Revolution Bars Group urged to show “financial discipline” as conditions toughen

Revolution Bar Group

Revolution Bars Group is going to need to show “financial discipline” to deal with the more difficult demand and cost environment lying ahead, analysts said today after the company revealed a strong set of half-year figures.

Sales at the premium bar operator grew 13% to £67m, while EBITDA rose 14% to £9m, for the six months to the end of 2016.

The group’s strategy is to provide high quality leisure retail brands in the bar and restaurant sector through its two brands, Revolution and Revolución de Cuba.

It has opened four new Revolución de Cuba bars in the last six months, taking its estate to 66 units nationwide. Revolución de Cuba has been expanded to 13 units, with the company adamant that there remains “significant scope” for further expansion.

CEO Mark McQuater said:”Our finely tuned operating model has delivered like-for-like sales growth and well-planned expansion. During the period we have added another four Revolución de Cuba units taking the estate to 66 units, along with two more bars scheduled for opening in the second half, and we are confident of meeting our strategic growth targets.”

In the first half of the trading year it opened Revolución de Cuba bars in Harrogate, Reading, Aberdeen and Glasgow. Trading for all four bars is currently tracking in-line with its pre-investment expectations.

Two further sites, in Southend-on-Sea and Torquay, will open in the second half of the year.

Paul Hickman, analyst at Edison Investment Research, said the group continues to reward investors who backed its March 2015 IPO with a textbook roll-out of its two distinctive brands Revolution and Revolución de Cuba.

“Despite an intensive opening programme with four new bars opened, interim earnings per share grew by 7%, and tellingly, the dividend has been raised by 10%. Revenue growth of 12.7% reflects the openings activity, which has been increased from five to six this financial year, but is backed by organic growth running at 2% like-for-like.

“Although operating margins have inevitably been hit by opening costs, underlying EBITDA margin is still 10 bps ahead at 13.8%. And although the £2.3m net cash at last year-end has been used, there is no net debt on the balance sheet. Revolution Bars Group is going to need the financial discipline it has shown so far to deal with the more difficult demand and cost environment lying ahead.”

Revolution Bars Group said that trading over January and February had been positive.  Like-for-like sales for the eight weeks to 25 February rose by 1.7%.

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