Revolution Bars warns on earnings as weather, absence of CEO weigh

Revolution Bars was under the cosh on Thursday as it warned that adjusted earnings for the year would be in line with last year's results and below analysts' expectations amid challenging trading conditions, with the blamed laid on weather and the absence of a CEO.

In an update for the year to 30 June, the company said it has experienced "challenging and volatile" trading conditions, with sales falling short of expectations. As a result, adjusted earnings before interest, taxes, depreciation and amortisation are expected to be unchanged from last year's £15.1m.

The company said weather has been the most significant factor affecting the sales trend, while the prolonged absence of a chief executive has also played its part.

"The adverse, wintery weather conditions in March combined with the unusually hot weather throughout May and early June, has curtailed typical late-night week-end trading. The sales performance in the last six weeks at sites with significant outside trading areas has performed well relative to last year."

Total sales for the group in the second half to 9 June were up 7.3%, but like-for-like sales were down 1.7%, with both of its brands affected, although the smaller Revolucion de Cuba brand saw LFL sales remain in growth. For the 49 weeks to 9 June 2018, total sales were up 9.1% and LFL sales were 0.5% lower. The company said wet sales performed better than food, particularly in the Revolution estate where little food development and innovation was undertaken in 2017.

"This development is now underway for delivery in Q1 next year," it said.

On a brighter note, the group said the new bars opening programming for the year has been delivered to schedule, with those five bars performing to expectations. In addition, its capex plans for FY19 remain unchanged and the group will open six new sites this year including four large bars in the next four months.

At 1025 BST, the shares were down 8.8% to 142.90p.

Canaccord Genuity said: "Customers stay at home when the weather is dreadful and head to the pub when it's very hot and there's not much night-club and late-night bar operators can do about that, except batten down the costs and wait for the weather to change (as it inevitably does).

"When new CEO Rob Pitcher arrives from Mitchells & Butlers, Revolution would have been without a CEO since mid-October 2017 when Mark McQuater left the building. Nine months is too long without a CEO. We also suspect the tone of the trading statement reflects the desire to clear the decks before the new CEO, Rob Pitcher, arrives on 25 June."

Canaccord cut its price target on the stock to 190p from 210p but maintained its 'buy' stance.