Brait PLC (BAT) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the Brait Interim Results Presentation. [Operator Instructions] Please note that this call is being recorded. I would now like to turn the conference over to Peter Hayward-Butt. Please go ahead, sir.

Many thanks. Many thanks to all of our various stakeholders who took the time to join this call. And most importantly, on behalf of the Board, we would like to thank all of our stakeholders for the significant contribution that everybody made to the recapitalization program that was undertaken at the back end of June, July. We massively appreciate the support that we got. And hopefully, as a result of that, the share price has appreciated all thanks to the contribution that you all made to ensuring that we could get the various bonds and extensions that we needed and the capital raise to do so. So on behalf of the Board, we would just like to start by thanking everybody. In terms of the presentation today, I will just start off with sort of an overview of the business and how things have gone. Sabelo will then take you through the NAV changes and the liquidity. And then with respect to both Virgin Active and Premier, we'll have Dean and Mark talking to the Virgin Active slides and Kobus talking to Premier. We massively appreciate the time that they've taken to attend this. And I'm sure everyone is appreciative of not having this donkey talk to those slides, but rather hearing it from the horse's mouth, so to speak. And I will then come back and talk about the valuations and then the general outlook for Brait. Just starting off with the sort of the general economic update. We get asked a lot of questions, as Kobus mentioned yesterday in his presentation from investors around the general economic situation of the key markets which we operate in, really, that's South Africa and the U.K. Just talking about South Africa first. I think we have started to see the benefit of a year or just under a year without any load shedding. It has had a massive impact, probably less so on businesses per se, although obviously, from a cost perspective, it's been a positive. But I do think on consumer sentiment more broadly, we have seen the benefit of that over the last 6 months or so. The political stability that's brought through the GNU in the South African context has also been positive. I don't -- I wouldn't suggest we've yet seen it in the till, so to speak, from a consumer sentiment perspective, though. Again, people are seemingly more bullish and the policy transitions that we're seeing in some of the key policies that the GNU are incorporating are positive. Look, we need to see those executed before I think we'll see any major step-up in growth rate. But I think from a South African perspective, the whole GNU has been a positive broadly for our businesses. We have seen, as I mentioned, an uptick in consumer sentiment and producer sentiment, both of which are positive for our business. I think Kobus will talk about it in the context of Premier later on and Dean from a perspective of the South African membership base. And hopefully, going forward with inflation coming down and hopefully interest rate cuts coming our way soon, I think that will broadly filter into a better environment for our consumers. So the outlook in the SA context is broadly biased towards the positive, recognizing, obviously, there's many hurdles still to get over from a political stability perspective. The U.K. isn't quite as bullish as that. I'll be honest. Consumers remain under very significant pressure there. The political change hasn't gone seamlessly to be quite frank. I think there's policy uncertainty. Anyone who read or listened to the budget there a couple of weeks ago, you would have seen the increase in NI contributions that's had an impact on both of our businesses there, hasn't been a positive, in my view, from a growth perspective in the U.K. economy. And we haven't yet to see the declines in the interest rates that I think are needed there to get the economy going. So while South Africa seems to be on a slightly better trajectory, we would say the U.K. is probably more benign. I wouldn't say it's going backwards from a consumer sentiment perspective, but it remains a difficult place to be, and we've seen that. Again, Dean will touch about on that from a U.K. membership perspective, but also in the context of New Look, which we will touch on later. In terms of rate overall, as I mentioned the recapitalization program that was completed in -- probably in August has gone -- went really well, went without any hiccups. Again, we are massively appreciative of all the stakeholder contributions to that, both input into the recapitalization itself, but obviously also the capital that went with it. As you will see today, over the last 6 months, an increase in NAV per share of around 8% from the post recapitalization NAV per share up to ZAR 3.10. That's largely been driven by the increase in the Premier share price, credit to Kobus and his team. But I think overall from a growth perspective, the threefold increase in the share price or more than threefold increase from the ZAR 0.59 where the rights issue was priced is reflective of the fact that I think broadly the market has been -- has positively taken the recapitalization. I think it's brought the business time to find the opportunities to exit the window -- exit assets in the right window. And I think that is reflected in the overall share price. We still need to deliver on that, and we'll talk about the outlook for that in the outlook slide. From a Virgin Active perspective, and Dean will cover this in more detail. I think the most important point is we've continued the transition or the business has continued the transition towards a broad a holistic wellness offering. Dean will touch on what that actually means. It's a journey. It's not a destination. There's lots of work still to be done. But I would genuinely say on behalf of Dean, who presented at one of the leading conferences a couple of weeks ago that I genuinely believe that Virgin Active has got -- has stolen a march on some of our competitors and is one of the operators that really is leading the whole wellness journey, and Dean can touch on a bit of that later. So credit to Dean and his strategy and his team. We'll also talk to some of those slides later on about pre-COVID, where this business was pre-COVID on a like-for-like basis to give context. What happened during COVID and the recovery out of COVID to the business, what decisions had to be made by the management team, quite frankly, in some cases to keep the business alive. But I think what we're now starting to talk to is that's behind us, right? We're starting to talk about a new growth strategy. Dean and his team will talk to that. And it's massively positive from that perspective to no longer be talking about how do we extract ourselves from this COVID malaise into something which is much more positive and growth driven. We continue to see lots of investment in the membership engagement, I'm getting to those slides here. And that talks to lots of things. It talks to investment in the facilities within the gyms. The gyms themselves, making sure that we refurbish gyms that are looking tired. Updating our IT. We spent a huge amount of CapEx in IT over the last 2 to 3 years. New clubs that we're looking to open and then refurbs on existing clubs. All of those go to the heart of membership engagement, quite frankly. And overall, it's a war to reduce attrition. At the end of the day, if we can reduce attrition in this business, that will be the key driver of growth going forward. And again, Dean will touch on a lot of the smaller things that are being done, all of which are cumulative to ensuring that we manage attrition over time. I do think we'll again touch on a slide in the pack that Virgin Active has a really distinctive investment proposition for investors going forward when it comes to market. It's in the premium space. I think it's got a wellness -- stolen a march from some of the competitors in terms of wellness. And I think it's got growth levers, both in terms of organic growth, but also new club growth and new offerings and M&A potentially that will help drive this business to the next level. And again, Dean will touch on all of that. From a performance perspective, it's been a great year, quite honestly. And again, none of this is credit to us, it's credit to Dean and his team. We've seen membership growth and yield increases driving revenue overall up 16%, excluding Kauai. I think it's around 18-odd percent, including Kauai. EBITDA up fourfold from about GBP 12 million to a year-to-date number of GBP 55 million, a run rate EBITDA increasing up to GBP 94 million. And again, we can touch on that. And all of that is due to membership growth, yield, lower attrition, which Dean and the team have managed to achieve and obviously some new clubs that have opened. So again, Dean will talk to the story, but a lot of positivity around Virgin Active. And again, as I stress, we're no longer talking about coming out of COVID and how did we do it, but how do we grow from where we are today in terms of this business going forward. From a Premier perspective, and again, I just want to congratulate Kobus and his team on a fantastic set of interim results that came out yesterday. It's very, very easy for me to talk about this. But again, all the credit on this must go to the management team there. A very, very strong performance both on a relative and an absolute level. Revenue in this business up 4%, both volume and price driven, but that led to a 14% year-on-year increase in EBITDA and much more [ pertinently ] at 33% increase in earnings per share, a fantastic result, I think certainly ahead of market consensus. And with a return on invested capital at 22.7% and gearing now just below 1x, that really has achieved all of the objectives that the team set out to achieve at the time of the listing and surpassed them. So we'll let Premier talk to that. In terms of the growth levers going forward, there also remain significant opportunities there. There's market share growth, particularly in the Millbake business, but also in the Confectionery and Lil-lets business. There's operating leverage and efficiencies being the lowest cost producer really enables you to grow your operating leverage and benefit from that. There's free cash flow. I think the ZAR 1.4 billion of cash flow was free cash flow in the last 12 months has led to the deleveraging in the business, which obviously leads to value growth for investors. And as Dean -- sorry, as Kobus mentioned on the call yesterday, there are a number of acquisitions, one in the Goldkeys acquisition, which was made this last period, but other opportunities for the business to look at responsibly going forward. So lots of growth levers, lots of great performance to date, and I'll leave it to Kobus to talk to that. On New Look, not quite as positive an outlook there. It remains extremely difficult trading conditions in the U.K. I know I've been saying that for some time, particularly around the weather. So -- but anyone who's been there recently and Kobus is there today, will tell you that the weather has been dire, continues to be dire, and that's not necessarily good for fashion retail. But having said that, the online business had a very strong performance over the last year and 6 months in particular. The bricks-and-mortar business actually went backwards. But having said that, we've reduced the number of stores given that the CVA program ran its course during 2024. So we lost a number of stores, about 5% of the footprint. And obviously, footfall was down. Those are exogenous factors that make it very difficult to grow the retail or the bricks-and-mortar business. But we'll touch again on this in more detail. Importantly, the gross margin remained slightly up year-on-year, but the inflationary impact on costs and, again, anyone operating in the U.K. at the moment will understand that inflationary costs are significant in the business, meant that EBITDA reduced from GBP 40 million, which is the number that we had as of March down to GBP 35 million that we're now using for our sustainable valuation multiple. From an outlook perspective, we do expect improved consumer sentiment. When it arrives, we don't know. We are slightly more bullish around the Christmas quarter this year than we were last year, but a lot of that remains to be seen. And the management team continue to focus on reducing central costs in that business to reduce costs overall. So broadly, we'll go into more detail on all of this, a good 6 months, particularly with the recapitalization, lots of growth opportunities in Virgin and Premier, which the management team will talk to, and I'll come back and talk to you at the end. I'll just hand over quickly to Sabelo to talk through the slides on NAV.

Thanks, Peter, and good day all. Starting with Slide 7. As Peter stated, NAV per share is ZAR 3.10, which increased by 8% compared to March 2024 on a like-for-like basis after adjusting for the recapitalization. Total assets of ZAR 15.6 billion at reporting date is weighted 61% Virgin Active, 28% Premier, 6% cash and receivables and 5% New Look. Total liabilities of ZAR 4.6 billion comprised ZAR 2.7 billion on the convertible bonds, ZAR 1.8 billion on the BIH exchangeable bonds and accounts payable of ZAR 155 million, which largely comprises the coupon accrual of these 2 bond instruments. The BML RCF was undrawn at reporting date. The resulted NAV of ZAR 12 billion represents ZAR 3.10 per share. Slide 8 sets out movements in balance sheet positions for the period. To note at the outset that's the peer group for New Look remains unchanged. In line with its wellness strategy, Virgin Active's peer group was adjusted to exclude Technogym and include Lifetime Group. Virgin Active's rand carrying value has been maintained at a circa ZAR 10.1 billion. Virgin is valued on a December 2025 EBITDA estimate of GBP 123.9 million. The forward valuation multiple of 9x remains unchanged and net third-party debt was GBP 414 million post shareholder capital injections during the period. Premier is valued at its JSE closing price of ZAR 104 per share, which equates to an implied EV/LTM EBITDA multiple of 7.1x. Brait's shareholding in Premier is 34.4% compared to 35.4% in FY '24. The reduction in shareholding is a result of the September 2024 sale of 1.4 million shares in Premier, raising proceeds of ZAR 142 million. New Look's carrying value reflects a 13% decrease in GBP with maintainable earnings of GBP 35 million. The unchanged spots multiple of 6.5x represents a 39% discount to the peer group's average multiple of 10.7x. No normalization adjustments were considered in net third-party debt of GBP 32 million and Brait's equity participation in New Look remained 17.2%. The decrease in cash and receivables of ZAR 800 million was largely due to the full repayment of the outstanding amount on the BML RCF in September 2024 and Brait subscriptions of GBP 2.9 million and GBP 24 million in Virgin Active's convertible preference shares issued in June '24 and its GBP 34 million capital raise in September 2024, respectively. Turning to Page 9. The liability movements were driven by the BML RCF being fully settled following the Rights Offer concluded in August 2024. GBP 44 million for the exchangeable and convertible bonds, including IFRS accounting charges and adjustments for the term extensions and partial repayments pursuant to the recapitalization. Slide 10 analyzes Brait's liquidity and debt and is set out on a consolidated basis. The closing cash balance of ZAR 850 million, mainly consisting of the remaining proceeds of the rights offer, resulting in available cash and facilities of ZAR 1.9 billion. Lastly, Brait is in compliance with all debt covenants at reporting date. Thank you, and back to you, Peter.

Thanks very much, Sabelo. And without any further ado, thanks very much to Dean and Mark for taking the time to join us today, and I'll hand over to Dean.

Thank you, Peter, and good afternoon, everyone. Peter, if you can go to the next slide. Just I thought I'd start and just have a look at some of the trends that we've seen in the industry. And then actually, I don't like to refer to these as trends anymore. They've really become permanent lifestyle habits. So it's the real changes post-COVID in terms of how people see health, how they see fitness, how they see wellness. And probably the most important changes in habits we see is that post-COVID, there's a much, much greater awareness, increased knowledge about health, about personal well-being and fitness. And when people look -- consumers look at well-being and fitness, they don't look through such a narrow lens anymore. Exercise is certainly part of that, but they start looking at things like nutrition, sleep, mental wellness as well. So looking at through a much, much broader lens and certainly much greater awareness and knowledge. We also see consumers looking for in-person experiences, what we call in real-life experiences. What we saw through COVID in terms of online offerings, exercise offerings has really fallen away. And you've seen that in the impact of the likes of share prices of groups like Peloton exercise groups that are focused on at-home exercise, online exercise. And we see it in the restaurant space as well. We see it in Kauai, more and more consumers wanting to have in-person, in real-life experiences. A lot of the online activities today are contributing to loneliness and loneliness is one of the leading causes today. And in fact, it's higher than obesity in terms of mortality rates that is affecting consumers' wellness. So these online activities, negative impact on loneliness, negative impact on health and, therefore, people are looking for in real-life experiences. And in fact, prioritizing experiences over possessions, and that is driving the fitness and the wellness model. Younger people today are much more aware and much more health conscious. They're looking for healthier spaces to socialize, what we call nontoxic spaces. Sure, the pubs and clubs, people are still going. But more and more, we're seeing young people wanting safe, healthy spaces to socialize and to be with friends. And at the same time, mid-lifers, older generations are seeking ways to be more active, to keep active. They want to be part of communities. They want to socialize. And they're looking for ways not only to live longer, but to live better. And you hear this buzzword at the moment around longevity. Everyone is searching how do I live better, how do I live longer. So we've seen this impact across not only young people, but mid-lifers and older generations as well. All of this is driving what we call the wellness economy, and we've seen significant growth and strong growth in the wellness economy as consumers allocate a much higher proportion of their disposable income to wellness. What does that mean for Virgin Active is that we've evolved our strategy and really '24 was the time we started to bed down that strategy where we want to be more than just a gym. And we've evolved from just a gym to what we call a Social Wellness Club. And important, maybe just to understand what are the differences between what Virgin Active is today and what -- as Peter said, it's a journey. It's certainly not -- we're not at the destination yet. But what is the difference between a gym and a Social Wellness Club. And the gym really focuses on things like fitness, conditioning, performance. And those are all extremely important. And it's important to note in our new model, in our new strategy of being a Social Wellness Club, we are everything a gym has to offer. So we're not forgetting the gym model. In fact, we have probably the most state-of-the-art gym facilities, gym equipment, amazing gym floors, largest state of swimming pools, cardio equipment. So included in the Social Wellness Club is a state-of-the-art. But it is much more rounded than that. It has a much broader proposition than just a gym has. In our clubs today, you see things like boutique exercise studios. Most of our clubs have a minimum of 3 studios, many clubs up to 6 studios. And in those studios, we do things like reformer pilates, yoga, hot yoga, sound bath, boxing, cycling, high-intensity workouts. So a whole lot of group specialized boutique-like group exercise experiences. There's a big focus on our spa facilities. In many of our clubs today, we have sauna and steam. And recently, we've started to add cold plunge that gives us -- our members the ability to do what we call contrast therapy, hot and cold therapy, which not only has a whole lot of physical benefits, age recovery, but also has an impact on overall mood and energy levels. We've introduced workspaces, dedicated workspaces, co-working spaces, meeting rooms, and we've seen a great uptake in the use of those spaces. The Kauai transaction brought a strong food and beverage offering. So all of our clubs in South Africa now have the Kauai offering, and we started to roll out the Kauai offering across our U.K. estate. We're up to 17 Kauais in the U.K. We've started to roll out in Italy, in Thailand, in Australia. So an important part of the proposition inside the clubs is the food and beverage offering. But it goes beyond just the physical spaces when we talk about a Social Wellness Club. It's also around the overall experience. It's around service levels, and it's around the type of support that we give our members. We have to elevate the service levels. We have to give an enhanced experience when we talk about what we see, sound, scent, all of that contributes to the overall member experience. So we've turned our gyms into what we call the Social Wellness Clubs, effectively a second space for our members. The members have their home and then they have the second space, a space between 6 in the morning and 9 in the evening where they can come to work out, they can socialize, they can work, they can engage in our recovery activities. They can use our spa facilities. So this is what -- how we've evolved from just a gym to a Social Wellness Club. What are the reasons, though, why do we want to be a Social Wellness Club? Why do we want to be more than just a gym? And if we start with the financial reasons, when it comes to a Social Wellness Club, the total addressable market is significantly bigger. The gym market is a good market, a nice sized market. But obviously, once we go beyond someone who's just looking for traditional fitness, we access a much, much larger market. People that are looking for spa facilities, co-working spaces that are into mind and body yoga type offerings, et cetera. So a much bigger addressable market. And also, if you look at the age set that is attracted to a wellness club, it's a much broader age set. Wellness is not at a point in time. It's a lifelong pursuit that crosses all age groups. So we get a much larger addressable market. The size of the market we can go after as a Social Wellness Club is significantly bigger. When we look at yields, and we're always trying to move yields, the ability to raise prices is really a factor of 2 things is what additional value can you offer members. We can't just push up our prices, but our members do appreciate additional value. So what additional services, products, experiences can we offer them and how we differentiate it to the competitors, how we're able to charge higher prices through differentiation. And a wellness club with all those offerings I spoke about earlier, enables us to differentiate ourselves. It enables us to demonstrate additional value to our members and that additional value is our members are prepared to pay for, and we've seen that come through in higher yields. The third criteria from a financial point of view and what the wellness club delivers versus just a gym is around share of wallet, what we term ancillary revenue. It's important for us to start capturing a greater share of our members' wallets over and above just their membership fees. And a more affluent consumer, social wellness consumer is more likely to purchase a whole lot of ancillary services, things like personal training, our learn to swim offering. So we see increased ancillary revenue beyond membership dues in the Social Wellness Club. Then probably the fourth one and the most important for me, and Peter spoke a little bit about it, is around retention. What amazed me, I'm really relatively new, last 2.5 years in the gym industry. And the gym model to me was always something that I was quite astounded about in terms of the levels of attrition or churn in the gym business, not in the Virgin Active business, but in the gym industry as a whole. And in my opinion, that's driven largely around gym to most people being a choice. It's physical exercise and people have the choice between going to exercise or staying at home and going for a meal or sitting on the couch and watching Netflix. People are really honest, many will choose the Netflix over the chore of going to exercise. That Social Wellness Club changes all of that because of the broader offering because it's not just about exercise, the ability to socialize, meet friends, to work, to have a spa, to have sauna, to have steam, cold plunge. All of that results in our members having much higher dwell time. So instead of just going to the gym, exercising for an hour and leaving, they generally spend much longer in our clubs. Not only do they spend longer, but they come more frequently. So more -- they come to the clubs more often during the week than they would just with the gym. So you've turned something that's a gym experience that's traditionally quite a chore into an enjoyable experience, into an experience that people actually want to do as frequently as possible. And one of the things that's clear in the industry is the higher levels of engagement we have, the more often our members exercise with us, the longer they exercise with us, the better our churn rates, the reduction in churn. So there's a direct correlation between engagement, how often our members exercise, what they do with us, do they do group exercise classes and the churn in our business. So we've seen really, really an impact in terms of -- a decent impact in our churn levels and retention with the Social Wellness Club offering. And then the last point is around differentiation. It significantly differentiates our brand from some of the other gym operators out there. And I think if we're able to be seen as way more than just a gym in the long term, that's going to have an impact on valuations. Social Wellness Club, a wellness model should attract different multiples and different valuations to just a gym. Peter, if we can go to the next slide. If we just have a look, how does that strategy, how does that wellness strategy play out? And if we start with pre-COVID and we look at the EBITDA of GBP 142 million, on a constant currency basis, if we adjust that for the '24 and '25 currency that we've used in our budgets, that's the equivalent of around GBP 125 million. And you'll see in the Brait valuation, they referred to maintainable or sustainable EBITDA of GBP 124 million. And that's really a similar -- you see a similar number to that constant currency number from 2019. What we think as a business, once all the recoveries paid out post-COVID, that's a sustainable number in the business of around GBP 124 million. We've just come through that recovery phase. And through COVID, there was significant underinvestment in the business. I mean, as Peter alluded to, the business was largely in survival mode. We had to rationalize the U.K. estate from late '22, '23 onwards. We also changed the cost structure in the business. The management structure significantly changed, really starting to lay the foundations for this post-recovery era, which really started in earnest post-'24. When we look at that post recovery, certainly from the beginning of '24, the major focus areas for myself and the team have been around driving revenue in the business. And it's important to differentiate between revenue and membership numbers, pure volumes. I mean the business -- subscription business has often referred to just member numbers, whereas we see it more important to look at revenue, which is a contribution of volume. Obviously, volume plays an impact there. But we focused on quality of sale on our yields and on retention. And when we look at yields, it's not only our headline, our selling prices, but also the product mix, the mixes between youth and premiers, different types of membership product mixes. And also our under yielded members, there's a whole base of existing members that are significantly under the headline price, and we've been working to yield those existing members up to improve our yields, and we see that come through in our numbers. And then the last one in terms of revenue is obviously around retention. We've launched the loyalty program and app in South Africa. We've launched in the U.K. now. Just over 70% of our members are using and highly engaged with the app, and we've seen the app play a role in reducing churn numbers. It's not only the loyalty program. The data that, that app is giving us enables us to personalize and connect with our members in a much better way. We built a data platform today. So we have a single view of our members, and we're able to interact with our members way more effectively. It's also around the experience. We do believe an enhanced experience, better service levels, the investment that we made into our club all have an impact on churn. So from a focus point of view, heavily focused on revenue through '24. And as I said, we see that coming through in the numbers. From a CapEx point of view, because of the underinvestment from -- through the COVID period '20 to 2022, '23, '24 has been a catch-up of some of the underinvestments. So we've had to play some catch-up in terms of maintenance CapEx, but we've also managed now to start investing in growth opportunities, investing in the wellness strategy, rolling out reformer pilates studios, cold plunge, workspaces, the Kauai in the U.K., all growth opportunities that facilitate the wellness model. And if we have a look at that, the impact in '24 based on where we are year-to-date October, we estimate that we'll end the year '24 on around GBP 81 million of EBITDA. So I think a lot of those evolution of the strategy, the changes in some of the operating structures have facilitated that growth from the GBP 22 million in '23 up to the GBP 81 million. From a maintainable EBITDA point of view of GBP 124 million, as I said, that's where we see the business should get to post recovery. When do we expect to see that, the GBP 124 million? On a run rate basis, we would expect by Q2 '25 to be seen a run rate annualized EBITDA of that GBP 124 million. The actual EBITDA for '25 due to seasonality may vary slightly, but not material, potentially in the range of around 5% from that GBP 124 million being achieved through '25. Post-'25, I mean, due to the new structures that we put in place, central structures, cost-effective structures, reducing costs, there's significant operating leverage still within the business, '25, '26 and post that. So we see an uplift through that operating structure, through the operating leverage as we premiumize and we're able to invest into the clubs, the existing clubs, we see increased yield opportunities, increased retention opportunities that will fuel growth post that maintainable number. And then also in terms of identifying new territories, not only investing in existing clubs and existing facilities, but the new central structure where we have one central team that's able in Europe to go invest into new territories or facilitate new clubs, which will deliver growth beyond that maintainable EBITDA number. Peter, next slide. So from an investment proposition point of view, the Virgin Active brand and the Virgin brand is internationally recognized. I mean we've seen it as we've looked at new territories. I mean we're busy building a club in Qatar and a capital-light model. I'll touch on that a bit later. But what we've seen is as we go into new territories where we don't currently operate, the brand is extremely well known. So that assists us with any future growth opportunities in new territories. The position of the brand or the repositioning of the brand, we've definitely taken a leading -- a market-leading position to reposition the brand from just a gym to a wellness club. So I think we've got a start on the competitors in that space. We do think more and more competitors will embrace the wellness proposition, but we're definitely ahead of our competitors. And we're also firmly positioned in the premium space. We know where we want to be. The premium space is the space that we understand. We know we see the stronger growth. We see it less -- being less price sensitive. So moving out in some of the territories where in that recovery phase we were, call it trapped-in-the-middle market, position ourselves through capital investment, through service levels, through experience into that premium space. We -- from an existing estate point of view, I think it's important to recognize that Virgin Active in that premium space is one of the only global -- truly global players. We have some premium players, for example, in the U.K. space. But on a global scale, Virgin Active outside North America is really the only truly global player. I mean we have clubs in some of the most iconic cities around the world from obviously, Cape Town, Johannesburg, but London, Singapore, Bangkok, Sydney, Milan, Rome, Naples. So some of the most iconic cities in the world, now in Doha or about to be opened in Doha. So a really strong global footprint in that premium estate. And not only do we have global cities, but the locations that we've secured in those cities, iconic locations within iconic cities with long leases make it difficult for competitors to catch up on a global scale and secure spaces like we have. So an incredibly valuable existing estate, global estate across the world. From a performance matrix point of view, we -- through that recovery phase through '23, we had a look at our cost base. There was significant cost that was taken out of the business. It wasn't only about reducing the cost base in the business, but also about making our business more efficient, facilitating, as I said, the ability to go into other new territories across Europe without the need to put head office structures down. So I think our ability now to leverage this lower cost base across growth opportunities has been enhanced. And then from a management point of view, an extremely aligned management team, myself heavily invested into the business. So highly, highly aligned with all the other shareholders in the business. We've got quite a diverse new team in the business. So we brought in some people from outside of the industry, some digital experts, subscription experts, customer service experts, IT experts that have come from outside of the industry to enhance the extensive industry experience that we've already got in the business. So it's a new talent, existing talent and a really strong management team that's not -- that's open and willing to change into new structures into the wellness structure. And from a profitability point of view, we've touched on many of these things. A high, high focus in terms of customer lifetime value, and we believe the wellness strategy enhances all of these yield, volume growth, retention and share of wallet as I've spoken about. We're able to optimize the existing lower cost structure and some of the tech that we facilitated in our business to drive higher margins and taking a really disciplined approach to our investment, a quantitative disciplined approach to what we invest and how we delever the business. And then probably most excitingly is the growth opportunities that we see. We've seen it by reinvesting into existing clubs and what that does to our retention numbers, to our yields but also a strong pipeline of new clubs in Italy, we see. We're building a new club currently in Australia in an iconic location. And then also in new territories, the ability to go into new territories either ourselves or like we've done in Qatar, which is a management contract. So we're not responsible for any of the capital that goes in there. We run it as if it's a corporate club, but it's a capital-light model. And still, as I said, significant ability to yield up our estate. And then where it's possible through opportunistic acquisitions, we would look at potential acquisitions of individual sites as opposed to greenfield sites. Next slide. I'm now going to hand over to Mark Field, our Group CFO, will take you through some of the numbers.

Thanks, Dean, and good afternoon, everybody. I'm going to start with the Virgin Active revenue performance for the 9 months ended September '24. These numbers exclude Kauai. Our year-on-year revenue growth has been 16%. And importantly, we've seen all 4 of our territories contribute to this double-digit revenue growth. Starting with South Africa, we've seen strong sales in the business. We focused on quality of sales and selling high-yielding membership options, particularly our premier all-club access option. And that's been combined with improved retention levels as we've invested in our clubs and as we've engaged our members through our app and loyalty program. So we've seen a 5% increase in membership year-on-year to 634,000 members, a 10% yield increase, and that was driven by the positive sales mix as people purchase high-yielding membership options and a 4 percentage point improvement in our retention rate. Moving on to Italy, which had a 19% year-on-year increase in revenue. We continue to see strong sales in our Italian business despite us putting up prices in certain of the clubs in our portfolio. Membership grew 7% to 188,000 members. Yield grew 6% as we put prices up in certain clubs. We did see a 3 percentage point drop in our -- or increase in our churn rate. This has been driven by the fact that in the prior year period, we had a high number of post-COVID recovery sales, and those sales have been maturing in the '24 period. So what we're seeing is a normalization of churn rates rather than deterioration of churn rates. So Italy's attrition rate of 45% remains industry-leading. Moving on to the United Kingdom. As Peter mentioned earlier, it remains a benign economic environment. We've seen an 11% increase in revenue year-on-year. Both sales and retention remain robust. We've seen a 5% increase in membership to 139,000 members. We've seen a 7% increase in yield over and above the CPI increases we have put through increases in clubs where we have reinvested, and that's given us a 7% yield increase. And then we've seen a 3 percentage point improvement in our churn rate. In the U.K., we've been focused on engaging members who are out of contract to recommit to 12-month contracts, and that supported us in terms of retention. And then finally, looking at APAC, we've seen a 20% year-on-year improvement in revenue. That's been a 7% growth in members to 63,000 members, 4% yield growth, a slight deterioration in our churn rate for the same reasons as Italy, where we saw high sales in the prior period maturing into the current period. Next slide, please, Peter. Looking at our key KPIs across the business, once again, excluding Kauai. Our sales for the 9 months ending September '24 margin over 368,000 members. That's a 5% reduction year-on-year. Two primary reasons for that. Firstly is the prior year had a stronger post-COVID recovery period, and we're seeing a normalization into '24. And the second part has been we've been focused on quality of sales rather than quantity of sales. So we're looking to sell to members who will pay us more per contract and have a higher propensity to stay with us, all looking to drive improved attrition. Our attrition rate has improved from 45% to 42%, driven by a number of factors, quality of sales, maintenance of clubs, increased customer engagement through our app and loyalty. The resulting membership increase has been 6% to just a touch under 1,024,000 members. Our yields have increased by 9% to GBP 37.8 per month. And the drivers of that have been underlying CPI increases plus the investments in the clubs plus upselling our members to high-yielding membership options. The 6% growth in members, combined with the 9% growth in yield and some growth in ancillary revenues has resulted in a 16% increase in the -- our revenue to GBP 408.9 million year-to-date. And our EBITDA year-to-date is GBP 55 million, which is over 4x growth over the prior period. And when you look at the increase in revenue, 72% of the increase in revenue has converted to EBITDA, and that demonstrates the underlying operating leverage in our business. Next slide, please. Looking at the results here, including Kauai. So including Kauai, our revenue for the 9 months to September is GBP 430.6 million and our EBITDA GBP 56.9 million. When we look at run rate EBITDA and run rate is the EBITDA in the month multiplied by 12. The September EBITDA run rate was GBP 85 million. The October, the current run rate for the business is GBP 93.7 million. Looking on the right-hand side, we provide some segmental breakdown across our various geographies. The 2 points to highlight are, firstly, that all territories have contributed to the growth in revenue and EBITDA. And our Kauai business has seen a 66% increase in revenue and a 35% increase in EBITDA, demonstrating that business continues to benefit from strong trends in the healthy eating space. Next slide, please. Right. Looking at how we get from our current run rate to the GBP 123.9 million maintainable EBITDA. The key stepping stones for us are volume, yield, ancillary revenues and costs. And the way we look at it is we look at our -- extrapolating our current trends and overlaying that with the operating leverage in the business. So if you look at what this business delivered in the 12 months to September '24, we grew 59,000 members. We grew yield by 9%. We had a 16% improvement in ancillary revenues, which essentially tracks the growth in our membership dues, and we get a certain penetration of membership dues revenue from ancillary revenues. And then we get CPI-related increases in our cost base. If we look at what we did over that September past 12-month period, and we extrapolate that over another 12-month period, if we grow 52,000 members versus the 59,000 that we grew in the previous 12 months, if we grow our yield by 6%, which is essentially CPI plus a flow-through of the yield increases that we have been putting into the estate, plus 12% growth in ancillary revenues, tracking the growth we're seeing in the June's revenue and a CPI-related 5% growth in costs, those stepping stones take us from the September run rate of GBP 85 million to the GBP 123.9 million sustainable EBITDA. Next slide, please. I'll hand back to Dean for the slide.

So in addition to the existing estate, I just want to have a look at some of the growth opportunities. And if we start with the existing estate, except for the U.K., and we're the #1 premium operator in all the markets that we currently invest -- I mean, currently operate in. We've embarked in our existing estates to premiumize or to convert the gyms into social wellness spaces, as mentioned, where we've executed on that, where we've changed clubs and we've added ice bars and studios and workspaces. We've seen a fairly immediate impact on yields. We've been able to yield those clubs up. But most importantly, we've seen an impact on churn and attrition rates. Italy, APAC, a well-invested estate and the opportunity in Italy is around new clubs, and we've got a strong pipeline of new clubs in those -- in Italy. We've opened -- we're busy working on a new club in Chelsea. We managed to secure an iconic site, as I mentioned previously, in Bondi in Sydney, that was an incumbent that was the most profitable club across their estate, a competitor of ours. That site went to tender and the large mall operator in Australia bought into the social wellness strategy, and we're able to secure that site. So that's a club that will open in April, May of next year. We spoke a little bit about Qatar, the capital-light model, the Doha club also opening in the second quarter of next year and an opportunity to roll Kauai and Nu, we've seen really strong performance in Kauai and Nu. We think there's a gap in European markets for a convenient healthy offering that addresses more than 1 daypart, strong breakfast-lunch offering, so the ability to roll out Kauai and Nu. So really exciting growth opportunities across not only the existing estate, but also in terms of new clubs in existing territories, but new clubs in new territories as well. Next slide, please.

Okay. So the purpose of this slide is to illustrate the normalized levels of CapEx in our business. When we look at the CapEx, we see 2 components. First is maintenance CapEx, which include IT CapEx, head office CapEx. And the second component would be growth CapEx, which cover new clubs and premiumization of our existing estate. When we look at normalized CapEx, industry norms for premium clubs like ourselves is annual maintenance CapEx should be 6% to 7% of revenue. So in our case, that would translate to GBP 40 million. When you look at our historical spend, clearly, we have underspent during the COVID period as we sought to preserve capital. What we've been doing in the '23 and '24 calendar years is looking to catch up, as Dean touched on earlier on. And if you average the investment that we put into the estate over the 2020 to '24 period, it averages out at GBP 40 million. When we look at new -- and so GBP 40 million is what we see as a normalized level and subject to CPI is what we would be expecting to spend across the estate going forward. Obviously, that number will grow as we grow the number of clubs. Looking at new clubs and premiumization of growth CapEx. This is very much opportunity driven. We are always looking for opportunities to invest in our current estate or to invest in new clubs where they meet our strategic imperatives for the business and where they meet our targeted return on capital being the IRR of 20% to 30% and getting a free cash flow conversion of 80%. So subject to our strategic imperatives, subject to achieving our investment hurdles and obviously subject to availability of capital, we are always looking for new capital opportunities in this business. So that -- illustratively, we put in GBP 10 million on a normalized basis. That number may fluctuate. The more opportunities we get that can deliver our hurdle rates, the more we will do.

Okay. Thanks, Mark. Lastly from my side, just to sum it up quickly, I'm not going to take you through what we've already spoken about. I think Virgin Active now, we're post that recovery phase. We're well on our journey to become a leading global wellness business. We have enough proof points now to demonstrate that a global wellness business or a wellness business versus gym delivers us superior financial performance, increases our growth opportunities, and we believe a wellness business will deliver higher multiples than just the gym business. We're starting to see that come through, as I said, with these proof points in our numbers with the current run rate EBITDA of GBP 93.7, maintainable EBITDA now clearly within our sights. As I mentioned, we forecast to hit that from a run rate point of view in the second quarter of next year. So as I said, it's really the growth beyond maintainable EBITDA that we see it exciting. We've got the team in place, the structure, the culture, the strategy and really exciting post recovery to see where the business can go to. And Peter, that's all from us. Back to you.

Yes. Thanks, Dean and Mark, and thanks for your insights. It's great to hear it directly from you guys. Speaking of good results, let's hand over to Kobus to talk about Premier. Kobus, are you there?

Apologies. Just a moment while we reconnect Kobus.

Okay. Let's just move to the New Look section. I'll just take you through New Look quickly and then we can come back and talk about that. So in terms of New Look, as I mentioned at the outset, a slightly different consumer outlook at the time in the U.K. Consumers still remain under pressure there. We are starting to see some of the green shoots of recovery certainly in our recent numbers, but it's been an extremely tough 6 months. As you can see, revenue overall down just over 3.5% year-on-year. Very importantly, the management team remains fixated on ensuring that gross margin remains. And you can see the gross margins and gross profit was up slightly, which was a positive, particularly not rushing to discount. That said, with the inflation in the cost base over that period of time, we've seen an increase in cost resulting in a decrease in EBITDA from the previous year of around about 23%. As we said, the U.K. business the whole market remains relatively promotional in its outlook. We had to respond to that, and we continue to put certain articles on promotion. That said, we have started to see the early signs of recovery in our winter wear and normally that continues into the third quarter. In terms of maintaining market share, the business has continued to do that, which I think has been important, so it hasn't forsaken any market share. In doing so it just show that the whole market is under pressure. But what has been relatively pleasing is the money that we spent over the last 4 or 5 years on our e-commerce platform has paid off with a pretty resilient performance in that business. And again some of our third party partnerships that we have engaged in and entered into over the last probably 18 months to 24 months are starting to pay dividends and we continue to look to invest in that. Again, just looking on an year-on-year basis from a revenue perspective, as I mentioned revenue is slightly down. The retail decline really driven by a 5% reduction in trading space, and that resulted from the CVA that we did in 2020. So those sites will all go at the end of that period of time. And obviously, the footfall decline which has hit the overall market. As I mentioned online traffic and demand actually remained pretty resilient, to be honest, which is good. And I think what we have seen, and this is from the business, we saw a positive reaction to the August summer sale and we are starting to see people move relatively quickly into our winter wear, which has been a positive. So a long way to go. It's going to be an interesting third quarter, but it remains a pretty tough space, as you can see in the fact that overall, the EBITDA was down 23% over the course of that period, really driven by the fact that costs were up over the period. Management remain focused on reducing that cost base. But importantly, there's still some way to go on that. So that's New Look. Kobus, are you back online?

I am, Peter. Yes. Thank you.

Let me just go back to your slides there. Do you want to take it away?

Yes. Thank you very much. I'm sorry about that. I think the web link phone -- link doesn't work very well. So I'm just on a phone line. If we start with the slide with the 7 bullets on it there. I think that it's a very strong performance during the 6-month period from our Millbake division and Premier is unashamedly a Millbake business. It represents 83% of our profitability. And so it is really the big engine in the room that is firing quite well for us that is allowing us to deliver the results. Our Groceries/International business, I think we're very satisfied with the performance of our Lil-lets and cotton wool business under Dove Cotton wool. We're very happy with the performance of our candy businesses under the Mister Sweet Manhattan and a few other brands. It's really a matter of the CIM business in Mozambique, Companhia Industrial da Matola that has had a very tough period during the 6 months with continued depressed economic conditions weighing quite heavily on that business in country and with a whole bunch of initiatives underway from our side to try and augment that. The benign revenue growth from a Premier perspective was effectively driven by lower global wheat prices and a stronger rand, further assisting us to get better currency hedges on the importation of wheat. And we were able to use those lower wheat prices to offset a lot of other inflationary pressures like fuel and wage increases, et cetera, in our business. And so we were quite comfortable that between the volume growth that we've shown, we've also been able to use the additional margin to continue to deliver the results for the 6 months. So strong EBITDA across all our divisions. From a CapEx perspective, the major project being our Aeroton Bakery rebuild that is the last bakery in our portfolio that really needs to get up to the standard of the rest of our portfolio. And project is well underway. We've shown before that it's a ZAR 700 million project over 2.5 years in order to construct, and we're still on track for second half of next calendar year. So it's back second half of 2025 in order to bring that online. At the same time, we've continued to improve our returns on our invested capital as the investments that we make drives returns ahead of our current return on the rest of our portfolio. And so we're continuing to see an improvement in our return on invested capital. And then we -- from a free cash flow perspective, we continue to generate nice free cash flow, but investing heavily into the CapEx program, but with a debt level at about 1x EBITDA and also recently refied at rates that are really at the lowest end in terms of margin that we've been able to see in our careers. It really does stand testament to the risk profile that the banks are assessing on the Premier with the onetime gearing of debt. Then just from an overview perspective, revenue up just under 4% to almost ZAR 10 billion. EBITDA up 13.5% to just under ZAR 1.2 billion. Nice margin expansion for us on EBITDA continuing now almost 12%. EBIT margin growing to over 17% as depreciation remains fairly flat and the positive draws of the EBITDA growth flows through the income statement. EBIT margin up to almost 10% for us now. We've spoken about the ROIC and then our net profit margin getting close to the 6% level. And then for us as well, we previously had normalized numbers as we had certain restructuring expenses in the lead up to our listing that has now anniversaried out of our numbers. And so our EPS and our HEPS are both the same number at ZAR 4.36, up ZAR 0.38 and our third-party gearing at 1x. Just from a divisional performance, showing the low revenue growth in the Millbake division, but I think that one must also remember that 2 years ago, that revenue number was running at around about 30%. And so it's very heavily tied to price movements on commodities, and we don't pay that much attention to that. We're much more focused on managing our margins. And there, we'll see that the EBIT margin now -- EBITDA margin going up to almost 14% in the core Millbake division. And as I mentioned, the Aeroton Bakery project well underway as we speak here. Then from a Groceries/International perspective, a very good story, as I said, on Sugar Confectionery and Home and Personal Care. Very happy with the performance on those businesses. We're also investing quite a lot in the HPC factory in Durban to further increase the economies of scale. We're at the moment, commissioning our new liquorice line within our candy business and chocolating capabilities that we're expanding quite significantly to onboard especially more business with Woolworths. And so we're seeing nice performance and EBITDA growth coming out of those businesses, offset by the tough conditions in Mozambique that I've touched on. From an income statement perspective, just the positive draws that I've spoken about, revenue growth of 4% going to EBITDA growth of just under 14% going to EBIT growth of just under -- over 17% and then going to 33% by the time we get to the net income level as we've also managed to reduce our interest bill with the capital repayments that we made in 31 December last year of about ZAR 600 million that has now started to flow through into our interest expense lines. From a cash flow perspective, we're happy with the cash generation. The working capital movement really, to a large extent, influenced by the big inflationary pressure that we've seen on the maize side of our business as maize have become quite scarce in South Africa as a result of drought conditions in South Africa, but also in our neighboring countries with SAFEX prices on maize today at just over ZAR 6,000 a tonne, really historical highs in that commodity. We're continuing to invest -- spend the money on maintenance of our facilities. And then the big expansionary CapEx numbers coming through as we ramp up the expenditure on the Aeroton Bakery, driving -- but still generating the free cash that we need in order to service our facilities and pay dividends to shareholders. We'll see the borrowings coming down and the leverage ratio improving to 1x from last year same time 1.4x. Peter, that's it from my side. Thank you very much.

Perfect. Kobus, thanks very much for that, and we can come back if there are any questions. Just moving quickly on, there are a couple of slides left on valuations. I'll firstly talk with New Look first. From a maintainable EBITDA perspective, as I mentioned, from the 31st of March '24, which is the last numbers you would have seen, we had a sustainable or maintainable number of GBP 40 million. We've reduced that to GBP 35 million in line with current trading in the U.K. We've maintained the multiple of the same, and there's no normalization adjustment items in the debt, which has meant that the equity value -- well, the shareholder value has gone from GBP 228 million to GBP 196 million. There's obviously been some strengthening in the rand. So that's obviously had an impact from a rand perspective as well. And therefore from a rand carrying value perspective, the valuation has gone from ZAR 982 down to ZAR 822. The multiple that we've used is of 6.5x is at a relatively significant discount. So like a 40% discount to the peer group, which currently trades at about 10.7x. And you can see most of the peers on the right hand side, they have actually appreciated over the last 6 months or so, we haven't changed the multiple. We think it's the right thing to do to retain it at the current level. So that gives you a slight reduction in the overall valuation of New Look. We've added a slide here, which I went well on, which goes into a bit more detail on the peer group for Virgin Active. And a couple of points to point out here. As you know, we're valuing Virgin Active on a next 12-month basis, as you can see there, the 2025. And the average from the peer group is 9.3x. We're valuing Virgin Active at 9x. What we've also shown here is what are the 3-year CAGR for revenue and EBITDA to give you some idea of how do we measure ourselves against those peers. I think Dean's referred to it. But as you can see in our EBITDA over that '23 to '26 period, we'll be up 97%, albeit off a low base, again, significantly above the growth rate in the peer group. And I think importantly, there's a high correlation between the margins in this business, the gym businesses and the rating that you have, that 19% goes close to 25% on a normalized basis pre-COVID and that's where I think Mark and the team are likely to take the business. And that would put us, again, alongside some of the other peers, which are more favorably rated in the peer group. And the last point I'd say is obviously, when we look in 12 months' time, we will then be looking at a historic multiple. So if you look at historic multiples here or the 2024 column, you can see there's about a 17% uplift from 9.3x in the peer group to 10.9x. So hopefully, at that point, if multiples are still at the same level, it might be that we would look to have a slightly higher multiple for the business going forward. Just to dwell on this slide for a while. I had a lot of questions from people around, one, the valuations and how we go about it, which is dealt with on the left-hand side. But then most importantly, what are some sensitivities around that, which I'll deal with now. So on the left-hand side, from a valuation perspective, we've kept the maintainable EBITDA flat at GBP 123.9 million, kept the multiple the same with a very, very similar enterprise value. You can see some of the reductions in third-party debt, which was the injection of capital that the shareholders made in September this year. So that went from GBP 427 million down to just under GBP 400 million, which meant that the overall shareholder value was GBP 701 million compared to GBP 663 million. But just remembering that, obviously, on a like-for-like basis, we had injected some capital. In terms of rand value, there's been a circa 5% or 7% strengthening of the rand from ZAR 23.86 to ZAR 23.09 as of September, which obviously had an impact on the overall rand value of Virgin Active. So slightly up in pounds, slightly down in rand, but on a like-for-like basis, probably down 4% in rand, noting the fact that we've obviously injected capital into the business. On the right-hand side, what we've tried to do here is to show what is the market currently valuing Virgin Active at. On the right side, you'll see the ZAR 3.10 is the implied Brait NAV that we discussed -- Sabelo discussed a couple of points ago. So this assumes that Premier remains at the ZAR 104, not ZAR 116, where it's currently trading, but at ZAR 104 and the New Look at our current NAV. So no change to that number. That would, as you know, if we apply 9x to Virgin Active, you get to our Brait NAV of ZAR 3.10. The current market value in the same we did this was around ZAR 1.60 or ZAR 1.59. The implicit at ZAR 1.60, it defers the share price. The market is effectively implying a valuation of 6x on the Virgin Active business, which gives you a valuation of ZAR 187 compared to ZAR 438, which you see on the left-hand column there. So that would mean that it's about a ZAR 5.8 billion value uplift from where the market is valuing it to the NAV at 9x. What we show in the table below is I'm not going to tell people what multiple this business should trade at. But illustratively, for example, if Virgin Active by the time we list this business in, say, 2 years' time, it's got an EBITDA of 140, to pick a number out of a hat. And let's say, for now trades at 8x EBITDA. The effective Brait NAV would be ZAR 3.12 at that, and you can read off that chart pretty much any number that you can assess your own valuation. So obviously, there remains some significant upside over the current share price. If Dean and his team can get it right, one can grow the EBITDA above the sustainable level. And if we continue to focus on the wellness strategy, hopefully, that will enable us to get a premium multiple of the business, hopefully at or above the 9x that are in this sheet. And then just the last slide quickly is on outlook. Just touching on this quickly, certainly, from where we've come, I won't go to all the 11 things that have happened in the last 4, 5 years since TRG have been managing the portfolio, but certainly a significant amount of exits and capital raises. To give people context, there's been ZAR 9.3 billion over that 5-year period of realization proceeds back to Brait, an average TMB times money back of 1.44x and a cash-on-cash in price to exit of those realized assets of 21%. So pretty difficult times over the last 5 years. For all the exits that have been conducted, there's been an average cash-on-cash exit IRR of 21%. In terms of looking forward, which I'm sure people are much more interested in. New Look, we've put in a dotted line there for a window in the second half of 2025, hopefully off the back of March's numbers to potentially exit this business somewhere between the second half of '25 and the first half of '26. I reiterate that this depends on, one, the market performance and general market conditions in the U.K. and secondly, the business' overall performance, but that's certainly what we're aiming towards in terms of the New Look business. From a Virgin Active perspective, we would look to IPO or sell the business certainly off the back of the sustainable number having been achieved. Illustratively, if we assume that's done in December '25 or sometime around then, the first realistic window to IPO the business would be in the second half of '26 or the first half of '27. And as you can see, we put a dotted line around that. And again, we are starting to work with advisers and gearing up towards that. That would leave us with the Premier shares that we hold, we are very significant believers in the story, the growth story. All the steps that Kobus talked around earlier has continued into the first half -- sorry, second half of Premier this year. That momentum has continued. And so we are not, and then we've reiterated this before, an active sellers of our stake in Premier. We will look bilaterally potentially if people are prepared to pay around market and we think market is a fair value for the business to engage people, but we wouldn't look to come with very large offerings to market at any form of discount. So that would be those shares to be placed to unbundle at the end of that. And as you know, we've got a 3-year extension on the exchangeable bonds and convertible bonds to ensure that we can find the right window to hit. Sorry, with that, I know we've gone slightly overboard, but we thought it would be useful to do that. And let me -- well, let's first turn to the questions on the line. Shall we?

[Operator Instructions] At this moment, we don't have any questions on the conference call, and I would like to hand over to Peter for any webcast questions.

So currently, we have 3 webcast questions. The first one -- I'll probably take the first one and then maybe the second one, and I can hand over to Dean. The first question is from [ Tinashe ] from [indiscernible]. Given the CapEx outlook for Virgin Active at GBP 50 million, how big a capital injection from Brait at the center is necessary? And just to give you very high-level numbers, Tinashe, I mean, if we do hit the maintainable EBITDA number of, call it, GBP 123 million, GBP 125 million, whatever that number is, and CapEx is somewhere in the GBP 50 million that you mentioned, that would give free cash flow before interest of about GBP 73 million -- call it, GBP 70 million to GBP 75 million. Interest once we paid down some of the Virgin Active South Africa debt, let's say, somewhere in the region of GBP 35 million to give you some context. You can see that in the historical slide in the appendix. So if you take the GBP 75 million and you take GBP 35 million for interest off that number, you're left with pretax free cash flow of around GBP 40 million, right? Now what to do with that? Obviously, would be injecting it into the business for growth. It would be repaying some of the debt. But it does show that it's an extremely cash-generative business once we start to hit the sustainable numbers. So in terms of the capital injection from Brait, as we mentioned, we did inject some capital to pay down debt in the Virgin Active South Africa business to get to facilitate the extension of that. We will always look -- Dean and the team, we will always look to help and inject capital where the right growth opportunities exist. If there are new club growths or premiumization of the estate that we need in the lead up to the listing, before we hit the sustainable number, we are positively minded to invest behind the business, and we continue to engage with Dean, Mark and the team on those opportunities. The second question is, can Virgin Active self-finance its own expansion and premiumization plans post the debt restructure at Virgin? What do you expect will be the finance cost interest rate on third-party debt? Again, I think it's a similar question that was from Matthew -- answered, also from [indiscernible]. Matt, it can self-finance its position. As I mentioned, once it hits a sustainable level, there will be around about GBP 40 million, and that's a very broad number of pretax free cash flow, and that business will be either injected into the business or used to repay debt. In terms of the lead up to that, we will look to inject capital where it's required if there are the right growth projects that meet the hurdle. From a finance cost perspective, historically, that number, if you look at last year was around GBP 40 million. Obviously, it's hugely dependent on exchange rates and the like. But using GBP 40 million as a sort of sounding board there, I would say the number is probably in the region of GBP 35 million given that we've repaid some of the [ Vasta ] facility. Leading on to the last question that we had here also from Matt, which I'll hand over to Dean. What proportion of clubs have been transformed into Social Wellness Clubs? Please, can you break this down per geography? Can you provide some detail on how yields and member attrition improved post conversion? Dean?

Thanks, Peter. I mean just as we mentioned, this is not a one size fits all is that there are different degrees of Social Wellness Clubs that we'll implement from a full implementation where we do in the wellness space, which includes spa facilities, cold plunge, the food and beverage workspaces, studios, to lighter touches where the demographics don't warrant us spending that level of investment to do the full implementation. At this stage, in terms of full implementation of a Social Wellness Club, it's a relatively small portion of our estate that has been converted into a full Social Wellness Club. But on the flip side of that, in the U.K., Italy, across APAC, from a studio point of view, most of our clubs now have the required number of studios, and they have the new product offering in those clubs. A relatively small rollout in South Africa, I think currently around 10 of the 130 clubs have got [ ice bars. ] I think there's quite an aggressive rollout through '25. But the point is that there are varying degrees of this. It happens in different phases. We prioritize which portions of the Social Wellness Club we need to do first, food and beverage, the studio, the product offering. But I have to emphasize that the implementation of a Social Wellness Club is not just about the capital we spend. It's not just about the spaces. We also need to look at the product offering, what are we doing in those clubs from a product point of view, the experience, the service levels. And often, we find when we look at NPS scores, so when we get feedback from our members that where we implement the service offering, where we change the product, so with small changes that are not capital intensive, often we're getting Net Promoter Scores or feedback from our members are as positive as where we've done the capital investment. So part of the strategy is around elevating service levels, elevating experience on top we would then overlay the capital. So I can't give you the finished part and say X number of clubs are a full Social Wellness Club. Across different territories, different degrees of the Social Wellness Clubs have been implemented. In terms of what we see from a yield point of view, where we do the full Social Wellness Club, we've just done -- we've got 2 or 3 examples in South Africa, where we've done a full implementation. At the time of completion, some of those clubs we've yielded up across the existing membership base and not across new sales, across the whole membership base plus new sales at around 17% to 20%, which is obviously significantly above CPI. U.K., we've seen yield increases where we've been able to implement some of the Social Wellness CapEx spend there of around 12% to 15%. So in all cases, significantly above CPI increases that we've seen where we're able to implement the Social Wellness Club strategy. From an attrition point of view, it's quite difficult, to be honest, to attribute -- I mean, you've seen the positive impact of attrition in South Africa and U.K. That's a combination of the Social Wellness Club strategy on top of loyalty app data, some of the CRM strategies. But we would expect around a 2%, 3% improvement -- continued 2%, 3% improvement in attrition as we would experience in the social world -- implement the Social Wellness Club growth capital.

Thanks, Dean. Next question from Dave at SaltLight Capital Management. Why would you not sell down Premier shares sooner and rather pay down the convertible debt? Dave, I think as we've explained before, there's a waterfall that is contracted for, right? Any proceeds from a sell-down, first and foremost, need to be used to or offered to the exchangeable bondholders. They are first in the queue. So you can't bypass the exchangeable bondholders and just go and buy back convertible bonds, for example. So any use of proceeds would first need to be offered to the exchangeable bonds and only then could you then offer them to the convertible bond. So I think it's important to say we have not said we would not do that. We would look opportunistically potentially to sell down our Premier shares bilaterally. We're not likely to come to the market in any big discounted offering. We don't think we should be offering shares at a discount, which offers other people the opportunity to make good returns on the Premier business that we believe in. But to the extent we did raise capital, the reality is we first have to offer it to exchangeable bondholders. Now remember the yield on an exchangeable bond that currently is 6%, plus the option value because it can convert at a strike price of ZAR 2.21. So at the end of the day, if you think that Premier has got a yield of 3%, your net hurdle to beat is 3%, right? Your 6% yield on the exchangeable bond less the current yield on Premier. So if we're just going to use it to pay down the exchangeable bond at par, you would suggest it's probably not a great use of your capital. That said, we will opportunistically look to do so. And I think once -- and if the share price runs beyond or close to the strike price of ZAR 2.21, then it's probably more likely that an exchangeable bondholder would let you flow the capital past them and we can then use it to repay the convertible bond. So I wouldn't say we wouldn't do it. We are looking at all options, but a lot of those things are very tactical about how you go about it to ensure that we can buy back at the right price or the right yield or the right discount those various parts of the capital structure. Those are the only questions that we have. So unless there are any other questions on the call, I would like to say thank you to everybody for your participation. As we've always said, we remain open to anybody to get hold of us if there's any further questions. And we're massively appreciative for Dean, Mark and Kobus for spending the time with us today.

Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.