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Viva Leisure share price soars on COVID-19 update

ASX shares soaring higher

The Viva Leisure Ltd (ASX: VVA) share price stormed more than 6% higher in early trade after the company released a market update. It has since dropped back slightly, sitting at $2.06 at the time of writing.

What did Viva Leisure announce?

Viva released a positive market update earlier today informing shareholders on the company’s recent performance. According to the announcement, Viva’s facilities have been trading above management’s expectations following their re-opening.

The listed gym operator announced that 94% of its locations are either operating or undergoing scheduled refurbishment and will re-open shortly. Viva also informed the market that operations in the Melbourne metro area account for only 4% of the company’s membership portfolio and are not operating due to government COVID-19 lockdown restrictions. However, 3 of the company’s operations in regional Victoria are still open and operating as they aren’t affected by the restrictions.

Viva also reported that membership levels have recovered to 98% of pre-COVID-19 levels. According to the company’s management, the significant recovery in membership is above its expectations. Viva currently has 95,400 operating members and around 10,000 memberships suspended due to restrictions. The company also provided an update on landlord arrangements, with Viva successfully negotiating waiver and deferral arrangements with over 75% of its landlords.

How has Viva performed in 2020?

Viva Leisure is an ASX-listed gym operator with 100 health clubs in Australia. Pre-COVID, the company reported a 52.7% increase in revenue for the first half of FY20 and a 79.8% increase in earnings before interest, tax, depreciation and amortisation.

The government restrictions and lockdown period saw all of the company’s operations in Australia close for around 10 weeks. As a result, Viva reported a 100% reduction in revenue over the period from April to May 2020. The company was forced to cancel all casual shifts and reduce its permanent staffing in late March.

In early June, Viva completed a $25 million equity raising in order to provide the company with financial strength and flexibility to function. The company also reported that funds will be used for strategic acquisition opportunities and to accelerate refurbishments at existing locations.

Foolish takeaway

The Viva share price stormed more than 6.1% higher in early trade after hitting an intra-day high of $2.09. Since then the company’s share price has been sold-down and is currently trading more than 4% higher for the day at around $2.06.

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Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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