Loungers reports results, changes like-for-like reporting: Cafe bar brand Loungers has reported sales hit £48.02m, in the year to 26 April 2015, with like-for-like sales up 3.9%. However, the company has moved to report like-for-like sales only for ‘mature’ sites that have been trading for two years because sites "over-trade" in the first three to six months before settling to more sustainable trading levels. Operating profit rose to £2.54m from £1.54m the year before. There was an exceptional loss of £451,082 on the disposal of a site in Formby. Profit before tax was £1,700,804, compared with £1,276,477 the year before. 

Results: The company stated: “The last twelve months has seen yet another successful trading performance from Loungers, with our mature estate generating like for like sales growth of 3.9% versus the previous period (based on gross sales inclusive of VAT). In tandem with solid growth from our established sites, we have seen some excellent performances from our more recent openings, which have risen in number to eighteen this year as the pace of roll-out has accelerated further. Our financial performance for the 52 week period ending 26 April 2015 is once again very pleasing with revenues growing by £14.29m from £33.73m to £48.02m representing a 42.3% growth in net sales. The increase in sales was mirrored by underlying Ebitda which grew by 45.1% from £4.38m to £6.35m for the period, whilst Site Ebitda rose from £7.34m to £10.71m. We continue to benefit from improving margins on food and drink whilst the cost side of the business is well-controlled, in spite of the increasing pace of our new site roll-out, as we continue to benefit from low rents. The business continues to invest cash generated from operating activities into fixed assets and the development of new sites. During the period, we spent £12.32m on new sites, representing an increase of £5.38m (77.5%) on the previous year. This increase reflects the incremental costs of opening six more sites than in the previous period, including two Cosy Clubs which tend to be larger, more complex developments, as well as investing in larger Lounge sites than was generally the case previously. As a result of cash generated being invested in new sites, fixed assets increased to £25.63m from £15.95m in the period.”

Financial health: The company stated: “The financial health of the business remains strong with total assets less current liabilities increasing to £17.72m as at 26 April 2015, an increase of £7.52m versus the previous period end balance of £10.21m. The company benefits from the working capital cash in-flow associated with the accelerated roll-out whilst maintaining prudent, industry standard terms with our creditors. The combination of capital creditor balances, and trade and payroll creditors associated with new openings, are contributing to the increasing current liability balance. Santander continues to provide term loan facilities to help finance the opening cost of new units and in January 2015, an additional credit facility of £10m was agreed to facilitate the accelerated roll-out. As at the period end, £2m of this additional facility had been drawn down resulting in an overall balance owed to Santander of £10.77m. The balance of new site costs is funded from internally generated cash flow. Shareholders’ funds increased to £4.73m from £3.29m, reflecting the underlying profitability of the business. During the year, the company changed the way in which it reports like for like sales performance, now only including the performance of ‘mature’ sites that have been trading for two or more years. This makes year-an-year comparison far easier by eliminating the honeymoon effect of new sites which tend to trade particularly strongly in their first three to six months before settling at a more consistent level of sales in the second year of trading.”

New openings and geographic spread: The company stated: “We continue to report decent like for like sales growth, and the ongoing roll-out program has accelerated further with 18 new sites opening in the period, against twelve sites in the previous 12 months. We continue to target secondary high street pitches but the range of property types and schemes that we are now locating in is also growing, in tandem with the widening geography of our site locations. Geographically, Loungers’ expansion has continued across our South West heartland, as well as along the South Coast. However, our move eastwards into Central England and particularly the East Midlands is notable, including the opening of our first site within the M25 vicinity, all of which once again demonstrates the brand’s ability to trade across the entire UK. Loungers’ presence in the South West and along the South Coast was further consolidated with the opening of six new Lounge sites. After a flurry of openings in the North West during the previous year, the focus moved further eastwards as we opened five new Lounges in the Midlands, two in Oxfordshire and Wiltshire, one in Surrey, and a further two in Hertfordshire. After a period of consolidation in 2014, we opened two new city-centre Cosy Clubs in Bristol and Leicester. The brand continues to trade very strongly in both cities and market towns and is a particular focus in terms of 2015/16 openings, with new Cosy Clubs already having been opened in Birmingham, Manchester and Coventry in the first half of the new financial year.”

First site closure: The company stated: “The period also saw the first closure in Loungers’ 13-year history with Haro in Formby ceasing to trade at the end of January 2015. The site had traded poorly for several months and generally failed to meet expectation so management swiftly took the decision to close. All staff members were given the opportunity to transfer to an alternative Loungers site under TUPE legislation and in fact several did just this with a number of alternative Lounges situated nearby. The costs of closure have been recognised as Exceptional costs within the profit and loss account. The site has been sub-let, effective October 2015, ensuring any future costs will be negated by the associated rental income. At the period end there were 53 Lounges and 8 Cosy Clubs across England and Wales, bringing the overall estate to 61 sites at the balance sheet date. The in-house management of all site developments continues to set us apart from our competitors. Our three build teams successfully developed all eighteen opening sites, working to strict timelines, with all sites opening on time.”

Central operations: The company stated: “We continue to invest in our central operations whilst remaining true to the Loungers model of maintaining limited reporting lines and a lean central overhead. The regional operations structure that we created last year has now bedded down well and proved a successful way of breaking the business down into four more manageable parts. During the period, we have extended this model further to include an Operations Chef within each region which has helped ensure that each site receives the appropriate level of managerial focus, in terms of both our food and drink offering. Head Office costs continue to rise, largely as a function of the rollout, as we continue to recruit ahead of new site openings and further expansion. In short, our current infrastructure would allow us to open more sites without expanding further although clearly the number of sites that could be accommodated without change would be limited.”

People: The company stated: “People continue to be at the heart of our business, responsible for the everyday experiences which drive customers back to the Lounges and Cosy Clubs again and again. We invested heavily in training in 2015 with £364,000 being spent in total, largely focussing on our Manager Training program which offers employees a clear path to progression within the business. This year saw also our third and biggest Loungefest to-date, an all-day festival held in the Cotswolds where more than a thousand Loungers employees were further rewarded for their efforts over the last year. The board appreciates the crucial role ‘Loungers’ play in the on-going success of the business and continue to build a reputation as an employer of choice within the sector.”

Future prospects: The company stated: “The first half of the new 2015/16 financial year has seen further acceleration in the pace of roll-out with ten new sites having already opened, made up of seven new Lounges and three new Cosy Clubs. Over the second half of 2015/16, we plan to open a further eleven sites, taking us to 21 new sites in the period, and 82 sites in total by April 2016. The Board remains committed to the continued roll-out of the Lounge and Cosy Club brands, and believes that the current economic climate will allow our strategic growth plans to be executed with continued success.”