Directors’ Deals: Loungers’ chief banks gains

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Dealmaking in the final quarter of 2023 made it an interesting end to the year for hospitality businesses. US private equity firms made some moves on the sector, with Wagamama owner Restaurant Group taken off the market by Apollo Global Management and bowling and social entertainment centre operator

Ten Entertainment purchased by Trive Capital. Elsewhere in the sector, Young & Co’s Brewery agreed terms to buy fellow pub chain City Pub Group.

For Stifel, casual dining operator Loungers “is a natural alternative for investors looking to stay invested in the sector”. The broker argues that the company’s resilience and growth prospects are “under-appreciated” by the market. 

Loungers, which listed in 2019 and trades under the Lounge, Cosy Club, and Brightside brands, has accelerated the rollout of new sites as it takes advantage of the relative lack of demand for real estate in its market. Rent as a proportion of revenue fell to 4.4 per cent in the company’s latest half. The board has a “conservative” target of 600 Lounges and 65 Cosy Clubs.

The shares rose above their 200p listing price in November and have climbed by 13 per cent over the past six months as trading and sentiment have improved.

For the 24 weeks to October 1, total revenue rose 22 per cent year-on-year to £150mn and statutory pre-tax profit was up by 39 per cent to £3.9mn. However, while adjusted cash profits grew by almost a quarter against the previous year, its margin remains below pre-pandemic levels. 

Chief executive Nick Collins recently decided it was time to bank some gains. He sold £287,300-worth of shares on January 8. 

Loungers’ valuation isn’t cheap, with the shares trading hands at 19 times forward earnings according to consensus analyst forecasts on FactSet. However, this is a notable discount to the 5-year average of 31-times.

Tristel directors clean up

The chief executive and chief financial officer of Tristel have both offloaded shares in the disinfectant maker following a record-breaking first half in terms of sales.

In an AGM statement issued on December 19, chief executive Paul Swinney said that revenue for the six months to the end of 2023 would be £20.7mn — up from £17.5mn in the prior year.

Swinney, who has been Tristel’s head for the past three decades, also revealed he intends to retire in the next year, though he has vowed to remain in post until a successor has been found. He subsequently sold 50,000 shares in the company at a price of 422.5p each on January 10. Chief financial officer Liz Dixon also offloaded 40,000 shares at the same price that day, netting £169,000.

The Aim-listed group’s share price fell around 7 per cent on the news, suggesting investors fear the sale by management is a sign of volatility ahead. Tristel’s stock has nonetheless risen by 9 per cent in the past 12 months, with momentum building following the approval of its ULT disinfectant foam by US regulators in June.

Parker Laboratories, the group’s US distribution partner, began production of the solution — which is designed to be used on ultrasound equipment — in October. 

Broker Numis thinks that a US expansion could add around 15 per cent to group revenue in five years. But with shares currently trading at more than 32 times projected earnings for the full financial year, it appears that this good news has been priced in.