Revolution Bars : Preliminary announcement for the year ended 2 July 2022

THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION (EU NO. 596/2014) (AS AMENDED) AS IT FORMS PART OF UK DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 AND OTHER IMPLEMENTING MEASURES. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

18 October 2022

Revolution Bars Group plc (LSE: RBG)

Preliminary results for the 52 weeks ended 2 July 2022

A strong return to more normalised, profitable trading with careful cost management

Revolution Bars Group plc ("the Group"), a leading UK operator of 69 premium bars, trading predominantly under the Revolution and Revolución de Cuba brands, today announces its preliminary results for the 52 weeks ended 2 July 2022.

After restrictions were lifted on 19 July 2021 in England, two weeks into FY22, the Group enjoyed strong trading, which 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.

Results to 2 July 2022

• "Net cash"/net bank debt is cash in bank less all drawings on the Revolving Credit Facility ("RCF") and Coronavirus Large Business Interruption Loan Scheme ("CLBILS") term loan

Key points

Strong rebound in profits, sales and cash post-COVID-19

• Return to profitability, reporting profit before tax of £2.1 million (2021: loss before tax of £26.3 million);
• Full year like-for-like2 ("LFL") sales of 1.3% have been delivered in our 56 English bars after 19 July 2021, when restrictions were fully lifted in England;
• The Group experienced softer trading in the final quarter, reflecting reduced consumer confidence, which reduced the positive LFL2 sales seen up to November down to 0.3%; and
• The Group was pleased to finish FY22 with net cash of £4.1 million following an increase in operational cash generation; this is in comparison to FY21 which ended with a net bank debt position of (£3.6 million).

Sales by Quarter

Investing in our brands, people and propositions

• Capex of £8.3 million was spent in line with expectations in FY22 across the 19 refurbishments, two new sites, new concepts, and other planned capital expenditure;
  o Delivered the most ambitious refurbishment programme ever, delivering 19 refurbishments in FY22. Four further refurbishments have been completed in FY23 to date, with up to 18 planned across the year;
  o Expansion resumed with two new leases, the first in four years, resulting in the opening of our two new exciting Revolution bars in Preston and Exeter;
  o We are pleased with current performance of the new and refurbished sites, and confident they will achieve the two-year payback target we set for refurbishments and four-year for new sites;
• Two new concepts provide estate flexibility and diversification: Founders & Co. enjoyed its first full year of trading, with Playhouse opening in November 2021. Both have been welcomed by their local communities, are performing well;
• In the year, we have continued our exciting sustainability journey through the removal of passion fruit garnishes from our cocktail menu, energy reductions, recycling advances, investment in our Reading de Cuba sustainability flagship site, Zero Heroes in all our sites, and many other exciting initiatives;
• The Group became an above-minimum wage paying employer in November 2021, helping us to attract and retain the best talent in the industry; and
• Continued progress made with our award-winning Inclusion & Diversity, wellbeing and sustainability programmes.

Managing headwinds with a forensic focus

• Mitigating inflationary increases, such as employment, food, transportation and energy, wherever possible with forensic and relentless focus on costs;
• Energy costs are largely fixed until April 2023, significantly protecting us from current cost pressures. Our team are actively engaging with brokers to secure best available pricing from the spring onwards;
• We have seen pleasing reductions in energy usage which will aid our cost focus through our continued strong sustainability agenda; and
• We are mindful of the potential for economic uncertainty and the impact on guest confidence, but are confident of the resilience of our guest base.

Acquisition of The Peach Pub Company (Holdings) Limited and its subsidiaries ("Peach") for £16.5 million (see separate announcement)

• The Group is thrilled to announce that it has completed the acquisition of the entire issued share capital of Peach, the operator of a collection of 21 award-winning, premium food-led pubs;
• Peach offers greater exposure to daytime and weekday trading, providing a natural balance to existing Group portfolio which performs strongly in the evening and at weekends. Furthermore, Peach pubs are located outside of city centres / larger town centres and have benefited from working from home dynamics;
• Trading in Peach's current financial period (since 3 January 2022) has been strong with LFL2 sales exceeding +10% compared to 2019; and

• Peach creates a more balanced and diversified business with scale and compelling growth potential across multiple trading segments of drinks, food and accommodation.

Current trading and Outlook

• The first two periods of FY23 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. LFL2 sales in the first 11 weeks were -10.0% with city bars bearing the brunt of transport strikes;
• The next two weeks improved to LFL2 sales of -4.5%, aided by the return of students and gradual end of summer holidays, giving first quarter LFL2 sales of -9.1%, showing trading was still impacted by continued disruption of footfall into cities due to the ongoing train strikes;
• For FY23 and beyond, our focus continues on investment in the business: refurbishments, new sites, acquisitions and the roll-out of our new concepts are all key workstreams to ensure the continued growth of the business;
• Continued focus on building a strong pipeline of future properties;
• 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;
• The acquisition of Peach has redirected our capital, and thus we won't be opening the previously announced six new sites in FY23;
• We expect the acquisition of Peach to add a part-year contribution of c. £1 million of APM3 adjusted1 EBITDA to the business;
• Whilst the macro consumer environment remains challenging, we are pleased to have retained a strong balance sheet with net cash of £0.7 million as at 17 October 2022 which will underpin the Group;
• Following the acquisition, the Group will target a net bank debt figure of 1 x APM3 adjusted1
  EBITDA;
• Taking into account the contribution from Peach for the rest of the financial period, we now expect the FY23 outturn to be APM3 adjusted1 EBITDA c. £10 million; and
• In FY24 we expect an increased contribution from Peach post-synergies, although this is expected to be somewhat tempered by increased energy costs for the Group as a whole as we come out of the March-23 energy cap.

1. Adjusted performance measures exclude exceptional items, share-based payment charges and bar opening costs
2. Like-for-like(LFL) sales are same site sales defined as sales at only those venues that traded in the same week in both the current year and most recent non-COVID-19 affected comparative period
3. APM refers to Alternative Performance Measure being measures reported on an IAS 17 basis

Rob Pitcher, Chief Executive Officer, 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.

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.

We remain focused on delivering great value and providing good times for our guests and are very mindful of the pressures they are experiencing. Having said that, our young adult guest base are somewhat protected from the ongoing cost pressures and continue to prioritise experiences and their freedom.

I am incredibly proud of what our people have achieved over recent years; we have made great progress with advancements of our brand offerings, our "Inclusion Revolution", sustainability agenda, guest journey, and wellbeing and support of our colleagues. We have created exciting work streams which focus on value-creation and developing the Group for the future.

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."

A presentation will be shared with analysts today and the presentation will be made available on the Group's corporate website at www.revolutionbarsgroup.com.

Chairman's Statement

I am pleased that our business has now returned to normal trading without restrictions, despite the impact from COVID-19 in the first half of the year. We hope and plan for a period of exciting trading over the winter months, celebrating large parties with our corporate guests, whilst remaining cautious of the upcoming festive period where the Government has found it necessary in the last few years to restrict trading and damage guest confidence.

We recognise the potential for uncertainty in guest confidence as we enter a period of economic uncertainty, characterised by recession and an inflationary environment, but are confident of the resilience of our guest base. During the year, we have delivered two new Revolution bars, completed 19 refurbishments across the estate, and launched our second exciting new concept.

The two new bars, in Preston and Exeter, have had excellent guest reception and feedback and are trading in line with expectations, which are set to achieve a four-year payback.

On 18 October we were also very excited to announce the acquisition of The Peach Pub Company (Holdings) Limited and its subsidiaries ("Peach"), the operator of a collection of 21 award-winning pubs. Peach offers an exciting addition to the Group portfolio and provides a more balanced and diversified business with scale and compelling growth potential across multiple trading segments of drinks, food and accommodation. We look forward to seeing where this new venture takes us.

Our refurbished Revolution sites are demonstrating a new, edgy design which is social media friendly and gives our guests the opportunity to showcase their experience, encouraging return visits. Our refurbished bars are also performing well and are in line with a two-year payback period. Our guest proposition review is being finalised on Revolución de Cuba to take it into its next exciting stage and enhance the guest journey.

We are pleased with the performance of both new concepts, Founders & Co. and Playhouse, both of which have received excellent guest feedback. Founders & Co. has created a friendly community feel which is enjoyed by guests of all ages and has enabled the Group to diversify sales towards daytime and food from the more traditional patterns. Playhouse, a competitive socialising offering, has seen great success with corporate and group bookings, offering an immersive experience for our guests.

We have continued to build on the progress made with Inclusion & Diversity, Wellbeing, Sustainability and developing the guest journey. Management are now aligning their focus to continue driving these important strategies forwards, whilst driving new workstreams to grow and build business performance.

Our business

At the end of the reporting period, the Group operated 69* premium bars with a strong presence throughout the UK for its two high-quality retail brands: Revolution (49 bars), focused on young adults; and Revolución de Cuba (18 bars), which attracts a broader age range. Most of the Group's sales are derived from food and drink with some late-night admission receipts driven by entertainment completing the sales mix. The FY22 portfolio also includes one Founders & Co. venue in Swansea and one Playhouse venue in Northampton, providing a new diversification of sales through increased food offerings and game machine sales.

We were excited to return to our pre-COVID-19 strategy of expansion and refurbishment of the estate, and in the year spent £8.3 million of capital expenditure across two brand new Revolution bars, 19 refurbishments, converting a bar into Playhouse, sustainability, IT and other key investments. In FY23 we plan on refurbishing up to a further 18 bars, meaning up to 57% of the like-for-like estate will have been refurbished across FY22 and FY23.

To date, four bars have been refurbished in FY23. The bars opened and refurbished in FY22 are performing well, and we look forward to extending our expansion plans over the coming years.

Our results

Sales of £140.8 million (2021: £39.4 million) were 257.4% higher than the previous year due to a return to much more normal trading, albeit with some impact from COVID-19 at the start of the period and during festive trading. In comparison, the previous year was significantly impacted by lockdowns and restrictions. Our statutory profit before tax for the year of £2.1 million (2021: loss before tax of (£26.3) million) reflects very positive trading and careful cost management, compared to the prior period which was significantly impacted by the restrictions on trading. Adjusted1 EBITDA, our preferred KPI, is significantly impacted by IFRS 16 and thus the Directors believe that business progress is best measured by the directly comparable IAS 17 Alternative Performance Measures3 ("APM") measure of adjusted1 EBITDA which was a profit of £10.2 million (2021: loss of (£12.0) million). The positive movement in APM3 adjusted1 EBITDA reflects a strong period of cash generative sales from excellent business progress and pent-up demand.

No further debt drawdowns were required in FY22 due to the positive trading, whereas in FY21 a total of £20.0 million of Coronavirus Large Business Interruption Loan Scheme ("CLBILS") term loans were obtained, as well as £34.0 million from the net proceeds of the two equity fundraisings. The business remains in a strong cash position, meaning it is ready to take advantage of any potential good-value acquisition opportunities in addition to the organic expansion and refurbishment of the estate. As at 17 October 2022, the Group had net cash of £0.7 million.

Our Board

There have been no changes to the Board in the year. With COVID-19 firmly behind us, the Board have been able to return to in-person meetings where applicable, and have continued their focus on Governance matters, strategy, and performance improvement of the business. The Board and Executive Management group continue to work closely together, with the Board providing challenge, a sounding board and support to Management decisions.

Our team members

At the end of the reporting period, the Group employed around 2,800 people, all of whom strive to provide the outstanding guest experience that is at the heart of our strategy. Recruitment needs have risen since the start of FY22, when we were able to finish our use of the Coronavirus Job Retention Scheme early and bring all our people back, as well as staffing our brand-new bars. Our teams continue to demonstrate amazing commitment to the business, making sure our bars are the place where everyone wants to be. I thank all of our people and teams for their hard work, great attitudes, and continued efforts as we move into the next exciting stage of expansion and growth for the business.

Our Future

Like-for-like2 ("LFL") revenue generated in the first 11 weeks of FY23 was -10.0%, reflecting the challenging trading conditions faced. A combination of rail and tube strikes, heatwaves, festivals and events, and people going abroad for their holidays have all contributed to reduced footfall in our bars.

However, LFL2 revenue from next two weeks improved to -4.5%, reflecting the positive sales increase from the return of students in September. Our young and resilient guest base are somewhat protected from the ongoing cost pressures on the economy; summer trading is one of our quieter times of the year and we are therefore pleased to see sales improve after the summer period.

The Financial Review provides information on liquidity and going concern, and also the full going concern disclosures, which include references to material uncertainty, can be found in note 1.

I am confident that the strong leadership and new workstreams will continue to drive improved performance and expansion and look forward to a future of positive trading.

I would like to take this opportunity to thank all our colleagues for their hard work during a very difficult year interrupted by COVID-19, as well as our stakeholders with particular thanks to the continued support of our suppliers.