One Rebel Limited Investment Review - Q2 2018

Status Update

• 1Rebel finished 2017 with a club level EBITDA of £1.35m from two mature clubs, St Mary’s Axe and Broadgate. Occupancy was consistently above 60% (plan 65%) in both clubs in the final quarter, but yield remained some 10% below plan due to discounting by Classpass.
• Two new clubs (South Bank in February and Bayswater in March) have been opened in Q1. Despite increased pre-opening costs, EBITDA on turnover for the quarter is 29.4% – only marginally below 2017 with two mature clubs. This is due to increasing occupancy levels and improved Classpass terms – reflecting the importance of the 1Rebel brand. Early indications from the two new clubs are that occupancy and yield could reach maturity levels faster than plan.
• The next new club will open in June near Victoria Station. It is expected that this will become a flagship for the Company, featuring the largest spin class in the sector (85 bikes on three tiers), accompanied by state of the art sound system and light show in a high ceiling studio.
• A further 6 sites are under active consideration. The London property market remains challenging, but the attractiveness of the brand means 1Rebel is well placed on sites suitable for a boutique gym. Nevertheless, given the stage of development of the current pipeline, it is possible that the Company will not open any more London sites this year.

Trading Performance

Cash Update

At 31 March total cash and cash equivalents stood at £2.5 million, reflecting a large part of the Codex investment as yet unspent.

Exit Planning

The plan is still to have 22 clubs opened by 2022, and exit via IPO. The boutique gym sector is showing growth in a number of Western economies however, and this is attracting interest from private equity houses. Given the strength of the 1Rebel brand and its growth characteristics, it is likely also to become of interest to PE.

Summary

• The Company moved into profitability during 2017 and raised a significant war chest to pursue the opening of new sites.
• Two of those new sites have been successfully launched and are showing early signs that they might out-perform plan.
• Introduction of the Codex funds in autumn 2017 has injected additional focus in the Company: on exit and the delivery requirements to achieve it.