REG - Loungers PLC - Results for the 24 weeks ended 4 October 2020
2 December 2020
Loungers plc
Results for the 24 weeks ended 4 October 2020
"A very strong resumption of trading post the first lockdown that provides confidence in Loungers' ability to out-perform in a post Covid-19 environment"
Loungers (the "Group") is pleased to announce its unaudited results for the 24 weeks ended 4 October 2020. Loungers is an operator of 168 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.
The 24 week period being reported on includes 11 weeks of lockdown, four weeks of phased re-opening, four weeks of Eat Out to Help Out ("EOTHO") in August, and finally five weeks of relative normality, albeit this five week period included the introduction of the "Rule of 6", the 10pm curfew and local lockdowns in Wales.
Financial Highlights
24 weeks ended 4 October 2020
£'000
24 weeks ended 6 October 2019
£'000
Revenue
53,493
79,827
Adjusted EBITDA
13,205
14,475
Adjusted EBITDA margin (%)
24.7%
18.1%
Adjusted EBITDA (IAS 17)
8,734
10,222
Profit / (loss) before tax
117
(2,494)
Diluted earnings / (losses) per share (p)
0.1
(2.3)
Adjusted profit before tax
739
2,630
Adjusted diluted earnings per share (p)
0.6
2.5
Cash generated from operating activities
20,937
12,561
4 October 2020
£'000
19 April 2020
£'000
Non-property net debt
13,554
35,417
· Revenue decline of £26.3m (33.0%) to £53.5m reflects the impact of national lockdown to 4 July
· Post reopening like for like ("LFL") sales growth of +25.1% between 4 July and 4 October
· Adjusted EBITDA of £13.2m, down 8.8% (H1 2020: £14.5m)
· IAS 17 Adjusted EBITDA of £8.7m, down 14.6% (H1 2020: £10.2m)
· Non property net debt of £13.6m, a reduction of £21.9m over the FY20 year end
· Completion of equity raise (net proceeds £8.1m) and agreement of additional £15m revolving credit facility ("RCF")
Operational Highlights
· Significant market out-performance post re-opening to 4 October
- Headline LFL sales growth of +25.1% in the period to 4 October is testimony to the strength of our concepts and our teams
· Continued evolution of our offer
- Covid-19 has provided both the requirement and the impetus to evolve our offer at pace. The successful introduction of our order at table app and the need to reduce the scale and complexity of our menu whilst maintaining its broad appeal are clear examples
· Material reduction in non-property net debt to £13.6m
- This provides the balance sheet strength not only to withstand the second and potential future lockdowns but to ensure the Group is well positioned to resume its roll-out strategy and benefit from an increasingly tenant friendly property market, where prime pitch properties in strong target locations are available at attractive rents
· Roll-out programme recommenced in a measured fashion
- During the first half Cosy Club Brindleyplace and Ponto Lounge Hull were opened, whilst Sentado Lounge in Sittingbourne opened shortly after the half year end. Currently on site in Stourbridge and Wolverhampton and scheduled to open early in the New Year.
Current Trading and Outlook
· The strength of our trading in the first half was maintained through to the second national lockdown commencing on 5 November
· Underlying LFL sales performance (excluding the positive impacts of EOTHO and the VAT reduction) of -1.1% in the period to 4 October declined only fractionally to -1.3% in the extended period to 4 November, in spite of the growing impact of the 10pm curfew and the ultimate inclusion of 55 of our sites in Tier 2 and 3 areas
· In the short term we expect a more severe impact on sales. In England we have 60 sites that will remain closed under Tier 3, with 91 sites trading in Tier 2 and three sites trading in Tier 1. In Wales we have 14 sites that will be subject to increased restrictions from 4 December
· The strength of our brands and the manner in which they performed coming out of the first lockdown provides confidence for the future and we would expect a strong trading environment for our brands once Covid-19 restrictions are eased
· We anticipate returning to a run rate of 25 new site openings per annum during the course of the financial year ending April 2022
Nick Collins, Chief Executive Officer of Loungers said:
"The last six months have been challenging, but I am immensely proud of how we have reacted and delivered such a strong performance. We are fortunate that due to our suburban and market town locations, the flexibility of our offer, and our fantastic team, we have been able to trade well when given the opportunity to open our sites. As we dare to look beyond Covid-19, Lounge and Cosy Club have never seemed more relevant, and we approach 2021 with enthusiasm and optimism. Our strong balance sheet will enable us to get back to doing what we do best, opening 25 sites a year, creating over 500 jobs a year, investing in high streets across the UK and looking after our customers and teams. With the encouraging news on the development of vaccines, it certainly feels like that time is within reach and I would like to say a huge thank you to our teams for their commitment and engagement over these past difficult months.
"We are grateful to the ongoing support we have received from the Government, in particular for our employees through the furlough scheme, and recognise our position is one of relative security. However, the recent restrictions imposed are bewildering, unfair, appear to lack any scientific basis and will decimate the hospitality industry across the UK. On re-opening in July our sector invested hugely in providing a safe environment for people to eat and drink-out, and then demonstrated it was indeed safe during Eat Out to Help Out in August. These most recent interventions, at the most critical time of year for the sector, will cost hundreds of thousands of jobs, see the demise of thousands of pubs, bars and restaurants and leave vacant properties across the UK. The impact on the livelihoods and health of the sector's predominantly young workforce and on communities and high streets across the UK will be felt for years to come.
"I would strongly urge the Government to engage with our sector, provide immediate, targeted support where required, and re-consider the ill-thought through policies that have brought much of our industry to its knees."
Use of Alternative Performance Measures
The Interim Results include both statutory and alternative performance measures ("APMs"). APM's are included for the following reasons:
· They reflect the way in which management report and monitor the financial performance of the Group internally;
· They improve the comparability of information between reporting periods by adjusting for one-off factors;
· The IAS 17 presentation reflects the way in which the financial performance of the Group has been presented historically and the basis on which the Group's financial covenants are tested.
Reconciliations between statutory measures and APM's are presented below.
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)
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 2010/2005
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. There are 138 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. There are 30 Cosy Clubs nationwide.
CHIEF EXECUTIVE REVIEW
Highlights
• Market-leading sales performance of +25.1% LFL since re-opening in July
• Adjustments to the Lounge and Cosy Club models to allow us to trade in a Covid-19 environment, have fundamentally improved the business for the longer-term
• The pandemic has underlined the strength of the senior management team and enhanced the culture more broadly within the business
• We have resumed the roll-out in a measured fashion
As we look beyond Covid-19 the strengths and relevance of our unique model have never been clearer and we are optimistic and confident about the future:
• The broad demographic appeal of our flexible, community-based offer alongside our unique hospitality and culture resonates now more than ever;
• Our suburban, market-town locations aligned with our best-in-class rent to revenue ratio of 5.4% mean we are very well placed; and
• We are seeing excellent property opportunities in very strong locations and have the opportunity, infrastructure and capability to scale up the roll-out in the coming months.
Operating review
Trading
The phased re-opening of our sites between 4 July and 7 August was a clear success. The intense and entrepreneurial approach we adopted during the first lockdown ensured we hit the ground running on reopening, with well-prepared teams operating in a safe, yet welcoming and familiar, environment for our customers.
This approach was reflected in our trading performance with our sites typically taking two to three weeks to return to pre-lockdown levels of sales and subsequently predominantly volume-driven like for like growth. We experienced a modest capacity reduction in the sites due to distancing requirements but in the majority of cases this did not impact our level of sales.
Whilst the business has evolved in reaction to Covid-19, a number of these developments will benefit both brands in the longer-term:
• The introduction of our order at table web-based app has been a notable success. The app initially represented 40% of sales in Lounge and with the subsequent requirement to order at table increased to in excess of 70%. Over the coming months we will benefit more as a result of its impact on speed of service, labour costs, ease of access to customer feedback and average spend;
• The menus in both brands have reduced fairly significantly. Whilst we are likely to see modest increases in the coming months, we anticipate a longer-term reduction in menu size benefitting our consistency, speed of service, margins, and team engagement;
• Through regular and honest communication, we have enhanced the culture in the business and anticipate this being reflected in the loyalty of our team and levels of staff retention. In addition, our management team applied their entrepreneurial approach over this period to challenge all aspects of the business.
Since re-opening we have reacted effectively and efficiently to the introduction of the Rule of 6, table-service only, test and trace, a 10pm curfew and Tiers 1, 2 and 3. Each of these interventions has presented significant challenges to our team and required changes to our processes to implement new rules and explain them to our customers. I am enormously grateful to our team, who in each instance, have risen superbly to the challenge and not allowed these restrictions to affect the customer experience. Our strong sales performance reflects both the outstanding efforts of our team and the relevance and flexibility of our offer and locations.
It was hugely frustrating and disappointing to have to close our sites once again with the announcement of the Wales 'firebreak' lockdown, and the subsequent second lockdown in England on 5 November. Ahead of closing the sites, the more onerous Tier 2 and 3 restrictions imposed in October were starting to negatively impact our sales in the North West of England. Following the Government's announcements last week, from today we will have 14 sites trading in Wales, 3 sites reopening in Tier 1 in England, 91 sites reopening in Tier 2 and 60 sites that remain closed as they are included in Tier 3. We anticipate reduced levels of trade in the Tier 2 sites on the basis of our experience ahead of the most recent lockdown. As a business we are fortunate that Christmas is not as materially important as is it for many in hospitality, however it is bewildering that the Government has chosen to penalize the hospitality sector with no credible evidence to justify it. As a result of these decisions 36% of our sites will be closed for at least the next two weeks. We will monitor developments in respect of the Tiers and reopen sites as and when we have the opportunity.
The most recent restrictions imposed by the Governments in England and Wales will subdue sales in the coming weeks and the scope of further potential restrictive measures in the New Year remains unknown. We do however take enormous confidence from the overwhelmingly positive response from our customers and anticipate continuing our track record of market out-performance once we are trading again without such severe restrictions.
Roll-out and pipeline
Having put the roll-out programme temporarily on hold in early March it has been particularly pleasing to be able to resume new site openings, even if at a measured pace. We have opened three new sites to date in the current financial year and are due to open sites in Stourbridge and Wolverhampton early in the New Year. We now expect to open a total of eight sites in the financial year to April 2021.
The impact of Covid-19 on the property market has enhanced and accelerated trends we were already seeing. The availability of prime-pitch opportunities in strong target locations has increased, not least as a result of the large number of retail and hospitality CVA's. In each of the five years up to the year ending April 2020 we opened over 20 sites. Over this period our performance track record and consistency of sales growth across all cohorts demonstrated the robustness of our property model. The current increasingly tenant-friendly property market will allow us to open sites generating higher levels of sales and EBITDA.
Our property team are now focused on re-building our pipeline, with competitive tension allowing us to drive better deals, but perhaps more importantly offering us access to better sites in better locations. We anticipate returning to a run rate of 25 new site openings per year in the financial year ending April 2022.
People
I am extremely appreciative of the significant contribution from our senior team over the past few months. Our stark out-performance reflects their positive acceptance of the challenges posed by Covid-19 alongside the entrepreneurial spirit within the business and collective drive to win.
We have always focused on having a management structure in place to ensure we continue to evolve the brands and improve our performance, whilst the business continues to grow at pace. As we near the 200 site threshold, we have adapted the management structure to ensure we are suitably resourced to look forward to being a 300 site business.
As such, I am delighted to announce Eve Bugler will join the business as Chief Operating Officer on 14 December. Eve previously held roles at McKinsey, Nando's and more recently founded BabaBoom. Eve's blend of entrepreneurial and commercial experience is very much aligned with the Loungers' ethos and existing senior management team. Eve will take responsibility for the commercial, build and people arms of the business and will sit on our Executive Board. Justin Carter (Lounge MD) and Amber Wood (Cosy Club MD) will continue to report into me. Eve's appointment will strengthen our collaborative leadership team and ensure our continued growth comes alongside improved performance across all facets of the business. It will also free up my time to focus more directly on achieving our strategic objectives and further allow Justin and Amber to drive continued evolution and improvement in Lounge and Cosy Club respectively.
I am incredibly proud of the achievements of our wider team across the UK and how they have reacted to the challenges Covid-19 has presented. The pandemic has further enhanced the culture within the business and their warmth, hospitality and determination to succeed is reflected in our performance. When we floated the business in April 2019, we talked about employee share ownership being a major factor in our decision. As of today, we have 714 employees within the All Employee Share Plan and 85 within the Management Share Plan.
Financial review
Financial Performance
The headline financial performance, which saw adjusted EBITDA of £13.2m showing only a relatively modest decline of 8.8% against a revenue decline of 33.0%, can only be understood with the following context:
· The 24 week period being reported on includes 11 weeks of lockdown, four weeks of phased re-opening, four weeks of EOTHO in August, and finally five weeks of relative normality, albeit this five week period included the introduction of the "Rule of 6", the 10pm curfew and local lockdowns in Wales;
· Tight financial control during lockdown, with all site teams placed on furlough and benefitting from the support of the Coronavirus Job Retention Scheme;
· A rapid return to pre Covid-19 levels of trading. Typically, sites took two to three weeks to achieve pre Covid-19 sales levels;
· The beneficial impact on EBITDA margins of Government initiatives including the temporary reduction in the VAT rate charged on food and non-alcoholic drinks and the business rates holiday; and
· The EOTHO campaign that ran across Monday to Wednesday throughout August and drove substantial incremental volumes without impacting later week volumes
In the period post reopening from 4 July to 4 October headline LFL sales were +25.1%. Excluding the positive impacts of EOTHO and the VAT reduction the underlying LFL result was -1.1%.
This robust underlying performance, allied to the Government initiatives referred to above and described in greater detail below, helped to offset the not insignificant additional costs of operating in a Covid-19 safe environment, notably additional labour costs and Covid-19 consumables spend. The net effect however was a significant expansion in the Adjusted EBITDA margin to 24.7% (2020 18.1%). This margin expansion was driven by the gross profit margin, which increased to 46.1% from 41.5%, a reflection of the flow-through from the VAT reduction only partially being offset by additional labour costs.
Exceptional costs of £0.6m include the costs of:
· Removing and storing excess furniture and soft furnishings from our sites to enable adherence to social distancing requirements; and
· Professional fees in connection with the extension of our banking facilities to provide adequate funding headroom
Impact of UK Government Initiatives
The Group has benefited from a number of UK Government initiatives introduced to mitigate the impact of Covid-19 which we very much welcomed, notably:
· The Coronavirus Job Retention Scheme ("CJRS") - At the onset of lockdown in March 2020, with all our sites closed, we transferred all site employees and the majority of head office employees (in total 99% of employees) into the CJRS. During the period under the review the Group received a total of £17.2m of funding under the CJRS. A total of £13.1m was recognised in the statement of comprehensive income in the period, offsetting site payroll costs on the costs of sales line and head office payroll costs on the administrative expenses line. Cash receipts included £4.4m that was recognised in the FY20 results and £0.3m was receivable as at 4 October 2020.
· The Eat Out to Help Out Scheme ("EOTHO") - The Group completed the phased re-opening of all its sites by 7 August and was therefore well-placed to benefit from the EOTHO scheme that ran on Monday to Wednesday throughout August. The Group received total funding under the EOTHO scheme of £5.6m. This has been recognised as revenue in the period.
· Business Rates Relief - The Group's sites have benefitted from the business rates holiday that runs from 1 April 2020 to 31 March 2021. During the 24 weeks to 4 October the Group has benefitted by £2.5m.
· Retail, Leisure and Hospitality ("RLH") Grant Fund - In the period under review the Group has recognised £0.6m of grant funding received under the RLH scheme. This income has been recognised under other income.
In addition to the support initiatives described above the Government introduced the Corporate Insolvency and Governance Bill which provided a range of protections for tenants. The Group has sought to work collaboratively with all of its landlords, seeking to reach agreement over an equitable share of the pain of lockdown whilst recognizing the significant support the Group has received. As at 4 October the Group had reached agreement in respect of 69% of its sites, and total deferred rent at that date was £4.5m of which an agreement to defer had been reached in respect of £1.6m. In addition to rent deferrals the Group has recognised £0.6m in the period in respect of rent waivers.
Net debt
Non property net debt reduced to £13.6m at period end, an improvement of £21.9m from the FY20 year end. Reported net debt continues to benefit from deferred liabilities to landlords and HMRC. Adjusting to reflect these deferred liabilities as if they had been paid, net debt at 4 October 2020 would be £25.1m. This represents a reduction of £10.3m relative to the FY20 year end. It is important to note that the timing of the interim results does not flatter the reporting of net debt, coming as it does immediately after the September rent quarter and month end payment runs. In the week prior to the half year end payments totalling £8.6m were made to suppliers, landlords and HMRC.
Finance costs for the period have reduced to £3.3m (2020: £4.5m) reflecting the absence of the exceptional write off of arrangement fees in the prior year. Finance costs include £2.6m (2020: £2.5m) of IFRS 16 lease interest charges.
Cash flow
Net cash generated from operating activities grew by 66.7% to £20.9m (2020: £12.6m). The performance in the period was boosted by a positive swing of £7.4m in the working capital position post reopening, of which £4.1m related to funding under the CJRS.
The positive inflow from operating activities was further boosted by net proceeds of £8.1m from the April 2020 equity raise whilst the cessation of the new site roll-out programme in March saw capital expenditure cash flows in the period fall to £1.4m (2020: £11.2m).
Dividend policy
In the short term, the Board intends to retain the Group's earnings to bolster liquidity and balance sheet strength and 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.
Current trading and prospects
The strong performance post reopening and through to 4 October was maintained in the weeks through to the second lockdown on 5 November. Whilst the impact of the 10pm curfew and the increasing number of sites falling into Tiers 2 and 3 was felt, the Group continued to benefit from a very strong performance in its Tier 1 sites, notably in the South West.
It remains unclear how we will trade following re-opening in England and with the latest restrictions in Wales, not least during the Christmas trading period, however the strength of our brands and the manner in which they performed coming out of the first lockdown provides us with confidence for the future.
Nick Collins
Chief Executive Officer
1 December 2020
Condensed Consolidated Statement of Comprehensive Income
For the 24 Week Period Ended 4 October 2020
24 weeks ended
24 weeks ended
Year ended
Note
4 October 2020
6 October 2019
19 April 2020
£000
£000
£000
Unaudited
Unaudited
Audited
Revenue
53,493
79,827
166,502
Cost of sales
(28,848)
(46,662)
(98,523)
Gross profit
24,645
33,165
67,979
Gross profit before exceptional items
24,645
33,165
68,882
Exceptional items included in cost of sales
3
-
-
(903)
Administrative expenses
(21,862)
(31,136)
(74,695)
Other income
4
600
-
-
Operating profit / (loss)
3,383
2,029
(6,716)
Operating profit before exceptional items
4,005
5,706
8,620
Exceptional items included in cost of sales
-
-
(903)
Exceptional items included in administrative expenses
3
(622)
(3,677)
(14,433)
Finance income
22
24
50
Finance costs
5
(3,288)
(4,547)
(8,115)
Finance costs before exceptional items
(3,288)
(3,100)
(6,668)
Exceptional finance cost
-
(1,447)
(1,447)
Profit / (loss) before taxation
117
(2,494)
(14,781)
Tax credit on profit / (loss)
6
39
429
1,960
Profit / (loss) for the period
156
(2,065)
(12,821)
Other comprehensive expense:
Cash flow hedge - change in value of hedging instrument
(27)
(135)
(332)
Other comprehensive expense for the period
(27)
(135)
(332)
Total comprehensive income / (expense) for the period
129
(2,200)
(13,153)
Earnings per share (pence)
Basic
7
0.2
(2.3)
(14.0)
Diluted
7
0.1
(2.3)
(14.0)
Condensed Consolidated Statement of Financial Position
As at 4 October 2020
Note
4 October 2020
6 October 2019
19 April 2020
£000
£000
£'000
Unaudited
Unaudited
Audited
Assets
Non-current
Intangible assets
113,227
113,227
113,227
Property, plant and equipment
9
162,436
164,936
166,447
Deferred tax assets
608
-
236
Finance lease receivable
709
868
752
Total non-current assets
276,980
279,031
280,662
Current
Inventories
1,259
1,338
815
Trade and other receivables
2,211
4,127
6,850
Cash and cash equivalents
25,946
3,160
4,083
Total current assets
29,416
8,625
11,748
Total assets
306,396
287,656
292,410
Liabilities
Current liabilities
Trade and other payables
(39,381)
(31,823)
(34,118)
Lease liabilities
(6,585)
(5,408)
(6,160)
Derivative financial instruments
(359)
(135)
(332)
Total current liabilities
(46,325)
(37,366)
(40,610)
Non-current liabilities
Borrowings
10
(39,094)
(31,966)
(39,039)
Other non-current liabilities
-
(64)
-
Lease liabilities
(97,869)
(93,049)
(98,779)
Deferred tax liabilities
-
(1,607)
-
Total liabilities
(183,288)
(164,052)
(178,428)
Net assets
123,108
123,604
113,982
Called up share capital
11
1,124
1,025
1,025
Share premium
8,066
-
-
Hedge reserve
(359)
(135)
(332)
Other reserves
14,278
14,278
14,278
Accumulated profits
99,999
108,436
99,011
Total equity
123,108
123,604
113,982
Condensed Consolidated Statement of Changes in Equity
For the 24 Week Period Ended 4 October 2020
Share Capital
Share Premium
Hedge Reserve
Other Reserve
Accumulated Profits / (Losses)
Total Equity
£000
£000
£000
£000
£000
£000
At 21 April 2019
53
4,184
(10)
51
(23,370)
(19,092)
Redeemable preference shares issued
100
-
-
-
-
100
Share for share exchange - ordinary shares
8,408
(4,184)
-
(4,224)
-
-
Preference debt for equity swap
66,193
-
-
18,451
-
84,644
Ordinary shares issued
3
-
-
-
-
3
Ordinary shares issued on IPO
308
61,288
-
-
(3,802)
57,794
Capital reduction
(74,040)
(61,288)
-
-
135,328
-
Share based payment charge
-
-
-
-
2,355
2,355
Total transactions with owners
972
(4,184)
-
14,227
133,881
144,896
Loss for the period
-
-
-
-
(2,065)
(2,065)
Other comprehensive expense
-
-
(125)
-
(10)
(135)
Total comprehensive expense
-
-
(125)
-
(2,075)
(2,200)
At 6 October 2019
1,025
-
(135)
14,278
108,436
123,604
Ordinary shares issued on IPO
-
-
-
-
147
147
Share based payment charge
-
-
-
-
1,184
1,184
Total transactions with owners
-
-
-
-
1,331
1,331
Loss for the period
-
-
-
-
(10,756)
(10,756)
Other comprehensive expense
-
-
(197)
-
-
(197)
Total comprehensive expense
-
-
(197)
-
(10,756)
(10,953)
At 19 April 2020
1,025
-
(332)
14,278
99,011
113,982
Ordinary shares issued
99
8,066
-
-
(6)
8,159
Share based payment charge
-
-
-
-
838
838
Total transactions with owners
99
8,066
-
-
832
8,997
Profit for the period
-
-
-
-
156
156
Other comprehensive expense
-
-
(27)
-
-
(27)
Total comprehensive income
--
--
(27)
-
156
129
At 4 October 2020
1,124
8,066
(359)
14,278
99,999
123,108
Condensed Consolidated Statement of Cash Flows
For the 24 Week Period Ended 4 October 2020
24 Weeks ended
24 Weeks ended
Year ended
Note
4 October 2020
6 October 2019
19 April 2020
Unaudited
Unaudited
Audited
£000
£000
£000
Net cash generated from operating activities
12
20,937
12,561
24,397
Cash flows from investing activities
Purchase of property, plant and equipment
(1,367)
(11,179)
(23,058)
Disposal of property, plant and equipment
-
12
10
Net cash used in investing activities
(1,367)
(11,167)
(23,048)
Cash flows from financing activities
Issue of ordinary shares
8,158
57,794
57,941
Shares issued on exercise of employee share awards
(79)
-
-
Bank loans advanced
-
31,912
38,924
Bank loans repaid
-
(71,000)
(71,000)
Repayment of other loans
-
(17,950)
(17,950)
Interest paid
(603)
(620)
(1,099)
Principal element of lease payments
(2,926)
(2,433)
(5,228)
Interest paid on lease liabilities
(2,319)
(2,499)
(5,478)
Principal element of lease receivables
62
62
124
Net cash from / (used in) financing activities
2,293
(4,734)
(3,766)
Net increase / (decrease) in cash and cash equivalents
21,863
(3,340)
(2,417)
Cash and cash equivalents at beginning of the period
4,083
6,500
6,500
Cash and cash equivalents at end of the period
25,946
3,160
4,083
Notes to the Condensed Consolidated Interim Financial Statements
1. General information
The Directors of Loungers plc (the "Company") and its subsidiaries (the "Group") present their interim report and the unaudited condensed financial statements for the 24 weeks ended 4 October 2020 ("Interim Financial Statements").
The Company is a public limited company, incorporated and domiciled in England and Wales, under the company registration number 11910770. The registered office of the company is 26 Baldwin Street, Bristol BS1 1SE.
The Interim Financial Statements were approved by the Board of Directors on 1 December 2020.
The Interim Financial Statements have not been audited or reviewed by the auditors. The financial information shown for the 24 weeks ended 4 October 2020 does not constitute statutory financial statements within the meaning of section 434 of the Companies Act 2006.
The information shown for the year ended 19 April 2020 does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 and has been extracted from the Group's Annual Report and Financial Statements for that year.
The Interim Financial Statements should be read in conjunction with the Group's Annual Report and Financial Statements for the year ended 19 April 2020, which were prepared in accordance with European Union endorsed International Financial Reporting Standards ('IFRS') and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The Group's Annual Report and Financial Statements for the year ended 19 April 2020 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Group's Annual Report and Financial Statements for the year ended 19 April 2020 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.
2. Basis of preparation
The Interim Financial Statements have been prepared in accordance with IAS 34, 'Interim Financial Reporting' as endorsed by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority. They do not include all of the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last financial statements.
The Interim Financial Statements are presented in Pounds Sterling, rounded to the nearest thousand Pounds, except where otherwise indicated; and under the historical cost convention as modified through the recognition of financial liabilities at fair value through the profit and loss.
The Directors consider that the principal risks and uncertainties faced by the Group are as set out in the Group's Annual Report and Financial Statements for the year ended 19 April 2020.
The accounting policies adopted in the preparation of the Interim Financial Statements are consistent with those applied in the preparation of the Group's consolidated financial statements for the year ended 19 April 2020. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
Going concern
As reported in the Group Annual Report and Financial Statements for the year ended 19 April 2020 and reflected in these Interim Financial Statements the Group took the following measures to strengthen its financial position following the onset of the Covid-19 pandemic:
· An equity placing of 9.25m new shares raising net proceeds of £8.1m
· Agreeing an additional £15m revolving credit facility ("RCF") with its lenders
Completion of these measures left the Group with liquidity of £30.0m on 23 April 2020 and based upon assumed levels of weekly cash outflow and working capital unwind approximately 44 weeks liquidity in the event of a prolonged total lockdown.
The Group's trading performance post re-opening allied to the equity raise referred to above and the beneficial impact of Government initiatives, enabled the Group to report liquidity of £43.9m on 4 October 2020. At the time of implementation of the second lockdown on 5 November available liquidity was £44.3m, comprising cash balances of £19.3m and total undrawn RCF of £25.0m. Using similarly prudent assumptions for weekly cash outflow and working capital unwind this would provide approximately 60 weeks liquidity in a total lockdown scenario.
Going concern (continued)
In considering the appropriateness of adopting the going concern basis management have updated the management case and downside case scenarios described in the Group' s Annual Report and Financial Statements for the year ended 19 April 2020 to reflect recent trading, the implementation of the second four-week national lockdown in England, the introduction of revised tiers to come into effect in England on 2 December 2020 and the additional restrictions to be introduced in Wales from 4 December 2020. Management have prepared two revised downside scenarios, the first assumes that the tier system commencing on 2 December remains in place through to 18 April 2021, the end of the current financial year, and accordingly that 60 sites are closed throughout that period. The second assumes that, in addition to the revised tiers remaining in place, there is also a four-week national lockdown throughout January.
In both of these revised downside scenarios the Group is forecast to remain within its borrowing facilities and to be in compliance with its covenant obligations, and accordingly the Directors have concluded that it is appropriate to prepare the Interim Financial Statements on the going concern basis.
Accounting estimates and judgements
In preparing these financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the Group's consolidated financial statements for the year ended 19 April 2020.
3. Exceptional Items
24 Weeks ended
24 Weeks ended
Year ended
4 October 2020
6 October 2019
19 April 2020
£000
£000
£000
Unaudited
Unaudited
Audited
Included in cost of sales
Covid-19 related
-
-
903
Included in administrative expenses
Covid-19 related
622
-
-
Change of ownership
-
2,156
1,528
IPO Related share based payment charge
-
1,521
2,901
Impairment of property, plant and equipment
-
-
9,829
Head office relocation
-
-
175
622
3,677
15,336
The Covid-19 related costs included in administrative expenses include the costs of the removal and storage of furniture and soft furnishings and the professional fees incurred in respect of the amendments made to the Group's banking facilities.
4. Other income
24 Weeks ended
24 Weeks ended
Year ended
4 October 2020
6 October 2019
19 April 2020
£000
£000
£000
Unaudited
Unaudited
Audited
Retail, Leisure, and Hospitality Grant funding
600
-
-
600
-
-
5. Finance costs
24 Weeks ended
24 Weeks ended
Year ended
4 October 2020
6 October 2019
19 April 2020
£000
£000
£000
Unaudited
Unaudited
Audited
Bank interest payable
704
566
1,155
Finance cost on lease liabilities
2,584
2,499
5,478
Other loan interest payable
-
18
18
Preference share interest
-
17
17
Exceptional write off of loan arrangement fees
-
1,447
1,447
3,288
4,547
8,115
6. Tax on loss
24 Weeks ended
24 Weeks ended
Year ended
4 October 2020
6 October 2019
19 April 2020
£000
£000
£000
Unaudited
Unaudited
Audited
Taxation charged to the income statement
Current income taxation
335
(442)
-
Adjustments for current tax of prior periods
-
-
(130)
Total current income taxation
335
(442)
(130)
Deferred Taxation
Origination and reversal of temporary differences
Current period
(374)
13
(1,940)
Effect of changes in tax rates
-
-
110
Total deferred tax
(374)
13
(1,830)
Total taxation credit in the consolidated income statement
(39)
(429)
(1,960)
The income tax expense was recognised based on management's best estimate of the effective income tax rate expected for the full financial year, applied to the profit before tax for the 24 weeks ended 4 October 2020.
7. Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity shareholders by the weighted average number of shares outstanding during the period, excluding unvested shares held pursuant to the following long-term incentive plans:
· Loungers plc Employee Share Plan
· Loungers plc Senior Management Restricted Share Plan
· Loungers plc Value Creation Plan
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. During the period ended 4 October 2020 the Group had potentially dilutive shares in the form of unvested shares pursuant to the above long-term incentive plans.
24 Weeks ended
24 Weeks ended
Year ended
4 October 2020
6 October 2019
19 April 2020
Unaudited
Unaudited
Audited
£000
£000
£000
Profit / (loss) for the period after tax
156
(2,065)
(12,821)
Basic weighted average number of shares
102,169,298
90,953,614
91,786,283
Adjusted for share awards
2,061,637
1,791,805
1,734,508
Diluted weighted average number of shares
104,230,935
92,745,419
93,520,791
Basic earnings / (losses) per share (p)
0.2
(2.3)
(14.0)
Diluted earnings / (losses) per share (p)
0.1
(2.3)
(14.0)
Adjusted earnings per share is based on profit for the year before exceptional items and the associated tax effect.
24 Weeks ended
24 Weeks ended
Year ended
4 October 2020
6 October 2019
19 April 2020
Unaudited
Unaudited
Audited
£000
£000
£000
Profit / (loss) for the period before tax
117
(2,494)
(14,781)
Exceptional items
622
3,677
15,336
Exceptional write off of loan arrangement fees
-
1,447
1,447
Adjusted profit for the period before tax
739
2,630
2,002
Tax credit
39
429
1,960
Tax effect of exceptional items
(118)
(749)
(1,719)
Adjusted profit for the period after tax
660
2,310
2,243
Basic earnings per share (p)
0.6
2.5
2.4
Diluted earnings per share (p)
0.6
2.5
2.4
8. Share based payments
The Group had the following share-based payment arrangement in operation during the period:
- Loungers plc Employee Share Plan
- Loungers plc Senior Management Restricted Share Plan
- Loungers plc Value Creation Plan
The Group recognised a total charge of £854,000 in respect of the Group's three share-based payment plans.
9. Fixed assets
Leasehold Building Improvements
Motor Vehicles
Fixtures and Fittings
Right of Use Asset
Total
£000
£000
£000
£000
£000
Cost
At 22 April 2019
44,927
83
39,961
100,634
185,605
Additions
4,308
10
6,761
11,886
22,965
Disposals
-
(12)
(30)
-
(42)
At 6 October 2019
49,235
81
46,692
112,520
208,528
Additions
5,263
-
6,456
9,143
20,862
Disposals
-
-
(1)
(183)
(184)
At 19 April 2020
54,498
81
53,147
121,480
229,206
Additions
264
-
1,129
2,775
4,168
Disposals
-
-
-
-
-
At 4 October 2020
54,762
81
54,276
124,255
233,374
Depreciation
At 22 April 2019
5,199
-
10,151
20,994
36,344
Provided for the period
1,382
16
2,798
3,090
7,286
Disposals
-
(12)
(26)
-
(38)
At 6 October 2019
6,581
4
12,923
24,084
43,592
Provided for the period
1,778
18
3,638
4,087
9,521
Impairment
2,166
-
400
7,263
9,829
Disposals
-
-
-
(183)
(183)
At 19 April 2020
10,525
22
16,961
35,251
62,759
Provided for the period
1,659
14
3,123
3,383
8,179
Disposals
-
-
-
-
-
At 4 October 2020
12,184
36
20,084
38,634
70,938
Net book value
At 4 October 2020
42,578
45
34,192
85,621
162,436
At 19 April 2020
43,973
59
36,186
86,229
166,447
At 6 October 2019
42,654
77
33,769
88,436
164,936
At 21 April 2019
39,728
83
29,810
79,640
149,261
10. Borrowings
4 October 2020
6 October 2019
19 April 2020
£000
£000
£000
Unaudited
Unaudited
Audited
Non-current
Bank loan
39,500
32,500
39,500
Loan arrangement fees
(406)
(534)
(461)
39,094
31,966
39,039
The Group's bank borrowings are secured by way of fixed and floating charges over the Group's assets.
The facilities entered into at the time of the IPO in April 2019 provide for a term loan of £32,500,000 and a revolving credit facility of £10,000,000. 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%.
On 22 April 2020, in response to the Covid-19 lockdown, the Group agreed an incremental £15,000,000 revolving credit facility for the 18-month period to October 2021. In addition, the waiver of the covenant tests scheduled for 12 July 2020 and 4 October 2020 and amendments to the covenant tests running through to 3 October 2021 were agreed.
At 4 October 2020 the term loan was fully drawn and £7,000,000 was drawn down under the revolving credit facility.
11 Share capital
4 October 2020
6 October 2019
19 April 2020
£000
£000
£000
Unaudited
Unaudited
Audited
Allotted, called up and fully paid ordinary shares
1,024
925
925
Redeemable preference shares
100
100
100
1,124
1,025
1,025
Ordinary shares at £0.01 each
102,400,000
92,500,000
92,500,000
Redeemable preference shares
2
2
2
The table below summarises the movements in share capital for Loungers plc during the period ended 4 October 2020:
Ordinary
Redeemable
£'000
Shares
Preference
Shares
£0.01 NV
£49,999 NV
At 19 April 2020
92,500,000
2
1,025
Shares issued
9,900,000
-
99
At 4 October 2020
102,400,000
2
1,124
On 22 April 2020, in response to the Covid-19 lockdown, the Group issued 9,250,000 ordinary shares of 1 pence each to existing shareholders at a price of 90 pence per ordinary share.
On 4 May 2020 the Group issued 650,000 ordinary shares of 1 pence each to 480 employees pursuant to the Group's share plans.
12. Note to the cash flow statement
24 Weeks ended
24 Weeks ended
Year ended
4 October 2020
6 October 2019
19 April 2020
£000
£000
£000
Cash flows from operating activities
Profit / (loss) before tax
117
(2,494)
(14,781)
Adjustments for:
Depreciation of property, plant and equipment
4,796
4,196
9,630
Depreciation of right of use assets
3,383
2,956
7,177
Impairment of property, plant and equipment
-
-
9,929
Share based payment transactions
854
2,680
4,027
Profit on disposal of fixed assets
-
(8)
(5)
Finance income
(22)
(24)
(50)
Finance costs
3,288
4,547
8,115
Changes in inventories
(444)
162
685
Changes in trade and other receivables
3,515
780
(733)
Changes in trade and other payables
4,319
390
1,793
Cash generated from operations
19,806
13,185
25,687
Tax reclaimed / (paid)
1,131
(624)
(1,290)
Net cash generated from operating activities
20,937
12,561
24,397
Reconciliation of Statutory Results to Alternative Performance Measures
24 weeks ended
24 weeks ended
Year ended
Note
4 October 2020
6 October 2019
19 April 2020
£000
£000
£000
Unaudited
Unaudited
Audited
Operating profit / (loss)
3,383
2,029
(6,716)
Exceptional items
3
622
3,677
15,336
Share based payment charge
854
524
1,125
Site pre-opening costs
167
967
2,220
Adjusted operating profit
5,026
7,197
11,965
Depreciation (pre IFRS 16 right of use asset charge)
4,796
4,196
9,630
IFRS 16 Right of use asset depreciation
3,383
3,090
7,177
(Profit) / loss on disposal of fixed assets
-
(8)
(5)
Adjusted EBITDA (IFRS 16)
13,205
14,475
28,767
IAS 17 Rent charge
(4,650)
(4,444)
(10,380)
IAS 17 Rent charge included in IAS 17 pre-opening costs
179
191
426
Adjusted EBITDA (IAS 17)
8,734
10,222
18,813
Profit / (loss) before tax (IFRS 16)
117
(2,494)
(14,781)
Exceptional items
3
622
3,677
15,336
Exceptional finance costs
-
1,447
1,447
Adjusted profit before tax (IFRS 16)
739
2,630
2,002
IAS 17 Rent charge
(4,650)
(4,444)
(10,380)
IAS 17 Leasehold depreciation (re landlord contributions)
(246)
(189)
(464)
IFRS 16 Right of use asset depreciation
3,383
3,090
7,177
IFRS 16 Lease interest charge
2,584
2,499
5,478
IFRS 16 Lease interest income
(22)
(24)
(50)
Adjusted profit before tax (IAS 17)
1,788
3,562
3,763
Profit / (loss) before tax (IFRS 16)
117
(2,494)
(14,781)
IAS 17 Rent charge
(4,650)
(4,444)
(10,380)
IAS 17 Leasehold depreciation (re landlord contributions)
(246)
(189)
(464)
IFRS 16 Right of use asset depreciation
3,383
3,090
7,177
IFRS 16 Lease interest charge
2,584
2,499
5,478
IFRS 16 Lease interest income
(22)
(24)
(50)
Profit / (loss) before tax (IAS 17)
1,166
(1,562)
(13,020)
Reconciliation of Statutory Results to Alternative Performance Measures
24 weeks ended
24 weeks ended
Year ended
4 October 2020
6 October 2019
19 April 2020
£000
£000
£000
Unaudited
Unaudited
Audited
Adjusted profit before tax (IFRS 16)
739
2,630
2,002
Tax credit
39
429
1,960
Tax effect of exceptional items
(118)
(749)
(1,719)
Adjusted profit after tax (IFRS 16)
660
2,310
2,243
IAS 17 Rent charge
(4,650)
(4,444)
(10,380
IAS 17 Leasehold depreciation (re landlord contributions)
(246)
(189)
(464)
IFRS 16 Right of use asset depreciation
3,383
3,090
7,177
IFRS 16 Lease interest charge
2,584
2,499
5,478
IFRS 16 Lease interest income
(22)
(24)
(50)
IFRS 16 Tax effect
(244)
(159)
(423)
Adjusted profit after tax (IAS 17)
1,465
3,083
3,581
Basic weighted average number of shares
102,169,298
90,953,614
91,786,283
Diluted weighted average number of shares
104,230,935
92,745,419
93,520,791
Adjusted basic earnings per share (p) IAS 17
1.4
3.4
2.4
Adjusted diluted earnings per share (p) IAS 17
1.4
3.3
2.4
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