The Gym Group plc

Hello and welcome to the Gym Group Half Year Results 2025. If you're joining us on Zoom, automated subtitles are available and you can turn this feature on or off within your Zoom app settings. But please note this is an automated service and transcription errors sometimes occur. I'm now going to hand over to Will Orr, CEO. Will, please go ahead.

Good morning and welcome to the 2025 Half Year Results presentation for the Gym Group. Thank you for making the time to join us in the room and on the dial-in. After the presentation we'll take your questions in the room first and then on the webcast. Our CFO Luke Tate and I will be doing the presenting today. and here's what we plan to cover. I'll start with an overview before handing to Luke to share the 2025 half-year financial results. I'll then provide a progress report on our next chapter growth plan before summarising and taking your questions. So, starting with the overview. I'm pleased to report strong performance for the first half of 2025. Closing membership was up 5% with revenue for the period up 8%, 3% on a like for like basis. With this performance and strong management of costs EBITDA less normalised rent was up 24%. The market we're in remains highly attractive and gym penetration has again reached new highs supported by structural growth tailwinds. And within our next chapter growth plan, the programme to strengthen the core continues to drive mature site performance, underpinning confidence in further progress on mature site ROIC, which we'll report on at full year results. And when it comes to new sites, we're on track to increase openings to 14 to 16 in 2025, in line with our plan to open circa 50 new sites over three years funded from free cash flow.

so the momentum continues and with that I'll hand over to Luke for the financial results thanks Will good morning so starting with a summary of our financial KPIs the key revenue KPIs which were released in July have both shown good growth year-on-year We had average members across the first half of 953,000, up 4% versus last year, and average revenue per member month was £21.16 for the first half, also up 4% on prior year. As a result, revenue was £121 million, up 8% on last year. The additional revenue converted well to profit with EBITDA less normalised rent of £27.4 million up 24% on prior year. Statutory profit before tax was 3.3 million, up 3.1 million on prior year. Free cash flow at 25.1 million was up 8% on prior year and enabled a net debt reduction of 10.1 million to 51.2 million, reducing the net debt to EBITDA leverage ratio to one times. We will look at each of these key financial metrics in more detail in the following slides. Turning to the income statement, EBITDA grew strongly in the first half of the year, up 24% versus last year. Revenue was £121 million, up by £8.9 million year-on-year. Approximately one third of the incremental revenue year-on-year was generated from like-for-like gyms and two thirds from new openings since December 2022. Costs in the first half evolved in line with expectations. Site costs of £57.9 million benefited from a reduction in electricity costs from lower commodity rates, resulting in site cost margin improvement of 2%. I'll come back to the other key site cost movement shortly. Central costs grew by 7% with the growth rate expected to slow further in the second half and therefore the central cost margin is expected to drop to circa 11% as guided in March. Normalised rent increased by 7% reflecting a combination of new site growth and underlying lease inflation EBITDA was £27.4 million with EBITDA margin at 23% for the first half, an improvement of 3% vs prior year Moving on down the P&L, the non-cash charge for share based payments of £2.5 million was higher than prior year due to the delay in the commencement of the new scheme last year. Net financing costs of £10.4 million remain flat year on year as lower interest rates offset an increase in property lease liabilities. The charge consists of £8.1 million relating to property lease interest and £2.5 million relating to our borrowing facilities. Profit before tax and non-underlying items was £4.9 million, up £4.4 million on prior year. Non-underlying items of £1.6 million principally relate to the implementation of a new member management and payment system. Finally, profit before tax for the six months was £3.3 million, up from breakeven last year. Revenue grew by 8% in the first half. Average revenue per member per month grew by 4%. This was principally down to a combination of yield increases in the like-for-like estate and the optimisation of yield in the new site openings, including coming off introductory headline rate discounts. The average headline rate of a standard membership was £25.10, up by £1.16 year-on-year. like-for-like revenue was three percent in line with guidance with the average membership remaining at a hundred percent year-on-year and the average yield increasing by three percent looking at site costs in more detail We've been able to control site costs in the first half, despite the ongoing inflationary environment. In the first half, like-for-like site costs were down by 1%. This was driven by a further reduction in electricity commodity prices and our energy optimisation programme. For example, we have now installed 120 voltage optimisation units across the estate. Efficiencies in the staffing model and cleaning have partially offset the national living wage and NIC increases in Q2, and rates rebates have partially offset the Q2 increase in the UBR. In the second half, we expect site cost inflation to return, bringing the full year in line with our guidance of like-for-like site cost growth of 2%. This is as a result of an increase in the non-commodity element of the electricity cost from Q4 as well as two quarters of National Living Wage and UBR increases. Turning now to the cash flow. Strong cash flow generation in the year enabled us to self-fund our expansionary capex, buy shares for the EBT and pay down debt. The working capital inflow of 8 million reflects a cash generative nature of the business model when growing and a higher proportion of pay up front memberships. Although some unwind of this inflow is expected by year end. after deducting the cash spend on maintenance capex of 7.3 million operating cash flow was 28.1 million the cash element of non underlying costs was half a million Bank and lease interest was 2.5 million. It's worth noting that due to losses incurred during Covid and accelerated capital allowances, we do not expect any cash tax until 2028. Free cash flow was 25.1 million. Expansionary capex was 12.6 million and after refinancing and EBT share purchase costs, net debt reduced by 10.1 million during the first half. We continue to invest to grow the business and ensure a well maintained estate. Total cash capex in the first half of the year was 19.9 million. Maintenance capex across both property and tech was 7.3 million in the first half. Property maintenance of 6.2 million was 5% of revenue. Tech and data maintenance capex of 1.1 million was spent on hardware including CCTV upgrades and on our data infrastructure. Expansionary capex was 12.6 million with the main spend being on new sites as we target 14 to 16 new sites this year. Tech and data expansionary spend relates principally to investments in the website to enable next chapter growth initiatives such as product add-ons and website conversion optimization. Spend on the replacement member management and payment systems was 0.7 million and is expected to increase significantly in the second half as this project ramps up. We continue to expect total capex to be approximately 50 million for the full year. Turning now to net debt, the strong free cash flow in the first half has allowed good progress on leverage reduction. Non-property net debt was 51.2 million at the end of June, down 10.1 million from the year end. The debt consisted of 59 million of bank debt and 1.5 million of finance leases. As a result of the reduction in debt, The net debt to EBITDA multiple reduced to 1 times EBITDA, down from 1.3 times at year end. Given the second half weighting of CapEx and an expected element of working capital unwind, year end net debt is expected to be at a similar level to last year end at circa 60 million. In June we agreed an amend and extend of our current facilities with our bank syndicate, increasing the total facilities to 102 million and extending the maturity to 2028. The new sites continue to perform well. The 25 sites opened in 2022 are expected to deliver ROIC of 30% this year. The small 2023 cohort is on track to deliver an average ROIC of 25% with one site having been impacted by an unusual level of competitors openings. And although early in their tenure, the 12 2024 sites are progressing well with strong initial membership volume. Overall, our confidence remains high and returning 30% on new openings. Finally, turning to current trading and outlook. Current trading momentum has continued through July and August. We're now entering the key student acquisition period. We've opened five new gyms so far this year with another eight gyms currently on site. For the full year like-for-like revenue is expected to grow at circa 3% and like-for-like cost growth is expected to be circa 2%. Given the current trading momentum, we now expect EBITDA at the top end of market expectations. We do not expect to pay any cash tax before 2028. We're on track to open 14 to 16 new openings in 2025, in line with our March guidance, with total capex of circa 50 million expected for the full year. Therefore, net debt is expected to trend back to last year's level by year end. I'll now hand over to Will.

Thank you Luke. In March 2024 I set out our next chapter growth plan and wanted to provide you with a further update on the strong progress we're making. Firstly a reminder of the investment case, sustained growth from free cash flow and why we think it's so compelling. starting at 12 o'clock on the circle health and fitness is a very large market that's benefiting from continued structural growth and in gyms the high-value low-cost sector is growing fast as with other categories we're benefiting from consumers appetite for no frills great value propositions and from new more committed generations of gym goers This winning proposition has high levels of customer satisfaction and is delivered by a strategically advantaged, labour-light business model. We also have multiple drivers of growth listed on the right hand side of the slide with detailed plans on each of them. Strong execution on those growth drivers is increasing returns in our existing estate, in turn funding the organic rollout of quality new sites. This virtuous circle of sustained growth is being powered by data and technology, two areas we continue to invest in as the foundation for any successful digital subscription business. Demand for gyms continues to grow. UK consumers now spend £6.5 billion on gym memberships with 11.3 million of us being members. That penetration continues to grow with another strong increase in 2025 to 16.6%. And as you can see, low-cost gym growth is strong. With a proposition that's high quality and affordable, we're introducing new generations of gym goers to something they really value as well as benefiting from the continued trade down from the mid-market and in this growing market segment we're one of two brands that account for 80% member share Seeing the way future generations, particularly Gen Z, are embracing gyms is one of the reasons we're so optimistic about the gym group's future. With around 40% of our members being in this cohort, we now publish a Gen Z fitness report based on a regular independent survey of over 2,000 respondents. The most recent results are again encouraging. Nearly three quarters of this group now saying they're making time for fitness at least twice a week and their fitness is their top priority when it comes to discretionary spend. For a growing number of this generation fitness is a non-negotiable These are consumers who are highly engaged in fitness for its physical and mental health benefits, who have a growing appetite for strength training, best done in a well equipped and affordable gym, and who increasingly see going to the gym as part of their identity and social life. And I should add that these trends extend beyond Gen Z and into our membership base as a whole. The future is bright for fitness and gyms. To take full advantage of a market with structural growth you need a winning proposition and ours resonates more than ever. For any subscription business usage is a good health indicator and the proportion of members visiting us four times a month or more increased again year on year. while the proportion of members rating us 5 out of 5 in satisfaction surveys has risen to a remarkable 62% and when it comes to Google reviews we lead the market with every one of our gyms scoring 4 out of 5 or better so the gym group is growing in a growing part of a growing market benefiting from structural market growth and an advantaged labor-lite business model that delivers a winning proposition The Gym Group also has a clear growth plan. As a reminder, there are three elements to the next chapter. Strengthen the Core is focused on increasing returns from our existing sites, principally by growing like-for-like revenue. It's the programme that helps us deliver our 25% mid-term target for mature site ROIC in full year 2024, ahead of schedule, and is generating the cash to accelerate our organically funded rollout of quality sites in the UK. As we said in March, those first two COGs are very much where our executional focus is for the time being because we see so much headroom here. I will, however, also update on the third COG to broaden our growth later in the presentation. Turning in more detail to strengthen the core, we've again delivered multiple wins across three levers of customer revenue growth. On pricing and revenue management, we're seeing a sustained upside opportunity based on our strong value for money credentials and I'm confident we have the data and capability to continue growing yield. When it comes to acquiring new members, we're using data, ad technology, brand management, local targeting and e-commerce skills to create a highly efficient acquisition engine. And thirdly, on member retention, we continue to increase the average tenure of our membership by taking a systematic approach. On the next few slides, I'll give you some examples of the progress we're making in these areas. In explaining why we see such a sustained opportunity on pricing and yield, I wanted to start with the UK gym market as a whole. At a gym group gym you get a large, clean, well-equipped, well-maintained gym with friendly, expert people. you also get 24 7 access and you're not tied into a contract and yet because of our advantage business model were able to offer all this at prices that as well as being marginally lower than the direct competition are comprehensively lower than the rest of the market And as I'll touch on shortly, we have ways to keep enhancing the perceived value of what we offer without adding to our costs. So our market position gives us a strong long term pricing and yield opportunity. And critically, that opportunity exists in the minds of our consumers. The graph on the left hand side is output from a large quantitative study we refreshed again in H1 with Simon Kutcher Partners. It plots perceived value on the x-axis against perceived price on the y-axis and shows that the high value, low cost gym sector remains underpriced in the minds of our target consumer. In other words, they continue to perceive more value than they pay. And when you consider the value proposition I just described, that large, well-equipped, well-maintained 24-7 gym for about £25 a month, that's not surprising. It is a phenomenal piece of value engineering. And as you can see on the right-hand side of the chart, this delivers strong value-for-money scores, which remain stable despite increasing prices again over the last 12 months. With this opportunity in mind, we delivered several wins again in H1. All these have been underpinned by analytics and A-B testing, de-risking our decision making as we execute. Firstly, we've increased our headline rates for new members, while remaining cheaper than the competition in competing sites. We note that our main competitors continue to take a similar approach with JD Gyms particularly aggressive in the period and further Pure Gym price increases noted already in H2. Secondly, we've continued to test and innovate on promotions seeking to optimise for return on spend. This has included more targeted treatments at site level and ongoing deployment of our churn reducing stepped kickers. Thirdly, we've continued to revenue optimise our product range including offering premium features like guest pass and multi-site access as add-ons to standard membership. And finally, we've developed a data model to assess site level headroom in the mature estate enabling even more targeted pricing and volume interventions as a result. I'll return to this data model later. Turning to acquisition, we're also taking a targeted approach here. As I've described before, to maximise return, we're spending our marketing money close to our sites where the demand will naturally be. And as you can see in the graph, unprompted awareness within 3 miles of our sites is growing. When it comes to then converting prospects into sales, our programme of web conversion improvements continues with nine successful A-B tests completed and adopted in H1. We're also progressing initiatives to be as relevant and attractive as possible to our core audience of Gen Z consumers. This includes growing our footprint in social media and enhancing the presentation of our brand and our sites. To expand on this a bit further, as you can see on the left hand side of this chart, our social media reach both at national and local level continues to grow at pace with well over half a million people interacting with us in social. This is a key channel for quality fitness advice, engagement and of course sales and we'll continue to prioritise this area. We're also evolving the aesthetic presentation of the gym group in marketing activity and in our gyms. This is one of the ways we'll continue to build our perceived value in the minds of members, supporting pricing and revenue growth. And I'll return to what evolves in gym design in more detail shortly. Our focus on retention is one of the reasons we've been able to hold like-for-like membership constant while pricing up, and why the average tenure of our members continues to grow. Churn rates are highest in the first 45 days of a member's tenure, which is why we developed our early life plan. Part of this plan is encouraging new members to visit more often in their first month, and in H1 we launched targeted nudge messages in the app to encourage visits. As well as this, we're enhancing all aspects of the new joiner experience. For example, we've renamed and better promoted the free Kickstart induction session we offer new members. Kickstart introduces the new member to their gym and helps them get the most from it. We've seen a 37% increase in participation and 10% higher retention rates among participating members. Rejoins are also an important part of our member mix, with members benefiting from our flexible proposition. We have a programme of enhancements to capture as many returning members as possible and increase the 6 month rejoin rate by 6% in H1. And finally, we continue to grow our base of members on a longer term commitment. We call these 6, 9 and 12 month products savers and have enhanced them in several ways, growing this base by 37% in H1. So that's a few examples of the many ways we're strengthening the core of the business and improving mature site ROIC. To remind you, we grew that measure 4 percentage points in fall year 24 to 25% and look forward to reporting further progress on this metric at fall year results. Now turning to the second part of the plan. In line with our strategy and capital allocation policy we're currently deploying free cash flow to accelerate the rollout of quality sites in the UK. PWC estimates 10 years plus of UK white space for low-cost gyms so the opportunity for sustained rollout is clear and we're taking a disciplined returns focused approach to unlocking that opportunity. We opened 12 new sites in 2024 at the top end of guidance and are on track to open the guided 14 to 16 in 2025. Using data to isolate the characteristics of our best performing mature sites we're then applying that formula to the new sites we open and as a result I'm pleased to say that the five sites we've opened so far this year are performing ahead of expectations. Given the power of data driven site selection, we continue to enhance our methodology. In H1, we developed a new fully bespoke site selection model with more data sources and machine learning to further increase accuracy and speed of appraisal. And as referenced earlier, we're elevating design aesthetic and kit innovation in new sites. I'll provide some more detail on that now. We have great gyms with strong customer ratings and improving returns, but we've identified Hedrum to elevate the gym experience further, driving those high value perceptions and supporting sustained revenue growth. The evolved approach is being applied to all new sites and as I'll cover in a moment, being rolled out in our mature estate in a commercially targeted way within our existing maintenance capex programme. The work to do this, which has included input from a world-leading retail design agency, was based on five principles. Firstly, this is a careful evolution, so we wanted to build on the strengths we have and continue to create welcoming gyms for all our members. That said, we're evolving the look to be more on-trend and premium. This includes some darker colours, more use of original building features, more use of neon and lighting design, black kit, better change rooms and better zoning. Thirdly, kit is a very important part of why customers choose the gym group. So we're innovating here with more advanced strength training equipment and the introduction of some sought after kit brands like Booty Builder and Exego. We're also being more conscious about creating spaces for members to socialise in and environments suited to posting on social media. Finally and critically, through thoughtful cost engineering, we're doing all this without adding to fit out costs. And here are some visuals of the new approach. I'm pleased to say the performance of the eight sites we've opened so far with the new approach has been strong. The rate at which we fill these gyms with members is well above our historic growth curve and at an average of 4.8 out of 5, the feedback on Google reviews is excellent too. As well as opening new sites for this improved approach, we want to apply it to the mature estate within our existing capex budget. And we'll prioritise this maintenance spend based on likely return. To aid this, we recently completed a multivariant statistical model to analyse potential membership headroom across the estate. This is allowing us to prioritise our refurbishment programme where the returns should be highest. It will also help us to target local marketing and pricing as well as those in gym enhancements. Here's an early example of the approach. The model identified membership headroom in Bristol Longwell Green. We business case the site investment within our maintenance capex budget and rolling refurb programme. And then we reopened with a new design approach and some local relaunch marketing. I'm extremely encouraged by the early results we're seeing and across new and existing sites we expect around 40 of our gyms to benefit from the new design approach in the full year 2025 with the program then continuing into 2026 So that's some examples of the progress across the first two cogs of our growth plan. As I said earlier, we see Hedrum in both these areas. Hedrum to further strengthen the core of the business by continuing to improve mature site ROIC and Hedrum to accelerate our organically funded rollout of quality sites into ample UK white space. And that's why these two areas remain the majority of our focus. we have however continue to analyze opportunities to broaden our sources of growth so brief update on this part of the plan One area we've explored here is channels to market – new, scaled channels delivering incremental members. WellHub is a B2B2C channel, providing a platform of fitness and wellness benefits to 1.5 million eligible employees across 450 UK companies, including the likes of Santander, Tesco and Nationwide. We recently started a six-month pilot on the platform with a robust framework to assess incrementality when it comes to new members. If the pilot delivers in line with our estimates and we've seen an encouraging start we'll roll this out nationally as a new source of like-for-like membership growth. We also continue to investigate other significant adjacencies well aligned not just to fitness but also to our core competencies. We'll of course update on this in more detail at the appropriate time. So that's the progress report on the next chapter growth plan. I'd like to take the opportunity to thank the committed expert people across our gyms and support center for delivering the progress you can see. We'll very shortly take your questions but before that I'll briefly summarize today's presentation. The GYM Group operates in a large market with structural growth. We have an advantaged, labour-like business model that delivers high value at low cost and limits exposure to national living wage and national insurance increases. With a clear growth plan and significant white space, H1 saw 24% growth in EBITDA or less normalised rent, underpinning confidence in full year progress on mature site ROIC. Profit growth is converting into strong cash flow and that's allowing us to accelerate our organically funded expansion. As a result of this strong progress and our current trading performance, we're now expecting 2025 EBITDA less normalised rent to be at the top end of analysts' forecast range. Thank you and we'll now take your questions.

Thank you. If you'd like to ask a question, you can do so in three ways. If you're in the room, you can raise your hand and wait for a microphone to come to you. If you're joining on Zoom, you can press the Q&A button at the bottom of your screen, which will allow you to type questions. Or you can press the raised hand button and we'll bring you into the meeting to ask your question audibly. So please be ready to unmute your microphone at that point. I'll now pause to allow for any questions.

Thank you for that excellent presentation. Three questions from me. Just on the ending of your presentation, Will, in terms of broadening our growth part of the presentation. Should we assume that as part of that strategy, moving overseas could be an option over the medium term? Second question is given the strength of the free cash flow and Self-funding and where leverage is now. How should we be thinking about capital returns going forward? and the final question I suppose this is for Any update in terms of what's happening to site costs relative to previous guidance? Thank you.

Thank you. I'll take the first one. So in terms of broadening our growth, I mean as I said we see a lot of UK headroom both in terms of sort of mature site performance and white space so that's very much where our focus is for the time being and to the international piece we wouldn't rule out anything and periodically we sort of assess the landscape but for the time being we're very much focused on the UK so that's that's that one and perhaps Luke do you want to talk buyback and cost

so Sahil as you know it was 18 months ago we set out our capital allocation policy which I think still essentially remains the same first priority was making sure that net debt leverage remained below two times it is now down to one times that we've just reported but will increase again a bit towards year-end so so obviously well within scope there. The second was to prioritise organic growth as long as we had high levels of confidence on achieving 30% ROIC. I think we're still there and then the third was if we felt we had excess free cash flow we would consider returns to shareholders and we're very much still looking at that actively. The returns are pretty good. and in theory at least risk-free that said there is still quite a big gap between those returns and the returns we think we can get from deploying the capex on organic growth so for the time being we're still concentrating on that organic growth but it is something that is under active consideration by the board and you know we may well make changes in the future The third question was around site costs. So we had a very strong first half in terms of site costs, so light for light site costs actually down year on year, driven by that. Commodity continuing reduction the commodity rate which actually we continue to see going into into the future We had only one quarter of the Changes imposed on us around living wage and I and rates we will have two quarters of that in in the second half and so that adds to the inflation burden and we will also see non commodity rates increase in the final quarter as I said so if we're down down one in the first half and then up to for the full year you can see the second half will you know we will have a bit a much sort of more significant increase from point of view of what that means going into next year that non-commodity increase will last for a year and its two-year contract will then be flat thereafter so it's kind of one hump to get over if you see what I mean and then on the national living wage for next year I'd be interested in your view so but we'll find out in November and I think we'll guide when we know more which is probably early January CapEx on new sites essentially running in line I think to sort of more general levels of inflation so we do see some increase from wage costs coming through that said everything is tendered to minimum of three contractors and as a result we're not seeing massive increases year and year the biggest variation really is down to the site level sort of dimensions such as is it in central London or London or is it outside of London is it a complex site to develop or is it a nice clean sort of industrial type box But no, nothing more than headline inflation rates.

Ross Broad for RBC you referred a few times to average tenure continuing to grow I was wondering if you have any color on sort of where it's been and where it is just to give that a bit more sort of scope number two you talked about strong volumes at the enhanced new sites and just question you know to what extent discounting has played a role in the strong volumes or whether there's normal volume growth if you see what I mean and then thirdly off-peak now 13% of the mix I think previously you've said mid-teens is where you sort of see it maturing any update on that at all thank you

The average tenure of our membership is around 18 months with a very significant sort of dispersion around that, the average of 18 months and it's been sort of ticking up nicely over the last couple of years. So that's that one and we continue to work on that. I think volume at new sites yeah well ahead of historical averages I would say we've been moderately more aggressive on kind of opening offers because strategically we think It's good to fill new sites fast and then yield up thereafter, but it's not been a huge change to our historical approach. So yeah, there's a little bit of promotion in there. I would still say that I think what we're seeing from the kind of the new aesthetic and so on I think is is is encouraging very encouraging in its own right so that's that one off-peak off-peak Ross so yes I think that that guidance is on mid-teens still is is our best direction and I think

in the round off peak has performed pretty much as expected from the trials you know has some multi functions it has added some volume which has helped offset some of our price increases it's also enabled us to price you know more aggressively in in the other you know essentially 80 85 percent of members 87 87 members and it also gives us that excellent marketing low headline rate which we use. I think we'll continue to optimize it so we do literally set that differential on pricing at a gym level and therefore we can sort of control that volume depending on what we think will maximize revenue.

Thanks very much.

It's Douglas Jack, Peel Hunt. Three questions, if that's okay. First one is, are you seeing much difference in terms of regional performance across the UK, i.e. London versus outside in particular? Are you seeing any changes in terms of competitor behaviour in terms of expansion? And in terms of the refurb program, how many are you doing at the moment per annum and what does that mean in terms of that pipeline applying your latest format to the mature estate?

um yeah i mean maybe i'll start with the last one and sort of work up uh from there yeah i mean i i think said that between the new sites that were opening this year and the sort of significant uh refurbs we'd estimate for about 40 of our sites by the end of this year we'll sort of have will have had a sort of will either be the new look because it's a new site we'll have had a sort of significant refurb there's actually you know over over 100 sites that in the refurb program get some form of treatment let's say upgrade so yeah so I think happy with the pace of that and then it will continue into 2026 and I think I'm sort of excited by this Now more granular ability to try and assess how we should prioritize That that maintenance program, but I think yeah We will as we move into next year. We'll have a significant proportion of the estate with that kind of new more premium Look and feel if that answers that question I think on competitive behavior I think you know as we said before we continue to think the market is rational you know I think rational on pricing rational on sort of site selection and sort of looking at trade areas and and those sorts of things I think we noted JD being particularly aggressive on pricing and h1 and as I say Pugin doing some pricing already in H2 so that direction of travel looks to be very sort of consistent and then in terms of rollout speed you know Pugin are going faster than us they're opening quite a lot of small sites and we're principally sticking to our sort of and sort of tried and trusted formula at larger sites but I think the market continues to be to be rational there's a lot of white space I think there's a lot of room for everybody to be honest among us and Pure Gym and then on regional performance I don't think there's any particular change and we have strong performing sites right across the UK I mean London, Greater London has always been a good area for us but we haven't seen any real change in that

good morning Jack Cummings at Berenberg and my first question is just on site openings and bit h2 waited this year and obviously it's accelerating next year could you give us a little bit more kind of color in terms of your confidence behind those targets and also what phasing we should expect in in 2026 and you mentioned the new add-ons like guest passes multi-site access etc what sort of penetration are you getting for this and has this been rolled out across the entire estate and all of your members and in the final ones just going back to the prioritizing of that mature estate investment and is there potentially a discussion internally actually accelerating the amount of maintenance capex given this headroom and the returns that you could get from it thank you

So phasing of new openings, I think we are confident about our guided 14 to 16 for this year. We've opened 5 we're on site at another 9 so we're I think I think we're on track there it is going to be back weighted for sure this year and then in terms of 2026 I think we actually need the pipeline for 2026 is looking strong already I think we're sort of further ahead at this point than we that we have been historically not sure of exact phasing of all of that in next year but I think net back weighted this year but confident on guidance and looking really promising actually for next year as we step up so that's that one I think on the mature estate investment I think as I said various times in that presentation we're sort of trying to do it within the existing envelope at the moment but to your question we assess the performance of every newly refurb site it takes a bit of time to assess that performance because it needs to go through a bit of a trading cycle but if we see really strong returns and really strong improvements then we would potentially accelerate that but I think we'd guide if that's something that we thought we were going to do

On the add-ons, it's very early in the launch process. I think it's probably premature to give stats on that.

I think we're on site at 8, not 9. I saw Catherine looking at me in a horrified way. But yeah, I think we're on track for our 14, 16.

First question was about yield. Obviously the 3% price increase you put through certainly wasn't greedy versus the competition. Do you feel you might go faster in 2026? Is there scope for more catch up? Slide 32 was really interesting about local market headroom. Can you give us an idea of what the scale was on that chart and does it include the workforce centric gyms? I'm just thinking whether you might be able to recoup some of the previous lost members there. Thank you.

yeah sure thanks Tim so yes on the yield as you say I think so 3% was for the proportionate to the inflationary pressures we were seeing I think so I don't I think there is definitely it's all continued as well so set out no slice continued midterm opportunity to to take yield and whilst our input inflation isn't a driver it's definitely an important consideration and we do know that particularly around that non-commodity utility rate we will be seeing some more inflation next year so we will definitely wait and see what happens through the budget on other cross lines but I think depending on the inflationary pressure I think we will sort of flex our pricing plan to match that.

and then on that Hedrum piece I think the headroom in certain sites you see on the left is significant that's not to say you know it can be automatically unlocked and it's a statistical model and we're now applying it to sites like the one I showed and sort of assessing the performance so we've got to sort of test the model but yeah I mean there are definitely a number of sites on there that look like they had good headroom And then I think that the second part in terms of workforce Yes, the model would suggest that there's some opportunity there, but I don't think it would be our our first priority to be honest But it's something that will sort of continue to keep under review and I think you also seeing incremental return to office working and so on so I hope that answers the question so I think some good headroom in that model we need to prove that out but I think that small handful of workforce is unlikely to be the top priority for the deployment of that effort

Jane from Oceanwall, can you help us a bit with the algebra on the ex-workforce ROIC calculations because in the 2025 presentation you showed the 184 mature sites delivering this huge uplift in ROIC but with the same EBITDA margin as the ex-workforce 159 sites in the 2023 presentation. So it just seems strange that the EBITDA margin, admittedly one includes rent free, one doesn't I think, but why isn't the margin showing a bigger improvement and does that mean that we should be worrying about the workforce gyms? Or put it another way, if there's still a 200 basis point drag from the workforce gyms, and the portfolio is 25 mature gyms bigger, is there a deterioration in the workforce gyms? I suppose there's a long-winded way of saying that.

So I'm not sure I totally followed all of your numbers in the first part of the question, but to the second part of the question, we're not seeing any particular deterioration in the workforce, the workforce dependent gyms, and I would anticipate a similar level of drag by year end. So I don't think that will have changed at year end.

So even though the portfolio is bigger, the drag is the same.

So it should be getting smaller. The portfolio will have increased by 4% or whatever it is. So yes, it will have got a bit smaller, but I don't think it will be material there.

And can I just follow up on rents, are they inflation linked by and large?

They are by and large inflation linked with collars and caps.

A lot of questions have been asked already. Could I just drill a bit deeper on marketing costs? Obviously you changed your approach to be more local. Can you give us a sense of where that is as a percentage of revenues and how that will trend? And then a bit of a technical one, Luke, on business rates. You talk about inflationary impact, the rise in the second half. Business rates may well be reviewed in the budget, who knows? Can you just give me a sense of what business rates are as percentage of revenue as well?

yep sure and so marketing costs I think we've historically said marketing costs are run about five percent of revenue and when we are not materially outside of that I mean I think what we would say is as we continue to optimize the way we spend the marketing money on media and get a better and better understanding of CPAs and particularly incremental CPAs I think we will we are trying to move into a world where we see marketing costs more almost more as a variable cost as in if we think by deploying more in a given moment that we can drive new members that write incremental CPA then we would do that but I mean essentially I think from modeling purposes probably five percent of revenues is the right assumption on business rates I don't think we've ever sort of given that as a margin I mean it's a significant cost but not the biggest not the biggest cost you know we have seen you UBR rates I think increased at six percent this year so similar six to seven percent similar to living wage what we've heard about rates going into next year is that the big quite a quite a meaningful reset where I think the rateable values are expected to be increased quite significantly but offset by reductions in UBRs particularly in in properties which have rental annual rental charges of less than half a million which broadly speaking is us so I don't know what will happen in November but there is a possibility of some good news.

Sorry just to follow up on the marketing cost so maybe I asked as a percentage of revenues do you look at it internally of acquisition member cost of acquisition per member?

Yes absolutely. Is that trending down? it varies by month within the year and generally speaking there is inflationary pressure on media costs but we have been able to offset majority of those through continued efficiencies in how we deploy it but media There has been inflation in media historically, if that makes sense.

But with that the percentage staying largely constant we'd expect marketing spending to increase but only in line with revenue growth.

And on CPA specifically if we decided to push a bit harder you might actually see your CPA go up but we'd only do that if the LTV of the acquired members justified that incremental CPA.

Yeah, Douglas Jack again at Peel Hunt. Just a couple more rather boring accounting questions. IFRS 16 is still a headwind in these results. When do you think it will become a tailwind to you? And the second question is historically fixed asset depreciation besides being much higher than what you've had to spend on maintenance capex. You've been very conservative on that. Can we expect depreciation besides to perhaps come down in the future?

Thanks Doug. Yes so on IFRS I expect the drag to be about two million this year and I think most of that should be gone within the next two years and then in theory we're actually in a place where we see a benefit. and then on fixed asset depreciation yes you're right I mean a big chunk of the leasehold improvements will never be replicated through maintenance capex and therefore we should continue to see maintenance capex below fixed asset depreciation and as the estate matures which is also a driver that IFRS point we should see sites starting as you say to come off that original maintenance

depreciation cycle and therefore it should be a benefit just a reminder if you're on zoom and you'd like to ask a question you can do so by raising your hand or typing a question into the Q&A box

Ross again just a quick one on the on the pilot the b2b2c when do you think we'll hear more about how that sort of pilot is going and is that something you would expect to see nationwide and sort of part two could there actually be a benefit then for the workforce dependent gyms thanks

So two parts of that. The pilot is a sort of roughly six month pilot so I'd expect we'd update on that in March potentially. And then the second part of the question is this isn't specifically a workforce site play already we're seeing participation right across the estate because it's more about where we have gyms that fit with that particular employer so it's a sort of like to like volume play right across the estate but yeah very early days but I should think by March I'd expect we could give an update on that

Thank you for all your questions I will now hand back to Will for any closing comments.