Numis Securities – Revolution Bars Group management has underestimated impact of new wage legislation: Numis Securities leisure analyst Tim Barrett has said Revolution Bar Group management has underestimated the impact of new wage legislation. Issuing an ‘Under Review’ note on the shares with the target price also under review, Barrett said: “Like-for-like sales growth now stands at 1.7% year-to-date versus 2% in the first half and 1.7% in weeks 27 to 34. This implies a slowdown to 1.3% in the past 18 weeks. The company suggests disappointing trading over Easter and the first May bank holiday is a factor here. Management has underestimated the impact of new wage legislation. Although the National Living Wage was introduced in April 2016, there were also National Minimum Wage increases (applying to under-25s) in October 2016 and April 2017. Similarly, labour market data shows a wider impact on differentials across the sector, hence we believe labour inflation is 100 to 200 basis points higher than previously guided. Revolucion de Cuba site openings are taking longer to reach mature levels of profitability, despite producing a weekly turnover in line with target (£43,000). This reflects the more labour-intensive customer service in this model (compared with Revolution sites). Two large sites were closed for unplanned refurbishments in the second half (Blackpool and Cardiff). The loss of four weeks of trading could have an impact of up to £0.3m on operating profit, we estimate. For FY17 we now assume like-for-like sales growth of 1.5%, general manager reduction of 100 basis points and 5% wage growth. This gives adjusted Ebitda (excluding pre-opening costs) of £15.6m, a 12% downgrade. Earnings per share excluding pre-opening cost are 13.7p (or 12.1p post). In FY18, like-for-like sales growth of circa 3% will be needed to cover cost inflation in the existing estate. We cautiously assume 1.5% like-for-like sales growth but expect the group to generate circa £1m in cost mitigation. Combined with the impact of new site openings, this gives adjusted Ebitda of £17.2m, a 10% year-on-year improvement but 12% downgrade against our previous forecast. Revolution Bars Group trades on an FY17 price-to-earnings ratio of 14.9 times on an adjusted (excluding pre-opening costs) basis, which increases to 16.9 times after such costs. While the group’s roll-out potential remains attractive, cost pressures will continue to represent downside risk to estimates, in our view.”

 

Craft beer bar and wholesaler The Bottle Shop launches £350,000 crowdfunding campaign to double retail estate as part of expansion plans: Craft beer bar and wholesaler The Bottle Shop has launched a £350,000 fund-raise on crowdfunding platform Crowdcube as it looks to double its retail estate as part of expansion plans. The company, founded by Andrew Morgan in 2010, is offering a 10.14% equity stake in return for the investment. The Bottle Shop currently has three sites – in Bermondsey, south east London, and Canterbury and Margate in Kent. Its wholesale customers include better burger brand Byron, Scottish brewer and retailer BrewDog and Curzon Cinemas. It plans to use some of the funds raised to open two new London bars as well as a distribution hub and bar in Manchester. The pitch states: “The Bottle Shop exists at the top end of the craft beer world, working with breweries that are producing the most in-demand beers on the planet. As well as fuelling our own bars (and making higher retail margins) we have the scalability of nationwide distribution as a wholesaler. Our value is in our brewery and customer relationships, our curation, and the ability to predict and adapt to changes in the market. The funds will be used to refrigerate our London warehouse to create our ColdChain platform, open two new London shops in the next 12 months, and a distribution hub/bar in Manchester. With the ColdChain platform in place, we forecast £4.9m turnover for FY17/18 – up from £3.1m in FY16/17. We have raised more than £350,000 in previous rounds from angel investors in 2012, 2013, 2014 and 2016. We intend to reinvest all profits and find a buyer for the business within five to ten years. With the development of the craft beer market in the UK, we envisage another international distributor seeking to purchase us to gain market leverage and access to our market.”

 

Ei Group begins nationwide expansion of Craft Union, trials new menu to allow additional sites to be considered: Ei Group has started nationwide expansion of Craft Union Pub Company, part of Ei Managed Operations, the group’s directly managed house business, with the addition of several sites across the country, taking its current estate to 122 pubs. Craft Union is also trialling a new food offer that focuses on simple dishes such as burgers and pizzas, which could “allow for additional sites to be considered for the estate”. The Craft Union brand features a straightforward drinks-led offer with beer at affordable prices and a comprehensive sports and entertainment offer. Craft Union launched in the north of England in May 2015 but recently expanded into East Anglia, the south east and south west. New additions to the fast-growing estate include The Boundary in Norwich, The George in Ashford, The Crown in Ramsgate and The Clocktower in Torquay. The company said a pipeline of sites was being built in these regions, as well as along the south coast and the M4 corridor towards South Wales. Craft Union Pub Company operations director Frazer Grimbleby said: “It has always been our intention to develop into a leading-scale operator of community pubs and our recent expansion southwards marks an important milestone in that journey. With the right investment in areas such as sports viewing, entertainment, quality interiors and affordable drinks delivering value to the consumer, we are confident our pubs will continue to thrive.”

Barburrito opens 21st site, in Sheffield: Mexican brand Barburrito, which is backed by the British Growth Fund, has opened its 21st site, in Sheffield. The company has opened the site at the Meadowhall Shopping Centre. Founder and chief executive Morgan Davies said: “This is a huge milestone for Barburrito – I am thrilled to be opening our 21st store and personally excited about the future of Barburrito. We are passionate about serving high quality, fresh and tasty food at an affordable price and it’s great to be doing this across 11 cities in the UK now.” The business, which opened its first site in Piccadilly Gardens in Manchester in 2005, recently acquired a site at the Intu Derby shopping centre as it continues to expand across the UK.

 

On-trade whisky sales increase by £29.2m as consumers opt for premium quality, new research reveals: On-trade whisky sales have increased by £29.2m compared with last year as consumers opt for premium quality, according to new research. The findings by CGA Strategy showed whisky is the second-largest spirits category in the on-trade after vodka, worth £1.1bn in sales over the past 12 months. While volume sales are actually in decline (-1.7%), the research showed new and existing whisky drinkers are switching to more specialist and higher-quality options. The popularity of malt whisky is on the up, with 41,533 additional 70cl bottles sold in the on-trade during the past 12 months, growing sales by £11m to £176.2m. More than 7,000 extra licensees are stocking malt whisky compared with five years ago. Standard American whiskey is in decline, while premium American whiskey has seen sales grow year-on-year to a value of £82.8m. Irish whiskey sales are also increasing, with year-on-year value and volume growth for the past five years making sales now worth £75.4m to the on-trade.