The Gym Group plc

Hello and welcome to the Gym Group Half Year Results 2025. If you're joining us on Zoom, automated subtitles are available and you can turn this feature on or off within your Zoom app settings. But please note this is an automated service and transcription errors sometimes occur. I'm now going to hand over to Will Orr, CEO. Will, please go ahead.

Good morning and welcome to the 2025 Half Year Results presentation for the Gym Group. Thank you for making the time to join us in the room and on the dial-in. After the presentation we'll take your questions in the room first and then on the webcast. Our CFO Luke Tate and I will be doing the presenting today. and here's what we plan to cover. I'll start with an overview before handing to Luke to share the 2025 half-year financial results. I'll then provide a progress report on our next chapter growth plan before summarising and taking your questions. So, starting with the overview. I'm pleased to report strong performance for the first half of 2025. Closing membership was up 5% with revenue for the period up 8%, 3% on a like for like basis. With this performance and strong management of costs EBITDA less normalised rent was up 24%. The market we're in remains highly attractive and gym penetration has again reached new highs supported by structural growth tailwinds. And within our next chapter growth plan, the programme to strengthen the core continues to drive mature site performance, underpinning confidence in further progress on mature site ROIC, which we'll report on at full year results. And when it comes to new sites, we're on track to increase openings to 14 to 16 in 2025, in line with our plan to open circa 50 new sites over three years funded from free cash flow.

so the momentum continues and with that I'll hand over to Luke for the financial results thanks Will good morning so starting with a summary of our financial KPIs the key revenue KPIs which were released in July have both shown good growth year-on-year We had average members across the first half of 953,000, up 4% versus last year, and average revenue per member month was £21.16 for the first half, also up 4% on prior year. As a result, revenue was £121 million, up 8% on last year. The additional revenue converted well to profit with EBITDA less normalised rent of £27.4 million up 24% on prior year. Statutory profit before tax was 3.3 million, up 3.1 million on prior year. Free cash flow at 25.1 million was up 8% on prior year and enabled a net debt reduction of 10.1 million to 51.2 million, reducing the net debt to EBITDA leverage ratio to one times. We will look at each of these key financial metrics in more detail in the following slides. Turning to the income statement, EBITDA grew strongly in the first half of the year, up 24% versus last year. Revenue was £121 million, up by £8.9 million year-on-year. Approximately one third of the incremental revenue year-on-year was generated from like-for-like gyms and two thirds from new openings since December 2022. Costs in the first half evolved in line with expectations. Site costs of £57.9 million benefited from a reduction in electricity costs from lower commodity rates, resulting in site cost margin improvement of 2%. I'll come back to the other key site cost movement shortly. Central costs grew by 7% with the growth rate expected to slow further in the second half and therefore the central cost margin is expected to drop to circa 11% as guided in March. Normalised rent increased by 7% reflecting a combination of new site growth and underlying lease inflation EBITDA was £27.4 million with EBITDA margin at 23% for the first half, an improvement of 3% vs prior year Moving on down the P&L, the non-cash charge for share based payments of £2.5 million was higher than prior year due to the delay in the commencement of the new scheme last year. Net financing costs of £10.4 million remain flat year on year as lower interest rates offset an increase in property lease liabilities. The charge consists of £8.1 million relating to property lease interest and £2.5 million relating to our borrowing facilities. Profit before tax and non-underlying items was £4.9 million, up £4.4 million on prior year. Non-underlying items of £1.6 million principally relate to the implementation of a new member management and payment system. Finally, profit before tax for the six months was £3.3 million, up from breakeven last year. Revenue grew by 8% in the first half. Average revenue per member per month grew by 4%. This was principally down to a combination of yield increases in the like-for-like estate and the optimisation of yield in the new site openings, including coming off introductory headline rate discounts. The average headline rate of a standard membership was £25.10, up by £1.16 year-on-year. like-for-like revenue was three percent in line with guidance with the average membership remaining at a hundred percent year-on-year and the average yield increasing by three percent looking at site costs in more detail We've been able to control site costs in the first half, despite the ongoing inflationary environment. In the first half, like-for-like site costs were down by 1%. This was driven by a further reduction in electricity commodity prices and our energy optimisation programme. For example, we have now installed 120 voltage optimisation units across the estate. Efficiencies in the staffing model and cleaning have partially offset the national living wage and NIC increases in Q2, and rates rebates have partially offset the Q2 increase in the UBR. In the second half, we expect site cost inflation to return, bringing the full year in line with our guidance of like-for-like site cost growth of 2%. This is as a result of an increase in the non-commodity element of the electricity cost from Q4 as well as two quarters of National Living Wage and UBR increases. Turning now to the cash flow. Strong cash flow generation in the year enabled us to self-fund our expansionary capex, buy shares for the EBT and pay down debt. The working capital inflow of 8 million reflects a cash generative nature of the business model when growing and a higher proportion of pay up front memberships. Although some unwind of this inflow is expected by year end. after deducting the cash spend on maintenance capex of 7.3 million operating cash flow was 28.1 million the cash element of non underlying costs was half a million Bank and lease interest was 2.5 million. It's worth noting that due to losses incurred during Covid and accelerated capital allowances, we do not expect any cash tax until 2028. Free cash flow was 25.1 million. Expansionary capex was 12.6 million and after refinancing and EBT share purchase costs, net debt reduced by 10.1 million during the first half. We continue to invest to grow the business and ensure a well maintained estate. Total cash capex in the first half of the year was 19.9 million. Maintenance capex across both property and tech was 7.3 million in the first half. Property maintenance of 6.2 million was 5% of revenue. Tech and data maintenance capex of 1.1 million was spent on hardware including CCTV upgrades and on our data infrastructure. Expansionary capex was 12.6 million with the main spend being on new sites as we target 14 to 16 new sites this year. Tech and data expansionary spend relates principally to investments in the website to enable next chapter growth initiatives such as product add-ons and website conversion optimization. Spend on the replacement member management and payment systems was 0.7 million and is expected to increase significantly in the second half as this project ramps up. We continue to expect total capex to be approximately 50 million for the full year. Turning now to net debt, the strong free cash flow in the first half has allowed good progress on leverage reduction. Non-property net debt was 51.2 million at the end of June, down 10.1 million from the year end. The debt consisted of 59 million of bank debt and 1.5 million of finance leases. As a result of the reduction in debt, The net debt to EBITDA multiple reduced to 1 times EBITDA, down from 1.3 times at year end. Given the second half weighting of CapEx and an expected element of working capital unwind, year end net debt is expected to be at a similar level to last year end at circa 60 million. In June we agreed an amend and extend of our current facilities with our bank syndicate, increasing the total facilities to 102 million and extending the maturity to 2028. The new sites continue to perform well. The 25 sites opened in 2022 are expected to deliver ROIC of 30% this year. The small 2023 cohort is on track to deliver an average ROIC of 25% with one site having been impacted by an unusual level of competitors openings. And although early in their tenure, the 12 2024 sites are progressing well with strong initial membership volume. Overall, our confidence remains high and returning 30% on new openings. Finally, turning to current trading and outlook. Current trading momentum has continued through July and August. We're now entering the key student acquisition period. We've opened five new gyms so far this year with another eight gyms currently on site. For the full year like-for-like revenue is expected to grow at circa 3% and like-for-like cost growth is expected to be circa 2%. Given the current trading momentum, we now expect EBITDA at the top end of market expectations. We do not expect to pay any cash tax before 2028. We're on track to open 14 to 16 new openings in 2025, in line with our March guidance, with total capex of circa 50 million expected for the full year. Therefore, net debt is expected to trend back to last year's level by year end. I'll now hand over to Will.