Brait Plc · JSE:BAT
Brait — Investor Day (May 2023)
55 slides from Brait's investor day presentation, May 10, 2023
Slide 1: Virgin Active: Perspectives from the Advisor - Investor Day May 2023
STRICTLY CONFIDENTIAL VIRGIN ACTIVE: PERSPECTIVES FROM THE ADVISOR Investor Day May 2023
Slide 2: Important Information
Important Information As of 1 April 2023, Ethos Private Equity Proprietary Limited ("Ethos") has merged its operations into those of The Rohatyn Group (“TRG”), a specialized global asset management firm focused on investment solutions in emerging markets and real assets. Following the completion of
Slide 3: Virgin Active: Time of Ethos Investment
VIRGIN ACTIVE Virgin Active: Time of Ethos Investment February 2020 Brait Rights Issue: Ethos makes investment & is appointed as new advisor to the Brait board Virgin Active had delivered good performance, with strong cash generation, a large membership base and an attractive footprint 1.16m EBITDA
Slide 4: Virgin Active: COVID lockdowns & restrictions
VIRGIN ACTIVE Virgin Active: COVID lockdowns & restrictions March 2020 December 2020 May 2021 March 2022 COVID lockdowns and restrictions imposed: gyms across all territories temporarily closed & memberships frozen Lockdowns were expected to last for a few weeks. Immediate actions from management &
Slide 5: Virgin Active: Extended Lockdowns & Restrictions
VIRGIN ACTIVE Virgin Active: Extended Lockdowns & Restrictions March 2020 December 2020 May 2021 March 2022 However, lockdowns lasted significantly longer than initially anticipated resulting in severe liquidity challenges During FY2020, Virgin Active lost 24 months of trading across its four territ
Slide 6: Virgin Active: Pioneering Restructure Plan
VIRGIN ACTIVE Virgin Active: Pioneering Restructure Plan March 2020 December 2020 May 2021 March 2022 Prolonged lockdowns resulted in the need for a holistic restructure plan in the UK, Europe & APAC divisions Resilience features The Ethos team actively drove a holistic Concessions from all stakehol
Slide 7: Virgin Active: Capital Raise & Real Foods Amalgamation
VIRGIN ACTIVE Virgin Active: Capital Raise & Real Foods Amalgamation March 2020 December 2020 May 2021 March 2022 R950m (£46.3m) VASA guarantee capitalised, £88.4m capital raise & amalgamation with Real Foods nutrition business New CEO appointed and transaction concluded in order to expedite Virgin
Slide 8: Virgin Active: The First Three Years
VIRGIN ACTIVE Virgin Active: The First Three Years 800 lockdowns restrictions recovery Active management: 700 business fundamentally repositioned 600 South Africa 500 400 liquidity support 300 debt restructures Active Members (‘000) 200 100 0 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 J
Slide 9: Virgin Active
virgin active
Slide 10: Financial Update
financial update Mark Field: Group CFO 2
Slide 11: Impact of extended COVID lockdowns and restrictions
Impact of extended COVID lockdowns and restrictions lost trading restrictions % of 2019 members net terminations at (2020 & 2021) lifted at the lowest point the lowest point South 5.5 months Q1 2022 70% 217k Africa United 9 months Q1 2022 63% 67k Kingdom Italy 8.5 months May 2022 68% 54k Asia Pacifi
Slide 12: High degree of operating leverage
High degree of operating leverage c.95% of the operating cost base is fixed, resulting in the revenue loss during Covid having a significant impact on earnings and cash Operating cost breakdown 74% 85% 95% High fixed cost base: inflation- adjusted operating costs at 98% of 2019 levels despite member
Slide 13: Volume recovery firmly entrenched
Volume recovery firmly entrenched Volume recovery has picked up pace over the last seven months, post Northern Hemisphere summer. Active members grew by 104k (+12%) over this period South Africa United Kingdom 650 85% 135 87% 600 611 131 130 571 550 551 125 500 122 120 119 450 +40k (+7%) total membe
Slide 14: Positive KPI trends recovering to pre-Covid levels
Positive KPI trends recovering to pre -Covid levels Q1 2019 Q1 2022 Q1 2023 2023 vs 2022 2023 vs pre-COVID Revenue (£M) 123.9 92.4 113.0 +22% -9% Yield (£) 35.0 34.6 36.3 +4 % +3% Active Members (‘000s) 1,083.7 837.1 963.1 +15% -11% Gross Sales (‘000s) 136.2 125.8 150.9 +20% +11% Attrition 39% 40% 3
Slide 15: Kauai & Nü continue to perform well
Kauai & Nü continue to perform well Gross Sales - ZARm (12 months to March) 342 328 +31% 260 255 on pre-COVID +4% …in large part driven by on budget in-gym stores: 2019 Prior year Current Year Budget Store EBITDA - ZARm (3 months to March) Group EBITDA - ZARm (12 months to March) +20% on budget 46 4
Slide 16: Earnings impacted by structurally higher energy costs
Earnings impacted by structurally higher energy costs Ukraine war has created a structural change in European energy supply chains which may remain elevated for an extended period Global energy prices increased Virgin Active’s utility costs by +37% in 2022 and +54% in 2023 South Africa continues to
Slide 17: Shifting focus from volume to yield recovery
Shifting focus from volume to yield recovery Sales promotions have supported volume recovery – managing transition to focus on yield While yields are 4% up on 2019, they Managed shift in focus to drive higher yields: are down on in real terms. Lower real yields driven by: Reducing sales promotions %
Slide 18: The path to earnings recovery
The path to earnings recovery The Group has passed the EBITDA breakeven membership mark. Operating leverage and yield progression are the primary drivers of EBITDA recovery of the ‘as is’ gym business New active members Additional active members over the last 7 months: to return to 2019 +104,000 +12
Slide 19: Operations Update
operations update Luca Valotta: Group COO 11
Slide 20: Virgin Active club footprint by country
London UK | 32 Clubs Naples Rome Milan Italy | 40 Clubs Thailand | 8 Clubs Bangkok Australia | 10 Clubs Sydney Johannesburg Cape Town Melbourne Southern Africa | 134 Clubs Singapore Singapore | 6 Clubs
Slide 21: Virgin Active's premium offering
Virgin Active’s premium offering Location Club facilities Customer A well-invested & product experience portfolio of exclusive Premium facilities, Combining physical locations in large gym equipment, & digital to deliver a global cities with studios and classes, personalised clubs across with a dist
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Slide 23: Virgin Active's premium offering
Virgin Active’s premium offering Location Club facilities Customer A well-invested & product experience portfolio of exclusive Premium facilities, Combining physical locations in large gym equipment, & digital to deliver a global cities with studios and classes, personalised clubs across with a dist
Slide 24: What makes our Virgin Active Product standout?
What makes our Virgin Active Product standout? Developed and Continuous Something Exclusive to All inclusive of delivered by our improvement for everyone Virgin Active the membership in-house experts innovation We attract the best We have a laser focus We have something We focus on our own We offer
Slide 25: The Virgin Active Product Suite
The Virgin Active Product Suite Best in Class Purpose built Premium Lift Club, Large and Boxing and Cross Swimming Pools Yoga Studios Spacious Gym Active spaces Floor spaces which are Grass, Hard and Over 2,700 Personal Well invested filled with an Clay Courts Trainers globally in and scaled imbalan
Slide 26: Product suite: Group Exercise
Group Exercise Athletic Training Yoga & Pilates Exercise To Music Yoga Calm, Align and Flow, Grid Training Cycle Spirit Sound Bath Strength and Conditioning Cycle Burn Hot Yoga Product suite Lift and Move Club Align, Athletic and Stretch Aqua Reformer Pilates Callisthenics Barre Boxing Mat Pilates D
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Slide 28: Fitness, PT and Events
Fitness, PT and Events Gym Floor Personal Training Events and Experiences Functional Training Athletic Events 121 and Small Group Progression Training Personal Training Hyrox, NFG, Spartan Product suite Lift Training Cycle Events Personal Training Studios S&C Training Contender Boxing Cardiovascular
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Slide 30: Family, Swim and Racquets
Family, Swim and Racquets Family Swim Racquets Crèche Junior Tennis Parent and Baby Swim Club-V Adult Tennis Toddler Swim Product suite Birthday Parties Learn to Swim Padel Holiday and Day Camps Swim Club Badminton and Squash Junior GEX Swim Gala Series Padel and Tennis Events and Tournaments Junior
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Slide 32: Club segmentation
Virgin Active Club segmentation Premium Life Center Collection Premium+ & Red
Slide 33: Three Macro Areas
Three Macro Areas... Operations People Acquisition Global Group Exercise Standard Global General Global Operation Standard Global Acquisition Manager Standard Global Customer Journey ...drive sharing of Global Best Practice
Slide 34: Proven model that works in mature & emerging markets
Proven model Global Customer Journey that works in Mature & Emerging Markets, with an Global General Manager operating Global Group structure that Global project Exercise Standard can leverage Portfolio global Global Acquisition Standard experience and expertise to expand Global Operation into new S
Slide 35: Virgin Active Academy EcoSystem
Virgin Active Academy EcoSystem Creation Marketing & Operations Communication Education (Training) Commercial Support Exercise Experience People Implementation
Slide 36: Strategy Update
strategy update Dean Kowarski: Group CEO 28
Slide 37: Our Vision… Our Focus…
OUR VISION… is to change people’s lives for the better through wellness OUR FOCUS… is to ensure Virgin Active members and Kauai customers, engage more frequently with the brands, in both the physical and digital environments, and use the data from these multiple engagements to better understand indi
Slide 38: Why do we believe in our vision? Wellness is a growing market
Why do we believe in our vision? 1 . Wellness is a growing market Covid-19 highlighted health vulnerability & increased desire for humans to seek a healthier lifestyle The wellness industry is booming and growing twice as fast as the world health economy >50% of consumers reported wellness as a top
Slide 39: Why do we believe in our vision? Wellness must be integrated
Why do we believe in our vision? 2. For wellness to be effective it must be integrated better mindfulness better fitness Current offerings come to the individual as components To deliver the best results to better Wellness better customers we need to think of the appearance ecosystem health individu
Slide 40: What is the value of wellness vs a pure gym play?
What is the value of wellness vs a pure gym play? Societal shift towards living a healthy lifestyle Wellness has become a way of life – it is not just a fad or a luxury Wellness is now accepted as part of the healthcare delivery system The pandemic has moved wellness into the mainstream, and shifted
Slide 41: Vision and initiatives
vision: change people’s lives for the better through wellness use technology demonstrate build drive offer a & digital to a strategy ancillary refresh the continued differentiated enhance the of strategy wellness look, feel membership exercise, member diversified, revenue and recovery & club and exp
Slide 42: BAU initiatives: new group structure & culture
BAU initiatives new group structure & culture Leadership and culture being fundamentally transformed from a de-centralised to a centralised model: – Simplify and scale back in-country structures – Consolidate duplicated in-country overheads – Strengthen core group team • CMO appointed • CTO appointe
Slide 43: BAU initiatives: sales process and partnerships
BAU initiatives sales process – Critical to drive continued membership recovery – Currently in-person direct sales force; expensive COA and people dependent – New immersive websites being developed with frictionless on-line join functionality – Sales commission structures being realigned to group st
Slide 44: Virgin Active's premium offering
Virgin Active’s premium offering Location Club facilities Customer A well-invested & product experience portfolio of exclusive Premium facilities, Combining physical locations in large gym equipment, & digital to deliver a global cities with studios and classes, personalised clubs across with a dist
Slide 45: Digital transformation
Digital transformation Embracing digital technology to improve our current business, ensure maximum returns from our physical estate and enhance our customer value proposition (i) Reduce the cost of acquisition improve quality of sale & reduce dependence on direct, in person sales channel (ii) Digit
Slide 46: Loyalty App
Loyalty App New app and loyalty programme have been developed Objectives: (i) Increased engagement (ii) Encourage & reward club usage (iii) Quality first & zero party data (iv) Enable data driven decisions to enhance member experience (v) Use data to build personal / emotional connections. (vi) Redu
Slide 47: Rejuvenate Estate
REJUVENATE ESTATE Virgin Active has an attractive footprint in Re-investment into the estate the UK, but the and an improved customer value proposition supports: estate is under- – membership volume growth invested particularly – reduced churn in our larger format – improved yields “lifestyle” clubs
Slide 48: M&A Opportunities
M&A OPPORTUNITIES – The right M&A opportunities offer the ability to accelerate expansion – New organic sites are hard to find There has been a tendency to compromise on locations in order to accelerate expansion as incumbents have already secured superior locations – Construction costs are expensiv
Slide 49: Social Wellness
SSS THE 5 SOCIAL ° WELLNESS agit if” pe be
Slide 50: The Social Wellness Club
The Social Wellness Club THE CURRENT VIEW… …THE FUTURE VIEW 1. 2. THE DEVELOPMENT OF NEW we have a current churn SPACES AND EXPERIENCES global levels make the THAT BRING PEOPLE loneliness business model TOGETHER IN REAL LIFE - crisis challenging CREATIVELY AND WITH 3. 4. INTENTION customers’ we will
Slide 51: Social Wellness Clubs
OUR GYMS MUST BECOME SOCIAL SPACES…THEY MUST BE REIMAGINED AS SOCIAL WELLNESS CLUBS, WHERE WORKING OUT, WELLNESS, RECOVERY AND SOCIAL PROGRAMING ALL GET EQUAL PLAY ULTIMATE GOAL: BRING MORE OF PEOPLE’S SOCIAL LIFE AND “ALL” OF WELLNESS UNDER ONE ROOF IN A MODEL THAT IS SCALABLE & ACCESSIBLE TO A BRO
Slide 52: In summary...
in summary...
Slide 53: Valuation Drivers
VALUATION DRIVERS Primary Drivers EBITDA recovery & EBITDA margins return on invested capital consistent & replicable growth hard currency / geographic diversification cash conversion evolution from fitness to wellness Secondary Drivers customer lifetime value | average revenue per members | low chu
Slide 54: …and ultimately delivering real value for stakeholders
Management will continue to focus on BAU initiatives and is taking defensive measures such as conserving cash, managing costs and raising productivity, but it is also key to go on the offensive There is a real opportunity to drive value creation not only by recovering EBITDA but by: – Repositioning
Slide 55: Today: March 2023 vs Target
Today: March 2023 Target 963k active members +1.2m active members South Africa concentration territory diversification sub-scale APAC a social wellness club underinvested estate hard currency growth limited innovation valuation multiple re-rating 47