Like many in the hospitality sector Loungers benefited from the Eat Out to Help Out scheme but even excluding the resulting uplift, like-for-like sales were positive for the nine weeks from 13 July to 13 September.
The company closed all its 167 sites ahead of the government’s official lockdown on 20 March, before which it experienced strong trading with like-for-like sales up 4.5% and total revenues up 22% in the 44 weeks to 23 February 2020.
The five weeks of closed sites impacted full-year revenues but the group still managed to increase revenues by 8.8% to £166.5 million for the period to 19 April, helped by the opening of 21 new sites. Earnings before interest, taxes, depreciation and amortisation (EBITDA) nudged-up 0.8% to £28.8 million.
STRATEGICALLY BETTER POSITIONED
The company grasped the post Covid-19 challenges with both hands and made improvements to the overall customer experience during lockdown.
Chairman and co-founder Alex Riley commented: ‘With the undeniable change underway in the way people live, and more specifically work, we believe we are extremely well-placed to benefit. The suburban and small town locations of the vast majority of our Lounge estate have remained strong and our large, airy Cosy Club venues - coupled with an offer that is sufficiently differentiated from our competitors - mean that both brands are in a strong position to prosper.’
Management is sufficiently confident to announce the resumption of the roll-out of new sites, cautiously building up to pre-Covid 19 run-rates of 25 new sites a year. Moreover the company reckons the longer-term target of 400 sites ‘feels increasingly conservative’ as it builds more confidence on the attractions of its unique proposition.
The fall-out in the hospitality sector and soft property market has the potential to increase the availability of sites in very good locations while the ‘tenant friendly property market’ has continued to benefit the groups’ financials with the rent to revenue ratio at 5.3%, significantly lower than the overall sector.
Liberum has increased its EBITDA forecast for the current financial year to £9.9 million from £2.2 million and fiscal 2022 by 6% to £24 million. The broker believes the balance sheet is strong with around £33 million of headroom enough to support further investment in expansion and unwinding working capital.
Even after paying remaining deferred VAT and rent liabilities net debt at £24.5 million remains below pre-Covid-19 levels, helped by careful cash management and the £8.1 million of new equity raised.