13th Oct 2023 12:59
(Alliance News) - Cafes and bars operator Loungers PLC said it has "never felt more optimistic" after it reported improved sales amid signs inflation pressure is abating.
Loungers shares traded 1.0% higher at 188.85 pence each in London on Friday afternoon.
In a trading update on the 24 weeks ended October 1, Loungers said it delivered like-for-like sales growth of 7.7%. This represents an acceleration from the like-for-like sales growth of 5.7% previously reported for the 12 weeks to July 9.
It also said it reflects a strong like-for-like sales performance since the pandemic. Relative to the 24-week period ended October 6, 2019, like-for-like sales are up 25%.
It added that total revenue in the first half of financial 2024 jumped 22% to GBP149.6 million from GBP122.3 million a year earlier. Further, inflationary pressures in the period continued to diminish, in line with the company's expectations.
During the first half of the financial year, Loungers said it has opened 16 new sites, taking its portfolio to 238 sites. One Lounge site has been opened to date in the second half and, with a further 17 sites scheduled to open.
"I am delighted with our strong trading performance across both the mature estate and our new openings. Our consistent sales growth reflects the continued evolution of our offer and the resilience of the UK consumer and high street," said Chief Executive Nick Collins.
Loungers reports amid a backdrop of M&A action in the dining space. Restaurant Group PLC on Thursday said it has agreed to be acquired by funds managed by private equity firm Apollo Global Management Inc.
Apollo is offering to pay 65 pence per Restaurant Group share in cash. The offer values the equity of Restaurant Group at GBP506 million and the company as a whole, including debt, at an enterprise value of GBP701 million.
Back in July, Fulham Shore PLC, the owner of Franco Manca and The Real Greek, was taken over by Toridoll Holdings Corp, a Japanese-based food and beverage services company.
Analysts at Liberum commented: "Yet sector share prices have all suffered from deteriorating investor sentiment as consumer confidence dropped, with market cap at a similar level to four years ago."
Liberum noted Loungers currently trades at 6.1 equity value to estimated earnings before interest, tax, depreciation, and amortisation multiple. It means it trades at a discount to the 8.6 multiple for Restaurant Group, as implied by the sum of Apollo's bid. The discount is despite Loungers "having a significantly larger runway for growth", according to Liberum.
"With FY23 a clean, base year behind it, this will provide a basis for reappraisal and the shares should re-rate as macro sentiment improves further," Liberum added.
By Eric Cunha, Alliance News news editor
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