Loungers Plc

LOUNGERS.CO.UK

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ANNUAL REPORT AND FINANCIAL STATEMENTS 
FOR THE 52 WEEK YEAR ENDED 19 APRIL 2020

 
 
 
 
WHAT WE DO

 OVERVIEW

What We Do 

 STRATEGIC REPORT

Chairman’s Statement 
Chief Executive’s Statement 
Key Strengths 
Directors’ Duties – S172 Statement 
Financial Review 
Key Performance Indicators (“KPI’s”) 
Principal Risks and Uncertainties 

IFC

3
6
10
11
13
16
19

 GOVERNANCE

Board of Directors 
22
Chairman’s Corporate Governance Statement  23
Audit Committee Report 
28
30
Remuneration Committee Report 
34
Nomination Committee Report 
Directors’ Report 
35
Independent Auditors’ Report  
 to the Members of Loungers plc 

39

 FINANCIAL STATEMENTS

MARKET OVERVIEW

Loungers operates through its two complementary 
brands – Lounge and Cosy Club – in the UK hospitality 
sector. 

At the year end the Group had 165 sites, comprising 136 Lounges and 
29 Cosy Clubs. Whilst it competes with coffee shops, pubs, restaurants and 
local independent operators, 72 per cent of Lounge customers see it as a unique 
proposition, rather than categorise it solely as a restaurant, pub or coffee shop. 

Independent analysis undertaken for the Group in 2018 concluded that the 
Group has no single competitor and that it can co-exist with all other operators. 
The Group competes with every element of the trade of a pub chain, coffee 
shop, or restaurant, whereas each of those operators only competes for a part 
of Loungers’ sales. It is this level of differentiation that has enabled the Group to 
deliver significant and consistent like for like (“LFL”) sales out-performance, and 
in turn, it is this sales out-performance allied to the new site roll-out and growing 
scale of the Group that have provided the scope to better withstand the cost 
pressures that have afflicted the broader hospitality sector in recent years.

Consolidated Statement of  
 Comprehensive Income 
45
Consolidated Statement of Financial Position  46
Consolidated Statement of Changes  
 in Equity 
Consolidated Statement of Cash Flows  
Notes to the Consolidated  
 Financial Statements 
Independent Auditors’ Report  
77
 to the Members of Loungers plc 
82
Company Statement of Financial Position 
Company Statement of Changes in Equity 
83
Notes to the Company Financial Statements  84
90
Company Information 

47
48

49

136

LOUNGES 
NATIONWIDE

29

COSY CLUBS 
NATIONWIDE

LOUNGE

COSY CLUB

Cosy Clubs are more formal bars/
restaurants offering reservations and 
table service but share many similarities 
with the Lounges in terms of their broad, 
all-day offering and their focus on 
hospitality and culture. 

Cosy Clubs are typically located in city centres and 
larger market towns. Interiors tend to be larger and more 
theatrical than for a Lounge, and heritage buildings or 
first-floor spaces are often employed to create a sense 
of occasion. The Cosy Club brand enables the Group 
to operate in areas where there is a more occasion-
led demographic and offers an opportunity for greater 
coverage within cities. Sales, EBITDA and capital 
expenditure are typically higher for a Cosy Club than for 
a Lounge. As at the FY20 year end, there were 29 Cosy 
Clubs nationwide.

Whilst during the daytime, customers use Cosy Clubs 
much like they use Lounges (for instance, for coffee or a 
quick lunch), in the evenings they are used more formally 
for drinks and dinner and frequently host larger tables 
celebrating a special occasion.

A Lounge is a neighbourhood café/bar 
combining elements of a restaurant, the 
British pub and coffee shop culture. 

As at the FY20 year end, there were 136 Lounges 
nationwide. Lounges are principally located in secondary 
suburban high streets and small town centres. The sites 
are characterised by informal, unique interiors with an 
emphasis on a warm, comfortable atmosphere, often 
described as a “home from home”. The Lounge estate has 
a consistent look and feel but each Lounge is individually 
named and tailored to the site and local area, and the 
design of each Lounge is continually evolving, meaning no 
two sites are the same.

The Lounge brand aims to have hospitality and familiarity 
at its core, driven by an independent culture and focus on 
the local community. Each site has its own social media 
presence and staff are encouraged to engage with the 
local community through events, charity, and community 
groups. 80 per cent of customers live locally, underlining 
each Lounge’s local neighbourhood credentials.

Every Lounge offers all-day dining, with the same menu 
served from 9am to 10pm, every day. Sales are well 
diversified across all day parts and all days of the week 
as well as across all food types. In addition to helping to 
drive repeat custom and maximise the trading efficiency of 
the sites, the all-day offering gives the Group experience 
in managing operational complexity, particularly in the 
kitchens, which the Directors believe is a meaningful 
barrier to entry for other operators.

THELOUNGES.CO.UK

COSYCLUB.CO.UK

1

OVERVIEW  LOUNGERS PLC ANNUAL REPORT 2020 
Strategic Report

2

CHAIRMAN’S STATEMENT

CHAIRMAN’S STATEMENT 

INTRODUCTION

At the turn of the calendar year I imagined that my 
inaugural Loungers plc Chairman’s statement would be a 
relatively straightforward affair. Whilst we are reporting 
on FY20, the reality is that we are providing more 
detailed commentary on the final weeks of FY20 and 
the subsequent months of the current financial year, in 
regard to how the business has dealt with the monumental 
challenge of Covid-19 in particular. Consequently, and for 
good reason, my statement is a lengthy one. 

Having successfully listed the business in April 2019, I 
think it’s fair to say we always expected FY20 would be a 
challenging year as the business adjusted to life as a plc. 
Little did we know that a far greater challenge lay ahead 
and, that by the end of the financial year, we’d have a 
business that was generating no revenue and we’d have 
no certainty as to when we would be permitted to reopen.

There are many aspects of the events of the last few 
months that will live with us for many years to come. 
The business has faced enormous challenges and I am 
extremely proud of the roles the Board, the executive/
senior management team and the ops team have played 
in dealing with these challenges head-on and making the 
right calls at the right time.

Putting the impact of Covid aside, it was a historic year 
for Loungers and, as a co-founder of the business, I am 
extremely proud that Loungers is a plc. I am also thrilled 
that we currently have 480 employees who are now 
shareholders in the Company and very much look forward 
to being able to see the success of Loungers shared with 
an ever-increasing number of our people in future.

STRATEGIC

The business continued to trade very strongly right up until 
the week before lockdown and we remained on track to 
meet the objectives we had set out at the time of the IPO.

We continued to deliver sector-leading like for like sales 
and were expanding at a rate of 25 new sites a year. 
Pleasingly, we opened some particularly profitable sites 
over the course of the financial year with FY20 new 
openings looking like an especially strong vintage.

We continued to evolve our offer in both brands, 
making a number of improvements to our food menus 
and undertaking a significant and exciting overhaul of 
our drinks offering. We also continued to see margin 
improvement as we increasingly reaped the benefits of 
greater scale.

Ultimately FY20 saw an 8.8% increase in net turnover to 
£166.5m (FY19: £153.0m) and, whilst it is pleasing to 
register another year of year-on-year growth, Covid-19 
clearly stopped us in our tracks in March, five weeks prior 
to our year end.

THE TEAM

Having successfully listed the business against a 
challenging backdrop in April 2019 (as Brexit 
negotiations to-ed and fro-ed), the executive team 
immediately set about executing and delivering the plan. 

We genuinely believe that the Loungers team is 
operationally one of the finest in the sector. Under Nick 
Collins’ collaborative and steadfast leadership, everyone 
has responded to the monumental challenge brought 
about by Covid-19, clearly demonstrating the talent and 
tenacity we have within our ranks.

I’d like to thank our teams at every level but would like 
to reserve special praise for the immense effort put in by 
the small group of head office staff who worked tirelessly 
throughout lockdown, often in very difficult circumstances, 
to ensure the business was in the very best possible 
position to rise to the challenges of the last few months. 

THE BOARD

I am also delighted at how well the relationship between the 
executive team and Non-Executive Directors has developed 
and I’d like to thank the Non-Executive Directors for their 
guidance and contribution over the last 16 months in 
bringing challenge, wisdom and experience to the Loungers’ 
table. When assembling the plc Board, the executive team 
were keen to ensure that Board meetings retained the same 
level of intensity and challenge that we’d been accustomed 
to under private equity partnership and I am delighted that 
we have achieved this as a public company. 

I would also like to take this opportunity to thank 
the Non-Executive Directors for their dedication and 
commitment to the business during the period of closure 
resulting from Covid-19.

3

STRATEGIC REPORT  LOUNGERS PLC ANNUAL REPORT 2020CHAIRMAN’S STATEMENT
CONTINUED

COVID-19

Having temporarily closed the entire business and secure 
in the knowledge that the livelihoods of our workforce 
would be protected through the Coronavirus Job Retention 
Scheme, the executive team worked closely with the 
Board to set about ensuring the business had sufficient 
liquidity to survive a prolonged period of full closure, well 
beyond 2020 should that be required. We agreed an 
additional £15m revolving credit facility with our existing 
lenders and raised a further £8.1m through the issue of 
equity. We were grateful and extremely encouraged by 
the support from our shareholders, which not only ensured 
the Placing was successful but was ultimately over-
subscribed.

With the liquidity of the business secured, the executive/
senior management team set about tackling a number 
of significant challenges. The key areas of focus were 
on culture and communication, rent negotiations and the 
reopening of 27 sites during lockdown for takeout. We 
also started planning the reopening of the business and 
considered what changes we would need to make to 
menu, service style and site layouts.

This was a significant piece of work and required the team 
to be very entrepreneurial and at times fleet of foot – our 
‘at-seat’ ordering capability being an excellent example 
of something that has been an undeniable game-changer 
for the business and was developed and implemented 
in just four weeks. With regards to social distancing, we 
adopted a positive mindset and approached what we 
needed to do with a mentality that we had decided to 
make the changes ourselves and not because we had 
been forced to. I genuinely believe that the team could 
not have done a more sterling job and I believe that 
the decisions and changes we made, and subsequently 
implemented, ensured the business was very much on the 
front foot when we were permitted to reopen. I am also of 
the view that the unprecedented challenges of lockdown 
resulted in an acceleration of changes in the business 
that had been more mid to long term objectives. As a 
result, we face the future in a much stronger, and better 
equipped, position.   

Over a seven-week period from early June, I made a 
conscious effort to visit 103 of our sites personally, with 
our logistics team who were busy removing furniture 
to go into storage and delivering our bespoke social 

distancing partitions. This gave me an opportunity to 
spend time with our operators, to catch up with some of 
our teams as they returned to work ahead of reopening 
and to oversee the implementation of our plan to ensure 
our sites felt safe and reassuring but that, critically, they 
still retained our unique look and feel and very much 
felt like a Lounge or Cosy Club. It was a gruelling but 
hugely rewarding few weeks that left me feeling very 
positively charged at how our operators and teams 
felt about the way we had looked after them during 
lockdown and about how excited they were to welcome 
back their customers. I was also hugely encouraged 
at how good, and normal, our sites looked – whilst 
adhering to Covid-19 social distancing requirements, 
which I genuinely believe has been a major reason 
as to why we have reopened so strongly. It was also 
really encouraging to see how busy the vast majority 
of the high streets and locations we operate from were 
ahead of us reopening and I felt cautiously optimistic 
that we would trade significantly better than we have 
anticipated. Consequently, I wasn’t surprised that within 
a week of our initial phase of reopening we opted to 
accelerate the reopening process, which resulted in all 
165 sites being reopen by 7th August.

Our approach to reopening has had a number of benefits. 
Most notably, we have learnt and adapted to trading 
in a Covid-compliant environment, which has enabled 
us to improve the overall customer experience. We also 
fully benefitted from the Eat Out to Help Out (“EOTHO”) 
initiative which has resulted in record sales for the business 
during the month of August. We are also delighted to 
have over 95% of our team back from furlough and doing 
what they do best. 

THE FUTURE

We are clearly still in unprecedented times and the 
coming weeks and months are almost certainly going 
to be uncertain at best and possibly challenging. That 
said, I think we have every reason to be optimistic and 
excited for the future. Trading since we reopened has 
been remarkable and, whilst we have clearly benefited 
enormously from the Government’s EOTHO scheme, to 
date trading outside of the EOTHO days has been - and 
continues to be - very encouraging. Having reopened 
has given us significant competitive advantage over those 
businesses that have been slower to do so.

4

LOUNGERS PLC ANNUAL REPORT 2020  STRATEGIC REPORT  CHAIRMAN’S STATEMENT
CONTINUED

With the undeniable change underway in the way 
people live, and more specifically work, we believe we 
are extremely well-placed to benefit. The suburban and 
small town locations of the vast majority of our Lounge 
estate have remained strong and our large, airy Cosy 
Club venues - coupled with an offer that is sufficiently 
differentiated from our competitors - mean that both 
brands are in a strong position to prosper. Our lack of 
exposure to central London and travel hubs has meant that 
the strength of performance across the business is both 
sustainable and consistent. This, together with a reduction 
in the number of food and drink operators, positions 
Loungers well to benefit from a significant contraction in 
supply.

Following reopening, we are sufficiently confident and 
excited to be resuming our roll-out – albeit we will do so 
cautiously and it will take some months for us to get back 
up to a run-rate of 25 sites a year. However, we have 
some high quality sites within our current pipeline and will 
be able to benefit from some exciting opportunities against 
a backdrop of an extremely soft property market.

Our opportunity remains exciting as we have barely 
reached 30% of the potential scale in the UK of both 
brands and, in the case of Lounge, our stated target 
of 400 sites feels increasingly conservative. Our team 
has the drive, determination, and talent to deliver our 
long-term objectives but, importantly, working through 
the challenges of lockdown has further enhanced the 
entrepreneurial flame inherent within the business. I 
genuinely believe this could be ‘our time’ and the burning 
ambition within Loungers has never been stronger.

Alex Reilley 
Chairman 

5

STRATEGIC REPORT  LOUNGERS PLC ANNUAL REPORT 2020CHIEF EXECUTIVE’S STATEMENT

INTRODUCTION

It was impossible to imagine that a year 
which started with the landmark IPO of 
the Group would end with all our sites 
closed due to Covid-19.

For the large part of the year the Group continued to achieve 
the strategic goals it had set out at the time of the IPO:

 Market leading LFL sales growth across all site age 
cohorts, primarily driven by volume.

 Margin improvement as we continued to benefit from 
operational gearing and economies of scale.

 Progressing towards a self-financing roll-out.

 Continuation of the roll-out of Lounge and Cosy Club 
estates at a rate of 25 sites a year, most importantly 
opening better sites and benefitting from an 
increasingly tenant friendly property market.

 Enhancing the customer offer and our hospitality through 
the evolution of our menus and constantly challenging 
ourselves to improve our culture and community-led 
proposition.

Prior to the impact of Covid-19 we were delighted with the 
progress the business had made and that it had continued 
to demonstrate how our unique all-day trading model with 
broad appeal was winning in an evolving sector.

The enormous challenge of closing and subsequently 
reopening the estate is one we approached head-on 
and positively. Our reaction to the challenge will ensure 
we emerge a better business. We used the period of 
lockdown to evolve the offer and introduce bold changes 
which might otherwise have taken significantly longer. 
The estate was fully reopened by 7th August with our 
sites reconfigured to provide social distancing and our 
teams fully trained to reassure customers they are in safe 
hands. Most importantly hospitality remains at the core of 
everything we do.

We were confident the business would emerge strongly 
post-lockdown and this has been evidenced by the 
strength of our trading since reopening, with LFL sales of 
+29.9% on a net of VAT basis in the period from 4 July to 
13 September. Our community focus in market towns and 

suburbs, with no exposure to central London, tourism or 
business districts has meant our customers have returned 
quickly to both Lounge and Cosy Club. Our belief in the 
potential scale of both brands has been strengthened, and 
we look forward to returning to rolling-out new sites in due 
course.

THE YEAR PRE-COVID-19

EVOLUTION

Evolution in both brands continued, benefitting from our 
broad menus and the fact that we are not wedded to any 
single cuisine. Our vegan, gluten free and allergen-friendly 
menus continued to develop and grow and remain a key 
differentiator. Alongside this, we continued to add more 
resource to our menu development team, focusing on 
ingredient rationalisation and quality. Over the course of the 
year our dishes improved and continued to become more 
consistent.

On the drinks side we saw considerable change in our 
draught line-up, switching Stella, Becks Vier and Cruiser, 
for Moretti, Amstel, and Punk IPA. As a result of this switch 
we saw higher average spend and improved growth in 
our evening sales, a previously stated goal.

Our Reset project in the Lounge kitchens continued, with 
investment in a further 26 sites. This investment is resulting 
in more efficient processes, improved ticket times, better 
information and reduced staff turnover. Whilst this project 
was paused due to Covid-19 we look forward to getting 
it back on track. The combination of additional resource 
on the menu development side alongside investment in the 
kitchens will result in quicker, more consistent service for 
customers, improvement in our margins and better working 
conditions for our teams.

Having unique, individual designs for each site ensures the 
look and feel of the Lounges and Cosy Clubs continues 
to evolve. Over the course of the year evolution in 
terms of our back bars and furniture has helped target 
evening sales. In addition, we carried out splash and 
dash investments at seven sites, ensuring each site within 
the estate is in prime condition and benefits from the 
continued evolution of our design.

6

LOUNGERS PLC ANNUAL REPORT 2020  STRATEGIC REPORT   
 
 
 
 
CHIEF EXECUTIVE’S STATEMENT
CONTINUED

THE ROLL-OUT, PROPERTY AND PIPELINE

During the year and prior to the Covid-19 closure we 
opened 16 Lounges and five Cosy Clubs, and were on 
track to open 25 sites in the financial year. Over the past 
five years, we have become comfortable with opening 
sites at this rate and this is reflected in the performance of 
our FY20 new site openings.

Through 2019 and into 2020 we benefitted from an 
increasingly tenant friendly property market. As a result 
of this we secured excellent sites in strong locations with 
great pitch, and this was reflected in the performance 
of our new site openings. Loungers typically converts 
A1 retail premises to A3 use and the increase in retail 
CVAs has meant we are seeing more opportunities in 
those targeted locations where we know we will perform 
strongly. Examples of this are sites such as Fosso Lounge 
in Wells and Cobrizo Lounge in Newbury.

Our new site openings also continued to demonstrate the 
underlying potential scale of the Lounge and Cosy Club 
brands. Our openings in Wells, Carmarthen and Chorley 
illustrate our ability to trade successfully in towns with 
relatively small populations across the country, whilst the 
opening of Cosy Club at Mermaid Quay in Cardiff saw 
us operating two Cosy Clubs in the same city for the first 
time.

As we went into lockdown our pipeline remained very 
strong with contracts exchanged on eight sites which have 
not yet opened. These include Lounges in Sittingbourne, 
Wolverhampton and Welwyn Garden City and a Cosy 
Club in Chelmsford. We remain very confident in the 
strength of the pipeline. Our rent to revenue ratio in the 
year was 5.3% and continues to be significantly lower 
than the sector overall. Given the consistent discipline we 
have displayed in terms of property deals we believe we 
are extremely well-placed to take advantage of the current 
environment.

Since the year end, we have opened Cosy Club 
Brindleyplace, Birmingham, and Ponto Lounge in Hull 
which opens today. Both were sites where much of the 

capex cost had been incurred before the estate was 
closed due to Covid-19. We have also taken the decision 
to close two sites. Banco Lounge in Bristol was one of our 
earliest sites and a combination of its small size and the 
additional costs of doing business meant that it no longer 
met our returns criteria. Its lease expires in March 2021 
and will not be renewed. We have also closed Allegro 
Lounge which has not performed as we had hoped since 
opening in 2018. Whilst we are always willing to give 
each site time to mature, Northfield has proven to be 
the wrong location for a Lounge, and we will ensure we 
learn from that. We are not considering any other sites for 
closure.

PEOPLE

The culture within the business continues to be at the heart 
of our success, and this has never been as important as 
during the last few months. During the year under review, 
the continued evolution of our team recruitment, training, 
development, and communication has contributed hugely 
to our performance. I am enormously grateful to our 
4,500 employees who over the year continued to ensure 
our customers keep coming back. 

Towards the year end we restructured our Regional 
Operations Structure, reducing further the Site to 
Operations team ratio. This was done to ensure our sites 
continue to be intensively managed alongside providing 
continued capacity across the UK to roll-out new sites. 
As our geographic footprint grows alongside the number 
in the operations team, so the impact of new openings 
is diluted, allowing for smoother openings and less 
distraction for our teams. 

At a senior management level, we welcomed Tom 
Trenchard into the team as Property Director and have 
added additional resource in the food, training and 
development, purchasing, and systems teams. We 
continue to look forward to ensure we have the right 
structure in place, commensurate with our continued 
growth.

7

STRATEGIC REPORT  LOUNGERS PLC ANNUAL REPORT 2020CHIEF EXECUTIVE’S STATEMENT
CONTINUED

COVID-19 AND THE CLOSURE PERIOD

Our priorities during lockdown centred around supporting 
and communicating with our team, minimising cash burn 
and ensuring our balance sheet strength was sufficient to 
withstand the impact of Covid-19, continuing to engage with 
our customers and communities during the difficult time, and 
preparing to reopen. We also took advantage of the unique 
opportunity to think about and evolve the business to ensure 
we were best positioned when it came to reopening.

Throughout the Covid-19 period we have focused on 
looking after our team of 4,500 employees. Through 
regular communication we have kept them informed and 
we are appreciative of the Government support via the 
Coronavirus Job Retention Scheme. Over 99% of our 
team were furloughed during lockdown with around 30 
people working throughout. The Board is enormously 
appreciative, both of those who worked throughout the 
period, and those who were on furlough but participated 
in the numerous forms of engagement which allowed us 
to keep the culture in the business alive. In addition, we 
ensured we continued to engage with our customers and 
their communities and witnessed many fantastic charitable 
acts from our site teams as they sought to contribute to 
beat the virus.

To minimise cash burn, as soon as lockdown was 
imposed, we immediately stopped all non-essential 
capex and contracts, challenged every recurring cost 
line in the business and negotiated with our landlords 
and suppliers. The Board is appreciative of our supply 
chain who were highly supportive during this period. 
Our conversations with landlords regarding the waiver 
or deferral of rent during the closure period are ongoing, 
but our collaborative approach, engaging with each of 
our landlords, has proved worthwhile. During lockdown 
we secured an additional £15m of banking facilities and 
carried out an £8m equity placing. The Board recognised 
the importance of demonstrating we had sufficient funding 
to both survive through any worst case Covid-19 lockdown 
scenarios, and, critically, to get the roll-out back on track 
once we reopened. We recognised that post-lockdown the 
property market would be more tenant friendly and present 
a fantastic opportunity to further strengthen our pipeline. 
As a result of the increased facilities and completion of 
the placing, the Group had liquidity of £30m in place on 
23 April and the strength to withstand a very prolonged 
lockdown.

The pause in day to day operations during lockdown 
allowed us to review various aspects of the business and 
ensure when we reopened, we were well-positioned in 
respect of operating both in a Covid-19 environment, and 
more generally. Key activities during this period were:

 Undertaking a maintenance audit. This ensured any critical 
works that would require closure once reopened, or splash 
and dash style improvements that were previously planned, 
were carried out during lockdown. This, alongside a 
thorough deep clean in every site, ensured when our sites 
reopened it was in the best condition they had ever been.

 Reconfiguring the sites to suit trading with distancing 
guidelines in place. Our approach here was to ensure 
any steps we took were consistent not only with 
Government guidelines but also with our uniquely 
obsessive focus on atmosphere and look and feel. 
Whilst our covers have reduced by between 10% and 
15% because of this, the addition of bespoke timber 
partitioning and the very detailed approval process for 
the new layouts have ensured the sites are comfortable 
and recognisable to our customers.

 Challenging the menus and ingredients. Menus in both 
Lounge and Cosy Club were reduced for reopening 
which has provided us with an opportunity to understand 
how our customers will react to slightly less choice. 
Alongside this a forensic approach to menu engineering 
and ingredient lists has provided us with the opportunity 
to further gain margin and labour efficiency over time.

 Introducing an order at table app. This was something 
we were always cautious about, but in Lounges in 
particular, where the service model otherwise involves 
ordering at the bar, it became a requirement. App 
sales now represent 42% of sales in Lounges.

 Trialling takeaway at 27 Lounges. Opening these sites 
for takeaway allowed us an early opportunity to get 
the business and supply chain back up and running 
and to learn a great deal about operating in a socially 
distanced environment.

 Rewriting our processes and procedures to ensure 
the safety of our teams and customers. Our objective 
here was to ensure we could engage with our 
customers and continue to provide great hospitality, 
whilst demonstrating we were operating in a safe 
environment. 

8

LOUNGERS PLC ANNUAL REPORT 2020  STRATEGIC REPORT   
 
 
 
 
 
CHIEF EXECUTIVE’S STATEMENT
CONTINUED

REOPENING

We adopted a phased approach to reopening, gradually 
opening the full estate between the 4th July and 7th 
August. This allowed us to learn from the initial openings, 
and feed in any changes required to subsequent 
openings. It also allowed us to ensure every employee 
received a full day’s training on the new processes in 
place, and to reassure them that they were working in 
a safe environment. Our sites look fantastic, our teams 
and customers feel safe and the steps we took during 
lockdown have ensured a slick reopening.

CURRENT TRADING AND OUTLOOK

The Group has traded significantly ahead of our 
expectations. Since reopening our LFL net sales growth 
in the period from 4 July to 13 September has been 
+29.9%. Excluding the positive impacts of EOTHO and  
the VAT reduction, our underlying LFL sales have been 
-1.1%, and over the nine weeks ending 13 September 
2020 have been positive. This represents a significant 
out-performance of the market, materially exceeding the 
sector out-performance we have experienced over the 
past five years.

Whilst the economic outlook remains uncertain, we take 
confidence from our performance to date and remain 
optimistic with regard to future trading. Our value for 
money, flexible offer, and its broad appeal, alongside the 
locations in which we operate, mean we continue to be 
well-placed.

As a result of this confidence we have decided to 
cautiously restart the roll-out of new site openings. Over 
the remainder of the current financial year we plan to 
open six sites (of which Cosy Club Brindleyplace and 
Ponto Lounge Hull are already open), from those sites 
where we are already committed. We will also start 
rebuilding the pipeline such that we are in a position to 
accelerate the roll-out towards our pre-lockdown target of 
opening 25 sites a year.

Nick Collins 
Chief Executive Officer

9

STRATEGIC REPORT  LOUNGERS PLC ANNUAL REPORT 2020 
KEY STRENGTHS

The Directors believe that the Group has the following  
key strengths and competitive advantages:

 BROAD, NATIONWIDE DEMOGRAPHIC APPEAL

 We offer something for everyone regardless of age, 
demographic or gender and operate successfully in a diverse 
range of site types and locations across England and Wales.

VALUE FOR MONEY ALL-DAY OFFER

We are the only growing all-day operator of scale in the 
UK with a strong reputation for value for money which 
offers proven resilience in a tighter and more competitive 
consumer spending environment. The strength of our 
all-day trade and repeat custom enables us to trade 
successfully in smaller, secondary locations which typically 
have lower rents and less competition.

 TWO DISTINCT BUT COMPLEMENTARY BRANDS

Our dual brand approach, with Lounges and Cosy Clubs, 
allows us to maximise our geographic and demographic 
reach. We can open Lounges in a broad range of smaller 
secondary locations in suburban high streets and market 
towns, as well as opening Cosy Clubs in larger market 
towns and city centres.

WELL INVESTED CENTRAL INFRASTRUCTURE TO 
SUPPORT GROWTH

We have invested significantly over the past three years to 
build an operational and head office structure capable of 
supporting our growth plans, in addition to having a well-
developed roadmap for continued investment.

EXPERIENCED MANAGEMENT TEAM

The Group’s senior management team combines 
entrepreneurial spirit with significant sector experience 
and has a track record of meeting openings, sales, and 
profitability targets. Two of the original founders, Alex 
Reilley and Jake Bishop, remain active in the Group while 
Nick Collins and Gregor Grant each have over 16 years 
of experience within the hospitality industry.

The Directors consider that within the key strengths 
identified above the following are of particular relevance 
in the current Covid-19 environment:

 Broad demographic customer base – there is no 
reliance on any single demographic segment

RESILIENT AND CONSISTENT OUTPERFORMANCE, 
RETURNS AND ECONOMICS

 Wide geographic spread – limits exposure to any one 
geographic area or region

 All day / everyday offer – there is no reliance on 
peak trading periods, reducing the potential negative 
impact of capacity constraints resulting from social 
distancing

 Focus on suburbs and market towns – very limited 
exposure to city centre office communities, overseas 
tourism, and travel hubs

Like-for-like sales have consistently and significantly 
outperformed the Coffer Peach Business Tracker which 
is seen as the benchmark for the UK hospitality sector. 
This like-for-like sales outperformance to date has been 
primarily driven by volume, rather than price. Our 
sites have delivered consistently strong returns and site 
economics across vintages and locations.

CLEAR, PROVEN GROWTH POTENTIAL

Independent analysis has identified the potential for more 
than 400 Lounges and more than 100 Cosy Clubs in 
England and Wales. This is supported by a consistent track 
record of successful openings and a strong pipeline of sites.

STRONG PIPELINE OF NEW SITES AND TRACK 
RECORD OF SUCCESSFUL OPENINGS

We opened 20, 22 and 25 sites in FY17, FY18 and FY19 
respectively, with a further 21 new sites opened in FY20 
pre lockdown. As at the date of this report, the Group has 
opened two new sites (one Lounge and one Cosy Club) in 
the current financial year.

10
10

LOUNGERS PLC ANNUAL REPORT 2020  STRATEGIC REPORT   
 
 
 
DIRECTORS’ DUTIES – S172 STATEMENT

The Directors are aware of their duty under Section 172(1) of the Companies Act 2006, to act in the way they consider, 
in good faith, would be most likely to promote the success of the Group for the benefit of its members as a whole, and in 
doing so have regard (amongst other matters) to:

 The likely consequence of any decision in the long term

 The interests of the Group’s employees

 The need to foster the Group’s business relationships with suppliers, customers and others

 The impact of the Group’s operations on the community and the environment 

 The desirability of the Group maintaining a reputation for high standards of business conduct

 The need to act fairly as between members of the Group.

The following disclosure describes how the Directors have had regard to the matters set out in Section 172(1)(a) to (f) 
and forms the Directors’ statement under section 414CZA of the Companies Act 2006.

OUR KEY STAKEHOLDERS AND HOW WE ENGAGE WITH THEM 

The Directors consider the Group’s key stakeholders to be its employees, its customers, its suppliers, the community in which 
it operates and its shareholders.

Employees

Having high quality team members, both at 
site and at head office, is critical. 

At site level the ability to be truly engaging 
in delivering genuine hospitality, at the 
same time as preparing and delivering high 
quality food and drink is fundamental to 
delivering our strategy and the long-term 
success of the Group. 

Customers

Our customers cover a broad demographic 
and show considerable loyalty, typically 
visiting for a wide range of occasions across 
all day parts.

The ability to attract a broad customer base 
across all day parts and across all days of 
the week is key to generating our sales and 
profitability levels.

STAKEHOLDER KEY INTERESTS 

HOW WE ENGAGE 

•  Training and development

•  Training and feedback

•  Career progression

•   Identifying and progressing talented 

•  Reward

•  Engagement

•  Health and safety

•  Respect

individuals

•   Competitive rates of pay and recognition 

schemes

•   Employee engagement surveys, 

briefings, and events 

•   Hospitality and “home from home” 

•   Offering an informal, quirky, “home 

familiarity

from home”

•  Safe food and environment

•   Strong emphasis on hospitality and 

•   Broad menu range, with specific 

vegetarian, vegan, gluten free menus

•  Consistency and quality

•  Value for money pricing

•  Responsiveness to feedback

familiarity, really getting to know our 
customers

•   Random acts of kindness to lift those 

who are low and to rejoice with those 
celebrating

•   Formal feedback and customer surveys

•  Social media

11

STRATEGIC REPORT  LOUNGERS PLC ANNUAL REPORT 2020 
 
 
 
 
 
DIRECTORS’ DUTIES – S172 STATEMENT
CONTINUED

Local Community

Lounges, in particular, are at the heart of 
their community, the “third space” of choice 
for the local community.

We look to have a positive impact on the 
communities in which we operate through 
job creation, re-invigoration of the high street 
and support for local charities.

Suppliers & partners

The Group has developed long term 
relationships with many of its suppliers, 
across both its hospitality operations and 
its capital projects. Many of these suppliers 
have grown alongside the Group to become 
significant businesses.

We need to maintain trusting relationships 
with suppliers and partners for mutual 
benefit and to ensure they are meeting our 
standards and conducting business ethically. 

Shareholders 

Further to the Group’s IPO in April 2019 
gaining the confidence of existing and 
potential investors is critical.

The confidence of our shareholders is key to 
delivering our strategy as access to capital 
may be critical to the long-term performance 
of our business. 

We ensure that we provide fair, balanced 
and understandable information to 
shareholders and investment analysts 
and work to ensure that they have a 
strong understanding of our strategy and 
performance.

STAKEHOLDER KEY INTERESTS 

HOW WE ENGAGE 

•  Community resource

•  Staff out-reach

•   Investment and re-invigoration of the 

•  Events

local economy

•   Community events and charity 

fundraising

•  Charity

•   Provision of space and a welcome for 

community groups and activities

•  Long-term relationships

•  Growth

•  Trade profitably and efficiently

•  Logistics efficiency

•   Responsible procurement, trust and 

ethics

•   Additional internal Loungers resource 
added in the year to ensure close and 
timely communication

•   Collaborative work on product 

innovation

•   Participation and attendance at 

Loungers events

•   Contract negotiation and contract 

renewals

•  Financial performance

•  Regular market updates

•  Governance and transparency

•  Investor days/presentations

•  Operating and financial information

•  One-to-one meetings

•   Confidence and trust in the Group’s 

•  Investor roadshows 

leadership team

•   Dedicated investor section on corporate 

website

•  Shareholder consultations 

•  Annual reports 

•  Annual General Meetings

12

LOUNGERS PLC ANNUAL REPORT 2020  STRATEGIC REPORT  FINANCIAL REVIEW

FINANCIAL PERFORMANCE

The financial results for FY20 reflect another year of significant growth, albeit severely impacted in the latter weeks by 
the impact of Covid-19. Revenue growth of 8.8% combines the impact of 21 new site openings and a strong underlying 
LFL sales performance (+4.5% in the 44 weeks to 23 February 2020). Adjusted EBITDA grew by 0.8% to £28.8m (2019: 
£28.5m) under IFRS 16, whilst under IAS 17 it fell by 8.6% reflecting the impact of IAS 17 rent costs during lockdown.

The impact of the Covid-19 lockdown which commenced on 20 March 2020 and the introduction of IFRS 16 present two 
challenges to interpreting our financial performance over the year under review, the highlights of which are:

IFRS 16

IAS 17

Year ended
19 April
2020
£000

Year ended 
21 April
 2019
£000

166,502

152,999

28,767

28,541

Year ended
19 April
2020
£000

Year ended 
21 April 
2019
£000

166,502

152,999

18,813

20,582

Change

+8.8%

+0.8%

Change

+8.8%

-8.6%

Revenue

Adjusted EBITDA

Adjusted EBITDA margin (%)

17.3%

18.7%

-1.4 ppts

11.3%

13.5%

-2.2 ppts

Loss before tax

Adjusted profit / (loss) before tax

Adjusted diluted earnings / (losses) per share (p)

(14,781)

2,002

2.4

(6,700)

(6,238)

(35.4)

(13,020)

3,763

3.2

(4,989)

(4,527)

(28.0)

Net debt

139,895

254,750

34,956

165,612

Throughout the Annual Report we use a range of financial and non-financial measures to assess our performance. A number 
of the financial measures, for example Adjusted EBITDA, Adjusted profit / (loss) before tax and Adjusted diluted earnings/
(losses) per share are not defined under IFRS and accordingly they are termed Alternative Performance Measures 
(“APMs”). The Group believes that these APMs provide stakeholders with additional useful information on the underlying 
trends, performance and position of the Group and are consistent with how business performance is measured internally. 
Adjusted EBITDA is also the measure used by the Group’s banks for the purposes of assessing covenant compliance.

Reconciliations of statutory numbers to the adjusted numbers reported above are included on pages 88 to 89.

IFRS 16

IFRS 16 Accounting for Leases has been adopted for the first 
time in FY20 using the fully retrospective method. Accordingly 
the FY19 comparatives have been re-stated. The impact of 
IFRS 16 is essentially twofold:

 firstly, to create a lease liability for rental costs and 
corresponding right of use asset in the balance sheet; and 

 secondly, to remove the rental charge from the income 
statement and replace it with a depreciation charge in 
respect of the right of use asset and a finance charge in 
respect of the unwinding of the lease liability.

Accordingly, and relative to the previous lease accounting 
standard IAS 17, IFRS 16 sees the Group report:

 a higher level of Adjusted EBITDA. EBITDA no longer 
includes the IAS 17 rent cost;

 a higher level of adjusted operating profit. The 
depreciation on the right of use asset is lower than the IAS 
17 rent charge;

 a higher level of loss before tax. The combined IFRS 16 
charges for depreciation of the right of use asset and 
interest on the lease liability exceed the IAS 17 rent 
charge. This reflects the relative immaturity of the Group’s 
lease portfolio as, whilst over the life of a lease these 
costs will equal out, in the early years the combination of 
a straight line depreciation charge and a higher interest 
charge leads to a total IFRS 16 charge exceeding the rent 
payable charge under IAS 17; and

 a higher level of net debt. Reflecting the inclusion of the 
capitalised lease liabilities within net debt.

Whilst the shape of the income statement may have changed 
with the introduction of IFRS 16 the decision to adopt on a 
fully retrospective basis does mean that the reported numbers 
for FY20 and FY19 are directly comparable. Further details 
on the adoption of IFRS 16 are provided in notes 2.23, 17 
and 31.

13

STRATEGIC REPORT  LOUNGERS PLC ANNUAL REPORT 2020 
 
 
 
 
 
FINANCIAL REVIEW
CONTINUED

COVID-19 IMPACT

The Group reports internally on the basis of 13 four week periods and in order to explain the impact of Covid-19 on the 
Group’s FY20 financial performance the table below presents Adjusted EBITDA (under IFRS 16) for the first 11 periods (the 
44 weeks to 23 February 2020) and the final two periods (the 8 weeks to 19 April 2020).

Turnover

LFL Sales

Cost of sales

Gross profit

Gross profit %

Administrative expenses

Adjusted EBITDA

Adjusted EBITDA margin

44 Weeks ended
23 February 2020
£000

8 Weeks ended
19 April 2020
£000

52 Weeks ended
19 April 2020
£000

154,876

+4.5%

(89,404)

65,472

42.3%

(36,334)

29,138

18.8%

11,626

(61.4%)

(7,503)

4,123

35.5%

(4,494)

(371)

(3.2%)

166,502

(6.4%)

(96,907)

69,595

41.8%

(40,828)

28,767

17.3%

The impact of the lockdown from 20 March 2020 is stark. 
Whilst the Group traded relatively normally in the three 
weeks ending 15 March 2020 (LFL sales were +2.0%) 
unsurprisingly sales tailed off as we moved through the days 
immediately prior to 20 March 2020. LFL sales that were 
running at +4.5% for the first 44 weeks of the year declined 
to -6.4% for the full year on the back of a severely impacted 
week 48 and complete closure for weeks 49 to 52.

The impact on margins was equally pronounced, with the 
gross profit margin declining from 42.3% after 44 weeks 
to 41.8% for the full year and the Adjusted EBITDA margin 
declining from 18.8% after 44 weeks to 17.3% for the 
full year. The Group moved very quickly to adapt to a 
world of zero sales, with site teams being furloughed from 
22 March 2020 and head office staff from 31 March 

2020, and all non-essential spend halted. However, the 
final five weeks of the year continued to be impacted by the 
costs of shutting down the estate, fixed property costs and 
incremental staff costs, notably holiday pay.

Over the first 44 weeks of the year the Group had 
performed very well. The table below sets out the financial 
performance on an IFRS 16 Adjusted EBITDA basis for the 
44 weeks to 23 February 2020 versus the same 44 week 
period in the prior year.

Like for like sales growth of 4.5% supplemented the impact 
of new site openings to deliver total revenue growth of 
21.9%. Continued focus on managing the cost base was 
reflected in an improvement in the Adjusted EBITDA margin 
from 18.7% to 18.8%, with Adjusted EBITDA increasing by 
22.7% over the 44 week period.

44 Weeks ended
23 February 2020
£000

44 Weeks ended
24 February 2019
£000

154,876

(89,404)

65,472

42.3%

(36,334)

29,138

18.8%

127,101

(74,071)

53,030

41.7%

(29,280)

23,750

18.7%

Year on Year
Change

+21.9%

+0.6%

+22.7%

+0.1%

Turnover

Cost of sales

Gross profit

Gross profit %

Administrative expenses

Adjusted EBITDA

Adjusted EBITDA margin

14

LOUNGERS PLC ANNUAL REPORT 2020  STRATEGIC REPORT  FINANCIAL REVIEW
CONTINUED

The major drivers behind the improvement in the IFRS 16 
Adjusted EBITDA margin were as follows:

 Improvement in gross margin of 0.6%; and

 Operational leverage across central costs of 0.4%; 
offset by:

 Increased utility and pension costs of 0.3%;

Increased business rates costs of 0.2%; and

 Incremental costs associated with being a publicly 
traded company of 0.3%.

The improvement in gross margin reflected both the 
success of the re-tendering of food and drink suppliers 
that was conducted through the first half of 2019, with 
the implementation completed in November 2019, and 
the continued focus on menu and range development and 
control of site labour costs.

EXCEPTIONAL COSTS

The impairment methodology included the calculation of 
a value in use for all sites. This valuation was based upon 
three year site cash flow forecasts covering FY21 through 
FY23 which incorporated the impact of lockdown closure 
and assumptions regarding post reopening recovery, and 
a full allocation of central costs and maintenance capex 
spend.

FINANCE COSTS AND NET DEBT

Finance costs of £8.1m (2019: £19.5m) include IFRS 16 
lease liability finance costs of £5.5m (2019: £4.7m) and 
a non-cash exceptional charge of £1.4m in respect of the 
write off of unamortised loan arrangement fees relating 
to the Group’s pre IPO banking facilities. Bank interest 
payable in the year was £1.2m (2019: £4.3m).

The significant reduction in year on year finance costs is 
a function of the Group’s IPO and the resulting change 
in capital structure. Excluding IFRS 16 lease liabilities net 
debt has reduced from £165.6m at 21 April 2019 to 
£35.0m at 19 April 2020.

The statutory operating loss of £6.7m is after charging 
exceptional costs totalling £15.3m (2019: £0.5m). 
Exceptional costs include:

CASH FLOW

 £0.9m relating to the write off of stock on the forced 
closure of the estate due to Covid-19;

 £1.5m in respect of costs incurred in the Group’s IPO. 
Further IPO related costs of £3.7m have been charged 
directly to reserves as they relate to the raising of 
equity share capital;

 £2.9m of IPO related share based payment awards; 
and

 £9.8m relating to the impairment of property, plant, 
and equipment (see below).

The Covid-19 pandemic and associated lockdown was 
a clear indicator of potential impairment and accordingly 
a detailed impairment review of each individual site was 
undertaken. The result of this review was an impairment 
charge of £9.8m (2019: £nil), split £7.2m against the right 
of use asset and £2.6m against leasehold improvements and 
fixtures.

Net cash generated from operating activities declined by 
13.8% to £24.4m (2019: £28.3m). The reduction in cash 
generation was wholly a function of the introduction of 
lockdown and the initial impact of the resulting working 
capital unwind. The most significant element of the 
working capital unwind pre year end related to payroll 
liabilities, with all our employees being paid at the end 
of March and no subsequent rebuild of the net liability as 
the site teams and the majority of head office employees 
transferred to the Coronavirus Job Retention Scheme.

Cash outflows in the year in respect of capital expenditure 
totalled £23.1m (2019: £21.1m). Prior to the lockdown the 
Group was on course to be self-funding in terms of capital 
expenditure, with cash generated from operating activities 
exceeding the cash out flow on capital expenditure. Capital 
expenditure in the year included a spend of £17.4m (2019: 
£18.5m) in respect of new site openings. FY20 new site 
spend of £17.4m included £2.1m in respect of five sites 
where work was halted due to lockdown.

15

STRATEGIC REPORT  LOUNGERS PLC ANNUAL REPORT 2020 
 
 
 
 
 
 
 
 
FINANCIAL REVIEW
CONTINUED

KEY PERFORMANCE INDICATORS (“KPI’S”)

The KPI’s, both financial and non-financial, that the Board reviews on a regular basis in order to measure the progress of the 
Group are as follows:

New site openings

Capital expenditure (IAS 17)

Like for like sales growth

Total sales growth

Adjusted EBITDA margin (IFRS 16)

GOING CONCERN

FY20

21

£22.8m

(6.4%)

8.8%

17.3%

FY20 to
23 February 2020

19

£22.4m

4.5%

21.9%

18.8%

FY19

25

£21.8m

6.9%

26.4%

18.7%

In concluding that it is appropriate to prepare the FY20 
financial statements on the going concern basis attention has 
been paid to the impact of Covid-19 on the Group, both 
experienced to date and potentially foreseeable in the future.

COVID-19 ACTIONS TAKEN TO MITIGATE THE 
IMPACT OF LOCKDOWN

It is important to note that the strong financial performance 
of the business prior to lockdown on 20 March 2020 
meant that it was as well placed as possible to respond 
to a significant period of lockdown. The actual period of 
lockdown ranged between 15 and 19 weeks across our 
sites.

As the likelihood of lockdown increased during early March 
2020 an immediate halt was put on the new site opening 
programme, all discretionary expenditure was stopped, and 
discussions commenced with our lenders Santander and 
Bank of Ireland to agree additional borrowing facilities. 
Additional immediate actions to preserve liquidity within the 
Group included:

 Transferring all site employees and the majority of head 
office employees (in total 99% of employees) into the 
Coronavirus Job Retention Scheme;

 Reaching agreement with our suppliers to extend credit 
terms and restrict the level of working capital unwind. 
Our supportive supply partners were typically paid an 
amount on account during lockdown, with the deferred 
balance settled in full post reopening;

 Seeking to agree rent waivers and deferrals with our 
landlords, and taking advantage of the moratorium on 
enforcement by landlords;

 Taking advantage of HMRC’s VAT deferral scheme and 
agreeing to defer payment of PAYE/NI liabilities due for 
payment in March and April; and

 Agreeing temporary salary reductions with those 
employees who had not been furloughed.

Significant work was undertaken throughout March and 
April 2020 to model a range of potential scenarios. The key 
variables within these scenarios included:

 The length of lock-down. The management case scenario 
included a lockdown period of 16 weeks, with the estate 
re-opening 13 July 2020;

 The level of sales decline on the reopening of the 
estate and the period over which sales recovered. The 
management case assumed that sites would reopen with 
LFL sales running at negative 50% and would finish the 
FY21 financial year at negative 10%;

 The labour cost of operating at depressed sales levels 
and the required additional investment in labour to 
support post reopening Covid-19 protocols; and

 Working capital impacts of potentially amended credit 
terms post reopening.

16

LOUNGERS PLC ANNUAL REPORT 2020  STRATEGIC REPORT   
 
 
 
 
 
 
 
 
FINANCIAL REVIEW
CONTINUED

The management base case underpinned the decision to 
agree an additional £15m revolving credit facility (“RCF”) 
with our lenders and to proceed with an equity placing 
of 9.25m new shares raising net proceeds of £8.1m. 
At 19 April 2020, the Group had cash of £4.1m and 
net debt of £35.4m, having drawn down £7m under the 
Group’s existing £10m RCF. On completion of the equity 
placing on 23 April, and with the additional RCF in place, 
the Group had total liquidity of £30.0m. Based on an 
assumed further working capital unwind of £9m and with 
an average weekly cash outflow of £0.48m (assuming 
all rents paid as they fell due) this provided the Group 
with approximately 44 of weeks liquidity in the event of a 
prolonged total lockdown.

PERFORMANCE POST LOCKDOWN

Commencing with the full reopening of 24 Lounges on 
4 July 2020 the Group adopted a phased reopening 
programme with 165 sites opened and fully trading 
by 7 August. Trading in the 10 weeks post reopening 
has been significantly ahead of that modelled in the 
management case referred to above, with LFL sales growth 
(including the impact of the VAT reduction on food and 
non-alcoholic drinks) of 29.9%. Underlying trading has 
been stronger than that modelled in the management case 
scenario and there has been significant additional benefit 
coming from:

 The support measures announced by the Chancellor on 
8 July 2020, including the reduction in the VAT rate on 
food and non-alcoholic drinks from 20% to 5% for the 
period 15 July 2020 to 12 January 2021, and the Eat 
Out to Help Out scheme in August 2020; and

 The support of the Group’s supply partners in 
maintaining their pre Covid-19 credit terms.

The strength of initial trading post lock down, allied to 
the various initiatives detailed above and the additional 
capital raised in the equity placing have significantly 
offset the negative impact of the lockdown period. As at 
6 September 2020 net debt, adjusted to reflect deferred 
liabilities to landlords and HMRC as if they had been 
paid, was £24.5m. This compares favourably to net debt 
of £26.5m on the corresponding date last year and to net 
debt of £28.8m on 22 March 2020, immediately post the 
start of lockdown.

CASH FLOW AND COVENANT MODELS

The management case scenario has been updated to 
reflect the impact of the events noted above. Under this 
scenario borrowing under the Group’s total RCF facility 
of £25m would not exceed £5.0m and the Group would 
be in compliance with its bank covenants. The Group is 
subject to leverage and interest cover covenant tests. The 
amendment to the Group’s banking facilities agreed in April 
2020 included the waiver of the covenant tests scheduled 
for 12 July 2020 and 4 October 2020, and amendments 
to the tests running through to 3 October 2021. The Group 
was in compliance with its covenants throughout the FY20 
financial year.

Additional downside scenarios have been modelled against 
the management case. These downsides have included:

 The closure of 20 sites from early September 2020 
through the remainder of FY21 to reflect the potential 
impact of a series of regional lockdowns;

 The closure of an additional 20 sites through a 12 week 
period covering November 2020 to January 2021 
to reflect the potential for more rigorous localized 
lockdowns over the Christmas trading period;

 Increases in the level of LFL sales decline for the 
remainder of FY21 from the negative 10% in the 
management case to a range from negative 10% to 
negative 25%; and

 Continued LFL sales decline throughout FY22 of 
between 10% and 25%.

The impact of reflecting all these downside scenarios is to 
reduce expectations of Adjusted EBITDA by approximately 
64% for FY21 and 61% for FY22 relative to Board 
expectations pre Covid-19. Under this downside scenario 
the Group is forecast to remain within its borrowing facilities 
and to be in compliance with its covenant obligations, 
and accordingly the Directors have concluded that it is 
appropriate to prepare the FY20 financial statements on the 
going concern basis.

Gregor Grant
Chief Financial Officer

17

STRATEGIC REPORT  LOUNGERS PLC ANNUAL REPORT 2020 
 
 
 
 
 
1818

LOUNGERS PLC ANNUAL REPORT 2020  STRATEGIC REPORT  PRINCIPAL RISKS AND UNCERTAINTIES

The Group has continued to develop and adhere to its risk management disciplines and managed risks in line with 
good practice. The Group continually assesses risks and takes appropriate action to mitigate risks that could impact the 
achievement of the Group’s objectives.

The Directors consider the following to be the principal risks faced by the Group:

KEY RISKS

RISK DESCRIPTION

MITIGATING ACTIONS

Covid-19

Consumer 
confidence

Brexit

Cost inflation

The Group derives all its sales and profits from its 
165 sites. The complete closure of sites as required 
during the Covid-19 lockdown had a very severe 
negative impact on sales and profits. Whilst the 
estate is now re-opened, it trades under restricted 
capacity due to social distancing requirements and 
incurs additional costs to ensure compliance with 
hygiene guidelines and the safety of our guests. It 
remains unknown as to how long these Covid-19 
measures will remain in place and there exists the 
real possibility that further lockdowns, at least on a 
local or regional basis, may be required.

The Group derives all its profits from the United 
Kingdom and is therefore sensitive to fluctuations 
in the UK economy. The Group’s performance 
depends to a certain extent on several factors 
outside of the control of the Group which impact 
on consumer sentiment. 

Brexit has the potential to adversely impact the 
business in several ways, notably:

•   weaker economic performance in the UK that 

may impact consumer demand,

•   further depreciation of sterling that may drive 

cost inflation,

•   cross border supply issues that may impact 

availability of imported goods, and

•   the recruitment and retention of team members 

in our sites.

The Group operates in a sector that has been 
subject to significant cost pressures in recent years, 
notably staff costs driven by annual increases 
in the National Living Wage (“NLW”), utilities, 
business rates and food and drink cost inflation. 
The value for money principles of the Group’s offer 
require the Group to manage cost inflation tightly.

The preceding pages have set out in detail the 
specific mitigating actions taken in response to 
Covid-19, particularly those relating to preserving 
liquidity within the business, the secure lockdown of 
our sites,and the safe resumption of trading.

The planning and implementation of these mitigating 
actions was managed through the Directors and the 
executive management team. Throughout the period 
from early March 2020 to the ending of lockdown 
the Directors and executive team met remotely on 
an increased basis, with weekly meetings throughout 
much of this period.

The Group’s existing offer has value for money 
as a core principle and the Directors believe this 
will provide a level of resilience in the event of a 
consumer slow down.

Mitigating actions have focused upon the security of 
our supply chain and ensuring availability of product. 
Higher risk products have been identified and plans 
put in place to both secure supply or identify and 
source alternative products as appropriate.

The increasing scale of the Group and its 
attractiveness to suppliers has assisted in mitigating 
cost inflation in respect of food and drink products. In 
addition, the Group has recruited additional internal 
resource to manage relationships with suppliers.

19

STRATEGIC REPORT  LOUNGERS PLC ANNUAL REPORT 2020PRINCIPAL RISKS AND UNCERTAINTIES
CONTINUED

KEY RISKS

RISK DESCRIPTION

MITIGATING ACTIONS

Health and 
safety and 
food safety

The health and safety of the Group’s employees 
and guests is of key concern and the Group 
is required to comply with health and safety 
legislation that includes fire safety, food hygiene, 
and allergens. 

The Group invests significantly in the training of its 
employees and in third party specialists to ensure 
adherence to legislation and the safety of our 
employees and guests. The past 12 months has seen 
particular focus and attention on allergen awareness 
training.

The Group has established a Health and 
Safety Committee to oversee the operation and 
development of health and safety policies and 
Health and Safety matters are formally reported to  
the plc Board.

Employee engagement and satisfaction is a key 
focus of management and the Group’s IPO has 
provided another mechanism by which the Group 
can incentivise and reward team members.

The Group has strengthened its recruitment and 
training and development teams during the year to 
assist in recruiting and retaining the best talent.

The Group strengthened its property team in the 
year with the recruitment of a new property director 
with significant property acquisition experience.

It is anticipated that post Covid-19 there will be 
considerable new site acquisition opportunity in a 
more tenant friendly environment.

The success of the business to date and our ability 
to maintain our roll-out programme is in large 
part down to our ability to recruit and retain 
the best teams in our sites. Recruitment of the 
best staff remains competitive and the potential 
for restrictions on the free movement of EU 
nationals has the potential to increase this level of 
competition, and with it bring additional pressure 
on wage inflation. 

The Group’s growth strategy includes an 
expectation that we can continue to open 
approximately 25 new sites per annum. The Board 
only approves new site investment where strict 
economic criteria are met. The availability of sites, 
with the correct rent levels, cost of investment, and 
demographics, are critical to the delivery of the 
roll-out programme.

Recruitment 
and retention

Availability 
of new sites

Information 
technology 
and data 
security

The Group is increasingly reliant on information 
technology and the risk of failure leading to 
disruption of trading, loss of data and reputational 
damage.

The Group continues to invest in its IT platforms to 
ensure that upgrades are implemented on a timely 
basis and that appropriate data protection measures 
are in place.

Initiatives during the year have included:

•   migration of application and data servers to a 

managed data centre; and

•   commencement of a project to upgrade firewall 

security.

The Covid-19 pandemic provided a successful test of 
the ability of Head Office teams to operate remotely.

The Strategic Report, from pages 3 to 20, was approved by the Board of Directors and signed on its behalf by:

Nick Collins
Chief Executive Officer
16 September 2020

20

LOUNGERS PLC ANNUAL REPORT 2020  STRATEGIC REPORT  Governance

21
21

GOVERNANCE  LOUNGERS PLC ANNUAL REPORT 2020BOARD OF DIRECTORS

ALEX REILLEY   
EXECUTIVE CHAIRMAN

Alex co-founded the Group in 2002, acting as Managing 
Director until 2015 when he assumed the role of Executive Vice 
Chairman. In 2016, following the investment from Lion Capital, 
Alex assumed the role of Executive Chairman and remains 
heavily involved in the branding and look and feel of the 
Loungers estate. Prior to founding Loungers, Alex had several 
roles within the leisure sector including as Operations Manager at 
Glass Boat Co., where he spent seven years.

NIC K COLLINS 
CHIEF EXECUTIVE OFFICER

Nick joined the Group in January 2012 as Finance Director, 
becoming Chief Operating Officer in January 2014 and 
Chief Executive Officer in January 2015. He has overseen the 
expansion of the Group from 56 sites as at January 2015 to 
165 sites at 19 April 2020. Prior to joining the Group, Nick 
spent three years as Finance Director at AIM quoted Capital Pub 
Company plc, leaving when that company was sold to Greene 
King plc in 2011. Prior to that Nick founded Fuzzy’s Grub, a 
sandwich business in London, which he grew to eight outlets and 
a central production facility over five years. Nick also spent five 
years in corporate finance at Arthur Andersen where he qualified 
as a chartered accountant in 2001.

GREGOR GRANT   
CHIEF FINANCIAL OFFICER

Gregor joined the Group in August 2018 as Chief Financial 
Officer. Gregor qualified as a chartered accountant with Deloitte 
and Touche in 1992 and, after leaving Deloitte in 1998, has 
spent the last 20 years in a variety of CFO roles, primarily in 
the hospitality sector. Prior to joining the Group, Gregor spent 
two years as interim CFO at Colosseum Dental UK Ltd (2016 
– 2018), the third largest provider of NHS dental services in 
the UK, three years as Finance Director at Novus Leisure Ltd 
(2013 – 2016), and acted as interim CFO at ETrawler Unlimited 
(trading as CarTrawler) (2011 – 2012) and CFO at Fuddruckers 
Inc., a US hamburger chain based in Austin, Texas (2007 – 
2010). Gregor was also part of the management buy in team 
that acquired regional brewers Morrells of Oxford Ltd in 1998, 
which was subsequently sold to Greene King plc in 2002, and 
Eldridge, Pope & Co. Ltd in 2004 which was subsequently sold to 
Marston’s plc in 2007.

22

NIC K BAC KHOUSE   
SENIOR INDEPENDENT NON-EXECUTIVE DIRECTOR

Nick joined the Board in March 2019 as an Independent Non-
Executive Director and is the Senior Independent Director of the Board 
and chair of the Nomination Committee. Nick has extensive public 
company, finance, and leisure sector experience. He currently also 
serves as Senior Independent Director of Hollywood Bowl Group 
plc (2016 – Present), as a Non-Executive Director of Hyve Group 
plc (2019 – Present) and as Non-Executive Chairman of Giggling 
Restaurants Limited (2019 – Present). Nick has also held positions 
as Non-Executive Director at Marston’s Plc (2012 – 2018) and at 
All3Media Ltd (2011 – 2014) and Senior Independent Director at 
Guardian Media Group Plc (2007 – 2017). Nick started his career 
at Baring Brothers and Co. where he became a Board Director 
(1989-99) following which he held CFO positions at Freeserve Plc 
(1999 – 2001), The Laurel Pub Company Ltd (2002 – 2005) and 
National Car Parks Ltd (2006 – 2007), and was Managing Director 
and Deputy CEO of David Lloyd Leisure Ltd (2008 – 2011).

ADAM BELL AMY   
INDEPENDENT NON-EXECUTIVE DIRECTOR

Adam joined the Board in March 2019 as an Independent 
Non-Executive Director and chair of the Audit Committee. Adam 
is also the Senior Non-Executive Director at Ten Entertainment 
Group plc (2018 – Present) and is a Non-Executive Director at 
Gymfinity Kids Limited (2020 – Present). Adam was previously 
CFO (2012-2018) and then a Non-Executive Director (2018-
2020) at PureGym Ltd, prior to which he was Finance Director 
at Atmosphere Bars & Clubs Ltd (2009 – 2012) and Finance 
Director at D&D London Ltd (2006 – 2009). He has also held 
various finance positions at House of Fraser Ltd, Granada Group 
plc and Whitbread Plc.

JILL LITTLE   
INDEPENDENT NON-EXECUTIVE DIRECTOR

Jill joined the Board in March 2019 as an Independent Non-
Executive Director and chair of the Remuneration Committee. Jill is 
also a Non-Executive Director of Joules Group plc (2016 – Present) 
and Chairman of the National Trust Commercial Group (2014 
– Present). Jill has also held positions as Non-Executive Director at 
Nobia AB (2017 – 2020) and Shaftesbury plc (2010 – 2020) 
and as an adviser to El Corte Ingles S.A. (2012 – 2020), Europe’s 
largest department store group. Jill spent the majority of her 
executive working life at John Lewis Partnership (1975 – 2012) 
where she held positions including Merchandise Director, Strategy & 
International Director and Business Development Director.

ROBERT DARWENT   
NON-EXECUTIVE DIRECTOR

Robert Darwent is a Founding Partner and member of the 
Investment Committee of Lion Capital. Prior to founding Lion 
Capital, Robert served with Hicks, Muse, Tate & Furst for six 
years. Prior to joining Hicks Muse, he was employed in the 
private equity group of Morgan Stanley in London. Robert 

received his BA and MA from Cambridge University.

LOUNGERS PLC ANNUAL REPORT 2020  GOVERNANCECHAIRMAN’S CORPORATE 
GOVERNANCE STATEMENT

CHAIRMAN’S STATEMENT 

As Loungers’ Chairman, I am responsible 
for leading the Board and for ensuring 
the overall effectiveness of the 
Company’s governance arrangements, 
particularly at Board level. 

The Board supports high standards of corporate 
governance and considers that the Company’s continuing 
success on AIM is enhanced by a strong corporate 
governance framework.

COMPLIANCE WITH THE QCA CODE

The Company has chosen to adopt and report against 
the Quoted Companies Alliance Corporate Governance 
Code 2018 (the “QCA Code”). This Corporate 
Governance Statement for the year to 19 April 2020 
provides an account of how Loungers has applied and 
complied with the principles of the QCA Code and 
summarises how the Board and its Committees operate, 
highlighting key activities during the year. The Board 
expects to provide at least annual updates on the 
Company’s compliance in the manner recommended by 
the QCA Code and required by the AIM Rules. 

Whilst as a Board we believe the ten principles of the 
QCA Code have been applied during the year, we 
recognise that there are areas where we can continue to 
evolve our governance practices and disclosures in order 
to ensure they support the growth and strategic progress 
of the Group and the effective application of the principles 
going forwards.

APPLICATION OF THE QCA CODE PRINCIPLES

Delivering Growth
The Board has collective responsibility for setting the 
strategic aims and objectives of the Group. These aims 
are articulated in the Strategic Report on pages 3 to 
20. The Board held a strategy day in January 2020, 
part of which was attended by senior members of the 
management team. The Board intends to hold at least one 
such session each year dedicated to strategy, with input 
from senior members of the management team and, where 
appropriate, senior advisers. While implementing the 
agreed strategic aims, the Board takes into account the 
expectations of the Company’s shareholder base and also 
its wider stakeholder and social responsibilities. 

The Board is committed to an open and ongoing 
engagement with the Company’s shareholders. It takes 
collective responsibility for ensuring a satisfactory 
dialogue with shareholders takes place and reviews and 
discusses the make-up of the Company’s shareholder base 
at Board meetings.

The Company takes its corporate social responsibilities very 
seriously. The Board recognises that for the Company to 
achieve long-term success effective working relationships 
must be maintained across a wide range of stakeholders, 
as well as shareholders, including employees, existing and 
new customers, suppliers and others that it collaborates with 
as part of its business strategy.

Effective risk management is also critical to meeting the 
Company’s strategic objectives. The Company operates 
a risk framework. The Board has overall responsibility for 
determining the Company’s risk management objectives 
and policies. The principal risks can be found on page 
pages 19 to 20. The Board regularly monitors the risks 
the Company faces and takes appropriate action where 
necessary. This has been an area of great focus for the 
Board as the Covid-19 pandemic has progressed and 
a central consideration for the Board when reviewing 
strategy and preparing for and implementing plans to 
reopen sites following lockdown.

Maintaining a Dynamic Management framework
As Chairman, I consider both the operation of the 
Board as a whole and the performance of individual 
Directors regularly. We have commenced an internal 
Board performance evaluation this year in compliance 
with principle 7 of the QCA Code, which requires 
the Company to carry out a full Board performance 
evaluation.

Taken as a whole, the Board represents a suitable 
balance of independence and detailed knowledge of 
the Company and is well positioned to fulfil its roles and 
responsibilities as effectively as possible. Future Board 
appointments will continue to consider diversity, including 
gender, alongside commercial and experience-based 
suitability criteria, to complement the current balance of 
skills on the Board.

23

GOVERNANCE  LOUNGERS PLC ANNUAL REPORT 2020CHAIRMAN’S CORPORATE GOVERNANCE STATEMENT
CONTINUED

The Board has adopted terms of reference which have a 
clear and specific schedule of matters that are reserved 
for the Board and which include corporate governance, 
strategy, major investments, financial reporting, and 
internal controls.

The Board has also established an Audit Committee, a 
Remuneration Committee, and a Nomination Committee 
each with written terms of reference. The responsibilities 
and current membership of these committees are set out 
in their respective reports. From time to time, separate 
committees may be set up by the Board to consider and 
address specific issues, as and when they arise.

The Company promotes a culture of integrity, honesty, 
trust and respect and all employees are expected to 
operate in an ethical manner in all their internal and 
external dealings. The Company’s staff handbook and 
policies promote this culture and include such matters as 
whistleblowing, social media, anti-bribery, communication, 
and general conduct of employees.

The Board places significant importance on the promotion 
of ethical values and good behaviour within the Company 
and takes ultimate responsibility for ensuring that these are 
promoted and maintained throughout the organisation and 
that they guide the Company’s business objectives and 
strategy.

Build Trust
The Board recognises the importance of understanding the 
expectations of our shareholders, and a description of our 
activity in this area is set out on page 12. The Chief Executive 
Officer is the primary contact for the Company’s shareholders 
and is responsible for ensuring that the links between the 
Board and the shareholders, are strong and efficient. The 
Board as a whole is responsible for the good management 
of the Company and its principal aim is to enhance the 
Company’s long-term value for the benefit of shareholders. 

24

CHAIRMAN’S CORPORATE GOVERNANCE STATEMENT
CONTINUED

BOARD STRUCTURE AND OPERATION

The Board comprises seven Directors: the Founder Chairman, 
four Non-Executive Directors and two Executive Directors. 
Three of the Non-Executive Directors, Nick Backhouse, 
Adam Bellamy, and Jill Little are considered by the Board 
to be independent, the fourth, Robert Darwent is not 
considered to be independent because of his relationship 
with Lion, a substantial shareholder of the Company. 

The Chairman leads the Board and is responsible for its 
governance structures, performance, and effectiveness. 
The Independent Non-Executive Directors are responsible 
for bringing independent and objective judgement to 
Board decisions. The Chief Executive Officer and the 
Chief Financial Officer are responsible for the day-to-day 
management of the Company and for implementing the 
strategic goals agreed by the Board. The non-independent 
Non-Executive Director represents Lion, a substantial 
shareholder, on the Board. A relationship agreement is 
in place between the Company and Lion to ensure their 
ongoing relationship is at arm’s length and on a normal 
commercial basis. The skills and experience of the Board 
are set out in their biographies on page 22.

The Board as a whole is responsible for the good 
management of the Company and its principal aim 
is to enhance the Company’s long-term value for the 
benefit of shareholders. The Board has adopted terms of 
reference which have a clear and specific schedule of 
matters that are reserved for the Board and which include 
corporate governance, strategy, major investments, 
financial reporting, and internal controls. The Board has 
also established an Audit Committee, a Remuneration 
Committee, and a Nomination Committee each with 
written terms of reference. The responsibilities and current 
membership of these committees are set out below. From 
time to time, separate committees may be set up by the 
Board to consider and address specific issues, as and 
when they arise.

The Board meets regularly (at least eight times a year) 
and is responsible for strategy, performance, approval 
of any major capital expenditure and the framework of 
internal controls.

Briefing papers are distributed to all Directors in advance 
of Board meetings and all Directors have access to the 
advice and services of the Chief Financial Officer and 
Company Secretary, who are responsible for ensuring that 
Board procedures are followed, that each Director is at all 
times provided with such information as is necessary for 
him or her to discharge their duties and that applicable 
rules and regulations are complied with, in accordance 
with the QCA Code. In addition, all Directors can obtain 
independent professional advice in the furtherance of their 
duties, if necessary, at the Company’s expense.

The rules governing the appointment and replacement 
of Directors are set out in the Company’s Articles of 
Association. In accordance with the Company’s Articles of 
Association, one-third of Directors are subject to re-election 
by shareholders at the Annual General Meeting and any 
new Directors appointed during a financial year must be 
formally elected at the Annual General Meeting following 
their appointment.

The Articles of Association may be amended by special 
resolution of the Company’s shareholders.

BOARD MEETINGS

During the year, the Board has met formally eight times. 
Board meetings are also convened on an ad-hoc basis 
from time to time to consider specific corporate activity, 
and since the outbreak of the Covid-19 pandemic the 
Board has also held regular calls outside of scheduled 
Board meetings.

When possible, the location of Board meetings is varied 
so that the Directors visit different sites and have the 
opportunity to meet with local management teams.

Directors are expected to attend all meetings of the Board 
and the Committees on which they sit, and the Non-
Executive Directors are expected to devote sufficient time 
to the Company to enable them to fulfil their duties as 
Directors. The Board is satisfied that the Chairman and 
each of the Non-Executive Directors is able to devote 
sufficient time to the business, and they each maintain 
open communication with the Executive Directors and 
senior management between the formal Board meetings.

25

GOVERNANCE  LOUNGERS PLC ANNUAL REPORT 2020CHAIRMAN’S CORPORATE GOVERNANCE STATEMENT
CONTINUED

Scheduled Board
Meetings

Audit  
Committee 
Meetings

Remuneration  
Committee 
Meetings

Nomination  
Committee 
Meetings

8/8

8/8

8/8

8/8

8/8

7/7

8/8

1/1

N/A

N/A

N/A

2/2

2/2

N/A

2/2

N/A

N/A

N/A

N/A

1/1

1/1

N/A

1/1

N/A

N/A

N/A

N/A

1/1

1/1

N/A

1/1

N/A

CONFLICTS OF INTEREST

At each meeting of the Board or its Committees, the 
Directors are required to declare any interests in the 
matters to be discussed and are regularly reminded of 
their duty to notify any actual or potential conflicts of 
interest. The Company’s Articles of Association provide 
for the Board to authorise any actual or potential conflicts 
of interest if deemed appropriate to do so. The Board 
has effective procedures in place to monitor and manage 
conflicts of interests.

INTERNAL CONTROLS

The Board has ultimate responsibility for the Group’s 
system of internal controls and for the ongoing review 
of their effectiveness. Systems of internal control can 
only identify and manage risks and not eliminate them 
entirely. As a result, such controls cannot provide an 
absolute assurance against misstatement or loss. The 
Board considers that the internal controls which have been 
established and implemented are appropriate for the 
size, complexity, and risk profile of the Group. The Board 
continues to review the system of internal controls to ensure 
it is fit for purpose and appropriate for the size and nature 
of the Company’s operations and resources.

Director

Chairman

Alex Reilley 

Executive Directors

Nick Collins 

Gregor Grant

Non-Executive Directors

Nick Backhouse

Adam Bellamy

Robert Darwent

Jill Little

Former Non-Executive Director

James Cocker

Only the independent Non-Executive Directors are 
Committee Members.

Other Directors regularly attend Committee meetings.

Further ad hoc meetings were held during the year to deal with 
ad hoc approvals and issues arising from the Covid-19 crisis.

BOARD COMMITTEES

The Board has delegated specific responsibilities to the 
Audit Committee, the Remuneration Committee and the 
Nomination Committee, details of which are set out below 
and/or in the respective Committee reports.

Each Committee has written terms of reference setting out its 
duties, authority and reporting responsibilities. The terms of 
reference of each Committee will be reviewed on an annual 
basis going forward to ensure they remain appropriate 
and reflect any changes in legislation, regulation or best 
practice. 

EXTERNAL ADVISERS

The Board seeks advice and guidance on various matters 
from its Financial and Nominated Advisor, GCA Altium, 
its Joint Brokers, Liberum and Peel Hunt and its Financial 
Public Relations Adviser, Instinctif Partners. The Board 
also uses the services of an external company secretarial 
provider, Prism Cosec.

26

LOUNGERS PLC ANNUAL REPORT 2020  GOVERNANCECHAIRMAN’S CORPORATE GOVERNANCE STATEMENT
CONTINUED

BOARD EVALUATION 

During the year, the Company commenced its first 
evaluation of the performance of the Board as a whole 
and of its Committees. The process will be further 
enhanced in future years to encompass formal evaluation 
of individual Directors, including the Chairman, to ensure 
that all are committed, independent (where relevant) and 
provide a relevant and effective contribution. The Senior 
Independent Director will be responsible for establishing a 
formal process for appraising the Chairman’s performance 
and will undertake such evaluation annually and 
otherwise as deemed appropriate from time to time.

RELATIONS WITH SHAREHOLDERS AND 
STAKEHOLDERS

The Board places a strong emphasis on the standards of 
good corporate governance and maintaining effective 
engagement with its shareholders and key stakeholders, 
which it considers to be integral to longer term growth 
and success.

The principal methods of communication with shareholders 
are the Annual Report, the half year and full-year results 
announcements, trading updates (where required or 
appropriate), Annual General Meetings and the investor 
relations section of the Company’s website (in particular 
the ‘AIM Rule 26’ page).

The Company’s website is updated with information 
regarding the Company’s activities and performance. 
The Company’s reports and presentations and notices 
of Annual General Meetings are made available on 
the website when available, as are the results of voting 
at shareholder meetings. The Company will publish an 
explanation around any actions it proposes to take on 
votes where a significant proportion of independent votes 
have been cast against any resolution.

ANNUAL GENERAL MEETING

Shareholders will have an opportunity to raise questions with 
the Board at the Group’s Annual General Meeting, which 
will be held at Cosy Club, 14 Tunsgate Quarter, Guildford 
GU1 3QY on 16 October 2020. Details of the business to 
be transacted at the AGM are set out in the Notice of AGM, 
which is available on the Company’s website.

Alex Reilley
Chairman
16 September 2020

27
27

GOVERNANCE  LOUNGERS PLC ANNUAL REPORT 2020AUDIT COMMITTEE REPORT

 Considering new accounting standards and their 
implications for the Group; and

 Reviewing the Group’s risk management processes, 
key risk register and risk mitigations.

SIGNIFICANT ISSUES

The significant issues considered by the Audit Committee in 
respect of the FY20 Annual Report are as follows:

 Going concern – The Committee has considered the 
impact of Covid-19 on the profitability, cash flows 
and liquidity of the Group.  Financial modelling has 
been undertaken to examine the impact of a range of 
scenarios and the Committee has also benefitted from 
understanding the Group’s financial performance post 
re-opening in order to support the assessment that it is 
appropriate to prepare the FY20 financial statements on 
the going concern basis.

 Impairment of tangible fixed assets – Management have 
undertaken an impairment review at individual site level.  
The key assumptions underpinning cash flow forecasts, 
future growth rates and discount rates were reviewed 
by the Committee and the Committee was satisfied with 
the methodology and assumptions that underpin the 
impairment charge taken in the year.

 Share based payments – The Committee has reviewed 
the accounting for share based payments, and in 
particular the assumptions used in the fair value estimate 
of the Value Creation Plan.

 Exceptional costs – Exceptional items identified by 
management have been reviewed and considered by the 
Committee and the Committee is satisfied that they have 
been appropriately classified.

 IFRS 16 – The Committee has reviewed management’s 
approach to the adoption of IFRS 16, including the 
decision to adopt the fully retrospective approach, the 
adoption of a discount rate of 5.9% in respect of leases 
entered into whilst the Group was under private equity 
ownership and the revised discount rate of 3.5% for 
leases entered into in FY20 to reflect the Group’s post 
IPO capital structure.

On behalf of the Board, I am pleased to 
present the Audit Committee Report for the 
52 weeks ended 19 April 2020.

The Committee consists of the three independent Non-
Executive Directors and is chaired by myself. The Board 
is satisfied that I, as Chairman of the Committee, have 
recent and relevant financial experience. I am a chartered 
certified accountant with experience as a Finance 
Director in multi-site leisure and hospitality operations. The  
Committee met twice during the year, and all members 
of the committee attended both meetings. Although not 
members of the Audit Committee, our Executive Chairman, 
CEO and CFO are also invited to attend meetings unless 
they have a conflict of interest.

DUTIES

The Audit Committee is responsible for ensuring that the 
financial performance of the Group is properly reported 
on and reviewed. Its role includes monitoring the 
integrity of the Group’s financial statements and results 
announcements, reviewing significant financial reporting 
issues, reviewing the effectiveness of the Group’s internal 
control and risk management systems and overseeing the 
relationship with the external auditors (including advising 
on their appointment, agreeing the scope of the audit 
and reviewing the audit findings). It is also responsible 
for establishing, monitoring and reviewing procedures 
and controls for ensuring compliance with the AIM Rules. 
The detailed duties of the Audit Committee are set out 
in its Terms of Reference which will be reviewed by the 
Committee on an annual basis. The principal areas of 
focus for the Committee since the Company listed have 
been as follows:

 Approving the external auditor’s plan for the audit 
of the Group’s annual financial statements, including 
key audit matters, key risks, confirmation of auditor 
independence and terms of engagement;

 Reviewing the Group’s draft financial statements and 
interim results statements and reviewing the external 
auditor’s detailed reports including their analysis of 
key audit matters and risks;

 Meeting the external auditor and their team during 
the year, to review the audit plan, timetables, specific 
matters relating to the audit work and any issues arising;

 Reviewing the performance of the external auditor;

28

LOUNGERS PLC ANNUAL REPORT 2020  GOVERNANCE 
 
 
 
 
 
 
 
 
 
 
AUDIT COMMITTEE REPORT
CONTINUED

ROLE OF THE EXTERNAL AUDITORS

The Audit Committee monitors the relationship with the 
external auditors, PricewaterhouseCoopers LLP, to ensure 
that the auditors’ independence and objectivity are 
maintained. The Committee will assess the independence 
of the external auditors and the effectiveness of the external 
audit process before making recommendations to the Board 
in respect of their appointment or reappointment. In assessing 
independence and objectivity, the Committee will consider 
the level and nature of services provided by the external 
auditors as well as the confirmation from the external 
auditors that they have remained independent within the 
meaning of the APB Ethical Standards of Auditors.

RISK MANAGEMENT AND INTERNAL CONTROLS

The Group has established a system of risk management 
and internal controls. The Audit Committee is responsible 
for reviewing the internal financial control systems that 
identify, assess, manage and monitor financial risks, and 
other internal control and risk management systems and 
will do so during the year. 

SHARE DEALING, ANTI-BRIBERY AND 
WHISTLEBLOWING

Loungers plc has adopted, with effect from Admission, a 
share dealing code for the Directors and all employees, 
which is appropriate for a company whose shares are 
admitted to trading on AIM and which is in accordance 
with Rule 21 of the AIM Rules. The Group takes all 
reasonable steps to ensure compliance by the Directors 
and any other applicable employees with the terms of 
this code. The Group promotes a culture of integrity, 
honesty, trust and respect and all employees are expected 
to operate in an ethical manner in all their internal and 
external dealings. The Group’s staff handbook and 
policies promote this culture and include such matters as 
whistleblowing, social media, anti-bribery, communication, 
and general conduct of employees. The Group’s 
whistleblowing and anti-bribery policies are overseen 
by the Audit Committee. The Audit Committee believes, 
based on experience to date, that these policies are 
effective and staff members are aware of them.

Adam Bellamy
Audit Committee Chairman
16 September 2020

29

GOVERNANCE  LOUNGERS PLC ANNUAL REPORT 2020REMUNERATION COMMITTEE REPORT

On behalf of the Board, I am 
pleased to present the Remuneration 
Committee Report for the 52 weeks 
ended 19 April 2020.

The Executive Chairman, Chief Executive Officer and 
Chief Financial Officer occasionally attend meetings and 
provide information and support as requested. Executive 
Directors are not present when their remuneration 
package is considered.

The Committee consists of the three independent Non-
Executive Directors and is chaired by myself. The 
Committee met once during the year, and all members of 
the Committee attended the meeting.

DUTIES

The Committee has responsibility for:

 Determining the policy for the remuneration of the 
Chairman, Executive Directors, and any employees 
that the Board delegates to it;

 Within the terms of the agreed policy, determining 
individual remuneration packages including 
bonuses, incentive payments, share options, pension 
arrangements and any other benefits;

 Giving due regard to the comments and 
recommendations of the QCA Corporate Governance 
Code and the AIM Rules for Companies;

 Being informed of and where appropriate advising on 
any major changes in employee benefit structures; and

 Monitoring the level and structure of remuneration for 
senior managers below Board level as determined.

The principle objective in setting the Group’s remuneration 
policy is to ensure the recruitment and retention of 
executives with the appropriate skills and qualities to 
drive the company’s strategy and deliver value for 
shareholders. To achieve this, our policy on executive 
remuneration is designed to:

 Include a competitive mix of base salary and short and 
long-term incentives, with an appropriate proportion of 
the package determined by stretching targets linked to 
the Group’s performance;

 Promote the long-term success of the Group, in line 
with our strategy and focus on profitability and growth; 
and

 Provide appropriate alignment between the interests 
of shareholders and executives, which is further 
enhanced through shareholding guidelines and the 
deferral of a proportion of the annual bonus as shares.

At the time of the Company’s IPO the Remuneration 
Committee sought the advice of external remuneration 
advisors to ensure that remuneration packages and incentive 
programmes were set at appropriate levels. The Committee 
continues to have access to those advisors for ongoing 
support and advice as required.

REMUNERATION – EXECUTIVE DIRECTORS

Remuneration levels for Executive Directors were set at 
the time of the IPO with the assistance of a benchmarking 
exercise undertaken by external advisors. Base salaries 
were re-set to bring them into line with lower quartile 
salaries paid by a comparator group of similarly sized 
listed companies.

The Executive Directors and the two divisional Managing 
Directors are incentivised through a combination of an 
annual bonus plan and a long-term value creation plan 
(“VCP”). The annual bonus provides an opportunity to 
earn a cash bonus of a maximum of 100% of salary. 
Awards under the annual bonus scheme are subject 
to achieving financial targets, with the Remuneration 
Committee setting the targets by reference to Group 
budgets and analysts’ forecasts. Payments under the 
annual bonus plan are subject to typical malus and 
clawback provisions.

The VCP was introduced at the time of the IPO and provides 
the Executive Directors and two divisional Managing 
Directors with an incentive scheme that sees them wholly 
aligned with the Group’s shareholders. At the time of the IPO 
the five participants in the VCP were granted awards giving 
them a future right to be issued Ordinary Shares based on 
the excess cumulative total shareholder return generated 
over the VCP performance period.

It is intended that the awards made at IPO are one-off 
awards, with no further awards under this plan being 
made. The Remuneration Committee will, however, review 
this approach on an annual basis taking into consideration 
performance, retention challenges and affordability.

The VCP Awards shall have a three-year performance 
period commencing on the date of Admission. Participants 

30

LOUNGERS PLC ANNUAL REPORT 2020  GOVERNANCE 
 
 
 
 
 
 
 
REMUNERATION COMMITTEE REPORT
CONTINUED

in the VCP each have a right to share in a pool of 
Ordinary Shares that has a value equal to:

 10 per cent. of any excess cumulative shareholder 
value created over a 12 per cent. per annum hurdle 
and up to 15 per cent. per annum growth over the 
VCP performance period;

 11 per cent. of any excess cumulative shareholder 
value created over a 15 per cent. per annum hurdle 
and up to 20 per cent. per annum growth over the 
VCP performance period; and

 12 per cent. of any excess cumulative shareholder 
value created over a 20 per cent. per annum hurdle 
over the VCP performance period.

Any performance conditions applying to the VCP Awards 
may be varied, substituted or waived by the Remuneration 
Committee if events occur (e.g. major acquisition or 
disposal) that cause it to determine that the conditions are 
unable to fulfil their original intended purposes and the 
change would not be materially less difficult to satisfy. 
New equity issues will be excluded from the calculation 
unless decided otherwise by the Remuneration Committee. 
The value created will be measured in terms of Total 
Shareholder Return (being the growth in the Company’s 
market capitalisation including dividends reinvested). There 
will be an overall cap on the number of Ordinary Shares 
that can be issued under the VCP equal to six per cent. of 
the Group’s share capital from time to time.

VCP Awards will vest as to one third on the 3rd 
anniversary of Admission, one third on the 4th anniversary 
of Admission and one third on the 5th anniversary of 
Admission, to the extent permitted following any operation 
of malus or clawback.

REMUNERATION – NON-EXECUTIVE DIRECTORS

The remuneration policy for the Non-Executive Directors 
is to pay fees necessary to attract the individual of the 
calibre required, taking into consideration the size and 
complexity of the business and the time commitment of 
the role, without paying more than is necessary. The fees 
of the Non-Executive Directors are determined by the 
Executive Directors.

Non-Executive Directors may be eligible to receive 
benefits such as travel, the use of secretarial support 
and other expenses relevant to the performance of their 
roles. None of the Non-Executive Directors are eligible to 
participate in any of the Group’s incentive arrangements.

EMPLOYEE SHARE SCHEMES

The Directors recognise the importance of ensuring that 
all employees are well motivated and aligned with the 
broader success of the Group. Accordingly, the Directors 
consider equity participation to be an important element 
of attracting, retaining, and incentivising key staff. To 
this end the Group operates two shares schemes: the 
senior management restricted share plan (“RSP”) and the 
employee share plan (“ESP”).

The RSP is a discretionary executive share plan. Awards 
shall be made on an annual basis, and as proposed 
by the Executive Directors, at the discretion of the 
Remuneration Committee. There will be an overall cap 
on the number of shares that can be issued under the RSP 
equal to the dilution limit of 10 per cent. in 10 years (such 
amount to be reduced by any dilution arising from the 
VCP and/or the Employee Share Plan). The Group has 
also established a subplan to the RSP which permits the 
grant of RSP Awards designed to meet the requirements of 
a company share option plan (“CSOP”) for the purposes 
of Schedule 4 to the Income Tax (Earnings and Pensions) 
Act 2003 (“CSOP Options”)

Awards made under the RSP plan carry no performance 
conditions but are subject to a three-year vesting period 
from the date of grant subject to continued employment 
with the Group.

The ESP is a discretionary all-employee share plan under 
which senior management may, within certain limits, grant 
to any employee a conditional award (i.e. a conditional 
right to acquire Ordinary Shares), at their discretion. At 
the time of the IPO grants of 500 shares were made to 
616 employees. The ESP has no performance conditions, 
other than continued employment over the vesting period.

31

GOVERNANCE  LOUNGERS PLC ANNUAL REPORT 2020 
 
 
REMUNERATION COMMITTEE REPORT
CONTINUED

SINGLE TOTAL FIGURE OF REMUNERATION TABLE (AUDITED)

Salary / Fees

Annual Bonus

IPO Cash Bonus(2)

IPO Share Award(2)

Total

Alex Reilley

Nick Collins

Gregor Grant (1)

Nick Backhouse

Adam Bellamy

Jill Little

Robert Darwent

James Cocker

2020
£000

96

273

158

58

52

52

-

-

2019
£000

95

151

110

-

-

-

-

-

Total

689

356

2020
£000

2019
£000

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

2020
£000

20

200

50

-

-

-

-

-

270

2019
£000

-

-

-

-

-

-

-

-

-

2020
£000

-

1,259

100

-

1,359

2019
£000

-

-

-

-

-

-

-

-

-

2020
£000

116

1,732

308

58

52

52

-

-

2019
£000

95

151

110

-

-

-

-

-

2,318

356

(1) Gregor Grant’s 2019 remuneration reflects his remuneration from the 1 August 2018, the date on which he joined the Group.

(2) The IPO cash and share awards were made in recognition of the Group’s successful IPO on 29 April 2019.

DIRECTORS’ INTERESTS (AUDITED)

As at 19 April 2020 the Directors of the Company held the following number of 1p ordinary shares.

Alex Reilley

Nick Collins

Gregor Grant

Nick Backhouse

Adam Bellamy

Jill Little

Beneficially owned at
16 September 2020

Beneficially owned at
19 April 2020

Vested, unexercised 
share awards at
19 April 2020

7,201,432

1,436,276

180,148

13,903

13,903

13,903

6,546,757

1,305,706

146,815

12,500

12,500

12,500

-

450,000

50,000

-

-

-

The table includes details of shares beneficially owned as at the date of this report to reflect the shares taken up by 
Directors in the equity placing completed on 23 April 2020.

(1) Robert Darwent is a Director of Lion Capital. At 19 April 2020 funds managed by Lion Capital were interested in 26,728,524 shares and at 16 September 2020 in 
29,728,638 shares.

OUTSTANDING DIRECTORS’ SHARE AWARDS (AUDITED)

Scheme

At 21 April 
2019

Granted

At 19 April 
2020

Share price 
at grant

Exercise 
price

Date of 
Grant

Exerciseable 
from(1)

Expiry 
Date

Nick 
Collins
Gregor 
Grant

RSP

RSP

–

–

450,000

450,000

£2.00

Nil April 2019

April 2020 April 2029

50,000

50,000

£2.00

Nil April 2019

April 2020 April 2029

(1) The RSP awards disclosed above in respect of a total of 500,000 shares are exercisable in three equal tranches on 29 April 2020, 29 April 2021 and 29 April 
2022.

Jill Little
Remuneration Committee Chairman
16 September 2020

32

LOUNGERS PLC ANNUAL REPORT 2020  GOVERNANCE33

NOMINATION COMMITTEE REPORT

 Board evaluation. The Committee has considered 
the appropriate methodology for undertaking Board 
evaluation and an evaluation process is currently 
underway.

Nick Backhouse
Nomination Committee Chairman
16 September 2020

On behalf of the Board, I am pleased 
to present the Nomination Committee 
Report for the 52 weeks ended 
19 April 2020.

The Committee consists of the three independent Non-
Executive Directors and is chaired by myself. In this year 
of the Company’s IPO the Committee met once, and all 
members of the committee attended. In future years it is 
intended that the Committee will meet at least twice per 
year.

DUTIES

The Committee is responsible for, inter alia:

 Ensuring that the Board and its Committees have the 
right balance of skills, knowledge, and experience;

 Considering and planning for the orderly succession of 
Directors and other senior managers; and

 Identifying and nominating suitable candidates to fill 
Board vacancies.

For this year the Committee has focused upon:

 Succession planning. The Committee discussed long 
term succession planning and emergency cover and 
identified the necessary actions to identify and develop 
talent both within the Group and from the wider 
market. In its discussions the Committee recognised 
the importance of looking at a diverse range of 
candidates when considering future appointments;

 Board and Committee membership. Review of Board 
and Committee membership to ensure that the Board 
and Committees can discharge their responsibilities 
effectively;

 A review of the required time commitment of the Non-
Executive Directors to fulfil their duties appropriately 
and a review of the Terms of Reference of the 
Committee; and

34

LOUNGERS PLC ANNUAL REPORT 2020  GOVERNANCE 
 
 
 
 
 
 
DIRECTORS’ REPORT

The Directors present their report and 
the consolidated financial statements of 
Loungers plc for the 52 weeks ended 
19 April 2020.

The Corporate Governance Statement on pages 23 to 27 
also forms part of this Directors’ Report.

PRINCIPAL ACTIVITY

The principal activity of the Group is the operation of café 
bars and café restaurants.

INCORPORATION

The Company was incorporated on 28 March 2019 and 
was admitted to trading on the AIM market on 29 April 
2019.  Further details, including the basis of preparation 
of these financial statements, are provided in note 2.1.

RESULTS AND DIVIDENDS

The consolidated statement of comprehensive income is 
set out on page 45 and shows the comprehensive loss for 
the year.

There were no dividends paid or proposed in the year 
under review.

STRATEGIC REPORT

Information in respect of the Business Review, Future 
Outlook of the Business and Principal Risks and 
Uncertainties are not shown in the Directors’ Report 
because they are presented in the Strategic Report.

DIRECTORS

The Directors who served during the year and up to 
the date of this report, unless otherwise stated, were as 
follows:

 Alex Reilley (appointed 28 March 2019)

 Nick Collins (appointed 28 March 2019)

 Gregor Grant (appointed 28 March 2019)

 Nick Backhouse (appointed 29 March 2019)

 Adam Bellamy (appointed 29 March 2019)

 Robert Darwent (appointed 1 July 2019)

 Jill Little (appointed 29 March 2019)

 James Cocker (appointed 28 March 2019, resigned 
1 July 2019)

Brief biographical details for each of the Directors are 
given on page 22.

DIRECTORS’ INTERESTS

A table showing the Directors’ interests in the share capital 
of Loungers plc is set out in the Directors’ Remuneration 
Report on page 32.

GOING CONCERN

In adopting the going concern basis for preparing the 
financial statements, the directors have considered the 
business activities as set out on pages 6 to 10 as well as 
the Group’s principal risks and uncertainties as set out 
on pages 19 to 20, including the downside sensitivities 
outlined on pages 16 to 17 and in note 2.2. Based on the 
Group’s cash flow forecasts and projections, the Board 
is satisfied that the Group will be able to operate within 
the level of its facilities for the foreseeable future. For this 
reason, the Board considers it appropriate for the Group 
to adopt the going concern basis in preparing its financial 
statements.

SHARE CAPITAL

Details of the issued share capital, together with details of 
movements during the year are shown in Note 22 to the 
Consolidated Financial Statements.

The Company has one class of Ordinary share and each 
Ordinary share carries the right to one vote at general 
meetings. The Company also has one class of non-voting 
Preference shares.

There are no restrictions on the transfer of Ordinary shares 
in the capital of the Company other than those restrictions 
which may from time to time be imposed by law, for 
example, insider trading law.

AUTHORITY FOR THE COMPANY TO PURCHASE ITS 
OWN SHARES

Subject to authorisation by shareholder resolution, the 
Company may purchase its own shares in accordance 
with the Companies Act 2006. Any shares which have 
been bought back may be held as treasury shares or 
cancelled immediately upon completion of the purchase.

At the AGM on 16 October 2019 the Company 
was generally and unconditionally authorised by its 
shareholders to make market purchases (within the 
meaning of section 693 of the Companies Act 2006) of 
up to a maximum of 9,250,000 of its Ordinary shares. 
The Company has not purchased any of its Ordinary 
shares under this authority, which is due to expire at the 
date of this year’s AGM.

35

GOVERNANCE  LOUNGERS PLC ANNUAL REPORT 2020 
 
 
 
 
 
 
 
DIRECTORS’ REPORT
CONTINUED

SUBSTANTIAL SHAREHOLDINGS

The Company is aware that the following had an interest 
of 3% or more of the issued Ordinary share capital of the 
Company at 15 September 2020, the last practicable 
date before the publication of this report:

No of ordinary 
shares

% of share 
capital

Funds managed by Lion Capital

29,728,638

29.0%

AXA Framlington Investment 
Managers

Alex Reilley

Jacob Bishop

7,252,677

7,201,432

7,157,432

M&G Investment Management

6,140,004

Highclere International Investors

5,852,772

Canaccord Genuity Wealth 
Management

BlackRock

Merian Global Investors

5,800,000

5,265,696

5,244,431

Gresham House Asset Management

4,710,051

Invesco

3,509,673

7.1%

7.0%

7.0%

6.0%

5.7%

5.7%

5.1%

5.1%

4.6%

3.4%

EMPLOYMENT POLICY

Our policy is to promote equal opportunity in employment 
regardless of gender, race, colour or disability, subject 
only to capability and suitability for the task and legal 
requirements. Where existing employees become 
disabled, it is our policy to provide continuing employment 
under equivalent terms and conditions, and to provide 
equal opportunity for promotion to disabled employees 
wherever appropriate.

We keep our team members regularly updated with issues 
affecting the running of the business and obtain their views 
on any key matters, all of which is in accordance with 
our obligations under the Information and Consultation 
Regulations 2004. The dissemination of information is 
achieved in many ways including weekly newsletters, regular 
regional and area meetings, our company intranet and 
Directors and Managers briefings. These are opportunities 
for team members to express their views and ask questions. 
Outside of these specific events, we welcome any questions 
that team members may have about the business.

The Board recognises that Loungers’ performance and 
success are directly related to our ability to attract, retain 
and motivate high-calibre employees. We are committed 
to linking reward to business and individual performance, 
giving employees the chance to share in the Company’s 

financial success. Eligible employees are typically 
provided with financial incentives related to the Group’s 
performance in the form of annual bonuses. The Group 
also operates incentive plans and share plans.

FINANCIAL RISK MANAGEMENT

The Group finances its operations through a combination 
of intra-Group funding and bank debt. The Group uses 
various financial instruments in the form of cash, third-
party bank debt and other items, such as trade payables, 
that arise directly from its operations. The main purpose 
of these financial instruments is to fund the Group’s 
operations. These financial instruments expose the Group 
to several financial risks, principally liquidity and interest 
rate risks. 

The Group seeks to meet liquidity risk through assessment of 
short-, medium- and long-term cash flow forecasts to ensure 
the adequacy of committed debt facilities. The banking 
facilities referred to above include a £10m revolving 
credit facility. To provide additional liquidity following the 
Covid-19 outbreak the Group entered into an additional 
£15m revolving credit facility with its bankers on 22 April 
2020, further details are provided in note 30.

Interest rate risk is managed by the use of interest rate 
swaps to fix the Group’s interest rate on its term loan debt. 
The Group has entered into a three-year interest rate SWAP 
to fix LIBOR at 0.7% on the £32.5m term loan facility.

STREAMLINED ENERGY AND CARBON REPORTING

The data below relates wholly to the United Kingdom and 
covers the 52 weeks to 19 April 2020.

Energy Usage 
(kWh)

GHG Emissions 
(CO2e tonnes)

Grid electricity

Natural gas
Transport fuel (purchased and 
reimbursed)

21,160,051

28,342,175

1,451,521

5,358

5,211

400

Total

Scope 1

Scope 2

Scope 3

Total

Intensity ratio

Annual revenue (£000)

Total CO2e tonnes per £m 
revenue

50,953,747

10,969

28,342,175

21,160,051

1,451,521

5,373

4,933

663

50,953,747

10,969

166,502

65.9

36

LOUNGERS PLC ANNUAL REPORT 2020  GOVERNANCEDIRECTORS’ REPORT
CONTINUED

The methodology adopted involved capturing energy 
consumption data through utility billing, this accounted for 
97.2% of consumption.  Defra 2020 conversion figures 
were used to calculate CO2e.

During the year under review the Group has undertaken 
the following energy efficiency measures:

 Installation of more efficient kitchen equipment 
(including induction hobs and more accessible 
refrigerated storage) during the kitchen reset 
programme; and

 During the Covid-19 lockdown the Group worked 
closely with their energy consultants to minimise 
energy waste, achieving a 75% reduction in electricity 
consumption and 90% reduction in gas consumption 
during the period.

DIRECTORS’ LIABILITY INSURANCE AND INDEMNITY

The Group has arranged insurance cover in respect of 
legal action against its Directors. To the extent permitted 
by UK law, the Group also indemnifies the Directors. 
These provisions were in force throughout the year and in 
force at the date of this report.

POLITICAL DONATIONS

During the year ended 19 April 2020 the Group made no 
political donations (2019 £nil).

S172 STATEMENT 

The Directors behave and carry out their activities to 
promote the long-term success of the Group. More detail 
is shown in the Strategic Report.

POST BALANCE SHEET EVENTS

On 22 April, in response to the Covid 19 lockdown and 
to ensure that Group had sufficient liquidity to withstand 
a very prolonged lockdown, the Group announced the 
following initiatives to strengthen its financial position:

 The issue of 9,250,000 ordinary shares of 1 pence 
each to existing shareholders at a price of 90 
pence per ordinary share to raise gross proceeds of 
£8,325,000;

 An incremental £15m revolving credit facility with its 
bankers Santander Corporate Banking and Bank of 
Ireland; and

 The waiver of the covenant tests scheduled for 12 July 
2020 and 4 October 2020, and amendments to the 
tests running through to 3 October 2021.

On 4 May 2020 the Company allotted and issued 
650,000 ordinary shares of 1 pence each in the 
Company following the vesting of awards made to 
480 Company employees pursuant to the Company’s 
Employee Share Plan.

On 4 July, the Group commenced a phased re-opening of 
its sites, with all of its sites re-opened and fully operational 
by 7 August 2020.

DIRECTORS’ RESPONSIBILITIES STATEMENT

The Directors are responsible for preparing the Strategic 
Report, Directors’ Report and the financial statements 
in accordance with applicable law and regulations. 
Company law requires the Directors to prepare financial 
statements for each financial year. Under that law the 
Directors have elected to prepare the Group financial 
statements in accordance with International Financial 
Reporting Standards (IFRSs) as adopted by the European 
Union and the parent Company financial statements 
in accordance with FRS 102. Under company law the 
Directors must not approve the financial statements unless 
they are satisfied that they give a true and fair view of the 
state of affairs of the Group and parent Company and the 
profit and loss of the Group for that period. In preparing 
those financial statements, the Directors are required to:

 select suitable accounting policies and then apply 
them consistently;

 make judgements and accounting estimates that are 
reasonable and prudent;

 state whether applicable IFRSs have been followed, 
subject to any material departures disclosed and 
explained in the financial statements; and

 prepare the financial statements on the going concern 
basis unless it is inappropriate to presume that the 
Group will continue in business.

The Directors are responsible for keeping adequate 
accounting records that are sufficient to show and explain 
the Group’s transactions and disclose with reasonable 
accuracy at any time the financial position of the Group 
and enable them to ensure that the financial statements 

37

GOVERNANCE  LOUNGERS PLC ANNUAL REPORT 2020 
 
 
 
 
 
 
 
 
DIRECTORS’ REPORT
CONTINUED

comply with the Companies Act 2006. They are also 
responsible for safeguarding the assets of the Group and 
hence for taking reasonable steps for the prevention and 
detection of fraud and other irregularities. 

DISCLOSURE OF INFORMATION TO AUDITOR

So far as each of the Directors is aware, there is no 
relevant audit information that has not been disclosed to 
the Group’s auditors and each of the Directors believes 
that all steps have been taken that ought to have 
been taken to make them aware of any relevant audit 
information and to establish that the Group’s auditors 
have been made aware of that information.

INDEPENDENT AUDITORS

The auditors, PricewaterhouseCoopers LLP, have indicated 
their willingness to continue in office.

This report was approved by the Board of Directors and 
signed on its behalf.

G Grant
Chief Financial Officer

16 September 2020

38

LOUNGERS PLC ANNUAL REPORT 2020  GOVERNANCEINDEPENDENT AUDITORS’ REPORT 
TO THE MEMBERS OF LOUNGERS PLC

REPORT ON THE AUDIT OF THE GROUP FINANCIAL STATEMENTS

OPINION

In our opinion, Loungers plc’s group financial statements (the “financial statements”):

 give a true and fair view of the state of the group’s affairs as at 19 April 2020 and of its loss and cash flows for the 
52 week period (the “period”) then ended;

 have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by 
the European Union; and

 have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements, included within the Annual report and financial statements (the “Annual 
Report”), which comprise: the consolidated statement of financial position as at 19 April 2020; the consolidated 
statement of comprehensive income, the consolidated statement of cash flows, and the consolidated statement of changes 
in equity for the 52 week period then ended; and the notes to the financial statements, which include a description of the 
significant accounting policies.

BASIS FOR OPINION

We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. 
Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial 
statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to 
provide a basis for our opinion.

Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the 
financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have 
fulfilled our other ethical responsibilities in accordance with these requirements.

OUR AUDIT APPROACH

OVERVIEW

•   Overall group materiality: £1,665,000, based on 1% of revenue.

•   Following our assessment of the risk of material misstatement we selected the parent 
company, Loungers plc, and the trading company, Loungers UK Limited, for full 
scope audits and performed specified audit procedures over certain balances and 
transactions in the four intermediate holding companies.

 Our assessment of the risk of material misstatement also informed our views of the 
areas of particular focus of our work which are listed below:

•  The impact of COVID-19.

•  Impairment of property, plant and equipment.

THE SCOPE OF OUR AUDIT

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial 
statements. In particular, we looked at where the directors made subjective judgements, for example in respect of significant 
accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all 
of our audits we also addressed the risk of management override of internal controls, including evaluating whether there 
was evidence of bias by the directors that represented a risk of material misstatement due to fraud.

39

GOVERNANCE  LOUNGERS PLC ANNUAL REPORT 2020 
 
 
 
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF LOUNGERS PLC
CONTINUED

KEY AUDIT MATTERS

Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit 
of the financial statements of the current period and include the most significant assessed risks of material misstatement 
(whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall 
audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, 
and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the 
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these 
matters. This is not a complete list of all risks identified by our audit.

Key audit matter

The impact of COVID-19

As set of on pages 3 to 20, COVID-19 has had 
a number of significant financial, as well as 
operational, impacts, both during lockdown and 
since. Management have also considered the 
impacts of COVID-19 on the financial statements 
including in respect of their assessment on the 
going concern basis of preparation of the financial 
statements and in respect of any potential for the 
impairment of assets.

As part of our risk assessment, we considered the 
potential impact for the group to be the following:

How our audit addressed the key audit matter

We have considered the impact of COVID-19 on various areas of 
the financial statements and performed procedures to address the 
risk around the impact of COVID-19. We have set out our responses 
to the risk in respective areas of the financial statements as below:

Regarding the impact on the potential impairment of property, 
plant and equipment, refer to the ‘Impairment of property, plant 
and equipment’ Key audit matter below.

In respect of the impact of potential impairment of the carrying 
value of goodwill, we assessed the group’s annual impairment 
review value in use calculations, which included assumptions that 
were consistent with the impairment review of property, plant and 
equipment. There was no indication of impairment identified.

•   The effects of lockdown and social distancing 

restrictions on consumer behaviour has resulted in 
reduced footfall and therefore reduced revenue,  
profitability and cash generation. This creates 
a risk of impairment of the carrying value of 
property, plant and equipment as well as the 
carrying value of goodwill.

•   The lower level of revenue, profit and cash 

generation also creates a going concern risk 
related to the adequacy and availability of bank 
facilities going forward in the context of the 
overall liquidity requirements of the Group.

•   Disclosure of the impact of COVID-19 on the 
group’s business in the financial statements.

In respect of the impact of going concern, we have understood 
how management have factored in the impact of COVID-19 
on their assessment of future cash flows and bank facility 
covenant compliance. This included a downside scenario which 
included lower levels of revenue across sites, the potential for 
regional lockdowns resulting in the closure of sites, and more 
severe affects of COVID-19 over the winter months. In doing 
this we have validated management’s assumptions by looking 
at the actual impact on revenue and operating expense cash 
flows since the outbreak of COVID-19. We also validated the 
terms of the revised bank facility and the proceeds from the 
placing which took place after the year end. Further we have 
assessed the availability of financial resources and the ability 
of the Group to absorb potential severe but plausible adverse 
circumstances over the going concern period.

We have read management’s disclosures in the financial 
statements and the related narrative disclosures within the ‘other 
information’ to confirm they are consistent with the financial 
statements and our knowledge based on our audit.

Overall, we consider management’s assessment of the impact 
of COVID-19 on the financial statements to be reasonable. Our 
conclusion in respect of going concern is stated below. 

40

LOUNGERS PLC ANNUAL REPORT 2020  GOVERNANCEINDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF LOUNGERS PLC
CONTINUED

Key audit matter

How our audit addressed the key audit matter

Impairment of property, plant and equipment

As noted above the effects of COVID-19 are 
unfolding across the UK economy and business. 
The effects of lockdown and social distancing 
restrictions on consumer behaviour has resulted in 
reduced footfall and therefore reduced revenue and 
profitability. This creates a risk of impairment of the 
carrying value of property, plant and equipment 
across the sites.

We have obtained management’s impairment review of 
property, plant and equipment, which has been performed at 
an individual site level, which indicated an impairment totalling 
£9.8 million in respect of a number of sites. This impairment 
has been recognised in the financial statements and included 
in the income statement as part of exceptional items. Given 
the nature and magnitude of the impairment, we considered 
the classification of the charge within exceptional items to be 
acceptable, alongside other exceptional items such as costs 
related to the IPO. 

We focussed on this area due to the carrying value 
of property, plant and equipment and the impairment 
risk noted above. At 19 April 2020, the group 
reported property, plant and equipment, with a 
carrying value of £166 million. 

In addition, following an impairment review 
performed by management, an impairment of 
property, plant and equipment of £9.8 million was 
recognised. Management’s impairment review 
involved the preparation of a discounted cash flow 
model, which include assumptions in relation to 
future trading results which required management 
judgement.

As part of our audit work, we validated the carrying amounts 
that were attributed to each site cash generating unit.

We assessed the assumptions used in determining the value in use 
of each site. This included engaging our valuation experts to confirm 
that the discount rate used in the calculations was reasonable.

We also assessed the revenue, profit and cash flow forecasts 
included in the value in use calculations, taking into account the 
improvement in actual results since the outbreak of COVID-19 
and after the balance sheet date. We also considered the 
results of a number of sensitivity scenarios in respect of forecast 
revenue, discount rate and long-term growth rate.

We tested the calculation in the value in use model to ensure 
that it appropriately determined the net present value of the 
future cashflows, and the resultant impairment amount.

We also considered the disclosures made in respect of the 
impairment review performed and the impairment charge 
recognised.

We concluded that whilst management’s impairment assessment 
is inherently judgemental, the accounting for the impairment 
of property, plant and equipment and related disclosures was 
acceptable and consistent with the audit evidence obtained. 

HOW WE TAILORED THE AUDIT SCOPE

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the 
financial statements as a whole, taking into account the structure of the group, the accounting processes and controls, 
and the industry in which it operates.

The group consists of five holding companies and one trading company, with the accounting function of all entities based 
in the head office in Bristol. All entities are audited by PricewaterhouseCoopers LLP, Bristol.

Following our assessment of the risk of material misstatement we selected the parent company, Loungers plc, and the trading 
company, Loungers UK Limited, for full scope audits and performed specified audit procedures over certain balances and 
transactions in the four intermediate holding companies. Taken together, these reporting entities where we performed audit 
work accounted for approximately 100% of group revenue and in excess of 95% of group loss before tax.

41

GOVERNANCE  LOUNGERS PLC ANNUAL REPORT 2020INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF LOUNGERS PLC
CONTINUED

MATERIALITY

The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for 
materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the 
nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in 
evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole. 

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Overall group materiality

£1,665,000.

How we determined it

1% of revenue.

Rationale for benchmark 
applied

As the group has performed close to break-even at the loss before tax level 
before exceptional items, using 1% of revenue is considered to be the most 
appropriate benchmark.

For each component in the scope of our group audit, we allocated a materiality that is less than our overall group 
materiality. The range of materiality allocated across components was between £576,000 and £1,581,000. Certain 
components were audited to a local statutory audit materiality that was also less than our overall group materiality.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above 
£83,000 as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

CONCLUSIONS RELATING TO GOING CONCERN

We have nothing to report in respect of the following matters in relation to which ISAs (UK) require us to report to you 
where: 

 the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not 
appropriate; or 

 the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant 
doubt about the group’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve 
months from the date when the financial statements are authorised for issue.

However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the group’s 
ability to continue as a going concern. 

REPORTING ON OTHER INFORMATION 

The other information comprises all of the information in the Annual Report other than the financial statements and our 
auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial statements 
does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent 
otherwise explicitly stated in this report, any form of assurance thereon. 

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing 
so, consider whether the other information is materially inconsistent with the financial statements or our knowledge 
obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency 
or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of 
the financial statements or a material misstatement of the other information. If, based on the work we have performed, 
we conclude that there is a material misstatement of this other information, we are required to report that fact. We have 
nothing to report based on these responsibilities.

With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the 
UK Companies Act 2006 have been included.

Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK) require us 
also to report certain opinions and matters as described below.

42

LOUNGERS PLC ANNUAL REPORT 2020  GOVERNANCE 
 
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF LOUNGERS PLC
CONTINUED

STRATEGIC REPORT AND DIRECTORS’ REPORT

In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and 
Directors’ Report for the period ended 19 April 2020 is consistent with the financial statements and has been prepared in 
accordance with applicable legal requirements. 

In light of the knowledge and understanding of the group and its environment obtained in the course of the audit, we did 
not identify any material misstatements in the Strategic Report and Directors’ Report. 

RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND THE AUDIT

RESPONSIBILITIES OF THE DIRECTORS FOR THE FINANCIAL STATEMENTS

As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of 
the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair 
view. The directors are also responsible for such internal control as they determine is necessary to enable the preparation 
of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the group’s ability to continue as a going 
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless 
the directors either intend to liquidate the group or to cease operations, or have no realistic alternative but to do so.

AUDITORS’ RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from 
material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. 
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with 
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are 
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic 
decisions of users taken on the basis of these financial statements. 

A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: 
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.

USE OF THIS REPORT

This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance 
with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, 
accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose 
hands it may come save where expressly agreed by our prior consent in writing.

OTHER REQUIRED REPORTING

COMPANIES ACT 2006 EXCEPTION REPORTING

Under the Companies Act 2006 we are required to report to you if, in our opinion:

 we have not received all the information and explanations we require for our audit;

 certain disclosures of directors’ remuneration specified by law are not made.

We have no exceptions to report arising from this responsibility. 

OTHER MATTER

We have reported separately on the company financial statements of Loungers plc for the 55 week period ended 19 April 
2020.

Colin Bates 
for and on behalf of PricewaterhouseCoopers LLP, Chartered Accountants, Bristol
16 September 2020

43

GOVERNANCE  LOUNGERS PLC ANNUAL REPORT 2020 
 
Financial Statements

44

CONSOLIDATED STATEMENT OF 
COMPREHENSIVE INCOME
FOR THE 52 WEEK YEAR ENDED 19 APRIL 2020

Revenue

Cost of sales

Gross profit

Gross profit before exceptional items

Exceptional items included in cost of sales

Administrative expenses

Operating (loss) / profit

Operating profit before exceptional items

Exceptional items included in cost of sales

Exceptional items included in administrative expenses

Finance income

Finance costs

Finance costs before exceptional items

Exceptional finance cost

Loss before taxation

Tax credit / (charge) on loss

Loss for the year

Other comprehensive expense: 
Items that may be reclassified to profit or loss

Cash flow hedge – change in value of hedging instrument

Other comprehensive expense for the year

Total comprehensive expense for the year

Earnings per share

Basic earnings / (losses) per share

Diluted earnings / (losses) per share

Year ended 
19 April 2020

£000

166,502

(98,523)

67,979

68,882

(903)

(74,695)

(6,716)

8,620

(903)

(14,433)

50

(8,115)

(6,668)

(1,447)

(14,781)

1,960

(12,821)

(332)

(332)

(13,153)

Year ended
21 April 2019
Restated*
£000

152,999

(89,485)

63,514

63,514

-

(50,811)

12,703

13,165

-

(462)

54

(19,457)

(19,457)

-

(6,700)

(460)

(7,160)

(333)

(333)

(7,493)

Year ended 
19 April 2020
Pence

Year ended
21 April 2019
Pence

(14.0)

(14.0)

(37.5)

(37.5)

Note

4

9

5

9

9

7

7

8

Note

10

10

*See note 31 for details regarding the restatement as a result of the adoption of IFRS 16. 

The accompanying notes form an integral part of these consolidated financial statements.

45

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2020CONSOLIDATED STATEMENT OF 
FINANCIAL POSITION
AS AT 19 APRIL 2020

At 19 April 2020

Note

£000

At 21 April 2019
Restated*
£000

At 22 April 2018
Restated*
£000

Assets

Non-current 

Intangible assets

Property, plant and equipment

Deferred tax assets

Finance lease receivable

Total non-current assets

Current

Inventories

Trade and other receivables

Derivative financial instruments

Cash and cash equivalents

Total current assets

Total assets

Liabilities

Current liabilities

Trade and other payables

Lease liabilities

Derivative financial instruments

Total current liabilities

Non-current liabilities

Borrowings

Lease liabilities

Deferred tax liabilities

Total liabilities

Net assets / (liabilities)

Called up share capital

Share premium

Hedge reserve

Other reserve

Retained earnings / (accumulated losses)

Total equity

11

12

20

14

13

14

15

16

17

19

18

17

20

22

23

23

23

23

113,227

166,447

236

752

113,227

149,261

-

831

113,227

121,256

-

907

280,662

263,319

235,390

815

6,850

-

4,083

11,748

292,410

(34,118)

(6,160)

(332)

(40,610)

(39,039)

(98,779)

-

(178,428)

113,982

1,025

-

(332)

14,278

99,011

113,982

1,500

4,883

-

6,500

12,883

276,202

(32,440)

(4,946)

(10)

(37,396)

(172,112)

(84,192)

(1,594)

(295,294)

(19,092)

53

4,184

(10)

51

(23,370)

(19,092)

1,065

4,139

323

7,669

13,196

248,586

(27,715)

(3,759)

-

(31,474)

(157,368)

(69,405)

(2,001)

(260,248)

(11,662)

53

4,172

323

-

(16,210)

(11,662)

*See note 31 for details regarding the restatement as a result of the adoption of IFRS 16.

The financial statements on pages 45 to 76 were approved and authorised for issue by the Board and were signed on its behalf by:

Nick Collins  

Gregor Grant

Chief Executive Officer 

Chief Financial Officer

16 September 2020 

16 September 2020

46

LOUNGERS PLC ANNUAL REPORT 2020  FINANCIAL STATEMENTSCONSOLIDATED STATEMENT OF 
CHANGES IN EQUITY
FOR THE 52 WEEK YEAR ENDED 19 APRIL 2020

Called up
 share capital
£000

Share 
premium
£000

Hedge 
reserve
£000

Other 
reserve
£000

(Accumulated 
losses)/
retained 
earnings
£000

Total 
equity
£000

At 22 April 2018  
(as previously reported)

IFRS 16 Transition

At 22 April 2018 restated

Share transactions during  
the 52 week year

Total transactions with owners

Loss for the year

Other comprehensive expense

Total comprehensive expense 
for the 52 week year

At 21 April 2019

Redeemable preference shares issued

Share for share exchange – ordinary 
shares

53

-

53

-

-

-

-

-

53

100

4,172

-

4,172

12

12

-

-

-

4,184

-

8,408

(4,184)

Preference debt for equity swap

66,193

Ordinary shares issued

Ordinary shares issued on IPO

3

308

-

-

61,288

Capital reduction

(74,040)

(61,288)

Share based payment charge

Total transactions with owners

Loss for the year

Other comprehensive expense

Total comprehensive expense 
for the 52 week year

At 19 April 2020

-

972

-

-

-

1,025

-

(4,184)

-

-

-

-

323

-

323

-

-

-

(333)

(333)

(10)

-

-

-

-

-

-

-

-

-

(322)

(322)

(332)

-

-

-

51

51

-

-

-

51

-

(4,224)

18,451

-

-

-

-

(13,945)

(9,397)

(2,265)

(2,265)

(16,210)

(11,662)

-

-

(7,160)

-

63

63

(7,160)

(333)

(7,160)

(7,493)

(23,370)

(19,092)

-

-

-

-

100

-

84,644

3

(3,655)

57,941

135,328

-

3,539

3,539

14,227

135,212

146,227

-

-

-

(12,821)

(12,821)

(10)

(332)

(12,831)

(13,153)

14,278

99,011

113,982

47

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2020CONSOLIDATED STATEMENT OF 
CASH FLOWS
FOR THE 52 WEEK YEAR ENDED 19 APRIL 2020

Net cash generated from operating activities

Note

24

Cash flows from investing activities

Purchase of property, plant and equipment

Disposal of property, plant and equipment

Net cash used in investing activities

Cash flows from financing activities

Issue of ordinary shares

Capital contribution

Bank loans advanced

Bank loans repaid

Repayment of other loans

Interest paid

Principal element of lease payments

Interest paid on lease liabilities

Principal element of lease receivables

Net cash used in financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of the year

Cash and cash equivalents at end of the year

25

*See note 31 for details regarding the restatement as a result of the adoption of IFRS 16.

Year ended 
19 April 2020

£000

24,397

(23,058)

10

(23,048)

57,941

-

38,924

(71,000)

(17,950)

(1,099)

(5,228)

(5,478)

124

(3,766)

(2,417)

6,500

4,083

Year ended
21 April 2019
Restated*
£000

28,287

(21,162)

-

(21,162)

12

51

6,000

(2,000)

-

(4,066)

(3,744)

(4,668)

121

(8,294)

(1,169)

7,669

6,500

48

LOUNGERS PLC ANNUAL REPORT 2020  FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED  
FINANCIAL STATEMENTS
FOR THE 52 WEEK YEAR ENDED 19 APRIL 2020

1.  GENERAL INFORMATION

Loungers plc (“the company”) and its subsidiaries (“the Group”) operate café bars and café restaurants through two complementary 
brands, Lounge and Cosy Club.

The Company is a public company limited by shares whose shares are publicly traded on the Alternative Investment Market (“AIM”) of 
the London Stock Exchange and is incorporated in the United Kingdom and registered in England and Wales.

The registered address of the Company is 26 Baldwin Street, Bristol, United Kingdom, BS1 1SE.

2.  ACCOUNTING POLICIES

2.1  BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The consolidated financial statements of the Loungers plc Group have been prepared in accordance with International Financial 
Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRS IC) interpretations as adopted by the European Union applicable 
to companies reporting under IFRS.

The Company was incorporated on 28 March 2019 as the vehicle for the purposes of achieving admission to trading on the AIM 
market of the London Stock Exchange (“Admission”) and the Company had no significant transactions prior to Admission on 29 April 
2019. The Company acquired the entire share capital of Lion/Jenga Topco Limited on 24 April 2019 in a share for share exchange. 
The introduction of the Company into the Group has been accounted for as a capital reorganisation. In doing so the comparatives for 
the 52 weeks ended 21 April 2019 have been presented as if the Group had always existed in its current form.

The accounting policies adopted in the preparation of the Financial Statements are consistent with those applied in the preparation of 
the Lion/Jenga Topco consolidated financial statements for the year ended 21 April 2019, except for the adoption of IFRS 16 effective 
as of 1 January 2019. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is 
not yet effective.

The financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial liabilities 
(including derivatives) at fair value through profit and loss. The financial statements are presented in thousands of pounds sterling 
(‘£000’) except where otherwise indicated.

The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. The policies 
have been consistently applied to all years presented, unless otherwise stated.

Judgements made by the Directors in the application of the accounting policies that have a significant effect on the consolidated financial 
statements and estimates with significant risk of material adjustment in the next year are discussed in note 3.

2.2  GOING CONCERN

In concluding that it is appropriate to prepare the FY20 financial statements on the going concern basis the Directors have considered 
the Group’s cash flows, liquidity and business activities. Particular attention has been paid to the impact of Covid-19 on the business, 
both experienced to date and potentially foreseeable in the future.

As at 19 April the Group had cash balances of £4.1m and undrawn facilities of £3.0m. On 22 April 2019 the Group raised gross 
proceeds of £8.3m through the issue of 9,250,000 ordinary shares and agreed an additional £15m revolving credit facility with its 
bankers, providing total liquidity of £30.2m.

Based on the Group’s forecasts, the Directors have adopted the going concern basis in preparing the Financial Statements. The Directors 
have made this assessment after consideration of the Group’s cash flows and related assumptions and in accordance with the Guidance 
on Risk Management, Internal Control and Related Financial and Business Reporting 2014 published by the UK Financial Reporting 
Council.

In making this assessment the Directors have made a current consideration of the potential impact of the Covid-19 pandemic on the cash 
flows and liquidity of the Group over the next 12 month period. This assessment has considered:

• 

 Measures put in place during lockdown to preserve and to increase liquidity

• 

 The impact of Government measure to support industry, and in particular the hospitality industry. These measures include the 
Coronavirus Job Retention Scheme, the business rates holiday, the temporary VAT reduction to 5% on food and non-alcoholic 
drinks and the EOTHO Scheme

• 

 Initial trading during the period post the resumption of trading on 4 July 2020

49

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

The Group’s forecasts assume a level of like for like sales decline, resulting from the impact of Covid-19 on consumer behaviour, that 
exceeds that experienced in the period post re-opening (adjusted to exclude the positive impact of EOTHO).

The Directors have also considered a more severe downside set of assumptions. These include:

• 

• 

 The closure of 20 sites from early September through the remainder of FY21 to reflect the potential impact of a series of regional 
lockdowns

 The closure of an additional 20 sites through a 12 week period, covering November to January, to reflect the potential for more 
rigorous localized lockdowns over the Christmas trading period

• 

 Further increases in the level of LFL sales decline for the remainder of FY21

• 

 Continued LFL sales decline throughout FY22

The impact of these downside scenarios is to reduce expectations of Adjusted EBITDA by approximately 64% for FY21 and 61% for 
FY22 relative to Board expectations pre Covid-19. Under this downside scenario the Group is forecast to remain within its borrowing 
facilities and to be in compliance with its covenant obligations, and accordingly the Directors have concluded that it is appropriate to 
prepare the FY20 financial statements on the going concern basis.

2.3  BASIS OF CONSOLIDATION

A subsidiary is an entity controlled by the Group. Control is the power to govern the financial and operating policies of an entity to 
obtain benefits from its activities. Subsidiaries are fully consolidated from the date on which control is transferred to the Group.

All intra-Group transactions, balances, income and expenses are eliminated on consolidation.

2.4  ALTERNATIVE PERFORMANCE MEASURES (“APM’S”)

The Group has identified certain measures that it believes will assist the understanding of the performance of the business. These APMs 
are not defined or specified under the requirements of IFRS. 

The Group believes that these APMs, which are not considered to be a substitute for, or superior to, IFRS measures, provide 
stakeholders with additional useful information on the underlying trends, performance and position of the Group and are consistent with 
how business performance is measured internally. Adjusted EBITDA is also the measure used by the Group’s banks for the purposes of 
assessing covenant compliance. The APMs are not defined by IFRS and therefore may not be directly comparable with other companies’ 
alternative performance measures.

The key APMs that the Group uses include: Adjusted EBITDA, Adjusted operating profit, Adjusted profit before tax, and Adjusted profit 
after tax. These APMs are set out on pages 88 to 89 including explanations of how they are calculated and how they are reconciled to 
a statutory measure where relevant.

These measures exclude exceptional items and site pre-opening costs, as defined below, and non-cash share-based payment charges.

Exceptional items
The Group classifies certain one-off charges or credits that have a material impact on the Group’s financial results as ‘exceptional items’. 
These are disclosed separately to provide further understanding of the financial performance of the Group. Management splits out these 
costs for internal purposes when reviewing the business.

Site pre-opening costs
Site pre-opening costs refer to costs incurred in getting new sites fully operational, and primarily include costs incurred before opening 
and in preparing for launch. These costs are disclosed separately to provide a more accurate indication of the Group’s underlying 
financial position.

2.5  REVENUE

The Group has recognised revenue in accordance with IFRS 15. The standard requires revenue to be recognised when goods or 
services are transferred to customers and the entity has satisfied its performance obligations under the contract, and at an amount that 
reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. The Group has one revenue 
stream which comprises food and beverage sales at restaurants and therefore represents one performance obligation that is satisfied 
when control is transferred to the customer at the point of sale when payment is received and therefore no contract assets or contract 
liabilities are created.

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and provision of services in the 
ordinary course of the Group’s activities. Revenue is shown net of sales/value added tax, returns and discounts.

50

LOUNGERS PLC ANNUAL REPORT 2020  FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

2.6  FINANCE COSTS

Finance costs are charged to the Statement of Comprehensive Income over the term of the debt using the effective interest rate method 
so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the 
proceeds of the associated capital instrument.

2.7 

INTANGIBLE ASSETS GOODWILL

Goodwill represents the difference between amounts paid on the cost of a business combination and the acquirer’s interest in the fair 
value of the identifiable assets and liabilities of the acquiree at the date of acquisition. 

Goodwill is not subject to amortisation and is tested annually for impairment, or more frequently if events or changes in circumstances 
indicated that they may be impaired.

2.8  PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is stated at historical cost less accumulated depreciation and any accumulated impairment losses. 
Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be 
capable of operating in the manner intended by management.

Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line 
method.

Depreciation is provided on the following basis:

Leasehold building improvements

- straight-line over the life of the lease

Motor vehicles

Fixtures and fittings

- 25% straight-line

- 6.67% - 33% straight-line or over the life of the lease

The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is 
an indication of a significant change since the last reporting date.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the 
Consolidated Statement of Comprehensive Income.

2.9  RIGHT OF USE ASSETS

The Group recognises right-of-use assets at the commencement date of the lease. Right-of-use assets are measured at cost, less any 
accumulated depreciation and impairment losses and adjusted for any remeasurement of lease liabilities, for example resulting from rent 
reviews. The cost of right-of-use assets includes the amount of lease liabilities recognised, and lease payments made at or before the 
commencement date less any lease incentives received. Right-of-use assets are related to the property leases and are depreciated on a 
straight-line basis over the lease term.

2.10  INVENTORIES

Stocks are stated at the lower of cost and net realisable value, being the estimated selling price less costs to complete and sell. Cost is 
based on the cost of purchase on a first in, first out basis.

At each reporting date, stocks are assessed for impairment. If stock is impaired, the carrying amount is reduced to its selling price. The 
impairment loss is recognised immediately in profit or loss.

2.11  TRADE AND OTHER RECEIVABLES

Trade and other receivables are recognised initially at the amount of consideration that is unconditional, unless they contain significant 
financing components, when they are recognised at fair value. The Group holds the trade and other receivables with the objective of 
collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method. 

The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for 
all trade and other receivables.

To measure the expected credit losses, trade receivables and other assets are grouped based on shared credit risk characteristics and 
the days past due.

2.12  IMPAIRMENT

Goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicated that it might be impaired. 
Goodwill is not allocated to individual CGUs but to a group of CGUs. As the business has a single operating segment as disclosed in 

51

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

note 4, and goodwill is not disaggregated for internal management purposes, goodwill impairment testing is performed for the business 
as a whole, in accordance with IAS 36.

The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing 
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely 
independent of the cash inflows from other assets or groups of assets (cash-generating units).

Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be 
recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.

2.13  CASH AND CASH EQUIVALENTS

Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 
24 hours. Cash equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that 
are readily convertible to known amounts of cash with insignificant risk of change in value. Payments taken from customers on debit and 
credit cards are recognised as cash.

2.14  FINANCIAL INSTRUMENTS

The Group enters into basic financial instrument transactions that result in the recognition of financial assets and liabilities like trade and 
other debtors and creditors, and loans from banks and other third parties.

Debt instruments (other than those wholly repayable or receivable within one year), including loans and other accounts receivable 
and payable, are initially measured at the present value of the future cash flows and subsequently at amortised cost using the effective 
interest rate method. Debt instruments that are payable or receivable within one year, typically trade debtors and creditors, are 
measured, initially and subsequently, at the undiscounted amount of the cash or other consideration expected to be paid or received. 

Fees paid on the establishment of loan facilities are recognised as transactional costs of the loan and the fee is capitalised as a pre-
payment for liquidity services and amortised straight line over the period of the facility to which it relates.

Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting year for objective evidence of 
impairment. If objective evidence of impairment is found, an impairment loss is recognised in the Statement of Comprehensive Income.

Financial assets and liabilities are offset and the net amount reported in the Statement of Financial Position when there is an enforceable 
right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability 
simultaneously.

2.15  DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING

The Group uses interest rate swaps to hedge its exposure to interest rate fluctuations on its variable rate bank loans. Interest rate swaps 
are initially measured at fair value, if any, and carried on the balance sheet as an asset or liability. The Group has adopted cash flow 
hedge accounting and subsequent measurement is at fair value, with the effective portion of the gain or loss on an interest rate swap 
recognised in other comprehensive income, whilst any ineffective portion is recognised immediately in finance costs. When a hedging 
instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting, amounts previously recognised in 
other comprehensive income are held there until the previously hedged transaction affects the Statement of Comprehensive Income. 
If the hedged transaction is no longer expected to occur, the cumulative gain or loss recognised in other comprehensive income is 
immediately transferred to finance costs.

2.16  TRADE AND OTHER PAYABLES

Short-term creditors are recognised initially at fair value and subsequently measured at amortised cost using the effective interest 
method. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs, and are measured 
subsequently at amortised cost using the effective interest rate method.

2.17  LEASED ASSETS: THE GROUP AS LESSEE

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be 
made over the lease term. The lease payments include lease payments less any lease incentives receivable. In calculating the present 
value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate 
implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the 
accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there 
is a modification, for example a rent review or a change in the lease term.

52

LOUNGERS PLC ANNUAL REPORT 2020  FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

2.18  PENSIONS

The Group operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Group 
pays fixed contributions into a separate entity. Once the contributions have been paid the Group has no further payment obligations.

The contributions are recognised as an expense in the Consolidated Statement of Comprehensive Income when they fall due. Amounts 
not paid are shown in accruals as a liability in the Statement of Financial Position. The assets of the plan are held separately from the 
Group in independently administered funds.

2.19  PROVISIONS

Provisions are made where an event has taken place that gives the Group a legal or constructive obligation that probably requires 
settlement by a transfer of economic benefit, and a reliable estimate can be made of the amount of the obligation.

Provisions are charged as an expense to the Consolidated Statement of Comprehensive Income in the year that the Group becomes 
aware of the obligation, and are measured at the best estimate at the Statement of Financial Position date of the expenditure required to 
settle the obligation, taking into account relevant risks and uncertainties. When payments are eventually made, they are charged to the 
provision carried in the Statement of Financial Position.

Onerous contracts are contracts in which the unavoidable costs of meeting obligations under the contract exceed the economic benefits 
expected to be received under it, where the unavoidable costs are defined as the lower of the cost of fulfilling the contract and any 
compensation or penalties arising from failure to fulfil it. As soon as a contract is assessed to be onerous, a provision is recognised in the 
Balance Sheet and charged as an expense to the Statement of Comprehensive Income.

2.20  SHARE BASED PAYMENTS

Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at the grant date. The fair 
value excludes the effect of non-market-based vesting conditions. Details regarding the determination of the fair value of equity-settled 
share-based transactions are set out in note 21.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the 
vesting year, based on the Group’s estimate of equity instruments that will eventually vest. At each balance sheet date, the Group revises 
its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The 
impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised 
estimate, with a corresponding adjustment to equity reserve.

2.21  CURRENT AND DEFERRED TAXATION

The tax expense for each reporting year comprises current and deferred tax. Tax is recognised in the Consolidated Statement of 
Comprehensive Income, except that a charge attributable to an item of income and expense recognised as other comprehensive income 
or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.

The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the 
reporting date.

Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the Statement of 
Financial Position date, except that:

• 

 The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of 
deferred tax liabilities or other future taxable profits;

• 

 Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met; and

• 

 Where they relate to timing differences in respect of interests in subsidiaries, associates, branches and joint ventures and the Group 
can control the reversal of the timing differences and such reversal is not considered probable in the foreseeable future.

Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred 
tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the 
differences between the fair values of liabilities acquired and the amount that will be assessed for tax. Deferred tax is determined using 
tax rates and laws that have been enacted or substantively enacted by the reporting date.

Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and liabilities and where 
the deferred tax balances relate to the same tax authority. Current tax assets and tax liabilities are offset where the entity has a legally 
enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

53

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

2.22  RELATED PARTY TRANSACTIONS

The Group discloses transactions with related parties which are not wholly owned within the Group. Where appropriate, transactions 
of a similar nature are aggregated unless, in the opinion of the directors, separate disclosure is necessary to understand the effect of the 
transactions on the Group Financial Statements.

2.23  NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS ADOPTED

The Group has applied the same accounting policies and methods of computation in its Financial Statements as in the Lion/Jenga Topco 
2019 annual financial statements, with the following exception of the adoption of IFRS 16 Leases.

IFRS 16 supersedes IAS 17 and sets out the principles for the recognition, measurement, presentation and disclosure of leases and 
requires lessees to account for most leases under a single on-balance sheet model. The Group has adopted IFRS 16 using the fully 
retrospective method with the date of initial application being 23 April 2018.

In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard: 

• 

 the use of a single discount rate to a portfolio of leases with reasonably similar characteristics 

• 

 relying on previous assessment of whether a lease is onerous

• 

 the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application, and 

• 

 the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

Before the adoption of IFRS 16, the Group was required to assess and classify each of its leases at the inception date as either a finance 
lease or an operating lease. All leases have previously been classified as operating leases. In an operating lease, the leased asset was 
not capitalised, and the lease payments were recognised as rent expense in the income statement on a straight-line basis over the lease 
term. Any prepaid rent and accrued rent were recognised under Prepayments and Trade and other payables, respectively.

Under IFRS 16, the Group recognises right-of-use assets at the commencement date of the lease (i.e. the date the underlying asset is 
available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for 
any remeasurement of lease liabilities. Unless the Group is reasonably certain to obtain ownership of the leased assets at the end of 
the lease term, the recognised right-of-use assets are depreciated over the shorter of its estimated useful life and lease term. Right-of-use 
assets are subject to impairment testing.

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be 
made over the lease term. The lease payments include fixed payments less any lease incentives receivable.

In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date if the 
interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to 
reflect the accretion of interest and reduced for lease payments made. In addition, the carrying amount of lease liabilities is remeasured 
if there is a modification or a change in the lease term.

The Group applies the short-term lease recognition exemption to its short-term leases of equipment (i.e. those leases that have a lease 
term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value 
assets recognition exemption to leases that are considered of low value. Lease payments on short-term leases and leases of low-value 
assets are recognised as an expense on a straight-line basis over the lease term.

In accordance with the fully retrospective method of adoption, the Group applied IFRS 16 at the date of initial application as if it 
had already been effective at the commencement date of existing lease contracts. Accordingly, the comparative information in these 
consolidated financial statements has been restated, as summarised and set out in Note 31.

At the reporting date the Group has applied the practical relief available during the Covid-19 pandemic, which provides lessees with 
relief from applying lease modification accounting to Covid-19 related rent concessions.

There are no other new standards, amendments or interpretations not yet adopted by the Group that are expected to have a material 
impact on these consolidated financial statements.

3.  CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATION UNCERTAINTY

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of 
future events that are believed to be reasonable under the circumstances. 

54

LOUNGERS PLC ANNUAL REPORT 2020  FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have 
a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are 
addressed below:

KEY JUDGEMENTS

Operating Segments
The directors have taken a judgement that individual sites meet the aggregation criteria in IFRS 8 and hence have concluded that the 
Group only has a single reporting segment, as discussed in note 4.

Determining the rate used to discount lease payments
At the commencement date of property leases the lease liability is calculated by discounting the lease payments. The discount rate 
used should be the interest rate implicit in the lease. However, if that rate cannot be readily determined, which is generally the case for 
property leases, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow 
the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, 
security and conditions. The weighted average discount rate applied to those leases that pre-dated the Group’s IPO was 5.9%. Leases 
entered into post IPO have been discounted with a weighted average discount rate of 3.5%. For the lease liabilities at 19 April 2020 a 
0.1 per cent change in the discount rate used would have adjusted the total liabilities by £0.6 million.

KEY ESTIMATES

Impairment of property plant and equipment
Annually, the Group considers whether tangible assets are impaired. Where an indication of impairment is identified the estimation 
of recoverable value requires estimation of the recoverable value of the cash generating units (CGUs). This requires estimation of the 
future cash flows from the CGUs and also selection of appropriate discount rates in order to calculate the net present value of those 
cash flows. Individual sites are viewed as separate CGUs in respect of the impairment of property, plant and equipment. Details of the 
sensitivity of the estimates used in the impairment exercise are provided in note 12.

Useful economic lives of property, plant and equipment
The depreciation charge in each year is sensitive to the assumptions used regarding the economic lives of assets. A 10% increase in the 
average useful economic lives results in approximately a 9% decrease in depreciation.

Share-based payments
The charge for share based payments in respect of the Value Creation Plan is calculated in accordance with the methodology described 
in note 21. The model requires subjective assumptions to be made including the future volatility of the Company’s share price, expected 
dividend yield, and risk-free interest rates. Changes in such estimates may have a significant impact on the original fair value calculation 
at the date of grant and therefore the share based payments charge. A 5% change in the estimate regarding share price volatility results 
in a £600,000 change in the fair value of the Value Creation Plan.

4.  SEGMENTAL REPORTING

IFRS 8 “Operating Segments” requires operating segments to be based on the Group’s internal reporting to its Chief Operating Decision 
Maker (“CODM”). The CODM is regarded as the Chief Executive together with other Board Members who receive financial information 
at a site-by-site level. The Group trades in one business segment (operating café bars and café restaurants) and these sites meet the 
aggregation criteria set out in paragraph 12 of IFRS 8. Economic indicators assessed in determining that the aggregated operating 
segments share similar economic characteristics include expected future financial performance, operating and competitive risks and 
return on investment.

The CODM uses Adjusted EBITDA as the primary measure for assessing the Group’s results on an aggregated basis.

Revenue
Revenue arises from the sale of food and drink to customers in the Group’s sites for which payment in cash or cash equivalents is 
received immediately. The Group operates in a single geographical region (the UK) and hence all revenues are impacted by the same 
economic factors. Accordingly, revenue is presented as a single category and further disaggregation is not appropriate or necessary to 
gain an understanding of the risks facing the business.

55

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

5.  OPERATING PROFIT

The operating profit is stated after charging / (crediting):

Depreciation of tangible fixed assets

Depreciation of right of use assets

Inventories - amounts charged as an expense

Auditors’ remuneration

-  for statutory audit services

-  for other assurance services

-  for tax compliance services

-  for tax advisory services

Staff costs (excluding share based payments)

Pre- opening costs

Exceptional costs

Year ended 
19 April 2020

£000

9,630

7,177

40,876

94

-

48

351

65,143

2,220

15,336

Year ended
21 April 2019
Restated
£000

7,852

5,694

38,968

80

75

24

28

57,377

1,904

462

Note

12

12

9

The Group incurred further costs of £502,000 (2019: £nil) with the auditors in connection with the IPO, these costs have been charged 
directly to reserves as they related to the raising of equity.

6.  EMPLOYEES AND DIRECTORS

The average monthly number of employees, including the directors, during the year was as follows:

Management, administration and maintenance

Site

Staff costs were as follows:

Wages and salaries

Social security costs

Share based payments

Other pension costs

Year ended 
19 April 2020
Number

Year ended
21 April 2019
Number

142

4,336

4,478

132

3,524

3,656

Year ended 
19 April 2020
£000

Year ended
21 April 2019
£000

60,966

4,285

4,026

802

70,079

53,443

3,397

(87)

537

57,290

Additional payroll costs of £1,551,000 (2019: £1,517,000) relating to the build team have been capitalised.

Wages and salaries include IPO related employee bonus payments of £910,000 (2019: £nil) which have been treated as exceptional 
costs.

Share based payment costs include an IPO related share based payment charge of £2,901,000 (2019: £nil) which has been treated 
as an exceptional cost.

56

LOUNGERS PLC ANNUAL REPORT 2020  FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

The key management personnel are considered to be the Directors of the Company and details of their 
remuneration are disclosed below.

The following table shows a breakdown of the remuneration of individual Directors who served in all or part of the year.

  Salary / Fees

  Annual Bonus

  IPO Cash Bonus(2)

  IPO Share  
  Award(2)

Total

2020 
£000

2019 
£000

2020 
£000

2019 
£000

2020 
£000

2019 
£000

2020 
£000

2019 
£000

2020 
£000

2019 
£000

Alex Reilley

Nick Collins

Gregor Grant (1)

Nick Backhouse

Adam Bellamy

Jill Little

Robert Darwent

James Cocker

96

273

158

58

52

52

-

-

95

151

110

-

-

-

-

-

Total

689

356

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

20

200

50

-

-

-

-

-

270

-

-

-

-

-

-

-

-

-

-

1,259

100

-

1,359

-

-

-

-

-

-

-

-

-

116

1,732

308

58

52

52

-

-

95

151

110

-

-

-

-

-

2,318

356

(1) Gregor Grant’s 2019 remuneration reflects his remuneration from the 1 August 2018, the date on which he joined the Group.

(2) The IPO cash and share awards were made in recognition of the Group’s successful IPO on 29 April 2019.

Further information in respect of Directors’ remuneration is provided in the Remuneration Committee Report on pages 30 to 32.

7.  FINANCE COSTS

Bank interest payable

Finance cost on lease liabilities

Other loan interest payable

Preference share interest

Exceptional write off of loan arrangement fees

Year ended 
19 April 2020

£000

1,155

5,478

18

17

1,447

8,115

Year ended
21 April 2019
Restated
£000

4,327

4,671

2,058

8,401

-

19,457

The Group’s IPO included a re-financing of the Group’s bank debt.  This re-financing necessitated the write off of loan arrangement fees 
incurred in the Group’s May 2017 financing. This was a non-cash charge.

57

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

8.  TAX (CREDIT) / CHARGE ON LOSS

The income tax (credit) / charge is applicable on the Group’s operations in the UK.

Year ended 
19 April 2020

£000

-

(130)

(130)

(1,940)

-

110

(1,830)

(1,960)

(1,940)

(20)

(1,960)

Year ended 
19 April 2020

£000

(14,781)

(2,808)

3

545

661

183

(524)

(130)

110

(1,960)

Year ended
21 April 2019
Restated
£000

918

(51)

867

(420)

8

5

(407)

460

498

(38)

460

Year ended
21 April 2019
Restated
£000

(6,700)

(1,273)

1,596

-

404

(229)

-

(43)

5

460

Taxation (credited) / charged to the income statement

Current income taxation

Adjustments for current tax of prior periods

Total current income taxation

Deferred Taxation

Origination and reversal of temporary timing differences

Current year

Prior year

Adjustment in respect of change of rate of corporation tax

Total deferred tax

Total taxation (credit) / expense in the consolidated  
income statement

The above is disclosed as:

Income tax (credit) / expense - current year

Income tax credit – prior year

Further information on the movement on deferred taxation is given in note 20.

Factors affecting the tax charge for the year

Loss before tax

At UK standard rate of corporation taxation of 19% (2019: 19%).

Expenses not deductible for tax purposes

 - Preference share interest

 - Share based payments

 - Other

Fixed asset differences

Movement in unrecognised deferred tax

Adjustments to tax charge in respect of prior years

Adjustment in respect of change of rate of corporation tax

Total tax (credit) / charge for the year

58

LOUNGERS PLC ANNUAL REPORT 2020  FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

9.  EXCEPTIONAL ITEMS

Included in cost of sales

 Covid-19 related

Included in administrative expenses

 Change of ownership

 IPO Related share-based awards

 Impairment of property, plant and equipment

 Head office relocation

Year ended 
19 April 2020

£000

903

1,528

2,901

9,829

175

15,336

Year ended
21 April 2019
Restated
£000

-

462

-

-

-

462

The Covid-19 related costs are in respect of the write-off of food and drink inventories resulting from the forced closure of all sites on 
20 March 2020.

The change of ownership costs in the year ended 19 April 2020 relate to costs incurred in the IPO of the business which completed on 
29 April 2019. These costs include employee bonuses and professional fees. The costs incurred in the year to 21 April 2019 relate to 
costs incurred in the preparation for the IPO of the business.

The IPO Related share-based award charge relates to awards made to 485 employees where the shares vested either at IPO or on first 
the anniversary of the IPO.

The impairment charge in respect of property, plant and equipment, and the calculation methodology is set out in note 12. The impairment 
charge is deemed to be exceptional due both to its link to the Covid-19 impacted trading environment and to its magnitude.

10. EARNINGS PER SHARE

Basic (losses) / earnings per share is calculated by dividing the profit attributable to equity shareholders by the weighted average 
number of shares outstanding during the year, excluding unvested shares held pursuant to the following long-term incentive plans:

• 

Loungers plc Employee Share Plan

• 

Loungers plc Senior Management Restricted Share Plan

• 

Loungers plc Value Creation Plan

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion 
of all dilutive potential ordinary shares. During the year ended 19 April 2020 the Group had potentially dilutive shares in the form of 
unvested shares pursuant to the above long-term incentive plans.

Loss for the year after tax

Basic weighted average number of shares

Adjusted for share awards

Diluted weighted average number of shares

Basic losses per share (p)

Diluted losses per share (p)

Year ended 
19 April 2020

£000

(12,821)

91,786,283

1,734,508

93,520,791

(14.0)

(14.0)

Year ended
21 April 2019
Restated
£000

(7,160)

19,110,695

-

19,110,695

(37.5)

(37.5)

The share awards are not considered to be dilutive as they would have the impact of reducing the losses per share.

59

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

Adjusted earnings/(losses) per share is based on profit for the year before exceptional items and the associated tax effect.

Loss for the year before tax

Exceptional items

Exceptional write off of loan arrangement fees

Adjusted profit / (loss) for the year before tax

Tax credit / (charge)

Tax effect of exceptional items

Adjusted profit / (loss) for the year after tax

Basic adjusted earnings / (losses) per share (p)

Diluted adjusted earnings / (losses) per share (p)

11. INTANGIBLE ASSETS

Goodwill

Year ended 
19 April 2020

£000

(14,781)

15,336

1,447

2,002

1,960

(1,719)

2,243

2.4

2.4

Year ended
21 April 2019
Restated
£000

(6,700)

462

-

(6,238)

(460)

(69)

(6,767)

(35.4)

(35.4)

Year ended 
19 April 2020
£000

113,227

113,227

Year ended
21 April 2019
£000

113,227

113,227

Goodwill of £113,227,000 arose on the acquisition of a majority stake in the Group by Lion Capital LLP on 19 December 2016.

Goodwill is not amortised, but an impairment test is performed annually by comparing the carrying amount of the goodwill to its 
recoverable amount. The recoverable amount is represented by the greater of the business’s fair value less costs of disposal and its 
value in use.

Goodwill is monitored at the operating segment level identified in note 4. For assessing impairment at 21 April 2019 and 19 April 2020 
a value in use calculation has been performed using a discounted cash flow method based on the forecast cash flows, a CGU specific 
discount rate and a terminal growth rate. The cash flows used in this assessment are based on a three year business plan to April 2023, 
the cash flows include ongoing capital expenditure required to maintain the sites but exclude any growth capital. The discount rate used 
to determine the present value of projected future cash flows is based on the Group’s Weighted Average Cost of Capital (“WACC”) 
and the Group’s current view of achievable long-term growth. The pre-tax discount rate and terminal growth rate used in the discounted 
cash flow model were 8.0% and 2.0% respectively.

The estimation of value in use involves significant judgement in the determination of inputs to the discounted cash flow model and is most 
sensitive to changes in future cash flows, discount rates and terminal growth rates applied to cash flows beyond the forecast year. The 
sensitivity of key inputs and assumptions used was tested by recalculating the recoverable amount using reasonably possible variances 
to those assumptions. The discount rate was increased by 1%, the terminal growth rate was decreased by 1%, and future cash flows 
were reduced by 10%. As at 19 April 2020, no reasonably possible change in an individual key input or assumption, as described, 
would result in the carrying amount exceeding its recoverable amount based on value in use.

60

LOUNGERS PLC ANNUAL REPORT 2020  FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

12. PROPERTY, PLANT AND EQUIPMENT

Leasehold
 Building
 Improvements
£000

Motor
 Vehicles
£000

Fixtures and
Fitting
£000

Right of 
use asset
£000

Cost

At 23 April 2018 (as previously reported)

Adoption of IFRS 16

At 23 April 2018 (as restated)

Additions

Disposals

At 21 April 2019

Accumulated depreciation

At 23 April 2018 (as previously reported)

Adoption of IFRS 16

At 23 April 2018 (as restated)

Provided for the year

Disposals

At 21 April 2019

Net book value

At 21 April 2019

Cost

At 22 April 2019

Additions

Disposals

At 19 April 2020

Accumulated depreciation

At 22 April 2019

Provided for the year

Impairment

Disposals

At 19 April 2020

Net book value

At 19 April 2020

39,413

(3,859)

35,554

9,660

(287)

44,927

3,348

(535)

2,813

2,672

(286)

5,199

104

-

104

37

(58)

83

29

-

29

27

(56)

-

Total
£000

67,684

77,139

144,823

41,660

(878)

28,167

-

28,167

12,106

(312)

-

80,998

80,998

19,857

(221)

39,961

100,634

185,605

5,301

-

5,301

5,153

(303)

10,151

-

15,424

15,424

5,694

(124)

20,994

8,678

14,889

23,567

13,546

(769)

36,344

39,728

83

29,810

79,640

149,261

44,927

9,571

-

54,498

5,199

3,160

2,166

10,525

83

10

(12)

81

-

34

-

(12)

22

39,961

13,217

(31)

100,634

21,029

185,605

43,827

(183)

(226)

53,147

121,480

229,206

10,151

6,436

400

(26)

20,994

7,177

7,263

(183)

16,961

35,251

36,344

16,807

9,829

(221)

62,759

43,973

59

36,186

86,229

166,447

Impairment of property, plant and equipment and right of use assets
The Group has determined that each site is a separate CGU for impairment testing purposes. Each CGU is tested for impairment at 
the balance sheet date if there exists at that date any indicators of impairment. The Covid-19 pandemic and the associated national 
lockdown introduced on 20 March 2020 are considered an indicator of potential impairment, accordingly all sites have been tested for 
impairment.

The value in use of each CGU is calculated based upon the Group’s latest three-year forecast, incorporating the impact of the Covid-19 
lockdown and assumptions concerning the rate at which site level cash flows will recover. The site cash flows include an allocation of 
central costs and ongoing capital expenditure to maintain the sites. The cash flows exclude any growth capital. Cash flows beyond the 
three-year period are extrapolated using the Group’s estimate of the long-term growth rate, currently 2.0%.

61

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

The key assumptions in the value in use calculations are the like for like sales projections for each site, changes in the operating cost 
base, the long-term growth rate and the pre-tax discount rate. The post-tax discount rate is derived from the Group’s WACC and is 
currently 8.0%.

During the year the Group has recognised an impairment of charge of £9,829,000 (2019: £nil). The cash flows used within the 
impairment model are based upon assumptions which are sources of estimation uncertainty. Management has performed sensitivity 
analysis on the key assumptions in the impairment model using reasonably possible changes in the key assumptions. A reduction in site 
cash flows of 10% in each year would result in an increase in the impairment charge of £797,000. A 100 basis point increase in the 
discount rate would result in an increase in the impairment charge of £1,354,000 and a 50 basis point reduction in the terminal growth 
rate would result in an increase in the impairment charge of £438,000.

13. INVENTORIES

Food and beverages for resale

19 April 2020
£000

21 April 2019
£000

815

815

1,500

1,500

There is no material difference between the replacement cost of inventories and the amounts stated above.

Inventories are charged to cost of sales in the consolidated statement of comprehensive income.

14. TRADE AND OTHER RECEIVABLES

Included within current assets

Trade receivables

Corporation tax recoverable

Finance lease receivable

Other receivables

Prepayments

Included within current assets

Finance lease receivable

Receivables are denominated in sterling.

19 April 2020

£000

661

1,126

80

4,575

408

6,850

752

21 April 2019
Restated
£000

78

-

75

310

4,420

4,883

831

The Group held no collateral against these receivables at the balance sheet dates. The Directors consider that the carrying amount of 
receivables are recoverable in full and that any expected credit losses are immaterial.

At each year end, there were no overdue receivable balances.

15. CASH AND CASH EQUIVALENTS

Cash at bank and in hand

19 April 2020
£000

21 April 2019
£000

4,083

4,083

6,500

6,500

Cash and cash equivalents comprise cash at bank and in hand. The fair value of cash and cash equivalents is the same as the carrying 
value of £4,083,000 (21 April 2019: £6,500,000).

62

LOUNGERS PLC ANNUAL REPORT 2020  FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

16. TRADE AND OTHER PAYABLES

Included in current liabilities:

Trade payables

Corporation tax

Other taxation and social security

Other payables

Accruals and deferred income

19 April 2020

£000

16,891

-

7,179

5,579

4,469

34,118

21 April 2019
Restated
£000

16,703

294

5,970

5,698

3,775

32,440

Trade payables were all denominated in sterling and comprise amounts outstanding for trade purchases and ongoing costs and are 
non-interest bearing.

The Directors consider that the carrying amount of trade payables approximate to their fair value.

17.  LEASES

This note provides information for leases where the Group is the lessee.

The Group leases the entire Lounge and Cosy Club estates as well as its Head Office. The leases are non-cancellable operating leases 
with varying terms, escalation clauses and renewal rights and in some cases include variable payments that are not fixed in amount but 
based upon a percentage of sales. Rental contracts are typically made for fixed years of between 10 and 25 years, the average lease 
runs for 16.1 years from commencement.

Prior to the adoption of IFRS 16 leases of property, plant and equipment were classified as either finance leases or operating leases. 
From 23 April 2018, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is 
available for use by the Group. For adjustments recognised on adoption of IFRS 16 on 23 April 2018, please refer to note 31.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of 
the following lease payments: 

• 

fixed payments (including in-substance fixed payments), less any lease incentives receivable, and

• 

 variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the 
commencement date

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is 
generally the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the Group would have 
to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with 
similar terms, security and conditions.

Amounts recognised in the balance sheet

Right of use assets – leasehold properties

Lease liabilities

Current

Non-current

19 April 2020
£000

21 April 2019
£000

86,229

79,640

6,160

98,779

104,939

4,946

84,192

89,138

Additions to right of use assets during the year ended 19 April 2020 were £21,029,000 (2019: £19,857,000).

A maturity analysis of gross lease liability payments is included within Note 19.

63

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

Amounts recognised in the consolidated statement of comprehensive income

Depreciation charge of right of use assets

Impairment charge of right of use assets

Interest expense (included in finance cost)

Total cash outflow for leases in 2020 was £10,706,000 (2019: £8,412,000). 

18. BORROWINGS

Long term borrowings:

Secured bank loans

Loan arrangement fees

Loans from related parties

Preference shares

19 April 2020
£000

21 April 2019
£000

7,177

7,263

5,478

5,694

-

4,671

19 April 2020
£000

21 April 2019
£000

39,500

(461)

-

-

71,000

(1,447)

17,932

84,627

39,039

172,112

As part of the IPO process, a share for share exchange saw the preference shares and accrued dividends in Lion/Jenga Topco 
(21 April 2019: £84,627,000) reclassified as ordinary shares in Loungers plc. Net proceeds of £57,941,000 raised from the IPO and 
a new term loan facility of £32,500,000 were utilised to repay outstanding loan stock (21 April 2019: £17,932,000) and bank debt 
(21 April 2019: £71,000,000).

Secured bank loans
The Group’s bank borrowings are secured by way of fixed and floating charges over the Group’s assets.

The facilities entered into at the time of the IPO provide for a term loan of £32,500,000 and a revolving credit facility (“RCF”) of 
£10,000,000. The term loan is a five-year non-amortising facility with a margin of 2% above LIBOR. A three-year interest rate swap has 
been entered into that fixes LIBOR on the full term loan facility at 0.7%.

The term loan and RCF are subject to financial covenants relating to leverage and interest cover. The Group has been in compliance 
with all of the covenants during the periods under review.

At 19 April 2020 the term loan was fully drawn and £7,000,000 had been drawn down under the revolving credit facility.

Prior to the IPO the Group’s financing facilities included a £60,000,000 term loan, a £15,000,000 capex facility to assist in funding the 
Group’s expansion programme and a £5,000,000 revolving credit facility to cover working capital and liquidity commitments. At 21 
April 2019 the term loan was fully drawn, £11,000,000 was drawn under the capex facility and £nil under the revolving credit facility. 

Loans from related parties
The Group issued investor loan notes (“ILNs”) with a value of £25,000,000 in December 2016. These ILNs were unsecured 13% 
fixed rate PIK loan notes. At 21 April 2019, ILNs with a principal value of £13,454,000 and accrued interest of £4,478,000 were 
outstanding. These loan notes and accrued interest were repaid as part of the IPO process.

Preference shares
The preference shares consisted of two classes of share, the P1 preference shares and the P2 preference shares. The P1 preference 
shares did not carry voting rights. They carried the entitlement to an annual dividend of 10.9%. On a return of capital (including on 
winding up) they ranked ahead of the A, B, C and D ordinary shares but behind the P2 preference shares. The shares were cumulative 
and were redeemable in certain circumstances or on maturity in December 2026.

The P2 preference shares did not carry voting rights. They carried the entitlement to an annual dividend of 13.0%. On a return of capital 
(including on winding up) they ranked ahead of the A, B, C and D ordinary shares and the P1 preference shares. The shares were 
cumulative and were redeemable in certain circumstances or on maturity in December 2026.

The P1 and P2 preference shares and accrued dividends were reclassified as ordinary shares in Loungers plc as part of the IPO process.

64

LOUNGERS PLC ANNUAL REPORT 2020  FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

19. FINANCIAL INSTRUMENTS

The Group is exposed to the risks that arise from its use of financial instruments. Derivative instruments may be transacted solely for risk 
management purposes. The management consider that the key financial risk factors of the business are liquidity risks, interest rate risk 
and market risks. The Group operates solely within the UK and therefore has limited exposure to foreign exchange risk. The Group’s 
exposure to credit risk is limited due to insignificant receivables balances.

The Group enters into interest rate swap transactions, which create derivative assets and liabilities, their purpose being to manage the 
interest rate risk arising from the Group’s borrowings.

This note describes the objectives, policies and processes of the Group for managing those risks and the methods used to measure them.

Interest rate risk
The Group’s exposure to the variable interest element of its term loan is fully hedged by an interest rate swap.

Commodity price risk
The Group is exposed to movements in the wholesale prices of foods and drinks. Although the Group sources a majority of products in 
the UK, there is a risk that Brexit will cause a significant increase in wholesale food and drink prices. Prices are typically fixed for years 
of 3-6 months to address seasonality, with suppliers hedging foreign exchange risk across these years. The Group benchmarks and 
verifies any potential cost changes from suppliers and also has the ability to flex its menu items to mitigate specific product related cost 
pressures.

Liquidity risk
The Group’s primary objective is to ensure that it has sufficient funds available to meet its financial obligations as they fall due. The 
Covid-19 pandemic and the lockdown period that ensued significantly raised the potential liquidity risk. This increased risk was 
addressed through the raising of an additional £8.1m (net)  of equity capital and by agreeing an additional £15m RCF with the Group’s 
bankers. Further details are provided in the strategic report on page 17.

Capital risk
The Group manages its capital to ensure it will be able to continue as a going concern while maximising the return to shareholders 
through optimising the debt and equity balance.

The Group monitors cash balances and prepares regular forecasts, which are reviewed by the board. In order to maintain or adjust the 
capital structure, the Group may, in the future, return capital to shareholders, issue new shares or sell assets to reduce debt.

Financial assets and liabilities
Financial assets and liabilities consist of the following:

Financial Assets

Financial assets that are debt instruments measured at amortised cost

Financial liabilities

Financial liabilities measured at amortised cost

Financial liabilities held at fair value

19 April 2020

£000

9,319

(61,509)

(332)

21 April 2019
Restated
£000

6,888

(194,513)

(10)

Financial assets held at amortised cost include trade and other receivables and cash. Financial liabilities held at amortised cost include 
trade and other payables, borrowings and, at 21 April 2019, preference share liabilities.

Financial liabilities held at fair value represent interest rate swaps.

There are no material differences between the carrying values of financial assets and liabilities held at amortised cost and their fair 
values.

65

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

Hedging
The Group has entered into an interest rate swap as described above which qualifies as a cashflow hedge. The movements in fair value 
have been recognised as follows:

Derivative liability at 22 April 2019

Recognised through other comprehensive income

Derivative liability at 19 April 2020

£000

(10)

(322)

(332)

Maturity analysis
The maturity analysis table below analyses the Group’s contractual undiscounted cash flows (both principal and interest) for the Group’s 
financial liabilities, after taking into account the effect of interest rate swaps.

Less than 
1 year

1,035

11,572

22,470

35,077

Between 1 
and 5
 years

More than 
5 years

42,616

47,330

-

-

87,087

-

89,946

87,087

4,224

27,351

-

-

9,930

22,401

36,555

-

-

39,986

-

60,302

45,698

188,869

79,262

-

67,337

374,131

Total

43,651

145,989

22,470

212,110

91,877

45,698

188,869

129,178

22,401

478,023

For the 52 week year ended 19 April 2020

Secured bank loans

Lease liabilities

Trade and other payables

For the 52 week year ended 21 April 2019

Secured bank loans

Loans from related parties

Preference shares

Lease liabilities

Trade and other payables

The secured bank loans include the impact of cash flow hedges.

20. DEFERRED TAXATION

At 23 April 2018 (restated)

Recognised in income statement

At 21 April 2019

Recognised in income statement

Change in deferred tax rate

At 19 April 2020

Accelerated 
capital 
allowances
£000

(898)

(169)

(1,067)

800

(126)

(393)

Losses
£000

Acquisition 
accounting
£000

Share 
schemes
£000

-

-

-

318

-

318

(1,672)

255

(1,417)

255

-

(1,162)

90

1

91

135

11

237

Other
£000

479

320

799

432

5

1,236

Total
£000

(2,001)

407

(1,594)

1,940

(110)

236

The Group had unrecognised deferred tax assets as follows:

Unrecognised deferred tax assets

66

19 April 2020
£000

21 April 2019
£000

58

521

LOUNGERS PLC ANNUAL REPORT 2020  FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

21. SHARE BASED PAYMENTS

Year ended 19 April 2020
The Group had the following share based payment arrangements in operation during the year:

• 

Loungers plc Employee Share Plan

• 

Loungers plc Senior Management Restricted Share Plan

• 

Loungers plc Value Creation Plan

In accordance with IFRS 2 Share Based Payments, the value of the awards is measured at fair value at the date of the grant. The fair 
value is expensed on a straight-line basis over the vesting period, based on management’s estimate of the number of shares that will 
eventually vest. The Group recognised a total charge of £3,538,000 in respect of the Group’s share based payment plans and related 
employer’s national insurance of £488,000. The total cost of £4,026,000 includes £2,901,000 that relates to awards made at IPO. 
These costs have been treated as exceptional IPO related costs. A further charge of £1,125,000 relates to ongoing share based 
payments in respect of the Senior Management Restricted Share Plan and the Value Creation Plan. The total charge of £4,026,000 is 
split by scheme as follows:

Employee share plan

Senior management restricted share plan

Value creation plan

Employer’s management bonus plan

Employee share plan

Senior management restricted share plan

Value creation plan

Year ended 
19 April 2020
£000

Year ended
21 April 2019
£000

500

2,754

772

-

4,026

-

-

-

(87)

(87)

Granted during
 the year
Number

Lapsed during 
the year
Number

Outstanding at
19 April 2020
Number

285,500

(65,500)

220,000

1,552,069

(37,561)

1,514,508

-

-

-

Employee Share Plan
Share grants over 285,500 shares were made at the time of the IPO. These awards had no performance conditions other than 
continued employment for one year post IPO. Post year end a total of 220,000 shares were issued in respect of the awards made.

Senior Management Restricted Share Plan
Share grants over 455,000 shares were made at the time of the IPO. These awards had no performance conditions other than 
continued employment for one year post IPO. Post year end a total of 430,000 shares were issued in respect of the awards made.

Share options in respect of 625,000 shares were granted at the time of the IPO. These options vested at the date of grant. The option 
price is £0.01 and the options are exercisable in equal instalments on the first, second and third anniversary of the IPO.

A further 472,069 nil cost options were awarded during the year. These options have no performance conditions, other than continued 
employment for three years post grant, and are exercisable on the third anniversary of issue. A total of 12,561 options awarded during 
the year had lapsed at year end.

Value Creation Plan
The Value Creation Plan (“VCP”) is a discretionary executive share plan. One-off VCP awards were granted at the time of the IPO, with 
no further awards being made to participants. The vesting conditions of the VCP are set out in the Remuneration Committee report.

67

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

The fair value of the total shareholder return (“TSR”) element of the award was estimated at the grant date using a Monte Carlo 
simulation model, taking into account the terms and conditions upon which the awards were granted. This model simulates the TSR and 
compares it against a group of comparator companies. It uses historic dividends and share price fluctuations to predict the distribution 
of relative share price performance. The shares are potentially dilutive for the purposes of calculating diluted earnings per share. The 
following assumptions were used:

Share price at date of grant 
Exercise price  
Expected volatility 
Term until exercised 
Maximum dilution 
Risk free interest rate 
Expected dividend yield 

£2.00
Nil
35%
3 years
6.00%
0.74%
0.00%

The fair value of the VCP at grant was £2,600,000.

Year ended 21 April 2019
Employer’s Management Bonus Scheme
Prior to the IPO the Company operated a cash settled Employer’s Management Bonus Scheme. This required the Company to make a 
cash payment upon change of ownership or IPO (“an exit event”), based on the value of the Company’s shares at that time. This liability 
was remeasured at each balance sheet date, with the directors’ best estimate of cost being spread over the expected period prior to the 
exit event. At 21 April 2019 the directors calculated the liability based upon the valuation achieved in the Company’s IPO and there 
was a subsequent credit to the income statement of £87,000.

22. CALLED-UP SHARE CAPITAL

Allotted, called up and fully paid ordinary shares

Redeemable preference shares 

Ordinary shares at £0.01 each

Ordinary A shares at £0.01 each

Ordinary B shares at £0.01 each

Ordinary C shares at £0.09 each

Ordinary D shares at £0.01 each

Redeemable preference shares at £49,999 each

19 April 2020
£000

21 April 2019
£000

925

100

1,025

19 April 2020
Number

92,500,000

-

-

-

-

2

53

-

53

21 April 2019
Number

-

2,737,281

946,052

129,999

417,086

-

68

LOUNGERS PLC ANNUAL REPORT 2020  FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

The table below summarises the movements in share capital for Loungers plc during the year ended 19 April 2020:

Ordinary
Shares
£1.00 NV

Ordinary
Shares
£0.01 NV

Preference
Shares
£0.50 NV

Deferred
Shares
£0.01 NV

Redeemable
Preference
Shares
£49,999 NV

At date of incorporation

1

Share for share exchange

8,460,835

-

-

- 132,386,444

-

-

Number of shares

Share conversion

Share subdivision

Shares issued

Shares issued on IPO

Capital reduction

At 19 April 2020

-

42,322,050 (132,386,444) 6,577,000,150

(8,460,836)

19,110,695

269,158

30,798,097

-

-

-

826,972,905

-

-

-

- (7,403,973,055)

92,500,000

-

-

-

-

-

-

£000

50

74,704

-

-

-

311

(74,040)

1,025

1

1

-

-

-

-

-

2

The Company was incorporated on 28 March 2019 with one ordinary share of £1 and one redeemable preference share of £49,999.

On 23 April 2019 the shareholders of Lion/Jenga Topco exchanged their ordinary and preference shares in Lion/Jenga Topco for 
ordinary shares of £1.00 and preference shares of £0.50 in the Company. There immediately followed a share conversion whereby the 
preference shares of £0.50 in the Company were exchanged for ordinary shares of £0.01 and deferred shares of £0.01 and a share 
subdivision and conversion whereby the ordinary shares of £1.00 in the Company were converted into ordinary shares of £0.01 and 
deferred shares of £0.01.

On 29 April 2019 the Company allotted a further 31,067,255 ordinary shares of £0.01, raising gross proceeds of £62,135,510.

On 10 September 2019 the Court approved the cancellation of 7,403,973,055 deferred shares of £0.01.

Rights of shareholders
The redeemable preference shares carry no right to vote. They have the right to be redeemed at nominal value by the Company.

23. EQUITY

The Group’s Equity comprises the following:

Called-up share capital
Called-up share capital represents the nominal value of the shares issued.

Share premium account
The share premium account records the amount above the nominal value received for shares sold.

Hedge reserve
The hedge reserve represents the cumulative profits or losses on the mark-to-market at the balance sheet of the Group’s interest rate 
hedge.

69

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

Other reserve
The movement in other reserves is set out in the table below:

At 22 April 2019

Share for share exchange with Lion/Jenga Topco

At 19 April 2020

Other
Reserve
£000

-

18,451

18,451

Merger
Reserve
£000

-

(4,224)

(4,224)

Capital
Contribution
Reserve
£000

51

-

51

Total
Other
Reserves
£000

51

14,227

14,278

The other reserve and the merger reserve arose on the share for share exchange between Loungers plc and Lion/Jenga Topco Limited.

The capital contribution reserve represents additional contributions from shareholders.

Profit and loss account
The profit and loss account represents cumulative profits or losses, net of dividends paid and other adjustments.

24. NOTE TO CASH FLOW STATEMENT

Year ended 
19 April 2020

£000

Year ended
21 April 2019
Restated
£000

(14,781)

(6,700)

9,630

7,177

9,829

4,027

(5)

(50)

8,115

685

(733)

1,793

25,687

(1,290)

24,397

7,852

5,694

-

(87)

(29)

(54)

19,457

(435)

(703)

4,310

29,305

(1,018)

28,287

Cash flows from operating activities

Loss before tax

Adjustments for:

Depreciation of property, plant and equipment

Depreciation of right of use assets

Impairment of property, plant and equipment

Share based payment transactions

Profit on disposal of tangible assets

Finance income

Finance costs

Changes in inventories

Changes in trade and other receivables

Changes in trade and other payables

Cash generated from operations

Tax paid

Net cash generated from operating activities

70

LOUNGERS PLC ANNUAL REPORT 2020  FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

25. ANALYSIS OF CHANGES IN NET DEBT

Cash in hand

Bank Loans

Lease liabilities

Unsecured loan stock

Preference shares

Net debt

Derivatives

23 April 
2018
Restated
£000

7,669

(65,268)

(73,164)

(15,874)

(76,226)

Cash flows

Non-cash
movement

£000

(1,169)

(4,000)

8,412

-

-

£000

-

(285)

(24,386)

(2,058)

(8,401)

21 April 
2019
Restated
£000

6,500

(69,553)

(89,138)

(17,932)

(84,627)

(222,863)

3,243

(35,130)

(254,750)

Interest-rate swaps asset / (liability)

Total derivatives 

323

323

-

-

(333)

(333)

(10)

(10)

Net debt after derivatives

(222,540)

3,243

(35,463)

(254,760)

Cash in hand

Bank Loans – due after one year

Lease liabilities

Unsecured loan stock – due after one year

Preference shares – due after one year

Net debt

Derivatives

Interest-rate swaps liability

Total derivatives 

Cash flows

Non-cash
movement

19 April 
2020

22 April 
2019
Restated
£000

6,500

(69,553)

(89,138)

(17,932)

(84,627)

£000

(2,417)

32,076

10,706

17,950

-

(254,750)

58,315

(10)

(10)

10

10

£000

-

£000

4,083

(1,562)

(39,039)

(26,507)

(104,939)

(18)

84,627

56,540

(332)

(332)

-

-

(139,895)

(332)

(332)

Net debt after derivatives

(254,760)

58,325

56,208

(140,227)

Non-cash movements in bank loans due after one year relate to the amortisation of bank loan issue costs.

26. PENSION COMMITMENTS

Pension cost

Year ended 
19 April 2020
£000

Year ended
21 April 2019
£000

802

537

71

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

The following contributions were payable to the fund and are included in creditors:

Pension contributions payable

27. LESSOR

19 April 2020
£000

21 April 2019
£000

327

267

The Group leases out un-utilised property space under non-cancellable operating leases. The Group is due to receive minimum lease 
payments under non-cancellable operating leases as follows:

Within one year

In two to five years

After five years

19 April 2020
£000

21 April 2019
£000

125

500

445

1,070

235

918

769

1,922

28. RELATED PARTY TRANSACTIONS

A Reilley and J Bishop, a director of the Company’s subsidiary, Loungers UK Limited, are directors of Flatcappers Limited. Additionally, 
they are partners in Colombe D’Or Property LLP (formerly Loungers Property LLP); the Group leases three properties from Colombe 
D’Or. The Group undertook the following transactions, stated net of VAT:

Sales to related parties:

 Flatcappers Limited

Purchases from related parties:

 Colombe D’Or Property LLP

Amounts owed (to) / from related parties:

 Flatcappers Limited

 Colombe D’Or Property LLP

19 April 2020
£000

21 April 2019
£000

21

117

-

-

90

167

-

-

A Reilley is a director and shareholder of Reilley Properties Limited. The Group leases two properties from Reilley Properties Limited and 
undertook the following transactions:

Purchases from Reilley Properties Limited

Amounts owed to Reilley Properties Limited

19 April 2020
£000

21 April 2019
£000

240

57

171

-

72

LOUNGERS PLC ANNUAL REPORT 2020  FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

Lion Capital LLP, prior to the IPO, had the following interest in the investor loan notes:

Interest charged in the year

Amount due to Lion Capital at year end

Amounts paid to Lion Capital

19 April 2020
£000

21 April 2019
£000

18

-

17,950

2,058

17,932

-

Management and Lion Capital LLP, prior to the IPO, had the following interests in the preference shares issued by the Group:

Management

Preference dividends charged in the year

Preference dividends due at year end

Preference dividends exchanged for ordinary shares at IPO

Lion Capital LLP

Preference dividends charged in the year

Preference dividends due at year end

Preference dividends exchanged for ordinary shares at IPO

29. LEGAL ENTITIES

19 April 2020
£000

21 April 2019
£000

2

-

7,532

15

-

77,112

843

7,530

-

7,558

77,097

-

The following table presents the investments in which the Group owns a portion of the nominal value of any class of share capital:

Direct Subsidiary Holding 
Lion/Jenga Topco Limited 

Indirect Subsidiary Holding 
Lion/Jenga Midco Limited 

Ordinary 100% 

Holding company

Ordinary 100% 

Holding company

Lion/Jenga Bidco Limited 

Ordinary 100% 

Holding company

Loungers Holdings Limited 

Ordinary 100% 

Holding company

Loungers UK Limited 

Ordinary 100% 

 The development, operation and management of all day 
neighbourhood café/bars and bar/restaurants.

The registered office of all four subsidiaries is 26 Baldwin Street, Bristol, BS1 1SE.

30. POST BALANCE SHEET EVENTS NOTE

On 22 April, in response to the Covid 19 lockdown and to ensure that Group had sufficient liquidity to withstand a very prolonged 
lockdown, the Group announced the following initiatives to strengthen its financial position:

• 

 The issue of 9,250,000 ordinary shares of 1 pence each to existing shareholders at a price of 90 pence per ordinary share to raise 
gross proceeds of £8,325,000.

•  An incremental £15m revolving credit facility with its bankers, Santander Corporate Banking and Bank of Ireland.

• 

 The waiver of the covenant tests scheduled for 12 July 2020 and 4 October 2020, and amendments to the tests running through to 
3 October 2021.

On 4 May 2020, the Company allotted and issued 650,000 ordinary shares of 1 pence each in the Company following the vesting of 
awards made to 480 Company employees pursuant to the Company’s Employee Share Plan.

On 4 July 2020, the Group commenced a phased re-opening of its sites, with all of its sites re-opened and fully operational by 7 August 
2020.

73

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

31. IMPACT OF ADOPTION OF IFRS 16 IN THE YEAR

The Group applied IFRS 16 Leases for the first time. The Group applied the standard using the fully retrospective method, with the date 
of initial application of 23 April 2018, and has restated its results for comparative periods as if the Group had always applied the new 
standard. 

The impact of adopting IFRS 16 on the Group’s consolidated statement of comprehensive income, consolidated statement of financial 
position and consolidated statement of cash flows is presented in the following tables.

Reported
Year ended
21 April 2019
£000

IFRS 16
Transition
£000

Restated
Year ended
21 April 2019
£000

Revenue

Cost of sales

Gross profit

Administrative expenses

Operating profit

 Operating profit before exceptional items

 Exceptional items included in administrative expenses

Finance income

Finance costs

Loss before taxation

Tax credit / (charge) on loss

Loss for the year

Other comprehensive expense:

Cash flow hedge – change in value of hedging instrument

Other comprehensive expense  
for the year

Total comprehensive expense for the year

152,999

(89,485)

63,514

(53,717)

9,797

10,259

(462)

-

(14,786)

(4,989)

(750)

(5,739)

(333)

(333)

(6,072)

-

-

-

2,906

2,906

2,906

-

54

(4,671)

(1,711)

290

(1,421)

-

-

(1,421)

152,999

(89,485)

63,514

(50,811)

12,703

13,165

(462)

54

(19,457)

(6,700)

(460)

(7,160)

(333)

(333)

(7,493)

74

LOUNGERS PLC ANNUAL REPORT 2020  FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

The adjustments to the consolidated statement of financial position are as follows:

Reported at
22 April 2018
£000

IFRS 16
Transition
£000

Restated at
22 April 2018
£000

Reported at
21 April 2019
£000

IFRS 16
Transition
£000

Restated at
21 April 2019
£000

Assets

Non-current

Intangible assets

Property, plant and equipment

Total non-current assets

Current

Inventories

Trade and other receivables

Derivative financial instruments

Cash and cash equivalents

Total current assets

Total assets

Liabilities

Current liabilities

113,227

59,006

172,233

1,065

5,182

323

7,669

14,239

186,472

-

62,250

62,250

113,227

121,256

234,483

113,227

74,073

187,300

-

75,188

75,188

113,227

149,261

262,488

-

(136)

-

-

1,065

5,046

323

7,669

(136)

14,103

1,500

6,289

-

6,500

14,289

-

(575)

-

-

(575)

1,500

5,714

-

6,500

13,714

62,114

248,586

201,589

74,613

276,202

Trade and other payables

(27,723)

8

(27,715)

(33,095)

655

(32,440)

Lease liabilities

Derivative financial instruments

-

-

(3,759)

(3,759)

-

-

-

(10)

(4,946)

(4,946)

-

(10)

Total current liabilities

(27,723)

(3,751)

(31,474)

(33,105)

(4,291)

(37,396)

(157,368)

-

(157,368)

(172,112)

-

(172,112)

-

(69,405)

(69,405)

-

(84,192)

(84,192)

(8,183)

(2,465)

(130)

8,183

464

130

-

(2,001)

-

(9,312)

(2,348)

(118)

9,312

754

118

-

(1,594)

-

(195,869)

(64,379)

(260,248)

(216,995)

(78,299)

(295,294)

(9,397)

(2,265)

(11,662)

(15,406)

(3,686)

(19,092)

Non-current liabilities

Borrowings

Lease liabilities

Accruals and deferred income

Deferred tax liabilities

Provisions

Total liabilities

Net liabilities

Called up share capital

Share premium

Hedge reserve

Other reserve

53

4,172

323

-

-

-

-

-

53

4,172

323

-

Accumulated profits / (losses)

Total equity

(13,945)

(9,397)

(2,265)

(2,265)

(16,210)

(11,662)

53

4,184

(10)

51

(19,684)

(15,406)

-

-

-

-

(3,686)

(3,686)

53

4,184

(10)

51

(23,370)

(19,092)

75

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

Cash flows from operating activities

Loss After Tax

Adjustments for:

Depreciation of property, plant and equipment

Depreciation of right of use assets

Share based payment transactions

Profit on disposal of tangible assets

Finance Income

Finance Costs

Changes in inventories

Changes in trade and other receivables

Changes in trade and other payables

Changes in provisions 

Cash generated from operations

Tax paid

Net cash generated from operating activities

Cash flows from investing activities

Purchase of property, plant and equipment

Net cash used in investing activities

Cash flows from financing activities

Issue of ordinary shares

Capital contribution

Bank loans advanced

Bank loans repaid

Interest paid

Finance lease liabilities paid

Finance lease interest paid

Finance lease receivables

Net cash used in financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of the year

Cash and cash equivalents at end of the year

Reported
Year ended
21 April 2019
£000

IFRS 16
Transition
£000

Restated
Year ended
21 April 2019
£000

(4,989)

(1,711)

(6,700)

8,147

-

(87)

12

-

14,786

(435)

(1,074)

6,089

(12)

22,437

(1,018)

21,419

(22,585)

(22,585)

12

51

6,000

(2,000)

(4,066)

-

-

-

(3)

(1,169)

7,669

6,500

(295)

5,694

-

(41)

(54)

4,671

-

371

(1,779)

12

6,868

-

6,868

1,423

1,423

-

-

-

-

-

(3,744)

(4,668)

121

(8,291)

-

-

-

7,852

5,694

(87)

(29)

(54)

19,457

(435)

(703)

4,310

-

29,305

(1,018)

28,287

(21,162)

(21,162)

12

51

6,000

(2,000)

(4,066)

(3,744)

(4,668)

121

(8,294)

(1,169)

7,669

6,500

76

LOUNGERS PLC ANNUAL REPORT 2020  FINANCIAL STATEMENTSINDEPENDENT AUDITORS’ REPORT 
TO THE MEMBERS OF LOUNGERS PLC

REPORT ON THE AUDIT OF THE COMPANY FINANCIAL STATEMENTS

OPINION

In our opinion, Loungers plc’s company financial statements (the “financial statements”):

 give a true and fair view of the state of the company’s affairs as at 19 April 2020;

 have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United 
Kingdom Accounting Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the UK and 
Republic of Ireland”, and applicable law); and

 have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements, included within the Annual report and financial statements (the “Annual 
Report”), which comprise: the company statement of financial position as at 19 April 2020; the company statement 
of changes in equity for the 55 week period then ended; and the notes to the financial statements, which include a 
description of the significant accounting policies.

BASIS FOR OPINION

We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. 
Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial 
statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to 
provide a basis for our opinion.

Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the 
financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have 
fulfilled our other ethical responsibilities in accordance with these requirements.

OUR AUDIT APPROACH

OVERVIEW

 Overall materiality: £1,090,000, based on the lower of 1% of total assets and an 
allocation of group materiality.

 The company is structured as a single reporting unit and the audit was carried out by a 
single audit team.

 The impact of COVID-19.

77

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2020 
 
 
 
 
 
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF LOUNGERS PLC
CONTINUED

THE SCOPE OF OUR AUDIT

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial 
statements. In particular, we looked at where the directors made subjective judgements, for example in respect of 
significant accounting estimates that involved making assumptions and considering future events that are inherently 
uncertain. As in all of our audits we also addressed the risk of management override of internal controls, including 
evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due 
to fraud.

KEY AUDIT MATTERS

Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit 
of the financial statements of the current period and include the most significant assessed risks of material misstatement 
(whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall 
audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, 
and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the 
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these 
matters. This is not a complete list of all risks identified by our audit.

Key audit matter

The impact of COVID-19

As set of on pages 3 to 20, COVID-19 has had 
a number of significant financial, as well as 
operational, impacts, both during lockdown and 
since. Management have also considered the 
impacts of COVID-19 on the financial statements 
including in respect of their assessment on the 
going concern basis of preparation of the financial 
statements and in respect of any potential for the 
impairment of assets. 

As part of our risk assessment, we considered the 
potential impact for the entity to be the following:

  The effects of lockdown and social distancing 
restrictions on consumer behaviour has resulted in 
reduced footfall and therefore reduced revenue,  
profitability and cash generation of the group. 
This creates a risk of impairment of the carrying 
value of investments.

 The lower level of revenue, profit and cash 
generation also creates a going concern risk 
related to the adequacy and availability of bank 
facilities going forward in the overall liquidity 
requirements of the Group.

 Disclosure of the impact of COVID-19 on the 
group’s business in the financial statements.

How our audit addressed the key audit matter

We have considered the impact of COVID-19 on various 
areas of the financial statements and performed procedures to 
address the risk around the impact of COVID-19. We have set 
out our responses to the risk in respective areas of the financial 
statements as below:

In respect of the impact of a potential impairment of the carrying 
value of investments, we obtained the entity’s assessment of any 
potential impairment using their value in use calculations and 
performed the following:

 We assessed the assumptions used in determining the value in 
use calculations. This included engaging our valuation experts 
to confirm that the discount rate used in the calculations was 
reasonable.

 We also assessed the revenue, profit and cash flows 
included in the value in use calculations, taking into account 
actual results since the outbreak of COVID-19 and after the 
balance sheet date. We also considered the results of a 
number of sensitivity scenarios in respect of forecast revenue, 
discount rate and long-term growth rate.

 We tested the model used to calculate the value in use to 
ensure that it determined the net present value of the future 
cashflows correctly.

78

LOUNGERS PLC ANNUAL REPORT 2020  FINANCIAL STATEMENTS 
 
 
 
 
 
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF LOUNGERS PLC
CONTINUED

Key audit matter

How our audit addressed the key audit matter

In respect of the potential impact on the going concern 
assessment, we have understood how management have factored 
in the impact of COVID-19 on their assessment of future cash flows 
and bank facility covenant compliance. This included a downside 
scenario which included lower levels of revenue across sites, the 
potential for regional lockdowns resulting in the closure of sites, 
and more severe affects of COVID-19 over the winter months. 
In doing this we have validated management’s assumptions by 
looking at the actual impact on revenue and operating expense 
cash flows since the outbreak of COVID-19. We also validated 
the terms of the revised bank facility and the proceeds from the 
placing which took place after the year end. Further we have 
assessed the availability of financial resources and the ability of 
the Group to absorb potential adverse circumstances over the 
going concern period.

We have read management’s disclosures in the financial 
statements and the related narrative disclosures within the ‘other 
information’ to confirm they are consistent with the financial 
statements and our knowledge based on our audit.

Overall, we consider management’s assessment of the impact 
of COVID-19 on the financial statements to be reasonable. Our 
conclusion in respect of going concern is stated below. We 
have read management’s disclosures in the financial statements 
and the relative narrative.

HOW WE TAILORED THE AUDIT SCOPE

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the 
financial statements as a whole, taking into account the structure of the company, the accounting processes and controls, 
and the industry in which it operates. 

The entity’s finance function is based in one location in Bristol, UK.

The company is structured as a single reporting unit and the audit was carried out by a single audit team.

MATERIALITY

The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for 
materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the 
nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in 
evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole. 

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Overall group materiality

£1,090,000.

How we determined it

Lower of 1% of total assets and an allocation of group materiality.

Rationale for benchmark 
applied

As the entity is a holding company, we consider that total assets is the most 
appropriate benchmark to assess materiality.

79

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2020INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF LOUNGERS PLC
CONTINUED

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above 
£54,000 as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

CONCLUSIONS RELATING TO GOING CONCERN

We have nothing to report in respect of the following matters in relation to which ISAs (UK) require us to report to you 
where: 

 the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not 
appropriate; or 

 the directors have not disclosed in the financial statements any identified material uncertainties that may cast 
significant doubt about the company’s ability to continue to adopt the going concern basis of accounting for a period 
of at least twelve months from the date when the financial statements are authorised for issue.

However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the 
company’s ability to continue as a going concern. 

REPORTING ON OTHER INFORMATION

The other information comprises all of the information in the Annual Report other than the financial statements and our 
auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial statements 
does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent 
otherwise explicitly stated in this report, any form of assurance thereon. 

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing 
so, consider whether the other information is materially inconsistent with the financial statements or our knowledge 
obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency 
or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of 
the financial statements or a material misstatement of the other information. If, based on the work we have performed, 
we conclude that there is a material misstatement of this other information, we are required to report that fact. We have 
nothing to report based on these responsibilities.

With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the 
UK Companies Act 2006 have been included.  

Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK) require us 
also to report certain opinions and matters as described below.

STRATEGIC REPORT AND DIRECTORS’ REPORT

In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and 
Directors’ Report for the period ended 19 April 2020 is consistent with the financial statements and has been prepared in 
accordance with applicable legal requirements.

In light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we 
did not identify any material misstatements in the Strategic Report and Directors’ Report. 

RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND THE AUDIT

RESPONSIBILITIES OF THE DIRECTORS FOR THE FINANCIAL STATEMENTS

As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of 
the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair 
view. The directors are also responsible for such internal control as they determine is necessary to enable the preparation 
of financial statements that are free from material misstatement, whether due to fraud or error.

80

LOUNGERS PLC ANNUAL REPORT 2020  FINANCIAL STATEMENTS 
 
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF LOUNGERS PLC
CONTINUED

In preparing the financial statements, the directors are responsible for assessing the company’s ability to continue 
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis 
of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic 
alternative but to do so.

AUDITORS’ RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from 
material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. 
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with 
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are 
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic 
decisions of users taken on the basis of these financial statements. 

A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: 
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.

USE OF THIS REPORT

This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance 
with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, 
accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose 
hands it may come save where expressly agreed by our prior consent in writing.

OTHER REQUIRED REPORTING

COMPANIES ACT 2006 EXCEPTION REPORTING

Under the Companies Act 2006 we are required to report to you if, in our opinion:

 we have not received all the information and explanations we require for our audit; or

 adequate accounting records have not been kept by the company, or returns adequate for our audit have not been 
received from branches not visited by us; or

 certain disclosures of directors’ remuneration specified by law are not made; or

the financial statements are not in agreement with the accounting records and returns.

We have no exceptions to report arising from this responsibility.

OTHER MATTER

We have reported separately on the group financial statements of Loungers plc for the 52 week period ended 19 April 2020.

Colin Bates 
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants 
Bristol

16 September 2020

81

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2020 
 
 
 
COMPANY STATEMENT OF 
FINANCIAL POSITION
AS AT 19 APRIL 2020

Assets

Non-current

Investments

Total non-current assets

Current assets

Trade and other receivables

Total current assets

Total assets

Liabilities

Current liabilities

Trade and other payables

Total current liabilities

Total liabilities

Net assets

Called up share capital

Other reserve

Retained earnings

Loss for the year attributable to the owners

Other changes in retained earnings

Total equity

At 
19 April 2020
£000

Note

5

6

7

8

9

9

136,300

136,300

18,554

18,554

154,854

(4,225)

(4,225)

(4,225)

150,629

1,025

18,451

(520)

131,673

131,153

150,629

The financial statements on pages 82 to 87 were approved and authorised for issue by the Board and were signed on its behalf by:

Nick Collins 
Chief Executive Officer 

16 September 2020 

Gregor Grant 
Chief Financial Officer

16 September 2020

82

LOUNGERS PLC ANNUAL REPORT 2020  FINANCIAL STATEMENTSCOMPANY STATEMENT OF 
CHANGES IN EQUITY
FOR THE 55 WEEKS ENDED 19 APRIL 2020

Called up
 share capital
£000

Share 
premium
£000

Other 
reserve
£000

Retained 
earnings
£000

Balance on incorporation

Redeemable preference shares issued

Share for share exchange – ordinary shares

Preference debt for equity swap

Ordinary shares issued

Ordinary shares issued on IPO

Capital reduction

Total transactions with owners

Loss for the year

Total comprehensive expense for the  
55 week period

At 19 April 2020

50

50

8,461

66,193

3

308

-

-

-

-

-

61,288

(74,040)

(61,288)

-

-

-

18,451

-

-

-

Total 
equity
£000

50

50

8,461

84,644

3

-

-

-

-

-

(3,655)

57,941

135,328

-

975

-

-

1,025

-

-

-

-

18,451

131,673

151,099

-

-

(520)

(520)

(520)

(520)

18,451

131,153

150,629

83

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2020NOTES TO THE COMPANY  
FINANCIAL STATEMENTS
FOR THE 55 WEEKS ENDED 19 APRIL 2020

1.  GENERAL INFORMATION

Loungers plc (“the company”) is incorporated and domiciled in the United Kingdom with company number 11910770. The registered 
address of the Company is 26 Baldwin Street, Bristol, United Kingdom, BS1 1SE.

The Company was incorporated on 28 March 2019 and was admitted to trading on the AIM market on 29 April 2019.

The Company is a public company limited by shares whose shares are publicly traded on the Alternative Investment Market (“AIM”) of 
the London Stock Exchange.

The principal activity of the Company and the nature of the Company’s operations is as a holding entity.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies is set out below. These have been applied consistently in the Financial Statements.

2.1 BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The Financial Statements have been prepared in accordance with Financial Reporting Standard 102, the Financial Reporting Standard 
applicable in the UK and Republic of Ireland (FRS 102) as issued in August 2014 and the Companies Act 2006.

The financial statements have been prepared under the historical cost convention. The financial statements are presented in thousands of 
pounds sterling (‘£000’) except where otherwise indicated.

The Company is a qualifying entity for the purposes of FRS 102, as it prepares publicly available consolidated financial statements, 
which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group. The Company 
has therefore taken advantage of the exemptions from the following disclosure requirements in FRS 102:

•  Section 4 ‘Statement of Financial Position’ – Reconciliation of the opening and closing number of shares;

•  Section 7 ‘Statement of Cash Flows’ – Presentation of a statement of cash flows and related notes and disclosures;

• 

 Section 11 ‘Basic Financial Instruments’ – Carrying amounts, interest income/expense and net gains/losses for each category of 
financial instrument not measured at fair value through profit or loss, and information that enables users to evaluate the significance 
of financial instruments;

•  Section 33 ‘Related Party Disclosures’ – Compensation for key management personnel.

These financial statements present information about the Company as an individual entity and not about its Group. 

As permitted by section 408(3) of the Companies Act 2006, no profit and loss account has been presented for the Company.  The loss 
for the financial year dealt with in the Financial Statements of the Parent Company is £520,000.

The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. The policies 
have been consistently applied to all years presented, unless otherwise stated.

2.2 GOING CONCERN

The directors have concluded that it is appropriate for the financial statements to be prepared on the going concern basis (see Note 2.2 
to the consolidated financial statements).

2.3 NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS ADOPTED

The new standard impacting the Group for the year ended 19 April 2020 is: IFRS 16 ‘Leases’. The adoption of this standard has not 
had any impact upon the Company’s financial statements.

2.4 INVESTMENTS

Investments held as fixed assets are stated at cost less provision for any impairment. The carrying value of investments are reviewed for 
impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable.

2.5 TRADE AND OTHER RECEIVABLES

Trade and other receivables are recognised initially at the amount of consideration that is unconditional, unless they contain significant 
financing components, when they are recognised at fair value. The Company holds the trade and other receivables with the objective of 
collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method. 

84

LOUNGERS PLC ANNUAL REPORT 2020  FINANCIAL STATEMENTSNOTES TO THE COMPANY FINANCIAL STATEMENTS 
CONTINUED

The Company applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance 
for all trade and other receivables.

To measure the expected credit losses, trade receivables and other assets are grouped based on shared credit risk characteristics and 
the days past due.

2.6 FINANCIAL INSTRUMENTS

The Company enters into basic financial instrument transactions that result in the recognition of financial assets and liabilities like trade 
and other debtors and creditors, and loans from banks and other third parties.

Debt instruments (other than those wholly repayable or receivable within one year), including loans and other accounts receivable 
and payable, are initially measured at the present value of the future cash flows and subsequently at amortised cost using the effective 
interest rate method. Debt instruments that are payable or receivable within one year, typically trade debtors and creditors, are 
measured, initially and subsequently, at the undiscounted amount of the cash or other consideration expected to be paid or received. 

Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting year for objective evidence of 
impairment. If objective evidence of impairment is found, an impairment loss is recognised in the Statement of Comprehensive Income.

Financial assets and liabilities are offset and the net amount reported in the Statement of Financial Position when there is an 
enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the 
liability simultaneously.

2.7 TRADE AND OTHER PAYABLES

Short-term creditors are recognised initially at fair value and subsequently measured at amortised cost using the effective interest 
method. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs, and are measured 
subsequently at amortised cost using the effective interest rate method.

2.8 CURRENT AND DEFERRED TAXATION

The tax expense for each reporting year comprises current and deferred tax.

The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the 
reporting date.

Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the Statement of 
Financial Position date, except that:

• 

 The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of 
deferred tax liabilities or other future taxable profits;

• 

 Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met; and

Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date.

Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and liabilities and where 
the deferred tax balances relate to the same tax authority. Current tax assets and tax liabilities are offset where the entity has a legally 
enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

2.9 RELATED PARTY TRANSACTIONS

The Company discloses transactions with related parties which are not wholly owned within the Group. Where appropriate, transactions 
of a similar nature are aggregated unless, in the opinion of the directors, separate disclosure is necessary to understand the effect of the 
transactions on the Company Financial Statements.

3.   INFORMATION INCLUDED IN THE NOTES TO THE CONSOLIDATED 

FINANCIAL STATEMENTS

Some of the information included in the notes to the consolidated financial statements is directly relevant to the financial statements of the 
company. Please refer to the following:

Note 5 – Auditors’ remuneration

Note 21 – Share based payments

Note 30 – Post balance sheet events

85

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2020NOTES TO THE COMPANY FINANCIAL STATEMENTS 
CONTINUED

4.  STAFF COSTS

Loungers plc has no employees other than the Directors. Details of Directors emoluments are disclosed in the Remuneration Committee 
Report on pages 30-32 and in note 6 of the notes to the consolidated financial statements.

5.  INVESTMENTS

At the beginning of the year

Additions

At 19 April 2020

£000

-

136,300

136,300

The additions in the year reflect the share for share exchange by which Loungers plc acquired the entire issued share capital of Lion / 
Jenga Topco on 24 April 2019.

The Company’s subsidiary undertakings are shown in note 29 to the Consolidated Financial Statements.

6.  TRADE AND OTHER RECEIVABLES

Included within current assets

Other receivables

Amounts owed by Group companies

Amounts owed by Group companies are repayable on demand and are non-interest bearing.

7.  TRADE AND OTHER PAYABLES

Included within current liabilities

Amounts owed to Group companies

Amounts owed to Group companies are payable on demand and are non-interest bearing.

8.  CALLED-UP SHARE CAPITAL

Allotted, called up and fully paid ordinary shares

Redeemable preference shares

86

19 April 2020
£000

103

18,451

18,554

19 April 2020
£000

4,225

4,225

19 April 2020
£000

925

100

1,025

LOUNGERS PLC ANNUAL REPORT 2020  FINANCIAL STATEMENTSNOTES TO THE COMPANY FINANCIAL STATEMENTS 
CONTINUED

Ordinary shares at £0.01 each

Redeemable preference shares at £49,999 each

The table below summarises the movements in share capital for Loungers plc during the period ended 19 April 2020:

Ordinary 
Shares

Ordinary 
Shares

Preference 
Shares

Deferred
Shares

Redeemable 
Preference 
Shares

£1.00 NV

£0.01 NV

£0.50 NV

£0.01 NV

£49,999 NV

Number of shares

At date of incorporation

1

Share for share exchange

8,460,835

-

-

-

132,386,444

-

-

Share conversion

Share subdivision

Shares issued

Shares issued on IPO

Capital reduction

At 19 April 2020

-

42,322,050

(132,386,444) 6,577,000,150

(8,460,836)

19,110,695

-

-

-

-

269,158

30,798,097

-

92,500,000

-

-

-

-

-

826,972,905

-

-

(7,403,973,055)

-

1

1

-

-

-

-

-

2

19 April 2020
Number

92,500,000

2

£000

50

74,704

-

-

-

311

(74,040)

1,025

The Company was incorporated on 28 March 2019 with one ordinary share of £1 and one redeemable preference share of £49,999.

On 23 April 2019, the shareholders of Lion/Jenga Topco exchanged their ordinary and preference shares in Lion/Jenga Topco for 
ordinary shares of £1.00 and preference shares of £0.50 in the Company.  There immediately followed a share conversion whereby 
the preference shares of £0.50 in the Company were exchanged for ordinary shares of £0.01 and deferred shares of £0.01 and a 
share subdivision and conversion whereby the ordinary shares of £1.00 in the Company were converted into ordinary shares of £0.01 
and deferred shares of £0.01.

On 29 April 2019, the Company allotted a further 31,067,255 ordinary shares of £0.01, raising gross proceeds of £62,135,510.

On 10 September 2019, the Court approved the cancellation of 7,403,973,055 deferred shares of £0.01.

Rights of shareholders
The redeemable preference shares carry no right to vote. They have the right to be redeemed at nominal value by the Company.

9.  EQUITY

The Group’s Equity comprises the following:

Called-up share capital
Called-up share capital represents the nominal value of the shares issued.

Other reserve
The other reserve arose on the share for share exchange between Loungers plc and Lion/Jenga Topco Limited.

Profit and loss account
The profit and loss account represents cumulative profits or losses, net of dividends paid and other adjustments.

87

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2020RECONCILIATION OF STATUTORY 
RESULTS TO ALTERNATIVE 
PERFORMANCE MEASURES

Year ended
19 April 2020
£000

Year ended 
19 April 2019
£000

(6,716)

15,336

1,125

2,220

11,965

9,630

7,177

(5)

28,767

(10,380)

426

18,813

(14,781)

15,336

1,447

2,002

(10,380)

(464)

7,177

5,478

(50)

3,763

(14,781)

(10,380)

(464)

7,177

5,478

(50)

(13,020)

12,703

462

(87)

1,904

14,982

7,853

5,694

12

28,541

(8,306)

347

20,582

(6,700)

462

-

(6,238)

(8,306)

(294)

5,694

4,671

(54)

(4,527)

(6,700)

(8,306)

(294)

5,694

4,671

(54)

(4,989)

Operating (loss) / profit

Exceptional items

Share based payment charge / (credit)

Site pre-opening costs

Adjusted operating profit

Depreciation (pre IFRS 16 right of use asset charge)

IFRS 16 Right of use asset depreciation

(Profit) / loss on disposal of fixed assets

Adjusted EBITDA (IFRS 16)

IAS 17 Rent charge

IAS 17 Rent charge included in IAS 17 pre-opening costs

Adjusted EBITDA (IAS 17)

Loss before tax (IFRS 16)

Exceptional administrative expenses

Exceptional finance costs

Adjusted profit / (loss) before tax (IFRS 16)

IAS 17 Rent charge

IAS 17 Leasehold depreciation (re landlord contributions)

IFRS 16 Right of use asset depreciation

IFRS 16 Lease interest charge

IFRS 16 Lease interest income

Adjusted profit / (loss) before tax (IAS 17)

Loss before tax (IFRS 16)

IAS 17 Rent charge

IAS 17 Leasehold depreciation (re landlord contributions)

IFRS 16 Right of use asset depreciation

IFRS 16 Lease interest charge

IFRS 16 Lease interest income

Loss before tax (IAS 17)

88

LOUNGERS PLC ANNUAL REPORT 2020  FINANCIAL STATEMENTSRECONCILIATION OF STATUTORY 
RESULTS TO ALTERNATIVE 
PERFORMANCE MEASURES

Adjusted profit / (loss) before tax (IFRS 16)

Tax credit / (charge)

Tax effect of exceptional items

Adjusted profit / (loss) after tax (IFRS 16)

IAS 17 Rent charge

IAS 17 Leasehold depreciation (re landlord contributions)

IFRS 16 Right of use asset depreciation

IFRS 16 Lease interest charge

IFRS 16 Lease interest income

IFRS 16 Tax effect

Adjusted profit / (loss) after tax (IAS 17)

Year ended
19 April 2020
£000

Year ended 
21 April 2019
£000

2,002

1,960

(1,719)

2,243

(10,380)

(464)

7,177

5,478

(50)

(423)

3,581

(6,238)

(460)

(69)

(6,767)

(8,306)

(294)

5,694

4,671

(54)

(290)

(5,346)

Basic weighted average number of shares

Diluted weighted average number of shares

91,786,283

93,520,791

19,110,695

19,110,695

Adjusted basic earnings / (losses) per share (p) IFRS 16

Adjusted diluted earnings / (losses) per share (p) IFRS 16

Adjusted basic earnings / (losses) per share (p) IAS 17

Adjusted diluted earnings / (losses) per share (p) IAS 17

Net cash generated from operating activities (IFRS 16)

IAS 17 Rent charge

Movement in working capital

Net cash generated from operating activities (IAS 17)

2.4

2.4

3.9

3.8

24,397

(10,380)

2,616

16,633

(35.4)

(35.4)

(28.0)

(28.0)

28,287

(8,306)

1,438

21,419

89

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2020COMPANY INFORMATION

DIRECTORS

A M Reilley
N C E Collins
G Grant
N P Backhouse
A J G Bellamy
R Darwent
J C Little

COMPANY SECRETARY

Prism Cosec Limited

SOLICITORS

Jones Day
21 Tudor Street
London 
EC4Y 0DJ

INDEPENDENT AUDITORS

PricewaterhouseCoopers LLP 
2 Glass Wharf
Bristol 
BS2 0FR

REGISTERED NUMBER

REGISTRAR

Link Market Services Limited
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU

BANKERS 

Santander Corporate Banking 
1st Floor
Alliance House 
12 Baldwin Street 
Bristol
BS1 1SD

Bank of Ireland
Bow Bells House 
1 Bread Street
London
EC4M 9BE

11910770

REGISTERED OFFICE

26 Baldwin Street
Bristol
BS1 1SE

NOMINATED AND 
FINANCIAL ADVISER

GCA Altium Limited
1 Southampton Street
London
WC2R 0LR

CORPORATE BROKERS

Liberum Capital Limited
25 Ropemaker Street
London
EC2Y 9LY

Peel Hunt LLP
Moor House
120 London Wall
EC2Y 5ET

Designed and produced by Perivan

90

LOUNGERS PLC ANNUAL REPORT 2020  FINANCIAL STATEMENTSWHAT WE DO

 OVERVIEW

What We Do 

 STRATEGIC REPORT

Chairman’s Statement 
Chief Executive’s Statement 
Key Strengths 
Directors’ Duties – S172 Statement 
Financial Review 
Key Performance Indicators (“KPI’s”) 
Principal Risks and Uncertainties 

IFC

3
6
10
11
13
16
19

 GOVERNANCE

Board of Directors 
22
Chairman’s Corporate Governance Statement  23
Audit Committee Report 
28
30
Remuneration Committee Report 
34
Nomination Committee Report 
Directors’ Report 
35
Independent Auditors’ Report  
 to the Members of Loungers plc 

39

 FINANCIAL STATEMENTS

MARKET OVERVIEW

Loungers operates through its two complementary 
brands – Lounge and Cosy Club – in the UK hospitality 
sector. 

At the year end the Group had 165 sites, comprising 136 Lounges and 
29 Cosy Clubs. Whilst it competes with coffee shops, pubs, restaurants and 
local independent operators, 72 per cent of Lounge customers see it as a unique 
proposition, rather than categorise it solely as a restaurant, pub or coffee shop. 

Independent analysis undertaken for the Group in 2018 concluded that the 
Group has no single competitor and that it can co-exist with all other operators. 
The Group competes with every element of the trade of a pub chain, coffee 
shop, or restaurant, whereas each of those operators only competes for a part 
of Loungers’ sales. It is this level of differentiation that has enabled the Group to 
deliver significant and consistent like for like (“LFL”) sales out-performance, and 
in turn, it is this sales out-performance allied to the new site roll-out and growing 
scale of the Group that have provided the scope to better withstand the cost 
pressures that have afflicted the broader hospitality sector in recent years.

Consolidated Statement of  
 Comprehensive Income 
45
Consolidated Statement of Financial Position  46
Consolidated Statement of Changes  
 in Equity 
Consolidated Statement of Cash Flows  
Notes to the Consolidated  
 Financial Statements 
Independent Auditors’ Report  
77
 to the Members of Loungers plc 
82
Company Statement of Financial Position 
Company Statement of Changes in Equity 
83
Notes to the Company Financial Statements  84
90
Company Information 

47
48

49

LOUNGERS.CO.UK

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ANNUAL REPORT AND FINANCIAL STATEMENTS 
FOR THE 52 WEEK YEAR ENDED 19 APRIL 2020