Revolution Bars Share Discussion Threads

[mammyoko] 05/3/2018 15:30

Sadly, I don't think Deltic are credible players. They don't have the cash, can't raise it and insti holders aren't going to vote for a merger involving increased risk where Deltic takes all the management positions and any potential upside.

A market sell-off over the next three months coupled with further deterioration in consumer spending that brings the share price down to 125p would likely bring Stonegate back to the table. Or if they decide that the current mismanagement is damaging the business potential.

[mammyoko] 05/3/2018 14:55

If they're still interested, Stonegate will hope it's the former!

Can't see why a company that was "disciplined" (inflexible?) enough to walk away from a bid at 203p is going to pay more after those numbers.

There has to be around 25p bid premium in the price at the moment. I would imagine that Stonegate will be waiting to see if it gets down to 125p. Probably won't.

Odd situation - difficult for Stonegate to justify paying more than 203p and almost impossible for RBG management to justify recommending less!

[mammyoko] 05/3/2018 13:56

Langton Capital view

REVOLUTION BAR GROUP – H1 NUMBERS – ANALYSTS’ MEETING:
Following its H1 update this morning, Revolution Bars Group hosted a presentation for analysts and our comments thereon are set out below:
Headline Numbers:
• A strong end to the period helped edge like-for-likes for the 26 weeks up by 0.4% (+1.9% for the 27-week period, which includes New Year’s Eve).
• Sales in the four weeks between 4 December and 31 December +5.9%.
• That said, the overall trend over the past four years has been one of moderating like-for-like sales growth.
• Revolution faces the same cost headwinds as everybody else – staff costs increased by £600,000 and rates increased by £500,000.
• Four new venues opened in H1, all trading ahead of expectations (Belfast, Solihull, Putney, and Inverness).
• Returns from venues open for a second year averaging 37.3%, with Belfast performing particularly well.
Exceptionals:
• There are some £9.5m of total exceptional charges in the period and, since this is the difference between an adjusted operating profit of £6m and a reported operating loss of £3.7m, we view this as worthy of comment.
• Some £2.2m of fees have gone towards M&A activity. Considering Revolution was the company being bid for, it raises the question of why it has been left footing this bill. Surely the onus is on the bidding company?
• It also seems a lot to spend on corporate advice, considering the deal was botched and led to the resignation of the group’s CEO and CFO.
• One might argue that the £705,000 charge related to changes in executive management is a part of normal business and should be included in the adjusted figure.
• The £5.6m onerous lease charge casts doubt on the group’s claim of a ‘self-funding roll-out’.
Balance Sheet etc.:
• Starting net assets of £35.2m minus total comprehensive loss of £3.4m minus a £765k share-based payment minus £1.65m of dividends gives ending net assets of £29.4m on a market cap of £85m.
• Given market conditions, it might be prudent to keep dividends flat for a year or two. Revolution has taken on £3m of debt, suggesting this dividend is not being financed from profits.
• On a related note, if Marston’s and Greene King were not paying dividends already they might think that their profits might be better deployed elsewhere.
• For example, Enterprise Inns Group and JD Wetherspoon continue to buy back shares at these levels.
• Debt is up £3m to £10.5m and will go up more towards the end of the year as RBG sets about three new openings. This suggests, contrary to what management says, that the group’s roll-out is not self-funding.
• £5.6m exceptional charge on onerous leases following ‘more robust analysis of trading performance’ has not resulted in plans to close any bars.
Outlook:
• Two new Revolucion de Cubas opening in H2 (Birmingham and Newcastle) and a minimum of six sites opening in FY19 (including Bristol, Glasgow, and Southampton).
• Headwinds will remain, but the group is implementing cost efficiencies (including improved labour scheduling and a new four-year supply agreement with Matthew Clarke), which should deliver results in FY19.
• Revolution’s food offer should improve once incoming Food Director Simon Dobson gets his feet under the desk – at present, food is just 15% of RBG’s sales.
• With incoming CEO Rob Pitcher rounding off the picture, shareholders will be optimistic of some stability at the top.
Langton View:
• Revolution Bar Group has maintained the pace of its cash-fueled roll out and Revolucion de Cuba appears to be hitting its stride. Its pipeline is secure and the sites it picks offer a degree of security in that they are big sites, often in Community Impact Zones, where it is harder to get a license and more difficult for landlords to find appropriate tenants.
• That said, the sector’s headwinds are fierce, and the group’s overall like-for-like trend over the past five years has been of moderating increases. Management says the group is focusing on ‘premiumisation’ (aka ‘making things more expensive’) but that the bulk of like-for-like sales growth is coming from volume. Regardless, we note the possibility of Revolution ‘maxing out’ a la Restaurant Group and hitting a price point that no longer offers value for money.
• The group’s image as a standalone company has been tarnished somewhat by a botched merger with Deltic. If Revolution would allow itself to be acquired for c200p, what does that say about the group’s perception of its own value?
• Further concerns might be raised about the group taking on debt to pay dividends, the fact that it will take on more debt towards the end of the year to help finance three new sites, and its significant £5.6m onerous lease charge.
• Considering the above, we are cautious about the company’s prospects in what is proving to be a hostile environment for the majority of operators.

[barnetpeter] 02/3/2018 22:35

Dreadful results and only holding up at this level because of a bid premium. I think the company went crazy on spending thinking the bid was a done deal. Divi should be abandoned...paid out of debt. Company in chaos imo; how many bids are rejected and the company collapses? I don’t see much value here myself at the moment unless another bidder comes knocking.

[glavey] 02/3/2018 20:50

Cloaked warning.

[kazoom] 02/3/2018 14:04

QS99 - just to note it was Graham Neary's article, not Paul Scott.

I do agree it was very poor cost control, but do bear in mind that was under the previous management team.

[barvin] 02/3/2018 13:28

Yes, I have been pro RBG but luckily got out last week and into FLYB(another bid target) whilst I wait for bid return period here to lapse.However, not great results and the restaurant sector issues may span to bars perhaps. So not sure whether to get back in come mid-April. Although at a 150p-160p it's still tempting I reckon

[qs99] 02/3/2018 13:12

Just read Paul Scott's review on Stockpedia. I agree, those advisor fees for the aborted bid when it was being bid for are extortionate. Very very poor control on company cash IMO by the board. On that alone I am not now tempted to buy, let alone the other exceptionals....GLA!

[sailing john] 19/2/2018 11:28

Volume today! and a small tick up with spread close
Added a few

[spot1034] 19/2/2018 11:20

Price firming up nicely here with more activity than we've seen in recent days. Interims due at the end of next week.

[boonkoh] 12/2/2018 15:51

Visa's spend index report for Jan 2018 states that "spending on hotels, restaurants and bars recorded a rise of 3.7 per cent."Good omen for RBG sales growth hopefully!

[qs99] 24/1/2018 08:13

Nice opening

[qs99] 22/1/2018 18:20

Well they now have an update, but may wait until results early March to see the actual numbers. THen again they may not revisit things at all, but hopefully IR team and management can get the shares motoring anyway....DYOR

[kazoom] 22/1/2018 17:42

I didn't think Deltic were actually locked out, as they didn't actually table a formal offer?

[crumppot] 22/1/2018 16:46

Interesting times ahead

[crumppot] 22/1/2018 11:10

When can Stonegate or Deltic bid again?

[runthejoules] 22/1/2018 11:05

£2.50 with a bit of luck. Have they sorted their fod out yet? They need a good vegan option for all the Che badge wearing Momentum students innit

[qs99] 22/1/2018 10:52

Does look a little odd. Wonder how long before Deltic have another sniff, or Stonegate....£3 anyone? DYOR

[boonkoh] 22/1/2018 09:28

Interesting, super low trading volumes today for a trading update announcement. Market getting bored of RBG?

[barvin] 22/1/2018 08:27

Good Xmas trading, would have been nice to have seen other figures a bit higher. But we are on track and they know what to expect.Let the bidding commence, just need about be to stoke the fire

[qs99] 22/1/2018 08:04

well Mr Market seems to like It IMO...