Viva Leisure buys 8 WA gyms

ASX company Viva Leisure is bringing a new health club brand to the WA market after striking a deal to buy eight existing gyms for $15.7 million.

Viva already owns 14 Plus Fitness gyms in Perth and will rebrand the eight new locations as Club Lime.

The acquisition, in two parts, provides fresh insight into the valuation of gyms.

Five of the new gyms operate as a standalone brand with locations in the CBD, Northbridge and Perth’s northern suburbs at Tapping, Butler and Clarkson.

This group has approximately 10,000 members and generated revenue of $9.0 million and underlying earnings (EBITDA) of $2.2 million in FY24.

Viva will pay $9.5 million for these gyms, including $2 million to cover the cost of recent capital upgrades.

Viva said the purchase represented an EBITDA multiple of 3.41 times but that was after excluding the $2 million reimbursement.

The full purchase price represents an earnings multiple of 4.3 times.

The second acquisition is part of a franchise group that will be de-franchised at settlement.

It comprises two gyms at Port Kennedy and a third at Silver Sands near Mandurah.

These gyms also have about 10,000 members but generated a lower revenue of $5.7 million and lower EBITDA of $1.7 million in FY24.

Viva will pay $6.2 million for these gyms, representing 3.5 times EBITDA.

The targets have not been specifically identified by Viva.

The transaction is expected to complete by 31 August 2024

Viva Leisure CEO Harry Konstantinou believes the WA market provides plenty of growth opportunity.

He says WA is under-serviced because it has 10.1 per cent of the national population but only 9.2 per cent of Australia’s gyms.

The acquisitions reinforce Viva’s status as the second largest health club operator in Australia with 349 locations.

This comprises 183 corporate locations and 166 franchises.

The market leader is Anytime Fitness, which has 566 locations nationally, according to data in Viva’s investor presentation.

Other big players are F45, with 306 locations nationally, and Snap Fitness, with 253 locations.

In the WA market, Anytime Fitness is a leader with 40 franchises, according to Business News’ Data & Insights.

Snap has 35 franchises in WA and Jetts 24 Hour Fitness has 23 while Perth-based REVO Fitness owns 27 gyms in WA (and 15 interstate).

Viva has launched a share placement to raise $16 million to fund the acquisitions.

“The board of Viva Leisure has decided to pursue this equity raise to support these acquisitions, which are beyond our usual business operations,” Mr Konstantinou said.

“Moving forward, the company will continue to utilise its cash flow and existing debt facilities for regular business activities, including other acquisitions.”