0 2 0 2 T R O P E R L A U N N A YEAR ENDED 30 JUNE 2020 CONTENT O UR LO CATI O NS AND B RANDS 2020 HI GHLI GHTS LE TT ER FR OM T HE C HAIR CE O ’S RE PO R T D IR ECTO RS R EPO RT RE MU NER ATI O N R EPO RT CO RPO R ATE GOVE RNANCE STAT E M ENT AU DI TOR S IND EPEND ENCE D E CL ARAT I O N FINANC IAL STATEM ENTS Consolidated Statement of Profit or Loss Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statements SI GNED R EPO RTS Directors Declaration Independent Auditor’s Report AD DI TI O NAL INFO RM AT IO N FO R LI ST E D COM PANIE S Shareholder Information Corporate Directory 1 3 5 7 9 17 2 3 2 5 27 29 3 1 33 35 65 67 75 79 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V Viva Leisure’s mission is to connect as many people as possible to a healthy lifestyle, delivering to its members an uncompromising fitness experience via accessible, affordable and quality facilities and services. About this Report This 2020 Annual Report for Viva Leisure Limited (ACN 607 079 792) has been prepared as at 2 October 2020. Please note that terms such as Viva Leisure, VVA and Viva Leisure Limited have the same meaning unless the context requires otherwise. Viva Leisure is committed to reducing the environmental footprint associated with the production of this annual report and printed copies are only posted to shareholders who have elected to receive a printed copy. Shareholders can request a printed copy of the Annual Report free of charge by emailing investor.relations@vivaleisure.com.au or by writing to the Company Secretary, PO Box 1, Mitchell ACT 2911. our brands and locations 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V 1 QLD 10 NSW 23 VIC 5 ACT 41 O O U U R R L L O O C C A A T T I I O O N N S S A A N N D D B B R R A A N N D D S S 2 2 2 0 0 h g i h O A A N N U U R R R E E P T S L I LOCATIONS - UP 97.5% $40.9m MEMBERSHIPS - UP 74.3% 94,196 I S REVENUE - UP 23.6% T H G s I L H t G H h 0 2 g 0 2 i l 14.8% 79 EBITDA MARGIN* - DOWN FROM 24.8% *E xcludi ng im pacts of AASB 16 . EBITDA* - DOWN 16.7% $6.07m E L A V I V 3 REVENUE ($m) R 2 2.1 % G A C 24.1m 20.7m 18.4m 40.9m 33.1m EBITDA ($m) G A C % 5 . 7 R 3 8.2m 6.1m 5.2m 3.3m 1.8m FY2016 FY2017 FY2018 FY2019 FY2020 FY2016 FY2017 FY2018 FY2019 FY2020 MEMBERS 94,196 AGR 37.0% C 54,039 EBITDA MARGIN (%) 35,631 29,124 26,754 24.8% 21.6% 15.8% 14.8% 10.0% FY2016 FY2017 FY2018 FY2019 FY2020 FY2016 FY2017 FY2018 FY2019 FY2020 2 0 2 0 H H I I G G H H L L I I G G H H T T S S 4 A L E T T E R F R O M THE CHAIR Dear Fellow Shareholders • Cash and cash equivalents reserves remain OU R FIRST FULL YEAR AS A LISTED CO MPANY On behalf of the Board, I am pleased to present the Viva Leisure Limited 2020 Annual Report. During 2020, our first full year as a listed company, Viva Leisure has faced the headwinds of COVID-19 and the consequential severe impacts to our stakeholders and the business. Our strong and controlled expansion to the business saw trading above forecast until the COVID-19 pandemic required all health clubs to close with 24-hours’ notice by government pronouncement. The required stand-down of staff at that time was one of the toughest decisions that the Board and Management had to make. Notwithstanding the unexpected closure of all locations we were grateful for the support of members and the high level of understanding by our team. The staff, very capably led by our management team, provided a platform of rationalisation to costs and the business structure to see through the close-down period. As soon as the business was permitted to re-open across the States and Territories in which we operate, our loyal membership base and proven business model recovered quickly. Of particular importance to highlight in the COVID-19 affected results were: • Total revenues were $40.9 million compared with $31.2 million in the financial year ended 30 June 2019, an increase of 31.1%; • Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) decreased to $6.07 million from $8.2 million in the previous year excluding the impacts of AASB16; 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V 5 strong at $30.1 million, up from $14.4 million in the previous year, predominantly due to the capital raised just before the end of the financial year; • An increase in net assets to $63.3 million compared to $25.7 million in the financial year ended 30 June 2019. • The Company successfully sought additional capital on 2 occasions from shareholders during the year. Each capital raising was heavily supported, reflecting a positive understanding of investors to the business opportunities pursued by the Company. As foreshadowed in the 2019 Prospectus, reflecting Viva Leisure’s growth profile and continuing investment opportunities, the Directors confirm that no dividend will be paid in respect of the 2020 Financial Year. OPERATING HIGHLIGHTS FOR TH E YEAR Highlights for the year were: • An increase in operating locations/clubs from 40 to 79; • A strong pipeline of new locations secured, consistent with the strategic vision of growth; • The hiit republic boutique concept went from strength to strength and will continue to be rolled out as part of Viva Leisure’s unique hub and spoke model; • Despite the impact of COVID-19, membership increased by over 40,000; • Acquisitions of Healthworks (10 locations in Queensland), FitnFast (13 locations in New South Wales, Victoria and the ACT), and Re-Creation Malvern (Victoria) were each completed. SO C IAL AND CO M M UNIT Y CO M MI TM E NT Viva Leisure has again continued its commitment to ongoing support of the local communities in which we operate. That contribution has been necessarily moderated in 2020 by the impact of the pandemic. The Board and Management are justifiably proud of the impact that it has made in the community as a responsible corporate citizen. Likewise, we are proud of the opportunities offered for employment of some team members who have special circumstances. O UT LOO K Subject to the vagaries of the pandemic, we expect the upcoming year to be another dynamic and successful year, with several exciting opportunities from which Viva Leisure will benefit, including capitalising on our recent acquisition of the Plus Fitness master franchisor, and our potential expansion into other geographies. In closing, I extend the gratitude of the Board to our shareholders, our team, and our members for their continued support throughout this most challenging year. Yours sincerely, B R U C E G L A N V I L L E Chair A L E T T E R F R O M T T H H E E C C H H A A I I R R The Viva Leisure Board and Management team have joined regularly during the year as the challenges have been met and overcome. The spirit of contribution and effort has been unrelenting and reflects positively on the whole team. I am personally grateful for the valuable contribution of each of the Board and management team. In particular, I appreciate the significant contribution and achievements of Harry Konstantinou, his executive team, and the entire Viva Leisure team which nearly doubled during the year and now comprises over 1,100 amazing team members. I also take the opportunity to recognise the valued contribution of Mark McConnell who retires at the Annual Meeting and does not seek re-election. Mark has been a director since before the Initial Public Offering and has provided valued counsel over the early years of Viva Leisure as a public company. the chair 6 DIVIDENDS B OARD AND M ANAGE ME NT A R E P O R T F R O M THE CEO 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V Dear Fellow Shareholders There is no doubt that 2020 has been a year like no other. The financial year started with Viva Leisure coming out of the blocks very quickly and exceeding our expectations on performance, and then the COVID-19 pandemic hit. Our clubs and facilities were all mandated to close with 24-hours’ notice on the 23 March 2020, and we did not start re-opening facilities until 31 May 2020. I am pleased to report that our loyal and committed membership base returned to near pre-COVID levels by the end of June 2020 which is testament to our product and the importance of health and wellbeing to our members. The importance of a healthy lifestyle has never been more important than through this experience, and I truly believe that this now resonates with more and more members of our community. I further believe this will help to drive health club membership and participation to new levels over the next few years. Whilst we did not quite achieve 100,000 members for the year as originally forecast due to the impact of COVID-19, we expect to achieve that milestone in the next few months. Membership however has increased at a compound annual growth rate (CAGR) of 37.0% since FY2016, an outstanding achievement. Other key milestones include: • Revenue increased to $40.9 million, which represents a CAGR of 22.1% from FY2016 to FY2020; • EBITDA decreased to $6.1 million, however, still maintained an impressive CAGR of 35.7% over the period FY2016 to FY2020; It is even more important in the middle of a pandemic that the community be permitted to use the facilities of health clubs and maintain and improve their fitness levels. The feedback that we have received from members during the mandatory closure of health clubs was primarily around how lockdown introduces unhealthy habits into our lifestyles. OVERVIEW Viva Leisure owned and operated 79 locations as at 30 June 2020. As of 30 September 2020, this had already increased to 85 locations, which is over 100% increase from the 40 locations we owned and operated at the end of the financial year 2019. Together with new club openings and acquisitions during the year, our existing like-for-like locations continued to grow members which is the key metric that we constantly monitor. Our hiit republic brand has gone from strength to strength and as of 30 September 2020 we have 15 locations opened across the ACT and NSW. I expect this to grow to approximately 25 locations at the end of this financial year. This is an outstanding achievement considering the first hiit republic only opened in March 2019. TALENT To support our ambitious future growth, and as we have done in the past, our executive team is focused on attracting the best possible talent, as well as retaining, fostering and offering growth opportunities to our already bright shining stars. Viva Leisure offers a unique career path for anyone who wishes to work in the fitness industry and nearly all of our senior management have come through the ranks and worked their way up. Our business is all about experiences, and these can only be offered sincerely when we have the very best working in harmony. Our team is highly motivated, excited, and constantly educating and adapting to remain at the forefront. pivot, adapt and grow in my opinion faster and more controlled than any other player in the market. I expect in the coming twelve months our level of innovation will surprise not only our members but also our competitors. I look forward to leading the team into the next period of growth, continuing to extend our services into more markets, increasing the opportunities for our team and growing the value of the company for our shareholders. It is encouraging to see so many of our members as shareholders of the business. H A R R Y K O N S T A N T I N O U Founder, Managing Director and Chief Executive Officer A R E P O R T F R O M T T H H E E C C E E O O During the year, our team grew from 600 strong to over 1,100, and each of them plays a very important part of the experience which we offer our members. ACQ UI SI TI O NS During the financial year, we negotiated, settled and more importantly integrated various acquisitions. These included 10 locations as part of the Healthworks acquisition (Queensland) in two separate acquisitions, 13 locations as part of the FitnFast acquisition (NSW, Victoria and the ACT), and the Re-Creation Malvern location in Victoria. At the end of the financial year, we were also deep in due-diligence for the acquisition of the Plus Fitness master franchisor, which was settled in August 2020. The acquisition has introduced nearly 200 locations to the Viva Leisure network, a new market segment we can now target, and an existing network in both New Zealand and India we can expand on. I am very excited about what the introduction of our technology can do to the existing Plus Fitness network to help our franchisees grow their businesses which will, in turn, grow our business. T HE FUT URE The future, whilst extremely exciting, will continue our ‘more of the same’ model. A model which we have proven over the past 16 years since we opened our first location. Viva Leisure is committed to continue and even accelerate our strategic, controlled and well-planned growth trajectory in all key market segments in which we operate. With the acquisition of the Plus Fitness master franchisor (in August 2020), Viva Leisure has added another option to select from in entering new markets. We now have brands available to us which are suitable in all markets and all price-points, which is something our competitors simply do not offer. We are a dynamic, three-dimensional business that can 7 8 ceothe t r o p e r ’ T R O P E R ’ s r o t S R c O T C e E R r D i d I 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V BR UCE GLANV ILLE Independent Non-Executive Director Independent Chair Member of the Audit and Risk Committee and Chair of the People and Culture Committee Appointed 12 October 2018 Qualifications Fellow Chartered Accountants Australia and New Zealand Experience Appointed Board, Committee member and Chair on 12 October 2018. Bruce is a Chartered Accountant and was formerly a partner at Duesburys, Rolins and Deloitte. He has extensive experience providing Board leadership and governance in addition to driving growth strategies to the businesses he has led. Other Current Directorships None Directorships held in other listed entities during the three years prior to the current year None Interest in Shares and Options 300,000 ordinary shares and options to acquire a further 200,000 ordinary shares HARRY KONSTANTINOU MARK MCCONNELL Managing Director and Chief Executive Officer Appointed 15 July 2015 Member of the People and Culture Committee Appointed 12 October 2018 Qualifications BA, (University of Canberra) Experience Company co-founder and Director since 2004. Harry has over 25 years of experience developing, managing and selling technology services business. Other Current Directorships None Directorships held in other listed entities during the three years prior to the current year None Interest in Shares and Options 23,290,066 ordinary shares and options to acquire a further 2,340,000 ordinary shares. D D I I R R E E C C T T O O R R S S ’ ’ R E P O R T Non-Executive Director Member of the People and Culture Committee Appointed 12 October 2018 Qualifications Bachelor of Science, Graduate Diploma of Employment Relations, Graduate Diploma of Logistics Management, Master of Business Administration, Fellow of Australian Institute of Company Directors Experience Appointed Board and Committee member on 12 October 2018. Mark has over 20 years of management, executive and non-executive experience in a range of industries, including aviation, technology and investment finance. Mark’s experience and skills include business strategy, investor relations, capital raisings and innovation. Other Current Directorships Executive Director of Citadel Group Limited (ASX:CGL) Non-executive Director of Adveritas Limited (ASX:AV1) Directorships held in other listed entities during the three years prior to the current year None Interest in Shares and Options 4,543,296 ordinary shares 9 1 0 SUSAN FOR R E STER A M KYM GALLAGHER Independent Non-Executive Director Audit and Risk Committee Chair Appointed 12 October 2018 Qualifications Bachelor of Arts, Bachelor of Law (Hons), Master of Business Administration, Fellow of the Institute of Company Directors Experience Appointed Board and Committee member on 12 October 2018. Susan has 25 years executive management experience and 10 years listed Board experience across law, finance, business, HR and governance. Other Current Directorships Non-Executive Director of G8 Education Limited (ASX:GEM) Non-Executive Director of Over the Wire Holdings Limited (ASX:OTW) Non-Executive Chair of Jumbo Interactive Limited (ASX:JIN) Directorships held in other listed entities during the three years prior to the current year Non-Executive Director of Xenith IP Group Limited (ASX:XIP) between 2015 and August 2018 Chair and Non-Executive Director of National Veterinary Care Ltd (ASX:NVL). Resigned 7th April 2020 following completion of a Scheme of Arrangement Interest in Shares and Options 326,668 ordinary shares and options to acquire 100,000 ordinary shares. Company Secretary and Chief Financial Officer Appointed 12 October 2018 Qualifications Bachelor of Economics, Member of Chartered Accountants ANZ Experience Kym has considerable experience as the CFO and other senior management roles of numerous ASX listed companies, commencing with RG Capital Radio (ASX:REG) in 2000, followed by Macquarie Media Group (ASX:MMG) in 2005 and Southern Cross Media (ASX:SXL) in 2010 Other Current Directorships None Directorships held in other listed entities during the three years prior to the current year None Interest in Shares and Options 140,000 ordinary shares and options to acquire a further 250,000 ordinary shares MO RGAN B RYAN T Company Secretary and Group General Counsel Appointed Company Secretary on 12 October 2018. Resigned 16 March 2020. 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V 1 1 PRI NCI PAL AC TI VI TI ES The principal activities of the consolidated group during the financial year were the operation of health clubs. No significant change in the nature of these activities occurred during the year. RE VI EW O F O PERATI ONS A ND FI NANC IAL R ESU LTS Financial highlights for the year: • Total revenues were $40.9 million compared with $31.2 million in the financial year ended 30 June 2019; • Loss before income tax was ($9.3 million), compared to a profit of $4.0 million in the financial year ended 30 June 2019; • Net Profit / (loss) After Tax (NPAT) from continuing operations and attributable to members was ($6.2 million) compared with a financial year ended 30 June 2019 result of $2.9 million; • Cash and cash equivalent reserves available for deployment on acquisitions is strong at $30.1 million, up from $14.4 million in the financial year ended 30 June 2019; and • There was an increase in net assets from $25.8 million to $63.3 million ’ s r o t c e r i d t r o p e r 1 2 D D I I R R E E C C T T O O R R S S ’ ’ R E P O R T Impact of AASB16 The statutory financial results have been significantly impacted by the introduction of AASB16. Below is a reconciliation of the underlying statutory results to the pre-AASB16 results. Profit and Loss ($m) FY20 Statutory AASB16 Impact FY20 (pre AASB16) Revenues and profits were significantly impacted during the closure period and where appropriate this has been addressed in the specific notes, estimates and judgements in the Financial Statements. The Group has all Victorian locations currently closed due mandatory shutdowns imposed by the Victorian State Government and there remains uncertainty with respect to future events or circumstances which may continue to impact the financial results of the consolidated entity. The table below shows the management results for the period to February 2020 (pre COVID-19 impacts) and compared to the full 12 months results. This demonstrates the impact on the financial results due to the mandatory closures. 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V Revenue EBITDA Depreciation and Amortisation EBIT Finance Costs Profit / (loss) Before Tax Income Tax Expense Net Profit After Tax Earnings per share (basic - cents) 40.89 15.73 17.01 (1.28) 8.06 (9.34) (3.10) (6.24) (10.89) 0.00 (9.66) (12.94) 3.28 (7.30) 10.58 2.91 7.67 13.39 40.89 6.07 4.07 2.00 0.76 1.24 (0.19) 1.43 2.50 Operational highlights for the financial year: Other key events during shutdown: • An increase in operating locations/clubs from 40 to 79; • Fast tracking of back office synergies from the • Member numbers increasing from 54,039 at June 2019 to 94,196 at 30 June 2020; • Now operating 13 hiit republic boutique studios; • Expanded presence into NSW and Victoria with the completion of the FitnFast acquisition • Entered the Queensland market with the completion of the Healthworks acquisitions COVID-19 Impacts All of Viva Leisure Limited’s clubs were closed at Midday 23rd March 2020 in accordance with the Commonwealth Government directive. The Company took immediate steps to mitigate exposure to ongoing costs, seek alternative revenue opportunities and to preserve cash: • Wage costs reduced significantly by the stand down of significant numbers of staff during this period of closure, supported by the JobKeeper incentive • Removed significant controllable costs from the business • Senior CBA loan facility and existing finance lease payment obligations were deferred for six months • Rent negotiations commenced using the Mandatory Code of Conduct as a backdrop • Delayed all un-committed capital works on rollouts • Activated ‘at home’ work-out and work-in options via apps for members at a reduced rate to provide some certainty of service, income for the business and retain contact with members FitnFast acquisition • Development of a National Operations Centre (“NOC”) to allow for ‘staff-less’ gym environments in the future As the closedown period ended, the Company recommenced its capital works programs and completed the following: • Rebranded all of the Healthworks sites to Club Lime, and refurbished 5 of the 10 sites including full equipment upgrades • Completed the fitouts of the second site in Gungahlin ACT as well as hiit republic site in Wagga Wagga NSW The Company also fully prepared a comprehensive re-opening plan including: • Ensuring all government and industry guidelines are adhered to • • • Implementation of booking system during the phase two re-opening to manage headcount limits Installation of people counters during the phase two re-opening to manage headcount limits Instituting appropriate broad social distancing and cleaning protocols • Re-engaging stood down staff to ensure staffing was available to meet capacity Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have, on the group based on known information. This consideration extends to the nature of the products and services offered, customers, supply chain, staffing and geographic regions in which the group operates. 8 MONTHS JULY - FEBRUARY 12 MONTHS JULY - JUNE $m (8 months and 12 months) FY2020 Underlying FY2019 Underlying Variance FY2020 Underlying FY2019 Underlying Variance Revenue Operating Costs EBITDA EBITDA Margin 33.16 (25.39) 7.78 23.4% 20.48 (15.99) 4.49 21.9% 61.9% 58.8% 73.1% 40.89 33.08 (34.82) (25.80) 23.6% 35.0% 6.07 14.8% 7.29 (16.7%) 22.0% SI GNIFI CANT C HANGES IN T HE STATE O F AFFAIR S EV ENTS SUB S EQ UENT TO T HE E ND OF T HE RE PO RT ING PERI OD During the year, the following significant changes occurred within the Group: • • In December 2019, completed a fully underwritten $20m equity raising by way of an institutional placement of approximately 7.5m ordinary shares at $2.65 In June 2020, completed a fully underwritten $25m equity raising by way of institutional placement and rights entitlement offer of approximately 11.36m ordinary shares at $2.20 • Credit terms were agreed with the Commonwealth Bank of Australia in relation to a $17.45m five-year senior secured facility, comprising a $10m Market Rate Loan facility (currently drawn to $8.0m) to assist in financing future acquisitions, an equipment finance facility, bank guarantee facility and a direct debit facility • Completed two separate acquisitions comprising 10 Healthworks Health Clubs located in Queensland • Completed the acquisition of 13 FitnFast Health Clubs located in the Australian Capital Territory, New South Wales and Victoria On 21st August 2020 the Company completed the acquisition of Australian Fitness Management Pty Limited, the Master Franchisor for the Plus Fitness group comprising approximately 200 clubs located in Australian Capital Territory, New South Wales, Victoria, South Australia, Western Australia, New Zealand and India. AFM was acquired for an initial payment of $18m, with a $2m deferred payment which is subject to performance hurdles. No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the consolidated group, the results of those operations, or the state of affairs of the consolidated group in future financial years, other than the impacts of COVID-19 mentioned above. LI KELY DE VELO PM ENTS A ND E XPE CTE D RE SU LTS O F OPE RAT IO NS Likely developments in the operations of the consolidated group and the expected results of those operations in future financial years have not been included in this report as the inclusion of such information is likely to result in unreasonable prejudice to the consolidated group. D D I I R R E E C C T T O O R R S S ’ ’ R E P O R T 1 3 1 4 DIRECTORS’ MEETINGS D IV ID ENDS Indemnity of auditors The number of meetings of the Board (including meetings of Committees of Directors) held during the year and the number of meetings attended by each Director is as follow: There were no dividends paid or declared since the start of the financial year (2019: nil). Director’s name Board Meetings Audit and Risk Committee People and Culture Committee INDEMNITIES GIVEN TO, AND INSURANCE PREMIUMS PAID FOR AUDITORS AND OFFICERS The Group has agreed to indemnify its auditors, Hall Chadwick, to the extent permitted by law, against any claim by a third party arising from the Group’s breach of its agreement. The indemnity requires the Group to meet the full amount of any such liabilities including a reasonable amount of legal costs. A 21 21 21 21 B 21 20 20 21 A - 3 - 3 B 3 3 3 3 A 1 2 2 2 B 1 2 2 2 Harry Konstantinou Bruce Glanville Mark McConnell Susan Forrester Where: • column A: is the number of meetings the Director was entitled to attend • column B: is the number of meetings the Director attended During the year, there were 8 scheduled Board Meetings. The additional meetings held and attended by Directors were for special matters, such as for acquisitions, capital raises and COVID-19 matters. UNISSUED SHARES UNDER OPTION Unissued ordinary shares of the Company under option at the date of this report are: Date options granted Expiry date Exercise price of shares ($) Number under option 2 May 2019 2 May 2019 7 June 2019 30 October 2019 Total 2 May 2023 2 May 2023 31 August 2023 31 August 2024 1.34 1.43 0.00 0.00 1,500,000 1,000,000 295,000 295,000 3,090,000 These options were issued under either the LTI, Tranche 1 or Tranche 2 Plans (described in Note 21.2 to the financial statements) and have been allotted to individuals on conditions as follows: • LTI Plan Options: The vesting of those options and will be subject to the satisfaction of appropriate service-based conditions and/or performance hurdles determined by the Board. Options issued under the LTI program expire on the earlier of their expiry date or termination of the employee’s employment; • Tranche 1 and Tranche 2 Plan Options: The options are currently vested. Options issued under the Tranche 1 and Tranche 2 program expire four years from the date of grant of the options. S HA RE S ISSU ED DURING OR SINCE THE END OF TH E YEA R AS A RESULT OF EXERCISE OF O PTION S There have been no issued ordinary shares as a result of the exercise of options during or since the end of the financial year. ENVIRONMENTAL LEGI SLATION The consolidated group’s operations are not subject to any particular or significant environmental regulation under a law of the Commonwealth or of a State or Territory in Australia. 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V 1 5 Insurance of Officers Non-audit services During the year, Viva Leisure paid a premium to insure officers of the Group. The officers of the Group covered by the insurance policy include all Directors and Secretaries. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of the Group, and any other payments arising from liabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else to cause detriment to the Group. Details of the amount of the premium paid in respect of insurance policies are not disclosed as such disclosure is prohibited under the terms of the contract of insurance. The Group has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify any current or former officer of the Group against a liability incurred as such by an officer. No indemnities have been given or insurance premiums paid, during or since the end of the financial year, for any person who is or has been an officer or auditor of the consolidated group. Indemnity of officers The Company has entered into deeds of access, indemnity and insurance with each Director (Director’s Protection Deed) which confirm and extend the Director’s statutory and general law rights of access to Board papers and the books and records of the Company and its Subsidiaries. The Director’s Protection Deeds provide that the Director be allowed access to and a copy of records in certain circumstances. In accordance with the Constitution, the Company must indemnify any current and former Directors and officers of the Company and its Subsidiaries against any liability incurred by that person in that capacity, including legal costs. The Director’s Protection Deed also requires the Company to indemnify the Director for liability incurred as an officer of the Company and its Subsidiaries, including reasonably incurred legal costs, to the maximum extent permitted by law. The Constitution also allows the Company to enter into and pay premiums on contracts insuring any liability incurred by any current and former Directors and officers of the Company and its Subsidiaries, which is incurred by them in that capacity, including legal costs. Accordingly, the Director’s Protection Deed requires the Company to maintain, to the extent permitted by law, an insurance policy which insures Directors and officers against liability as a Director or officer of the Company and its Subsidiaries. During the year, Hall Chadwick, the Company’s auditors, performed certain other services in addition to their statutory audit duties. The Board of directors has considered the position and, in accordance with the advice received from the audit committee, is satisfied that the provision of the non- audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • All non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the auditor; and • None of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants. Details of the amounts paid to the auditors of the Company, Hall Chadwick, for audit and non-audit services provided during the year are set out in Note 28 to the financial statements. The total paid for non-audit services was $53,000. This comprised tax and other business services. PRO C EED INGS O N BEH AL F O F TH E CO NSO LI DATE D GRO UP No person has applied for leave of Court to bring proceedings on behalf of the consolidated group or intervene in any proceedings to which the consolidated group is a party for the purpose of taking responsibility on behalf of the consolidated group for all or any part of those proceedings. The consolidated group was not a party to any such proceedings during the year. AU DI TOR ’S I ND EPEND ENCE DE CL ARAT ION A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 19. This directors’ report including the Remuneration Report on pages 12 to 18 is signed in accordance with a resolution of the Board of Directors: D D I I R R E E C C T T O O R R S S ’ ’ R E P O R T Director H A R R Y K O N S T A N T I N O U Dated this 25th day of August 2020. 1 6 n u m e r 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V I D U A D E T I N O s T n A R E o N U i M E t R a r e T R O P E R 1 7 The Directors of Viva Leisure Ltd (Viva Leisure, the Group, or the Company) present the Remuneration Report for Non-Executive Directors, Executive Directors and other Key Management Personnel, prepared in accordance with the Corporations Act 2001 and the Corporations Regulations 2001. The Remuneration Report is set out under the following main headings: a. Principles used to determine the nature and amount of remuneration; b. Details of remuneration; c. Service agreements; d. Share-based remuneration; and A. PRINCIPLES USED TO DETERMINE TH E NATURE AND AMOUNT OF REMUNE RATI O N The principles of the Group’s executive strategy and supporting incentive programs and frameworks are: • to align rewards to business outcomes that deliver value to shareholders; • to drive a high performance culture by setting challenging objectives and rewarding high performing individuals; and • to ensure remuneration is competitive in the relevant employment market place to support the attraction, motivation and retention of executive talent Viva Leisure has structured a remuneration framework that is market competitive and complementary to the reward strategy of the Group. The Board has established a People and Culture Committee which operates in accordance with its charter as approved by the Board and is responsible for determining and reviewing compensation arrangements for the Directors and the Executive Team. Short Term Incentives (STIs) Performance measures involve the use of annual performance objectives, metrics, performance appraisals and continuing emphasis on living the Company values. The Committee has engaged independent remuneration consultants to provide any necessary information to assist in the discharge of its responsibilities (refer to the disclosures below). The remuneration structure that has been adopted by the Group consists of the following components: • fixed remuneration being annual salary including directly related statutory obligations; • short term incentives (STIs), being cash based payments; • long term incentives (LTIs), being participation in the form of options. The People and Culture Committee assess the appropriateness of the nature and amount of remuneration on a periodic basis by reference to recent employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality Board and Executive Team. The payment of incentive salaries, share options and other incentive payments are reviewed by the People and Culture Committee annually as part of the review of executive remuneration and a recommendation is put to the Board for approval. All incentive salaries, options and incentives are linked to pre-determined performance criteria, and subject to the usual discretion of the Board. The performance measures are set annually after consultation with the Board and executives and are specifically tailored to the areas where each executive has a level of control. The measures target areas the Board believes hold the greatest potential for expansion and profit and cover financial and non- financial measures. Entitlement to an annual STI payment for the Executive Team is subject to the following: • the achievement of targets as against key performance indicators (KPIs) and the budget adopted by the Board for the financial year ending 30 June of each year; • an unqualified audit report for that financial year; • the People and Culture Committee will assess whether those KPIs have been achieved or otherwise and provide a recommendation to the Board; • where the KPIs are only partially achieved, the Board will, wholly at its sole discretion, determine the basis upon which any STI payment will be calculated in those circumstances; and • any STI amount is only payable upon finalisation of the financial accounts by the Company. R R E E M M U U N N E E R R A A T T I I O O N N R R E E P P O O R R T T A U D I T E D 1 8 Long Term Incentives (LTIs) B . D ETAIL S OF RE MU NERATI O N The table below describes the performance hurdles and vesting conditions that apply as at the date of this report and in relation to the 590,000 options granted to senior executives: Details of the nature and amount of each element of the remuneration of each Key Management Personnel (KMP) of Viva Leisure are shown in the table below.: Earnings per Share (EPS) Cumulative Compound Annual Growth Rate (CAGR) The percentage of options that vest for each % EPS CAGR is illustrated in the following table: Directors and other Key Management Personnel Short-term Employee Benefits Post- employment Benefits Long-term Benefits Share- based Payments Performance based on % of Remuneration LTIs (Tranche 1) LTIs (Tranche 2) Employee Year Cash salary and fees Cash incentive Super- annuation Long service leave Termination benefits Options Total EPS CAGR over the two Financial Years Ending 30 June 2021 EPS CAGR over the three Financial Years Ending 30 June 2022 Percentage of Options that Vest Executive Directors Less than 15% (minimum Target) Less than 15% (minimum Target) 0% 15% to 20% (within target range) 15% to 20% (within target range) 50% - 100% (on a straight-line basis) Greater than 20% (above maximum target) Greater than 20% (above maximum target) 100% • For the purposes of the above performance hurdles, Earnings per Share means the Basic EPS recorded in the Company’s audited financial statements. • The Basic EPS may be adjusted for items which the Board, in its discretion, considers should be excluded from the EPS result (such as items of a one-off and non-recurring nature). • The Company’s Basic EPS for FY2019 was calculated following the IPO and confirmation of the number of Shares on issue as at the date of listing. • The performance hurdle will be tested only once the vesting condition has been met by the grantee senior executive and following the Company’s audited accounts being finalised for FY2021. USE O F REMUNERATION CONSULTANTS Viva Leisure Limited’s Board engaged the services of BDO Reward Pty Ltd to review and to provide recommendations in respect of the amount and elements of executive remuneration, including short-term and long-term incentives. Minter Ellison were engaged to review the long-term incentives plan rules and associated documentation. Under the terms of the engagement, BDO Reward Pty Ltd and Minter Ellison provided remuneration recommendations as defined in section 9B of the Corporations Act 2001 for fees of $14,750 and $7,000 respectively for these services. Each of BDO Reward Pty Ltd and Minter Ellison have confirmed that any recommendations have been made free from undue influence by members of the Group’s key management personnel. BDO Reward Pty Ltd and Minter Ellison were engaged by, and reported directly to, the Board of Directors. The agreement for the provision of remuneration consulting services of each consultant was executed by the Chair of the Board of Directors on behalf of the Board. The reports containing the remuneration recommendations was provided by BDO Reward Pty Ltd and the documentation related to the long-term incentives plan rules and associated documentation by Minter Ellison were provided directly to the Chair of the Board of Directors. The Board is satisfied that the recommendations were made free from undue influence from any members of the key management personnel. 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V 1 9 Harry Konstantinou 2020 425,000 90,000 25,000 7,125 (Managing Director) 2019 273,1 1 1 84,375 22,840 107,885 Non-executive Directors Bruce Glanville* 2020 89,124 - 20,620 (Independent) 2019 73,194 200,000* Mark McConnell 2020 53,076 (Non-Independent) 2019 60,000 Susan Forrester 2020 65,625 (Independent) 2019 68,750 - - - - - - - - - - - - - - - - - - - - - - - 11,689 558,814 127,552 615,763 18.2% 34.9% - 109,744 11,064 284,258 - - - 53,076 60,000 65,625 5,532 74,282 Nil Nil Nil Nil Nil Nil Directors voluntarily reduced Directors fees by 50% during the period 27 March 2020 to 14 June 2020. *2019: Rolins Consulting, an associated entity of Mr Bruce Glanville was paid a $200,000 incentive fee for a successful initial public offering. Note: Directors were paid as Advisory Board members until their appointment on 12th October 2018. Directors and other Key Management Personnel Short-term Employee Benefits Post- employment Benefits Long-term Benefits Share- based Payments Performance based on % of Remuneration R R E E M M U U N N E E R R A A T T I I O O N N R R E E P P O O R R T T A U D I T E D Employee Year Cash salary and fees Cash incentive Super- annuation Long service leave Termination benefits Options Total Other Key Management Personnel Kym Gallagher (Chief Financial Officer) Angelo Konstantinou (Chief Technology Officer) Sean Hodges (Chief Operating Officer) 2020 275,000 60,000 25,000 4,799 2019 2 3 1 , 7 1 8 56,250 23,945 8,055 2020 200,000 44,119 20,597 3,353 2019 176,029 42,063 15,356 50,769 2020 175,000 20,000 18,678 13,281 2019 164,267 25,000 14,564 9,459 2019 Total 2020 1,282,825 214,119 109,895 28,558 2018 Total 2019 1,047,069 407,688 76,705 176,168 - - - - - - - - 5,157 369,956 5,532 325,500 3,438 271,507 5,532 289,749 226,959 - 213,290 20,284 1,655,682 155,212 1,862,842 17.6% 19.0% 17.5% 16.4% 8.8% 11.7% 14.2% 30.2% 2 0 The relative proportions of remuneration that are linked to performance and those that are fixed are as follows: Fixed remuneration At Risk Short-Term Incentives (STI) At risk options Executive Directors Harry Konstantinou Other Key Management Personnel Kym Gallagher Angelo Konstantinou Sean Hodges 450,000 Up to 50% of fixed remuneration Up to 100% of fixed remuneration 340,000 240,000 230,000 Up to 25% of fixed remuneration Up to 40% of fixed remuneration Up to 25% of fixed remuneration Up to 40% of fixed remuneration Up to 15% of fixed remuneration Up to 20% of fixed remuneration Since the long-term incentives are provided exclusively by way of options, the percentages disclosed also reflect the value of remuneration consisting of options, based on the value of options expensed during the year. C. SERVICE AGREEMENTS Remuneration and other terms of employment for the Executive Directors and other Key Management Personnel are formalised in a Service Agreement. The major provisions of the agreements relating to remuneration are set out below: Employee Base Salary ($) Term of Agreement Notice Period Harry Konstantinou Kym Gallagher Angelo Konstantinou Sean Hodges 425,000 315,000 2 1 9 ,1 7 8 210,045 Three years Six months Three years Three months Three years Three months Three years Three months D. SHARE- BASED REM UNERAT ION All options refer to options over ordinary shares of the Company, which are exercisable on a one-for- one basis under the terms of the agreements. Options granted to the Executive Team are under the LTI Plan and under Tranche 1 and Tranche 2 Plans: • LTI Plan Options: The vesting of those options and will be subject to the satisfaction of appropriate service-based conditions and/or performance hurdles determined by the Board; • Tranche 1 and Tranche 2 Plan Options: These options are currently vested. Options granted under the LTI, Tranche 1 and Tranche 2 Plans carry no dividends or voting rights. 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V 2 1 Details of options over ordinary shares in the Company that were granted as remuneration to each key management personnel are set out in the table below. Non-Executive Directors are not entitled to participate in the LTI Plan. No options under the LTI Plan have been exercised or forfeited during the year. Employee Number granted Grant date Value per Option at Grant Date Value of Options at Grant Date Number Vested Exercise Proceeds ($) Vesting and First Exercise Date Last Exercise Date Directors and other Key Management Personnel Executive Directors Harry Konstantinou Tranche 1 1,000,000 2 May 2019 $0.055 $55,320 Tranche 2 1,000,000 2 May 2019 $0.072 $77,232 LTI LTI 170,000 7 Jun 2019 - - 170,000 30 Oct 2019 $0.069 $11,689 Non-Executive Directors Bruce Glanville Tranche 1 200,000 2 May 2019 $0.055 $11,064 Susan Forrester Tranche 1 100,000 2 May 2019 $0.055 $5,532 Other Key Management Personnel Tranche 1 100,000 2 May 2019 $0.055 $5,532 Kym Gallagher LTI LTI 75,000 7 Jun 2019 - - 75,000 30 Oct 2019 $0.069 $5,157 Tranche 1 100,000 2 May 2019 $0.055 $5,532 Angelo Konstantinou LTI LTI 50,000 7 Jun 2019 - - 50,000 30 Oct 2019 $0.069 $3,438 - - - - - - - - - - - - - - - - - - - - - - - - 7 Jun 2019 2 May 2023 7 Jun 2019 2 May 2023 31 Aug 2021 31 Aug 2023 31 Aug 2022 31 Aug 2024 7 Jun 2019 2 May 2023 7 Jun 2019 2 May 2023 7 Jun 2019 2 May 2023 7 Jun 2022 7 Jun 2024 31 Aug 2022 31 Aug 2024 7 Jun 2019 2 May 2023 7 Jun 2022 7 Jun 2024 31 Aug 2022 31 Aug 2024 E. SHAR ES HEL D BY D I REC TOR S AND KE Y M ANAGEM E NT PE RSO NN EL The number of ordinary shares in the Company during the 2020 reporting period held by each of the Group’s key management personnel, including their related parties, is set out below Directors and other Key Management Personnel Balance at Start of Year Granted as Remuneration Received on Exercised Options Shares Purchased Held at the End of the Reporting Period Executive Directors Harry Konstantinou 23,230,502 Non-Executive Directors Bruce Glanville Mark McConnell Susan Forrester 300,000 4,543,296 24,593 Other Key Management Personnel Kym Gallagher 100,000 Angelo Konstantinou 23,230,502 Sean Hodges 40,000 - - - - - - - - - - - - - - 59,564 23,290,066 - - 300,000 4,543,296 302,075 326,668 40,000 140,000 - 23,230,502 6,667 46,667 At 30 June 2020 there were no loans outstanding to Directors or Key Management Personnel. 2 2 R R E E M M U U N N E E R R A A T T I I O O N N R R E E P P O O R R T T A U D I T E D 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V corporate governance statement The Board is committed to achieving and demonstrating the highest standards of corporate governance. As such, Viva Leisure Ltd and its Controlled Entities (the Group) have adopted the third edition of the Corporate Governance Principles and Recommendations. The Group’s Corporate Governance Statement for the financial year ended 30 June 2020 is available on the investor relations website at https://investors.vivaleisure.com.au. 2 3 2 4 C O R P O R A T E G G O O V V E E R R N N A A N N C C E E S S T T A A T T E E M M E E N N T T 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V n e p e d n e c n e d i r a l c e d N O I T A R E L C E D S E C N E D N n E P E i D N o i t a I R O T I D U A ’ A A U U D D I I T T O O R R ’ ’ S S I I N N D D E E P P E E N N D D E E N N C C E E D D E E C C L L A A R R A A T T I I O O N N 2 5 2 6 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V consolidated statement PROFI T O R LOSS AND OT HER COMPREHENSI VE INCOME for the Ye ar End ed 30 Ju ne 2020 Earnings per share 24 Cents Cents Basic earnings per share: Earnings from continuing operations Diluted earnings per share: Earnings from continuing operations (10.9) (10.4) 5.4 5.2 The weighted average shares for the financial year ended 30 June 2019 are calculated from the date of listing on 7th June 2019 to 30 June 2019. Sales revenue Other income Rental expense Employee benefits expense Bank Charges Advertising and marketing costs Utilities and cleaning Licences and subscriptions Insurances Repairs and maintenance Professional fees Depreciation and amortisation expense Finance costs Costs of capital raisings and acquisitions Other expenses Profit / (loss) before income tax Income tax benefit / (expense) Profit / (loss) for the year Total other comprehensive income for the year Note 2020 $ 2019 $ 5 5 6 40,367,123 31,069,941 518,574 (135,325) 90,279 (6,742,218) 20 (13,551,344) (9,664,619) (657,908) (1,322,313) (425,835) (1,007,700) (3,507,656) (2,383,840) (826,882) (236,809) (817,151) (255,002) (479,020) (180,255) (625,137) (148,450) (17,006,278) (2,201,812) (8,063,229) (1,051,385) (631,570) (913,619) (2,798,033) (1,780,200) (9,343,618) 3,097,273 (6,246,345) - 3,975,945 (1,120,842) 2,855,103 - 7 6 9 Total comprehensive income / (loss) for the year (6,246,345) 2,855,103 This statement should be read in conjunction with the notes to the financial statements. C O N S O L I D A T E D S T A T E M E N T O F P P R R O O F F I I T T O O R R L L O O S S S S A A N N D D O O T T H H E E R R C C O O M M P P R R E E H H E E N N S S I I V V E E I I N N C C O O M M E E 2 7 2 8 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V T N E M E T A T S D E T A D I L O S N O C n o i t i s o p l a i c n a n i f N O T I I S O P I L A C N A N I F 0 2 0 2 E N U J 0 3 T A S A ASSETS CURRENT ASSETS Cash and cash equivalents Trade and other receivables Other current assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Trade and other receivables Property, plant, and equipment Right of use assets Intangible assets Deferred tax assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS LIABILITIES CURRENT LIABILITIES Trade and other payables Borrowings Lease liabilities Contract liabilities Current tax liabilities Provisions TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Borrowings Lease liabilities Contract Liabilities Provisions Deferred tax liabilities TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Retained earnings TOTAL EQUITY Note 2020 $ 2019 $ 10 11 12 14 19 15 16 17 13 19 18 16 21 13 19 18 21 16 30,103,095 14,385,895 2,652,313 2,972,356 218,443 365,306 35,727,764 14,969,644 - 28,646,732 176,881,777 20,529,715 57,726,670 114,231 9,769,193 9,427,644 6,564,081 3,460,781 283,784,894 29,335,930 319,512,658 44,305,574 5,096,543 1,272,500 14,829,663 863,350 704,386 1,655,033 24,421,475 6,716,000 167,797,430 - 4,476,841 52,784,151 231,774,422 256,195,897 63,316,761 2,542,778 2,274,815 - 1,299,678 1,495,149 1,176,473 8,788,893 5,668,840 - 1,294,002 115,937 2,675,844 9,754,623 18,543,516 25,762,058 43,715,691 (21,430,110) 3,476,477 22 23 87,375,694 (21,725,385) (2,333,548) 63,316,761 25,762,058 C O N S O L I D A T E D S T A T E M E N T F F I I N N A A N N C C I I A A L L P P O O S S I I T T I I O O N N This statement should be read in conjunction with the notes to the financial statements. 2 9 3 0 s e g n a h c y t i u q e n 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V I S E G N A H C Y T U Q E N I F O T N E M E T A T S D E T A D I L O S N O C 0 2 0 2 E N U J 0 3 D E D N E R A E Y E H T R O F Share Capital $ Reserves $ Retained Earnings (Accumulated a) $ Total Equity $ Balance at 30 June 2018 Transactions with owners Issue of shares, net of transaction costs and tax 120 22,715,571 Issue of shares under group restructure 21,000,000 - - - Common control reserve arising from group restructure Share option premium reserve - - (21,585,321) 155,211 Total transactions with owners 43,715,571 (21,430,110) 621,374 621,494 - - - - - 22,715,571 21,000,000 (21,585,321) 155,211 22,285,461 Profit for the year Total comprehensive profit for the year attributable to members of the entity Total transactions with owners and other transfers - - - - 2,855,103 2,855,103 2,855,103 2,855,103 43,715,571 (21,430,110) 2,855,103 25,140,564 Balance at 30 June 2019 43,715,691 (21,430,110) 3,476,477 25,762,058 Balance at 1 July 2019 43,715,691 (21,430,110) 3,476,477 25,762,058 Impact of initial recognition of AASB16, net of tax - - 436,320 436,320 Balance at 1 July restated 43 ,7 15 ,69 1 (21,430,110) 3,912,797 26,19 8, 37 7 Issue of shares, net of transaction costs and tax Common control reserve arising from group restructure in prior year Share option premium reserve 43,660,003 - . - (315,559) 20,284 Total transactions with owners 43,660,003 (295,275) - - - - 43,660,003 (315,559) 20,284 43,364,728 Loss for the year Total comprehensive loss for the year attributable to members of the entity Total transactions with owners and other transfers - - - - (6,246,345) (6,246,345) (6,246,345) (6,246,345) 43,660,003 (295,275) (6,246,345) 37,118,383 Balance at 30 June 2020 87,375,694 (21,725,385) (2,333,548) 63,316,760 This statement should be read in conjunction with the notes to the financial statements. C O N S O L I D A T E D S T A T E M E N T C C H H A A N N G G E E S S I I N N E E Q Q U U I I T T Y Y i 3 1 3 2 F O T N E M E T A T S D E T A D I L O S N O C S W O L F H S A C 0 2 0 2 E N U J 0 3 D E D N E R A E Y E H T R O F 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V h s a c s w o l f CASH FLOWS FROM OPERATING ACTIVITIES Note Receipts from customers Payments to suppliers and employees Interest received Interest paid Payments of income tax 2020 $ 2019 $ 45,894,517 35,881,038 (32,816,827) (27,470,717) 199,463 35,699 (8,063,229) (1,575,870) (631,570) (469,785) Net cash provided by operating activities 25 3,638,054 7,344,665 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (17,314,639) (3,928,258) Proceeds from sale of property, plant and equipment Purchase of intangibles 583,015 (601,652) Payments for business combinations, net of cash acquired 29 (17,729,613) 168,882 (335,431) (7,121,033) Net cash (used in) investing activities (35,062,889) (11,215,840) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares Direct costs of issue of shares Proceeds from borrowings Reduction in equipment leases principal Reduction in property leases principal Repayment of borrowings Net cash provided by financing activities Net increase in cash held Cash at beginning of financial year Cash acquired under Group restructure 45,000,000 23,500,000 (1,848,761) 7,988,500 (951,652) - (1,759,274) (1,986,449) (2,238,429) - - (3,480,228) 47,142,036 17,081,671 15,717,201 13,210,496 14,385,895 - 535,530 639,869 Cash at end of financial year 10 30,103,095 14,385,895 This statement should be read in conjunction with the notes to the financial statements. C O N S O L I D A T E D S T A T E M E N T C C A A S S H H F F L L O O W W S S 3 3 3 4 s e t o n 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V S E T O N D E T A D I L O S N O C E H T O T R O F S T N E M E T A T S L A I C N A N I F 0 2 0 2 E N U J 0 3 D E D N E R A E Y E H T › NOTE 1 – NATUR E OF OPERATIONS The principal activities of the consolidated group during the financial year were health club operations. No significant change in the nature of these activities occurred during the year. › NOTE 2 – GENERAL INFORMATION AND STATEMENT OF COMPLIANCE The consolidated general purpose financial statements of the Group have been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board (AASB). Compliance with Australian Accounting Standards results in full compliance with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Viva Leisure Limited is a for-profit entity and statements are prepared on accruals basis under the historical cost convention. Viva Leisure Limited is the Group’s Ultimate Parent Company. Viva Leisure Limited is a Public Company incorporated and domiciled in Australia. The address of its registered office and its principal place of business is Unit 7, 141 Flemington Road, Mitchell, ACT, Australia. The consolidated financial statements for the year ended 30 June 2020 were approved and authorised for issue by the Board of Directors on 25 August 2020. › NOTE 3 – CHANGES IN SIGNIFICANT ACCOUNTING POLICIES Initial Application of AASB 16: Leases The Group has recognised a lease liability and right- of-use asset for all leases recognised as operating leases under AASB 117: Leases where the Group is the lessee. Lease liabilities are shown at the present value of the remaining lease payments. The Group’s incremental borrowing rate as at 1 July 2019 has been used to discount the lease payments. The right-of-use assets which the Group entered into as a lessee have been measured and recognised in the statement of financial position as at 30 June 2020 by taking into consideration the lease liability and the prepaid and accrued lease payments (that are related to the lease). The following practical expedients have been used by the Group in applying AASB 16 for the first time: • For a portfolio of leases that have reasonably similar characteristics, a single discount rate has been applied. • Leases that have remaining lease term of less than 12 months as at 1 July 2019 have been accounted for in the same way as short-term leases. • The use of hindsight to determine lease terms on contracts that have options to extend or terminate. • Applying AASB 16 to leases previously identified as leases under AASB 117: Leases and Interpretation 4: Determining whether an arrangement contains a lease without reassessing whether they are, or contain, a lease at the date of initial application. • Not applying AASB 16 to leases previously not identified as containing a lease under AASB 117 and Interpretation 4. The difference between the undiscounted amount of operating lease commitments at 30 June 2019 and the impact of applying AASB16 as at 1 July 2019 is due to discounting the operating lease commitments at the Group’s incremental borrowing rate; the inclusion of option periods and any lease incentives (note 20.). Prior year financial statements have not been restated to reflect the changes in the Group’s accounting policies. › NOT E 4 – S UM M ARY OF ACCO UNT ING POL IC IES a. Overall Considerations The consolidated financial statements have been prepared using the significant accounting policies and measurement bases summarised below. b. COVID-19 Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have, on the group based on known information. This consideration extends to the nature of the products and services offered, customers, supply chain, staffing and geographic regions in which the group operates. The Group has all Victorian locations currently closed due mandatory shutdowns imposed by the Victorian State Government and there remains uncertainty with respect to future events or circumstances which may continue to impact the financial results of the consolidated entity. In addition, NSW has not returned to 24 hour operation. c. Basis of Consolidation The Group financial statements consolidate those of the Parent Company and all of its subsidiaries as at 30 June 2020. The parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All subsidiaries have a reporting date of 30 June. Refer to Note 30 for the list of subsidiaries. All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Where unrealised losses on intra- group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable. b. Business Combinations The Group applies the acquisition method in accounting for business combinations. The consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred and the equity interests issued by the Group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred. The Group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognised in the acquiree’s financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition- date fair values. Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of: (a) fair value of consideration transferred, (b) the recognised amount of any non- controlling interest in the acquiree, and (c) acquisition- date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of N N O O T T E E S S T T O O T T H H E E C C O O N N S S O O L L I I D D A A T T E E D D S S T T A A T T E E M M E E N N T T S S F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 0 3 5 3 6 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (i.e. gain on a bargain purchase) is recognised in profit or loss immediately. See note 16. c. Fair Value of Assets and Liabilities Where applicable, the Group measures some of its assets and liabilities at fair value on either a recurring or non- recurring basis, depending on the requirements of the applicable Accounting Standard. Fair value is the price the Group would receive to sell an asset or would have to pay to transfer a liability in an orderly (i.e. unforced) transaction between independent, knowledgeable and willing market participants at the measurement date. As fair value is a market-based measure, the closest equivalent observable market pricing information is used to determine fair value. Adjustments to market values may be made having regard to the characteristics of the specific asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. To the extent possible, market information is extracted from either the principal market for the asset or liability (i.e. the market with the greatest volume and level of activity for the asset or liability) or, in the absence of such a market, the most advantageous market available to the entity at the end of the reporting period (i.e. the market that maximises the receipts from the sale of the asset or minimises the payments made to transfer the liability, after taking into account transaction costs and transport costs). For non-financial assets, the fair value measurement also takes into account a market participant’s ability to use the asset in its highest and best use or to sell it to another market participant that would use the asset in its highest and best use. The fair value of liabilities and the entity’s own equity instruments (excluding those related to share-based payment arrangements) may be valued, where there is no observable market price in relation to the transfer of such financial instruments, by reference to observable market information where such instruments are held as assets. Where this information is not available, other valuation techniques are adopted and, where significant, are detailed in the respective note to the financial statements. d. Revenue Revenue is derived mainly from the sale of health club membership services to its customers. To determine whether to recognise revenue, the Group follows a 5-step process: (i) Identifying the contract, or otherwise, with a customer; (ii) Identifying the performance obligations (iii) Determining the transaction price (iv) Allocating the transaction price to the performance obligations (v) Recognising revenue when/as performance obligation(s) are satisfied The health club membership services revenue stream focuses on providing customers with access to the groups’ gym facilities. Revenue is recognised as the customers are provided access to the gym. Under AASB 15: Revenue from Contracts with Customers, this happens over time as customers pay in advance of receipt of this service. The consideration received in advance of providing these services, which is generally two weeks in advance, is recognised as a contract liability. Therefore, revenue is recognised over time as the customer consumes these services. The transaction price is determined with reference to the contract price as stated in the customers contract. Interest revenue is recognised using the effective interest method, which for floating rate financial assets is the rate inherent in the instrument. All revenue is stated net of the amount of goods and services tax. e. Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is necessary to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed in the period in which they are incurred and reported in finance costs. f. Goodwill Goodwill represents the future economic benefits arising from a business combination that are not individually identified and separately recognised. Goodwill is carried at cost less any accumulated impairment losses. Goodwill is calculated as the excess of the sum of: (i) the consideration transferred at fair value; (ii) any non-controlling interest (determined under either the fair value or proportionate interest method); and (iii) the acquisition date fair value of any previously held equity interest; over the acquisition date fair value of any identifiable assets acquired and liabilities assumed. The acquisition date fair value of the consideration transferred for a business combination plus the acquisition date fair value of any previously held equity interest shall form the cost of the investment in the separate financial statements. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill is tested for impairment annually and is allocated to the Group’s cash-generating units or groups of cash- generating units, representing the lowest level at which goodwill is monitored and not larger than an operating segment. Gains and losses on the disposal of an entity include the carrying amount of goodwill related to the entity disposed of. g. Other Intangible Assets Depreciation Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of acquisition. Intangible assets acquired separately are initially recognised at cost. Intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in the profit or loss arising from derecognition of an intangible asset is measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of finite life intangibles are reviewed annually. Changes in expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period. Amortisation The amortisable amount of all intangibles is amortised on a straight-line basis over the asset’s useful life to the consolidated group commencing from the time the asset is held ready for use. The amortisation rates used for each class of amortisable assets are: h. Plant and Equipment The depreciable amount of all fixed assets including buildings and capitalised lease assets, but excluding freehold land, is depreciated on a straight-line basis over the asset’s useful life to the consolidated group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The depreciation rates used for each class of depreciable assets are: Class of Fixed Asset Depreciation Rate Plant and equipment Furniture and fittings Motor Vehicles Leased plant and equipment Leasehold improvements 10-40% 10-20% 15-25% 5-20% 5-20% The assets’ residual value and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. Each class of plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment losses. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Class of Intangible Trademarks Capitalised Software Digital Assets Amortisation Rate Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains or losses are recognised in profit or loss when the item is derecognised. 5-10% 33% 10% i. Leases The Group as a lessee Plant and equipment are measured on the cost basis and are therefore carried at cost less accumulated depreciation and any accumulated impairment losses. In the event the carrying amount of plant and equipment is greater than the estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and impairment losses are recognised either in profit or loss. A formal assessment of recoverable amount is made when impairment indicators are present (refer to Note 4 k. for details of impairment). The cost of fixed assets constructed within the consolidated group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the consolidated group and the cost of the item can be measured reliably. All other repairs and maintenance are recognised as expenses in profit or loss in the financial period in which they are incurred. At inception of a contract, the Group assesses if the contract contains or is a lease. If there is a lease present, a right-of-use asset and a corresponding lease liability are recognised by the Group where the Group is a lessee. However, all contracts that are classified as short-term leases (ie leases with a remaining term of 12 months or less) and leases of low value assets are recognised as operating expenses on a straight-line basis over the term of the lease. Initially the lease liability is measured at the present value of the lease payments still to be paid at the commencement date. The lease payments are discounted at the interest rate implicit in the lease. If this rate cannot be readily determined, the Group uses the incremental borrowing rate. Lease payments included in the measurement of the lease liability are as follows: • fixed lease payments less any lease incentives; • variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date; • the amount expected to be payable by the lessee under residual value guarantees; N N O O T T E E S S T T O O T T H H E E C C O O N N S S O O L L I I D D A A T T E E D D S S T T A A T T E E M M E E N N T T S S F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 0 3 7 3 8 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V • the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and • payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease. The right-of-use assets comprise the initial measurement of the corresponding lease liability, any lease payments made at or before the commencement day and any initial direct costs. The subsequent measurement of the right- of-use assets is at cost less accumulated depreciation and impairment losses. Right-of-use assets are depreciated over the lease term or useful life of the underlying asset, whichever is the shortest. Where a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group anticipates to exercise a purchase option, the specific asset is depreciated over the useful life of the underlying asset. Short-term leases Short-term leases The Group has elected not to recognise lease liabilities for short-term leases that have a lease term of 12 months or less. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. j. Impairment Testing of Goodwill, Other Intangible Assets and Property, Plant and Equipment For impairment assessment purposes, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management monitors goodwill. Cash-generating units to which goodwill has been allocated (determined by the Group’s management as equivalent to its operating segments) are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount, which is the higher of fair value less costs to sell and value-in- use. To determine the value-in-use, management estimates expected future cash flows from each cash- generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly linked to the Group’s latest approved budget, adjusted as necessary to exclude the effects of future reorganisations and asset enhancements. Discount factors are determined individually for each cash-generating unit and reflect management’s assessment of respective risk profiles, such as market and asset-specific risks factors. Impairment losses for cash-generating units reduce first the carrying amount of any goodwill allocated to that cash-generating unit. Any remaining impairment loss is charged pro rata to the other assets in the cash- generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An impairment charge is reversed if the cash- generating unit’s recoverable amount exceeds its carrying amount. k. Financial Instruments Recognition, initial measurement and derecognition Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument, and are measured initially at fair value adjusted by transactions costs, except for those carried at fair value through profit or loss, which are measured initially at fair value. Subsequent measurement of financial assets and financial liabilities are described below. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Classification and subsequent measurement Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with AASB 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable) For the purpose of subsequent measurement, financial assets other than those designated and effective as hedging instruments are classified into the following categories upon initial recognition: • amortised cost • fair value through profit or loss (FVPL) • equity instruments at fair value through other comprehensive income (FVOCI) • debt instruments at fair value through other comprehensive income (FVOCI) Classifications are determined by both: • The entities business model for managing the financial asset • The contractual cash flow characteristics of the financial assets All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables, which is presented within other expenses. Subsequent measurement financial assets Financial assets at amortised cost Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVPL): credit risk ratings or other methodologies using a globally comparable definition of low credit risk. A financial asset is considered to have low credit risk if: • there is a low risk of default by the borrower; • the borrower has strong capacity to meet its • they are held within a business model whose contractual cash flow obligations in the near term; objective is to hold the financial assets and collect its contractual cash flows • the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments. Impairment of Financial assets AASB 9’s impairment requirements use more forward looking information to recognise expected credit losses – the ‘expected credit losses (ECL) model’. Instruments within the scope of the new requirements include loans and other debt-type financial assets measured at amortised cost and FVOCI, trade receivables, contract assets recognised and measured under AASB 15 and loan commitments and some financial guarantee contracts (for the issuer) that are not measured at fair value through profit or loss. • adverse changes in economic and business conditions in the longer term may, but not necessarily will, reduce the ability of the borrower to fulfil its contractual cash flow obligations. A financial asset is not considered to carry low credit risk merely due to existence of collateral, or because a borrower has a risk of default lower than the risk inherent in the financial assets, or lower than the credit risk of the jurisdiction in which it operates. Recognition of expected credit losses in financial statements At each reporting date, the Group assesses the credit risk and recognises a loss allowance if appropriate. Any movement in the loss allowance from prior year is treated as an impairment gain or loss in the statement of profit or loss and other comprehensive income. The carrying amount of financial assets measured at amortised cost includes the loss allowance relating to that asset. Classification and measurement of financial liabilities The Group considers a broader range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument. As the accounting for financial liabilities remains largely unchanged from AASB 139, the Group’s financial liabilities were not impacted by the adoption of AASB 9. However, for completeness, the accounting policy is disclosed below. In applying this forward-looking approach, a distinction is made between: The Group’s financial liabilities include borrowings, trade and other payables. • financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit risk (‘Stage 1’) and • financial instruments that have deteriorated Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group designated a financial liability at fair value through profit or loss. significantly in credit quality since initial recognition and whose credit risk is not low (‘Stage 2’). Subsequently, financial liabilities are measured at amortised cost using the effective interest method. ‘Stage 3’ would cover financial assets that have objective evidence of impairment at the reporting date. ‘12-month expected credit losses’ are recognised for the first category while ‘lifetime expected credit losses’ are recognised for the second category. Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected life of the financial instrument. Low credit risk operational simplification approach If a financial asset is determined to have low credit risk at the initial reporting date, the Group assumes that the credit risk has not increased significantly since initial recognition. In order to make such a determination that the financial asset has low credit risk, the Group applies its internal All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are included within finance costs or finance income. l. Trade and other payables Trade and other payables represent the liabilities for goods and services received by the consolidated group that remain unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability. m. Inventories Inventories are stated at the lower of cost and net realisable value. Cost includes all expenses directly attributable to the manufacturing process as well as suitable portions of related production overheads, N N O O T T E E S S T T O O T T H H E E C C O O N N S S O O L L I I D D A A T T E E D D S S T T A A T T E E M M E E N N T T S S F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 0 3 9 4 0 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V based on normal operating capacity. Costs of ordinarily interchangeable items are assigned using the first in, first out cost formula. Net realisable value is the estimated selling price in the ordinary course of business less any applicable selling expenses. n. Income taxes Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised in other comprehensive income or directly in equity. Current income tax assets and / or liabilities comprise those obligations to, or claims from, the Australian Taxation Office (ATO) and other fiscal authorities relating to the current or prior reporting periods that are unpaid at the reporting date. Current tax is payable on taxable profit, which differs from profit or loss in the financial statements. Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill or on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with investments in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided the expected rates are enacted or substantively enacted by the end of the reporting period. Deferred tax assets are recognised to the extent that it is probable that they will be able to be utilised against future taxable income, based on the Group’s forecast of future operating results which is adjusted for significant non- taxable income and expenses and specific limits to the use of any unused tax loss or credit. Deferred tax liabilities are always provided for in full. Deferred tax assets and liabilities are offset only when the Group has a right and intention to set off current tax assets and liabilities from the same taxation authority. Changes in deferred tax assets or liabilities are recognised as a component of tax income or expense in profit or loss, except where they relate to items that are recognised in other comprehensive income (such as the revaluation of land) or directly in equity, in which case the related deferred tax is also recognised in other comprehensive income or equity, respectively. Viva Leisure Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. As a consequence, these entities are taxed as a single entity and the deferred tax assets and liabilities of these entities are set off in the consolidated financial statements. o. Cash and Cash Equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position. p. Employee Benefits Short-term employee benefits Provision is made for the consolidated group’s obligation for short-term employee benefits. Short-term employee benefits are benefits (other than termination benefits) that are expected to be settled wholly before 12 months after the end of the annual reporting period in which the employees render the related service, including wages, salaries and sick leave. Short-term employee benefits are measured at the (undiscounted) amounts expected to be paid when the obligation is settled. The consolidated group’s obligations for short-term employee benefits such as wages, salaries and sick leave are recognised as part of current trade and other payables in the statement of financial position. Other long-term employee benefits Provision is made for employees’ long service leave and annual leave entitlements not expected to be settled wholly within 12 months after the end of the annual reporting period in which the employees render the related service. Other long-term employee benefits are measured at the present value of the expected future payments to be made to employees. Expected future payments incorporate anticipated future wage and salary levels, durations of service and employee departures and are discounted at rates determined by reference to market yields at the end of the reporting period on government bonds that have maturity dates that approximate the terms of the obligations. Upon the remeasurement of obligations for other long-term employee benefits, the net change in the obligation is recognised in profit or loss as part of employee benefits expense. The consolidated group’s obligations for long-term employee benefits are presented as non-current provisions in its statement of financial position, except where the consolidated group does not have an unconditional right to defer settlement for at least 12 months after the end of the reporting period, in which case the obligations are presented as current provisions. All employees of the consolidated group receive defined contribution superannuation entitlements, for which the consolidated group pays the fixed superannuation guarantee contribution (currently 9.5% of the applicable employee’s average ordinary salary) to the employee’s superannuation fund of choice. All contributions in respect of employees’ defined contribution entitlements are recognised as an expense when they become payable. The consolidated group’s obligation with respect to employees’ defined contribution entitlements is limited to its obligation for any unpaid superannuation guarantee contributions at the end of the reporting period. All obligations for unpaid superannuation guarantee contributions are measured at the (undiscounted) amounts expected to be paid when the obligation is settled and are presented as current liabilities in the consolidated group’s statement of financial position. q. Share-based Employee Remuneration The Group operates equity-settled share-based remuneration plans for its employees (see note 20). None of the Group’s plans feature any options for a cash settlement. All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are rewarded using share-based payments, the fair values of employees’ services are determined indirectly by reference to the fair value of the equity instruments granted. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions (for example profitability and sales growth targets and performance conditions). All share-based remuneration is ultimately recognised as an expense in profit or loss with a corresponding credit to share option reserve. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting. Upon exercise of share options, the proceeds received net of any directly attributable transaction costs are allocated to share capital up to the nominal (or par) value of the shares issued with any excess being recorded as share premium. r. Provisions Provisions are recognised when the consolidated group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result, and that outflow can be reliably measured. Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period. s. Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the ATO is included with other receivables or payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities, which are recoverable from or payable to the ATO, are presented as operating cash flows included in receipts from customers or payments to suppliers. t. Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. The comparatives reflect the consolidated group. Where the consolidated group retrospectively applies an accounting policy, makes a retrospective restatement of items in the financial statements or reclassifies items in its financial statements, a third statement of financial position as at the beginning of the preceding period in addition to the minimum comparative financial statements is presented. u. Critical Accounting Estimates and Judgements The directors evaluate estimates and judgements incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the consolidated group. Key estimates and uncertainty Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Actual results may be substantially different. Impairment Impairment In assessing impairment, management estimates the recoverable amount of each asset or cash- generating unit based on expected future cash flows and uses an interest rate to discount them. Estimation uncertainty relates to assumptions about future operating results and the determination of a suitable discount rate. Useful lives of depreciable assets Useful lives of depreciable assets Management reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets. Inventories Inventories Management estimates the net realisable values of inventories, taking into account the most reliable evidence available at each reporting date. The future realisation of these inventories may be affected by future technology or other market-driven changes that may reduce future selling prices. Business combinations Business combinations Management uses valuation techniques in determining the fair values of the various elements of a business combination. Particularly, the fair value of contingent N N O O T T E E S S T T O O T T H H E E C C O O N N S S O O L L I I D D A A T T E E D D S S T T A A T T E E M M E E N N T T S S F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 0 4 1 4 2 consideration is dependent on the outcome of many variables that affect future profitability. option to terminate the lease if the lessee is reasonably certain not to exercise that option. › NOT E 7 – FINANC E COSTS AND FINANC E IN CO ME Lease term and option to extend under AASB16 Lease term and option to extend under AASB16 The lease term is defined as the non-cancellable period of a lease together with both periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option; and also periods covered by an The decision on whether or not the options to extend are reasonably going to be exercised is a key management judgement that the entity will make. The Group determines the likeliness to exercise on a lease-by-lease basis looking at various factors such as which assets are strategic and which are key to future strategy of the entity. Interest expense from borrowings at amortised cost: External entities Interest expenses for finance lease arrangements* Total interest expense 2020 $ 2019 $ 758,649 7,304,580 8,063,229 209,127 422,443 631,570 › N OTE 5 –REVENUE AND OTHER INCOME *For the financial year ended 30 June 2020 this is recorded separately in Note19: Leases Revenue from contracts with customers Other sources of income Other income Total revenue and other income 2020 $ 2019 $ 40,367,123 31,069,941 446,958 35,699 40,814,081 31,105,640 71,616 54,580 40,885,697 31,160,220 5a 5b 5c › NOT E 8 – SE GM ENT RE PO R T ING Management have determined that the Group operates in one business segment – health club operation; and one geographic segment. › NOT E 9 – I NCO M E TAX EXPE NSE The group operates in one segment, health club services. a. Revenue from contracts with customers: 40,367,123 31,069,941 The major components of tax expense and the reconciliation of expected tax expense based on the effective tax rate of Viva Leisure Limited at 27.5% (2019: 27.5%) and the reported tax expense in profit or loss are as follows: Timing of revenue recognition Over time Total revenue from contracts with customers b. Other revenue: Interest received Management fees received Total other revenue c. Other income: Gain on disposal of property, plant and equipment Total other income › N OTE 6 – PROFIT FOR THE Y E A R Profit before income tax from continuing operations includes the following specific expenses: Rental expense on operating leases • Minimum lease payments • Amounts expensed as part of business combinations • Short term lease payments • Amounts expensed as part of capital raises 40,367,123 40,367,123 31,069,941 31,069,941 199,463 247,495 446,958 71,616 71,616 35,699 - 35,699 54,580 54,580 2019 $ 2018 $ - 733,789 135,325 317,596 6,742,218 71,309 - 913,619 *For the financial year ended 30 June 2020 this is recorded separately in Note 19: Leases Profit / (loss) before tax Domestic tax rate Prima facie tax expense Adjustment for non-deductible expenses: Non-deductible expenses Tax effect of change in tax rate on DTA/DTL Prior year’s over provision of tax Income tax (benefit)/expense Tax expense comprises Current tax expense Deferred tax expense 2020 $ 2019 $ (9,343,618) 3,975,945 27.5% (2,569,495) 27.5% 1,093,385 14,819 (411,877) (115,315) (3,097,273) 717,046 (3,814,318) (3,097,273) 52,022 - (11,341) 1,120,842 1,465,952 (345,110) 1,120,842 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V N N O O T T E E S S T T O O T T H H E E C C O O N N S S O O L L I I D D A A T T E E D D S S T T A A T T E E M M E E N N T T S S F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 0 4 3 4 4 › N OTE 10 – CASH AND CASH EQUIVALENTS Cash at bank and on hand Short-term bank deposits Cash backed bank guarantees 2020 $ 2019 $ 3,870,360 3,392,562 23,203,643 10,000,000 3,029,092 993,333 30,103,095 14,385,895 The effective interest rate on short-term bank deposits was 0.65% (2019: 2.49%); these deposits are held at call. › N OTE 11 – TRADE AND OTHER RECEIVA BLE S Current Trade receivables Other receivables Total trade and other receivables 2020 $ 2019 $ 143,380 2,508,933 2,652,313 202,184 16,260 218,444 The net carrying of trade receivables is considered a reasonable approximation of fair value. All of the Group’s trade and other receivables are within current terms and therefore at 30 June 2020 there is no expected losses recognised. › N OTE 12 – OTHER CURRENT ASSETS Current Stock on hand Prepayments Bonds and other deposits 2020 $ 2019 $ 158,200 286,260 2,527,896 167,989 197,317 - 2,972,356 365,306 Bonds relate to amounts set aside against rental obligations to landlords where the Company is a lessee. › N OTE 13 - BORROWINGS At amortised cost: Bank loans Current Non-current 2020 $ 2018 $ 2019 $ 2018 $ 1,272,500 1,272,500 - - 6,716,000 6,716,000 - - 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V In addition, the bank loans mature on 28 May 2025 and the facility agreement specifies the following security interests: 1. First ranking General Security Interest from each Obligor comprising first ranking charge over all present and after acquired property. 2. First ranking charge over any assets financed under the Equipment Finance Facility. 3. Account Set offs from Viva Leisure Property Pty Ltd over Deposits totalling $3,400,000 (relating to security for all cash covered bank guarantees issued in the name of Viva Leisure Property Pty Ltd. 4. The interest rate payable on the market rate loan is BBSY plus 4.0%, at 30 June this amounted to 4.25% Finance lease liabilities are secured against the underlying leased equipment and are at an average interest rate of 5.8% › NOT E 1 4 - PR OPE RT Y, PLANT AND E Q UI PME NT Details of the Group’s property, plant and equipment and their carrying amounts are as follows: Gross carrying amount Balance at 1 July 2019 Additions Plant and Equipment Furniture and Fittings Motor Vehicles Leasehold Improvements $ $ $ $ Total $ 2,854,883 370,299 168,080 6,375,931 9,769,193 3,122,699 232,725 212,187 13,747,029 17,314,640 Acquisitions through business combinations 1,434,429 533,630 (670,698) (4,931) - - 2,328,680 4,296,739 (4,251) (679,880) (847,244) (114,833) (61,070) (1,030,813) (2,053,960) Disposals Depreciation expense Carrying amount at 30 June 2020 5,894,069 1,016,890 319,197 21,416,576 28,646,732 At cost Accumulated depreciation Written down value 9,460,802 1,972,439 520,679 23,789,646 35,743,567 (3,566,733) (955,549) (201,482) (2,373,070) (7,096,834) 5,894,069 1,016,890 319,197 21,416,576 28,646,732 Plant and Equipment Furniture and Fittings Motor Vehicles Leasehold Improvements Total $ $ $ $ $ Gross carrying amount Balance at 1 July 2018 Additions 110,360 833,852 4,880 55,428 Acquisitions through Group restructure 1,192,901 258,833 73,421 99,990 53,925 327,854 516,515 3,539,046 4,528,316 2,630,936 4,136,595 Acquisitions through business combinations Disposals Depreciation expense Carrying amount at 30 June 2019 At cost Accumulated depreciation Written down value 1,119,508 (41,592) (360,146) 2,854,883 5,690,892 (2,836,009) 2,854,883 101,844 - 228,975 1,450,327 - (26,069) - (67,661) (50,686) (33,187) (350,880) (794,899) 370,299 168,080 6,375,931 9,769,193 1,217,623 308,492 7,724,651 14,941,658 (847,324) (140,412) (1,348,720) (5,172,465) 370,299 168,080 6,375,931 9,769,193 N N O O T T E E S S T T O O T T H H E E C C O O N N S S O O L L I I D D A A T T E E D D S S T T A A T T E E M M E E N N T T S S F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 0 There are several asset specific security interests registered on the PPS Register against each of the members of the Group listed at Note 30. All depreciation and impairment charges are included within depreciation, amortisation and impairment of non-financial assets.. 4 5 4 6 › N OTE 15 – IN TANGIBLES Details of the Group’s intangibles and their carrying amounts are as follows: Gross carrying amount Balance at 1 July 2019 Additions Goodwill Trademarks Capitalised Software Digital Assets $ $ $ $ Total $ 6,163,027 50,470 337,695 12,889 6,564,081 - 84,429 472,170 45,052 601,651 Acquisitions through business combination 13,581,598 Disposals Amortisation expense - - - (1,927) - - - - 13,581,598 (1,927) (6,387) (205,832) (3,469) (215,688) 15.1 Impairment Testing For the purpose of annual impairment testing, the Group has one cash-generating unit which is expected to benefit from the synergies of the business combinations in which the goodwill arises. The following key assumptions were used in the value-in-use calculations: Growth Rate Discount Rate Health Clubs 3% 7.01% The recoverable amount above is determined based on value-in-use calculations. Value-in-use is calculated based on the present value of cash flow projections over a five-year period plus a terminal value calculated using a terminal growth rate of 3% less selling costs as determined by management. The present value of the expected cash flows is determined by applying an estimated weighted average cost of capital (WACC) of 7.01%. Carrying amount at 30 June 2020 19,744,625 126,585 604,033 54,472 20,529,715 15.2 Growth Rates 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V At cost 19,744,625 144,734 972,311 58,102 20,919,773 Accumulated depreciation Written down value - (18,149) (368,278) (3,630) (390,058) 19,744,625 126,585 604,033 54,472 20,529,715 Goodwill Trademarks Capitalised Software Digital Assets $ $ $ $ Total $ Gross carrying amount Balance at 1 July 2018 Additions Acquisitions through Group restructure - - - Acquisitions through business combination 6,163,027 1,432 4,582 37,926 10,000 36,689 - 38,121 317,800 13,050 335,432 76,515 - - - 114,441 6,173,027 Amortisation expense - (3,470) (93,309) (161) (96,940) Carrying amount at 30 June 2019 6,163,027 50,470 337,695 12,889 6,564,081 At cost Accumulated depreciation Written down value 6,163,027 64,405 500,141 13,050 6,740,623 - (13,935) (162,446) (161) (176,542) 6,163,027 50,470 337,695 12,889 6,564,081 All amortisation is included in within depreciation and amortisation expense. Customer contracts are typically short term, with low barriers to cancellation and as such, no value has been recognised during the year. Prior year balances have been adjusted to goodwill. The growth rates reflect the estimated long-term average growth rates for mature health clubs. 15.3 Discount Rates The discount rates reflect appropriate adjustments relating to market risk and any specific risk factors. 15.4 Cash Flow Assumptions Management’s key assumptions include stable profit margins, based on past experience in this market. The Group’s management believes that this is the best available input for forecasting this mature market. Cash flow projections reflect stable profit margins achieved immediately before the budget period. No expected efficiency improvements have been taken into account and prices and wages reflect publicly available forecasts of inflation for the industry. Apart from the considerations described in determining the value-in-use of the cash-generating units described above, management is not currently aware of any other probable changes that would necessitate changes in its key estimates. › NOT E 1 6 – TAX 1 July 2019 Recognised in Equity Recognised in Profit and Loss 30 June 2020 $ $ $ $ Non-Current Assets Property, plant and equipment Leased assets Other intangible assets Non-Current Liabilities Provisions Lease liabilities Deferred legal costs Current Liabilities Provisions Accruals Lease liabilities Contract liabilities Equity (77,485) (2,592,602) (5,757) 171,408 1,558,931 183,507 184,005 24,750 625,574 418,700 - - - - - - - - - 367,095 289,610 (50,471,931) (53,064,533) (3,471) (9,228) 1,171,644 1,343,052 48,780,298 50,339,229 441,461 624,968 312,505 5,250 496,510 30,000 3,823,325 4,448,899 (418,700) - Costs of IPO allocated direct to equity 293,906 784,937 343,264 343,264 (193,157) 444,012 3,814,319 4,942,519 N N O O T T E E S S T T O O T T H H E E C C O O N N S S O O L L I I D D A A T T E E D D S S T T A A T T E E M M E E N N T T S S F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 0 4 7 4 8 1 July 2018 Acquired Businesses under Group Reconstruction Recognised in Equity Recognised in Profit and Loss 30 June 2019 $ $ $ $ $ Non-Current Assets Property, plant and equipment Leased assets Other intangible assets Non-Current Liabilities Provisions Lease liabilities Deferred legal costs Current Liabilities Provisions Accruals Lease liabilities Contract liabilities Equity Costs of IPO allocated direct to equity 5,768 (117,408) 16,361 - 57,966 6,001 8,110 61,494 46,400 7,922 - 92,614 (1,308,053) - (5,274) - 541,952 77,414 180,339 - 405,375 88,077 - (20,170) - - - - - - - - - - 1,224,800 (77,485) (2,475,194) (2,592,602) (16,843) (5,757) 171,408 171,408 959,013 1,558,931 100,091 183,507 (4,444) 184,005 (36,744) 24,750 173,799 322,701 625,574 418,700 367,383 367,383 (73,477) 293,906 345,110 784,937 All deferred tax assets have been recognised in the statement of financial position. Tax Payable CURRENT Income tax payable › NOTE 17 – T RADE AND OTHER PAYABLES CURRENT Trade payables Sundry payables and accrued expenses 2020 $ 2019 $ 704,386 1,495,149 2020 $ 2019 $ 4,452,036 644,507 5,096,543 1,533,550 1,009,228 2,542,778 All amounts are short-term. The carrying values of trade and other payables are considered to be the fair value. 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V › NOT E 1 8 – CO NTR ACT L IAB I LI TI ES CURRENT Amounts received in advance for sale of gym memberships Operating lease fitout incentives received Operating lease rent incentives received NON-CURRENT Operating lease fitout incentives received Operating lease rent incentives received Total contract liabilities Refer to note 4 d. for the revenue recognition policy. 2020 $ 2019 $ 863,350 - - 1,071,135 174,121 54,422 863,350 1,299,678 - - - 863,350 1,006,400 287,602 1,294,002 2,593,680 N N O O T T E E S S T T O O T T H H E E C C O O N N S S O O L L I I D D A A T T E E D D S S T T A A T T E E M M E E N N T T S S F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 0 4 9 5 0 › N OTE 19 – L EASES (i) AASB 16 related amounts recognised in the balance sheet RIGHT OF USE ASSETS Leased buildings: Opening balance Additions to right-of-use assets Depreciation expense Net carrying amount Leased equipment: * Opening balance Additions to right-of-use assets Disposals of right-of-use assets Depreciation expense Net carrying amount 2020 $ 2019 $ - 173,822,889 (12,985,993) 160,836,896 9,427,644 8,452,127 (7,011) (1,827,879) 16,044,881 - - - - 426,939 10,176,990 (46,639) (1,129,646) 9,427,644 Total right-of-use assets 176,881,777 9,427,644 *FY2019 leased equipment included in Property, plant and equipment LEASE LIABILITIES Leased buildings: Opening balance Additions to lease liabilities Principal repayments Net carrying amount Leased equipment: Opening balance Additions to lease liabilities Principal repayments Net carrying amount Total lease liabilities Current liabilities Non-current liabilities - 170,390,976 (2,284,894) 168,106,082 - - - - 7,943,655 8,332,235 379,512 9,652,559 (1,754,879) (2,088,415) 14,521,011 7,943,655 182,627,093 7,943,655 14,829,663 167,797,430 182,627,093 2,274,815 5,668,840 7,943,655 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V 2020 $ 2019 $ Net carrying amount (ii) AASB 16 related amounts recognised in the statement of profit or loss Depreciation charge related to right-of-use assets (included in total depreciation and amortisation expense) 14,941,974 1,129,646 Interest expense on lease liabilities (included in total finance costs) 7,911,181 378,507 (iii) Cash outflows relating to leases / rental payments Property lease payments* Equipment lease payments Total cash outflows for leases / rental payments *property lease payments for the year ended 30 June 2019 refer to rental payments a. Options to Extend or Terminate 9,658,521 2,292,434 11,950,955 6,742,218 2,466,922 9,209,140 The options to extend or terminate are contained in several of the property leases of the Group. There were no extension options for equipment leases. These clauses provide the Group opportunity to manage leases in order to align with its strategies. All of the extension or termination options are only exercisable by the Group. The extension options or termination options which management were reasonably certain to be exercised have been included in the calculation of the lease liability. b. Reconciliation from Operating Lease Commitments to lease liabilities Operating lease commitments as at 30 June 2019 Add/Less: Other Adjustments Initial Lease liability recognised Other adjustments include: - discounting the existing lease commitment at the incremental borrowing rate - inclusion of option periods in the lease liability calculation - adjusting for lease incentives › NOT E 20 – NOTE 20 EM PLOY EE RE MU NERATI O N 20.1 Employee benefits - expense Expenses recognised for employee benefits are analysed below: WAGES AND SALARIES Employee leave entitlements Share based payments Superannuation Employee Benefits Expense The Company received JobKeeper payments of $2.835m. These payments have been offset against wages and salaries for the year 77,162,659 972,405 78,135,064 2020 $ 2019 $ 11,739,107 703,702 20,284 1,088,251 8,289,001 537,523 155,211 682,884 13,551,344 9,664,619 N N O O T T E E S S T T O O T T H H E E C C O O N N S S O O L L I I D D A A T T E E D D S S T T A A T T E E M M E E N N T T S S F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 0 5 1 5 2 20.2 Share-Based Employee Remuneration As at 30 June 2020, the Company maintained a Long-Term Incentive (LTI) share-based payment scheme for employee remuneration, which will be settled in equity. In addition, the Company has issued Tranche 1 and Tranche 2 options. Options granted to the Executive Team are under the LTI Plan and under Tranche 1 and Tranche 2 Plans: • LTI Plan Options: The vesting of those options and will be subject to the satisfaction of appropriate service-based conditions and/or performance hurdles determined by the Board; • Tranche 1 and Tranche 2 Plan Options: These options are currently vested. Options granted under the LTI, Tranche 1 and Tranche 2 Plans carry no dividends or voting rights. Long Term Incentives (LTIs) The table below describes the performance hurdles and vesting condition that in accordance with the Long Term Incentive Plan in relation to the 590,000 options granted to senior executives: Earnings per Share (EPS) Compound Annual Growth Rate (CAGR) The percentage of options that vest for each % EPS CAGR is illustrated in the following table: LTIs (Tranche 1) LTIs (Tranche 2) The fair values of options granted were determined using the Black Scholes option pricing model. The following principal assumptions were used in the valuation: Grant date Vesting period ends Share price at grant date Volatility Option Life Dividend yield Risk free investment rate Fair value at grant date Exercise price at date of grant Exercisable from LTI (Tranche1) LTI (Tranche1) Tranche 1 Tranche 2 Options Options Options Options 7 Jun 2019 30 Oct 2019 7 June 2019 7 June 2019 Release of FY2021 results Release of FY2022 results Vested Vested 1.00 25% 1.00 25% 1.00 25% 1.00 25% 5 years 5 years 4 years 4 years 0% 2% Nil Nil 0% 2% Nil Nil 0% 2% 82,979 1.34 0% 2% 72,232 1.43 Release of FY2021 Results Release of FY2022 Results 7 June 2020 7 June 2020 EPS CAGR over the two Financial Years Ending 30 June 2021 EPS CAGR over the three Financial Years Ending 30 June 2022 Percentage of Options that Vest Exercisable to 31 August 2023 31 August 2024 2 May 2023 2 May 2023 Weighted average remaining contractual life 3.25 Years 4.25 Years 2.94 Years 2.94 Years The underlying expected volatility was determined by reference to historical data of comparable listed entities over a period of time. No special features inherent to the options granted were incorporated into measurement of fair value. In total, $20,284 (2019: $155,211) of employee remuneration expense (all of which related to equity-based payment transactions) has been included in profit or loss and credited to share option reserve. 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V Less than 15% (minimum Target) Less than 15% (minimum Target) 0% 15% to 20% (within target range) 15% to 20% (within target range) 50% - 100% (on a straight-line basis) Greater than 20% (above maximum target) Greater than 20% (above maximum target) 100% • For the purposes of the above performance hurdles, Earnings per Share means the Basic EPS recorded in the Company’s audited financial statements. • The Basic EPS may be adjusted for items which the Board, in its discretion, considers should be excluded from the EPS result (such as items of a one-off and non-recurring nature). 20.3 Employee benefits - liabilities • The Performance Hurdle will be tested only once the Vesting Condition has been met by the grantee senior executive and following the Company’s audited accounts being finalised . All options refer to options over ordinary shares of the Company, which are exercisable on a one-for-one basis under the terms of the agreements. There were no share options exercised during the reporting period. LTI (Tranche 1) LTI (Tranche 2) Tranche 1 Tranche 2 No of Options No of Options No of Options No of Options Outstanding at 1 July 2019 Granted Exercised 295,000 295,000 1,500,000 1,000,000 - - - - Outstanding at 30 June 2020 295,000 295,000 1,500,000 1,000,000 Exercisable at 30 June 2020 - - 1,500,000 1,000,000 Current: Employee leave entitlements Non-Current: Employee leave entitlements Total employee obligations › NOT E 21 – PROV IS IO NS Consolidated Group Opening balance at 1 July 2019 Additional provisions Amounts used Balance at 30 June 2020 2020 $ 2019 $ 1,655,033 1,176,473 153,046 115,937 1,808,079 1,292,410 Employee Benefits Property Make Good $ $ Total $ 1,292,410 1,219,371 (703,702) 1,808,079 - 4,323,795 - 4,323,795 1,292,410 5,543,166 (703,702) 6,131,874 N N O O T T E E S S T T O O T T H H E E C C O O N N S S O O L L I I D D A A T T E E D D S S T T A A T T E E M M E E N N T T S S F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 0 5 3 5 4 Provision for Employee Benefits Provision for employee benefits represents amounts accrued for annual leave and long service leave. The current portion for this provision includes the total amount accrued for annual leave entitlements and the amounts accrued for long service leave entitlements that have vested due to employees having completed the required period of service. Based on past experience, the Group does not expect the full amount of annual leave or long service leave balances classified as current liabilities to be settled within the next 12 months. However, these amounts must be classified as current liabilities since the Group does not have an unconditional right to defer the settlement of these amounts in the event employees wish to use their leave entitlement. The non-current portion for this provision includes amounts accrued for long service leave entitlements that have not yet vested in relation to those employees who have not yet completed the required period of service. In calculating the present value of future cash flows in respect of long service leave, the probability of long service leave being taken is based on historical data. The measurement and recognition criteria relating to employee benefits have been discussed in Note 4 (o). Provision for Property Make Good A provision has been recognised for the costs to be incurred for the restoration of property leases for which the Group is a lessee and where the obligation to make good is included as a condition of the lease. The provision is based on the present value of estimated costs to restore the property at the end of each property lease term. › N OTE 2 2 – EQUITY 22.1 Share Capital The share capital of Viva Leisure consists only of fully paid ordinary shares. All shares are equally eligible to receive dividends and the repayment of capital and represent one vote at the shareholders’ meeting of Viva Leisure. 2020 Shares 2019 Shares 2020 $ 2019 $ Shares issued and fully paid: Beginning of the year 52,600,000 120 43,715,691 120 Shares issued (less costs of offer) 18,911,393 3,425,000 43,660,003 3,500,000 Group restructure Share reconstruction Initial Public Offer (less costs of offer) - - - 21,000,000 7,974,880 20,200,000 - - - 21,000,000 - 19,215,571 Total contributed equity at 30 June 71,511,393 52,600,000 87,375,694 43,715,691 Capital Management Capital Management Management controls the capital of the Group in order to maintain a sustainable debt to equity ratio, generate long-term shareholder value and ensure that the Group can fund its operations and continue as a going concern. The Group’s debt and capital include ordinary share capital and financial liabilities, supported by financial assets. The Group is not subject to any externally imposed capital requirements. Management effectively manages the Group’s capital by assessing the Group’s financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues. 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V There have been no changes in the strategy adopted by management to control the capital of the Group since the prior year. This strategy is to ensure that the Group’s gearing ratio remains below 70%. The gearing ratios for the years ended 30 June 2020 and 30 June 2019 are as follows: Total borrowings Less cash and cash equivalents Net debt Total equity Total capital Gearing ratio › NOT E 23 – R ESERVES a. Common Control Reserve 2020 $ 2019 $ 22,509,511 30,103,095 7,943,655 14,385,895 (7,593,584) (6,442,240) 63,316,762 25,762,058 55,723,178 19,319,818 N/A N/A A common control reserve was created when the Group restructure took place as it was determined to occur under the control of the same shareholders. A business combination involving entities or businesses under common control is a business combination in which all of the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination, and that the control is not transitory. Where an entity within the group acquires an entity under common control, the acquirer consolidates the carrying values of the acquired entity’s assets and liabilities from the date of acquisition. The consolidated financial statements of the group include the acquired entity’s income and expenses from the date of acquisition onwards. Any difference between the fair value of the consideration paid/transferred by the acquirer and the net assets/ (liabilities) of the acquired entity are taken to the common control reserve. Common Control Reserve Measurement under Group restructure Movement in common control reserve 2020 $ 2019 $ (21,900,880) (315,559) (21,585,321) (21,585,321) b. Share Options Reserve The share option reserve records items recognised as expenses on valuation of employee share options. Share Options Reserve Issue of options to key management personnel Movement in share options reserve 2020 $ 2019 $ 175,495 20,284 155,211 155,211 N N O O T T E E S S T T O O T T H H E E C C O O N N S S O O L L I I D D A A T T E E D D S S T T A A T T E E M M E E N N T T S S F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 0 5 5 5 6 › N OTE 24 – EARNINGS PER SHARE AND D IVIDE NDS 24.1 Earnings per Share Both the basic and diluted earnings per share have been calculated using the profit attributable to shareholders of the Parent Company as the numerator (i.e. no adjustments to profit were necessary in 2020 or 2019). The reconciliation of the weighted average number of shares for the purposes of diluted earnings per share to the weighted average number of ordinary shares used in the calculation of basic earnings per share is as follows: Weighted average number of shares used in basic earnings per share* 57,335,790 52,600,000 Shares deemed to be issued for no consideration in respect of options granted 3,090,000 2,795,000 Weighted average number of shares used in diluted earnings per share 60,425,790 55,395,000 *The weighted average shares for the financial year ended 30 June 2019 are calculated from the date of listing on 7th June 2019. 2020 $ 2019 $ 24.2 Dividends There were no dividends declared or paid during the year (2019: nil) 24.3 Franking Credits The amount of franking credits available for subsequent reporting periods are: Balance at the end of the reporting period Franking credits that will arise from payment of the amount of provision for income tax Total franking credits 2020 $ 2019 $ 2,045,656 485,676 704,386 1,495,149 2,750,042 1,980,825 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V Changes in assets and liabilities, net of the effects of purchase and disposal of subsidiaries › NOT E 25 – R ECO NCIL IATI O N OF C ASH FLOWS Cash flows from operating activities Profit / (loss) after income tax Non-cash flows in profit / (loss) — depreciation and amortisation — net (gain)/loss on disposal of property, plant and equipment — interest expenses included in financing activities — tax effect of expenses taken to equity — tax effect of initial adoption of AASB 16 taken to equity — charges to common control reserve — charges to share options reserve — (increase)/decrease in trade and term debtors — (increase)/decrease in other assets — (increase)/decrease in deferred tax — increase/(decrease) in payables — increase/(decrease) in current tax — increase/(decrease) in other liabilities — increase/(decrease) in provisions Net cash from operating activities › NOT E 26 - AU DI TO R R EM UNE RAT I O N Remuneration of the auditor for: Audit and review of financial statements Financial year ended 30 June 2020 Half year ended 31 December 2019 Financial year ended 30 June 2019 Total audit services Other non-audit services Financial year ended 30 June 2019* Half year ended 31 December 2018* Taxation and business services Investigating Accountant services for the initial public offering Total non-audit services Total auditor remuneration *These relate to work performed as part of the Group’s listing on the ASX. 2020 $ 2019 $ (6,246,344) 2,855,103 - 17,211,622 71,616 - 508,764 (165,500) (315,559) 20,284 (4,847,535) (79,155) (4,157,583) 2,980,097 (790,763) (1,067,559) 515,668 2,201,813 (54,580) 631,570 167,383 - (194,349) 155,211 322,987 (57,825) (526,293) (840,004) 1,000,513 1,707,563 607,143 3,638,054 7,976,235 2020 $ 2019 $ 50,500 25,500 - 76,000 - - 53,000 - 53,000 129,000 - - 43,500 43,500 26,500 18,148 40,050 90,209 174,907 218,407 N N O O T T E E S S T T O O T T H H E E C C O O N N S S O O L L I I D D A A T T E E D D S S T T A A T T E E M M E E N N T T S S F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 0 5 7 5 8 › N OTE 27 – RELATED PARTY TRANSACTIONS › NOT E 29 – B U SI NE SS CO M B I NATI O NS The Group’s related parties include key management of the Group which are considered to be any person(s) having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity. Related parties continue to own several properties which are leased by the Group as described below. The Board considers that each of these arrangements are on arm’s length terms, commercial terms and are subject to the usual risks associated with other leases entered by the Company. The Board has obtained independent valuation advice to confirm that the arrangements are arm’s length. 27.1 Transactions with Key Management Personnel Short-term Employee Benefits: Wages and salaries (including incentives and Annual Leave entitlements) 1,496,944 1,454,757 2020 $ 2019 $ Superannuation Long service leave Share-based payments Total remuneration Short-term employee benefits 109,895 28,558 20,284 76,705 176,168 155,212 1,655,681 1,862,842 These amounts include fees and benefits paid to the non-executive Chair and non-executive directors as well as all salary, paid leave benefits, fringe benefits and cash incentives awarded to KMP. Post-employment benefits These amounts are the superannuation contributions made during the year. Other long-term benefits These amounts represent long service leave benefits accruing during the year, long-term disability benefits and deferred incentives payments. Share-based payments These amounts represent the expense related to the participation of certain Directors and KMP in equity-settled benefit schemes as measured by the fair value of the options granted on grant date (see Note 21.2). Further information in relation to KMP remuneration can be found in the directors’ report and at Note 21. 27.2 Related Party Properties Total related party property transactions 2,464,167 2,537,853 2020 $ 2019 $ › N OTE 2 8 – CONTINGENT LIABILITIES The company has no contingent assets or liabilities. 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V (a) During the period the Group acquired 12 clubs from various vendors as outlined below: Number of clubs State Purchase consideration Amount settled in cash 10 QLD 1 ACT 2 VIC 12 Total $ $ $ $ 3,430,855 230,000 635,219 4,296,074 Assets and liabilities acquired at fair value Property, plant and equipment Other net identifiable assets /(liabilities) acquired 590,059 (11,990) 31,525 138,000 - (9,781) 759,584 (21,770) Goodwill 2,852,786 198,475 507,000 3,558,261 3,430,855 230,000 635,219 4,296,075 Revenue and profit contribution from the date of acquisition until 30 June 2020 Revenue 2,448,737 301,258 112,716 2,862,711 Profit before depreciation, amortisation, interest and tax (b) FitnFast NSW, Victoria and ACT 1,383,603 249,830 91,364 1,724,797 On 13 February 2020, the Group acquired the health club businesses FitnFast for a purchase consideration of $13,433,539. The acquisition is part of the Group’s overall strategy to expand into other territories and included clubs in NSW (10), Victoria (2), and ACT (1). The purchase was satisfied by the payment of $13,433,539. Fair value of consideration transferred Amount settled in cash Recognised amounts of identifiable net assets acquired Property, plant and equipment Other net identifiable assets /(liabilities) acquired Goodwill Revenue and profit contribution from the date of acquisition until 30 June 2020 Revenue Profit before depreciation, amortisation, interest and tax $ 13,433,539 3,537,155 (126,953) 10,023,337 13,433,539 1,996,492 1,071,593 Acquisition-related costs amounting to $733,789 for all acquisitions have been recognised as an expense in the consolidated statement of profit or loss and other comprehensive income. The goodwill arising from these business combinations is not expected to be deductible for tax purposes. The above contributions to of revenue and profit from the date of acquisition to 30 June 2020 were impacted by the mandatory shutdowns sue to COVID-19. N N O O T T E E S S T T O O T T H H E E C C O O N N S S O O L L I I D D A A T T E E D D S S T T A A T T E E M M E E N N T T S S F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 0 5 9 6 0 › N OTE 30 – INTERESTS IN SUBSIDIARIES › NOT E 3 2 – FI NANCI AL I NST R UM ENT RI SK Name of Subsidiary Principal Activity Proportion of Ownership Interests held by the Group 30 June 2020 30 June 2019 Viva Leisure Limited Viva Leisure Operations Pty Limited Viva Leisure People Pty Limited Viva Leisure Property Pty Limited Viva Leisure Memberships Pty Limited Psycle Life Pty Limited The Club Group Pty Limited The Club Group (Greenway) Pty Limited Club MMM! Pty Limited HIIT Republic Australia Pty Limited Club Lime Pty Limited Club Pink Pty Limited Club Blue Pty Limited Club Swim Pty Limited Club Team Pty Limited Parent Health club operation Health club operation Health club operation Health club operation Health club operation Health club operation Health club operation Health club operation Health club operation Dormant Dormant Dormant Dormant Dormant 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% › N OTE 31 – C APITAL AND LEASING COMMITMENTS 31.1 Finance Leases (as lessee) The Group’s finance lease liabilities, which are secured by the related assets held under finance leases, are classified shown at Note 20. Future minimum finance lease payments at the end of each reporting period under review were as follows: Minimum Lease Payments Due Within 1 Year $ 1 to 5 Years $ After 5 Years $ Total $ 30 June 2020* Lease payments Finance charges Net present values 30 June 2019- Lease payments Finance charges Net present values N/A N/A N/A N/A N/A N/A 2,726,832 (452,017) 2,274,815 6,249,321 (580,481) 5,668,840 N/A N/A N/A - - - N/A N/A N/A 8,976,153 (1,032,498) 7,943,655 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V The Group is exposed to various risks in relation to financial instruments. The main types of risks are market risk, credit risk and liquidity risk. The Group’s risk management is coordinated at its headquarters, in close cooperation with the Board, and focuses on actively securing the Group’s short to medium-term cash flows by minimising the exposure to financial markets. 32.2 Credit Risk Analysis The Group does not actively engage in the trading of financial assets for speculative purposes nor does it write options. The most significant financial risks to which the Group is exposed are described as below. 30 June 2020 Financial assets Financial liabilities Total exposure 30 June 2019 Financial assets Financial liabilities Total exposure Interest rate sensitivity Interest rate sensitivity Short term exposure $ Long term exposure $ 35,283,303 (9,198,855) - (18,407,199) 26,084,448 (18,407,199) 14,718,569 (4,817,593) 9,900,976 - (5,668,840) (5,668,840) The Group’s policy is to minimise interest rate cash flow risk exposures on long-term financing. Longer- term borrowings are therefore usually at fixed rates. At 30 June 2020, the Group is exposed to changes in market interest rates as its Bank Debt is at variable interest rates. The Group’s investments in term deposits all pay fixed interest rates. The following table illustrates the sensitivity of profit and equity to a reasonably possible change in interest rates of +/- 1% (2019: +/- 1%). These changes are considered to be reasonably possible based on observation of current market conditions. The calculations are based on a change in the average market interest rate for each period, and the financial instruments held at each reporting date that are sensitive to changes in interest rates. All other variables are held constant. Profit for the Year Equity $ +1% $ -1% $ +1% $ -1% 30 June 2020 30 June 2019 309,020 67,749 (309,020) (67,749) 309,020 67,749 (309,020) (67,749) 32.2 Credit Risk Analysis Credit risk is the risk that a counterparty fails to discharge an obligation to the Group. The Group is exposed to this risk for various financial instruments, for example receivables to customers, placing deposits, investment in term deposits, etc. *For the financial year ended 30 June 2020 this is recorded separately in Note 20: Leases Credit risk management Credit risk management 31.2 Operating Leases (as lessee) The Group leases health club and office space under operating leases. The future minimum lease payments are as follows: Minimum Lease Payments Due Within 1 Year $ 1 to 5 Years $ After 5 Years $ Total $ 30 June 2020* 30 June 2019 N/A N/A N/A N/A 8,807,608 36,944,474 31,410,576 77,162,658 *For the financial year ended 30 June 2020 this is recorded separately in Note 20: Leases The credit risk is managed on a group basis based on the Group’s credit risk management policies and procedures. The credit risk in respect of cash balances held with banks and deposits with banks are managed via diversification of bank deposits and are only with major reputable financial institutions. The majority of the Group’s customer pay on an upfront basis by way of direct debit and as such, the Group does not provide for bad debts as revenue is not recorded until received. 32.3 Liquidity Risk Analysis Liquidity risk is the risk that the Group might be unable to meet its obligations. The Group manages its liquidity needs by monitoring scheduled debt servicing payments for long-term financial liabilities as well as forecast cash inflows and outflows due in day-to-day business. The data used for analysing these cash flows is consistent with that used in the contractual maturity analysis below. See Note 13 for details of borrowings during the financial periods under review. 6 1 6 2 N N O O T T E E S S T T O O T T H H E E C C O O N N S S O O L L I I D D A A T T E E D D S S T T A A T T E E M M E E N N T T S S F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 0 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V 32.4 Financial Risk Management Guarantees and Security Interests Within 1 Year 1 to 5 Years Over 5 Years Total 2019 $ 2018 $ 2019 $ 2018 $ 2019 $ 2018 $ 2019 $ 2018 $ Consolidated Group Financial liabilities due for payment Trade and other payables 5,096,543 2,542,778 Contract liabilities 863,350 1,299,678 - - - 261,870 Bank loans 1,272,500 - 6,716,000 - - - - 14,829,663 2,274,815 89,720,302 5,668,840 78,077,128 Finance lease liabilities Total expected outflows 22,062,056 6,117,271 96,436,302 5,930,710 78,077,128 1,032,132 196,575,486 13,080,113 Financial assets – cash flows realisable Cash and cash equivalents 30,103,095 14,385,895 Trade receivables 2,652,313 218,443 Total anticipated inflows Net (outflow)/ 32,755,408 14,604,338 - - - - 114,230 114,230 - - - - - - 30,103,095 14,385,895 2,652,313 332,673 32,755,408 14,718,568 1,032,132 863,350 2,593,680 - - 7,988,500 - 182,627,093 7,943,655 There are several asset specific security interests registered on the PPS Register against each of the members of the Group listed at Note 31. In addition, the bank loans mature on 28 May 2025 and the facility agreement specifies the following security interests: 1. First ranking General Security Interest from each Obligor comprising first ranking charge over all present and after acquired property. 3. Account Set offs from Viva Leisure Property Pty Ltd over Deposits totalling $3,400,000 (relating to security for all cash covered bank guarantees issued in the name of Viva Leisure Property Pty Ltd 4. The interest rate payable on the market rate loan is BBSY plus 4.0% Contractual commitments At 30 June 2020, Viva Leisure Limited has the following contractual commitments. The Company had entered into binding agreements to lease certain rental properties*, but the lease terms had not commenced as at the reporting date. The Company entered into a binding agreement to acquire Australian Fitness Management Pty Limited at 30 June 2020, which completed on the 21st August 2020. Contractual Commitments Within 1 Year $ 1 to 5 Years $ After 5 Years Total $ $ - 5,096,543 2,542,778 2. First ranking charge over any assets financed under the Equipment Finance Facility. inflow on financial 10,693,352 8,487,067 (96,436,302) (5,816,480) (78,077,128) (1,032,132) (163,820,078) 1,638,455 instruments 30 June 2020 30 June 2019* 18,000,000 - - - 1,785,046 11,504,094 18,618,400 31,907,541 › N OTE 33 – FAIR VALUE MEASUREMENT Financial assets and financial liabilities measured at fair value in the statement of financial position are measured at amortised cost. › N OTE 34 – PARENT ENTITY INFORMATION Statement of Financial Position Current Assets Non-Current Assets Total Assets Current Liabilities Total Liabilities Net Assets Issued Capital Reserves Retained Earnings Total Equity Statement of Profit and Loss and Other Comprehensive Income Profit / (loss) for the year Other comprehensive income Total Comprehensive Income 6 3 2020 $ 2019 $ 65,735,485 22,584,246 11,838 11,838 65,747,323 22,596,084 12,087 12,087 12,087 12,087 65,735,236 22,583,997 87,375,694 43,715,691 (21,725,385) (21,430,110) 84,927 298,416 65,735,236 22,583,997 (213,489) 298,665 - - (213,489) 298,665 *For the financial year ended 30 June 2020 this is recorded separately in Note 20: Leases › NOT E 35 – EVENTS AFTE R T HE R EPO R TI NG PER IO D The following events occurred after the reporting period: On 21st August 2020 the Company completed the acquisition of Australian Fitness Management Pty Limited (AFM), the Master Franchisor for the Plus Fitness group comprising approximately 200 clubs located in Australian Capital Territory, New South Wales, Victoria, South Australia, Western Australia, New Zealand and India. AFM was acquired for an initial payment of $18m, with a $2m deferred payment which is subject to performance hurdles. › NOT E 3 6 - CO MPANY I NFO R M AT IO N Viva Leisure Limited is the Group’s Ultimate Parent Company. Viva Leisure Limited is a Public Company incorporated and domiciled in Australia. The address of its registered office and its principal place of business is Unit 7, 141 Flemington Road, Mitchell, ACT, Australia. N N O O T T E E S S T T O O T T H H E E C C O O N N S S O O L L I I D D A A T T E E D D S S T T A A T T E E M M E E N N T T S S F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 2 0 6 4 N O I T A R E L C E D ’ S R O T C E R D I P U O R G E R U S I E L ’ s r o t c e r i d r a l c e d I V A V n i o i t a 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V VI VA L EI SUR E GRO UP DI RE CTO RS D EC LARATI O N 1) In the opinion of the Directors of Viva Leisure Ltd: a) The consolidated financial statements and notes of Viva Leisure Ltd are in accordance with the Corporations Act i) Giving a true and fair view of its financial position as at 30 June 2020 and of its performance for the financial year ended on that date; and ii) Complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and b) There are reasonable grounds to believe that Viva Leisure Ltd will be able to pay its debts as and when they become due and payable.; 2) The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2020. 3) Note 2 confirms that the consolidated financial statements also comply with International Financial Reporting Standards. Signed in accordance with a resolution of the Directors. Director H A R R Y K O N S T A N T I N O U Dated this 25th day of August 2020. D D I I R R E E C C T T O O R R S S ’ ’ D D E E C C L L E E R R A A T T I I O O N N 6 5 6 6 ’ S R O T D U A I T R O P E R I N D E P E N D E N T A A U U D D I I T T O O R R ’ ’ S S R R E E P P O O R R T T 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V T N E D N E P E D N I s ’ r o t i d u a t r o p e r 6 7 6 8 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V I N D E P E N D E N T A A U U D D I I T T O O R R ’ ’ S S R R E E P P O O R R T T 6 9 7 0 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V I N D E P E N D E N T A A U U D D I I T T O O R R ’ ’ S S R R E E P P O O R R T T 7 1 7 2 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V 7 3 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V additional information The following information is current as at 17 September 2020 3 . 20 LAR GEST SHARE HOL D ER S 1. DIST RIBUTION OF SHAREHOLDERS The Distribution of issued capital is as follows: Holding 100,001 and over 10,001 – 100,000 5,001 – 10,000 1,001 – 5,000 1 – 1,000 2 . DIST RIBUTION OF OPTIONS Holding 100,001 and over 10,001 – 100,000 5,001 – 10,000 1,001 – 5,000 1 – 1,000 Total No. of Shares Held No. of Shareholders 64,367,503 4,269,461 1,310,293 1,276,700 287,436 71,511,393 33 172 179 498 597 1479 Total No. of Options Held No. of Shareholders 2,990,000 100,000 - - - 3,090,000 4 1 - - - 5 Shareholder SHJA MANAGEMENT PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED NATIONAL NOMINEES LIMITED MERA VALE NO 1 PTY LTD CITICORP NOMINEES PTY LIMITED HARRY KONSTANTINOU ANGELO KONSTANTINOU JOHN KONSTANTINOU SPIROS KONSTANTINOU BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD BNP PARIBAS NOMINEES PTY LTD CS THIRD NOMINEES PTY LIMITED BNP PARIBAS NOMS PTY LTD EASTY HOLDINGS PTY LTD BNP PARIBAS NOMINEES PTY LTD TRENWITH NOMINEES PTY LIMITED B & S FORRESTER PTY LTD MR DEREK HILL & MRS JOANNA HILL J P MORGAN NOMINEES AUSTRALIA PTY LIMITED DR GLENN CARLTON CROFT A A D D D D I I T T I I O O N N A A L L I I N N F F O O R R M M A A T T I I O O N N F O R L I S T E D C O M P A N I E S FOR LISTE D COMPANIES Number Held % of Issued Shares 21,688,434 1 4,8 8 1 ,191 7,144,105 4,543,296 3,729,451 1,542,068 1,542,068 1,542,067 1,442,067 1,213,255 580,412 536,066 466,667 325,000 305,000 300,000 260,000 233,334 219,400 1 6 2 ,0 1 6 30.3% 20.8% 10.0% 6.4% 5.2% 2.2% 2.2% 2.2% 2.0% 1.7% 0.8% 0.7% 0.7% 0.5% 0.4% 0.4% 0.4% 0.3% 0.3% 0.2% 7 5 7 6 4. SU BSTA NTIAL SHAREHOLDERS RE LAT ED PART Y L EAS E AG REE M ENTS The names of the substantial shareholders listed in the holding company’s register as at 17 September 2020 are: Shareholder SHJA MANAGEMENT PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED NATIONAL NOMINEES LIMITED MERA VALE NO 1 PTY LTD CITICORP NOMINEES PTY LIMITED Number of Shares % of Issued Shares 21,688,434 14, 881,191 7,144,105 4,543,296 3,729,451 30.3% 20.8% 10.0% 6.4% 5.2% 5. LESS THA N MARKETABLE PARCEL OF ORDINARY SHARES There are 90 shareholders with an unmarketable parcel totalling 12,129 shares 6. UN QUOTED EQUITY SECURITIES The company had the following unquoted securities on issue as at 17 September 2020 Security Unquoted Options No. of Securities 3,090,000 7. RE STRICTED SECURITIES The company had no restricted securities on issue as at 17 September 2020 8 . VOT ING RIGHTS In accordance with the Constitution each member present at a meeting whether in person, or by proxy, or by power of attorney, or in a duly authorised representative in the case of a corporate member, shall have one vote on a show of hands, and one vote for each fully paid ordinary share, on a poll. Performance rights and Options have no voting rights. 9. ON - MA RKET BUY BACKS There is no current on-market buy-back in relation to the Company’s securities 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V The Company received a waiver from Listing 10.1 at time of listing to the extent necessary to permit the Company not to seek shareholder approval in relation to rental payments made during the remaining initial terms of certain lease agreements as set out in the following table. A condition of the ASX waiver is for inclusion of a summary of the material terms of these lease agreements in each annual report of the Company during the terms of the leases. The table below sets out the material terms of these lease agreements. Location Lessor Mitchell Office space Dimensional Developments Australia Pty Ltd Club Lime Mitchell Dimensional Developments Australia Pty Ltd Mitchell Expanded office space Dimensional Developments Australia Pty Ltd Term and options to renew 5 years commencing on 1 August 2018. 3 further options to renew for 5 years each. 5 years commencing on 1 August 2018. 3 further options to renew for 5 years each. 4 years commencing on 1 July 2019. 3 further options to renew for 5 years each. Club Lime and Ladies Only Gym and Pool CISAC Sports Centres Australia Pty Ltd 10 years commencing 1 August 2018. 2 further options to renew for 10 years each. ClubMMM at CISAC Sports Centres Australia Pty Ltd 5 years commencing 1 August 2018. 2 further options to renew for 5 years each. Speedo shop at CISAC Sports Centres Australia Pty Ltd 5 years commencing 1 August 2018. 2 further options to renew for 5 years each. Club Lime Curtin Akon Holdings Pty Ltd 5 years commencing 1 July 2018 2 further options to renew for 5 years each. Club Lime Kambah Jenke Investments Pty Ltd 5 years commencing 1 August 2018. 2 further options to renew for 5 years each. Current annual rent (plus GST) and future increases $98,880 Rent increases by 3% per annum in the initial term, after which the base rent is set by market review on each exercise of the options with further fixed annual increases of 3% per annum. $154,500 Rent increases by 3% per annum in the initial term, after which the base rent is set by market review on each exercise of the options with further fixed annual increases of 3% per annum. $98,880 Rent is fixed yearly (increasing incrementally year on year by 3%) for the initial term of the lease, after which the base rent is set by market review on each exercise of the options with further fixed annual increases of 3% per annum. $1,730,559 Rent is fixed yearly (increasing incrementally year on year by 4%) for the initial term of the lease, after which the base rent is set by market review on each exercise of the options with further fixed annual increases of 4% per annum. $198,365 Rent is fixed yearly (increasing incrementally year on year by 4%) for the initial term of the lease, after which the base rent is set by market review on each exercise of the options with further fixed annual increases of 4% per annum. $37,856 Rent is fixed yearly (increasing incrementally year on year by 4%) for the initial term of the lease, after which the base rent is set by market review on each exercise of the options with further fixed annual increases of 4% per annum. $140,000 Rent is fixed yearly (increasing incrementally year on year by $10,000) for the initial term of the lease, after which the base rent is set by market review on each exercise of the options with further fixed annual increases of 3.5% per annum. $240,294 Rent is fixed yearly (increasing incrementally year on year by 3%) for the initial term of the lease, after which the base rent is set by market review on each exercise of the options with further fixed annual increases of 3% per annum. Club Lime Conder Konstantinou Consultants Pty Ltd as trustee for Ramesses Discretionary Trust 10 years commencing 1 April 2019 2 further options to renew for 10 years each. $332,801 Rent increases by 4% per annum in the initial term, after which the base rent is set by market review on each exercise of the options with further fixed annual increases of 4% per annum. OT HER KEY TE RM S The Board considers that the leases are on arms’ length terms which reflect customary provisions commonly found in commercial leases of a similar nature. Set out below are some key terms of these leases (other than those set out in the other columns of this table). Rent is payable in advance by monthly instalments and the lessor may charge daily interest on any late payment at 2% above the rate that would be charged by the lessor’s bank for unsecured overdrafts. On termination of the lease, the lessee is responsible for make good of the premises. The lessee is responsible for maintaining insurance to cover standard risks applicable to a lessee in the health club industry, public liability and for the plate glass on the premises. The lessee releases the lessor from, and indemnifies the lessor against, claims for damages, loss, injury or death. A A D D D D I I T T I I O O N N A A L L I I N N F F O O R R M M A A T T I I O O N N F O R L I S T E D C O M P A N I E S 7 7 7 8 Y R O T C E R D E T A R O P R O C I e t a r o p r o c y r o t c e r i d 0 2 0 2 T R O P E R L A U N N A E R U S I E L A V I V 7 9 CE O : Harry Konstantinou CO M PANY S ECR ETARI ES: Kym Gallagher RE GISTE RED O FFI CE AND PR INC IPAL PL ACE O F B US I NE SS: Unit 7, 141 Flemington Road, Mitchell ACT 2911 02 6163 8011 investor.relations@vivaleisure.com.au www.vivaleisure.com.au RE GISTE RS O F S ECU RI TI ES AR E HE LD AT TH E FO LLOW I NG AD D RESS: Link Market Services Level 12, 680 George Street, Sydney NSW 2000 1300 554 474 registrars@linkmarketservices.com.au www.linkmarketservices.com.au STO CK EXCHANGE LI ST ING Quotation has been granted for all the ordinary shares of the company on all Member Exchanges of the Australian Securities Exchange Limited under the code “VVA”. AU DI TOR S Hall Chadwick Level 40, 2 Park St, Sydney NSW 2000 C C O O R R P P O O R R A A T T E E D D I I R R E E C C T T O O R R Y Y 8 0
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