Investors have given Canberra-based Viva Leisure an emphatic endorsement after it successfully listed on the Australian Securities Exchange (ASX) on Friday 7 June.
Viva Leisure Chief Executive and Managing Director Harry Konstantinou says the $20 million capital raising hit the target date June 7 on schedule.
“We had opened the book build about three or four weeks ago and we were over-subscribed $10 – $11 million, so we had to scale back investors to get to the $20 million,” Mr Konstantinou says. “So, it was well received,” says the principal of Australia’s leading operator of health clubs and aquatic facilities.
“We had bids for over $30 million, obviously as we were only raising $20 million, we had to scale back and send money back to people, so satisfaction comes from there. Then the whole process of going through the ASX application and being listed is another milestone and we completed that and were listed today.
“Today I am excited that Viva Leisure is the first dedicated health club operator to list on the ASX. The company continues to deliver strong, profitable growth while also capitalising on the platform we have built over many years for an even bigger business in the future,” Mr Konstantinou says.
He said the pace of expansion this financial year was a significant achievement, which involved acquiring four clubs to date. Another three clubs will be acquired and integrated as part of the Fitness 24/7 acquisition in Albury and Wodonga (Victoria). Viva Leisure has opened eight greenfield clubs, and another four greenfield clubs will open this month.
“Shortly we will achieve the milestone of 50,000 members (excluding the Fitness 24/7 acquisition), which demonstrates the demand and effectiveness of our business model which operates in all four segments of the fitness industry,” Mr Konstantinou says.
Working in a very capital intensive industry, Mr Konstantinou says it was not a hard decision to bring in outside investment. “The way we want to grow through acquisitions, we need access to capital, so we open up all our new locations using cash flow of the business, but to acquire new businesses which can cost several million dollars each, raising capital through a platform like the ASX is the best way for us.”
He says Viva Leisure’s management structure will remain unchanged. “We have been operating with an independent board for 18 months, we will continue to do that.”
The board does not plan on paying any dividends this financial year, as per the prospectus.
“Maybe for the 2020 financial year it will be considered, but essentially, we are in a growth phase, so we need to keep as much money as we can to continue to grow before we start paying out dividends. They are likely to flow in 2020-21 financial year.”
Viva Leisure began in 2004 and now operates in 33 different locations across its portfolio of brands including Club Lime and Hiit Republic.
Since issuing its prospectus, four locations have successfully opened: Club Lime Conder; Hiit Republic Tuggeranong; PsycleLife Tuggeranong and Studio by Club Lime, Tuggeranong.
Four other locations are also opening ahead of schedule in the second quarter of this financial year: Club Lime Denman Prospect; Club Lime Queanbeyan; Hiit Republic Kingston and Hiit Republic Queanbeyan, while Hiit Republic Braddon, Hiit Republic Campbell, Club Lime Erindale and Hiit Republic Erindale are on track to open in the third quarter of 2019. This will bring to 40 the number of locations operating at the end of the year, a robust increase from the 21 at the end of financial year 2018.
The pipeline of new sites continues to be strong and Viva Leisure is expected to announce further greenfield locations in the next quarter.
Meanwhile, membership numbers continue to increase month on month, with current membership at 49,600, up from 47,500 (4.4%) since the date of prospectus lodgement.
With the acquisition of Fitness 24/7 to be completed this month and contributing an additional 3,500 members, membership is anticipated to exceed the prospectus forecast of 53,400 members by June 30.
Hiit Republic, Viva Leisure’s boutique functional fitness brand, opened its first location in March 2019 and is already exceeding management expectations, in membership numbers and class participation.
Two more locations at Kingston and Queanbeyan are expected to open ahead of schedule and capitalise on the momentum.
Hiit Republic’s unique membership offering of combining its boutique functional fitness studios and Club Lime’s health clubs into one membership has been well received by market participants with over 70 per cent of members taking the multi-club membership option which is increasing the membership yield per member. The 24-hour access (outside of scheduled class times) into the Hiit Republic studios has also proven to be popular and a unique selling point in the boutique functional fitness market.