Last checked at 18 Oct 2022 18:01
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18 October 2022
Revolution Bars Group PLC("Revolution" or the "Company")
Acquisition of Peach Pub Company (Holdings) Limited ("Peach")
Transformative acquisition to accelerate and diversify Revolution's growth strategy
Revolution, a leading operator of 69 premium bars is pleased to announce that it has completed the acquisition of the entire issued share capital of Peach ("the Acquisition"), the operator of a collection of 21 award winning, premium food-led pubs from its founders for a cash consideration of £16.5m, on a debt and cash free basis, of which £0.5m is contingent upon the future performance of the business.
The Acquisition will create a more balanced and diversified business with scale and compelling growth potential across multiple trading segments of drinks, food and accommodation.
Both businesses are at the forefront of their marketplaces offering premium product and experience
Peach operates 21 well-invested leasehold pubs located in the South of England and the Midlands that deliver attractive financial metrics: average weekly takings (net of VAT) approaching £30k, a food mix of 53% of sales and strong profit and cash conversion. Its offer is positioned at affluent guests seeking a consistent, high quality premium food-led pub experience. The business is well aligned to key structural trends, addressing customer demand for quality and locally sourced food as well as exceptional service in attractive surroundings. In addition, Peach operates in the premium accommodation market with over 80 bedrooms across its portfolio.
Revolution is a leading premium bar operator that delivers a high-quality experience for its guests across the United Kingdom. It operates principally under two strong brands, namely Revolution (49 bars) and Revolucion de Cuba (18 bars).
In the year ended 2 July 2022, sales were £140.8m in a highly disrupted period and Group Adjusted EBITDA after rental charges (on an IAS 17 basis) was £10.2m.
The combined business will benefit from diversification and be strongly growth oriented
The Acquisition provides greater balance to the enlarged business and diversifies trading patterns and income streams. Peach's greater exposure to day time and mid week trading sessions provides a natural balance to Revolution, which performs strongly in the evening and weekends. Furthermore, Peach pubs are located outside of larger town and city centres and have benefited from working from home dynamics.
Trading in Peach's current financial period (since 3 January 2022) has been strong with LFL sales up over 10% compared to 2019. The Board anticipates 12 month site EBITDA for Peach in Revolution's current financial year to be over £5m with central costs in the region of £3.5m on turnover over £30m.
Significant cost synergies are expected to result from the Acquisition. It is estimated that cost savings through increased buying power, business combination and improved systems will generate at least £1.5m of synergies, taking pro-forma EBITDA to £3m once synergies have been fully realised. We expect these synergies to be largely delivered in FY24 (£1m) before being fully achieved in FY25. The costs to achieve such synergies are expected to be minimal.
The Acquisition will present further growth opportunities to Revolution in the leasehold food-led pub market, either in individual sites or in small groups. In addition, Revolution will continue to invest in its current portfolio of brands.
Management team with extensive experience of both food-led pubs and premium bars
The two businesses have similar cultures with a strong focus on people and sustainability; both companies are award-winning in these areas.
The management team of Revolution is delighted that the entire operations team of Peach, led by Chris Stagg, will remain with Peach following the acquisition and will be incentivised to remain with the business over the longer term. In addition, the current Finance Director, Tony Bobath, will assist in the integration of the acquisition.
Revolution's balance sheet strength allows for the entire consideration to be funded from available facilities
Revolution's net cash position prior to the Acquisition and strong trading performance following the pandemic, together with the compelling strategic rationale for the acquisition of Peach, has allowed it to fund the entire consideration for the transaction from its banking facilities. Net cash, pre-acquisition, on 17 October 2022 was £0.7m. Following the Acquisition, the Group will have headroom on its bank facilities of more than £15 million, and will target a return to net bank debt / EBITDA (IAS17) of 1x in the short to medium term.
In the year to 2 January 2022, the last available audited financial information, Peach achieved a profit before tax of £ 2.7m, which benefited from VAT reductions and business rates relief. As at 2 January 2022, Peach net assets were £3.9m.
Commenting on the Transaction:
Rob Pitcher, CEO, Revolution Bars Group said:
"This is an exciting and transformative opportunity for Revolution. It broadens our guest base, balances our day part sales and seasonality whilst providing another avenue for growth both organically and by acquisition.
Peach is a quality business with great pubs offering a premium experience. It has rebounded strongly from the dark days of the pandemic. Central to this success has been a strong people focused culture with clear values that are focused on making the right choices for guests and our teams, a very similar approach to that taken at Revolution.
We welcome the Peach team to Revolution where they can continue their excellent work delighting guests and seek continued personal development in a business with a multi-pronged strategy that has similar values, ambition, and drive for excellence, which Peach has clearly displayed over the last 20 years.
I would like to acknowledge the exceptional work of Lee Cash, Hamish Stoddart and Jo Eames, as the founders of Peach, for creating an industry leading collection of premium gastro pubs."
18 October 2022
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