Revolution Bars Group plc
Annual Report and Accounts 2017
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CONTINUED GROWTH
WE ARE A LEADING
OPERATOR OF PREMIUM BARS...
...with two strong brands, “Revolution” and “Revolución de Cuba”. We have a
strong national presence across the UK and significant growth opportunities.
We currently trade from an estate of 69 bars located predominantly in town
or city centre high streets.
Our bars focus on a premium drinks and food-led offering and typically trade
from late morning through to late evening.
Our journey to continued growth...
ONGOING
GROWING NEW SITES
Six new bars have opened in
FY17 and are trading well.
2017
CONTINUED OPERATIONAL PROGRESS
Attractive premium brands positioned for
growth, with constant innovation ensuring
a differentiated customer proposition.
Contents
Strategic report
Corporate statement
Highlights
At a glance
Chairman’s statement
Chief Executive Officer’s statement
Our markets
Our business model
Our strategy and KPIs
Principal risks
Financial review
Corporate and social responsibility statement
Corporate governance
Introduction to governance
Board of Directors
Senior management
Corporate governance report
Remuneration report
Audit Committee report
Nomination Committee report
Directors’ report
Directors’ responsibility statement
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96
Financial statements
IFC
Independent auditor’s report
Consolidated statement of profit and loss
and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flow
Notes to the consolidated financial information
Company statement of financial position
Company statement of changes in equity
Company statement of cash flow
Notes to the Company financial information
Corporate information
>
Find out more information at:
www.revolutionbarsgroup.com
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01
HIGHLIGHTS
FINANCIAL HIGHLIGHTS
Strong financial performance
> Revenue of £130.5 million (2016: £119.5 million),
an increase of 9.2 per cent
> Positive like-for-like** sales of +1.5 per cent
> Adjusted EBITDA*** increased by £2.1 million to
£15.1 million (2016 Restated*: £13.0 million)
> Profit before tax of £3.6 million (2016 Restated*:
£5.1 million); adjusted profit before tax*** of £9.3 million
(2016 Restated*: £7.4 million)
> Gross margin improved by 82 bps
> EPS of 8.2 pence (2016 Restated*: 8.8 pence); adjusted
EPS*** of 14.2 pence (2016 Restated*: 11.7 pence)
> Final dividend of 3.3 pence per share
(2016: 3.3 pence per share)
Estate development
> Six new sites opened in the year and are trading well
> Existing estate well invested and constantly evolving
through innovation to maintain premium positioning
Current trading
> Like-for-like sales for first quarter of current year +0.3 per cent
> Six new sites planned for the year to 30 June 2018, of which
four are expected to open in H1
Revenue £m
£130.5m
Gross margin £m
£99.4m
17
16
130.5
119.5
17
16
99.4
90.0*
Adjusted EBITDA £m***
Adjusted PBT £m***
£15.1m
£9.3m
17
16
15.1
13.0*
17
16
9.3
7.4*
Profit after tax £m
£4.1m
17
16
4.1
4.4*
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior year adjustments included
in respect of the profit for the 53 weeks ended 2 July 2016.
** Like-for-like sales are defined as total retail sales from bars that have traded continuously for at least 12 months.
*** Adjusted EBITDA excludes exceptional items and bar opening costs (see reconciliation table on page 18 of the Financial Review).
The company has an accounting reference date 30 June and prepares accounts to
the Saturday closest to this date. Throughout this report references to “2016”,
“FY16”, “Year ended 30 June 2016” and “30 June 2016” relate to the 53 week period
ended 2 July. When discussing performance in the period to 2 July 2016 when
referring to the position at the end of period references to “2015”, “FY15”, “Year
ended 30 June 2015” and “30 June 2015” relate to the 52 week period ended 27 June
2015 when discussing performance in the period and to 27 June 2015 when referring
to the position at the end of the period. When discussing LFL metric the prior period
comparison have been adjusted to reflect an equivalent 53 week period.
Revolution Bars Group plc Annual Report and Accounts 2017 2018
NEW SITES
The first of six new sites
planned for the new financial
period opened in Belfast in
the third week of July. Belfast
Revolución de Cuba has
achieved the highest sales
levels of all venues opened
in the last two years and has
averaged £80k per week over
the first nine full weeks of trading.
Three Revolutions are scheduled
to open in Solihull, Inverness and
Putney before Christmas and two
Revolución de Cubas are expected
to open in the second half. The
new venue pipeline is building very
strongly and contracts have already
been exchanged on a further
two sites to open in the following
financial period.
Belfast
03
STRATEGIC REPORT
AT A GLANCE
Strong cash generation and investment to
deliver rollout of both the Revolución de Cuba
and Revolution brands.
New Revolución de Cubas at Harrogate, Aberdeen, Reading and Glasgow were
opened in the first half of the period, and were followed by two new Revolutions
in Southend and Torquay in the final quarter.
Total sales increased +9.2%
Currently trading from
£130.5m
69 sites
New Revolution
bars in 2017
New Revolución de
Cuba bars in 2017
Our Revolution bars have been trading since
1996 and are a destination of choice for
customers who value a premium drinks and
food-led offering.
Customers
59% female
Operational priorities
> Consistently providing outstanding
service and unbeatable quality
to our customers.
Each Revolution bar has its own character,
individual design and layout, with bar interiors
tailored on a site-by-site basis to utilise the
space available and the best attributes of the
architecture of each bar.
The success of our Revolution brand is driven by
our customers’ desire to be entertained outside
of their homes in highly invested, exciting, quality,
contemporary environments. The principal
revenue streams are generated from our wide
range of premium cocktails and drinks and our
lunchtime and evening food offerings.
Content – mainstream
“feel good” music
> Substantial training investment
driving service performance.
Drinks – wide premium
cocktail and drinks range
> Constantly innovating to ensure
that we offer our customers a
market-leading range of
cocktails and spirits.
> Rollout of the brand in selective
high street locations throughout
the UK.
The bar design differs from the Revolution
concept, with Revolución de Cuba bars being
characterised by their 1940s Cuban-inspired
style, with dark woods, traditional bar counters,
antique tiles, vintage furniture, Havana-style
ceiling fans and original Cuban artwork and
photographs, with each bar tailored to give
it an individual character.
The success of our Revolución de Cuba brand
is driven by the Cuban-inspired premium
proposition offering cocktails, food and live music
to a wide range of customers. The principal
revenue streams are generated from our rum-led
cocktail range coupled with a Spanish and
Mexican-based tapas-inspired food menu and
authentic live Latin music and entertainment.
Customers
66% female
Operational priorities
> Consistently providing outstanding
service and unbeatable quality
to our customers.
Content – live Cuban/
Spanish bands
> Providing ongoing training to
our people to offer the highest
service standards.
Drinks – rum-led cocktail
range and Mexican and
Spanish beers
> Rollout of the brand in selective
high street locations throughout
the UK.
Revolution Bars Group plc Annual Report and Accounts 2017 04
STRATEGIC REPORT
CHAIRMAN’S STATEMENT
The clear and focused strategy, the quality of our sites and proposition, and the talent
within the Group leave the business well placed for further growth in 2018.
The scale and strength of our new venue pipeline and the excellent returns achieved
by new venues opened in the last two years mean that the business can be confident
about achieving its growth targets going forward.
Summary
> The Board paid an interim dividend
this year of 1.65 pence per share
(2016: 1.5 pence per share).
> Subject to approval at the
Company’s annual general
meeting, we will pay a final
dividend of 3.3 pence per share
(2016: 3.3 pence per share).
As the Chairman of Revolution Bars
Group plc, it is my privilege to introduce
this, our third annual report and accounts
for the 52 weeks ended 1 July 2017.
Our business
The strategy of the Group is to provide
high-quality retail brands in the leisure sector.
Our business comprises two strong brands:
Revolution, which is focused on young adults,
and Revolución de Cuba, which is focused on
a broader age range. Whilst both businesses
are wet-led, food is an important part of our
growth and of our appeal to both customer
groups. Our strategy for growing the business
is to be customer focused, continually striving
to provide a better experience both in terms
of product offering, ambience and facilities
leading to repeat visits and driving like-for-like
sales. The Group is additionally focused on
growing its footprint and number of premium
bars by seeking new sites in good locations,
and investing capital to deliver good returns.
This year we opened six new venues, four of
which were Revolución de Cubas. Two years
ago, Revolución de Cuba traded from only
five venues but, including Belfast, which
opened shortly after the period end, the
brand now trades from 14 venues and has
the potential for further significant growth
in the number of trading units.
At the beginning of the period, the Group
operated from 62 venues (53 Revolutions
and nine Revolución de Cubas). During the
reporting period there were six openings and
we temporarily closed one venue in May but
reopened it in September 2017, and therefore
the Group traded from 67 venues at the end
of the reporting period.
Our results
Our reported results show good progress
against the prior period, with sales growth
of +9.2 per cent and even stronger growth in
adjusted EBITDA*** at +16.0 per cent against
the restated figure for the prior period. We
consider adjusted EBITDA*** to be the key
measure that best represents the business’
underlying performance as it excludes
exceptional items and bar opening costs
that are a function of the timing of the new
venue development programme rather
than the underlying trade. Last year’s
adjusted EBITDA*** has been restated from
£15.6 million to £13.0 million. Operating
profit was £3.7 million (2016 Restated*:
£5.3 million) but this was after charging
exceptional items of £4.3 million (2016
Restated*: £1.4 million).
During the year, there was significant change
within our finance team. This included the
Chief Financial Officer, Sean Curran, and the
Group Financial Controller, who had both
been with the business for over ten years,
both leaving the Group. Chris Chambers
replaced Sean in the autumn of 2016 but
resigned shortly thereafter in February 2017.
Mike Foster joined the business in March
2017, initially as interim Finance Director,
before being appointed to the Board and
as the Group’s Chief Financial Officer in
early June 2017.
The new team’s initial focus was to assess
the forecast results for the current period.
This review resulted in the trading update
that was released on 19 May 2017. The
current finance team has strengthened
and upgraded the systems and processes
of the finance function. Additionally, a
detailed review has been undertaken of
the application of the Group’s accounting
policies and practices. This review has
resulted in a restatement of the prior
period’s results.
Revolution Bars Group plc Annual Report and Accounts 2017 05
Recommended cash offer for
the Group
Following the Group’s trading update in
May 2017 updating investors on lower than
anticipated profitability for the full year ended
1 July 2017, and the resulting drop in the
Group’s share price, Stonegate Pub Company
Limited (“Stonegate”) made an approach to
acquire the Group. On 24 August 2017, the
Board recommended Stonegate’s cash offer
of 203 pence per share, which represented
a 62.4 per cent premium to the share price
prior to the commencement of the offer
period on 31 July 2017. It is expected that
the Group’s shareholders will vote on the
recommended cash offer from Stonegate
on 17 October 2017.
The Board is also engaged with Deltic
Group plc (“Deltic”) as a possible offeror
for the Group. Deltic has outlined a merger
proposal, which the Board has rejected due
to significant concerns regarding both value
and deliverability. Deltic has indicated that,
in order to put forward its merger proposal
and discuss it with the Group’s shareholders,
it will in due course publish its own profit
forecast and a quantified financial benefits
statement in respect of a merger. In parallel,
Deltic has also stated that it continues
to evaluate a possible cash offer for the
Group. The Takeover Panel announced on
21 September 2017 that Deltic must either
announce a firm intention to make an offer
for the Group under Rule 2.7 of the City Code
on Takeovers and Mergers, or announce
that it does not intend to make an offer,
by 5.00 p.m. on 10 October 2017. Deltic
is continuing to perform due diligence on
the Group, and the Board is committed to
ensuring that the interests of shareholders
are best served.
generation and long-term earnings potential
of the Group whilst retaining sufficient capital
to fund investment to grow the business.
However, in light of the restatement of profits
relating to earlier periods and the lower level
of underlying earnings for the current period
relative to original expectations, the Board is
proposing a final dividend of 3.3 pence per
share (2016: 3.3 pence). This will result in the
dividend for the full year being at 4.95 pence
per share, an interim dividend of 1.65 pence
per share (2016: 1.5 pence) having been
paid on 6 April 2017.
The final dividend is subject to approval at
the Company’s annual general meeting and
would ordinarily be expected to be paid on
7 December 2017. However, if the Stonegate
acquisition of the Group completes prior to
the annual general meeting taking place, the
dividend will not be payable.
Stonegate will have the right to reduce
the amount of consideration payable for
each Revolution share by the amount of
any dividend (or other distribution) which
is paid or becomes payable by Revolution
to Revolution shareholders before the date on
which the proposed scheme of arrangement
becomes effective, which is expected to
be on or about 23 October 2017. Based
on the expected timetable, therefore, it is
not anticipated that any dividend (or other
distribution) will be paid or that the offer
price will be reduced.
If Stonegate does exercise its right to reduce
the amount of consideration payable for
each Revolution share by the amount of any
dividend (or other distribution) that has not
been paid, Revolution shareholders will be
entitled to receive and retain that dividend
(or other distribution).
Our Board
Our people
As previously noted, Chris Chambers
resigned from the Board in February 2017.
Mike Foster was appointed as Chief Financial
Officer (and to the Board) in early June 2017.
We also welcomed Jemima Bird as a
Non-executive Director in December 2016.
Our dividend
To date, the Board has adopted a progressive
dividend policy reflecting the cash flow
The Group has a skilled workforce as
well as experienced senior and regional
management teams with proven credentials
in the industry. Strong cohesive teams have
been built across our businesses with a
focus on staff training and development to
continuously improve individual capabilities
and trading performance. I would like
to recognise the commitment and the
substantial effort of all our employees
and thank them for their contribution to the
Group’s performance. It is their continued
dedication and commitment to the business
together with a clear strategic plan that is
integral to our achievements.
Our future
Given the recommended cash offer for
the business from Stonegate, it is likely that
the ownership of the Company will change
in the next few weeks. However, such an
event is not certain and, whatever the
outcome of the potential transactions,
the business is well placed to succeed.
We have two strong brands that are trading
well in a challenging market. In the first
quarter of the new period, like-for-like**
sales are +0.3 per cent and our first new
opening this year in Belfast has achieved
the best initial sales levels of all 12 openings
in the last two years, averaging £80k per full
week since opening.
The sector is facing some well-publicised
and significant cost headwinds: minimum
wage and living wage rate increases, the
introduction of the apprenticeship levy
and substantial increases in general rates
following the 2017 revaluation. Staffing
and recruitment may now also come under
pressure due to Brexit-related issues.
However, now that we have dealt with
the historical financial reporting issues,
and have improved reporting and controls
in place, we are better placed to be able
to rise to these challenges.
The scale and strength of our new venue
pipeline and the excellent returns achieved
by new venues opened in the last two years
mean that the business can be confident
about achieving its growth targets going
forward. The clear and focused strategy, the
quality of our sites and proposition, and the
talent within the Group leave the business
well placed for further growth in 2018.
Keith Edelman
Chairman
3 October 2017
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior year adjustments included in respect of the profit for the 53 weeks ended 2 July 2016.
** Like-for-like sales are defined as total retail sales from bars that have been trading continuously for at least 12 months.
*** Adjusted EBITDA excludes exceptional items and bar opening costs (see reconciliation table on page 18 of the Financial Review).
Revolution Bars Group plc Annual Report and Accounts 2017 06
STRATEGIC REPORT
CHIEF EXECUTIVE OFFICER’S STATEMENT
Customer loyalty is determined by many factors. We do not take anything for granted
with people in all areas of our business contributing fully to this goal.
Driving profit improvement from existing sites requires a focus on both sales and costs,
which is integral to the way that all our teams are managed.
Six openings are planned for the new financial period: three Revolutions
and three Revolución de Cubas.
Summary
> Positive set of results for the
financial year ended 1 July 2017.
> Existing site portfolio achieving
positive like-for-like sales** of
+1.5 per cent.
> Six new bars opened in the
reporting period and are
trading strongly.
I can report that the business has made
good operational progress during the
last reporting period. At the heart of that
progress is our focused strategy to:
> build customer loyalty, ensuring
that all visits to our venues are an
excellent experience;
> drive continued profit improvement
from existing sites; and
> expand the estate into new
profitable locations.
Building customer loyalty
Customer loyalty is determined by many
factors. We do not take anything for
granted with employees in all areas of our
business contributing fully to this goal.
> Our drinks purchasing team is
continuously seeking new products
and looking to premiumise, innovate
and evolve our customer proposition
through new products, service quality
and brand support. Cocktails, which
comprise 23 per cent of our total drink
sales by value, are a good demonstration
of the success of this team’s approach.
Our two brands currently list in the
region of 100 different cocktails and
change menus four times per annum to
ensure that there is always something
new. Last year we introduced more than
130 new serves.
> Our food development team is always
seeking to innovate with new dishes
and ways in which to make the service
delivery faster and more consistent. We
regularly introduce specials to determine
whether a new dish could become part
of the regular menu. In a small number
of venues, we are currently trialling a
reduced number of menu options with
encouraging results, delivering important
benefits such as reduced wastage, labour
savings and purchasing economies.
> Our people development teams are
continually enhancing training and
recruitment programmes to ensure
that we have front line staff capable of
providing outstanding customer service.
> Our sales and marketing teams promote
our proposition particularly well. By
getting close to and understanding our
customers, through both social media
and in our venues, they ensure that
our customers’ needs are fulfilled.
Our pre-booked revenue, which has
grown consistently year on year, is a
key driver of like-for-like sales. In the
reporting period, £17.1 million of our
income was pre-booked. We also monitor
standards very closely through customer
feedback scores and a “mystery visitor”
programme, and results are reviewed
weekly by the Senior Management Team.
> Our operations teams are ultimately
responsible for the business delivery,
and have to plan and co-ordinate the
right resources to ensure the customer
enjoys an excellent experience.
Revolution Bars Group plc Annual Report and Accounts 2017 07
Driving profit improvement from
existing sites
Driving profit improvement from existing
sites requires a focus on both sales and
costs, which is integral to the way that all
our teams are managed.
> Premiumisation of our drink and food
offerings and strong brand identities
differentiate our business model and
customer offer. We are conscious that,
in a challenging marketplace, we do
not overprice and therefore monitor
competitor prices very closely to ensure
we continue to be competitive and take
advantage of our premium positioning.
> Driving sales is the most important
activity of our sales and marketing
teams, which constantly produce new
campaigns and work with brand owners
to build promotions to drive footfall and
to encourage customers to increase
spend. For example, cocktail master
classes are very popular – in the last
year we achieved £4.7 million of
incremental sales and have recently
launched an online retail option for our
flavoured vodkas. During the year, we
recruited two corporate sales managers
to also develop this part of the market.
Their early results are encouraging and,
in particular, our Christmas bookings for
2017 are significantly ahead of last year.
> Our finance and IT teams play a critical
role in providing the systems and
reporting to facilitate running an efficient
business. Significant IT developments
have been undertaken in the year to
support the sales, operations and people
development teams. Our finance team
has had much to contend with in the
last year and it is now very clear that
our accounting systems and processes
were in need of upgrading. Improvements
have been made, and will continue to
be made, in this area to provide a more
robust financial infrastructure and in
so doing bring additional benefits.
> As ever, it is the operations team at the
“sharp end” of the business which drives
sales through outstanding operating
standards and marketing effectively to its
customers at a local level. Payroll is our
biggest cost and it has risen significantly
in recent years as a result of the increases
to minimum wage and living wage. Our
efforts to meet these structural challenges
have not been quick enough, but we are
introducing new systems that will result in
improved labour scheduling and better
control of this significant cost.
Expansion of our estate
Our property team is driving significant
value through its site selection and
property development activities. During
the reporting period, we opened two
Revolutions in Southend and Torquay and
four Revolución de Cubas in Harrogate,
Aberdeen, Reading and Glasgow.
Revolution in Macclesfield closed at
the end of May 2017 but reopened in
September 2017 after the period end.
Shortly after the period end we opened
a Revolución de Cuba in Belfast and
now trade from 69 venues (55 Revolutions
and 14 Revolución de Cubas).
Sales levels at the new sites have been
excellent. Our primary objective at opening
is to ensure that we provide an outstanding
customer experience and our venues are
resourced accordingly. Newly trained staff
are unable to achieve full efficiency initially,
but this strategy aims to ensure good
feedback scores and good word of mouth
marketing and achieve significant repeat
business. Additionally, there are significant
marketing costs associated with a launch,
and therefore new sites do not make a full
contribution in their first year of trading
(and, in some cases, can take a full year
to reach normal operating maturity and
efficiency). We believe this is the right
approach for the long-term health and
viability of these new venues, a belief
which is being borne out in practice by
the achievement of very strong returns
in the second year of trading.
Six openings are planned for the new
financial period: three Revolutions and
three Revolución de Cubas. Belfast
Revolución de Cuba opened in July and
new Revolutions are planned to open
before Christmas in Inverness, Solihull and
Putney. Two further Revolución de Cubas
are expected to open in the second half.
The property team has built a very strong
pipeline with three further sites that could
potentially open in the second half of the
current financial period, but given that our
developments are primarily funded from
internally generated cash resources, they
are planned for early in the 2018/19 financial
period. The pipeline being developed
beyond that is considerable and we would
expect to be able to open at least six sites
per annum for several years onwards.
Results
The year-on-year growth in total revenue
of +9.2 per cent and adjusted EBITDA***
of +16.0 per cent reflects good progress
despite the absorption of significant cost
headwinds affecting the whole sector.
Operating profit was £3.7 million (2016
Restated*: £5.3 million) but this was after
charging exceptional items of £4.3 million
(2016 Restated*: £1.4 million).
Employees and management teams
I would like to acknowledge the dedication
and commitment demonstrated by all
our employees.
The results of the Group represent a
collective effort and I would like to thank all
of our employees for their support during the
year and for their contribution to our results.
Mark McQuater
Chief Executive Officer
3 October 2017
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior year adjustments included in respect of the profit for the 53 weeks ended 2 July 2016.
** Like-for-like sales are defined as total retail sales from bars that have been trading continuously for at least 12 months.
*** Adjusted EBITDA excludes exceptional items and bar opening costs (see reconciliation table on page 18 of the Financial Review).
Revolution Bars Group plc Annual Report and Accounts 2017 08
STRATEGIC REPORT
OUR MARKETS
Significant growth in pipeline with
six openings confirmed for FY18
Market overview
With their combination of premium drinks, food
and entertainment, both of the Group’s brands,
Revolution and Revolución de Cuba, are well
placed to take advantage of market trends.
The market is moving towards premium products
with discerning customers willing to pay a little bit
more for premium brands and handmade cocktails
as a key element of their “night out”. With premium
spirits now accounting for half of all spirit sales
and with cocktails, as a category, forecast to continue
strong growth through 2018, the premium positions
of the Group’s brands are clearly aligned with
market trends.
The Group seeks to operate, through both of its
brands, at the premium end of each local market it
serves. Use of branded products, premium pricing
and a highly invested, quality environment appeals
to aspirational customers, particularly females.
Our locations
We currently operate 69 bars across the UK under
both the Revolution and Revolución de Cuba
brands. With our bars being situated in town and
city centre locations, we believe there is significant
scope for expansion.
Revolution
Revolución de Cuba
Large headroom available in the
UK for new sites with a potential
of 150 over both brands
150
2017
WELL INVESTED ESTATE
With £12.8 million capital expenditure in the year,
split between:
2017 openings
2018 openings
Existing state
Total
£m
6.8
1.8
4.2
12.8
Largest category growth
in premium cocktails
+23%
Growth of Revolución de Cuba
estate in the reporting period
+44%
Digital marketing
grown significantly
Facebook fans
+25%
Website visits
+13%
1
Northern
Ireland
3 / 2
Scotland
7 / 3
North East
14 / 2
North
West
10 / 2
Midlands
2 / 1
Wales
12 / 3
South East
7
South West
Revolution Bars Group plc Annual Report and Accounts 2017 Southend
The pipeline being developed
is considerable and we would
expect to be able to open at
least six sites per annum for
several years onwards.
Aberdeen
Mark McQuater
Chief Executive Officer
10
STRATEGIC REPORT
OUR BUSINESS MODEL
The Group’s business model balances strong cash
generation with investment to deliver a rollout of both
the Revolución de Cuba and Revolution brands.
What we do
Revolution Bars Group plc is a leading operator of premium bars, with a strong national
presence across the UK and significant growth opportunity. We have a trading portfolio of
69 bars located predominantly in town or city centre high streets and operating under the
Revolution and Revolución de Cuba brands.
1
Skilled people
The Group’s training and development
activity ensures that we maintain a strong
pipeline of managers to lead and grow
the business. A variety of development
tools, maximising technology where
appropriate, combined with our ACE
Customer Service training programme,
take people from learning about our
purpose, vision and values at induction
through to mastering a range of brand
standards that ensure quality and
speed of service are a focus for all
team members.
4
Compelling marketing
The Group is one of the leaders
in the sector at communicating
and marketing to its customers.
Our significant digital presence
monitors and is consistent with
the user habits of our core
customer group.
2
Premium products
The high value placed on our retail
brands by our core customer groups
drives significant levels of loyalty and
increases frequency of visits. Our
Revolution bars have been trading since
1996 and are a destination of choice for
customers who value a premium drinks
and food-led offering. The success of our
Revolución de Cuba brand is driven by
the Cuban-inspired premium proposition
offering cocktails, food and live music to
a wide range of customers.
3
National estate
We have a trading portfolio of
69 bars located predominantly
in town or city centre high streets
operating under the Revolution
and Revolución de Cuba brands.
We regularly review opportunities
for expansion against rigorous and
proven investment criteria.
OUR OPERATING PLATFORM
Two distinct brands
Tailored design and
individual layout
Outstanding
customer service
Premium quality
Revolution Bars Group plc Annual Report and Accounts 2017 2017
ATTRACTIVE POSITIONING
FOR GROWTH
Highly experienced management
team with proven track record.
12
STRATEGIC REPORT
OUR STRATEGY AND KPIs
Focused on a measured rollout of new bars under both brands
and delivering continued growth from the established estate.
CUSTOMER EXPERIENCE
PROFIT IMPROVEMENT
ESTATE EXPANSION
Strategic objectives
Strategic objectives
Strategic objectives
Provide our customers with an exceptional
and premium drinks and food experience.
Continued profit improvement from
existing sites.
Estate expansion through growth for
both brands.
Performance in 2017
Performance in 2017
Performance in 2017
> +23 per cent growth in premium cocktails
> Blended iced cocktails accounted for
11 per cent of cocktail sales
> New food specials range and fresher
food content
> Pre-bookings for Christmas ahead
of last year
> Improved drinks margin
> 16 consecutive quarters of like-for-like growth
> Significant digital growth:
> Four new Revolución de Cuba bars opened
> Two new generation Revolution bars opened
> Returns on capital investment projected
> Facebook fans up 25 per cent
> Website visits up 13 per cent
> 35 per cent growth in digital booking
with new Customer Relations
Management system
to comfortably exceed 30 per cent
> Additional 26,050 sq.ft. of trading area
> Scope for both brands to grow, Revolution
to 100 sites and Revolución de Cuba to at
least 50 sites
Future focus
Future focus
Future focus
Continued investment and design in the
brands, combined with food and drinks
innovation, to ensure we remain leading
edge with premium brands.
Continued improvement through a
programme of targeted efficiencies,
focusing on key cost lines,
principally payroll.
Our pipeline of new sites for FY18 looks
strong. We have opened a new Revolución
de Cuba in Belfast and we expect three
Revolution sites in Solihull, Inverness
and Putney to open before Christmas.
KPIs
The principal KPIs for the strategy outlined
above are as follows:
> like-for-like sales**;
> number of units;
> adjusted venue EBITDA***; and
> gross margins.
** Like-for-like sales are defined as total retail sales from bars that have been trading continuously for at least 12 months.
*** Adjusted EBITDA excludes exceptional items and bar opening costs (see reconciliation table on page 18 of the Financial Review).
Revolution Bars Group plc Annual Report and Accounts 2017 Aberdeen
2017
PREMIUM PRODUCTS
Continuously seeking to innovate
and evolve our products, service
and brand support.
14
STRATEGIC REPORT
PRINCIPAL RISKS
The Group believes that the principal risks and uncertainties faced
by the business are captured in the table below. Occurrence of any
of these risks or a combination of them may significantly impact
the business or impair the achievement of our strategic goals.
Underlying cause of risk
Response and mitigation
DEPENDENCE ON KEY SITES
The Group operates throughout the UK and therefore
has income sources from a geographically diverse estate.
Notwithstanding that, certain sites deliver more profit than
others and the Group’s profits are sensitive to this. A decline
in profitability in a key site would have an adverse impact on
Group profits and, in some cases, this could be material.
There are two mitigating actions to this risk. Firstly,
operational teams are focused on the maintenance of
profits of economically significant sites. Secondly, growing
the business, through the addition of new sites, enhances
the portfolio effect and reduces the Group’s exposure to the
fortunes of any particular site.
ACQUISITION OF NEW SITES
The Group’s strategy is based on growth through the
acquisition of new sites. Market expectations rely on the Group
sourcing and developing a number of suitable sites per annum.
Failure to identify the sites or to develop them commercially
would impact growth rates.
The development team has been expanded to ensure that
all pipeline opportunities are pursued. A wide selection of
property agents has also been briefed. Public company status
is seen as attractive to potential landlords, enhancing the
Group’s covenant, as is the Group’s low-debt balance sheet.
CONSUMER DEMAND
The eating-out and drinking-out markets are dependent on
consumers’ disposable income. Macroeconomic factors, such
as employment levels, interest rates and consumer confidence,
can be important influences on disposable income. Declines in
disposable income in the Group’s target market could adversely
impact the levels of demand and, hence, profitability.
DISCOUNTING
The Group retains the ability to tailor its offering to respond to
macroeconomic influences. Pricing, discounting, marketing and
promotions can all be adjusted quickly to respond to pressures.
Furthermore, the Group’s proposition is not based solely on
price. A more affluent demographic is targeted and, in so
doing, there is some down-side protection against adverse
macroeconomic factors impacting on disposable income and
consumer demand.
The Group operates in a market that is sensitive to the balance
between supply (licensed premises and related capacity) and
demand (from consumers). Imbalances can lead to competitive
discounting in local marketplaces and this can place competitive
pressures on the Group’s pricing structures. Should the Group
feel compelled to respond through discounting, operating
margins could be affected.
The risk of entering into a competitive discounting environment
is mitigated by the fact that the appeal of the Group’s brands
is not based on price. Environment, use of premium products,
innovative serves and entertainment all combine to attract
those customers who are willing to spend more. The risk of
discounting is therefore transferred, at least in part, to other
operators within the sector.
Revolution Bars Group plc Annual Report and Accounts 2017 15
Underlying cause of risk
HEALTH AND SAFETY
Response and mitigation
The Group’s venues are open to the public and the Group
has a duty of care to look after its customers. Failure to do so
through failure to operate the Group’s policies and procedures
effectively could lead not only to financial loss, but also to
negative associations with the brands.
The Group’s policies and procedures manual covers all aspects
of operations. Adherence to these is strictly enforced both through
internal operational line management and through external
third-party audits. Incidents are followed up and lessons are
reflected in the manual, which is updated from time to time.
LEASEHOLD RENTS
All of the Group’s operating sites are held on leases. Typically,
the rents under these leases are determined every five years
for each five-year period by reference to open market rents
prevailing at the time of the review. Most leases stipulate
upward-only increases. Increases in market rents coinciding
with rent reviews could impair the net profitability of the
relevant site, which could damage returns.
Market rents in each location are beyond the control of the
Group. To mitigate this risk, the Group employs specialist rent
review advisers, who deal only with tenant reviews. Further
mitigation is offered by the fact that rent reviews are spread
out geographically and in terms of timing, meaning that on
average one-fifth of the estate reviews are concluded each
year. This minimises the exposure to any rental market in
any specific location or at any point in time.
SUPPLIER CONCENTRATION
The drinks distribution market is dominated by one
significant business, Matthew Clark, which supplies the
Group. If Matthew Clark were to face business difficulties
or otherwise change its arrangements or pricing, then the
Group’s operations could be disrupted.
NATIONAL MINIMUM/LIVING WAGE
A significant proportion of venue-based staff, at any point in time,
are affected, directly or indirectly, by wage legislation. Above
inflation increases in wage rates could impair site profitability.
The proposed strategy is to tolerate the risk, principally based on
the Group’s assessment that Matthew Clark represents the best
supplier. Matthew Clark operates nationwide whereas other drink
wholesalers do not; it has a long history and good service record
with the Group; and the Group is an important customer.
Mitigation is in place through a four-year deal (signed April 2015)
giving continued surety of supply. Further mitigation is provided
through the Group’s principal commercial deals being with brand
owners and not, therefore, dependent on the identity of the
distributor. The Group has in place a contingency plan if required.
Whilst there have been wage increases above rates of inflation,
recent increases have been more in line with inflation and have
therefore been covered by increases in the sales prices paid by
the customer. Future increases in wage costs are expected to
be covered in the same way.
Revolution Bars Group plc Annual Report and Accounts 2017 16
STRATEGIC REPORT
FINANCIAL REVIEW
Revenue increases comprised part-year contributions from the six new sites opened during
the period, the annualisation of the five new sites opened in the prior period, as well
as an increased contribution from established sites.
Improvement in operating margin1 has been predominantly driven by improvements in profit
conversion from the five openings in the prior period and improved terms on a number
of product supply arrangements, which helped gross margin improve by 0.8 per cent.
The five venues opened in the prior period generated EBITDA in the current period
of £2.3 million, producing a return on capital of 32 per cent.
Summary
> Revenue for the year was
£130.5 million (2016: £119.5 million),
a 9.2 per cent increase compared
with the prior period.
> On a like-for-like** basis, sales
rose by 1.5 per cent.
> Adjusted EBITDA*** was £15.1 million
(2016 Restated*: £13.0 million),
which represents a 16.0 per cent
increase over the prior period.
Operating profit was £3.7 million
(2016 Restated*: £5.3 million)
but this was after charging
exceptional items of £4.3 million
(2016 Restated*: £1.4 million).
Prior period adjustments
Towards the end of the reporting period,
and following a thorough internal financial
review, it has come to light that certain
marketing expenditures were incorrectly
capitalised as short-life assets, and that
there had been an over-accrual of supplier
rebates at previous period ends. As a result,
the Board engaged PwC to undertake a
detailed independent review and report
on these items. This report was delivered
to the Board in August 2017. The correction
of these two items has resulted in a
restatement of the accounts for the 53-week
period ended 2 July 2016. In parallel with
the PwC work, the Audit Committee of the
Board decided that, ahead of the completion
of the consolidated financial statements for
the reporting period, a thorough review
should also be undertaken of the
application of the Group’s accounting
policies and practices. This has resulted in
the identification of a number of adjustments
that are required to be made in prior period
accounts. Many of these relate to 2016,
although some relate to earlier periods.
The adjustments are outlined in notes
to the announcement. In aggregate, the
effect of the prior period restatement is
to reduce net assets at 27 June 2015 by
£2.5 million. The cumulative effect of the
restatements was to reduce profit after
tax for the period ended 2 July 2016 by
£1.7 million, and to reduce net assets as
at 2 July 2016 by £3.3 million.
Throughout this report, the 2016
comparatives are described as "Restated",
which means they are adjusted for prior
period adjustments.
The restatements of the key comparative measures for the 53 weeks ended 2 July 2016
are set out below:
Statutory measures
Operating profit
Profit on ordinary activities before taxation
Profit and total comprehensive income for the period
Basic earnings per share (pence)
Non-GAAP measures
Adjusted EBITDA***
Adjusted operating profit***
Adjusted profit before tax***
Adjusted earnings per share (pence)***
As originally
published
£m
Restated
£m
7.3
7.1
6.1
12.1
15.6
9.3
9.2
14.6
5.3
5.1
4.4
8.8
13.0
7.6
7.4
11.7
1 Operating margin is adjusted EBITDA as a percentage of revenue.
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior year adjustments
included in respect of the profit for the 53 weeks ended 2 July 2016.
** Like-for-like sales are defined as total retail sales from bars that have been trading continuously for at least 12 months.
*** Adjusted EBITDA excludes exceptional items and bar opening costs (see reconciliation table on page 18 of the Financial Review).
Revolution Bars Group plc Annual Report and Accounts 2017 17
Revenue £m
£130.5m
Gross margin £m
£99.4m
Adjusted EBITDA £m***
£15.1m
17
16
130.5
119.5
17
16
99.4
90.0*
17
16
15.1
13.0*
Adjusted PBT £m***
£9.3m
Profit after tax £m
£4.1m
17
16
9.3
17
16
7.4*
4.1
4.4*
Results
Revenue for the year was £130.5 million
(2016: £119.5 million), a +9.2 per cent
increase compared with the prior period.
The revenue increase comprised part-year
contributions from six new sites opened
during the period and the annualisation of
five new sites opened in the prior period
as well as an increased contribution from
established sites. Revenue from like-for-like**
venues increased on the prior period by
1.5 per cent.
Operating profit was £3.7 million (2016
Restated*: £5.3 million) but this was after
charging exceptional items of £4.3 million
(2016 Restated*: £1.4 million).
The underlying result, as measured
by adjusted EBITDA*** was £15.1 million
(2016 Restated*: £13.0 million), an increase
of 16.0 per cent. This reflects an adjusted
EBITDA*** margin of 11.6 per cent of
revenue compared with 10.8 per cent in the
prior period (Restated*). This improvement
has been predominantly driven by
improvements in profit conversion from
the five openings in the prior period and
improved terms on a number of product
supply arrangements, which helped gross
margin improve by 0.8 per cent. This was
notwithstanding that food sales, where
margins are lower, increased their share
of total revenue from 13.6 per cent to
14.3 per cent due to the accelerated
expansion of the Group’s Revolución de
Cuba branded venues, where food sales
are a higher proportion of total revenue.
The improvements in gross margin are
also testament to our policy of offering a
premium drinks range and the introduction
of many new brands with significant
support from the brand owners.
The table below shows how adjusted EBITDA*** has moved forward in the constituent
parts of the estate.
Adjusted EBITDA***
Venues opened pre-July 2015
Venues opened in prior period
Venues opened in current period
Venue closed in period
Adjusted EBITDA from venues
Central support costs
Adjusted EBITDA
Number
of venues
56
5
6
1
2017
£m
19.4
2.3
0.8
(0.3)
22.2
(7.1)
15.1
2016
Restated *
£m
19.6
0.5
—
(0.1)
20.0
(7.0)
13.0
Despite like-for-like** sales growth and
improvements in gross margin, adjusted
EBITDA*** in the older estate has reduced
by £0.5 million, predominantly reflecting
the 53rd week in the 2016 period and on
an underlying basis with revenue growth
and margin improvements offsetting higher
than inflation cost increases on wages
and overheads.
Of the five venues opened in the prior
period, three opened in the first half and
two towards the end of the second half
(and the profit maturity at these sites is
very encouraging). Adjusted EBITDA***
excludes bar opening costs, meaning the
improvement is due to a combination of
annualisation of revenue, sales growth
post-anniversary of opening (included in
like-for-like** sales increase) and maturing
EBITDA conversion. As referred to in the
Chief Executive Officer’s report, our
primary objective at opening is to ensure
outstanding customer experience, and it
is entirely expected that revenue growth
is achieved post-anniversary and that
operating efficiencies improve significantly
over time. Average revenue per venue
for these five venues in the period was
£2.5 million, with adjusted EBITDA***
equating to 18.4 per cent of revenue. We
anticipate seeing further profit improvements
at these sites in the coming period and,
ultimately, for adjusted EBITDA***
conversion to exceed 20 per cent.
Six venues opened in the current period,
four Revolución de Cubas in the first half
and two Revolutions towards the end of the
second half. All have traded well achieving
total revenue in the year of £5.6 million
and adjusted EBITDA*** of £0.8 million,
which equates to 14.2 per cent of revenue.
Clearly this group of sites has yet to reach
full maturity, but we expect improvements
in the coming year that should also
approach an adjusted EBITDA***
conversion of 20 per cent.
Central costs represent 5.4 per cent revenue
compared to 5.9 per cent in the prior period.
The Group’s reported pre-tax profit
reduced to £3.6 million (2016 Restated*:
£5.1 million). The reported result for the
period has been significantly impacted by
exceptional items and bar opening costs
for new venues of £5.7 million (2016
Restated*: £2.3 million).
Revolution Bars Group plc Annual Report and Accounts 2017 18
STRATEGIC REPORT
FINANCIAL REVIEW CONTINUED
Results continued
The Board’s preferred profit measure is adjusted pre-tax profit, which excludes exceptional
items and bar opening costs, and on this basis adjusted pre-tax profit rose to £9.3 million
(2016 Restated*: £7.4 million), an increase of 25.1 per cent.
Reported pre-tax profit
Exceptional items
Bar opening costs
Adjusted pre-tax profit
Add back finance costs
Add back depreciation
Adjusted EBITDA
FY17
£m
3.6
4.3
1.4
9.3
0.2
5.6
15.1
FY16
Restated *
£m
5.1
1.4
0.9
7.4
0.1
5.5
13.0
Exceptional items and bar
opening costs
Exceptional items, by virtue of their
size, incidence or nature, are disclosed
separately in order to allow a better
understanding of the underlying trading
performance of the Group. Costs of
£4.3 million (2016 Restated*: £1.4 million)
were associated with the changes in
Chief Financial Officer, additional
resourcing to support the accounting
review, a fixed assets impairment charge,
an increase in the provision for onerous
leases and charges relating to the Long
Term Incentive Plan. The prior period costs
principally related to professional fees
associated with an aborted acquisition.
Bar opening costs refer to costs incurred
in getting new sites fully operational and
primarily include costs incurred before
opening and in preparing for the launch.
The Board believes that the performance
measures, adjusted EBITDA***, adjusted
operating profit*** and adjusted pre-tax
profit***, give a clearer indication of the
underlying performance of the business
as they exclude exceptional items and
bar opening costs that are a function
of the timing of the new venue
development programme rather
than the underlying trade.
Finance cost
Finance costs of £0.2 million (2016: £0.1 million)
relate to borrowings under the Group’s
committed revolving credit facility and also
include commitment fees relating to any
undrawn element of the facility and
the amortisation of arrangement fees
over the life of the facility. During the year,
the Group increased its credit facility to
£25 million to provide greater flexibility in
managing the timing of capital investments
so that good opportunities are not foregone
and also to provide headroom against
unforeseen short-term trading issues.
At the end of the period, loans of £7.5 million
(2016: £0.5 million) were outstanding on
the revolving credit facility.
Taxation
The current period shows a tax credit
of £0.6 million (2016 Restated*: charge
of £0.7 million) due to credits from earlier
periods more than offsetting the current
year tax charge. The corporation tax payable
on profits in the current period amounts
to £0.9 million (2016 Restated*: £1.1 million)
but is offset by a net deferred tax credit
arising from timing differences and
adjustments to prior periods of £1.4 million.
Capital expenditure and returns
on invested capital
The Group invested £12.8 million (2016
Restated*: £11.9 million) in total during
the period, of which £8.6 million (2016
Restated*: £6.5 million) related to new
venues and £4.2 million (2016 Restated*:
£5.4 million) related to developing and
maintaining the existing estate. £1.5 million
of the expenditure on new venues related
to the new Revolución de Cuba in Belfast
that did not open until the third week of
July 2017, just after the period end.
The five venues opened in the prior
period generated adjusted EBITDA*** in
the current period of £2.3 million. The capital
development cost for these five venues was
£7.1 million producing a return on capital
of 32 per cent during the current reporting
period (adjusted EBITDA*** divided by capital
cost). As indicated in the results section,
some of these venues opened at the end
of the prior period and their current period
performance does not reflect full maturity
of either sales or EBITDA conversion. Further
improvements in both sales and profit are
being achieved at these venues that will
drive the returns higher. The six venues
opened in the current year are following
a similar trading and maturity profile to
date and similar returns are expected.
Operating cash flow and net debt
The Group generated net cash flow
from operating activities in the period
of £10.0 million, £3.2 million less than the
prior period (Restated*). This was mainly
attributable to negative movements on
working capital and the payment of tax
of £1.1 million (2016 Restated*: £nil). Capital
investments of £12.8 million (2016 Restated*:
£11.9 million) and dividend payments of
£2.5 million (2016: £1.6 million) resulted in a
net cash outflow in the period of £5.4 million
(2016 Restated*: £0.4 million) and an opening
net cash position of £2.3 million moving to a
closing net debt position of £3.2 million.
Earnings per share
Basic earnings per share for the period
was 8.2 pence (2016 Restated*: 8.8 pence).
Adjusting for exceptional items and bar
opening costs results in an adjusted
earnings per share for the year of
14.2 pence (2016 Restated*: 11.7 pence),
an increase of 2.5 pence per share.
Dividend
The Board has recommended a
final dividend of 3.3 pence per share
(2016: 3.3 pence), which is to be proposed
at the Company’s annual general meeting
on 30 November 2017.
Mike Foster
Chief Financial Officer
3 October 2017
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior year adjustments included in respect of the profit for the 53 weeks ended 2 July 2016.
*** Adjusted EBITDA excludes exceptional items and bar opening costs (see reconciliation table on page 18 of the Financial Review).
Revolution Bars Group plc Annual Report and Accounts 2017 Glasgow
2017
PREMIUM PRODUCTS
Continuously seeking to innovate
and evolve our products, service
and brand support.
20
STRATEGIC REPORT
CORPORATE AND SOCIAL RESPONSIBILITY STATEMENT
The Group’s corporate social responsibility activities
prioritise our people, responsible retailing and charity.
People
The Group’s performance as an employer
is measured twice yearly through our
internal “Quality of Life” survey. In the
past year the results of these surveys have
been linked with our customer feedback
platform, in order to identify ways to not
only improve employee engagement but
to provide a direct link to how this can
enhance the customer experience.
The Group employs around 2,743 people
and, through its proven growth strategy,
is committed to creating more careers for
our teams. In order to support the retention
of our teams, our development activity
focuses on creating career paths from
every department within the business.
Our talent development activity ensures
that we maintain a strong pipeline of
managers to lead and grow the business.
This is evidenced by a detailed succession
plan and talent management programme,
enabling us to fill circa 70 per cent of our
management positions internally. Our
training utilises a variety of development
tools, maximising technology where
appropriate. We combine our e-learning
platform, ACE Online, and customer service
training programme to provide training to
all our employees from day one. These
tools take people from learning about our
purpose, vision and values at induction
through to mastering a range of brand
standards that ensure quality and speed of
service are a focus for all team members.
For those wishing to progress, our career
development path is clearly outlined in
My Career Portfolio (“MCP”), taking ambitious
team members from first-line supervisor
roles to General Manager and Area Manager
positions. Three times a year, we recruit
new talent to our Academy programme,
selected through an assessment centre
selection process; we ensure that the top
talent joins our next cohort of future managers
and induct them at a two-day development
centre, followed up by pairing them with a
dedicated mentor and regular reviews with
their General Manager. All management
groups within the operations team have
their own dedicated annual conference.
The purpose of these conferences is to
set the directive for the year to come,
to create a strong network amongst
peers and to ensure that the purpose,
vision and values of the business are
embedded into the actions taken on
the back of the events.
Using a blend of in-house and third-party
provision, the Group ran around 100 days
of classroom-based management
development training courses during
FY17, providing access to full-day training
courses to over 1,200 people. This was
supplemented by e-learning programmes.
The Company is committed to equal
opportunities and the elimination of
discrimination, harassment and victimisation
of employees. Of our workforce, 42 per
cent are female and 58 per cent are male.
In addition to competitive pay rates, it
creates a suite of reward and incentive
schemes, investing around 1 per cent of
turnover annually. Further, all employees
are able to join the Group’s stakeholder
pension plan, as well as obtain tax-efficient
childcare vouchers. All team members are
entitled to a 50 per cent discount on food
and drink purchased within our bars.
Food information and quality
People
Revolution Bars Group plc Annual Report and Accounts 2017 21
Responsible drinks retailing
The Group supports practices which
promote responsible drinking and has
established its own “Responsible Alcohol
Retailing Policy”, supported by staff training
and monitoring. The Group’s pricing models
are set so as to avoid deeply discounting
products. Events are promoted responsibly
and are accompanied by individual risk
assessments. A number of bars enter local
“Best Bar None” schemes (run by local
authorities and the police to encourage
good behaviour in town centres), promoting
a safe and secure environment.
Food information and quality
The Group continuously aims to improve
the quality of its food offering and provide
customers with the required information
about its product range to allow them
to make informed decisions about their
food consumption. This includes providing
allergen and calorie information for all
dishes via our website. Products not
containing gluten or meat are advertised
on the printed menu. Full training is provided
to bar teams to enable them to deal with
customer queries and prevent cross-
contamination. The Group sets out strict
specifications for all products so that high
standards of quality are met.
Charity
The Group has a programme designed
to promote charitable activity within its
workforce. The scheme, called “You raise
it, we match it”, rewards funds raised by
staff for various charities and matches what
they have raised. During the reporting period,
the Group matched £10,000 of fundraising.
Environment
The Group endeavours to conduct its
business in a way that is sympathetic to
the environment. Where possible, glassware
and bottles are recycled as is cardboard
packaging. In developing our sites, we are
making increasing use of energy-efficient
devices and our use of energy when
operating our sites is monitored by smart
meters and reviewed by management.
Indirect emissions have been calculated
using the Carbon Reduction Commitment
("CRC") Energy Efficiency Scheme factor
and cover the period 1 April to 31 March.
These emissions totalled 14,225 tonnes
of CO2 (2016: 14,015 tonnes).
Human rights
Even though the Group does not have a
formal human rights policy, it is committed
to conducting business with integrity
and fairness.
By order of the Board
Mike Foster
Company Secretary
3 October 2017
Environment
Responsible drinks retailing
Revolution Bars Group plc Annual Report and Accounts 2017 22
CORPORATE GOVERNANCE
INTRODUCTION TO GOVERNANCE
Keith Edelman
Chairman
Introduction from the Chairman
This is the Company’s third
Governance Report.
> we will review regularly, and implement
as necessary, any developments in
corporate governance best practice
and seek to apply them appropriately.
The Board recognises the importance
of, and is committed to, high standards
of corporate governance, and all Directors
are fully aware of their duties and
responsibilities under the UK Corporate
Governance Code 2016 (the “Code”), the
Disclosure Guidance and Transparency
Rules (“DTRs”) and the Listing Rules.
Save as set out in this report, the Board
considers that the Group has complied
with the requirements of the Code
throughout its existence and through
to the end of the reporting period.
The Group continues to implement a
robust governance structure to ensure
compliance with the Code. The following
are some key highlights:
> the Board consists of three independent
Non-executive Directors, including me
as Non-executive Chairman (deemed
independent on appointment), and two
Executive Directors;
> each Non-executive Director has
a proven track record in business
at a high level and has expertise
of relevance to the Company;
> the interests of the Group’s Executive
Directors as shareholders are aligned
closely with those of other shareholders;
> the Board and its Committee structure,
as required for a listed company, have
been implemented. The Non-executive
Directors have provided critical challenge
and support to the areas of the Group
which they believe are of particular
importance; and
A formal process to identify suitable
independent Non-executive Directors
was undertaken prior to listing and
Michael Shallow and I were appointed
at that time. Michael Shallow serves as
an independent Non-executive Director
and Chair of the Remuneration and Audit
Committees. Jemima Bird was appointed
as our third independent Non-executive
Director on 1 January 2017.
Each Director has been chosen to bring
the range of public company, commercial
and industry skills required to drive the
business forward. The Board continues to
take appropriate advice on governance
matters from our external advisers.
The Group continues to implement the
advised remuneration policy consistent
with advice taken prior to listing from New
Bridge Street (a trading name of Aon plc).
This remuneration policy for both Executive
and Non-executive Directors is set out
within the Remuneration Report, which
starts on page 30.
I am well aware that the Group has faced
substantial challenges during the past year,
with financial performance falling short of
our expectations. The Board has taken
decisive action in the following areas:
> we moved quickly to appoint
a successor to Chris Chambers.
Mike Foster, who has considerable
experience in this industry, joined the
business in March 2017 on a short-term
basis to provide interim cover but was
appointed as Chief Financial Officer on
a permanent basis on 2 June 2017; and
> we have completed a comprehensive
review of our accounting policies and
balance sheet, and the appropriate
write-downs and prior year adjustments
have been made.
Further details are in the Chairman’s
Statement on pages 4 and 5.
Significant steps have been implemented
to strengthen the finance team and
financial disciplines, which will lead to
greater transparency in external reporting.
The challenges of the past year are behind
us, and the Board can now look forward to
delivering shareholder value in the years
to come.
The Group has the principles of transparency
and openness at the heart of its culture
and we are committed to high standards
in corporate governance. We firmly believe
that corporate governance structures
and processes will help our business to
perform in a more efficient and competitive
way in the marketplace and will lead to strong
relationships with all our stakeholders.
Keith Edelman
Chairman
3 October 2017
Revolution Bars Group plc Annual Report and Accounts 2017 23
Revolution Bars Group plc Board
Chairman: Keith Edelman
Chief Executive Officer: Mark McQuater
Chief Financial Officer: Mike Foster
Independent Non-executive Director: Michael Shallow
Independent Non-executive Director: Jemima Bird
Audit Committee
Chairman: Michael Shallow
Keith Edelman
Jemima Bird
Remuneration Committee
Chairman: Michael Shallow
Keith Edelman
Jemima Bird
Nomination Committee
Chairman: Keith Edelman
Michael Shallow
Mark McQuater
Viability statement
In accordance with provision C.2.2 of
the 2014 UK Corporate Governance Code,
the Board has assessed the prospects
for the Group over a period of three
years from the date of approval of the
financial statements.
The Board believes that a three-year
period is appropriate as it is aligned with
the Group’s strategic planning process.
The latest three-year plan was reviewed
by the Board in May 2017 and covers the
three-year period to the end of June 2020.
This plan provided the basis for setting the
detailed budget for the 52 weeks ending
30 June 2018 and also for understanding
the Group’s long-term funding term
requirements ahead of agreeing a new
funding facility with the Group’s bankers.
The Group’s three-year plan is based on
up to date trading data and built up in a
spreadsheet model comprising segments
for the like-for-like mature estate, immature
venues (those opened within the current
financial year and the previous financial
year), committed future openings and
other projected openings. This information
is then overlaid with a series of
assumptions in respect of sales growth,
known cost increases including rent
reviews and general rate increases, and
cost saving initiatives as well as available
market data and trend analysis on matters
such as economic outlook, inflation
forecasts and other government imposed
costs such as minimum wage and living
wage, property rates revaluations,
apprenticeship levy, and changes in excise
duties and other tax rates. The three-year
plan model comprises a fully integrated
profit and loss account, balance sheet and
cash flow statement analysed into quarter
years. The model also includes financial
covenant tests consistent with the Group’s
banking facilities allowing the covenants
to be stress tested against different
trading scenarios.
Following the Board’s review of the
three-year plan, a new increased revolving
credit facility was agreed with the Group’s
bankers, NatWest. This £25 million facility
runs to 31 December 2021 and provides
liquidity to cover normal monthly and
seasonal cash flows, a safety net for the
business to ride out short-term downturns
in trade, and potentially to facilitate an
acceleration of expansion plans if good
site acquisition opportunities are identified
in excess of the Company’s stated target
of a minimum of five new sites per annum.
As detailed on pages 14 and 15, the Board
has conducted a robust assessment of the
principal risks facing the Company. This
includes consideration of strategic risks,
economic and market risks, operational
and people risks, regulatory risks and
financial risks. The resilience of the Group
to the impact of these risks has been
assessed by applying significant but
plausible sensitivities to the cash flow
projections based on past experience.
This includes modelling the effect of
reduced consumer confidence and
spending, a failure to maintain and
develop compelling customer offers
and the impact of increased regulation.
Taking account of the Group’s current
position, the principal risks to normal levels
of trading and the potential mitigating
actions that the Company would take in
response to a downturn in trade, and the
experience that the Group has in adapting
the business to change, the Board has a
reasonable expectation that the Company
will be able to continue in operation and
meet its liabilities as they fall due over
the three-year period of assessment.
Revolution Bars Group plc Annual Report and Accounts 2017 24
CORPORATE GOVERNANCE
BOARD OF DIRECTORS
The Board currently comprises a Non-executive Chairman,
two Executive Directors and two other Non-executive Directors.
Keith Edelman Non-executive Chairman – Appointment date: 16 February 2015
Keith was appointed to the Board in February 2015
as Non-executive Chairman. Keith has served on the
boards of public companies for over 29 years across a
wide range of businesses and markets, with extensive
experience in the retail sector. He is currently the senior
independent non-executive director of SuperGroup plc
(a UK fashion retailer) and a non-executive director of
Safestore Holdings plc (the UK’s largest self-storage
group). He is also a non-executive director
(and chairman of the audit committee) of the London
Legacy Development Corporation. Keith’s previous
roles include being managing director of Arsenal
Holdings plc from 2000 to 2008 and chief executive
officer of Storehouse plc (encompassing BHS and
Mothercare) from 1993 to 1999. Keith has a BSc in
management studies from the University of Manchester
(Institute of Science and Technology).
Mark McQuater Chief Executive Officer – Appointment date: 12 March 2013
Mark joined the Group as Chief Executive Officer in
March 2013. He studied economics and accountancy
at Edinburgh University before qualifying as a Chartered
Accountant with Thomson McLintock (now KPMG) in
Edinburgh. Mark’s first industry role was in the corporate
development team at Scottish & Newcastle in 1986.
In 1989 he joined NatWest Ventures (now Bridgepoint),
becoming local director in its Scottish office. In 1994,
Mark joined the board of pub group JD Wetherspoon plc
as its first managing director. In 1996, Mark moved to
The Rank Group as managing director of Tom Cobleigh,
Rank’s managed pub company, and then to The Greenall’s
Group as managing director of the 850-unit pub and
restaurant division, where he stayed until its sale to
Scottish & Newcastle in 1999. Mark then founded the
Barracuda Group in July 2000, with backing from
venture capital firm PPM Ventures, the private equity
arm of Prudential. In 2005, Barracuda was the subject
of a £262 million management buy-out financed by
Charterhouse Capital Partners.
Mike Foster Chief Financial Officer – Appointment date: 2 June 2017
Mike was appointed as Chief Financial Officer on
2 June 2017 having joined the Group on a short-term
interim contract towards the end of March 2017. Mike
is a Chartered Accountant with extensive corporate
finance and hands-on financial and commercial
management experience gained in senior positions at
large multi-site retail and leisure businesses, including
the last 20 years at major pub and bar companies.
Most recently, he was chief financial officer of
iNTERTAIN Ltd from 2009 until December 2016,
when that company was sold to Stonegate
Pub Company Limited. Prior to that, he was chief
financial officer of Regent Inns plc from 2005 and
held a number of senior accounting roles at Spirit
Group (formerly with Scottish & Newcastle Retail),
Esporta plc and First Leisure Corporation plc.
Michael Shallow Independent Non-executive Director – Appointment date: 16 February 2015
Michael joined the Board as an independent
Non-executive Director in February 2015. Michael
has held a variety of roles in UK public companies,
including finance director of pub group Greene King plc
from 1991 to 2005, non-executive director (and audit
committee chairman) of Britvic plc from 2005 to 2014 and
non-executive director (and audit committee chairman) of
Spice plc (now EnServe Group Ltd) from 2006 to 2010.
He was formerly a non-executive director, member
of the remuneration and nomination committees,
and chairman of the audit committee of Domino’s Pizza
Group plc. Michael has a degree in natural sciences
and engineering from Trinity College, Cambridge.
Jemima Bird Independent Non-executive Director– Appointment date: 1 January 2017
Jemima was appointed to the Board as an independent
Non-executive Director at the beginning of 2017. Jemima
is a marketer with experience spanning 20 years in
many of the UK’s leading high street brands. She
formed Jbird Consulting in 2013. She is currently
working with The Co-operative Group as customer
director, which she rejoined in January 2016 on an
interim basis having worked there previously in various
branding and marketing roles from 1996 to 2008.
Between 2010 and 2015, Jemima has held board positions
at Moss Bros plc, the restaurant operator Tragus, and
Musgrave Retails Partners (Budgens and Londis).
Sean Curran, who held the position of Chief Financial Officer at the beginning of the period, stepped down from the Board
on 31 August 2017 and was replaced by Chris Chambers. Chris Chambers resigned his position in February 2017 and stepped
down from the Board with effect from 6 May 2017.
Revolution Bars Group plc Annual Report and Accounts 2017 25
CORPORATE GOVERNANCE
SENIOR MANAGEMENT
In addition to the Executive Directors, the following senior managers are
considered relevant to establishing the appropriate expertise and experience
for the management of the business.
Jimmy Del Giudice Chief Operating Officer
Having spent three years in high street retail
management, Jimmy joined the Group in 1991.
He has worked in a number of operational roles
within the Group, including bar management and
area management.
Jimmy was promoted to Group Operations Director in
2006 and to Chief Operating Officer in 2016. He was
instrumental in the development of the Revolución de
Cuba brand.
Godfrey Russell Group Property Director
Godfrey joined the Group in 1997, having graduated
from Liverpool John Moores University, where he
studied urban estate management (BSc (Hons)). Prior
to joining the business, Godfrey worked for Housing
Project Ltd and Shapstone Investments Ltd.
He has developed and been responsible for all new
Group sites since 1999, as well as overseeing the
Group’s existing estate capital expenditure programme.
Kate Eastwood Sales Director
Kate initially joined the business as a catering consultant
in June 2013, becoming the Group’s Director of Business
Development in October 2013, with a remit including
food management, advance sales and customer insight.
Kate was promoted to Sales Director in May 2017. Her
career began at Whitbread plc in the commercial drinks
operations of Beefeater and Brewers Fayre. She moved
to The Laurel Pub Company, creating and heading the
food development, supply chain and buying team
there. Kate then worked as Roadchef’s retail catering
director, before moving back into licensed trade
and heading the food team and, subsequently,
the pre-booked sales team at Barracuda. Kate has
a degree in international management with hospitality
from the University of Brighton.
Myles Doran Commercial Director
Myles joined the Group as a consultant in June 2013
and became a permanent employee in December
2013. Prior to joining the Group, Myles was head of
sales and marketing at Barracuda Group and held a
number of roles at First Leisure Corporation, including
marketing manager and brand manager, spending
11 years with each business.
Myles was promoted to Commercial Director
in January 2017. Prior to this, Myles’ role was that
of a Trading Director, a role which encompassed
procurement, drinks retail strategy, reward and
recognition programmes and commercial supplier
agreements and relationships.
Fiona Regan People Development Director
Fiona joined the business in April 2015 as People
Development Director. Prior to this Fiona was HR
director for five years at Grosvenor Casinos, a division
of The Rank Group. During her career she has held a
number of HR roles starting in financial services then
moving to the civil service before her time at The Rank
Group, where she was part of the team leading the
acquisition of Gala Casinos in 2013. Fiona has a degree
in business studies and human resource management
and is a Fellow of the CIPD.
The business address of each senior manager is 21 Old Street, Ashton-under-Lyne, Tameside OL6 6LA.
Revolution Bars Group plc Annual Report and Accounts 2017 26
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE REPORT
Board composition
1
2
Directors40+
2
Executive Directors
Independent Non-executive
Non-executive Directors
Overview
This report sets out the Group’s
governance structure and how it complies
with the UK Corporate Governance Code
2016 (the “Code”), published in April 2016
by the Financial Reporting Council, and
also includes items required by the
Disclosure Guidance and Transparency
Rules (“DTRs”). The Code is available on
the Financial Reporting Council website
at www.frc.org.uk. The Code sets out
standards of good practice in relation
to Board leadership and effectiveness,
accountability, remuneration and
relations with shareholders.
other than the Chairman, to appraise
the Chairman’s performance and to provide
a sounding board for the Chairman and
to serve as an intermediary to the other
Directors when necessary.
Michael Shallow was performing these
functions prior to 1 January 2017 before
his designation as “senior” independent
Director and he has also been and is
available to shareholders if they have
concerns with contact through the normal
channels of Chairman, Chief Executive
Officer or other Executive Directors where
their issues have failed to be resolved, or
for which such contact is inappropriate.
The disclosures in this report relate
to our responsibilities for preparing the
annual report and accounts, including
compliance with the Code to the extent
required, our report on the effectiveness
of the Group’s risk management and
internal control systems and the
functioning of our Committees.
The Directors consider that the Group
has complied with those provisions of the
Code applicable to companies of its size,
other than in terms of Board composition
for the first half of the period.
Compliance with the Code: Board
composition
Prior to the appointment of Jemima Bird
as an independent Non-executive Director
on 1 January 2017, the Board did not have
a “senior” independent Director. With effect
from that date Michael Shallow was
designated as the “senior” independent
Director to lead annual (and other)
meetings of Non-executive Directors,
Compliance with the Code
In considering compliance with the
provisions of the Code, the Board has
undertaken an evaluation of its own
performance, Committees, individual
Directors who served during the period to
1 July 2017 and Chairman. The Chairman
has confirmed to shareholders in the
Notice of the Annual General Meeting
that he and the Board believe that the
performance of each Director, Committee
and Non-executive Director continues to
be effective and demonstrates
commitment to the role.
Board governance
The Board is appointed by shareholders,
who are the owners of the Group. The
Board’s principal responsibility is to act
in the best interests of shareholders
as a whole, within the legal framework
of the Companies Act 2006. It is also
collectively responsible to shareholders
for the long-term success of the Group.
It agrees the strategic direction and
governance structure that will help
achieve this long-term success and
deliver shareholder value. The Board
oversees areas such as strategy, financial
policy and maintaining a sound system
of internal control, and focuses primarily
on strategic policy and governance
issues. The Board’s main responsibilities
are included in a schedule of matters
reserved for the Board, as set out below.
The matters reserved for the
Board include:
> agreeing the Group’s strategy
and objectives;
> changing the structure and capital
of the Group;
> approving the annual budget;
> approving the annual report and
accounts, half-yearly reports and
interim management statements;
> approving the Group’s dividend policy
and declaration of dividends;
> approving the Group’s treasury policy;
> reviewing the effectiveness
of the Board;
> reviewing the effectiveness of risk
identification and management and
internal controls. Risks identified
by the Directors are outlined on
pages 14 and 15;
Revolution Bars Group plc Annual Report and Accounts 201740
+
20
+
I
27
The Non-executive Chairman is
Keith Edelman and he is responsible
for the effective operation, leadership
and governance of the Board, leading
the Board’s discussions and its decision
making. The Chairman promotes a culture
of openness and debate by facilitating the
effective contribution of Non-executive
Directors in particular and ensuring
constructive relations between Executive and
Non-executive Directors. The Chief Executive
Officer is Mark McQuater, who, through
delegation from the Board, is responsible
for leading the Group’s business
organisation and performance and the
day-to-day management of the Group.
This separation of responsibilities between
the Chairman and the Chief Executive Officer,
coupled with the schedule of reserved
matters, ensures that no individual has
unfettered powers of decision making.
The Board is committed to the highest
standards of corporate governance.
The Board comprises a Non-executive
Chairman, two Executive Directors and
two other Non-executive Directors.
Non-executive Directors
and independence
The independence of each Non-executive
Director was considered at the time of their
appointment. The Group’s Non-executive
Directors provide a broad range of skills
and experience to the Board which
assists both in their roles in formulating
the Group’s strategy and in providing
constructive challenge to the Executive
Directors. The Group considers that
Keith Edelman, Michael Shallow and
Jemima Bird were independent at the
time of their appointments and continue
to be independent for the purposes
of the Code.
> approving significant expenditure and
material transactions and contracts;
> ensuring a satisfactory dialogue with
the Group’s shareholders;
> appointing and removing Directors;
> determining the remuneration
policy for the Executive and
Non-executive Directors;
> reviewing the Group’s overall
corporate governance arrangements;
> delegating authority to the
Chief Executive Officer;
> setting annual objectives for the
business in line with the current
Group strategy;
> monitoring performance of the
Group’s objectives through Board
reports, which include updates
from the Chief Executive Officer,
the Chief Financial Officer and
other functional heads of key
departments; and
> considering and continually updating
a rolling agenda of items that includes
any current issues or matters as
they arise.
The Board has carried out a robust
assessment of the principal risks
facing the Company, including those
that would threaten its business model,
future performance, solvency or liquidity.
A description of these risks, together with
an assessment of how they are being
managed or mitigated, is included
on pages 14 and 15.
The Board has carried out a review
of the effectiveness of the Group’s
risk management and internal control
systems. Towards the end of the reporting
period, following several changes in key
personnel in the finance department,
it became evident that internal control
systems regarding financial forecasting
and budgeting were not of the quality
expected and that certain accounting
policies and practices were not being
properly applied. The Board moved
quickly in terms of recruiting additional
financial resources and also in engaging
external independent support from PwC
in order to investigate these issues. In the
short term, the resultant actions have been
largely reactive to ensure that reporting
deadlines were met and that the Company
could respond appropriately to two
approaches regarding possible offers for
the Group. The Board recognises that the
Group’s risk management and internal
control systems have not operated to the
high standard expected in this area of
the business and that it will remain a
significant focus for the Board in the
coming months.
The Board has delegated certain
responsibilities to Committees to assist
it with discharging its duties. The Committees
play an essential role in supporting the
Board to implement its strategy and provide
focused oversight of key aspects of the
business. The full terms of reference for
each Committee are available on the Group’s
website, www.revolutionbarsgroup.com.
Board balance and independence
The Code recommends that a group
outside the FTSE 350 (such as the Group)
should have at least two independent
non-executive directors, being individuals
determined by the board to be independent
in character and judgement and free from
relationships or circumstances which may
affect, or could appear to affect, the
directors’ judgement. It also recommends
that a non-FTSE 350 group’s remuneration
and audit committees should comprise
at least two independent non-executive
directors, and that its nomination committee
should comprise a majority of independent
non-executive directors. The Group
complies with these recommendations.
Chairman and Chief Executive Officer
The Group has established a clear division
between the respective responsibilities of
the Non-executive Chairman of the Board
and the Chief Executive Officer.
Revolution Bars Group plc Annual Report and Accounts 2017 28
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE REPORT CONTINUED
Board meetings
The Board’s intention is to meet six
to eight times per year for structured
Board meetings, covering all aspects
of the business. During the 52 weeks
to 1 July 2017 the Board had such
meetings eight times.
Agendas for the Board meetings are
set out in advance of each meeting.
All Directors receive papers in advance
of Board meetings. These include a
business report with updates from the
Chief Executive Officer and the Chief
Financial Officer. Members of the Group’s
Senior Management Team may also be
invited to present at Board meetings,
as appropriate, so that Non-executive
Directors keep abreast of developments
in the Group.
Appointment and tenure
The Board believes that all Directors
are effective, are committed to their roles
and have sufficient time available to
perform their duties. Accordingly, all
members of the Board will be offering
themselves for election at the Group’s
annual general meeting to be held on
Thursday 30 November 2017. All of the
Directors have service agreements
or letters of appointment and the
details of their terms are set out in
the Directors’ Remuneration Report.
The service agreements and letters of
appointment are available for inspection
at the Group’s registered office during
normal business hours.
No other contract with the Company
or any subsidiary undertaking of the
Company in which any Director was
materially interested subsisted during
or at the end of the financial period.
Evaluation and effectiveness
Evaluations of the performance of
the Board, its Committees, individual
Directors and the Chairman have taken
place during the 52 weeks ended
1 July 2017. The conclusion from these
evaluations is that the Board is
operating effectively and in the best
interests of shareholders.
In addition, the Chairman continues to
meet with the Non-executive Directors
at least once a year without the Executive
Directors present to discuss Board balance,
monitor the powers of individual Executive
Directors and raise any issues between
themselves as appropriate.
Development
In line with the Code, the Group will
ensure that any new Directors joining the
Board will receive appropriate support
and are given a comprehensive, formal
and tailored induction programme
organised through the Company
Secretary, including the provision of
background material on the Group,
briefings with senior management and
accompanied operational visits. Each
Director’s individual experience and
background will be taken into account
in developing a programme tailored to
his or her own requirements. Any new
Director will also be expected to meet
with major shareholders if required.
This process has been implemented.
Directors’ conflicts of interest
Directors have a statutory duty to avoid
situations in which they have or may
have interests that conflict with those
of the Group, unless that conflict is first
authorised by the Board. This includes
potential conflicts that may arise when a
Director takes up a position with another
company. The Company’s Articles of
Association allow the Board to authorise
such potential conflicts, and there is
a procedure in place to deal with any
actual or potential conflict of interest.
The Board deals with each appointment
on its individual merit and takes into
consideration all the circumstances.
All potential conflicts approved by the
Board are recorded in a conflicts of
interest register, which will be reviewed
by the Board on a regular basis to ensure
that the procedure is working effectively.
External directorships
The service agreements of the Executive
Directors do not permit them to accept
external commercial non-executive director
appointments. Where Non-executive
Directors have external directorships,
the Board is comfortable that these do
not impact on the time that any Director
devotes to the Group and we believe
that this experience only enhances the
capability of the Board.
Information and support available
to Directors
All Board Directors have access to the
Company Secretary, who advises them
on governance matters. The Chairman
and the Company Secretary work
together to ensure that Board papers
are clear, accurate, delivered in a timely
manner to Directors, and of sufficient
quality to enable the Board to discharge
its duties. Specific business-related
presentations are given by senior
management when appropriate. As well
as the support of the Company Secretary,
there is a procedure in place for any
Director to take independent professional
advice at the Group’s expense in the
furtherance of their duties, where
considered necessary.
Shareholder engagement
Responsibility for shareholder relations
rests with the Chairman, the Chief Executive
Officer and the Chief Financial Officer. They
ensure that there is effective communication
with shareholders on matters such as
governance and strategy, and are responsible
for ensuring that the Board understands
the views of major shareholders. The
Board aims to present a balanced and
clear view of the Group in communications
with shareholders and believes that being
transparent in describing how we see the
market and the prospects for the business
is extremely important.
Revolution Bars Group plc Annual Report and Accounts 2017 29
issue. The Chairman, the Chairman
of each of the Committees and both
Executive Directors will be present at the
AGM and will be available to answer
shareholders’ questions.
Remuneration Committee Report
This report is set out on pages 30 to 45. The
report provides details of the remuneration
policy for the Company’s Directors, describes
how the remuneration policy is implemented
and discloses the amounts paid to Directors
during the 52 weeks ended 1 July 2017.
The Board communicates with shareholders
in a number of different ways. The full
and half-year reporting is followed by
presentations and investor meetings
in locations where we have institutional
shareholders. We also regularly meet
with existing and prospective shareholders
to update them on our latest performance
or to introduce them to the Group.
Periodically, we arrange visits to the
business sites to give analysts and major
shareholders a better understanding of
how we manage our business. These visits
and meetings are principally undertaken
by the Chief Executive Officer and the
Chief Financial Officer, although other
senior management are present from time
to time. Any relevant material resulting
from such meetings is uploaded to the
Group’s website so that it is available to
all shareholders. The Board receives
regular updates on the views of its
shareholders from the Chief Executive
Officer, the Chief Financial Officer and
Company brokers, which are a feature
of each Board meeting.
The Group’s corporate website is
also regularly updated with news and
information, including this annual report
and accounts, which sets out our strategy
and performance together with our plans
for future growth.
Auditor
Towards the end of the current year
external audit, and therefore after the end
of the reporting period, the Committee
reviewed the effectiveness of the audit.
Annual General Meeting
The annual general meeting (“AGM”) of the
Group will take place on 30 November 2017.
All shareholders have the opportunity to
attend and vote, in person or by proxy,
at the AGM. The Notice of AGM can be
found in a circular which is being posted
at the same time as this annual report and
accounts. The Notice of AGM sets out the
business of the meeting and explanatory
notes on all resolutions. Separate resolutions
are proposed in respect of each substantive
Revolution Bars Group plc Annual Report and Accounts 2017 30
CORPORATE GOVERNANCE
REMUNERATION REPORT
for the 52 weeks ended 1 July 2017
Michael Shallow
Chairman of the
Remuneration Committee
Dear shareholder
I am pleased to present, on behalf
of the Board, the Remuneration Report
of the Remuneration Committee.
against the adjusted EBITDA and adjusted
profit before tax bonus threshold targets
were not met and no bonuses are payable
to any of the Executive Directors or to
senior management.
The Group’s remuneration policy aims
to promote a strong and sustainable
performance culture, to incentivise
high growth and to align the interests
of Executive Directors and other senior
managers with those of shareholders.
In promoting these objectives, the policy
has been structured so as to adhere to
the principles of good corporate governance
and appropriate risk management.
In determining remuneration levels, the
Committee has taken account of market
conditions, the performance of the Group
and its responsibility to shareholders.
Performance and reward in relation
to the 52 weeks ended 1 July 2017
The Group made good progress on its
strategic objectives with like-for-like sales
growth of 1.5 per cent, the opening of six
new venues in the year that are trading
well, and the five new openings of the prior
year proven to be delivering excellent
returns on investment. However, financial
performance has been constrained by the
discovery that the Group’s accounting policies
and practices have not historically been
applied in accordance with best practice.
Consequently, a number of prior period
adjustments have been made to the
consolidated financial statements which
have reduced the previously reported
results of those prior periods and the
correct application of those accounting
policies and practices have suppressed
profits in the reporting period under
review relative to market expectations at
the beginning of the year. Performance
The Committee also decided that due
to the shortfall in underlying profitability
relative to market expectations as at the
beginning of the period and the reduction
in prior period profits, it was not appropriate
to undertake salary reviews in July 2017
for the Executive Directors or Senior
Management Team.
The Committee was required to determine
the package afforded to Chris Chambers
who commenced work with the Group
on 31 August 2016. His salary on
appointment was agreed at £245,000
with the remainder of his package set
in line with our policy.
Mike Foster, who was immediately
available, initially joined the Group on
a short term contract in March 2017 as
interim Finance Director to enable the
Group to conduct a proper search of the
market for a suitable replacement for the
Chief Financial Officer position. However,
given the accounting matters that came
to light shortly after Mike Foster’s interim
appointment, culminating in the market
announcement and given the approach
from Stonegate Pub Company Limited
(“Stonegate”) to potentially make an
offer for the Group, we moved quickly
to secure Mike Foster’s services on a
permanent basis. The terms agreed
with Mike Foster are in certain respects
less than our stated remuneration policy
for new directors but were considered
appropriate given that he did not
have significant experience as a
Chief Financial Officer of a listed
business and also because the approach
had already been received from Stonegate
to potentially make an offer for the
Group. Permission to appoint Mike Foster
to the Board had to be sought from and
was granted by the Takeover Panel as it
could potentially have been regarded as
a frustrating action under the Takeover
code. The terms were agreed with that
in mind. For the same reason, no awards
were made to Mike Foster under the
Long Term Incentive Plan.
The Committee has also met to consider
whether outstanding awards under the
Long Term Incentive Plan should vest
contingent upon the Board recommended
offer for the Group from Stonegate.
The Committee has confirmed that time
pro-rating will be applied and will be
calculated on a monthly basis in each case
in accordance with the rules of the relevant
employee scheme plan and, performance
conditions will be applied. All performance
conditions are to be tested in accordance
with their terms. On this basis, the Group
currently forecasts that 62,222 options will
vest should the Stonegate offer complete
at the offer price of 203 pence per share.
Shareholder feedback
The Committee welcomes any feedback
on this report and the remuneration policy
in general. On behalf of the Board, I would
like to thank shareholders for their continued
support and I look forward to your approval
of our report at the 2017 AGM.
Michael Shallow
Chairman of the Remuneration Committee
3 October 2017
Revolution Bars Group plc Annual Report and Accounts 2017 31
Directors’ remuneration policy
This part of the Directors’ Remuneration
Report sets out the remuneration policy for
the Company and has been prepared in
accordance with the Companies Act 2006,
Schedule 8 of the Large and Medium-sized
Companies and Groups (Accounts and
Reports) Regulations 2008 (as amended)
and the UKLA’s Listing Rules. The policy
has been developed taking into account
the principles of the UK Corporate
Governance Code 2016 and the voting
guidelines of UK institutional investors.
The Group’s remuneration policy was
put to a formal and binding vote at the
2015 AGM. As set out at that time, the
policy is expected to continue to apply
until 30 June 2018. The Annual Report on
Remuneration will be put to an advisory
vote at the 2017 AGM.
The Committee’s key objectives
relate to the determination of specific
remuneration packages for each of
the Executive Directors and certain
Senior Executives of the Group, including
pension rights and any compensation
payments, recommending and monitoring
the level and structure of remuneration for
senior management and the implementation
of share schemes and any other
performance-related schemes.
The Remuneration Committee meets
at least twice a year.
The Committee reviews the remuneration
policy and, in particular, performance-related
pay scheme structures on an annual basis
to ensure that they continue to operate
within the agreed risk framework of the
Group. The Committee also ensures that
an effective system of control and risk
management is in place with regards to
remuneration, which includes access to
the Audit Committee to discuss matters of
operational and financial risk. The Committee
is satisfied that the proposed policy does
not encourage or reward undue risk taking.
The Committee ensures that
performance-related pay structures
will not raise environmental, social or
governance (“ESG”) risks by inadvertently
motivating irresponsible behaviour.
More generally, with regard to the overall
remuneration structure, there is no
restriction on the Committee that prevents
it from taking into account corporate
governance on ESG matters.
The policy, in relation to subsequent years,
will be kept under review to ensure that it
reflects any changing circumstances.
Revolution Bars Group plc Annual Report and Accounts 2017 32
CORPORATE GOVERNANCE
REMUNERATION REPORT CONTINUED
for the 52 weeks ended 1 July 2017
Remuneration for Executive Directors
The main component parts of the remuneration policy for Directors are detailed in the table below.
Policy table
Element
Operation
Opportunity
Performance metrics
Base salary
To attract and
retain key
individuals.
To reflect the
relevant skills
and experience
in the role.
Salaries will normally be
reviewed annually against
performance, experience,
responsibilities, relevant market
information and the level of
workforce pay increases.
A broad-based assessment
of individual and Company
performance is considered
as part of any salary review.
The current salaries are
set out in the Annual Report
on Remuneration.
Annual increases will usually
be commensurate with those
of the wider workforce.
Further increases may
be considered if there
are significant changes in
responsibility or scope, or a
sustained increase in the size
of the business, or if there are
significant market movements.
New joiners, where pay is
initially set below market levels,
may benefit from larger increases
as their salary is progressed
towards the market rate based
on their development in the role.
Pension
To provide
cost-effective,
yet market-
competitive,
retirement
benefits.
Benefits
To provide
benefits that
assist Directors in
the performance
of their roles and
are designed to
be competitive
and cost effective.
Contribution to a personal
pension arrangement or cash
in lieu of pension by way of
a salary supplement.
Set at market-competitive
levels for Executive Directors.
The maximum contribution
will be up to 17.5% of salary.
Not applicable.
Only basic annual salary
is pensionable.
Not applicable.
Not applicable.
Car and fuel allowance for
Executive Directors, private
health insurance and life
insurance cover.
Other benefits may be offered
(e.g. relocation) where
considered appropriate.
Revolution Bars Group plc Annual Report and Accounts 2017 33
Element
Operation
Opportunity
Performance metrics
Annual bonus plan
To motivate
Executive
Directors and
incentivise the
achievement of
key financial and
strategic goals
and targets over
the financial year.
Based on the achievement of
performance metrics measured
at Group level.
Maximum bonus potential
is 100% of salary for the
Executive Directors.
The Remuneration Committee
retains discretion to withhold
or reduce a bonus even if the
objectives have been met.
Bonus is paid wholly in cash.
Recovery provisions will apply in
the event of material misconduct,
misstatement of financial results
and/or an error in the calculation
of the bonus payable. The recovery
period in respect of each bonus
will be three years from the date
the bonus is paid.
Performance Share Plan (“PSP”)
Annual awards of performance
share awards which vest, subject
to performance, after three years.
Normal awards of up to 200%.
300% of salary in exceptional
circumstances.
To motivate
Executive
Directors and
incentivise
delivery of
performance over
the long term.
To encourage
greater
shareholder
alignment by
rewarding total
shareholder
return (“TSR”)
outperformance.
To facilitate share
ownership.
The annual bonus plan is
subject to the achievement
of stretching performance
conditions based on financial
performance of the Group
and personal strategic
objectives which reflect key
business drivers. The majority
(if not all) of any bonus will
be determined by financial
measures with only a
minority being paid for
achieving threshold
performance levels.
The performance measures
used for the 2016/17 annual
bonus and those proposed
for 2017/18 are described
in the Annual Report on
Remuneration starting on
page 39.
Awards will be granted
subject to a combination of
relative TSR and/or financial
measures (e.g. as adjusted
EPS) over, at least, a
three-year period.
The Committee will review
the appropriateness of the
performance conditions on
an annual basis and may make
changes to the weightings
or introduce new measures
which are aligned to the
Company strategy at that time.
The performance measures
used for the Initial Awards
are described in the Annual
Report on Remuneration on
page 39.
Revolution Bars Group plc Annual Report and Accounts 2017 34
CORPORATE GOVERNANCE
REMUNERATION REPORT CONTINUED
for the 52 weeks ended 1 July 2017
Remuneration for Executive Directors continued
Policy table continued
Element
Operation
Opportunity
Performance metrics
Company Share Option Plan (“CSOP”)
To incentivise
and recognise
service over the
longer term.
The Company operates a share
option plan under which it may
grant share options with an
exercise price as determined
by the Committee on grant. The
terms on which an award vests
are determined by the Committee
on grant and, once vested, options
are exercisable up to ten years
from the date of grant.
For Executive Directors with
PSP awards, any grant of CSOP
awards will be linked to the grant
of PSP awards, which will be
reduced accordingly to reflect
the value received under any
CSOP award.
Executive share ownership
To align
Executive
Directors’ and
shareholders’
interests.
All Executive Directors are
expected to hold an investment
of at least 100% of base salary in
the Company, using 50% of net
awards under the Company’s
PSP to achieve the shareholdings,
if required.
Aggregate value of any PSP
and CSOP award granted will not
normally exceed normal awards
of 200% of salary (300% of salary
in exceptional circumstances),
with PSP grant levels in the same
year taken into consideration
and reduced accordingly.
For Executive Directors,
performance conditions
will be linked to those used
under the corresponding
PSP award.
100% of salary for all
Executive Directors.
Not applicable.
Remuneration for Non-executive Directors
The remuneration policy for Non-executive Directors is set out below:
Policy table
Element
Operation
Opportunity
Performance metrics
Not applicable.
To attract and
retain high calibre
Non-executive
Directors.
To set
remuneration by
reference to the
responsibilities
and time
commitment
undertaken by
each Non-
executive Director.
Fee levels are reviewed on a
periodic basis and are set based
on expected time commitments
and responsibilities and in context
of the fee levels in companies of a
comparable size and complexity.
The Committee sets the fee
for the Non-executive Chairman,
whereas fees for the Non-executive
Directors are set by the members
of the Board, excluding the
Non-executive Directors.
The Non-executive Chairman’s
fee and Non-executive fees are
set out in the Annual Report
on Remuneration.
Any increase in fees may be
above those of the wider workforce
(in percentage terms) in any
particular year, reflecting the
periodic nature of any review and/
or changes to time commitments
and/or responsibilities.
Revolution Bars Group plc Annual Report and Accounts 2017 35
The Committee operates the annual
bonus plan and long-term incentive plans
according to their respective rules and
consistent with normal market practice,
the Listing Rules and HMRC rules where
relevant, including flexibility in a number
of regards. These include:
> timing of awards and payments;
> the size of an award (within the limits
noted in the table above) and when
and how much should vest;
> who receives an award or payment;
> dealing with a change of control or
restructuring of the Group;
> determining whether a participant is
a good/bad leaver for incentive plan
purposes and whether and what
proportion of awards vest;
> any adjustments required to awards
in certain circumstances (e.g. rights
issues, corporate restructuring,
events and special dividends); and
> the weightings, measures and targets
for the annual bonus plan, PSP and
CSOP from year to year.
The Committee retains the discretion
to adjust the targets and/or set different
measures and alter weightings for the
annual bonus plan and to adjust targets
for the PSP and CSOP if events occur
(e.g. a major acquisition or disposal)
which cause it to determine that the
conditions are unable to fulfil their
original intended purpose and if the
change would not be materially less
difficult to satisfy.
Existing awards
The Committee intends to honour any
commitments, including the outstanding
PSP awards, on the terms applicable
at the time each such commitment was
made. The relevant outstanding awards
are described in the Annual Report
on Remuneration.
Executive Directors’ service
agreements including policy
on contracts of service
Mark McQuater
On 27 February 2015, Mark McQuater
(Revolution’s Chief Executive Officer)
entered into a service agreement with
Revolution, under which he is currently
entitled to receive an annual base
salary of £367,500. The appointment
(as Revolution Director) is subject to
annual re-election by the Revolution
shareholders. If he is not re-elected
as a Director, his employment continues
in accordance with the terms of his
service agreement.
Under the terms of the service
agreement, Mark McQuater is entitled
to an annual car allowance of 10 per cent
of his basic salary, permanent health
insurance, private health insurance for
himself, his spouse and his family, life
insurance and a pension contribution
of 15 per cent of basic salary, which was
increased to 17.5 per cent effective at the
beginning of the current reporting period.
The service agreement is terminable
by Mark McQuater or Revolution on not
less than 12 months’ prior written notice.
Revolution can, however, terminate
Mark McQuater’s service agreement
immediately, provided that such
termination is effected together with
payment of a cash sum in lieu of notice
equivalent to the basic salary, pension
allowance, car allowance and the value
of his insured benefits to which he would
have been entitled for the remainder
of his notice period.
The service agreement is terminable
with immediate effect without notice
in certain circumstances.
Mike Foster
On 31 May 2017, Mike Foster
(Revolution’s Chief Financial Officer
and Company Secretary) was sent an
offer letter by Revolution, under which
he is currently entitled to receive an
annual base salary of £200,000. The
offer letter had been approved by the
Revolution Board on 29 May 2017. No
service agreement has yet been entered
into by Mike Foster and Revolution and
he is currently performing his duties on
the basis of the terms of the offer letter.
The offer letter entitles Mike Foster
to receive an annual car allowance
of £15,000, as well as private health
insurance for himself and his spouse.
Mike Foster’s employment is terminable
by him or Revolution on not less than
six months’ prior notice.
The Executive Directors are eligible to
participate in such bonus arrangements
as Revolution may specify from time to
time. The Revolution Board retains absolute
discretion to determine whether or not
a bonus should be paid to an Executive
Director and, if a bonus is to be paid,
the amount of such bonus.
Copies of Mark McQuater’s service
contract and Mike Foster’s appointment
letter are available for inspection, on
request to the Company Secretary,
at the Company’s registered office.
On cessation of an Executive Director’s
employment, the treatment of any
outstanding share awards will be governed
by the rules of the appropriate plan. In the
normal course, awards will lapse. If a
participant is treated as a good leaver (for
reasons of death, injury, permanent ill health
or disability, redundancy, the employing
entity ceasing to be a member of the Group,
the business being transferred outside of
the Group, or any other reason the Committee
determines at its discretion) the award will
normally vest on the normal vesting date to
the extent that the performance conditions
have been achieved and pro-rated for
the service period rendered (unless the
Committee decides to vest awards at
cessation and/or disapply time pro-rating).
The Non-executive Directors have letters
of appointment which provide for notice
by either party giving to the other not
less than six months’ notice in writing
for the Chairman and three months’ notice
in writing for other Non-executive Directors.
The Company may also terminate by
making a payment in lieu of notice.
None of the employment contracts
or letters of appointment of the
Directors contain special contractual
termination provisions.
Revolution Bars Group plc Annual Report and Accounts 2017 36
CORPORATE GOVERNANCE
REMUNERATION REPORT CONTINUED
for the 52 weeks ended 1 July 2017
Other employees’ pay
The Committee does not consult with employees directly on matters of Executive remuneration. However, the Committee is aware
of the disconnect which may be created if Executive Director remuneration is set in isolation and therefore is updated during the
year with details of the pay and employment conditions in the wider workforce. In particular, the Committee is made aware of
general salary increases, general benefit provision and the proposed level of annual bonuses. The Committee is also responsible
for reviewing the proposed participants of the PSP and the CSOP.
Remuneration policy across the Group
The remuneration policy described in this report is broadly consistent with the policy used for other Senior Executives of the
Company. A significant proportion of remuneration remains performance related, although lower quantums will operate.
The majority of employees will participate in an annual bonus or incentive scheme, although the limits and performance metrics
will vary according to the seniority and location of the role. Participation in the PSP and the CSOP is targeted at senior
management and key staff who are more able to influence overall Group performance.
The majority of new senior employees are eligible to join a defined contribution pension plan.
Policy on Executive Director recruitments/promotions
In relation to external Executive recruitment or internal promotion, the Committee will follow the principles outlined in the table below:
Element of remuneration
Base salary
Salary levels will be set based on:
> the particular experience, knowledge and skills of the individual;
> market rates for comparable positions in companies of a similar size and complexity; and
> internal Company relativities.
Where considered appropriate, the Committee may wish to set the initial salary below the perceived market rate (e.g. to
reflect an individual’s limited experience at a public limited company board level) but with the view to make phased increases,
potentially above those of the wider workforce as a percentage of salary, to achieve the desired market positioning over time.
Any increases would be subject to the individual’s continued development and performance in the role.
Benefits
A new appointment would be offered the same or a similar benefits package (or equivalent, in line with local market practice)
as that provided to current Executive Directors.
Where considered necessary, the Committee may be required to pay certain relocation expenses, legal fees and other costs
incurred by the individual in relation to their appointment.
Pension
A defined contribution or cash supplement (or equivalent, in line with local market practice) at the level provided to current
Executive Directors may be provided.
Revolution Bars Group plc Annual Report and Accounts 2017 37
Element of remuneration continued
Annual bonus
The Committee would envisage the annual bonus for any new appointment operating as set out in the policy table for current Executive
Directors. The annual bonus maximum, as a percentage of salary, would be limited to that of the current Chief Executive Officer.
However, the Committee may consider it necessary (depending on timing and the nature of the appointment) to set different tailored
performance measures for the initial bonus year.
Long-term incentives
Ongoing LTIP awards will be made on the same terms as current Executives’, albeit possibly with different performance periods
depending on the timing of the appointment. The maximum ongoing award, as a percentage of salary, will be no higher than
that of the current Chief Executive Officer. An award may be made shortly after an appointment.
For internal promotions, existing awards will continue over their original vesting period and remain subject to their terms as at
the date of grant.
Buy-out awards
To facilitate external recruitment, it may be necessary to buy out remuneration which would be forfeited on the appointee
leaving their previous employer. When determining the quantum and structure of any buy-out awards, the Committee will,
where possible, use a consistent basis, taking into account the form of remuneration (cash or shares), timing horizons and
the application of any performance criteria.
Buy-out awards, if used, will be granted using the Company’s existing share plans to the extent possible, although awards
may also be granted outside of these schemes if necessary and as permitted under the Listing Rules.
Revolution Bars Group plc Annual Report and Accounts 2017 38
CORPORATE GOVERNANCE
REMUNERATION REPORT CONTINUED
for the 52 weeks ended 1 July 2017
Shareholder engagement
The Committee considers an open and constructive dialogue with investors to be vitally important to establishing a successful
remuneration policy that is considered fair and transparent by both Executives and shareholders. Therefore, the Committee will
consult with major investors whenever material changes to the policy are proposed. The Committee also welcomes investor
feedback and will consider views raised at the AGM and regular meetings throughout the year when establishing the overall policy.
Reward scenarios
The charts below illustrate the level and mix of remuneration based on the current remuneration policy, updated to reflect current
salary levels depending on the achievement of threshold, target and maximum performance of the Executive Directors. These charts
are indicative as share price movement and dividend accrual have been excluded. All assumptions made are noted below the chart.
£1,575
47%
23%
£1,061
35%
21%
£473
100%
44%
30%
)
0
0
0
£
’
(
n
o
i
t
a
r
e
n
u
m
e
R
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
£818
47%
23%
30%
£538
35%
21%
44%
£218
100%
Fixed pay
Annual bonus
Long-term incentives
Minimum
Target
Maximum
Minimum
Target
Maximum
CHIEF EXECUTIVE
OFFICER
PERFORMANCE
CHIEF FINANCIAL
OFFICER
PERFORMANCE
Assumptions:
1. Base salary applying on 3 July 2017.
2. Annualised benefits estimated based on 52 weeks ended 1 July 2017.
3. Minimum performance assumes no bonus, on-target performance assumes 60 per cent of the maximum bonus potential
and maximum performance assumes 100 per cent of salary for the annual bonus.
4. Although there is no plan to grant PSP awards to Executive Directors in 2017/18, the charts show the grant levels for the initial
PSP awards for the Chief Executive Officer, annualised over a three-year period. Target levels of 50 per cent of maximum have
been used.
5. For illustrative purposes only, a grant of PSP awards to the new Chief Financial Officer in line with policy at 200 per cent of
salary has been included. However, no award has yet been granted and the Committee has not yet determined whether to
make any award.
Revolution Bars Group plc Annual Report and Accounts 2017
39
Annual Report on Remuneration
The Committee’s terms of reference are
available from the Company Secretary
and can be found on the Company’s
website at www.revolutionbarsgroup.com.
The Chief Executive Officer is invited
to attend meetings, although is not
present when matters affecting his
own remuneration are discussed.
The Company Secretary or their nominee
acts as secretary to the Committee.
During the 52 weeks ended 1 July 2017,
the Committee met formally on three
occasions, with all members attending.
The key activities of the Committee during
the 52 weeks ended 1 July 2017 have been:
> approval of the bonus outcome and
pay-out in respect of the financial reporting
period for the 53 weeks ended 2 July 2016,
confirming that the calculation had
been made in accordance with the
agreed mechanism;
> determination and approval of
the bonus scheme in respect of the
financial reporting period for the 52
weeks ended 1 July 2017 in line with
the policy and provisions set out here;
> to review the salary and pension
arrangements for Mark McQuater;
> determination of the financial terms
of the leaver arrangements for Sean
Curran and Chris Chambers; and
> determination of an appropriate
remuneration structure for Mike Foster
as incoming Chief Financial Officer.
Subsequent to the end of the reporting
period, the Committee has met to
determine the calculations to be applied
to the vesting of shares under the Long
Term Incentive Plan in connection with
the recommended Board offer from
Stonegate Pub Company Limited.
Composition of the Remuneration
Committee (unaudited)
The Committee currently consists of
Michael Shallow (Chairman), Keith Edelman
(Non-executive Chairman) and Jemima Bird
(Non-executive Director). None of the
Committee has any personal financial
interest (other than as a shareholder),
conflicts of interest from cross-directorships,
or day-to-day involvement in the running
of the business.
The Committee retains independent
remuneration consultants, New Bridge
Street (“NBS”) (a trading name of Aon plc),
to advise on aspects of Executive
remuneration. NBS is a member of the
Remuneration Consultants Group and has
signed up to its code of conduct. NBS has
no connection with Revolution Bars Group
plc other than in the provision of advice
on Executive remuneration. The terms
of engagement with NBS are available
from the Company Secretary on request.
The fees payable to NBS during the
52 weeks ended 1 July 2017 were
£8,924 (2016: £11,471).
During the year the Company also used
Macfarlanes LLP to provide advice on
termination arrangements relating to
Sean Curran and Chris Chambers.
The Committee reviews its relationships
with external advisers on a regular basis and
believes that no conflicts of interest exist.
Implementation of the
remuneration policy in the
52 weeks ending 30 June 2018
(unaudited)
Basic annual salary
Each Executive Director’s basic salary
is normally reviewed and determined
by the Committee annually, taking into
account the individual’s performance and
experience. The Committee also, from
time to time, makes use of independent
benchmark data provided by external
remuneration consultants, takes due
account of market data in separate
comparator groups based on sector, size
and complexity, and is aware of the level
of salary increases awarded to other
employees within the Group.
Salaries were not reviewed at the normal
review date at the beginning of July 2017
consistent with the decision not to review
the salaries of the Senior Management
Team. The Committee agreed an initial
salary for Mike Foster that is below that
of his predecessor but consistent with his
experience levels. Current salaries are
summarised as follows:
> Mark McQuater, Chief Executive
Officer, £367,500 per annum
(2016: £367,500); and
> Mike Foster, Chief Financial Officer,
£200,000 per annum (2016 for
Chris Chambers: £245,000).
Performance-related bonus
The maximum bonus potential for the
Chief Executive Officer and the Chief
Financial Officer for the 52 weeks ending
30 June 2018 is 100 per cent of basic
salary earned in the reporting period.
For each Executive Director, their
performance-related bonus is based
80 per cent on an annual scorecard of
financial performance metrics and 20 per cent
on personal strategic objectives that reflect
key drivers of the business, such as new
openings, customers, quality and staff. An
underpin applies to the annual bonus award,
which gives discretion to the Remuneration
Committee to reduce the award.
For the 52 weeks ended 1 July 2017,
no award was allotted to any qualifying
participants by the Committee, due to the
shortfall in the Group’s profit performance
measures relative to the targets set at the
beginning of the period.
For the 52 weeks ending 30 June 2018,
the financial targets will be measured based
on adjusted EBITDA and adjusted profit
before tax (“PBT”). Further detail about
such strategic and personal objectives
is considered commercially sensitive and
will therefore not be disclosed prospectively.
This bonus will also be wholly payable in
cash and subject to recovery provisions
for three years from date of payment.
Long-term incentive awards
The Committee believes that share
ownership and the granting of share-
based incentives strengthen the link
between Executives’ personal interests
and those of the shareholders. The Company
has two long-term share plans in place,
being a Company Share Option Plan (“CSOP”)
and a Performance Share Plan (“PSP”).
Revolution Bars Group plc Annual Report and Accounts 2017 40
CORPORATE GOVERNANCE
REMUNERATION REPORT CONTINUED
for the 52 weeks ended 1 July 2017
Implementation of the remuneration policy in the 52 weeks ending 30 June 2018 (unaudited) continued
Long-term incentive awards continued
It is not the Committee’s current intention to grant any awards in the coming period given the Board recommended offer for the
Group. No awards were made to Mike Foster given that the Group was already in discussions regarding a potential offer for the
Group at the time of his appointment to the Board.
Policy on Executive share ownership
The Board has adopted a formal policy in respect of Executive share ownership, pursuant to which all Executives are expected to invest in
the Company to a level of at least 100 per cent of annual salary over time, save that under such policy Executives may build to this level using
50 per cent of net awards under the Company’s long-term incentive plans. Details of current share ownership levels are set out on page 34.
Non-executive Directors’ fees and incentives
The fees of the Non-executive Directors are set by the Board following a review against fee levels operated in companies of a
comparable size and after taking into account the anticipated time commitment of each role. The Non-executive Directors do not
participate in any incentive, pension or benefit schemes of the Company.
Details of each Director’s remuneration for the 52 weeks ended 1 July 2017 are given below.
Directors’ remuneration for the 52 weeks ended 1 July 2017 (audited)
Executive Directors
Mark McQuater
Mike Foster2
Chris Chambers3
Sean Curran4
Sean Curran
Non-executive Directors
Keith Edelman
Michael Shallow
Jemima Bird5
Aggregate emoluments
2017
2016 6
2017
2017
2017
2016 6
2017
2016
2017
2016
2017
2017
2016
Fees/
salary
£’000
368
350
15
218
206
235
90
90
40
40
16
953
715
Taxable
benefits1
£’000
Pension
£’000
Bonuses
£’000
Long-term
incentives
£’000
Single figure
of total
remuneration
£’000
41
42
1
17
23
26
—
—
—
—
—
82
68
64
52
—
33
31
36
—
—
—
—
—
128
88
—
126
—
—
—
—
—
—
—
—
—
—
126
—
—
—
—
—
—
—
—
—
—
—
—
—
473
570
16
268
260
297
90
90
40
40
16
1,163
997
1 Taxable benefits comprise medical insurance policies and car allowances.
2 Mike Foster was appointed to the Board on 2 June 2017; his remuneration figures above reflect the period from the date of appointment only.
3 Chris Chambers was appointed on 31 August 2017 and stepped down from the Board on 6 May 2017; the remuneration figures include garden leave payments of £44,917
up to the end of the reporting period. One further and final payment in lieu of notice of £25,701 was made to Chris Chambers after the end of the reporting period.
4 Sean Curran left on 31 August 2016 but under the agreed severance arrangements was paid until 10 May 2017.
5 Jemima Bird was appointed to the Board on 1 January 2017.
6 Taxable benefits during the 53 weeks ended 2 July 2016 have been restated to reflect the correct medical insurance benefit.
Basic annual salary
> Mark McQuater, Chief Executive Officer, £367,500 per annum.
> Sean Curran, Chief Financial Officer, £235,000 per annum.
> Chris Chambers, Chief Financial Officer, £245,000 per annum.
> Mike Foster, Chief Financial Officer, £200,000 per annum.
Revolution Bars Group plc Annual Report and Accounts 2017 41
Performance-related bonus
For the 52 weeks ended 1 July 2017, a discretionary annual bonus plan was operated for the Executive Directors and other senior
management. A percentage of each individual’s base salary was payable, based on the attainment, on a sliding scale, of adjusted
EBITDA and adjusted profit before tax targets, as well as on the achievement of personal objectives.
For each measure a bonus pool was created once a threshold target level of adjusted EBITDA or adjusted profit before tax had
been achieved. For achieving threshold target performance, a pool of £258,000 would be allocated to be shared by all participants.
Up to an additional £514,000 would be allocated to the pool for performance between threshold target and budget, with up to a
further £256,000 of EBITDA (or PBT) allocated to the pool for performance above budget.
EBITDA performance
Actual adjusted EBITDA performance for the 52 weeks ended 1 July 2017 did not achieve the threshold target and consequently
no bonus payment became payable.
PBT performance
Actual adjusted profit before tax performance for the 52 weeks ended 1 July 2017 did not achieve the threshold target and
consequently no bonus payment became payable.
Full details of the performance outcome are set out in the table below:
Financial objectives
Performance measure
Adjusted EBITDA (£’000)
Adjusted profit before tax (£’000)
Target
16,280
9,805
Stretch
18,480
11,130
Annual bonus
Performance
outcome
Weighting
Outcome
(% of max bonus)
15,066
9,296
40%
40%
80%
0%
0%
0%
A bonus of up to 20 per cent could also be earned based on personal objectives but the Committee decided that due to profit
performance in the reporting period falling significantly short of target and given the restatement of prior year earnings it was not
appropriate to make such awards.
The table below summarises the overall bonus result:
Individual
Chief Executive Officer
Total bonus: % salary payable
0% of salary payable
Acknowledging that the bonus mechanism is in line with the remuneration policy, the Committee is comfortable that the level
of bonuses paid to Executive Directors reflects both the Company and individual performance during the year.
Pension arrangements
The Company contributed into defined contribution schemes or made cash payment equivalents for Executive Directors at the
following percentages of basic salary:
Mark McQuater
17.5 per cent
Sean Curran
15.0 per cent
Chris Chambers
15.0 per cent
Mike Foster
0.0 per cent
Revolution Bars Group plc Annual Report and Accounts 2017
42
CORPORATE GOVERNANCE
REMUNERATION REPORT CONTINUED
for the 52 weeks ended 1 July 2017
Non-executive Directors’ fees and incentives continued
Performance Share Plan (“PSP”) – awards granted in FY17 (audited)
The following PSP award was issued to an Executive Director:
Executive
Type of award
Exercise price (p)
Number of
awards granted
Basis of award
Face value 1
Percentage which
vests at threshold
Performance
period end
Chris Chambers
Performance share
0.1
410,000 300% of salary
£735,000
25
30.06.20
1 Face value was determined based on the share price of 179.3 pence at the date of the grant of the awards.
Awards granted to Chris Chambers as consideration for a buyout of previous awards forfeited, in granting these awards the
Committee considered the value, time horizon and form of the award being forfeited. These awards lapsed at the date of his
departure, the performance conditions are outlined below.
In connection with the awards held by Mark McQuater, 70 per cent of the awards are based upon an adjusted EPS target (Part A)
and 30 per cent of the awards are based upon a TSR target (Part B).
The performance conditions are tested over three overlapping three-year performance periods:
> the first tranche (50 per cent of the award) will be tested over the period from 1 July 2015 to 30 June 2018 for Part A and
18 March 2015 to 30 June 2018 for Part B and will vest in 2018 to the extent it satisfies the conditions;
> the second tranche (25 per cent of the award) will be tested over the period from 1 July 2016 to 30 June 2019 and will vest in
2019 to the extent it satisfies the conditions; and
> the third tranche (25 per cent of the award) will be tested over the period from 1 July 2017 to 30 June 2020 and will vest in
2020 to the extent it satisfies the conditions.
Part A – EPS targets
The vesting of Part A of each such award will be dependent on the Group’s EPS performance over the fixed periods listed above.
No portion of Part A will vest unless the Group’s EPS growth is at least equal to a compound annual growth rate of 7 per cent;
thereafter the following vesting schedule will apply:
The Company’s EPS compound growth
At least 7% per annum
Between a minimum of 7% per annum and 13% per annum
At least 13% per annum
Extent of vesting of Part A
25%
Pro-rata between 25% and 100%
100%
For the IPO LTIP Award, EPS performance will be tested using a pro-forma EPS figure for the year ended FY15 as a base point.
Adjusted EPS for such purposes thereafter will be disclosed in due course at the time of vesting in the Remuneration Report.
Part B – TSR targets
The vesting of Part B of each such award will be dependent on the Group’s TSR over the fixed periods listed above relative to the
TSR of the constituents of the peer group of other UK-listed restaurant and bar sector companies over the same period.
No portion of Part B will vest unless the Group’s TSR performance at least matches the median of the TSR performance within the
comparator Group; thereafter the following vesting schedule will apply:
The Company’s TSR performance against the TSR of the comparator companies
Median
Between median and upper quartile
Upper quartile (or better)
Extent of vesting of Part B
25%
Pro-rata between 25% and 100%
100%
For the IPO LTIP Award, the offer price (200 pence) will be used as the base point from which TSR is measured for the Company.
For the FY16 LTIP Award and the FY17 LTIP Award a three-month average prior to the start of the performance period will be used.
For all awards the end point will be averaged over the last three months of the respective performance period.
Expected volatility has been estimated by considering historical average share price volatility for the Company or similar
companies. Staff attrition has been assessed based on historical retention rates.
Revolution Bars Group plc Annual Report and Accounts 2017 43
Outstanding Executive share awards
Executive Director
Scheme
Grant date
Exercise
price (p)
No. of shares
at 2 July 2016
Granted during
the year
Vested during
the year
Lapsed during
the year
No. of shares
at 1 July 2017
Vesting date
Mark McQuater
PSP – IPO LTIP
Tranche 1
PSP – IPO LTIP
Tranche 2
PSP – IPO LTIP
Tranche 3
CSOP
19.03.15
19.03.15
19.03.15
0.1
0.1
0.1
700,000
350,000
350,000
19.03.15
191
15,706
—
—
—
—
1,415,706
—
—
—
—
—
—
—
—
—
—
700,000
30.06.18
350,000
30.06.19
350,000
30.06.20
15,706
30.06.18
—
1,415,706
Sean Curran1
PSP – IPO LTIP
Tranche 1
PSP – IPO LTIP
Tranche 2
PSP – IPO LTIP
Tranche 3
CSOP
19.03.15
19.03.15
19.03.15
19.03.15
Chris Chambers2
PSP – IPO LTIP
Tranche 3
CSOP
02.11.16
02.11.16
1 Sean Curran left on 31 August 2016.
2 Chris Chambers stepped down on 6 May 2017.
Directors’ share-based incentives
0.1
0.1
0.1
191
0.1
179
350,000
175,000
175,000
15,706
715,706
—
—
—
—
—
—
—
410,000
16,759
—
426,759
—
(350,000)
—
—
—
—
—
—
—
(175,000)
(175,000)
(15,706)
(715,706)
(410,000)
(16,759)
(426,759)
—
—
—
—
—
—
—
—
n/a
n/a
n/a
n/a
n/a
n/a
Aggregate emoluments do not include any amounts for the value of share-based incentives to acquire Ordinary Shares in the
Company granted to or held by the Directors.
The number of Ordinary Shares that may be issued under the PSP and any other share plan may not exceed 5 per cent of the
Ordinary Shares in issue in any ten-year period. However, the Initial Awards shown above do not count for the purposes of this limit.
Payments made for loss of office and payments to past Directors (audited)
As described in last year’s Annual Report on Remuneration, Sean Curran stepped down from the Board on 31 August 2016.
He remained on garden leave until 10 May 2017 during which time he received his normal pay and benefits. No bonus payments
were made to Sean during the reporting period and all share awards under the Long Term Incentive Plan have lapsed.
Chris Chambers stepped down from the Board on 6 May 2017; he continued to receive his normal pay and benefits until 6 May 2017.
Payments totalling £77,342 in lieu of notice were paid in three equal instalments, the last of which was after the end of the reporting
period. No bonus payments were made to Chris during the reporting period and all share awards under the Long Term Incentive
Plan have lapsed.
Revolution Bars Group plc Annual Report and Accounts 2017
44
CORPORATE GOVERNANCE
REMUNERATION REPORT CONTINUED
for the 52 weeks ended 1 July 2017
Directors’ interests and shareholding guidelines (audited)
The following table shows Directors’ interests in the Company:
Director
Mark McQuater
Sean Curran
Chris Chambers
Mike Foster
Keith Edelman
Michael Shallow
Jemima Bird
Beneficially owned
at 1 July 2017
Outstanding
LTIP awards
Outstanding share
awards under
all employee
share plans
813,720
—
—
—
30,500
12,750
12,750
1,415,706
—
—
—
—
—
—
—
—
—
—
—
—
—
Total interest
in shares
2,229,426
—
—
—
30,500
12,750
12,750
Shareholding as a %
of base salary
at 1 July 2017
606%
n/a
n/a
0%
n/a
n/a
n/a
All Executive Directors are expected to hold an investment of at least 100 per cent of base salary in Company shares. This
requirement can be achieved over a period of time using 50 per cent of net awards which vest under the Company’s LTIPs.
The table above shows shareholdings as at both the start and end of the reporting period and the percentage of the guideline
currently met as at 1 July 2017.
Total shareholding, which counts towards the measurement of the guideline, is calculated on the basis of legally owned
shares. The percentage of guideline met is based on the annual base salary and the higher of the acquisition cost of the total
shareholding or the current market value of the total shareholding. Once an Executive Director meets the required holding,
the Executive Director is only required to purchase additional shares equivalent to the value of any increase in base salary.
Performance graph and Chief Executive Officer remuneration table (unaudited)
The graph below illustrates the Company’s total shareholder return (“TSR”) performance relative to the FTSE Fledgling Index.
This was chosen as it represents a broad-based index of which the Company is a constituent. Performance is shown over the
period from the Company’s listing in March 2015 through to the end of the current reporting period at 1 July 2017. The graph
shows performance of a hypothetical £100 invested and its performance over that period.
Total shareholder return
Source: Datastream (Thomson Reuters)
180
160
140
120
100
80
40
20
0
)
d
e
s
a
b
e
R
(
)
£
(
e
u
a
V
l
Revolution Bars Group plc
FTSE Fledgling (excluding investment trusts)
March 2015
March 2016
March 2017
This graph shows the value, by 1 July 2017, of £100 invested in Revolution Bars Group plc on 12 March 2015, compared with the
value of £100 invested in the FTSE Fledgling Index (excluding investment trusts).
The other points plotted are the values at intervening financial year ends.
Revolution Bars Group plc Annual Report and Accounts 2017
45
The table below details the CEO’s remuneration over the same period as presented in the TSR graph:
Single figure of remuneration (£’000)
LTIP vesting (% of maximum)
Bonus (% of maximum)
2017
473
—
—
2016
570
—
22
2015
449
—
12
Percentage increase in the remuneration of the Chief Executive Officer (unaudited)
The table below demonstrates the movement in the salary, benefits and annual bonus for the Chief Executive Officer between the
current and previous financial periods compared to that for the average full-time salaried employee.
Salary
Taxable benefits
Annual bonus
Relative importance of spend on pay (unaudited)
Staff costs
Distributions to shareholders
CEO %
Employee %
5.0
(2.1)
(100.0)
2016
£m
33.5
1.6
2.2
—
(12.6)
%
18
56
2017
£m
39.5
2.5
Shareholder voting on the Directors’ Remuneration Report at the 2016 annual general meeting (unaudited)
At the annual general meeting on 1 December 2016, the Directors’ Remuneration Report and Annual Report on Remuneration
received the following votes from shareholders:
Directors’ Remuneration Report
% of votes cast 80.2
Votes for
Votes against
Votes withheld
37,538,753
96.78
1,288,614
3.22
1,388,055
—
Note: A vote withheld is not a vote in law and is not counted in the calculation of the proportion of votes cast “for” and “against” a resolution.
As indicated in the section of the report under Directors’ remuneration policy, the Group’s remuneration policy was put to a formal and binding vote at the
2015 annual general meeting and is expected to continue to apply until 30 June 2018. Therefore, a vote was not held on the Directors’ remuneration policy
at the 2016 annual general meeting.
Approval
This report was approved by the Remuneration Committee and signed on its behalf by:
Michael Shallow
Chairman of the Remuneration Committee
3 October 2017
Revolution Bars Group plc Annual Report and Accounts 2017 46
CORPORATE GOVERNANCE
AUDIT COMMITTEE REPORT
Michael Shallow
Chairman of the
Audit Committee
Dear shareholder
I am pleased to introduce the report of
the Audit Committee for the 52 weeks
ended 1 July 2017.
consider to be of significant audit risk.
The Committee meets at least twice a
year at the appropriate times in the
reporting and audit cycle.
The Committee has this year strongly
supported the new finance team following
the departure of a long-standing Chief
Financial Officer in August 2016 and
subsequently his replacement in May 2017
as well as a long-standing Group Financial
Controller in December 2016. Our current
Chief Financial Officer, Mike Foster, joined
the business in an interim role in March 2017
and together with the new team initially
focused on understanding the reliability of
the Group’s forecasts and this resulted in
the market announcement on 19 May 2017.
The new team also identified that the
application of our accounting policies
required updating, particularly in two
key areas:
> Certain items of marketing expenditure,
including menus and branded collateral
which were being capitalised as
short-life assets. The appropriate
treatment for such expenditure is
to expense the cost as incurred.
and the appropriateness of the accounting
treatment. In parallel, the new team was
asked to review the application of all key
accounting policies and practices and this
identified several other issues also
requiring adjustments to prior periods.
These are also detailed in Note 1b to
the consolidated financial statements.
The Committee has closely reviewed
the PwC report, which was delivered
in mid-August 2017, and the other
findings of the finance team and
their recommended adjustments. The
Committee’s main goal at this time
has been to ensure that the material
judgements and estimates used this
financial year are the most appropriate
to present a fair and balanced view of
the financial affairs of the Group as at
1 July 2017 and the progress made
during the course of the year.
During the year, the Directors continued
to assess the following key areas:
> Board governance, including the
Committee and the procedure for
assessing the Group’s key risks;
> Certain policies relating to income
> management accounting processes
from supplier rebates and listing fees
were not applied correctly, resulting in
over-statements of accrued income as
at 2 July 2016 and 27 June 2015.
Corrections in relation to these two items
have led to prior period adjustments that
are set out in Note 1b to the consolidated
financial statements.
When these matters came to the attention
of the Audit Committee, the Committee
engaged PwC to undertake a full
independent review relating to these two
issues to confirm the amounts involved
and the quality of information provided
to the Board;
> external financial reporting
procedures and audit arrangements
and reporting standards;
> complex transactions, potential
exposure and risk;
> information systems; and
> budgeting and forecasting procedures
and controls.
The Code recommends that all members
of the Committee be Non-executive
Directors, independent in character and
judgement and free from any relationship
or circumstance which may, could or
would be likely to, or appear to, affect
their judgement and that at least one such
member has recent and relevant financial
experience. Accordingly, the Committee
comprises all three independent Non-
executive Directors with me as Committee
Chairman, considered by the Board
to have recent and relevant financial
experience due to my previous experience
in senior financial roles. As such, the
Committee complies with the Code
recommendations. Regular Committee
meetings are also normally attended
by the Chief Financial Officer and the
external auditor. The Chief Financial
Officer, who is also the Company Secretary,
acts as secretary to the Committee. Other
members of management, particularly
senior financial managers, are invited
to attend depending on the matters
under discussion.
The Committee also meets at least twice
per annum with the external auditor with
no members of management present.
The Committee was set up by the Board
to assist it with its responsibilities in
respect of financial reporting, including
reviewing annual and half-year results,
external auditing and internal controls,
and advising on the independence and
appointment of the external auditor.
The Committee also routinely examines
significant accounting treatments facing
the Group and will focus on those
matters raised by KPMG LLP, which they
Revolution Bars Group plc Annual Report and Accounts 2017 47
The Directors recognise the need
to maintain the financial reporting
procedures, review them on a continuing
basis and adapt them to changing
circumstances. Their review forms
part of the Committee’s agenda going
forward together with its wider role
and responsibilities, which are set out
in more detail in this report. Based on
its performance during the 52 weeks
ended 1 July 2017, the Committee will
be recommending that KPMG LLP be
re-appointed as auditor at the 2017
annual general meeting (“AGM”). I look
forward to meeting with shareholders
at the AGM to answer any questions
on the work of the Audit Committee.
Ensuring external auditor
independence
During the year the value of non-audit
services provided by the external auditor
amounted to £0.02 million (2016: £0.4 million).
New EU legislation on permitted non-audit
services came into effect from 17 June 2016
which introduced a permitted non-audit
services fee cap of 70 per cent of the
average audit fee over a consecutive
three-year period. This cap will come into
effect for the Group in the financial year
ending 30 June 2019. A significant
proportion of non-audit services delivered
during 2017 related to reviewing the
Group’s half-year reporting, which is a
service incidental to the role as auditor.
The Committee is satisfied that, in relation
to services provided, KPMG LLP has taken
actions to ensure that any potential
conflicts of interest are properly managed.
KPMG was appointed as auditor of the
Group by the Directors on 18 March 2015.
The period of total uninterrupted
engagement is the three years ended
1 July 2017. Prior to that KPMG was also
auditor to the Group’s previous Parent
Company, but which, being unlisted, was
not a public interest entity. Under the EU
audit regulation, the Company is required
to undertake a tender for audit services
at least every ten years (being for the
period commencing July 2024). In light
of the Board recommended offer for the
business, there are currently no plans
to undertake a tender.
Role and responsibilities
Meetings and attendance
During the 52 weeks ended 1 July 2017,
the Audit Committee met formally on three
occasions, with all members attending
the meetings. In addition, at two of the
meetings, the Audit Committee had
access to the external auditor without
management present.
Following the end of the reporting
period, the Committee met formally
on two further occasions prior to the
approval of the consolidated financial
statements. In addition to the Committee’s
work associated with the accounting
review referred to on the previous page,
other work performed by the Committee
during the year has included:
> reviewing and approving the external
audit plan for the 52 weeks ended
1 July 2017;
> agreeing the Committee’s rolling agenda
for the 52 weeks to 30 June 2018 and
the associated financial calendar;
> reviewing the annual report and accounts
for 2017 and recommending to the
Board its adoption as fair, balanced and
understandable. In fulfilling this task,
the Committee reviewed the process
undertaken to produce the annual report
and accounts 2017, which included
internal verification processes and
content approval procedures;
> reviewing the pre-close statement in
July 2017;
> receiving the external auditor’s reports
to the Committee;
> reviewing the Group’s accounting
policies and key accounting judgements;
> considering the risk assessment,
mitigation actions and assurance
activities produced by management;
The Committee’s terms of reference
can be found on the Group’s website
or alternatively can be obtained from the
Company Secretary. The primary function
of the Audit Committee is to assist the
Board in fulfilling its responsibilities to
protect the interests of shareholders
with regard to the integrity of financial
reporting, audit, risk management and
internal controls. This comprises:
> monitoring and reviewing the Group’s
accounting policies, practices and
significant accounting judgements; and
> receiving the annual and half-yearly
financial statements and any public
financial announcements and advising
the Board on whether the annual
report and accounts is fair, balanced
and understandable in relation to the
external audit:
> approving the appointment and
recommending the re-appointment
of the external auditor and its terms
of engagement and fees;
> considering the scope of work to be
undertaken by the external auditor
and reviewing the results of that work;
> reviewing and monitoring the
independence of the external auditor;
> reviewing the effectiveness of the
external auditor;
> reviewing compliance with the UK
Corporate Governance Code;
> overseeing the Group’s procedures
for its employees to raise concerns
through its whistleblowing policy as
set out in the code of conduct and
business principles policy;
> monitoring the effectiveness of the
risk management systems and
processes; and
> assessing and advising the Board on
the internal financial, operational and
compliance controls.
Revolution Bars Group plc Annual Report and Accounts 2017 48
CORPORATE GOVERNANCE
AUDIT COMMITTEE REPORT CONTINUED
Meetings and attendance continued
> reviewing the independence and
objectivity of the external auditor,
together with its effectiveness, and
recommending its re-appointment to
shareholders at the AGM;
> reviewing compliance with and
explaining any exceptions from the
UK Corporate Governance Code; and
> reviewing the internal financial,
operational and compliance control.
Internal audit
The Group does not have an internal
audit function and considers that the
key risks to the business are covered by
a combination of resources including its
compliance department, stock-takers
and area managers.
The Group’s compliance department
is responsible for managing many of
the principal risks facing the business
concerning licensing and health and
safety. Its work is supported by external
consultants on both of these matters and
as part of these arrangements annual
contracts are in place to provide at least
two audit visits per annum by fully
qualified health and safety advisers.
The Group also employs four full-time
stock-takers who are checking stocks
and various other related compliance
matters such as cash counts on a risk
assessed basis. Site stocks are counted
on average between eight and ten times
per annum. Stock-take results are
reviewed by both operational and
finance staff immediately that they
are made available.
An important element of the area
manager’s role is to perform spot checks
on cash, stocks, licensing and health and
safety matters as part of their regular site
visits. The area manager assessments
are used, amongst other things, to rate
general managers and poor scores
relating to these standards will reduce
their bonus earnings potential.
Significant accounting matters
In reviewing the financial statements with
management and the external auditor,
the Committee has discussed and debated
the critical accounting judgements and
key sources of estimation uncertainty
as set out in Note 1 to the consolidated
financial statements. There has been
particular emphasis this year on the matters
giving rise to the prior period adjustments.
As a result of its review, the Committee
has identified the following issues that
require particular judgement or have
significant impact on the interpretation of
the annual report and accounts for 2017:
> Accrued rebates from suppliers:
rebates are usually invoiced on a
monthly or quarterly basis based on
supplied volumes and whilst-these
can usually be quickly assessed
post-period, judgements are also
sometimes required as to whether
longer-term contractual thresholds
will be met. The Committee is satisfied
that appropriate judgements have
been made.
> Carrying value of fixed assets: the
Group keeps the carrying value of
its fixed assets under review. Formal
procedures are used in each external
reporting period to make assessments
of the appropriateness of carrying
values within the balance sheet.
> Capitalisation of property, plant
and equipment: the Committee has
reviewed capitalisation policies and in
particular the capitalisation of internal
costs in relation to property development
and IT systems development and is
satisfied that its policies and the
amounts capitalised are appropriate.
> Accounting for and the disclosure
of prior period errors: the Committee
has reviewed each of the items and
is satisfied that they constitute prior
year adjustments.
> Exceptional items: exceptional items
on a pre-tax basis of £4.3 million
(2016 Restated*: £1.4 million) represent
a material item in the profit and loss
account. The charge comprises fees
associated with the resignation of the
Chief Financial Officer, fees associated
with the accounting review, an increase
in the provision for onerous leases,
a fixed assets impairment charge and
charges relating to the Long Term
Incentive Plan (see Note 3 to the
consolidated financial statements). The
Committee reviewed the constituent
elements of this cost and was satisfied
that they were exceptional in nature.
The Committee reviewed reports
presented by KPMG LLP that detailed
key audit findings in relation to the above
accounting matters.
Michael Shallow
Chairman of the Audit Committee
3 October 2017
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior year adjustments included in respect of the profit for the 53 weeks ended 2 July 2016.
Revolution Bars Group plc Annual Report and Accounts 2017 49
CORPORATE GOVERNANCE
NOMINATION COMMITTEE REPORT
Keith Edelman
Chairman of the
Nomination Committee
Dear shareholder
I am pleased to introduce the report
of the Nomination Committee for the
52 weeks ended 1 July 2017.
By invitation, the meetings of the Committee
may be attended by the Chief Financial
Officer, although this did not happen
during the year under review.
Responsibilities
The Committee’s terms of reference,
which can be found on the Group’s
website and can be obtained from the
Company Secretary, deal with such
issues as membership and frequency of
meetings, together with the requirements
for quorum and notice procedure and the
right to attend meetings. The responsibilities
of the Committee covered in its terms
of reference include reviewing Board
composition, appointing new Directors,
re-appointment and re-election of
existing Directors, succession planning
taking into account the skills and expertise
that will be needed on the Board in the
future, reviewing time required from
Non-executive Directors, determining
membership of other Board Committees
and ensuring external facilitation of the
evaluation of the Board. As part of its
activities the Committee also considers
the diversity of the Board.
Meetings and attendance
During the 52 weeks ended 1 July 2017,
the Nomination Committee met formally
on two occasions with all members
attending the meetings. The Committee
will continue to meet formally at least
once a year and at such other times as
the Board or the Committee Chairman
requires. The Committee has access
to sufficient resources to carry out its
duties, including the services of the
Company Secretary. Independent
external legal and professional advice
can also be taken by the Committee if
it believes it is necessary to do so.
Election of Directors
On the recommendation of the
Committee and in line with the Code,
all of the Group’s Directors will stand
for election at the forthcoming AGM
and will subsequently offer themselves
for re-election on an annual basis.
Composition
The Code recommends that a majority
of the members of the Nomination
Committee should be independent
Non-executive Directors. The Committee
is chaired by me, and its other members
are Michael Shallow, Jemima Bird and
Mark McQuater, of whom Michael and
Jemima are independent Non-executive
Directors. Consequently, the Committee
complies with the Code recommendation.
The biographical details of the Directors
can be found on page 24. Following
performance evaluations conducted
during the year, the Committee is
satisfied that the Directors, who served
during the 52 weeks ended 1 July 2017,
performed effectively and demonstrated
a commitment to their roles. This will
continue to be monitored going forward
with further formal performance reviews
taking place during the 52 weeks ending
30 June 2018.
Diversity
The Committee supports the aims,
objectives and recommendations
outlined in Lord Davies’ report “Women
on Boards” and is aware of the need to
increase the number of women on the
Board, to which it is committed over time.
Within this overriding commitment, we
will make appointments based on merit
and against objective criteria to ensure
we appoint the best individual for each
role. The Committee and the Board
understand the importance of a diverse
Board membership as well as throughout
the Group, and recognise that diversity
encompasses not only gender but also
background, ethnicity and disability. The
Committee believes that appointments
should be made on merit, the key criterion
being whether or not the appointee can
add to or complement the existing range
of skills and experience on the Board.
Jemima Bird was appointed to the
Board during the reporting period
and two of the seven members of the
Senior Management Team are women
(29 per cent). Across our business of
approximately 2,743 employees, female
employees represented approximately
42 per cent of the workforce as at
15 July 2017. The Group is committed
to continuing to develop the potential
of its female employees through its
training programmes and its corporate
development pipeline.
I look forward to meeting with shareholders
at the AGM to answer any questions on
the work of the Nomination Committee.
Keith Edelman
Chairman of the Nomination Committee
3 October 2017
Revolution Bars Group plc Annual Report and Accounts 2017 50
CORPORATE GOVERNANCE
DIRECTORS’ REPORT
Introduction
Results and dividend
Powers of the Directors
The Directors may exercise all the
powers of the Group including, subject
to obtaining the required authority from
the shareholders in general meeting,
the power to authorise the issue of
new shares and the purchase of the
Company’s shares. During the year, the
Directors have not exercised any of the
powers to issue or purchase shares in
the Company.
Restrictions on transfer
There are no general restrictions
on the transfer of Ordinary Shares in
the Company other than in relation to
certain restrictions that are imposed
from time to time by laws and regulations
(for example insider trading laws).
Pursuant to the Listing Rules, Directors
and certain officers and employees of
the Group require the approval of the
Company to deal in the Ordinary Shares
of the Company.
The Company has in place certain share
incentive plans and details can be found
on page 37. As at the financial period end
on 1 July 2017 and up to the date of this
report, no awards have been granted
to the Company’s new Chief Financial
Officer, Mike Foster. During the reporting
period, 1,190,000 awards lapsed and
692,500 awards have been granted.
The Directors present their annual report
and the audited financial statements of
the Company and Group for the 52 weeks
ended 1 July 2017. This Directors’ Report
includes additional information required
to be disclosed under the Companies
Act 2006, the Code, the DTRs and the
Listing Rules of the Financial Conduct
Authority. Certain information required to
be included in the Directors’ Report is
included in other sections of this annual
report as follows, which is incorporated
by reference into this Directors’ Report:
> the Strategic Report on pages 1 to 21
which sets out a review of the business
of the Group during the 52 weeks ended
1 July 2017 and the financial position of
the Group at the end of that period to
enable shareholders to assess how the
Directors have performed their duty
under section 172 of the Companies
Act. The review also describes the
principal risks and uncertainties facing
the Group, and provides a fair review
of the Group’s business at the end of
the financial year and an indication of
likely future developments in the business;
> the Corporate Governance Statement
on pages 26 to 29; and
> related party transactions as set
out in Note 24 to the consolidated
financial statements.
This Directors’ Report together with the
Strategic Report set out on pages 1 to 21
represents the “Management Report”
for the purpose of compliance with the
DTR 4.1.5R.
The Group’s results for the year are
shown in the statement of comprehensive
income on page 60. The Directors intend,
subject to sufficient distributable reserves
being available, that there will be a final
dividend in respect of the 52 weeks
ended 1 July 2017 of 3.3 pence per share
(2016: 3.3 pence per share). The Group
paid an interim dividend of 1.65 pence per
share during the period (2016: 1.5 pence
per share), taking the total dividend in
relation to the 52 weeks ended 1 July 2017
to 4.95 pence per share (2016: 4.8 pence
per share). Payment of the dividend is
subject to shareholder approval at the
annual general meeting. See also the
post balance sheet events note below.
Share capital and related matters
The Company has only one class of
share and the rights attached to each
share are identical. Details of the rights
and obligations attaching to the shares
are set out in the Company’s Articles
of Association, which are available
from the Company Secretary and can
also be found on the Company’s website,
www.revolutionbarsgroup.com, under
investor relations and shareholder
information. The Ordinary Shares are
listed on the official list and are traded
on the London Stock Exchange. The
Company may refuse to register any
transfer of a share which is not a fully
paid share. At a general meeting of the
Company, every member has one vote
on a show of hands, and on a poll one
vote for each share held. Details of the
voting procedure, including deadlines for
exercising voting rights, are set out in
the Notice of Annual General Meeting
2017. As at 1 July 2017, the issued share
capital of the Company was 50,000,000
Ordinary Shares of £0.001 each. Details
of the share capital as at 1 July 2017 are
shown in Note 19 to the consolidated
financial statements.
Revolution Bars Group plc Annual Report and Accounts 2017 51
Substantial shareholdings
As at 26 September 2017, the Company had been notified, in accordance with the DTRs, of the following interests representing
3 per cent or more of the voting rights in the issued share capital of the Company:
Name of holder
Artemis Investment Management
Legal & General Investment Management
River and Mercantile Asset Management
Sand Grove Capital Management
Hargreaves Lansdown, stockbrokers (EO)
AXA Framlington Investment Managers
Cigogne Management
Barclays Stockbrokers (EO)
Sanford Deland Asset Management
Leste Capital Management
Directors
The Directors of the Company and their
biographies are set out on page 24. Their
interests in the Ordinary Shares of the
Company are shown in the Directors’
Remuneration Report on page 44.
On 31 August 2016, Chris Chambers was
appointed to the Board as an Executive
Director. Sean Curran stepped down from
the Board on the same day. Chris Chambers
stepped down from the Board on 6 May 2017
and Mike Foster was appointed as an
Executive Director on 2 June 2017.
Appointment and removal
of Directors
Directors may be appointed by
ordinary resolution of the Company or
by the Board. All Directors will stand for
re-election on an annual basis, in line
with the recommendations of the Code.
In addition to any powers of removal
conferred by the Companies Act 2006,
the Company may by special resolution
remove any Director before the
expiration of his period of office.
Directors’ indemnities
and insurance
The Articles of Association of the
Company permit it to indemnify the
Directors of the Company against
liabilities arising from or in connection
with the execution of their duties or
powers to the extent permitted by law.
The Group has directors’ and officers’
indemnity insurance in place in respect
of each of the Directors. The Group has
entered into a qualifying third-party
indemnity (the terms of which are in
accordance with the Companies Act
2006) with each of the Directors. Neither
the indemnity nor insurance provides
cover in the event that a Director or
officer is proved to have acted fraudulently.
Transactions with related parties
Details of the transactions entered
into by the Group with parties who are
related to it are set out in Note 24 to
the consolidated financial statements.
There were no material transactions
with related parties during the 52 weeks
ended 1 July 2017.
Total holding
of shares
7,387,121
4,588,000
4,448,106
4,128,061
3,032,486
2,275,601
2,211,758
2,168,532
2,085,000
1,705,047
% of total
voting rights
14.77
9.18
8.90
8.26
6.06
4.55
4.42
4.34
4.17
3.41
Change of control
The provisions of the Group’s share
incentive plans may cause options and
awards granted to employees under
such plans to vest on a change of
ownership of the Group. The Group does
not have agreements with any Director
that would provide compensation for loss
of office or employment resulting directly
from a change of its ownership.
Amendment to the Company’s
Articles of Association
The Company may alter its Articles of
Association by special resolution passed
at a general meeting of shareholders.
Political donations
The Group has not made in the past,
nor does it intend to make in the future,
any political donations.
Revolution Bars Group plc Annual Report and Accounts 2017 52
CORPORATE GOVERNANCE
DIRECTORS’ REPORT CONTINUED
Post balance sheet events
On 24 August 2017, the Company
announced that the Board was
recommending an offer for the Company
from Stonegate Pub Company Limited at
an offer price of 203 pence per share. It
is expected that the Group’s shareholders
will vote on the recommended cash offer
by Stonegate on 17 October 2017.
The Board is also engaged with Deltic
Group plc (“Deltic”) as a possible offeror
for the Group. Deltic has outlined a merger
proposal, which the Board has rejected
due to significant concerns regarding
both value and deliverability. Deltic has
stated that, in order to put forward its
merger proposal and discuss with
shareholders, it will in due course publish
its own profit forecast and a quantified
financial benefits statement in respect
of a merger. In parallel, Deltic has also
stated that it continues to evaluate a
possible cash offer for the entire issued
and to be issued share capital of
Revolution. The Takeover Panel
announced on 21 September 2017
that Deltic must either announce a firm
intention to make an offer for the Group
under Rule 2.7 of the City Code on
Takeovers and Mergers, or announce
that it does not intend to make an offer,
by 5.00 pm on 10 October 2017. Deltic
is continuing to perform due diligence
on the Group, and the Board is committed
to ensuring that the interests of the
shareholders are best served.
The final dividend of 3.3 pence per share
is subject to approval at the Company’s
annual general meeting on 30 November
2017 and would ordinarily be expected to
be paid on 7 December 2017. However,
if the Stonegate acquisition of the Group
completes prior to the annual general
meeting taking place, the dividend will
not be payable.
Stonegate will have the right to reduce
the amount of consideration payable
for each Revolution share by the amount
of any dividend (or other distribution)
which is paid or becomes payable by
Revolution to Revolution Shareholders
before the date on which the proposed
scheme of arrangement becomes
effective, which is expected to be on
or about 23 October 2017. Based on
the expected timetable, therefore,
it is not anticipated that any dividend
(or other distribution) will be paid or
that the offer price will be reduced.
If Stonegate does exercise its right to
reduce the amount of consideration
payable for each Revolution share by the
amount of the dividend that has not been
paid, Revolution Shareholders will be
entitled to receive and retain that dividend.
Going concern
The Directors have reviewed the Group’s
trading forecasts. These forecasts
demonstrate that the Group has adequate
financial resources, including its £25 million
revolving credit facility which is committed
until December 2021, to continue in
operational existence for a period of at
least 12 months from the date of approval
of the financial statements.
The Group is forecast to remain compliant
with the terms of the revolving credit facility
and the financial covenants attached to it,
which are tested quarterly. The Directors
expect to utilise the revolving credit facility
for cash flow management and general
business purposes as required.
The revolving credit facility contains
a change in control clause and, should
this clause be invoked, the Directors are
confident that replacement facilities
could be obtained from either the
purchaser of the business or from
alternative financial providers. For this
reason the Directors continue to adopt
the going concern basis in preparing the
consolidated financial information.
Annual general meeting
The annual general meeting (“AGM”)
of the Company will take place on
30 November 2017. The Notice of
Annual General Meeting is set out
in the explanatory circular that
accompanies this annual report
and accounts.
Financial risk management,
objectives and policies
The Group is exposed to certain financial
risks, namely interest rate risk, liquidity
risk and credit risk.
Information regarding such financial
risks is detailed in Note 21 on pages 85
and 86. The Group’s risk management
policies and procedures and principal
risks and mitigations can be found on
pages 14 and 15.
Auditor and disclosure
of information to auditor
Each of the Directors in office at
the date when this annual report and
accounts was approved confirms that:
> so far as the Director is aware, there
is no relevant audit information of
which the Company’s auditor is
unaware; and
> the Director has taken all the steps
that he ought to have taken as a
Director in order to make himself
aware of any relevant audit information
and to establish that the Company’s
auditor is aware of that information.
KPMG LLP has expressed its willingness
to be re-appointed as auditor of the
Company. In accordance with section
489 of the Companies Act 2006, a
resolution for the re-appointment of
KPMG LLP as auditor of the Company is
to be proposed at the forthcoming AGM.
By order of the Board
Mike Foster
Company Secretary
3 October 2017
Revolution Bars Group plc Annual Report and Accounts 2017 53
CORPORATE GOVERNANCE
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE
ANNUAL REPORT AND THE FINANCIAL STATEMENTS
The Directors are responsible for
preparing the annual report and the
Group and Parent Company financial
statements in accordance with applicable
law and regulations.
Company law requires the Directors
to prepare Group and Parent Company
financial statements for each financial
year. Under that law they are required to
prepare the Group financial statements
in accordance with International Financial
Reporting Standards as adopted by the
European Union (IFRSs as adopted by the
EU) and applicable law and have elected
to prepare the Parent Company financial
statements on the same basis.
Under company law the Directors must
not approve the financial statements
unless they are satisfied that they give
a true and fair view of the state of affairs
of the Group and Parent Company and
of their profit or loss for that period. In
preparing each of the Group and Parent
Company financial statements, the
Directors are required to:
> select suitable accounting policies
and then apply them consistently;
> make judgements and estimates that
are reasonable, relevant and reliable;
> state whether they have been
prepared in accordance with IFRSs
as adopted by the EU;
> assess the Group and Parent
Company’s ability to continue
as a going concern, disclosing,
as applicable, matters related to
going concern; and
> use the going concern basis of
accounting unless they either intend
to liquidate the Group or the Parent
Company or to cease operations,
or have no realistic alternative but
to do so.
Responsibility statement of
the Directors in respect of the
annual financial report
We confirm that to the best of
our knowledge:
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Parent
Company’s transactions and disclose
with reasonable accuracy at any time the
financial position of the Parent Company
and enable them to ensure that its financial
statements comply with the Companies Act
2006. They are responsible for such
internal control as they determine is
necessary to enable the preparation
of financial statements that are free from
material misstatement, whether due
to fraud or error, and have general
responsibility for taking such steps as are
reasonably open to them to safeguard the
assets of the Group and to prevent and
detect fraud and other irregularities.
Under applicable law and regulations,
the Directors are also responsible for
preparing a Strategic Report, Directors’
Report, Directors’ Remuneration Report
and Corporate Governance Statement that
complies with that law and those regulations.
The Directors are responsible for
the maintenance and integrity of the
corporate and financial information
included on the Company’s website.
Legislation in the UK governing the
preparation and dissemination of financial
statements may differ from legislation
in other jurisdictions.
> the financial statements, prepared
in accordance with the applicable set
of accounting standards, give a true
and fair view of the assets, liabilities,
financial position and profit or loss of
the Company and the undertakings
included in the consolidation taken
as a whole; and
> the Strategic Report and Directors’
Report includes a fair review of the
development and performance of the
business and the position of the issuer
and the undertakings included in the
consolidation taken as a whole,
together with a description of the
principal risks and uncertainties that
they face.
We consider the annual report and
accounts, taken as a whole, is fair,
balanced and understandable and
provides the information necessary for
shareholders to assess the Group’s
position and performance, business
model and strategy.
By order of the Board
Mark McQuater
Chief Executive Officer
Mike Foster
Chief Financial Officer
3 October 2017
Revolution Bars Group plc Annual Report and Accounts 2017 54
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
to the members of Revolution Bars Group plc
1. Our opinion is unmodified
We have audited the financial statements of Revolution Bars
Group plc (the “Company”) for the period ended 1 July 2017
which comprise the consolidated statement of profit and loss,
the consolidated statement of other comprehensive income, the
consolidated statement of financial position, the consolidated
statement of changes in equity, the consolidated statement of
cash flows, the Company statement of financial position, the
Company statement of changes in equity, the Company statement
of cash flows and the related notes, including the accounting
policies in Note 1.
> the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities are described below. We believe that the
audit evidence we have obtained is a sufficient and appropriate
basis for our opinion. Our audit opinion is consistent with our
report to the Audit Committee.
In our opinion:
> the financial statements give a true and fair view of the
state of the Group’s and of the Parent Company’s affairs
as at 1 July 2017 and of the Group’s profit for the period
then ended;
> the Group financial statements have been properly prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union (“IFRSs as adopted by the EU”);
> the Parent Company financial statements have been properly
prepared in accordance with IFRSs as adopted by the EU and
as applied in accordance with the provisions of the Companies
Act 2006; and
We were appointed as auditor by the Directors on 18 March 2015.
The period of total uninterrupted engagement is the three years
ended 1 July 2017. Prior to that we were also auditor to the
Group’s previous parent company, but which, being unlisted,
was not a public interest entity. We have fulfilled our ethical
responsibilities under, and we remain independent of the
Group in accordance with, UK ethical requirements including
the FRC Ethical Standard as applied to listed public interest
entities. No non-audit services prohibited by that standard
were provided.
Overview
Materiality:
£356,000 (2016: £425,000)
Group financial statements as a whole
4.5% (2016: 5.1%) of Group profit before tax normalised to exclude exceptional items
Coverage
100% (2016: 100%) of Group profit before tax
Risks of material misstatement
Recurring risks
Recoverability of property, plant and equipment
New: Accrued volume rebates
New: Capitalisation of leasehold improvements
New: Parent Company recoverable amount of investment in subsidiary
Event driven
New: Prior period adjustments
vs 2016
Revolution Bars Group plc Annual Report and Accounts 2017 55
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us,
including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing
the efforts of the engagement team. We summarise below the key audit matters in decreasing order of audit significance, in arriving
at our audit opinion above, together with our key audit procedures to address those matters and, as required for public interest
entities, our results from those procedures. These matters were addressed, and our results are based on procedures undertaken,
in the context of, and solely for the purpose of, our audit of the financial statements as a whole, and in forming our opinion
thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on these matters.
The risk
Our response
Recoverability of property,
plant and equipment
(£58.7 million; 2016: £52.9 million)
Impairment charge £1.5 million;
2016: £nil
Refer to page 48 (Audit Committee Report),
page 65 (accounting policy) and Note 11
(financial disclosures).
Forecast-based valuation:
The Group’s statement of financial
position includes a significant
property, plant and equipment
(“PP&E”) balance, principally in
relation to its portfolio of 68 bars.
The estimated recoverable amounts
are subjective due to the inherent
uncertainty involved in forecasting
and discounting future cash flows
on a bar-by-bar basis.
Accrued volume rebates
(£0.9 million; 2016: £0.6 million)
Refer to page 48 (Audit Committee Report),
page 67 (accounting policy) and Note 13
(financial disclosures).
Data capture:
Completeness and accuracy of data
used in the calculation, including
actual supplier purchases and
volume-specific contractual rebate
percentages, because of the manual
nature of the data transfer.
Our procedures included:
> control design: evaluating the Group’s budgeting
procedures and methodology upon which the
forecasts are based;
> benchmarking assumptions: challenging
assumptions used by the Group based on
externally derived data as well as our own
assessment, using knowledge of the Company
and sector or using our own valuation specialist
where applicable, of key inputs such as projected
economic growth, cost inflation and discount rate;
> sensitivity analysis: performing break-even analysis
to understand the sensitivity of the conclusions
reached to changes in assumptions; and
> assessing transparency: evaluating the
adequacy of the Group’s disclosures about the
sensitivity of the outcome of the impairment
assessment to changes in key assumptions.
Our results
> We found the resulting estimate of recoverable
amounts to be acceptable.
Our procedures included:
> test of detail: recalculate a sample of rebates
based on actual supplier purchases and the
relevant contractual rebate percentages.
Comparing a sample of the year-end receivables
back to post-year-end confirmatory evidence such
as, cash receipts and supplier confirmations to
assess the accuracy of the rebate receivable.
Our results
> We considered the amount of accrued rebate
receivable recognised to be acceptable.
Revolution Bars Group plc Annual Report and Accounts 2017 56
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT CONTINUED
to the members of Revolution Bars Group plc
2. Key audit matters: our assessment of risks of material misstatement continued
The risk
Our response
Our procedures included:
> accounting analysis: critically assessing the
appropriateness of the capitalisation by obtaining
third-party invoices for a sample of amounts
capitalised and challenging the appropriateness
of capitalisation based on the capitalisation
criteria of the relevant accounting standards
and the description of the expenditure.
Our results
> We considered the amounts capitalised as
leasehold improvements to be acceptable.
Our procedures included:
> test of detail: for each material prior year
adjustments we inspected and agreed back to
confirmatory evidence such as external reports or
confirmations, or where external confirmations are
not applicable internal supporting documentation,
to critically assess the appropriateness of
adjustments to prior periods.
> assessing transparency: evaluating the adequacy
of the Group’s explanatory disclosures in relation
to each prior year adjustment made.
Our results
> We found the accounting entries in respect of
the prior period adjustments to be acceptable.
Our procedures included:
> test of detail: we compared the carrying value of
the investment to the market capitalisation of the
Group at the statement of financial position date.
Our results
> We found the carrying amount of investment in
subsidiary to be acceptable.
Capitalisation of
leasehold improvements
(£12.9 million; 2016: £11.9 million)
Refer to page 48 (Audit Committee Report),
page 65 (accounting policy) and Note 11
(financial disclosures).
Accounting treatment:
The Group’s statement of financial
position includes a significant PP&E
balance to which additions of £12.9 million
have been made in the year in respect
of leasehold improvements.
Prior period adjustments
Opening reserves at 27 June 2015
£2.5 million; opening reserves at
2 July 2016 £3.3 million
Refer to page 48 (Audit Committee Report),
page 68 (accounting policy) and Note 1b
(financial disclosures).
Parent Company:
recoverable amount of
investment in subsidiary
(£29.7 million; 2016: £29.7 million)
Refer to page 92 (accounting policy) and
Note 29 (financial disclosures).
The classification of spend on
leasehold improvements between
operational and capital expenditure
is inherently judgemental.
Accounting application:
Six categories of prior period
errors, with a cumulative impact on
opening reserves at 27 June 2015 of
£2.5 million have been identified and
corrected in the financial statements.
Judgements and complexities are
involved in determining the amount
of the identified errors and the
appropriate prior accounting period
to which the identified error relates.
Low risk, high value
The carrying amount of the Company’s
investment in subsidiary, held at cost,
represents 100% of the Company’s
total assets.
We do not consider the recoverable
amount of this investment to be at a
high risk of significant misstatement,
or to be subject to a significant level
of judgement. However, due to its
materiality in the context of the Company
financial statements as a whole (this is
the only asset recorded on the statement
of financial position), this is considered
to be the area which had the greatest
effect on our overall audit strategy and
allocation of resources in planning and
completing our Company audit.
Revolution Bars Group plc Annual Report and Accounts 2017 57
3. Our application of materiality and an overview
of the scope of our audit
Materiality for the Group financial statements as a whole was set
at £356,000 (2016: £425,000), determined with reference to a benchmark
of Group profit before tax, normalised to exclude this year’s exceptional
items of £4,352,000 (2016: £1,382,000) as disclosed in Note 3.
Profit before tax
normalised to exclude
exceptional items
£7,903,000
Group materiality
£356,000
Materiality for the Parent Company financial statements as a
whole was set at £2,826,000 (2016: £2,965,000), determined
with reference to a benchmark of Company total assets, of
which it represents 9% (2016: 10%).
We agreed to report to the Audit Committee any corrected
or uncorrected identified misstatements exceeding £18,000
(2016: £22,500), in addition to other identified misstatements
that warranted reporting on qualitative grounds.
96+4+I
The Group team performed the audit of the Group, including
the audit of the Parent Company, as if it was a single aggregated
set of financial information. The audit was performed using the
materiality level set out above.
Normalised profit before tax
Group materiality
£18,000
Misstatements reported
to the Audit Committee
Group revenue
Group profit before tax
Group total assets
100%
(2016: 100%)
100%
(2016: 100%)
I100+
100+
I100+
100+
I100+
I 100+
I100+
I 100+
Full scope for Group audit purposes 2017
100%
(2016: 100%)
100%
(2016: 100%)
Group profit before
exceptional items and tax
Full scope for Group audit purposes 2016
Revolution Bars Group plc Annual Report and Accounts 2017I
I
58
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT CONTINUED
to the members of Revolution Bars Group plc
4. We have nothing to report on going concern
Disclosures of principal risks and longer-term viability
We are required to report to you if:
> we have anything material to add or draw attention to in
relation to the Directors’ statement in Note 1 to the financial
statements on the use of the going concern basis of accounting
with no material uncertainties that may cast significant doubt
over the Group and Company’s use of that basis for a period of
at least 12 months from the date of approval of the financial
statements; or
Based on the knowledge we acquired during our financial
statements audit, we have nothing material to add or draw
attention to in relation to:
> the directors’ confirmation within the viability statement on
page 23 that they have carried out a robust assessment of
the principal risks facing the Group, including those that
would threaten its business model, future performance,
solvency and liquidity;
> if the same statement is materially inconsistent with our
> the principal risks disclosures describing these risks and
audit knowledge.
explaining how they are being managed and mitigated; and
We have nothing to report in these respects.
5. We have nothing to report on the other information
in the Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does not
cover the other information and, accordingly, we do not express
an audit opinion or, except as explicitly stated below, any form
of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing
so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or inconsistent
with the financial statements or our audit knowledge. Based solely
on that work we have not identified material misstatements in the
other information.
Strategic report and directors’ report
Based solely on our work on the other information:
> we have not identified material misstatements in the strategic
report and the directors’ report;
> the directors’ explanation in the viability statement of how
they have assessed the prospects of the Group, over what
period they have done so and why they considered that
period to be appropriate, and their statement as to whether
they have a reasonable expectation that the Group will be
able to continue in operation and meet its liabilities as they
fall due over the period of their assessment, including any
related disclosures drawing attention to any necessary
qualifications or assumptions.
Under the Listing Rules we are required to review the viability
statement. We have nothing to report in this respect.
Corporate governance disclosures
We are required to report to you if:
> we have identified material inconsistencies between the
knowledge we acquired during our financial statements audit
and the directors’ statement that they consider that the annual
report and financial statements taken as a whole is fair,
balanced and understandable and provides the information
necessary for shareholders to assess the Group’s position
and performance, business model and strategy; or
> in our opinion the information given in those reports for the
financial year is consistent with the financial statements; and
> the section of the annual report describing the work of the
Audit Committee does not appropriately address matters
communicated by us to the Audit Committee.
> in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
We are required to report to you if the Corporate Governance
Statement does not properly disclose a departure from the
eleven provisions of the UK Corporate Governance Code
specified by the Listing Rules for our review.
We have nothing to report in these respects.
Revolution Bars Group plc Annual Report and Accounts 2017 59
The risk of not detecting a material misstatement resulting
from fraud or other irregularities is higher than for one resulting
from error, as they may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control and may involve any area of law and regulation not
just those directly affecting the financial statements.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
8. The purpose of our audit work and to whom we owe
our responsibilities
This report is made solely to the Company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to
the Company’s members those matters we are required to state
to them in an auditor’s report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the
Company’s members, as a body, for our audit work, for this
report, or for the opinions we have formed.
Stuart Burdass (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 St Peter’s Square
Manchester
M2 3AE
3 October 2017
6. We have nothing to report on the other matters
on which we are required to report by exception
Under the Companies Act 2006, we are required to report to
you if, in our opinion:
> adequate accounting records have not been kept by the
Parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
> the Parent Company financial statements and the part of
the Directors’ Remuneration Report to be audited are not
in agreement with the accounting records and returns; or
> certain disclosures of Directors’ remuneration specified by
law are not made; or
> we have not received all the information and explanations
we require for our audit.
We have nothing to report in these respects.
7. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 53,
the Directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and
fair view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing
the Group and Parent Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going
concern; and using the going concern basis of accounting unless
they either intend to liquidate the Group or the Parent Company or
to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud, other irregularities,
or error, and to issue our opinion in an auditor’s report.
Reasonable assurance is a high level of assurance, but does
not guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud, other irregularities or error
and are considered material if, individually or in aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
Revolution Bars Group plc Annual Report and Accounts 2017 60
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER
COMPREHENSIVE INCOME
for the 52 weeks ended 1 July 2017
Revenue
Cost of sales
Gross profit
Operating expenses:
– operating expenses, excluding exceptional items
– exceptional items
Total operating expenses
Operating profit
Finance expense
Profit before taxation
Tax
Profit and total comprehensive income for the period
Earnings per share:
– basic and diluted (pence)
Dividend declared per share (pence)
Non-GAAP measure
Revenue
Operating profit
Exceptional items
Bar opening costs
Adjusted operating profit
Finance expense
Adjusted profit before tax
Depreciation
Finance expense
Adjusted EBITDA
Note
2
52 weeks ended
1 July 2017
£’000
53 weeks ended
2 July 2016
Restated*
£’000
130,467
(31,075)
119,491
(29,444)
99,392
90,047
3
3
4
7
8
9
3
(91,304)
(4,352)
(83,401)
(1,382)
(95,656)
(84,783)
3,736
(185)
3,551
560
4,111
8.2
4.8
5,264
(129)
5,135
(726)
4,409
8.8
4.8
130,467
119,491
3,736
4,352
1,393
9,481
(185)
9,296
5,585
185
5,264
1,382
912
7,558
(129)
7,429
5,427
129
15,066
12,985
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior year adjustments included in respect of the profit for the 53 weeks ended 2 July 2016.
Revolution Bars Group plc Annual Report and Accounts 2017
61
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 1 July 2017
1 July
2017
£’000
2 July
2016
Restated*
£’000
27 June
2015
Restated*
£’000
Note
11
12
13
14
15
18
17
16
16
19
58,722
52,906
46,472
3,320
9,268
4,336
16,924
75,646
2,961
8,303
2,770
14,034
66,940
(20,819)
(843)
(21,908)
(1,034)
(21,662)
(22,942)
(1,537)
(7,500)
(3,441)
(1,504)
(13,982)
(2,981)
(500)
(1,697)
(937)
(6,115)
2,462
8,843
2,652
13,957
60,429
(19,168)
34
(19,134)
(3,323)
—
(3,077)
(808)
(7,208)
(35,644)
(29,057)
(26,342)
40,002
37,883
34,087
50
11,645
28,307
40,002
50
11,645
26,188
37,883
50
11,645
22,392
34,087
Assets
Non-current assets
Property, plant and equipment
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Trade and other payables
Tax payable
Non-current liabilities
Deferred tax liability
Interest-bearing loans and borrowings
Provisions
Other liabilities
Total liabilities
Net assets
Equity attributable to equity holders of the parent
Share capital
Merger reserve
Retained earnings
Total equity
Signed on behalf of the Board on 3 October 2017.
Mike Foster
Director
Registered number: 08838504
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior year adjustments included in respect of the profit for the 53 weeks ended 2 July 2016.
Revolution Bars Group plc Annual Report and Accounts 2017
62
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the 52 weeks ended 1 July 2017
At 27 June 2015 – as reported
Impact of restatements*
At 27 June 2015 – restated*
Total comprehensive income for the period – restated*
Credits arising from long-term incentive plans – restated*
Dividends paid
At 2 July 2016 – restated*
Total comprehensive income for the period
Credits arising from long-term incentive plans
Dividends paid
At 1 July 2017
Share
capital
£’000
50
—
50
—
—
—
50
—
—
—
50
Reserves
Merger
reserve
£’000
11,645
—
11,645
—
—
—
Retained
earnings
£’000
24,880
(2,488)
22,392
4,409
987
(1,600)
11,645
26,188
—
—
—
4,111
483
Total
shareholders’
equity
£’000
36,575
(2,488)
34,087
4,409
987
(1,600)
37,883
4,111
483
(2,475)
(2,475)
11,645
28,307
40,002
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior year adjustments included in respect of the profit for the 53 weeks ended 2 July 2016.
Revolution Bars Group plc Annual Report and Accounts 2017 FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOW
for the 52 weeks ended 1 July 2017
Cash flow from operating activities
Profit after tax from operations
Adjustments for:
Net finance costs
Depreciation of property, plant and equipment
Impairment of property, plant and equipment
Tax (credit)/charge
Charges arising from long-term incentive plans
Operating cash flows before movement in working capital
Increase in inventories
(Increase)/decrease in trade and other receivables
(Decrease)/increase in trade and other payables
Increase/(decrease) in provisions
Tax paid
Net cash flow generated from operating activities
Cash flow from investing activities
Purchase of property, plant and equipment
Net cash flow used in investing activities
Cash flow from financing activities
Equity dividends paid
Interest paid
Drawdown of borrowings
Net cash flow from/(used in) financing activities
Net increase in cash and cash equivalents
Opening cash and cash equivalents
Closing cash and cash equivalents
63
52 weeks ended
1 July 2017
£’000
Note
53 weeks ended
2 July 2016
Restated*
£’000
4,111
4,409
185
5,585
1,476
(560)
483
11,280
(359)
(965)
(539)
1,663
11,080
(1,075)
10,005
(12,779)
(12,779)
(2,475)
(185)
7,000
4,340
1,566
2,770
4,336
129
5,427
—
726
987
11,678
(499)
540
2,869
(1,380)
13,208
—
13,208
(11,861)
(11,861)
(1,600)
(129)
500
(1,229)
118
2,652
2,770
20
11
14
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior year adjustments included in respect of the profit for the 53 weeks ended 2 July 2016.
Revolution Bars Group plc Annual Report and Accounts 2017
64
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION
for the 52 weeks ended 1 July 2017
1. General information
Corporate information
The consolidated financial statements of Revolution Bars Group plc for the 52 weeks ended 1 July 2017 were authorised for issue
by the Board of Directors on 3 October 2017. Revolution Bars Group plc is a public limited company incorporated and domiciled in
England and Wales under the Companies Act 2006. The Company’s shares are listed on the London Stock Exchange.
The registered number of the Group is 08838504 and its registered office is 21 Old Street, Ashton-under-Lyne, Tameside OL6 6LA.
Statement of compliance
The Group’s financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as
adopted by the EU, as they apply to the financial statements of the Group for the 52 weeks ended 1 July 2017 (prior year 53 weeks
ended 2 July 2016), and in accordance with the provisions of the Companies Act 2006.
Basis of preparation
The accounting period runs to the Saturday which falls nearest to 30 June each year and therefore normally comprises a 52-week
period but with a 53-week period falling at approximately five-year intervals. The year ended 1 July 2017 is a 52-week period; the
period ended 2 July 2016 was a 53-week period. The consolidated financial statements have been prepared in accordance with
those parts of the Companies Act 2006 applicable to companies reporting under IFRS. References to 2017 relate to the 52-week
period ended 1 July 2017 and references to 2016 relate to the 53-week period ended 2 July 2016 unless otherwise stated. The
consolidated financial statements are presented in Pounds Sterling with values rounded to the nearest hundred thousand, except
where otherwise indicated.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of Revolution Bars Group plc and its subsidiaries.
The financial statements of subsidiaries are prepared for the same reporting period as the Parent Company with adjustments
made to their financial statements to bring their accounting policies in line with those used by the Group.
The financial results of subsidiaries are included in the consolidated financial information from the date that control commences
until the date that control ceases. The consolidated financial information presents the results of the companies within the same
group. Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are
eliminated in preparing the consolidated financial information. Unrealised losses are eliminated in the same way as unrealised
gains, but only to the extent that there is no evidence of impairment.
Judgements made by the Directors in the application of these accounting policies that have a significant effect on the financial
statements and estimates with a significant risk of material adjustment in the next year are discussed below.
Going concern
The Directors have reviewed the Group’s trading forecasts. These forecasts demonstrate that the Group has adequate financial
resources, including its £25 million revolving credit facility which is committed until December 2021, to continue in operational
existence for a period of at least 12 months from the date of approval of the financial statements.
The Group is forecast to remain compliant with the terms of the revolving credit facility and the financial covenants attached to it,
which are tested quarterly. The Directors expect to utilise the revolving credit facility for cash flow management and general
business purposes as required.
The revolving credit facility contains a change in control clause and should this clause be invoked the Directors are confident that
replacement facilities could be obtained from either the purchaser of the business or from alternative financial providers. For this
reason the Directors continue to adopt the going concern basis in preparing the consolidated financial information.
Revolution Bars Group plc Annual Report and Accounts 2017 65
1. General information continued
(a) Accounting policies
Non-derivative financial instruments
Non-derivative financial instruments comprise investments in equity securities, trade and other receivables, cash and cash
equivalents, loans and borrowings and trade and other payables.
Trade and other receivables
Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised
cost using the effective interest method, less any impairment losses.
Trade and other payables
Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised
cost using the effective interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an
integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the
cash flow statement only.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial
recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method.
Share capital
Ordinary Shares are classified as equity. Incremental costs directly attributable to the issue of Ordinary Shares are recognised as
a deduction from equity, net of any tax effects.
Merger reserve
The merger reserve arose due to the return of share capital related to the sale of a subsidiary business on 22 February 2014.
Property, plant and equipment
Property, plant and equipment are stated at historical purchase cost less accumulated depreciation and any accumulated
impairment losses. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to
its working condition for its intended use.
Depreciation is charged so as to write off the costs of assets over their estimated useful lives, on the following bases:
Short leasehold premises and improvements
IT equipment and office furniture
Fixtures and fittings in licensed premises
Freehold land is not depreciated.
–
–
–
Lower of 25 years or the term of the leasehold agreement on
a straight line basis
3 years to 4 years on a straight line basis
5 years on a straight line basis
Depreciation policies and useful economic lives are reviewed at each statement of financial position date.
Short leasehold costs include directly attributable employment costs and related personal expenses of individuals employed
to manage or implement the Company’s capital development programme.
Revolution Bars Group plc Annual Report and Accounts 2017
66
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUED
1. General information continued
(a) Accounting policies continued
Impairment of tangible fixed assets
At each statement of financial position date, the Group reviews the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets have suffered an impairment loss. Where the asset does not generate
cash flows its value is allocated to other cash generating units (“CGUs”) to which it is related as part of the impairment testing of
those CGUs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset for which the estimate of future cash flows have not been adjusted. If the recoverable
amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset
(cash generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.
Inventories
Inventories are stated at the lower of cost and net realisable value, with due allowance being made for obsolete or slow-moving
items. Cost is based on the first-in first-out principle and includes expenditure incurred in acquiring the inventories and other costs
in bringing them to their existing location and condition. Cost is stated net of supplier volume rebates.
Net realisable value is the estimated selling price less further costs expected to be incurred prior to disposal.
Employee benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which the Company pays fixed contributions to a separate entity
and has no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension
plans are recognised as an expense in the income statement in the periods during which services are rendered by employees.
Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is
provided. A liability is recognised amounts expected to be paid under short-term cash bonus or profit-sharing plans if the Group
has a present legal or constructive obligation to pay such amounts as a result of past service provided by the employee and the
obligation can be estimated reliably.
Provisions
A provision is recognised in the statement of financial position when the Group has a present legal or constructive obligation as
a result of a past event which can be reliably measured and it is probable that an outflow of economic benefits will be required to
settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks
specific to the liability.
Revenue recognition
Revenue is the fair value of goods and services sold to third parties as part of the Group’s trading activities, net of discounts.
Revenue primarily comprises food and beverages sold in the Group’s businesses. This revenue is recognised at the point of sale
to the customer.
Expenses
Cost of sales
Cost of sales principally comprises the purchase cost of drinks and food sold.
Operating lease payments
Payments made under operating leases are recognised in the income statement on a straight line basis over the term of the lease.
Lease incentives received are recognised in the income statement as an integral part of the total lease expense.
Revolution Bars Group plc Annual Report and Accounts 2017 67
1. General information continued
(a) Accounting policies continued
Expenses continued
Supplier rebates
Supplier rebates are recognised as a deduction from cost of sales on an accruals basis using the contractual terms and volumes
supplied up to the statement of financial position date for each relevant supplier contract. Where rebates are conditional on
long-term minimum volumes, management judgement is applied as to the achievement of those volumes. Accrued rebates receivable
as at the date of the statement of financial position are included within trade and other receivables. Where listing fees received
are conditional on a contractual term, the amounts are recognised over that term.
Financing income and expenses
> Financing expenses comprise interest payable on borrowings and other finance charges.
> Interest income and interest payable are recognised in the profit or loss account on an accruals basis, using the effective
interest method.
Taxation
Tax on the profit or loss for the period comprises current and deferred tax. Tax is recognised in the income statement except to
the extent that it relates to items recognised directly in equity, in which case the tax is also recognised directly in equity.
Current tax is the expected tax payable or credit receivable on the taxable income or loss for the period, using tax rates enacted
or substantively enacted at the statement of financial position date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition
of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business
combination; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable
future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount
of assets and liabilities, using tax rates enacted or substantively enacted at the statement of financial position date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which
the temporary difference can be utilised.
Operating segments
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to transactions with any of the Group’s other components.
Segment information is based on the internal reports regularly reviewed by the Group’s Chief Operating Decision Maker (“CODM”)
in order to assess each segment’s performance and to allocate resources to them. The CODM is the Board (see Note 2).
Share-based payments (long-term incentive plans)
The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured
at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed
on a straight line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest. This is recognised
as an employee expense with a corresponding increase in equity. Fair value is measured by the Monte Carlo model for options
subject to a market-based performance condition and by use of a Black Scholes model for all others. For share-based payment
awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions
and there is no true-up for differences between expected and actual outcomes.
Revolution Bars Group plc Annual Report and Accounts 2017 68
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUED
1. General information continued
(a) Accounting policies continued
Exceptional items
Items that are unusual or infrequent in nature and material in size are disclosed separately in the income statement. The separate
reporting of these items helps provide a more accurate indication of the Group’s underlying business performance, which the
Directors believe would otherwise be distorted. Exceptional items include impairments of property, plant and equipment, closure
costs including onerous lease costs, charges related to share-based payment arrangements, contract termination costs and costs
associated with one-off projects.
Bar opening costs
Bar opening costs refer to costs incurred in getting new sites fully operational and primarily include costs incurred before opening
and in preparing for the launch. These costs are disclosed separately in the income statement. The separate reporting of these
items helps provide a more accurate indication of the Group’s underlying business performance, which the Directors believe
would otherwise be distorted.
(b) Prior year restatements
During the year, there were extensive changes within the finance team, following the resignations of key senior personnel. The
new team became aware that certain of the Group’s accounting policies and processes were not being strictly applied or were not
in accordance with accounting standards. This was highlighted in the Group’s pre-close announcement. The new finance team has
undertaken a review into the Group’s accounting policies and practices and PwC was engaged to produce a report for the Board
on the two most significant matters relating to the classification of certain marketing expenditure as short-life assets and the
historical over-estimation of accrued income from supplier rebates.
The review work has identified a number of prior period errors that, due to their materiality, require the restatement of the results
for the 53 weeks ended 2 July 2016, as well as the consolidated statement of financial position positions as at 2 July 2016 and at
27 June 2015.
In aggregate, the effect of the prior period restatement is to reduce net assets at 27 June 2015 by £2.5 million. The cumulative
effect of the restatements was to reduce profit after tax for the period ended 2 July 2016 by £1.7 million, and to reduce net assets
as at 2 July 2016 by £3.3 million.
The nature and effect of individual adjustments is described below and in the tables that follow.
i. Overstatement of accrued income relating to supplier rebates
Certain policies relating to income from supplier rebates and listing fees were not applied correctly, resulting in an overstatement
of accrued income as at 2 July 2016 and 27 June 2015. These amounts have now been written off to the consolidated income
statements for those respective periods and net assets reduced accordingly.
ii. Short-life assets
Certain items of marketing expenditure, including menus and branded collateral with lives of several months, were being
capitalised as short-life assets and depreciated over periods of between three and six months. The appropriate treatment for
such expenditure is to expense the cost when incurred. This treatment resulted in the overstatement of net assets as at 2 July 2016
and 27 June 2015, and the overstatement of depreciation and understatement of marketing costs for the periods ended 2 July 2016
and 27 June 2015. Corrections made result in the restatement of the Group’s key alternative reporting measure (adjusted EBITDA).
iii. Onerous leases
Total liabilities were incorrectly assessed as at 2 July 2016 and 27 June 2015 due to errors in the calculation of onerous lease
liabilities for two vacant properties. This has resulted in the overstatement of net assets as at 2 July 2016 and 27 June 2015, and
the misstatement of the corresponding charge recorded within the consolidated income statement for the respective periods.
Revolution Bars Group plc Annual Report and Accounts 2017
69
1. General information continued
(b) Prior year restatements continued
iv. Share-based payments
The amounts charged to the income statement for share-based payments in the period ended 2 July 2016 and 27 June 2015
were understated due to errors in the calculations. Net assets at 2 July 2016 and 27 June 2015 were understated as a result
of errors in the recognition of the corresponding deferred tax asset.
v. Inventories
Inventories were overstated due to errors in the recording of sundry inventory values, the deductions made to cost for
rebates received, and the elimination of intercompany profits resulting in an overstatement of net assets at both 2 July 2016
and 27 June 2015.
vi. Under accrual of costs
Historically, the Group’s accounting systems and processes have not captured all expenditure and liabilities as incurred and
consequently prior year statement of financial position have understated liabilities and overstated net assets. Under accruals
at prior period ends have been identified. In addition, the systems for properly accounting for customer deposits have been
inadequate leading to an understatement of the carrying value of these balances and an overstatement of net assets.
In addition the Group has restated for the consequential adjustments to taxation arising from the above.
Summary
A summary of the combined impact of the prior year adjustments on the consolidated statement of profit and loss account and
consolidated statement of cash flow for the 53 weeks ended 2 July 2016 and on the consolidated statements of financial position
as at 2 July 2016 and at 27 June 2015 arising from the restatement are as follows:
Consolidated statement of profit and loss account for the 53 weeks ended 2 July 2016
2 July 2016
As published
£’000
Supplier
rebates
£’000
Short-life
assets
£’000
Onerous
lease
provision 1
£’000
Share
based
payments 1
£’000
Inventory
£’000
Revenue
Gross profit
Operating profit/(loss)
Profit/(loss) before tax
Tax
Profit/(loss) after tax
Adjusted EBITDA
119,491
90,873
7,273
7,144
(1,075)
6,069
15,589
—
(805)
(805)
(805)
159
(646)
(805)
—
—
(140)
(140)
—
(140)
(976)
—
—
636
636
(126)
510
(361)
—
—
(849)
(849)
148
(701)
138
—
(21)
(21)
(21)
4
(17)
(21)
Under
accrual
of costs
£’000
—
—
(830)
(830)
164
(666)
(579)
2 July 2016
Restated
£’000
119,491
90,047
5,264
5,135
(726)
4,409
12,985
1 The adjustments in respect of share-based payments and onerous leases are in respect of the shortfall of the pre-existing amounts.
Revolution Bars Group plc Annual Report and Accounts 2017
70
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUED
1. General information continued
(b) Prior year restatements continued
Summary continued
Consolidated statement of financial position as at 2 July 2016
2 July 2016
As published
£’000
53,300
3,504
Supplier
rebates
£’000
—
—
9,502
(1,199)
Non-current assets
Inventories
Trade and other
receivables
Cash and cash
equivalents
Current assets
Trade and other
payables
Tax payable
Current liabilities
Deferred tax liabilities
Financial liabilities
Provisions
Other liabilities
Non-current liabilities
Net assets
2,770
15,776
(20,398)
(1,798)
(22,196)
(3,183)
(500)
(1,126)
(889)
(5,698)
41,182
Non-current assets
Inventories
Trade and other
receivables
Cash and cash
equivalents
Current assets
Trade and other
payables
Tax payable
Current liabilities
Deferred tax liabilities
Financial liabilities
Provisions
Other liabilities
Non-current liabilities
Net assets
46,726
2,984
9,237
2,652
14,873
(18,440)
(529)
(18,969)
(3,377)
—
(1,870)
(808)
(6,055)
36,575
(962)
(394)
(436)
(1,250)
37,883
Short-life
assets
£’000
(394)
—
—
—
—
—
—
—
—
—
—
—
—
Short-life
assets
£’000
(254)
—
—
—
—
—
—
—
—
—
—
—
—
Onerous
lease
provision
£’000
Share-based
payments
£’000
Inventory
£’000
Under
accrual
of costs
£’000
2 July 2016
Restated
£’000
52,906
2,961
8,303
2,770
14,034
—
—
—
—
—
(1,510)
308
(21,908)
(1,034)
(1,202)
(22,942)
—
—
—
(48)
(48)
(2,981)
(500)
(1,697)
(937)
(6,115)
—
(543)
—
—
(543)
—
107
107
—
—
—
—
—
—
—
—
—
—
—
112
112
—
—
(571)
—
(571)
(459)
—
—
—
—
—
—
—
—
202
—
—
—
202
202
Onerous
lease
provision
£’000
Share-based
payments
£’000
Inventory
£’000
Under
accrual
of costs
£’000
2 July 2016
Restated
£’000
—
—
—
—
—
—
238
238
—
—
(1,207)
—
(1,207)
(969)
—
—
—
—
—
—
—
—
54
—
—
—
54
54
—
(522)
—
—
(522)
—
103
103
—
—
—
—
—
—
—
—
—
—
(728)
144
(584)
—
—
—
—
—
46,472
2,462
8,843
2,652
13,957
(19,168)
34
(19,134)
(3,323)
—
(3,077)
(808)
(7,208)
(419)
(584)
34,087
—
(1,199)
—
237
237
—
—
—
—
—
—
—
(394)
—
(394)
—
78
78
—
—
—
—
—
(316)
(254)
Consolidated statement of financial position as at 27 June 2015
27 June 2015
As published
£’000
Supplier
rebates
£’000
Revolution Bars Group plc Annual Report and Accounts 2017 71
1. General information continued
(b) Prior year restatements continued
Summary continued
Consolidated statement of cash flow for the 53 weeks ended 2 July 2016
2 July 2016
As published
£’000
Supplier
rebates
£’000
Short-life
assets
£’000
Onerous
lease
provision
£’000
Share-based
payments
£’000
Inventory
£’000
Under
accrual
of costs
£’000
2 July 2016
Restated
£’000
Net cash inflow/(outflow) from
operating activities
14,184
Net cash outflow from investing activities
(12,837)
Net cash outflow from financing activities
(1,229)
Net increase in cash and cash equivalents
118
Net cash and cash equivalents at
beginning of year
Net cash and cash equivalents at end
of year
2,652
2,770
—
—
—
—
—
—
(976)
976
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
13,208
(11,861)
(1,229)
118
2,652
2,770
The impact on diluted and basic EPS for the period ended 2 July 2016 was a reduction of 3.3 pence per share to 8.8 pence per share.
(c) Critical judgements and key sources of estimation and uncertainty
The preparation of consolidated financial information in conformity with IFRS requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities,
income and expenses. Actual results in due course may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis, and are based on historical experience and other
factors including expectations of future events that are believed to be reasonable under the circumstances. Revisions to
accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
The key assumptions concerning the future and other key sources of estimation and uncertainty at the date of the statement
of financial position that have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities
within the next financial year are set out below.
Provision for onerous leases (Note 16)
> Provisions for onerous leases require estimation and judgements to be made of the amounts expected to be payable over the
remaining lease term for bars that have been closed, including an assessment of any sublet income. The future cash flows are
discounted at a rate which reflects the risk profile of the cash flows. Sensitivity of the provision recorded to these key
assumptions is included in Note 16.
Recoverable amount of property, plant and equipment (Note 11)
> Assets that are subject to amortisation are tested for impairment whenever events or changes in circumstance indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount
exceeds its estimated recoverable amount.
> The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. In assessing value in use,
the expected future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the rate of return expected on an investment of equivalent risk. For an asset that does not generate largely
independent income streams, the recoverable amount is determined in conjunction with the income generating units to which
the asset belongs.
Revolution Bars Group plc Annual Report and Accounts 2017
72
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUED
1. General information continued
(c) Critical judgements and key sources of estimation and uncertainty continued
Recoverable amount of property, plant and equipment (Note 11) continued
> Determining value in use requires a series of estimates to be made including the appropriate discount rate to calculate the
present value, and an estimate of the cash flows expected to arise from the CGU (including an assessment of revenue and
cost base growth) and the long-term growth rate. For further details of sensitivity to these key assumptions, see Note 11.
> The key assumptions in the value in use calculation are the applicable discount rate of 11.7 per cent, revenue and cost base
growth, and the long-term growth rate.
Exceptional items and bar opening costs: adjusted profitability measures
Management uses a range of measures to monitor and assess the Group’s financial performance. These measures include
a combination of statutory measures calculated in accordance with IFRS and alternative performance measures ("APMs").
These APMs include the following adjusted measures of profitability:
> adjusted operating profit before exceptional items and bar opening costs;
> adjusted profit before tax before exceptional and bar opening costs;
> adjusted earnings before interest, tax, depreciation and amortisation before exceptional and bar opening costs
(“adjusted EBITDA”); and
> adjusted basic earnings per share (before exceptional items and bar opening costs).
We report these measures as the Board believes that they provide management and investors with useful additional information
about the Group’s performance. The above measures represent the equivalent IFRS measures but are adjusted to exclude items
that we consider would prevent comparison of the Group’s performance both from one reporting period to another and with other
similar businesses.
These items are not defined under IFRS and as such there is judgement applied in the classification of items as exceptional.
Exceptional items are classified as those which are separately identifiable by virtue of their size, nature or expected frequency
and therefore warrant separate presentation. Bar opening costs are other items that we consider should be presented separately
to allow a better understanding of the underlying performance of the business. Presentation of these measures is not intended to
be a substitute for or to promote them above statutory measures.
The Group’s income statement provides a reconciliation of the adjusted profitability measures, excluding exceptional
and non-underlying items to the equivalent unadjusted IFRS measures.
Exceptional items and bar opening costs are further detailed in Note 3 to the financial statements.
Items that are considered to be exceptional or bar opening costs and that are therefore separately identified in order to aid
comparability may include the following:
> costs incurred in association with business combinations, such legal and professional fees and stamp duty;
> costs incurred in respect of contract termination of CFO and the associated external costs of an accounting review;
> impairment charges in respect of tangible and intangible assets as a result of restructuring, business closure, underperformance
of sites or fire damage;
> charges relating to share-based payments arising from the Group’s long-term incentive schemes; and
> costs associated with onerous leases on property. The Group may incur costs and recognise liabilities in respect of leasehold
properties where the terms of the lease make them onerous.
Bar opening costs comprise non-recurring bar opening costs, which are costs incurred between a site being acquired and
commencement of trading. It predominantly includes property overheads and staff recruitment, payroll and training costs.
Revolution Bars Group plc Annual Report and Accounts 2017 73
1. General information continued
(c) Critical judgements and key sources of estimation and uncertainty continued
Capitalisation of leasehold additions
The Company capitalises employment costs and related personal expenses of individuals whose job roles are fundamentally
associated with managing or implementing the Company’s capital development programme. Judgement is therefore applied in
determining the element of internal employment costs which are directly attributable to capital projects. Where such an individual
undertakes non-capital expenditure related activities as part of their job role then that proportion of their cost is not capitalised
unless the non-capital expenditure related activities are incidental to their role.
(d) New accounting standards
There have been no significant changes to accounting under IFRS which have affected the Group’s results. The only changes
to the IFRS, International Financial Reporting Standards Interpretations Committee ("IFRS IC") interpretations and amendments that
are effective for the first time in this financial year are the Annual Improvements to IFRS: 2012–2014 cycle. These have not had
a material impact on the Group. The following IFRS have been issued but are not yet effective:
> IFRS 16 “Leases” (not yet endorsed by the EU) was issued on 13 January 2016 and is effective for accounting periods beginning
on or after 1 January 2019. Early adoption is permitted if IFRS 15 “Revenue from Contracts with Customers” has also been applied.
IFRS 16 is expected to have a significant impact on the amounts recognised in the Group’s consolidated financial statements.
On adoption of IFRS 16, the Group will recognise within the statement of financial position a right of use asset and lease liability for
all applicable leases. Within the income statement, rent expense will be replaced by depreciation and interest expense. This will
result in an increase in finance costs. The standard will also impact a number of statutory measures such as operating profit and
cash generated from operations, and APMs used by the Group. The full impact of IFRS 16 is currently under review, including
understanding the practical application of the principles of the standard. It is therefore not practical to provide a reasonable
estimate of the financial effect until this review is complete.
> IFRS 9 “Financial Instruments” replaces all phases of the financial instruments project and IAS 39 “Financial Instruments:
Recognition and Measurement”. The standard is effective from 1 January 2018 and introduces new requirements for the classification
and measurement of financial assets and financial liabilities, and a new model based on expected credit losses for recognising
provisions, and provides for simplified hedge accounting by aligning hedge accounting more closely with an entity’s risk
management methodology. The potential impact of this change to the Group is currently under review but is not expected
to have a material impact.
> IFRS 15 “Revenue from Contracts with Customers” (not yet endorsed by the EU) is effective after 1 January 2018 with early
adoption permitted. It has not yet been endorsed by the EU. The standard establishes a principles-based approach for revenue
recognition and is based on the concept of recognising revenue for obligations only when they are satisfied and the control of
goods or services is transferred. The potential impact of this change to the Group is currently under review but is not expected
to have a material impact.
Other standards and interpretations that are relevant to the Group have been assessed as having no significant financial impact
or additional disclosure requirements at this time:
> amendments to IAS 12 – Recognition of Deferred Tax Assets for Unrealised Losses (not yet endorsed by the EU);
> amendments to IFRS 2 – Share-based payment (not yet endorsed by the EU);
> the IASB’s annual improvement process 2014–2016 cycle (not yet endorsed by the EU); and
> amendments to IAS 7 – Disclosure Initiative (not yet endorsed by the EU).
Revolution Bars Group plc Annual Report and Accounts 2017 74
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUED
2. Segmental information
The Group’s continuing operating businesses are organised and managed as reportable business segments according to the
information used by the Group’s CODM in its decision making and reporting structure.
The Group internal management reporting is focused predominantly on revenue and EBITDA, as these are principal drivers of the
Group’s business and the allocation of resources. The CODM receives information on each trading venue and each trading venue
is considered an operating segment. In line with IFRS 8, each operating segment has the same characteristics and, accordingly,
the bars are aggregated to form the “Ongoing” reportable segment. Within the ongoing business, assets and liabilities cannot
be allocated to individual operating segments and are not used by the CODM for making operating and resource allocation decisions.
The Group performs all of its activities in the United Kingdom. All of the Group’s non-current assets are located in the
United Kingdom. Revenue is earned from the sale of goods.
Revenue
Cost of sales
Gross profit
Operating expenses:
– operating expenses excluding exceptional items
– exceptional items
Total operating expenses
Operating profit
Depreciation for the ongoing business is disclosed in note 4.
3. Operating expenses
Administrative expenses
Sales and distribution
Total operating expenses
Exceptional items
Administrative expenses:
– professional fees for aborted corporate transaction
– other exceptional fees (see below)
– termination of Directors’ contracts
– impairment of property, plant and equipment
– movement on onerous lease provisions
– charges arising from long-term incentive plans
Total exceptional items
52 weeks ended
1 July 2017
£’000
53 weeks ended
2 July 2016
Restated*
£’000
130,467
(31,075)
99,392
(91,304)
(4,352)
(95,656)
3,736
119,491
(29,444)
90,047
(83,401)
(1,382)
(84,783)
5,264
52 weeks ended
1 July 2017
£’000
53 weeks ended
2 July 2016
Restated*
£’000
12,697
82,959
95,656
—
239
190
1,476
1,964
483
4,352
10,203
74,580
84,783
1,063
—
329
—
(997)
987
1,382
During the year the Group was subject to significant senior personnel changes in its finance function and as a result of identifying
some significant accounting adjustments undertook a full accounting review. The associated external costs of the accounting
review, including work undertaken by PwC, together with the costs relating to the contract termination of Chris Chambers,
Chief Financial Officer, are included within exceptional costs.
Revolution Bars Group plc Annual Report and Accounts 2017
75
3. Operating expenses continued
As a result of the annual impairment testing of property, plant and equipment, the net book value of the assets at six of the
Group’s bars was written down either partially or in full.
During the year the level of provisions for onerous leases relating to two non-trading properties was reviewed and increased primarily
reinstating a release in the prior period when management considered that there was a good prospect of being able to sublet the properties.
At the time of the initial public offering (“IPO”), substantial share options were awarded to a number of senior staff. The Board
considers that the magnitude and timing of this award is one-off in nature and so treats any related charges or credits as exceptional.
In the 53 weeks ended 1 July 2016, restated exceptional items amounted to £1.4 million. This included professional fees incurred
for an aborted corporate transaction and the contract termination costs relating to Sean Curran’s resignation as Chief Financial
Officer. It also includes a charge for share-based payments (resulting from the prior year adjustments) and a credit in respect of
an adjustment to the onerous lease provision (part of which was previously included within underlying operating profit) reflecting
management’s assumptions at the time regarding the potential for subletting or disposing of the leasehold interests. Movements in
long-term incentive plans and onerous lease provisions are in respect of the shortfall of pre-existing amounts.
Bar opening costs
52 weeks ended
1 July 2017
£’000
53 weeks ended
2 July 2016
Restated*
£’000
1,393
912
Bar opening costs refer to costs incurred in getting new sites fully operational and primarily include costs incurred before
the opening date preparing for the launch. In the 52 weeks ended 1 July 2017, six new bars were opened but the costs also
include the new Belfast opening in July 2017, shortly after the end of the reporting period. Five new bars opened in the 53 weeks
ended 2 July 2016. Bar opening costs were found to be understated in the prior year, and the amount reported in the 53 weeks
to 2 June 2016 has been updated accordingly.
4. Group operating profit
Group operating profit is stated after charging:
Depreciation of owned fixed assets
Impairment of property, plant and equipment
Rentals payable under operating leases:
– leasehold premises
– other
Auditor’s remuneration:
– audit fees payable to the Company’s auditor for the audit of these financial statements
Fees payable to the Company’s auditor for:
– audit of financial statements of subsidiary
– tax services
– transaction services
– audit-related services
52 weeks ended
1 July 2017
£’000
53 weeks ended
2 July 2016
Restated*
£’000
5,585
1,476
9,948
504
105
20
1
—
23
5,427
—
7,963
499
61
20
55
261
16
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior year adjustments included in respect of the profit for the 53 weeks ended 2 July 2016.
Revolution Bars Group plc Annual Report and Accounts 2017
76
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUED
5. Staff numbers and costs
The average monthly number of employees during each period, analysed by category, was as follows:
Administration
Operational
The aggregate payroll costs were as follows:
Wages and salaries
Social security costs
Share-based payment charge
Other pension costs
6. Directors’ remuneration
Aggregate emoluments
Pension contributions to money purchase schemes1
Emoluments in respect of the highest paid Director
Aggregate emoluments
1
Includes salary enhancements made in lieu of pension contributions due to pension caps.
Three Directors (2016: two) were enrolled in the defined contribution pension scheme in the period.
7. Finance expenses
Interest payable on bank loans and overdrafts
52 weeks ended
1 July 2017
Number
53 weeks ended
2 July 2016
Number
82
2,661
2,743
73
2,357
2,430
52 weeks ended
1 July 2017
£’000
53 weeks ended
2 July 2016
Restated*
£’000
36,608
2,622
483
296
40,009
30,971
2,322
987
232
34,512
52 weeks ended
1 July 2017
£’000
53 weeks ended
2 July 2016
Restated*
£’000
1,060
131
1,191
473
1,019
88
1,107
570
52 weeks ended
1 July 2017
£’000
53 weeks ended
2 July 2016
£’000
185
129
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior year adjustments included in respect of the profit for the 53 weeks ended 2 July 2016.
Revolution Bars Group plc Annual Report and Accounts 2017
77
52 weeks ended
1 July 2017
£’000
53 weeks ended
2 July 2016
Restated*
£’000
884
—
285
(1,729)
(560)
3,551
701
591
(1,729)
(123)
(560)
1,068
—
(255)
(87)
726
5,135
1,027
157
(87)
(371)
726
8. Taxation
The major components of the Group’s tax (credit)/charge for each period are:
Analysis of (credit)/charge in the period
Current tax
UK corporation tax on the profit for the period
Adjustment in respect of prior periods
Deferred tax
Origination and reversal of timing differences
Adjustment in respect of prior periods
Total tax
Factors affecting current tax (credit)/charge for the period
Profit before taxation
Profit at standard rate of UK corporation tax (2017: 19.75%; 2016: 20%)
Effects of:
– expenses not deductible for tax and other permanent differences
– adjustment in respect of prior periods
– adjustments in respect of changes in tax rates on deferred tax balances
Total tax (credit)/charge for the period
A reduction in the UK corporation tax rate from 21 per cent to 20 per cent (effective from 1 April 2015) was substantively enacted on
2 July 2013. Further reductions to 19 per cent (effective from 1 April 2017) and to 18 per cent (effective 1 April 2020) were substantively enacted
on 26 October 2015, and an additional reduction to 17 per cent (effective 1 April 2020) was substantively enacted on 6 September 2016.
This will reduce the Company’s future current tax charge accordingly. The deferred tax liability at 1 July 2017 has been calculated based
on the rates which will apply when those balances are expected to unwind.
9. Earnings per share
The calculation of earnings per Ordinary Share is based on the results for the period, as set out below.
Profit for the period (£’000)
Weighted average number of shares (as adjusted for share subdivision) – basic and diluted
Basic and diluted earnings per Ordinary Share (pence)
52 weeks ended
1 July 2017
53 weeks ended
2 July 2016
Restated*
4,111
50,000
8.2
4,409
50,000
8.8
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior year adjustments included in respect of the profit for the 53 weeks ended 2 July 2016.
Revolution Bars Group plc Annual Report and Accounts 2017
78
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUED
9. Earnings per share continued
Profit for the period was impacted by one-off exceptional costs and bar opening costs. A calculation of adjusted earnings per
Ordinary Share is set out below.
Adjusted EPS
Profit on ordinary activities before taxation
Exceptional items and bar opening costs
Adjusted profit on ordinary activities before taxation
Taxation on ordinary activities
Taxation adjustments in respect of prior periods
Taxation on exceptional items and bar opening costs
Adjusted profit of ordinary activities after taxation
Basic and diluted number of shares
Adjusted basic and diluted EPS (pence per share)
10. Investments
52 weeks ended
1 July 2017
£’000
53 weeks ended
2 July 2016
Restated*
£’000
3,551
5,745
9,296
560
(1,729)
(1,013)
7,114
50,000
14.2
5,135
2,294
7,429
(726)
—
(855)
5,848
50,000
11.7
As at 1 July 2017 and 2 July 2016 the Group and Company have the following investments in subsidiaries:
Company name
Inventive Guarantee Co Limited1
Revolution Bars Limited1
Revolucion de Cuba Limited1
Inventive Service Company Limited1
Inventive Leisure Limited1
Rev Bars Limited1
Inventive Leisure (Services) Limited1
New Inventive Bar Company Limited1
Class of shares
Holding
Status
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
100%
100%
100%
100%
100%
100%
Holding company
Trading
Trading
Trading
Dormant
Dormant
Dormant
Dormant
1 The registered address of each company is 21 Old Street, Ashton-under-Lyne, Tameside OL6 6LA.
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior year adjustments included in respect of the profit for the 53 weeks ended 2 July 2016.
Revolution Bars Group plc Annual Report and Accounts 2017 79
Total
£’000
94,598
11,861
106,459
12,877
119,336
(48,126)
(5,427)
—
(53,553)
(5,585)
(1,476)
(60,614)
58,722
52,906
46,472
11. Property, plant and equipment
Group
Cost
At 28 June 2015 – restated*
Additions – restated*
At 2 July 2016 – restated*
Additions
At 1 July 2017
Depreciation
At 28 June 2015 – restated*
Provided in the period – restated*
Impairment charges
At 2 July 2016 – restated*
Provided in the period
Impairment charges
At 1 July 2017
Net book value
At 1 July 2017
At 2 July 2016 – restated*
At 27 June 2015 – restated*
Freehold land
and buildings
£’000
Short leasehold
premises
£’000
Fixtures
and fittings
£’000
IT equipment and
office furniture
£’000
1,426
—
1,426
—
1,426
(361)
—
—
(361)
—
—
(361)
1,065
1,065
1,065
48,316
7,076
55,392
9,381
64,773
(14,056)
(2,086)
—
(16,142)
(2,357)
(1,206)
(19,705)
45,068
39,250
34,260
39,608
3,718
43,326
2,925
46,251
(29,689)
(2,601)
—
(32,290)
(2,568)
(267)
(35,125)
11,126
11,036
9,919
5,248
1,067
6,315
571
6,886
(4,020)
(740)
—
(4,760)
(660)
(3)
(5,423)
1,463
1,555
1,228
The Group has determined that, for the purposes of impairment testing, each bar is a cash generating unit (“CGU”). The bars
are tested for impairment in accordance with IAS 36 “Impairment of Assets” when a triggering event is identified. The recoverable
amounts for the CGUs are predominantly based on value in use, which is calculated on the cash flow expected to be generated by
the bars using the latest projected data available and discounted over perpetuity.
In the 52 weeks ended 1 July 2017, the Group impaired the assets of six CGUs, either partially or in full, based on the value in use
of the CGU determined by discounted cash flow projections being lower than the net book value. When we recognise an impairment
loss, we depreciate the asset’s adjusted carrying value over its remaining useful economic life.
In the 53 weeks ended 2 July 2016, no CGUs were impaired.
The value in use calculations use cash flows based on Board-approved budgets covering a three-year period. These budgets
combine understanding of historical performance together with knowledge of the current market, and management’s views on the
future achievable growth. Cash flows beyond this three-year period are extrapolated using a long-term growth rate to five years,
at which point a terminal value has been calculated based upon the long-term growth rate.
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior year adjustments included in respect of the profit for the 53 weeks ended 2 July 2016.
Revolution Bars Group plc Annual Report and Accounts 2017
80
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUED
11. Property, plant and equipment continued
The key assumptions in the value in use calculations are the cash flows contained within the budgets, the long-term growth rate
and the risk-adjusted pre-tax discount rate as follows:
> Long-term growth rate: 2.0 per cent (2016: 2.0 per cent).
> Pre-tax discount rate: 11.7 per cent (2016: 11.7 per cent).
The long-term growth rate has been determined with reference to forecast Gross Domestic Product ("GDP") growth, which
management believes is the most appropriate indicator of long-term growth rates that is available. The pre-tax discount rate is
based on the Group’s weighted average cost of capital.
A sensitivity analysis has been performed on each of these key assumptions with other variables held constant.
Increasing the pre-tax discount rate by 1 per cent would result in additional impairments of £0.1 million. A 0.1 per cent decrease in
the long-term growth rate would increase the impairment charge recorded by £0.1 million.
12. Inventories
Goods held for resale
The cost of inventories recognised as an expense in cost of sales is as follows:
There were no expenses in cost of sales in respect of the write down of inventories.
13. Trade and other receivables
Amounts falling due within one year
Trade and other receivables
Accrued rebate income
Prepayments
1 July 2017
£’000
3,320
2 July 2016
Restated*
£’000
2,961
52 weeks ended
1 July 2017
£’000
53 weeks ended
2 July 2016
Restated*
£’000
31,075
29,444
1 July 2017
£’000
2 July 2016
Restated*
£’000
469
895
7,904
9,268
475
616
7,212
8,303
Prepayments and accrued rebate income do not contain impaired assets. There is no difference between the carrying
value and fair value of all trade and other receivables. £6.9 million comprises prepayments relating to property rent and rates
(2016: £6.4 million).
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior year adjustments included in respect of the profit for the 53 weeks ended 2 July 2016.
Revolution Bars Group plc Annual Report and Accounts 2017
81
14. Cash and cash equivalents
Cash and cash equivalents
1 July 2017
£’000
4,336
2 July 2016
£’000
2,770
Cash and cash equivalents consist entirely of cash at bank and on hand, including cash floats held at venues. Balances are
denominated in Sterling. The Directors consider that the carrying value of cash and cash equivalents approximates to their
fair value.
15. Trade and other payables
Trade payables
Other payables
Accruals
Onerous lease provision (Note 16)
Other taxes and social security costs
1 July 2017
£’000
10,935
58
5,794
302
3,730
20,819
2 July 2016
Restated*
£’000
11,769
41
6,642
383
3,073
21,908
Trade and other payables are non-interest bearing and are normally settled 30 days after the month of invoice. Trade payables are
denominated in Sterling. The Directors consider that the carrying value of trade and other payables approximates to their fair value.
16. Other non-current liabilities
Onerous lease provision
Other liabilities
Other liabilities comprise rent-free creditors recognised on operating leases.
Onerous lease provision
Opening balance
Provisions used in period
Provisions made/(reversed) in period
Interest charged in period
Current
Non-current
1 July 2017
£’000
3,441
1,504
4,945
2 July 2016
Restated*
£’000
1,697
937
2,634
1 July 2017
£’000
2 July 2016
Restated*
£’000
2,080
(301)
1,859
105
3,743
302
3,441
3,743
3,460
(383)
(1,055)
58
2,080
383
1,697
2,080
The onerous lease provision is expected to be payable over the remaining lease terms. In 2016, the provision was net of an
estimated rental income from future subletting of the properties.
The calculation is most sensitive to changes in the assumptions used for budgeted cash flow, and a risk-free discount rate
of 2.6 per cent. Management considers that reasonably possible changes in assumptions would be a change in discount
of 0.5 per cent. As an indication of sensitivity when applied to the calculation, an increase to the rate of +/-0.5 per cent
would result in a change in the corresponding liability of -/+£0.1 million.
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior year adjustments included in respect of the profit for the 53 weeks ended 2 July 2016.
Revolution Bars Group plc Annual Report and Accounts 2017
82
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUED
17. Interest-bearing loans and borrowings
Revolving credit facility
1 July 2017
£’000
7,500
2 July 2016
£’000
500
During the year, the Group revolving credit facility was increased from £5 million to £25 million to support general corporate
activity. Drawn elements of the facility attract an interest rate of LIBOR + 2.05 per cent and the undrawn element attracts a fee
of 0.82 per cent. The facility expires in December 2021 and is secured and supported by debentures over certain Group assets.
The amount drawn at 1 July 2017 was £7.5 million (2016: £0.5 million).
All borrowings are held in Sterling. There is no material difference between the fair value and book value of the Group
interest-bearing borrowings. For more information on the Group’s exposure to interest rate risk, see Note 21.
18. Deferred tax
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current
and prior reporting periods:
At 28 June 2015 – restated*
Credit to income
At 2 July 2016 – restated*
(Charge)/credit to income
At 1 July 2017
Deferred tax assets
Deferred tax liabilities
Total
19. Share capital
Allotted, called up and fully paid
50,000,000 £0.001 Ordinary Shares
Share-based
payments
£’000
Accelerated capital
allowances
£’000
54
148
202
(25)
177
(3,377)
194
(3,183)
1,469
(1,714)
1 July 2017
£’000
177
(1,714)
(1,537)
1 July 2017
£’000
50
50
Total
£’000
(3,323)
342
(2,981)
1,444
(1,537)
2 July 2016
Restated*
£’000
202
(3,183)
(2,981)
2 July 2016
Restated*
£’000
50
50
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior year adjustments included in respect of the profit for the 53 weeks ended 2 July 2016.
Revolution Bars Group plc Annual Report and Accounts 2017
83
52 weeks ended
1 July 2017
£’000
53 weeks ended
2 July 2016
Restated*
£’000
373
50
60
483
925
62
—
987
20. Share-based payments (equity settled)
The table below summarises the amounts recognised in the income statement during the year:
IPO LTIP Award
2016 LTIP Award
2017 LTIP Award
On 18 March 2015 conditional awards were made for 1,535,000 Ordinary Shares under the IPO LTIP Award, 767,500 under the
2016 LTIP Award and 767,500 under the 2017 LTIP Award to senior employees. On 9 November 2015 further conditional awards
were made for 44,357 under the IPO LTIP Award, 22,228 under the 2016 LTIP Award and 22,228 under the 2017 LTIP Award to
additional senior employees. On 2 November 2016 further conditional awards were made for 141,250 under the IPO LTIP Award,
70,625 under the FY16 LTIP Award and 70,625 under the FY17 LTIP Award to additional senior employees.
The vesting of each award is subject to the attainment of performance conditions. For each award, 70 per cent is based upon an
adjusted earnings per share (“EPS”) target (Part A) and 30 per cent on a TSR target (Part B). The adjusted EPS is based upon the
non-GAAP measure as discussed in Note 9 (page 77).
The performance conditions are tested over the below performance periods:
> the IPO LTIP Award will be tested over the period from 1 July 2015 to 30 June 2018 for Part A and 18 March 2015 to 30 June 2018
for Part B and will vest in 2018 to the extent it satisfies the conditions;
> the 2016 LTIP Award will be tested over the period from 1 July 2016 to 30 June 2019 and will vest in 2019 to the extent it satisfies
the conditions; and
> the 2017 LTIP Award will be tested over the period from 1 July 2017 to 30 June 2020 and will vest in 2020 to the extent it satisfies
the conditions.
Part A – EPS targets
The vesting of Part A of each such award will be dependent on the Group’s EPS performance over the fixed periods listed above.
No portion of Part A will vest unless the Group’s EPS growth is at least equal to a compound annual growth rate of 7 per cent;
thereafter the following vesting schedule will apply:
The Company’s EPS compound growth
At least 7% per annum
Between a minimum of 7% per annum and 13% per annum
At least 13% per annum
Extent of vesting of Part A
25%
Pro-rata between 25% and 100%
100%
For the IPO LTIP Award, EPS performance will be tested using a pro-forma EPS figure for the year ended FY15 as a base point.
Adjusted EPS for such purposes thereafter will be disclosed in due course at the time of vesting in the Remuneration Report.
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior year adjustments included in respect of the profit for the 53 weeks ended 2 July 2016.
Revolution Bars Group plc Annual Report and Accounts 2017
84
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUED
20. Share-based payments (equity settled) continued
Part B – TSR targets
The vesting of Part B of each such award will be dependent on the Group’s TSR over the fixed periods listed above relative to the
TSR of the constituents of the peer group of other UK-listed restaurant and bar sector companies over the same period.
No portion of Part B will vest unless the Group’s TSR performance at least matches the median of the TSR performance within the
comparator Group; thereafter the following vesting schedule will apply:
The Company’s TSR performance against the TSR of the comparator companies
Extent of vesting of Part B
Median
Between median and upper quartile
Upper quartile (or better)
25%
Pro-rata between 25% and 100%
100%
For the IPO LTIP Award, the offer price (200 pence) will be used as the base point from which TSR is measured for the Company.
For the FY16 LTIP Award and the FY17 LTIP Award a three-month average prior to the start of the performance period will be used.
For all awards the end point will be averaged over the last three months of the respective performance period.
Expected volatility has been estimated by considering historical average share price volatility for the Company or similar
companies. Staff attrition has been assessed based on historical retention rates.
The following table illustrates the number and weighted average exercise price ("WAEP") of, and movements in, share options
granted under the scheme:
Outstanding at the beginning of the year
New awards
Lapsed during the year
Outstanding at the end of the year
2017
Number of shares
2017
WAEP (p)
2016
Number of shares
2016
WAEP (p)
3,158,913
692,500
(1,190,000)
2,661,413
0.1
0.1
0.1
0.1
3,070,000
88,913
—
3,158,913
0.1
0.1
0.1
0.1
The fair value of the share options granted under the scheme which are dependent on TSR performance is estimated at the date
of grant using the Stochastic model. The fair value of the share options granted under the scheme which are dependent on EPS
performance is estimated at the date of grant using the Black Scholes model. The following table gives the assumptions for the
years ended 1 July 2017 and 2 July 2016:
FY17 LTIP
Award
3 3
182
143
178
0.1
18.94%
5.29
3
—
0.54%
FY16 LTIP
Award
3 3
182
130
178
0.1
19.59%
4.29
2
—
0.30%
IPO LTIP
Award
3 3
182
119
178
0.1
20.81%
3.29
1
—
0.23%
FY17 LTIP
Award
2 2
193
198
192
0.1
31.00%
5.29
3.36
—
1.37%
FY16 LTIP
Award
2 2
193
159
192
0.1
30.61%
4.29
2.36
—
1.15%
IPO LTIP
Award
2 2
193
113
192
0.1
28.90%
3.29
1.36
—
1.00%
FY17 LTIP
Award
1 1
187
113
191
0.1
31.00%
5.29
3
—
1.05%
FY16 LTIP
Award
1 1
188
112
191
0.1
30.61%
4.29
2
—
0.86%
IPO LTIP
Award
1 1
188
108
191
0.1
28.91%
3.29
1
—
0.65%
Fair value at grant date (p) – EPS
Fair value at grant date (p) – TSR
Share price (p)
Exercise price (p)
Expected volatility (%)
Expected life of options (years)
Weighted average remaining
contractual life (years)
Expected dividend yield (%)
Risk-free interest rate (%)
1 Granted on 18 March 2015.
2 Granted on 2 November 2015.
3 Granted on 9 November 2016.
Revolution Bars Group plc Annual Report and Accounts 2017 85
21. Financial instruments
The Board has overall responsibility for the determination of the Group’s risk management objectives and policies. The overall
objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group’s
competitiveness and flexibility.
The Group is exposed to the following financial risks:
> credit risk;
> liquidity risk;
> market risk; and
> capital risk.
Cash and cash equivalents are held in Pounds Sterling. Trade and other payables are measured at amortised cost.
Credit risk
Credit risk arises from the Group’s cash balances held with counterparties and trade and other receivables. Credit risk is the risk
of financial loss to the Group if a third party which owes amounts to the Group fails to meet its contractual obligations. At 1 July 2017
there were no receivables considered to be past due (2 July 2016: £nil).
Trade and other receivables are measured at amortised cost. Book values and expected cash flow are reviewed by the Board
and any impairment is charged to the consolidated statement of comprehensive income in the relevant period.
All cash balances are held with reputable banks and the Board monitors its exposure to counterparty risk on an ongoing basis.
The Group attempts to mitigate credit risk by assessing financial counterparties.
The Directors are not aware of any factors affecting the recoverability of outstanding balances as at 1 July 2017.
Given the nature of the Group’s operations, the Directors do not consider the Group’s credit risk, which arises mainly from cash
held with banks, to be significant.
Liquidity risk
Liquidity risk arises from the Group’s management of working capital. It is the risk that the Group will not be able to meet its future
obligations as they fall due. The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities
when they become due by maintaining adequate banking and borrowing facilities.
The Group performs regular cash flow projections to ensure that it has sufficient cash to meet expected operational expenses.
The Group has committed lines of credit through a £25 million revolving credit facility in the amount of £25 million provided by
The Royal Bank of Scotland, of which £7.5 million was drawn at 1 July 2017.
The Group’s financial liabilities are as follows:
Trade payables
Other payables
Revolving credit facility
1 July 2017
£’000
10,935
58
7,500
18,493
2 July 2016
Restated*
£’000
11,769
41
500
12,310
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior year adjustments included in respect of the profit for the 53 weeks ended 2 July 2016.
Revolution Bars Group plc Annual Report and Accounts 2017
86
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUED
21. Financial instruments continued
Liquidity risk continued
The maturity analysis of the financial liabilities is as follows:
As at 1 July 2017
Trade and other payables
Revolving credit facility
As at 2 July 2016
Trade and other payables – restated*
Revolving credit facility
Market risk
< 1 year
£’000
10,993
—
< 1 year
£’000
11,810
—
1–5 years
£’000
—
7,500
1–5 years
£’000
—
500
> 5 years
£’000
—
—
> 5 years
£’000
—
—
Total
£’000
10,993
7,500
Total
£’000
11,810
500
Market risk is the risk that changes in market prices, such as interest rates or foreign exchange rates, will affect the Group’s costs.
The objective of market risk management is to manage and control market risk exposures within acceptable parameters. Market
interest rate risk arises from the Group’s holding of interest-bearing financial assets and liabilities.
At 1 July 2017, the Group’s interest-bearing financial assets consisted solely of cash and cash equivalents (see Note 14). The Group
has interest-bearing financial liabilities as at 1 July 2017, being a revolving credit facility of £7.5 million (2016: £0.5 million).
The Board makes ad hoc decisions at its regular meetings as to whether to hold funds in instant access accounts or longer-term
deposits. All accounts are held with reputable UK banks. These policies, which the Directors consider to be appropriate for the
current stage of development of the Group’s business, will be kept under review by the Board in future years. If interest rates at
each period-end reporting date had moved by 5 per cent, the impact on results would not have been significant.
Fair value of financial instruments
The fair value of each category of financial instruments is the same as their carrying value in the Group statement of financial position.
Capital risk
The Group’s capital is made up of share capital and retained earnings.
The objectives when managing capital are:
> to safeguard the entity’s ability to continue as a going concern, so that it can provide returns for shareholders and benefits for
other stakeholders; and
> to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.
The capital structure of the Group consists of shareholders’ equity as set out in the consolidated statement of changes in equity.
All working capital requirements are financed from existing cash resources and a revolving credit facility. There are no externally
imposed capital requirements. Financing decisions are made by the Board based on forecasts of the expected timing and level
of capital and operating expenditure required to meet the Group’s commitments and development plans.
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior year adjustments included in respect of the profit for the 53 weeks ended 2 July 2016.
Revolution Bars Group plc Annual Report and Accounts 2017 87
22. Operating leases
At the statement of financial position date the Group has outstanding commitments for future minimum lease payments under
non-cancellable operating leases which are payable as follows:
Land and buildings
Operating leases which expire:
– in less than one year
– in two to five years
– in over five years
Other assets
Within one year
In two to five years
1 July 2017
£’000
2 July 2016
£’000
9,487
37,948
97,145
8,871
35,484
92,644
144,580
136,999
234
212
446
169
176
345
Lease agreements held by the Group have varying terms and renewal rights. While the commercial terms of the lease vary, they
commonly include either market or index-linked rent reviews. The timing of rent reviews varies on a lease-by-lease basis.
The total future minimum sublease income due under non-cancellable subleases is £1.2 million (2016: £1.4 million).
The total lease payments recognised in the income statement in the 52 weeks ended 1 July 2017 was £9.7 million (53 weeks
ended 2 July 2016: £8.3 million).
There were no capital commitments at 1 July 2017 (2 July 2016: £nil).
23. Dividends
Amounts recognised as distributions to equity holders in the period:
Final dividend for the 53 weeks ended 2 July 2016 of 3.30p (2015: 1.70p)
Interim dividend for the 52 weeks ended 1 July 2017 of 1.65p (2016: 1.50p)
Proposed final dividend for the 52 weeks ended 1 July 2017 of 3.30p (2016: 3.30p) per share
1 July 2017
£’000
2 July 2016
£’000
1,650
825
2,475
1,650
850
750
1,600
1,650
The proposed final dividend is subject to approval by shareholders at the annual general meeting and has not yet been included
as a liability in these financial statements.
Revolution Bars Group plc Annual Report and Accounts 2017
88
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUED
24. Related party transactions
2017 reporting period
(a) Subsidiaries
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are
not disclosed in this Note.
(b) Key management personnel
The compensation of key management personnel (including the Directors) is as follows:
Key management emoluments including social security costs
Awards granted under a long-term incentive plan
Pension contributions to money purchase schemes1
52 weeks ended
1 July 2017
£’000
53 weeks ended
2 July 2016
£’000
1,760
423
159
2,342
1,758
—
109
1,867
1
Includes salary enhancements made in lieu of pension contributions due to pension caps.
2016 reporting period
The Group paid £100,000 to acquire non-trade relationship deficits totalling £5,508,423 from Caspian Holdco Limited, its former
parent company, as per section 99 of the Corporation Tax Act 2010 and as provided for in section 183 of the Corporation Tax Act 2010.
Revolution Bars Group plc Annual Report and Accounts 2017
89
FINANCIAL STATEMENTS
COMPANY STATEMENT OF FINANCIAL POSITION
at 1 July 2017
Assets
Non-current assets
Investments
Current assets
Trade and other receivables
Total assets
Net assets
Equity attributable to equity holders of the Parent
Share capital
Merger reserve
Retained earnings
Total equity
Signed on behalf of the Board on 3 October 2017.
Mike Foster
Director
Note
1 July 2017
£’000
2 July 2016
Restated*
£’000
27 June 2015
Restated*
£’000
29
30
31
29,650
29,650
29,650
1,751
31,401
31,401
50
11,645
19,706
31,401
1,268
30,918
30,918
50
11,645
19,223
30,918
281
29,931
29,931
50
11,645
18,236
29,931
*
Restated – see Note 32 for an explanation and analysis of the prior period restatements included above in respect of the balances as at 2 July 2016 and
the adjustments included above.
Revolution Bars Group plc Annual Report and Accounts 2017
90
FINANCIAL STATEMENTS
COMPANY STATEMENT OF CHANGES IN EQUITY
for the 52 weeks ended 1 July 2017
At 27 June 2015 – as reported
Impact of restatements*
At 27 June 2015 – restated*
Total comprehensive income for the period
Credits arising from long-term incentive plans – restated*
Dividend paid
At 2 July 2016 – restated*
Total comprehensive income for the period
Credits arising from long-term incentive plans
Dividend paid
At 1 July 2017
Share capital
£’000
50
—
50
—
—
—
50
—
—
—
50
Reserves
Merger
reserve
£’000
11,645
—
11,645
—
—
—
11,645
—
—
—
Retained
earnings
£’000
17,955
281
18,236
1,600
987
(1,600)
19,223
2,475
483
(2,475)
11,645
19,706
Total
shareholders’
equity
£’000
29,650
281
29,931
1,600
987
(1,600)
30,918
2,475
483
(2,475)
31,401
*
Restated – see Note 32 for an explanation and analysis of the prior year adjustments included above in respect of the profit for the 53 weeks ended 2 July 2016
and in respect of other prior periods.
Revolution Bars Group plc Annual Report and Accounts 2017 FINANCIAL STATEMENTS
COMPANY STATEMENT OF CASH FLOW
for the 52 weeks ended 1 July 2017
Cash flow from operating activities
Profit after tax from operations
Adjustments for:
Dividends receivable
Increase in trade and other receivables
Charges arising from long-term incentive plans
Net cash flow generated from operating activities
Cash flow from investing activities
Dividends received from subsidiary company
Net cash flow generated from investing activities
Cash flow from financing activities
Equity dividends paid
Net cash flow used in financing activities
Net increase in cash and cash equivalents
Opening cash and cash equivalents
Closing cash and cash equivalents
91
52 weeks ended
1 July 2017
£’000
Note
53 weeks ended
2 July 2016
Restated*
£’000
2,475
1,600
(2,475)
(1,600)
20
(483)
483
—
2,475
2,475
(2,475)
(2,475)
—
—
—
(987)
987
—
1,600
1,600
(1,600)
(1,600)
—
—
—
*
Restated – see Note 32 for an explanation and analysis of the prior year adjustments included above in respect of the profit for the 53 weeks ended 2 July 2016
and in respect of other prior periods.
Revolution Bars Group plc Annual Report and Accounts 2017
92
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL INFORMATION
25. Accounting policies
Statement of compliance
The Company’s financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”)
as adopted by the EU, as they apply to the financial statements of the Group, for the 52 weeks ended 1 July 2017 (prior period
53 weeks ended 2 July 2016) and in accordance with the provisions of the Companies Act 2006.
Basis of preparation
The Company financial statements have been prepared in accordance with those parts of the Companies Act 2006 applicable to
companies reporting under IFRS as adopted by the EU. They are presented in Pounds Sterling, with values rounded to the nearest
hundred thousand, except where otherwise indicated.
Non-derivative financial instruments
Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and
cash equivalents, loans and borrowings and trade and other payables.
Trade and other receivables
Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised
cost using the effective interest method, less any impairment losses.
Trade and other payables
Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised
cost using the effective interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and cash held at bank. Bank overdrafts that are repayable on demand and
form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose
only of the cash flow statement.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial
recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method.
Share-based payments
The Company issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are
measured at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments
is expensed on a straight line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest. This
is recognised as an employee expense with a corresponding increase in equity. Fair value is measured by the Monte Carlo model
for options subject to a market-based performance condition and by use of a Black Scholes model for all others. For share-based
payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such
conditions and there is no true-up for differences between expected and actual outcomes. Cost is recharged to subsidiary entities.
Investments in subsidiary undertakings
A subsidiary is an entity controlled, either directly or indirectly, by the Company, where control is the power to govern the financial
and operating policies of the entity so as to obtain benefit from its activities. Investments in subsidiaries represent interests in
subsidiaries that are directly owned by the Company and are stated at cost less any provision for permanent diminution in value.
Revolution Bars Group plc Annual Report and Accounts 2017 93
25. Accounting policies continued
Share capital
Ordinary Shares are classified as equity. Incremental costs directly attributable to the issue of Ordinary Shares are recognised as a
deduction from equity, net of any tax effects.
Dividends
Dividends receivable from the Company’s subsidiaries and joint venture investments are recognised only when they are approved
or paid by shareholders.
Dividend distributions to the company’s shareholders are recognised in the period in which the dividends are paid, and, for the
final dividend, when approved by the company’s shareholders at the annual general meeting (“AGM”).
Taxation
Tax on the profit or loss for the period comprises current and deferred tax. Tax is recognised in the income statement except to
the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax rates enacted or
substantively enacted at the statement of financial position date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial
recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in
a business combination; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in
the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the statement of financial position date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which
the temporary difference can be utilised.
26. Profit for the period
No profit or loss account is presented for the Company as permitted by section 408 of the Companies Act 2006. The profit after
tax for the year was £2,475,000 (2016: £1,600,000).
27. Auditor’s remuneration
Auditor’s remuneration in respect of the Company audit was £500 (2016: £500).
28. Directors’ remuneration and employee costs
Details of Directors remuneration in respect of services delivered to the Group are contained in the Directors’ Remuneration
Report on pages 30 to 45. The remuneration received by the Directors in respect of directly attributable services to this company
is inconsequential in the context of the remuneration figure. The Company has no employees other than the Directors and the
Directors are not remunerated through this Company.
Revolution Bars Group plc Annual Report and Accounts 2017 94
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL INFORMATION CONTINUED
29. Investments
Investments in the Company’s statement of financial position consist of its investments in subsidiary undertakings.
The Company’s investment in its subsidiary undertakings is as follows:
At cost and net book value:
At the beginning of the period
Investment in subsidiary
At the end of the period
1 July 2017
£’000
29,650
—
29,650
2 July 2016
£’000
29,650
—
29,650
As at 1 July 2017 and 2 July 2016, the Company owned 100 per cent of the Ordinary Share capital of the following UK companies:
Company name
Country of incorporation
Class of shares
Holding
Status
Inventive Guarantee Co Limited1
Revolution Bars Limited1
Revolucion de Cuba Limited1
Inventive Service Company Limited1
Inventive Leisure Limited1
Rev Bars Limited1
Inventive Leisure (Services) Limited1
New Inventive Bar Company Limited1
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100% Holding company
Trading
100%
Trading
100%
Trading
100%
Dormant
100%
Dormant
100%
Dormant
100%
Dormant
100%
1 The registered address of each company is 21 Old Street, Ashton-under-Lyne, Tameside OL6 6LA.
30. Trade and other receivables
Amounts owed from subsidiary undertakings
31. Share capital
Allotted, called up and fully paid
50,000,000 £0.001 Ordinary Shares
32. Prior year restatements
1 July 2017
£’000
1,751
1,751
2 July 2016
Restated
£’000
1,268
1,268
1 July 2017
£’000
2 July 2016
£’000
50
50
50
50
During the year, there were extensive changes within the Finance team, following the resignations of key senior personnel. The
new team became aware that certain of the Group’s accounting policies and processes were not being strictly applied or were not
in accordance with accounting standards, this was highlighted in the Group’s pre-close announcement. The new finance team has
undertaken a review into the Group’s accounting policies and practices and PwC were engaged to produce a report for the Board.
The review work has identified a number of prior period errors that, due to their materiality, require the restatement of the results
for the 53 weeks ended 2 July 2016, as well as the consolidated statement of financial positions as at 2 July 2016 and at 27 June 2015.
Refer to note 1(b) on pages 68 to 71 for a detailed explanation of the prior year restatements.
In aggregate, the effect of the prior period restatement is to increase net assets as at 27 June 2015 by £0.3m, and to increase net
assets as at 2 July 2016 by £1.3m.
Revolution Bars Group plc Annual Report and Accounts 2017
95
32. Prior year restatements continued
Share-based payments
The amounts charged in relation to the share-based payments charge for the period ended 2 July 2016 and 27 June 2015 were
understated due to errors in the calculations and the corresponding recharge to subsidiary was not properly accounted for. There
was no impact on profit for the periods. Net assets at 2 July 2016 and 27 June 2015 were understated as a result.
Summary
There is no impact on the income statement or statement of cash flows for the period ended 2 July 2016. A summary of the
combined impact of the prior year adjustments on the consolidated statement of financial positions as at 2 July 2016 and at
27 June 2015 arising from the restatement are as follows:
Statement of financial position as at 2 July 2016
Non-current assets
Non-current assets
Amounts owed from subsidiary undertakings
Net assets
Statement of financial position as at 27 June 2015
Non-current assets
Non-current assets
Amounts owed from subsidiary undertakings
Net assets
2 July 2016
As published
£’000
Share-based
payments
£’000
29,650
29,650
—
29,650
—
—
1,268
1,268
2 July 2015
As published
£’000
Share-based
payments
£’000
29,650
29,650
—
29,650
—
—
281
281
2 July 2016
Restated
£’000
29,650
29,650
1,268
30,918
2 July 2015
Restated
£’000
29,650
29,650
281
29,931
Revolution Bars Group plc Annual Report and Accounts 2017 96
FINANCIAL STATEMENTS
CORPORATE INFORMATION
Revolution Bars Group plc
Registered number 08838504
Registered address
21 Old Street
Ashton-under-Lyne
Tameside
OL6 6LA
Broker
Numis Securities Ltd
The London Stock Exchange
10 Paternoster Square
London
EC4M 7LT
Registrar
Capita Asset Services
71 Victoria Street
London
SW1H 0XA
Financial PR
Instinctif Partners
65 Gresham St
London
EC2V 7NQ
Statutory auditor
KPMG LLP
1 St Peter’s Square
Manchester
Lancashire
M2 3AE
Tax advisers
Grant Thornton UK LLP
4 Hardman Square
Spinningfields
Manchester
M3 3EB
Legal advisers (corporate)
Macfarlanes LLP
20 Cursitor St
London
EC4A 1LT
Legal advisers (property)
Shoosmiths
Hardman Street
Spinningfields
3 Hardman St
Manchester
M3 3HF
Legal advisers (licensing)
Kuits
3 St Mary’s Parsonage
Manchester
M3 2RD
Woods Whur
38 York Place
Leeds
West Yorkshire
LS1 2ED
Revolution Bars Group plc Annual Report and Accounts 2017 R
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Revolution Bars Group plc
21 Old Street
Ashton-under-Lyne
Tameside
OL6 6LA