Shares in all-day cafe-bar operator Loungers (LGRS:AIM) gained 4% to 281p after reporting a 92% increase in first half revenues to £102.3 million and a 28% increase compared with 2019, despite the estate being open for only 11 weeks of the 24 week period.
Compared with 2019 like-for-like sales growth since reopening in April to 3 October was an industry leading 26.6%, and 13.6% excluding the VAT reduction, demonstrating the continued appeal of the company’s brands.
Strong trading has continued after the period end with like-for-like sales growing 23.4% across the 28 weeks to 28 November. Liberum analyst Anna Barnfather says this implies growth of 15.4% in the last eight weeks.
Looking ahead to Christmas, chief executive Nick Collins told Shares he was encouraged by the level of festive bookings at the company’s Cosy Club brand. This is a more formal restaurant-bar offering reservations and table service.
INCREASED MARGINS
Despite inflationary pressures the company managed to increase its EBITDA (earnings before interest, tax, depreciation, and amortisation) margin by 0.4%, excluding the beneficial impact of VAT reduction and other Government support measures.
Adjusted pre-tax profit increased to £12.8 million from £2.5 million last year and the business generated £35.9 million of cash from operations, up 71% year-on-year.
Strong cash generation supports the rollout of the estate with 12 sites opened in the first half and a further four sites opened since 3 October.
The company anticipates opening 25 new sites during the current financial year ending 17 April 2022, with scope to accelerate growth ‘as circumstances permit’.
Over the medium-term management have targeted 500 sites compared with 184 at the period end.
ANALYST UPGRADES
Continued strong trading prompted Barnfather at Liberum to increase her 2022 EBITDA estimate by 7% to £50.1 million. Meanwhile analyst Douglas Jack at Peel Hunt increased his 2022 EBITDA forecast by 5% to £49.4 million and his pre-tax profit estimate by 13.6% to £18.3 million.
Jack said: ‘We are upgrading our 2022 forecast to reflect strong trading, although we believe our forecast assumption of 8% per year average sales growth between 2019 and 2023 is cautious.’
