The Gym Group plc (GYM) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to The Gym Group's Capital Markets Day. This is the first that we've done since the pandemic, but a great opportunity to show that we've not just survived with what has been a difficult time, but actually made a number of steps to emerge as a better business. What we intend to do today is show how well positioned we are to grow very strongly over the coming years. Let me say a few welcomes. In the audience today, we have Penny Hughes, our Chair; John Treharne, our Founder Director; and Emma Woods, our Senior Independent Director and Chair of Remuneration Committee, and I'm sure that you'll be able to say hello to them afterwards. But let me introduce the team that is presenting today: Mark George, our CFO. As you know, this is Mark's last major event with us before he goes to Wickes, a huge thanks to Mark for helping us navigate over the last 3.5 years. It's been an absolute pleasure to work with. And we've been delighted a couple of days ago to announce the recruitment of someone of the caliber of Luke Tait, who comes to us from Nandos and you'll all get the opportunity to meet Luke in due course. Ann-Marie Murphy is our Chief Operating Officer. Ann-Marie has been with us for 4 years and has responsibility for both ops and people and has recently been appointed to the Board. And the measures that Ann-Marie Murphy put in place through 2020 and 2021 to ensure our people engagement have been truly first-class. Jasper McIntosh is our Chief Information Officer. Jasper was actually recently nominated #13 in the top 100 Chief Information Officers in the country for his work in technology that is both transformational and also disruptive. Jasper has actually been with us 11 years in total, but has played a huge role in our market-leading position in technology. And then a couple of newcomers. So we have Nick Shelmerdine, our Strategy Director. Now Nick last summer helped to shape some of our thinking in terms of our strategic overview. And many of the things that you see us talk about today came out of that review. He's ex OC&C, I'm delighted that he agreed to come and join us to be our first Strategy Director in our history. And Emily Kortlang, our Group Brand and Marketing Director, another very high-quality recent appointment. Emily spent 10 years at both Beats and Apple, and she brings real member insights and brand experience into the critical marketing role. Emily will really help bring our brand alive. And as you can all see, we're all on brand today. My own time at The Gym Group of 7 years has been split between being CEO and CFO. And during that time, clearly, we've operated a much larger scale business, and that's helped us in the quality of team that we've been able to recruit. Personally, I've never been more confident about the prospects of this business, both because of the quality of the team, but also because of the quality of the business that we've built in that time. So the story so far, this business has only been going 14 years in total. It's grown to 206 sites in that time. And I think the sign of our success that we've grown so quickly is down to the fact that we have a high-quality product at an affordable price. In fact, the business has grown 3x in scale since the IPO. And as we'll show, there is more growth to come. But I think how we've emerged from the pandemic is absolutely key. This is a very strong, resilient business. Initially, we chose to preserve capital rightly. But then late 2020, early 2021, we decided to be more forward-looking. We started to build our pipeline. We invested in our tech platform. We did some of the early work on the brand transformation. And above all, we chose and thought about how we could recover our membership quickly once we're able to reopen. And as we set out in the RNS this morning, we expect this business to do between GBP 95 million and GBP 105 million of EBITDA, that's EBITDA in old money by 2025. In the rest of this presentation, we'll refer to that circa GBP 100 million. And I've got absolute confidence that charts that you see at the bottom of this slide will resume their upwards only trajectory over the coming years, both in terms of sites, members and EBITDA and that we will emerge ever stronger with an enhanced market position. We should note as well that the business has been absolutely transformed since the IPO, both in terms of the quality of the systems and the people, the number of sites, but also with an emerging market-leading position in sustainability. Some of the investments into the infrastructure are absolutely key in terms of our ability to operate effectively at scale. We invested into an ERP system, a new tech platform that you'll hear about from Jasper. And we also formalized our personal trainer model so that our personal trainers are part self-employed and part part-time employees. The growth has been rapid, 104 sites by organic and a further 36 by acquisition. And on sustainability, there really are a number of firsts. We've been the first Health and Fitness business in the U.K. to go carbon neutral, the first to set our net zero targets to 2035, and the first to set social value targets in terms of the U.K. And there is so much to say on sustainability. We're not actually going to do it today. We're actually going to do a separate workshop at some point because I know there's a lot of interest in what we do on sustainability. But the thing we are going to talk to about today's people engagement. And we don't apologize for that. A lot of people say to me that it gets very difficult to maintain your culture once you get over 100 sites. I think we have proved otherwise. #25 in the Glassdoor ratings of the top 50 places to work in the U.K. And that is really important in our ability to recruit very good people as we accelerate our growth. I think the steps that we've taken, particularly in the infrastructure, they're not glamorous, but they are absolutely fundamental operating effectively at scale. So what is at the heart of our business? Well, our business is unashamedly mass market, with a very high-quality gym product that appeals to all sectors of the U.K. demographic. And fairly uniquely, I think for our business, we have a number of different avenues to expand beyond just site expansion. So when I talk about mass markets that means that we appealed to all parts of the demographic. And as you can see on this chart on the right-hand side, we slightly over index on rising prosperity and also urban adversity. But what you'll see is whilst we have quite a strong presence in financially stretched, actually, that is our core student demographic that make up that part of the [indiscernible] types. And because we're in mass market, we have the ability to expand into multiple demographic areas. So for instance, we are in Hove and we're also in Hartlepool, we're in Cambridge and we're in Carlisle, we're in Ealing, and we're in East Ham. And I would actually encourage any of you that are up in the Northeast to go and visit our gym in Hartlepool. Stunning views across the North Sea, situated on a marina, truly one of the best, low-cost gyms in the country. But we're proud of all our gyms. And our gyms are high quality. We see that through our member satisfaction scores and also from Trustpilot where we're rated excellent, and that's really important as we know, because we expect a number of our members to rejoin and they do with a rejoining rate of around 40% at the moment. And as I said, unique growth drivers for us. Much of the rest of this presentation we will talk about these growth drivers. Our ability to grow our estate further to increase yield, to change our product mix, to be able to drive like-for-like and extend customer groups still further, particularly with some of the work Emily is going to do for us on the brand. And we think there's a particular opportunity around women and those that find gyms still intimidating. And you'll also notice that all this growth is based on organic opportunities. Our business model, and this is the graphic we use in the annual report leads to self-financing growth. And actually, in 2019, pre-pandemic, we achieved that goal. So people often ask me, what do you put your growth down to? And I think it's no more complicated than the fact that we have a very high-quality product at an affordable price that introduces members to being a member of a gym that never previously were able to afford it. And as a result of that, we're growing the market. But importantly, in 2019, we did open 20 sites. And we were able to do that from our own operating cash flow. So our net debt at the beginning of that year started at GBP 47 million, it ended up GBP 47 million. We had about 1x leverage. And as we came into 2021, we had a choice to make. Would we accept a couple of years where we weren't self-financing to enable us to take advantage of the market opportunity. And that is a choice that we made and what you'll see later on from Mark is that as we go into 2023, we very rapidly get back to that position where we have self-financed growth. And I think there's one absolute key takeaway from today, and it was in our RNS. And that's our confidence that we can achieve GBP 100 million of EBITDA by 2025. And given the maturity profile of our business that comes from the sites that we've got open today, those that will open in 2022 and 2023 and a small contribution from 2024. So in that respect, GBP 100 million is just a staging post. It's not a destination. And to achieve that, there are 2 key financial drivers. Firstly, we need to recover our existing estate. Secondly, our new sites will achieve our historical returns. So the plan also encompasses PBT of GBP 40 million to GBP 50 million and 300-plus sites. And we expect and Mark will talk a little bit more about this to stay in the leverage range of about 1.5x to 2x leverage. And if there is excess cash generated, to return that to shareholders. And at the same time, we will reestablish the investment rules that we had pre the pandemic. And that entails investing 6% into maintenance and 3% of revenues into our tech CapEx. Ours is a very strong growth profile that we'll double EBITDA from where we were in 2019, enable us to grow very quickly, but with the financial discipline and also with the ability to return cash to shareholders. So today, we're going to cover 6 key areas. And in doing that, we're going to seek to answer 3 key questions. Why is this a great market? Why is this a great business? And why does the combination of that great market and business lead to exceptional financial returns. So I'll cover the market section, and I'll do that in a moment. And then I'll hand over to Ann-Marie who will talk about accelerated growth coming from our flexibility in terms of formats and operational excellence. Jasper will talk more about the tech platforms and the investments that we've made there, and Nick will talk about how we seek through pricing to maximize our revenue. And then Emily will do a deeper dive into our confidence on the new brand refresh and why we needed to do this quickly. And we'll finish off with the financial plan and capital allocation principles from Mark. We'll do this in 2 parts. So we'll take a break after the sections on the market, the growth tech platform and pricing, take some Q&A on those sections, come back after the break and we'll do brand and capital allocation and take some final Q&A, and that will wrap up the Capital Markets Day. So without further ado, let's get on to the market section. And the headline here is that health and fitness is in structural growth. This was a very strong market prior to the pandemic but one where low cost showed the majority of the growth. But post the pandemic, there is now a unique opportunity for low cost to accelerate expansion and become ever more important. And in that respect, we've got the coming together of 4 big themes. Firstly, that it's a large and growing market. Secondly, that there is an acceleration towards low cost mirroring what we've seen in other sectors. Thirdly, that scale, and this is some of the investments that I spoke about really does matter in terms of the low-cost market. And then finally, that this is an attractive property market that will enable us not necessarily to get sites at cheaper rent, but actually to be able to get really attractive sites that make sense for our model. So on to the first big theme that this is a large growing market. And I think what these charts show is that health and fitness has shown really long-term resilience through the global financial crisis, the growth that came after that, which was really coming from low cost and then has weathered the pandemic very well and held on to a majority of its members. And I think the key point here is that through the global financial crisis, penetration as a percentage of U.K. population, didn't decline. It just flatlined. As we went into 2012, we saw the emergence of low cost and actually low cost was growing by a CAGR of 21% in the years 2015 to 2019. What we see now and the best data we have on this is from Deloitte is that penetration is at 14% at the end of 2021, down from the peak of 15.6% that we saw at the beginning of 2020. So real resilience, and then we take from that, that health and fitness is no longer a discretionary item but just a core part of everybody's day-to-day life. And what we also think, however, is that post the pandemic, we've seen an acceleration of some of the trends about where are the best places to locate sites. And actually, The Gym Group has been locating in these areas for the last 6 years. So particularly in residential and Greater London and the town categories. So we have opened a small number of city center sites even though actually, there are enough gyms in the city centers today, but they've been ones that have had a very strong student presence. So for instance, Sheffield The Moor would be an example of where we've opened. But where we see great opportunities in residential and Greater London, and that was really the white space that the PwC research that we did in 2019 identified. And we think we're very well positioned post pandemic because of the move to hybrid working still to be in residential and Greater London. The town category is interesting because clearly, as you can see, we've grown by 15 sites there. And that is -- we define town as 25,000 to 55,000 adults in a 10-minute drive time. And 4 years ago, we didn't have a format to go into those sort of towns or categories. But now we do. We now operate very effectively at 10,000 square feet and below and are trading very well in the likes of Perth, Abingdon and Paignton. And the key point here is that we can deliver all our growth target of 25 to 30 sites from these 3 categories. But we're going slightly further because we're actively working on a format to work in the small town category, and that's 15,000 to 25,000 adults in a 10-minute drive time. We've opened our first trial site in Dorchester. And if we were able to make that work, that would expand the market opportunity for us and enable us to go faster. The second theme to talk about then is the acceleration to low cost. And here, overall, there's a very strong outlook for health and fitness in general with more people planning to increase their fitness activity and also low cost is very well positioned to take more of that share. So the fact that more people are planning to increase their fitness activity as shown on the chart on the left-hand side. If you take those that intend to work out more frequently versus less frequently, you get a delta of 35%. That's actually the highest in Europe. But also interesting to note that we're not quite there yet because that same delta on people working out today is only at 12%. So there is intention about increasing people's fitness activity. And then from our own survey data, why is low cost well positioned because when we asked nonmembers about what are the impediments to joining a gym, 2 key answers came out. One is that some people still think gyms are expensive, as you can see, 28% and also a member still feel intimidated in the gym. And that's where brand is important and some of the work that we'll do between Emily and Ann-Marie to make sure that we don't just appeal to fitness fanatics, but we appeal the whole different range of people that want to come to the gym. So overall, a really strong tailwind for growth. But more specifically, all the trends point towards low cost and an acceleration towards the low-cost sector. We saw the growth. I mentioned that stat prior to the pandemic of low-cost, took all the growth, doubled up to 2.8 million members, into the pandemic what we've seen is some failures and distress within the mid-market and also into the premium sector and also legal authority badly impacted. And that will give us opportunity. So for instance, we're about to open a site in Paddington, where the landlord took the site back from Virgin Active through their restructuring. And now, of course, we're into the cost of living crisis, but this is a world where low cost traditionally performs very well. And particularly, the world, as I've explained, we're going to the gym is no longer seen as a discretionary item. We think we're set up very well for success. In fact, we think we can operate extremely well in a difficult economic environment because that highlights the natural advantage our model has. The third big theme then was about scale advantages really mattered. The point here is that the growth in low cost has actually been concentrated across 2 key players over the last 5 years. But from 2016, actually, our percentage growth has been higher than anybody else. So in fact, we've grown by 127% in those years, 2016 to 2021. And the 2 market leaders have taken 78% of the site expansion in that time. So what that says to us is that scale really matters in low cost. And that's really in the areas of marketing, tech, people. And actually, we've demonstrated this a number of times. When we've acquired sites from competitors, what we've seen is that our margins are significantly higher than what they're able to achieve. And the final theme is that this is a very attractive property markets. And given that unique property market, as I said, we chose to expand from mid-2021 to effectively invest ahead of us generating the cash flows being generated. And the result of that is seen in a very strong pipeline. So I've spoken before about what a unique property market means. We're seeing distress from retail and that's giving us opportunity on retail parks in a way that we haven't seen previously. So in 2022, in terms of our pipeline, 61% of our openings will be on retail parks. And these are excellent sites for us. That compares just to 20% back in 2016. But there's also a second opportunity that is really beginning to emerge. And that is landlords taking sites back from tenants post the moratorium. And this can happen both in retail sites and also in gym sites, very early days in this trend because the moratorium only ended in March. But we think it will give us another impetus for our pipeline growth, and we can think of at least 3 sites in our pipeline today that have come from this route. So in terms of our pipeline, we're secured for 2022 that's 28 sites that we spoke about. We're building very effectively for 2023. On the table, on the right-hand side, compared to a year ago, we're 101 sites in our pipeline in various stages. That compares to 80 where we were this time last year. So this is still very much the best property market that we've seen in our history. But really importantly, we will maintain our discipline because this is all about finding the right places to locate and paying the right levels of rent. And when we bring this all together, what does this mean for their headroom in the low-cost gym market? And what we've done here is we've extrapolated the PwC research from 2019. And in doing that, come up with our own management estimate, and we consider the market can grow to between 1,700 and 1,900 sites overall. So the PwC estimate said 1,200 to 1,400. And within that, importantly, it assumed penetration of 17% in the U.K. Health and Fitness sector, of which low cost would have 7% overall. Now I put that in context, 17% is only what Netherlands did pre-COVID. It's well below some of the Northern European and U.S. levels that we see. And we think there's 2 ways that you can think about the expansion of low-cost even beyond that. Firstly, low cost can take more share. So for instance, within that 17%, it can grow above 7% or alternatively, if the market can grow further, the penetration could go above 17%, and that would all be driven by low cost in our opinion. Both scenarios lead to a total market size of 1,700 to 1,900 sites. So our key message here is that all trends are pointing towards the growth of low cost within what is in a very attractive market. The Gym Group is very well positioned to take advantage of this growth. And much of the rest of this presentation will demonstrate why that is the case. So I'm going to hand over now to Ann-Marie who's going to talk about enabling faster growth.

Okay. Thank you, Richard. Good afternoon. I'm Ann-Marie Murphy, our Chief Operating Officer. I've been with The Gym Group for just over 4 years. And prior to that, I worked for New Look and TUI Travel. So I'm going to talk today about how we are accelerating our growth and the ability we have to go faster to take full advantage of the market opportunities and our proposition. I'm going to talk about these 3 highly successful enablers of our business today. So our outstanding product and operational delivery are highly satisfied members and our flexible model and product formats. I'm going to explain how they form the basis for us to go further and faster and take advantage of the growth in our market. So we have a really high-quality product that we're all very proud of. It delivers great value to our members with flexibility and convenience. I'm going to put out 3 from the slide in front of you. First of all, our low cost, no contract membership. This really is at the heart of our business and remains the core of our proposition. We've also successfully been growing our free group ex classes, and we currently run at 50,000 bookings every week, across our 206 sites, and this is growing, and we get great feedback from our members on the quality. And we've also recently introduced access to 200 top-quality digital classes free as part of the membership. So as you can see, we continue to innovate on our product offer. We have the most successful operating model in the market, and this model really does underpin everything that we do. Let me explain how it works. So we employ our fitness trainers for 12 hours a week and they operate our gyms. And then in return for rent, they have unlimited access to train their clients in our gym in their self-employed personal trainer business. And this model is so successful, both for us and for the personal trainer. For us, it's labor light, it's flexible and it's really low cost. The rent almost offsets all our employment costs. So the personal trainer themselves, it gives them flexibility as to when they want to work, and it also provides them with a really rich source of quality leads for their personal trainer business. But not only do we have a really successful model, as Richard talked about, we also have a truly brilliant place to work. Rich has already mentioned it, but I have to mention it again because I'm so proud of the fact that we made it into the top 50 places to work for Glassdoor for the U.K. at 25 and the only business in our sector to make it in. We also have industry-leading employee engagement scores, and we increased those by 10 points as we came out of COVID, and we've gone on since then, most recently to increase a further 4 points. So you can see we're getting recognition for being a Great Place to Work, and we consistently see how our highly engaged employees are delivering record levels of member satisfaction, and I'm going to come back to that in a moment. We also have a really strong track record of high-quality gym operation at scale, and this provides us with a firm basis for further growth. We drive and track operational performance at every gym through these 4 pillars. So they're people; member service; safe, clean, legal; and profit. Our safe, clean, legal pillar is really important, and this is consistently applied across every single gym every day. We've also introduced a new KPI, which is about 4 a month. So this is all about encouraging our members to visit at least 4-plus times a month. And this is really the outcome of great operational delivery impacting our member behavior. And why 4-plus times a month, so we know that, that number helps to encourage a really healthy regular gym habits, provide some really strong social value as well as improved engagement and tenure. Our members love us. They really, really do. And these are just some of the quotes and comments that we get. Some of the things that they say, "immediately, I noticed the abundance of diversity in the gym. The gym is always so clean and welcoming the staff for great, never make you feel silly. I really like the layout of The Gym and always thought there's plenty of equipment with a good range." This focus on friendly inclusive gyms is a really important point for us. I also hear a lot and particularly since we reopened after COVID about how much our members have really loved coming back to the gym. And they talk about not just the physical, but the mental benefits of working out in one of our gyms. Our member satisfaction scores, I mentioned earlier, are really high. And at the 12-month period to April '21, we achieved our highest scores at that point of 57% and that is the number of members percentage that are giving us top box 5 out of 5 score. And this is really important because we know that our members will have several periods of membership and it's obvious that the link of high service to rejoin us. What we also know is that linked to our highly engaged employees that I talked about earlier and our highly satisfied members. We know that our highly engaged members are 1.7x more likely to stay. So we offer great value, but also really high levels of service. But as Rich said earlier, we also provide affordable fitness for all, and we successfully delivered to the mass market and have a real broad appeal. And you can see here on the slide, the range of members through age, affluence and location. In fact, 32% of our estate is in the 20% most [indiscernible] authorities. However, 18% of our members are in rising prosperity and 14% are affluent to changes. We know people will travel up to 15 minutes to a gym and 50% of the U.K. population live within a 15-minute drive time of at least one of our gyms. And you can see from the location chart here, we've got space to grow further. Our formats also reflect member requirements and the local catchments. We always remain true to low cost. And if you think about the list of requirements on the slide in front of you, very much as pieces of the jigsaw puzzle. So how do they fit together? Well, think of it in this way, and this is just an example based on small, medium and large. But we very much evolved the one-size-fits-all product to a much more flexible model approach. But this is still unique for every market and every catchment. And we're designed to optimize the space, configuration and product in every property so that we can utilize the maximum gym space. And what this means is that we can occupy many different building types and locations. And it means that we can -- even from the smaller format, we can drive more gym space. So we can go into many, many more catchments. The different formats enable our growth across the range of sizes. So this doesn't mean that we're not opening larger sizes. We're opening the full range of sizes. And just on the slide in front of you, just some of the examples of new gyms that I'm personally very proud of. So York, this is a standard size, great space over 2 floors, opened 12 months ago and is performing exceptionally well for us. Sydenham, slightly smaller, of 12,700 square feet. Now this is a really great example of what was quite a tricky building to convert to a gym, but a fabulous prime location, and our talented team converted this into a gym that is performing very well for us. And then Richard mentioned earlier about Hartlepool. My recommendation is that you also visit Paignton because you wouldn't believe the amount of usable gym space that we've managed to get into 10,000 square feet in Paignton. And the picture really can't do justice because it's a real impactful one, great location with really good curb appeal that is also performing very well for us. Crucially, though, our formats give us the headroom for growth. And I said that I will talk about how we are delivering and accelerating our growth. We know we can deliver the 25 to 30. That's already in the plan. And we know there's plenty of room in the U.K. head market, sorry, headroom for further growth. With our flexible formats and capability to deliver them, we can accelerate that growth, extend our reach into locations with smaller catchments. And this is a really critical step for us to accelerate our rollout and further drive penetration in the U.K. But it's not just about the number of sites, it's also about the financial returns of each site. And you can see here from the chart that over time, on average, we have been reducing the size of our gyms but critically, we have continued to deliver the key 30% ROIC target. So we've proven models to deliver a highly profitable operation in a wide range of locations and sizes and still deliver the returns. And then finally, around innovation. These are some of the things under development. So first of all, remote operation. This is where we have remote operations through a third party using technology to monitor the gym and be available for help and assistance should our members need it. We have this in place for certain times of the day in some of our gyms as a trial. And really, this is a good example of how we continuously innovate on our model, always looking to keep that low cost but high level of service balance. Small town, Richard talked about this earlier. So we opened our first one, Dorchester in November '21 and this is performing in line with our expectations, and we are learning so much about how to operate and win in the small town environment. We knew that group ex classes would be important, and it really is but we're also learning about how to operate with this different profile and very much community-based gym. And digital fitness, I talked a little bit earlier about the work that we've done there. And we are currently looking at how we enhance the experience of our members further digitally and have started to build our own digital content, so this is currently under development. And then diet and nutrition. This is another area of opportunity. This is a big opportunity for us to further enhance the member experience and extend our offer into diet and nutrition and work is also underway in this area. So in closing for me, I'm really proud of the strong basis that we have in place that is successfully delivering to our broad member base. We've built a really great business with great people and a truly great place to work. This, plus our ability to flex our model to accelerate our growth, our continued innovation means that we are at a really exciting stage. Thank you very much. I'm going to hand over to Jasper, who's going to talk about technology.

Good afternoon. My name is Jasper McIntosh. I'm the Chief Information officer here at The Gym Group. As Richard mentioned in his opening remarks, I've been here for quite a long time. I first started working the job 11 years ago. I have been in my current well as CIO for the last 8 years. It's safe to say that in that 8-year period, we have completely transformed the way that this business works with technology. As we stand here today, we have never been in a stronger position. We have market-leading capabilities in some really important areas of digital data. And most excitingly, we see a lot of further opportunity. So I'm going to talk to all of these points over the next slide. Technology is at the heart of everything we do at The Gym Group. Every single member joined online, every single visit is enabled by our technology platform. We see tech prevalent in all areas of the business, and it's an absolutely critical enabler to our high-volume, low-cost, high-quality model. The usage stats that you can see up here tells a really clear story. In the first quarter of this year, we delivered more than 14 million physical gym visits, which is a lot of visits. But in the same period of time, we delivered over 25 million web and app sessions. So a rate of more than 1.8 digital interactions for every physical visit that was delivered. And as Richard mentioned earlier on today, scale advantage is really important and scale advantage in technology is really valuable. We have that advantage. GBP 14 million invested in technology CapEx across 2019 to 2021. And that's an even investment across that period. So even during COVID disruption, we continue to invest at this rate in technology because it's a priority investment for this business. That allows us to invest in a wide range of areas, whether that's proprietary software, whether that's better infrastructure, whether that is data science models. And that investment is driving the core business. It's driving tens of millions of visits. It's driving tens of millions of web and app sessions. But more importantly, that investment enables us to go after the additional opportunity we see. So whether that's using technology to bring down marketing costs, whether that's using technology to reduce churn and extend tenure or using technology to improve conversion. And if I pick one of those conversion, a 50 basis points increase in conversion, which is achievable with the rates of conversion we see with our business, delivers about GBP 8 million into revenue. It's a big opportunity. So we have a clear strategy for how we invest in tech, and it's based on 3 principal areas: driving better acquisition through our e-commerce platform and our smart pricing tools, improving the member experience whether that is in gym or in app and driving efficiency in the business through automation, for example, enabling us to scale the business and keep tight control on costs. Underpinning all of those is data and insight, which really is a key enabler. We have very high-quality data and insight that we use right through the business. And when we apply that strategy into our user journey, what we see is that technology is adding value in every part of this journey. So we think about the journey in 6 areas. You've got the initial phase, which is consideration and acquisition and then we move in life to activation in gym and increasingly at home and then the final important stage of leave and win back. And as you can see, tech is really active in all of these areas. I'm going to pick out 3 in particular over the next few slides, all of which are areas where our recent investment has really driven us forward and put us into this market-leading position. The first is the e-commerce platform, which is obviously most conspicuous at the front. The second is our app, which is critical to that in life experience. And the third is data and insight, which runs through all 6 of these sections. So starting with our e-commerce platform. About 2 years ago, we started to look at our e-commerce platform with a view to completely rebuilding it. And we had 2 principal drivers here. One was to deliver a new platform for acquisition. The second was to deliver a platform for growth. On the acquisition side, we wanted to really make the most of the opportunity we have to bring new members into the business. In terms of the growth platform, that was about deploying the latest technology to enable us to put more traffic into the site, drive bigger marketing campaigns, do that as cost effectively as possible, adding in things like the latest content tools so that we could get new content into members faster and also a really high-quality data and analytics layer, so we could understand exactly what users were doing. You can see the site here that's scrolling through on the right. It looks fantastic. It's really mobile optimized. It's designed for that small screen experience. The platform delivered in April only a few weeks ago. So it's very early stages, but we're already seeing some really great results. We're pushing forward with better search visibility. We've got that speed and stability that we wanted and that capability to merchandise products to drive yield. It's driving engagement through that fantastic mobile experience And really importantly, it's going to give us the ability to push forward in product to take that richer data that we've got on the new platform and use that to guide product development and get products into market faster. And as you'll hear from Nick in his section on revenue optimization, that's going to be really valuable for us over the coming months. The second area that I wanted to highlight was the app. So again, about 18 months ago, we look to rebuild our app, again, applying a new design, a really fresh design to this, but more importantly, putting a lot of new features and functionality in. Many of these features are really about augmenting that gym experience. So contactless entry, easier class booking. And this one in the top right, the live gym busyness. So we put in a feature where you can see how many people are in your gym in real time. And members absolutely love this feature. It enables them to choose when to go to the gym. They know what to expect when they get there, how much capacity is going to be available. It's a great example of technology really augmenting physical experience. In February of this year and Ann-Marie mentioned this, we also then in our collaboration with Fit, the online content provider, took 200 Fit videos, which are real high energy, high quality digital exercise videos and have put them in our app. All 200 are available to all of our members to use whenever they want, how often they want. And again, a great example of using digital to expand our reach and give our members more choice and flexibility. So what's the net impact of these changes? Well, there are 2 sets of data for you to look at it, and both of them are quite compelling. So on the left-hand side in the bar, the blue bars are showing the percentage of our membership base that used our app monthly in 2019, and the bars on the right in the green are showing that same statistic in 2022. The changes that we've made to the app have driven almost a tenfold increase amongst our members, an absolutely huge uplift in how many of our members are using that. The table on the right here are app store rating. So independent ratings direct from users into the App Store that you'll be familiar with. And you can see that in the Apple App Store at the moment, we're rating 4.7 out of 5. In the Android Google Play store, we're rating 4.6 out of 5. And that combination of ratings gives us the best app experience amongst our peer group, the best app experience among major operators and this is something that we're really proud of. It's also in combination, these 2 data sets show very clearly that our investment in tech is making a difference to members. Members are really enjoying these features. They're really using them heavily, and they're really placing the value on them. And then the third area to look at was around our data and analytics capability. And I think this is the area that has transformed the most over the last few years. We now have a really first-class data and analytics capability that's driving value and pricing. It's driving value in churn, and it's driving value in operations, particularly around location assessment and performance. However, if there was 1 part of this that I would pick out as a lens for the future, it's the work that we've done on churn propensity in the last few years. So we've been building proprietary models that take hundreds of millions of data points about how our users use our products, how our members use our product and building models to identify the likelihood of those members leaving us before their next payment date. And we run this now over our entire member base, many hundreds of thousands of people. And what that is showing us is where on their own life cycle, those members are, how likely they are to leave, how urgently we should reach out and contact them. Clearly, this sort of work for everyone was very heavily disrupted by COVID. But what we're seeing already is that trackable patterns are coming back in and these models are reactivated and back end use again. I think how powerful that is being able to send someone exactly the right communication, exactly the right offer for them at their stage with our product. The principles of that can also be applied to many other areas. We started with churn first, but you can read across into pricing, into product selection, into usage patterns. This is a really powerful route forward for the future. And finally, innovation and new technology beyond these core areas, e-commerce, app, data, we continue to invest and look at a wide range of other tech, tech that might improve the in-gym experience a little bit more, tech that could increase automation, tech that helps us evolve our digital product. You heard Ann-Marie talk about remote operation. Tech is going to be absolutely central to that. You heard Richard talk about small town. Again, tech is going to be a really key part of that. So in summary, we are really well set up for ongoing success in this area. We have a fantastic team, really strong individuals drawn from a wide range of sectors, retail, finance, tech, and this team are focused around 3 key things. The first is that we see technology as a key differentiator in our market, and that is growing. We have a market-leading position at the moment in critical areas of digital and data. We're really on the front foot here. And most importantly, we see a lot of further opportunity. This is something that we are going to continue to invest in about 3% of revenue to drive forward and really take the competitive advantage that we have in this area. That's everything from me. Thank you very much for your time. I'm now going to pass over to Nick who's going to talk about revenue.

Thank you, Jasper, and good afternoon, everyone. I'm the Strategy and Corporate Development Director at The Gym Group, a new position created in November to maximize our long-term growth potential. So my background is in consumer growth strategy at OC&C Strategy Consultants and more recently, a number of positions at The Restaurant Group, putting that into practice. Now just before I start, I thought I'd share with you the 3 quite simple reasons I joined this business back in November. Firstly, the sheer strength of the business model and the consumer proposition. And secondly, the huge growth potential that this creates, but also because we're not even yet halfway through our growth curve. Thirdly, because this business is a real force for good. We are making a rapidly growing amount of members all over the country, healthier and happier every day. And that combination of 3 things is really a rare combination to find. So it's very exciting to be part of the team. Today, I'm going to talk to you about 3 big opportunities we see to drive revenue growth through price, membership structure, and our commercial strategies around this. Before I get to these, just a brief reminder of our membership structure today. So we have 2 main membership types and DO IT is our core basic membership, designed to offer outstanding value for money and accessible fitness for members of all types around the U.K. This is what we sometimes refer to as our headline rate. And with DO IT, we aim to be the best value gym available wherever we are, with prices varying by location. So from Chesterfield, where we are GBP 13.99 a month up to GBP 35.99 in Central London. LIVE IT is our more premium membership. So offering extra benefits for GBP 5 to GBP 7 more, the 3 key ones being multi-size access, Bring a Friend and our Fitness & Body composition tracking, which we call FitQuest. And this product, together with the add-ons that you see on this slide are our key tools to drive yield growth without increasing price. And taken together, all of the elements on this page are what we call our price product architecture, and this is crucial to understanding our approach to revenue optimization. Now what I described is simple enough on the surface, but the investments in data and analytics that Jasper's been talking about in the previous section, have enabled us to take an increasingly sophisticated approach to how we optimize and drive revenue at a site and member level around these products. So the next stage. What I'm going to focus on over the next 3 minutes -- the next few minutes rather, are 3 big opportunities that represent this next stage for us. So one, to drive revenue growth by optimizing our core price points. Secondly, to make a step change in our product architecture by adding a third core membership and new member features; and thirdly, to unlock new levels of sophistication in our commercial strategies. So taking our price points first. This is where we were at the end of last year. And you may recognize this data from our full year results, although the slide at that point looked a little different. So on the left-hand side, we show our average headline rate versus our core competitors across all locations. But this is a little misleading because each of us vary our prices by location, and we have very different geographic distributions across our estate. So JD Gyms, for example, has a lot of sites in the North of England, a few sites in the South of England and none in London, which is actually very different to us. So the key data is on the right-hand side, which shows our price position in competing locations, i.e., where we have a site near to one of these competitors. And you can see very clearly here that our competitors are typically 18% to 26% more expensive than us, GBP 4 to GBP 4.50. And that is a very large gap to the rest of the local sector. While we're on this page, just 1 more point worth noting on the bottom left here is that the gap is even bigger to the mid-market and public authority gyms, which, of course, makes us an attractive proposition for members looking to save money in the current climate. We have an opportunity to narrow this gap and increase revenue. We have quite a lot of data on this. And on this page here, we're showing 2 of the most important pieces from our member research. So on the left-hand side, this chart shows how members receive our price on the vertical axis. And the quality -- what is effectively the quality of our proposition on the horizontal axis here. So our position in the bottom right means members are saying that the value that we deliver significantly outweighs the price that we charge. Or put another way, a fair price for what we offer would be more in line with the shaded diagonal well above our position on the chart. On the right-hand side, we look at our rating versus one of our closest competitors. On the top 10 most important factors for members when they're joining a gym. The vertical axis is how important these factors are to members. And the horizontal axis is how we are rated relative to that competitor. So on the right-hand side is where we're better. On the left-hand side is where they are better. And you can see from the data that we are rated better or equal to them on almost all of these factors, yet we saw on the previous page that they charge 20% more than us. It's also worth noting that one of these factors is monthly price. But you can see we don't get much credit for that 20%. So these point to an opportunity for us to narrow the price gap. And although we don't show the data here in our trials, this has proven to generate additional revenue for us. So taken together, all of this gives us confidence to carefully accelerate our program and price increases. In April, we increased prices across 178 sites, adding GBP 1.18 in total to our headline rate, although, of course, the price increases were different from site to site. This closes some of the GBP 4 price gap that we saw earlier, but maintains our position as the best value gym. It also improves member experience in some of our busiest gyms as well. Of course, headline rate only applies to new members. So we're also increasing the repricing of existing members to speed up the flow through our business. Historically, we've actually been very conservative here and there's a lot of leeway. Only some members will receive a price increase. And to date, we've always kept that prices below the prices that we charge new members to encourage loyalty and discourage churn. Now this will still take some time to flow through the member base, but it will be faster and bigger than previously. And on a final and very important note, we are doing this because we see a market opportunity and because this increases revenue, not because we have coincidental cost inflation in the current environment. Now moving on to the second opportunity around membership architecture. LIVE IT, as you know, has been a great success for us, generating GBP 24 million of additional profit to date. On the right-hand side here illustrates what's going on. So offering LIVE IT at a higher price with extra benefits allows us to capture value in the market that we can't access with DO IT alone for members who are willing to pay more for those extra benefits. So that value on the chart here is represented by the darker shaded blue area under the chart. If we try to capture this with DO IT alone, all we do is shift down that paler blue area, and we wouldn't actually capture any more value. But with our new tech system, there is an opportunity to take this further. There are still members at the top of the curve that we can't reach because our prices are too high, and others at the bottom end that will be willing to pay more if we gave them the chance for the right package. So in other words, we've got potential to tap into extra volume with a new lower-priced membership, and you saw earlier that price is still the #1 barrier for people joining gyms and also extra yield with an enhanced premium package. So this is what we're going to do. And the illustration on the left-hand side here shows what this could look like with new memberships replacing DO IT and LIVE IT at higher and lower price points. This time around unlocking the green highlighted areas on the chart. I've mentioned some of the big benefits already, more volume and more yield, but there's 3 others that I want to highlight. Firstly, that this architecture will help us to further narrow that price gap that we were talking about to competitors. Secondly, it also gives us a lower price point in the market to catch members' attention. And that price perception benefit will be very valuable. And thirdly, it gives us a much more sophisticated and flexible membership architecture to enable us to optimize our overall revenue and also to monetize new membership features that we may introduce in the future. In terms of timing, we expect to begin trials before the end of the year, and we'll gradually phase in new elements after that. And of course, it's worth noting that in the same way that you saw for LIVE IT on a previous page, this will take time to reach its full benefits for the business. Finally, I'd like to just bring us back to those overall processes that optimize revenue around the architecture. The investments that we're making in tech and data and analytics that Jasper talked about and in brand, which Emily will do in the next section will enable us to unlock more levels of sophistication over time. And we've already -- we're already well into this journey, but there is a lot more that we can do. And this slide gives some examples of where this will come from. When we talk about the scale benefits to our business in commercial strategies, these are the sorts of things that we're thinking about. We can do more site-level tailoring across more elements, including promotions although as you might imagine, there's always more levels to go for on this one. Secondly, we will -- we can introduce more sophisticated strategies for driving volume and yield at key points in the year, at key points in our site maturity curves and also at key points in our member life cycles as they come in and out of our business. Thirdly, we have a much stronger test-and-learn capability, which is being unlocked by our tech platform. And that allows us to just optimize all of these things faster and better than we have ever been able to do before. Continuing to use data science also is an opportunity for us to help us make better and faster decisions. And there's a lot of scope to optimize our communications with behavioral economics, which can be very powerful in nudging member decisions essentially for free. And finally, we also firmly believe that as good value as we are, there's more we can do to communicate that value effectively to other people in the gym market but also non-gym goers who just don't realize how good a value we deliver. So in summary, we've got 2 big strategic opportunities that we're pursuing this year against the backdrop of increasing sophistication that will work alongside these 2 and amplify the benefits. And this gives us a really exciting pipeline of commercial initiatives to pursue over the next couple of years. So thank you for your time. We've now got the opportunity for Q&A on all of the sections up to this date after which point, you'll be glad to know, we'll take a quick break.

Douglas Jack, Peel Hunt. Yes, I've got 2 or 3 quick questions if that's all right? The first one, obviously, is not a trading statement. So I don't want to lead you into that. But the 14% penetration at the end of 2021, do you think that figure would have been impacted by Omicron. That's the first question. Second one would be, can you just talk about the difference in performance you're seeing between perhaps the most adverse locations in terms of those socioeconomic demographics and the most active ones as well. And in terms of the site pipeline, could you split the 101 sites between small, medium and large.

So actually, Doug, I think on the second of your questions, we're going to leave that to the financial section because Mark's got a couple of slides on that. In terms of the penetration rate, normally, our data, you would have seen that actually we gave less split of that 14% than we've done in previous years. And that's because the data in previous years has come from LDC. Now LDC are planning to update their forecasts in the market, and it's very imminent, but our Capital Markets Day was just a little bit too early for it. So we expect that data in about a month's time. So the 14% is just the best that we've got at the moment. I wouldn't say it's necessarily impacted by Omicron. It's an estimate that Deloitte have done, and they've estimated for all the various European markets, what they think the membership number is across health and fitness. So I think that's kind of the best that we've got at the moment. Mark, do you want to talk a little bit about the split of the pipeline between small and large?

Yes. So we don't look at it quite so rigidly as small, medium and large. It's a whole spectrum. So in 2021, for example, we opened 7,000 square feet and 21,000 square feet and everything in between, an average just over 12,000 square feet. So in the pipeline, it's actually very similar to the average that we opened in 2021. The average would be just over 12,000 square feet, ranging between probably 7,000 and close to 20,000 in terms of the range. Quite a lot of cluster around 10,000, 11,000, 12,000 where we're seeing a lot of success at the moment in those sort of small to medium-sized gyms.

Tim Barrett from Numis. Two things, please. One, also on the pipeline. What's really powerful is I think if you add the 101 to where you are now, you're obviously already at your 300th site. Within that, the 58 that you described as offers out, can you just give us an idea of what that really means? And presumably, you don't hope to win all of those because there will be sites for 2025 that haven't even been [ ramped ] up now. So how do you feel about that? And then the second one was on Nick's presentation, the 8% that you've put through price wise, obviously, we're in an inflationary world. What do you think big competitors are doing price wise?

Okay. Again, on the pipeline, you're absolutely right, are still competitive. And so therefore, we wouldn't expect to win all of those. And it may be as kind of as little as I'd say, 25% of those that we would actually be successful. That's not necessarily meaning that we're losing them to other gym competitors. It's just sometimes actually the landlords decide it's easier to leave it as retail because 1 of the things about when you actually fit out of gym is quite often, there's some landlord works that need to be done to put it in a position where you can actually fit it out as a gym. And when the alternative is retail, then often a retailer can go in straight away and just take the site as is. So it is a competitive environment. But I think we've got a lot of confidence, obviously, in that 101. And the really key point I was trying to make was that it comes because we started early. So we decided to get ahead of the curve even in the point when we were still in the third lockdown, we were recommencing our search sites. And we've seen some great ones that have come out of that, that we've opened in 2021. Ann-Marie is talking about York, Cambridge, a number of locations where we found it really difficult to get into previously. Oxford, we opened in, we're opening in about this year. And so that's why we have a lot of confidence about the sort of locations that we've been going into. Mark, would you pick up the one on price?

Yes. Very early days yet. So we haven't seen our major competitors increasing price since the 178 that we put through in April. But we would expect that over time, they would naturally be increasing prices as well. Let's -- as you say, it's an inflationary environment. But what we are looking at is the opportunity for us in understanding what we can do that will be revenue optimizing for us. And we're very clear that we can go beyond the opportunity that we've already got with the 8% increase we've put through.

[indiscernible] Capital. Some of the quotes today were very interesting. You said you were never more confident. Scale really does matter in this industry, a uniquely attractive property market and the most successful operating model in the market. But based on your revenue program and that estimate you gave for what the market should be like in 2030, you'd be losing market share. So my question really is, given all that's happening and the fact that you will have excess capital by the end of this year, why the lack of ambition on the opening program?

Let me cover that. I don't think it's a lack of ambition, it's actually 25 to 30 is faster than we've done previously in our history when it was 15 to 20 sites. And what we also said was that we see a further opportunity to go faster than that if we can make the town opportunity, which is also within the market sizing that you've seen work and hence the trial that we're doing in Dorchester. And I think you've seen on one of the slides, 25 to 30 is not a cap. I mean, clearly, we have to guide the market and we will guide the market to levels that we feel very comfortable on. If we see the right sort of levels of site and the right quality of sites and the right location and the right rent, then clearly, we would be prepared to go faster than that. But from our perception of what sites that we see come up, that is a level at which we are comfortable. Now the important thing, I think, is what I said right at the end. What we know from our experience is that locating in the right place at the right rent is absolutely fundamental to the model working well. And if you try to go faster, I think you've seen in other sectors where people have over-egged their rollout, that's where sometimes you can have difficulties. So I think we're very confident about all those things that you said, but we also think 25 to 30 is the right level to maintain that discipline in terms of the quality of the locations and also the rent.

[ Are you going to be ] focused on that 30%, 31% return on capital? Do you think that is affecting your sense of how fast you can roll out?

Well, I think if you look across different markets and different operators, that 30% becomes a very common number. And remember, it needs to be 30% as well because -- as we've also said, you do need to invest 6% into maintenance CapEx, you need to invest 3% of your revenues into CapEx. So you need actually quite a high return-on-capital model to really make this work overall. I think we're very comfortable with that sort of level of return on capital. We've done it historically, and we think that we can do it in the future. And I think one of the key things that we said today was that our success in being able to expand the type of formats that we go into, such that we can now open anything between 7,000 and 21,000 square feet, really increases the speed at which we've been able to go and achieve that sort of 30% return on capital.

Mark Walker from Tollymore. If I could just kind of follow up on that question, actually asking about the -- your expectations for the return on capital implied by the plan, which is sort of in line with historically achieved. But again, a lot of the messages were around a superior future environment versus the past. You talked about capacity extraction, better property conditions. And Nick talked a lot about this opportunity to capture consumer surplus with new products, LIVE IT penetration, pricing gap, et cetera. All of those things seem to point to actually richer unit economics. So what are the sort of primary offsetting factors that mean the incremental returns are not higher in the future?

Mark, I don't know whether you want to just give a little bit of a prelude to what you're going to say in your section in the second half?

Yes. I mean, a number of these factors, we believe, really can drive us back to levels of profitability we had before and potentially beyond. We don't want to commit to that at this stage, but we certainly believe it has the potential. We were a fantastic business before we refreshed the brand. We think we're going to be an even better business with a stronger brand that Emily is about to talk us through. Same on pricing, same on technology. Now an element of it is that you've always got to be moving forward to stand still. But we think we can go beyond that because we're accelerating, we think, faster than the rest of the market in these areas. So if you look at our financial model going forward, to get to the kind of numbers in terms of profit per site, in 2025 to hit the kind of targets that we're talking about. The mature sites that were open, for example, pre-pandemic, we'll be doing more profit per site than in 2019. And a lot of that is actually inflationary factors pushed through the system. So if you think about a typical site in 2019 that was mature, had GBP 1 million of revenue, GBP 440,000 of EBITDA at the site level. 6 years of inflation, if nothing else changed in terms of the ratio of costs and revenue, we're going to be making more than GBP 440,000 of EBITDA at the site level. So a component of it is that it's very hard for us to unpick individual elements here that we think are going to drive a bridge that says pricing is this much and property acquisitions is this much, and brand is this much. But overall, we're comfortable with a view that we will be earning more profit per site in a mature site in 2025 than we were in 2019.

Owen Shirley from Berenberg. I had 3 questions, if that's okay, please? The first was -- I just wondered if Nick would be able to give some examples of how you achieve the kind of additional price points? And is it 5 price points you were potentially talking about having? Or was it 3? Secondly, I don't know if you might want to take this one at the end, but you've got peers that are kind of doing franchising. They're looking at markets outside of the U.K. Just wondered what your latest thoughts were on those. And then finally, just a point of clarification as much as anything. On the GBP 100 million, is that what you'd hope to deliver in 2025? Or is that the sort of run rate in 2025 with all the sites matured? And I suppose if you did it from 350 sites, it wouldn't [indiscernible] as good as if it was 300 sites. So how many sites? What's the kind of tight range on sites you'd hope to achieve that from?

Okay. Nick, do you want to take the pricing question?

Yes, absolutely. So we're introducing a third core membership type. And that means that we will have 3 main price points. The top one, we are going to introduce new membership benefits in order to allow us to charge more for the top one. For obvious reasons we're not going to reveal what those things are going to be today, but we will announce them when we launch them, of course. And the lowest price point will be lower than we charge today, which gives us this opportunity to tap into additional volume and overcome one of these big barriers to people joining the gym today.

Is that sort of off-peak, or something?

We're not going to reveal the details. In terms of your second question, I mean, we can come back to this at the end. But I think just on international, in particular, obviously, it's a question we've had a number of times. And in many ways, I'll give the same answer, which is we think we are positioned in one of the best markets in Europe with a very strong market position. So what you'd expect me to say is that we're going to make sure we maximize our position and deliver those very strong returns from the U.K. market. At some point, this business has all the credentials and capabilities to go international or that sure, but our immediate priority is in the U.K. market. And then I think we'll take that third question on the GBP 100 million actually once you've seen Mark's presentation.

So the first question is from [ Gregory Randall ] from [indiscernible] Partners. Thank you for the helpful detail today. In general, we see your business went into the best sites first and then remaining sites are generally less desirable. Despite this, you forecast relatively consistent new [ routes ] over time. How is this possible?

A really good question. I think this business and this market has developed. So in the very early days, and John will recall this, initially, a lot of it was going into the city centers. As I said, about kind of 6 years ago, but even before that, in many ways, we started going into other markets more into the residential areas. Also kind of filling out in Greater London and then going into the town category. Now we wouldn't have had the format if we've just gone into particularly the towns with 15,000 square feet, that would have been too big and we wouldn't have made the same return on capital. But because we've been able to evolve the format, it enables us to go into some of these smaller catchments and still achieve the 30% return on capital. And our view, as I showed in the market section, is that there is considerable headroom within the U.K. market for us to continue to expand and achieve those 30% return on capital.

It might be worth just adding that in the U.K. market, property is very tight. It's not just easy to acquire a property you want in a place code that you want. So we know some catchments in the U.K. that we can't get in or haven't been able to get into now that would be absolutely fantastic locations for us. For example, residential areas of London are our most profitable sites, but it's not easy to find sites. And that's why it takes some time before you're able to get that. And there are plenty of absolutely excellent catchments available for us to come. It's not the case that you just pick the best ones first and then you gradually get lower and lower quality.

[indiscernible], what I suggest we do now, why don't we break and there's plenty of more opportunity to do Q&A. [Break]

Good afternoon, everybody, and welcome back. I'm Emily Kortlang, I'm the Group Brand and Marketing Director at the Gym Group. I've got a background in consumer marketing. I love building brands. I started my career at Red Bull and then went on to the employee #1 at Beats by Dr. Dre, which is then later acquired by Apple. And so I spent the last 5 years of my career, leading the brand and marketing team for the European business. But today, I'm here to talk about the Gym Group. And I'll talk about 3 things: Why brand and branding is important? What our challenge is in this area and how we'll address it? So firstly, why is brand and branding important? Strong brands deliver a competitive advantage. Firstly, brands are remembered. Just think about someone trying to choose a gym. The first thing they might do is go to Google. They'll type in a brand name that they're familiar with, that they've been recommended that they've been referred. And so having strong brand awareness is important for consideration because ultimately, consideration leads to conversion. And when they land on that website, they're willing to pay more for a brand. That's because brands have stronger perceived value. We all know from our own experiences from the trainers we wear, to the car we drive, to the watch we're wearing. At some point, we've all paid more for a brand whether that's consciously or subconsciously. And we're in the business of acquiring customers. So awareness and reduced price sensitivity reduces our cost to acquire. But to stay strong, brands need to evolve, and so do we. Just look at the brands on the right here. Brands that we all know, and we all love that at some point, in time, they've updated delivery, they've updated their logo, they've updated their iconography. They've even tweaked their names, and they do this so that they can stay relevant to their core and current customers also resonate and grow their audience and, therefore, grow market share. So what's our challenge in this area. As you've heard from Richard, we have a fantastic business, but our brand just isn't strong enough. We're almost the best business with a brand you've never heard of. And that's why I'm here, really. It's a marketeer's dream to work on a business just like this, where all the foundations are there for a great product at a great price with great technology and members that love us. And we're a business with purpose. We exist to break down barriers to fitness for all to democratize access to fitness, drive social value, and this doesn't only matter to me, it matters to our audience. And we care about the planet. We've really got really good strong sustainability credentials. In a recent Deloitte study, young people said that they were actively making choices about the brands they buy based on the company's environmental policies. So great product, great price in all the right places, but just not a great name. We called ourselves The Gym, and The Gym is generic as a category descriptor as the category norm. It's not a name. And when we pay to advertise the Gym, we do just that. We advertise the Gym, and we grow the category, and we grow our competitors. Just think about a conversation between 2 friends. One says up into the gym. I love the gym, you should go to the gym and a friend is an [indiscernible], as to which gym. But not only is our name forgettable, our logo lacks distinctiveness. This logo was designed by a Bournemouth student for GBP 500 in 2008. It's written in the font Futura, which is the second most used font in the world after Helvetica. And in a world where consumers see between 6,000 and 10,000 messages a day, you really need something that's distinctive and stands out because you simply can't buy a product that you're not aware of. So our members love us, but they just don't remember us. [Presentation]

So calling ourselves the Gym cost us money with lower awareness amongst both prospects and members. So we lose out in 2 ways. Our 800,000 members can't recommend us, they can't refer us. So we miss out on the incredible power of word of mouth. And for prospects, we have to invest heavily in Google in the bottom of the funnel to show up when people are looking for a gym rather than them seek us out. But as with all challenges, this presents us with an opportunity. So how do we address this challenge? Strong brands need 3 things. They need a name, an identity and a meaning. Back in the day, you just choose a name that was at the top of the phone book. Apple was only chosen because it was [indiscernible]. Today, we need a name that performs well in Google, the modern-day equivalent of the phone book. We need an identity that stands out. If I showed you a swoosh or a tick or the color red, I'm sure you'd tell me what brand it stands for. These are call distinctive brand assets, and they drive awareness and memorability, which leads to consideration and conversion. And we need a brand that people connect with, the people feel an emotional connection to that has meaning and it has purpose because the fastest route to the consumer [ first ] is through the heart. So we're changing our name from The Gym to The Gym Group. And I'm aware of this audience, you already know us as The Gym Group. But for consumers, this is new. And moving to The Gym Group is commercially beneficial for us. It connects our brand to our web address. We've been using the gymgroup.com as our domain name for the last 14 years, and this means it's been ranking in Google. And so therefore, moving to a new name and therefore, a new web address would cost us in 2 ways. We'd lose our #1 and #2 slot in Google search to our closest competitor, resulting in lost revenue. We'd have to rerank our new website. And our agency have calculated that this could cost in the tens of millions. And when we researched other names alongside The Gym Group, it tested just as well with consumers. So you can see it's a [ wholesale ] change in how we'll appear in the world. We retained our color cyan, which [ one color's theory ] relates to youthfulness and energy, perfect for a fitness brand. We've added a second color, volt green. And you may have heard the saying, blue and green should never be seen. So this stark contrast creates real standout, real distinctiveness. We've got a custom-built and custom-designed font called [ TGG Sans ], which is all lower case and breaks all category conventions. And hopefully, from looking at this font yourself, you'll see that it feels open, friendly and accessible just like our gyms. We've got our own icon. We call it a super g. This allows us to show up in more places more often and especially in a digital world, where 75% of our consumers are coming to us on a 5-inch screen. So in the future, you should be able to see a word in this font, our super g icon or a touch of cyan, and you'll instantly know it's The Gym Group. So new name, new identity, now to meaning. Adding the word Group is a marketing gift. Groups are powerful, they have a sense of belonging, a sense of community, a sense of inclusivity, perfect for growth audiences of women and gym intimidated. When people are in a group, they achieve more, they go further, faster, longer, perfect for people trying to achieve their fitness goals. And groups, they get behind their members, they cheer them on, so it's a rallying cry for our business, for our 2,000 PTs and our 400 GMs to all be part of our group. Now I appreciate it's really hard in this forum to convey the power of a group. And what it can be for us as a business. The group, after all, and the name the Gym Group is just 3 small words. But if I said to you, just do it, I'm sure you'd tell me what it means to you. But when it was first presented, the feedback was that it sounded like something your teacher or your mom would say. And there's a very different meaning today. So here we have the possibility to create a very different meaning for the Gym Group with these 3 words, something really powerful and really emotive. So hopefully, I've shown we've got a new name, SEO first. A new identity with distinctive assets. And a new brand meaning that want to create an emotional connection to the consumer and create that spark so that when they are choosing between 2 brands, The Gym Group shows up. So at the 18 -- we're at the end of an 18-month project on this. In July, you'll start to see our signage updated across our 200-odd gyms. One of the first up is Paddington. Then from August, you'll see our web and app updated, key part of our consumer journey. And then from September, we'll run a marketing campaign that's been designed by leading ad agency will break all category norms and generate a lot of earned media. I think it's going to be TikTok gold. We've also been recruiting a team of marketers with excellent pedigree, great marketing background from great businesses and great brands that are able to deliver this. So to summarize, we need to improve our brand health. We need stronger brand awareness because high brand awareness reduces your price sensitivity, increases the consumer's willingness to pay, decreases our reliance on discounting, decreases our cost per acquisition and our reliance on performance media, which can then free up investment into brand building, which as you can see, creates a virtuous cycle. So our new brand will deliver more awareness, more consideration and more members. It's been an absolute pleasure to share a new brand with you today. And on that note, I'll hand over to Mark.

Thank you, Emily. Very exciting plans for the brand there, really, really keen to see how that comes to life in our gyms and on our website, very, very confident that's going to be a big step forward for us as a business. So we've heard today so far about what a great business Gym Group is. We've also heard about how attractive the market it is that we operate in. I'm going to focus on the financial performance and the outlook we have in the medium term to 2025 and also talk a bit about capital allocation. So I wanted to start by talking about the very strong financial model that we have proven consistently prior to the pandemic. And you can see it on the chart here. The 2019 results are on the right -- on the left-hand side, -- and just 1 note about what we mean by EBITDA here. So this is, if you like, old money EBITDA, it's after rent costs have been taken off as if IFRS 16 had never been invented, if you like. But what you can see from this is that in 2019, we had a 40% site EBITDA margin, and that would have included sites that were immature at that time. And then after central costs, our group EBITDA margin was 32%. So really strong levels of profitability for what was still a very fast-growing business. Now our most important financial metric is the return on invested capital that we achieve from our mature sites. So maturity for us is from year 3 onwards. And we calculate return on invested capital with the site EBITDA divided by the initial capital invested. And as you can see, the bottom left there, in 2019, we met our target of 30%, and we consistently do that. What's also interesting to see is that it was a very consistent performance between the newer cohorts and the older cohorts. On average across our mature state, 31%. On the right-hand side, you can see a kind of a template example of how we'll deliver 30% return on capital at different sites, 16,000, 12,000, 8,000 square feet and everything in between. Clearly, the smaller sites are going to deliver less EBITDA per site. But what's really important is that the return on invested capital will be the same at all levels. The final thing I want to say on this slide was that this is a very cash-generative business and has been, and we'll return to that in a moment. But in 2019, as Richard mentioned earlier, we were able to grow our estate by 12% as 20 sites and we were self-funding while we were doing that, and we will soon be back to that position as we'll come on to in a moment. So we're setting out today our 2025 targets. We will be a business that will have over 300 sites and deliver EBITDA in the region of GBP 100 million, our range being GBP 95 million to GBP 105 million. That will translate to a profit before tax of between GBP 40 million and GBP 50 million. And we set out in this chart the building blocks in this bridge. So the first stage is that the pre-COVID [ estate ] that we had in 2019 will recover to the 2019 level of profit of GBP 48.5 million. But importantly, it will go beyond that point because there were a number of sites that were immature at that stage, both organically developed sites and also those sites we acquired from Lifestyle and easyGym. So the next block are now building a set of blocks here is the full maturity of those sites that we had pre-pandemic. We then, of course, opened sites in 2020 and 2021 through the pandemic, and that's the next building block as they mature. And then the new site pipeline 2022 to 2025. And here, we have our 25 to 30 sites that we've talked about earlier today. Now there will be some incremental central costs that offset some of this site growth in EBITDA, of course, but these are the building blocks that will get us to the GBP 100 million. So an important -- 2 important points to take away from this as well. One was the question asked earlier. So the GBP 100 million target is what we aim to achieve in 2025. The level of profit that we can achieve from the sites that exist at that time will be higher because those sites open in '24 and '25 will not be generating much in EBITDA. So the pro forma will be higher than GBP 100 million. The second thing is what Richard mentioned. This is a staging post. This is not the end of our growth by any means. And if you go back to the scale of the opportunity in terms of market headroom in the U.K., there's plenty more to come after this. So to summarize then, there are 2 key drivers that are going to deliver these results, recovering the profit margin of the existing estate, and we're going to open 25 to 30 sites per year at 30% return on capital in line with historical norms. So let's just touch on each of those in turn. So starting with the recovery of the existing estate. The 3 things on this chart that I wanted to talk about. The recovery is absolutely well underway. So the first chart shows membership growth of the top 10 operators by size in Europe. And as you can see, we were the fastest growing in terms of membership between 2020 and 2021. Now new site, those things would have helped, of course, but actually some of the other operators on that list also had new site openings. The second chart looks at revenue, and it's the recovery from pre-pandemic levels, and it takes the 2021 revenue versus 2019. And as you can see there, Gym Group has exceeded the U.K. average and the European average of gym operators. And then the third thing is our like-for-like revenue and how we're recovering that versus our 2019 levels. So -- what do we mean by like-for-like, 2 important distinctions here. The first is that we're taking sites that were open up to December 2018. We then compare the performance in 2019 versus performance in 2022. The second adjustment that we've made is that we introduced a new model for our personal trainers over the course of 2019. We now have income in our model in 2022 that we didn't have in 2019 -- in the beginning of 2019. So we've stripped that out. Otherwise, the numbers would be higher. So we've really got a good like-for-like comparison here. And as you can see, we're steadily increasing that month by month in the first part of this year. and that will accelerate in the second half of the year with some of the price increases that Nick talked about earlier. Our goal will be to get to 100% like-for-like revenue by the end of 2022. So why hasn't revenue just immediately snapped back to 100% of pre-COVID levels? Well, we think there are key factors that are slowing that growth. But ultimately, these factors, we think, will end up being positive for our business. So the first is simply the concern around COVID as an infection. Clearly, during 2020 and 2021, that was at its hike, that's now dissipating. But it's still there as a factor. Thankfully, it's reducing all of the time, and we expect that to go away in due course. Now actually, we think in a way, this could be a positive for our industry in the longer run. People are more interested, more aware now of the benefits and importance of a healthy lifestyle and that we think will lead to a higher penetration of gym usage in the U.K. Secondly, the shift in working patterns, we all know about this. It's been very disruptive. And we can see it, and there's a bit more data in a moment on it. We can see it in our business in city centers, in particular, where there's a little bit more of a workforce prevalence. In our particular business, city center is a very small proportion of our sites, but we do see that the city centers have recovered slower. In the longer term, we think that this will work to our favor. If people are spending a little bit more time at home, evenly spreading their time perhaps between home and the office. Actually, the gyms that will really succeed are the ones in residential areas and nearly all of our gyms are in residential areas. It will also help if you're a gym network with lots of sites to offer multisite access to people that might want to access a gym near the home and near their work. And of course, we have that in our LIVE IT offer. The third thing, alternative fitness options. Now there's a lot of talk about this, of course, during lockdowns, whether people watching Joe Wix on YouTube or buying a Peloton. But what we've also seen is that, that trend has reversed quite a bit in recent months. And the survey data would suggest that people have tried digital fitness and outdoor fitness. First of all, they're not completely satisfied with that. And secondly, that it will be complementary to being a member of a gym -- and we are working with that trend not against it. As Ann-Marie talked about and Jasper talked about, we now have a digital offer within our app. So if you want to do some work out at home, you can do that. If you want to come to the gym, you can do that. We're offering everything. And then the final thing is the cost-of-living squeeze. Clearly, at the moment, for some people, any new financial outlay they're thinking twice about. But really, this is a great opportunity for us. There are millions of people wanting to be a member of a gym in the U.K. at the moment. And we are the lowest price operator in the market, offering a very high-quality product. This is a great time, as Richard said, for us to be doing very well when people are looking to save money in their gym membership. So we think these factors are more about the timing of recovery rather than whether recovery will come. I mean just going into one of those, in particular, the working patterns, we are really seeing in our estate how that is transferring into gym membership. So where we are seeing more work from home, which would be in the city centers rather than residential, we're seeing the impact. And where we're seeing it also is in regions of the country. So if you look here in the first chart, London and the south much slower to recover in terms of their like-for-like revenue than the north. The north is back to where it was pre covered. In the second chart, you can see city centers versus more residential areas. So city suburban for us is the residential areas of the large [indiscernible]. That's back to 100% of where it was pre-COVID. And then if you look at parking versus public transport, so we've got the example there, London residential, where we've got parking and people are not dependent on London transport, where clearly, the traffic numbers are much down at the moment. You can see that the recovery is really quite strong. So what this tells us is that patterns normalize, we'll see a more even recovery across the rest of the estate. So we've talked quite a lot about the external factors that are driving the recovery. But of course, we're not just sitting there waiting for the members to come back. We're being proactive, both tactically and strategically. And most of this has been covered today, so I'm going to just go through this very quickly. But clearly, in terms of marketing and promotion, we've been very active at the moment so that when somebody is ready to join a gym again, they choose us. We're also investing in the customer offer and the member offer, both in gyms and digitally, and you've heard a lot about that today. And then there are the 3 big strategic initiatives that are going to help drive the recovery and take us beyond and that's around technology, pricing and brand, and you've seen those presentations today. So that was the first part of the component to get to our GBP 100 million target. The next is opening new sites. So the building blocks to get to that GBP 100 million. First of all, we've got to open 25 to 30 new sites. And you've heard from Ann-Marie and Richard about our confidence of why we think we can open at least that number of sites. But then how are those sites going to perform? Well, our best indication of that is how the new sites have performed since the end of the COVID lockdowns. And what you can see on this chart is that those new openings are performing very well compared to historical norms. So the blue line shows month by month what the membership has grown to in those gyms versus their ultimate appraised level, which we've indexed to 100%. We expect that after 2 years, they'll get to 100%. And the green line, dotted line is what is the historical average in our estate. And as you can see, the current cohort that has opened since April 2021 is actually slightly ahead of historical norms. Now one thing you will notice at the early months here, which are months minus 3, minus 2, which is before the gym opens, we were slow versus history on that. But the main reason for that is we had quite a lot of sites opened in April and May, soon after lockdown, where they're minus 1, minus 2, minus 3 months were actually in lockdown. So we obviously weren't selling memberships at that point. But what you can see is that very rapidly got to historical levels and beyond. So we're very confident about this cohort reaching its 30% return on invested capital. But we've now locked in the pipeline for 2022 and starting to build the pipeline for 2023, and we're very confident about the quality of sites that we've got in those pipelines. Now if you think back to our bridge to 2025 EBITDA, most of the -- nearly all of the GBP 100 million will come from sites open up to and including 2023. And we've got very good visibility of that pipeline. So we're really confident about the possibility of delivering that 30% return on capital. So let me now turn to the balance sheet. I'm going to start with capital allocation. Our first priority for capital is that we reinvest in the business to make sure we have a market-leading offer. And that investment comes in maintenance CapEx in our gyms and in tech. In maintenance CapEx, we will spend around 6% of revenue. Captured within maintenance CapEx is everything that we spend on an existing site. It could be repairs and maintenance to a faulty piece of air conditioning, but it could also be redesigning the gym for more modern trends, putting in new equipment, everything that we spend in terms of capital investment in existing sites will go into that. Jasper talked about the technology investment, as well as being a multi-site leisure operator, we are an e-commerce platform, and we will continue to invest in technology at around 3% of revenue for tech CapEx. Then coming on to growth CapEx. We had a question about this earlier. So our priority is to invest where we can see 30% return on invested capital. We've guided to 25 to 30 sites, but by no means is that a cap where we will find opportunities that meet our hurdle rate. If we can go faster, we will go faster. Small town is an example where we think we can go beyond 25 to 30. But depending on the property market, we may be able to go even further. But what's really important is we are not going to lower our hurdle rate of 30% return on capital. Coming on now to leverage. As a growth-orientated PLC, we believe the right level of leverage for us is between 1.5x and 2x EBITDA. Now that's a little bit higher than we had in 2019 where we ended 2019 on 1x. And we're very comfortable with that, and we think it's the right thing. We're very confident in the future cash flows of the business, and we're very determined to give strong equity return to shareholders. This is why we believe this is the right level of leverage to have. Now when we fall below 1.5x, which we will in 2023, that gives us an opportunity to distribute excess cash to shareholders in the form of dividends or share buybacks. So this final slide for me sums up why I think there's such a strong investment case here at the Gym Group. This is a business that's going to deliver very strong growth. We're continually reinvesting, but while we're doing that, we are now self-financed. Richard talked about the period immediately after lockdown where we took the decision that we didn't want to delay our growth. We took money from shareholders through a raise in July in order to do that. But we now have the capital we need for the rapid expansion program that we talked to you about today. What you can see on this chart in the dark blue line, is the net debt levels we would have at the end of each year give no money is returned to shareholders. So we've been small cash positive in '23, and then net debt starts to fall faster in '24 and '25, as you can see. The green line shows the level of debt that we could hold at 1.5x EBITDA, clearly without growth in EBITDA expected. The gap between the two is the excess cash that we would have available to distribute to shareholders in the form of cash dividends or share buybacks. And that will come as early as 2023. So in summary, this is a business that has very strong financial model that you've seen operate pre-pandemic, and we're now well on the recovery route post pandemic to get back to that level of profitability. We're going to combine that with a rapid expansion program of 25 to 30 sites per year for the next few years. So that in 2025, we have more than 300 sites and delivering EBITDA in the region of GBP 100 million, and we'll deliver this growth at the same time as distributing cash to shareholders. With that, I'd like to hand back to Richard for closing remarks.

Thank you, Mark. So this has been the Capital Markets Day that has concentrated on our medium-term prospects. But one of the key takeaways, I think, is how many of the initiatives that we've spoken about today are already underway. Clearly, membership being the most important, and we're recovering well. As Mark says, we expect to be at like-for-like revenue by the end of the year. In terms of new site pipeline and our ability to fulfill that through our flexible formats, we've built our pipeline for 2022 and we're building it very successfully, as you've seen for 2023. And we see a further opportunity around the small town segment. On yield, we've put some price increases through based on good levels of research, as Nick outlined, and we see a further opportunity in the price product architecture. And on key enablers, the tech platform is built and our brand refresh is well underway, and we relaunch our brand in the autumn. I think this final page really sums up the opportunity. This is a very strong market we're in, where we're recovering well, but we have a resilient business. And let me just touch on that in the context of the cost-of-living crisis that we see at the moment. So when I say we've got a resilient business, what I mean is that we have a labor-light model, as Ann-Marie showed, which means that actually, we're not subject to any of the labor shortages or the rapid increases in labor costs because we can replicate that with the amount that we charge our personal trainers in terms of rent. We have no cost of sale effectively within our business. So we're not like other leisure businesses in that regard. And we have a low price point even after the price increases that we put through, we're still the lowest priced in the market. And as we demonstrated in the market section, with such a fundamental part of everyday life for people in the U.K. that actually we expect to be very resilient even in the midst of a cost-of-living crisis. As we show on point 2 and 3, we have an opportunity straight away to increase our profitability, both through site expansion and through the yield increases that we've spoken about. And our 2 key enablers of tech and marketing are now clear strengths for this business. And as Mark has shown, we can grow this business to GBP 100 million EBITDA by 2025, GBP 40 million to GBP 50 million PBT. And as part of doing that, we expect to generate excess cash, and we have the potential, if we can't deploy it to actually get the return on capital that we require to return that to shareholders. The market opportunity is very significant for us. Our business is very well positioned to take advantage of it. And in doing so, we will drive excellent financial returns. And in turn, we believe we will drive shareholder value. So thank you for listening, and we will take some more Q&A.

First question on the share buybacks on timing. You've indicated that this would happen from 2023, given what the share business today wouldn't be today an opportune timing to kind of capitalize on that environment? That's question number one. And then two, on the dividends' page. I think with a -- it's a question of whether you can do better things with your capital and returning it to shareholders when your return on capital is 30%. So my question is, do you see that with the cash that you would have in hand that you're generating, you can't necessarily invest into growth again and rather than have to return it to shareholders because it's a question for us. To either invest it somewhere else if the capital is returned at 30% ROCE because I'd rather see it in the business where it can grow at these rates.

Why don't I start with the second of those questions? So absolutely, if we can deploy that capital at 30% return on capital, then we will do. And if we go faster than 25 to 30 sites, which is our current projection, then that may delay giving cash back to shareholders, but that would be the right thing to do. And hopefully, you would agree, it sounds like you would. So we will absolutely do that. That's the first priority. What we're saying is that at the moment, with that guidance of 25 to 30, we can still do that, and there would then be excess cash within our leverage limits. And we just don't know yet whether that will be what we deliver or whether we deliver more. Hopefully, that answers our ordering of preference. We're not going to give cash back to shareholders if we can open more sites at 30% return on capital. And in terms of buybacks, we don't think it's right to do it earlier. We've set now our guidance between leverage between 1.5x and 2x. So we're going to wait until we reach that point before we do buybacks or dividends.

Mark Walker from Tollymore. Following up again on that question. What would if you were to maintain your leverage at 1.5x without returning anything to shareholders, what would that imply about your site rollout? And what -- what would the numbers move to? And -- can you talk more about what the constraints are bottleneck in resourcing that type of ROI would be, please?

Mark, do you want to do that again?

Yes, can you just put the first question again? I'm not quite sure what you're asking?

So you have a natural sort of decline in your leverage as a result of excess cash generation, which you can do stuff with, right? You can reinvest more or you can return it to shareholders. If you didn't return any and you maintain the 1.5 leverage in your chart on the upward trajectory via reinvestment, what would your 25 to 30 go to?

Not easy to answer off the top of my head. But clearly, we could open a lot more. But I hope it's coming across. We are not limiting our rollout because of a capital constraint. The limit is when we can find sites that meet our hurdle rate. At the moment, we think that's about 25 to 30 a year. It might be a little bit more.

So if you find 50 sites, could you internally resource that?

Yes. And to the second part of your question, we have the ability in terms of the property acquisition team and the property development team to build the sites and then the ops team to then operate them to go faster than that. And we've scaled up and scaled down through the pandemic. In fact, during the pandemic, we increased the size of the property acquisition team and are now really well placed. So it's more about the property market conditions rather than our ability to deliver it.

Sorry, the internal resources to be able to do that. I mean just to give you an example of that, 1 year, we opened 21 organically and did 18 conversions of an acquisition. So we've already demonstrated in the past, we've got the ability to do 40 sites. So we're very comfortable about the fact that we can scale up our ability to be able to open more sites. But as Mark says, it all comes down to do we find the sites in the right locations that meet our criteria. And this is not in any way kind of a lack of ambition in our part because like Mark says, we've got the teams out there on the ground actively finding those sites.

That's clear. And then so in the absence of finding enough sites that meet your criteria, how do you think internally about the returns on dividends versus buybacks for shareholders?

I don't think we want to commit at this stage to that. That's something that will come later. And obviously, we're very happy to take feedback from investors who have different priorities, I know on both of those avenues. So we'll come back to you when we have a clearer view on that. What we wanted to set out today was our desire to return cash to shareholders and the demonstration of our ability that we will be able to.

It's Anna Barnfather from Liberum. Just turning back to the branding. Obviously, a lot of work has gone into that. Can you give us some detail on how you're going to track the success of that rebranding program? Secondly, related to that is on marketing. Can you give us some guidance maybe as a percentage of revenues, what marketing is going to be or customer acquisition costs? And then finally, a bit more sort of rollout. Obviously, the message is it's organic and there's a long pipeline, but where would acquisitions feature on your capital allocation framework?

Okay. I think just in terms of yield kind of -- your second question, when you're talking about CPA really kind of answers the first question. I mean one of the key metrics for us will be looking at the CPAs associated with acquiring new members. And I think that's where brand really comes out. And I think what you heard from Emily is the fact of having a unique brand name means that we'll need to put slightly less into performance marketing because as the market gets increasingly competitive on Google, in particular, then those sort of rates would increase. So I think having a strong brand, that's ultimately how we would track it, can we put more into brand marketing, that means we don't have to put it into performance marketing, and that should benefit the CPAs. I think on the marketing, probably about 5% of revenue is this sort of guide that we've always given and we'd expect to be at that sort of level. And then I think in terms of your question on organic versus acquisition. We will do small-scale acquisitions as we have done with the Fitness First, where we think we can achieve that 30% even taking account of both the premium that we pay as well as the conversion cost. And we've got a lot of confidence about those 3 sites that we bought. But overall, we see the opportunity, a, because we don't think there's a great deal to buy to be perfectly honest; and then secondly, because of some of the factors that I spoke about, the availability of sites in the right sort of locations of the right sort of quality gives us a lot of confidence about our ability to do the organic rollout. So that's where we're concentrating our efforts. And I think a lot of the presentations that we've set out today really show how we can enhance that organic opportunity as well through some of the things such as tech and brand and pricing.

Great. And a question for each of you in your respective departments, what do you think is the biggest risk for achieving the GBP 100 million or the plan going forward?

I mean it's [indiscernible] want to ask in terms of different functions. But I mean, I think clearly, what Mark did was set out the 2 key drivers associated with achieving that GBP 100 million. But look, let's -- Ann-Marie, I mean, in terms of operations, I mean I think clearly, we've got a lot of site expansion that we need to do to be able to contribute towards the GBP 100 million. So talk a little bit about what it means to kind of gear up the teams to be able to roll out at that sort of scale.

Yes. And it kind of links back a little bit to the resourcing question as well for growth. But the model that we've got also gives us access to fitness trainers that also have an ambition to be a general manager at a stage in the future. And so we've got development programs for those people and development programs for people that want to become an assistant general manager to then move on to be the GM. So we can build our own internal pipeline, and that's a great success story for us and for them, it's very attractive because you could join this business to grow a really successful personal trainer business and/or one day, ambitions to run your own gym and with our opening pipeline, going to be very possible, and we do that consistently. So that's one option. And then we recently introduced a new role of cluster general manager as well so that as we scale up, we've got the ability, again, to give our most talented general managers the opportunity to step up and do multisite management and therefore, increase our ability to scale up the operation as well.

The question was what are the risks of the opportunity?

Well, it is a risk, resourcing growth is a risk, but I think it provides an opportunity planned in the right way for our people and the fact that we're already at 206 gyms. We've got a decent talent base with which to work through.

Just perhaps go along the line then. So Jasper, perhaps kind of talk about the risk that our platform isn't scalable to be able to do 300 plus sites?

Yes, it would have been a different answer if this session that happened a few weeks earlier. Clearly, a lot of the work that we've done over the last 2 years has been about addressing risk of technology being able to scale with a fast growth business. Now we're in the very early stages. We're only a few weeks post release but all of the signs are really positive. So we have mitigated the risk out there. Our focus now is on taking that platform and providing the services that Emily needs and providing the services that Nick and Ann-Marie needs. So it's about taking a brand-new platform for us now and really pushing these guys' areas with that.

Okay. I'm going to jump over to Nick because I think actually Nick's area is a little bit more kind of long term and undoubtedly, you'll probably talk about opportunity rather than the risk if you did. But Emily, just in terms of the ability to scale up the marketing team and run 300 sites. Do you see that as a risk?

I think the biggest risk for me is attracting and retaining the best talent. It's a really, really competitive market from a recruitment standpoint, especially in marketing, post-pandemic. And we need to build a brand that people want to come and work on. At the moment, we're having fantastic conversations with really [ top-tier ] level talent you saw from one of the slides, and we've managed to attract some really exciting people who come work in the marketing team. And I think that will success breeds success and talent brings talent. So we've got all the right people to attract the next level of marketeers to grow the marketing team.

Doug Jack at Peel Hunt again. Three questions, if I may. You were saying earlier about the great property market for expansion. To what extent, are the landlord is still being generous with the terms that they're offering you? Second question is, to what extent does generating the same returns from the smaller sites require premium rate to be charged relative to the larger sites. And the third would be in terms of April's price increases, how long do you think it will take for that to fully feed through the whole membership base?

Let me cover the first one in terms of [ landlord ]. It's actually been remarkably consistent, actually almost through the time that we've been running the business overall. I mean, typically, [ rent-frees ] anything between 6 and 12 months, and we would always seek to get a capital contribution if the site needed work to take it back to a level of which we could fit out. Now that sometimes we do that work. Sometimes the landlord chooses to do that work. That's all part of the overall negotiation. If we do the work, then we'll get a capital contribution. If the landlord does the work, then clearly, we won't. But we're not seeing a great deal of difference within the market, I think, overall. Mark, do you want to talk a little bit kind of smaller sites and whether we need to charge more to be able to make the model work?

Yes. Our expectation is that we will charge a little more. And the reason for that is that most of the smaller sites are going to be located in smaller catchments where there often won't be low-cost gym competition. Typically, we'll be going into an area that perhaps has a local authority gym that might be between GBP 30 and GBP 40 a month. Perhaps a franchise gym as well often in the range of GBP 35 to GBP 40 a month and we'll go in probably around GBP 20 to GBP 22. Avington is a great example recently where we've opened as a first low-cost gym. We're very close to Anytime Fitness that was, I think, at GBP 39.99, and we opened at GBP 22.99, which is a little bit above our average that you saw earlier. So we would expect perhaps a 10% to 20% premium in those areas as a result, and that helps to make the model work in those smaller catchments.

And then I think your third question was just how long does it take for price increases to work through. I think as you saw from Nick's presentation, the price increases we put through in April were the new members. However, we are also actively repricing the base. Now we have to be a little bit more careful. When we do that to make sure that we don't need to churn, but we've got a lot of experience in terms of doing that. And so obviously, it does take a little bit of time to come through. But as we come into the second half of the year, as Mark says, then they will begin to see some of those yield uplifts come through into our key measure, which is really average revenue per member per month.

Tim Barrett from Numis. Can I ask 2 things on the returns framework? In terms of the denominator just what's going on there, the CapEx number within the 30% target. So how -- what kind of inflation are you seeing in construction, I guess? And then secondly, around the scalability of central costs, how should we model that? Clearly, it's not going to be 8.4% forever as you get to 300 sites.

Mark?

Yes. So we set out in the results presentation in March, both from a P&L perspective and a capital perspective, where we see inflation at the moment. And on CapEx, it's probably between 3% and 6%. So it's definitely higher than it has been in recent years, but also manageable, particularly as we would expect to be growing the top line at least as fast as that. So it's certain raw materials that we're seeing the the pricing pressure, gym equipment, we've actually got a deal that's locked in until January 2024, and that's in sterling. And so we've got a great prices for that, seeing a little bit of increase in relation to freight costs, which are more expensive when our kit comes from Asia. And at the moment, we're getting good availability of contractors. And one of the reasons why we're able to do that because we use about 5 different contractors for rollout is that because we can give them really steady work, actually, they just stay with us. Where you have difficulty in the market is if you have an employee contractor, you let them go for a few months. You try and get them back. And then, of course, they're hard to get that because they're on another project. So actually, we think it's controllable in that region of 3% to 6% and because the top line is growing at a similar or greater rate that's protecting the 30% return on capital. Central costs, we would expect, as you would expect, over time, it will gradually decrease as a percent to sales. It is important that we continue to invest in that capability. Everything you've seen here demonstrates the scale advantages that we have over smaller operators and investing in the team really drives that home. So it will be a slow decline in terms of percent of sales, but you would expect that in your model.

Owen Shirley at Berenberg again. Three questions, if that's okay. The first was just, it was super helpful that you've given an update on like-for-like revenues, particularly given this -- the big differences in size of site is having an impact on the mix. So I just wondered if you could sort of confirm if you'd be able to keep giving us like-for-like revenues at least on sort of an annual basis? The second one was just a follow-up on the GBP 100 million target. I wondered if there's a minimum number of sites you need to hit GBP 95 million and a maximum number of sites at which point you'd hope to kind of beat the GBP 105 million. And hopefully, an easy one on marketing. I think you said you would sort of break sector norms or something like that with the campaign in September or October. Just wondered if any color on sort of what's going to be [indiscernible] exciting there?

Why don't we take that last one first, Emily?

Just try to download TikTok...

Actually, Emily, you might want to just talk a little bit about the fact that we went on to TikTok for the first time this year and the sort of impact that we saw from that.

Yes, we did our first trial with our first campaign on TikTok in January. We used TikTok [indiscernible], which is the first view, if anybody who has TikTok for their kids. If you open TikTok as the first out of the day and it runs all day, 24 hours. So every user across the U.K., will see it. So it's a really impactful ad format. We used that and saw kind of unprecedented traffic to our website. I think it was the second biggest after opening day when we came back after the pandemic. So really significant traffic numbers. And we're hoping to use that format again, but with some really engaging content. No more color, I'm afraid you have to wait for TikTok.

In terms of your question on about like-for-like revenue, given Mark [indiscernible], I better answer that one because I'll be answering on half of Mark's successor, but -- look, I mean we've attempted to be quite transparent in terms of showing us where we are in terms of the recovery, and we obviously gave the number for sites opened to the end of 2018 at the end of April. Our confidence about that like-for-like recovery through the rest of the year getting to 100% comes because we see the benefit of some of the yield increases that we put through. We also expect to have a good September and October particularly because that's such a strong student season. And students, again, are probably a cohort that really aren't impacted a great deal by the cost-of-living crisis. Health and fitness is really important to them, and we've got a number of sites that are located very close to universities. So that's behind our confidence. I think we undoubtedly won't be giving it on a monthly basis as we go forward. But we'll always look at data that will help you do your job just as we seek to do our job. And I think on the -- I don't think it's much more to say than GBP 100 million in terms of number of sites. We've set out our immediate guidance for this year and for next year, which is the 25 to 30 sites. And we've already shown that we're going to meet that guidance this year, which is 28 sites. And obviously, we've got confidence that, that enables us to get to the targets that we've set out. If we can go faster, clearly, we will do and there may be opportunities to go faster, both in those kind of 3 key categories that we set out, which is residential, greater London and town as well as on small town, which clearly would give us greater opportunity to potentially even exceed those targets.

Are there any questions from the other side of the room? Okay. We'll go to the webcast.

Yes. And sorry, I should have just -- moderating an absolutely great job. But [indiscernible], our Company Secretary who's been with us for getting on for a year, she's been absolutely fundamental to arranging this whole event today, which I hope you all agree has gone really well. And so thank you to [indiscernible] for doing that. So any questions on the webcast?

Okay. So the next question or questions are from Peter Bate of Killik. I'm just going to select a few of these because there are a number of them. So what are the key inputs to your churn propensity models? Is it a lack of attendance?

Jasper, [indiscernible]?

Yes, absolutely. So attendance is 1 of its [ recency ] in frequency. It's demographic data of the individual and demographic data of the site as well. And that's looked at through a number of different lenses -- so we're looking at historical behavior over quite an extended period of time and then more recent changes in those metrics, and that's all pushed through various algorithms to come up with the number. So it's quite a wide set of points.

What are your average CPAs running at? And what's the conversion?

Yes. Yes. So typically around GBP 7 is our CPA, and we spend about 5% of revenue on marketing, as Richard mentioned. If you translate that to the number of new joiners that we have in a year, it works out at about GBP 7 in that order. And our conversion online, it's about 1 in 10. We don't want to give the exact number, but it's sort of in the region of 1 in 10 members that we would convert online through the conversion channel.

The next question is from [ Steven Hall ], a private investor. As key competitors also expand, how do you avoid overpaying and/or diminishing returns on newer sites either at some locations to get crowded or when you open in smaller towns.

Well, I think this goes back to our market estimate that we set out where we indicated that we see the overall potential has been 1,700 to 1,900 low-cost gyms in the U.K. by the end of the decade. Now as I said in my presentation, there's a couple of ways that we can get that. So we can keep it sort of levels of penetration that PwC estimated in 2019, which was 17% and low cost could take share within that or if we see this move towards health and fitness, particularly kind of post the pandemic, such as penetration goes up more closely to the sort of levels that you see in Northern Europe such as 19%, then you can see low cost and really driving that growth and taking a greater percentage overall. Now what does that actually mean in practical terms for new sites? What it means is that there is the ability to have kind of more sites, more densely located because the demand is there. So when we think about the new site today, we've got very good data about the sort of levels of penetration we can get in a 5-minute or a 10-minute drive time. And really what it would mean is that those levels of penetration would go up. And so that is how we would kind of get to a position where we believe that we could locate more gyms without it impacting on the overall returns.

And last question from [ Stephen ]. Can you comment on the duration of the favorable lease terms you're currently securing and any implications on renewal?

Actually, we've seen -- we don't have a huge number of sites that we've renewed. What we have done on occasion has extended the life of the lease, either by putting, say, an extra 5 or 10 years on to the lease or by taking out a break. Now that will increase. We did some of that during the pandemic. Undoubtedly, that will just become part of our normal course of business. But because we're still relatively quite a young estate, I think our average lease length is still about 11 -- just over 11 years left on the leases. We haven't seen a great deal of kind of those -- it's come to an end and we renew it. What we have seen is where we've put 5 years on or 10 years on and where we've taken the breakup.

Okay. These are all the questions from the webcast.

Okay. Thank you very much. That is the end of our Capital Markets Day presentation. Thank you very much for all attending in-person. Thank you for those people that have joined on the webcast. Our next big event would be our interim results, and we look forward to seeing you all there. Thank you very...

Thank you.