Increasing costs and slow profit maturation at Revolucion De Cubas dampened adj EBITDA
Companies: Revel Collective PLC
Shares in Revolution Bars fell 33% on Friday after the Fledgling-listed company warned investors that its full-year adj EBITDA would now be flat year on year, 15% below previous forecasts, following increased sector-wide cost headwinds from the impact of the living wage, the apprenticeship levy, and increased business rates.
The roll-out bar chain said sales performance had been positive in H2, with LFL sales growing by 1.7% and gross margins remaining as expected, however, the company added the five new Revolucion De Cubas that it had opened in the past 12 months were taking longer to mature to profitability.
Broker finnCap said it was withdrawing its forecasts pending an update from management, but added that sector news flow would not be helping, citing recent commentary on real wage growth:
"While management report that gross margin remained as expected, widely reported sector cost headwinds (wage inflation, apprenticeship levy, business rates) have had an impact during H2."
The share price collapse of 33% might seem overdone for a 15% fall in EBITDA, but there is an uncertain political climate, costs and inflation are on the rise, financial markets are at all-time highs, and many equities are trading at elevated levels at the moment.
The company said its Directors remained confident of the underlying strength and reiterated plans to open six new bars in the next financial year:
"The Directors remain confident in the underlying strength of the business, its brands, the strong customer proposition and the business's capability to deliver high returns on invested capital. Consequently, it remains the plan to open six new bars in the next financial year."
