Source - RNS
RNS Number : 7653J
Pure Gym Group PLC
14 September 2016
 



NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DO SO

 

This announcement is an advertisement for the purposes of the Prospectus Rules of the UK Financial Conduct Authority ("FCA") and not a prospectus and not an offer of securities for sale in any jurisdiction, including in or into or from the United States, Australia, Canada or Japan. Neither this announcement nor anything contained herein shall form the basis of, or be relied upon in connection with, any offer or commitment whatsoever in any jurisdiction. Investors should not purchase or subscribe for any shares referred to in this announcement except on the basis of information in the prospectus (the "Prospectus") expected to be published by the Company (as defined below) in due course in connection with the proposed admission of its ordinary shares) to the premium listing segment of the Official List of the FCA and to trading on the main market for listed securities of London Stock Exchange plc. A copy of the Prospectus will, following its publication, be available from the Company's website, subject to applicable securities laws, and at its registered office at Town Centre House, Merrion Centre, Leeds LS2 8LY, United Kingdom.

 

For immediate release

 

14 September 2016

 

Pure Gym Group plc

 

Announcement of Intention to Float on the London Stock Exchange

 

 

Pure Gym Group plc (the "Company" and, together with its subsidiaries, "Pure Gym" or the "Group") today announces that it intends to proceed with an initial public offering (the "IPO" or the "Offer") of its ordinary shares ("Shares"). The Company intends to apply for admission of the Shares to the premium listing segment of the Official List of the Financial Conduct Authority and to trading on the main market of the London Stock Exchange (together, "Admission").

                                             

Business Highlights

 

·      Founded in 2008, Pure Gym is the largest gym operator in the £4.4bn UK health and fitness club market by both number of gyms (163 as at 30 June 2016 including 40 gyms within the M25) and number of members (785,770 as at 30 June 2016) with an established nationwide footprint.

·      Pure Gym has a disruptive customer value proposition that is focused on providing affordable and flexible memberships to high quality gyms, with an average monthly membership fee of £19.79[1]. This proposition has enabled the Group to grow rapidly by gaining market share from traditional mid-market and premium operators, as well as attracting consumers to its gyms who have never previously been members of fitness clubs.

·      Pure Gym's differentiated, low-cost, capital efficient and technology-enabled gym operating model provides a competitive advantage over mid-market and premium gym operators and enables the Group's gyms to offer a compelling customer proposition and support high levels of membership while requiring low levels of operating and initial capital investment costs. Collectively, these factors drive strong unit economics and return on capital employed.

·      Senior management, supported by an experienced broader management team, have an established track record of delivering growth and operational excellence, and will be supported by a strong non-executive board.

·      The Group's strategy is to continue to lead the revolution in the UK health and fitness industry by providing affordable, flexible and value-for-money memberships to high-quality gyms to anybody who wants to increase their level of fitness, while simultaneously delivering profitable growth and strong returns to shareholders. The Directors believe there is a substantial opportunity for Pure Gym to continue its roll-out of gyms and strengthen its position as the market leader, as well as the potential to evaluate other avenues for growth such as alternative fitness formats and opportunistic acquisitions.

 

Financial highlights and H1 update

 

·      FY 2015 Revenue: £125.2 million (FY13-15 CAGR: +64 per cent.).

·      FY 2015 Gym Site Adjusted EBITDA[2]: £41.0 million (FY13-15 CAGR: +60 per cent.).

·      FY 2015 Group Adjusted EBITDA[3]: £28.0 million (FY13-15 CAGR: +54 per cent.).

·      FY 2015 Average Gym Site ROCE of Mature Gyms[4],[5]: 47 per cent. (Mature Gyms are the Group's Pure Gym's that have been open for 24 months or more at the end of the relevant reporting period).

 

·      27 new gyms opened in H1 16 (16 of which were conversions of previously acquired LA Fitness gyms).

·      H1 2016 Revenue: £76.6 million (+51 per cent. year-on-year).

·      H1 2016 Group Adjusted EBITDA: £16.5 million (+23 per cent. year-on-year)3.

Excluding impact of LA Fitness non-recurring items[6], Group Adjusted EBITDA growth of +44 per cent.

 

Board appointments

 

The Company is pleased to announce that Martin Stewart, Stephen Clarke and Jane Thompson (together, the "Proposed Directors") have agreed to join the board of directors of the Company (the "Board") as independent non-executive directors and will be appointed prior to Admission. These three individuals bring significant experience to the Board. Biographies of the Proposed Directors and current members of the Board (the "Directors") are included below.

 

Tony Ball, Chairman of Pure Gym, said:

"Pure Gym's growth from a start-up company in 2008 to undisputed market leader today is a story of disruption and shows how entrepreneurial vision can build real business success. When the company was founded the traditional gym market was moribund. It did not cater for modern gym users who are tech-savvy, want to be able to exercise at any time of day or night and want gyms they actually use, all without being locked into an expensive 12-month contract. Our successful model is built around our members' needs and it has made gym membership accessible for hundreds of thousands of people and created a fast growing, successful company. Considering what the company has achieved in just eight years, I am hugely excited about its potential for the future."

 

Humphrey Cobbold, Chief Executive Officer of Pure Gym, said:

"Pure Gym is ready to become a listed company. An IPO will enable us to be an even stronger counterparty for landlords, further raise our profile by building greater awareness of our strong brand, and provide a mechanism for incentivising the colleagues who have worked so hard to build the UK's leading gym business. We have a well-established and committed management team and are already benefiting from the scale of our 167 gym estate which provides a fantastic platform for future expansion in the fitness and health arena. As well as opening more gyms, we will continue to invest in technology and the innovation it supports. Technological capability has been and will remain fundamental to our success and going forward offers opportunities to further differentiate the options and services we provide our members."

 

Details of the Offer

 

The Company intends to apply for the Shares to be admitted to listing on the premium listing segment of the Official List of the Financial Conduct Authority and to trading on the main market of the London Stock Exchange.

 

Shares will be offered to certain institutional and other investors in the UK and elsewhere outside the United States of America and in the United States of America, only to qualified institutional buyers in reliance on Rule 144A under the United States of America Securities Act of 1933, as amended (the "Securities Act") or another exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.

 

The Offer is expected to raise gross primary proceeds of £190 million. The Company intends to use the majority of the net proceeds it receives from the Offer, together with borrowings under new banking facilities, to repay existing bank debt in full, with the remainder of the net proceeds received by it being used to reduce net leverage and for future growth opportunities. As a result of the Offer and associated refinancing, conditional upon Admission, the Group's indebtedness will be substantially reduced.

 

In addition, the Offer may include a partial sale of Shares held by Gym Bidco S.à r.l., an entity owned directly by funds advised by CCMP Capital Advisors, LP ("CCMP") and Hermes GPE LLP ("Hermes"), members of the Group's management team and other individual shareholders (the "Selling Shareholders"). Immediately following Admission, the Company and Selling Shareholders expect to target a free float of at least 25 per cent. of the Company's issued share capital. It is intended that an over-allotment option of up to 15 per cent. of the total Offer size will be made available.

 

Each of the Company, its Directors and the Selling Shareholders will agree to customary lock-up arrangements in respect of their remaining holdings of Shares for specified periods of time following Admission. It is expected that Admission will take place in October 2016 and that, following Admission, the Company will be eligible for inclusion in the FTSE UK indices.

 

In relation to the Global Offer and Admission, Jefferies International Limited ("Jefferies") and J.P. Morgan Securities plc ("J.P. Morgan Cazenove") are acting as Joint Global Co-ordinators, Joint Sponsors and Joint Bookrunners; Credit Suisse Securities (Europe) Limited ("Credit Suisse") is acting as Joint Bookrunner; N M Rothschild & Sons Limited ("Rothschild") is acting as Financial Advisor to the Company.

 

In connection with and conditional upon Admission, the Group will undertake certain corporate steps as part of a reorganisation of its corporate structure and will undertake further steps following Admission (the "Reorganisation"). The effect of the Reorganisation is that the Company will become the ultimate holding company of the Group on Admission, certain shareholder debt will be capitalised and shareholders in certain Group companies will convert their shareholding in the relevant Group company for an equivalent (in value) amount of Shares.

 

Full details of the Offer will be included in the Prospectus, expected to be published in due course.

 

Enquiries

 

Pure Gym (enquiries via Teneo Blue Rubicon)
Humphrey Cobbold (Chief Executive Officer)
Adam Bellamy (Chief Financial Officer)


 

Joint Global Co-ordinators, Joint Sponsors and Joint Bookrunners

Jefferies
Robert Foster

Paul Nicholls

Robert Leach

+44 (0) 20 7029 8000

J.P. Morgan Cazenove

Toby Radford

Caroline Thomlinson

Charles Pretzlik

Virginia Khoo

+44 (0) 20 7742 4000

 

Joint Bookrunner

Credit Suisse      
George Maddison

Michael Taylor

+44 (0) 20 7888 8888

Financial Advisor to the Company

Rothschild
Majid Ishaq

Nigel Himsworth

+44 (0) 20 7280 5000

Financial Public Relations

Teneo Blue Rubicon
Robert Morgan

Ben Ullmann

Rebecca Hislaire

+44 (0) 20 7420 3140

 

Note to Editors

 

Further background and history of the Group

 

Pure Gym was established in September 2008 by entrepreneur Peter Roberts, who recognised that there was a significant opportunity in the UK health and fitness market for a value gym offering. Following a period of rapid expansion, Pure Gym became the largest gym operator by number of members and gyms in the UK in 2015. As of 30 June 2016, the Group operated 163 gyms in cities and towns across the UK, including 40 gyms within the M25, and had 785,770 members.

 

Pure Gym has a powerful and highly disruptive customer value proposition that is differentiated from traditional UK gym operators and appeals to a broad range of consumers. The key elements of the proposition include affordable membership fees, no fixed term contracts, and '24x7x365' access to high quality gyms. The proposition is underpinned by Pure Gym's differentiated low-cost, capital-efficient, and technology-enabled gym operating model, which enables its gyms to support high levels of membership, operate on low costs, and generate strong unit economics, cash flow conversion, and ROCE.

 

In May 2013, funds advised by CCMP and Hermes and certain senior managers acquired Pure Gym. In November 2013, Tony Ball, formerly Chief Executive of BSkyB, joined the Board of Directors. In January 2015, Humphrey Cobbold, formerly the Chief Executive Officer of Wiggle, an online cycling goods retailer, joined Pure Gym as its Chief Executive Officer. In June 2015, Sir Chris Hoy, an eleven-time world champion and six-time Olympic champion track cyclist was appointed as a special advisor and brand ambassador.

 

In 2015, the Group completed a corporate rebranding, which included the design and rollout of a new logo, colour scheme and corporate brand image across all Pure Gym locations. In May 2015, the Group acquired the LA Fitness Group and its 43 LA Fitness and LAX branded gyms. Subsequent to the acquisition, Pure Gym divested or closed 12 LA Fitness sites while retaining 31 LA Fitness sites, 27 of which had been converted to the Pure Gym brand and operating model as at June 2016.

 

In 2015, Pure Gym was also named the ninth fastest growing business by the Sunday Times Virgin Fast Track 100, which ranks Britain's 100 private companies with the fastest growing sales over the last three years. In 2015, Pure Gym signed a three-year partnership with The Great Run Company, the UK's biggest mass participation running series. In 2016, Pure Gym launched partnerships with AXA PPP and UNiDAYS and was ranked 33rd in the Sunday Times 100 Best Companies To Work For. Over late December 2015 to early February 2016, the first Pure Gym television advertisement aired followed by a second television advertisement which aired over May 2016.

 

As a result of its disruptive customer value proposition and differentiated business model, Pure Gym has grown rapidly. For the year ended 31 December 2015, Pure Gym generated revenue of £125.2 million and Group Adjusted EBITDA of £28.0 million, representing compound annual growth rates ("CAGRs") of 64 per cent. and 54 per cent., respectively, as compared to the financial year ended 31 December 2013. In the six months ended 30 June 2016, Pure Gym generated revenue of £76.6 million and Group Adjusted EBITDA of £16.5 million, representing growth of 51 per cent. and 23 per cent., respectively, as compared to the six months ended 30 June 2015. Excluding the impact of LA Fitness non-recurring items[7], Group Adjusted EBITDA growth was 44 per cent year-on-year.

 

Key business strengths

 

Standout leader in an attractive and growing market

·      The UK health and fitness club market is a large and established sector with a market value of £4.4 billion as at March 2016 according to the Leisure Database Company ("LDC"):

Benefiting from the UK population becoming more health conscious, government initiatives designed to promote healthy living and active lifestyles, and the rapid expansion of value gyms.

Total number of UK gym members has grown from 7.3 million as at March 2011 to 9.2 million as at March 2016 (reflecting growth of 26 per cent.).

·      Over the last five years, the value gym segment has grown rapidly and driven the growth of the overall market. Between March 2011 and March 2016, 88 per cent. of the 1.9 million net new UK gym members joined value gyms according LDC.

Value gyms have grown rapidly as they are more affordable and accessible and offer better value-for-money than traditional mid-market and premium gyms

·      Pure Gym is the largest gym operator in the UK by both number of gyms (163) and number of members (785,770) as at 30 June 2016.

·      Pure Gym's scale and market-leading position provide the Group with significant competitive advantages, including:

Property Acquisition - Strong landlord covenant rating and "tenant of choice" status.

Purchasing Scale - Scale enables it to negotiate substantial purchasing discounts and reduce the costs of constructing and operating its gyms.

Commercial Offer - National footprint enables it to offer its members multi-site access in more locations than any other gym operator and to pursue partnerships and other commercial arrangements that further differentiate its product offer, such as the recent partnership launched with AXA PPP and UNiDAYS.

Brand - National brand that benefits from higher levels of brand awareness than any other value gym operator.

Ability to invest - Scale and resources mean it is able to rapidly develop new sites and invest in other areas of its business, such as technology, that enable it to operate more efficiently and deliver a better customer experience.

 

Powerful and highly disruptive customer value proposition

·      Pure Gym's customer value proposition is focused on providing affordable and flexible memberships to high quality gyms.

·      The strength of Pure Gym's proposition has enabled the Group to grow rapidly by gaining significant market share from traditional mid-market and premium operators:

45 per cent. of Pure Gym members who joined in the six months ended 30 June 2016 were formerly members of other UK operators' gyms.

Pure Gym's proposition is more flexible and better overall value-for-money.

·      The Pure Gym proposition is also attracting consumers to its gyms who have never previously been members of fitness clubs:

35 per cent. of Pure Gym members who joined in the six months ended 30 June 2016 had never been a member of a gym before.

Pure Gym's proposition addresses the two most significant reasons why UK consumers that wish to take on gym memberships do not join: high prices and the requirement to enter into a fixed term contract (source: Mintel Group Limited: Health And Fitness Clubs UK, July 2015).

·      The key characteristics of Pure Gym's customer proposition are as follows:

Everybody welcome philosophy - Pure Gyms have welcoming environments and the Group seeks to support all members in the pursuit of their fitness goals.

Affordable pricing - Pure Gym's average monthly membership fee for its standard "no contract" membership (inclusive of VAT) across its gym estate was £19.79 (excluding pre-opening offers and unconverted LA Fitness gyms) as at 30 June 2016, which is substantially below the private sector average monthly membership fee of £41.13, as at 31 March 2016 according to LDC.

No contracts - Pure Gym offers a flexible membership with no fixed term contracts. Members can cancel their memberships at any time.

24x7x365 access - Pure Gyms are generally open 24 hours a day, seven days a week, 365 days a year.

High quality facilities - Pure Gyms are equipped with a large number of pieces of high-specification gym equipment.

Free classes - Pure Gyms generally have one or two dedicated group exercise studios, including purpose-built stationary cycling studios in many locations. Each gym offers approximately 50-80 free exercise classes per week taught by professional personal trainers.

Multi-site access - Pure Gym's members can extend their memberships to access additional Pure Gyms beyond their chosen "home" gym, for a small additional fee.

Online membership management - Pure Gym operates a simple online joining process and allows members to manage their membership online.

·      The Directors believe that the strength of the Group's proposition is evidenced by Pure Gym's ability to appeal to a broad range of consumers, regardless of age, sex, or socioeconomic background, its increasingly loyal membership base and high re-joiner rates.

 

Differentiated business model that drives strong financial performance

·      Pure Gym's low cost, capital efficient and technology-enabled gym operating model provides a competitive advantage over mid-market and premium gym operators.

·      The operating model enables Pure Gym to offer a compelling customer proposition and support high levels of membership while requiring low levels of operating costs and Initial Capital Investment costs.

·      The model has been proven to work across all regions of the UK and in a wide variety of property types, including former retail park warehouses, offices, car showrooms and nightclubs.

·      The key characteristics of Pure Gym's gym operating model are as follows:

Low personnel costs - Through the use of technology, the Group generally employs only two to three full time employees per gym, which results in low personnel costs.

No high cost, low-utilisation amenities - Unlike most mid-market and premium operators, Pure Gym does not install pools, spas, saunas, steam rooms, cafes or other high-end amenities in its gyms. These amenities are generally expensive to construct, operate, and maintain and take up a significant amount of leased space. The Directors believe that these amenities are generally less utilised by members and that by eliminating them the Group is able to install a greater number of pieces of high utilisation fitness equipment, such as treadmills and free weights.

Efficient use of outsourcing - Pure Gym outsources most non-core functions such as cleaning, maintenance and remote security monitoring to specialists.

·      Collectively, these factors drive strong unit economics and ROCEs:

On average, the Group's Mature Gyms[8] had 5,631 members and generated revenues of £1.1 million, Gym Site Adjusted EBITDA[9] of £0.5 million, Gym Site Adjusted EBITDA margin of 46 per cent., and Gym Site ROCE[10] of 47 per cent. in the year ended 31 December 2015.

All of Pure Gym's Mature Gyms were profitable in 2015 and the Group has never closed or re-located a Pure Gym site. The attractive performance of the Group's gyms on an individual basis has resulted in the strong historical performance of the Group as a whole.

 

Experienced management team with strong organisational culture

·      The Group's senior management have an established track record of delivering growth and operational excellence at Pure Gym and similar businesses.

·      Senior management is supported by an experienced management team in key areas, including property, development, operations, IT, human resources, and finance.

·      Pure Gym has made substantial investments in management over the past two years to recruit high calibre individuals that can execute the Group's growth plan, with important business functions now generally managed internally.

·      Pure Gym has a strong and differentiated culture centred on collaboration, innovation, and entrepreneurship. This culture was recently recognised nationally when Pure Gym ranked 33rd in the Sunday Times 100 Best Companies To Work For in 2016.

 

Dividend Policy

 

The Company intends to retain any earnings to grow and develop its business and, therefore, does not anticipate paying dividends in the short to medium term.

 

Key Headline Financials


As at and for the year ended 31 December

As at and for the six months ended 30 June


2013

2014

2015

2015

2016



 (unaudited)

Financial Data






Revenue (£ million) (audited)

46.3

68.6

125.2

50.8

76.6

Gym Site Adjusted EBITDA[11] (£ million) (audited)

16.1

25.1

41.0

18.5

23.5

Group Adjusted EBITDA[12] (£ million) (audited)

11.9

19.2

28.0

13.4

16.5

Group Adjusted EBITDA before Pre-Opening Costs[13] (unaudited) (£ million)

14.5

22.7

33.8

15.3

21.0







Group Operating Cash Flow[14] (unaudited) (£ million)

19.1

24.5

30.8

14.3

8.1

Group Operating Cash Flow Conversion[15] (unaudited) (per cent.)

161

128

110

106

49







Operational Data






Total number of gyms[16]

60

84

152

131

163

Total number of Mature Gyms

22

38

60

n/a

n/a

Total number of members ('000s)

284

412

670

617

786

 

Strategy

 

The Group's strategy is to continue to lead the revolution of the UK health and fitness industry by providing affordable, flexible and value-for-money memberships to high-quality gyms to anybody that wants to increase their level of fitness, while simultaneously delivering profitable growth and strong returns to shareholders. The Directors believe there is a substantial opportunity for Pure Gym to continue its roll-out of gyms and strengthen its position as the market leader. The key elements of Pure Gym's strategy include:

 

Driving the performance of recently opened Pure Gyms

·      Pure Gym has significantly increased its number of gyms in recent years as a result of its organic roll-out strategy as well as through the acquisition of the LA Fitness Group.

·      As at 31 December 2015, the Group had 72 new gyms (being Pure Gyms that have been open for less than 24 months as at the end of the reporting period, "New Gyms") as well as an additional 20 unconverted LA Fitness gyms (being LA Fitness and LAX branded gyms that have not yet been converted to the Pure Gym operating model and brand, "Unconverted LAF Gyms").

·      In the six months ended 30 June 2016, the Group opened 27 Pure Gyms, including 11 new organic Pure Gyms and 16 LA Fitness gyms that were converted to the Pure Gym brand and operating model ("LA Fitness Conversions").

·      The Group has incurred the Initial Site Investment Costs and Pre-Opening Costs for these 99 opened Pure Gyms (72 as at year end 2015 and a further 27 opened in the six months since), which have yet to reach maturity and, as a result, have not yet achieved their full financial performance and ROCE potential.

·      The 72 New Gyms as at 31 December 2015 and those opened in the six months ended 30 June 2016 are currently performing in line with the Directors' expectations and membership, yields and site profitability continue to grow.

 

Continuing the organic roll out of new gyms

·      The Directors believe that there is a market opportunity for around 950 value gyms and approximately 3.5 million to 4.5 million value gym members in the UK market, compared to the 450 value gyms and 1.9 million value gym members as of March 2016.

·      Future growth in the value segment will be driven by the development of new value gyms, continued market share gains from mid-market and premium operators, and overall growth in UK gym participation rates.

·      The Directors believe Pure Gym is ideally positioned to capitalise on this substantial market opportunity as it is the standout market leader in the UK and has a long and successful track record of opening new gyms.

·      Pure Gym intends to open approximately 38 gyms (including approximately 20 organic new gyms and 18 LA Fitness Conversions) in 2016, 25-30 organic gyms in 2017 and 20-25 organic new gyms per year thereafter over the medium term.

·      The Group targets a minimum mature ROCE of 30 per cent. on organic site openings.

 

Executing plans to drive growth at all Pure Gyms

•      The Group remains focused on maintaining the performance of all open Pure Gyms and delivering profitable growth across the Group's estate. Management is implementing and has planned a number of key initiatives to further develop existing sites' revenue performance, including:

Expanding site capacity - Pure Gym seeks to expand the capacity of its existing gyms where this is possible and viable.

Developing new commercial products - The Group is developing new membership options to attract certain types of new members to its gyms and increase membership fee yields and/or member numbers. For example, Pure Gym is currently testing an off-peak membership option in a number of clubs and is trialling 'premium' memberships in a small number of gyms., The Group has also recently relaunched its multi-site membership proposition.

Maximising revenue through site level yield management - Pure Gym sets its prices at the local level and management reviews all gyms' prices regularly. Pricing changes are implemented to improve revenue performance through yield or membership increases.

Investing in marketing and CRM - Pure Gym has recently increased its investment in marketing and the Group is taking a more sophisticated and data-driven approach to membership acquisition and retention.

Development of new sales channels and cross marketing - Pure Gym is leveraging its nationwide scale to identify opportunities to partner and enter into commercial arrangements with large UK corporations.

Implementing new technology infrastructure - Pure Gym has increased its investment in IT and brought part of this core business function in-house in the second half of 2015.

 

Maintaining a rigorous focus on cost containment

•      The Group is focused on optimising and controlling gym-level operating costs, as well as Initial Capital Investment costs.

•      These costs are controlled centrally and the Group intends to continue to leverage its growing scale in order to achieve more favourable purchasing terms with third-party suppliers, service providers and contractors.

•      Over the last two years, the Group has made significant investments in central costs to deliver the management and technology infrastructure necessary to support the Group's enlarged gym estate and future growth plans. The Directors believe that the Group's central functions are well invested and that Pure Gym will be able to grow with more limited levels of incremental central cost expansion in the medium term.

 

Evaluating other potential growth prospects

•      Acquisitions

The UK health and fitness market remains highly fragmented and the Directors believe that there are likely to be future acquisition opportunities.

Pure Gym intends to evaluate acquisitions on an opportunistic basis. Acquisitions could be made for either the whole, or part of, an operator's gym portfolio and could accelerate the Group's roll-out strategy and/or augment its competitive position in certain important strategic local markets.

•      Develop and roll-out new fitness concepts and formats

Pure Gym will evaluate opportunities to innovate, develop and roll out new fitness concepts and formats that have significant growth and high ROCE potential.

An example of such innovation is Pure Ride, which the Group developed and launched in London in January 2016. Pure Ride is a boutique indoor cycling studio that was developed to cater to the growing demand for high-end, studio-based group exercise and specialist indoor cycling.

•      Expansion into international markets

The Directors believe that, given its similarities to the UK market, the market in the Republic of Ireland is likely to be well suited to the Pure Gym customer proposition and operating model and therefore, the Directors will monitor the Irish economy, property market and post-EU referendum situation closely.

The Directors believe there are a number of other international markets in addition to Ireland that could provide an attractive opportunity for the Group to establish a presence in the longer term either through the acquisition of existing gym portfolios or through organic roll-out.

 

Board of Directors

 

The Board of Directors will be led by Chairman Tony Ball, who has been a non-executive director since November 2013 and has helped oversee the Group's rapid growth to become the largest gym operator in the UK. Mr. Ball is the former Chief Executive Officer of BSkyB and former Chairman of Kabel Deutschland and currently is a Non-Executive Director of BT Plc.

 

Tony Ball, Chairman

Tony Ball joined Pure Gym as a non-executive director in 2013. He was Chairman of Kabel Deutschland, Germany's largest cable TV operator, from 2005 until 2013. Prior to joining Kabel Deutschland, he served as Chief Executive Officer of BSkyB, the largest pay TV broadcaster in Europe. Previously, he was the Chief Executive Officer of the News Corporation/Liberty Media joint venture, Fox/Liberty Networks, which included the FX Networks, Fox Sports Net and over 20 regional sports channels throughout the US. He also served as president of Fox Sports International. Mr. Ball is currently a non-executive director of BT Group, and chairman of the Advisory Board of Portland Communications. He is also a senior advisor to Providence Equity Partners. Mr. Ball received an M.B.A. from Kingston University and has been awarded honorary doctorates from both Middlesex University and Kingston University. He is also a Fellow of the Royal Television Society.

 

Humphrey Cobbold, Chief Executive Officer

Humphrey Cobbold joined Pure Gym in 2015 as Chief Executive Officer. Mr. Cobbold was previously Chief Executive Officer of Wiggle Ltd, an online retailer of cycling and triathlon related products, during which time he launched the international business across Europe, Japan, Australia, USA and China. He is a former Chairman of Fish4, a British classified advertising website, as well as the Director of Strategic Development and a former Executive Committee member of Trinity Mirror, the newspaper publisher. Prior to joining Trinity Mirror, he was a partner and the co-head of the UK media and corporate finance practices for the global management consulting firm McKinsey & Company. He graduated in Natural Sciences from the University of Cambridge and holds an M.B.A. with Distinction from INSEAD.

 

Adam Bellamy, Chief Financial Officer

Adam Bellamy joined Pure Gym in 2012 as Chief Financial Officer. He is a qualified accountant with experience in multi-site retail, hospitality and entertainment businesses. Prior to joining Pure Gym, Mr. Bellamy served as the Finance Director of Atmosphere Bars & Clubs from 2009 to 2012. Prior to this he served as the Finance Director of D&D London from 2006 to 2009 and also held various senior finance roles in House of Fraser and Whitbread (both publically listed businesses).

 

Jacques de Bruin, Chief Operating Officer

Jacques de Bruin has been the Chief Operating Officer of Pure Gym since 2011. Previously, he was the UK Operations Manager at Virgin Active, heading up over 71 clubs. He has deep industry experience, having started out with Virgin Active in South Africa, before working in the UK for six years. Mr. de Bruin graduated from the University of Johannesburg and holds a business degree in Sports Management.

 

Martin Stewart, proposed Senior Independent Non-Executive Director

Mr. Stewart is currently the Chief Executive Officer of OSN, a Dubai-based satellite television provider. Prior to this role he was the Chief Financial Officer at The Football Association. Mr. Stewart has also served as CEO of EurotaxGlass's International from 2011 to 2014 and as Director General at Grupo Corporativo Ono from 2009 to 2010. Prior to this, Mr. Stewart served as CFO at EMI plc from 2005 to 2007 and CFO at BSkyB from 1998 to 2004. Mr. Stewart also previously served as the Lead Non-Executive Director at the Department of Energy and Climate Change and as Non-Executive Director and Chair of the Audit Committee at Satellite Information Services, KabelDeutschland, the London 2012 Organising Committee for the Olympic and Paralympic Games and the London 2017 World Athletics Championships.

 

Jane Thompson, proposed Independent Non-Executive Director

Ms. Thompson has held various senior roles at Match.com LLC, including Senior Vice President and General Manager, North America and Asia before becoming Managing Director of International for IAC (InterActiveCorp), a leading interactive media and Internet company. Prior to this, Ms. Thompson was a consultant at Bain & Company in London. Ms. Thompson is currently Co-Founder and director of The Fusion Labs, a UK-based digital marketing and e-commerce company and a non-executive director of NYSE listed Michael Kors Holdings Ltd. She holds an M.B.A. from the Wharton School of the University of Pennsylvania.

 

Stephen Clarke, proposed Independent Non-Executive Director

Mr. Clarke is the Chief Executive Officer of WHSmith plc, a position he has held since July 2013. Mr. Clarke joined WHSmith in August 2004 as Marketing Director for WHSmith High Street. He joined WHSmith from Argos where he served as Head of Product Marketing since 2001. Prior to this, Mr. Clarke served as Marketing Manager for Cable & Wireless Optus and Marketing Director of Vox Retail Ltd and Buy.com. His career began at the Dixons Group where he carried out a number of store, product and marketing roles. Mr. Clarke has served as an Executive Director of WHSmith since 2012.

 

Richard Zannino, Non-Executive Director

Richard Zannino has served as a non-executive director of the Group since May 2013. Mr. Zannino is a Managing Director of CCMP Capital Advisors, LP and a member of the firm's Investment Committee. Prior to joining CCMP in 2009, Mr. Zannino was Chief Executive Officer and a member of the Board of Directors of Dow Jones & Company. Mr. Zannino joined Dow Jones as Executive Vice President and Chief Financial Officer in February 2001 and was promoted to Chief Operating Officer in July 2002 and to Chief Executive Officer and Director in February 2006. Prior to joining Dow Jones, Mr. Zannino was Executive Vice President in charge of strategy, finance, M&A, technology, and a number of operating units at Liz Claiborne. He originally joined Liz Claiborne in 1998 as Chief Financial Officer. Prior to this, he served as Executive Vice President and Chief Financial Officer of Saks Fifth Avenue. Mr. Zannino is currently a member of the Board of Directors of Infogroup Inc., Jamieson Laboratories, The Hillman Companies, Inc., Ollie's Bargain Outlet, Shoes For Crews, Estee Lauder, and IAC/InterActiveCorp. and is a trustee of Pace University. He holds a B.S. in Finance and Economics from Bentley College and an M.B.A. in Finance from Pace University.

 

Thomas Walker, Non-Executive Director

Thomas Walker has served as a non-executive director of the Group since May 2013. Mr. Walker is a Managing Director of CCMP Capital Advisors (UK) II Limited, CCMP's London affiliate, and is a member of the firm's Investment Committee. Prior to joining the London affiliate of CCMP upon its formation in August 2006, Mr. Walker was a Partner at J.P. Morgan Partners, LLC between 2002 and 2006. Before joining J.P. Morgan Partners in 2002, Mr. Walker was Managing Director and Head of Financial Sponsor Coverage for J.P. Morgan in London. Previously, Mr. Walker worked in the New York Investment Banking divisions of J.P. Morgan, Credit Suisse First Boston and Drexel, Burnham, Lambert. His investment banking experience covers a range of products, including mergers and acquisitions, equity capital markets, high yield debt and leveraged lending. He serves on the board of directors of Volotea S.A., Islestarr Holdings Ltd (parent company of Charlotte Tilbury Beauty) and Thinkforward, a UK charity organisation. Mr. Walker holds a B.A. from the University of Wisconsin and an M.B.A. from the University of Chicago.

 

 

Important notice:

 

The contents of this announcement, which have been prepared by and are the sole responsibility of Pure Gym Group plc, have been approved by Jefferies International Limited ("Jefferies") and J.P. Morgan Securities plc (which conducts its UK investment banking activities as J.P. Morgan Cazenove) ("J.P. Morgan Cazenove") solely for the purposes of section 21(2)(b) of the Financial Services and Markets Act 2000 (as amended).

 

The information contained in this announcement is for background purposes only and does not purport to be full or complete. It is also subject to change. Before subscribing for or purchasing any Ordinary Shares, persons viewing this announcement should ensure that they fully understand and accept the risks which will be set out in the Prospectus when published. The price and value of securities can go down as well as up, and investors may get back less than they invested. Potential investors should consult an independent financial advisor as to the suitability of the securities referred to in this advertisement for the person concerned.

 

Neither this announcement nor the information contained herein is for publication, distribution or release, in whole or in part, directly or indirectly, in or into or from the United States (including its territories and possessions), Australia, Canada, Japan or to any person in any of those jurisdictions or any other jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction. The Offer and the distribution of this announcement may be restricted by law in certain jurisdictions and persons into whose possession this announcement or any document or other information referred to herein comes should inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

 

This announcement does not contain or constitute an offer of, or the solicitation of an offer to buy or subscribe for, the securities referred to herein to any person in any jurisdiction, including the United States, Australia, Canada or Japan or in any jurisdiction to whom or in which such offer or solicitation is unlawful.

 

The securities to which this announcement relates have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act") or with any regulating authority or under any applicable securities laws of any state or other jurisdiction of the United States, and may not be offered, sold, pledged or otherwise transferred within the United States or to US persons unless registered under the Securities Act or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with applicable state law. There will be no public offer of the securities in the United States. The securities referred to herein have not been registered under the applicable securities laws of Australia, Canada or Japan and, subject to certain exceptions, may not be offered or sold within Australia, Canada or Japan or to any national, resident or citizen of Australia, Canada or Japan.

 

This announcement is only addressed to and directed at persons in member states of the European Economic Area ("EEA") who are qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive (Directive 2003/71/EC as amended, including by Directive 2010/73/EC) ("Qualified Investors") In addition, in the United Kingdom, this announcement is only addressed to and directed at Qualified Investors who (i) are persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "Order"), (ii) are persons who are high net worth entities falling within Article 49(2)(a) to (d) of the Order and (iii) to persons to whom it may otherwise be lawful to communicate it to (all such persons being referred to as "relevant persons"). Any investment or investment activity to which this announcement relates is available only to relevant persons in the United Kingdom and Qualified Investors in any member state of the EEA other than the United Kingdom and will be engaged in only with such persons. Other persons should not rely or act upon this announcement or any of its contents.

 

This announcement contains statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. Forward-looking statements may and often do differ materially from actual results. The forward-looking statements reflect the Company's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's business, results of operations, financial position, liquidity, prospects, growth and strategies. The forward-looking statements speak only as of the date they are made and cannot be relied upon as a guide to future performance.

 

Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by the Company, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements. As a result, investors are cautioned not to place undue reliance on such forward-looking statements. Forward-looking statements speak only as of their date and the Company's shareholders, the Banks (as defined below) and any of such person's respective directors, officers, employees, agents, affiliates or advisors expressly disclaim any obligation to supplement, amend, update or revise any of the forward-looking statements made herein, except where it would be required to do so under applicable law. It is up to the recipient of this announcement to make its own assessment as to the validity of such forward-looking statements and assumptions. No statement in this announcement is intended as a profit forecast or a profit estimate.

 

The Offer timetable, including the publication of the final Prospectus and the date of Admission, may be influenced by a range of circumstances such as market conditions. There is no guarantee that the Offer will proceed and that Admission will occur and you should not base your financial decisions on the Company's intentions in relation to the Offer and Admission at this stage. Acquiring investments to which this announcement relates may expose an investor to a significant risk of losing all or part of the amount invested. Persons considering making such an investment should consult an authorised person specialising in advising on such investments. This announcement does not constitute a recommendation concerning the Offer. The value of Shares can decrease as well as increase. Potential investors should consult a professional advisor as to the suitability of the IPO for the person concerned.

 

Each of Jefferies, authorised and regulated by the Financial Conduct Authority in the United Kingdom, J.P. Morgan Cazenove, Credit Suisse Securities (Europe) Limited and N M Rothschild & Son Limited, authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom, (together, the "Banks") is acting exclusively for the Company and no one else in connection with the Offer. None of the Banks will regard any other person (whether or not a recipient of this document) as a client in relation to the Offer and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients nor for giving advice in relation to the Offer, the contents of this announcement or any transaction or arrangement or other matter referred to herein.

 

In connection with the Offer, each of the Banks and any of their respective affiliates, acting as investors for their own accounts, may subscribe for or purchase Shares and in that capacity may retain, purchase, sell, offer to sell or otherwise deal for their own accounts in such Shares and other securities of the Company or related investments in connection with the Offer or otherwise. Accordingly, references in the final Prospectus, once published, to the Shares being offered, subscribed, issued, acquired, sold, placed or otherwise dealt in should be read as including any offer, subscription, issue, sale, acquisition, placing or dealing in the Shares by any of the Banks and any of their affiliates acting as investors for their own accounts. In addition, certain of the Banks or their affiliates may enter into financing arrangements and swaps in connection with which they or their affiliates may from time to time acquire, hold or dispose of Shares. None of the Banks nor any of their respective affiliates intend to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligations to do so.

 

Apart from the responsibilities and liabilities, if any, which may be imposed on any of the Banks by the FSMA or the regulatory regime established thereunder, or under the regulatory regime of any jurisdiction where exclusion of liability under the relevant regulatory regime would be illegal, void or unenforceable, none of Banks nor any of their respective affiliates, directors, officers, employees, advisors or agents accepts any responsibility or liability whatsoever for, or makes any representation or warranty, express or implied, as to the truth, accuracy, completeness or fairness of the information contained in this announcement (or whether any information has been omitted from the announcement) or any other information relating to the Company, its subsidiaries or associated companies, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available or for any loss howsoever arising from any use of this announcement or its contents or otherwise arising in connection therewith.

 

In connection with the Offer, J.P. Morgan Securities plc, as stabilising manager, may, for stabilisation purposes, over-allot Shares up to a maximum of 15 per cent. of the total number of Shares comprised in the Offer. For the purposes of allowing it to cover short positions resulting from any such over-allotments and/or from sales of Shares effected by it during the stabilisation period, J.P. Morgan Securities plc will enter into over-allotment arrangements with certain existing shareholders pursuant to which J.P. Morgan Securities plc may purchase or procure purchasers for additional Shares up to a maximum of 15 per cent. of the total number of Shares comprised in the Offer (the "Over-allotment Shares") at the offer price. The over-allotment arrangements will be exercisable in whole or in part, upon notice by J.P. Morgan Securities plc, for 30 calendar days after the commencement of conditional dealings in the Shares on the London Stock Exchange. Any Over-allotment Shares sold by J.P. Morgan Securities plc will be sold on the same terms and conditions as the Shares being sold in the Offer and will form a single class for all purposes with the other Shares. Save as required by law or regulation, neither J.P. Morgan Securities plc nor any of its agents intends to disclose the extent of any over-allotments made and/or stabilisation transactions conducted in relation to the Offer.

 

Certain figures contained in this document, including financial information, have been subject to rounding adjustments. Accordingly, in certain instances, the sum or percentage change of the numbers contained in this document may not conform exactly with the total figure given.

 

Market Data

 

Unless otherwise indicated, market, industry, market share and competitive position data are estimates (and accordingly, approximate) and should be treated with caution. Certain information contained in this document relating to the gym market and the industry in which the Group operates as well as certain economic and industry data and forecasts used in, and statements regarding the Group's market position made in, this document were extracted or derived from third party reports, market research, government and other publicly available information and independent industry publications, as the case may be. Wherever market, industry, market share and competitive position data has been presented, such information is based on management estimates from existing industry data and company accounts. Industry publications and market research generally state that the information they contain has been obtained from sources believed to be reliable but that the accuracy and completeness of such information is not guaranteed and that the projections they contain are based on a number of significant assumptions.



[1] Average membership fee is as at 30 June 2016 for standard "no contract" membership (inclusive of VAT) across Pure Gym's gym estate excluding pre-opening offers

[2] Gym Site Adjusted EBITDA for a given period is calculated as Group Adjusted EBITDA (as defined in footnote 3) for that period excluding Head Office Costs. Head Office Costs for a given period is defined as all non-gym specific costs related to the operation of Head Office functions in that period

[3] Group Adjusted EBITDA for a given period is calculated as the Group's profit for that period before income tax expense, net finance cost, depreciation of property, plant and equipment, amortisation of intangible fixed assets, profit/loss on disposal of property, plant and equipment and exceptional administrative expenses

[4] Average Gym Site ROCE for a given period is calculated as Gym Site Adjusted EBITDA for the relevant portfolio of gyms for that period divided by the total Initial Capital Investment attributable to that portfolio of gyms

[5] Initial Capital Investment is the capital cost of bringing new gyms into operation, including expenditures on site fit out, fixtures, fittings and equipment

[6] LAF non-recurring items includes Head Office costs and pre-opening costs

[7] LAF non-recurring items includes Head Office costs and pre-opening costs.

[8] Information presented on a Mature Gym portfolio basis is attributable to the Group's gyms that have been open as Pure Gyms for 24 months or more as at the end of the relevant reporting period. Based on the historic performance of the Group's gyms, it has taken on average approximately 24 months for Pure Gyms to reach maturity

[9] Average Gym Site Adjusted EBITDA is calculated as Gym Site Adjusted EBITDA (as defined in footnote 1) for the relevant portfolio of gyms for that period divided by the number of gyms in that portfolio

[10] Average Gym Site ROCE for a given period is calculated as Gym Site Adjusted EBITDA for the relevant portfolio of gyms for that period divided by the total Initial Capital Investment attributable to that portfolio of gyms. Initial Capital Investment is the capital cost of bringing new gyms into operation, including expenditures on site fit out, fixtures, fittings and equipment

[11] Gym Site Adjusted EBITDA for a given period is calculated as Group Adjusted EBITDA (as defined in footnote 3) for that period excluding Head Office Costs. Head Office Costs for a given period is defined as all non-gym specific costs related to the operation of Head Office functions in that period

[12] Group Adjusted EBITDA for a given period is calculated as the Group's profit for that period before income tax expense, net finance cost, depreciation of property, plant and equipment, amortisation of intangible fixed assets, profit/loss on disposal of property, plant and equipment and exceptional administrative expenses

[13] All site operating costs incurred during a gym's pre-opening period and primarily consisting of staff costs, marketing and rent

[14] Group Operating Cash Flow for a given period is calculated as Group Adjusted EBITDA plus Working Capital Cash Flow and less Maintenance and Corporate Capital Expenditures for that period. Working Capital Cash Flow for a given period represents the change in working capital per the balance sheet for that period, adjusted for working capital acquired upon the acquisition of the LA Fitness Group in May 2015 and non-cash IFRS transition adjustments in 2014. Maintenance and Corporate Capital Expenditures for a given period is defined as total capital expenditure incurred in that period less the Initial Capital Investment and less the capital costs of expanding gym sites incurred in that period

[15] Group Operating Cash Flow Conversion for a given period is calculated as Group Operating Cash Flow for that period divided by Group Adjusted EBITDA for that period

[16] 2015 data excludes Planned LAF Disposals


This information is provided by RNS
The company news service from the London Stock Exchange
 
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