Loungers PLC (LON:LGRS) said 60 of its restaurants will need to remain closed under the new tiered coronavirus restrictions starting today, but said its performance in recent months shows it should thrive when the economy reopens.
The owner of the Cosy Club bar and restaurant chain reported a 72% plunge in first-half profits due to the closure of sites during coronavirus restrictions earlier in the year.
But since reopening in the summer, the group traded well, with like-for-like sales growth of 25% in the period to October 4, 2020, with a decline of 1.3% in the period to November 5 when the second national lockdown began.
In the short term, management expects a more severe impact on sales, with 60 sites in England’s toughest Tier 3 measures, 91 sites trading in Tier 2 and three sites trading in Tier 1, together with 14 sites in Wales that will be subject to tougher restrictions from December 4.
Although sales fell by a third to £26.3mln in the 24-week interim results period and adjusted profit before tax by 72% to £739mln, the group halved non-property net debt to £13.6mln.
Management said this “provides the balance sheet strength not only to withstand the second and potential future lockdowns but to ensure the group is well positioned to resume its roll-out strategy and benefit from an increasingly tenant friendly property market”.
During the period it opened one Cosy Club and one Lounge, with a second Lounge shortly after the half year end and two more scheduled for early in the New Year.
“As we dare to look beyond Covid-19, Lounge and Cosy Club have never seemed more relevant, and we approach 2021 with enthusiasm and optimism,” said chief executive Nick Collins.
“Our strong balance sheet will enable us to get back to doing what we do best, opening 25 sites a year, creating over 500 jobs a year, investing in high streets across the UK and looking after our customers and teams. With the encouraging news on the development of vaccines, it certainly feels like that time is within reach.”
Shares in the company continued their recent ascent, sitting up 6% at 234.88p in afternoon trading, up over 11% since the start of the year.
House broker Liberum noted that in a period marred by trading restrictions, Loungers delivered strong LFL sales and EBITDA margin growth “as it adapted its model, flexed its costs and harnessed all available government support”.
“We expect the next few months to remain challenging under the new tier system but for Loungers’ agile, all day, suburban model to continue to evolve and take market share.”
— Adds shares, analyst comment–