REG - Loungers PLC - Interim Results
01/12/2021 07:00
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RNS Number : 1199U Loungers PLC 01 December 2021
1 December 2021
Loungers plc
Results for the 24 weeks ended 3 October 2021
Another strong resumption in trading post lockdown that supports Loungers'
ability to out-perform profitably in a post Covid-19 environment
Loungers (the "Group") is pleased to announce its unaudited results for the 24
weeks ended 3 October 2021 ("the period"). Loungers operates a total of 184
sites, comprising 153 Lounge café-bars and 31 Cosy Cub restaurant-bars. 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 four weeks to 16 May where the
Group's sites were restricted to external trading only, and a further nine
weeks to 18 July before the removal of the remaining Covid restrictions.
Accordingly, only 11 weeks of the period were absent from any Covid
restrictions.
Financial Highlights
24 weeks ended 3 October 2021 24 weeks ended 4 October 2020 24 weeks ended 6 October 2019
£'000 £'000 £'000
Revenue 102,361 53,493 79,827
Adjusted EBITDA 27,086 13,205 14,475
Adjusted EBITDA margin (%) 26.5% 24.7% 18.1%
Adjusted EBITDA (IAS17) 22,018 8,734 10,222
Adjusted EBITDA (IAS17) margin (%) 21.5% 16.3% 12.8%
Operating profit 15,968 3,383 2,029
Profit / (loss) before tax 12,809 117 (2,494)
Diluted earnings / (losses) per share (p) 10.4 0.1 (2.3)
Cash generated from operating activities 35,903 20,937 12,561
3 October 2021 4 October 2020 4 October 2019
£'000 £'000 £'000
Non-property net debt 11,890 13,554 29,340
· Revenue growth of 91.4% to £102.4m reflects the very successful
resumption of trading from 17 May
· Adjusted EBITDA of £27.1m, up 105.1% (H1 2021: £13.2m), driven
by strong sales and margin growth
· IAS17 Adjusted EBITDA of £22.0m, up 152.1% (H1 2021: £8.7m)
· Underlying IAS17 EBITDA margin growth of 40bps against 2019 over
the 20 weeks from 17 May, excluding the beneficial impact of the VAT reduction
and other government support measures
Operational Highlights
· Significant market out-performance post re-opening to 3 October
- Headline LFL sales growth of +26.6% in the period from 17 May to
3 October (compared to 2019) is testimony to the strength of our brands and
our teams
· Uniquely well-placed post Covid
- Suburban / market town focus protects against longer-term
behavioural changes brought about by Covid
- Increased sales, efficiency and margin being delivered through
the order at table app and the reduction in the number of dishes on the menu
· Resumption of new site roll-out
- 12 new sites opened in the period, comprising 11 Lounges and one
Cosy Club. A further four sites have been opened post the 3 October half
year end in Ringwood, Reigate, Colchester and St Neots
- Further investment in the build and property teams to provide
the capacity to accelerate the roll-out
- Pipeline strength and depth reflected in the quality of the
period's new site openings
· Managing the inflationary environment
- Introduction of differential pricing in July 2021 allows
additional pricing flexibility whilst we retain our critical focus on value
for money
- Continued control of labour and supply costs, where we continue
to benefit from our increasing scale
- Utility costs hedged in May 2020 through to September 2024
· Continued reduction in non-property net debt to £11.9m
- The Group's balance sheet strength has enabled the early
resumption of its roll-out strategy, allowing it to benefit from a tenant
friendly property market, where prime pitch properties in strong target
locations are available at attractive rents
Current Trading and Outlook
· Since the end of the period the business has continued to
consistently out-perform the sector and achieve strong like for like sales
growth post 3 October, headline LFL sales across the 28 weeks to 28 November
of +23.4%
· Whilst mindful of the news of the Omicron variant, we are
optimistic looking ahead to trading over the Christmas period and beyond. The
Lounge business is very balanced seasonally, whilst Christmas trading is more
important for Cosy Club and we are encouraged by the level of bookings.
· We anticipate 25 new site openings during the financial year
ending 17 April 2022 and have the infrastructure in place to accelerate that
pace as circumstances permit
Nick Collins, Chief Executive Officer of Loungers said:
"Our value for money, all day offer appeals to a very broad demographic, and
this underpins our market-leading performance in towns and suburbs across
England and Wales. We will open 25 sites this year as we continue to benefit
from the changing dynamics of the high street and our pipeline of new sites
has never looked so strong. Our sustained growth alongside our operational
discipline are enabling us to manage and mitigate most inflationary pressure.
"As we move into the Christmas trading period any potential impact of Omicron
remains to be seen, but as we look ahead to 2022, I am very optimistic with
regards to our prospects and the continuing roll-out of both Lounge and Cosy
Club."
Use of Alternative Performance Measures
The Half Year Results include both statutory and alternative performance
measures ("APMs"). Further background to the use of APM's and
reconciliations between statutory measures and APM's are presented on page 17.
For further information please contact:
Loungers plc Via Instinctif Partners
Nick Collins, Chief Executive Officer
Gregor Grant, Chief Financial Officer
GCA Altium 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
Instinctif Partners (Financial Public Relations) Tel: +44 (0) 207 457 2010/2005
Justine Warren / Matthew Smallwood
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 153 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
restaurant-bars 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 31 Cosy Clubs
nationwide.
CHIEF EXECUTIVE REVIEW
Highlights
· Market-leading sales performance of +26.6% LFL since re-opening
the entire estate on 17 May;
· Consistently strong sales performance across the business;
· Our suburban, market-town locations aligned with our
best-in-class rent to revenue ratio of 5.4% mean we are very well placed to
continue to generate strong returns;
· The broad demographic appeal of our flexible, community-based
offer together with our unique hospitality and culture resonates now more than
ever;
· Significant evolution of the Cosy Club food offer;
· Introduction of price banding throughout the estate;
· Roll-out resumed and we anticipate opening 25 new sites in the
current financial year; and
· We are seeing excellent property opportunities in very strong
locations and have the opportunity, infrastructure and capability to further
scale up the roll-out.
Operating review
Trading
The entire estate re-opened on 17 May once Government Covid-related
restrictions on indoor trading were lifted. Based on our very strong
performance in the summer of 2020, we expected both Lounge and Cosy Club to
open very strongly again and carried out our re-opening planning on that
basis. As anticipated, immediately on re-opening we saw a return to growth, in
contrast to 2020 when it took two to three weeks for the sites to return to a
normal level of sales. Our sales growth and market out-performance have been
largely consistent across both brands since re-opening, both during the summer
and as we now head into the winter months.
All categories and day parts across both Lounge and Cosy Club are in growth
and there is no one stand-out contributing factor to the sustained sales
growth we are experiencing. In terms of trends, we continue to see strong
performance in the brunch day part and shoulder periods either side of lunch
and continued excellent like for like performance in respect of cocktails,
puddings and premium drinks. We have always traded well from coastal locations
and in the summer months we benefitted in these sites from the staycation boom
in the UK.
This consistent out-performance of the market is in part attributed to how
both Lounge and Cosy Club are positioned and located. In Lounge our
concentration in market towns and suburban high streets has meant the business
has benefited from the behavioral changes we have seen as a result of Covid.
At the city centre Cosy Clubs, where our pitches usually benefit from both
leisure and retail footfall, we have found ourselves protected against the
worst aspects of Covid. In addition, I believe the continued emphasis on
community which has become increasingly forefront of mind throughout the
pandemic suits the Lounges, which are driven by a desire to improve
communities and high streets across the UK. The informality and flexibility of
trading all-day in both businesses also really suits consumers who might be
adapting to new working routines or looking to eat outside traditional meal
times and avoid the crowds.
I do believe our actions during the lockdowns and our broader approach to how
we wanted to emerge from Covid have had a material impact on our sales. We
were determined Covid would not interfere with our standards of hospitality
nor the atmosphere and warmth within our sites and our customers have
recognised this by coming back again and again. Equally the innovation and
evolution in the business during the various periods of lockdown, particularly
in respect of our order at table app and menu development have been
significant contributing factors to our sales success.
Evolution
The most significant development during the period was in respect of the Cosy
Club food menu and its broader brand positioning. Since the start of the
financial year we have been evolving and trialling a major re-work of the Cosy
Club menu, introducing a new structure and layout, with the inclusion of small
plates, and a material reduction in the number of dishes available at each
mealtime. The new menu is more elevated, introducing a number of less
mainstream, more aspirational dishes, with a slightly higher price point.
Alongside this we have introduced new furniture across the Cosy Clubs and
changed our steps of service to place more emphasis on providing great
hospitality. It has been one of the most significant development projects we
have ever undertaken. Following a successful trial over the summer months
the new menu has now been rolled out across the entire Cosy Club estate and
whilst it is too early to assess its impact, we are pleased with the initial
reaction from our customers.
On the Lounge side we have continued to improve the App in terms of customer
journey, performance and offering, alongside a new menu launch in October with
a more typical 10% change in the number of dishes. This summer we also
accelerated the roll-out of our kitchen management system across the Lounge
estate, with all Lounges now benefitting from electronic tickets and the
fantastic insight that gives us into our operational delivery. The final
elements of the kitchen reset project, largely relating to new equipment and
revised ergonomics, are currently being scheduled to take place in 2022.
This summer also saw us launch banded pricing across both Lounge and Cosy Club
estates. We now have three different tiers of pricing in each brand, with each
site allocated a tier based on our understanding of the level of affluence and
earnings in that location. As our geography has expanded across the UK, it has
become more apparent that we can take advantage of price elasticity in some
areas, consistent with how some of our peers approach pricing. Our initial
approach has seen all locations benefit from price increases, but we have been
relatively conservative, wanting to ensure that we understand any customer
reaction.
Roll-out and pipeline
Over the period we have opened 11 Lounges and one Cosy Club, and since the
period end we have opened a further four Lounges. Our four build-teams are
fully operational once again and we are back opening sites at a rate of 25 per
annum, delivering on the strategy we set out at the IPO in 2019. The sites we
have opened this year have further increased average unit sales and EBITDA
reflecting both the strength of our pipeline and our operational performance.
Highlights have included Lounges in Pontypridd and Blackpool and Cosy Club in
Chelmsford.
From a pipeline perspective it has never looked so good. Our property team
continued to look at opportunities throughout the lockdowns and as a result we
reopened in May with a strong pipeline in place, now stretching into FY24. We
are seeing a continuation and exaggeration of trends we were seeing pre-Covid
with strong-pitch opportunities in high priority target towns becoming
available, principally as a result of retail CVA's and administrations. These
opportunities are allowing us to open sites generating higher levels of sales.
Our rent to revenue ratio continues to hold firm at sub 6% and we are seeing
improving landlord packages in terms of rent free periods and capital
contributions helping to protect our returns on capital.
In the period we restructured the property and build teams with a view to
future-proofing this side of the business and ensuring we are well positioned
to both continue opening sites at a rate of 25 per year or accelerate beyond
that rate should we feel it appropriate. We have brought both build and
property under the leadership of Tom Trenchard, Property Director and created
a new position of Head of Construction. With the new structure now in place we
are well positioned to achieve efficiencies in our capex spend whilst ensuring
our site design is as fresh and innovative as ever.
People
Trading over the summer months, in particular, wasn't easy. Our teams had to
deal with staff shortages in some locations, unpredictably high demand at
times and occasional interruptions to the supply chain. Our teams at all
levels across the business performed astonishingly well in what were at times
incredibly challenging circumstances and I would like to thank them enormously
for all their efforts and contribution. As a provider of hospitality, we are
only ever as good as our team, and we have one of the best teams in the UK
today.
Recruitment and retention within the sector remains tough at the moment. Covid
has caused a minority of people working in the hospitality sector to think
twice about their careers as they consider their life choices and work/life
balance. We have managed this well to date, however, as a large employer it is
critical that we address this, in terms of both understanding where we can be
better, alongside promoting what we are very good at. Despite recruitment
being tough, we have opened 16 sites in the financial year to date, recruiting
16 teams and we continue to trade well. There are undoubtedly things that we
can do better, but through our strong culture and as a result of the
progression opportunities we can offer to our team, we are emerging from this
in a strong position.
We continue to reward our loyal team members through our share plans and are
very proud of the shared ownership within the business. Over 1,000 of our
5,000 employees are currently shareholders in the Group.
Financial review
Financial Performance
Whilst the impact of Covid (both the negatives of trading restrictions and the
positives of government support measures) once again runs through the reported
financial results, it cannot mask a very strong performance, with revenue up
91% to £102.4m and Adjusted EBITDA up 105% to £27.1m.
By way of context the period under review incorporates:
· A four week period where our sites were able to trade externally
only. Over the course of these four weeks, we increased the number of sites
trading external areas only from 44 sites to 88 sites, ahead of the whole
estate reopening for internal and external trade on 17 May;
· A further nine week period to 18 July during which social
distancing rules remained in place, including the "Rule of 6" and order at
table requirements;
· The beneficial impact on EBITDA margins of government initiatives
including the temporary reduction in the VAT rate charged on food and
non-alcoholic drinks, the business rates holiday; and the Restart Grants.
In the period post reopening for internal trade on 17 May headline LFL sales
were +26.6%. Excluding the positive impact of the VAT reduction the
underlying LFL result was +13.6%. This sales performance was remarkably
consistent across the period under review, with headline LFL sales of +23.7%
over the nine weeks to 18 July increasing to +28.8% over the 11 weeks to 3
October post the ending of Covid restrictions.
This strong sales performance helped to drive IFRS16 Adjusted EBITDA margin
growth of 1.8% to 26.5%, whilst the IAS17 Adjusted EBITDA margin, which was
relatively more impacted by the greater lockdown period in the prior year,
grew by 5.2% to 21.5%. As in the prior year the Adjusted EBITDA margin
continues to reflect the benefit of government support measures, with the VAT
reduction, for example, adding 7.5% to the reported Adjusted EBITDA margin in
the period under review. Most importantly however, if we exclude the period
of external trading and look at just the 20 weeks from 17 May to 3 October and
remove the positive impacts of government support and the costs of re-opening
post lockdown three, the business has delivered IAS17 Adjusted EBITDA margin
growth of 0.4%. This margin growth reflects the continuing positive benefits
of cost of goods margin growth and improving operational leverage offsetting
labour cost pressure that was particularly notable during the early weeks post
reopening.
Impact of UK Government Initiatives
The Group continued to benefit from a number of UK Government initiatives
introduced to mitigate the impact of Covid-19, notably:
· The Coronavirus Job Retention Scheme ("CJRS") - During the period
under the review the Group received a total of £4.1m of funding under the
CJRS. A total of £2.1m 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 £2.0m that was recognised in the FY21 results.
· Business Rates Relief - The Group's sites have benefitted from
the 100% business rates holiday that ran from 1 April 2021 to 30 June 2021 and
have continued to benefit from the 66% reduction (capped at £2.0m) that runs
to 31 March 2022. During the period Group has benefitted by £2.3m.
· Support Grant Funding - In the period under review the Group has
recognised £2.5m of grant funding received under the Restart Grant scheme.
This income has been recognised under other income.
Net debt
Non property net debt (gross of arrangement fees) reduced to £11.9m at period
end, an improvement of £22.7m from the FY21 year end. Reported net debt
continues to benefit from deferred liabilities to landlords and HMRC totaling
£5.6m. Adjusting to reflect these deferred liabilities as if they had been
paid, net debt at 3 October 2021 would have been £17.5m. This represents a
reduction of £30.0m relative to the FY21 year end. The timing of the half
year 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 totaling £9.0m were made to
suppliers, landlords and HMRC.
Finance costs for the period have reduced to £3.2m (2021: £3.3m) reflecting
the repayment of the £7m RCF draw in the period. Finance costs include
£2.6m (2021: £2.6m) of IFRS16 lease interest charges.
Cash flow
Net cash generated from operating activities grew by 71.5% to £35.9m (2021:
£20.9m). The performance in the period was boosted by a positive swing of
£9.9m (2021 £7.4m) in the working capital position post reopening.
The resumption of the new site roll-out programme saw a significant uplift in
capital expenditure, with outflows in the period rising to £6.5m (2021
£1.4m). Capital expenditure incurred in the period (excluding IFRS16 ROUA
investment) was £10.0m (2021 £1.4m), of which £8.4m related to new sites.
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 business has continued to consistently out-perform the sector and achieve
strong like for like sales growth post the 3 October half year end, with
headline LFL sales across the 28 weeks to 28 November of +23.4%. Whilst
mindful of the news of the Omicron variant, we remain optimistic looking ahead
to trading over the Christmas period and beyond. We anticipate 25 new site
openings during the course of the financial year ending 17 April 2022 and have
the infrastructure in place to accelerate that pace as circumstances permit.
Nick Collins
Chief Executive Officer
30 November 2021
Condensed Consolidated Statement of Comprehensive Income
For the 24 Week Period Ended 3 October 2021
24 weeks ended 24 weeks ended Year ended
Note 3 October 2021 4 October 2020 18 April 2021
£000 £000 £000
Unaudited Unaudited Audited
Revenue 102,361 53,493 78,346
Cost of sales (56,330) (28,848) (46,178)
Gross profit 46,031 24,645 32,168
Gross profit before exceptional items 46,031 24,645 32,609
Exceptional items included in cost of sales 3 - - (441)
Administrative expenses (32,553) (21,862) (43,950)
Other income 4 2,490 600 4,054
Operating profit / (loss) 15,968 3,383 (7,728)
Operating profit / (loss) before exceptional items 15,968 4,005 (6,401)
Exceptional items included in cost of sales - - (441)
Exceptional items included in administrative expenses 3 - (622) (886)
Finance income 23 22 46
Finance costs 5 (3,182) (3,288) (7,040)
Profit / (loss) before taxation 12,809 117 (14,722)
Tax (charge) / credit on profit / (loss) 6 (1,949) 39 3,580
Profit / (loss) for the period 10,860 156 (11,142)
Other comprehensive expense:
Cash flow hedge - change in value of hedging instrument 126 (27) 101
Other comprehensive expense for the period 126 (27) 101
Total comprehensive income / (expense) for the period 10,986 129 (11,041)
Earnings per share (pence)
Basic 7 10.6 0.2 (10.9)
Diluted 7 10.4 0.1 (10.9)
Condensed Consolidated Statement of Financial Position
As at 3 October 2021
Note 3 October 2021 4 October 2020 18 April 2021
£000 £000 £'000
Unaudited Unaudited Audited
Assets
Non-current
Intangible assets 113,227 113,227 113,227
Property, plant and equipment 9 169,005 162,436 165,443
Deferred tax assets 3,190 608 3,816
Finance lease receivable 623 709 668
Total non-current assets 286,045 276,980 283,154
Current
Inventories 1,558 1,259 774
Trade and other receivables 2,846 2,211 2,619
Cash and cash equivalents 20,610 25,946 4,912
Total current assets 25,014 29,416 8,305
Total assets 311,059 306,396 291,459
Liabilities
Current liabilities
Trade and other payables (44,602) (39,381) (28,576)
Lease liabilities (7,437) (6,585) (6,921)
Derivative financial instruments (106) (359) (231)
Total current liabilities (52,145) (46,325) (35,728)
Non-current liabilities
Borrowings 10 (32,211) (39,094) (39,157)
Lease liabilities (101,450) (97,869) (103,657)
Total liabilities (185,806) (183,288) (178,542)
Net assets 125,253 123,108 112,917
Called up share capital 11 1,127 1,124 1,124
Share premium 8,066 8,066 8,066
Hedge reserve (105) (359) (231)
Other reserves 14,278 14,278 14,278
Accumulated profits 101,887 99,999 89,680
Total equity 125,253 123,108 112,917
Condensed Consolidated Statement of Changes in Equity
For the 24 Week Period Ended 3 October 2021
Share Capital Share Premium Hedge Reserve Other Reserve Accumulated Profits / (Losses) Total Equity
£000 £000 £000 £000 £000 £000
At 20 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
Share based payment charge - - - - 979 979
Total transactions with owners - - - - 979 979
Loss for the period - - - - (11,298) (11,298)
Other comprehensive income - - 128 - - 128
Total comprehensive income - - 128 - (11,298) (11,170)
At 18 April 2021 1,124 8,066 (231) 14,278 89,680 112,917
Ordinary shares issued 3 - - - (3) -
Share based payment charge - - - - 1,350 1,350
Total transactions with owners 3 - - - 1,347 1,350
Profit for the period - - - - 10,860 10,860
Other comprehensive expense - - 126 - - 126
Total comprehensive income - - 126 - 10,860 10,986
At 3 October 2021 1,127 8,066 (105) 14,278 101,887 125,253
Condensed Consolidated Statement of Cash Flows
For the 24 Week Period Ended 3 October 2021
24 Weeks ended 24 Weeks ended Year ended
Note 3 October 2021 4 October 2020 18 April 2021
Unaudited Unaudited Audited
£000 £000 £000
Net cash generated from operating activities 12 35,903 20,937 12,031
Cash flows from investing activities
Purchase of property, plant and equipment (6,494) (1,367) (7,808)
Net cash used in investing activities (6,494) (1,367) (7,808)
Cash flows from financing activities
Issue of ordinary shares - 8,158 8,158
Shares issued on exercise of employee share awards (135) (79) (79)
Bank loans repaid (7,000) - -
Interest paid (595) (603) (1,260)
Interest received 3 - -
Principal element of lease payments (3,551) (2,926) (5,303)
Interest paid on lease liabilities (2,433) (2,319) (4,910)
Principal element of lease receivables - 62 -
Net cash (used in) / from financing activities (13,711) 2,293 (3,394)
Net increase in cash and cash equivalents 15,698 21,863 829
Cash and cash equivalents at beginning of the period 4,912 4,083 4,083
Cash and cash equivalents at end of the period 20,610 25,946 4,912
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 3 October 2021 ("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 30
November 2021.
The Interim Financial Statements have not been audited or reviewed by the
auditors. The financial information shown for the 24 weeks ended 3 October
2021 does not constitute statutory financial statements within the meaning of
section 434 of the Companies Act 2006.
The information shown for the year ended 18 April 2021 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 18 April
2021, which were prepared in accordance with 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 18 April 2021 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 18 April 2021 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 IAS34,
'Interim Financial Reporting' 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 18 April 2021.
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 18 April 2021. The Group
has not early adopted any other standard, interpretation or amendment that has
been issued but is not yet effective.
Going concern
In concluding that it is appropriate to prepare these interim results on the
going concern basis the Directors have considered the Group's cash flows,
liquidity and business activities. Particular attention has been paid to the
impact of Covid-19 on the business, both experienced to date and potentially
foreseeable in the future. This has included:
· Measures put in place during lockdowns to preserve and to
increase liquidity and the Group's ability to comply with revised covenants,
including the extension of the £15m RCF facility to October 2022
· The impact of Government measures to support industry, and in
particular the hospitality industry. While the impact of these will diminish
during H2, following the end of the Coronavirus Jobs Retention Scheme and the
increase in VAT for food and soft drinks to 12.5%, they have played a
significant role in enabling Loungers to retain significant liquidity
throughout the pandemic
· Initial trading during the period post the resumption of full
trading on 17 May 2021
· The repayment of rent and HMRC liabilities deferred during FY21
and FY22
As reported in the Group Annual Report and Financial Statements for the year
ended 18 April 2021 the Group had cash balances of £4.9m and undrawn
facilities of £18m, providing total liquidity of £22.9m at that date. As a
result of the strong trading performance post re-opening for full trading on
17 May 2021 as at 3(rd) October 2021 the Group had cash balances of £20.6m
and undrawn facilities of £25m, providing total liquidity of £45.6m.
In reaching their conclusion the Directors have assessed both a base case
scenario and a more severe downside set of LFL sales assumptions. The Group's
base forecasts assume a level of flat LFL sales for the remainder of FY22,
which is more prudent than the positive LFL sales growth experienced in the
period post re-opening. The more severe downside scenario assumes a
significant increase in infection rates over the winter leading to:
· Significant LFL sales decline over Christmas, followed by
lockdown in January and February
· Flat like for like sales in the last two months of FY22, followed
by a return to modest LFL sales growth in FY23
· Mitigation through the scaling back of new site openings
In the revised severe downside scenario 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 18 April 2021.
3. Exceptional items
24 Weeks ended 24 Weeks ended Year ended
3 October 2021 4 October 2020 18 April 2021
£000 £000 £000
Unaudited Unaudited Audited
Included in cost of sales
Covid-19 related - - 441
Included in administrative expenses
Covid-19 related - 622 886
- 622 1,327
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
3 October 2021 4 October 2020 18 April 2021
£000 £000 £000
Unaudited Unaudited Audited
Government support grant funding 2,490 600 4,054
2,490 600 4,054
5. Finance costs
24 Weeks ended 24 Weeks ended Year ended
3 October 2021 4 October 2020 18 April 2021
£000 £000 £000
Unaudited Unaudited Audited
Bank interest payable 601 704 1,398
Finance cost on lease liabilities 2,581 2,584 5,642
3,182 3,288 7,040
6. Tax on profit / (loss)
24 Weeks ended 24 Weeks ended Year ended
3 October 2021 4 October 2020 18 April 2021
£000 £000 £000
Unaudited Unaudited Audited
Taxation charged to the income statement
Current income taxation 1,323 335 -
Adjustments for current tax of prior periods - - -
Total current income taxation 1,323 335 -
Deferred Taxation
Origination and reversal of temporary differences
Current period 987 (374) (2,600)
Prior period - (980)
Effect of changes in tax rates (361) - -
Total deferred tax 626 (374) (3,580)
Total taxation charge / (credit) in the consolidated income statement 1,949 (39) (3,580)
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 3 October 2021.
The 2021 Budget announced an increase in the corporation tax rate from 19% to
25% with effect from 1 April 2023. This was substantively enacted on 24 May
2021. Accordingly, the deferred tax assets and liabilities at the balance
sheet date are calculated at the substantively enacted rate of 25%, to the
extent they are not expected to reverse before 1 April 2023.
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 3 October 2021 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
3 October 2021 4 October 2020 18 April 2021
Unaudited Unaudited Audited
£000 £000 £000
Profit / (loss) for the period after tax 10,860 156 (11,142)
Basic weighted average number of shares 102,716,490 102,169,298 102,291,621
Adjusted for share awards 2,111,986 2,061,637 2,076,783
Diluted weighted average number of shares 104,828,476 104,230,935 104,368,404
Basic earnings / (losses) per share (p) 10.6 0.2 (10.9)
Diluted earnings / (losses) per share (p) 10.4 0.1 (10.9)
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 £1,554,000 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 20 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
Additions 2,066 - 1,661 8,960 12,687
Disposals (160) - (147) (238) (545)
At 18 April 2021 56,668 81 55,790 132,977 245,516
Additions 4,900 - 5,112 2,074 12,086
Disposals - (19) - - (19)
At 3 October 2021 61,568 62 60,902 135,051 257,583
Depreciation
At 20 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
Provided for the period 1,894 17 3,581 4,184 9,676
Disposals (159) - (144) (238) (541)
At 18 April 2021 13,919 53 23,521 42,580 80,073
Provided for the period 1,740 10 3,120 3,654 8,524
Disposals - (19) - - (19)
At 3 October 2021 15,659 44 26,641 46,234 88,578
Net book value
At 3 October 2021 45,909 18 34,261 88,817 169,005
At 18 April 2021 42,749 28 32,269 90,397 165,443
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
10. Borrowings
3 October 2021 4 October 2020 18 April 2021
£000 £000 £000
Unaudited Unaudited Audited
Non-current
Bank loan 32,500 39,500 39,500
Loan arrangement fees (289) (406) (343)
32,211 39,094 39,157
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 through to July 2022 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. On 16 April 2021 this incremental facility was extended to
October 2022. In addition, the covenant tests scheduled for 11 July 2021, 3
October 2021 and 26 December 2021 were amended.
At 3 October 2021 the term loan was fully drawn and £nil was drawn down under
the revolving credit facility.
11 Share capital
3 October 2021 4 October 2020 18 April 2021
£000 £000 £000
Unaudited Unaudited Audited
Allotted, called up and fully paid ordinary shares 1,027 1,024 1,024
Redeemable preference shares 100 100 100
1,127 1,124 1,124
Ordinary shares at £0.01 each 102,738,664 102,400,000 102,400,000
Redeemable preference shares 2 2 2
The table below summarises the movements in share capital for Loungers plc
during the period ended 3 October 2021:
Ordinary Redeemable £'000
Shares Preference
Shares
£0.01 NV £49,999 NV
At 18 April 2021 102,400,000 2 1,124
Shares issued 338,664 - 3
At 3 October 2021 102,738,664 2 1,127
On 30 April 2021 the Group issued 338,664 ordinary shares of 1 pence each to
673 employees pursuant to the Group's share plans.
12. Note to the cash flow statement
24 Weeks ended 24 Weeks ended Year ended
3 October 2021 4 October 2020 18 April 2021
£000 £000 £000
Cash flows from operating activities
Profit / (loss) before tax 12,809 117 (14,722)
Adjustments for:
Depreciation of property, plant and equipment 4,870 4,796 10,288
Depreciation of right of use assets 3,654 3,383 7,567
Share based payment transactions 1,554 854 2,034
Profit on disposal of fixed assets - - 4
Finance income (23) (22) (46)
Finance costs 3,182 3,288 7,040
Changes in inventories (785) (444) 41
Changes in trade and other receivables (225) 3,515 3,108
Changes in trade and other payables 10,867 4,319 (4,414)
Cash generated from operations 35,903 19,806 10,900
Tax reclaimed - 1,131 1,131
Net cash generated from operating activities 35,903 20,937 12,031
Reconciliation of Statutory Results to 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 IAS17 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.
24 weeks ended 24 weeks ended Year ended
Note 3 October 2021 4 October 2020 18 April 2021
£000 £000 £000
Unaudited Unaudited Audited
Operating profit / (loss) 15,968 3,383 (7,728)
Exceptional items 3 - 622 1,327
Share based payment charge 1,554 854 2,034
Site pre-opening costs 1,040 167 421
Adjusted operating profit 18,562 5,026 (3,946)
Depreciation (pre IFRS 16 right of use asset charge) 4,870 4,796 10,288
IFRS 16 Right of use asset depreciation 3,654 3,383 7,567
(Profit) / loss on disposal of fixed assets - - 4
Adjusted EBITDA (IFRS 16) 27,086 13,205 13,913
IAS 17 Rent charge (5,295) (4,650) (10,889)
IAS 17 Rent charge included in IAS 17 pre-opening costs 227 179 506
Adjusted EBITDA (IAS 17) 22,018 8,734 3,530
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