Last checked at 27 Oct 2020 07:00
27 October 2020
Revolution Bars Group Plc
("RBG" or the "Group")
Launch of CVA in subsidiary entity
Revolution Bars Group plc ("Group"), the leading operator of 73 premium bars trading across the UK under the Revolution and Revolucion de Cuba brands, today announces that, following a review of its strategic options, one of its subsidiary entities, Revolution Bars Limited ("RBL" or the "Company"), has launched a company voluntary arrangement ("CVA"), in order to reduce the size of its estate and rental cost base and improve the profitability and return on capital of the Group over the long-term. The Group's Revolucion de Cuba branded bars and four Revolution branded bars operated by other entities in the Group are unaffected by the proposal. Furthermore, there is no impact on RBG with respect to its AIM listed status.
Background and trading update
Since the UK Government's enforced closure of bars in March 2020, the Group's management has undertaken significant and meaningful initiatives to protect the Group's ongoing viability. These have been covered extensively in previous announcements but include taking advantage of all relevant government support, management salary reductions, deferment of PAYE and VAT liabilities, a substantial increase in bank debt facilities, and an equity fundraising. Management have also sought to engage with the Group's landlords and gradually over the last seven months, a sharing of the rental burden has been agreed by approximately two thirds of landlords for which the Board is very grateful. These arrangements cover a wide spectrum, but many comprise lease extensions or the removal of tenant break options in return for short term rent relief.
The Group has reported previously that *comparable venue sales in the 8 weeks from when it commenced the reopening of its bars on 4 July 2020 through to 29 August 2020 were 72.5% of last year, ahead of the level anticipated by the Board at the time of the announcement of its equity fundraising. In the subsequent three weeks, *comparable venue sales remained buoyant at 77.8% of last year, but in the last five weeks to 24 October 2020 have reduced to 49.4% due to the imposition of the 10pm curfew and more recently localised lockdowns, with more severe operating restrictions now affecting many of the Group's reopened bars.
Given the latest Government restrictions under which the Group is operating, the Group's trading outlook is uncertain and based on all the information and commentary available, the Board now anticipates that the important Christmas trading period will be severely compromised and any return to near normal levels will not be possible before next Spring at the very earliest. When trading conditions return to more normalised levels it will be crucial for the Group to be able to recover quickly, return to cash generation and be appropriately structured for the long-term. Accordingly, the Board believes that it is in the best interests of all stakeholder groups for it to now propose a restructuring of certain of the Group's property interests through a CVA of one of its subsidiary entities RBL.
As a result of the uncertain trading outlook and macro-economic environment, the Board is unable to provide reliable guidance for the current financial period (to June 2021) at this stage.
Launch of CVA for RBL
RBL operates 50 Revolution branded bars. The CVA proposes to reduce the size of RBL's estate by 6 bars and reduce its rental cost base, thereby improving the profitability and return on capital of the Group over the long-term.
A comprehensive review of the RBL portfolio has identified 13 trading sites that are either:
· significantly underperforming due to their location and local trading conditions;
· significantly over-rented;
· not expected to generate future profitable returns going forward, or
· subject to a combination of all three above factors.
Under the terms of the proposed CVA:
· RBL expects to exit six bars and obtain materially improved rental terms on seven others. Where, improved rental terms are being sought, landlords will have the option to terminate the lease at various junctures over the next two years;
· The remaining 37 bars in the RBL portfolio will not be materially affected. These bars either benefit from Group guarantees, are considered strategic to the brand, and/or rental mitigation has been agreed with landlords in recent months;
· If approved and successfully implemented, the RBL business is expected to comprise approximately 44 bars;
· No claims other than those of certain landlords and inter-company liabilities are to be compromised.
· The rights and entitlements of all trade suppliers, HMRC and employees will not be affected by the proposals; and
· As part of the proposals, the Group will write-off 50% of the £30.9m debt owed by RBL to RBG, which will materially strengthen RBL's balance sheet.
The nominees for the CVA will be Clare Kennedy, Peter Saville and Catherine Williamson of AlixPartners LLP.
The attendant RBL creditors' meeting is scheduled to take place on 13th November 2020.
If the CVA proposals are accepted, the Group estimates that its annual cash flows (before one-off costs of implementing the CVA) will improve over the next two years by approximately £2.0m per annum. The CVA will not affect the ordinary course operations of the rest of the Group, which continues to trade as a going concern.
The proposals reflect the Group's proactive approach to ensuring a long-term sustainable business for all its stakeholder groups in the face of unprecedented, extended disruption to the UK's leisure and hospitality sector caused by COVID-19.
Group Banking facilities
The Group's lender, NatWest, has agreed to waive the defaults that arise from the CVA which would otherwise mean that the Group is in breach of certain undertakings under both its Revolving Credit Facilities and its CLBILS loans (both together the "Facilities") if the CVA proposals are accepted. Under the Facilities, the Group is also required to comply with minimum liquidity headroom levels, measured monthly, until the end of the Facilities. NatWest has also agreed to amend those headroom levels in certain months in order to ensure that the Group maintains sufficient headroom above the minimum liquidity requirements throughout the remaining term of the Facilities.
Future announcement dates
Subject to the CVA proposals being agreed on 13 November 2020, it is expected that the Group will report its Final results for the 52 weeks ended 27 June 2020 on 17 December 2020 and the Group's AGM will be held on 22 December 2020. As a result of the delay in the publication of the financial results of the Group as a consequence of the CVA proposals, the Company will be unable to propose at the AGM the resolutions to receive the Annual Report and Accounts in respect of the year ended 27 June 2020, to appoint the auditor and to authorise the Directors to determine the auditor's remuneration. A separate general meeting will therefore be convened as soon as is practicable after the AGM to deal with these items of business.
*comparable venue sales are sales at only those venues that traded on the same day in both the current year and last year reporting periods.
Commenting on the announcement, Rob Pitcher, Chief Executive said:
"Throughout this extended period of distress caused by COVID-19, the Group has sought to prioritise the health and well-being of its staff and customers, minimise its cash consumption, maintain good levels of liquidity to ensure its ongoing viability and to be in a position to take advantage of opportunities that may arise once restrictions are lifted. The CVA proposed by the Group's Revolution Bars Limited subsidiary entity, if agreed by landlords, is another proactive step to lower outgoings to help safeguard the future of the Group and improve long-term performance."
Enquiries:
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Notes
1. A CVA, or company voluntary arrangement, is a legal process that allows a company to reach a compromise or settlement agreement with some or all its creditors. Most CVAs are structured to close outlets, reduce rents and change lease terms with landlords
2. The statutory entity "Revolution Bars Limited" ("RBL") as at 26 October 2020 comprised 50 Revolution branded bars.
This announcement contains inside information within the meaning of the Market Abuse Regulation. The person responsible for arranging release of this announcement on behalf of Revolution Bars Group plc is Mike Foster, Chief Financial Officer.