Loungers (LGRS) — Preliminary results

0:00 Good morning, and welcome to the LOUNGERS PLC Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged, and they can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll. And I would now like to hand you over to

0:31 CEO, Nick Collins. Good morning to you. Good morning, everyone. Thank you very much for joining us for our results presentation for the fifty three weeks ending 04/21/2024. My name is Nick. I'm the CEO, and with me is Steven, our new CFO. And apologies for being slightly late as well. I will just take you through an initial slide and then hand over to Steven who's gonna through some more detail on the finance side. I think it'd be fair to say that we're really pleased with our progress and believe that these results set out another year of record growth and outperformance. And this strong financial performance is consistent with with the the track record that we've demonstrated since our IPO five years ago.

1:16 In terms of, we've seen record revenue up 24.7% to $353,000,000 Adjusted EBITDA on an IAS 17 basis $44,200,000 up 29%. And importantly, we've seen that adjusted EBITDA margin increase from 12.1% to 12.5%. And alongside our performance in the mature estate, we continue to deliver the rollout. We've opened a record 36 new sites during the year, and those new sites continue to perform really, really well.

1:49 Current trading remains strong. Like for likes are up 7.5% in FY twenty four. In the first eleven weeks of this year, we've seen like for like sales growth of of plus 5%. So on that note, I'll hand over to Steven who's going to go through the the finance side. Morning, everyone. The first slide here I'll take you through is our '24 versus '23 performance. So this year, f y twenty four was a fifty three week year, and that's only accounted for 2% of our overall EBITDA profit, so not material to our results. We generated f y twenty four revenue of $355.03... £353,000,000, which was 24.7% up. And that was driven by the full year effect of our f y twenty three launches, of which there were 29, and of our 36 f y twenty four launches, and also of our NFL sales performance of seven and a half percent.

2:49 We drew... We grew gross profit by 27.4% as a result of growing overall gross profit by 90 basis points, and that was a 110 basis points of margin offsetting 20 basis points of increased labor. We delivered IFRS 16 adjusted EBITDA growth of 25.9%, which was a margin improvement of 20 basis points. And because of the benefit of an improved rent as a percentage of sales, we delivered EBITDA IS 17 growth of 29.3, and that that was was a a 40 basis point improvement. So overall for the year, we delivered profit before tax growth of 56%.

3:36 Coming on to the next slide that shows our LFL performance. We delivered seven and a half percent LFL performance in f y twenty four, as Nick said, and that was evenly spread through the year, 7.7% in the first twenty four weeks. So very consistent performance there. And in the last eleven weeks, we've delivered 5% LFR growth, and that's been negatively affected by the football because we don't have screens in our sites, and slightly by the fact that we had an extra bank holiday in the previous year. I'll just quickly take you on to a slide that shows our overall LFL growth during the course of FY 2524 by cohort. So this is by the year in which the site was launched. And the really positive thing you can see here is the consistent LFL growth that we deliver regardless of when the site was launched. So if you think about the sites, the 55 sites that launched before FY fifteen, we still deliver very, very strong growth there.

4:43 The next slide takes you through the underlying margin improvement from FY twenty four f y twenty three, and the blocks on the right hand side are the movements from our far left hand block of 12.1%, which was our f y twenty three EBITDA margin percentage f y twenty four exit, which was 12.5%. So it tracks the four... The 40 basis point improvement. And the 40 points... Basis point improvement is from cost of sales, 90 basis points. And as I said, that's a 110 basis points of cost of of goods goods benefit netting off against 20 basis points of labor cost. It's site fixed costs, positive 30 basis points, and our site fixed costs are our rent, our rates, and and our our labor charge, and that improved in the year from 4.6 of sales to 4.3 of sales.

5:40 It's negative for energy by 30 basis points, and that's because we came out of a hedge that we took just post COVID. So, obviously, we've had to lock into slightly higher rates, but we are now locked in on our rates until the end of September twenty twenty five. We then had negative of central costs, was 30 basis points, and that was predominantly from increased bonus payments. And finally, we had negative variable costs of 20 basis points, which was maintenance costs. So overall, that gives us our 12.5%. And worth saying that that's slightly skewed towards h two where we have the benefit of Christmas and where we made price increases in October that weren't accompanied by national living wage cost increases because, obviously, they only happen every year in April.

6:34 I'll just take you now onto a view of our margin outlook, and this is showing inflation continuing to moderate. So we've seen falling inflation in our food inflation, only 1% or less than 1% at the end of April. We have seen some marginal inflation in q one of f y twenty five, and what we see is that continuing with some instances of particularly high inflation in certain categories. So we know, for example, that french fries will increase double digit. And that's very much in line with the story, the general narrative from CGA, the research consultancy that gives data on this information, albeit that we've performed better on inflation than the market.

7:20 In drink inflation, we see that about 3.3% and see a similar trend pervading for f y twenty five. And on national living wage, there was a 9.8% increase in f y twenty four, and we think we can mitigate that down to 6.5% as the cost increases or the wage increases going up to our salaried staff is lower than the national minimum wage. The next slide gives you an indication of how we hope to get towards our EBITDA margin target of 13 and a half percent over the medium term. So it's an indicative view. Indicatively, we see some benefit coming through in food and drink margin where we've negotiated a new supply contract and where we see further opportunities to optimize our supply chain.

8:15 And we think that will offset any issues on-site labor. So know it's a slightly unsure environment at the moment as the new labor government revealed their plans for national living wage. But we we think, obviously, national living wage will exert upward pressure, but we've shown good ability to mitigate that in the past. On-site variables, we see easing variable cost inflation, and we have certain specific projects to look at certain cost categories, so we hope to want to improve there. On central costs, we think that our increasing LFL sales and our new site openings should allow us to leverage our cost base better. On energy costs, we think there'll be a slightly adverse impact there because commodity prices are likely to increase, but we hope to offset that to a certain extent with usage efficiency.

9:13 And on the on the on the point of site fixed costs, as our LFL sales increase during the course of the on... Oncoming years and in a relatively tenant friendly property market, we hope to be able to keep those at worst at a constant level of sales. So that's broadly a sketch of how we would, over the medium term, endeavor to get back to our 12 and a half... Our 13 and a half percent original pre COVID level.

9:43 Coming on now to cash generation. We've had strong cash generation in the year. We generated cash of 47,100,000 from operations, and that was a 107% of IAS adjusted EBITDA. And that was because we got a working capital benefit as we rolled out new sites. We've used that to fund our maintenance CapEx. That's all of our non new site CapEx like our lounge kitchen reset, our splash and dash, our central CapEx. And that's left us with 35,400,000 of free cash flow with which we have funded our new site CapEx of 38,700,000, and from which we have repaid 12,500,000 of our term loan.

10:30 So that has left us with 10,000,000 of positive cash at the year end. Going through onto our capital expenditure. So we... As I just referred, we spent 38,500,000 on new site CapEx. That was 35,700,000 on our 36 new sites, so 33 lounges, one cozy, and two bright sides. We've then incurred £5,100,000 worth of CapEx on maintenance, and that's broadly in line with what... As a percentage of sales with what we've seen in previous years. We've completed our kitchen works program and spent some CapEx there, and we've completed 14 splash and dash refurbishments at an average cost of 130 k.

11:19 And within that overall maintenance cost, we're we're maintaining our sites in very good condition so that we prevent the big peaks of CapEx that some companies incur as they develop their sites. Bringing you on now to the lounge, the specifically the lounge rollout for f y twenty four and looking against that in f y twenty three. I mentioned that we opened 33 lounges, and that was nine more than we did in f y twenty three. In terms of the landlord incentives, they remain very attractive up to two months on average to twenty six months. We keep our lease length in line with prior years, so fifteen years being the average lease length. And we're seeing an improvement in the rent to rate rate... In the rent to revenue ratio of that rent cost going down from 4.9% to 4.7%.

12:15 We have seen a slight increase in our average CapEx cost 905,000. Although, when you exclude Ormo and Costerra, so Ormo's our lounge in Landudno and Costerra in Peyton, that does come down to $87.05. And that $87.05 is slightly up... Slightly higher than last year. We've We've done done slightly more covers, 6% higher per site, and we've had slightly more complex sites. So those are sites in heritage buildings or that are slightly built... Slightly bigger or potentially multi site. But against that, we have delivered better average gross weekly sales on our f y 24 sites. So average sales were 33.6 k, and that was 9% better than in FY twenty three when we had average sales of 30.9.

13:06 And worth remarking that that is significantly better than in FY nineteen when they were below 23 k. And finally, that slide, we've delivered 30% crocky, so that's cash returned on cumulative cash invested on those sites. So a really good target for us to hit there. Looking very quickly at an average maturity profile for our new sites. What I've done here is taken our cohorts from f y twenty, so just before COVID, we launched 16 sites, and the table that you can see on the right shows the profile of gross average weekly sales, EBITDA percentage, average annual EBITDA cash, and crocky over the ensuing three years.

13:52 So what typically happens in a lounge is we honeymoon for the first six to twelve weeks as people come and explore the site. There's a slight reduction in sales then in the next year as it settles down to its normal normal customer base. But then over the next two years, we get really strong double digit sales growth. And that's what you see in that second row going from 26.7 at start of FY twenty to 31.5 as we get towards more maturity. You see a similar improvement in EBITDA percentage. So the second... The third row there from 15.3% in FY twenty, growing steadily until we get above 20%. Worth noting there that FY twenty two number of 18.4 is distorted by the business rates relief that happened after COVID.

14:47 Average annual EBITDA increases very nicely from 206 k in f y twenty two to $2.90 as does Crocke. So really positive profile as we launch our sites and as they grow towards maturity.

15:05 And finally, just taking you towards our debt position at the end of the year, we ended the year with net debt of £9,700,000, which was slightly ahead of our 6.1 last year. But there, we did fund our 47,700,000 of CapEx, and we also paid back 12,500,000 of our term loan, so that's now down to 20,000,000. But we exit the year with a really strong balance sheet, a very strong funding position. We've still got our facility in place to June 2026. So really well positioned to fund our future growth over the coming years. And on that, I'll hand back to Nick so he can take you through the strategy and operations. Thank you, Stephen.

15:51 So my first slide just talks through some of the highlights as we continue to deliver on the rollout strategy. And as Stephen has shown, this decreasing inflationary pressures combined with our increasing scale is allowing us to make really good progress in terms of reestablishing those that pre COVID margin level. We've also seen record number of new site openings at 36. But despite that acceleration in the rollouts, it's the constant food, drink and design innovation that continues to drive the sales growth across the mature states. I'll talk in more depth about how we've invested further in the senior team and the operational structure to deliver the ongoing rollout. And we've got a really strong pipeline of new sites. And I think performance across the estate, both the mature estate and the new sites, gives us real confidence that, that target of six sixty five sites across The UK is a conservative one.

16:48 And we've seen both a strong trading performance in FY 2024 and over the first eleven weeks of this current year. So in terms of how the consumer is behaving and and what the trading environment's like, we continue to have real confidence in the high street. And we haven't really seen any notable shift in... Or change in demand or sales mix or sales patterns over the course of the last three years. And if you think about our estate, over two sixty sites across The UK now in England and Wales, yet we've got a really good spread and there's no variation in terms of demographics or affluence or regionality at all. Thinking about our FY 'twenty four like for like sales, that growth of plus 7.5% reflects largely flat volumes and around 7% to 8% of price.

17:41 And as we progress throughout the year, we anticipate a return to more meaningful volume growth. And that's as a result of us investing in our team and offer. And we remain really confident that we offer great value for money in all three brands and remain really competitive on the high street. And we haven't yes, we've taken more price, but we haven't increased our prices in recent years to the same extent as other operators. Looking at the eleven week year to date like for like figure of plus 5%, it's slightly below where we finished last year at plus 7.5%. But just thinking about that, it's a really short eleven week period. And the Maybank holiday, as Steven said, the euros, and I expect the weather as well have had a marginally negative impact. But we very much expect that to even out across the year. It's exaggerated over such a short period of time. And every year, we see some noise around bank holiday timing or the the weather weather or national sporting events.

18:43 Indeed, this time last year, when we were sitting here talking about the first twelve weeks of FY '24, I think the like for like was around plus five point... Plus 5% again, and we delivered plus 7.5% for the full year. What's important is that all three brands are in decent like for like growth. That like for like growth in lounge is pretty metronomic. Cozy can be more varied based on external factors, and it's very early days for Bright

19:10 side. The next slide then just looks at how the lounge sale profile has changed over the last five years. We thought this would quite interesting. It's a slide that we haven't shown before. And just picking at some of these charts in turn, the top left there looking at the food drink split, we've seen food sales... The food's share increased by 5%. I I think think that's a function of us delivering food quicker, turning tables, really capitalizing on the investment that we've made in our kitchen systems.

19:42 Looking at the next slide across on the top, which shows how our sales are split between brunch, lunch, dinner, and post dinner. Again, you can really see the benefits of that all day nature of what we do in the lounge business. I think one of the things I'd... It really highlights to me is the lack of importance of late night. Late night is the thing you... Many people will be familiar. It is a struggling category. Bars are really struggling, but it was and remains a very a very small element of of our at 1%.

20:13 Moving across to the next, you can see how our trade split in the lounge business in terms of the days of the week and 43% of our sales Monday to Thursday. And and that's a really important factor in understanding why the lounge business is so is so successful. Many businesses have real reliance on Friday to Sunday, and their trade's very much dominated, whereas 43% of our sales are achieved early week. You can see in the food categories in the top right there, exciting increase in brunch, and and then then moving down to the bottom left. And that chart shows our vegetarian versus meat dish sales and the split there. And we've seen slight decrease in the proportion of sales represented by vegetarian dishes. Maybe slightly surprising, but I think it also just reflects the the the the reduction in popularity of some of those meat substitute products like Beyond Burgers.

21:10 And then looking at our drinks, alcohol alcohol sales have shifted down from 60 to 55% of our drink sales. And then looking in the bottom right, you can see how hot drinks have really grown in terms of that split. And I think what we've seen there, that reduction in alcohol sales is reflecting the fact that we've got a lot better hot drinks, and in particular, delivering coffee sales really well.

21:37 During the year, moving on to the next slide, we've really invested in the lounge operational structure. And that's a significant investment in the lounge ops map increasing from five to eight regions. And the regions are a really important part of how we... It's a really, really important part of how we control the sites. And the regional ops managers, it's a it's a key level of responsibility and accountability in... Within that operational structure. Smaller regions allow us to drive continued operational

22:08 improvement and really importantly, provide capacity for further growth. And a statistic that we talk about an awful lot is that ratio of sites to operators currently at 4.2, comfortably, I think the lowest in our sector. And having such a small number of sites for each of our operators allows them to spend more time in the sites and also allows them to take up the considerable amount of work that's associated with us opening a site every ten days. 75% of our operators were previously lounge general managers or head chefs, and that's a statistic that we're really proud of. We're quite unique in the progression opportunities that we can offer people in our business, And it's a really important underlying factor in the continued success of our business and the rollout.

23:00 We've also invested in the region. So each region now has committed regional maintenance resource, community resource and recruitment resource working alongside our operators' teams. And that... What that allows them to do is it allows them to really focus just on the customers and their delivery. And and, yes, we expect to benefit over leverage... From leverage over our central cost base more in the short to medium term. And if you look at our central costs as a proportion of sales, as Stephen pointed out earlier, we saw an increase from 7% to 7.3% in FY twenty twenty four. If you remove the impact of bonuses, then underlying central costs were flat at 6.8% of sales over both years. And we'd expect that central cost percentage of revenue to come down more significantly over the next couple of years. I think we acknowledge that in the last six, nine months, we've invested quite a lot.

23:57 Just touching on Cozy Club. Cozy Club continues to perform really well with fresh impetus around maximizing covers, delivering strong like for likes, especially around those flagship days as evidenced by Christmas. And Lucy, the new MDs, had a really impressive impact there. Equally, it's a really exciting time as the brand as we look to build on that success and assume a slightly more premium position on the high street. And we're working hard on projects launching in the autumn to elevate the food and drink offer and drive hospitality excellence in our team. Closed club's performing really well. It's got great like but our instinct is that we can premiumize this a little bit more and just take a little bit money more... Take a little bit more sales.

24:43 I think what's great is that we've now got the strength and depth within that existing senior team to to undertake this project without causing significant distraction to other areas of the business. And thinking about the ongoing rollout of the cozy clubs, there are currently two in the pipeline, and we anticipate opening one or two new cozy clubs per year on an ongoing basis. And then on Bright side and the journey so far, sales have been really encouraging in terms of like for like growth. Exeter, the first site that we opened, we've seen... We... The first site we opened, which had any meaningful kind of growth post its first year anniversary, has been performing really, really well. And we're really pleased with the operational performance in that business. I was in there last Thursday, and it continues to be the case. Customer feedback's fantastic, and we're really proud of of of of what we're delivering from a hospitality point of view.

25:46 We've invested further in marketing in the run up to the key summer trading period to entice people in. We've invested in... We've sort of got more signage on the approach roads as you can see in that image there. We've got ads and advertising vans in the Southwest and key high foot fall areas. And then we're doing some quite fun cross brand marketing to benefit from the lounge and cozy club customers who are holidaying in the Southwest. I think what we would say is it's it's still a little bit too early for for us to talk about returns on Bright side or rollouts or size of the opportunity. From our perspective, it very much remains in the lab with a with a with a key summer ahead of it. And that's why summer's so important. I think it's it's it's it's more seasonal business, Bright Side. And and this year, I think it's second summer, understanding how those sales have grown, how familiarity's grown with people passing passing the Bright Sides for a second time as they head down to holidays in the Southwest.

26:44 I think equally, we're opening our fourth bright side in the autumn. It's the only one that we've got in the pipeline, and it's in a it's in a quite a different location. It's on the A1 up in Rutland, a very, very busy road. And equally, it's in a new build property, whereas the previous three were in were in, yeah, properties that were formerly restaurants. And we're interested to see how it opens where it's unhindered by any legacy impact. So coming on to talk about the new openings and the pipeline a little bit. As I mentioned, it's a record year of new openings, 36 sites. And as you can see from the map in the middle of that chart, really good geographic spread across the country, which is important from a balanced perspective and us having confidence that we can deliver those openings well.

27:32 And I'll pull out four sites here, which I think just really help reflect the different types of properties and the different types of locations where we're opening. Looking at the top left there, can see Costera Lounge in Painting where we opened in December in what was previously a harvester unit. We trade really well by the seaside. We had absolute confidence opening here and it's absolutely smashed all records, achieving a record week for for the lounge business with sales of 107,000 a few weeks ago and average sales of 72,000. Bottom left there is a picture of Ivo Lounge in St Ives and that's St Ives in Cambridgeshire not St Ives in Cornwall where we already have a site We opened here in November in this unit that was previously a pound stretcher and it's a much more typical town centre lounge On the top right, you can see Pontier Lounge in Chepstow, where we opened in February, not far from our office here in Bristol.

28:31 Chepstow, we've been looking for a site for a while. This was previously a local department store. And interesting about Chepstow, population of 15,000, it really highlights how lounge can perform very, very well in in locations with relatively low populations. Gross average weekly sales here of 36,000. There'll There'll be be a a bit bit of of honeymoon in that number. We'd expect it to come down well... Come down a little bit, but it will trade really, really consistently with with with an average lounge. And then in the bottom right there, you can see Ripborough land in in Westwood Cross. We've... It's a great example of of the... Of our success in some of these retail leisure schemes where we've opened a few more sites in in recent years.

29:19 I think where we have real confidence, there's a strong retail and leisure lineup, and that might be a cinema, bowling, etcetera, alongside really good shopping and good retail footfall. The lounges trade really well in these locations. Next couple of slides is focused on specific sites, and the first one is a case study of Bordeaux Lounge in Carlisle, the city of Carlisle in Cumbria where we opened in October. I think what's interesting here is we we always knew we'd trade well, and I think that gave us the confidence to to pay a slightly higher rent at 77,000 and invest a bit more from a CapEx point of view, just under 1,100,000. That's paid off. It's a top quartile site. Average weekly sales of 43,000 and a crocky of 40.2%.

30:06 I think what's interesting here is just a demonstration of how the the property landscape shifted over recent years. This really pretty site was formerly a top man within the Arcadia Group. It was led to Arcadia on a rent of 240,000 a year. We're now paying 77,000 a year.

30:28 Next case study shows Veracolounge in Bromsgrove. And if the population in Carlisle was was over a 100,000, population in Bromsgrove here 30,000, so smaller smaller town. This was previously a super drug. I think it's a great example of how how we really add value to our high streets. It was a pretty drab shopfront before, and we've completely shifted it around. I think made it look really good. This is a much more typical site. Rent of 40,000 is very competitive. Net CapEx of 867,000. More typical of the average lounge. And just looking at the map on the right hand side there and the and the retail and leisure lineup, very, very typical of the kind of locations where we operate. Boots, Costa, supermarket, a Wetherspoons pub, a couple of banks.

31:23 And thinking about the pipeline, future sites, it's in a really strong place, and and the property market continues to be favorable. We've opened eight sites so far so far this year. There's a further 46 in the pipeline, and we're now planning sites for year ending April 26, the year after this one. Again, a good geographical spread, and we've got five build teams operating, and they're very comfortable opening 35, 36 sites a year. One One thing I would point out that average CapEx of $905,000 is our sense that there's an opportunity to achieve further CapEx efficiencies and that's very much a priority of ours in FY twenty twenty five. And as hopefully the pictures have demonstrated, we continue to invest in our design and look and feel team to innovate and raise our game further.

32:14 Touching on people, In the second half of the year, we've kicked off a number of fairly significant l and d initiatives, the learning and develop initiatives, to further drive up retention of a bite size bite size program for reworking how we induct our team, step up programs for our assistant manager to general manager and for sous chef to head chef, and our future ops program, which formalizes and wraps up something that we're already doing very, very well. It's a big year for us this year from a learning and development point of view, and I'm excited about the impact it will have and look forward to telling you in twelve months' time how we're doing and and the return on this investment. LoungeFest, our annual staff party. We had our tenth one a few weeks ago, attended by over 4,000 people, continues to be the most important people cultural investment that we make in the business. Our teams love it.

33:08 And staff turnover has materially improved both front of house and back of house during the year. And there's more that we can do, and this is something we talk a lot about internally, but the cost of staff turnover continues to represent the biggest efficiency opportunity on the p and l. Meaningful is reductions or increases in staff tenure or reduction in staff turnover can flow right through to the bottom line.

33:36 And we are building a senior leadership platform for continued growth, and there's been quite a lot of change in that senior team over the last eighteen to twenty four months. We've we've already met Steven on the finance side, and the introduction of Justin Carter into the group MD role has been a really critical step that we've been thinking about for the last couple of years.

33:57 I previously had eight... Seven or eight direct reports, and Justin now is group MD. He take... Has reports of the individual brand MDs. So Kate on the lounge side, Lucy on the Kaysay Club side, and on... And the Bright side brand as well. And what that does is it allows much more focused leadership and guidance of the brands benefiting from Justin's significant experience. And it frees up me to focus more strategically as the business continues to grow and spend more time with the leadership on the finance side, on the commercial side, on the property side, and on the people side of the business.

34:36 Just thinking about this, two new brand names, Kate and Lucy, both landed really well in the business. Great cultural fit, and they're bringing experience and challenge into their roles. Steven's now firmly in place as CFO and has really clear priorities both in terms of business partnering, the operating business, and evolving our systems. I think we're really keen to point out the strength of our leadership team. We have confidence not just in delivering the continued rollout, but also alongside strategically challenging how we can leverage our scale, our team, our experience, and our our combined passion for hospitality.

35:16 As you can probably imagine, we've had quite a few questions over the last few days in the roadshow about the new Labour government and Labour's new deal for working people. And and Labour, in their manifesto, stated their intention to make some changes to the laws around how our teams work and pay. And amongst those, those that really stood out to us were, I guess, banning zero hours and and limiting or or employers' ability to change shifts at short notice, further removing the national living wage or minimum wage age bands, and then talk of delivering a genuine real living wage where the minimum wage the cost of living. I know the first thing we point out is that there's there's very little detail on these and no proposed timing.

36:01 And our sense is that nothing's gonna happen particularly quickly. But our perspectives are... I think in terms of that flexibility in banning zero as contracts, it's something that we're striving for, and I think it's something that we're very comfortable with. So, yeah, that's some work that's in progress within the business already. In terms of increasing minimum rates of pay and indeed removing removing age bands, I think over the last few years, we've got really used to kind of very high wage inflation as a result of increases in the national living wage. Last two years, we've seen plus 10% increases in national living wage, and indeed in March just gone, we saw the removal of the 23 age band. And I think we're fortunate. We're a big business. We're benefiting from increasing scale, And we've been... I think we've demonstrated that we're able to mitigate and absorb those significant increases in national living wage. So if labor do follow suit and that that is their course of action, then I think we're comfortable that that we can mitigate it. And what we would point out is that is that it is really fueling inflation, these increases in in national minimum wage, and indeed, it does make life for much smaller businesses a great deal more challenging.

37:20 On the flip side, clearly increases in national living wage will put more money in our customers' pockets and will have a positive impact on our sales. Moving on to the next slide and looking at the five areas around which our good stuff strategy is is built. Starting on the left and just thinking about community. Community is absolutely fundamental to the lounge business and something that we talk about an awful lot. Bringing joy to local places and our positive contribution to communities across The UK. We're well on track to deliver over 10,000 community events this year. We've introduced a new community fund where each site is provided with a thousand pounds a year to support their local community.

38:08 And that that will be an individual project chosen by that site team or chosen by their customers, and that might be through the team volunteering their time to help local causes or indeed donating food or drinks or providing cash. On the people side, I mean, we've talked a lot about people already and a succession planning and progression in the business. And And in terms of customers, we're really proud of what we put on the plate, and and the average of 18 vegan and 36 gluten free dishes on our menu. So gluten free and vegan and vegetarian dining, really important aspects of what we do. And in terms of the planets and how we deliver hospitality sustainably, we've launched major waste and energy campaigns, energy efficiency campaigns across the whole estate partnering with external experts.

39:00 And then from a supplier point of view, we're working with our partners to raise standards with 91% of our food and drink suppliers now registered on CEDEX, which is the supply ethical data exchange. What that allows us to do, it gives us the reassurance that our supply chain is behaving responsibly and ethically. So just coming on to conclude, I... We're we're delighted to have delivered another record year. And we'll, you know, we'll always point to, I think, the consistency of our performance and the fact that, you know, despite the fact that the rollout's accelerated a little, you know, the performance within the mature state continues to go from strength to strength as does the level of sales and levels of EBITDA in our new site openings.

39:46 And we firmly believe there are exciting opportunities ahead for all three of our brands. We're a better business for having three different but complementary bands, and I think that's really important. Sometimes we have... We've received a little bit of criticism about right sided, whether there's a risk of distraction. I really think these numbers demonstrate that we haven't been distracted and that the performance in the core... Core estate is just getting better investment. We've reshaped and strengthened the senior team. I think one of our core strengths has always been thinking about how do we need to look

40:20 in a year, how do we need to look in two years when the business is much bigger and taking those decisions now to make sure we're prepared for that for that increase in growth?

40:29 And as I said, changing government and their stance on our sector is not clear. I think we're really keen to have a government that's supportive and shouts for the hospitality sector, keen to see reform to business rates, keen to see reform to the apprenticeship levy. And equally, I think we recognize the need for the government to protect smaller businesses in our sector because they have a really important role to play in the continuing success of the high street. So that's the end of the formal presentation. I think we now move to answer questions. That's great, Nick, Stephen. Thank you very much indeed for your presentation. I will now bring your cameras back up for the Q and A. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the top right corner of your screen. While the company take a few moments to review those questions submitted today, I would like to remind you that a recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard.

41:30 Nick, Stephen, as you can see, we have received a number of questions throughout today's presentation. And if I may now hand back to you to kindly ask you to read out the questions where appropriate to do so, and I'll pick up from you both at the end. Of course. So we'll just run through. Gary's asked, with 36 new sites opened in FY twenty four, how do we assess the performance and profitability of these new locations compared to existing sites? I think, hopefully, you you might recall that the slide that Steven showed earlier in the presentation, which showed the maturity profile of the FY twenty cohort, so sites that we opened four, five years ago. And what we're saying in terms of new sites and the 36 that we opened in FY twenty four is we're seeing higher levels of average sales, higher levels of our... Of EBITDA, but real consistency in terms of that maturity profile.

42:28 So honeymoon opening, but then then a slight dip after honeymoon opening, then straight into like for like growth, and then we see that flow right down to an improving EBITDA and and and crocky. So real consistency, but performing a little bit better.

42:49 Christopher asked how we're planning to tackle ongoing inflationary pressures, especially concerning labor costs and national living wage increases. Steven, do you want to Yeah. I mean, I guess we always take a balanced view between maintaining the profitability of... Profitability of the business and of maintaining the right the right customer offer. I mean, if you look at our history of of tackling inflationary pressures, we have been very successful at doing that. We've talked about earlier on about how we've managed the the spread of the national living wage from twenty three year open age down to a twenty one year. And therefore, that's a that's a really a core competence of the business. We look very... We look at our our cost profile.

43:35 We look at our overall profitability of our sites, and we make sure we maintain those in balance. But we think as we look over the the coming year, we will be able to manage to balance those two things, the overall profitability of the site, the level of pricing that we have in our menus and our selling prices, and the balance between the costs that we're incurring. Okay. And Richard asked, your focus on staff retention sounds great. Please, could you give us some color on exactly what you're doing from a learning and development point of view? Say I'm a server front of house. What will you do for me to help my journey to GM, general manager, mentors, twelve hours video training? What specific things are you doing? As we said, we're... I think this is such a core strength of our business. I'm one of the things we're we're probably most proud of, I think, that we can take young people and and give them opportunity really quickly if if if they want a career in hospitality.

44:31 And there are countless examples right across the business with people who've been on who've been on that journey. In turn... And what I think we've tried to do this year is... Or in the last six months is formalize this a little. So we're really good at it. And the risk in a business like ours growing so quickly is that you get lots of doing things slightly differently. And so we've tried to wrap that up, and Mike talked earlier about the bite sized program and the step up programs and the future ops programs. So what we've done over the last six, nine months with bringing... Guy, our chief people officer, has has been been leading the charge on. It's just trying to wrap this up a little bit and formalize it. But in doing that, I think what's really important is not...

45:18 We're quite a a non... The the business has got quite a strong non corporate ethos, and it's... I think it's important we can't become too branded and and and too corporate and too kind of formulaic. So it's a balancing act. But if you're a young front of house person, then you'll be really encouraged to become a supervisor quickly. From that point onwards, we've got some more formal training in terms of how you get to become an assistant manager and then a general manager and then an ops manager. And, yeah, we do a lot of listening as well across the business and lots of surveys. We're really open, and it take... And I often say to people, both individually and if I communicate to the the business as a whole, if you feel you're not being listened to or if your career is not being treated with with the kind of respect it deserves, tell us, and we'll do something about it.

46:13 David asks, are there any specific market trends or consumer behaviors you are closely monitoring that could influence your strategy?

46:22 It's a good question. I don't I don't think so. I mean, an exam... I mean, as an example, there's lots of small things. So the great thing about all three of our brands is that we're we're not wedded to any specific cuisine or any, you know, specific drink or region. We can sell within reason whatever we want. And that's put us in a in a in a really strong position over the years. And if I look at the menu in LOUNGERS, for example, now, it's it's... Parts of it are very, very different to the menu we had ten years ago, indeed, twenty years ago. And if the menu now, we've seen a lot more Middle Eastern flavors come in. There's more Asian dishes. There's more spice.

47:09 And so we react to trends in food and drinks. Another example would be Guinness. So we're currently trialing... We haven't historically sold Guinness. Guinness is really popular at the moment. We're currently trialing Guinness in a number of sites with a view to to rolling it out. I think one thing that's... Yeah. The great thing about having a business as big as ours now is that we can trial stuff. So if we've got an instinct or just an itch that we want to scratch, then we can give it a go in a sight and see what impact it has. So hopefully, that answers that question. Richard asks volume versus price. Given you've taken lots of price, not as much as others granted, would this be at the expense of volume?

47:55 What things give you confidence volume will return, especially given you don't really run extensive email offers or large marketing campaigns to get people back through the door? I could ask the person who's deleting the questions not to delete them quite so quickly because my memory is not good enough, and I can't I can't quite remember them. But what gives us confidence? Yeah. I mean, I I think clearly the fact that we have taken more price recently is likely to been at the... A little bit at the extent of... The expense of volume. What what gives us confidence that we're gonna see a return to volume? I think for... The way I think about it is... And the the way we talk about it in the business, and just to be clear, we have... It's recently just started our new financial year, and that's quite a good time in a business like ours to remind the senior leadership team, the senior team about what our what our priorities are for that for for that... This coming year. And our number one strategic priority for this year is is is within the business, a return to more meaningful volume growth. So it's something that everyone's very, very focused on.

49:04 If I look across our estate and you look at the performance of the sites, we've got some sites and some operating areas which are in really good like for like double digit growth. And then we've got some some areas which are in less lower like for like growth, yeah, kind of lower single digit like for like growth. What's great about our business is is is looking at it now is that all the factors affecting in performance are internal. There aren't any external factors which are drive... Well, maybe with the small exception of one or two sides, but there aren't really external factors affecting. It's got nothing to do with demographics or demand or the way the consumer's behaving. It's all about us and our performance, and that's typically people related. And so if I think about how we've invested in our operation structure, how we've invested in the resource that we're giving our operators, yeah, we've given them every opportunity to match the the the... For the bottom half to match the top half of the estate in terms of in terms of performance.

50:06 So you're right. We don't have extensive email offers or marketing campaigns. At the end of the day, it it... I don't think performance in our business isn't necessarily about how we shout out to people and trying... It's it's it's much more about how we deliver our hospitality, how how how efficient we are in terms of speed, in terms of turning in terms of turning table, you know, how our familiarity is with our customer base in that local community. Those are the things which really influence sales growth within our individual sites.

50:45 So... Sorry. I'm just gonna go past that. So Richard asked, I've been surprised that some investor analysis online just focus on metrics like profit before tax. This seems completely to me... Missed the point about your rollout. You explain why the restaurant industry and your... And and yourselves focus on IAS IAS 17 EBITDA? Well, I'll start to answer that question, and and Steven Steven can can tell me if I if I get it wrong. But it's... I mean, you're you're right. I mean, we we... The the hospitality sector has forever looked at EBITDA multiples. And and in in the the old days, a a hospitality business, decent one much like ours, would have been valued around 10 times EBITDA, 10 times run rate EBITDA.

51:34 I think in recent years, we've seen that multiple kind of reduced down to eight and a half or something. And if you look at our multiple of a run rate, we're probably sub six on the way that we're currently valued. So it it looks it looks very cheap. And then equally, we see lots of investors who point to our PE ratio and suggest that, you know, we look expensive on a PE basis. But, clearly, the rollouts and the fact that that we have a higher depreciation charge because we have a very immature group of sites because we're always opening new sites, I think is is is an is an important factor there. So, you know, I personally will always look at run rate EBITDA multiples. That that that is where we focus. It's cash equivalents.

52:21 Does that sound sensible, Sam? No. Yeah. Sorry. Sensible. I'm not... As an accountant, I don't think the accounting profession has done a great service to the hospitality business. This IFRS 16 that capitalizes future rents has, I think, thrown a lot of analysis into confusion. But exactly as as Nick says, EBITDA is a really, really good surrogate for cash generation in our business. But as the question pose... Points out, it only ever captures what we've done today. It doesn't capture the full year effect of sites that we've got in train that will now have an extra, you know, one to eleven months of trading the following year nor does it look at the the enormous opportunity we've got in our business through that 600 plus site rollout. So I have a lot of sympathy with the question.

53:09 I think one thing I would say is that in... Yeah. We've been... It's over five years since the IPO now, and I think, yeah, I... And when we when we did IPO, I think there was there was a degree of skepticism and... Around the business and and our track record and and a lack of awareness of who we are, not having a presence in London, etcetera, were all factors. I think if we look at the last three or four years, I think the the trust and reassurance that we've built among the investment community has grown. And and and I think... And and hopefully that's reflected a little bit in the share as well. I think that's the last one. Michael asked, what's our average lease length? Michael asked that one. Fifth... Fifteen years.

53:57 There are anymore. Did we miss any? Oh, I was saying we've gone to the bottom. Are loyalty schemes on the radar? I... Assuming that's from a customer point of view, no, in short. I mean, the way we think about loyalty schemes is is rather than having a a card where you kind of stamp six times and get a free coffee, We think about loyalty, and we we have random acts of kindness. So we encourage our teams to to give stuff away to customers. And and, obviously, we put controls around that to make sure they don't do too much of it, and they record it, etcetera. But,

54:38 yeah, we say to our teams, if you see someone come in and they're having a really good day, they're celebrating, or if they're having a really bad day and they're sad, or indeed if you just fancy them. Just give... Be... Feel free to give them stuff because the impact that that can have on someone's day and someone's mood is is is is amazing. We feel that's a much more natural way for our teams to engage with their customers, rather than the kind of formality of a of a formal loyalty scheme. Further up, James asks, do we expect to see further optimization in the supply chain? And can we expect to see the sustainable sales growth continue at this level? So I think that's two there. In terms of further optimization in the supply chain, yes, absolutely.

55:24 Yeah. We've... We're on that journey in terms of taking kind of cost out, logistics cost out of our supply chain by reducing the number of wheels on the road, etcetera. Yes. We do. I don't think we'll go too quickly because it has operational impacts and impacts on our team. But clearly, one of the one of the benefits of of us growing in scale is is both, a, we can buy better and achieve economies of scale that way, but equally, we can we can move to more advanced logistics models which can takes... Take costs out of the supply chain. And can we expect to see the sustainable sales growth continue at this level? I think if you look at our track record over the last ten years, you know, we've really consistently delivered six, 7% like for like sales growth, and and and it's our belief that we can continue that.

56:24 We might check to see if we've not answered any questions. Oh, yes. We do. Richard says you have a great geographic spread, but also great diversification of types of locations. Into FY '25 and '26, are you skewing slight slightly to any specific themes? For example, you seem to be smashing it in coastal locations. I mean, we love trading in coastal locations, and we've got... For example, we've got one coming up in Tynemouth in the next couple of months. And we'd love to open more sites in coastal locations, and, you know, we've got other other opportunities which are on the radar. I think... And equally, I mentioned earlier, we are looking at...

57:09 We do use this more of those mixed use retail leisure schemes alongside our bread and butter, which is kind of towns and and secondary suburban high streets. We try to balance the pipeline such that it's good mix of geography. That's probably our number one kind of criteria when we're looking at sites. And and, yes, hopefully, answers that question. Richard asked what are our top two or three learnings from Cozy Of Aparrogate. For those not familiar, earlier this year, we closed our site in Coase Of LaParagat. This was really disappointing. It's the eighth site that we've closed in our twenty two year history. Two of those were were end of leases, one very small site. So the way I think about it was... Is that there were six mistakes we've made, and Arrogate was our sixth mistake. It traded for about eighteen months.

58:07 What what are our learnings? I think... Why did why did we get it wrong? I think what we did, we we... The pitch of the site was wrong. It was in a... On a a more daytime retail footfall pitch. It was too far away from the evening pitch, and daytime sales were okay, but evening sales were very poor. If I think about when we went into Harrogate, then... And the... You know, we knew... We know from the industry that Harrogate's difficult, and it's a it's a lovely town. It's a small town with a very strong food and drink offer there, lots and lots of operators there, and there are winners and losers. And that's very clearly defined more than perhaps in other locations.

58:52 Were perhaps a little arrogant in terms of in terms of rushing into a site. We didn't do enough didn't do enough kind of on the ground research, didn't think about it enough, presumed that we would be fine and we weren't and

59:08 really frustrating. And I think it's definitely caused us as an exec board to challenge, you know, our our sites when they come in front of the board to make sure that from a pitch perspective, we're we're really confident. Fantastic. Nick, Steven, I believe you have gone through all the questions from investors today, so thank you for that. But, Nick, before redirecting investors to provide you with their feedback, which I know is particularly important to the company, could I please ask you for a few closing comments? Yes. Well, listen. Thank you very, very much for for joining us today. I think we're at pains to point out it's another really consistent performance from LOUNGERS, both in terms of the mature states and the like for like sales growth and that focus on evolution and hospitality in the mature estate alongside a record number of new openings. 36 sites... New sites opened, and we have real confidence in the pipeline and and the rollouts as we're going forward and and and our ability to return to pre COVID levels of conversion. Thank you very much.

1:00:13 Nick, Steven, thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations? This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of Langer's PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.