LEEJAM Sports Company

ANNUAL REPORT
2020

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Female-Boxer

“More than just a gym”

From its humble beginnings, Leejam has continued in its path of evolution, fast becoming the region’s largest operator of sports and fitness centres. Under the tutelage of the Company’s vibrant, dynamic and energetic core of key management personnel, with extensive experience in the industry, Leejam has been able to further diversify its offerings to create a so-called “One Stop Fitness Shop”, offering state-of-the-art facilities for all users, leading apparel lines and locations that people want to spend time in, in all corners of the Country. In addition, the leadership team pride themselves in knowing that the evolution of the brand under their guidance aligns directly with Saudi Arabia’s Vision 2030; to get people exercising daily and to lead a healthier life.

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2020 KEY HIGHLIGHTS

Financial & Operational

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Total Members

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Female Members

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Saudiazation

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New Partnerships

KPIs

Leejam is committed to continually evaluating and improving performance. The carefully selected Key Performance Indicators, both financial and operational, are used to measure the Company’s performance over time.

Total Number of Gyms

Total Number of Members

Female Members

Saudiazation %

FINANCIAL

Revenue

NET INCOME

Cash Flow

EPS

EBITDA

MALE SEGMENT EBITDA

FEMALE SEGMENT EBITDA

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Leadership

Chairman’s Statement

Ali Hamad Al-Saqri

Ali-Hamad-Al-Sagri

Getting Fit Through Challenges

It is with great pleasure that I present our Annual Report for 2020, a year of global challenges; one that we not only survived, but successfully overcame, which is testament to the strength of our business.

In light of an unprecedented global pandemic that had, and still has, a wide negative impact on the global economy and on lifestyles around the world, the year 2020 marked an unexpected turn of events that affected us all. The effects of this pandemic meant that international cooperation was required in order to face the difficult repercussions.

The collaboration and great efforts were pioneered by the leadership of our beloved Kingdom in its capacity as leaders of G20. With all its pride, our beloved Country has led this global effort with the aim of focusing all its energies to eradicate the virus and achieve the desired recovery of the economy. These efforts coincided with the enforcement of precautionary and preventive measures, whilst simultaneously trying to stimulate the economy and support the private sector to overcome these repercussions and preserve jobs, increase gains and achievements.

Perhaps what is most satisfying and inspiring is the pride I take in knowing the pioneering role that Leejam plays in its provision of services to families across the Kingdom. It is what science has taught us, that exercise is the first line of defence against illness, and that physical fitness is the key factor in strengthening the body’s immune system and in raising morale in order to enhance one’s own ability to control and reduce stress, as well as fight insomnia.

This, in turn, gives us the ability to cope with viral outbreaks, whilst continuing to enjoy good physical and psychological health. Furthermore, it allows us to continue being productive at work, continue innovating and to be in a state of contentment and happiness. These facts give us tremendous momentum that motivate us to continue providing the highest levels of performance and services and to achieve all the aspirations and goals of our dear members, by helping to surpass all the difficulties and challenges we may face.

By divulging deeper into Leejam’s vision, mission and values, we have been keen, since the establishment of the Company, to encourage people of all age groups to exercise regularly and to increase fitness levels through our modern, state-of-the-art clubs in various parts of the Kingdom, as well as in the neighbouring United Arab Emirates. Looking towards the future, with significant expansion plans in place, Leejam is focusing on strengthening its budget offering ‘Fitness Time Xpress’ to improve market penetration and reach places which were not previously accessible. The Company is also working to significantly improve member experience with the goal of making the centres not only the fitness club of choice, but also a venue where members can interact with one another in a friendly and welcoming environment to promote healthy living and quality of life. The motivation behind this quest for healthy living lies in our desire to support the Kingdom in the realisation of its Vision 2030. Another key focus area of Leejam is Digitalisation and providing members with a connected gym experience.

Despite our very strong position, it was inevitable that our business would be affected by the global pandemic, especially during periods of lockdown, where we were unable to operate. As such, we immediately took appropriate measures to minimise the impact. First and foremost, to protect the lives and wellbeing of staff, the implementation of virtual, remote working wherever possible was put in place, which was actually implemented before Government instruction, whilst constantly planning for a safe way to return to work. We worked relentlessly to reduce costs and secure the future of the Company, during a period where revenues were reduced to zero. Nonetheless, we have managed to come out stronger with Revenue of 659.6 million Saudi Riyals and with 265,000 members, which represents a total market share of 28%.

In conclusion, my sincere gratitude and appreciation goes out to our shareholders, members, partners and government agencies for all of their continued support during a difficult year.

More importantly, I must acknowledge the dedication, strength and resilience that all of our employees have shown. It is in tough times where people must come together, and I am immensely proud of the efforts that everyone has shown. It is because of their hard work and perseverance that we were able to overcome all challenges that were faced, for which I am extremely grateful. It is as the saying goes, “teamwork makes the dream work”

Finally, we ask Allah almighty to preserve our wise leadership, may God protect them, and to perpetuate this generous nation and bestow upon all citizens and residents security, safety, progress and prosperity.

CEO’s Message

-Justin Musgrove

Justin-Musgrove
For all that 2020 threw at us, we came out fighting. Leejam maintained its dominant market position as the number 1 provider of fitness centres in the Region, ending the year on a high note. Even with the restrictions imposed on us in the early part of the year, we managed to open a further 9 centres by year end, launching a new brand in the process, and continuing in our evolutionary mission by agreeing new deals and partnerships.

Covid-19, a driving force

With a multitude of challenges, coupled with increasing uncertainty and anticipation of global developments, the global Covid-19 pandemic has had far reaching consequences and repercussions.

We have collectively pooled our efforts at Leejam to transform these negative repercussions into a driving force, that has only pushed us to be more determined in enhancing our existing offerings and continuing our path of evolution and diversification. We were confident, and remain so, of a return to normal life, coinciding with the release of a vaccine against Covid-19 being made public to both citizens and residents of Saudi Arabia.

Perseverance is the key to success

Through the continuous and ongoing support of our esteemed Board of Directors, we were able to integrate various mechanisms to see us through this difficult period, with minimal losses in real terms. Revenue for 2020 reached 659.6 Million Saudi Riyals. These incredibly positive figures took into consideration rationalisation of costs and an overall slowdown in membership sales, attributable to the nationwide lockdown which forced the closure of all fitness centres. With all this in mind, we persevered. We applied an “Attack is the best form of defence” approach to maintain our competitive edge. Our extensive planning focussed on delivering our three year strategy ahead of time and how we could incentivise users to return post-lockdown. We successfully negotiated new partnerships, to take maximum advantage of diversifying our line and maximising the benefits available through modern technology and we successfully prototyped our first smart gyms. We have continued diversifying the types of centres on offer with the launch of Fitness Time Xpress, aimed at lower budgets, supporting our vision and mission in steering society towards a healthy lifestyle and getting people to exercise daily. These developments, along with further digitalisation and the enhancement of our customer experience will lay the foundations for future growth and development.

Product Evolution

The year 2020, despite all the challenges, was the starting point for many positive achievements in terms of product and service development. We continued moving forward with our ambitious plans to expand geographically throughout the Kingdom and opening a new chain of “Xpress” centres. These are characterized by their low-cost model, 24-hour opening, minimum subscription lengths of 1 month and being digitally enabled. Leejam opened 5 new Xpress centres in 2020 with a further 30 planned for 2021. Running in parallel, we continued to invest in the quality of our services in a comprehensive manner, through the development and modernization of our gyms, by adding the latest equipment and introducing new and innovative training programs according to the latest technologies and reliable international research. Moreover, additional partnership agreements were signed with distinguished international sports brands such as “TechnoGym” and “SquatWolf”. In addition, to enhance Leejam’s customer experience, we enlisted CCC, a leading external agency to operate our call centre, to better engage with customers and improve customer relations.

Strength in Depth

By reviewing the most important performance indicators of the past year, which are detailed throughout this report, we find, as I mentioned, the clear impact of the repercussions of the pandemic in terms of activity and income, especially during the months of the total lockdown, where revenues decreased by 30% as well as gross profits by 64% compared to the previous year. Accordingly, comprehensive measures to reduce costs were applied to meet these exceptional circumstances. Nevertheless, we have been keen to enhance our capabilities in preparation for a return to normal life by completing digital transformation programs and preparing for the establishment and opening of new centres to be added to the current centres, reaching 136 operating centres as of year-end, including 38 female centres. By the end of the year, we reached 90% of member visits compared to pre-covid numbers. To promote our current membership numbers of 265,000, there were key incentives and attractive offers made available. We also continued in our program of Saudization to attract the best Saudi talent, both male and female, by providing them with a platform in which they were able to shine and succeed in our industry. Running concurrently, we continued to work in implementing our strategic plan taking the variables thrown at us by Covid-19 into consideration and by taking advantage of the lessons learned from these difficult circumstances. 2021, we hope, will soon show signs that the pandemic is nearing its end, so we can all continue to grow together and put the lessons of 2020 behind us.

Continuing the trend

s we look towards the future with confidence and optimism, we at Leejam do not intend to stop. Apart from wanting to open a further 40 centres in 2021, our aim is to have 150 male fitness centres and 100 female centres by 2025, of which 200 would be regular centres with 100 Xpress Centres. This would complement our aim to increase Leejam’s membership numbers to 500,000 and the Kingdom’s total membership numbers from the current 1.3million, to 3 million by 2030. We are also prudently maintaining healthy cash reserves in excess of 200million Saudi Riyals to meet any challenges from future interruptions to our business. But firstly, we must build upon the foundations we have built to date. 2020 was a year of learning and adapting. We will further ourselves and continue on our path of evolution, looking at unique ways for us to grow the business in more sustainable ways, keeping our valuable shareholders and members at the forefront of all we do. Given that every success is as a result of teamwork, positive cooperation and sharing common interests, I would like to extend my heartfelt gratitude and appreciation to all of our honourable contributors and partners; from my colleagues to Government agencies and institutions. A special mention must also go out to our Chairman and the Board of Directors for their full support and guidance offered throughout a tough year. It is an honour and a privilege to be the CEO of Leejam and a position I am immensely proud to hold. A final mention is also needed to show my appreciation for our shareholders, who in the face of adversity, have shown their unwavering support and loyalty.

Business Model

Leejam’s business model looks at the ways in which the Company is able to generate value for its stakeholders, along with the resources used to achieve all strategic objectives. These are built taking consideration towards the Company’s vision to be the people’s favourite and most accessible wellness club, and the Company’s mission to steer society towards a healthy lifestyle and encourage people to exercise daily.
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The Approach

  • Diligent and risk-based decision making
  • Customer centricity
  • Innovative and diverse range of products and services tailored to meet customer needs
  • Focus on quality and efficiency
Value-Prop

Value Proposition

  • Long term lease of land and construction of state-of-the-art and technologically superior facilities
  • High value membership
  • Strategic locations
  • Certified trainers and experts
  • Brands catering to various KSA demographics
  • Internationally certified training programs
  • Provision of opportunities for women.
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Inputs

  • Finance
  • Customer Service
  • People
  • Operational Efficiencies
  • Represented Brands
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Services and Features

  • Cardio
  • Strength
  • Personal Training
  • CrossFit Style
  • High Intensity Interval
  • Training (HIIT)
  • Extreme Boxing
  • Swimming
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The Facilities

  • Half Olympic Sized Pools
  • Jacuzzi
  • Sauna
  • Steam
  • Soccer, Basketball and Volleyball Courts
  • Squash
  • Lounges
  • Business centres
  • Showers
  • Lockers
  • Towels
  • Slippers
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Leejam’s Value Creation

  • Membership growth, retention and loyalty
  • Sustainable returns for shareholders
  • Steering society towards a healthy lifestyle
  • Consistency in increasing market share.

Strategy Framework

For Leejam to achieve on its strategic objectives, a clear and concise framework is required outlining the way in which the Company plans to execute its strategy and achieve its goals.
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To lead by example

  • Portray the core values of Leejam in all Company activities starting with leadership and cascaded down to the entire organization.
  • Coaching theme must be embraced for direct reports and mentoring the great talents in all teams to create a pool of outperformer.
  • Conduct a well-planned meetings internally, scheduled one-on-one and team meetings regularly.
  • Project the right image for the Company throughout the Company and centres.
  • Leadership image will reflect on Company’s image.
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To manage business performance

  • Ensure all Financial KPIs are cascaded and distributed to departmental teams. Monitor approved KPIs on a monthly basis and immediate action plan for any deviation is required.
  • Ensure all other KPIs (customers, regulatory, processes) are also cascaded down to all teams.
  • As for Strategic projects and expansions, stakeholders must be accountable and responsible for execution within their allocated timeframes.
process

To ensure structure and process

Driving improvement and enhancements across the organization. Without limitations, to set the strategy but continually scan the market locally and internationally, to adopt what is beneficial for future growth.

Focus on evolution, diversification, innovation and digitalisation.

CFO’s Review

-Mohammed Merajuddin

Meerajuddin

Holding Strong in the Face of Adversity

2020 proved to be a year of challenges, which tested our resolve and strength in depth. A total shutdown period of a little over 3 months meant we went back to the drawing board and implemented our rigorous busines continuity plan, including stringent cost cutting measures, ensuring the financial impact of the Covid-19 pandemic was minimised.

Because of the global Covid-19 pandemic, the figures for 2020 were down from the previous year. Even with a total shutdown of all centres for a little over 3 months, total revenue was down 30% to SAR 660 million from the SAR 945 million in 2019.  Gross profit was also down for the year, with Leejam ending 2020 with SAR 129 million, a reduction of 64%. These are both as a result of the total shutdown of our revenue streams.

The effects were elongated because of user sentiment both before and after the lockdown, and it took a while for our members to be comfortable returning to a gym. There was a decrease in membership income of SAR 264 million owing to the shutdown, a decrease in personal training income by SAR 18 million due to the suspension of all activities and the directives to reduce availability of sessions post lockdown in line with Government directives, along with a decrease in rental income of SAR 3.4 million due to the termination of rental contracts and the provision of rent concessions to lessees during the year.

However, with the overall lower results from the previous year came some incredibly positive news which we can all be proud of, and which will give us a platform to build upon for 2021. In line with ensuring the financial strength of Leejam, we have built up cash reserves of SAR 200 million, as per the guidance of our Board of Directors, who gave us their unwavering support throughout this tough period. We manged to significantly reduce costs, whilst increasing our standings in terms of the number of fitness centres. We were the first gym to open, within 12 hours of the Government announcement, and we ensured the highest hygiene levels across all of our facilities. This meant our members felt safe and comfortable returning, which is evident in footfall towards the end of 2020, which reached 90% of pre-covid attendance. In addition, we signed agreements with Technogym and Squatwolf that will see our product offering evolve and diversify further in the coming years.

Through the continuous and ongoing support of our esteemed Board of Directors, we were able to integrate various mechanisms to see us through this difficult period, with minimal losses in real terms. Revenue for 2020 reached 659.6 Million Saudi Riyals.

These incredibly positive figures took into consideration rationalisation of costs and an overall slowdown in membership sales, attributable to the nationwide lockdown which forced the closure of all fitness centres. With all this in mind, we persevered. We applied an “Attack is the best form of defence” approach to maintain our competitive edge. Our extensive planning focussed on delivering our three year strategy ahead of time and how we could incentivise users to return post-lockdown.

We successfully negotiated new partnerships, to take maximum advantage of diversifying our line and maximising the benefits available through modern technology and we successfully prototyped our first smart gyms. We have continued diversifying the types of centres on offer with the launch of Fitness Time Xpress, aimed at lower budgets, supporting our vision and mission in steering society towards a healthy lifestyle and getting people to exercise daily. These developments, along with further digitalisation and the enhancement of our customer experience will lay the foundations for future growth and development.

Looking towards 2021, we see this as a year of recovery. As the Country continues to lead the way in vaccinating the population and fighting this virus, we will push to ensure that our members have a safe, clean and hygienic environment where they can feel comfortable returning to, and are confident that our figures will reflect this come year end.

Summary of statement of income (SAR)

20202019201820172016Description
659,629,095944,933,381799,946,833732,878,928700,884,583Revenues
530,825,619584,738,941494,612,578454,479,095391,944,246Revenue costs
128,803,476360,194,440305,334,255278,399,833308,940,337Gross profit
-58,723,592205,920,845180,092,445174,198,884203,129,710Net profit

Summary of balance sheet (SAR)

Description20162017201820192020
Current assets200,970,282198,663,780170,239,232137,269,291325,206,571
Non-current assets1,155,416,8021,306,270,8251,438,482,7752,379,030,0472,242,110,666
Total assets1,356,387,0841,504,934,6051,608,722,0072,516,299,3382,567,317,237
Current liabilities457,703,186432,781,330430,412,542574,294,408664,162,755
Non-current liabilities374,919,339443,210,072464,641,0151,220,230,8341,238,670,418
Total liabilities832,622,525875,991,402895,053,5571,794,525,2421,902,833,173

Geographical analysis of the company's total revenues (SAR)

Description20162017201820192020
Headquarters and Central Province380,542,778371,062,299395,494,485461,880,348311,265,095
Western Province210,289,952250,513,964260,360,842312,303,000239,413,000
Eastern Province100,113,37397,656,413126,560,486151,962,13195,590,000
United Arab Emirates9,938,48013,646,25217,531,02018,787,90213,361,000
Total revenues700,884,583732,878,928799,946,833944,933,381659,629,095

Long Term (SAR)

Lender name Principal amount Loan term Repaid amount within the year Remaining Amount Total debt of company and its subsidiaries
National Commercial Bank 34,418,822 5 Years 18,689,994 15,728,828.09 487,586,916
Banque Saudi fransi 276,562,500 5 Years 41,562,500 235,000,000.00
Saudi British Bank 271,242,166 5 Years 59,384,078 211,858,088.04
Bank AlJazira 25,000,000 5 Years - 25,000,000.00

Subsidiaries

Subsidiary nameCapitalCompany's stakeMain activityCountry / operations headquartersCountry / incorporation address
Fitness Time Trading Co. Limited50,00095%Inactive (no activity)-Kingdom of Saudi Arabia

Details of shares and debt instruments of each subsidiary

Subsidiary nameIncorporation country Direct stake (%) Indirect stake (%) Remaining ownership stake 
Fitness Time TradingKingdom of Saudi Arabia95%-5%