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Basic Fit NV
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Good day, ladies and gentlemen. Welcome to Basic-Fit's 2021 Half Year Results Conference Call and Webcast. [Operator Instructions] Please note that this conference is being recorded.I will now turn the call over to your host for today's conference, John David Roeg, Manager of Investor Relations. Sir, you may begin.
Good afternoon, and welcome to our conference call during which we will discuss our results over the first half of 2021. With me today are CEO, René Moos; and CFO, Hans van der Aar. This call is being broadcast live on our website, and a recording of the call will be available shortly afterwards.As usual, I would like to point out that safe harbor applies. We will start with René, who will discuss the highlights and operational developments, followed by a more detailed look at the financial results from Hans. After these prepared remarks, we will open the call for questions. The call will finish no later than 3:00.And with that, René, I would like to hand over to you.
Thank you, David. Welcome, ladies and gentlemen, and thank you for joining today's call. Again, we are reporting over a period which was determined by COVID-19 and the subsequent government measures. Especially, in the Netherlands, Belgium and France, clubs were closed for a long period. On average, our clubs were closed for 81% of the time in the first half year compared to 49% of the time in the first half of 2020.During these times of closure, we did not collect membership fees, which resulted in a significant loss of revenue. In the period, revenue was EUR 53 million compared to EUR 183 million in the same period last year. We reopened our clubs in the Netherlands on May 19; and in Belgium and France on June 9, after which we saw our membership quickly coming back to their clubs for their workout. We also saw a strong inflow of new members after reopening.At the same time, the number of levers was relatively low. In the 6 weeks we were opened in the Netherlands and the 3 weeks in Belgium and France, our membership base has increased from a low 1.75 million to more than 2 million at the end of June. The month of June turned out to be our best month ever with over 0.25 million members joining our clubs.This strong performance helps us recover from the impact from the 2 lockdown periods over the past 5 quarters. It also clearly demonstrates that people are eager to get back to our clubs to work on their physical and mental health and to meet their friends and new people. In the first half of 2021, we grew our club network by 68 clubs to 973 clubs. Compared to a year ago, the number of clubs is up by 142.Let's go to Slide #3. In December 2020, due to the government measures, all our clubs, except for our clubs in Spain, had to be closed. In the end, our clubs remained close for 81% of the time in the first half of the year. When our clubs in the Netherlands, Belgium and France reopened, we had to respect several restrictions with regard to things like the maximum number of people in the club at the same time, no live group lessons and the use of showers.Since reopening, restrictions have been relaxed, which means our members can do their workouts again during their favorite time of the day, visit their live group lessons and use the showers. Since July '21, French members have to show proof of vaccination, a negative test or immunity by means of a health pass. It is currently not clear if and how the new government measures in France will impact the demand for fitness. We read encouraging articles in the media about the progress that is now being made with regard to the French vaccination program.In Spain, our clubs stayed open in the first half of 2021. And in Luxembourg, our clubs reopened mid-January. Performance in these countries were held back by strict government measures. With regard to the membership development, we expect that we will see a more normalized membership development during the summer holiday season.After the summer, we expect a positive membership trend and the recovery of the membership base to continue. I think it is good to briefly discuss what we did in the past months to keep the company in the best shape possible and to position ourselves optimally for the growth opportunities that lie ahead of us.During the period of club closure, we focused on keeping our members and employees engaged. Our members received a regular update about their clubs, were able to use the Basic-Fit app to support at home and the memberships were put on hold. This approach was appreciated by our members and resulted in a relatively limited cancellations.In Q4 last year, we already halted the construction and opening of new clubs and limited the maintenance activities, like replacement of equipment and refurbishments to bring the capital expansion to a minimum. In the period, we continued to receive support of our long-term business partners, including landlords, contractors and suppliers, which helped us to limit our monthly cash outflow during the month of club closures.In addition, we lowered the operating costs where possible and received support from governments who provided compensation for staff costs. At the same time, we took care of our expansion capabilities and made sure that they remained intact and our business -- and our business partners strong. To make sure that COVID-19 would not negatively impact our long-term growth strategy, and to make sure that we would be well positioned to pick up growth plans post the pandemic, we issued new shares and a convertible bond to finance our accelerated growth plans.Let's now go to the slide on club openings. We started the year with almost all of our clubs being closed. The impact this had on joiner rate is clearly visible in chart on Slide 4. Luckily, the trend significantly changed in May when we could reopen our Dutch clubs. The number of joiners we registered since the announced reopening in the Netherlands on May 19 was 3x the number reported pre-COVID-19 in the full month of May 2019.Due to a low number of levers, the net increase in memberships in the Netherlands in May was more than 39,000. The fantastic growth in the Netherlands in May continued into June as members were happy to work out again. When Belgium and France reopened on June 9, we saw a similar trend in joiners growth as after reopening in the Netherlands. In the 3 weeks since reopening, our French membership base rose by 18%.June turned out to be our best month ever in terms of membership growth with over 0.25 million people joining and growth of our membership base of over 200,000 memberships. If we look at the membership development in the Netherlands, Belgium and France in the first 3 weeks after opening this year compared to the same period after reopening in 2020, the number of joiners was 125% higher or more than twice as many. This is a great result.Let's go to the next slide. We strengthened our leading position in Europe with the addition of 68 clubs to our network, to 973 clubs, compared to a year ago. We grew our network by 142 clubs or 17%, which is a good result considering the pandemic and the long period in which we halted the club rollout.In the first half of the year, we added 45 clubs to our network in France, which now consists of 492 clubs. In the second half of 2021, we expect to open club #500 in France. And this means that we will further extend our market leadership in that country.In other countries, we also opened a substantial number of clubs in the first half of the year. This development underlines once more that we see plenty of opportunities in all our markets to successfully develop locations. I'm proud to say that despite all the challenges that the pandemic has caused since the start of 2020, we are really looking forward to the opening of club #1,000 in the month of September this year.Let's move to the next slide. Our priority remains organic growth, but we will also continue to look at potential acquisition opportunities. We confirm our previous guidance of adding around 105 clubs to enter -- to our network this year. Thanks to the strengthening of our balance sheet in the first half of the year, we now have ample liquidity to accelerate the execution of our growth strategy.Assuming no major new government measures due to COVID-19, we expect to reach 1,250 club target by the end of 2022. We have a pandemic clause in nearly all of our new property lease contracts, which gives us the flexibility to adjust to changing circumstances if we need to.This concludes my part of the presentation, and I would like to hand over to Hans for the financial review.
Thank you, René.I would like to start with a slide on our revenue development in the first half of the year. As René already told you, we were forced to close our clubs to 81% of the time in the first half year. With memberships being on freeze, this means we missed well over EUR 200 million in revenue. The result is that we reported a 71% decline in revenue to EUR 53 million. When our clubs in the Benelux and France reopened in May and June, we first compensated our members who were entitled for compensation for fees they paid while our clubs were closed in the second half of 2020. What this means is that we started charging usual fees again in the Netherlands from June and in Belgium and France from July onwards.Let's go to the next slide. Slides 9 and 10 show the main elements of our income statements and our underlying club EBITDA and net result performance. Our club EBITDA was close to 0 in the period compared to EUR 96.5 million last year. The decrease is, of course, entirely due to the longer period of club closures compared to last year.This longer period of club closures also explains our lower personnel and other costs in the first half year. During the time our clubs were closed, we received government support for employee costs of EUR 30.5 million compared to EUR 16.2 million in the first half of 2020. The reduction in other club costs this year is explained by lower cost of goods sold, like our sports water, lower maintenance costs and a one-off benefit of EUR 11.2 million as fixed cost compensation from the French and Belgium governments.We reduced our overhead goals by 26% to EUR 90.8 million, thanks to higher government support schemes for head office personnel and lower marketing spend. At our headquarters, while our clubs were closed, we further improved our processes and prepared ourselves for our growth acceleration program. Higher depreciation and amortization charges reflect our growing club network.We recorded higher amount of COVID-19 rent credit of EUR 16.9 million compared to EUR 8.6 million in the first half of 2020. COVID-19 rent credit, our property rent discounts received from our landlords that did not result in amendments of lease contracts. Let's go to the next slide.On Slide 10, you see our underlying club and group EBITDA and our underlying net results. The increase in club rent cost is the result of our growing club network. The exceptional costs are almost entirely COVID-19 related. Underlying club EBITDA amounted to EUR 8.7 million, and underlying EBITDA was a loss of EUR 12.5 million. The EUR 2 million in amortization was related to the purchase price allocation from when Basic-Fit was partly acquired by 3i Investments in 2013. The reason for the steep decline versus last year is because by now, the memberships have been almost fully amortized.The next slide is about the mature club development. We consider a club mature if it is at least 24 months old at the start of the year. At the end of June, we had 670 mature clubs, which is an increase of 107 clubs compared to the end of 2020. 249 of our mature clubs are located in France. That means that 40% of our mature clubs are now in France compared to 31% a year ago.The average number of members per mature club was 2,540 at the end of June. In a period of just 3 to 6 weeks since we reopened in the Benelux and France, the average number of members per mature club increased by 250 or 11%. It is worth mentioning that in France, the number of members at mature club rose by 12% in just 3 weeks' time.Let's go to the next slide on capital expenditure. The initial CapEx per newly built club was on average EUR 1.17 million compared to EUR 1.23 million in the first half of 2020. On maintenance, we spent on average EUR 14,000 per club compared to EUR 22,000 in the first half of 2020. We continued to work on our product offering with adjustments made in the layout of many clubs.We also installed our smart camera system in more existing clubs. These systems should allow us to have more 24/7 clubs and nonstop opening hours at night in the future. We currently operate more than 200 24/7 clubs. Our aim is to have the smart camera system installed in all Benelux clubs by the end of this year.Other CapEx of EUR 4.1 million was almost EUR 3 million lower than in the first half of 2020. In that period, we included the acquisition of the full IP rights of our exclusive membership administration software. The EUR 4.1 million was spent on innovations and software development.Let's go to my last slide before I hand over back to René. The balance sheet. At the end of June, we had net debt of EUR 420 million compared to EUR 539 million at the end of 2020. The decrease over the past 6 months is explained by the net proceeds from the capital raise in April of roughly EUR 200 million and a convertible bond issue in June of just over EUR 300 million, of which EUR 65 million is accounted towards equity component under IFRS.These combined proceeds more than offset the operating loss we recorded in the first half of the year and our capital expenditure related to the new club openings. Our available liquidity at the end of June was EUR 479 million, of which -- EUR 497 million, of which EUR 207 million cash at hand. Following the equity realized in April, we repaid the drawn part of the bridge facility and canceled the facility. As a result of the earlier communicated covenant waiver and the relaxation, there was no covenant testing in June 2021.We came to an agreement with our syndicate banks for our amended covenant testing at the end of 2021 and the end of June 2022. For the end of 2021 testing, we can now use the underlying EBITDA of the fourth quarter of 2021 at a run rate for the underlying EBITDA of that year. For June 2022 testing, we can use 2x the underlying EBITDA of the fourth quarter of 2021, plus the underlying EBITDA of the first half of 2022.And now back to René for the final slide.
Thank you, Hans. I would like to conclude with our outlook. We expect to enter 2021 with more than 1,000 clubs as we expect net new club opening of around 105. We have ample availability liquidity -- available liquidity, which allows us to accelerate our club rollout and reach the 1,250 club mark by the end of 2022. We will continue to be flexible and adjust the timing or pace of club openings if government measures adversely affect market conditions. Currently, we continue to expect to see another strong post-summer season and the next important step in the recovery of our membership base towards pre-COVID-19 levels.This concludes the presentation. Operator, please open the lines for questions.
[Operator Instructions] So we will now take our first question from Robert Vos at ABN AMRO.
I have a couple of questions. Maybe first on the number of clubs in 2022. It's a bit confusing because here and there, you mentioned to reach close to 1,250. And I think in the statements, you said that it is now really the target for 2022. So maybe you can make that clear to us.And related to this, you've already set the target for 2021, 105 new club openings. Assuming -- let's assume 1,250 for 2022. That means more than -- quite a bit more than 200 clubs to be opened in 2022. So my question is why is then the new club opening pace relatively modest for the second half of 2021? That is my first question. I have 2 other questions. Maybe this one first.
Thank you. It's good you don't ask them all because that first question was already 3. But let's -- the 1,250 is a number you cannot exactly say because we are always depending on government to give us the license to operate a gym or license to build the club. So it's not exact -- an exact number. So that's why we always say close to or around. But we think 1,250 clubs at the end of 2022 is reachable. So we think we will reach 1,250 clubs if the world stays normal and there's no other COVID lockdowns. So the 1,250 is something we think we will reach without COVID lockdowns.Then the target for 105 clubs. What that means is that the second half, it is correct, we will open less clubs than in the first half, but we will build a lot of clubs in the second half, let's say, in Q4, that will open probably in the month of January next year. So what you will see is maybe less openings in the second half, but there will be a lot of construction going on with a lot of opening in the beginning -- in the month of January 2022. So that means actually the clubs are built in '21, and they will open in the beginning or end of January.
All right. That's clear. Then I have a question on the government compensation. I saw 2 numbers in the press release. One was the EUR 41.7 million wage compensation -- sorry, the EUR 30.5 million wage compensation and there was EUR 11.2 million mentioned as a compensation for fixed cost. Just to be clear, the total is then EUR 41.7 million. It's not as if the EUR 11.2 million is part of the EUR 30.5 million. Maybe, Hans, you can answer that question.
I will answer that, Robert. No, it's -- we have a EUR 30 million compensation on salary costs in the Netherlands, you know the NOW rules, and so we use that. And the EUR 11.2 million is the compensation we got from -- especially the French government for the fixed cost. So they are separate to the compensation. In total, it's the EUR 41 million that you mentioned.
Okay, clear. And then my final question, expansion CapEx, it was quite limited per club, EUR 14,000, that is as anticipated, I guess. Is it fair to assume that this will go up quite materially in the second half? And if so, maybe you can elaborate a bit on that.
You mean not expansion, but you mean the maintenance CapEx, the EUR 14,000? I think the maintenance CapEx, the number was EUR 55,000.
Sorry, yes.
Yes. So the maintenance CapEx, the EUR 55,000 per year is something that we will maybe -- will maybe this year will be a little less. But I would say that on average, let's say, the next 5 years, that number is still correct. So that is a number you can work with, EUR 55,000 a year on average per club per year.It could be this year, maybe EUR 5,000 less and then the other 2 years after that, EUR 2,000 or EUR 3,000 more. But the average EUR 55,000 maintenance CapEx per club for the next 5 years will be the number you can work with.
Okay. That's clear. And the expansion CapEx was a bit lower. Is that something to anticipate for the second half or maybe next year as well? Or are there reasons why it could go up a bit?
Yes. It depends if we open big or smaller clubs. So that can vary per quarter, per half year. So I think it will be -- the second half will be a little bit more expensive but it will be below the EUR 1.2 million for sure also the coming periods.And maybe to add to that. In that EUR 1.2 million, maybe good to add to that as well, we're putting in a new camera system in every existing club, but every new club that we're building, that is already in. So that means, let's say, the EUR 1.2 million, that is EUR 1.150 million for the club and how we normally build it and EUR 50,000 for the new camera system.So for the last year, 1.5 years, every new club that we opened, we put in the camera system and the security system, which costs us on average around EUR 50,000. So that's included in that price you see now for a new club.
So we will now take our next question from James Rowland Clark at Barclays.
I'll also ask one by one. The first question, please, is on your membership growth of 250 net new members -- 250,000, sorry, net new members. Could you sort of give a little bit of color if you have about where those members are coming from? I'm thinking are they first time gym users? Are they from the competition? Or are they -- were they previously Basic-Fit members that have come back and rejoined?
Well, what we saw in the first lockdown in 2020, after we reopened our club, we saw a lot of male -- young male only joining. But now what we see is completely more back to normal. So we see male, female on the pre-COVID numbers, so more or less the same as before. So that has gone back to normal. We do not see a lot of older people joining at the moment still as a member, but male, female is back to normal. And we do see a lot of new joiners. So never -- people who have never been in a gym before. So I think that is overall a really good sign.
Okay. And then sort of the second thing would be, as you look at your markets -- your core markets, Belgian, Netherlands and France, how much capacity do you expect to come out of the market? We've heard some of your peers talk about -- in conversations talk about over 20%. Is that a number that you would agree with?
Well, it is a bit early to say anything about that. But our plans for the Netherlands and Belgium were to grow to 300 clubs per country. That is a number that we're still very comfortable with. Actually, we think it could be even more. France, we said we would do 1,000 clubs. And those numbers were all related to a certain amount of fitness penetration.What we see now is that a lot of people are joining that have never been to a gym before and also the whole sentiment about being locked up for such a long time, people had the time to think about, well, it's clear that people, who were less active and a little bit bigger in size, had more problems with this coronavirus than people who were a bit slimmer and more fit.So people had the time to think about that maybe it was time to also work out a bit more. So I think what we expect, but it's too early to say that that's going to happen that the fitness penetration in all countries will go up, not only the countries where we are active. But again...
But you're not...
We're not sure.
You're not expecting a material proportion of your competitors, perhaps the smaller chains and the independents, to drop out of the market once support dissipates or you are?
Well, we do see some people stopping or we see some bankruptcies. I'm not sure that it's going to be a huge number. Some countries are talking about 10% or 20%. We definitely see people stopping, but it is really too early to tell because of all the government measures with -- that they could pay the taxes later and all the things. Of course, one day, they have to be paid. So we have to see who is able to pay everything. But we are not -- too early to tell. I think, overall, the fitness penetration will grow. So I think the market will be there for everybody who's still there.
Okay. Great. And the final one was just on the club costs. As you signed new sites, are you signing these contracts at preferential rates to before? And by what percentage sort of reduction are you seeing these new site add-on is on your existing sites? Are they still running at the same kind of rental rate as before? Or have you renegotiated those as well?
Well, I think it is definitely clear that we get better deals, better rent proposals. But to put a percentage on it is a bit difficult right now, but it is clearly that we get better deals.
James, you should also understand when you get into those new contracts included the pandemic loss so that we can postpone all the rent payments when the lockdown pops up. So that's also good to get that in the contract. So it's the whole deal...
It's a combination.
It's a combination. The whole deal is much better than we used to have. It's not only the cost but also the other conditions are very important for us.
We cannot say -- and it also differs a lot per country and per area. Are you still in cities or are you villages, but it's clear that the rent cost is going down. Maybe in a year, we can say -- we can put a number on it.
So we will now take our next question from Marc Zwartsenburg at ING.
A couple of questions. René, can you say something about the opportunities in the market? Now that the government help is moving away, do you now see more smaller chains knocking down the board or anything moving in that direction? Can you give some context?
Yes. I would say there are definitely opportunities more than before COVID and we're looking at that. We are focusing on new openings. That is our main target, but we do have discussions about potential takeovers at the moment.
Okay. And if you look to what's currently going on there with COVID staying up in your main region, particularly in France, with the [ apps ] that you should have to go into public areas, do you already see a change in behavior there? Are you worried that you have to close down certain clubs again? Or is the talks with the unions and the government still supportive of keeping them open until the end of the year? How confident are you in that respect?
Well, the thing -- the main thing is, of course, how people will behave. And if the vaccination grade is going up, we are very positive because we see huge numbers of people taking the vaccination. And of course, that is the solution, more distance, not to close on each other and the vaccination. So yes, we are hoping that 100% of the population is taking that so we can get back to more than normal.What we are doing is we are really focusing -- what we did is we put equipment further away from each other. We made a reservation system. So it's not suddenly there are 250 people in the club. So you have a reservation system that we have limited amount of people in at the same time.So we do whatever we have to do to make our customers and employees work out and work in a safe environment. So the problem will not be on our clubs. But of course, if hospital beds fill up again, government has to do something. So I hope that people are very wise and keep the distance and get vaccinated. And if that happens, then we'll be fine.
Yes. And then maybe a few small ones. Will there be a big national marketing campaign scheduled for August, September in all your regions like France, Belgium and Netherlands?
Yes, I don't think August, but depending how the coronavirus is behaving and how the percentages are going of vaccination. But if it feels really safe that we can have more people in at the same time, that's the moment when we will step on the gas and do big campaigns. But that will not be in August.
Yes, exactly. So first await what COVID is doing and also new members are joining already. Naturally, that's right.
Correct. Correct. Because we did very limited marketing in June, and we had 250,000 joiners. And also, we see in the month of July, without marketing, a lot of people joining. So a lot of people had time to think about if it was something for them being more active. And it's clearly that a lot of people have made that step now or are going to make a step.
Yes. So you can save that money, perhaps?
Yes.
And then the payment for the 68 new clubs in the first half, the full cash out, will that be in the third quarter? Is that how it works for us?
No, no, most of the clubs have already been paid, Marc. So we paid already -- as you know, we started before lockdown already with -- during the first and second lockdown already with building of clubs. So we paid a bit at that time. And now we paid in this year, we paid the remaining part of those openings. So...
It's fully in there.
Yes, it's fully in there.
So we will now take our next question from Lance Ettus at CAS Investment Partners.
Just my question is about the new members. I know you commented about it before, but have you seen any closures of gyms around you? And how much -- I mean can you quantify how much that is driving the recent surge of new membership?
Yes. I think it's a very low number. So because there have not been so many closures yet because of all the government support that was there.
Okay.
So the new members are really what we see. We see, of the joiners -- the 250,000 to join us in June, we have seen a big part of that being people who've never been at gym before, and a big part of it being old members. We did not see a whole big group movement from other clubs.
No.
It's also not what we're focusing on trying to steal members away from our -- what we're focusing on is getting the fitness penetration up in the countries where we are because if you look at France, 8%. Well, if we grow 1%, we can open hundreds of clubs. So we should increase the fitness penetration, and that's our -- where we're focusing on.
We will now take our next question from Kris Kippers at BD.
A lot of questions have been asked. Just a small question on pricing. We have not seen that evolving, of course. There is, of course, talks about a lot of inflation, certainly in the U.S. but also in Europe, it's come. Do you have a strategy of altering that EUR 20 a month now with inflation coming in? Or is it just a matter of filling the clubs as efficient as possible and also controlling the cost base?And second question linked to the costs. I looked at the cost of owning -- of installing a new work club. I see it's going down actually. So does it imply you can put quite some pressure on your suppliers? Is that the reason? Or is it also a different setup than before?
The pricing, that's something we do not -- we will not focus on changing that in the coming 1, 2, 3 years, but we will be focusing on filling up the clubs more. So the EUR 19.99 will be -- it's not set in stone, but for the coming years, that will be the number. Again, we will focus on filling up the clubs, bringing it back to the 3,400 on a mature club level that we had before COVID. And from that, we can also grow to 3,500 or 3,600. So that is -- that's the focus. So no price increase. Your other question was about the club. We did -- actually, we're doing more. We're putting more into the club. So we're putting now in a camera system that costs around EUR 50,000, and you still see the price of building a club more or less the same as the year before or the year before that. So we do get better deals, but not on all because there's also some parts that become more expensive because of transport or ground...
Iron -- the price of iron and other materials -- raw material is going up, as you know. So there's still a bargaining and negotiation going on. But we're very good at that so we can keep our price on our clubs around that EUR 1.2 million, we always give information about and guidance on.
We will now take our next question from Adrija Chakraborty at Morgan Stanley.
Three questions from me, please. Firstly, on your expansion guidance of nearly 240 clubs for 2022, that looks very good. But I assume that, that is not the normal run rate for future years. So can you give us some sense of what the medium-term plans would be? Or is that one for the CMD? I'll ask the other 2 later.
Well, the medium term, the 240 clubs is something that we feel comfortable with. So it's not something that we do only -- expect to do only 1 year. But on November 4, we will communicate with the market our plans for the midterm period.
And does the 2022 club guidance include just organic expansion or does that include potential M&A?
No, no. Now again, we are focusing on opening new clubs and we do look at acquisitions, but we will only do it if it makes sense and we can make the return. So the 200 -- the 1,250 clubs will only be new club openings. And if we come to an agreement about an acquisition, so that will be then on top of the 1,250.
Got it. And my last question is just on France. Can you give us any details on the demographics or the average age of members, just trying to estimate the near-term impact of the new regulation on the health spas?
Yes, I think most of our members are below, let's say, 30 or 35 year age group, that has not changed. We see older people, before COVID the number was growing. But in the last 1.5 years, it's been going down rapidly, and we have not seen them come back yet. Even though older people, at least in the Netherlands, were the first one to be vaccinated, we still don't see them coming back in big numbers.So I guess there has to be more confidence that it is completely safe out there before they will come back. So it is -- it's similar to what it was before COVID. A bit more focused on younger people now.
And in France, it's the same as in the other countries. There's no big difference in demographics in France if you compare it to the other countries. So it's also, in France, the age group is where the majority of our members are between 18 and 35.
We will now take our final question from Hans Pluijgers at Kepler Cheuvreux.
Yes, only a few questions. First of all, coming back on M&A. In the past, you always mentioned, let's say, that you did see potential in the Netherlands, Belgium, maybe some in France, and mainly in Spain. Is there any change in that? Is that how you -- do you feel still that Spain likely -- most likely will be a country where you do some M&A, and in other countries, it is almost not likely? Can you give some flavor on that, why you, let's say, see the opportunities? And secondly -- okay, sorry, go ahead, yes, sorry.
Yes. I think, again, M&A is only something we will do if we can really make, let's say, a good deal. We do see a lot of good clubs in Spain that are really good to add to our list or to our base. So yes, I still think the most opportunity lies in Spain for acquisitions. But we are also looking and talking now in other countries. So -- and then we're talking about 1 club or 2 or maybe a few more, but it is -- again, it is not our focus, and we will only do it if we can make a good return.
Clear. And then on pricing, you indicated for longer term, you see the EUR 19. But could you give some feeling what competition currently is doing? Do you see any aggressive pricing to get additional members in during this period? I don't see it, but maybe you can give some feeling on what you're seeing in the market?
Yes. Well, you see some people doing really aggressive. Let's -- we have some players saying, well, the rest of this year don't have to pay anything. But are just a few doing -- seeing stuff like that. I don't think it's necessary. So that's why we also do not give a huge discount. We're giving 4 weeks for free. Well, before we even gave bigger discounts in certain periods. But we -- at this moment, we don't think it's necessary.And because the regulation only limits the amount of people are still possible to get in. So we cannot have everybody in once to get in. So because of the whole reservation system and the fact that we want to do it in a safe way. So for us, that is also a reason not to really focus on getting as many customers in, but we are focusing now also on having our existing members have a good workout.And once the vaccination grade is going up, that's the moment we will focus again on big marketing [ pace ], getting more and more people in. But the pricing and -- pricing offer, it is really per country, per chain, it is different. But you see some extreme proposals but not a lot.
Okay. And then my last question on the covenants. You gave the new [indiscernible]. Also anything changed in the absolute level that you can -- are allowed to for those 2 periods -- end of 2021?
Not the absolute level ones, but we -- the relaxation also is the -- we -- the testing was on 3.5x adjusted EBITDA, and now it's -- the end of year, it will be 4.5x adjusted EBITDA.
And we will have enough space in end of the -- testing end of the year and in June next year. We have no worries about the test.
This year, it will be 4x Q4, so -- and it will be a good quarter. So we don't have any issues there.
So we have reached the end of today's conference call. I would now like to hand over to Richard Piekaar for any closing remarks. Please go ahead, sir.
Well, thank you very much, everyone, for joining today's call. It's good to have you here. And if you have any additional questions, please contact John David or me, and we'll be happy to continue the discussion.
Cheers. Bye-bye.
Bye-bye.
Thank you.