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Tue 27th Oct 2020 - Update: Revolution CVA, Whitbread buys German sites, lunch loophole
Revolution launches CVA to exit six sites, sales in last five weeks reduced to 49.5% of last year because of 10pm curfew: Revolution Bars Group, the operator of 73 premium bars trading across the UK under the Revolution and Revolucion de Cuba brands, has launched a CVA today as its Revolution Bar Limited (RBL) subsidiary to reduce the size of its estate and rental cost base and improve the profitability and return on capital of the group over the long-term. RBL operates 50 Revolution branded bars. The CVA proposes to reduce the size of RBL’s estate by six bars and reduce its rental cost base, thereby improving the profitability and return on capital of the group over the long-term. RBL operates 50 Revolution branded bars. The CVA proposes to reduce the size of RBL’s estate by six bars and reduce its rental cost base, thereby improving the profitability and return on capital of the group over the long-term. A comprehensive review of the RBL portfolio has identified 13 trading sites that are either: significantly underperforming due to their location and local trading conditions; significantly over-rented; not expected to generate future profitable returns going forward, or subject to a combination of all three above factors. Under the terms of the proposed CVA: RBL expects to exit six bars and obtain materially improved rental terms on seven others. Where, improved rental terms are being sought, landlords will have the option to terminate the lease at various junctures over the next two years. The remaining 37 bars in the RBL portfolio will not be materially affected. These bars either benefit from group guarantees, are considered strategic to the brand, and/or rental mitigation has been agreed with landlords in recent months; if approved and successfully implemented, the RBL business is expected to comprise approximately 44 bars. If the CVA proposals are accepted, the group estimates that its annual cash flows (before one-off costs of implementing the CVA) will improve over the next two years by approximately £2m per annum. Chief executive Rob Pitcher said: “Throughout this extended period of distress caused by covid-19, the group has sought to prioritise the health and well-being of its staff and customers, minimise its cash consumption, maintain good levels of liquidity to ensure its ongoing viability and to be in a position to take advantage of opportunities that may arise once restrictions are lifted. The CVA proposed by the group’s Revolution Bars Limited subsidiary entity, if agreed by landlords, is another proactive step to lower outgoings to help safeguard the future of the group and improve long-term performance.” The group has reported previously that comparable venue sales in the 8 weeks from when it commenced the reopening of its bars on 4 July 2020 through to 29 August 2020 were 72.5% of last year, ahead of the level anticipated by the board at the time of the announcement of its equity fundraising. In the subsequent three weeks, comparable venue sales remained buoyant at 77.8% of last year, but in the last five weeks to 24 October 2020 have reduced to 49.4% due to the imposition of the 10pm curfew and more recently localised lock-downs, with more severe operating restrictions now affecting many of the group’s reopened bars.

Government warns restaurants not to exploit the business lunch loophole: The government yesterday warned restaurants not to abuse coronavirus restrictions by exploiting a loophole for ‘business lunches’ to fill their tables during the covid-19 pandemic. The Financial Times reported: “Downing Street said that where possible it wanted people to conduct business meetings by phone call or video conference rather than in restaurants, in order to reduce the chains of transmission of the disease. The possibility of being able to host business lunches has been seized on by restaurants as a lifeline after Prime Minister Boris Johnson’s new three-tier system of covid-19 restrictions in England hit already depressed sales in the hospitality industry. Under so-called tier two restrictions – introduced in London and Birmingham this month among other areas – members of different households are banned from mixing indoors unless the meeting comes under one of a number of exemptions including if it is ‘reasonably necessary’ for work. This prompted a mass reaction on social media as people mused on ways to use the business lunch loophole to see family and friends.” The prime minister’s spokesman told the FT he was not aware of people holding ‘fake’ business meetings in restaurants, but added that guidance on business dining was intended specifically for those who could not meet in other venues. “There’s an understanding that it was for people like the self-employed or freelancers who need to have face-to-face meetings but have nowhere else to hold them,” he added. The FT added: “Restaurateurs railed against Downing Street’s apparent attempt to narrow the exemption and said that enforcing the restrictions would be impossible. “How can they regulate this? In what way are they expecting people to be checked in terms of their employment status? It’s taking it to another level of absurdity,” said Ranjit Mathrani, chairman of MW Eat, which runs the casual dining chain Masala Zone as well as the high-end London restaurants Veeraswamy and Chutney Mary. Jeremy King, chief executive of Corbin & King, which owns white-collar favourites such as the Wolseley and the Delaunay restaurants, described trading under the tier two rules as ‘catastrophic’ and that if the business meeting option was taken away “the government has to shut us all down because it’s incredibly limited if it’s pure single household”. Both said the rule against different households mixing had cut sales from about 60% of last year’s levels to about 30%, which Mr King described as ‘completely untenable’. However, he said that limited business trade had helped sales improve this week. Corbin & King and MW Eat are among several restaurant groups and private members’ clubs – including Caprice Holdings, which owns the Ivy restaurants, and the Oxford and Cambridge Club – that sent messages to customers last week emphasising that they would welcome business meetings in their restaurants. The onus, however, is on the customer as government restrictions stipulate that those found to be breaking the one-household indoor-mixing rule are steep, starting at £100 for the first offence and doubling with each subsequent breach up to a total of £6,400.” 

Whitbread adds 15 hotels to Germany estate, reports slowdown in October: Whitbread has bought a further 15 hotels in Germany that are currently operating under the Centro, Ninetynine and Fourside brands, of which eight are open and seven are pipeline. The company stated: “Subject to competition clearance, the open hotels are expected to join the Premier Inn estate in December 2020, and would take our open estate to 29 hotels and our total open and committed pipeline in Germany to 68 hotels.” The company reported sales down 76.9% in its First Half to £250.8m and a statutory loss before tax of £724.7m. Alison Brittain, Whitbread chief executive, said: “Our performance following the reopening of our hotels and restaurants in the summer was encouraging and we continue to trade ahead of the market. Taking market share in the UK demonstrates the strength of our trusted Premier Inn brand and the benefits of our unique operating model. Since March we have trebled our open hotel network in Germany to 21 hotels and today announced the acquisition of up to 15 more hotels. This takes our network of open and pipeline hotels to nearly 70 hotels, with broad geographic coverage across many major cities and towns. Throughout the crisis we have taken decisive action and we continue to focus on protecting our guests, our teams and our business in light of the impact of the recent increase in regional and national restrictions. We are also improving the flexibility of our cost model to respond to changes in demand. As a result, we enter this second-wave period in a position of strength, with our customer scores higher than they have ever been, our market share growing in the UK and extending a meaningful network of hotels in Germany, giving us the opportunity to achieve national brand awareness and operate at scale. I am extremely proud of and grateful to our teams for their resilience and for the part they have played in enabling us to successfully navigate this difficult period. I would like to take this opportunity to thank them for their tremendous hard work and commitment. I would also like to thank our shareholders for their ongoing support as our successful £1bn Rights Issue ensures that our strong balance sheet continues to be a source of competitive advantage and positions the business for long-term growth. Whitbread’s long-term strategy remains as relevant and compelling as ever. The impact of the covid pandemic on the hotel sector will undoubtedly be significant and we are already seeing signs of distress and constraint in the competitive landscape. This is likely to accelerate the structural changes in the market with supply contraction and constrained investment amongst independent and budget branded operators in both the UK and Germany. We hold a uniquely advantaged position in the UK market as the largest player with the strongest brand. Our financial flexibility and resilience, combined with a strong balance sheet, give us the ability and the confidence to invest with discipline and focus on strong long-term returns. We will be well placed to enhance our market leadership position even further in the UK, and accelerate our growth in Germany, supporting our guests and teams and driving long-term value for all our stakeholders.” On current trading it stated: “Premier Inn UK’s occupancy increased from 51% in August to 58% in September and our total accommodation sales recovery year-on-year was c.6% ahead of the midscale and economy market in September. We continued to see good leisure bookings and a pick-up in business-to-business sales, albeit from a low base. Since the government announcement in early October instructing working from home where possible and the recent regional lock-downs, we have seen a slowdown in the market performance. Our performance has remained ahead of the market, but with the fast-changing nature of the covid-19 environment, near-term visibility remains limited. Despite this, profit and cash sensitivities for this year remain broadly consistent with those articulated in May.”

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