Good morning!
It's just me writing today, as Graham's having a day off.
Revolution Bars (LON:RBG)
(at the time of writing, I hold a long position in this share)
Meeting - I was lucky enough to attend a meeting yesterday with the CEO & CFO of Revolution Bars. Management ran us through a similar set of slides to the ones on their website here.
I was tremendously impressed with management - my impression was of serious, competent managers. Strategy is very clear, and they seem to be executing well.
Here are the points I jotted down;
Premium bars + casual dining - so quite differentiated from competition.
Roll-out is gaining real momentum.
Plan is to achieve double-digit sales & earnings growth each year.
High ROI of 38% on new sites, which is sustainable.
Relatively small number (66) of large sites - so they can manage sites very intensively.
At IPO the plan was to open 4 new sites p.a.. This has now increased to 6 new sites p.a..
Pipeline of new sites has grown to 26 sites - very confident can do 6 in FY2018 and FY2019. These are at various stages of planning - which can be a lengthy process. So growth in next 2 years is guaranteed, due to new sites pipeline.
H1 EBITDA grew by 13.6%, vs. revenue growth of 12.7%.
Higher depreciation charge, due to new sites opened.
Expecting profit growth in H2, due to new sites + LFL growth from existing sites.
Strong cash conversion.
Dividend increased 10%. Scope to be more aggressive with dividends in the future.
Revolution & Revolucion de Cuba brands have pricing power, due to premium products, high quality fit-outs, nice ambience, and entertainment (e.g. live music on busy nights).
Key area of procurement is wet sales. Have supply contracts to 2019, giving protection against cost price inflation from weak sterling.
We are a "lighthouse" operator - i.e. premium drinks brands want their products & brands on display behind the bar, which helps when negotiating cost prices.
Living wage - not seen as a significant problem, as many staff are under 25, and those above 25 tend to be in managerial roles, so are already earning above living wage.
Staffing costs steady at 22.9% of revenues.
New sites - are over-staffed to begin with, to ensure high customer service. Then efficiencies can be achieved once everyone is trained & experienced.
European Union staff - not stated what the proportion is, but key staff…
