Viva Leisure network expands to 329 locations but lockdowns result in fall in revenues during last half year

Fitness club owner and operator Viva Leisure Limited has reported ongoing expansion of its facility footprint to 325 locations but a decline in revenue during the first half of the 2021/22 financial year.

Reporting its results for the six months ended 31st December 2021 to the Australian Stock Exchange this morning, the Canberra-based business advised of revenues of $34 million in the half year (down from $36 million in the same period in 2020/21, with the decline driven by COVID lockdown constraints.

However, the group has continued its growth increasing its number of Viva Leisure owned club locations by 17 to 132 during the half year and reaching a total of 329 network locations with total membership of 297,211 as of the end of December - a fall of -0.3% - since 30th June 2021.

Commenting on the company’s half year performance, Viva Leisure Chief Executive and Managing Director, Harry Konstantinou stated “we have remained focused on our operational plans and growth aspirations even with COVID lockdown constraints creating earnings headwinds across the health club industry in the first half. We continued to invest in club acquisitions and greenfield locations, growing our footprint to 325 locations across five states and territories in Australia and three countries.

“These expansions are a great example of how we can efficiently transition our business model into new markets.

“Now that trading conditions are improving we are seeing the trust we have created in our brands paying dividends with increasing member enrolments. We remain dedicated to providing an exceptional member experience and providing a fitness environment that meets our members’ needs.

“Our industry-leading technology platform that provides frictionless sign-ups and data analytics provides this first-class experience, which we will bring to more people across Australia through the strategic acquisition of Rebalance Pilates and Yoga studios, complementing the increasing demand for boutique offerings.”

Acquisition of eight Pilates and yoga studios
The half-year update also detailed Viva Leisure’s acquisition of eight Rebalance Pilates and yoga studios, an expansion completed in December.

Located in Queensland, Victoria and NSW and with an expected annual EBITDA contribution of $1 million, the acquisition, which expands Viva Leisure’s presence in the high growth Pilates and yoga boutique segment, has seen the group also become the master franchisor of the business.

Rebalance started as one studio in 2013 and quickly grew to 11 locations under a franchise arrangement. Viva Leisure has acquired eight of the locations with the remaining three locations in the process of de-franchising. This will allow Viva Leisure to re-establish the franchising systems and grow the brand as it will own all the locations.

The acquisition was complementary to the strategy for Viva Leisure’s existing GroundUp brand by targeting a slightly lower cost offering ($40-$45 per week) that is exclusively Pilates and yoga, compared to the GroundUp target market ($40-$60 per week) at the premium end of the market and offers the unique Club Lime and hiit republic ‘add on option’.

The Rebalance brand is to be franchised as part of the strategy of providing comprehensive offerings while the GroundUp brand is expected to remain corporate owned locations only.

Commenting on the acquisition and the company’s operations, Konstantinou noted “Viva Leisure has continued to invest in growth, most notably over the last six months via the acquisition of Rebalance Pilates & Yoga studios.

“This acquisition will form part of our growing boutique offering, which now represents more than a quarter of our total portfolio.

“The boutique market is seeing increasing demand, as members extend their fitness goals. The Rebalance brand will offer Pilates and yoga through our customer-first technology platform, at a competitive price point so even more Australians can access programs to become healthier and happier.”

“Fitness and physical activity is now even more front of mind after sustained periods of lockdowns and isolation over the past two years, and the fitness sector now faces the challenge of reaching and engaging these new audiences, especially those who’ve been living an inactive lifestyle. This opens up significant opportunities”

Positive about the future and the company’s strong growth outlook, Konstantinou added “with mandated lockdowns lifted, we are seeing an immediate rebound of the business with membership growth reaccelerating over the last few months. We now have more than 310,000 members across our network of 329 gyms.

“Our February 2022 corporate owned location membership numbers have been particularly strong, with a net increase of 2,200 members [excluding acquisition]. This growth is well supported by the direct debit nature of the business and the seamless member experience we offer through our technology platform that sets us apart in the industry.

“With this membership growth momentum, we are expecting a strong second half this financial year, guiding to revenue of at least $55 million for the half. This is particularly significant as the second half revenue guidance substantially exceeds our total full year revenue in FY20.

“We have a terrific, dedicated team in place, and I am confident that our team, combined with our industry-leading technology and strong balance sheet, puts us in a strong position to sustainably grow in Australia and abroad.”

Images: Rebalance Pilates and Yoga (top), Viva Leisure Chief Executive and Managing Director Harry Konstantinou (middle) and Club Lime Yamanto which opened in July last year (below).