Like for Like Sales Disappoint - Revolution Bars

Friday, Jan 20 2017 by


Revolution Bars (LON:RBG)

Share Price 204p                       Today -9.5p (-4.4%)

Market Cap €123.1 million         Bid/Offer 202p - 206p

Normal Market Size 2,000 shares

About the Company

Revolution bar operates 66 premium bars across the UK. The bars trade under the Revolution and Revolución de Cuba brand names. My back of the envelope calculations shows circa £1 million of turnover for each bar.  Pretty impressive turnover as business starts late morning for each bar and then trade continues until late at night as expected.

The company only rolled out four new Revolución de Cuba bars in H1 FY17 in Harrogate, Aberdeen, Reading and Glasgow.   Their fifth development this year in Southend on Sea is due to open in H2 which will bring the number of units to just 67.  

Challenges Ahead

(i) Results showed LFL sales only up 2% for H1 17.  Given the likely increases in running expenses including wages, drinks supply costs etc suggests that some margin pressure will occur in the 2nd half of the year.

(ii) The Revolution and Cuban bar concept may fade in fashion as the concept becomes tired and other theme bars move into that space. 

(ii) The group is only adding a half dozen extra bars a year so far. The actual percentage Increase in earnings will be getting smaller as part of a large number of existing bars.

(iv) A number of the best locations for the concept are already in place leaving more riskier and possibly less rewarding locations in the future to select. 


The initial IPO price in March 2015 needed to be reduced substantially to get it away at a £100 million market cap. The company was promoted as a go-go growth stock in many respects. The single digit unit openings each year suggests only a pedestrian rate of growth.

All of the £86 million of money raised in the IPO was used to cash out existing investors who sold their 86% holding in the company. The fundraising was at 200p in March 2015.  The share has ebb back and forth and effectively gone nowhere.

The company is dependent on a limited number of suppliers and distributors and the price they charge. In particular, one key service provider, provides all of the Group’s logistics, warehousing and distribution services in respect of drinks products.

The new institutional investors who bought in at the IPO are reducing their stock exposure this stock, so they can invest their funds in alternative growth stocks.  Organic growth is too slow.  Only new investors are buying the old growth story.

The company's target of 100 Revolution Bars and 40 Cuban bars is just too far in the distance to imagine. The share price fall from IPO price and the recent share price faltering is suggesting that management may need to do a rethink on the self-funding roll out strategy.  A roll out of 20 units extra per year is required which either needs additional equity or a substantial lending facility on tap. 

Why The Two Brands?

"The Group’s management believed that the distinguishing features of the Revolucio´n de Cuba bars would allow them to be located near to existing Revolution bars whilst limiting cannibalisation. In addition to the distinct offering of the new Revolucio´n de Cuba bars compared to the existing Revolution sites, the new brand had (and has) a different target audience, with its customers being on average six years older than those of Revolution bars. The new brand was therefore intended to appeal to a segment of the UK’s working population which has a relatively high disposable income, is less price sensitive than other potential customers and which values quality and atmosphere over discounted prices."


(i) The bars are self-financing to date. No debt. The concepts are new and are working well.

(ii) The marketing of the bars through websites and social media looks to be top class. It looks the in-place to be for party nights and celebrations for free-spending customers which offer a good experience.

(ii) The bar design, table service, hand-made cocktails and freshly prepared food attracts the sort of customers willing to pay a premium.

(iv) The concept can be transferred to many more locations in Britain and Ireland and move later on to international locations.

Short Term Market Reaction to the Trading Statement

The share price sank at 8:00 a.m. after investors first take on the trading statement.  The price drop was mainly due to the disappointment in the 2% growth in LFL sales. I suspect the initial 4% or 5% share price drop knocked the share price through some investors stop loss positions.  This had the effect of further pushing the share price down another 5%. Later in the day, the share found support and the share rebounded back up to the 216p mark.

Back in April 2016, the share price was back down at the 150p level.  Since that low point, investors have become increasingly aware of the company’s obvious merits. Investors see the company as a reasonably valued growth stock and have bought in.  

The pessimists will point to the slight reduction in the profit forecasts for the end of this year and next year.  Any bad consumer spending news, inflation concerns, changes in consumer tastes are more likely to cause upset to the share price negatively. On the bright side, more tourists visiting the UK fashionable areas on weaker sterling may help somewhat.


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Consensus Estimate







1m Change







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The company's price-earnings forecast is 12.63 for the 2017 results and after that, the company is on a  forecast price/earnings ratio of 11.07 for 2018.


The candle chart does look a bit worrying. Lots of red candles to be seen from late December 2016.


Purchasing Decision

This share was on my watch list before the end of the year.  The company deserves a spot in my portfolio for diversification reasons only.  

Slowly, slowly I took an opening small position before the year end.  I took advantage of the Thursday drop below 200p.  I topped up once again late Friday afternoon on the negative tape.  Buying in separate lots on different days has now given me a more attractive average price entry point.

Around £800K worth of stock was traded today, so there are some determined sellers applying pressure to the share price.

My Future Expectations

I have only reasonable expectations for the share.  The company, if it grows its yearly earnings by 10% with a 10% increasing dividend would be nice. The business with a slow roll out of units as presently constructed, trades between a 10 and 12 times price earnings multiple. I think that is about right.

The current share price looks to want to trend down to the 180p-190p range where it may find support. The upside resistance level is at the 220p.  No need to rush to buy the share. 


Dearg Doom

PS (For entertainment purposes only.  No investment advice ever intended.)

Here is are individual links for all my comments to date.

May 22nd, 2017- After a Weekend of Reflection

My 2nd comment on Friday 19th May after the RNS profit warning.  

1st comment on May 19th, 2017 - My Profit Warning Initial View

My 2nd Comment on March 2nd, 2016 in reply to query RBG as a growth stock

My 1st comment to sell RBG March 2nd, 2017 

Filed Under: Stock Picks,


All articles and comments are for general information only. No investment advice intended.

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Revolution Bars Group plc is a United Kingdom-based operator of bars. The Company has a trading portfolio of approximately 60 bars located predominantly in town or city high streets, which operate under the Revolution and Revolucion de Cuba brands. The Company's bars focus on a drinks and food-led offering, and typically trade from late morning, during the day and into late evening. Revolucion de Cuba bars are characterized by their 1940s Cuban-inspired style, with dark woods, traditional bar counters, antique tiles, vintage furniture, Havana-style ceiling fans, and original Cuban artwork and photographs. Its bars are located in various places, such as Cambridge, Ipswich and Norwich in South East; Bath, Plymouth and Southampton in South West; Birmingham, Derby, Leicester, Loughborough and Milton Keynes in Midlands; Cardiff and Swansea in Wales; Blackpool, Chester and Huddersfield in North West; Sheffield, Sunderland and York in North East, and Edinburgh and Glasgow in Scotland. more »

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61 Posts on this Thread show/hide all

yamaha865 10th Mar '17 22 of 61

There Is great happy hour deals on drinks and food until 7pm at Clapham Junction branch, with decent food for £5. Give it a go!

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actsofvolition 10th Mar '17 23 of 61

In reply to post #174975

Revolution point out that, unsurprisingly, the majority of their customers are female. As is the trend with most bars and eateries, the portion sizes and drinks are simply not targeted for male audiences who are happy to tolerate bottles of lager in return for being allowed the chance to pick up women.

I think most women are happy to pay 10-20% more if the environment is right. 

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hayashi22 10th Mar '17 24 of 61

Yes not many men go for cocktails but I guess many go to 'pull'.I note the dress code is quite strict so the girls who go expect a better class of punter and no scruffs. Glad I'm well beyond all that.
It does though imply there are bouncers to enforce this dress code.

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paraic84 11th Mar '17 25 of 61

These little cocktail fellas are a particular novelty, looking more like something you'd buy at Starbucks. I felt sick after. 


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peterg 12th Mar '17 26 of 61

Mmm, makes me wonder if I really want to own part of a company that makes those :-)

But then I'm hardly the target demographic! I guess there really are people out there who do want to buy them.


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extrader 12th Mar '17 27 of 61

Hi all,

Checked out Revolucion de Cuba Nottingham (1900 > 1945) and Revolution Loughborough (2100 for 10 mins) last night - Saturday.

RdC was already heaving, which surprised us both. So good 'party' atmosphere with live music and hopefuls already dancing. Greeter said 45mins wait for a table. Some functions in private rooms. Decor very evocative/effective - took me straight to a Havana dive I went to a few years back ! Not too much menu/drinks overlap with RB, more 'adult' cocktails, fewer of the 'bubblegum' vodka type of shots seen at RB. Mixed demographics, from hen parties to, I imagine , work outings , with a brood of young girls and a few 'mother hens', plus lots of late 20's / early 30's DINKYs (I'm guessing).

We ate elsewhere (noise level a bit problematic for my hard of hearing sister) and checked in at RB L'boro on way home. Only about 25-30% full, which surprised us. The female bouncer ( a novel concept for me, at least) laconically said that the night was young - and indeed her colleague was only just starting to put out the queing arrangements.

Both N'ham and L'boro are university towns, I'm not clear whether the difference in occupancy was down to catchment area size or the RdC / RB offering. We liked the former for 'partying' and the latter - quiet as we found it - for socializing and eating.

The RB loyalty card doesn't work in RdC (or vice-versa, we asked), which may be a reflection of management wish to run them as discrete offerings. Certainly my bar-hopping niece wasn't aware of the connection.


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Paul Scott 17th Mar '17 28 of 61

I think you're crazy!

This is a fantastic roll-out. Each new site costs £1m in capex, and generates 300-400k in EBITDA. Mgt hasn't put a foot wrong in 5 years. It has nil debt, and is even paying a 3% divi - I got mine today, into my spread bet accounts.

No direct competition, this is a high margin, fantastic business. I think you've gone daft!

Who cares whether the IPO went well or not, or what the market thinks? This stock is clearly the wrong price. It should be 300-400p, based on 20p adj EPS coming soon, no debt, more sites coming on each year.

Price currently 224p. I see this as free money to 300-400p, with patience. It's a complete no-brainer, in my view.

Regards :-)


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Paul Scott 17th Mar '17 29 of 61


Well, unlike you old gits, I had a great time chatting to the staff in Relucion de Cuba in Reading - I just wafted in, with a broad smile on my face, and explained that I'm a small shareholder in the company. So from that point on, they treated me like a VIP, which I am, and showed me the lovely facilities.

It was fabulous. I could see that every attention to detail had been done.
I asked how the retractable roof worked. Well, unknown, as nobody knows how to work it LOL!

I felt what a marvellous facility, and all the staff were ace! Couldn't have been more friendly.

Couple of happy hour cocktails, and I staggered back to Paddington station. How fantastic! Utilising Reading's new £400m railway station.

Cheese, Paul.

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peterg 17th Mar '17 30 of 61

WTF is a 20's / early 30's DINKY?

The Urban Dictionary says: "a comical name for a penis". Probably not what you meant!

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Brigra 17th Mar '17 31 of 61

In reply to post #176112


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Steve Hill 17th Mar '17 32 of 61

In reply to post #176112

Double Income No Kids !!

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Carcosa 24th Mar '17 33 of 61

No reason for a rerating of £RBG share price.

Phil Oakley's Review

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simoan 24th Mar '17 34 of 61

In reply to post #177483

I never liked the Human League after Martin Ware and Ian Craig Marsh left :)

All the best, Si

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Dearg Doom 19th May '17 35 of 61


Revolution Bars (LON:RBG) surpassed my previous downbeat expectations on several fronts all in one go.  Share price 136p (down 33.3% this morning so far)

The Company is experiencing the well-publicised sector cost headwinds from the impact of the living wage, the double increase this year in the minimum wage, the new apprenticeship levy, as well as the above inflation increase in general business rates. These increased costs will be more than anticipated in the current year.

Certainly a bleaker outlook for future profits forecast. The share price fall is punishing for existing shareholders. The share is down to sub 140p as I write. The heightened excitement for their growth model definitely took a hammering today.  Those same growth investors have thrown in the towel very quickly and hence the dramatic drop. 

There may be a trading opportunity if the management and PR can get their story on track again.  My main concern is that the model will only work well in certain locations. Some of those locations are underperforming to expectations which may eventually happen in time to their previous successful bars. Expansion abroad is necessary. 

The Company has opened five new Revolucion De Cubas in the last twelve months (and one new Revolution Bar) and whilst the underlying sales performance of these bars remain on track with an average weekly turnover of £43k (net), these bars are taking longer to mature to full profitability than originally anticipated. 

The company expresses confidence in its model despite today's RNS and the management will press on with 6 more openings this year.  Presumably, they are too far down the line to stop these openings.  Will the number of openings next year slow or match the number of closures?

I have bought the stock just now as a trading stock.  Shining cutlery is the downfall of many investors.

Click link to my previous comment on the company


Dearg Doom

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Ramridge 19th May '17 36 of 61

In reply to post #186280

Hi Dearg Doom -
Re. Revolution Bars (LON:RBG) In spite of a promise I made myself not to go for falling knives, I bought some today at 140. Keeping a disciplined approach is really hard.

A comment made in a tweet is beginning to nag me. A twitter picked up RGB's comment today that "new bars are taking longer to mature to full profitability than originally anticipated." He drew a parallel with Crawshaw and warned of a possible similar downward spiral.

I am not close to the problems faced by Crawshaw. Do you see any merit in his remarks?
Best. Ram

BTW is Dearg Doom an anagram of something?

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janebolacha 19th May '17 37 of 61

In reply to post #186280


" Expansion abroad is necessary. "

I'd be very doubtful about the feasibility of that one. In the cities I spend time in in France, Spain and Brazil, I know of very few bars where you need to pay £9 or so for a vodka cocktail - or customers who would pay that!

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simoan 19th May '17 This post is under review

In reply to post #186294

A comment made in a tweet is beginning to nag me. A twitter picked up RGB's comment today that "new bars are taking longer to mature to full profitability than originally anticipated." He drew a parallel with Crawshaw and warned of a possible similar downward spiral.

What a ridiculous comment! I am surprised you gave it the time of day. How can you even start to compare butcher shops up against the supermarkets, to a bar group in an industry with well known headwinds. Ludicrous.

I am still holding because I don't see any danger to the dividend and it looks like an overreaction to me. It also appeals to my contrarian instincts to know that you lot are so bearish :)


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Bluey68 19th May '17 39 of 61

In reply to post #176112

Very funny, lol :-)  

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Ramridge 19th May '17 40 of 61

In reply to post #186315

Calm down, dear. You must be knee deep to react in this way :)

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willhampson 19th May '17 41 of 61

Very interesting discussion - thanks everyone! Against my best intentions, I have decided on this occasion to ignore my commitment to stop buying falling knives. The trading update is ugly and a marked change from their previous narrative, which is why I think it is being hammered so intensely. However, the 35% drop this morning is unwarranted in my view and I think it will gradually trickle back-up over the coming weeks. Therefore, I've taken out a position in my spreadbet with a tightish stop loss. Let's see how it plays out! Very sorry for the earlier holders who were stung by this.

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