EPE Capital Partners Ltd (EPE.JO) Earnings Call Transcript

Very good morning to everyone. A warm welcome to everyone in the room as well as to those that have connected online to this investor morning, which we are delighted to be hosting on behalf of Brait and Ethos Capital as their adviser. It's good to see so many familiar faces. Thank you for joining us. We really appreciate your time, and we will endeavor to make it worth your while. Taking a look at the agenda on the screen. The objective for the first session is to give you insights from the management team of Virgin Active, which is now the biggest contributor to Brait's NAV after the successful listing of Premier Foods recently. After the tea break, you'll hear from the management team of Optasia, which, as you know, is Ethos Capital's largest investment. Following that, Nick Rohatyn, Founder and CEO of the Rohatyn Group will address you. We have discussed Ethos Private equities acquisition about TRG with many of you in recent months. It is the end of an era in one sense, but the beginning of an exciting new one at the same time. Importantly, for the shareholders of Brait and Ethos Capital as well as for LPs in our private market funds, there's no change to the way we manage the advisory contracts or the funds for which we are responsible. We are continuing to have the same teams with the same incentives and the same governance frameworks. It has only been 5 weeks with our new colleagues. It feels like a lot longer than that, which is a good thing. And we're already working on a number of opportunities together. Nick will outline his vision for the firm and explain how Ethos Capital could benefit from some unique investment ideas as part of a potentially expanded mandate for Ethos Capital. Just a quick word about questions from the audience. As you can see on the agenda, there will be Q&A slots at the end of each session, and we will welcome questions from the floor, followed by questions from online participants. [Operator Instructions] Without further ado, let's get cracking with Virgin Active. Peter is going to start by providing some perspectives from us as the adviser before we hand over to the management team. Thanks.

Thanks, Jay. Before I start, thanks very much everyone for attending. It's really good to see everyone here. We've been talking about having this day for a while. And we did say let's get a couple of things under the belt. The first was the listing of Premier, which we had [indiscernible] in the last couple of months. And then secondly, give Dean and his team some time to get their feet out of the desk and to start to see some of the progress on some of the initiatives that they've set in place, and I think we'll see that today. But before we start, thanks so much to Francis in particular. Most of the presentations that you are viewing have been done by Francis, not by anyone else. So they look in good shape. And before we get in, just moving to the [indiscernible] do just before we get into Dean's presentation, firstly, for me to introduce team. And then secondly, give you some perspective of where does this business come from since we took it over unfortunately, it has been, 2 years ago. So just to introduce the team first. On the left is Luca. Luca spent more than 20 years in the business, started the Italian business, completing it with meaningful best dressed as you'll see when he stands up -- but set up a fantastic Italian business, and he will talk a little bit about that today. In his new refined role, he's effectively the CEO of the business and has massive experience, not just within the Virgin Group, but just about the whole sector in general. So he will talk a bit about his perspectives on the new role. On his right is Mark Field. Mark has also been around for 20 years in various roles from strategy to being the MD of the South African business, and then recently, probably a year or so ago, taken over as the CFO of the business. And on his right hand side is Dean. Dean, I'm not sure is well known to many of you. Dean is founder of The Real Foods business, started that and built it up into a fantastic business, which we took on just over a year ago. Dean is a big investor in the business alongside us and has massive alignment. The downside of working with Dean is many, many upsides. The downside is when you are on the Board meetings and you hope just about to have your last beer at dinner, you are reminded that Dean goes to gym at 4:30 in the morning, and he expects the Board members to be there. Anthonie has not had a great track record of attending, but myself, I'm normally there at 5 in the morning. But it's great to have such a passionate team here. You'll hear from them today. It's not just about the strategy of the business. I think they'll share the passion that will come through in the slides. But before we go ahead, it's probably worth just touching on briefly the 3-year journey since we took over. I think we took over on say the 3rd of March, I think it was. And about 2 days after that, we had a Board meeting in Mauritius. And at that Board meeting we heard for the first time that the Italian business has closed, I thought maybe for a couple of days because of this thing called COVID. And since then, it has been a massive uphill climb for the business. We'll touch a bit on that. But before we start on it, just to give people perspective when we talk again about the numbers today. Now this is a business that made GBP 142 million of EBITDA in 2019. Margin somewhere in the region of 25%, much higher in the South African business, a little bit lower in the international business at about just under 1.2 million to 1.16 million adult members as of December. Net debt at that time when we took over, it was 2.8x. Sounds a bit like the U.S. government, it's not a lot higher than that. And if you look at the business cumulatively, over 5 years from an operating cash perspective both CapEx, so we spent nearly GBP 300 million or over GBP 300 million. So it's a great business, high-margin business, really high-quality business. It has been through an extremely, extremely tough time. But I think it's important to remind ourselves what this business can become. And I think when Dean talks a bit later with his team, it's actually like where we can take the business over and above these numbers that are on the screen. Just to take you through the journey quickly. As I mentioned, in March 2020, as I sat there in Mauritius, things started to close down. Gyms across the world, all of our territories, ended up being closed. We spent the first 2 to 3 months -- now in most cases we hadn't been to some of these territories before. So unsure about rent deferrals with landlords. Government support. We would go and seek whatever pockets of government support there were. There were massive salary and bonus cuts across the Board, so it wasn't just shareholders taking the pain, and there were massive CapEx reductions as you would expect. And all of those resulted in us being able to reduce the cash cost by about 2/3, which at that time was a lifesaver. And I think if COVID had lasted 3 months, that would have been the end of it. We got a GBP 50 million funding package. Half of that or GPB 20 million of that came from shareholders. Virgin as the licensor came to the party as well, and we got another GBP 25 million from the banking syndicate. And as I mentioned, we were hopeful if it was a 3- to 6-month COVID lockdown, that would have sufficed. But as we all know, it lasted a lot longer than that. Just taking you to where we were in December. On [indiscernible], we had a Board call on the 27th of December in 2020. And it became very clear to us actually we needed to do a wholesale surgery to the business. If you look at these numbers, they differ slightly from the numbers you'll see from Mark, these were our assessments at that time, and it's a massively fixed cost business. Somewhere between 80% and 90% of the businesses -- the costs are fixed. And we don't have any really -- never really fantastically good news. You can see on the right-hand side, that was in December 2020. It got worse in 2021, where we went from having revenue of GBP 600-odd million down to GBP 296 million, and just about all of that was coming from the South African business, where the vitality contract remained in place. Again, from an EBITDA perspective, from GBP 142 million down to minus GBP 17 million is a delta of GBP 160 million in that 9 months. As you can see, at that point, it was very clear to us that we needed to go through a wholesale restructuring of the business. What did we do? Over the next 3 to 4 months, we decided that all the stakeholders needed to take some pain. This wasn't a story which could have been solved or thought of just by the shareholders. As you'll remember, we went through a restructuring time. We were the first people ever to do it in the U.K. And it was a high-risk strategy. To be honest, if we lost that game, we wouldn't have an international business today. We managed to win. I'll never forget those days, 76 days of court cases -- of court process. And then finally, getting the judgment in our favor. And what that effectively did was buy us somewhere between GBP 130 million and GBP 160 million of liquidity, and it was an absolute lifesaver for the business. At the same time, we restructured the debt in the South African business with our lenders here. And that gave the business some lifetime to be able to see it through. And again, I think that expected time of opening was probably in the region of March. As we all know, I think it lasted until September. In Italy's case, even longer than in Asia Pacific, to reopen the business. So again, it was a tough time, but it was something that without which the business wouldn't have survived. And then came -- once we were coming out of COVID, I think what we needed and massively needed was 2 things, a new management team. Matthew, who run the business for many years as the founder had definitely run out of steam by his own account and wanted to move on. And we looked at a number of options. We obviously went through a proper process around the world to find a CEO. And one of the most important attributes of the CEO and his team was about passion and understanding of the business. And also, the second point was to have a strategy to take this business not just from being a gym business, but into a wellness business. And Dean will talk a bit about that later. Dean came on. Mark took over the role as the CFO, and Luca soon thereafter became the CEO, and the business has done a fantastic job of turning the business around. We'll hear about it today. At that point, we raised GBP 88 million of capital. Most of which, GBP 68 million of which was from third-party investors, components of which came from Titan and a component from Dean as well, for which we are massively grateful. All done at a great valuation, which a lot of people gave us credit for at the time. This gave us enough liquidity to support growth in the business, reviewing the estate where it is required, and it continues today, but most importantly, on the right-hand side, started the journey towards a wellness theme. We bought and acquired the Real Foods business. That business has, we'll touch a bit on today, performed fantastically well, and I think has started the journey of moving this from just being a bricks-and-mortar gym business into something that is a wellness-themed business. So just talking about the numbers and what it looked like. You got the South African business at the top, and you've got the international business at the bottom. I think for the first time in a long time -- well, I don't think [indiscernible] else has, to be honest, over 3 years, particularly in the international business, we are above budget. It's been an extremely tough time. But you can start to see the recovery, the green part in the chart at the bottom, particularly in international business, how well it's done, and that is credit to the management team who have made some very tough calls around structure, around their management of the businesses, about the people who run those businesses, and about the offering that we can provide to our customers. And even the South African business, which is probably slightly less impacted by COVID than our international business, has continued that trajectory, and again, we'll touch a bit on the numbers in the presentation. So on the right-hand side, and in summary, what has happened over the last 2 years, I mean, obviously, lots of liquidity support required for the business, raising capital, negotiating with the banks and ensuring that the business has sufficient liquidity; debt restructures, both in the South African business and the international business continue, and it looks like we got to a point where we agreed to extend the international facilities just because of the performance of the business, which is great news. The restructure plan, as I mentioned, was certainly 2 weeks in my life that I won't get back and won't have again, but ended up putting the business in a massively better place. We got rid of some of the clubs that we didn't want to own. We managed to get rentals down across the portfolio, without which, certainly, the U.K. business today wouldn't be in the position it is. The capital raise and the third-party investors that have come in have really helped reposition the business. But I think really, today, when we talk about M&A, and we did the first one as Real Foods, there are opportunities in the group really to progress this theme from being a bricks-and-mortar business to wellness. The new management team, and we'll let them talk, really have done a great job in a relatively short period of time. I think they have had their feet under the desk just over a year. And I think we'll talk about the revised strategy today, and hopefully, that provides comfort to you all that we have the right people driving the bus. So I'm sure you're very happy to listen to people who actually do know what they're talking about. And with that, Mark, I'll hand over to you.

Thank you, Peter, and good morning, everybody. Thank you for being with us here today. Starting from what Peter said, there are a few things I want to touch on. I'll start with the impact that COVID has had on the business, talk to you about the current trading trends that we're seeing, then just touch on the path to earnings recovery in this business. I'm not really going into EBITDA specifics today, I'll leave that for the upcoming great results. So just touching on the impact that COVID had on our business. When we look at the impact, if we look at the period that we were closed during lockdown and then the period in which we operated under trading restrictions. Through the business in terms of first column, between the lockdown, we were closed between 5.5 and 9 months across the business. During that period, we froze our membership at no cost. The reason for that was to preserve as many members as we could, so when we came out of COVID, we could rebuild business. Most of the damage in that period was not done by people canceling. It was done by the fact that during the period, we could not sell. And we're a business where we typically churn about 40% of our base a year, and we need to keep selling to maintain those volumes. So that was the impact of the business during lockdown period. But more profound was actually the period of restriction. So for the standard period of time, we operated with volume restrictions and that inhibited our ability to sell and to retain because we couldn't drive the volumes [indiscernible]. And those restrictions were slowly lifted from the beginning of last year. So in SA, U.K., those restrictions were lifted in Q1. In Italy, they were lifted at the end of May '22. And in APAC, they were finally lifted towards the end of September last year. So really, it has only been since September 2022, that this business has been able to operate on an unrestricted basis, and therefore, to be able to properly drive the recovery in the business. Before we get into detail on recovery, I think one of the most important things to understand when we're looking at the recovery of this business is the role that operating leverage plays in our business. We operate in this business by about 95% of our fixed cost base. So if you look at our costs, employee costs, rent, utilities, together those 3 are close to 3/4 of our operating cost base, and then we're adding things like rates, the maintenance of the clubs, insurance, et cetera. That gets you to about 95%. In that number, I include marketing because of our subscription model. Because we are on a continued operations basis, we've got to maintain our marketing at a consistent level. On the right-hand side, you can see how that plays through. So if we look at Q1 2019 versus Q1 '22 and Q1 '23, you see the spike in memberships in Q1 '22 being 77% of what it was in '19. Our operating costs, if I exclude energy costs, which have fluctuated for well-known reasons and are harmonized for inflation, you can see that the operating cost base has barely flexed despite the change in volumes. But that is what has adversely impacted the performance of our business. While we lost volume through COVID, but it's exactly what drives the recovery of our business. 95% of each additional rand or pounds of revenue increase of the business flows through to the bottom line. And the business is now at a point that we have achieved or we've gone past our breakeven memberships. So this will be one of the key drivers of the recovery of our business. Moving on to the current trading performance, we've seen a clear volume recovery being influencing our business. So going through each of our territories. South Africa has had a steady recovery since COVID restrictions lifted last year. We started to see some headwinds in the South African business in Q1 this year. As you'll note, the macro situation compared to a year ago has worsened. We are seeing impact in terms of higher interest rates in terms of consumer. We're experiencing some higher unpaid than we normally get compared to prior years, but we are still selling relatively well. So our sales are outperforming budget. So we've seen a strong performance in the South African business despite macro headwinds. U.K. has seen quite a remarkable performance since the start of this year. When you look at our U.K. estate, it's really London-centric. It was impacted by work-from-home trends in London. But since the start of the year, we've seen a recovery in those London clubs. And if you go and track our business back, from September last year, we've grown about 8% in that base. The more encouraging, the Q1 performance has seen a clear step-up in that trend. So U.K. business is back to about 87% of pre-COVID levels, whereas in SA we're 85%. Moving down to Italy on the bottom left. Italy has been the sort of standout performer in our business. I mentioned that COVID restrictions were lifted late May '22. In Italy, the summer period is very quiet. So we didn't see much traction through June and July. It was only late August when the summer holidays ended that we started to see a pickup in membership, and you can see that trend. And since then, we've seen a really strong sustained recovery in the Italian business to the point that it is now at 95% of pre-COVID levels. So very encouraging results out of Italy. When we're looking to Asia Pacific, bottom right, that's Australia, Thailand, and Singapore, probably best to deal with those individually. Australia is a very bifurcated market. We have 5 clubs in CBD locations, 5 in residential locations. The residential locations have performed well, most as much as about pre-COVID levels. The CBD locations have struggled from work-from-home trends, probably more pronounced than the London CBD clubs. Particularly, the Melbourne clubs. Melbourne had the most recurring lockdowns across our portfolio and has been late to recover, but similar to London, we've started to see return of footfall at CBD locations in Australia and it's driving a recovery in the Australian business. Thailand was the last to lift restrictions. It's only since January this year, we started to see a recovery in the Thai business. So it's the lag out in estate, 8 clubs in Thailand, but the Q1 performance has demonstrated that we are going to see a sustained recovery in that business. And then finally, Singapore. Singapore is very similar to Italy. Singapore has seen a full return to work. So the clubs have recovered well to the point that they are now above pre-COVID levels. So Singapore has probably been the #2 performer across the estate. But all in all, we're looking at strong volume trends that are sustained and will be entrenched into the business. All right, moving on to some KPI trends. So looking across the key KPIs that we use for our business. We're seeing positive trends across most of those KPIs. Starting with revenue. So revenue is up 22% on -- sorry, I'm talking to Q1 '23 compared to Q1 2022 and 2019. Revenue is up 22% versus '22. We're still 9% below our Q1 '19 results, mainly because of the volume shortfall that we're still carrying. From a yield perspective, our yields are up 4% year-on-year. They're up 3% versus '19. In real terms, that's a negative performance. And I'll touch on yields in a few slides' time to give you some more insight as to what's driving that and obviously the recovery. Membership is up 15% year-on-year, still 11% below Q1 '19. And then probably the 2 most encouraging KPIs, gross sales for us in Q1 have been about 151,000 units, and that is 20% up on prior year. Prior year was still influenced by some of the restrictions. Most important number there is 11% up from what we did in 2019. So we're still seeing some pent-up demand in the market driving the recovery. And then our attrition rate for Q1 '23 is down to 36% compared to 42% last year and 39% in Q1 '19, so a positive trend on attrition rates at this point in time, which is encouraging. Despite, as I mentioned in South Africa, we are seeing some adverse trends on a consolidated basis, that remains positive. So strong performance across Europe and APAC. Italy and Singapore back to about pre-COVID levels. Good performance in the U.K. despite the macroeconomic headwinds we've seen. And there's some challenges in South Africa, which we are currently focusing on, particularly on the quality of sales, which is very much within our control. Then moving on to [indiscernible] our food business. I think that continues to perform very well. We're very happy with that acquisition. Looking at gross sales, they're up 31% pre-COVID. And our 4% [indiscernible], we've clearly seen a shift towards healthier eating that's become entrenched across the business. And looking at from an EBITDA perspective, we are 51% up on pre-COVID levels, 11% up from [indiscernible], so we're exceeding expectations. When we take that 11% and we analyze it in terms of what's acquired new in the Virgin Active gyms versus the retail stores, the gyms are recovering or driving much of that recovery. So gyms are 20% above [indiscernible] year-to-date, whereas the retail stores are 10%. What we're seeing is not just being driven by the higher footfall into the gym, we're seeing a higher spend per member, which is very encouraging. So we're very happy with that acquisition, continues to perform well, and we think that the trends are fairly entrenched along healthy eating. One of the challenges we faced in 2022 and '23 has been energy costs. The war in Ukraine has structurally changed the supply chains in Europe, as you know, and there's been a knock-on effect in terms of global energy costs. Our energy cost, when we compare to '21, '22, was increased by 37%. We still benefited by some locked in fixed pricing in Italy and in the U.K. in 2022. Those unwound in '23. When we look at our 2023 energy costs, they are up 54% on 2021. So a significant increase in energy costs across the group. From an SA perspective, we still continue to grapple with load shedding, and we will see continued tariff increases from Eskom for the foreseeable future. We are investing at the moment in inverters and batteries right across our estate to offset part of the impact. The key message here is, we are looking at a permanent structural change in energy costs in our group of about GBP 10 million a year. And right now, we don't see a catalyst for any change in terms of energy costs. We see some normalization, but that normalization is well above where we were in pre-Ukraine war. I touched on yield earlier on. When we came out of COVID, our key focus was to drive volumes. Let's get people back into our clubs. And from there, we can manage yield. From there, we can manage [indiscernible] revenues and drive greater penetration. So the reason why yields in 2023 are lower than '19 is, firstly, we've pushed sales promotions, we were offering 1 or 2 months free for people to come back into the gym, that gets amortized across the contract period. In Italy, we introduced a gym-only product. So therefore, it didn't include [indiscernible] classes. That's been fundamental in terms of driving volume in the mid- to lower-tier clubs. In South Africa, we have youth products for people 18 to 21, 21 to 25, which is discounted compared to normal adult prices. What we saw in the recovery was the first people to come back to the gym were the youth. They felt more confident and robust about coming back into the environment. And that's changed the mix. We expect that to unwind as older people come back to the club. And then within the U.K., there's a significant yield differential between our London clubs and particularly CBD clubs and our provincial clubs. The London clubs traded by 80% yield premium to provincial clubs. So as the provincial clubs performed and the London clubs struggled, there's been a portfolio mix that has dragged down the yield. But once again, as we start to see a recovery in the London clubs, we would expect to see that unwind. So going forward, as a business, strategically, we're looking at a much more balanced approach towards volume and yields. The first thing that's going to drive recovery in yields will be reducing our sales promotions, which is happening right now. We have put price increases through the estate. Back end of last year, we put price increases in U.K., Italy and Australia to recognize the inflationary impact and the energy cost impact on the business and put our normal annual increases through at the beginning of this year. So collectively, the blended yield increase for the estate in 2023 is going to be about 7%. We're expecting to see and we are all seeing a recovery in the CBD clubs driving some of that recovery. And then we're also repositioning some of our Italian clubs. So Italian clubs, there were 4 different pricing tiers depending on the estate of the club. And as we reinvest in this club, we are moving market here and benefiting from the yield benefit. So we expect to see a transition and improvement in yields through the next few years as these drivers of [indiscernible] unwind and as we put through initiatives to improve yields. So putting that all together, key messages: Firstly, volume recovery is firmly entrenched. Secondly, we are a business in our full EBITDA breakeven. And the recovery is only driven by 2 things. It's going to be driven by the operating leverage that I spoke about, 95% of every pound going through to the bottom line, and it's going to be driven by yield recovery. And this is simple mechanics here just to demonstrate how the yields and the operating leverage works for the business. In the last 7 months, we sold 104,000 members. We will need another 120,000 to get back to 2019 levels. We're expecting to get there by back end of 2024, early 2025. But if we take those just 121,000 members and we apply today's yield, that will give us a GBP 53 million upside in terms of EBITDA of the business. And then if we just process the yield increases that we put through in 2023, so 10% I mentioned, and we put a CPI increase through in 2024, that gives us another positive GBP 62 million. So clearly, those two items just mechanically pay out to about GBP 115 million incremental EBITDA to this business. That's not what we're going for. Clearly, we are going for more and Luca and team will touch on the initiatives that will drive that. But the key thing here is that we're seeing a clear path to recovery in the gym business. The food business is performing above expectations. So we've got a solid foundation here for us to build on our global wellness business. And on that note, I'm going to hand over to Luca Valotta, our Chief Operating Officer. He will talk to you more about the drivers of the business. I'm going to just caveat, as Luca is not feeling well, he didn't have a good night, he may ask to step out if things don't go well.

Yes, [indiscernible], I feel more comfortable. I had big stomach ache during all the night. So given the fact that I have been all my career in Italian business and I built, as a founder, a great business, when Dean asked me to be the CEO of the global business, I was wondering what I can add value to this business. And one thing is very clear in the industry that's a category killer is normally the model club that we're looking at. The category killer in our industry is a club that is very difficult to compete with. It's so competitive. It's large. It's that international, of course, expansion. And it's got some characteristics that make it very difficult to compete with. So I thought that my contribution to the business and to the team was kind of doing what I've done in Italy in my career. So this category killer, as you see, is coming off from COVID in a very good shape and trying to expand it and try to enhance in the rest of the world. So I think that the story about category killer today is built on 3 pillars. The first one is the hardware, the second one is the software and the third one is the brand. Let's talk about first the hardware. What is the hardware areas in our industry? The hardware is the club, the location. And Virgin Active has got an incredible portfolio of locations. 230 clubs is the most international health club chain to [indiscernible] club across the world from South Africa to Europe to Asia into Australia. And we are in the best city -- one of the best cities of Southern America in the world. So actually, we have been building the business for 25 years. We are in some amazing iconic locations, for example, that is very difficult to replicate, like, for example, London, Mayfair, Kensington, Milan, Corso Como, Rome, Parioli, Naples, Santa Giulia. We have, I don't know, Bangkok, we have Empire Tower. In Melbourne, we have Collin Street. In Sydney, we have Margaret Street. Capetown, Joburg, Silo, Melrose Arch. I mean these iconic locations, very impossible for any operator to build and for any operator to develop. Outside of that, we have also built this big club. One of the characteristic of our club is the size. We have a club that goes from 2,500 square meters pretty much to 5,000 square meters. This is another difficult thing to build for any operator that wants to compete with us, because finding such a large space, getting the capital to build it and run it properly is very difficult. So actually, we had built some critical factor of success within our business and within our portfolio club. The other pillar of our strategy on the hardware is definitely the financial discipline that we apply to our club. In my opinion, based on my experience, even if we are into the premium segment, we never overspec the club. If you look at now, we're going to show you some of the video of our international club. But I do believe, I mean, traveling the world and seen some of the luxury club, I think they are all overspec. And I think that when you go over this overspec, it's very difficult then to create some good returns for the shareholder. And our job, of course, is to create a good return for the money that you guys invest in our business. So actually, when we project the club, even for the future, we've always been very, very financially disciplined in order to apply the right capital to the right club. And we prove that our model is a model that can generate an IRR over 30%. So this is the hardware overview. And let's look at some of our video that we prepared for you in order to show the quality of our club, and then we talk about the software. This is Piazzale Lodi. It's one of the clubs in Milan that we opened in the first circle. This is a club that we opened in November last year. It's already full capacity. It's already over 3,500 members and with a very good yield. And you will see the latest product that we just opened in Milan. This is an iconic location. It's an old cinema in Milan. It's a building that is very important for the city. So it's been closed for 20 years. We took it. We put a very good club, and the city is very happy that today we take it back to life. So let's visit... [Presentation]

After 14 years in this industry, there was something that couldn't let us grow the business more. So actually, I recognized that the hardware, so the location and the facility itself was not enough to kind of create more value into the business. So I actually went to the U.S. to do a long trip, and I recognized that the market there was moving, was more dynamic than in Europe and in the rest of the world. And there was one other player other than locals that were already impacting our business, on the bottom of our business of the metrics. Of course, we pushed the business up in the premium segment. There was like a new boutique. So I went to see -- I was telling Dean yesterday that I went a couple of weeks in America to look at all the boutique operators with you guys, and they were just starting. There was SoulCycle, there was Barry's Bootcamp, F45. There was this only one single classes, but with great experience. So they were disrupting the market because pretty much they were offering to customer a different way to see the fitness, and then different way to see the future of the wellness. So I recognized that our model, that was pretty much based on location, yes, it was not enough. Like the cinema operator was not enough. We needed to create more value into the business. So what we actually did -- I mean the right metaphor is that like we were like a cinema operator that was buying and supplying the movie, so the product from other operators. We were buying to Les Mills, from Zumba, and all these operators. So what we have started to do, we have started to create our own software. We knew that we were going to need to be more competitive. And so without creating a software which is unique to us, we were going to lose some competitive advantage. So from 2015 on, I've been busy to build the software. And of course, the software is something that evolves, and that will become almost like a Netflix. So the streaming operator other than the platform in the ecosystem, they all source their production, and they are unique to them. So that's what we have done to create more value into the matrix. We did our own software. And our software is pretty much just getting down to our industry. It is pretty much based on 3 things. It is based on product. So product, program and trainers, of course. It's based on excellent customer service, so we have to raise the game in order to compete much better and preserve our premium positioning. And the third one, which is recent, is our hybrid position. So what we have done is that we have created a platform where actually the member cannot interact with us only at the club level. So the club is just 1 touch point, the most important, because it's our distribution across the world, but it's just 1 touch point. Thanks to the digital transformation, we create, of course, scalability, we create economy of scale, and we create a better way to attract those to our members to retain them. So actually creating all these within, we are both passionate about the product. We managed to gather the product line because we recognized that nowadays, compared to the past, it was almost like a property business, this business has become more sophisticated. And so actually having the leader of the business very focused on product is fundamental because, today, the fitness and awareness is very exposed to social network, it's a big trend. So we need to make sure that we are ahead of the game also on this. So we created a product line. We developed our own in-house expert. Continuous improvement, innovation. Of course, we continue to innovate. We're called Big 5 because we have this in-club experience. So we actually take the boutique experience and put in our club to create new value. Something for everyone where we attempt to make sure that we have a product that appeals to a wider range of people rather than the boutiques that are very niche and very specialistic to some segments of the consumer. And it's, of course, exclusive, as I said before, it's exclusive to Virgin Active and it's included in our membership. Our subscription model is a fundamental then as Mark showed to create value in our proposition and for your investment. What I also -- the last part of my explanation about the software goes into how we became progressively a data-driven business. Of course, it looks like -- for other businesses, it looks like kind of the normality today to be a data-driven business. I can assure you that in the fitness industry, we are heading the game. And I explained to you in 1 single example, which is down to our industry, down to our decision making process, how, for example, we use data to improve and to attract more members. Reformer Pilates, for example, if we talk about product, it's been one of our most successful product of the famous Big 5 that I was talking before about. And when it launched in Italy and across the world, we were seeing that this product is very important because it attracts a segment of consumer, which is probably the most precious segment of consumers that we have in our industry, which is the women between 30 to 50 years old, yes. But for some reason, we looked at it -- for some reason, we didn't attract Gen Z, the female segment of the Gen Z, below the 30 years old, so from 18 to 30 years old were not attracted by Reformer Pilates too much compared to the other segment of population. So actually, we looked at the data, we went through them, we did some research on that, and we recognized that our Reformer Pilates was not intense enough to attract that segment of people. So we created, on Reformer Pilates, a new program that appeals to that segment people. And now if you look at our data, after 2, 3 years of getting into the market with that product, we are now having a much broader consumer segment that appeal to that product. So actually here, I put some snapshot of the results. And this result, guys, is on top of the game in the industry. So no one has in the world got 2,700 personal trainers, that will end up probably to be 3,000 at the end of the year. We deliver 2.3 million sessions per year in our business. And the other snapshot that is very important to see is that we got to 1.6 million attendees on the famous Big 5 classes in general. And if we analyze it, our goal is to get to 20 million. So we want to deliver 20 million session to our members across the next 12 months. And this is an amazing achievement because, of course, when you talk about this number, it means that we also control and manage the trend of the future. So here, we put some -- within, we put some baskets. So you can see how we differentiate every segment. We also -- sorry, our product offer. We've got athletic training, we've got, as I said before, yoga and Pilates, and we got exercise music that is more appealing to a different segment of people, more choreography classes. And we definitely make in every kind of -- we do music, of course, in [indiscernible] across the different segments of products. We have some of the [ pictures ]. Then we have fitness [indiscernible] events. We also cluster the product suite. We have, of course, the GymPro, which is very important, because, of course, [indiscernible] vast audience, the main segment of the market. We got a personal trainer, which we point a lot on the personal training [indiscernible]. We launched recently this small group personal trainer that makes a personal trainer more affordable to the vast audience. Don't forget that the people that work out with a personal trainer have a double retention rate than a person that doesn't work out with a personal trainer. [indiscernible] our personal trainer more wider and more, let's say, more people attach and that [indiscernible] for our retention rate. And then we start to look at events and experience. We're looking to buy a company that does outdoor sports events, because at the end of the day, we want to be not an [indiscernible] chain, we want just to be a wellness brand. So actually, everywhere the member wants to work out and experience that lifestyle, which is going to be nutrition, which is going to be in the club, which is going to be outdoor. We're going to get on with our digital proposition that's going to be Virgin Active. And yes, then particularly in the U.K., again, we have this big club outside of London especially, and we developed a lot also in terms of product suite for family. We are looking at expanding our ability to do swing classes and to create a new revenue stream for using [indiscernible], and more extensively our huge number of pools around the world. And we started recently also looking at The Racket, particularly the Padel, and have been a big promoter of padels, both in Europe and in South Africa. And I think padel is a game that can be kind of really well fit in our proposition. Yes, then finalizing my speech around what I'm doing. The other important piece that I have done in the business is segmented the product. And this is another unique characteristic for Virgin Active, the product segmentation or club segmentation, because we have these 3 different clubs. We've got a Collection Club. We have 17 Collection plus 3 in South Africa, so 20 Collection Clubs. We have around 80, 85 Premium Clubs across the world, and the rest is the Lifestyle center RED. And particularly internationally, you will see that visiting our club internationally, you will see much difference in terms of product offering. So between the 3 [ tier ] club, the product offering is quite standard and is very high in Premium position. But my goal was to make sure that in each of the segments, so what changed is the demographic. Of course, Collection are in the middle high demographic. The Premium are in the middle first circle of the seed demographic, and the Lifestyle Centers is purely a middle [indiscernible] product. But in all the 3 segments, so high, middle-high, and middle, we are the leading [indiscernible] in clubs. So we are still [indiscernible]. And this is another thing that [indiscernible] because if you only concentrate on the Collection club, of course, we would have less of the standalone product physically. And then last part that I want to talk to you guys is another very important part of the software, which is the way that we work. And the way that we work since the new management has come on board has changed. While gradually we moved from a business that was territory [indiscernible] net and we become more global business. But to become a global business and a global brand, we need to change the way it works, and we need to embrace a new way of working and sharing and sharing the strategies and making sure that the people understand that they work for an international global brand. So what I have been busy to do in the first few months that I took the role is to work on projects. So actually, internationally today, on people, on operation and acquisitions that are the 3 main areas that I manage, we work on projects. So via the platform, we start out a project. For example, in this case, to standardize and globalize our acquisition process and our operation process, for example, and we take people from all around the world [indiscernible] and we work with that [indiscernible] and this is helping us to take the business forward. The last part of the [indiscernible] that is pretty much how we prove that working this way, we can be very competitive in both [indiscernible] market after a [indiscernible] competitor can do create both in [indiscernible] market and in emerging markets. And the last part of my presentation is about the academy, and we talked about software. I recognized the day when I started talking about software in this industry that we needed an R&D. Pretty much [indiscernible] our R&D is a place not only physical, but it is an organization that had the [indiscernible] to continue to innovate the product. So creating new products for trained people in order to be on top of the game, support them, and implement them. So somewhat research and development department [indiscernible] there's no other player that has got an R&D in the fitness industry. And this has become a key component of our success. And again, it will improve our capability of acquisition. So that is what I wanted to show in the first few months of our work. So thanks team to be standing here because I was like scared that I could stop. So I hope you enjoyed the presentation, and I'd like to end here. Thank you.

So firstly, thanks to Luca. Luca has traveled through the night. He has been up most of the night and been very unwell. So thanks for presenting. So I've been in the role for just over 12 months, and there's a lot of change that's taken place. But just to emphasize, to have the support of the likes of Mark and Luca, these are absolute industry experts, the experience they have over many, many years is unparalleled there. To find people in an organization that have that level of knowledge, know-how just makes my job so much simpler. So the team is incredible. The experience and knowledge, as I say, just absolutely unparalleled. And alongside that is also there the team's ability to accept change. So a lot of people that have been in the industry a long time and have this level of experience also are not open to new ideas and are quite set in the way they do things. The team that we have with all the experience are incredibly open to change and new opportunities and they've embraced the -- Mark, Luca, their teams have embraced the changes we've made and are starting to see the impact of some of those changes. So very much a teamwork over the last 12 months. We've seen really nice green shoots. We as a management team fully understand this is just the very, very beginning of the journey. We've got really, really lofty goals and aims on where we want to go with the business, but we understand there's a lot of hard work and a journey ahead there. When we start looking at our vision and our purpose and the reason we exist, and we're incredibly fortunate that this purpose, this North Star of our business is its ability to change people's lives for the better. It is amazing to work in a company where you have such a strong purpose, a really purpose-driven business. Our product, nutrition, fitness, makes a difference to people's lives. It's made a difference to my life personally, makes a difference to people's lives. It's incredible to be involved in the business, and our team at Virgin Active is so behind this purpose. They understand this is way more than a job. We've got a product that can change lives there. At the same time, being a purpose-driven business, a business with such a strong purpose resonates with the consumer. There's a commercial reason that purpose-driven businesses succeed. And as I say, Virgin has incredible purpose, that we have this ability to change people's lives. Traditionally, in the gym business -- in the traditional gym business, customer lifetime value has been low. Retention is low. There's a huge sales machine that sells, sells, sells, but there's leaky bucket as there is high levels of attrition and churn. People fall off the bottom of the bucket there. So we have to change the mindset. How do we change this business? How do we create a much stickier customer? How to improve customer lifetime value? And quite simply, customers, members stay with us if they engage with us more frequently. It's that simple. If they use our gyms, they don't leave. So we have to find ways to get engaged more frequently and that's when we start looking at how do we work with physical and digital environments and get all the data from those. When people access our clubs, when they use our app, what clubs they book, what food do they buy, get all of that data that we can create more engagements getting to use our club more and understand their needs and suddenly start to understand the reason why they use the gym, the reason why they eat healthy, when they train, all of their data. And using that data, we can offer a much more personalized offering. We offer a personalized offering. When I understand my member's needs, I start to create an emotional connection with the member or with the customer. And it's that emotional connection, that personalization that ultimately drives customer lifetime value. Frequency, how often they train with us, how many times they engage with us, and the average spend, how do I drive up the average [indiscernible], the average spend per member, and it's through these levels of engagement, using data, a combination of the physical and digital environments to create that. So that's where we're really focused on in terms of using this data, the different engagement points. We want to drive customer lifetime value add. The space that we play in is not just the gym space. It's not just the nutrition space. It's the wellness space. It's an incredible space to be in. It is a fast-growing space, and COVID was devastating to anyone, particularly restaurants, gyms that were in a physical environment. It goes without saying, we absolutely closed our doors, we had no revenue, we had this fixed cost base in both the food business and in the gym business. The [indiscernible] silver lining to COVID is that post-COVID, the awareness and knowledge people have of the benefits of being active, eating healthy, getting good sleep, mental wellness. COVID has been an amazing advert that people have suddenly woken up and understand I have to look after myself, this is a primary, primary reason. It's no longer just a lifestyle. This is a central shift we see in terms of people knowing that they need to keep well there. So we've seen this growth in this industry, this great place we see. We've seen a huge move even post-COVID. Obviously, through COVID, people had no choice but to exercise online. It was a question, will people ever get back to gyms. I mean, will people want to go to a restaurant? We are seeing a huge shift from what we call, from URL, from online experiences, to IRL, in real life experiences. People want to train with other people. People are not motivated training at home. You've seen a lot what's happened to Peloton and other online-only players. We see what happens in a restaurant, we see quite huge numbers there in terms of the growth post-COVID. People want to be with other people. They want to train with other people. They want to socialize with other people. And despite COVID and what happens through COVID, there is a strong move back into the gym space there. We're also seeing -- in terms of this wellness space, and we're seeing major macroeconomic headwinds in terms of cost of living increases, but this segment that understands wellness and this growing segment of people that are coming to wellness, despite those macroeconomic headwinds and challenges, are allocating more of their spend to wellness. As I said, post-COVID, they understand the importance of wellness, and we see this segment, people that are engaged in the wellness are much more resilient in terms of the hard times that we potentially faced in there. So when you start looking at what does the wellness space mean as opposed to the gym and nutrition. One of the biggest demotivating factors and why gym can become a chore, eating healthy is not pleasant, is when you don't see results. The converse of that is when you see results, it's motivating. So someone has a goal to run a marathon and they can train for that and they run well and they achieve their personal best in the marathon and they become incredibly motivated. Or the goal is potentially to lose weight because you've got a wedding or an event at the end of the month and you achieve that goal, it's incredibly motivating. You move from a chore or something you don't want to do to say, "Hey, this is really something I see the impact. I see the results." The reality is that you achieve wellness results when you only look at 1 vertical is very difficult. In other words, if I train, but I eat unhealthy, I don't sleep well, I have anxiety issues, my overall wellness is not going to improve. I could just eat well and never train, same story. So what we have to do is find ways to motivate people. And the way to do that, the way to deliver results is to start looking at an individual across the various silos of wellness. So not just the exercise, look at it across the whole. There's 6 different dimensions to wellness. We have strong fundamentals, a strong foundation in the 2 biggest pillars of wellness, nutrition, to acquire a new acquisition, and Virgin Active on the fitness space there. And we start by delivering a solution that delivers results. And as I said, as we deliver those results, we encourage engagement, we encourage usage, we start to drive our customer lifetime value. We start to get a much stickier member or customer within our ecosystem. So just following on from that in terms of a pure gym play versus the wellness play. As I mentioned, we've seen this shift to a healthy lifestyle. This is not a fad. This is not a trend. It's an absolute shift. It's something that's here to stay and will continue to grow and grow exponentially compared to other industries that we see here. We also have to see wellness as more than just a lifestyle. It's preventive health, and governments, insurers -- I mean, this [indiscernible] long, long time, I've gotten more and more insurers, big government, big corporates understand how effective preventative wellness is. Preventive wellness has become mainstream in terms of the health care delivery system. And we'll see shift in terms of spending from corporates allocating funds to support preventative wellness. It's significantly cheaper than treatment. So we would rather stop people in our ability through nutrition, through wellness, through activity, to stop people getting sick, and it's very, very powerful from a commercial point of view there. Clearly, the wellness addressable market is significantly bigger than just one of the verticals by itself there. And then we go back to this thing you hear me talking about often. The customer lifetime frequency here, where we can look at a person as a whole and can drive additional levels of engagement because we have more data, you start to reduce our churn. And the churn is probably the biggest factor in purely the underlying gym business that can have a material impact over and above the areas that Mark spoke about in terms of the pure mechanics of just driving volume to get back to the 2019 membership levels and yield. Over and above that, when you start making an impact, small impact 5%, 6%, 7% on attrition rates, that has impact as well above those mechanics that Mark [indiscernible]. And we also believe we've looked at valuations of businesses that play in the wellness space, lifestyle space versus businesses that are purely in the gym space or purely in the food space, and we see a much larger universe of potential investors that are attracted to the wellness space. We're seeing different valuations attributed to wellness businesses as opposed to pure gym businesses. So from an investment thesis point of view, we see a strong reason to move into the wellness space. I'm not going to take you through this pyramid in too much detail. I just want to emphasize a couple of things that everything on this pyramid is and has been actual. This is not a pretty slide that tells you what we want to do. Every step of this from the ground at the bottom when we started to look at people, we made changes to people, driving culture incredibly high in terms of how we want to run the business that is ready for honesty, we have this ability to communicate, to challenge each other, bold, agile decisions, all things at Virgin Active that we've changed and it's happening today as we speak in our business, not only the top level, from the ground up there. So that bottom level is addressed. We've made radical people changes for different people in different positions and we're driving that culture. Then you look at all the strategic initiatives and how we're achieving those against every different levels of spaces where we are in terms of them, some more advanced, some we're just starting. There is not anything on that board that we haven't actioned or measured and reported on internally in terms of how we perform against those measurements. So I think that it's really important to understand that 12 months in, but we're addressing all of these. We understand there's a lot of work to do, but these are actions that are taking place every single day as we speak in our business today. To talk a little bit more detail, I'm going through this very quickly, just in terms of qualities, the BAU initiative, just that we're doing every day. A big change to the business Luca alluded to and it's that Virgin Active was run by territories. Huge head office structures in every single territory we worked in. There's obvious implications and duplication of cost, incredibly large head office structure cost in different territories. But more than that is just no sharing of mind, no sharing of ideas, people worked in silos across these territories. We have unwound that structure. That structure does not exist. We have a group head office, a global head office. That doesn't mean a huge team. I'm talking about 6, 7 people sitting in global, and we started to simplify and take costs out of the territory structures. There's certain functions, there's certain territories that we've gone more now to [indiscernible]. In the past, marketing, IT, legal, all reported into a country MD. Those roles, marketing, IT, as an example, now report function into group. We've made a lot of those changes already. We've appointed a new Group Chief Marketing Officer. He starts at the beginning of July. I mean, it was amazing when you recruited for the position, the number of people that wanted to come work for Virgin Active, so we had an incredibly strong pool of people that wanted to apply for this position. And we're incredibly fortunate, and I can say today that we've appointed the Vice President of Digital Marketing for Disney across EMEA. So strong digital focus, work across all the Disney, Disney Plus, Marvel Comics, all their theme parks across Europe and EMEA, and he'll start in July. Real asset. Someone who can bring total different perspective not from the gym industry and really add value to the existing team. On the CTO, I'm pleased to point on David there. Dave is our new group CTO. So the CMO is London based. Our CTO is also London based. And just as a background to David, David headed -- is the IT Head for the NHS. In the whole of the U.K., David was responsible for the contact tracing app at the beginning of COVID. David worked very closely with the government, with Boris Johnson and his team in actually developing from scratch that U.K. contact tracing app that was very effective through COVID. Amazing to have Dave on Board. He's been on the Board for 2 weeks, but already started in terms of these insights and perceptions and understanding of the business and adds great value to us. And then as most of you know, we changed, Mark moved up to the group CFO, so we appointed Jessica Spira out of the banking space as the MD of South Africa. There are numerous other changes. Big changes are taking place in almost every other territory as we simplify our structures, as we take costs out of territories, and more importantly, that has become a more agile organization that can make decisions quicker, that we as a group team are much closer. There's not layers between us. We have information of what's going on the ground in real time. So those are some of the big changes, as I say, those are the implications of those changes. Sales processes blew me away. Coming to the business and how do we sell in the gym. So this is not Virgin Active. This is the gym industry. We have a very direct sales model. People come into the gym to buy their membership. So as a result of that, you need 4, 5 full-time employees sitting in every single club. And then on top of that, you need a sales manager in club to manage those 4 or 5 people. And then you need regional sales managers and then you need group sales, and then you need central sales. It's an incredibly big, expensive and inefficient structure to sell. We do very little of our sales online. We do very little of our sales through referrals, through corporate sales. The other implication of having these full-time employees not only is the salaries, but it's the commission structures that are associated. It's the misalignment with the organization where you have a sales team that is absolutely driven to hit sales numbers and sales targets and are not responsible for terminations. Ultimately, what drives our business is net member growth. The number of sales we do is not nearly as important as the net of sales and terminations, what ultimately comes to the bottom line. And where you've got a misalignment with the sales team is incentivize and driving sales, clearly the quality of sale is not going to be what it should be, where they don't really care whether the member stays with us for 3, 12, 24 months. So we have really started realigning those sales processes in terms of how we pay commissions, when we pay commissions, and how the salesperson becomes more accountable for the customer or the member throughout their life cycle in terms of trading comps, comps paid over a period of time. [indiscernible] seem obvious that we're not in place and are not in case in the gym space. In addition to the sales consultants and how we restructure that, we have to drive more of our sales through other channels. There is no reason that over time, the majority of our sales shouldn't come from online. People buy hotel accommodation without seeing the hotel, they buy [indiscernible] online. There is no reason we cannot sell gym memberships online. Result of that is not only that we need less full-time employees, perhaps not any of the sales commissions, but the quality of that sale -- generally, someone who buys online is a better quality sale than the walk-in to our club, and therefore, stays with us for a longer period of time. And also because of the cost of acquisition is so much lower, in fact, if they do leave after 6 or 12 months, we more than recover the cost of the sale. So a big projects underway. Some countries are really well advanced, but in every single territory, the sales process has been relooked at, how we create additional sales channels, online sales, corporate sales, referrals, and how to use other partners, so that we've done very well with vitality, but how to use other partners and leverage other relationships to help us distribute our product. Just the last one is Virgin Active Padel Clubs. Padel is one of the fastest-growing sports in the world today. What we see Padel as is just to come to everything is once again a retention tool. So we've decided to go with a very capital-light model and that we are not building Padel courts, we're finding partners globally to build the court on our behalf. We will get a commission. We've licensed the brand for that and we get a royalty for that. But ultimately, what we see with Padel is retention. How do we stop members from leaving our gym, because they want to pay Padel outside. So it becomes a retention tool for us more than anything, that we'll have Padel courts in our own clubs. We'll start using some of our tennis courts and parking spaces to be Padel Clubs because it drives retention. At the same time, you'll see satellite standalone Padel courts that are of Virgin Active brand and so our members can go play there. They'll get quite significant discounts if they play at those satellite locations versus [indiscernible] in the street, so not only a retention tool, but an acquisition tool. Our first Padel Court opened in the U.K. in Chiswick Riverside about 2 weeks ago. The usage has just been phenomenal. In that model, in that particular club, it's only available to our members. Members of the public cannot come play there, and we've seen the impact this had on sales in terms of -- and you see it in the U.K. numbers even in this 2-week period in terms of people signing up with the club because they want to play on these Padel Courts. So still early stages. You'll see, I guess, in the next 6 weeks -- or 6 to 8 weeks in South Africa, some existing Padel courts, new branded Virgin Active Padel Clubs, but once again, an exciting issue to drive retention and reduce churn there. Peter has spoken about the premium offering and what differentiates ourselves from the low cost and [indiscernible] hardware and software, but also from a customer experience point of view, and he started to speak about the experience customers. So what's the difference, as you walk into a budget operation, there's no one that greets you, no one knows your name. You swipe here, you go use the club. There's no facilities. Our experience is really important in terms of our differentiation there and how we use digital to enhance that experience. So very much for us the last 12 months has been around this digital transformation. And I don't want anyone to get confused when I say digital because immediately comes to mind is some sort of online only offering that we're going to monetize and we're going to scale it and serve it, and that is a small and relatively insignificant part of the digital transformation. The digital transformation, I'll talk about is around how we use data, how we become more efficient with data, how we serve better, how we bring down our cost of acquisition. And in how we use digital to enhance the in-club experience, how do I make access in booking and ratings and you buying food and buying personal training packages easier for our members, reduce the friction that we have in our clubs. So it's digital that once the grade improves the experience, gives us better access to data, having that data, and we know what our members want and need, and we can use that to improve the experience. Starting that prior to me get involved in Virgin, I've heard of that for a long time was the Virgin Active app, and there's a Virgin Active app coming and there's going to be loyalty program. I mean, there was a version there for the last 20 years and never really saw. I'm pleased to say that finally, we have a world-class Virgin Active app. It launched 10 days ago, just to a smallish group of members, a couple of hundred members and friends and family that are tasting it. And by the end of the month, Virgin Active app and Virgin Active loyalty program will be live in South Africa available to all our members. We've done South Africa first. Italy will follow, U.K. will follow and followed by APAC. It's more than just an app. It's the obvious things that the app told -- the app does, which is around access and booking classes, ratings, but it has a very, very strong loyalty program that is very aligned with our objectives in terms of what we want to drive. With all of the things I've spoken about, the [indiscernible] products, super important. We talk about why we have all these group classes. We find people who do group classes, that use PT stay with us longer. But today, you need a little bit more in there. You need to reward them for that, and that's the loyalty program. There isn't a success from Chipotle to hotel roofs, Starbucks all have incredibly powerful loyalty programs that drive frequency on retention of customers. Virgin Active and the whole German industry does not have a world-class gym program. Most operators have no loyalty program. So we launched the loyalty program. Let me take you very quickly through it. Just to -- once again, the reason for loyalty, why we want a loyalty program. We're encouraging, you see -- we only encourage people that comes to the club twice a week, automatically on their second exit, they have to scan now. Their access to the club will be a pure card on the phone. So it's not that we're asking people to download the app. Every member, across Virgin Active, will have to download the app because that will become their access card. We won't do that day 1. We need to educate people to -- most people bring their phones or move away from cards, who are basis overseas that they're tagging. But within 3 to 4 months, the only way you access the club is through the loyalty program, is through your app and then you've got to scan your access. You've been in the club for 30 minutes, on your second visit in a week, you automatically get a free smoothie. So we're trying to drive. We see a huge cohort of members that are trained or trained less than twice a month. And we know with that cohort when someone trains less than twice a month, they are very likely at the end of their contract to terminate. If we can get them to train twice a week, 8x a month, they're very unlikely to terminate their contracts. So we're rewarding usage, weekly usage, automatically seamlessly of your second visit, 30 minutes in, you get the free smoothie. We then reward them a streak. If you're able to do that 4 weeks in a row, you get a different reward. Every access, every online booking of the class, gives you points, different tier stages open up different benefits. You work every month, your points get convert into a wallet balance, you can apply that wallet balance to your next debit order, if you want, you can [indiscernible] physio, to different [indiscernible] in terms of discounts. So very competitive -- very, very first people to see the app apart from the small user group. I'll take you through this small group [indiscernible]. I'm not going to take you through all the functionality as we believe from the user experience and the user interface point of view in the Virgin app, and [indiscernible] from the access control point of view, the QR codes, this is what you scan to enter the club and so you go and scan to exit. Doesn't mean you have to exit by scanning. If you walk out the club and you don't scan, which is fine from a safety and security, you can unlock the gates, but you won't get your loyalty points. You need to be -- and you need to be in there for 30 minutes. Our experience have shown us sort of vitality program that we have a lot of people walking turnstiles and coming and coming straight up. You need to be in the club for a 30 minutes from access for the rewards program. You can see here, [indiscernible] length for a week or 2 weeks in that, [indiscernible] entered the gym twice this week and we got some smoothie. You've got 14 days to get it. You just go scan that at the quarry, you get your free smoothie instantaneous, frictionless on 30 minutes within your second visit, on your screening, you can opt your workouts and get that reward. Classes, you can go by phone, depending on which club you are, you can see a selection of the classes on offering that club. You can book it online and automatically comes into your calendar and so you're booking classes, you can rate classes. Workouts, we recognize, as I said, digital, there are days that you don't want to come in, you're unable to come in the club. We've got a selection of workouts tailored for yourself based on what your needs, what your goals, where you will surface stuff that's relevant to you, but at the same time, you can also view all the online workouts. The workouts then will tell you the level of intensity, how long they will take, what type of equipment you need to have. So you can use that to do a workout at home on the days that you don't want to come in the club or you can use to enter gym. You may want to work out by yourself and not with a personal trainer. He can guide you through your workouts and then the various tier benefits depending on what your services are. In addition to the [indiscernible] what we call the instant gratification rewards, there's a whole lot of other benefits that gets you unlocked as you move up to your statuses, you can get unlock different benefits. And then you can manage your profile and everything, your cell numbers, your membership details, everything online now. So we believe it's a more [indiscernible] game change and [indiscernible] environment and encourage you in this [indiscernible]. So as I said, by the end of the month, that will be live in South Africa. Apart from the engagement, the data we're going to get from that app, understanding the whole profile of a member, what type of smoothie they like, the time of day, how long they spend in the gym, which class they do, which PT they use, taking all their data and then using that data, once again, to create this emotional connection to personalize our offering and understand our member puts us on another level in terms of the premiumization, personalization of our products. In addition to the app and the digital and how we're going to use it, we also recognize, and it's particularly relevant in the U.K., and that we need to rejuvenate the estate in the U.K. I now managed to get to most of the clubs across the U.K. And I was expecting something quite different. What stood out to me is what [ Luca ] highlighted, the member of amazing locations that we have in the U.K. So we have these incredible locations in great city and residential areas. And in addition to that, the actual box, the size of the gym, the parking that we got is phenomenal. We cannot create the content. Yes, there's reinvestment required in the internals, in the equipment, adding some new studios to do the classes. But the actual box that we've got, the actual location we've got is phenomenal in the U.K. And our competitors don't have that. But we do need to upgrade our facilities and reinvesting into the estate. We have a very inconsistent proposition in the U.K. where you've got the [indiscernible] club and then you've got a totally different -- becomes very difficult to talk to our member when we have such a difference in terms of facilities within those clubs and the number of classes that we offer or don't offer and the quality of the equipment. So if we want to increase volume, they increase deal and reduce churn. There isn't any reinvestment. So at the digital transformation and on top of that, there is a reinvestment required in the U.K. M&A opportunities, there are some very unique opportunities we see in the marketplace at the moment. Why do we look at that versus organic? It's very difficult. We have -- in the cities that we operate in, we own our iconic location. It's very -- all our competitors potentially have to find incredible locations is very, very difficult. In addition to all those locations is costly. Not only is it costly to build, but in developing more clubs, there's a 2-year ramp-up period, where we're starting to get a mature base in terms of our membership numbers. Certain territories that we're in as well, we are subscale. We have this ability to leverage existing infrastructure -- existing overhead structures to add on numerous other clubs. And the easiest way to do that, the most effective and cost effective and the less risky way is through acquisition. And there definitely good acquisitions out there that can unlock incredible synergies with the existing of our business and makes sense in certain charities where we are subscale. Probably one of the most exciting but forward-looking piece is the evolution of the German. What the Germans become, [indiscernible] stages to German stages to food business we are struggling in terms of retention. Even the wellness model is a great, and it's a step on in terms of engagement. But step further from that is this turning us away from a gym to a club. The old school club where families joining a club and they never leave. Parents are there. Their children go there and their children [indiscernible] they grow, they say you're in club for life. And more than a club it becomes a social space. Now we start talking about social space, there's wellness space, this concept of a social wellness club as opposed to gym membership. There's a book out at the moment, it's the longest running sale of [ Harvest & Trail ] around loneliness and the results of loneliness. It's a -- I mean, there's more people alone today and suffer from obesity or diabetes. And it's a sign and killer in terms of the diseases that loneliness creates. So it kills more people than alcoholism and smoking and there's a pandemic of loneliness at the moment, particularly post-COVID. And the gym space is something that we can use to start addressing that loneliness crises. How do we get people to come into our gyms to use us more in a wellness space, more than a gym, more than a place to eat, that a place they can work, a place they can socialize where the young people who kind of mix together instead of going to some of the toxic type environments where they do socialize. So to create an encouraging, very purposely and with intent these social wellness spaces. We -- in terms of where we're going with club design, how we look at the spaces in between where people move, where people socialize, where people search, how do you start encouraging social interactions. So business people can have meetings or they can meet new people. The youth can also spend time there. How we build our clubs than far more than just gym spaces? We see -- and we have examples where that works really well. If you look at a club like the Silos, that does not have a traditional peak gym time. In other words, traditionally our gym spaces in South Africa, you have a peak time in the morning, pre-work and a pre-time in the evening. You go to the silos, busy throughout the day. People use that space to training, the boardrooms. I can't get a boardroom [indiscernible] 3 weeks in advance, I can't get a boardroom to have a meeting. And people are socializing in the food space, the lounge space. It's called throughout the day. And we want to evolve that further. And if you look at the churn rates in a club like Silos, they are totally, totally different to all the other clubs where people use those spaces for more than just a gym. So we find it, in my reading, people socialize, all of their wellness, their classes, their PTs, their gym trainings, their physios and a social environment all under one roof there. And we see that as a major opportunity in terms of evolving from a gym business to a wellness business to a social wellness club. So in summary, we -- there's a lot of fans who talk about engagement, customer lifetime value. At the same time, management fully appreciates that in terms of driving value, there's some foundational primary drivers of value that we just can't ignore. And I mean, so if you guys all know what that means in terms of EBITDA recovery, return on invested capital, cash conversion, all those basic fundamental drivers of value, we have to focus on, and we have to focus on them. We also understand in terms of the valuations that we expect to get in the future, we cannot be seen as a South African business. And we're not only a South African business. Lucas has taken you through -- showed you some of the amazing clubs that we have. And sometimes when you see in South Africa, you only relate to the South African. So this is a global business with a global footprint. It's not a South African business, but what we have to do is address the revenue and the EBITDA that comes out of the other territories. So we are focused in terms of hard currency earnings as well. And then there are all the secondary drivers, everything that I spoke, about in terms of customer lifetime retention. Those really become important when you start looking at valuation multiples and not just the EBITDA uplift there. And I've got to emphasize our management, myself and a shareholders business is incredibly disciplined. We understand scarcity of capital there. We understand we have to take costs out. We have to manage this business and raise productivity, and but we can't only do that. I got to emphasize, we are doing actually the focus on the discipline we have in terms of how we invest our maintenance capital compared to the past, how we look at our expenses, improve expense, all those disciplines are very much in place and management is focused. But we can't just do that. We're also having on [indiscernible]. If we want to not only drive EBITDA, but also improve the valuation multiple, we have to look at this business as I taken through from the fitness business, from the food only business and talk about wellness business. We have to take advantage of incredible and amazing -- I too need moments in time, M&A opportunities. And because of our structures that we have in place, the synergies that we can extract from those M&A opportunities. And then as I say leverage these new stretch. In the past, we couldn't go to a new territory. If we went to a new territory, we have to create a whole new head office structure. And you create that head office structure and then you got to scale. The new global strategy enables us to go into a new territory with no head office. We can go into Paris, to Geneva or Madrid, we can use our central head office to explore new territories without having to overhead at head office costs that was there before. So we've got to start looking at these new M&A opportunities in new territories, and we've got these focused and demonstrated that we can generate higher currency earnings. Where we are today? Our target as management, we believe we can get to 1.2 million active users in near, medium term. Mark spoke around end of '24, '25 to deliver that 120,000, which gets us back to pre-COVID levels. And then on top of that, we think we can get to 1.2 million. We've seen already in terms of strong performance of the U.K. and Italy in terms of starting to diversify our earnings and hard currency earnings outside of South Africa, which we understand is very important for us. We think the wellness play, the social wellness club, also plays into a multiple outlet. So in addition, as I said, to all those primary drivers, which are going to drive EBITDA and drive return on invested capital, we believe that the multiple from a non -- [indiscernible] all these other initiatives, less South African exposure, not just a gym business or wellness business start to put us and see an uplift in that valuation. Often certainly as a management team, we are incredibly focused on delivering the EBITDA that we need to do the membership numbers that we need to do. But in addition to that, adding a couple of turns on to multiples as well. That's all for me. Thank you.

Thanks, [indiscernible] and team. That was very insightful. And we have a long-term relationship with Discovery and the area you move into is quite supportive and complementary of what are you, but on the other hand, you're also starting to compete with what are you trying to achieve. Just your thoughts on the importance of vitality and discovery and relationship going forward and that's going to be part of your growth strategy.

We signed a model within Hawaii. We were able to reduce our dependency on them, but still work alongside and they're very supportive of. I think we move into a similar scenario with Virgin Active. The reality is that the growth within the Vitality business is they probably won't like me saying this, but it's probably limited in effort of growth. We get out of vitality in terms of where management wants to take the business. We have to start looking at other channels or other partners. And we've explored that already with non-competitor partners who we're in discussion, when they can add distribution, they can add scale to our business. So I think Discovery understand that we're going to expand our relationships. The relationship is good. They're incredibly valuable partner to us and in terms of what we've done in South Africa. I don't see that changing, but I do see us exploring other opportunities, but we did a test part, for example, with Shoprite. With Shoprite on the 6060 channel gave away trial gym membership. So they paid us for that. And you'll see us exploring some of those others and some scalable partners that are 20 million, 25 million members on their programs and how we deleverage that. In short, it's a strong relationship, very strong at the moment and we will, in parallel today, explore that opportunity to become this -- their parent on them.

Got it. If you have success in driving user engagement, you mentioned like people might not use the term match at all, maybe 2x a month but you prefer to the use 2x a week. Are there certain clubs and certain times where you are going to face bottlenecks and capacity constraints? What is the plan around that?

I hope that's the case. It'd be a great position to be in if we had capacity in all our clubs. I think different there are certain clubs and Silos or some of the collection clubs where part of the model is to limit member numbers in terms of enhancing the experience. In any of those scenarios where that happens, better for us is how we enhance the yield. So we see our best performing EBITDA clubs or clubs that have higher yields. Volume is important to us, but we're not a volume business, we're not a low base, because our cost -- our business rates, that needs volume. Yield is important. So hopefully, when we get to those capacities, we have all the yield levers that really are actually more beneficial to us than volume.

Okay. And then just on your app, I mean, often, you see businesses launched an app and the business is quite excited, but apps don't works so well. So, I comment. Maybe could you elaborate on the app like say, the exercise section of the app? Are there any other apps that you would compare it to that have that access? I know you said not in the gym space per se, but if that app has exercised like, is there a yoga app or another workout app you would compare it to? And also, does the app like, sorry for asking this, but does it upload is rather because for some people that's kind of binary. If it's not on straw, it never happened.

So to your first question, I mean, I have no doubt that there'll be bounds in app, stand-alone, I'll tell you, these apps go perfectly. We've done a lot of pre-testing, and on testing in a live environment. But I have no doubt when we launch to the members, members on the scale at 300,000, 400,000 South African members, they're going to find problems and we had bugs and we're going to have people shouting and screaming. Hopefully, we can fix those quickly. There are similar stand-alone apps that are purely do exercise. And quite honestly, you can go to YouTube and search yoga and do an app. No one has really monetized that incredibly well. I mean, your Netflix now partnership with [indiscernible] doing online workouts. That's not our model. The online workouts we have on our app are purely -- we're not trying to monetize. We're not seeing -- those are free to all our members. You get full access to the full library and that's online. We're not trying to monetize that in any way. We once again, that's a tool that if you can't come to the gym or you want to freeze your membership, speaking Europe, for example, through August, they want to take a summer break, and only you freeze the membership, freeze the membership and continue to pay us a fraction of your membership because you can do the online workout while you're on holiday. It gives us a tool as well. We start to terminate at the end of their contracts for EUR 9 a month, which is actually terminated, but we'll keep you on our app with online workouts. And by doing that, it's not about the EUR 9. We are then allowed by law to engage with that member on a continuous pace and continue to sell and continue to speak to. If they're terminated, we are unable to speak to. So it just keeps even a terminated member engaged with us longer. I don't think -- and I'm sure you all know it, nothing comes to my mind in terms of an app that is there to enhance the physical experience in the gym environment. Plenty in the food and hospitality space and within the gym space where you're using that app to grow a frictionless experience and then reward people for certain behaviors, I think it's -- I mean, certainly, as I say, I don't know of a comparable gym app that does it. Sorry? [indiscernible] the link.

[indiscernible]

So just to elaborate a little bit further. So in terms of where we've launched, there'll be a full integration. It's not yet launched now, but even with the techno gym equipment. So you'll then be logging with techno gym enabled piece of equipment that's connected to the WiFi, you'll be able to get the readings onto whatever you're wearable is. It will come up on your phone. And can you maybe just clarify at the moment in terms of connectivity to wearables and what they're going [indiscernible].

[indiscernible]

So, it's not at this launch, where it's [indiscernible] possibly 2, possibly 3 months connectivity. And we need to use that data. It's important for us to use that data to personalize the offering.

So you've spoken about sourcing after EBITDA and all that work you're doing around that. Can you help us understand the capital structure side of the business, how much equity appropriate at that EBITDA run rate of say GBP 115 million?

Maybe I talk a little bit broader around finding as opposed to -- in terms of what's appropriate. I mean, clearly, in terms of where we are from an EBITDA position at the moment, we are over leveraged. We do think that in terms of our run rate and where we see the business going to deleverage to acceptable levels quite quickly. At the same time, we recognize particularly outside South Africa, that is a reinvestment in the rebuilding phase that's required in our business. And every building phase is on plan. In fact, we're slightly ahead of budgets and plans. And also we focus us on these M&A opportunities that would also require funding. So we recognize and are working with the Board in terms of understanding what these opportunities are, what the funding could be required and in coming up with a plan and possibly in terms of how that we work, how we fund it possibly looking to different phases, to look at the first phase, where we look to existing shareholders or potentially a second phase where we looked to third-party capital. But it is something we're addressing, looking at in terms of understanding how to best rebuild the business and on top of that, take advantage of the growth opportunities.

Let me just give some context to that because it's very hard. But Netflix at their best was 2.5% per month. So 36% is [indiscernible] the vitality there, which is a CV customer, you've got Italy, which sits at around 20%, if I exclude the short-term contracts there. South Africa is probably higher than most routes are around 50% in terms of gym. But when you're 100%, where there is 36%, 40% 50%, it's a leaky bucket. I mean, phenomenally in my mind, I should have a business model, where you sell, sell, sell and half of it falls out the bottom. And that's all these initiatives are trying to address. If I can address churn, change it, it's much easier, much less costly to keep the name than to keep acquiring new members, which is incredibly constant process. We can reduce that 5%, 6%. It has a material impact over and above the numbers that Mark spoke about.

Good morning, everyone and welcome to the second session. Today, it's my pleasure to introduce Optasia, which is formerly known as Channel VAS to yourselves. Ethos invested in Channel VAS in late 2018. And in fact, at the time, the Optasia team actually had presented to you guys. And we did find a slide yesterday that they pitched in and we will show you some of the evolution of the business since then. Just from an Ethos Capital perspective, the Ethos Capital's exposure to Optasia arises through its commitments to Ethos Fund VII and then through the Ethos AI fund. At the time of investing in Optasia, what we saw was really a massively scalable platform where a business could really become the market leader in airtime credit lending but probably more exciting there was the ability to transition the business into the micro lending or sort of micro loan space, which is a 5x bigger market size than the traditional airtime credit business. We've been really pleased with the performance of the business over the last 5 years. It's really -- and the team will show you how well the business has actually done. And that's notwithstanding deployment delays arising out of COVID and then the massive impact that currency translation has had on the business. Obviously, we're earning currency or revenues in local currency and ultimately reporting in dollars, which is clearly at a tough time over the last couple of years. So I'd like to introduce Bassim Haidar, who is the founder of Optasia, to you. Bassim is a serial entrepreneur. He has built successful businesses in Africa and across the Middle East. Over the last couple of years, Bassim has stepped out of the CEO role and into a Chairman role. And so we're also joined by Mark Miller, who has taken over the Chief Executive role. Mark has worked with Bassim for probably 20 years plus. He joined Optasia in 2015 and has really seamlessly transitioned into the CEO role over the last few years. So Bassim and Mark over to you.

Thank you. Good morning. Well, you did all the presentations. So I'm not sure what's left there. I'll just give you a very quick, maybe brief to tell you about how we started the company back in 2012. It was purely out of a need where it was a very annoying thing in Africa, especially in Nigeria, where people would call you and drop the line, call you and drop the line and that was because they have no credit to continue the call. So we started to think around how to find a solution for this problem. That's how really the idea started. And then we have to find a way to build the platform and then how does it work with mobile operators, how do we do the distribution and so on. Hence, Channel VAS was created at a time, which we now call Optasia. And the business is very successful in the first deployment. So I never raised any capital at the time, I put in my own money. And we started to roll out across several countries with massive success. We had a roadblock around 2014 because the business did not have -- or the platform did not have a proper scoring system. And we didn't really understand deeply what scoring really meant at the time. So we hired some of the best scientists in the world. We went from a 12, 13 people company to right now, we're over 300 people with more than 45 data scientists and more than 75 developers, currently all based in Greece. So I'll take you through the transition and the performance of the business over then -- okay. So well, we've already did on the introduction. As I said, I've started multiple businesses. I've exited around four of those businesses over the pace of my career. One of them being a logistics business. I started in Nigeria with a friend of mine. That's when I met Mark. Mark joined us in 2001. And we exited that business. Mark was also a shareholder and we exited that business. But when we exited -- when we started, we started with $300,000 in 1995. And when we left the business, it was a $1.6 billion revenue new business and the business still exists today. So we rebranded in 2022. Optasia comes from a very nice Greek word, which is it could be -- well, optics vision is what it actually means in English as we know today. But Optasia means the appearance of something magical. And that's what we truly believe what we do in terms of empowering people, financial and social inclusion in emerging markets. Since we started over 10 years ago, we really have become one of the very rare extremely profitable fintech businesses across the world. I'm not only talking in emerging markets. And we redefined our brand, which reflects the image and reflects the next 10 years of the business and where we're heading. What is -- what does the business do? I mean, what is it that we actually empower is the question. So we are a white label business. We're not a brand like Coca-Cola, where we sit in front consumer-facing. We're a B2B2C business. So we integrate with financial partners being either banks or mobile operators or any financial institution. And we take data that is scattered all over the place within their environment and we make sense of that data. And we're able to aggregate that data using AI and machine learning capabilities that we developed over the years, create credit scores. We not only just create the credit score and say here is the credit score. We actually say we're going to bring in a financial institution that's going to enable us to lend airtime, data, cash or do simple things like buy now pay later or a product completion where you go on to a Jumia website, for example, and you want to buy something as sneakers and your mobile number becomes your single identifier, you are preapproved and we can complete the transaction for you. And we guarantee, for example, the e-commerce store that we would pay them their money. So this is what we're able to do with this data that we collect. So we sit right in the center between the financial institutions, the distribution partners and the customers. A lot of people claim about AI. And the honest truth is not many companies can deliver an AI-driven technology. As we've seen now a lot of noise around ChatGPT, but I guarantee you, even with ChatGPT or things like this, if you ask a question, you would see automatically, and you show it someone, you see automatically that this has been written by a robot. It's not really AI. It's just gathering data from different sources. That's not what we do. We're really using behavioral science on consumers. Now we take many metrics. We monitor more than 26,000 features per customer before we create that score. 2,000 of those features are the most -- tell us 80% about the behavior and the probability of that customer defaulting. Anyone can say, yes, you started. Yes, I started at the right time. That is the truth. Anyone coming in to start today, we are more than 10 years ahead on the curve. Some small competition we faced between 2013 and 2017-'18. And unfortunately for them, we humbly, I say, we took them out of the market. They don't exist. We hardly see any of those competitors today. And that's, for the very simple reasons, not because we're better. We just understood that we needed to invest a lot more into technology, into the data science itself and the ability to put the customer first and be socially responsible. And that's where many of these companies actually went wrong, is that they assumed just lend to anyone we do a ceiling, meaning you throw seeds out there and you hope that 30%, 40% they're going to pay back. And those 30%, 40% become your clients, and they pay for the 60% that defaulted. We never did that. Our policy has always been we need to be profitable from day 1. We do not burn our base. We do not burn our customers. And the defaults demonstrate this. So on our airtime and data credit products, we have less than 1% default globally. On our cash lending business is less than 3.5 lending, and this is unsecured loans. Now when you look at a company this year that will probably disburse around $4 billion in value that is incredibly significant with 725 million customers on our platform and processing more than 20,000 gigabytes of data daily. So this is the kind of platform capability we have. This just gives you a very simple snapshot about the opportunity we have at our hands. This is a $60 billion-plus market. When you measure our size and considering we're the leader in this field, you can just imagine the opportunity we have in front of us, and there's no one out there to fill this gap. There's not a single company, and we scan the market all the time. So we are in a leading position to actually capture the bulk majority of this market. It goes without saying 62% of people are setting either with no access to standard financial access. I mean, let's take a very simple example. You take a country like Nigeria, over 200 million population with 4,000 or 5,000 branches mainly in three cities in a country with 37 states. Now imagine someone wants to get $50 or $100 equivalent. You think any bank is interested in providing a $50 or $100 loan? Just the cost of acquisition loan is more than that. So there's simply no way for banks to even compete with us. If anything, actually, banks need us in order to create the distribution for them today that they cannot get. So there's no credit bureaus. If you look at the percentage of the world or the emerging markets covered by credit bureaus, simply doesn't exist. We -- one of our biggest countries where we operate cash loans is in Pakistan, and they have a very funny law. Before you lend to someone, you need to obtain a credit score from the Central Bank. Very nice. Except that when you ask for the credit score, it takes 2 weeks to come. And when it comes back, it comes nil. So effectively, you have to do that every time. And so every time we register a customer, we have to ask for that credit score, but we know nothing is going to come back to 0, but it's just a law they put in place. So you can imagine the opportunity that has created for us, and we started to think differently, what did we start creating the credit scores for these customers on behalf of governments where the likes of Experian, TransUnion, Equifax are unable to do that. And I'll come later on when I'm showing the three main verticals, what we've been able to do in Egypt in order to capture this unbelievable opportunity. So what is it that we actually do? So I spoke about the micro lending solutions. This is typically a customer that requires a loan say, up to $100, $50, okay? And they need the money instantly. They are preapproved on our platform. We -- they request a loan or they're trying to do a transaction, it fails. We offer them the loan immediately. They accept. Money is immediately disbursed into their account, into their mobile wallet account. And then they can pay bills, they pay utility, hospital bills, schools, et cetera. They want to do a taxi ride, whatever they want to do. And this product right now is growing at over 100% year-on-year. And this is only because of the limitations of our capability to grow faster than that. Otherwise, it will be even be growing a lot more than this. The airtime and advanced solutions is growing at about 30% a year. This is the technology that we developed that allows someone surfing the web, trying to make a call, someone that doesn't even know how to write. They'll get immediately a voice while they're making a call in their local language telling them you do not have enough credit. Would you like to borrow X? They say, yes, verbally. They got the money credited instantly and the call continues. So there's no missing of calls with operators or any bad customer experience because they didn't forget to charge or there's no way to charge their wallet. And then the data monetization. Now we always speak about creditworthy customers. The reality is, what about those customers that are not creditworthy for whatever reason. Does that mean we cannot monetize them? Yes, we can, by having -- I'm a bad credit worth, Mark is a good credit worth. How about Mark takes care of my credits risk. And this is what we did. So in a lot of the markets where we provide airtime credit, we say, I'm trying to call Mark, but I'm not -- I can't even borrow, but then I will let Mark to call me back, and Mark takes the charge on that call. And this has been an extremely successful product in every single country that we've deployed it. And then we go to the T-score product, and this is what I was saying earlier about banks, governments unable to credit score the customers. So in Egypt, we worked with the government, and we're currently deploying our platform there, is to collect every single data point from every single financial institution, insurance, telecom operators, banks, into our platform, we create the credit scores. And every time anyone wants to do a consumer loan, they can call on our platform for the credit score on that customer. So what we've done is we've created data where there was no data on these customers. And this model, I believe, can be replicated in many high population countries like Pakistan, Bangladesh, Nigeria and so on. So our first test country is going to be Egypt. This is just the short-term loan, as we call it the extra cash. The extra balance is where you're trying to acquire anything. You just need a little overdraft for a very small period of time. This is now being deployed in Uganda as our first country where it will be tested. And again, it's a short-term facility where you just need an extra float in order to complete certain actions. How does this actually work, is we've simplified it. The technology behind this is extremely complex, but on the interface, we understand that this must be very, very simple. So the customer applies for a loan, could be anything, data, cash, airtime credit and so on. We've already -- because we already have the data, we're already preapproved or not approved. And every single person in this room applying will get a different menu based on your capability to borrow. We understand that. So not everybody in this room will get the exact same menu. It's run the algorithm straightaway. Financial decision is taken. The money is credited. Customer repeats the cycle over and over again. I know what's going on in your heads right now, how does the customer pay back. Correct? Well, very simple. When the customer recharges their phone, the money comes to us first, plus our fee before any remaining balance goes into their main wallet, be it in the cash sector or in the airtime sector. When they want to pay back the loan, they can go to the tens of thousands of agents on the streets or to any financial institution or when they receive their payroll into their wallet, we have the first right to actually deduct what is owed to us. And then the cycle repeats. From the moment the customer requests the loan to delivery to that customer is on the 1 second. This is how powerful this technology is. The average customer for the airtime and data credit borrows about 4.7x a month, every month from our platform. The customers that are on our cash lending borrow an average between 1.7 to 2x a month because we do very short-term loans, 1 week, 2 weeks and 1 month. This is our global footprint. We're extremely active in Africa, Middle East and Southeast Asia. And this chart does not actually reflect the new countries that we've actually recently signed contracts with. We don't put them here until we've actually launched the service. And just look at the quality of the banks and mobile operators that we work with globally that trust us to do this for them. We are the -- we've become a core service. We've become a core platform within the environment, one of the best generating revenues for them. A lot of you know Vodacom here in South Africa. Very simple, just go to the financials, the latest financials and read about what we did for them. We are responsible for 48% of their total airtime revenue distribution in South Africa, 48%. This is what this platform does for them. It goes without saying that I learned something from the Nokia, Motorola case, which many of you maybe are not familiar with, whereby Nokia, obviously, with their Symbian technology and their phones and designs and so on, decided, well, we're not going to patent our technology. Motorola saw this as an opportunity, went and patented Nokia's technology and then soon Nokia and then won the case. So -- and this is a very well-known case. So I thought that was never going to happen to us. So we did -- today, we have -- I think it's even now more than 154 patents. And I'm proud to say that one of the most powerful patents we ever got, and this is with the -- from the Patent Cooperation Treaty office, which means it's global coverage, is the ability of Optasia. We own the technology and the trademark that allows us to collect data from telecom operators and create a credit score. We have the exclusive right to do that. Now why do I mention this? It's because again, I follow the Microsoft model. Microsoft over the years encouraged piracy across the world intentionally to get you used to their product, and they knew that they will come where they will start to license that product. In 5 to 10 years, these patents are going to be an amazing source of revenue for us. We don't put them on right now, but this is something that we think of down the road is how we're going to monetize our patents down the road. Michael mentioned when I was here, and I did give a promise that we would double our business and everyone was thinking, yes, is this business sticky enough, and I got a lot of questions and so on. Well, I'm here 3 years later, and I'd like to show you some of what we get considering. This COVID came a couple of months right after I presented. So we couldn't deploy in many countries, obviously, because mobile operators who are allowing us into their premises and so on. But just have a look. We've gone to 31 countries. We've gone from 550 million customers to 730 million customers on our platform. Look at the engagement. We've grown the engagement with our customers daily by 2.5x, where 100 million customers a month engaged with our platform. The deployments have gone from 31 to 49, so we've had multiple deployments in same countries. The distribution has gone from 1.5 billion to 3.5 billion last year. This is 2022 numbers. And I think the most beautiful thing of all, which I think Ethos and every other investor would be happy with, we've actually more than doubled our revenue in 3 years considering -- and this is in dollar terms. So after discounting foreign exchange losses, after discounting all the challenges with COVID, we still managed to double the business. And I can tell you right now, there's some amazing exciting things. Unfortunately, we can't talk about it now. It'll probably be announced around October this year. If I'm invited here in the next 3 years, I can tell you, we're going to double this number again. at least. So I guess that's it. And we're happy to answer any questions that anyone has. Thank you.

A question about the airtime credit. I mean why would there be a 1% credit loss ratio if the person has to pay back before they can reload data? Surely, credit losses would be lower.

So what happens is, within mobile operators, you've got porting. And that's one of the biggest issues is that when a mobile operator is offering very special rates for a period of a month or 2 months, you see all of a sudden, mostly in Africa and Middle East, people carry two mobile phones because one is cheaper to call at night, one is cheaper, et cetera. But sometimes, the mobile operator is desperate and they offer you a 3 months very special offer by this and gone and any unresidual balance goes on to the next month. So you see these offers. What happens is the usage of that customer drops where we lend. So they were a good customer and they stopped borrowing for a period of time. So we start to notice that behavior. So we put them in a little kind of box, say, okay, this is potentially about to churn. So that's one of the key elements that we're constantly monitoring. And you have, of course, other factors. I mean, the factors that we cannot see, guy lost his job or lost his phone, never bother to actually go, his phone got stolen, decides to go get another SIM card and so on, and he had a -- or a phone with a daughter and the daughter -- so there are these things that we cannot really see. Hence, why the default is around 1%. Now when you look at -- for example, there were a couple of companies out there back in 2015, '16, '17, and that default losses were between 7% and 12%. So we've brought it down to the 1% only because of the factors that we cannot control.

That was very, very interesting. Can you remind me what the sizes of Nigeria for your business? What exchange rates you're using? And then what's the impact of the recent launch of the payment service banks by the MNOs in that country?

Yes. So Nigeria, about 5 years ago was 70% of the business. Nigeria right now is under 30% of the business. By end of this year, it's probably going to be around 23%, 24% of the business. And that's not because the shrinking. It's actually quite growing but because of some major deployments that we won that are going live at the end of May and in June. So that ratio is changing, number one. Number two, regarding the foreign exchange, what we do is we do buy export proceeds and so on. So we do pay a premium. Why? Because we don't want to keep the currency, the Naira in the country itself. So as soon as we get paid, we find dollars on the -- from the export proceeds market or -- and then we ship that money basically. We transfer that money out. Saying so, we've recently now started the process of no tap, which allows us to apply to the government and transfer about 40% of our money through intellectual property rights at the official exchange rate. And that is starting to happen. There's a 6 months waiting period. We already took the pain of doing that already months ago, so we should start seeing the flows of that. That's going to drastically reduce our foreign exchange exposure. Regarding your third question about the PSB. The banks are very powerful lobby in Nigeria, and it's one of the only countries where mobile operators are not actually allowed to lend into the wallet. So the PSB is, as a payment system, through the banking. However, we found a legal loophole that actually allows us to lend into the PSB wallet, and we will obtain the approval to do that. And that's simply because we're able to get micro finance licenses and then use that as the basis to lend into the PSB. So you would question, why do you need a PSB then? Well, we need it for the distribution because currently, since MTN launched, they have 7 million PSB customers in Nigeria. So we don't want to use the microfinance solution, which is not our model. We want to use the mobile wallet or what we call the PSB as the distribution platform. So we are integrating actually now in Nigeria, and soon, Airtel is also coming on board. So we'll be able to address actually the bulk majority of the market.

Data privacy is becoming an increasingly looked after thing, just your comments on data privacy. And if you look at remittances and the Mercury system, of transmitting ForEx from one country to another, is that an opportunity for the future to do micro loans or ForEx transmissions?