Loungers — FY2023 Earnings Presentation
31 slides from Loungers's earnings presentation, Jul 12, 2023
Slide 1: Loungers plc Results for the 52 weeks ended 16 April 2023
Loungers plc Results for the 52 weeks ended 16 April 2023 12 July 2023
Slide 2: Highlights
2 Highlights Record revenue of £283.5m, industry-leading LFL’s and a record 29 new sites opened Margin pressures largely mitigated and inflationary pressures diminishing New site openings performing well and expect to open 34 sites in the current financial year Believe the potential scale of
Slide 3: Financial Review
Financial Review Gregor Grant - CFO 3
Slide 4: Results summary FY23 vs FY19
4 Results summary FY23 vs FY19 Comparison vs FY19 FY23 FY19 Var − Last full year pre Covid £m £m − No distortion from restricted trading or Revenue 283.5 153.0 85.3% government support − Illustrates strong growth post IPO Gross profit 113.2 63.5 78.2% Revenue of £283.5m up 85.3% 39.9% 41.5% (160
Slide 5: Results summary FY23 vs FY22
5 Results summary FY23 vs FY22 FY23 FY22 £m £m Comparison vs FY22 − FY22 significantly impacted by: Revenue 283.5 237.3 o The positive impact of government support Exclude 8 weeks external only / (46.0) (22.6) measures in FY22, notably VAT reduction Omicron and business rates support Exclude VAT B
Slide 6: LFL sales performance
6 LFL sales performance Three-year LFL of +17.6% FY23 H1 FY23 Covers 44 weeks 24wks 44wks − Excludes Covid impacted final 8 weeks of FY20 LFL Sales – 3 Year 17.0% 17.6% − No Covid distortion One-year LFL of +7.4% FY23 H1 FY23 Covers 48 weeks 20wks 48wks − Excludes external only trading at re
Slide 7: Consistent one year LFL performance across site age cohorts
7 Consistent one year LFL performance across site age cohorts 12.0% 10.0% 9.4% 8.8% 8.8% 8.4% 8.0% 8.0% 7.3% 7.2% FY23 One Year LFL 6.0% 4.5% Sales 4.1% 4.0% 2.0% 0.0% FY13 and pre FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Year of opening Reasonably consistent split of +7.4% across the various age c
Slide 8: Underlying margin FY23 vs FY19
8 Underlying margin FY23 vs FY19 IAS17 Adjusted EBITDA margin down 140bps vs FY19 Cost of sales (inc. site labour) negative 140bps − CGS margin growth of 120bps offset by labour ratio up FY19 Adjusted EBITDA Margin IAS17 13.5% 260bps Variable costs negative 30bps Cost of sales (inc. site labou
Slide 9: Margin outlook – inflation moderating
9 Margin outlook – inflation moderating FY24 July Update Expectation Selling Price 6% c4% price taken in April menus CGS Food 6% Pressure moderating CGS Drink 3-4% Benefit from new draught range Labour 8% Rate of pay pressure Utilities 20% Impact of spreading new hedges across mature estate Food i
Slide 10: Medium term goal to restore pre Covid EBITDA margin
10 Medium term goal to restore pre Covid EBITDA margin Food and drink margin − Renegotiated food supply contract from Q2 onwards − Drinks contracts – like for like products nil to low single digit inflation − Further supply consolidation opportunities Site labour − NLW increases forecast to cont
Slide 11: Cash flow IAS17 – continuing strong cash generation
11 Cash flow IAS17 – continuing strong cash generation FY23 £m Adjusted EBITDA IAS17 34.2 Cash generated from operations of £36.1m Pre-opening costs (3.6) Represents 106% of Adjusted EBITDA Corporation tax (0.1) Changes in working capital 5.6 Working capital inflow of £5.6m − Reflects new site
Slide 12: Capital expenditure
12 Capital expenditure Net new site capex of £29.6m FY23 − Includes £26.9m spend re 29 new sites built and opened in £m the period, 24 Lounges, four CC and one Brightside New site 34.1 Landlord contributions (4.5) Maintenance capex of £3.9m − Represents 1.3% of revenue (FY22 1.1%) Net new site s
Slide 13: Lounge roll-out investment – FY23 vs FY19
13 Lounge roll-out investment – FY23 vs FY19 Compare Lounge FY23 cohort to FY19 cohort FY23 FY19 − 24 Lounges opened in FY23, 23 in FY19 Lounge sites opened 24 23 Significant uplift in landlord incentives − Increase from 13 months to 24 months Average incentive months 24 13 Landlord contribution
Slide 14: Non property net debt
14 Non property net debt Net debt £6.1m Year on year £3.4m increase in underlying net FY23 FY22 debt, after £m £m − £37.0m capex outflow Cash 26.4 31.3 − £2.7m outflow fund Route acquisition Term Loan (32.5) (32.5) Bank facilities re-financed June 2023 − Term loan reduced to £20.0m (from £32.5
Slide 15: Strategy and Operations Review
Strategy and Operations Review Nick Collins – CEO 15
Slide 16: Sector leading sales performance
16 Sector leading sales performance • Loungers is unique in having consistently grown LFL sales over the last 10 years, including having accelerated that growth post-Covid 10.7% 6.9% 7.4% 6.0% 5.1% 5.3% 3.9% 4.4% 4.2% 2.2% FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 • FY23 LFL sales are 17.6%
Slide 17: Evolution and value for money continue to drive sales growth
17 Evolution and value for money continue to drive sales growth • Menu innovation no longer constrained by labour concerns − Flatbread sales overtaken sandwich sales at around 16,000 per week − Introduction of Nasi Goreng alongside old favourite Bang Bang chicken means Asian dishes represent 15% of
Slide 18: Continued investment and innovation in operational support
18 Continued investment and innovation in operational support • Introduction of regional community manager role in Lounge − Encouraging sharing best practice − Driving community involvement through charity fund-raising, quizzes and encouraging community groups • Introduction of Head of Brand for Cos
Slide 19: Ongoing focus on improving conversion
19 Ongoing focus on improving conversion • Medium term goal to restore EBITDA margins to pre-Covid levels • Investment in regional operating structure / low site to ops ratio − Driving improvement in gross margin consistency − Reducing costs associated with staff turnover • Labour − Constant challen
Slide 20: Our people and culture drive our continued success
20 Our people and culture drive our continued success • Supporting our team through the cost of living crisis − 11% Salary increases funded through buying out 50% of the bonus potential alongside average 6% uplift − Continued support through free food and drink whilst working and staff discount • Co
Slide 21: Leadership team further strengthened during the year
21 Leadership team further strengthened during the year • Guy Youll – Chief People Officer (Nov-22) − Senior experienced leader dedicated to our teams − Previously Whitbread, Superdry, Inspired Education − Challenging all aspects of recruitment, L&D, and HR − Driving better engagement and strategic
Slide 22: Property headlines
22 Property headlines • New site openings continue to perform very well, increasing average site EBITDA • Growing confidence in Lounges working in many different location types − Secondary suburban high street and small / market towns continue to dominate our locations − We are seeing really strong
Slide 23: Case Study: Bristol Area (1)
23 Case Study: Bristol Area (1) There is still an opportunity to double the size of the estate in Bristol – highlighting the scale opportunity for the Lounge brand Porto Lounge relocated to bigger premises during the year Barranco Lounge opened during the year in the Abbeywood Retail Park Th
Slide 24: Case study: Bristol area (2)
24 Case study: Bristol area (2) The relocation of Porto Lounge has more than doubled sales and EBITDA, demonstrating our ability to generate high returns on capital in secondary suburban high streets Old Porto Lounge: New Porto Lounge: Relocated site opened February 2023 Original site opened O
Slide 25: Case study: Bristol area (3)
25 Case study: Bristol area (3) Barranco Lounge is a great example of how well Lounges can work in the right retail schemes Opened in March 2023 15-year lease (tenant only 10-year break) Rent £75,000 Landlord package 28 months Gross AWS £42,400 (15 weeks) Net capex £860,000 Forecast
Slide 26: Case Study: Cadno Lounge, Neath
26 Case Study: Cadno Lounge, Neath Our performance in Neath, opening this year, and our continued success in Wales, really help highlight the scale opportunity; there are many towns in the UK like Neath Opened in Neath in March 2023 15-year lease Rent £37,500 Landlord package 32 months G
Slide 27: Case Study: Cosy Club Canterbury
27 Case Study: Cosy Club Canterbury Opened in August 2022 Freehold purchase £850k Gross AWS £48,600 (45 weeks) Net capex £1,352,000 Forecast CROCI 29.0%
Slide 28: Brightside
28 Brightside • Exeter opened in February, Saltash in June • Honiton due to open early August • It’s early days but we are relatively pleased with the sales performance • We expect to learn a lot more over the next six weeks of summer holidays, when sales will peak • Key observations and learnings s
Slide 29: Final thoughts
Final thoughts 29
Slide 30: Loungers is uniquely well-positioned to deliver continued out-performance
30 Loungers is uniquely well-positioned to deliver continued out- performance Sector leading performance Relentless focus on evolution and value for money to drive LFL sales growth New sites performing very well and roll-out accelerated to 34 sites in FY24 Roll-out self funded from consisten
Slide 31: Thank you
Thank you LOUNGERS