Loungers Plc Annual Report 2022

FY2022 Annual Report · Loungers Plc
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Company number 11910770

ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE 52 WEEKS ENDED 17 APRIL 2022

 
 
 
 
WHAT WE DO

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 195 sites, comprising 164 Lounges and 31 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.  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 outperformance, and in turn, it is 
this sales outperformance 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.

 OVERVIEW

What We Do 

 STRATEGIC REPORT

Chairman’s Statement 
Chief Executive’s Statement 
Key Strengths 
ESG – Loungers as a Force for Good 
Directors’ Duties – S172 Statement 
Financial Review 
Key Performance Indicators (“KPIs”) 
Principal Risks and Uncertainties 

IFC

3
5
9
10
14
16
19
20

  CORPORATE GOVERNANCE 
STATEMENT

Board of Directors 
Chairman’s Corporate Governance Statement 
Audit Committee Report 
Remuneration Committee Report 
Nomination Committee Report 
Directors’ Report 
Independent Auditors’ Report  
 to the Members of Loungers plc 

 FINANCIAL STATEMENTS

Consolidated Statement of  
 Comprehensive Income 
Consolidated Statement of Financial Position 
Consolidated Statement of Changes in Equity 
Consolidated Statement of Cash Flows 
Notes to the Consolidated Financial Statements 
Company Statement of Financial Position 
Company Statement of Changes in Equity 
Notes to the Company Financial Statements 
Reconciliation of statutory results to alternative  
 performance measures  
Company Information 

23
24
29
31
36
37

40

47
48
49
50
51
72
73
74

78
IBC

164

LOUNGES 
NATIONWIDE

31

COSY CLUBS 
NATIONWIDE

LOUNGE

COSY CLUB

Cosy Clubs are more formal restaurant-bars 
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 FY22 
year end, there were 31 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 17 April 2022, there were 164 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

OVERVIEW  LOUNGERS PLC ANNUAL REPORT 2022

1

Strategic Report

2

CHAIRMAN’S STATEMENT

OVERVIEW

A record year of ﬁnancial and operational progress

FY22 was a record year for Loungers, with sales of £237.3m, 
Adjusted EBITDA of £53.6m (IFRS16), and 27 new sites opened. 
We have come through the challenges of the Covid period 
with ﬂying colours, and we are a stronger, more resilient and 
indeed more ambitious business than ever before. All in all, our 
performance during the year was a truly outstanding achievement 
against an extraordinarily challenging and changeable backdrop.  

At the start of the ﬁnancial year, we only had roughly a third of 
our estate open - and even then those sites were only able to trade 
outside. On 17 May 2021 the entire estate recommenced trading, 
which for some of our sites was the ﬁrst time that they had been 
able to welcome customers since early November 2020. We had 
planned meticulously to ensure that we hit the ground running as 
quickly as possible, and as a result our sites were busy straight 
from the off.  

However, as we went into a very busy summer, the ‘pingdemic’, 
rising Covid cases, and signiﬁcant recruitment challenges caused 
severe disruption to our ability to trade normally. We found 
ourselves having to take extremely difﬁcult decisions and to make 
compromises about how we operated. Throughout this time, the 
commitment, professionalism and dedication of our teams never 
wavered, and it was humbling to witness the way in which they 
helped to navigate the business through the unprecedented 
challenges of that summer. 

As we went into autumn, a certain amount of stability returned and 
we regrouped with a sense of optimism that the pandemic and 
its consequences might ﬁnally be behind us. However, we could 
already see then the warning signs of economic trouble ahead as 
inﬂation started to soar, and we began to plan accordingly.  

As it transpired, Covid was far from over and the Omicron 
variant wreaked havoc throughout the Christmas season, which 
is of course a critically important time for the hospitality sector. 
Whilst sales at Lounge held up well during December, we saw 
widespread Christmas party cancellations at our 31 Cosy Clubs. 
Although some of those parties rebooked with us in the new year, 
it clearly wasn’t enough to compensate for the momentum that was 
lost in December. We are hopeful that, given the pent-up consumer 
demand after two years of lost Christmas party celebrations, 
December 2022 should be a bumper month. 

As we entered 2022, we found ourselves up against a new set of 
challenges, and the short-term outlook is looking exceptionally 
uncertain for many businesses. However, in the case of Loungers, 
our consistent outperformance relative to the wider hospitality 
sector is evidence of a team and a business that knows how to 
deliver on its strategic objectives whilst having to deal with all 
manner of challenges and distractions. Our performance in FY22 is 
clear evidence of that ability, and I see absolutely no reason why 
this will be any different in FY23 and beyond - especially as we 
have emerged from Covid as a more resilient, agile and adaptive 
business than ever before.  

LOOKING AHEAD 

Further challenges on the horizon, but well placed to take 
advantage given previous experience of trading successfully 
through a downturn 

The next few months will undoubtedly be challenging, albeit at the 
time of writing we are not seeing much in our trading performance 
to suggest that there has been any change to consumer sentiment.  

However, we have been planning for these headwinds for months 
now and I believe we are not only positioned to weather a 
signiﬁcant decline in consumer spending - or even a recession - but 
that we can actually take advantage of the circumstances. 

The reason for this conﬁdence is that as a business we have 
experience of dealing with a seismic economic shock before, 
having traded successfully through the 2008 ﬁnancial crisis. In 
2005/06 the economy was buoyant and consumer spending 
was elastic, which was exploited by the sector, and speciﬁcally 
by casual dining operators who conﬁdently increased their prices. 
As a small management team at the time, we took the view then 
that we should minimise any price increases and hold on to our 
value for money credentials. We resisted making short-term gains 
in exchange for being fully prepared should a recession happen. 
Ultimately this approach paid dividends, and when recession hit 
in the autumn of 2008 we didn’t need to alter our proposition or 
change our pricing as the consumer recognised that we already 
offered great value for money. 

By contrast, many of our peers found they had driven price 
increases too strongly and resorted to discounting in a desperate 
attempt to drive volume, which ultimately ended up undermining 
their offer for years afterwards. 

STRATEGIC REPORT  LOUNGERS PLC ANNUAL REPORT 2022

3

CHAIRMAN’S STATEMENT
CONTINUED

By early 2009 we were confident that we would not only continue 
to trade well - and ahead of our peers - but also that we should 
continue to accelerate our rate of growth. As our peers retrenched 
we expanded, taking advantage of an uncompetitive landscape 
for new sites and attracting talent to a business that was recognised 
to be winning. In September 2008 we had nine sites and by the 
end of 2011 we had 20 sites, with a further nine new sites planned 
for 2012. We were brave, ambitious, creative, and believed that 
we could build something special, and these same attributes have 
never been more alive in the business as they are today.

We have just opened our 200th site - a Cosy Club in Chester 
– and on 27 August the business will celebrate 20 years since 
we opened our first tiny 10-table café/bar called Lounge 
on North Street in Bedminster, Bristol. After two decades of 
sustained growth, we now employ over 6,000 people and we 
have a remarkably talented team lead by CEO Nick Collins and 
supported by a really engaged Board. Despite the near-term 
challenges, we remain hugely optimistic and ambitious for the 
future - particularly as it genuinely feels as if we are still just getting 
started. 

In my view, there are similar trends at play as we sit here 14 years 
on. Following the end of the third lockdown in 2021 we have 
seen prices in the hospitality sector surge. While some of these 
increases have been driven by a degree of necessity as supplier 
prices increased, some have also been driven by businesses 
trying to make up for months of lockdown. We have had to 
increase our prices in a targeted way, but by nowhere near as 
much as our peers. We have deliberately held back from doing so 
because we remember our experience in 2008 and how offering 
great value-for-money in an environment where the consumer is 
squeezed puts you at a distinct advantage. We are also extremely 
well placed to meet the challenges of incoming cost pressures to 
the business, as detailed in the CEO report. 

Alex Reilley
Chairman
13 July 2022

4

LOUNGERS PLC ANNUAL REPORT 2022  STRATEGIC REPORT  

CHIEF EXECUTIVE’S STATEMENT

INTRODUCTION

RECORD SALES PERFORMANCE

I am pleased to report on a very successful 
year for Loungers.  One in which we, on the 
whole, had the opportunity to put Covid behind 
us and begin to truly demonstrate the strength 
of the Loungers offer, the quality of both our 
brands, and the expertise of our people. 

To pick just a few highlights from what was a record year, we: 

 Delivered a sector leading three year LFL sales performance of 
22.1% (including VAT benefit)

 Opened a record 27 new sites

 Reduced net debt (excluding IFRS16 lease liabilities) to £1.03m

 Delivered IFRS16 Adjusted EBITDA of £53.6m, a record for 
the business

Whilst we continue to face a number of well-publicised headwinds, 
Loungers is uniquely well-placed within the leisure sector to thrive 
through a period of economic uncertainty and emerge stronger on 
the other side. Our key strengths include:

 Broad appeal across all parts of the day

 Value for money offer benefits from trading down

 Community driven offer benefitting from working from home 
and staying local

 Scale purchasing opportunities and operational gearing 
mitigating margin pressure

 Excellent property opportunities driving roll-out

 Self-financing roll-out

 Best in class management team, and outstanding talent across 
the entire business

Throughout the year the business consistently out-performed 
the sector by in excess of 15%, delivering robust like for like 
sales growth in both our Lounge and Cosy Club brands. 
This out-performance shouldn’t be a surprise – Loungers has 
consistently out-performed the market for more than seven years. 
The table below shows our LFL sales performance for the 48 weeks 
from full re-opening on 17 May 2021 to 17 April 2022 on 
both a net (including the benefit of the VAT reduction) and gross 
(excluding the one-off benefit of the VAT reduction) basis. 

Net – including VAT benefit

Gross – excluding VAT benefit

Three year LFL

48 weeks to 17 April 2022

+22.1%

+14.2%

The reasons for this out-performance are simple, we are serving 
more customers than we were pre-Covid and our customers are 
on average spending more. This isn’t a post-Covid blip; it is the 
product of our relentless focus on our strategic priorities, combined 
with shifts in consumer behaviour.

 We continue to innovate and evolve our food and drink 
menus, with our focus on value for money remaining at the 
forefront of our thinking.

 We continue to benefit from our focus on hospitality, atmosphere 
and community at a time when other operators are finding it more 
difficult to maintain standards in the face of recruitment difficulties.

 We continue to benefit from an increase in average spend as a 
result of the introduction of our order at table app, which now 
accounts for 40% of all Lounge sales.

 We are serving our customers more quickly and more 
consistently as a result of our focus on kitchen systems, 
processes and training, and

 We are benefitting from changes in consumer behaviour, 
with more people staying local, working from home, and 
supporting their local community and local high street.

5

STRATEGIC REPORT  LOUNGERS PLC ANNUAL REPORT 2022 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CHIEF EXECUTIVE’S STATEMENT
CONTINUED

While there is little doubt we are entering into a period in which 
consumer discretionary spending will come under pressure we 
remain confident that we are well-placed to continue to grow our 
sales within this environment:

 We remain excellent value for money. Over the past 12 months 
we have taken considerably less price than the sector in 
general as we recognise value is a key differentiator.

 We have a broad, all-day offer in both Lounge and Cosy 
Club, with customers enjoying both venues for a variety of 
occasions across the day and evening.  We are not overly 
reliant on any specific day-part or celebration spend.

 We know from the 2008 recession that we benefit from people 
being more discerning about their leisure spend, and people 
staying local.

SCALE AND OPERATIONAL FLEXIBILITY

Along with the rest of the sector, we are experiencing significant 
input cost inflation. We aren’t immune to this pressure, but we 
believe we are better placed than most to mitigate it. 

Our continued growth means we are attractive to suppliers and 
can benefit from increasing scale. During FY23 we will tender 
some of our food purchasing as we seek to consolidate our 
supply chain and take logistics costs out of the business. This is an 
ongoing process as we move over the medium-term towards a 
fully consolidated model. In addition, our food development teams 
continue to evolve the menu in the face of ingredient shortages and 
price increases. We don’t have a reliance on any single cuisine, 
we can sell whatever we want, and this allows us to move with 
trends and be very fleet of foot. We have significant expertise in 
both food and drink development and can engineer our menus 
away from ingredients that have seen short-term cost increases 
and use stretch to protect our margin whilst maintaining value for 
money. Added to this, we continue to see the benefit from our 
investment in our ‘kitchen Resets’ and the margin upside from 
increased uniformity across the estate.

Our utility costs were hedged in May 2020 until September 2024, 
giving us protection from price rises in the medium term. Elsewhere 
on the P&L we expect to benefit from operational gearing as our 
central costs are spread over an increasing number of sites. 

Loungers has a fantastic track record of delivering consistent like 
for like sales growth across the whole estate, in both older and 
newer sites. We have achieved this via an unwavering focus on the 
customer, our product and our hospitality. This will remain unchanged 
in FY23, and I anticipate that any resulting margin impacts will be 
modest, short-term and compensated for by our sales performance.

INVESTING IN OUR TEAM

It has been an important year in the evolution of our People 
strategy. Covid and the various lockdowns (and to a lesser degree 
Brexit) have resulted in a shift in attitudes towards working in 
hospitality. As a result of this Loungers, along with the rest of the 
hospitality sector, had to re-evaluate both our role as an employer 
and how we make ourselves more attractive as an employer, in 
particular to the younger generations. During the year it became 
apparent that there was a real recruitment and retention challenge 
in our sector, varying in impact across England and Wales. It rarely 
impacted our ability to trade at full capacity, and it did not impact 
our roll-out and the opening of new sites. 

During the year we launched ‘The Commitments’ setting out very 
publicly to our team (and prospective employees) the values that 
we want to represent as an employer. Included within these were 
commitments to (i) respect everyone’s time off, (ii) to pay fairly, 
(iii) to rota fairly, (iv) to focus on everyone’s development and 
progression and (v) to ensure everyone is made welcome. These 
weren’t new values to Loungers, but we wanted to make sure 
everyone in the business knew what we stood for and to be held to 
account. There are no easy wins here – the sense we get from our 
team is that it is not about pay. It is about flexibility, working hours, 
team environment, progression and development, fairness and 
respect. By setting out our values, we want our team to hold us to 
account, which will allow us to become an even better employer.  

Towards the end of the year we significantly restructured the 
operations team within the Lounge business. With the continued 
growth of the business, this is necessary every two to four years. 
The restructure saw us add one Operations Director, two Regional 
Operations Managers and five Operations Managers/Chefs. It 
also saw us reduce the ‘site to ops team ratio’ at every level. At the 
Operations Managers/Chefs level we now have a ratio of 5:1, 
which is unprecedented in our sector. This consistently low ratio 
has allowed for our intensity of operation and our focus on detail. 
Pleasingly all of the new roles were filled with internal promotion 
candidates. We continue to lead the way in providing outstanding 
career progression opportunities within our sector.

6

LOUNGERS PLC ANNUAL REPORT 2022  STRATEGIC REPORT   
 
 
CHIEF EXECUTIVE’S STATEMENT
CONTINUED

NEW SITE OPENINGS AND ROLL-OUT

During the year we opened 27 sites, a record number of new 
openings, and after an enforced pause due to Covid, our roll-
out programme is very much back on track. We are opening 
high-performing sites, achieving above average levels of sales and 
EBITDA. This reflects the market for new sites and we continue to see 
really strong opportunities for prime pitch Lounges and Cosy Clubs 
in target high street locations where we know we will trade well. The 
year saw a bias towards Lounge openings - of which there were 
26 vs one Cosy Club - which is a reflection of how Lounges can 
thrive in different location types. Highlights include openings in:

 Smaller towns such as Matlock (Ostello Lounge) and 
Pontypridd (Gatto Lounge)

 Larger towns such as Basildon (Orleto Lounge) and 
Shrewsbury (Floro Lounge)

 Greater London locations such as Ealing (Castano Lounge)

 Retail centres such as Fosse Park in Leicester (Volpo Lounge)

 Coastal locations benefiting from staycations such as 
Aberystwyth (Athro Lounge) and Bognor Regis (Bonito Lounge)

The pipeline is well-developed and we continue to see a wealth 
of excellent opportunities, whilst maintaining our sector-leading 
sub 6% rent to revenue ratio. It remains the case that we typically 
convert former retail units or bank units, occupying prime pitches on 
the high street. As a result of our confidence in both our operational 
performance in opening sites and the range of opportunities we are 
seeing, we have decided to increase the rate of roll-out. 

We have recently been opening at a rate of around 25 sites per 
year, using four in-house site fit-out teams. In the coming weeks we 
will be increasing to five fit-out teams and this will give us annual 
capacity of around 32 sites a year. For this year (FY23) we expect 

to open around 30 sites given the mid-year introduction of the 
additional team. We continue to have real confidence over the 
potential scale of the business, with the capacity to open at least 
500 sites across both brands in the UK.

In the current year we anticipate opening at least four Cosy Clubs 
(including Chester, Milton Keynes, Harrogate and Canterbury). 
Operating in city centres and larger market towns, there are fewer 
Cosy Club opportunities overall than Lounge and as a result, the 
number of Cosy Club openings each year can vary. The Cosy Clubs 
continue to go from strength to strength and this year is an opportune 
time to have several openings to capitalise on the momentum within 
the brand.  We are particularly pleased with the impact of the Project 
Finesse roll-out, which incorporated a more elevated menu and 
guest experience alongside more sophisticated design and furniture 
that is more fitting for the Cosy Club surroundings.

INNOVATION AND EVOLUTION

The most significant change during the year was the re-working of 
the Cosy Club food menu. We saw the opportunity to elevate the 
proposition and take even greater pride in the offer. The new menu 
launched across the business last autumn, and saw the introduction 
of small plates on the menu, wider stretch with more expensive 
dishes at one end whilst retaining our value for money at the other. 
The menu launch was accompanied by an overhaul of our steps 
of service and an investment in our furniture which has altogether 
really pushed the brand on. We are delighted with the impact this 
is having across the Cosy Club estate. 

Right at the end of the year we saw a considerable menu change 
in Lounge with some 40% of the dishes either being replaced 
or improved. 

Our investment in the kitchens continues, with the final 60 Lounges 
now being improved via our Reset programme, benefitting from the 
new equipment and standardised layouts.

7

STRATEGIC REPORT  LOUNGERS PLC ANNUAL REPORT 2022 
 
 
 
 
CHIEF EXECUTIVE’S STATEMENT
CONTINUED

We have also more formally defined our ESG strategy. I believe it 
is important that this is driven by our teams rather than purely in the 
boardroom and as such it is based around four core pillars:

1.  Looking after our teams well and being an inclusive employer

2.  Bringing joy to local places across the country

3.  Delivering our hospitality sustainably

4.  Being proud of what we put on the plate

We already achieve a great deal within these categories, but 
importantly have identified areas where we can improve and are 
building a framework to allow us to deliver.

MANAGEMENT TEAM

We remain very focused in evolving and building the strongest 
management team in the sector to facilitate the successful roll-out 
of our brands. During the year Tom Trenchard, Property Director, 
took over responsibility for the construction side of the business, 
joining together the site acquisitions and build businesses under 
one leader. I am also delighted to announce the appointment of 
Guy Youll as Chief People Officer. Guy joins the business in the 
autumn and will lead the people side of the business and build on 
the important work we have done this year. We continue to focus 
a great deal on developing our employees’ careers and there 
continue to be many positive internal success stories as we grow.

CURRENT TRADING AND OUTLOOK

Since the year end our LFL sales have been +17.9% on a three year 
basis, representing a 15% out-performance of the Peach Tracker.  
We are delighted with how the business is trading and, despite the 
well-documented macroeconomic challenges, have not yet seen 
any shift in how our customers are behaving.

Whilst the short-term outlook is of course uncertain, we remain 
confident in the future prospects for Loungers given the quality 
and value of our all-day offering.  In addition, our pipeline of new 
openings is well-developed and we continue to see a wealth of 
excellent opportunities to occupy prime pitches on the high street.  
This, combined with our recently expanded fit-out teams, means 
that we now have the capacity to roll-out over 30 sites a year 
and expect to have at least 500 sites in the UK across both of our 
brands in the future.

Nick Collins
Chief Executive Officer
13 July 2022

8

LOUNGERS PLC ANNUAL REPORT 2022  STRATEGIC REPORT  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 continued to invest 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 
18 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 economic 
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

 Value for money all-day offer – there is limited reliance on 
peak trading periods

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

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 25 sites in FY19 and  21 sites in FY20 pre lockdown.  
Whilst openings were restricted to three new sites in FY21 due to the 
Covid-19 pandemic, we have opened 27 new sites in FY22, and as 
at the date of this report, a further six sites since the year end.

STRATEGIC REPORT  LOUNGERS PLC ANNUAL REPORT 2022

99
9

 
 
 
ESG – LOUNGERS AS A FORCE FOR GOOD

Striving to make a positive difference in all 
aspects of our operations has always been an 
inherent part of Loungers’ strategy. 

The challenges of the past two years have given the Group 
the chance to demonstrate what we are best at as well as 
consolidating our thinking in how best to approach the challenges 
of the future. The Directors believe that our four core pillars as set 
out below not only propel our commercial success but benefit our 
teams and society more widely.

When considering the UN’s 17 Sustainable Development Goals, 
the Group’s day to day operations as an employer of over 6,500 
people across 200 sites gives us tangible opportunities to make 
a positive contribution, particularly in the areas of “Decent work 
and economic growth”, “Sustainable cities and communities” and 
“Responsible consumption and production.” During the past year, 
we have engaged both internally and externally with stakeholders 
and industry experts to understand how our actions are impacting 
at the moment and how we can do more.

PEOPLE – LOOKING AFTER OUR TEAMS 
WELL AND BEING AN INCLUSIVE EMPLOYER

Having high quality team members, both at site and at head office, 
is critical to the functioning of the Group. At site level the ability 
to be truly engaging in delivering genuine hospitality, whilst also 
preparing and delivering high quality food and drink is fundamental 
to delivering our strategy and the long-term success of the Group.

In March of 2022 we launched “The Commitments,” in which we set 
out what our teams can expect from working at Loungers, including:

 Prioritising work-life balance, through different contract 
options, days off, holiday time

 Fair rotas, including advance notice, minimal changes, limiting 
long shifts, paid breaks and staff food on all shifts

 Fair pay, including paid overtime and new tip functionality 
on the order at table app. Our share ownership plans mean 
that over 50% of our salaried employees are owners in the 
Loungers business

 Development and Progression, with clear pathways for 
progression and regular feedback. In the year to April 2022, 
12% of our team were internally promoted, while in the recent 
restructure of our operational teams, all the promotions were 
internal candidates

 Welcome for all, encouraging individuality and authenticity at 
work. In an employee survey in February 2022, of the 2,906 
responses the mean average response to the question “I feel 
accepted and can be myself at work” was an 8.9 on a scale 
from 0 (completely disagree) to 10 (completely agree).

Engaging regularly with our employees is important to Loungers and 
we take feedback from our teams through our regular Glue Crews 
and pulse surveys, as well as our email service “The Voice” which 
can be contacted anonymously to raise any issues. Once a year we 
bring all our teams to “Loungefest,” our annual staff party where we 
close our sites for the day and celebrate our culture together.

10

LOUNGERS PLC ANNUAL REPORT 2022  STRATEGIC REPORT   
 
 
 
 
ESG – LOUNGERS AS A FORCE FOR GOOD
CONTINUED

COMMUNITIES AND CUSTOMERS – BRINGING 
JOY TO LOCAL PLACES ACROSS THE COUNTRY

When Loungers was founded in 2002, it was to create a place 
where people could go that was “home from home” - warm, 
welcoming and relaxing from breakfast through lunch to evening 
meals, pints and cocktails. This spirit has grown across the country 
from St Ives up to Durham and community remains at the heart of 
what we do. 

Loungers is a proudly Bristol born and grown brand and has 
expanded largely through market towns and suburban areas. We 
sustain over 6,500 jobs currently and until Castano Lounge opened 
in Ealing in 2022 these were all outside of Zone 4 London, including 
sites in many of the Government’s Top 20 Levelling up Priority areas 
such as Wolverhampton and Aberystwyth. In many cases, these 
have been sites where previous businesses have closed, thereby 
regenerating high streets by bringing new footfall and energy. 

It’s crucial to us that our Lounges become embedded within 
the communities that they serve. Our teams find creative and 
innovative ways to achieve this, working with local charities and 
organisations, arranging and participating in community events 
and more. Since 2015, we have run an annual 2-month-long 
initiative known as “LoungeAid” whereby our site teams raise 
money for local causes. 

For every new Lounge or Cosy Club, we donate 50p from every 
burger and 20p from every coffee sold to a local charity: this 
equates to an average of £1,000 donated to local charities for 
each new opening. Additionally, our sites regularly run their own 
community projects, from hosting local knitting clubs and social 
events to organising lockdown soup kitchens and free school meals.

Our sites are designed to be welcoming, with full disabled access 
and space to wheel buggies around. We bring the same quality 
and attention to detail on our build and on our menu wherever we 
are from Athro Lounge to Zorro Lounge as we believe where you 
live shouldn’t impact on the quality you get. We are committed to 
giving our customers value for money.

What we offer the customer has an important role in shaping 
their food consumption and our separate vegan menu is an 
example of how by offering a great selection we are having a 
positive sustainability impact. Similarly we recognise that we 
have a responsibility to ensure that we make our healthy choices 
as delicious and visible as possible in comparison with our less 
healthy options. At all times, we prioritise customer safety, with 
allergen training mandatory for our teams and allergen matrices 
available in every site.

We have a high number of loyal, regular customers and we 
encourage our teams to get to know them and understand what 
brings them back to Loungers. This is supported by use of Feeditback, 
an online tool to collect feedback on customer experience, which is 
reviewed daily by our site teams and senior management.

SUPPLIERS – BEING PROUD OF WHAT WE 
PUT ON THE PLATE

Whilst we don’t directly employ the people in our supply chain, we 
believe that we have an obligation that extends beyond the basic 
health and safety requirements of supply chain assurance.

We consider provenance of our core ingredients carefully:

 All whole eggs used in our kitchens are free range.

 All coffee, tea and hot chocolate are Fairtrade, with coffee 
purchased 97% from origin and bought at an average of 
126% over Fairtrade price.

 We have recently signed up to the Better Chicken 
Commitments, an evidence-based animal welfare policy.

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 and we actively support 
smaller entrepreneurial suppliers in order to give them access to a 
nationwide customer base.

We take a collaborative approach towards projects with our 
suppliers and have dedicated internal resource to ensure close and 
timely communication, with many suppliers attending Loungers events.

11

STRATEGIC REPORT  LOUNGERS PLC ANNUAL REPORT 2022 
 
 
ESG – LOUNGERS AS A FORCE FOR GOOD
CONTINUED

ENVIRONMENT – DELIVERING OUR 
HOSPITALIT Y SUSTAINABLY

As one of the fastest growing businesses in our industry we 
recognise the impact that our operations can have on our planet. 
During the year we have met with representatives from the Zero 
Carbon Forum and sought advice from an external consultant 
about how we can improve sustainability across our business.

We are relatively unusual in the hospitality sector in that we have 
our own in-house designers and builders. This vertical integration 
means that we have more visibility and influence on our site 
openings, enabling us to embed sustainable practices such as 
using excess materials from one site on the next, using reclaimed 
flooring and vintage furnishings throughout the estates, as well as 
new technology such as LED lightbulbs in all sites.

We have a number of policies in place to reduce waste and 
recycle where possible, using a zero to landfill waste company, 
with separate collections for food waste, glass and dry mixed 
recycling. Around 500,000 litres of our used cooking oil is 

collected and turned into biofuel annually. All our menus are 
printed on FSC certified paper, while all straws and takeaway 
packaging is fully compostable.

We work with Amber, a B Corp certified energy consultancy, who 
manage our energy supply and offer guidance around reducing 
carbon emissions, such as optimising sites to minimise energy 
wasted during the national lockdown period. Currently our sites 
receive energy from 50% renewable and 5% nuclear sources and 
we are looking at ways in which we can increase the proportion 
from clean energy sources.

While Loungers is not required to report against the Taskforce for 
Climate-Related Financial Disclosure recommendations until the 
next financial year, we have begun to consider processes and 
strategies for approaching climate related risk that will be evolved 
over the coming year.

12

LOUNGERS PLC ANNUAL REPORT 2022  STRATEGIC REPORT  

ESG – LOUNGERS AS A FORCE FOR GOOD
CONTINUED

STREAMLINED ENERGY AND CARBON REPORTING

The data below relates wholly to the United Kingdom and covers the 52 week periods to 17 April 2022 and 18 April 2021.

2022
Energy Usage 
(kWh)

2022
GHG Emissions 
(CO2e tonnes)

2021
Energy Usage
(kWh)

2021
GHG Emissions 
(CO2e tonnes)

Grid electricity

Natural gas

Transport fuel (purchased and reimbursed)

Total

Scope 1

Scope 2

Scope 3

Total

Intensity ratio

Annual revenue (£000)

Total CO2e tonnes per £m revenue

26,106,974

28,945,216

2,109,924

57,162,114

29,418,525

26,106,974

1,636,615

57,162,114

12,578,753

13,976,477

1,157,488

27,712,718

14,213,322

12,578,753

920,643

27,712,718

6,034

5,875

519

12,428

5,992

5,543

893

12,428

237,291

52.4

3,185

2,848

288

6,321

2,848

2,992

481

6,321

78,346

80.7

QUANTIFICATION AND REPORTING METHODOLOGY

INVESTORS AND GOVERNMENT

Gaining the confidence of existing and potential investors has 
remained a priority for the Group following its IPO in April 2019. 
In the coming years more sustainability focused legislation is likely 
to influence our operations and we will continue to engage with 
investors and regulatory bodies to understand the impact of this 
and ensure that we are prepared.

We continue to 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, through regular investor 
meetings, market updates, roadshows and consultations.

We have followed 2019 HM Government environmental reporting 
guidelines to ensure compliance with the SECR requirements. The 
DEFRA issued 2021 conversion figures for CO2e were used along 
with the fuel property figures to determine the kWh content for 
unknown liquid fuels used in transport.

INTENSITY MEASUREMENT

The chosen intensity measurement ratio is £m turnover.

MEASURES TAKEN TO IMPROVE ENERGY EFFICIENCY

Loungers PLC continue to strive for energy and carbon reduction 
arising from their activities. During this reporting period, the Group 
has:

 Set up its sites from the start with LED lightbulbs, reclaimed 
flooring and vintage furnishings. 

 Collected used cooking oil (circa 500,000 litres per year) 
from sites and used an external company to recycle it into 
biofuel.

13

STRATEGIC REPORT  LOUNGERS PLC ANNUAL REPORT 2022 
 
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; and

RESPONSE TO COVID-19

In establishing how the Group’s sites would operate after the 
reopening of trading in May 2021, the Board considered feedback 
from staff and customers, customer behaviour observed during 
initial trading and the practices adopted by the hospitality industry 
as a whole. As the government lifted all restrictions in July, all staff 
were invited to express their views through an online survey, which 
was discussed as part of the Board’s decisions on how to support 
staff and retain customer experience. The Board was kept regularly 
informed by the CFO of the impact of Covid-19 upon trading 
performance and cash flow, which enabled them to balance the 
longer term health of the business with the provision of support to 
employees impacted by Covid-19. As a result, the decision was 
taken to provide a company funded equivalent of the furlough 
scheme throughout the Omicron wave in the winter months.

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

RECRUITMENT AND RETENTION

The Group monitors retention rates and conducts exit interviews 
with all salaried employees. Following a number of regional 
recruitment shortages, the Executive Directors and the brand 
Managing Directors sought to address key themes being raised by 
employees through a specific paper on Recruitment and Retention. 
The responses to the issues raised were developed into “The 
Commitments”, as referenced in the ESG section of the Strategic 
report on page 10.

NEW SITES

The Board is mindful of the positive impact that opening a Lounge 
or Cosy Club can have on local communities, but also of ensuring 
that the Group has the operational capability to deliver new sites. 
During the year the Board approved a new internal structure for 
the Property and Build teams to ensure that the Group was well 
positioned to deliver on the property pipeline.

The Directors consider the Group’s key stakeholders to be its 
employees, its customers, its suppliers, the communities in which 
it operates and its shareholders. Details about how the Group 
interacts with these stakeholders can be found in the ESG section of 
the Strategic Report on pages 10 to 12.

The following disclosure describes how the Directors have had 
regard to the matters set out in Section 172(1)(a) to (f) and 
together with the information set out in the ESG section of the 
Strategic Report on pages 10 to 12 forms the Directors’ statement 
under section 414CZA of the Companies Act 2006.

The Board considers the impact upon the key stakeholders as part 
of all decision making. It seeks engagement from stakeholders 
through a variety of methods, including briefings from Executive 
Directors and senior leaders within the business, customer 
feedback and staff surveys. During the year ended 17 April 2022, 
measures adopted to improve awareness of stakeholder impact 
included the inclusion of enhanced monthly reporting focused on 
People (the Group’s staff) and Health and Safety (the Group’s 
customers) as well as a more detailed quarterly update to the 
Board by the CEO following the meetings of the Health and Safety 
Committee.

During the year, the key strategic issues under discussion by the 
Board continued to be the Group’s response to the Covid-19 
pandemic, specifically how to reopen sites in a way that preserved 
the nature of a Lounge or Cosy Club in a safe way for our staff and 
customers, as well as how to manage wider issues of recruitment 
and retention in the hospitality industry and how to progress the 
Group’s pipeline of new sites.

14

LOUNGERS PLC ANNUAL REPORT 2022  STRATEGIC REPORT   
 
 
 
 
 
15

STRATEGIC REPORT  LOUNGERS PLC ANNUAL REPORT 2022FINANCIAL REVIEW

OVERVIEW

The year to 17 April 2022 represents the first year in our three years 
as a public company where we have ended the year with all our sites 
open, trading, and free of Covid restrictions.  Indeed, if we exclude the 
first four weeks of the year where we could trade external areas only, 
and excepting the impact of Omicron on our Christmas trading, then 
the past year has very much seen a return to normality.

The financial highlights below demonstrate the underlying resilience 
and relevance of the Loungers business, and the positive benefits of 
that return to normality.

Revenue

Operating profit / (loss)

Operating margin (%)

Profit / (loss) before tax

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

Net cash generated from operating activities

Net debt

IFRS 16

Year ended 
17 April 
2022
£000

Year ended 
18 April 
2021
£000

237,291

78,346

28,437

12.0%

21,605

17.0

69,626

(7,728)

(9.9%)

(14,722)

(10.9)

12,031

120,627

144,823

Year on year revenue was up by £158.9m to a record £237.3m. 
Whilst Covid restrictions meant our sites could only trade in 34% 
of the available weeks in the comparative year, strong like for 
like (“LFL”) sales growth and the strength of our new site openings 
also played a significant role in delivering the year on year sales 
uplift.  Accompanying the sales growth, operating profit increased 
to £28.4m from an operating loss of £7.7m in the prior year, with 
operating margins growing to 12.0%.  We continued to benefit from 
various government support measures during the year (detailed 
below) and they played a part in delivering our strong operating 
margin performance.

The strong trading and profit performance, allied to the recovery in 
the Group’s negative working capital position that the resumption of 
full trading allowed, resulted in net cash generated from operations 
of £69.6m.  Post investing and financing outflows net cash balances 
increased by £26.3m and were instrumental in the reduction in net 
debt of £24.2m.

Throughout the annual report and accounts we use a range of 
financial and non-financial measures to assess our performance.  
A number of the financial measures, for example Like for Like 

(“LFL”) sales and Adjusted EBITDA 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 adjusted numbers reported 
below are included after the financial statements as an annex to this 
Strategic Report on page 78.

The table below summarises the key APM’s under both IFRS16 and 
IAS17 and covers the past three financial years.  The negative impact 
of Covid restrictions and the positive impact of government support 
continues to make comparisons difficult.  The year ended 19 April 
2020 is arguably a more sensible comparator in that its broadly 
five weeks of total lockdown and two weeks of Covid impact is not 
wholly dissimilar to the four weeks of limited external trading and the 
Omicron impacted December 2021 that was suffered in the year to 
17 April 2022.

16

LOUNGERS PLC ANNUAL REPORT 2022  STRATEGIC REPORT  FINANCIAL REVIEW
CONTINUED

Sites at year end

New sites opened

Revenue

Adjusted EBITDA – IFRS16

Adjusted EBITDA margin (%) – IFRS16

Adjusted EBITDA – IAS17

Adjusted EBITDA margin (%) – IAS17

Net debt – IAS17

Revenue of £237.3m compares to £166.5m in the year to 
19 April 2020 and reflects the positive impacts of strong LFL sales 
performance, a record 27 new sites opened during the financial 
year, and the reduced VAT rates on food and non-alcoholic drinks 
that ran to 31 March 2022, and delivered a benefit of £15.1m.  
The Group has delivered consistently strong LFL sales, whether 
measured on a two year (40 weeks where trading not impacted 
by lockdown in the current or comparative year) or three year 
basis (48 weeks where trading not impacted by lockdown in the 
current year) and whether including or excluding the benefit of the 
VAT reduction:

Two year LFL

Three year LFL

40 weeks to

48 weeks to

20 February 2022

17 April 2022

Net – including VAT benefit

Gross – excluding VAT benefit

+17.7%

+9.3%

+22.1%

+14.2%

Adjusted EBITDA (IAS17) of £42.3m compares to £18.8m in the 
year to 19 April 2020, with a corresponding increase in Adjusted 
EBITDA margin from 11.3% to 17.8%.  The reduction in the VAT rate 
on food and non-alcoholic drink was the most substantial part of 
that margin expansion, contributing 5.6% to the margin growth 
of 6.5%.

Non-property net debt reduced to £1.0m, a year on year 
reduction of £33.2m.  This reflects not only the strong trading 
and EBITDA performance but also the rebuilding of the Group’s 
negative working capital position.

Year ended 
17 April 
2022
£000

195

27

237,291

53,639

22.6%

42,319

17.8%

1,025

Year ended 
18 April 
2021
£000

168

3

78,346

13,913

17.8%

3,530

4.5%

34,245

Year ended 
19 April 
2020
£000

165

21

166,502

28,767

17.3%

18,813

11.3%

34,956

IMPACT OF UK GOVERNMENT SUPPORT INITIATIVES

In addition to the VAT reduction referenced above the Group 
benefited over the year from the continuation of a number of 
UK Government initiatives introduced to mitigate the impact of 
Covid-19, notably:

 The Coronavirus Job Retention Scheme (“CJRS”) – The 
Group continued to benefit from the CJRS through to the 
ending of the scheme on 30 September 2021.  During the year 
under review the Group received a total of £4.1m of funding 
under the CJRS.  A total of £2.1m was recognised in the 
statement of comprehensive income in the year, offsetting site 
payroll costs on the cost of sales line and head office payroll 
costs on the administrative expenses line.  Cash receipts 
included £2.0m that was recognised in the FY21 results.

 Business Rates Relief – The Group’s sites have benefitted 
from the business rates holiday that ran to 30 June 2021, and 
subsequently from the 66% reduction (capped at £2.0m) that 
ran to 31 March 2022.  During the year to 17 April 2022 the 
Group has benefitted by £3.3m.

 Support Grant Funding – In the year under review the 
Group has recognised £2.5m of grant funding received under 
the Restart Grant scheme.  This income has been recognised 
under other income.

The Corporate Insolvency and Governance Bill provided a range 
of protections for tenants and allowed the Group to continue to 
work collaboratively with all of its landlords, seeking to reach 
agreement over an equitable share of the pain of lockdowns and 
trading restrictions.  The Group has recognised £0.8m in the year 
in respect of rent waivers.

STRATEGIC REPORT  LOUNGERS PLC ANNUAL REPORT 2022

17

 
 
 
FINANCIAL REVIEW
CONTINUED

LONG TERM EMPLOYEE INCENTIVES

The focus on employee engagement and retention has been 
unstinting throughout the year, and share awards continue to 
play a significant role in these efforts.  During the year the Group 
granted further share awards under the employee share plan 
(574,000 shares) and the senior management restricted share 
plan (435,334 shares).  These awards were made to a total of 
1,206 employees who work across the business, predominantly at 
site level, and in hourly paid and salaried positions.  In addition, 
awards covering 673 employees and in respect of 338,664 
shares vested in the year.

The Group recognised a share based payment charge in the year 
of £3.2m (2021: £2.0m), the charge covering the employee share 
plan, the senior management restricted share plan and the value 
creation plan.

FINANCE COSTS AND NET DEBT

Finance costs of £6.9m (2021: £7.0m) include IFRS 16 lease 
liability finance costs of £5.7m (2021: £5.6m) and bank interest 
payable of £1.2m (2021: £1.4m).

Net debt at the year end including property leases of £120.6m 
(2021: £144.8m) represented a significant decrease over the prior 
year, with strong trading and profitability, allied to the rebuilding of 
the Group’s negative working capital position, offsetting the impact 
of adding new lease liabilities of £16.4m.

The Group’s capital structure includes a £32.5m term loan due for 
repayment in July 2024.  The Group entered into an interest rate 
hedge to fix SONIA at 0.7% until July 2022.  Whilst the Group’s 
significant positive cash balances provide an element of natural 
interest rate hedge the Board continues to consider the options for 
hedging the interest rate risk on the outstanding term loan.

In April 2020 the Group entered into an incremental £15m RCF 
facility to provide additional liquidity should it be required during 
the Covid lockdowns.  It is envisaged that this facility, which has 
never been drawn upon, will be allowed to expire at its term date 
in October 2022.

TAXATION

The Group has reported a tax charge of £3.7m for the year to 
17 April 2022 (2021: credit of £3.6m) and at year end carried 
a corporation tax receivable of £0.1m (2021: £nil payable or 
receivable) and a deferred tax asset of £1.4m (2021: £3.8m).  
The corporation tax payable in respect of the year of £1.3m 
benefits from the introduction of the 130% capital allowance super 
deduction.  During the year corporation tax payments on account 
of £1.4m were made.

CASH FLOW AND CAPITAL EXPENDITURE

Net cash generated from operating activities of £69.6m (2021: 
£12.0m) reflects a working capital cash inflow of £19.7m (2021: 
cash outflow of £1.3m).  The working capital cash inflow has 
been achieved in spite of a significant reduction in deferred Covid 
liabilities.  At year end the Group had settled all bar £1.4m of its 
deferred Covid liabilities in respect of outstanding rents and all of 
its HMRC liabilities (2021: £12.9m outstanding in total).

Cash outflows in the year in respect of capital expenditure totalled 
£22.8m (2021: £7.8m) and compare to the cost of fixed asset 
additions (excluding right of use assets) recognised in the year 
of £26.2m.  The lower cash outflow reflects the rebuild of capital 
expenditure creditors as the new site opening programme returned 
to its pre Covid pace during the year.  Capital expenditure in the 
year of £26.2m (2021: £5.1m) included £19.6m (2021: £2.8m) in 
respect of new site openings.

18

LOUNGERS PLC ANNUAL REPORT 2022  STRATEGIC REPORT  FINANCIAL REVIEW
CONTINUED

KEY PERFORMANCE INDICATORS (“KPIS”)

The KPIs, 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:

Year ended
17 April 2022
£000
Growth 

Year ended
18 April 2021
£000
Growth / (decline)

Year ended
19 April 2020
£000
Growth

27

£26.2m

+22.1%(1)

302.9%

22.6%

3

£5.1m

+13.3%

(52.9%)

17.8%

21

£22.8m

+4.4%

8.8%

17.3%

The impact of reflecting the third scenario is to reduce expectations 
of Adjusted EBITDA (IAS17) by approximately 54% for FY23 
relative to the Group’s budget.  Under this scenario the Group is 
forecast to remain comfortably 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 
financial statements for the year ending 17 April 2022 on the going 
concern basis.

Gregor Grant
Chief Financial Officer
13 July 2022

New site openings

Capital expenditure (IAS 16 PPE excluding IFRS RoU assets)

LFL sales growth (excluding lockdown periods) 

Total sales growth

Adjusted EBITDA margin (IFRS 16)

(1) 

Three year LFL calculated over 48 weeks from 17 May 2021 and including VAT benefit

GOING CONCERN

In concluding that it is appropriate to prepare the financial statements 
for the year to 17 April 2022 on the going concern basis attention 
has been paid both to the potential impact of further Covid-19 
outbreaks on the Group and also to the current sector headwinds in 
terms of consumer confidence and inflationary pressures.

The Group has very successfully navigated the Covid-19 challenges 
of the past two years and has emerged with a significantly 
strengthened balance sheet, with IAS17 net debt reduced to £1.0m 
at 17 April 2022 and total liquidity, excluding the incremental £15m 
RCF which is assumed to expire in October 2022, of £41.3m.

In order to assess the Group’s going concern position the Board has 
considered three downside scenarios of the Group’s business plan.

 The first scenario assumes a re-emergence of Covid-19 in 
similar fashion to the Omicron outbreak of 2021.  A sales 
decline of 20% relative to the FY23 budget for 12 weeks 
across December 2022, January and February 2023 has been 
modelled.  This is significantly worse than the impact felt from 
the 2021 Omicron variant.

 The second scenario looks to model a weakening in consumer 
confidence, commencing in July 2022 and accelerating in 
October 2022 with sales between 5% and 10% below budget, 
allied to continuing cost of goods sold and labour inflation 
reducing gross margins by 1%.

 The third scenario combines both the above scenarios, 
resulting, for example, in sales being 30% below budget across 
December 2022 to February 2023.

STRATEGIC REPORT  LOUNGERS PLC ANNUAL REPORT 2022

19

 
 
 
PRINCIPAL RISK 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 take 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

Consumer 
confidence

Cost 
inflation

Covid-19

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. 

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.

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

The increasing scale of the Group and its attractiveness to 
suppliers has assisted in mitigating cost inflation in respect 
of food and drink products.  Utility costs are hedged until 
September 2024. The Group continues to monitor its supply 
chain constantly and seeks to optimise efficiency through a 
number of initiatives.

The Group derives all its sales and profits from its 200 sites.  
The complete closure of sites as required during the Covid-19 
lockdowns had a very severe negative impact on sales 
and profits.  Whilst the Directors consider the risk of further 
lockdowns to be remote, the Group continues to monitor the 
situation in order to respond as required.

During the pandemic, the Group demonstrated its ability to 
respond to changing circumstances through:

•   Preserving access to capital
•  Closing and reopening sites safely 
•   Supporting staff required to isolate
•   Ensuring that operating processes in sites minimised risk

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.  Allergen training is 
mandatory for all employees in sites.

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.

Recruitment 
and 
retention

Availability 
of new sites

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.  Over the 
past year, recruitment has been very challenging across the 
hospitality sector. The increased level of competition has the 
potential to put additional pressure on wage inflation.  

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

The Group continues to strengthen its recruitment and training 
and development teams to assist in recruiting and retaining the 
best talent.

The Group’s growth strategy includes an expectation that 
we can continue to open up to 32 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.

As we emerge from Covid-19 there is considerable new site 
acquisition opportunity in a more tenant friendly environment. 
The Group continues to strengthen its property team to ensure 
that we can respond to the right opportunities in a timely 
fashion.

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 recognises that cyber threats pose a significant risk 
and works to continually assess and manage these risks.

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. During the 
year, the Board reviewed the cyber security framework and a 
number of measures have been adopted, including the rollout 
of Office 365, data security training for head office staff and 
phishing email software and testing.

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
13 July 2022

20

LOUNGERS PLC ANNUAL REPORT 2022  STRATEGIC REPORT  CORPORATE 
GOVERNANCE 
STATEMENT

22

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.

NICK 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 195 sites at 17 April 2022. 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 22 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.

NICK BACKHOUSE 
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 both Hollywood Bowl Group plc (2016 – 
Present) and 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 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 BELLAMY 
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 Chairman 
at Ten Entertainment Group plc (2018 – Present) and is a Non-Executive 
Director and chair of the Audit Committee at In the Style plc (2021-present) 
and a Non-Executive Director at Gymﬁnity Kids Limited (2020 - Present). 
Adam was previously CFO (2012-2018) and then a NED (2018-2020) at 
Pure Gym 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 LIT TLE 
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). Jill also 
held positions as Non-Executive Director at Nobia AB (2017 – 2020) 
and Shaftesbury plc (2010 – 2020), as an adviser to El Corte Ingles S.A. 
(2012 – 2020), Europe’s largest department store group, and as Chairman 
of the National Trust Commercial Group (2014 – 2021). 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.

GOVERNANCE  LOUNGERS PLC ANNUAL REPORT 2022

23

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 17 April 2022 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 the need for 
continued evolution of our governance practices and disclosures 
in order to ensure they support the growth and strategic progress 
of the business 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 its annual 
strategy day in April 2022, part of which was attended by senior 
members of the management team. In addition to consideration 
of the Group’s operational strategy, the session provided an 
opportunity for discussion around other topics of key strategic 
importance, including:

the Group’s five-year plan;

 the Group’s Environmental, Social and Governance (“ESG”) 
agenda and areas of focus;

the Group’s pricing strategies and

the Group’s culture and employee engagement.

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. In the 
course of 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, including 
shareholders, 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 and the Company operates a risk management 
and internal control framework. The Board has overall responsibility 
for determining the Company’s risk management objectives and 
policies and for keeping under review the Company’s systems for 
risk management and internal control. The Company’s principal risks 
can be found on page 20. The Board regularly monitors the risks the 
Company faces and takes appropriate action where necessary. This 
has continued to be an area of focus for the Board as the Company 
has navigated through the Covid-19 pandemic and more recently 
the inflationary impacts exacerbated by the situation in Ukraine.

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 carry 
out an annual Board performance evaluation, in compliance with 
principle 7 of the QCA Code, which is in progress as at the date of 
this report. 

We continue to believe that, 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 and race, alongside commercial 
and experience-based suitability criteria, to complement the current 
balance of skills on the Board.

24

LOUNGERS PLC ANNUAL REPORT 2022  GOVERNANCE 
 
 
 
CHAIRMAN’S CORPORATE GOVERNANCE STATEMENT
CONTINUED

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 wider stakeholders, and a 
description of our activity in this area is set out on page 14 as well 
as in the ESG section of the Strategic Report on pages 10 to 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 whilst having regard to its 
wider stakeholders.

The Board has a schedule of matters that are reserved for its 
decision, 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, which can be found on pages 29, 31 and 36, respectively. 
From time to time, separate committees may be set up by the Board 
to consider and address specific issues, as and when they arise.

 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 and are 
members of each of the three principal Committees. The fourth 
Non-Executive Director, Robert Darwent, is not considered to be 
independent because of his relationship with Lion Capital LLP (“Lion 
Capital”), a substantial shareholder of the Company, and is not a 
member of any Committee.

25
25

GOVERNANCE  LOUNGERS PLC ANNUAL REPORT 2022CHAIRMAN’S CORPORATE GOVERNANCE STATEMENT
CONTINUED

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, Robert Darwent, represents Lion Capital, 
a substantial shareholder of the Company, on the Board. A 
relationship agreement is in place between the Company and Lion 
Capital 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 23.

The Board meets regularly (at least eight times a year, and met 
10 times during the year under review) and is responsible for 
strategy, performance, approval of any major capital expenditure 
and the framework of risk management and internal control.

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 and AIM Rules. In addition, all Directors can 
obtain independent professional advice in the furtherance of their 
duties at the Company’s expense, if requested. 

The rules governing the appointment and replacement of Directors 
are set out in the Company’s Articles of Association, which can be 
found on the Company’s website: www.loungers.co.uk. 

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 AND COMMITTEE MEETINGS

During the year the Board has met formally 10 times, the Audit 
Committee three times, the Remuneration Committee ﬁve times and 
the Nomination Committee twice. Board and Committee meetings 
are also convened on an ad-hoc basis from time to time in order 
to consider speciﬁc corporate activities and various other ad-hoc 
approvals as required.

When possible, the location of Board and Committee meetings 
is varied so that the Directors visit different sites and have the 
opportunity to meet with local management teams. In the prior 
year, the majority of meetings were held electronically due to the 
restrictions imposed by the Covid-19 pandemic. However, during 
the year under review, the Board and its Committees were pleased 
to hold the majority of its meetings in person.

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 scheduled meetings.

Director

Chairman

Alex Reilley 

Executive Directors

Nick Collins 

Gregor Grant

Non-Executive Directors

Nick Backhouse

Adam Bellamy

Robert Darwent

Jill Little

Scheduled Board 
Meetings

Audit  
Committee Meetings

Remuneration 
Committee Meetings

Nomination 
Committee Meetings

10/10

10/10

10/10

10/10

10/10

9/10

9/10

NA

NA

NA

3/3

3/3

NA

2/3

NA

NA

NA

5/5

5/5

NA

5/5

NA

NA

NA

2/2

2/2

NA

2/2

26

LOUNGERS PLC ANNUAL REPORT 2022  GOVERNANCE

CHAIRMAN’S CORPORATE GOVERNANCE STATEMENT
CONTINUED

Only the independent Non-Executive Directors are Committee 
Members.

Other Directors regularly attend Committee meetings.

Other members of the senior management team attend Board and 
Committee meetings at the invitation of the Board.

Jill Little missed a scheduled Board meeting on 25 March 2022 due 
to a family commitment.

Robert Darwent missed a scheduled Board meeting on 15 October 
2021 due to a conflicting business commitment.

Further ad hoc meetings were held during the year to deal with ad-
hoc approvals and other specific corporate activities.

The Board has an agreed schedule of activity covering regular 
business updates, financial, operational and governance matters. 
Each Board Committee also has a schedule of work to ensure that all 
areas for which the Board has overall responsibility are addressed 
and reviewed during the course of the year. These schedules of 
activity are reviewed at least annually to ensure that key matters and 
developments are discussed at the appropriate time.

BOARD COMMITTEES

The Board has delegated specific responsibilities to the Audit 
Committee, the Remuneration Committee and the Nomination 
Committee.

Each Committee has written terms of reference setting out its duties, 
authority and reporting responsibilities. The terms of reference 
of each Committee are reviewed on an annual basis to ensure 
they remain appropriate and reflect any changes in legislation, 
regulation or best practice. The terms of reference are available on 
the Company’s website: www.loungers.co.uk.

EXTERNAL ADVISERS

The Board seeks advice and guidance on various matters from 
its Financial and Nominated Advisor, Houlihan Lokey, its Joint 
Brokers, Liberum and Peel Hunt and its Financial Public Relations 
Adviser, Powerscourt. The Board also uses the services of an 
external company secretarial provider, Link Company Matters 
Limited (“Company Matters”) who were appointed as Company 
Secretary on 26 May 2022.

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.

RISK MANAGEMENT AND INTERNAL CONTROL

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

BOARD AND COMMITTEE EVALUATION 

Every year the Company completes an internal evaluation of the 
performance of the Board as a whole and of its Committees, by way 
of questionnaires issued to the Board, results of which are tabled to 
the Board. Questionnaires elicit feedback on the performance of 
individual Directors, including the Chairman, in order for the Board to 
satisfy itself that all are committed, independent (where relevant) and 
provide a relevant and effective contribution.

The questionnaire evaluating the function of the Board covers the 
following topics:

 Strategy

 Board effectiveness

 Chairmanship and leadership

 Succession and composition

 Stakeholders

 Board processes

Committee questionnaires include questions regarding Committee 
constitution and composition, as well as the running of meetings 
and other topics relevant to each Committee’s area of responsibility.

The most recent evaluation is in progress as at the date of signing 
the report and accounts and the results will be tabled to the Board 
in due course.

27

GOVERNANCE  LOUNGERS PLC ANNUAL REPORT 2022 
 
 
 
 
 
CHAIRMAN’S CORPORATE GOVERNANCE STATEMENT
CONTINUED

STAKEHOLDER ENGAGEMENT

ANNUAL GENERAL MEETING (“AGM”)

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 
14 October 2022. 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
13 July 2022

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): www.loungers.
co.uk. During the year the Company has begun to use Investor 
Meet to enable retail investors to view and ask questions on the 
interim and full year financial results presentations.

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, being those where 20 per cent or more of votes have 
been cast against the Board recommendation for a resolution. 

28
28

LOUNGERS PLC ANNUAL REPORT 2022  GOVERNANCEAUDIT COMMITTEE REPORT

On behalf of the Board, I am pleased to 
present the Audit Committee Report for the 
52 weeks ended 17 April 2022.

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 three times during the year, and all members 
of the committee attended each meeting with the exception of Jill 
Little, who attended two 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.

COVID-19

While the impact of Covid-19 has not been as severe in the past 
financial year as in the prior year, the disruption to ongoing 
trading and the impact of changing regulations has required the 
Audit Committee and the Group’s finance function to put in place 
processes, systems and controls to monitor and respond to the 
increased operational risks. As the business has reopened post 
Covid-19 restrictions, the Committee’s focus has increasingly 
shifted towards more “business as usual” risks, including a detailed 
review undertaken to examine the completeness and efficacy of 
the Group’s financial controls.

The impact of Covid-19 was identified as a key audit matter in 
the year ending 18 April 2021 and again in the current year. The 
Committee has worked alongside the Board to assess the potential 
impact on the Group’s financial statements and has primary 
responsibility for reviewing and considering the Group’s going 
concern assessment and any requirement for impairment to the 
Group’s assets.

FINANCIAL REPORTING

In spring 2022, the Group’s annual report and accounts for the 
52 weeks ending 18 April 2021 were reviewed by the FRC. This 
review was based on the Group’s annual financial statements 
and did not include any detailed review of the business or its 
underlying transactions. Its purpose was not to verify the accuracy 
of the information provided in the financial statements but to review 
compliance with reporting standards. No queries or questions 
were raised by the FRC as a result of this review. 

While the FRC did not enter into substantive correspondence with 
the Group, it did raise a number of ways in which the Group might 
improve its compliance with reporting standards and provide additional 
transparency to readers of the 2022 report and accounts. The most 

significant among these were adding more context to the disclosures 
under section 172 and ensuring that the Alternative Performance 
Metrics (APMs) disclosed were relevant and explained clearly. 

In conjunction with the Group’s response to these 
recommendations, the Audit Committee also reviewed a selection 
of the annual reports and accounts of the Group’s peers in the 
hospitality industry to ensure that the level of disclosure provided 
by Loungers is consistent and appropriate.

TAX STRATEGY

Following the financial performance in the 52 weeks ended 
17 April 2022 the Group is now classed as a large company 
by HMRC, having exceeded the £200m turnover threshold. This 
requires the Group to provide more detail publicly around its 
tax strategy and its approach to considering tax risk. The Group 
has been reviewing this with its tax advisors in expectation of 
exceeding the threshold and the Audit Committee anticipates that 
this will continue to be refined ahead of its deployment in FY23.

ROLES AND RESPONSIBILITIES

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 are reviewed 
by the Committee on an annual basis, no material changes were 
made to the Terms of Reference during the year. The principal 
areas of focus for the Committee have been as follows:

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

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

 Meeting the external auditors 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 auditors;

29

GOVERNANCE  LOUNGERS PLC ANNUAL REPORT 2022 
 
 
AUDIT COMMITTEE REPORT
CONTINUED

 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 FY22 Annual Report are as follows:

 Impairment of tangible fixed assets – following the cessation of 
Government support measures such as the decreased VAT rate, 
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 conclusion that no impairment 
charge is required to be taken in the year.

 Impairment of goodwill – similarly to the review of tangible 
fixed assets, the Committee has reviewed key assumptions 
and forecasts for the Group and is satisfied that no impairment 
charge is required to be taken in the year.

 Going concern – The Committee has considered the impact of a 
range of potential scenarios on the profitability, cash flows and 
liquidity of the Group. While Covid-19 remains a potential risk, 
the Committee is satisfied that the Group has sufficient liquidity to 
support the assessment that it is appropriate to prepare the FY22 
financial statements on the going concern basis.

 Accounting for Government support – The Group has received 
Government support through the Coronavirus Job Retention 
Scheme, various grant schemes, and the business rates holiday. 
The Committee has reviewed the accounting treatment for these 
various support measures. 

 Accounting for landlord negotiations – The Committee has 
reviewed management’s approach to the adoption of Covid-19 
Related Rent Concessions - Amendment to IFRS16 and is 
satisfied that the rent credit taken in FY22 to reflect rent waivers 
agreed with landlords has been appropriately calculated.

 FRC response – following the review by the FRC in March 
2022, the Committee reviewed the recommendations from the 
FRC and was satisfied that they have been addressed in the 
FY22 report and accounts.

The Committee assess the independence of the external auditors 
and effectiveness of the external audit process before making 
recommendations to the Board in respect of their re-appointment. 
In assessing independence and objectivity, the Committee consider 
the level and nature of services provided by the external auditors 
and the fees paid in respect of such services in relation to the total 
audit fee. The Audit Committee seek confirmation from the external 
auditors that they have remained independent within the meaning 
of the APB Ethical Standards of Auditors.

Following the FY22 audit, the current Audit Partner will rotate off 
and a new Audit Partner will be appointed. The Audit Committee 
has consulted with PricewaterhouseCoopers and met with a 
selection of potential replacements, following which a new partner 
has now been identified. 

RISK MANAGEMENT AND INTERNAL CONTROLS

The Group has established a system of risk management and 
internal control. The Audit Committee is responsible for reviewing 
the internal financial control systems that identify, assess, manage 
and monitor financial risks, in addition to other internal control and 
risk management systems. During the year, the Audit Committee 
undertook a detailed review of the internal controls environment and 
the finance function is now implementing a programme of systems 
and controls which are appropriate for a business of the scale and 
complexity of Loungers both now and for the next few years.

SHARE DEALING, ANTI-BRIBERY AND WHISTLEBLOWING

Loungers plc adopted, with effect from Admission, a share dealing 
code (the “Code”) for the Directors and all employees, which is 
appropriate for a company whose shares are admitted to trading 
on AIM and which is subject to 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 the 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.

ROLE OF THE EXTERNAL AUDITORS

The Audit Committee monitors and oversees the relationship with 
the external auditors, PricewaterhouseCoopers LLP, to ensure that 
external auditor independence and objectivity are maintained. 

Adam Bellamy
Audit Committee Chairman
13 July 2022

30

LOUNGERS PLC ANNUAL REPORT 2022  GOVERNANCE 
 
 
 
 
 
 
 
REMUNERATION COMMITTEE REPORT

On behalf of the Board, I am pleased to 
present the Remuneration Committee Report 
for the 52 weeks ended 17 April 2022.

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 five times 
during the year, and all members of the Committee attended all the 
meetings.

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;

The Committee continues to have access to external remuneration 
advisors for ongoing support and advice as required.

REMUNERATION – EXECUTIVE DIRECTORS

Since IPO, the remuneration structure for the Executive Directors 
has consisted of the following elements:

 Base salary – set at below the market rate for companies of a 
similar size

 Benefits and pension – none operated

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

 Annual bonus – cash bonus of a normal maximum of 100% 
of base salary, subject to achieving stretching financial targets 
(an exceptional limit of 150% was operated for 2021/22 only)

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

 Value Creation Plan (“VCP”) – one-off awards in a geared 
arrangement entitling participants to be issued shares based 
on the excess cumulative total shareholder return generated

 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 detailed duties of the Remuneration Committee are set out 
in its Terms of Reference, which can be found on the corporate 
website. These are reviewed by the Committee on an annual basis, 
and no material changes were made to the Terms of Reference 
during the year.

The principal 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.

The VCP reached the end of its performance period in April 2022 
and this has led the Remuneration Committee to consider how 
best to continue to link remuneration to the Company’s long-term 
performance and, indeed, whether the underlying principles that 
have shaped the approach to executive remuneration remain 
appropriate as the Company moves into the next stage of its 
development.

As a result, the Committee has conducted a review of its 
Executive Director remuneration policy and practices. This review 
was undertaken in the context of continued strong underlying 
performance at the Company.

The key output of the review was that the Committee considers 
it appropriate to now adopt a more market standard approach 
going forward. How this impacts the individual elements of 
remuneration is outlined below:

Fixed pay 
Fixed pay (e.g. base salary, pension and benefits) had been very 
conservatively positioned against companies of a comparable size 
under the existing structure. At the time of the IPO with the assistance 
of a benchmarking exercise undertaken by external advisors, base 
salaries were set to be in line with the lower quartile salaries paid by 
a comparator group of similarly sized listed companies.

31

GOVERNANCE  LOUNGERS PLC ANNUAL REPORT 2022 
 
 
 
 
 
 
 
 
 
 
 
REMUNERATION COMMITTEE REPORT
CONTINUED

In the context of a more market standard structure the Committee 
has approved the following salaries effective 1 May 2022:

  Alex Reilley - £231,000

  Nick Collins - £374,000

  Gregor Grant - £220,000

The intention is to continue with the approach of not offering 
any benefits and pension but the Committee intends to keep this 
under review.

The resulting levels of fixed pay are broadly in line with the median 
level seen in other companies of a similar size.

Annual Bonus
All Executive Directors will have a bonus opportunity at the 
previous normal maximum of 100% of base salary. The intention 
for the 2022/23 financial year is to have payout based on a mix 
of stretching financial metrics (using Adjusted EBITDA – IAS17) 
and measurable non-financial targets linked to the Company’s 
strategy. The Remuneration Committee set the financial targets by 
reference to Group budgets and analysts’ forecasts. Payments 
under the annual bonus plan are subject to typical malus and 
clawback provisions.

Long-term Incentives
Since IPO, the VCP has been the vehicle through which the link 
between long-term performance and remuneration has been 
delivered. The structure of the VCP is explained later in this report 
but, in essence, involved a one-off award of nil-cost options based 
on performance against an absolute total shareholder return 
(“TSR”) based condition. 

Mindful of the fact that the VCP’s performance period has now 
ended, the Committee believes it important that a new long-term 
incentive opportunity is created for the Company’s well-regarded, 
highly performing management team. However, rather than 
adopting another one-off/end-to-end plan such as the VCP, 
the Committee considers it appropriate to adopt a more market 
standard approach to long-term incentive provision going forward, 
under which more modest regular annual awards are made which 
vest subject to performance over rolling three-year periods.

Therefore, the Committee is intending to make awards going 
forward under a Performance Share Plan (“PSP”). The PSP will be 
of fairly standard design, in that awards of free shares can (in the 
normal course) be made worth up to 150% of base salary each 
year which vest three years later, subject to continued employment 
and the satisfaction of performance conditions. 

Awards are to be subject to typical malus and clawback 
provisions. The intention is for the initial awards to Executive 
Directors in 2022/23, if made, to be over Ordinary Shares with 
the following value:

  Alex Reilley – 100% of base salary

  Nick Collins – 150% of base salary

  Gregor Grant – 125% of base salary

Key members of senior management will also participate in the plan.

When considering which performance conditions should be used 
to determine vesting of PSP awards, the Committee noted that 
the link with share price performance in the VCP provided the 
management team with a simple, transparent long-term incentive 
opportunity that was directly aligned with value creation for 
shareholders. Consequently, the Committee wishes to retain the use 
of a link with share price performance in the new PSP awards.

The Committee is aware of the preference of some shareholders 
for relative targets and therefore 50% of awards will based on 
TSR performance against a bespoke group of hospitality and 
leisure comparators. TSR performance will be measured on a 
sliding scale between median and upper quartile performance 
against the peer group.

The remaining 50% of awards will be based on stretching EPS 
targets, which the Committee considers incentivises management 
to both grow revenue and manage costs in a balanced way. 
The performance range will be determined by the Committee by 
reference to Group budgets and analysts’ forecasts. Full details of 
the targets for the 2022/23 awards are yet to be determined but 
will be disclosed in next year’s report.

As the VCP performance period ended in April 2022 and as any 
PSP award will not normally vest until 2025, the Committee wishes 
to ensure the Executive Directors and other members of senior 
management are fully motivated and retained over the intervening 
period. Therefore, the Committee is intending to grant one-off 
Retention Awards in 2022/23. These awards, if made, would be 
subject to continued employment and would vest 50% after one 
year and 50% after two years. The intended one-off awards to 
Executive Directors in 2022/23 would be over Ordinary Shares 
with the following value:

  Alex Reilley – 87% of base salary

  Nick Collins – 73% of base salary

  Gregor Grant – 125% of base salary

Key members of senior management would also receive Retention 
Awards.

32

LOUNGERS PLC ANNUAL REPORT 2022  GOVERNANCEREMUNERATION COMMITTEE REPORT
CONTINUED

2021/22 INCENTIVE PLAN PAYOUTS

As outlined elsewhere in the Annual Report, the Company’s 
significant outperformance of the market has been maintained over 
the financial year resulting in delivery of record total revenue of 
£237.3m and Adjusted EBITDA (IFRS16) of £53.6m, the opening 
of 27 new sites and a significant reduction in net debt.

Annual bonuses for 2021/22 were driven by Adjusted EBITDA 
(IAS17) performance. Stretch bonus targets were introduced this 
year which, if achieved, would result in payout of 150% of base 
salary. Based on strong business performance during the year, the 
bonus will pay out at the maximum performance level.

The performance period under the VCP which was introduced at 
the time of the IPO ended in April 2022. The five participants in 
the VCP were granted one-off awards giving them a future right 
to be issued Ordinary Shares based on the excess cumulative TSR 
generated over the VCP performance period.

The VCP awards had a three-year performance period commencing 
on the date of Admission. Participants in the VCP each had 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

The Remuneration Committee received advice from their external 
remuneration advisors about how best to reflect the impact on the 
VCP of the equity raise completed in April 2020.

The value created was measured in terms of TSR (being the growth 
in the Company’s market capitalisation including dividends 
reinvested). The VCP had an overall cap on the number of 
Ordinary Shares that could be issued under the plan, equal to 
six per cent. of the Company’s share capital from time to time. 

The measurement of performance over the performance period 
resulted in the following share entitlements under the nil cost 
options awarded to each of the Executive Directors under the VCP:

 Alex Reilley – 89,359 Ordinary Shares

 Nick Collins – 238,292 Ordinary Shares

 Gregor Grant – 119,146 Ordinary Shares

These share entitlements 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. Awards are subject 
to typical malus and clawback provisions. No further awards are 
to be made under the VCP.

No adjustments have been made to out-turns to reflect the impact 
of the pandemic or any other factors over the performance period. 
The Committee considered that the formulaic out-turns for both the 
annual bonus and VCP, which represent the first payouts under the 
Company’s incentive arrangements since IPO, were appropriate 
in the context of wider business performance and reflective of the 
wider stakeholder experience.

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 
share schemes: the senior management restricted share plan 
(“RSP”) and the employee share plan (“ESP”). Further details are 
provided in Note 21.

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”).

33

GOVERNANCE  LOUNGERS PLC ANNUAL REPORT 2022 
 
 
 
 
 
REMUNERATION COMMITTEE REPORT
CONTINUED

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. During the year 435,334 nil cost options were awarded to 90 employees under the RSP. 

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. The ESP has no performance conditions, other than continued 
employment over the vesting period. During the year awards over 574,000 shares were made to 1,116 employees under the ESP.

SINGLE TOTAL FIGURE OF REMUNERATION TABLE (AUDITED)

Salary / Fees

Beneﬁts / Pension

Annual Bonus

Long-term incentives

Total

2022
£000

175

285

200

55

50

50

-

815

2021
£000

155

283

187

55

50

50

-

780

2022
£000

2021
£000

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

2022
£000

263

428

300

-

-

-

-

991

2021
£000

2022
£000

2021
£000

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

2022
£000

438

713

500

55

50

50

-

2021
£000

155

283

187

55

50

50

-

1,806

780

Alex Reilley

Nick Collins

Gregor Grant 

Nick Backhouse

Adam Bellamy

Jill Little

Robert Darwent1

Total

1. Robert Darwent is a Director of Lion Capital and receives no remuneration from the Company.

DIRECTORS’ INTERESTS (AUDITED)

As at 17 April 2022 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
17 April 2022

Vested, unexercised share 
awards at
17 April 2022

6,951,432

1,086,276

180,148

13,903

13,903

13,903

-

450,000

50,000

-

-

-

Robert Darwent is a Director of Lion Capital. At 17 April 2022 funds managed by Lion Capital were interested in 26,728,524 shares.

OUTSTANDING DIRECTORS’ SHARE AWARDS (AUDITED)

Scheme

At 19 April 
2021

Granted

At 17 April 
2022

Share price 
at grant

Exercise 
price

Date of 
Grant

Exercisable 
from(1)

Expiry Date

Nick Collins

Gregor Grant

RSP

RSP

450,000

50,000

-

-

450,000

50,000

£2.00

£2.00

Nil

Nil

April 2019

April 2020

April 2029

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
13 July 2022

34

LOUNGERS PLC ANNUAL REPORT 2022  GOVERNANCE

3535

GOVERNANCE  LOUNGERS PLC ANNUAL REPORT 2022NOMINATION COMMITTEE REPORT

Board and Committee composition
The Committee reviewed the balance of independence, skills, 
experience and diversity of the Board and Committees, noting 
in particular that all Committees comprise only independent 
Non-Executive Directors, and half the Board (excluding the 
Chair) are independent Non-Executive Directors. The Committee 
was therefore satisfied that the composition of the Board and its 
Committees remains appropriate for the Company.

Non-Executive Director time commitments
The Committee reviewed the time commitment required of each 
Non-Executive Director as set out in their letters of appointment 
and confirmed that the time commitment remained appropriate. 
Each of the Non-Executive Directors confirmed to the Committee 
that they continue to have the capacity to devote appropriate time 
to the affairs of the Company in order to discharge their duties as 
Directors.

Terms of reference
In accordance with good governance practice, the Committee 
conducted its annual review of its terms of reference and no 
changes were recommended. 

Board and Committee evaluation
The Committee reviewed and made recommendations to the Board 
regarding the appropriate methodology for undertaking the next 
annual Board evaluation process, which is in progress as at the 
date of signing the 2022 report and accounts. 

Nick Backhouse
Nomination Committee Chairman
13 July 2022

On behalf of the Board, I am pleased to 
present the Nomination Committee Report 
for the 52 weeks ended 17 April 2022.

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

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.

ACTIVITY DURING THE YEAR

There have been no changes to the Company’s Board during the 
year, and the Committee has therefore prioritised its oversight 
of the development of succession planning and processes in 
the business. Succession planning is a standing item on the 
Committee’s agenda, and detailed discussions have been held 
on this area at both of the Committee’s meetings during the year. 
In addition, the Committee has also reviewed the composition 
of the Board and its Committees, the time commitments of 
the Non-Executive Directors and its own terms of reference. 
More detail on the Committee’s discussion on each of those areas 
is summarised below.

Succession Planning
The Committee received and discussed regular updates from the 
CEO on succession plans for the Company’s senior management 
team, with particular focus on supporting the business as it scales 
further. As part of these discussions the Committee considered 
where the business might also add new leadership roles or 
upweight existing roles, such as in the Marketing and People 
functions.

The Committee is satisfied that good progress on succession 
planning within the business is being made, and that career 
development plans for operational and head office teams 
support the development of a pipeline of internal talent for future 
succession. When considering development and future roles, 
particular consideration was given to the future diversity needs of 
the Group.

36

LOUNGERS PLC ANNUAL REPORT 2022  GOVERNANCE 
 
 
DIRECTORS’ REPORT

The Directors present their report and the audited 
consolidated financial statements of Loungers 
plc for the 52 weeks ended 17 April 2022. 

The Corporate Governance Statement on pages 23 to 28 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.

RESULTS AND DIVIDENDS

The consolidated statement of comprehensive income is set out on 
page 47 and shows the comprehensive income for the year.

There were no dividends paid or proposed in the year under 
review. The Board announced, in its half year results on 1 
December 2021, its intention to retain Group earnings in the 
short-term to bolster liquidity and balance sheet strength and for 
re-investment in the roll-out of new Lounge and Cosy Club sites. 
However, it is the Board’s ultimate intention to pursue a progressive 
dividend policy, subject to the need to retain sufficient earnings for 
the future growth of the Group.

STRATEGIC REPORT

Information in respect of the Business Review, Future Outlook of the 
Business, Section 172 reporting, SECR disclosures and Principal 
Risks and Uncertainties are not shown in the Directors’ Report 
because they are presented in the Strategic Report.

ANNUAL GENERAL MEETING (“AGM”)

The Group’s next Annual General Meeting will be held at Cosy Club, 
14 Tunsgate Quarter, Guildford GU1 3QY on 14 October 2022. 
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.

DIRECTORS

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

  Alex Reilley

  Nick Collins

  Gregor Grant

  Nick Backhouse

  Adam Bellamy

  Robert Darwent

Jill Little

Brief biographical details for each of the Directors are given on 
page 23.

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 34.

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 3 to 8 as well as the Group’s principal risks 
and uncertainties as set out on page 20, including the downside 
sensitivities outlined on page 19 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.

37

GOVERNANCE  LOUNGERS PLC ANNUAL REPORT 2022 
DIRECTORS’ REPORT
CONTINUED

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 15 October 2021 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 10,273,866 of its Ordinary 
shares. The Company has not repurchased any of its Ordinary 
shares under this authority, which is due to expire at the date of this 
year’s AGM.

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 
28 June 2022, the last practicable date before the publication of 
this report:

Funds managed by Lion Capital

26,728,524

25.9%

No of ordinary 
shares

% of share 
capital

Canaccord Genuity Wealth 
Management

Alex Reilley

Jake Bishop

10,056,745

6,951,432

6,507,432

AXA Framlington Investment Managers

6,349,757

Highclere International Investors

M&G Investment Management

Invesco

Gresham House Asset Management

Jupiter Asset Management

5,852,772

5,696,081

5,183,925

3,433,022

3,424,437

9.8%

6.8%

6.3%

6.2%

5.7%

5.5%

5.0%

3.3%

3.3%

As at 13 July 2022 the Company’s ordinary issued share capital 
was 103,123,831 ordinary shares of 1p each, each carrying one 
right to vote in general meeting.

Robert Darwent is a Non-Executive Director on the Board of 
Loungers plc and represents Lion Capital, a substantial shareholder 
of the Company. A relationship agreement is in place between the 
Company and Lion Capital to ensure their ongoing relationship is 
at arm’s length and on a normal commercial basis.

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.

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.

EMPLOYEE ENGAGEMENT

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 and 
quarterly 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. Further 
information on employee engagement is provided on page 10.

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 £25m revolving credit facility, of which 
it is expected that £15m will expire in October 2022.

38

LOUNGERS PLC ANNUAL REPORT 2022  GOVERNANCEDIRECTORS’ REPORT
CONTINUED

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 through to 31 July 
2022 to fix SONIA at 0.7% on the £32.5m term loan facility.

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 are qualifying third 
party indemnity provisions which were in force throughout the year 
and in force at the date of this report.

POLITICAL DONATIONS

During the year ended 17 April 2022 the Group made no political 
donations (2021 £nil).

POST BALANCE SHEET EVENTS

 make judgements and accounting estimates that are 
reasonable and prudent; and

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

The Directors are responsible for safeguarding the assets of the 
group and company and hence for taking reasonable steps for the 
prevention and detection of fraud and other irregularities.

The Directors are also responsible for keeping adequate 
accounting records that are sufficient to show and explain the 
Group’s and Company’s transactions and disclose with reasonable 
accuracy at any time the financial position of the Group and 
Company and enable them to ensure that the financial statements 
comply with the Companies Act 2006.

On 9 May 2022 the Company allotted and issued 385,167 
ordinary shares of 1 pence each in the Company following the 
vesting of awards made to 711 Company employees pursuant to 
the Company’s Employee Share Plan.

The Directors are responsible for the maintenance and integrity 
of the Company’s website. Legislation in the United Kingdom 
governing the preparation and dissemination of financial 
statements may differ from legislation in other jurisdictions.

DIRECTORS’ RESPONSIBILITIES STATEMENT

DISCLOSURE OF INFORMATION TO AUDITORS

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
13 July 2022

The Directors are responsible for preparing the Annual Report and 
Financial Statements and the financial statements in accordance 
with applicable law and regulation.

Company law requires the Directors to prepare financial statements 
for each financial year. Under that law the Directors have prepared 
the group financial statements in accordance with UK-adopted 
international accounting standards and the company financial 
statements 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).

Under company law, 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 Company and of the 
profit or loss of the Group for that period. In preparing the financial 
statements, the Directors are required to:

 select suitable accounting policies and then apply them 
consistently;

 state whether applicable UK-adopted international accounting 
standards have been followed for the group financial 
statements and United Kingdom Accounting Standards, 
comprising FRS 102 have been followed for the company 
financial statements, subject to any material departures 
disclosed and explained in the financial statements;

39

GOVERNANCE  LOUNGERS PLC ANNUAL REPORT 2022 
 
 
 
INDEPENDENT AUDITORS’ REPORT 
TO THE MEMBERS OF LOUNGERS PLC

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

OPINION

In our opinion:

 LOUNGERS plc’s group financial statements and company financial statements (the “financial statements”) give a true and fair view of 
the state of the Group’s and of the Company’s affairs as at 17 April 2022 and of the Group’s profit and the Group’s cash flows for the 
52 week period then ended;

 the Group financial statements have been properly prepared in accordance with UK-adopted international accounting standards;

 the company financial statements 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

 the financial statements 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 and company statements of financial position as at 17 April 2022; the consolidated statement of comprehensive income, the 
consolidated statement of cash flows and the consolidated and company statements of changes in equity for the 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 other listed entities of public interest, and we have fulfilled 
our other ethical responsibilities in accordance with these requirements.

To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided.

We have provided no non-audit services to the Company or its controlled undertakings in the period under audit.

OUR AUDIT APPROACH

OVERVIEW

•   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.

•  Impairment of property, plant and equipment (group)

•  Overall group materiality: £2,370,000 (2021: £1,338,000) based on 1% of revenue.

•   Overall company materiality: £870,000 (2021: £870,000) based on 1% of total assets or an 

allocation of group reporting materiality if lower.

•   Performance materiality: £1,777,000 (2021: £1,003,500) (group) and £652,500 (2021: 

£652,500) (company).

40

LOUNGERS PLC ANNUAL REPORT 2022  GOVERNANCE 
 
 
 
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.

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.

The impact of COVID-19, which was a key audit matter last year, is no longer included because of the notable impacts being mainly 
endured in the prior ﬁnancial year, with all sites re-opening following the last lock-down near the start of the current year and trading 
continuously since. Otherwise, the key audit matters below are consistent with last year.

Key audit matter

How our audit addressed the key audit matter

Impairment of property, plant and equipment – note 12 (group)

At the start of the year the COVID-19 lock-downs ended and 
sites gradually opened again for business over a 4 week 
period, however some COVID-19 restrictions continued to 
apply for part of the year, such as social distancing ending on 
19 July 2022. In addition, the VAT reduction to 5% for food 
and non-alcoholic drinks was extended to 30 September 
2021 with a stepped increase to 12.5% to 31 March 2022.
The impact of the lower VAT rates, which have not been passed 
on to consumers, has increased revenue by approximately 
£15m during the year. The mixed trading performance of some 
sites post re-opening, together with the ending of the lower 
VAT rates results in an impairment risk for site property, plant 
and equipment. We focussed on this area due to the carrying 
value of property, plant and equipment and the impairment risk 
noted above. At 17 April 2022, the Group reported property, 
plant and equipment, with a carrying value of £188 million, as 
disclosed in note 12. Following an impairment review performed 
by management, no impairment of property, plant and 
equipment 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.

We have obtained management’s impairment review of property, plant 
and equipment, which has been performed at an individual site level, which 
indicated no impairment charge in the current period. As part of our audit 
work, we validated the carrying amounts that were attributed to each site 
cash generating unit. We tested the assumptions used in determining the 
value in use of each site which included assessing the revenue, proﬁt and 
cash ﬂow forecasts included in the value in use calculations, taking into 
account the proﬁle of actual results since the sites re-opened. We used 
PwC experts to assess the appropriateness of the discount rate used. We 
also considered the results of a number of sensitivity scenarios in respect 
of 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. We also considered the disclosures 
made in respect of the impairment review performed as disclosed in note 
12. We concluded that whilst management’s impairment assessment is 
inherently judgemental , the accounting for the carrying value of property, 
plant and equipment and related disclosures was acceptable and 
consistent with the audit evidence obtained.

We determined that there were no key audit matters applicable to the parent company to communicate in our report.

GOVERNANCE  LOUNGERS PLC ANNUAL REPORT 2022

41

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF LOUNGERS PLC
CONTINUED

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 and the Company, the accounting processes and controls, and the industry in which they operate.

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 and the Company, the accounting processes and controls, and the industry in which they 
operate. 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 99% of group proﬁt before tax.

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 materiality

£2,370,000 (2021: £1,338,000).

£870,000 (2021: £870,000).

Financial statements – group

Financial statements – company

How we determined it

1% of revenue

Rationale for benchmark 
applied

Whilst the Group is proﬁtable in the current year it 
has signiﬁcantly beneﬁted from the VAT reduction 
which has returned to the full rate as well as 
business rates grants not expected to reoccur in 
future periods and therefore using 1% of revenue is 
considered to be the most appropriate benchmark.

1% of total assets or an allocation of group 
reporting materiality if lower

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

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 £870,000 and £2,232,500. Certain components were audited to a local statutory 
audit materiality that was also less than our overall group materiality.

We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected 
misstatements exceeds overall materiality. Speciﬁcally, we use performance materiality in determining the scope of our audit and the 
nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. 
Our performance materiality was 75% (2021: 75%) of overall materiality, amounting to £1,777,000 (2021: £1,003,500) for the group 
ﬁnancial statements and £652,500 (2021: £652,500) for the company ﬁnancial statements.

In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and 
aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range was appropriate.

We agreed with those charged with governance that we would report to them misstatements identiﬁed during our audit above £115,000 
(group audit) (2021: 67,000) and £43,000 (company audit) (2021: £43,000) as well as misstatements below those amounts that, in our 
view, warranted reporting for qualitative reasons.

42

LOUNGERS PLC ANNUAL REPORT 2022  GOVERNANCE

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF LOUNGERS PLC
CONTINUED

CONCLUSIONS RELATING TO GOING CONCERN

Our evaluation of the Directors’ assessment of the Group’s and the Company’s ability to continue to adopt the going concern basis of 
accounting included:

 Evaluation of management’s going concern assessment

 Evaluation of the Group’s forecast financial performance, liquidity and covenant compliance over the going concern period

 Evaluation of stress testing performed by management in their downside scenario and consideration of whether the stresses applied are 
appropriate for assessing going concern.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually 
or collectively, may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern for a period of at least 
twelve months from when the financial statements are authorised for issue.

In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of 
the financial statements is appropriate.

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

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.

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 our work undertaken in the course of the audit, the Companies Act 2006 requires 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 17 April 2022 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 Company and their environment obtained in the course of the audit, we did 
not identify any material misstatements in the Strategic report and Directors’ Report.

43

GOVERNANCE  LOUNGERS PLC ANNUAL REPORT 2022 
 
 
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF LOUNGERS PLC
CONTINUED

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 and 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 Group or 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.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our 
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our 
procedures are capable of detecting irregularities, including fraud, is detailed below.

Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and regulations 
related to those with a direct impact on the financial statements such as financial reporting regulations, taxation legislation and the 
Companies Act 2006, and we considered the extent to which non-compliance might have a material effect on the financial statements. 
We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of 
override of controls), and determined that the principal risks were related to posting unusual journal entries to increase revenue and profits 
or the manipulation of accounting estimates which could be subject to management bias. Audit procedures performed by the engagement 
team included:

 Confirmation and enquiry of management and those charged with governance over compliance with employment legislation and 
financial reporting and taxation legislation, including consideration of actual or potential litigation and claims

 Reviewing relevant minutes of Director Board meetings

 Evaluation of management’s controls designed to prevent and detect irregularities, in particular the whistleblowing policy and 
employee code of conduct

 Challenging assumptions and judgements made by management in their significant accounting estimates, in particular in relation to 
impairment of property, plant and equipment, useful economic lives of property, plant and equipment and share based payments

 Designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing

 Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and 
regulations

 Identifying and testing journal entries, in particular any entries posted with unusual account combinations

There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance 
with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of 
not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve 
deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.

44

LOUNGERS PLC ANNUAL REPORT 2022  GOVERNANCE 
 
 
 
 
 
 
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF LOUNGERS PLC
CONTINUED

Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. 
However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to 
target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a 
conclusion about the population from which the sample is selected.

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

We have no exceptions to report arising from this responsibility.

Colin Bates (Senior Statutory Auditor) 
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Bristol
13 July 2022

45

GOVERNANCE  LOUNGERS PLC ANNUAL REPORT 2022 
 
 
 
Financial Statements

46

CONSOLIDATED STATEMENT OF 
COMPREHENSIVE INCOME
FOR THE 52 WEEK YEAR ENDED 17 APRIL 2022

Revenue

Cost of sales

Gross proﬁt

Gross proﬁt before exceptional items

Exceptional items included in cost of sales

Administrative expenses

Other income

Operating proﬁt / (loss)

Operating proﬁt / (loss) before exceptional items

Exceptional items included in cost of sales

Exceptional items included in administrative expenses

Finance income

Finance costs

Proﬁt / (loss) before taxation

Tax (charge) / credit on proﬁt / (loss)

Proﬁt / (loss) for the year

Other comprehensive income:

Items that may be reclassiﬁed to proﬁt or loss

Cash ﬂow hedge – change in value of hedging instrument

Other comprehensive income for the year

Total comprehensive income / (expense) for the year

Earnings / (losses) per share

Basic earnings / (losses) per share

Diluted earnings / (losses) per share

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

Year ended 
17 April 2022
£000

Year ended
18 April 2021
£000

237,291

(134,369)

102,922

102,922

-

(76,975)

2,490

28,437

28,437

-

-

44

(6,876)

21,605

(3,727)

17,878

269

269

18,147

78,346

(46,178)

32,168

32,609

(441)

(43,950)

4,054

(7,728)

(6,401)

(441)

(886)

46

(7,040)

(14,722)

3,580

(11,142)

101

101

(11,041)

Year ended
17 April 2022
Pence

Year ended
18 April 2021
Pence

17.4

17.0

(10.9)

(10.9)

Note

4

9

5

5

9

9

7

8

Note

10

10

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2022

47

CONSOLIDATED STATEMENT OF 
FINANCIAL POSITION
AS AT 17 APRIL 2022

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

Total liabilities

Net assets

Called up share capital

Share premium

Hedge reserve

Other reserve

Retained earnings

Total equity

Note

At 17 April 2022
£000

At 18 April 2021
£000

11

12

20

14

13

14

19

15

16

17

19

18

17

22

23

23

23

23

113,227

188,363

1,355

579

303,524

1,919

5,466

38

31,250

38,673

342,197

(56,214)

(8,475)

-

(64,689)

(32,275)

(111,127)

(208,091)

134,106

1,127

8,066

38

14,278

110,597

134,106

113,227

165,443

3,816

668

283,154

774

2,619

-

4,912

8,305

291,459

(28,576)

(6,921)

(231)

(35,728)

(39,157)

(103,657)

(178,542)

112,917

1,124

8,066

(231)

14,278

89,680

112,917

The financial statements on pages 47 to 71 were approved and authorised for issue by the Board and were signed on its behalf by:

Nick Collins 
Chief Executive Officer 
13 July 2022

G Grant
Chief Financial Officer

48

LOUNGERS PLC ANNUAL REPORT 2022  FINANCIAL STATEMENTSCONSOLIDATED STATEMENT OF 
CHANGES IN EQUITY
FOR THE 52 WEEK YEAR ENDED 17 APRIL 2022

Called up
 share capital
£000

1,025

99

-

99

-

-

-

Share 
premium
£000

-

8,066

-

8,066

-

-

-

Hedge 
reserve
£000

(332)

-

-

-

-

101

101

Other 
reserve
£000

14,278

Retained
 earnings
£000

Total 
equity
£000

99,011

113,982

-

-

-

-

-

-

(6)

1,817

1,811

(11,142)

-

8,159

1,817

9,976

(11,142)

101

(11,142)

(11,041)

1,124

8,066

(231)

14,278

89,680

112,917

At 19 April 2020

Ordinary shares issued

Share based payment charge

Total transactions with owners

Loss for the year

Other comprehensive income

Total comprehensive expense for the 
52 week year

At 18 April 2021

Ordinary shares issued

Share based payment charge

Total transactions with owners

Profit for the year

Other comprehensive income

Total comprehensive income for the 
52 week year

3

-

3

-

-

-

-

-

-

-

-

-

At 17 April 2022

1,127

8,066

-

-

-

-

269

269

38

-

-

-

-

-

-

(3)

3,042

3,039

17,878

-

17,878

-

3,042

3,042

17,878

269

18,147

14,278

110,597

134,106

49

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2022CONSOLIDATED STATEMENT OF 
CASH FLOWS
FOR THE 52 WEEK YEAR ENDED 17 APRIL 2022

Year ended 
17 April 2022
£000

69,626

Year ended
18 April 2021
£000

12,031

Note

24

(22,837)

(22,837)

-

(135)

(7,000)

(1,101)

3

(6,903)

(5,315)

(20,451)

26,338

4,912

31,250

(7,808)

(7,808)

8,158

(79)

-

(1,260)

-

(5,303)

(4,910)

(3,394)

829

4,083

4,912

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

Shares issued on exercise of employee share awards

Bank loans repaid

Interest paid

Interest received

Principal element of lease payments

Interest paid on lease liabilities

Net cash used in financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of the year

Cash and cash equivalents at end of the year

25

50

LOUNGERS PLC ANNUAL REPORT 2022  FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED  
FINANCIAL STATEMENTS
FOR THE 52 WEEK YEAR ENDED 17 APRIL 2022

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 and domiciled 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 UK adopted International Accounting Standards 
and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.

The accounting policies adopted in the preparation of the Financial Statements are consistent with those applied in the preparation of the financial statements 
of the Group for the year ended 18 April 2021.

The financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and 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 FY22 financial statements on the going concern basis the Directors have considered the Group’s cash 
flows, liquidity and business activities in accordance with the Guidance on Risk Management, Internal Control and Related Financial and Business Reporting 
2014 published by the UK Financial Reporting Council. 

As at 17 April 2022 the Group had cash balances of £31.3m (2021: £4.9m) and undrawn facilities of £25m (2021: £18m), providing total liquidity, 
assuming the incremental £15m RCF is allowed to expire in October 2022, of £41.3m (2021: £22.9m). The Group has not had to use its RCF facilities since 
the resumption of trading in May 2021 and does not forecast requiring to do so in the next 12 months.

Attention has been paid both to the potential impact of further Covid-19 outbreaks on the Group and also to the current sector headwinds in terms of 
consumer confidence and inflationary pressures.

The Directors have modelled a number of downside scenarios relating to additional cost pressure and reduced consumer demand alongside a resurgence 
of Covid-19 cases over the winter months and are satisfied that the Group can manage these within existing cash flow forecasts. It is therefore deemed 
appropriate to prepare the FY22 financial statements on a going concern basis.

2.3  BASIS OF CONSOLIDATION

A subsidiary is an entity controlled by the Group. Control exists when the Group possesses power over the investee, has exposure to variable returns from its 
involvement with the entity and has the ability to use its power over the investee to affect its returns. The financial statements of subsidiaries are included in the 
consolidated financial statements from the date that control commences until the date that control ceases.

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

2.4  ALTERNATIVE PERFORMANCE MEASURES (“APMS”)

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.

51

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

The key APMs that the Group uses include: Like for Like (“L4L”) sales growth %, Adjusted EBITDA and Adjusted operating profit. These APMs are set out on 
page 78 including explanations of how they are calculated and how they are reconciled to a statutory measure where relevant.

Like for like sales are calculated using all sites within the estate that have been open for at least 18 months. It is generally the case that when a new site opens 
it enjoys a “honeymoon” period of above trend performance. Starting the LFL calculation from 18 months post opening removes the impact of this above 
trend trading period.

The Adjusted EBITDA and Adjusted operating profit measures exclude exceptional items and site pre-opening costs, as defined below, and non-cash share-
based payment charges. These are excluded until such time as their liability crystalises and becomes payable in order to relate the adjusted measure more 
closely to the cash performance of the business. The calculation of these measures aligns to the way in which they are calculated by the Group’s lenders for 
the purpose of testing compliance with its covenants.

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 café bars 
and café restaurants and therefore represent 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.

2.6  GOVERNMENT GRANTS

Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the 
grants will be received. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving 
immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable. Where 
the income relates to a distinct identifiable expense, the income is offset against the relevant expense for example, income received under the Coronavirus 
Job Retention Scheme has been offset against staff costs. Where an expense is not distinctly identifiable or the income relates to multiple expenses, the 
income is recognised within Other income.

2.7  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.

2.8  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.

2.9  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.

52

LOUNGERS PLC ANNUAL REPORT 2022  FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

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.

2.10 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.

2.11 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.

2.12 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.

2.13 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 cash generating units (“CGUs”) but to a group of CGUs. As the business has a single operating segment as disclosed in 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.

2.14 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.

2.15 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. 

53

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

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 using the effective interest rate method 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.

2.16 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.

2.17 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.

2.18 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.

2.19 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.

2.20 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.

2.21 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.

54

LOUNGERS PLC ANNUAL REPORT 2022  FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

2.22 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.

2.23 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.

2.24 NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS ADOPTED

Amendments to accounting standards applied from 19 April 2021 included amendments to:

• 

Interest Rate Benchmark Reform – Phase 2 impacts on IFRS9, IAS39, IFRS 7, IFRS4 and IFRS16 (effective 1 January 2021). 

The application of the above did not have a material impact on the Group’s accounting treatment and has therefore not resulted in any material changes. 

Certain new accounting standards and interpretations have been published that are not mandatory for 17 April 2022 reporting periods and have not 
been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods an on 
foreseeable future transactions.

3.  CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATION UNCERTAINT Y

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. 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.

55

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

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 in April 2019 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 17 April 2022 a 0.1 per cent change in the discount rate used would have adjusted the total liabilities by £615,000.

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 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 11% (£1,289,000) decrease in depreciation. More information on useful economic lives is presented in note 2.9.

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 (IFRS16 and IAS17) 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.

56

LOUNGERS PLC ANNUAL REPORT 2022  FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

5.  OPERATING PROFIT / (LOSS)

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

Depreciation of tangible fixed assets

Depreciation of right of use assets

Inventories - amounts charged as an expense

Fees payable to the Company’s auditors and its associates for the audit of parent 
company and consolidated financial statements

Fees payable to Company’s auditors and its associates for other services:

- for statutory audit services (subsidiary companies)

- for tax compliance services

- for tax advisory services

Staff costs (excluding share based payments)

CJRS Grant income

Government support grant income

Pre-opening costs

Exceptional costs

Year ended 
17 April 2022
£000

11,187

8,451

53,815

75

75

-

-

95,779

(2,045)

(2,490)

2,344

-

Year ended
18 April 2021
£000

10,288

7,567

16,804

60

66

71

37

69,599

(33,157)

(4,054)

421

1,327

Note

12

12

9

Government support grant income of £2,490,000 relates to income received under the Re-Start Grant Scheme. The prior year total of £4,054,000 also 
included income received under the Retail, Leisure and Hospitality Scheme and The Local Restrictions Support Grant Scheme.

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

CJRS Grant income

Year ended 
17 April 2022

Year ended
18 April 2021

176

5,461

5,637

144

4,377

4,521

Year ended 
17 April 2022
£000

Year ended
18 April 2021
£000

88,801

5,820

3,220

1,158

98,999

(2,045)

96,954

64,778

3,928

2,034

893

71,633

(33,157)

38,476

Additional payroll costs of £1,804,000 (2021: £1,100,000) relating to the build team have been capitalised. CJRS grant income in respect of the build 
team amounted to £nil (2021: £261,000).

57

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2022NOTES 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.

Alex Reilley

Nick Collins

Gregor Grant

Nick Backhouse

Adam Bellamy

Jill Little

Total

 Salary / Fees

 Annual Bonus

Share Award

Total

2022 
£000

2021 
£000

2022 
£000

2021 
£000

2022 
£000

2021 
£000

2022 
£000

2021 
£000

175

285

200

55

50

50

815

155

283

187

55

50

50

263

428

300

-

-

-

780

991

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

438

713

500

55

50

50

155

283

187

55

50

50

1,806

780

Further information in respect of Directors’ remuneration is provided in the Remuneration Committee Report on pages 31 to 34.

7.  FINANCE COSTS

Bank interest payable

Other interest payable

Finance cost on lease liabilities

8.  TAX CHARGE / (CREDIT) ON PROFIT / (LOSS)

The income tax credit is applicable on the Group’s operations in the UK.

Taxation charged / (credited) to the income statement

Current income taxation

Total current income taxation

Deferred Taxation

Origination and reversal of temporary timing differences

Adjustments to tax charge in respect of prior years

Adjustment in respect of change of rate of corporation tax

Total deferred tax

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

The above is disclosed as:

Income tax charge / (credit) - current year

Income tax charge / (credit) – prior year

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

58

Year ended 
17 April 2022
£000

Year ended
18 April 2021
£000

1,190

4

5,682

6,876

1,398

-

5,642

7,040

Year ended 
17 April 2022
£000

Year ended
18 April 2021
£000

1,266

1,266

2,408

109

(56)

2,461

3,727

3,618

109

3,727

-

-

(2,600)

(980)

-

(3,580)

(3,580)

(2,600)

(980)

(3,580)

LOUNGERS PLC ANNUAL REPORT 2022  FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

Factors affecting the tax charge / (credit) for the year

Profit / (loss) before tax

At UK standard rate of corporation taxation of 19% (2021: 19%).

Expenses not deductible for tax purposes

Fixed asset permanent differences

Adjustments to tax charge in respect of prior years

Adjustment in respect of change of rate of corporation tax

Total tax charge / (credit) for the year

Year ended 
17 April 2022
£000

Year ended
18 April 2021
£000

21,605

4,105

384

(815)

109

(56)

3,727

(14,722)

(2,797)

206

(9)

(980)

-

(3,580)

In the Spring budget 2021, the Government announced that from 1 April 2023, the corporation tax rate will increase to 25%. This change was substantively 
enacted on 24 May 2021; as such deferred tax liabilities and assets have been recalculated and recorded at the rate they are expected to unwind.

9.  EXCEPTIONAL ITEMS

Included in cost of sales

 Covid-19 related

Included in administrative expenses

 Covid-19 related

Year ended 
17 April 2022
£000

Year ended
18 April 2021
£000

-

-

-

441

886

1,327

The Covid-19 related costs included in cost of sales are in respect of the write-off of food and drink inventories resulting from the forced closure of all sites on 
4 November 2020 and 30 December 2020.

The Covid-19 related costs included in administrative expenses include the costs of the removal and storage of furniture and soft furnishings to enable 
compliance with social distancing and professional fees incurred in respect of the amendments made to the Group’s banking facilities.

10. EARNINGS / (LOSSES) PER SHARE

Basic earnings/ (losses) / per share is calculated by dividing the profit / (loss) 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/ (losses) 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 17 April 2022 the Group had potentially dilutive shares in the form of unvested shares pursuant to 
the above long-term incentive plans.

59

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

Profit / (loss) for the year after tax

Basic weighted average number of shares

Adjusted for share awards

Diluted weighted average number of shares

Basic earnings/ (losses) per share (p)

Diluted earnings/ (losses) per share (p)

Year ended 
17 April 2022
£000

17,878

102,728,430

2,464,588

105,193,018

17.4

17.0

Year ended
18 April 2021
£000

(11,142)

102,291,621

2,076,783

104,368,404

(10.9)

(10.9)

The share awards were not considered to be dilutive in the prior year as they would have had the impact of reducing the losses per share.

11. INTANGIBLE ASSETS

Goodwill

17 April 2022
£000

113,227

113,227

18 April 2021
£000

113,227

113,227

Goodwill of £113,227,000 arose on the acquisition of a majority stake in the Group by the former controlling party, 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 17 April 2022 and 18 April 2021 a value in use 
calculation has been performed using a discounted cash flow method based on the forecast cash flows and a terminal growth rate. The cash flows used in 
this assessment are based on a three year business plan to April 2025, 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 post-tax discount rate and terminal growth rate used in the 
discounted cash flow model were 9.0% and 2.0% respectively (2021: 8.0% and 2.0% respectively).

The estimation of value in use 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 17 April 2022, 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 2022  FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED

12. PROPERT Y, PL ANT AND EQUIPMENT

Leasehold 
Building
Improvements
£000

Motor
 Vehicles
£000

Fixtures and
Fittings
£000

Right of 
use asset
£000

121,480

11,735

(238)

132,977

35,251

7,567

(238)

42,580

Total
£000

229,206

16,855

(545)

245,516

62,759

17,855

(541)

80,073

53,147

2,790

(147)

55,790

16,961

6,704

(144)

23,521

32,269

90,397

165,443

55,790

14,816

-

132,977

16,404

-

245,516

42,558

(19)

70,606

149,381

288,055

23,521

7,137

-

30,658

42,580

8,451

-

51,031

80,073

19,638

(19)

99,692

54,498

2,330

(160)

56,668

10,525

3,553

(159)

13,919

42,749

56,668

11,190

-

67,858

13,919

4,018

-

17,937

81

-

-

81

22

31

-

53

28

81

148

(19)

210

53

32

(19)

66

Cost

At 20 April 2020

Additions

Disposals

At 18 April 2021

Accumulated depreciation

At 20 April 2020

Provided for the year

Disposals

At 18 April 2021

Net book value

At 18 April 2021

Cost

At 19 April 2021

Additions

Disposals

At 17 April 2022

Accumulated depreciation

At 19 April 2021

Provided for the year

Disposals

At 17 April 2022

Net book value

At 17 April 2022

49,921

144

39,948

98,350

188,363

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. All sites were reviewed in FY20 following the ﬁrst national lockdown and an impairment of £9.8m was 
booked in the FY20 ﬁnancial statements. All sites have been tested for impairment in FY22, however following the successful reopening of all sites in April 
and May 2021, no further impairment has been booked.

The value in use of each CGU is calculated based upon the Group’s latest three-year forecast. 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% (2021: 2.0%).

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 9.0% (2021: 8.0%).

On the basis of the impairment test undertaken the Group has not recognised any impairment charge in the year to 17 April 2022 (2021: £nil). The cash 
ﬂows used within the impairment model are based upon assumptions which, while prudent, 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 incremental impairment charge of £2,984,000. A 100 basis point increase in the discount rate would 
result in an impairment charge of £1,431,000 and a 50 basis point reduction in the terminal growth rate would result in an impairment charge of £295,000.

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2022

61

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

13. INVENTORIES

Food and beverages for resale

17 April 2022
£000

18 April 2021
£000

1,919

1,919

774

774

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 non-current assets

Deferred tax assets

Finance lease receivable

Receivables are denominated in sterling.

17 April 2022
£000

18 April 2021
£000

464

146

89

303

4,464

5,466

1,355

579

163

-

84

2,150

222

2,619

3,816

668

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

17 April 2022
£000

31,250

31,250

18 April 2021
£000

4,912

4,912

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 
£31,250,000 (2021: £4,912,000).

62

LOUNGERS PLC ANNUAL REPORT 2022  FINANCIAL STATEMENTSNOTES 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

17 April 2022
£000

18 April 2021
£000

27,270

-

9,092

9,140

10,712

56,214

8,562

5

7,218

5,408

7,383

28,576

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, 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.

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

17 April 2022
£000

98,350

8,475

111,127

119,602

18 April 2021
£000

90,397

6,921

103,657

110,578

Additions to right of use assets during the year ended 17 April 2022 were £16,404,000 (2021: £11,735,000).

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

63

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

Amounts recognised in the consolidated statement of comprehensive income

Depreciation charge of right of use assets

Interest expense (included in finance cost)

Total cash outflow for leases in 2022 was £12,218,000 (2021: £10,336,000). 

18. BORROWINGS

Long term borrowings:

Secured bank loans

Loan arrangement fees

17 April 2022
£000

8,451

5,682

18 April 2021
£000

7,567

5,642

17 April 2022
£000

18 April 2021
£000

32,500

(225)

32,275

39,500

(343)

39,157

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 SONIA. A three-year interest rate swap through to July 2022 was entered into that 
fixes SONIA on the full term loan facility at 0.7%. 

As a consequence of Covid-19, on 22 April 2020 the Group agreed an incremental £15,000,000 RCF with its lenders, providing a total RCF of 
£25,000,000. This incremental facility was originally due to expire in October 2021, however, given the prolonged Covid-19 lockdowns on 16 April 2021 
the facility was extended for a further 12 months to October 2022. It is not anticipated that this facility will be renewed in October 2022.

The term loan and RCF are subject to financial covenants relating to leverage and interest cover. The agreement reached with lenders on 16 April 2021 
included a waiver of the covenant tests due at 18 April 2021 and amendment of the covenant tests scheduled for 11 July 2021, 3 October 2021 and 26 
December 2021. There were no breaches of these tests in the year to 17 April 2022.

At 17 April 2022 the term loan was fully drawn while nothing was drawn on any of the revolving facilities (2021: term loan fully drawn and £7,000,000 
drawn down under the RCF).

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 through to 31 July 2022. The Group is currently 
reviewing its options for mitigating interest rate exposure post 31 July 2022.

64

LOUNGERS PLC ANNUAL REPORT 2022  FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

Commodity price risk
The Group is exposed to movements in the wholesale prices of foods and drinks. Like many others in the hospitality sector, following the Covid-19 pandemic 
and the conflict in Ukraine the Group is exposed to increases in input prices. Prices are typically fixed for periods 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. While the risk of further 
restrictions as a result of Covid-19 now seems remote and the Group has a healthy cash position, the Directors continue to monitor cashflow in order to 
ensure access to sufficient liquidity.

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.

The Group is subject to capital requirements from its lenders in respect of the term loan and revolving credit facility, which obliged the Group to maintain a 
leverage ratio of Net Debt (IAS 17 basis) to Adjusted EBITDA (IAS17) at stepped thresholds throughout the year. As at 17 April 2022 the leverage ratio of 
the Group was 0.03 compared with a threshold of 2.50. At 18 April 2021 the leverage ratio was 9.8 but the covenant requirement had been waived.

Reconciliation of net debt (IAS 17) and adjusted EBITDA (IAS17) to the statutory results can be found on page 78.

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 assets held at fair value

Financial liabilities

Financial liabilities measured at amortised cost

Financial liabilities held at fair value

17 April 2022
£000

18 April 2021
£000

32,685

38

(188,287)

-

7,977

-

(163,705)

(231)

Financial assets held at amortised cost include trade and other receivables, finance lease receivables and cash. Financial liabilities held at amortised cost 
include trade and other payables, lease liabilities and borrowings.

Financial assets held at fair value represent interest rate swaps. Interest rate swaps are valued at the present value of the estimated future cash flows based 
on observable yield curves and hence are considered to be level 2 of the fair value hierarchy under IFRS 13.

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

Hedging
The Group has entered into an interest rate swap for £32.5m to fix its floating rate loan at a rate of 0.7% above SONIA as described above which qualifies 
as a cashflow hedge. The movements in fair value have been recognised as follows:

Derivative liability at 19 April 2021

Recognised through other comprehensive income

Derivative asset at 17 April 2022

£000

(231)

269

38

65

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

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
£000

Between
1 and 5 years
£000

More than 
5 years
£000

1,064

13,951

36,410

51,425

1,035

12,462

13,970

27,467

33,659

55,730

-

89,389

41,584

51,108

-

92,692

-

86,376

-

86,376

-

86,126

-

86,126

Total
£000

34,723

156,057

36,410

227,190

42,619

149,696

13,970

206,285

For the 52 week year ended 17 April 2022

Secured bank loans

Lease liabilities

Trade and other payables

For the 52 week year ended 18 April 2021

Secured bank loans

Lease liabilities

Trade and other payables

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

20. DEFERRED TAX ASSETS

At 19 April 2020

Recognised in income statement

At 18 April 2021

Recognised in income statement

At 17 April 2022

Accelerated 
capital 
allowances
£000

(393)

2,458

2,065

(3,428)

(1,363)

Losses
£000

318

57

375

(375)

-

Acquisition 
accounting
£000

Share schemes
£000

(1,162)

255

(907)

129

(778)

237

605

842

396

1,238

Other
£000

1,236

205

1,441

817

2,258

Total
£000

236

3,580

3,816

(2,461)

1,355

Deferred tax assets have been recognised in respect of all tax losses and other temporary differences where it is probable that these assets will be recovered. 
Based on its current business plan, the Group anticipates that future taxable profits will be generated in excess of the profits arising from the reversal of 
existing taxable temporary differences.

The Group had no unrecognised deferred tax assets at 17 April 2022 or 18 April 2021.

66

LOUNGERS PLC ANNUAL REPORT 2022  FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

21. SHARE BASED PAYMENTS

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 £3,042,000 (2021: £1,817,000) in respect of the Group’s share based payment plans and related employer’s national insurance of £178,000 
(2021: £217,000). The total charge of £3,220,000 is split by scheme as follows:

Employee share plan

Senior management restricted share plan

Value creation plan

A summary of the movements in each scheme is outlined below:

Year ended 
17 April 2022
£000

Year ended
18 April 2021
£000

1,118

1,007

1,095

3,220

528

733

773

2,034

Employee share plan

Senior management restricted share plan

Value creation plan

Retention award

Outstanding at
19 April 2021
Number

Granted during
 the year
Number

338,664

1,738,119

-

-

574,000

435,334

-

-

Vested during 
the year
Number

(338,664)

-

-

-

Lapsed during 
the year
Number

Outstanding at
17 April 2022
Number

(217,500)

(166,540)

356,500

2,006,913

-

-

-

-

Employee Share Plan
Share grants over 360,664 shares were made on the 21st October 2020. These awards had no performance conditions other than continued employment 
for one year from grant date and on 29th April 2021 a total of 338,664 shares were issued in respect of these awards. Awards over a further 574,000 
shares were made on 21 May 2021 and post year end a total of 356,500 shares were issued in respect those awards.

Senior Management Restricted Share Plan
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. 

During the year ended 19th April 2020, 472,069 nil cost options were awarded. 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 91,871 options in respect of this award had lapsed at year end.

During the year ended 18th April 2021 a further 718,766 nil cost options were awarded. 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 114,696 options in respect of this award 
had lapsed at year end.

During the year ended 17th April 2022 a further 435,334 options were granted. 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 37,689 options in respect of this award 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 2022NOTES 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 the time of grant in April 2019 was £2,600,000. At this time it was not anticipated that there would be a Covid related equity 
raise in April 2020. As reported in the Remuneration Committee Report external advice was taken as to how the impact of the equity raise might be reﬂected 
in the VCP scheme, and it was decided to replicate the thresholds and vesting conditions of the original scheme in respect of the April 2020 equity raise, with 
a start date of April 2020.

The performance period for the VCP ended on 29 April 2022 and it was determined that a total of 595,729 shares would be issued to Executive Directors 
and senior management in respect of the VCP. These shares will vest in three equal instalments in April 2022, April 2023 and April 2024. The original fair 
value calculation of £2,600,000 did not reﬂect the impact of the April 2020 equity raise and accordingly a further fair value charge of £1,477,000 is 
required to be recognised over the period to April 2024. Whilst the VCP performance period did not end until 29 April 2022 there was a settled expectation 
that an award would be made under the VCP pre the 17 April 2022 year end and accordingly a charge of £525,000 was taken in respect of the additional 
fair value charge of £1,477,000 during the year ended 17 April 2022.

22. CALLED UP SHARE CAPITAL

Allotted, called up and fully paid ordinary shares

Redeemable preference shares 

Ordinary shares at £0.01 each

Redeemable preference shares at £49,999 each

17 April 2022
£000

18 April 2021
£000

1,027

100

1,127

17 April 2022
Number

102,738,664

2

1,024

100

1,124

18 April 2021
Number

102,400,000

2

The table below summarises the movements in share capital for Loungers plc during the year ended 17 April 2022:

At 19 April 2021

Shares issued

At 17 April 2022

Ordinary
Shares
£0.01 NV

102,400,000

338,664

102,738,664

Redeemable
Preference
Shares
£49,999 NV

2

-

2

£000

1,124

3

1,127

On 7 May 2021 the Company allotted 338,664 ordinary shares of £0.01 to employees of the Group under the Employee Share Plan and Senior 
Management Restricted Share Plan.

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.

68

LOUNGERS PLC ANNUAL REPORT 2022  FINANCIAL STATEMENTS

 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED

23. EQUIT Y

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.

Other reserve
The other reserve comprises:

At 18 April 2021 and 17 April 2022

Other
Reserve
£000

18,451

Merger
Reserve
£000

(4,224)

Capital
Contribution
Reserve
£000

51

Total
Other
Reserves
£000

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

Cash ﬂows from operating activities

Proﬁt / (loss) before tax

Adjustments for:

Depreciation of property, plant and equipment

Depreciation of right of use assets

Share based payment transactions

Loss 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) / reclaimed

Net cash generated from operating activities

Year ended 
17 April 2022
£000

Year ended
18 April 2021
£000

21,605

(14,722)

11,187

8,451

3,220

-

(44)

6,876

(1,145)

(2,699)

23,593

71,044

(1,418)

69,626

10,288

7,567

2,034

4

(46)

7,040

41

3,108

(4,414)

10,900

1,131

12,031

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2022

69

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

25. ANALYSIS OF CHANGES IN NET DEBT

Cash in hand

Bank Loans – due after one year

Lease liabilities

Net debt

Derivatives

Interest-rate swaps liability

Total derivatives 

Net debt after derivatives

Cash in hand

Bank Loans – due after one year

Lease liabilities

Net debt

Derivatives

Interest-rate swaps (liability) / asset

Total derivatives 

Net debt after derivatives

20 April 
2020
£000

4,083

(39,039)

(104,939)

(139,895)

(332)

(332)

Cash flows
£000

829

-

10,213

11,042

-

-

Non-cash
movement
£000

-

(118)

(15,852)

(15,970)

101

101

18 April 
2021
£000

4,912

(39,157)

(110,578)

(144,823)

(231)

(231)

(140,227)

11,042

(15,869)

(145,054)

19 April 
2021
£000

4,912

(39,157)

(110,578)

(144,823)

(231)

(231)

Cash flows
£000

26,338

7,000

12,218

45,556

Non-cash
movement
£000

-

(118)

(21,242)

(21,360)

-

-

269

269

17 April 
2022
£000

31,250

(32,275)

(119,602)

(120,627)

38

38

(145,054)

45,556

(21,091)

(120,589)

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

26. PENSION COMMITMENTS

The Group operates a defined contributions pension scheme. The assets of the scheme are held separately from those of the Group in an independently 
administered fund. The pension cost charge represents contributions payable by the Group.

Pension cost

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

Pension contributions payable

Year ended 
17 April 2022
£000

1,158

17 April 2022
£000

517

Year ended
18 April 2021
£000

893

18 April 2021
£000

316

70

LOUNGERS PLC ANNUAL REPORT 2022  FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
CONTINUED

27. LESSOR 

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

17 April 2022
£000

18 April 2021
£000

125

496

207

828

125

500

307

932

28. RELATED PART Y TRANSACTIONS

A Reilley and J Bishop, a Director of the Company’s subsidiary, Loungers UK Limited, 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:

Purchases from related parties:

 Colombe D’Or Property LLP

Amounts owed to related parties:

 Colombe D’Or Property LLP

17 April 2022
£000

18 April 2021
£000

201

6

125

57

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

29. LEGAL ENTITIES

17 April 2022
£000

18 April 2021
£000

242

2

239

137

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 

Lion/Jenga Bidco Limited 

Loungers Holdings Limited 

Loungers UK Limited 

Ordinary 100% 

Holding company

Ordinary 100% 

Ordinary 100% 

Ordinary 100% 

Ordinary 100% 

Holding company

Holding company

Holding company

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

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

30. POST BAL ANCE SHEET EVENTS NOTE

On 9 May 2022 the Company allotted and issued 385,167 ordinary shares of 1 pence each in the Company following the vesting of awards made to 711 
Company employees pursuant to the Company’s Employee Share Plan.

71

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2022COMPANY STATEMENT OF 
FINANCIAL POSITION
AS AT 17 APRIL 2022

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

Share premium account

Other reserves

Retained earnings

Brought forward

Loss for the year attributable to the owners

Other changes in retained earnings

Total equity

Note

At 17 April 2022
£000

At 18 April 2021
£000

5

6

7

8

136,300

136,300

21,474

21,474

157,774

(50)

(50)

(50)

157,724

1,127

8,066

18,451

130,621

(538)

(3)

130,080

157,724

136,300

136,300

22,012

22,012

158,312

(50)

(50)

(50)

158,262

1,124

8,066

18,451

131,153

(526)

(6)

130,621

158,262

The ﬁnancial statements on pages 72 to 77 were approved and authorised for issue by the Board and were signed on its behalf by:

Nick Collins
Chief Executive Ofﬁcer
13 July 2022

G Grant
Chief Financial Ofﬁcer

72

LOUNGERS PLC ANNUAL REPORT 2022  FINANCIAL STATEMENTS

COMPANY STATEMENT OF 
CHANGES IN EQUITY
FOR THE 52 WEEK YEAR ENDED 17 APRIL 2022

At 19 April 2020

Ordinary shares issued

Total transactions with owners

Loss for the financial year

Total comprehensive expense for the 52 week year

At 18 April 2021

Ordinary shares issued

Total transactions with owners

Loss for the financial year

Total comprehensive expense for the 52 week year

Called up
 share capital
£000

1,025

99

99

-

-

Share 
premium
£000

-

8,066

8,066

-

-

Other 
reserves
£000

18,451

Retained 
earnings
£000

Total 
equity
£000

131,153

150,629

-

-

-

-

(6)

(6)

(526)

(526)

8,159

8,159

(526)

(526)

1,124

8,066

18,451

130,621

158,262

3

3

-

3

-

-

-

-

-

-

(3)

(3)

(538)

(538)

-

-

(538)

(538)

At 17 April 2022

1,127

8,066

18,451

130,080

157,724

73

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2022NOTES TO THE COMPANY  
FINANCIAL STATEMENTS
FOR THE 52 WEEK YEAR ENDED 17 APRIL 2022

1.  GENERAL INFORMATION

Loungers plc (“the Company”) is incorporated and domiciled in the United Kingdom and registered in England and Wales, 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.  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 
United Kingdom and the Republic of Ireland’ (‘FRS 102’) 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 £538,000 (2021: £526,000).

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

No new standards have been adopted during the year.

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  FINANCIAL INSTRUMENTS

The Company has chosen to adopt sections 11 and 12 of FRS102 in respect of financial instruments.

Basic financial assets, including trade and other receivables, cash and bank balances are initially recognised at transaction price, unless the arrangement 
constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Such 
assets are subsequently carried at amortised cost using the effective interest method.

74

LOUNGERS PLC ANNUAL REPORT 2022  FINANCIAL STATEMENTSNOTES TO THE COMPANY  FINANCIAL STATEMENTS 
CONTINUED

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.

Other financial assets, including investments in equity instruments which are not subsidiaries, associates, or joint ventures, are initially measured at fair value, 
which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss.

Basic financial liabilities including trade and other payables, bank loans, loans from fellow group companies and preference shares that are classified as 
debt are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the 
present value of the future receipts, discounted at a market rate of interest. Debt instruments are subsequently carried at amortised cost, using the effective 
interest rate method.

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable 
are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities

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.

2.6  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.

2.7  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.  CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATION UNCERTAINT Y

There were no matters of material accounting judgement or estimation uncertainty within the Company financial statements.

4.   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

75

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2022NOTES TO THE COMPANY  FINANCIAL STATEMENTS 
CONTINUED

5.  STAFF COSTS

Loungers plc has no employees other than the Directors. Details of Directors’ emoluments are disclosed in the Remuneration Committee Report on pages 31 
to 34 and in note 6 of the notes to the consolidated financial statements.

6.  INVESTMENTS

At 19 April 2021

Additions

At 17 April 2022

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

7.  TRADE AND OTHER RECEIVABLES

Included within current assets

Amounts owed by Group undertakings

Other debtors

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

8  TRADE AND OTHER PAYABLES

Included within current liabilities

Amounts owed to Group undertakings

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

Shares in subsidiary
undertakings
£000

136,300

-

136,300

17 April 2022
£000

18 April 2021
£000

21,371

103

21,474

21,909

103

22,012

17 April 2022
£000

18 April 2021
£000

50

50

50

50

76

LOUNGERS PLC ANNUAL REPORT 2022  FINANCIAL STATEMENTSNOTES TO THE COMPANY  FINANCIAL STATEMENTS 
CONTINUED

9.  CALLED UP SHARE CAPITAL

Allotted, called up and fully paid ordinary shares

Redeemable preference shares 

Ordinary shares at £0.01 each

Redeemable preference shares at £49,999 each

At 17 April 2022
£000

At 18 April 2021
£000

1,027

100

1,127

1,024

100

1,124

At 17 April 2022
Number

At 18 April 2021
Number

102,738,664

102,400,000

2

2

The table below summarises the movements in share capital for Loungers plc during the year ended 17 April 2022:

At 19 April 2021

Shares issued

At 17 April 2022

Ordinary Shares
£0.01 NV

102,400,000

338,664

102,738,664

Redeemable 
Preference Shares
£49,999 NV

2

-

2

£000

1,124

3

1,127

On 7 May 2021 the Company allotted 338,664 ordinary shares of £0.01 to employees of the Group under the Employee Share Plan and Senior 
Management Restricted Share Plan.

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.

10. 

EQUIT Y

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

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.

77

FINANCIAL STATEMENTS  LOUNGERS PLC ANNUAL REPORT 2022RECONCILIATION OF STATUTORY RESULTS TO 
ALTERNATIVE PERFORMANCE MEASURES

Operating profit / (loss)

Exceptional items

Share based payment charge

Site pre-opening costs

Adjusted operating profit / (loss)

Depreciation (pre IFRS 16 right of use asset charge)

IFRS 16 Right of use asset depreciation

Loss on disposal of fixed assets

Adjusted EBITDA (IFRS 16)

Adjusted EBITDA % (IFRS 16)

IAS 17 Rent charge

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

Adjusted EBITDA (IAS 17)

Adjusted EBITDA Margin % (IAS17)

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

Profit / (loss) before tax (IAS 17)

Net debt (IFRS 16)

Property lease liability

Net debt (IAS 17)

Year ended
17 April 2022
£000

Year ended
18 April 2021
£000

28,437

-

3,220

2,344

34,001

11,187

8,451

-

53,639

22.6%

(11,745)

425

42,319

17.8%

21,605

(11,745)

(675)

8,451

5,682

(41)

23,277

120,627

(119,602)

1,025

(7,728)

1,327

2,034

421

(3,946)

10,288

7,567

4

13,913

17.8%

(10,889)

506

3,530

4.5%

(14,722)

(10,889)

(531)

7,567

5,642

(46)

(12,979)

144,823

(110,578)

34,245

The Group references Like for Like sales growth as a key APM. Like for Like sales growth excludes the sales from sites that have been open for less than 
18 months. During the year ended 17 April 2022, the comparator period was the same period in the most recent pre-Covid year (ie 2020 for the weeks up 
to March 20th and 2019 for the remaining weeks of the year). The periods in which the Group did not trade are excluded from the calculation.

78

LOUNGERS PLC ANNUAL REPORT 2022  FINANCIAL STATEMENTSCOMPANY 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

Link Company Matters Limited

SOLICITORS

Jones Day
21 Tudor Street
London
EC4Y 0DJ

INDEPENDENT AUDITORS

PricewaterhouseCoopers LLP 
2 Glass Wharf
Temple Quay
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

Houlihan Lokey
1 Curzon Street
London
W1J 5HD

CORPORATE BROKERS

Liberum Capital Limited
25 Ropemaker Street
London
EC2Y 9LY

Peel Hunt LLP
100 Liverpool Street
London
EC2M 2AT

DESIGNED AND PRODUCED BY PERIVAN

LOUNGERS.CO.UK

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