Revolution Bars - Preliminary results
17/10/2023 07:00
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RNS Number : 3023Q Revolution Bars Group 17 October 2023
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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)
£m £m £m £m
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
(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 £11.8 million to £152.6 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.
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.
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.
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.
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.
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.
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.
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.
(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
(http://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
£1.5 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, management 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 £152.6 million (2022: £140.8 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 £(22.2) million (2022: profit
before tax of £2.1 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 £6.6 million (2022: profit of £10.2 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 £30.0 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 £23.2 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 £1.5
million when fully delivered in FY25, taking proforma EBITDA to approximately
£3.0 million. To date we have delivered £0.7 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. £750,000.
· 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 £2.99
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)
£m £m £m £m
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 £152.6 million
(2022: £140.8 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 £3.6 million lower, at a profit of £6.6 million (2022:
profit of £10.2 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 £17.0 million (2022:
profit of £19.4 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 £117.1 million (2022: £110.1
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 £55.6 million compared to £51.4 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 £(15.2) million (2022: profit of £7.4
million). This was after charging non-cash exceptional items of £18.6 million
(2022: £0.6 million) and cash exceptionals of £1.6 million (2022: £nil),
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 ended 1 July 2023 52 weeks ended 2 July 2022 52 weeks ended 1 July 2023 52 weeks ended 2
APM(3) July 2022
IFRS 16 IFRS 16 IAS 17 APM(3)
£m
£m
£m IAS 17
£m
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 £20.2 million
is £12.5 million higher than the APM(3) exceptionals of £7.7 million due to
impairment charges under IFRS 16 on right-of-use assets.
The statutory exceptional charge of £20.2 million comprises £18.6 million
(2022: £0.6 million) of non-cash exceptionals relating to right-of-use
impairment charges of £12.6 million, and property, plant and equipment
impairment charges of £6.0 million. Cash exceptionals of £1.6 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 £117k
(2022: charge of £77k) 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 £7.1 million (2022: £5.3 million) comprised £1.9 million
(2022: £0.9 million) of bank interest paid on borrowings and £5.2 million
(2022: £4.4 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 £5.0 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 £16.3 million RCF which was fully
unutilised, with £14.8 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 £30.0
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 £1.35 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 £30.0 million facility will reduce by £5.0 million to a £25.0 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 Guarantee RCF Total Facility
£m £m
£m
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 2024 1.35 28.65 30.0
As at 15 October 2023 the Group has net debt of £23.2 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 £nil
(2022: £nil).
(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
£9.7 million (2022: £25.8 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 £5.5 million, bank loan interest of £1.9 million, loan
repayments of £25.8 million (offset by drawdowns of £36.0 million),
acquisition of subsidiary costs of £13.9 million offset by cash acquired of
£4.7 million, and £5.9 million of repayment of subsidiary borrowings
contributed to a net cash outflow in the period of £15.4 million. This
decreased net bank cash of £4.1 million as at 2 July 2022 to a net bank debt
closing position of £(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 £8.3 million, bank loan interest of £0.9
million and loan repayments of £1.0 million, which all contributed to a net
cash inflow in the period of £6.7 million improving the net bank cash
position to £4.1 million.
Capital expenditure
The Group made capital investments of £5.5 million (2022: £8.3 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
Note 52 weeks ended 52 weeks ended
1 July 2023 2 July 2022
£'000 £'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
Note 1 July 2 July
2023 2022
£'000 £'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 losses Total
capital premium reserve £'000 equity
£'000 £'000 £'000 £'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
Note 52 weeks 52 weeks
ended ended
1 July 2023 2 July 2022
£'000 £'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 £21.6
million (2022: net cash of £4.1 million). At the start of FY23, the Group
held a £16.3 million Revolving Credit Facility ("RCF") which was fully
unutilised, with £14.8 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 £30.0
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 £1.35 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 £30.0 million facility will reduce by £5.0 million to a £25.0 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 Guarantee RCF Total Facility
£m £m
£m
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 2024 1.35 28.65 30.0
Current Net debt and available liquidity
As at 15 October 2023, the Group's net bank debt position was £23.2 million
and therefore the Group has available liquidity of £5.4 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 2023 2 July 2022
£'000 £'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 2023 2 July 2022
£'000 £'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 2023 2 July 2022
£'000 £'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 2022
£'000 £'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 2023 2 July 2022
£'000 £'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 167 160
financial statements
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 2023 2 July 2022
£'000 £'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 2023 2 July 2022
£'000 £'000
Analysis of credit in the period
Current tax
UK corporation tax on the (loss)/profit for the period 27 -
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: (4,552) 405
19.0%)
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 £70.7 million
(2022: £45.5 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 £250,000. Companies with profits between £50,000
and £250,000 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
£50,000 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 2023 2 July 2022
(Loss)/profit for the period (£'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.
Adjusted earnings per share 52 weeks 52 weeks
ended ended
1 July 2023 2 July 2022
£'000 £'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. £1.5 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 £22.6 million
and a loss before tax of £(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
Principal activity Total share capital acquired
Date of acquisition
The Peach Pub Company (Holdings) Limited Management Company 18 October 2022 100%
The Peach Pub Company Limited Pub Trading Company 18 October 2022 100%
The Peach Pub Properties Limited Pub Trading Company 18 October 2022 100%
Pretty as Peach Limited Pub Trading Company 18 October 2022 100%
Pure Peach Limited Pub Trading Company 18 October 2022 100%
100% Peach Limited Pub Trading Company 18 October 2022 100%
Peach Almanack Limited Pub Trading Company 18 October 2022 100%
Giant Peach Pubs Limited Pub Trading Company 18 October 2022 100%
Peach Paddy Club Limited Pub Trading Company 18 October 2022 100%
Peach County Limited Pub Trading Company 18 October 2022 100%
Peach Melba Limited Pub Trading Company 18 October 2022 100%
Peach on the Water Limited Pub Trading Company 18 October 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 value of assets and liabilities acquired IFRS Conversion Adjustments Fair Value Adjustments on acquisition Fair value of assets and liabilities acquired
£'000 £'000
£'000 £'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 £3.9
million of intercompany balances which net off.
Goodwill arising on acquisition
The Enterprise Value of £16.5 million was adjusted by a number of balance
sheet adjustments resulting in an equity value at completion of £13.4 million
plus £0.5 million of contingent consideration based on performance that is
expected to be fully achieved but not yet paid.
The cashflow shows the £13.4 million payment, plus £0.5 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 £4.7 million.
Goodwill
£'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 £13.4 million cash
consideration for the purchase of the 100% share capital of The Peach Pub
Company (Holdings) Limited and its subsidiaries, and £0.5 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 £4.3 million. If the growth rate was reduced by 1% this
would reduce the VIU by £3.0 million. If both were changed by 1% this would
reduce the VIU by £6.7 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 land Short leasehold Fixtures IT equipment and Total
and buildings premises and fittings office furniture £'000
£'000 £'000 £'000 £'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
£'000 £'000 £'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 £1.6 million. A 0.1 per cent decrease in the long-term growth
rate would result in additional impairments of £1.0 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 £2.2 million.
11. Inventories
1 July 2023 2 July 2022
£'000 £'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 £0.16 million (2022: £0.23
million). £nil was written down in the year as an expense (2022: £0.11
million).
The cost of inventories is recognised as an expense in cost of sales as
follows:
52 weeks 52 weeks
ended ended
1 July 2023 2 July 2022
£'000 £'000
Cost of inventories 35,419 30,359
12. Trade and other receivables
1 July 2023 2 July 2022
£'000 £'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 2023 2 July 2022
£'000 £'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 2023 2 July 2022
£'000 £'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 Total
£'000 Vehicles £'000
£'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 £4.9 million and principal
of £6.4 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 £0.1 million (2022: £0.1
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 2023 2 July 2022
£'000 £'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 2023 2 July 2022
£'000 £'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 £30.0 million expiring June
2025, of which £25.0 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 provision Total provisions
£,000 £'000 £'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 2023 2 July 2022
£'000 £'000
Current 871 1,314
Non-current 1,967 1,582
2,838 2,896
18. Dividends
52 weeks ended 52 weeks ended
1 July 2023 2 July 2022
£'000 £'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 £30.0 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 £5.0 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:
Note 52 weeks ended 52 weeks ended
1 July 2023 2 July 2022
£'000 £'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 2023
IFRS 16 IAS 17
£'000 £'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 ended 1 July 2023 Reduction Reduction Onerous lease provision interest Rent charge IFRS 16 Exceptionals 52 weeks ended 1 July 2023
in depreciation in
interest
IFRS 16 IAS 17
£'000 £'000 £'000 £'000 £'000 £'000 £'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 ended 2 July 2022 Reduction Reduction Onerous lease provision interest Rent charge IFRS 16 Exceptionals 52 weeks ended 2 July 2022
in depreciation in
interest
IFRS 16 IAS 17
£'000 £'000 £'000 £'000 £'000 £'000 £'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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