Embattled bar operator Revolution Bars (RBG:AIM) has delivered yet another profit warning and suspended its dividend amid weak trading, causing the shares to plummet 16.3% to an all-time low of 66.5p.
Revolution Bars has suspended the dividend to prioritise investment in its estate and cut bank borrowings. There is currently no indication when the dividend will be re-introduced.
SLOW START TO SECOND HALF
The firm, which owns the Revolution and Revolucion de Cuba brands, says a slow start to second half trading means adjusted earnings will now be between £11m and £12m in the year to 30 June.
This is the second warning in 2019 after adjusted earnings guidance was downgraded to £12m against analysts’ forecasts of £16m last month.
Unfortunately, an uplift in Christmas trading could not offset the impact of higher costs and declining sales outside of the festive period.
In the half year to 29 December, life-for-like sales declined 4%, which has been blamed on under investment in the business, management instability and a scorching summer.
In the eight weeks to 23 February, trading has been disappointing with like-for-like sales falling 7.3%.
The temporary closure of three Revolution sites, a later half term holiday and, probably least credibly, Valentine’s Day not coinciding with student events on Wednesdays joined the list of excuses for the weak performance.
WHAT IS BEING DONE TO BOOST TRADING?
Revolution Bars wants to deliver annualised cost savings of £1.5m and spruce up bars under the Revolution brand as new and refurbished sites have been delivering an uplift in performance.
In a bid to improve trading, the firms also wants to speed up service, innovate its food and drink menus and launch a new Revolution website to boost online bookings.
Peel Hunt’s Douglas Jack has cut annual pre-tax profit forecasts by £1m to £3m, but says the company is taking the making the right call by focusing on investment instead of expansion and dividends.
