Loungers — H1 FY23 Earnings Presentation
34 slides from Loungers's earnings presentation, Nov 30, 2022
Slide 1: Loungers plc Results for the 24 weeks ended 2 October 2022
Loungers plc Results for the 24 weeks ended 2 October 2022 30 November 2022
Slide 2: Highlights
2 Highlights ▪ Market out-performance continues with consistently strong trading ▪ Sales uplift reflects both volume growth and price increases ▪ We remain well-positioned in a recessionary environment through our balance of margin protection and value for money price points ▪ Fifth build team up an
Slide 3: Financial Review
Financial Review Gregor Grant - CFO 3
Slide 4: Results summary FY23 vs FY20
4 Results summary FY23 vs FY20 ▪ Comparison vs FY20 FY23 H1 FY20 H1 Var o Compares to pre Covid £m £m o No distortion from restricted trading or government support Revenue 122.3 79.8 53.2% ▪ Revenue of £122.3m up 53.2% o Additional 50 sites at period end Gross profit 47.9 33.2 44.3% o Very strong th
Slide 5: Results summary FY23 vs FY22
5 Results summary FY23 vs FY22 ▪ Comparison vs FY22 o Significantly impacted by the positive impact of government support measures in FY22 FY23 H1 FY22 H1 o Notably VAT reduction and business rates £m £m support o Opening four weeks of FY22 trading restricted Revenue 122.3 102.4 to external areas ▪
Slide 6: LFL sales performance
6 LFL sales performance ▪ Three year LFL of +17.0% over H1 (24 weeks) FY23 H1 FY23 ▪ No Covid distortion 24wks 32wks ▪ Improved to +17.4% over 32 weeks LFL Sales – 3 Year 17.0% 17.4% ▪ One year LFL of +1.5% ▪ Covers 20 weeks ▪ 16 May 2022 to 2 Oct 2022 FY23 H1 FY23 20wks 28wks ▪ Excludes external on
Slide 7: Consistent Three Year LFL performance maintained into FY23
7 Consistent Three Year LFL performance maintained into FY23 Omicron 25.0% impacted Christmas 19.6% 2021 20.0% 18.3% 17.9% 18.5% 16.6% 16.1% 15.0% Three Year LFL Sales 10.0% 5.0% 3.2% 0.0% P2-4 FY22 P5-7 FY22 P8-10 FY22 P11-13 FY22 P1-P3 FY23 P4-P6 FY23 P7-8 FY23 ▪ Three year underlying LFL post re-
Slide 8: Consistent Three Year LFL performance across site age cohorts
8 Consistent Three Year LFL performance across site age cohorts 25.0% 20.0% FY23 Three 15.0% Year LFL Sales 10.0% 5.0% 0.0% FY13 and pre FY14 FY15 FY16 FY17 FY18 FY19 Year of opening ▪ Consistent split of +17.4% across the various age cohorts ▪ Ranges from +12.6% (FY16) to +21.2% (FY14)
Slide 9: Underlying margin FY23 vs FY20
9 Underlying margin FY23 vs FY20 ▪ IAS17 Adjusted EBITDA margin down 180bps vs FY20 ▪ Cost of sales (inc. site labour) negative 230bps o Priority to retain value for money principles and drive share FY20 Adjusted EBITDA Margin IAS17 12.8% o CGS margin growth of 60bps offset by labour ratio up 290bps
Slide 10: Margin outlook – inflationary pressures
10 Margin outlook – inflationary pressures FY23 July FY23 November Update Expectation Expectation Selling Price 3-6% 7% Additional price taken in October menus CGS Food 6-9% 9-10% Further challenge from oil, produce, dairy CGS Drink 4-5% 5-7% Upcoming draught increases, coffee, milk Labour 6-8% 9% R
Slide 11: Cost reduction initiatives in a challenging environment
11 Cost reduction initiatives in a challenging environment ▪ No single action o Opportunities exist to cut waste and deliver savings across a number of cost lines o Often about changing long ingrained behaviours ▪ Examples of opportunities that we are addressing: o Minimising energy consumption o Im
Slide 12: Cash flow IAS17
12 Cash flow IAS17 FY23 £m Adjusted EBITDA IAS17 13.5 Pre-opening costs (1.5) ▪ Cash generated from operations of £7.3m Corporation tax - o Impacted by half year working capital outflow Changes in working capital (4.7) ▪ Working capital outflow of £4.7m o Reflects timing of half year vs full year Ca
Slide 13: Capital expenditure
13 Capital expenditure ▪ Net new site capex of £11.2m FY23 o Includes £9.7m spend re 11 new sites built and opened in £m the period, eight Lounges and three CC New site 13.1 ▪ Maintenance capex of £1.6m Landlord contributions (1.9) o Represents 1.3% of revenue (FY22 1.1%) Net new site spend 11.2 o P
Slide 14: Non property net debt
14 Non property net debt ▪ Net debt £9.5m FY23 H1 FY22 FY22 H1 £m £m £m ▪ Increase in net debt post April 2022 year end Cash 23.0 31.3 20.6 reflects timing of working capital flows Term Loan (32.5) (32.5) (32.5) ▪ Year on year £8.0m reduction in underlying net debt, after Net debt (9.5) (1.2) (11.9)
Slide 15: Strategy and Operations Review
Strategy and Operations Review Nick Collins – CEO 15
Slide 16: Evolution – our food has never been so good
16 Evolution – our food has never been so good • We are back at the top of our game both in terms of breadth of choice and quality • We are balancing priorities within the development process: › Customer experience › Value for money vs gross margin › Kitchen simplicity
Slide 17: Evolution – our design goes from strength to strength
17 Evolution – our design goes from strength to strength • We have invested in our in- house design team and are introducing new elements to both Lounge and Cosy Club • Each site being different and giving a nod to the local community is fundamental to our success • We have 8 sites programmed in for
Slide 18: Christmas 2022
18 Christmas 2022 • Emphasis on Christmas is different across the two brands: › Lounge 8% of sales › Cosy Club 12% of sales • We have introduced a new booking system in the Lounges, for groups of 8 or more • We are using dynamic pricing in Cosy Club • Bookings suggest we are well-placed in respect o
Slide 19: Significant volumes of insights data driving innovation and focus
19 Significant volumes of insights data driving innovation and focus • We now receive over 15,000 pieces of feedback per month • In addition during the summer we surveyed 35,000 customers • Dish specific feedback drives menu evolution • Site specific feedback helps Hot drink and food ticket wait tim
Slide 20: Our value for money is a significant driver of our volume growth
20 Our value for money is a significant driver of our volume growth £4.95 £5.15
Slide 21: Case Study: Romano Lounge Colchester
21 Case Study: Romano Lounge Colchester
Slide 22: Case Study: Romano Lounge Colchester
22 Case Study: Romano Lounge Colchester • Well positioned near the shopping centre and main high street and close to the bus station and train station • Colchester population c 200,000 • Very typical retail and leisure line-up
Slide 23: Case Study: Romano Lounge Colchester
23 Case Study: Romano Lounge Colchester Romano Gross AWS Sales by Day ▪ Opened November 2021 9,000 8,000 ▪ 15-year lease (tenant break at 10) 7,000 ▪ Rent £75,000 6,000 5,000 ▪ Landlord package 36m 4,000 ▪ Gross AWS £29,400 3,000 ▪ Net capex £704,000 2,000 1,000 ▪ Forecast CROCCI 32% - Mon Tue Wed T
Slide 24: Case Study: Cosy Club Lincoln
24 Case Study: Cosy Club Lincoln
Slide 25: Case Study: Cosy Club Lincoln
25 Case Study: Cosy Club Lincoln • Lincoln population c100,000 • University city c14,000 students • Located on first floor of the redeveloped Grade II Corn Exchange • Located on Cornhill, between the prime retail on High Street and Broadgate • Competing F&B focused on Brayford Pool
Slide 26: Case Study: Cosy Club Lincoln
26 Case Study: Cosy Club Lincoln ▪ Opened February 2018 CC Lincoln Gross AWS Sales by Day ▪ 20-year lease 9,000 8,000 ▪ Rent £75,000 7,000 ▪ Landlord package 24m 6,000 5,000 ▪ Gross AWS £47,500 4,000 ▪ LTM EBITDA £409,000 3,000 2,000 ▪ Net lifetime capex £1,094,000 1,000 0 ▪ CROCCI (post pre-opening
Slide 27: Examples of Recent Openings
27 Examples of Recent Openings Morro Lounge Richmond North Yorkshire Cosy Club Canterbury Open 14 Sept 2022 Open 15 Aug 2022 Weekly Sales £29.7k Weekly Sales £50.4k Rent £50k Freehold Prospero Lounge Stratford upon Avon Open 2 Nov 2022 Weekly Sales £49.2k Rent £105k
Slide 28: Continuing to invest in our team
28 Continuing to invest in our team • In house recruitment team already significantly strengthened • Chief People Officer Guy Youll now in role focusing on evolving our people strategy including: › Strengthening our recruitment systems, tools and employer brand › Ensuring our L&D spend is best-targe
Slide 29: Introducing Brightside
29 Introducing Brightside What is Brightside? • Roadside dining restaurants on A roads, alongside petrol stations • Emphasis on warmth, hospitality, adventure, a degree of nostalgia and family • Plays to our strengths - all day, no reservations, great value, large fresh menu The opportunity? • All c
Slide 30: The first four Brightside sites
30 The first four Brightside sites • We have exchanged contracts to acquire three roadside restaurants in the South West • These are located on A38 south of Exeter, A303 near Honiton and A38 near Saltash • We are completely refurbishing and rebranding these with the first opening in February 2023, a
Slide 31: How do we see the future for Brightside?
31 How do we see the future for Brightside? • We are excited about the opportunity and have confidence in how these initial sites will trade • Our forecast new site openings for FY23 and FY24 remain 30 and 32-34 respectively, including these three Brightside openings • The potential opportunity is c
Slide 32: Final thoughts
Final thoughts 32
Slide 33: Loungers is uniquely well-positioned
33 Loungers is uniquely well-positioned ▪ Focus on evolution and value for money is driving our market-leading sales performance ▪ There is uncertainty post-Christmas but we are very well-positioned ▪ We are managing inflationary pressures through our continued growth ▪ We continue to invest in our
Slide 34: Thank you
Thank you LOUNGERS