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Mon 1st Apr 2019 - Loungers set for AIM float, plans 25 new openings a year
Loungers set for AIM float, plans 25 new openings a year: Loungers plans to float on the Aim market with a value of between £250m and £300m – and is targeting 25 new openings a year. The company, which is backed by Lion Capital, the private equity firm, was founded by Alex Reilley, Jake Bishop and Dave Reid. It opened its first bar, Lounge, in 2002 in Bristol. It will open two sites in Street, Somerset, and Aylesbury, Buckinghamshire this week, bringing its total to 146. It has 122 Lounge café bars and 24 sites under the Cosy Club banner, which targets larger market towns and city centres. Loungers will use its Aim listing to raise money to pay off its debt, provide capital for growth and allow existing shareholders to sell part of their stake. The company is on track to hit underlying earnings of £20m this year, valuing the company at between £250 and £300m. The company stated: “The group has a proven track record of sales growth, profitability and operating cash generation. This growth has been driven by a combination of new Lounge and Cosy Club site openings but also by strong like-for-like sales growth in the existing estate. The group’s like-for-like sales were 6.4% in the 24 weeks to 7 October 2018 (compared to 0.9% reported by the Coffer Peach Business Tracker), 6.0% in FY18 (compared to minus 0.2% reported by the Coffer Peach Business Tracker) and 5.5% in FY17 (compared to 1.3% reported by the Coffer Peach Business Tracker). Sales grew at a CAGR of 33% between 24 April 2016 and 22 April 2018 and Adjusted Ebitda grew at a CAGR of 39% over the same period. The overall cash return on capital invested has remained consistent at circa 34% in each of FY17, FY18 and the 24 weeks to 7 October 2018. Independent analysis by location planning consultants CACI has identified the potential for more than 400 Lounges and more than 100 Cosy Clubs in England and Wales. This is supported by a consistent track record of successful openings and a strong pipeline of new sites. The group opened 21, 20 and 22 sites in FY16, FY17 and FY18, respectively and will have opened 25 sites and relocated one site by the end of FY19. The group has a further 13 sites where contracts have been exchanged and 35 sites in legal documentation or at heads of terms stage. The directors are targeting 25 new sites per annum over the medium term, of which approximately 20 are expected to be Lounges and approximately five are expected to be Cosy Clubs.” Nick Backhouse, Adam Bellamy and Jill Little have each joined the board of Loungers as independent non-executive directors, Nick Collins, chief executive of Loungers, said: “I am delighted to announce our intention to list on AIM. It has long been the ambition of the founders and myself that Loungers becomes a listed entity. The listing will allow us to broaden the employee shareholder base and provide us with an appropriate capital structure to pursue our future growth ambitions. Loungers is the only growing all-day operator of scale within the UK hospitality sector. Our relaxed, casual, home from home proposition which combines coffee shop, pub and restaurant across our two complementary brands – Lounge and Cosy Club – resonates with today’s consumer, attracting broad demographic appeal in a diverse range of trading locations. We have a growing business and clear expansion strategy to continue to rollout 25 new sites per year supported by a strong pipeline of sites and led by an experienced and committed management team. We believe our track record speaks for itself and look forward to the opportunity which lies ahead to deliver significant value for all shareholders.” The company reported that a lounge costs £600,000 to open whilst a Cos Club site cost £1,000,000. On its more recent trading, the company stated: “For the five-week period to 6 January 2019, the group delivered record like-for-like sales growth of 11%, building on a strong like-for-like performance over Christmas 2017 and maintaining the group’s track record of consistently outperforming the wider hospitality sector. Total sales for the period were £18.3 million, which was 31% higher than the previous year (2017: £14.0 million). Since 6 January 2019, the group has continued to trade in line with the directors’ expectations, delivering strong like-for-likes sales growth.” The company added: “The Lounge brand has a proven ability to operate in populations as low as 10,000 and still generate attractive returns on capital. The strength of the group’s all-day trade and repeat custom enables the group to trade successfully in smaller secondary locations that typically have lower rent and less competition. The group also has the ability to cluster in the suburbs of larger cities, with new units opening in close proximity to existing sites without cannibalising sales, as demonstrated in Birmingham, which has nine Lounges and one Cosy Club. Like-for-like sales and returns are consistent across vintages and geographic regions.”


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