1. Les Mills International Club Owner CVM Report February 2008

2. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 2 CVM Overview

3. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 3 Customer Value Management is based on customer trade offs between what they get and how much they pay, organised around customer facing processes and linked to internal business processes so pragmatic changes can be implemented Customer Value Management (CVM) Products & Services Prices & Costs Customer process Les Mills process Les Mills business processes Customer view Image & Reputation

4. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 4 The link with business processes is vital as these processes are the levers that managers can use to change customer perceptions of value and ultimately impact EBIT HR Operations Finance Sales and Marketing Customer Service Recruiting, retaining and training the right people Training Billing Communicating the value proposition of the Les Mills programmes effectively Providing the required level of service to the customers e.g. Initiative: Improve Programme Quality EBIT Impact Business processes… (across LMI and its agents) …influence customer perceptions of Les Mills performance… …which are modelled… …to provide clarity as to where Les Mills can focus its business improvement efforts and quantify what's at stake… Direct Financial Impact Cost of project Revenue gain Indirect Financial Impact Impact on customer perceptions which impacts share of wallet

5. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 5 We also know that what is important to customers can vary across their lifecycle so we also measure the key decision criteria customers use when deciding to spend on Les Mills programmes Performance on Key Decision Criteria determine likelihood to spend with Les Mills High Low New Relationship Trigger Point Customer perceptions (as shown by CVM) determine likelihood to change spend levels Time Illustrative e.g. Renegotiation of contract, bad service experience, new entrant in the market Level of consideration given to selection / changing Group Fitness Provider

6. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 6 A Customer Value Model has three key metrics which each serve a purpose in understanding perceptions of performance 3 2 1 CVM x.x ±xx Image and Reputation xx%x.x ± xx Prices and Costs xx%x.x ± xx Products and Services xx%x.x ± xx Absolute performance 1=poor, 10=excellent Change relative to 2004 survey Level of impact of driver 0-100% Impact weights vary by CVM model and by competitor CVM is a measure of the markets perceptions – as a result CVM scores take time to move as perceptions lag actions and therefore slowly change over time

7. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 7 There are a few things that need to be borne in mind when considering the results of a CVM survey

8. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 8 Number of Les Mills programmes Length of time using Les Mills programmes Proportion of timetable devoted to Les Mills programmes Number of members within the club Size of Group Fitness facilities in the club Attendance Internet connections of clubs Other Business Information Likelihood to reduce usage of Les Mills programmes in the next twelve months Customer views on who the main competition for Les Mills programmes are in each market Customer views on performance of main competition identified eClub usefulness Advanced Instructor Training usefulness Scorecard usefulness BODYPUMP ™ weight attributes Other Business Issues The five factors (rated in importance) which the customer considered in buying the Les Mills programmes initially Key Decision Criteria In addition to the customer value data, we collected data on key decision criteria, other business issues and information about the customers’ businesses as part of the survey

9. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 9 Actions that need to be carried out across all markets e.g. addressing programme quality issues Actions that need to be carried out on a market by market basis but are common across markets e.g. addressing price issues Actions that can only be carried out by LMI to address a particular issue in market e.g. change to programme content to address individual market issue Actions that need to be carried out to address issues particular to individual markets e.g. addressing billing issues Local Global LMIAgents Scope of Action Implementation of Actions The purpose of collecting this information is to form action plans to maximise profitability across the lifecycle, which because of the supply chain for Les Mills programmes, are undertaken by either LMI and / or the agent Les Mills CVM Action Framework

10. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 10 Response rates from the clubs were good enabling detailed information to be provided for seven markets – Australia, Brazil, France, Germany, the Netherlands, Baltic and U.S.A. – and indicative results for Japan China 1 response Brazil 88 responses Spain 2 responses France 74 responses Australia 81 responses Germany 59 responses The Netherlands 83 responses Baltic 92 responses Total Sample = 649 Japan 19 responses USA 151 responses The United States did not participate in the last CVM study and as a result this sample is different to the last study and this will influence the results shown

11. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 11 USA

12. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 12 CVM Performance

13. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 13 The USA is very sensitive to prices and costs, evenly split between financial and non- financial costs, but performance on these drivers outperforms other markets Although relatively lower than other measures, Les Mills is rated higher in the USA on both financial and non-financial costs Actions on non-financial costs should focus on how the convenience of workshops can be improved Actions on financial costs should aim to remove focus on prices and costs and put it on the programs Within the US market Les Mills programs have a very strong reputation for being technical and leading edge which should be reinforced through marketing as it is a high impact driver People are also important and are perceived as a positive with strong performance particularly for proactive contact, being fair, likeable and credible and respecting the customer as valued Insights and Implications USA

14. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 14 The US is the strongest performing country with all aspects significantly higher than the market average Overall perceived value is high at 8.0 The US is price sensitive with two thirds of perceived value accounted for by prices and costs with relatively high performance at 7.4 The remainder of perceived value is split between image and reputation and products and services both of which are performing extremely strongly Insights and Implications USA Note: (1) Sample size n = 151 Perceived value of Les Mills products to clubs Image and Reputation Products and Services Prices and Costs Overall CVM Performance (1) Process xx%x.x Key: Impact Weight 2007 CVM Score Perceived value of the Les Mills systems to clubs Perceived value of the Les Mills system to clubs

15. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 15 Brings in and retains customers Recognised brand Recognised as effective and safe Image and reputation is a real strength within the US, especially in having a reputation for technical and leading edge programs which is of particular importance to US clubs Image and Reputation Image and Reputation CVM Performance (1) Fair, likeable and credible people Technical and leading edge Of most importance to the customer is that the programs are technical and leading edge and performance on this factor is very high at 8.9 People are also important and Les Mills is seen as having of reputation for fair, likeable and credible people Insights and Implications USA Note: (1) Sample size n = 151 Process xx%x.x Key: Impact Weight 2007 CVM Score

16. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 16 Using the programs Getting set up and going Using the services Products and services generally perform very highly, especially the actual programs themselves Products and Services Product and Services CVM Performance (1) Account management Billing Overall products and services rated highly at 8.3 Only a very small portion of US customers’ overall perceptions of value are shaped by their views in respect of products and services In general Les Mills performs well on these factors within the US market Although it is a longer term strategy, within USA Les Mills should look to move the focus away from price and cost to products and services through concentrating marketing and promotion efforts on the quality and effectiveness of the Les Mills system Insights and Implications USA Note: (1) Sample size n = 151 Process xx%x.x Key: Impact Weight 2007 CVM Score

17. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 17 Providing me with programs that suit my needs Providing me with training and education on programs Agreeing a fair and reasonable contract Getting set up and going Getting Set Up and Going CVM Performance (1) Assisting me with launching my programs The initial training of my staff Performance is generally very strong with performance across all aspects at or above 8.0 Although of no current impact to the USA clubs overall, the high performance on these drivers indicates that Les Mills support of new clubs is working well Insights and Implications Providing training and education to run Group Fitness Getting set up and going currently has no impact on perceived value but performance is high on all aspects USA Note: (1) Sample size n = 151 Process xx%x.x Key: Impact Weight 2007 CVM Score

18. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 18 Ensuring programs are innovative and exciting Ensuring ongoing quality of programs Providing programs that generate a return on investment Performance across all subdrivers connected with using the programs is very strong Using the programs Using the programs CVM Performance (1) Providing updated programs on a timely basis Providing programs and training to recruit and retain the best instructors Customers rated performance of the programs as very high at 8.6 Performance is strong across all subdrivers Of particular note is that clubs rate the programs highly as generating a return on investment which is likely to support the better performance on prices and costs Although still high, performance on providing programs and training to recruit and retain the best instructors is slightly lower Insights and Implications USA Note: (1) Sample size n = 151 Process xx%x.x Key: Impact Weight 2007 CVM Score

19. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 19 Training my instructors Providing assistance with marketing any programs Assisting me in keeping my staff happy and motivated Using the services within the Les Mills system is important to US customers and although still relatively good, performance is lower than on other drivers Using the services Using the Services CVM Performance (1) Assisting me with measuring the success of my programs Providing certification of my instructors In general Les Mills performance in respect of the services associated with the programs is perceived to be less than performance on the programs themselves Most importance is placed on training the instructors, followed by assisting with measurement of the success of the programs and providing instructor certification All other subdrivers currently have no impact Although still high performance on these areas is relatively lower and improvement initiatives should be focused on training and assisting the measurement of the success of the program Insights and Implications USA Note: (1) Sample size n = 151 Process xx%x.x Key: Impact Weight 2007 CVM Score

20. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 20 Available when I need them Committed to my business Provide me with information when I need United States performs well on account management which suggests the “club coach” system is working well Account management Account Management CVM Performance (1) Assist me in sorting out issues related to my programs Respect me as a valued customer All areas of account management are currently performing well and generally exceed other markets across most subdrivers In particular, compared to other markets, the USA agencies perform well on proactive content Performance on this driver and other drivers suggests that the “club coach” system is working well and should be considered for introduction to other markets Insights and Implications Proactively contacting me to add value to my business USA Note: (1) Sample size n = 151 Process xx%x.x Key: Impact Weight 2007 CVM Score

21. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 21 The bills I receive are simple to understand The bills I receive are accurate There is a convenient payment system As in other markets billing is a strength with the USA agents on all aspects Billing Billing CVM Performance (1) Ensuring confidentiality of financial arrangement There are fair payment terms The USA agents perform extremely well in all aspects of billing Although unlikely to confer any significant competitive advantage it is an important hygiene factor where non performance could impact club retention Insights and Implications USA Note: (1) Sample size n = 151 Process xx%x.x Key: Impact Weight 2007 CVM Score

22. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 22 Financial Costs Non Financial Costs Prices and costs performs very well compared to all other countries, which is likely to be related to the high rates of the programs for generating a return on investment Prices and Costs Prices and costs are currently rated at 7.4, significantly ahead of the global average Perceived value is driven by both financial and non- financial Although performing well compared to other countries, perceptions of financial costs are still well behind those for non-financial costs Insights and ImplicationsPrices and Costs CVM Performance (1) USA Note: (1) Sample size n = 151 Process xx%x.x Key: Impact Weight 2007 CVM Score

23. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 23 Costs of setting up the program such as marketing and training Licence Fee Costs to use the program eg music, video, headsets, uniforms, training etc All aspects of financial costs have a large impact on overall perceived value with performance being relatively good, compared to other countries, across all factors Financial Costs All aspects of financial costs impact on customers views of overall perceived value Performance across all factors is relatively good compared to other markets To improve performance within the US market on price and costs Les Mills should look to identify areas in operational costs that can be reduced without impacting EBIT In addition a strategy of trying to move focus from price onto the qualities of the program through developing and promoting tools to measure the success of the program and use of marketing should also improve overall perceived value Insights and ImplicationsFinancial Costs CVM Performance (1) USA Note: (1) Sample size n = 151 Process xx%x.x Key: Impact Weight 2007 CVM Score

24. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 24 Time and effort in operating the program Time and effort involved in setting up the program Managing the resistance from staff eg instructors In general customers perceive performance of the US operation to be good in respect of non financial costs, although improving the convenience of workshops should be investigated Non Financial Costs Overall Non Financial Costs CVM Performance (1) Convenience of workshops Perceptions of performance in respect of non financial costs account for a large portion of overall perceived value The US operations performance is perceived to be good across all factors except convenience of workshops Given the relative impact of this driver it is worth investigating with customers what aspects of workshops (timing or location) can be improved and determining whether those issues can be improved without undermining program quality or profitability Insights and Implications USA Note: (1) Sample size n = 151 Process xx%x.x Key: Impact Weight 2007 CVM Score

25. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 25 Competition and Retention Analysis

26. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 26 Surprisingly only 19% of customers perceived branded programs to be the main competition for Les Mills in the USA Customers Views on the Main Competition for Les Mills programs (1)(2) USA Note: (1) Sample size n = 145

27. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 27 Where competition does exist in the US market, Les Mills programs outperform it on all aspects of customer value drivers leaving only 3% of the customer base at risk Customers Views of Les Mills programs Main Competition (1)(2) Products and Services Image and Reputation Prices and Costs Perceived Value of Competitors Products to Clubs Notes: (1) Excludes responses that say there are “no competitors”; (2) Sample size n = 151; (3) Customers who rated 8 to 10 on a scale of 1 to 10 where 1 = ‘not likely” and 10 = “highly likely”; (4) Sample size n = 151 Process x.x Key: 2007 RVS Score RVS calculated as Les Mills Scorex 100 Competitors Score1 USA Likelihood to Reduce Usage of Les Mills programs in the Next 12 Months (3)(4) Overall Perceived Value Proportion Expecting to Decrease Number of Les Mills programs Used in Next 12 Months 3% of customer base at risk

28. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 28 Key Decision Criteria Performance

29. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 29 As in other markets it is the programs contribution to attracting and retaining members, together with the image and quality of the programs which is most important to buyers, and performance is rated highly on all factors Promotion to new clients should centre around how the programs generate a return on investment for the club and this needs to be reinforced once the club has purchased the programs so as to remove focus from price This promotion will be best achieved through direct contact, using case studies and selling tools Marketing of the programs to raise awareness of the programs should also focus on the programs themselves The training and certification of instructors is important to clubs considering purchasing Les Mills programs which is different to the other markets but which is also an area of strength within the USA Price ranks sixth with an 8% weighting Insights and Implications USA