Founded in 2002, Loungers has grown rapidly to a nationwide portfolio of “Lounge” bars, and “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.

09 Jul 2024

Loungers plc: All-day strategy success, with more to come

Loungers’ FY24 results illustrate the strength of its all-day café-bar model with record FY24 revenues increasing 25% to £353m and Adj. EBITDA (pre-opening costs) rising 26% to £59.6m, 1% ahead of our, and consensus, estimates. The group’s growth strategy is on track with continued food innovation, 36 new sites (and some record-breaking sales) and an expanded regional management structure. Meanwhile, whilst we make no significant changes to our recently upgraded forecasts, current trading of 5% LFL sales growth in the last 11 weeks and seven new Lounge openings, is very encouraging.

We initiated on Loungers earlier this year, 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 14% CAGR in Revenues, 15% CAGR in Adj. EBITDA and 21% CAGR in Adj. EPS FY24-FY27E. Whilst Loungers’ share price has rallied 35% since March, we believe this high growth is not reflected in the group’s valuation.

We reiterate our Fair Value of 370p (8.0x our calendar 2025 EV/Adj. EBITDA).

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