AUGUST 2019 1 FORWARD-LOOKING STATEMENT DISCLAIMER This - PowerPoint PPT Presentation

AUGUST 2019

1 FORWARD-LOOKING STATEMENT DISCLAIMER This presentation and information communicated verbally to you may contain certain projections and other forward-looking statements with respect to the financial condition, results of operations, businesses and prospects of The Gym Group plc. These statements are based on current expectations and involve risk and uncertainty because they relate to events and depend upon circumstances that may or may not occur in the future. There are a number of factors which could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. Any of the assumptions underlying these forward-looking statements could prove inaccurate or incorrect and therefore any results contemplated in the forward- looking statements may not actually be achieved. Nothing contained in this presentation or communicated verbally should be construed as a profit forecast or profit estimate. Investors or other recipients are cautioned not to place undue reliance on any forward-looking statements contained herein. The Gym Group plc undertakes no obligation to update or revise (publicly or otherwise) any forward-looking statement, whether as a result of new information, future events or other circumstances. Neither this presentation nor any verbal communication shall constitute an invitation or inducement to any person to subscribe for or otherwise acquire securities in The Gym Group plc.

2 ANOTHER HALF YEAR OF STRONG PROGRESS Members Low cost gym 8 5.6 % market share of 796,000 24 % Increase in Average Openings in Revenue per 2019 so far  10.6 % Member per Month + 2 easyGym sites converted vs 2018 (incl easyGym) Penetration of Awarded +700,000 ‘First Steps’ premium price Gold standard campaign offering product Investors In People free off-peak TGG App uses membership to 16- per month 18 year olds over the summer 16 .9 %

3 OPERATIONAL KPIS Gyms Revenue £’m £74.0m 165 Open sites as at H1 2019 (1) CAGR: 28.5% 26.9% 165 158 123.9 128 91.4 89 32 73.5 74.0 74 1 5 10 16 55 40 60.0 58.3 45.5 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 H1 2014 2015 2016 2017 2018 2018 H1 2019 H1 Members Group Adjusted EBITDA £’m (2) 796k £24.0m CAGR: 25.4% CAGR: 23.3% 796 724 28.0% 607 39.1 448 30.6 376 96 7 26 58 225 293 25.4 24.0 166 20.7 16.9 18.8 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 H1 2014 2015 2016 2017 2018 2018 H1 2019 H1 1. 8 new sites opened in H1 2019 and one site recently closed – the former easyGym site in Birmingham. This site has been mothballed due to higher than expected costs to convert to The Gym and members have been transferred to our nearby Birmingham City gym. 2. Group Adjusted EBITDA is now calculated under an IFRS16 basis which excludes IAS17 Property Rent charges, to maintain a comparable measure Cash Rent paid in the period is added back as an expense

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5 PROGRESS ACROSS ALL METRICS Estate Members Revenue Group Adjusted EBITDA 165 sites 796,000 £74.0m £24.0m  10.6 % vs PY  26.9 % vs H1 2018  28.0 % vs H1 2018 (H1 2018: 147 sites 2 ) (H1 2018: 720,000) (H1 2018: £18.8m) +20% +5.6% Av. Member ARPMM growth growth Adjusted PBT (1) Basic Adjusted Non-Property Net Interim dividend EPS (1) Debt per share £7.1m 4.0p £47.2m 0.45p  53.3 % vs PY Per share As at June 2019 (H1 2018 Interim: 0.35p) (2018: 2.8p) (2018: £4.6m) 1.Adjusted PBT and EPS based on the new method of calculating KPIs 2. Proforma easyGym sites and members were included in the H1 2018 metrics

6 SUMMARY OF KPI CHANGES & PERFORMANCE IFRS 16 Post IFRS 16 Pre-IFRS16 Unless otherwise stated all financial metrics will Metrics (£'m) • H1 H1 % H1 H1 % now be stated using IFRS 16 as the basis (1) 2019 2018 Change 2019 2018 Change New KPIs have been used to continue to show • Revenue 74.0 58.3 74.0 58.3 26.9% 26.9% the operating performance of the business Group Adjusted 24.0 18.8 28.0% 22.6 17.5 28.9% Revenue remains the same under both • EBITDA standards Group Adjusted 7.1 4.6 53.3% 9.1 6.7 36.4% PBT (2) IFRS 16 EBITDA removes the rent charge from • the P&L. Adjusted EBITDA adds back the cash Basic Adjusted EPS 4.0 2.8 42.9% 5.1 4.0 27.5% rent paid for the period Group Operating 18.7 16.4 13.8% 18.7 16.4 13.8% Other Changes Cash Flow Free Cash Flow 16.0 13.6 16.0 13.6 Amortisation relating to IT/software is no 17.9% 17.9% • longer excluded from Adjusted PBT/EPS Non Property Net 47.2 21.6 47.2 21.6 118.7% 118.7% Debt (4) Depreciation – UEL on gym equipment • extended (3) 1. Further information in relation to the Company’s KPIs and IFRS 16 can be found in the link: https://www.tggplc.com/media/93415/tgg-ifrs-presentation-02july2019.pdf 2. Adjusted PBT/EPS has to date included an adjustment to remove all amortisation, as the majority related to acquired intangibles (brand, customer lists, contracts). As the business has grown, investment in software (and associated amortisation) has increased, so from 2019 Adjusted PBT/EPS is no longer adjusted for amortisation of IT/software (but will continue to be adjusted for non-IT amortisation) 3. From 1 Jan, 2019 Useful Economic Life (UEL) on equipment has increased from 5.5 years to 7 years on cardio equipment and 7 to 9 years on strength equipment 4. Net Debt is significantly higher than in H1 2018 due to the financing of EasyGym acquisition, Net Debt at Dec 2018 was £46.0m

7 GROUP INCOME STATEMENT £’m H1 2019 H1 2018 % Change • +26% growth in site EBITDA broadly in line with growth in revenue helped by: Number of Gyms 165 147 12.2% improved profitability of Lifestyle sites due – to closures in H1 2018 Revenue 74.0 58.3 26.9% ongoing maturity of the organic estate – Site EBITDA 30.5 24.3 25.5% offset by the inclusion of the easyGym – sites which currently have a lower site Site EBITDA Margin 41.2% 41.6% (4)bps EBITDA profitability than the organic estate Central Costs (6.5) (5.5) 18.2% • Central cost of £6.5m – decreasing costs as a percentage of revenue as we gain the benefits Group Adjusted EBITDA 24.0 18.8 28.0% of our growing scale Group Adjusted EBITDA 32.5% 32.2% 0.3bps Margin • IFRS16 reduces quantum PBT and earnings in Group Adjusted EBITDA both years, increasing the percentage growth 24.6 19.3 27.5% before pre-opening costs (1) rate Adjusted PBT 7.1 4.6 53.3% Adjusted Earnings 5.5 3.5 54.7% Basic Adjusted EPS 4.0 2.8 42.9% 1. Pre-opening costs means the costs associated with new site openings, which primarily consist of staff costs, marketing and now excludes rent

8 REVENUE GROWTH SUPPORTED BY INCREASE IN ARPMM ARPMM Growth H1 2018 to H1 2019 0.05 0.16 0.20 0.41 15.47 14.65 ARPMM H1 2018 Increased LIVE IT. easyGym PT Rental Net Price ARPMM H1 2019 Penetration Movement

9 GROUP ADJUSTED EBITDA INCREASED 28% £m (1.0) 3.6 24.0 0.5 2.1 18.8 Group Adjusted 2008 - 2017 2018 and 2019 Acquired Lifestyle Central Costs Group Adjusted EBITDA H1 2018 openings openings and EasyGym sites EBITDA H1 2019

10 CAPITAL EXPENDITURE Expansionary Maintenance • Total initial capex higher than prior year due to • 5 major refits in H1 2019 as well as significant kit more openings (1) . (Note: £1.4m capex for H1 enhancement in 23 sites openings spent in H2 2018) • Maintenance capex for 2019 as a whole expected • 8 H1 2019 sites opened at an average cost of to be 6-7% of revenue £1.33m per site • easyGym: £2.1m deferred consideration paid H1 H1 % on initial acquisition and £0.4m for conversions 2019 2018 Change in H1 2019 Initial Capex 9.7 9.2 easyGym consideration 2.1 - • Product enhancement & IT relating to app Product Enhancement & IT 1.3 1.2 launch & data analysis tools including pricing easyGym conversions 0.4 - & churn Lifestyle conversions - 4.8 • Reduction in expansionary capex vs H1 2018 ERP - 1.1 due to fully converted Lifestyle estate Other - 0.3 Expansionary Capex 13.6 16.6 (17.8%) Maintenance Capex 3.3 3.2 1.7% Capex Creditor: - Expansionary Capex 2.3 3.2 - Maintenance Capex 0.7 0.3 Total Cashflow Capex 19.8 23.3 (14.6%) 1. H1 2019 has 8 new openings while H1 2018 had 6. 2. Capex cashflow excludes cashflows relating to business combinations.

11 GROUP CASH FLOW- NET DEBT MOVEMENT (4) £m Free Cash Flow (3) £16.0m 1.5 (2018: £13.6m) 3.9 Operating Cashflow 0.3 2.4 Conversion (2) 77.8% (2018: 87.5%) 24.0 15.9 18.7 Non-Property Net 16.0 Debt (4) £47.2m (2018: £21.6m) (1.3) (1.2) Group Working Maintenance Group Tax and Exceptionals Free Cash Flow Expansionary Dividends Net Movement Adjusted Capital Capex Operating interest paid capex in Non- (1) EBITDA Cash Flow Property Net Debt 1. Group Operating Cash Flow is calculated as Group Adjusted EBITDA less working capital and less maintenance capital expenditures 2. Group Operating Cash Flow Conversion is calculated as Group Operating Cash Flow as a percentage of Group Adjusted EBITDA 3. Free Cash Flow is calculated as Group Operating Cash Flow less tax and interest paid and exceptional items 4. Net Debt Movement from FY2018 (£46.0m) to H1 2019 (£47.2m)