As the sector leader in Europe with 1,200 clubs, half of which are in France, the group is delivering positive results for the first time: free cash flow reached €94 million.

The opening of new venues has been carried out at a rapid pace over the last five years. The number of clubs and subscribers has tripled since 2018, while revenues have only doubled. While it's premature to draw conclusions, this suspicious divergence invites caution.

Basic Fit is planning 200 new openings in 2023, and is significantly evolving its formula by developing a premium offer to complement the initial budget positioning. The very strong competition in this second segment is obviously weighing on prices - see previous paragraph.

Spain and Germany are the two markets that still offer good organic growth potential. In France, the Netherlands and Belgium, however, excluding M&A, the number of sites is likely to reach a plateau very soon.

New room openings require an average investment of €1.2 million, and the acquisition of a new member costs in the €23-€25 range. Management claims that a site becomes profitable within six months, and that a mature club - i.e. with at least 3,300 members - generates a profitability before investments of 30%.

After investments - i.e. with a more reliable numerator than EBITDA - the said profitability of a venue is probably closer to 10%, provided that it has the capacity to welcome a large number of subscribers, including a non-negligible proportion of premium members.

At €35, the market capitalization is equivalent to a multiple of x23 the cash profit realized in 2022. This remains reasonable for a growing and well-managed company, notwithstanding the hyper-competitive dimension of the business. Nevertheless, we will have to closely monitor the LTV per subscriber and the success of the concept in the Pyrenees and in Germany.

In terms of financial position, with leverage already reaching x3.5 EBITDA, the group will probably have difficulty increasing its borrowing capacity. The refinancing of the €570 million bank credit lines maturing in 2025 should not be a problem, however.

As for the €300 million of debt maturing in 2028, it is convertible at a price of €50 per share: a good point for the management here, who will have done very well with this placement.

For the record, Basic Fit is managed by René Moos, the former Dutch tennis champion, who holds 14% of the capital. His last acquisition of shares on the market was made in November 2022 at an average price of €21 per share.

As the 200 new openings will require about €250 million and the leverage is already substantial, a capital increase this year seems inevitable. Again, caution is advised, as it would be surprising if it were done at a valuation significantly higher than current levels.