The Viva Leisure Ltd (ASX: VVA) share price won't be going anywhere today after the health club operator requested a trading halt.
Why is the Viva Leisure share price in a trading halt?
Viva Leisure requested a trading halt this morning while it undertakes a fully underwritten $30 million equity raising.
According to the release, the company is raising the funds via an institutional placement at a price of $2.90 per new share. This represents a 4.3% discount to its last close price of $3.03.
The proceeds will be used to pursue future growth opportunities. This includes the acquisition of health clubs and locations, the buyback of franchisee owned Plus Fitness centres, and greenfield rollouts.
In respect to acquisitions, management notes that it has a robust and deep pipeline of acquisition opportunities. These range from single club operators to large established health club groups.
These potential acquisitions will allow Viva Leisure to strengthen its presence in under-served locations and regions.
Management notes that there are strong acquisition synergies available for each opportunity and there is a preference for complementary overlap with existing locations.
The purchase price for these sites is expected to be equal to the EBITDA multiples paid for previous health club groups. This was approximately ~3 times EBITDA.
As for its franchise buybacks, management advised that it has identified buybacks within the range of $9 million to $10 million. These franchises relate to its recently completed acquisition of Australian Fitness Management, which is the master franchisor of the Plus Fitness brand.
Finally, in respect to its greenfield plans, the company expects to open 20+ locations between now and the end of FY 2021. It advised that 19 of these locations have been secured and leases executed.
Long term growth plans.
Looking ahead, Viva Leisure has a plan to add approximately 300 locations (including greenfield and acquisitions) by 2025. This results in a 2025 Target of 400+ locations.
Management also recognises the potential for additional locations nationwide, with the pipeline of franchisee owned Plus Fitness franchises representing a significant growth opportunity.
Trading update.
In addition to the equity raising, the company has provided a trading update this morning.
It revealed that since 30 June 2020, memberships have grown by 8,764. This means Viva Leisure now has 103,000 members. However, when including the 175,000 Plus Fitness network members, its total members grow to ~278,000.
As of 24 November 2020, there are 6,175 members on requested suspension, which is down from 15,000 in September.
Revenues in October 2020 were higher than pre-COVID shutdown levels, despite nearly 12,000 members still being suspended and excluding revenue from Victoria which only re-opened on 9 November 2020.
This led to its October 2020 revenue coming in at a run rate of ~$80.4 million.
