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Morning Briefing for pub, restaurant and food wervice operators

Wed 10th Apr 2024 - Revolution sets out £12.5m fundraise plan, launches sales process, Luke Johnson proposed as new chair
Revolution sets out £12.5m fundraise plan, launches sales process, Luke Johnson proposed as new chair: Revolution Bars Group, the operator of the Revolution, Revolución de Cuba and Peach Pubs brands, has set out its proposed restructuring plans, including a £12.5m fundraise and the closure of 18 sites, alongside the launch of a formal sales process. The proposed fundraising will look to raise up to £10.5m via a firm placing and subscription and up to approximately £2m via the placing and open offer. Cornerstone investments of £9.5m comprise of £3m from serial sector investor Luke Johnson, £3m from Robus SCSp and £3.5m from three key existing shareholders. The fundraising proceeds will be used to fund the implementation of the restructuring plan, which will primarily impact the Revolution branded sites and provide additional working capital to the company, and is expected to enable the business to recommence a site refurbishment programme from FY26 for the group’s bars and pubs and exploration of site acquisition opportunities for its Peach and De Cuba trading sites, should the plan be successful. The business said that without the additional funding proposed to be raised in connection with the fundraising, and without the cost savings delivered through the proposed restructuring plan, it anticipates that the group will face liquidity pressures from Q1 FY25 onwards. The company said: “The proposed restructuring plan, if sanctioned, would enable significant adjusted Ebitda improvement (£3.8m expected in first year) through site rationalisation, rent reductions and other tangible central cost savings. It would also enable a deleveraging of the company (to less than 2x LTM Ebitda anticipated by the end of FY26). In addition to the central costs savings identified (equating to an approximately £900,000 FY25 adjusted Ebitda benefit and included within the expected £3.8m adjusted Ebitda benefit detailed above) the company intends to identify up to a further £2m) of annual cost savings.” It is proposed that Johnson will join the board as a non-executive director in the first instance following implementation of the restructuring plan and the fundraising, with a view to him being proposed to take the role of chairman at the company's annual general meeting in 2024. The restructuring plan, if implemented, will affect a subsidairy, Revolution Bars Limited, which holds 38 Revolution branded sites, six sites that are already closed, one Playhouse site and one Founders & Co site. The current expectation is that the implementation of the restructuring plan would enable: this company to exit the leases of certain loss-making sites (currently anticipated to be 18 sites, of which six are already currently closed); and impose a rent reduction on certain sites (currently expected to be 14 sites) to enable them to return to profitability at a sustainable level. The company said: “The lender has also indicated its willingness to provide circa £6.9m of support prior to and as part of the restructuring plan via: a £4m write-off of existing debt; the deferral of 12 months of interest through conversion to Payment in Kind (or PIK), which is estimated, based on the latest company projections, to total £2.2m; circa £700,000 of additional working capital support by allowing the group to retain proceeds from the sale of an office; and suspension of the minimum liquidity covenant from April 2024 to April 2025.” As an alternative to the potential restructuring plan, the company has launched a formal sale process, to explore whether a sale of the business will provide a more beneficial outcome for stakeholders than the restructuring plan. The business has appointed FTI Consulting as its financial adviser in relation to the M&A process. The company said it is not currently in any discussions with any potential offeror relating to an acquisition of the issued and to be issued share capital of the company. It said that there can be no certainty that an offer will be made, nor as to the terms on which any offer will be made. Rob Pitcher, chief executive of Revolution Bars Group, said: “Following a period of macro-economic and external challenges which has impacted both the company and disproportionately its Revolution brand’s young customer base and consequently our trading, the board has had to consider all strategic options for the group to improve its future prospects and provide the best outcome for all stakeholders. After much consideration, the board concluded that a plan to restructure the business, together with a fundraising of up to £12.5m, and to simultaneously launch a formal sale process would deliver the best value. We are driven by the imperative to deliver to stakeholders a business which is fit for purpose in today’s environment, better balanced and financed in a way to provide a sustainable long-term future for the group which, in time, has the opportunity to grow and flourish again.” Trading in shares in Revolution Bars Group were temporarily suspended last week after the business was unable to publish its interim results for the 26 weeks ending 30 December 2023. Revolution Bars features in the Propel Turnover & Profits Blue Book. Its turnover of £152,551,000 for the year ending 1 July 2023 is the 70th highest in the database. The Blue Book ranks companies by turnover, profit and profit conversion, listing directors’ earnings for the past five years. Companies can now have an unlimited number of people receive access to Propel Premium for a year for £995 plus VAT – whether they are an operator or a supplier. The single subscription rate is £495 plus VAT for operators and £595 plus VAT for suppliers. Email kai.kirkman@propelinfo.com to upgrade your subscription.

Revolution Bars Group reports ‘better current trading’ for Revolución de Cuba and Peach Pubs, returns to profit as lfl sales up 8.3%: Revolution Bars Group said 2024 has seen better current trading for its Revolución de Cuba and Peach Pubs brands than Revolution. It comes after the group returned to profit in the 26 weeks to 30 December 2023 as like-for-like sales grew by 8.3%. The group reported a profit before tax of £3.1m, after an exceptional gain on disposal of £3.9m relating to the exit from certain leasehold properties, in its interim results for the period. Total sales grew from £76m in the first half of 2023 to £82.3m in the first half of 2024, while adjusted Ebitda was down from £9.8m to £8.9m. Group like-for-like sales for the four weeks from 4 to 31 December 2023 were up 9.0%, representing its best festive period since 2019. “After a strong Christmas, trading has been challenging in January and February, with the ongoing strain on consumer finances,” said non-executive chairman, Keith Edelman. “Revolución de Cuba and Peach Pubs continue to see much better performance than the Revolution brand, whose guests remain more heavily impacted by the cost-of-living crisis. With improvements to the guest proposition in both main bar brands and an array of exciting events and guest experiences launching in the coming months, we anticipate seeing growth in performance. We are pleased to see an improvement in economic data, with inflation and interest rates stabilising. Despite the cost impact of National Minimum Wage increases on the business, this does also constitute a significant pay increase for many of our teams and guests. We continue to see pleasing advancements in our brand offerings and guest journey, and the board remains confident of achieving APM adjusted Ebitda in line with market expectations set in January 2024 for FY24.” The company said Revolution continues to experience challenged trading as a result of its younger guests being disproportionately impacted by the cost-of-living crisis pressurising their discretionary income. Peach Pubs delivered its best ever Christmas trading period and continues to trade well, while Revolución de Cuba saw “a pleasing performance across FY24 H1”. Founders & Co “continues to go from strength to strength”, with the concept “well positioned for growth and an exciting prospect for the group”. Chief executive Rob Pitcher added: “The first half of FY24 has seen continued challenges with the cost-of-living crisis disproportionately impacting particularly the discretionary expenditure of our young Revolution brand guests. Revolución de Cuba and Peach have been less impacted as the guest profile is more affluent, and both brands enjoyed very strong festive trading, and Revolución de Cuba, in particular, has shown excellent trading when compared against the wider bars market. I would like to take this opportunity to thank our brilliant teams for always bringing a smile to our guests, and their continued resilience and hard work in the face of these challenging times. They have delivered another brilliant Christmas, continue to delight and thrill our guests, and I appreciate their continued professionalism.”

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