Basic-Fit N.V. (BFIT) Earnings Call Transcript & Summary

Hello, and welcome to Basic-Fit's 2024 Full Year Results Conference Call and Webcast. Please note that today's conference is being recorded. [Operator Instructions] I will now turn the call over to your host for today's conference, Richard Piekaar, Head of Investor Relations. Sir, you may begin.

Thank you, Laura, and good afternoon, and welcome to our conference call during which we will discuss our results over the full year 2024. With me today are CEO, René Moos, who you all know well; and our new CFO, Maurice de Kleer, who will present the results of Basic-Fit for the first time. Some of you have had the opportunity to meet Maurice already in the past months, and those of you who did not will get the opportunity in the coming period. This call is being broadcast live on our website, and a recording of the call will 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 the financial results from Maurice. After these prepared remarks, we will open the call for questions and the call will finish no later than 3:00. And with that, René, I hand it over to you.

Thank you, Richard, and welcome, everyone, for joining today's call. We had a very strong 2024 recorded significant increases in all key metrics. Clubs, membership, revenue and underlying EBITDA less rent all increased with double-digit percentages. In 2024, we expanded our Club network to 1,575 clubs and our membership base to 4,250,000. Revenue and underlying EBITDA less rent came in with the guidance ranges. Compared to a year ago, our revenue increased by 16% to EUR 1.215 billion. We increased underlying EBITDA less rent even faster by 20% to EUR 313 million. Let's go to the next slide on club openings. Let's take a look at our latest club expansion figures. At the end of 2024, we operated 1,575 clubs, up from 1,402 at the end of 2023, a 12% increase. Today, we operate 1,611 clubs after opening 36 clubs year-to-date. In France, we have further strengthened our market leadership with a net club growth of 77, representing a 10% increase. We have been shifting our focus more towards Spain, which has been a major growth driver. We achieved a net club growth of 70 marking a 50% increase, driven in part by the acquisition of RSG Spain. We surpassed the 200 club mark in Spain, providing us with the scale to launch national marketing campaigns and made clear steps in increasing our brand recognition and building our brand. As a result, we are seeing a positive membership development, something I will share more about later in the presentation. In Germany, we expanded our presence with 16 new club openings, now total to 28 clubs. After an initial phase of more scattered openings to test the market, we are now strategically focusing on 4 key urban regions. By building club clusters in these areas, we aim to establish ourselves as the logical fitness choice for local communities. With the growth we have achieved across our markets, we continue to fulfill our mission by making fitness accessible to even more people across Europe. Let's go to the membership development slide. We have seen strong momentum in our Membership growth. We reached 4,250,000 memberships at the end of 2024, reflecting a 12% year-on-year increase. Growth has been across all countries with France and Spain delivering the strongest performances. We have been seeing solid ingrowth in newly opened clubs, supported in part by successful founding member campaigns. These campaigns have proven to be an effective driver of early-stage membership growth, giving new clubs a strong head start. Market conditions in France improved somewhat during the course of the year. In 2024, we also implemented a new management structure in France. We separated the responsibilities for club expansion and club operation and divided the country into separate regions. Each region is now being overseen by its own dedicated business manager. This contributed to improved operations and join numbers per club. The start of 2025 overall was very solid with membership increasing by over 200,000 in the first 2 months. This is clearly an improvement compared to the first quarter of 2024. In this quarter, we increased the membership base by 250,000, which is including the [ acquired ] well over 100,000 members of the RSG Spain acquisition. The improving membership trends are also visible when looking at the different cohorts of clubs. As we analyze our club performance, it is important to differentiate between the cohorts and how they are developing over time. On this slide, we show a graph with 2 lines with the ramp-up of the average revenue per club of 2 different cohorts in the first 3 years after opening. The gray line represents the cohort of clubs that we opened before 2020. We filtered the COVID-19 years out of the data to show a more representative picture of the development of revenue ingrowth. The purple line represents the cohort of clubs that we opened during the COVID-19 affected years 2020, '21 and 2022. The purple line is fairly straight, indicating that the COVID-19-affected clubs missed out on the accelerated ingrowth that typically occur in the first 2 years after opening, something that you do see in the gray line of the pre-COVID clubs. The COVID-affected clubs continued to grow, however, at a slow pace. I see a lot of positive developments on this slide with both cohorts continuing to increase revenue per club. On the next slide, we provide more details on the development of the post-COVID cohort. On this slide, you see 2 lines representing the average revenue ingrowth per club in the cohorts of COVID-affected clubs and the cohort of clubs that we opened post-COVID in '23 and '24. The blue line represents the post-COVID clubs ingrowth, taking into account the fact that 90 of the opened clubs were regional clubs and we acquired the 42 clubs in Spain. We can still see that we are able to reach the cash flow break-even level at 1,500 membership after 6 months while the COVID-affected clubs on average were only just over 1,000 membership after 6 months. Noteworthy also is that the cumulative average revenue of the 2023 and 2024 clubs over the first 6 months is similar to those of 2018 and '19. Then going to the next slide. As we have demonstrated in prior Capital Market Days, we have invested heavily in our smart camera system, which has enabled us to increase the service to our members without increasing staff cost. It has also been instrumental to our 24/7 model, which further enhances accessibility and convenience for our members. In Benelux, we have successfully implemented 24/7 unstaffed clubs with more than 75% of our location now operating under this model. This has been a key driver behind the increased service to our members in the Benelux countries. However, in France, regulations do not yet allow unstaffed clubs. To see if we could offer French members the same level of accessibility and convenience, we launched a pilot program in the second half of 2024 to test 24/7 staffed clubs in France. The result of the 70 pilot clubs were encouraging. In addition, as in the Benelux, French consumers highly valued the accessibility and convenience that the club, which is open 24/7 offers. We, therefore, decided [ to expand ] the number of club operating 24/7 with staff to 333 in France in January 2025. Beyond France, we are also expanding opening hours in Spain and Germany, further enhancing accessibility for our members in these markets. While this transition comes with an additional annual cost of EUR 35 million, we expect this to be mitigated by higher membership numbers as of 2026. The next slide, strategy update. Today, we announced our more capital-efficient strategy, which paves the way for sustainable growth, increased shareholder value and an even stronger market position in the fitness industry. We are pleased to announce that in 2025 we will initiate a EUR 40 million share repurchase program, enabled by the positive cash flow post expansion that we expect to generate this year. This move reflects our commitment to enhancing shareholder value while maintaining financial discipline. By 2026, we aim to achieve a below 2x adjusted EBITDA leverage target. This milestone will ensure we maintain a strong and flexible financial position, allowing us to continue investing in future growth. Growth is in our DNA, so we will continue to open many clubs in our current countries in the coming years. With approximately 100 new clubs openings planned for both 2025 and 2026, we are further strengthening our European leadership in the industry. Longer term, we continue to see the development for more than 3,000 owned clubs across our current markets. On top of this, we are actively preparing for the launch of our franchise platform. More details we expect to share with you in the second half of 2025 when we can announce concrete steps. In summary, Basic-Fit's capital-efficient strategy positions us for continued growth, financial strength and leadership in the European fitness market. We remain committed to delivering value to our members, investors and all stakeholders. Now let's go to the next slide and see what our strategy execution has resulted in over the past years. Since our IPO, we have consistently delivered strong growth across all key performance indicators, achieving double-digit compound annual growth rates. Since our IPO in 2016, we have expanded our club network by an average of 18% a year while underlying EBITDA less rent has grown even faster at 19% a year on average. Looking ahead, our updated strategy is designed to reinforce these growth trends, enhance the quality of our results and ensure a more sustainable long-term outlook, allowing us to continue building on our success. I now hand it over to Maurice for the financial review.

Yes. Thank you, René. In the next 2 slides, I will quickly walk you through the main elements of our income statement and the underlying performance. Total revenue increased by 16% to EUR 1.2 billion, thanks to the expansion of our club network, an increase in memberships and an increase in the average monthly yield to EUR 24.24 from EUR 23.53 a year ago. Underlying club EBITDA less rent, which is Club EBITDA adjusted for exceptional items and minus the invoiced rent costs in the opened clubs increased by 16% to EUR 462 million. The underlying club EBITDA less rent margin was stable at 38.3%. Total club operating costs related to rent, personnel and other club costs increased to EUR 750 million, mainly due to our growing club network and cost inflation, partly mitigated by decreasing energy prices. Bad debt write-offs remained broadly stable as a percentage of revenue. Marketing costs, EUR 61 million. As a percentage of revenue, they came in at 5%, which is lower than the 5.4% of revenue we spent in 2023. Underlying EBITDA less rent increased by 20% to EUR 313 million compared with EUR 261 million last year. The increase was supported by continued operating leverage as our attention to operational efficiencies at the head office are paying off. The underlying EBITDA less rent is adjusted for exceptional items that came in at EUR 12.3 million compared to EUR 6.9 million in '23. In addition to various relatively small amounts, exceptional items in '24 mainly related to one-off costs for the integration and reorganization of the RSG Spain acquisition, club closure costs, disputed claims and the rent costs of clubs that were not yet open. At our Capital Market Day in November '23, we communicated our aim to reduce overhead costs, excluding marketing, to between 6% and 7% of revenue in the medium term. In '24, we made good progress towards achieving this goal by reducing overhead costs, excluding marketing, by 60 basis points to 7.2% of our revenue. Including marketing costs, overhead as a percentage of revenue decreased to 12.2% from 13.2% in 2023. For '25, we expect overhead, including marketing to come down to between 11.5% and 12%. In January '24, Basic-Fit launched Smart Refurbishment. Instead of fully replacing fitness equipment at the end of its useful life, our fitness partner pays regular visits to the clubs after year 6 to replace parts, refurbish and maintain the fitness equipment for a fixed yearly fee. Smart Refurbishing extends the useful life of our fitness equipment from 6 and 8 years to 12 years. This change had a positive impact on the depreciation of fitness equipment in 2024 for an amount of approximately EUR 11 million. Our cash finance costs amounted to EUR 46 million, compared with EUR 35 million in '23. The year-on-year increase reflects higher average level of bank debt than in the previous years. The higher average level of bank debt results from a strong organic club growth, and of course, the acquisition of RSG Spain. This year, we expect a different picture, of course, with the moderation of the pace of club openings. The net result for the full year '24 was a profit of EUR 8 million compared to a loss of EUR 2.7 million in the previous year. On an underlying basis, we report a year-on-year increase in net profit of 59% to EUR 44 million from EUR 27 million. You can find all the adjustments in the table. Let's go to the next slide on mature club developments. Our 990 clubs ended the full year with an average of 3,139 memberships. This is below the average of 3,283 we reported over the full year of 2023. In 2024, the 2021 club cohort was added in the mature club base. These clubs are impacted -- were impacted during their important ingrowth period by COVID-19 closures and restrictions and have an average membership count below the average of the group. The high uptake of the premium membership, although supportive to our average yield per member, has been having a negative effect on the average membership per club. In the medium term, we continue to expect the [ average membership ] of mature club to have 3,250 memberships as communicated at our Capital Markets Day in November 2023. Our mature clubs generated underlying EBITDA less rent of EUR 395 million. On an average club basis, this resulted in an underlying EBITDA of EUR 399,000 compared with EUR 390,000 in 2023. Like last year, mature club profitability improved in the second half of the year as a result of the further gradual increase of average yield per member and growth in memberships. The average underlying club EBITDA represents a return on invested capital of 34%, meeting our target of an ROIC of at least 30% at our mature clubs. Let's go to the next slide on CapEx. Expansion CapEx, including acquisitions and expansion of existing clubs, was EUR 224 million compared to EUR 289 million in 2023. The decrease is the result of the lower clubs -- number of club openings, 181 in '24 compared to 213 in 2023. The average CapEx per newly built club was EUR 1.3 million in 2024, compared to EUR 1.2 million in 2023. The increase compared to the prior year is due to modest cost inflation and fewer regional club openings in France than in 2023. As a reminder, regardless of the initial CapEx for a Club, we only sign a lease contract for a new club where we expect to achieve an ROIC of at least 30% when a club becomes mature. Maintenance CapEx was EUR 58,000 per club, an increase from EUR 55,000 per club in the prior year. The increase reflects targeted investments in France to enhance club quality and meet evolving member needs. We expect similar average maintenance costs per club in 2025. Other CapEx amounted to EUR 19.3 million, an increase from EUR 12.8 million in the prior year. Other CapEx consists of investments in innovations and software development and also in sustainability-related investments. The increase in 2024 was mainly driven by sustainability-related investments, including installing solar panels at head offices and clubs and replacing gas-driven systems for hot water and heating with fully electrical systems. Let's go to the next slide on financing. Net debt, excluding lease liabilities, was EUR 938 million at year-end 2024, compared with EUR 804 million at year-end 2023. The year-on-year increase was partially due to the continued strong club growth, which could not yet be financed from cash flow from operating activities, and partially due to the financing of the acquisition of RSG Spain. Including committed but undrawn facilities, we had available liquidity of EUR 120 million at the end of 2024. In May 2024, we extended our existing term and revolving facilities agreement by 1 year to June 2028. We have a remaining option, which allows us in 2025 to extend these facilities by another year to June 2029. In 2024, we repaid EUR 18 million of the German Schuldschein loan, bringing it to 0. The net debt-to-adjusted EBITDA ratio was 2.6x at year-end 2024, unchanged from the previous year. As René already mentioned, our new strategy update will allow us to reach a leverage target of below 2x by 2026. We have EUR 304 million in senior unsecured convertible bonds maturing in June 2028 with a put option for the bondholders in June 2026. We have been looking at several suitable refinancing options in case bondholders will exercise the put option. We are confident in the breadth of options available to us that will meet redemption requests while maintaining comfortable liquidity. Let's go to the final slide of our presentation, the outlook for 2025. I will conclude the presentation with our outlook for 2025. We expect further growth of our club network, memberships revenue and underlying EBITDA, supported by positive membership growth trends, albeit that we are living in uncertain geopolitical times making things more difficult to predict. What we do know is that we plan to open around 100 clubs this year and also in 2026. The positive free cash flow after club expansion that we expect to generate, we expect our leverage ratio to decrease to below 2x in 2026. And additionally, we will initiate a share buyback program this year. With the new club openings plans, the percentage of our mature clubs in the total will increase from around 75% at the start of 2025 to close to 90% at the start of 2027. With fewer starting losses and the maturation of our club network, this will have a positive impact on our profit margins. We do not give guidance on yields and memberships, but we do expect the average revenue per member to increase again this year on the back of the new membership structure. This will help increase revenue for 2025 to between EUR 1.375 billion and EUR 1.425 billion. René discussed this earlier, we have increased the number of 24/7 staff clubs in France this year to 333. And in addition, we are extending the opening hours in Spain and Germany. These actions will bring additional costs of EUR 35 million a year. We expect memberships at the involved clubs to increase and mitigate these additional costs by 2026. For 2025, we expect underlying EBITDA less rent to come in at between EUR 330 million and EUR 370 million. The past 2 years, we have been reducing the overhead cost, including marketing as a percentage of revenue, and expect it to decrease further in 2025 to between 11.5% and 12%. All in all, I believe that we have presented a strong set of results and positive guidance today. And with these positive notes, I end my presentation. Operator, please open the line for questions.

[Operator Instructions] We will now take our first question from Chandni Hirani from Barclays.

I've got a few, if I may. The first is do you still expect EBITDA per mature club to get back to that EUR 460,000 mark? This definitely kind of seemed a bit light at EUR 399,000 that you reported today and that compares to EUR 390,000 last year. So I think last year, you had said you expected it to come back within 2 to 3 years. Do you still feel that way? The second question is the club openings that you've reduced, is that in any particular region that it's coming from? Is it mainly Germany? Or is it France? Any color on that would be helpful. And then the third is can we expect more share buybacks announced this year and going forward in general? Is that kind of what the company is moving towards? The EUR 40 million announced today was obviously a step, but it was 3% of your current market cap and kind of well below what was suggested in the recent activist letter. So just wondering whether this is going to be your primary focus from now on given you want to generate better free cash flow quicker.

Okay. Let's start with the first question. So yes, we increased the mature clubs to EUR 399,000. We do expect to reach the EUR 460,000 EBITDA per club. It is not that we expect it for this year, but in the near term we expect that to grow to the EUR 460,000. We -- in 2025, we will add the last COVID cohort with it. So for sure, we will not reach it this year, but we do expect in '26 or latest '27 to be able to reach the EUR 460,000 per club. So that is the first question. Then the second question is the growth in which country. I think it will be a bit similar to what we saw in 2024, just on a lower number. So the growth countries are clearly France, Spain and Germany and that will also continue for this year and also next year. Then the last one, the share buyback. Yes, we, of course, listen to all stakeholders. And then we, as a company, make a decision how we use our capital allocation, where we spend our money. I think we will not disclose already if we will do additional buybacks. We are a growth company, so we will want to continue growing. But we thought in this current situation with everything that's happening in the world, interest rates and so on, that it was the right choice to slow down in club openings. And in that, in combination, we were able to also do this first buyback. So the answer is yes and no. It's not saying the first and only time, but it's also not our focus. Our focus will be as a company to grow, but we will use the slowdown in the next 2 years from 2x -- 100 clubs, first of all, start the franchise; and second of all, the things that we have just mentioned.

We'll now take our next question from Robert Vos of ABN AMRO.

I have a few questions as well. First, I would like to come back to the share buyback. According to your long-term outlook for clubs, there is still plenty of growth to be captured. I can also imagine that there is a certain advantage of moving quickly in order to discourage new entrants. So my question is can you explain why you have opted for, in itself, a modest share buyback program in combination with a severe cut in new club openings instead of maybe a scenario with a more modest cut in club openings, but without share buybacks. To me, you are now clearly signaling that you're stepping on the brakes in order to be able to do a share buyback program. So that's my first question. The second one, you spent last year EUR 1.3 million on average for newly built clubs, that were opened. Should we assume a similar amount for 2025 and possibly beyond? And then my last question, is it possible to elaborate a bit more on how you expect to meet a potential early redemption request for the convertible bonds potentially, as you said, as per June next year? Those were my questions.

To start with the share buyback. Yes, the severe cut in club openings was a decision we made without considering doing or not doing share buyback. So it was, for us, the right decision to actually improve the balance sheet and lower the debt, but also have more time to focus on our franchise adventures. So that was the combination. And of course, listening to all stakeholders, we got more and more discussions about buying back shares. So we -- looking at the balance sheet and looking at the plans and the cash flow that we expect for the next 2 years, it was also a logical step to buy back the first EUR 40 million. So the combination was actually not buying back shares and lower growth. The combination was focusing on our franchise and stepping back on -- less club openings and improving the balance sheet a bit. The last question was the convertible bond.

The initial CapEx...

Oh, yes, the initial CapEx. So the initial CapEx last year was EUR 1.2 million. I think we stated in the press release or in this presentation that for this year we expect it to be EUR 1.3 million. Why is it higher? So we are putting now, first of all, the index. So construction index is -- was fairly high. But also we're adding more plate-loaded equipment, massage chairs. So we're actually optimizing the look and feel of the club a bit. So for that, we are growing to the EUR 1.3 million on average for a new club this year.

Yes. And in addition to that, as to your last question relating to the convertible bond, of course, there's a chance certainly based on the current share value that the bondholders will use their put option at the mid of 2026. And currently, we are in dialogue, good dialogue, with our banks and we're feeling comfortable that we have several options in refinancing the convert. But it is on the agenda in the next few months.

And of course, with the less club openings, we can do 1/3 or 50% of the convertible if they come, we can do it with the cash flow that we are making in '25 and '26. So it's not that we have to refinance the full EUR 300 million. We can do 1/3 or 50% of our own cash flow that is extra available because of slowing down the club openings.

We will now move on to our next question from Lynn Hautekeete of KBC Securities.

I also have few questions. First of all, on the franchise model, I think it's delayed again. It's pushed more towards the end of 2025. And I was wondering if there was a specific reason for that.

Yes. Well, the specific reason is it is a lot of work and it takes more time than we expected. But we rather start with a good partner and the right contract in the right area than starting 6 months earlier. It's something we will do in the coming 10, 20 years. So starting off with the right partner in the right contract is for us crucially important, more important than starting 6 months or 12 months earlier.

Okay. That's clear. And then secondly is also, yes, on the convertible and on the share buyback. I can imagine that you want to do a share buyback to keep the shareholders happy. But in conversations with your banks, do you get a lot of pushback during the share buyback given the leverage and the refinancing of the bond that is coming up?

No, we're not getting any pushback. I think the 2.6x EBITDA that is going down next year to do below 2 is actually a number that not only we, but also our banks are comfortable with.

Okay. Clear. And maybe as a follow-up, do you have any guidance on the interest costs in 2025 and 2026?

Well, you're actually working for a bank. So maybe you can advise us. But I think -- no, we have no guidance on that.

No. But of course, there's -- we have now a coupon of 1.5%. So that might change if we refinance the convert.

But again, we will do it with a combination of own cash and bank loan.

We'll now take our next question from Marc Zwartsenburg of ING.

First question is on the EUR 35 million investment in the 24/7 gyms. So now also Germany and Spain are included. But can you give a bit more detail? Are you going to have 24/7 in all clubs in Germany and Spain? And are these unstaffed or are they also staffed? How would that work?

Yes. So of the EUR 35 million, more than 90% of the cost will go to France because that is not allowed to go staffless. In Spain and Germany, the cost is limited because we just need Spanish and German-speaking people in the security room. And if we do 10 clubs or 300 clubs, it's similar cost. So that is a one-off. And if we keep adding clubs in Spain and Germany, there's no extra -- additional cost. The real cost is France with more than 90% of the EUR 35 million to this 24/7. We have been looking at all of Spain because we want to have all the members in Spain being able to work out at 3 in the morning as an example. So we have looked at clubs that function in a cluster. So yes, I'm talking about France now. No, no, France. So more than 90% -- sorry. So Spain and Germany is with the cameras. France is with people. So because of that, 90% -- more than 90% of the EUR 35 million will be invested in France because we need to have staff at night. And we have been looking at the different clusters. So we do not have to do all clubs 24/7. So it's a cluster of, let's say, 3 and then 1 of the 3 clubs is 24/7 and the other 2 clubs that are close by can use that club if they want to work out in the middle of the night. So for that, with the 333 clubs, we cover most of France. Maybe if we add another 100, 200 clubs in the near future, we will add a few more. But I think with this, we are fine. We can have everybody who really wants to work out at night work out at night. And I think this will help us in the future, not this year. So the cost is first, but we think in time we will be able to add more members on those 24/7 clubs. So it's a long-term investment. Another thing, Marc, is we're not sure if it will help the length of stay, but we think the combination of the service to be able to work 24/7 in a cluster is crucially important.

Yes. It's more a bit maybe the cost number to it. If you have defined by the 333 clubs, it comes...

EUR 100,000 a club.

Yes, EUR 100,000 a club, that is a lot. So...

Yes, a lot.

How can you explain that? Because how many more members do you need? I can make a calculation, but I think it's more than 15 to 20 per month.

Correct, correct. So that's why we'll lose money on it. So this year, we will for sure lose money on it and maybe the beginning of next year also. But we think in time, we will improve the member base with it. But yes, the EUR 100,000, so that means, yes, you need around 350 extra members. So it will take some time to reach that. And you cannot really pinpoint it saying, okay, because of that, we have more members now. But we do know that our customers in the Benelux really appreciate it so it's for us, it's a positive effect. And if you compare our length of stay, so when we IPO-ed, it was 16 months, it's now over 23 months length of stay. If you compare that to other companies, that is a high number. And we think it's a combination of all the things that we're doing. So yes, we think in time, it is the right investment. It's the right investment now and we think in time we will make the return.

Yes. Well, you need to make that 50% ROCE also, so you need 30% more than the 350. So you're basically talking about 500 more members per gym. It's quite a lot to have some people in the night working out because you need to make a return on it.

Yes. But you -- yes -- no, that's true. Again, we do not expect to make any return this year and also probably not beginning of next year. But in time, we do expect that.

Okay, okay. Then maybe on the membership growth. So if you look to Q4 -- I see January, Feb looks good. But if you look to Q4, it's half of what it was the year before. I know there were more promotions in 2023. But I also recall at the Q3 call that you said October is even ahead of the trend that we saw last year. So apparently, November, December must have been pretty ugly. Is that a correct read across from what I've seen and from what you said that there was maybe high churn? Is there some something that went wrong in November, December to explain the Q4 number?

Yes. No, I think I'm sure you can remember that in 2023, we had extra marketing investment in Q4. So if you compare them with Q4 2024, yes, it is lower because we did not do the investment, which you can also see in the percentage of marketing that we spend. So that is lower. And we did spend that money in the first quarter this year. And you do see that, that helps and makes a difference. We increased -- in the first 2 months of this year, we increased the net growth huge. So yes, it is -- but for us, really, it doesn't matter if somebody is joining in end of December or beginning of December or 1st of January. So overall, there's no -- for us, not a big difference. But -- so we did it in '23 in November, December, big marketing push and a great sales month. And for this year, for '24, we did not and we spent that money in January, February and we saw a big increase in members in January and February.

Okay. Okay. And then maybe on the net debt position. Basically, it remained flat versus the end of the first half. But you would expect a bit of positive cash inflow in the second half. What explains that the cash flow is making that kind of seasonal pattern in the second half of this year?

The biggest point is the working capital. I think, by far, the biggest point is working capital. So we opened most of the clubs, not in December, what we did the year before. And then you can pay it in January. We opened most of the clubs September, October. So we all had to pay those clubs in 2024. While the year before -- so it's working capital.

Okay, okay. And then the final one...

Of course, then we also have some higher maintenance -- we also have some higher maintenance costs at EUR 3,000 a club and we have some higher expansion CapEx, especially the reorganization of RSG Group. So it's a combination of a lot of things. But the biggest part is working capital. So clubs that we paid at the end of the year because they were opened in, say, September or October. While in other years, they were opened in, let's say, December.

Okay. Then on the franchise, you didn't mention anything in the press release, I think. Is there a reason not to mention it?

About what?

The franchise model. Is it still expected that we get an update somewhere in the second half after the summer on that? Or has anything changed in the plans?

Yes, definitely. So as we communicated, we want to be able to really announce not only which continent and which -- but we also want to open a club. So we are working hard currently on finalizing things. Then it also takes time to find the clubs and to build the clubs. And once we are ready to open clubs, that is the moment that we will communicate where and when we will be opening. So we do have really big plans about franchise, and we are really enthusiastic about rolling it out big.

Okay. That's -- may I squeeze in a final one maybe for Maurice? Maybe one on the -- you say -- you mentioned that you want to pay 1/3 of the EUR 300 million, let's say, EUR 100 million in cash for the convertible next year. But you do a share buyback of EUR 40 million this year. You have a little bit of free cash flow. But next year, you probably will open the clubs at the beginning of the year. So first half normally is not a cash flow half. So how would you then all of a sudden make EUR 100 million of free cash flow in the first half of next year?

Yes. Good question, Marc. Of course, we calculated that with the increase. First of all, the effect of our new membership mix, which gives us a positive effect on our yield. The growth that we expect in memberships, new memberships, would give us enough free cash flow to do both. So both deleverage and also, albeit limited, EUR 40 million share buyback program.

Yes. If you look at it, Marc, I think what is important is that in 2026 you will have only like 10%, 11% of your clubs being immature. So that will be a really big change in cash flow. So for that, the way we calculate it, we can do 1/3 or 50% of the convertible by the cash flow that is available.

We'll now move on to our next question from Kris Kippers of Degroof Petercam.

Can you hear me?

Yes.

Okay. Perfect. Two questions still from my side. First one, coming back to the French market with indeed the bulk of the EUR 35 million additional costs linked to the opening. To what extent is there any possibility that you could, let's say, lobby for a change in the law because the flexibility in France, of course, is not comparable to, let's say, the Benelux, for example, but is there any hope on that side? And then second question, looking at the openings in 2024, Spain was already close to the French number of openings. Could you share with us how the situation in France is actually going right now? And would there be an optionality that the Spanish market would grow faster than number of openings in France in this year?

Yes. I think with the French clubs unstaffed, yes, there's always hope and we are already for years lobbying. So it's not that we are not trying that, but it clearly takes time. I think eventually, one day, it would be very logical to do this. You see more and more things staffless from supermarkets to -- a lot of things are staffless with cameras. So we have built a system. We invest, yes, a lot of money to make that super safe. So once the French government is ready for that and I'm sure in time, it will, then we're also ready for it. But I don't see it happen in the near future, to be honest. But yes, hope is always there. Then if you look at the French clubs, we have, I would say, end of the year, we will pass the 900 clubs in France, top of my head. So meaning the biggest growth is out of France. So yes, in time and maybe not this -- and for sure, not this year and maybe also not next year, but the years after I would say that the Spanish opening will be higher than the French opening, yes.

We will now move on to our next question from Natasha Brilliant of UBS.

My first one is around the target of 100 clubs opening this year and next year. Should we assume that is just organic? Or is M&A still an option for some of those clubs? Second question is on the buyback. Just when -- can you confirm when you will start that? You said 2025, but should we assume that, that starts pretty soon? And then my last question is just coming back on the convertible bond and potential refinancing. Are you just considering the debt market at the moment? Or could you consider equity markets as well?

Yes. So the 100 clubs is without M&A. So the 100 clubs is new openings. The buyback is something, yes, we will start fairly soon, but we will take a maximum of 12 months. But we will not wait until the end of the year, so we will start pretty soon on that.

And for the convertible, we are considering all options.

Okay. And just one follow-up also on the franchise model. Could we see any monetization of that in 2025? Or is the message this is more of a 2026 story now?

I would say that 2025 is definitely reachable, yes. What do you mean monetizing?

[indiscernible]

[indiscernible] No, I would say that will be in 2026 or 2027 even, yes.

Okay. So I assume no revenues from the franchise model until 2026 or even 2027.

Yes, you will see revenue, but no results. So maybe negative results, limited, but...

We'll now take a follow-up question from Marc Zwartsenburg of ING.

Yes, sorry, one quick follow-up. Now that we closed 2024, can you share with us the return on invested capital or the ROCE for a mature French club just to get a feel for where we are and what we can expect going forward in the mix?

Well, I don't know at the top of my head. So Richard will come back on you what that is.

Thank you. We have reached the end of today's conference call. I would like to hand over to Richard Piekaar for any closing remarks. Please go ahead, sir.

Yes, thank you. And thank you, everyone, for dialing in today. And if there's any follow-up questions, you know where to find us and happy to continue the conversation. And with this, I would like to close the call. Thank you all.

Thank you. This concludes today's call. Thank you for your participation. You may now disconnect.