Holmes Place 2025: More Clubs, More Members, but 2026 Will Be Judged on Cash, Not EBITDA

Getting to Know the Company

Holmes Place is no longer a survival story. It is a nationwide network of 78 clubs, with 214,468 members at the end of 2025 and 202,506 average members during the year. On the surface the picture looks straightforward: revenue rose 6.6% to ILS 588.6 million, EBITDA excluding IFRS 16 increased to ILS 100.6 million, and the banks do not look remotely worried. But that is only a partial read.

The better read is that the group now runs on two very different engines. The mature Holmes Place and Family segment carries most of the profitability. Icon, the low-cost format, carries most of the opening pace and most of the growth story, but it is still not producing the same quality of earnings. That is why 2025 looks like a transition year: the footprint is bigger, but the bottom line and the cash left after real uses have not caught up with the volume yet.

What is working now? The network is still expanding, churn improved, the premium segment is lifting profitability, and direct bank leverage remains moderate. Why does that matter now? Because 2026 will show whether the clubs opened in 2025, the Revo acquisition and the next openings can become a new earnings engine, or whether they mostly add more capex, more lease burden and more ramp-up time.

What is still not clean? Net profit fell 39.3% to ILS 28.2 million, finance expense climbed to ILS 66.2 million, taxes moved from a tailwind to a headwind, and all-in cash flexibility remained tight after investment, lease principal and dividends. That means the market can look at EBITDA and think the story improved more than common shareholders actually feel in cash terms.

The 2025 economic map makes the split clear:

Events and Triggers

Revo and Pitland: In 2025 Holmes Place stopped relying only on organic club openings. The company completed the acquisition of 51% of Revo Fitness, a women-only Pilates reformer operator with 2 owned clubs and 11 franchise locations, for total consideration of up to ILS 15.3 million. It also acquired the Pitland gym activity in Netivot for ILS 2.336 million, with around 1,000 members, and converted it into the Icon format. This broadens the portfolio, but it also adds another layer of integration, intangible assets and goodwill, not just more cash generation.

The opening pace is still high: Two Icon clubs opened in the fourth quarter, in Yavne and Netivot. After the balance-sheet date, Icon clubs opened in Ramat Hasharon in January 2026 and Zichron Yaakov in March 2026, and pre-sales began for Icon Agamim Netanya in February 2026. At the same time, the Family clubs in Be'er Yaakov and Even Yehuda are slated for the second half of 2026, while Be'er Sheva and Harish still depend on permits, execution and approvals. That is the core point: the forward thesis depends much more on the maturation of what already opened, and on timely delivery of a known pipeline, than on distant future assets.

Capital and governance: In September 2025 the company raised ILS 69.3 million in a private equity issuance. In January 2026 CEO Keren Shtui agreed to buy 7,503,552 company shares for ILS 51 million, of which ILS 6 million is cash and the balance is a Non-Recourse seller loan for 60 months with an extension option. That is an important alignment signal, but it needs precision: it is not new capital going into the company, it is a secondary transaction between shareholders. It improves alignment, not liquidity.

Finance handoff: Effective May 1, 2026, Shimshon Tauber will stop serving as CFO and continue as an adviser to the CEO and the CFO. Ariel Hadar, previously the company controller and corporate secretary, will become CFO. This looks more like an internal handoff with continuity than a management shock.

The company still pays out: From the start of 2025 through the report date, the company distributed ILS 49 million in dividends, and it approved another ILS 12 million distribution for May 2026. That reinforces management's confidence message, but at the same time it increases the cash test, because the same company is opening clubs, acquiring activities and paying heavy lease obligations.

Efficiency, Profitability and Competition

The central insight here is that the network is growing as one group, but its economics are splitting. The Holmes Place segment, with 34 clubs, lifted revenue to ILS 424.4 million and operating profit to ILS 74.0 million. The Icon segment, with 44 clubs, increased revenue to ILS 164.1 million, but operating profit fell to ILS 24.2 million from ILS 31.2 million a year earlier. Growth is still there, but growth quality is no longer uniform.

Premium carries the earnings, low cost carries the story

The quarterly numbers sharpen the point. In the fourth quarter of 2025, Holmes Place segment revenue rose 6.1% to ILS 110.5 million, while segment EBITDA rose 18.5% to ILS 30.2 million. In the same quarter, Icon grew revenue 11.0% to ILS 42.9 million, but segment EBITDA fell 3.3% to ILS 11.8 million. It is a mistake to read those two growth figures as the same type of growth. In Holmes Place, this is maturity. In Icon, it is still forward motion with margin pressure along the way.

The reason is not only one-off expense noise. Pricing tells the same story. The group's average monthly revenue per member fell to ILS 242 from ILS 247. In Holmes Place it fell to ILS 307 from ILS 315, while Icon stayed flat at ILS 161. That is exactly what a shift toward a cheaper mix and a larger share of still-ramping locations looks like: member growth can keep rising, but not every additional member generates the same profit.

There is also a real positive datapoint. Average monthly churn improved to 4.9% from 5.1% for the group, and to 6.1% from 6.4% in Icon. So demand is not broken. The issue is not the lack of customers. The issue is how long it takes for those customers to translate into mature margins.

The backlog is softer than it looks

At first glance the signed revenue base also looks encouraging. In Icon, expected future revenue from signed but not yet consumed contracts stands at ILS 56.7 million. But the company itself notes that subscriptions can be cancelled, usually with one month notice and cancellation fees. This is not backlog in the industrial or infrastructure sense. It is more like a pool of contracted revenue with some stickiness, not a hard committed book. A reader who translates that number into full certainty is taking an easier read than the economics justify.

Who is paying for growth

Icon operates on a model built to lower the customer price point and win scale, using smaller footprints, cheaper locations and leaner staffing. That works well in the penetration stage. The issue is that the company is now past the point where the only question is whether there is demand for low-cost fitness. By the end of 2025 Icon already had 44 clubs, and 46 by the report date. The real question now is whether Holmes Place can sustain that opening pace without constantly creating more ramp-up periods that leave earnings one step behind volume.

Put differently, Holmes Place no longer needs to prove that it can sell subscriptions. It needs to prove that it can mature Icon faster. Otherwise the group can keep getting bigger while net profit still looks too small for the scale.

Cash Flow, Debt and Capital Structure

The key point here is that Holmes Place's bottleneck is not the bank covenant package, but the all-in cash test. The banks are actually comfortable. Net debt to EBITDA for covenant purposes was only 0.63 at year-end, far below the ceiling of 3. Equity for covenant purposes stood at roughly ILS 293 million against a floor of ILS 50 million, and the covenant equity ratio stood at 55% against a 25% minimum. This is not a classic bank-debt stress story.

But it is absolutely a real-cash obligations story. I am using an all-in cash flexibility bridge that starts from operating cash flow. In that bridge I subtract actual cash uses from cash generated by operations. Because operating cash flow already includes interest paid, and the company paid ILS 53.3 million of total interest in 2025, the lease figure I subtract here is lease principal only, ILS 86.1 million, not total lease-related cash outflow, so I do not double count interest.

The implication is clear. In 2025 the company generated ILS 164.3 million of operating cash flow, but it also spent ILS 81.9 million on capex, ILS 86.1 million on lease principal, ILS 38.0 million on dividends actually paid, and another ILS 7.3 million on acquiring activity and a company. Anyone who stops at EBITDA of ILS 100.6 million, or even at operating cash flow of ILS 164.3 million, is missing the main point. After all real uses, there is not a large cash surplus here.

That is why year-end cash fell to just ILS 20.8 million from ILS 27.2 million despite strong operating cash flow. What balanced the picture was ILS 69.3 million of equity issuance and ILS 60.7 million of new borrowing, against ILS 86.0 million of loan repayments. In plain language, 2025 does not look like a distress year, but it also does not look like a year in which the business fully funded its own appetite.

Negative working capital is not magic

The company is right to explain that negative working capital is part of the model. Customers pay in advance, while suppliers are paid with credit terms, which is why the group ended 2025 with negative working capital of ILS 153.5 million. The current liability base also includes ILS 33.0 million of deferred revenue and ILS 94.4 million of current lease liabilities. That means the working-capital deficit is not automatically a distress sign.

But it is not a reason to ignore cash either. The model works nicely as long as monthly subscription inflows remain steady, operations are continuous and the clubs stay open. The minute the system pauses, even briefly, as it did during the June 2025 closure period and the February 2026 closure period, it becomes obvious how dependent the business is on continuous billing and selling.

Covenant room is wide, but IFRS 16 still matters economically

The most important gap in the report is the gap between banking comfort and economic weight of leases. The covenants are measured on numbers adjusted to exclude IFRS 16. That is why the company looks very strong in that framework, and fairly so. But for shareholders this does not change the fact that the full balance sheet carries ILS 1.097 billion of lease liabilities, and the 2025 cash paid for leases reached ILS 134.5 million. That matters because it determines how much real freedom management actually has.

Direct bank debt itself is manageable. Principal outstanding stood at ILS 84.4 million, down from ILS 109.8 million at the end of 2024. The company also retains unused credit lines, which materially lowers short-term liquidity risk. On the other hand, the banks sit behind a broad security package that includes a floating charge, equipment and rights to credit-card receivables. So even if the banks are relaxed today, this is not soft, unsecured debt.

Outlook

First finding: 2026 looks like a proof year, not a clean breakout year. The company still has to show that the 2025 and early 2026 openings are moving from ramp-up into mature profitability.

Second finding: The fall in 2025 net profit was amplified by the shift toward more normal tax expense and by higher finance expense, including a one-off component tied to the arbitration ruling. The bottom line therefore looks weaker than the underlying operating business.

Third finding: That does not mean the whole problem can be adjusted away. Even after stripping out noise, Icon still shows margin pressure. So the thesis will not improve just because finance expense declines.

Fourth finding: The company does enter 2026 with some real tailwinds. After prepaying roughly ILS 40 million of debt, management expects finance expense to decline. Revo will also contribute for a full year rather than only from the fourth quarter.

Fifth finding: Even if management reaches its 2027 EBITDA target of ILS 121 million to ILS 134 million, and its 2030 target of ILS 165 million to ILS 172 million, the path there first runs through the maturing of engines that already opened. It does not run only through distant assets such as Harish or Be'er Sheva.

This also helps separate long-term targets from the next twelve months. Holmes Place presents a clear growth plan: improve profitability in existing clubs, open new clubs and pursue adjacent business opportunities. That is a positive signal because there is actual strategic direction here, not generic talk about growth. The issue is that the immediate 2026 test is shorter-dated: Icon must show that clubs opened in 2025 are moving faster toward mature margins, Revo must prove that it contributes more than the cost layer it adds, and the group must show that Family openings do not trigger another squeeze on the cash balance.

The company itself also highlights two more points. The first is tax. In 2025 accounting tax expense stepped up sharply, and management estimates that over the next 3 to 4 years the cash tax rate will move from roughly 15% toward the normal 23% corporate rate. That means even if the model improves, reported profit is unlikely to get the same accounting support it enjoyed in earlier years.

The second is security risk. Management believes the February 2026 closure period should not have a material effect on the first quarter of 2026 or the full year, as long as there are no additional closure days. That sounds reasonable, but it also means the base-case outlook explicitly depends on operational continuity. Any deviation from that assumption will show up quickly in sales, renewals and summer-related revenue.

That is why 2026 looks like a combined proof year: not only a demand test, but a conversion test. For the thesis to strengthen, the company needs to show lower finance expense, better Icon margin, on-time openings in Be'er Yaakov and Even Yehuda, and enough capital-allocation discipline to avoid letting the dividend crowd out flexibility again.

Risks

Legal and regulatory load

The legal burden here is not a footnote. The group faces claims totaling roughly ILS 36.9 million and carries a provision of ILS 10.0 million. Beyond that, it has a long list of class actions around pricing disclosures, CPI-linked price increases, cancellation fees, direct marketing and employee rights. In several of them the company believes the odds favor dismissal, but the sheer volume matters. A subscription model built on pricing updates, benefits and cancellations lives in a commercially and regulatorily sensitive environment.

Leases, capex and the temptation to pay out too early

The main financial risk is not bank debt, but the obligation to keep paying, refurbishing and opening. Lease liabilities are enormous relative to direct debt, capex rose to ILS 81.9 million, and the company keeps distributing dividends. Each of those decisions is understandable on its own. The issue is the combination. If openings are delayed, if Icon stays in ramp-up for longer, or if the security backdrop hurts sales, the company can end up with more volume and less freedom.

Demand is real, but not immune

Churn actually improved, which is a genuine positive. But 2025 already showed that in a security event lasting less than two weeks, sales, renewals and ancillary activity can slow immediately. If closure days become more frequent again, the prepaid-subscription model will look much less comfortable.

Execution risk in Icon and Family

The company wants to keep expanding Icon by at least 20 more clubs, while also moving forward with Family in Be'er Yaakov, Even Yehuda, Be'er Sheva and Harish. That is a strong growth engine, but it also requires very strong execution. Be'er Sheva has already exposed friction around Ministry of Interior approval for a partner above 25%, and Harish is still in the signing and construction-start stage. If that pipeline slips even modestly, the strategic target set will stay more on paper than in cash flow.

Conclusions

Holmes Place ends 2025 as a company where it is clear what works, but still not fully clear how much cash remains after the whole system moves. The premium engine carries earnings, Icon carries the story, and direct bank leverage does not look like an immediate threat. What will determine near- to medium-term market interpretation is whether the new scale starts translating into bottom-line earnings and cash, not only into more openings.

Current thesis: Holmes Place is building a bigger and faster network, but 2026 has to prove that Icon, Revo and the next openings are starting to line up with net profit and shareholder cash, not just with volume.

What changed versus the earlier read: the company is no longer judged mainly on resilience and demand recovery, but on growth quality and on the discipline with which it returns capital while still expanding.

Counter-thesis: finance expense should fall, taxes should normalize, the new clubs should mature, and 2025 will then look like a noisy transition year on the way to 2027.

What could change the market read in the near to medium term: faster Icon margin recovery, a visible decline in finance expense, and on-time Family openings without another round of capital pressure.

Why this matters: this is a business-quality test, not only an opening-pace story. The market can give credit to a growing network. It gets much tougher when the network grows faster than the cash left over at the end.

What must happen over the next 2 to 4 quarters for the thesis to improve? Icon needs to show margin improvement, Revo needs to contribute more than it costs, and the company has to prove that dividends and expansion do not push it back toward relying on fresh equity. What would weaken the thesis? More quarters of volume without profit, more Family delays, or another security disruption that reminds investors how dependent the model is on operational continuity.