Sats ASA (SATS) Earnings Call Transcript & Summary

Good morning, everyone, and a warm welcome to all of you to this Q&A session following our Q4 2022 reporting earlier this morning. We are still getting people joining the call. So I think we'll give them just a few more seconds here to get everyone in. There, it seems like everyone is in from the lobby. So once again, good morning, everyone, and welcome to this Q&A session. We are just jumping directly into Q&A. We have set aside 30 minutes, so just raise your hands, and Stine will give you the word, and we'll go through.

Massive line on questions here so, yes, nobody wants to be first.

Can someone confirm that you hear us?

Can you hear us? Great. If you could just -- one could raise the hand, so give you a thumbs up or something? Yes. Yes. That we see sometimes. Okay. Then at least the technique is fine. We -- as we said, for new participants, welcome. And if there are any questions, just raise your hand, and we will give you the word. We did not plan to go through the presentation now as we just presented the report an hour ago.

One question. Very good, Martin.

It's a busy day today, so a lot of reports, but I can try. When it comes to your outlook for membership growth for the next coming quarters, can you give some sort of top level about we should sort of expect and what you see or expectations with regards to that? And if the positive trend is sort of set to continue? And on top of that also, if you can give some more color on the club closures and the -- you expect and what you see in potential there going forward? Also beyond 202, and sort of what is the sort of growth outlook when it comes to clubs?

Yes. Thank you, Ole Martin. I can start and please fill in, Cecilie, when it comes to member development. We are leaving behind us now a few quarters with, I would say, exceptionally high net growth compared to, of course, what is normal. We don't guide on the membership development going forward. But I think, of course, we are more coming toward a normalized quarterly development on the member base as we also showed in the presentation today, which I think will be one of the best, I'll just show it, since the gap is now closed. We have now closed the gap on number of members per club on the like-for-like base. And then, of course, we continue to develop from there and grow from there and also bring the new clubs back to that -- or into that level. That will take some time. We also say in the report today that the positive development on sales and also, so to say, a normalized development on churn has continued into the start of the new year. So that gives us an indication of the start of the year, but we don't -- we will not guide or, so to say, give any flavor on what we expect in our internal estimates for the member base going out of the year. But in general, of course, when the member base is back like-for-like and you see a more normalized, so to say, situation in the society, I would expect the net growth to be more normalized quarter-by-quarter going forward.

Just a follow-up on that. When you close clubs, what is the -- is there a rule of thumb in terms of how many members that sort of continues to be with SATS and how many that leaves?

I can comment on that and also on the club here. So we list some of the clubs that we have closed and are planning to close in the presentation today. There will not be a massive club closure, just to be clear on that, because the only club -- so what we are, of course, looking into is there are few clubs and that's still quite a few of the clubs in our portfolio who are not generating, so to say, good enough for results, not only talking about those generating a negative results, but also not good enough results. So what we will typically do then is, of course, to go in dialogue with the landlords and discuss potential alternatives, both renovating paying the rent, potentially downsizing the clubs and looking at also relocation alternatives that would always be the preferred solution. And then if we don't find a way to get attractive club financials, we will close the clubs either before the end of the lease contract or by the end of the lease contract. And then it varies a lot. So there's no -- I would say there's no rule of thumb because on the list now, just to give you 2 examples -- on the list now in the presentation today, we have mentioned 2 different clubs in Norway. So SATS Hønefoss and SATS Spektrum. SATS Spektrum, you have several great SATS clubs pretty close to that club, and we would typically see quite a low loss on members from the members who have Spektrum as a home club when we close that club because what we also look into is, of course, where do the members workout in addition to their home club. And most of those members workout at many different Oslo clubs. So there, we don't expect to lose many members. But of course, when we close a club like Hønefoss in a place where we only have 1 club, there's a much higher loss of members and basically, you lose everyone. So there is not a rule of thumb. But when we close clubs in strong clusters, we see a very low loss of members. And when we relocate clubs in a strong cluster, we nearly see the opposite. We keep all the members and attract quite a lot of new members because it's a new club. And of course, we relocate to, in most cases, a better location. One example of that is ELIXIA Ruoholahti, which we also have on the list today which is the relocation of ELIXIA Salmisaari in Helsinki. We just moved the club a few hundred meters, but it's to a much more important location in terms of public transport and the club already has 800, 900 more members than the old club we closed just some weeks ago. So it varies a lot Ole Martin, that's the short answer.

And just a follow-up. I know you mentioned the significant increase in lease rates. And you are also having looks to be some successful negotiations with the landlords. Can you comment upon how you concluded the majority of those negotiations? How many are ongoing? And how is that sort of affecting your lease cost increases for the coming quarters?