RB 9/2020: Quarterly information about the number of active sports cards; impact of the COVID-19 coronavirus epidemic on the activity of the Benefit Systems Capital Group

RB: 9/2020
Date: 2020-03-31
Quarterly information about the number of active sports cards; impact of the COVID-19 coronavirus epidemic on the activity of the Benefit Systems Capital Group
Legal basis: Art. 17 item 1 of MAR - inside information.

Text of the report:

Quarterly information about the number of active sports cards; impact of the COVID-19 coronavirus epidemic on the activity of the Benefit Systems Capital Group

Further to current report No. 24/2016 of 20 July 2016, the Management Board of Benefit Systems S.A. with its registered seat in Warsaw hereinafter, the 'Company,' or the 'Issuer' would like to announce that as of the end of 1Q 2020, the number of active sports cards amounted to 1 548.9 thousand pcs. of which 1 177.5 thousand pcs. are in Poland and 371.4 thousand pcs. on foreign markets, whereby, as of the end of 1Q 2019, the number of active sports cards amounted to 1 297.3 thousand pcs. of which 1 032.1 thousand pcs. in Poland and 265.1 thousand pcs. on foreign markets.

A growth in the number of supported sports cards over the recent 12 months amounted to 145.4 thousand pcs. in Poland and 106.3 thousand pcs. on foreign markets respectively, thus representing growth by 14.1% in Poland and by 40.1% on foreign markets, respectively, as compared to Q1 2019.

On the basis of Regulation issued by the Minister of Health on 13 March 2020 concerning the declaration of the state of emergency due to epidemic in the territory of the Republic of Poland and the Regulation issued by the Minister of Health on 24 March 2020 concerning the state of epidemic in the territory of the Republic of Poland, starting from 14 March 2020, sports facilities and fitness clubs have been temporarily closed. Therefore, the Issuer is taking steps aimed at providing online services to the sports cards. In April, the Company will offer employers and their employees rebates or additional services if they use the MultiSport programme. The clients and users have also an option to suspend their sports cards until the sports facilities reopen the 'Suspended Cards', with no fee being charged for the Suspended Cards from April. Billing will resume after the sports facilities are reopened. The estimated proportion of the Suspended Cards in April amounts to 70% of the total number of cards in Poland.

On foreign markets, where sports facilities are also closed due to thestate of the COVID-19 coronavirus epidemic the 'Epidemic', the companies belonging to the Issuer's capital group the 'Capital Group' are offering on-line services at the moment. Therefore, the Issuer expects a significant drop in the revenues of the 'Foreign' segment in 2Q 2020. As at the date of this report, the companies of the Capital Group have not reported terminations of agreements for sports cards with the clients employers on a considerable scale whether in Poland or abroad.

Both in Poland and abroad, the companies of the Capital Group charge no fee for the sports carnets to the customers B2C of the fitness chains.

Therefore, the Group expects a significant negative impact of the Epidemic on the results of 2Q 2020 both on the revenues and the operating profit. Its scale will depend, among other things, on how long the sports facilities will have to remain closed and on how effective the measures taken by the member companies of the Capital Group in terms of cost saving will be.

As of the date of this report, the Issuer expects that in connection with the Epidemic, a substantial part of its adverse impact on the results of 2Q 2020 due to loss of the B2C profit at fitness clubs will be offset by the savings on the costs directly related to the operation of the clubs. Furthermore, the Issuer has started to optimize the costs of sales and overheads of the Capital Group. The Company also expects savings from the fitness clubs on foreign markets in 2Q 2020; however, these savings are going to be much lower than the savings on the direct expenses by the fitness clubs in Poland. Implementation of the assumed cost-efficiency measures depends, among other things, on factors independent from the Capital Group, including the final shape of the aid regulations introduced by the governments in Poland and in the other countries where the Capital Group operates and on the results of negotiations with business partners.

Notwithstanding the above-described impact of the Epidemic on the results of 2Q 2020, in accordance with the current estimations of the Company based on the assumptions available as of the date of this publication, the impact on 1Q 2020 results is not going to be significant in spite of a significant drop in the revenues for the second half of March. The final financial results for 1Q 2020 will be known after the quarterly report is published and may depart from the current estimations.

The Issuer would like to note that due to uncertainty regarding the development of the Epidemic and its impact on the economic situation in Poland and on foreign markets, they are unable to precisely estimate its impact on the results in the second half of 2020.

The management of the liquidity of the Capital Group of the Issuerduring the COVID-19 epidemic is regarded as a top priority. The Issuer monitors collection of receivables on a daily basis. As of the date of this report, the process has been continued without any major disturbance. Concurrently, whenever possible and reasonable, the Issuer is working to postpone payment of liabilities, and is taking other steps aimed at the management of the liquidity of the Company.

Date	Full Name	Position/Function
2020-03-31	Bartosz Józefiak	Management Board Member
2020-03-31	Emilia Rogalewicz	Management Board Member