Bars group returns to profit and toasts acquisition of 21-strong pubs chain
Manchester-based bars business Revolution Bars Group has made a return to annual profits, and announced the £16.5m acquisition of a 21-strong portfolio of premium food-led pubs operating mainly in the South of England and the Midlands.
It also called on the Government for further support, through business rates reform and VAT cuts, to help the hospitality industry weather current stormy trading conditions.
Revolution, which operates 69 Revolution and Revolución de Cuba branded bars, achieved revenues of £140.8m in the year to July 2, 2022, compared with £39.4m the previous year, which was heavily impacted by pandemic lockdowns and restrictions.
The group turned around a £26.3m pre-tax loss incurred in 2021, with a pre-tax profit of £2.1m. It ended the year with £4.1m in cash reserves, compared with a £3.6m deficit the previous year.
Revolution had postponed announcing its annual results yesterday (October 18), to conclude the successful acquisition of the Peach chain of bars.
Publishing its annual results, it said that the group enjoyed strong trading after restrictions were lifted on July 19, 2021 in England, two weeks into its 2022 fiscal year, although trading was slower to return in Wales, Northern Ireland and Scotland, where restrictions continued for longer. The important festive trade of 2021 and early 2022 was disrupted by Omicron, but post-Omicron trade was buoyant.
However, the group experienced softer trading in the final quarter of the year, reflecting reduced consumer confidence, which reduced the positive like for like sales seen up to November, down to 0.3%.
During the reporting period the group invested £8.3m, in line with expectations, on 19 refurbishments, its most ambitious programme so far, and on two new sites, new concepts, and other planned capital expenditure.
The group also became an above-minimum wage paying employer in November 2021, helping it to attract and retain the best talent in the industry.
It said it is mitigating inflationary increases, such as employment, food, transportation and energy, wherever possible with forensic and relentless focus on costs. Its energy costs are largely fixed until April 2023, significantly protecting it from current cost pressures.
The team is actively engaging with brokers to secure the best available pricing from spring onwards,
And it said it is mindful of the potential for economic uncertainty and the impact on guest confidence, but is confident of the resilience of its guest base.
Looking ahead, the group said the first two periods of fiscal year 2023 were challenging, with footfall disrupted by train and tube strikes, heatwaves, resurgence in festivals and events, and people going abroad for their first holidays in three years.
But it said for fiscal year 2023 and beyond, the focus continues on investment in the business – refurbishments, new sites, acquisitions and the roll-out of new concepts which are all key workstreams to ensure the continued growth of the business.
It said it is well prepared and looking forward to the first restriction-free festive season for three years. Christmas bookings are tracking well ahead of this time last year with strong growth in recent weeks.
Revolution has also announced the acquisition of Peach for a cash consideration of £16.5m, on a debt and cash free basis, of which £0.5m is contingent on the future performance of the business.
It said Peach delivers attractive financial metrics with average weekly takings (net of VAT) approaching £30,000, a food mix of 53% of sales and strong profit and cash conversion. Its offer is positioned at affluent guests seeking a consistent, high quality premium food-led pub experience.
The business is well aligned to key structural trends, addressing customer demand for quality and locally-sourced food as well as exceptional service in attractive surroundings. In addition, Peach operates in the premium accommodation market with more than 80 bedrooms across its portfolio.
The group said the acquisition provides greater balance to the enlarged business and diversifies trading patterns and income streams.
Trading in Peach’s current financial period, since January 3, 2022, has been strong with like for like sales up more than 10% compared with 2019. The Revolution board anticipates 12 month site EBITDA for Peach in Revolution’s current financial year to be more than £5m with central costs in the region of £3.5m on turnover in excess of £30m.
Rob Pitcher, CEO, Revolution Bars Group, said: “This is an exciting and transformative opportunity for Revolution. It broadens our guest base, balances our day part sales and seasonality whilst providing another avenue for growth both organically and by acquisition.
“Peach is a quality business with great pubs offering a premium experience. It has rebounded strongly from the dark days of the pandemic. Central to this success has been a strong people-focused culture with clear values that are focused on making the right choices for guests and our teams, a very similar approach to that taken at Revolution.
“I would like to acknowledge the exceptional work of Lee Cash, Hamish Stoddart and Jo Eames, as the founders of Peach, for creating an industry-leading collection of premium gastro pubs.”
Revolution said the acquisition of Peach has redirected its capital, and so won’t be opening the previously announced six new sites in financial year 2023.
Mr Pitcher said: “We are hugely encouraged by the performance in FY22, seeing what trade and performance can look like under normal trading conditions with our better-invested estate. The new sites and the significant number of refurbishments delivered in the year put the group in an exciting position for growth in the future.
“That we have been in a position to restart our growth strategy is a testament to the hard work of our people and the positive growth we have seen in the last year.”
He added: “Like all hospitality businesses, we are facing significant challenges and urge the Government to deliver the promised reform of the business rates and support all high street businesses through these extraordinary times with an immediate 50% business rates cut for all business, no matter of size.
“Additionally, a cut in the headline rate of VAT to help lower the cost impact would assist in reducing further price rises, without which price rises are inevitable, further feeding inflationary pressures.
“Looking forwards, we are focused on navigating the current macro-economic situation, developing our business, and putting in place further building blocks for continued growth.”