Gym Group Stock

Good morning, and welcome to the 2026 Half Year Results Presentation for The Gym Group. Thank you for making time to join us in the room and on the dial-in. After the presentation, we'll take your questions in the room first and then from the webcast.

Our CFO, Luke Tait and I will be doing the presenting today. And here's what we plan to cover. I'll start with an overview before handing to Luke to share our 2026 half year financial results. I'll then provide a further progress report on our Next Chapter growth plan and summarize before taking your questions.

So starting with the overview. I'm pleased to report a strong performance for the first half of 2026. Average membership was up 5% with revenue for the period up 10%, 3% on a like-for-like basis. With this revenue growth and continued cost discipline, EBITDA (sic) [ adjusted EBITDA ] less normalized rent was up 12% to GBP 30.8 million.

The market remains highly attractive. U.K. gym penetration has reached another new high at circa 18% with high-value, low-cost gyms continuing to grow share. Within our Next Chapter growth plan, we continue to strengthen the core, supporting further progress in mature site performance and ROIC. And we continue to accelerate the rollout of quality new sites. We expect to open at least 20 gyms in 2026, all funded from free cash flow. So we've maintained strong momentum through the first half and remain confident as we look to the full year '26 and beyond.

I'll now hand over to Luke for the financial results.

Thank you, Will. Good morning. Starting with a summary of our financial KPIs. The key revenue KPIs, which were released in July, have both shown good growth year-on-year. Average members were just over 1 million in the first half, up 5% year-on-year. Average revenue per member per month was GBP 22.14, also up 5% on prior year. As a result, revenue was GBP 133.1 million, up 10% on the first half of last year.

The additional revenue converted well to profit with EBITDA (sic) [ adjusted EBITDA ] less normalized rent of GBP 30.8 million, up 12% or GBP 3.4 million year-on-year. Adjusted profit before tax increased by 31% to GBP 6.4 million. Free cash flow was GBP 27.7 million, up 10%, supporting our accelerated rollout and the ongoing share buyback.

Non-property net debt was GBP 58 million. This was GBP 6.8 million higher than June last year, reflecting the new gym investment and share buyback program, but GBP 1.3 million lower than 2025 year-end. Adjusted leverage remained at 1x. We'll look at each of these key financial metrics in more detail in the following slides.

Starting with the income statement. EBITDA (sic) [ adjusted EBITDA ] grew strongly in the first half of the year, up 12% versus last year. Revenue was GBP 133.1 million, up by GBP 12.1 million, reflecting growth in both the like-for-like estate and our new openings. Cost of sales increased by GBP 0.3 million, reflecting the revenue growth. Site costs of GBP 63.7 million were slightly better than expected due to energy optimization initiatives, including a new energy purchasing program.

Central costs increased by GBP 0.9 million or 7%, well below the rate of revenue growth. As a result, central costs as a proportion of revenue dropped below 11% as guided. Normalized rent of GBP 22.2 million increased by GBP 1.3 million or 6%, reflecting new site growth and underlying lease inflation. As a result, EBITDA (sic) [ adjusted EBITDA ] less normalized rent was GBP 30.8 million, up GBP 3.4 million. EBITDA margin increased by 0.5 percentage point to 23.1%.

Moving down the P&L. The growth in EBITDA converted well into profit before tax. Depreciation and amortization increased by GBP 2.1 million, reflecting the larger estate and continued investment in technology and data. Net financing costs increased by GBP 0.5 million to GBP 10.9 million, reflecting the growth in the property lease base. The higher net debt was broadly offset by lower interest rates. The noncash share-based payments charge of GBP 3.1 million increased by GBP 0.6 million, largely due to the recent share price growth. Adjusted profit before tax was therefore GBP 6.4 million, up 31%.

Non-underlying items of GBP 1.5 million relate principally to the noncapitalizable costs associated with upgrading our member management and payment systems. Statutory profit before tax increased by 48% to GBP 4.9 million. The accounting tax charge reflects the initial unwinding of the deferred tax asset. We expect a full year effective tax rate of circa 18%, but no cash tax charge. As a result, the profit after tax was GBP 4.3 million.

Turning now to revenue. Across the total estate, revenue grew by 10% in the first half, with both member volume and average revenue per member per month contributing strongly. Average members increased by 5% to just over 1 million. Average revenue per member per month increased by 5% to GBP 22.14 with maturing sites growing fastest as usual.

In the like-for-like estate, revenue grew by 3%. Member volume was maintained with the growth delivered through a 3% increase in average revenue per member per month.

Looking now at site costs in more detail. Like-for-like site costs increased by 3.5% in the first half, better than our expectations. In Utilities, lower commodity prices offset the increase in non-commodity charges that took effect in the fourth quarter of 2025. We also benefited from the new peer-to-peer energy purchasing program and other ongoing energy efficiency initiatives.

Staff and cleaning costs increased as a result of the National Living Wage increase and the annualization of the National Insurance change from the second quarter of last year. We also made an additional investment in brand awareness during the period.

We expect the rate of site cost inflation to slow in the second half as the non-commodity electricity increase annualizes in the fourth quarter. Commodity rates are now fixed through to October 2028 with further reduction in future commodity rates secured. We're also implementing time management software to optimize staffing schedules further. As a result, we expect full year like-for-like site cost inflation to be at the lower end of our guided range of 3% to 4%.

Turning now to cash flow. Strong cash flow generation in the first half enabled us to self-fund our expansionary CapEx and buy shares for the EBT and buyback program with no change to net debt. The working capital inflow of GBP 7.4 million reflects the cash-generative nature of the business model when growing, although some unwind of this inflow is expected by year-end.

After deducting the cash spend on maintenance CapEx of GBP 7.1 million, operating cash flow was GBP 31.1 million, in line with EBITDA LNR. The cash element of non-underlying costs was GBP 1.2 million and bank interest was GBP 2.2 million. As mentioned earlier, there's no cash tax in the first half. In fact, we do not expect any cash tax until 2030 due to losses incurred during COVID and accelerated capital allowances.

Free cash flow was GBP 27.7 million, up 10% year-on-year. Expansionary CapEx was GBP 18.5 million. We acquired GBP 4.1 million of shares for the Employee Benefit Trust to avoid dilution and GBP 3.8 million for the share buyback, leaving net debt materially unchanged. This demonstrates the strength of our cash-generative model. We're funding a faster rollout, investing in tech and the existing estate and returning capital to shareholders while maintaining leverage at 1x.

We continue to reinvest free cash flow to grow the business and maintain a high-quality estate. Total cash CapEx in the first half was GBP 25.6 million compared to GBP 19.9 million last year. Maintenance CapEx was GBP 7.1 million. Property maintenance spend was GBP 5.9 million, equivalent to 4% of revenue and technology and data maintenance spend was GBP 1.2 million.

Expansionary capital expenditure increased to GBP 18.5 million. This included GBP 12.9 million on new sites, GBP 2.1 million on tech and data growth initiatives and GBP 3.5 million on the member management and payments program. The member management and payments upgrade is well progressed with all members now successfully migrated to the new system. We opened 4 new gyms in the first half and currently have a further 11 gyms on site. We're still expecting to open at least 20 gyms by year-end.

Turning to net debt. Non-property net debt was GBP 58 million at the end of June, GBP 1.3 million lower than the December 2025 position of GBP 59.3 million. Adjusted leverage remained at 1x and fixed charge cover improved to 2.2x. In June, we amended our facilities, increasing total committed facilities by GBP 15 million to GBP 117 million. The facilities now comprise a GBP 60 million term loan and a GBP 57 million revolving credit facility with maturity in June 2028. This provides appropriate headroom and flexibility as we continue to accelerate our self-funded rollout and share buyback.

The new site cohorts continue to perform well. The 6 sites opened in 2023 are currently tracking towards an average ROIC of approximately 25%, with this small cohort affected by the unusual competitive environment at one site. The 12 sites opened in 2024 are tracking to deliver more than 30% ROIC. The 16 sites opened in 2025 continue to progress well with strong early member acquisition. Overall, the performance of these cohorts supports our confidence in the 30% ROIC hurdle for new openings.

We continue to operate in line with the capital allocation policy we set out in 2023. Our first priority is maintaining the existing estate with property maintenance CapEx continuing at approximately 6% of revenue over the full year. Our second priority is to maintain leverage below 2x. At June, leverage was 1x. Thirdly, we're prioritizing organic new site growth with our accelerated target of approximately 75 new sites over 3 years. And finally, we are returning excess capital to shareholders through the GBP 10 million share buyback.

Finally, turning to the full year outlook. We remain on track to deliver like-for-like revenue growth of approximately 3% for the full year. We now expect like-for-like site cost inflation to be at the lower end of our guided range of 3% to 4%. And as a result for the first half -- as a result of the first half performance, we expect the full year EBITDA less normalized rent to be at the top end of current analyst forecast range of GBP 60.5 million to GBP 62.0 million.

And in terms of full year expectations for capital allocation, we've opened 4 new gyms to date with a further 11 on site and another 5 exchanged and 2 expected to exchange imminently. We expect to deliver at least 20 new openings this year. We've also completed 15 major refurbishments to date with 6 further planned by year-end. We expect total capital expenditure to be GBP 60 million to GBP 65 million, in line with our previous guidance. And finally, we expect the GBP 10 million share buyback to be completed by year-end. Year-to-date, we've acquired 3.1 million shares for just under GBP 6 million, an average price of GBP 1.81 per share.

I'll now hand back to Will for the Next Chapter progress report.

Thank you, Luke. So in March 2024, I set out our Next Chapter growth plan. And today, I want to give you another progress update. Firstly, a reminder of the investment case and our commitment to deliver sustained growth from free cash flow for our shareholders.

Starting at 12:00 on the circle, health and fitness is a large market benefiting from continued structural growth. And within gyms, the high-quality, low-cost sector is growing quickly, supported by consumers' appetite for high-quality no-frills value and by ever more committed generations of gym goers. And we address this growing demand with a winning proposition that delivers strong member satisfaction at low cost through an advantaged labor-light business model.

We also have multiple drivers of growth, listed on the right-hand side of the slide. And strong execution against those growth drivers is increasing returns from our mature estates and generating the free cash flow that funds our accelerating new site rollout. And the whole model is powered by data and technology, enabling us to deliver our growth plans with precision.

And the U.K. gym market continues to grow strongly. There are now 12.1 million gym members in the U.K., spending approximately GBP 7.3 billion a year. Gym penetration increased again in 2026 to 17.6% of the population versus 16.6% prior year and 12% in 2012. And most of that long-term growth has come from high-value low-cost gyms. Of the 5.5 percentage point increase in penetration since 2012, 4.6 points have been delivered by our segment.

High-value low-cost gyms now account for 29% of U.K. gym members, reflecting the inherent strength of the proposition. And in this growing market segment, we're 1 of 2 brands that account for around 80% member share. A major driver of that growth is the generational shift in fitness engagement.

The younger the consumer, the more likely they are to be a gym member. The bar chart on the left shows that 85% of 16- to 34-year-olds have or have had a gym membership. Gyms and fitness is increasingly hardwired into the way young people live. In fact, fitness is the leading discretionary spend priority for Gen Z. And as you can see on the right-hand side, its lead has increased year-on-year. And that's particularly powerful for The Gym Group where nearly half our members are Gen Z. All that gives us continued confidence in the long-term growth prospects for the market and for The Gym Group.

Managing weight has always been a motivator for gym members and developments in this area are another emerging tailwind. PwC estimates that approximately 3 million U.K. adults currently use GLP-1s with that number potentially increasing to 7 million or 13% of the adult population during 2027. We're already seeing this growth within our own estate. In a recent internal survey, 75% of gym group personal trainers said they've trained someone using GLP-1s.

The important point for our sector is what happens to fitness behavior. PwC's research indicates that fitness is one of the categories where spending increases during treatment and remains elevated after treatment ends. We're actively evaluating the most responsible, sustainable and profitable way to participate in this new ecosystem.

The Gym Group has a clear plan to keep turning these market tailwinds into sustained growth. And as a reminder, there are 3 elements to the Next Chapter growth plan. Strengthen the core is about increasing returns from our existing sites and members, driving like-for-like revenue and free cash flow. That cash generation allows us to accelerate the rollout of quality sites in the U.K. And those first 2 cogs are our primary focus because the headroom in both is so substantial. But we're also taking selective opportunities to broaden our growth, and I'll return to those later.

So turning first to strengthen the core. In H1, we continued to strengthen the core across revenue management, acquisition and retention. On revenue management, we continue to increase new member pricing in a measured and data-led way. This includes a new pricing decision engine using observed site-level elasticities to support more precise decisions. We're also further optimizing promotional spend. And for example, in H1, we ran revenue-enhancing trials offering different discounts to different lapsed members based on their modeled propensity to rejoin. And we continue to grow our successful member add-ons with yield from members buying these increasing by 26%.

On acquisition, unprompted brand awareness increased again by 5 percentage points, building on recent gains. In social media, we further increased our reach and web conversion improved by another 10%. And on retention, the proportion of members on higher lifetime value fixed memberships increased to 10% of the base. We're also progressing our payment success program, addressing members who churn because they inadvertently fail a payment.

In H1, we improved payment success on credit card by 6%. And moving forward, our new payment platform will enable several new initiatives of this kind. Overall, our average member tenure increased again to 18.5 months. These are just some examples of incremental gains we're driving. And together, they compound into strong like-for-like revenue, higher returns and more free cash flow.

The data on this slide and the next clearly show the ongoing pricing opportunity we benefit from. Our members pay around GBP 27 a month for a large, well-equipped gym with friendly expert teams and 24/7 access. It's not surprising that members score us so highly on value for money. And while we're similarly priced to other high-value, low-cost players, the mid-market is 55% higher. Our market segment has a clear advantage on value, supporting pricing headroom and ongoing trade down from the mid-market. And we continue to have headroom versus direct competitors in competing locations.

The ongoing pricing opportunity is also clear in our consumer data. The graph on the left-hand side of the chart is output from a large quantitative study we refresh each summer with pricing experts, Simon-Kucher. It plots perceived price on the Y-axis against perceived value on the X-axis and shows that we, along with other high-value low-cost players, remain underpriced with the opportunity to sit nearer or in the blue corridor shown on the chart.

So we continue to have both competitor and customer headroom when it comes to pricing. And as you can see on the right-hand side of the slide, while we've modestly increased prices for several years, our value for money scores remain high at around 8 out of 10. To support that value for money equation and our ongoing price increases, we continue to enhance the value of the proposition in several ways. This includes the ongoing modernization of our gyms, and I'll cover that in some more detail shortly.

This summer, we reached an important milestone, successfully migrating all our gyms to modern cloud-native platforms for member management and payments. I wanted to share more on this and some of the other ways we've modernized our technology in recent years. The new member management platform unlocks several new commercial opportunities. These include member referral, new tools to increase payment success rates and new member payment options. The new platforms will also enable us to innovate faster, offer members more self-service options and simplify processes for our gym teams.

Our digital channels are also continuing to improve. We've been continually making the app and website faster and more reliable, adding new features and increasing the breadth of our A/B testing capability. This drives both a better member experience and continued improvements in sales conversion. As you'd expect, we're also applying AI in practical areas where it can improve speed, productivity and decision-making. In software development, for example, we estimate that AI-enabled tools are increasing delivery speed by around 30%. We're also using AI to automate marketing content creation and analyze member feedback more quickly.

Behind all of that, we've continued to modernize our cloud data and network infrastructure, improving the speed, resilience and scalability of our systems. And we strengthened the security and operational monitoring, bringing better detection and resolution of issues and ultimately, a more reliable service for our teams and members. All of these investments help to strengthen the business, enabling growth in profit and reduction in risk.

So that's some of the ongoing progress we're making to strengthen the core. The resulting free cash flow is being deployed to accelerate the rollout of quality new sites and to enhance our mature estate. At the heart of that rollout is the commitment to modern high-quality gyms. And across both new sites and major refurbishments, we're continuing to elevate our products.

The evolution is visible right across the member journey, more welcoming arrival areas, continued kit innovation, better zoning, improved group exercise areas, more considered lighting and better changing rooms. We're also responding to how members use gyms today, including dedicated strength areas, women's workout spaces and equipment that reflects the latest training innovation. The objective is to create more premium feeling, more memorable experiences while retaining the cost discipline that sits at the heart of our model.

And we're continuing to accelerate the self-funded rollout of new gyms. As a reminder, we expect to open at least 20 sites in 2026 and 75 sites over the 3-year period with an average ROIC of at least 30%. The rollout is supported by a bigger prospective site pipeline, data-driven site selection, our improved design template and ever better launch marketing programs.

And looking beyond that 3-year period, a recently updated PwC assessment reinforces the scale of the U.K. opportunity. PwC has increased its estimates of total potential to between 1,500 and 750 (sic) [ 1,750 ] high-value low-cost gyms in the U.K. That means despite significant sector openings in the last 2 years, the headroom is still there for a further 600 to 850 locations.

PwC's increase in estimated total potential is being driven by growing fitness demand, population growth and the increasing ability for high-value, low-cost operators to succeed across a wider range of trade areas and formats. On this assessment, the segment still has more than 10 years of expansion potential.

Alongside the new site rollout, we're also increasing the number of major refurbishments in the mature estate. We completed 10 major refurbs in 2025 and have tracked their performance. I'm pleased to say the results have been strong. For this cohort, we've seen strong member feedback leading to an average of 10% membership growth. And most importantly, the sites are tracking to deliver a 30% return on the refurbishment capital. And as a result, we've accelerated the major refurb program to 21 in 2026. This is consistent with our capital allocation policy and current CapEx budget.

By the end of 2026, the elevated design will be present in over 1/4 of the estate. That comprises 41 new sites and 31 major refurbishments or 72 gyms in total. And if the data on the previous slide continues to show a strong return on capital while simultaneously making our estate more competitive for the long term, we'll continue to accelerate the refurb program. So that's the progress across the first 2 elements of the plan, strengthening the core and accelerating the rollout of quality sites.

Turning to the third cog. We continue to pursue selective opportunities to broaden our growth. The quality hurdles remain unchanged. Any opportunity must align to core competencies, be highly incremental and offer strong returns. On new channels, our partnership with Wellhub is performing ahead of expectations, providing an incremental B2B2C route to market. Another new channel could be our existing members.

We're currently exploring a scaled member referral scheme enabled by our new member management software. We're also backing new site formats. Early performance in both smaller catchment and larger destination gyms is encouraging with more of these now in the pipeline. And when it comes to new products and services, we're exploring commercial partnerships in the broader health and fitness ecosystem, including GLP-1s, the opportunity I described earlier.

So that's the latest progress report on our Next Chapter growth plan, and I'll now summarize. The Gym Group has an advantaged labor-light business model in a large market with structural growth. We have multiple opportunities to grow like-for-like revenue and significant U.K. white space. In the first half of 2026, revenue grew by 10% and EBITDA (sic) [ adjusted EBITDA ] less normalized rent by 12%.

We're accelerating the pace of both new site rollout and our refurb program. With continued elevation of our gym product, both programs are achieving 30% ROIC. Our capital allocation priorities are unchanged, and this year's GBP 10 million share buyback is ongoing. Looking to the full year, we expect 2026 EBITDA (sic) [ adjusted EBITDA ] less normalized rent to be at the top end of the current analyst forecast range of GBP 60.5 million to GBP 62.0 million.

Finally, I'd like to thank our committed and expert people across our gyms and support center. The quality of our team is one of the many reasons I'm very optimistic about our sustained growth prospects.

Thank you, and we will now take your questions with a briefing coming in from above.

[Operator Instructions]

Douglas Jack at Peel Hunt. Two questions, if it's okay. Just in terms of the enhanced format refurbs, how many do you think you might do next year? And what's the typical cost of one of those on average? And then the second question was in terms of expansion, in terms of the site size you're looking at big, medium, small, any preference towards that? Any orientation towards type of location and what the site availability is looking at?

Yes. Maybe I'll do the second one first. I mean, I think in terms of site availability, still very good, I think and as we said, the openings this year are quite back weighted, but we've been seeing a pipeline of really strong opportunities, and we're seeing that into next year and even the year beyond in terms of some really good sites coming through.

I think the kind of core will remain that sort of 14,000, 15,000 square feet, Greater London, other of those sort of urban sorts of locations, but then at the sort of -- at the margins, more of that smaller catchment, the one that we opened is performing extremely well and then more of those sort of big 20,000 square feet, more destination sites like the site in Norwich, which is going extremely well.

But I think at the core, it will remain that relatively familiar format that we know works very well, and we continue to be able to make a range of high street retail park, mixed-use development. I think we can make a nice wide range of sites work. So an acceleration, I think, along similar lines, but just with a bit more flexibility around trade areas.

So, on refurbs, I mean, for the moment, we are still sticking to that capital allocation policy of 6% of revenue. But obviously, revenue is increasing year-on-year. So I think we would be looking at more like sort of 25% plus next year. I think we have a decision to make that if -- when we get really comfortable with that 30% ROIC is being consistently delivered. I think there is always an option to actually go a bit faster.

Anna?

Anna Barnfather from Panmure Liberum. Just back on to the sort of rollout and the sort of Q4 weighting. I know it's the future of the industry, but I imagine it puts quite a lot of stress on your delivery teams on that. Is there anything you can do internally to smooth that progress, particularly as you step up to 25 and then 30?

Yes. And as you say, it's always been somewhat back weighted. In truth, it's a bit more back weighted this year than I would want it to be, though I am still expecting that we'll open at least the 20. And then, yes, I think what we're looking at for next year is a quite specific thing really, which is -- it sounds fairly basic, but to deploy a team now working on early 27 sites. So in terms of doing the sort of necessary groundwork to get those openings in place in the early part of next year. So yes, sort of back-weighted next year. I think it will be back weighted every year, but I'd like to think it will be a bit smoother next year. We've got quite a specific plan in place to try and do that.

And then a question to Luke, technically. When we're looking at the mature ROIC and we're looking at the refurb ROIC, how are those calculated? Is the mature ROIC still on initial capital investment? Or do you adjust it for those refurbishments?

No, mature is still on the original investment.

So then the refurb ROIC is the EBITDA uplift on the refurb spend, is it?

Yes, exactly. So exactly that. So it's incremental EBITDA on incremental CapEx essentially.

And then just a final question. You mentioned before the worker dependent sites kind of bringing down that mature site ROIC. Do you have any loss-making sites? And are there any kind of action plans to address that?

So we've got -- I mean, the benefit of being a high-margin business is the sort of tail, the loss-making tail is very, very small. We've got literally a handful of loss-making sites. And we have been closing about 1 or 2 of those a year as they naturally come up for sort of lease expiration. We will close, I think, 2 this year. So we are bit-by-bit working our way through that tail.

Ross, I think you had your hand up a few times.

Ross Broadfoot from RBC. What would being in the magic blue corridor mean for pricing versus the sort of GBP 27 headline rate? And it might sound like an obvious question, but what is the primary aim of these refurbs? Is this about driving new members through the door with the underpin -- structural underpins that you talked about? Or is this about being able to charge the existing group more for a better product?

Yes. I think the second part of that question, I think the -- I mean, I think there is more than one aim. I hope that's okay because I think they're all positive things. I think it is about good capital allocation, 30% return on -- specifically on that refurb capital to the previous question. And it is about supporting member volume. It is about supporting pricing and it is about making a better experience for the members. And all those things are true.

And then if it's doing all those things and it's a good use of capital, I think it's also ensuring the estate is competitive and sustainable over the long term. And we're extremely committed to making sure that the estate matures with real quality so that for many years to come, they can continue to deliver high returns. So there are a few elements to it.

The second one was about the corridor. Do you want to take the corridor question?

I mean that's a good question. I mean I don't think I can give you a precise answer. I mean what I think I can say is that we know we have taken reasonable levels of pricing, always considering what our cost inflation is each year for a number of years now, we've not seen it move materially. So I don't know the answer, but I think it does -- the fact that we don't seem to be moving into that corridor does give good confidence that there's a decent long-term pricing opportunity.

On the front and then we'll go back to Tim.

Jack Cummings at Berenberg. First question, just on the refurbs, how are you deciding on which sites to refurbish? Is it headroom? Or how is that decision being made? Second question is, I think in the release, members are now visiting more often, the average tenure of your members is also going up. Could that support faster than 3% like-for-like growth? Or does that kind of play into the 3%?

And then final question, leverage of 1x target 2x. I know you mentioned maybe a bit of a working capital reversal. There's obviously a lot of CapEx in H2, but you're still well below 2x. Should we anticipate potentially an additional buyback when it comes to the full year results given you are 50%, 60% through the current one?

Yes. So the first one, in terms of how we prioritize that, we've done a lot of work on that, and we've got quite a sort of quite multidimensional piece when it comes to how we choose the refurb. It's sort of a combination of, you sort of said it, sort of headroom. And we talked before about we sort of built this statistical model with Simon-Kucher again actually to sort of to look at where we think that the headroom is on volume in the estate. So that's one piece.

And then we would look at some of the sort of trade dynamics as well. So we sort of take in sort of competitive factors as well. And then we would look at the gyms themselves and just kind of go, is there an opportunity to turn this from a really good gym into a really great gym. So it's sort of a combination of factors. I think on what it does on like-for-like, I think we continue to guide that we've got strong members per gym, sort of 3,800 members per gym. I think it's a much higher level than sort of contract gyms.

And so we want to sort of sustain that and then it's a yield-weighted revenue growth. So I think, again, these refurbs are kind of, I would say, at the moment, kind of underpinning that sort of revenue growth path.

And then the third one was that...

On leverage and buyback. I mean we increased our facility size this year, as you've seen in the presentation, which gives us the opportunity to do another buyback next year as you are asking. And I think that as long as we are going as fast as we think is appropriate on the other areas of spend, which are delivering really high ROICs and leverage still, as you say, remains nice and low. I think there's a good chance we would go again next year.

And then Tim?

Tim Barrett from Deutsche Numis. Quick question on some of the costs that Luke mentioned. You talked about peer-to-peer energy and investment in brand awareness. Just a little bit more detail on that, if you could lift the lid. And then just coming back to the volume question just asked really, is there still volume upside in those pre-COVID gyms that you talked about? I know it's ancient history, but it would be interesting in the medium term, volumes could move on. Can you answer that one?

Yes. I mean I think on that one, Tim, it's probably a little bit similar to -- we're always wanting to sort of beat that number, but I think we'll continue to guide to hold the like-for-likes. There is a sort of 1% to 2% drag on that from competitor rollout, and we expect us and others to continue to roll out for some time to come. So I think, yes, I'd say we'd guide to hold that like-for-like volume number. And if we can beat it, we'd obviously be pleased to do that. I might leave peer-to-peer energy matching to you, Luke.

Sure. So it's a scheme we started this year whereby committing to specific energy producers, particularly in renewable energies, we can actually reduce the commodity rate that we're paying. And on the second question around brand awareness, so we did do a trial, as I mentioned, on brand awareness. We did see, as Will said, a good jump in unprompted brand awareness as a result. What we're still monitoring is how that actually converts to incremental members. And I think when we get to -- once we've sort of completed that analysis, it would sort of help guide us into next year as to whether we do that sort of thing again or not.

If you [indiscernible] round figure? Is there -- is it too small to quantify?

It was less than GBP 1 million. It is less than GBP 1 million.

It's Nigel Parson from Cavendish. I just had a couple of questions on actual gym usage. Are you seeing any difference in trends, say, between strength and cardio? And is GLP-1 starting to affect how people want to use the gym? And does that affect how you sort of allocate the equipment that you buy and so on? And are there any other trends you are beginning to spot that are interesting?

Yes. I think that you sort of, in a way, I guess, I referenced it. I think there's a sort of -- there has been a sort of ongoing sort of the rise of strength. I think you've seen that over the last few years, continue to see that. So I think people really across age ranges actually sort of increasingly understand the benefits of strength training sort of physical, mental and health benefits of strength training. So we will allocate a bit more space now to strength and to sort of functional training a little bit less to cardio.

But it's still a balance and you want to get -- okay, you want a gym that's rounded and allows people to work out in around a way. But I think certainly, will allocate more to strength. And then GLP-1s as referenced in the presentation, we know penetration is growing, and we know that people look to gyms, again, on that sort of strength piece to sort of sustain muscle mass while they're on those programs and then also to build sort of sustained habits.

And also, I think that if people are doing that -- for some people doing the GLP-1 treatment will give them some additional confidence to come into the gym. So still relatively early day. Well, it's not that early days, it's 3 million people, we think now using GLP-1s, it's growing. So yes, I think a strong tailwind for the gym market there, and I think more to come on that.

Okay. Any on the coming in...?

We have no raise hands on zoom. So I'll hand back to you.

Okay. Great. Well, thanks very much for coming. I think that's it. So thank you.

Good morning, and welcome to the 2025 Full Year Results presentation for the Gym Group. Thank you for making the time to join us in the room and on the dial-in. After the presentation, we'll take your questions in the room first and then from the webcast. Our CFO, Luke Tait and I will be doing the presenting today.

And here's what we plan to cover. I'll start with an overview before handing to Luke to share our 2025 full year financial results. I'll then provide a progress report on our next chapter growth plan and summarize before taking your questions.

So starting with the overview. And I'm pleased to report strong progress for the full year 2025. Closing membership was up 4%, with revenue for the period up 8%, 3% on a like-for-like basis. With this performance and strong management of costs, EBITDA less normalized rent was up 19% at GBP 56.7 million. The market we operate in grew again in 2025. U.K. penetration is up to a new high, around 17%, and we expect this growth to continue.

In line with our next chapter growth plan, we've continued to strengthen the core of the business with mature site ROIC up a further 2 percentage points to 27%. We also accelerated our site rollout, opening 16 new sites in 2025 at the top end of guidance. We expect to open at least 20 in 2026, again, all funded from free cash flow.

And finally, I'm pleased to report a strong start to 2026 with 9% revenue growth for the January, February peak trading period. So the momentum continues, giving us confidence as we look ahead.

I'll now hand over to Luke for the financial update.

Thank you, Will. Good morning. So starting with a summary of our financial KPIs. The key revenue KPIs, which we announced in January, have both shown good growth year-on-year. We had average members of 945,000 during the year, up 4% versus last year, and average revenue per member per month was GBP 21.60, also up 4% on prior year. As a result, revenue for the year was GBP 244.9 million, up 8% on prior year. The revenue growth has dropped through well to profit with EBITDA less normalized rent of GBP 56.7 million, up 19% or GBP 9 million year-on-year and GBP 1.2 million ahead of consensus.

Statutory profit before tax was GBP 7.4 million, up GBP 4.9 million or nearly 200% year-on-year.

Free cash flow of GBP 38.3 million was up 10% versus prior year, enabled the -- and enabled the opening of 16 new sites and a net debt reduction of GBP 2 million to GBP 59.3 million, reducing the net debt-to-EBITDA leverage ratio to 1x, down by 0.3x versus December 2024.

We'll now look at each of these key financial metrics in more detail on the following slides. Starting with the income statement. EBITDA grew strongly in the year, up 19% versus last year. Revenue was GBP 244.9 million, up by GBP 18.6 million year-on-year. The acceleration of new openings has resulted in over 70% of the revenue growth coming from the new openings.

Overall, costs came in slightly better than expectations. Cost of sales were in line with prior year at GBP 2.9 million. Site costs were well controlled with the GBP 5.8 million increase, reflecting the new openings and a 1% increase in like-for-like site costs. We'll expand on the key drivers shortly, but we benefited from lower electricity rates in 2025, which offset increases such as the Living Wage and NI.

The central cost increase year-on-year slowed further in the second half as guided, with full year cost as a percentage of revenue dropping by 0.4% to 11.3%. The 5% increase year-on-year relates principally to the annual inflationary salary increase and a number of investments in delivering the next chapter growth plan.

In 2026, we expect to see further operating leverage and central gross margin to drop below 11%. Normalized rent increased by GBP 2.6 million, reflecting new site growth with an underlying increase of 4%. As a result, EBITDA was GBP 56.7 million, up GBP 9 million year-on-year with a strong drop-through of incremental revenue to profit. EBITDA margin was 23%, up 2 percentage points on prior year.

Moving on down the P&L. EBITDA growth converted well to PBT and EPS growth. The noncash charge for share-based payments increased to GBP 5.5 million predominantly reflecting the delay in granting awards in 2024 and the recent strong financial performance.

Depreciation and amortization of GBP 62.4 million grew by GBP 2.3 million due to the estate growth and investment in technology.

Net financing costs of GBP 20.4 million remain essentially in line with prior year due to a reduction in bank and finance lease interest, offsetting an increase in property lease interest. The decrease year-on-year in bank and finance lease interest was driven by lower average net debt during the year and lower interest rates.

It's worth noting that the IFRS 16 property lease charges are GBP 2.9 million higher than the cash rent costs. They are expected to align in around 2029.

Adjusted profit before tax was GBP 10.6 million, up GBP 7 million or nearly 200% year-on-year and nonunderlying items of GBP 3.2 million was GBP 2.1 million higher than prior year. This is due to the non-CapEx costs relating to the implementation of the new member management and payment systems due to go live this summer.

There was no P&L or cash tax in 2025. The deferred tax asset will start to unwind in 2026, but no cash tax is expected until 2029.

Finally, profit after tax for the year was GBP 7.4 million, GBP 3 million higher than prior year.

Revenue grew by 8% in the year. Average revenue per member per month grew by 4%. This was principally down to a combination of yield increases in the like-for-like estate and the optimization of yield in the new site openings, including coming off introductory headline rate discounts. The average headline rate of a standard membership was GBP 25.64, up by GBP 1.11 year-on-year. Like-for-like revenue was up 3%, in line with guidance, with the average membership remaining at 100% year-on-year and the average yield increasing by 3%.

Looking at site costs in more detail. We've been able to control site costs well despite the ongoing inflationary environment. In the first half, like-for-like site costs were actually down by 1%. As mentioned earlier, this was principally driven by a further reduction in electricity commodity prices and our energy optimization program. For example, we now have installed 210 voltage optimization units across the estate.

In the second half, site cost inflation was 3%, bringing the full year increase to 1%, which was slightly lower than guidance of 2%. The increase was driven by a 44% increase in the noncommodity element of the electricity cost in Q4 as well as 3 quarters of NI and UBR increases. These cost increases will annualize during 2026. And therefore, we expect the cost inflation in the first half to be higher than in the second half.

Our cost optimization program will continue to offset increases elsewhere. For example, we see potential for significant energy optimization through air handling unit sensors as well as the last phase of the [ VO ] rollout. We recently launched an academy with a specialist training company to help staff our gyms more efficiently. And we also successfully appealed 116 of the 2023 ratings list valuations last year. However, as we guided in September, we do expect site cost inflation to be higher in 2026 until the noncommodity electricity rate in particular annualizes in Q4 this year. This will then remain unchanged until October '27. Commodity rates have also been fixed until October 2027.

Turning now to cash flow. Strong cash flow generation in the year enabled us to self-fund our expansionary CapEx, buy shares to the EBT and pay down debt. The working capital inflow of GBP 5.3 million reflects the cash-generative nature of our business model, careful cash management and a higher proportion of pay upfront memberships. After deducting the cash spend on maintenance CapEx of GBP 17.3 million, Operating cash flow was GBP 44.7 million. The cash element of nonunderlying items was GBP 1.8 million, bank and lease interest was GBP 4.6 million. As mentioned earlier, due to losses incurred during COVID and accelerated capital allowances, we do not expect to pay any cash tax until 2029.

Free cash flow was GBP 38.3 million, up 10% year-on-year, giving a free cash flow yield based on recent share price of around 12%. Expansionary CapEx was GBP 33.9 million, and after refinancing and EBT share purchase costs, net debt reduced by GBP 2 million year-on-year.

We continue to invest to grow the business and ensure a well-maintained estate. Total cash CapEx in the year was GBP 51.2 million, up from GBP 40 million in the prior year. Maintenance CapEx across both property and tech was GBP 17.3 million in the year. Property maintenance of GBP 14.7 million was 6% of revenue. Tech and data maintenance CapEx of GBP 2.6 million was spent on hardware, including CCTV upgrades and on our data infrastructure. Expansionary CapEx was GBP 33.9 million with the main spend being on new sites as well as we opened 16 new sites last year, in line with the top end of our guidance. Tech and data expansionary spend relates principally to investments in our digital assets to enable next chapter growth initiatives such as product add-ons and our conversion optimization program. Spend on upgrading our member management and payment systems was GBP 4.2 million, and will unlock functionality around member referrals, reductions in payment failure rates and new retention strategies. The project is expected to complete in 2026.

Turning now to net debt. Non-property net debt was GBP 59.3 million at year-end, down GBP 2 million from December 2024. The net debt consisted of GBP 62 million of bank debt and GBP 0.3 million of finance lease debt and GBP 3 million of cash. As a result of the reduction in net debt, the leverage ratio reduced to 1x, down from 1.3x at year-end 2024 and 1.7x at the end of 2023. Given the further acceleration in new openings planned in 2026 funded from free cash flow, we do not expect any further reduction in net debt at this year-end.

Moving on to ROIC. ROIC for the mature estate increased by 2 percentage points to 27% last year, benefiting from the strong EBITDA growth in the year. This 2 percentage point increase was on the back of a 4 percentage points increase the year before. If the 13 workforce dependent sites are excluded, the mature site ROIC increases to 30%. We expect further progress this year on mature site ROIC and as a result, have continued confidence in returning to 30% ROIC over the medium term. The new sites are performing well, with the sites opened in 2022, delivering an average ROIC of 30% last year. The small 2023 cohort is on track to deliver an average ROIC of 25% with 1 site having been impacted by an unusual level of competitors' openings. The 2024 cohort of 12 gyms is trading well and on track to deliver ROIC of 30%. And although early in their tenure, the 16 2025 sites are progressing well with strong initial membership volume. Overall, our confidence remains high on returning 30% on new openings.

We set out our planned capital allocation policy with our results in 2023, and we've delivered against it. Our first priority is to maintain the existing estate, and we guided to maintenance CapEx spend of circa 6% of revenue. Our second priority was to keep net debt-to-EBITDA leverage below 2x. And as at December 2025, it was 1x. Thirdly, we've prioritize organic new site openings. And in January, we increased our rollout plan to circa 75 sites over the next 3 years from free cash flow.

And finally, we would return any excess capital to shareholders. In January, we commenced a GBP 10 million share buyback and to date, we purchased and canceled 1.1 million shares. We'll continue to operate to this capital allocation policy going forward.

Finally, turning to current trading and outlook. Revenue year-to-date at the end of February was up 9% versus prior year with average members up 4% and average revenue per member per month, up 5%. Like-for-like was 3%. The run rate EBITDA when adjusting for gyms open at the end of last year, but not yet mature, a circa GBP 65 million. We're planning to open 20 to 22 new gyms this year, which in line with previous years will be second half weighted. We expect to spend between GBP 60 million and GBP 65 million on CapEx funded from free cash flow.

Looking ahead, for the full year, we expect like-for-like sales growth of circa 3% and like-for-like site cost inflation of 3% to 4% with the first half weighting. Our electricity rates are fixed until October 2027. Central costs are expected to drop below 11% of revenue this year. And as a result, we now expect 2026 EBITDA less normalized rent to be at the top end of analyst forecast range.

And now I'll hand over to Will for the strategy update.

Thank you, Luke. In March 2024, I set out our next chapter growth plan, and I wanted to give you another progress report. Firstly, a reminder of the investment case, sustained growth from free cash flow and why we think it's so compelling. Starting at 12:00 on the circle, health and fitness is a large market that's benefiting from continued structural growth. And in gyms, the high-value, low-cost sector is growing fast. As with other categories, we're benefiting from consumers' appetite for no-frills, great value propositions and from new, more committed generations of gym goers. This winning proposition has high levels of customer satisfaction and is delivered by an advantaged labor-light business model. We also have multiple drivers of growth listed on the right-hand side of the slide with detailed plans on each of them. Strong execution on those growth drivers is increasing returns in our existing estate, in turn, funding the organic rollout of quality new sites. This virtuous circle of sustained growth is being powered by data and technology, 2 areas we continue to invest in as the foundation for any successful digital subscription business. U.K. consumers now spend GBP 6.5 billion on gym memberships with 11.3 million of us being members. That penetration continues to grow with another strong increase in 2025 to 16.6%. And as you can see from the green bars, low-cost gym growth is strong. With a proposition that's high quality and affordable, we're introducing new generations of gym goers to something they really value and benefiting from continuing trade down from the mid-market. And in this growing market segment, we're 1 of 2 brands that account for around 80% of member share. And there are several consumer trends that support our continued growth. Consumers fitness IQ is increasing all the time, meaning the use of a gym is ever more rounded and more engaged. They tell us they want to prioritize mental health and see gyms as an obvious way to do that. They want to feel and look strong, increasing the need for equipment you'll only find in a good gym and amplified by the rise of social media, consumers are increasingly seeing the gym as part of their identity, lifestyle and social life. All this is creating increased demand for gyms and our advantaged model best meets that need affordably and conveniently. We're also seeing the rise of GLP-1s, which we see as a positive trend for 2 reasons. Firstly, because GLP-1s are giving more people the confidence to come to the gym. And secondly, because of growing awareness that strength training protects muscle mass during the treatment period. This ever-growing engagement in fitness and gyms is particularly strong among Gen Z consumers, because they're so engaged, they're prioritizing fitness over anything else when it comes to discretionary spend, and they now make up 44% of our membership base. This generation of consumers is 1 of the many reasons I'm optimistic for the Gym Group's future, and we'll keep working hard to meet their needs going forward. Our simple scalable proposition based on value, convenience and results is highly rated by our members, and the progress here continues.

For any subscription business, usage is important, and we continue to see an uptick in visits per member. The proportion of members visiting us 4 times a month grew again in 2025 to 54.6%, while the proportion of members rating us 5 out of 5 in satisfaction surveys has risen year-on-year to a remarkable 62%. So we're growing in a growing part of the growing market, and we have a fundamentally strong proposition. We also have a clear growth plan that everyone in our company is focused on and I wanted to give you a further progress report on that plan. As a reminder, there are 3 elements to the plan. Strength in the core is about increasing returns from our existing sites and members, driving growth in like-for-like revenue and free cash flow. It's the pillar of the plan that's helped us to deliver a 6 percentage point improvement in the mature site ROIC over the last 2 years to 27% and will underpin further growth in that measure. Strengthening the core has also supported growth in free cash flow, and that, in turn, allows us to accelerate our organically funded rollout of quality sites in the U.K. These first 2 COGS where our executional focus is for the time being because we see so much headroom here. We do, however, continue to assess opportunities to broaden our growth over the longer term, and I'll return to that later in the presentation.

So turning to the first part of the plan. We continue to strengthen the core of the business in 2025 across revenue management, acquisition and retention. On revenue management, we continue to increase prices in a measured data-driven way. We also supported yield by adding new guest pass and multisite add-ons to our standard product and further optimized off-peak pricing, unlocking incremental revenue in target sites. On acquisition, we made significant further progress on brand memorability, social media reach and web conversion. And on retention, we saw average member tenure increase again in 2025, supported by several initiatives. Progress here included 16% growth in members taking a long-term product, for example, 9 or 12 months, a 39% increase in early life kickstart inductions and strong engagement with our market-leading app. I'll briefly expand on a few of these areas, starting with pricing. The data on this slide and the next clearly shows the ongoing pricing opportunity we benefit from. Our members pay around GBP 25 a month for a large, well-equipped gym that's run by a friendly expert team and open 24/7. It's not surprising member score us so highly on value for money. And while we're similarly priced to our key high-value, low-cost competitors, the mid-market is 60% higher. Our market segment has a clear advantage on value, supporting pricing headroom and ongoing trade down from the mid-market. And this ongoing pricing opportunity is also clear in our consumer data. The graph on the left-hand side of the slide is output from a large quantitative study we refresh annually with pricing experts SK&P. It plots perceived value on the y-axis against perceived price on the x-axis, and shows that we, along with other high-value low-cost players remain underpriced with the opportunity to sit nearer or in the blue corridor shown on the chart. And the table on the right-hand side is also reassuring. It shows that while we increased prices in 2025, so did our competitors, meaning the headroom, we can exploit in competing locations actually grew.

One of the ways we can add perceived value supporting our pricing strategy is to further strengthen and modernize our brand. After research with our core Gen Z audience. We've evolved our visual identity and tone of voice, rolling out the new approach gradually and cost effectively across web, app, marketing campaigns and, of course, our gyms. Increasing brand awareness also brings new prospects into our e-commerce journey, and we've seen another set of encouraging improvements unprompted awareness. And with that growing brand awareness, we're increasing the number of people coming into our web buying journey. And with over 10 million non-member traffic starting that buying journey in 2025, small improvements to conversion rate make a big difference. I've talked about our web conversion program before with our e-commerce team running multiple A/B tests at any given time to increase conversion. And as you can see, we saw some good results from this in 2025 with more to come this year. We also have a team who worked tirelessly to improve our already sector-leading app. The app supports our retention program, engaging existing members. 2025 enhancements included more personalized onboarding for new members, more digital workouts and better dashboards to track your progress. And the app isn't just a retention tool. It's proving to be a sales tool as well. 93% of the new add-on sales we had last year were via the app. It's also growing as a convenient channel for past members to rejoin us. So that's a few examples of the many ways we're strengthening the core of the business, supporting like-for-like revenue, mature site returns and free cash flow. And in line with our strategy and capital allocation policy, we're currently deploying that free cash flow to accelerate the rollout of quality sites in the U.K. And in 2024, PwC estimated 10 years plus of U.K. white space for low-cost gyms. So the opportunity here is compelling. We opened 16 new sites in 2025 at the top end of our guidance. We've continued to be rigorous in identifying the characteristics of our best-performing sites, some of which are set out on the left-hand side of the slide. We then applied that formula in a disciplined way to the 16 sites we chose to open. We're taking a measured returns-focused approach to rollout. And what about the gyms themselves? Across the estate, we have great gyms with strong customer ratings and improving returns, but we identified headroom to elevate the gym experience further, driving those high value perceptions and supporting sustained revenue growth. The evolved approach is being applied to all new sites and as I'll cover in a moment, also being rolled out into our mature estate. The work to do this, which included input from a world-leading retail design agency was based on 5 key principles set out on the slide. Here's a short video showcasing the new approach.

[Presentation]

We've had fantastic feedback from members on the new design template, and we're very encouraged by the performance of the 2025 sites so far. Where we've been open long enough to get a read, these sites are building membership 22% faster than our 2022,'23 cohort and getting even higher customer ratings. And after just 3 months, these sites are already at 92% of the member volume needed to deliver a 30% ROIC. So we're seeing accelerating performance in new sites as well as growing returns in the mature state. And that performance has supported our decision to accelerate further our cash funded rollout. We opened 28 sites in the last 2 years with maturation of those sites, generating a run rate EBITDA less normalized rent of GBP 65 million.

And looking ahead, as we said in our January trading statement, we're targeting 75 new sites over the next 3 years and will open no less than 20 this year. We have strong visibility of the 2026 pipeline that we do expect openings to be H2 weighted again this year.

And as per our capital allocation policy, we'll continue to invest in our mature estate to keep it as well maintained and as competitive as possible. And we're working hard to maximize the return on this capital. Firstly, by prioritizing mature site investment in a data-driven way. We've developed a detailed prioritization matrix, which now includes a statistical model estimating likely member headroom at site level. And once the site is prioritized, we refurbish it in the new design template and support it with local relaunch marketing. I'm excited by the results we've seen to date with this approach with strong member feedback, growth in volume and increasing prices. And as a result, these refurbs are on track to deliver a 30% return on the capital, we're investing in them. So that's a progress report on the first 2 elements of the plan in 2025, and I'm looking forward to making further progress in these areas in 2026.

Turning to the third COG of the plan. We continue to look at ways to broaden our growth. We're investigating new channels, new products and new markets. And we're looking for returns that align with core competencies are highly incremental and have strong returns. Given the quality of the returns in the core business, the bar for anything additional is extremely high. So far, we've looked in detail at a few opportunities, but have been disciplined about saying no, if our criteria aren't fully met. We have, however, launched a new channel in partnership with Wellhub, a fitness and wellness platform accessing over 400 employees in the U.K. We piloted this channel, testing it for high levels of incrementality and have now rolled it out nationally. Performance continues to track ahead of business case. So that's the progress report on our next chapter growth plan, and I'll now summarize.

The next chapter growth plan has created strong momentum. We've consistently grown revenue, margin and EBITDA less normalized rent. And we've also been able to accelerate site openings while reducing our leverage ratio. And I'm pleased to say our teams are doing all this in a sustainable way, creating social value, engaged employees and new jobs while also reducing our energy consumption per gym.

As I said at the beginning, I'm confident that we'll continue to deliver on our investment case of sustained growth free cash flow. Firstly, we have an advantaged business model that delivers exceptional value for money in a market with structural growth. And we're attracting a new generation of gym goers for whom fitness in the gym is increasingly nondiscretionary. Secondly, we have multiple like-for-like growth opportunities in the existing estate and strong white space to roll out new sites. Against that backdrop, in 2025, we delivered 19% growth in EBITDA less normalized rent and another strong step forward on mature site ROIC to 27%. We're accelerating our self-funded rollout to 75 sites over the next 3 years and in line with our capital allocation policy, have commenced a GBP 10 million share buyback.

Looking to 2026, we expect EBITDA less normalized rent to be at the top end of analyst forecast range, and I'm pleased to report a strong start to the year with 9% year-on-year revenue growth for the Jan-Feb peak trading period.

Finally, I'd like to thank our committed expert people for delivering these strong results. The Gym Group benefits from a fantastic team, and it's a real pleasure to be a part of that team.

Thank you, and we will now take your questions.[Operator Instructions] I am now handing back to Will Orr for questions in the room.

Go ahead.

Ross Broadfoot from RBC. 3, please. Let's go 1 at a time, so I've got them written on different pages. The proportion of members scoring you 5 out of 5 at 62% is clearly a very good score. Could you give any insight into what makes people score you less than 5 out of 5 as number 1?

Yes. I mean 92% score us 4 out of 5, or 5 out of 5. And the metrics that are important around that choice would be principally friendly expert people, really good equipment, clean, safe, those sorts of things, those sort of drivers of satisfaction.

And could you just remind me where we're up to in terms of refurbing the mature sites to the new style? And if you can tell us anything about any changes to volumes you've seen at those sites?

Yes. So as I was saying, the refurb sites that we've done already are performing well. We've seen some improvement in volume. We've been able to put some pricing through and we're seeing better satisfaction. So they're tracking nicely towards the 30% return on the incremental capital that we've put in. And then in terms of the estate as a whole across new and refurbed, we've now got I think, 37 sites in the new format, and we'll expect to double that this year as we roll it out.

Fine. And then number 3, you talked about 2025 new sites, 92% of volumes required to deliver the 30% ROIC. What is required from price, obviously, because you've just given sort of a higher volume percentage there?

Yes. So we have introductory offers and the volume growth is faster than it ever has been. And then we -- customers step on to full price. So that's essentially the model. But with that pace of volume to that 92%, I think you'd have pretty good confidence as customers step up to the full price, you get to the 30% and beyond on that cohort.

Yes, Douglas Jack at Peel Hunt. Just on the expansion. Has there been any sort of change looking into 2026 in terms of the size of openings and the weighting you're having towards London because, obviously, London has been doing very well in the last year or 2?

Yes. So in terms of size, it was -- I think it will sort of net or sort of at similar level to previous years. I think we sort of talked about sort of 14,000, 15,000 square feet being the average. But there's -- there will again be a variation around that. We'll open sites up to sort of best part of 20,000 square feet down to just below 10. And then London weighting will be a bit lower, I think, this year than it has been in the last 2, but not hugely.

And last question for me. In terms of the advertising campaign you had, do you get any measurement coming out of that in terms of the success it has been? And what's your plan for that going forward?

Yes. So we ran that for the sort of January, February peak. So that's sort of the first time we've run it, and we'll have a sort of PCA on it in the next post campaign analysis on it in the next couple of weeks. But we've seen some efficiency on CPA. So I think that would be encouraging about its sort of cut through and performance. And I think we plan to continue with that theme of for every group, there's a Gym Group.

Jack Cummings at Berenberg. My first question is just on the openings. I think you said circa 20 in January, and you said at least 20, and I think the presentation said 20 to 22. So kind of what's giving you confidence in that number? And can you maybe share any details in terms of how many you are on site at the moment. [ Should I do 1 by 1 ]?

Yes. So on that one, we've opened one. We're on site a further 3 and exchanged on a further 8. So we've got 12 secured. I think in terms of confidence, I think we've got good visibility of a sort of good pipeline for 2026. We sort of already, I think, know what those sites are going to be. It's just, in some cases, securing them. So yes, I think we've got reasonable levels of confidence around that.

Perfect. And second question, I think in the release and you put it in the presentation as well, you said about continuing to assess opportunities for the new adjacencies, the partnership. Could you maybe just flesh that out a little bit? Would anything be outside of the core low-cost gym or is this just partnerships with other kind of like workplaces, et cetera?

Yes. So I mean, we see lots of opportunities. As we said, the sort of hurdle rate on them is extremely high given the sort of current deployment of capital. And 1 or 2 things we've looked at them in some detail. I think the Wellhub thing is quite illustrative of the sort of approach as in it's a channel that's genuinely incremental. It's low distraction for us. The economics on the members that we get through that channel are good and it's obviously pretty close to the core of what we do. So I think that's illustrative of the approach, and we'll just keep assessing opportunities against that kind of high hurdle rate.

Perfect. And my final question is just on returns. You're obviously seeing really improving returns over the past couple of years. And I think in the slide, it was the 30% excluding the workforce dependent ones. And Is 30% a ceiling? Or given the growth that you're seeing at the moment, could we actually start to move into the low 30s percentage on return on invested capital?

Good question, Jack. I think we still see pretty sustained opportunity on pricing, pricing headroom, value for money and the increasingly sort of committed spend towards health and illness as in Gen Z and seeing gyms as nondiscretionary. So I think whilst all those are aligned in the same way. I think we can continue to drive the gyms forwards.

Anna Barnfather from Panmure Liberum. Sort of a much higher level question, if I could. You mentioned the Pricewaterhouse 10-year runway for new gyms. I just wondered what that would imply for penetration rates in terms of population? And if you talk about demographic differences with younger people, what that means for penetration amongst that cohort. And then I've got a follow-up on that if you have views?

I mean as you see from the chart, what we've seen is somewhere between a sort of 0.5%, around, I think, sort of long-term average about 0.5% extra penetration a year. We actually saw a bit more last year, but I think that's probably the sort of run rate you'd see as you progress through those 10 years. And I think from a sort of demographic point of view, I think when you open in the white space, probably the demographic mix is similar. So [indiscernible] good sort of strong view of the way on how that demographic mix might shift as that white space evolves.

And just to follow up on GLP-1s, there's a lot of studies that it's older women predominantly who are taking it. Are you seeing any hard data on more older women coming in to lift weights?

I think that's right. I think the sort of our understanding of it is that there is a skew in that direction. I mean it's a bit hard to measure because not everybody will sort of disclose, but we did. We do a -- 1 of the best ways to try and understand what's going on as we did -- we're surveying our fitness trainers and in January, 39% of our fitness trainer said they were training at least 1 person doing GLP treatment. And last June, that was 24%. So it's stepping up well within our membership base, which is obviously broad because we've got nearly 1 million members. So I would say it's growing in terms of our membership and we see that as positive for the reasons that we talked about in the presentation. And if we put together really sort of responsible experts provision of advice and training, I think we can appeal right across the sort of age spectrum when it comes to that.

And related to that, the question Jack asked about sort of ancillary revenues. Are there other things you're looking at that would go alongside that in terms of guidance counseling on nutrition and partnering with people who are prescribing?

Yes. Yes, that's the sort of thing. That's an area that we're exploring for sure, yes, yes.

Tim Barrett from Deutsche Numis. A question on yield, please. The gap with peers, low-cost peers isn't, really isn't closing. Would your view be that it doesn't need to, if there's a kind of a rising tide in the high-value, low-cost segment?

And then second question, possibly for Luke, on the CapEx split. It sounds like you're funding after the upgrades out of maintenance capital sort of still getting a 30% return on it, which is really interesting. Is there -- is that true? And is there kind of an argument for going faster on those?

Good questions, Tim. So on yield. I think that we will do -- we A/B test everything we do. And so we will follow our own strategy to maximize revenue. But I think it is very helpful that the other main names in the sector are also moving forward quite positively in the yield terms. So it always -- it's just providing us more and more headroom. I think we always said we thought that, that would happen, the headroom would open up as time went on and it does -- it's continuing to do that. In fact, you saw in the data that Will presented there, actually headroom got a little bit more last year. So I think it's really helpful that that's happening, but I think we are also sort of using our own strategy, if you [ see what I mean ].

And then on the refurb CapEx, it's still quite early days, but we're seeing a nice sort of incremental membership movement on that refurb. And as we said, to this point, we've done all that refurb within the sort of refurb spend that we were planning anyway. I think the second part, which we're still learning is what does it sort of give us permission to do in terms of price. And I think if we can come -- combine that sort of volume uptick and a price uptick then I think it would really increase our confidence levels in getting an equivalent return on that investment as we get on new sites. And then I think there is, as you say, an opportunity potentially to go a bit faster.

Good. Any more? Is that -- that's -- we're done, got all the questions? Yes. Okay. Good. Well, thank you very much for coming. And as I say, we're very, very pleased with the results and the momentum and the start to 2026. So thank you.

Hello, and welcome to the Gym Group Half Year Results 2025. If you're joining us on Zoom, automated subtitles are available, and you can turn this feature on or off within your Zoom app settings. But please note, this is an automated service and transcription errors sometimes occur.

I'm now going to hand over to Will Orr, CEO. Will, please go ahead.

Good morning, and welcome to the 2025 half year results presentation for the Gym Group. Thank you for making the time to join us in the room and on the dial-in. After the presentation, we'll take your questions in the room first and then on the webcast. Our CFO, Luke Tait and I will be doing the presenting today.

And here's what we plan to cover. I'll start with an overview before handing to Luke to share the 2025 half year financial results. I'll then provide a progress report on our next chapter growth plan before summarizing and taking your questions.

So starting with the overview. I'm pleased to report strong performance for the first half of 2025. Closing membership was up 5%, with revenue for the period up 8%, 3% on a like-for-like basis. With this performance and strong management of costs, EBITDA less normalized rent was up 24%. The market we're in remains highly attractive, and gym penetration has again reached new highs, supported by structural growth tailwinds.

And within our next chapter growth plan, the program to strengthen the core continues to drive mature site performance, underpinning confidence in further progress on mature site ROIC, which we'll report on at full year results. And when it comes to new sites, we're on track to increase openings to 14 to 16 in 2025, in line with our plan to open circa 50 new sites over 3 years, funded from free cash flow. So the momentum continues.

And with that, I'll hand over to Luke for the financial results.

Thanks, Will. Good morning. So starting with a summary of our financial KPIs. The key revenue KPIs, which were released in July have both shown good growth year-on-year. We had average members across the first half of 953,000, up 4% versus last year, and average revenue per member month was GBP 21.16 for the first half, also up 4% on prior year. As a result, revenue was GBP 121 million, up 8% on last year.

The additional revenue converted well to profit with EBITDA less normalized rent of GBP 27.4 million, up 24% on prior year. Statutory profit before tax was GBP 3.3 million, up GBP 3.1 million on prior year. Free cash flow of GBP 25.1 million was up 8% on prior year and enabled a net debt reduction of GBP 10.1 million to GBP 51.2 million, reducing the net debt-to-EBITDA leverage ratio to 1x. We will look at each of these key financial metrics in more detail in the following slides.

Turning to the income statement. EBITDA grew strongly in the first half of the year, up 24% versus last year. Revenue was GBP 121 million, up by GBP 8.9 million year-on-year. Approximately 1/3 of the incremental revenue year-on-year was generated from like-for-like gyms and 2/3 from new openings since December 2022.

Costs in the first half evolved in line with expectations. Site costs of GBP 57.9 million benefited from a reduction in electricity costs from lower commodity rates, resulting in site cost margin improvement of 2%. I'll come back to the other key site cost movement shortly.

Central costs grew by 7%, with the growth rate expected to slow further in the second half, and therefore, the central cost margin is expected to drop to circa 11% as guided in March. Normalized rent increased by 7%, reflecting a combination of new site growth and underlying lease inflation. EBITDA was GBP 27.4 million, with EBITDA margin at 23% for the first half, an improvement of 3% versus prior year.

Moving on down the P&L. The noncash charge for share-based payments of GBP 2.5 million was higher than prior year due to the delay in the commencement of the new scheme last year. Net financing costs of GBP 10.4 million remained flat year-on-year, as lower interest rates offset an increase in property lease liabilities. The charge consists of GBP 8.1 million relating to property lease interest and GBP 2.5 million relating to our borrowing facilities.

Profit before tax and non-underlying items was GBP 4.9 million, up GBP 4.4 million on prior year. Non-underlying items of GBP 1.6 million principally relates to the implementation of a new member management and payment system. Finally, profit before tax for the 6 months was GBP 3.3 million, up from breakeven last year.

Revenue grew by 8% in the first half. Average revenue per member per month grew by 4%. This was principally down to a combination of yield increases in their like-for-like estate, and the optimization of yield in the new site openings, including coming off introductory headline rate discounts. The average headline rate of a standard membership was GBP 25.10, up by GBP 1.16 year-on-year. Like-for-like revenue was 3%, in line with guidance, with the average membership remaining at 100% year-on-year and the average yield increasing by 3%.

Looking at site costs in more detail. We've been able to control site costs in the first half despite the ongoing inflationary environment. In the first half, like-for-like site costs were down by 1%. This was driven by a further reduction in electricity commodity prices and our energy optimization program. For example, we have now installed 120 voltage optimization units across the estate.

Efficiencies in the staffing model and cleaning have partially offset the National Living Wage and NIC increases in Q2. And rates rebates have partially offset the Q2 increase in the UBR. In the second half, we expect site cost inflation to return, bringing the full year in line with our guidance of like-for-like site cost growth of 2%. This is as a result of an increase in the non-commodity element of the electricity cost from Q4 as well as 2 quarters of National Living Wage, NI (sic) [ NIC ] and UBR increases.

Turning now to the cash flow. Strong cash flow generation in the year enabled us to self-fund our expansionary CapEx, buy shares for the EBT and pay down debt. The working capital inflow of GBP 8 million reflects the cash generative nature of the business model when growing, and a higher proportion of payout front memberships, although some unwind of this inflow is expected by year-end.

After deducting the cash spend on maintenance CapEx of GBP 7.3 million, operating cash flow was GBP 28.1 million. The cash element of non-underlying costs was GBP 0.5 million, bank and lease interest was GBP 2.5 million. It's worth noting that due to losses incurred during COVID and accelerated capital ounces, we do not expect any cash tax until 2028. Free cash flow was GBP 25.1 million. Expansionary CapEx was GBP 12.6 million. And after refinancing and EBT share purchase costs, net debt reduced by GBP 10.1 million during the first half.

We continue to invest to grow the business and ensure a well-maintained estate. Total cash CapEx in the first half of the year was GBP 19.9 million. Maintenance CapEx across both property and tech was GBP 7.3 million in the first half. Property maintenance of GBP 6.2 million was 5% of revenue. Tech and data maintenance CapEx of GBP 1.1 million was spent on hardware, including CCTV upgrades and on our data infrastructure.

Expansionary CapEx was GBP 12.6 million, with the main spend being on new sites as we target 14 to 16 new sites this year. Tech and data expansionary spend relates principally to investments in the website to enable next chapter growth initiatives such as product add-ons and website conversion optimization. Spend on replacement member management and payment systems was GBP 0.7 million and is expected to increase significantly in the second half as this project ramps up. We continue to expect total CapEx to be approximately GBP 50 million for the full year.

Turning now to net debt. The strong free cash flow in the first half has allowed good progress on leverage reduction. Non-property net debt was GBP 51.2 million at the end of June, down GBP 10.1 million from the year-end. The debt consisted of GBP 59 million of bank debt and GBP 1.5 million of finance leases. As a result of the reduction in debt, the net debt-to-EBITDA multiple reduced to 1x EBITDA, down from 1.3x at year-end.

Given the second half weighting of CapEx and an unexpected element of working capital unwind, year-end net debt is expected to be at a similar level to last year end at circa GBP 60 million. In June, we agreed an amend and extend of our current facilities with our bank syndicate, increasing the total facilities to GBP 102 million and extending the maturity to 2028.

The new sites continue to perform well. The 25 sites opened in 2022 are expected to deliver ROIC of 30% this year. The small 2023 cohort is on track to deliver an average ROIC of 25% with one site having been impacted by an unusual level of competitors' openings. And although early in their tenure, the 12 2024 sites are progressing well with strong initial membership volume. Overall, our confidence remains high on returning 30% on new openings.

Finally, turning to current trading and outlook. Current trading momentum has continued through July and August. We're now entering the key student acquisition period. We've opened 5 new gyms so far this year with another 8 gyms currently on site. For the full year, like-for-like revenue is expected to grow at circa 3% and like-for-like cost growth is expected to be circa 2%.

Given the current trading momentum, we now expect EBITDA at the top end of market expectations. We do not expect to pay any cash tax before 2028. We're on track to open 14 to 16 new openings in 2025, in line with our March guidance, with total CapEx of circa GBP 50 million expected for the full year. Therefore, net debt is expected to trend back to last year's level by year-end.

I will now hand over to Will.

Thank you, Luke. In March 2024, I set out our next chapter growth plan and wanted to provide you with a further update on the strong progress we're making.

Firstly, a reminder of investment case, sustained growth from free cash flow and why we think it's so compelling. Starting at 12:00 on the circle, health and fitness is a very large market that's benefiting from continued structural growth. And in gyms, the high-value, low-cost sector is growing fast.

As with other categories, we're benefiting from consumers' appetite for no-frills great value propositions and from new more committed generations of gym goers. This winning proposition has high levels of customer satisfaction and is delivered by a strategically advantaged labor-light business model. We also have multiple drivers of growth listed on the right-hand side of the slide with detailed plans on each of them.

Strong execution on those growth drivers is increasing returns in our existing estate, in turn, funding the organic rollout of quality new sites. This virtuous circle of sustained growth is being powered by data and technology, 2 areas we continue to invest in is the foundation for any successful digital subscription business.

Demand for gyms continues to grow. U.K. consumers now spend GBP 6.5 billion on gym memberships with 11.3 million of us being members. That penetration continues to grow with another strong increase in 2025 to 16.6%. And as you can see, low-cost gym growth is strong. With the proposition that's high quality and affordable, we're introducing new generations of gym goers to something they really value as well as benefiting from the continued trade down from the mid-market. And in this growing market segment, we're 1 of 2 brands that account for 80%-member share.

Seeing the way future generations, particularly Gen Z, are embracing gyms is one of the reasons we're so optimistic about the Gym Group's future. With around 40% of our members being in this cohort, we now publish a Gen Z fitness report based on a regular independent survey of over 2,000 respondents. The most recent results are again encouraging. Nearly 3/4 of this group now saying they're making time for fitness at least twice a week. And their fitness is their top priority when it comes to discretionary spend.

For a growing number of this generation, fitness is a nonnegotiable. These are consumers who are highly engaged in fitness for its physical and mental health benefits, who have a growing appetite for strength training, best done in a well-equipped and affordable gym and who increasingly see going to the gym as part of their identity and social life. And I should add that these trends extend beyond Gen Z and into our membership base as a whole. The future is bright for fitness and gyms.

To take full advantage of the market with structural growth, you need a winning proposition and ours resonates more than ever. For any subscription business, usage is a good health indicator. And the proportion of members visiting us 4 times a month or more increased again year-on-year. While the proportion of members rating us 5 out of 5 in satisfaction surveys has risen to a remarkable 62%. And when it comes to Google reviews, we lead the market with every one of our gyms scoring 4 out of 5 or better.

So the Gym Group is growing in a growing part of a growing market, benefiting from structural market growth and an advantaged labor-light business model that delivers a winning proposition.

The Gym Group also has a clear growth plan. As a reminder, there are 3 elements to the next chapter. Strength in the core is focused on increasing returns from our existing sites, principally by growing like-for-like revenue. It's the program that helped us deliver our 25% midterm target for mature site ROIC in full year 2024 ahead of schedule, and is generating the cash to accelerate our organically funded rollout of quality sites in the U.K.

As we said in March, those first 2 COGS are very much where our executional focus is for the time being because we see so much headroom here. I will, however, also update on the third COG, broaden our growth later in the presentation.

Turning in more detail to strengthen the core. We've again delivered multiple wins across 3 levers of customer revenue growth. On pricing and revenue management, we're seeing a sustained upside opportunity based on our strong value-for-money credentials and I'm confident we have the data and capability to continue growing yield.

When it comes to acquiring new members, we're using data, ad technology, brand management, local targeting and e-commerce skills to create a highly efficient acquisition engine. And thirdly, on member retention. We continue to increase the average tenure of our membership by taking a systematic approach. On the next few slides, I'll give you some examples of the progress we're making in these areas.

In explaining why, we see such a sustained opportunity on pricing and yield, I wanted to start with the U.K. gym market as a whole. At the Gym -- at The Gym Group gym, you get a large, clean, well-equipped, well-maintained gym with friendly expert people. You also get 24/7 access, and you're not tied into a contract.

And yet, because of our advantaged business model, we're able to offer all this at prices that as well as being marginally lower than the direct competition are comprehensively lower than the rest of market. And as I'll touch on shortly, we have ways to keep enhancing the perceived value of what we offer without adding to our costs. So our market position gives us a strong long-term pricing and yield opportunity. And critically, that opportunity exists in the minds of our consumers.

The graph on the left-hand side is output from a large quantitative study we refreshed again in H1 with Simon-Kucher Partners. It plots perceived value on the X-axis against perceived price on the Y-axis and shows that the high-value low-cost gym sector remains underpriced in the minds of our target consumer. In other words, they continue to perceive more value than they pay.

And when you consider the value proposition I just described, that large, well equipped, well maintained 24/7 gym for about GBP 25 a month, that's not surprising. It is a phenomenal piece of value engineering. And as you can see on the right-hand side of the chart, this delivers strong value, for money scores, which remains stable despite increasing prices again over the last 12 months.

With this opportunity in mind, we delivered several wins again in H1, all these have been underpinned by analytics and AB testing, derisking our decision-making as we execute. Firstly, we've increased our headline rates for new members, while remaining cheaper than the competition in competing sites. We note that our main competitors continue to take a similar approach with JD Gyms particularly aggressive in the period and further pure gym price increases noted already in H2.

Secondly, we've continued to test and innovate on promotions, seeking to optimize for return on spend. This has included more targeted treatments at site level and ongoing deployment of our churn-reducing stepped kickers.

Thirdly, we've continued to revenue optimize our product range, including offering premium features like Guest Pass and Multi-Site Access as add-ons to standard membership. And finally, we've developed a data model to assess site level headroom in the mature estate, enabling even more targeted pricing and volume interventions as a result. I'll return to this data model later.

Turning to acquisition. We're also taking a targeted approach here. As I've described before, to maximize return, we're spending our marketing money close to our sites where the demand will naturally be. And as you can see in the graph, unprompted awareness within 3 miles of our sites is growing. When it comes to then converting prospects into sales, our program of web conversion improvements continues with 9 successful AB tests completed and adopted in H1.

We're also progressing initiatives to be as relevant and attractive as possible to our core audience of Gen Z consumers. This includes growing our footprint in social media and enhancing the presentation of our brand and our sites.

To expand on this a bit further, as you can see on the left-hand side of this chart, our social media reach, both at national and local level continues to grow at pace with well over 0.5 million people interacting with us in social. This is a key channel for quality fitness advice, engagement and, of course, sales, and we'll continue to prioritize this area.

We're also evolving the aesthetic presentation of the Gym Group in marketing activity and in our gyms. This is one of the ways we'll continue to build our perceived value in the minds of members, supporting pricing and revenue growth. And I'll return to what evolves in gym design in more detail shortly.

Our focus on retention is one of the reasons we've been able to hold like-for-like membership constant, while pricing up and where the average tenure of our members continues to grow. Churn rates are highest in the first 45 days of the members' tenure, which is why we developed our early life plan. Part of this plan is encouraging new members to visit more often in their first month, and in H1, we launched targeted nudge messages in the app to encourage visits.

As well as this, we're enhancing all aspects of the new joiner experience. For example, we've renamed and better promoted the free Kickstart induction session we offer new members. Kickstart introduces the new member to the gym and helps them get the most from it. We've seen a 37% increase in participation and 10% higher retention rates among participating members.

Rejoins are also an important part of our member mix, with members benefiting from our flexible proposition. We have a program of enhancements to capture as many returning members as possible and increase the 6-month rejoin rate by 6% in H1.

And finally, we continue to grow our base of members on a longer-term commitment. We call these 6-, 9- and 12-month product savers and have enhanced them in several ways, growing this base by 37% in H1. So that's a few examples of the many ways we're strengthening the core of the business and improving mature site ROIC. To remind you, we grew that measure 4 percentage points in full year 24% to 25%, and look forward to reporting further progress on this metric at full year results.

Now turning to the second part of the plan. In line with our strategy and capital allocation policy, we're currently deploying free cash flow to accelerate the rollout of quality sites in the U.K. PwC estimates 10 years plus of U.K. white space for low-cost gyms. So the opportunity for sustained rollout is clear. And we're taking a disciplined returns-focused approach to unlocking that opportunity.

We opened 12 new sites in 2024 at the top end of guidance and are on track to open the guided 14 to 16 in 2025. Using data to isolate the characteristics of our best-performing mature sites, we're then applying that formula to the new sites we open. And as a result, I'm pleased to say that the 5 sites we've opened so far this year are performing ahead of expectations.

Given the power of data-driven site selection, we continue to enhance our methodology. In H1, we devoted a new fully bespoke site selection model with more data sources and machine learning to further increase accuracy and speed of appraisal. And as referenced earlier, we're elevating design aesthetic and kit innovation in new sites. I'll provide some more detail on that now.

We have great gyms with strong customer ratings and improving returns. But we've identified headroom to elevate the gym experience further, driving those high value perceptions and supporting sustained revenue growth. The evolved approach is being applied to all new sites and as I'll cover in a moment, being rolled out in our mature estate in a commercially targeted way within our existing maintenance CapEx program.

The work to do this, which has included input from a world-leading retail design agency was based on 5 principles. Firstly, this is a careful evolution, so we wanted to build on the strengths we have and continue to create welcoming gyms for all our members. That said, we're evolving the look to be more on trend and premium. This includes some darker colors, more use of original building features, more use of neon and lighting design, black kit, better change rooms and better zoning.

Thirdly, kit is a very important part of why customers choose the Gym Group. So we're innovating here with more advanced strength training equipment and in the introduction of some sort after kit brands like Booty Builder and [ ExCo ]. We're also being more conscious about creating spaces for members to socialize in an environment suited to posting on social media. Finally, and critically, through thoughtful cost engineering, we're doing all this without adding to fit-out costs.

And here are some visuals of the new approach. I'm pleased to say the performance of the 8 sites we've opened so far with the new approach has been strong. The rate at which we fill these gyms with members is well above our historic growth curve, and at an average of 4 out of -- 4.8 out of 5. The feedback on Google reviews is excellent, too.

As well as opening new sites with this improved approach, we want to apply it to the mature estate within our existing CapEx budget. And we'll prioritize this maintenance spend based on likely return. To aid this, we recently completed a multi-variant statistical model to analyze potential membership headroom across the estate. This is allowing us to prioritize our refurbishment program, where the returns should be highest. It will also help us to target local marketing and pricing as well as those in gym enhancements.

Here's an early example of the approach. The model identified membership headroom in Bristol Longwell Green. We business case the site investment within our maintenance CapEx budget and rolling refurb program. And then we reopened with a new design approach and some local relaunch marketing. I'm extremely encouraged by the early results we're seeing. And across new and existing sites, we expect around 40 of our gyms to benefit from the new design approach in the full year 2025, with a program then continuing into 2026.

So that's some examples of the progress across the first 2 COGS of our growth plan. As I said earlier, we see headroom in both of these areas, headroom to further strengthen the core of the business by continuing to improve mature site ROIC and headroom to accelerate our organically funded rollout of quality sites into ample U.K. white space. And that's why these 2 areas remain the majority of our focus.

We have, however, continued to analyze opportunities to broaden our sources of growth. So a brief update on this part of the plan. One area we've explored here is channels to market, new scale channels delivering incremental members. Wellhub is a B2B2C channel, providing a platform of fitness and wellness benefits to 1.5 million eligible employees across 450 U.K. companies, including the likes of Santander, Tesco and Nationwide.

We recently started a 6-month pilot on the platform with a robust framework to assess incrementality when it comes to new members. If the pilot delivers in line with our estimates, and we've seen an encouraging start, we'll roll this out nationally as a new source of like-for-like membership growth. We also continue to investigate other significant adjacencies, well aligned not just a fitness, but also to our core competencies. We'll, of course, update on this in more detail at the appropriate time.

So that's the progress report on the next chapter growth plan. I'd like to take the opportunity to thank the committed expert people across our gyms and support center for delivering the progress you can see. We'll very shortly take your questions. But before that, I'll briefly summarize today's presentation.

The Gym Group operates in a large market with structural growth. We have an advantaged labor-light business model that delivers high value at low cost and limits exposure to national living wage and national insurance increases. With a clear growth plan and significant white space, H1 saw 24% growth in EBITDA less normalized rent, underpinning confidence in full year progress on mature site, ROIC.

Profit growth is converting into strong cash flow, and that's allowing us to accelerate our organically funded expansion. As a result of this strong progress and our current trading performance, we're now expecting 2025 EBITDA less normalized rent to be at the top end of analysts' forecast range.

Thank you, and we'll now take your questions.

[Operator Instructions]

Sahill Shan from Singer. Three questions from me. Just on the ending of your presentation, Will, in terms of broadening our growth part of the presentation. Should we assume that as part of our strategy, moving overseas could be an option over the medium term?

Second question is given the strength of the free cash flow and self-funding and where leverage is now, how should we be thinking about capital returns going forward?

And the final question, I suppose, this is for you, Luke, any update in terms of what's happening to site costs relative to previous guidance?

Thank you. I'll take the first one. So in terms of broaden our growth, I mean, as I said, we see a lot of U.K. headroom, both in terms of sort of mature site performance and white space. So that's very much where our focus is for the time being. To the international piece, we wouldn't rule out anything. And periodically, we sort of assess the landscape. But for the time being, we're very much focused on the U.K. So that's that one. And perhaps, Luke, do you want to talk buyback and cost.

Sue. So, as you know, it was 18 months ago, we set out our capital allocation policy, which I think still essentially remains the same. First priority is making sure that net debt leverage remained below 2x. It is now down to 1x as we just reported, but will increase again a bit towards year-end. So obviously, well within scope there.

The second was to prioritize organic growth as long as we had high-level confidence on achieving 30% ROIC. I think we're still there. And then the third was if we felt we had excess free cash flow, we would consider returns to shareholders. And we're very much still looking at that actively. The returns are pretty good, and in theory, at least risk fee.

That said, there is still quite a big gap between those returns and the returns we think we can get from deploying the CapEx on organic growth. So for the time being, we're still concentrating on that organic growth, but it is something that is under active consideration by the Board. And we may well make changes in the future.

The third question was around site costs. So we had a very strong first half in terms of site costs -- like-for-like site costs actually down year-on-year, driven by that commodity -- continuing reduction in the commodity rate, which actually we continue to see going into the future.

We had only 1/4 of the sort of changes imposed on us around Living Wage, NI and rates. We will have 2 quarters of that in the second half, so that adds to the inflation burden, and we will also see non-commodity rates increase in the final quarter, as I said.

So if we're down one in the first half and then up 2 for the full year. You can see that second half will -- we will have a much sort of more significant increase. From point of view of what that means going into next year, that non-commodity increase will last for a year, and its 2-year contract will then be flat thereafter. So it's kind of one hump to get over if you see what I mean.

And then on the National Living Wage for next year, I'd be interested in your view, so -- but we'll find out in November. And I think we'll guide when we know more, which is probably early January.

Sorry, my third question, I was thinking more about CapEx per new site much have been reduced...?

Oh, sorry. So get CapEx on new sites, essentially running in line, I think, to sort of more general levels of inflation. So we do see some increase from wage costs coming through. That said, everything is tendered to minimum of 3 contractors. And as a result, we're not seeing massive increases year-on-year.

The biggest variation really is down to site level sort of dimensions such as, is it Central London or London? Or is it outside of London? Is it a complex site to develop? Or is it a nice clean sort of industrial-type box. But no, nothing more than sort of headline inflation rates.

Ross Broadfoot for RBC. You referred a few times to average tenure continuing to grow. I was wondering if you could give any color on sort of where it's been and where it is, just to give that a bit more sort of scope.

Number two, you talked about strong volumes at the enhanced new sites. And just question, to what extent discounting has played a role in the strong volumes or whether those sort of normal volume growth, if you see what I mean?

And then thirdly, off-peak now 13% of the mix. I think previously, you've said mid-teens is where you sort of see it maturing? Any update on that at all?

So yes, on tenure, I mean, the average tenure of our membership is sort of around 18 months with a very significant sort of dispersion around that, the average of 18 months and it's been sort of ticking up nicely over the last couple of years. So that's that one. And yes, we continue to work on that.

I think volume at new sites, yes, well ahead of historical averages. I would say, we've been moderately more aggressive on kind of opening offers because strategically, we think it's good to fill new sites fast and then yield up thereafter, but it's not been a sort of huge change to our sort of historical approach. So yes, there's a little bit of promotion in there.

But I would still say that I think what we're seeing from the kind of the new aesthetic and so on, I think is encouraging, very encouraging in its own right. So that's that one. Off peak, do you want to take.

It's not off peak, Ross. So yes, I think that guidance of sort of mid-teens still is sort of our best direction. And I think in around off-peak has performed pretty much as expected from the trials, has some multifunctions. It has added some volume, which has helped offset some of our price increases. It's also enabled us to price more aggressively in the other essentially 85% of members, 87% of members, and it also gives us that sort of excellent marketing low headline rate, which we use. I think we'll continue to optimize it. So we do literally set that differential in pricing at a gym level. And therefore, we can sort of control that volume depending on what we think will maximize revenue.

It's Douglas Jack, Peel Hunt. Three questions, if that's okay. First one is, are you seeing much difference in terms of regional performance across the U.K., i.e., London versus outside in particular. And are you seeing any changes in terms of competitor behavior in terms of expansion?

And in terms of the refurb program, how many are you doing at the moment per annum? And what does that mean in terms of that pipeline applying your latest format to the mature estate.

Yes. I mean, maybe I'll start with the last one and then sort of work up from there. Yes. I mean, I think I said that between the new sites that we're opening this year and the sort of significant refurbs, we'd estimate about 40 of our sites by the end of this year. We'll sort of -- would have had a sort of -- will either be the new look because it's a new site or have had a sort of significant refurb. There's actually over 100 sites in the refurb program gets some form of treatment, let's say, upgrade.

So -- yes, sort of I think happy with the pace of that, and then it will continue into 2026. And I think I'm sort of excited by this now more granular ability to try and assess how we should prioritize that maintenance program. But I think we will -- as we move into next year, we'll have a sort of a significant proportion of the estate with that kind of new and more premium look and feel, if that answers that question.

I think on competitor behavior. I think as we've said before, we continue to think the market is rational, I think rational on pricing, rationale on sort of site selection and sort of looking at trade areas and those sorts of things, I think we noted JD being particularly aggressive on pricing in H1. And as I say, PureGym doing some pricing already in H2. So that direction of travel looks to be very sort of consistent.

And then in terms of rollout speed, PureGym are going faster than us, but opening quite a lot of small sites, and we're principally sticking to our sort of tried and trusted formula of larger sites. But I think the market continues to be to be rational. There's a lot of white space. I think there's a lot of room for everybody to be on this among us and PureGym.

And then on regional performance, I don't think there's any particular change, and we have strong performing sites right across the U.K. I mean, London -- Greater London has always been a good area for us, but we haven't seen any real change in that.

Jack Cummings at Berenberg. My first question is just on-site openings. And it's a bit H2 weighted this year and obviously, it's accelerating next year. Could you just give us a little bit more kind of color in terms of your confidence behind those targets and also what phasing we should expect in 2026?

You mentioned the new add-ons like guest passes, multisite access, et cetera. What sort of penetration are you getting for this? And has this been rolled out across the entire estate and all of your members?

And then the final one is just going back to the prioritizing of that mature estate investment. Is there potentially a discussion internally actually accelerating the amount of maintenance CapEx, given this headroom and the returns that you could get from it?

[indiscernible] one answer and I'll try the first and third. So phasing of new openings, I think we are confident about our guided 14 to 16 for this year. We've opened 5. We're on site at another 9. So we -- I think we're on track there. It is going to be back weighted for sure this year.

And then in terms of 2026, I think we actually -- the pipeline for 2026 is looking strong already. I think we're sort of further ahead at this point than we have been historically, not sure of the exact phasing of all of that in next year. But I think net back weighted this year, but confident on guidance and looking really promising actually for next year as we step up. So that's that one.

I think on the mature estate investment, I think as I said, various times in that presentation sort of trying to do it within the existing sort of envelope at the moment. But to your question, we assess the performance of every newly refurb site. It takes a bit of time to assess that performance because it needs to go through sort of a bit of a trading cycle. But if we see really strong returns and really strong improvements then we would potentially accelerate that. But I think we'd sort of guide if that's something we thought we were going to do.

Yes, Jack, on the add-ons, it's very early in the launch process. So I think it's probably premature to give stats on that.

I think we're on site at 8, not 9. I saw Catherine looking at me in a horrified way. But yes, I think we're on track for our 14 to 16.

Tim Barrett from Deutsche Numis. The first question was about yield. Obviously, the 3% price increase you put through certainly wasn't greedy versus the competition. Do you feel you might go faster in 2026? Is there scope for more catch-up?

And then Slide 32 is really interesting about local market headroom. Can you give us an idea of what the scale was on that chart? And does it include the workforce-centric gyms. I'm just thinking whether you might be able to recoup some of the previous lost members there.

Yes, sure. Thanks, Tim. So yes, on yield, as you said, I think sort of 3% which was proportionate to the inflationary pressures we were seeing, I think. So I don't -- I think there is definitely sort of continued, as we also set out in those slides, continued midterm opportunity to take yield. And whilst our input inflation isn't a driver, it's definitely an important consideration. And we do know that particularly around that noncommodity utility rate, we will be seeing some more inflation next year. So we will definitely wait and see what happens through the budget on other cost lines. But I think depending on the inflationary pressure, I think we will sort of flex our pricing plan to match that.

And then on that headroom piece, I think that the headroom in certain sites, as you see on the left is significant. That's not to say it can be automatically unlocked and it's a statistical model, and we're now applying it to sites like the one I showed and sort of assessing the performance. So we've got to sort of test the model. But yes, I mean, there's definitely a number of sites on there that look like they had good headroom.

And then I think the second part in terms of workforce, yes, the model would suggest that there's some opportunity there, but I don't think it would be our first priority, to be honest. But it's something that we'll sort of continue to keep under review. And I think you are sort of seeing incremental return to office working and so on. So I hope that answers the question. So I think some good headroom in that model. We need to prove that out. But I think were -- those sort of that small handful of workforce is unlikely to be the top priority for the deployment of that effort.

Jane from Ocean Wall. Can you help us a bit with the algebra on the ex workforce ROIC calculations, because in the 2025 presentation, you showed the 184 mature sites delivering this huge uplift in ROIC. But with the same EBITDA margin as the ex workforce 159 sites in the 2023 presentation. So it just seems strange that the EBITDA margin, admittedly one includes rent-free, one doesn't, I think. But why isn't the margin showing a bigger improvement? And is -- does that mean that we should be worrying about the workforce gyms? Or put it another way, is there still a 200 basis point drag from the workforce gyms, then -- and the portfolio is 25 mature gyms bigger, should we be -- is there a deterioration in the workforce gyms? I suppose is a long-winded way of saying that.

So I'm not sure I totally followed all of your numbers in the first part of the question. But to the second part of the question, I don't -- we're not seeing any particular deterioration in the workforce dependent gyms. And I would anticipate a similar level of drag by year-end. So I don't think that will have changed at year-end.

So even though the portfolio is bigger the drag is the same, so it should be getting smaller, shouldn't that?

The portfolio will have increased by 4%, whatever it is. So -- yes, it will have got a bit smaller, but it won't be -- I don't think it will be material there.

And can I just follow-up on rents? Are they inflation linked by and large, and the [indiscernible]...?

They are, by and large, inflation linked with colors and caps. Anna?

Anna Barnfather from Panmure Liberum. A lot of questions have been asked already. Can I just drill a bit deeper on marketing costs?

Obviously, you changed your approach to be more local. Can you give us a sense of where that is as a percentage of revenues and how that will trend? And then a bit of a technical one, Luke, on business rates. You talked about sort of inflationary impact of the rise in the second half. Business rates may well be reviewed in the budget, who knows. Can you just give me a sense of what business rates are as a percentage of revenue as well?

Yes, sure. So marketing costs, I think we've historically said marketing costs are around about 5% of revenue, and we are not materially outside of that. I mean I think what we would say is as we continue to sort of optimize the way we spend the marketing money on media and get a better and better understanding of CPAs and particularly incremental CPAs, I think we will -- we are trying to move into a world where we see marketing costs more -- almost more as a variable cost as in if we think by deploying more in a given moment that we can drive new members that write incremental CPA, then we would do that. But I mean, essentially, I think for modeling purposes, probably 5% of revenue is the right assumption.

On business rates, I don't think we've ever sort of given that as a margin. I mean it's a significant cost, but not the biggest cost. We have seen UBR rates, I think, increased to 6% this year. So it was sort of similar -- 6% to 7%, similar to living wage. What we've heard about rates going into next year is that there'll be quite a meaningful reset where I think the ratable values are expected to be increased quite significantly, but offset by reductions in UBRs, particularly in properties, which have rental -- annual rental charges of less than GBP 0.5 million, which broadly speaking, is us. So I don't know what will happen in November, but there is a possibility of some good news.

Just on the marketing then. Sorry, just a follow-up on the marketing cost. So maybe I asked as a percentage of revenues. Do you look at it internally acquisition member cost of acquisition per member?

Yes, absolutely. I mean, there are...

And is that trending down?

It varies by month within the year. And generally speaking, there is inflationary pressure on media costs, but we have been able to offset the majority of those through continued efficiencies in how we deploy it. But media, there has been inflation in media historically, if that makes sense.

But with that, the percentage staying largely constant, we'd expect marketing spend to increase, but only in line with revenue growth.

And on CPA specifically, if we if we decided to push a bit harder, you might actually see your CPA go up, but we'd only do that if the LTV of the acquired members justified that incremental CPA.

Douglas Jack at Peel Hunt. Just a couple more rather boring accounting questions. IFRS 16 is still a headwind in these results. When do you think it will become a tailwind to you?

And the second question is, historically, fixed asset depreciation precise being much higher than what you've had to spend on maintenance CapEx. You've been very conservative on that. Can we expect depreciation per site to perhaps come down in the future?

Thanks, Doug. Yes. So on IFRS, I expect the drag to be about GBP 2 million this year, and I think most of that should be gone within the next 2 years. And then in theory, we're actually in a place where we will see a benefit.

And then on fixed asset depreciation, yes, you're right. I mean a big chunk of the leasehold improvements will never be replicated through maintenance CapEx, and therefore, we should continue to see maintenance CapEx below fixed asset depreciation.

And as the estate matures, which is obviously also a driver that IFRS point, we should see sites starting, as you say, to come off that original maintenance depreciation cycle, and therefore, it should be a benefit.

[Operator Instructions]

Ross again. Just a quick one on the pilot, the B2B2C. When do you think we'll hear more about how that sort of pilot is going? And is that something you would expect to see nationwide? And sort of part 2, could there actually be a benefit then for the workforce dependent gyms?

So 2 parts to that. I mean the pilot is a sort of roughly 6-month pilot. So I'd expect we'd update on that in March potentially.

And then the second part of the question is this isn't specifically a workforce site play. Already, we're seeing participation sort of right across the estate because it's more about where we have gyms that fit with that particular employer. So it's a sort of like-for-like volume play right across the estate, but very early days, but I should think by March, I'd expect we could give an update on that.

Thank you for all your questions. I will now hand back to Will for any closing comments.

Well, thank you for coming. Tube strikes, notwithstanding. Thank you, and I think that's it. Thanks.