Loungers Plc Share Price (LGRS)

Loungers need to declare a maiden dividend and reliable dividend policy, if necessary by moderating site rollout - that is the next step to actualising shareholder value in my view

Loungers has announced record FY24 Sales of £353.5m, up 24.7% and 22.2% excluding the 53rd week. This exceptional performance was 2.7% ahead of our estimate as FY24 LFL sales growth of 7.5% was maintained into the final 21 weeks, outperforming the industry again. Even more impressively, FY23/FY24 new sites contributed c.15% to revenue growth as Loungers’ unique all-day café-bar model continues to attract new customers nationwide, ranging from coastal towns to mixed use retail / leisure schemes. Sales leverage and easing inflation has led to FY24E Adj. EBITDA ahead of expectations and we raise our FY24 Adj. EBITDA by c.3% to £43.5m (IAS 17 metric).

We recently initiated on Loungers detailing why its profitable model and self-funded growth was undervalued. The 257-site group still has huge scope to grow towards its ambition of over 650 sites, driving 17% CAGR in Revenues, 19% CAGR in Adj. EBITDA and 23% CAGR in Adj. EPS FY23-FY26E.

Whilst Loungers’ share price has rallied 10% in the past month, we maintain our view that this high growth is not reflected in the group’s valuation. We raise our Fair Value to 370p, based on 8.0x our new calendar 2025 EV/Adj. EBITDA.

Link to report: https://www.equitydevelopment.co.uk/research/all-day-success-all-year-round

Loungers is an award winning, uniquely positioned all day café-bar group that has grown revenues an impressive 22.5% CAGR FY16-FY23. Comprising of Lounges, Cosy Club and Brightside, the 257-site group still has huge scope to grow towards its conservative ambition of over 650 sites.

Loungers is profitable with improving margins and we forecast will generate over £100m free cashflow (pre-expansion capex) FY24E-FY26E. This, we estimate, will fully fund c.100 new site openings over the next three years driving 16% CAGR in Revenues, 18% CAGR in Adj. EBITDA and 20% CAGR in Adj. EPS FY23-FY26E.

This high growth is not reflected in the group’s valuation, in our view. We initiate coverage with a Fair Value of 360p, based on 8.0x cal 2025 EV/Adj. EBITDA.

Link to research note: https://www.equitydevelopment.co.uk/research/delivering-self-funded-growth-all-day-long

I suggest you or they email Loungers about it, they are extremely responsive. Also, your friend won't get two unless he asks for two.

A friend has been telling anyone that they meet how in their local Velo Lounge in Bath a single slice of toast with marmite costs £2.95 - and apparently they counted it three times and each time there was just the ONE slice of toast on the plate for which they paid £2.95!!! They assured me that they will NEVER frequent a Lounge establishment ever again.

Now while I love to see Loungers posting great turnover figures and a healthy profit I think turning away customers by charging an extortionate amount for one single lonely slice of toast is not good business, heaven knows how many people my friend has told about the £2.95 slice of toast, but to me it’s not good PR.

Solution? Make the single slice a couple of slices and Loungers will still make a load of profit from that £2.95.