The increasing awareness of people towards the health benefits from the physical activities and high obesity levels have triggered the growth in the health leisure industry. In Australia, the health & fitness industry is a good business and is gaining momentum. Health and fitness industry mainly consists of fitness centres, health clubs and gymnasiums. It is expected that health leisure industry to continue robust growth for more than five years. In Australia, the enlargement of budget gym chains and functional fitness with the increasing consciousness towards the health advantages of physical activities and evolution in health awareness are the key contributors for the growth. Hence, the health leisure industry was expected to grow and generated revenue of approximately $2.5 billion in 2018-2019.
According to a recently released media report Gyms and Fitness Centres in Australia, the health and fitness industry in Australia has expanded firmly over the past five years while undergoing significant structural transformation.
As per the report from IBISWorld which is an international market research company the revenue for the fitness industry would grow at an annualised rate of 1.8% to reach $2.4 billion over the half-decade through to 2022/2023 which was $2.2 billion for 2017/18.
Employment levels (2000 to 2018) and employment projections in 2023 for the sports and physical recreation activities industry and the Amusement and other recreation activities industry-
Employment level and projection (Source: AISC)
Let us discuss a technology-focused Australian health club owner- Viva Leisure Limited
Viva Leisure Limited (ASX: VVA)
An ASX listed company Viva Leisure Limited (ASX:VVA) which operates in health and leisure industry was founded in 2004 with the goal to connect health & fitness and to provide an affordable, accessible facilities to its members. The company operates more than 40 health clubs within NSW, Victoria and the ACT and gives various different membership possibilities and a variety of facilities like big-box fitness, boutique fitness and others.
Institutional Placement of $20 million-
On 3 December 2019 Viva Leisure announced that the company has completed the Institutional placement and raised $20.0 million. This placement is for nearly 7.5 million ordinary shares which would be issued using Viva Leisure’s 15% placement capacity pursuant to ASX Listing Rule 7.1. It was fully supported by the company’s existing shareholders and various new institutional investors.
This capital raising strengthens Viva Leisure’s balance sheet and would be used for the funding of the acquisition of 13 FitnFast health clubs. Additionally, this capital raising also provides VVA with the resources to implement its stated strategy of growth by way of acquisition or greenfield locations.
On 2 December 2019, the company released its investor’s presentation on ASX highlighting the transaction and business overview, including the financial metrics.
Quick highlights from investors presentation are-
- The company has agreed for the acquisition of 13 FitnFast Health Clubs (“FnF”) which are located in the ACT, NSW and Victoria.
- In the financial year ended on June 30, 2019 FitnFast Health Clubs generated revenue of approximately $17.9 million and EBITDA of nearly $3.6 million.
- The company expected to complete subject to assignment of property leases before 31 March 2020.
- Viva Leisure generated revenue of approximately $33.1 million and EBITDA of $7.3 million for the financial year 2019 (year ended 30 June 2019).
- The combined group has received revenue and EBITDA of more than $50 million and $10 million, respectively.
- The combined group operates in ACT, NSW, Victoria and Queensland.
- The EBITDA margin for the combined group is 21.4%.
Source: Investors Presentation
Acquisition of 13 FitnFast clubs-
On 2 December 2019, Viva Leisure announced that it had signed a sale agreement for acquiring 13 FitnFast Health Clubs for $13.5 million. The company is acquiring a total of 13 out of the 17 operating locations of FitnFast Health Clubs. The combined membership for the newly acquired locations of more than 21,500 members at an average revenue per member of approximately $14.80 per week.
It is expected that the combined group would have achieved revenue of more than $50 million and an EBITDA of over $10 million on an FY2019 audited basis. After this acquisition, nearly 200 employees would join the Viva Leisure team, and hence the combined group will have more than 800 employees which also includes recently announced Healthworks acquisitions in Queensland.
Acquisition of two Healthworks locations-
Viva Leisure announced that it had acquired two Healthworks Fitness Centres in Cleveland and Victoria Point, Queensland. The company is operating in 45 locations at present and five more locations to open in December 2019, with 10 acquired Queensland locations. This would result in total of 60 operating locations at the half year 2020, in addition to this further 12 locations are in the pipeline. These additions would represent a 50% increase in the total number of clubs operating since 30 June 2019 which is corresponding to a new location opening on average every 1.3 weeks.
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The company has revised the forecast FY2020 members who would now include acquisition of
Healthworks, FnF and greenfield locations. Viva Leisure now targets the membership of approximately 106,500 members for 30 June 2020.
The forecast for revenue for the fiscal year 2020 has been revised, which include the expected contribution of the Healthworks acquisition, the FnF Acquisition, new club openings and overperformance of the existing portfolio. Revenue target is $58.7 million for 30 June 2020, and the annualised run rate for revenue is now estimated to be approximately $85 million.
The forecast EBITDA for the fiscal year 2020 has also been revised which include the contribution of new openings and acquisitions and EBITDA target is now $14.2 million with an annualised run rate to be nearly $21 million.
Stock performance of Viva Leisure Limited (ASX:VVA)-
On 4 December 2019, the company’s stock settled the day at $2.880 up by 3.226% with a market cap of $146.75 million. The stock has 52 weeks high price and 52 weeks low price at $ 3.040 and $0.850, respectively. VVA’s stock has delivered a good return of 86% in last three months and a positive return of 13.88% in last one month.
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