Loungers hits record 203% revenue surge to £237.2m, celebrates 200th site opening

Natasha Doris
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Loungers hits record 203% revenue surge to £237.2m, celebrates 200th site opening

Loungers shares gained 3.2% to 188.5p in late afternoon trading on Wednesday after the group announced a record revenue surge of 203% to £237.2 million compared to £78.3 million in FY 2022.

The company reported an adjusted EBITDA rise to £53.6 million against £13.9 million, along with an adjusted EBITDA margin of 22.6% from 17.8%.

Loungers swung back to an operating profit £28.4 million compared to a loss of £7.7 million and an adjusted operating profit of £34 million from a loss of £3.9 million in the previous year.

The group further highlighted cash generated from operating activities of £69.6 million from £12 million.

The firm also reduced its non-property debt by £33.2 million to £1 million, significantly shoring up its balance sheet.

The company opened a new record of 27 sites across the UK, with its 200th site recently opened for the public.

Loungers grew its build teams to five, marking the capacity to open approximately 32 sites per year.

The company added it was optimistic regarding its outlook, with no observed change in customer behaviour despite macro-economic headwinds, and the group said it was on track to hold at least 500 sites across the UK, alongside its strong pipeline of developments in the future.

“These results demonstrate the extent to which Loungers has thrived over the past year, achieving a record number of openings, record underlying like for like sales growth and a record level of profits,” said Lounger CEO Nick Collins.

“We are benefitting from changes in consumer behaviour, with more people staying local, working from home, and supporting their local community and high street. We are delighted to have just opened our 200th site, and to be announcing today that we are increasing our roll-out target for site openings to 30 for this year.”

“Whilst the short-term economic outlook is challenging, we are in an excellent position to weather the storm and to take advantage of growth opportunities coming out of it. We have a strong balance sheet, a very capable and highly motivated team and an affordable, value for money all-day offer with enormous scope for further expansion across the UK.”

Loungers mentioned an EPS of 17p after a loss per share of 10.9p in FY 2021.

FTSE 100 falls as US inflation hits 9.1%

Natasha Doris
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FTSE 100 falls as US inflation hits 9.1%

The FTSE 100 was down going into the close Wednesday despite a reported 0.5% growth in the UK economy over May, according to figures released by the ONS today.

However, the real driver of markets of Wednesday was the higher than expected US CPI reading that rose to 9.1%.

“If anyone had been harbouring hopes that US inflation had topped out at 8.6% those hopes have been dashed today. A potent mix of soaring prices both at the pump and at food stores has created a situation that no-one can hide from,” said Danni Hewson AJ Bell financial analyst.

“Markets will now have to lock in the expectation that the Fed will deal out another 75 basis point hike later this month as it seeks to push the lid down on the pot that just keeps bubbling over. There’s been plenty of volatility as investors consider how fast the economy will slow once the brakes are tapped again.”

US Inflation hits 9.1%

The spike marked the highest yearly gain in inflation since 1981 and the highest monthly gain since 2005.

The NASDAQ fell 0.6% to 11,189, the Dow Jones dropped 0.7% to 30,739.6 and the S&P 500 was down 0.7% to 3,790.

UK economy

Despite the positive news after two consecutive months of GDP contraction in March and April, the sectors behind the growth displayed less reason for optimism.

The GDP climb was predominantly on the back of a 0.4% rise in services, linked to a 1.2% increase in human health and social activities due to a higher level of GP appointments.

Meanwhile, output in consumer-facing services dropped by 0.1% as a result of a 0.5% fall in the retail sector, demonstrating a lack of household retail spending and sending recession alarms ringing.

“Households are strategically cutting back on their spending, which is a particular blow to the consumer services which still haven’t been able to get anywhere near their pre-pandemic glory days,” said AJ Bell financial analyst Danni Hewson.

Fashion groups felt the cold chill of the cost of living crisis, with JD Sports Fashion falling 1.9% to 122.8p and Next dipping 0.1% to 6,296p as consumers cut back on retail expenses.

Supermarkets also felt the effects of consumers paring back on shopping, with Tesco dropping 0.9% to 257.3p, Ocado falling 4.5% to 793.6p and Sainsbury’s sliding 0.1% to 214.9p.

Euro falls below parity against Dollar

Meanwhile, the Euro fell below parity against the Dollar for the first time in two decades, after the US inflation statistics served to strengthen the Dollar.

The Dollar was worth 0.997 Euro at the time of reporting, marking the first time since 2002 that the Dollar was listed as the stronger currency against the Euro.

European markets fell across the board, with the German DAX down 1.2% to 12,740, the French CAC 40 sliding 1% to 5,980.2 and the Italian FTSE MIB dropping 1.1% to 21,241.3.

Renold rebounds from Covid-19 with £195.2m revenues

Natasha Doris
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Renold rebounds from Covid-19 with £195.2m revenues

Renold shares were down 3.1% to 27.2p in late afternoon trading on Wednesday following a reported revenue of £195.2 million in FY 2022 against £160.8 million in FY 2021.

The industrial components company announced an adjusted operating profit of £15.3 million compared to £10.9 million the last year, alongside a 7.8% return on sales from 6.8%.

Renold lowered its net debt over the financial term to £13.8 million from £18.4 million after the group rebounded from the Covid-19 pandemic.

The firm highlighted a 31.7% growth in order intake to £223.9 million compared to £170 million and a closing order book increase of 57% to £84.1 million.

The company pointed out record revenue, order intake and closing order book in its chain Europe and Americas segments.

Renold also mentioned a £11 million long-term military contract among its operational highlights and a successful bolt-on acquisition in its chain sector, with payback of less than two years.

The firm noted an adjusted EPS rise of 87% to 4.3p compared to 2.3p year-on-year and a basic EPS of 4.7p against 2p.

Renolds added it believed the company would remain in a good position going forward in FY 2023, despite macro-economic headwinds and supply chain problems.

“Throughout the reported period the business performance has been on an improving trend and our order books have continued to grow in the early part of the new financial year,” said Renold CEO Robert Purcell.

“We are cognisant that there remain considerable Covid-19-related challenges in some parts of the world; supply chain issues are still prevalent and inflation is high.”

“However, we have entered the new financial year with good momentum and a belief in the excellent fundamentals of the Renold business upon which we are building.”

Computacenter acquires US reseller Business IT Source

Natasha Doris
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Computacenter acquires US reseller Business IT Source

Computacenter shares were down 2.4% to 2,432p in late afternoon trading on Wednesday after the group announced its acquisition of US value-added reseller Business IT Source for an unspecified figure.

Computacenter confirmed Business IT Source listed a revenue of $245 million with an EBIT of $8.9 million in FY 2021

The company reportedly employs approximately 100 workers and is based in Buffalo, Illinois.

Computacenter said the existing Business IT Source team would remain in the US as a separate operating unit within Computacenter United States in a bid to maximise the growth opportunity.

“Our US business continues to grow organically but we will take additional opportunities to improve our positioning,” said Computacenter Group CEO Mike Norris.

“BITS gives us a much stronger presence in the Midwest of the United States and brings some great people, customers and leadership to our business. The Buffalo Grove Integration Center will allow us to serve more of our Midwest regional customers locally over time, helping us to meet our sustainability goals.” 

“I am confident that the BITS leadership will seize the opportunity to continue their current growth momentum.”

The firm mentioned the business and team would be fully-integrated into Computacenter’s North American operations over time.

“We are excited to become part of the Computacenter family. This gives us the opportunity to provide a much broader range of capabilities to our customers and growth opportunities for our people,” said CEO & Co-Founder of BITS Bob Frauenheim

“Operating as a separate business unit will allow us to continue our personalized service while leveraging Computacenter’s capabilities to best serve customers and associates.”

Year of consolidation for Ilika before Stereax sales take off

Andrew Hore
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Year of consolidation for Ilika before Stereax sales take off

Battery technology developer Ilika (LON: IKA) has commissioned its manufacturing plant for Stereax batteries and there is significant interest from medical technology companies, but it will be another year until sales start to ramp up so investors will have to be patient.

Process optimisation and product qualification continues at the facility and then initial products can be sold for pre-clinical studies for medical technology products. Management has decided to focus on this sector rather than the sensors market. Sales will be slower building up, but the medical markets could be much bigger.

It could take five years to go from pre-clinical studies to mass production. The potential products include implanted medical devices, smart orthodontics and cardiac sensors. The potential pipeline is much larger than the capacity of the manufacturing facility. Licensing the technology could become a possibility in three years. A US supplier would be useful given the potential customer base.

Liberum is expecting a rise in Stereax revenues from £31,000 to £200,000 this year before a jump to £6m in 2023-24. That is slower than previously expected.

Meanwhile, the development of the larger Goliath battery for luxury electric cars continues. Ilika would be one of the few European producers of solid state batteries. Goliath batteries could achieve a level of performance in excess of existing technology by 2024. A pilot plant could be started next year with a larger scale plant likely at the UK Battery Industrialisation Centre later.

Cash

There is plenty of cash in the bank to undertake the investment required in both Stereax and Goliath battery technologies thanks to the £24.7m raised at 140p a share last July. Net cash is £22.6m and that could fall to £12.2m by April 2023 after which the cash outflows from operations and investment should start to reduce.

This year the loss is expected to fall slightly from £8.15m to £7.79m on revenues improving from £496,000 £1m – mainly due to greater grant income.

At 45.5p, down 10.8%, the share price is not much more than one-third of the placing and open offer price last year, which itself was a significant discount to the then market price.

The focus for Stereax on medical technology has slowed initial sales growth, but there are still enormous prospects for Stereax and Goliath. Investors got overexcited a few years ago and pushed up the share price but there appears an opposite overreaction in the current share price.

AIM movers: CMO downgrades guidance and Concurrent Technologies medical order

Andrew Hore
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AIM movers: CMO downgrades guidance and Concurrent Technologies medical order

CMO Group (LON: CMO) is the largest faller on the day having almost halved to 39p – last year’s placing price was 132p. The online retailer of building products says revenues in the 27 weeks to June 2022 are 10% ahead, or 2% higher like-for-like. Guidance is that full year revenues will increase from £76.3m to at least £86m, but previously £95.5m was expected. The EBITDA estimate has been reduced from £5.55m to around £3.7m – similar to last year. Supply problems have increased prices and trading has been getting tougher since Easter.

T42 IOT Tracking Solutions (LON: TRAC) has signed a distribution agreement in Argentina for its shipping container tracking systems with an estimated value of more than $16m over four years. That sent the share price 39% higher at 14.25p. The deal includes recurring revenues and sales should start in 2023.

Aeorema Communications (LON: AEO) says that the year to June 2022 was its strongest ever with a 130% jump in revenues and a pre-tax profit of at least £700,000. The live events agency benefited from the ending of Covid restrictions for in-person events and virtual events are continuing. There is £1.65m in the bank. The share price rose 27.3% to 70p.

Embedded computer boards supplier Concurrent Technologies (LON: CNC) has received a new order from a global medical technology company. The initial order is worth $2.2m in the first year of product shipments and there should be orders for several years. This further diversifies the customer base away from defence, which was 70% of the revenues of £20.5m in 2021. The share price is 9.4% higher at 81.5p and it is 5.2% ahead of the level at start of the year, which is a significant outperformance of AIM.

Drink brands owner Distil (LON: DIS) says first quarter revenues have decreased by 81% to £120,000. The share price dived 14.8% to 1.15p. Management says that there is a one-off impact from stock being removed from a distributor so that Distil can handle its own UK sales. Marketing spending is higher, and the benefits of the distribution change are not expected to show through until next year. Export sales increased.

Ironveld (LON: IRON) has raised £4m at 0.3p a share to finance the acquisition and refurbishment of Ferrochrome Furnaces Ltd and may raise up to £1m more. Directors’ loans and fees of £351,000 has been capitalised. Management has raised the cash because it is not certain that Grosvenor Resources will be able to complete the promised cash injection. Shareholder approval is required at a general meeting on 1 August. A time has not been set for the requisitioned general meeting to remove two directors. The share price fell 7.8% to 0.355p – having been 0.705p one month ago.

Itaconix (LON: ITX) increased interim revenues by 124% to $3m. This sparked a 11.4% rise in the share price to 6.85p. Revenues trebled from cleaning applications using the company’s plant-based ingredients, but beauty and hygiene revenues declined due to lower order volumes. That hit gross margin. There was $900,000 of net cash at the end of June 2022.

UK GDP, Wetherspoons, and Mode with Alan Green

UK Investor Magazine
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UK GDP, Wetherspoons, and Mode with Alan Green

Alan Green joins the UK Investor Magazine Podcast for our weekly instalment of markets and Uk equities.

UK GDP rose 0.5% in May dispelling fears about an impending recession, for now. The impact of bank holidays and a boost in travel spending drove the boost, despite ongoing fears of a cost of living crisis.

We look at the current playbook for inflation and a potential snap back in markets.

However, the boost in economic activity was missed by Wetherspoon that suffered a contraction in sales, albeit an improvement on prior quarters declines. The demographics of the Wetherspoon customer may be to blame as their core ale sales suffer while spirits grew.

Bitcoin app Mode has had a torrid year during the crypto crash and we discuss recent activity at the activity. Revenue nearly tripled in 2021 but increases in their expenses meant continued cash burn.

Golden Metal Resources is set for a spin out from Power Metal Resources and help crystalise valuation creation by the parent company. We outline the Golden Metal Resources portfolio and progress of the IPO.

Watch the Power Metal Resources investor presentation here.

ITV under investigation by CMA for competition infringement

Natasha Doris
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ITV under investigation by CMA for competition infringement

ITV has confirmed it is under investigation by the Competition and Markets Authority (CMA) for its purchase of freelance services which support the production and broadcasting of sports content in the UK.

ITV has been identified in the investigation, along with BT Group, IMG Media and Sky UK.

The investigation was launched under section 25 of the Competition Act 1998 into suspected infringements of the Chapter One prohibition of the Act by companies involved in the production and broadcasting of sports content.

The CMA announced it had “reasonable grounds to suspect one or more breaches of competition law.”

However, the organisation highlighted it was too early to confirm if any breaches had been committed, and that no assumptions should be made of any infringement of the Act.

ITV said it was complying with the probe, and was committed to working with the CMA while the investigation took place.

“ITV is committed to complying with competition law and is cooperating with the CMA’s inquiries. ITV does not propose to comment on this investigation further at this stage,” said the company in a statement.

UK economy grows 0.5% in May on GP appointments, retail sector shrinks

Natasha Doris
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0
UK economy grows 0.5% in May on GP appointments, retail sector shrinks

The UK economy grew 0.5% in May after two consecutive months of contraction, according to figures released by the Office of National Statistics (ONS).

The ONS confirmed GDP was estimated to currently be 1.7% above its pre-Covid-19 levels.

“After all the doom and gloom about the state of the British economy May’s growth figures might have some people wondering what all the fuss has been about,” said AJ Bell financial analyst Danni Hewson.

“A slight uptick had been anticipated, but at 0.5% the pace of growth has caught many by surprise.” 

“Put simply, people have been living their lives, playing catch up, and doing all that housekeeping they hadn’t yet been able to get round to.”

The growth was attributed to a 0.4% climb in services output linked to human health and social activities, which rose by 2.1% on the back of a significant increase in GP appointments and served to offset the decline of track and trace.

“Anyone who has tried to book an appointment with their doctor over the last few weeks won’t be surprised to learn that GP visits have played a big part in boosting May’s numbers, something which has offset the drag from a real tapering off of test and trace operations and booster vaccine programmes,” said Hewson.

Meanwhile, output in consumer-facing services declined by 0.1% over May due to a 0.5% fall in retail trade.

However, non-consumer facing services grew by 0.5% after a drop of 0.8% in April.

The ONS reported a 0.9% rise in production, boosted by a 1.4% growth in manufacturing and a 0.3% increase in electricity, gas, steam and air conditioning supply.

“Manufacturers have really turbo charged operations despite all the price hikes they’ve experienced,” said Hewson.

“It suggests that supply blockages may finally have worked their way through the system and that many have been able to pass on extra costs to their customers.”

The figures also mentioned a 1.5% climb in construction over the month, after a 0.3% uptick in April, marking the seventh consecutive month of growth for the sector.

“Construction has had another great month, bolstered by housebuilding in a market that’s only slightly coming off the boil, and by the changing requirements of business that need to reconfigure workspaces after Covid restrictions or embrace new ways of working,” said Hewson.

Cautious Optimism

The figures painted an optimistic picture of the UK economy over May after the dire news of the previous two months. However, experts stressed the importance of cautious optimism despite the GDP growth.

The risk of recession alarms remain heavy on the horizon, and customers have been spending less on retail and non-essential expenses as the cost of living crisis bites, with inflation currently at 9.1% and on-track to hit 11% by October this year.

“These figures represent just one month – albeit a crucial one because it means the quarter as a whole doesn’t meet the criteria for negative growth – but one month can never tell the whole story,” said Hewson.

“There are headwinds that are impossible to ignore. Retailers, hospitality venues, gyms, museums and children’s play centres are all feeling the weight of high inflation.”

“Households are strategically cutting back on their spending, which is a particular blow to the consumer services which still haven’t been able to get anywhere near their pre-pandemic glory days.”

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