In the first quarter of 2020, the Benefit Systems Group recorded sales revenues of PLN 386.1 million, an increase of 9% compared to the same period last year. The improvement of the results in this period was connected with the growth recorded before the epidemic (January and February this year), which was influenced by, among others, increasing the number of MultiSport cards to the level of 1,548,900. Closing sports and recreation facilities in mid-March, which translates into a significant reduction in the revenues generated by fitness clubs and as part of the MultiSport Programme, with further raising of costs related to, among others, maintenance of its own sports infrastructure, has a significant impact on the Group's results. The Group is currently preparing for the clubs to be reopened. According to the Company's Management Board, the epidemic will have a negative impact on the Group's financial results in the following quarters.
Key information about the first quarter of 2020
- We are satisfied with the results achieved in the first quarter, because January and February were very good for us. Unfortunately, the changes caused by COVID-19 that have been taking place since March, closing sports and recreation facilities in particular, pose an operational challenge to us and will have an impact on our results in the coming months. Therefore, at the end of the quarter, we took cost-optimising actions to minimise losses connected with the closure of fitness clubs and provide the Group with stability in new conditions. We also decided to expand the MultiSport Programme’s online offer, adapting it to the needs of Poles staying at home, including remote workouts. We are currently preparing ourselves for the reopening of sports facilities. We hope this will happen at the beginning of June – explains Bartosz Józefiak, Management Board Member at Benefit Systems responsible for the Capital Group’s finances.
In the first quarter of 2020 the Benefit Systems Group’s operating profit amounted to PLN 42.9 million, which means an increase of 35% year-on-year. At the same time, the Benefit Systems Group reported the net profit of PLN 2.05 million attributable to shareholders of the parent company against PLN 16.25 million a year earlier. In the first quarter of 2020 EBITDA amounted to PLN 96.3 million, which means an increase of 30% year-on-year.
In the first three months of this year there were 1,177,500 MultiSport card users throughout the country (an increase of 14% year-on-year) and 371,400 users on foreign markets (Czech Republic, Slovakia, Bulgaria, Croatia and Greece), which means an increase of 40% year-on-year. Due to the epidemic, the MultiSport Programme was completely suspended in other countries, while in Poland we started expanding the online offer, which allowed us to keep some of the revenues. At the same time, after closing sports and recreation facilities, all memberships in fitness clubs belonging to the Group in the country and abroad were suspended. As a result, during this period no subscription fees are charged to customers in any of the markets. In Poland, people who have and pay for the subscription cards in fitness clubs managed by Benefit Systems Fitness Branch have access to the Yes2move.com platform, which offers various online sports training. At the end of the quarter, the Benefit Systems Group managed a total of 163 clubs in Poland and 25 on foreign markets.
- The MultiSport Programme is one of the most popular non-financial benefits in Poland and on foreign markets its position in this area is getting stronger every year. Due to the epidemic, we are forced to operate under different conditions. In Poland, our biggest market, we have been expanding the online service package to support physical activity of sports card users at home since mid-March. The offer now includes, among others, sports activities run by our partner facilities, solutions supporting personal development, mindfulness workshops and sports games for children. Due to the closure of sports and recreational facilities, we changed the settlement conditions for MultiSport Programme customers with the access to online services both this month and in the previous one. Customers can alternatively use the option of suspending their cards until the full formula of the programme is restored. In April, about 30% of users used the online offer and this level is still maintained. Therefore, we achieve only a small level of our normal monthly revenues – explains Emilia Rogalewicz, Management Board Member responsible for the sale of MultiSport cards in Poland.
As a result of restrictions introduced in March in connection with the epidemic, revenues of the Poland segment in the first quarter of 2020 were less dynamic than a year ago and increased by 5.1% year-on-year to PLN 299.3 million. Revenues of the Foreign Countries segment (reported jointly for sports cards and fitness) in this period amounted to PLN 80.8 million, which represented an increase of 12.2% year-on-year. In the first quarter of this year the Cafeteria segment (MultiKafeteria and MyBenefit platforms) increased the number of users to the level of 482,800 (24% growth year-on-year). The turnover increased by 11.2% to PLN 85.5 million. The impact of the epidemic on this segment is relatively moderate. The turnover of categories influenced by the authorities' decisions slightly decreased in favour of solutions supporting households’ current needs.
Benefit Systems has already started resuming its operations in individual markets. The first country to reopen sports and recreation facilities was the Czech Republic (April 27), followed by Croatia (May 13) and Bulgaria (May 18). Slovakia – like Poland – should be opened in early June. During the closure of sports facilities caused by the epidemic, a decision was made to close the Greek market, which was due to the moderate interest of employers in the offer and unfavourable macroeconomic forecasts for the country.
Commentary on the Capital Group’s situation in relation to COVID-19
– At this stage, it is still difficult for us to estimate the impact of the epidemic on our activities and the results achieved in subsequent periods. We still do not know how the return of employees from their home offices to regular offices and normal functioning of enterprises will look like. It is also difficult to predict the behaviour of users in the initial period of sports and recreation facilities’ operations and the demand for these services, as well as macroeconomic conditions in the markets in which we run our business. We have ambitious plans connected with restoring our flagship product to the pre-epidemic level and we want to focus on that in the coming months – explains Bartosz Józefiak.
According to the Company, COVID-19 will have a significant impact on the results for the second quarter, and the negative impact will still depend on, among others, effectiveness of the Group's actions in terms of cost savings, the effects of negotiations with business partners and the scope of aid measures undertaken by governments in various markets.
- The issue of rent negotiations is and will be for us one of the key cost areas we are working on. We also continue optimisation activities at the level of direct costs of fitness clubs, sales costs, and general management. We continue to prioritise managing the Capital Group’s financial liquidity. The Group’s current strategy, which assumes stable and long-term development, is a safe option that is helping us to survive the epidemic. We have a solid operating cash flow generated in previous periods and relatively low debt. However, reopening sports and recreation facilities, which will help our sports partners to be back in the game and rebuild their activities after a break, will be crucial – adds Bartosz Józefiak.
The surveys carried out by Kantar for Benefit Systems show an increased need for movement and activity due to the epidemic, which allows us to assume that in the next few months the situation will stabilise. According to the MultiSport Index Pandemic data, as many as 85% of Poles plan to increase their physical activity after lockdown, and 75% of the respondents who used sports facilities before the epidemic plan to return to training as soon as these facilities are reopened.
Additional information on the number of cards in Poland and on foreign markets is available at www.benefitsystems.pl/en/for-investors/.
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Benefit Systems S.A. has been operating on the Polish market since 2001. The company created the MultiSport sports and recreation programme, which supports an active and healthy lifestyle of its users. Sports cards provide access to nearly 4,600 sports and recreation facilities in over 650 cities throughout the country. The Company’s sports offer is also successfully implemented in the Czech Republic, Slovakia, Bulgaria, and Croatia. An important area of Benefit Systems activities is promoting an active lifestyle at every stage of life, which is why the Company undertakes initiatives to encourage physical activity among children, adults, and seniors.
