Revolution roars back as bar group reveals injection of cash
SHARES in Revolution Bars bounced back off the ropes after the struggling hospitality group announced plans to raise £12.5 million in emergency funding and formally put itself up for sale, while welcoming high-profile entrepreneur Luke Johnson to its board.
The company, which owns the Revolution, Revolucion de Cuba and Peach Pub brands, revealed plans to shore up its balance sheet by issuing new shares as it continues to battle difficult trading conditions on the high street. Shares surged by nearly 55%, closing the day up 0.65p at 1.85p.
The revival came after Revolution announced on March 26 that the firm was “actively exploring all the strategic options available to it” following a “period of external challenges which have impacted the company’s business and trading performance”. The company said then it would close around 20 of its worst-performing venues, equating to around one-quarter of its estate, open talks with investors over an injection of funding and explore the “sale of all or part of the group and any other avenue to maximise returns for shareholders”.
Shares were then temporarily suspended on April 2, when the company said it had been unable to publish its interim results by March 30. The results were published yesterday.
Revolution has now announced plans to raise £10.5m under a firm placing and subscription offer, and a further £2m under a placing and open offer of shares.
The company flagged cornerstone investments of £9.5m under the process, including £3m from Mr Johnson, whom it is proposed will initially join the board as a non-executive director, following the implementation of a restructuring plan and fundraising. It is proposed that Mr Johnson, a former chairman of restaurant chains Pizza Express and Giraffe and a prominent hospitality investor, will become chairman after the company’s 2024 annual meeting.
The restructuring plan is expected to improve underlying profits by around £3.8m in the first year through site rationalisation, rent reductions and other central cost savings, as well as allow the company to reduce debt. Revolution said it also plans to identify up to a further £2m in annual cost savings, while its lender has signalled its willingness to provide £6.9m of support as part of the restructuring, which would involve writing off £4m of debt. The group’s net debt stood at £21.8m on April 10.
However, while work on the restructuring proceeds, directors will continue to explore whether a sale of the company or any of its business, assets or subsidiaries would provide a better outcome for stakeholders. A formal sale process has been launched.
Revolution has come under pressure as a cost crisis has engulfed the hospitality industry. In January, it issued a profit warning, citing concerns over inflation and the “material” increase in costs which this month’s rise in the minimum wage would bring. It cast doubt on whether the rise would lead to “increased discretionary spend for our Revolution guests in particular”.
Yesterday, the company reported sales growth of 8.3% to £82.3m for the six months ended December 31, following positive trading over the festive season. It made a pre-tax profit of £3.1m, following an exceptional gain on disposal of £3.9m relating to the exit from certain leasehold properties.
Despite strong trading at Christmas, Revolution warned the environment continues to be “challenging”, adding that the prospect of an 11% rise in the national living wage this month will “add further cost pressure”. “Accordingly, eight site closures were announced in January 2024 to reduce expected future losses,” the firm said.
CEO Rob Pitcher said: “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. Revolucion de Cuba and Peach have been less impacted as the guest profile is more affluent, and both brands enjoyed very strong festive trading and Revolucion de Cuba has shown excellent trading when compared against the wider bars market.”