REG - Loungers PLC - Final Results for the 52 weeks ended 21 April 2019

LoungersAnnouncement

28/08/2019 07:05

RNS Number : 3205K
Loungers PLC
28 August 2019
 


28 August 2019
Loungers plc
("Loungers")
 
Another strong trading performance in a transformational year
Results for the 52 week period ended 21 April 2019
 
Loungers is pleased to announce the audited results for the Loungers Group of companies ("the Group") for the 52 weeks ended 21 April 2019 ("FY19") (1).  Loungers is an operator of 154 café/bar/restaurants across England and Wales under two distinct but complementary brands, Lounge and Cosy Club.  The Group's sites offer something for everyone regardless of age, demographic or gender and the Group operates successfully in a diverse range of different sites and locations across England and Wales.
 
Financial Highlights (1)
 
-       Revenue up 26.4% to £153.0m (2018: £121.1m)
-       Like for like sales growth of 6.9% (2018: 6.0%)
-       Adjusted EBITDA (2) up 23.7% to £20.6m (2018: £16.6m)
-       Adjusted EBITDA margin broadly maintained at 13.5% (2018: 13.7%)
-       Adjusted operating profit (3) up 23.3% to £12.4m (2018: £10.1m)
-       Cash generated from operations up 13.5% to £22.4m (2018: £19.8m)
 
Operational Highlights
 
-       25 new sites opened in the year (2018: 22 new sites), taking the total to 146 sites at FY19 year end
-       Continued investment in and evolution of both brands in respect of menu, design and people
-       Commenced "re-set investment programme" to improve kitchen efficiency and the working environment of our back of house teams
-       Continued development of the Group's head office infrastructure to support our future growth
-       Admission to trading on AIM of Loungers' ordinary shares post year end (the "IPO"), raising £83.3m
 
Outlook
 
-       The new financial year has started well and we are trading in line with our expectations as we continue to outperform the wider hospitality market.  We look forward to updating the market further when we next report on trading at our AGM in October
-       Eight new sites have opened in the current financial year and the Group remains on track to deliver its target of 25 new openings in the full year
 
Nick Collins, Chief Executive Officer of Loungers said:
 
"These results represent a strong performance for the financial year ending 21 April 2019 and are in line with both our, and the market's, expectations.  Our revenue and profit growth not only reflect the continued success of the roll-out, but also our unwavering focus on our customers, the evolution of our proposition and how we support and invest in our teams.
 
"Our admission to AIM post the FY19 year-end has meant almost 600 employees have had the opportunity to become shareholders in Loungers plc and it is fantastic that their hard work and commitment can be rewarded in this way.
 
"Our new financial year has started well and our roll-out strategy for both brands is on schedule.  I remain confident about the outlook and future growth prospects for the Group."
 
 
(1)   As at 21 April 2019, the Group consisted of Lion / Jenga Topco Limited ("Topco") and its direct subsidiaries, which included Loungers UK Limited, the Group's operating company.  Loungers plc was newly established to effect the IPO.  As a result of the IPO completing shortly after the Group's 21 April 2019 financial year end the Directors are required to present the consolidated financial statements of Topco to the shareholders of Loungers plc. The historical financial information for FY18 contained in Loungers' admission document also presents the consolidated financial statements of Topco.  Had the IPO completed prior to the FY19 year-end then the Directors would have presented the consolidated financial statements of Loungers plc as if Loungers plc had owned the Group throughout FY19. The consolidated financial statements of Topco reflect the operating financial performance of the Group.  Accordingly, the reported adjusted EBITDA for FY19 of £20.6m is consistent with the adjusted EBITDA that Loungers plc would have reported had the IPO completed prior to the FY19 year end.  Further information is included in note 1 below.
(2)   Adjusted EBITDA is calculated as operating profit before depreciation, pre-opening costs, exceptional costs and share-based payment charges.
(3)   Adjusted operating profit is calculated as operating profit before pre-opening costs, exceptional costs and share-based payment charges.
 
For further information please contact:




 
Loungers plc
Nick Collins, Chief Executive Officer
Gregor Grant, Chief Financial Officer
 


 
Via Instinctif Partners




GCA Altium Limited (Financial Adviser and NOMAD)
Sam Fuller / Katherine Hobbs / Tim Richardson
 


Tel: +44 (0) 20 7484 4040




Liberum Capital Limited (Joint Broker)
Clayton Bush / Andrew Godber / John Fishley
 


Tel: +44 (0) 20 3100 2000




Peel Hunt LLP (Joint Broker)
Dan Webster / George Sellar


Tel:  +44 (0)20 7418 8900




 


 




Instinctif Partners (Financial Public Relations)
Justine Warren / Matthew Smallwood
 


Tel: +44 (0) 207 457 2020




 
Notes to Editors
 
Loungers operates through its two complementary brands - Lounge and Cosy Club - in the UK hospitality sector.  A Lounge is a neighbourhood café/bar combining elements of coffee shop culture, the British pub and dining.  As at the FY19 year end, there were 122 Lounges nationwide. Lounges are principally located in secondary suburban high streets and small town centres. The sites are characterised by informal, unique interiors with an emphasis on a warm, comfortable atmosphere, often described as a "home from home".  Cosy Clubs are more formal bars/restaurants offering reservations and table service but share many similarities with the Lounges in terms of their broad, all-day offering and their focus on hospitality and culture.  Cosy Clubs are typically located in city centres and large market towns. Interiors tend to be larger and more theatrical than for a Lounge, and heritage buildings or first-floor spaces are often employed to create a sense of occasion.  As at the FY19 year end, there were 24 Cosy Clubs nationwide.
Chief Executive's Statement
Introduction
The 52 weeks ended 21 April 2019 were another year of significant development for the Group, with highlights including:
-       Revenue growth of 26.4% to £153.0m (2018: £121.1m)
-       Like for like sales growth of 6.9% (2018: 6.0%)
-       Adjusted EBITDA growth of 23.7% to £20.6m (2018: £16.6m)
-       25 site openings to take the Group to 146 sites at year end, comprising 122 Lounges and 24 Cosy Clubs (2018: 121 sites comprising 100 Lounges and 21 Cosy Clubs).
-       Continued investment in and development of the Group's infrastructure to provide the platform for future growth.
The continuing and successful implementation of the Group's strategy, as exemplified by the FY19 highlights above, provided the platform for the Group's successful IPO just after the year end.  The IPO is testament to the quality of the Loungers' business, its level of differentiation, the loyalty of our customer base, and the dedication of all our team members.
Brand development
Critical to delivering the sustained like for like sales growth in the mature estate has been our focus on evolving and developing the Lounge and Cosy Club brands and their customer proposition.  Neither brand is wedded to a particular cuisine and this year has seen continued evolution and innovation in our broad all-day menus.  The business has had a strong reputation for vegetarian, vegan and gluten free dining since inception and we continue to build on these foundations to respond to changing consumer dynamics.  The roll-out of the "Beyond Meat" plant-based vegan burger during the year, initially trialled as a special but now a core menu item, is an example of our continual evolution.
A current focus is on our drinks ranges and we see significant opportunity to refresh and enhance our drinks offer in the coming months.  Coffee has been another area of focus, with emphasis on training, equipment and consistency as we seek to stay ahead of other national brands.
We commenced our kitchen re-set programme during the year and to date have completed our work at 47 sites.  The objective of the re-set is to improve the efficiency of our kitchens and the working environment of our back of house teams.  The relatively modest capital investment at each site addresses kitchen lay-out and additional equipment, as well as the deployment of kitchen display screens which provide invaluable data in terms of ticket times, efficiency and guest experience.
Our focus on the look and feel of our sites has been maintained, in particular on ensuring each site is unique.  Particular attention has been placed on our furniture styles, to allow us to maximise food covers whilst not impacting wet-led bar trade in the evenings, and on our external areas.  During the year we undertook eight "splash and dash" refurbishments at a total cost of £0.9m (2018: eight at a cost of £0.8m).
Roll-Out
Core to our growth strategy is the roll-out of the Group's two brands. During FY19 we opened a further 25 sites, 22 Lounges and three Cosy Clubs (2018: 22 sites).  In addition, we relocated one of our early Lounges - Ocho Lounge in Penarth, Wales - to a new site, making a total of 26 completed new sites in the year.  The total investment in new site openings during the year, net of landlord contributions, was £18.5m (2018: £14.8m).
Our new site openings have covered a broad geography across England and Wales, albeit with a slight emphasis on the North East Midlands, in line with our expansion strategy.  The performance of our new sites has been in line with expectations.
The Group's highly refined rollout model includes a dedicated property function which supports the senior management with site selection, evaluation and contract negotiation. The Group has four dedicated in-house build-teams which manage the entire fit out process for each new site.  The familiarity, efficiency, cost-effectiveness and reliability of these in-house teams have been an important factor in the successful acceleration of the rollout in recent years, and the ongoing ability of the Group to manage circa 25 openings per year.
Property and pipeline
As we noted at the time of the IPO the roll-out strategy is dependent upon our ability to identify and secure suitable sites.  Whilst the well-documented travails of the high street are undoubtedly throwing up opportunities, it is equally true that many of the regional high streets we have identified remain very well supported and consequently sites that become available are relatively highly valued.  A pillar of the Group's success to date has been a refusal to overpay for new sites, reflected in our rent to revenue ratio of 5.2% (2018: 5.2%).  This rental discipline remains a core focus.
As at 28 August 2019 the Group has opened eight new sites since the year end, comprising six Lounges and two Cosy Clubs, and is on-site on a further four sites.  The Group expects to open 10 new sites in its first half (24 weeks ending 6 October 2019) and is on track to deliver 25 new site openings in the full year.  The pipeline remains strong.
People
The success of the Group is in large part due to the commitment of our people.  We believe a key differentiator of Loungers is our desire and ability to deliver genuine hospitality to the communities in which we operate.  I would like to thank our teams for the great hospitality they provide.  As the business has grown, maintaining the unique, independent culture inherent in the business has consistently been one of our top priorities and this will always be the case.
A key benefit of our IPO has been the opportunity it provides to broaden share ownership throughout the Group.  On IPO, we were delighted to issue shares with a value of £1,000 to almost 600 team members.  It is very much the Board's desire that this broader share ownership is built upon in the coming years.
We have recently held our seventh Loungefest, our one-day festival which was attended and very much enjoyed by some 2,300 members of the Loungers family.  It is a truly amazing sight to see our teams, resplendent in their fancy dress, come together from all over the country, and to have the opportunity to thank them for their hard work and commitment over the year.
Systems and Infrastructure
We have continued to develop and enhance our infrastructure to ensure we are capable both of delivering our roll-out and extracting the benefits that come with increased scale.  The past year has seen particular investment in our people, IT and property teams through senior hires.  We have implemented new property maintenance software and we continue to work closely with our EPOS providers to enhance our systems and the way in which our teams use them.  In addition, we commenced the implementation of new labour scheduling and HR software to deliver a seamless system from recruitment through to payroll, a project that was successfully completed post year end.
Current Trading and Outlook
The new financial year has started well and we are trading in line with our expectations as we continue to outperform the wider hospitality market.  We look forward to updating the market further when we next report on trading at our AGM in October.
Eight new sites have opened in the current financial year and the Group remains on track to deliver its target of 25 new openings in the full year.
 
Financial Review
Financial position and performance
The financial results for FY19 reflect another year of significant revenue and adjusted EBITDA growth for the Group, with growth of 26.4% and 23.7% respectively.
Revenue growth from new site openings was underpinned by strong like for like sales growth of 6.9% in our mature sites (2018: 6.0%).  Mature sites are defined as sites that have been trading for 18 months.
A key measure of Group performance is adjusted EBITDA.  Adjusted EBITDA is calculated as follows:




 


Period ended
21 April 2019


Period ended
22 April 2018




 


£'000


£'000




 


 


 




Operating profit


9,797


6,996




Exceptional items


462


542




Share-based payments


(87)


533




Site pre-opening costs


2,251


2,001




Depreciation


8,147


6,567




Loss on disposal of fixed assets


12


-




Adjusted EBITDA


20,582


16,639




 


 


 




Adjusted EBITDA margin %


13.5%


13.7%




 
Against the well-documented cost base challenges of the sector in which the Group operates (not least the National Living Wage increase of 4.4% in April 2018) the Group has worked hard to drive cost efficiency without negatively impacting the quality of our product, our value for money credentials, or the guest experience.  These efforts have enabled the Group to broadly maintain its adjusted EBITDA margin for the year at 13.5% (2018: 13.7%).
Exceptional items of £0.5m (2018: £0.5m) wholly relate to costs incurred in the planning and preparation for the IPO.  Additional exceptional IPO costs were incurred by Loungers plc in FY20.  The share-based payment credit / charge relates to a cash settled incentive scheme, the liability at year end was based upon the post year pay-out.  Site pre-opening costs are essentially property and payroll costs incurred prior to a new site opening.
Our statutory operating profit margin improved to 6.4% in FY19 (2018: 5.8%).  This improvement was largely a result of the share-based payment charge in FY18 reversing to a small credit in FY19.  Excluding the impact of this, the operating profit margin improved to 6.3% (2018:6.2%).
The tax charge for the year of £0.8m (2018: £0.6m) resulted from the dis-allowance of the preference share dividend charge included in financing costs in the tax computation.
Finance costs and net debt
The reported finance costs of £14.8m (2018: £13.6m) reflect the pre-IPO capital structure of the Group under private equity ownership.  This finance charge comprised:




 


Period ended
21 April 2019
£'000




 


 




Bank interest


4.3




Loan stock interest


2.1




Preference share dividends


8.4




 


 




Total


14.8




 
As part of the IPO process, a share for share exchange saw the preference shares and accrued dividends in Topco exchanged for ordinary shares in Loungers plc.  Net proceeds of £56.4m raised from the IPO and a new term loan facility of £32.5m were utilised to repay outstanding loan stock (£17.9m) and bank debt (£71.0m). 
Accordingly, a pro-forma balance sheet of Loungers plc as at 21 April 2019, prepared on the basis that Admission to trading on AIM occurred on 21 April and not 29 April 2019, would have net debt of £26.7m (see notes 8 and 9).
The facilities entered into at the time of the IPO provide for a term loan of £32.5m and a revolving credit facility of £10.0m.  The term loan is a five-year non-amortising facility with a margin of 2% above LIBOR.  A three-year interest rate swap has been entered into that fixes LIBOR on this facility at 0.7%.
Cash flow
Cash generated from operations increased 13.5% to £22.4m (2018: £19.8m) and represented 109% of adjusted EBITDA (2018: 119%).  The reduction in the cash conversion from FY18 largely arose from the timing of the payment of the monthly payroll taxes at the year end.
The Group's cash conversion continues to benefit from the negative working capital generated by the roll-out programme and strong underlying revenue growth.  During FY19 cash generated from operations covered 99% of our capital expenditure (2018: 106%).
During FY19 a net drawdown of £4.0m was made under the Group's facilities (2018: £4.7m) and net bank interest of £4.1m was paid (2018: £4.8m).
Dividend Policy
As disclosed at the time of the IPO, in the short term, the Board intends to retain the Group's earnings for re-investment in the roll-out of new Lounge and Cosy Club sites.  It is the Board's ultimate intention to pursue a progressive dividend policy, subject to the need to retain sufficient earnings for the future growth of the Group.
IFRS16
IFRS16 "Leases" establishes principles for the recognition, measurement, presentation and disclosure of leases.  IFRS16 is effective for accounting periods starting on or after 1 January 2019.  The Group will adopt this standard in the year ending 19 April 2020, implementing the fully retrospective method.  The impact on the statement of financial position at 21 April 2019 and on the consolidated statement of comprehensive income in the 52 week period to 21 April 2019 is disclosed in note 10.
Key Performance Indicators ("KPI's")
The KPI's, both financial and non-financial, that the Board reviews on a regular basis in order to measure the progress of the Group are as follows:




 


FY19


FY18




 


 


 




New site openings (net)


25


22




Capital expenditure


£23.2m


£18.6m




Like for like sales growth


6.9%


6.0%




Total revenue growth


26.4%


31.9%




Adjusted EBITDA margin


13.5%


13.7%




 
Going concern
In adopting the going concern basis for preparing the financial statements the Board has considered the business activities along with the principal risks and uncertainties of the Group. Based on its current financial projections to 1 November 2020 and having considered the facilities available, the Board is confident that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, the Board considers it appropriate for the Group to adopt the going concern basis in preparing its financial statements.
Consolidated Statement of Comprehensive Income
For the 52 Week Period Ended 21 April 2019
 
 




 


 


Period ended


Period ended




 


Note


21 April 2019


22 April 2018




 


 


£000


£000




 


 


 


 




Revenue


 


152,999


121,067




Cost of sales


 


(89,485)


(70,479)




Gross profit


 


63,514


50,588




Administrative expenses


 


(53,717)


(43,592)




Operating profit


3


9,797


6,996




Finance costs


4


(14,786)


(13,644)




Loss before taxation


 


(4,989)


(6,648)




Tax on loss


6


(750)


(601)




Loss for the period


 


(5,739)


(7,249)




 


 


 


 




Other comprehensive (expense) / income:


 


 


 




Cash flow hedge - change in value of hedging instrument


 


(333)


323




Other comprehensive (expense) / income for the period


 


(333)


323




Total comprehensive expense for the period


 


(6,072)


(6,926)




 


 


 


 


 



 
 
 
 
 
 
 
 



 




Non GAAP alternative performance measure


 


 


 




 


 


Period ended


Period ended




 


Note


21 April 2019


22 April 2018




 


 


£000


£000




 


 


 


 




Operating profit


 


9,797


6,996




Exceptional items


5


462


542




Share based payment (credit) / charge


 


(87)


533




Site pre-opening costs


 


2,251


2,001




Adjusted operating profit


 


12,423


10,072




Depreciation


 


8,147


6,567




Loss on disposal of fixed assets


 


12


-




Adjusted EBITDA


 


20,582


16,639




 
Consolidated Statement of Financial Position
As at 21 April 2019
 




 
 


Note


At 21 April 2019


At 22 April 2018




 


 


£000


£000




Assets


 


 


 




Non-current


 


 


 




Intangible assets


 


113,227


113,227




Property, plant and equipment


7


74,073


59,006




Total non-current assets


 


187,300


172,233




 


 


 


 




Current


 


 


 




Inventories


 


1,500


1,065




Trade and other receivables


 


6,289


5,182




Derivative financial instruments


 


-


323




Cash and cash equivalents


9


6,500


7,669




Total current assets


 


14,289


14,239




 


 


 


 




Total assets


 


201,589


186,472




 


 


 


 




Liabilities


 


 


 




Current liabilities


 


 


 




Trade and other payables


 


(33,095)


(27,723)




Derivative financial instruments


 


(10)


-




Total current liabilities


 


(33,105)


(27,723)




 


 


 


 




Non-current liabilities


 


 


 




Borrowings


9


(172,112)


(157,368)




Accruals and deferred income


 


(9,312)


(8,183)




Deferred tax liabilities


 


(2,348)


(2,465)




Provisions


 


(118)


(130)




Total liabilities


 


(216,995)


(195,869)




 


 


 


 




Net liabilities


 


(15,406)


(9,397)




 


 


 


 




Called up share capital


 


53


53




Share premium


 


4,184


4,172




Hedge reserve


 


(10)


323




Capital contribution reserve


 


51


-




Accumulated losses


 


(19,684)


(13,945)




Total equity


 


(15,406)


(9,397)




 
Consolidated Statement of Changes in Equity
For the 52 Week Period Ended 21 April 2019
 
 




 


 


 
 


 


 


 




 
 
 


Share Capital


Share Premium


Hedge Reserve


Capital Contribution Reserve


Accumulated Losses


Total Equity




 


£000


£000


£000


£000


£000


£000




 


 


 


 


 


 


 




 


 


 


 


 


 


 




At 23 April 2017


52


4,151


-


-


(6,696)


(2,493)




 


 


 


 


 


 


 




Shares issued during the 52 week period


1


21


-


-


-


22




 


 


 


 


 


 


 




Total transactions with owners


1


21


-


-


-


22




 


 


 


 


 


 


 




Loss for the period


-


-


-


-


(7,249)


(7,249)




Other comprehensive income


-


-


323


-


-


323




 


 


 


 


 


 


 




Total comprehensive expense for the 52 week period


-


-


323


-


(7,249)


(6,926)




 


 


 


 


 


 


 




 


 


 


 


 


 


 




At 22 April 2018


53


4,172


323


-


(13,945)


(9,397)




 


 


 


 


 


 


 




Share transactions during the period


-


12


-


51


-


63




 


 


 


 


 


 


 




Total transactions with owners


-


12


-


51


-


63




 


 


 


 


 


 


 




Loss for the period


-


-


-


-


(5,739)


(5,739)




Other comprehensive expense


-


-


(333)


-


-


(333)




 


 


 


 


 


 


 




Total comprehensive expense for the 52 week period


-


-


(333)


-


(5,739)


(6,072)




 


 


 


 


 


 


 




 


 


 


 


 


 


 




At 21 April 2019


53


4,184


(10)


51


(19,684)


(15,406)



 
 
 
 
 
 
 
 
 
 
 
 



 
Consolidated Statement of Cash Flows
For the 52 Week Period Ended 21 April 2019
 
 




 


 


Period ended


Period ended




 


Note


21 April 2019


22 April 2018




 


 


£000


£000




 


 


 


 




Cash flows from operating activities


 


 




Loss after tax


(5,739)


(7,249)




 


 


 




Adjustments for:


 


 




Depreciation of property, plant and equipment


8,147


6,567




Share based payment transactions


(87)


533




Loss on disposal of tangible assets


12


-




Changes in inventories


(435)


(133)




Interest payable


14,786


13,644




Taxation expense


750


601




Changes in provisions


(12)


(86)




Changes in trade and other receivables


(1,074)


(876)




Changes in trade and other payables


6,089


6,771




Cash generated from operations


22,437


19,772




Tax paid


(1,018)


(571)




Net cash generated from operating activities


 


21,419


19,201




 


 


 


 




Cash flows from investing activities


 


 


 




Purchase of property, plant and equipment


 


(22,585)


(18,595)




Net cash used in investing activities


 


(22,585)


(18,595)




 


 


 


 




Cash flows from financing activities


 


 


 




Issue of ordinary shares


 


12


-




Capital contribution


 


51


-




Bank loans advanced


 


6,000


65,000




Bank loans repaid


 


(2,000)


(21,050)




Repayment of other loans  


 


-


(39,272)




Interest paid


 


(4,066)


(4,786)




Net cash used in financing activities


 


(3)


(108)




 


 


 


 




Net (decrease) / increase in cash and cash equivalents


 


(1,169)


498




 


 


 


 




Cash and cash equivalents at beginning of the period


 


7,669


7,171




 


 


 


 




Cash and cash equivalents at end of the period


 


6,500


7,669




 
 
NOTES TO THE PRELIMINARY FINANCIAL INFORMATION
 
1. Lion / Jenga Topco Limited
 
As at 21 April 2019, the Loungers Group (the "Group") consisted of Lion / Jenga Topco Limited ("Topco") and its direct subsidiaries Lion / Jenga Midco Limited ("Midco"), Lion / Jenga Bidco Limited ("Bidco"), Loungers Holdings Limited and Loungers UK Limited, the main operating subsidiary of the Group.  Topco, Midco and Bidco were incorporated in December 2016 to facilitate the acquisition of a majority stake in Loungers Holdings Limited by funds managed by Lion Capital LLP.  Topco is the parent company for the Group as at 21 April 2019.
 
Loungers plc was newly incorporated to effect the IPO of the Group (the "IPO").  With effect from the admission to trading on AIM of its ordinary shares on 29 April 2019 Loungers plc became the parent company of the Group.
 
As a result of the IPO completing shortly after the Group's 21 April 2019 financial year end ("FY19") the Directors are required to present the consolidated financial statements of Topco to the shareholders of Loungers plc.  Had the IPO completed prior to the FY19 year end then the Directors would have presented the consolidated financial statements of Loungers plc as if Loungers plc had owned the Group throughout FY19.
 
The consolidated financial statements of Topco reflect the operating financial performance of the Group.  Accordingly, the reported adjusted EBITDA for FY19 of £20.6m is consistent with the adjusted EBITDA that Loungers plc would have reported had the IPO completed prior to the FY19 year end.
 
However, the consolidated statement of financial position as at 21 April 2019 reflects a typical private equity capital structure and differs significantly in terms of capital structure and financing costs to that in existence post the IPO.  Reported borrowings at the year-end of £172.1m are a combination of third-party bank debt, shareholder loan notes and preference shares.  The Group's IPO process included a capital re-organisation which saw Topco's preference shares exchanged for ordinary shares in Loungers plc, the shareholder loan notes repaid and the third-party bank debt repaid and replaced with a new £32.5m term facility and £10m revolving credit facility (undrawn at IPO).
 
A pro-forma consolidated statement of financial position for Loungers plc as at 21 April 2019, prepared on the basis that Admission to trading on AIM occurred on that day, is included in note 8.
 
Loungers plc will report half year financial results for the 24 weeks to 6 October 2019 in its own name.
 
2. Basis of preparation
 
The condensed consolidated financial information for the 52 week period ended 21 April 2019 has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRSs), as adopted by the European Union.
 
For all periods up to and including the period ended 22 April 2018, the Group prepared its financial statements in accordance with United Kingdom Generally Accepted Accounting Principles (UK GAAP) at the level of Midco.  The financial statements of Topco for the period ended 21 April 2019 are the first the Group has prepared in accordance with IFRS.
 
The financial information contained within this preliminary announcement for the periods ended 21 April 2019 and 22 April 2018 does not comprise the statutory financial statements of Topco or Midco.
 
Topco is registered in Jersey and accordingly statutory accounts have not been delivered to the Registrar of Companies.  However statutory accounts for the period ended 22 April 2018 for Midco have been filed with the Registrar of Companies.
 
The auditors' reports on the accounts for the 52 weeks ended 21 April 2019 of Topco, and for the 52 weeks ended 22 April 2018 of Midco were unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006 (or Jersey Law equivalent).
 
3. Operating Profit
 
Operating profit is after charging / (crediting):
 




 


Period ended


Period ended




 


21 April 2019


22 April 2018




 


£000


£000




 


 


 




Staff Costs (excluding share based payments)


57,377


47,033




Share based payments


(87)


533




Depreciation of tangible fixed assets


8,147


6,567




Operating lease rentals:


 


 




  Land and buildings


8,262


6,782




Inventories- amounts charged as an expense


38,968


30,987




 


 


 




 
4. Finance Costs
 




 


Period ended


Period ended




 


21 April 2019


22 April 2018




 


£000


£000




 


 


 




Bank interest payable


4,327


4,096




Other loan interest payable


2,058


1,969




Preference share interest


8,401


7,579




 


14,786


13,644




 


 


 




 
5. Exceptional Items
 
 
 




 


Period ended


Period ended




 


21 April 2019


22 April 2018




 


£000


£000




Change of ownership


462


203




Closed sites


-


107




Other


-


232




 


462


542




 
The change of ownership costs in the 52 weeks ended 21 April 2019 relate to costs incurred in the preparation for the IPO of Loungers plc which completed on 29 April 2019.  Additional IPO costs were incurred by Loungers plc.  The costs incurred in the 52 weeks ended 22 April 2018 largely represent professional fees incurred in respect of the sale of the majority stake in the business to Lion Capital in December 2016.
 
The cost relating to closed sites represents one-off costs associated with closed sites in the 52 week period ending 22 April 2018.
 
The costs relating to the other category largely represent costs associated with the one-off strategic review of the supply chain and employee compensation costs.
 
6. Tax on loss
 
The income tax charge is applicable on the Group's operations in the UK.  The Group is subject to tax at a rate of 0% in Jersey.




 


Period ended


Period ended


 




 


21 April 2019


22 April 2018


 




 


£000


£000


 




 


 


 


 




Taxation charged to the income statement


 


 


 




Current income taxation


918


755


 




Amounts (under)/over provisioned in earlier years


(51)


(15)


 




Total current income taxation


867


740


 




 


 


 


 




 


 


 


 




Deferred Taxation


 


 


 




Origination and reversal of temporary timing differences


 


 


 




Current period


(130)


(119)


 




Prior period


8


(20)


 




Adjustment in respect of change of rate of corporation tax


5


-


 




Total deferred tax


(117)


(139)


 




 


 


 


 




Total taxation expense in the consolidated income statement


 
750


 
601


 




 


 


 


 




The above is disclosed as:


 


 


 




 


 


 


 




Income tax expense - current period


801


636


 




Income tax expense - prior period


(51)


(35)


 




 


750


601


 




 


 


 




 


 




 




Factors affecting the tax charge for the period


 


 




 


Period ended


Period ended




 


21 April 2019


22 April 2018




 


£000


£000




Loss before tax


(4,989)


(6,648)




 


 


 




At UK standard rate of corporation taxation of 19% (2018: 19%).


(948)


(1,263)




Expenses not deductible for tax purposes


 


 




 - Preference share interest


1,596


1,440




 - Other


369


488




Fixed asset differences


(229)


(29)




Adjustments to tax charge in respect of prior periods


(43)


(35)




Adjustment in respect of change of rate of corporation tax


5


-




Total tax charge for the period


750


601




 


 


 




 
7. Fixed assets
 




 


Leasehold Building
Improvements


Motor Vehicles


Fixtures and Fittings


Total




 


£000


£000


£000


£000




Cost


 


 


 


 




At 24 April 2017


30,266


33


18,790


49,089




 


 


 


 


 




Additions


9,147


71


9,377


18,595




 


 


 


 


 




At 22 April 2018


39,413


104


28,167


67,684




Depreciation


 


 


 


 




At 24 April 2017


841


4


1,266


2,111




 


 


 


 


 




Provided for the period


2,507


25


4,035


6,567




 


 


 


 


 




At 22 April 2018


3,348


29


5,301


8,678




 


 


 


 


 




Net book value


 


 


 


 




At 22 April 2018


36,065


75


22,866


59,006




 


 


 


 


 




Cost
 


 


 


 


 




At 23 April 2018


39,413


104


28,167


67,684




 


 


 


 


 




Additions


11,083


37


12,106


23,226




Disposals


(287)


(58)


(312)


(657)




 


 


 


 


 




At 21 April 2019


50,209


83


39,961


90,253




 


 


 


 


 




Depreciation


 


 


 


 




At 23 April 2018


3,348


29


5,301


8,678




 


 


 


 


 




Provided for the period


2,967


27


5,153


8,147




Disposals


(286)


(56)


(303)


(645)




 


 


 


 


 




At 21 April 2019


6,029


-


10,151


16,180




 


 


 


 


 




Net book value


 


 


 


 




At 21 April 2019


44,180


83


29,810


74,073




 


 


 


 


 




 
 
8. Pro-Forma Consolidated Statement of Financial Position of Loungers plc
 
As detailed in note 1 the IPO of Loungers plc completed shortly after the year end of the Group.  Accordingly, the Directors are required to present the consolidated financial statements of Topco. 
 
In order to enable users of this announcement to better understand the capital structure of Loungers plc the Directors have prepared a pro forma consolidated statement of financial position to reflect the position as at 21 April 2019 as if Admission to trading on AIM had occurred on that date.  A reconciliation of net debt as at 21 April 2019 between Topco and the pro-forma Consolidated Statement of Financial Position of Loungers plc is included in note 9.
 
At the time of the IPO Loungers plc entered into a £32.5m term loan facility and a £10.0m revolving credit facility.  Borrowings of £31.9m reflect the £32.5m term loan facility net of loan arrangement fees of £0.6m.  The term loan is a five-year non-amortising facility with a margin of 2% over LIBOR.  A three-year interest rate swap was entered into in July 2019 in order to fix LIBOR at 0.7%. 
 
8. Pro-Forma Consolidated Statement of Financial Position of Loungers plc (continued)
 




 
 


Note


At 21 April 2019




 


 


£000




Assets


 


 




Non-current


 


 




Intangible Assets


 


113,227




Property, plant and equipment


 


74,073




Total non-current assets


 


187,300




 


 


 




Current


 


 




Inventories


 


1,500




Trade and Other receivables


 


6,292




Cash and Cash equivalents


9


5,833




Total current assets


 


13,625




 


 


 




Total assets


 


200,925




 


 


 




Liabilities


 


 




Current liabilities


 


 




Trade and other payables


 


(33,095)




Derivative financial instruments


 


(10)




Total current liabilities


 


(33,105)




 


 


 




Non-current liabilities


 


 




Borrowings


9


(31,912)




Accruals and deferred income


 


(9,312)




Deferred tax liabilities


 


(2,348)




Provisions


 


(118)




Total liabilities


 


(76,795)




 


 


 




Net assets


 


124,130




 


 


 




 
9. Reconciliation of movement in net debt
 
 




 


 
Topco
At 21 April 2019


 
Share for share pre-IPO


 
Primary raise net of costs


 
New term loan facility


 
Repay old bank facility


Repay loan stock


PLC
Pro-forma
At 21 April 2019




 


£000


£000


£'000


£'000


£'000


£000


£000




 


 


 


 


 


 


 


 




Net debt


 


 


 


 


 


 


 




Cash in hand


6,500


-


56,353


31,912


(71,000)


(17,932)


5,833




 


 


 


 


 


 


 


 




Bank Loans


(71,000)


-


-


(32,500)


71,000


-


(32,500)




Arrangement fees


1,447


-


-


588


(1,447)


-


588




Unsecured loan stock


(17,932)


-


-


-


-


17,932


-




Preference shares


(84,627)


84,627


-


-


-


-


-




Borrowings


(172,112)


84,627


-


(31,912)


69,553


17,932


(31,912)




Net debt


(165,612)


84,627


56,353


-


(1,447)


-


(26,079)




 


 


 


 


 


 


 


 




 
10. New standards, amendments and interpretations not yet adopted
 
IFRS 16 'Leases' establishes principles for the recognition, measurement, presentation and disclosure of leases and replaces IAS17. IFRS 16 will become effective for accounting periods starting on or after 1 January 2019, and the Group do not intend to early adopt. It will therefore become applicable to the Group for the 52 week period ending 19 April 2020. Management intend to apply the fully retrospective method of adoption.  Management have performed a review to quantify the impact that this standard will have on the Group, which will result in the recognition of a lease liability and a corresponding asset on the Group's balance sheet for a majority of leases, which predominantly represent buildings, currently being treated as operating leases.
 
In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard: 
-       the use of a single discount rate to a portfolio of leases with reasonably similar characteristics
-       relying on previous assessment of whether a lease is onerous
-       the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application, and
-       the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
 
The estimated balance sheet impact is as follows:
 




 


21 April 2019


22 April 2018




 


£000


£000




 


 


 




Right of use asset


79,640


65,574




Lease liability


(89,138)


(73,164)




Fixed assets


(4,452)


(3,324)




Finance lease receivable


906


974




Deferred tax asset


754


464




Accruals and deferred income


10,085


8,321




Prepayments


(1,481)


(1,110)




 


(3,686)


(2,265)




 
10. New standards, amendments and interpretations not yet adopted (continued)
 
The estimated impact on the income statement is as follows:
 




 


21 April 2019


22 April 2018




 


£000


£000




 


 


 




Reversal of rent charge


8,365


6,606




Depreciation on right of use asset


(5,459)


(4,369)




EBITDA


2,906


2,237




Interest expense


(4,617)


(3,760)




Profit before taxation


(1,711)


(1,523)




 
 
 
 




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