Basic-Fit N.V. (OTCPK:BSFFF) Q2 2024 Earnings Conference Call July 26, 2024 11:30 AM ET
Company Participants
Richard Piekaar - Head of Investor Relations
Rene Moos - Chief Executive Officer
Hans van der Aar - Chief Financial Officer
Conference Call Participants
Chandni Hirani - Barclays
Marc Zwartsenburg - ING
Lynn Hautekeete - KBC Securities
Robert Jan Vos - ABN AMRO
Natasha Brilliant - UBS
Operator
Hello and welcome to the Basic-Fit's 2024 Half Year Results Conference Call and Webcast. Please note that today's conference is being recorded and for the duration of the call, your lines will be on listen-only. However, you'll have the opportunity to ask questions at the end of the call. [Operator Instructions]
I will now turn the call over to your host for today's conference, Richard Piekaar, Head of Investor Relations. Sir, you may begin.
Richard Piekaar
Well, thank you, Francois, and good afternoon, and welcome to our conference call everyone, during which we will discuss our results over the first half of 2024. With me today are Rene, our CEO; and CFO, Hans van der Aar. This call is being broadcast live on our website and a recording of the call will be available shortly afterwards.
As usual, I would like to point out that Safe Harbor applies. We will start with Rene, who will discuss the highlights and the operational developments followed by a more detailed look at the financial results from Hans.
After these prepared remarks, we will open the call for questions. Also the call will finish no later than 3 O'clock.
And with that, Rene, I would like to hand over to you.
Rene Moos
Thank you, Richard, and welcome everyone for joining today's call. We achieved a strong set of results in the first half of the year, a period in which there were still macroeconomic and geopolitical challenges.
During the first six months, we expanded our club network to 1,537 clubs and our membership base to 4.1 million. Compared to a year ago, our revenue increased by 17% to EUR584 million, and thanks to a larger base of mature clubs in our network in combination with an increased focus on overhead costs, we could increase our underlying EBITDA less rent at a faster pace of 26% to EUR139 million.
Let's go to the next slide on club openings. In the first half of the year, we grew our club network by a record of 135 clubs. Year-on-year this represents a growth of 234 clubs or 18%. With the full year guidance of our network growth to around 1,575 clubs. We will open a more limited number of clubs in the second half of the year.
In 2023, the growth of our network was more evenly spread across the first and the second half of the year. This year, the net growth of our network in the first 6 months is 78%, based on the full year guidance. Our Spanish network recorded the highest net growth of 62 clubs or 45% reaching 201 clubs.
I will provide more details about Spain and integration of the RSG Spain clubs on the next slide. In France, we added 53 clubs to our network reaching a total of 834 clubs. Compared to a year ago, our French network increased by 116 clubs, which is an increase of 16%. In our newest growth mark Germany, we opened 12 clubs, increasing our German presence to a total of 24 clubs.
Compared to a year ago, our German network has grown by 18 clubs. What we observe is that the clubs in Germany that we have opened in 2024 are showing stronger growth trends after opening compared to the clubs we opened last year. Although, it is still early days and we still have limited brand equity in the region where we operate, I believe that the stronger trend is the result of applying our learnings and increased brand awareness.
One does not make an impact in a local market with just one club. But once people see that you are becoming a logical and affordable choice, thanks to our cluster strategy, trends will improve. In the first half of this year, we opened our first club in Berlin, Frankfurt and second club in Bremen and Cologne. Lastly, our Benelux club network increased by eight clubs with four opening in the Netherlands and four in Belgium.
Let's go to the next slide about the RSG Spain integration. Last December, we announced the exciting news that we reached an agreement with the RSG Group for the acquisition of RSG Spain. At the end of March, we announced the finalization of the acquisition and more recently we finalized the sale of the five Holmes Place clubs that were part of the original 47 club deal.
This means that on balance, we have acquired 42 McFIT clubs. Nearly all of these clubs will be rebranded and refurbished as a Basic-Fit club by the start of the important sales season in September. On the slide, you can see where the 42 clubs are located. We have a regional approach when it comes to conversion. And we are well underway in the Madrid and Barcelona clusters.
At the moment, at the end of July, we have already successfully converted 19 clubs and four clubs are currently in the process of being converted. On the next slide, you can see some pictures of a few recently converted McFIT clubs. Our team in Spain is doing a remarkable job with regard to the pace and efficiency of the conversion process.
As you can see on this slide, these clubs look like brand new Basic-Fit clubs and are a good and welcome addition to the Basic-Fit network in Spain. Let's move to the next slide on membership growth. In the first half of the year, we increased our membership base by almost 300,000 to 4.1 million.
Compared to a year ago, our membership base increased by almost 0.5 million members or 13%. We recorded membership growth in all our countries with the strongest performance in the Benelux countries and Spain. In Germany, as I explained in the previous slide, we see a gradually improving membership growth trend, notably with the newer clubs as we continue to build brand equity.
Market condition in France remained somewhat challenging during the first half of the year. The second quarter, however, showed some improving growth trends in France. In our Q1 trading update, we announced the implementation of new management structure in France, in which we separated the responsibilities for club expansion and club operations.
We have also divided the country in separate regions with each region being overseen by its own dedicated business manager. To further improve the membership experience, we continue to invest in the quality of the clubs including the offering of massage chairs and longer opening hours, which we are currently testing in different clubs and in different regions.
The uptake of the premium membership by joiners remained around 50%. Premium membership accounted for 43% of our total membership base at the end of the first half. Note that our total membership base including the new RSG Spain members who do not have a premium membership.
Excluding these new members, the penetration rate would have been 44%. Although, we are only about halfway the conversion of all McFIT clubs in Spain, so far membership trends post conversion are better than we expected.
Let's go to my last slide before I hand it over to Hans. As we have explained at the time of our full year 2023 result, in our club rollout plans for 2024, we have taken into account the cash flow and macro developments. With year-to-date 143 net openings today, we now operate a network of 1,545 clubs.
As I explained before, our club network growth is skewed towards the first half of this year. This automatically means that a more limited number of openings are planned for the second half of the year. With that in mind, we confirm our club growth target for 2024 to around 1,575 clubs compared to 1,402 clubs at the start of the year.
For the full year, we expect the average CapEx for newly built club to increase slightly to around EUR1.25 million from EUR1.18 million in 2023. The small increase reflects a combination of modest cost inflation and fewer regional club openings in France than in 2023.
This concludes my part of the presentation. And now I hand it over to Hans for the financial review.
Hans van der Aar
Well, thank you, Rene. In the next two slides, I will quickly walk you through the main elements of our income statement and our underlying performance.
Total revenue increased by 17% to EUR585 million. Thanks to the growth in memberships in combination with an increase in the average monthly yield to EUR23.80 from EUR23.13 a year ago.
Underlying club EBITDA less rent which is the IFRS based club EBITDA minus the invoiced rent costs of our opened clubs and adjusted for exceptional items increased by 18% to EUR214 million. Club operating costs related to rents and personnel both increased by 20% compared to the first half of 2023 due of course to a combination of higher costs related to our increasing network and low to mid-single-digit rent and wage cost inflation.
Other club operating expenses increased by 10% to EUR147 million. The lower increase of other club operating costs compared to personnel and club rent costs reflects the benefit from a lower energy bill compared to a year ago.
Bad debt write-offs in monetary terms as well as a percentage of revenue increased compared to the first half of 2023. Compared to the second half 2023, the bad write-offs as a percentage of revenue was stable. In our largest market, France, the rate improved compared to the second half of 2023.
Underlying EBITDA less rent increased by 26% to EUR139 million compared with EUR110 million last year. Operating leverage has received our increased intention over the past year. At our CMD in November 2023, we communicated our aim to reduce overhead cost excluding marketing to be between 6% or 7% of revenue in the medium term.
In the first half of 2024, we made good progress towards achieving this goal by reducing overhead cost excluding marketing by 100 basis points to 7.2% of revenue compared to the first half of 2023. As a result overhead expenses have increased by only 4% to $42 million.
Marketing expenses increased by 12% to EUR32 million. Marketing expenses as a percentage of revenue came in at 5.5% which is in line with our medium term target range of 5.5% to 6% and lower than the 5.9% of revenue we spent in the first half of 2023.
Let's go to the next slide. Operating profit increased by 72% to EUR55 million compared with EUR32 million in the first half of 2023. The reasons for this strong increase include the same factors that drove our high EBITDA in the first half of the year as explained in the previous slide.
Operating profit also benefited from a lower increase in depreciation charges for our fitness equipment, thanks to our Smart Refurbishing initiative. We announced our Smart Refurbishing initiative at our CMD last November.
Under this initiative instead of fully replacing all of our fitness equipment after six or eight years, our fitness equipment partner pays regular visits to the club to maintain and refurbish the equipment. The maintenance and service activities extend the useful life of the fitness equipment to 12 years.
This change has resulted in a EUR5 million decrease in the depreciation of fitness equipment for the April to June 2024 period compared to the depreciation prior to the start of the Smart Refurbishing. After tax this has a positive impact on net profit of around EUR3.5 million.
Our cash finance costs increased to EUR22.8 million in the first half of 2024 compared with EUR13.5 million in the first half of 2023 and EUR21.1 million in the second half of 2023. The strong year-on-year increase reflects higher average interest rates due to the expiration of favourable hedging contracts in May 2023 and a higher average level of bank debt than in the previous year.
The higher average level of bank debt results from the decision to open 78% of the targeted club openings including the RSG Spain acquisition in the first half of 2024. The net result for the first half 2024 was a profit of EUR4.2 million compared to a loss of EUR6.1 million in the first half of 2023.
On an underlying basis, we report a year-on-year increase in net profit of 126% to EUR13 million. You can find all the adjustment in the table. Well, let's go to the next slide on mature club development. As you know, we consider a club mature if it is at least 24 months old at the start of the year.
This means that roughly speaking clubs are accounted for as mature in our reporting after approximately 30 months. Our 993 mature clubs ended the first half of 2024 with an average of 3,175 memberships. That is slightly below the averages we reported for June and December 2023.
In 2024, the 2021 club cohort was added in the mature club base. These clubs were impacted during their important ingrowth period by COVID-19 closures and restrictions and have an average membership count below the average of the group. The continued high uptake of the premium membership although supportive to our average yield per member is also having a negative impact on the average membership per club.
Still in the medium term, we expect the average mature club to have 3,250 membership as communicated at our CMD in November last year. As you can see on the slide, we are now also resuming full mature club underlying EBITDA less rent disclosure on a half yearly basis.
Compared to a year ago, our mature clubs generated a 16% higher underlying EBITDA less rent of EUR188 million. On an average club basis, this resulted in an underlying EBITDA of EUR189,000 compared to EUR182,000 a year ago.
Like last year, we expect mature club profitability to improve in the second half of the year as a result of the further gradual increase in average yield per member and growth in memberships. Let's go to the next slide on CapEx. The average CapEx for the newly built club was EUR1.25 million which is in line with our guidance.
As Rene already mentioned, the small increase compared to last year reflects a combination of modest cost inflation, the opening of more clubs in Germany, where we are starting in the more expensive city centers and fewer regional club openings in France than in 2023. As a reminder, regardless of the initial CapEx for a club, we only sign a lease contract for a new club when we expect to achieve a ROIC of at least 30% when a club becomes mature.
Maintenance CapEx was EUR15,000 per club. And we expect, as communicated with our full year results in March, a full year amount of around EUR55,000 per club. The relatively low maintenance spending in the first half of the year should be viewed in relation to the relatively high number of club openings and the RSG Spain acquisition during the same period.
For the period through 2030, we expect maintenance CapEx to remain about EUR55,000 per club per year and this is also possible thanks to our Smart Refurbishing initiative. Other CapEx amounted to EUR9.4 million. Other CapEx consists of investments in innovations and software development and sustainability related investments.
The sustainability related investments amounted to €2.5 million and are mainly related to the energy transition and include a conversion from gas systems to electric systems and installation of solar panels.
Let's go to the next slide on financing. Net debt excluding lease liabilities was EUR944 million at the end of June 2024, compared with EUR804 million at year-end 2023. The higher net debt reflects the decision to open 78% of the targeted club openings, including again the RSG Spain acquisition in the first half of the year compared to 51% for the first half of 2023.
With a lower level of club openings in the second half of the year, we anticipate a lower net debt level at year-end 2024. Including committed, but undrawn facilities, we had available liquidity of EUR104 million at the end of June 2024.
In May of this year, we have exercised the first of two extension options. As a result of which we have extended our existing term and revolving facilities agreement by one year to June 2028. Our remaining option allows us in 2025 to extend these facilities by another year to June 2029. In 2024, debt repayments are limited to the repayment of EUR18 million of the German Schuldschein loan bringing to zero.
The net debt to adjusted EBITDA ratio was 2.8 times at the end of June 2024 compared to 2.6 times at the end of December 2023. Our midterm leverage ratio target remains below two times. Well, let's go to the final slide of our presentation, the outlook for 2024.
We are comfortable with our full year guidance for 2024 and accept further strong growth of our membership base. We reiterate our 2024 full year guidance for club network to increase to 1,575 clubs, revenue between EUR1.2 billion and EUR1.25 billion, average revenue per member per month to increase to at least EUR24.50.
Underlying EBITDA less rent between EUR305 million and EUR330 million. Free cash flow before new club expansion per share between EUR2.60 and EUR2.95 and finally ROIC of mature clubs of well over 30%.
This concludes our presentation. And operator, please open the lines for questions.
Question-and-Answer Session
Operator
Thank you, sir. [Operator Instructions] Our first question comes from the line of Shani Ihilani from Barclays. Please go ahead.
Chandni Hirani
Hi. Thank you for your presentation guys. So first question is your EBITDA per mature club was obviously up 16% to EUR189,000 per club. Our full year results, I think, you said you expect EBITDA per mature club to improve to EUR460,000 in two to three years with a good step made in 2024. Is that still the aspiration for the medium term? And if so, what gives you that confidence of growth coming in, in H2? The second question is, can I just check on why there's a bigger discrepancy this quarter between cash rental expense costs, which is that principal and interest on the cash flow and the rental expense of open clubs on your income statement I think it's 132 million versus 157 million. And then the final question is, Planet Fitness obviously opened its first club in Spain earlier this week, which is quicker than, I guess, what most people expected. And it seems that they might be going full throttle from here. What are your latest thoughts on this? And how are you feeling about the competitive environment in Spain? Thank you.
Hans van der Aar
Well, thanks, Chandni, for your very good questions. First, the EBITDA on the mature clubs. We're still confident that we can reach the 460K on our mature clubs on average on the midterm. And that means, of course, as I've said at the Capital Market Day in two to three years. What we see of course that average EBITDA in the mature club is now slightly diluted by the addition of the 2021 clubs, but we still see improvement on those vintages and we're still very confident that we can reach to 460K due to the fact that we'll see a gradual increase of the yield and still a growth of membership. Of course, every time the second half of the year is much better than in the first half of the year by the increase of memberships and increase of the yield. To come to your second question about the difference in the cash rent cost in the cash flow statement and in the P&L. Well, there's a difference what we put in the cash flow statement is the rent that we actually paid. And of course there's always a timing issue in that. So when we didn't pay the rent in the month June, it's still on our balance sheet. So we include only the cash payments on rent in our cash flow statement, but the invoice rent is part of our P&L So there will always be a small difference in those numbers.
Rene Moos
And the last question about Planet Fitness, the thought about that. I think in Spain there's still a lot of room for growth. If you look at the fitness penetration currently in Spain and what it could be. So I would say that having new players enter the market is not bad for the growth of the market. I'm not sure if it's a bit earlier than we expected, but it is the first club is open and I think they're going to open a few more over the coming weeks. So overall, again, it's a big country. It's still very immature country. So I think it's a good thing that more change will join to increase the fitness penetration.
Chandni Hirani
Lovely. Thank you, guys.
Operator
The next question comes from the line of Mark Swartzberg from ING. Please go ahead.
Marc Zwartsenburg
Yeah, good morning, gentlemen. Thanks for taking my questions. First, I think for Hans, the -- you mentioned the net debt and the working capital that there is a sort of different policy in place. Can you remind me perhaps what you have changed? And is there a bit of a knockover effect also from the gyms that you opened at the end of last year that were paid in Q1 and that you don't have that effect this year, that advantage, so to speak, that it moves over to next year because of the phasing in of the gyms more now geared to the first three quarters of this year. So can you give an indication of what the impact has been from that on your working capital and this on your net debt? That's my first question.
Hans van der Aar
As you explained, these are the elements that will influence -- that impacted our working capital. First, the policy. Well, we come from a COVID period. So we paid a bit later to keep the money in and to be able to fund our growth. And now we're back to normal again, so we now pay our suppliers on time and like we want to do, because we want to be a good partner and a healthy company. So now we pay them on time. And the other reason is exactly what you explained. We'll have opened more clubs in the first periods of this half year, meaning that we'll not open a lot of clubs in the end of this quarter. So the trade payables on that account is less than in the year before than where we opened. The openings were more evenly spread over the year. What we saw next year that we also had already the invoices in clubs that we opened in August and July of 2023 and September. So we already get the 90% invoices of our builders, which of course were part of the trade payables because we paid them when the club was opened. So those elements had an impact on the working capital. Beware that for the second half of the year, we'll also not open a lot of clubs at the end of the year. So the impact on the working capital will remain. And don't expect a higher working capital negative working capital at the end of the year.
Marc Zwartsenburg
Yes. And since your working capital as a percentage of revenues came down by six percentage points, should we then take 6% of your total revenue base that is the impact roughly of EUR50 million, EUR60 million negative? Is that a bit how we should look at the ballpark here?
Hans van der Aar
I think if you look at the percentage of working capital that is now for revenue, you can stick to that number.
Marc Zwartsenburg
Thanks for that. Then the other question on France. At Q1, you indicated that you were that you made some changes there to the operations and also trying to fix the quality of the gyms. In Q2, I think, as far as I've learned, those tickets have been fixed. Do you see can you see already or is it too early to see some traction in those churns that in growth is improving or the churn coming down or a combination of both? Do you see any change you have in this already that in France the trend is going back more to normal again?
Rene Moos
Well, what we see in France in the second quarter is that going a bit better than the first quarter. So it is improving. So we see in new clubs, but also in mature clubs that we have made a turn in the second quarter. Of course September, October should prove some more, but at least we made a turn. So it is definitely going better than Q1. We're also completely back to the standards that we like to be. And I think that the fact that we have been growing really fast and as you can see more than 100 clubs in the last 12 months putting that in the hands of one team was maybe a bit much. So taking the operations separate from the new builds, I think, is the right way to go. So, yes, we are comfortable and we're seeing improvement in the second quarter.
Marc Zwartsenburg
All right. Thank you for that. And then one on The Netherlands. So the discussion around an increase in the VAT potentially, can you share us where we stand as a sector or gym sector in terms of lobbying to prevent that from happening? Are you confident that it will happen or not happen? But let's say, if it happens, have you already decided what you're going to do in terms of pricing or something else?
Rene Moos
Yes. Well, the sector lobbying is I think is full speed ahead. We are not sure how that will end up of course. But we are on top of it. We're supporting those groups and we have still time of course because they're talking about January 2026. So it's not something that's going to happen next year. But so we still have time to do some more and more lobbying. We of course think it's the wrong decision. But yeah, if they need money, they need money, I guess. But it's 2026 and we're working on it. Not sure that where that will end. But on the other hand, it's also good to mention that Spain has announced that it is probably changing their VAT on fitness as of the 1st of January 2025, so five months from now from 21% to 10%. So that is a flip side on the other side. So, for instance, if the Netherlands is going the wrong way, it would be good. If Spain is going the right way that they balance it out.
Marc Zwartsenburg
How certain is that?
Rene Moos
Well, it is what we read and what we understood it is fairly certain. But again it's maybe there's lobby groups working the other way around in Spain. So let's see if it's really going to happen in January coming year. But what I wrote down and what are in the papers is that it's going to happen. But let's see.
Marc Zwartsenburg
Yeah, the question is also what have you already decided what to do if it happens in the Netherlands? Would you then change pricing? Or would you opt for a general price increase across the board to keep the prices similar?
Rene Moos
No. We would not change pricing because of the VAT, but we are currently working with a pricing agency to optimize our top line and look at what to do. It's always the combination of yield and membership of course. Having a higher yield means less membership and the other way around. So we're working on our top line and we could see some changes some small changes maybe in September and some bigger changes in the January period next year.
Marc Zwartsenburg
So you already decided in the next month or so what to do for September and then maybe further?
Rene Moos
Correct.
Marc Zwartsenburg
Changes in January. Okay. All right. You're willing already to share a bit or is that will there be a press release later on?
Rene Moos
Yes. There will be a press release later on, but we have had a lot of discussions already with all of you about the high usage of the premium membership. So the high use of premium membership is not only that they bring every month a few friends, but also they're coming like 20%, 25% more times than the comfort members. So we will look at optimizing that membership.
Marc Zwartsenburg
In terms of that you cannot take a friend that many times or you have to pay more combination?
Rene Moos
Yes. Combination of different things. But that is why we have the pricing agency. So I don't know yet exactly where that is going. But for sure we will look at that.
Marc Zwartsenburg
Okay. Thanks very much. Those were my questions.
Rene Moos
Thank you.
Operator
The next question comes from the line of Lynn Hautekeete from KBC Securities. Please go ahead.
Lynn Hautekeete
Good afternoon, everyone. Thanks for taking my questions. I have two. First of all, I was wondering if you could give a small update on franchise maybe, the time line and how the discussions are going?
Rene Moos
Yes. Well, we're looking at franchise what we said during the CMD that in the last quarter this year we will communicate our plans. Nothing changed to that. So we will continue we are spending a lot of time out. We're very optimistic and positive. We see a lot of opportunities, but we will communicate it later this year.
Lynn Hautekeete
All right. That's clear. And then maybe secondly, if I look at the mature members, per club, it stands at 3,175. And in medium term, the guidance is 3,250. How confident are you that you will reach that? And also wondering, if you could give maybe some more details on the mature members per club in the Benelux versus France?
Rene Moos
Yes. So we are very comfortable that we will reach this 3,250. So we're very comfortable that in the midterm we will reach this number. And we're not sharing exact number dates per country of member dates and numbers per country.
Lynn Hautekeete
Okay. Thank you.
Rene Moos
Thank you.
Operator
The next question comes from the line of Robert Vos from ABN AMRO. Please go ahead.
Robert Jan Vos
Yes. Hi. Good afternoon all. Thanks for taking my questions. First question is a bit general. Can you maybe spend a few words on the competitive landscapes in general and competitive behavior? For example, do you see a lot of promotions? Do you see changes in membership fees? And what about apart from the already discussed Planet Fitness initiative in Spain, do you see club openings by competitors? That's my first question.
Rene Moos
Yes. If you look at the competitive landscape, not a lot has changed. So if you look at the openings we have done in the first six months, I think, it is more than the number two till 10 together. So we are still growing a lot faster than our competitors. What we see in the very aggressive competition in Germany with EUR1 for six months is not being offered anymore. Of course, the more clubs you open, it's pretty impossible for them to keep that up because there is no income, because we will continue opening clubs. So it is per country, it's a bit different, but overall no big changes. We're by the fastest growing company in fitness in the countries where we are.
Robert Jan Vos
Okay.
Rene Moos
And you see about pricing, pricing maybe something to add. We have seen increasing in prices pretty much all over the -- with most of our competitors, if not all.
Robert Jan Vos
Okay. Thanks for that. My second one is a clarification question. Apologies for not listening well to Hans. But what did you exactly say on your expectations for net debt at the end of 2024? Did you say that it will be lower than half year or lower than last year?
Hans van der Aar
No, I said lower than the end of this half year. So we are now on 944 and we expect on a lower level than that number. We have to take into account that we will repay the Schuldschein in October, EUR18 million
Robert Jan Vos
Okay. That's clear then. Thank you.
Hans van der Aar
Thank you.
Operator
[Operator Instructions] The next question comes from the line of Natasha Brilliant from UBS. Please go ahead.
Natasha Brilliant
Thank you for taking my questions. I have three as well. The first is on club openings. And maybe it's too early, but whether you have any view on 2025 yet. Do you think it will be closer to this year or back to the 200 plus number that you've previously targeted? Second question is on Germany. You mentioned some learnings. Is there anything you can share with us about what you might have learned? Is there anything that surprised you or anything to think your medium term goals might be a bit ambitious? And then finally, just on the bad debt write-downs, you said it was similar to the second half of last year. Is there any color you can share as the quarter has progressed and particularly in recent weeks in France? Anything you can talk about there? Thank you.
Rene Moos
Okay. Let me start with the club open for 2025. So this is something that we will communicate in March next year with expectation on turnover, club opening etcetera. So we will do that same as this year. The learnings of Germany, it is definitely marketing wise. We've been trying different things and there we have stepped up some and did some different ways of marketing. And we see definitely big improvement in the new club openings. So, overall, what we have learned from the German market is, of course, if you're in a city with one club you're not really a competitor. If your competitors have 10 or 15 clubs open, so we definitely need to it takes time for as it has taken time in every country. In Spain it also took a few years for your cash flow breakeven same as in France. So going to a new country cost money and cost time, but once you have a bit mature base or once we have this say 7,500 clubs open and we expect that to happen in the near future then we will have better brand recognition and then we are more logical choice. We have signed for Germany of 40 locations. We're actually building right now as we speak. So and we are in negotiation with a lot of clubs. So our focus for the coming years will be Germany and Spain. And yes and we are happy with what we have seen in the openings of the new clubs this year so far.
Hans van der Aar
Regarding the bad debt, well, it's if you look at the evolution of the bad debt write-offs, I'm very happy that we can get it on a stable level. And I'm especially happy that we see a lower rate of bad debt write-offs in France, because as explained before, in France it's more difficult to get back the money for people who didn't pay. So I'm happy that we took the measures to improve that number. If you compare it to the first half year of 2023, of course, the percentage is much higher. We have to take into account with restarted 2023 and already in 2022 with a more clean sheet because we already wrote-off all the debts that we had during the COVID period. So we started with a lower debtors number and resulting in a lower debt write-off. But I like to compare it with the 20 the second half year and then we are more or less on the same level. So if you then take into account we already have more members in Spain and France, with more difficult to get that money back from not paying members. In Spain, it's even allowed to cancel your membership in contract. So if you take that into account, I'm very happy with the percentage that we can show now on that bad debt level.
Natasha Brilliant
Thank you.
Operator
There are no further question. We are now reaching the end of today's conference call. I'd like to hand over to Richard Piekaar for any closing remarks. Please go ahead, sir.
Richard Piekaar
Thank you, Francois, and thank you, everyone, for joining this call today. If there are any follow-up questions or further questions at any point, please contact David or me and we're happy to continue the discussion. Have a nice day. Bye-bye.
Hans van der Aar
Thank you all.
Rene Moos
Thank you.
Operator
Thank you for joining today's call. You may now disconnect your lines.