Founded in 2002, Loungers has grown rapidly to a nationwide portfolio of 218 “Lounge” bars, and 36 “Cosy Clubs” which offer a unique combination of restaurant, pub and coffee shop; a proposition which differentiates from competition to appeal regardless of age, demographic or gender. As an all-day operator providing value for money, “Lounge” bars offer a “home from home” ambience and are competitive in a wide range of locations from market towns to coastal towns to retail and leisure centres. “Cosy Club” offers a more dramatic and up-market experience in city centres. In 2023 Loungers launched its third brand, with three “Brightside” roadside diners.

27 Mar 2024

Delivering self-funded growth “all day” long - Initiation

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.

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