Revolution Bars warns on profits as LFL sales drop in 'challenging' conditions

Shares in bar operator Revolution Bars lost their fizz on Friday as the company warned on profit, reported a drop in like-for-like sales and said it was halting its expansion programme amid "challenging" conditions.

In an update for the 26 weeks to 29 December 2018, the owner of the Revolucion de Cuba chain said revenue rose to £78.5m from £73.8m, but LFL sales in the period were down 4% compared to a 0.4% increase in the same period a year ago, while adjusted earnings before interest, tax, depreciation and amortisation fell to £6.9m from £8.9m.

Adjusted pre-tax profit, meanwhile, declined to £2.9m from £5.8m.

The company said it now expects full-year 2019 adjusted EBITDA in the range of £11m to £12m, versus guidance of approximately £12m given in January and £15m in FY18.

The group pinned the blame for the drop in Revolution's LFL sales on under-investment in the brand's proposition, management instability and the hot summer.

Chief executive officer Rob Pitcher said: "While Revolucion de Cuba has performed well and delivered growth in the reporting period, it is clear that the lack of investment into the Revolution proposition is impacting performance. Revolution has been reviewed, the issues identified, and workstreams are being implemented to restore it to growth.

"Our confidence in achieving this is underpinned by the good performance of the new Revolution venues, while the recently refurbished sites are also seeing uplifts. We have therefore decided to prioritise the refurbishment programme over new openings. We expect trading to improve as we come up against softer comparatives for the rest of the financial year."

Given negative LFL sales trends and Brexit-related economic uncertainties, Revolution has decided to halt new openings to focus capital investment on the existing estate and to reduce bank borrowings.

"The ongoing specific concerns regarding Brexit are related to food supplies and availability of labour, and both situations are being closely monitored," it said. "The group's bigger concern regarding Brexit relates to the potentially adverse impact on consumer demand."

Revolution said trading at the start of the third quarter has been challenging, with LFL sales down 7.3% in the eight weeks to 23 February, although that improved slightly to a 5.5% decline in the first three weeks of February.

At 1415 GMT, the shares were down 17.8% to 65.28p.