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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Loungers Plc | LSE:LGRS | London | Ordinary Share | GB00BH4JR002 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -7.00 | -3.29% | 206.00 | 210.00 | 216.00 | 213.00 | 213.00 | 213.00 | 34,054 | 16:35:17 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Eating Places | 283.51M | 6.93M | 0.0668 | 31.89 | 220.95M |
From Apr 2021 to Apr 2024
TIDMLGRS
RNS Number : 8976F
Loungers PLC
21 July 2021
21 July 2021
Loungers plc
("Loungers")
Audited results for the 52 weeks ended 18 April 2021
Material market out-performance post re-opening
Loungers ("the Group") is pleased to announce its audited results for the 52 weeks ended 18 April 2021 ("FY21"). Loungers is an operator of 175 café/bar/restaurants across England and Wales under two distinct but complementary brands, Lounge and Cosy Club. The Group's sites offer something for everyone regardless of age, demographic or gender and the Group operates successfully in a diverse range of different sites and locations across England and Wales.
Finance Summary
Hot Features
Premium
IFRS 16 IAS 17
Year Year Change Year Year Change
ended ended ended ended
18 April 19 April 18 April 19 April
2021 2020 2021 2020
GBP000 GBP000 GBP000 GBP000
Revenue 78,346 166,502 -52.9% 78,346 166,502 -52.9%
Adjusted EBITDA 13,913 28,767 -51.6% 3,530 18,813 -81.2%
Adjusted EBITDA margin (%) 17.8% 17.3% +0.5ppts 4.5% 11.3% -6.8ppts
Loss before tax (14,722) (14,781) (12,979) (13,020)
Adjusted (loss) / profit before
tax (13,395) 2,002 (11,652) 3,763
Adjusted diluted (losses)
/ earnings per share (p) (9.8) 2.4 (8.4) 3.8
Net debt 144,823 139,895 34,245 34,956
Current Trading
-- Significant market out-performance since full re-opening on 17 May, with net like for like ("LFL") sales growth of +23.7% in the nine weeks from 17 May to 18 July 2021 versus the same period in 2019
-- Benefiting from post-Covid trends; flexible working driving traffic to local high streets rather than city centres, community presence, staycationing
-- Non-property net debt at 18 April 2021 of GBP34.2m reduced to GBP18.2m at 11 July 2021 as our negative working capital rewinds
-- Seven new sites opened to date in the current financial year, and return to opening sites at the pre-Covid-19 level of 25 sites per year
Financial and Operational Highlights
-- Strong trading and consistent significant sector outperformance when allowed to trade between lockdowns
-- Continuous evolution: introduction of web-based app for orders at table, optimising and improving menus, developing dishes and redesigning external areas
-- Strong team engagement during lockdown, supporting furloughed teams
-- Incorporated all Covid secure processes whilst protecting our unique atmosphere and hospitality
-- Three sites opened during year; strong pipeline going forwards
-- Rapid actions taken during March and April 2020 and in subsequent lockdowns to preserve liquidity, with GBP15m additional credit facility arranged and GBP8.1m (net) new equity raised. Net debt (ex property leases) down year on year
-- In addition to strong trading and self-help measures the results benefit from government support
-- Positive collaboration with landlords and suppliers to manage cashflow
Nick Collins, Chief Executive Officer of Loungers said:
"I am delighted with the strength of our performance since re-opening, with LFL sales of +23.7%. Each time the business has re-opened over the past 18 months, we have achieved consistent, sector-leading sales growth.
"We welcomed the removal of all Covid related restrictions on Monday and whilst there is naturally short-term uncertainty, we are looking ahead with real confidence. We have already opened seven very strong new sites this year, and I am delighted we are now back opening sites at a run-rate of 25 sites per year. We want to play our part in driving economic growth as we come out of Covid, improving high streets across the UK and providing amazing hospitality in communities. The strategy that we outlined when we floated the business in 2019, and our place on the high street, have never looked more relevant.
The last few weeks have been very challenging operationally, and as we head into the summer holidays, the operating environment will continue to be difficult as we face interruption due to positive Covid cases and self-isolation and a very tight labour market in a number of locations. Once again our team have approached the challenge with enthusiasm and commitment and I am enormously grateful and proud of the contributions made at every level in the business. The resilience shown by our team over the last 18 months has been remarkable. We are committed to using our growth to provide fantastic careers and progression opportunities in the hospitality sector, and with around 1,250 employee shareholders, rewarding loyalty with ownership in the business"
(1) Adjusted EBITDA is calculated as operating profit before depreciation, pre-opening costs, exceptional costs, and share-based payment charges.
(2) Adjusted profit / (loss) before tax is calculated as profit / loss before tax before exceptional costs.
For further information please contact:
Loungers plc Via Instinctif Partners Nick Collins, Chief Executive Officer Gregor Grant, Chief Financial Officer GCA Altium Limited (Financial Adviser and Tel: +44 (0) 20 NOMAD) 7484 4040 Sam Fuller / Tim Richardson Liberum Capital Limited (Joint Broker) Tel: +44 (0) 20 Andrew Godber / John Fishley 3100 2000 Peel Hunt LLP (Joint Broker) Tel: +44 (0)20 7418 Dan Webster / George Sellar 8900 Instinctif Partners (Financial Public Relations) Tel: +44 (0) 207 Justine Warren / Matthew Smallwood 457 2020
Notes to Editors
Loungers operates through its two complementary brands - Lounge and Cosy Club - in the UK hospitality sector. A Lounge is a neighbourhood café/bar combining elements of coffee shop culture, the British pub and dining. There are 145 Lounges nationwide. Lounges are principally located in secondary suburban high streets and small town centres. The sites are characterised by informal, unique interiors with an emphasis on a warm, comfortable atmosphere, often described as a "home from home". Cosy Clubs are more formal bars/restaurants offering reservations and table service but share many similarities with the Lounges in terms of their broad, all-day offering and their focus on hospitality and culture. Cosy Clubs are typically located in city centres and large market towns. Interiors tend to be larger and more theatrical than for a Lounge, and heritage buildings or first-floor spaces are often employed to create a sense of occasion. There are 30 Cosy Clubs nationwide.
Chairman's Statement
Introduction
When writing my chairman's statement for our FY20 annual report, some 10 months ago, I had rather hoped that we were facing a future where the impact of Covid-19 was increasingly in the past. Regrettably, as we now know, even bigger challenges lay ahead for the business and, as it turns out, we were only able to trade for a handful more weeks of FY21 as the second and then third lockdowns saw the business closed.
As we went into the autumn and further restrictions were layered on at regular intervals trading became tougher and it felt increasingly inevitable that the hospitality sector would once again be forced into lockdown. It was a deeply frustrating time in terms of having to deal with restrictions, some of which were puzzling and introduced at very short notice, that allowed us to continue trading but effectively tied one hand behind our back. During the third lockdown, that frustration was very much centred around the government's approach of engaging and listening to the sector but then seemingly making decisions that had no bearing on that consultation. As someone who was part of some of those discussions, it did feel at times that we were banging our heads against a brick wall. Notwithstanding the above, we are very appreciative of the significant financial support provided to Loungers and the wider hospitality sector, and the role this played in enabling us to keep our teams intact.
Despite this hugely distracting and frustrating backdrop it has been a good year for Loungers albeit this isn't obviously reflected in this set of accounts. Not only have we traded exceptionally well when we have been allowed to open, but in periods of lockdown the Loungers team made great use of their time to accelerate the development and evolution of the business. We must hope that the worst is now firmly behind us and we can look forward to a positive future.
Strategic
Whilst none of us would ever again want to see the business closed for any period of time, having the opportunity to work through really big strategic objectives without the distraction of a trading business has been invaluable. The senior management team, supported ably by the plc board, has worked through a series of challenges focusing on how we can make the business better. The Loungers way has always been about constant evolution, innovation and improvement and we have made a great deal of progress in addressing and accelerating some long-term objectives.
We have continued to evolve both our food and drink menus with a focus on some more comprehensive changes to the Cosy Club food menu, which are currently being trialled.
We have tweaked and refined our web-based at-seat ordering app, having launched it in July 2020 after just six weeks of development. Orders through the app account for over 70% of all sales in Lounge and whilst we would expect this number to reduce when our customers are once again allowed to order at the bar, it's very clear that ordering at-table is a big behavioural shift that is here to stay.
We have undertaken comprehensive improvements to our external trading areas as well as extending some where we have been permitted to do so. Improving our outside seating areas had actually been a key objective before the pandemic struck as we felt the design of our external areas didn't reflect the strong look-and-feel of our sites internally. Consequently, with the importance of outside trading areas becoming only too apparent, we were well-placed to tackle the challenge of maximising the sales potential of our external areas as we already had the basis of a plan in place. We have invested in around 50% of the overall estate, with a focus on making the most of the space we have and significantly improving the look-and-feel of our external areas. There is an obvious short-term benefit from this investment, but more importantly we will reap long-term benefits too as the external areas of new sites will be much better designed going forwards.
Whilst a break from the roll-out of new sites has been unwelcome it has given us the time to review our design and build processes. This has resulted in a focus, and a plan, on how we can build better and more efficiently. We have also challenged ourselves to continue to turn the dial on our designs and to build and open better sites from a look-and-feel perspective. I am really pleased with the way this is evolving and believe our most recent openings represent a significant step-change in the quality and inventiveness of our design.
We have also made significant strides in the construction of our pipeline of new sites, not only in terms of quantity but more importantly in terms of quality. In the near 19-year history of Loungers we have never had a better pipeline of sites and such is the quality that we have genuine competitive tension. Critically I believe the sites in the pipeline, which stretches well into FY23, represent at least top quartile opportunities and in some cases I see sites that I believe could be in our top ten best performers.
The Team
Despite the stressful and extremely distracting backdrop of Covid-19, and the associated lockdowns, FY21 has seen yet another stellar performance from the whole senior management team. If you learn a lot about people in a crisis, then what I have learnt is that we have a team, and a business, with tremendous ability and tenacity. The senior management team have dealt with everything that has been thrown at them head-on and with a positive mindset. There has been no hiding, and everyone has risen to every challenge, no matter its nature. We have seized every opportunity to trade when we could and played the hand we have been dealt to the best of our ability. We have a very talented team and it has been an absolute privilege to work with, and be part of, that team.
The positivity of the senior management team is also reflected in the way in which the whole business has responded to the challenges of Covid-19. It has been incredibly tough for our teams to deal with operating in a new Covid-secure environment with ever-changing restrictions and having to close and then reopen and then close again. However, despite all the challenges of trading during Covid-19 our teams have responded brilliantly and have seemingly taken everything in their stride, with a smile on their face (underneath their face mask), and with the same level of warmth and hospitality that Loungers has always been known for. Loungers would be nothing without our teams and, in what has been the most challenging of years, I would like to thank everyone on the Loungers' bus for their dedication, hard work and unwavering commitment to the cause.
The Board
The plc board has continued to play a significant role, particularly in supporting the executive team in meeting their main objectives. I am hugely grateful for their continued support and for the role they have played in helping the executive team to reach the right conclusions.
We recently managed to hold our annual strategy day in person, which made such a difference, despite how well connected we have managed to be during the pandemic. It was so good to meet in person and we had a thoroughly enjoyable and much more constructive day than I believe we would have had if we had met remotely. It was a very productive session and set out the key objectives for the executive team for the coming months. As always there is lots for us to do.
Post-lockdown trading
When we have been allowed to trade we have undoubtedly traded very strongly, which gives us great encouragement for the future. Our like-for-like (LFL) sales have been sector-leading and at times off the scale. This has clearly been influenced by some pent-up demand after periods of lockdown, but is also, I believe, a consequence of how well we have managed the various restrictions and the positive mindset we have adopted in making the most of being able to trade. Net turnover for FY21 was GBP78.3m, which whilst considerably down on FY20 (GBP166.5m), is a remarkable number when you consider how blighted the year was by lockdowns. We managed to post positive Adjusted EBITDA of GBP3.5m (IAS17), which is also no mean feat.
Like-for-likes since 17(th) May 2021, after which we have been permitted to trade indoors, have been very strong at +23.7% when compared against the same period in 2019 and with a summer of staycationing to come we expect a very busy few months ahead. We have restarted the roll-out and have so far opened 7 new sites in FY22. Our strong trading, coupled with the strength of our property pipeline, has encouraged us to return to our pre-pandemic run-rate of 25 new site openings per year, which is earlier than we had anticipated.
The Future
It is difficult not to get too carried away when looking to the future. We have a business that is currently trading fantastically well and a really exciting, fully formed pipeline of new sites, which we are now opening at the same rate as before the pandemic. The business is led by a best-in-class executive management team, which in turn is supported by a superb senior management team. However, whilst small, the threat of further disruption in the future from Covid-19 still remains and we have to be mindful of that. We are currently also dealing with a very substantial shortage of staff in hospitality and, whilst I believe Loungers are faring better than most, it remains unclear whether this is an acute short-term challenge or something we are going to be grappling with longer term. In my 28 years in hospitality, recruitment has always been challenging but I have never known there to be such a shortage of people in the sector as there is now. We desperately need the sector to work together and then, more importantly, for the government to assist in helping to address the labour crisis we currently have.
Whilst there are big challenges ahead, we have, I believe, the best team to rise to these challenges. I also believe there are very few businesses in our sector that have such a strong platform to continue to build from and such a fantastic opportunity to grow. Post-pandemic there are some unique opportunities for a business like Loungers and we fully intend to seize them.
Alex Reilley
Chairman
21 July 2021
Chief Executive's Statement
Introduction
The year was dominated by Covid-19 and the constantly changing environment brought about by the response to the pandemic. When we were forced to close we focused on our financial position, engaging with our teams, using the downtime to evolve and improve and preparing ourselves to re-open. When we re-opened our emphasis was on the safety of our teams and customers, providing amazing hospitality whilst complying with the rules, and approaching the restricted environment with a positive attitude and a will to come out as winners.
Throughout the year a number of themes have consistently resonated:
-- When we have been allowed to trade, our sales have been industry leading, and post Covid our brands have never looked more relevant;
-- When the business has been closed we have used the downtime well, evolving and getting better at what we do;
-- Our senior team is best in class, as has been demonstrated by our performance over this period;
-- The culture in the business has never been stronger and I am incredibly appreciative and proud of the loyalty, commitment and hard work of our teams across the UK.
Evolution
The pandemic in itself accelerated change within the business that might otherwise have taken years. In the enforced downtime whilst the sites were closed we were also presented with an extraordinary opportunity to analyse the business and challenge how it could be improved. Some of the most important ways in which the business has evolved over the past year are set out below:
-- Our web-based order at table app currently accounts for over 70% of sales in Lounge (with only order at table being permitted). Once our customers are allowed to order at the bar again, we anticipate in excess of 40% of customers will still use the app. As a result of the app we have benefited from average spend increasing, table turns becoming faster, ticket times reducing, our team being freed up to focus more on hospitality, tens of thousands of weekly pieces of feedback and detailed data on the performance of our sites. We recognised early the risk of our standards of hospitality dropping with technology being added and we have successfully avoided this
-- Our menus have reduced in size with no adverse customer reaction. This has led to quicker delivery of dishes to customers, higher levels of efficiency and simplicity in the kitchens and a reduced number of ingredients. Simplifying our kitchens has long-been one of our key priorities and the menu reduction brought about due to Covid-19 has really pushed this on.
-- Whilst the menus have got smaller, the dishes have continued to evolve and improve. The lockdowns provided valuable time for our teams to be in the development kitchen and we achieved a great deal without the need to focus on the day to day operations of the business.
-- Lockdown 3 saw the business focus on improving our external seating areas. Over two thirds of the sites within the estate have some outside seating and we have known for some time it's an aspect of the business that we could improve. Starting in January 2021, we have had a programme of improvements across some 81 sites, introducing bespoke planters, barriers, furniture, signage and lighting in these external areas. These improvements weren't just to maximise sales during the April/May period when we were only allowed to trade in external areas, but they will benefit sales at these sites for the foreseeable future.
Re-opening and trading safely amid Covid
The considerable investment we made post-Lockdown 1 in terms of bespoke timber partitions and carefully scrutinising every single site's 'Covid layout' has been critical. We removed around 10% to 15% of the covers throughout the business to achieve '1m plus' social distancing and currently have in excess of GBP1m of sofas and armchairs stored in a warehouse in South Wales, awaiting their return to Lounges and Cosy Clubs across the UK. Back in June 2020 we were determined our sites would look better than ever when we re-opened, and we have maintained this attitude throughout Covid, approaching every challenge positively.
If you consider the many barriers, we have had to put between us and our customers as a result of Covid, it is all too easy to see how the customer experience could suffer. Our teams have had to deal with test and trace, masks, distancing, sanitising, order at table only, substantial meal rules, rule of six, external areas only and different regional variations on all of the above. All of these present an opportunity to detract from amazing hospitality. Our detailed, collaborative and considered approach, has ensured we have made the most of everything that has been thrown at us and huge credit has to go to our teams who have absorbed one rule change after another, ensuring our customers left happy.
During the first lockdown in 2020 we opened for takeaway only in 27 sites. This was not an exercise in profitability, but we recognised it would allow us to learn about trading with Covid and ensure we were more fully prepared once we were allowed to fully open. That approach ensured we hit the ground running in July 2020, aware of the challenges our customers, suppliers and teams would face, and having evolved our training materials and processes accordingly. Likewise in April 2021 we opened 46 (ultimately increased to 88) sites for external trading only and were able to bring the business back to life gradually, unfurloughing our teams, and ensuring we were prepared to reopen the estate fully on 17th May.
Trading performance post Lockdowns
Both Lounge and Cosy Club have demonstrated extraordinary resilience every time they have re-opened.
-- In July 2020 it typically took two to three weeks for sites to return to pre-Covid levels of sales, despite the reduction in capacity, restrictions to our trading model, and the general nervousness in some parts of the population. Eat Out to Help Out ("EOTHO") in August 2020 was an astonishing month with our sites achieving record levels of sales. Between 4 July and 4 October the business achieved headline LFL sales of +25.1%, with underlying LFL sales of -1.1%, once the benefit of EOTHO and the reduction in the VAT rate are removed. Loungers out-performed its sector by around +30% consistently.
-- Since reopening fully on 17 May 2021 over the nine weeks to 18 July 2021 we have achieved LFL sales of +23.7% (versus the same period in 2019), with underlying LFL sales of +11.6% excluding the impact of the reduction in VAT rate, again despite the restrictions to our trading model and the reduction in capacity. Once again this represents a material out-performance of our sector more broadly and it has been fantastic to see the sites re-open immediately at pre-Covid levels of sales. The successful ongoing vaccination programme in the UK has clearly resulted in a more confident consumer with a willingness to eat and drink out.
-- Our consistent out-performance can be put down to a few key factors:
-- Geography - our focus on small towns and secondary suburbs means we are not exposed to the types of locations most impacted by Covid. We do not have a presence in travel hubs, tourism locations nor large office communities;
-- We are benefitting from more people working from home, spending money on their local high street rather than in the city centre where their office is located;
-- Our focus on community has never been more important as customers have returned to places where they have a connection and familiarity;
-- Some of the changes we have made within the business as a result of Covid have enhanced sales, in particular the introduction of the app and the reduction in menu size; and
-- The culture within the business and the positive approach towards dealing with the challenges we have faced over the last 18 months.
Financial position
During the first lockdown we took the appropriate steps to ensure our liquidity was sufficiently robust to survive our worst-case planning scenarios. We raised GBP8.1m (net) of equity capital via a placing of new shares in April 2020 and agreed additional debt facilities of GBP15m with our banks. We are grateful for the continued excellent support of both Santander and Bank of Ireland. It was important that we had the funding to not just survive Covid, but also to allow us to return to growth as soon as possible once we were back up and trading.
During each lockdown the business has struck the right balance between controlling expenditure and minimising cash burn, whilst ensuring critical work-streams continue. We are very grateful for the support we have received from our supply chain, and in particular our core suppliers in Matthew Clark, Elite, Reynolds, United, and Clifton Coffee.
Throughout the pandemic, our approach with landlords has been to be collaborative and maintain a dialogue. In line with the Government's code of practice we have asked our landlords to share some of the cost of Covid through partial rent waivers for periods when we have been unable to trade. The majority of our landlords have been supportive, and we continue to engage with the small number of landlords with whom we have not yet agreed terms.
We are grateful for the support the Government has provided to the sector during the pandemic in the form of the business rates holiday, the short-term reduction in the VAT rate, and the various support grants. In addition, the furlough scheme has provided our team with an income during lockdowns and allowed us to keep the team together. The ongoing support is critical to the economic recovery from Covid. The hospitality sector has a crucial role to play in the recovery, and continued Government support through the VAT rate reduction and business rates support should be a catalyst for entrepreneurialism and economic growth.
People
I am very proud of the performance of our teams over what has been a very difficult year. At times over 99% of our 4,500 employees were furloughed and at each time of asking, reopening was approached positively and enthusiastically. We worked hard to strike the right balance over the closure periods, communicating regularly and honestly with our teams with respect to their financial position, while ensuring that they stayed in touch with each other, and had access to any support or guidance they might need.
Ultimately, all of the Covid restrictions and rules have had to be interpreted and monitored by our teams in the sites, putting them in difficult situations and effectively acting as the police to an often confused consumer. In this environment our teams performed astonishingly well, maintaining the highest standards of hospitality whilst keeping everyone safe.
Our senior team, both at an operational level and within HQ, has performed incredibly well over the past year. Our collaborative, detailed approach has meant that in a very fluid and challenging environment, we have been able to make considered decisions with positive outcomes for our teams and customers. The senior team was bolstered during the year with the addition of Eve Bugler as COO and we have also made senior hires in the finance team, property team and on the people side. We continue to focus on having the right leadership structure and senior team for a 250 plus site business.
Since coming out of lockdown 3, recruitment has become more challenging, and it is clear the hospitality sector is suffering from an outflow of talent to other sectors. We are not immune from this, although to date it has impacted us in a minority of locations where we are finding it difficult to recruit. As a fast-growing business we can provide progression opportunities for those wanting a career in hospitality and we will continue to work hard to both improve as an employer and highlight what sets us apart. As a sector we need to work hard to demonstrate it is a fantastic career option.
Property and pipeline
The roll-out was paused with the onset of Covid and we only opened three sites during the year - Ponto Lounge in Hull, Sentado Lounge in Sittingbourne and a Cosy Club in Brindleyplace, Birmingham - bringing us to 168 sites at the year end. These were all sites where the builds were largely complete ahead of Lockdown 1. Since the year end and with the success of the UK vaccination programme we have cautiously restarted the roll-out and have opened a further seven Lounge sites in Wolverhampton, St Ives, Stourbridge, Welwyn Garden City, Blackpool, Scarborough and Aberystwyth.
Management's confidence in the roll-out of both Lounge and Cosy Club has been reinforced by the strength of our trading when we have been allowed to open. In the second half of the year we continued to work hard on developing our new site pipeline. We now have good visibility as to openings for more than the next 12 months, and the quality of the pipeline sites is better than ever before. It remains the case that the majority of our sites are retail conversions from A1 use, but over the course of the last few months, we have taken a handful of former restaurant sites as a result of CVA's. Covid has undoubtedly strengthened our pipeline and accelerated changes we were already starting to see on the high street pre-Covid, presenting Loungers with good property opportunities. Most importantly we are seeing prime pitch sites in key target locations, including coastal locations where we trade very strongly, which will help us increase average site sales and EBITDA.
Current trading and outlook
Since reopening fully on 17 May 2021, we have achieved LFL sales growth of +23.7% (versus the same period in 2019). Excluding the positive impact of the VAT reduction this represents underlying LFL sales growth of +11.6% and represents a significant out-performance to the market.
As we look ahead, we now have sufficient confidence to resume new site openings with four in-house build teams, which will allow us to return to a run-rate of 25 new site openings per year. As such we now anticipate opening 23 new sites during this financial year, with 7 open already.
Whilst there is no guarantee that there will not be further interruption from Covid-19 restrictions, the business is uniquely well-placed to move forwards and we take confidence from our continued out-performance of the market .
Nick Collins
Chief Executive Officer
21 July 2021
Financial Review
Overview
The year to 18 April 2021 has seen many challenges but importantly we ended the year with a clear roadmap to re-opening, and indeed with 46 sites open for outdoors only trading in the final week of the year, and a balance sheet that has weathered the storm of Covid-19 remarkably well.
The financial highlights below demonstrate the financial pain the Group has suffered. Year on year revenue was down by GBP88.2m, a fall of 52.9%, albeit a creditable performance given our sites were only able to trade for 34% of the available trading weeks in the year. However, the prompt actions that the Group took at the start of the pandemic, raising net equity proceeds of GBP8.1m, securing additional financing, and focusing on maximizing cashflows through controlling costs and accessing Government support, has left us well positioned at the end of the year, with year-end net debt (excluding IFRS16 liabilities) of GBP34.2m showing a modest year on year improvement.
IFRS 16 IAS 17
Year Year Change Year Year Change
ended ended ended ended
18 April 19 April 18 April 19 April
2021 2020 2021 2020
GBP000 GBP000 GBP000 GBP000
Revenue 78,346 166,502 -52.9% 78,346 166,502 -52.9%
Adjusted EBITDA 13,913 28,767 -51.6% 3,530 18,813 -81.2%
Adjusted EBITDA margin (%) 17.8% 17.3% +0.5ppts 4.5% 11.3% -6.8ppts
Loss before tax (14,722) (14,781) (12,979) (13,020)
Adjusted (loss) / profit before
tax (13,395) 2,002 (11,652) 3,763
Adjusted diluted (losses)
/ earnings per share (p) (9.8) 2.4 (8.4) 3.8
Net debt 144,823 139,895 34,245 34,956
Throughout the Annual Report we use a range of financial and non-financial measures to assess our performance. A number of the financial measures, for example Adjusted EBITDA, Adjusted profit / (loss) before tax and Adjusted diluted earnings / (losses) per share are not defined under IFRS and accordingly they are termed Alternative Performance Measures ("APMs"). The Group believes that these APMs provide stakeholders with additional useful information on the underlying trends, performance and position of the Group and are consistent with how business performance is measured internally. Adjusted EBITDA is also the measure used by the Group's banks for the purposes of assessing covenant compliance.
Reconciliations of statutory numbers to adjusted numbers reported above are included in note 12.
Financial Performance
I noted in last year's financial review the challenges posed by Covid-19 when it came to interpreting our financial performance. The further lockdowns we have endured, and the various support measures introduced by Government, make the challenge even greater when it comes to interpreting the results for the year to 18 April 2021. Looking at the year split between the first and second halves:
24 Weeks ended 4 October 2020
The first 24 weeks of the year included 11 weeks of lockdown, four weeks of phased re-opening, four weeks of Eat Out to Help Out ("EOTHO") in August and ended with relative normality for the five weeks to 4 October 2020. The net effect of the lockdowns and phased re-opening was that our sites traded for 48% of the available weeks. Importantly, during the weeks that sites were able to trade they traded very strongly with headline LFL sales of +25.1%; excluding the positive effects of EOTHO and the VAT reduction the underlying LFL result was -1.1%. The strong sales performance, allied to the positive margin impact of the VAT reduction and the business rates holiday, saw the Group deliver an Adjusted EBITDA margin of 24.7% against 18.1% in the same period in 2019.
28 Weeks to 18 April 2021
The second half of the year covering the 28 weeks to 18 April 2021 opened with all sites trading but, as the infection rate climbed, a second national lockdown commenced on 5 November. 106 sites reopened on 2 December, however as restrictions and the tier system became increasingly onerous this had reduced to just 35 sites trading when the third national lockdown commenced on 31 December. This lasted just over 14 weeks, with sites allowed to trade in external areas only from 12 April 2021. The net effect of these two lockdowns is that our sites were able to trade for just 22% of the available weeks across the second half of the year.
The increasingly challenging restrictions in place across the weeks when trading was possible, for example the Rule of 6, the 10pm curfew and the substantial meal requirement, impacted the LFL sales performance. Those sites that were able to trade during October and December delivered a net LFL sales result of -6.4%. The lower sales volumes, allied to the increasing costs of funding the furlough scheme and the costs of closing and reopening sites, contributed to the reduction in gross margin in the second half to 32.2%. The increased costs of Covid-19 that impacted the second half of the year were in part offset by additional Government grant support, principally through the Local Restrictions Support Grant funding, with GBP3.5m of grant support being recognised in the second half.
24 Weeks ended 28 Weeks ended 52 Weeks ended
4 October 2020 18 April 2021 18 April 2021
--------------- --------------- ---------------
GBP000 GBP000 GBP000
--------------- --------------- ---------------
% of Weeks able
to trade 48% 22% 34%
--------------- --------------- ---------------
Turnover 53,493 24,853 78,346
--------------- --------------- ---------------
Gross profit 24,716 8,003 32,719
--------------- --------------- ---------------
Gross profit % 46.2% 32.2% 41.8%
--------------- --------------- ---------------
Administrative expenses (12,111) (10,749) (22,860)
--------------- --------------- ---------------
Other income 600 3,454 4,054
--------------- --------------- ---------------
Adjusted EBITDA 13,205 708 13,913
--------------- --------------- ---------------
Adjusted EBITDA
margin 24.7% 2.8% 17.8%
--------------- --------------- ---------------
Impact of UK Government Support Initiatives
The Group has benefited over the year from a number of UK Government initiatives introduced to mitigate the impact of Covid-19, notably:
-- The Coronavirus Job Retention Scheme ("CJRS") - At the onset of lockdown 1 in March 2020, with all our sites closed, we transferred all site employees and the majority of head office employees (in total 99% of employees) into the CJRS. Subsequently, and notably in periods of increasing restrictions, the Group was able to utilise the flexible furlough scheme. During the year under review the Group received a total of GBP35.7m of funding under the CJRS. A total of GBP33.4m was recognised in the statement of comprehensive income in the year, offsetting site payroll costs on the cost of sales line and head office payroll costs on the administrative expenses line. Cash receipts included GBP4.3m that was recognised in the FY20 results and GBP2.0m was receivable as at 18 April 2021.
-- The Eat Out to Help Out Scheme ("EOTHO") - The Group completed the phased re-opening of all its sites after Lockdown 1 by 7 August and was therefore well-placed to benefit from the Eat Out to Help Out ("EOTHO") scheme that ran on Monday to Wednesday throughout August 2020. The Group received total funding under the EOTHO scheme of GBP5.6m. This has been recognised as revenue in the year.
-- Business Rates Relief - The Group's sites have benefitted from the business rates holiday that ran from 1 April 2020 to 30 June 2021. During the year to 18 April 2021 the Group has benefitted by GBP5.9m.
-- Support Grant Funding - In the year under review the Group has recognised GBP4.1m of grant funding received variously under the Retail, Leisure and Hospitality Scheme, the Local Restrictions Support Grant Scheme, and latterly the Re-Start Grant Scheme. This income has been recognised under other income.
In addition to the support initiatives described above the Government introduced the Corporate Insolvency and Governance Bill which provided a range of protections for tenants. The Group has sought to work collaboratively with all of its landlords, seeking to reach agreement over an equitable share of the pain of lockdown whilst recognizing the significant Government support the Group has received. The Group has recognised GBP1.4m in the year in respect of rent waivers and as at 18 April 2021 there were deferred rent liabilities carried in the balance sheet of GBP6.3m.
Exceptional Costs
The statutory operating loss of GBP7.7m is after charging exceptional costs totalling GBP1.3m (2020: GBP15.3m). Exceptional costs include:
-- GBP0.4m relating to the write off of stock on the forced closures of the estate due to Covid-19;
-- GBP0.3m in respect of the costs of removing and storing excess furniture to allow the Group to comply with social distancing measures; and
-- GBP0.4m of professional fees relating to the renegotiation of banking arrangements and legal advice relating to Covid-19 matters.
Long Term Employee Incentives
Keeping our employees engaged and motivated during the sporadic trading was critical to the Group. During the year the Group granted further share awards under the employee share plan (360,664 shares) and the senior management restricted share plan (718,766 shares). These awards were made to a total of 799 employees who work across the business, predominantly at site level, and in hourly paid and salaried positions. In addition, awards covering 480 employees and in respect of 650,000 shares vested in the year.
The Group recognised a share based payment charge in the year of GBP2.0m, the charge covering the employee share plan, the senior management restricted share plan and the value creation plan.
Finance Costs and Net Debt
Finance costs of GBP7.0m (2020: GBP8.1m) include IFRS 16 lease liability finance costs of GBP5.6m (2020: GBP5.5m) and bank interest payable of GBP1.4m (2020: GBP1.2m). The reduction in year on year finance costs relates to the inclusion in 2020 of a GBP1.4m exceptional charge in respect of the write-off of unamortised loan arrangement fees relating to the Group's pre IPO banking facilities.
Net debt (excluding IFRS16 lease liabilities) at the year end of GBP34.2m (2020: GBP35.0m) represented a small decrease. The Group enjoyed excellent support from its banking partners during the year, taking prompt action to secure an incremental RCF facility of GBP15m which provided additional liquidity, albeit that it remained unutilized during the year. The robustness of the year end balance sheet combined with the strength of post year end trading has resulted in the Group being able to repay the GBP7m drawn down at year end under existing facilities post year end.
Taxation
The Group has reported a tax credit of GBP3.6m for the year to 18 April 2021 (2020: credit of GBP2.0m) and at year end carried a deferred tax asset of GBP3.8m (2020: GBP0.2m). Overpaid corporation tax of GBP1.1m, relating to payments on account made in advance of Covid-19, was recovered in the year.
Cash Flow
The Group maintained a strict focus on controlling cash flow during the period, predominantly through the immediate halt of further new site rollouts in March 2020, but also through cost control, accessing Government support and the support of our trading partners and landlords.
Net cash generated from operating activities declined by 50.7% to GBP12.0m (2020: GBP24.4m). Cash generation reflects a working capital cash outflow of GBP1.3m (2020: cash inflow of GBP1.7m). The negative impact of the working capital unwind resulting from the payment of outstanding trade supplier balances was offset by the build-up of deferred rent liabilities and a reduction in the year end outstanding furlough claim debtor. The Group is grateful for the support it has received from trade suppliers, notably during the first national lockdown, and from those landlords who have agreed rent waivers and deferrals.
Cash outflows in the year in respect of capital expenditure totalled GBP7.8m (2020: GBP23.1m) and compare to the cost of fixed asset additions (excluding right of use assets) recognised in the year of GBP5.1m. The excess cash outflow reflects the unwind of capital expenditure liabilities carried at 19 April 2020. Capital expenditure in the year of GBP5.1m (2020: GBP22.8m) included GBP2.8m (2020 GBP17.4m) in respect of new site openings.
Key Performance Indicators ("KPI's")
The KPI's, both financial and non-financial, that the Board reviews on a regular basis in order to measure the progress of the Group are as follows:
FY21 FY20
Growth /(decline) Growth /(decline)
------------------ ------------------
New site openings 3 21
------------------ ------------------
Capital expenditure (IAS GBP5.1m GBP22.8m
16 PPE excluding IFRS
RoU assets)
------------------ ------------------
LFL sales growth (excluding
lockdown periods) +13.3% +4.4%
------------------ ------------------
Total sales growth (52.9%) 8.8%
------------------ ------------------
Adjusted EBITDA margin
(IFRS 16) 17.8% 17.3%
------------------ ------------------
Going Concern
In concluding that it is appropriate to prepare the FY21 financial statements on the going concern basis attention has been paid to the impact of Covid-19 on the Group, both experienced to date and potentially foreseeable in the future.
Covid-19 actions taken to mitigate the impact of lockdown
The Group has to date successfully navigated the three national lockdowns through a combination of:
-- Strong financial performance of the business prior to the first lockdown on 20 March 2020;
-- Rapid actions taken during March and April 2020 and in subsequent lockdowns to preserve liquidity;
-- Equity raise and banking amendments concluded in April 2020; -- Level of Government support made available; and -- Strong levels of trade when we have re-opened after periods of lockdown.
As a consequence of the above the Group has managed to maintain significant levels of liquidity at all times. At 18 April 2021, with a clear roadmap to re-opening and with 46 sites re-opened for external trading, the Group had available liquidity of GBP22.9m, sufficient to fund 37 weeks of lockdown on the basis of a working capital unwind of GBP5.1m and a rent inclusive weekly cash burn during lockdown of GBP0.48m.
Significant work has been undertaken throughout the year to model an ever-changing range of potential scenarios. Following the announcement of the government's reopening roadmap on 22 February 2021 and the subsequent announcement of further support measures in the budget on 3 March 2021 the base case model was updated to reflect the following key assumptions:
-- Limited reopening on 12 April 2021 for external trade only with no positive contribution to fixed costs;
-- Total estate re-opening from 17 May 2021, with gross sales (i.e. before reflecting any benefit from the VAT reduction) LFL performance ranging from -25% to -15% over the 8 weeks to 11 July 2021;
-- Sites trade at flat LFL gross sales (compared to 2019/20 sales) for the remainder of the financial year to 17 April 2022 and return to modest LFL sales growth in FY23;
-- VAT reduction to 5% ends on 30 September 2021 and replaced with reduction to 12.5% through to 31 March 2022;
-- Business rates holiday to 30 June 2021, followed by 66% relief capped at GBP2m to 31 March 2022; and
-- A resumption of the new site roll-out programme, with a return to a run rate 25 new sites in the year.
In light of the extended third lockdown and the impact on second half profitability highlighted above a further amendment was agreed with the Group's lenders. This amendment included:
-- An extension of the additional GBP15m revolving credit facility ("RCF"). This facility was previously due to expire in October 2021 but will now run to October 2022; and
-- A waiver of the covenant tests due at 18 April 2021 and amendment of the covenant tests scheduled for 11 July 2021, 3 October 2021 and 26 December 2021.
Performance post lockdown
As previously reported the Group delivered a very strong trading performance in the period following the resumption of trading from 4 July 2020. Trading in the period from 4 July 2020 to 4 October 2020 delivered LFL sales growth (including the impact of the VAT reduction on food and non-alcoholic drinks) of +25.1%. Excluding the positive impacts of the VAT reduction and the EOTHO scheme, underlying trading in that period was LFL-1.1%.
The very strong trading performance that followed the resumption of trading after lockdown 1 has been repeated in the period from 17 May 2021, when full indoor and outdoor trading resumed after the third lockdown. In the nine weeks ended 18 July 2021 the Group has delivered net LFL sales growth of +23.7%. Excluding the positive impact of the VAT reduction underlying LFL sales growth was +11.6%. This underlying performance compares to the base case management plan that assumed LFL sales between -25% and -15% across the period from 17 May 2021 to 11 July 2021.
As was the case after trading resumed following the first lockdown, the strength of trading post reopening on 17 May and the accompanying working capital rewind has delivered a significant reduction in net debt. As of 11 July 2021, net debt was GBP18.2m. Adjusted to reflect deferred liabilities to landlords and HMRC as if they had been paid, net debt was GBP25.7m. This compares favourably to net debt of GBP28.8m on 22 March 2020, immediately post the start of lockdown 1.
Cash flow and covenant models
Under the management base case scenario described above, borrowing under the Group's total RCF facility of GBP25m would not exceed GBP2.0m and the Group would be in compliance with its bank covenants. The Group is subject to leverage and interest cover covenant tests, and as referred to above, the amendment to the Group's banking facilities agreed in April 2021 included the waiver of the covenant tests scheduled for 18 April 2021 and amendments to the tests running through to 26 December 2021. To the extent that covenant tests were not waived, the Group was in compliance with its covenants throughout the year ended 18 April 2021.
Additional downside scenarios have been modelled against the management base case. These include a severe but plausible downside scenario based upon the following assumptions:
-- Total estate re-opening from 17 May 2021, with gross sales (i.e. before reflecting any benefit from the VAT reduction) LFL performance ranging from -25% to -15% over the 8 weeks to 11 July 2021;
-- Gross LFL sales over the 16 weeks to 31 October 2021 in line with those delivered by the Group during October 2020 when full, and increasingly restrictive, social distancing measures were in place;
-- Gross LFL sales declining to -25% in the four weeks to 28 November 2021 and then to -60% in the four weeks to 26 December, seeking to reflect increasing lockdown measures as we enter the winter season;
-- Full lockdown in the eight weeks to 20 February 2022;
-- Reopening and flat LFL sales in the final eight weeks of the year to 17 April 2022 followed by a return to modest LFL growth in FY23; and
-- Mitigations consistent with those adopted during FY21 (for example pausing the rollout of new sites and negotiations with landlords)
The impact of reflecting all these assumptions in the downside scenario is to reduce expectations of Adjusted EBITDA by approximately 46% for FY22 relative to the Board's base case forecast. Under this downside scenario the Group is forecast to remain within its borrowing facilities and to be in compliance with its covenant obligations, and accordingly the Directors have concluded that it is appropriate to prepare the financial statements for the year ending 18 April 2021 on the going concern basis.
Gregor Grant
Chief Financial Officer
21 July 2021
Consolidated Statement of Comprehensive Income
For the 52 Weeks Ended 18 April 2021
Year ended Year ended
Note 18 April 19 April
2021 2020
GBP000 GBP000
Revenue 78,346 166,502
Cost of sales (46,178) (98,523)
Gross profit 32,168 67,979
Gross profit before exceptional items 32,609 68,882
Exceptional items included in cost
of sales 6 (441) (903)
---------------------------------------------- ----- ----------- -----------
Administrative expenses (43,950) (74,695)
Other income 4 4,054 -
Operating loss 4 (7,728) (6,716)
Operating (loss) / profit before exceptional
items (6,401) 8,620
Exceptional items included in cost
of sales 6 (441) (903)
Exceptional items included in administrative
expenses 6 (886) (14,433)
---------------------------------------------- ----- ----------- -----------
Finance income 46 50
Finance costs 5 (7,040) (8,115)
Finance costs before exceptional items (7,040) (6,668)
Exceptional finance cost 5 - (1,447)
---------------------------------------------- ----- ----------- -----------
Loss before taxation (14,722) (14,781)
Tax credit on loss 7 3,580 1,960
Loss for the year (11,142) (12,821)
=========== ===========
Other comprehensive expense:
Items that may be reclassified to
profit or loss
Cash flow hedge - change in value
of hedging instrument 101 (332)
Other comprehensive income / (expense)
for the year 101 (332)
Total comprehensive income / (expense)
for the year (11,041) (13,153)
=========== ===========
Losses per share Year ended Year ended
Note 18 April 19 April
2021 2020
Pence Pence
Basic losses per share 8 (10.9) (14.0)
Diluted losses per share 8 (10.9) (14.0)
Consolidated Statement of Financial Position
As at 18 April 2021
Note At 18 April At 19 April
2021 2020
GBP000 GBP000
Assets
Non-current
Intangible assets 113,227 113,227
Property, plant and equipment 9 165,443 166,447
Deferred tax assets 3,816 236
Finance lease receivable 668 752
------------ ------------
Total non-current assets 283,154 280,662
Current
Inventories 774 815
Trade and other receivables 2,619 6,850
Cash and cash equivalents 4,912 4,083
------------ ------------
Total current assets 8,305 11,748
Total assets 291,459 292,410
============ ============
Liabilities
Current liabilities
Trade and other payables (28,576) (34,118)
Lease liabilities (6,921) (6,160)
Derivative financial instruments (231) (332)
------------ ------------
Total current liabilities (35,728) (40,610)
Non-current liabilities
Borrowings 10 (39,157) (39,039)
Lease liabilities (103,657) (98,779)
Total liabilities (178,542) (178,428)
============ ============
Net assets 112,917 113,982
============ ============
Called up share capital 1,124 1,025
Share premium 8,066 -
Hedge reserve (231) (332)
Other reserve 14,278 14,278
Retained earnings / (accumulated losses) 89,680 99,011
------------ ------------
Total equity 112,917 113,982
============ ============
Consolidated Statement of Changes in Equity
For the 52 Weeks Ended 18 April 2021
(Accumulated
Called losses)
up share Share Hedge Other / retained Total
capital premium reserve reserve earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 21 April 2019 53 4,184 (10) 51 (23,370) (19,092)
Redeemable preference shares
issued 100 - - - - 100
Share for share exchange
- ordinary shares 8,408 (4,184) - (4,224) - -
Preference debt for equity
swap 66,193 - - 18,451 - 84,644
Ordinary shares issued 3 - - - - 3
Ordinary shares issued on
IPO 308 61,288 - - (3,655) 57,941
Capital reduction (74,040) (61,288) - - 135,328 -
Share based payment charge - - - - 3,539 3,539
Total transactions with
owners 972 (4,184) - 14,227 135,212 146,227
Loss for the year - - - - (12,821) (12,821)
Other comprehensive expense - - (322) - (10) (332)
Total comprehensive expense
for the 52 week year - - (322) - (12,831) (13,153)
At 19 April 2020 1,025 - (332) 14,278 99,011 113,982
---------- --------- --------- --------- ------------- ---------
Ordinary shares issued 99 8,066 - - (6) 8,159
Share based payment charge - - - - 1,817 1,817
---------- --------- --------- --------- ------------- ---------
Total transactions with
owners 99 8,066 - - 1,811 9,976
Loss for the year - - - - (11,142) (11,142)
Other comprehensive income - - 101 - - 101
Total comprehensive expense
for the 52 week year - - 101 - (11,142) (11,041)
At 18 April 2021 1,124 8,066 (231) 14,278 89,680 112,917
========== ========= ========= ========= ============= =========
Consolidated Statement of Cash Flows
For the 52 Weeks Ended 18 April 2021
Year ended Year ended
18 April 19 April
2021 2020
GBP000 GBP000
Cash flows from operating activities
Loss before tax (14,722) (14,781)
Adjustments for:
Depreciation of property, plant and
equipment 10,288 9,630
Depreciation of right of use assets 7,567 7,177
Impairment of property, plant and
equipment - 9,829
Share based payment transactions 2,034 4,027
Loss / (profit) on disposal of tangible
assets 4 (5)
Finance income (46) (50)
Finance costs 7,040 8,115
Changes in inventories 41 685
Changes in trade and other receivables 3,108 (733)
Changes in trade and other payables (4,414) 1,793
----------- -----------
Cash generated from operations 10,900 25,687
Tax reclaimed / (paid) 1,131 (1,290)
Net cash generated from operating
activities 12,031 24,397
Cash flows from investing activities
Purchase of property, plant and equipment (7,808) (23,058)
Disposal of property, plant and equipment - 10
Net cash used in investing activities (7,808) (23,048)
=========== ===========
Cash flows from financing activities
Issue of ordinary shares 8,158 57,941
Shares issued on exercise of employee (79) -
share awards
Bank loans advanced - 38,924
Bank loans repaid - (71,000)
Repayment of other loans - (17,950)
Interest paid (1,260) (1,099)
Principal element of lease payments (5,303) (5,228)
Interest paid on lease liabilities (4,910) (5,478)
Principal element of lease receivables - 124
Net cash used in financing activities (3,394) (3,766)
=========== ===========
Net increase / (decrease) in cash
and cash equivalents 829 (2,417)
Cash and cash equivalents at beginning
of the year 4,083 6,500
Cash and cash equivalents at end of
the year 4,912 4,083
=========== ===========
NOTES TO THE PRELIMINARY FINANCIAL INFORMATION
1. General information
Loungers plc ("the company") and its subsidiaries ("the Group") operate café bars and café restaurants through two complementary brands, Lounge and Cosy Club.
The Company is a public company limited by shares whose shares are publicly traded on the Alternative Investment Market ("AIM") of the London Stock Exchange and is incorporated and domiciled in the United Kingdom and registered in England and Wales.
The registered address of the Company is 26 Baldwin Street, Bristol, United Kingdom, BS1 1SE.
2. Basis of preparation
The consolidated financial statements of the Loungers plc Group, from which the financial information in this announcement is derived, have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 ('IFRS') and the applicable legal requirements of the Companies Act 2006.
The financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial liabilities (including derivatives) at fair value through profit and loss. The financial statements are presented in thousands of pounds sterling ('GBP000') except where otherwise indicated.
The accounting policies adopted in the preparation of the Financial Statements are consistent with those applied in the preparation of the financial statements of the Group for the year ended 19 April 2020, except for the adoption of the Covid-19 Related Rent Concessions - Amendment to IFRS16. Further information is given in note 3.
The auditors' reports on the accounts for the 52 weeks ended 18 April 2021 and 19 April 2020 for Loungers plc were unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006.
The financial statements for Loungers plc for the year to 18 April 2021 will be delivered to the Registrar of Companies shortly. The financial information contained within this preliminary announcement for the periods ended 18 April 2021 and 19 April 2020 does not comprise the statutory financial statements of Loungers plc.
In concluding that it is appropriate to prepare the FY21 financial statements on the going concern basis the Directors have considered the Group's cash flows, liquidity and business activities. Particular attention has been paid to the impact of Covid-19 on the business, both experienced to date and potentially foreseeable in the future.
As at 18 April 2021 the Group had cash balances of GBP4.9m and undrawn facilities of GBP18m, providing total liquidity of GBP22.9m. On 17 May 2021, outdoor trading resumed in all of the Group's sites, with initial trading exceeding expectations.
Based on the Group's forecasts, the Directors have adopted the going concern basis in preparing the Financial Statements. The Directors have made this assessment after consideration of the Group's cash flows and related assumptions and in accordance with the Guidance on Risk Management, Internal Control and Related Financial and Business Reporting 2014 published by the UK Financial Reporting Council.
In making this assessment the Directors have made a current consideration of the potential impact of the Covid-19 pandemic on the cash flows and liquidity of the Group over the next 12 month period. This assessment has considered:
-- Measures put in place during lockdown to preserve and to increase liquidity and the Group's ability to comply with revised covenants, including the extension of the GBP15m RCF facility to October 2022;
-- The impact of Government measure to support industry, and in particular the hospitality industry. These measures include the Coronavirus Job Retention Scheme, the business rates holiday and the temporary VAT reduction to 5% on food and non-alcoholic drinks;
-- Initial trading during the period post the resumption of trading on 17 May 2021;
-- The repayment of liabilities deferred during FY201 and FY20, including rent and HMRC liabilities; and
-- The potential for opening new sites.
The Group's forecasts assume a level of LFL sales decline, resulting from the impact of Covid-19 on consumer behaviour, which is more prudent than the positive LFL sales growth experienced in the period post re-opening (adjusted to exclude the positive impact of EOTHO).
The Directors have also considered a more severe downside set of LFL assumptions. These include:
-- Summer trading at the same rate of LFL decline as that experienced post the first lockdown in 2020;
-- Further increases in the level of LFL sales decline in the approach to winter, followed by lockdown in January and February;
-- Flat LFL sales in the last two months of FY22, followed by a return to modest LFL sales growth in FY23; and
-- Some mitigation could be achieved through the scaling back of the new site openings and further negotiations with landlords.
The impact of these downside scenarios is to reduce expectations of Adjusted EBITDA by approximately 46% for FY22 relative to the Board's base case forecast. U nder this downside scenario the Group is forecast to remain within its borrowing facilities and to be in compliance with its covenant obligations, and accordingly the Directors have concluded that it is appropriate to prepare the FY21 financial statements on the going concern basis.
3. New standards, amendments and interpretations adopted
Impact of the initial application of 'COVID-Related Rent Concessions' Amendment to IFRS 16
In May 2020, the IASB issued COVID-Related Rent Concessions (Amendment to IFRS 16) that provides practical relief to lessees in accounting for rent concessions occurring as a direct consequence of COVID-19, by introducing a practical expedient to IFRS 16. The practical expedient permits a lessee to elect not to assess whether a COVID-related rent concession is a lease modification. A lessee that makes this election shall account for any change in lease payments resulting from the COVID-related rent concession the same way it would account for the change applying IFRS 16 if the change were not a lease modification. The practical expedient applies only to rent concessions occurring as a direct consequence of COVID-19 and only if all of the following conditions are met:
-- The change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change;
-- Any reduction in lease payments affects only payments originally due on or before 30 June 2021 (subsequently extended to 30 June 2022); and
-- There is no substantive change to other terms and conditions of the lease.
The Group has applied the practical expedient to all rent concessions that meet the conditions in IFRS 16:46B and has not restated prior period figures. The Group has accounted for lease payments of GBP1.4million as a negative variable lease payment in profit or loss. The Group has derecognised the part of the lease liability that has been extinguished by the forgiveness of lease payments, consistent with the requirements of IFRS 9:3.3.1.
Other amendments to accounting standards applied from 20 April 2020 were as follows:
-- Definition of Material - amendments to IAS 1 and IAS 8; -- Definition of a Business - amendment to IFRS 3; -- Revised Conceptual Framework for Financial Reporting; and -- Interest Rate Benchmark Reform - amendments to IFRS 9, IAS 39 and IFRS 7
The application of these did not have a material impact on the group's accounting treatment and has therefore not resulted in any material changes.
The group has applied phase 1 of the interest rate benchmark reform and has identified one interest rate swap that is linked to the LIBOR rate. Under phase 1 the Group has elected to take the relief provided for continuation of hedge accounting and continues to hedge account on interest rate swaps. The Group is in the process of assessing the transition to alternative interest rate benchmarks ahead of phase 2 of the reform being implemented.
Certain new accounting standards and interpretations have been published that are not mandatory for 18 April 2021 reporting periods and have not been early adopted by the group. These standards are not expected to have a material impact on the entity in the current or future reporting periods an on foreseeable future transactions.
4. Operating loss
The operating loss is stated after charging / (crediting):
Year ended Year ended
Note 18 April 19 April
2021 2020
GBP000 GBP000
Depreciation of tangible fixed assets 9 10,288 9,630
Depreciation of right of use assets 9 7,567 7,177
Inventories - amounts charged as
an expense 16,804 40,876
Fees payable to the company's auditors
and its associates:
* For statutory audit services (parent and consolidated
accounts)
60 46
* for statutory audit services (subsidiary companies) 66 48
* for tax compliance services 71 48
* for tax advisory services 37 351
Staff costs (excluding share based
payments) 69,599 69,423
CJRS Grant income (33,157) (4,280)
Government support grant income (4,054) -
Pre-opening costs 421 2,220
Exceptional costs 6 1,327 15,336
=========== ===========
Government support grant income of GBP4,054,000 (2000: GBPnil) relates to income received variously under the Retail, Leisure and Hospitality Scheme, The Local Restrictions Support Grant Scheme and the Re-Start Grant Scheme.
5. Finance Costs
Year ended Year ended
18 April 19 April
2021 2020
GBP000 GBP000
Bank interest payable 1,398 1,155
Finance cost on lease liabilities 5,642 5,478
Other loan interest payable - 18
Preference share interest - 17
Exceptional write off of loan arrangement
fees - 1,447
----------- -----------
7,040 8,115
=========== ===========
The Group's IPO in April 2019 included a re-financing of the Group's bank debt. This re-financing necessitated the write off of loan arrangement fees incurred in the Group's May 2017 financing. This was a non-cash charge.
6. Exceptional Items
Year ended Year ended
18 April 19 April
2021 2020
GBP000 GBP000
Included in cost of sales
Covid-19 related 441 903
Included in administrative expenses
Covid-19 related 886 -
Change of ownership - 1,528
IPO Related share-based awards - 2,901
Impairment of property, plant and equipment - 9,829
Head office relocation - 175
----------- -----------
1,327 15,336
=========== ===========
6. Exceptional Items (continued)
The Covid-19 related costs included in cost of sales are in respect of the write-off of food and drink inventories resulting from the forced closure of all sites on 20 March 2020, 4 November 2020, and 30 December 2020.
The Covid-19 related costs included in administrative expenses include the costs of the removal and storage of furniture and soft furnishings to enable compliance with social distancing and professional fees incurred in respect of the amendments made to the Group's banking facilities.
7. Tax credit on loss
The income tax credit is applicable on the Group's operations in the UK.
Year ended Year ended
18 April 19 April
2021 2020
GBP000 GBP000
Taxation credited to the income statement
Current income taxation - -
Adjustments for current tax of prior periods - (130)
----------- -----------
Total current income taxation - (130)
=========== ===========
Deferred Taxation
Origination and reversal of temporary
timing differences
Current year (2,600) (1,940)
Prior year (980) -
Adjustment in respect of change of rate
of corporation tax - 110
----------- -----------
Total deferred tax (3,580) (1,830)
=========== ===========
Total taxation credit in the consolidated
income statement (3,580) (1,960)
=========== ===========
The above is disclosed as:
Income tax credit - current year (2,600) (1,940)
Income tax credit - prior year (980) (20)
----------- -----------
(3,580) (1.960)
=========== ===========
Year ended Year ended
18 April 2021 19 April
2020
GBP000 GBP000
Loss before tax (14,722) (14,781)
At UK standard rate of corporation taxation
of 19% (2020: 19%). (2,797) (2,808)
Expenses not deductible for tax purposes
- Preference share interest - 3
-Share based payments (347) 545
- Other 553 661
Fixed asset differences (9) 183
Movement in unrecognised deferred tax - (524)
Adjustments to tax charge in respect of
prior years (980) (130)
Adjustment in respect of change of rate
of corporation tax - 110
Total tax credit for the year (3,580) (1,960)
============== ===========
8 Earnings per share
Year ended Year ended
18 April 19 April
2021 2020
GBP000 GBP000
Loss for the year after tax (11,142) (12,821)
Basic weighted average number of shares 102,291,621 91,786,283
Adjusted for share awards 2,076,783 1,734,508
Diluted weighted average number of shares 104,368,404 93,520,791
Basic losses per share (p) (10.9) (14.0)
Diluted losses per share (p) (10.9) (14.0)
The share awards are not considered to be dilutive as they would have the impact of reducing the losses per share.
Adjusted earnings per share is based on loss for the year before exceptional items and the associated tax effect.
Year ended Year ended
18 April 19 April
2021 2020
GBP000 GBP000
Loss for the year before tax (14,722) (14,781)
Exceptional items 1,327 15,336
Exceptional write off of loan arrangement
fees - 1,447
----------- -----------
Adjusted (loss) / profit for the year
before tax (13,395) 2,002
Tax credit 3,580 1,960
Tax effect of exceptional items (252) (1,719)
----------- -----------
Adjusted (loss) / profit for the year
after tax (10,067) 2,243
Basic adjusted (losses) / earnings per
share (p) (9.8) 2.4
Diluted adjusted (losses) / earnings per
share (p) (9.8) 2.4
9 Property, plant and equipment
Leasehold Motor Fixtures Right Total
Building Vehicles and Fittings of use
Improvements asset
GBP000 GBP000 GBP000 GBP000 GBP000
Cost
At 22 April 2019 44,927 83 39,961 100,634 185,605
Additions 9,571 10 13,217 21,029 43,827
Disposals - (12) (31) (183) (226)
At 19 April 2020 54,498 81 53,147 121,480 229,206
Accumulated depreciation
At 22 April 2019 5,199 - 10,151 20,994 36,344
Provided for the year 3,160 34 6,436 7,177 16,807
Impairment 2,166 - 400 7,263 9,829
Disposals - (12) (26) (183) (221)
At 19 April 2020 10,525 22 16,961 35,251 62,759
Net book value
At 19 April 2020 43,973 59 36,186 86,229 166,447
============== ========== ============== ======== ========
Cost
At 20 April 2020 54,498 81 53,147 121,480 229,206
Additions 2,330 - 2,790 11,735 16,855
Disposals (160) - (147) (238) (545)
At 18 April 2021 56,668 81 55,790 132,977 245,516
Accumulated depreciation
At 20 April 2020 10,525 22 16,961 35,251 62,759
Provided for the year 3,553 31 6,704 7,567 17,855
Disposals (159) - (144) (238) (541)
At 18 April 2021 13,919 53 23,521 42,580 80,073
Net book value
-------------- ---------- -------------- -------- --------
At 18 April 2021 42,749 28 32,269 90,397 165,443
============== ========== ============== ======== ========
9 Property, plant and equipment (continued)
Impairment of property, plant and equipment and right of use assets
The Group has determined that each site is a separate CGU for impairment testing purposes. Each CGU is tested for impairment at the balance sheet date if there exists at that date any indicators of impairment. All sites were reviewed in FY20 following the first national lockdown and an impairment of GBP9.8m was booked in the FY20 accounts. All sites have been tested for impairment in FY21 as the Covid pandemic continues, however following the successful reopening of all sites in April and May 2021, no further impairment has been booked.
The value in use of each CGU is calculated based upon the Group's latest three-year forecast, incorporating the impact of the Covid-19 lockdown and assumptions concerning the rate at which site level cash flows will recover. The site cash flows include an allocation of central costs and ongoing capital expenditure to maintain the sites. The cash flows exclude any growth capital. Cash flows beyond the three-year period are extrapolated using the Group's estimate of the long-term growth rate, currently 2.0%.
The key assumptions in the value in use calculations are the like for like sales projections for each site, changes in the operating cost base, the long-term growth rate and the pre-tax discount rate. The post-tax discount rate is derived from the Group's WACC and is currently 8.0%.
On the basis of the impairment test undertaken the Group has not recognised any impairment charge in the year to 18 April 2021 (2020: charge of GBP9,829,000). The cash flows used within the impairment model are based upon assumptions which, while prudent, are sources of estimation uncertainty. Management has performed sensitivity analysis on the key assumptions in the impairment model using reasonably possible changes in the key assumptions. A reduction in site cash flows of 10% in each year would result in an impairment charge of GBP2,437,000. A 100 basis point increase in the discount rate would result in an impairment charge of GBP1,142,000 and a 50 basis point reduction in the terminal growth rate would result in an
impairment charge of GBP211,000.
10 Borrowings
18 April 19 April
2021 2020
GBP000 GBP000
Long term borrowings:
Secured bank loans 39,500 39,500
Loan arrangement fees (343) (461)
39,157 39,039
==================== =========
Secured bank loans
The Group's bank borrowings are secured by way of fixed and floating charges over the Group's assets.
The facilities entered into at the time of the IPO provide for a term loan of GBP32,500,000 and a revolving credit facility ("RCF") of GBP10,000,000. The term loan is a five-year non-amortising facility with a margin of 2% above LIBOR. A three-year interest rate swap through to July 2022 has been entered into that fixes LIBOR on the full term loan facility at 0.7%.
As a consequence of Covid-19 on 22 April 2020 the Group agreed an incremental GBP15,000,000 RCF with its lenders, providing total a total RCF of GBP25,000,000. This incremental facility was originally due to expire in October 2021, however, given the prolonged Covid-19 lockdowns on 16 April 2021 the facility was extended for a further 12 months to October 2022.
The term loan and RCF are subject to financial covenants relating to leverage and interest cover. The agreement reached with lenders on 16 April 2021 included a waiver of the covenant tests due at 18 April 2021 and amendment of the covenant tests scheduled for 11 July 2021, 3 October 2021 and 26 December 2021.
At 18 April 2021 the term loan was fully drawn and GBP7,000,000 had been drawn down under the revolving credit facility.
11 Analysis of changes in net debt
22 April Cash flows Non-cash 19 April
2019 movement 2020
GBP000 GBP000 GBP000 GBP000
Cash in hand 6,500 (2,417) - 4,083
---------- ----------- ---------- ----------
Bank Loans (69,553) 32,076 (1,562) (39,039)
Lease liabilities (89,138) 10,706 (26,507) (104,939)
Unsecured loan stock (17,932) 17,950 (18) -
Preference shares (84,627) - 84,627 -
Net debt (254,750) 58,315 56,540 (139,895)
Derivatives
Interest-rate swaps asset
/ (liability) (10) 10 (332) (332)
Total derivatives (10) 10 (332) (332)
Net debt after derivatives (254,760) 58,325 56,208 (140,227)
========== =========== ========== ==========
20 April Cash flows Non-cash 18 April
2020 movement 2021
GBP000 GBP000 GBP000 GBP000
Cash in hand 4,083 829 - 4,912
---------- ----------- ---------- ----------
Bank Loans - due after one
year (39,039) - (118) (39,157)
Lease liabilities (104,939) 10,213 (15,852) (110,578)
Net debt (139,895) 11,042 (15,970) (144,823)
Derivatives
Interest-rate swaps liability (332) - 101 (231)
Total derivatives (332) - 101 (231)
Net debt after derivatives (140,227) 11,042 (15,869) (145,054)
========== =========== ========== ==========
Non-cash movements in bank loans due after one year relate to the amortisation of bank loan issue costs.
12 Reconciliation of statutory results to alternative performance measures
Year ended Year ended
18 April 19 April
2021 2020
GBP000 GBP000
Operating loss (7,728) (6,716)
Exceptional items 1,327 15,336
Share based payment charge 2,034 1,125
Site pre-opening costs 421 2,220
-----------
Adjusted operating profit (3,946) 11,965
Depreciation (pre IFRS 16 right of
use asset charge) 10,288 9,630
IFRS 16 Right of use asset depreciation 7,567 7,177
Loss / (profit) on disposal of fixed
assets 4 (5)
-----------
Adjusted EBITDA (IFRS 16) 13,913 28,767
IAS 17 Rent charge (10,889) (10,380)
IAS 17 Rent charge included in IAS
17 pre-opening costs 506 426
Adjusted EBITDA (IAS 17) 3,530 18,813
===========
Loss before tax (IFRS 16) (14,722) (14,781)
Exceptional items 1,327 15,336
Exceptional finance costs - 1,447
-----------
Adjusted (loss) / profit before tax
(IFRS 16) (13,395) 2,002
IAS 17 Rent charge (10,889) (10,380)
IAS 17 Leasehold depreciation (re
landlord contributions) (531) (464)
IFRS 16 Right of use asset depreciation 7,567 7,177
IFRS 16 Lease interest charge 5,642 5,478
IFRS 16 Lease interest income (46) (50)
----------- -----------
Adjusted (loss) / profit before tax
(IAS 17) (11,652) 3,763
=========== ===========
Loss before tax (IFRS 16) (14,722) (14,781)
IAS 17 Rent charge (10,889) (10,380)
IAS 17 Leasehold depreciation (re
landlord contributions) (531) (464)
IFRS 16 Right of use asset depreciation 7,567 7,177
IFRS 16 Lease interest charge 5,642 5,478
IFRS 16 Lease interest income (46) (50)
-----------
Loss before tax (IAS 17) (12,979) (13,020)
=========== ===========
Year ended Year ended
18 April 19 April
2021 2020
GBP000 GBP000
Adjusted (loss) / profit before tax
(IFRS 16) (13,395) 2,002
Tax credit / (charge) 3,580 1,960
Tax effect of exceptional items (252) (1,719)
Adjusted (loss) / profit after tax
(IFRS 16) (10,067) 2,243
IAS 17 Rent charge (10,889) (10,380)
IAS 17 Leasehold depreciation (re
landlord contributions) (531) (464)
IFRS 16 Right of use asset depreciation 7,567 7,177
IFRS 16 Lease interest charge 5,642 5,478
IFRS 16 Lease interest income (46) (50)
IFRS 16 Tax effect (239) (423)
------------ -----------
Adjusted (loss) / profit after tax
(IAS 17) (8,563) 3,581
============ ===========
Basic weighted average number of shares 102,291,621 91,786,283
Diluted weighted average number of
shares 104,368,404 93,520,791
Adjusted basic (losses) / earnings
per share (p) IFRS 16 (9.8) 2.4
Adjusted diluted (losses) / earnings
per share (p) IFRS 16 (9.8) 2.4
Adjusted basic (losses) / earnings
per share (p) IAS 17 (8.4) 3.9
Adjusted diluted (losses) / earnings
per share (p) IAS 17 (8.4) 3.8
Net cash generated from operating
activities (IFRS 16) 12,031 24,397
IAS 17 Rent charge (10,889) (10,380)
Movement in working capital 3,012 2,616
------------ -----------
Net cash generated from operating
activities (IAS 17) 4,154 16,633
============ ===========
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