The company said it expected Christmas trading to be ‘severely compromised’ by ongoing social distancing restrictions thanks to the coronavirus pandemic. The bar closures would come through a company voluntary arrangement (CVA).
Revolution shares have lost about 86% of their value this year as investors deserted the stock in the face of the UK's national clampdown on socialising since the virus outbreak emerged. The share price sank another 4% on Tuesday, to 9.5p, on the firm’s grim festive forecast.
CURFEWS IMPACTS TRADING
Today’s announcement confirms the 23 September press release that the board was contemplating a CVA after the government introduced late night 10 pm curfews and regional lockdowns impacted trading.
The summer respite and Eat out scheme which saw trading back to 77.8% of prior year levels seem like a distant memory with comparable trading in the five weeks to 24 October down to 49.4%.
Under the proposed CVA the company will restructure some of the sites owned by one of its subsidiaries Revolution Bars Limited (RBL), which operates 50 Revolution branded bars.
Six will close and seven will see ‘materially improved’ rental terms, although in return landlords will have the option to terminate the lease at various junctures over the next two-years.
IMPROVED CASH FLOW
The company intends to write-off 50% of the £30.9 million debt RBL owes to the group which it says will ’materially strengthen RBL’s balance sheet’. If the proposal is approved by creditors on 13 November the company estimates a £2 million improvement in annual cash flows over the next two-years before costs.
The group’s lender Natwest Bank has agreed to waive the defaults which would arise from the CVA and otherwise put the group in breach of certain conditions under the revolving credit facilities. Natwest has also agreed to amend the minimum headroom requirements overt the remaining term of the facilities.
Final results for the year ended 27 June are now expected to be released on 17 December with the annual general meeting on 22 December. The delayed results mean the company will have to convene a separate general meeting to approve the report and accounts, appoint directors and approve the auditor’s remuneration.