As previously reported by The Morning Advertiser (MA), an update on 25 September revealed Revolution Bars Group was assessing the potential impact of the Government’s latest restrictions and exploring options such as the downsizing of its estate through a CVA.
Now, a statement from the operator of 73 sites under its Revolution and Revolución de Cuba brands has announced a CVA has been launched in order to scale back its portfolio and rental cost base as well as improve the group’s profitability and return on capital.
After a review identified 13 sites that were considered to be either underperforming, over-rented or not expected to generate future profitable returns going forward, the CVA proposal includes reducing Revolution Bars Group’s estate of Revolution branded bars from 50 to 44 and obtaining improved rental terms for seven others.
Revolution Bars Group confirmed ts remaining 37 Revolution bars, as well as its estate of Revolución de Cuba sites and four Revolution branded bars operated by other entities, would be unaffected by the CVA, as would the broader group’s AIM listed status.
What’s more, as part of the proposals Revolution Bars Group will write-off half of the £30.9m debt owed by its subsidiary.
If the proposals are accepted, the group estimates its annual cash flows will improve by approximately £2m per annum over the next two years.
Extended period of distress
Revolution Bars Group reported sales in the eight weeks from when its sites resumed trading on 4 July to 29 August were 72.5% of 2019’s takings, and that in the subsequent three weeks sales climbed to 77.8% of last year’s numbers.
However, in the last five weeks to 24 October, trading has reduced to less than half (49.4%) of 2019’s level due to the 10pm curfew and more recently localised lockdowns.
"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,” chief executive Rob Pitcher said of the announcement.
“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."
The update from Revolution comes after the group revealed on 5 June that it intended to raise up to £15m through share placings in a bid to weather the ongoing crisis and prepare for life after lockdown.
What’s more, the operator secured a £16.5m loan under the Government’s Coronavirus Large Business Interruption Loan Scheme (CLBILS) in May.
Subject to the CVA proposals being agreed on 13 November, it is expected Revolution Bars Group will report its results for the 52 weeks ended 27 June on 17 December before its AGM on 22 December 2020.