Ardent Leisure’s (ASX:AAD) sale of the Goodlife health clubs and Hypoxi weight loss businesses caught the market by surprise early in the month, with the AAD share price opening 9% higher on the announcement.
The gyms had been seen as an ongoing headache with business transformation underway to cope with the increasing prevalence of cheaper 24-hour small format gyms and the sale was seen as representing a fair price.
The annual result was announced a few days later with solid performances across all divisions; particularly in bowling which is benefiting from a number of initiatives introduced from the US Main Event business.
In meetings with management earlier in the year, we had a number of robust discussions about exiting some of the lower returning businesses such as marinas and health clubs and redeploying that capital into the high growth, but capital hungry, Main Event roll-out in the US. Credit is due to the management team who not only listened to the market but executed an unexpectedly strong outcome with the sale of the health clubs.
With the sale of the marinas business still tracking to management’s schedule, the company is now in a strong position to accelerate the roll-out of Main Event, which is a quality business that has achieved very high returns on invested capital.
August 2016 reports