Hello and welcome to the Basic-Fit 2022 Year Results Conference Wall and webcast. Please note that today's conference is being recorded and for the duration of the call, your lines will be on listen only. However, you'll have the opportunity to ask questions at the end of the call. If you require assistance at any point, please press star zero and you'll be connected to an operator. I will now turn over the call to your host for today's conference, which is Richard Piekaar, Head of Investor Relations. Sir, you may begin now. Thank you.
Thank you, Caroline. Good afternoon. Welcome everyone to this conference call during which we will discuss our results over 2022. With me today are, as usual, René Moos, our CEO, and Hans van der Aar, our CFO. This call is being broadcast live on our website and a recording of the call will also be available shortly afterwards. As usual, I would like to point out that Safe Harbor applies. We will start with René, who will discuss the highlights and the operational developments, followed by a more detailed look at financial results from Hans. After these prepared remarks, we will open the call for questions and the call will finish no later than 3:00 P.M. With that, René, I would like to hand over to you.
Thank you, Richard. Welcome everybody and thank you for joining today's call. 2022 was a year in which we recovered from two years impacted by COVID-19. At the start of the year, we still had to cope with all kinds of government restrictions, as these were gradually lifted and consumers were able to join our clubs without limitations, membership growth accelerated. By the end of the year, our membership base had increased by 51% to more than 3.35 million. Equally important, our 502 mature clubs were back at pre-COVID-19 levels with both membership and profitability. This means that with our membership structure changes in France and the Benelux, with a higher average revenue per membership, we have a better starting position in 2023 for further revenue and EBITDA growth.
This better starting position also allows us to deal with the impact from cost inflation. With 185 net club openings, we ended the year with 1,200 clubs, which is an increase of 18% compared to 2021. Our revenue more than doubled to EUR 795 million, our underlying EBITDA was EUR 204 million. Acting in a sustainable and socially responsible way has been part of Basic-Fit DNA for many years. By expanding our club network in Europe, we enable more people to work on their physical health and wellbeing in a social way. At the same time, we aim to use our natural resources carefully, both in our clubs and in our offices, by reducing our energy consumption and using sustainable energy. We aim to reduce our carbon emissions and be carbon neutral by 2030.
Our first goal is to reduce the average energy consumption per club by an average of 20% in the course of 2023 compared to 2022. Our energy department will work on further energy consumption reductions and help us achieve our long-term goals. As we work toward our 2023 goals, gas heating systems in our clubs will be replaced by fully electronic alternatives. We are installing solar panels on our head offices and on our clubs when possible in the coming years. Let's go to the next slide about the club openings. With a record of 185 net club openings, we have further strengthened our leading position in Europe. At the end of 2022, we had a network of 1,200 clubs with almost 650 clubs in France and nearing the 100 club mark in Spain.
We closed six clubs. To start with Spain, we are now the clear number one in terms of clubs and memberships. This also means that we are now market leader in five of our six countries. In 2022, we opened our first two clubs in Barcelona, we strengthened our clusters in regions like Madrid, Valencia and Seville. In these last two regions, we already operate eight clubs each. Last month we celebrated the opening of club number 100 in Spain in Córdoba. In France, we further extended our leadership position with 119 net openings to 647 clubs at year-end. With around 40 openings already this year, we are rapidly heading towards a new 700 club milestone.
Our team is convinced that we will further extend our market leadership in France as we see potential to grow to 1,000-1,300 clubs in the coming years in France. Our third high-growth market, Germany, we opened our first three clubs. Originally, we had planned to do more openings, but as we start to look for the right locations, negotiate contracts and apply for permits, we learned it takes a bit more time to build a large pipeline like we have today in France and Spain. We are building momentum and have already 65 new contracts signed for clubs to be opened in Germany in the next 24 months. Lastly, our Benelux club network enjoyed a steady growth of almost 30 clubs to 460 clubs.
We will continue to open new clubs with the pace in line with the past few years in the Benelux. Let's move to the next slide on membership growth. Our membership base grew by 51% to 3,000,035. In 2022. March last year, we told you that we had a strong start of 2022, and we benefited from a strong catch-up demand triggered by the lifting of all the COVID-19 restriction in all our countries, new club openings and lower than usual churn rates. This exceptionally strong performance with joining numbers per club significantly above normal levels continued until September, when joiner growth trends returned towards average growth rates that we had before the start of the pandemic. Churn rates were slightly below pre-COVID levels in 2022.
All countries in which we operate had a solid performance, and we saw growth rates at new clubs which were quite similar to those in pre-COVID periods. In October, the average number of membership in our 502 mature clubs had recovered to the average pre-COVID level of 3,300 memberships per club. This recovery once again confirms the strength of our business model as well as our cluster strategy. Since the outbreak of the COVID-19 pandemic, the number of immature clubs increased from close to 400 to nearly 700 clubs. Hans will give some more further details on our mature club performance. On the next two slides, I will update you about our effective marketing spend and our successful membership structure changes that helped to lift the Premium membership uptake to more than 50%.
Let's go to the next slide about marketing. We wanted a speedy membership recovery last year, we decided to increase our marketing budget to around 6% of group revenue from previously anticipated 4%-5%. The increased budget also helped us to support a record number of club openings. If you divide our entire marketing spend by the record number of new members that we welcomed, what you will see is that the average spend per joiner was comparable to the last three years before COVID. This shows that we continue to be effective with our marketing spend. With an average length of stay of around 23 months and a gradual increase in the average revenue per membership, we think we get a good return on our marketing investment. For 2023, we again foresee a marketing spend of around 6% of revenue like last year.
Let's move to the next slide. In an environment with rising costs, basically all our competitors had to substantially raise their pricing during 2022. Because of the low club operating costs and favorable long-term energy contracts, we were able to keep our membership list price unchanged during 2022. In anticipation of further cost inflation in 2023, we optimized the value gap between the Basic and Premium membership propositions to further increase the average revenue per membership. The Premium membership uptake rate increased from 35 to over 50% in the second half of the year, when we introduced the Basic Membership for all joiners. The result of these changes was that our Premium membership penetration rate rose from 23 at the start of the year to 34 at the end of the year.
This means that by year-end, 11% of our member base are paying EUR 10 extra per four weeks. It doesn't stop here. As we want to safeguard our 30% minimum ROIC, we decided to implement another membership structure change, which involves a list price increase. By the end of the year in France, the Benelux countries followed the successful French structure change at the beginning of February this year. With the Basic Membership in France and the Benelux being replaced by the EUR 5 higher price Comfort membership, we also added access to all clubs in a country. The introduction of the Comfort membership did not reduce the interest in the Premium membership and the uptake is still over 50% today. If this trend continues, I believe that by year-end, we could have a Premium penetration rate of between 40%-45%.
Let's move to the next slide. Year to date, we already grew our network by 64 clubs, and as you can see in the chart, we have a full pipeline. This year, most openings will take place in France and Spain. In this last country, we worked hard the past few years to build a pipeline with the right location, and this is now starting to bear fruit. In Germany, we are gaining momentum and are filling the pipeline. We have already 65 new contracts signed for clubs to be opened in the next 24 months. These are the first steps in reaching the 600 club target for Germany. In our Benelux markets, we will continue to open new clubs with the pace in line with the past few years. That brings me to the last slide about our track record.
Many of you will recognize these charts that we always include in our roadshow investor presentation. We have updated this slide with our results of 2022, and although we ourselves see 2022 as a recovery year after two years of COVID, it is clear that we re immersing our track record of growth. Between 2016, the year of our IPO, and 2022, our KPIs have a CAGR of between 17% and 21%. With the recovery after COVID and the continuous optimization of our product offering, I am convinced we will continue to deliver strong growth rates going forward. This concludes my part of the presentation and now hand it over to Hans for the financial review.
Well, thank you, René. This slide shows you our income statement and the underlying performance. Of course, 2022 was a recovery year for us after two years impacted by COVID. Because of that, it doesn't make a lot of sense to compare all line items of the two years. Instead, I will walk you through some of the key items of 2022. Our revenue more than doubled and came in close to EUR 800 million. Revenue growth was driven by our strong membership development and a higher average revenue per member of close to EUR 23. Compared to the EUR 20.60 we had before COVID in 2019, this means an increase of 11%.
Revenue in the second half of the year of EUR 440 million was 24% higher than in the first half, shows the strong momentum we developed throughout the year. For the year as a whole, we experienced the modest impact from cost inflation in areas like rent and wages. On a monthly basis, cost inflation crept up in the course of the year. With rents, we have a broad mix of contracts. In the Benelux, we have a lot of contracts with caps, while in France this is not possible. Luckily, the French government already intervened earlier in the year by adjusting, in our favor, the commercial rent index on which indexation is based. Energy was, of course, a hot topic in 2022. With the exception of Spain, we had low fixed prices in place.
On average, we spent around EUR 25,000 a club on energy, which is comparable to previous non-COVID years. In December last year, we provided guidance for energy costs for this year of around EUR 55,000 per club. Please keep in mind that this figure is without any benefits from lower energy consumption in initiatives that we are going to implement this year. Overhead costs consist of cost of our corporate and regional head offices, as well as our marketing spend. As a percentage of revenue, overhead costs were around 14%, which is slightly higher than the 12.5% or 13% range we had pre-COVID. The reason for this is twofold. Firstly, because our group revenue was still in recovery mode, notably in the first half of the year.
Secondly, because we decided to increase our marketing spend to around 6% of revenue to enable the speedy membership recovery, but also for a record number of club opening campaigns. Before COVID, our marketing spend was around 4% of revenue. If you look at our overhead cost, excluding marketing, then the percentage has actually come down by some 50 basis points compared to pre-COVID. Our underlying EBITDA came in at EUR 204 million for the year, which implies a EUR 144 million result in the second half of the year. As a percentage of revenue, the underlying EBITDA margin in the second half of 2022 is now slightly higher than it was in the second half of 2019, pre-COVID. A great achievement, if you ask me.
For the year, we recorded a net loss of EUR 3.7 million, compared with a net loss of EUR 150 million in the previous year. If you look at the second half of the year, then we realized a net profit of EUR 24 million. On an underlying basis, we had a net profit of EUR 11 million for the year, compared with a loss of almost EUR 100 million in the previous year. In the second half of the year, we recorded an underlying net profit of EUR 32 million. Let's go to the next slide on mature club development. As you know, we consider a club mature if it's at least 24 months old at the start of the year. Because of the pandemic, we reported in 2022 only on the clubs that were mature before the start of the pandemic in March 2020.
These 502 mature clubs ended 2022 with an average of 3,326 memberships. This means that these mature clubs' average membership level has fully recovered from the COVID period. Our mature clubs in all countries had a strong recovery. I find this important to tell because you might remember that we told you last year that France and the Netherlands had a stronger start in 2022. However, as all restrictions were lifted in the first part of the year, also members in our Belgium and Spanish mature clubs came back. René already spoke about the strong start of 2023.
Thanks to this, if we add the clubs opened in 2018 and 2019 to the group of 502 mature clubs, then the large group of close to 770 mature clubs now also has around 3,300 memberships, which is the pre-COVID average level. Lastly, also the clubs opened in 2020 have performed well in 2022 and in the first months of 2023. We have decided, therefore, to return to the original mature club reporting as from the first half of this year. We will report on the performance of 891 mature clubs. With membership at our mature clubs coming back at the pre-COVID level, so is profitability.
We believe that our club network embeds a lot of value, which will become visible with maturation. In 2022, we had 502 mature clubs which had an underlying EBITDA, on average EUR 431,000. If we assume that the 1,200 clubs that we started the year with will all be mature in two years' time, and assuming they will reach the same underlying EBITDA, the total underlying EBITDA of these clubs will then be EUR 580 million. This compares to EUR 316 million underlying club EBITDA last year. This increase in profitability we call the embedded growth potential for maturation. With the expected increase in average revenue per membership, we expect to mitigate the cost inflation that we are currently experiencing.
As we will start the year with a higher cost base and the impact of the introduction of the Comfort membership and a higher uptake of the Premium membership will only gradually filter through, we still expect that the return on invested capital of mature clubs will again be well above 30% this year and years after. Let's go now to the next slide on capital expenditure. In 2022, the average CapEx per newly built club was EUR 1.17 million, compared to EUR 1.15 million last year. Next to building relatively more rural clubs, the low initial CapEx is the result of further scale benefits, intelligent benchmarking, selection of more cost-efficient materials, and tweaks to the fitness kit in the clubs, in line with trends and changing demand.
For 2023, we again expect CapEx of new clubs to be around EUR 1.2 million. Regardless of the initial CapEx for a club, we only sign a lease contract for a new club when we expect to achieve a ROIC of at least 30%. Maintenance CapEx amounted to an average EUR 55,000 per club, to compare to EUR 50,000 in 2021. The average spent per club in 2022 was in line with our multi-year planning. The lower amount in the previous year was of course, the result of clubs being closed for 36% of the time and our decision to use that period to roll out our smart camera system in more clubs and to further optimize the club layout. For the medium term, we expect maintenance CapEx to remain around EUR 55,000 per club per year.
Other CapEx amounted to EUR 11.2 million and is related to ongoing investments in software and innovations. One such development is our mobile phone app that was developed in-house. In 2022, we again made additional improvements to the mobile phone app. Last week, when I checked the App Store ratings of our app, I saw for Belgium a 4.1 star rating out of five stars. The Netherlands and Spain each had 4.2 stars, and France scored 4.4 stars. Also important to mention is that the embedded QR code in the app has become the standard tool for joiners to enter our clubs. Let's go to the next slide. Balance sheet. We ended the year with available liquidity of EUR 143 million, which allows us to continue our accelerated club growth program.
Please note that we will do that in a sensible way. With market conditions having normalized post-COVID, we will provide an update on our available liquidity when we report our half year and full year results, just like we did before COVID. Excluding rent lease liabilities, our net debt amounted to EUR 694 million at the end of 2022, compared with EUR 548 million in the previous year. The increase took place in the first half of the year, at a time when our mature club profitability was still in recovery mode. Our net debt to Adjusted EBITDA ratio came in at 2.9 x and is well below the allowed maximum of 3.5 x, as agreed with our syndicate banks. To once more point to the normalization of our operations post-COVID, this year we will repay the final two installments of the government-backed facility.
Our focus the coming years is on growth and profitability. Now for the final slide of our presentation, the outlook for 2023. On the back of the positive membership development year to date, we remain optimistic on the outlook for 2023, and we will continue to execute our accelerated club opening plans. We opened 64 clubs in the first 10 weeks of the year and are on track to open at least 200 clubs. This is in line with our longer term target to open between 200 and 300 clubs a year. We will continue to monitor macroeconomic and membership developments, so we can adjust the pace of club openings when necessary. Most clubs in 2022 will be opened in France and Spain, while we are building momentum in Germany.
For the full year, we expect revenue of at least EUR 1 billion on the back of a strong membership growth and a gradual increase of the average revenue per membership. Finally, as I explained, our 891 mature clubs will have a strong underlying EBITDA, as our actions will mitigate cost inflations, which will result in a ROIC of our mature clubs of well over 30% this year.
This concludes the presentation. Operator, please open the lines for questions.
Thank you, sir. If you would like to ask a question at this time, please press star one followed by the digit one on your telephone keypad. Please ensure that the mute functions on your telephone is switched off to allow your signal to reach our equipment. If you find that your question has been answered, you may remove yourself from the queue by pressing star two. We will take the first question from line. Robert Vos from ABN Amro. The line is open now. Please go ahead.
Yes. Hi. Good afternoon all. I have three questions, if I may. Firstly, maybe a little bit elaboration on Germany. It's only a few data points I know, but, how was the ramp-up in memberships in the opened club so far? How many clubs do you expect to open in 2023? Then, my second question, and my third is I think for Hans. Where is the guidance for expected positive cash flow in the course of the second half of 2023? I don't see that back. Maybe you can elaborate on that. Finally, I'm a bit puzzled by what I see in the cash statement, cash flow statement on the inventory. There's a big, again, a big cash outflow for inventory. Balance sheets shows lower inventory.
Maybe you can explain. It's the second year in a row with quite a material inventory related cash outflow. What should we assume for the coming years? Thank you.
If I start with Germany, we opened three clubs at the end of last year, so it's just a few months open, the three clubs. What we see there is normal in-growth of members. Nothing extremely good or extremely bad, just a normal in-growth of new club openings. Your second part of Germany was how many clubs you would open. It will be around 10% of the clubs that we will open this year will be clubs in Germany. It also a bit depends how many clubs we open. If it's gonna be 200 clubs, it's gonna be around 10%, so around 20 clubs in Germany. If we will open more clubs, that number can go slightly up.
It depends how many clubs we will open, this year. I would say 10% is a good percentage.
Robert, thank you for your questions about the positive cash flow. As you know, I'm always talking about positive cash flow, but it always depends on the amount of openings that we plan to do and that also hasn't changed. As said, we want to keep the guidance a bit more, a bit more modest. We want to get back to the guidance that we gave pre-COVID and memberships amount of clubs and give you ample information on the other parts on half year basis on the end of the year. We don't wanna give too much guidance.
As I've said in my part of the presentation, the costs, higher costs that we experienced in the several countries, due to the energy, higher energy costs and also the wages and the rent, start immediately. The impact of the new pricing, because we only do that for the new members, will take some time to really kick in. In the first half year, the cash flow will be less positive and it will start in the second half of the year. Your question about inventory, yeah, that's a technical issue. If you know, we in 2021 and also in 2022, we acquired stock of bikes to at first sell them to our members and to our potential members.
in course of 2022 we changed that model. Now it's part of our subscription. Due to that, it went from those bikes that we still had, went from the inventory to the assets. It's not really a cash out. At this moment we have on our balance sheet around 20,000 bikes, which will be part of the subscription in the coming years, the All-In subscription. Again, it's a shift between inventory and assets and doesn't have any cash impact.
Okay.
To come back to your cash flow question, again, as like I said already for the last seven, six years, it depends on the amount of club openings and the timing of those club openings.
All right. Thank you.
Thank you. We will take the next question from line, Hans Pluijgers from Kepler Cheuvreux. The line is open now, please go ahead.
Yes. Good afternoon, gentlemen. A few questions from my side. First of all, on your ROIC guidance for the full year for the mature clubs, well over 30%. At the same time you are, let's say somewhat more cautious for H 1 due to the higher cost levels. How should we read this guidance indeed that you, let's say for maybe for H 1 you are slightly still below that and indeed in H 2 you are clearly ahead of that. Can you maybe in general give sort of more building blocks of that guidance, please? Then going to other revenues, an increase ahead of, let's say your average revenue increase. Could you give maybe some feeling what are the key drivers there?
Secondly, more importantly, what do you see for this year? Do you expect again that as a percentage of total sales, this will increase? A last question from us at this moment. In Spain, I'd say several change are becoming more available. How do you see the market? I know that the price are still quite high, but how do you see, especially the risk of a change in the competitive environment if several of those maybe could merge. Would you have some feeling on what you see in Spain on that?
Hans, thank you very much for your questions. I will start with the growing question that you got. The growing 30% that we mentioned is on a mature club level, and that's on a yearly basis. So what you see is that actually what I already explained is that in the first half year, we'll have the higher cost and then the impact of the increases of prices for our new members will kick in later. But the number that we mentioned, the 30%, is on a whole year basis, and it will be well above the 30%. If you look at secondary revenue, it will remain a low percentage of the total revenue. So, it is a growing number
Part of that is the advertisement that we do on our narrowcasting screens and things like that. It's a growing number because we have more clubs, but it will remain a low percentage of our total revenue because the most important part of revenue is, of course, the membership subscriptions. That will always be by far the most important part of our revenue.
The question about Spain being changed for sale, we have, we saw that two companies are for sale. Our focus will continue on building our own new clubs. We are very comfortable with building new clubs. It is for everybody a good experience. Everything is new staff, new members, everybody happy. If you do acquisitions, you never know exactly what you're buying. You will change the structure for staffing, for customers. It's a lot of work. It has to be a really good deal if we would go for a big acquisition. For us, we are not looking at it at the moment.
Depending what will happen with those change, if we look at it in a later stage. Our focus is building new clubs and not doing acquisitions.
Okay. Maybe one follow-up question. On the membership trend in the first few months, you gave already the number, but you, looking at the mature clubs, do you foresee a continued growth in that? Then I'm talking more about the 502 mature clubs end of last year. Do they all still continue to show growth in average number of members?
Yeah. What you see is two things. We are opening a lot of new clubs next to the old ones. Even though we are opening so many new clubs in the cluster next to our 502 old ones, you still see a small increase in members. Yes, it is still an increase even though we open more clubs next to the old ones.
Okay, thanks.
Thank you. We will take the next question from line Ed Young from Morgan Stanley. The line is open now. Please go ahead.
Thank you. The first one is you said that the price rises will come through gradually. I understand obviously that that's the case of premiumization as well. I wonder if you could give us any metric, whether it's around churn or kind of ARPU, how you expect that actually to be during the year. I appreciate it goes up during the year, but any more detailed color on that would be useful. The second question is around consensus EBITDA. You know, since, you know, since January, you've frozen or fixed more of your costs. You've obviously put through these price rises.
I appreciate you haven't given any formal commentary on EBITDA, but could you give any commentary generally about how you feel relating to what consensus underlying EBITDA is for 2023 as it stands? Third, just a final follow-up on the cash break even comment you made. You're saying it depends on the pace of club openings. If we just accept that you're doing the lower bound of 200, which is kind of what you intimated the last time you gave that guidance, is there any reason to expect you wouldn't be cash flow positive in H2 as you previously guided? I understand what you're saying is if things are good, you might accelerate and that might change things a little bit. Is that still a fair underlying assumption to understand that? Thanks.
Well, your first question is about how, what will be the timing of the growth of our average revenue. It's a bit difficult to predict, but because it depends on the amount of joiners that we get during the coming months and how many of those will take the Premium membership and how many will take the Comfort membership. We now see that the uptake of the Premium membership is above 50% of the new joiners. Of course, the remaining part is the Comfort membership. It's more difficult to really calculate the amount of people who, how that yield will develop in the coming months.
I won't go into that detail because it's too hard to predict that. What we see is that on a membership base, of course, in the end of the year, we expect that it will be more 40%- 45% of our members will have the Premium membership. Consensus, if we are happy with the consensus on the EBITDA, what we explained is that we don't want to give any guidance anymore on EBITDA performance for 2023. We want to get back to the guidance that we gave pre-COVID. We, during the COVID years, we thought it was important to give more certainty to our investors, what we will do and what our EBITDA would look like. We think we're now back to a normal status.
We want to report again on our mature club levels. We're very happy how the performance of mature club is going. We gave guidance on that. I won't go that far to give guidance on our EBITDA for the coming year. Hope you understand that and appreciate that. On the cash flow breakeven, it's based on the amount of openings that we do, and if we go to the 200 clubs, which we are, is on the low end of that range, and which we expect to open. It also has to do with the timing of the openings. If we are now looking at around 100 club openings in the first half year, it can even be a bit more.
It depends on when the permit is achieved, received, and when we're allowed to open that club. It's hard to say when the clubs will be opened, and the opening date is also crucial for seeing a cash flow positive. I expect to be cash flow positive in the second half of the year. Again, it depends on the amount of openings, and if we do very well with our member development, we can also decide to open more clubs. That will have clearly an impact on our cash flow. We'll definitely look at our cash flow position, and we will make sure that we have enough liquidity available to finance that growth.
Okay. Thank you.
Thank you. We will take the next question from line, James Wheatcroft from Jefferies. The line is open now. Please go ahead.
Good afternoon to you all. I've got three questions, please. Firstly, could you just remind us the shape of utility cost fixes as they run through the next year or so, just in terms of timing, et cetera. Secondly, what proportion of your new customers were members elsewhere previously, and how much has that changed, if at all? Any sort of change in consumer behavior around the usage of the gyms, et cetera. Thirdly, just in terms of the financial model for Germany, I'm assuming that it's gonna be very similar financial models elsewhere. Any thoughts on the pricing model there, please?
Well, you talked very quick. Yeah, the first question is about utilities. What we gave guidance on that we will have on utilities. Energy costs per club, that will grow from the EUR 25,000 that we had in 2022 to around EUR 55,000 per club on average for this year. It's a significant increase. What's not taken into account in that number is the outcome of our energy savings program. We expect to reduce usage of energy with around 20%. We have a task force in place who's only looking at energy saving and what we can do with all our clubs. We expect to have a saving there of around 20%. The EUR 55,000 has not taken that saving into account.
It can be lower, but we put in the maximum position, and that's based on the contracts that we signed and already had signed in the Benelux and also signed a new contract in France. Based on those contracts, we now calculate with a EUR 55,000 cost per club for energy.
I think the second part was consumer base or consumer behavior. I'll discuss both then. Consumer base is what we saw during COVID, is that we had a lot of young members joining. Age group 17 to, let's say, 27 years old. That was the big block of joiners. Female were behind. That is almost back. I would say 95%, it is back again. The older members, let's call it the 60+ age group, is still behind. Very, very slowly returning. The behavior is, it is busy in the clubs, so people are visiting a lot more than pre-COVID.
We have a lot of usage in the club, but having only on average 3,300 members on a 1,200-1,300 square meter club, that is not a problem. The consumer behavior is more or less back to normal. Germany, again, it's, some of the clubs are open now for three months, the other one, four months. It's very early days. It's just a new club. There's not much really to add to those three clubs for four months. It's, the German market is a very good market. The fitness penetration, we think can really rise. We still have the old pricing in place, because we just started there.
We didn't want to, with one or three club openings, change the price immediately after we opened. That is something, we might do at the end of this year. Same story, for Spain. We started with our biggest country end of last year. We changed the Benelux in February, we will, look how, Spain compared to the Benelux and France is going and probably change our pricing in Spain in, September, and maybe Germany as well.
Thank you.
Thank you.
Thank you. We will take the next question from line, James Rowland Clark from Barclays. The line is open now. Please go ahead.
Hi. Just one question from me, please. Just on the competitive backdrop, I wondered if you could comment on what you're seeing from your main peers in your markets in terms of pricing trends and marketing trends. And a follow-up to that would be, you used to describe how perhaps the smaller gym players in the market were gonna struggle once COVID support had fallen away. Is that something you're seeing today, or do you think that still needs to play out? Thank you.
Thanks. We do see some smaller gyms struggling and stopping or going bankrupt. We do see that as we speak. It's not huge, big numbers, but more than normal. Comparative pricing, the competitors, in the low cost, we saw price increase between EUR 5 and EUR 10, but some exceptions even increased the price with EUR 15. We are still the cheapest in the countries where we are. And with the current way we set up the pricing, we always have the possibility to bring the Basic back in. If you look at our pricing now, you have the Premium membership for EUR 29.99 for four weeks.
You can use all the clubs in all the countries and you can unlimited bring a friend. That's our most expensive membership, EUR 29.99. We have now the Comfort being EUR 24.99. You can use all the clubs in one country, so let's say 230 clubs. If necessary, we can introduce, of course, again, the third membership, having the Basic back in with only one club, and then you can go below the EUR 20 again if you think that is necessary. I think it is good now we are focusing on the Comfort and the Premium, so all clubs in the country or all countries and bring your friends.
Maybe in time, when prices and inflation and everything normalized again, we can decide to bring back, or because of competition or whatever reason, we can decide to bring back the Basic Membership again to allow you to join for a low price for just one club.
Thank you. Which markets are you seeing, smaller players going bankrupt in?
We've seen it in all countries. What we've also seen is that we were offered a lot of clubs, actually in all countries, for next, let's say, for EUR 1 million, they have been offered to us again in the last one or two months for half that price. There's a lot of things. There's a lot of movement there. Again, we will maybe buy one or two clubs, but we are not really focusing on buying existing clubs. We're focusing on building new ones. It has a lot of advantages, having the layout exactly how you want it, and a happy moment for everybody, for the staff and the members who join.
Excellent. Thank you.
Thank you. Again, please press star one to ask questions. We will take the next question from line, Hans Pluijgers from Kepler Cheuvreux. Thank you.
Yeah, thank you. A few follow-on questions. Looking mainly at H2, there you saw, first of all, the cost of goods sold to the services went down in H2, despite the fact that non-membership revenue continued to increase. Is there any specific reasons for that? Actually, do you read it as a trend? In H2, also other income, an increase in H2. Can you give maybe some feeling on that? OpEx in H2 went down compared to H1, as I understand, from EUR 124 down to EUR 120, despite you have more clubs. What's driving that? One question on the bikes, again, coming back. You moved it to assets. Is it now in PPE or is there any impairment on those bikes?
Could you give maybe some background, more background on what happened there?
Thank you, Hans, again, for your questions. Let's start with the last one because I can remember that one. The bikes was actually from inventory and now registered as an asset. We have to do that because it's still our property and we part of our subscription, we rent out that bike, so it's part of our inventory. Not our inventory, our PPA. That's actually true. It's part of our PPA. We changed that from inventory to PPA. At first, we aimed to sell the bikes, then it was inventory goods held for sale, now it's part of our assets, it's part of the PPA. The question about the lower cost of goods cost price of goods sold.
Our other income now increased in the second half year by selling more narrowcasting revenue. Advertisement from companies on our narrowcasting, and there's no cost price on that. We have a higher income, but no cost of sales. That's the reason why that, and that was mostly done in the second half of year. Companies want to advertise to get more staff in, and we are able to get more advertisement on our narrowcasting. It will be a loan number. Our focus will still be on getting more members in. The other revenue was around EUR 5 million this year. We don't expect that it will be higher, but not much higher.
On the operating, other operating income in H 2 and operating expenses. H 2 versus H 1.
Yeah, that's a timing issue. There's not a significant change of operating our clubs that our costs went down. It's only a minimum increase of cost in the second half year. There's no really reason for that. Can be partly the first consequences of the inflation kicking in. Of course, we saw that, it's not really a big reason why those costs went down or up.
Okay. Maybe one follow-up on average maintenance CapEx. I know you gave it, let's say, for a total number of clubs, but you gave me some guidance on the average maintenance CapEx per mature club. I've always calculate with about EUR 100,000 and also from your filings in Belgium, that's the case. It looks like that at least. Is that a correct number to calculate with for mature clubs?
If you look at the maintenance CapEx, it can be for one club, it can be, if we change all equipment and we do a really real big rebuild, it can be EUR 600,000 on a mature club. It really depends on the club, the performance of the club, the length of the rental contract that we still have. It varies. If you look at the average, maintenance CapEx on our mature clubs, again, on the average, it's around EUR 70,000-EUR 75,000 per year.
Okay, thanks.
If you-
Thank you.
Combine it with the new club openings, it is the 55,000 that we have just mentioned.
That's clear.
On average it's EUR 55,000.
Yeah.
If you... Okay.
Thank you. We will take the next question from line, Lynn Hautekeete from KBC Securities. The line is open now, please go ahead.
Yes. Thank you for the presentation. I have a question on the rental caps that you've mentioned. I was wondering if you could tell us the limit per country and if you see any changes in the current negotiations in the new club openings. The second question that I had was on the churn. I was wondering if you could give any guidance on this. Thank you.
Well, if you look at the rental caps, we have rental caps in the majority of our contracts in the Benelux, and that the index is there capped to around 3%, so it can't be increased more than 3%. In France, unfortunately, that's not possible. Legally, it's not possible to put in a cap on those contracts. Due to government measures, we see the index now in this year with all the inflation that we see, that's not more than a 5% increase of the rent. The cap is on the Benelux contracts. In new contracts, we for the Benelux, we always put in the cap of 3% maximum increase. Your question about the churn.
Well, we used to work with a churn of around 4% per year. What we saw in post-COVID, logically in the first year post-COVID, we didn't have a lot of joiners during COVID. All the people that want to leave already left. There we saw a very low churn. It's very good to see that now also in 2023, in the last months of 2022, we see the churn going down. Now it's less than 4%. It's more getting into the 3%- 3.5% of churn. That's actually good. We think that also with the new pricing, we keep our members longer in, and we're really focusing now on retention, keeping our members in. We're very successful in that.
Yeah. Our old members who are paying EUR 90.99 are still allowed to join every club in all countries. When they cancel their membership, we of course send them a text saying, "Well, you have a very good deal now. Are you sure?" We see actually a lot of members rethinking and staying in. I think the price increase also helps the retention.
Thank you. On the rental caps, you mentioned the Benelux and France. What about Spain?
Spain and Germany, again, it's not per country, right? It's contract per contract. Some landlords is somebody who owns one building, then he can make maybe a cap of 2%, and other building owners a big change that. It's really not country by country, but it's really contract by contract. The only big change is in France. There, it's not allowed. By law, it's not allowed. If you put it in a contract that you have a cap of 3%, then nobody has to follow it because it's not allowed.
Okay. Sure. Thank you.
Thank you. We will take the last question from line, Marc Zwartsenburg from ING. The line is open now, please go ahead.
Thank you for the last question. I had some difficulties connecting. I have a couple of questions left. First of all, on the club openings, can you give us a bit of a split also between what you intend to open in France and in Spain, please? To start with that one.
Yeah. The club opening in France and Spain, I'm doing it now on the top of my head, but I would say that in Spain, we will open 40 clubs this year. In France, I think it will be around 100 clubs.
Okay. Then if you look to the first 10 weeks, say you opened 65 clubs, but some were already in the pipeline since Q4. I don't think you will be able to achieve the 100 gyms that I think was a bit targeted by the end of April. Is that right? Are you running a bit slower or can you give a bit more color there?
No, we have. If you look at the slide number seven, you see that we are actually currently building 78 clubs. That means that it's not gonna happen by the way, but for instance, next week we could open the 78 clubs that are under construction. That will not happen. For sure, we will reach more than 100 clubs, let's say, in the first half. It is true that you cannot really predict exactly when a club is gonna open. It is very unpredictable, especially the last year and a half. That's why we have such a big pipeline. We don't see any problem reaching the 200 openings this year.
Yeah, it could be one or two months later. That's what we saw also in last year, right? When we said we're gonna grow to 1,250 clubs, and we're gonna grow to 3.5 million members. When we said in September, October, we were not reaching that. We got a lot of calls, a lot of discussions. We said a couple of weeks later, huh, we reached the 1,250 clubs and 3.5 million members a few weeks later. Yeah, you can hardly predict that. That's why we are not giving guidance to the exact numbers anymore. Because it's hard to predict.
It's not in our control when the government gives a license, and it's not in our control when we are allowed to open the clubs. Yeah, we can miss that by one or two months.
If I look to Germany where you have that, the contract signed, does it also mean that the permits are in? Is that's been seen or no?
No. That means the permits are not in. That means that we have the deal with the landlord and that we are working on the permits. That is a very unpredictable outcome, how many clubs we are able to open this year. We have enough clubs in the pipeline to make sure to open the 200 clubs. That's what we're also focusing on for next year, that at least, let say, if we wanna do, let's say 250 clubs next year, that at least we have 300 or more clubs ready, contract signed. Because you never know exactly when we're gonna get the license.
We know exactly how many weeks we need to open a club, to build a club. We don't know when they're gonna show up to open a club. For instance, we have now a few clubs ready. Yeah, we're waiting for the government to give us the stamp so that we can open. It's a bit unpredictable. Not completely, but a bit. We can be off one or two months like we were off in September, October last year.
Okay. Clear. Now, talking about the revenue outlook for this year. The EUR 1 billion at least. If you take a bit of a, take the 3.35 million members as a starting point, and you have a normal in growth of the gyms again this year. It basically seems to suggest that yield per member actually is based on that number, even slightly lower than what you performed last year, which is not that rational given the Premium uptake and the price increases. Is it then the conclusion fair to say that the EUR 1 billion is a very cautious outlook number?
Yeah. Depends again, Marc, when we open the clubs. If we don't get the license in and we open all the clubs in December, then it could be a stretch. It depends really when we're opening the clubs. That is what we said before. That could vary a few months.
Yeah. That's a bit the same.
To add to that, Marc, we also see a gradually increase of, what you said, a gradually increase of the yield improvement, right? The all the existing members still pay the EUR 9.99, and only the new members are paying the new pricing. It will take some months to really have an impact of those new pricing. The yield improvement will definitely be there in 2023, but it will be gradually done.
Yeah, true. The Premium uptake already ramped up quite significantly last year, you have a bit of a follow-through effect from that this year.
If you look at that member development, there's also the two periods where we really see the member increase, so that's in the first months as we see now, and then in the summer not a lot happens, and then the member increase is skewed to this August, September campaign.
Yeah.
We have, of course, only four months or three months of revenue of those members. You can't. I understand your calculation, we made our budget and based on that, we gave him the guidance that it will be more than EUR 1 billion of turnover.
Yeah. Cause implicitly, Hans, you also give a guidance a bit on EBITDA with your ROIC on the mature gyms. You have nine on the mature gyms. You do 30 to 30+ ROIC on it, and you already know where you are, and then you only have to make assumption on the immature gyms, and then you're gonna above 300.
I know, I know the analysts, especially more experienced analysts can do the math, but don't also ask for me to give those guidance.
Yeah. No, of course. Maybe if one for you then, Hans. Free cash flow. Looking at net working capital, what do you think of net working capital development in 23? Will it be an inflow for the year or would it be a small outflow? What do you think?
I personally think that will be an inflow of working capital.
Okay.
It will be around 10%-50% of revenue. A minus, of course. We have a lot of differences now in the working capital due to the impact of those bike transition. Normally, we'll see a negative working capital between 10% and 50% or so, we see an inflow out of the working capital in the cash flow.
Yeah. Yeah, yeah. Maybe a final one for René. Is there any update on Planet Fitness? I know they were quite vocal, maybe also teasing a bit the competition with, maybe we'll move to Europe. Is there any update on that noise or are you pretty quiet?
No, no. Not that I know. I think Planet is, of course, a very successful company. We, the product that they're having is more or less similar to what we're having, even though we are, we have the personal training, we have live group classes. We have some small differences. No, we have not hear, see or hear anything yet, no.
Okay. All right. Well, thank you very much.
Thank you.
Thank you.
Thank you. We have reached to the end of today's conference call. I would like to hand over to Mr. Richard Piekaar for any closing remarks. Please go ahead, sir.
Well, thank you, Caroline, and thanks everyone for joining today's call. I hope we had the time to answer all your questions, but if not or if any other questions come up, please give us a call and we're happy to continue with that. Have a nice day. Bye-bye.
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