The directors present the strategic report for the period ended 31 December 2021.
The Group financial statements show a revenue of £4,887,851, which can be largely attributed to the successful acquisition of KOBOX, BOOM Spin, and Barrecore. These strategic investments have undoubtedly played a pivotal role in driving the company's financial performance. Additionally, considering the cost of sales amounting to £1,151,875, the resulting gross profit margin stands at £3,735,976 for the year ended 31 December 2021. This figure showcases the company's ability to effectively manage its operating expenses.
The Group is well-positioned to navigate further headwinds and take advantage of opportunities for growth through organic growth and acquisition. The principal risks and uncertainties for the Group include membership risk, price risk, liquidity risk, and investment impairment risk.
Other key performance indicators monitored by the Group include occupancy at 37%. Total class attendances of 175k, and yield per attendee per class of £18.62, up from £16.30. A like for like comparison is presently unavailable.
Key Findings:
Positive Growth and Development:
The Group had a continued period of growth and development in the 12-month period to 31 December 2021. The acquisition of Kobox, Boom Spin, and Barrecore resulted in a robust potential for turnover growth in the portfolio via the buy and build strategy.
Covid-19:
Throughout 2021 there was an ongoing threat of Covid-19. Thanks to our strong relationship with customers, staff and creditors we were able to respond to the challenges posed for the Group. The team showed incredible determination and motivation to handle the uncertainty. The Group managed to weather the storm by re-examining the cost base during the crisis. The Group is now in a good position to navigate further headwinds.
Opportunities for Growth:
The Group is well-positioned to capitalise on opportunities within its fragmented marketplace and drive growth through a combination of organic expansion, strategic acquisitions, and franchising in the upcoming 12-18 months. The Group's well-defined buy-and-build strategy has demonstrated substantial potential for generating significant turnover growth.
The Group faces several principal risks and uncertainties, including membership risk, price risk, liquidity risk, and investment impairment risk. To mitigate these risks, the Group consistently monitors its member numbers and takes proactive measures to retain customers, ensuring their satisfaction in terms of quality and value. Furthermore, the Group is exposed to price risk stemming from the regular inflationary pressures on goods and services in the UK market. To manage its financial obligations and support the business's capital investments, the Group maintains a combination of short and long-term debt facilities, which aim to provide adequate cash flow for both day-to-day operations and future expansion plans.
Manage Price Risk:
To mitigate the price risk, the Group proactively manage its cost base and seek to mitigate the impact of inflationary pressures on goods and services in the UK. The Group will explore opportunities to reduce costs and optimise its pricing strategy.
Maintain Liquidity:
To mitigate liquidity risk, the Group will continue to maintain a mixture of short and long term debt facilities to fund the capital investments of the business and to ensure that the business has sufficient cash for operations and expansion plans.
Retain Customers:
To mitigate the membership risk, the Group should continue to monitor member numbers and seek to engage in positive steps to retain customers and meet their expectations from both a quality and value perspective. The Group will focus on customer satisfaction and experience to retain customers.
Monitor Investments:
The directors understanding of the risks associated with the investments held relate to the potential impairment of those investments. As part of the accounting period to December 2021, an impairment review was conducted on the investment in the subsidiaries and the subsequent impairment of the investment has been reported herein.
Such impairment reviews will continue to be conducted in a timely manner across all investments held by the Group.
On the 22nd of September 2022, Triyoga (UK) Limited entered into administration. On the 23rd of September 2022, the assets of Triyoga (UK) Limited and it subsidiary Everyone Triyoga Limited were purchased by Dalai Holdings, a company owned by related parties of the Group.
On behalf of the board
The directors of the group have elected not to include a copy of the profit and loss account within the financial statements.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £9,147,662 (2020 - £0 profit).
United Fitness Brands Ltd. (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Unit 4, 122a Gloucester Ave, London, NW1 8HX.
The group consists of United Fitness Brands Ltd. and all of its subsidiaries.
United Fitness Brands Limited was incorporated on 14 October 2020.
The group consolidated financial statements are prepared over a longer reporting period, due to year end alignment of it's subsidiaries, as such, comparative amounts are not entirely comparable.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, [modified to include the revaluation of freehold properties and to include investment properties and certain financial instruments at fair value]. The principal accounting policies adopted are set out below.
The consolidated group financial statements consist of the financial statements of the parent company United Fitness Brands Ltd. together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 December 2021. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.
Investments in joint ventures and associates are carried in the group balance sheet at cost plus post-acquisition changes in the group’s share of the net assets of the entity, less any impairment in value. The carrying values of investments in joint ventures and associates include acquired goodwill.
If the group’s share of losses in a joint venture or associate equals or exceeds its investment in the joint venture or associate, the group does not recognise further losses unless it has incurred obligations to do so or has made payments on behalf of the joint venture or associate.
Unrealised gains arising from transactions with joint ventures and associates are eliminated to the extent of the group’s interest in the entity.
When assessing the foreseeable future, the directors have reviewed the budget for the financial year 2022 and 2023 up to the present, along with the available cash at the time of this report's approval. Based on their assessment, they are confident that the Company and Group possess the capability to cover their activities and fulfil short-term obligations. Shareholders have confirmed their commitment to provide resources to support the Company and Group in the foreseeable future. Additional funding has been received from the shareholders' post-year end, and further commitment from the date of this report has been confirmed via a letter of support.
While the directors acknowledge the existence of material uncertainties, they remain optimistic that the Company and Group have sufficient access to resources to settle their liabilities as they become due for the next twelve months, at a minimum, starting from the date of approval of these consolidated financial statements. Consequently, the consolidated financial statements have been prepared on a going concern basis, taking into account the material uncertainty involved.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the group’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.
Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the company has incurred legal or constructive obligations or has made payments on behalf of the associate.
In the parent company financial statements, investments in associates are accounted for at cost less impairment.
Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
The component parts of compound instruments issued by the group are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortised cost basis using the effective interest method until extinguished upon conversion or at the instrument's maturity date. The equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in equity net of income tax effects and is not subsequently remeasured.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following businesses became party to the new Group and under merger accounting treatment, their combined financials for the period ended 31 December 2020 constitute the comparative period figures in these financial statements.
Boom Spin Limited
Boom Cycle Waterloo Limited
Cyclebeat Limited
While the incorporation date of United Fitness Brands Limited, the new parent company, was 14 October 2020, the comparative period covers 12 months to 31 December 2020 with current period figures covering the 12 months to 31 December 2021.
The average monthly number of persons (including directors) employed by the group and company during the period was:
Details of the company's subsidiaries at 31 December 2021 are as follows:
As of 31 December 2021, the Group's bank loans primarily comprise the UK government's COVID support loans. These loans are structured to be repaid over a period of 5 to 6 years and carry an interest rate ranging from 2.5% per annum to 3.5% per annum.
Finance lease payments represent rentals payable by the company or group for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets.
The net proceeds received from the issue of the convertible loan notes have been split between the financial liability element and an equity component, representing the fair value of the embedded option to convert the financial liability into equity.
The liability component is measured at amortised cost, and the difference between the carrying amount of the liability at the date of issue and the amount reported in the Balance Sheet represents the effective interest rate less interest paid to that date.
The effective rate of interest is 8%.
The equity component of the convertible loan notes has been credited to the equity reserve.
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
On October 2020, the day of incorporation, 1 Ordinary share of £1 each were issued and fully paid.
During the year, on 8 March 2021, 1 Ordinary share of £1 each were subdivided into 100 Ordinary shares of £0.01 each.
During the year, on 8 March 2021, 1599699 Ordinary shares of £0.01 each were issued and fully paid.
During the year, on 8 March 2021, 1599798 Ordinary shares of £0.01 each were issued and fully paid.
During the year, on 8 April 2021, 1599975 Ordinary shares of £0.01 each were issued and allotted at total premium of £398,338 for a cash consideration.
During the year, on 9 July 2021, 87937 Ordinary shares of £0.01 each were issued and allotted at total premium of £199,125 for a cash consideration.
During the year, on 16 July 2021, 5277 Ordinary shares of £0.01 each were issued and allotted at total premium of £11,949 for a cash consideration.
During the year, on 16 July 2021, 439683 Ordinary shares of £0.01 each were issued and allotted at total premium of £995,618 for a cash consideration.
During the year, on 19 July 2021, 5277 Ordinary shares of £0.01 each were issued and allotted at total premium of £11,949 for a cash consideration.
During the year, on 19 July 2021, 26148 Ordinary shares of £0.01 each were issued and allotted at total premium of £59,210 for a cash consideration.
During the year, on 20 July 2021, 6095 Ordinary shares of £0.01 each were issued and allotted at total premium of £13,802 for a cash consideration.
During the year, on 23 September 2021, 121433 Ordinary shares of £0.01 each were issued and allotted at total premium of £274,973 for a cash consideration.
During the year, on 20 October 2021, 6596 Ordinary shares of £0.01 each were issued and allotted at total premium of £14,936 for a cash consideration.
During the year, on 16 December 2021, 910 Ordinary shares of £0.01 each were issued and allotted at total premium of £2,061 for a cash consideration.
During the year, on 20 December 2021, 1271941 Ordinary shares of £0.01 each were issued and allotted at total premium of £2,737,281 for a cash consideration.
During the year, on 22 December 2021, 2290785 Ordinary shares of £0.01 each were issued and fully paid.
As the income statement has been omitted from the filing copy of the financial statements, the following information in relation to the audit report on the statutory financial statements is provided in accordance with s444(5B) of the Companies Act 2006:
The auditor's report was qualified and the auditor reported as follows:
Qualified Opinion
We have audited the financial statements of United Fitness Brands Ltd. (the 'parent company') and its subsidiaries (the 'group') for the period ended 31 December 2021 which comprise, the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for qualified opinion
We were not appointed as auditor of the company until after 31 December 2021 and thus did not observe the counting of physical stocks at the end of the year. We were unable to satisfy ourselves by alternative means concerning the stock quantities held at 31 December 2021, which are included in the group balance sheet at £128,425, by using other audit procedures.
In respect of the group’s and parent company’s VAT liability included in the balance sheets at £739,935 and £210,113 respectively, we were unable to determine whether the opening balances were materially correct as documents relating to an agreed payment plan with HMRC were unavailable and we were unable to verify these amounts by other means.
Consequently we are unable to determine whether any adjustments to the above amounts were necessary. In addition, were any adjustments necessary the strategic report would also need to be amended.
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
On the 22nd of September 2022, Triyoga (UK) Limited entered into administration. On the 23rd of September 2022, the assets of Triyoga (UK) Limited and its subsidiary Everyone Triyoga Limied, were purchased by Dalai Holdings, a company owned by related parties of the Group.