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

Good morning, everybody, and welcome to The Gym Group half year results presentation. Just to start with, I thought I ought to do a little bit of introductory as we've got some new people on board. So I'm John Treharne, I'm the Chair and Founder of The Gym Group. Moving from your right, far right, Will Orr, our new CEO, who will be talking to you later, has only been in the business since the first of September. So don't be too rough on him. Moving to Ann-Marie Murphy, who is our COO; and then Luke Tait, who is our CFO. So in terms of what we're going to cover today, I'm going to give you an initial overview, then I'll pass over to Luke, who will take you through the financial update; Ann-Marie will then take you through the business and operations update. And as I said, finally, Will will introduce himself. So a very solid and encouraging first half, which is great to see. Membership up 10% to 867,000, up from 790,000 a year ago. Yield up 8%, revenue up 19% compared with the -- this time last year, like-for-like, up 7%. So broadly speaking, offsetting any cost inflation to maintain EBITDA. The business continues to invest in two key areas. First of all, in terms of new sites. So we've opened two new sites in the first half in Edinburgh and Accrington, and we plan to open approximately another five sites in the second half. And we're accelerating our new openings, so the plan is to return to previous levels in 2024. But we also continue to critically invest in our existing estate. So enhancement in existing estates, we spent about GBP 7 million, keeping our product fresh and up to date. Net debt reduced by GBP 6.4 million since December 2022. And we're also extremely pleased to announce our new bank facility has been extended to October '25, and Luke will obviously be giving you a lot more detail about that shortly. We've -- as we explained to when we last spoke, we've been trialing three price architecture structure and we've seen some very encouraging results from that. And then finally, we've been following on from strengthening the Board last year, where Elaine O'Donnell joined us as Chair of Audit. Obviously, Will has joined us as CEO now. And also Simon Jones has joined us as NED, and he's been invaluable to the Board, obviously, with his background as MD of Premier Inn, so a great addition to the team. So an encouraging and solid start to the year, giving us the opportunity to build confidence that the journey to long-term recovery is well underway. And now I'll pass you to Luke.

Good morning. So starting with a summary of our financial KPIs. The key revenue KPIs, which we announced in July, have both shown significant growth year-on-year. We had 867,000 members at the end of June, up 10% versus last year, and average revenue per member per month was GBP 18.81 for the first half, up 8% on prior year. As a result, revenue of GBP 99.8 million was up 19% on the first half of last year. As previously guided, the strong revenue growth was absorbed by high cost inflation, leaving EBITDA less normalized rent, broadly in line with prior year at GBP 17.2 million. The loss before tax of GBP 6.1 million, narrowed by just over GBP 1 million versus prior year. Free cash flow of GBP 14.2 million was up nearly GBP 7 million on prior year and enabled a net debt reduction of over GBP 6 million to GBP 69.7 million, reducing the net debt-to-EBITDA leverage ratio to 1.8x. We'll look at each of these key financial metrics in more detail in the following slides. Turning to the income statement. EBITDA less normalized rent for the first half was GBP 17.2 million, in line with last year. Revenue was GBP 99.8 million, up by GBP 15.6 million year-on-year. The additional revenue was absorbed by higher utility costs and additional site costs relating to the 18 new openings year-on-year. Looking at the chart on the right-hand side, which explains the main movements in the P&L, utility costs were up GBP 5.1 million, more than doubling versus prior year. The significant increase reflects coming off a forward contract taken in February 2019, well before recent macroeconomic events and then fixing in March last year. The cost increase is despite an underlying 5% reduction in like-for-like energy consumption in the first half. Looking forward to next year, current electricity prices should see full year like-for-like costs reduced by around GBP 2 million. The remaining incremental site costs of GBP 7.3 million and GBP 1.4 million of normalized rent, relate principally to new openings, although there was also an increase in rates of just over GBP 2 million relating to the COVID rates holiday in Q1 last year. Moving on down the P&L. The noncash charge for share-based payments of GBP 1.4 million returned to more normal run rates in the first half. The prior year charge have been reduced by an adjustment for a number of levers. Net financing costs of GBP 10.4 million consists of GBP 7.3 million relating to property lease interest and GBP 3.1 million relating to our borrowing facilities. The majority of the GBP 2.2 million increase year-on-year was driven by higher bank and lease interest costs. Non-underlying items of GBP 0.9 million were GBP 1.6 million lower than prior year and a full breakdown is included in today's announcement. Finally, loss before tax for the 6 months narrowed by GBP 1.1 million to GBP 6.1 million. Turning now to like-for-like revenue. Like-for-like revenue for the first half was 107%. We've progressed -- as we have progressed through the year, the trading environment has become more stable, and we head into a key trading period with good momentum. The average revenue per member per month increase of 8% was delivered without material impact to membership numbers. We continue to optimize revenue through price and promotion. Looking forward, we're unlikely to repeat the elongated deep discount promotion we used in October last year. Like-for-like revenue against pre-COVID sales recovered to 97% in the first half, and the breakdown is in the appendix. Looking now at average revenue per member per month growth in more detail. Average revenue per member per month grew by 8% to GBP 18.81 in the first half of 2022 from continued price optimization and higher LIVE IT penetration. Our headline rates increased with the average DO IT membership up by 5.4% to GBP 22.02 in June '23 versus June '22. When we move headline rates, we continue to reprice existing members as long as our internal tests to ensure minimal churn are met. There was a further increase in the proportion of members choosing the benefits of LIVE IT membership now running at 30.7% of the membership base, up 2% compared to June last year and up 1% from December. In the previous chart, we showed that we have increased our headline rates by just over 5%. These headline rate increases have not materially changed our position against our nearest competitors as our competitors continue to take price. Indeed, against our largest competitor, the gap has actually increased 30p to GBP 2.67 since December, narrowing this gap further remains a significant commercial opportunity for us. Turning now to cash flow. Strong cash flow generation in the first half enabled us to self-finance our investments in line with our guidance at the time of our full year results in March. The higher-than-expected working capital inflow of GBP 7.5 million reflects careful cash management throughout the first half, but does also include some short-term timing differences, which are expected to reverse in the second half. After deducting the cash spend on maintenance CapEx for the first half of GBP 7 million, operating cash flow was GBP 17.7 million, nearly double the same period last year. The cash element of nonunderlying costs was GBP 0.6 million, also well down year-on-year. Bank and lease interest was higher at GBP 2.9 million, reflecting the higher interest rates, leaving free cash flow of GBP 14.2 million. Expansionary CapEx was GBP 7.6 million, leaving net debt GBP 6.4 million lower than year-end. We continue to invest to drive the business forward. Total cash CapEx in the first half of the year was GBP 14.6 million, down GBP 3.2 million versus last year. The balance of spend shifted with new site spend of GBP 4.2 million, significantly lower than last year. The slightly higher tech and data spend of GBP 3.2 million included an investment in the 3-tier membership infrastructure. Enhancement spend of GBP 4.9 million was predominantly related to the replacement of gym kit in 19 acquired gyms and is an essential part of maintaining a strong customer proposition across the estate. Maintenance CapEx remained reasonably consistent year-on-year at GBP 2.1 million. And in the second half, the balance of CapEx spend will shift back towards new sites and away from enhancement. Turning now to net debt. Nonproperty net debt was GBP 69.7 million at the end of June, down GBP 6.4 million from the year-end. The net debt consisted of GBP 57.9 million of bank net debt and GBP 11.8 million of finance lease debt. As a result, the reduction in net debt as a result of the reduction in net debt, the total net debt-to-EBITDA leverage multiple reduced to 1.8x EBITDA, down from 2x at year-end. In March, we guided to a planned operating range for net debt leverage of 1.5 to 2x, which continues to be a key consideration in our planned level investment going forward. We have recently extended our bank facilities to October 2025, giving funding certainty for the next 2 years. Barclays have joined HSBC and NatWest in our syndicate, providing us with support of banking partners for the future. All COVID-related covenants have been removed, providing us with more flexibility to take advantage of opportunities as they arise. The net debt-to-EBITDA leverage covenant is set at 3x, providing significant headroom from our planned operating range. Finally, turning to current trading and outlook. As mentioned previously, current trading has become more stable, and we have good momentum going into the second half. The full year outlook remains unchanged from March with the revenue increase from yield and new openings expected to broadly cover the increase in costs year-on-year as we have seen in the first half. Investment in CapEx and strategic projects for the current year will be financed from free cash flow. We're now expecting 4 to 5 new openings in the second half and leverage to remain within the 1.5 to 2x range. I'll now hand over to Ann-Marie, who will give a business and operations update.

Thank you, Luke, and good morning. So as Luke said, I'm going to give you a business and operations update. But I want to start by just recapping on The Gym Group's founding mission, to make health and fitness accessible and affordable for everyone and thereby contributing to a healthier nation and breaking down barriers to fitness for all. This has been a fundamental to the business from day 1 and is still very much a core underpin of our strategic priorities. We've made some good operational progress across the business towards these priorities in the first half as I'll now talk you through in the following slides. Despite the cost of living crisis, consumers appear to be continuing to prioritize spending on health and fitness over other areas of leisure spend. The whole sector is strong, but the low-cost sector is showing the fastest growth and is continuing to gain share with most of the increase in site expansion coming from ourselves and our nearest competitor. There are some changes in the low-cost sector. Some direct competitors are being reclassified as moving to mid-market because they've raised prices out of low-cost base. And we're also seeing some further consolidation within the mid-market. But what we've been focusing on during this period is how we can improve our customer proposition to add even more value to our members, and I'd like to start with the performance of our more recently opened sites. So our new sites are performing well, and we opened a record 47 sites in the past 2 years in 2021, '22. And our sites typically take 2 years from opening to mature, and this is the usual predictable maturation we would expect to see. And when you bear in mind, we signed the '21-'22 openings before we understood the new post-COVID landscape, we're pleased to see they are maturing to our expectations. And as you've heard, we are accelerating our opening program. So far, we've opened 2 in the first half of '23, and we plan to open another 4-5 in H2. We're on site fitting out for now with the further one may just slip slightly into early '24, and the locations for these are Wimbledon, Uxbridge, Stafford, Coventry and the latter one being in Houston, all of which are in strong residential locations ideally suited to our proposition. The 2024 pipeline of 10 to 12 is building along the same lines with sites carefully selected to meet the low landscape with returns of 30% being targeted. In '22, '23, openings were very much back-ended, whereas we have a pretty busy program in the first half of '24. So over the next few slides, I'd like to take you through some of the improvements that we're making in delivering to our core mission of breaking down barriers to fitness for all across investing in our sites, upgrading our equipment and innovating in our fitness product. So I'm pleased to say, operationally, we continue to be really strong and lead the market in the levels of member satisfaction proving we're serving the needs of our members today better than ever. Our teams step up and adapt to the market, delivering to our members and the growing demand for our proposition. And we see these strong satisfaction levels and engagement across all areas, across all channels. So some examples, gym level member engagement and satisfaction is strong with 57%, give us 5 out of 5 top box scoring and a huge 93%, rate us at least 4 out of 5. We are the friendliest gym, and this is a really important differentiator and enabler to strong visit scores, which have a direct link to retention and the lifetime value of our members. Our Google review score is plus 0.7 ahead of our nearest competitor, and we continue to see industry-leading employee engagement levels. A strong culture is a critical enabler of our ability to constantly respond to the market and drive those high levels of satisfaction. We've also seen good levels of engagement in the app with 80% with ratings at the top end of our sector, seeing the benefit from our recent investment in tech. And all of this is driving strong levels of demand, as shown here in the visits up 21% since 2019 and 9% on prior year. And we continue to stay ahead of the competition through enhancing our customer proposition. An important factor in how we enhance our proposition as a maturing business is through investing in our gym products. In fact, this was a founding principle John had when he started the business, and to quote you, John, "every site, like new every day." So we're investing in mature sites to maintain memberships and those high levels of satisfaction and the member mature estate returns. For example, we will complete major refurbishments in 11 sites by the end of this year. And of the refits that we've already completed, we've already seen increases in customer satisfaction of 10% post refit. We're also making changes in format and rolling out new equipment to stay relevant and meet members' needs. We've seen a shift toward more strength building exercise over recent years. And we're meeting this through, for example, extended dumbbell ranges in 88 gyms, lifting rigs in 22 more sites and air bikes in 15 sites as well as ongoing equipment upgrades. In fact, 101 gyms expect to receive some form of investment -- enhancement investment in '23, and that's half of the mature state. And we're also making the latest emerging fitness product accessible in the low-cost space, and we continue to innovate and be the true pioneers of the sector. For example, we introduced High Watch training classes in London as a trial this summer, which we're now expanding following the huge success and positive feedback from our members. HYROX is an immersive group race base workout that combines both functional and running workout stations and has a very strong committed following. It's now offered in 17 gyms since expanding from the initial 12 in London and is also available in Manchester, Birmingham and Glasgow, with further opportunity to expand to more gyms. And critically, we are the only low-cost provider in the U.K. to offer these classes. As you heard, we have been trialing a 3-tier price architecture across 64 sites since May. And the benefits of this 3-tier approach are: to drive incremental volume from price-sensitive members, drive yield in premium and core memberships, lower entry price to drive brand value and consideration and a more flexible structure for commercial pricing and local needs. And we've been encouraged by what we've seen so far in the initial trial results and we're currently in the process of evaluating and optimizing the trial to prepare for a potential rollout plan. So our commitment to being a sustainable business with the core purpose of breaking down barriers to fitness goal extends to every part of the business. And in fact, we expect to exceed our 2022 social value this year. We continue to provide good jobs and lifelong learning and to achieve industry-leading employee engagement scores, offering good career development and being a great place to work, support staff retention and reinforces good service for our members. As the first U.K. carbon-neutral gym chain, we've made good progress in reducing our carbon emissions and in reducing our energy costs through a series of energy reduction programs, which will deliver savings of 6% in the first half of 2023 and some examples of how we're delivering this through voltage, optimization, lighting controls, water consumption reduction and optimized air conditioning. So in summary, we're on track to deliver our plan, and we've built strong momentum across the business. We secured longer-term funding, which is enabling us to continue to invest in our customer proposition and deliver the highest levels of member satisfaction across all channels. We see demand remained strong for our proposition, offering the best value in the market and demonstrate the importance placed on health and fitness remains robust despite the inflationary environment and cost living pressures. We're in good shape operationally and have built the good momentum we need to take us forward to the next stage of our development and the next chapter in The Gym Group story. And at this point, it's the perfect time for me to introduce you to our new CEO, Will Orr. Thank you.

Thanks, Ann-Marie, and good morning, everybody. I joined The Gym Group on the first of September, and I'm enormously excited to be here. I think John founded a fantastic business. He founded it with a very clear purpose, which was to break down barriers to fitness. And I think that proposition is more relevant than it's ever been. I think it meets a really clear consumer, growing consumer appetite for high-value, low-cost fitness. And I've also seen that it really connects with our expert team in the way that they deliver for our members. By way of an introduction, I was going to just talk briefly in three areas, starting with the experience that I bring to this role. I believe I'm well placed to lead The Gym Group on the next chapter of its journey. I've had a 30-year career working with consumer brands and businesses. The vast majority of that experience has been in subscription and membership type businesses. So I think I do have a deep understanding of those types of businesses and those types of business models. And I'm also pleased to say that I've had a proven track record of growth in those businesses. And I've done that principally by focusing on drivers of growth like data, digital marketing, pricing, retention, customer experience and new product development. A lot of that experience has also been in what I would call people-intensive businesses. And what I mean by that is businesses that need to have highly engaged expert teams delivering the proposition around the country. So that's the experience that I bring to the role. Secondly, why am I extremely optimistic about the future of The Gym Group. Firstly, because we have a very strong high-value, low-cost proposition. I think it's extremely powerful and will certainly remain focused on everything that we could do to increase that value to the member while keeping our cost to deliver that value as low as possible. We're also fortunate to offer that proposition in a fitness market that's growing and also a value segment within that fitness market that, in particular, is growing both in the U.K. and also around the world. Secondly, I think we've got a very resilient business model. John founded the business in a recession and it is built to last. And one of the things that I like about the business model is that I think there are very clear drivers of growth and a little bit relating to the experience that I talked about. I think if we take a rigorous data-led approach in areas like digital marketing, pricing and yield management, member retention, site selection, just to name a few elements, I think we can unlock real upside given the scale that this business has. So the foundations are strong as well as the proposition and the business model, I would also call out our people, many of whom I've been able to meet over the summer. And I've been really impressed by our people. We have highly engaged expert teams, both in our support center and also in our gyms. It's a team, many of whom are shareholders that I think are very committed to John's founding purpose of lowering barriers to fitness. And I think also very excited and energized about the next chapter of the business and continuing to grow it and to deliver value for our members and also for our shareholders. So in essence, I see great foundations and lots of potential, and that's why I'm very optimistic about our future. In terms of my initial focus, it will be in three areas: the first one is immersion. I want to make sure I understand our business, all of our shareholders and stakeholders and also the sector. I've had some opportunity to do that over the summer, but it is working day 8 in the business. So I will invest the time to make sure that I do really, really understand it. The second area is I want to support the team to trade the business as well as possible for the rest of the financial year, building on the H1 results that Luke has talked through. And thirdly, and perhaps most importantly, I want to work with the team and the Board to set out what we're calling our next chapter growth strategy. And that strategy will encompass both the customer strategy and also the site strategy, and we see real opportunity in both of those areas. So we'll return on that in due course. But in the meantime, as I say, I'm enormously optimistic about the future of The Gym Group. I think if we continue to do a brilliant job of lowering barriers to fitness for our members, I think we'll have a very bright future. So with that, I'm going to hand back to John, and I think we're going to take your questions. Thank you.

Thank you, Luke (sic) [ Will ]. If you've got any questions, do let us know. Please wait until we've got a mic to you so everybody can hear the question. And if you could give us your name and who you represent, that would be helpful, too. So who's going to start us off? Anna?

It's Anna Barnfather from Liberum. Three, if I can, please. You mentioned that the market environment was a bit more stable. Can you give us any data around churn or churn patterns that you might be seeing? The second question is on maintenance CapEx, which is obviously higher. Is there a change in view of maintenance CapEx cycles? Or what's the sort of guidance for CapEx with reference to revenue? And then third question, you talked about the additions, I think you still had some sites that perhaps haven't come back to life after COVID. Is there any disposals? I think there was one lease that expired. Are there any others planned?

Sure. Thanks, Anna. So on churn patterns, we're seeing no sort of discernible difference to churn year-on-year, so reasonably positive there. On maintenance CapEx, what we -- in that slot we split what we called enhancement and maintenance and the actual maintenance, which is the sort of the -- sort of reactive fixing kit as when it's required, was pretty consistent year-on-year. The enhancement was what was the step-up and that related to bringing acquisitions in line with The Gym Group product. Well, that enhancement element will always remain quite lumpy. But overall, I don't think we are, at this stage, calling out any change to us or normal 5% to 6% of sales guidance. And finally, on disposals, as we sort of called out some time ago that were sort of 16 gyms workforce dependent gyms, which have all been significantly impacted by us on new working patterns. Whilst they are still growing in like-for-like terms year-on-year, we're not seeing sort of material change. And so there are a couple of sites that if we could get out of, we certainly would, but that will be quite dependent on lease tenure. So I think you will see us trim the estate by a couple of gyms a year, but nothing more significant than that. So was that all right, Anna?

Yes.

Tim Barrett from Numis. Two parts from returns, if that's all right. You've been restrained in not really blaming the workforce dependent gyms, but obviously, they have depressed returns. Could you give us an idea of how much? And just to clarify, on the returns target on new sites, is that 30% valid even in a higher utilities price world? And then just the last thing actually on the refi. It sounds like a positive experience. But can you just talk around terms, please?

Sure. So from point of view of ROIC in the sort of mature estate and in our prelims, we called out the mature estate ROIC was 20%. So within that, we've got an awful lot of strong, for example, Greater London sites, which are 30% plus ROIC. And then we've got the workforce dependent sites, which are basically sort of breakeven. And that's how we're ending up with that blended lower level. But what it does mean coming on to new sites is we do still see plenty of great opportunities to hit that 30% ROIC. And that will be our key metric that we -- against which we assess all new opportunities. On the refi, I mean, I think the -- we had three sort of main targets we wanted to achieve. The first was to get the right syndicate going forward, and so we're delighted to have Barclays in that syndicate. The second was we wanted to remove all of the sort of COVID type restrictions and covenants that had been put in place 2 years ago when that extension was put in place, and the third was to get another year on the term. So we are pretty pleased with where we've ended up on all of those. I mean, I think that's a syndicate that will hopefully now be great partners in the future, enabling us to continue to grow and take advantage of opportunities as they come .

Darragh O'Sullivan, Jefferies. Are you seeing any impacts from the change in brand last year?

Ann-Marie?

I think marketing remains a really important part of our investment and as is constantly having that brand awareness and attracting new members. And we see certainly, on a local basis, the new VI that was launched across all of the sites externally, has had a really great impact for us on high streets and in each community and recognition and attribution is increasing. So it's an important factor, but it's an ongoing part of how we drive the business. So yes, it's still early days. And actually, we've only had 1 January peak period since we did that rollout. So I think it's a longer-term plan.

And of course, you need to take into account, a lot of the demand for health and fitness at the moment is coming from the younger generation. And therefore, it's vital our brand is fresh, exciting, up to date. So that was part of the initiative.

Mark Irvine-Fortescue from Stifel. Just one question, please. You talked a bit about member feedback and experience as positive soft metrics. Do you think part of that reflects how busy gyms are and maybe a bit more awareness of space and queuing post pandemic? I think when you look at the like-for-like numbers, now versus 2019, volumes are still down 20% or so. Is that a natural tension between membership numbers, how busy gyms are and customer experience or membership experience? Or do you think you can move those two numbers up together?

Yes. I mean it's a good question. And obviously, in the busier site, certainly at peak times in the evenings, that always has been and always will be a challenge. And that's one of the key parts of what the ops team deal with. But we do see consistently that the customer satisfaction scores have improved, particularly the friendliness scores and some of the other key metrics that drive that number have still increased and are still really strong even in your busiest gyms. So it's an ongoing thing, an ongoing challenge, but that's part of the day job, really.

I think the other thing is, whereas we saw a shift in behavior post-COVID from pre-COVID around the workforce dependent gyms, what we have seen is a bit of a flattening of the peaks. So pre-COVID, they were very peaky around lunch and evening and now people are finding opportunities throughout the day to exercise, and so that's flattened some of those peaks. And very early indications on our trial would be that an off-peak membership would flatten that even further.

And of course, that is -- I mean it's interesting, one of the most popular parts of the app actually are people finding out how busy they're local gym is. So if you're working from home, it gives you time to be able to select when you use the gym. So that, over time, should help spread usage. Richard?

It's Richard Taylor from Barclays. I've got three, please. First of all, on the like-for-like in the appendix, you show that the like-for-like is now at 97%, up considerably. But obviously, price of product volume down 5%. Just interested to know why you think volumes have gone down. Is that a necessary result of prices going up? Second question, you said you won't be doing the discounting that you did this time last year. Just interested to know why you're sort of feeling brave enough not to go down that path now or whether the external backdrops improved, so any thoughts there will be welcome. And then finally, a follow-up on Tim's question on return on capital, 20% of the prelims. In view of how you traded more recently and also your comments on utilities, can you give us an idea as to where that could go next year? I accept that some of them are brought lower by the Central London sites but just more generally, I would be interested in your thoughts into next year.

Sure. So on the like-for-like, specifically around volume, I think the sort of the long-term trend we have seen is very slight volume decline in mature sites where around the estate, we've seen competitive interaction. So I think it's showing we're in a fairly steady place, pre doing something different, which is, I think, where our 3-tier trial will, I think, potentially address. From a point of view of discounting, I think we are just beginning -- I think two things here. One is this time last year when it became sort of increasingly clear that membership behavior had changed, we tried everything we could to try and get membership back again, and that included some really quite deep discounts. We obviously did rigorously assess the economic value of those discounts after the event. And actually, the one we did in August, which was a sort of multi-month discount, we think was actually pretty enhancing in lifetime value of members, whereas the sort of 50%, which we ran for sort of 3 weeks, we think is not actually revenue enhancing. So I think there's two things. I think there's sort of a change in -- change in where we are in terms of what we're trying to achieve, but also continually optimizing revenue management for want of better phrase. And then finally, on ROIC, I think the question was around utilities impact. I don't expect ROIC to be very different this year from last year, maybe turn a bit down because of that utilities impact. And then we should see a little bit of support for ROIC the following year. But I think our real opportunity to drive ROIC is to narrow that price gap with our competitors.

And on the last point then, is there a basis point delta from utilities? If you think about this year's utility bill and where you're likely to end up next year with a range where you [indiscernible] next year?

Yes, it's about -- it's probably a point, it's probably 1%.

Ivor Jones from Peel Hunt. Could you just talk about the introduction of 3-tier pricing a little bit more, particularly about whether you're going to introduce some friction or some incentives to prevent trading down within the mix? And I guess following on from that, as you think about greater price segmentation, is there an argument for a more segmented gym product, you've always argued for uniformity in the past, but is there -- do you need to now be your own budget competitor below your current price point?

Ann-Marie?

Yes. I mean as I said, we are still in the process of evaluating the trial and the trial was on a quarter of the sites. So there's still some more optimization to go there. But as I said, we are encouraged by it. And it does have multifaceted benefits, as I said, and it was on the slide. So really, what we see is that it will give us several levers to be able to pull based on the local circumstances and how we can best drive revenue to -- in each location that we exist in. And as for the trading down, that's all part of, obviously, what we're really carefully evaluating in the trials that we've done. So that's all part and parcel. And obviously, we'll update in due course as we come to the end and determine any rollout plans.

Could that mean a lower cost gym, in terms of lower capital cost?

No, that is not...

I don't think there's any change to the gym. I mean I think the key thing is to realize it's potentially both a driver of volume and yield.

Any other questions?

So there are no more questions in the room, we'll take some of the questions submitted on the webcast. And if you are following on the webcast and you'd like to ask a question, then please type it into the Q&A box. The first of those that's been submitted is a fairly straightforward question without a name attached. When do you expect to make a statutory profit?

I think probably the best answer to that is that we would expect that loss to halve year-on-year into next year. I think it's probably not worth trying to forecast that further at this stage.

Then there've been a few questions with regard to like-for-like revenue comparisons to 2009. And for those of you following on the webcast, there's a chart in the appendix, and you can download the full presentation from the website. Of those questions, are the like-for-like volume declines versus 2019 all sleepers or are gyms actually less busy? How economically important are sleepers to the low-cost model? And are you seeing trading down from mid-tier as reported by PureGym?

So I think we've sort of covered that volume point earlier on the 2019. It's not about sleepers. It's more about competition across the mature state. Sleepers are not a major driver of our economics. And I apologize, it was a third part to it.

And the third part was, are you seeing trading down from mid-tier as reported by PureGym?

So we are -- I think that has always been a function of our -- of the low-cost subsector. We've always seen it, and we're continuing to see it.

And the next question is looking at the competitive landscape, can you give a sense of how the competitive landscape has changed compared to, say, 5 years ago?

Ann-Marie, do you want to start on that?

Well, I think as I said, as we continue to see the sector growing, we see competition increasing as well and the opportunity there grows. So that's all part and parcel of why we need to constantly enhance in the customer proposition, offering things like HYROX and obviously looking at how we can revenue management on a local level and take account to competition as and when it appears. So it is increasing, but that's as the market increases.

And broadly speaking, the local sector hasn't changed very much over the last 5 years, sort of pre and post COVID. 80% of the market is dominated by the big two operators, and that continues to be the case. Market share growth is coming from those two operators. So as we've said before, it's not dissimilar to low-cost airlines, low-cost supermarkets, low-cost hotels. There are two dominant players.

I think also worth just adding, we've actually seen some of the sort of these low-cost operators price really quite aggressively so that the sort of market commentators have actually taken them out the low-cost sector.

That is all the questions on the webinar. Thank you very much. Perhaps I can just ask if any final questions in the room?

Thank you very much, and we look forward to seeing you again at the year-end results.