🇬🇧 NEW UK REOPENING IDEA 🇬🇧
Meet: Loungers PLC $LGRS
LGRS operates restaurants across the UK under two brands, Lounge and Cosy Club.
What we like:
- 34% CROIC per site
- Growth CAPEX hides true FCF
- Founder-led
- Long runway for new sites
Dive in👇
macro-ops.com/loungers-plc-l…
Meet: Loungers PLC $LGRS
LGRS operates restaurants across the UK under two brands, Lounge and Cosy Club.
What we like:
- 34% CROIC per site
- Growth CAPEX hides true FCF
- Founder-led
- Long runway for new sites
Dive in👇
macro-ops.com/loungers-plc-l…
1/ What Makes The $LGRS Experience Unique: The Lounge Sites
Lounges are 'homey' sites that feel like esoteric living rooms (this = lower maintenance capex!)
Each Lounge is unique to its location without overarching LGRS branding.
All-day offering, same menu at every location.
Lounges are 'homey' sites that feel like esoteric living rooms (this = lower maintenance capex!)
Each Lounge is unique to its location without overarching LGRS branding.
All-day offering, same menu at every location.
2/ What Makes The $LGRS Experience Unique: Cosy Club Sites
Think of Cosy Clubs as old-school high-end restaurants. The company houses its Clubs inside theatrical buildings that catch the eye.
LGRS generates higher sales and EBITDA (on average) in its Clubs versus Lounge sites.
Think of Cosy Clubs as old-school high-end restaurants. The company houses its Clubs inside theatrical buildings that catch the eye.
LGRS generates higher sales and EBITDA (on average) in its Clubs versus Lounge sites.
3/ Value For Money: Always Low Prices
LGRS prides itself on always low prices.
They offer the same menu at every store, which lends itself to unique advantages like discounted wholesale prices on supplies.
Low prices create durable biz thru recession as customers trade down.
LGRS prides itself on always low prices.
They offer the same menu at every store, which lends itself to unique advantages like discounted wholesale prices on supplies.
Low prices create durable biz thru recession as customers trade down.
4/ Another Advantage of Low Prices
LGRS cost structure is such that it can generate profits at low per-item prices.
This means it can open stores in places higher-cost restaurants can't.
LGRS model scales better than high-cost dining experiences.
Plus, no need to discount!
LGRS cost structure is such that it can generate profits at low per-item prices.
This means it can open stores in places higher-cost restaurants can't.
LGRS model scales better than high-cost dining experiences.
Plus, no need to discount!
5/ LGRS Benefits From *Gulp* Socialization As A Service
The LGRS thesis isn't about how good the food is or even how cheap the meals are.
It's about the desire of people to *meet* at their locations to socialize.
Like SBUX sells you more than coffee (free WiFi, aroma, etc.)
The LGRS thesis isn't about how good the food is or even how cheap the meals are.
It's about the desire of people to *meet* at their locations to socialize.
Like SBUX sells you more than coffee (free WiFi, aroma, etc.)
6/ LGRS Boasts Impressive Growth Figures
LGRS has grown sites at a 29% CAGR since 2014 (from 44 to 146 in 2019).
During that time, the company grew sales and adj EBITDA at 38% / 39% CAGRs.
LGRS has grown like-for-like (LfL) sales at least 4% or higher each of the last 5 years
LGRS has grown sites at a 29% CAGR since 2014 (from 44 to 146 in 2019).
During that time, the company grew sales and adj EBITDA at 38% / 39% CAGRs.
LGRS has grown like-for-like (LfL) sales at least 4% or higher each of the last 5 years
7/ LGRS Strong Unit Economics
- Avg cost to build site: GBP 837K
- Avg EBITDA after First Year: ~GBP 284K
That's a cool 34% CROIC per-store.
So for every $1 invested in building a new store, the company recognizes $0.34 as EBITDA.
Now we know why they reinvest so heavily!
- Avg cost to build site: GBP 837K
- Avg EBITDA after First Year: ~GBP 284K
That's a cool 34% CROIC per-store.
So for every $1 invested in building a new store, the company recognizes $0.34 as EBITDA.
Now we know why they reinvest so heavily!
8/ Current Reinvestment Hides True FCF Yield
LGRS spends on growth & maintenance CAPEX.
Growth CAPEX compiles initial build-out costs for new sites (10% of revenues).
Maintenance CAPEX represents the annual cost to maintain every LGRS site (1.16% of revenues).
HUGE difference
LGRS spends on growth & maintenance CAPEX.
Growth CAPEX compiles initial build-out costs for new sites (10% of revenues).
Maintenance CAPEX represents the annual cost to maintain every LGRS site (1.16% of revenues).
HUGE difference
9/ LGRS Has A Long Runway To Open New Sites
LGRS has 167 sites as of 2019. Their plan is to reach 500 total sites.
To do that, they'll build 20-25 new sites per year.
The company can cluster multiple sites without cannibalizing sales -- allowing it to open even more sites.
LGRS has 167 sites as of 2019. Their plan is to reach 500 total sites.
To do that, they'll build 20-25 new sites per year.
The company can cluster multiple sites without cannibalizing sales -- allowing it to open even more sites.
10/ Thinking About Growth, Revenue, and Valuation
Valuing this business is simple. We ask two ?s:
1. How many stores can they build?
2. How much $ can they generate per store on a normalized basis?
We used 3 scenarios:
a) 300 sites
b) 400 sites
c) 500 sites
Results 👇
Valuing this business is simple. We ask two ?s:
1. How many stores can they build?
2. How much $ can they generate per store on a normalized basis?
We used 3 scenarios:
a) 300 sites
b) 400 sites
c) 500 sites
Results 👇
11/ Concluding Thoughts
LGRS will expand sites and become the go-to spot to hang out/grab drinks with friends.
Low prices allow LGRS to enter smaller mkts w/out fierce competition.
And during a recession, customers will crave LGRS prices.
More ideas: macro-ops.com/collective/
LGRS will expand sites and become the go-to spot to hang out/grab drinks with friends.
Low prices allow LGRS to enter smaller mkts w/out fierce competition.
And during a recession, customers will crave LGRS prices.
More ideas: macro-ops.com/collective/
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