L A U N N A T R O P E R Y E A R E N D E D 3 0 J U N E 2 0 2 1 2021 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 2021 Annual Report for Viva Leisure Limited (ACN 607 079 792) has been prepared as at 1 October 2021. 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. c o n t 1 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 e n t s O UR LO C ATI O NS AND B RANDS 2020 HI GHLI GHTS A LET T ER FRO M T HE CHAI R CE O ’S REPO R T D IR ECTO R S’ REPO R T RE M UNER ATI O N R EPO RT ( AUD I TE D) AU DI TOR S IND EPEND ENCE DE CL ARATI O N CO RPO R ATE GOV ERNANC E STATE ME NT CO NSO LI DATED FINANCI AL STAT EM EN TS 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 I NFO RM AT IO N FO R L ISTE D CO MPANIE S Shareholder Information Corporate Directory C O N T E N T S 1 3 5 7 9 17 2 5 27 29 3 1 33 35 37 69 7 1 79 84 B 1 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 R A L O N C W A PLUS 35 D A S T I O N SA PLUS 5 S SW N VIVA 34 Q L VIVA 14 D PLUS 11 PLUS 131 AC T VIVA 47 O U R B R A N D S A N D L O C A T I O N S V IC VIVA 16 PLUS 8 1 Viva corporate owned Plus Fitness locations included in Plus numbers 2 1 2 2 L T P E 0 R R U A O s t h g li h g i h N A A N U V V R E E S L I I REVENUE - UP 104.8% $83.7m MEMBERSHIPS - UP 33.8% 126,006 LOCATIONS - UP 45.5% 115 EBITDA* - UP 97.0% $11.95m EBITDA MARGIN* - DOWN FROM 14.8% 14.3% *E xcludi ng imp acts of A ASB 16. REVENUE ($m) 83.7m % 5 3 R + G A C 40.9m 33.1m 24.1m 20.7m 18.4m +105% EBITDA ($m) 12.0m +97% C A G R + 4 6 % 7.3m 6.1m 5.2m 3.3m 1.8m FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 2 0 2 1 H I G H L I G H T S MEMBERS 298,376 EBITDA MARGIN (%) C A G R +62% 0 7 3 2 7 1 , +217% 1 0 5 5 , 22.0% 21.6% 94,196 54,039 5 0 5 0 2 1 , 15.8% 14.8% 14.3% 10.0% 26,754 29,124 35,631 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 HEALTH CLUBS & OTHERS HIIT REPUBLIC PLUS FITNESS (AU/NZ) Plus Fitness Corporate Owned locations now in Health Club & others 3 4 2021 c h a i rleTTe r 1 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 MEET IN G THE CHALLENGES On behalf of the Board, I am pleased to present the Viva Leisure Limited 2021 Annual Report. The operations for the year have once again been severely impacted by the effects of COVID-9. Suffice to say that there are three financial years now impacted (including the current year). During each of the years, your Board and management team have not lost sight of the underpinning strategy to the continued development of our Company. The last financial year saw the acquisition of the Plus Fitness franchisor as an opportunity to add substantially to the offering formats by the Company. Over the past 12 months we have worked to further develop the management skill base associated with franchising, as complementary to the existing traditional base of the company. That extension, together with our continued technology development and support, we believe, augers well for the future. The recent announcements of expected location re- openings, based on vaccination rates, is welcomed. We are sure that the whole community looks forward to a future uninterrupted by the pandemic. Once again, in 2021 our staff have been magnificent in the face of the stress of closedowns, re-openings and further closedowns. We do not underestimate the personal toll on all of our staff, all of whom have shown resilience and understanding of the difficult position imposed by various Governments. The continued support of our shareholders by subscribing to the capital raise in the 2021 year, and recently, evidences the continued appreciation of the development of the company and the achievement of objectives. Likewise, the rapid take-up of suspended membership once our facilities have been permitted to be open, is evidence not only of the community need of the services we provide, but also a wonderful statement of loyalty by our members. Thank you to each. Important highlights in the COVID-19 affected results were: • Whilst every step has been taken for the rationalisation of costs, there has been an impact to the financial result. • Total revenues were $83.7 million compared with $40.9 million in the financial year ended 30 June 2020, an increase of 104.8%; • Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) increased to $11.95 million from $6.07 million in the previous year, excluding the impacts of AASB16; DIVIDENDS As set out in the report to shareholders last year and, as foreshadowed in the 2019 Prospectus, reflecting Viva Leisure’s growth profile and continuing investment opportunities, and the present impact of COVID-19 related closedowns, the Directors confirm that no dividend will be paid in respect of the 2021 Financial Year. O PERAT ING HI GHLI GHTS FO R T HE Y E AR Highlights for the year were: • An increase in operating locations/clubs from 79 to 115; • A strong pipeline of new locations secured, consistent with the strategic vision of growth; • The hiit republic boutique concept continues to be rolled out as part of Viva Leisure’s unique hub and spoke model. In addition, the development of our new concept Groundup represents the further extension of the suite of offerings; • Despite the impact of COVID -19, Viva Leisure membership increased by over 31,800 members and additionally, 170,000 Plus Fitness members; • The acquisition of Plus Fitness franchisor represents a strong opportunity to extend opportunities to Viva Leisure, as well as having a small overseas footprint available for future development. SO C IAL AND CO M M UNI TY CO M M IT ME NT Viva Leisure has again continued its commitment to ongoing support of the local communities in which we operate. That contribution has continued to be necessarily moderated in 2021 by the impact of the pandemic. The Company continues to strive to be a responsible corporate citizen. A L E T T E R F R O M T H E C H A I R B OARD AND M ANAGE ME NT I am delighted that Louise Bolger joined the Board in July 2021. Louise has a deep corporate and commercial experience and has made a valued contribution since her appointment. As shareholders will see from the number of meetings reported, the year has again been highly active. Not only have the effects of COVID-19, but also the continued acquisitions achieved and proposed have been dealt within the meetings and interactivity of the Board. During all of that time, the spirit of contribution and sustained vision of outcomes sought, together with the continued positive culture, has maintained the highest quality of relationships between the Board and management team. The Board and I appreciate the significant contribution of Harry Konstantinou and the executive team together with the entire Viva Leisure team of over 1,600 amazing members. 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 5 6 c eorepo rt Together with new club openings and acquisitions during the year, our existing like-for-like locations continued to grow membership and visitations which are two key metrics that we constantly monitor. 1 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 As we closed the FY2021 financial year, part of our business was in lockdown. As I write this in September 2021, we still have parts of the business in lockdown due to COVID-19, however we now have a clear path out less than a month away. It is unfortunate that FY2021 was another year impacted by COVID-19 for the Viva Leisure business. Since listing in June 2019, the business has not had the opportunity to operate a full 12 months without interruptions, however as they say where there is confusion there are opportunities. There are some significant milestones reached during the year, and with the pent-up demand expected from the latest round of lockdowns, we expect to see an acceleration in growth upon reopening. 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. Our hiit republic brand has gone from strength to strength and we now operate in four States and Territories with 22 locations. I expect this to grow to approximately 35 locations at the end of this financial year. This is an outstanding achievement considering the first hiit republic only opened in March 2019. The first GroundUp boutique Pilates, Yoga and Barre studio opened in July 2021 with two further locations currently being planned. The GroundUp concept builds on our unique hub and spoke approach to fitness where one size, service and product does not fulfil all members needs and requirements. Key highlights for the year included: TALENT • Direct membership increased 33.8% to 126,006 members, and increased to 298,376 members including the Plus Fitness network of members; • Locations increased 45.5% to 115, adding a further 36 locations during the year, essentially one new location joined the Viva Leisure network every 1.4 weeks of the year; • Revenue more than doubled to $83.7 million, an increase of 104.8%; and • EBITDA was up 97.0% to $11.95 million (excluding the impacts of AASB-16) OVE RVIEW Viva Leisure owned and operated 115 locations as at 30 June 2021. As of the date of this report, this has increased to 118 locations. This represents a 4-fold increase from the 29 locations we owned and operated at our IPO in June 2019. 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. During the year, our team grew from 1,100 strong to over 1,600, and each team member plays a very important part of the experience which we offer our members. Our senior management team has also grown which allows us to support the strong strategic growth prospects which are in front of us. Company- wide our female/male team mix is now made up of 70% female and 30% male, up from 67% and 33% in FY2020. Our Head Office and Management team members are more evenly split with 48% female and 52% male as at the end of FY2021. It is important for me and the Viva Leisure board to be an equal opportunity employer and our human resources team works hard to ensure the right balance is maintained. ACQ UI SI TI O NS During the financial year, we negotiated, settled and more importantly, integrated various acquisitions. These included 15 health club locations in eight separate acquisitions, which included our first four Plus Fitness corporate owned locations. In addition, in August 2020, Viva Leisure completed its largest ever acquisition to date with the purchase of the Plus Fitness master franchisor (Australian Fitness Management). 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. The Viva Leisure team has learnt and has been able to contribute a lot to the Plus Fitness business and team members. Over the next 12-18 months we expect to start to integrate key Viva Leisure technology and systems into the Plus Fitness network which will help our franchisees operate more efficiently and more profitably. 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, while extremely exciting, will continue our ‘more of the same’ model. A model which we have proven over the past 17 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 and potentially some new markets we are currently exploring. With the acquisition of the Plus Fitness master franchisor, Viva Leisure has added another option to select from in entering new markets. We now have a combination of brands available to us which are suitable in all markets and all price-points, which is something our competitors simply do not offer nor can easily replicate. We are a dynamic business that can pivot, adapt and grow. 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. A R E P O R T F R O M T H E C E O H A R R Y K O N S T A N T I N O U Founder, Managing Director and Chief Executive Officer 7 8 The Directors of Viva Leisure Limited present their report together with the financial statements of the consolidated entity, being Viva Leisure Limited and its controlled entities (the Group) for the financial year ended 30 June 2021. 1 2 2 L T P E 0 R R O ’ s r o t c e r d i a v i V f o s r o t c e r i D e r e w s n o s r e p g n w o l a i c n a n f o d n e r o g n : r a e y e r u s i i r u d d e t i e h T m L e c n e h t e h t e L o f i s i f l l N N A A A U U V V R E E S L i i I I 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 D I R E C T O R S ’ R E P O R T HARRY KONSTANTINOU RHYS HOLLERAN Managing Director and Chief Executive Officer Appointed 15 July 2015 Independent Non-Executive Director Member of the Audit and Risk Committee Member of the People and Culture Committee Appointed 12 October 2018 Member of the People and Culture Committee Appointed 30 September 2020 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 23,346,701 ordinary shares and options to acquire a further 3,090,000 ordinary shares. Qualifications Bachelor of Economics and Member of Certified Practising Accountants Australia Experience Appointed Board and Committee member on 30 September 2020. Rhys has 30 years of executive management expertise ranging from micro-cap to ASX 200 companies in the media sector including as Chief Executive of two public listed companies - RG Capital Radio Limited (ASX:REG) and Macquarie Media Group (ASX:MMG, now ASX:SXL) 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 30,000 ordinary shares. 9 1 0 report LOUISE B OLGE R KYM GALLAGHER Independent Non-Executive Director Member of the People and Culture Committee Appointed 5 July 2021 Qualifications Bachelor of Laws (Hons) Bachelor of Arts Bachelor of Education Experience Louise is an experienced telecommunications, media and technology lawyer and company secretary having held Director, General Counsel and Company Secretary roles with various ASX listed companies. Her experience as a non- executive director extends to listed and not-for- profit organisations. Other Current Directorships None Directorships held in other listed entities during the three years prior to the current year Superloop Limited (ASX: SLC) resigned 23 November 2018 Interest in Shares and Options Nil 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 476,667 ordinary shares. RETIRED DIRECTORS MARK MCCON N E LL SUSAN FORR ESTER AM Non-Executive Director Independent Non-Executive Director Member of the People and Culture Committee Appointed 12 October 2018 and retired on 6 November 2020 Audit and Risk Committee Chair Appointed 12 October 2018 and retired on 31 December 2020 1 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 1 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 PR INC IPA L ACTIVITIES Operational highlights for the financial year: • Completed several acquisitions comprising: The principal activities of the consolidated group during the financial year were the operation of health club services. No significant change in the nature of these activities occurred during the year. R EVIEW OF OPERATIONS AND F IN A NCIA L RESULTS Financial highlights for the year: • Total revenues were $83,718,105 compared with $40,855,697 in the financial year ended 30 June 2020; • Loss before income tax was $8,793,735, compared to a loss of $9,343,618 in the financial year ended 30 June 2020; • Net loss After Tax (NPAT) from continuing operations and attributable to members was $6,384,898 compared with a financial year ended 30 June 2020 loss of $6,246,345; • Cash and cash equivalent reserves is strong at $17,290,971, down from $30,103,095 in the financial year ended 30 June 2020; and • There was an increase in net assets to $86,352,203 compared to $63,316,761 in the financial year ended 30 June 2020 Impact of AASB16 The statutory financial results have been significantly impacted by the application of AASB16. Below is a reconciliation of the underlying statutory results to the pre-AASB16 results. Profit and Loss ($m) FY21 Statutory AASB16 Impact FY21 (pre AASB16) • An increase in operating locations/clubs from 79 to 115; • Member numbers increasing from 94,196 at June 2020 to 126,006 at 30 June 2021; • Now operating 22 hiit republic boutique studios; COVID-19 Impacts With the exception of the Group’s ACT clubs, all of Viva Leisure Limited’s clubs have had intermittent closures during the financial year due to mandated Government directives. The Company has in place a comprehensive safety and communications plan to keep its members informed and safe during the closure periods. 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. Revenues and profits were significantly impacted during the closure periods and where appropriate, this has been addressed in the specific notes, estimates and judgements in the Financial Statements. There remains uncertainty with respect to future events or circumstances which may continue to impact the financial results of the consolidated entity. 83,718,105 83,718,105 Dispute with Plus Franchisees Revenue Expenses EBITDA 49,639,347 22,126,667 71,766,014 34,078,758 11,952,091 Depreciation and Amortisation 30,076,823 (21,114,439) 8,962,384 EBIT Finance Costs Profit / (loss) Before Tax Income Tax Expense Net Profit After Tax Earnings per share (basic - cents) 4,001,936 2,989,707 12,795,671 (11,098,610) 1,697,061 (8,793,735) (2,408,837) (6,384,898) (8.24) 1,292,646 387,794 904,852 1.17 As announced to the ASX on 17 May 2021, the Company received a draft statement of claim prepared on behalf of a number of Plus Fitness franchisees. The draft statement of claim advised of the possibility of proceedings being commenced against Viva Leisure and its subsidiary Australian Fitness Management (AFM). No claim has been filed with any Court as at the date of this report, and accordingly no provision or contingent liability has been recorded. Viva Leisure is confident that it and its group companies are dealing with franchising appropriately and in accordance with the law. All legal costs incurred to date in relation to this matter have been expensed as incurred. SI GNIFI CANT C HANGES IN T HE STATE O F AFFAIR S During the year, the following significant changes occurred within the Group: • Completed a fully underwritten $30 million equity raising by way of an institutional placement of approximately 10.34 million ordinary shares at $2.90 • New credit terms were agreed with the Commonwealth Bank of Australia in relation to a $35.35 million five-year senior secured facility, comprising a $25 million Market Rate Loan facility (currently drawn to $10.00 million) to assist in financing future acquisitions, a bank guarantee facility and a direct debit facility • 100% of the issued capital of Australian Fitness Management Pty Limited (AFM), the master franchisor for the Plus Fitness group of health clubs • The assets of FitHQ, a health club based in Campbelltown NSW • The assets of Active Life, a health club based in Norman Park, QLD • The assets of G Fitness, a health club based in Rhodes, NSW • The assets of two Coffs Coast health clubs, based in Moonee and Tormina, NSW • The assets of four separate Plus Fitness sites, based in Everton Park and Morayfield, QLD, Shepparton, VIC, Goulburn, NSW • Total growth in club numbers from acquisitions and new club openings were as follows: • 26 Health clubs • 10 Hiit Republics EV ENTS S UB SE QU ENT TO TH E E ND O F TH E RE PO RT ING PE RI O D Since the end of the financial year, the Company has entered into binding agreements or completed the following acquisitions: • The assets of One Health, a health club based in South Morang, VIC • The assets of Plus Fitness sites in, Manly and Mona Vale, NSW, Beerwah, QLD In addition, the Company has opened the Group’s first GroundUp site – a Reformer and Mat Pilates, Barre and Yoga studio. As at the date of this report the Group has mandatory temporary closures of some of its clubs in NSW, Victoria and ACT due to COVID-19. 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 I R E C T O R 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 follows: There were no dividends paid or declared since the start of the financial year (2020: 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. Harry Konstantinou Bruce Glanville Mark McConnell* Susan Forrester^ Rhys Holleran A 17 17 6 10 13 B 17 17 6 10 13 A 0 3 0 1 2 B 2 3 1 1 2 A 4 6 5 5 1 B 4 6 5 5 1 *Resigned 6 November 2020 ^Resigned 31 December 2020 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. UN ISSUED 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-19 2-May-19 7-Jun-19 30-Oct-19 12-Nov-20 2-May-23 2-May-23 31-Aug-23 31-Aug-24 16-Oct-25 1.34 1.43 0.00 0.00 3.34 1,400,000 1,000,000 295,000 295,000 1,213,334 4,203,334 These options were issued under either the LTI, Tranche 1 or Tranche 2 Plans (described in Note 20.2 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. 1 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 HARES ISSUED DURING OR SINCE THE E ND OF TH E YEA R AS A RESULT OF EXERCISE OF O PTION S There were 100,000 issued ordinary shares as a result of the exercise of options during 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. 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 26 to the financial statements. The total paid for non-audit services was $26,500. This comprised tax and other business services. PRO C EED INGS O N B E HAL F OF TH E CO NSO LI DATED 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 TO R’S I NDEPE NDE NCE DE CLA RATIO N A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 31. This directors’ report including the Remuneration Report is signed in accordance with a resolution of the Board of Directors: D I R E C T O R S ’ R E P O R T H A R R Y K O N S T A N T I N O U D i r e c t o r Dated this 17 day of AUGUST 2021. 1 5 1 6 rem u n e ra t i o n re po rt AUDITED • fixed remuneration being annual salary including • short term incentives (STIs), being cash based directly related statutory obligations; payments; 1 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 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; and d. Share-based remuneration A . P RINC IP LES USED TO DETERMINE TH E N AT URE A ND AMOUNT OF REMUNERATION 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. 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: • 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. 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 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 E M U N E R A T I O N R E P O R T A U D I T E D 1 7 1 8 Long Term Incentives (LTIs) The table below describes the performance hurdles and vesting conditions that apply as at the date of this report and in relation to the 1,803,334 options granted to senior executives: Earnings per Share (EPS) and Total Shareholder Return (TSR) Cumulative Compound Annual Growth Rate (CAGR) The percentage of options that vest for each % EPS CAGR is illustrated in the following table: LTIs (Granted 7 June 2019) EPS CAGR over the two Financial Years Ending 30 June 2021 Percentage of Options that Vest Less than 15% (minimum Target) 0% 15% to 20% (within target range) 50% - 100% (on a straight-line basis) Greater than 20% (above maximum target) 100% LTIs (Granted 30 October 2019) EPS CAGR over the three Financial Years Ending 30 June 2022 Percentage of Options that Vest Less than 15% (minimum Target) 0% 15% to 20% (within target range) 50% - 100% (on a straight-line basis) Greater than 20% (above maximum target) 100% LTIs (Granted 12 November 2020) Tranche 1 (50% of Options – based on EPS CAGR) Tranche 2 (50% of Options – based on TSR CAGR) CAGR over the three Financial Years Ending 30 June 2023 Percentage of Options that Vest Percentage of Options that Vest Less than 10% (minimum Target) 0% 10% to 15% (within target range) 50% - 100% (on a straight-line basis) Greater than 15% (above maximum target) 100% 0% 0% 100% 1 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 • For the purposes of the above performance hurdles, EPS means the Basic Earnings per Share calculated by reference to the Company’s audited financial statements. • For the purposes of the above performance hurdles, TSR means Total Shareholder Return and will be measured using the VVA 20-day Volume Weighted Average Market Price (VWAP) for the twenty (20) trading days commencing from the announcement of results for the financial year ended 30 June 2020 (TSR measure start date) to the same 20 trading period VWAP post the date of announcement of results for the year ended 30 June 2023 (TSR measure end date). • 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 performance hurdles 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 each respective financial year end. US E OF RE MU NERATI ON CO NS ULTANTS Viva Leisure Limited’s Board engaged the services of Crichton & Associates to review and to provide recommendations in respect of the amount and elements of executive remuneration, including short-term and long- term incentives. Crichton & Associates was engaged by, and reported directly to, the Board of Directors. The agreement for the provision of remuneration consulting services was executed by the Chair of the Board of Directors on behalf of the Board. Under the terms of the engagement, Crichton & Associates provided remuneration recommendations as defined in section 9B of the Corporations Act 2001 for fees of $28,114 for these services. Crichton & Associates confirmed that any recommendations have been made free from undue influence by members of the Group’s key management personnel. The report containing the remuneration recommendations was provided by Crichton & Associates 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. CO M PANY PE RFO RM ANCE The tables below set out summary information about the consolidated entity’s earnings and movements in shareholder wealth for the period from listing to 30 June 2021: R E M U N E R A T I O N R E P O R T A U D I T E D Revenue Net profit before tax Net profit after tax Share price at start of the year Share price at end of the year Interim dividend Final dividend Basic earnings pe share* Diluted earnings per share* 30 June 2021 30 June 2020 30 June 2019* 83,718,105 40,885,697 31,160,220 (8,793,735) (9,343,618) 3,975,945 (6,384,898) (6,246,345) 2,855,103 $2.62 $1.64 nil nil (8.2) (7.9) $0.88 $2.62 nil nil (10.9) (10.4) N/A $0.88 nil nil 5.4 5.2 * 30 June 2019 results did not include the impacts of AASB16 as the standard was not adopted at that date. 1 9 2 0 B. DE TAILS OF REMUNERATION Details of the nature and amount of each element of the remuneration of each Key Management Personnel (KMP) of Viva Leisure are shown in the table below: The relative proportions of remuneration that are linked to performance and those that are fixed for the financial year are as follows: Directors and other Key Management Personnel Short-term Employee Benefits Post- employment Benefits Long-term Benefits Share- based Payments Performance based on % of Remuneration Fixed remuneration ($) At Risk Short-Term Incentives (STI) At risk options Employee Year Cash salary and fees ($) Incentives ($) Super- annuation ($) Long Service ($) Termination benefits ($) Options ($) Total ($) Executive Directors Harry Konstantinou 2021 425,000 - 2 5,0 00 7,109 (Managing Director) 2020 425,000 90,000 2 5,0 00 7,125 Non-executive Directors Bruce Glanville* 2021 86,795 (Independent) 2020 89,124 Rhys Holleran 2021 51,962 (Independent)# 2020 - Mark McConnell 2021 25,385 (Non-Independent)* 2020 53,076 Susan Forrester 2021 37,500 (Independent)^ 2020 65,625 Other Key Management Personnel 2021 315,000 - - - - - - - - - 25,000 20,620 - - - - - - - - - - - - - - 25,000 7,009 Kym Gallagher (Chief Financial Officer) Angelo Konstantinou (Chief Technology Officer) Sean Hodges (Chief Operating Officer) Total Total 2020 275,000 60,000 25,000 4,799 2021 2 1 9 , 1 7 8 - 20,822 8,856 2020 200,000 4 4 ,1 1 9 20,597 3,353 2021 210,045 - 19,954 7,455 2020 175,000 20,000 18,678 13,281 2021 1,370,865 - 115,776 30,429 2020 1,282,825 2 1 4 , 1 1 9 109,895 28,558 1 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 - - - - - - - - - - - - - - - - - - 65,869 522,979 11,689 558,814 12.6% 18.2% - - - - - - - - 111 ,794 109,744 51,962 - 25,385 53,076 37,500 65,625 19,907 366,916 5,157 369,956 14,052 262,908 3,438 271,507 6,733 244,187 - 226,959 106,562 1,623,631 Nil Nil Nil Nil Nil Nil Nil Nil 5.4% 17.6% 5.3% 17.5% 2.8% 8.8% 6.6% Directors voluntarily reduced Directors fees by 50% during the period 27 March 2020 to 14 June 2020. *Resigned 6 November 2020, remuneration shown is until the date of retirement ^Resigned 31 December 2020, remuneration shown is until the date of retirement #Appointed 30 September 2020 % Calculated in accordance with AASB 2: Share Based Payments 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 for the financial year are provided exclusively by way of options, the percentages disclosed also reflect the value of remuneration consisting of options. The relative proportions of remuneration that are linked to performance and those that are fixed for subsequent financial years are as follows: Fixed remuneration ($) At Risk Short-Term Incentives (STI) At risk options Executive Directors Harry Konstantinou Other Key Management Personnel Kym Gallagher Sean Hodges FY2022 changes to STIs and LTIs 650,000 Up to 40% of fixed remuneration Up to 60% of fixed remuneration 380,000 264,000 264,000 Up to 25% of fixed remuneration Up to 30% of fixed remuneration Up to 25% of fixed remuneration Up to 30% of fixed remuneration Up to 25% of fixed remuneration Up to 30% of fixed remuneration Based on remuneration structure review conducted by the People and Culture Committee there is no change to the underlying performance metrics for either the FY22 STI or LTI. The performance targets have been adjusted by the Board to reflect the current market conditions and align incentives with shareholder interests. R E M U N E R A T I O N R E P O R T A U D I T E D 20,284 1,655,681 14.2% Angelo Konstantinou 2 1 2 2 1 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 C . SERVIC E 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 for the financial year are set out below: Employee Number granted Grant date Value per Option at Grant Date ($) Value of Options at Grant Date ($) Number Exercised Exercise Proceeds ($) Options held at Balance Date Vesting and First Exercise Date Last Exercise Date Employee Base Remuneration ($) Term of Agreement Notice Period Non-Executive Directors Directors and other Key Management Personnel Harry Konstantinou 4 5 0 , 0 0 0 Three years Six months Kym Gallagher 3 4 0 , 0 0 0 Three years Three months Angelo Konstantinou 24 0 , 0 0 0 Three years Three months Bruce Glanville Tranche 1 200,000 2-May-19 0.055 11,064 - - 200,000 7-Jun-19 2-May-23 Susan Forrester* Tranche 1 100,000 2-May-19 0.055 5,532 100,000 134,000 - 7-Jun-19 2-May-23 Other Key Management Personnel Sean Hodges 2 3 0 , 0 0 0 Three years Three months Tranche 1 100,000 2-May-19 0.055 The major provisions of the agreements relating to remuneration for subsequent financial years are set out below: Employee Base Remuneration ($) Term of Agreement Notice Period Harry Konstantinou 65 0,000 Three years Six months Kym Gallagher 3 8 0 , 0 0 0 Three years Three months Angelo Konstantinou 2 6 4 , 0 0 0 Three years Three months Sean Hodges 2 6 4 ,0 0 0 Three years Three months 5,532 - 5,157 Kym Gallagher LTI LTI LTI 75,000 7-Jun-19 - 75,000 30-Oct-19 0.069 226,667 12-Nov-20 0.391 88,587 Tranche 1 100,000 2-May-19 0.055 5,532 Angelo Konstantinou LTI LTI 50,000 7-Jun-19 - - 50,000 30-Oct-19 0.069 3,438 LTI 160,000 12-Nov-20 Sean Hodges LTI 76,667 12-Nov-20 0.391 0.391 62,532 3,438 *Resigned 31 December 2020, holdings shown are as at the date of retirement - - - - - - - - - - - - - - - - - - 100,000 7-Jun-19 2-May-23 75,000 31-Aug-21 31-Aug-23 75,000 31-Aug-22 31-Aug-24 226,667 16-Oct-23 16-Oct-25 100,000 7-Jun-19 2-May-23 50,000 31-Aug-21 31-Aug-23 50,000 31-Aug-22 31-Aug-24 160,000 16-Oct-23 16-Oct-25 76,667 16-Oct-23 16-Oct-25 D. SHARE- BASED REM UNERAT ION E. S HARES HEL D BY D IR EC TO RS AND KEY M ANAGE ME NT PER S ON NE L 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. The number of ordinary shares in the Company during the 2021 reporting period held by each of the Group’s key management personnel, including their related parties, is set out below 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; Directors and other Key Management Personnel Balance at Start of Year Granted as Remuneration • 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. 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 ($) Number Exercised Exercise Proceeds ($) Options held at Balance Date Vesting and First Exercise Date Last Exercise Date Directors and other Key Management Personnel Executive Directors Tranche 1 1,000,000 2-May-19 Tranche 2 1,000,000 2-May-19 Harry Konstantinou LTI LTI 170,000 7-Jun-19 0.055 0.072 - 55,320 72,232 - - - - - - - - - - - 1,000,000 7-Jun-19 2-May-23 170,000 31-Aug-21 31-Aug-23 170,000 31-Aug-22 31-Aug-24 750,000 16-Oct-23 16-Oct-25 170,000 30-Oct-19 0.069 11,689 LTI 750,000 12-Nov-20 0.391 293,119 Executive Directors Harry Konstantinou 23,290,066 Non-Executive Directors Bruce Glanville Rhys Holleran# 300,000 Other Key Management Personnel Kym Gallagher 140,000 Angelo Konstantinou 23,230,502 Sean Hodges 40,000 Mark McConnell* Susan Forrester^ 4,543,296 326,668 1,000,000 7-Jun-19 2-May-23 Retired Non-Executive Directors Received on Exercised Options Shares Purchased Shares Sold Held at the End of the Reporting Period - - - - - - - - - - - - - 56,635 - 30,000 - - - - - - 23,346,701 300,000 30,000 140,000 1,100,000 22,130,502 6,667 - 46,667 29,400 1,000,000 3,572,696 100,000 - - 426,668 2 3 2 4 *Resigned 6 November 2020, holdings shown are as at the date of retirement ^Resigned 31 December 2020, holdings shown are as at the date of retirement #Appointed 30 September 2020 At 30 June 2021 there were no loans outstanding to Directors or Key Management Personnel. AUDITOR’S INDEPENDENCE e l c T i o d a 1 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 5 r a n VIVA LEISURE LIMITED ABN 76 607 079 792 AND ITS CONTROLLED ENTITIES AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF VIVA LEISURE LIMITED In accordance with Section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Viva Leisure Limited. As the lead audit partner for the audit of the financial report of Viva Leisure Limited for the year ended 30 June 2021, I declare that, to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Hall Chadwick (NSW) Level 40, 2 Park Street Sydney NSW 2000 Sandeep Kumar Partner Dated: 17 August 2021 A Member of PrimeGlobal An Association of Independent Accounting Firms SYDNEY · PENRITH · MELBOURNE · ADELAIDE · PERTH · DARWIN · BRISBANE Liability limited by a scheme approved under Professional Standards Legislation www.hallchadwick.com.au A U D I T O T R ’ S I N D E P E N D E N C E D E C L A R A T I O N 2 6 c o rpo ra t e go ve rn a n c e STATEMENT C O R P O R A T E G O V E R N A N C E S T A T E M E N T 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 fourth edition of the Corporate Governance Principles and Recommendations. The Group’s Corporate Governance Statement for the financial year ended 30 June 2021 is available on the investor relations website at https://investors.vivaleisure.com.au. 1 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 7 2 8 c o nSoli date d PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME StaTem e nt FOR THE Y EAR ENDED 30 JUN E 2021 Note 2021 $ Earnings per share 2020 Cents 2020 $ 2021 Cents 24 1 Basic earnings per share: Earnings from continuing operations Diluted earnings per share: Earnings from continuing operations (8.2) (7.9) (10.9) (10.4) Revenue Rental and outgoings 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, acquisitions and contractual matters Other expenses Loss before income tax Income tax benefit Loss for the year 4 83,718,105 40,885,697 (2,021,447) (135,325) 20 (26,384,475) (13,551,344) (1,217,433) (2,133,953) (657,908) (1,322,313) (6,618,395) (3,507,656) (1,984,615) (473,408) (1,241,134) (261,635) (826,882) (236,809) (817,151) (255,002) (30,076,823) (17,006,278) (12,795,671) (8,063,229) (1,044,935) (1,051,385) (6,257,916) (2,798,033) (8,793,735) (9,343,618) 2,408,837 3,097,273 (6,384,898) (6,246,345) 6 5 8 Total other comprehensive income for the year - - Total comprehensive loss for the year (6,384,898) (6,246,345) This statement should be read in conjunction with the notes to the financial statements. 2 9 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 C O N S O L L I D A T E D S T A T E M E N T P R O F I T O R L O S S A N D O T H E R C O M P R E H E N S I V E I N C O M E l n a c i a n SiTio AS AT 30 JUN E 2021 CONSOLIDATED STATEMENT OF f i n o p 1 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 ASSETS CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories 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 Provisions Deferred tax liabilities TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Retained earnings TOTAL EQUITY Note 2021 $ 2020 $ 9 10 11 12 10 14 19 15 16 17 13 19 18 16 21 13 19 21 16 17,290,971 30,103,095 2,719,211 899,521 2,692,697 23,602,400 130,423 51,707,684 204,883,653 47,915,884 69,896,036 2,652,313 158,200 2,814,156 35,727,764 - 28,646,732 176,881,777 20,529,715 57,726,670 374,533,680 283,784,894 398,136,080 319,512,658 6,383,048 2,080,500 22,873,600 4,437,889 1,560,361 1,875,182 39,210,580 7,927,000 197,287,676 6,794,176 60,564,445 272,573,297 311,783,877 86,352,203 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 22 23 116,677,780 (21,607,131) (8,718,446) 87,375,694 (21,725,385) (2,333,548) 86,352,203 63,316,761 C O N S O L I D A T E D S T A T E M E N T O F F I N A N C I A L P O S I T I O N This statement should be read in conjunction with the notes to the financial statements. 3 1 3 2 CONSOLIDATED STATEMENT OF h e c i n 1 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 FOR THE Y EAR ENDED 30 JU NE 2021 n e g u it a q s y Share Capital Reserves Retained Earnings (Accumulated losses) Total Equity $ $ $ $ Balance at 1 July 2019 43,715,691 (21,430,110) 3,476,477 25,762,057 Impact of initial recognition of AASB16, net of tax - - 436,320 436,320 Balance at 1 July restated 43,715,691 (21,430,110) 3,912,797 26,198,377 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 Balance at 1 July 2020 87,375,694 (21,725,385) (2,333,548) 63,316,761 Issue of shares, net of transaction costs and tax 29,162,554 - Exercise of share options Share option premium reserve 139,532 - Total transactions with owners 29,302,086 (5,532) 123,786 118,254 - - - - - - - - 29,162,554 134,000 123,786 29,420,340 (6,384,898) (6,384,898) (6,384,898) (6,384,898) Loss for the year Total comprehensive loss for the year attributable to members of the entity Total transactions with owners and other transfers 29,302,086 118,254 (6,384,898) 23,035,442 C O N S O L I D A T E D S T A T E M E N T O F C H A N G E S I N E Q U I T Y Balance at 30 June 2021 116,677,780 (21,607,131) (8,718,446) 86,352,203 This statement should be read in conjunction with the notes to the financial statements. 3 3 3 4 CONSOLIDATED STATEMENT OF h o w S S l a f FOR THE YEAR EN DE D 30 JUN E 2021 c 1 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 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Interest received Interest paid Payments of income tax Note 2021 $ 2020 $ 95,961,521 45,894,517 (57,098,045) (32,816,827) 72,568 199,463 (12,795,671) (8,063,229) (779,854) (1,575,870) Net cash provided by operating activities 25 25,360,519 3,638,054 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment Proceeds from sale of property, plant and equipment Purchase of intangibles (27,105,482) (17,314,639) 598,208 (755,869) 583,015 (601,652) Payments for business combinations, net of cash acquired 29 (27,540,181) (17,729,613) Net cash (used in) investing activities (54,803,324) (35,062,889) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares Direct costs of issue of shares Proceeds from borrowings Repayment of borrowings Reduction in equipment leases principal 22 30,139,532 45,000,000 (1,200,000) (1,848,761) 3,112,500 7,988,500 (1,093,500) (3,299,791) (1,759,274) Reduction in property leases principal 19 (11,028,057) (2,238,429) Net cash provided by financing activities Net decrease in cash held Cash at beginning of financial year 16,630,684 47,142,036 (12,812,121) 15,717,201 30,103,095 14,385,895 Cash at end of financial year 9 17,290,974 30,103,095 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 C A S H F L O W S 3 5 3 6 1 2 0 2 E N U J 0 3 D E D N E R A E Y E H T R O F D E T A D I L O S N O C E H T O T S T N E M E T A T S L A I C N A N I F › 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 2021 were approved and authorised for issue by the Board of Directors on 17 August 2021. › NOTE 3 – SUMMARY OF ACCOUNTI NG POLI CIES 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 the majority of NSW, Victorian and ACT locations currently closed due mandatory shutdowns imposed by the respective State Governments and there remains uncertainty with respect to future events or circumstances which 1 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 may continue to impact the financial results of the consolidated entity. Assets acquired and liabilities assumed are generally measured at their acquisition date fair values. The Directors monitor the Group’s liquidity and believe that the strong balance sheet position, together with the ability to raise funds if required, provide a reasonable expectation that the Group will be able to pay its debts as and when they become due and payable. Accordingly, the Directors believe that the preparation of the financial statements on a going concern basis is still appropriate. c. Basis of Consolidation The Group financial statements consolidate those of the Parent Company and all of its subsidiaries as at 30 June 2021. 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. d. 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. 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 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 15. e. 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 N O T E S T O T H E C O N S O L I D A T E D S T A T E M E N T 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 1 3 7 3 8 1 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 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. f. 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 All revenue is stated net of the amount of goods and services tax. g. 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. h. 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: (iv) Allocating the transaction price to the (i) the consideration transferred at fair value; performance obligations (v) Recognising revenue when/as performance (ii) any non-controlling interest (determined under either the fair value or proportionate interest obligation(s) are satisfied method); and 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 customer’s contract. Franchise Operations Following the acquisition of Australian Fitness Management, the following additional revenue recognition policies are now applicable for the group The group enters into franchise licence agreements, whereby franchisees pay an upfront five year licence fee, and ongoing monthly franchise fees. The licence fee consideration is received in advance of providing the services attaching to the licence, which is generally over a five year period, and is recognised as a contract liability. The monthly franchise fees are recorded as revenue as they are derived. The transaction price is determined with reference to the contract price as stated in the franchise agreement. The group provides equipment to franchisees as part of establishing the licence. The equipment is invoiced in advance of the supply and is recognised as a contract liability until the point in time the franchise commences operation. On commencement of the franchises operation the revenue is recognised. The transaction price is determined by the amount invoiced to the franchise. Interest revenue is recognised using the effective interest method, which for floating rate financial assets is the rate inherent in the instrument. (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. i. Other Intangible Assets 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: Class of Intangible Trademarks Capitalised Software Digital Assets j. Plant and Equipment Amortisation Rate per annum 5-10% 33% 10% Each class of plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment losses. 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. Depreciation 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. 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. 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. k. Leases The Group as a lessee 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; • 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 N O T E S T O T H E C O N S O L I D A T E D S T A T E M E N T 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 1 3 9 4 0 1 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 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 generating unit’s recoverable amount exceeds its carrying amount. m. 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. 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. 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. l. Impairment Testing of Goodwill, Other Intangible Assets and Property, Plant and Equipment Classification and subsequent measurement 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. 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: 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 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- • 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): • they are held within a business model whose 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. 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 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 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. n. 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. o. 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, 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. contractual cash flow obligations in the near term; p. Income taxes • adverse changes in economic and business conditions in the longer term may, but not necessarily will, reduce 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. N O T E S T O T H E C O N S O L I D A T E D S T A T E M E N T 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 1 4 1 4 2 1 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 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. q. 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. r. 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 and salaries. 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. s. 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. t. 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. u. 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. v. 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. w. Changes in Significant Accounting Policies There were no changes in significant accounting policies during the year. x. New and revised Australian Accounting Standards and Interpretations on issue but not yet effective At the date of the financial statements, the Group has not applied the following new and revised Australian Accounting Standards, Interpretations and amendments that have been issued but are not yet effective: Standard/amendment Effective for annual reporting periods beginning on or after AASB 2020-1 Amendments to Australian Accounting Standards – Classification of Liabilities as Current or Non-Current and AASB 2020-6 Amendments to Australian Accounting Standards – Classification of Liabilities as Current or Non-current – Deferral of Effective Date AASB 2020-3 Amendments to Australian Accounting Standards – Annual Improvements 2018-2020 and Other Amendments AASB 2020-8 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform – Phase 2 AASB 2021-2 Amendments to Australian Accounting Standards – Disclosure of Accounting Policies and Definition of Accounting Estimates AASB 2021-3 Amendments to Australian Accounting Standards – Covid-19-Related Rent Concessions beyond 30 June 2021* 1 January 2022 1 January 2022 1 June 2021 1 January 2023 1 April 2021 N O T E S T O T H E C O N S O L I D A T E D S T A T E M E N T 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 1 4 3 4 4 y. Critical Accounting Estimates and Judgements Inventories Inventories › NOT E 5 – LOSS FO R T HE Y E AR 1 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 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. 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 consideration is dependent on the outcome of many variables that affect future profitability. 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 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 option to terminate the lease if the lessee is reasonably certain not to exercise that option. 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. › N OTE 4 –REVENUE AND OTHER INCOME Revenue from contracts with customers Income from franchise operations Other sources of income Total revenue and other income The group operates in one segment, health club services. a. Revenue from contracts with customers: a. Income from franchise operations: 4a 4a 4b Timing of revenue recognition Over time At a point in time Total revenue from contracts with customers b. Other Revenue Interest received Rent received Gain on disposal of property, plant and equipment Management fees received Total other revenue 2021 $ 2020 $ 75,135,620 8,460,040 40,367,123 - 83,595,660 40,367,123 122,445 518,574 83,718,105 40,885,697 75,135,620 40,367,123 8,460,041 - 83,595,660 40,367,123 78,951,201 4,644,459 40,367,123 - 83,595,660 40,367,123 72,568 39,442 10,435 - 122,445 199,463 - 71,616 247,495 518,574 2021 $ 2020 $ Loss before income tax from continuing operations includes the following specific expenses: • Amounts expensed as part of business combinations and acquisition 4 5 5 , 1 1 1 733,789 opportunities • Short term lease payments • Amounts expensed as part of capital raises and debt restructure • Costs relating to contractual matters with AFM Franchisees 219,027 206,795 383,029 135,325 317,596 - › NOT E 6 – FI NANCE COSTS AND FI NANCE I NCO ME Interest expense from borrowings at amortised cost: External entities Interest expenses for finance lease arrangements Total interest expense › NOT E 7 – SE GM ENT REPO RT I NG 2021 $ 2020 $ 922,234 11,873,437 12,795,671 758,649 7,304,580 8,063,229 Management have determined that the Group operates in one business segment – health club operations; and one main geographic segment. Refer to Note 4 for the revenue splits between the revenue with contracts from customers and franchise operations. › NOT E 8 – I NCO ME TAX EXPE NSE 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% (2020: 27.5%) and the reported tax expense in profit or loss are as follows: 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 2021 $ 2021 $ (8,793,735) (9,343,618) 30.0% 27.5% (2,638,121) (2,569,495) 66,313 - 162,971 14,819 (411,877) (115,315) (2,408,837) (3,097,273) 1,573,022 717,046 (3,981,859) (3,814,318) (2,408,837) (3,097,273) N O T E S T O T H E C O N S O L I D A T E D S T A T E M E N T 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 1 4 5 4 6 › N OTE 9 – CASH AND CASH EQUIVALENTS › NOT E 1 1 – INVE NTO R IES Cash at bank and on hand Short-term bank deposits Cash backed bank guarantees 2021 $ 3,261,521 9,678,852 4,350,598 2020 $ 3,870,360 23,203,643 3,029,092 17,290,971 30,103,095 Current At cost or lower of net realisable value Finished goods The effective interest rate on short-term bank deposits was 0.01% (2020: 0.65%); these deposits are held at call. › NOT E 1 2 – OT HER C UR RENT ASSE TS › N OTE 10 – TRADE AND OTHER RECEIVABL ES Current Trade receivables Other receivables Sub leases receivable 2021 $ 2020 $ 2,549,312 112,748 57,151 143,380 2,508,933 - Current Prepayments Bonds and other deposits 2021 $ 2020 $ 899,521 899,521 158,200 158,200 2021 $ 2020 $ 991,848 1,700,849 2,692,697 286,260 2,527,896 2,814,156 Total current trade and other receivables 2,719,211 2,652,313 Bonds relate to amounts set aside against rental obligations to landlords where the Company is a lessee. Non-current Sub leases receivable Total non-current trade and other receivables 130,423 130,423 - - › NOT E 1 3 - B O RR OWI NGS Current >30 days past due >60 days past due >90 days past due Total $ $ $ $ $ At amortised cost: Bank loans 2021 Australian Fitness Management - franchise fees 1,979,632 - - - 1,979,632 Trade receivables 338,306 20,785 18,848 191,741 569,680 Other receivables and sub leases receivable 169,899 - - - 169,899 2,487,837 20,785 18,848 191,741 2,719,211 The amount in current receivables for Australian Fitness Management – licence fees relates to franchise sites that are in various stages of development. The fees become payable 14 days prior to the club opening. The net carrying of trade receivables is considered a reasonable approximation of fair value. Current Non-current 2021 $ 2020 $ 2021 $ 2020 $ 2,080,500 1,272,500 7,927,000 6,716,000 2,080,500 1,272,500 7,927,000 6,716,000 There are several asset specific security interests registered on the PPS Register against members of the Group listed at Note 30. 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 $3,250,000 (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 drawn balance of the market rate loan is BBSY plus 4.30%, at 30 June 2021 this amounted to 4.55% Finance lease liabilities are secured against the underlying leased equipment and are at an average interest rate of 4.8% 1 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 O T E S T O T H E C O N S O L I D A T E D S T A T E M E N T 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 1 4 7 4 8 › N OTE 14 - P ROPERTY, PLANT AND EQUIPMENT › NOT E 1 5 – INTANGI B LES Details of the Group’s property, plant and equipment and their carrying amounts are as follows: Details of the Group’s intangibles and their carrying amounts are as follows: Plant and Equipment Furniture and Fittings Motor Vehicles Leasehold Improvements $ $ $ $ Total $ Gross carrying amount Balance at 1 July 2020 Additions 5,894,069 1,016,890 9,351,082 358,689 Acquisitions through business combinations 1,942,276 - 319,197 146,771 - 21,416,576 28,646,732 17,248,941 27,105,483 - 1,942,276 Disposals Depreciation expense (465,901) (15,503) (20,026) (2,821) (504,251) (1,790,063) (307,351) (159,868) (3,225,274) (5,482,555) Carrying amount at 30 June 2021 14,931,463 1,052,725 286,074 35,437,422 51,707,684 Gross carrying amount Balance at 1 July 2020 Additions Goodwill Trademarks Capitalised Software Digital Assets $ $ $ $ Total $ 19,744,625 126,585 604,033 54,472 20,529,715 - 14,323 738,775 2,771 755,869 Acquisitions through business combination 27,160,604 - - - 27,160,604 Amortisation expense - (13,283) (511,060) (5,961) (530,304) Carrying amount at 30 June 2021 46,905,229 127,625 831,748 51,282 47,915,884 At cost Accumulated depreciation Written down value 20,222,349 2,315,423 630,788 41,035,766 64,204,326 (5,290,887) (1,262,697) (344,714) (5,598,344) (12,496,642) 14,931,462 1,052,726 286,074 35,437,422 51,707,684 At cost Accumulated depreciation Written down value 46,905,229 159,056 1,711,086 60,873 48,836,244 - (31,431) (879,338) (9,591) (920,360) 46,905,229 127,625 831,748 51,282 47,915,884 Plant and Equipment Furniture and Fittings Motor Vehicles Leasehold Improvements Total $ $ $ $ $ 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 Balance at 1 July 2019 Additions 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 Disposals Depreciation expense Carrying amount at 30 June 2020 At cost Accumulated depreciation Written down value (670,698) (4,931) - - 2,328,680 4,296,739 (4,251) (679,880) (847,244) 5,894,069 9,460,802 (3,566,733) 5,894,069 (114,833) (61,070) (1,030,813) (2,053,960) 1,016,890 319,197 21,416,576 28,646,732 1,972,439 520,679 23,789,646 35,743,567 (955,549) (201,482) (2,373,070) (7,096,834) 1,016,890 3 1 9,1 97 21,416,576 28,646,732 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) Carrying amount at 30 June 2020 19,744,625 126,585 604,033 54,472 20,529,715 At cost Accumulated depreciation Written down value 19,744,625 144,734 972,311 58,102 20,919,773 - (18,149) (368,278) (3,630) (390,058) 19,744,625 126,585 604,033 54,472 20,529,715 1 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 All depreciation charges are included within depreciation, amortisation and impairment of non-financial assets. 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. 4 9 5 0 N O T E S T O T H E C O N S O L I D A T E D S T A T E M E N T 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 1 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 5% 6.55% 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 5% 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 6.55%. 15.2 Growth Rates 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 above, and in Note 3 b. relating to the current COVID-19 lockdowns, management is not currently aware of any other probable changes that would necessitate changes in its key estimates. › NOTE 16 – TAX 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 1 July 2020 $ Recognised in Equity Recognised in Profit and Loss 30 June 2021 $ $ $ 289,610 (53,064,533) (9,228) 1,343,052 50,339,229 624,968 496,510 30,000 4,448,899 - 444,012 4,942,519 - - - - - - - - 631,399 921,009 (8,400,563) (61,465,096) (60,557) (69,785) 695,201 2,038,253 8,926,715 59,265,944 360,260 985,228 66,045 (9,000) 562,555 21,000 2,333,540 6,782,439 362,555 362,555 (516,523) 4,026,517 290,044 9,331,591 1 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 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 1 July 2019 Recognised in Equity Recognised in Profit and Loss 30 June 2020 $ $ $ $ (77,485) (2,592,602) (5,757) 171,408 1,558,931 183,507 184,005 24,750 625,574 418,700 293,906 784,937 - - - - - - - - - 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 3,823,325 (418,700) 496,510 30,000 4,448,899 - 343,264 343,264 (193,157) 444,012 3,814,319 4,942,519 All deferred tax assets have been recognised in the statement of financial position. Tax Payable CURRENT Income tax payable › NOT E 1 7 – T RAD E AND OT HER PAYAB LE S CURRENT Trade payables Sundry payables and accrued expenses 2021 $ 2020 $ 1,560,361 704,386 2021 $ 2020 $ 5,235,112 1,147,936 4,452,036 644,507 6,383,048 5,096,543 All amounts are short-term. The carrying values of trade and other payables are considered to be the fair value. › NOT E 1 8 – CO NTR ACT L IAB IL IT I ES CURRENT Amounts received in advance for sale of gym memberships Amounts received in advance for franchise licence sales Total contract liabilities 2020 $ 2019 $ 1,442,538 2,995,351 4,437,889 863,350 - 863,350 N O T E S T O T H E C O N S O L I D A T E D S T A T E M E N T 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 1 5 1 Refer to note 3 f. for the revenue recognition policy. 5 2 › N OTE 19 – L EASES 2021 $ 2020 $ 2021 $ 2020 $ (i) AASB 16 related amounts recognised in the balance sheet Net carrying amount 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 160,836,896 - 47,699,023 173,822,889 (21,114,439) (12,985,993) 187,421,480 160,836,896 16,044,881 4,319,065 (93,956) (2,807,817) 17,462,173 9,427,644 8,452,127 (7,011) (1,827,879) 16,044,881 Total right-of-use assets 204,883,653 176,881,777 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 168,106,082 - 47,579,096 170,390,976 (11,065,065) (2,284,894) 204,620,113 168,106,082 14,521,011 4,319,944 7,943,655 8,332,235 (3,299,792) (1,754,879) 15,541,163 14,521,011 220,161,276 182,627,093 22,873,600 197,287,676 220,161,276 14,829,663 167,797,430 182,627,093 (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) 24,033,264 14,941,974 Interest expense on lease liabilities (included in total finance costs) 11,873,437 7,911,181 (iii) Cash outflows relating to leases / rental payments Property lease payments Equipment lease payments Total cash outflows for leases / rental payments 22,126,667 4,074,620 26,201,287 9,658,521 2,292,434 11,950,955 a. Options to Extend or Terminate 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. › 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 2021 $ 2020 $ 23,092,699 907,214 106,562 2,278,000 11,739,107 703,702 20,284 1,088,251 26,384,475 13,551,344 The Company received JobKeeper payments of $3.437 million. These payments have been offset against wages and salaries for the year N O T E S T O T H E C O N S O L I D A T E D S T A T E M E N T 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 1 5 3 5 4 VIVA LEISURE ANNUAL REPORT 2021 20.2 Share-Based Employee Remuneration As at 30 June 2021, 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 1,803,334 options granted to senior executives: Earnings per Share (EPS) Compound Annual Growth Rate (CAGR) The percentage of options that vest for each % EPS and %TSR CAGR is illustrated in the following tables: LTIs (Granted 7 June 2019) EPS CAGR over the two Financial Years Ending 30 June 2021* Less than 15% (minimum Target) 15% to 20% (within target range) Percentage of Options that Vest 0% 50% - 100% (on a straight-line basis) Greater than 20% (above maximum target) 100% * the performance hurdles have not been met and it is the Company’s intention to cancel the options before vesting date LTIs (Granted 30 October 2019) EPS CAGR over the three Financial Years Ending 30 June 2022 Percentage of Options that Vest Less than 15% (minimum Target) 0% 15% to 20% (within target range) 50% - 100% (on a straight-line basis) Greater than 20% (above maximum target) 100% LTIs (Granted 12 November 2020) Tranche 1 (50% of Options – based on EPS CAGR) Tranche 2 (50% of Options – based on TSR CAGR) CAGR over the three Financial Years Ending 30 June 2023 Percentage of Options that Vest Percentage of Options that Vest Less than 10% (minimum Target) 0% 10% to 15% (within target range) Greater than 15% (above maximum target) 50% - 100% (on a straight-line basis) 100% 0% 0% 100% • For the purposes of the above performance hurdles, EPS means the basic Earnings per Share recorded in the Company’s audited financial statements. • For the purposes of the above performance hurdles, TSR means Total Shareholder Return and will be measured using the VVA 20-day Volume Weighted Average Market Price (VWAP) for the twenty (20) trading days commencing from the announcement of results for the financial year ended 30 June 2020 (TSR measure start date) to the same 20 trading period VWAP post the date of announcement of results for the year ended 30 June 2023 (TSR measure end date). 1 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 Basic EPS may be adjusted for items which the Board, in its discretion, considers should be excluded from the EPS result (such as the impacts of AASB 16 and items of a one-off and non-recurring nature). • The performance hurdles 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 each respective financial year end. 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 100,000 share options exercised during the reporting period. LTI (Tranche 1) LTI (Tranche 2) LTI (Tranche 3) No of Options No of Options No of Options Tranche 1 No of Options Tranche 2 No of Options Outstanding at 30 June 2020 295,000 295,000 - 1,500,000 1,000,000 Granted Exercised - - - - 1,213,334 - - 100,000 - - Outstanding at 30 June 2021 295,000 295,000 1,213,334 1,400,000 1,000,000 Exercisable at 30 June 2021 - - - 1,400,000 1,000,000 The fair values of options granted were determined using the Black Scholes option pricing model. The following principal assumptions were used in the valuation: LTI (Tranche 1) LTI (Tranche 2) LTI (Tranche 3) Tranche 1 Tranche 2 Options Options Options Options Options 7 June 2019 30 October 2019 12 November 2020 Release of FY2021 results Release of FY2022 results Release of FY2023 results 7 June 2019 7 June 2019 Vested Vested 1.00 25% 1.00 25% 2.75 25% 1.00 25% 1.00 25% 5 years 5 years 5 years 4 years 4 years 0% 2% Nil Nil 0% 2% Nil Nil 0% 2% Nil 3.34 0% 2% 82,979 1.34 0% 2% 72,232 1.43 Release of FY2021 Results 31 August 2023 Release of FY2022 Results 31 August 2024 Release of FY2023 Results 16 October 2025 7 June 2020 7 June 2020 2 May 2023 2 May 2023 2.25 Years 3.25 Years 4.30 Years 1.94 Years 1.94 Years 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 Exercisable to Weighted average remaining contractual life 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, $106,562 (2020: $20,284) 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. N O T E S T O T H E C O N S O L I D A T E D S T A T E M E N T 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 1 5 5 5 6 20.3 Employee benefits - liabilities Current: Employee leave entitlements Non-Current: Employee leave entitlements Total employee obligations › N OTE 2 1 – P ROVISIONS Consolidated Group Opening balance at 1 July 2020 Additional provisions Amounts used Balance at 30 June 2021 Provision for Employee Benefits 1 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 1,808,079 1,804,957 (907,214) 4,323,795 1,639,741 - 2,705,822 5,963,536 6,131,874 3,444,698 (907,214) 8,669,358 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 3 (r). 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. 2021 $ 2020 $ 1,875,182 1,655,033 830,640 153,046 2,705,822 1,808,079 › NOT E 22 – EQ UI TY 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. 2021 Shares 2020 Shares 2021 $ 2020 $ Shares issued and fully paid: Beginning of the year 71,511,393 52,600,000 87,375,694 43,715,691 Shares issued (less costs of offer) 10,344,828 18,911,393 29,162,554 43,660,003 Shares issued through exercise of options 100,000 - 139,532 Total contributed equity at 30 June 81,956,221 71,511,393 116,677,780 87,375,694 Employee Benefits Property Make Good $ $ Total $ 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. 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 2021 and 30 June 2020 are as follows: Total borrowings - Market Rate loan Total borrowings – equipment finance leases Total borrowings Less cash and cash equivalents Net debt Total equity Total capital Gearing ratio 2021 $ 2020 $ 10,007,500 15,541,986 25,549,486 17,290,971 8,258,515 7,988,500 14,521,011 22,509,511 30,103,095 (7,593,584) 86,352,203 63,316,762 94,610,718 55,723,178 8.7% N/A N O T E S T O T H E C O N S O L I D A T E D S T A T E M E N T 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 1 5 7 5 8 › N OTE 2 3 – RESERVES a. Common Control Reserve A common control reserve was created when the Group restructure took place during the financial year ended 30 June 2019 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. 2021 $ 2020 $ › NOT E 24 – E ARNI NGS PE R SH ARE AN D D IV ID E 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 2021 or 2020). 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 77,516,637 57,335,790 Shares deemed to be issued for no consideration in respect of options granted 3,804,446 3,090,000 Weighted average number of shares used in diluted earnings per share 81,321,103 60,425,790 2021 $ 2020 $ Common Control Reserve Beginning of the year Net movement in common control reserve (21,900,880) - (21,585,321) (315,559) 24.2 Dividends There were no dividends declared or paid during the year (2020: nil) Total common control reserve at 30 June (21,900,880) (21,900,880) 24.3 Franking Credits b. Share Options Reserve The share option reserve records items recognised as expenses on valuation of employee share options. Share Options Reserve Beginning of the year Issue of options to key management personnel Total share options reserve at 30 June 2021 $ 2020 $ 175,495 118,254 293,749 155,211 20,284 175,495 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 2021 $ 2020 $ 2,825,510 2,045,656 1,560,361 704,386 4,385,871 2,750,042 N O T E S T O T H E C O N S O L I D A T E D S T A T E M E N T 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 1 5 9 6 0 VIVA LEISURE ANNUAL REPORT 2021 › NOTE 25 – RECONCILIATION OF CASH FLOWS › NOT E 27 – REL ATE D PAR T Y T R AN SACT I O NS 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 — tax effect of expenses taken to equity — tax effect of initial adoption of AASB 16 taken to equity — charges to common control reserve — share based payments 2021 $ 2020 $ (6,384,898) (6,246,344) - - 30,076,823 17,211,622 - 362,554 - - 118,254 71,616 508,764 (165,500) (315,559) 20,284 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 Directors and Key Management Personnel Short-term Employee Benefits: Wages and salaries (including bonuses and Annual Leave entitlements) 1,318,903 1,696,944 2021 $ 2020 $ Changes in assets and liabilities, net of the effects of purchase and disposal of subsidiaries — (increase)/decrease in trade and term debtors 1 ,1 5 5 , 8 6 3 (4,847,535) (225,786) (4,389,071) 557,269 901,634 948,157 (79,155) (4,157,583) 2,980,097 (790,763) (1,067,559) 2,239,720 515,668 25,360,519 3,638,054 Superannuation Long service leave Share-based payments Total remuneration Short-term employee benefits 115,776 30,429 106,562 109,895 28,558 20,284 1,623,631 1,655,681 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. 2021 $ 2020 $ Share-based payments These amounts represent the expense related to the participation of certain KMP in equity-settled benefit schemes as measured by the fair value of the options granted on grant date (see Note 20.2). Further information in relation to KMP remuneration can be found in the directors’ report and at Note 20. 2021 $ 2020 $ 27.2 Related Party Properties Total related party property transactions 3,014,870 2,464,167 63,500 31,500 9,500 104,500 26,500 26,500 131,000 50,500 25,500 - 76,000 53,000 53,000 129,000 N O T E S T O T H E C O N S O L I D A T E D S T A T E M E N T 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 1 1 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 — (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 › N OTE 2 6 - AUDITOR REMUN ERATION Remuneration of the auditor for: Audit and review of financial statements Financial year ended 30 June Half year ended 31 December Other assurance engagements Total audit services Other non-audit services Taxation and business services Total non-audit services Total auditor remuneration 6 1 6 2 › N OTE 2 8 – CONTINGENT LIABILITIES › NOT E 3 0 – I NTE RESTS I N SU B SID I ARI ES Under the Share Sale Agreement relating to the acquisition of Australian Fitness Management Pty Limited, the Group will be required to make an additional payment as part of the acquisition consideration to the vendors of up to $2 million if certain hurdles are achieved prior to the first anniversary of the acquisition. No amount has been included or provided in the accounts as at 30 June as the achievement of the hurdles is considered unlikely. No amount has been included or provided in respect to the threatened claim by certain franchisees of Australian Fitness Management Pty Limited. Legal costs incurred in relation to the matter have been expensed as incurred. 1 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 › NOTE 29 – B USINESS COMBINATIONS During the period the Group acquired 15 clubs from various vendors in addition to Australian Fitness Management Pty Limited, the master franchisor for the Plus Fitness network as outlined below: Number of clubs Acquisition Purchase consideration 4 6 5 PLUS Sites Pinnacle Other Sites AFM* $ $ $ 15 Total $ Amount settled in cash, net of cash acquired 1,239,401 6,118,627 2,753,846 17,428,307 27,540,181 Assets and liabilities acquired at fair value Property, plant and equipment 208,985 1,281,650 300,460 151,181 1,942,276 Other net identifiable assets /(liabilities) acquired (28,099) (252,698) (106,154) (1,175,748) (1,562,699) Goodwill 1,058,515 5,089,675 2,559,540 18,452,874 27,160,604 1,239,401 6,118,627 2,753,846 17,428,307 27,540,181 Revenue and profit contribution from the date of acquisition until 30 June 2021 Revenue 354,412 2,094,693 1,658,963 8,499,856 12,607,924 Profit before depreciation, amortisation, interest and tax 165,466 492,380 781,083 2,545,364 3,984,293 *AFM is Australian Fitness Management Pty Limited the master franchisor for the Plus Fitness network Acquisition-related costs amounting to $274,332 for all acquisitions have been recognised as an expense in the consolidated statement of profit or loss and other comprehensive income. Certain costs relating to the acquisition of AFM were included in the previous financial year. 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 2021 were impacted by the mandatory shutdowns due to COVID-19. Name of Subsidiary Principal Activity Proportion of Ownership Interests held by the Group 30 June 2021 30 June 2020 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 Australian Fitness Management Pty Limited Viva Leisure (NZ) Limited Viva Leisure Operations (NZ) Limited Plus Fitness (NZ) Limited Club Lime Pty Limited Club Pink Pty Limited Club Blue Pty Limited Club Swim Pty Limited Club Team Pty Limited 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 Master franchisor for Plus Fitness (Aust) NZ Parent NZ operations Master franchisor for Plus Fitness (NZ) 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% 100% 100% 100% 100% › NOT E 3 1 – CAPI TAL AND LEASI NG CO MM I T ME NTS At 30 June 2021, Viva Leisure Limited has entered into binding agreements totalling $2.85 million to purchase the following health clubs: • Plus Fitness - Mona Vale, NSW • Plus Fitness – Beerwah, QLD • One Health and Fitness - South Morang, VIC The Company entered into a binding agreement to acquire Australian Fitness Management Pty Limited at 30 June 2020, which completed on 21 August 2020. Contractual Commitments Within 1 Year $ 1 to 5 Years $ After 5 Years $ Total $ 30 June 2021 30 June 2020 2,850,000 18,000,000 - - - - - - N O T E S T O T H E C O N S O L I D A T E D S T A T E M E N T 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 1 6 3 6 4 › NOTE 32 – FINANCIAL INST RUMENT RISK 32.2 Credit Risk Analysis 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. 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.. 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. Credit risk management Credit risk management 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 below. 32.1 Market Risk Analysis The Group is exposed to market risk through its use of financial instruments and specifically to interest rate risk, which result from its operating and investing activities. 30 June 2021 Financial assets Financial liabilities Total exposure 30 June 2020 Financial assets Financial liabilities Total exposure Interest rate sensitivity Interest rate sensitivity Short term exposure $ Long term exposure $ 20,010,182 - (12,864,607) (19,067,929) 7,145,575 (19,067,929) 35,283,303 (9,198,855) - (18,407,199) 26,084,448 (18,407,199) The Group’s policy is to minimise interest rate cash flow risk exposures on long-term financing. Longer- term borrowings such as equipment lease financed amounts are therefore usually at fixed rates. At 30 June 2021, 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% (2020: +/- 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 2021 30 June 2020 71,456 260,845 (71,456) (260,845) 71,456 260,845 (71,456) (260,845) 1 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 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. 32.4 Financial Risk Management Within 1 Year 1 to 5 Years Over 5 Years Total 2021 $ 2020 $ 2021 $ 2020 $ 2021 $ 2020 $ 2021 $ 2020 $ Consolidated Group Financial liabilities due for payment Trade and other payables Contract liabilities 6,383,048 5,096,543 4,437,889 863,350 - - - - Bank loans 2,080,500 1,272,500 7,927,000 6,716,000 - - - - - - 6,383,048 5,096,543 4,437,889 863,350 10,007,500 7,988,500 Finance lease liabilities Total expected outflows 22,873,600 14,829,663 95,466,815 89,720,302 101,820,861 78,077,128 220,161,276 182,627,093 35,775,037 22,062,056 103,393,815 96,436,302 101,820,861 78,077,128 240,989,713 196,575,486 Financial assets – cash flows realisable Cash and cash equivalents Trade receivables Total 17,290,971 30,103,095 2,719,211 2,652,313 anticipated 20,010,182 32,755,408 - - - - - - - - - - - - 17,290,971 30,103,095 2,719,211 2,652,313 20,010,182 32,755,408 inflows Net (outflow)/ inflow on financial instruments (15,764,855) 10,693,352 (103,393,815) (96,436,302) (101,820,861) (78,077,128) (220,979,531) (163,820,078) N O T E S T O T H E C O N S O L I D A T E D S T A T E M E N T 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 1 6 5 6 6 › N OTE 33 – FAIR VALUE MEASUREMENT Contractual commitments Financial assets and financial liabilities measured at fair value in the statement of financial position are measured at amortised cost. At 30 June 2021, Viva Leisure Limited has entered into binding agreements totalling $2.85 million to purchase the following health clubs: › 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 Loss for the year Other comprehensive income Total Comprehensive Income Guarantees and Security Interests 1 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 2021 $ 2020 $ 94,669,485 65,735,485 11,838 11,838 94,681,323 65,747,323 12,087 12,087 12,087 12,087 94,669,236 65,735,236 116,538,248 87,375,694 (21,467,599) (21,725,385) (401,413) 84,927 94,669,236 65,735,236 (486,340) (213,489) - - (486,340) (213,489) 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. 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 $3,250,000 (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% • Plus Fitness - Mona Vale, NSW • Plus Fitness – Beerwah, QLD • One Health and Fitness - South Morang, VIC The Company entered into a binding agreement to acquire Australian Fitness Management Pty Limited at 30 June 2020, which completed on 21 August 2020. 30 June 2021 30 June 2020* Within 1 Year $ 2,850,000 18,000,000 Contractual Commitments 1 to 5 Years $ After 5 Years Total $ $ - - - - - - › NOT E 35 – EVENTS AFTE R T HE R EPO R TI NG PER IO D The following events occurred after the reporting period: Since the end of the financial year, the Company has entered into binding agreements or completed the following acquisitions: • The assets of One Health, a health club based in South Morang, VIC • The assets of Plus Fitness sites in, Manly and Mona Vale, NSW, Beerwah, QLD In addition, the Company has opened the Group’s first GroundUp site – a Reformer and Mat Pilates, Barre and Yoga studio As at the date of this report the Group has mandatory temporary closures of some of its clubs in NSW, Victoria and ACT due to COVID-19. No other matters or circumstances other than as referred to in this report, 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 referred to above. › 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 O T E S T O T H E C O N S O L I D A T E D S T A T E M E N T 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 1 6 7 6 8 t V I VA L E I S U R E G R O U P c e d d i r 1 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 r c l o e S ’ a 1) t i o a r VI VA L EI SUR E GRO UP DI RE CTO RS D EC LARATI O N 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 2021 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 2021. 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 17 day of AUGUST 2021. n D I R E C T O R S ’ D E C L E R A T I O N 6 9 7 0 I N D E P E N D E N T d i t o p e u r a 1 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 r’s T o r I N D E P E N D E N T A U D I T O R ’ S R E P O R T 7 1 7 2 1 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 U D I T O R ’ S R E P O R T 7 3 7 4 1 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 U D I T O R ’ S R E P O R T 7 5 7 6 1 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 7 FOR LISTED COMPANIES a d d i t i o n a l i n fo 3 . 20 LAR GEST SHARE HOL D ER S The following information is current as at 24th September 2021 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 79,862,204 6,035,793 1,743,333 1,520,703 352,207 89,514,240 40 243 233 606 757 1,879 Total No. of Options Held No. of Shareholders 3,831,667 76,667 - - - 3,908,334 4 1 - - - 5 Shareholder Number Held SHJA MANAGEMENT PTY LTD CITICORP NOMINEES PTY LIMITED NATIONAL NOMINEES LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED BOND STREET CUSTODIANS LIMITED HARRY KONSTANTINOU MR JOHN KONSTANTINOU BNP PARIBAS NOMS PTY LTD CAPITAL PROPERTY CORPORATION PTY LTD CAPITAL PROPERTY CORPORATION PTY LTD BNP PARIBAS NOMINEES PTY LTD SPIROS KONSTANTINOU BROADGATE INVESTMENTS PTY LTD PORTMAN TRADING PTY LTD BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD BNP PARIBAS NOMINEES PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 EASTY HOLDINGS PTY LTD MR ANGELO KONSTANTINOU 21,688,434 16,303,096 14,991,844 5,238,470 2 ,1 1 0,1 4 5 1,690,000 1,542,068 1,442,067 1,436,314 1,226,433 1,185,448 1,170,407 1,042,067 949,036 900,000 883,519 847,065 510,500 466,667 442,068 A D D I T I O N A L I N F O R M A T I O N F O R L I S T E D C O M P A N I E S % of Issued Shares 24.23% 18.21% 16.75% 5.85% 2.36% 1.89% 1.72% 1.61% 1.60% 1.37% 1.32% 1.31% 1.16% 1.06% 1.01% 0.99% 0.95% 0.57% 0.52% 0.49% 1 1 2 2 0 0 2 2 T T R R O O P P E E R R L L A A U U N N N N A A E E R R U U S S I I E E L L A A V V I I V V 7 9 7 9 8 0 8 0 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 24 September 2021 are: Shareholder SHJA MANAGEMENT PTY LTD CITICORP NOMINEES PTY LIMITED NATIONAL NOMINEES LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED CITICORP NOMINEES PTY LIMITED Number of Shares % of Issued Shares 21,688,434 16,303,096 14,991,844 5,238,470 3,729,451 24.23% 18.21% 16.75% 5.85% 5.2% 5. LESS THA N MARKETABLE PARCEL OF ORDINARY SHARES There are 139 shareholders with unmarketable parcels totalling 18,695 shares. 6. UN QUOTED EQUITY SECURITIES The company had the following unquoted securities on issue as at 24 September 2021: Security Unquoted Options No. of Securities 3,908,334 7. RE STRICTED SECURITIES The company had no restricted securities on issue as at 24 September 2021. 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 1 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 $105,746 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. $165,229 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. $105,746 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. $1,713,920 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. $196,458 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. $37,492 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. $148,194 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. $254,745 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. 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 D D I T I O N A L I N F O R M A T I O N F O R L I S T E D C O M P A N I E S 8 1 8 2 e C O R P O R AT E d i r 1 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 y r o t c CE O : Harry Konstantinou CO M PANY S ECR ETARY: Kym Gallagher RE GISTE RED O FFI CE AND PR INCIPAL PL ACE O F B U SINE 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 H E LD AT T HE FOL LOWI NG AD DR ESS: 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 O R P O R A T E D I R E C T O R Y 8 3 8 3 8 4 8 4
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