Loungers sees further opportunities to boost its trade in the evenings, particularly when it comes to drinks sales, chief executive Nick Collins has told MCA.

Speaking on the back of its interim results for the 24 weeks to 6 October 2019, he said that both food and drink remained in growth across the Lounges and Cosy Club businesses, but there was “a slight bias toward food and our daytime sales”.

“We never want to be standing still, we are always looking to see whether we can do more,” he said. “We see opportunity in the evenings, in particular our evening wet sales, so that is something we are talking about a lot and will be looking at in calendar year 2020.”

Collins said one of the benefits of trading all day is that there are so many different day parts and occasions to target in terms of improvement. However, one of the standout features of the brands are that there is broadly a 50/50 split between food and drink at each, said Collins – and that hasn’t really changed over the past eight years. The fact is its trade is balanced throughout the year, and not reliant on a very busy Christmas period, is also a real strength of its model, he added.

The business, which currently operates 161 café/bar/restaurants in England and Wales (133 Lounges and 28 Cosy Clubs), has recently introduced new winter food menus and updated its drinks offering with wines and new draft beers, such as Punk IPA, Dead Pony, Moretti and Amstel now available on draft. “It is much more relevant, and premium, and the initial reaction from our customers has been really positive,” said Collins.

The business, which is on track to open a further 25 sites this year – the fifth year in a row it will have achieved an opening rate of at least 20 sites per annum – has not wavered from its property strategy of opening in a diverse range of town centre and secondary high street locations.

“The pipeline is in a similar to how it was at the time of the IPO. The property market is weaker, we have seen a lot of retail CVAs and they present us with opportunities,” he said, adding that Loungers has “never had a problem finding property opportunities”, and that continues to be the case.

“What’s really important is that we continue our track record and our discipline of negotiating great property deals so that we keep that rent to revenue ratio sub 6%,” he said.

Loungers has previously spoke about the potential growth which could come from Scotland and said it is still the intention to open sites there – although it’s unlikely to be in the very near future.

“Our expansion strategy, particularly from a Lounge perspective, has always been gradual expansion further north and further east rather than taking big jumps and trying to open in sites in locations where we don’t have sites and a particularly strong employee culture nearby,” he explained.

“But from a Lounge point of view, we will definitely open in Scotland. We see an awful lot of opportunity there, albeit it might not be in the next 12-24 months. From a Cosy Club perspective, it could be sooner than at, depending on whether we see the right opportunity,” added Collins.

Loungers, which listed on AIM in April this year, reported a revenue increase of 22% to £79.8m, (2018: £65.4m), in its trading update yesterday (4 December) which it said reflected the positive impact of both new site openings and strong underlying sales growth in its existing estate.

Adjusted EBITDA (IFRS 16) was up 26% to £14.7m, and loss before tax was reduced from -£4.3m to -£2.5m.

“When you take that in the context of a business that now has additional plc costs it is really impressive. And the fact we are growing our margins at the same time as opening 25 sites a year and floating as a business is something we are enormously proud of,” said Collins. “It demonstrates the benefit of scale and of the operational discipline in the business.”

He said one of the most important balances it has to strike is that in opening that number of sites per year – something many operators would feel was unsustainable – is that it still continues to evolve the business and deliver from a customer perspective across the whole estate, as well as maximising its profit conversion through the growing scale of the business.

Upcoming openings include Lounges in Sutton, Watford, Sittingbourne and Chorley and Cosy Clubs in Nottingham and Brindley Place, Birmingham.

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