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Tue 18th Oct 2022 - Revolution Bars Group reports full-year results, buys Peach for £16.5m |
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Revolution Bars Group returns to profit but sees recent trading hit by train strikes and softening of consumer confidence: Revolution Bars Group, the operator of 69 premium bars, trading predominantly under the Revolution and Revolución de Cuba brands, has reported a return to profit but seen recent trading hit by the train strikes and consumer confidence. The company stated: “The first two periods of FY23 were challenging with footfall disrupted by train and tube strikes, heatwaves, resurgence in festivals and events, and people going abroad for their first holidays in three years. Like-for-like sales in the first 11 weeks were minus 10% compared with the previous year, with city bars bearing the brunt of transport strikes. The next two weeks improved to like-for-like sales of minus 4.5%, aided by the return of students and gradual end of summer holidays, giving first quarter like-for like sales of minus 9.1%, showing trading was still impacted by continued disruption of footfall into cities due to the ongoing train strikes. For FY23 and beyond, our focus continues on investment in the business: refurbishments, new sites, acquisitions and the roll-out of our new concepts are all key workstreams to ensure the continued growth of the business. We are well prepared and looking forward to the first restriction-free festive season for three years. Christmas bookings are tracking well ahead of this time last year, with strong growth in recent weeks.” For the year ending 2 July 2022, the company reported turnover increased to £140.8m compared with £39.4m the previous year. Adjusted Ebitda was up to £19.4m from minus £3.9m the year before. It made a pre-tax profit of £2.1m compared with a loss of £26.3m the previous year. Full year like-for-like sales of 1.3% were delivered in its 56 English bars after 19 July 2021, when restrictions were fully lifted in England. The group experienced softer trading in the final quarter, reflecting reduced consumer confidence, which reduced the positive like-for-like sales seen up to November down to 0.3%. Capex of £8.3m was spent in line with expectations in FY22 across 19 refurbishments, two new sites, new concepts and other planned capital expenditure. Four further refurbishments have been completed in FY23 to date, with up to 18 planned across the year. The group resumed expansion with two new leases, the first in four years, resulting in the opening of our two Revolution bars in Preston and Exeter. The company said it was pleased with current performance of the new and refurbished sites, and are confident they will achieve the two-year payback target it set for refurbishments, and four-year for new sites. Founders & Co. enjoyed its first full year of trading, with Playhouse opening in November 2021. Both have been welcomed by their local communities and are “performing well”, the group said. It added that energy costs are largely fixed until April 2023. Chief executive Rob Pitcher said: “We are hugely encouraged by the performance in FY22, seeing what trade and performance can look like under normal trading conditions with our better-invested estate. The new sites and the significant number of refurbishments delivered in the year put the group in an exciting position for growth in the future. That we have been in a position to restart our growth strategy is a testament to the hard work of our people and the positive growth we have seen in the last year. Like all hospitality businesses, we are facing significant challenges and urge the government to deliver the promised reform of the business rates and support all high street businesses through these extraordinary times with an immediate 50% business rates cut for all business, no matter the size. Additionally, a cut in the headline rate of VAT to help lower the cost impact would assist in reducing further price rises, without which price rises are inevitable, further feeding inflationary pressures. We remain focused on delivering great value and providing good times for our guests and are very mindful of the pressures they are experiencing. Having said that, our young adult guest base is somewhat protected from the ongoing cost pressures and continue to prioritise experiences and their freedom. I am incredibly proud of what our people have achieved over recent years; we have made great progress with advancements of our brand offerings, our ‘Inclusion Revolution’, sustainability agenda, guest journey and wellbeing and support of our colleagues. We have created exciting work streams which focus on value-creation and developing the group for the future. Looking forwards, we are focused on navigating the current macro-economic situation, developing our business and putting in place further building blocks for continued growth.”
Revolution Bars Group buys Peach Pub Company for £16.5m, management team to remain: Revolution Bars Group has confirmed the acquisition of gastropub operator Peach. The 21-strong business has been bought for a cash consideration of £16.5m, on a debt and cash free basis, of which £0.5m is contingent upon the future performance of the business. Revolution said the acquisition “will create a more balanced and diversified business, with scale and compelling growth potential across multiple trading segments of drinks, food and accommodation”. Revolution started: “Peach operates 21 well-invested leasehold pubs located in the south of England and the Midlands that deliver attractive financial metrics: average weekly takings (net of VAT) approaching £30,000, a food mix of 53% of sales and strong profit and cash conversion. Its offer is positioned at affluent guests seeking a consistent, high quality premium food-led pub experience. The business is well aligned to key structural trends, addressing customer demand for quality and locally sourced food, as well as exceptional service in attractive surroundings. In addition, Peach operates in the premium accommodation market, with more than 80 bedrooms across its portfolio. The combined business will benefit from diversification and be strongly growth oriented. The acquisition provides greater balance to the enlarged business and diversifies trading patterns and income streams. Peach’s greater exposure to daytime and midweek trading sessions provides a natural balance to Revolution, which performs strongly in the evening and weekends. Furthermore, Peach pubs are located outside of larger town and city centres and have benefited from working from home dynamics. Trading in Peach’s current financial period (since 3 January 2022) has been strong, with like-for-like sales up more than 10% compared with 2019. The board anticipates 12-month site Ebitda for Peach in Revolution’s current financial year to be more than £5m, with central costs in the region of £3.5m on turnover in excess of £30m. Significant cost synergies are expected to result from the acquisition. It is estimated that cost savings through increased buying power, business combination and improved systems will generate at least £1.5m of synergies, taking pro-forma Ebitda to £3m once synergies have been fully realised. We expect these synergies to be largely delivered in FY24 (£1m) before being fully achieved in FY25. The costs to achieve such synergies are expected to be minimal. The acquisition will present further growth opportunities to Revolution in the leasehold food-led pub market, either in individual sites or in small groups. In addition, Revolution will continue to invest in its current portfolio of brands. The management team of Revolution is delighted the entire operations team of Peach, led by Chris Stagg, will remain with Peach following the acquisition, and will be incentivised to remain with the business over the longer term. In addition, the current finance director, Tony Bobath, will assist in the integration of the acquisition. Revolution’s net cash position prior to the acquisition and strong trading performance following the pandemic, together with the compelling strategic rationale for the acquisition of Peach, has allowed it to fund the entire consideration for the transaction from its banking facilities. Net cash, pre-acquisition, on 17 October 2022 was £0.7m. Following the acquisition, the group will have headroom on its bank facilities of more than £15m and will target a return to net bank debt/Ebitda (IAS17) of one times in the short to medium term. In the year to 2 January 2022, the last available audited financial information, Peach achieved a profit before tax of £2.7m, which benefited from VAT reductions and business rates relief. As at 2 January 2022, Peach net assets were £3.9m.” Rob Pitcher, chief executive of Revolution Bars Group, said: “This is an exciting and transformative opportunity for Revolution. It broadens our guest base, balances our daypart sales and seasonality while providing another avenue for growth, both organically and by acquisition. Peach is a quality business with great pubs offering a premium experience. It has rebounded strongly from the dark days of the pandemic. Central to this success has been a strong people focused culture, with clear values that are focused on making the right choices for guests and our teams, a very similar approach to that taken at Revolution. We welcome the Peach team to Revolution, where it can continue its excellent work delighting guests and seek continued personal development in a business with a multi-pronged strategy that has similar values, ambition and drive for excellence, which Peach has clearly displayed over the last 20 years. I would like to acknowledge the exceptional work of Lee Cash, Hamish Stoddart and Jo Eames, as the founders of Peach, for creating an industry leading collection of premium gastro pubs.” Sapient Corporate Finance advised Revolution on the deal.
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