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$BFIT is a low-cost provider of ~900 gyms in Europe (500 in France). They are a great case study of Nick Sleeps’ concept of ‘scale economies shared’.
Basic-Fit have a long runway of growth and if we normalise to pre-covid revenues they might be reasonably priced.
$BFIT is a low-cost provider of ~900 gyms in Europe (500 in France). They are a great case study of Nick Sleeps’ concept of ‘scale economies shared’.
Basic-Fit have a long runway of growth and if we normalise to pre-covid revenues they might be reasonably priced.
1/
I’ll start with a quick shout out to @vperelman for his podcast with @AndrewRangeley where I first heard the idea.
Additionally @1MainCapital and his commentary on $BFIT in his Q4 letter.
I’ll start with a quick shout out to @vperelman for his podcast with @AndrewRangeley where I first heard the idea.
Additionally @1MainCapital and his commentary on $BFIT in his Q4 letter.
2/
$BFIT revenues have halved since 2019 (pre-covid) from £515m down to £247m. So important to note that a big assumption in the Basic-Fit thesis is a return to pre-covid numbers. Which I think is a reasonable assumption to make.
$BFIT revenues have halved since 2019 (pre-covid) from £515m down to £247m. So important to note that a big assumption in the Basic-Fit thesis is a return to pre-covid numbers. Which I think is a reasonable assumption to make.
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Fitness memberships in Europe are much less common than the US. @1MainCapital in his letter mentioned that 1/3 adults in the US have a fitness membership in comparison to 1/10 in Europe. Possibly some organic growth for $BFIT as that % increases.
Fitness memberships in Europe are much less common than the US. @1MainCapital in his letter mentioned that 1/3 adults in the US have a fitness membership in comparison to 1/10 in Europe. Possibly some organic growth for $BFIT as that % increases.
4/
$BFIT scale economies allow them to pass savings back to the customer. Their scale allows them to buy equipment at lower prices & being a quality tenant allows them to rent cheaper than competitors. They also digitalise sign-ups and require less staff than a typical gym.
$BFIT scale economies allow them to pass savings back to the customer. Their scale allows them to buy equipment at lower prices & being a quality tenant allows them to rent cheaper than competitors. They also digitalise sign-ups and require less staff than a typical gym.
5/
$BFIT build-outs cost 30-40% less than independent operators. This allows Basic-Fit to be the low-cost provider in the region whilst also having better equipment, facilities and services for clients.
Essentially, it’s a better gym for a lower price.
$BFIT build-outs cost 30-40% less than independent operators. This allows Basic-Fit to be the low-cost provider in the region whilst also having better equipment, facilities and services for clients.
Essentially, it’s a better gym for a lower price.
6/
@1MainCapital explained $BFIT unit economics: “a new location typically costs approximately €1.2 million to build, supports 3k+ members, and generates around €375k in annual EBITDA less maintenance capex at maturity, generating greater than 30% pre-tax returns on capital”
@1MainCapital explained $BFIT unit economics: “a new location typically costs approximately €1.2 million to build, supports 3k+ members, and generates around €375k in annual EBITDA less maintenance capex at maturity, generating greater than 30% pre-tax returns on capital”
7/
If we adjust $BFIT revenues to £600m (pre-covid prices + some growth from build outs). We get ~£370m in operating cashflow. Minus ~£180m capex for an adjusted FCF of £190m.
If we adjust $BFIT revenues to £600m (pre-covid prices + some growth from build outs). We get ~£370m in operating cashflow. Minus ~£180m capex for an adjusted FCF of £190m.
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A large portion of the capex is ‘growth capex’ for the new gyms they develop. I don’t know the business well enough yet so would appreciate any $BFIT shareholders to provide insights here. But I’d assume ~30% capex would be maintenance.
A large portion of the capex is ‘growth capex’ for the new gyms they develop. I don’t know the business well enough yet so would appreciate any $BFIT shareholders to provide insights here. But I’d assume ~30% capex would be maintenance.
9/
If that is accurate, $BFIT adjusted/normalised owners earnings would be ~£315m. Current enterprise value for Basic-fit is £4420m, implying an EV/adjusted owners earnings multiple of 14.
Not bad for a low-cost provider with a long runway of scale economies shared.
If that is accurate, $BFIT adjusted/normalised owners earnings would be ~£315m. Current enterprise value for Basic-fit is £4420m, implying an EV/adjusted owners earnings multiple of 14.
Not bad for a low-cost provider with a long runway of scale economies shared.
10/
I’m not long $BFIT, but it’s a company I’ll definitely do some more digging on. Possibly a future write up for my free newsletter:
Seekingvalue.substack.com/p/welcome
I’m not long $BFIT, but it’s a company I’ll definitely do some more digging on. Possibly a future write up for my free newsletter:
Seekingvalue.substack.com/p/welcome
Edit* I wrote that whole thread with £ instead of €. Europeans must hate me right now. Sorry for being an ignorant Australian.
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