Revolution’s £12.5m fundraising bid, remains confident in expectations

11-Apr-2024 - Last updated on 11-Apr-2024 at 09:01 GMT

Update: the group's Revolution brand has been impacted most through the cost-of-living crisis on its younger guests

Revolution Bars Group has announced a restructuring plan that involves raising £12.5m while launching a formal sales process of the business.

Meanwhile, the group, which operates bars and gastropubs mainly under the Revolution, Revolución de Cuba and Peach Pubs brands, said it remains confident in the future as it posted its unaudited results for the 26-week period ended 30 December 2023 (H1 2024).

The business’s fundraising bid is looking to raise up to £10.5m through a firm placing and subscription of shares and up to £2m via the placing and open offer.

It also said there will be cornerstone investments of £9.5m, comprising of £3m from sector investor Luke Johnson, £3m from Robus SCSp and £3.5m from three key existing shareholders.

The group, which operates 58 bars and 22 gastropubs, said following a period of external challenges, the board has considered all the strategic options available to it and concluded to support a proposal by subsidiary business Revolution Bars Limited of a restructuring plan alongside additional measures across the group to “reshape its business as well as exploring, in parallel, a formal sale process”.

Restructuring will primarily impact its Revolution branded sites, provide additional working capital to the company and to help continue a site refurbishment programme from its 2026 financial year and seek site acquisition opportunities for its Peach and Revolucion de Cuba sites if restructuring is successful.

The proposal includes Luke Johnson joining the board as a non-executive director with a view to him taking the role of chairman.

All options considered

The group has appointed financial advisers Cavendish and FTI Consulting to carry out the sale process of the business and confirmed there are no ongoing discussions with potential purchasers.

Revolution Bars Group CEO Rob Pitcher said: “Following a period of macro-economic and external challenges, which has impacted both the company and disproportionately its Revolution brand’s young customer base and consequently our trading, the board has had to consider all strategic options for the group to improve its future prospects and provide the best outcome for all stakeholders.

“After much consideration, the board concluded a plan to restructure the business, together with a fundraising of up to £12.5 million and to simultaneously launch a formal sale process, would deliver the best value.

“We are driven by the imperative to deliver to stakeholders a business, which is fit for purpose in today’s environment, better balanced and financed in a way to provide a sustainable long-term future for the group which, in time, has the opportunity to grow and flourish again.”

Meanwhile, in its latest trading update for H1 2024, total sales rose to £82.3m versus £76m for the same period a year ago, operating profit was up to £7.2m (£3.1m H1 2023), adjusted EBITDA (earnings before interest, taxation, depreciation and amortisation) is £8.9m (£9.8m: H1 2023) while profit was tax stood at £3.1m (£0.1m loss: H1 2023).

The group was pleased to have traded positively over the festive season and like-for-like sales for the four weeks from 4 to 31 December 2023 were up 9.0%, the best festive period since 2019 while like-for-like sales for (H1 2024), including New Year’s Eve, continued to demonstrate an improving trend at minus 2.8%.

Its Peach Pubs opened its 22nd site, in November 2023, and delivered its best ever Christmas trading period and continues to trade well.

Revolución de Cuba saw corporate guests return to Christmas parties in full for the period, and “our refreshed brand proposition delighted party goers who recorded excellent guest feedback scores”.

Younger guests impacted

However, Revolution continues to experience challenged trading as a result of its younger guests who are disproportionately impacted by the cost-of-living crisis pressurising their discretionary income.

Its Founders & Co brand delivered double-digit like-for-like growth every month in H1 2024 and is now “well positioned for growth and is an exciting prospect for the group”.

Pitcher said trading since the turn of the year has remained challenging with the post-Christmas January hangover lasting into February.

He added: “The divergence in performance across the brands remains consistent with Revolución de Cuba and Peach performing more strongly than the Revolution brand, which is reliant on the younger generation who we know are still suffering with the cost-of-living crisis.

“We are expectant that the planned above inflation increase in national minimum wage will provide a meaningful boost to this generation’s spending power, allowing them to return to nights out on a more frequent basis. Economic data also looks more positive for the Revolución de Cuba and Peach guest.

“While we anticipate some economic improvement from which we will benefit, the markets in which we operate are expected to remain challenging in the near term. However, the board remains confident in achieving trading performance in line with its previous expectations.”