Strong Gains: Pumping Up Returns with Viva Leisure

Viva Leisure (ASX: VVA) is a key player in Australia’s fitness industry, operating a diverse network of health clubs across the country. Founded in 2004 by Harry Konstantinou, who remains actively involved as the company’s CEO, Viva Leisure has built a reputation for offering accessible and affordable fitness options through its stable of brands. What started as a single Club Lime gym in Canberra has evolved into a network of over 190 corporate-owned and 200 franchised locations. The company caters to a wide range of customer preferences with its mix of big-box gyms, boutique fitness studios, and high-value, low-price models, making it one of the fastest-growing fitness operators in the country.

Australian gym numbers by operator. Source: Company Presentation

 

Viva Leisure’s growth has been marked by both strategic acquisitions and organic expansion. Starting with the acquisition of smaller gym operators, VVA has successfully integrated these assets into its network, improving operating efficiency, club profitability and member experience. A standout acquisition was the 2020 purchase of Plus Fitness, which added over 200 franchised locations and broadened VVA’s reach into regional markets. This acquisition allowed Viva to diversify its offerings and leverage franchisee relationships for further growth.

In 2024, VVA further increased its presence in Western Australia through a series of acquisitions, expanding its footprint in a key market. These moves have enabled VVA to grow quickly, with fully fitted out and recently renovated Golds Gyms being acquired as the US group left the state. The company’s proven ability to extract value from acquisitions through enhanced systems and processes remains a core part of its growth strategy.

An example of a Viva refit. Source: Company Presentation

 

Current Strategy and Revenue Diversification
Viva Leisure’s strategy combines expanding its network of locations with leveraging technology to boost margins and member experience. The acquisition of gyms is only the beginning, as VVA seeks to drive more value from each location through services like Viva Pay. This proprietary payment system enables the company to manage transactions and billing in-house, capturing margins that would otherwise go to third-party providers. Additionally, Viva Pay’s data insights help VVA tailor its offerings and improve member retention.

The “Viva Hub” platform is another strategic initiative, centralizing communication and data across locations to enhance operational efficiency. Further, VVA is one of the only gym operators that can use its mobile app to grant user access to the gym, offering significant savings on the widely used fob/card system. These tech-driven solutions help VVA optimize the performance of newly acquired gyms, improve profitability, and offer a seamless experience to members. This focus on technology has allowed VVA to differentiate itself in the competitive fitness market.

1Q25 Results: A Strong Start to the Fiscal Year
Viva Leisure’s trading update for 1Q25 showed encouraging growth, with corporate memberships increasing to 229,000, up from 200,000 at the end of FY24. Including franchised members, total memberships reached 400,000, a solid gain during a traditionally slower season. The company’s network of corporate locations expanded from 176 to 190, positioning VVA well for membership growth in the coming months.

Revenue for 1Q25 came in at $47.5 million, translating to an annualized run-rate of $190 million, already close to the FY25 target of $192 million. This early momentum suggests that VVA is on track to meet, if not exceed, its revenue goals, with member growth and new locations contributing positively. The recent Western Australia acquisitions and seasonal factors like summer could further boost performance as the year progresses.

Investment Case: Why Viva Leisure Deserves Attention
For investors, Viva Leisure presents a compelling opportunity within the fitness sector. Its founder-led management ensures alignment with long-term goals, while the company’s track record of successful acquisitions and integration offers a clear path to further growth. Viva Pay and other tech-enabled solutions provide additional margin improvement, making each gym more profitable post-acquisition.

Currently, VVA is trading at a significant discount to its global industry peers, with a price-to-earnings ratio around 9.5x compared to averages above 20x. This gap, alongside a forecasted 50% EBITDA growth over the next two years, suggests potential upside as VVA continues to execute its strategy. With plans for further acquisitions, new club openings, and innovative offerings like the Viva Pass, VVA is well-positioned to capture market share and deliver shareholder value.

While challenges such as competition and integration risks exist, VVA’s clear set of strategic initiatives and solid recent performance make it a strong candidate for investors seeking growth in the consumer discretionary space. Its blend of organic growth, smart acquisitions, and technological innovation offers a balanced approach to capturing the ongoing demand in the highly competitive fitness market.