Loungers optimistic after strong first-half growth

Hospitality operator Loungers reported revenue growth of 22.3% in the 24 weeks ended 1 October on Tuesday, to £149.62m.

The AIM-traded firm put the growth down to a like-for-like sales growth of 7.7% and the addition of a net 32 new sites.

Adjusted EBITDA rose 23.6% year-on-year to £23.9m, and IAS17 adjusted EBITDA was ahead 28.2% at £17.3m.

The IAS17 adjusted EBITDA margin increased 0.6 percentage points to 11.6%.

Cash generated from operating activities surged to £23.4m from £14.6m in the first half of 2023.

On the operational front, Loungers said its strong trading was driven by both existing locations, with like-for-like sales exceeding pre-Covid levels by 25% and the successful launch of 16 new sites.

Loungers said it continued to enhance its offerings, introducing innovations in food menus and new blended drinks and iced coffee options.

The company’s margins benefited from reduced inflationary pressures and were on track to return to pre-Covid levels.

It said the accelerated expansion of new sites, with 16 opened during the period, including 14 Lounges and two Brightsides, contributed positively to the business.

The board said the pipeline for new sites remained robust.

Regarding current trading and outlook, Loungers reported strong performance in the first eight weeks of the third quarter, with like-for-like sales growth of 7.6% over the 32 weeks that ended on 26 November.

Additionally, six new sites had opened since the 1 October half-year end, including five Lounges and one Cosy Club.

With robust consumer demand and signs of moderating inflationary pressures, the company was optimistic ahead of the Christmas trading season.

“This has been another period of strong financial and operational growth for Loungers,” said chief executive officer Nick Collins.

“The fact that we have delivered increases of 22.3% and 23.6% in our revenue and EBITDA respectively should be taken as yet another reminder that it is not all doom and gloom in the UK hospitality sector.

“We are living proof that businesses which can provide outstanding hospitality, great food and drink and excellent value are still capable of thriving, and we see more growth potential for Loungers than ever before.”

Collins said the company’s accelerated site roll-out programme continued at pace, with the firm on track to open 34 in the 2024 financial year, meaning it would end the year with more than 250 sites.

“The opening of every new Lounge means an investment of nearly £1m into the local high street, and the increased footfall creates a positive knock-on effect on all of the businesses around us.

“By the end of 2023, we will have added another 1,000 people to our team during the year, and we are particularly pleased that one in eight of those new jobs is in areas that the government wants to ‘level up’ by creating better opportunities and standards of living.”

At 0843 GMT, shares in Loungers were down 1.71% at 230p.

Reporting by Josh White for Sharecast.com.