Viva Leisure Limited (VVA) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Viva Leisure Limited FY '22 Results Investor Briefing Conference. [Operator Instructions] I would now like to turn the conference over to Mr. Harry Konstantinou, CEO and Managing Director. Please go ahead, sir.

Good morning, ladies and gentlemen, and thank you for joining us on the conference call today for Viva Leisure's FY 2022 Full Year Financial Results Presentation. I'm joined today by our CFO, Kym Gallagher. This morning, various documents, including an investor presentation were uploaded to the ASX, and we will be referring to our results presentation today. The presentation is being webcast on openbriefing.com and will be available for replay on the Viva Leisure investor website later today. The agenda for today's presentation will commence with some highlights of FY '22, followed by Kym providing more detailed information on the actual financial results, followed by a very quick, however, interesting update on the business recovery from COVID, and I will finish with the FY '23 outlook and what our team is focused on for the rest of the financial year. The presentation also includes a brand and segment update commencing on Page 28 as well as some additional information in the appendix commencing on Page 35. I'm not proposing to go through the brand and segment update, all the pages are in the appendix during this webcast as they are self-explanatory. However, if you have any questions, please ask them during the questions-and-answer session. At the back of the investor presentation on Page 39 is also a reconciliation of the statutory profit and loss to the traditional ex AASB 16 numbers. As mentioned, following the completion of the presentations, we will have the opportunity for questions. [Operator Instructions] I look forward to taking you on the Viva journey over the FY '22 period. This is Viva Leisure's fourth set of full year results since listing on the ASX in June 2019. Unfortunately, this period was also affected by COVID restrictions in the first half. However, the business has bounced back extremely strongly for the second half. Where possible, we have provided both H1 and H2 comparisons as well as the full year results so that our shareholders can understand the story of the 2 halves of the financial year. Moving to Slide 4. You will recall that earlier in the year, Viva provided guidance in relation to revenue for the half, EBITDA margin, June revenue run rate as well as EBITDA margin target for June. I'm pleased to advise that we have exceeded the guidance provided, and the H2 result is an outstanding result in what followed a very difficult half 1. In terms of financial performance, noting that these figures are excluding AASB 16, revenue for the half year was $56.8 million on guidance provided between $54 million and $56 million. EBITDA margin finished at 16.4%, at the higher end of the range provided of between 15% and 17%. One of the key metrics we provided was an exit run rate of revenue for June 2022 at over $10 million as part of our guidance. As previously advised to the ASX, we reached that $10 million milestone 1 month earlier in May 2022 and again repeated that in June with $10.2 million of revenue. In addition, we are able to return the business to an EBITDA margin for June in excess of 20% and achieved 20.2% for the month, again, exceeding the previously provided guidance. Our aim moving forward into FY '23 is to maintain the 20% minimum monthly EBITDA margin, which is reflective of the business from pre-COVID and excluding lockdowns, is achievable. With our regular recurring direct debit revenue stream and our annual revenue run rate, which I will advise in the next few slides, I'm excited about what FY '23 will achieve. Moving to Slide 5. Revenue for the full year was $90.8 million, a record for the business and up 8.5% from FY '21. This is an excellent result considering the business was unable to trade for a large portion of the first half of the year. More details on this in the COVID section of the presentation. EBITDA for the half year was also a record for the business at $9.3 million, and when combined with the first half loss, resulted in a full year EBITDA of $5.5 million. This result is 53.8% down from FY '21. However, when taking into account the uninterrupted strong second half result of $9.3 million, this represents nearly 80% of the full year FY '21 EBITDA from just the half year, and this is extremely encouraging. Kym will have more details around this in his presentation. Moving to operational highlights. Corporate-owned members were up to 159,546. And in fact, with presale memberships scheduled to start in the days following the end of the financial year, we were in excess of 160,000 members. Corporate membership growth was over 26% for the year, which is extremely encouraging and highlights the lifestyle nature of our business and the demand for members to get back into training in our facilities. Network members, which comprise both Viva corporate-owned members and Plus Fitness franchise members was 320,161 as at 30th of June, up nearly 22,000 members from the previous corresponding period. Utilization, which refers to Viva estimated maximum capacity within our portfolio, ended the year at 69.3%, up from 64.6% in the previous corresponding period. This is significant as any increase in utilization does not come with an increase in our essentially fixed cost base, and therefore, a large portion of the additional revenue falls directly to EBITDA. Kym again will have more details on this data shortly. Corporate-owned locations were 151, an increase of 36 from the previous corresponding period. Network locations totaled 334 at the end of the period. Moving to Slide 6. Our annual revenue run rate based on a day count of June 2022 revenue now sits at $124.5 million. Again, this is based on the June 2022 result of $10.2 million revenue. An interesting statistic is that the business is now generating over $341,000 of revenue each and every day, and this is increasing. Average revenue per week per member finished the year at $14.59 ex GST, up from $13.79 in the previous corresponding period and is a record for the business. We expect this to be over $15 per week in the coming months. The next metric that we wish to highlight is the Like for Like membership growth. As mentioned in our market announcement, when taking into account operating locations pre-COVID in February 2020, and comparing the membership and revenue to June 2022, the business is actually trading at 3.1% above the February membership numbers for those Like for Like locations. What this tells us is that we do not need to wait for the business to recover from COVID as we have already recovered 100% of our membership and our revenue and have actually grown both in terms -- both -- for the first time, we are now also reporting system-wide sales for the franchise network. The network is run rating at $95.5 million of system-wide sales. To be clear, this is an accumulation of the revenue within the franchise network and our franchisees. This metric helps to measure the success and health of our franchise network, and we are proud that the Plus Fitness network is approaching $100 million worth of annualized revenue, which is a significant milestone. I would now like to pass on to our CFO, Mr. Kym Gallagher, to run you through the financial results starting at Slide 7.

Thank you, Harry, and good morning all. I'm on Slide 8, as Harry mentioned. Firstly, the results presented throughout this presentation are predominantly based on ex AASB 16 basis, which is also consistent with prior periods. Looking at the profit and loss. During the year, it was really a story of 2 halves, with the imposition of mandated lockdowns on our clubs and members heavily impacting the July to October period which affected our financial results for the half. This led to a significant loss of revenue while many costs remained in place, and this resulted in the first half loss on the EBITDA line. It also showed -- slowed the rollout strategy to almost a stand still with only 3 new sites opening during the first half. This further led us to paying rent on sites in the second half, which had not yet opened. The second half started slowly through January as Omicron made its presence felt and members feared quarantining during the holiday period. But as you will see from the various charts later in this presentation and in the bi-monthly statistics we reported last week, business is now performing better than pre-COVID numbers on a like-for-like basis. And despite the slow start to the half, the second half resulted in revenues of nearly $57 million, normalized EBITDA for the half of $9.3 million and at a margin of 16.4% across that period. Also, as Harry mentioned, we exited June with record member and revenue, and we've returned to an operating margin that we haven't seen since FY '20. In addition, our yield at around $14.60 per member per week is also the highest in the group's history. This has led us to a robust launching pad for FY '23, and we will discuss this in more detail on the upcoming slides. I'm on Slide 9. Monthly revenue was up 18% from June 2021 to June 2022 and up 52% on an annualized basis from the start of the financial year to the end. Annualized revenue is now approximately $125 million based on the June '22 exit rate with our July management numbers continuing to climb. Harry will talk about some like-for-like performance of members and revenue from pre-COVID closures to where we sit at 30 June 2022, and the recovery is significant. This takes me to the next slide. I'm now on Slide 10. This shows the growth in revenue from the month of December 2021 to June 2022, which is an overall growth of 22% in monthly revenue. These are technically post-COVID impacted months, although there was still some overhang in December and January from Omicron. And as you can see, the biggest step in the bridge is organic growth for pre-FY 2022 clubs being approximately $800,000 of the $1.9 million growth in monthly revenue. I'm on Slide 11. Combined with our record member numbers comes record average revenue per member per week. What this shows is that our average yield has increased by 8.2% since December. We imposed a member fee increase across many of our legacy clubs and members in April. That is those clubs or members that hadn't seen increases for many months or even years in some instances. This has seen the yield increase by approximately 4.5% in the last quarter alone. There's a slight decline in yield between May and June, and this is simply because we ran an end of year -- end of financial year sale, which attracted over 3,000 new members. So the member numbers are included, but they don't start paying fees until August. So in other words, we would expect to see the average revenue per member exceed the $15 mark shortly. I'm on Slide 12. Note that we've grown our membership base by approximately 7% across the year on a combined group basis. This includes a recovery from a decline in total member base as at December, again due to COVID impacts. The growth from December 2021 to June 2022 is actually 7.7%, demonstrating that members were very keen to return to our clubs. In addition, the opening up of a new territory for corporate-owned clubs with the acquisition of 7 WA Plus Fitness Clubs has assisted in further diversification of the geographic spread of the group. Finally, Viva's corporate members are now equal in number to Plus Fitness franchise members, which is a great achievement. I'm on Slide 13. This chart shows the bridge of Viva owned club members between June 2021 and June 2022, It's worth noting that the same chart presented at the half year results showed that there was actually a decline in the pre-2022 club members or 3,070 members between June '21 and December '21. This means that we've essentially gained 8,500 organic members in the second half from club's owned prior to July 2021. This equates to 7% growth across the 6 months simply in organic club membership. Voluntary member suspension numbers have also now returned to more normal levels at around 2% to 2.5% of the membership base suspended at any time. Of the 23,000 or so acquired members, over 11,000 of these came from Plus Fitness acquisitions. I'm on Slide 14. For those unfamiliar with our business, one of our key metrics is utilization. This is a measure of members per square meter of floor space at a facility used to monitor capacity. We assume that 2 members per square meter of health club floor space is at capacity and one member per square meter at the Hiit Republics and the Boutiques. The realistic long-term target of the group is an average of 75% to 80% utilization, and we're currently sitting at 69.3%, which is the highest level we have seen since pre-COVID. For perspective, every 1% increase in utilization improves revenue by approximately $1.8 million, with most of this falling to the EBITDA line. And this also creates a significant improvement in the margin. So in summary, we have record member numbers combined with record utilization and yield and an EBITDA margin back over 20% for the first time since the [ 2000 ] financial year, and we now see this momentum continuing into FY '23. I'm on Slide 15. A strong opening cash balance and a successful $11.7 million capital raise in August last year during the uncertain COVID lockdown period, provided us with a sufficient safety net at the time, but once we reopened, allowed us the opportunity to continue to pursue rollouts and acquisitions. Accordingly, we completed a total of 16 acquisitions for 25 clubs and rolled out 12 greenfield sites, which is reflected in the movements between property, plant and equipment, right of use assets and lease liabilities and intangibles. One of the main acquisitions was the acquisition of the Rebalance master franchise and 8 company-owned clubs. We're in the process of developing a franchise model around this, and Harry will talk about that later. That has remained under control with a total of approximately $20 million in senior debt and with revised facility terms leaves us approximately $22 million in available funding for further acquisitions. From a leverage perspective, net debt, being total debt less available cash, to the annualized June 2022 EBITDA run rate is approximately 1.2x. I'm now on Slide 16. As I mentioned at the beginning, this was really a story of 2 halves, which is clear by the strong performance of operating cash flows for H2 compared to H1 with H2 nearly even eclipsing the full FY '21 total. Similar comments to the balance sheet regarding the deployment of the opening cash balance and the inflows from the cap raise, which we undertook in August 2021, which, in particular, nearly $20 million was invested in the 25 acquired clubs. And it's also worth noting that approximately $12.3 million was invested in property, plant and equipment, much of which was spent towards the 12 new greenfield sites that opened across the year. The lease payment line is simply the principal reduction of our lease liabilities, both equipment leases and rental leases. So it also includes a property rent payment component in that item. I'm on Slide 17. Management has considered the impacts of inflation on the business. So when preparing the FY '23 budget, we've taken into consideration the increase in our key P&L costs based on known facts and estimates. We forecast a total of 5.8% increase in wages between June '22 and June '23 for existing sites. This includes a 4.6% increase in wages plus on costs for our award staff, which accounted for approximately 2/3 of the total payroll, that took place on first of July. In addition to that, we have the non-award staff increases and legislated superannuation increases included in this number. Secondly, we've taken into account the rent schedule for the year and applied the fixed growth rates in the leases and estimated CPI rates for those sites to CPI-based increases. These account for approximately 18% of our total leases. We've estimated a 5.5% increase -- a 5.5% increase in total rental costs on a like-for-like basis. And those 2 expense items being wages and ramp account for approximately 75% of our FY '23 cost base. Other expenses, which account for a smaller component, the main ones being utilities, cleaning, license fees, marketing, et cetera, we've assumed a more aggressive and higher rate, which brings the estimated average expense increases on a like-for-like basis across FY '23 at around 6.5%. Any savings against these estimates will lead to an improvement in margin. You'll note the increase in cost is mitigated with recent membership fee increases in both April and July, driving a higher yield. The combined increases in the revenue base is expected to be about 6.5% based on these increases in fees. So overall, we're expecting to stay above the 20% margin on average for the year. Interest rates are also increasing, and this is somewhat mitigated with nearly half of our debt being the equipment lease finance being on fixed rates for the duration of the leases. Equipment purchases and fit-out costs have gone up approximately 10% in the second half of FY '22, and we plan for this through our expanded expansion CapEx budget. Thank you. I'll now hand back to Harry.

Thanks, Kym. Moving to Slide 19. This is a slide which was presented in our half year results but has been updated to reflect the second half of the year. Essentially, it shows a story of 2 halves, as Kym mentioned. The first half of FY '22 resulted in 52% of our locations being closed for the first 4 months. The second half of FY '22 was much smoother and 100% of locations were opened, however, at times with minimal restrictions. While lockdowns have a direct impact on revenue as we are unable to charge for membership, they also had a direct impact on our rollout program, as mentioned by Kym, as we had to put the brakes on new locations until we had certainty of reopening. Moving to Slide 20. As mentioned in my introduction, on a like-for-like basis, the locations open and operating in February 2020 pre-COVID, our membership now sits at 3.1% higher than it was. Essentially, this is a full recovery and then some. Revenue for the Like for Like club is even more impressive, indicating an 8.3% increase over the pre-COVID numbers. This puts to bed once and for all the recovery of our robust business post-COVID. We have recovered, and we are continuing to grow the business. The lifestyle nature of our business is well and truly an accurate representation of our industry and no longer do our members consider a Health Club membership as a discretionary spend. People value their health, which is often considered the new wealth. It is no longer about managing waist lines but rather helping with overall wellness, mental health and generally just feeling better as well as other lifestyle benefits. Moving to Slide 22, the FY '23 outlook. Our aim today is not to provide guidance but rather highlight the firepower, the initiatives and the projects Viva is currently working on. As mentioned, we have 152 opened and operating corporate locations today. We have another 12 locations which have been secured, of which approximately 5 are in fit-out and will open in the coming months with the remainder at pre fit-out stage. A further 12 locations are currently under negotiation to acquire or secure leases. This number of 12 moves on a weekly basis as opportunities for acquisitions and greenfield locations are presented to the team. Once an opportunity is presented, it goes through a review process before progressing and being considered an active opportunity. Moving to Slide 23, the Chain Collective Group. Our investors will be aware of the establishment of the Chain Collective Group, a wholly-owned subsidiary of Viva Leisure. The Chain Collective Group is our franchising division, and its current mandate is: one, the management and growth of the Plus Fitness division; two, the preparation of Hiit Republic for franchising, which is still on track to commence by the end of calendar year 2022; and lastly, the preparation of the Rebalance Pilates & Yoga franchising, which is also to be ready for franchising by the end of this calendar year, however, possibly sooner. Last week, the Plus Fitness network held its annual franchisee conference where 200-plus fitness franchisees attended this conference. Expressions of interest for both Hiit Republic and Rebalance Pilates were taken, and the interest is very strong even in these early stages for existing Plus Fitness franchisees to secure one of our new franchise offerings. Moving to Slide 24, banking facilities. I'm pleased to advise that Viva has secured increased banking facilities with our primary bank, the Commonwealth Bank. These facilities include an increase in our senior loan facility, which is used for acquisitions, increasing from $22.1 million to $42.1 million, of which $22 million is available for use as at 30 June. In addition to other banking facilities, Viva was able to secure an increase in our bank guarantee facility from $6.5 million to $16.5 million, of which $9.8 million was available for use at 30 June. This is significant as generally bank guarantees are required on properties we lease. And with over 150 property leases, the cash required to guarantee lease obligations can be significant. This facility will allow us to continue to grow and secure new property leases. In addition to the significant increase in the senior loan facility, Viva was able to secure improved lending terms, including leverage ratios and drawdown ratios. Previously, Viva was limited to draw down 50% of acquisition, with the remaining 50% to be paid by cash. Under the new terms of our facility, we are now able to borrow up to 70% of the purchase price of an acquisition, which results in having to use only 30% of cash to complete the acquisition. This is a significant achievement and will allow our cash to be used for additional greenfield sites or additional acquisitions. With the available balance and the 70% ratio, Viva essentially has $30 million of firepower for acquisitions. With our low debt and based on our target of 3x historic normalized EBITDA on acquisition, this facility will allow us to acquire approximately $10 million worth of annualized EBITDA. Moving to Slide 25, scrip acquisitions. The Viva Board has approved the use of VVA scrip for acquisitions moving forward, subject to the same stringent acquisition criteria we have always used. This change allows Viva to preserve cash and aligns existing vendors -- exiting vendors, sorry, with the Viva business by holding shares in a listed entity. Currently, 6 acquisitions have been agreed, and we're in the process of executing binding sale of business agreements. As indicated in the table on this page, the combined EBITDA of these 6 acquisitions, once completed, will be $1.485 million at an average multiple of 3.05x for a total acquisition price of $4.525 million. I should confirm that these 6 acquisitions have been agreed but are not yet at the binding stage and are provided for informational purposes only. Viva will advise the market [indiscernible]. When taking into account 70% debt facilities, as advised on the previous slide, and the agreed scrip to be issued to the vendors, the cash required to complete these acquisitions will be approximately $240,000. For reference, each individual vendor has agreed to accept between $100,000 and $300,000 of scrip. The scrip will be issued generally on a 7-day VWAP prior to settlement, which will obviously benefit Viva as the value of the scrip hopefully increases over time. Viva does have the option at its discretion to pay cash in place of scrip at settlement if it prefers. In addition to acquire an addition -- in summary, to acquire an additional $1.485 million of annualized EBITDA for a cash outlay of $240,000 is strategically very attractive to management and the Board and will ensure cash can be used for other initiatives and opportunities. Moving to Slide 26, technology upgrades. Our long-term investors who participated with us in the acquisition of the Plus Fitness business would be aware of our target to transition the Plus Fitness direct debit to Viva in order to: a, provide our franchisees with better processing rates; and b, to provide additional and alternative income to Viva as a direct debit provider. Plus Fitness network system-wide revenue is circa $100 million, as mentioned earlier. The current contract is due to expire in November '22, and we expect Viva to transition from the existing Plus Fitness member management systems to the new Viva systems known as the Hub on or shortly after this date. This has meant that Viva had to upgrade its member management systems to cater for franchisees. The systems were not designed initially to operate a franchise network. The process of upgrading and essentially rewriting and updating the systems to the latest technology platforms is well underway. Viva expects to invest in excess of $1 million this financial year, our largest investment in member management system upgrade. Together with these upgrades is the implementation of the Viva Pay direct debit processing system previously advised to the market. We expect to provide more information on this transition in the coming months. Moving to Slide 27, our new micro-gym concept. Our team has been working on a new staffless, small footprint or micro-gym concept. This concept is built around 150 to 200 square meter locations, targeting a low-cost, low-service model with 500 to 600 members, which is in excess of our regularly targeted 2 members per square meter. These micro-gyms are designed to be located in areas where traditional Viva health clubs with target -- which targets circa 700 square meters or Plus Fitness health clubs, which target a minimum of 300 square meters cannot be located. Management believes that locating smaller micro-gyms in these key areas based on our data insights of members selecting locations close to their home and work is a key driver to the success of this concept. Viva also believes, as mentioned, that we can operate these locations with 0 staff on site. Similar to a vending machine, it is essentially a set and forget with one area manager monitoring up to 10 locations. Our target is to open at least one of these locations in FY '23, possibly more. These micro-gyms also come with additional location opportunities such as hotels, workplaces, et cetera. Micro-gyms will use existing Viva IT systems, including app access to streamline the joining and access control requirements. We are very excited about the opportunities micro-gyms offer, and we expect to provide more details in the coming months. As mentioned in my introduction, the aim today is not to go through the brands and segment update during this webcast. However, we are available for questions. This now ends our presentation. I'd like to highlight that fitness and physical activity is now even more front of mind after sustained periods of lockdowns and isolation over the past 2 years for the community. Fitness and health is a lifestyle for our members. It is not -- it is part of their daily routine. From the data we are seeing, it's not affected by inflationary pressures. This observation is also matched by our listed peers in the U.K. and the U.S., who are seeing the same data in increases in membership enrollment. Fitness for the community is no longer about waist lines and being beach body ready. It is about what happens inside our bodies. It is about mental health, about keeping your heart healthy, about feeling better with a clear mind and helping with stress. It is also about socializing and getting out. While previously may have been common to visit the pub after work, what we are seeing is that our members would rather visit the gym after work to socialize and get a workout. The energy and feeling you get up for each and every workout is what our members chase and enjoy. And this is what makes it a lifestyle spend and not a discretionary spend. We need to also understand that our weekly gym membership is extremely affordable when compared to other costs and people's budgets at an average of $15 to $20 per week for gym membership, this is less than most people spend on lunch each day. We would now like to open up for any questions.

[Operator Instructions] We have a first question from the line of Nick McGarrigle. Nick is from Barrenjoey.

Just thought I'd ask about the new debt facility, I think. Can you give us some background on how long you've been working on that and what -- why you would not use that predominantly to fund acquisitions versus potentially issuing scrip to vendors?

Nick, thanks for the question. Well, the debt facility is limited to 70% of an acquisition price. So we were able to increase that from 50% to 70%. So we have to use either scrip or equity -- scrip or cash to complete that acquisition. So previously, we've always been using cash. We now have that scrip option, which we think is an attractive option moving forward to help us use cash for other things and preserve cash moving forward as well.

And just in terms of the 6 that you've got coming up, are they likely to be issued scrip as consideration? Or is there sort of sufficient cash and operating cash generation to fund those?

Yes. So the way we've been negotiating these acquisitions is that we offer 2 prices. We offer a straight cash price, which is at a lower multiple, somewhere sitting between 2 and 2.5x. And we give them an option at a slightly higher multiple, which is averaging at 3.05x with slightly more cash and some scrip. So that is the option that we've been going to the market with. All these vendors have accepted a scrip component. And that scrip ranges from $100,000 to $300,000. And the range of the acquisitions is somewhere between $400,000 and $1.5 million each.

Yes. And then just in terms of the acquisition pipeline and more generally commentary around the health clubs you're finding that the pipeline is getting fuller -- or is the recovery post-COVID meaning that owners are happy to retain the gyms?

We get opportunities presented to us nearly on a daily basis. What we're seeing -- and we've been a little bit delayed in accepting some of the acquisitions because we had 8 acquisitions to complete before 30 June, but we also had a backlog of sites, as Kym mentioned, from half 1, which were greenfield sites. So we needed to get them operating and performing because we had to delay the opening of those during the first half lockdown. So we've sort of gone through that backlog of acquisitions, completed all those in WA that we had, opened up the sites that we had to delay. And now we're back in the market, and we've agreed with 6 separate vendors for 6 acquisitions, including scrip. We'll get these completed, and then we'll move to the next slot.

And just in terms of maybe a comment from Kym on current levels of cash generation, excluding CapEx, I suppose, just in terms of that June run rate EBITDA looks good, but just some confirmation around what that means in terms of cash.

Yes. So what we're finding that we're generating at the moment, Nick, is somewhere between $800,000 and $1 million free cash flow a month depending on when, obviously, the principal repayments fall. But on average for the next 6 months, we'd see probably around about $800,000 to $900,000 in free cash flow per month.

Cool. And then I think you've given some level of detail on sort of older clubs or existing clubs versus newer clubs. But can you make some comments around how greenfield sites are maturing versus how they may have been maturing pre-COVID? And specifically, I guess, are you seeing maturation similar outside of the ACT as you were seeing in the ACT?

Yes, we can do that. The -- traditionally, we've said that cash flow breakeven is about 6 weeks. What we're seeing with new greenfield locations because we're entering completely new markets that we haven't got existing sites on. Essentially now. So the awareness is taking a little bit longer, so somewhere between 8 and 10 weeks, which is still an excellent achievement in our opinion to get the cash flow breakeven, but it is longer than it was before. Where before we were infilling existing sites like you mentioned in the ACT, we already had awareness, now we're entering new markets like [indiscernible] and things like that, where we haven't had a presence before. So it's about getting awareness of our brand. But yes, we're -- still attractive breakeven numbers, which is good. And this is why we'll continue to roll out greenfield locations.

I think, Nick, where we struggle a little bit on the greenfield sites, certainly heading into the second half was a pre-marketing component. Normally, we would have a good 6 weeks to 2 months premarketing so that you could open the doors with, I don't know, call it, 300 to 400 members on day 1, which -- if breakeven membership is somewhere between 500 and 600 members depending on the size of the site. You'd expect to get those extra 150 or 200 members within the next 6 weeks through natural growth. What we found though is that the pre-marketing campaigns that we were undertaking late last year and certainly even in the first quarter of this year, people were more interested in getting through the Omicron isolation process and potentially getting back to their own gyms or their own lives before thinking about joining a new gym that's just opened on the corner. What we've seen in the second -- the fourth quarter of this year is that, that enthusiasm is starting to pick up, and we're finding that the presales are much stronger in Q4 than they were in Q3. So we think moving into FY '23, we'll have improved that position a lot and hopefully get back to that benchmark or breaking even within 6 weeks.

We have next question from the line of [ Jack Dunn ] with Citigroup.

Harry and Kym, can you hear me okay?

Yes, we can.

Just the first one, I was wondering if you can talk us through the 2025 target of corporate-owned locations. Is this still the target? And so what are the plans to ramp up to get there?

Yes, that is still our target. Obviously, COVID got in the way a little bit. That target was based on opening circa 17 locations -- opening or acquiring 17 locations a quarter, so 68 a year. Over the last 3 years, we've averaged about 41, 42 locations a year. So we're slightly behind that. This year and based on the growth that we've seen in the second half of last financial year, we're hoping to exceed that 40 opening or acquired club numbers. So we're still targeting that number. We may be 6 months or 12 months later on that, but we are still targeting that number. And it is based -- we see the growth mostly in the boutiques to achieve that number.

Jack, it's also worth mentioning that a club is not a club as such. We're looking at -- for example, one of the acquisitions in the WA market is like $500,000 worth of EBITDA a year. And yet the lowest one is about $130,000 to $140,000 EBITDA a year. So one club is not necessarily one club. I guess it's more about an EBITDA target at some point in the future on top of, as a backdrop, I guess, number of clubs on an average EBITDA basis is kind of how we set that standard a year ago. So either way, we're still aiming towards that. But to us, it's the EBITDA component, which is slightly more important than simply the number of clubs statistic.

Yes, I might just stay with the WA market then. Are you going to talk to how you're seeing sort of the utilization rates since you've moved in there? Understanding it's a new market and always a slower uptake to start. But have you been surprised by how the WA markets responded?

Yes. So our entry into WA was via Plus Fitness acquisitions. So these were existing clubs. And we acquired 7 clubs prior to the end of the financial year, but we now own 8. We're seeing the same thing we see on the eastern side of Australia, seeing good retention. We've got a large club there in Alkimos that does really, really well, over 2,000 members Plus Fitness, which is very large. The -- but yes, we're just seeing the same things there because these are established concept that we've purchased to sort of enter that market.