Viva Leisure (ASX: VVA) has drawn down almost half its cash reserves during the COVID-19 lockdown, but at least some of that money has been put to use revamping its gyms for future business.
In a release today the company said $5 million had been spent on pre-closure creditors, as well as the acceleration of refurbishments, completion of sites under development and business improvements.
After listing on the ASX in mid-2019, the Canberra-based group has expanded from 33 to 83 locations through expansion of its brands including Club Lime, Groundup, Gymmy Pt, Hiit Republic, Cycle Life and FitnFast, the latter acquired in mid-February.
In its release today the company highlighted the following upgrades:
Five of the 10 Queensland locations will re-open fully refurbished and with upgraded
Four locations currently under development/fit-out, two of which will be completed before
re-opening, with the remaining two being Nunawading, Melbourne (to be completed in July 2020), and
Pyrmont, Sydney (to be completed in late August 2020 at this stage); and
Two new locations have completed during the shutdown and are ready to open (Gungahlin
Club Lime in ACT and Wagga Wagga Hiit Republic in NSW).
Viva Leisure now holds $6 million cash in the bank, excluding the May 2020 JobKeeper reimbursement which is expected to be approximately $950,000, as well as an undrawn overdraft facility of $6 million.
The company's Australian National University aquatic facilities already opened on Saturday, and the hydrotherapy facilities at the Canberra International Sports & Aquatic Centre were expected to open today.
Scheduled easings of restrictions on gyms in the ACT (30 May), QLD (12 June) and VIC (21 June) mean 70 per cent of Viva Leisure's locations have confirmed opening dates, while the group expects a NSW will be imminent. However, NSW Premier Gladys Berejiklian has today said the state government is not in a position to make an announcement on a return to business for gyms just yet.
It is expected that Stage 2 will continue to have restrictions in place, likely to be 20 members within the gym, or different parts of each gym at one time, the final details are not yet known.
The company notes while any restriction on members is not ideal, it has implemented systems including bookings and automated people counters which restrict entry into the facility to assist with this short-term restriction. Members will be able to determine how busy each location is before attending outside of booked times.
Stage 3 of easing restrictions contemplates allowing 100 people in a gym at the same time, which would mean Viva can operate most facilities at full capacity.
"As we commence the tenth week of the mandatory shutdown of our clubs, our team has been working overtime to ensure we are ready to open our doors as soon as permitted to do so," says Viva Leisure's CEO and managing director Harry Konstantinou.
"It is promising to know that over 70 per cent of our locations could be open within the next three to four weeks, albeit with some initial restrictions.
"The feedback from members we have received during this shutdown is encouraging, with a large percentage of members keen to get back into it."
Konstantinou says data from reopened overseas clubs is encouraging, with the majority seeing higher than expected attendance and new member signups.
"While the mandatory shutdown is not something any business wants, it has allowed our team to reset, recharge and be ready to go.
"As expected, significant opportunities are now in front of us, and with our strong balance sheet, we will capitalise on them."
Viva has also successfully renegotiated deferrals or reduced rental payments for 25 locations, resulting in a saving of $444,000 per month on cashflow for up to six months.
The group is still negotiating on 58 locations, however it has not paid rent on them and various landlords are waiting for gyms to reopen so that any arrangement can be agreed.
VVR shares are up 4.74 per cent so far this morning trading at $2.43 each.
Updated at 11:27am AEST on 25 May 2020.
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