Small Cap Value Report (Tue 2 Oct 2018) - RBG, TET, SCS

Monday, Oct 01 2018 by

Good morning,

This is what I intend reviewing today;

Revolution Bars (LON:RBG) (in which I hold a long position) - preliminary results

Treatt (LON:TET) - trading update

SCS (LON:SCS) - preliminary results

DX (Group) (LON:DX.) - preliminary results - sorry, I ran out of time, so didn't get round to looking at this after all.

Revolution Bars (LON:RBG)

Share price: 123p (down 1.7% today, at 10:16)
No. shares: 50.0m
Market cap: £61.5m

(at the time of writing, I hold a long position in this share)

Preliminary results

Revolution Bars Group plc ("the Group"), a leading UK operator of 76 premium bars, trading under the Revolution and Revolución de Cuba brands, today announces its results for the 52 weeks ended 30 June 2018

Where to start with this?! This is a classic case of a share where some investors will see negatives, and others (including me) see a turnaround opportunity, with the negatives already priced-in to the share price.

Larger competitor, Stonegate, tried to buy RBG last year, with a 203p recommended cash bid. Very unusually, RBG's larger shareholders then turned down this bid, as undervaluing the company. I'm struggling to think of that happening before, as recommended bids are not usually recommended, unless management has agreed the terms with major shareholders. So a very unusual turn of events.


Why has the share price slipped so far down, from the 203p cash bid approach last year, to only 123p now? Partly it's the bid premium coming out of the price of course. But also, here is a list of the things that have gone wrong in the last year;

Management distraction from Stonegate (and Deltic) bid approaches - this is a perfectly valid point in my view - business is bound to suffer, if a small management team is spending a lot of time handling a takeover bid & other approaches.

Lack of leadership - the outgoing CEO (mark McQuater) left on 18 Oct 2017. The new CEO (Rob Pitcher) joined on 25 June 2018. So that's over 7 months without a proper CEO. Again, for a smallish business, that's bound to…

Unlock this article instantly by logging into your account

Don’t have an account? Register for free and we’ll get out your way


As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested. ?>

Do you like this Post?
64 thumbs up
1 thumb down
Share this post with friends

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 »

LSE Price
Mkt Cap (£m)
P/E (fwd)
Yield (fwd)

Treatt PLC is a United Kingdom-based ingredients manufacturer and solutions provider to the flavor, fragrance and consumer goods markets. The Company's geographical segments include United Kingdom, Rest of Europe, The Americas and Rest of the World. The Company's products include Essential oils, Citrus, Treattarome, Functional ingredients, Chemicals, Organic essential oils, Vegetable oils and Treatt brew solutions. Its Essential oils include Amyris Oil, Angelica Oil and Aniseed Oil. Treattarome products include Pineapple Treattarome, Honey Treattarome and Cucumber Treattarome. Its Citrus products include citrus oils, CitrustT, TreattZest and Citrus add-back range. Its Functional ingredients include beverage specialties, fragrance ingredients and sugar reduction products. Its chemicals include aroma chemicals, natural chemicals and Treatt Flavour Wheel. Its Vegetable oils include Borage Oil and Baobab oil. Its organic essential oils include Organic Aniseed Oil and Organic Lime Oil. more »

LSE Price
Mkt Cap (£m)
P/E (fwd)
Yield (fwd)

ScS Group plc is engaged in the provision of upholstered furniture and flooring, trading under the brand name, ScS. The Company specializes in fabric and leather sofas, and sells a range of branded and ScS branded products sold under registered trademarks, including Endurance and SiSi Italia. The Company also offers a range of third-party brands, including La-Z-Boy, G Plan and Parker Knoll. The Company operates from approximately 100 stores nationwide along with an online sales and also has approximately 10 distribution centers across the United Kingdom. The Company has operations in retail park locations and in House of Fraser stores across the country-as far north as Aberdeen and as far south as Plymouth, offering a range of upholstered furniture and floorcoverings. The Company also runs a made-to-order sofas, furniture and flooring concession within House of Fraser. The concession operates from approximately 30 House of Fraser stores across the United Kingdom and online. more »

LSE Price
Mkt Cap (£m)
P/E (fwd)
Yield (fwd)

  Is LON:RBG fundamentally strong or weak? Find out More »

30 Comments on this Article show/hide all

HornBlower 2nd Oct '18 11 of 30

on Revolution Bars I think the new CFO has been quite aggressive in adopting much harsher accounting policies which have resulted in a number of negative restatements to historic numbers but will give a tailwind to profits for the next few years. the new financial disclosure is very good. remains to be seen if new food director can make a difference. although I don't like management blaming the weather generally the extreme cold and extended heat wave (and World Cup) must have been a headwind for their type of bar and no CEO for 6 months won't have helped. All in all operating profits flat on last year not a bad result. Share reaction looks like the market is giving the new CEO a chance to fix things. Long and happy to hold as potential upside more than downside from here.

| Link | Share
HornBlower 2nd Oct '18 12 of 30


did you see one of the restatements at RBG is the uncleared debit/credit card payments from last few days trading have been moved to receivables, previously classified as cash. £1.3m one off reduction in cash. Good example of new CFO putting in place robust accounting policies.

| Link | Share | 1 reply
dscollard 2nd Oct '18 13 of 30

on an apropos, notice that Funding Circle Holdings (LON:FCH) is down 10% today and below its IPO price: I have used them in the past as a bit of a bond proxy but wan't overly impressed with their practices and operations.... increasingly I don't opt into IPOs as price action in year one seems to follow a similar paths.
I prefer to see good signs of exits by the loose hands and bottoming of price action before taking positions.
One for the watchlist ... maybe

| Link | Share
SundayTrader 2nd Oct '18 14 of 30

In reply to post #403769

Not familiar with the relevant standards myself, but I would have thought uncleared card payments should count as cash. Receivables surely is payments where you may not get paid if the debtor gets into trouble, while an uncleared card payment is one that has already been approved by the debtor's bank. Do Revolution Bars (LON:RBG) have a lot of card payments that the bank subsequently rejects?

| Link | Share | 1 reply
barnetpeter 2nd Oct '18 15 of 30

I am afraid I am not sure Paul is not looking at RBG as objectively as he does on other stocks. No criticism intended at all.....I just think there is much more downside risk here than is suggested. I think the business is not as robust as they say and resolving the dire food offer is not as simple as some think.

I did very well out of these on the roared well above the 203 price at one stage. I would def be a buyer towards the 100 pence level but I have a higher risk appetite than most.

| Link | Share | 1 reply
garbetklb 2nd Oct '18 16 of 30

In reply to post #403684

National Milk Records National Milk Records (OFEX:NMRP) - irrespective of what one might think of the business, it's pretty academic as there is close to zero liquidity. It's just about the least liquid stock I've ever tried to buy!

| Link | Share | 2 replies
HornBlower 2nd Oct '18 17 of 30

In reply to post #403784

I agree, a very high quality receivable as already authorised by card provider

| Link | Share
rmillaree 2nd Oct '18 18 of 30

Ref Tesla

production figures out today for 3 months ended sep and the numbers are bang on the money as far as the consensus estimates (50-55k model 3's slightly beaten) - model 3 deliveries in the period were double the level of all previous periods to date. so hopefully the extra sales will eat massively (but probably not entirely) into their ongoing cashflow negativity.

Interesting fact that the model 3 was the top grossing car in the US for August (and likely September too) - ignoring pickups - so the comments about the company not being able to mass produce cars will hopefully now slightly diminish.

finally they delivered more cars than they produced so the rumours about them not being able to sell the vehicles due to lack of buyers or the cars not being fit to be sold seem to be wide of the mark.

I guess none of the above will change the minds of the non believers one iota at present, in some respects till they are decently cashflow positive and profitable on sensible non adjusted silly adjustments profit and loss wise i would expect most bods not to be convinced the company justifies its premium rating.

Now if only Twitter would ban Musky then ..........

| Link | Share
mmarkkj777 2nd Oct '18 19 of 30


A great report on Revolution Bars (LON:RBG). Thanks.

I'm sorely tempted to take a holding, as I can see value at the current price and the new CEO seems to be making elbow room for a damn good shot at delivering results over the next 6 -12 months.

I'm watching for a good entry point.

| Link | Share
Beginner 2nd Oct '18 20 of 30

In reply to post #403814

Quite correct. I tried to purchase half a dozen times over the last two years. It is nearly impossible. (But a cracking niche business)

| Link | Share
Effortless Cool 2nd Oct '18 21 of 30

In reply to post #403814

There's a certain irony in National Milk Records (OFEX:NMRP) having no liquidity.

| Link | Share | 1 reply
garbetklb 2nd Oct '18 22 of 30

In reply to post #403879

Very good, EffortlessCool..........................!

| Link | Share | 1 reply
Paul Scott 2nd Oct '18 23 of 30

In reply to post #403809

Hi BarnetPeter,

I am afraid I am not sure Paul is not looking at RBG as objectively as he does on other stocks...

Well, I tried my best, by starting the section on Revolution Bars (LON:RBG) with a massive list of every negative point I could think of!!! Headed, "Negatives" in large font!

The new food offering has already been launched actually. I've not tried it yet, but this might be a good excuse for me to pop down to my local and have a meal & a couple of pornstar martinis!

When I met the (fairly) new CFO, formerly from WalkAbout, he commented in passing that RBG makes "staggering returns" from its bars. I find that people often form their view on RBG based on what their local bar is like. Some of them are starting to look like they need a refresh, which the CEO mentions in today's report (e.g. Bournemouth, Brighton). However, if you look at the new sites, e.g. Reading Rev de C, it's fantastic. They're doing £1m fit-outs on the new sites, so they look the absolute business. And with time, the new sites become a larger proportion of the total.

With decent management, there's every chance performance could return to growth, in my view. Remember this company has basically been rudderless, in terms of management, for 7 months. It's actually quite surprising that it's managed to perform as well as it has, without key management.

Anyway, time will tell, nothing's guaranteed. I think risk:reward is leaning towards reward, on a turnaround. You don't. That's fine, it's what makes a market!  But I don't think your comment that I'm not being objective is fair. I wrote about both the negatives and the positives, then gave an opinion. Which may turn out to be right, or wrong, we'll have to wait & see!

Regards, Paul.

| Link | Share | 1 reply
Aislabie 2nd Oct '18 24 of 30

The Revolution Bars (LON:RBG) summary is still that management - who know what is really going on - backed a sale at 203p.
The shareholders were wrong to reject the management advice, and getting back to 203p is going to be a prolonged struggle.

| Link | Share | 1 reply
mmarkkj777 2nd Oct '18 25 of 30

In reply to post #403919

Hi Aislabie.

I don't mind prolonged struggles if I think the odds are stacked in my favour. A previous value of 203p per share means that currently the intrinsic value of the company could well be greater than the market cap, due to increased sites in-between times. The shareholders were, perhaps, wrong at the time to decline the offer, but the situation now looks like a buying opportunity, and with a revitalised exec team it could well go from strength to strength.

So I think the CURRENT summary is: was misguided, had a bad correction, now looks like value if the new management team can harness the potential.

| Link | Share
Gromley 2nd Oct '18 26 of 30

In reply to post #403894

Hi Paul,

I had similar thoughts to BarnetPeter.. No criticism whatsoever of the way you very clearly laid out the pros and cons - excellent as ever, but when if came to your conclusion I was personally somewhat reminded of some of my own spirited defences of holding "value traps".

RBG escapes being given the value trap label by stock primarily because of the fantastic "Gross Profit to Assets ratio" contributing to the quality measure.(Although that might not be a great measure in this case given that the bar staff are really a variable cost rather than an overhead).

Perhaps though the thing that most struck me was your statement :

My view is firmly that this is probably a recovery situation, but we'll have to be patient to find out.

Somebody said yesterday (I think) that whenever they catch themselves using the word "hopefully" they realise it is time to sell in the current market - I have similar thoughts about the word "probably" at the moment.

As you say though we each reach different conclusions and yours and Graham's work here every day are a tremendous resource to help people make their own decisions, but they won't all be the same.

I'll keep my eye on RBG but I don't see the attraction right now.

| Link | Share
mojomogoz 2nd Oct '18 27 of 30

In reply to post #403884

On National Milk Records (OFEX:NMRP) ....

I read up on this company for first time today as seems a little odd and interesting. Does anyone know it a bit?

Underlying profit improvement this year despite falling revenue is driven by an even bigger cut in Admin expense. From the data given its hard to understand why. There's a hint the 2018 report that it could be through a cut in R&D...if so that would be hefty and perhaps as much as £3m suggesting projects shelved.

Any light from anyone that knows a bit more?

| Link | Share
abtan 3rd Oct '18 28 of 30


Thanks for the very in-depth review of Revolution Bars (LON:RBG)

I couldn't agree more with everything you wrote, eg:

  • The CEO is saying all the right things (much better than previous reports), including areas for improvement.
  • I do believe the unusual summer distorted LFL's (a World Cup and they don't have TV screens is clearly going to have an impact)
  • I'm pleased that expansions are slowing down so that they can get everything in order.

Operating Cash flow (before changes in working capital) is c.£8.5m...which is great for a company valued at £67m and gives me confidence that the balance sheet is significantly protected, even if there were to be further LFL sales declines.

A further point to add is that I follow Revolution Bars (LON:RBG) on twitter. I did't realise I had been following them as they never actually posted anything. However, recently I started receiving tweets on their latest food offerings, which do indeed look appealing. Retweet and likes are still low, but I am seeing a clear improvement in these metrics over the last couple of months. Fingers crossed.

Yes, I hold


| Link | Share
beatingmrindex 10th Oct '18 30 of 30

And a good thing - Deltic wanted to be bought then the would in turn run the company... No idea why the proposed merger with Stonegate was rejected.... Will be interesting to see what happens to the share price in the morning...

| Link | Share

Please subscribe to submit a comment

 Are LON:RBG's fundamentals sound as an investment? Find out More »

About Paul Scott

Paul Scott

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »


Stock Picking Tutorial Centre

Let’s get you setup so you get the most out of our service
Done, Let's add some stocks
Brilliant - You've created a folio! Now let's add some stocks to it.

  • Apple (AAPL)

  • Shell (RDSA)

  • Twitter (TWTR)

  • Volkswagon AG (VOK)

  • McDonalds (MCD)

  • Vodafone (VOD)

  • Barratt Homes (BDEV)

  • Microsoft (MSFT)

  • Tesco (TSCO)
Save and show me my analysis