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Revolution Bars blames new sites as it lowers full-year guidance

The five new Revolucion de Cubas opened in the past year or so have taken longer to reach full profitability than expected
revolution bar
The five new Revolucion de Cubas opened in the past year or so have taken longer to reach full profitability than expected

Shares in Revolution Bars Group PLC (LON:RBG) stumbled on Friday after the bar and restaurant chain said adjusted underlying earnings would miss expectations this year.

Revolution blamed the five new Revolucion de Cubas it has opened in the past year or so, saying that although underlying sales are on track, the bars are taking longer to reach full profitability than originally anticipated.

A couple of other issues have also hampered the second half performance so far.

Revolution had to close two of its “key” sites (Blackpool and Cardiff) for a couple of weeks while they were refurbished, while it has also had to deal with “well-publicised sector cost headwinds”.

The London-listed group said the costs from things like the living wage, the increases to the minimum wage and the rise in business rates will be more than originally anticipated this year.

Given all this, Revolution said adjusted EBITDA (underlying earnings) for the year to 30 June would be broadly flat on the £15.6mln it posted in 2016. City analysts had expected a figure closer to £17.9mln.

The slower-than-expected ramp-up to profitability of the new bars hasn’t affected the group’s expansion plans going forward though and it still expects to open six more sites in the next financial year.

Cost increases should've been seen 'a mile off'

Hargreaves Lansdown analyst Nicholas Hyett has been critical of Revolution's top brass, who he thinks should've budgeted for the cost increases.

“The announcement comes just two weeks after the appointment of a new interim CFO and is being blamed on cost headwinds such as the living wage, minimum wage and apprenticeship levy that frankly the group should have seen coming a mile-off,” said Hyett in a note to clients.

“That said, Revolution remains highly cash generative and new openings are set to continue. If the group can rectify its budgeting problems quickly that trend should continue.”

Shares were down 39%, or 79p, to 125p.

--Updates for analyst comment and share price--

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Revolution Bars Timeline

July 06 2015
February 17 2015

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