Once shunned, Viva Leisure and these ASX stocks are making a comeback post-Covid


  • Viva Leisure is making a post-Covid comeback
  • Stockhead reaches out to Viva CEO Harry Konstantinou
  • Other health and beauty stocks on the ASX that could also be making a comeback

Few industries have been hit as hard during Covid as the fitness industry.

At the height of the pandemic, all gyms in Australia were ordered to close.

Fitness Australia, the umbrella organization representing over 25,000 members across the fitness space, said half of its “industry operators reported a complete loss of income” during the 2020 forced closures.

Around half of the employees in the industry had also quit their jobs, which increased the pressure on the studio operators.

But things are starting to turn now as the threat from the pandemic recedes.

Australia’s second largest gym operator and ASX lister Viva Leisure (ASX:VVA) has already made a record start to fiscal 23.

The company’s Annualized Revenue Run Rate (ARRR) was $130.2 million, up 41.9% year-to-date.

It also generated a record average monthly revenue rate of $11.1 million, up 42% this calendar year.

Since December, Viva has also increased the total number of members across all its brands to ~325,000, an increase of 28,000.

Recurring Revenue

Viva Leisure owns a number of brands including its flagship Club Lime, Pinnacle Health Clubs, Fit n Fast, HIIT Republic and Plus Fitness.

Since reopening, the business has been in an expansion mode with the opening of its second greenfield corporate location from Plus Fitness in Glebe, Sydney and the acquisition of Plus Fitness Hocking in Western Australia.

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It’s also on track to make three more acquisitions in WA before opening a dozen more locations in Queensland and Victoria in FY23.

Speak with stick headCEO of Viva Leisure Harry Konstantinou said that although the business is growing rapidly, many people don’t understand that most of the revenue generated is recurring.

“As soon as we’re allowed to reopen, it turns on like a faucet for us in terms of revenue because our members are very sticky. And they are members with recurring revenue,” Konstantinou said.

A tech prodigy who started an internet service provider (ISP) business at 15 and sold it at 25, Konstantinou said the gym business is very similar to the ISP business because it’s all about recurring revenue and managing churn go.

Around 88% of Viva’s earnings are recurring, and Konstantinou believes people will keep going to the gym (rather than staying at home and working out in front of the TV) because the gym provides an experience.

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“We are in the experience business. People want to go to the gym, they want to meet people, they want to hang out and work out with their friends.

“And that’s never going to change because it’s part of a lifestyle and we’ve explained this issue to investors,” Konstantinou told Stockhead.

Viva technology

What sets Viva gyms apart from other networks is the use of data and technology, including artificial intelligence (AI).

According to Konstantinou, the company analyzes a lot of data, such as: B. The ratio of male to female memberships, which allows it to optimize the ratio of fitness equipment at each location.

The technology could also analyze things like the time each device is most used or why a member stopped coming on certain days.

This clever use of technology has enabled the company to increase its portfolio utilization, or utilization of assets, to 70% with plans to increase that to over 75%.

“Of course, every time you add a club, that usage goes down, of course, because you include, for example, 1000 square meters in this calculation, but you don’t have the members yet,” Konstantinou explained.

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“And for us we have opened an average of 41 clubs in the last three years. So on average we open or acquire a club every nine days.”

The company also builds on greenfield sites, meaning it could build the gym any way it wants, sometimes even two clubs side-by-side.

reviews

Viva’s share price has fallen by almost half its value in 2022, but now that the sector is on the up, Konstantinou believes investors may not have fully priced in the company’s potential growth.

The metrics show that is indeed the case — with EBIT jumping from a loss of $3.8 million in the first half of FY22 to a positive $9.3 million in the second half.

“We are currently opening 50 new locations and have five acquisitions in the pipeline. Also, we have a really good banking setup that allows us to go 70% on acquisitions.

“So we’re seeing very clear upside, and I don’t think that’s necessarily what the market is seeing right now,” Konstantinou said.

Viva Leisure share price today:

Other health and beauty stocks on the ASX

These other health and beauty stocks could be the ones to watch as Australia and the world emerge from the pandemic.

Established in 2009, Silk Laser has built a reputation as Australia’s premier destination for laser, skin, injectable and body treatments.

The company currently operates 127 clinics across Australia.

In FY22, the company surprisingly beat its market guidance of $20 million, grew 28% year over year and delivered full-year EBITDA of $22 million.

Silk has had a strong start to FY23 and expects to continue on its growth trajectory.

Pacific Smiles operates over 120 dental centers nationwide and over 800 dentists operate their practices with PSQ.

The company has been hit hard during lockdown as the number of walk-in patients dropped dramatically.

However, FY23 performance to date shows business volume and activity returning to pre-pandemic levels.

However, the company says the level of growth is expected to be more consistent over a longer period of time than post-lockdown increases recorded in FY21.

Higher cancellation rates and doctor absences mean appointments continue to be rescheduled but ultimately stay on the books.

For FY23 PSQ has provided the following guidance:

  • Patient fees between $270 and $285 million (up from $226 million in FY22)
  • Underlying EBITDA of between $24 million and $27 million (vs. $11.3 million in FY22)
  • 5 new PSG centers and 2 new HBFD centers are planned to open in FY23

Established in 1986, Shaver Shop is a specialty retailer of personal care products for men and women.

It operates 120 owned and franchised stores across Australia and New Zealand, as well as an e-commerce platform.

Shaver Shop’s main product categories include electric shavers, clippers, trimmers, hair styling, women’s hair removal, and wet shaving items for men and women.

Despite the disruptions from Covid, total FY22 sales increased 4.2% over FY21 to $222.7 million.

The company has quickly moved into the digital space, with online sales now accounting for 34% of total sales.

Looking ahead, SSG says its priorities in FY23 will be to expand its product range and brand portfolio, particularly in female categories.

It will also seek to improve brand awareness and economies of scale in New Zealand by opening new stores.

CCX is a global omnichannel retailer specializing in plus size women’s clothing, lingerie, footwear and accessories.

It is a collective of customer-led brands including City Chic, Avenue, Evans, CCX, Hips & Curves and Fox & Royal.

The company’s retail network in Australia and New Zealand consists of 12 premium flagship stores.

It also boasts great geographic diversification, with 56.2% of sales now coming from the Northern Hemisphere, where it offers 8,000 styles for over 15,000 brands.

In FY22, CCX had revenue of $369 million with an underlying NPAT of $28.5 million.

Looking ahead to FY23, CCY is targeting a closing inventory of $125 million to $135 million as of June 30, 2023 as the supply chain normalizes.

Stock prices today:


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