TIDMLGRS
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 52 weeks 52 weeks
ended ended ended
16 April 17 April 21 April
2023 2022 2019
GBP'000 GBP'000 GBP'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 17 April 21 April
2023 2022 2019
GBP'000 GBP'000 GBP'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 GBP283.5m (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 GBP47.3m represents growth of 66% since IPO in April 2019
-- Operating profit of GBP14.8m declined vs FY22 reflecting the
positive impact in FY22 of Covid related government support
measures
-- Cash generated from operating activities of GBP51.1m
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
GBP47.3m. 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 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 Tel: +44 (0) 20
and NOMAD) 7484 4040
Sam Fuller / Tim Richardson
Liberum Capital Limited (Joint Broker) Tel: +44 (0) 20
Andrew Godber / John Fishley 3100 2000
Peel Hunt LLP (Joint Broker) Tel: +44 (0)20 7418
Dan Webster / George Sellar 8900
Powerscourt (Financial Public Relations) Tel: +44 (0) 207
Rob Greening / Nick Hayns / Elizabeth Kittle 250 1446
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 GBP283.5m,
and delivered Adjusted EBITDA of GBP47.3m. 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 GBP21.5m. 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 GBP283.5m, operating profit of
GBP14.8m, opened a record 29 new sites, and our Adjusted EBITDA
performance of GBP47.3m 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 Year ended
16 April 17 April
2023 2022
GBP000 GBP000
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 GBP283.5m.
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
GBP15.1m in FY22; adjusting out this benefit reduces FY22 operating
profit to GBP13.4m and operating margin to 6.0%. Further detail on
profit margins pre and post Covid is provided below.
Net cash generated from operations of GBP51.1m 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 GBP3.7m, cash balances
decreased by GBP4.9m to GBP26.4m. Total IFRS 16 net debt increased
by GBP20.3m to GBP140.9m, the increase driven by taking on new
leases with a capital value of GBP24.5m 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 Year ended Year ended
16 April 17 April 21 April
2023 2022 2019
GBP000 GBP000 GBP000
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 GBP283.5m compares to GBP237.3m 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 Three year Four year
LFL LFL LFL
Gross - excluding VAT
benefit +7.4% +17.6% +22.8%
Adjusted EBITDA (IFRS 16) of GBP47.3m 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
GBP15.1m) and business rates support (worth GBP3.3m). 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 GBP6.0m, a year on year
increase of GBP5.0m. 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 GBP14.8m is after incurring
net impairment charges of GBP1.6m. These costs include
-- GBP2.9m relating to the impairment of right of use assets
-- GBP0.5m relating to the impairment of property, plant and equipment
-- The release of impairment provisions totaling GBP1.8m 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
GBP4.0m (2022: GBP3.2m), 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 GBP7.6m (2022: GBP6.9m) include IFRS 16 lease
liability finance costs of GBP6.1m (2022: GBP5.7m) and bank
interest payable of GBP1.5m (2022: GBP1.2m). The Group received
interest of GBP0.2m (2022: GBPnil) 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 GBP140.9m
(2022: GBP120.6m) reflects the impact of adding new lease
liabilities of GBP24.5m in the year.
At year end the Group's capital structure included a GBP32.5m
term loan and a GBP10m 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 GBP12.5m of the term loan to leave a term loan debt of
GBP20.0m and extending the RCF to GBP22.5m to leave total
facilities unchanged at GBP42.5m. 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 GBP0.4m for the financial
year to 16 April 2023 (2022: charge of GBP3.7m) and at year end
carried a corporation tax receivable of GBP0.1m (2022: GBP0.1m
receivable) and a deferred tax asset of GBP0.9m (2022: GBP1.4m).
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 GBP51.1m (2022:
GBP69.6m) reflects a working capital cash inflow of GBP7.3m (2022:
cash inflow of GBP19.7m). 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 GBP37.0m (2022: GBP22.8m) and compare to the cost of fixed
asset additions (excluding right of use assets) recognised in the
year of GBP39.2m (2022: GBP26.2m). Capital expenditure incurred in
the year of GBP39.2m (2022: GBP26.2m) included GBP29.6m in respect
of new site openings, of which GBP26.9m related to the 29 sites
opened in the year (2022: total new site capex spend of GBP19.6m of
which GBP18.2m related to the 24 sites built and opened in the
year). In addition capital expenditure in the year included GBP2.7m
on the Lounge kitchen reset programme, completed in May 2023 (2022:
GBP0.6m) and a further GBP0.9m in respect of the freehold purchase
of our Cosy Club Canterbury site.
As referenced earlier, the Group invested a further GBP2.7m 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 Year ended Year ended
16 April 17 April 21 April
2023 2022 2019
New site openings 29 27 25
Capital expenditure (excluding GBP39.2m GBP26.2m GBP23.2m
IFRS16 RoU assets)
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 GBP140.9m and
total liquidity of GBP36.4m.
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 17 April
2023 2022
GBP000 GBP000
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 17 April
2023 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 At 17 April
2023 2022
GBP000 GBP000
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 Share Hedge Other Retained
capital premium reserve reserve earnings Total equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
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 17 April
2023 2022
GBP000 GBP000
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 309 -
equipment
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 (2,719) -
(net of cash acquired)
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 ('GBP000') 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 GBP26.4m
(2022: GBP31.3m) and undrawn facilities of GBP10m (2022: GBP25m),
providing total liquidity of GBP36.4m (2022: GBP41.3m). 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
GBP12.5m of its term loan. At the same time the Group's RCF was
increased to GBP22.5m 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 17 April
2023 2022
GBP000 GBP000
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 parent company and consolidated
financial statements
Fees payable to company's auditors
and its associates for other services: 85 75
* 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 17 April
2023 2022
GBP000 GBP000
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 17 April
2023 2022
GBP000 GBP000
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 17 April
2023 2022
GBP000 GBP000
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 17 April
2023 2022
GBP000 GBP000
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 17 April
2023 2022
GBP000 GBP000
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 17 April
2023 2022
GBP000 GBP000
Cost
At beginning of year 113,227 113,227
Additions 1,495 -
--------- ---------
At end of year 114,722 113,227
========= =========
Goodwill of GBP113,227,000 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 GBP1,495,000 arose on the acquisition of Route
Restaurants Limited and Nightlife Leisure (South West) Limited on 1
December 2022
9. Property, plant and equipment
Freehold Leasehold Motor Fixtures Right Total
Land and Building Vehicles and Fittings of use
Buildings Improvements asset
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
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 GBP2,467,000 (2022: GBP1,031,000) 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 GBP9.8m 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 GBP1.8m has been released to the income statement (2022:
GBPnil). Conversely, the assessment carried out at the end of FY23
indicated that a further ten sites showed potential impairment and
a GBP3.4m charge has been recognised in respect of these sites
(2022: GBPnil).
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 GBP1,000,000 (2022: GBP2,984,000). A 100 basis
point increase in the discount rate would result in an impairment
charge of GBP400,000 (2022: GBP1,431,000) and a 50 basis point
reduction in the terminal growth rate would result in an impairment
charge of GBP100,000 (2022: GBP295,000).
10. Borrowings
16 April 17 April
2023 2022
GBP000 GBP000
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 GBP32,500,000 and a revolving credit facility ("RCF")
of GBP10,000,000. 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 GBP20,000,000 and increasing the RCF by GBP12,500,000.
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 GBPnil drawn down under the RCF).
11. Analysis of changes in net debt
19 April Cash flows Non-cash 17 April
2021 movement 2022
GBP000 GBP000 GBP000 GBP000
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 Cash flows Non-cash 16 April
2022 movement 2023
GBP000 GBP000 GBP000 GBP000
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 GBP32,500,000 to GBP20,000,000 and increased its RCF from
GBP10,000,000 to GBP22,500,000, 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 17 April
2023 2022
GBP000 GBP000
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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END
FR NKDBDDBKBCOD
(END) Dow Jones Newswires
July 12, 2023 02:00 ET (06:00 GMT)
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