The Gym Group plc CAPITAL MARKETS DAY JUNE 2017
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. 1
Agenda John Treharne, CEO Introduction John Treharne, CEO Market Opportunity Jasper McIntosh, IT and Digital Director Technology Barney Harrison, Commercial and Marketing Director Commercial and Marketing David Melhuish, Head of Property Development Rollout Richard Darwin, CFO Financial Model Richard Darwin, CFO Trading update and Q&A Depart for Lewisham gym 2
Lewisham Site Visit • New build mixed use development Opened Square footage P&L rent psf Current • Close to railway station, DLR and bus station membership <£12 OCT 16,600 £17.99 2016 3
Our Journey So Far Revenue £’m Gyms (#) 94 89 73.5 74 60.0 55 45.5 40 35.7 32 22.3 1 5 16 10 2008 2009 2010 2011 2012 2013 2014 2015 2016 May-17 2012 2013 2014 2015 2016 Members (‘000) Group Adjusted EBITDA £’m 22.7 507 448 17.0 376 14.7 293 11.8 225 166 6.0 7 26 96 58 2008 2009 2010 2011 2012 2013 2014 2015 2016 May-17 2012 2013 2014 2015 2016 2016 Average Mature Gym Site ROCE 32% 4
Investment Proposition £ Technology-led Compelling customer High quality Attractive financial Market opportunity business model proposition gym estate model Investment Low cost segment Investment in Attractive low cost Disciplined site High returns on capital, rationale leading the growth technology has created product drives high selection process maintained as the of the UK health and a low operating cost, levels of member assisted by attractive market develops fitness market high margin business acquisition covenant for landlords • Opportunities arising • New Member • Developments to our • Flexible approach to • Reductions in capital Further developments from local authorities Management system marketing and CRM space cost in all areas and the mid market strategies • Enhancing use of data • Opportunities from • Strong balance sheet • The Gym Group: low • Focusing on customer to aid commercial excess retail space enables high quality cost leader within decision making satisfaction through NPS site maintenance • Adapting the model for London programme and drives • Developing the product smaller catchments competitive advantage • The Gym Group creates and proposition • Opportunity for high strength through quality site expansion clusters of sites continues 5
The Right Team for Growth BOAR D Other people John Treharne Chief Executive here today David Melhuish Head of Property Nick Henwood Barney Harrison Jasper McIntosh Jonathan Spaven Richard Darwin Development Operations Commercial & Marketing Technology Propert y Finance Becky Tummey • Reporting • Operational review • Member acquisition • IT infrastructure • Property Group Financial Controller and control development • Planning and • Customer • Member analysis • Operating • Acquisitions relationship Management • Financial control Emma Castledine performance management system • Estates • M&A • Net Promoter Score • Product and • Website management Group Reporting Manager proposition • Investor relations • People • Facilities • Data and insight development management • Company Cornelia Woschek secretarial Head of Special Projects 6
MARKET OPPORTUNITY 7
Market Opportunity Investment rationale Results to date Developments and insights • Local authority segment A rapidly growing market, 1 Number of low cost gyms 1 experiencing decrease in driven by the low cost segment spending Scope for the market to double 515 • Consolidation of the 450 over the coming years 1 319 mid market 257 196 101 • Continuing opportunity in 2 2012 2013 2014 2015 2016 2017 London. The Gym Group is the leading low cost operator Top 10 low cost operators 1 The Gym in London Group: Pure Gym 1 1 12 The Gym Group 13 12 2 nd 15 energie fitness largest 31 Xercise4Less 174 • 3 main operators pulling away 3 operator Sports Direct Fitness 47 EasyGym • The Gym Group creates Fitness4Less 18% 24/7 Fitness 58 strength through clusters market TruGym 91 share Simply Gym of sites 1. Leisure Database Company 2017 State of the UK Fitness Industry Report. As at 31 March 2017. 8
The Current Market Market growth driven Limited growth from Public membership by low cost traditional providers stagnant 515 5 year CAGR 0 % 5 year CAGR 44 % 5 year CAGR 1 % Number of 1,427 2,709 UK gyms 2.2 6,728 1.9 4.2 4.2 4.1 4.1 4.1 4.0 3.4 3.3 3.3 3.3 3.2 3.1 1.3 2,077 0.9 0.7 Low cost 0.4 Traditional private multi-club Traditional private independent 2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017 Public Members ‘m Members ‘m Members ‘m Source: Leisure Database Company 2017 State of the UK Fitness Industry Report. As at 31 March 2017. 9
Low Cost - an Alternative to Local Authority Provision England local authority recreation and sport spending 1 £'m Number of public gyms 2 Public gyms 2 The Gym Group 16 % AVERAGE MEMBERSHIP FEE decrease in local 1,326 2,762 £30 £17 authority recreation and sport spending 2,753 2,750 1,268 AVERAGE NUMBER OF EQUIPMENT STATIONS 1,222 2,735 47 170 2,724 AVERAGE MEMBERSHIP PER GYM 2,709 1,109 1,234 5,644 2012/13 2013/14 2014/15 2015/16 2012 2013 2014 2015 2016 2017 An alternative model provided by The Gym Group 1. Department for Communities and Local Government Revenue Account Budgets for England 2. Leisure Database Company 2017 State of the UK Fitness Industry Report. As at 31 March 2017. 10
Growth of the Top Low Cost Operators Low Cost Development UK Ownership Mar ’16 – Mar ’17 1 (Number of clubs) 24/7 structure Consolidation of the mid market 2 Pure Gym 147 174 O • LA Fitness brand acquired by Pure Gym in 2015 The Gym 75 91 O • Fitness First sold in 2016. Purchases energie Fitness 3 48 58 O/F made by The Gym Group, DW Fitness Xercise4Less 35 47 O and GLL Sports Direct Fitness 30 31 • O 35 Virgin Active clubs purchased by Nuffield Health in 2016 Snap Fitness 21 27 F • Virgin Active in the process of selling Easy Gym 15 15 O 16 clubs to David Lloyd Fitness4Less 12 13 O 12 24/7 Fitness 10 O TruGym 12 12 O Simply Gym 11 12 O = Owned F = Franchise The top 3 operators are pulling away from the competition 1. Leisure Database Company 2017 State of the UK Fitness Industry Report. Low cost defined as majority of membership options <£20 per month. Note: Snap Fitness and DW Fitness not defined as low cost by Leisure Database Company 2. Pure Gym excludes 2 premium sites purchased from LA Fitness 3. energie Fitness includes Fit4Less. Not included in the top 3 operators as a franchise model. 11
London Low Cost Leader Average Headline Price 2 London Low Cost Market Share 1 Number of sites charging <£25 The Gym Group £19.80 True low cost provider 5 2 21 Fitness4Less £19.90 within London Xercise4Less £19.99 The Gym Group 8 Pure Gym 32 Tru Gym £19.99 Energie Fitness Sports Direct Fitness £19.99 Easy Gym Easy Gym 13 £21.49 Fitness4Less Sports Direct Fitness Energie Fitness £25.39 Tru Gym Pure Gym £27.40 21 Xercise4Less Number of sites Sites charging within the M25 <£25 • A further 6 sites exchanged inside the M25 for the rest of 2017, including The Gym Group 34 32 Bloomsbury, Streatham and Walthamstow • Inner London sites require a cost effective rent deal Pure Gym 41 21 • Clusters of London sites helps build brand loyalty Energie Fitness 20 13 1. Low cost defined as headline rate <£25.00 2. Average headline rate for sites inside the M25 as at 30 April 2017 12
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