Revolution vodka bar operator to float: Revolution vodka bar operator New Inventive Bar Company is to seek an Initial Public Offering under the name Revolution Bars Group. The company has also announced the appointment of Keith Edelman as non-executive chairman, and Michael Shallow as an independent non-executive director. The company has 58 bars, located predominantly in town or city high streets across the UK, which it operates under the Revolution (53 sites) and Revolución de Cuba (five sites) brands. The company delivered a strong financial performance in the year ended 30 June 2014, with its current bar operations having reported revenue of £108.7 million (2013: £104.5 million) and Adjusted Ebitda of £13.2 million (2013: £10.9 million). For the six months ended 31 December 2014, the Group’s current bar operations had reported revenue of £58.0 million (six months ended 31 December 2013: £56.1 million) and Adjusted Ebitda of £7.9 million (six months ended 31 December 2013: £7.0 million). The group’s revenue for the period from 7 December 2014 to 13 December 2014 (inclusive, in each case) was the highest recorded for any one-week period in the Group’s history. This record was broken the following week, the period from 14 December 2014 to 20 December 2014 (inclusive, in each case). The Group’s like-for-like revenue for the six weeks to 3 January 2015 was approximately 6%. higher than for the same period in the previous year and was the highest for this period recorded in the Group’s history.

Brands: All of the Group’s bars trade under the Revolution or Revolución de Cuba brands. Each brand is clearly defined and brand operating templates are closely followed. The Directors regard each brand as having distinct unique selling points. Revolution is renowned for its cocktails and vodka heritage and has a growing reputation for food. Revolución de Cuba specialises in rum and rum-based drinks, Latin American and Cuban themed live entertainment and a Spanish and Latin American food menu. Because they target different demographics, the Directors believe both brands can co-exist in close proximity with minimal cannibalisation.

Premium target market: The Group’s target market is the premium end of the 18-35 year old mainstream market. The designs of the bars, high-quality finishes, quality product ranges, presence of table service and hosting, hand-made cocktails and freshly-prepared food are all intended to attract customers willing to pay a premium. Average customer spend per head in the Group’s bars is high compared to other businesses in both the UK restaurant and pub industries.

Market fundamentals: The UK’s dining out market (worth £48.2 billion annually (Source: Allegra Foodservice) is forecast to grow by a CAGR of 2.5% between 2014 and 2017, whilst the UK’s drinking out market (worth £27.5 billion annually (Source: CGA Report)) is forecast to grow by a CAGR of 0.9% over the same period. Market trends indicate that consumer tastes are trending towards premium products at premium prices (Source: CGA Report). Further, the Directors believe that occasions to go out are more likely to be planned in advance around set-piece events and, therefore, more likely to be pre-booked (including via digital and social media – see below) at attractive destinations.

Quality estate: The Group’s trading estate has national coverage throughout Great Britain, with the Group operating profitably in all regions. The Directors believe that the Group’s trading formats have appeal in a wide variety of UK locations, but benefit from limited exposure to any one regional market. The Group’s bars are generally located in city centres or affluent large towns where they can benefit from high footfall and local demand.

Returns: The majority of the bars opened by the Group over the past eight years have performed in line with or above management’s pre-investment expectations, delivering long-run, high levels (of approximately 40%.) of return on investment. The Average Site ROI of the Group’s bars opened in this period is 53% for its larger format bars compared to 33% for its standard format bars, and is 54% for Revolución de Cuba bars compared to 32% for Revolution bars. 

Management team: The management team, led by Mark McQuater (CEO), is highly experienced in the leisure sector and has a track record of delivering operational and financial improvements and of managing growing businesses. Alongside the executive directors, the Group’s senior management team provide significant ‘bench strength’ to the group’s managerial and operating functions.

Digital and social media: The business uses digital and social media to engage with its customers. It has a customer database with over one million contacts and a social media fan base of over 420,000 followers on Facebook, which is one of the leading social media fan bases in the industry. The Group’s websites had around three million visitors in 2014, with approximately 60% accessing them from mobile or tablet devices.

Scalability: The Directors believe that the operational, financial and IT platforms within the Group are capable of serving a bigger business without material additional expenditure.

The company added: “The group’s strategy is focused on a measured roll-out of new bars under both brands as well as delivering continued growth through enhancing its existing estate. The directors would consider corporate acquisitions in the event that a suitable opportunity arose. The Directors’ view is that the Group’s opportunities to grow by bar acquisition, coupled with improvements to its existing bars, are significant. The Group seeks to benefit from opportunities arising from economies of scale for ‘larger’ (as opposed to ‘standard’) format bars, where development circumstances permit. The Group’s larger format bars have, on average, a floor area of approximately 7,800 square feet, making them almost 70% larger than the Group’s standard format bars. Larger format bars require more development investment (typically around £1.7 million per site), but they have historically delivered, on average, more revenue and higher profits and returns than the standard format bars. Compared to standard format units, the larger format bars have historically delivered, on average, around 117% more sales per annum (on average, £3.7 million compared to £1.7 million) and, on average, around 167% more Ebitda (at £0.8 million average Site Ebitda per annum compared to £0.3 million). Given the higher average profitability of the Group’s larger format bars, the Group currently plans to target larger sites for its expansion. Building from the Group’s current trading portfolio of 53 Revolution bars and five Revolución de Cuba bars, the Directors believe that the Group has significant growth potential within the UK and plan to continue to grow the number of bars under each brand by pursuing a measured roll-out strategy. Based on the Directors’ assessments, there are opportunities within the UK and Ireland for the combined estate to grow to around 140 bars. Within this expanded estate, the Directors are of the view that the Revolution estate could grow to around 100 bars, whilst the Revolución de Cuba estate could grow to around 40 bars. The Group is currently targeting a roll-out of up to five new bars per annum by the end of the 2017 financial year, with a likely initial focus on new Revolución de Cuba bars.” Chief executive Mark McQuater added: “Revolution Bars Group is one of the leading players in the UK’s premium drinking out and casual dining out markets, with a well-invested trading estate of 58 bars that is generating market-leading returns in this sector. Both Revolution and Revolución de Cuba are premium brands which target a growing market where we believe a premium offering is in demand. We believe that a successful listing will complement the Group’s growth strategy and help support our roll-out plans for the Group’s branded bars in the UK.”