Globo Gym - discussion with Laura Slaughter, CFO of Globo Gym - business overview for KPMG Audit
Planning Purposes
Audit Associate (You): Good morning, Laura, thank you for meeting with me today. As you know one of
the important steps in the audit planning process is a business review to discuss Globo Gym’s business
results for the year. We’d like to hear from you about the performance of the business, particularly
focusing on the bonus scheme and the recent investment in new gym equipment. Could you start by
providing an overview of the company's financial performance this year?
Laura: Good morning. Overall, we've had a solid year. Our revenue increased by 8% compared to last
year, and our net profit margin improved slightly, from 10% to 12%. This growth has been driven by both
our core business operations and the successful launch of several new gym locations.
Audit Associate: That's great to hear. How have these financial improvements impacted the bonus
scheme for employees?
Laura: Given the positive performance, we decided to enhance our bonus scheme this year. We
increased the pool by 15% to ensure that our employees are rewarded for their hard work and
contributions. Bonuses are now more closely tied to individual and team performance metrics, which
has helped to drive productivity and morale.
Audit Associate: It's excellent to see that the company is investing in its employees. Can you elaborate on
the criteria used to determine these bonuses?
Laura: Certainly. We use a combination of financial metrics, such as revenue targets and profit margins,
along with non-financial metrics like customer satisfaction and employee engagement scores. Each
department has specific targets, and bonuses are calculated based on the achievement of these targets.
We believe this approach aligns individual goals with the overall strategic objectives of the company.
Audit Associate: That sounds like a comprehensive approach. Regarding the revenue target portion of
the bonus, when exactly is the revenue considered earned for purposes of the bonus calculation?
Laura: That's a great question. Our intention is to follow IFRS revenue recognition guidelines so that the
bonus calculation simply reflects revenue as recognised on our financial statements.
Audit Associate: Moving on to the investment in new gym equipment, can you explain the rationale
behind this decision and how it aligns with the company's overall strategy?
Laura: Of course. We believe our customers want gym experiences using the latest in fitness equipment.
Investing in new gym equipment is a continuation of this commitment. We do a scheduled rotation of
capital improvements for gym equipment each year.
Audit Associate: And how does the continual rotation of equipment impact the potential realisable value
of existing PP&E at your facilities?
Laura: We evaluate the net realisable value of our PP&E on a sampling basis with particular focus on
those locations that have not received new equipment in the current year.
Audit Associate: That's fantastic to hear. In terms of financial impact, how was this investment funded?
Laura: The investment was funded through a combination of operational cash flow and budget
reallocation from other non-essential projects.
Audit Associate: Thank you for providing such detailed insights. It seems like the company is making
strategic investments in both its financial health and its employees' satisfaction through the bonus
scheme. Is there anything else you would like to highlight about the past year's performance or future
plans?
Laura: We're optimistic about the future. Our focus remains on sustainable growth, innovation, and
maintaining a supportive work environment. We're also looking at expanding into new markets and
investing in the latest fitness equipment to stay competitive. Thank you for the opportunity to discuss
our performance and initiatives.
Audit Associate: Thank you for your time and insights. This information will be very helpful for our audit
planning purposes and understanding the company's strategic direction.
