Viva Leisure (ASX:VVA) told investors its first-half FY26 result marked the first full period reflecting a strategic shift away from aggressive physical expansion and toward network optimization, technology investment, and converting scale into higher profits and cash flow.
Profit conversion and cash generation highlighted
Chief Executive Officer Harry Konstantinou said the half “delivers on what matters most to shareholders: profit conversion and cash generation,” pointing to statutory net profit after tax (NPAT) growth of 168% to AUD 5.2 million and adjusted free cash flow (AFCF) of AUD 19.9 million, up 25%.
CFO Kym Gallagher attributed the stronger profit conversion to a larger contribution from the company’s higher-margin technology and payments segment, as well as “disciplined cost management.” He noted rent expense increased 9.9% to AUD 28.7 million, growing more slowly than revenue, which he said reflected operating leverage.
Organic growth without acquisitions
Management repeatedly emphasized that member growth was driven organically during the half. Konstantinou said the corporate network added more than 7,000 members organically with “just one net new site for the half.” Across the prior corresponding period comparison, the company said it added about 27,000 members on a net basis, including roughly 17,000 organic members.
In corporate health clubs, Viva reported 202 corporate locations and 265,612 members at the half year, generating AUD 102.9 million of revenue, up 16.3%. Average utilization across the network was said to be above 78%, compared with “low 70s” previously reported, while average members per corporate club increased to 1,314 from 1,210.
Konstantinou said the network optimization program announced at the prior full-year results had driven more than 11,000 net new organic members from June through to the date of the call, while net locations increased by just one to 202.
TPLR segment positioned as growth engine
A key theme of the call was the expanding contribution from the company’s “technology, payments, licensing, and retail” segment, which Viva renamed from TPLS to TPLR to reflect a “retail” direction. TPLR revenue grew 44.7% to AUD 9.3 million, representing 8.1% of group revenue, up from 6.5%.
Gallagher said key contributors included Viva Pay, contributing over AUD 6 million per annum, and the company’s vending and supplements operations, which he said were also exceeding AUD 6 million on an annualized basis. Konstantinou outlined four components to TPLR:
- Technology: a priority door access solution being piloted at World Gym, with additional revenue-generating products planned for launch in the second half and a “next generation” online joining experience targeted to complete sign-up in less than 45 seconds on average.
- Payments: Viva Pay, with a World Gym payments migration “on track for the second half of FY27.”
- Licensing: a pipeline of external licensing opportunities that management said did not exist 12 months ago.
- Retail: expansion of “subsidiary” branded stores within club locations, with three stores open plus online presence and a target of 20 or more locations by 31 December.
Konstantinou said the company was targeting more than AUD 28 million in TPLR revenue for FY27 and suggested the pillar could grow at over 40% year-on-year, with a “30%–40% net margin across this pillar,” as it scales.
Franchise pipeline and international expansion
Viva reported 316 franchise locations with more than 390,000 franchise members. Franchise revenue rose 10.5% to AUD 4.2 million, while franchise locations increased 13.3% and franchise membership grew 9.9%, according to Gallagher.
Management said there were 171 franchise locations sold across Plus Fitness, World Gym, and Boutique Fitness brands, expected to open over the next 12 to 24 months across Australia, Singapore, and the UK. Konstantinou highlighted 10 committed locations in Singapore and said the first Plus Fitness UK location was set to open in April, describing these as “demand-led” moves with committed franchisees.
Balance sheet actions, buyback, and FY26 guidance
On capital allocation, the company said it reduced senior debt by AUD 2.6 million to AUD 97.9 million, bringing net leverage to about 1.7 times. Viva also revised terms on its Commonwealth Bank facility, with the net leverage covenant limit increased from 2.25 times to 2.5 times, which management said provided additional flexibility.
Operating cash flow increased 34% to AUD 42.2 million, while capital expenditure fell to AUD 13.1 million from AUD 15.9 million, reflecting a “deliberate shift away” from aggressive greenfield rollouts. Gallagher said there were no acquisitions in the half, compared with AUD 23.5 million in acquisition spend in the prior corresponding period.
Viva announced the recommencement of an on-market share buyback of up to 10% of issued ordinary shares. Konstantinou said the board viewed the share price as not reflecting underlying value and called the buyback “an efficient use of our cash.”
For FY26, the company guided to revenue in excess of AUD 237 million, statutory NPAT above AUD 11.5 million, and underlying NPAT above AUD 16 million. Management noted this underlying NPAT guidance was more than 20% above what it described as current analyst consensus of AUD 13 million, and said it had a “high degree of confidence” in delivery. In Q&A, Konstantinou described the guidance as conservative and said it largely reflected an annualization approach.
Konstantinou also said membership had grown to over 670,000 since 31 December, an increase of more than 13,000 members, and corporate membership had exceeded 270,000, up 4,000 since December.
About Viva Leisure (ASX:VVA)
Viva Leisure Limited operates health clubs. The company operates health clubs within the Australian Capital Territory, New South Wales, Victoria, Queensland under the Club Lime and Hiit Republic brands; and franchised health clubs under the Plus Fitness brand in Australia, New Zealand, and India. In addition, it operates ladies only health club under the Ladies Only brand; Boutiques under the Psycle Life, GROUNDUP, and Studio brands; indoor aquatics facilities under the Aquatics; swim school under the Swim School brand; health club under the FNF and Pinnacle brands; and personal training under the GymmyPT brand.
