Viva Leisure (ASX:VVA) share price sinks 7% on capital raising efforts

The company’s shares have been free falling lately…

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The Viva Leisure Ltd (ASX: VVA) share price is nearing its 52-week low today. This comes after the health club operator provided the market with an update to its latest capital raise.

At the time of writing, Viva Leisure shares are down a sizable 7.60% to $1.58.

What did Viva Leisure announce?

In a statement to the ASX, Viva Leisure announced it has successfully completed its $11.7 million (before costs) institutional placement.

Offered at a price of $1.55 per share, the placement received strong support from both new and existing institutional investors. This initially represented a discount of 9.4% to the last closing price of $1.71 on 24 August. However, after today’s steep drop in the Viva Leisure share price, the offer reflects a slight discount of just under 2%.

The company advised it will use the proceeds to strengthen its balance sheet as well as pursue acquisition opportunities.

The newly created ordinary shares will be issued on or around 6 September.

How did Viva Leisure perform for FY21?

Last week, Viva released its full-year results for the 2021 financial year highlighting significant growth across the board. Here are some of the key metrics:

What happened in FY21 for Viva Leisure?

Viva Leisure reported that membership retention and enrolment momentum exceeded historical patterns when its health clubs were open. However, stop-start lockdowns caused disruption to enrolment momentum and created additional costs to re-open and re-establish the previous momentum.

Throughout the entire financial year, the company’s entire facilities were open for 2 months without trade or restriction.

Nonetheless, there were 11 months of positive net member growth for the business.

In addition to the results, Viva Leisure also increased its portfolio, acquiring 21 greenfield locations and 15 acquisitions. When combining this with Viva Leisure and the Plus Fitness network, there is a total of 309 operating locations.

Management commentary

Viva Leisure CEO and managing director Harry Konstantinou commented on the outstanding achievement:

Despite a difficult year where all our facilities across Australia had just two months of being open at the same time, I am proud of my team for managing to achieve an increase in all key metrics being Members, Locations, Revenue, EBITDA and NPAT.

Outlook for Viva Leisure in FY22?

The current COVID-19 lockdown has again significantly impacted Viva Leisure operations for the first two months of FY22.

As such, it is estimated July and August will reflect a decline in revenue of roughly $6.9 million. Furthermore, EBITDA is forecasted to be impacted by $4.2 million.

The company introduced a ‘wait and see’ approach to preserve cash reserves as much as possible. Future roll-outs and acquisitions have been currently frozen until further notice.

Viva Leisure share price snapshot

Over the past 12 months, Viva Leisure shares have fallen more than 40%, with year-to-date down 45%.

Viva Leisure presides a market capitalisation of roughly $131.9 million, with approximately 81 million shares on its registry.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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