Senior Managers' Update
Financial performance in FY19 was excellent despite economic uncertainty supressing consumer spending and intense competition from low cost gym operators. We are reporting a profit of £4.7m, a £0.9m overperformance to our budget for the year. We generated turnover of £158m, £1.5m lower than budget. The strong first half year performance, predominantly driven by casual swimming during the summer months, was eroded by a poor performance in the second half year both in fitness and swimming. Fitness ended the year £1.3m behind budget. Many sites failed to hit sales targets throughout the year which led to a progressive club live shortfall to budget and the resultant impact on fitness revenue. Notwithstanding this, we saw notable performances at the new Waltham Abbey and Loddon Valley as well as Eastleigh, Dorking, Deben and Sparkhill. Swimming ended the year £0.2m behind budget following a particularly tough Q4 where the unseasonably warm weather in the February half term had a detrimental effect on casual swimming. Other activity income ended £0.4m behind budget with half of the shortfall in group exercise classes. Food & Beverage finished the year £140k ahead of budget with exceptional café sales both at Eastleigh and in the first full Costa franchise at The Triangle.
We implemented the ‘bold goals’ cost saving exercise at the start of the year to mitigate against the risk to income from economic uncertainty and rising energy costs. We targeted savings of £2.5m and achieved an impressive £3.0m by the end of the year. Almost two thirds of the savings were in staffing which, through various restructures and a focus on sales and fitness staff in particular, was £1.8m less than budget. Within the other controllable expenditure headings, we also made good savings in R&M, admin and marketing costs. We also saw a sizeable saving in rates where we received unbudgeted NNDR relief at the Places Gyms. Partly offsetting these savings were additional energy costs of £0.3m (net of benchmarking), driven by an increase in energy prices and increased consumption during the exceptionally hot summer months.
Capital expenditure was tightly controlled throughout the year resulting in significant depreciation savings to budget of £1.36m.
In the like for like sites, total income growth for the year was +3.1%. Swimming grew by 5.9% driven by strong growth in lessons of 5.7% and casual swimming growth of 7.0%. The increase in casual swimming was a result of the hot summer in FY19 boosting income and the snow in FY18 which had a significant impact on income in that year. Fitness income grew by just 0.1% as new competition stole market share and growth in other activity income was +6.5% with instructor led activities the main driver, particularly holiday activities where we reverted to in-house delivery in most sites. Operating expenditure increased by just +1.6% in like for like sites despite large increases in energy, IT support and LA payment, resulting in an increase in profits of £1.3m (+24%) compared to the prior year.
Thank you to everyone for your efforts in driving income and delivering the ‘bold goals’ savings which led to the strong outturn in FY19. The profit budget for FY20 is £4.4m which is a reduction on the FY19 position due to the loss of North Norfolk, High Peak and closure of Surrey Heath. The continued uncertainty in the economy and unrelenting competition imposes a risk to our income budget however we are confident that we can overcome these challenges. We will be introducing measures to strengthen our position including a new membership pricing model, 12-month contracts and new programmes aimed at reaching those people currently not engaged with fitness. With the drive and commitment of colleagues we are in a favourable position to achieve the FY20 budget.