Well, good morning, and welcome to the Full Year Results and Strategy Update for The Gym Group. Thank you for making 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 questions from the webcast. Our CFO, Luke Tait, and I will be doing the presenting today, but we're joined in the room by our founder, John Treharne, and members of our executive committee. For those I haven't met, I'm Will Orr, CEO of The Gym Group, and I joined on September 1, 2023, bringing 30 years of experience in consumer businesses, and in particular, subscription business models. I very much enjoyed the last six months, learning about the business, the sector, our fantastic team, and of course, our members.
I'm confident about our future, and as a team, we're committed to delivering value for our members and, of course, our shareholders. Here's what we plan to cover today. I'll start with an overview before handing to Luke to share the 2023 financial results. I'll then provide a strategy update with some detail on our growth plan. Luke will then cover financial guidance and outlook before I summarize. We'll leave plenty of time for questions and close by 1:00 P.M. at the latest. Starting with the overview. 2023 was a year of positive momentum, and that has continued into 2024. Revenue was up 18% on 2022, offsetting cost inflation, and as a result, EBITDA, less normalized rent, was slightly up at GBP 38.5 million, with strong growth in free cash flow to GBP 27 million.
We rolled out nationally our three-tier proposition, comprising Ultimate, Standard and Off-Peak, which will support both yield when it comes to growing member revenue. We also strengthened the team. I joined as CEO, Simon Jones, former MD of Premier Inn, and now CEO of Away Resorts, joined as a non-executive director, and a highly experienced non-executive director, Elaine O'Donnell, stepped up into the senior independent director role. On technology, we appointed the highly experienced Milan Juza as our Chief Technology Officer. Milan previously led the global e-commerce technology team at TUI Group. I'm also pleased to say that we've hired a new Chief Commercial Officer, Alison Sagar, to drive further growth in membership and revenue.
Alison, who starts next week and joins us today, has worked for British Airways, Booz Allen, where she consulted on multiple leisure brands, Amex, PayPal, and most recently, two private equity-backed digital scale-ups. We ran a thorough search process, and I'm excited to have Alison joining. On site openings in 2023, we opened a further six sites, four in H2, and we'll accelerate that this year with 10-12 sites. We're on track here, with four new gyms currently on site and a further three exchanged. On ESG, the social value we deliver grew by a further 18%, and we remain the only carbon neutral gym chain in the UK. We also have a highly engaged team, upper quartile for the leisure sector.
Finally, I'm very pleased to say that we had a good peak trading period in January and February, with revenue up 16% on the same period prior year. So we're continuing to build momentum and see opportunity to accelerate from strong foundations. I'll return to this in the strategy update, but before that, Luke will share the financial results for 2023.
Thank you, Will. So starting with a summary of our financial KPIs. The key revenue KPIs, which we announced in January, have both shown significant growth year-on-year. We had average members of 872,000 during the year, up 8% versus last year, and average revenue per member per month was GBP 19.50 for the year, up 9% on prior- year. As a result, revenue for the year was GBP 204 million, up 18% prior year—w as absorbed by high cost inflation, leaving EBITDA less normalized rent, slightly ahead of prior year, at GBP 38.5 million and over GBP 1 million ahead of consensus. The loss before tax of GBP 8.3 million, more than halved year-on-year.
Free cash, GBP 37 million, was up. Reduction of nearly GBP 10 million to GBP 66.4 million, reducing the net debt to EBITDA leverage ratio to 1.7x , down 0.3x versus last year. We'll look at each of these key financial metrics in more detail in the following slides. Turning to the income statement, EBITDA less normalized rent for the year was GBP 38.5 million, up GBP 0.5 million on prior- year. Revenue was GBP 204 million, up by GBP 31.1 million year-on-year. The additional revenue was absorbed by higher utility costs and additional site costs relating to the new openings year-on-year. Looking at the chart on the right-hand, utility cost, GBP 8.2 million, nearly doubling versus prior year.
The significant increase reflects coming off a forward contract taken in February 2019, well before the recent surge in prices, and then fixing in March last year. This cost increase is despite an underlying 5% reduction in like-for-like energy consumption in the year. Looking forward, electricity prices fixed for this year will start to see the higher rate unwind, with a full year rate reduction of around GBP 2 million. The remaining incremental site costs of GBP 13.1 million and GBP 3.7 million of normalized rent relate principally to the rollout of new openings from 2022 and openings in 2023. There was also an increase in rates of just over GBP 2 million, relating to the COVID rate holiday in Q1 2022.
Central cost increase year-on-year relates principally to the reinstatement of an element of variable pay and a 5% inflationary salary increase. Moving on down to P&L, the non-cash charge for share-based payments of GBP 2.4 million returned to more normal run rates in 2023. The prior year charge had been reduced by an adjustment for a number of leavers. Net financing costs of GBP 21.1 million consist of GBP 15.5 million, relating to lease interest, and GBP 5.6 million relating to our borrowing facilities. The majority of the increase year-on-year was driven by higher bank interest costs. It is worth noting that the IFRS 16 property lease charges are GBP 3 million higher than the cash rent costs. A reconciliation is included in the appendix.
Non-underlying items of GBP 2.8 million were GBP 11 million lower than prior year, and a full breakdown is included in today's announcement. Finally, statutory loss before tax for the year more than halved to GBP 8.3 million. Turning now to like-for-like revenue. Like-for-like revenue for the year was 108%. The trading environment in the second half was more stable than at the beginning of the year. The average revenue per member per month increase of 9% was delivered without material impact to membership numbers. We continued to optimize revenue through price and promotion, and as flagged at the half year, we did not repeat the elongated deep discount promotion we used in October 2022, which has flattered the average revenue per member per month increase year-on-year, but been a drag on the average membership levels.
Looking now at average revenue per member per month growth in more detail, average revenue per member per month grew by 9% to GBP 19.50 in 2023, from continued price optimization and higher ultimate penetration. Our headline rates increased, with the average Standard membership up by 8% to GBP 23.16 in December 2023 versus December 2022. When we move headline rates, we continue to reprice existing members as long as our internal tests to ensure minimal churn are met. There was a further increase in the proportion of members choosing the benefits of Ultimate membership at 31.7% of the membership base, up 2.1% compared to December last year, supported by the enhancement of the Ultimate membership benefits included in the launch of the three price point architecture. We continue to focus on costs.
This slide covers three examples of areas we're managing to mitigate cost inflation. We continue to evolve and optimize our staffing model, both at the management and trainer level. We're tailoring our management structures using a range of roles, which enable us to align the management structure to the complexity and scale of the operations in each area. Optimizing the number of trainers ensures satisfaction for members, sufficient opportunities for the trainers themselves, and maximum rents for the business. In utilities, as well as seeing the higher electricity prices start to work their way out of the business, we have a number of energy efficiency programs. Following a trial in voltage optimization units, for example, returning an average of 69% ROIC, we will roll them out to a further 75 sites this year. We have ongoing trials in high efficiency air handling units and centralized air conditioning control.
On maintenance, we have agreed an extended maintenance support agreement with our main equipment supplier from 10 years to 15 years. This extends the lifespan of equipment and reduces maintenance costs, depreciated over seven to nine years. Turning now to cash flow. Strong cash flow generation in the year enables us to self-finance our investments and pay down debt. The working capital inflow of GBP 5 million reflects management and a strong student season in pay up-front products. After deducting the cash spent on maintenance CapEx of GBP 10.3 million, operating cash flow was GBP 33.2 million. The cash element of non-underlying costs was GBP 1 million, also well down year-on-year, due to the brand relaunch last year. Bank and lease interest was higher at GBP 5.2 million, reflecting higher interest rates, leaving free cash flow of GBP 27 million, up 63% year-on-year.
Free cash flow conversion increased from 44% to 70% year-on-year. Expansion of CapEx was GBP 16.4 million, leaving net debt GBP 9.6 million lower than prior year. We continue to invest to drive the business forward. Total cash CapEx in the year was GBP 26.7 million, GBP 25 million lower than prior year. The main reduction was in new site spend of GBP 10.7 million, GBP 21 million lower than last year, reflecting the lower number of new openings. Although tech and data spend was lower in 2023, we expect it to return to 2022 levels this year. Total maintenance CapEx remained reasonably consistent year-on-year at GBP 10.3 million.
The higher enhancement spend level of GBP 6.9 million in 2023 is related to the refurbishment of gyms as we return to a more normal level of spend post-COVID, an essential part of maintaining a strong customer proposition across the estate, and the replacement of gym equipment in previously acquired gyms. Turning now to net debt. Non-property net debt was GBP 66.4 million at year-end, down GBP 9.6 million from December 2022. The net debt consisted of GBP 57.5 million of bank net debt and GBP 8.9 million of finance lease debt. The reduction in net debt. The total net debt to EBITDA multiple reduced to 1.7x , down from 2x at prior year-end.
The year-end position is in the middle of the planned operating range for net debt leverage of 1.5-2x we guided to last March, and which can take consideration in our planned level investment going forwards. ROIC for the mature estate reduced by 1% year-on-year to 19% in 2023 due to the increase in utility costs mentioned earlier. If the 13 workforce-dependent sites are excluded, ROIC increases to 22%. Finally, if we include the Greater London and urban residential gyms that match our target criteria for new gyms going forwards, there are more than 100 gyms with an average ROIC of 30%. New sites are performing well, with the 19 sites opened in 2021 on track to deliver an average ROIC of 30%.
Although earlier in their tenure, the 25 organic sites opened in 2022 are on a similar trajectory to the 2021 sites. Finally, turning to current trading. Revenue year to date at the end of February is up 16% versus prior year, with average members up 3% and average member per member per month up 13%. Like-for-like revenue has performed strongly for the two months and was up 12% versus February 2023, but it should be noted that we took price increases early this year, whereas last year they were more flat phased across the year, and therefore the like-for-likes will slow as the year goes on. The gym rollout is on track, with the guidance of 10-12 new openings this year, with four gyms currently on site, and we've exchanged on a further three sites. I'll now hand you over to Will for the strategy update.
Thank you, Luke. And turning now to the strategy update. The aim here has not been to reinvent the wheel, it is to accelerate performance and increase shareholder returns. To increase confidence in execution, we are, wherever possible, building on strength and on work already bearing fruit, as well as selectively bringing new ideas where we see significant potential for upside. I'll cover four things in this section, starting with the investment case as we see it and why we believe it's compelling. Secondly, I'll cover the market and the strong tailwinds we're seeing. Thirdly, a section on our winning proposition and how it delivers for members and prospects. And then lastly, some detail on what we're calling our Next Chapter growth plan, designed to accelerate growth and increase shareholder returns. The investment case is fundamentally about sustained growth from free cash flow.
Starting at 12:00 P.M. on the circle, we operate in a robust and growing market for health and fitness. While it's a challenging environment for consumers right now, the long-term growth trend for fitness and gyms, looking backward and forward, is very encouraging. In turn, it is the low-cost part of the market that is growing fastest. As in other sectors, consumers' growing appetite for no-frills propositions means that low-cost, high-value players are growing share. To take advantage of market tailwinds, you need a proposition that powerfully meets the needs of a target consumer and can be efficiently scaled. We have that, and as you'll see shortly, our members are more engaged than ever in our proposition. Building on those foundations, we see multiple drivers of growth that we can leverage.
We've listed those drivers on the right-hand side of the slide, and we'll be focused on pricing, new customer acquisition, member retention, and opening quality new sites. Strong execution on those growth drivers will increase returns on our existing sites and create ever more cash flow to reinvest, both in the proposition and in accelerating the expansion of quality sites. All of this will be powered by two things. The first is data. Investing in an already strong team, we will optimize decision-making across every driver of growth. The second is technology, where we're building a secure, high-performing digital tech stack to enable rapid execution on the growth drivers. Turning now to the market. We operate in a robust and growing UK gym market. Based on LDC data, UK consumers spent GBP 5.4 billion on gym memberships in the UK, up 40% over the last decade.
There are over 10 million of us who are gym members, and that's over 15% of the UK population. Gyms are very much here to stay, and forecasts for 2028 see that growth continue, built on macro trends that I'll describe shortly. Looking even further ahead, and comparing UK gym penetration to many other European markets, I think there's potential headroom well over the 16.5% participation forecast for 2028. Turning to our market sector, low-cost gyms continue to drive growth and gain share. That's because low cost is attracting new gym goers by making fitness more accessible and gaining share from other sectors, including the mid-market. It's a slightly busy slide, but the blue bars are the total gym market and the green bar is low cost.
As you can see, low-cost has seen a CAGR since 2012 of 25%, and despite that CAGR, it's just, it's still just 15% of the total market, suggesting good headroom to keep growing share in a growing market. Low-cost members have seen a CAGR of 22% in the period, with COVID increasingly in the rearview mirror. It's also worth noting that the top two low-cost brands have 80% of the low-cost market, giving us a strong competitive position for the future. As you'd expect, we spend a lot of time trying to understand consumers, both prospects and members. This includes ongoing surveys and focus groups, plus a recent quantitative study of 5,000 people. What we're seeing are consumer trends that should really support low-cost gym growth. The first is the ongoing increase in what we call fitness IQ.
Consumers are increasingly informed about the benefits of fitness and gyms, increasing their motivation and broadening the range of equipment they use in our gyms, in turn, giving them more value for money. Mental health is now as powerful a motivator as physical health, particularly for younger consumers, and our product naturally delivers an immediate and noticeable mental health benefit for members. When it comes to body image, there's a trend towards fit, not thin, which in turn has led to a shift towards more strength and functional training, best done in a well-equipped, affordable gym. The rise of social media has supported this change and also provides opportunity to develop this marketing channel further and to more deeply embed a community of members. It's also clear that consumers are more and more accepting of no-frills propositions.
Across many consumer sectors, not just gyms, the high-value, low-cost equation works for consumers. And finally, consumers want convenience and immediacy, immediacy. This includes a growing dislike for opaque contracts and inconvenient opening hours. Given the macro trends I've just described, it's not surprising that spending on fitness and gyms looks to be very resilient. A 2023 Deloitte consumer survey looked to where consumers are most willing to cut back in what has been an inflationary period. As you can see, gym spend is more resilient than all but one category. For many gym members, fitness and gyms is one of the most important things in their life. Feeling good and looking good matters to them. Long-term prospects for this market.
So to harness the clear market tailwinds, it's clearly important to have a proposition that meets the needs of the target customer and can be scaled cost effectively, and we have that. We're clear on what we deliver and who our members are, and we'll stay focused on delivering outstanding value to members while keeping our costs tightly under control. So why is our proposition so well positioned for the future? When you look at the trends I just described, and then the members that we tend to attract, our proposition is naturally well positioned. Firstly, Gym Group members skew younger. That gives us a natural flow of new members, and it's also where many of the trends are particularly powerful.
Our members tend to be image conscious and value looking good, whether that's in real life or in social media, and with a huge rise in mental health awareness, they also value feeling good. And while not necessarily wealthy, we know that they will pay for things they value, a good summer holiday, the right clothing brands, the gym. We also know that our audience values the flexibility that's built into our proposition, and also the community that it enables them to be part of. In essence, what we offer has compelling value to our target consumer and is future fit. And that's part of the reason why our proposition is appealing more than ever to our members. We remain focused on delivering the three pillars of our proposition, great value, convenience, and results, and we're seeing growing engagement with it.
In 2023, member visits were up 10% year on year as our members' fitness IQ grows, and we shape the experience to their needs. In any subscription business, frequency of usage is an important measure as it tends to correlate to retention, so it's positive to see these member visits growing. An amazing 92% of members rate us four out of five or five out of five, and we're industry-leading on Google and Trustpilot. Eighty percent of our members regularly use our app and rate it highly. That in itself creates a great opportunity that I will return to later. To be clear, we're not complacent, and we'll continue to innovate on the proposition, as we have done recently with a three-tier architecture, with new and with our higher tiers, but our proposition does have growing traction with members.
So we have a proposition that delivers for our current members, but what about headroom when it comes to new members? According to Kantar data, shown on the left-hand side of this slide, between 2019 and 2023, non-gym members considering joining a private gym increased by 21%, meaning there are now 12.6 million adult prospects considering joining a gym. The data on the right-hand side shows that when it comes to consideration within specific age bands, consideration is highest among the 16-44 prospect group that our proposition particularly appeals to. Given that people choose gyms that are close to them, we also wanted to look at headroom filtered for where our sites are.
So we took the UK population that fall into our age and socioeconomic sweet spot, and then looked at how many of them live within 3 miles of one of our gyms. That's about 8 million people. We then looked at how many of those people are either a gym member or considering joining one, and that's 5 million. Of that group, 3 million are non-members who are actively considering joining a gym. So while we can also attract switchers, there are 3 million people who fit our target profile, who live within 3 miles of a Gym Group site and are considering joining a gym. I'm not saying it will be easy. Consumers are squeezed right now, and there is, of course, competition for spend both inside and outside the category. But on every measure of prospect headroom, we see good potential.
So we're in a growing market and occupy the fastest-growing part of that market, as consumers in many categories continue to embrace high-value, low-cost brands. We have a simple, scalable proposition that appeals more than ever to our current customers, with encouraging prospect headroom near our current sites. For that reason, we wanted a growth plan that doesn't reinvent the wheel but accelerates it. To increase confidence in execution, we are, wherever possible, building on strengths and accelerating on work already bearing fruit, plus selectively bringing new thinking where significant upside potential. I should add, much of what I will cover is already underway, and we're very much in execution mode on what follows, with an engaged team of experts working hard on what I'm about to cover. There are three elements to our growth strategy.
Strengthen the core is about increasing returns on our existing estate and members, driving growth in like-for-like revenue and free cash flow. That, in turn, allows us to accelerate using free cash flow our rollout of quality sites in the UK. Those first two cogs are very much where our executional focus is for the time being, but successful execution will create cash, capability, and confidence to look at new ways to broaden our growth over the mid-term. So starting with the first cog, strengthen the core, in turn, has three areas of focus, covering different aspects of customer revenue growth. Firstly, on pricing and yield, where we see strong near-term upside opportunity, and I'm confident we have the capability and technology to execute. Secondly, there is opportunity when it comes to acquiring new customers close to our current sites.
While our revenue growth will be more weighted to yield, we do have plans aimed at volume, too. And thirdly, member retention. While no contract is an important part of our proposition, and I don't expect our business model to be long-term, per se, I do see opportunity for significant marginal gains by taking a systematic and data-driven approach. As you can see, there are multiple initiatives in each area. So if the majority deliver even marginal gains, they add up in a business with our scale. And to illustrate that point, an additional GBP 1 of average revenue per member month, with price elasticity taken into consideration, is worth over GBP 8 million of annualized revenue.
Similarly, a 1% increase in membership volume is worth GBP 3.3 million of revenue a year, while adding just one week to the tenure of each member gives us nearly GBP 6 million of annualized revenue. These numbers aren't guidance, please note, but I hope they are—s o strengthening the core is a lot about using data, insight, and technology to unlock gains. On the next few slides, with examples from three—t he data shows that low-cost gyms are delivering outstanding in the minds of members. From the beginning, I've been impressed to find large, well-equipped and staffed by friendly expert people at such affordable prices. And global pricing expert SKP conducted a quantitative survey for us last year, and the left-hand side of the graph is one of the outputs.
The x-axis is perceived value and the y-axis perceived price. The blue corridor is where optimal pricing is going to be. The data therefore shows that for all low-cost brands, there's an opportunity to increase prices further. So the landscape for pricing looks very favorable for The Gym Group, particularly when you look on the right-hand side of the slide, which shows that we lead the market on NPS and have top parity on value for money. In that context, while we and our competitors have been increasing prices, you can see on the left-hand side of the slide that in December 2023, there was still a gap of more than GBP 2 a month on our rate for us versus our nearest competitor.
Looking at the right-hand side of this slide, when you compare the top ten purchase criteria, our relative performance is similar to our nearest competitor, so we should be able to largely close that gap. Our prices, our prices will remain affordable and will deliver outstanding value for money, but there is clear upside on pricing based on headline rate and member- led pricing. Clearly, this needs to be done in a nuanced, data-driven way, and here are four tools we use to do this. The first, as you'd expect, is price elasticity analysis, which I'll return to in a moment. The second is our site segmentation. Our data science team has segmented sites into groups that share similar characteristics in order to further refine site-level pricing. The third is a dynamic tool we've developed to test promotional effectiveness in real time.
During peak trading, for example, we're able to use this to guide us on maximizing revenue. We also use data to keep a real-time view of pricing sentiment, so that we can spot and react to any early signs that a particular price point at campaign or site level is not working optimally. And just to bring one of these to life a little bit more, on elasticity, our pricing team has datasets and more sophisticated tools to measure elasticity. In addition to that, they have a three-tier product architecture, which was designed to improve price elasticity by positioning the value of our Standard and Ultimate products while providing the cover of the cheaper price point in Off-Peak.
Comparing quarter one of 2023 with quarter three of 2023, the first quarter where we had the three-tier system in place, we saw a 2x improvement in our elasticity score. In some data and capability to deliver good upside in pricing and yield. Revenue growth this year will again be weighted towards yield. We do have strategies to address volume growth, too, and the national rollout of Off-Peak provides an opportunity. As a reminder, prices vary by site, and the left-hand table gives you pricing in our Thanet gym as an example, across Ultimate, Standard and now Off-Peak.
Off-Peak does three things for us: It gives us an eye-catching lead price for marketing, it frames the value of the more expensive products, and we're also seeing that it appeals to a new kind of member, one that is more price sensitive, a bit older, and wants to exercise during the day. So this should be incremental volume for us here. Before leaving the slide, it's also important to note that uptake of our Ultimate product is continuing to rise, with record penetration in December 2023 of 31.7%. So across this architecture, we will continue to optimize for value and volume going forward. Turning to acquisition marketing, we are focusing our spend close to our gyms to maximize return on investment. It's unsurprising, looking at the chart on the left, that awareness of The Gym Group is highest among people who live near our gyms.
It's also clear that people tend to choose a Gym Group that's nearby. Rather than get distracted by the expense of national awareness, we're going to geo-target our marketing spend to where our gyms are. As anyone in the company will tell you, we want to be number one locally and win around each of our 233 sites. We're also going back to basics on our marketing messaging, focusing on the aspects that we know matter most to prospects: convenience, affordable pricing, and great kit. In peak, we ran advertising near our sites, telling prospects there's a Gym Group around the corner, and we're encouraged by the results that we've seen from the campaign. As with pricing, we'll use data and technology to drive digital marketing efficiency and marginal gains.
Firstly, we're increasingly testing in real time our advertising copy, and I'll return to an example of that shortly. Secondly, we're making an investment in advertising technology, so dynamically tailor adverts in real time. For example, to insert the name of a particular gym or to talk about a benefit that data shows appeals to that particular prospect. When it comes to web conversion, we've created a squad of experts across our marketing and technology teams who are running multiple A/B tests to improve web conversion rates. Again, small improvements, given the volume of traffic we get, can make a big difference. And perhaps most importantly, we're de-averaging our understanding of our customers' likely lifetime value to us so that we can target spend accordingly and refine the case to invest more to grow faster.
Briefly returning to what we do on continual ad testing, this example shows how a series of iterative changes have increased the revenue from that advert by 6%. We run so the 6% can add up. In any subscription business, retention is a powerful driver. So keeping a member than those acquiring one. Our flexible no-contract model is an important part of our proposition, but nonetheless, I do think we can make incremental gains on retention. On retention, we're focused on what we call early life, because as the chart shows, members are most likely to churn in their first month before they've established a habit. We've developed a number of initiatives on early life retention, centered around four things: optimizing promotions, encouraging early engagement, enhancing member communication, and most importantly, supporting habit before. Improving retention starts with how we acquire customers.
The graph on the left-hand side shows that a member who joins on a promotional offer has a month one survival rate that is 3.5 percentage points lower than one who joins at full price. So while promotions will remain important, in 2024, we're reducing the number of days on promotion by 11%. And as you can see on the right-hand side, we also know that certain kinds of promotions have higher survival rates, so we'll weight more of our promotions accordingly. There's clearly a balance to be achieved here, and promotions do support acquisitions for testing and learning to aim for sustainable growth. Once a member has joined, it's all about helping them to get value from their membership and build lasting fitness habits. And our app is a great channel to do that.
80% of our members use it, and they rate it highly, so it's a great opportunity for us. We're developing new functionality to personalize the environment for our members, giving them relevant workout plans, the ability to monitor progress, and critically, things like badges, streaks, rewards, messages of encouragement to support every member in achieving their fitness goals. As with any other digital subscription business, a great app experience can be a strong source of competitive advantage and a great way to give members more value. So that is a flavor of Strengthen the Core. It's a data-driven program to increase like-for-like revenue and produce more free cash flow. Pricing and yield, in particular, is where we'll see the most return in 2024, and it's early days on retention.
Over the coming years, every part of that cog will help to keep improving like-for-like revenue and generating more cash. Turning to the second part of our growth strategy, we want to use the cash generated from the first cog to accelerate our rollout of quality sites in size of the opportunity, and then the approach we're taking to unlock. PwC have recently revealed some analysis in the UK. Do you see on that chart upwards? Current growth rates, there are a number of potential drivers could expand this further. Firstly, closures in independent and local authority gyms, where finances have been particularly—s econdly, macro trends include, macro trends continuing to drive consideration and participation. And thirdly, format innovation, unlocking quality sites in new location types. Turning to how we will unlock that white space opportunity.
As you'd expect, we've analyzed the performance of all of our 233 sites, and we're clear on the ingredients of our most successful sites. With an approach that is now more joined up than ever across data, commercial, and property acquisition, we're targeting sites in Greater London or other urban residential areas. Sites that have high population density, good transport options, and good visibility for passing footfall. 101 sites with these criteria are meeting our 30% ROIC target, and so we're tightly focused on these target site characteristics. I should add that that means some sites are returning less than 30%, and we're transparent about the average ROIC. The point, however, is that we do have 101 sites returning 30% ROIC, and our opening strategy will focus relentlessly on this type of target site.
As well as being clear and disciplined on site selection criteria, there are levers to further drive returns on new sites once they're open. The first is the Strengthen the Core cog of the plan, where improvements in pricing, acquisition, and retention all benefit, whether more mature or newer sites. The first is proposition, where again, we'll use data to tailor even more what is in each gym to the local population or competitive dynamics. Secondly, we have a refreshed launch plan to ensure that we secure early volume build before turning to yield uplift. This mirrors best practice in other multi-site sectors, including hotels. And thirdly, we're continuing to challenge ourselves on-site costs, with innovation across operating model, energy usage, and build costs.
Armed with the right selection, site selection, and these tools to increase returns, our ambition is to open circa 50 new sites over the next three years at an average ROIC of 30%, all funded from free cash flow. The approach will be quality first, with a returns target prioritized over the volume target. Luke will cover our ambition on mature ROICs in the next section. So that is our second cog, the re-accelerating rollout of quality UK sites. LDC data points to a lot of white space for low-cost gyms, and we're taking a disciplined approach focused on 30% ROIC returning sites. So right now, our executional focus is on the first two cogs of the plan, and that's where our teams are totally focused.
As we execute successfully in those areas, however, we will create pace and confidence and look at further options to broaden our growth. This could be about adjacent revenue streams, new formats, or new markets, and with our strategy team, plus some external help, we will be building a plan over the next 12 months on this. We'll return with more details on that when we're ready. Suffice to say that in the meantime, there is plenty to be executing on in strengthening the core and accelerating our site rollout. We will do this in a data-driven and technology-led way, and our focus will be on the investment case, sustained growth from free cash flow. There's a lot of work underway, and with a committed expert team we have, I am very confident on progress. I'll now hand to Luke to provide financial guidance and outlook.
Thank you, Will. Starting with guidance for the current year, although we have had a strong carry with price increases landing well, we'll start to annualize the more regular monthly increases we took last year, and therefore, we expect full-year like-for-like sales growth in the 4%-5% range. Site costs remain tightly controlled, expanding. This reflects inflationary increases, such as National Minimum Wage, offset by the initial unwind of higher electricity rates mentioned earlier, and ongoing initiatives to manage costs. We will be investing behind the Next Chapter strategy, which will lead to central costs in the 10%-11% of revenue range and an increase in tech CapEx to around GBP 8 million. Total CapEx is expected to be GBP 35 million-GBP 40 million, with 10-12 new sites targeted for this year, with Greater London weighting than previous years.
Maintenance CapEx is expected at circa 6% of sales. Strong free cash flow, which gives confidence that the expansion in the CapEx will be—w e expect a small working capital inflow, interest subject [audio distortion] , but no tax. Leverage operating range remains 1.5-2x . Leverage is expected to fall by the end. Looking longer term, like-for-like sales will be to strengthen the core from the Next Chapter strategy we'll just outline. The SKP value map analysis and price gap to our competitors give us confidence there remains an opportunity to be able to price ahead of inflation. We will maintain a disciplined approach to rollout with a 30% ROIC target for new sites.
Our ambition is to open circa 50 sites over the next three years, but we will be prioritizing 30% ROIC over the number of sites opened in any one year. We're targeting a midterm mature estate ROIC of 25% from driving ROIC from the existing mature sites and opening new sites with a 30% hurdle. Strong free cash will continue to be expected to continue 6% of sales, and I'll talk more to that shortly. Our capital allocation policy for leverage below 2x, followed by growth return. We're targeting a midterm mature estate ROIC of 25%. Our ROIC calculations have historically included landlord contributions as a deduction from invested capital, but not rent-free periods, giving the 2023 ROIC of 19%, as reported earlier.
The rent-free periods are an inducement for the tenant to make the fit-out investment and therefore should be included to make the right commercial decision. Including historical rent-free periods improves the 2023 ROIC by 200 basis points to 21%. We include the rent-free periods in our investment decisions and will do so in our reported ROIC going forward. The medium-term target of 25% will be achieved by the combination of improving ROIC of the existing mature sites through strengthening the core strategy and by adding new sites from the target Greater London and urban residential sites, in which we have high confidence of achieving a 30% ROIC. A typical new site P&L is set out on the right-hand side of the slide and equates to an IRR in excess of 20%.
A breakdown of the GBP 1.4 million invested capital and associated depreciation is included in the appendix. Finally, turning to maintenance CapEx. As mentioned previously, maintenance CapEx is expected to continue at 6% of revenue. Looking at historic spend levels, maintenance CapEx starts very low in the early life years, gradually increasing until a mid-life refresh, averaging around GBP 30,000 per annum over this period. The mid-life refresh of around GBP 300,000 normally takes place between years 8 and 12, depending on the levels of usage. Post the refresh, the spend levels typically still run a bit higher than the early years in the region of GBP 50,000 per annum. This gives an average annual maintenance CapEx of circa GBP 50,000 per site, which supports the guidance of 6% of revenue.
It's also worth noting that 70% of our fit-out cost is in the building works, which require a lower level of maintenance CapEx spend. This level of maintenance spend gives further confidence in our future cash flow generation and our ability to self-fund future growth. This concludes the current year and medium-term guidance, and I'll now pass back to Will, who will summarize the key points from today's presentation.
Thank you again, Luke. So, we will very shortly take your questions. But before that, I will summarize the key points from the presentation and why we believe The Gym Group is a compelling investment case, well set to deliver sustainable growth from free cash flow. Firstly, we operate in a large, growing market with low-cost, high-value gyms taking share. There are significant macro trends in our favor that are only set to grow. Secondly, when you look at our NPS, our Google ratings, our Trustpilot ratings, we're the best-rated low-cost player in the market, and that's reflected in strong growth in visits per member. We'll continue to innovate and improve our proposition, but it's inherently strong and future fit. Thirdly, building on 2023 momentum, our principal focus is on further like-for-like revenue growth, and there is clear opportunity here.
As the data we shared demonstrates, there is clear headroom on pricing, and we have an ongoing detailed plan to maximize that opportunity. On acquisition, there are 3 million potential new members who fit our profile, live within 3 miles of one of our sites, and who are actively considering gym membership. We will geo-target our marketing close to our sites, with messaging focused on the clear drivers of choice, convenience, affordable price, and great kit. When it comes to retention, we've started a cross-company program to take a systematic, data-driven approach. To illustrate the opportunity, an additional one week on every member's tenure is worth GBP 6 million of annualized revenue. Looking beyond like-for-like growth, 2024 PwC analysis points to significant white space opportunity for low-cost gyms of between 600 and 850 additional gyms in the UK.
We will take a disciplined, return-centric approach to opening new sites and have done detailed analysis to ensure that we're clear on the target site locations and the exact characteristics that return 30%+ ROIC. We will open circa 50 new sites over the next three years, and these will all be funded from free cash flow. Finally, we're taking a rigorous approach to capital allocation, as Luke has outlined. We're committed to creating value for you, our shareholders, and that will always inform our approach when it comes to capital. So I hope that's given you a flavor of the Next Chapter for The Gym Group. We're excited by the growth plan and confident about future prospects for the business. And now, we have plenty of time for questions. And there, there's just a little note here that I need to get right.
So we're going to take questions from the room, first, but please do wait for the microphone, and there's a very stern instruction to state your name and institution, before you ask your question. So we'll take questions in the room first, and then, if you are following online on the webcast and you'd like to ask a question, please type your question into the Q&A box, provide your name and company, and we'll read it out in the room on your behalf. Should we do that?
Hi, Tim Barrett from Numis. Can I ask one thing on short-term outlook and then a couple on the strategy update, please? The short-term one's on costs. You talked about utilities this year. Can you talk about 2025 in terms of mark to market and actually business rates? And outlook as well.
Yeah.
And then strategically, in the, you haven't talked about it much, but in the appendix, you're showing that you're at 81% of 2019 levels on volume. Sensibly, you're not over-promising there, but, but how do you feel that could come back in the context of all the great marketing stuff that's going on? And actually, one last one on the new openings. The sort of the denominator, the CapEx figure is about GBP 1.3 million on target size. Intuitively, it might, I'd have thought it'd be higher in London, but is that not the case? Can you talk around that?
I'll take one, three, and I'll check two, yeah. So, from a outlook on utility costs point of view, we've gladly seen presentation around GBP 2 million rates benefit in the current year. We will, we will see, I think, further benefit in the following year. But we probably won't put a number to that today, Tim, if that's right, just because we've, we've not yet fully locked out there. But, but we do expect to see some, some further benefit into 2025 as well.
Thanks, Tim. On the strategy question and the 81% versus pre-COVID life. I mean, I think, as we sort of said in the presentation, our principal focus will be towards yield and solving to maximize revenue growth. And I think that will continue to be the sort of shape of 2024. That said, you know, it'll be the first year that we've had Off-Peak nationally. We do see incrementality there in terms of a different type of customer. So we'll be looking to take that opportunity. The plans around retention should support volume. And I think that the refreshed plan in terms of site launches should also help with that. So the things that we'll do, Tim, but I think the shape will still be weighted toward yield. I think that's where the biggest opportunity is for us at the moment.
And Tim, please, on new openings. Yeah, and on new opening CapEx, I think, the two biggest drivers of capital costs, the size of gym and the sort of location /site complexity of delivering it. This year, as I mentioned, we will be sort of more London weighted, and therefore, the complexity is definitely, and also our pipeline sites for this year are larger than they've been for the last couple of years. In fact, we've seen our size actually get a bit larger for the last two years, and therefore, new site CapEx for this year will be higher than, a little bit higher than was stated as the sort of typical P&L.
Yeah, thanks. I've got about four questions, and so maybe do one at a time if you want. Just in terms of the different sites, obviously, if the average site is getting bigger and you're looking at a 30% ROIC versus the estate average, that will be quite big in terms of potential to drive average EBITDA across the estate.
Yes. So, I think that part of the function of the fact that we've sort of slowed down the new openings compared to sort of 2021 and 2022 means that we are being a little bit more selective in the sites we're choosing. And as a result, we're doing much less in terms of the sort of smaller format and sort of cherry-picking sites more. So, the sites necessarily will continue to get larger and larger, but I think we will see probably more of a weighting towards decent-sized sites than maybe some of our competitors.
In terms of catch-up CapEx, obviously the new sites doing or on track to do a 30% return on CapEx, or you say in the low 20s. Apart from obviously the population density issue, is there an opportunity in terms of spending more on the oldest to bring that—
Yeah, I think there's to improve the sites, but to think pricing, quality of local marketing, really tailoring the proposition to the particular site, managing costs at a site level, all of those things. All of those are designed to increase returns, whether it's on the newer sites or on the older sites. I mean, on the sort of capital catch-up CapEx piece, I don't know if that's a question you'd want to take, if I understand.
I don't—s ort of when you're referring to catch-up CapEx, are you referring to my commentary in the earlier section?
Well, I was kind of thinking that if you're using retrofit into the older estate—
Yeah, for sure. I mean, as we said, everything that we do needs to be able to scale efficiently, but we would, you know, we will certainly continue to output these sites with the things that are working best. So 50 kg dumbbells and SkiE rgs, there's been a lot of demand for those recently with members, so we'll roll those out into new sites.
But I think that also means that you're not building up a sort of maintenance debt because we are also putting the sort of new types of equipment into the older sites. I've got a couple of less interesting accounting questions quickly. The next one was about 70% of the CapEx being on the building costs, which is the walls, ceilings, and floors, which effectively don't wear out over the 15-year lease. Does that imply that the depreciation charge could be coming down quite a bit in the future?
Yes. I mean, in theory, when we go through renewals, that's the case. But I think that on new continue to the sort of to the end of the lease rather than—
The final one, IFRS 16, obviously, in PBT is quite a headwind for you, so when will that start to turn in your favor a little bit more?
Yeah, it's a good question. I mean, it all depends obviously, on the number of new sites we open in the coming years. But based on our guidance today, I think we'd see the sort of breakpoint where cash rents and IFRS 16 charges would be about the same in a sort of couple of years' time, and then from there on, we'd start to benefit.
Thank you very much. It's Anna Barnfather from Liberum. Just on the ROIC targets, is that a two-year mature, or is the maturity curve changing on that?
As and when, as and when the new sites drop into the mature calculation—
Yeah.
Yeah, in full year.
Okay. So that's, I mean, based on 50 new sites, that's sort of 20+ extra EBITDA, probably by 2027, 2028.
Yes.
Is that—
It does take a while to drop through.
Okay.
Yeah.
So, sorry, a couple of other questions, a bit more. On the retention side, have you—y ou haven't released any figures that I could see on things like average tenure or anything like that, just the example on—
No.
Could you give us a sense of where it is?
Yeah. I think we, we haven't historically, I think, yeah, out, out of context, those, those numbers can be, misleading. And, and as I've said, I think the, the, the positive and important thing is, I think there's lots of opportunity there for the marginal, gains through, principally through helping people to form habit and, and, and, and build those sort of lifetime, fitness habits, the app, all those, all those aspects. So I think there's lots of upside on it, Anna, but we haven't sort of published a number around that.
Just the final question, just on head office costs. You've given guidance as a proportion of revenue. Can you help us with guidance, maybe in incremental site expansion? Because I was a bit surprised by the jump, and if I look at it versus 2019, I'm trying to look at a sort of ratio of, you know, how many extra you can add without adding central cost, or am I trying to think of it in the wrong way?
No, I think you're thinking of it in exactly the right way. I mean, I think, I think, you know, we've seen a bit of a step up. We had a bit of a step up in the current, in the year we just reported because we had some vacancies that had, hadn't been in the business for quite a few years. What we're seeing in the current year in guidance is a bit of a step up just behind the Next Chapter strategy. But I think from there on, the sort of leverage that you're talking about of increasing new openings and sales growth should start to see, I think, some efficiencies on the central cost margin. If that's the right way of putting it.
Yeah.
Actually, linking it to an exact site number, I think I might have to go away and have a think about that one.
Okay.
Hello, it's Adam Phillips from RBC BlueBay. Guys, can you just give us just some basic thoughts on three-tier pricing? I mean, I think probably some of that is pretty obvious in terms of Off-Peak, but just the specifics of that, and presumably in Ultimate and Standard, well, perhaps not in Standard, but in Ultimate you get multi-site access, et cetera, I'm assuming. But critically, you know, do you have a view on take on that three-tier, tier pricing relative to your main competitors or main competitor, if I can put it like that?
I mean, I think that the sort of positive piece in all of that is firstly, that we've got those three tiers in place now, and then when you kind of look at the different elements, the Ultimate product's got the best ever mix that it's had, and I think there's opportunity to keep refining that and keep merchandising that. And then at the other end of the spectrum, we're definitely seeing incrementality from Off-Peak. And so at both ends of the spectrum, there's opportunity. Back to that kind of yield versus volume piece, I don't think we would expect to see a huge change in that mix over the short run.
and we will be, you know, relatively selective around Off-Peak to make sure that we're sort of optimized for revenue. So I wouldn't expect to see a huge shift in mix, and I probably wouldn't comment on the mix of our nearest competitor.
Oh, sorry. So the key question is, at the Ultimate price.
Yeah.
You know, are you still incrementally cheaper than the main competitors?
Yeah. So, yeah.
For their equivalent.
Yes, we are. So, back to that piece in the presentation, you know, on average, we're more than GBP 2 cheaper per month, across the whole piece. And so, we see that, definitely see that gap, as an opportunity because we think our product performs at least as well.
Yeah, morning. It's Richard Sellar from Park Place. I've got two questions, please. Firstly, given you've got 230 sites or so already, presumably some strong locations, can you just share your thoughts again on how the sales per site in the new openings can be GBP 200,000 or so sites higher? Because it looks like the ratios and costs are lower, but the absolutes are higher on costs. So just again, you know, why the new sites are in better locations, driving better revenue, hence returns higher.
Sure. So, I think it's the same reason why the mature site ROIC is behind the new site ROIC, and that is that the estate includes a lot of historical decisions, particularly relating to sort of the pre-COVID workforce and behavior, consumer behavior. You know, as we've pointed out in the financial results part, if you strip out just 12 sites, it moves ROIC by 3%. And so, when we pick the new sites, we'll be picking them from that 101 sites that we own, that we have sort of highlighted as our targets, rather than a sort of blended site average across, you know, many years of history, as it were.
Okay, thank you. And then a follow-up to that. Given the average is currently 19, although it's going to go higher when utilities come out, but you talked a lot about growth today, but are there also sites where, you know, given the history of the company now, you're perhaps at breakpoints or end of leases where you would consider actually walking away from sites which might be to the detriment of profits, but to the positive return on capital. Thoughts on that, please?
Yeah. So I think that over time, there are opportunities to close sites. It's in relatively small numbers. So in 2023, we closed 2, and we don't have any plans to close any in 2024. So it's relatively small numbers. But yes, Richard, we look at the performance of each of the sites and where there are selective opportunities towards the end of leases, we do look at that.
But I think to your second point, there are obviously sites that are profitable and cash generative, but not making the 25% ROIC. We wouldn't terminate them just because they're not making the 25% ROIC. If they're generating good cash, you know, and I think, you know, I think we have to make the right cash decision rather than obsessing over that ROIC target.
Yeah.
You mentioned that the Ultimate is now 31.7% of your membership base. Can you give us a steer of how the rest is split? Is it all still Standard because Off-Peak is new?
We haven't actually guided on that. It's still quite a small proportion, I guess, is the best way of putting it, but we would expect it to build as the year goes on.
And sorry to ask you this, but I also noticed that the target of corporate members are only 2% of your membership base. What are students 25, or could you talk a bit more about what that,
Yeah.
Yeah, so that, so that's about right. And just to cover corporate, Anna, I think, you know, we're growing now off a small base, and we definitely again see opportunity there. We didn't cover it in detail there, but there are sort of good channels to market when it comes to corporates, and there are corporates that clearly want to offer benefits to their employees, and this is a very compelling benefit. So we would expect that corporate base to grow. So I think that's one area of opportunity, and they tend to be really good persistent, sticky customers. So we'll continue to grow in that area. And then, yes, that's about right for students. We had a strong, really strong student—
The sort of key sales period for students is September and October, and we had a good sales period in that peak season for students. So it continues to be a really important part of the proposition. And I think some of the trends around, again, fitness, IQ, and mental health and so on, show up very, very strongly in that cohort of customers. And I think just back to the Off-Peak, yeah, as I say, I think we've only really recently rolled it out nationally, so we'll use it in a sort of selective and targeted way to try and get incrementality, but we wouldn't expect it to be something to become a huge part of the mix very quickly. Right. So I think now we'll take—i f there aren't any more questions in the room, we will take questions from the webcast, if there are any.
Thank you. Well, we have a question. This is from Mitchell Lally from Forum Family Office: Do you expect to continue growing free cash flow, excluding growth investments, in the coming years off the 2023 base number?
I think, for the current year, because of a slightly lower working capital inflow in the year, we would expect free cash flow to be sort of broadly flat. We would expect in the years after that, as we continue to grow EBITDA, we should see free cash flow continue to grow.
Many thanks. We have another question from Martin Beck: What are the biggest risks you see to the business strategy?
The biggest risks to the business strategy? That's a good, that's a good question. I mean, I would say I see more opportunities than risk. I, you know, short term, I think we, you know, it continues to be a challenging environment for, consumers, overall. So there's a risk there. But beyond that, and by the way, we have a very thorough risk register that will be, in the annual report. So we monitor our risks very, very carefully, but there's a bit of short-term turbulence around, consumer spend and the economic environment. But I, over the longer run, we sort of see that really as just opportunity in terms of consumer demand.
Many thanks. There are no further questions online.
Thank you very much.
Thank you.