Loungers plc: Equity Development
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 (see “Loungers: Delivering self-funded growth “all day” long”). 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 cal 2025 EV/Adj. EBITDA.
Record sales as 36 new sites and 7.5% LFL sales drive 22% sales growth
Despite a lack-lustre trading period for the industry in January-February 2024, Loungers has once again outperformed with FY24 LFL sales growth of 7.5%, implying c.5% outperformance of the industry in 4Q24. New sites continued to attract new customers, contributing c.15% sales growth.
Raising FY24E Adj. EBITDA by c.3% and FY24E PBT by c.15%
This exceptional sales performance, combined with disciplined cost management, has led us to increase our Adj. EBITDA (IAS 17) margin by c.10bps to 12.3%.
Growth prospects look undervalued, Fair Value raised to 370p
Offering higher organic growth than sector peers, operating cashflow to re-invest in growth and a strong balance sheet, we raise our Fair Value from 360p to 370p based on c.8.0x calendar (“cal”) 2025 EV/EBITDA and equating to c.1.3x cal 2025 EV/Sales and 27x cal 2025 PER.
Read or download the full report here....
Disclaimer & Declaration of Interest
The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.