Earnings Call: Q1 2021

Apr 29, 2021

Hello, everyone, and a warm welcome to the Actik Quarter 1 Interim Report. My name is Anders Karlbark, and I am the CEO for Actik. And with me today, I also have our CFO, Anna Eskolt. We have placed you all on mute. So at the end of the presentation, there will be room for Well, let's start. To start with, we have Some key figures with our business and everything that you will see here is obviously heavily impacted by the Here are the figures around the current status of Actik. We have 172 gyms. We have 171,000 number of members, an average full time employee of 581. Our revenue is SEK 140,000,000 in the quarter with an EBITDA of SEK 28,000,000. And we'll take you through the numbers more in detail throughout the presentation. 1st, We want to share our market situation. We have gyms in Sweden, Norway, Germany and Austria. And if we look at our full portfolio, close to half of our sites are either closed or they we have gyms in closed baths, not decisions taken by Actik, but rather decisions taken by municipalities or governmental restrictions. So half of our portfolio during quarter 1 has been heavily impacted by COVID-nineteen. And obviously, then that is reflected in the report and the figures. If we zoom in on the Nordics, we have a recommendation in Sweden to not visit the gyms. We have requirements of a minimum of 10 square meters per visiting members. We have 7 sites, which have been which we have been forced to close because they are situated in municipality baths that are closed and we do not operate the entrance ourselves. And we have 46 of the municipality baths being closed. And here we then have a negative effect to the full customer offer not being able to offer the bath, but being able to offer the gym. In Norway, we have seen during the quarter back and forth opening and closings, But currently, we have 15 of our gyms in Norway open, but it's been up and down throughout the quarter. In Germany, we have all gyms and all baths closed since the 2nd November 2020 and we're awaiting and more information regarding when we're able to open. So summary here, operating in, of course, difficult conditions and 45% of the portfolio is heavily impacted by COVID-nineteen. If we look at the long term trends, we see a clear demand for at home access to training, personal training, programs and advice. Many people work in other locations than their office. And obviously, this impacts also where you Umea training. We see that from our customer perspective, our members train for health more and more so when we look at service rather than muscles. And we believe this is an even more important direction here also after we see the pandemic being less of an impact to the society. We see a very strong outdoor trend. We see that offering training and the gym side, which we are doing in our outdoor boxes, are extremely popular. And we are able to bring out the best of the gym to the outdoors as one example of tackling that. We are also working very hard with bringing out more of our offer, not only the boxes, but also a lot of our group training occurs outside to offer that. We see this being partly a trend given the pandemic, but we also believe that this will be a very important trend to take care of also in the long run. Other than that, we see also digital developments is key to improve our customer offer as a whole, both by training inspiration, but also digitalizing a lot of the membership to make it easier for the members and load the membership with more value. We tackle this, As I mentioned in the beginning, when sharing our mission, we work with an omnichannel strategy to leverage on these trends. We work with operating our gyms and baths in clusters in medium and small sized cities. We are working heavily with increasing our outdoor impact with the boxes that you see in one of these pictures. And we currently we have a plan to currently operate 22 boxes now before summer. We are expecting to increase that further seeing the great start that we have seen in these boxes. We're also bringing out a lot of our group X, which we see is popular among our members. We also have worked a lot with the Anywhere offer, which is our training app, which gives you inspiration and structure to your training wherever you are. Could be out or it could be at the gym, it could be at home. And we think that this is also one of the keys going forward to really tie the membership to the Anywhere application that we're working with. So examples of initiatives in this omni strategy. 1, we launched Actik Anywhere in quarter 4, which was which then is our training app. We are launching 22 out of boxes with continued expansion during the rest of the year. The 2 boxes that we piloted last year were open throughout the whole winter and spring. We had a plan to close them in mid November, but we managed to keep them open throughout the whole season based on demand from members. So we believe that these boxes are not just something for the summer, but it's something that we will have and operate throughout most of the year. We have also started an upgrade programs for our gyms. We have started with 2 pilot sites and we are planning to do more sites. We see clearly impact on membership development, customer satisfaction, employee satisfaction, and this is something we believe will also be an important aspect of recovering the member base over time. We are working with strengthening our digital purchase flow. So we launched a new website in quarter 1 where we have simplified and strengthened the purchase flow. We will continue working with digitalizing that, making sure that it's easier and more convenient to buy memberships or single training opportunities within our offers. We also won the bid for a big bath in Veche, which we will start operating from June, which is in line with our strategy to combine the gym and bath. And in a cluster, a city, we want to have a bath as part of our offer, which is clearly what we see popular among members. We see the bars that we're able to operate that are not closed currently are doing a lot, lot better than the rest of the portfolio. So the bath is clearly an important aspect also going forward for us. So we're really happy to be able to take over the operations of this path in Vekko. Digging down a little bit into our financials for quarter 1, if we summarize, we have focused on safety and we are focused on cost control. Number 1 has been safe environment for our members and staff. We have had checkups at our facilities and we have been approved at all of them. We're very grateful for the great job that our team are doing out at our sites and we're happy that our program is 100% approved by these checkups. So we'll continue this job, making sure that we stay true to the corona restrictions and making sure that the gyms are a safe environment for our members and staff. We have decreased the average full time employee during the whole last year, but also compared to last year's quarter. We have to remember that what we are comparing figures to last year was a strong start of the year and then we had the pandemic in the middle of March impacting primarily short term than Norway and Germany. And since then, we have restructured our operations and we have decreased the number of full time employees. We have already before 2020, we launched an efficiency program to make that our operations are more streamlined. We have worked with that throughout the full year and continue to do so and that includes automatic entrances. We have centralized support to work more efficiently and we have worked a lot with digitalizing our offer and our operation. We see that whilst we are doing a good job within creating a safer environment, we have been doing well, controlling what we can control, meaning our costs. We are starting to increase investments for the comeback, meaning we develop our digital offer, we develop our outdoor training and we upgrade our sites to be ready for our members when they want to come back to the gym and rebuild our membership base as soon as fast as we can. If we look at some highlights, obviously all of these figures being impacted with the environment we operate in, our net sales is SEK 140,000,000 compared to SEK 229,000,000 €39,000,000 of these 1,000,000 is from short term COVID restrictions, meaning closings and freezings of memberships. 32 of these comes from a lower member base. And having 50% of our sites This heavily impacted it, makes it a little bit challenging to build the member base, but we see that sales compared to last year. Now current performance are going up and we are having this as the number one commercial focus is to build back our member base. But these are the figures for quarter 1. Our EBITDA, SEK 28,000,000 compared to SEK 71,000,000 and excluding IFRS 16, it's a minus SEK 11,500,000 compared to SEK 30 0.4%. Again, highlighting that January February in 2020 was really strong months for Actik. We then saw a lot of the actions that we worked with throughout 2019 to work more efficiently. However, looking at our cash position, we have a negative cash flow, but we stay with a strong cash position at the end of the period close to €130,000,000 And as soon as the member base turns positive again and turns up, we that would also boost our cash flow depending on when the pandemic will ease its grip to our operations. But cash remains strong. Net debt, SEK 356,000,000 with cash of €130,000,000 and not used credit lines of €77,000,000 We have at the moment a strong cash position as mentioned. However, the EBITDA rolling EBITDA now starts to get heavily impacted by the COVID-nineteen. We have a full pandemic year, and our leverage is above the covenants that we have with the bank. However, we have a positive dialogue with the bank and we expect an agreement new agreement with our bank being closed at the end of May at its latest. Short around the development per segments, we see clearly Nordics with Sweden open, Norway Some have opened, some have closed, but the membership base at the end of the period is 151,000 compared to 195,000 at the end of last year's period. Germany being closed and obviously that impacts the profitability clearly. Summing up starting to sum up, we believe that we are well positioned to leverage after COVID-nineteen. We have streamlined our operations. We have also accelerated that throughout the pandemic. We have shown that we have good control of our costs. We see that the current level of staffing can continue and is sufficient to support growth in members. We are working different to what we did previously and we are working much more efficient with better tools than before. Examples are the automatic entrances, which can increase opening hours without increased staffing centralized facility management. We have a growing digital offer and we have a continued growth in outdoor training. So we see that, 1, the costs are in better control 2, we have a stronger customer offer than what we had last year. So when given the opportunity, we believe that we're positioned in a good way to leverage our offer and costs as a totality. Here is the last 2 years revenue and EBITDA excluding IFRS with its margin. We were able to last year, even though we had a pandemic, to remain at the same EBITDA as 2019 whilst dropping around SEK 200,000,000 in revenue. What we see ahead is that we're able to keep our current cost level, but of course, hunting back our member base and with that to drive revenues back to levels they were previously to the pandemic. That's the case and that's why we feel confident that we're able to leverage a stronger customer offer and a stronger cost control than what we've had previously. It's really tough to put the time line on this, but this is what we are working towards. Last Last part in a summary then lower cost base combined with post COVID digital outdoor and modern gym growth forms the foundation for strong profitability. Our financial targets remain unchanged, and these are the ones we see here with a growth of 5% organically, additional growth from acquisitions. We strive for an EBITDA margin, which you So we believe we have done part of the work to reach. It's about building back the member base. We have a net debt aim of 3.0 so far and we have a payout ratio of 30% to 50% of annual net income as our financial targets. These remain the same as before, no changes here. With that, Thanks for listening in, and we are now open to take your questions. If there are no questions, Me and Anna will also be available afterwards. So please feel free to contact us if there are no questions. Thank you so much for listening in again. Wish you a great day and bye bye.