Chairwoman's Statement

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Our current position

During the first two months of 2020 the business traded well and guidance had been prepared to expect continued profitable growth with an acceleration of small box openings for the year. However, the Covid-19 pandemic has in March begun to impact our business with participation levels in gyms dropping and with similar businesses in Europe announcing closure during periods of government-led self-isolation. It is now our expectation that a period of disruption is likely and we will take all measures to protect our colleagues, members and business through this unprecedented event. This will include the reduction of cost and the protection of cash and liquidity until revised prospects can be ascertained. At this time it is not possible to guide with any accuracy what the impact will be, however appropriate financial modelling has been undertaken to support the assessment of the business as a going concern with the material uncertainty from Covid-19 and in support of viability.�

Our 2019 results

The rapid development of the Group has continued with revenue growth of 23.6% and Group Adjusted EBITDA growth of 24.0%. Mature estate Return On Invested Capital was maintained above our 30% hurdle. During the year 18 standard gyms were opened and a further two small box gyms as we extend our attractive proposition to smaller sized towns and communities. Following three site closures, this takes the number of gyms from 158 to 175 in the year with membership growing 9.7% to 794,000. Notably, this rate of growth is largely self-funded with net debt moving marginally from �46.0m to �47.4m. Our bank facilities were refinanced during the year increasing headroom and receiving more favourable rates. The strength of our listed company covenant continues to be attractive to landlords and is an important advantage in winning new sites.

Our shareholders

In addition to the many investor meetings held by executive directors during the year, I also offered to engage with our top ten shareholders, many of whom have been significant investors since our IPO in 2015. This allowed me to discuss the process undertaken to manage director succession and to listen to shareholder views on our business. Of particular note, I focused on telling our sustainability story, recognising the strength of our purpose - bringing affordable fitness to towns and communities across the UK.

I was pleased to kick off the work of a Sustainability Working Group drawn from across the business and it is encouraging to report significant progress. The team has identified four key areas of focus all of which are United Nations Sustainable Development Goals; promoting Health & Well-being, Good Jobs, Quality Education and Lifelong Learning, Diversity & Inclusion, and Responsibility to the Environment. You will be able to read more about our work in our Annual Report.

Our team

Our business has been well led in their first full year by CEO, Richard Darwin and CFO, Mark George, together with a stable and talented team of executives. Significant work has been undertaken to embed our values and nurture our positive culture. We remain committed to lead an organisation that helps members and each other 'take the first steps', we are characterized by 'Realness', being fair and honest in all we do. We run gyms that accentuate 'Friendliness' being welcoming, inclusive and not intimidating. 'Challenging Your limits' is a mindset we bring to members and to each other and to the Group as a whole. We were delighted to retain the Investors in People Gold award, a very significant accolade for a growing business.

Our People and Operations teams, led by Ann-Marie Murphy and Nick Henwood respectively, managed a most significant change to our business model in the roll-out of New Gym Team (NGT). We now have 1,600 Fitness Trainers as part-time employees, bringing consistency across the estate and offering them support to further their self-employed businesses for which a rent is paid. Taking the business from 500 to over 2,000 employees was a major achievement and has required, and will continue to require, significant focus on the development and recruitment of well qualified trainers.

Our work

Your Board continues to work out in our gyms and visit sites individually and together as a Board. It continues to be the best way of satisfying ourselves of the standards being maintained and the progress being made. I was particularly pleased to visit Newark, our first small box gym, and see the innovations that have been developed to create an excellent gym on a smaller footprint at appropriately lower capital expenditure.

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The Board retains close oversight of performance as the team execute our approved strategy. I am grateful to my Board colleagues for their engagement and contribution, always given with a good heart when either challenging or supporting the executive team. The transparency and openness of our dialogue together with continued improvement of reporting to the Board were universally recognised as strengths in our Board performance review. We are also delighted to welcome Katy Tucker as our first dedicated Company secretary; I know she will support us all to achieve greater effectiveness as we become a business of scale.

On behalf of the Board let me thank all our colleagues for their dedication to making our members' lives healthier and thank them for their support in facing into the new difficulties that Covid-19 poses to us all.

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Penny Hughes

Chairwoman

19 March 2020

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Chief Executive's Review

Covid-19

At this time our business is focused on mitigating the impact that Covid-19 is likely to have over the coming months. We go into this period of disruption with an established membership base, a cash generative model and a strong balance sheet following a successful 2019. Mitigating Covid-19 will require a period of slowdown in our expansion to preserve cash in order that we are well placed, when this period of uncertainty ends, to address the long-term growth opportunity for low cost gyms in the UK.

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Review of 2019

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2019 was another year of strong growth and rapid development for The Gym Group. We continued to grow our business by remaining focused on our strong and worthwhile purpose, bringing affordable fitness to towns and communities across the UK. Our growth has also been assisted by the investment in central infrastructure and systems made over the past 2-3 years and a stable, talented team that is focused on the profitable expansion of the business. We continue to believe that there is a substantial opportunity within the UK low cost gym market and we are intent on ensuring that the business is well positioned to take advantage of the potential for further expansion.�

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Our membership base continued to expand as we rolled out new sites and grew market share with total year end members up 9.7% to 794,000 (2018: 724,000) and average members up 14.9% to 796,000 (2018: 693,000). This is reflected in the growth of our financial metrics: revenue up 23.6% to �153.1 million (2018: �123.9 million) and Group Adjusted EBITDA up by 24.0% to �48.5 million (2018: �39.1 million). Adjusted Profit before Tax increased by 35.9% to �14.0 million (2018: �10.3 million) and Basic Adjusted Earnings per Share was up by 32.8% to 7.7p (2018: 5.8). Our statutory Profit before Tax decreased to �6.2 million (2018: �7.0 million).

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These metrics are very much in line with our expectations for the business, demonstrating that as our estate matures and we concentrate on organic growth, this business is well positioned to generate strong profits and cashflow.�

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After two acquisitions in 2017 and 2018, our site growth this year has been concentrated on growing the Group organically.� We expanded the estate by opening 18 sites of c.15,000 square feet each with the focus being on ensuring we open high quality sites in a variety of locations around the UK. Significantly we have created an additional avenue of growth with our small box format, with our first two openings late in the year. As we build on the opportunity to open small box sites our growth will enable us to offer affordable fitness to a greater proportion of the UK. Our market share currently stands at 24% of the low-cost market by number of sites (higher as a proportion of members) and we are well positioned with a strong future pipeline for this to increase further over the coming years.

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We continue to believe there is a substantial opportunity for the Group to expand in the UK. The PwC report we commissioned last year noted the potential for the low-cost gym market to almost double from its base of 727 gyms as at December 2019. Around half of the future growth is forecast to come from catchments with a population of over 60,000 within a 15-minute drive time (standard catchments) and half in smaller catchments. Through 2019 we have continued to take advantage of opening standard gyms. The smaller catchment opportunity is also significant for the small box format where we opened our first two sites in Newark and Beverley during the year.

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Strategic progress

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Delivering strong performance from gyms�

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At the end of 2019 we had 109 sites out of 175 sites which have been open and in our network for over two years (which we define as Mature). By the end of 2020 this number will grow to 155, therefore in 2020 we will continue to derive the benefits of a maturing estate. Mature Site EBITDA in 2019 was �48.1 million, up 23.3% (2018: �39.0 million) and Mature Site EBITDA per site remained strong at �437,000 (2018: �438,000), with the 2017 cohort of sites performing well. In 2019 we achieved a return on invested capital in the mature estate of 31% (2018: 30%), once again achieving our target return on capital of 30% for organic openings. This measure continues to be achieved consistently both from sites reaching maturity more recently as well as from our older sites, which have maintained strong levels of performance.

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During the year we have made good progress with the sites acquired from Lifestyle Fitness (in 2017) and easyGym (in 2018). The two remaining easyGym branded sites (Oxford Street and Kings Heath) were converted to our brand and operating model during 2019. We intend to invest further in these sites once the lease extensions are confirmed.

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The former Lifestyle sites have demonstrated strong member growth as we have brought the sites up to our specification and as a result have delivered significantly increased revenue in 2019 vs 2018. The easyGym sites are also making good progress, with particularly encouraging take up of LIVE IT; penetration is already higher for ex-easyGym sites than the Group average, even though they have been selling the product for a relatively short period of time. As a result, we have seen revenue in the former easyGym sites increase in 2019 vs 2018 on a like for like basis. We will continue to make some selective investments to ensure we take advantage of the significant potential of the sites.

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Our marketing capability is a real source of competitive advantage and an important way of driving high levels of member acquisition. Our no-contract proposition is appealing to new members as they know they have the flexibility to cancel their membership at any time and as a result we have some members who join and cancel multiple times.� It remains important therefore that we deliver strong rejoiner numbers from ex-members and that they have had a good experience whilst being a member to encourage them to return. Our ability to attract new and ex-members is enhanced by our capability in areas such as CRM and in different marketing channels (TV, Out of home, digital, SEO and social media). Our innovative First Steps campaign launched in June offered 16 to 18-year olds their first taste of being in a gym with a 6-week off-peak free membership, helping them to manage their stress during the exam period and enabling us to reach this important group of potential members.�

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Developing the Business Model

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Our premium membership package, LIVE IT, has benefited from being in operation for a full year across the entire estate. With the ability to access more than one site being a key feature of the premium membership, take-up of LIVE IT is assisted by the growth in our overall network of sites, demonstrated by strong levels of demand in the metropolitan areas such as London, Manchester and Birmingham where we have multiple sites. The other LIVE IT member benefits of "refer a friend" and use of the Fitquest machine are also proving popular and now are an integral part of our offer. At December 2019 150,000 members (18.9% of our total base; 2018: 85,000 members, 11.7% of our total base) had taken advantage of LIVE IT. We continue to be encouraged by the level of take-up.

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Following a trial in 47 sites we have now also rolled out Yanga Sports Water to the entire estate ahead of the peak Jan and Feb trading period. This is another great value product offered at �3.99 per month and also a sustainable product given it requires members to fill up using their own water bottles.

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The roll-out of our new operating model for personal trainers, New Gym Team (NGT) went according to plan in 2019 with all gyms now on the common operating model. We now have 1,600 part-time employees who work for us 12 hours a week ("Fitness Trainers"). Outside of these hours they run their self-employed personal trainer business in our gyms for which they pay us a rent. In addition, we have around 300 full rental personal trainers who do not do any employed hours and are wholly self-employed - they also pay us a rent. We consider that this model is both market leading and also reflective of the flexible working economy that allows Fitness Trainers to be employees for part of their week, with the benefits that come from being employed, and self-employed for the rest of the time. The transition has gone smoothly and we are now focused on leveraging the benefits of this model. This means driving consistency of operational delivery across our whole estate along with the ability for Fitness Trainers to develop their skill set to further their self-employed businesses and provide high quality personal training services to our members. We hope that this will attract the best personal trainers who will then in turn provide even better member experience.

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In addition to improving the overall member experience, these initiatives are also increasing Average Revenue Per Member Per Month (ARPMM), which grew by 7.6% to �16.02 in the year. The increase in revenue from personal trainers under NGT (offset by a salary cost), accounted for about a third of this increase; excluding this factor ARPMM increased by 5.2%. Increased LIVE IT penetration accounted for approximately a third of the growth in ARPMM with the remainder coming from an increase in average headline price. We ended 2019 with an average headline price of �18.45 per month (2018: �17.14). Our philosophy remains to be a high-quality operator charging the lowest price in any given market. Where we can increase price, we will do so but we are also prepared to reduce price on occasion if the local market requires. Our capability around yield management has advanced in the last year with central support from our data and analytics team.

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Achieving our rollout strategy

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We opened 20 sites organically in 2019 of which two were our first small box gyms, which will bring our affordable fitness to smaller catchments across the UK. With three site closures in the year, this brings our total estate to 175 gyms. Our primary focus is selecting strong locations for the long term and we are encouraged by the quality of sites that are becoming available. Our strong, listed company covenant continues to be highly attractive to landlords, which supports us in securing high potential sites that come onto the market.� Two trends are worth highlighting: increasingly we are successful in taking sites on retail parks at a time when there has been less demand from retailers for physical stores. Colliers Wood, Basingstoke and Northampton are good examples of sites we have opened in the last year on retail parks. In addition, we still see plenty of opportunities in residential areas in large towns and cities - during the year we have opened in Hove, Battersea and Glasgow West End as examples of this trend. The strength of our new openings is highlighted by the performance of the 2017 cohort (21 sites) which has now become mature and we are seeing a similar trend with the 2018 cohort that will mature this year. We continue to take a variety of sites, including new builds, which demonstrates the flexibility of our model.�

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Our small box format gives us the ability to take advantage of the opportunity highlighted by our market analysis. These sites have a smaller square footage than our standard model of 15,000 sq. ft and we expect to open sites of between 5000-9000 sq. ft. The development that we have made across both the operating model and capital model enables us to open at a capital cost of between �700k-�750k and we expect to continue to achieve the 30% return on capital on a lower average member level. The average monthly price that we will charge is around �2 higher than in the rest of the estate but in these types of location the competitive environment (mainly from local authority or franchise operators), will enable us to charge at this price point and be very competitive. Members' response to the small box format at Newark and Beverley has been encouraging.

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Developing the member proposition

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Investment continued across our existing estate and our focus in 2019 has been to ensure the sites have the appropriate equipment mix. Particular investment has been in plate-loaded equipment and enhanced functional areas. We are also maintaining our very high maintenance standards ensuring that the sites continue to maintain high levels of fit-out even as they become more mature. We will focus the more substantial refurbishments on sites that need an enhanced product and a competitive boost in their local market. We have plans to enhance our Group Exercise capability in 2020 by trialling a combined real and virtual offering in some of our sites. This is part of a wider development of our Group Exercise proposition.

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Our use of technology

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We highlighted in 2019 that increasingly we think of our business as both an e-commerce leisure retailer and a multi-site operator. As part of this we have committed to invest into technology capex developments in the future. Our technology platforms deliver the online member experience and also serve finance, HR and commercial functions and are key to delivering sustainable scale advantages. Our focus is on making changes that deliver member improvements and operating efficiency. The initial spend will be in three areas: an upgraded website that will deliver improved opportunities for product sales and conversion; investment into efficiency gains within the gyms such as the upgrade of our digital camera systems; and a data function with enhanced models that support our team in decision making in areas such as pricing and retention. We are excited about the opportunities within this area and have been building the capability and strength of our technology team over the past year under the leadership of our CIO, Jasper McIntosh. Technology will remain fundamental to the delivery of our business model and is key to facilitating the low-cost environment in which we operate.

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Sustainability at the heart of our business

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Sustainability is one of the foundations on which our business is built and continues to be a core focus as we grow. We are seeking to build on the strong credentials we already have and to enhance our work in this area. During the year we have established a Sustainability Working Group ('SWG') to oversee the management of sustainability across the Group. In addition, we are working with expert advisers to articulate our sustainability strategy. We have identified four key areas of focus: i) 'Promoting Health & Wellbeing'; ii) 'Good Jobs, Quality Education and Lifelong Learning'; iii) 'Diversity and Inclusion' and iv) 'Responsibility to the Environment.' As outlined further within the sustainability section of this report these help to deliver against the United Nations Sustainable Development Goals. In the coming year we plan to publish our first full Sustainability Report in accordance with the Global Reporting Initiative (GRI) Standards on sustainability reporting. In doing so we will be able to provide our stakeholders with information that helps demonstrate how we perform against our sustainability goals and how we are progressing with our material workstreams.

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Our people

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Our entire team across the business buy into the strong social purpose of The Gym Group. Our aim is to break down barriers to Health & Fitness and in doing so to spread affordable fitness across the UK. Our values that we launched to our colleagues in 2019 - taking the first step, friendliness, realness, and challenging our limits - have landed well and we are now looking at ways to boost engagement across the whole team through the use of improved communication tools. Optimising Fitness Trainer recruitment is an area of focus for us now that the NGT model has been rolled out. We recognise that there are multiple recruitment channels that we need to tap into.

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The drive and passion of all our people across the whole business is what makes The Gym Group special. We retained our Gold Investors In People (IIP) status during the year and were shortlisted for Employer of the Year in the IIP awards.� Rightly we celebrate these achievements with our teams. I would like to personally thank all our colleagues for their efforts in building this business. As we enter into a difficult period as a result of Covid-19, I am sure that our teams will respond to the challenges ahead.

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Outlook

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In the first two months of the year trading was in line with the Board's expectations. Membership numbers at the end of February show an increase to 891,000, another record level, with a 12.2% increase since December 2019.�

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In the last two weeks there has been a small impact on trading from Covid-19 and we have drawn up plans to react to an ever changing situation. Currently all gyms are open and any actions we take in the future will be guided by advice from Public Health England. At 18 March our membership base was 870,000 members and our Net Debt �41.9m.

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Our response involves slowing down the expansion to preserve cash and running the business as efficiently as possible with reductions in discretionary spend. In this way we intend to get to a position of having neutral cashflows even with lower revenues in the short term.��

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We remain confident in our business model and believe that when we are through this period we will be able to return to a growth trajectory.

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Richard Darwin

Chief Executive Officer

19 March 2020

Note: Refer to page 15 for the definitions of key performance indicators under IFRS 16.

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Financial Review

Summary

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The Group has delivered another strong set of financial results, with revenue growing 23.6% to �153.1 million and Group Adjusted EBITDA growing 24.0% to �48.5 million. We have also continued to deliver a strong return on invested capital, with ROIC in our mature sites at 31% (2018: 30%), once again meeting our target of 30%.

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The growth in Group Adjusted EBITDA has been achieved alongside significant transformation and investment in the business in 2019 with 20 organic site openings, which included the first two of our new small box gym sites towards the end of the year. ���������

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Group Operating Cash Flow increased 20.0% to �40.8 million (2018: �34.0 million) as a result of the growth in EBITDA and continuing efficient use of working capital. Free cash flow which also incorporates exceptional items, tax and interest increased from �28.5m to �33.9m.

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We ended the year with non-property net debt of �47.4 million, a small increase on the �46.0 million at Dec 2018 and broadly in line with the �47.2 million debt level at June 2019, demonstrating that we are now at the point of being able to fund our expansion through operating cash flows.

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IFRS 16 has been adopted for the first time in 2019 and all figures presented are on this basis unless stated otherwise. The 2018 comparatives have been restated accordingly - see note 3 for more detail. This financial review uses a combination of statutory and non-statutory measures to report on 2019 performance. See page 15 for the definitions of the Key Performance Indicators.

�	�	2019 �	�	2018 Restated
�	�	�'000	�	�'000
Total Number of Gyms	�	1751	�	158
Total Number of Members ('000)	�	794	�	724
Revenue	�	153,134	�	123,884
Group Adjusted EBITDAR*	�	74,453	�	58,498
Group Adjusted EBITDA*	�	48,540	�	39,131
Group Adjusted EBITDA before Pre-Opening Costs*	�	49,715	�	40,671
Mature Gym Site EBITDA	�	48,113	�	38,967
Adjusted Profit Before Tax*	�	13,969	�	10,275
Adjusted Earnings*	�	10,574	�	7,712
Group Operating Cash Flow*	�	40,763	�	33,972
Free cash flow	�	33,867	�	28,487
Statutory profit before tax	�	6,219	�	6,956
�	�	%	�	%
Return on Invested Capital (%)	�	31	�	30

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¹ Excludes three gyms closed in 2019 as previously announced; two sites acquired from the Lifestyle Fitness and easyGym acquisitions plus one site opened in 2015 for which a 5-year break clause was exercised by the Group

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* Refer to page 15 for the definitions of the Key Performance Indicators.

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Key financial metrics on a pre-IFRS 16 basis2:	�	�	�	�
�	�	2019 �'000	�	2018 Restated �'000
Revenue	�	153,134	�	123,884
Group Adjusted EBITDA	�	47,005	�	36,813
Adjusted Profit Before Tax	�	18,206	�	13,348
Adjusted Earnings	�	13,925	�	10,217

²�Figures shown using IAS 17 rent costs rather than IFRS 16 right of use depreciation and interest. 2018 figures restated to include IT amortisation costs following a change to definition of Adjusted PBT and Adjusted Earnings in 2019.

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Result for the year on IFRS 16 basis

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�	�	2019 �	�	2018 Restated
�	�	�'000	�	�'000
Revenue	�	153,134 �	�	123,884
Cost of sales	�	(1,437)	�	(1,007)
Gross profit	�	151,697	�	122,877
Administration expenses excluding exceptional items	�	(124,036)	�	(100,919)
Exceptional administration items	�	(6,086)	�	(2,343)
Operating profit	�	21,575	�	19,615
Finance income	�	32	�	22
Finance costs excluding exceptional items	�	(14,902)	�	(12,681)
Exceptional finance costs	�	(486)	�	-
Profit before tax	�	6,219	�	6,956
Tax charge	�	(2,624)	�	(2,193)
Profit for the year	�	3,595	�	4,763
�	�	�	�	�
Profit before tax	�	6,219	�	6,956
Amortisation of non-IT intangible assets	�	1,178	�	976
Exceptional administration and finance expenses	�	6,572	�	2,343
Adjusted profit before tax	�	13,969	�	10,275
Tax charge	�	(2,624)	�	(2,193)
Tax effect of above items	�	(771)	�	(370)
Adjusted Earnings	�	10,574	�	7,712

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�	�	2019 �	�	2018 Restated
�	�	�'000	�	�'000
Operating profit	�	21,575	�	19,615
Depreciation of property, plant and equipment and Impairment	�	41,778	�	33,539
Amortisation of intangible assets	�	3,114	�	1,989
Exceptional administration costs	�	6,086	�	2,343
Long term employee incentive costs	�	������������������ 1,900	�	������������������ 1,012
Cash rent payments	�	(25,913)	�	(19,367)
Group Adjusted EBITDA	�	48,540	�	39,131

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Revenue

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The increase in revenue was driven by a combination of growth in the number of members and an increase in the Average Revenue Per Member Per Month ('ARPMM').

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We ended the year with 794,000 members, an increase of 9.7% compared with the closing membership level in December 2018. As a result of the increased size of the estate, including the easyGym acquisition in July 2018, the average membership level across the 12-month period grew by 14.9% to 796,000 (2018: 693,000).

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ARPMM increased 7.6% from �14.89 to �16.02 in 2019 through a combination of factors. Approximately one third of the increase came from the rollout of our new personal trainer operating model, NGT, which added rental income to each site (offset by a salary cost); excluding this factor, ARPMM growth would have been 5.2%. Of the remaining increase in ARPMM, �0.37 came from the increased penetration of our premium membership package LIVE IT and �0.40 resulted from an increase in average headline price. The positive contribution to yield from pricing was due to selected price increases across our mature estate, the maturation of pricing on recently opened sites and the impact of former easyGym sites being in our estate for a whole year in 2019 (vs only six months in 2018).

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As a result of these factors, revenue for the year increased 23.6% to �153.1 million (2018: �123.9 million).

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Group Adjusted EBITDA

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Group Adjusted EBITDA (Group Adjusted EBITDAR minus cash rent costs) increased by 24.0% to �48.5 million (2018: �39.1 million). Growth was driven by the increased size and maturation of the organic estate and a growing contribution from sites acquired in the Lifestyle and easyGym acquisitions. Group Adjusted EBITDA margin remained strong at 31.7% (2018: 31.6%) which is particularly encouraging in light of the rollout of NGT in the year, which, as planned, increased revenue and had a small reduction in EBITDA.�

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Mature Site EBITDA^* contributed by the 110^** mature sites increased to �48.1 million (2018: �39.0 million Mature Site EBITDA from 89 mature sites) and this has contributed significantly towards the growth in overall Group Adjusted EBITDA.

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EBITDA from new sites*** increased from �10.9 million in 2018 to �13.3 million in 2019. New sites in the year include sites acquired from Lifestyle Fitness in 2017 and from easyGym in 2018, in addition to new gyms opened in 2018 and 2019, which are performing in line with expectations.

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* Mature sites are defined as gyms that have been open for 24 months or more measured at the end of the year. New sites are defined as gyms that have been open for fewer than 24 months at the end of the year.

**Total number of mature sites during the year was 110. Following the closure of a site in December 2019 there were 109 mature sites at year end.

***Total number of new sites (sites opened in 2018 onwards and those acquired from Lifestyle Fitness and easyGym) during the year was 70 including two gyms closed in 2019 (2018: 68).

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Administration expenses

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Administration expenses (excluding exceptional items) increased by 22.9%, primarily due to the number of gyms increasing from 158 at 31 December 2018 to 175 at 31 December 2019.

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The largest cost within administration expenses is depreciation, which following the adoption of IFRS 16 now includes the depreciation of property lease right of use assets. As a percentage of revenue, depreciation charges have increased from 27.0% (�33.5 million) in 2018 to 27.3% (�41.7 million) in 2019. Excluding property lease assets depreciation, the depreciation charges have decreased from 15.9% of revenue (�19.7 million) in 2018 to 14.7% (�22.6 million) in 2019, partly as a result of a change in the useful economic life assumption of gym equipment.

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Staff costs also form a significant part of administration expenses and increased from �16.8 million to �24.7 million, excluding a charge of �1.9 million (2018: �1.0 million) from long term employee incentives. The increase in staff costs was driven by new gym openings and a scaling up of support office costs to support future growth and the roll out of NGT.

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Overall central support office costs (including central staff costs) increased from �10.6 million in 2018 to �12.9 million in 2019 due primarily to headcount increases. This represents a decrease as a percentage of revenue from 8.6% to 8.4%.

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Amortisation charges increased from �2.0 million to �3.1 million of which �1.9 million was amortisation of IT and software investment (�1.0 million in 2018) and �1.2 million was amortisation of acquisition intangibles (�1.0 million in 2018).

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Exceptional items

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Exceptional administration costs increased to �6.1 million, from �2.3 million in 2018, and comprised:

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������ �3.0 million due to a change in the probability-based estimate of contingent consideration that will be payable for the acquisition of two former easyGym sites (London Oxford Street and Birmingham Kings Heath) as it is assumed that the Group will be successful in acquiring new leases for these sites;

������ �2.7 million arising on the closure of three sites during 2019, which arose as a result of estate management. Stoke and Birmingham Corporation Street were acquisitions from Lifestyle and easyGym respectively, whilst we exercised a lease break option in Newport, a site we opened in 2015;

������ �0.4 million of restructuring costs, related to the cost associated with changing the operating model in relation to the use of personal trainers within the business.

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Exceptional finance costs increased to �0.5 million (2018: �nil) and comprised:

������ �0.5 million of unamortised bank facility fees from our previous bank facilities which were written off on completion of our refinancing in October 2019.

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Of the �6.6 million of exceptional items, only �1.1 million had a cash impact in the year.

Long term employee incentives

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During the year the Group granted further shares under the Performance Share Plan (PSP) and Share Incentive Plan (SIP) and also Restricted Stock Options to certain members of senior management. The awards vest in three years provided continuous employment during this period and, in the case of the PSP, certain performance conditions are attained relating to earnings per share and total shareholder returns.

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The Group continues to operate a matching shares scheme under the SIP, where for every share purchased by an employee the Group will award one matching share, up to a maximum value, which vest in three years subject to continuous employment.

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Towards the end of the year, the Group has also granted shares under a new share saving scheme (SAYE), where all employees were invited to save regularly, up to a maximum value, to buy the Group's shares at a discounted price, which vest in three years subject to continuous employment.

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The Group recognised a charge of �1.9 million (2018: �1.0 million) in relation to these share-based payment arrangements.

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Finance costs

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Finance costs excluding exceptionals increased to �14.9 million in 2019 (2018: �12.9 million) comprising the implied interest relating to the lease liability under IFRS 16 of �12.9 million (2018: �10.9 million) plus interest costs associated with our bank borrowing facilities of �2.0 million (2018: �1.7 million).

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In October 2019 the Group refinanced its existing �60.0 million facilities with a new �70.0 million Revolving Credit Facility (RCF). The interest charge on the new RCF varies according to the Group's leverage ratio at any time but at current leverage levels interest is charged at 1.75% above LIBOR. This compares to the previous facilities' interest rate of 2.5% above LIBOR, regardless of leverage. As the new RCF came into effect towards the end of the year the benefit on overall finance costs in 2019 was minimal. The remaining unamortised loan arrangement fees of �0.5 million in relation to the previous facility have been written off as a result of the debt refinance (see Exceptional items above) and an additional �0.9 million of fees has been incurred on the establishment of the RCF, which will be amortised over the term of the facility.

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At December 2019 the Group has drawn �50.0 million of the facilities and with cash of �2.6 million ended the year with non-property net debt of �47.4 million, representing 0.98x Group Adjusted EBITDA (2018: 1.17x). This relatively low level of leverage ensures we can offer a strong covenant to potential landlords, providing us with a significant commercial advantage in the securing of desirable new sites.

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Taxation

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The Group has incurred a tax charge of �2.6 million for the year ended 31 December 2019, which represents an effective tax rate (ETR) on statutory profit before tax of 42.2% (2018: 31.5%). The increase in ETR is due to an increased level of exceptional items which are not deductible for tax purposes and increased charges relating to share based payments.

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The underlying effective tax rate on adjusted profit before tax, after adjusting for amortisation and exceptional items, is 24.3% (2018: 24.1%).

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Earnings

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Statutory profit before tax decreased to �6.2 million (2018: �7.0 million), with an increase in Group Adjusted EBITDA, offset by increased depreciation due to increased number of sites, increased amortisation of intangible assets from acquisitions and higher exceptional costs. The Group delivered a profit for the year of �3.6 million (2018: �4.8 million) as a result of the factors discussed above.

Adjusted profit before tax is calculated from statutory profit before tax and adding back the amortisation associated with non-IT related intangibles and any exceptional items. Adjusted profit before tax in the year was �14.0 million up 35.9% from �10.3 million in 2018.

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Basic earnings per share (EPS) was 2.6p (2018: 3.6p). Basic Adjusted EPS was 7.7p (2018: 5.8p).

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Dividend

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The Board expects to continue to adopt a progressive dividend policy. When making proposals for the payment of dividends, the Board considers the resources available to the Group.

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The Group declared an interim dividend of 0.45p per share earlier in the year. The Board recommends a final dividend of 1.15p per share in respect of the financial year ending 31 December 2019, resulting in a full year dividend of 1.60p per share. As part of our response to Covid-19, we currently do not anticipate putting a resolution to the AGM to pay this dividend .

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Capital Expenditure�

The Group invested expansionary capital expenditure³ of �32.3 million (2018: �54.5 million) in the fit-out of new gyms, the conversion of two of the easyGym sites acquired in 2018 and investment in new LED lighting across the estate. Expansionary capital expenditure also includes IT & software capital expenditure of �3.9 million (2018: �3.2 million) as a result of investment in website, infrastructure, app and support office technology. Adjusting for the movement in capex creditors, the cash flow in the year from expansionary capital expenditure was �32.5 million.

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Total maintenance capital expenditure⁴ was �10.2 million (2018: �7.6 million) and, at 6.7% of revenue, in line with our guidance. Adjusting for the movement in capex creditors, the cash flow in the year from maintenance capital was �10.3 million.

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3 Expansionary capital expenditure relates to the Group's investment in the fit-out of new gyms, the acquisition of the Lifestyle and easyGym portfolios and technology projects. It is stated net of contributions towards landlord building costs. It is a non-IFRS GAAP measure

4 Maintenance capital expenditure comprises the replacement of gym equipment and premises refurbishment. It is a non-IFRS GAAP measure

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Cash flow

�	�	2019 �	�	2018 Restated
�	�	�'000	�	�'000
�	�	�	�	�
Group Adjusted EBITDA*	�	48,540	�	39,131
Movement in working capital	�	2,507	�	3,159
Maintenance capital expenditure cash flow	�	(10,284)	�	(8,318)
Group Operating Cash Flow	�	40,763	�	33,972
Exceptional items	�	(1,120)	�	(2,105)
Bank interest	�	(2,197)	�	(1,371)
Taxation	�	(3,579)	�	(2,009)
Free cash flow	�	33,867	�	28,487
Expansionary capital expenditure cash flow	�	(32,504)	�	(57,551)
Dividends paid	�	(1,933)	�	(1,637)
Refinancing fees	�	(884)	�	(302)
Net proceeds from issue of Ordinary shares	�	-	�	23,196
Other financial assets purchased	�	-	�	(645)
Bank interest received	�	32	�	22
Movement in non-property net debt	�	(1,422)	�	(8,430)
Net drawdown of borrowings	�	1,000	�	11,000
Net Cash flow	�	(422)	�	2,570

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*See page 16 for a reconciliation of operating profit to Group Adjusted EBITDA

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Group Operating Cash Flow has increased by 20.0% from �34.0 million to �40.8 million as a result of an increase in Group Adjusted EBITDA. Our Group Operating Cash Flow Conversion has decreased slightly to 84.1% (2018: 86.8%).

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Balance sheet

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�	�	2019	�	2018
�	�	�'000	�	�'000
Non-current assets	�	500,990	�	467,284
Current assets	�	12,027	�	11,102
Current liabilities	�	(49,691)	�	(44,131)
Non-current liabilities	�	(312,893)	�	(286,785)
Net assets	�	150,433	�	147,470

Non-current assets have increased by �33.6 million to �501.3 million (2018: �467.7 million). This is largely as a result of capital expenditure in property, plant and equipment and intangibles plus an increase in right of use assets totalling �82.1 million, offset by depreciation and amortisation of �44.8 million.

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Current assets have increased �0.9 million due to higher trade receivables (as a result of the introduction of rental income charged to personal trainers) and higher inventories (as a result of the increased stock of Yanga water in our gyms). Current liabilities have increased by �5.6 million as a result of growth in the number of gyms, which has increased trade and other payables as well as lease liabilities.

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As of 31 December 2019 the Group had drawn �50.0 million of its �70.0 million revolving credit facility.

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As a precaution against a potential period of disruption to the business resulting from the Covid-19 outbreak, the Group drew the remaining �20.0 million of the revolving credit facility in March 2020.

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Response to Covid-19

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In the first two months of 2020, the Group traded in line with our expectations.

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In the first half of March we have begun to see an impact to our business from the Covid-19 outbreak. Our strategy for operating through the outbreak will be to:

������� reduce run rate cash outgoings to a level whereby we can remain cash neutral at a substantially lower level of monthly revenue; and

������� retain a cash 'buffer' to help us in the event there is a period of widespread enforced gym closures during which we may have no revenue for a number of weeks.

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We have taken a number of actions to reduce our cash outgoings in anticipation of a period of disruption:

������� We have drawn down the remaining �20m of our RCF. As of 18 March have �28.9m of cash;

������� New gyms under construction will be completed but all other new sites put on hold, resulting in 7 standard gyms and 1 small box gym opening in H1 2020. YTD committed expansionary capex of �10m;

������� Expenditure on maintenance and IT capex reduced to essential spend only; we currently plan to complete the� refurbishment of the London Oxford Street and Fulham sites;

������� Operating costs will be reduced by halting discretionary spend, reducing marketing and focusing maintenance on essential health & safety spend only;

������� We plan to not pay the final dividend for FY2019 which would preserve a further �1.6m of cash.

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We also have other options open to us including (i) additional reductions in expenditure at certain times to improve liquidity; (ii) the announcement by the Chancellor of the Exchequer on 17th March 2020 of measures to assist companies with the impact of the Covid-19 pandemic including a rates holiday for retail, leisure and hospitality and, more specifically, guaranteed loans for lending of over �300bn to enable companies to help meet their fixed cost obligations including rent, rates and staff costs during the period of the pandemic; (iii) the potential of the Group to access additional debt where the Directors note that the Group's existing �70m revolving credit facility includes a further �30m accordion which requires consent of the banks;��� (iv) the potential for the Group to� agree with its landlords deferrals in the timing of rental payments ; or (v) the potential to raise additional funds from third parties

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Mark George

Chief Financial Officer

19 March 2020

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Key Performance Indicators - pre- and post-IFRS 16

The adoption of IFRS 16 as of 1 January 2019 has had a significant impact on the key performance indicators previously adopted by the Group. As there is no impact on Group strategy or cash, the Board has amended the definitions of KPIs, which are non-IFRS GAAP measures, as per the presentation available on our website https://www.tggplc.com with the aim to have cash-based measures that best reflect the underlying performance of the business and these new definitions are those used in this document.

Definitions

For each of the KPIs below the definition remains unchanged with the adoption of IFRS16 unless stated otherwise

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-������ Group Adjusted EBITDAR - is operating profit before depreciation, amortisation, long term employee incentive costs and exceptional items.

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-������ Group Adjusted EBITDA - Pre-IFRS 16 definition of Group Adjusted EBITDA is operating profit (including IAS17 rent costs) before depreciation, amortisation, long term employee incentive costs and exceptional items, and is a non-IFRS GAAP measure. Post IFRS 16 definition of Group Adjusted EBITDA is operating profit before depreciation, amortisation, long term employee incentive costs and exceptional items, and after cash rent costs.

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-������ Group Adjusted EBITDA before Pre-Opening Costs - is defined as Group Adjusted EBITDA excluding the costs associated with new site openings.

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-������ Adjusted Profit before Tax* - is calculated as profit before tax before non-IT amortisation and exceptional items.

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-������ Adjusted Earnings* - is calculated as the Group's profit for the year before non-IT amortisation, exceptional items, and the related tax effect.

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-������ Basic Adjusted EPS* - is calculated as the Group's profit for the year before non-IT amortisation, exceptional items, and the related tax effect, divided by the basic weighted average number of shares.

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-������ Group Operating Cash Flow - is calculated as Group Adjusted EBITDA plus movement in working capital less maintenance capital expenditure.

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-������ Free Cash Flow - is calculated as Group Operating Cash Flow less tax, interest and other financing costs and exceptional items.

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-������ Non-Property Net Debt - is calculated as borrowings less property finance leases and cash and cash equivalents.

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-������ Return On Invested Capital - is calculated as Group Adjusted EBITDA of the Group's mature sites, divided by total capital invested in the sites.

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* Note: the definitions of Adjusted PBT/Earnings/EPS have changed between 2018 and 2019 with IT-related amortisation no longer being excluded. Where shown, the 2018 Adjusted PBT/Earnings/EPS figures have been restated based on this new definition.

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** Note: In 2019 the Group changed its policy relating to the Useful Economic Life of gym equipment (see Note 2.3 below). The 2019 numbers in this report reflect this new policy and the 2018 numbers are based on the previous policy.