REG - Loungers PLC - Results for the 24 weeks ended 1 October 2023
28/11/2023 07:00
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RNS Number : 8328U Loungers PLC 28 November 2023
28 November 2023
Loungers plc
Results for the 24 weeks ended 1 October 2023
Continued strong like for like sales performance accompanied by acceleration
in new site roll-out and margin improvement
16 new sites opened in the period; on-track to open 34 new sites this year and
to end the year with 256 sites
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
unaudited results for the 24 weeks ended 1 October 2023 ("the period").
Financial Highlights
24 weeks ended 1 October 2023 24 weeks ended 2 October 2022
£'000 £'000
Revenue 149,619 122,326
Adjusted EBITDA((1)) 23,862 19,307
Adjusted EBITDA margin (%) 15.9% 15.8%
Adjusted EBITDA (IAS17) 17,284 13,482
Adjusted EBITDA (IAS17) margin (%) 11.6% 11.0%
Operating profit 7,774 6,056
Operating profit margin (%) 5.2% 5.0%
Profit before tax 3,936 2,831
Diluted earnings per share (p) 2.6 2.3
Cash generated from operating activities 23,402 14,613
1 October 2023 2 October 2022
£'000 £'000
Non-property net debt 14,259 9,457
Net debt 156,136 134,246
((1)) Adjusted EBITDA is calculated as operating profit before depreciation,
impairment, pre-opening costs, exceptional costs, and share-based payment
charges.
· Revenue growth of 22.3% versus H1 2023 reflects like for like
("LFL") sales growth of +7.7% and the addition of a net 32 new sites
· Adjusted EBITDA of £23.9m (H1 2023: £19.3m), up 23.6%
· Adjusted EBITDA (IAS17) of £17.3m (H1 2023: £13.5m) up 28.2%
· IAS17 Adjusted EBITDA margin of 11.6% up 0.6% on H1 2023
· Cash generated from operating activities increased to £23.4m (H1
2023: £14.6m)
Operational Highlights
· Consistently strong trading driven by both mature estate (with LFL
sales 25% ahead of pre Covid levels) and new sites
· Continued evolution of our offer, including further food menu
innovation and the introduction of a new blended drinks and iced coffees range
· Headline four-year LFL sales growth of +25.0% is testament to the
strength of our brands, the flexibility of our offering, and the quality of
our teams
· Margins benefitting from an easing of inflationary pressures and on
track to return to pre Covid levels
· New site roll out accelerated with 16 sites opened in the period
(H1 2023 11 sites) - 14 Lounges and two Brightsides. New sites performing
very well and the pipeline remains strong
Current Trading and Outlook
· The business has continued to trade well over the first eight weeks
of Q3, with LFL sales growth across the 32 weeks to 26 November of 7.6%
· A further six sites have opened post the 1 October half year end -
five Lounges and one Cosy Club
· With the consumer remaining robust and continuing evidence of
moderating inflationary pressure we are optimistic as we look ahead to the
Christmas trading period
· The current financial year will be a 53 week accounting year to 21
April 2024
Nick Collins, Chief Executive Officer of Loungers said:
"This has been another period of strong financial and operational growth for
Loungers. The fact that we have delivered increases of 22.3% and 23.6% in our
revenue and EBITDA respectively should be taken as yet another reminder that
it is not all doom and gloom in the UK hospitality sector. We are living proof
that businesses which can provide outstanding hospitality, great food and
drink and excellent value are still capable of thriving, and we see more
growth potential for Loungers than ever before.
Our accelerated site roll-out programme continues at pace, and we are on track
to open 34 in FY24, which means that we will end the year with more than 250
sites. The opening of every new Lounge means an investment of nearly £1m into
the local high street, and the increased footfall creates a positive knock-on
effect on all of the businesses around us. By the end of 2023, we will have
added another 1,000 people to our team during the year, and we are
particularly pleased that one in eight of those new jobs is in areas that the
government wants to 'level up' by creating better opportunities and standards
of living."
Analyst Presentation Webcast
An analyst presentation will be held today, Tuesday 28 November 2023, at
9.00am (GMT). Participants wishing to join the webcast should contact
loungers@powerscourt-group.com (mailto:loungers@powerscourt-group.com) to
request details.
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 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 / Andrew Clark
Powerscourt (Financial Public Relations) Tel: +44 (0) 207 250 1446
Rob Greening / Nick Hayns / Elizabeth Kittle
Notes to Editors
Loungers operates through its three established complementary brands - Lounge,
Cosy Club and Brightside - 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 205 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 36 Cosy Clubs nationwide.
Brightside is a roadside dining concept and was launched in November 2022. The
first Brightside location opened on the A38, south of Exeter, in February
2023, with the second opening in Saltash near Plymouth in June 2023 and the
third in Honiton on the A303 in August 2023.
CHIEF EXECUTIVE REVIEW
Operating review
Continuing the consistently strong sales performance post Covid
Our sales performance continues to be consistently strong. We achieved like
for like sales of +7.7%, whilst our four year LFL result of +25.0% reflects
the resilience of our sales performance in the post Covid period. There is
always noise around weather, sporting events, public holidays and the impact
on sales, but from our perspective the sales story across Lounge and Cosy Club
has been consistently good. Our customer base is relatively robust and
represents a very broad demographic which enjoys our hospitality across the
day. Historically our sales growth has been dominated by volume growth and us
serving more customers. Over the last six months it is predominantly price
that has been driving that growth. There are a number of different dynamics in
the marketplace: - some consumers are spending less, many operators are
pushing through aggressive price increases, supply has and continues to come
out of the market, and everyone is working hard to impress the consumer. The
last point is particularly important: Covid and the economic environment have
caused everyone to up their game (and their prices). That our sales volumes
have grown in the post-Covid period whilst most have seen have their volumes
shrink considerably is both impressive and encouraging. I am optimistic that
against this backdrop we will see a return to more significant volume growth
in the short to medium term.
Pleasing margin progression
We talked in July about our goal to return to pre-Covid levels of EBITDA
margin in the medium-term, and these results demonstrate our firm progress on
that journey. Our impressive margin growth (IAS17 Adjusted EBITDA margin at
11.6% vs 11.0% last year) reflects not just our increasing scale and resultant
ability to mitigate inflationary pressure, but also our recent focus on
efficiency. Over the course of the last six months we have been working on
projects looking at our efficiency in respect of oil, cellar gas, print, waste
and energy. The majority are at relatively early stages, but they are
demonstrating that there's significant opportunity.
Successful new openings
Our new openings continue to perform very well and above average, and the
pipeline remains in good shape to deliver at our current roll-out rate of
around 34 sites per year. Geographically we are seeing more opportunities in
the north east as we gradually move towards Scotland, but there still remains
a great deal for us to go for across England and Wales. We are enjoying strong
trading in mixed use retail/leisure parks and coastal locations, alongside our
"bread and butter" of suburban and small town high street locations. Our
strength of performance across this variety of site types gives us real
confidence in our conservative targets of 600 Lounges and 65 Cosy Clubs.
A relentless focus on innovation
The strong sales performance is achieved by an unrelenting restlessness to
deliver better for our customers. The spirit of innovation and
entrepreneurialism within the business has never been stronger. Given our
significant growth, we often see a cyclical effect with periods that are more
dominated by change and innovation followed by those that are more dominated
by implementation and consolidation. We are currently in the former, and the
strength and depth of our senior team is allowing us to really push on. Recent
food menu launches in both Lounge and Cosy Club have been excellent, and our
flexibility around being able to focus on emerging food trends - without being
wedded to a specific cuisine - is a significant point of difference. We serve
just as many bacon butties as vegetarian cauliflower dishes. And this
restlessness is not just on the food side; we have also rolled out major
improvements to our blended drinks, iced coffees, and cocktails and are
embarking on a major project to improve our already strong coffee offer, which
represents 10% of our sales in the Lounge estate.
Innovation and change within the business isn't limited to the customer
experience. Challenging how we can adapt and improve organisationally to make
life easier for our site teams whilst maintaining and enhancing the culture
within the business is also critically important. Our ambition is to ensure
that we benefit from the advantages that scale brings, whilst not succumbing
to the red-tape risk that comes with being a 250-site business. On the
commercial side, we are investing more in operational support, procurement and
supply chain, risk management and maintenance, recognising that we can do more
centrally, to ensure our site teams can focus solely on their customers and
their own teams. Within our operational structure, we have now introduced
regional maintenance managers, community managers and talent and recruitment
managers. A degree of devolution and accountability at a regional level are
critical to our continued success.
Brightside progressing to plan
During the summer we opened our second and third Brightsides and the team have
done a fantastic job at delivering well for their customers in what has been
an intense period due to the openings coinciding with school summer holidays.
This year we have achieved a gross average weekly level of sales of £22.5k
across the sites and we expect this to grow as we continue to build our brand
awareness. In the main we are pleased with Brightside's performance to date,
and most importantly are proud of the hospitality we are providing, and the
choice we have introduced to passing motorists as well as to local residents.
As we continue to trade, and with the benefit of the two further planned
openings in FY25, we will build a view on Brightside's returns on capital and
whether there is an opportunity to roll it out as a national brand. Whilst
it's an exciting time for this new brand, I believe the strength of these
interim results firmly demonstrates that Brightside has in no way distracted
from our focus on or the performance of the Lounge and Cosy Club brands.
Aiming to be the number one choice for careers in hospitality
On the people side we have continued to focus on how we reward and incentivise
our teams across the business. We have adapted our site team bonus structures
to ensure that they are fully aligned with our operational priorities. We have
also enhanced the focus on development and succession planning. One of our
core attributes - and one of the parts of the business of which I am most
proud - is our ability to build careers in hospitality. We're good at this and
have many great examples of people who have worked up through the ranks, but
there is still plenty of scope for us to do more and to be better. The next
couple of years will see us really double-down in terms of investing in
learning and development, and ensuring that we are making the most of the
career opportunities that our growth creates. We want to be the number one
choice for anyone pursuing a career in the hospitality industry in the UK.
At an exec level we have welcomed Lucy Knowles into the business as Cosy Club
Managing Director. Cosy Club is a fantastic brand that complements our Lounges
and continues to perform well. It achieves strong sales and returns on capital
in line with the Lounge business, but our instinct is that there is more that
we can do to maximise sales and I am excited about the impact Lucy will have
on the business.
Financial review
Financial Performance
It is pleasing to be able to report for the first time in four years current
and prior year numbers that are not impacted by Covid, and all the more
pleasing to be reporting such a strong year on year performance, with:
· Total revenue ahead by 22.3%;
· Adjusted EBITDA ahead by 23.6%
· Operating profit ahead by 28.4%
Total revenue growth of 22.3% reflects the positive impact of LFL sales growth
of 7.7% allied to the continued strength of our new site opening programme,
with 16 sites opened in the first half and a net 32 new sites opened in the
past 12 months. The sales performance again demonstrates both the resilience
of the Loungers business and the consistency we have seen in consumer
behaviour.
Adjusted EBITDA margins are ahead by 0.1% to 15.9% on the IFRS16 basis.
However the margin expansion is more marked when looked at on the IAS17
basis with rent costs included, showing an increase to 11.6% from 11.0% in H1
2023. The 60bps improvement in IAS17 Adjusted EBITDA margin reflects:
· Gross margin improvement of 60bps;
· Fixed property cost leverage benefit of 60bps; offset by
· Negative impact of higher energy costs of 50bps
· Negative impact of other costs of 10bps
The gross margin improvement has been largely driven by improvements in food
and drink gross margin as the business continues to benefit from its growing
scale allied to a moderation in inflationary pressures. The maintenance of
strong property discipline assists in delivering improvements in fixed
property cost leverage, with a rent to revenue ratio of 4.4% in the first
half. As anticipated these benefits have been partially offset by higher
energy costs. Whilst the business will continue to benefit from its May 2020
energy hedge through to September 2024, the new site roll out means that only
approximately 70% of the estate is covered by that original hedge, with the
negative margin impact coming from sites opened post May 2020.
Profit before tax of £3.9m (H1 2023 £2.8m) represents an uplift of 39.0%.
The tax charge of £1.2m relates wholly to deferred tax, with the business
benefitting from the introduction of the 100% main pool first year allowance.
The effective tax rate of 30.4% reflects the impact of non-deductible
depreciation on capital expenditure not eligible for capital allowances and
the deferred tax accounting for share based payments.
Net debt
Non-property net debt (gross of arrangement fees) of £14.3m represents an
increase of £4.8m relative to 2 October 2022, and reflects in large part the
acceleration in the new site opening programme.
During the half year the Group entered into a new senior facilities lending
agreement with its existing lenders Santander Corporate Banking and Bank of
Ireland. Under the terms of the new agreement the Group reduced its term
loan from £32.5m to £20.0m and increased its RCF from £10.0m to £22.5m.
Finance costs for the period have increased to £3.9m (H1 2023: £3.3m),
reflecting an increase in IFRS16 lease interest charges to £3.1m (H1 2023:
£2.8m) and an increase in bank interest payable to £0.9m (H1 2023: £0.5m).
Cash flow
Net cash generated from operating activities was £23.4m (H1 2023: £14.6m),
with the improvement of £8.8m coming from EBITDA growth of £4.1m and working
capital improvements of £4.7m.
Capital expenditure outflows in the period increased to £21.0m (H1 2023:
£15.0m), a function of the acceleration in the new site opening programme and
the opening of 16 sites in the first half (H1 2023:11 sites). The capital
expenditure incurred in the period (excluding IFRS16 ROUA investment) of
£22.0m (H1 2023: £15.9m), included £15.1m related to new sites (H1 2023:
£11.2m).
Cash outflows include £12.5m in connection with the refinancing referenced
above and £0.7m in relation to the cash settlement of share awards and the
purchase of the Group's own shares.
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 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 trade well over the first eight weeks
of Q3, with LFL sales growth across the 32 weeks to 26 November of 7.6%
· A further six sites have opened post the 1 October half year end -
five Lounges and one Cosy Club
· With the consumer remaining robust and continuing evidence of
moderating inflationary pressure we are optimistic as we look ahead to the
Christmas trading period
· The current financial year will be a 53 week accounting year to 21
April 2024
Nick Collins
Chief Executive Officer
28 November 2023
Condensed Consolidated Statement of Comprehensive Income
For the 24 Week Period Ended 1 October 2023
24 weeks ended 24 weeks ended Year ended
Note 1 October 2023 2 October 2022 16 April 2023
£000 £000 £000
Unaudited Unaudited Audited
Revenue 149,619 122,326 283,507
Cost of sales 90,314 (74,411) (170,350)
Gross profit 59,305 47,915 113,157
Administrative expenses (51,531) (41,859) (98,406)
Operating profit 7,774 6,056 14,751
Finance income 84 61 204
Finance costs 3 (3,922) (3,286) (7,621)
Profit before taxation 3,936 2,831 7,334
Tax charge on profit 4 (1,198) (368) (405)
Profit for the period 2,738 2,463 6,929
Other comprehensive (expense) / income:
Cash flow hedge - change in value of hedging instrument - (38) (38)
Other comprehensive (expense) / income for the period - (38) (38)
Total comprehensive income for the period 2,738 2,425 6,891
Earnings per share (pence)
Basic 5 2.6 2.4 6.7
Diluted 5 2.6 2.3 6.5
Condensed Consolidated Statement of Financial Position
As at 1 October 2023
Note 2 October 2022 2 October 2022 16 April 2023
£000 £000 £'000
Unaudited Unaudited Audited
Assets
Non-current
Intangible assets 114,722 113,227 114,722
Property, plant and equipment 7 250,467 203,845 228,414
Deferred tax assets - 988 945
Finance lease receivable - 534 -
Total non-current assets 365,189 318,594 344,081
Current
Inventories 2,450 2,031 2,475
Trade and other receivables 7,024 3,734 8,722
Cash and cash equivalents 5,741 23,044 26,370
Total current assets 15,215 28,809 37,567
Total assets 380,404 347,403 381,648
Liabilities
Current liabilities
Trade and other payables (70,411) (52,207) (69,708)
Lease liabilities (11,025) (9,153) (59)
Derivative financial instruments - - (10,247)
Total current liabilities (81,436) (61,360) (80,014)
Non-current liabilities
Borrowings 8 (19,709) (32,329) (32,392)
Lease liabilities (130,852) (115,636) (124,590)
Deferred tax liabilities (252) - -
Total liabilities (232,249) (209,325) (236,996)
Net assets 148,155 138,078 144,652
Called up share capital 9 1,139 1,133 1,133
Share premium 8,066 8,066 8,066
Treasury shares (376) - -
Other reserves - 14,278 14,278
Accumulated profits 139,326 114,601 121,175
Total equity 148,155 138,078 144,652
Condensed Consolidated Statement of Changes in Equity
For the 24 Week Period Ended 1 October 2023
Share Capital Share Premium Hedge Reserve Treasury Shares Other Reserve Accumulated Profits Total Equity
£000 £000 £000 £000 £000 £000 £000
At 17 April 2022 1,127 8,066 38 - 14,278 110,597 134,106
Ordinary shares issued 6 - - - - (6) -
Share based payment charge - - - - - 1,547 1,547
Total transactions with owners 6 - - - - 1,541 1,547
Profit for the period - - - - - 2,463 2,463
Other comprehensive expense - - (38) - - - (38)
Total comprehensive income - - (38) - - 2,463 2,425
At 2 October 2022 1,133 8,066 - - 14,278 114,601 138,078
Share based payment charge - - - - - 2,108 2,108
Total transactions with owners - - - - - 2,108 2,108
Profit for the period - - - - - 4,466 4,466
Total comprehensive income - - - - - 4,466 4,466
At 16 April 2023 1,133 8,066 - - 14,278 121,175 144,652
Ordinary shares issued 6 - - - - (6) -
Share based payment charge - - - - - 1,141 1,141
Group reorganisation - - - - (14,278) 14,278 -
Purchase of own shares - - - (376) - - (376)
Total transactions with owners 6 - - (376) (14,278) 15,413 765
Profit for the period - - - - - 2,738 2,738
Total comprehensive income - - - - - 2,738 2,738
At 1 October 2023 1,139 8,066 - (376) - 139,326 148,155
Condensed Consolidated Statement of Cash Flows
For the 24 Week Period Ended 1 October 2023
24 Weeks ended 24 Weeks ended Year ended
Note 1 October 2023 2 October 2022 16 April 2023
Unaudited Unaudited Audited
£000 £000 £000
Net cash generated from operating activities 10 23,402 14,613 51,107
Cash flows from investing activities
Purchase of subsidiary undertakings (net of cash acquired) - - (2,719)
Purchase of property, plant and equipment (21,022) (15,012) (36,978)
Interest received 84 43 204
Net cash used in investing activities (20,938) (14,969) (39,493)
Cash flows from financing activities
Shares issued on exercise of employee share awards (183) (183) (190)
Cash settlement of share awards (333) - -
Purchase of own shares (376) - -
Loan arrangement fees (266) - -
Bank loans repaid (12,500) - -
Interest paid (852) (455) (1,334)
Principal element of lease payments (5,533) (4,511) (8,824)
Interest paid on lease liabilities (3,050) (2,758) (6,146)
Principal element of lease receivables - 57 -
Net cash used in financing activities (23,093) (7,807) (16,494)
Net decrease in cash and cash equivalents (20,629) (8,206) (4,880)
Cash and cash equivalents at beginning of the period 26,370 31,250 31,250
Cash and cash equivalents at end of the period 5,741 23,044 26,370
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 1 October 2023 ("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 28
November 2023.
The Interim Financial Statements have not been audited or reviewed by the
auditors. The financial information shown for the 24 weeks ended 1 October
2023 does not constitute statutory financial statements within the meaning of
section 434 of the Companies Act 2006.
The information shown for the year ended 16 April 2023 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 16 April
2023, which were prepared in accordance with UK adopted International
Accounting Standards and those parts of the Companies Act 2006 applicable to
companies reporting under those standards. The Group's Annual Report and
Financial Statements for the year ended 16 April 2023 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 16 April 2023 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 16 April 2023.
The accounting policies adopted in the preparation of the half year financial
statements are consistent with those followed in the preparation of the
Group's financial statements for the 52 weeks ended 16 April 2023. The Group
has not early adopted any standard, interpretation or amendment that has been
issued but is not yet effective.
Going concern
In concluding that it is appropriate to prepare the Group's interim financial
statements 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 terms risks such as climate change.
As at the 1 October 2023 the Group had cash balances of £5.7m and unutilised
facilities of £22.5m providing total liquidity of £28.2m.
In order to assess the Group's going concern position the Board has considered
a base case and a downside case scenario of the Group's business plan. The
going concern period covers the period to December 2024.
· 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 and the 30
September 2024 end date of the May 2020 energy hedge. 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 50% decline in adjusted EBITDA over
the year to December 2024. This significant sales decline has been mitigated
by a cessation of the new site roll out programme from May 2024 onwards.
In the downside scenario the Group continues to have significant liquidity and
banking covenant headroom and accordingly the Directors have concluded that it
is appropriate to prepare the Interim Financial Statements on the going
concern basis.
ESG and TCFD requirements
The Group reported under the TCFD framework in its full year report and
accounts to 16 April 2023. The Group continues to evolve its ESG strategy,
with initiatives undertaken in the first half of the financial year including
the rollout of its Community initiatives strategy, a waste management trial
and the launch of its first group-wide Environmental Policy.
At the half year, the Group is not aware of any climate related risks that
would have a material financial impact upon the Group's ability to operate,
but the Board continues to monitor this as part of their ongoing risk
assessments.
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 16 April 2023.
The Group tests for impairment on an annual basis or earlier if there are
indicators that an asset might be impaired. At the 1 October 2023 the Group
was not aware of any specific events that would require a site to be impaired.
The Group has reviewed its FY23 impairment calculations, flexing assumptions
for potential increases in discount rates and is satisfied that there is no
requirement to recognise additional impairment.
3. Finance costs
24 Weeks ended 24 Weeks ended Year ended
1 October 2023 2 October 2022 16 April 2023
£000 £000 £000
Unaudited Unaudited Audited
Bank interest payable 872 528 1,475
Finance cost on lease liabilities 3,050 2,758 6,146
3,922 3,286 7,621
4. Tax on profit
24 Weeks ended 24 Weeks ended Year ended
1 October 2023 2 October 2022 16 April 2023
£000 £000 £000
Unaudited Unaudited Audited
Taxation charged to the income statement
Current income taxation - - -
Adjustments for current tax of prior periods - -
Total current income taxation - - -
Deferred Taxation
Origination and reversal of temporary differences - - 1,069
Current period 1,198 368 -
Adjustments to tax charge in respect of prior periods - - (911)
Adjustment in respect of changes in tax rates - - 247
Total deferred tax 1,198 368 405
Total taxation charge in the consolidated income statement 1,198 368 405
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 1 October 2023. The effective tax
rate of 30.4% is above the standard rate of income tax due to the impact of
non-deductible depreciation on fixed asset additions that are not eligible for
capital allowances and the impact of share based payment charges.
5. 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 1 October 2023 the Group
had potentially dilutive shares in the form of unvested shares pursuant to the
above long-term incentive plans.
Own shares held in Treasury are treated as cancelled for the purpose of this
calculation.
24 Weeks ended 24 Weeks ended Year ended
1 October 2023 2 October 2022 16 April 2023
Unaudited Unaudited Audited
£000 £000 £000
Profit for the period after tax 2,738 2,463 6,929
Basic weighted average number of shares 103,657,995 103,137,035 103,243,015
Adjusted for share awards 3,338,091 2,148,438 3,375,062
Diluted weighted average number of shares 106,996,006 105,285,472 106,618,077
Basic earnings per share (p) 2.6 2.4 6.7
Diluted earnings per share (p) 2.6 2.3 6.5
6. 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 £1,665,000 in respect of the Group's
three share-based payment plans.
7. Fixed assets
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 17 April 2022 369 67,489 210 70,606 149,381 288,055
Additions 832 6,455 - 8,640 9,698 25,625
At 2 October 2022 369 74,776 210 79,246 159,079 313,680
Additions - 10,621 - 12,633 14,821 38,075
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
Additions 2,865 7,717 - 11,429 12,571 34,582
At 1 October 2023 5,316 91,831 201 103,133 186,471 386,952
Depreciation
At 17 April 2022 - 17,937 66 30,658 51,031 99,692
Provided for the period - 2,079 23 3,713 4,328 10,143
At 2 October 2022 - 20,016 89 34,371 55,359 109,835
Provided for the period 14 2,692 25 4,818 5,533 13,082
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
Provided for the period 42 2,606 16 4,856 5,009 12,529
At 1 October 2023 56 25,133 127 43,970 67,199 136,485
Net book value
At 1 October 2023 5,260 66,698 74 59,163 119,272 250,467
At 16 April 2023 2,437 61,587 90 52,590 111,710 228,414
At 2 October 2022 369 54,760 121 44,875 103,720 203,845
At 17 April 2022 369 49,552 144 39,948 98,350 188,363
8. Borrowings
1 October 2023 2 October 2022 16 April 2023
£000 £000 £000
Unaudited Unaudited Audited
Non-current
Bank loan 20,000 32,500 32,500
Loan arrangement fees (291) (171) (108)
19,709 32,329 32,392
The Group's bank borrowings are secured by way of fixed and floating charges
over the Group's assets.
In June 2023 the Group completed a refinancing of it debt arrangements leaving
it with a term loan of £20,000,0000 and a revolving credit facility of
£22,500,000. 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,
which are unchanged from the original facility.
The Group has been compliant with all of its covenant obligations during the
24 weeks to 1 October 2023.
At 1 October 2023 the term loan was fully drawn and £nil was drawn down under
the revolving credit facility.
9. Share capital
1 October 2023 2 October 2022 16 April 2023
£000 £000 £000
Unaudited Unaudited Audited
Allotted, called up and fully paid ordinary shares 1,039 1,033 1,033
Redeemable preference shares 100 100 100
1,139 1,133 1,133
Ordinary shares at £0.01 each 103,900,642 103,303,312 103,332,033
Redeemable preference shares 2 2 2
The table below summarises the movements in share capital for Loungers plc
during the period ended 1 October 2023:
Ordinary Redeemable £'000
Shares Preference
Shares
£0.01 NV £49,999 NV
At 16 April 2023 103,332,033 2 1,133
Shares issued 568,609 - 6
At 1 October 2023 103,900,642 2 1,139
On 4 May 2023 the Group issued 359,000 ordinary shares of 1 pence each to 718
employees pursuant to the Group's share plans. At the same time the Group
applied to increase its block listing by 477,962 shares in respect of its
share plans. In the period to 1 October 2023 209,609 shares have been issued
under the block listing scheme.
10. Note to the cash flow statement
24 Weeks ended 24 Weeks ended Year ended
1 October 2023 2 October 2022 16 April 2023
£000 £000 £000
Cash flows from operating activities
Profit before tax 3,936 2,831 7,334
Adjustments for:
Depreciation of property, plant and equipment 7,520 5,815 13,364
Depreciation of right of use assets 5,009 4,328 9,861
Impairment of property, plant and equipment - - 309
Impairment of right of use assets - - 1,298
Share based payment transactions 1,665 1,730 4,024
Loss on disposal of fixed assets - - 317
Finance income (84) (60) (204)
Finance costs 3,922 3,286 7,621
Changes in inventories 25 (112) (557)
Changes in trade and other receivables 1,552 1,591 (3,134)
Changes in trade and other payables (143) (4,796) 10,950
Cash generated from operations 23,402 14,613 51,183
Tax paid - - (76)
Net cash generated from operating activities 23,402 14,613 51,107
11. Group reorganisation
As of 1 October 2023 the Group was engaged in a restructuring exercise, to
remove three intermediate holding companies (Lion / Jenga Topco Ltd, Lion /
Jenga Midco Ltd and Lion / Jenga Bidco Ltd) from the Group structure, thereby
simplifying it. As a consequence of the capital reductions undertaken, the
Condensed Consolidated Statement of Changes in Equity at 1 October 2023 shows
a reduction in other reserves and a corresponding increase in accumulated
profits.
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
1 October 2023 2 October 2022 16 April 2023
£000 £000 £000
Unaudited Unaudited Audited
Operating profit 7,774 6,056 14,751
Net impairment charge - - 1,607
Loss on disposal of fixed assets - - 317
Transaction costs - - 102
Share based payment charge 1,665 1,730 4,024
Site pre-opening costs 1,894 1,378 3,323
Adjusted operating profit 11,333 9,164 24,124
Depreciation (pre IFRS 16 right of use asset charge) 7,520 5,815 13,364
IFRS 16 Right of use asset depreciation 5,009 4,328 9,861
Adjusted EBITDA (IFRS 16) 23,862 19,307 47,349
Adjusted EBITDA % (IFRS 16) 15.9% 15.8% 16.7%
IAS 17 Rent charge (6,816) (5,959) (13,459)
IAS 17 Rent charge included in IAS 17 pre-opening costs 238 134 331
Adjusted EBITDA (IAS 17) 17,284 13,482 34,221
Adjusted EBITDA % (IAS 17) 11.6% 11.0% 12.1%
The Group references Like for Like sales growth as a key APM. Like for Like
sales growth excludes the sales from sites that have been open for less than
18 months.
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