12,079
–
2,466
170,553
844,922
580,186 405,323
–
16,666
–
1,000
–
–
–
–
–
–
1,766,370 1,595,427 644,396 408,789 10,000
13,930
–
–
–
–
–
–
–
–
–
100,000
13,642 65,201
–
4,563
–
–
–
–
–
–
–
–
100,000
18,205 65,201
–
–
–
–
–
1 The shareholdings and awards set out above include those held by Directors and their respective connected persons.
2
Penny Hughes, Mark George and Rio Ferdinand stepped down from the Board during the year (their interests above are shown at the date they left the Group).
The total number of Ordinary shares in which Penny Hughes or persons connected with her was interested in included 5,201 Ordinary shares owned by Robbie
Hughes on the date Penny left the Board. All PSP and Sharesave awards for Mark George lapsed when he left the Company.
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
5
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.
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.
Progress towards share ownership guidelines
Richard
Darwin
Luke
Tait
Ann-marie
Murphy
1%
23%
Multiple of salary as at 31 December 2022
Percentages at the end of the bars show the total beneficial shareholding as a % of salary
237%
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
previously committed to (and
continues to comply with) maintaining
a holding of at least 0.5% of issued
share capital whilst in the role of
Founder Director. Richard Darwin’s
shareholding has increased slightly
during 2022, but his share ownership
as a proportion of salary has fallen
below the guideline level due to share
price movements. Luke Tait and Ann-
marie Murphy will build a shareholding
to the required levels.
Appointment of our new CFO
The remuneration package for our
new CFO, Luke Tait on appointment
is summarised in the ‘At-a-glance’
summary on page 95. In addition, on
resigning from his former employer,
Nandos, Luke forfeited certain
share plan awards. To secure Luke’s
appointment it was necessary to
‘buy out’ these awards on a ‘like-
for-like’ basis as permitted by the
Directors’ Remuneration Policy. As
the forfeited awards were in relation
to an unquoted company, the
buy-out was negotiated to provide
equivalent ‘expected value’, delivered
in ‘restricted stock’ awards over The
Gym Group shares and which will vest
dependent on continued employment.
In summary, the buy-out awards have
the following terms:
l 228,050 shares
l date of award – 17 October 2022
l vesting date – 17 October 2025
Payments to past Directors
(audited)
Payments were made to Mark George
during the year, consistent with the
disclosed payments set out in the
2021 report and otherwise disclosed in
this report.
Departure of our CEO
As was announced on 12 January 2023,
Richard Darwin is stepping down as
our CEO and will leave the Board in
due course. The remuneration related
arrangements for Richard leaving
the Group are fully in line with our
Directors’ Remuneration Policy whereby:
l Fixed pay reflects contractual
entitlements for the notice period
only.
l Richard is permitted to retain his
unvested PSP share plan awards,
although the vesting of these
remains subject to full application
of the performance conditions
over the original performance
periods, and any vested shares
will be reduced on an appropriate
time pro-rated basis and remain
subject to holding periods.
l Holdings under the SIP and
SAYE schemes will be treated in
accordance with the relevant
plan rules.
l Richard is not entitled to a bonus
in respect of 2022 as these
are being given in shares and
given importance of retention
will be subject to continuous
employment, which Richard will
not qualify for. Richard is entitled
to participate in the 2023 bonus
scheme which will be prorated for
the period for which he works only,
to reflect his role in leading and
setting up the business for the
change of CEO.
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Governance report
Report of the Remuneration Committee continued
Performance graph and CEO remuneration table (unaudited)
The graph below shows the total shareholder return (‘TSR’) performance of an investment of £100 in The Gym Group plc’s
shares from its listing in November 2015 to the end of the period, compared with a £100 investment in the FTSE SmallCap
Index over the same period. The FTSE SmallCap Index was chosen as a comparator because it represents a broad equity
market index of which the Company is a constituent. The TSR was calculated in accordance with the DRR Regulations.
Total Shareholder Return (TSR)
200
175
150
125
100
75
50
106
101
115
87
193
133
167
142
123
136
113
151
146
157
113
The Gym Group plc
FTSE Small Cap Index
57
Source: Datastream
(a Refinitiv Product)
06 Nov
2015
31 Dec
2015
31 Dec
2016
31 Dec
2017
31 Dec
2018
31 Dec
2019
31 Dec
2020
31 Dec
2021
31 Dec
2022
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
20212
2022
CEO
Single figure of total
remuneration
John Treharne
John Treharne
John Treharne
John Treharne
Richard Darwin
Richard Darwin
Richard Darwin
Richard Darwin
Richard Darwin
£287,793
£313,628
£431,302
£272,721
£97,326
£536,613
£335,624
£483,833
£381,905
Annual bonus pay-out
against maximum
%
£60,0003
27.2%4
74.3%4
16.0%
16.0%
35.1%
0%
44.7%
0%6
Long term incentive
vesting rates against
maximum opportunity
%
n/a
n/a
n/a
41.7%
41.7%
72.5%
0%
0%5
n/a7
1 The 2018 figures represent the single figure of total remuneration for John Treharne for the period to 17 September 2018, and for Richard Darwin from that date.
2 The single figure of total remuneration has been updated to reflect the amended value for Richard Darwin for 2021 as a result of the restated pension value.
Please see page 99 for further details.
3
4
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.
5 The TSR element of 2019 PSP awards was not determined in time for inclusion in the 2021 Annual Report. The final outcome was subsequently confirmed as nil
vesting for the 2019 award.
6 Richard Darwin was not eligible for a bonus as he has given notice that he will step down from the Board.
7 The PSP awards granted in September 2020 are due to vest in September 2023. It is too early to accurately assess whether these awards are likely to vest.
The final vesting outcome will be included in the 2023 report.
Annual percentage change in remuneration of Directors and employees
During 2020 and 2021, there was significant volatility in remuneration at The Gym Group, as a result of the impact of
Covid-19 and the actions taken by the Board to ensure that executive remuneration aligned with the broader experience
of our stakeholders. During 2022, the business started to return to a more stable position, albeit subject to significant
inflationary pressures as a result of the Ukraine war and resulting energy crisis. Those inflationary pressures are reflected
in the increases in general employee remuneration, resulting in material increases in salaries, benefits and bonuses. The
percentage movements between 2021 and 2022, shown in the table below, therefore reflect the impact of these pressures
on remuneration of employees and, to a lesser extent, the Directors.
The percentage change in remuneration of the Directors and employees of the business between the 2019, 2020, 2021
and 2022 financial years were as follows:
% change from 2019 to 2020
% change from 2020 to 2021
% change from 2021 to 2022
Salary
or fees
Benefits
Bonus
Employees1,2
5%
(11)%
(100)%
Executive Directors:
Richard Darwin
Luke Tait3
Ann-marie
Murphy3
Mark George4
(6)%
N/A
N/A
(3)%
3%
N/A
N/A
20%
(100)%
N/A
N/A
(100)%
Chair and Founder Director:
Salary
or fees
6%
Benefits
29%
8%
N/A
N/A
13%
8%
N/A
N/A
100%
Bonus
100%
100%
N/A
Salary
or fees
11%
Benefits
Bonus
4%
720%
10%
N/A
7% (100)%
N/A
N/A
N/A
0%
N/A
N/A
(38)%
(38)%
N/A
0%
John Treharne
(27)%
(48)%
N/A
36%
42%
N/A
(40)%
23%
N/A
Non-Executive Directors:
Penny Hughes4
David Kelly
Emma Woods
Wais Shafta5
Rio Ferdinand6
Elaine O’Donnell7
Richard Stables7
(27)%
(27)%
(27)%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
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%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
0%
0%
24%
0%
0%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1
2
The strict legal requirement is to only provide details of employees of The Gym Group plc. As the listed entity has very few 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.
3 Ann-marie Murphy and Luke Tait joined the Board on 11 April 2022 and 17 October 2022 respectively.
4 Mark George and Penny Hughes stepped down from the Board on 1 July 2022 and 25 July 2022 respectively.
5 Wais Shaifta joined the Board on 1 February 2021.
6 Rio Ferdinand joined the Board on 1 February 2021 and stepped down on 30 August 2022.
7 Elaine O’Donnell and Richard Stables joined the Board on 30 August 2022.
104 |
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Governance report
Report of the Remuneration Committee continued
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 98) 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
2022
Method
Option B
Option B
Option B
Option B
Option B
25th percentile
pay ratio
Median pay ratio
75th percentile
pay ratio
19.2 : 1
30.4 : 1
19.0 : 1
26.3 : 1
19.6 : 1
12.8 : 1
26.6 : 1
18.8 : 1
25.0 : 1
19.1 : 1
10.4 : 1
13.5 : 1
13.2 : 1
23.8 : 1
15.5 : 1
Notes to the CEO to employee pay ratio:
1 Option B (based on the gender pay gap reporting disclosures) was preferred as this data was already prepared on a Group basis.
2
In line with the gender pay gap reporting regulations, pay for the 25th percentile, median and 75th percentile employees was calculated with reference to 5
April for each financial year. As the employees at the 25th, 50th and 75th percentile all have the same hourly rate (for gender pay gap reporting purposes), the
relevant individuals were identified using the full pay and benefits of employees for the financial year.
3
The ratios shown are representative of the FTE 25th percentile, median and 75th percentile pay for employees within the Group at the gender pay gap reference date.
4 FTE equivalent pay has been calculated using the gender pay gap reporting methodology.
5
The Committee believes the median pay ratios for the periods reported above to be consistent with the pay, reward and progression policies for the Group’s UK
employees taken as a whole as at the reference date.
The total pay and benefits and the salary component of total pay and benefits for the 2022 pay and benefits of the
employees 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
£19,527.60 £20,026.27 £20,849.65
£19,527.60 £20,026.27
£24,671.37
The change in each of the pay ratios for 2022 (relative to prior year) reflects the relative reduction in total remuneration
for the Chief Executive Officer (which has reduced by over 20% compared to the prior year). This partly obscures the
underlying changes in employee remuneration which is made up of increased salaries (c. 3-5%) and higher bonus for the
representative employee at the 75th percentile.
Relative importance of spend on pay (unaudited)
The table below details the change in total staff pay between 2021 and 2022 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 buyback(s)
2022
£’000
35,403
–
2021
£’000
29,738
–
% change
19%
0%
1 The increase in gross staff pay from 2021 reflects the combined impact of higher employee wages and bonuses, as well as the increase in employee numbers
due to new gym openings.
Summary of shareholder voting
The following table shows the results of the advisory vote on the 2021 Directors’ Remuneration Report (at the 2022 AGM)
and the binding vote on the Directors’ Remuneration Policy at the 2022 AGM:
For (including discretionary)
Against
Votes withheld
Approval of the
2021 Directors’ Remuneration Report
(2022 AGM)
Approval of the
Directors’ Remuneration Policy
(2022 AGM)
Total number of votes
% of votes cast Total number of votes
% of votes cast
102,619,408
38,206,463
3,174,635
72.9%
27.1%
–
137,871,527
4,841,266
1,287,713
96.6%
3.4%
–
Remuneration Committee in
2022 (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. Our Chair, John Treharne,
takes no part in any discussions
relating to his own remuneration. The
Committee met four times during the
year and the table on page 78 details
attendance of members at these
meetings.
The Committee has formal terms of
reference which can be viewed on the
Group’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 Group seeks to promote
and maintain good relationships
with employees as part of its
employee engagement strategy. The
whole Board, especially 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 2023 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:
l the Directors’ Remuneration Policy
supports the Group’s strategy
(including in the performance
measures chosen); and
l 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 2022 were £63,356 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
15 March 2023
106 |
The advisory vote on the 2021 Report of the Remuneration Committee was passed with approximately 72.9% support.
Please see the Committee Chair’s letter on page 94 for further context.
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The Gym Group plc | Annual Report and Accounts 2022
Governance report
Directors’ report
The Directors present their report
together with the audited financial
statements for the period ended
31 December 2022.
Where reference is made to other
sections of the Annual Report and
Accounts 2022, 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 65.
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 (resigned with
effect from 25 July 2022)
John Treharne
Richard Darwin
David Kelly
Emma Woods
Wais Shaifta
Ann-marie Murphy (appointed
with effect from 11 April 2022)
Mark George (resigned with
effect from 1 July 2022)
Rio Ferdinand (resigned with
effect from 30 August 2022)
Elaine O’Donnell (appointed with
effect from 30 August 2022)
Richard Stables (appointed with
effect from 30 August 2022)
Luke Tait (appointed with effect
from 17 October 2022)
On 12 January 2023, it was announced
that Richard Darwin would step
down as Chief Executive Officer and
Executive Director in due course.
Simon Jones joined the Board on 6
February 2023.
The roles and biographies of the
Directors as at the date of this
report are on pages 72-74. 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:
l The shareholders may, by ordinary
resolution, elect any person willing
to act as a Director.
l The Board may, by ordinary
resolution, elect any person willing
to be a Director.
l Every Director shall retire at
each AGM and be eligible for
re-election.
l 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.
l 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 21, the Directors
are not proposing a final dividend
for the year 2022. It is a condition of
the Company’s Bank Facilities that
the Company shall not declare or
pay a dividend while the new £10m
additional RCF Facility is in place.
Going concern
As noted on pages 62-63, the
Directors have a reasonable
expectation that the Group has
adequate resources to continue in
operational existence for the period
to 30 June 2024. As a result, they
continue to adopt the going concern
basis in preparing these consolidated
financial statements.
Future developments in the
business
The likely future developments in
respect of the business can be found in
the Strategic report on pages 8-69 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 70-80, 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 43 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 pages
46-49 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 and
corruption policies is set out in the
Sustainability report on page 39 and
forms part of this report by reference.
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.
Political donations
The Company made no political
donations in 2022 (2021: £nil).
Employee involvement and
policy regarding disabled
persons
The Group 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 Group’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,
Institution
Blantyre Capital
Liontrust Sustainable Investments
Invesco
Farringdon Capital Management
Legal & General Investment Management
Goldman Sachs collateral account
Columbia Threadneedle Investments
Fidelity International
GVQ Investment Management
Blackmoor Investment Partners
the Group 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 2022, and their
connected persons, in the issued
Ordinary shares are provided on
page 102 within the Report of the
Remuneration Committee.
Major interests in shares
As at 31 December 2022, the Company
was aware of the following interests
representing 3% or more of the issued
share capital of the Company. 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.
Number of shares
Percentage
21,059,643
18,184,078
9,138,239
8,665,574
8,628,833
7,537,073
7,203,990
7,142,451
6,824,346
5,360,000
11.81
10.20
5.12
4.86
4.84
4.23
4.04
4.00
3.83
3.01
Since 31 December 2022 until 14 March 2023, the Company has been notified of the following interests representing over
3% of the issued share capital:
Institution
Number of shares
Percentage
Date of notification
Liontrust Investment Partners LLP
Invesco1
1 Notification of shares on loan.
Share capital
As at 31 December 2022, the
Company’s issued share capital
comprised 178,351,482 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
19,831,403
9,138,239
11.12
17 January 2023
5.12
18 January 2023
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.
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.
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.
108 |
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Governance report
Directors’ report continued
There are no restrictions on transfers
of Ordinary shares other than:
l certain restrictions which may
from time to time be imposed by
laws or regulations such as those
relating to insider dealing;
l some of the Company’s employee
share plans include restrictions on
transfer of shares while the shares
are held within the plan;
l pursuant to the Group’s Share
Dealing Code whereby the
Directors and designated
employees require approval to
deal in the Company’s shares; and
l 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.
Directors to allot further new Ordinary
shares up to a nominal value of
£11,851.90, equivalent to 66.67% of the
authorised share capital of the Group.
The Company intends to renew this
authority at its 2023 AGM.
Authority for the Company to
purchase its own shares
At the 2022 AGM, shareholders
approved an authority for the
Company to make market
purchases of its own shares up to a
maximum of 17,776,956 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 2023 AGM.
Authority to allot shares
At the 2022 AGM, authority was given
to the Directors to allot new Ordinary
shares up to a nominal value of
£5,925.06, equivalent to 33.33% of the
issued share capital of the Company.
In addition, authority was given to the
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 24 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
2022. If a requirement is not shown, it
is not applicable to the Company.
Section
Listing Rule requirement
Location
1
4
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
10
Details of contracts of significance
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 66-69.
Auditor
Each of the persons who is a
Director at the date of approval of
the Annual Report and Accounts
2022 confirms that: a) so far as the
Director is aware, there is no relevant
audit information of which the
Group’s auditor is 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 Group’s auditor is aware of that
information. Ernst & Young LLP has
expressed its willingness to continue
in office as auditor and a resolution
to reappoint them will be proposed at
the forthcoming AGM.
Note 10 Finance costs (page 142)
Report of the Remuneration
Committee (pages 92-107)
Corporate Governance report (page
80 Directors’ conflicts of interest)
AGM
The Notice convening the 2023 AGM
will be circulated to shareholders
separately with details of the meeting.
We will ensure that shareholders are
kept informed using the Notice of
Meeting, our website, and relevant
regulatory announcements in
due course.
On behalf of the Board
Katy Tucker
Company Secretary
15 March 2023
Responsibility statement
The Directors confirm, to the best of
their knowledge:
l That the consolidated financial
statements, prepared in
accordance with UK-adopted
IFRSs, give a true and fair view
of the assets, liabilities, financial
position and results of the
Parent Company and subsidiary
undertakings included in the
consolidation taken as a whole;
l That the Annual Report and
Accounts 2022, including the
Strategic report, includes a fair
review of the development and
performance of the business and
the position of the Company and
subsidiary undertakings included
in the consolidation taken as a
whole, together with a description
of the principal risks and
uncertainties that they face; and
l That they consider the Annual
Report and Accounts 2022, taken
as a whole, is fair, balanced and
understandable and provides
the information necessary
for shareholders to assess
the position, performance,
business model and strategy of
the Company and subsidiary
undertakings included in the
consolidation taken as a whole.
On behalf of the Board
Richard Darwin
Chief Executive Officer
15 March 2023
Governance report
Directors’ responsibility statement
The Directors are responsible for
preparing the Annual Report and
Accounts 2022 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 UK-adopted
international accounting standards
(‘IFRS’) , 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.
In preparing the financial statements,
the Directors are required to:
l select suitable accounting
policies in accordance with IAS 8
Accounting Policies, Changes in
Accounting Estimates and Errors
and then apply them consistently;
l make judgements and estimates
that are reasonable and prudent;
l present information, including
accounting policies, in a manner
that provides relevant, reliable,
comparable and understandable
information;
l 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;
l in respect of the Group financial
statements, state whether
applicable UK-adopted IFRSs
have been followed, subject to any
material departures disclosed
and explained in the financial
statements;
l 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
l 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 relevant financial reporting
framework. 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 Group’s website.
Legislation in the UK governing the
preparation and dissemination of
accounts may differ from legislation
in other jurisdictions.
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Financial statements
Independent auditor’s report
to the members of The Gym Group plc
In our opinion:
l 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 2022 and of the Group’s loss for the year then ended;
l the Group financial statements have been properly prepared in accordance with UK adopted international
accounting standards;
l the Parent Company financial statements have been properly prepared in accordance with UK adopted international
accounting standards as applied in accordance with section 408 of the Companies Act 2006; and
l We corroborated lease costs with agreements; rate forecasts to published rate increases; and benchmarked costs
against external industry forecasts.
l We further corroborated the membership impact of the timing / number of new gym openings with management’s
expansion plans.
l 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.
l We obtained supporting documentation to evaluate the plausibility of management’s mitigation plans considering
l the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
actions delivered to date.
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 2022 which comprise:
Group
Parent Company
Consolidated statement of financial position
as at 31 December 2022
Company statement of financial position
as at 31 December 2022
Consolidated statement of comprehensive income for
the year then ended
Company statement of changes in equity for the year
then ended
Consolidated statement of changes in equity for the
year then ended
Related notes 1 to 8 to the financial statements including a
summary of significant accounting policies
Consolidated cash flow statement for the year
then ended
Related notes 1 to 29 to the financial statements, including
a summary of significant accounting policies
The financial reporting framework that has been applied in their preparation is applicable law and UK adopted
international accounting standards and as regards the Parent Company financial statements, as applied in accordance
with section 408 of the Companies Act 2006.
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.
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:
l We obtained management’s forecast cash flows and covenant calculations covering the period from the date of
signing to 30 June 2024 and we agreed these to the Group’s three year financial plan.
l We challenged the appropriateness of the going concern assessment period, taking into consideration events after
the going concern period which may have an impact.
l We tested the mathematical accuracy of the cash flows, as well as the calculation of the forecast covenants.
l 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.
l 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.
l 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.
l We performed our own sensitivity analysis on managements forecast cash flows.
l We obtained evidence of the banks’ agreement to the extension of the Group’s Revolving Credit Facility to
October 2024.
l We agreed available facilities to underlying agreements and the extent of drawings thereunder to external
confirmations at 31 December 2022.
l We enquired with management in respect of events beyond the going concern period, taking into consideration
refinancing in October 2024, and inspected minutes of meetings held, made inquiries of our Restructuring team and
considered the company’s experience of support from their banks.
l We assessed the adequacy of disclosures within the Annual Report and Accounts 2022.
Our key observations
We observed that since gyms re-opened in April 2021, membership numbers have increased from 718,000 in December
2021 to 821,000 in December 2022 and 890,000 in February 2023.
Under the reverse stress test, it required an assumed reduction in new members each month against the base case,
resulting in a closing membership number at 30 June 2024 of 647,000 (being 27% lower than the closing membership at
28 February 2023) to create a breach of financial covenants (breach occurring in June 2024 after available controllable
mitigations had been applied) 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 and Parent Company’s ability to continue as a
going concern for a period to 30 June 2024.
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.
• Property, plant and equipment and Right-of-use assets impairment testing including
cash flow and discount rate assumptions.
Materiality
• Overall Group materiality of £1,400,000 which represents 2% of Group EBITDA.
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Financial statements
Independent auditor’s report continued
to the members of The Gym Group plc
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, the potential impact of climate change 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. The remaining four
components are non-trading.
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 component’), 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% (2021: 100%) of the Group’s
Revenue, Loss before tax and Group’s Total assets.
Number of components
Revenue
Loss before tax
Total assets
2022
2021
Full
scope
2
100%
99.95%
99.98%
Specific
scope
Remaining
components
1
0%
0.05%
0.02%
4
–
–
–
Full
scope
2
100%
100%
99.9%
Specific
scope
Remaining
components
1
0%
0%
0.1%
4
–
–
–
Changes from the prior year
There are no changes from the prior year.
Involvement with component teams
All audit work performed for the purposes of the audit was undertaken by the Group audit team.
Climate change
Stakeholders are increasingly interested in how climate change will impact the Group. The Group has determined that
the most significant future impacts from climate change on their operations will be from reputational risk of not meeting
net zero targets and physical risks regarding heatwaves and temperature increases. These are explained on pages
50-53 in the required Task Force for Climate related Financial Disclosures and on pages 54-63 in the Principal risks and
uncertainties. They have also explained their climate commitments on pages 46-49. All of these disclosures form part of
the “Other information,” rather than the audited financial statements. Our procedures on these unaudited disclosures
therefore consisted solely of considering whether they are materially inconsistent with the financial statements, or
our knowledge obtained in the course of the audit or otherwise appear to be materially misstated, in line with our
responsibilities on “Other information”.
In planning and performing our audit we assessed the potential impacts of climate change on the Group’s business and
any consequential material impact on its financial statements.
The Group has explained in its Sustainability report how climate change has been reflected in the financial statements
under summary of significant accounting policies how they have reflected the impact of climate change in their financial
statements including how this aligns with their commitment to the aspirations of the Paris Agreement to achieve net zero
emissions by 2035 for Scope 1 and 2 emissions and 2045 for Scope 3 emissions. There are no significant judgements and
estimates relating to climate change impacting the financial statements.
Our audit effort in considering the impact of climate change on the financial statements was focused on evaluating
management’s assessment of the impact of climate risk, physical and transition, their climate commitments, the effects
of material climate risks disclosed on page 53. As part of this evaluation, we performed our own risk assessment,
supported by our climate change internal specialists, to determine the risks of material misstatement in the financial
statements from climate change which needed to be considered in our audit.
114 |
We also challenged the Directors’ considerations of climate change risks in their assessment of going concern to 30 June
2024 and viability of the Group over the next three years. Where considerations of climate change were relevant to our
assessment of going concern, these are described above.
Based on our work we have not identified the impact of climate change on the financial statements to be a key audit
matter or to impact a key audit matter.
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
2022: £172.9m (31 December 2021:
£106.0m), of which £11.0m was deferred
at 31 December 2022 (31 December
2020: £8.4m) and presented in the
Consolidated Statement of Financial
Position as contract liabilities.
Refer to the Report of the Audit and Risk
Committee (pages 84-89); Accounting
policies (page 128); and note 5 of the
Consolidated financial statements (page 138).
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.
We also obtained an understanding of the
deferred membership fee income calculation
process and related controls.
Key observations communicated
to the Audit and Risk Committee
Based on our procedures,
deferral of membership
income in the year
ended 31 December
2022 is appropriately
recognised and
presented as contract
liabilities as at that date.
We tested the completeness of revenue
recorded during the year through obtaining
the full revenue listing directly from the
management service provider and agreed
them to the accounting records. We tested a
sample to ensure validity of the information
and 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.
The Group audit team performed full scope
audit procedures over this risk area in all
locations, which covered 100% of the risk
amount.
In preparing the consolidated financial
statements, management need to calculate
the amount of joining and subscription
payments collected, which relate to
membership after the year end date and
for which the related revenue should be
deferred and presented as a contract
liability under IFRS 15 “Revenue from
Contracts with Customers” (‘IFRS 15’).
Although the calculation of deferred
membership fees does not involve significant
judgement or estimation, there are a
number of inputs including large numbers
of members, varying subscription rates
and the reliance on outsourced processes
which could be open to manipulation. The
deferred revenue calculation is automated,
driven by manually input reports. There
is an increased risk of material error and
management override in the inputs to
this calculation. Further, consistent with
Auditing Standards, the recognition of
revenue is assessed as a material fraud
risk on every audit engagement with only
rare exceptions.
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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 notes 15 and
16 to the Consolidated
financial statements,
materially comply
with the applicable
requirements of IAS 36
and IAS 1.
Financial statements
Independent auditor’s report continued
to the members of The Gym Group plc
Risk
Our response to the risk
Property, plant and equipment
(‘PPE’) impairment testing –
31 December 2022: £181.0m
(31 December 2021: £165.6m);
Right-of-use (‘ROU’) assets
31 December 2022: £289.4m
(31 December 2021: £281.2m)
Refer to the Report of the Audit
and Risk Committee (pages 84-89);
Accounting policies (page 132); and
notes 15 and 16 of the Consolidated
financial statements (pages 147-150).
As disclosed in notes 15 and 16 to the
Consolidated financial statements,
PPE including ROU of £470.4m
is recognised.
Management has undertaken an
annual impairment review in respect
of PPE and ROU assets and has
recognised an impairment of £8.3m
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
and the determination of CGUs.
In addition, such judgements and
estimates could be influenced by
management bias.
The significant assumptions are
disclosed in note 15 for PPE and note
16 for ROU assets.
We performed a walkthrough of the process and
controls to gain an understanding of the Group’s
impairment process.
We considered the appropriateness of the
determination of cash generating units, challenging
management on this allocation and obtaining
supporting evidence.
We obtained management’s three-year plan for 2023
to 2025 and assessed assumptions within this. We also
assessed the historical accuracy of management’s
forecasting by comparing actual financial
performance for the year ended 31 December 2022 to
management’s previous budget.
We challenged the reasonableness of these
assumptions by reference to historical data, external
benchmarks and the risk of management bias.
For the impairment test, we assessed whether
the assumptions disclosed in notes 15 and 16 to
the Consolidated financial statements were the
appropriate key assumptions to be used in the
impairment model, being the discount rate, revenue
growth and cost inflation, taking into consideration the
cost-of-living crisis over the next three years and the
long term growth from 2024 onwards.
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 internal valuations
specialists to assist in assessing the appropriateness
of the methodology applied in management’s
impairments 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 PPE and 16 for ROU
Assets to the Consolidated financial statements,
against the requirements of IAS 36 and IAS 1
“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, which covered 100% of the
risk amount.
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 £1,400,000 (2021: £689,000), which is 2% of Group EBITDA (2021: 0.65%
Revenue). We believe that Group EBITDA would be the most appropriate basis given the focus on Group EBITDA as the
Group’s results continue to normalise (as compared to prior year where gym sites were closed half of the year due to
Covid-19 restrictions).
We determined materiality for the Parent Company to be £3,148,000 (2020: £2,923,000), which is 1% (2021: 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% (2021: 75%) of our planning materiality, namely £1,050,000 (2021:
£517,000). 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 £315,000 to £1,050,000 (2021: £187,500 to £517,000).
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
£70,000 (2021: £34,000), 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 2022 set out on pages
1-107, 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 2022.
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 Annual Report and Accounts 2022 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.
In the prior year, our Auditor’s report included a key audit matter in relation to annual goodwill impairment testing. In the
current year, we downgraded the risk due to sufficient headroom.
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Financial statements
Independent auditor’s report continued
to the members of The Gym Group plc
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance
with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
l 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;
l 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
l 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.
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:
l the Strategic report or the Directors’ report; or
l 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:
l 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
l 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
l certain disclosures of Directors’ remuneration specified by law are not made; or
l we have not received all the information and explanations we require for our audit; or
l 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:
l Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and
any material uncertainties identified set out on pages 62-63;
l 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 62-63;
l Directors’ 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 62-63;
l Directors’ statement on fair, balanced and understandable set out on page 111;
l Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on pages
54-63;
l The section of the Annual Report and Accounts that describes the review of effectiveness of risk management and
internal control systems set out on pages 54-61; and
l The section describing the work of the Audit and Risk Committee set out on pages 84-89.
Responsibilities of Directors
As explained more fully in the Directors’ responsibility statement set out on page 111, 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.
l We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and
determined that the most significant are 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.
l 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.
l 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.
l 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;
reviewing board meeting minutes in the period and up to date of signing; enquiring about the policies that have
been established to prevent non-compliance with laws and regulations by officers and employees, and whether such
policies are formalised in a code of conduct, conflict-of-interests statement or similar standard; enquiring about the
entity’s methods of enforcing and monitoring compliance with such policies, if any; and inspecting correspondence, if
any, with 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.
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Financial statements
Independent auditor’s report continued
to the members of The Gym Group plc
Financial statements
Consolidated statement of comprehensive income
for the year ended 31 December 2022
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 8 years, covering the
years ending 31 December 2015 to 31 December 2022.
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.
Ian Venner (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Belfast
15 March 2023
Revenue
Cost of sales
Gross profit
Other income
Operating expenses (before
depreciation, amortisation and
impairment)
Depreciation, amortisation and
impairment
Operating profit/(loss)
Finance costs
Loss before tax
Tax (charge)/credit
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
5
6
7
31 December 2022
£m
Note Underlying
Non-
Underlying
(note 9)
Total
Underlying
31 December 2021
£m
Non-
Underlying
(note 9)
172.9
(2.0)
170.9
0.8
–
–
–
–
172.9
(2.0)
170.9
0.8
106.0
(1.7)
104.3
7.3
–
–
–
–
Total
106.0
(1.7)
104.3
7.3
(101.8)
(4.4)
(106.2)
(79.1)
(2.3)
(81.4)
14,15,16
(59.3)
10
11
10.6
(16.1)
(5.5)
(1.4)
(8.5)
(12.9)
(1.0)
(13.9)
1.5
(67.8)
(2.3)
(17.1)
(19.4)
0.1
(52.7)
(20.2)
(16.6)
(36.8)
8.3
(4.2)
(6.5)
(0.9)
(7.4)
0.5
(56.9)
(26.7)
(17.5)
(44.2)
8.8
(6.9)
(12.4)
(19.3)
(28.5)
(6.9)
(35.4)
(0.1)
–
(0.1)
0.1
–
0.1
(7.0)
(12.4)
(19.4)
(28.4)
(6.9)
(35.3)
12
(3.9)
(10.9)
(16.7)
(20.7)
r
e
p
o
r
t
S
t
r
a
t
e
g
c
i
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
Reconciliation of Operating profit/(loss) to Group Adjusted EBITDA Less Normalised Rent1
Operating loss
Add back:
Non-underlying operating items
Share based payments
(included in Operating expenses)
Underlying depreciation and amortisation
Group Adjusted EBITDA
Less:
Normalised Rent2
Group Adjusted EBITDA Less Normalised Rent1
Note
9
8,26
14,15,16
31 December 2022
£m
31 December 2021
£m
(2.3)
12.9
1.4
59.3
71.3
(33.3)
38.0
(26.7)
6.5
2.9
52.7
35.4
(29.7)
5.7
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, share based payments and non-underlying items, and after deducting Normalised Rent. Refer to the KPIs on pages
36-37 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 125-158 form an integral part of the financial statements.
120 |
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The Gym Group plc | Annual Report and Accounts 2022
Financial statements
Consolidated statement of changes in equity
for the year ended 31 December 2022
At 1 January 2021
0.1
159.5
(0.2)
Own shares
held
£m
Share
premium
£m
Hedging
reserve
£m
Note
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
At 31 December 2021
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
25
26
11
26
11
–
–
–
–
–
–
0.1
–
–
–
–
–
–
–
–
–
30.2
–
–
189.7
–
–
–
0.1
–
–
At 31 December 2022
0.1
189.8
The notes on pages 125-158 form an integral part of the financial statements.
–
0.1
0.1
–
–
–
–
0.1
0.1
–
–
–
–
Merger
reserve
£m
39.9
–
–
–
–
–
–
–
–
–
–
–
–
Retained
deficit
£m
(44.9)
(35.3)
–
Total
£m
154.4
(35.3)
0.1
(35.3)
(35.2)
–
2.4
0.3
(77.5)
(19.4)
–
30.2
2.4
0.3
152.1
(19.4)
0.1
(19.4)
(19.3)
–
1.7
(0.6)
0.1
1.7
(0.6)
39.9
(95.8)
134.0
(0.1)
39.9
Consolidated statement of financial position
as at 31 December 2022
Note
31 December 2022
£m
31 December 2021
£m
Non-current assets
Intangible assets
Property, plant and equipment
Right-of-use 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
Provisions
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
14
15
16
17
11
18
19
20
16
23
21
16
23
25
25
25
25
25
92.7
181.0
289.4
1.0
16.3
580.4
0.9
8.9
–
5.4
15.2
595.6
38.8
25.3
0.6
64.7
70.0
325.1
1.8
396.9
461.6
134.0
0.1
189.8
–
39.9
(95.8)
134.0
86.0
165.6
281.2
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
The notes on pages 125-158 form an integral part of the financial statements.
These financial statements were approved by the Board of Directors on 15 March 2023.
Signed on behalf of the Board of Directors
Richard Darwin
Chief Executive Officer
Luke Tait
Chief Financial Officer
Company Registration Number 08528493
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The Gym Group plc | Annual Report and Accounts 2022
Financial statements
Consolidated cash flow statement
for the year ended 31 December 2022
Financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2022
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
Share based payments
Rent concessions
(Profit)/Loss on disposal of property, plant and equipment
Increase in inventories
Increase in trade and other receivables
Increase in trade and other payables
Payment of deferred consideration
Cash generated from operations
Tax received/(paid)
Net cash inflow from operating activities before non-
underlying items
Non-underlying items
Net cash inflow from operating activities
Cash flows from investing activities
Business combinations
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds from disposal of property, plant and equipment
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 outflow from financing activities
Net (decrease)/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
Note
31 December 2022
£m
31 December 2021
£m
(19.4)
(44.2)
10
9
15
16
14
26
16
7
9
13
22
22
22
22
25
25
19
17.1
12.9
26.4
28.1
4.8
1.4
(0.5)
(0.4)
(0.6)
(3.1)
3.2
–
69.9
0.8
70.7
(5.3)
65.4
(5.4)
(36.5)
(7.2)
0.4
(48.7)
(27.4)
(13.3)
(2.3)
(0.7)
30.5
(5.5)
0.1
–
(18.6)
(1.9)
7.3
5.4
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
The notes on pages 125-158 form an integral part of the financial statements.
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 of the Group for the year ended 31 December 2021. 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.
Going concern
In assessing the going concern position of the Group for the year ended 31 December 2022, the Directors have
considered the following:
l the Group’s trading performance in FY22 and throughout the traditional January and February 2023 peak period;
l future expected trading performance to June 2024 (the going concern period), including membership levels and
behaviours in light of the current difficult macroeconomic environment; and
l the Group’s financing arrangements and relationship with its lenders and shareholders.
2022 was a year of significant recovery and growth for The Gym Group, with membership at the end of December 2022
reaching 821,000, an increase of 14.3% from the end of December 2021. Average revenue per member per month for the
year (‘ARPMM’) was £17.82 and for the second half of the year was £18.30, up 4.5% on the second half of the prior year.
LIVE IT, the premium price product, ended the year at 29.6% of total membership compared with 27.1% in December
2021. As a result, revenue and Group Adjusted EBITDA both increased significantly. The Group also reported strong cash
generation, with free cash flow of £16.6m being generated and used to part-fund the 25 organic site openings as well as
our investment in the new technology and brand. The remaining organic site openings and the acquisition of the three
sites previously trading under the Fitness First brand were funded through an increase in the Group’s borrowings. All sites
opened in the year are performing in line with our expectations.
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Financial statements
Notes to the consolidated financial statements continued
for the year ended 31 December 2022
2. Summary of significant accounting policies continued
Going concern continued
In May 2022, the Group agreed with its lenders certain changes to the Group’s Revolving Credit Facility (‘RCF’). As a
result, the Group now has access to a combined £80m facility which matures in October 2024. The Group also currently
has access to £13m of finance lease facilities (£15m permitted under the RCF). As at 31 December 2022, the Group had
Non-Property Net Debt (including finance leases) of £76.1m, with £15.4m of headroom (calculated off bank debt less cash)
under the RCF. The RCF is subject to quarterly financial covenant 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. Whilst the going concern assessment covers the period to the end of June 2024, the Directors have 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 or refinanced before that time.
Following the January and February 2023 peak trading period, closing membership at 28 February 2023 was 890,000
members, an increase of 8.4% on the position at 31 December 2022. However, demand has been impacted by the cost-of-
living pressures felt by many; and the Directors expect the current difficult macroeconomic environment and consumer
behaviour to continue. As a result, we have taken a cautious approach to preparing the three-year financial plan that
underpins the going concern review.
The base case forecast for the period to 30 June 2024 anticipates continued growth in yields across the whole estate
as a result of pricing actions that have already been taken. However, modest increases in membership levels are driven
largely by the sites opened in 2022 and not by growth in the mature estate. In addition, the Directors have taken a more
measured approach to new site openings throughout the plan period, with all new sites assumed to be self-financed.
Under this scenario, all financial covenants are passed with a reasonable level of headroom and the Group can operate
within its financing facilities.
The Directors have considered a downside scenario which anticipates a more significant cost-of-living downturn
throughout the period under review. Under this scenario, membership numbers in the mature estate start to deviate
from the base case from March 2023 such that they are approximately 10% lower by the end of 2023. Yields do continue
to increase but at a much lower level than under the base case. Under this scenario, the number of new site openings is
reduced and discretionary performance-related bonuses removed to ensure that 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 to ascertain the extent of the downturn in trading
that would be required to breach the Group’s banking covenants or liquidity requirements. Mitigating actions assumed
in this scenario include moving to a minimum level of maintenance and IT capital expenditure; reducing controllable
operating costs and marketing expenditure; and pausing the new site opening programme in order to preserve cash.
In this scenario, the number of new members each month would have to decline by 16.5% compared to the base case
(the equivalent of membership reducing to 73% of the February 2023 closing membership number) before the leverage
covenant would be breached in June 2024. 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 consider the reverse stress test scenario to be highly unlikely.
Conclusion
The Board has reviewed the financial plan 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 2024. 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 and 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 2024 nor the viability of the Group over the next three years.
2. Summary of significant accounting policies continued
The following specific points were considered:
l we procure 100% renewable energy for all of our sites where we directly control the purchase of energy.
l 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.
l all of our gyms now have full LED lighting.
l 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 32 sites
operating successfully without gas for water heating and are continuing to roll out electric heat pumps to obviate the
requirement for gas.
l 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.
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:
l power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the
investee);
l exposure, or rights, to variable returns from its involvement with the investee; and
l the ability to use its power over the investee to affect its returns.
All subsidiaries are wholly owned.
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.
All subsidiaries apply consistent accounting policies and 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 non-controlling interest. The excess of the cost of acquisition over
the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition
is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income
statement. Subsequent changes to the fair value during the measurement period are treated as fair value adjustments
against the acquired net assets.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing
performance of the operating segment, has been identified as the Board of Directors. The Group’s activities consist solely
of the provision of low cost, high quality, 24/7, no contract gyms within the United Kingdom, traded through 229 sites at
31 December 2022. It is managed as one entity and management has consequently determined that there is only one
operating segment.
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The Gym Group plc | Annual Report and Accounts 2022
Financial statements
Notes to the consolidated financial statements continued
for the year ended 31 December 2022
2. Summary of significant accounting policies continued
Segment results are measured using earnings before interest, tax, depreciation, amortisation, share based payments
costs and non-underlying items. Segment assets are measured at cost less any recognised impairment. All revenue
arises in and all non-current assets are located in the United Kingdom. The accounting policies used for 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 comprise student memberships which typically cover a nine-month
period, pay up front memberships which typically cover a six- or nine-month period and corporate annual membership.
All membership income (being the membership fee and the joining fee) is recognised straight-line over the period that the
membership relates to, with any subscriptions in advance of the period in which the service is provided being recorded as
a contract liability in the statement of financial position.
Rental income from personal trainers, which represents amounts paid by standalone personal trainers to operate their
business from our gyms, is recognised on a straight-line basis over the term of the rental agreement.
Other income, which includes the sale of goods through vending machines, is recognised at the point in time when control
of the goods transfers to the customer.
Contracts with customers are non-complex and do not require any significant accounting judgements or estimates.
Cost of sales and gross profit
Cost of sales comprises costs arising in connection with the generation of ancillary revenue as well as call centre costs
and payment processing costs. Therefore gross profit is before costs associated with operating the gyms.
Other income and government grants
Other income comprises government grants receivable, research and development tax credits and other non-
membership-related income.
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.
They 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. 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
arise 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 businesses, remeasurement 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.
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. Further information
in relation to impairment testing is provided in the ‘Impairment of non-financial assets’ section of this note.
Customer lists
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 customers lists over their estimated useful lives, which is the period the
Group expected to get value/benefit. The carrying value of customer lists is reviewed for impairment if events or changes
in circumstances indicate the carrying value may not be recoverable.
Computer software and licenses
Acquired computer software and 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:
l it is technically feasible to complete the software product so that it will be available for use;
l management intends to complete the software product and use or sell it;
l there is an ability to use or sell the software product;
l it can be demonstrated that the software product will generate probable future economic benefits;
l adequate technical, financial and other resources to complete the development and to use or sell the software
product are available; and
l 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 statements
Notes to the consolidated financial statements continued
for the year ended 31 December 2022
2. Summary of significant accounting policies continued
Property, plant and equipment
Property, plant and equipment are included in the financial statements 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 basis over the estimated useful lives
as follows:
l leasehold improvements over the shorter of the useful life and the term of the lease;
l fixtures, fittings and equipment between three and ten years;
l gym and other equipment between five and ten years; and
l 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 costs incurred in the construction of gyms and are included in Property, plant
and equipment. No depreciation is provided on assets under construction until the asset is available for use.
Leases 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 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.
Lease liabilities
Lease liabilities are presented as a separate line in the Consolidated Statement of Financial Position.
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, which is
generally the case for leases in the Group, the Group’s incremental borrowing rate is used, being the rate that the Group
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.
Lease payments included in the measurement of the lease liability comprise:
l fixed lease payments (including in-substance fixed payments) less any lease incentives receivable;
l variable lease payments that depend on an index or rate, initially measured using the index or rate at the
commencement date; and
l payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the
lease.
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.
To determine the incremental borrowing rate, the Group:
l 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;
l 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
l makes adjustments specific to the lease, e.g. term and security.
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.
2. Summary of significant accounting policies continued
The Group remeasures the lease liability whenever:
l there is a change in the Group’s assessment of whether it is reasonably certain to exercise a purchase, extension or
termination option, in which case the lease liability is remeasured by discounting the minimum lease payments using
a revised discount rate at the effective date of the change in assessment;
l 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);
l the lease payments change due to a rent review, in which case the lease liability is remeasured by discounting the
revised lease payments using the original discount rate at the effective date of the change in rent;
l the lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the
lease liability is remeasured by discounting the revised lease payments using a revised discount rate at the effective
date of the modification.
When the lease liability is remeasured, an equivalent adjustment is made to the right-of-use asset, except in the case
of modifications resulting in a reduction in the scope of the lease, or in instances where doing so would reduce the
carrying amount of the right-of-use asset below zero. For a modification that fully or partially decreases the scope of
the lease, the carrying amount of the right-of-use asset is reduced to reflect partial or full termination of the lease and
any difference between that adjustment and the amount of the remeasurement of the lease liability is recognised in
profit or loss at the effective date of the modification. In other cases, if the right-of-use asset is reduced to zero by a
remeasurement, any remaining amount of the remeasurement is recognised in profit or loss.
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.
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. When it is reasonably
certain that the Group will not exercise a termination option or will exercise an extension option, this assumption is
included within the calculation of the lease liability.
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 has been applied to those leases entered into prior to November 2015 when
the Group listed on the London Stock Exchange and entered into a Revolving Credit Facility (‘RCF’), and which remain
on the 31 December 2022 balance sheet as right-of-use assets and lease liabilities. Prior to this the Group was under
private equity ownership, with its financing reflecting such ownership (including loan notes). As a consequence, there
was less observable data on which to assess the IBR of the Group during this time, hence there was an increased level of
judgement in assessing an appropriate IBR for use in applying IFRS to pre-2015 leases. Post listing and refinancing of
the Group’s bank facilities in October 2019, there was an increased level of observable data, including a market-based
margin, to indicate the credit spread on which the Group could borrow. This margin was then added to observable Bank of
England base or risk-free rates, such that the level of judgement on post-2015 leases, and in particular post-2019 leases,
is considered to be low.
Right-of-use assets
Right-of-use assets predominantly relate to property leases and are depreciated on a straight-line basis over the
shorter of the asset’s useful life and the lease term. Right-of-use assets for non-property leases mainly relate to gym
equipment purchased on hire purchase contracts and are depreciated over the asset’s useful life.
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:
l the amount of the initial measurement of the lease liability;
l any lease payments made at or before the commencement date less any lease incentives received;
l any initial direct costs; and
l restoration costs.
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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.
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Financial statements
Notes to the consolidated financial statements continued
for the year ended 31 December 2022
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.
Under IAS 36, goodwill is allocated to the cash generating units (‘CGUs’) on the basis of which CGU or group of CGUs
is expected to benefit from the business combination in which the goodwill arose identified according to operating
segments. As management has determined that the Group’s goodwill cannot be allocated to CGUs on a non-arbitrary
basis and that the Group has just one operating segment and goodwill is not monitored at any lower level, then
consistent with the requirements of IAS 36, testing for goodwill impairment is performed at the operating segment level,
being the entire business.
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 CGU to which the asset belongs. CGUs are identified based on the lowest level aggregation of
asset from which largely independent cash inflows are generated. This can be a single gym or, in a number of instances,
a group of gyms which are geographically closely located where the cash inflows from each individual gym are not
generated largely independent of other gym sites within the surrounding geographical area. 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. At each reporting date, an assessment is
made as to whether there is any indication that a previously recognised impairment loss for assets other than goodwill
no longer exists or has decreased. If there is any such indication, the recoverable amount of the asset is recalculated
and the impairment loss reversed. 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.
Further information on impairment testing is provided in notes 3, 14, 15 and 16.
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:
quoted prices in active markets for identical assets or liabilities
Level 2:
inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices)
Level 3:
inputs for the asset or liability that are not based on observable market data (unobservable market data)
There were no transfers between levels throughout the periods under review.
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 finance income 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. Any changes in fair
value of those assets are recognised in other comprehensive income and are not recycled to profit or loss.
2. Summary of significant accounting policies continued
Debt instruments that meet the following conditions are measured subsequently at amortised cost:
l the financial asset is held within a business model whose objective is to hold financial assets in order to collect
contractual cash flows; and
l 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.
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 which 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.
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 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 use of financial
derivatives to hedge the exposure are approved by the Board and the Group does not use derivative financial instruments
for speculative purposes. As at 31 December 2022, there were no derivatives or hedging arrangements remaining in place.
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.
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 finance costs in the income statement.
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Financial statements
Notes to the consolidated financial statements continued
for the year ended 31 December 2022
2. Summary of significant accounting policies continued
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 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.
The Group also enters into structured wholesale energy market contracts for the procurement of electricity and
natural gas. It does this by buying energy directly from the wholesale market to cover operational energy requirements.
All contracts are entered into and continue to be held to receive or deliver the energy in accordance with the Group’s
expected usage requirements and all contracted quantities are actually physically supplied with no financial settlement
prior to, or at, maturity. As such, the Group applies the own use exemption in IFRS 9 with regards energy market contracts
and recognises the contracted cost of energy in the consolidated income statement when the energy is consumed.
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 an employee benefit expense when they are due.
Share based payments
The Group operates a number of share based arrangements for employees. 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 comprise rental income due from personal trainers, room rental income, advertising income
and amounts due from landlords in respect of contributions towards building work. They are initially measured at
transaction price. Subsequently, trade and other receivables are measured at amortised cost. The loss allowance for
trade receivables and accrued income is measured using the simplified approach (lifetime expected credit losses).
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank, short term deposits held on call with banks and other short term,
highly liquid investments with original maturities of three months or less.
Trade and other payables
Trade 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.
2. Summary of significant accounting policies continued
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:
l 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;
l 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
l 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 present 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
Determination of CGUs for goodwill impairment testing
The Group’s activities consist solely of the provision of low cost, high quality, 24/7, no contract gyms within the United
Kingdom, traded through 229 sites as at 31 December 2022. All gyms operate under ‘The Gym Group’ brand including
gyms acquired through business combinations. Under IAS 36, goodwill is allocated to the cash generating units (‘CGUs’)
on the basis of which CGU or group of CGUs is expected to benefit from the business combination in which the goodwill
arose. However, management has determined that the Group’s goodwill cannot be allocated to CGUs on a non-arbitrary
basis. Further, the Group has determined that it has a single operating segment and goodwill is not monitored at any
lower level. Therefore, consistent with the requirements of IAS 36, testing for goodwill impairment is performed at the
operating segment level, being the entire business.
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Financial statements
Notes to the consolidated financial statements continued
for the year ended 31 December 2022
3. Significant accounting judgements, estimates and assumptions continued
Determination of CGUs for property, plant and equipment and right-of-use assets impairment testing
Annually, management consider indicators of impairment to determine if an impairment assessment is required
for property, plant and equipment, right-of-use assets and intangible assets other than goodwill. Where indicated,
management identifies the CGU into which an asset belongs. Individual assets generally do not generate independent
cash inflows, and therefore they must be tested at the level of the CGU. In many cases, individual gyms are considered
to generate largely independent cash flows and therefore are considered to be a single CGU for impairment purposes.
However, there are some instances where a number of sites may be interdependent in generating cash flows. This is the
case where some gyms in a geographic location have a higher proportion of LIVE IT members who frequently visit other
gyms in the same geographic location. In these instances, there is significant trading interdependency and the cash
inflows from each individual gym are not generated largely independent of each other. In these instances, these gyms
are grouped together and considered to be one CGU for impairment assessment purposes. There is judgement required
to determine which sites are largely independent and which gyms are interdependent on each other. If no grouping of
sites was assumed, the additional impairment recognised in the financial year ended 31 December 2022 would have been
£8.8m in relation to six sites. Further information is provided in note 15.
Sources of estimation uncertainty
Impairment testing
The recoverable amount of the Group’s CGUs is typically based on value-in-use calculations. 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. Discount rates reflect the estimated return on capital employed required by an investor. This is also the
benchmark used by management to assess operating performance and to evaluate future capital investment proposals.
The pre-tax discount rate is derived from the Group’s post tax weighted average cost of capital. Changes in the discount
rate are calculated with reference to latest market assumptions for the risk-free rate, equity market risk premium and the
cost of debt.
Where an impairment loss is identified, it is allocated to the assets of the CGU on a pro rata basis to their carrying
amount, subject to the limitation that the carrying amount of an asset cannot be reduced below the highest of fair value
less costs of disposal, value-in-use or zero. Due to the ability to sublease the right-of-use assets, these have a measurable
fair value less costs of disposal and, as a result, this restriction results in the right-of-use asset being written down only
to its recoverable amount based on fair value less costs of disposal. Any remaining amount of the impairment loss that
would otherwise have been allocated to the right-of-use asset is allocated instead pro rata to the other assets of the unit.
More information, including key assumptions and carrying values, is included in notes 14, 15 and 16.
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 15 for further details. In addition, estimates of future cash flows and the determination of
discount rates applied to those cash flows could change in the longer term such that an impairment arises in relation to
other CGUs.
Provisions
Provisions are made for dilapidations in respect of leased premises. The recognition and measurement of these
provisions require estimates to be made in respect of uncertain events and amounts, with the key sources of estimation
uncertainty relating to whether a restoration obligation will arise, the amount and timing of future cash flows required to
settle any restoration obligation assessed as arising, and, to a lesser extent, the discount rate 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 196 of the Group’s 229 gym sites as at 31 December 2022 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 2022 would increase by £0.2m. If a provision was required for a site where the
Group does benefit from security of tenure, the provision at 31 December 2022 would increase by £0.1m. A ten basis points
change in the discount rate would not have a material impact on the provision recognised at 31 December 2022.
Details of dilapidation provisions recognised are set out in note 23.
4. New and amended IFRS standards
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 2022 (unless otherwise stated). The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is not yet effective.
Reference to the Conceptual Framework – Amendments to IFRS 3
The amendments replace a reference to a previous version of the IASB’s Conceptual Framework with a reference to the
current version issued in March 2018, without significantly changing its requirements.
The amendments add an exception to the recognition principle of IFRS 3 Business Combinations to avoid the issue of
potential ‘day 2’ gains or losses arising for liabilities and contingent liabilities that would be within the scope of IAS 37
Provisions, Contingent Liabilities and Contingent Assets or IFRIC 21 Levies, if incurred separately. The exception requires
entities to apply the criteria in IAS 37 or IFRIC 21, respectively, instead of the Conceptual Framework, to determine
whether a present obligation exists at the acquisition date. The amendments also add a new paragraph to IFRS 3 to
clarify that contingent assets do not qualify for recognition at the acquisition date.
These amendments had no material impact on the consolidated financial statements of the Group.
IFRS 9 Financial Instruments – Fees in the ’10 per cent’ test for derecognition of financial liabilities
The amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial
liability are substantially different from the terms of the original financial liability. These fees include only those paid or
received between the borrower and the lender, including fees paid or received by either the borrower or lender on the
other’s behalf. There is no similar amendment proposed for IAS 39 Financial Instruments: Recognition and Measurement.
This amendment had no material impact on the consolidated financial statements of the Group.
There were no other standards and amendments that became effective in the period, that apply to the consolidated
financial statements of the Group.
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 effective for reporting periods beginning on or after 1 January 2023:
Amendments to IAS 1
Classification of Liabilities as Current or Non-current
Amendments to IAS 1 and IFRS Practice
Statement 2
Disclosure of Accounting Policies
Amendments to IAS 8
Amendments to IAS 12
Definition of Accounting Estimates
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.
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Financial statements
Notes to the consolidated financial statements continued
for the year ended 31 December 2022
5. Revenue
The principal revenue streams for the Group are membership income, rental income from personal trainers and ancillary
income.
Membership income comprises monthly membership fees, non-refundable joining fees and longer term membership
fees in relation to student, pay up front and corporate memberships. Rental income from personal trainers represents
amounts paid by standalone personal trainers to operate their business from our gyms. Ancillary income includes income
from the sale of goods through vending machine, advertising income through the use of media screens and the sale of
day memberships.
The majority of revenue is derived from contracts with members 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 (note 20)
Revenue recognised that was included in contract liabilities in the prior year
Membership income
31 December 2022
£m
31 December 2021
£m
162.5
7.8
2.6
172.9
3.1
169.8
172.9
(11.0)
8.4
100.8
4.0
1.2
106.0
1.8
104.2
106.0
(8.4)
6.4
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 20).
The contract liability balance increases as the Group’s membership numbers increase. The Group does not receive any
consideration greater than 12 months in advance from members. Hence the total contract liability as at 31 December
2021 of £8.4m has been recognised as revenue during the year ended 31 December 2022.
6. Other income
Research and development tax credits
Government grants receivable towards work placements (note 8)
Government grants receivable for the purpose of immediate financial support
Other
31 December 2022
£m
31 December 2021
£m
0.4
0.1
–
0.3
0.8
–
0.2
7.1
–
7.3
During the prior year, the Group received £7.1m of direct local government grants as a result of the Covid-19 pandemic
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.
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
(Profit)/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 2022
£m
31 December 2021
£m
37.6
59.3
5.0
(0.4)
0.2
0.1
101.8
4.4
106.2
31.6
41.0
5.9
0.4
0.1
0.1
79.1
2.3
81.4
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.
In 2022, the Group received government assistance in the form of a 66% discount on business rates (subject to a
maximum of £2.0m per business) for businesses in the retail, hospitality and leisure sectors in England for the period
1 June 2021 to 31 March 2022. In the prior year, the Group benefitted from a business rates holiday for these sectors
covering the period from 1 January 2021 to 30 June 2021. The value of business rates saved during the year ended
31 December 2022 was £1.1m (2021: £8.2m).
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The Gym Group plc | Annual Report and Accounts 2022
Financial statements
Notes to the consolidated financial statements continued
for the year ended 31 December 2022
8. Employee information
Wages and salaries
Social security costs
Employers’ pension costs
Share based payments (note 26)
Government grants
Underlying employee costs
Non-underlying employee costs
Employee costs
31 December 2022
£m
31 December 2021
£m
33.4
2.9
0.7
1.4
(0.5)
37.9
0.3
38.2
30.4
2.1
0.5
2.9
(4.0)
31.9
0.3
32.2
Included within employee costs in 2022 is £0.3m (2021: £0.3m) which has been included within cost of sales in the
consolidated income statement.
The Group participated in the Kickstart scheme offered by the Government to combat youth unemployment. Under this
scheme, the Group received 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. In 2022, £0.5m was received as a contribution
towards salary costs and has been netted off against employee costs in the income statement (2021: £0.6m). A further
£0.1m (2021: £0.2m) represents a grant towards training costs and has been recognised in Other income. There are no
balances in deferred income related to this grant (2021: £0.1m) and there is no outstanding balance receivable related to
this grant as of 31 December 2022 (2021: £nil).
In 2021, the Group received £3.4m as part of a government initiative to provide immediate financial support as a result
of the Covid-19 pandemic in the form of the Coronavirus Job Retention Scheme (‘CJRS’). This amount was netted off
employee costs in the income statement.
The average number of employees, including Directors, during the year was:
Operational
Administrative
31 December 2022
Number
31 December 2021
Number
1,848
187
2,035
1,873
132
2,005
9. Non-underlying items
Affecting operating expenses (before depreciation, amortisation and
impairment)
Costs of major strategic projects and investments
Restructuring and reorganisation (income)/costs (including site closures)
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 2022
£m
31 December 2021
£m
4.6
(0.2)
4.4
8.3
0.2
8.5
12.9
0.9
0.1
1.0
13.9
(1.5)
12.4
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
1
In addition to the £4.4m of non-underlying items affecting operating expenses before depreciation, amortisation and impairment, there was £0.9m of
cash outflow in the year in relation to prior year creditors, bringing the total amount of cash flow on non-underlying operating items to £5.3m. Depreciation,
amortisation and impairment and remeasurement of borrowings are non-cash items.
The costs of major strategic projects and investments of £4.6m (2021: £1.8m) includes £4.0m (2021: £0.5m) in relation
to the Group’s brand transformation. The total costs incurred in the year in respect of this project were £6.5m of which
£4.0m is reflected in the income statement and relates to the relaunch of the brand and creation of the Group’s visual
identity and marketing assets, and £2.5m is included in property, plant and equipment and relates predominantly to new
site signage. The remainder of the costs included in other strategic initiatives in the year largely relate to the integration
costs of the three sites acquired from Fitness First in March 2022.
The credit in restructuring and reorganisation costs in the year reflects lease surrender income and costs associated
with the closure of a small number of gyms, together with the profit on remeasurement of one of the Group’s leases. Also
included here are the costs associated with the various Board changes that occurred during the year.
Non-underlying costs affecting depreciation, amortisation and impairment in the year amounted to £8.5m (2021:
£4.2m), of which £8.2m (2021: £4.0m) relates to the impairment of 13 sites where slower recovery from Covid-19 and
changes in hybrid working patterns have impacted on performance (see note 15 for further details). Also included here
is the amortisation of business combination intangibles acquired as part of the Lifestyle, easyGym and Fitness First
acquisitions.
Non-underlying items affecting finance costs amounted to £1.0m (2021: £0.9m) and largely reflect the remeasurement
of the Group’s Revolving Credit Facility (‘RCF’) following the changes agreed with the lenders.
Tax on non-underlying items represents the tax charge or credit arising on the Group’s non-underlying items calculated
at the current tax rate.
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The Gym Group plc | Annual Report and Accounts 2022
Financial statements
Notes to the consolidated financial statements continued
for the year ended 31 December 2022
10. Finance costs
Bank loans and overdraft interest including amortisation of financing fees
Lease interest
Movement in fair value of derivatives
Capitalised interest
Underlying finance costs
Non-underlying finance costs
Finance costs
31 December 2022
£m
31 December 2021
£m
2.8
13.3
0.2
16.3
(0.2)
16.1
1.0
17.1
2.6
14.0
–
16.6
–
16.6
0.9
17.5
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 2022 of 4.5%.
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% (2021: 19%).
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
Unrecognised tax losses
Adjustments in respect of prior years
Tax credit
31 December 2022
£m
31 December 2021
£m
(0.1)
–
(0.1)
(0.3)
0.5
–
0.2
0.1
0.3
0.3
0.6
7.7
3.0
(2.5)
8.2
8.8
31 December 2022
£m
31 December 2021
£m
(19.4)
3.7
0.7
(0.4)
(3.9)
–
0.1
(44.2)
8.4
(0.7)
3.3
–
(2.2)
8.8
11. Taxation continued
Deferred tax
At 1 January 2021
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
Adjustments in respect of prior years
Recognised in income statement
Business combinations (see note 13)
(Charge)/credit to income statement due
to changes in tax rates
Recognised in equity
At 31 December 2022
Accelerated
capital
allowances
£m
1.6
(2.1)
0.5
(0.2)
–
(0.2)
1.9
(0.5)
0.6
–
–
1.8
Losses
£m
2.0
(0.4)
7.2
2.5
–
11.3
(1.8)
1.1
–
0.5
–
11.1
Intangible
assets
£m
Share
schemes
£m
(0.1)
–
0.1
–
–
–
(0.1)
(0.3)
–
–
–
(0.4)
1.2
–
(0.1)
–
0.3
1.4
–
(0.1)
–
–
(0.6)
0.7
Other
£m
2.9
–
–
0.7
–
3.6
–
(0.5)
–
–
–
3.1
Total
£m
7.6
(2.5)
7.7
3.0
0.3
16.1
–
(0.3)
0.6
0.5
(0.6)
16.3
Deferred tax assets have been recognised in respect of tax losses and other temporary differences where the Directors
believe it is probable that these will be recovered within a reasonable period. Short term timing differences are generally
recognised ahead of losses on the basis that they are likely to reverse more quickly. In assessing the probability of
recovery, the Directors have reviewed the Group’s three year financial plan that underpins both the Going concern and
Viability assessments, and the goodwill and property, plant and equipment impairment testing. The use of a three year
period is also consistent with that used to assess the longer term viability of the Group. The Directors believe this detailed
plan provides convincing evidence to recognise the amount of deferred tax assets that are forecast to be recovered over
this three-year period. In particular, and as disclosed in more detail in respect of going concern in note 2 and impairment
in notes 15 and 16, this plan anticipates continued growth in yields across the whole estate and additional members from
new site openings over the next three years. The Directors have also considered the impact of climate-related risks set
out in the Sustainability report on pages 50-53.
The trading losses incurred as a result of the Covid-19 pandemic, together with the introduction in March 2021 of the
temporary enhanced capital allowances regime (the super-deduction tax break), have resulted in significant tax losses to
carry forward which are not anticipated to be fully utilised during the three years covered by the Group’s financial plan.
Losses for which no deferred tax asset is recognised equate to £20.2m, resulting in an unrecognised deferred tax asset of
£5.1m using a 25% tax rate. There is no time limit for utilising trade losses in the UK.
A deferred tax asset has arisen on accelerated capital allowances, whereby the tax written-down value is higher than the
net book value. A deferred tax liability has arisen on intangible assets of £0.4m. Other deferred tax assets include timing
differences on the accounting for the various share schemes.
The Finance Act 2022 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 2022 (2021: £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.
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The Gym Group plc | Annual Report and Accounts 2022
Financial statements
Notes to the consolidated financial statements continued
for the year ended 31 December 2022
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’s share based long term incentive schemes (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 2022, the Group had
potentially dilutive shares in the form of share options and unvested shares issued pursuant to The Gym Group plc’s share
based long term incentive schemes (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 2022
31 December 2021
(19.3)
12.4
(6.9)
(35.4)
6.9
(28.5)
177,251,348
171,060,028
(10.9)
(3.9)
(20.7)
(16.7)
At 31 December 2022, 6,804,605 share awards (2021: 5,260,315) were excluded from the diluted weighted average number
of Ordinary shares calculation because their effect would be anti-dilutive.
13. Business combinations
On 22 March 2022, the Group acquired the trade and assets of three sites trading under the Fitness First brand. The
property lease agreements in respect of these gyms have been transferred to the Group and the gyms have been
rebranded to operate under The Gym Group brand. The details of the transaction, the purchase consideration, the net
assets acquired, and the goodwill arising are as follows:
Assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Deferred tax assets
Liabilities
Trade and other payables
Lease liabilities
Provisions
Total identifiable net assets at fair value
Goodwill arising on acquisition
Purchase consideration paid – satisfied by cash
Net cash flow arising on acquisition
Cash consideration
Net cash outflow
Fair value recognised
on acquisition
£m
0.3
1.2
3.3
0.6
5.4
(0.6)
(3.3)
(0.2)
(4.1)
1.3
4.1
5.4
(5.4)
(5.4)
The Group measured the acquired lease liabilities using the present value of the remaining lease payments at the date
of acquisition. The right-of-use assets were measured at an amount equal to the lease liabilities.
The sites contributed revenues of £1.3m and net loss of £0.1m to the Group’s results for the period from 22 March 2022 to
31 December 2022. The additional revenue that would have been recognised if the sites had been acquired on 1 January
2022 is £0.4m. No additional net profit or losses would have been recognised.
The goodwill recognised is primarily attributed to the synergies and economies of scale expected from combining
each gym within the Group’s operations, the premium associated with advantageous site locations, potential growth
opportunities offered by each gym and the assembled workforce. It will not be deductible for tax purposes.
Acquisition-related costs of £1.3m were incurred in 2021 and were treated as non-underlying items in the financial
statements for the year ended 31 December 2021. No additional costs have been recognised in 2022.
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The Gym Group plc | Annual Report and Accounts 2022
Financial statements
Notes to the consolidated financial statements continued
for the year ended 31 December 2022
14. Intangible assets
15. Property, plant and equipment
Goodwill
£m
Customer list
£m
Contract
£m
Computer
software and
licences
£m
Assets under
construction
£m
Leasehold
improvements
£m
Fixtures,
fittings and
equipment
£m
Gym and
other
equipment
£m
Computer
equipment
£m
Cost
At 1 January 2021
Additions
At 31 December 2021
Additions
Business combinations
Disposals
At 31 December 2022
Accumulated amortisation
At 1 January 2021
Charge for the year
At 31 December 2021
Charge for the year
Impairment
Disposals
Transfer to right-of-use assets
At 31 December 2022
Net book value
At 31 December 2021
At 31 December 2022
77.7
–
77.7
–
4.1
–
81.8
–
–
–
–
–
–
–
–
77.7
81.8
2.7
–
2.7
–
0.3
–
3.0
(2.4)
(0.2)
(2.6)
(0.1)
–
–
–
(2.7)
0.1
0.3
Total
£m
96.7
5.2
101.9
7.3
4.4
(7.4)
106.2
(10.3)
(5.6)
(15.9)
(5.0)
(0.1)
7.3
0.2
1.2
–
1.2
–
–
(0.1)
1.1
(0.5)
–
(0.5)
(0.1)
(0.1)
–
0.2
15.1
5.2
20.3
7.3
–
(7.3)
20.3
(7.4)
(5.4)
(12.8)
(4.8)
–
7.3
–
(0.5)
(10.3)
(13.5)
0.7
0.6
7.5
10.0
86.0
92.7
Included within additions to computer software and licences in 2022 is £1.0m in relation to a collaboration agreement
with Fiit whereby Fiit granted The Gym Group a licence to provide certain products and content to LIVE IT members for
a period of five years. Also included within additions to computer software and licenses in 2022 is £4.7m (2021: £3.0m) in
relation to the investment made into the Group’s new digital platform.
Impairment test for goodwill
Goodwill is tested for impairment on an annual basis, or more frequently if events or changes in circumstance indicate
that the carrying value may be impaired.
The recoverable amount of goodwill has been determined based on a value-in-use calculation using cash flow projections
based on the Group’s three year plan. Cash flows beyond this period are extrapolated using an estimated growth rate of
3.0% (2021: 3.0%). All cash flows are discounted using a pre-tax discount rate of 8.5% (2021: 11.9%).
Membership growth, growth rates in subscription prices and increases applied to costs are the key assumptions
included within the Group’ s three year plan. These have been modelled based upon a mixture of historical experience
and expected future performance. The impact of any future openings has not been included in the assessment as they
do not form part of the existing assets. The performance of any gyms expected to close have been included within the
calculation up to the point of closure.
In the years under review, management’s value-in-use calculations have indicated no requirement to impair and no
reasonably possible change in key assumptions give rise to an impairment. Further information on impairment is
provided in note 3.
Cost
At 1 January 2021
Additions
Disposals
Transfers
At 31 December 2021
Additions
Business combinations
Disposals
Transfers
At 31 December 2022
Accumulated depreciation
At 1 January 2021
Charge for the year
Impairment
Disposals
At 31 December 2021
Charge for the year
Impairment
Disposals
At 31 December 2022
Net book value
At 31 December 2021
At 31 December 2022
2.3
1.9
(0.1)
(2.0)
2.1
2.0
–
–
(1.8)
2.3
–
–
–
–
–
–
–
–
–
2.1
2.3
191.9
16.4
(1.5)
1.9
208.7
31.9
1.1
(2.6)
1.7
240.8
(63.0)
(14.6)
(2.8)
1.2
(79.2)
(16.4)
(2.2)
2.6
(95.2)
129.5
145.6
11.3
0.2
–
–
11.5
0.5
–
(0.4)
–
11.6
(8.0)
(1.1)
–
–
(9.1)
(0.9)
–
0.4
(9.6)
2.4
2.0
84.5
2.5
(0.5)
0.1
86.6
7.4
0.1
(4.2)
0.1
90.0
(48.4)
(7.4)
(0.4)
0.3
(55.9)
(8.5)
(0.3)
4.2
3.6
0.7
–
–
4.3
1.3
–
–
–
5.6
(2.9)
(0.5)
–
–
(3.4)
(0.6)
–
–
Total
£m
293.6
21.7
(2.1)
–
313.2
43.1
1.2
(7.2)
–
350.3
(122.3)
(23.6)
(3.2)
1.5
(147.6)
(26.4)
(2.5)
7.2
(60.5)
(4.0)
(169.3)
30.7
29.5
0.9
1.6
165.6
181.0
Included within additions for the year is £0.2m of capitalised interest (2021: £nil), and £6.2m of accrued capital
expenditure (2021: £2.2m). In the prior year, there was also £0.1m of capital contributions from landlords not yet received.
Impairment test for property, plant and equipment, right-of-use assets and other intangible assets
The Group reviews the carrying value of property, plant and equipment, right-of-use assets and intangible assets
(excluding goodwill) for indicators of impairment annually, or more frequently if events or changes in circumstances
indicate that the carrying value may be impaired.
The recoverable amount of the Group’s CGUs is typically based on value-in-use calculations. The value in use at
31 December 2022 was calculated using the discounted present value of each CGU’s expected future cash flows using
the Group’s three year plan as the basis. Membership growth, growth rates in subscription prices and increases applied
to costs are the key assumptions included when determining the expected future cash flows of each CGU. These have
been modelled based upon a mixture of historical experience and expected future performance. A pre-tax discount rate
of 8.5% (2021: 11.9%) was used to calculate the present value.
During the year a total impairment loss of £8.2m was recognised relating to 13 sites which have been particularly hard
hit by the Covid-19 pandemic and where recovery is slower than in the rest of estate. Of the total impairment charge
recognised in the year of £8.2m, £2.5m was allocated against property, plant and equipment and £5.7m was allocated
against right-of-use assets. The total recoverable amount of the affected CGUs was £7.7m.
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The Gym Group plc | Annual Report and Accounts 2022
Financial statements
Notes to the consolidated financial statements continued
for the year ended 31 December 2022
15. Property, plant and equipment continued
The impairment loss was allocated to the assets of the CGU on a pro rata basis to their carrying amount, subject to the
limitation that the carrying amount of an asset cannot be reduced below the highest of fair value less costs of disposal,
value-in-use or zero. Due to the ability to sublease the right-of-use assets, these have a measurable fair value less costs
of disposal and, as a result, this restriction results in the right-of-use asset being written down only to its recoverable
amount based on fair value less costs of disposal. The remaining amount of the impairment loss that would otherwise
have been allocated to the right-of-use asset was allocated pro rata to the other assets of the unit. In restricting the
impairment charge recognised in respect of the right-of-use assets, their fair value less costs of disposal 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 7.8% (2021: 9.8%).
Under the downside scenario prepared for the going concern assessment, a further impairment of £1.1m would arise
in relation to property, plant and equipment and £0.4m in relation to right-of-use assets at the sites impaired. An
impairment charge of £0.1m in relation to property, plant and equipment at two sites and £0.6m in relation to right-of-use
assets at a further four sites totalling would also be recognised under the downside scenario.
Further information on impairment is provided in note 3.
16. Right-of-use assets and leases
The Group leases gym sites and its head office (‘Property leases’) and also enters into hire purchase and lease
agreements for gym equipment (‘Non-property leases’). Property leases are typically made for fixed periods of ten to 20
years but may have extension options as well. Non-property leases are typically made for fixed periods of three years.
Both property and non-property leases are recognised as a right-of-use asset with a corresponding liability at the date
at which the leased asset is available for use by the Group.
(i) Amounts recognised in the consolidated statement of financial position
Cost
At 1 January 2021
Additions
At 31 December 2021
Additions
Business combinations
Disposals
At 31 December 2022
Accumulated depreciation
At 1 January 2021
Charge for the year
Impairment
At 31 December 2021
Charge for the year
Impairment
Disposals
Transfer from intangible assets
At 31 December 2022
Net book value
At 31 December 2021
At 31 December 2022
Property
leases
£m
Non-property
leases
£m
345.4
42.8
388.2
33.5
3.3
(4.5)
–
7.2
7.2
8.1
–
–
Total
£m
345.4
50.0
395.4
41.6
3.3
(4.5)
420.5
15.3
435.8
(89.8)
(23.3)
(0.9)
(114.0)
(26.5)
(5.7)
1.8
(0.2)
(144.6)
274.2
275.9
–
(0.2)
–
(0.2)
(1.6)
–
–
–
(1.8)
7.0
13.5
(89.8)
(23.5)
(0.9)
(114.2)
(28.1)
(5.7)
1.8
(0.2)
(146.4)
281.2
289.4
16. Right-of-use assets and leases continued
During the year a total impairment loss of £8.2m was recognised relating to 13 sites which have been particularly hard
hit by the Covid-19 pandemic and where recovery is slower than in the rest of estate. Of the total impairment charge
recognised in the year of £8.2m, £2.5m was allocated against property, plant and equipment and £5.7m was allocated
against right-of-use assets. The total recoverable amount of the affected CGUs was £7.7m. See note 15 for further
disclosure.
In 2020, 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 £0.5m (2021: £1.6m) 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.
In the prior year, where landlords have agreed to permanently change the frequency of rental payments, the change in
the value of the lease liability of £0.8m was recognised within finance costs in the consolidated income statement as all
changes impact solely on the interest charge related to the lease liability.
The split of lease liabilities between current and non-current is as follows:
Current
Non-current
Total Lease liabilities
31 December 2022
£m
31 December 2021
£m
25.3
325.1
350.4
27.0
309.3
336.3
The total cash outflow for leases in the year was £40.7m (£2021: £31.9m). 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 2022
£m
31 December 2021
£m
40.4
43.4
40.5
38.6
38.7
246.0
447.6
(97.2)
350.4
39.1
37.8
37.8
35.4
35.5
242.7
428.3
(92.0)
336.3
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Financial statements
Notes to the consolidated financial statements continued
for the year ended 31 December 2022
16. Right-of-use assets and leases continued
(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 2022
£m
31 December 2021
£m
(0.5)
28.1
5.7
13.3
(1.6)
23.5
0.9
14.0
19. Cash and cash equivalents
Cash at bank
Short term deposits
Cash and cash equivalents
31 December 2022
£m
31 December 2021
£m
0.5
4.9
5.4
3.3
4.0
7.3
Cash and cash equivalents earn interest at floating rates based on daily bank deposit rates. Short term deposits are
made for periods of one day and earn interest at the respective short term deposit rates.
There are no variable lease payments and no sublease income recognised in the consolidated income statement.
20. Trade and other payables (due in less than one year)
(iii) Extension and termination options
The Group has recognised lease extension options contained within the lease in the calculation of right-of-use assets
and lease liabilities at inception of the lease if management is reasonably certain to exercise the option to extend
the lease beyond its contractual term. In all other cases, a lease extension is only recognised when a lease is extended
beyond the original contractual term.
During the year, the Group has renegotiated four leases (2021: 12) which resulted in additional lease liabilities of £3.5m
being recognised (2021: £6.9m) and terminated two leases (2021: none).
(iv) Non-property lease facilities
At 31 December 2022, the Group had in place total facilities of £12.5m in respect of non-property lease arrangements
(2021: £9.5m) which it utilises to finance the fit-out of new gyms. As at 31 December 2022, the amount outstanding on this
facility was £11.5m (2021: £6.4m).
17. Investments in financial assets
On 3 February 2020, the Group purchased convertible loan notes in Fiit Limited for cash consideration of £1.0m.
Conversion was originally expected to take place within two years of issue giving the Group a small non-controlling stake
at a maximum valuation of £1.25m. During the year, 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. These notes are measured at fair value through profit or loss and the
carrying value at the end of the year was £1.0m (2021: £1.0m).
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 2022 to reasonably possible changes in the assumptions used is not considered to be material.
18. Trade and other receivables (due in less than one year)
Trade payables
Social security and other taxes
Accruals
Other payables
Contract liabilities (note 5)
31 December 2022
£m
31 December 2021
£m
8.0
2.0
17.6
0.2
11.0
38.8
2.3
2.5
17.0
0.2
8.4
30.4
21. Borrowings
The carrying value of the Group’s bank borrowings at 31 December 2022 was £70.0m (2021: £44.3m).
The Group has in place a Revolving Credit Facility (‘RCF’) which is syndicated to a three-lender panel of NatWest, HSBC
and Banco de Sabadell. Until May 2022, the Group had £100m of available facilities under the RCF and it was due to
mature in 2023.
In May 2022, the Group agreed changes to its RCF facility with its lenders which 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.
Facility A and Facility B had been accounted for as a single facility totalling £100m. The Group has applied the
requirements of IFRS 9 to determine whether the changes made constitute a significant modification to the facility and
management has concluded that the new agreement represents a single loan agreement for an RCF totalling £80m
and that the change is not a substantial modification as the revised cash flows are below 10% of the original facility.
Consequently, the existing liability has been remeasured to amortised cost using a revised effective interest rate.
The funds borrowed under the RCF bear interest at a minimum annual rate of 2.85% (2021: 2.60%) above the Sterling
Overnight Index Average (‘SONIA’) plus a credit adjustment spread.
Trade receivables
Loss allowance
Other receivables
Prepayments and accrued income
31 December 2022
£m
31 December 2021
£m
The average interest rate paid in the year on drawn funds under the facility is 4.46% (2021: 2.67%). Undrawn funds bear
interest at a minimum annual rate of 1.14% (2021: 0.91%).
0.6
–
0.6
0.7
7.6
8.9
0.8
–
0.8
0.6
4.9
6.3
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 non-underlying and
excluded from adjusted earnings.
The RCF is subject to financial covenants relating to leverage, fixed charge cover and minimum liquidity.
At 31 December 2022, the Group had drawn down £70.0m under the RCF (2021: £45.0m), leaving £10.0m (2021: £55.0m)
undrawn and available. The £70.0m is repayable in October 2024.
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Financial statements
Notes to the consolidated financial statements continued
for the year ended 31 December 2022
22. Financing liabilities
Cash and cash
equivalents
£m
Borrowings
£m
Non-property
lease liabilities
£m
Property lease
liabilities
£m
At 1 January 2021
Cash flows
Non-cash changes to
amortised cost
IFRS 16
At 31 December 2021
Cash flows
Non-cash changes to
amortised cost
IFRS 16
At 31 December 2022
3.7
3.6
–
–
7.3
(1.9)
–
–
5.4
(49.2)
6.0
(1.1)
–
(44.3)
(25.0)
(0.7)
–
(70.0)
–
–
–
(6.4)
(6.4)
–
–
(5.0)
(11.4)
(306.3)
–
–
(23.6)
(329.9)
–
–
(9.1)
Total lease
liabilities
£m
(306.3)
–
–
(30.0)
(336.3)
–
–
(14.1)
(339.0)
(350.4)
Non-cash changes to amortised cost comprises accrued interest using the effective interest rate method and
remeasurements arising from refinancing.
The IFRS 16 movements in non-property lease liabilities represent the net movement in lease payments of £3.6m
(2021: £0.9m) offset by additions of £8.0m (2021: £7.2m) and finance costs of £0.6m (2021: £0.1m).
The IFRS 16 movements in property lease liabilities represent the net movement in lease payments of £37.1m
(2021: £31.0m), disposals of £2.5m (2021: nil) and rent concessions of £0.5m (2021: £1.6m) offset by additions of £33.0m
(2021: £35.3m), modifications of £3.5m (2021: £7.0m) and finance costs of £12.7m (2021: £13.9m).
23. Provisions
At 1 January 2021
New provisions
Release of provision
At 31 December 2021
New provisions
Business combinations
Utilisation of provisions
At 31 December 2022
Due in less than one year
Due in more than one year
At 31 December 2021
Due in less than one year
Due in more than one year
At 31 December 2022
Dilapidations
£m
Other
£m
1.2
0.4
–
1.6
0.2
-
-
1.8
–
1.6
1.6
–
1.8
1.8
0.1
–
(0.1)
–
0.2
0.5
(0.1)
0.6
–
–
–
0.6
–
0.6
Total
£m
1.3
0.4
(0.1)
1.6
0.4
0.5
(0.1)
2.4
–
1.6
1.6
0.6
1.8
2.4
A dilapidations provision is recognised when there is a present 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 with £0.1m expected to crystalise in the next five years, £0.8m crystallising in
between five and ten years and the remainder crystallising in more than ten years.
24. Financial instruments
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 £70.0m (2021: £44.3m) have a fair value of £70.0m (2021: £45.0m). 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 and
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 bank borrowings and non-property leases less cash and
cash equivalents. Total capital is calculated as equity (excluding own shares held and retained earnings) as shown in the
Consolidated Statement of Financial Position plus net debt. The gearing ratios for the periods under review are as follows:
Bank borrowings
Non-property leases
Less: cash and cash equivalents
Non-Property Net Debt
Total equity
Total capital
Gearing ratio
31 December 2022
£m
31 December 2021
£m
70.0
11.5
(5.4)
76.1
229.7
305.8
25%
45.0
6.4
(7.3)
44.1
229.6
273.7
16%
Financial risk management
The Group has exposure to the following risks from its use of financial instruments:
l Market risk
l Liquidity risk
l 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 2022 and 2021. 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.
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The Gym Group plc | Annual Report and Accounts 2022
Financial statements
Notes to the consolidated financial statements continued
for the year ended 31 December 2022
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
based on GBP SONIA. The risk is sometimes managed by the Group through interest rate swap contracts and hedging
activities are evaluated regularly to align with interest rate views and defined risk appetite to ensure the most cost-
effective hedging strategies are applied. During the year, the Group had in place an interest rate swap contract which
was designated as a cash flow hedge. This derivative expired in September 2022 and as at 31 December 2022 the Group
did not have any interest rate hedging in place.
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 Group is not expecting any reduction in interest rates over the next 12 months.
The number of Ordinary shares in issue is as follows:
31 December 2022
£m
31 December 2021
£m
–
0.1
–
0.1
31 December 2022
31 December 2021
178,039,002
48,050
177,519,174
48,050
Ordinary shares of £0.0001 each
Deferred Ordinary shares of £1 each
In addition, 312,480 Ordinary shares of £0.0001 each are held by an employee benefit trust (2021: 232,044).
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 £31.2m. The costs directly related to the transaction amounted to £0.9m. The proceeds of the share issue
were 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 £0.1m.
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% (2021: 0.5%)
31 December 2022
£m
31 December 2021
£m
0.4
0.2
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 where possible and 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
Lease liabilities
31 December 2022
1 to 2 years
£m
2 to 5 years
£m
–
74.1
43.4
117.5
–
–
117.8
117.8
31 December 2021
1 to 2 years
£m
2 to 5 years
£m
–
46.0
37.8
83.8
–
–
108.7
108.7
More than
5 years
£m
–
–
246.0
246.0
More than
5 years
£m
–
–
242.7
242.7
Within
1 year
£m
25.8
5.6
40.4
71.8
Within
1 year
£m
19.4
1.2
39.1
59.7
Total
£m
25.8
79.7
447.6
553.1
Total
£m
19.4
47.2
428.3
494.9
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract,
leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily trade receivables)
and from its financing activities, including deposits with banks and financial institutions, and other financial instruments.
The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by
international credit-rating agencies.
Due to the nature of the business requiring customers to pay in advance, there is little concentration of risk in trade
receivables due to the limited value of trade receivables due from large number of customers which are spread across
wide geographical areas. Trade receivable balances are written off when the balance is known not to be recoverable. and
expected credit losses are immaterial.
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The Gym Group plc | Annual Report and Accounts 2022
Financial statements
Notes to the consolidated financial statements continued
for the year ended 31 December 2022
26. Share based payments
The Group had the following equity-settled share based payment arrangements in operation during the year:
26. Share based payments continued
The following assumptions were used for options granted during the year:
a) The Gym Group plc Performance Share Plan (‘PSP’)
b) The Gym Group plc Share Incentive Plan – Free shares (‘SIP - Free Shares’)
c) The Gym Group plc Share Incentive Plan – Matching shares (‘SIP’)
d) The Gym Group plc Restricted Stock Plan (‘RSA’)
e) The Gym Group plc Long Service Award Plan (‘LSA’)
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 £1.7m (2021: £2.4m) in respect of
the Group’s share based payment arrangements and a credit related to employer’s national insurance of £0.3m (2021:
charge of £0.5m).
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
2022
Granted
during the
year
3,613,320
19,431
158,896
1,604,628
4,358
882,569
1,244,092
–
77,085
1,272,508
2,750
857,360
Lapsed/
cancelled
during the
year
(1,520,175)
–
(11,548)
(202,357)
–
(408,736)
Exercised
during the
year
Outstanding
at 31
December
2022
Exercisable
at 31
December
2022
–
(3,048)
(7,729)
3,327,237
16,383
216,704
(496,747) 2,178,032
2,750
1,312,444
(4,358)
(18,749)
378,888
16,383
47,139
316,047
–
52,386
6,283,002
3,453,795
(2,142,816)
(530,631) 7,063,550
810,843
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 93.0p and 236.0p. 758,457 options were exercisable under the PSP, RSA and SIP
schemes as at 31 December 2022 (2021: 488,466) and 52,386 options were exercisable under the SAYE scheme (2021: nil).
No other options were exercisable as at 31 December 2022.
(a) Performance Share Plan
The outstanding awards under the PSP as at 31 December 2022 will all vest within three years, subject to continued
employment and the achievement of certain performance targets.
For awards made in 2022 and prior to 2020, the targets are based on TSR and financial performance measures with each
target contributing to 50% of the vesting conditions. For awards made in 2022, the financial performance measures are
Return on Invested Capital (‘ROIC’) and Cumulative Adjusted Group Operating Cash Flow, with the awards being split
equally between these two measures. 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.
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.
The vesting conditions of the Performance Share Plan awards are set out on page 101. The maximum term of these
awards is three years and settlement is in the form of shares.
The fair value of the ROIC, Cumulative Adjusted Operating Cash Flow and EPS elements 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.
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
2022
2021
2022
2021
£2.22
£0.0001
61.75%
3 years
–
1.57%
£2.32
£0.0001
60.20%
3 years
–
0.13%
£2.22
£0.0001
54.25%
5 years
–
1.56%
£2.32
£0.0001
68.83%
5 years
–
0.42%
The weighted average fair value of each award issued under this scheme during the year was £1.21 (2021: £1.67). The
weighted average remaining contractual life was 8.0 years at 31 December 2022 (2021: 8.0 years).
(b) Share Incentive Plan – Free shares
The awards made under the SIP - Free Shares occurred when the Group floated on the London Stock Exchange and were
subject to continued employment requirements over a three-year period and had no performance conditions. Therefore,
the options vested in full at the end of the three-year period. No further awards have been issued. The shares are held by
an employee benefit trust and are dilutive for the purposes of earnings per share.
The weighted average remaining contractual life was 3.3 years at 31 December 2022 (2021: 4.3 years).
(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. Therefore, the options vest in full at the end of the three-year period. 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 weighted average fair value of each award issued under this scheme during the year was £1.60 (2021: £2.64) and was
determined using the share price at the date of grant. The weighted average remaining contractual life was 1.2 years at
31 December 2022 (2021: 1.3 years).
(d) Restricted stock
The outstanding awards under the RSA are subject to continued employment requirements over a two or three-year
period and have no performance conditions. Therefore, the options vest in full at the end of the period. The shares are
potentially dilutive for the purposes of calculating diluted earnings per share.
The weighted average fair value of each award issued under this scheme during the year was £1.53 (2021: £2.66) and was
determined using the share price at the date of grant. The weighted average remaining contractual life was 8.7 years at
31 December 2022 (2021: 8.4 years).
(e) Long Service Awards
The outstanding awards under the LSA are subject to continued employment requirements over a one-year period and
have no performance conditions. Therefore, the options vest in full at the end of the period. The shares are potentially
dilutive for the purposes of calculating diluted earnings per share.
The weighted average fair value of each award issued under this scheme during the year was £1.05 (2021: £2.61) and was
determined using the share price at the date of grant. The weighted average remaining contractual life was 0.9 years
(2021: 0.6 years) at 31 December 2022.
(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. Therefore, the options vest in full at the end of the period. The shares
are dilutive for the purposes of earnings per share.
The weighted average fair value of each award issued under this scheme during the year was £0.56 (2021: £1.17) and was
determined using the share price at the date of grant. The weighted average remaining contractual life was 2.7 years
(2021: 2.5 years) at 31 December 2022.
156 |
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The Gym Group plc | Annual Report and Accounts 2022
The Gym Group plc | Annual Report and Accounts 2022
Financial statements
Notes to the consolidated financial statements continued
for the year ended 31 December 2022
Financial statements
Company statement of financial position
as at 31 December 2022
27. Commitments and contingencies
The Group had £0.8m of commitments that were contracted but not provided as at 31 December 2022 relating to
contracts for the fit-out of new gyms where works have not yet commenced (2021: £2.9m).
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 provided services to
the Group in prior years. During the prior period, Closewall Limited provided services to the Group to the value of £11,000.
There was no balance outstanding at 31 December 2022 (2021: £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 Limited1
Derwent Fitness GS Limited1
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%
1 These subsidiaries are in the process of being struck off; the process is expected to be complete by the end of March 2023.
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 employment services is shown below:
Note
31 December 2022
£m
31 December 2021
£m
Non-current assets
Investments in subsidiaries
Trade and other receivables
Deferred tax asset
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
The notes on pages 161-166 form an integral part of the financial statements.
4
5
5
6
7
8
8
8
8
8
227.6
85.4
0.5
313.5
3.0
0.1
3.1
316.6
4.3
70.0
74.3
242.3
0.1
189.8
–
39.9
12.5
242.3
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
As permitted by s408 of the Companies Act 2006, the Company’s profit and loss account is not presented as part of
these accounts. The Company’s profit for the year amounted to £0.3m (2021: loss of £1.5m).
r
e
p
o
r
t
S
t
r
a
t
e
g
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i
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e
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o
r
t
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o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
Remuneration
Termination benefits
Company contributions to defined contribution pension scheme
Share based payment charge
31 December 2022
£m
31 December 2021
£m
These financial statements were approved by the Board of Directors on 15 March 2023.
1.6
–
0.1
0.8
2.5
2.6
0.2
0.1
1.2
4.1
Signed on behalf of the Board of Directors
Richard Darwin
Chief Executive Officer
Luke Tait
Chief Financial Officer
At the current and prior year end, there were no outstanding loan balances owed by key management personnel. At the
year end, no balance (2021: £0.6m) was owed to key management personnel in respect of year-end bonuses.
Company Registration Number 08528493
Information regarding the highest paid Director is shown in the Report of the Remuneration Committee.
29. Dividends made and proposed
It is a condition of the Facility C of the Group’s RCF that the Company shall not declare or pay a dividend until the facility
is cancelled in full. As such the Directors are not proposing a final dividend for the financial year 2022 (2021: £nil).
158 |
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Strategic reportFinancial statementsGovernance report
The Gym Group plc | Annual Report and Accounts 2022
The Gym Group plc | Annual Report and Accounts 2022
Financial statements
Company statement of changes in equity
for the year ended 31 December 2022
Financial statements
Notes to the Company financial statements
for the year ended 31 December 2022
Own shares
held
£m
Share
premium
£m
Hedging
reserve
£m
Merger
reserve
£m
Retained
earnings
£m
At 1 January 2021
Loss for the year
Other comprehensive income
Total comprehensive loss for the year
Capital contributions to subsidiaries
Issue of Ordinary share capital
At 31 December 2021
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Capital contributions to subsidiaries
Issue of Ordinary share capital
0.1
–
–
–
–
–
0.1
–
–
–
–
–
159.5
–
–
–
–
30.2
189.7
–
–
–
–
0.1
At 31 December 2022
0.1
189.8
The notes on pages 161-166 form an integral part of the financial statements.
Retained earnings include distributable reserves of £9.6m (2021: £4.9m).
(0.2)
–
0.1
0.1
–
–
(0.1)
–
0.1
0.1
–
–
–
39.9
–
–
–
–
–
39.9
–
–
–
–
–
9.7
(1.5)
–
(1.5)
2.3
–
10.5
0.3
–
0.3
1.7
–
Total
£m
209.0
(1.5)
0.1
(1.4)
2.3
30.2
240.1
0.3
0.1
0.4
1.7
0.1
39.9
12.5
242.3
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 Group’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 2022, the Directors have
considered the following:
l the Group’s trading performance in FY22 and throughout the traditional January and February 2023 peak period, in
particular in respect of its trading subsidiary The Gym Limited (‘TGL’) on which the Company is interdependent;
l future expected trading performance of the Company and TGL to June 2024 (the going concern period), including
membership levels and behaviours in light of the current difficult macroeconomic environment; and
l the Company and Group’s financing arrangements and relationship with its lenders and shareholders.
2022 was a year of significant recovery and growth for The Gym Group, with membership at the end of December 2022
reaching 821,000, an increase of 14.3% from the end of December 2021. Average revenue per member per month for the
year (‘ARPMM’) was £17.82 and for the second half of the year was £18.30, up 4.5% on the second half of the prior year.
LIVE IT, the premium price product, ended the year at 29.6% of total membership compared with 27.1% in December
2021. As a result, revenue and Group Adjusted EBITDA both increased significantly. The Group also reported strong cash
generation, with free cash flow of £16.6m being generated and used to part-fund the 25 organic site openings as well as
our investment in the new technology and brand. The remaining organic site openings and the acquisition of the three
sites previously trading under the Fitness First brand were funded through an increase in the Group’s borrowings. All sites
opened in the year are performing in line with our expectations.
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The Gym Group plc | Annual Report and Accounts 2022
Financial statements
Notes to the Company financial statements continued
for the year ended 31 December 2022
2. Summary of significant accounting policies continued
Going concern continued
In May 2022, the Company agreed with its lenders certain changes to the Company’s Revolving Credit Facility (‘RCF’).
As a result, the Company now has access to a combined £80m facility which matures in October 2024. The Group also
currently has access to £13m of finance lease facilities (£15m permitted under the RCF). As at 31 December 2022, the
Group had Non-Property Net Debt (including finance leases) of £76.1m, with £15.4m of headroom (calculated off bank
debt less cash) under the RCF. The RCF is subject to quarterly financial covenant 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. Whilst the going concern assessment covers the period to the end of June 2024, the
Directors have considered the fact that the Company’s RCF facility is currently expected to expire in October 2024 and
concluded that there is a realistic prospect that this will be extended or refinanced before that time.
Following the January and February 2023 peak trading period, closing membership at 28 February 2023 was 890,000
members, an increase of 8.4% on the position at 31 December 2022. However, demand has been impacted by the cost-of-
living pressures felt by many; and the Directors expect the current difficult macroeconomic environment and consumer
behaviour to continue. As a result, we have taken a cautious approach to preparing the three-year financial plan that
underpins the going concern review.
The base case forecast for the period to 30 June 2024 anticipates continued growth in yields across the whole estate
as a result of pricing actions that have already been taken. However, modest increases in membership levels are driven
largely by the sites opened in 2022 and not by growth in the mature estate. In addition, the Directors have taken a more
measured approach to new site openings throughout the plan period, with all new sites assumed to be self-financed.
Under this scenario, all financial covenants are passed with a reasonable level of headroom and the Company and Group
can operate within its financing facilities.
The Directors have considered a downside scenario which anticipates a more significant cost-of-living downturn
throughout the period under review. Under this scenario, membership numbers in the mature estate start to deviate
from the base case from March 2023 such that they are approximately 10% lower by the end of 2023. Yields do continue
to increase but at a much lower level than under the base case. Under this scenario, the number of new site openings is
reduced and discretionary performance-related bonuses removed to ensure that 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 to ascertain the extent of the downturn in trading
that would be required to breach the Group’s banking covenants or liquidity requirements. Mitigating actions assumed
in this scenario include moving to a minimum level of maintenance and IT capital expenditure; reducing controllable
operating costs and marketing expenditure; and pausing the new site opening programme in order to preserve cash.
In this scenario, the number of new members each month would have to decline by 16.5% compared to the base case
(the equivalent of membership reducing to 73% of the February 2023 closing membership number) before the leverage
covenant would be breached in June 2024. However, the Company 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 consider the reverse stress test scenario to be highly unlikely.
Conclusion
The Board has reviewed the financial plan and downside scenarios of the Group and has a reasonable expectation
that the Company and the Group have adequate resources to continue in operational existence for the period to 30
June 2024. As a result, the Directors continue to adopt the going concern basis in preparing the 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 and 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.
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
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:
quoted prices in active markets for identical assets or liabilities
Level 2:
inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices)
Level 3:
inputs for the asset or liability that are not based on observable market data (unobservable market data)
There were no transfers between levels throughout the periods under review.
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 use of financial
derivatives to hedge the exposure is approved by the Board and the Company does not use derivative financial
instruments for speculative purposes. As at 31 December 2022, there were no derivatives or hedging arrangements
remaining in place.
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.
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.
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.
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The Gym Group plc | Annual Report and Accounts 2022
Financial statements
Notes to the Company financial statements continued
for the year ended 31 December 2022
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 2021
Additions
At 31 December 2021
Additions
At 31 December 2022
£m
193.6
32.3
225.9
1.7
227.6
In December 2021, the Company invested £30m 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 £1.7m has been recognised within
investments in subsidiaries (2021: £2.3m). Details of the Company’s share based payment arrangements are shown in
note 26 to the consolidated financial statements.
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
31 December 2022
£m
31 December 2021
£m
–
88.4
88.4
3.0
85.4
88.4
0.2
65.3
65.5
65.5
–
65.5
2022 was a year of recovery and investment for The Gym Group. However, the challenges brought about by the war in
Ukraine and cost-of-living pressures on consumers, meant that the Group was not able to recover to pre Covid-19 levels.
As a result, the Group reported a loss for the year of £19.3m. It is expected that the current difficult macroeconomic
environment and its impact on consumer demand will continue throughout 2023 and the Group is taking a more
measured approach to new site openings with all new site growth expected to be self-financed. As such, the Directors no
longer anticipate that the amounts due from Group undertakings will be repaid within one year, and as such, £85.4m has
been classified as non-current as at 31 December 2022.
At 31 December 2022, the Company was exposed to £2.7m should its trading subsidiary, The Gym Limited, default on its
obligations under non-property leases. No expected credit loss in respect of this has been recognised at the balance
sheet date.
The Company’s subsidiary undertakings are shown in note 28 to the consolidated financial statements.
6. Trade and other payables (due in less than one year)
Trade payables
Amounts owed to Group undertakings
Accruals
31 December 2022
£m
31 December 2021
£m
0.1
3.8
0.4
4.3
0.1
5.3
1.7
7.1
7. Borrowings
The carrying value of the Company’s borrowings at 31 December 2022 was £70.0m (2021: 44.3m).
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 2022
£m
31 December 2021
£m
–
0.1
–
0.1
31 December 2022
31 December 2021
178,039,002
177,519,174
48,050
48,050
Refer to note 25 of the consolidated financial statements for details of movements in share capital.
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The Gym Group plc | Annual Report and Accounts 2022
Financial statements
Notes to the Company financial statements continued
for the year ended 31 December 2022
Other information
Five-year record
8. Issued capital and reserves continued
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 £0.1m.
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 Less Normalised Rent
Return on Invested Capital of mature gym sites3
Employee engagement score
2022
£m
172.9
38.0
24.0
76.1
2.00
229
821
17.82
47.2%
182
50.9
20%
67%
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
1
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.
2 The 2021 and 2020 figures are impacted by closure days.
3
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, share based payments 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 – Adjusted earnings 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 Less Normalised Rent – Group Adjusted EBITDA Less Normalised Rent contributed by mature
sites (open 24 months or more at the period end).
Return On Invested Capital of mature gym sites – Mature gym site EBITDA Less Normalised Rent divided by total
capital initially invested in the mature sites excluding acquisition 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 |
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Strategic reportFinancial statementsGovernance report The Gym Group plc | Annual Report and Accounts 2022
Other information
Corporate information
Company Secretary
Katy Tucker
Company number
08528493
Registered office
5th Floor
OneCroydon
12-16 Addiscombe Road
Croydon
CR0 0XT
Website
www.tggplc.com
Corporate Advisers
Bankers
HSBC Bank plc
Solicitors
Allen & Overy LLP
Auditor
Ernst & Young LLP
Joint Brokers
Numis Securities Limited
Peel Hunt LLP
Registrar
Link Group
168 |
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T
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The Gym Group plc
5th Floor
OneCroydon
12-16 Addiscombe Road
Croydon
CR0 0XT
www.tggplc.com
www.thegymgroup.com