Loungers, which operates 167 venues across the UK under its Lounge and Cosy Club concepts, has revealed that the placing of 9,250,000 new ordinary shares at 90p per share on 22 April raised approximately £8.3m.
What’s more, the group also announced that its lending banks – Santander and Bank of Ireland – had agreed to provide a £15m revolving credit facility over an 18-month period. Of this, £10m is available for Loungers to draw immediately with the final £5m at the company’s disposal on condition that it raises equity funding of at least £5m.
According to Loungers’ statement on 17 April 2020, the company had £4.1m on its balance sheet, undrawn facilities of £3m and net debt of £35.4m.
According to a company statement, the net proceeds of Loungers’ placing, in tandem with its new bank facilities, will provide sufficient cash reserves should the Covid-19 shutdown impact Loungers’ 2021 sales, as well as allowing it to continue ambitious expansion plans post-pandemic.
As previously reported by The Morning Advertiser (MA), Loungers hopes to upscale its estate of Lounge and Cosy Club sites at a rate of roughly one new venue every fortnight, equating to 25 per year. Speaking in February 2019, co-founder and chairman Alex Reilley outlined plans to eventually reach around 500 sites across its two concepts.
“Having continued to outperform our market immediately prior to lockdown, we are determined to emerge strongly from this period and rebuild that momentum,” chief executive Nick Collins said following Loungers’ placing.
The group’s placing comes almost a month after City Pub Group revealed that it raised £15m from the successful placing of 30,000,000 new ordinary shares in a bid to offset the impact of Covid-19.
Taken ‘self-help’ measures
In the past calendar year, Loungers has opened a landmark 150th site, successfully listed on London’s Alternative Investment Market (AIM) and revealed a 22% increase in revenue for the 24 weeks ended 6 October to £79.8m.
What’s more, in January 2020, Collins told MA that Loungers was keen to grow its number of employee shareholders over the coming year, with around 700 staff members already owning shares.
Yet, prior to placing, Loungers had implemented a number of measures to reduce its cost base and minimise outgoings in light of Prime Minister Boris Johnson calling last orders for the on-trade on 20 March.
The company revealed that 99% of its employees – comprising all on-site staff and most head office employees – had been furloughed, with a “skeleton staff” in place to steer Loungers through closure and prepare for the reopening of its sites.
In addition, the group paused all capital expenditure, renegotiated creditor payment terms, and slashed its directors’ salaries by 50% for the duration of site closure.
“We have taken all the self-help measures open to us and are indebted to our teams for their ongoing support and engagement in the communities they serve,” Collins continued.
“Government support is welcomed and continues to be critical to us, and the wider hospitality industry. However, it is imperative this is maintained throughout the reopening phase until consumer confidence rebuilds.
“With our newly agreed debt facilities and the successful equity fundraising, we are in a strong financial position with sufficient liquidity to come through this crisis and to take advantage of the opportunities that will emerge when restrictions are lifted.”