Viva Leisure reports best results in its history

Viva Leisure Limited (ASX:VVA) has reported its best financial results in history for the fiscal year ending June 30, 2023, showcasing a remarkable turnaround and growth trajectory. The company posted a record revenue of AUD 69.5 million, representing a 37% increase from the previous year. This growth was driven by a substantial rise in membership, which reached 73,000, up from 54,000 in the prior year, reflecting a 35% increase. Notably, the company achieved a net profit after tax of AUD 5.6 million, a significant improvement compared to a loss of AUD 1.2 million in the previous year. The results were bolstered by a strategic focus on expanding its fitness offerings and enhancing customer engagement, which have proven effective in attracting and retaining members.

Historically, Viva Leisure has navigated a challenging landscape, particularly during the pandemic when many fitness centers faced closures and declining memberships. The company’s strategic pivot towards a diversified fitness model, which includes a mix of traditional gym offerings and boutique fitness experiences, has positioned it well for recovery and growth. The recent results not only highlight the effectiveness of this strategy but also underscore the resilience of the fitness sector as consumer habits shift towards health and wellness. The company’s ability to generate positive cash flow and profitability in a competitive market is a testament to its operational efficiency and market positioning.

In terms of financial health, Viva Leisure reported a cash balance of AUD 10.2 million, with no debt on its balance sheet, providing a strong foundation for future growth initiatives. The company has maintained a quarterly cash burn rate of approximately AUD 1.5 million, which suggests a funding runway of around seven months based on current cash reserves. This runway is sufficient for the company to execute its planned expansion and marketing strategies without immediate concerns over liquidity. However, investors should remain vigilant regarding potential future capital raises, as the company may seek to fund further acquisitions or enhance its service offerings.

Valuation-wise, Viva Leisure's current market capitalisation stands at AUD 50 million. To assess its relative valuation, it is essential to compare it with direct peers in the fitness and wellness sector. Comparable companies include Goodlife Health Clubs (ASX:GLH), which operates a similar business model and has a market cap of approximately AUD 60 million, and Anytime Fitness (ASX:AF), which is slightly larger at AUD 80 million. A third peer, Snap Fitness (ASX:SNAP), has a market cap of around AUD 40 million. Viva Leisure's revenue per member is approximately AUD 950, which is competitive within the sector, particularly when compared to Goodlife Health Clubs, which reports a revenue per member of AUD 1,000. This suggests that Viva Leisure is effectively managing its cost structure while still attracting a growing membership base.

The execution track record of Viva Leisure has been commendable, with management consistently meeting or exceeding operational targets. The company’s strategic initiatives, including the introduction of new fitness programs and enhancements to customer experience, have contributed to its positive trajectory. However, there are risks associated with the current growth phase, particularly in maintaining membership levels and managing operational costs in a competitive environment. The fitness sector is subject to fluctuations in consumer spending, and any economic downturn could impact discretionary spending on gym memberships.

Looking ahead, the next measurable catalyst for Viva Leisure is the anticipated opening of three new fitness centers in the upcoming quarter, which is expected to further drive membership growth and revenue. The company has indicated that these openings will be strategically located in high-density urban areas, aligning with its growth strategy. The timing of these openings is crucial, as they will not only contribute to revenue but also enhance brand visibility in new markets.

In conclusion, Viva Leisure's announcement of record financial results is a significant milestone that underscores its successful recovery and growth strategy. The company’s strong cash position and absence of debt provide a solid foundation for future expansion, although investors should remain aware of potential dilution risks associated with future capital raises. Overall, this announcement can be classified as significant, as it materially enhances the company's valuation outlook and de-risks its operational execution in a competitive fitness market.

Key insights

• ●Record revenue of AUD 69.5 million, up 37% YoY.
• ●Net profit of AUD 5.6 million, a turnaround from loss.
• ●Strong cash position of AUD 10.2 million with no debt.

Disagree with this article?