The directors present the strategic report for the year ended 31 December 2024.
The group reports a loss before tax for the year of £7,509,132 (2023: loss of £6,926,698, as restated).
2024 can be split into three areas: the trading business, growth through additional sites, and the cost of the debt used to fund that growth whilst refinancing existing facilities.
The Trading Business
Revenue was £36.7m, an increase of 19.7% (£6.0m) on the previous year's revenue of £30.7m. The Group's preferred performance measure, Adjusted EBITDA (defined below), decreased by £0.2m to £2.4m (2023 as restated: £2.6m). This reduction predominantly reflects the cost of living crisis in the UK impacting discretionary consumer spending, combined with continued inflationary pressure on wages. Gross profit increased by £5.3m to £32.6m (2023: £27.3m), driven by revenue growth from new site openings, although this was accompanied by a slightly reduced gross profit margin of 88.7% (2023: 88.8%) as cost of sales and wage cost inflation across the site network grew modestly ahead of revenue. The majority of sites remained highly profitable on a standalone basis; however, as noted below, the recoverable value of certain operational sites has been reassessed in light of forecast future trading, resulting in an impairment charge (see note 14). Central (Head Office) costs increased as the business continued to invest in its support functions in readiness for the anticipated future growth of the estate.
Depreciation of £2.9m (2023: £2.4m) was charged to the income statement, an increase of £0.6m on the prior year, reflecting the level of capital investment across the Group's new and existing sites. An impairment charge of £1.15m (2023: £nil) was also recognised against certain operational sites, as explained in note 14, following a reassessment of the recoverable value of specific site assets against forecast future trading.
The board is satisfied with the performance of the underlying trading business.
Growth / Additional Sites
Three new sites were recently added, two of which opened in the prior year: Warrington, a former franchise site absorbed back into the business, and Liverpool One, an ex-department store re-purposed by Gravity into a leisure facility. The third site, Westfield Stratford, opened in Spring 2024. All three incurred pre-opening overhead costs of £1.0m (2023 - £2.9m).
The board regards these as exceptional, one-off, pre-opening costs. A delay in opening Liverpool One added weight and pressure to the cost; such delays are an inevitable risk given the complexity of creating a new unique site.
Cost of Debt
The Group's growth was funded in part by third-party debt, part of which was also used to refinance existing facilities. The facility is a complex financial instrument containing an embedded derivative linked to the future exit or repayment value of the Group (see note 24), that gives rise to a material non-cash credit in the P&L from fair value adjustments, together with an effective interest rate leading to a significant cost of interest in excess of interest cashflows. Interest payable and similar expenses increased to £5.3m (2023: £3.0m), of which £1.4m was paid in cash during the year per the cash flow statement (2023: £0.5m); the balance principally represents interest accrued but not yet paid, together with the unwinding, under the effective interest method, of the discount and transaction costs recognised on initial recognition of the loan. Separately, the change in the fair value of the embedded derivative gave rise to a credit of £1.6m in the year (2023: credit of £0.5m), which is presented separately and partially offsets the interest charge described above. The Directors do not consider these non-cash, fair-value-driven items to be reflective of the Group's trading performance, but they have nonetheless had a material impact on the reported loss for the year.
Accounting for debt
As explained in note 2, the Group changed its accounting policy for this instrument during the year, bifurcating it into a debt host element and an embedded derivative rather than accounting for it as a single instrument; the figures above, and elsewhere in these financial statements, are presented on the new, bifurcated basis, with 2023 restated accordingly (see note 40 for the quantified prior period adjustment). Values given in this report have been restated from last year’s report to reflect this change of accounting policy.
Cash position
Cash at bank and in hand decreased by £2.1m in the year to £0.5m (2023: an increase of £2.1m to £2.6m). This reflects the Group's continued investment in new sites: the Group generated a net cash inflow from operating activities of £2.4m in the year (2023: outflow of £4.8m), a marked improvement reflecting the increased trading contribution from sites as they matured, before £9.1m was invested in purchasing new tangible and intangible fixed assets (2023: £9.5m) as part of the Group's continued expansion. The board is encouraged by the improvement in cash generated from trading and remains confident in the prospects for the underlying business, notwithstanding the funding pressure created by the pace of the Group's expansion.
The increase in the cost of living may result in less disposable income for the group's customers. The board strives to continue to offer an affordable, quality experience.
The group is experiencing increased energy costs as a result of high global fuel prices. The board continues to monitor this, along with all of the group's overheads, and strives to keep them as low as possible.
The group is also subject to a number of trading and operational risks, including employment, health and safety and public liability risks. The group mitigates these risks by ensuring good industry practice is always followed, and by maintaining adequate insurance where necessary.
Due to the location of a significant number of the group's leisure sites within retail shopping centres, the group's prospects are aligned with those of the UK retail sector, which is under increasing pressure from the shift to online shopping. The group aims to draw footfall to these centres through its diverse attractions.
The group also faces competitive risk. The board constantly monitors competitor activity so that it can react quickly to changing conditions, and continues to diversify its offering.
Financial risk management
The Group's activities expose it to a number of financial risks, principally credit risk, liquidity risk and price (interest rate) risk. The Board has overall responsibility for the identification and management of these risks.
Credit risk principally arises from amounts due from franchisees. This is managed through the Group's credit control procedures and, where recovery is doubtful, through bad debt provisions.
Liquidity risk is managed through regular cash flow forecasting and monitoring of covenant compliance under the Group's borrowing facilities. As explained in the going concern disclosure in the Directors' Report and in note 35, the Group breached its financial covenants during the year; this was subsequently addressed through the Company Voluntary Arrangement and the related lender agreement completed after the year end.
Price risk arises principally from the Group's borrowings under its third-party facility, which include an embedded derivative linked to the Group's future exit or repayment value (see note 24). Movements in the fair value of this derivative are recognised through profit or loss. The Group does not use derivative financial instruments to hedge this exposure.
Post year-end financial restructuring
As explained in note 35 to the financial statements, the financial and liquidity risks referred to above, and in the going concern disclosure in the Directors' Report, crystallised after the year end. The Directors proposed, and the Company's creditors and members approved, a Company Voluntary Arrangement (“CVA”), which became effective on 4 December 2025, and the Group's senior secured lender separately agreed to a substantial reduction in its secured debt as part of the wider restructuring. Further detail is given in the Directors' Report and in note 35.
Details of the Group's going concern position are provided in the Directors' Report.
The group uses a range of financial indicators to monitor performance. The key performance indicators used by the group are as follows:
Revenue £36,720,710 (2023: £30,675,787)
Revenue growth: 19.7% (2023: 16.0%)
EBITDA: profit of £591,419 (2023: loss of £2,341,512, as restated)
Adjusted EBITDA £2,414,927 (2023: £2,615,511 as restated)
Operating loss £3,640,619 (2023: loss £4,922,343 as restated)
Movement in operating loss: an improvement of £1,281,724 (2023: an improvement of £6,906,600)
Net liabilities £10,504,330 (2023: £3,076,014, as restated)
Movement in net liabilities: a deterioration of £7,428,316 (2023: a deterioration of £9,767,288 as restated)
These measures are those used by management to monitor and assess the group's finances, therefore they meet the definition of financial key performance indicators. EBITDA is gross profit less underlying administrative expenses, exclusive of depreciation, amortisation, and certain non-trading legal costs. EBITDA and Adjusted EBITDA is reconciled to the P&L as follows:
Exceptional items in the above relates to one-off costs not otherwise classified. Inflated lighting and heating is an internal adjustment to normalise the impact of the spike in the UK's electricity prices in the period, whilst Site Closures is to remove the cost of sites which are planned to close within 12 months of the year end date. Bad debt expense relates to the costs of irrecoverable debts from franchisees which are being mitigated in the future. The Directors believe that the use of this metric provides greater clarity into the performance of the underlying business and how it is trading.
At Gravity we strive to continuously develop and improve our customer journey, not only to enhance enjoyment but to do so in a safe environment. Strong health and safety guidance is in place across the business to keep our accident ratio ahead of industry standards; staff self-improvement is encouraged at all levels and underpinned by the company's core values; and customer feedback is recorded and discussed weekly. The Compliance Director, the Chief People and Culture Director, and the Director of Sales work jointly to ensure the highest standards are maintained.
Accident ratio: 0.12% for the full year (2023 – 0.14%)
Learning & Development completion: site scores between 70% - 100% (2023 - 70%–100%)
Customer Net Promoter Score: 67.25 (2023 - 67.25) average for the year
Guest Opinion Score: 84 (2023 – 84) average for the year; Review Rating: 81% (2023 - 81%)
The Group provides team members with a blended learning approach across four stages, empowering individuals to progressively develop their skills, with line managers able to review progress and offer support through the Group's LMS system. Customer feedback is fed into the “Feed It Back” platform daily, and results are benchmarked against competitors.
The board continues to focus not only on operating the business, but also on identifying further opportunities to enable the group to grow. The directors believe the opening of Westfield Stratford was a key milestone in 2024 and will help solidify the company's future growth.
As explained in note 35, the Group's financial structure has since been substantially reset through the CVA and the related reduction in secured debt, and the board's near-term focus is on stabilising and building on this position.
Notwithstanding this near-term focus, the Group has continued to invest in its future pipeline. Heads of terms were agreed in February 2024 for a new, larger-format site at the Capitol Centre, Cardiff, and the Group's subsidiary entered into an agreement for lease after the year end, with the Lease itself to follow, as explained further in note 35. The Directors regard this as evidence of the Group's continued ability to identify and secure new growth opportunities notwithstanding the financial restructuring described above.
Board
The UK-based board comprises full-time UK directors, non-executive directors and other senior executives bringing a diverse range of experience and skillsets.
Promoting the success of the group
The directors consider the combined board's breadth of experience and knowledge sufficient to discharge their collective obligations thoroughly. In doing so, the directors have regard to the matters set out in section 172(1) of the Companies Act 2006, including the likely long-term consequences of decisions, the interests of the Group's employees, the need to foster relationships with suppliers, customers, lenders and other stakeholders, the impact of the Group's operations on the community and environment, the desirability of maintaining a reputation for high standards of business conduct, and the need to act fairly between the Company's members. How these are reflected in practice is set out below.
Strategy
The executive team is supported by a senior leadership structure covering Finance, HR, IT, Marketing, customer relationship, and health and safety, each reporting weekly, monthly and quarterly. This reporting informs key strategic decisions, both short- and long-term. The Group is focused on being the home of experiential leisure, maximising the enjoyment of time spent with friends and family by combining the best and safest elements of entertainment in one place. Strategy involves continuous investment in high-footfall destinations and technology-led activities that differentiate Gravity from competitors, with energy efficiency considered when entering new sites. During the year this included the opening of Westfield Stratford and continued investment in Liverpool One and Warrington, and, since the year end, agreeing heads of terms for a new, larger-format site at the Capitol Centre, Cardiff - decisions the Board takes with the long-term consequences for the Group's growth and stakeholders in mind.
Decision making
The full-time UK directors are heavily involved in the management of the business, and the executive team holds regular meetings, as well as meeting with heads of department and the wider management team. Operational and strategic decisions are debated in this environment to ensure management input into strategy execution. The directors believe this process spreads risk, ensures decisions are fair and balanced, develops team members' wider business understanding, and reflects the interests of the business and its stakeholders.
Employee engagement
The company has a large number of employees who are often employed on short-term and casual contracts. The company aims to minimise use of this and, for permanent employees, ensures that training and development opportunities are available. Decisions are taken in a way that maximises their ability to grow within the company. The Group's policy is to consult and discuss with employees, through staff councils and at meetings, matters likely to affect their interests; information about matters of concern to employees is shared through information bulletins and reports, and there is no employee share scheme at present, although the directors are considering introducing one to further encourage employee involvement in the company's performance. Applications for employment by disabled persons are always fully considered, and it is the Group's policy that the training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees. During the year the Group's learning and development completion scores across sites ranged between 70% and 100% (2023: 70%–100%), and the accident ratio was maintained at 0.12% (2023: 0.14%), reflecting the Board's continued focus on employee wellbeing and safety.
Suppliers, customers and other business relationships
The Board recognises that maintaining strong relationships with customers, suppliers, landlords and lenders is central to the Group's long-term success. Customer feedback is recorded and discussed weekly through the Group's “Feed It Back” platform, and is benchmarked against competitors. The Group also maintains ongoing relationships with its landlords at shopping centre locations and with franchise partners. Following the covenant breaches disclosed in the going concern section, the Board engaged directly with the Group's senior secured lender throughout the year and in the period to the CVA becoming effective on 4 December 2025, as part of which the lender agreed to significantly reduce the secured debt owed.
Community and environment
The Group's sites are designed to draw footfall into the retail and leisure centres in which they are located, supporting the wider communities around those sites. The Group's ESG committee, established in the prior year, holds responsibility for the Group's environmental strategy, including reviewing renewable-backed tariff options as contracts renew and identifying energy efficiency opportunities across the estate. The Board also has regard to the Group's health and safety performance as part of its wider responsibility to customers and the communities it serves, maintaining an accident ratio of 0.12% for the year (2023: 0.14%).
High standards of business conduct
The Directors ensure the highest standards of conduct are maintained across the Group, underpinned by the company's core values. Strong health and safety guidance is in place across the business, and the Group does not recognise any trade unions, instead maintaining direct consultation with employees through staff councils.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2024.
The results for the year are set out on page 16.
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Directors benefited from the standard directors' and officers' insurance cover during the financial year end at the date of this report.
The group's policy is to consult and discuss with employees, through staff councils and at meetings, matters likely to affect employees' interests. The group does not recognise any trade unions.
Information about matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness among employees of the financial and economic factors affecting the group's performance.
There is no employee share scheme at present, but the directors are considering introducing one to further encourage employee involvement in the company's performance.
The group's policy is to keep employees informed on matters relevant to them through regular meetings and briefings, and to ensure employees possess the tools and training they need to flourish in their roles. The directors recognise the contribution staff make daily and encourage them to reach their full potential.
We have considered the recommendations of The Companies (Directors Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 which implement the governments policy on streamlined Energy and Carbon reporting (SECR) when preparing this report.
Electricity and gas consumption for 2024 has been extracted from site-level supplier invoices across the Group's UK sites, using the UK Government (DESNZ) 2024 Greenhouse Gas Conversion Factors for Company Reporting (electricity, location-based: 0.20705 kg CO2e/kWh; natural gas: 0.18296 kg CO2e/kWh). Westfield Stratford's consumption is taken from the landlord's backbilling statement and covers 17 May to 31 December 2024 only, reflecting the site's opening date; there is no earlier-2024 figure and no 2023 comparator for this site.
The rise in emissions per customer visit, from 0.52 kg CO2e (2023, as reported) to 0.55 kg CO2e (2024), is primarily attributed to two factors: the addition of Westfield Stratford and the ramp-up of Liverpool One to a fuller year of trading, both of which added substantial energy consumption ahead of these newer sites reaching a mature level of visitor throughput (Liverpool's electricity alone rose from c.92,000 kWh in 2023 to c.996,000 kWh in 2024); and softer customer visit numbers at the Group's established sites, consistent with the downturn referred to in the Strategic Report and going concern disclosure, which reduces the visitor total against which the Group's overall energy use is measured. The Directors have not separately quantified the split between these two effects, as this would require visitor numbers by site for both years.
The Group's ESG committee, established in the prior year, continues to hold responsibility for the Group's environmental strategy, including reviewing renewable-backed tariff options as contracts renew and identifying energy efficiency opportunities across the estate. Specific measures had not been completed and quantified as at the date of this report; the Directors intend to expand this disclosure as the committee's work progresses.
During the year, the Group invested heavily in its two flagship sites, Liverpool One and Westfield Stratford, with combined capital investment of approximately £7.7m. This was funded through a combination of existing cash resources, cash generated from trading, and drawdowns under the Group's third-party loan facility (see note 25), which was extended during the year, together with new bank borrowings of £1m taken out in November 2024.
At the balance sheet date, the Group was in breach of its financial covenants in respect of Adjusted EBITDA performance under its primary lending facility, resulting in an event of default. In these circumstances, the lender had the contractual right to demand immediate repayment of the outstanding borrowings. If this right had been exercised, the Group would not have had sufficient resources to settle its liabilities as they fell due, including additional payments of approximately £4.8m as part of the ‘Minimum Multiple’ provision as at 31 December 2024.
The Group has continued to be in breach of its financial covenants on an ongoing basis ever since.
The principal value of the loan at the year end was £26m and is not repayable until the earlier of an exit event or February 2028, with only part of the interest payable subject to quarterly cash repayments. The Directors consider the need to refinance or otherwise restructure this facility, or reach a further agreement with its lender, ahead of February 2028 (or any earlier exit), to be a further factor contributing to the material uncertainty described below.
Subsequent to the year end, following a proposal by the Directors dated 14 November 2025, the Company's creditors and members approved a Company Voluntary Arrangement (“CVA”), which became effective on 4 December 2025. The CVA is legally binding on the Group's creditors, including its primary lender, and provides a framework for the restructuring of the Group's financial obligations, including a proposed debt-for-equity swap, which would reduce the secured debt owed to it from approximately £46m to £18m. This swap had not been implemented at the date of approval of these financial statements, and is expected by the Directors to be completed following the conclusion of the audit of these financial statements for the year ended 31 December 2024.
Management has performed a comprehensive assessment of the Group's funding and liquidity position, including the preparation of detailed cash flow forecasts covering the period to 30 September 2027, being at least 12 months from the date of approval of these financial statements. These forecasts include scenario analysis reflecting reasonably possible changes in trading performance, including a downside scenario assuming a sustained 10% reduction in customer numbers compared with the base case.
The forecasts reflect an improvement in trading performance and cash generation since the year end, alongside the anticipated benefits of the CVA and ongoing cost management actions. In the base case scenario, the Group is forecast to meet its obligations as they fall due throughout this period. However, in the downside scenario described above, the forecasts indicate that further cost-cutting mitigating actions, beyond those already assumed in the base case, would be required to maintain sufficient liquidity headroom; these further mitigating actions have not yet been implemented and their outcome cannot be assured.
The Group continues to operate in a challenging macroeconomic environment, including pressure on discretionary consumer spending and ongoing cost inflation, which increases the level of uncertainty in forecasting future performance.
These conditions, together with the existence of the covenant breach at the balance sheet date and its continuation, on an ongoing basis, to the date of approval of these financial statements, the sensitivity of the Group's forecasts to a reasonably possible downside in customer numbers (which would require further, as yet unimplemented, mitigating actions to maintain adequate liquidity), the need to refinance or restructure the facility ahead of February 2028, and the fact that the financial restructuring, including the debt-for-equity swap, has not yet been fully implemented, indicate the existence of a material uncertainty that may cast significant doubt on the Group's and Company's ability to continue as a going concern.
Notwithstanding the significant reduction in secured debt achieved through the CVA and the related lender agreement, the Directors have concluded that it remains appropriate to continue to draw attention to this material uncertainty, and to prepare the financial statements on a going concern basis, having regard to the legally binding nature of the CVA, the progress made towards implementing the wider restructuring, and the results of the Group's forecasting and scenario analysis.
Post year-end developments
As explained more fully in note 35, the Group's financial position was substantially restructured after the year end. On 4 December 2025, following a proposal by the Directors dated 14 November 2025, the Company's creditors and members approved a Company Voluntary Arrangement (“CVA”), which became effective from that date. As part of the wider arrangements agreed alongside the CVA, the Group's senior secured lender agreed to reduce the secured debt owed to it from approximately £46m to £18m.
At the date of approval of these financial statements, discussions to amend and restate the terms of the facility agreement with the lender remained ongoing, and certain of the property and litigation matters described in note 35 remained unresolved. The Directors have concluded that, notwithstanding the significant reduction in secured debt achieved through the CVA and the related lender agreement, it remains appropriate to continue to draw attention to the material uncertainty referred to above, as the Group's financing arrangements and a number of related matters had not been finalised at the date of approval of these financial statements.
United Kingdom company law requires the directors to prepare financial statements for each financial year. Under that law, the directors have elected to prepare the group and parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law, the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and parent company, and of the profit or loss of the group for that period.
In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether applicable United Kingdom Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and parent company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and parent company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and parent company, and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the group and parent company, and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
We have audited the financial statements of Gravity Fitness Limited (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 31 December 2024 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, the group statement of cash flows 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 FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
Material uncertainty related to going concern
Opinions on other matters prescribed by the Companies Act 2006
As explained more fully in the directors' responsibilities statement set out on page 11 the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group's and the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Irregularities are instances of non-compliance with laws and regulations. The objectives of our audit are to obtain sufficient appropriate audit evidence regarding compliance with laws and regulations that have a direct effect on the determination of material amounts and disclosures in the financial statements, to perform audit procedures to help identify instances of non-compliance with other laws and regulations that may have a material effect on the financial statements, and to respond appropriately to identified or suspected non-compliance with laws and regulations identified during the audit.
In relation to fraud, the objectives of our audit are to identify and assess the risk of material misstatement of the financial statements due to fraud, to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud through designing and implementing appropriate responses and to respond appropriately to fraud or suspected fraud identified during the audit.
However, it is the primary responsibility of management, with the oversight of those charged with governance, to ensure that the entity's operations are conducted in accordance with the provisions of laws and regulations and for the prevention and detection of fraud.
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud, the group audit engagement team:
• obtained an understanding of the nature of the industry and sector, including the legal and regulatory framework that the group and parent company operates in and how the group and parent company are complying with the legal and regulatory framework;
• inquired of management, and those charged with governance, about their own identification and assessment of the risks of irregularities, including any known actual, suspected or alleged instances of fraud;
• discussed matters about non-compliance with laws and regulations and how fraud might occur including assessment of how and where the financial statements may be susceptible to fraud.
As a result of these procedures we consider the most significant laws and regulations that have a direct impact on the financial statements are FRS 102, the Companies Act 2006 and tax compliance regulations. We performed audit procedures to detect non-compliances which may have a material impact on the financial statements which included reviewing financial statement disclosures, inspecting correspondence with local tax authorities and evaluating advice received from internal/external tax advisors.
The most significant laws and regulations that have an indirect impact on the financial statements are those in relation to employment law, health and safety regulations and food safety. We performed audit procedures to enquire of management and those charged with governance whether the group is in compliance with these law and regulations and inspected correspondence with licensing or regulatory authorities.
The group audit engagement team identified the risk of management override of controls, revenue recognition and misappropriation of assets as the areas where the financial statements were most susceptible to material misstatement due to fraud. Audit procedures performed included but were not limited to testing manual journal entries and other adjustments and evaluating their business rationale in relation to significant, unusual transactions and transactions entered into outside the normal course of business, testing a sample of revenue transactions for appropriate recognition in accordance with FRS 102, challenging judgments and estimates applied, reviewing capitalization of assets and physically verifying a sample of assets at different sites.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the parent company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
As permitted by section 408 of the 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 £7,590,246 (2023 as restated - £6,946,034 loss).
Gravity Fitness Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is shown on the company information page.
The group consists of Gravity Fitness Limited and all of its subsidiaries.
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 £.
In accordance with Section 11 of FRS 102, the group has elected to apply the recognition and measurement requirements of IFRS 9, Financial Instruments, in accounting for its financial instruments.
The financial statements have been prepared under the historical cost convention, modified to the financial instrument explained in note 2 at fair value. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The consolidated group financial statements consist of the financial statements of the parent company Gravity Fitness Limited 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 2024. 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.
Notwithstanding the significant reduction in secured debt achieved through the CVA and the related lender agreement, the Directors have concluded that it remains appropriate to continue to draw attention to this material uncertainty, and to prepare the financial statements on a going concern basis, having regard to the legally binding nature of the CVA, the progress made towards implementing the wider restructuring, and the results of the Group's forecasting and scenario analysis.
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 invoices are issued in advance of revenue recognition, the excess is shown as deferred income in creditors.
For sales of goods, revenue is recognised when performance obligations have been satisfied, which is on dispatch unless otherwise agreed.
For franchise arrangements, revenue is recognised over the term of the franchise in accordance with the entitlement set out in the contract.
Upfront fees are charged at the inception of a franchise contract. The group's performance obligation is to provide time, knowledge and expertise required to set up a functioning franchised site. This involves, but is not limited to, finding and assessing suitable premises, providing support and training to the new franchisee prior to launch, and providing branding services and marketing materials. The fees are recognised as revenue upon the successful launch of the site and deferred until this point is reached.
Revenue from services is provided when those services are delivered. Amounts received in advance of delivery are included in deferred income.
Where amounts are capitalised in advance of opening a new site, these are not amortised until the site is opened, after which they are amortised over the remaining life of that site (determined by reference to the underlying lease on that site).
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 recognition and measurement requirements of IFRS 9 Financial Instruments, as permitted by FRS 102. Under this, the disclosure requirements of FRS 102 are used.
Financial assets are classified on initial recognition as subsequently measured at amortised cost, fair value through other comprehensive income or fair value through profit or loss, depending on the company's business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.
Trade receivables are measured at amortised cost less expected credit losses. The company applies the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for trade receivables.
Financial assets comprise trade and other receivables and cash and cash equivalents. Financial assets are initially recognised at fair value and are subsequently measured at amortised cost using the effective interest method where they are held to collect contractual cash flows that represent solely payments of principal and interest. Trade receivables without a significant financing component are initially measured at the transaction price. Financial assets measured at amortised cost are assessed for impairment using the expected credit loss model.
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.
The company recognises a loss allowance for expected credit losses ("ECLs") on financial assets measured at amortised cost.
Expected credit losses are measured using a forward-looking approach and reflect the present value of cash shortfalls, taking into account historical credit loss experience, current conditions and reasonable and supportable forecasts of future economic conditions.
The company applies the simplified approach permitted by IFRS 9 to trade receivables, under which a loss allowance is recognised based on lifetime expected credit losses at each reporting date.
For other financial assets measured at amortised cost, the company recognises a loss allowance equal to 12-month expected credit losses unless there has been a significant increase in credit risk since initial recognition, in which case a loss allowance equal to lifetime expected credit losses is recognised.
The carrying amount of a financial asset is reduced through the use of a loss allowance account and changes in the loss allowance are recognised in profit or loss. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.
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.
Financial liabilities comprise trade and other payables, bank borrowings, amounts due to group undertakings and other debt instruments. Financial liabilities are initially recognised at fair value, net of directly attributable transaction costs where applicable, and are subsequently measured at amortised cost using the effective interest method.
Where a financial liability contains a significant financing component, it is initially recognised at the present value of future payments discounted using a market rate of interest.
Trade payables are obligations to pay for goods or services acquired in the ordinary course of business from suppliers. Amounts are classified as current liabilities where payment is due within one year or less after the reporting date; otherwise, they are presented as non-current liabilities.
Interest expense is recognised using the effective interest method and included within finance costs in the statement of profit or loss.
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.
Transaction costs associated with the inception and ongoing maintenance of such financial instruments are expensed to profit and loss when the financial instrument is entered into.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
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 tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
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.
In the current year, a change in accounting policy was adopted by the group with regard to the accounting for financial instruments. The company has elected to apply the recognition and measurement requirements of IFRS 9, Financial Instruments, as permitted by FRS 102. This change was made as the Directors felt that this provided more relevant and useful information to the users of the financial statements by being able to observe the underlying movements in the derivative element only.
Previously, financial instruments were accounted for in accordance with Sections 11 and 12 of FRS 102. Following the adoption of IFRS 9, financial assets are classified and measured based on the company's business model for managing the assets and the contractual cash flow characteristics of the instruments. In addition, impairment losses are recognised using an expected credit loss model.
The change in accounting policy has been applied retrospectively and comparative information has been restated. The impact of the change on the company's financial position and results is disclosed in note 40. No financial instruments in the group at 31 December 2022 are impacted by the adoption of IFRS 9.
Because the change in the policy affects a material fair value calculation as at 31 December 2024, the Directors believe that it is impractical to show the impact on the current year's financial statements from the change of accounting policy. This is because the cost of determining a fair value under Section 12 of FRS 102 would significantly outweigh the benefits to the users of this information being provided.
The company’s revised accounting policies are set out in note 1.
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 judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
Management exercises judgement when assessing the recoverability of intercompany loans.This includes an evaluation of the future prospects and business plans of the subsidiary company, with the resulting cash flow projections assessed on a discounted cash flow basis and compared to the principal value of the debt.
In addition, management has reviewed the expected credit loss (ECL) associated with the intercompany loan and has determined the expected credit loss rate to be 0% (nil).
Based on these assessments, no impairment has been recognised in the current year.
The recognition of deferred tax assets is based upon whether it is more likely than not that sufficient and suitable taxable profits will be available in the future against which the reversal of temporary differences can be deducted.
Where the temporary differences related to unused tax losses, evidence considered to support the recognition of deferred tax assets include the existence of relevant taxable profits in the current and preceding periods and in the period after the reporting date and expectations of profits in the future. Recognition therefore involves judgement regarding the future financial performance of the particular legal entity or tax group in which the deferred tax asset has been recognised.
A deferred tax asset in respect of losses is recognised up to the value of deferred tax liabilities against which the losses will automatically unwind in future years.
The Group assesses its non-monetary assets, comprising intangible and tangible assets, for impairment at each year end. This process involves reviewing the projected cashflows from each site across the expected life of that site (typically determined by reference to the life of the underlying lease), discounted to present value at the Group's weighted average cost of capital. This value is compared to the total carrying value of each site. The key judgement is around the forecast revenues and associated costs for each site.
The Group's election to use IFRS 9 to account for its financial instruments, as opposed to Sections 11 and 12 of FRS 102, is a key judgement because it has a material impact on the accounts. Details of this are provided in note 2.
Determining whether a loan prepayment option is an embedded derivative to be recognised separately from the loan was a key judgement in implementation of this accounting policy choice. Further details are included in disclosure note 24.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
To determine the appropriate depreciation charge, it is necessary to estimate each asset's useful economic life. While experience of using similar assets in the business should give a reasonable informed indication of this, there is an inherent variability in their durability, in addition there are many ways in which an asset could cease to be used in the business, for example it could be damaged, be worn out beyond economic repair, be superseded by new assets, be made redundant by changes in demand or operational methods, or be stolen.
Any differences between estimated and actual lives could lead to an excessive profit or loss on disposal, or to continued use of the asset without a cost being recorded to reflect this usage.
The group's leases often commit the group to maintaining the property and returning it to the owner in the condition it was in at the start of the lease. Costs incurred in meeting such obligation can include major repairs, reversion of alterations, and compensation to the landlord. Exactly what works will be required many years in the future and the costs will be then is inherently imprecise. The outcome of future negotiations with the landlord on such matters is also hard to predict. If such estimates do not match actual costs, additional costs may occur or provisions may be released unused.
The group obtained a major injection of finance in the prior year and obtained further drawdowns against this in the current year, as shown in note 24. The terms of this finance are complex and required many assessments and judgements to determine the required presentation and determination of fair value. These include:
probability distribution of exit dates
performance of the business throughout the period the loan is held
the market value of the group on repayment
volatility of the group's valuation
future dividend yield
relevant discount rates
The primary area of estimation uncertainty in the above relates to the market value of the group as at the year end, which is based on EBITDA multiples as adjusted for cash and borrowings, and on management's best estimate of potential exit dates. The impact of small changes in either of these estimates carries a significant adjustment to the expected repayment value.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 3 (2023 - 3).
Other interest on financial liabilities represents a combination of interest charged and discount and transaction costs unwound on the host debt described in note 24.
This is explained in note 3 and is in respect of the liability shown in note 23.
The actual (credit)/charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
The corporation tax rate was 19% until 31 March 2023 and 25% thereafter. In the disclosure above for the prior year a hybrid rate of 23.5% was used to pro-rate this change. All deferred tax balances are carried at 25% (2023 - 25%).
Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:
The impairment losses in respect of financial assets are recognised in other gains and losses in the profit and loss account.
Impairments have arisen on certain operational sites, calculated by reference to the estimated value in use of each site compared to the carrying value of associated assets.
Included within tangible fixed assets are assets held under finance leases or hire purchase contracts, as follows:
In addition to the above, certain items of leasehold improvements have been pledged as security against borrowings with a value at the year end of £1,000,000, which were incepted in the year.
More information on impairment movements in the year is given in note 14.
Details of the company's subsidiaries at 31 December 2024 are as follows:
Registered office addresses (all UK unless otherwise indicated):
Gravity Fitness Limited has provided, under s479A Companies Act 2006, a guarantee which permits its wholly-owned subsidiary Gravity Franchise Limited (company number 10963421, registered in England & Wales) to not obtain an audit of its individual financial statements for the year ended 31 December 2024.
Bank loans represent assets acquired and subsequently transferred under a lease, such that the incoming funds represented financing. The arrangement is termed a hire purchase contract but in substance is borrowings secured against those assets.
Other loans
Other loans represent borrowings from third parties which include an element of additional variable financing costs which are linked to a fixed percentage of any uplift in equity value of the Group which is crystallised on a future exit, or if an exit does not take place then a derived equity value in February 2028 when the loan falls due for repayment in full. As a result, the loan contains an embedded derivative, with this element held at fair value through profit and loss. The difference between the fair value of the embedded derivative on inception of each tranche of the loan, and the residual difference between cash received (adjusted for transaction costs), is denoted as the host debt and carried at the implied effective interest rate ("EIR") to maturity of the debt.
In 2024 an additional £4,100,000 was drawn down under the loan arrangement.
The key input assumptions in the valuation of the derivative are:
Probability of exit: weighted over a period of up to 3 years.
Expected volatility in the Group's asset value: 50%
Dividend yield: 0%
Risk-free rate: 4.754% over 1 year, 3.977% over 2 years, 3.619% over 3 years, 3.435% over 4 years
Starting value based on an agreed formula with the lender as at inception of the loan, as a result of which the fair value at that date approximated to the fair value of the monies received.
The gain on the embedded derivative for the year is recognised in in note 11. All actual interest incurred on the host debt during the year, plus relevant unwinding of the inception discount and allocated transaction costs, are recognised in note 10. The transaction costs allocated to the host debt being unwound over the 5 year life of the original loan via the EIR total £1,456,456 (2023 - £1,360,361).
The embedded derivative has no specified value payable on maturity, as that maturity may take the form of an exit where the upside to the liability is uncapped. If an exit is not made, there is a formula based on deriving the value of the business at that maturity date for which an estimated market value can be derived, which is similarly uncapped in value.
This loan is secured by fixed and floating charges over the assets of the parent company.
The principal value of the loan at the year end was £22.45m and was not contractually repayable until the earlier of an exit event or February 2028, with only part of the interest payable subject to quarterly cash repayments.
On this basis alone, there was no imminent contractual requirement for the Group to repay the borrowings. However, the Group breached its financial covenants in respect of Adjusted EBITDA performance in September 2024, resulting in an ongoing event of default under the facility, with further covenant breaches forecast for December 2024 and June 2025. Had the lender demanded repayment of the loan at any point while this default event was continuing, the Group would not have been able to meet its liabilities as they fell due from its remaining facilities and cash reserves.
In addition, had the lender demanded repayment, the Group would have incurred a further liability under the “Minimum Multiple” provisions of the facility agreement. Under these provisions, repayment of the loan in full - whether voluntary or as a result of the lender exercising its rights following an event of default - triggers a liability calculated by reference to a multiple of the original facility amount (plus capitalised payment-in-kind interest), less amounts already paid, subject to a minimum of nil. This multiple was 1.55 times up to the facility's first call date (24 months from the 18 February 2023 signing of the facility agreement), rising to 1.65 times, 1.80 times and 2.00 times at each subsequent anniversary. As the September 2024 default event arose before the first call date, a demand for repayment at that time would have crystallised a liability calculated using the 1.55 times multiple, over and above the principal and interest otherwise recognised in these financial statements. This liability is not reflected in the balance sheet as at 31 December 2024, as the lender had not demanded repayment as at that date or at the date of approval of these financial statements.
Hire purchase liabilities are secured against the specific assets being financed, supported by personal guarantees given by two of the parent company's directors.
Leases relating to the parent company's premises require the company to rectify dilapidations at the end of the lease terms. The dilapidations provision reflects this obligation and is subject to uncertainty regarding the ultimate cost and timing of settlement.
The following are the major deferred tax liabilities and assets recognised by the group and company:
The deferred tax asset relates to tax losses which are expected to be utilised against future taxable profits, after taking account of capital allowances claimed in advance of depreciation.
Losses incurred by the group for which no deferred tax asset has been recognised amount to £7,872,000 (2023 - £7,627,000, adjusted for changes recognised in the current year for the adoption of IFRS 9). If deferred tax were recognised in respect of these balances, it would increase the net assets of the group by approximately £1,968,000 (2023 - £1,907,000). The Directors do not consider there to be sufficient viability of future taxable profits to recognise an asset. Note comparative tax losses have been restated to reflect the change of accounting policy, which is explained in note 2.
Deferred tax is calculated at the headline rate of 25% (2023 - 25%).
At the year-end £57,456 (2023: £57,829) was due to the scheme.
Ordinary Shares
Each share has full rights in the company with respect to voting, dividends and distributions.
A Ordinary Shares
Each share has full rights in the company with respect to voting and dividends plus added rights on distribution of funds relating to an exit or sale.
B Ordinary Shares
Each share has one vote subject to a cap restricting B shares to less than half of votes. Dividends and distributions are subject to the distribution waterfall contained in the articles.
Profit and loss account represents the accumulated retained earnings.
Share capital
Share capital represents the issued and called-up shares of the company at nominal value.
Share premium
Share premium represents the issue proceeds of shares in excess of the nominal value.
Capital reduction
On 17 February 2023 the shareholders resolved to reduce the share premium, supported by a solvency statement from the directors.
The Group and Company have contingent liabilities of £5,515,779 which are not recognised in the financial statements as economic outflow is not considered probable. Any further disclosure of information is considered seriously prejudicial and is therefore not included.
Following the execution of the CVA on 14th November 2025 as documented in note 35 this contingent liability has been extinguished with no economic outflow required.
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:
The above represents minimum amounts payable, and does not include any elements such as service charges or turnover rents payable.
Amounts contracted for but not provided in the financial statements:
The parent company has taken advantage of the exemption available in section 33.1A of FRS102, whereby it has not disclosed transactions with the parent company or any wholly owned subsidiary undertaking of the group. Details of amounts outstanding at the year end are provided in note 21.
The following amounts were outstanding at the reporting end date:
Included within other debtors in note 21 is £nil (2023 - £5,000) due from a director of the company. The amount is interest-free and repayable on demand.
There is no controlling party.
Other non-cash changes represents accrued and unpaid interest on borrowings, and the unwinding of accounting adjustments for transaction and derivative costs using the effective interest method under IFRS 9.
Market value changes represent the change in fair value of embedded derivatives.
During the year ended 31 December 2024, the Group adopted the recognition and measurement principles of IFRS 9 Financial Instruments. The directors consider this provides more up to date and relevant information because it shows more clearly the actual finance costs from a committed cash flow perspective separately from a potential estimated payment on exit. The Group has restated the comparative information for the year ended 31 December 2023 accordingly. During the preparation of the current year's financial statements, adjustments relating to the application of IFRS 9 principles to the comparative period were identified. As a result, the comparative statement of financial position as at 31 December 2023 has been restated.
The adjustments primarily relate to the measurement and presentation of loans and derivative financial instruments; the instrument was previously measured as one linked contract and has now been split so that the equity upside element and the host debt are now presented separately.
The impact of the restatement was to increase retained earnings at 31 December 2023 by £6.5 million. Details of the adjustment are set out above. In addition to this, adjusted administrative expenses of £1.36m relate to transaction costs associated with the host debt effective interest rate (EIR). The group and parent company are impacted by an equivalent adjustment.
In addition, an adjustment has been made to reclassify a corporation tax debtor which had previously been offset against a different tax creditor of £65,235.
The effect on the results for the year to 31 December 2024 has not been evaluated.
The comparative information for the year ended 31 December 2023 has been restated following the identification of adjustments arising from the application of IFRS 9 Financial Instruments principles. These adjustments relate to amounts previously reported in the comparative period and affect the classification and measurement of certain financial instruments and related expenses.
As a result of the restatement, the loss after taxation for the year ended 31 December 2023 decreased by £6.5 million. The effects of the adjustment on the individual profit and loss account line items are shown above. The group and parent company are impacted by an equivalent adjustment.
The effect on the results for the year to 31 December 2024 has not been evaluated.