REG - Loungers PLC - Audited results for the 52 weeks ended 16 April 23
12/07/2023 07:00
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RNS Number : 7155F Loungers PLC 12 July 2023
12 July 2023
Loungers plc
("Loungers" or the "Group")
Audited results for the 52 weeks ended 16 April 2023
A year of success and strength
Opened a record 29 new sites, with plans to open around 34 in FY24
Loungers, a leading operator of all day café/bar/restaurants across the UK
under the Lounge, Cosy Club and Brightside brands, is pleased to announce its
audited results for the 52 weeks ended 16 April 2023 ("FY23").
Finance Summary
52 weeks ended 52 weeks ended 52 weeks ended
16 April 2023 17 April 2022 21 April 2019
£'000 £'000 £'000
Revenue 283,507 237,291 152,999
Adjusted EBITDA ((1)) 47,349 53,639 28,541
Operating profit 14,751 28,437 12,703
Adjusted operating profit 24,124 34,001 14,982
Profit / (loss) before tax 7,334 21,605 (6,700)
Diluted earnings / (losses) per share (p) 6.5 17.0 (37.5)
Adjusted diluted earnings / (losses) per share (p) 8.1 17.0 (35.4)
Cash generated from operating activities 51,107 69,626 28,287
16 April 2023 17 April 2022 21 April 2019
£'000 £'000 £'000
Non-property net debt 6,022 1,025 27,500((2))
Net debt 140,859 120,589 116,648((2))
((1)) Adjusted EBITDA is calculated as operating profit before depreciation,
impairment, pre-opening costs, exceptional costs, and share-based payment
charges.
((2)) Proforma net debt on IPO on 29 April 2019
Financial Highlights
· Achieved record revenue of £283.5m (up 19% vs FY22 and 85% vs
FY19) and a record 29 new sites opened
· Industry leading like for like (LFL) sales growth of 7.4% (one
year) and 17.6% (three year)
· Adjusted EBITDA of £47.3m represents growth of 66% since IPO in
April 2019
· Operating profit of £14.8m declined vs FY22 reflecting the
positive impact in FY22 of Covid related government support measures
· Cash generated from operating activities of £51.1m represents
growth of 81% since IPO in April 2019
Operational Highlights
· Inflationary pressures mitigated and are now diminishing.
Medium term goal to restore Adjusted EBITDA margins to pre Covid levels
· Consistently strong new openings in a variety of location models
continue to increase average levels of sales
· Menu evolution driving sales growth and highlighting brand
relevance and appeal
· Strong pipeline of new sites, with internal capability developed
to accelerate to around 34 openings next year
· Identified potential for at least 600 Lounges across the UK
· Launch of new roadside brand Brightside, with two sites now open
and a third to follow in August 2023
· Leadership and operational structure further strengthened to
deliver continued growth and out-performance
Current Trading and Outlook
We continue to feel very positive about the outlook for our brands. Over
the 12 weeks since the year end our LFL sales have been +5.7% despite the
impact of Easter timing and we are pleased with our performance and
trajectory. Our new site openings continue to perform exceptionally well,
achieving record levels of sales, and our pipeline of new sites is as strong
as ever.
We ended FY23 by accelerating many of the initiatives that have underpinned
Loungers' resilience in FY23; opening six sites in six weeks across March and
April, launching new innovative menus in Lounge and Cosy Club and
restructuring benefits for our salaried staff. We are confident that the good
momentum we are seeing across the business, as well as the investment that we
continue to make in our operational structure, puts us in the best possible
position to deliver further growth and profitability in FY24.
Nick Collins, Chief Executive Officer of Loungers said:
"I am delighted to be announcing another excellent set of results for
Loungers. During the year we opened 29 new sites creating around 1,000 new
jobs, launched an exciting new roadside dining brand and achieved industry
leading LFL sales growth. We also converted well at the bottom-line
achieving Adjusted EBITDA of £47.3m. This is the seventh year in succession
we have delivered industry leading LFL sales growth and over that period the
estate has grown from 44 sites to 232 today. We are proud to be making a
positive contribution to high streets and communities across the UK and there
are hundreds more locations around the country for us to target.
Based on our experience the UK consumer remains positive, inflationary
pressures are diminishing and recruitment challenges have eased. As an
example, a few weeks ago, we opened Ormo Lounge in the seaside town of
Llandudno which achieved a record level of sales for any new Lounge opening in
our 22-year history, reflecting the relevance of our offer and how well we
trade by the coast.
More broadly, we are excited about our ongoing roll-out programme and the
opportunity to bring our culture and hospitality to around 34 new locations in
the coming year, with many more to come beyond that."
Analyst Presentation Webcast
An analyst presentation will be held today, Wednesday 12 July 2023, at 9:30am
(BST). Participants wishing to join the webcast should contact
loungers@powerscourt-group.com (mailto:loungers@powerscourt-group.com) to
request details.
For further information please contact:
Loungers plc Via Powerscourt
Nick Collins, Chief Executive Officer
Gregor Grant, Chief Financial Officer
Houlihan Lokey UK Limited (Financial Adviser and NOMAD) Tel: +44 (0) 20 7484 4040
Sam Fuller / Tim Richardson
Liberum Capital Limited (Joint Broker) Tel: +44 (0) 20 3100 2000
Andrew Godber / John Fishley
Peel Hunt LLP (Joint Broker) Tel: +44 (0)20 7418 8900
Dan Webster / George Sellar
Powerscourt (Financial Public Relations) Tel: +44 (0) 207 250 1446
Rob Greening / Nick Hayns / Elizabeth Kittle
Notes to Editors
Loungers operates through its two established 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 195 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 35 Cosy Clubs
nationwide.
Loungers launched its third brand, a roadside dining concept called
Brightside, in November 2022. The first Brightside location opened on the A38,
south of Exeter, in February 2023, the second in Saltash near Plymouth in June
2023, with a further site opening in Honiton on the A303 in August 2023.
Chairman's Statement
I am delighted to report on another year of excellent financial, operational,
and strategic progress for Loungers.
A record year
In the financial year ending 16 April 2023 we opened a record number of new
sites (29), achieved record turnover of £283.5m, and delivered Adjusted
EBITDA of £47.3m. The business grew overall sales by 19.5% and posted
like-for-like sales growth of 7.4% on a one-year basis - or 17.6% on a
three-year basis (albeit an increasingly less relevant metric).
We also opened our 200th site (Cosy Club Chester) and ended the year on 222
sites including the opening of the first Brightside, our new roadside
restaurant brand, on the A38 near Exeter. The momentum of FY23 and the quality
of our new site openings has been maintained into the new year, with the
recent opening of Ormo Lounge in Llandudno representing, from a sales
perspective, the biggest Lounge opening in our history.
A strengthened team
During the year, we made some key hires into newly created roles for the
business: Guy Youll joined the business as Chief People Officer in the autumn,
and has quickly set about delivering a better, more joined up people strategy.
Having a proven people leader of his calibre is already helping us to
substantially build on great work like The Commitments (our five point
covenant with our employees), and will ultimately only make the business an
even better place in which to work; Kate Lister joined us at the same time as
our first ever Marketing Director, and has made an immediate impact in helping
us to move away from our previous 'light touch' approach to promoting our
brands; and, more recently, Jono Jenkins, who was previously Lounge Head of
Food, has been promoted to Commercial Director. Having someone senior leading
our commercial team should help us deliver not just our immediate goals, but
also our more medium to long term ambitions.
It isn't all one-way traffic, however, and we are sorry to say goodbye to
Amber Wood who leaves her role as Cosy Club MD in August. Amber has been an
integral part of the Loungers journey for a number of years now and has
achieved a huge amount in her time with us. We were very lucky to have Amber
as part of our executive team, and I wish her all the very best for the
future.
Exceptional resilience in the face of multiple challenges
Loungers has been a listed company for over four years now and in that time
it's fair to say we have had to deal with some unprecedented challenges, most
notably the Covid pandemic. Despite having to be constantly reactive, and at
times having to roll with multiple punches, the executive team, masterfully
led as ever by Nick Collins, has risen to every challenge. With the exception
of the period in which we were unable to trade due to the UK hospitality
industry being forced to close, the business has delivered time-and-time
again.
Our brands have proved to be exceptionally resilient and, through constant
innovation and evolution, our offer is more relevant and compelling than it
has ever been before. Whilst the majority of businesses in our sector have
struggled, Loungers has thrived, and whilst many of our peers still talk about
'recovery' we have been back to full speed for over 18 months now - with the
business enjoying significant growth despite the challenging backdrop. When
comparing our FY23 results to our results for FY19, which was our year end
just before the business listed on the London Stock Exchange, Loungers now has
52% more sites. This in turn has increased revenue by 85%, generated 66% more
Adjusted EBITDA, and reduced net debt by £21.5m. In short, there is a great
deal for the business to be extremely proud about, not the least the fact we
have created 3,675 new jobs in the last four years - creating fantastic career
opportunities for people from all backgrounds, all over the UK.
Time to celebrate success stories across the sector: not all doom and gloom
During the pandemic, the UK hospitality industry received unprecedented levels
of government support thanks in no small part to the tireless efforts of the
various trade bodies that represent the sector. This support was, of course,
very much required and more than justified, given the sector was forced to
close entirely at times due to the various lockdowns. Since emerging from the
Covid period, the industry has been significantly impacted by soaring energy
costs, high inflation, the rising cost of labour, the cost-of-living crisis,
and rail strikes (most acutely felt by London-centric businesses) and lobbying
for more government support continues. Whilst highlighting the issues the
sector continues to face and seeking more government support is
understandable, it concerns me that hospitality is now viewed as a sector that
is still very much on life-support.
Clearly it is very challenging at the moment, particularly for smaller
independent businesses in our sector who have been hit by outrageous and
unsustainable energy costs. But surely we need to start to provide some
balance to the way the sector portrays itself, because it is simply not
accurate to characterise it as being all doom and gloom. As our results show,
Loungers is doing extremely well and I make no apology for the success we
continue to enjoy. Operating a hospitality business has always been
challenging and our continued success is down to a number of factors, not
least the hard work and talent of our executive team and our site teams'
dedication to providing consistently great hospitality. However, at the heart
of our success has been our ability to make the most of the cards we have been
dealt and to get our heads down and crack on. This is undeniably a major
reason why we emerged strongly from the Covid lockdowns and is also why we are
successfully navigating the cocktail of challenges the sector faces
post-pandemic.
And Loungers is by no means alone. There are countless other hospitality
businesses that are growing, investing, creating jobs, building their brands,
and being ambitious. A lot of these businesses, almost all of which are
privately owned, are not making the same mistakes as others, because they have
learnt from them, and instead of pausing their innovation and evolution
post-pandemic they have accelerated it. They are helping to rejuvenate our
high streets and aid the economic recovery and it is time that we start to
shine a light on the success stories of our sector instead of allowing a
message of woe to be promoted.
The investment community too needs to start hearing a different, more
up-to-date message. Just because a number of over-leveraged casual dining
brands have failed over the last few years doesn't mean that casual dining is
totally broken. Indeed, most of the growth and innovation in the sector is
currently in casual dining. Likewise, just because certain high-profile
operators are reducing their leisure/retail park estates doesn't mean that
these types of locations are absolutely off-limits. Indeed, some of our best
performing Lounge sites are in exactly the locations that sector commentators
seem to have condemned.
The UK consumer is on the one hand looking for familiarity but also for
adventure. They are attracted to brands that they feel constantly deliver a
great experience but also, and most importantly, that they feel are relevant.
Brands that have failed in recent years have done so for a number of reasons;
their offer hasn't evolved, their sites look tired and under-invested, and the
business model that sits behind the brand is broken. These brands have lost
their relevance and the UK consumer has simply moved on to better, more
relevant brands operated by smart management teams who know not to repeat the
mistakes of others.
Exciting times ahead
On which note, as Loungers enters FY24 we are in a great place, and I firmly
believe that we are armed with the best thought-through and most realistically
deliverable strategic plan that the business has ever had. We will open
another record number of new sites in FY24, which will be overwhelmingly
dominated by Lounge openings, including our first sites in the North East.
Lounge will break through the 200 sites landmark and, with a sizeable runway
ahead of us, we believe there is scope for at least 600 Lounges across the UK.
We will continue to be selective about Cosy Club opportunities and look
forward to opening our first ever site in Oxford, a city in which we envisage
having at least four Lounge sites in the future, when we open Cosy Club Oxford
in late summer.
At the time of writing our second Brightside has recently opened on the A38
near Saltash and our third site will open on the A303 near Honiton in early
August. Whilst we have already learnt an awful lot about operating a roadside
brand in just a short space of time, with three sites open and a summer's
trade ahead there will be a lot more to learn and the brand will inevitably
need to spend some time 'in the lab'. However, we are encouraged by how
Brightside has traded to date and remain hugely excited about its potential.
In the case of both Cosy Club and Brightside, we will remain disciplined in
our approach to new openings and will not allow either brand to distract the
business from the overall strategy which, for the foreseeable future, remains
taking full advantage of the sizeable runway we have identified for new Lounge
sites.
Despite the challenging trading conditions, we are, as ever, working
tirelessly to improve the business and our brands. There is a real ambition
within the executive team to make tangible progress on a number of areas of
the business where we believe we can improve, particularly in light of the key
hires that we made in FY23. Most notably, we believe we can improve margin,
develop even better capex controls, and promote a more fully-formed, authentic
ESG strategy that has total buy-in from our teams.
A big thank you to all our people
On the subject of our teams, the importance of community engagement
post-pandemic has never been greater, and the business owes a huge debt of
gratitude to our wonderful site teams and the hardworking, talented ops team
that support them. They not only provide first-rate, genuine hospitality, but
also work tirelessly to help us earn our place on every high street and in
every town centre where we are lucky enough to operate. As always, my sincere
thanks goes to them for their outstanding commitment, professionalism and
enthusiasm for providing outstanding quality and service to our customers.
Alex Reilley
Chairman
12 July 2023
Chief Executive's Statement
Introduction
I am pleased to report on a very successful year for Loungers. We achieved
record revenue of £283.5m, operating profit of £14.8m, opened a record 29
new sites, and our Adjusted EBITDA performance of £47.3m represents growth of
66% since our IPO in 2019. Our LFL sales performance has consistently
out-performed the wider sector, according to the Coffer CGA Tracker and we
have successfully mitigated much of the inflationary pressure, which is now
diminishing.
Sales performance and our evolving offer
Our sales performance throughout the year was once again exceptional,
achieving underlying LFL sales growth of 7.4%.
In a year of fluctuating consumer sentiment and inconsistent macro-economic
signals, it was hard to ascertain any material shift in our customers'
attitudes towards going out, or their behaviour once they were in our
premises. Covid, or any lingering nervousness as a result of it, was certainly
not a factor throughout the year. It continues to be the case that the
evolution and value of our offer, alongside our ability to deliver it well
operationally, are the core factors that drive our sales growth.
We have delivered some fantastic menu evolution during the year, and I look
forward to seeing this momentum continue into FY24. Over the last three years
we haven't been as bold evolving our food offer as we might have liked,
predominantly as a result of the trickier employment market and our
determination to make life as easy as possible for our kitchen teams, avoiding
more substantial change. However, the most recent March 2023 menu change in
Lounge saw some really bold and more significant changes, which have had a
material impact on our food sales mix, as have the more recent changes in Cosy
Club. Our development teams in both food and drink have never been so strong
and there is a healthy restlessness to drive further evolution and
improvement.
The table below shows our annual LFL sales performance over the last ten
years. Over this period the estate has grown from 44 sites to 222. The
consistency of our performance whilst having gradually accelerated the
roll-out is second to none and demonstrates the relevance of our offer, our
understanding of the UK consumer and the strength of our team.
Financial Year FY23 FY22((1)) FY21((1)) FY20((2)) FY19 FY18 FY17 FY16 FY15 FY14
Loungers LfL growth (%) 7.4% 4.2% 10.7% 4.4% 6.9% 6.0% 5.3% 2.2% 3.9% 5.1%
( )
(1) Based upon 13 weeks trading not impacted by lockdowns / restrictions
(2) 44 weeks ending 23 February 2020
Conversion and inflationary pressure
I am pleased with the way in which we have managed the cost base in the
business in an inflationary environment and we continue to be very well-placed
versus our peers as a result of our growth and operational flexibility.
In the first half we saw some margin deterioration, predominantly due to wage
inflation. Whilst annual National Living Wage increases of 10% are of course a
significant factor, how we manage labour is also critically important. Our
labour management, coming out of a very tight labour market, improved
throughout the year, and I was more pleased with our performance in the second
half.
On the food and drink side, we have mitigated inflationary pressure well, and
price increases alongside our rolling supplier renegotiation program, have
allowed us to slightly increase our food and drink margin. In the second half
of the year we started negotiations in respect of several material food and
drink supply contracts which will see further margin benefit in FY24 as these
negotiations draw to a close. It remains the case that our significant growth
allows us to challenge hard on cost and mitigate some of the inflationary
pressure. We took a further step on the supply-chain consolidation journey
during the year, through our switch to Bidfood and have learnt more about the
actions we will need to take to optimise the supply chain further.
We continue to benefit from our May 2020 electricity and gas hedge which runs
until September 2024, albeit as a result of our growth 25% of the estate is
hedged at higher levels. This will continue to have a modest negative impact
on our conversion over the next couple of years, but we will look to offset
this as we challenge our energy efficiency in the sites.
There is no doubt that the inflationary environment has eased, and whilst wage
inflation through annual National Living Wage increases is here to stay, our
medium-term margin outlook is positive. It's critical that we strike the right
balance between margin protection and value for money and the 10-year LFL
sales chart above would suggest that we have historically got the balance
right. This year I anticipate maintenance of our gross profit margins as we
move towards our medium-term goal of restoring margins to their pre Covid
levels.
People and culture
Improving as an employer, and protecting and nurturing the Loungers culture,
continue to be the foundations of our roll-out strategy. Last year (FY22) we
introduced The Commitments, setting out to our team what we wanted to
represent as an employer, and this year we have worked hard to fulfil these
commitments. We regularly survey our team to understand how they feel about
working for Loungers - the most recent survey confirmed that we are performing
better, but there is still more that we can do.
Towards the end of the year we restructured our site salaried team's pay,
transferring some cash away from potential bonus awards and increasing
salaries across the board, resulting in on average +11% salary increases. This
has made us more competitive from a salary point of view and helped our team
address the cost of living increases that they are experiencing. For our
hourly paid team, whilst we continue to pay slightly above average rates, we
have worked hard to maintain our appeal through benefits including free staff
food and drinks for all shifts and staff discount alongside the softer aspects
such as not having to wear a uniform, and our annual staff party Loungefest.
One of the consistent messages we hear from our team is that it's not all
about pay. Working in hospitality should be rewarding and fun, and this is
inherent in the Loungers culture.
For anyone wanting a career in hospitality, there can be no better home than
Loungers. This year saw a record number of promotions from people working at
site level into our operations team. We have introduced new processes to
ensure we are recognising talent and the desire to progress earlier, and are
allowing people the best opportunity to succeed through development programs.
We have a unique opportunity to shape careers in hospitality and progress
talented individuals early in their careers.
The appointment of Guy Youll as Chief People Officer in the second half of the
year was an important step in the journey. As we head into FY24, the People
side of the business has never had more prominence and we are excited about
the opportunities in respect of recruitment, learning and development and
career progression.
I am enormously grateful to our teams across the country for their commitment
and contribution over the year. Working in hospitality is incredibly
rewarding but can also be demanding at times, and our continued growth and
success reflects the efforts of our amazing teams in Lounge, Cosy Club,
Brightside and our head office.
The roll-out and the opportunity in front of us
During the year we opened 29 sites - 24 Lounges, four Cosy Clubs and our first
Brightside. To facilitate this, we managed the phased introduction of a fifth
build team, increasing our annual site-opening capacity to around 34 sites per
year.
We continue to open sites very well, with newer sites increasing the average
level of unit sales and EBITDA and achieving our returns hurdle. The diversity
and quality of site openings during the year really highlights the opportunity
in front of us, particularly from a Lounge perspective.
Lounge's uniquely consistent success in a variety of location types clearly
demonstrates the relevance of our offer and the positive impact we have in
communities. Over one stretch during March and April we opened six sites in
six weeks, illustrating the roll-out capability within the business. Our
typical Lounge openings are in small market-towns or secondary-suburbs, but we
continue to see real success in coastal locations and exceptional
out-performance in the occasional retail park. Retail parks are interesting -
historically they have been talked-down, but I think this is more as a
consequence of the quality or relevance of food and drink offer within them.
Our experience suggests that the right locations with a strong retail and
leisure offer and therefore strong footfall, represent an excellent
opportunity for us.
The more sites we have opened, the more we have learnt about the type of
location in which Lounges perform well, and we are now very confident there is
scope for at least 600 Lounges across the UK. We have a detailed target list
which is derived and updated from road trips carried out by the executive and
property teams over the last 20 years; our combined knowledge of small and
medium UK towns is impressive. When we reference the existing Lounge estate
and its performance alongside the estates of other national food and drink
operators, it would suggest 600 is a conservative target. We have also looked
at the Cosy Club list and believe the potential scale here is realistically
between 50 and 65 sites. In FY24 we expect to open one Cosy Club, and going
forward the ratio of Cosy Club new openings to Lounge new opening is likely to
continue to be low as we look for opportunities in a diminishing pool of
potential locations.
Geographically we continue to push further into the North and the South East
with openings in Richmond (North Yorkshire), and Clacton-on-Sea (Essex). The
Lounge new site pipeline continues to be in excellent shape, with FY24 likely
to see further expansion in the North West and the North East and continued
infill across England and Wales. It remains our strategy to gradually nudge
into new territories so we can pull on culture and team strength to ensure we
open new sites well. We get asked a lot about when we will get to Scotland,
and it feels like the next year or two should see a Loungers presence there.
On the Cosy Club side, we opened four sites during the year in Chester,
Canterbury, Harrogate and Milton Keynes and are opening in Oxford towards the
end of the summer. The sites have opened well and highlight the diversity of
property type and our design team's ability to transform space. Potential Cosy
Club locations however are less numerous and at present, outside of Oxford we
don't have further Cosy Club opportunities in the pipeline.
Brightside
The first Brightside restaurant, our new roadside dining brand focused on busy
A roads close to towns, opened its doors in Exeter on 10(th) February, and
post year-end we have opened our second Brightside in Saltash. It has been a
fantastic opportunity for the talent across the business to come together to
create something that we are all enormously proud of. The sites look
fantastic, the food and drink offer is exceptionally good, and differentiated
from the Lounge and Cosy Club offers, whilst drawing on our core strength of
all-day dining. Whilst Loungers has become a big business, at its heart is a
young, entrepreneurial team and approach, and Brightside has given us the
opportunity to express ourselves.
We have been relatively pleased with the very early sales performance at
Exeter and Saltash and are excited about the forthcoming opening in Honiton.
Customer reaction has been largely excellent and we have learnt some important
lessons already in the early weeks of trade. The next three months will be a
great test - and opportunity - for the business as the three west-country
locations trade over the busy summer period. We look forward to providing an
update in November with further thoughts on the brand and its performance.
Our impact on society and the environment
Community has been at the heart of our business for our 20 year history and is
the core focus of our positive impact. With the opening of every new Lounge
comes new jobs, a place for anyone in the community to meet and support for
local charities, causes and groups. Through our 29 new openings we have
created around 1,000 new jobs and significantly 21% of these are in government
identified "Levelling Up" areas.
This year we have prioritised both Community and wider Force for Good
activities in our strategy and planning. This has resulted in the
establishment of our first ever Force for Good Committee, led by our COO, and
a Force for Good Roadmap that unites our commercial, maintenance, people,
marketing and food teams. Highlights include an update to our build
specification to make our sites more energy efficient, an energy reduction and
waste sorting project which will be delivered directly by our 200+ site teams,
the investment in seven Regional Community Managers to extend our local
outreach and a full review of our supply chain so we have clarity on our
ingredients and confidence in our Modern Slavery Act ("MSA") Commitments.
Whilst our senior leadership is 36% female we believe that we have
significantly further to go, not least in improving the gender balance within
our operational leadership.
We are pleased to share our first full Scope 1-3 carbon mapping in this
report, in next year's report you will see our carbon roadmap including
stepped green energy targets and our plans to convert our full estate to
electric only.
Management team
We remain very focused on evolving and building the strongest management team
in the sector to facilitate the successful roll-out of our brands. As
mentioned above Guy Youll joined us as Chief People Officer during the year
and we also welcomed Kate Lister who joined as our first Marketing Director.
Jono Jenkins was promoted to Commercial Director following four-years as
Lounge Head of Food. We will continue to seek to internally develop and
progress people where we have the opportunity.
Amber Wood has decided to leave in August following eight successful years
with Loungers plc, including the last six as Cosy Club Managing Director.
Amber has played a really important role in the growth and success of the Cosy
Club brand, and leaves with my enormous gratitude for a job very well done. We
are currently recruiting for her replacement.
Current Trading and Outlook
We continue to feel very positive about the outlook for our brands. Over
the 12 weeks since the year end our LFL sales have been +5.7% despite the
impact of Easter timing and we are pleased with our performance and
trajectory. Our new site openings continue to perform exceptionally well,
achieving record levels of sales, and our pipeline of new sites is as strong
as ever.
We ended FY23 by accelerating many of the initiatives that have underpinned
Loungers' resilience in FY23; opening six sites in six weeks across March and
April, launching new innovative menus in Lounge and Cosy Club and
restructuring benefits for our salaried staff. We are confident that the good
momentum we are seeing across the business, as well as the investment that we
continue to make in our operational structure, puts us in the best possible
position to deliver further growth and profitability in FY24.
Nick Collins
Chief Executive Officer
12 July 2023
Financial Review
Overview
In last year's financial review I reflected upon a year in which we had very
much seen a return to normality, at least in the context of being able to
trade free of restrictions. With hindsight, and looking back upon a year in
which inflation really took hold, such references to normality look rather
optimistic. That said the financial highlights below continue to demonstrate
strong rates of revenue growth, both in terms of like for like sales from our
mature estate and from new site openings, and when the positive impacts of
government support measures in the prior year are adjusted out, a solid
operating margin % performance against a challenging backdrop.
IFRS 16
Year ended 16 April 2023 Year ended 17 April 2022
£000 £000
Revenue 283,507 237,291
Operating profit 14,751 28,437
Operating margin (%) 5.2% 12.0%
Profit before tax 7,334 21,605
Fully diluted earnings per share (p) 6.5 17.0
Net cash generated from operating activities 51,107 69,626
Net debt 140,859 120,589
Year on year revenue was up by 19.5% to a record £283.5m. Whilst our sales
growth benefitted from the absence of any negative Covid impact, it also
reflects strong one year like for like sales growth of 7.4% (over the 48 weeks
to 16 April 2023) and the positive impact of our new site opening programme,
with 29 sites opened in the financial year. The headline reduction in
operating margin from 12.0% to 5.2% in large part reflects the cessation of
government support measures to assist the hospitality sector during Covid.
The reduction in VAT alone, which ceased on 31 March 2022, was responsible for
incremental sales and operating profit of £15.1m in FY22; adjusting out this
benefit reduces FY22 operating profit to £13.4m and operating margin to
6.0%. Further detail on profit margins pre and post Covid is provided below.
Net cash generated from operations of £51.1m represented 108% (2022: 130%) of
IFRS 16 Adjusted EBITDA and reflects the working capital benefits accruing
from the strong like for like sales performance and the new site opening
programme. The reduction from FY22 reflects the one-off working capital
rebuild enjoyed in FY22 as the estate returned to unrestricted trading after
the third lockdown. Post investing and financing outflows, which included
the acquisition of three freeholds for a net £3.7m, cash balances decreased
by £4.9m to £26.4m. Total IFRS 16 net debt increased by £20.3m to
£140.9m, the increase driven by taking on new leases with a capital value of
£24.5m at inception.
We use a range of financial and non-financial measures to assess our
performance. A number of the financial measures, for example Like for Like
("LFL") sales and Adjusted EBITDA are not defined under IFRS and accordingly
they are termed Alternative Performance Measures ("APMs"). The Group
believes that these APMs provide stakeholders with additional useful
information on the underlying trends, performance and position of the Group
and are consistent with how business performance is measured internally.
Adjusted EBITDA is also the measure used by the Group's banks for the purposes
of assessing covenant compliance.
Reconciliations of statutory numbers to adjusted numbers reported below are
included after the financial statements as an annex to this Strategic Report
on pages 23-24.
The table below summarises the key APM's under both IFRS 16 and IAS 17 and
covers the past two financial years as well as the financial year ending 21
April 2019. The rationale for including the FY19 numbers is twofold:
· It provides a clean non-Covid impacted comparative against which
more meaningful comparisons of profit margins can be made, and
· It serves to demonstrate the significant growth achieved by the
business in the four years post IPO, in spite of the significant challenges
that have arisen in that period.
Year ended 16 April 2023 Year ended 17 April 2022 Year ended 21 April 2019
£000 £000 £000
Sites at year end 222 195 146
New sites opened 29 27 25
Revenue 283,507 237,291 152,999
Adjusted EBITDA - IFRS 16 47,349 53,639 28,541
Adjusted EBITDA margin (%) - IFRS 16 16.7% 22.6% 18.7%
Adjusted EBITDA - IAS 17 34,221 42,319 20,582
Adjusted EBITDA margin (%) - IAS 17 12.1% 17.8% 13.5%
Net debt - IAS 17 6,022 1,025 27,500((1))
((1))Proforma net debt on IPO on 29 April 2019
Revenue of £283.5m compares to £237.3m in the year to 17 April 2022,
headline growth of 19.5% and if the one-off benefit of the VAT support is
excluded from FY22 revenue growth of 27.6%. Over the four years since IPO the
Group has grown revenue by 85.3%, a function of growing the estate by 52% and
consistently strong like for like sales performance, whether measured on a one
year, three year or four year basis.
One year LFL Three year LFL Four year LFL
Gross - excluding VAT benefit +7.4% +17.6% +22.8%
Adjusted EBITDA (IFRS 16) of £47.3m delivers a margin of 16.7%, some 5.9%
down on FY22. As noted earlier FY22 does not provide a particularly helpful
comparison, impacted as it was to the downside by restricted trading for the
first four weeks and then suffering the effects of the Omicron strain over
Christmas, whilst to the upside it benefited from the VAT reduction (worth
£15.1m) and business rates support (worth £3.3m). Whilst somewhat
historic, the four year comparison against FY19 is perhaps more useful in
understanding how the Group's profitability has developed, firstly in response
to the changes brought about over the Covid period and secondly over the
period of significant cost inflation and allied pressure on the consumer over
the past year.
Over the four year period Adjusted EBITDA (IFRS 16) has grown by 65.9%, with a
more modest decline in Adjusted EBITDA margin of 2.0%. The Group has worked
hard to balance the impacts of cost inflation with the need to retain its core
value for money principles, and whilst it is always disappointing to report a
margin decline, we believe that the correct balance has been struck. The
damage has largely been done at the gross profit margin line, with a decline
of 1.4% over the four years and improvements in food and drink gross margins
not being sufficient to offset the labour cost pressures from a combination of
a very tight labour market and significant national living wage increases.
The IFRS 16 Adjusted EBITDA measure does of course exclude the benefit
delivered from our strong control of property costs and the continued
reduction in our rent to revenue ratio, down to 4.6% in FY23 from 5.2% in
FY19. Accordingly, on the IAS 17 basis the margin decline versus FY19 is
reduced to 1.4%.
Non-property net debt increased to £6.0m, a year on year increase of
£5.0m. This largely reflects the acquisition of Route Restaurants Limited
and Nightlife Leisure (South West) Limited in order to gain access to two
freehold sites for the development of the Group's Brightside brand and the
increase in the build pipeline and related capex costs at the year end in
FY23.
Impairment costs
The statutory operating profit of £14.8m is after incurring net impairment
charges of £1.6m. These costs include
· £2.9m relating to the impairment of right of use assets
· £0.5m relating to the impairment of property, plant and
equipment
· The release of impairment provisions totaling £1.8m that were
established in FY20.
The impairment methodology included the calculation of a value in use for all
sites. This valuation was based upon three year site cash flow forecasts
covering FY24 through FY26 which incorporated assumptions regarding future
trading, and a full allocation of central costs and maintenance capex spend.
The release of excess impairment provisions created in FY20 relates to the
improved trading performance in a number of sites relative to the assumptions
about future trading made in FY20.
Long Term Employee Incentives
Employee engagement and retention remains a key area of focus, and share
awards continue to play a significant role in these efforts. During the year
the Group granted further share awards under the employee share plan (471,500
shares) and the senior management restricted share plan (537,653 shares).
These awards were made to a total of 1,055 employees who work across the
business, predominantly at site level, and in hourly paid and salaried
positions. In addition, awards covering 770 employees and in respect of
724,483 shares vested in the year.
The Group recognised a share based payment charge in the year of £4.0m (2022:
£3.2m), the charge covering the employee share plan, the senior management
restricted share plan and the value creation plan.
Finance Costs and Net Debt
Finance costs of £7.6m (2022: £6.9m) include IFRS 16 lease liability finance
costs of £6.1m (2022: £5.7m) and bank interest payable of £1.5m (2022:
£1.2m). The Group received interest of £0.2m (2022: £nil) on its positive
cash balances to leave net bank interest payable broadly flat year on year.
Net debt at the year end including property leases of £140.9m (2022:
£120.6m) reflects the impact of adding new lease liabilities of £24.5m in
the year.
At year end the Group's capital structure included a £32.5m term loan and a
£10m revolving credit facility ("RCF") due for repayment in April 2024.
Subsequent to the year end the Group has refinanced its borrowing facilities
with its existing lenders, paying down £12.5m of the term loan to leave a
term loan debt of £20.0m and extending the RCF to £22.5m to leave total
facilities unchanged at £42.5m. The new facilities run for three years to
June 2026. The Group's interest rate hedging arrangements ended in July
2022, and whilst the Group's positive cash balances provided an element of
natural interest rate hedge the new capital structure will be more efficient
in minimizing interest costs. The Board continues to consider the options
for hedging the interest rate risk on the outstanding term loan.
Taxation
The Group has reported a tax charge of £0.4m for the financial year to 16
April 2023 (2022: charge of £3.7m) and at year end carried a corporation tax
receivable of £0.1m (2022: £0.1m receivable) and a deferred tax asset of
£0.9m (2022: £1.4m). The corporation tax charge represents 5.5% of profit
before tax (2022: 17.3%), benefiting from the 130% capital allowance super
deduction, and without which the corporation tax rate would have been 20.9%.
Cash Flow and Capital Expenditure
Net cash generated from operating activities of £51.1m (2022: £69.6m)
reflects a working capital cash inflow of £7.3m (2022: cash inflow of
£19.7m). The reduced working capital cash inflow reflects the one-off
benefit to working capital in FY22 as the Group emerged from lockdown and
rebuilt its negative working capital position.
Cash outflows in the year in respect of capital expenditure totalled £37.0m
(2022: £22.8m) and compare to the cost of fixed asset additions (excluding
right of use assets) recognised in the year of £39.2m (2022: £26.2m).
Capital expenditure incurred in the year of £39.2m (2022: £26.2m) included
£29.6m in respect of new site openings, of which £26.9m related to the 29
sites opened in the year (2022: total new site capex spend of £19.6m of which
£18.2m related to the 24 sites built and opened in the year). In addition
capital expenditure in the year included £2.7m on the Lounge kitchen reset
programme, completed in May 2023 (2022: £0.6m) and a further £0.9m in
respect of the freehold purchase of our Cosy Club Canterbury site.
As referenced earlier, the Group invested a further £2.7m in the acquisition
of Route Restaurants Limited and Nightlife Leisure (South West)
Limited.
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:
Year ended 16 April 2023 Year ended 17 April 2022 Year ended 21 April 2019
New site openings 29 27 25
Capital expenditure (excluding IFRS16 RoU assets) £39.2m £26.2m £23.2m
LFL Sales growth +7.4%((1)) +14.2%((2)) +6.9%
Total sales growth 19.5% 302.9% 26.4%
Adjusted EBITDA margin (IFRS16) 16.7% 22.6% 18.7%
((1) ) One year LFL calculated over 48 weeks from16 May 2022
((2) ) Three year LFL calculated over 48 weeks from 17 May 2021
and excluding VAT benefit
Going Concern
In concluding that it is appropriate to prepare the financial statements for
the year to 16 April 2023 on the going concern basis attention has been paid
both to the current sector headwinds in terms of consumer confidence and
inflationary pressures and also longer term risks such as climate change.
The Group has traded successfully over the past year, and ended the year with
net debt (including property leases) of £140.9m and total liquidity of
£36.4m.
In order to assess the Group's going concern position the Board has considered
a base case and downside case scenario. The base case assumes below inflation
selling price increases and flat volumes and reflects current assumptions in
respect of future cost inflation and incorporates increases in energy costs to
reflect the continued opening of new sites whose energy costs are hedged at
current rates. The base case scenario indicates that the Group has significant
headroom in respect of both its liquidity position and its banking covenants.
In the downside scenario it has been assumed that sales volumes fall by 10%
from the base case with an associated reduction in labour and variable cost
efficiency and a resultant 38% decline in adjusted EBITDA. Under this
scenario the Group is able to maintain its new site opening programme and
continues to have significant liquidity and banking covenant headroom and
accordingly the Directors have concluded that it is appropriate to prepare the
financial statements for the year ending 16 April 2023 on the going concern
basis.
Gregor Grant
Chief Financial Officer
12 July 2023
Consolidated Statement of Comprehensive Income
For the 52 Weeks Ended 17 April 2022
Year ended Year ended
Note 16 April 2023 17 April 2022
£000 £000
Revenue 283,507 237,291
Cost of sales (170,350) (134,369)
Gross profit 113,157 102,922
Administrative expenses (98,406) (76,975)
Other income - 2,490
Operating profit 4 14,751 28,437
Finance income 204 44
Finance costs 5 (7,621) (6,876)
Profit before taxation 7,334 21,605
Tax charge on profit 6 (405) (3,727)
Profit for the year 6,929 17,878
Other comprehensive (expense) / income:
Items that may be reclassified to profit or loss
Cash flow hedge - change in value of hedging instrument (38) 269
Other comprehensive (expense) / income for the year (38) 269
Total comprehensive income for the year 6,891 18,147
Earnings per share Year ended Year ended
Note 16 April 2023 17 April 2022
Pence Pence
Basic earnings per share 7 6.7 17.4
Diluted earnings per share 7 6.5 17.0
Consolidated Statement of Financial Position
As at 16 April 2023
Note At 16 April 2023 At 17 April 2022
£000 £000
Assets
Non-current
Goodwill 8 114,722 113,227
Property, plant and equipment 9 228,414 188,363
Deferred tax assets 945 1,355
Finance lease receivable - 579
Total non-current assets 344,081 303,524
Current
Inventories 2,475 1,919
Trade and other receivables 8,722 5,466
Derivative financial instruments - 38
Cash and cash equivalents 26,370 31,250
Total current assets 37,567 38,673
Total assets 381,648 342,197
Liabilities
Current liabilities
Trade and other payables (69,708) (56,214)
Corporation tax payable (59) -
Lease liabilities (10,247) (8,475)
Total current liabilities (80,014) (64,689)
Non-current liabilities
Borrowings 10 (32,392) (32,275)
Lease liabilities (124,590) (111,127)
Total liabilities (236,996) (208,091)
Net assets 144,652 134,106
Called up share capital 1,133 1,127
Share premium 8,066 8,066
Hedge reserve - 38
Other reserve 14,278 14,278
Retained earnings 121,175 110,597
Total equity 144,652 134,106
Consolidated Statement of Changes in Equity
For the 52 Weeks Ended 16 April 2023
Called up share capital Share premium Hedge reserve Other reserve Retained earnings Total equity
£000 £000 £000 £000 £000 £000
At 18 April 2021 1,124 8,066 (231) 14,278 89,680 112,917
Ordinary shares issued 3 - - - (3) -
Share based payment charge - - - - 3,042 3,042
Total transactions with owners 3 - - - 3,039 3,042
Profit for the year - - - - 17,878 17,878
Other comprehensive income - - 269 - - 269
Total comprehensive income for the 52 week year - - 269 - 17,878 18,147
At 17 April 2022 1,127 8,066 38 14,278 110,597 134,106
Ordinary shares issued 6 - - - (6) -
Share based payment charge - - - - 3,655 3,655
Total transactions with owners 6 - - - 3,649 3,655
Profit for the year - - - - 6,929 6,929
Other comprehensive income - - (38) - - (38)
Total comprehensive income for the 52 week year - - (38) - 6,929 6,891
At 16 April 2023 1,133 8,066 - 14,278 121,175 144,652
Consolidated Statement of Cash Flows
For the 52 Weeks Ended 16 April 2023
Year ended Year ended
16 April 2023 17 April 2022
£000 £000
Cash flows from operating activities
Profit before tax 7,334 21,605
Adjustments for:
Depreciation of property, plant and equipment 13,364 11,187
Depreciation of right of use assets 9,861 8,451
Impairment of property, plant and equipment 309 -
Impairment of right of use assets 1,298 -
Share based payment transactions 4,024 3,220
Loss on disposal of tangible assets 317 -
Finance income (204) (44)
Finance costs 7,621 6,876
Changes in inventories (557) (1,145)
Changes in trade and other receivables (3,134) (2,699)
Changes in trade and other payables 10,950 23,593
Cash generated from operations 51,183 71,044
Tax paid (76) (1,418)
Net cash generated from operating activities 51,107 69,626
Cash flows from investing activities
Purchase of subsidiary undertakings (net of cash acquired) (2,719) -
Purchase of property, plant and equipment (36,978) (22,837)
Interest received 204 3
Net cash used in investing activities (39,493) (22,834)
Cash flows from financing activities
Shares issued on exercise of employee share awards (190) (135)
Bank loans repaid - (7,000)
Interest paid (1,334) (1,101)
Principal element of lease payments (8,824) (6,903)
Interest paid on lease liabilities (6,146) (5,315)
Net cash used in financing activities (16,494) (20,454)
Net (decrease) / increase in cash and cash equivalents (4,880) 26,338
Cash and cash equivalents at beginning of the year 31,250 4,912
Cash and cash equivalents at end of the year 26,370 31,250
NOTES TO THE PRELIMINARY FINANCIAL INFORMATION
1. General information
Loungers plc ("the company") and its subsidiaries ("the Group") operate café
bars and café restaurants through three complementary brands, Lounge, Cosy
Club and Brightside.
The Company is a public company limited by shares whose shares are publicly
traded on the Alternative Investment Market ("AIM") of the London Stock
Exchange and is incorporated and domiciled in the United Kingdom and
registered in England and Wales.
The registered address of the Company is 26 Baldwin Street, Bristol, United
Kingdom, BS1 1SE.
2. Basis of preparation
The consolidated financial statements of the Loungers plc Group have been
prepared in accordance with UK adopted International Accounting Standards and
with the requirements of the Companies Act 2006 as applicable to companies
reporting under those standards.
The financial statements have been prepared under the historical cost
convention, as modified by the revaluation of financial assets and liabilities
(including derivatives) at fair value through profit and loss. The financial
statements are presented in thousands of pounds sterling ('£000') except
where otherwise indicated.
The accounting policies adopted in the preparation of the Financial Statements
are consistent with those applied in the preparation of the financial
statements of the Group for the year ended 17 April 2022.
The auditors' reports on the accounts for the 52 weeks ended 16 April 2023 and
17 April 2022 for Loungers plc 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.
The financial statements for Loungers plc for the year to 16 April 2023 will
be delivered to the Registrar of Companies shortly. The financial
information contained within this preliminary announcement for the periods
ended 16 April 2023 and 17 April 2022 does not comprise the statutory
financial statements of Loungers plc.
In concluding that it is appropriate to prepare the FY23 financial statements
on the going concern basis the Directors have considered the Group's cash
flows, liquidity and business activities in accordance with the Guidance on
Risk Management, Internal Control and Related Financial and Business Reporting
2014 published by the UK Financial Reporting Council.
As at 16 April 2023 the Group had cash balances of £26.4m (2022: £31.3m) and
undrawn facilities of £10m (2022: £25m), providing total liquidity of
£36.4m (2022: £41.3m). The Group did not utilise its RCF facilities during
the year to 16 April 2023. Subsequent to the year end, the Group has
refinanced its banking facilities, using its excess cash balances to pay down
£12.5m of its term loan. At the same time the Group's RCF was increased to
£22.5m to leave total bank facilities unchanged.
The Group has modelled financial projections for the going concern period to
the 4 August 2024 based upon two scenarios, a base case and a downside case.
The base case incorporates the Board approved budget for FY24 as well as the
first 16 weeks of the FY25 business plan. The base case assumes below
inflation selling price increases and flat volumes. It reflects current
assumptions in respect of future cost inflation and incorporates increases in
energy costs to reflect the continued opening of new sites whose energy costs
are hedged at current rates. The base case scenario indicates that the Group
has significant headroom in respect of both its liquidity position and its
banking covenants.
In the downside scenario it has been assumed that sales volumes fall by 10%
from the base case with an associated reduction in labour and variable cost
efficiency and a resultant 38% decline in adjusted EBITDA. Under this
scenario the Group is able to maintain its new site opening programme and
continues to have significant liquidity and banking covenant headroom.
3. New standards, amendments and interpretations adopted
Amendments to accounting standards applied from 18 April 2022 were as follows:
· Scope amendments to IAS1, IFRS Practice Statement 2 and IAS8
regarding accounting policy disclosures
· Amendments to IAS12 - deferred tax related to assets and
liabilities arising from a single transaction
The application of the above did not have a material impact on the group's
accounting treatment and have therefore not resulted in any material changes.
4. Operating profit
The operating profit is stated after charging / (crediting):
Year ended Year ended
Note 16 April 2023 17 April 2022
£000 £000
Depreciation of tangible fixed assets 9 13,364 11,187
Depreciation of right of use assets 9 9,861 8,451
Net impairment on property, plant and equipment 9 309 -
Net impairment on Right of Use assets 9 1,298 -
Loss on disposal of tangible fixed assets 9 317 -
Inventories - amounts charged as an expense 68,023 53,815
Fees payable to the company's auditors and its associates for the audit of 85 75
parent company and consolidated financial statements
Fees payable to company's auditors and its associates for other services:
- for statutory audit services (subsidiary companies) 85 75
Staff costs (excluding share based payments) 123,008 95,779
CJRS Grant income - (2,045)
Government support grant income - (2,490)
Pre-opening costs 3,323 2,344
5. Finance Costs
Year ended Year ended
16 April 2023 17 April 2022
£000 £000
Bank interest payable 1,475 1,190
Other interest payable - 4
Finance cost on lease liabilities 6,146 5,682
7,621 6,876
6. Tax charge on profit
The income tax credit is applicable on the Group's operations in the UK.
Year ended Year ended
16 April 2023 17 April 2022
£000 £000
Taxation charged to the income statement
Current income taxation - 1,266
Total current income taxation - 1,266
Deferred Taxation
Origination and reversal of temporary timing differences 1,069 2,408
Adjustments to tax charge in respect of prior years (911) 109
Adjustment in respect of change of rate of corporation tax 247 (56)
Total deferred tax 405 2,461
Total taxation charge in the consolidated income statement 405 3,727
The above is disclosed as:
Income tax charge - current year 1,316 3,618
Income tax (credit) / charge - prior year (911) 109
405 3,727
Factors affecting the tax charge for the year
Year ended Year ended
16 April 2023 17 April 2022
£000 £000
Profit before tax 7,334 21,605
At UK standard rate of corporation taxation of 19% (2022: 19%). 1,393 4,105
Expenses not deductible for tax purposes 801 384
Fixed asset permanent differences (1,125) (815)
Adjustments to tax charge in respect of prior years (911) 109
Adjustment in respect of change of rate of corporation tax 247 (56)
Total tax charge for the year 405 3,727
7. Earnings per share
Year ended Year ended
16 April 2023 17 April 2022
£000 £000
Profit for the year after tax 6,929 17,878
Basic weighted average number of shares 103,243,015 102,728,430
Adjusted for share awards 3,375,062 2,464,588
Diluted weighted average number of shares 106,618,077 105,193,018
Basic earnings per share (p) 6.7 17.4
Diluted earnings per share (p) 6.5 17.0
Adjusted earnings per share is based on profit for the year before the
following adjusting items: impairment charges and reversing credits, profit or
loss on disposal of fixed assets, and acquisition related transaction costs.
Year ended Year ended
16 April 2023 17 April 2022
£000 £000
Profit for the year before tax 7,334 21,605
Net impairment charge 1,607 -
Loss on disposal of fixed assets 317 -
Transaction costs 102 -
Adjusted profit before tax 9,360 21,605
Tax charge (405) (3,727)
Tax effect of adjusting items (324) -
Adjusted profit after tax 8,631 17,878
Basic weighted average number of shares 103,243,015 102,728,430
Adjusted for share awards 3,375,062 2,464,588
Diluted weighted average number of shares 106,618,077 105,193,018
Basic adjusted earnings per share (p) 8.4 17.4
Diluted adjusted earnings per share (p) 8.1 17.0
8. Goodwill
16 April 2023 17 April 2022
£000 £000
Cost
At beginning of year 113,227 113,227
Additions 1,495 -
At end of year 114,722 113,227
Goodwill of £113,227,000 arose on the acquisition of a majority stake in the
Group by the former controlling party, Lion Capital LLP, on 19 December 2016.
Goodwill of £1,495,000 arose on the acquisition of Route Restaurants Limited
and Nightlife Leisure (South West) Limited on 1 December 2022
9. Property, plant and equipment
Freehold Land and Buildings Leasehold Building Improvements Motor Vehicles Fixtures and Fittings Right of use asset Total
£000 £000 £000 £000 £000 £000
Cost
At 19 April 2021 - 56,668 81 55,790 132,977 245,516
Additions 369 10,821 148 14,816 16,404 42,558
Disposals - - (19) - - (19)
At 17 April 2022 369 67,489 210 70,606 149,381 288,055
Accumulated depreciation
At 19 April 2021 - 13,919 53 23,521 42,580 80,073
Provided for the year - 4,018 32 7,137 8,451 19,638
Disposals - - (19) - - (19)
At 17 April 2022 - 17,937 66 30,658 51,031 99,692
Net book value
At 17 April 2022 369 49,552 144 39,948 98,350 188,363
Cost
At 18 April 2022 369 67,489 210 70,606 149,381 288,055
Additions 832 17,076 - 21,273 24,519 63,700
Acquisition of subsidiaries 1,500 - - - - 1,500
Disposals (250) (451) (9) (175) - (885)
At 16 April 2023 2,451 84,114 201 91,704 173,900 352,370
Accumulated depreciation
At 18 April 2022 - 17,937 66 30,658 51,031 99,692
Provided for the year 14 4,771 48 8,531 9,861 23,225
Impairment - 381 - 85 2,937 3,403
Impairment reversal - (157) - - (1,639) (1,796)
Disposals - (405) (3) (160) - (568)
At 16 April 2023 14 22,527 111 39,114 62,190 123,956
Net book value
At 16 April 2023 2,437 61,587 90 52,590 111,710 228,414
The above includes assets in the course of construction with a total cost of
£2,467,000 (2022: £1,031,000) which have not been depreciated to date.
Impairment of property, plant and equipment and right of use assets
The Group has determined that each site is a separate CGU for impairment
testing purposes. Each CGU is tested for impairment at the balance sheet
date if there exists at that date any indicators of impairment. All sites
were reviewed in FY20 following the first national lockdown and an impairment
of £9.8m was booked in the FY20 financial statements. Following reopening a
number of those sites have generated sufficient cashflows to justify an
assessment that impairment is no longer necessary and consequently a reversal
of £1.8m has been released to the income statement (2022: £nil). Conversely,
the assessment carried out at the end of FY23 indicated that a further ten
sites showed potential impairment and a £3.4m charge has been recognised in
respect of these sites (2022: £nil).
The value in use of each CGU is calculated based upon the Group's latest
three-year forecast. The site cash flows include an allocation of central
costs and ongoing capital expenditure to maintain the sites. The cash flows
exclude any growth capital. Cash flows beyond the three-year period are
extrapolated using the Group's estimate of the long-term growth rate,
currently 2.0% (2022: 2.0%).
The key assumptions in the value in use calculations are the like for like
sales projections for each site, changes in the operating cost base, the
long-term growth rate and the pre-tax discount rate. The post-tax discount
rate is derived from the Group's WACC and is currently 9.0% (2022: 9.0%).
The cash flows used within the impairment model are based upon Board approved
forecasts. Management has performed sensitivity analysis on the key
assumptions in the impairment model using reasonably possible changes in the
key assumptions. A reduction in site cash flows of 10% in each year would
result in an incremental impairment charge of £1,000,000 (2022:
£2,984,000). A 100 basis point increase in the discount rate would result
in an impairment charge of £400,000 (2022: £1,431,000) and a 50 basis point
reduction in the terminal growth rate would result in an impairment charge of
£100,000 (2022: £295,000).
10. Borrowings
16 April 2023 17 April 2022
£000 £000
Long term borrowings:
Secured bank loans 32,500 32,500
Loan arrangement fees (108) (225)
32,392 32,275
Secured bank loans
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 provide for a term loan of
£32,500,000 and a revolving credit facility ("RCF") of £10,000,000. The term
loan is a five-year non-amortising facility with a margin of 2% above SONIA.
In June 2023 the Group completed a refinancing of it debt arrangements,
reducing the term loan to £20,000,000 and increasing the RCF by £12,500,000.
The term loan and RCF are subject to financial covenants relating to leverage
and interest cover. There were no breaches of these tests in the years to 17
April 2022 or 16 April 2023.
At 16 April 2023 the term loan was fully drawn while nothing was drawn on any
of the revolving facilities (2022: term loan fully drawn and £nil drawn down
under the RCF).
11. Analysis of changes in net debt
19 April 2021 Cash flows Non-cash movement 17 April 2022
£000 £000 £000 £000
Cash in hand 4,912 26,338 - 31,250
Bank Loans - due after one year (39,157) 7,000 (118) (32,275)
Lease liabilities (110,578) 12,218 (21,242) (119,602)
Net debt (144,823) 45,556 (21,360) (120,627)
Derivatives
Interest-rate swaps liability (231) - 269 38
Total derivatives (231) - 269 38
Net debt after derivatives (145,054) 45,556 (21,091) (120,589)
18 April 2022 Cash flows Non-cash movement 16 April 2023
£000 £000 £000 £000
Cash in hand 31,250 (4,880) - 26,370
Bank Loans - due after one year (32,275) - (117) (32,392)
Lease liabilities (119,602) 14,970 (30,205) (134,837)
Net debt (120,627) 10,090 (30,322) (140,859)
Derivatives
Interest-rate swaps liability 38 - (38) -
Total derivatives 38 - (38) -
Net debt after derivatives (120,589) 10,090 (30,360) (140,859)
Non-cash movements in bank loans due after one year relate to the amortisation
of bank loan issue costs.
12. Post balance sheet events note
On 4 May 2023 the Company allotted and issued 359,000 ordinary shares of 1
pence each in the Company following the vesting of awards made to 718 Group
employees pursuant to the Company's Employee Share Plan. At the same time the
Company applied for a block listing of 477,962 ordinary shares of 1 pence each
to satisfy such options as might be exercised from time to time under the
Senior Management Restricted Share Plan award which vested on the 29(th) April
2023.
On 7 June 2023 the Group entered into a new senior facilities agreement with
its existing lenders Santander and Bank of Ireland. Under the terms of the
new agreement the Group reduced its term loan from £32,500,000 to
£20,000,000 and increased its RCF from £10,000,000 to £22,500,000, The
new facility terminates on 7 June 2026. The term loan is non-amortising and
bears interest at between 1.75% and 2.5% over SONIA subject to the Group's
leverage. At inception of the new facility the Group was paying a margin of
1.75%. The term loan and RCF are subject to financial covenants relating to
leverage and interest cover, these are unchanged from the original facility.
On 8 June 2023 the Group repurchased 195,000 ordinary shares which are now
held in treasury.
13. Reconciliation of statutory results to alternative performance measures
Year ended Year ended
16 April 2023 17 April 2022
£000 £000
Operating profit 14,751 28,437
Net impairment charge 1,607 -
Loss on disposal of fixed assets 317 -
Transaction costs 102 -
Share based payment charge 4,024 3,220
Site pre-opening costs 3,323 2,344
Adjusted operating profit 24,124 34,001
Depreciation (pre IFRS 16 right of use asset charge) 13,364 11,187
IFRS 16 right of use asset depreciation 9,861 8,451
Adjusted EBITDA (IFRS 16) 47,349 53,639
Adjusted EBITDA % (IFRS 16) 16.7% 22.6%
IAS 17 Rent charge (13,459) (11,745)
IAS 17 Rent charge included in IAS 17 pre-opening costs 331 425
Adjusted EBITDA (IAS 17) 34,221 42,319
Adjusted EBITDA Margin % (IAS17) 12.1% 17.8%
Profit before tax (IFRS 16) 7,334 21,605
IAS 17 Rent charge (13,459) (11,745)
IAS 17 Leasehold depreciation (re landlord contributions) (945) (675)
IFRS 16 Right of use asset impairment 1,298 -
IFRS 16 Right of use asset depreciation 9,861 8,451
IFRS 16 Lease interest charge 6,145 5,682
IFRS 16 Lease interest income - (41)
Profit before tax (IAS 17) 10,234 23,277
Profit before tax (IFRS16) 7,334 21,605
Net impairment charge 1,607 -
Loss on disposal of fixed assets 317 -
Transaction costs 102 -
Adjusted profit before tax (IFRS16) 9,360 21,605
Adjusted profit before tax 9,360 21,605
Tax charge (405) (3,727)
Tax effect of adjusting items (324) -
Adjusted profit after tax (IFRS16) 8,631 17,878
Basic weighted average number of shares 103,243,015 102,728,430
Adjusted for share awards 3,375,062 2,464,588
Diluted weighted average number of shares 106,618,077 105,193,018
Basic adjusted earnings per share (p) 8.4 17.4
Diluted adjusted earnings per share (p) 8.1 17.0
Net debt (IFRS 16) 140,859 120,627
Property lease liability (134,837) (119,602)
Net debt (IAS 17) 6,022 1,025
The Group references Like for Like (LFL) sales growth as a key APM. LFL sales
growth excludes the sales from sites that have been open for less than 18
months. During the year ended 16 April 2023, the comparator periods are the 48
weeks ended 17 April 2022 for the one year like for like (excluding the four
weeks ended 16 May 2021 when sites could trade external areas only) and the 44
weeks to 23 February 2020 for the three year like for like (excluding the
eight weeks to 19 April 2020 when the business was impacted by the onset of
Covid and the first national lockdown). The four year like for like period is
on a comparable 52 week basis. The benefit from the VAT reduction during the
Covid-19 pandemic is excluded in calculating the LFL result.
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