Revolution reports ‘solid’ performance ahead of takeover vote

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Revolution Bars Group has reported “solid underlying performance” as it prepares for shareholders to vote on the takeover bid by Stonegate Pub Company.

In its results for the year to July 1, it saw a 25% increase in adjusted pre-tax profit to £9.3 million alongside a 16% rise in adjusted earnings (EBITDA) to £15.1 million.

Like-for-like sales have slowed to 1.5%, which has further fallen over the past three months to 0.3%, blamed on poor weather in September and difficult trading conditions across the sector.

The board continues to back the £100 million takeover bid by Stonegate, the UK’s largest bar operator, which is due to be voted on by shareholders on October 17.

However, bar and club operator The Deltic Group is still pushing its proposal of a merger although it is also considering a possible cash offer for Revolution Bars Group. The Takeover Panel has given Deltic until October 10 to make a move.

Now with 68 sites after Revolución de Cuba opened in Belfast in July (pictured), the group continues to roll out its two concepts. Three Revolutions are scheduled to open in Solihull in the West Midlands, Inverness and Putney in London before Christmas and two Revolución de Cubas are set to open in the first half of 2018.

The company’s statement today added: “The pipeline of new venues is building very strongly and contracts have already been exchanged on a further two sites that are due to open in the next financial period.”

Chairman Keith Edelman said: “The sector is facing some well-publicised and significant cost headwinds: minimum wage and living wage rate increases, the introduction of the apprenticeship levy and substantial increases in general rates following the 2017 revaluation.

“Staffing and recruitment may now also come under pressure due to Brexit-related issues. However, now that we have dealt with the historical financial reporting issues, and have improved reporting and controls in place, we are better placed to be able to rise to these challenges.”

City analysts had mixed responses to the results. Douglas Jack of Peel Hunt said: “The goalposts have shifted. Full-year adjusted profit before tax is ahead, up 25% to £9.3 million – we forecast £8.2 million, consensus was £8.1million – with EBITDA up 16% to £15.1 million – we forecast £15.6 million, consensus £14.6 million.

“After a restatement of prior-year numbers, the operational side of the company has generated sector-leading growth. We have upgraded profit before tax forecasts by 9% and cautiously downgraded EBITDA by 2%.

“2017 profit before tax exceeded expectations due to lower-than-expected depreciation and central costs. The depreciation element is partly due to prior-year adjustments: previously, certain marketing expenditures were incorrectly capitalised as short life assets. Reversing this has reduced marketing spend and depreciation in all years, as has reversing the over-accrual of supplier rebates.”

Fiona Cincotta, senior market analyst at City Index, said: “Stonegate’s takeover bid looks all the more appealing now in light of the disappointing results recorded for the opening months of the current financial year. The downward trend in like-for-like sales growth is continuing apace so it’s hard to see a great deal of performance upside, at least in the near future.

“The ball is now firmly in Deltic’s court. Investors betting on a protracted bidding war face a nervous wait as Stonegate’s rival suitor considers its options.”

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