TIDMRBG
RNS Number : 3023Q
Revolution Bars Group
17 October 2023
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THE PUBLIC DOMAIN
17 October 2023
Revolution Bars Group plc (LSE: RBG)
Preliminary results for the 52 weeks ended 1 July 2023
Peach acquisition delivering against a challenging trading
environment
Overall result in line with expectations
Revolution Bars Group plc ("the Group"), a leading UK operator
of 67 premium bars and 22 gastro pubs, trading predominantly under
the Revolution, Revolución de Cuba and Peach Pubs brands, today
announces its preliminary results for the 52 weeks ended 1 July
2023.
We are pleased to report that Peach Pubs has performed well
since acquiring the business in October 2022, with significant
opportunity for expansion in the future. On a macroeconomic basis,
late-night hospitality, in particular, is facing very challenging
times impacted by the cost-of-living crisis which followed the
period affected by trading restrictions under the pandemic. In
addition, the working from home trend, especially on Fridays,
historically our second largest night, has affected our sales.
Against this backdrop, our initiatives to drive sales, support our
guests, and manage costs are making progress.
Results to 1 July 2023
FY23 FY22 FY23 FY22
(IFRS 16) (IFRS 16) (IAS 17) (IAS 17)
GBPm GBPm GBPm GBPm
Total Sales 152.6 140.8 152.6 140.8
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Adjusted(1) EBITDA 17.0 19.4 6.6 10.2
------------ ------------ ----------- -----------
Operating (Loss)/Profit (15.2) 7.4 (7.0) 4.8
------------ ------------ ----------- -----------
(Net Bank Debt)/Net
Cash (21.6) 4.1 (21.6) 4.1
------------ ------------ ----------- -----------
Key points
Despite the challenges faced in the year, we are proud
to deliver the FY23 EBITDA expectation set in January
2023.
Total revenue for the year was up GBP11.8 million to GBP152.6
million. However, the Group faced continuous and varied
external headwinds, particularly impacting bars, during
FY23, all combining to deliver -8.7% like-for-like(2)
("LFL") sales in the full year FY23.
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Peach Pubs, part of the Group for a year as of October
2023, has delivered +14.1% LFL sales in FY23 since acquisition,
compared to 2019, demonstrating that the acquisition of
Peach has already delivered much needed diversification
of sales and guests. We have been very pleased with performance
since acquisition, especially when the sun is shining,
and guests are enjoying the high-quality outdoor spaces.
We were very excited to open our first new Peach pub since
acquisition in October 2023, with further significant
opportunities to expand as capital becomes available.
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Revolución de Cuba brand has performed well versus
other bar brands under current conditions. Corporate bookings
continue to be strong as we look forward to what should
be a return to a normal Christmas trading period.
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Revolution has been most impacted by the cost-of-living
crisis with guests seeing a direct impact on their disposable
income. We continue to implement tactical initiatives
and monitor pricing carefully to support the return of
this young and young professional guest base.
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New market hall and competitive socialising concepts Founders
& Co. and Playhouse continue to mature into exciting new
brands. Founders & Co. in particular has experienced very
strong performance as it has become a go-to destination
in Swansea. There is excellent opportunity to expand this
brand when funding allows.
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We have delivered significant cost savings in the business,
with energy usage now down 35% since 2017, seen significant
reduction in consumable spend in our bars, and have recently
implemented an enhanced labour management system to further
increase efficiency.
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LFL pre-booked party revenue for Christmas FY24 of +17.7%
versus FY23 gives evidence of a potentially normal festive
season, and our new CRM system, recently used in its first
major campaign as students returned, is proving to be
a significant asset driving sales.
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FY24 has started with a continuation of the challenges
as above with year-to-date LFLs at -5.5% compared to FY23,
though pleasingly this has improved in the last three
weeks to -3.5% as a result of the return of students and
corporates in bars and continued strong performance in
pubs. The Board remains confident in achieving FY24 expectations,
which have been prepared on the assumption that the important
Christmas trading period is not interrupted by train strikes.
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(1) Adjusted performance measures exclude exceptional items,
share-based payment charges and bar opening costs.
(2) Like-for-like (LFL) sales are same site sales defined as
sales at only those venues that traded in the same week in both the
current year and most recent non-COVID-19 affected comparative
period.
(3) APM refers to Alternative Performance Measure being measures
reported on an IAS 17 basis.
Rob Pitcher, Chief Executive Officer, said:
"Peach Pubs has seen continued strong trading since acquisition,
especially during periods of good weather. We are very excited to
open our first new Peach Pub since the acquisition and see this
brand as having significant expansion opportunities across the
United Kingdom when we have the necessary available funds.
The Group now offers a well-rounded, diversified offering
through our bars and pubs to navigate the ongoing challenges our
guests face with the cost-of-living crisis. The macroeconomic
challenges facing the industry impact on both our guests' available
spending as well as profitability of the business. This is a key
area of focus for our management teams, and we are pleased to see
the impact of our sales-driving initiatives coming to fruition,
alongside active cost management.
With pre-booked revenues at record-highs for the upcoming
festive period, we look forward to our bars and pubs hosting our
fabulous corporate guests, as well as anticipating improved walk-in
custom following the challenges of industrial action on the
railways in recent years.
We join UK Hospitality in calling for the crucial festive season
to be protected and for an urgent resolution to the ongoing rail
dispute. Not only do the strikes have a significant impact on sales
and profitability, but most importantly they affect our colleagues'
earning potential through lost shifts and tips which the teams rely
on to see them through the quieter trading months of January and
February.
I am immensely proud of the resilience and positive attitude our
colleagues continue to show and look forward to entering our
busiest trading period of the year, which we hope to be the first
normal Christmas since 2019."
Enquiries:
Revolution Bars Group plc Tel: 0161 330 3876
Rob Pitcher, CEO
Danielle Davies, CFO
Cavendish (Nominated Adviser and Broker) Tel: 020 7220 0500
Matt Goode / Simon Hicks / Teddy Whiley
(Corporate Finance)
Tim Redfern / Charlotte Sutcliffe (ECM)
Instinctif (Financial PR) Tel: 020 7457 2020
Matt Smallwood
Justine Warren
Guy Scarborough
Change of Name of Nominated Adviser and Broker
The Company also announces that its Nominated Adviser and
Broker, finnCap Ltd, has now changed its name to Cavendish Capital
Markets Ltd.
A presentation will be shared with analysts today and the
presentation will be made available on the Group's corporate
website at www.revolutionbarsgroup.com .
Chairman's Statement
I was delighted that the Group managed to complete the exciting
acquisition of Peach Pubs in October 2022. I am immensely proud of
the management team's ability in both managing the integration of
Peach Pubs whilst at the same time having to operate in the most
difficult of trading environments with a cost-of-living crisis,
compounded by high inflation, train strikes and permanent change
post COVID-19 of the office workforce working from home.
We have nearly completed our integration of the Pubs, with the
only synergies still to be delivered being contracts and systems
which will provide added benefits to our strong brand of pubs. We
remain confident in delivering the GBP1.5 million of annual
synergies we identified at the time of making the acquisition in
FY25. This acquisition has already delivered much needed
diversification of sales and guests to tackle the changing
environment and consumer trends seen post-pandemic. When the sun
shines, we now get to benefit from our guests flocking to the
lovely outside spaces at our pubs.
Our Revolution brand has however been particularly impacted by
the reduced footfall as a result of the well-publicised challenges
faced by our young guest base. Revolución de Cuba has performed
well, particularly in the second half of the year, as we see the
results of the initial actions taken as a result of our review of
the brand proposition. Given the fundamental changes in the market,
m anagement is undertaking key strategic brand proposition work on
our main bar brands to ensure we remain our guests' first choice
when they're able to enjoy out-of-home experiences. Christmas was,
yet again, impacted by external factors, this time by train strikes
after the two previous years of COVID-19 restrictions. Th train
strikes particularly impacted our walk-in trade, whilst corporate
party bookings remained strong. We are very excited by the current
level of bookings made for Christmas 2023.
It is pleasing to see our guests' inclination to recommend
Revolution bars through our feedback tracking, which has never been
higher and gives us confidence that once our guests can afford to
do so, we will see visit frequency improve.
Whilst performance and our brands remain a key focus, we of
course maintain our focus on offering a rewarding workplace to our
teams, ensuring we retain key partnerships with our wellbeing
partners and continuing to drive progress in our Diversity &
Inclusion, Wellbeing and Sustainability journeys.
Our business
At the end of the reporting period the Group operated 89 venues
(2022: 69 not including Peach Pubs) consisting of the following
brands: Revolution (47 bars), focused on young adults; Revolución
de Cuba (18 bars), which attracts a broader age range; Peach Pubs
(21 pubs), attracting a more affluent guest base, Playhouse (two
bars), a competitive socialising offering; and Founders & Co.
(one bar), an artisanal market place experience. After year-end we
closed one Revolution bar and opened one new Peach Pub.
In FY23, we refurbished five bars in the first half of the year
as well as converting a second bar into a Playhouse, and investing
in sustainability, IT and other key investments. Our refurbishment
strategy was paused in January 2023 whilst we manage the
cost-of-living cost impacts on our guests and our business, and we
intend to resume progress when appropriate.
Our results
Sales of GBP152.6 million (2022: GBP140.8 million) were 8.4%
higher than the previous year as a result of the acquisition of
Peach Pubs and the associated increased sales from pubs in the last
eight months of the year. This offset the impact of the
cost-of-living crisis and resulting lack of consumer confidence
particularly felt by our young guest base in bars. The current year
was significantly affected by macroeconomic factors outside of our
control, with none of the last three years representing the true
Christmas trading that the Group can deliver when not disrupted by
external factors.
Our statutory loss before tax for the year of GBP(22.2) million
(2022: profit before tax of GBP2.1 million) is significantly
impacted by non-cash exceptional impairment charges. Adjusted(1)
EBITDA, our preferred KPI, removes the impact of non-cash and
non-recurring elements to show a true reflection of performance.
Though this measure is also significantly influenced by IFRS 16 and
thus the Directors believe that business progress is best measured
by the directly comparable IAS 17 Alternative Performance
Measures(3) ("APM") of adjusted(1) EBITDA profit of GBP6.6 million
(2022: profit of GBP10.2 million). The reduction in APM(3)
adjusted(1) EBITDA is a direct result of heightened costs and the
challenging sales environment.
During FY23, the Group refinanced its banking facilities
resulting in full repayment of all existing Coronavirus Large
Business Interruption Loan Scheme ("CLBILS") term loans, and the
previous Revolving Credit Facility ("RCF") being replaced with a
new GBP30.0 million RCF. This was utilised for repayment of
existing debts and to fund the acquisition of Peach Pubs. As at 15
October 2023, the Group had net debt of GBP23.2 million.
Our Board
There have been no changes to the Board in the year. With
COVID-19 firmly behind us, the Board has been able to return to
in-person meetings and has continued its focus on strategy,
performance improvement of the business, and Governance
matters.
The Board and Executive Management group continue to work
closely together, with the Board providing challenge, a sounding
board and support to Management decisions.
Our People
The Group is led by an experienced and committed Executive
Management team with proven credentials who continue to navigate
the challenging trading conditions the industry faces, supported by
the Board. Our young, ambitious workforce create amazing
experiences in all our bars and pubs, and I would like to extend my
thanks to the whole team for continuing to demonstrate remarkable
resilience and enthusiasm, and delivering excellent service to our
guests.
Our Future
Year-to-date like-for-like(2) ("LFL") revenue, compared to FY23,
has been -5.5%. However, in the past three weeks this has improved
to -3.5% as a result of improved performance in Revolution bars
following the return of students, continued positive momentum in
Revolución de Cuba bars, and a continuation of the strong
performance seen at Peach Pubs. We have confidence in the Peach Pub
brand's ability to expand across the United Kingdom, when funding
allows.
The Financial Review provides information on liquidity and going
concern, and also the full going concern disclosures, which include
references to material uncertainty, can be found in note 1.
I am confident that the strong leadership, cost focus, and
delivery of synergies will continue to drive performance and
navigate us through the continued challenging environment.
I would like to take this opportunity to thank all our
colleagues for their hard work, amazing attitudes, and delivery of
fun and memorable experiences to our guests, as well as our
stakeholders with particular thanks to the continued support of our
suppliers.
Keith Edelman
Non-Executive Chairman
16 October 2023
(1) Adjusted performance measures exclude exceptional items,
share-based payment charges and bar opening costs
(2) Like-for-like (LFL) sales are same site sales defined as
sales at only those venues that traded in the same week in both the
current year and most recent non-COVID-19 affected comparative
period
(3) APM refers to Alternative Performance Measure being measures
reported on an IAS 17 basis
Chief Executive Officer's Statement
Business review
After a strong FY22, there has been a seismic shift from
COVID-19 to the cost-of-living crisis now being the major factor
impacting the UK Hospitality sector. With COVID-19 now largely
behind us, we are trading in its wake caused by lockdowns and the
changes in consumer behaviour which include working from home,
which has especially impacted trade on a Friday afternoon and
evening in our bars.
It is our young guest base who are the most impacted by the
current high inflationary environment. Young people have seen the
largest fall in real wages since the real value of take-home pay
started to fall in May 2022; this has directly impacted their
ability to spend on discretionary items such as nights out. When
able to do so, we are pleased to see our guests still choosing us
as their venue of choice, with their propensity to recommend our
bars as a great place to go at record levels, however the strain on
their budgets means they are less often able to do so.
The other major factor impacting our business during the last 12
months has been the continuation of industrial action on the
railways preventing our guests from travelling to city centres.
This targeted approach has continued to disrupt major events and
key trading days across the UK, including payday weekends and the
week before Christmas, and we hope to see this matter resolved
before it impacts another Christmas trading period.
Clearly, these issues, that are beyond our control, have meant
we have had to be agile and adapt to the changing environment. In
October 2022 we purchased the Peach Pub Company, consisting of 21
gastropubs primarily located in the heart of England, in desirable
market towns. The Peach guest brings an exciting and diverse new
dynamic to the Group, typically being older and more affluent than
the Group's traditional guests, and therefore more insulated from
the cost-of-living crisis. Furthermore, the work-from-home dynamic
benefits Peach where guests start their weekends early at the pubs
rather than venturing into major cities or towns.
In January 2023, our logistics partner experienced major issues
with the implementation of a new IT system which resulted in five
months of severe disruption through our supply chain. This has both
had an impact on product availability to our guests as well as
being a major distraction for management teams in bar. This
disruption with our logistics partner has caused a delay in
delivering the full synergies from the Peach acquisition whilst
management focus was on resolving those issues.
The year began with a record-breaking heatwave across the UK,
including the hottest day in history for England. As a business
with very little outdoor space, this clearly impacted trading at
the time, whilst demonstrating the need to diversify our estate.
The summer of 2022 also saw the return of restriction-free travel
outside of the UK, providing our guests with the opportunity to
experience holidays abroad for the first time in a number of years.
Coupled with the return of major festivals and international
artists performing delayed events, this impacted on summer trading
due to our target market being a key consumer of both European
holidays and music festivals.
Inflationary cost pressures have continued, driven by
unprecedented increase in many areas, including the utilities
market. These inflationary pressures have driven the cost-of-living
crisis, disproportionately impacting our younger guests. We are
pleased to see the recent fall in utility prices and resultant
increases in consumer confidence.
We are pleased to see a strong return of our corporate guests,
with pre-booked party revenue for the FY24 festive period now at
record levels, up 17.7% versus FY23. Unfortunately, the
above-mentioned industrial action had a major impact on walk-in
trade during the festive period in FY23, without which we would
have delivered a much stronger festive trading season.
Our Brand family
Revolution is aimed at 18 to 30-year-old guests. As demonstrated
by the CGA Peach industry tracker, bars businesses across the UK
have had a very difficult 12 months due to the impact on younger
guests. The focus has therefore been on providing the very best
value and guest experiences to tempt our guests in, with some
strong improvements seen in recent months and significant brand
proposition work is ongoing.
Revolución de Cuba is aimed at a slightly older target market
who are further into their careers and have more disposable income
and are therefore more protected from the cost-of-living crisis.
Having seen a difficult six months leading up to the key festive
trading period, I'm pleased to see this guest base has returned
more strongly in the second half of the financial year. With a
focus on live entertainment and delivering an authentic Cuban
experience, we are now consistently tracking ahead of the wider
bars market and have been since the turn of the year.
Peach Pubs , since acquisition in October 2022, has seen
continued strong trading that has strengthened in recent months
with the good weather throughout May and June. Whilst sales in this
brand are buoyant, cost pressures are nonetheless impacting on
profitability. We are currently focused on delivering our synergies
targets to mitigate the impact of these inflationary pressures.
Founders & Co. , our market hall concept, has performed
extremely well over the last 12 months, having established itself
as a destination in Swansea city centre. Two years on from opening,
sales continue to grow as the site reaches maturity. We have
refreshed the lineup of traders during in the year, and this has
continued to strengthen our reputation as a go-to destination for
both food and events.
Playhouse , our competitive socialising concept, now consists of
two sites both of which were previous Revolution legacy locations.
Whilst guest feedback is positive, footfall at these locations is
lower than anticipated and therefore further refinement of the
proposition is underway.
Acquisition of Peach
We were delighted to announce in October 2022 the completion of
the acquisition of Peach Pubs, a collection of 21 award-winning
gastropubs. We have been very pleased to see sales continue to
strengthen since acquisition, and the brand helps to diversify and
strengthen our portfolio.
Working closely with the Peach team in advance of the
acquisition, we identified that Peach has a strong focus on its
colleagues and guests and has great synergies with the wider Group
both operationally and from a people perspective. The Group and
Peach are focused on our people and the planet, and both are
award-winning in these areas.
Our existing Executive Management team were already very
experienced in running food-led pubs, and we were pleased to
welcome Chris Stagg, the existing Operations Director of Peach, to
the Group Management team. The Peach brand offers an exciting new
avenue for growth, with good levels of new pub availability in
affluent market towns located in aspirational counties.
The Peach Pubs brand trades well throughout the week and is
mainly focused on daytime and early-evening trade which offers a
great diversification for the Group, allowing it to be less reliant
on weekend and late-night trading. The affluent guest base and
locations also offer mitigation and balance against recent
macroeconomic factors. Some of the pubs offer high-margin
accommodation for guests with over 80 letting bedrooms, providing a
new revenue stream for the Group. Peach's revenue mix is
approximately 45:49 between Wet and Food, with c. 6% accommodation;
after annualisation of the Peach brand we expect this to
significantly increase food sales, taking the Group from a previous
c. 14% food sales mix to 20%.
Following some of the hottest summers on record, the Group's
existing brands have been negatively affected by the hot weather
due to a lack of outdoor space and the impact on late-night
trading. The Peach estate offers extensive, attractive outdoor
spaces with a proven track record of increased sales during good
weather. Furthermore, the post-pandemic impact of working from home
has seen an impact on city centre trading on Fridays as commuters
choose to stay home; Peach has benefitted from this change as
guests now stay local on a Friday and visit their pubs for either
lunch meetings or a post-work drink.
Peach Pubs has delivered +14.1% like-for-like sales in FY23
since acquisition, compared to 2019, clearly demonstrating the
additional resilience and diversity that the acquisition has
brought to the Group.
FY23 Group strategic priorities
Our focus is and has been on getting back to our value-creating
workstreams to further develop the business under our strategic
priorities. In the year we have taken the opportunity to refine our
focuses and strategy, identifying synergies between our previous
strategic objectives and our new pillars for growth:
-- Maximising Revenue & Profit :
o Acquisition of Peach Pubs, 21 premium gastropubs,
predominantly located in affluent towns and villages in
Warwickshire, Oxfordshire, Bedfordshire, Hertfordshire and Surrey,
providing diversification in the brand portfolio;
o Five refurbishments were completed in FY23 H1, with these bars
performing in line with expectations, and ahead of the main estate
whilst meeting our ROI targets. The refurbishment programme has
been paused until the macroeconomic trading environment
improves;
o Our new Customer Relationship Management ("CRM") platform is
now live, with campaigns operational, allowing us to optimise the
3.6 million guest database, following a purge of inactive users, by
gaining a complete view of the way our guests interact with and
across our brands. This will allow real-time communication with
them, integrating social media content and audience management
features;
o Monthly competitor price reviews established to ensure we are
optimally priced and utilising dynamic pricing in the current
ever-changing environment;
o Spirits range tender has been completed, with a new range
implemented in April, delivering cost savings in an inflationary
environment as well as a fresh range for our guests; and
o New draught product range fully rolled out across the Group,
delivering improved margins.
-- Brand Awareness and ESG including Sustainability and EVP :
o Our Net Zero target was assessed and approved by the Science
Based Targets initiative in the year, becoming one of the first UK
companies to have their net zero targets approved in this way;
o We were thrilled to win or be nominated for a variety of
awards in the last year, including winning On-trade Company of the
Year at the Footprint Drinks Sustainability Awards, and being a
finalist for the EDIE Net Zero Strategy of the Year award;
o Installed cellar energy reduction equipment across 80% of the
bars estate. This equipment has undergone extensive trials and
produces an eight-month return on investment;
o Continued partnership with So Let's Talk, holding general
wellbeing and health sessions for our colleagues. Supporting 21 of
our colleagues through exciting apprenticeship journeys;
o Excellent success of our people: our first General Manager to
complete the Women in Hospitality, Travel and Leisure ("WiHTL")
Ethnic Future Leaders Programme was subsequently selected to join
the WiHTL advisory board; and two internal promotions from our
high-performance General Managers Programme to Area Manager and
General Manager of our flagship bar;
o Instigated a trial of energy-efficient kitchen extract
controls in our bar in Wigan, with a view to roll-out following a
successful trial period; and
o Retained our B score in our FY23 Carbon Disclosure Project
("CDP") submission, which is in the Management band, demonstrating
that we are taking coordinated action on climate issues.
-- Guest Experience :
o Revolución de Cuba brand proposition review completed in FY23
H1, and in FY23 H2 trials have been taking place on all
guest-facing elements ahead of rollout in FY24. This covers all
aspects of our guest experience, enabling us to further refine our
guest offering to drive increased awareness and usage of the brand
;
o Head Bartender role created in all bars to drive product
quality, average spend and speed of service, culminating in the
first RBG Bartender of the Year competition held in June 2023;
and
o Entertainment and atmosphere creation remain core to the
product offering. Whilst we remain competitive in this area, we
have put extra investment into this with the creation of a
dedicated role to ensure we are best in class in this important
aspect of our business.
-- Cost Control :
o Utilities remain an area of real focus for the Group, with
Peach remaining fixed until at least October 2023 and the remaining
Group entering into a new three-year contract at the end of March
2023. We continue to drive down consumption with a decrease of 35%
versus our 2017 baseline, which is a further improvement from the
start of FY23, partially achieved through the new cellar cooling
technology;
o A new broker engaged to assist with our dynamic energy
purchasing strategy. We are pleased to note wholesale energy costs
reducing recently;
o Integration of the newly acquired Peach Pubs is on track, and
cost synergies are starting to be realised. It is expected that the
larger Group will attract bigger buying power and secure further
cost savings;
o Synergies from the acquisition with Peach Pubs will be at
least GBP1.5 million when fully delivered in FY25, taking proforma
EBITDA to approximately GBP3.0 million. To date we have delivered
GBP0.7 million in synergies from the acquisition of Peach through a
reduction in people costs, food costs, and goods not for resale,
with drink purchasing synergies now a major focus area having been
delayed due to the previously mentioned issues with our logistics
supplier; and
o A full review of our non-consumable spend has been conducted,
with new contracts being signed at reduced rates across many areas
of spend despite the current inflationary environment, resulting in
cost savings of c. GBP750,000.
-- Diversification of Sales :
o New revenue streams in the business through introduction of
accommodation sales with Peach Pubs;
o Vending machines continue to be rolled out across the Bars
brands, delivering incremental revenue;
o Third Party Account sales have been a real avenue of growth
throughout the year with new partnerships struck with Virgin
Experience Days, amongst others, showcasing our experiences through
their websites and databases; and
o Our two Playhouse bars are seeing up to 34% of their revenue
coming from machine sales.
FY24 Group strategic priorities
With the current macroeconomic issues continuing, and the
cost-of-living crisis still disproportionately affecting our
younger guest base, we are focusing on tight cost control whilst
providing great value and memorable experiences for our guests.
Below are some of our key areas of focus for FY24:
-- Maximising Revenue & Profit :
o New CRM platform to be optimised in order to engage our
different, and more diversified, guest profiles;
o Deliver outstanding value to our guests to support them
through the cost-of-living crisis, including the launch of our
inflation-busting GBP2.99 main course meals across the Revolution
brand, as well as strengthening the value in our Happy Hour
cocktail promotions;
o Cocktail menus will be revamped to incorporate current trends
of Rum and Tequila, as well as refreshing our No and Low alcohol
options;
o Further drive the adoption and usage of the Revolution App;
and
o Improve margins in the Peach pubs by fully delivering
procurement synergies.
-- Brand Awareness and ESG including Sustainability and EVP :
o Create a culture of exceptional hospitality to delight our
guests, in order to drive repeat visit and increased earnings for
our teams through higher tips;
o Drive down energy consumption across the Peach pubs estate
through the implementation of technology and support structures
that have delivered for the bars business in recent years; and
o Continue striving towards our carbon reduction targets through
decarbonisation of kitchens, cellar cooling, LEDs lighting, and
expanding our Zero Heroes' work to include travel and food.
-- Guest Experience :
o Brand proposition rollout for the new elements within
Revolución de Cuba to drive increased awareness and usage of the
brand ;
o Brand proposition review to be undertaken on the Revolution
brand to ensure we continue to be the destination of choice for
young adults looking for a great night out;
o Brand partnerships created to support our ambition of creating
unforgettable in-bar experiences; and
o Dedicated resource to drive our guest experience through
best-in-class music and entertainment.
-- Cost Control :
o Rollout of an upgraded labour management system with dedicated
training and support to deliver further optimisation in this
area;
o Review of all service providers to achieve "same-for-less" or
"more-for-same" outcomes; and
o Water consumption monitoring equipment is now on trial in
seven bars, with good opportunities to reduce usage being
highlighted. The trial continues, and if successful will be fully
rolled out.
-- Diversification of Sales :
o Take our brands to new places to highlight them outside of our
bricks and mortar locations; and
o Further utilisation of unused spaces in bars to drive sales
and bring in new guests.
Our People
The challenges faced by the business also impact our colleagues
who are not immune from the cost-of-living crisis. We continue to
support and identify ways to maximise colleague earnings and
incentivise the continued amazing performance of our people. We are
very pleased that our Peach teams are now integrated into the
Group, creating one family to contribute towards our goals.
Despite the challenges faced by our teams, I was incredibly
proud to find in the most recent Quality of Life employee survey
that employee engagement is at record levels, seeing the highest
ever participation rate and highest ever Employee Net Promoter
Score. I am extremely proud of the fantastic service our teams
continue to deliver and the amazing experiences they create for our
guests.
Market outlook
Our young guests are, in the bars business, disproportionately
impacted by the cost-of-living crisis, facing unprecedented
challenges against their earnings and outgoings. We are pleased to
see utility prices continuing to trend in the right direction which
is of some comfort to both our guests and the business. Inflation
has, hopefully, peaked, and is now starting to fall with consumer
confidence starting to rise.
The continuing challenge with interest rates remaining high
means we anticipate the macroeconomic climate to remain difficult
for a further 12-to-18 months. We continue to monitor the situation
carefully and mitigate our cost base wherever possible.
Furthermore, the continuing disruption on railways is
unfortunately still impacting on our business and the wider
Hospitality sector, over a year on from when this action first
started. We hope to see this resolved and allow the first normal
Christmas of trade since 2019, and are comforted by early signs of
returning consumer confidence. Peach trade, albeit affected by a
wet summer, has remained strong under market conditions, with the
first new Peach Pub post-acquisition opening in October 2023.
Current Trading and Outlook
It has been a challenging start to the new financial year with
the continued pressure on our guests, and whilst the wetter and
colder summer, in comparison to recent years, has somewhat aided
our bars business it has not helped the Peach Pubs business whose
beautiful beer gardens weren't fully utilised. The Peach business
has performed extremely well outside the periods of poorer
weather.
The return of students has been strong for the Revolution brand
over recent weeks with a high level of engagement in our promoted
nights as well as sign-ups to the Revolution App. Revolución de
Cuba continues to outperform the bars market, per the Coffer CGA
Tracker, and has done since the start of 2023. Our Founders &
Co. bar in Swansea continues to trade positively and provides
another route for growth when the time is right. Our two Playhouse
bars are experiencing the same challenges with the cost-of-living
crisis as we see in the Revolution brand and we continue to review
this concept. Peach Pubs continue to perform in line with
expectations and well ahead of pre-COVID-19 levels, with excellent
expansion opportunities available when funds allow.
Corporate Christmas booking are tracking well ahead of the same
period last year, and this gives us confidence of a strong festive
trading period whilst we remain mindful of the global political
volatility and, nearer to home, potential industrial action by the
railway unions to disrupt peoples' Christmas.
Rob Pitcher
Chief Executive Officer
16 October 2023
Financial Review
Introduction
-- The "FY23" accounting period represents trading for the 52
weeks to 1 July 2023 ("the period"). The comparative period "FY22"
represents trading for the 52 weeks to 2 July 2022 ("the prior
period");
-- the Group continues to offer comparative Alternative
Performance Measures(3) ("APM") of the numbers converted to IAS 17
following the implementation of IFRS 16 in FY20. APM(3) for the
current period are given equal prominence in this review because,
in the opinion of the Directors, these provide a better guide to
the underlying performance of the business;
the results information therefore gives FY23 IFRS 16 statutory
numbers, followed by APM(3) of FY23 under IAS 17, and the
equivalent comparison from FY22. A reconciliation between statutory
and APM(3) figures is provided in note 20.
FY23 FY22 FY23 APM(3) FY22 APM(3)
(IFRS 16) (IFRS 16) (IAS17) (IAS17)
GBPm GBPm GBPm GBPm
Total Sales 152.6 140.8 152.6 140.8
------------ ------------ ------------- -------------
Adjusted(1) EBITDA 17.0 19.4 6.6 10.2
------------ ------------ ------------- -------------
Operating (Loss)/Profit (15.2) 7.4 (7.0) 4.8
------------ ------------ ------------- -------------
(Loss)/Profit Before Tax (22.2) 2.1 (9.1) 3.9
------------ ------------ ------------- -------------
Non-cash Exceptionals (18.6) (0.6) (6.1) (0.2)
------------ ------------ ------------- -------------
Cash Exceptionals (1.6) - (1.6) -
------------ ------------ ------------- -------------
(Net Debt)/Net Cash (21.6) 4.1 (21.6) 4.1
------------ ------------ ------------- -------------
Presentation of results
Consistent with previous reporting periods, the Group operates a
weekly accounting calendar and as each accounting period refers
only to complete accounting weeks, the period under review reflects
the results of the 52 weeks to 1 July 2023. Prior year comparatives
relate to the 52 weeks ended 2 July 2022. There have been no
significant changes to accounting policies following the
implementation of IFRS 16 in FY20.
The Directors believe that adjusted(1) EBITDA provides a better
representation of underlying performance as it excludes the effect
of exceptional items and share-based payment charge/credits
(non-cash), none of which directly relate to the underlying
performance of the Group. The adjusted(1) EBITDA represents IFRS 16
and therefore excludes any rental costs. APM(3) adjusted(1) EBITDA
represents IAS 17 and is therefore after deducting the IAS 17
rental charge.
Results
The Group faced a challenging trading period in FY23 under the
cost-of-living crisis which significantly affected consumer demand.
A strategic decision was made to acquire Peach Pubs in October 2022
which has seen very positive results and contribution to sales and
profit generation since. Because of this, the Group has seen an
increase in revenue in the year to GBP152.6 million (2022: GBP140.8
million), 8.4% higher than the corresponding period. Despite Peach
only being part of the Group for eight months of FY23, which didn't
include its key summer trading months, we have been very pleased
with the diverse complement of new guest offering that the brand
brings to the Group.
The underlying result, as measured by our preferred APM(3)
adjusted(1) EBITDA (see note 28), was GBP3.6 million lower, at a
profit of GBP6.6 million (2022: profit of GBP10.2 million). This is
our preferred metric because it shows the underlying cash
available, in a normal trading period, for investment, loan
servicing and repayment, and for distributing to shareholders in
the form of dividends. Adjusted(1) EBITDA (IFRS 16) was a profit of
GBP17.0 million (2022: profit of GBP19.4 million). Despite the
positive benefit of Peach in the last eight months of the year,
sales were challenged under uncertain trading conditions, with
other cost headwinds, which impacted on profitability.
Margins: Gross profit in the year amounted to GBP117.1 million
(2022: GBP110.1 million) which amounted to a gross margin of 76.8%,
down from 78.2% in the prior year but still above margins seen
pre-COVID-19, with 75.8% seen in FY19. The reduction seen in the
year is a result of higher participation of food in the Group
following the acquisition of Peach, as well as the ongoing cost
challenges faced across the UK, mitigated by active contract
reviews and negotiations. Although discounting is kept under
control, there is still the need for adaptation of marketing and
deals to entice guests into our venues, which impacts on
margin.
Payroll: Headcount increased from 2,827 in FY22 to 3,591 in
FY23. Just over 600 of these new staff joined the Group as part of
the Peach Pubs acquisition, meaning the underlying Group headcount
saw a small increase. This increase in headcount is predominantly
as a result of improved staffing levels at bars following recent
challenging recruitment conditions, mitigated by a small
restructuring at head office. The acquisition, increased headcount,
and becoming an above-minimum wage employer in the previous year
meant that total payroll costs for the year were GBP55.6 million
compared to GBP51.4 million in FY22. This is a payroll to turnover
ratio of 36.4% in FY23, compared to 36.5% in FY22, showing that
payroll has maintained a similar rate since prior year. Although
the Group percentage has remained consistent, there has actually
been a net reduction seen in the bars business due to active cost
management, with the Group result arising due to Peach's
high-quality service model requiring heightened payroll costs.
The Group had an operating loss of GBP(15.2) million (2022:
profit of GBP7.4 million). This was after charging non-cash
exceptional items of GBP18.6 million (2022: GBP0.6 million) and
cash exceptionals of GBP1.6 million (2022: GBPnil), which are
detailed further below.
Underlying profitability
The Board's preferred profit measures are APM(3) adjusted(1)
EBITDA and APM(3) adjusted(1) pre-tax (loss)/profit as shown in the
tables below. The APM(3) adjusted(1) measures exclude exceptional
items, pre-opening costs and charges arising from long-term
incentive plans.
52 weeks 52 weeks 52 weeks 52 weeks
ended ended ended ended 2
1 July 2 July 1 July July 2022
2023 2022 2023 APM(3)
APM(3) IAS 17
IFRS IFRS IAS 17 GBPm
16 16 GBPm
GBPm GBPm
Pre-tax (Loss)/Profit (22.2) 2.1 (9.1) 3.9
Add back Exceptional items 20.2 0.6 7.7 0.2
Add back (Credit)/Charge arising
from long-term incentive plans (0.1) 0.1 (0.1) 0.1
Add back Pre-opening costs - 0.3 - 0.3
Adjusted(1) pre-tax (Loss)/Profit (2.1) 3.1 (1.5) 4.5
Add back Depreciation 12.0 11.1 6.0 4.8
Add back Amortisation 0.0 0.0 0.0 0.0
Add back Finance costs 7.1 5.3 2.1 0.9
Adjusted(1) EBITDA 17.0 19.4 6.6 10.2
=================================== ========= ========= ========= ===========
Exceptional items, pre-opening costs and accounting for
long-term incentive plans
Exceptional items , by virtue of their size, incidence or
nature, are disclosed separately in order to allow a better
understanding of the underlying trading performance of the Group.
The statutory exceptional position of GBP20.2 million is GBP12.5
million higher than the APM(3) exceptionals of GBP7.7 million due
to impairment charges under IFRS 16 on right-of-use assets .
The statutory exceptional charge of GBP20.2 million comprises
GBP18.6 million (2022: GBP0.6 million) of non-cash exceptionals
relating to right-of-use impairment charges of GBP12.6 million, and
property, plant and equipment impairment charges of GBP6.0 million.
Cash exceptionals of GBP1.6 million predominantly relate to legal
and consultancy costs involved in the acquisition of Peach Pubs. A
full analysis of exceptional items is given in note 3 to the
financial statements.
(Credit)/Charge relating to long-term incentive schemes resulted
from equity-settled share-based payment transactions; this was a
credit of GBP117k (2022: charge of GBP77k) as a result of the lapse
of previous schemes. No awards vested in either the current period
or prior period.
Pre-opening costs refer to one-off costs incurred in getting new
bars fully operational and primarily include costs incurred before
opening and in preparing for launch. The most significant element
of these costs relates to property overheads incurred between
signing the lease and opening for trading.
Finance costs
Finance costs of GBP7.1 million (2022: GBP5.3 million) comprised
GBP1.9 million (2022: GBP0.9 million) of bank interest paid on
borrowings and GBP5.2 million (2022: GBP4.4 million) of lease
interest. Bank interest relates to the committed fees relating to
the Company's committed revolving credit facility ("RCF") with
NatWest, as well as the interest charged on the Coronavirus Large
Business Interruption Loan Scheme ("CLBILS") loans until they were
repaid in October 2022. An increase is seen in bank interest due to
higher borrowings as a result of the acquisition of Peach Pubs, as
well as rising interest rates.
Liquidity
In the prior year, on 11 November 2021, the RCF was extended to
30 June 2023, and interest was increased by 1.2% with a further
up-to 1% chargeable if the RCF was drawn to within GBP5.0 million
of total limits. A new deleveraging profile was agreed with the
first reduction due in June 2022, which was extended to September
2022 in June 2022 to support the refinancing.
At the start of FY23, the Group held the GBP16.3 million RCF
which was fully unutilised, with GBP14.8 million total outstanding
in CLBILS term loans which continued to amortise. The total
facility was refinanced on 10 October 2022, through which a new RCF
was committed at a total facility level of GBP30.0 million expiring
October 2025. The RCF was sought with the purposes of repaying all
other indebtedness, general working capital requirements, and for
the acquisition of Peach Pubs. Therefore, all outstanding CLBILS
term loans were repaid on 13 October 2022, with just the RCF making
up total facilities going forwards. Interest is charged on the
utilised RCF at a margin determined by leveraging plus SONIA, with
unutilised RCF values having interest charged at 40% of margin.
In March 2023, an amendment was made to the facility to hold a
GBP1.35 million Energy Guarantee for the purposes of signing a new
energy contract. A further amendment was made in October 2023 such
that all originally agreed reductions in total facility level be
deferred to 30(th) June 2025, meaning at that date the GBP30.0
million facility will reduce by GBP5.0 million to a GBP25.0 million
facility. All profitability-based covenants were waived until June
2025, and the minimum liquidity covenant was amended to link to
management severe but plausible downside case forecasts. The
requirement for a signed covenant certificate by the auditors was
also waived for FY23 and FY24.
In accordance with these arrangements and subject to compliance
with financial covenants, the Group will therefore have committed
funding facilities available during the going concern assessment
period as shown in the table below.
Energy RCF Total
Guarantee Facility
GBPm GBPm GBPm
30 June 2023 1.35 28.65 30.0
31 December
2023 1.35 28.65 30.0
30 June 2024 1.35 28.65 30.0
31 December 1.35 28.65 30.0
2024
As at 15 October 2023 the Group has net debt of GBP23.2
million.
Taxation
There is no tax payable in respect of the current period due to
brought-forward losses. Accordingly, the charge in the current year
is GBPnil (2022: GBPnil).
(Loss)/Earnings per share
Basic loss per share for the period was (9.7) pence (2022:
earnings 0.9 pence). Adjusting for exceptional items, non-recurring
bar opening costs and charges arising from long-term incentive
plans resulted in a basic adjusted(1) earnings per share for the
period of 0.7 pence (2022: earnings 1.3 pence).
Operating cash flow and net bank debt
The Group generated net cash flow from operating activities in
the period of GBP9.7 million (2022: GBP25.8 million) as a direct
result of cash generation from sales in the year, with a reduction
seen since the prior year due to the impact of heightened
costs.
After positive cash flow from operating activities, capital
expenditure payments of GBP5.5 million, bank loan interest of
GBP1.9 million, loan repayments of GBP25.8 million (offset by
drawdowns of GBP36.0 million), acquisition of subsidiary costs of
GBP13.9 million offset by cash acquired of GBP4.7 million, and
GBP5.9 million of repayment of subsidiary borrowings contributed to
a net cash outflow in the period of GBP15.4 million. This decreased
net bank cash of GBP4.1 million as at 2 July 2022 to a net bank
debt closing position of GBP(21.6) million as at 1 July 2023.
This is in comparison to 2022, where cash generated from trade
was offset with capital expenditure payments of GBP8.3 million,
bank loan interest of GBP0.9 million and loan repayments of GBP1.0
million, which all contributed to a net cash inflow in the period
of GBP6.7 million improving the net bank cash position to GBP4.1
million.
Capital expenditure
The Group made capital investments of GBP5.5 million (2022:
GBP8.3 million) during the period; this was incurred entirely on
existing bars and pubs, comprising refurbishments and the
conversion of one Revolution bar to a Playhouse, as well as
sustainability, and IT projects and other key investments.
Refurbishments were paused in January 2023 for cash preservation,
with plans to restart the refurbishment programme as soon as
reasonably possible.
In the prior year, capital expenditure related to two new
Revolution bars, converting an existing Revolution bar into a new
concept, Playhouse, refurbishments across 19 bars, sustainability,
and IT projects and other key investments.
Dividend
As notified previously, the Board has suspended payments of
dividends. A condition of taking on the CLBILS facility was that
the Company was unable to pay a dividend whilst the CLBILS remains
outstanding; the CLBILS loans were repaid during the year, and
therefore is no longer a condition. As a result of the CVA, the
Company's subsidiary entity, Revolution Bars Limited, was unable to
pay a dividend until cessation of the CVA period, which occurred in
December 2022, so is therefore also no longer a condition. There
was no dividend paid or declared in either the current or prior
period.
Going concern
Under the terms of its banking facilities with NatWest, the
Company has a minimum liquidity covenant. The Directors have
modelled both a management base case forecast scenario and a severe
but plausible downside case scenario; please see note 1 for further
details on the key assumptions. No forecast breach of the banking
covenant arises under either forecast scenario, but under the
severe but plausible downside case certain points of the year
operate at a very tight headroom.
The constantly changing economic environment, including the
cost-of-living crisis, increasing costs, and impacts on guest
confidence, coupled with forecasting difficulties as a result of
constantly changing economic impacts means that the Group cannot be
assured that it will not breach the covenant, and that there is
therefore a material uncertainty over the going concern of the
Group and the Company. This uncertainty exists because of the
unpredictability of the duration and extent of the current
economic, as well as significant inflationary cost pressures, and
how this will impact the Group's operational performance and in
particular the level of sales and EBITDA generated that will in
turn determine the Group's covenant compliance.
An amendment to borrowings was agreed in October 2023 which
waived all profitability-related covenants and amended the minimum
liquidity covenant to link it to the management severe but
plausible downside case forecast. A breach of covenant would
require the bank to grant a waiver or for the Group to renegotiate
its banking facilities or raise funds from other sources, none of
which is entirely within the Group's control. A breach of the
covenant would also result in the reclassification of non-current
borrowings to current borrowings. The Group has a strong
relationship with its banking partner, and monitors covenant
compliance closely.
Notwithstanding the material uncertainty, after due
consideration the Directors have a reasonable expectation that the
Group and the Company have sufficient resources to continue in
operational existence for the period of 12 months from the date of
approval of these financial statements. Accordingly, the financial
statements continue to be prepared on the going concern basis.
However, the circumstances noted above indicate the existence of a
material uncertainty which may cast significant doubt over the
ability of the Group and Company to continue as a going concern.
The financial statements do not contain the adjustments that would
arise if the Group and the Company were unable to continue as a
going concern.
A more comprehensive disclosure on going concern including the
banking facilities, liquidity and the detailed assumptions behind
both forecast scenarios is given in note 1 to the financial
statements.
Danielle Davies
Chief Financial Officer
16 October 2023
(1) Adjusted performance measures exclude exceptional items and
share-based payment charges and bar opening costs.
(2) Like-for-like ("LFL") sales are same site sales defined as
sales at only those venues that traded in the same week in both the
current year and most recent non-COVID-19 affected comparative
period.
(3) APM refers to Alternative Performance Measures being
measures reported on an IAS 17 basis.
Revolution Bars Group plc
Consolidated Statement of Profit or Loss and other Comprehensive
Income
for the 52 weeks ended 1 July 2023
52 weeks 52 weeks
ended ended
1 July 2 July
2023 2022
Note GBP'000 GBP'000
-------------------------------------------- ---- --------- ---------
Revenue 3 152,551 140,821
Cost of sales (35,419) (30,695)
-------------------------------------------- ---- --------- ---------
Gross profit 117,132 110,126
-------------------------------------------- ---- --------- ---------
Operating (expenses)/income:
- operating expenses, excluding exceptional
items 4 (112,039) (102,721)
- exceptional items 4 (20,244) (561)
- grant income - 568
-------------------------------------------- ---- --------- ---------
Total operating expenses (132,283) (102,714)
-------------------------------------------- ---- --------- ---------
Operating (loss)/profit 5 (15,151) 7,412
Finance expense 6 (7,056) (5,280)
(Loss)/profit before taxation (22,207) 2,132
Income tax 7 (27) -
-------------------------------------------- ---- --------- ---------
(Loss)/profit and total comprehensive
(expense)/income for the period (22,234) 2,132
-------------------------------------------- ---- --------- ---------
(Loss)/earnings per share:
- basic (pence) 8 (9.7) 0.9
- diluted (pence) 8 (9.3) 0.9
Dividend declared per share (pence) - -
-------------------------------------------- ---- --------- ---------
There were no items of other comprehensive income and therefore
a separate statement of other comprehensive income is not
presented.
Revolution Bars Group plc
Consolidated Statement of Financial Position
at 1 July 2023
1 July 2 July
2023 2022
Note GBP'000 GBP'000
-------------------------------------- ---- --------- ---------
Assets
Non-current assets
Property, plant and equipment 10 36,161 36,375
Right-of-use assets 10 67,706 62,744
Intangible assets 30 28
Goodwill 9 17,419 -
-------------------------------------- ---- --------- ---------
121,316 99,147
-------------------------------------- ---- --------- ---------
Current assets
Inventories 11 3,405 3,487
Trade and other receivables 12 11,448 8,777
Cash and cash equivalents 13 3,367 18,815
-------------------------------------- ---- --------- ---------
18,220 31,079
-------------------------------------- ---- --------- ---------
Total assets 139,536 130,226
-------------------------------------- ---- --------- ---------
Liabilities
Current liabilities
Trade and other payables 14 (31,720) (30,618)
Lease liabilities 15 (7,087) (5,437)
Provisions 17 (871) (1,314)
Tax payable (27) -
(39,705) (37,369)
-------------------------------------- ---- --------- ---------
Net current liabilities (21,485) (6,290)
-------------------------------------- ---- --------- ---------
Non-current liabilities
Lease liabilities 15 (118,236) (99,545)
Interest-bearing loans and borrowings 16 (25,000) (14,751)
Provisions 17 (1,967) (1,582)
(145,203) (115,878)
-------------------------------------- ---- --------- ---------
Total liabilities (184,908) (153,247)
-------------------------------------- ---- --------- ---------
Net liabilities (45,372) (23,021)
-------------------------------------- ---- --------- ---------
Equity attributable to equity holders
of the parent
Share capital 230 230
Share premium 33,794 33,794
Merger reserve 11,645 11,645
Accumulated losses (91,041) (68,690)
-------------------------------------- ---- --------- ---------
Total equity (45,372) (23,021)
-------------------------------------- ---- --------- ---------
Revolution Bars Group plc
Consolidated Statement of Changes in Equity
for the 52 weeks ended 1 July 2023
Reserves
Share Share Merger Accumulated Total
capital premium reserve losses equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- -------- -------- -------- ----------- --------
At 3 July 2021 230 33,794 11,645 (70,899) (25,230)
Profit and total comprehensive
income for the period - - - 2,132 2,132
Charge arising from long-term
incentive plans - - - 77 77
At 2 July 2022 230 33,794 11,645 (68,690) (23,021)
Loss and total comprehensive expense
for the period - - - (22,234) (22,234)
Credit arising from long-term
incentive plans - - - (117) (117)
At 1 July 2023 230 33,794 11,645 (91,041) (45,372)
------------------------------------- -------- -------- -------- ----------- --------
Revolution Bars Group plc
Consolidated Statement of Cash Flow
at 1 July 2023
52 weeks 52 weeks
ended ended
1 July 2 July
2023 2022
Note GBP'000 GBP'000
-------------------------------------------------- ---- -------- --------
Cash flow from operating activities
(Loss)/profit before tax (22,207) 2,132
Adjustments for:
Net finance expense 6 7,056 5,280
Depreciation of property, plant and equipment 5 6,634 5,630
Depreciation of right-of-use assets 5 5,423 5,437
Impairment of property, plant and equipment 5 6,096 261
Impairment of right-of-use assets 5 12,642 376
Lease modification 4 (50) (76)
Acquisition costs 4 1,499 -
Amortisation of intangibles 5 5 3
Taxation charge 7 27 -
(Credit)/charges arising from long-term incentive
plans (117) 77
Operating cash flows before movement in working
capital 17,008 19,120
-------------------------------------------------- ---- -------- --------
Decrease/(increase) in inventories 584 (532)
Increase in trade and other receivables (543) (3,559)
(Decrease)/increase in trade and other payables (6,936) 10,170
(Decrease)/increase in provisions (443) 650
-------------------------------------------------- ---- -------- --------
Net cash flow generated from operating activities 9,670 25,849
-------------------------------------------------- ---- -------- --------
Cash flow from investing activities
Cost of acquisition of subsidiaries, net
of cash acquired 9 (10,689) -
Purchase of intangible assets (7) (7)
Purchase of property, plant and equipment 10 (5,533) (8,321)
-------------------------------------------------- ---- -------- --------
Net cash flow used in investing activities (16,229) (8,328)
-------------------------------------------------- ---- -------- --------
Cash flow from financing activities
Interest paid 6 (1,895) (917)
Principal element of lease payments 15 (6,432) (4,544)
Interest element of lease payments 15 (4,885) (4,363)
Repayment of subsidiary borrowings (5,926) -
Repayment of borrowings (25,751) (1,000)
Drawdown of borrowings 36,000 -
-------------------------------------------------- ---- -------- --------
Net cash outflow used in financing activities (8,889) (10,824)
-------------------------------------------------- ---- -------- --------
Net (decrease)/increase in cash and cash
equivalents (15,448) 6,697
Opening cash and cash equivalents 18,815 12,118
-------------------------------------------------- ---- -------- --------
Closing cash and cash equivalents 13 3,367 18,815
-------------------------------------------------- ---- -------- --------
Reconciliation of net bank (debt)/cash
Net (decrease)/increase in cash and cash
equivalents (15,448) 6,697
Cash inflow from increase in borrowings (36,000) -
Cash outflow from repayment of borrowings 25,751 1,000
Opening net bank cash/(debt) 4,064 (3,633)
------------------------------------------- -------- -------
Closing net bank (debt)/cash (21,633) 4,064
------------------------------------------- -------- -------
Notes to the consolidated financial information
for the 52 weeks ended 1 July 2023
1. General information
(a) General Information
The accounting period runs to the Saturday falling nearest to 30
June each year and therefore normally comprises a 52-week period
but with a 53-week period arising approximately at five-year
intervals. The period ended 1 July 2023 is a 52-week period; the
period ended 2 July 2022 was a 52-week period.
The consolidated financial statements have been prepared in
accordance with UK-adopted International Accounting Standards
("IFRS") and with the requirements of the Companies Act 2006
applicable to companies reporting under those standards, and they
apply to the financial statements of the Group for the 52 weeks
ended 1 July 2023 (prior period 52 weeks ended 2 July 2022).
References to 2023 or FY23 relate to the 52-week period ended 1
July 2023 and references to 2022 or FY22 relate to the 52-week
period ended 2 July 2022 unless otherwise stated. The consolidated
financial statements are presented in Pounds Sterling with values
rounded to the nearest thousand, except where otherwise indicated.
These policies have been applied consistently unless otherwise
stated.
(b) Going Concern
Going concern
The Directors have adopted the going concern basis in preparing
these financial statements after careful assessment of identified
principal risks and, in particular, the possible adverse impact on
financial performance, specifically on revenue and cash flows, as a
result of ongoing inflationary cost rises, and associated impact on
consumer confidence. The going concern status of the Company and
subsidiaries is intrinsically linked to that of the Group.
Liquidity
At the end of the reporting period, the Group had net bank debt
of GBP21.6 million (2022: net cash of GBP4.1 million). At the start
of FY23, the Group held a GBP16.3 million Revolving Credit Facility
("RCF") which was fully unutilised, with GBP14.8 million total
outstanding in CLBILS term loans which continued to amortise. The
total facility was refinanced on 10 October 2022, through which a
new RCF was committed at a total facility level of GBP30.0 million
expiring October 2025.
The RCF was sought with the purposes of repaying all other
indebtedness, general working capital requirements, and for the
acquisition of Peach Pubs. All outstanding CLBILS term loans were
repaid on 13 October 2022, with just the RCF making up total
facilities going forwards.
In March 2023, an amendment was made to the facility to hold a
GBP1.35 million Energy Guarantee for the purposes of signing a new
energy contract. A further amendment was made in October 2023 such
that all originally agreed reductions in total facility level be
deferred to 30(th) June 2025, meaning at that date the GBP30.0
million facility will reduce by GBP5.0 million to a GBP25.0 million
facility. All profitability-based covenants were waived until June
2025, and the minimum liquidity covenant was amended to link to
management severe but plausible downside case forecasts. The
requirement for a signed covenant certificate by the auditors was
also waived for FY23 and FY24.
In accordance with the updated amendments, the Group will
therefore have committed funding facilities available during the
going concern assessment period as shown in the table below.
Energy RCF Total
Guarantee Facility
GBPm GBPm GBPm
30 June 2023 1.35 28.65 30.0
31 December
2023 1.35 28.65 30.0
30 June 2024 1.35 28.65 30.0
31 December 1.35 28.65 30.0
2024
Current Net debt and available liquidity
As at 15 October 2023, the Group's net bank debt position was
GBP23.2 million and therefore the Group has available liquidity of
GBP5.4 million.
Covenants
The facility's profitability-based covenants were waived in the
year, with only a minimum liquidity covenant remaining that was
amended to link to management severe but plausible downside case
forecasts. The minimum liquidity covenant is built into long-term
forecasting to allow Management to review and manage covenant
compliance.
Significant judgements and base case
The financing arrangements referred to in this going concern
section are expected to provide a sufficient platform for the
business to meet the challenging trading conditions that face the
UK Hospitality industry this year, including softened guest
confidence, higher input and energy costs, as well as potentially
reduced Christmas footfall compared to pre-pandemic levels due to
the impact of increased cost-of-living, with some price increases
assumed to mitigate the earnings impact of these challenges.
The level of sales that the Group generates drives EBITDA and
cash generation, which in turn drives compliance with the minimum
liquidity covenant test. In reaching their assessment that the
financing arrangements are expected to be sufficient for the
business, the Directors have reviewed a base case forecast scenario
which assumes a continued impact of the cost-of-living crisis on
the business, with rises in sales following a particularly tough
FY23 impacted by ongoing cost pressures, mitigated by delivery of
synergies post-acquisition. Under the base case forecast, liquidity
is sufficient and there is no forecast breach of the minimum
liquidity covenant.
Severe but plausible downside scenario
The Directors have also reviewed a severe but plausible downside
case which takes the base case and assumes a sales decline from
FY23 actual performance, with a small improvement at Christmas
accounting for some rail strikes should they continue. Pub
performance is assumed at a reduction, equivalent to no further
synergies being delivered. Softer trading is then continued into
FY25. No further Government assistance is assumed, and Capex is
further reduced compared to the original Board-approved budget
prepared May-June 2023. The severe but plausible downside case
shows sufficient liquidity and no forecast breach of the minimum
liquidity covenant, but at certain points of the year operates at a
very tight headroom.
The material uncertainty caused by ongoing inflationary cost
rises, the associated impact on consumer confidence, and
forecasting difficulties as a result of the constantly changing
economic environment means that the Group cannot be assured that it
will not breach the minimum liquidity covenant. A breach of
covenant would require the bank to grant a waiver or for the Group
to renegotiate its banking facilities or raise funds from other
sources, none of which is entirely within the Group's control. A
breach of the covenant would also result in the reclassification of
non-current borrowings to current borrowings. The Group has a
strong relationship with its banking partner, and monitors covenant
compliance closely.
Going concern statement
The continued cost-of-living narrative and economic effects
including the impact on consumer confidence means that a material
uncertainty exists that may cast significant doubt on the Group's
and Company's ability to continue as a going concern. These factors
impact the Group's operational performance and in particular the
level of sales and EBITDA generated that will in turn determine the
Group's covenant compliance.
Notwithstanding the material uncertainty, after due
consideration the Directors have a reasonable expectation that the
Group and the Company have sufficient resources to continue in
operational existence for the period of 12 months from the date of
approval of these financial statements. Accordingly, the financial
statements continue to be prepared on the going concern basis. The
financial statements do not contain the adjustments that would
arise if the Group and the Company were unable to continue as a
going concern.
2. Significant accounting policies
Leases
Where the Company is a lessee, a right-of-use asset and lease
liability are both recognised at the outset of the lease. Each
lease liability is initially measured at the present value of the
remaining lease payment obligations taking account of the
likelihood of lease extension or break options being exercised.
Each lease liability is subsequently adjusted to reflect imputed
interest, payments made to the lessor and any modifications to the
lease. The right-of-use asset is initially measured at cost, which
comprises the amount of the lease liability, plus lease payments
made at or before the commencement date adjusted by the amount of
any prepaid or accrued lease payments, less any incentives received
to enter in to the lease, plus any initial direct costs incurred by
the Group to execute the lease, and less any onerous lease
provision. The right-of-use asset is depreciated in accordance with
the Group's accounting policy on property, plant and equipment. The
amount charged to the income statement comprises the depreciation
of the right-of-use asset and the imputed interest on the lease
liability.
Items impacting Alternative Performance Measures
Exceptional items
Items that are unusual or infrequent in nature and material in
size are disclosed separately in the income statement. The separate
reporting of these items helps provide a more accurate indication
of the Group's underlying business performance, which the Directors
believe would otherwise be distorted. Exceptional items typically
include impairments of property, plant and equipment and
right-of-use assets, significant contract termination costs and
costs associated with major one-off projects.
Share based payments
Charges relating to share-based payment arrangements, while not
treated as an exceptional item, are adjusted for when arriving at
adjusted EBITDA on the basis that such amounts are non-cash, can be
material and often fluctuate significantly from period to period,
dependent on factors unrelated to the Group's underlying trading
performance.
Bar opening costs
Bar opening costs relate to costs incurred in getting new bars
fully operation and primarily include costs incurred before the
opening and preparing for launch, even if the bars do not open in
the period. Although not treated as an exceptional item, these are
adjusted for when arriving at adjusted EBITDA on the basis that
such amounts are noncash, can be material and often fluctuate
significantly from period to period, dependent on factors unrelated
to the Group's underlying trading performance.
Key Risks
The directors believe that the principal risks and uncertainties
faced by the business are as set out below. Occurrence of any of
these risks or a combination of them may significantly impact the
achievement of the Group's strategic goals;
-- Consumer demand and Cost-of-living
-- COVID-19
-- Climate change and Sustainability
-- Refurbishment and acquisition of bars and pubs
-- Supplier concentration and inflationary cost rises
-- Consumer demand and PR
-- Health and safety
-- National minimum/living wage
-- Funding and Interest rates
3. Segmental reporting
The Group's continuing operating businesses are organised and
managed as reportable business segments according to the
information used by the Group's Chief Operating Decision Maker
("CODM") in its decision making and reporting structure.
The Group's internal management reporting is focused
predominantly on revenue and APM IAS 17 adjusted EBITDA, as these
are the principal performance measures and drives the allocation of
resources. The CODM receives information by trading venue, each of
which is considered to be an operating segment. All operating
segments have similar characteristics and, in accordance with IFRS
8, are aggregated to form an "Ongoing business" reportable segment.
Within the ongoing business, assets and liabilities cannot be
allocated to individual operating segments and are not used by the
CODM for making operating and resource allocation decisions.
The Group performs all its activities in the United Kingdom. All
the Group's non-current assets are located in the United Kingdom.
Revenue is earned from the sale of drink and food with a small
amount of admission income.
52 weeks 52 weeks
ended ended
1 July 2 July
2023 2022
GBP'000 GBP'000
------------------------------------------------- --------- ---------
Revenue 152,551 140,821
Cost of sales (35,419) (30,695)
------------------------------------------------- --------- ---------
Gross profit 117,132 110,126
------------------------------------------------- --------- ---------
Operating (expenses)/income:
- operating expenses excluding exceptional items (112,039) (102,721)
- exceptional items (20,244) (561)
- grant income - 568
------------------------------------------------- --------- ---------
Total operating expenses (132,283) (102,714)
------------------------------------------------- --------- ---------
Operating (loss)/profit (15,151) 7,412
------------------------------------------------- --------- ---------
Bar & Pub Revenue relates to food, drink and admission sales
from the Group's bars and pubs. Other Revenue includes
accommodation and photobooth income, as well as other smaller
revenue streams including rental, commission, gaming and online
revenue.
52 weeks 52 weeks
ended ended
1 July 2 July
2023 2022
GBP'000 GBP'000
------------------ -------- --------
Bar & Pub Revenue 149,742 139,581
Other Revenue 2,809 1,240
------------------ -------- --------
Revenue 152,551 140,821
------------------ -------- --------
4. Operating (expenses)/income
52 weeks 52 weeks
ended ended
1 July 2 July
2023 2022
GBP'000 GBP'000
------------------------- -------- --------
Sales and distribution 119,682 91,696
Administrative expenses 12,601 11,586
Grant income - (568)
------------------------- -------- --------
Total operating expenses 132,283 102,714
------------------------- -------- --------
Exceptional items
Exceptional items, by virtue of their size, incidence or nature,
are disclosed separately in order to allow a better understanding
of the underlying trading performance of the Group. Exceptional
charges/(credits) comprised the following:
52 weeks 52 weeks
ended ended
1 July 2023 2 July
GBP'000 2022
GBP'000
Administrative expenses/(income):
- impairment of right-of-use
assets 12,642 376
- impairment of property, plant
and equipment 6,096 261
- lease modification (50) (76)
- acquisition costs 1,499 -
- business restructure 57 -
Total exceptional items 20,244 561
----------------------------------- ------------ --------
Following implementation of IFRS 16, impairment reviews now also
include right-of-use assets relating to leases. The net book value
of property, plant and equipment at 35 of the Group's bars and pubs
(2022: nine) was written down, including right-of-use asset
write-downs at 30 bars and pubs (2022: two).
A credit for lease modification was recognised where the
respective IFRS 16 creditors had reduced following a reduction in
rental amount or length of lease. Where a lease modification
reduces the scope of a lease, the gain is netted against the
related right-of-use asset. Where the right-of-use asset is fully
impaired, the gain is taken as a credit to exceptional
administrative expenses.
Acquisition costs relate to the acquisition of Peach Pubs, and
the business restructure predominantly relates to costs involved
with the closure of bars and finalisation of the 2020 CVA.
Bar opening costs relate to costs incurred in getting new bars
fully operation and primarily include costs incurred before the
opening and preparing for launch, even if the bars do not open in
the period. In the 52-week period ended 1 July 2023 no new bars
were opened (2022: two new bars opened).
5. Operating (loss)/profit
Group operating (loss)/profit is stated after charging:
52 weeks 52 weeks
ended ended
1 July 2 July
2023 2022
GBP'000 GBP'000
----------------------------------------------- -------- --------
Depreciation of property, plant and equipment 6,634 5,630
Depreciation of right-of-use assets 5,423 5,437
Impairment of property, plant and equipment 6,096 261
Impairment of right-of-use assets 12,642 376
Amortisation of intangibles 5 3
Auditors' remuneration:
- audit fees payable to the Company's auditors
for the audit of these financial statements 167 160
Fees payable to the Company's auditors for:
- audit of financial statements of subsidiary
companies 233 103
6. Finance expense
52 weeks 52 weeks
ended ended
1 July 2 July
2023 2022
GBP'000 GBP'000
---------------------------------------------- -------- --------
Interest payable on bank loans and overdrafts 1,895 917
Interest on lease liabilities 5,161 4,363
Interest payable 7,056 5,280
---------------------------------------------- -------- --------
7. Income Tax
The major components of the Group's tax credit for each period
are:
52 weeks 52 weeks
ended ended
1 July 2 July
2023 2022
GBP'000 GBP'000
------------------------------------------------------ -------- --------
Analysis of credit in the period
Current tax
UK corporation tax on the (loss)/profit for the 27 -
period
27 -
------------------------------------------------------ -------- --------
Deferred tax - Profit and loss account
Origination and reversal of timing differences - -
- -
------------------------------------------------------ -------- --------
Total deferred tax - -
------------------------------------------------------ -------- --------
Total tax charge 27 -
------------------------------------------------------ -------- --------
Factors affecting current tax credit for the period
(Loss)/profit before taxation (22,207) 2,132
------------------------------------------------------ -------- --------
(Loss)/profit at standard rate of UK corporation
tax (2023: 20.5%; 2022: 19.0%) (4,552) 405
Effects of:
- expenses not deductible for tax and other permanent
differences 987 54
- adjustment in respect of prior periods 27 -
- changes in expected tax rates on deferred tax
balances - 145
- deferred tax not recognised 3,565 (604)
Total tax charge/(credit) for the period 27 -
------------------------------------------------------ -------- --------
At 2 July 2023, the Group has carried forward tax losses of
GBP70.7 million (2022: GBP45.5 million) available to offset against
future profits for which no deferred tax asset has been recognised
(2022: no deferred tax asset recognised).
The Finance Bill 2016 enacted provisions to reduce the main rate
of UK corporation tax to 17% from 1 April 2020. However, in the
March 2020 Budget it was announced that the reduction in the UK
rate to 17% will now not occur and the Corporation Tax Rate will be
held at 19% for the years starting 1 April 2020 and 2021. The Group
has recognised deferred tax in relation to UK companies at 19%
accordingly.
In the March 2021 Budget, it was announced that from 1 April
2023 the Corporation Tax Rate for non-ring-fenced profits will be
increased to 25% applying to profits over GBP250,000. Companies
with profits between GBP50,000 and GBP250,000 will pay tax at the
main rate reduced by a margin relief providing a gradual increase
in the effective Corporation Tax rate, and a small profits rate
will also be introduced for companies with profits of GBP50,000 or
less so that they will continue to pay Corporation Tax at 19%.
8. (Loss)/earnings per share
The calculation of (loss)/profit per Ordinary Share is based on
the results for the period, as set out below.
52 weeks 52 weeks
ended ended
1 July 2 July
2023 2022
--------------------------------------------------- -------- --------
(Loss)/profit for the period (GBP'000) (22,234) 2,132
--------------------------------------------------- -------- --------
Weighted average number of shares - basic ('000) 230,049 230,049
--------------------------------------------------- -------- --------
Basic (loss)/earnings per Ordinary Share (pence) (9.7) 0.9
--------------------------------------------------- -------- --------
Weighted average number of shares -diluted ('000) 239,838 235,139
--------------------------------------------------- -------- --------
Diluted (loss)/earnings per Ordinary Share (pence) (9.7) 0.9
--------------------------------------------------- -------- --------
Diluted shares are calculated making an assumption of
outstanding options expected to be awards. The associated diluted
(loss)/earnings per Ordinary Share cannot be anti-dilutive and
therefore is capped at the same value as basic (loss)/earnings per
Ordinary Share. (Loss)/profit for the period was impacted by
one-off exceptional costs. A calculation of adjusted earnings per
Ordinary Share is set out below.
52 weeks 52 weeks
ended ended
1 July 2 July
2023 2022
Adjusted earnings per share GBP'000 GBP'000
------------------------------------------------------ -------- --------
(Loss)/profit on ordinary activities before taxation (22,207) 2,132
Exceptional items, share-based payments and bar
opening costs 20,244 944
Adjusted (loss)/profit on ordinary activities
before taxation (1,963) 3,076
Taxation (charge)/credit on ordinary activities (27) -
Taxation on exceptional items and bar opening
costs 3,584 (150)
Adjusted profit on ordinary activities after taxation 1,594 2,926
------------------------------------------------------ -------- --------
Basic number of shares ('000) 230,049 230,049
Adjusted basic earnings per share (pence) 0.7 1.3
------------------------------------------------------ -------- --------
Diluted number of shares ('000) 239,838 235,139
Adjusted diluted earnings per share (pence) 0.7 1.2
------------------------------------------------------ -------- --------
Taxation on exceptional items and bar opening costs is
calculated by applying the standard corporation tax rate of 19%
against only taxable exceptional items.
9. Business combinations
In the 52-week period ended 1 July 2023, the Group has acquired
100% of the share capital of 12 companies, between them holding 21
pubs, which form The Peach Pub Company (Holdings) Limited group
("Peach"). Acquisition of these shares has led to the control and
consolidation of these companies as of the date of acquisition,
being 18 October 2022, leading to control from the date of
acquisition. GBP1.5 million of acquisition costs were incurred
which have been recognised as an expense in exceptional items.
As the acquisition occurred mid-accounting period, the Group has
taken advantage of the IFRS 3 "Convenience Date", noting that no
material changes in amounts were recognised between the date of
acquisition and date of consolidation, being 30 October 2022 (the
first date of the next period after acquisition).
Since acquisition to FY23-end, Peach has generated revenue of
GBP22.6 million and a loss before tax of GBP(0.1) million. It is
not practical to provide a proforma as if the acquisition had taken
place at the start of the year due to the following:
-- Peach has previously operated a 52-week period on the
calendar year, where Revolution Bars Group plc operates a 52-week
period from the end of June. There would be additional complexity
in analysing the information from these variety of dates as well as
the acquisition date;
-- The acquisition occurred approximately three months into
FY23, and is therefore not a significant proportion of the
full-year trade. It is not expected that providing analysis as if
acquired at the start of the year would provide a quantitively or
qualitatively material impact for the readers;
-- Peach was previously accounted for under FRS 102 UK GAAP, and
Management has completed the IFRS conversion as at acquisition. The
additional work to convert the balance sheet as at the start of the
year is not expected to provide significantly different information
to that as at acquisition;
-- Due to the differing accounting frameworks, as well as differing management of the business pre-acquisition, there have also been a large number of accounting policy amendments to bring Peach in line with the Group. Rolling this to the start of the year is also not expected to provide meaningful information; and
-- It is not believed the level of analysis from Management to
produce the above analysis would provide truly meaningful
information for the readers of the financial statements.
Subsidiaries acquired in the 52-week period ended 1 July
2023
Total share
Principal activity Date of acquisition capital acquired
The Peach Pub Company (Holdings) 18 October
Limited Management Company 2022 100%
18 October
The Peach Pub Company Limited Pub Trading Company 2022 100%
The Peach Pub Properties 18 October
Limited Pub Trading Company 2022 100%
18 October
Pretty as Peach Limited Pub Trading Company 2022 100%
18 October
Pure Peach Limited Pub Trading Company 2022 100%
18 October
100% Peach Limited Pub Trading Company 2022 100%
18 October
Peach Almanack Limited Pub Trading Company 2022 100%
18 October
Giant Peach Pubs Limited Pub Trading Company 2022 100%
18 October
Peach Paddy Club Limited Pub Trading Company 2022 100%
18 October
Peach County Limited Pub Trading Company 2022 100%
18 October
Peach Melba Limited Pub Trading Company 2022 100%
18 October
Peach on the Water Limited Pub Trading Company 2022 100%
---------------------------------- -------------------- --------------------- -----------------
Assets acquired and liabilities recognised at the date of
acquisition
The amounts recognised in respect of identifiable assets and
liabilities relating to the acquisition are as follows, as at the
consolidation date of 30 October 2022. The acquisition disclosures
have been combined as each acquisition is considered to be
individually immaterial to the Group. Assets and liabilities have
been valued at fair value on acquisition, with the 12-month period
of review ending 17 October 2023.
Book IFRS Conversion Fair Value
value Adjustments Adjustments Fair value
of assets on acquisition of assets
and liabilities GBP'000 and liabilities
acquired GBP'000 acquired
GBP'000 GBP'000
------------------------------- ----------------- ---------------- ---------------- -----------------
Non-current assets
Property, plant and equipment 9,145 - (2,162) 6,983
Right-of-use assets - 25,161 (3,342) 21,819
Goodwill 69 - (69) -
Current assets
Inventories 368 - 189 557
Trade and other receivables 2,265 (5) 3,753 6,013
Cash and cash equivalents 4,738 - - 4,738
Non-current liabilities
Lease liabilities - (24,404) - (24,404)
Dilapidations provision - - (372) (372)
Current liabilities
Trade and other payables (6,693) - (4,966) (11,659)
Loans (5,755) - (82) (5,837)
Lease liabilities - (1,048) - (1,048)
Tax payable (280) - - (280)
Net assets 3,857 (296) (7,051) (3,490)
------------------------------- ----------------- ---------------- ---------------- -----------------
The implementation of IFRS 16 gave rise to newly created
right-of-use assets and lease liabilities; in line with IFRS 3, the
right-of-use assets have been brought on at a value equal to lease
liability, adjusted for any known market conditions. These leases
relate to the standalone pub leases. Impairment reviews of both
property, plant and equipment and right-of-use assets then gave
rise to fair value adjustments to accordingly bring the values
down. Trade and other receivables and Trade and other Payables
above include GBP3.9 million of intercompany balances which net
off.
Goodwill arising on acquisition
The Enterprise Value of GBP16.5 million was adjusted by a number
of balance sheet adjustments resulting in an equity value at
completion of GBP13.4 million plus GBP0.5 million of contingent
consideration based on performance that is expected to be fully
achieved but not yet paid.
The cashflow shows the GBP13.4 million payment, plus GBP0.5
million paid out in relation to another contingent consideration
that is not expected to be realised and thus does not attribute to
the investment figure, less cash received on acquisition of GBP4.7
million.
Goodwill
GBP'000
------------------------------------------ ---------
Consideration 13,929
Plus: Fair value of liabilities acquired 3,490
------------------------------------------ ---------
Goodwill arising on acquisition 17,419
------------------------------------------ ---------
The consideration shown within the table above relates to
GBP13.4 million cash consideration for the purchase of the 100%
share capital of The Peach Pub Company (Holdings) Limited and its
subsidiaries, and GBP0.5 million of contingent consideration due
dependent on the future performance of Peach, which is expected to
be achieved fully.
Under IFRS, goodwill is not amortised and accordingly an
impairment review must be conducted annually. The review is
compared to the discounted cash flows based on forecasts for the
brand. A long-term growth rate has been applied from July 2023 at
1.0 per cent, and the post-tax discount rate used was 11.6%; both
assumptions are in line with those used for other areas of
impairment review in the Group. The value-in-use ("VIU") was then
assessed against goodwill and other relevant assets associated with
the company including property, plant and equipment and
right-of-use assets; the VIU was greater than goodwill and
investment value and accordingly no impairment has been recognised.
If the post-tax discount rate was increased by 1% this would reduce
the VIU by GBP4.3 million. If the growth rate was reduced by 1%
this would reduce the VIU by GBP3.0 million. If both were changed
by 1% this would reduce the VIU by GBP6.7 million. In all
sensitivity cases, the VIU still exceeds the carrying value of
goodwill.
10. Property, plant and equipment and right-of-use assets
Property, plant and equipment Freehold Short leasehold Fixtures IT equipment
land premises and fittings and
and buildings GBP'000 GBP'000 office
GBP'000 furniture Total
GBP'000 GBP'000
------------------------------ -------------- --------------- ------------- ------------ ---------
At 3 July 2021 1,426 83,888 56,887 9,155 151,356
Additions - 3,846 3,881 594 8,321
Asset reclassification* - (1,059) 1,066 (7) -
------------------------------ -------------- --------------- ------------- ------------ ---------
At 2 July 2022 1,426 86,675 61,834 9,742 159,677
Acquired at 30 October
2022 226 2,103 4,463 191 6,983
Additions - 1,701 2,732 1,100 5,533
At 1 July 2023 1,652 90,479 69,029 11,033 172,193
------------------------------ -------------- --------------- ------------- ------------ ---------
Accumulated depreciation
and impairment
At 3 July 2021 (1,216) (56,740) (51,033) (8,422) (117,411)
Charge for the period - (2,626) (2,436) (568) (5,630)
Impairment charges - (162) (78) (21) (261)
Asset reclassification* - 148 (156) 8 -
------------------------------ -------------- --------------- ------------- ------------ ---------
At 2 July 2022 (1,216) (59,380) (53,703) (9,003) (123,302)
Charge for the period - (3,001) (2,938) (695) (6,634)
Impairment charges - (4,649) (1,214) (233) (6,096)
At 1 July 2023 (1,216) (67,030) (57,855) (9,931) (136,032)
------------------------------ -------------- --------------- ------------- ------------ ---------
Net book value
At 1 July 2023 436 23,449 11,174 1,102 36,161
------------------------------ -------------- --------------- ------------- ------------ ---------
At 2 July 2022 210 27,295 8,131 739 36,375
------------------------------ -------------- --------------- ------------- ------------ ---------
At 3 July 2021 210 27,148 5,854 733 33,945
------------------------------ -------------- --------------- ------------- ------------ ---------
* The above Asset reclassifications reflect a reclassification
to cost and accumulated depreciation, with a net impact to net book
value of nil. This is to align opening cost and accumulated
depreciation to the consolidated Group basis.
Right-of-use assets Bars & Pubs Vehicles Total
GBP'000 GBP'000 GBP'000
---------------------------------------- ----------- -------- --------
Cost
At 3 July 2021 105,269 418 105,687
Reassessment/modification of assets
previously recognised 1,171 - 1,171
Additions 3,342 - 3,342
At 2 July 2022 109,782 418 110,200
Reassessment/modification of assets
previously recognised 1,208 - 1,208
Additions 21,819 - 21,819
At 1 July 2023 132,809 418 133,227
---------------------------------------- ----------- -------- --------
Accumulated depreciation and impairment
At 3 July 2021 (41,318) (325) (41,643)
Charge for the period (5,348) (89) (5,437)
Impairment charges (376) - (376)
---------------------------------------- ----------- -------- --------
At 2 July 2022 (47,042) (414) (47,456)
Charge for the period (5,423) - (5,423)
Impairment charges (12,638) (4) (12,642)
At 1 July 2023 (65,103) (418) (65,521)
---------------------------------------- ----------- -------- --------
Net book value
At 1 July 2023 67,706 - 67,706
---------------------------------------- ----------- -------- --------
At 2 July 2022 62,740 4 62,744
---------------------------------------- ----------- -------- --------
At 3 July 2021 63,951 93 64,044
---------------------------------------- ----------- -------- --------
Depreciation and impairment of property, plant and equipment and
right-of-use assets are recognised in operating expenses in the
consolidated statement of profit or loss and other comprehensive
income. As at year-end, there was no committed spend for
projects.
The Group has determined that for the purposes of impairment
testing, each bar and pub is a cash generating unit ("CGU"). The
bars and pubs are tested for impairment in accordance with IAS 36
"Impairment of Assets" when a triggering event is identified. The
recoverable amounts for CGUs are predominantly based on value in
use, which is derived from the forecast cash flows generated to the
end of the lease term discounted at the Group's weighted average
cost of capital.
During the 52 weeks ended 1 July 2023, the Group impaired the
property, plant and equipment of 35 CGUs (2022: nine CGUs) and the
right-of-use assets of 30 CGUs (2022: two CGUs), either partially
or in full, based on the value in use of the CGU being lower than
the prevailing net book value. When an impairment loss is
recognised, the asset's adjusted carrying value is depreciated over
its remaining useful economic life.
Impairment testing methodology
At the end of each reporting period, a filter test is used to
identify whether the carrying value of a CGU is potentially
impaired. This test compares a multiple of run rate EBITDA,
adjusted for an allocation of central overheads, to the carrying
value of the CGU. If this test indicates a potential impairment, a
more detailed value in use review is undertaken using cash flows
based on a Board-approved forecast. These forecasts combine
management's understanding of historical performance and knowledge
of local market environments and competitive conditions to set
realistic views for future growth rates. Cash flows beyond this
period are extrapolated using a long-term growth rate to the end of
the lease term. The cash flows assume a 5-year refurb cycle, with
an increase in revenue factored after refurbishments for bars based
on historical refurbishment outcomes.
The Group has previously applied a lower annual earnings
multiplier of seven to recognise the adverse trading impact of
COVID-19. For the current reporting period the Group has applied an
earnings multiplier of ten to reflect the reduced risk in the
year.
The key assumptions in the value in use calculations are
typically the cash flows contained within the Group's trading
forecasts, the long-term growth rate and the risk-adjusted post-tax
discount. The Budget for FY24 is based on the last twelve months of
trade and then accordingly adjusted. Standard agreed long-term
assumptions are then applied at revenue and cost levels to the end
of the lease term. This is deemed the most suitable basis at the
year-end for considering whether the assets were impaired at the
balance sheet date and, therefore, management has adopted these
assumptions in all of the detailed value in use reviews.
-- The long-term growth rate has been applied from July 2023 at
1.0 per cent (2022: 1.0 per cent).
-- Post-tax discount rate: 11.6 per cent (2022: 11.0 per cent)
based on the Group's weighted average cost of capital.
Sensitivity analysis has been performed on each of the long-term
growth rate and post-tax discount rate assumptions with other
variables held constant. Increasing the post-tax discount rate by 1
per cent would result in additional impairments of GBP1.6 million.
A 0.1 per cent decrease in the long-term growth rate would result
in additional impairments of GBP1.0 million. Applying the most
recent performance to the signing date, which includes the impact
of continued challenging trade over the summer, results in an
increase in the impairment charge of approximately GBP2.2
million.
11. Inventories
1 July 2 July
2023 2022
GBP'000 GBP'000
---------------------- -------- --------
Goods held for resale 2,437 2,321
Sundry stocks 968 1,166
---------------------- -------- --------
3,405 3,487
---------------------- -------- --------
Sundry stocks include items such as glasses, packaging, uniform
and drinks decorations. Inventory is net of provision of GBP0.16
million (2022: GBP0.23 million). GBPnil was written down in the
year as an expense (2022: GBP0.11 million).
The cost of inventories is recognised as an expense in cost of
sales as follows:
52 weeks 52 weeks
ended ended
1 July 2 July
2023 2022
GBP'000 GBP'000
--------------------- -------- --------
Cost of inventories 35,419 30,359
--------------------- -------- --------
12. Trade and other receivables
1 July 2 July
2023 2022
GBP'000 GBP'000
------------------------------------ -------- --------
Amounts falling due within one year
Trade receivables 4,429 3,707
Accrued rebate income 721 501
Prepayments 5,809 4,427
Other debtors 489 142
------------------------------------ -------- --------
11,448 8,777
------------------------------------ -------- --------
13. Cash and cash equivalents
1 July 2 July
2023 2022
GBP'000 GBP'000
-------------------------- -------- --------
Cash and cash equivalents 3,367 18,815
-------------------------- -------- --------
Cash and cash equivalents consist entirely of cash at bank and
on hand. Balances are denominated in Sterling. The Directors
consider that the carrying value of cash and cash equivalents
approximates to their fair value.
14. Trade and other payables
1 July 2 July
2023 2022
GBP'000 GBP'000
-------------------------------------- -------- --------
Trade payables 15,011 11,801
Other payables 1,339 142
Accruals and deferred income 11,261 15,434
Other taxes and social security costs 4,109 3,241
-------------------------------------- -------- --------
31,720 30,618
-------------------------------------- -------- --------
Trade and other payables are non-interest bearing and are
normally settled 30 days after the month of invoice. Trade payables
are denominated in Sterling. The Directors consider that the
carrying value of trade and other payables approximates to their
fair value.
15. Lease liabilities
Bars & Pubs
GBP'000 Vehicles Total
GBP'000 GBP'000
----------------------------------------- ----------- ---------- --------
At 2 July 2022 104,976 6 104,982
Reassessment/modification of liabilities
previously recognised 1,096 - 1,096
Modifications taken as a credit
to administrative expenses (50) - (50)
Additions 25,451 - 25,451
Lease liability payments (11,311) (6) (11,317)
Finance costs 5,161 - 5,161
----------------------------------------- ----------- ---------- --------
At 1 July 2023 125,323 - 125,323
----------------------------------------- ----------- ---------- --------
Cash payments in the period comprise interest of GBP4.9 million
and principal of GBP6.4 million. Reassessment and modification of
liabilities previously recognised predominantly relates to the
re-gear of six bars and pubs (2022: five bars) where either the
length of the lease has been extended or the rental charge has been
increased.
The expense relating to short-term, low-value and variable lease
payments not included in the measurement of lease liabilities is
GBP0.1 million (2022: GBP0.1 million). A number of bars and pubs
have options to break the lease at an earlier point; Management
consider each of these based on likelihood for the purposes of IFRS
16 calculations.
Lease liabilities are comprised of the following balance sheet
amounts:
1 July 2 July
2023 2022
GBP'000 GBP'000
------------------------------------- -------- --------
Amounts due within one year 7,087 5,437
Amounts due after more than one year 118,236 99,545
------------------------------------- -------- --------
125,323 104,982
------------------------------------- -------- --------
16. Interest-bearing loans and borrowings
1 July 2 July
2023 2022
GBP'000 GBP'000
---------------------------------------------------- -------- --------
Revolving credit facility 25,000 -
Coronavirus Large Business Interruption Loan Scheme - 14,751
---------------------------------------------------- -------- --------
25,000 14,751
---------------------------------------------------- -------- --------
As at the date of the consolidated financial position, the Group
had a revolving credit facility (the "Facility") of GBP30.0 million
expiring June 2025, of which GBP25.0 million was drawn down. The
facility is subject to interest charged at a margin plus SONIA, and
a minimum liquidity covenant. Please see the going concern
disclosure in note 1 for further information.
The Coronavirus Large Business Interruption Loan Scheme
("CLBILS") loans were repaid in October 2022 as part of the 10
October 2022 refinancing.
The Facility is secured and supported by debentures over the
assets of Revolution Bars Group plc, Revolución De Cuba Limited,
Revolution Bars Limited, Revolution Bars (Number Two) Limited and
Inventive Service Company Limited, and the Peach Pub subsidiaries,
and an unlimited guarantee.
All borrowings are held in Sterling. There is no material
difference between the fair value and book value of the Group
interest-bearing borrowings.
17. Provisions
The dilapidations provision relates to a provision for
dilapidations due at the end of leases. The Group provides for
unavoidable costs associated with lease terminations and expires
against all leasehold properties across the entire estate, built up
over the period until exit. Other provisions include provisions for
various COVID-19 related items, which are uncertain of timing and
therefore classified as less than one year. Dilapidations
provisions are expected to be utilised over the next 5-15 years as
leases come to an end.
Other provisions Dilapidations Total provisions
GBP,000 provision GBP'000
GBP'000
------------------------- ------------------ --------------- ------------------
At 2 July 2022 1,314 1,582 2,896
Movement on provision - 510 510
Release of provision (443) - (443)
Utilisation of provision - (125) (125)
At 1 July 2023 871 1,967 2,838
------------------------- ------------------ --------------- ------------------
1 July 2 July
2023 2022
GBP'000 GBP'000
------------ -------- --------
Current 871 1,314
Non-current 1,967 1,582
------------ -------- --------
2,838 2,896
------------ -------- --------
18. Dividends
52 weeks 52 weeks
ended ended
1 July 2 July
2023 2022
GBP'000 GBP'000
------------------------------------------------- -------- --------
Amounts recognised as distributions to equity
holders in the period:
Final dividend for the 52 weeks ended 1 July 2023 - -
of nil per share (52 weeks ended 2 July 2022 of
nil per share)
------------------------------------------------- -------- --------
- -
------------------------------------------------- -------- --------
19. Post balance sheet events
Changes to committed borrowing facilities
As at the date of the consolidated financial position the Group
had a revolving credit facility ("RCF") of GBP30.0 million expiring
in June 2025. In October 2023, it was agreed with the bank that all
previously agreed reductions in the facility would be deferred to
30 June 2025, meaning at that date a GBP5.0 million reduction is
due. Furthermore, all profitability-based covenants were waived,
and the minimum liquidity covenant was amended to link to
management forecasts. Further details of the facility, their
duration, amortisation profiles, future availability of committed
funding and covenants are set out under the going concern section
of note 1 to the financial statements.
Changes in leases
Revolution Putney was closed in FY23 and the lease was exited
shortly after year-end. Revolution Clapham High Street was closed
at the start of FY24 and an exit of the lease is expected shortly.
A new Peach Pub, The Three Horseshoes, opened in October 2023.
20. Alternative Performance Measures - Adjusted EBITDA -
Non-IFRS 16 Basis
The Board's preferred profit measures are Alternative
Performance Measures ("APM") adjusted EBITDA and APM adjusted
pre-tax loss, as shown in the tables below. The APM adjusted
measures exclude exceptional items, bar opening costs and
charges/credits arising from long term incentive plans. Non-GAAP
measures are presented below which encompasses adjusted EBITDA on
an IFRS 16 basis:
52 weeks 52 weeks
ended ended
1 July 2 July
2023 2022
Note GBP'000 GBP'000
Non-GAAP measures
Revenue 2 152,551 140,821
-------------------------------------------------- ---- -------- --------
Operating (loss)/profit 5 (15,151) 7,412
Exceptional items 3 20,244 561
(Credit)/charge arising from long-term incentive
plans 23 (117) 77
Bar opening costs - 306
Adjusted operating profit 4,976 8,356
-------------------------------------------------- ---- -------- --------
Finance expense 8 (7,056) (5,280)
Adjusted (loss)/profit before tax (2,080) 3,076
-------------------------------------------------- ---- -------- --------
Depreciation 5 12,057 11,067
Amortisation 5 3
Finance expense 8 7,056 5,280
Adjusted EBITDA 17,038 19,426
-------------------------------------------------- ---- -------- --------
A comparison of statutory and APM exceptionals is provided
below:
52 weeks 52 weeks
ended ended
1 July 2023 1 July
IFRS 16 2023
GBP'000 IAS 17
GBP'000
Administrative expenses/(income):
- impairment of right-of-use
assets 12,642 -
- impairment of property, plant
and equipment 6,096 6,096
- lease modification (50) -
- acquisition costs 1,499 1,499
- business restructure 57 57
Total exceptional items 20,244 7,652
----------------------------------- ------------ --------
The below table reconciles from the statutory non-GAAP adjusted
EBITDA to the APM formats, which translates to a pre-IFRS 16 basis
by inputting the rental charge and other relevant adjustments.
52 weeks Reduction Reduction Onerous Rent IFRS 52 weeks
ended in depreciation in lease provision charge 16 Exceptionals ended
1 July interest interest 1 July
2023 2023
IFRS IAS
16 17
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Operating loss (15,151) 6,022 - - (10,424) 12,592 (6,961)
Exceptional
items 20,244 - - - - (12,592) 7,652
Credit arising
from long-term
incentive plans (117) - - - - - (117)
----------------- ---------- ---------------- ---------- ---------------- --------- ---------------- ----------
Adjusted
operating
profit 4,976 6,022 - - (10,424) - 574
Finance income - - 16 - - - 16
Finance expense (7,056) - 5,145 (211) - - (2,122)
----------------- ---------- ---------------- ---------- ---------------- --------- ---------------- ----------
Adjusted loss
before
tax (2,080) 6,022 5,161 (211) (10,424) - (1,532)
Depreciation 12,057 (6,022) - - - - 6,035
Amortisation 5 - - - - - 5
Finance income - - (16) - - - (16)
Finance expense 7,056 - (5,145) 211 - - 2,122
----------------- ---------- ---------------- ---------- ---------------- --------- ---------------- ----------
Adjusted EBITDA 17,038 - - - (10,424) - 6,614
----------------- ---------- ---------------- ---------- ---------------- --------- ---------------- ----------
52 weeks Reduction Reduction Onerous Rent IFRS 52 weeks
ended in depreciation in lease provision charge 16 Exceptionals ended
2 July interest interest 2 July
2022 2022
IFRS IAS
16 17
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Operating profit 7,412 6,218 - - (9,189) 328 4,769
Exceptional
items 561 - - - - (328) 233
Charge arising
from long-term
incentive plans 77 - - - - - 77
Bar opening
costs 306 - - - - - 306
----------------- ---------- ---------------- ---------- ---------------- -------- ----------------- ----------
Adjusted
operating
profit 8,356 6,218 - - (9,189) - 5,385
Finance expense (5,280) - 4,393 (30) - - (917)
----------------- ---------- ---------------- ---------- ---------------- -------- ----------------- ----------
Adjusted profit
before
tax 3,076 6,218 4,393 (30) (9,189) - 4,468
Depreciation 11,067 (6,218) - - - - 4,849
Amortisation 3 - - - - - 3
Finance expense 5,280 - (4,393) 30 - - 917
----------------- ---------- ---------------- ---------- ---------------- -------- ----------------- ----------
Adjusted EBITDA 19,426 - - - (9,189) - 10,237
----------------- ---------- ---------------- ---------- ---------------- -------- ----------------- ----------
The APM profit measures have been prepared using the reported
results for the current period and replacing the accounting entries
related to IFRS 16 Leases with an estimate of the accounting
entries that would have arisen when applying IAS 17 Leases. The
effective tax rate has been assumed to be unaltered by this change.
Impairment assumptions have been re-geared for an IAS 17
perspective, and the onerous lease provision movement has been
included.
The APM profit measures see a large reduction in depreciation
due to the non-inclusion of IFRS 16 depreciation on the
right-of-use assets, and similarly non-inclusion of the finance
expense of interest on lease liabilities. The operating loss is
impacted by the inclusion of rent expenditure from the income
statement and inclusion of the onerous lease provision.
Exceptionals are significantly impacted by the change in
impairment, gain on disposals recognised under IFRS 16, and the
classification of certain cash closure exceptionals.
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END
FR FFFILIILRLIV
(END) Dow Jones Newswires
October 17, 2023 02:00 ET (06:00 GMT)
Grafico Azioni Revolution Bars (LSE:RBG)
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Grafico Azioni Revolution Bars (LSE:RBG)
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